Madras High Court
N.Debora Indira Jaba Priya vs Ibrahim Sha on 19 November, 2012
Author: R.S.Ramanathan
Bench: R.S.Ramanathan
IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 19.11.2012 CORAM The Hon'ble Mr.Justice R.S.Ramanathan Appeal Suit No.195 of 2010 1.N.Debora Indira Jaba Priya 2.D.Vijayakumar ... Appellants Vs. 1.Ibrahim Sha 2.K.Jalaluddin 3.Kamala Narayanan 4.Lalitha Venkatesh 5.Sri Raj & Co., Auctioneers rep., by its Manager 6.S.Ramkumar ... Respondents Appeal filed under Order 41, Rule 1 of Civil Procedure Code read with Section 96 of C.P.C., against the judgment and decree, dated 21.10.2009, passed in O.S.No.2557 of 2007, on the file of the Additional District and Sessions Judge, Fast Track Court, No.III, Chennai 600 001, in directing the appellants to quit and deliver vacant possession of the schedule mentioned property to the respondents 1 and 2 and also directing the appellants to deliver the original title deeds pertaining to the suit property and similarly, directing the appellants to pay a sum of Rs.68,886/- as costs. For Appellants : Mr.T.V.Ramanujan Senior Counsel for Mr.D.Ashok Kumar For Respondents 1 & 2 : Mr.S.Parthasarathy Senior Counsel for Mr.M.Basker For Respondents 3& 4 : Mr.D.Muneeswaran For Respondent 5 : Mr.V.Anandakrishnan For Respondent -6 : Mr.A.Vadivel JUDGEMENT
The defendants 1 and 2 are the appellants herein.
2. The respondents 1 and 2 herein filed the suit in O.S.No.2557 of 2007, on the file of the IV Additional Judge, City Civil Court, Chennai, for recovery of possession and to handover all the original title deeds in respect of the property and for costs of the suit.
3. That suit was decreed, as prayed for. Aggrieved by the same, this Appeal has been filed by the appellants/defendants 1 & 2.
4. The case of the plaintiffs, as seen from the plaint is as follows:-
i) The suit property originally belonged to the first defendant and her mother Mrs.Lilly Williams, who had a life estate in that property. Both of them borrowed a sum of Rs.1,00,000/- from the Chintadripet Co-operative Bank Ltd., and executed a registered mortgage, dated 19.06.1996, for the said sum. After the death of the first defendant's mother, with a view to discharge the mortgage debt, the first defendant along with the second defendant, mortgaged the property in favour of the defendants 3 & 4, for a sum of Rs.2,00,000/-, on 09.01.2002, and further borrowed a sum of Rs.2,00,000/-. Thus, the defendants 1 and 2 were liable to pay Rs.4,00,000/-, to the defendants 3 and 4.
ii) As per the terms of the mortgage, the mortgagees, viz., the defendants 3 and 4 are entitled to bring the property to sale. As the defendants 1 and 2, failed to repay the amount, the defendants 3 and 4 brought the property to auction sale by invoking the provisions of Section 69 of the Transfer of property Act ( hereinafter referred to as 'the Act') through the fifth defendant. The auction was fixed, on 11.07.2002. On coming to know of the same, the defendants 1 and 2 filed the suit in O.S.No.3632 of 2002 and obtained an order of interim injunction. As per the injunction order, the defendants 1 and 2 have to pay Rs.25,000/- to the defendants 3 and 4, on or before, 17.09.2002. As the amount was not paid by the defendants 1 and 2, the injunction order was vacated. Later, an auction was conducted, on 19.09.2002, by the fifth defendant, in which, the sixth defendant was the successful auction purchaser of the property, for a sum of Rs.6,00,000/-
iii) Thereafter, the defendants 1 and 2 filed the suit in O.S.No.5308 of 2002, on the file of the Second Additional Judge, City Civil Court, Chennai, for redemption of the mortgage, for declaration that no auction was conducted, on 19.09.2002, and for permanent injunction, restraining the defendants 3 4 and 5 from executing the sale deed in favour of the sixth defendant. In that suit, a compromise was entered into between the parties and as per the compromise, a decree was passed, by which, the defendants 1 and 2 should pay Rs.4,00,000/- to the defendants 3 and 4, on or before, 28.02.2005, failing which, the sale in favour of the auction purchaser/sixth defendant would be confirmed and the defendants 3 and 4 shall execute and register the sale deed in favour of the sixth defendant in respect of the suit property.
iv) The defendants 1 and 2 failed to comply with the terms of the compromise decree. Hence, the sale in favour of the sixth defendant was confirmed and on 08.09.2005, the defendants 3 and 4 executed a registered sale deed in favour of the sixth defendant and symbolic possession was given to the sixth defendant and the sixth defendant became the absolute owner of the property. On the same date, the sixth defendant conveyed the suit property to the plaintiffs, for a sum of Rs.7,00,000/- under a registered sale deed and also gave symbolic possession.
v) As per the sale deed, the plaintiffs are directed to initiate proceedings for recovery of possession as well as for original documents and despite repeated demands made to the defendants 1 and 2, they failed to deliver vacant possession of the suit property and also failed to handover the original documents. Therefore, a notice, dated 02.04.2007, was given to defendants 1 and 2, calling upon them to deliver vacant possession. Even after the receipt of the said notice, they failed to deliver vacant possession of the property as well as to handover the original documents. Hence, the suit was filed for the relief prayed for.
5. The defendants 1 and 2 contested the suit by filing a written statement. In the statement, they denied all the allegations made in the plaint and submitted that the first defendant was having only a limited estate over the suit property and she has no right to mortgage the property in favour of the defendants 3 and 4 and fraud has been played by the defendants 3 and 4 in collusion with the fifth defendant on the defendants 1 and 2, and no notice was issued to the defendants 1 and 2, calling upon them to pay the mortgage amount and no statement of account had been furnished to them and even the mortgage amount of Rs.2,00,000/- was not paid to the defendants 1 and 2 and a sum of Rs.1,70,000/- was paid and without complying with the mandatory provisions laid down in Section 69 of the Act, the property was brought to sale and the sixth defendant, who is the close relative of the defendant 3 and 4 had been declared as successful auction purchaser and any sale in favour of the kith and kin of the defendants 3 and 4 is prohibited.
6. Therefore, the defendants 1 and 2 filed O.S.No.5308 of 2002 on the file of the Second Additional Judge, City Civil Court, Chennai, for redemption of mortgage, as well as for declaration that the auction conducted on 19.09.2002 is illegal and for permanent injunction. Though a compromise decree was passed in the suit and as per the compromise decree, the defendants 1 and 2 were to pay Rs.4,00,000/- in discharge of the mortgage, the defendants 3 and 4 refused to receive the amount tendered by the defendants 1 and 2 and failed to give the receipt. Therefore, the defendants 1 and 2 thought that they could deposit the mortgage amount, when an Execution Petition was filed by the defendants 3 and 4 to execute the decree and without executing the decree, by filing Execution Petition, the defendants 3 and 4 executed the sale deed in favour of the sixth defendant through the fifth defendant and the sale deed in favour of the sixth defendant is not valid. The defendants 3 and 4 ought to have enforced the decree only through Court and ought not to have proceeded with the sale in favour of the sixth defendant and hence, the sixth defendant did not get any right over the property under the said sale deed and consequentially, the plaintiffs, who purchased the property from the sixth defendant also, did not get any right over the property. It is further stated that the present suit for recovery of possession and for original documents is also not sustainable in law.
7. On the basis of the pleadings, stated above, the Trial Court framed the following issues:-
i)Is it true that the defendants 1 and 2 had offered to pay the sum of Rs.4,00,000/- as per the compromise decree to the defendants 3 and 4 and they had refused?
ii)Is is true that in case of failure of payment of the amount mentioned in the compromise decree, the defendants 3 and 4 have to file E.P. to recover the amount?
iii) Whether the fifth defendant was entitled to confirm the sale and execute a sale deed in favour of the sixth defendant?
iv) Whether the sale deed executed by the sixth defendant in favour of the seventh defendant is valid in law?
v) Whether the plaintiffs are entitled for decree for delivery of possession and for documents?
8. The Trial Court, on the basis of oral and documentary evidence, held that the defendants 1 and 2 did not take any steps to pay the mortgage amount, as per the compromise decree and held issue No.i against the defendants 1 and 2. The Trial Court also held issue Nos.ii and iii against the defendants 1 and 2, holding that as per the compromise decree, there is no necessity to file an Execution Petition to execute the decree and the defendants 1 and 2 cannot incorporate any new procedure, which was not mentioned in the compromise decree and on the failure of the payment of the amount by the defendants 1 and 2 to the defendants 3 and 4, as per the compromise decree, there is no need to file Execution Petition to recover the amount. The Trial Court also held that the fifth defendant is entitled to confirm the sale and execute the sale deed in favour of the sixth defendant and the sale deed executed by the sixth defendant in favour of the seventh defendant is also valid in law and the plaintiffs are entitled to the decree of delivery of possession and for delivery of original documents and answered all the issues in favour of the plaintiffs.
9. Aggrieved by the judgment and decree passed by the Trial Court, the appellants filed this Appeal and in the memorandum of grounds, they raised the following points:-
i)The sale was not conducted as per the provisions of Section 69 of the Transfer of Property Act and no title will pass on to the purchaser under the sale.
iii)The sixth defendant is the brother of the third defendant and therefore, any sale in his favour is not legally valid under Section 69 of the Transfer of Property Act and therefore, sale is liable to be set aside.
v)In the event of non-compliance of the compromise decree passed in O.S.No.5308 of 2002, the decree-holders, viz., the defendants 3 and 4 ought to have executed the decree by filing Execution Petition and realized the fruits of the decree and they have no right to execute the sale in favour of the sixth defendant.
vi)The Trial Court failed to appreciate the evidence of D.W.1, to the effect that they tendered a sum of Rs.4,00,000/-to the defendants 3 and 4 and they refused to receive the same and therefore, there was no default committed by the defendants 1 and 2 , as per the compromise decree.
viii)Further, in the event of default committed by the defendants 1 and 2, the decree has to be executed in the manner known to law and in the event of any execution of the sale deed, a show cause notice ought to have been given to them calling upon them to pay the amount as per the compromise decree and only in the event of non payment of such amount, the sale deed can be executed.
x) The settlement deed copy, which has been marked as Ex.A.4, has not been properly appreciated and some lines were struck off in the settlement deed and the same was not attested and no right can be claimed under the settlement deed.
xi) No notice has been given under Section 69 of the Act, while selling the property and fraud has been practiced by the defendants 3 and 4 in collusion with the fifth defendant in selling the property to the sixth defendant, who is none other than the brother of the third defendant and hence, no right can be claimed under the said sale deed.
10. Mr.T.V.Ramanujan, the learned Senior Counsel for the appellants submitted that under the settlement deed-Ex.A.4, the first appellant/first defendant had no absolute right over the property and therefore, the sale in favour of the sixth defendant on the basis of the mortgage executed by the defendants 1 and 2 will not confer any right over the property. The learned Senior Counsel further submitted that, as per the compromise decree in O.S.No.5308 of 2002, in the event of failure on the part of the defendants 1 and 2, to comply with the terms of the decree, the decree-holders/defendants 3 and 4 ought to have filed an Execution Petition to execute the decree and they cannot take the law into their hands and sell the property to the sixth defendant through the fifth defendant.
11. The learned Senior Counsel for the appellants further submitted that the sale purported to have been made as per the provisions of Section 69 of the Act was not a valid sale, as no publication regarding the sale was made and no notice was given to the defendants 1 and 2/appellants, calling upon them to pay the principal and interest amount, due on the mortgage and therefore, the sale was conducted fraudulently in collusion with the fifth and sixth defendants, who are the brothers of the third defendant and the plaintiffs failed to produce any material to prove that the sale was conducted, after due publication and notice to the appellants and in the absence of any notice, produced by the plaintiffs/respondents 1 and 2, the Trial Court ought to have held that the sale was in violation of Section 69 of the Act and therefore, it was not a valid sale and ought to have dismissed the suit.
12. On the other hand, Mr.S.Parthasarathy, the learned Senior Counsel for the respondents 1 and 2 submitted that, it is not open to the appellants to question the sale conducted by the fifth defendant pursuant to the power given under the mortgage, as in the compromise decree, they accepted the sale in favour of the sixth defendant and as per the compromise decree, the appellants have to pay Rs.4,00,000/- within certain period and having failed to pay the same, auctioneer/fifth defendant was permitted to confirm the sale in favour of the sixth defendant and the defendants 3 and 4 were permitted to execute the sale in favour of the sixth defendant and therefore, there was no need to file Execution Petition for executing the decree, as there was nothing to execute and power had been given to the parties under the compromise decree to execute the sale in favour of the sixth defendant.
13. The learned Senior Counsel for the respondents 1 and 2 further submitted that the sale cannot be questioned by the appellants, as they have accepted the sale deed by entering into a compromise in O.S.No.5308 of 2002. The learned Senior Counsel further submitted that, as per the compromise decree, auction purchasers shall take proper proceedings for possession of the property as well as the original title deeds from the appellants herein and pursuant to the compromise decree, suit was filed for taking delivery of possession of property and for receiving the title deeds and therefore, suit is maintainable and the Court below correctly appreciated the oral and documentary evidence and decreed the suit, as prayed for.
14.The points for consideration in this Appeal are as follows:-
i)Whether the sale conducted by the fifth defendant/auctioneer, pursuant to the power conferred under the mortgage deed is valid one?
ii)Whether the appellants/defendants 1 and 2 tendered the amount of Rs.4,00,000/-, as per the compromise decree to the respondents 3 and 4/defendants 3 and 4 and they failed to the discharge the debt?
iv)Whether the defendants 3 and 4 are entitled to execute the sale in favour of the sixth defendant in the event of failure by the appellants to pay the amount as per the compromise decree, without filing Execution Petition?
vi)Whether the defendants 3 and 4, viz., the respondents 3 and 4 herein have to file Execution Petition for recovery of the amount in the event of failure by the appellants to pay the amount?
vii)Whether the sale in favour of the sixth defendant by the defendants 3 and 4 is a valid one and consequentially, whether the sale in favour of the seventh defendant is valid?
15. It is the contention of the learned Senior Counsel for the appellants that no materials have been placed by the respondents 1 and 2/ plaintiffs that proper notice was given by the auctioneer/fifth defendant before conducting the sale in favour of the sixth defendant and no proper notice was given to the appellants, calling upon them to pay the amount as per the mortgage and in the absence of any such materials, the sale conducted by the defendants 3 and 4 in favour of the sixth defendant is not valid. As regards issue No.3, it is the contention of the learned Senior Counsel for the appellants that the sale held by the fifth defendant is against the provisions of Section 69 of the Act and it was fraudulent sale deed and the sale in favour of the sixth, who is the brother of the third defendant is also against the provisions of Section 69 of the Act.
16. To appreciate the contention of the learned Senior Counsel for the appellants, we will have to see the provisions of Section 69 of the Act, which reads as follows:-
(1) Power of sale when valid A mortgage or any person acting on his behalf, shall, subject to the provisions of this Section have power to sell or concur in selling the mortgaged property or any part thereof, in default of payment of the mortgage-money, without the intervention of the court, in the following cases and in no others, namely:-
(a)where the mortgage is an English mortgage, and neither the mortgagor, nor the mortgagee is a Hindu, Muhammadan, or Buddhist or a member of any other race, sect, tribe or class from time to time specified in this behalf by the State Government in the Official Gazatte;
(b) Where a power of sale without the intervention of the Court is expressly conferred on the mortgagee by the mortgage deed and the mortgagee is the Government;
c) where a power of sale without the interpretation of the court is expressly conferred on the mortgage by the mortgage deed and the mortgaged property or any part thereof was, on the date of the execution of the mortgage-deed, situated within the towns of Calcutta, Madras, Bombay .. or in any other town or area which the State Government may, by notification in the Official Gazette, specify in this behalf.
2) No such power shall be exercised unless and until-
a) Notice in writing requiring payment of the principal money has been served on the mortgagor or on one of several mortgagors, and default has been made in payment of the principal money, or of part thereof, for three months after such service; or
b) some interest under the mortgage amounting at least to five hundred rupees is in arrears and unpaid for three months after becoming due.
3) when a sale has been made in professed exercise of such a power, the title of the purchaser shall not be impeachable on the ground that no case had arisen to authorize the sale or that due notice was not given, or that the power was otherwise improperly or irregularly exercised, but any person damnified by an unauthorized or improper or irregular exercise of the power shall have his remedy in damages against the person exercising the power.
4) The money, which is received by the mortgagee, arising from the sale, after discharge of prior encumbrances, if any, to which the sale is not made subject, or after payment into court under section 57 of a sum to meet any prior encumbrance, shall, in the absence of a contract to the contrary, be held by him in trust to be applied by him, first, in payment of all costs, charges and expenses properly incurred by him as incident to the sale or any attempted sale; and, secondly, in discharge of the mortgage-money and costs and other money, if any, due under the mortgage, and the residue of the money so received shall be paid to the person entitled to the mortgaged property, or authorized to give receipts for the proceeds of the sale thereof.
5) Nothing in this Section, or in Section 69 A applies to powers conferred before the first day of July, 1882. "
17. To apply the provisions of Section 69 of the Act, the following ingredients are to be proved:-
a) The mortgage must contain stipulation, giving power to the mortgagee to sell the property, without intervention of the Court, in the event of failure of the mortgage money.
b) Notice in writing requiring payment of the principal money has been served on the mortgagor or some interest under the mortgage amounting at least to five hundred rupees is in arrears and unpaid for three months after becoming due.
18. Therefore, a reading of Section 69 (1) and (2), makes it clear that notice in writing, requiring payment of the principal amount has to be served on the mortgagor and the mortgagor failed to pay the amount within a period of three months, after such notice or interest amounting atleast to five hundred rupees as in arrears and unpaid for three months, after becoming due, and the mortgage contains stipulations empowering the mortgagee to sell the property without intervention of the Court.
19. In the judgment reported in (1990) 1 MLJ 323, in [ Rahima Bi and others Vs. Menezez and another], this Court has held that when interest of atleast to five hundred rupees as arrears and unpaid for three months, after becoming due, there is no need to issue notice for bringing the property to sale. Further, under Section 69 (3) of the Act, when a sale has been made in professed exercise of such a power, the title of the purchaser shall not be impeached on the ground that no case had arisen to authorise the sale or that due notice was not given or that the power was otherwise improperly or irregularly exercised, and any person damnified by an unauthorised or improper or irregular exercise of the power shall have his remedy in damages against the person exercising the power.
20. Therefore, even assuming that no proper notice was given by the mortgagees/defendants 3 and 4 or power was improperly or irregularly exercised by the defendant 3 and 4, while bringing the property to sale, by exercising the power conferred under the mortgage, when the property was sold in professed exercise of such power given in the deed, the title of the purchaser shall not be impeached, on the above grounds.
21 In this case, it is not in dispute that the mortgage contains the provisions enabling the mortgagees to bring the property to sale and as per the clause empowering the mortgagees to bring the property to sale, they appointed fifth defendant/auctioneer to conduct the sale and the fifth defendant also conducted the sale. Therefore, the sale was conducted in professed exercise of power given under the mortgage and therefore, the title of the auction purchaser shall not be impeached on the ground that no notice was given or no case was made out to authorise the sale or power was improperly or irregularly exercised.
22. The scope of Section 69 (3) of the Act came up for interpretation before this Court and in the judgment reported in (1940) 2 MLJ 281 in [P.R.Govindaswami Naicker Vs. Pukhraj Sowcar and another ] this Court has held that it is clear that, unless, there was fraud, the only remedy of the appellant, is by way of damages against the mortgage, who brought the property improperly to sale. If there was fraud, then, there may be a cause of action against the respondents in the appeal to have the sale declared void or to have it set aside on the ground of fraud.
23. In the judgment reported in (2008) 2 MLJ 51 in [ Basanthmal Javaaji Vs. Shreya Nas Nahar] this Court has held as follows:-
" The terms of Section 69 of the Act (3) is clear and obvious and it protects the interest of the purchaser and confine the remedy of the mortgagor or any aggrieved person to a suit for damages. No irregularity or impropriety in the exercise of the power of sale would affect the title of an innocent purchaser and the purchaser gets a good title."
24. Therefore, unless, a case of fraud has been made out, the sale under Section 69 of the Act, cannot be impeached and the title of the purchaser cannot be challenged by the mortgagor.
25. In this case, though it is alleged by the appellants that fraud has been committed by the defendants 3 and 4 and in collusion with the fifth defendant, the defendants 3 and 4 sold the property to the sixth defendant, who is none other than the brother of the third defendant, the appellants failed to prove the allegation of fraud. It is a elemental principle that when fraud has been alleged by a person, the burden is on him to prove the fraud and in this case, the appellants failed to prove the fraud.
26. Further, in the judgment reported in (1996) 1 L.W. P.372 in the matter of [Shri Bhagwanaas/B.Kishore Vs. K.G.Purushothaman and 6 others] the Hon'ble Division Bench of this Court discussed the scope of Section 69 of the Transfer of Property Act with reference to earlier judgments as follows:-
"In Davey Vs. Durant (26 ( New series) Law Journal Reports Courts of Chancery, page 830), it was held that a mortgagee with power of sale is not bound to wait till a more advantageous sale could be effected; nor, was he bound to advertise before proceeding to a sale. In Warner Vs. Jacob ( 20 Chancery Division 220) Kay, J. explained the ruling of Vice-Cancellor Stuart in Robertson Vs. Norris (1 Giff.421) and pointed out that the mortgagee was not the trustee of the power of sale and it was a power given to him for his own benefit,to enable him better to realize his debt. The learned Judge said that if he exercised the power bona fide for that purpose, without corruption or collusion with the purchaser, the Court will not interfere even though the sale be very disadvantageous, unless indeed the price is so low as in itself to be evidence of fraud. On the facts, the Court held that there was no evidence of mala fides or collusion. In Bettyes Vs. Maynard ( 49 N.S.The Law Times 389) Lindley, L.J. said that merely because, it was harsh to uphold the right of exercise of power of sale, it was not sufficient to set it aside. He observed that unless the purchaser colluded with the mortgagee so as to make the sale fraudulent, relief could not be granted to the mortgagor. In Haddington Island Quarry Company Vs. Alden Wesley Huson and others (1911 A.C. 722), the Privy Council reversed the decree for redemption passed by the Court of Appeal on the ground that there had been reckless disregard of the interests of the mortgagors in the conduct of the sale and, therefore, the sale was invalid. The Judicial Committee held that the pleadings contained no charge or fraud or collusion or bad faith against the purchasers and, therefore, there was no justification for holding that the sale was fraudulent. In Belton Vs. Bass Ratcliffe and Gretton, Limited ((1922) 2 Chancery Division 449), Russell, J. referred to the earlier judgments and reiterated the proposition that the mortgagee was not a trustee of the power of sale for the mortgagor, and if he was entitled to exercise the power, the Court could not look into his motives for so doing.
15. In N.Ramakrishna Mudali Vs. The Official Assignee of Madras ( I.L.P. 45 Madras 774 = (1922) 16 L.W.133) a Division Bench of this Court held that a private sale by a mortgagee in exercise of power conferred by the mortgage-deed is not affected by the doctrine of lis pendens embodied in Section 52 of the Transfer of Property Act and is valid, though made during the pendency of a redemption suit filed by the mortgagor. It was also held that mortgagee, who has such power may assign it with the mortgage to a third person and the latter can validly exercise it. It was further held that where such power is exercised in part as to an indebtedness which it did not in truth cover, the sale is not invalidated, but the mortgagor is entitled to damages under Section 69 of the Transfer of Property Act, if he can prove that he has been damnified. In Pichai Moideen Rowther vs. Chathurbuja Das Kushal Das and sons and others (65 MLJ 491 = (1993) 38 L.W. 507) a Division Bench held that a mortgagee with a power of sale is not a trustee of the power of sale and if he exercises it bona fide for realizing his mortgage debt, without corruption or collusion with the purchaser, the Court will not interfere even though the sale be very disadvantageous, unless, indeed the price is so low as in itself to be evidence of fraud.
16. In Govindaswami Naicker Vs. Pukhraj Sowcar (1940) II MLJ 281 = 52 L.W. 324), a mortgagor filed a suit injunction restraining the second mortgagee from bringing the suit properties to sale on the ground that he was an agriculturist entitled to have his debts scaled down and that until it was done the property should not be brought to sale. As he failed to comply with certain terms imposed by the Court, the property was sold to a third party by the mortgagee. The plaintiff sought to amend the plaint by impleading the purchaser as a party on the ground that he was a nominee of the mortgagee and the purchase was fraudulent. The trial court rejected the application and this Court confirmed the same. It was held that the doctrine of lis pendens would not apply so as to vitiate the sale and that the suits against the mortgagee and the auction purchaser were entirely on different causes of action and they could not form the subjects of a joint suit against the mortgagee and the purchaser.
17. In M.K. Ranganathan Vs. Government of Madras ( AIR 1955 Madras 331) a Division Bench of this Court comprising Rajamannar C.J. and Rajagopala Ayyangar, J., held that a mortgagee's sale in exercise of the power reserved in that behalf in the mortgage is not liable to be impeached on account of want of publicity or want of notice as required either by the instrument of mortgage or by the law.
18. In M.K.Pandarinathan and another Vs. L.Ct. L.Pl.L.Lakshmi Achi and others ( AIR 1955 NUC (Madras) 3917), a learned Single Judge of this Court held that the motives actuating a mortgagee in exercising his power of sale will not be considered by a Court, but, it is incumbent on the mortgagee to act in good faith and that he must sell as a prudent owner intending to sell his own property with reasonable conditions. The learned Judge added that the mortgagee is not at liberty to look after his own interests alone and it is not right or proper or legal for him either fraudulently or recklessly or wilfully to sacrifice the property of the mortgagors and that the exercise of the power of sale shall not be oppressive. It was held that the mortgagee must use every exertion to sell the property at the best price, for, he is chargeable with the full value of the mortgaged property sold, if for want of due care and diligence it has been sold at an under-value and that the Court will interfere if the price is so low as in itself to be evidence of fraud. With respect to the learned Judge, we are of the opinion that the proposition is widely stated and three is a confusion of ideas. While one part of the observations relates to the relief of setting aside the sale, on the ground of fraud, in exercising the power of sale, the other part relates to grant of damages to the mortgager for a sale at an inadequate price. The two aspects of the matter shall be kept apart and considered independently. In our opinion, the judgment of the learned Judge in that case runs counter to the rulings of the Division Bench of this Court referred to earlier.
21. In P.L.Chakrapan Naidu Vs. T.Gopal Mudaliar and others ( 1972) II MLJ 390 = AIR 1973 Madras 8 = (1972), 85 L.W. 733, a Division Bench of this Court considered the law on the subject in detail and held that the power of sale is given to the mortgagee for his own benefit to enable him to realize his debt and the Court will not interfere merely to prevent its exercise contrary to the wishes or interests of the mortgagor or even if the mortgagee is seeking some collateral object and not merely the payment of his debt. The Bench observed that the Court will not inquire into the motives of the mortgagee for exercising the power, so long as he acts bona fide. The Court said that the mere use of the words " fraud" and "collusion" meant nothing and there must be positive proof of the same and the burden of proving that a sale is invalid by reason of any infirmity or fraud or collusion was on the mortgagors. It is worthwhile extracting the following passages in the judgment, which lays down the law emphatically:-
' In the case of a private sale, the mortgagee must act fairly and with bona fides and reasonable care and try his best to secure the maximum price, but, in the case of an auction sale, there is no question of the mortgagee taking any particular care or taking special efforts to secure a good price, because, so long as he does not interfere with the auction and entrust the sale of the property to an auctioneers and if there is a free auction, the mortgagor must take the risk of whatever price, the property fetches in the auction.......
In the instant case, the mortgagee is not guilty of any fraudulent conduct. If a sufficient number of bidders were not forthcoming, if better offers were not forthcoming, it is all because of the obstructive tactics pursued by the mortgagors. How can the mortgagors expect bidders to assemble in large numbers, when, in the morning of the 12th February, 1959, the mortgagors presented a petition for the adjournment of the sale, which was disposed of only after the lunch interval on the 12th and when, side by side, the mortgagors had been distributing pamphlets? The learned Judge has overlooked that the mortgagors brought upon themselves all the trouble. It is not the law that the mortgagee and the auctioneer should adjourn the sale merely because the property does not fetch a price, fair according to the mortgagors, and there are not large number of bidders participating in the auction.........
Fraud and collusion cannot be proved by mere suspicion and there must be convincing, acceptable evidence that the first defendant maneuvered to have the property purchased in the name of the third defendant benami for the former and that the former furnished the entire consideration"
We are entirely in agreement with the propositions laid down by the Division Bench. We may point out that in view of the said ruling, the observations in M.K.Pandarinathan's case (AIR 1955 NUC ( Madras) 3917 and ClaraMookerjea's case ( AIR 1963 Madras 208 = 76 L.W.183) are not good law.
22. In Narandas Karsondas Vs. S.A.Kamtam and another ( AIR 1977 SC 774 = 90. L.W. 113 S.N.), the Court held that the mortgagee is not action as the agent of the mortgagor in selling the property in exercise of his power of sale. The Court pointed out that the mortgagee's right is different from the mortgagor's and that the mortgagee exercises the same under a totally superior claim, which is not under the mortgagor, but against him. The Court held in the case that the right of redemption of the mortgagor is not extinguished by a mere contact of sale and until the sale is completed by registration of a deed in favour of the purchaser by the mortgagee in accordance with the provisions of the Registration Act, the mortgagor does not lose his right of redemption.
23. In Mohammed Ali Vs. Abdul Salam Sabeb ( 1982) 1 MLJ 425 = 95 L.W. 213 ) it was held that the conferment of a power of sale without intervention of the Court in a mortgage deed by itself will not deprive the mortgagor of his right to redemption and the same is not extinguished till the completion of the sale by execution and registration of the sale deed. In that case, the mortgagor filed a suit for redemption after the auction sale was held by the mortgagee, but before the execution of the sale deed. The suit was dismissed and the auction sale was held to be valid by the trial court. On appeal, the lower appellate court held that the auction was collusive and not valid. The appeal was allowed. The mortgagee and the purchaser filed Second Appeals. But, after the dismissal of the suit by the trial court, a sale deed was executed and registered in favour of the purchaser by the mortgagee. When the lower appellate court considered the appeal by the mortgagor, the sale had already been completed. This court held that the doctrine of lis pendens could not be applied to the sale and on the completion of the sale by execution and registration of the document, the right of redemption of the mortgagor was extinguished and there was nothing for the mortgagor to redeem. In that view, this Court allowed the Second Appeals and dismissed the suit. The court had taken note of the ruling of the Supreme Court in In Narandas's case ( AIR 1977 SC 774 = 90. L.W. 113 S.N.) as well as the decision of the Bench of this Court in Ramakrishna Mudali's case ( I.L.P. 45 Madras 774 = (1922) 16 L.W.133).
24. In K.Mohanakrishnan Vs. Seetha Natarjan and others ( 1991 -2 L.W. 592 ) a Division Bench of this Court held that the mortgagee with a power of sale is not a trustee and when the power is exercised bona fide without corruption or without collusion with the purchaser, the court will not interfere unless the price is so low as itself to be in evidence of fraud.
26. Thus, the settled position of law is that a mortgagee is not a trustee for the mortgagor and that the sale under Section 69 of the Transfer of Property Act cannot be attacked by the mortgagor except when there is fraud or collusion between the mortgagee and the purchaser. If the price for which the properly is sold is so low as by itself will lead to an interference of fraud on the part of the mortgagee and the purchaser, the court can interfere. But, the burden is on the mortgagor to plead and prove such fraud or the gross inadequacy of price from which an inference can be drawn by the Court of the fraud. In the absence of such proof, the court cannot and will not interfere with the sale even if the sale price is lesser than the market value of the property or there was want of publicity or want of notice as required by the instrument or that many bidders had not participated in the auction."
27. In this case, there is no allegation of any fraud against the mortgagees and the appellants also admitted the sale conducted by the mortgagees and also agreed for confirmation of the sale in favour of the respondents 1 and 2, in the event of their failure to pay Rs.4,00,000/- as per the compromise decree passed in O.S.No.5308 of 2002.
28. Therefore, the purchaser gets absolute title over the property free from all encumbrances and hence, it cannot be contended by the appellants that the sale under Section 69 of the Act is not a valid sale and therefore, no title passes to the sixth defendant. Further, having regard to the facts of this case, there is no necessity to go into the question of fairness in the sale conducted by the fifth defendant or whether the sale by the fifth defendant is valid or not. Admittedly, O.S.No.5308 of 2002 was filed by the appellants for redemption of property and for declaration that no sale had taken place, as alleged by the mortgagees/defendants 3 and 4 in favour of the sixth defendant, a compromise was entered into and a compromise decree was also passed. The terms of the compromise decree is as follows:-
"1.That the plaintiffs 1 and 2 do pay to defendants 1 and 2, a sum of Rs.4,00,000/- towards the registered mortgage in full quit on or before, 28.02.2005, from this date and that as otherwise the sale in favour of the fourth defendant shall be confirmed and mortgagees shall execute and register the sale deed in favour of the auction purchaser pertaining to suit property described hereunder:-
2. that the fourth defendant/auction purchaser shall take appropriate proceedings for possession and for receiving the title deeds from the plaintiffs.
3. that in the event of the payment of Rs.4,00,000/- within stipulated period as aforesaid in clause No.1 supra, the defendants 1 and 2 shall execute necessary discharge before the concerned sub-registrar."
29. Therefore, as per the compromise decree, the appellants were aware of the sale in favour of the sixth defendant, who was the fourth defendant in that suit and they agreed to confirm the sale deed in favour of the sixth defendant, if they failed to pay Rs.4,00,000/- and mortgagees/defendants 3 and 4 were also permitted to execute and register the sale in favour of the auction purchaser/sixth defendant.
30. It is also admitted that prior to the filing of the suit in O.S.No.5308 of 2002, the auctioneer had sold the property to the sixth defendant and at that time, the suit was filed challenging the same and in that context, in the compromise decree, it is stated that, in the event of failure of the appellants to pay Rs.4,00,000/-, the sale in favour of the sixth defendant shall be confirmed and the mortgagees/defendants 3 and 4 shall execute and register the sale deed in favour of the auction purchaser.
31. Therefore, having accepted the sale deed in favour of the sixth defendant and having permitted the defendants 3 and 4 to execute the sale deed in favour of the sixth defendant in the event of failure of payment of Rs.4,00,000/-, by the appellants, as per the compromise decree, it is not open to the appellants, now, to contend that the sale was not in accordance with the provisions of Section 69 of the Act. Further, as per Section 69 of the Act in the absence of any fraud, the sale cannot be impeached and the title of the purchaser cannot be challenged and the only remedy available to the mortgagors is to sue for damages. Therefore, I hold that the sale held under Section 69 of the Act is valid one and the same cannot be challenged by the appellants.
32. It is the specific case of the appellants that they tendered the amount to the respondents 3 and 4/defendants 3 and 4, as per the compromise decree and the defendants 3 and 4 refused to receive the amount and execute the discharge receipt and therefore, the appellants waited for the defendants 3 and 4 to file Execution Petition and in that Petition, they can deposit the amount.
33. The Trial Court has extracted the evidence of D.W.1 in its judgment. As per the evidence of D.W.1, he admitted that he invited the third defendant by going to his house and between 2004-05 he invited five times, but, he has not taken any draft for Rs.4,00,000/- and no notice was given to the defendants 3 and 4 about the payment of Rs.4,00,000/- and no Petition was filed before the Court to receive the amount.
34. Therefore, it is clearly admitted by the second appellant that no attempt was made by appellants to pay Rs.4,00,000/- to the defendants 3 and 4 and no notice was given calling upon the defendants 3 and 4, to receive the amount and in the absence of any proof produced by the appellants that they tendered the amount and that was refused by the defendants 3 and 4, the Court below has rightly held that the amount was not offered and the appellants committed default in the payment of Rs.4,00,000/-, as per the compromise decree. Therefore, I hold that the appellants failed to prove that they tendered the amount and that was refused by the defendants 3 and 4.
35. Further, the contention of the appellants that, without filing Execution Petition, the sale cannot be executed by the defendants 3 and 4 in favour of the sixth defendants is also devoid of merits. A reading of the compromise decree makes it clear that in the event of failure of mortgage payment, the sale in favour of the sixth defendant shall be confirmed and the mortgagees shall execute the sale in favour of the auction purchaser. Therefore, under the compromise decree, power has been given to the mortgagees to execute the sale deed, and as the appellants committed default in the payment of Rs.4,00,000/-, as per the compromise decree, the right is conferred on the mortgagees to execute the sale deed and exercise all their power conferred under the compromise decree, and the mortgagees validly executed the sale deed in favour of the sixth defendant and there is no need to file Execution Petition, seeking permission of the Court to execute the sale deed.
36. Further, it is analogous to the decree passed in a suit for specific performance. In the decree for specific performance, the defendant is directed to execute the sale deed, on receipt of sale consideration, if any, and in the event of any default, it is open to the decree-holder to apply to the Court for getting the sale deed executed in his favour. Therefore, there is no need for the decree-holder to apply to the Court for getting the sale deed executed by the judgment debtor, if the judgment debtor is willing to execute the sale deed as per the decree. Only in the event of the judgment-debtor refusing to execute the sale deed as per the decree, the decree-holder has to apply to the Court.
37.Similarly, in this case also, only in the event of mortgagees/defendants 3 and 4 failed to execute the sale deed in favour of the sixth defendant, the sixth defendant had to approach the Court and when the mortgagees/defendants 3 and 4 were willing to execute the sale deed, there was no necessity to file Execution Petition to execute the decree.
38. Therefore, I hold that the sale conducted by the fifth defendant is valid and the appellants did not tender Rs.4,00,000/- as per the compromise decree to the respondents 3 and 4 and the respondents 3 and 4/defendants 3 and 4 are entitled to execute the sale in favour of the sixth defendant pursuant to the compromise decree, without filing execution petition and there is no necessity for the respondents 3 and 4/defendants 3 and 4 to file execution petition to recover the amount from the appellants, as per the compromise decree and the sale in favour of the sixth defendant executed by the defendants 3 and 4 and the consequential sale executed by the sixth defendant in favour of the respondents 1 and 2 are valid.
39 Hence, the Court below has rightly held that there is no need to file Execution Petition for executing the decree. As the sale in favour of the sixth defendant was pursuant to the compromise decree passed in O.S.No.5308 of 2002 the sixth defendant became the absolute owner of the property and consequentially, the respondents 1 and 2/plaintiffs, who purchased the property from the fifth defendant also got absolute right over the property . As per the compromise decree, auction purchaser has to take proper proceedings for delivery of possession and for recovery of documents and as per the said clause, the suit was filed by the respondents 1 and 2 and hence, the suit was also legally sustainable. Therefore, I hold that the points for considerations are answered against the appellants.
40. Therefore, the Trial Court has rightly decreed the suit in favour of the plaintiffs/respondents 1 and 2 and I am also in complete agreement with the findings rendered by the Trial Court and I also hold that the respondents 1 and 2 are entitled to the decree as prayed for.
41. In the result, this Appeal is dismissed. No costs.
19. 11.2012 sd Index : yes/no Internet : Yes/no To
1.The Additional District and Sessions Judge, / Fast Track Court, No.III, Chennai 600 001, R.S.Ramanathan,J., sd Pre delivery judgment in Appeal Suit No.195 of 2010 19-11- 2012