Ramakkammal vs C.G. Subbarathnam Iyer and Others

Satyanarayana Rao, J.—This is an appeal by the first defendant against the decree of the Subordinate Judge of Coimbatore granting to the

plaintiff a preliminary mortgage decree.

On the 20th February 1989, the first defendant executed a deed which is described as a usufructuary mortgage deed for a sum of Rs. 4,000.

The property comprised in the mortgage is a terraced building in Coimbatore. Under this document, it was stipulated that the mortgagee should in

lieu of interest on the amount advanced enjoy the property mentioned, that is, the house as under a usufructuary mortgage. It further provided that:

Within a period of four years from this date, I shall pay you the above usufructuary amount and get return of the deed with endorsement of

discharge thereon and along with the title deeds pertaining thereto. I shall also take possession of the under mentioned properties from you. If

before the above period of four years I pay the principal sum you shall receive it. If I fail to pay the principal sum on the due date of the above four

years you shall continue to be in enjoyment as under a usufructuary mortgage for the very aforesaid mortgage amount till it is paid. Besides. I shall

pay the above amount on demand with interest thereon at the rate of four annas per hundred rupees per mensem from the date of default to the

date of payment.

The deed also recites that the mortgagee was put in possession of the property immediately, that is, on the date of the execution of the deed. On

that very day. the plaintiff leased the property under a rental agreement to one Ramoswami Mudaliar who is examined in the case as P. W. 1 and

the lessee agreed to pay a rent of Rs. 30 per mensem for the terraced building and he also stated in the rental agreement Ex. P-2. that he was put

In possession of the property. The plaintiff alleged in the plaint that notwithstanding the recitals in the documents above referred to, the first

defendant failed to deliver possession of the property to the plaintiff"" or to his nominee and that she had continued in possession without even

paying any sum by way of rent or damages for use and occupation.

On the 3rd April 1943, the first defendant sold the property to defendants 2 to 4 under Ex. D-7 and they arc impleaded as parties to the action.

The plaintiff, therefore, seeks to recover from the defendants and the property, a sum of Rs. 5949, Rs. 4000 being the principal amount due under

the mortgage and Rs. 1949, as compensation for loss of possession from the date of the mortgage to the date of the suit at Rs. 30 per mensem or

Rs. 360 per annum. The suit was instituted on the 19th July 1944, and in the plaint, the plaintiff claimed that he was entitled to realise the amount of

Rs. 5949 by sale of the hypotheca and he also claimed a personal decree for the balance in case the proceeds of the hypotheca are not sufficient

to satisfy the decree. The consideration for the mortgage was not disputed by the defendants in their written statement but they denied the assertion

of the plaintiff in the plaint that he had not been given possession of the property immediately after the deed was executed. They disputed the right

of the plaintiff to claim compensation for loss of possession and also denied the tight of the plaintiff to a decree for sale of the mortgaged Property

as claimed in the plaint. It was also alleged in the written state me it that by his acquiescence, non-delivery, the plaintiff lost his right to sue by sale

of tne mortgaged property and that in any event the plaintiff is not entitled to claim more than Rs. 4000 as per the agreement which, it is claimed,

was reached between tne parties on the 10th September 1942, evidenced by a varthamanam of that date, whereby the claim under the mortgage

and also under two other promissory notes was settled at a sum of Rs. 4500 to be paid by the first defendant to the plaintiff.

Immediately after the purchase of the property by defendants 2 to 4 under Ex. D-7 they deposited a sum of Rs. 4050 in Court under S. 83 of the

Transfer of Property Act and filed O. P. No. 95 of 1943. The plaintiff, however, refused to receive the amount and give a discharge to the first

defendant and therefore the further plea was taken by the defendants that their tender was valid and therefore the plaintiff is not entitled to interest

or compensation or to any costs.

The learned Subordinate Judge framed as many as 8 issues in the case covering the contentions of the parties, but on the chief points on which

the parties were at variance he found that the mortgage, notwithstanding the covenants (above set forth) contained in Ex. P-l, was a usufructuary

mortgage and not an anomalous mortgage. On the question of delivery of possession, he upheld the contention of the plaintiff that the house, in fact,

continued to be in the possession of the first defendant. He followed the decision of the Full Bench in - Subbamma v. Narayya 41 Mad 259, which

held that it under a usufructuary mortgage possession was not delivered, the mortgage is not a usufructuary mortgage within the meaning of S.

58(d) of the Transfer of Property Act and that the mortgagee is entitled to bring a suit for sale of the mortgaged property. In view of this decision

he held that the plaintiff is entitled to a decree for sale. He was also of the opinion that the plaintiff was entitled to claim damages in lieu of interest,

in view of two decisions in -- C.R. Subramania Aiyar Vs. Panchanada Odayar and Another, and -- Gurusami Thevan Vs. Ganapathi Chetti and

Others, . He found also that the varthamanam was not enforceable as it was intended merely to enable the first defendant to effect a private sale of

the property and that the concession granted by the plaintiff was subsequently withdrawn by him as it was not accepted immediately and acted

upon. In the result the learned Judge passed a preliminary decree for sale of the property.

In this appeal by the first defendant, the claim under the varthamanam was not seriously pressed as it is not an enforceable contract, as the

agreement was not supported by consideration and a mere agreement to remit could not under law be enforced. There is also the further objection

that it is not admissible in evidence for want of registration and as it purports to modify the essential terms of the mortgage deed. It is, however,

unnecessary to pursue this matter as the appellant has not before us relied upon the varthamanam letter as affording a defence to the action. The

decision of the Full Bench in -- ''Subbamma v. Narayya 41 Mad 259 (FB) is no longer good law in view of the amended definition of a

usufructuary mortgage"" in Section 58 of the Transfer of Property Act. The amendment was introduced to nullify the effect of the Full Bench

decision. No attempt was made before us to support the decision.

The other Questions that were seriously pressed were: firstly, that the finding of the learned Judge that the plaintiff did not obtain possession of

the property at any time and that the first defendant continued to be in possession of the property"" is wrong; secondly, that the plaintiff is not

entitled to a decree for sale; and lastly that he is not entitled to claim profits in lieu of interest.

On the first question we have no doubt on the evidence that the finding of the learned Subordinate Judge is correct. (His Lordship reviewed the

evidence and continued.) In view of these circumstances we are clearly of opinion ""that the plaintiff did not obtain possession of the properly and

that the first defendant alone continued in possession and made considerable profit from and out of the rents of the house.

The learned Subordinate Judge construed the document as containing no personal covenant to pay and that it is a usufructuary mortgage. The

relevant covenants extracted above show that the mortgagor undertook to pay the amount, within a period of four years and that if he failed to pay

the principal sum within that date, the mortgagee should continue to be in enjoyment until the amount is paid and under the last clause the

mortgagor promises to pay the above amount on demand with interest thereon at the rate of four annas for hundred rupees per month from the

date of default, that is after the expiry of the four years, to the date of payment. This further rate of four annas for hundred rupees per month is in

addition to the profits which the mortgagee is entitled to enjoy until the amount is paid in lieu of interest. There is, therefore, a clear covenant to pay

the mortgage amount. The document, therefore, is a simple usufructuary mortgage, and is not a usufructuary mortgage, pure and simple. Under the

law as it stood before the amendment of the Transfer of Property Act in 1929, the mortgage would not be an anomalous one. The old Section 98

was as follows:

In the case'' of a mortgage, not being a simple mortgage, a mortgage by conditional sale, an usufructuary mortgage, or an English mortgage, or a

combination of the first and third, or the second and third, of such forms, the rights and liabilities of the parties shall be determined by their contract

as evidenced in the mortgage deed, and, no far as such contract does not extend by local usage.

When in such a case the mortgagor failed to deliver possession of the property the mortgagee was entitled u/s 68(1)(c), which corresponds to the

present Clause (d) of that section, to sue for the mortgage money and u/s 67 when there is no contract to the contrary, he would be entitled also to

a decree for sale Clause (a) of old Section 67 did not confer upon & usufructuary mortgagee power to institute a suit for foreclosure or sale but

this was confined to cases where he claimed to sue as a usufructuary mortgagee as such. If he was a simple cum usufructuary mortgagee or a

person entitled to enforce the statutory right under the old Section 68(c) to sue for the mortgage money when there was a default in delivering

possession by the mortgagor, it could not be said he was then suing or seeking to enforce the rights as a usufructuary mortgagee and would not

therefore come within the description of usufructuary mortgage ""as such"". A suit to enforce payment of the mortgage money u/s 58 and for the sale

of property u/s 67 is therefore maintainable, as such a ""mortgage is not an anomalous mortgage within the meaning of old Section 98, Under the

old law, an anomalous mortgage was not included within the definition of ""mortgage"" u/s 58. A simple cum usufructuary mortgagee, not being an

anomalous mortgagee was entitled to the benefit of Ss. 67 and 68 of the Transfer of Property Act.

The question was finally decided by the Privy Council in -- ''Narasing Partab Bahadur Singh v. Mohammed Yaqub Khan'', 56 Ind. App. 299: 58

Mad LJ 401. In that case the mortgage was dated 8th April 1923 and was given to secure an advance of Rs. 30000, which carried interest at the

rate of 5 annas and 1 pie per cent per month. The mortgage money was promised to be repaid within a period of 35 years and the mortgagee was

to enjoy the rents and profits of an 8 annas share in certain villages in lieu of interest on the mortgage money and the possession of the property

was delivered to the mortgagee. If the mortgagor failed to redeem the mortgaged property within the time fixed, power was conferred upon the

mortgagee to realise the money due to him by sale of the mortgaged property. There was also a provision for a personal decree if the mortgaged

property was found to be insufficient to satisfy the full amount. The mortgagor received the advance but failed to deliver possession of the

mortgaged property. An assignee of the mortgagee''s interest instituted an action on the 14th May 1924, nearly a year from the date of the deed,

claiming to recover the principal and interest by sale of the mortgaged property and in the alternative for a simple money decree for the amount.

The subordinate Judge who tried the action held that the plaintiff was entitled to a decree for sale u/s 68 of the Transfer of Property Act and

passed a decree in his favour. On appeal the Chief Court held that the mortgage in question was an anomalous mortgage and not a combination of

a simple mortgage and a usufructuary mortgage and therefore Section 68 of the Act was inapplicable, as it was excluded by Section 98 and

passed a decree for possession only in accordance with the terms of the mortgage deed in substitution of the decree for sale granted by the learned

Subordinate Judge. The plaintiff appealed to His Majesty in Council.

The Judicial Committee construed the deed as constituting a combination of a simple mortgage and a usufructuary mortgage. Though under the

terms of the deed there was no power of sale, if there is a default in putting the mortgagee in possession of the property and if the suit was

instituted within the period of 35 years, the Judicial Committee held that as the plaintiff was deprived of part of his security, he was entitled u/s 68

of the Act to recover the mortgage money as it became payable under S, 68 in conseauence of the failure to deliver possession. They further held

that as the money became payable u/s 68 a decree for sale could be made u/s 67. Their Lordships observed :

It would indeed be a startling result of the legislation if in such a case as this where a default has been made by the mortgagors of a kind which

materially affects the mortgagee''s security there existed no remedy for the immediate enforcement of the mortgage.

There is however in this decision no express reference to Section 67(a) which deprived a usufructuary mortgagee, as such, from claiming a right of

foreclosure or sale. Their Lordships must have treated the case as an ''a fortiori'' one as the mortgage was not a mere usufructuary mortgage but

was a combination of simple-mortgage and a usufructuary mortgage; and, further, the right that was sought to be enforced was not a right under the

usufructuary mortgage, as such, but the statutory right u/s 68(c) (old) of compelling the mortgagor to pay the mortgage money when he had

committed default in putting the mortgagee in possession of the mortgaged property. This statutory right carried with it a right of sale u/s 67 of the

Act. But for the fact that there is the complication by an amendment of Section 98 in 1929 by the legislature, this decision of the Judicial

Committee would have concluded the case now before us. As the definition of ""anomalous mortgage"" is now transferred with modifications to

Section 58 and is added as Clause (g) to that section, which does not expressly exclude the combination of simple mortgage and usufructuary

mortgage, it would seem to follow that such a mortgage would be an anomalous mortgage under the present law. Clause (g) to that section says:

A mortgage which is not a simple mortgage, a mortgage by conditional sale, a usufructuary mortgage, an English mortgage, or a mortgage by

deposit of title deeds within the meaning of this section is called an anomalous mortgage.

So that, the mortgages enumerated and defined in the previous clauses were alone excluded from the definition of anomalous mortgage and not

their combinations. This omission, it is claimed, is indicative of the view that the legislature intended to treat the combinations as anomalous

mortgages. That is also the opinion, of Mulla in his commentary. This may be so.

But this alteration in our opinion does not affect the result in the case. As anomalous mortgages are now included in Section 58 of the Act the

application of Sections 68 and 67 of the Act is not excluded as under the old law. This is really the effect of the amendments introduced in 1929.

Even under the old law, some courts have taken the view that even in the case o� an anomalous mortgage if there is failure to deliver possession,

the mortgagee was entitled to take advantage of the provisions in Section 68(c) (old) now corresponding to Clause (d) and also entitled to sue for

a decree for'' sale,

There is also another point of view from which it would follow that the mortgagee in the present case is entitled to a decree for sale. A personal

covenant to pay, according to the decisions of this court and of some of the other High Courts implies and carries with it a right of sale. There is the

judgment of the Full Bench of this court in -- ''Sivakami Ammal v. Gopala Savundaram'', 17 Mad. 131. The judgment however is very short and

does not give any reasons. But the earlier decision of a Bench in -- ''Ramaya v. Guruva 14 Mad 232 which considers the relevant provisions of the

Transfer of Property Act holds that a covenant to pay confers a right to sue for sale of the mortgaged property u/s 67 of the Act. This principle

was recognised by the Patna High Court in -- ''Jag Sahu v. Mt. Ram Sakhi Kuar'', Pat. 350 which quotes with approval the decision in --

''Pitambar Purkait v. Madhu Sudan'', 6 Ind. Cas. 153 (Cal) in which it is said:

It is well settled that when an instrument of mortgage gives a fight to possession and also contains a covenant to pay, thus presenting a

combination of a usufructuary and a simple mortgage, the two rights are independent and the mortgagee may sue for sale although he may have

given up possession, and the right accrues immediately after the due date is passed.

Even though the Transfer of Property Act is mot applicable to Punjab, the ignore High Court also applied the same principle in--''Mahomed Saeed

V. Abdul Alim'', I. L, R. (1946) Lah. 805 and the decisions in -- ''Ramaya v. Guruva'', 14 Mad. 232 and -- ''Sivakami Ammal v. Gopala

Savundaram'', 17 Mad. 131 were referred to. The Allahabad High Court in -- ''Kanhaiya Prasad v. Hamidan'', I. L. R. (1933) All. 714 no doubt

takes a contrary view. Mahajan J. in the Lahore case dissents from that view and follows the view taken by the Madras High Court as sound.

Even in the case of an anomalous mortgage, if there are indications in the deed negativing a right of sale and showing that the parties never

contemplated any such right, the right of sale cannot be given effect to as the parties are bound by the terms of the contract. See -- ''Madho Rao v.

Ghulam Mohiuddin'', 56 Ind. Cas. 717. (9) It follows from the foregoing discussion hat viewed from any aspect the plaintiff is entitled to a decree

for sale.

Lastly, in view of the decisions of this court, no doubt of single Judges in -- C.R. Subramania Aiyar Vs. Panchanada Odayar and Another,

and-- Gurusami Thevan Vs. Ganapathi Chetti and Others, and the reasons given by Ramesam J. in the judgment in -- C.R. Subramania Aiyar Vs.

Panchanada Odayar and Another, we think that the plaintiff is entitled to the profits claimed by him. The view of the learned Judges in the two

cases also receives support from the decision of a ""Bench in the earlier case in -- ''Linga Reddi v. Sama Rau'', 17 Mad. 469. The decision in --

''Sitanath Ghose v. Thakurdas Chakravarti''. 46 Cal. 448 also takes the same view. The Allahabad High Court differs from the Madras and

Calcutta decisions: Vide -- ''Nurul Hassan v. Mahabub Bus''. I. L. R. (1945) All. 676 . In view of the decisions of pur court, we respectfully

dissent from the view of the Allahabad Court. The mortgage deed itself in the present case recites that the mortgagee should enjoy the property in

lieu of interest on the said amount. If the mortgagor commits a breach of the covenant to deliver possession he should not be allowed to take

advantage of it or retain the proceeds of the property and at the same time paying no interest on the mortgage amount, the benefit of which he

admittedly enjoyed. We respectfully adopt the reasoning of Ramesam J. in the decision in-- C.R. Subramania Aiyar Vs. Panchanada Odayar and

Another, and hold that the view of the learned Subordinate Judge on this point also is correct.

In the result the appeal fails and is dismissed with costs of the first respondent.