Patna High Court
Abdul Ghafoor vs Mt. Paharia And Ors. on 19 December, 1955
Equivalent citations: AIR1957PAT136, AIR 1957 PATNA 136
JUDGMENT Raj Kishore Prasad, J.
1. This appeal by defendant 1 arises out of a suit for redemption brought by the plaintiffs respondents in respect of usufructuary mortgages, dated 14-6-27 and 16-2-28, exetuted by Kashi, father of plaintiffs 1 and 2, in favour of Ghulam Rasool, defendant 5, the predecessor-in-interest of the appellant.
2. The facts of the case may shortly be stated as follows: The recorded tenant Kashi Dusarh, father of plaintiffs 1 and 2 gave in Ijara 3B. 5K. out of 7 bighas equivalent to 4.80 acres, of Khatte 768 to Ohulam Rasool, defendant 5 on 14-6-27. In this bond the rental fixed for this portion bf the land was Rs. 13 out of Rs. 28, which was the rental for the entire holding. This rental of Bs. 13 was to be paid by the mortgagee to the mortgagor, or the landlord.
Kashi executed another Ijara on 16-2-28 in favour of Ghulam Basool, defendant 5, in respect of IB. 10K. out of the remaining areas of Khata 768 with a rental of Rs. 6 which was to be paid by the mortgagee to the mortgagor himself. Thus under these two ijaras, 4B. 10K. out of 7 bighas with a rental of Rs. 19, out of Rs. 28 came in possession of Ghulam Basool, defendant 5 the mortgagee; and the balance of the land remained in possession of the mortgagor, Kashi who was to pay the balance of the rent.
On 4-2-31 Ghulam Rasool, defendant 5, assigned both his mortgages to defendants 3 and 4. In 1933 the landlord of the holding obtained a rent decree for Khata 768 against the recorded tenant only, in 1934 the landlord started execution of this decree, and put up the holding to sale in execution of his rent decree.
Defendants 3 and 4 the assignee on 19th November 1934, deposited the decretal amount under Section 170 of the Bihar Tenancy Act. Thereafter, they obtained possession of the entire holding under Section 171, Bihar Tenancy Act, and thus became statutory mortgagees of the entire holding. On 17th June, 1935, defendants 3 and 4 assigned their mortgage interest in favour of defendant 2, wife of the landlord, and she undertook to pay the rent of the holding for the years 1340 to 1342 fasli. Defendant 2 did not pay the rent and, therefore, in 1935 the landlord, husband of defendant 2, brought a rent suit for the years 1340 to 1342 fasli against the recorded tenant only.
After obtaining the decree the landlord in 1936 started its execution, and put up to sale Khate 768. which was subsequently purchased by his wife defendant 2, at the auction. On 1st November, 1936, defendant 2 was given possession through the court in due course, over Khata 766 though of course she was then, and always had been at all material times, in actual physical possession since 17th June, 1935, when she took the assignment from defendants 3 and 4, the first assignees from the original mortgagee defendant 5. After remaining in possession of this land for about 'six years defendant 2 sold it on 12th June 1941 to defendant 1 the present appellant. The plaintiffs, who are the heirs of Kashi, the recorded tenant, brought the present suit for redemption on 9th September 1948.
3. Defendant 1 alone contested the suit. His defence was that the plaintiffs were liable to pay the rent and not defendant 1. or defendant 2: the decree obtained by the landlord in 1935 was binding on the plaintiffs, because they had knowledge of the delivery of possession in favour of defendant 2; and that the plaintiffs' right of redemption was extinguished, because of the sale of the disputed land in the rent execution.
4. Both the courts below concurrently negatived the defence of defendant 1 that the plaintiffs' right of redemption had been extinguished. They have, therefore, decreed the plaintiffs suit. Against this concurrent decision the defendant no. 1 has come in second appeal to this Court.
5. Mr. B. C. De, appearing for the appellant, has put forward two contentions, (1) that a rent sale extinguishes a mortgage, and entire holding at such a sale passes to the purchaser, who takes it free from encumbrances and, as such, the plaintifffe'' right of redemption was extinguished: and (2) that if a mortgagee is liable to pay the rent, and he deliberately defaults payment, and brings about the sale and purchases the property himself, or benami, and is in possession, his rights are subject to the equity of redemption, but In the case of a bona fide purchaser such equitable rights, are not available.
6. in support of his first contention that a rent sale extinguishes a mortgage, and by the sale the entire holding passes to the purchaser free from encumbrance, Mr. De has relied on these cases: Gauri Shanker v. Sheotahal, AIR 1936 Pat: 434 (A), Pekua Mahto v. Lal Sahu, AIB 1939 Pat362 (B), Bam Bup v. Jang Bahadur, ILR 30 Pat 391: (AIR 1951 Pat 566) (C), and Deo Saran v. Barhu, ILR 31 Pat 365: (AIB 1952 Pat 286) (D).
The ratio decidendi of these cases is that where a tenant mortgages his property, with possession, and the mortgagee in possession, who is bound to pay rent, has made default in payment of rent, in consequence of which the holding is brought to sale by the landlord in execution of the rent decree, and is purchased by the landlord himself, but later the property comes into the hand of the original mortgagee, the mortgagor has no right for redemption when the rent sale is not proved to be fraudulent, because equity of redemption is for ever extinguished by the sale in execution of the rent decree, and does not revive when the mortgagee eventually obtains the property.
It is a well-known legal maxim that convenience cannot accrue to a party from his own wrong (commodum ex injurie sua memo habere debet.) There can be no dispute that if no fraud is proved; or the conduct of the auction purchaser is not tainti ed with any mala fide action, then surely in the ordinary course a rent sale will extinguish the mortgage and the entire holding would pass to the auction purchaser free from encumbrance.
But, the above authorities also make it clear that, when the rent sale is fraudulent, and the mortgagee had a hand in bringing about the Bale, either because he did not discharge his liability, to pay the rent to the landlord, or for some other reason, then, the right of redemption will not be wiped off, because a man cannot take advantage of his own wrong.
7. It is well established by a decision of the Judicial Committee of the Privy Council in Nawab Sidhee Nuzir Ali Khan v. Ojodhyaram Khan, 10 Moo Ind App 540 (E) that "Fraud is an extrinsic, collateral act,' which vitiates the most solemn' proceedings of courts of justice. It avoids all judicial acts, Ecclesiastical, or Temporal. A Court will strip off all disguises from a case of fraud, and look at the transaction as it really is". Therefore, the question to be decided in the-present case is, was this sale, as between the landlord and his wife, defendant 2, really, meant to be a sale under the Bihar Tenancy Act for arrears of rent, or was it a device part of the machinery as it were to effect a fraud?
8. In the present case, the court of appeal below found that: (1) Deorati Kuer, defendant 2 was liable to pay the rent dues respecting which the sale was held, (2) the relations between Jhulan, the landlord and his wife, defendant 2, were normal and (3) no distinction need be made between Jhulan, the landlord, and his wife, defendant 2 On the above, facts, the court of appeal below came to the conclusion, that "the action of defendant 2 (and her husband) can fully be regarded as mala fide." The Court of appeal below further observed as follows:
"The predecessor of the defendant no. 1 Undertook to pay the rent, and it was due to her default that the property was sold. The defendant no. 2, purchased the property and now it is in possession of her successor in interest, the appeltant. It is difficult in my opinion to contend seriously on these facts that the appellant is not liable to be redeemed by the plaintiff respondent.
There can be little doubt that the appellant's precedessor, by reason of her advantageous position, as mortgagee, has become the purchaser of the suit land at the Court auction sale. More over, the appellant, or her predecessor cannot be allowed to take advantage of their own wrong in not paying the rent as she had undertaken to 'do."
It is obvious from the above findings that the purchase of defendant 2 at the auction was a mere device to deprive the mortgagors of their property. When the breach of an obligation must necessarily result in the properties being brought to sale, it must be taken that the breach was made with a view to the properties being put up for sale, for a person, must be taken to intend the natural and probable consequence of his act.
Likewise, when that person purchases the pro-perties himself at the sale, it is a legitimate inference to draw that it was with that intention that the properties were allowed to be brought to sale see Kombi Achan v. K. C. Velayudhan, AIR 1954 Mad 144 (P). Therefore, when defendant 2 purchased the property herself at, the sale it is a legitimate inference to draw that the breach of the obligation to pay the rent was made by her with a view to the properties, being put up for sale.
The court of appeal below is, therefore, right in his finding that the action of defendant 2 and her husband as mala fide. The contention of Mr. De that the rent sale wiped off the mortgage, and the plaintiffs' right to redemption was extinguished, even when the rent sale was found to be fraudulent, has no substance, and must be overruled.
9. It is next contended that in view of Sections 64 and 96 of the Indian Trusts Act, 1882, the right Of transferees in good faith for consideration would not be affected. Mr. De relies on Section 90 of the Act, which provides, inter alia, that where a mortgagee by availing himself of his position as such, gains an advantage, in derogation of the rights of the other persons interested in the property, he must hold for the benefit of all persons so interested in the advantage so gained. He, therefore, contends that no-doubt that is the position in law toy virtue of Section 90 of the Act, but he says that It must be read subject to Ss. 64 and 96 of the Act, particularly, Section 96. Section 96 runs thus:-
"Nothing contained in this Chapter shall impair rights of transferees in good faith for consideration, or create an obligation in evasion of any law 'for the time being in force."
Mr. De's contention is that as the court of appeal below had found that defendant 1, namely, the appellant, is a bona fide purchaser no matter whether he has purchased from defendant 2, or not, he is a transferee in good faith within the meaning of Section 96 of the Act, and, therefore, his interest Would toe unaffected. In reply to this argument. Mr. Katriar, has relied on Section 59A of the Transfer of Property Act. This new Section 59A was inserted in 1929. It runs thus:--
"Unless otherwise expressly provided, reference In this Chapter to mortgagor and mortgagees shall be deemed to include reference to persons deriving title from them respectively".
His contention, therefore, is that defendant 1 may toe a transferee in good faith, but under Section 59A of the Transfer of Property Act he must be considered to be a representative of the mortgagee, as he has derived his title from the mortgagee, defendant 2, and therefore, defendant 1 cannot have a better right than what the defendant 2 herself mad.
In this connection he has referred to Plarey Lal v. Dina Nath, AIR 1939 All. 190 (G) /in which Section 59A was considered, and it was held that distinction is drawn by Section 59A between the two categories of mortgagors and mortgagees, and the intention is that the persons who derive title from them are to be persons who derive title as a mortgagor or as a mortgagee. Very recently in Karup-panan Servai v. Daivasigamania Filial, AIR 1954 Mad 650 (H), Venkatarama Aiyar, J. who delivered the judgment of the Division Bench, held that under Section 59-A, Transfer of Property Act, "a mortgagee for the purpose of redemption would include all persons who derive title from him and it is immaterial whether that title is derived by sale in 'invitum' or by private treaty, or whether it is by act of parties, or by operation of law".
In my opinion, therefore, on a proper construction of Section 59A of the Transfer of Property Act there can be no doubt that defendant 1, having derived his title from the mortgagee, defendant 2, is a representative of the mortgagee herself, and defendant 1, for the purpose of redemption, would be considered a mortgagee liable to be redeemed.
10. Section 90, Illustration (c), of the Trusts Act is to the point. The section embodies a well known principle of equity, justice, and good conscience. It incorporates a wholesome doctrine of trust, and whenever occasion has arisen, Judges have been always alert and astute to give effect to this doctrine despite all the artifice and subteruge devised by human ingenuity to defeat it. Therefore, where the mortgagee in possession by, committing default in payment of the landlord's rent suffers the mortgaged property to be sold and buys it himself, or in the name of his benamidar he cannot claim the property to be his own in derogation of the mortgagor's interest in the property.
The mortgage interest will continue to subsist On account of the trust imposed on the estate held by the mortgagee. The property would be stamped with a trust in favour of the mortgagor. This is the settled principle of law see ILR 31 Pat 865: (AIR 1952 Pat 286) CD) and Bishunath Tewari v. Mt. Mirchi, (S) AIR 1955 Pat 66 (I).
11. But Mr. De's contention is that, even if that be so, defendant 1's rights are protected by Section 96 of the Trusts Act, because he is a bona fide transferee from defendant 2, the auction-purchaser. Section 96 provides also that "nothing contained in this Chapter shall .... create an obligation in evasion of any law for the time being in force".
In my opinion, therefore, Section 96 of .the Trusts Act is controlled by and should be read subject to Section 59A of the Transfer of Property Act. Section 96 would not protect a person, if the right, which he has acquired, is hit by or is an evasion of any law for the time being in force. Where it 'would amount to an evasion of any law for the time being in force, Section 96 would be of no avail to such a person. This view finds support from Raja Rajesh-wara Dorai v. Arunachellan Chettiar, ILR 38 Mad 311: (AIR 1916 Mad 350) (J). In this case Miller, J. with whom Sadasiva Ayyar J, agreed, observed:
"Again, Section 96 shows that Chapter IX of the Trusts Act was not intended to alter any provision of the law, but merely to make provision, so far as that could be done consistently with the 'laws already in force, for certain cases in which Courts of Equity in England fastened a constructive, or resulting trust upon holders of property and, for which in India, before the Trusts Act, there was no statutory, provision."
In my opinion, therefore, Section 96 of the Trust Act, will not at all be of any avail to the appellant.
12. Mr, De in this connection, has particularly emphasised on the' following observations of Sarjoo Prosad J. with whom Ramaswami J. agreed in ILR 31 Pat 365: (AIR 1952 Pat 286) (D) While considering Section 90 of the Indian Trusts Act.
"Different consideration would, however, arise where the interest in the property has passed on to a purchaser unaffected by the mortgage, and thereafter the mortgagee whose mortgage is extinguished on account of that purchase buys the property from that purchaser, and acquires an independent title through him just as much as any other transferee would do; provided always that the purchase by third party and the subsequent transfer to the mortgagee is not found to be a mere artifice on the part of the mortgagee to acquire the property for himself."
13. In my opinion, these observations do not help Mr. De at all, because as I have stated earlier, and to repeat what I have said before, on the findings of the court of appeal below, defendant 2 and her husband the landlord, were in collusion of each, other, and the property was purchased at the rent sale by no other person than the wife of the landlord himself. The auction purchaser, namely, defendant 2, the wife of the landlord, was the mortgagee and she knew well that under the document of her title she had taken the liability to pay the rent for the years for which the rent suit had been obtained.
In spite of this knowledge, she deliberately did not pay up the decretal amount with the result that the property was sold and purchased by herself. Therefore' defendant 2 being the mortgagee in possession and because of having undertaken the liability to pay the rent, was bound to pay it and so cannot take advantage of her own default to deprive her mortgagors of their property. When defendant 2 purchased 'at the auction she held as a trustee for th'e plaintiffs and so was bound to return the property on being reimbursed for whatsoever she spent over it.
The appellant, being a purchaser from defendant no. 2 therefore, is also liable to be redeemed, as he must be1 deemed to be a representative of defendant 2, and to have as such, purchased the property subject to the mortgage and the equity of redemption of the plaintiffs, see Sidhkamal Narayan Ramanuj Das v. Eire Naik, AIR 1954 SC 336 (K), Kombi Achan v. K. C. Valayaudhan, AIR 1955 Pat 66 (I), AIR 1954 Mad 144 (P).
In such circumstances the courts below are correct in their findings that the conduct of defendant 2, and her husband the landlord, was mala fide, and as defendant 1 is a representative of defendant 2, and in the position of a mortgagee he cannot in law have a right better than what she herself possessed. I do not think, therefore, that defendant 1 is protected either by Section 64, or by . Section 96 of the Trusts Act.
14. For the reasons given above, I find that there is no substance in any of the contentions of Mr. De, and as such they must be rejected.
15. In similar circumstances in the case of AIR 1954 SC 336 (K), referred to before, While considering the position of a statutory mortgagee under Section 225(1) of the Orissa Tenancy Act (2 of 1923) who purchases the property in his possession at an auction sale in execution of a rent decree brought about by his own default to pay the rent, his Lordship Bose, J. who delivered the judgment of the Court, observed as follows:--
"The position in our opinion, is very clear and In the absence of any special statutory provision to the contrary is governed by Section 90, Trusts Act.
The defendant, is a mortgagee and apart from special statutes the only way in which a mortgage can be terminated as between the parties to it is by the act of the parties themselves, by merger or by an order of the Court. The maxim 'once a mortgage always a mortgage' applies. Therefore, when the defendant entered upon possession he was there as a mortgagee and being a mortgagee the plaintiffs have a right to redeem unless there is either a contract between the parties or a merger or a special statute to debar them.
"When he purchased under the second sale he did not thereby destroy the plaintiffs' right to redeem because he was at that time standing in the plaintiffs' shoes a mortgagee in possession under Section 225(1) and his purchase so far as title was concerned had exactly the same effect as if the plaintiffs, having omitted to satisfy the decree and save themselves by all the last minute acts of , grace permitted to judgment-debtors, had in end themselves purchased that property. All that happened was that he regained his position as a mortgagee in possession under Section 225 (1)".
16. Mr, De wanted two ijara bonds dated 14-6-27 and 16-2-28 to be admitted as additional evidence in the case, but for reasons, recorded in the order sheet of the date, I have rejected this application.
17. In the result, the appeal fails, and is dismissed, with costs.