This Second Appeal coming on for hearing in the first instance before Seshagiri Ayyar, and Kumaraswami Sastriyar, JJ., the following Order of Reference to a Full Bench was made by
Kumaraswami Sastriyar, J.:— As regards the contention that there is a covenant to pay in respect of the mortgage of item No. 1, we must overrule it, having regard to Ram Narayan Singh v. Adhindra Nath Mukherji and Hakeem Patte Muhammad v. Shaik Davood(2). Consequently section 68, clause (a) of the Transfer of Property Act, is not applicable. The further question is whether in the events which have happened, the mortgagee is not entitled to bring item No. 1 to sale. The mortgagor covenanted to put the mortgagee in possession, and the finding is that he has broken the covenant. Therefore section 68, clause (c) of the Transfer of Property Act, applies.
Mr. Ramadoss argued that the failure to give possession, although it may give a right to the mortgage money, would not enable the mortgagee be sue for the sale of the property. He is supported in his contention by Arunachallam Chetti v. Ayyavayyan(3) and by the cases following that decision. On the other hand the recent decision of the Judicial Committee in Ram Narayan Singh v. Adhindra Nath Mukherji seems to suggest that the failure to fulfil the conditions mentioned in clauses (b) and (c) of section 68 would ensure the same legal consequences as may be enforced under clause (a).
The right to sue for sale under a covenant to pay the mortgage money is provided for by section 67 of the Transfer of Property Act. As at present advised, we fail to see why that section should not be appealed to where there is a default under clauses (b) and (c) of sect on 68. Arunachallam Chetti v. Ayyavayyan seems to proceed on the footing that the ordinary right of a usufructuary mortgagee to realize the monies due to him is to claim possession, in other words, notwithstanding the fact that the mortgagor refuses to perform his part of the contract, the mortgagee is only entitled to specific performance of the contract and is precluded from claiming any other relief. We think this position requires reconsideration. The Judicial Committee by saying that accounts might have to be taken in the case already referred to impliedly recognize the mortgagee's right to sue for the sale of the property and we think that the restriction on the mortgagee's right enunciated in Arunachallam Chetti v. Ayyavayyan is not justifiable.
Under these circumstances, we must refer the following question for the decision of the Full Bench:—
“Whether a usufructuary mortgagee is mt entitled to sue for the sale of the property mortgaged to him when the mortgagor fails to deliver possession of the said property to him and has consequently to sue for the money.”
On this Reference—
V. Ramadoss for the appellant.—The mortgage does not contain any covenant to pay and it is purely a usufructuary mortgage and as there is no contract to the contrary, the mortgagee has no right to sue for sale; see Arunachallam Chetti v. Ayyavayyan and section 67(a) of the Transfer of Property Act. The mortgagee has also no charge; Ram Narayan Singh v. Adhindra Nath Mukherji. Reference was also made to Lazarannessa Bibi v. Mahomed Jaffar, Luchmeshar Singh v. Dook Moohan Jha(4), Kangaya Gurukal v. Kalimuthu Annavi(5), Perianna Servaigaran v. Marudainayagam Pillai(6) and Samayya v. Nagalingam(7).
K.V.L Narasimham for the respondent.—As possession was not given, the plaintiff was nit a usufructuary mortgagee, but is only a simple mortgagee; see the definition of ‘usufructuary mortgage’ in section 68(d) of the Act. Section 67(a) cannot; apply as the restriction therein contained refers only to a usufructuary mortgagee ‘as such.’ The words ‘as such’ must be given their due meaning. The property has been secured for the money; see the definition of ‘mortgage money’ in section 58(a) of the Act. On failure to give possession the mortgage money has become payable according to section 68(c) of the Act; and the mortgagee is entitled to sue for sale and realize his money by sale of the property: see Venkatarao v. Mahableshwar and Bihari Lal v. Deoki Nandal Lal.
The Court expressed the following Opinions:—
Wallis, C.J:— I agree with the referring Judges and answer the question is the affirmative. A mortgagee does not become a usufructuary mortgagee within the meaning of section 58(d) until the mortgagor has given him possession of the mortgaged property and so put him in a position to realize his security out of the accruing rents and profits. It is because the intention in that the security shall be realized in this manner that by section 67, proviso (a), a usufructuary mortgagee as such is debarred from suing for foreclosure or sale under the section. A mortgagee to whom possession has not been given is not a usufructuary mortgagee. Consequently he does not come within the proviso and is entitled to sue for foreclosure or sale under the section, in the absence of a contract to the contrary, “at any time after the mortgage money has become payable to him.” Section 68 entitles the mortgagee to sue the mortgagor for the mortgage money.
“where, the mortgagee being entitled to possession of the property, the mortgagor fails to deliver the same to him, or to secure the possession thereof to him without disturbance by the mortgagor or any other person.”
The first of these events having happened, the mortgagee has become entitled to sue for the mortgage money, or in other words, the mortgage-money has become payable to him, and he is entitled under section 67 to sue for foreclosure or sale, in the absence of a contract to the contrary which cannot be implied. On the contrary the fact that the mortgagor was unable to put the mortgagee in a position to realize his security out of the rents and profits makes it only reasonable that be should be remitted to the ordinary remedies of a mortgagee by foreclosure or sale, and the legislature has recognized this by making the mortgage money payable in this event. He has advanced his money on the security of the mortgagor's interest in the property, and mortgagor has failed to perform his part of the contract by putting him in possession and enabling him to realize his security in that manner, and there is no reason why he should not be allowed to realize it by bringing the mortgagor's interest to sale if be so desires or for requiring him to undergo the expense and trouble of litigation with third parties unless he is content to lose his security. These aspects of the question appear to have been overlooked in Samayya v. Nagalingam and Arunachallam Chetti v. Ayyavayyan. In Ram Narayan Singh v. Adhindra Nath Mukherji the Judicial Committee observed:
“It must also be borne in mind that if the mortgagor be in the first instance under no personal liability, such liability may arise under section 68(b) or (c) of the Transfer of Property Act.”
As pointed out in the Order of Reference, once the mortgage-money becomes payable under any clause in section 68, there can be no reason for refusing to give effect to section 67 which allows of a suit for foreclosure or sale “at any time after the mortgage money has become payable” except in certain cases of which this is not one.
I accordingly answer the question in the affirmative.
Ayling, J.:— I concur.
Kumaraswami Sastriyar, J.:— I agree and have nothing useful to add to what I have said in the Order of Reference.
N.R