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  • Sadasiva Aiyar
  • Spencer, JJ.
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  • Sadasiva Aiyar
  • Spencer, JJ.
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Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

The opinion concerns an appeal by the defendants (the appellants) against an order of remand arising from a suit by the plaintiff for redemption of a mortgage executed in 1884 (Exhibit A). The mortgage deed describes itself in several places as a usufructuary mortgage, grants possession to the mortgagee, and contains a clause that if the mortgage amount is not paid on a stipulated date nine years from the deed, the mortgage would "work itself out as a sale" for the principal due. The deed also contains a covenant by the mortgagor to pay costs of construction/repairs "on the date fixed for redemption as per your accounts along with the mortgage-money." The central procedural posture is an appeal against an order of remand; the court is determining the legal character of the mortgage-deed and the consequences for the mortgagor's right of redemption.

Legal Issues Presented

  1. What is the legal nature of Exhibit A — is it a usufructuary mortgage, a simple mortgage, a mortgage by conditional sale, or a combination of these forms?
  2. Whether the deed, being a combination of forms, amounts to an "anomalous mortgage" within the meaning of section 98 of the Transfer of Property Act and thereby affects the rights and liabilities of the parties.
  3. Whether, given the character of the deed and the provisions of the Transfer of Property Act (particularly sections 58(c), 58(d), 60 and 98), the mortgagor retains a right of redemption.

Arguments of the Parties

Appellants' Arguments

  • The appellants' learned Vakil contended that Exhibit A is a combination of three kinds of mortgages: a simple mortgage, a usufructuary mortgage and a mortgage by conditional sale.
  • The appellants advanced a construction of section 98 of the Transfer of Property Act to include a combination of a simple and a usufructuary mortgage within the definition of "anomalous mortgage" (i.e., that the words “in the case of a mortgage not being” should be read before the phrase “a combination of the first and third”).

Plaintiff's Arguments

  • The plaintiff contended that the deed was a usufructuary mortgage and that the covenant at the end amounted to a clog on the equity of redemption.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Thambusawmy Moodelly v. Hossain Rowthen Privy Council observation about settling law as to Hindu form of mortgage by conditional sale and legislative action to affirm mortgagor's right to redeem until foreclosure. Used to support the view that the Transfer of Property Act was framed to exclude the Hindu form of mortgage by conditional sale from the definition of mortgage by conditional sale, treating such instruments as mortgages (simple or usufructuary) and disabling the clause that would otherwise work as an absolute sale.
Rama Brahman v. Venkatanarsu Puntulu Authority followed for treating an express covenant to pay in a mortgage-deed as creating a personal covenant, potentially converting to a simple mortgage. Cited to justify the conclusion that the presence of the mortgagor's covenant to pay made Exhibit A also a simple mortgage (thus a combination of simple and usufructuary mortgage).
Amarchand Lakhmaji v. Kila Morar Earlier decision treating a combination as anomalous (as relied upon by the appellants). The court states this case was relied upon by the appellants but regards it as wrongly decided (noting the respondent was unrepresented) and disagrees with its proposition that a simple+usufructuary combination is anomalous under section 98.
Ramayya v. Guruva Contains an observation that the Subordinate Judge had treated the mortgage as anomalous. The court notes the observation but declines to treat the opinion of the Subordinate Judge (as mentioned) as endorsed by the higher court; it does not accept that the higher court intended to affirm that view.
Ammanna v. Gurumurthi Observation that the transaction was a mortgage by conditional sale under section 58(c) (as per earlier Act). The court regards that observation as unnecessary for decision in that case and disents from it; the observation is not accepted as binding here.
Perayya v. Venkata Authority indicating that a right of redemption is not extinguished by existence of a covenant at the end of the mortgage deed similar to the present one. Relied upon to show that Exhibit A's covenant did not destroy the mortgagor's right of redemption and that section 60 would apply to such a mortgage.
Pamurlapati Ankivedu v. Samurlapati Subbiah Example where even less onerous terms were held not to destroy the right of redemption. Cited to reinforce the conclusion that covenants of the kind in Exhibit A do not extinguish redemption rights.
Gopalsami v. Arunachella Comparative authority on construing words as personal undertaking to pay. Referenced by Spencer, J. to distinguish Exhibit A (where he found no personal covenant) from instruments that do contain a personal promise to pay.
Kangaya Gurukal v. Kalimuthi Annavi Instance where words constituted a personal promise to pay the mortgage-money. Used as a contrast by Spencer, J. to show Exhibit A lacks the explicit personal promise found in that case.
Tukaram v. Ramchand Instance where document passing ownership usufructuarily on failure to pay was construed as an anomalous mortgage (in that case combined with a lease). Referred to as an example in which an instrument was treated anomalously, possibly due to combination with lease; court distinguishes that case from the present facts.

Court's Reasoning and Analysis

The court's analysis proceeds in the following steps, using only the reasoning explicitly contained in the opinion:

  1. Examination of the deed's terms: The deed repeatedly labels itself a "usufructuary mortgage," grants possession to the mortgagee, and contains a covenant by the mortgagor to pay certain costs "on the date fixed for redemption." The deed also contains a clause that it would "work itself out as a sale" if payment were not made nine years after execution.
  2. Classification under the Transfer of Property Act: The court considers whether the instrument falls within the definition of "mortgage by conditional sale" in section 58(c). It concludes that because the deed was executed after the Transfer of Property Act came into force and lacks an ostensible sale on its face, it does not fit section 58(c)'s definition of mortgage by conditional sale.
  3. Effect of the Transfer of Property Act on Hindu form: Relying on the reasoning in Thambusawmy Moodelly and the statutory scheme, the court concludes the Act treats the Hindu form that formerly worked as a conditional sale as a mortgage (simple or usufructuary) and renders the clause working as an absolute sale unenforceable in that sense.
  4. Existence of a personal covenant: Noting the mortgagor's covenant to pay moneys "along with the mortgage-money on the date of redemption," the court follows Rama Brahman v. Venkatanarsu Puntulu and holds that this covenant can amount to a personal covenant to pay, which converts the instrument, in part, into a simple mortgage. Thus the deed is held to be a combination of a simple mortgage and a usufructuary mortgage.
  5. Interpretation of section 98 (anomalous mortgage): The appellants' construction of section 98 — that a combination of a simple and usufructuary mortgage falls within the anomalous mortgage category — is rejected. The court reads the section as excluding certain combinations from the "anomalous" label and concludes the present deed is not an anomalous mortgage under section 98.
  6. Redemption right under section 60: Given the characterization as a combination of simple and usufructuary mortgage (but not anomalous), the court holds the mortgage is redeemable and that the provisions of section 60 apply. The court cites Macpherson and Perayya v. Venkata to support that the right of redemption is retained despite the covenant.
  7. Concurrence and further analysis by Spencer, J.: Spencer, J. concurs on the interpretation of section 98 and offers an independent reading of Exhibit A. He suggests Exhibit A could be treated either as a usufructuary mortgage with a clog on the equity of redemption or as a usufructuary mortgage combined with a mortgage by conditional sale; in either event, section 60 would operate to preserve redemption and no extrinsic act of the parties could extinguish redemption.
  8. Distinguishing other authorities: The court reviews other cases (Amarchand Lakhmaji, Ramayya, Ammanna) and either distinguishes them or indicates disagreement where observations were unnecessary for decision or were wrongly decided.

Holding and Implications

HOLDING: The court dismissed the appeal with costs.

Key implications and direct effects based on the opinion:

  • The mortgage-deed (Exhibit A) is held to be a combination of a simple mortgage and a usufructuary mortgage (and, in Spencer, J.'s view, alternatively a usufructuary mortgage possibly combined with a conditional-sale element), but it is not an "anomalous mortgage" within the meaning of section 98 of the Transfer of Property Act as contended by the appellants.
  • Because the deed is so characterized, the mortgagor retains the right of redemption; section 60 of the Transfer of Property Act applies and the covenant in the deed does not extinguish the mortgagor's right of redemption.
  • The court expressly disagreed with certain prior decisions or observations that would have treated such combinations as anomalous or as a mortgage by conditional sale under section 58(c), and thus did not follow those views. The decision clarifies (as expressed in this opinion) the interpretation of sections 58(c), 58(d), 60 and 98 in relation to mortgages of this character.
  • Direct consequence for the parties: the appeal by the defendants is dismissed and costs are awarded to the plaintiff; the mortgage is deemed redeemable.

Note: The summary above is limited to, and strictly follows, the reasoning, facts and citations contained in the provided opinion.

Show full summary ...

    Srinivasa Aiyangar v. Radhakrishna Pillai

    The Judgment of the Court was delivered by

    Sadasiva Aiyar, J.:— This is an appeal against an order of remand. The appellants are the defendants.

    2. The plaintiff sued for redemption of a mortgage created in 1884. This mortgage document (Exhibit A) begins by calling itself a usufructuary mortgage and, in two or three places in the course of the deed, it is expressly called a usufructuary mortgage-deed. It, however contains a clause that, if the mortgage amount was not paid on a date which is stipulated in the document at an interval of exactly nine years from the date of the document—the mortgage was to work itself out as a sale for the principal amount due on the mortgage bond. Possession was given to the mortgagee in accordance with the nature of the document and its spirit. At the and, there is a covenant to this effect: “I, the mortgagor, shall pay to you the costs of the construction of earthwork etc. on the data fixed for redemption as per your accounts along with the mortgage-money.” The question is what is the nature of this document. It is contended by the Appellant's learned Vakil that this is a combination of three kinds of mortgages, a simple mortgage, a usufructuary mortgage and a mortgage by conditional sale. The plaintiff's contention, on the other hand, is that it is a usufructuary mortgage with a covenant at the end clogging the equity of redemption. I am inclined to think that it is a combination of a simple mortgage and a usufructuary mortgage with a covenant clogging the equity of redemption. I think it cannot be called a mortgage by conditional sale, as it was executed after the Transfer of Property Act came into force, and it does not come within the definition of a mortgage by conditional sale found in section 58, clause (c) of the Transfer of Property Act. There is no ostensible sale of the mortgaged property on the date of the document. It is what was known as the Hindu form of a mortgage by conditional sale before the Transfer of Property Act was enacted but it seems to me that the definition given in section 58 clause (c) of the Act was expressly framed so as to exclude the Hindu form of mortgage by conditional sale from the definition of mortgage by conditional sale in the Transfer of Property Act. That Hindu form of mortgage by conditional sale, which began as a mortgage and worked itself out as a sale on breach of certain conditions by the mortgagor formed the subject of several decisions of the High. Courts and the Privy Council and because much confusion resulted from conflicts between those decisions, their Lordships of the Privy Council expressly stated in Thambusawmy Moodelly v. Hossain Rowthen(1): “An Act of the Legislature affirming the right of the mortgagor to redeem until foreclosure by a judicial proceeding, and giving to the mortgagee the means of obtaining such a foreclosure, with a reservation in favour of mortgagees whose titles under the law as understood before 1858, had become absolute before a date to be fixed by the Act, would probably settle the law, without injustice to any party.” I think that the Transfer of Property-Act, so far as the Hindu form of mortgage by conditional sale was concerned, treated it as a mortgage either simple or usufructuary according to its terms-and treated the condition as to its afterwards working out as a sale as not enforceable by enacting section 60 in the Act which gives to the mortgagors-generally a right to redeem. A mortgage-deed which begins as a mortgage-transaction cannot, in my opinion, he called a mortgage by conditional sale, though it is a mortgage which gives the mortgagee, after a certain time and on breach of certain conditions by the mortgagor, a right to claim a title as vendee. It is a mortgage with a clause providing for a future conditional sale and not a mortgage by means of a present sale transaction.

    3. If, then, this document is not a mortgage by conditional sale, it is clearly a usufructuary mortgage according to the definition in section 58, clause (d) of the Transfer of Property Act. I think, that as there is the covenant at the end by the mortgagor which expressly says:—

    “I shall pay some moneys along with the mortgage-money on the date of redemption”, the document might, according to its literal construction, be treated as containing a personal covenant to pay the mortgage-money; and following Rama Brahman v. Venkatanarsu Puntulu(2). I would hold that, owing to the existence of that covenant, it is also a simple mortgage. Hence the document becomes a combination of a simple and usufructuary mortgage.

    4. It was next contended that even a combination of a simple and a usufructuary mortgage is an anomalous mortgage under the definition of section 98 of the Transfer of Property Act. That section is 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, so far as such contract does not extend, by local usage.” The construction sought to be put by the appellant's learned Vakil upon this section is that the words “in the case of a mortgage being” should be understood before the words, “a combination of the first and third.” I do not think that this is a reasonable construction of the section. I think the meaning is “or in the case of a mortgage not being combination etc.”.

    5. Reliance was placed upon the decision of Amarchand Lakhmaji v. Kila Morar(3). In that case, the respondent was not represented, and I think that case was wrongly decided. Reference was also made to Ramayya v. Guruva(4). No doubt, there is an observation in that case that the Subordinate Judge who decided the case in the lower Court treated the mortgage in question in that case as an anomalous mortgage; but I do not think that the learned Judges of this Court intended to state that opinion of the Subordinate Judge was correct. Again, reference was made to Ammanna v. Gurumurthi(5). There is an observation there that the transaction evidenced by the document in question in that case was a mortgage by way of conditional sale as defined in section 58, clause (c) of Act IV of 1882. That observation was not necessary for the decision in that case, and with the greatest respect I dissent from that observation, though it seems to be accepted without criticism by Sheppard and Brown (page 238) and by Gour (section 1044) in their Commentaries on the Transfer of Pro peart Act. In the result, I hold that the mortgage-deed in this case is not an anomalous mortgage as defined in section 98 of the Transfer of Property Act, but it is a combination of a simple mortgage and a usufructuary mortgage and hence that it is redeemable. That, in the case of such a mortgage the provision of section 60 would apply, seems to me to be clear from the observations in page 707 of Macpherson, in his book on the Law of Mortgage. The case of Perayya v. Venkata(6) also shows that the right of redemption is not extinguished by the existence of a covenant at the end of the mortgage deed similar to the terms given in the present mortgage-deed. [See also Pamurlapati Ankivedu v. Samurlapati Subbiah(7), where even less onerous terms were held not to destroy the right of redemption].

    6. In this view, it is not necessary for me to consider the question whether the learned District Judge was right in his view that even if it was anomalous mortgager section 60 of the Transfer of Property Act would allow the mortgagor to redeem the mortgage and that the terms of section 93 should be read subject to the provisions of section 60 and other sections of the Transfer of Property Act. I need only say that I would find it very difficult to hold that the express terms of section 93, which are intended to apply specially to anomalous mortgages, can be controlled by the provisions of the previous sections of the Act which deal with other matters.

    7. In the result, I would dismiss the appeal with costs.

    Spencer, J.:— I agree with my learned brother in the interpretation he has put on section 98 of the Transfer of Property Act. I find it quite impossible to read the words “or a combination of the first and third, or the second and third, of such forms” as not being governed by the negative which comes at the beginning of the sentence. If a different construction is to be put on this section, it would be necessary to imply the words “in the case of” between the words “or” and “a combination etc.” This would be a violation of the meaning of the plain English of the sentence. I am unable to follow the statement of the learned Judges who decided Amarchand Lakhmaji v. Kila Morar, that a combination of a simple mortgage and a usufructuary mortgage is an anomalous mortgage provided for by section 98. Mr. Gour in paragraph 1603 of his book on the Law of Transfer in British India treats this statement as an oversight and in paragraph 1606 speaks of there being six and only six forms of mortgage eliminated by this action from the category of anomalous mortgages.

    8. As regards the mortgage-deed, Exhibit A, as I read the document, I am in lined to treat it as either a usufructuary mortgage deed with a clause containing a clog on the equity of redemption or a usufructuary mortgage-deed combined with a mortgage by conditional sale. In either case, it will be Subject to the conditions of section 60 of the Transfer of Property Act, and no act of the parties other than a transaction outside the mortgage-deed itself will extinguish the right of redemption: vide Perayya v. Venkata.

    9. The words which provide for the payment of repairs, improvements etc., along with the mortgage-money, are evidently mended only to take effect in the event of the mortgage being redeemed. I do not consider that they constitute a personal undertaking to pay, nor are there any other words in this document which can be construed as a personal covenant, express or implied, to pay the mortgage money: compare Gopalsami v. Arunachella(8). In this respect, this, case may be distinguishable from that of Kangaya Gurukal v. Kalimuthi Annavi(9), in which a personal promise to pay was contained in the words: we shall cause Rs. 200 to be paid and we shall redeem our land.”

    10. If section 58, clause (c) of the Transfer of Property Act is to be read strictly, it is necessary that there should be an ostensible sale of the mortgage property to constitute a mortgage by conditional, sale. There are no words in Ex. A, which, by themselves create a sale; but the document implies that, if payment is not made by the stipulated date, the property should be held and enjoyed by the mortgagee as if he had obtained it by absolute sale. In some cases, such words have been treated as a mortgage usufructuary by conditional sale. Instances are given in paragraph 1605, page 1025 of Mr. Gour's book. The next paragraph describes anomalous mortgages. In Tukaram v. Ramchand(10), the document which passed the ownership of the property usufructuarily mortgaged in case of failure to pay the mortgage-money on the prescribed date, was construed as an anomalous mortgage. But in that case, the usufructuary mortgage seems to have been combined with a lease and that may have led the learned Judges to treat it as an anomalous mortgage. Whether the present; document be treated as a usufructuary mortgage combined with a mortgage by conditional sale, as the lower Appellate Court treated it, or a usufructuary mortgage with a clog on the equity of redemption, in either case, the judgment of the lower Appellate Court will have to be upheld and this appeal dismissed with costs, and I, therefore, agree in the order proposed by my learned brother.

    V.S/R.K

    11. Appeal dismissed.

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    Srinivasa Aiyangar v. Radhakrishna Pillai
    (Nov 12, 1913)