Decided on April 15,1946


Referred Judgements :-



Lokur, J. - (1.)THIS appeal arises out of a suit filed by the plaintiff to recover Rs. 3,000 on a mortgage bond of Rs. 1,500 passed to him by defendant No.1 on August 16, 1930. By that mortgage bond defendant No.1 had mortgaged survey No.59 alone to the plaintiff, but prior to this mortgage defendant No.1 had mortgaged survey Nos. 59, 71 and 171 to defendant No.2 for Its. 4,000 on April 8,1930. In execution of a money decree obtained by a stranger all the three lands were sold subject to defendant No.2's mortgage and were purchased by defendant No.2 for Rs. 700 on May 12, 1933. Defendant No.2 did not get immediate possession of the three lands, but after some proceedings he got possession of them on May 12, 1938. The plaintiff brought this suit on June 26, 1941.
(2.)THE trial Court found that Rs. 3,000 were due to the plaintiff by defendant No.1 under the mortgage, but he had also a right to redeem defendant No.2's prior mortgage; and the trial Court further found that on that mortgage the total amount due on May 12, 1933, when defendant No.2 purchased the mortgaged lands came to Rs. 6,480. THE assessment of the three lands is Rs. 83-10-0 and the assessment of survey No.59 alone is Rs. 34-8-0. Hence proportionately the liability under the mortgage of that land was found to be Rs. 2,272-8-0. Defendant No.2 was not allowed any future interest from the date of the auction purchase as he was in possession. THE trial Court, therefore, passed a decree declaring Rs. 3,000 to be due on the' plaintiff's mortgage at the date of suit. Defendant No.1 was ordered to pay to the plaintiff that amount with future interest and costs. THE decretal amount was made payable by annual instalments of Rs. 500. In default, the plaintiff was allowed to recover the amount by the sale of survey No.59 subject to defendant No.2's mortgage charge of Rs. 2,272-8-0. A decree under Section 15b of the Dekkhan Agriculturists' Relief Act was directed to be drawn up accordingly. Defendant No.2 appealed to the District Court complaining that he should have been awarded future interest from the date of his auction purchase and the property should have been ordered to be sold subject not only to Rs. 2,272-8-0 but also to such future interest. THE learned Assistant Judge who heard the appeal relied upon the ruling in Syed Ibrahim Sahib v. Arumugathayee (1912) I. L. R. 38 Mad. 18 and held that the prior mortgagee was not entitled to claim any interest on his mortgage from the date he took possession of the mortgaged property as its auction purchaser. He, therefore, confirmed the deciee of the trial Court and dismissed the appeal.
It is not disputed that although defendant No.2 purchased the mortgaged property at the auction sale his rights under his mortgage remained alive as against the subsequent mortgagee. The relevant portion of Section 101 of the Transfer of perty Act provides: Any mortgagee of immoveable property may purchase the rights in the property of the mortgagor without thereby causing the mortgage or charge to be merged as between himself and any subsequent mortgagee of the same property; and no such subsequent mortgagee shall be entitled to foreclose or sell such property without redeeming the prior mortgage. The lower Courts were, therefore, right in ordering the sale of the mortgaged property for the recovery of the amount due to the subsequent mortgagee subject to the amount due to the prior mortgagee. Although the mortgage of defendant No.2 may be extinguished as between himself and the mortgagor, defendant No.1, yet so far as the subsequent mortgagee is concerned he can claim from him the amount due under his mortgage and allow the subsequent mortgagee to sell the property for his dues subject to the amount due on his prior mortgage. In Syed Ibrahim Sahib v. Arumugathayee, relied upon by the lower appellate Court, the mortgagor, after the creation of a puisne mortgage, sold the mortgaged property to the prior mortgagee with possession. It was held that the prior mortgage was kept alive as against the puisne encumbrancer, but the prior mortgagee was not entitled to claim interest on her mortgage amount after the date of her purchase against the puisne mortgagee. In that case the prior mortgage was with possession and the effect of her possession after her purchase of the mortgaged property was thus described (p. 33): What was enjoyed by her [the prior mortgagee] till then as compensation for the amount advanced on the usufructuary mortgage, she agreed subsequently to enjoy in consideration of the whole price fixed on Exhibit C. She cannot therefore claim any further compensation from that date for any portion of the price.

Mr. Pradhan for the appellant argues that defendant No.2 had to pay Rs. 700 for purchasing the three lands at the auction and he obtained possession of the lands as auction purchaser and enjoyed the profits because he paid Rs. 700 at the auction sale. But it must be remembered that he would not have got possession of the three lands merely by paying Rs. 700, since the price of those lands was the amount of the mortgage plus Rs. 700. In fact the lands were sold subject to the mortgage charge of Rs. 5,345-0-0 thus showing that they were valued at the auction at Rs. 6,045. He actually paid Rs. 700 only and began to enjoy the income of the lands valued at Rs. 6,045. The real test to determine the price of redemption of the mortgage would be what the mortgagor would have had to pay if he wanted to redeem the mortgage. It is obvious that when taking accounts he would be given credit for the profits of the mortgaged lands which were enjoyed by the mortgagee. This point of view was clearly expressed in Muthammal v. Razu Pillai (1917) I. L. R. 41 Mad. 513, where the earlier ruling in Syed Ibrahim Sahib v. Arumugathayee was considered and distinguished. In that case it was held that if the prior mortgagee purchased the mortgaged property in execution of a decree and obtained possession of the same, the rents and profits received by him could not be set off as equivalent to the interest due for the period of possession but must be accounted for and deducted from the amount payable by the puisne mortgagee. I respectfully agree with that view. In determining the amount due under the prior mortgage the mortgagor would be entitled to claim an account of the profits actually realised and the amount would be set off against the amount due under the mortgage. In Syed Ibrahim Sahib v. Arumugathayee it was held that interest altogether ceased from the date when the prior mortgagee took possession of the mortgaged property and that view was adopted by the Courts below. But there is no reason to suppose that the profits realised were sufficient to meet the interest due on the mortgage amount. If it exceeded the interest, the agriculturist mortgagor would be entitled to have it appropriated towards the principal. Defendant No.2 is, therefore, liable to render an account of the income realised by him from the mortgaged property, but he would be entitled to interest on his mortgage amount.

(3.)ONE other point urged on behalf of defendant No.2 is that the lower Court erred in holding that the interest on his mortgage amount ceased from the date of his auction purchase although he got actual possession of the lands five years thereafter. The learned Assistant Judge has remarked that defendant No.2 would be entitled to recover mesne profits from the mortgagor from the date of the auction purchase. But there is no question of the interest ceasing altogether from any particular date. The interest does run so long as the mortgage is not redeemed. But in calculating the interest credit has to be given to the profits actually realised by the prior mortgagee from the mortgaged property. If the test of the amount due from the subsequent mortgagee is what the mortgagor himself would have had to pay for redeeming the mortgage, then it follows that the mortgagor being in possession five years after the auction sale he could not ask for accounts of profits from the prior mortgagee until he delivered possession of the mortgaged property to him. Hence the proper course would be to require the prior mortgagee to render an account of the profits actually realised by him and to require him to appropriate that amount towards the interest due.
Defendant No.2 paid Its. 700 for his auction purchase and his encumbrance was then shown as Rs. 5,845, so that he really purchased the three mortgaged lands for Its. 6,045. Out of that he actually paid Rs. 700 and began to enjoy the profits in lieu of that amount as well as his mortgage amount. He, therefore, has to account for only 58/60th of the profits realised from survey No, 59 and that amount will be deducted from the amount due. The trial Court has calculated interest only up to the date of sale, viz. May 12, 1933, and future interest from that date will also be calculated and the lands will be sold subject to the amount thus found due minus 58/60th of the profits actually realised from that land by defendant No.2.


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