Satyanarain Rai and Others vs Nathuni Sah and Others

Nagendra Prasad Singh, J.—These three Letters Patent Appeals have been filed against the judgment of a learned Judgde of this Court, in two second appeals. The Letters Patent Appeals 21 and, 22 arise out of Second Appeal No. 544 of 1969. That Second Appeal had been filed by defendant 1 of Title Suit No. 82 of 1963, which had been filled by plaintiff-respondent 1 for redemption of three mortgage bonds (Exts. 2/a, 2/b and 2/c). The suit was dismissed by the trial court. On appeal filed by the plaintiff, the suit was decreed in respect of all the three mortgage bonds. Against that, the aforesaid second appeal was filed by defendant No. 1. The learned Judge of this Court on a consideration of the materials came to the conclusion that the court of appeal below has rightly decreed the suit of the plaintiff for redemption in respect of two mortgage bonds, i.e., Exts. 2/a and 2/c. He was, however, of the opinion that the suit for redemption of the plaintiff in respect of the third mortgage bond, i.e., Ext. 2/b, cannot be decreed and the suit has to be dismissed to that extent. Being aggrieved by that judgment, the plaintiff has filed Letters Patent Appeal 21 of 1972 and defendent 1 has filed Letters Patent Appeal 22 of 1972. Another title suit had been filed by the same plaintiff which was numbered as Title Suit No. 78 of 1963 for redemption of yet another mortgage bond which was marked as Ext. 2 in that suit. That suit was also dismissed by the trial court, but on appeal being filed, on behalf of the plaintiff, it was decreed. Defendants filed a second appeal, which was numbered as second appeal 631 of 1969. That second appeal was allowed by a learned Judge of this Court, who dismissed the suit of the plaintiff. Letters Patent Appeal 20 of 1972 has been filed on behalf of the plaintiff against the said judgment.

As parties are common and common questions of law and fact are involved in these appeals, they were heard together and are being disposed of by a common judgment.

Letters Patent Appeal 22 of 1972 was heard as the leading case. The counsel appearing for the defendant-appellant submitted that the learned Judge erred in holding that the mortgage created by the two bonds, Exts. 2/a and 2/c, subsists and a suit for redemption in respect of those mortgages can be decreed. According to the learned counsel, the equity of the redemption in respect of those two mortgages was long extinguished.

The properties covered, by the two bonds (Exts. 2/a and 2/c) along with some other properties were sold in execution of a rent decree sometime in the year 1938. At the court sale the properties were purchased by the appellant along with five others. Later, there was a partition among the purchasers and the lands covered by Exts. 2/a and 2/c were allotted to the share of the appellant. According to the appellant, he was in possession of the lands covered by two mortgage bonds aforesaid as a mortgagee till they were sold, in execution of the rent decree, but after the sale aforesaid he came in possession as the owner thereof and any suit for redemption of such a mortgaged property is not maintainable because the equity of redemption itself was extinguished in the process of the court sale. It is not disputed that the plaintiff is the purchaser of the equity of redemption from the original mortgagors. As such, the only question considered by the learned Judge in the aforesaid second, appeal, was as to whether in the facts and circumstances of the present case the equity of redemption was extinguished as a result of the sale of the properties. Learned Judge has pointed out that in the two mortgage bonds, Exts. 2/a and 2/c, it had been clearly stated that the rent shall be paid by the mortgagor and in case the rent was not paid by the mortgagor, the mortgagee shall pay the rent and obtain the receipt in the name of the mortgagor. In view of the aforesaid, recital, the learned Judge found that a duty was cast on the mortgagee to make the payment of rent in case there was a default in payment of rent by the mortgagor. Admittedly, the appellant as mortgagee defaulted in payment of rent in respect of the properties covered by the aforesaid two mortgage bonds, which resulted in the sale along with other properties as already stated above. Can in such a situation the appellant as mortgagee urge that the right, title and, interest of the mortgagor has been extinguished because of the sale aforesaid ?

This aspect of the matter has been considered by the Supreme Court and reference in this connection may be made to the judgment of the Supreme Court in the case of Mritunjoy Pani and Another Vs. Narmanda Bala Sasmal and Another, where the legal position has been summarised ,as follows (para 7) :--

"The legal position may be stated thus;

(1) The governing principle is ''once a mortgage always a mortgage'' till the mortgage is terminated by the act of the parties themselves, by merger or by order of the court. (2) Where a mortgagee purchases the equity of redemption in execution of his mortgage decree with the leave of court or in execution of a mortgage or money decree obtained by a third party, the equity of redemption may be extinguished, and, in that event, the mortgagor cannot sue for redemption without getting the sale set aside. (3) where a mortgagee purchases the mortgaged property by reason of a default committed by him, the mortgage is not extinguished and the relationship of mortgagor and mortgagee continues to subsist even thereafter, for his purchase of the equity of redemption is only in trust for the mortgagor."

Admittedly the instant case is not covered by the situations mentioned in categories (1) and (2). This case is covered by category (3) aforesaid where a mortgagee has purchased the mortgaged property by reason of a default committed by him, i.e., non-payment of rent. As such, it cannot be held that the mortgage is extinguished and the relationship of mortgagor and mortgagee does not subsist. In such cases Section 90, Trusts Act, is applicable. Section 90 is as follows;--

"Where a .....mortgagee.....by availing himself of his position as such, gains an advantage in derogation of the right of the other persons interested in the property .....he must hold, for the benefit of all persons so interested, the advantage so gained, but subject to the repayment by such persons of their due share of the expenses properly incurred, and to an indemnity by the same persons against liabilities properly contracted, in gaining such advantage."

Illustration (c) of Section 90 is as follows:--

"A mortgages land to B, who enters into possession. B allows the Government revenue to fall into arrears with a view to the land being put up for sale and his becoming himself the purchaser of it. The land is accordingly sold to B. Subject to the repayment of the amount due on the mortgage and of his expenses properly incurred as mortgagee, B holds the land for the benefit of A."

Again in the case of Basmati Devi Vs. Chamroo Sao and Others, it was pointed out that where both the mortgagor and the mortgagee are liable to pay rent and sale in execution of a rent decree is brought about because of the default of both of them and the mortgagee purchases the mortgaged land in execution of sale, the fact that the mortgagor had made a default does not alter the position. It was further pointed out that by default the mortgagee has contributed to the position as such when he purchased the property himself at a sale in execution of a rent decree, he clearly gained an advantage by availing himself of a position of mortgagee and in such cases Section 90, Trusts Act, was applicable and the mortgagor is entitled to redeem the mortgaged property.

On behalf of the appellant, reliance was placed, on a Bench decision of this Court in the case of Fekua Mahto and Others Vs. Babu Lal Sahu and Others, . From a bare reference to the judgment it will appear that application of Section 90, Trust Act, has not been considered. In any case, after the aforesaid judgments of the Supreme Court it cannot be held as laying down a good law. On behalf of the appellant reliance was also placed on the judgment of the Supreme Court in the case of Sachidanand Prasad Vs. Babu Sheo Prasad Singh, . In that case, on the facts a clear finding was recorded that the default in payment of rent was of the mortgagors because the rent was payable by them under the terms of the mortgage deed and in spite of that mortgagee paid almost the entire amount of the rent, but the sale took place because of default of payment of a trifling sum. In that context it was held that there was no question of applicability of Section 90, Trusts Act, and Illustration (c) of that section was not attracted even if the mortgagee had purchased the property. This case is not helpful to the appellant because the facts were different. In my opinion, the learned Judge has rightly come to the conclusion that under the terms of the two mortgagee bonds, referred to above, the appellant as mortgagee defaulted in the payment of rent which resulted in the sale of the properties and the appellant cannot urge in the facts and circumstances of the case that equity of redemption has been extinguished.

Learned counsel appearing for the appellant submitted that the principle enunciated in the Supreme Court judgments are not applicable to the facts of the present case because at the rent sale not only the lands covered by the two mortgage bonds aforesaid were sold, but even other lands of the khatna were sold and they were purchased by the appellant along with five others. In my opinion, this is of no consequence. It is an admitted position that the appellant purchased the properties sold in execution of the rent decree and after sale he is in exclusive possession of the properties covered by the two bonds aforesaid. In my view, he continues to be the mortgagee of the properties covered by Exts. 2/a and, 2/c. As such, there is no merit in the appeal filed on behalf of the defendant and it is, accordingly, dismissed, but, in the circumstances of the case, there will be no order as to costs.

So far as Letters Patent Appeal 21 of 1972 is concerned which has been filed on behalf of the plaintiff and, which relates to the third mortgage bond, i.e., Ext. 2/b, from the recital of the bond itself the learned Judge has pointed out that in that bond there was no duty on the mortgagee to pay the rent and the duty was exclusively of the mortgagor. As such, when the sale took place it cannot be held that it was as a result of any default on the part of the mortgagee, i.e., defendant 1. In my view, the facts, so far as this mortgage bond is concerned, are covered by the aforesaid decision of the Supreme Court, ( Sachidanand Prasad Vs. Babu Sheo Prasad Singh, ) and, the learned Judge has rightly held that after the sale the right, title and interest of the mortgagor was extinguished because Section 90, Trusts Act, was not applicable. Accordingly, I find no reason to interfere with that part of the judgment. As such, this appeal is dismissed, but without costs.

So far as Letters Patent Appeal 20 of 1972 is concerned, which has been filed on behalf of the plaintiff, the facts thereof are more or less similar to Letters Patent Appeal 21 of 1972. The learned Judge has pointed out from the recitals of the mortgage bond of this case, i.e., Ext. 2, that no duty was cast on the mortgagee, i.e, on the defendants to pay rent. In such a situation, when the sale took place in execution of a rent decree, there was no scope for application of Section 90, Trusts Act, for granting relief to the mortgagors or the purchasers of the equity of redemption because such equity of redemption, after sale was extinguished and the mortgage does not subsist. This appeal is also, accordingly, dismissed, but, in the circumstances of the case, there will be no order as to costs.

Ashwini Kumar Sinha, J.

I agree.