Kanhaiya Singh, J.:— These six consolidated appeals from the judgments and orders of the Additional Subordinate Judges, Patna, dated the 4th January, 1951, and the 12th July, 1952, reversing in all cases the decisions of the learned Munsiffs of Patna, have been heard together, as common questions of law and fact are involved, and this judgment will govern them all.
2. It will be more convenient to deal with Second Appeal 1166 of 1952 separately from the rest.
SECOND APPEAL 1166 of 1952.
3. This appeal arises out of a suit instituted by the plaintiffs mortgagees for recovery of the mortgage money under Section 68(1)(b) of the Transfer of Property Act on the ground that the security has been rendered insufficient without any wrongful act or default on the part of either the mortgagors or the mortgagees and that the mortgagors defendants were given reasonable opportunity of making up the deficiency in the security and had failed to do so. The facts admitted and proved by evidence, about which there is now no controversy, are these. The defendants first party executed a mortgage bond dated 29-9-1926 in favour of the plaintiffs in respect of Rs. 2250 hypothecating their milkiat share of 2 annas 3 pies in village Khainia tauzi 4593. The mortgagees plaintiffs are also tenants holding occupancy lands under the mortgagors defendants in the said tauzi. The mortgage bond aforesaid is obviously and admittedly an anomalous mortgage within the meaning of that term as used in Section 98 of the Transfer of Property Act.
4. As provided in the mortgage bond, the total amount of income derivable from the mortgaged share was, by mutual agreement, fixed at Rs. 232/0/6, out of which the plaintiffs mortgagees were to appropriate Rs. 101-4/- in lieu of interest and pay the balance of Rs. 130/12/6 to the mortgagors annually by way of Haqhazri. The mortgaged milkiat share consisted only of bhaoli holdings, and there was no bakasht land in this tauzi. In 1945 on the applications of the raiyats including the plaintiffs under section 40 of the Bihar Tenancy Act the bhaoli rent was, in the presence of the mortgagors landlords themselves, commuted to cash rent on 13-3-1948, and the order of the commutation was given retrospective operation from 1354 Fasli (1947).
5. In consequence of this commutation, the total gross income from the mortgaged share fell from Rs. 232/0/6 to Rs. 70 per year. Thereupon, on 16-3-1948 the plaintiffs demanded from the defendants a further security to render the whole security sufficient or to pay up the mortgage money. The defendants failed to comply with the demand. The plaintiffs then served them with notices per registered post to provide sufficient security, but to no effect. Thereupon the present suit was instituted on 9-8-1949 for the reliefs indicated above.
6. Defendants 1 to 3 resisted the suit on various grounds. One of the grounds taken by them, which eventually succeeded, was that the mortgage being an anomalous mortgage, the rights and liabilities of the parties would be determined by their contract embodied in the mortgage deed as provided in Section 98 of the Transfer of Property Act and since there was no stipulation for recovery of mortgage money on the diminution of income, the provisions of Section 68 of the Transfer of Property Act were excluded, and the suit for recovery of the mortgage money was incompetent.
7. The learned Munsif negatived this defence and decreed the plaintiffs' suit disallowing, however, their claim for interest. The defendants went in appeal, and the learned Additional Subordinate Judge came to the conclusion that on the terms of the mortgage bond the mortgagees were not entitled to sue for the mortgage money on account of the security being rendered insufficient by any cause whatsoever other than the default of the mortgagors or the mortgagees and further that in case of an anomalous mortgage section 68 of the Act has no application.
8. According to the learned Subordinate Judge, in the case of an anomalous mortgage the diminution in the security did not entitle the mortgagees to sue for mortgage money, notwithstanding the provisions of S. 68, unless the covenant embodied in the mortgage bond provided for a suit for realisation of the mortgage money in such a contingency. In reaching this conclusion the learned Sub-ordinate Judge relied upon a Bench decision of the Calcutta High Court in Gajadhar Agarwala v. Sibananda Predhani, AIR 1924 Cal 592. He accordingly allowed the appeal and dismissed the plaintiffs' suit with costs throughout. Now, the plaintiffs have come up in Second Appeal.
9. The contention of Mr. Lalnarain Sinha appearing for the appellants is that the view expressed by the learned Subordinate Judge is wholly erroneous in law and the decision of the Calcutta High Court in the case of Gajadhar Agarwala, AIR 1924 Cal 592 aforesaid turned upon the construction of Section 67 of the Transfer of Property Act and not S. 68, and, therefore, was distinguishable and not applicable to the facts of the present case. In my opinion, the contention of Mr. Sinha is correct. There is no direct authority of this Court or of any other Court, so far as I am aware, exactly in point, one way or the other, nor was any such authority brought to our notice. This question was, therefore, to be determined as a case of first impression. Section 98 of the Transfer of Property Act before its amendment by Act XX of 1929 which applies to the present case provides as follows:
“In the case of a mortgage, not being a simple mortgage, a mortgage by conditional sale, a 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, so far as such contract does not extend, by local usage.”
10. Prior to the amendment in 1929 there was no definition in the Transfer of Property Act of an anomalous mortgage. Now ‘anomalous mortgage’ has been defined in S. 58(g). In the light of this definition the old S. 98 was amended. In substance there is very little difference between the old section and the present one. Under this section, either old or new, the rights and the liabilities of the parties in case of an anomalous mortgage are to be determined by their contract as evidenced in the mortgage deed, and so far as such contract does not extend by local usage.
11. Section 68 gives the mortgagee a right to sue for the mortgage money in four cases only enumerated in clauses (a), (b), (c) and (d) of sub-s. (1) of that section. The present case comes under clause (b) which provides that where, by any cause other than the wrongful act or default of the mortgagor or mortgagee, the mortgaged property is wholly or partially destroyed or the security is rendered insufficient within the meaning of S. 66, and the mortgagee has given the mortgagor a reasonable opportunity of providing further security enough to render the whole security sufficient, and the mortgagor has failed to do so, the mortgagee has a right to sue for the mortgage money.
12. Thus, under this clause, any diminution in the mortgage security not made up even after notice to the mortgagor and not brought about by the wrongful act or default of the mortgagor or mortgagee, entitles the mortgagee to sue for the mortgage money. Suppose, in an anomalous mortgage there is a stipulation that in the event of the mortgaged property being wholly or partially destroyed, or the security being rendered insufficient, the mortgagee will have no right to sue for the mortgage money.
13. In such a case, according to the strict and literal interpretation of S. 98, without the aid of other provisions of the Transfer of Property Act, the mortgagee will have no right to sue for the mortgage money, as the contract embodied therein specifically barred such a suit. Such a construction will create a conflict between the provisions of S. 68 and those of S. 98, and the question that fails for determination is whether S. 98 excludes file operation of the provisions of Section 68 of the Transfer of Property Act. The answer, in my opinion, is in the negative.
14. Though not exactly on this question, we have, on a cognate question of exclusion of S. 60 from the operation of S. 98, a decision of the Privy Council in the case of Mohammad Slier Khan v. Raja Seth Swami Dayal, AIR 1922 PC 17. The question for determination in that case was whether the mortgagor had a present right on payment of the mortgage money to redeem the mortgaged property. It was assumed in that case that the mortgage was an anomalous mortgage.
15. The contention of the mortgagee was that he was entitled to remain in possession for twelve years from the date on which he took possession, and there was no right of redemption. Thus, the contest between the parties to that litigation turned upon whether the mortgagor's right to redeem was supported by the provisions in the mortgage which purported to entitle the mortgagee to remain in possession for twelve years from the date on which lie took possession, and on this question their Lordships of the Privy Council observed as follows:
“In the argument there has been considerable discussion as to the category to which this mortgage belongs, and more especially as to whether or not it is an anomalous mortgage. But their Lordships do not think it necessary to pursue this enquiry, for, in the view they take, the rights and liabilities of the litigants must depend on the terms of the instrument as controlled by the Transfer of Property Act, for, even if it were an anomalous mortgage, its provisions offend against the statutory right of redemption conferred by S. 60, and the provisions of the one section cannot be used to defeat those of another unless it is impossible to effect reconciliation between them. An anomalous mortgage enabling a mortgagee after a lapse of time and in the absence of redemption to enter and take the rents in satisfaction of the interest would be perfectly valid if it did not also hinder an existing right to redeem. But it is this that the present mortgage undoubtedly purports to effect. It is expressly stated to be for five years, and after that period the principal money became payable. This, under Section 60 of the Transfer of Property Act, is the event on which the mortgagor had a right on payment of the mortgage money to redeem.
16. The section is unqualified in its terms, and contains no saving provision as other sections do in favour of contracts to the contrary. Their Lordships therefore see no sufficient reason for withholding from the words of the section their full force and effect. In this view the mortgagor's right to redeem must be affirmed, and as both suits are now before the Board there will be no difficulty in passing one decree in both, so framed as to give due effect to this right.”
17. These observations, in my opinion, are apposite to the present case also. There is absolutely no difference in the wordings of Ss. 60 and 68 of the Act. Like S. 60, S. 68 is unqualified in its terms and contains no saving provisions as other sections do in favour of contracts to the contrary. When S. 68 is not subject to contract to the contrary, there is no reason why the ratio of the decision of the Privy Council in the aforesaid case will not govern the present case also.
18. There is an additional reason so far as Sec. 68 is concerned. Sub-section (2) of this section provides as follows:
“Where a suit is brought under Cl. (a) or Cl. (b) of sub-s. (1), the Court may, at its discretion, stay the suit and all proceedings therein, notwithstanding any contract to the contrary, until the mortgagee has exhausted all his available remedies against the mortgaged properly or what remains of it, unless the mortgagee, abandons his security and, if necessary, re-transfers the mortgaged property.” According to this provision, the Court has absoluta discretion to stay the suit and all Proceedings therein even if there is a contract to the contrary. This sub-section was enacted to avoid unnecessary hardship to the mortgagee. The mortgagee may sue for the mortgage money and still preserve his rights under the mortgage. In order to avoid this hardship this sub-section enacts that in cases where the mortgagor is not in default, that is to say, in clauses (a) and (b) the suit under Sec. 68 shall be stayed until the mortgagee has exhausted his remedy against the mortgaged property or what remains of it. The parties cannot contract out of this statutory provision.
19. The mortgagee; can avoid stay only when he surrenders his security. In that case there is no question of hardship, because the mortgagee after abandoning his security is competent to bring a simple suit for the money advanced by him. The question is that if there is a contract to the contrary in the anomalous mortgage, will it prevail over the provisions of sub-s. (2) aforesaid? I think, not. This shows quite clearly that the provisions of Sec. 98 cannot prevail over the provisions of Sec. 68.
20. The aforesaid decision of the Privy Council was followed by a Division Bench of this Court in Jagdeo Singh v. Rambilas Singh, ILR 28 Pat 531 : (AIR 1950 Pat 13). The question mooted in that case was whether Sec. 98 excluded the operation of Secs. 72 and 92 of the Transfer of Property Act, and their Lordships relying upon the aforesaid decision of the Privy Council have held that in the case of an anomalous mortgage, under the provisions of Sec. 98 of the Act, the rights and liabilities of the parties are governed by their contract as evidenced in the deed itself, and by local usage in the absence of a contract, but the section does not altogether exclude the operation of the other relevant provisions of the Act in so far as they are not inconsistent with the contract embodied in the deed.
21. Learned Counsel for the respondents relied strongly on the Bench decision of the Calcutta High Court in the case of AIR 1924 Cal 592. In that case the mortgage deed provided that the mortgagee was to have immediate possession which was to be continued for eight years for payment of the interest and that on failure to pay the mortgage money the property was to be sold for recovery of the mortgage amount and that on interference by the mortgagor with the mortgagee's possession, the mortgagee was entitled to sue for recovery of principal and interest.
22. In this case, however, the mortgagor never delivered possession of the mortgaged property to the mortgagee. The mortgagee, therefore, brought the suit for the realisation of the mortgage security by sale, and the question was whether he had a right of sale. Their Lordships held that the mortgage being an anomalous mortgage section 67 did not apply, and the mortgagee could not sue for the sale of the property. This section enacts the rights and liabilities in the absence of a contract to the contrary.
23. Therefore, if the terms of an anomalous mortgage show that the parties never contemplated a sale, the anomalous mortgagee has no right of sale. The right conferred upon the mortgagee by S. 68, is, however, not subject to a contract to the contrary. Therefore, the decision in the case of Gajadhar Agarwalla, AIR 1924 Cal 592 has no bearing in the present case, and that decision, having regard to the provisions of Sec. 67, was perfectly right. In my opinion, this case is distinguishable and has no application to the facts of the present case.
24. In my opinion, Sec. 68 not being subject to a contract to the contrary does not conflict with Sec. 98 and Sec. 98 is subject to Sec. 68 for, as observed by the Privy Council in the aforesaid case, the provisions of one section cannot be used to defeat those of another unless it is impossible to effect a reconciliation between them. Therefore, even though there be a contract to the contrary in the bond in question, if a term of that contract offends against the statutory right to sue for the mortgage money conferred by Sec. 68, the statutory right must prevail upon the stipulations in the deed.
25. The present case is stronger than the case before the Privy Council. In the present case, there is no stipulation in the mortgage deed debarring the mortgagees from suing for the mortgage money on account of the security being rendered insufficient. All that we find here is that there is no specific provision in the deed entitling the mortgagees to sue for the mortgage money on the ground that the mortgaged property had been wholly or partially destroyed or the security had been rendered insufficient.
26. It is true that the rights and liabilities of the parties in the case of anomalous mortgage will be determined by their contract as evidenced in the mortgage deed. When there is no contract disentitling the mortgagees to sue for the mortgage money, there is no reason why their statutory right under Sec. 68 of the Act will not be given full force and effect. Considered from any of view, the plaintiffs were entitled to a decree in this case.
27. In the result, this appeal is allowed, the judgment and decree of the learned Additional Subordinate Judge are set aside and the decree of the learned Munsif is restored. The plaintiffs will get the costs of this court and of the lower appellate court.
SECOND APPEALS 488 to 492 of 1951.
28. Unlike the above appeal, the, mortgagors were the plaintiffs in the suits which gave rise to these Second Appeals and the mortgagees were the defendants. The suits were brought for recovery from the mortgagees of Haqhazri reserved to the mortgagors in the mortgage deeds in respect of four years, 1352 to 1355 fasli. The plaintiffs mortgagors usulructuarily mortgaged their proprietary shares in village Khainia, tauzi 4593, to the defendants by separate mortgage deeds.
29. The total annual income of the mortgaged properties was by mutual agreement fixed at Rs. 1650 per year, and there were stipulations in the mortgage deeds that out of the aforesaid sum, Rs. 720 would be appropriated towards the interest accruing due on the mortgage money, and the balance of Rs. 930 would be payable to the plaintiffs mortgagors annually by way of Haqhazari. These suits were instituted for the recovery of the same.
30. Tile defence of the mortgagees in all the suits was common. They allege that the mortgagee property comprised of bhaoli holdings and that the bhaoli rent was commuted to money rent under section 40 of the Bihar Tenancy Act, as a result of which the total income from the mortgaged property came down to Rs. 550 annually. The commuted rent came into effect in 1354 fasli. The defendants alleged that due to this reduction in the annual jama for which they were not at all responsible, it was impossible for diem to discharge the obligations imposed upon them by the mortgage deeds and pay the mortgagors Rs. 930 by way of Haqhazri when the total income fell to Rs. 550/- only to speak of interest, which was to be realised out of the said sum. They contended that in view of the changed circumstances, the plaintiffs were not entitled to recover Haqhazri from them.
31. The learned Munsif gave effect to the defence and held that since the mortgage security had been rendered insufficient due to the commutation of bhaoli to nakdi rent for which neither the mortgagors nor the mortgagees were to blame the plaintiffs were not entitled in law to recover the Haqhazri from the mortgagees, as there was no fund in their hands, out of which this could be paid. Since, however, the commuted rent came into operation in 1354 fasli only, he held that the plaintiffs were entitled to Haqhazri for the preceding two years, namely, 1352 and 1353 fasli only.
32. He, therefore, disallowed the plaintiffs claina for 1354 and 1355 fasli and decreed the suit in part. In appeal by the plaintiffs the learned Subordinate Judge held that the mortgagees were also the tenants under the mortgaged tauzi and were directly responsible for commutation of the rent under section 40 of the Bihar Tenancy Act, and, consequently, neither in law nor in equity they were absolved of the obligations under the mortgage deeds. He accordingly held that the plaintiffs were entitled ts recover Haqhazri for the years in suit. He allowed the appeal and decreed the suits of the plaintiffs in full.
33. The defendants have come up in Second Appeal.
34. It is common ground that in consequence of the commutation the entire income from the mortgaged property was reduced from Rs. 1650, as fixed in the mortgage deeds, to Rs. 550. The defendants were to pay the plaintiffs Rs. 930 by way of Haqhazri and were to appropriate towards interest the balance of Rs. 720. The reduced income of Rs. 550 was not sufficient even to liquidate the interest that accrued due from year to year, not to speak of the Haqhazri of Rs. 930. In view of this commutation it was impossible for the mortgagees defendants to discharge the obligations imposed upon them by the mortgage deeds.
35. The learned Subordinate Judge fixed this responsibility upon them, because he thought that the commutation was effected at the instance of the mortgagees themselves. This view is erroneous in law. It is true that the mortgagees are tenants. But, in taking proceedings for commutation of bhaoli rent to money rent under section 40 of the Bihar Tenancy Act, they were exercising only the right which law conferred upon them. It under the law of the land the bhaoli rent was excessive and was liable to be commuted to money rent, the mortgagees cannot be held responsible for the reduction of the jama as a consequence of the-commutation which was effected under law.
36. It is obvious that the mortgagees cannot be held responsible for this commutation and the consequential insufficiency of the security cannot be attributed to any wrongful act or default of the mortgagees. Therefore, in my opinion, due to the intervention of the events by operation of law, the mortgagees were not legally liable to pay the mortgagors the Haqhazri reserved to them in the mortgage deeds. Therefore, the view taken by the learned Munsif was, in my opinion, perfectly correct.
37. In the result, all these appeals are allowed, the judgment and decrees of the lower appellate Court are set aside and the decrees of the learned Munsif are restored. The defendants will get the costs of this Court and of the lower appellate Court.
38. V. Ramaswami, C.J:— I agree.
D.H.Z
39. Appeals allowed.