Meenakshi Velu and Another vs Kasturi Sakunthala and Others

Ramamurti, J.—These two suits which are connected and raise common questions of fact and law were tried together. By consent of parties the documents were marked in Civil Suit No. 175 of 1963. The parties adduced no oral evidence. The main point that arises for determination is whether the mortgagor has an unqualified right to redeem the mortgage after the mortgagee had exercised his power of sale u/s 69 of the Transfer of Property Act and a third party had purchased the same and had also paid the full purchase price and all that remained to be done was that the mortgagee had to execute and register the sale deed which has been engrossed on a duly stamped paper.

The main facts of the case which are not in controversy may briefly be stated. The parties are referred to according to their ranks in Civil Suit No. 175 of 1963. The first Defendant, Kasturi Sakunthala, borrowed a sum of Rs. 13,200 from the second Defendant, V. Ranganatham Chetty on 6th March 1956 and executed a deed of simple mortgage comprising the house, ground and premises Door No. 64, Bazulullah Road, Thyagarayanagar, Madras, conferring the power of sale on the mortgagee u/s 69 of the Transfer of Property Act. The first Defendant did not pay the interest regularly, the arrears of interest alone amounted to about Rs. 13,000 and on 11th July 1960, the second Defendant called upon the first Defendant to pay the entire mortgage amount, principal and interest which amounted to about Rs. 26,000. The second Defendant attempted to sell the property by public auction in the exercise of the power of sale but he could not proceed with the matter as the first Defendant filed a suit, Original Suit No. 880 of 1962 in the City Civil Court and got an order of stay. But that suit was ultimately dismissed and after due publication and advertisement the mortgaged property was sold by the auctioneers, Messrs. Murray & Co., on 14th February 1963 and the Plaintiff, Mrs. Meenakshi Velu, hereinafter referred to as Mrs. Velu, purchased the same for a sum of Rs. 52,000 as that was the highest bid. The Plaintiff paid Rs. 13,000, representing 25 per cent of the bid amount to the auctioneers on the date of the sale itself, i.e., 14th February 1963; paid the entire balance of Rs. 39,000 on 1st March 1963, well within the time notified in the terms of the auction sale, and the title deeds of the property were duly delivered to the Plaintiff. The draft sale deed was duly approved by the second Defendant and the Plaintiff purchased the necessary stamp papers for the value of Rs. 4,940 and engrossed the sale deed. The fair sale deed as engrossed on the stamp paper was sent to the second Defendant on 15th March 1963 who promised to execute and register the same on 16th March 1963. In the meanwhile the first Defendant, Kasturi Sakunthala had filed the suit, Original Suit No. 605 of 1963 on the file of the City Civil Court (now re-numbered as Civil Suit No. 193 of 1963 on transfer to this Court) on 15th March 1963, for redemption of the mortgage alleging that the sale conducted by the auctioneers and the purchase by Mrs. Velu, the Plaintiff in Civil Suit No. 175 of 1963, for a sum of Rs. 52,000 was invalid and that in any event the equity of redemption had not been extinguished as the sale deed had not been executed in favour of the purchaser. To that suit she impleaded the mortgagee Ranganathan Chetty as the first Defendant, Suvarnakumari a second mortgagee as the second Defendant. Kasturi Sakunthala appears to have obtained an interim injunction restraining the mortgagee, Ranganatham Chetty, from executing and registering the sale deed in favour of Mrs. Velu. In view of this suit in the City Civil Court and the interim injunction passed therein Ranganatham Chetty could not execute and register the sale deed. At this stage, it may be mentioned that Mrs. Velu was not impleaded as a party to this City Civil Court suit Original Suit No. 605 of 1963. The Plaintiff, Mrs. Velu, was, therefore, obliged to file the present suit, Civil Suit No. 175 of 1963 for establishing her rights under her purchase at the auction on 14th February 1963, by directing the first Defendant, the mortgagor, and the second Defendant, the mortgagee, to execute and register the sale deed and for recovery of possession of the property. The third Defendant in the suit, Civil Suit No. 175 of 1963, is Suvarnakumari, in whose favour a second mortgage had been executed by the first Defendant on 4th July 1956 and Mr. Narayana Rao has been impleaded as the fourth Defendant as a charge has been created in his favour under a registered security bond, dated 14th July 1959. One Janakiraman has been impleaded as the fifth Defendant as he was claiming certain rights as a lessee under a registered deed of lease, dated 6th September 1962 executed by the first Defendant in his favour over a portion of the suit property measuring 39 feet 124 feet for aperiod of five years commencing from 6th September 1962.

The real contest or opposition to the suit was by the mortgagor, Kasturi Sakunthala, the first Defendant, and Janakiraman the fifth Defendant, the lessee. Some objections were raised in the pleadings attacking the validity of the auction sale in pursuance of the power of sale of the mortgagee but they were not pressed at the time of the hearing of the suit. Learned Counsel for the first Defendant-mortgagor argued the only point as to whether the right of redemption was still subsisting and could be exercised in the circumstances of the case in derogation of the rights of the Plaintiff. The other point in controversy related to the binding nature of the lease executed in favour of the fifth Defendant and as to how far it would prevail over the rights of the Plaintiff, the purchaser.

I shall first take up the question as to whether the mortgagor is entitled to exercise his right of redemption at this stage unaffected by the rights which have accused to the Plaintiff as a purchaser at the auction. The mortgage deed has been marked as exhibit P-1 and the power of sale is conferred in these terms:

The mortgagee may at any time call upon the mortgagor for the due repayment of the amount due and payable hereunder and should the mortgagor fail to repay the amount due, the mortgagee shall be at liberty after expiry of three months from the date of the notice of demand to sell the mortgaged property by way of public auction or private treaty and after crediting the net sale proceeds towards amount due and payable under these presents pay the balance if any to the mortgagor and should there be any deficit the mortgagor agrees to pay the same personally and from the rest of her properties and upon such sale the mortgagee shall have the power to execute the necessary deeds of transfer.

It is unnecessary to refer to the other documents which have been marked on the Plaintiff''s side and it is sufficient to state that they disclose that the mortgagor has been delaying and creating every obstacle in the way of the mortgagee realising the mortgage amount and that for that purpose, the mortgagor resorted to several obstructive, useless and infruotuous proceedings in the City Civil Court. The bidders'' list which has been marked as exhibit P-12 discloses that the opening bid started at Rs. 25,000, several persons participated in the auction and the Plaintiff was the successful bidder having made the highest bid for Rs. 52,000, one thousand rupees more than the previous or earlier bid by one Sarala Devi for Rs. 51,000, The mortgagee had also made an endorsement in the bidders'' list consenting to the sale conducted by the auctioneers. As observed earlier nothing was argued about the validity of the auction, and it is clear that the Plaintiff, an innocent third party, has purchased the property with perfect bona fides and in good faith, and had also paid a large sum of Rs. 52,000 relying upon the power of sale exercised by the mortgagee in pursuance of the express terms of the deed of mortgage. Learned Counsel for the first Defendant placed considerable reliance upon the Bench decision of the Bombay High Court in Abraham Ezra v. Abdul Latiff ILR (1944) Bom. 549 in which it was held that till the agreement of sale in favour of the purchaser is completed by the execution and registration of the deed of sale, the relationship of mortgagor and mortgagee would subsist and continue between the parties and that u/s 60 the mortgagor would have the right to redeem even if a contract has been entered into by the mortgagee to sell the property in the purported exercise of the power of sale. In this decision, the Bombay High Court did not follow but distinguished the decision in Waring (Lord) v. London and Manchester Assurance Co. (1935) Ch. 310 in which a contrary view was taken to the effect that the right of redemption would be extinguished the moment the mortgagee exercised the power of sale and a third party has entered into a binding contract to purchase the property. Learned Counsel for the first Defendant also drew my attention to the decision of Kunhamed Kutti J. in Civil Suit No. 74 of 1957,in which in a similar situation the learned Judge preferred to follow the decision of the Bombay High Court and held that the right of redemption would subsist so long as a sale deed had not been executed in favour of the purchaser. From this decision of Kunhamed Kotti J. Original Side Appeal No. 33 of 1962 was preferred but I am told the matter was compromised and there was no final decision by the Bench on the merits. On an analysis of the first principles and the examination of the relevant case law I am of opinion that the right of redemption of the mortgagor is no longer subsisting in an unqualified manner as contended by the first Defendant and that the Plaintiff''s claim must be upheld.

Section 60 of the Transfer of Property Act provides that 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 the documents of title; (6) to deliver possession of the mortgaged property to the mortgagor where the mortgagee has been put in possession of the mortgaged property; and (c) to re-transfer the mortgaged property to the mortgagor at his cost and to execute, if necessary, a registered document acknowledging that any right created by the mortgagee in derogation of the interests of the mortgagor has been extinguished. This right is called the right to redeem and the suit to enforce it is called a suit for redemption. The proviso to this section expressly provides that the right conferred, i.e., the right of redemption, can be exercised unless and until the same has not been extinguished by the ad of the parties or by a decree of Court.

The main argument of learned Counsel for the first Defendant is based upon this proviso, his contention being, that till the sale deed is executed and registered or till there is a decree of Court negativing the right of redemption it cannot be said that the right has been extinguished by the act of parties or by a decree of Court. In substance his contention is whatever may be the nature or the character of the events or the actings of parties, the right of redemption would continue to subsist unless it becomes unavailable under the strict terms of the proviso. According to learned Counsel the equity of redemption being a very valuable right the intention of the Legislature is clear that, that right would inhere and continue to subsist in the mortgagor in every other situation, except the two contingencies covered by the proviso to Section 60.

Mr. V. Thyagarajan, learned Counsel for the Plaintiff, contended that u/s 69 of the Transfer of Property Act, a statutory power of sale has been conferred on the mortgages, that, under that power of sale, the mortgagee can sell the property out and out either by private contact or by auction and subsequently complete the same by conveyance and that the mortgagee''s act would be binding upon the mortgagor either under the doctrine of powers, or the theory of an agency coupled with interest. His argument is that the mortgagor who has conferred the power of sale upon the mortgagee cannot derogate from his grant and exercise his right of redemption to the prejudice of the rights of an innocent third party, who has parted with consideration, in good faith, relying upon the power of sale. According to learned Counsel, the mortgagor would be bound by all '' lawful acts done by the mortgagee in pursuance of the power conferred upon him, and cannot nullify the same after the entire price had been paid by the purchaser and all that remains is the mere execution of a sale deed and the right of the purchaser to demand the execution and registration of a duly stamped deed of sale cannot be defeated by the mortgagor, merely because the mortgagee takes some time to execute the sale deed. He urged that the decision in Waring (Lord) v. London and Manchester Assurance Co.(1935) Ch 310 should be followed as laying down the correct law and being in consonance with first legal principles, and that the grounds on which the Bombay High Court distinguished the Chancery Division case are incorrect.

At this stage Section 69 of the Transfer of Property Act, dealing with the power of sale by the mortgagee, may be extracted:

69 (1) A mortgagee, or any person acting on his behalf, shall, subject to the provisions of this section, have power to sell or concur in selling the mortgaged property, or any part thereof, in default of payment of the mortgage-money without the intervention of the Court, in the following cases and in no others namely:

(a) Where the mortgage is an English mortgage, and neither the mortgagor nor the mortgagee is a Hindu, Mohamedan or Buddhist or a member of any other race, sect, tribe or class from time to time specified in this behalf by the State Government in the official Gazette;

(b) where a power of sale without the intervention of the Court is expressly conferred on the mortgagee by the mortgage-deed, and the mortgagee is the Government;

(c) where a power of sale without the intervention of the Court is expressly conferred on the mortgagee by the mortgage-deed, and the mortgaged property or any part thereof was, on the date of the execution of the mortgage-deed, situate within the towns of Calcutta, Madras, Bombay, or in any other town or area which the State Government may, by notification, in the official Gazette specify in this behalf.

(2) No such power shall be exercised unless and until-

(a) notice in writing requiring payment of the principal money has been served on the mortgagor, or on one of several mortgagors, and default has been made in payment of the principal money, or of part thereof, for three months after such service, or

(b) some interest under the mortgage amounting at least to five hundred rupees is in arrear and unpaid for three months after becoming due.

(3) When a sale has been made in professed exercise of such power the title of the purchaser shall not be impeachable on the ground that no case had arisen to authorise the sale, or that due notice was not given, or that the power was otherwise improperly or irregularly exercised; but any person damnified by an unauthorised or improper or irregular exercise of the power, shall have his remedy in damages against the person exercising the power.

(4) The money which is received by the mortgagee, arising from the sale, after discharge of prior incumbrances, if any, to which the sale is not made subject, or after payment into Court u/s 57 of a sum to meet any prior incumbrances, shall, in the absence of a contract to the contrary, be held by him in trust to be applied by him, first, in payment of all costs, charges and expenses properly incurred by him as incident to the sale or any attempted sale; and secondly, in discharge of the mortgage-money and costs and other money, if any, due under the mortgage; and the residue of the money so received shall be paid to the person entitled to the mortgaged property or authorised to give receipts for the proceeds of the sale thereof.

(5) Nothing in this section or in Section 69-A applies to powers conferred before the first day of July 1882.

It is important to notice the essential difference between Section 69 (1)(a) and Section 69 (1) (6) and (c). In the case of an English mortgage covered by Section 69 (1)(a) the power of sale of the mortgagee is a necessary incident of the mortgage, there being no need for an express stipulation to that effect, while u/s 69 (1) (6) and (c) the power of sale should be expressly conferred upon the mortgagee by the mortgage deed, thereby emphasising the consensual element involved. As the Privy Council pointed out in Raja Kishendatt Ram v. Raja Mumtaz Ali Khan (1879) ILR 5 Cal. 198 (P.C.).

The effect of a sale under a power of sale is to destroy the equity of redemption in the land, and to constitute the mortgagee exercising the power a trustee of the surplus sale proceeds after satisfying his own charge, first for the subsequent encumbrancers, and ultimately for the mortgagor. The estate, if purchased by a stranger, passes into his hands free from all these encumbrances.

This distinction between an execution sale under a mere money decree and the execution sale under a mortgage decree was emphasised in Jadu Nath Ray v. Paramestwar Mallik ILR (1940) 1 Cal. 265 (P.C.) Sir George Rankin stated thus at page 262:

While the purchaser at an execution sale under a mere money-decree gets no more than the right, title and interest of the judgment-debtor at the date of the sale, the purchaser under a mortgage decree gets the right, title and interest in the mortgaged subjects which the mortgagor had at the date of the mortgage and charged thereby. Buying the mortgaged property free from incumbrances he gets, as it is sometimes put, the title of both the mortgagee and of those interested in the equity of redemption. He is not a mere successor in interest of the equity of redemption at the date of the sale.

From this it will be seen that if the mortgagee exercising the power of sale had executed the sale deed, the purchaser will get all the right, title and interest of the mortgagee as well as of the mortgagor as on the date of the mortgage, unaffected by and extinguishing all encumbrances and interests in the mortgaged property created subsequent to the mortgage in question. When the mortgagee executes a conveyance ho acts both on his own behalf as well as on behalf of the mortgagor as the latter''s agent duly empowered in that behalf.

The crucial question for determination is whether the proviso to Section 60 should receive such an overriding operation to enable the mortgagor to by-pass or ignore every other dealing or transaction concerning the mortgaged property which he has expressly authorised. Do the words of the proviso warrant such an interpretation entitling the mortgagor to derogate from his own grant and free himself from the fetters or the restrictions which he willingly agreed to be imposed on his right of redemption either at the time when the mortgage was executed or subsequently within the limits permissible in law? Is the mortgagor''s right to redeem, made so unqualified, as to be exercised at any time and at any stage, except, when and only when a registered sale deed has been executed? (The contingency of a decree of a Court extinguishing the equity of redemption not considered here). In my opinion the words extinguished by the act of the parties would take in not only the situation of the execution of a deed of sale but the happening of events and contingencies which would preclude the mortgagor from asserting the right of redemption. The view that so long as the mortgagor continues to be the owner having a subsisting title to the property he can exercise the right of redemption, regardless of all that had transpired up till then would lead to strange and anomalous results besides resulting in injustice. In my opinion such an extreme view would be violenty opposed to basic principles of laws, besides rendering nugatory and useless the provisions of Section 69 of the Transfer of Property Act. Incident to every mortgage is the right of the mortgagor to redeem, a right which is called his equity of redemption, and which continues even though the mortgagor has failed to pay the debt in accordance with the conditions of the mortgage. Any provision in the mortgage preventing redemption on payment of the debt or the performance of the obligation for which security was given is termed a clog or fetter in the equity of redemption and is void and unenforceable. This right to redeem is such a valuable right and an integral and inseparable incident of a mortgage that the law does not permit or countenance any agreement between the parties, taking away from the mortgagor his right to redeem the mortgage. But this rule against dogging the equity of redemption does not render invalid subsequent independent transactions between the mortgagor and the mortgagee concerning the mortgaged property. So long as there is no oppression or unfairness or over-reaching on the part of the mortgagee, law permits the freedom of contract to the parties to subsequently enter into any stipulation, for instance, an option to purchase the property, for a sale or for a release of the equity of redemption, Reference may be made to the statement of the law in Fisher on Mortgages (seventh edition) at page 586:

Although a mortgagee cannot at the time, or as part of the mortgage transaction, stipulate in advance for the extinguishment of the equity of redemption if the debt is not paid by a certain time, yet the equity of redemption may be released under a subsequent separate bargain.

Subsequent to the mortgage the mortgagee may stipulate for the purchase of the property from the mortgagor in satisfaction of the mortgage claim. See Reeve v. Lisle (1902) A.C. 461

In Shankar Din v. Gokal Prasad (1912) ILR 34 ALL. 620 (P.C.) it was held that there is nothing in law to prevent the parties to a mortgage from coming to a subsequent arrangement qualifying the right to redeem. In that case a mortgage was executed in 1846, but in 1870 in consideration of some additional benefit reserved to the mortgagors under a compromise the mortgagors agreed to certain restrictions and conditions being imposed upon their right of redemption. When the mortgagors sought redemption of the mortgage of 1846 the Privy Council observed that whatever may have been the mortgagors'' right under the mortgage deed of 1846, the subsequent settlement which the parties deliberately came to in 1870 would govern the rights of parties, and that it would not be competent to the mortgagors to assert any right in derogation of the terms of the subsequent settlement. It is, therefore, clear that if a subsequent agreement has been entered into between the mortgagor and the mortgagee, the mortgagor could exercise the right of redemption and claim the property only burdened with the covenants and the obligations, rights and equities which he has expressly agreed.

The correctness of the extreme view contended on behalf of the mortgagor may well be examined by taking a simple illustration. Suppose, instead of the mortgagor conferring the power of sale at the time of the mortgage, this power of sale is conferred by a distinct subsequent agreement between the mortgagor and the mortgagee and suppose in pursuance of that subsequent agreement the mortgagee enters into a contract for the sale of the property and receives the price from a bona fide purchaser, would it be open to the mortgagor to file a suit for redemption ignoring the rights created in favour of the third party? What is the principle of law or equity which would entitle the mortgagor to give the go-by to the stipulation which he has solemnly entered into and on the basis of which innocent third parties have acted and paid consideration? Merely because the mortgagee has not executed the sale deed in favour of the third party the mortgagor cannot under the proviso to Section 60 file a suit for redemption and claim the property. In such a situation has not the mortgagor by his own conduct precluded himself from asserting the right of redemption? The agreement of sale entered into by the mortgagee in pursuance of the subsequent agreement is in law an agreement of sale entered into by the mortgagor himself. It is obvious that the mortgagor will be bound by such an agreement of gale, The general principles of contract law, in particular the law of agency, the principles of estoppel would undoubtedly come into play and estop the mortgagor from claiming an unqualified right of redemption. I have no doubt that if the right of sale has been conferred upon the mortgagee under a distinct subsequent agreement, dissociated from the original mortgage, the mortgagor would be clearly bound by any agreement of sale entered into by the mortgagee with a third party. The mortgagor cannot seek in aid the proviso to Section 60 to defeat the claims of third party.

The question next arises whether it would make any difference because the power of sale is conferred under the very mortgage deed. I am clearly of the opinion that it can make no difference whatsoever and any interpretation which would make Section 69 and this power of sale useless should be avoided. The securing of the right of the mortgagee, to realise his mortgage debt after it becomes due, is as valuable and important as securing the right of redemption of the mortgagor, with the result that the mortgagor will be bound by every condition or stipulation which he has agreed to, for securing the right of the mortgagee, so long as such a covenant is not regarded as a clog on the equity of redemption. The very fact that the statute, Section 69, itself provides for a power of sale being conferred under the terms of the mortgage shows that it is not regarded as a clog on the equity of redemption. Section 69, as amended by the Act of 1929, is substantially the same as the corresponding provisions of the Law of Property Act of 1925 in England, the relevant provisions being Sections 89, 101, 103 and 104 of the English. Act. Even though there is no provision in the English Acts corresponding to the proviso to Section 60 of the Transfer of Property Act, the law in England is undoubtedly the same. In XXVII Halsbury''s Laws of England, Simonds edition, page 158, dealing with the right of redemption the law is stated in these terms:

The right continues unless and until by judgment for foreclosure, or, in the case of a mortgage of land where the mortgagee is in possession, by the running of time, the title of the mortgagor is extinguished, or the interest of the mortgagor is destroyed by sale either under the process of the court or of a power in the mortgage incident to the security. (Italics mine.)

The significance of this will be noticed when I refer to the decision in Waring (Lord) v. London and Manchester Assurance Co. (1935) Ch. 310

This legal consequence of the mortgagor being bound by an executory contract of sale entered into by the mortgagee with a third party (in the exercise of the power of sale conferred under the mortgage deed) follows either by the application of the legal principles of the law relating to powers or the law of agency.

Power is a term of art denoting an authority vested in a person called the donee to deal with or dispose of property not his own. There can be no doubt that the power of sale conferred upon a mortgagee under Clauses (a), (b) and (c) of Section 69 (1) is a power, the only distinction being that under Clause (a) the power of sale is a necessary incident of the mortgage of the particular description de hors any stipulation between the parties while the power of sale u/s 69 (1)(b) and (c) rests solely upon the express contract between the parties. The power of sale is exercised by the mortgagee for his benefit when the mortgage money has become due, though the statute imposes certain conditions as to when and how a power of sale should be exercised. A mortgagee is entitled to sell upon such conditions as he thinks suitable for securing a sale of the property. He is not a trustee for the mortgagor as regards the exercise of the power of sale, though he must exercise the power in a prudent way with due regard to the interests of the mortgagor in the surplus sale proceeds. He has his own interests to consider as well as that of the mortgagor. The Court will not interfere with the exercise of the power provided he keeps himself within the terms of the power, exercises the power, bona fide for the purpose of realising the security and takes reasonable precautions to secure a proper price. It is sufficient if the mortgagee while complying with the terms of the power acts in good faith and he is not in duty bound to wait and watch the market and the fluctuations of the price so as to sell at the highest price. The mortgagee will not be restrained from exercising his power of sale because the mortgagor has commenced a redemption action or the mortgagor raises an objection as to the manner in which the sale of the properties is announced. A mortgagee, however, cannot proceed with the proclaimed sale if the mortgagor tenders and pays the amount claimed. The sale will be set aside if the mortgagee conducts the auction sale or concludes an agreement of sale by a private treaty after the mortgagor pays or tenders the amount claimed by the mortgagee. Vide XXVII Halsburys Laws of England, Simonds edition, page 301, paragraph 566.

In Ramakrishna Mudali v. The Official Assignee I.L.R(1922) Mad 774 a Bench of this Court has held that a private sale by a mortgagee in exercise of a power conferred by the mortgage deed is not affected by the doctrine of lis pendents embodied in Section 52 of the Transfer of Property Act and the sale is valid though made during the pendency of the redemption suit filed by the mortgagor. The position was stated thus at page 775:

The first argument is based upon Section 52 of the Transfer of Property Act and was this; that as the Plaintiff had started this suit for redemption before the sale to the fourth Defendant, the sale fell under the doctrine of lis pendens and, by virtue of the provisions of Section 52 of the Act, no rights could be conferred under it. It has been held in a series of cases in the Bombay High Court that the doctrine embodied in Section 52 of the Transfer of Property Act has no application whatever to a mortgagor who has given under that mortgage an express power of sale and that he cannot, by starting a suit-perhaps a perfectly hopeless suit for redemption-derogate from that which he has in express terms conferred upon the mortgagee by the instrument, namely, the power of sale. It appears to us that that is the only logical result that can be arrived at, and we agree with the view of the Bombay High Court that to hold otherwise would simply be to tear up the instrument which contains the contract agreed upon between the parties.

As the power of sale is conferred to secure the payment and realisation of the mortgage debt this power would determine and come to an end if the mortgage debt is paid before the exercise of the power. It is clear, therefore, that this event which would extinguish the power should happen before the power is exercised. But if the payment is not made before the exercise of the power the legal consequences of the exercise of the power should follow. It is by the application of this rule that the decisions have held that the last chance that is given to the mortgagor, is to tender and pay the amount before the auction is held. A power once exercised cannot be revoked. A careful perusal of Section 69(2)(a) and (6) would show that this power of sale of the mortgagee is a contingent and determinable power. The power can be exercised only on the contingency of the mortgagor not paying the principal money within three months after a notice in writing requiring payment of the same has been served on the mortgagor, or if the arrears of interest amount to atleast Rs. 500 and remain unpaid for three months after becoming due. If either of these contingencies occur the power can be exercised. Equally, the power would determine u/s 69(2) if the mortgagor pays the amount within theperiod of three months after such notice. It is plain, therefore, that after the expiry of three months, the power, which is contingent defeasible and determinable, becomes absolute and will have full, operation when it is exercised. Thereafter, it is not subject to any restriction or limitation. In my opinion, the plain language of Section 69(2)(a) itself is a powerful pointer to the conclusion that a payment made after the auction is held cannot affect the rights of the purchaser. It is perhaps by reason of this that in some of the cases it was held that the mortgagee is not bound to stop the sale even if the mortgagor tenders the amount at the time of the auction though beyond the expiry, of three months. But the later cases, however, have taken the view that if the money is paid at the latest at the time of the auction the mortgagee cannot proceed with the same. From this it follows, that looked at from any point of view, the latest point of time when the mortgagor can determine or put an end to the power of sale is to pay the money before the property is knocked down if it is a sale by public auction, and before any contract of sale is entered into if it is a sale by private treaty.

Reference may be made to the following statement of the law in XXX Halsbury''s Laws of England, Simonds edition, page 267, paragraph 507:

On the principle that a deed cannot be revoked unless it reserves a power of revocation, a power, once executed, cannot be revoked unless a power of revocation is reserved by the instrument executing the power, even if the instrument creating the power expressly authorises revocation.

Vide also page 306, Farwdl on Powers, third edition.

After the property had been auctioned and purchased by a third party it is the duty of the mortgagee to execute a proper deed of conveyance to implement the auction sale. This obligation on the part of the mortgagee can be enforced by the purchaser by a suit for specific performance. The law is stated, thus in XXX Halsbury''s Laws of England, Simonds edition, page 227, paragraph 411:

A covenant to exercise the power may be enforced by an action for specific performance; and, if the donee refuses to execute the deed in accordance with the decree, the court will declare him a trustee of the estates subject to the power, and will appoint some one to execute the appointment for him. (Italics mine).

This right of specific performance available to the purchaser has been applied so as to hold that the rights of parties will date back to the auction sale. Dealing with contracts, to exercise contingent powers, the law is stated in these terms in XXX Halsbury''s Laws of England, Simonds edition, page 263, paragraph 492:

If, before the event happens, the donee covenants for valuable consideration to exercise the power and fails to do so, the court will, if the power is general and exercisable by deed, treat the power as properly executed as from the date of the happening of the event.

When the property is sold and the purchase price has been paid by the purchaser, it is clear that the donee of the power, the mortgagee, has fully exercised the power and he is bound to implement the transaction by executing a deed of conveyance and registering the same. The mortgagor cannot derogate from his grant and revoke the power which has been acted upon. In fact, at that stage he has no power of revocation at all and whatever right he may have, is only on the sale proceeds. If the mortgagee at his own instance or under a mandate from mortgagor, thereafter, refuses to complete the transaction by the execution and registration of the sale deed, the purchaser will be entitled to claim specific performance. In Farwett on Powers, third edition, page 314 Section 58, the position is stated thus:

It is convenient here to consider the effect of a covenant or contract to exercise a power. Such a contract is some times spoken of as "a good execution in equity", but this is only accurate when the contract is of such a kind, and the circumstances are such, that a proper case can presently be made for a decree of specific performance.

The learned author gives at page 315 instances of specific performance granted, of contracts for valuable consideration, to exercise a power. Vide also XXX Halsbury''s Laws of England, Simonds edition, page 241, paragraph 444. I may refer to the following observations of Sib Richard Abden in Jackson v. Jackson 29 E.R. 988

Can his death then make any difference, or shall a remainder-man now prevent the carrying the equity of the Court into execution? It seems that where a man has a power and covenants to act, the Court will hold the estate bound. Andrews v. Emmot (29) E.R. 162 is the strongest case; it was a case of more volunteers, and the Court does not act for them in the plenitude of its equity: the husband there had a power to act upon the wife''s estate, if he thought fit: he made a will, not referring to the power, but it was argued he must have meant it, because otherwise his effects would not satisfy his legacies: Lord Kenyon cited several cases to show, that though it was not necessary to recite the power, yet there must be something to show the testator meant to refer to it, particularly the title power, in 2 Eq. Abr. I fully agree with Lord Kenyon as to those dicta. In Coventry v. Coventry (as reported in the end of Maxims in Equity), the opinion of Sir Joseph Jekyll is strongly expressed "since the statute, if cestuique, use, for us life, with a power, covenants for a valuable consideration, to execute his power, and in the execution it proves defective, this Court aids the execution of it and makes it effectual; nay, further, if he does not execute his power at all, this Court, I conceive, ought to decree an execution of that covenant, as it would be of any other covenant for a consideration, and compel him to execute his power; for as the justice of the Court makes good a defective execution against the remainder-man, so if the tenant for life dies before the execution, I conceive there is the same justice due to the purchaser against the remainder-man, after his remainder takes place, as there was before, for by the covenant the purchaser has a lien upon the estate into whose hands so ever it comes.

My conclusion, therefore, is that the power conferred upon the mortgagee is determined only in the event of the mortgagor paying the debt before the exercise of such a power, and that, if, in default of such payment, the power is exercised, neither the mortgagor nor the mortgagee can derogate from the exercise of the power and a third party purchaser who has paid consideration in good faith will be clearly entitled to obtain specific performance. The property in the hands of the mortgagor will be bound by the contract of sale which has sprung into existence as a result of a valid exercise of the power of sale.

The same conclusion is reached when we notice the elements of the law of agency which are involved in the power of sale conferred upon the mortgagee u/s 69. Where the authority of an agent is given for valuable consideration, for the purpose of effectuating any security or of protecting or securing the interests of the agent, it is irrevocable during the subsistence of such security or interest. Vide Bows-tad on Agency, twelfth edition, page 301, Article 137. The first illustration which the learned author has given in support of this proposition at page 302 is as follows:

A, being indebted to B, gives him a power of attorney to sell certain land to discharge his debt out of the purchase-money. The power is irrevocable. Vide Gaussen v. Morton (1830) 10 B.&C. 731

Reference may be made to the statement of the law to the similar effect in I Halsbury''s Laws of England, Simonds edition, page 238, paragraph 531:

Authority coupled with interest: Where the agency is created by deed, or for valuable consideration, and the authority is given to effectuate a security or to secure the interest of the agent, the authority cannot be revoked. Thus if an agreement is entered into on a sufficient consideration whereby an authority is given for the purpose of securing some benefit to the donee of the authority such an authority is irrevocable, on the ground that it is coupled with an interest.

These principles touching the termination or the non-revocability of the authority of an agent are embodied in Sections 202 to 204 of the Indian Contract Act. Section 202 provides that if the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot in the absence of an express contract be terminated to the prejudice of such interest. Illustration (a) to Section 202 directly applies to the case on hand. Section 203 provides that the principal can (subject to Section 202) revoke the authority given to the agent at any time before the authority has been exercised so as to bind the principal. This embodies the principle laid down in several cases in England which have held that the authority of the agent becomes absolute and irrevocable as soon as the agent enters into a binding contract with a third party for valuable consideration Section 204 is a further extension of the principles contained in Sections 202 and 203 and it says that the principal cannot revoke an authority given to his agent after the authority had been partly exercised so far as regards such acts and obligations as arise from acts already done in the agency. Illustration (a) to Section 201 of the Contract Act is as follows:

A authorizes B to buy 1,000 bales of cotton on account of A and to pay for it out of A''s money remaining in B''s hands. B buys 1,000 bales of cotton in his own name, so as to make himself personally liable for price. A cannot revoke B''s authority so far as regards payment for the cotton.

This emphasises that if the agency has been partly exercised it cannot be revoked. On a plain reading of Sections 202 to 204 of the Contract Act and the illustrations thereto it is clear beyond doubt that the power of sale conferred upon the mortgagee is an agency coupled with interest and, therefore, cannot be revoked so to nullify the effects of the acts done by the agent, the mortgagee, to secure his interests. It is sufficient to refer to the recent Bench decision of the Patna High Court in Prahlad Pd. Modi and Another Vs. Tikaitni Faldani Kumari and Another, , which has dealt with the scope of Section 202 of the Contract Act where the agency was created to secure the interests of a person who had advanced moneys to another. Vide observations at page 237.

I shall now take up the two cases cited at the Bar and the first in order comes the decision in Waring (Lord) v. London and Manchester Assurance Co. (1935) Ch. 310 strongly relied upon by Mr. V. Thiagarajan. The following portion of the head-note brings out the ratio of that decision:

The Court will not grant to a mortgagor tendering the moneys due under the mortgage an injunction restraining the mortgagee from completing by conveyance a contract to sell the mortgaged property in exercise of his power of sale unless it is proved that the mortgagee entered into the contract in bad faith. ...a mortgagee''s exercise of his power u/s 101, Sub-section (1), paragraph (i), of the Law of Property Act, 1925, to sell the mortgaged property by public auction or private contract is binding on the mortgagor before completion unless it is proved that he exercised it in bad faith:

...the fact that a contract for sale was entered into at an under value is not by itself enough to prove bad faith.

In that case, Lord Waring created a mortgage in favour of London Assurance Company on 12th November 1929 securing a large sum of 180,000 � the mortgage deed containing a power of sale. The mortgagor did not pay the amount within the time and on several occasions, the mortgagee was pressing for payment, threatening to exchange contracts of sale with prospective purchasers. Every time this was put off by the mortgagor in an attempt to make some other arrangement for payment of the mortgage debt. After having waited sufficiently long the board of directors of the company entered into a contract for the sale of the property on 3rd October 1934; the purchase price was fixed at 180,000 � and the sale transaction was to be completed on 24th December 1934. This exchange of contracts was duly intimated to the mortgagor. On November 21, 1934 the mortgagor, the Plaintiff, commenced the proceeding for an injunction restraining the company and the purchaser from carrying into effect the contract of sale entered into on 3rd October 1934, with an offer to pay the mortgage debt and redeem the mortgage. The proceeding was dismissed and the head-note extracted above contains the ratio of the decision. As the ratio underlying this decision has not been correctly appreciated by the Bench of the Bombay High Court in Abraham Ezra v. Abdul Latiff I.L.R (1944) Bom 549 it is necessary to set out in detail the arguments presented by Counsel on behalf of the mortgagor in Waring (Lord) v. London and Manchester Assurance Co. (1935) Ch. 310 The arguments of K. C. Evershed, on behalf of the mortgagor may be summed up as follows: (i) This is not a case in which the Court''s assistance was sought after the sale was completed but in an earlier stage, (ii) Under the Property Act of 1925 there is nothing whatever to shut out the equity of redemption until conveyance, and until conveyance, the mortgagor is entitled to pay the moneys due and have the contract set aside. (iii) The purchaser knows that he is buying from a mortgagee exercising the power of sale and, therefore, takes subject to the risk of the mortgagor coming to redeem before the completion, (iv) Contract for sale by the mortgagee does not bar the right of redemption. The equity of redemption is not barred by a sale until the moment of completion. Notwithstanding, the exercise of the power of sale it is only the completion that extinguishes the equity of redemption, (v) Section 104 (2) of the Property Act of 1925 which, provides that the title of the purchaser shall not be impeachable where the conveyance is made in the exercise of a power of sale conferred and so the Act emphasises that a conveyance made in the exercise of the power of sale is the crucial thing, (vi) Sections 89, 101, 104 of the Property Act do not exclude the equity of redemption before on actual conveyance. I am not setting out the arguments on behalf of the company (the mortgagee) as they have been accepted and fully brought out in the judgment of Crossman, J. Crossman J., negativing the contention of the mortgagor, put the matter thus at page 317:

The contract is an absolute contract, not conditional in any way, and the sale is expressed to be made by the company as mortgagee. If, before the date of the contract, the Plaintiff had tendered the principal with interest and costs, or had paid it into Court in proceedings, then, if the company had continued to take steps to enter into a contract for sale, or had purported to do so, the Plaintiff would, in my opinion, have been entitled to an injunction restraining it from doing so. After a contract has been entered into, however, it is, in my judgment, perfectly clear (subject to what has been said to me to-day) that the mortgagee (in the present case, the company) can be restrained from completing only on the ground that he has not acted in good faith and that the sale is therefore liable to be set aside. Counsel for the Plaintiff, who has argued the case most excellently, submitted that, notwithstanding that the company exercised its power of sale by entering into the contract, the Plaintiff''s equity of redemption has not been extinguished, as there has been no completion by conveyance, and that, pending completion, the Plaintiff is still entitled to redeem, that is, to have the property reconveyed to him on payment of principal, interest and costs. Counsel is relying, to some extent, on the provisions of the Law of Property Act, 1925, which creates a statutory power of sale. In my judgment, Section 101 of that Act, which gives to a mortgagee power to sell the mortgaged property, is perfectly clear, and means that the mortgagee has power to sell out and out, by private contract or by auction, and subsequently to complete by conveyance; and the power to sell is, I think, a power by selling to bind the mortgagor. If that were not so, the extraordinary result would follow that every purchaser from a mortgagee would in effect, be getting a conditional contract liable at any time to be set aside by the mortgagor''s coming in and paying the principal, interest and costs. Such a result would make it impossible for a mortgagee, in the ordinary course of events, to sell unless he was in a position to promise that completion should take place immediately or on the day after the contract, and there would have to be a rush for completion in order to defeat a possible claim by the mortgagor.

It seems to me impossible seriously to suggest that the mortgagor''s equity of redemption remains in force pending completion of the sale by conveyance. The only effect of the conveyance is to put the legal estate entirely in the purchaser; that follows from Section 104, Sub-section (1) of the Law of Property Act, 1925, which provides that a mortgagee shall have power to convey the legal estate; and the whole legal estate can be conveyed free from all estates, interests, and rights to which the mortgagee has priority. Section 104, Sub-Section 2, upon which also Counsel for the Plaintiff relied, does not seem to me to affect the question at all. Its purpose is simply to protect the purchaser and to make it unnecessary for him, pending completion and during investigation of title, to ascertain whether the power of sale has become exercisable. Of course, if the purchaser becomes aware, during thatperiod, of any facts showing that the power of sale is not exercisable, or that there is some impropriety in the sale, then, in my judgment, he gets no good title on taking the conveyance. The result in the present case is, in my judgment, that the sale effected by the contract, assuming, for the moment, that there is no objection to it on any other ground, binds the Plaintiff, and that it is too late after the sale for him to tender the mortgage money and become entitled to have the property reconveyed to him.

From the foregoing it will be seen that the decision did not turn or rest upon the doctrine of English law that an agreement of sale creates an equitable interest in the purchaser, but upon the main and the only ground, whether or not the mortgagor is bound by an agreement of sale entered into by the mortgagee. Even-though, there is no corresponding statutory provision like the proviso to Section 60 of the Transfer of Property Act, considerable and prominent stress was undoubtedly laid upon the basic principle of mortgage law that it is only an actual conveyance that would extinguish. the equity of redemption and till that event the right of redemption would continue to subsist in the mortgagor. It is to emphasise this aspect that a conveyance is the crucial thing, that pointed reliance was placed upon the opening words of Section 104(2) where the conveyance is made in exercise of the power of sale conferred by this Act. In other words, the learned Judge Crossman J., was fully alive to the basic principle of English law, that the right to redeem continues unless and until there is a judgment for foreclosure or the title of the mortgagor is extinguished or the interests of the mortgagor are destroyed by sale either under the process of Court or by a power in the mortgagee incident to the security Vide XXVII Halsbury''s Laws of England, Simonds edition, page 158, paragraph 243.

Having due regard to the nature of the contentions and arguments advanced on behalf of the mortgagor which were rejected and the ultimate decision, in Waring (Lord) v. London and Manchester Assurance Co. (1935). Ch 310 I am unable to see how that case can be distinguished as not applicable to a power of sale exercised u/s 69 of the Transfer of Property Act. In my opinion, this decision, with great respect, lays down sound law, and is in accord with the fundamental principles of law, law of contracts, agency, estoppal, the doctrine of powers and the mortgage law. The fact that under English law the contract of sale creates an equitable interest while no such equitable interest is created in India, the right merely resting on a contract, cannot make any difference.

In Abraham Ezra v. Abdul Latiff ILR (1944) Bom. 549 a mortgage was created for securing a sum of Rs. 35,000 the mortgage deed containing the usual clause entitling the mortgagee to sell the property without reference to Court. The due date for the payment of the amount expired in June 1937 and 26th April 1943, the mortgagee intimated the mortgagor that the former had entered unto an agreement to sell the property mortgaged for Rs. 48,000 to a third party. On 24th June 1954 the mortgagor filed the suit for redemption of the mortgaged properties and also for an injunction restraining the mortgagee from selling the property to the purchaser. This claim for redemption by the mortgagor overriding the contract of sale was upheld by the Bench of the Bombay High Court consisting of Stone C. J., and Kania J., as he then was, affirming the decision of Chagla J., as he then was. Stone C. J., rested his decision on the following two grounds: (i) In England in the case of an agreement for sale an equitable interest is created in the property and, therefore, it is a question of competing equities and in the case of competing equities the Court will assist the mortgagor unless there is corruption and collusion. In India, the case is quite different. There is no equity or right in the property created in favour of the proposed purchaser, and that the whole thing is regulated by the words in Section 60 has not been extinguished by the act of parties, (ii) No case has been found in which in this Country an action for specific performance has been decreed and u/s 12 of the Specific Relief Act the Court must exercise the discretion and withhold specific performance as a contract by the mortgagee with an intending purchaser does not extinguish the equity of redemption. With great respect to the learned Chief Justice I must observe that the ground on which the decision in Waring (Lord) v. London and Manchester Assurance Co. (1935) Ch. 310 was distinguished is not correct. I have already adverted to this aspect that the English decision was not rested on the English doctrine that an agreement of sale created an equitable interest, but that the decision, was rendered after being fully alive to the principle of mortgage law that till the equity of redemption was extinguished the mortgagor would have the right to redeem. In other words, the English decision was rendered despite the corresponding rule of law, which is embodied in India in the proviso to Section 60 in the material words has not been extinguished by the act of parties. In England too the law is not different. It is identical in all respects as in India. See Section 60. In India too, the question of competing equities does pointedly arise. An agreement of sale undoubtedly and beyond question creates a valuable right in the proposed purchaser. In many cases, as in the instant case, the prospective purchaser might have parted with valuable consideration, several thousands of rupees, complying with the terms of the auction, all the while relying upon the power of sale voluntarily and expressly conferred by the mortgagor. As between the mortgagor and the prospective purchaser, I have no doubt the competing equity is clearly in favour of the proposed purchaser. I see no principle of law or justice why the mortgagor should be allowed to derogate from his grant. The position becomes a fortiori when, as observed earlier, a locus penitentiae is given to the mortgagor only up to aperiod of three months as specified in the notice issued u/s 69(2)(a). After that stage is reached, I can see no equity in favour of the mortgagor to supersede the claims of proposed purchaser. A reference to the facts of the instant case forcibly brings out this aspect. In the suit, Original Suit No. 880 of 1962 filed by the mortgagor she got an interim stay restraining the mortgagee from exercising the power of sale. But that suit was ultimately dismissed. Is it not clear that thereafter atleast, the mortgagee is entitled to sell the property? Otherwise we will be attaching no significance, no meaning, to the fact, that the mortgagor filed a suit questioning the right of the mortgagee to sell but the latter successfully asserted and established his right to do so. In that set up, how can there be any doubt that the competing equity is all in favour of the mortgagee. With great respect again, I am unable to agree with the reasoning based upon Section 12 of this Specific Relief Act. What I observed earlier is sufficient to show that if at all there is any discretion to be exercised it should be exercised in favour of the proposed purchaser. In the face of the determinable event determining the power of sale as specified in Section 69(2)(a), there is no scope for the Court to exercise a discretion u/s 12 of the Specific Relief Act in favour of the mortgagor if there is no bad faith or oppressive conduct on the part of the mortgagee.

Kania J., (as he then was), dealt with the matter on three grounds: (i) The mortgagee was not acting as an agent of the mortgagor, (ii) In the contract of sale entered into it is only the act of the mortgagee and not the act of the parties, (iii) The difference between the English and the Indian law on the incidents of a contract of sale. In repelling the argument, that it is not open to the mortgagor to resile from the contract of sale on the ground that the mortgagee has acted as an agent of the mortgagor the learned Judge observed as follows at page 555:

In my opinion while conceding that what is sold, by the conveyance is what is contracted to be sold it does not mean, that in exercising the power of sale the mortgagee acts as the agent of the mortgagor. The mortgagee exercises his right under a totally superior claim, which is not under the mortgagor but against him. Indeed in most cases the sale is against the mortgagor''s wishes. If the position of agency were accepted, a difficult question may arise if the mortgagor countermanded the authority of the mortgagee to sell before the contract of sale was made. No authority is cited to support the contention that in entering into the contract of sale the mortgagee acts as the agent of the mortgagor and in my opinion the position is not correct.

With respect, this reasoning is not correct. The assumption of the learned Judge that if the mortgagor countermanded the authority of the mortgagee the authority would come to an end, is not correct. Again, the fact, that the mortgagee will be exercising the power of sale against the mortgagor''s wishes will not make the mortgagee any the less an agent coupled with interest. In almost all cases of agency coupled with interest governed by Sections 202 to 204 of the Contract Act the principal may not agree at all. But * surely, that does not mean the agent cannot sell or when the agent sells the property to secure his interests Loaets in any opacity other than as an agent. On the same process of reasoning I am of the opinion that when the contract of sale is entered into it is an act of both the mortgagor and the mortgagee. Even if it were to be regarded as the sole act of the mortgagee, it is the act of the donee of the power exercising his power. For instance if the property is ultimately sold and a conveyance is executed the sale deed is executed by the mortgagee alone. Vide Encyclopaedia of Forms and Precedents, volume XII, form 133, page 579. It is not necessary for the mortgagor to pin in the conveyance, and it cannot be said that because the mortgagee alone executes the conveyance the equity of redemption still subsists as the condition of the act of parties has not been satisfied. I have said enough to show how, with great respect, to the learned Judges of the Bombay High Court, I am unable to share their view and their perspective of approach with regard to the relevancy and the application of the decision in Waring (Lord) v. London and Manchester Assurance Co. (1935) Ch 310 to cases arising in India.

I may also refer to the following statement of the law in Lindley on Partnership, twelfth edition, page 402:

The position of an agent who has already acted on his instructions, and has thereby incurred a legal obligation to third parties, is different. The better opinion is that in this case he is not bound on the command of his principal to stop short and refuse to perform the obligation incurred. There is no doubt that, as between himself and his principal, an agent entitled to obey the counter-order, and to obtain a full indemnity from the consequences of so doing. But it is apprehended that he is at liberty so far to carry out the instructions on which he has begun to act as may be necessary to relieve himself from all the legal liabilities incurred before notice of the countermand, and having done so, to insist upon indemnity and reimbursement as if the principal had not changed his instructions. Nemo potest mutare consilium suum in alterius injuriam is the maxim of the civil law, and expresses the correct principle for the decision of these cases.

To a similar effect, that the agent is not bound on the command of his principal to decline to perform the obligation already incurred by him in pursuance of the authority conferred, and that the agent is bound to complete and perform the act already begun by him on the basis of the authority.

Learned Counsel for the first Defendant-mortgagor, also relied upon the later Bench decision of the Bombay High Court in Abraham Ezra Issac Mansoor Vs. Abdul Mahomed Alibhai, in support of his contention that an agreement to sell property is conditional on the mortgagor not redeeming the property u/s 60 of the Transfer of Property Act. It is unnecessary to discuss the reasonings on this decision as it is merely an off-shoot of the earlier case in Abraham Ezra v. Abdul Latiff ILR (1944). Bom.549 In the later case the proposed purchaser filed a suit for damages and the Bench held that the agreement to sell was not an absolute agreement but a conditional one. In the setting of the controversy in the second stage of the litigation there was no occasion for the learned Judges to consider the matter with an independent approach and to express their opinion, as, between the parties, they were bound by the effect of the decision in Abraham Ezra v. Abdul Latiff ILR (1944). Bom.549. It is, However, significant to note that. Chagla C.J., observed that when the mortgagee exercises the power of sale he conveys the right, title and interest of the mortgagee himself and the equity of redemption of the mortgagor which the mortgagee is conveying as the agent of the mortgager, a view different from that of Kania J., in Abraham Ezra v. Abdul Latiff ILR (1944). Bom.549 Bhagwati J., has also proceeded on the footing that till the equity of redemption was extinguished u/s 60, the contract of sale entered into by the mortgagee was a conditional one. He too discussed the question on the basis of the finality reached by the appellate Court in Abraham Ezra v. Abdul Latiff I.L.R.(1944). Bom.549 It is, therefore, clear that this later decision does not advance any step in the argument on behalf of the first Defendant.

The decision in Radhakisan Laxminarayan Toshniwal Vs. Shridhar Ramchandra Alshi and Others, is not of much assistance. This decision held that u/s 54 of the Transfer of Property Act a contract of sale does not of itself create any interest in or charge on immovable property. This aspect of the matter has already been dealt with earlier as not being a circumstance to negative the claims of the purchaser.

Learned Counsel for the first Defendant next relied upon certain observations in the decision of the Federal Court in Thota China Subba Rao and Ors. v. Mattapalli Raju and Ors. (1949) F.C.R. 484 reversing the Bench decision of this Court in Raju v. Raghavayya ILR (1945). Mad.803 I am unable to regard this decision as supporting the contention of the first Defendant. In that case a suit for redemption was dropped and abandoned under Order XXIII, Rule 1, CPC as a result of the compromise without the mortgagor obtaining the permission from the Court to bring a fresh suit. The compromise which resulted in the withdrawal of the suit for redemption was evidenced by two agreements. Under one agreement executed by the mortgagor in favour of the mortgagee it was provided that the mortgagor shall execute a sale deed of the properties within three months. The second agreement was executed by the mortgagee as part of this compromise in favour of the mortgagor''s wife that in consideration of the wife causing an agreement to be executed by her husband to sell the properties to the mortgagee, the mortgagee would execute in favour of the wife a gift deed of certain other properties. Following execution of these two agreements the mortgagor''s suit for redemption was allowed to be dismissed with costs on 11th November 1932. But no registered deeds were executed as provided under the compromise. Subsequently the mortgagor instituted the suit for redemption claiming at the same time benefits under the Madras Debt Relief Act. The High Court hold that the bar under Order XXIII, Rule 1, CPC against the maintainability of the second suit (as no permission of the Court was obtained to institute a fresh suit) would prevail and override the provisions of Section 60 of the Transfer of Property Act. The High Court decided against the mortgagor resting its decision upon the legal consequences and the way in which the mortgagor''s suit was dismissed on the earlier occasion, as operating as a bar to the claim for redemption. The High Court did not express any opinion on the alternative contentions based upon the two agreements which were executed between the mortgagor and his wife and the mortgagee and as to how far that would operate as a bar to the mortgagor claiming a right for redemption u/s 60. The Federal Court which reversed the decision of the High Court, however, (towards the end of the judgment) observed that the two agreements on their terms did not have that effect of extinguishing the right of redemption. The fact that the mortgagor was not even a party to the document in favour of the wife was specifically adverted to and emphasised by the Federal Court. The following observation at page 498:

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.

should be understood in the light of the finding which the Federal Court recorded that the evidence on record showed that soon after the dismissal of the mortgagor''s 1929 suit the mortgagees repudiated the agreements and thereafter the parties adopted from time to time such attitude in respect of the said agreements as it suited them for the moment, and that there was no satisfactory evidence to hold that there was an enforceable compromise. I am not inclined to take these observations detached from their context, and hold that this decision is authority for the position that in the absence of a regular deed of conveyance the mortgagor could exercise the right of redemption regardless of everything that has happened and the obligations which the mortgagee had incurred relying upon the power of sale. It is significant to notice that the Federal Court rested its decision mainly on the ground that Order XXIII, Rule 1, CPC would not operate as a bar preferring the view of the Bombay High Court and overruling the view of the Madras High Court. The crucial and the substantial discussion in the judgment related to this aspect of the question only, i.e., a suit for redemption like a suit for partition is based upon a recurring and continuing cause of action and till the right of redemption is extinguished any number of actions can be brought.

I must at this stage advert to one other important feature in the instant case which distinguishes it from the decision in Abraham Ezra v. Abdul Latiff ILR 1944 Bom. 549 In the instant case, there is a suit for redemption as well as a suit for specific performance. I an unable to see what answer or defence the mortgagor can possibly have in the suit for specific performance. In the suit Civil Suit No. 193 of 1963 for redemption the mortgagor has not impleaded the proposed purchaser. Even though no interest in immovable property has been created in favour of Mrs. Vein there can be no doubt about it that valuable rights have accrued to her and she has parted with a large sum of money Rs. 52,000. It is impossible to grant any relief to the mortgager in her suit for redemption ignoring the rights of the proposed purchaser when the latter has not been impleaded with the result that so far as the purchaser is concerned her rights will have to be worked out as if no suit for redemption had been filed. In my opinion the non-joinder of Mrs. Velu in the suit for redemption is sufficient to entail a dismissal of that suit. Even if she had been impleaded, from what I have observed earlier, it is clear that the purchaser is entitled to have the transaction completed by the execution and registration of the sale deed This aspect of the significance of the suit for specific performance was noticed in the decision of the Federal Court and that was why the doctrine of part performance was invoked based upon the two agreements which passed between the parties. But on the facts, the Federal Court held that a case for part performance had not been made out I am emphasising this to show that the proposed purchaser herself has filed a suit for specific performance and it has to be decreed.

The matter can also be looked at from one other perspective. Even if the right of redemption of the mortgagor is subsisting because he or she, still, continue to be the owner of the property it does not mean that in a suit for redemption he or she is entitled to ignore lawful transactions entered into by the mortgagee which in certain circumstances would enure even after redemption. For instance, suppose the mortgagee had been empowered to grant a lease extending a large number of years, say fifty years. If the mortgagor files a suit before the expiry of this leaseperiod undoubtedly he will be entitled to redemption and all the reliefs flowing therefrom, but he cannot disturb the lessee''s possession, but he would be bound by the terms of the lease created by the mortgagee. In other words his title will be restored back to him extinguishing the title of the mortgagee but at the same time subject to rights created in favour of third parties. What applies to a valid agreement of lease would equally apply to a valid agreement for the sale of the property. In other words in a suit for redemption the mortgagor will be bound by the agreement of sale but his rights will be transferred to the sale proceeds, if paid, or to recover the same, if still payable. It may be, in certain cases, the mortgage may comprise several items of properties. The mortgage may be an anomalous mortgage in which mortgagee would have been put in possession of the property and would be liable to render an account of the income. It may be, the mortgagor may be entitled to the provisions of the Debt Relief Act. If in such a situation the mortgagee exercising the power of sale enters into a contract of sale in respect of one item as being sufficient to satisfy his claim, in a suit for redemption, the mortgagor would undoubtedly have a right to redeem, because there are other secured properties and there is the liability of the mortgagee to render an account and equities will have, lobe worked out as provided under Order XXXIV, CPC and the provisions of the Transfer of Property Act, particularly section 60. From this it will he seen that in one sense the right of redemption may still subsist but the right of the mortgagor is transferred over to the sale proceeds in respect of property agreed to be sold, and a right to the properties themselves, which arc not covered by such an agreement. it may be, that a portion of the property would have been acquired by the land acquisition, and the mortgagee would have received compensation and side by side a portion of the property would have been sold in the exercise of the right of sale. In all these cases the light of redemption would subsist and is exercised over the assets, i.e., sale proceeds and the other properties.

While concluding discussion on this aspect of the matter I may refer to the decision in Warner v. Jacob (1882) 20 Ch.D.220 In that case one Warner executed a mortgage on 5th Juno 1870 to secure � 3,500 advanced on the mortgage of certain hereditaments the mortgage deed containing a power of sale in the usual form. Warner did not pay the debt and was in arrears. On 23rd October 1870 the mortgagees gave notice to Warner that they intended to sell and on 8th November they contracted to sell to one Boyd for 3,500 �. On 10th January 1881 Warner brought this action against the mortgagee and against the purchaser for setting aside the sale alleging that he, the mortgagor, was only in temporary difficulties and could have Meenakshi borrowed money to pay off the mortgage debt. He sought redemption alleging that the agreement of sale with Boyd was not binding and that the sale was at an under-value. On these facts it was held that there was no collusion or mala fides on the part of the mortgagees and that the sale under circumstances to Boyd was the best thing that the mortgagees could do, and that the sale to Boyd could not be sot aside. Kay J., explains the position in these terms at page 224:

The result seems to be that a mortgagee is (strictly speaking not a trustee of the power of sale. It is a power given to him for his own benefit, to enable him the better realise his debt. If he exercises it bonafide for that purpose, without corruption or collusion with the purchaser, the Court will not interfere even though the sale be very disadvantageous, unless indeed the price is so low as in itself to be evidence of fraud.

The learned Judge observed that if the mortgagor was unable to pay before the date of the sale the mortgagees were under no obligation to wait and had a perfect right to exercise their power of sale to realise their debt. The important thing to notice in this decision is that the action in so far as it sought the relief of setting aside the sale as against the purchaser Boyd was dismissed but as against the mortgagees there was a decree for redemption with the usual provision and direction for the purchase money to be brought into account. From this it follows that in such a situation the mortgagor''s right is transferred to the sale proceeds for working out his right of redemption while at the same time the purchaser is entitled to his rights under v. the purchase.

I am not inclined to accept the view which would make the rights of a prospective purchaser in pursuance of an agreement of sale so precarious as to be defeated by a suit for redemption, as the consequences and repercussions will be highly detrimental and pro-judicial to the interests of the mortgagor himself. It is here that a harmonious reading and construction of Sections 60 and 69 is clearly called for. Section 69 (3) furnishes the answer. The important object underlying Section 69 (3) is to secure an unimpeachable title to the purchaser even though there may be some irregularity and defect in the manner in which the mortgagee might have exercised the power of sale. If the title which the purchaser secures is made doubtful or precarious and easily defeasible by the mortgagor picking holes in the way in which the mortgagee exercised the power of sale, there will be no incentive or inducement for persons coming forward to purchase the property. There won''t be scope for free competition and naturally the property won''t be sold for its proper price and it would, therefore, recoil upon the mortgagor. It is obvious that only if there is security and certainty about the rights which flow from a successful bid that people will readily and freely come forward to pay the real market price. I am clearly of the opinion that it is in this background, that the Legislature has provided in Section 69 (2) the limit upto which the mortgagor''s power of sale could be stopped from being exercised. Beyond that limit the interests of the mortgagor themselves require that the title of the purchaser should be certain definite, and capable of enforcement in a Court of law.

After the entire price had been paid the law says a deed must be executed and the purchaser has got a right to demand such a conveyance and when the purchaser files the suit for specific performance he is demanding only what is his legal right and what the law says he is entitled to. Some delay on his part or some default on the part of the mortgagee cannot possibly extinguish the right of the purchaser. There is no principle of law, nor justice, which warrants such a view.

It is unnecessary to refer to the cases which have arisen under Order XXXIV, Rule 5, read with Order XXI, Rule 89, Code of Civil Procedure. In those cases it has been hold that even though the time for payment of thirty days under Order XXI, Rule 89, has expired, the mortgagor has got a right to redeem by paying the amount till the execution sale is confirmed. These oases proceed on an entirely different principle based upon the language of Order XXXIV, Rule 5, and the necessity for the confirmation of the sale and will have no application to cases of a mortgagee exercising the power of sale u/s 69, Civil Procedure. Code.

It only remains to deal with the rights of the fifth Defendant, the lessee. The lease deed, exhibit P-7, dated 17th September 1962, is for aperiod of five years. The lease is for the construction of a soda factory, and I have no doubt that it cannot enure after the sale in favour of the Plaintiff. The lease is entirely for a different purpose, and not only alters the character of the land but by being put to a different user, but it would affect utility and the value of the land and the building The mortgagor has no right to lease out the vacant site around the residential bungalow for the purpose of installing a soda factory. It is sufficient to refer to the decision of the Supreme Court in Kamakshaya Narayan v. Chohan Ram (1952) S.C.J. 553, 558 I, therefore, hold that this lease will not be binding upon the Plaintiff and the fifth Defendant is bound to surrender possession of the property to the Plaintiff I, however, grant the fifth Defendant one year time to vacate and hand over possession to the Plaintiff.

The result, therefore, is as follows: Civil Suit No. 175 of 1963;

On issues 1 and 2, I find that the Plaintiff is entitled to specific performance by reason of the acceptance of her highest bid in the auction sale, and Defendants ) and 2 are hereby directed to execute the registered deed of sale conveying the suit property to the Plaintiff for the sum of Rs. 52,000. The first Defendant is not entitled to redeem the mortgage in derogation of the rights of the Plaintiff. The first Defendant, however, will be entitled to the balance of the sale proceeds after discharging the entire amount due to the second Defendant and the amount due to the third and fourth Defendants.

On issue No. 4, I find against the fifth Defendant and hold that there is no evidence whatsoever to hold that the Plaintiff should not be allowed to question the validity of the lease. There is no evidence to connect the Plaintiff with the construction of the superstructure made by the fifth Defendant.

On issue No. 5, I hold (i) that the Plaintiff will be entitled to a decree for specific performance as prayed for in paragraph 12 (a); (ii) a declaration that the lease deed executed in favour of the fifth Defendant cannot affect the right of the Plaintiff, and that the fifth Defendant is liable to quit and deliver vacant possession of the portion of the schedule-mentioned property in his occupation within aperiod of one year; (iii) Defendants 1 and 5 are directed to deliver possession of the suit property set out in the schedule to the Plaintiff; (iv) out of the sale proceeds the Plaintiff will be entitled to his costs of the suit, Court-fee as well as Counsel''s fee one set, senior and junior. The Defendants in Civil Suit No. 175 of 1963 shall bear their own costs.

Civil Suit No. 193 of 1963. On issue No. 1, I find the suit is maintainable. But the Plaintiff will not have a right of redemption as prayed for by her.

Issue No. 3 is not pressed, and the finding is that the auction sale is valid and proper.

Issue No. 4 The suit is bad for non-joinder of the auction purchaser.

Issue No. 1 As regards the amount due to the Plaintiff, the Plaintiff will file a memorandum of calculation within two days. The auctioneers, Murray and Company, are directed to deposit the entire sale proceeds into Court within a week from today, after deducting their commission and their expenses, including their charges for this auction as well as the steps taken by them on the earlier occasion to auction the property. The case will be posted to next Thursday (30th September 1965) for giving appropriate directions as regards the distribution of the sale proceeds. The third and fourth Defendants will make their claims. In the meanwhile the Plaintiff in Civil Suit No. 175 of 1963 is permitted to bill the costs without the certified copy of the decree and the bill will be taxed to enable the Plaintiff to recover her costs out of the sale proceeds before any distribution is made.

In Civil Suit No. 193 of 1963, the parties shall bear their own costs.