Patna High Court
Deo Saran Singh And Ors. vs Barhu Singh And Ors. on 19 February, 1952
Equivalent citations: AIR1952PAT286, AIR 1952 PATNA 286
JUDGMENT Sarjoo Prosad, J.
1. The plaintiffs, who are the appellants in this appeal, sued for redemption in respect of four mortgage bonds relating to plots Nos. 296, 831, 850 and 858 of khata No. 109 situate in village Harpur Akauna.
2. The case of the plaintiffs is that the khata in question was their raiyati kasht land, and from time to time their family being in need of money borrowed from the defendants various sums of money under the bonds in suit. The first bond (Ex. 1-c) is dated the 16th of July 1927, under which a sum of Rs. 200/- was borrowed from the defendant No. 1. The next (Ex. 1-b) is dated the 10th of August, 1928, under which a similar sum of money was borrowed from Doman Das, the husband of defendant No. 9. The third (Ex. 1) is dated the 2nd of June 1930, in favour of defendants 11 to 14 for a sum of Rs. 190, and the last one (Ex. 1-a) is dated the 14th of July, 1930 for Rs. 200/-from the defendant No. 15. The total area given in rehan covered almost the enure khata except for a small area of 2 1/2 kathas of land which is said to have remained in possession of the mortgagors. The plaintiffs alleged that when they wanted to redeem the mortgage, the defendants refused to accept the mortgage dues on the ground that the entire holding had been sold in execution of a rent decree. The plaintiffs learnt that the said 'purchase was by the defendants-mortgagees themselves in the name of their relations, and that the ex parts rent decree in execution of which the sale had taken place was a fraudulent and collusive decree at the instance of the defendants who had suppressed the processes and got the lands sold in execution with a view to purchase the same. The plaintiffs further stated that the mortgagees in spite of the fraudulent decree and sale continued to be in possession of the property, and their character as mortgagees had never changed, the plaintiffs as such being entitled to redemption. It was also stated by the plaintiffs that under the mortgage deeds in question the mortgagees were liable to pay rent to the landlord and they could not take advantage of their default in paying the rent to the detriment of the plaintiffs in getting the ex parte decree passed and purchasing the property themselves in execution of such a decree with a dishonest, intention of wiping out the mortgage.
3. It may be stated at the outset that the defendants 11 to 14, the defendants third party, who were mortgagees under the rehan bond of the 2nd of June, 1930, in respect of 62 decimals of plots 850 and 858 of the khata in suit, have already compromised with the plaintiffs and allowed the plaintiffs to redeem the bond in question. The dispute is, therefore, confined to the defendants interested in the other three mortgagees. They have in their respective written statements taken up a common defence which in substance is that the decree passed in the rent suit and the sale which followed in execution were good and valid and binding on the plaintiffs; and as a result of the sale the mortgage interest of the plaintiffs had been completely extinguished. They denied that the defendants were liable to pay rent to the landlord for the lands mortgaged to them, and, on the contrary, asserted that the entire liability for the payment of the said rent was on the plaintiffs, and that the plaintiffs having defaulted in payment of rent, the decree had been validly passed against them. They also stated that the auction purchasers were not the farzidars of the mortgagees but independent purchasers in their own right and all the allegations of the plaintiffs to the contrary were false and unfounded. On these allegations they contended that the plaintiffs' suit for redemption did not lie as the mortgage interest no longer subsisted, the holding having been sold in execution of the rent decree.
4. The Courts below have concurrently found after a careful consideration of the evidence on record that it had been" established that the lands in suit had been purchased by the rehandars themselves. In fact, the finding of the trial Court that the auction-purchases were made by the rehandars themselves was not even challenged before the Court of appeal below. The learned Munsif held that the documents (Exs. 1 to 1-b) showed that the mortgagees were liable to pay rent in respect of the lands mortgaged to them, but so far as Ex. 1-C, is concerned, namely, the earliest bond in favour of the defendant No. 1 Barhu Singh, there was nothing to show that the mortgagee under the terms of the bond undertook to pay the liability, and the plaintiffs' evidence that there was some oral agreement between the parties under which all the mortgagees undertook to pay the rent irrespective of the terms of the bond was not accepted. The learned Munsif accordingly held that besides the said mortgagees themselves, the plaintiffs were liable to pay rent in respect of 2 1/2 kathas of the holding in question which remained in possession of the plaintiffs' family and also in respect of the land given in mortgage to defendant No. 1, and as such, there was default on the part of the plaintiffs as well in not paying rent to the landlord. He also found that there was no fraud or coliusion so far as the rent decree and execution was concerned, and consequently the plaintiffs were not entitled to redeem the mortgage bonds and to take advantage of their own default resulting in the sale of the disputed lands.
5. The learned Subordinate Judge also agreed with the Munsiff in respect of his finding that the decree and the execution sale were not fraudulent or collusive. He, however, held that under the bonds (Exs. 1 to 1-b) it was quite clear that the liability to pay rent was on the mortgagees though in the bond (Ex. 1-c) the liability was left with the mortgagors. He also disbelieved the plaintiffs' evidence in regard to the oral agreement set up by them as to the liability to pay rent, and finally came to the conclusion in agreement with the learned Munsiff that the liability for payment of rent at least in respect of 2 1/2 kathas was with the plaintiffs, and the plaintiffs themselves being liable for payment of rent of a portion of the holding, and the sale not being entirely due to the fault of the rehandars, the sale was a valid sale and extinguished the mortgaged interest. On these findings the suit has been dismissed by the two Courts below.
5-a. Mr. G. P. Das, on behalf off the appellants contends that the rent of the khata had not been: split up and the mortgage bonds (Exs. 1 ana 1-b) did not show at all that the rent payable by the mortgagee was only in respect of the lands mortgaged. On the contrary the documents showed that the liability was in respect of the entire rental of the holding in question. In support of his argument he has placed before us a translation of those bonds in suit, and these documents show that the mortgagees were to enter into possession of the mortgaged property and appropriate the produce thereof in lieu of rehan money after making payment of the annual rent to the landlord. There is no share of the rent specified in the documents but what the documents speak of is the annual rental payable to the landlord which Implies the entire rental payable in respect of the holding in question and not only in respect of a part of the holding. It was open to the mortgagors and the mortgagees to distribute the liability for the payment of rent between themselves without, of course, binding the landlord who was entitled to take the entire rent for the holding; but the documents do not establish any such arrangement. The finding of the learned Subordinate Judge on the point is rather ambiguous, because he-does no alogether agree with the learned Munsiff that the liability to pay rent on some of the mort-
gagees was only in respect of the lands actually mortgaged to them. In my opinion, the rent of the various portions of the holding not having been split up with the consent of the landlord, the liability to pay rent must of necessity imply the liability for the entire rent payable in respect of the holding.
Mr. Lal Narayan Sinha on behalf of the respondents contends that such a construction would lead to anomalies, because it could not be held -that each of the mortgagees under the bonds in question would be liable to pay the entire rent and be accountable to the mortgagors for the default in paying the rent. I do not see how any anomaly arises; because if any one of them pays rent to the landlord, he would not be accountable to the mortgagors to that extent, and the person who does not pay him has to account for his failure to do so. The contention of the learned counsel that usually the parties in such cases do not desire to undertake a liability for accounting does not hold water in the present case. I cannot, therefore, accept the construction of Mr. Sinha that the said documents made the mortgagees under two of those mortgage bonds responsible for the payment of only, a part, of the rent payable to the landlord.
In regard to the first mortgage bond, dated the 16th of July 1927, in favour of the defendant No. 1, it has been argued on behalf of the appellants that the bond was silent as to the liability to pay the landlord's rent. In such a case under Section 76 (c) of the Transfer of Property Act (Act IV of 1882), as amended up to date the liability to pay the rent accruing due during the period of such possession was upon the mortgagee. The learned Subordinate Judge has, however, held that the liability under the bond was left with the mortgagors. Be that as it may, the situation does not improve in favour of this defendant because he has made a joint purchase of the mortgaged property along with the other defendants who were undoubtedly liable to pay the landlord's rent and did not make the payment. The purchase being joint and the shares of the purchasers being undefined, he cannot claim any special advantage for himself. Even if the interpretation of Mr. Sinha is accepted, the legal position, as I shall presently show, is not affected.
6. The facts which emerge out of the findings of the Court below are these: (i) that the plaintiffs and the defendants stand in the relationship of mortgagors and mortgagees; (ii) that the mortgagees or at least some of them were liable to pay the rent due to the landlord; (iii) that the said mortgagees committed default in payment of the rent; (iv) that when the landlord obtained an ex parte decree for rent and proceeded to sell the mortgaged property in execution, all the mortgagees jointly purchased the same in the name of their benamidars; and (v) that they have all along continued to be in possession of the properties originally mortgaged. The question then arises whether they can say to their mortgagors: "You cannot redeem this property now, because by the sale your rights have been extinguished. You were also responsible for the payment of rent to the landlord as such as we were and you must suffer on account of your own default." If it were an ordinary case of 'pari delicto' I agree that the position of the defendants would be better and there would be much force in the argument of Mr. Sinha. But the answer to the question posed by me is furnished, in my opinion, by Section 90 of the Indian Trusts Act (Act II of 1882) applicable to this State. The said section as also the relevant illustration thereunder runs as follows:
"Where a tenant for life, co-owner, mortgagee or other qualified owner of any property, by availing himself of his position as such, gains an advantage in derogation of the rights of the other persons interested in the property, or where any such owner as representing all persons interested in such property, gains any advantage, he must hold, for the benefit of ail persons so interested, the advantage so gained, but subject to repayment by such persons of their due share of the expenses properly incurred, and to an indemnity by the same persons against liabilities properly contracted in gaining such advantage.
* * * * * "(c) A mortgages land to B, who enters into possession. B allows the Government revenue to fall into arrear with a view to the land being put up for sale and his becoming himself the purchaser of it. The land is accordingly sold to B. Subject to the repayment of the amount due on the mortgage and of his expenses properly incurred as mortgagee, B holds the land for the benefit of A."
The section embodies a well-known principle of equity, justice and good conscience. A person who stands on a fiduciary position to another cannot take advantage of that position in derogation of rights of others, and if he does gain any such advantage it will ensure to the benefit of all the persons interested subject to the equities in favour of the former. 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 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. In other words, the mortgage interest will continue to subsist on account of the trust imposed upon the estate held by the mortgagee. The mortgagee cannot be allowed to take advantage of his own default. Fraud or misrepresentation or suppression of facts need not necessarily lead to the advantage gained; the section does not contemplate the presence of these elements, which by themselves are sufficient to vitiate all transactions. Different considerations 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 the 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.
7. Section 90, as discussed above, 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 subterfuge devised by human ingenuity to defeat it. It is needless to multiply authorities, but to illustrate my point I shall refer to a few of them in order to show how Judges have from time to time re-acted to this doctrine.
8. The first case which needs reference is a decision of the Judicial Committee in 'NAWAB SIDHEE NUZUR ALLY KHAN v. RAJAH OJOODHYARAM KHAN', 10 Moo Ind App 540. There a mortgagee had wilfully suffered an estate to fall Into arrears of Government revenue and had entered into an agreement with the auction-purchaser for the purchase of the estate benami which the auction-purchaser actually did. The Judicial Committee in dealing with the case laid down two important principles: (i) It referred with approval to the 'KINGSTON'S CASE', where the learned Chief Justice observed:
"Fraud is an extrinsic, collateral act, which vitiates the most solemn proceedings of Courts of justice. Lord Coke says, it avoids all judicial acts, Ecclesiastical or Temporal."
It also referred to the case of 'COLLINS v. BLANTERN', (1767) 2 Wils. 341, as an authority for the proposition that "a Court will strip off all disguises from a case of fraud, and look at the transaction as it really is." (ii) the second important principle propounded was as follows :
"Again, a title by estoppel is a well-known title. The doctrine that a man cannot take advantage of his own wrong, as used and applied by Mr. Justice Bayley to this title to redeem, is a correct application of that doctrine, if the facts support him. Assuming as we must, the agreement to be proved, was this sale, as between Abbott and M' Arthur, really meant to be a sale under the Revenue laws for arrears of revenue, or was it a device -- part of the machinery, as it were to effect a fraud? Under a private conveyance in the state of the title and of these parties, the estate, if conveyed toy Abbot to M' Arthur, would have been redeemable by the plaintiff."
Their. Lordships of the Judicial Committee were cautious in pointing out that their decision proceeded entirely upon the ground that as between the parties the sale must be considered as a private sate, and the decision had no application to interest derived under a real auction-sale; and the effect of the mortgagor's suit was, as it were, to claim a right to confess and avoid the sale, "by Imposing a trust on the estate which passed under it. This decision, therefore, fully bears out the principle which I have discussed above, namely that the mortgagees could not take advantage of his own wrong and claim protection under the sale and purchase made by him to extinguish the right of redemption.
9. The case more in point is another decision of the Judicial Committee of the Privy Council in 'DEONANDAN PRASAD v. JANKI SINGH', 44 Ind App 30 (PC). There again the agents for a minor, the mortgagee of a separately owned share in property, intentionally made default in paving the revenue for which he was responsible with a view to have the property sold and purchased on behalf of the mortgagee, which in fact happened. The Judicial Committee held that it should be declared that the property was held for the benefit of all the co-sharers and the mortgagee, according to their several interests at the date of the sale, subject to repayment to the mortgagee of the expense properly incurred in the purchase, together with interest on the amount. Their Lordships found that Government revenue was intentionally allowed by the agents of the minor mortgagee to fall into arrear with a view to the property being put up to sale and bought on behalf of the minor, and then Sir Lawrence Jenkins, who delivered the judgment of the Board, proceeded to observe:
"If this be the true view, as their Lordships hold, then, however free from personal blame the minor may have been, he cannot profit by his agents' deliberate default committed in breach of the terms of the mortgage. As against his mortgagor, therefore, the mortgagee cannot be allowed to hold for himself the advantage gained by the default for which his agents were res ponsible."
In regard to the co-owners also their Lordships applied the same principle as is apparent from the following quotation:
"Equally in relation to the co-owners was the deault designed with a view to a subsequent sale and to a purchase on the minor's behalf, and the advantage gained by this scheme must, in like manner, be held for the benefit of the co-owners, who are not shown to have been aware of the default or sale, or to have disentitled themselves to this equitable relief."
The above decision of Sir Lawrence Jenkins fully elucidates the doctrine of trust under consideration. In course of the decision Sir Lawrence Jen-kins in criticising a case strongry relied upon by the appellant made these highly significant and pertinent remarks:
"The decision in 'DOORGA SINGH v. SHEO PERSHAD SINGH', 16 Cal 194 applied to lax a standard of reciprocal conduct in holding that fraud in its strictest sense; such fraud as would support a common law action of deceit, was the test by which to judge these transactions. It failed to pay due regard to the relative position of co-owners in respect of the payment of revenue and to the need of demanding from each such measure of candid dealing and good faith as would ensure that a sharer would rot be tempted to make a deliberate default with a view to ousting his co-sharers and appropriating to himself their common property. Here Deonandan, through his representatives, had a duty to perform, which was inconsistent with his becoming a purchaser of the property in the way he did; therefore his title cannot operate to the exclusion of the co-owners."
Finally, they concluded the judgment with a direction that the sale stood out, in the circumstances, the transaction was to be regarded in effect as nothing more than payment of an arrear of revenue enuring for the benefit of all, and instead of granting a declaration that the decree, sale and purchase were invalid, they substituted a declaration to the effect that the property purchased must be held for the benefit of the plaintiffs and the either co-sharers according to their several interests at the date of the sale, subject to payment to the mortgagee of the expenses incurred by him.
10. I will now refer to a very recent decision of this Court in 'RAM RUP v. JANG BAHADUR', 30 Pat 391, where his Lordship the Chief Justice being confronted with a similar situation has followed the principles discussed above. In the case in question the plaintiffs had executed a Sudhbharna and left the consideration money with the sudbharnadars to satisfy a rent decree upon his properties. The Sudbharnadars did not pay the rent decree and the properties were sold in execution thereof and purchased by the landlord who subsequently settled them with the Sudbharnadars. The learned Chief Justice held as follows:
"Thus on the evidence it is clear that the defendants took possession as mortgagees and it was their clear duty to save the property from the Court sale which took place on the 20th of August 1937, in execution of the rent decree. Admittedly, the landlords became the auction-purchasers and the defendants took settlement from them and are in possession of the disputed land. In my opinion, the defendants, by taking the settlement from the landlords could not change the character of their possession as against the plaintiffs. The defendants were clearly in the wrong in allowing the property to be sold, and, therefore, if the holding has come back into their hands, they cannot take advantage of their own wrong and deprive the plaintiffs of their right of redemption. It is a well-known legal maxim that convenience cannot accrue to a party from his own wrong (commo-dum ex injuria sua memo habere debet.)"
It is true that on the evidence there also appears to be sufficient material to establish fraud on the part of the mortgagee in bringing about tile sale in collusion with the landlord's 'amlas.' The decision, however, rests not only on the principle of fraud but also upon the principle of trust created by the relationship of the mortgagor and the mortgagee as it is manifest from the passage above mentioned. This decision is important in another respect because Mr Lal Narayan Sinha who appeared on behalf of the mortgagees relied to that case as he seeks to rely in the present case also upon two decisions of this Court in 'GAURl SHANKER V. SHEOTAHAL GIR', AIR 1936 Pat 434 and 'FEKUA MAHTO v. BABU LAL SAHU', 18 Patna 133. Both these cases have been elaborately discussed and distinguished by the learned Chief Justice, and I respectfully endorse the decision, and it would be unnecessary for me to encumber this judgment by a repetition of those reasons. Those cases do not on close analysis support the argument of the learned counsel.
11. The learned Counsel for the respondents has also endeavoured to explain the decisions quoted above on the ground that they were all cases of fraud, and therefore could not be pressed in aid to support the appellants' contention. There is in fact no charm in the word 'fraud'. It is true that on the findings of the Courts below in this case fraud in the actual processes of the Court has not been established. But if fraud means, as it does, causing wrongful gain to oneself and wrongful loss to another, then evidently there was fraud on the part of the mortgagees in the present case in making default in payment of the landlord's rent which, under the terms of the mortgage, some of them were liable to pay, and in purchasing the property jointly themselves in the name of their benamidars with a view to deprive the mortgagors of their interest. There can be no doubt that their intention at the date of sale was clearly dishonest. But, as Sir Lawrence Jenkins pointed out in 'DEONANDAN PRASHAD'S CASE', 44 Ind App 30 PC (Supra), the matter in the present' case does not rest upon the fact that fraud in its stricter sense so as to support a common law action of deceit must necessarily be proved; it would be enough to rest one's decision in the present case upon the principle governing the relative position of mortgagor and mortgagee and based upon the doctrine of trust demanding from each a high measure of candid dealing and good faith so as to ensure that the mortgagee would not be tempted to make a deliberate default with a view to deprive the mortgagor of his interest or to oust him from the property in order to make it his own.
The principle applies with equal force to co-
sharers also. I am fortified in this view by several other decisions of this Court and of other Courts where irrespective of the existence of fraud, Courts have interfered in jurisdiction of this principle; for instance; 'KALAPPA v. SHIVAYA', 20 Bom 492;
CHHITA BHULA v. BAI-JAMNI, 40 Bom 483 at pp. 489, 490; 'JAI KARAN v. SHEO KUMAR SINGH', AIR 1927 All 747, a case of default of the mortgagee in paying the rent and subsequent purchase toy the mortgagee; 'TALI MAHTON v. LEKHRAJ MAHTON', AIR 1928 Pat 17; 'RAM KISHORE V. JAGARNATH', AIR 1934 Pat 307 and 'CHANDI MANDER v. sITABI BHAGAT, 21 pat L T 699 (another case where a mortgagee bound by the terms of a mortgage to pay rent was held not entitled to claim the benefit arising from his own default.)
12. For the reasons stated above, I cannot agree with the decision of the Courts below which is based upon an erroneous view of the law on the point. The appeal, therefore, must succeed and the decision of the Courts below must be set aside, and the plaintiffs' suit must be decreed with costs throughout. In addition to the usual reliefs in a suit for redemption, the plaintiffs will be entitled to a declaration that the purchase made by the mortgagees did not in any manner affect the rights of the plaintiffs to redeem the property mortgaged. The decree will be subject to the payment not only of the mortgage dues but also of the amount, paid by the mortgagees in acquiring the property at the sale held in execution of the rent decree with interest at 6 per cent per annum on me amount from the date of sale. I further direct that on such payment being made, the defendants shall reconvey the property to the plaintiffs mortgagors within a date to be fixed by the, learned Subordinate Judge on the entire amount being deposited by the plaintiffs mortgagors.
Ramaswami, J.
13. I agree.