Judgement

SATYANARAYANA RAJU, J. : -

This is an appeal from a judgment and decree of the Court of the Subordinate Judge of Masulipatam dismissing the appellants suit for redemption of the mortgage deed dated 27-7-1909, and for possession of the land specified in the plaint schedule.

2. The claim of the plaintiff for the above relief was, as stated in the plaint, founded on the following allegations. He acquired the lands described in the plaint schedule on payment of nazarana from the Court of Wards then in charge of the South Vallur Estate by means of a registered patta, dated 20-1-1909. Having become indebted to the 1st defendants family in a sum of Rs. 8,000/- he and others executed a simple mortgage, hypothecating the scheduled lands on 27-7-1909.

The plaint schedule mentioned lands were then barren and uncultivated. The 1st defendant and his brother, the late Bhaskararamamurthy, were men of influence and they represented to the plaintiff that if the lands stood in their names, they could use their influence to get irrigation facilities for the lands sooner. With that end in view, the lands were entered in the name of Bhaskararamamurthy in the revenue accounts in the year 1913 and by the year 1920 they were also entered in the name of the 1st defendant.

The 1st defendant was able to get irrigation facilities for 30 acres of the lands alone and only a small extent of the land being included in the wet ayacut, the 1st defendant and his late brother were pressing the plaintiff to discharge the mortgage-debt. They rejected the offer of the plaintiff to take the lands in discharge of their debt. The plaintiff made attempts to sell the lands but being frustrated in those attempts, consented in or about the year 1929 to allow the 1st defendant to have custody of the lands for the sake of better security for his debt, which he might realise either by cultivating the lands or by leasing them out.

Thus the 1st defendant entered into possession in 1929 and remained ever since in possession as a mortgagee. The plaintiff believes that if a proper account is rendered by the 1st defendant of the profits which he realised, the mortgage debt would have been completely discharged long ago after applying the provisions of the Madras Act IV of 1938 as the plaintiff is an agriculturist within the meaning of the Act. The 1st defendant, without any manner of right, executed a deed of sale in favour of the 2nd defendant on 13-4-1947.

3The first defendant contested the suit and denied the averments in the plaint. He pleaded inter alia that the plaintiff having abandoned all hopes of redeeming the mortgage-debt in accordance with the terms of the bond, requested him to pay the arrears of cist due to the Estate and take the land in discharge of the debt and relieve him of all liability thereunder.

He acceded to the repeated requests made by the plaintiff in that behalf and duly paid the arrears of rent and in order to implement the arrangement, joined the plaintiffs application to the Estate to transfer the lands in his name, and that thereupon mutation was effected in the Estate Accounts in 1913 and 1914. Since then he was in enjoyment of the property, and finally in or about the year 1921 or thereabouts, in response to the plaintiffs request, he agreed to take the lands as absolute owner in full quit of the plaintiffs liability and ever since he was, to the plaintiffs knowledge, in possession of the lands in his own right as absolute owner.

4. The 2nd defendant contended that he purchased an extent of Ac. 50-14 cents in S. No. 314 and 65 cents in S. No. 297/8 for Rs. 20,000/-from the 1st defendant on 13-4-1947. He claimed that he spent Rs. 10,000/- for improving the lands purchased by him.

5. Defendants 6 to 16, who are the tenants under the 2nd defendant, adopted his written statement.

6. Defendants 3, 17 to 22 and 27 to 29 remained ex parte and the 4th defendant was given up at the time of the trial of the suit.

7. The 1st defendant died during the pendency of the suit in or about October 1949, and defendants 23 to 29 have been added as his legal representatives.

8. The contentions of the other defendants are not material for the purposes of this appeal.

9. On the above pleadings, fourteen issues were framed out of which the material issues were the following :

"1. Whether the 1st defendant is in possession of the suit lands as trustee or agent of the plaintiff?

5. Whether the suit mortgage-debt is subsisting and if so, is it liable to be scaled down under Madras Act IV of 1938? 7. Whether the sale of the suit properties in favour of the 1st defendant in 1921 is true and valid?"

An additional issue framed on 16-7-1951 runs thus :

"Whether the plaintiff is in possession of the suit lands within 12 years before suit? Whether such a plea is open in this suit?"

10. On a consideration of the correspondence which passed between the parties and the oral evidence adduced by them, the Subordinate Judge found that the 1st defendant was not in possession of the suit land as a trustee or agent of the plaintiff, that the mortgage was not subsisting and that there was no question of scaling down the same.

He found that the suit properties were sold to the 1st defendant who perfected his title thereto by adverse possession and lastly that the plaintiff was not in possession of the suit lands within twelve years before suit. On these findings, he held that the plaintiff was not entitled to recover possession of the suit lands and dismissed the suit with costs of the contesting defendants. Against the said decree of dismissal, the plaintiff has preferred the above appeal.

11. Mr. P. Somasundaram, learned Counsel for the appellant, has contended that the relationship of mortgagor and mortgagee between the appellant and the 1st defendant was not extinguished either by act of parties or by operation of law and that therefore the appellant was entitled to a decree for redemption and possession. He submitted that the case of the contesting defendants that as a result of the sale in his favour, the 1st defendant became the absolute owner of the property was untenable in the absence of proof of the oral sale set up by him.

12. The positive and specific case pleaded by the appellant is that he consented in or about the year 1929 to allow the 1st defendant to have custody of the lands for the sake of better security for his debt and that the 1st defendant had entered into possession of the lands in 1929 and remained ever since in possession only as a mortgagee and he must be deemed to have remained in possession as an agent or trustee of the plaintiff and was therefore liable to account for the profits which he had received during the period of his remaining in occupation. It is therefore incumbent upon the appellant to establish that the possession which the 1st defendant had obtained was qua mortgagee in which case S. 76 of the Transfer of Property Act would undoubtedly be attracted.

13. The first of the questions which arises for determination, therefore, is whether the admitted possession of the 1st defendant is referable to the mortgage or whether it is dehors the mortgage. It is common ground that if the possession of the 1st defendant was referable to the mortgage, the plaintiff would be entitled to succeed but if on the other hand, it is de hors the mortgage, there would be no liability on the part of the 1st defendant or his successors-in-title to render an account.

14. In its origin, Ex. A-1, dated 27-7-1909, executed by the plaintiff and others in favour of the 1st defendant, was admittedly a simple mortgage with a recital that the mortgagors regained possession of the hypothecs. According to the terms of that mortgage, the amount of the debt was to be paid at the expiration of two years, i.e., by 27-7-1911. The plaint schedule land is of an extent of Ac. 107-22 cents. It is ryoti land situated in the village of Munjulur in the South Vallur Estate.

The plaintiff obtained a registered ryoti patta for the land under Ex. A-2 dated 20-1-1909, from the Manager of the South Vallur Estate, then under the management of the Court of Wards, on payment of a nazarana of Rs. 6,500/-. Under a registered non-possessory mortgage deed, Ex. A-1, dated 27-7-1909, executed by the plaintiff and his brothers in favour of the 1st defendant, they hypothecated the suit property for a sum of Rs. 8,000/-.

The plaintiff is a resident of Yanam in the East Godavari District and the 1st defendant is a resident of Kakinada in the same district. On the evidence it appears that the plaintiff and the 1st defendant are related. The lands are situated in the Krishna District. When the plaintiff obtained the ryoti patta, the lands were admittedly saline and barren and were not under cultivation for want of irrigation facilities.

15. Voluminous correspondence which passed between the plaintiff and the 1st defendant and his brother Bhaskararamamurthy has been filed and it is mainly on the strength of this correspondence that the appellant endeavoured to prove his case. Mr. Somasundaram, learned counsel for the appellant, has taken us through the entire correspondence which ranges from 1910 to 1928, that is, for a period of eighteen years and it is necessary to scrutinise this correspondence.

(After scrutinising the correspondence and considering the oral testimony of the witnesses produced by the plaintiff his Lordship concluded : )

From the above correspondence it is abundantly clear that the 1st defendant was not treating himself as a mortgagee in possession nor did the plaintiff treat him as such. It may be recalled that the positive and specific case pleaded by the plaintiff is that he consented in or about the year 1929 to allow the 1st defendant to have custody of the lands for the sake of better security for his debt which he might realise either by cultivating the lands or by leasing them out. The specific recital in the mortgage, which at its inception was a simple mortgage, is that the mortgagor retained possession. The covenant in the mortgage therefore did not contemplate the mortgagee coming into possession.

16. A careful consideration of the above correspondence discloses that the plaintiff at no time asked the 1st defendant to take possession as a mortgagee and account for the profits. The plaintiff having defaulted to pay the arrears of cist due to the Estate in or about the year 1914, the lands were sold in a revenue auction. On 10-8-1914, the plaintiff made a definite request to the 1st defendants brother to pay up the arrears and get the land transferred in his favour.

There is no suggestion made by the plaintiff that the suit lands should be taken by the 1st defendant as security for the mortgage. From Ex. B-1, dated 6-10-1914, it is clear that the arrears were paid by the 1st defendant. Thereafter the plaintiff and the 1st defendant made a joint application to the Manager of the South Vallur Estate for transferring the patta from the name of the plaintiff to that of the 1st defendant. Pursuant to the said joint application, the Estate Manager transferred the lands from the plaintiff to the 1st defendant in the Estate accounts, and there was an exchange of patta and muchilika between the 1st defendant and the Estate. It was thereafter as a ryot of the Estate that the 1st defendant entered into possession of the suit lands.

The intermediate correspondence which passed between the plaintiff and the 1st defendants brother only shows the anxiety on the part of the 1st defendants brother that the plaintiff should find money for payment of the mortgage-debt in which event they were prepared to release the property and give it back to the plaintiff. On 16-7-1927, there was a definite and categorical assertion made by the 1st defendants brother in Ex. B-43, which is admitted to be in reply to Ex. B-2 written by the plaintiff, that the suit land was transferred in favour of the 1st defendant in discharge of the mortgage-debt.

There is no repudiation of this assertion made by Bhaskararamamurthy in Ex. B-43 by the plaintiff at any time thereafter. It is impossible to find from the voluminous correspondence which has been referred to above, that the possession of the 1st defendant was by way of security for the debt or in some way referable to the mortgage. On the other hand, there is unequivocal proof furnished by Ex. B-43 that the parties treated the transaction as one of an outright transfer in satisfaction of the debt evidenced by the mortgage. If so much is conceded, it follows that the possession of the 1st defendant of the suit lands was de hors the mortgage.

17. Mr. Somasundaram has contended that the relationship of mortgagor and mortgagee between the plaintiff and the 1st defendant was subsisting and that as a mortgagee who had obtained possession of the hypotheca, there is a liability on the part of the 1st defendant to render an account for the profits received by him under S. 76 of the Transfer of Property Act.

18. Now, S. 76 provides that the mortgagee in possession is under a liability to account when, during the continuance of the mortgage, the mortgagee takes possession of the mortgaged property. It has been argued for the appellant that for the application of the provisions of S. 76 it is sufficient if the mortgagee takes possession of the mortgaged property and it does not matter how the mortgagee came into possession of the property. But S. 76 is not applicable unless the mortgagee has obtained possession qua mortgagee. There is ample authority for this position.

19. In Gulab Chand v. Ram Kumar, AIR 1941 Pat 296 (A), the mortgagee obtained a lease of the mortgaged house from the mortgagor and advanced a certain sum to the mortgagor for repairing and reconstructing the house. The advance was to be set off against the rent payable at a certain rate by the mortgagee for the house for a fixed term on the expiry of which if the mortgagee wished to continue to occupy the premises a higher rate of rent was to be paid by him. A Division Bench of the Patna High Court held that S. 76 had no application since the mortgagee came into possession as tenant and not as mortgagee, nor was the possession of the mortgagee in any way referable to the mortgage.

To the same effect is the decision of Seshagiri Aiyar, J. in Chidambaram Pillai v. Doraiswamy Chetty, 31 Ind Cas 473 : (AIR 1916 Mad 974) (B) where the facts were : In 1898, a simple mortgage was executed of certain properties by the mortgagor. In 1904, he executed a lease of the same to the mortgagee and directed him to apply the rent payable under the lease towards the interest due under the mortgage-bond executed in 1898. The learned Judge held that the two transactions must be deemed to be independent of each other and the simple mortgage was not converted into a usufructuary mortgage on the execution of the lease.

20. Mullas Transfer of Property Act, 4th edition, at page 479, gives a neat summary of the correct position in law : It reads :

Section 76 is not applicable unless the mortgagee is in possession qua mortgagee. Even if a mortgage deed entitles a mortgagee to take possession, collect rents and profits, his liability to account for such rents and profits will not arise unless and until he has taken such possession. A mortgagee is not in possession qua mortgagee if he enters the property as lessee."

21. The appellant has not been able to substantiate the specific case set up by him that he consented in or about the year 1929 to allow the 1st defendant to take custody of the lands for the sake of better security for his debt. We have already held that the oral evidence adduced by the appellant in support of his case is entirely untrustworthy.

There is not an iota of evidence that the plaintiff asked the 1st defendant to take possession of the suit lands by way of better security for the debt. The correspondence filed in the case on the other hand furnishes proof of an unmistakable intention on the part of the appellant to transfer the suit lands in favour of the 1st defendant in full quit of his claim under the mortgage.

22. The learned counsel for the appellant, however, contended that the 1st defendant got into possession qua mortgagee. Assuming however that the case of the plaintiff that he consented to the 1st defendant taking possession of the suit lands by way of better security for the debt is true, when at the request of the Mortgagor the mortgagee took possession of the lands in discharge of the debt, that would amount to an effective arrangement that the mortgagee should take the lands for the debt.

The arrangement took place in or about the year 1927 as evidenced by Ex. B-43, and the mortgagees possession thereafter for over twelve years cured the absence of registered document of conveyance in favour of the 1st defendant. It was held in Usman Khan v. Dasanna, ILR 37 Mad 545 : (AIR 1914 Mad 578 (2) ) (C) that "an unregistered agreement between the mortgagor and the mortgagee, that the mortgagee shall hold possession as owner will not confer an immediate ownership on the mortgagee, but is valid in so far as it has the effect of changing the legal character of the possession to a mortgagee into possession as owner. It is true that the mortgagee cannot by a mere assertion of his own or by any unilateral action on his part convert possession as mortgagee into possession as absolute owner. But there is nothing to prevent both the mortgagor and the mortgagee from agreeing that the mortgagee should from a certain date hold possession as an owner. At p. 547 (of ILR Mad) : (at p. 579 of AIR) the learned Judges, Sundara Ayyar and Sadasiva Ayyar JJ., pointed out :

"Such an agreement may not be valid to confer immediate title on the mortgagee but as far as we are aware there is no principle of law which prevents both parties from agreeing what the character of the possession to be held by the mortgagee should be from a certain date."

The learned Judges distinguished the decision of the Privy Council in Sri Rajah Papamma Rao v. Sri Vira Pratapa H. V. Ramachandra Raju, ILR 19 Mad 249 (PC) (D) holding that the decision only dealt with a case where possession was given to the mortgagee in his character as mortgagee in which case, of course, the mortgage was liable to be redeemed.

In the above case, the mortgage deed provided that in default of payment of the mortgage amount within the stipulated period the mortgagee should take possession of the mortgaged property and enjoy the name as absolute owner, and accordingly the mortgagor after the said period, and in consideration of a further payment of Rs. 250/- by the mortgagee, relinquished the mortgaged property to be held by the mortgagee as absolute owner and had the patta transferred in his name. It was held that the possession of the mortgagee under the circumstances for over twelve years, was adverse to the mortgagor whose right to redeem consequently became barred by limitation.

23. The decision in ILR 37 Mad 545 : (AIR 1914 Mad 578 (2) ) (C) was followed by a later Bench Decision of the Madras High Court in Kandasami pillai v. Chinnabba ILR 44 Mad 253 : (AIR 1921 Mad 82) (E). In that case, under an oral arrangement between the mortgagor and usufructuary mortgagee, the latter retained possession of a portion of the mortgaged property in full ownership in satisfaction of the mortgage-debt, and enjoyed it as full owner for more than twelve years after the arrangement.

Subsequently the mortgagor instituted a suit for redemption of the property, more than twelve years after the arrangement. Ayling and Odgers, JJ., held that the mortgagee had acquired by adverse possession an absolute title to the property, and that the mortgagors right to redeem the property was barred by limitation.

24. It was however argued by the learned counsel for the appellant that possession was permissive at its inception and therefore no question of adverse possession would arise in this case. Here again the difficulty is that the plaintiff did not succeed in establishing that the arrangement "pleaded by him namely, that the 1st defendant entered into possession qua mortgagee is true.

On the other hand, there is abundant evidence to show that there was an arrangement between the parties under which the 1st defendant took possession of the suit land as its owner. If that conclusion is right, there is no doubt that the plaintiffs claim to redeem the property became barred by limitation, the 1st defendant having had more than 12 years possession subsequent to the date of the arrangement which, even according to the plaintiff, was in 1929.

25. We find from the evidence adduced in the case, and that indeed is not denied, that from 1914, ever since there was a transfer of, patta in favour of the 1st defendant as a result of the joint application made by the plaintiff and the 1st defendant, the latter was paying all the taxes due to the Estate. He paid up the arrears of cist and had the revenue sale set aside. It is admitted that the 1st defendant himself paid the inclusion fees for purposes of getting the suit land included under wet ayacut.

According to the plaintiff himself, this sum was about Rs. 3,000/-. After 1927 we find that the list defendant made improvements to the suit lands by erecting a protective bund all round the lands. He made other improvements also. It is admitted by the plaintiff that the 1st defendant was keeping a farm-servant to look after the lands paying him salary. There is undoubted evidence that the 1st defendant himself was leasing the lands and otherwise treating himself as the owner. He was in receipt of the rents and profits from the lands. From 1927, when the 1st defendants brother intimated the plaintiff in unambiguous terms that the lands were transferred in favour of the 1st defendant in discharge of the debt, we find that the plaintiff made no assertion of his right.

From the year 1930 till 1946, for over a period of 16 years, we do not find that the plaintiff evinced any interest in the lands. There is nothing on record to show that during this period, the plaintiff asked the 1st defendant for an account. All this is consistent only with the assumption that the plaintiff agreed to treat the 1st defendant as the owner of the lands.

26. There is one further circumstance which may be mentioned here and that is that the 1st defendant refrained from suing upon the mortgage, and this is consistent only with the assumption that both the parties treated the debt to have been discharged as a result of the 1st defendant being put in possession of the suit lands.

27. As already noted, the claim made by the plaintiff is not only for redemption of the mortgage but also for possession. As has been rightly pointed out by the lower Court, the plaintiff has not succeeded in establishing that he was in possession of the land within twelve years before suit. The long inaction on the part of the plaintiff in making a claim for possession, coupled with the fact that the plaintiff failed to establish that the possession of the 1st defendant was qua mortgagee, can only lead to the conclusion that the case of the 1st defendant of an arrangement whereunder he became the owner of the property with the consent of the plaintiff, is true.

28. It has been contended for the appellant that the 1st defendant had set up a case that there was a sale in his favour in the year 1921, but that the correspondence showed that even subsequent to that year, the 1st defendant and his brother treated the plaintiff as the owner. It is true that the case of an oral sale in or about the year 1921 has not been established, but it is not open to the plaintiff, who has failed to establish his positive case, to take advantage of this fact.

29. For the above reasons, we are in agreement with the Court below that the plaintiff is not entitled to any of the reliefs claimed by him. The result is the appeal fails and dismissed with costs of the 1st respondent and respondents 22 to 28.

Appeal dismissed.