Bank of Poona, Now Merged Into Sangli Bank Ltd. Vs. Navrajasthan Co-operative Housing Society Ltd. and ors. - Court Judgment

Patel, J.

(1) This is an appeal by the defendant against the decree of the Civil Judge, Senior Division, Poona, in a redemption suit.

(2) The facts are few and they are as follows:

The appellant before us is the Bank of Poona, which is now merged into Sangli Bank Ltd. Defendants Nos. 9 and 10 owned S. Nos. 93, 102 and 107 in Poona, near Bhamburda. They effected a mortgage in respect of these Survey Numbers in favour of the Bank of Poona of February 16, 1949. The mortgage deed is at Ex. 85/9. Thereafter defendants Nos. 9 and 10 sold 4 acres and 34 gunthas to the plaintiffs Navrajasthan Co-operative Housing Society Ltd. for a sum of Rs. 67,000/-. Out of this amount, the Society retained a sum of Rs. 16,500/- to be paid to the mortgagee, but which it did not pay. Thereafter in 1954, the bank instituted arbitration proceedings and ultimately the award was made a decree of the Court on August 17, 1954, in Suit No. 92 of 1954. In these proceedings the plaintiff-Society was not made a party. Only the mortgagors defendants Nos 9 and 10 were parties as defendants. Under this decree the Bank brought the property to sale and it purchased all the three survey numbers with the leave of the Court on October 16, 1969, for the amount then due. It appears that during the execution proceedings the Society appeared in Court and took time to make payment of the dues but did not make any payment. Eventually the sale came to be confirmed. Defendants 9 and 10 challenged the said order of confirmation in Appeal No. 48 of 1960, which was eventually dismissed on September 6, 1968. The Society then instituted the present suit for redemption.

(3) In the plaint, the plaintiff-Society alleged that it had purchased 4 acres and 3 gunthas of the land and that a redemption decree be made in its favour in respect of all the three numbers mentioned in the schedule. In this suit some of the members of the Society who had become owners of smaller plots made in these 4 acres and 34 gunthas were joined as party defendants, the main defendant being the Bank. The Bank contended that the Society was not entitled to redeem the whole of the mortgage property, but only the property that it had purchased on payment of proportionate amount of the mortgage dues. The learned trial Judge made a decree for redemption of the entire mortgage property. In the three survey numbers, by decree, dated September 26, 1962, By this appeal the Bank challenges the said decree.

(4) In order to appreciate the contentions raised and apparently accepted by the trial Judge, it is necessary to refer to the sale deed executed by defendants Nos. 9 and 10 in favour of the plaintiff-Society, which is at Ex. 92. The sale deed recites that 4 acres and 34 gunthas out of S. No. 93 was sold for a sum of Rs. 67, 500/- free from all encumbrances. To ensure payment of the mortgage dues Rs. 16,500/- were kept with the Society in order to be paid over to the mortgage. The terms agreed between them are provided in paragraph 8, which refers to the amount of consideration for the sale deed. Against item 16,500/- this appears.

'After making accounts of the deed of mortgage which we have executed to the Bank of Poona Ltd. on the date 16-2-1949 for Rs. 15,000/- the amount found due to the Bank to-day is Rs. 16,500/-. We have deducted the said amount from the amount of this sale-deed. So you should pay in full the amount due to the Bank on the mortgage deed dated 16-2-1949 and the interest and should take the mortgage deed of the bank satisfied. Today a larger amount is not due to the Bank. If a debt in excess of Rs, 16,500/- is found due, we shall pay it. And if the debt is found to be less you should pay back the balance to us. As we have accepted the liability of the Bank if any injury is caused to us and if we suffer any loss we will be entitled to recover the same from you.

The rest of the terms are not material, because they recite the making up of the consideration of Rs. 67,500/-

(5) In the Court below and here is was contended on behalf of the plaintiff that under this deed the right of equity of redemption is vested in the plaintiff and therefore the plaintiff had a right to redeem the whole property it being not bound by the proceedings which had so far taken place between the mortgagors and the mortgagee. The trial Court accepted this contention of the Society. The learned Judge says that as a result of the sale by Ex. 92 in its favour the society became entitled to the equity of redemption of the suit property, i.e. the whole of the mortgaged property.

(6) We do not see how by any canon of construction of the sale deed the conclusion that the plaintiff-society became entitled to the equity of redemption can be supported. The clause which we have reproduced above clearly indicates that the plaintiffs in order to be able to get the property, i.e., 4 acres and 34 gunthas, free from all encumbrances, retained with it a sum of Rs. 16,500 which the mortgagors said was due to the bank for payment to the mortgagee Bank. It thus constituted itself a trustee for making the payment to the Bank only, as shown by the subsequent terms in the said paragraph, viz

'If a debt in excess of Rs 16,500/- is found due we shall pay it and if the debt is found to be less you pay back the balance to us'.

It also provides that if the Society made a default in making the payment and if any loss was caused to mortgagors then the Society would be liable. There is not a word in the said sale deed by which equity of redemption of the whole property is transferred to the Society. It is clear from the whole tenor of the document that what was transferred was only 4 acres and 34 gunthas of S.No. 93 free from all encumbrances and in order to fulfil that term, as the Society could not have redeemed only that portion of the land a sum of Rupees 16,500/- was kept with the Society so that the whole mortgage debt could be discharged and the property freed of the mortgage. This is entirely something different from conveying the right of equity of redemption to an assignee which gives the assignee the right to redeem the whole property.

(7) The question then is what are the rights of the Society as an assignee of a portion of the mortgaged property in its favour under the provisions of the Transfer of Property Act. We would like to consider the question first apart from authorities. The relevant section which fall to be considered are section 60, 82 and 91 of the Transfer of Property Act. Section 60 defines the rights and liabilities of the mortgagor. The first part of the section entitles him to redeem the property as soon as the mortgage amount becomes payable it being subject to the proviso.' Provided that the right conferred by this section has not been extinguished by th act of parties or by decree of a Court'. The last clause in this section is relevant and it is:

'Nothing in this section shall entitle a person interested in a share only of the mortgaged property in redeem his own share only, on payment of proportionate part of the amounts remaining due on the mortgage, except only where a mortgagee , or if there are more mortgagees than one, all such mortgagees has or have acquired to whole or in part , the share of a mortgagor'.

Now, the purpose of this section seems to be very clear. As soon as the mortgage money falls due th mortgagor is entitled to redeem the property. But this right is subject to the continued existence of the mortgage if the right is extinguished either say by conveyance of the said right by the mortgagor to the mortgagee by a voluntary act or by decree of a Court such as one of foreclosure or by a completed sale in execution then the right could no longer subsist. Subsequent provisions must be read in the light of this fundamental requirement. The last clause in this section provides that where a mortgagor owns only a share of the mortgaged property to be redeemed he cannot break up the mortgage and insist on redemption of his share only. He must, if he wants to redeem the property, redeem the entire mortgage. To this again there is an exception and that is where a part of the equity of redemption is acquired by the mortgagee he can redeem his share only. The exception in this clause is a consequence to the proviso to the first part of the section and recognises the principle that redemption of the mortgage can be only to the extent to which the equity of redemption is not extinguished. As has been frequently observed this rule has been enacted both for the benefit of the mortgagor and mortgagee in order to prevent multiplicity of suits. If redemption can be permitted in part each one of the sharers may institute separate suits against the mortgagee without making other sharers parties and there may even be conflicting decrees and confusion and chaos may result. Similarly, if the mortgagee was entitled to file separate suits against the co-sharers a similar result may follow. Where, however, the mortgagee acquires a part of the property the mortgage is broken up and the sharer is entitle to redeem his share only.

(8) Section 91 provides for right of redemption and enables redemption of the property by any person who has any interest in, or charge upon, the property mortgaged or in or upon the right to redeem the same, except the mortgagee of the interest sought to be redeemed. Under this section a co-mortgagor is entitled to redeem the mortgage and when read with the last clause of section 60 already referred to he must redeem the whole of the mortgage but if the exception in that clause applies than if the exception in that clause applies then of course he can redeem his share.

(9) Now the argument in the present case is that in as much as in the earlier suit the Bank did not make the plaintiff-Society a party, though the decree for sale was made against defendants Nos. 9 and 10 and subsequent sale of the property was effected it did not affect the rights of the society to redeem the whole property because it was interested in a part of the mortgage security, viz. 4 acres 34 gunthas. The first question, therefore, to be decided is what are the rights that are acquired by the Bank by its purchase of the entire property.

(10) The provisions of Order 34, rule 1 cannot be ignored. It requires that in a mortgage suit every one interested in the mortgage security must be made a party. Now this Court has held that is rule, is subject to the other provisions of the Code of Civil Procedure, with the result that merely because a necessary party is not added, the suit of the mortgagee cannot fail. It is on this principle that in Shah Saheb v. Sadashiv Supdu, : AIR1919Bom135 this Court held that a decree for sale can be passed only in respect of the right, title and interest of those co-sharers who are parties to the proceedings. This case was later followed by the Calcutta High Court in Kherodamoyi Dasi v. Habib Shah : AIR1925Cal152 . Indeed the effect of the decisions is that in all such cases where necessary party is not joined in such a suit the rights of those e who were not joined cannot be affected and such person is entitled to enforce such of his rights as are available to him. The fact remaining that the Bank has obtained a decree against defendants Nos. 9 and 10 and acquired their interest in the auction sale. It is admitted that the decree obtained in the earlier suit by the Bank is binding as between it on the one hand, defendants Nos. 9 and 10 on the other. In Nagubai Ammal v. B. Shama Rao, : [1956]1SCR451 , after referring to the passage from the judgment of Sir John Bimilly, Wood v. Surr, (1854) 19 Beav 551, Mr. Justice Venkatarama Ayyar said (para 26),

'These observations directly cover the point now in controversy, and they embody a principle adopted in the law of this country as to this effect of a sale in execution of a decree passed in a defectively constituted mortgage suit. Such a sale, it has been held, does not affect the rights of redemption of persons interested in the equity of redemption, who have not been impleaded as parties to the action as they should have been under Order 34, rule 1, Civil Procedure Code, but that it is valid and effective as against parties to the action'.

The result in the present case would be that after the plaintiff redeems the property, the next day the Bank as purchaser of the property in execution sale i.e., owner of equity of redemption would be entitled to file another suit for redemption against the plaintiff who would be surrogated tot he mortgagee's right. In such case the Court would be called upon to decide the contribution to be made by the two part owners of the property in respect of the debt and allow the Bank to redeem the entire property minus 4 acres and 34 gunthas. If the very purpose of O. 34, Rule 1 is to prevent multiplicity of suits, it is difficult to see why in this very suit the same result cannot be brought about.

(11) It is argued that the plaintiff-Society has a right under section 60 read with S. 91 to redeem the whole property and this right can be enforced notwithstanding the fact that there was a decree against defendants Nos. 9 and 10 and the consequential sale of the whole property. This contention overlooks the fact that so far as defendants Nos. 9 and 10 are concerned their equity of redemption, or right to redemption is completely extinguished by reason of the sale of the property in execution proceedings. As a result, the Society as purchaser of 4 acres and 34 gunthas becomes a co-owner of the mortgaged property along with the mortgagee. It is argued that this case does not come within the words of exception to the last clause in S. 60, because this is not a case where the mortgagee has acquired a share in the mortgaged property by a proceeding against the mortgagor in respect of a different cause of action, independent of the mortgage transaction, but has purchased the whole property of the mortgagors in execution sale in respect of the mortgage transaction itself. One fails to see on what principle this distinction can be made. It is well recognised and well settled that what is sold at the execution sale is right, title and interest of the judgment-debtor and there is no warranty of title. In this case without the knowledge of the alienation in favour of the Society of a portion of the property the defendant brought all the three properties to the sale. As the plaintiff was not a party, the decree was not binding on it and the defendants Nos. 9 and 10 had no right or interest in 4 acres and 34 gunthas sold to the Society. As a result of the sale, therefore the Bank got all the property minus 4 acres and 34 gunthas of the Society. In principle no distinction can be made between this case and a case where either by agreement with the mortgagor or by sale in execution of another decree the mortgagee acquires a part of the interest in the equity of redemption. Once this conclusion is reached then, as section 91 and section 60 must be read together, the plaintiff can redeem only its interest as right of redemption of defendants Nos. 9 and 10 is lost.

(12) There is another way of looking at the question. Assume that the plaintiff under section 91 has got a right of redeeming the whole property. The plaintiff in not being owner of the whole equity of redemption, owning only 4 acres and 34 gunthas, is liable to be redeemed under section 92 of Transfer of Property Act by the owner of the other part of the property. Even in Mizra Yadalli Beg v. Tukaram, 47 Ind App 207 : AIR 1921 PC 125, relied upon by Mr. Vaidya, the judicial Committee says:

'A transferee of part of mortgaged property is entitled to redeem the whole, unless the mortgage in whole or in part is extinguished or the transferee is estopped from denying that it is so; the right is subject to the safeguarding of an equal right to redeem possessed by any other person'.

As the Bank has become the owner of the rest of the property it would be entitled to redeem the same from the Society to the extent of its share.

(13) Such decision was reached in two cases: (1) Pawan Kumar v. Jagdeo, and (2) Maulabax v. Sardarmal, AIR 1952 Nag 341 (FB).

We may here notice the decision in Nawab Azimat Ali Khan v. Jowahir Sing, (1869) 13 Moo Ind. App. 404 (PC). The appellant before the Judicial Committee, original defendant was a mortgagee of sixteen different mouzahs. The estate was sold in execution of the decrees against the mortgagors. The plaintiffs purchased mouzah Hosseinpore, mouzah Jeetpore was purchased by Buhal Singh and Basti Ram. Mouzah Bookunpore was purchased by Hossein Ali Khan and two others and one-fourth of Mouzah Chundharee by Mussamat Imamate Begum. The residue of the estate was purchased by the appellant. In 1862, the plaintiffs brought a suit for redemption of mouzah Hosseinpore on payment of Rupees 4,737. 7a. saying that that amount was the rateable share of the mortgage dues payable by them. The suit was dismissed mainly on the ground that the purchasers of other three parcels of land should have been made parties and the plaintiffs should have offered to redeem their shares as well. Then the plaintiffs filed the new suit accordingly claiming to redeem not only their mortgage but also the other three parcels of the property. Decree was made in their favour which defendant challenged before the Judicial Committee. He complained that the plaintiffs were wrongly allowed to redeem the other parcels of the property. The Judicial Committee said:

'The Courts below however, seem to their Lordships to have mistaken the effect of the former decision of the Sudder Court. It is merely ruled that the plaintiffs were bound to offer to redeem the villages in question, it did not rule that they were entitled to do so, or to acquire the interest of the mortgagee in them against his will. It is unnecessary to determine in this suit, whether in the peculiar circumstances of this case, the former proposition is correct. Their Lordships are of opinion, that the latter cannot be supported. They think that appellant, if desirous of retaining possession of these villages as mortgagee, is entitled to do so against the plaintiffs, whose right in that case is limited to the redemption and recovery of their village of Hosseinpore, upon payment of so much of the sum deposited in Court as represents the portion of the mortgage debt chargeable on that village.'

In the circumstances similar to the present case, the Judicial Committee permitted to redeem only a part of the mortgaged property on this principle. It is said that th effect of this decision is nullified by the two subsequent decisions.

(14) Mr. Vaidya relied upon the decision in 47 Ind App. AIR 1921 P.C. 125 to which we have already referred to. The facts were that the Laxman Balakrishna mortgaged with possession to the appellant sixteen fields to five different villages by a document, on March 9, 1893. On October, 4, 1896, the mortgagor sold one of the fields as mortgaged. In 1809, the appellant mortgagee filed a suit in the District Court, East Becar to recover mortgagee amount with interest without making the alienee under the deed dated October 4, 1896, a party to the suit. In this suit a consent decree was made providing that the appellant should be the nine fields including the field alienated under the said deed dated October 4, 1896 be foreclosed. As the terms were not complied with the property stood foreclosed on April 14, 1901. Thereafter the alienee filed the suit for redemption of the entire property. The Judicial Committee affirmed the right of the plaintiff to redeem the whole mortgagor saying ;

'According to English Law the respondents would have been entitled to redeem the mortgagee in its entirely, subject only to the safeguarding of the equal title to redeem of any other person who had a right of redemption, ' appoint which has not arisen so far in the present case'. The respondents, being transferees of part of the security, by English Law, if it applied, would on the one had be entitled to redeem to entire mortgage on properties generally and correlatively could not compel the mortgagee to allow the tour redeem their part by itself. this would be so, as the result of principle unless something had happened which extinguished the mortgage in whole or in part.' Such as an exercised of a power of sale originally conferred on the mortgagee by his securing or such consent on the part of the 'transferors' as would stop them from ascertaining what normally would have been their right'. 'Nothing of this kind is aliened in the case before Lordships.'

(Underlining (here in) is ours'

The case was governed by English Law. As pointed but by Mr. Justice Hidayatulla in AIR 1947 Nag. 110, the did not specifically consider and decide whether foreclosure decree would not be a means of acquiring mortgaged property. A passing observation has been made by their Lordships in the last para i connection with the section 60 that 'if it had applied, it would have done in more than declare applicable what is just he had established in England'. The observation is good enough so far as it gives but cannot be read to decide anything in the construction of the relevant provisions of this group of sections which must be construed together with due regard to the binding nature of the decree between the mortgagor and the mortgagee. In this connection we cannot fail to notice a peculiar incident of a foreclosure decree in English law. in Halsbury's Laws of England ( 3rd edition, Vol. 27, para 757) we find :

'Neither the order for foreclosure insist which directs foreclosure in the event of non-payment at a prescribed date, nor the order for foreclosure absolute, is conclusive as regards the mortgagor's right to redeem. After the order for foreclose nist, whether followed by an order for foreclosure absolute or not, the mortgagor can apply for, and, in suitable circumstances and on certain conditions, obtain an order enlarging the time for redemption, and if, there has been foreclosure absolute, opening the foreclosure and giving a new right of redemption'.

This would not be so order of Civil Procedure Code. If a final decree for foreclosure is made, it is binding and cannot be reopened, except of course on the ground of fraud as any other decree. Sir Dinshaw Mulla seems to be of the opinion (Transfer of Property of Act 5th Edition page 444) that Nawab Aziz Azimat Alli's case (1851) 13 Moo Ind App. 404 (PC) is overruled by Mirza Yadalli Beg's case. 47 Ind App 217: AIR 1921 PC 125. In the present case we are not concerned with the question whether the owner of a parcel of mortgaged property is bound to redeem the whole of mortgaged property parcels of which are owned by other including the mortgagee. We, therefore, need express no opinion in that, though we doubt the correctness of the observation.

(15) Mr. Vaidya has relied upon the decision of the Privy Council in Mt. Sukhi v. Ghulam Safdar Kha, 48 Ind App 465 : AIR 1922 PC 11, where the mortgagee obtained a foreclosure decree against his mortgagor without making a puisne mortgagee a party. The latter than filed a suit for enforcing his mortgage by sale of the property. The right of the puisne mortgagee to have the property sold was approved and the condition that he should pay the amount due under his mortgage. So far there is no difficult. A second point arose in that case and under those circumstances, original owners of suit property and others had mortgaged the same to K by two deeds of January 3, 1874 and June 10, 1875, the husband of the plaintiff before the Judicial Committee. The mortgagee executed another mortgage on January 15, 1883 for suit property in favour of one G.S.K. filed a suit on his mortgage without impleading G.S. and in execution purchased the property. Subsequently K died leaving a will of his property in favour of his widow the plaintiff. That she made a suit of the property to her nephews Jag Ram and Net Ram and they agreed to pay her Rs. 1200 per year as maintenance, and as security for this, they hypothecated the properties including the suit property. G.S. filed suit against Jag Ram and Net Ram but did not implead the plaintiff. Nag Ram and Net Ram set up the original mortgage of K and the foreclosure decree was made conditional upon his saving them Rs. 2954/-. The plaintiff filed the suit for sale and the decree for sale was conditional upon her paying the dues of G.S. under his mortgage and also what G.S. paid in connection with mortgage to K. the plaintiff-challenged the second condition. Their Lordships approved of the general principle enunciated by the High Court which is :

'The plaintiff is a present mortgagee seeking to enforce his mortgage, the first mortgagee in his suit having failed to make her a party. It is the duty of the Court to give the plaintiff the opportunity of occupying the position which she would have occupied. If she had been a party to the former suit.'

Reliance is placed on this proposition for the contention that the plaintiff society would have been entitled to redeem the whole property if it ad been made a party in the former suit, and, now should be enabled to do so. The observation cannot be read out of its context. Their Lordships observed that as the widow was wrongfully deserved of the amount which was wrongfully deprived of the amount which was carried out by the Jag Ram and Net Ram which she was entitled in right of her mortgage could not be called upon to pay the same to G.S. This was what was restored to her. We think, the general principle must be applied having due regard to definite provisions of law. as we have stated, the Society even if it is allowed to redeem the whole property again return the rest of te property of the Back which has become owner of the same by purchase. This follows from the following observations of their Lordships (473):

'Now the original mortgagee having brought the estate at the sale in the suit, was owner of both the mortgagee and the equity of redemption merged in one, by the decree of the Courts'

(16) Mr. Vaidhya has adopted rather indefinite attitude. In one breach he says that the decree in favour of the mortgagee and he sale proceedings in the former suit where binding on the depending Nos. 3 and 10, and yet has they do not bind them the mortgagee gets nothing. He was not able to cite any authority for such a proposition. He said that would be the logical conclusion which must follow from the decision of the Privy council in 47 Ind App 207 = AIR 1921 PC 125 and 48 Ind App 455 = AIR 1921 PC 11. We have shown above that no such conclusion follows. The case of 48 Ind App 465 = AIR 1922 PC 11 decides to the contrary since it holds. K the mortgagee became owner of the property though he had not impleaded G,.S. in his suits. It is settled that a decision in a case is authority only for what it decided and not what may be thought to follow logically from that t decision 47 Ind App 207 = AIR 1921 PC 125 was decided in accordance with English Law.

(17) It is not necessary to refer in detail the three other decisions which were referred to by Mr.Vaidya as they have absolutely no application to the present case. One is Nagu Tukaram v.Gopal Ganesh. : AIR1953Bom405 . It was a case of a puisne mortgagee, who was not made a party to the suit of the first mortgagee for sale and it was held that he was not bound by the decree for sale, the next case is Pala Singh v. Attar Sing where the Court held relying upon the decision of the Privy Council that a co.mortgagor is entitled to redeem the shares of other co- mortgagors even if they did not seek to redeem the same, which is entirely a different matter. I the third case Prithi Nath singh v, Suraj Ahir, AIR 1953 SC 1941, there is an observation that if a mortgagor makes payment of all the moneys due under the mortgage the mortgage is extinguished. We are not concerned with the question of extinction of the extinction of the mortgage.

(18) We, therefore, hold that the plaintiff is entitled to redeem that portion of the property that it had purchased on payment of proportionate amount of mortgage dues, v.z. 4 acres and 34 gunthas, which it holds in its possession out of S No.93.

(19) We think it is desirable that we call for a finding from the Lower Court since the relevant issue has not been decided. The issue will be what is the rateable amount of the mortgage debt of defendant nt 1 Bank payable by the plaintiff as purchaser of 4 acres and 34 gunthas of the land? The Court will decide the issue in accordance with the principles ,laid down in Section 82 of the Transfer of Property Act and certify its findings to this Court within two months of the record and proceedings reaching it

(20) Order accordingly