Ramakrishna Kukkilaya vs Nekker Kuppanna alias Raghavendra Rao and Others

Spencer, J.—This suit was brought for the purpose of redeeming a usufructuary mortgage of the year 1867. The mortgagor remained in

possession under a lease until 1882 when the mortgagee got into possession. The mortgagee''s representatives pleaded in defence of this suit that

the plaintiffs were bound to pay off two simple motgages of the years 1873 and 1877 and a decree of 1882 before they could be allowed to

redeem the prior usufructuary mortgage. On the points of law arising out of this contention the District Judge, disagreeing with the opinion of the

District Munsif, has decided in the defendants'' favour.

Now it is clear that by the Limitation Act in force at the institution of this suit if the mortgagees had sued at that time to recover what was due to

them on the footing of those simple mortgages their suit would have been time-barred, whereas if the mortgagors sued to redeem them, their suit

would not be out of time.

The question then is whether the defendants can set them up in bar of the plaintiff''s right of redemption. So far as this presidency is concerned, it

must be taken as settled law that a mortgagee having more than one mortgage on the same property can treat each as a separate cause of action

and can bring a suit for the recovery of his debt by sale of the mortgaged property on a puisne mortgage subject to his intesest in a prior mortgage

(vide Subramania v. Balasubramania ILR (1915) Mad. 927, and Radhakrishna Iyer v. Muthusawmy Sholagan I.L.R (1908) Mad. 530, although it

was held in Dorasami v. Venkcataseshayyar ILR (1808) Mad. 108 : 11 M.L.J. 373, that he could not get a sale on the earlier mortgage subject to

the later mortgage. Yet when the mortgagor comes to Court and applies for redemption, it has been declared on the strength of Section 61 of the

Transfer of Property Act that all the mortgages over the same property and in favour of one and the same person must be simultaneously

redeemed. Vide Dorasami v. Venkataseshayyar ILR (1915) M. 108 and Balasubramania Nadar Vs. Sivaguru Asari and Another, , approved of

by Sadasiva Aiyar, J. in Subramania v. Balasubramania ILR (1915) M. 927, and Ramaswami Ayyar v. Vythinatha Ayyar ILR (1903) M. 760,

and Meloth Kannan Nair v. Kodath Kammaran Nair (1918) 1 L.W. 102.

In Allahabad this principle was followed in a case where the purchaser of the equity of redemption over a usufructuary mortgage with five

subsequent bonds tacked on to it sued to redeem the usufructuary mortgage alone Vide Ranjit Khan v. Ramdhan Singh ILR (1909) All. 482. I

think we must assume that this view of the law as to the liability of the mortgagor to redeem all the mortgages outstanding on the same property in

favour of the same mortgagee is correct. No doubt there are other considerations to be taken into account against this view. For instance it may be

noted that Section 61 of the Transfer of Property Act is silent on the subject of the mortgagor''s rights in the case where money is due on a

separate mortgage on the same property as that on which he seeks to redeem. Because the section permits one mortgage to be redeemed without

redeeming a separate mortgage when the properties are different, does it follow logically that this cannot be done when the properties are the same

? Again, if a mortgagor is allowed to pay off one mortgage, the mortgagee would be left with a better security for the remaining debt and it is thus

often to the advantage of the mortgagee to accept a partial redemption. Still, assuming the correctness of the decided cases of this Court on the

point, the position is altered when there is only ones unsisting mortgage and the separate mortgages are no longer enforce able. Where Section 61

speaks of "" any separate mortgage"" I conclude that it was intended to refer only to subsisting separate mortgages.

In Athan Kutti v. Subhadra (1916) 32 M.L.J. 817 we held that no duty was imposed on a mortgagor of discharging a barred debt before

redeeming a mortgage secured by a separate instrument. There is no equity in favour of a mortgagee who sleeps over his rights.

I am now fortified in the opinion that I expressed in that case by the decision of the Allahabad High Court in Kesar Kunwar v. Kashi Ram ILR

(1915) All. 634, that in circumstances similar to those present before us, the mortgagor is entitled to redeem the first usufructuary mortgage without

paying the money due, on the later simple mortgage at a time when, if the defendant had to sue on the simple mortgage, his suit would have been

barred by limitation. That was a stronger case than this, for there was an express covenant in the second mortgage in that case that the plaintiff

should not seek to redeem the usufructuary mortgage till he paid the money due on the second bond.

The learned Judges nevertheless observed that in effect the defendant was asking the Court to enforce against this property a stale claim and

that this could not be done. Similarly in Dhondu v. Bhikaji ILR (1914) B. 138, Beaman, J., considered that if a mortgagee allowed a prior

mortgage upon the same property as a puisne mortgage to become time-barred he could not revive the prior mortgage by suing upon the puisne

mortgage.

A further question of some difficulty has been raised, which is whether the defendants having got simple mortgages executed in respect of the

arrears of rent on the property usufructuarily mortgaged, can now fall back on the security of the earlier usufructuary mortgage bond which

contains a stipulation that the mortgagor shall pay ""the consideration amount of the mortgage together with arrears of rent, if any, in respect of the

said property"" whenever he requires the land. The lower Courts were of opinion that the later mortgages constituted a novation of contract and that

therefore u/s 62 of the Contract Act the original contrast need not be performed. On the construction of exhibits III and IV I think the lower

Courts were right.

The documents are styled "" deeds of further charge."" They contain recitals that on the dates when they were executed the parties settled

accounts for the arrears of rent that were due till then. On the sums so ascertained there was an agreement to pay interest at a specified rate, and a

further agreement that if the principal and interest were not paid by a certain date, the whole should be recoverable at a higher rate of interest than

that first mentioned on the security of the mortgaged property. The debt secured by the usufructuary mortgage (Exhibit I) is expressly excluded

from the terms of the settlement. If the mortgagee had sued in time to enforce payment of the money secured by these documents, I do not think it

would have been open to the mortgagor to go behind the settlement of accounts and plead that he was only liable under the lease deeds or under

the covenant contained in the usufructuary mortgage. The answer to such a plea would have been that the taking of the bonds extinguished the

simple contract debts. If these hypothecation deeds (Exhibits III and IV) had been invalid or ineffectual, there would have been no merger of the

equitable right of the mortgagee on redemption to have an account taken of the rent due to him on the land usufructuarily mortgaged. But I think

they were effectual when they were executed and the intention of the parties was that they should take effect. If these deeds had not been brought

into existence, the obligation of the mortgagor to make all payments arising out of his covenants in the usufructuary mortgage deed would have

been kept alive till the time of redemption. (See Parasurama Pattar v. Venkatachalam Pattar (1918) 25 M.L.J. 561.

But the mortgagee having deliberately substituted a new liability under Exhibits III and IV for the mortgagor''s original liability under his contract

of lease, and afterwards through his laches having suffered his rights to become barred by time, his representatives cannot now be allowed to

enforce the terms of the original contract any more than the mortgagor could have relied on it if the mortgagee had been in the position of plaintiff.

The appeal must therefore be allowed, the judgment of the lower Appellate Court reversed with costs in that Court and this, and the decree of

the District Munsif restored. Time for redemption is extended for four months from this date.

Krishnan, J.

This Second Appeal arises from a suit to redeem a usufructuary mortgage of 1867 Exhibit I on payment of the principal amount secured less

certain damages for waste. The question of damages has now been set at rest against the plaintiffs. Though the mortgage Was one with possession,

the property was taken back by the mortgagor on lease and held by him till 1882 when he was evicted under the decree Exhibit II and since that

date the mortgagee has been in possession. For the time the mortgagor was in possession he owed the mortgagee certain arrears of rent after

deducting payments made by him from time to time. The accounts of these arrears were settled in 1873 and again in 1877 and the mortgagee

obtained from the mortgagor two simple mortgage deeds, Exhibits III and IV for the amounts due. The mortgagee had included the subsequent

rent due in his suit for eviction and had obtained a money decree for it. In this manner all the rent due had been accounted for. It is admitted that

the mortgagee''s right to execute the decree and to enforce the two bonds, Exhibits III and IV by suit is now barred by limitation.

On these facts the dispute between the parties is whether redemption should be allowed on payment of the principal money alone as

contended for by plaintiffs or whether the amounts due under Exhibits II, III and IV should also be paid to the mortgagors as contended for by

them. The District Munsiff decided in favour of the mortgagor holding that the mortgagee''s claim for arrears of rent had become merged in the

decree and the two bonds II, III and IV and as these were unenforceable at the date of suit the mortgagor was not bound to pay anything as

amounts due under the said decree and bonds or as arrears of rent. On appeal the District Judge while agreeing with the Munsiff on the question of

merger held that the mortgagor was bound to redeem the two mortgages III and IV along with Exhibit I as they were all between the same parties

and on the same property relying on Dorasami v. Venkataseshayyar ILR (1901) M. 108 and Balasubramania Nadar Vs. Sivaguru Asari and

Another, and that as defendant was setting up these two later mortgages as a defence to the suit, it did not matter that his suit to enforce them

would be dismissed as time-barred, as the Limitation Act applied only to suits and not to defences. For the latter position he relied on the cases

reported in Krishna Menon v. Kesavan ILR (1897) M. 305 and Subrahmania Ayyar v. Poovan ILR (1902) M. 28. He therefore directed the

mortgagor to pay the amounts due under Exhibits III and IV as well but disallowed the amount of the decree Exhibit II.

Against this decree the 2nd plaintiff, one of the representatives of the mortgagor, has appealed to us. His learned Vakil contended before us

that there is no rule requiring the mortgagor to redeem all the mortgages on a property in one and the same suit and that even if there is such a rule

it should not be applied in the case of mortgages which have become unenforceable by lapse of time.

15.The learned Advocate for the respondents has urged that the District Judge''s view on both the above points was correct but that his opinion on

the question of merger was erroneous and that if his clients could not rely on Exhibits III and IV they were entitled to fall back upon their rights

under Exhibit I and under that deed they were entitled to have an account taken of the rents due and the amount arrived at paid along with the

mortgage money.

On the first question raised, whether a mortgagor should be compelled to redeem all the mortgages on a property in favour of the same

mortgagee in the same suit it is not necessary in this case to give a decision in the view I am taking on the 2nd question raised; for even assuming

that there is a rule as contended for by the mortgagee. I agree with my learned brother that it should be confined to eases where the mortgages

insisted upon being redeemed are enforceable ones and are not such as are barred by limitation or any other cause from being enforced by suit.

This view has already been laid down by Sir W. Ayling, J. and my learned brother in Athan Kutti v. Subhadra (1916) 32 M.L.J. 317, and a similar

view was held in Kesar Kunwar v. Kashi Ram ILR (1916) All 634. It will not be equitable to allow a rule like the one in question, which is after all

a rule of equity, to be used to enable a person to enforce a stale claim indirectly when he could not enforce it directly by suit. The question is not,

as the District Judge has conceived it, a question whether a defendent in possession should be allowed to set up a barred defence to protect his

possession but a question whether the rule should be allowed to be used as a means for compelling payment of barred mortgage debts. The

mortgagee is not entitled to any possession under the two mortgages Exh. Ill and IV. As in the present case the property is directed to be sold if all

the moneys due to the mortgagee is not paid the result is, if the decree stanos, the mortgagee will get paid what is due on his barred mortgages as

well. The suit for possession is not dismissed for non-payment of the amounts of the barred mortgages; so they do not form a defence to

defendant''s possession. I think therefore the principle laid down in the rulings cited by the District Judge in Krishna Menon v. Kesavan ILR (1897)

M. 305, and Subrahmania Ayyar v. Poovan ILR (1902) M. 28, does not apply at all to this case. I agree that defendants are not entitled to insist

on their claims under Exhibits III and IV being paid up on redemption.

Mr. Shenai for the respondents then raised the question that his clients were entitled to fall back upon their rights under Exhibit I for payment of

arrears of rent. As stated before, it is for these very arrears that Exhibits II, III and IV were obtained by the mortgagee and the lower Courts have

held that the claim for such arrears had become merged in those bonds and the decree so that the claim could no longer be enforced as a claim for

arrears of rent. The question is important because there is a clause in the original mortgage deed Exhibit I which says ""I (the mortgagor) shall pay

you (the mortgagee)...the consideration amount of the mortgagee together with any arrears of rent if any if in respect of the said property if the

same is taken by me on rent under you,"" i.e. at the time of redemption. If there is no merger of the claim for arrears of rent this covenant will enable

the mortgagee to claim the amount of arrears against the mortgagor at the time of redemption irrespective of any questions of limitation.

Mr. Shenai''s argument against applying the doctrine of merger in this case is that his clients had already got a charge on the property for the

rent when they took Exhibits III and IV as deeds of further charge and that charge should be deemed not to have been abandoned when the fresh

securities were taken as the latter were not of a higher character; and he cited Halsbuiy''s Laws of England, Vol. 21, Sections 579 and 581 and

Fisher on Mort-gages, Sections 1554 to 1560 and the cases in Velayuda Reddi v. Narasimha Reddi (1916) 32 M.L.J 253, and Mahant Prayag

Doss Jee Yarn v. Chengama Naidu (1916) 4 L.W. 477 in support of his proposition that the taking of a fresh security for an already secured debt

when that security is not of a higher character does not lead to a merger of the original rights. To succeed in this argument we must be satisfied that

the mortgagee had a charge on the property for rent, to start with. This charge was claimed in 2 ways and I shall now consider them.

It was first urged that the provision in Exhibit I by which the mortgagor undertook to pay any arrears of rent due along with the mortgage

money at the time of redemption, itself created a charge.

I am unable to accept this argument. I think the words do not amount to any thing more than a mere personal covenant to pay. There are no

appropriate words to create a charge. In a somewhat similar case Sargent C.J, and Kemball, J., held that no charge was created, see Hari

Mahadaji Savarkar v. Balambhat Raghunath Khare I.L.R (1884) B. 233 Their view was folio wed in Yashvant Shenvi v. Vithoba Shetti ILR

(1887) B. 231 and by this High Court in Unni v. Nagammal I.L.R (1895) M. 368. I hold no charge was created by the wording of Exhibit. I as

urged.

It was next contended that the mortgage Ex. I and the lease to the mortgagor should be looked upon as one and the same transaction and the

rent payable under the latter treated as in reality to be the interest payable on the mortgage money and therefore charged on the property equally

with the principal sum. Such an argument was accepted in the case of Altaf Ali Khan v. Lalta Prasad ILR (1897) A. 496 and Maihwa Sidhanta

Onahini Nidhi v. Venkataramanjulu Naidu I.L.R (1903) M. 662, but was rejected in Chimman Lal v. Rahadur Singh ILR (1901) A. 338, As was

pointed out in the earlier Allahabad case and emphasized in the latter one ""each case has to be decided on its own peculiar circumstances

regarding this point. Where prima facie a mortgage and a lease are two distinct transactions the person alleging that they are one must prove it. I do

not think there are circamstances here which would prove that the lease to the mortgagor was a part of the mortgage arrangement itself. Ex, I

seems to show that an immediate lease at the sama time as the mortgage was not contemplated as it speaks only of a possible future lease. We do

not know as a matter of fact when the 1st lease was taken as no lease deed has been produced. The schedule in Exhibit II would seem to show

that several leases were given one after another; two of them are referred to in it as having been filed as Exhibits B and C in that suit We do not

know the rent fixed and whether it was equal to the interest on the mortgage money. The motgagee sued for the rent under the lease as lessor in his

suit which resulted in Exhibit II. If the parties intended that the rent should be looked upon as interest and thus charged on the property it is not

likely that they would have taken the trouble to get two new deeds, Exhibit III and IV executed and registered for creating a charge for that very

rent. I think the usual indications for treating the two transactions as the same are wanting here; but on the other hand the circumstances point the

other way. The claim for a charge on this ground also must be disallowed.

In these circumstances it is clear that at the time the mortgagee obtained the decree and the two simple mortgages his claim for arrears of rent

was a simple money debt. There can be no doubt that the conversion of a simple contract debt as in this case into a judgment debt and secured

mortgage debts clearly causes a merger; see Halsbury, Volume 21, Section 578 and Fisher on Mortgages Section 154. The two cases cited in

Velayuda Reddi v. Narasimha Reddi (1916) 32 M.L.J. 263, and Mahant Prayag Doss Jee Varu v. Chengamma Naidu (1916) 4 L.W. 477, were

both cases where the original debts themselves were secured debts so that the presumption that a man intends what is for his benefit led to an

inference against the merger. There is no scope for such an inference when a simple money debt is converted into a secured debt.

There is here no indication of any intention to keep the original debt alive. I am therefore of opinion that the Lower Courts were right in holding

that the defendants'' claim for arrears of rent had merged in Exhibits II, III and IV and could no longer be enforced as for such arrears. The

covenant in Exhibit I cannot be made to apply as there are no arrears of rent existing as such

It follows that the plaintiffs are entitled to redeem on payment of the principal amount secured under Exhibit I. In the result I agree that the

appeal must be allowed and the decree of the District Judge reversed and that of the District Munsif restored with costs here and below.

Time for redemption is extended for four months.