Ram Ranbijoy Prasad Singh vs Badri Upadhya and Others

Chatterji, J.—This is an appeal by the plaintiff in a suit for redemption. The plaintiff is the 16 annas proprietor of village Dubauli in which one Rachya Lal had a tenure of 21.06 acres of land. On 6th June 1914 Rachya Lal executed a mortgage in respect of this tenure in favour of the defendants for a consideration of Rs. 300. The mortgage which was for a term of four years was a combination of a usufructuary mortgage and a simple mortgage. The mortgage-deed provided that the mortgagees would remain in possession of the tenure and would appropriate its usufruct in lieu of interest after paying the annual rent of Rs. 22-11-0 to the landlord. There was also a stipulation that in case of dispossession, the mortgagees would be entitled to recover the principal with interest at 2 per cent, per mensem by sale of the mortgaged property. The plaintiff''s father, who was then the landlord, obtained a decree for arrears of rent of the tenure, and in execution of the decree purchased it on 11th July 1919. Many years later, in 1939, the plaintiff brought a suit for rent against the tenants who were in cultivating possession of the lands comprised in the tenure. The tenants disputed the plaintiff''s right to realise rent and pleaded payment to the usufructuary mortgagees, that is, the defendants. The rent suits were dismissed. The plaintiff then brought the present suit for redemption on 28th September 1940. In the plaint it was alleged that though the defendants were bound to pay the rent of the tenure to the plaintiff, they never made any payment to him, and that the amount of rent withheld by the defendants exceeded the rehan money by Rupees 1010-6-9. The plaintiff, therefore, not only claimed possession but also the excess amount said to be due from the defendants.

The defendants raised various objections, but the only one that is material to the present appeal was that in this suit for redemption the plaintiff could not claim any amount which would be payable to him as landlord on account of rent. The learned Munsif accepted this defence and passed a decree for redemption on the condition that the plaintiff should pay Rs. 300, the principal amount of the mortgage. On appeal by the plaintiff, the learned Subordinate Judge held that the plaintiff should be allowed a set-off for the rent that was legally recoverable up to the date of the decree. This amount was found to be Rs. 113-12-0, He accordingly modified the decree of the learned Munsif to this extent that the plaintiff should pay Rs. 196-4-0 (should be Rupees 186-4-0) only as redemption money.

The plaintiff, being dissatisfied with this decision, has preferred this second appeal. There is no cross-objection by the defendants. It has been argued by Mr. Sarjoo Prasad on behalf of the appellant that the defendants being liable to pay rent to the plaintiff under the terms of the bond as well as u/s 76(c), T.P. Act, it is most inequitable that the defendants should be allowed to keep in their own hands the money due from them to the plaintiff, and at the same time require the plaintiff to pay to them the money due to him. Reliance has been placed on the cases in Nursingh Narain Singh v. Baboo Lukputty Singh (80) 5 Cal. 333 and Bihari Lal v. Shib Lal AIR 1924 All. 591. In the first case, Nursingh Narain Singh v. Baboo Lukputty Singh (80) 5 Cal. 333, the plaintiff had granted a zerpeshgi lease of certain property to the defendant for a term of years at a yearly rent of Rs. 130 on an advance of Rs. 800. It was agreed that the lessee should be allowed to deduct out of the rent, Rs. 96 as interest on the advance made by him, and the remainder Rs. 34 was to be paid over in cash to the lessor. In the suit, which was brought for redemption, it was held that the plaintiff was entitled to set-off the rent withheld by the defendant against; the money advanced. In the second case, Bihari Lal v. Shib Lal AIR 1924 All. 591, the usufructuary mortgage of which redemption was sought provided that the mortgagee should pay to the mortgagor a fixed sum of Rs. 25 a year as "malikana," and that except for this sum, there was to be no accounting between the parties. No "malikana" was ever paid. In the suit which was brought by the mortgagor for redemption, the defendants contended that the plaintiff could obtain the arrears of "malikana" only by means of a separate suit. This contention was overruled and the Court passed a decree for redemption on payment of the principal sum due, less the "malikana" for a certain number of years.

It will thus appear that in both these cases there was a stipulation in the mortgage-deed itself that the mortgagee should make payment of the specified amount to the mortgagor. It was, therefore, obviously inequitable that the mortgagee should be allowed to retain in his own hands the money due from him to the mortgagor under the terms of the mortgage, and at the same time would require the mortgagor to pay to him the money due on his side. In the present case there was no stipulation that the mortgagee should pay rent of the mortgaged property to or through the mortgagor. Therefore, the principle of the above decisions cannot apply to the present case.

It is, however, argued by Mr. Sarjoo Prasad that the plaintiff, by reason of his auction-purchase, having stepped into the shoes of the mortgagor, the position must be the same as if he was himself the mortgagor. In other words, the mortgagee must be deemed to have contracted to pay the rent to the mortgagor. In this view the principle of the above decisions would apply. But on the clear terms of the mortgage itself, it is difficult to take this view. It is true that the mortgagor and the landlord are now the same person, but in this suit for redemption the landlord who has stepped into the shoes of the mortgagor cannot claim any higher right than the mortgagor. The mortgagor, if he had sued for redemption, could not certainly claim any set-off on a6count of the rent, unless he had himself paid it to the landlord. I was at first inclined to think that it would not be equitable to disallow the plaintiff''s claim for set-off on respect of the rent withheld by the defendants. But after further consideration I am of opinion that the suit being for redemption, the rights of the parties must be determined with reference to the terms of the mortgage and with reference to the provisions of Section 77, T.P. Act. This section runs as follows:

Nothing in Section 76, Clauses (b), (d), (g) and (h), applies to cases where there is a contract between the mortgagee and the mortgagor that the receipts from the mortgaged property shall, so long as the mortgagee is in possession of the property, be taken in lieu of interest on the principal money, or in lieu of such interest and defined portions of the principal.

In this case the contract between the mortgagor and the mortgagee was that the receipts from the mortgaged property should be taken by the mortgagee, while in possession of the property, in lieu of interest on the principal money. Consequently, the mortgagee is not liable to account, as required under Clause (h) of Section 76 of the Act. Mr. Sarjoo Prasad has drawn our attention to the fact that Clause (c) of Section 76 is not to be found in Section 77. But Clause (c) of Section 76 merely casts upon the mortgagee in possession the liability to pay all charges of a public nature and all rent accruing due in respect of the property during his possession. This clause has no reference to any accounting. In Raghubar Narayan Chaudhuri Vs. Mohit Narayan Jha and Others, , decided by Jwala Prasad and James JJ., their Lordships had to deal with a usufructuary mortgage under the terms of which the mortgagee was entitled to appropriate in lieu of interest the profits of the property remaining after the payment of Government revenue and malikana to the malikanadars. There was a condition that all profits from increased income would go to the mortgagee. The mortgagee made additional profits by escaping payment of malikana to the malikanadars. The assignee of the equity of redemption brought a suit for redemption and for accounts. It was held that the usufructuary mortgagee was not liable to render accounts in respect of the malikana. It should be made clear that the malikana was to be paid not to the mortgagor but to a third person. James J., who delivered the judgment, said:

We are of opinion that the mortgagees'' failure to pay the malikana does not render them liable for account, nor does it necessarily affect the liability of the mortgagors to pay the mortgage-money before they can recover possession of the property. The utmost that the mortgagors can be allowed to claim is that they should be indemnified against the contingency that a valid claim for arrears of malikana may be made against them after their recovery of possession.

It is on the strength of this last observation, though, strictly speaking, it does not apply to the facts of the present case, that the learned Subordinate Judge in this case has allowed the plaintiff a set-off for the arrears of rent legally recoverable. In an unreported case Nagina Kuer v. Ramran Vijaya Prasad Singh S.A. Nos. 480 and 481 of 1941 decided by Harries C.J. and Manohar Lall J., a similar question came up for consideration. There an occupancy holding had been given in mortgage by two different deeds executed on different dates, each being in respect of a portion of the holding. The mortgage-deeds provided that the mortgagees would remain in possession and would appropriate the produce of the lands in lieu of interest on the money advanced and would pay the proportionate rent to the landlord. Subsequently, the landlord in execution of a decree obtained by him against the raiyat for another holding purchased the mortgaged holding. The landlord then sued for redemption of the two mortgages, and he claimed a set-off for the rent due to him against the mortgage-money. This claim was rejected. Manohar Lall J. who delivered the judgment, said:

As a landlord the only rights of the Maharaja are to recover arrears of rent not from the mortgagee but from his tenants. But the arrears of rent are being claimed in this case from the date when the Maharaja became the purchaser of the interest of his tenants. From this date onward the tenant and the landlord became one and the liability to pay rent disappeared.

In holding that the liability to pay rent disappeared, his Lordship apparently proceeded on the assumption that the holding ceased to exist when it was purchased by the landlord. In other words, there was a merger by reason of the entire interests of the landlord and the tenant in the holding being united in the same person, as contemplated by Section 22(1), Bihar Tenancy Act. But what the landlord purchased was only the tenant''s equity of redemption and not his entire interest in the holding. A part of his interest still remained with the mortgagee. Suppose in the present case the mortgagee brought a suit on his mortgage and obtained a decree for sale, and eventually he purchased it. Can it be said that he would purchase it free from the liability to pay rent? Certainly not. As a purchaser of the holding, he would be liable to pay rent. How, then, can it be said that the liability to pay rent disappeared when the landlord purchased the equity of redemption? Though, however, with the greatest respect I do not agree with the above reasoning of Manohar Lall J., I think his decision is correct, and at any rate it is binding on us. In the result I would dismiss the appeal, but, in the circumstances, without costs. It should, however, be noted in the decree that the plaintiff should pay Rs. 186-4 -0 and not Rs. 196-4-0 for redemption.

Shearer, J.

The mortgagee was entitled to appropriate the whole of the profits of the land in lieu of interest, and was, in consequence, not liable to account to the mortgagor. That, however, merely means that in no circumstances is the mortgagor entitled to recover any money from the mortgagee on the ground that the amount of the profits which the latter has derived from the property exceeds the principal and interest due under the mortgage. The question that really arises here is a somewhat different one, namely whether the, mortgagor is entitled to say that he has made, or must be deemed to have made, certain payments from time to time which can in law be treated as part payments of the mortgage-debt, and that, in consequence, the mortgage-debt has been liquidated, and he may recover possession of the mortgaged property without any further payment to the mortgagee. Under the terms of the mortgage-deed, the mortgagee was liable to pay the rent. If the mortgagee failed to pay it, and the mortgagor paid it instead, the latter could have treated each such payment as part payment of the mortgage-debt and asked for a corresponding reduction to be made in the amount ordered to be paid for redemption of the mortgage if and when he instituted a redemption suit: see Ghose on the Law of Mortgage in India, 4th Edn., vol. I, page 560. In fact, a doubt has been expressed as to whether a mortgagor who has made such payments is entitled to recover the money from the mortgagee immediately, and is not bound to wait until he is in a position to sue for redemption of the mortgage and then ask for a set-off: see Krishnier v. Arappuli Iyar (04) 14 M.L.J. 488. Such difficulty as there is in this case arises from the fact that in 1919, that is, five years after the mortgage-deed was executed, the equity of redemption was purchased by the landlord. By reason of the concluding words in Sub-section (1) of Section 22, Bihar Tenancy Act, the mortgage and therefore also, I think, the liability of the mortgagee to pay the rent continued to subsist. If the landlord had called on the mortgagee to pay the rent and had intimated to him that if he failed to pay any kist as it fell due he would credit him with the amount in his laggit or jamabandi and treat this as a part payment by himself of the mortgage-debt, he would, I am inclined to think, have now been entitled to have any such amounts set-off against the amount still due under the mortgage.

This, however, the plaintiff did not do and it is a little difficult to say that he has, in fact, made any payments which can be treated as payments in liquidation of the mortgage-debt. For this reason mainly I agree to the order proposed.