R. Govindoo vs N. Ramaehande

Qamar Hasan, J.—This is an appeal on behalf of the Plaintiff assailing the correctness of the judgment and decree, dated 19th July, 1955, of the District Judge Hyderabad, whereby he affirmed the decision of the Munsif of the East Taluk, Hyderabad District dismissing the suit as being barred by limitation.

It would appear that Neethikari Ramder the Respondent herein, on 24th Bahman P., mortgaged with possession two houses restively situated at Lalapet and Malkajgiri to payment of Rs. 300 advanced to him by the Appellant. One of the terms of the mortgage was that if the mortgagor failed to redeem the property within three years of the date of the mortgage, it shall be deemed to have been sold to the mortgagee. The Respondent did not, however, redeem the mortgage and the Appellant brought the present suit. Instead of making a prayer for foreclosure he prayed that "a decree for sale of the mortgaged property be passed against the Defendant.

In case the proceeds of the sale are found to bo insufficient to pay the amount due to the Plaintiff then, that liberty be reserved to the Plaintiff to apply for a decree for the balance amount against the person and the other property of the Defendant."

The Respondent in his reply admitted the loan and the execution of the mortgage deed with all the recitals contained therein but pleaded a partial discharge of the debt to the extent of Rs. 275. He further contended that the suit was liable to dismissal on the ground of limitation inasmuch as the Appellant had asked for the mortgage money on account of breach of the contract and also because the Appellant was a money-lender andhad not obtained licence for money-lending as was required by the Hyderabad Money-lenders'' Act. The issues settled on these pleadings were as follows:

(1) Whether the Defendant has paid to the .Plaintiff the mortgage money except Rs. 25 as stated in his written statement?

(2) Whether the suit of the Plaintiff is time barred?

(3) Whether the Plaintiff is not entitled to sue for sale and he ought to have sued the Defendant for foreclosure?

The trial Judge did not believe the evidence tendered in support of the first issue and consequently decided it against the Respondent. On issues 2 and 3 he held that in view of the terms of the mortgage, the Appellant could sue only for fore-closure and not for sale of the hypotheca in order to recover the mortgage-debt and has he bad "abandoned'' this relief for foreclosure, he would be deemed to sue for compensation and this would attract the period of limitation prescribed in Article 116 of the Limitation Act. Inasmuch as the suit was beyond six years from the date when the debt became payable, the learned Munsif thought it was barred by limitation. In support of this view he relied on Venka v. Jagannath, AIR 1954 Hyd 41

On an appeal by the Appellant to the District Court, the learned District Judge agreed with the trial Judge and disallowed the appeal.

In this appeal the learned advocate for the Appellant basing his contentions on Bhagwant Rao v. Damodhar, AIR 1938 Nag 112 and AIR 1940 156 (Nagpur) , argued that a mortgagee by conditional sale can sue for the sale of the hypotheca for satisfaction of his debt. The learned advocate for the Respondentia the other hand relied on the Hyderabad authority referred to above and also cited AIR 1940 204 (Privy Council) ; and Kunwarlal v. Rekhlal, AIR 1950 Nag 83 for the contrary proposition. I have noted with regret that neither the Courts below nor the advocates appearing for the parties have cared to study the law bearing on the point under discussion.

In the Hyderabad case the suit was originally for foreclosure but the Plaintiff seeing the impossibility of getting a decree for foreclosure in view of the provisions of the Hyderabad Land Alienation and Restraint Act, abandoned the prayer for foreclosure and prayed for a money decree. On these facts the learned Judges held that the suit as it remained was governed by Article 116 of the Limitation Act. In the present case there was no prayer for foreclosure from the beginning. In the present case the prayer is for sale. Such a suit is obviously governed by Article 132.

B''y no stretch of imagination can. it be said that the Appellant had praved for a simnle money decree. The case in AIR 1950 Nag 83 (51), is also of no assistance to the Respondent. What has been laid down in that case is that a Court has no power to direct sale on a foreclosure mortgage unless the mortgage is an anomalous mortgage. The ratio decidendi of this case finds support from the provision of Sewction G7, CI. (a) of the Transfer of Property Act. By the latter part of ''CI. (a) such a mortgagee is forbidden from suing for a sale of the hypotheca.

The real question to be determined and is whether the transaction in question was a mortgage by conditional sale simplicities or waa it an anomalous mortgage. A reading of the mortgage bond would show that it is a mortgage with possession with a default clause entitling the penalty in the form of an automatic sale. The document was executed on 24th Bahman 1351-F. By that time the Hyderabad Transfer of Property Act had come into force. Section 58 (3) of that Act defined "mortgage by conditional sale" as follows:

Where the mortgagor ostensibly sells the mortgage property - on condition that on default of payment of the mortage money on a certain date the sale shall become absolute, or on condition that on such payment being made the sale shall become void, or on condition that on such payment being made the buyer shall transfer the property to the seller, the transaction is called a mortgage by conditional sale and the mortgagee a mortgagee by conditional sale.

It would thus be seen that for a mortgage by conditional sale under CIause, (3) there must, to begin with, be an ostensible sale, i. e., a transaction which bears the appearance of a sale, but is not really that of which it bears the appearance. In Kandula Venkiah Alias Padmanabhudu Vs. Donga Pallayi and Others, , it has been held that where the document purports to be a mortgage only but says that on default of payment the land is to be regarded as sold, it is not a mortgage by conditional sale. As according to the recitals in the mortgage-deed the possession appears to have been given to the mortgagee, can it be said that it was a usufructuary mortgage.

In order that a transaction may be regarded as a mortgage under the category aforesaid, it is necessary that there must be a stipulation that the mortgagee is to appropriate the rents and profits in lieu of interest or of the principal or both. The bond in question is silent about interest. There is a provision that the profits arising out of the hypotheca would be appropriated towards the principal. If the payment of interest and its rates were agreed upon, then as has been held in the Madras case (F) referred to above, it may have been possible to hold that it was intended that they were to be appropriated towards the interest.

It is thus clear that the disputed mortgage was neither usufructuary nor was it a mortgage by conditional sale. As a matter of fact it is an anomalous mortgage. Section 87 of the Hyderabad Transfer of Property Act provides that in the case of an anomalous mortgage the rights and liabilities of the parties shall be determined by their contract as evidenced in the mortgage-deed. According to the terms of the suit mortgage-deed there would be no right of redemption since by reason of the default of payment of thc debt within three years, the document would automatically convert itself into a sale-deed.

It, however, has been held by the Privy Council in Mahomed Sher Khan v. Raja Seth Swami Dayal, 49 Ind App 60 : AIR 1922 PC 17 that even in cases of anomalous mortgages, the rights and liabilities depend on the terms of the contract as controlled by the Transfer of Property Act. The terms of the contract cannot offend the terms of S. 60 and clog redemption.

In this view of the law the Judgments of the Courts below cannot be sustained. The learned advocate for the Respondent, however, argued that the Respondent had in para. 7 of his-written statement raised the plea that the Appellant was a money-lender within the meaning of the Hyderabad Money-lenders'' Act since he had realised interest from the Respondent though the document is silent about it. Therefore, it was necessary for the trial Court to have raised issues in that behalf.

In the mortgage-deed and in the cause title of the plaint the Appellant has been described as a carpenter. That fact has not been specifically denied by the Respondent in his reply. The plea in question was raised on the ground that the Appellant had realised interest from the Respondent a plea which has not been established by any evidence. I have no doubt that the plea is frivolous.

I''D For the reasons stated above. I allow the appeal and remand the case to the trial Court for passing a preliminary decree in accordance with the provisions of the CPC Code. The Respondent will pay the costs of this Court and of the Courts below to the Appellant. The Appellant will also get a certificate for the refund of the Court-fee paid on the memorandum of second appeal.