D. Mayandi Thevar vs A. Balu alias Balachandran and Others

M. Karpagavinayagam, J.—Appellant Mayandi Thevar is the first defendant in O.S.No. 474 of 1982 on the file of Sub Court, Madurai,

instituted by the plaintiffs/first respondent and two others claiming the redemption of the mortgaged property. The plaintiffs having lost in the trial

court filed an appeal in A.S.No. 121 of 1984 before the learned single Judge of this Court. The said appeal, after hearing the parties, was allowed

by setting aside the judgment and decree of the trial court and decreeing the suit filed by the plaintiffs. Having aggrieved over this, the appellant/first

defendant has come forward with this L.P.A. before this Court. ..

The case of the plaintiffs is as follows : The first plaintiff mortgaged the suit property belonging to the plaintiffs on his behalf and on behalf of his

two sons, the plaintiffs 2 and 3 on 17.11.1961 with one Periasamy Servai. From the said Periasamy Servai, on 28.9.1963 the appellant/first

defendant got the mortgage made over to him. On 5.12.1963, the first plaintiff for himself and on behalf of other plaintiffs created a second

mortgage in favour of the first defendant. He had again executed a mortgage third time on 13.4.1966 in favour of the first defendant. On

1.11.1969, the plaintiffs executed further mortgage for a period of 13 years. The period of mortgage expires on 1.11.1982. The plaintiffs have to

pay Rs. 41,000 to the first defendant towards the discharge of the mortgage.

In the meantime, the plaintiffs came to know that under a registered partition deed dated 6.12.1976 effected partition among the defendants 1

and 2 being brothers. So, the plaintiffs issued a notice on 21.9.1981 to both the defendants claiming the benefits under the Act 40 of 1979 and

seeking for redemption of the mortgage and recovery of possession. The first defendant alone sent a reply notice dated 12.10.1981 stating that

there is an agreement of sale between the parties and as such, from 1.11.1982, the date of expiry of the mortgage the plaintiffs ceased to have

interest to redeem the mortgage by virtue of the sale agreement.

The allegation about the execution of agreement of sale is not correct. The plaintiffs having been advised that they cannot claim the benefits

under the Act 40 of 1979, got ready the mortgage amount of Rs. 41,000 and approached the defendants to pay the said sum. The defendants

refused to receive. Hence, the plaintiffs filed the suit after depositing the said sum into court praying for the redemption by directing the defendants

to return the original documents and to deliver possession of the suit property and also for future mesne profits.

The case of the defendants as contained in the written statement is as follows : The execution of the mortgage deed for a sum of Rs. 41,000 and

the expiry of the mortgage on 1.11.1982 are not denied. But, on 1.10.1975 the first plaintiff had executed an agreement of sale in favour of the first

defendant and since then the first defendant is in possession and enjoyment of the property in that capacity. The sale price was fixed at Rs.

1,01,000. The first defendant has assured to pay Rs. 60,000, the balance amount towards sale consideration on the expiry of the mortgage period

and to have the sale deed registered. The first plaintiff agreed for the same and received Rs. 2,000 on a promissory note. By virtue of the

agreement of sale executed by the first plaintiff, the plaintiffs are not entitled to redeem the mortgage, as their right of redemption of mortgage has

been lost.

During the course of trial, on behalf of the plaintiffs P.Ws.l to 3 were examined through whom Exs. A-1 to A-21 were marked. On the side of

the defendants, beside the first defendant as D.W.1 two other witnesses were examined as D.W.2 and D. W.3 and Exs.B-1 to B-14 were

marked.

On consideration of the entire materials, the trial court dismissed the suit on 23.1.1984 holding that the first plaintiff had entered into an

agreement of sale on 1.10.1975 with the first defendant and that therefore, the plaintiffs are not entitled to redeem the suit property.

Challenging the dismissal of the suit, the plaintiffs filed an appeal before the learned single Judge of this Court on 27.2.1984 in A.S.No. 121 of

1984.

During the pendency of the above appeal, the first defendant, the appellant herein filed O.S.No. 218 of 1985 on the file of Sub Court, Madurai,

for specific performance against the plaintiffs, on the strength of agreement of sale dated 1.10.1975.

After hearing the parties, the learned single Judge concluded that even assuming that there is existence of agreement of sale dated 1.10.1975,

though it was disputed by the plaintiffs, the said agreement would not disentitle the plaintiffs to redeem the suit property, since the right of

redemption exists till the property is sold by way of execution of the sale deed. On this finding, the learned single Judge allowed the appeal and

decreed the suit.

The said decree and judgment of the learned single Judge are under appeal before this Court in this L.P.A.

When this appeal in L.P.A.No. 218 of 1996 came up for admission before the First Division Bench, by the order dated 2.1.1997, it admitted

the appeal and stayed the decree. However, it did not grant stay of the proceedings in the suit for specific performance filed by the appellant herein

in O.S.No. 218 of 1985 on the file of Sub Court, Madurai and instead, directed the trial court to dispose of the said suit within three months.

It is now seen from the counter affidavit filed by the respondents that the said suit for specific performance in O.S.No. 218 of 1985 on the file

of Sub Court, Madurai, was dismissed on 30.6.1997.

Mr. T.R. Rajagopal, the learned senior counsel representing Mrs. P. Bagyalakshmi, the counsel appearing for the appellant, would put forth

the following contentions:

By virtue of the sale agreement dated 1.10.1975, the mortgage debt has already been wiped out by adjustment between the parties. As the

mortgage is no longer in existence, the right of redemption has been lost. The proviso to Section 60 of Transfer of Property Act, 1882 (hereinafter

referred to as ""the Act"") would enable the parties to extinguish the mortgage by adjustment effected by way of conclusion of the sale agreement.

Therefore, the suit for redemption is not maintainable as the plaintiffs have lost their right of redemption as seen from the agreement to sell and the

subsequent arrangement agreed to between the parties. Having not disturbed the finding of the trial court that the sale agreement was true and

correct, the learned single Judge ought not to have held that the suit is maintainable despite the sale agreement. As envisaged by Section 60 of the

Act, it is clear from the proviso to the said section that the right covered by the section would be extinguished by the act of parties. In the present

case, the agreement of sale executed by the plaintiffs in favour of the first defendant being an act of the parties would definitely make the plaintiffs

incompetent to file of the suit for redemption.

In support of the above submissions, the learned senior counsel has cited several authorities which we shall see later.

By way of reply, Mr. Chandramouli, the learned senior counsel appearing for the plaintiffs/respondents, in support and justification of the

judgment and decree under appeal, would strenuously contend as follows:

Even if the agreement of sale put forward by the counsel for the appellant is true, though not admitted, the plaintiffs'' right to redeem the property

cannot be said to have been lost by them, by virtue of proviso to Section 60 of the Act, as the property was not said to be sold by way of sale

deed.

He would also cite several decisions, which we shall consider at the appropriate stage.

We have given our meticulous consideration to the submissions made by the respective parties.

The learned single Judge in the judgment under appeal without going to the validity of the sale agreement would come to a definite conclusion

that the mere execution of the agreement of sale by itself would not deprive the mortgagor of his right of redemption and that the equity of

redemption cannot be extinguished by mere contract for sale.

The main thrust of the argument by the learned senior counsel for the appellant is that the right of redemption under proviso to Section 60 has

been extinguished by the act of parties, namely, the execution of the agreement of sale. According to him, the learned single Judge has not

considered this aspect as the result of which a serious illegality has been committed by the suit being decreed in favour of the plaintiffs.

Thealleged agreement of sale is dated 1.10.1975. The recital in the said agreement would make it clear that the mortgage expires on

1.11.1982 and it is agreed that the balance of sale consideration of Rs. 58,000 shall be received after the expiry of mortgage period on 1.11.1982,

at the time of execution of the sale deed.

Admittedly, the notice was issue by the plaintiffs calling upon the defendants to return the documents and have over the property, on

21.9.1981. The suit was filed in O.S.No. 474 of 1982 by the plaintiffs on 21.12.1982. Therefore, till the filing of the suit there was no sale deed

executed nor the alleged sale consideration was fully paid to the plaintiffs.

According to the recital in the agreement of sale, the mortgage agreed to give the balance sale consideration after the expiry of mortgage

period, that is, on 1.11.1982, at the time of execution of sale deed.

Incidentally, we may point out that the first defendant did not take steps to pay the balance of sale consideration either by sending the amount

to the plaintiffs to execute the sale deed or by filing the suit for specific performance and depositing the said sum into court till the date of filing of

the present suit, that is, on 21.12.1982.

Moreover, even during the course of. trial of this suit no such steps were taken by the first defendant. Curiously the first defendant chose to file

the suit for specific performance on the strength of the agreement of sale dated 1.10.1975 only after the dismissal of the present suit, that too,

subsequent to the filing of the appeal by the plaintiffs in A.S.No. 121 of 1984 dated 27.2.1984. It is quite obvious from this at the alleged

agreement of sale has not been acted upon in terms of the recital in the agreement of sale dated 1.10.1975.

It is also to be noticed that the earlier mortgage deeds have been executed by the first plaintiff on his behalf and on behalf of the minor sons, the

plaintiffs 2 and 3. The agreement of sale would show that this document was signed by the first plaintiff alone on 1.10.1975 and during that period

the other plaintiffs became major.

In the light of the above facts, we have to see whether the agreement of sale dated 1.10.1975 would be construed to be the act of parties by

which the right of redemption is lost.

Before dealing with this question, let us at the outset refer to the relevant provisions of the Transfer of Property Act, to have a clear picture

about the legal position, with reference to the right of redemption.

Section 60 of the Act is as follows:

Right of mortgagor to redeem : At any time after the principal money has become due, the mortgagor has a right, on payment or tender, at a

proper time and place, of the mortgage-money, to require the mortgagee, (a) to deliver to the mortgagor the mortgage-deed and all documents

relating to the mortgaged property which are in the possession or power of the mortgagee, (b) where the mortgagee is in possession of the

mortgaged property, to deliver possession thereof to the mortgagor, and (c) at the cost of the mortgagor either to re-transfer the mortgaged

property to him or to such third person as he may direct, or to execute and (where the mortgage has been effected by a registered instrument) to

have registered an acknowledgement in writing that any right in derogation of his interest transferred to the mortgagee has been extinguished :

Provided that the right conferred by this section has not been extinguished by act of the parties or by decree of a court.

The right conferred by this section is called a right to redeem and suit to enforce it is called a suit for redemption...

It is clear from the reading of this section that this right cannot be extinguished unless by the act of the parties or by the decree of the court.

In this context, Section 54 of the Act would be quite relevant, which is as follows:

''Sale'' defined : ""Sale"" is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. ...

Contract of sale : A contract for the sale of immovable property is a contract that a sale of such property shall take place on terms settled between

the parties.

It does not, of itself, create any interest in or charge on such property.

From this, it is obvious that an agreement of sale does not by itself create any interest in, or charge on such property.

Moreover, as indicated by the learned single Judge, the combined effect of Section 54 of the Transfer of Property Act and Section 17 of the

Indian Registration Act is that a contract for sale in respect of immovable property of the value of more than one hundred rupees without

registration cannot extinguish the equity of redemption.

When the similar question was raised in the decision in Abraham Ezra Issac Mansoor Vs. Abdul Latif Usman, , a Division Bench of the

Bombay High Court would observe that mere agreement of sale would not attract the proviso of Section 60 of the Transfer of Property Act under

the garb of ""act of the parties."" The relevant observations are these:

The question, therefore , is that when there is a contract of sale entered into by a mortgagee in the purported exercise of the power, whether the

equity of redemption is extinguished, as mentioned in Section 60, Transfer of Property Act. Now, the equity of redemption can be extinguished by

the Act of the parties or by a decree of the court. There is no question of a decree of the court in this matter, and, therefore, the appellant must rely

on the words ""by the act of the parties."" to support his contention. In the present case the only act relied upon is the contract of sale. I am unable to

consider that act as the act of the ""parties "". It is an act of the mortgage alone. Secondly, that act, i.e., entering into the contract of sale by itself,

does not extinguish the right of redemption. A contract of sale, as defined by Section 54, Transfer of Property Act, doe''s not create any interest in

the property in the purchaser. ....It is only on execution of the conveyance that the ownership passes from one party to another. The previous

documents do not transfer any interest in the property. It may also be noted that if the extinguishment of the right to redeem is by a document, the

same still require registration u/s 17, Registration Act. I do not know how, without a transfer of the mortgagor''s interest by a written registered

instrument or by operation of law or by adverse possession, the right could be extinguished.

The above decision would apply, in our view, in all fours to the present case. When the Apex Court in the decision in Narandas Karsondas

Vs. S.A. Kamtam and Another, had to deal with this aspect, it had an occasion to consider the above decision of Bombay Division Bench and

endorsed the said view as correct law.

While comparing the contract of sale between English Law and Indian law, the Apex Court would hold in the above decision that in England,

sale is effected by the contract of sale, and in India an agreement for sale is not a sale or transfer of interest. While explaining the term ""act of

parties"", the Supreme Court in the above decision would observe as follows:

The right of redemption which is embodied in Section 60 of the Transfer of Property Act is available to the mortgagor unless it has been

extinguished by the act of parties.... In India it is only on execution of the conveyance and registration of transfer of the mortgagor''s interest by

registered instrument that the mortgagor''s right of redemption will be extinguished.... The mortgagor''s right to redeem will survive until there has

been completion of sale by the mortgagee by a registered deed.... Therefore, until the sale is complete, by registration the mortgagor does not lose

right of redemption.

These decisions answer to the question which has been raised in this case. It is thus clear that mere execution of the agreement for sale, which

not confer any interest in, or the charge on, the property, would not be said to be the act of the parties to extinguish the right as enjoined in the

proviso to Section 60 of the Act.

Mr. T.R. Rajagopal, the learned senior counsel, would cite the judgment of the Division Bench rendered in K. Narayana Rao Vs. Meenakshi

Velu and Others, , in which it is held as follows:

On the facts of this case, we are of the view that the mortgagor''s right to redemption had been extinguished, because, after the purchaser had paid

the full purchase money and the same had been appropriated towards the debt and the balance distributed, the mortgage itself no longer

subsisted.... That the right to redemption is extinguished only when the sale is completed by a registered instrument is not correct.

In the first place the said decision governs the facts of that case, and in our view it has no application to the facts of the case on hand. Further the

Apex Court in Narandas Karsondas Vs. S.A. Kamtam and Another, has endorsed the view of the Division Bench decision of the Bombay High

Court in Abraham Ezra Issac Mansoor Vs. Abdul Latif Usman, . In this view, the case of K. Narayana Rao Vs. Meenakshi Velu and Others, , of

this Court does not help the appellant, and the said decision cannot be taken as an authority on the point that arises for consideration before us in

this appeal.

Mr. T.R. Rajagopal, learned senior counsel, would cite another decision in Prithi Nath Singh and Others Vs. Suraj Ahir and Others, , wherein

it is held thus:

If the mortgage money due has been already paid by the mortgagor and has been accepted by the mortgagee in full discharge of the mortgage

debt, no occasion for such accounting arises and therefore any/suit to enforce the return of the mortgage-deed and to get back the possession of

the mortgaged property cannot be a suit for redemption.

On the strength of this observation, the learned senior counsel would strenuously submit that the plaintiffs having executed the agreement of sale

would, at the most, file a suit for return of the mortgage deeds and to get back the possession of the mortgaged property. Here again, the decision

rendered, in our opinion, was having regard to the facts of that case. On the basis of the said decision, it is not. possible to agree with the learned

senior counsel for the appellant, when there are direct authorities of the Apex Court on the point.

The question raised in this case is whether by the act of parties, the right of redemption is extinguished or not? When it is by the act of parties,

it should be considered that the said act must take the shape and observe the formalities which the law prescribes.

In this context, the observation of the Supreme Court made in Parichhan Mistry (Dead) by Lrs. and another Vs. Acchiabar Mistry and others,

is quite relevant which is as follows:

It is true that a right of redemption under a mortgage deed can come to an end, but only in a manner known of law. ...The mortgagor''s right of

redemption is exercised by the payment or tender to the mortgagee at the proper time and at the proper place, of the mortgage money. When it is

extinguished by the act of the parties the act must take the shape and observe the formalities which the law prescribes.

In Jayasingh Dnyanu Mhoprekar and Another Vs. Krishna Babaji Patil and Another, , the Apex Court would hold as follows:

The right of redemption under a mortgage deed can come to an end only in a manner known to law. Such extinguishment of the right can take

place by a contract between the parties, by a merger or by a statutory provision which debars the mortgagor from redeeming the mortgage. A

mortgagee who has entered into possession of the mortgaged property under a mortgage will have to give up possession of the property when a

suit for redemption is filed unless he is able to show that the right of redemption has come to an end or that the suit is liable to be dismissed on

some other valid ground. This flows from the legal principal which is applicable to all mortgagees, namely, ""once a mortgage, always a mortgage.

While dealing with the similar circumstance, it is held by the Federal Court in the decision in Subba Rao v. Raju AIR 1950 EC. 1, which was

cited by the learned senior counsel for the respondents, that the agreement for sale would not extinguish the equity of redemption. The relevant

observation is as follows;

The document passed in favour of the wife of the mortgagor can be described as a reward promised to her for bringing about the willingness of her

husband to agree to convey the mortgaged lands to the mortgagees. That can in no event be considered as extinguishing the equity of redemption.

The mortgagor was not even a party to that document. The second document executed by the mortgagor is an agreement to convey the lands after

three months. There is however no document or evidence to show that the mortgagees agreed to accept these lands in full satisfaction of their

claims or promised to pay the sum of Rs. 100 mentioned therein. This was only an agreement to convey the lands after three months, and, if at all,

the question of extinction of the equity of redemption could arise on the conveyance being executed but not before.

The facts of the present case are also more or less similar to that of the above case. Here also, admittedly, the plaintiffs 2 and 3 are not the

parties to the agreement of sale. Moreover, this document of agreement of sale does not convey or transfer the ownership to the first defendant,

the appellant herein.

The learned senior counsel for the respondents also cited a decision in Mohamed Ali and Another Vs. M.K. Abdul Salam Saheb and Others, .

In the said decision, the Apex Court''s judgment reported in Narandas Karsondas Vs. S.A. Kamtam and Another, has been considered and

referred the relevant observation of the Supreme Court in the following words:

As may be seen from the facts stated above, the right of redemption could subsist only in a case where the conveyance was not completed by

execution of the sale deed and registration of the same in pursuance of the auction. The ratio of the judgment in my opinion, is that only on such

completion by execution and registration, the mortgage could be said to have been extinguished or discharged and so long as the mortgage is not

extinguished, the right of redemption is always available to the mortgagor.

Mr. T.R. Rajagopal, the learned senior counsel, cited another judgment rendered in V. Paily v. K. Augusthy AIR 1967 Ker. 247, in support of

his submission. The said decision was considered by the learned single Judge to distinguish the same by observing that in the said case the Full

Bench of Kerala High Court upheld the proviso to Section 60 of the Act under which the right of mortgagor comes to an end by a decree of the

court and that in the case on hand, there is no decree relied upon by the defendants. Therefore, this case also would not be any use to the

appellant.

It is, therefore, clear that the respondents/plaintiffs have made out a case for claiming the right of redemption on the basis of which the learned

single Judge has passed a decree in favour of the plaintiffs by granting the reliefs sought for by giving valid reasons. As there is no infirmity

whatsoever in the finding of the learned single Judge, we are constrained to reject this appeal by confirming the impugned judgment and decree.

In the result, this L.P.A. is dismissed. No order as to costs. Consequently, C.M.P.Nos. 17664 of 1996 and 15102 of 1997 stand dismissed.