HIGH COURT OF MADHYA PRADESH
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Dixit, J. -
(1.) THIS is an appeal by an unsuccessful Plaintiff in a suit for redemption. On 23 -8 -1941 one Narendradutta mortgaged with Kishorilal and his brother Ramsewak a piece of land situated in Dabra mandi for Rs. 50 agreeing to pay Rs. 2 per cent per month as interest. The mortgage deed contained a clause which provided that the mortgagees would be regarded as absolute owners of the property at the end of one year, should the mortgagor fail to redeem within that period, and that thereafter the mortgagees will be entitled to put up any construction they liked on the land. The mortgage debt was not paid within the stipulated period.
On 12 -10 -1942 the mortgagees gave a notice to Narendradutta intimating to him that if he failed to redeem the property within eight days, they would according, to the term of the mortgage construct a house on the land. Narendradutta did not send any reply to this notice. Subsequently on 18 -12 -1945 Narendradutta sold the equity of redemption to the Appellant Tularam by a registered deed for Rs. 1,000 leaving Rs. 100 with Tularam for the redemption of the property.
Alter the purchase Tularam gave a notice to the mortgagees to allow him to redeem the property. The mortgagees refused the demand. The Plaintiff Tularam then filed this suit to redeem the mortgage dated 23 -8 -1941. The plea of the Defendant -mortgagees was that the Plaintiff had no right to redeem inasmuch as the mortgagor Narendradutta having failed to redeem the property within one year of the date of the mortgage and the mortgagees having put up a construction on the land after the stipulated period of redemption, had no interest left in the land which he could transfer to the Plaintiff.
In other words the plea of the mortgagees was that by virtue of the clause about redemption in the mortgage deed, they had become absolute owners of the land. The mortgagees also pleaded in the alternative that the Plaintiff was not entitled to redeem without paying the costs of construction put by them on the land. The Courts below rejected the Plaintiff's claim for redemption holding that the mortgagees became the owners, of the land when Narendradutta failed to redeem the land within one year and when the mortgagees thereafter put a construction on the land.
(2.) IN this appeal Mr. Ravidutta Sharma contended that the term in the mortgage deed that on the mortgagor's failure to redeem the property within one year, the mortgagees would become the owners of the land, was a clog on redemption and absolutely void and that, therefore, Narendradutta's right to redeem the property could not be extinguished merely because of his default to redeem within the agreed period; and that, therefore, Tularam the purchaser of the equity of redemption was entided to redeem the mortgage which was subsisting.
This contention is in my opinion, sound. It seems to me that the lower Courts have not been able to understand the correct legal principles applicable in the case. It is well established that condition converting a mortgage into a sale on the mortgagor's failure to redeem the property within a stated period of redemption is invalid as a clog on the equity, of redemption. But such a condition does not prevent the parties to a mortgage from entering into a contract subsequent to the mortgage for the sale of the mortgage property to the mortgagee. This principle was laid down in the case of - 'Lisle v. Reeve', (1902) 1 Ch 53 (A), where Vaughan Williams L.J. observed:
I did not understand the Defendant's Counsel to dispute that it is competent for a mortgagee to enter into an agreement to purchase from the mortgagor his equity of redemption. The only objection to such an agreement is, that it must not be part and parcel of the original loan or mortgage bargain.
The mortgagee cannot at the moment when he is lending his money and taking his security, enter into an agreement, the effect of which would be that the mortgagor should have no equity of redemption. But there is nothing to prevent that being done by an agreement which in substance and in fact is subsequent and independent of the original bargain.
This decision was affirmed by the House of Lords in 'Reeve v. Lisle', 1902 A.C. 461 (B). The same principle has been enunciated in 'Shankardin v. Gokul Prasad', 34 All 620 (C), where the Privy Council said that there was nothing in law to prevent the parties to a mortgage from coming to a subsequent arrangement qualifying the right of redemption. The real question, therefore, for determination is whether by reason of any agreement, in substance and in fact subsequent and independent of the mortgage dated 23 -8 -1941 the mortgagees Kishorilal and Ramsewak became the owners of the Land.
If there is no such subsequent and independent transaction of sale, then the mortgagee's claim that they are the owners of the mortgaged property must fail. They cannot merely by virtue of the failure of the mortgagor to redeem the property within one year become the owners of the property. In this case the mortgagees did not plead and rely on any subsequent and separate transaction of sale 'dehors' the mortgage. In the written statement the mortgagees said that as according to the clause in the mortgage Narendradutta did not redeem the property within one year and as after that period they had put up a construction of the land, they had become the owners of the land.
In the notice which the mortgagees gave to Narendradutta on 12 -10 -1942 also the mortgagees stated that if Narendradutta failed to redeem the property within eight days, they would consider themselves as owners of the property and would begin putting up a construction on the land. The mortgagees did not enter in the witness -box. They sought to prove by the evidence of Shreeram, Onkarlal and Bhawani Prasad that when the mortgagees asked Narendradutta to redeem the property, Narendradutta replied in their presence that he had no money and that they, that is the mortgagees, should act according to the clause in the mortgage deed.
The evidence of these witnesses is only about Narendradutta's understanding of the mortgagees having become the owners of the property on account of his failure to redeem it within one year, Narendradutta's conception of his rights as a mortgagor was no doubt wrong. But this understanding cannot operate as an estoppel or prevent the Plaintiff from redeeming the property, when there is no evidence whatsoever of a subsequent and independent contract of the sale of the land by Narendradutta to the mortgagees.
Mr. Athawle learned Counsel for the Respondent laid some stress on the fact that, as has been found by the lower Courts Narendradutta handed over the title deeds of die land to the mortgagees when he failed to redeem the property and diat thereafter he also allowed the mortgagees to build on the land. It, was said that this act and omission on the part of Narendradutta, indicated that subsequent to the mortgage he sold the property to the mortgagees.
I am unable to accept this suggestion. The handing over of the title deeds and the silence of Narendradutta when the mortgagees began constructions on thr land are referable equally both to the mortgagees having become the owners of the land by virtue of the clause in the mortgage deed itself as also to their becoming owners under a subsequent and independent transaction of sale. These circumstances do not by themselves prove the important fact that subsequent to the mortgage the parties entered into a contract for the sale of the mortgaged property to the mortgagees.
The decisions of the Bombay High Court in - 'Abdul Rahim v. Madhavrao Apaji', 14 Bom 78 (D) and - 'Kanhyalal v. Narhar', 27 Bom 297 (E), fully support the view I have taken. In my judgment there being no subsequent and independent transaction of sale in favour of the mortgagees, their claim that they have become the owners of the land 'pro prio vigore' of the aforesaid term in the mortgage deed must fail and the Plaintiff is entitled to redeem the property.
(3.) MR . Ravidutta Sharma for the Appellant conceded before me the liability of the Plaintiff to pay the value of the constructions put by the mortgagees on the land in redeeming the property. On the question of the value of these constructions the evidence on record and the finding of the lower Courts are not clear and satisfactory. The evidence is mostly to the effect that the mortgagees purchased material worth Rs. 5,000 for the construction. What was required was evidence about the value of the constructions actually put up and standing on die land on the date of the institution of the suit.
The case must, therefore, go back to the District Judge for a proper finding on the value of these constructions and the mortgage amount due under the deed and for passing a proper redemption decree according to those findings. The parties are at liberty to adduce evidence on die value of the constructions.;
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