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  • Woodroffe
  • Caspersz, JJ.
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Smart Summary

Judgment Summary

Factual and Procedural Background

This is a suit for redemption of a mortgage. On 14 December 1884 the Defendant executed a kdbuliyat (lease) in favour of the Plaintiff's father in respect of 8 annas of Mehal Siswa Rasulpur; on the same day the Plaintiff's father executed a mortgage in favour of the Defendant for Rs. 4,000. The Subordinate Judge found that the lease and the bond of that day formed one transaction and together constituted a usufructuary mortgage; that finding was not contested on appeal.

On 16 June 1885 a second mortgage was executed by the Defendant. On 15 June 1889 a roka handnote was executed by the Plaintiff's father in favour of the Defendant. A suit was brought on the roka on 16 January 1890 and a decree obtained for about Rs. 1,200. On 27 May 1890 a suit on the second mortgage resulted in a decree for Rs. 4,052. The decree on the roka was put into execution; during execution the Plaintiff's father filed a petition (Ex. E) seeking postponement of sale to 28 August 1890 without fresh attachment or proclamations, and the decree-holder's pleader signed to show agreement to the terms.

On 28 August 1890 the property was put up for sale (subject to two prior mortgages) and was sold for Rs. 570; a sale-certificate and possession were granted the same year. An application under the Registration Act for registration of the property was subsequently made without objection on behalf of the Respondent. Fifteen years later, on 25 September 1905, the present suit for redemption was brought within the period allowed by law.

The Subordinate Judge held that the 28 August 1890 sale contravened section 99 of the Transfer of Property Act and was therefore a nullity, and decreed redemption. On appeal, the Full Bench decision in Ashutosh Sikdar v. Behari Lal (subsequently referred to) had held that a sale in contravention of section 99 is not a nullity but merely an irregular sale avoidable on proof of the contravention. The present court therefore treated the sale as irregular rather than void ab initio.

Legal Issues Presented

  1. Whether a sale in contravention of section 99 of the Transfer of Property Act (held by a Full Bench to be an irregularity and not a nullity) affects the mortgagor's right to redeem, i.e., does an irregular sale extinguish the equity of redemption or is the mortgagee who purchases the equity a trustee subject to redemption?
  2. Whether the petition filed during execution (Ex. E), by which the judgment-debtors sought postponement of sale without fresh attachments and agreed not to object to procedural irregularities, amounts to a release of the equity of redemption.
  3. Whether the mortgagor must have the irregular sale set aside before bringing a suit for redemption, and whether limitation bars such a suit.
  4. If the mortgagee is to be treated as a trustee by reason of purchase of the equity of redemption, what sums (if any) is he entitled to be reimbursed and add to the mortgage-debt?

Arguments of the Parties

Appellant's Arguments

  • It was contended that the Full Bench's holding (that a sale in contravention of section 99 is not a nullity but an irregularity) means the sale must be treated as existing with all its consequences until it is set aside; consequently, the equity of redemption was purchased by the Appellant and ceased to exist in the Respondent.
  • On that basis the Appellant argued that the Plaintiff had no right to sue for redemption unless and until the sale was set aside, and further contended that any suit to set aside the sale would be barred by the law of limitation.
  • The petition Ex. E was relied on (by the party seeking to justify the sale) as showing acquiescence in the sale and as amounting to a release of the equity of redemption in favour of the purchaser.

Respondent's / Plaintiff's Position

  • The Subordinate Judge had held that the sale contravened section 99 of the Transfer of Property Act and was therefore a nullity; based on that, the Plaintiff was decreed redemption below.
  • The Plaintiff maintained a right to redeem and, in the appeal, contended (or relied on the view) that the petition Ex. E did not operate as a release of the equity of redemption.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Ashutosh Sikdar v. Behari Lal (Full Bench) Held that a sale in contravention of section 99 of the Transfer of Property Act is not a nullity but an irregular sale liable to be avoided on proof of contravention. The court accepted that, for present purposes, the 1890 sale is an irregular sale (not a nullity) in accordance with that Full Bench decision; but noted the Full Bench did not decide whether such an irregular sale extinguishes the mortgagor's right to redeem.
Khiarajmal v. Diam (Privy Council) Authority that exclusive possession by the mortgagee for any length of time short of 60 years, or acquiescence not amounting to a release, will not bar a suit for redemption. Quoted to support the proposition that purchase by a mortgagee does not of itself create an irredeemable title and that Ex. E did not operate as a release of the equity of redemption.
Kamini Debi v. Ramlochan; Erusappa v. Commercial and Land Mortgage Bank; Martrand Balkishna v. Dhondo These decisions were referred to on the specific point whether the Full Bench decision narrowed previously existing rights of the mortgagor. The court relied on reference to these cases in concluding it was not satisfied that the Full Bench decision had the effect of curtailing the established rights of the mortgagor to redeem despite an irregular sale.
Mayan Pathuti v. Pakuran Holds that notwithstanding sale and confirmation, mortgagors might not be precluded from suing to redeem the mortgaged property on payment of the amount given credit for by the mortgagee in respect of the sale. Applied to support the court's conclusion that the Plaintiff could sue to redeem without first setting aside the sale and could leave the property vested in the Defendant while exercising the right to redeem.

Court's Reasoning and Analysis

The court proceeded in a sequence of legal steps, applying statutory principle and established equitable doctrine:

  1. Characterisation of the sale: the court accepted the Full Bench decision in Ashutosh Sikdar v. Behari Lal and accordingly treated the 28 August 1890 sale as an irregular sale (contravening section 99) rather than a nullity. The court expressly took the sale to be "not a nullity but an irregular sale."
  2. Equity and trustee relationship: the court recalled the long-established rule that when a mortgagee purchases the equity of redemption, he becomes a trustee for the mortgagor and does not thereby acquire an irredeemable title — unless there has been a release or some other legal bar to redemption.
  3. Effect of Ex. E (the postponement petition): the court analysed the petition and concluded it did not constitute a release of the equity of redemption. The court read Ex. E as an agreement by the judgment-debtors (and, by signature of the decree-holder's pleader, the decree-holder) not to object to procedural irregularities and not as an expression of intention to release the equity. The Privy Council's observation in Khiarajmal v. Diam was cited to reinforce that mere possession or acquiescence not amounting to a release will not bar redemption.
  4. Effect of Full Bench decision on mortgagor's rights: the court considered the Appellant's argument that because the Full Bench held such a sale to be irregular (and not void), the sale stands with its consequences until set aside. The court rejected the submission that this narrows previously existing rights of the mortgagor, referring to other authorities cited (Kamini Debi, Erusappa, Martrand Balkishna) and concluding that the established equitable rule (mortgagee-as-trustee) remains intact.
  5. Requirement to set aside sale before redeeming: the court held it was not necessary for the Plaintiff to first set aside the sale to obtain redemption. The Plaintiff could leave the property vested in the purchaser and still sue to redeem, consistent with the purchaser's possession — a position supported by the language in Mayan Pathuti v. Pakuran.
  6. Reimbursement to mortgagee/purchaser: recognizing that a purchaser who holds as trustee is entitled to reimbursement, the court accepted that the Defendant (as purchaser) may recover sums properly and prudently expended for the protection and preservation of the property since the date of purchase. However, the court excluded sums spent as costs of partitioning the 8 annas share purchased by him. The determination of the proper amounts to be reimbursed was directed to a factual enquiry.
  7. Relief ordered and limitation point: although the Appellant had argued limitation barred any suit to set aside the sale, the court was not persuaded that the Full Bench decision or limitation principles defeated the Plaintiff's right to seek redemption in the present form of suit.

Holding and Implications

Primary Holding: Subject to an enquiry and adjustment of accounts for sums properly expended by the purchaser for preservation and protection of the property, the Plaintiff has a subsisting right to redeem and the appeal is dismissed with modification of the decree below.

Specific orders and direct consequences:

  • The 28 August 1890 sale is treated as an irregular sale (in line with the Full Bench) but that irregularity does not extinguish the mortgagor's right to redeem; the Plaintiff may proceed to redeem despite the sale having taken place and despite the purchaser's possession.
  • The petition Ex. E does not amount to a release of the equity of redemption.
  • The Defendant (purchaser) is to be treated as a trustee insofar as his purchase of the equity is concerned and is entitled to be reimbursed, and to add to the mortgage debt, sums he has properly and prudently expended since the date of purchase for the preservation and protection of the property (including litigation expenses properly incurred), but excluding sums spent as costs of partitioning the 8 annas share.
  • An enquiry is ordered to ascertain the sums properly expended; such sums, when found, are to be credited to the purchaser and added to the mortgage debt.
  • Subject to the order for enquiry and accounting, the appeal is dismissed and the decree below is modified in accordance with these directions.

The opinion does not purport to create a new rule displacing the Full Bench's characterization of sales under section 99; rather, it reconciles that characterization with the established equitable principle that a mortgagee-purchaser holds as trustee and that the mortgagor's right to redeem survives an irregular sale unless there has been a valid release or other legal bar.

Decree modified. Subject to the above order, appeal dismissed.
Show full summary ...

    Pancham Lal Chowdhury v. Kishun Pershad Misser

    Woodroffe, J.:— This is a suit brought for redemption of a mortgage. There was a kdbuliyat executed by the Defendant in favour of the Plaintiff's father in respect of the property in suit which the Defendant took on lease. That property is 8 annas of Mehal Siswa Rasulpur. There was also on the same day, namely, 14th December 1884, a mortgage executed by the father of the Plaintiff in favour of the Defendant for a sum of Rs. 4,000.

    The learned Subordinate Judge has found that the lease and the bond which were executed on the same day formed one transaction and the two taken together constituted a usufructuary mortgage. That finding has not been contested on appeal.

    On the 16th June 1885, a second mortgage was executed by the Defendant and on the 15th June 1889 a roka handnote was executed by the Plaintiff's father in favour of the Defendant. On the 16th January 1890, a suit was brought upon this roka and a decree was obtained for a sum of Rs. 1,200 odd. Then on the 27th May of the same year, a suit was brought on the second mortgage and a decree given for Rs. 4,052. The decree, however, on the roka was a decree which was put into execution and in the course of the execution of the decree, the Plaintiff's father made an application for time which is Ex. E. and which is in these terms:—

    “In the above case (No. 190 of 1890) the sale of the properties of your Petitioners, the judgment-debtors, is fixed for to-day; and it is necessary for the judgment-debtors to pay the decretal money in this case as well as the other dues of the said decree-holder, viz., under decree No. 50 of 1890 passed, by this Court for Rs. 4,052-9 as and also the money due under the bond, dated the 14th December 1884, for Rs. 4,000 and it is impossible for your Petitioners, the judgment-debtors to raise money unless sufficient time is granted to them. Your Petitioners therefore beg to file this petition and pray that the sale may be stayed to-day and it may be fixed for the 28th August 1890, which is the second sale day in the month of August, without issue of fresh attachment processes and fresh sale proclamations. The attachment processes and the sale proclamations have been duly served. Your Petitioners, the judgment-debtors, shall raise no objection on the ground of non-service of fresh attachment processes and fresh sale proclamations or on the ground of inadequacy of price etc., and in case of sale your Petitioners, the judgment-debtors, shall not raise any objections to the purchase made by the decree-holder. The decree-holder also agrees to the above matter and the signature of the decree-holder's pleader is affixed below.”

    This petition has been relied on for the purpose of showing that there was acquiescence by the Respondent in the sale and that, as a matter of fact, the terms of that petition really amounted to a release of the equity of redemption in favour of the Appellant.

    On the 28th August 1890, the property was sold for Rs. 570, it having been put up to sale subject to two prior mortgages. A sale-certificate was granted, and possession was granted in the same year. Subsequently, an application was made under the Registration Act for registration of the property without objection on behalf of the Respondent. Then some 15 years after the purchase, namely, on the 25th September 1905 this suit for redemption was brought within the period allowed by law.

    The learned Subordinate Judge has held that notwithstanding the sale on the 28th August 1890, the Plaintiff is entitled to redeem and has given him a decree accordingly, holding that the sale was one in contravention of sec. 99 of the Transfer of Property Act and was therefore a nullity. That decision was passed before the decision of the Full Bench in Ashutosh Sikdar v. Behari Lal, where it was held that a sale in contravention of the terms of that section was not a nullity but an irregular sale liable to be avoided merely on proof that the terms of that section had been contravened.

    It must be taken, therefore, for the purposes of this appeal that the sale was not a nullity but was an irregular sale.

    The Full Bench, however, did not deal with the matter which is now before us, namely, whether, assuming the sale to be irregular, the right of redemption is, or is not, affected by such sale. The Full Bench dealt with proceedings for reversal of the sale and was not concerned with a suit for redemption such as that which is now before us.

    The question is one not altogether free from difficulty. Independently of the provisions of the Transfer of Property Act, it is a well established principle that a purchase by the mortgagee of the equity of redemption constitutes him a trustee for the mortgagor and that he does not on such a purchase acquire an irredeemable title. That is, of course, assuming that there has been no release of the equity of redemption or other circumstance which in law would bar this right to redeem. I do not think that in the present case the petition (Ex. E.) to which I have referred, constitutes such a release. I think that the meaning of that petition was that the Defendant agreed not to object as to any matters of procedure or irregularities in the procedure connected with the sale and it was not in his mind nor did he express himself as releasing thereby his equity of redemption. As regards this, their Lordships of the Privy Council observe in Khiarajmal v. Diam, that neither exclusive possession by the mortgagee for any length of time short of the statutory period of 60 years, nor any acquiescence by the mortgagor not amounting to a release of the equity of redemption will be a bar or defence to a suit for redemption if the parties are otherwise entitled to redeem.

    It has, however, been contended on behalf of the Appellant that the Plaintiff is not entitled to redeem. The way in which the argument has been put is this: it has been contended that as the Full Bench has held that a sale in contravention of sec. 99 is not a nullity but an irregularity, thus the sale must be taken to exist with all its consequences until it is in fact set aside and that the consequence of such sale was that the equity of redemption was purchased by the Appellant and therefore no longer existed in the Respondents so as to form the foundation of his present suit. It is contended that until the sale has been set aside, the Plaintiff has no right to sue and that the sale cannot be set aside as the suit is barred by the law of limitation.

    The point, as I have said, is one which appears to me to be open to arguments; but I am not satisfied that the effect of the Full Bench decision to which we have referred, is to narrow the previously existing rights of the mortgagor or to affect the hitherto established proposition of law, that the purchase of the equity of redemption constitutes the mortgagee a trustee for the mortgagor. We have been referred upon this point to the decisions in Kamini Debi v. Ramlochan, Erusappa v. Commercial and Land Mortgage Bank, and Martrand Balkishna v. Dhondo.

    I do not think that it is necessary that the Plaintiff should, in order to obtain the relief which he claims, have the sale set aside. He is, for the purposes of this suit, content to leave the property where it is, namely, vested in the Defendant by the sale which is still subsisting. But as so vested and against it as property in the Defendant's possession he seeks to exercise another, and a distinct, right which is consistent with the Defendant's right of possession, namely, his, the mortgagor's right to redeem. I refer to what was said in Mayan Pathuti v. Pakuran, where the learned Judges held that “notwithstanding such sale and confirmation, the mortgagors might not be precluded from suing to redeem the mortgaged property on payment of the amount given credit for by the mortgagee in respect of the sale.” I am of opinion, therefore, that the Plaintiff has a subsisting right to redeem.

    Then, the learned pleader for the Appellant contends, and I think rightly, that if the Defendant is to be taken to be, since his purchase, a trustee for the Plaintiff then he is entitled to be re-imbursed and to add to the mortgage-debt the amount which he has expended in the protection and preservation of the property. It appears that the Defendant has been engaged, amongst other things, in certain litigation in respect of which he claims to be re-imbursed. It is quite clear, and indeed it has not been contested, that the Appellant is entitled to recover whatever he has properly spent for the preservation and protection of the property though, of course, it is a question of fact to be determined what particular sum was properly spent for this purpose.

    In so far, however, as the accounts are determined by the decree both parties are desirous that they should be accepted and should not be re-opened. We order accordingly and direct that an enquiry be made to ascertain what sums the mortgagee has, properly and as a prudent man, expended since the date of his purchase for the preservation and protection of the property in suit either by litigation or in any other manner, excluding, however, the sums of money which he has spent as costs of partitioning the 8 annas share of the property purchased by him. The sums which on enquiry shall be found to be thus properly spent, the mortgagee is entitled to recover. These sums must be credited to him and added to the mortgage debt.

    Subject to the above order, the appeal is dismissed.

    N.G
    Decree modified.

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    Comments

    Pancham Lal Chowdhury v. Kishun Pershad Misser
    (Mar 11, 1910)