Patna High Court
Subedar Rai vs Bachai Pandey on 25 March, 1960
Equivalent citations: AIR1960PAT423, AIR 1960 PATNA 423
JUDGMENT Mahapatra, J.
1. Plaintiff, who is the appellant, brought a suit for redemption of a mortgage executed in favour of the father of the defendant in 1895 (Exhibit 1) in respect of 1 bigha 15 kathas of land. It was pleaded in defence that the mortgage security had been sold in a court sale in execution of a rent decree in January, 1903 and was purchased and taken possession by the landlord, who, on 7-6-1905, settled the land with the defendant. The area settled with the defendant was 1 bigha 15 kathas, being identical with that of the mortgage security.
The sale in execution of rent decree was in respect of 2 bighas 1 katha 14 dhurs including this land. The trial court held that the rent sale was due to the default of the mortgagee, inasmuch as, he failed to pay the rent, which he was under an obligation to do, and, therefore, the subsequent settlement taken by him from the landlord after the rent sale, will be for the benefit of the mortgagor, namely, the plaintiff, under Section 90 of the Trusts Act, but dismissed the plaintiffs suit on the ground that the defendant, having been recorded as a tenant in the revisional settlement khatian, had established his title by adverse possession against the plaintiff.
The court of appeal, on an appeal by the plaintiff, has held that there was no adverse possession in favour of the defendant and the rent sale was not due to the default of the mortgagee, as he was not bound to pay the rent for the land in question. The mortgage came to an end by the rent sale and the settlement taken by the defendant created new rights different from that of the mortgagee. In that view, the plaintiff's suit has also been dismissed and he has been refused the equitable right of redemption.
2. In the present second appeal, it is contended, no doubt, that the proportionate rent in respect of the mortgage security was Rs. 3/8/-, against Rs. 8/2/- payable for the entire holding, which contained larger area; the balance of the rent payable for the portion not mortgaged to the defendant, was undoubtedly on the mortgagor to pay to the landlord. The rent decree and the sale following that, were the result of the non-payment both by the plaintiff mortgagor and the defendant mortgagee. Still the mortgagee having defaulted to discharge his part of the trust imposed upon him under the terms of the mortgage deed, the dispossession of the mortgagee, if at all, must be held to have been brought about by his own wrong and, therefore, any benefit or advantage that he has gained thereafter will enure to the benefit of the mortgagor, because, he cannot take advantage of his own wrong.
The equitable principles laid under Section 90 of the Trusts Act are well known. It is well settled that if a mortgagee, like a co-owner, acts in a manner, which is repugnant to the obligations of a trustee and if he later on, as a result following from, his own action, gains an advantage, that will not be in derogation of the mortgagor. In cases, where on account of the default committed by the mortgagee, the mortgage security was brought to sale and was, purchased by the mortgagee either in his own name or in the name of his benamdar, the courts have consistently held, following the dictum laid down by the Privy Council in similar cases, that the mortgagor will still continue to have his right to redeem the mortgage and the possession or the rights acquired by the mortgagee in such sale will not be taken to have broken the mortgagee's position or the status of the mortgagee involving the rights of the mortgagor to redeem the mortgage.
There is another line of cases in which the mortgagee does not appear on the surface to be either a direct purchaser or a purchaser through a benamdar, but the landlord purchases in the court auction sale, in execution of rent decree and later on, settles the land with or sells the land to the mortgagee. In such cases there appears to have been some conflict in the expression of opinion by the Courts. Where fraud or collusion is established on evidence between the mortgagee and the landlord, either in the matter of bringing about the rent sale or in the matter of default, committed in payment of rent, the Courts have not made any distinction between the mortgagee or the landlord as the purchaser.
In such cases, even if the landlord was the purchaser and the settlement or the sale was effected in favour of the mortgagee after the landlord took possession in execution of the rent decree, the Courts have held that on account of such collusion the advantage will not be allowed to be taken and appropriated by the mortgagee to the exclusion of the mortgagor. The mortgagor in such cases has the right to redeem the mortgage. But in those cases, where there is no fraud or collusion established, but only for the mere default of payment of rent by the mortgagee, the rent sale is brought about and the landlord purchases the land and settles it, later on, with the mortgagee, Courts have held the view in some cases that the mortgagee acquires new right and the mortgage comes to an end by the rent sale.
It is, however, to be borne in mind that the underlying principles of Section 90 of the Trusts Act are that the mortgagee, availing himself of his position as a mortgagee, does something to gain an advantage in his own favour. In other words, the default committed by him must be with an intention to gaining certain advantage for himself either directly by being purchaser in court sale or by taking settlement from the auction purchaser later on. Commissions or/and omissions with mala fide intention are therefore necessary elements, though not directly connected with the ultimate result brought about.
But those elements must be shown to be present at the time when the default is made. Such elements may also appear from the subsequent conduct of the mortgagee after the rent sale is brought about. In cases, where in spite of the rent sale, the mortgagee continues in possession, that will be indicative of an intention to take advantage of one's possession and create a situation by one's default and then utilise that for his own benefit later.
3. In the present case there is no dispute over the fact that there was liability on the mortgagor to pay a certain portion of the rent of the entire holding and the mortgagee had the obligation to pay Rs. 3/8/- towards the rent in proportion to the extent of land given in mortgage. A contention was raised on behalf of the defendant-respondent that in absence of an obligation to pay the entire rent for the entire holding, the rent sale cannot be said to have been brought about by the default committed by the mortgagee.
Where the rent has not been split up in proportion to the mortgage security with the consent of the landlord, the landlord will not be bound to receive rent, except for the entire holding. If in this case it would have been shown that the defendant made an attempt to pay his proportionate rent either to the plaintiff mortgagor or to the landlord, but such rent was not accepted for the default committed by the mortgagor in paying his own share, the consideration would have been entirely different and in favour of the defendant's contention. On facts, therefore, there is no escape from the conclusion that the rent sale in the present case was due also to the default committed by the mortgagee.
4. Learned counsel for the appellant referred to the case of Deo Saran Singh v. Barhu Singh, AIR 1952 Pat 286, where the mortgagor was also liable to pay rent in respect of 21/2 kathas of the holding, whereas the mortgagee was to pay the rent for the balance of that holding, and on account of default by both, the rent decree was passed and the property was brought to sale in execution thereof. It was also found in that case that there was no fraud or collusion so far as the rent decree and execution were concerned.
Their Lordships however, on the facts of that case held that on the terms of the document the liability to pay rent in respect of the entire holding was on the mortgagee, as the rent for the various portions of the holding had not been split up with the consent of the landlord.
It was further found that when the landlord obtained the ex parte decree for rent in that case and proceeded to sell the mortgaged property in execution all the mortgagees jointly purchased the same in the name of their benamidars; and that (this is important to note) all the mortgagees had all along continued to be in possession of the property originally mortgaged in spite of the sale. In that background their Lordships observed:
"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 90 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 morgage 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".
From these observations, it is clear that a mere inability to pay the rent on the part of the mortgagee is not all that would constitute the pre-requisite condition for the application of Section 90. As, in the reported case, the mortgagees purchased the property through a benamidar and the mortgagees continued their possession in spite of the sale, the element of mala fide intention on the part of the mortgagees was clearly visible and, therefore, they could not be allowed to take advantage of their own wrong.
This case, therefore will not support the appellant unless he shows that such element of mala fide intention has been established against the defendant either in respect of the rent sale or from his subsequent conduct. It was pointed out by learned counsel that according to the evidence or D. W. 2, the delivery of possession was taken following the rent sale sis months before the settlement with defendant in June, 1905 that will take us to sometime in January, 1905 although the sale had taken place in January, 1903. It was rightly contended that this clearly shows that the mortgagee continued his possession as before, for a period of two years after the sale was confirmed. If the mortgagee defendant was not at all concerned directly or indirectly, except by his default to pay the rent, with the rent sale, then, in ordinary course of events he could not have been allowed to remain on the land, in spite of the purchase by the landlord, for a period of two years and to appropriate the harvest.
His possession during this period was undoubtedly that of the mortgagee and immediate settlement before the next harvest season taken by him from the landlord is an indication of his complicity with the rent sale. Another significant fact to be borne in mind is that he took the settlement of 1 bigha 15 kathas exactly representing the same land which he had taken as mortgage security, although the land sold in rent sale was more than that. These facts, in my view, which have been lost sight of by the courts below, go a long way to show that not only the defendant mortgagee defaulted in discharging his obligation to pay the rent but he did so in order to bring about the sale, so that he may gain advantage for himself.
In that view of the matter, undoubtedly Section 90 will come into application and the mortgagor's right to redeem the mortgage will not be lost. The next case relied upon on behalf of the appellant is the case of Ram Rup v. Jang Bahadur, ILR 30 Pat .391: (AIR 1951 Pat 566) in which a portion of the consideration money was left with the mortgagee to satisfy a rent decree. He failed to discharge that rent decree, the result being, that the property was put to sale and later on the mortgagee took settlement from the landlord. In that case their Lordships have held that the mortgagee cannot, take advantage of his own wrong and that the mortgage continues. By the omission to do what he was required to do, the mortgagee brought about a situation, in which he could take the settlement of the land.
He was not allowed to utilise that situation to his own benefit and deprive the mortgagor of his rights and interests in the property. The other case relied upon in this connection is the case of Chandi Mander v. Sitabi Bhagat, 21 Pat LT B99 in which there was a default by the mortgagee to pay the rent and in rent sale, the landlord purchased the land and later on, settled it with the mortgagee. It was held that Section 90 of the Trusts Act was applicable and the mortgagor was held to have the right to redeem the mortgage.
The main consideration there was whether proceedings under Section 87 of the Bihar Tenancy Act would break the mortgage. The question whether jthe mala fide intention or fraud or collusion was necessary to be proved in regard to the default of the mortgagee and his apparent dispossession, was not raised in that case. The case of Sidhakamal Narayan Ramanuj Das v. Bira Naik, AIR 1954 SC 336 which was also relied upon by the appellant, was one, in which a simple mortgagee, on satisfying a rent decree, remained in possession of the land under Section 225 of the Orissa Tenancy Act. Later on, he defaulted to pay the rent and there was a sale of the property in execution of another rent decree and he himself purchased it.
In that case also the benefits of Section 90 were held to be available to the mortgagor. There is no discussion about fraud or mala fide intention, but from the facts it is clear that he, having been himself a purchaser at a sale brought about by his own default, was subjected to the limitations under Section 90 of the Trusts Act. That fact was enough to indicate the mala fide character of his deeds.
5. Learned counsel for the respondent referred to the case of Isar Nonia v. Karinan Pandey, AIR 1958 Pat 353 to show where the rent is payable by both, the mortgagor and the mortgagee, in parts, and on account of default by both, the property is brought to rent sale, the mortgagor cannot invoke in his aid the equitable principle of Section 90 of the Trusts Act. On the facts and circumstances of that case the mortgagee was found not to have committed any default. Therefore, that case will not be applicable here.
The clear finding in the present case is that the mortgagee defaulted to pay the rent and the rent sale was due to that also. Although there are some observations in this reported case which would go in support of the respondents' contention, yet, in view of the clear finding in that case that the mortgagee had not committed any default to bring about any sale, those observations will be of no assistance here. The next case relied upon, was Gauri Shanker Sahu v. Sheotahal Gir, AIR 1936 Pat 434. The rent sale there was due to the default of the mortgagee. It was observed that as the sale was not fraudulent, it extinguished the equity of redemption.
The clear finding about the absence of fraud or collusion on the part of the mortgagee justified the conclusion. I have already pointed out that from the facts of the present case, the mortgagee cannot be held to be completely innocent, judging his conduct both before and after the rent sale. In my view, therefore, this is a case in which the principle of Section 90 will be available to the aid of the plaintiff-appellant and he will be entitled to redeem the mortgage. The judgments and decrees passed by the courts below are, therefore, set aside and the appeal is allowed with costs. The plaintiff's suit is decreed with costs throughout.