George Mathai and Another vs Mathew Daniel and Others

Sankaran, J.—The dismissal of the Plaintiffs'' suit for redemption of the mortgages and puravaippas granted in favour of the 1st Defendant and for recovery of the plaint property, has given rise to this appeal. The property originally belonged to the father of the 1st Plaintiff and it devolved on the 1st Plaintiff as per the gift deed Ext. E dated 6-1-1093 executed by the father. In the year 1097 the 1st Plaintiff executed a mortgage for a sum of Rs. 225 in favour of the 1st Defendant and put him in possession of the property. This was followed by and puravaippa of the year 1098 under which an additional loan of Rs. 300 was obtained by the 1st Plaintiff. Subsequently Anr. loan of Rs. 781 was also obtained by the 1st Plaintiff from the 1st Defendant on the security of the same property by executing the puravaippa deed Ext. A dated 30-10-1099. The property was again hypothecated by the 1st Plaintiff in favour of the 1st Defendant under Ext. B dated 10-12-1100 for an additional advance of Rs. 172.

In this latter document the 1st Plaintiff had undertaken to discharge the loan obtained under it within a period of two years and it was further stipulated that in default the 1st Defendant may treat the entire transaction as a sale, the total consideration advanced under the mortgage and the subsequent puravaippas being the consideration for the sale. According to the Plaintiffs, a sum of Rs. 400 had been paid to the 1st Defendant on 17-1-1102 as per the receipt Ext. G and thereby the debt due under Ext. B was completely discharged, the balance of the amount covered by the receipt being credited towards partial discharge of the earlier debts.

The present suit was instituted by the plain tiffs in the year 1122 for redeeming these earlier puravaippas and mortgage on payment of the balance amount due under those documents. The value of improvements effected on the property by the mortgagee Defendant was estimated at Rs. 50 and it was set off against a like amount claimed by the Plaintiffs towards compensation for the waste alleged to have been committed in the property. Item 2 is a building in item 1 and it is alleged that the Defendants had unauthorisedly put up this building and that they are liable to remove the same at their own cost. On failure to do so, the Plaintiffs have offered to take the building also on payment of Rs. 100 as its value.

All the rights which the 1st Defendant had over the plaint items were purchased from him by Defendants 2 and 3 under the sale deed Ext. II dated 10-3-1114 and from that time onwards they are in possession and enjoyment of these items. The suit was resisted mainly by these Defendants. The 1st Defendant also filed a separate written statement opposing the Plaintiffs'' claim for redemption and at the same time admitting the sale deed he had executed in favour of Defendants 2 and 3. All these three Defendants have impeached the receipt Ext. G as spurious and have denied the payment of Rs. 400 as pleaded by the Plaintiffs. According to them the Plaintiffs have failed to get a release of Ext. B within the time stipulated and thus they have forfeited the right to redeem the suit property. It is contended that on the date of the expiry of the period of two years fixed under Ext. B the 1st Defendant had become the absolute owner of the property and that ever since that date he was holding the property adversely to the Plaintiffs. The Defendants have also pleaded that on account of such adverse possession for over the statutory period, the Defendants have perfected their title to the property.

The value of improvements effected by these Defendants on the property has been estimated at Rs. 1500 by the 1st Defendant and at Rs. 3500 by Defendants 2 and 3. The allegation of waste was also denied by them. The lower Court upheld the defence plea that Ext. B has worked itself out as an outright sale and that even otherwise the Defendants have perfected their title to the property on account of adverse possession and limitation and accordingly dismissed the suit.

The lower Court''s finding that Ext. G is not genuine and that the plea of discharge set up by the Plaintiffs is false has been challenged by the Appellants as erroneous. The 1st Plaintiff had undertaken in Ext. B to discharge the debt due under it within a period of two years and had also agreed to forego his right of redemption of the mortgage and puravaippa deeds executed In favour of the 1st Defendant. Apart from the question of the legality of the latter part of this agreement, it has to be stated that it is extremely unlikely that the 1st Plaintiff would have been satisfied with a simple receipt like Ext. G to evidence the fact of the discharge of the debt under Ext. B. Ordinary prudence would have dictated to him that he must get a release deed or at least a registered receipt to evidence the fact of such a discharge.

Exhibit G is not attested by any independent witness. P.Ws. 2 and 3 have been examined to prove the genuineness of the receipt. If they were present at the time of the alleged execution of the receipt and of the payment under it, there is no reason why any of them should not have been made to attest the receipt. Both these witnesses are persons of no status and it has been amply brought out in their cross-examination that they are only hired witnesses. They are not able to give any convincing details regarding the execution of the receipt and there are material discrepancies in the versions given by them. Under these circumstances we are in agreement with the lower Court in holding that Ext. G is not and that the alleged payment under it is false.

The next point for consideration is whether the Plaintiffs have lost their right of redemption by virtue of the stipulation contained in Ext. B that on failure of the repayment of the loan with in a period of two years the transaction may be treated as an outright sale. It was while the 1st Defendant was holding the property as security for the amounts which he had advanced to the 1st Plaintiff under the mortgage of the year 1097 and under the subsequent puravaippa deeds that the additional loan under Ext. B was obtained by the 1st Plaintiff. It is clear from Ext. B that this loan was taken on the security of the property already mortgaged. The earlier mortgages have all been recited in Ext. B and it is then stipulated that on the mortgagor''s default to repay the loan within a period of two years the mortgagee may enjoy the property as on sale for the total consideration made up of the several loans advanced on the security of the property. All the essential elements of a mortgage by conditional sale are thus satisfied by Ext. B.

A similar transaction had come up for the consideration of the Privy Council in - ''Mirza Abid Hussain v. Mt. Kaniz Fatima'' AIR 1924 PC 102 (A). There also there were two mortgages in favour of the same individual in respect of the same property. Possession had been given under the first mortgage deed dated 15-5-1869. On obtaining a fresh loan the second mortgage was executed on 24-6-1878 and the deed contained an express stipulation that in case of failure to repay the loan within a period of five years, the deed shall be deemed to be a sale deed and the total amount due to the mortgagee shall be treated as the consideration for the sale. In construing this document it was ruled by the Privy Council that the mortgage deed dated 15-5-1869 and the subsequent deed dated 24-6-1878 must be read together and the mortgagee should be treated as having held the mortgaged property as a mortgagee in possession under a mortgage in the form of a mortgage by conditional sale.

It is well settled that where a transaction is essentially a mortgage, any provision inserted in the deed of mortgage, which is repugnant to or inconsistent with the mortgagor''s right of redeeming, the security, will be deemed to be a clog or fetter on the equity of redemption and treated as void. This principle has been accepted and followed by the Travancore High Court in respect of mortgage transactions entered into at a time when the Transfer of Property Act had not been made applicable to that State. The full Bench decision in - ''Padmanabha Pillay v. Umamaheswara Iyer'' 1948 Trav LR 556 (B), is to that effect. It was ruled in that case that a condition in a mortgage deed that in the event of payment of the loan within a stipulated, time the mortgage shall become a sale, will be treated is a clog on the equity of redemption and therefore be void and ineffective. In construing a deed of mortgage containing a similar provision, it was ruled by this Court also in - ''Soosa Pillai v. Azhakianambia Pillay'' AIR 1950 Ker LT. 100 (C), that such a provision would be looked upon as a clog on redemption in Travancore as in other jurisdictions. It has therefore to be held that the stipulation contained in Ext. B in the present case that the mortgagee may enjoy the property as on sale after the expiry of two years from the date of the document, has only to be ignored as being void and that the same cannot affect the Plaintiffs'' right to redeem the property even though there has been default in the repayment of the loan within that period.

The claim of title set up by the Defendants-Respondents on the basis of adverse possession is equally untenable. Their possession originated under the first mortgage of the year 1097 and that possession has been continued by them even after advancing further loans on the security of the same property. Nothing happened subsequent to the origin of such possession by the 1st Defendant as mortgagee which could in law be deemed to have effected a change in the character of the possession of the property or to make out that the mortgagors'' right to the equity of redemption was effectively transferred to the mortgagee or was otherwise lost or had become extinguished. The agreement in Ext. B which itself is to be read along with the original mortgage that the transaction may be treated as a sale after a specified date having been found to be void and inoperative, that agreement cannot be relied on as having effected a change in the legal character of the mortgagee''s possession subsequent to that date. On the other hand the possession in law continued to be the possession of the mortgagee. Any unilateral act or assertion by the mortgagee cannot result in changing the character of his possession or affect the mortgagors'' right to redeem.

The rulings relied on by the learned advocate for the Respondents in support of his argument that the Defendants have perfected their title to the property by adverse possession do not in any way go counter to these principles. ''Usman Khan v. Nagalla Dasanna'' AIR 1914 Mad 578 (2) (D), is the first case cited by him. In that case the mortgage deed of the year 1876 had provided that in default of the payment of the mortgage amount within the stipulated period, the mortgagee should take possession of the property and enjoy the same as absolute owner. Possession was not given on the date of the mortgage; nor did the mortgagee take possession of the property on the strength of the stipulation contained in the mortgage deed. But the parties entered into a separate agreement on 2-7-1885 under which the mortgagor received a sum of Rs. 250/- from the mortgagee and relinquished the equity of redemption and also agreed, to the transfer of the Pattah for the property in the name of the mortgagee. On the strength of this latter agreement the Defendant obtained Pattah for the property in his own name and thereafter continued to enjoy the property as its absolute owner for more than 12 years before the suit for redemption was instituted by the mortgagor. It was under these circumstances that, the Defendant''s plea of adverse possession was upheld in that case.

It is clear that the separate agreement entered into by the parties and acted upon by them subsequent to the mortgage furnished the starting point of the adverse possession found in favour of the mortgagee. At the same time the general rule governing the nature of possession obtained and continued under a deed of mortgage has been stated in that case in the following terms:

It is quite true that a mortgagee cannot by a mere assertion of his own or by any unilateral act of his convert his possession as mortgagee into possession as absolute owner. That is a principle in favour of the mortgagor which prevents the mortgagee from Altering the legal character of his possession by his own act or assertion.

''Khedu Rai v. Sheo Parson Rai'' AIR 1917 All 212 (2) (E), is the second case relied on by the learned advocate for the Respondents. In that case also there was a mortgage by conditional sale in favour of the Defendants in the year 1869. While they were thus in possession as mortgagees, disputes arose between them and the mortgagor in the Revenue Court in the year 1876 regarding the entry of names in the record of rights. Such disputes ended in a compromise between them under which the mortgagor gave up all his equity of redemption in the property in favour of the mortgagees and accordingly the names of the mortgagees were recorded in the Government records as the full owners of the property. There have been subsequent dealings also by the mortgagees as full owners of the property.

It was held that the nature of the mortgagees'' possession had been changed with effect from the date of the compromise entered into between the parties subsequent to the date of the mortgage and fully acted upon by them. It was further observed in that case as follows:

...this was not a case of the mortgagee merely setting up adverse possession without any act on the part of the mortgagor in the matter. In other words, that the present case is not one of mere unilateral action by the mortgagee. Both parties consented to the complete transfer of the equity of redemption to the mortgagee, and both parties have acted upon it for very nearly 40 years.

The principle accepted and followed in the above cases gains support from the rulings of the Privy Council in - ''Mahomed Musa v. Aghore Kumar'' AIR 1914 PC 27 (F) That was a case for redemption of two mortgages executed in the years 1848 and 1871. The mortgagees resisted the suit and pleaded that the equity of redemption had become extinguished. It appears that in the year 1870 the legal representatives of the mortgagor and the mortgagee had entered into an agreement with reference to the mortgage of the year 1848. Subsequently in the year 1873 differences arose between them in respect of that agreement and the mortgagee instituted a suit to enforce it. That suit was compromised between the parties and on the strength of the compromise petition filed by them the suit was struck off. But no conveyances were executed by the mortgagor in completion of the contract to that effect in the compromise, nor was the agreement of compromise registered or its terms incorporated in the decree. All the same, the compromise was acted upon and carried out by all the parties and for a period of about 40 years prior to the date of the suit for redemption all the parties were conducting themselves as if the mortgagor had made an express conveyance parting with the equity of redemption of the shares allotted to the mortgagees.

In dealing with the rights of the mortgagor and the mortgagee under such circumstances, the Privy Council ruled as follows:

If the agreement of compromise was defective as not being registered, the decree had been obtained only on one footing, namely that the parties to the suit had in fact arranged their rights in the property in terms of the compromise. And even though the compromise and the decree taken together were considered to be defective or inchoate as elements making up a final and validly concluded agreement for the extinction of the equity of redemption, the acts of the parties had been such as to supply all defects. When the actings of the parties are founded upon, as in the performance or part-performance of an agreement, the ''locus poenitentiae'', which exists in a situation where the parties stand upon nothing but an engagement which is not formal or complete, is excluded. For equity will support a transaction clothed imperfectly in those legal forms to which finality attaches after the bargain has been acted upon.

None of the features contemplated by these decisions is shown to exist in the present case and it cannot be said that the mortgagor''s right to redemption has been lost or extinguished by any agreement between the parties or by their mutual conduct or otherwise subsequent to the time when the mortgagee got into possession of the property oh the strength of the mortgage in his favour or that the mortgagee acquired title to the property by adverse possession.

The conduct of the Defendants in having obtained Ext. VII Pattah for the plaint property in their names cannot also affect the Plaintiffs'' right of redemption. The proceedings which resulted in the issue of Pattah were conducted without notice to the Plaintiffs. When the Plaintiffs knew about the grant of Pattah to the Defendants, they applied for a reconsideration of that decision. Exhibit C is copy of the order passed by the Assistant Peishkar at Alleppey upholding the contentions of these Plaintiffs and directing the Kandukrishi Tahsildar to take the necessary steps to have the decision ordering grant of Pattah in favour of the Defendants cancelled. It may also be mentioned in this connection that the original decision granting Pattah in favour of the Defendants was passed on the basis that Ext. B had worked itself into an outright sale of the property. It has already been pointed out that this view is erroneous. When the matter came up before the Division Peishkar for a revision of that decision as contemplated by the directions contained in Ext. C, the Peishkar''s attention was drawn to the fact that the question regarding the validity of the conditions incorporated in Ext. B and the question regarding the truth of the plea of discharge set up by the Plaintiffs on the basis of the receipt Ext. G were pending decision in the present civil suit.

Accordingly the Peishkar passed an order that the revision of the order for Patta will await the final decision in this suit. Exhibit W, is copy of that order. Thus it is clear that the decision regarding the grant of Pattah in favour of the Defendants is not accepted as final. On the other hand, the Revenue authorities propose to revise that decision in the light of the final decision in the present civil suit. It may also be stated that any rights acquired by the Defendants by securing Pattah for the property in their names in respect of the mortgaged property during the currency of the mortgage would enure to the benefit of the mortgagors. Viewed in all these aspects, it is clear that the Plaintiffs'' right of redemption subsists and that the present suit is sustainable.

The quantum of the redemption price payable by the Plaintiffs has not to be fixed. There is no dispute between the parties regarding the amount covered by the first mortgage and by the subsequent Puravaippas inclusive of Ext. B. The plea of discharge set up by the Plaintiffs on the basis of the receipt Ext. G was alone in dispute in this connection. That plea having been found to be false and unsustainable, the Plaintiffs are bound to pay the full amount due under the several documents in favour of the 1st Defendant. Defendants 2 and 3 who have acquired the rights, under these documents have stated in para. 6 of their written statement that the total amount due under these documents comes to Rs. 1498 and Chs. 5. Even though the plea of discharge was reiterated by the Plaintiffs, the correctness of the calculation made by Defendants 2 and 3 in para. 6 of their written statement was not challenged, by the Plaintiffs in their replication. Hence that calculation is accepted as correct. These Defendants have stated in para. 16 of their written statement that in case the property is found to be redeemable they should be paid the total amount as specified in para. 6 together with the value of improvements as estimated in para. 11 of their written statement. This necessarily leads on to the further question as to what is the actual amount payable to these Defendants on account of the value of improvements in the property.

10-12. (His Lordship considered the report of the Commissioner who had been deputed to assess the value of the improvement and objections and gave their findings in the question.)

On behalf of the Appellants it is contended that the mortgagee has unauthorisedly put up the buildings and as such the Defendants have to be directed to remove them at their cost. We see no force in this connection. (After considering this question on evidence his Lordship continued.) Hence we agree with the lower Court in holding that no amount can be awarded by way of damages under this item.

Then there is the question of mesne profits. The Plaintiffs have claimed mesne profits at the rate of 400 paras of paddy and Rs. 800 per year. (After considering this contention, His Lordship proceeded.) Thus the net annual mesne profits has been found to be Rs. 772 Chs. 14 Cash 9. We accept this figure as correct and hold that the Plaintiffs are entitled to get mesne profits at this rate from the date of tender of the mortgage amount and the value of improvements due to the Defendants.

Coming to the question of costs, it cannot be said that the mortgagees Defendants have been guilty of any serious misconduct in this case so as to forfeit their normal right to get their costs, of the suit. No doubt they questioned the Plaintiffs'' right to redeem the property. But such resistance was based purely on certain questions of law. It may also be pointed out that the Plaintiffs have denied the mortgagees'' right to get the value of the improvements effected by them in the property, with the result that the Defendants, had to take out a commission to report about the nature and value of such improvements. Considering all these aspects, we think that it would be just and proper to direct the Plaintiffs to suffer their costs throughout and to pay the Defendants one-half of their costs.

The result is that this appeal is allowed, and in reversal of the decree of the lower Court the Plaintiffs'' suit for redemption is allowed on payment to Defendants 2 and 3 of S. Rs. 1498 Chs. 5 as the total amount of mortgage money together with I. Rs. 1730 As. 11 Ps. 0 as the value of improvements effected in the property by the Defendants. From the date of notice to these Defendants of the deposit of the total amount under these two counts in Court, the Plaintiffs will get mesne profits at the rate of S. Rs. 772 Chs. 14 Cash 9, per year. Defendants 2 and 3 will get one-half of their costs throughout from the Plaintiffs who will suffer their costs.