http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 8  

CASE NO.: Appeal (civil)  319 of 2002

PETITIONER: M.R. Satwaji Rao (D) by L.Rs.

RESPONDENT: B. Shama Rao (Dead) by L.Rs. & Ors

DATE OF JUDGMENT: 09/04/2008

BENCH: Dr. Arijit Pasayat & P. Sathasivam

JUDGMENT: JUDGMENT

REPORTABLE

CIVIL APPEAL NO. 319 OF 2002

P. Sathasivam, J.

1)      This appeal is directed against the final judgment dated  11.12.1998 of the High Court of Karnataka at Bangalore in  R.F. A. No. 465 of 1990 by which the High Court allowed the  first appeal filed by the respondents herein. 2)      The facts, in a nutshell, are as under: The legal representatives of defendant No.2 are the appellants  in this appeal.  On 19.2.1948, the plaintiffs’ predecessor  executed a usufructory mortgage in favour of the appellants  herein for a sum of Rs.10,000/-.  The terms of the said  mortgage deed were that the mortgagee shall remain in  possession of the mortgaged property without paying rent and  that the mortgage amount of Rs.10,000/- shall carry no  interest.  The period of redemption was five years from the date  of mortgage.  However, the mortgagers continued in possession  of the mortgaged property as tenants of the mortgagee on a  monthly rent of Rs.97.50.  As the mortgagors failed to pay the  rent, on 19.5.1952, the mortgagee filed suit being O.S. No.  120/51-52 on the file of the Ist Munsif, Bangalore for arrears  of rent.  The said suit was decreed.  In pursuance of the said  decree, the mortgagee (2nd defendant) filed Execution Petition  No. 1002/51-52 and the property was put on auction sale by  the executing Court.  Mortgagee being the highest bidder  purchased the schedule property in court auction.  Sale was  confirmed.  The respondents/mortgagors neither objected for  the sale nor confirmed the sale or taken any steps to set aside  the sale over three decades.  On 18.2.1983, the  plaintiffs/respondents, after nearly three decades, filed a suit  being O.S. No. 632 of 1983 on the file of the III Addl. City Civil  Judge, Bangalore for a decree of redemption of the mortgage of  the suit schedule property sold in public auction as long back  as on 11.9.1952.  The Civil Judge, after considering both oral  and documentary evidence, dismissed the suit with costs on  31.7.1990.  Aggrieved by the said order, the plaintiffs filed  R.F.A. No. 465 of 1990 before the High Court.  The High Court  allowed the appeal decreeing the suit for redemption.  Against  the impugned judgment of the High Court, the defendants filed  the present appeal by way of special leave. 3)      Heard Mr. S.B. Sanyal, learned senior counsel appearing  for the appellants, Mr. P. Vishwanath Shetty, learned senior  counsel for the contesting respondent Nos. 1(i) to (vii) and 7  and Mr. R.P. Wadhwani, learned counsel appearing for

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 8  

respondent Nos. 2,3,5,6,8 & 9.  4)      Mr. Sanyal, learned senior counsel for the appellants  mainly contended that the money decree (O.S.No 120/51-52)  obtained is an independent one and not connected with the  mortgage claim and in execution of the money decree the  property was sold on 11.09.1952, the relationship of  mortgagor and mortgagee is not subsisting, in such  circumstances, Order XXXIV Rule 14 CPC is not applicable  and the trial Court rightly dismissed the suit, however, the  High Court committed an error in granting preliminary decree  for redemption as if the original mortgage subsists.  According  to him, the application of Order XXXIV Rule 14 CPC is wholly  illegal and setting aside the sale of 1951-52 is inequitable  especially in view of the fact that there was no objection from  the respondents for sale or confirmation of the sale and of the  fact that they have not taken any steps to set aside the sale for  over three decades.  On the other hand, Mr. Vishwanath  Shetty, learned senior counsel for the contesting respondents  submitted that O.S. No 120/51-52 brought by the appellants  was very much for seeking satisfaction of the claims patently  arising under the mortgage of the suit schedule property and  the same not being a suit for sale instituted in enforcement of  the mortgage in question clearly comes under the pale of the  bar under Order XXXIV Rule 14 CPC. He further submitted  that their purchase in the circumstances amounts to a mere  trust and they cannot be allowed to exploit the adversity of the  appellants.  He further pointed out that the property in  question is worth of Rs. 100 lacs and for non-payment of rent  of just less than Rs.1,200/-, the sale took place and was  purchased by the mortgagee.  Finally according to him, even  on equity, the appellants are not entitled to any relief.  5)      Before adverting to necessary provisions, it is useful to  refer certain factual details.  It is seen that the deceased  second defendant had taken the suit property under  possessary mortgage dated 19.02.1948 on payment of  Rs.10,000/- for a period of five years from the plaintiffs.   However, the plaintiffs/mortgagors continued in possession as  tenants on monthly rent of Rs.97.50.  As the plaintiffs/  mortgagors failed to pay rents, O.S. No.120/51-52 was filed  for recovery of Rs.1,225/- towards arrears of rent.  The suit  was decreed and the property was put in auction in execution  No. 1002/51-52 and the mortgagee/second defendant  purchased the schedule property in court auction on  11.09.1952.  The sale was confirmed under Order XXI Rule 92  CPC.  The second defendant became the absolute owner of the  schedule property.  It is the claim of the mortgagee that the  sale held on 11.09.1952 was the sale of the right of plaintiffs  in the mortgaged property in question which came to be  purchased by him/second defendant, the said sale having  become final, there was no right of redemption subsisting on  the date of confirmation of sale as mortgage came to an end.   In this way, it was contended that the suit which was filed for  redemption of the schedule property is mis-conceived and not  maintainable in law.  It was also claimed that the property  once mortgaged was sold in court auction and consequently  the property never subsists as a mortgaged property.  It was  also argued that the auction sale is not void, but voidable  unless the mortgagor avoids such a sale by taking recourse to  legal proceedings in the absence of which he will not be  entitled to exercise his right of redemption as there is no such  right exist.  It was also pointed out that though it was open to  the plaintiffs to take such steps as was necessary to prevent  the sale being held or to institute such proceeding as was  necessary to get the sale set aside, the plaintiffs failed to avail  the remedy available to them in law within the time available

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 8  

under the Limitation Act and thus allowed the sale to become  final.  Therefore, the plaintiffs waived their rights.  Though the  trial Court dismissed the suit and rejected the claim of  redemption of the mortgaged property, the appellate  Court/High Court on appreciation of oral and documentary  evidence and on the basis of relevant provisions, namely, Civil  Procedure Code, Transfer of Property Act and Indian Trusts  Act granted preliminary decree for redemption which is now  challenged in this appeal.  6)      Chapter IV of the Transfer of Property Act, 1882 refers  various kinds of mortgage of immoveable property.  Section 58  defines that mortgage is the transfer of an interest in specific  immoveable property for the purpose of securing the payment  of money advanced or to be advanced by way of loan, an  existing or future debt, or the performance of an engagement  which may give rise to a pecuniary liability.  The transferor is  called a mortgagor, the transferee a mortgagee; the principal  money and interest of which payment is secured for the time  being are called the mortgage-money, and the instrument by  which the transfer is effected is called a mortgage-deed.  In the  case on hand, it is not in dispute the mortgage in question is a  usufructuary mortgage which is defined in sub-section (d) of  Section 58 as under: "(d) Usufructuary mortgage.- Where the mortgagor delivers  possession or expressly or by implication binds himself to  deliver possession of the mortgaged property to the  mortgagee, and authorizes him to retain such possession  until payment of the mortgage-money, and to receive the  rents and profits accruing from the property or any part of  such rents and profits and to appropriate the same in lieu of  interest, or in payment of the mortgage-money, or partly in  lieu of interest  or partly in payment of the mortgage-money,  the transaction is called an usufructuary mortgage and the  mortgagee an usufructuary mortgagee." Section 60 refers to ’right of mortgagor to redeem’ which reads  thus: "Section 60 - Right of mortgagor to redeem.- At any time  after the principal money has become due, the mortgagor  has a right, on payment or tender, at a proper time and  place, of the mortgage-money, to require the mortgagee (a) to  deliver to the mortgagor the mortgage-deed and all  documents relating to the mortgaged property which are in  the possession or power of the mortgagee, (b) where the  mortgagee is in possession of the mortgaged property, to  deliver possession thereof to the mortgagor, and (c) at the  cost of the mortgagor either to re-transfer the mortgaged  property to him or to such third person as he may direct, or  to execute and (where the mortgage has been effected by a  registered instrument) to have registered an acknowledgment  in writing that any right in derogation of his interest  transferred to the mortgagee has been extinguished :  Provided that the right conferred by this section has  not been extinguished by act of the parties or by decree of a  Court.  The right conferred by this section is called a right to  redeem and a suit to enforce it is called a suit for  redemption.  Nothing in this section shall be deemed to render  invalid any provision to the effect that, if the time fixed for  payment of the principal money has been allowed to pass or  no such time has been fixed, the mortgagee shall be entitled  to reasonable notice before payment or tender of such  money." Order XXXIV CPC speaks about suits relating to mortgages of  immoveable property.  Among the other provisions, we are

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 8  

concerned about Order XXXIV Rule 14 CPC which reads as  under:- "14. Suit for sale necessary for bringing mortgaged  property to sale.- (1) Where a mortgagee has obtained a  decree for the payment of money in satisfaction of a claim  arising under the mortgage, he shall not be entitled to bring  the mortgaged property to sale otherwise than by instituting  a suit for sale in enforcement of the mortgage, and he may  institute such suit notwithstanding anything contained in   Order II, Rule 2." It is useful to refer Section 90 of the Indian Trusts Act, 1882  which reads as under:- "Section 90 - Advantage gained by qualified owner.-  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 all 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. Illustrations (a) A, the tenant for life of leasehold properly, renews the  lease in his own name and for his own benefit. A holds the  renewed lease for the benefit of all those interested in the old  lease. (b) A village belongs to a Hindu family. A, one of its  members, pays Nazrana to Government and thereby  procures his name to be entered as the inamdar of the  village. A holds the village for the benefit of himself and the  other members. (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 property incurred as mortgagee, B holds the  land for the benefit of A.   A perusal of the various clauses in the mortgage deed dated  19.02.1948, second mortgage dated 12.12.1948, pleadings in  O.S. No. 120/51-52 filed for arrears of rent which was decreed  on 19.05.1952, order passed in E.P.No. 1002/51-52 dated  11.09.1952 as well as pleadings in O.S. No.632/1983 on the  file of third Additional City Civil Judge, Bangalore filed for  redemption of mortgage and the reasoning of the High Court in  RFA No. 465/1990 dated 11.12.1998 which is impugned in  this appeal clearly support the stand taken by the contesting  respondents/plaintiffs.  Though learned senior counsel for the  appellants contended that the claim and the decree in  O.S.No.120/51-52 has nothing to do with the mortgage dated  19.02.1948 or 12.12.1948, a perusal of all the details referred  to above leads to an irresistible conclusion that the decree in  favour of the appellant mortgagee in O.S. No. 120/51-52 was  not an independent money decree against respondents but  merely for satisfaction of the rents accrued on the mortgaged  property, leased back to the respondents on 19.02.1948 itself  up to 12.12.1948 and thereafter which was secured by a  second mortgage deed dated 12.12.1948 executed by the  respondents in favour of the appellants.  We have already  referred to Rule 14 of Order XXXIV CPC which prohibits the  mortgagee to bring the mortgaged property to sell otherwise

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 8  

than by instituting a suit for sale in enforcement of the  mortgage.  Admittedly, the said suit by the mortgagee was not  in terms of Rule 14 of Order XXXIV.  Therefore, bringing the  mortgaged property for sale by the appellants in execution of  the decree passed in O.S. No. 120/51-52 and purchasing the  same by the appellants in public auction is clearly barred  under Order XXXIV Rule 14 CPC.  It is useful to point out that  D.W.1 has specifically stated in her examination that though  the suit schedule property was mortgaged by the respondents  with the appellants by way of possessory mortgage deed dated  19.02.1948, the respondents never parted with the possession  thereafter, as the appellants chose simultaneously on  19.02.1948 to let the respondents continue in possession as  tenants on a monthly rental of Rs.97.50.  The High Court has  also referred to the fact that on 12.12.1948 a second mortgage  deed for Rs.3,000/- was executed in favour of the appellants  by the respondents towards arrears of rent for the period from  19.02.1948 to 12.12.1948. In those circumstances, we agree  with the conclusion of the High Court that in O.S. No. 120/51- 52 brought by the appellant was very much for seeking  satisfaction of claims arising under the suit schedule property  and the same not being on a suit for sale instituted in  enforcement of the mortgage in question, the same is barred  under Order XXXIV Rule 14 CPC.  Further, we are satisfied  that all the relevant materials have been specifically pleaded in  the plaint in O.S. No. 632 of 1983 on the file of third  Additional City Civil Judge, Bangalore.  7)      We have already referred to Section 90 of the Indian  Trusts Act.  Illustration (c) of Section 90 is applicable to the  case on hand.  The purchase by the mortgagee in the  circumstances narrated above amounts to a mere trust and  either himself or his legal representatives cannot be allowed to  exploit the adversity of the appellants.   8)      In view of the factual scenario, though learned senior  counsel for the appellants relied on decisions of various High  Courts, we are of the view that there is no need to refer the  same.  9)      In Mritunjoy Pani and Another vs. Narmanda Bala  Sasmal and Another, [1962] 1 SCR 290, the legal position as  to right of redemption in a usufructuary mortgage and Section  90 of the Indian Trusts Act have been clearly explained.  The  following discussion and conclusion are relevant: "The following three conditions shall be satisfied before s. 90  of the Indian Trusts Act can be applied to a case : (1) the  mortgagee shall avail himself of his position as mortgagee;  (2) he shall gain an advantage; and (3) the gaining should be  in derogation of the right of the other persons interested in  the property. The section, read with illustration (c), clearly  lays down that where an obligation is cast on the mortgagee  and in breach of the said obligation he purchases the  property for himself, he stands in a fiduciary relationship in  respect of the property so purchased for the benefit of the  owner of the property. This is only another illustration of the  well settled principle that a trustee ought not to be permitted  to make a profit out of the trust. The same principle is  comprised in the latin maxim commodum ex injuria sua nemo  habere debet, that is, convenience cannot accrue to a party  from his own wrong. To put it in other words, no one can be  allowed to benefit from his own wrongful act. This Court had  occasion to deal with a similar problem in Sidhakamal  Nayan v. Bira Naik A.I.R. 1954 S.C. 336. There, as here, a  mortgagee in possession of a tenant’s interest purchased the  said interest in execution of a decree for arrears of rent  obtained by the landlord. It was contended there, as it is  contended here, that the defendant, being a mortgagee in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 8  

possession, was bound to pay the rent and so cannot take  advantage of his own default and deprive the mortgagors of  their interest. Bose, J., speaking for the Court, observed at  p. 337 thus:  "The position, in our opinion, is very clear and in the  absence of any special statutory provision to the  contrary is governed by s. 90, Trusts Act. The  defendant is a mortgagee and, apart from special  statutes, the only way in which a mortgage can be  terminated as between the parties to it is by the act of  the parties themselves, by merger or by an order of the  Court. The maxim "once a mortgage always a  mortgage" applies. Therefore, when the defendant  entered upon possession he was there as a mortgagee  and being a mortgagee the plaintiffs have a right to  redeem unless there is either a contract between the  parties or a merger or a special statute to debar them."  These observations must have been made on the assumption  that it was the duty of the mortgagee to pay the rent and  that he made a default in doing so and brought about the  auction sale of the holding which ended in the purchase by  him. The reference to s. 90 of the Indian Trusts Act supports  this assumption.  Xxxx xxx xxxx The legal position may be stated thus: (1) The governing  principle is "once a mortgage always a mortgage" till the  mortgage is terminated by the act of the parties themselves,  by merger or by order of the court. (2) Where a mortgagee  purchases the equity of redemption in execution of his  mortgage decree with the leave of court or in execution of a  mortgage or money decree obtained by a third party, the  equity of redemption may be extinguished; and, in that  event, the mortgagor cannot sue for redemption without  getting the sale set aside. (3) Where a mortgagee purchases  the mortgaged property by reason of a default committed by  him the mortgage is not extinguished and the relationship of  mortgagor and mortgagee continues to subsist even  thereafter, for his purchase of the equity of redemption is  only in trust for the mortgagor.

       Xxxx xxxx xxx \005\005\005 The said findings clearly attract the provisions of s. 90  of the Indian Trusts Act. In view of the aforesaid principles,  the right to redeem the mortgage is not extinguished and in  the eye of law the purchase in the rent sale must be deemed  to have been made in trust for the mortgagor. In the  premises, the High Court was right in holding that the suit  for redemption was maintainable."

10)     In Jayasingh Dnyanu Mhoprekar and Another vs.  Krishna Babaji Patil and Another, (1985) 4 SCC 162, again  considering similar claim with reference to Section 83 of the  Transfer of Property Act and Section 90 of the Indian Trusts  Act, this Court held:    "6. The only question which arises for decision in this case  is whether by reason of the grant made in favour of the  defendants the right to redeem the mortgage can be treated  as having become extinguished. It is well settled that the  right of redemption under a mortgage deed can come to an  end only in a manner known to law. Such extinguishment of  right can take place by a contract between the parties, by a  merger or by a statutory provision which debars the  mortgagor from redeeming the mortgage. A mortgagee who  has entered into possession of the mortgaged property under  a mortgage will have to give up possession of the property

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 8  

when the suit for redemption is filed unless he is able to  show that the right of redemption has come to an end or that  the suit is liable to be dismissed on some other valid ground.  This flows from the legal principle which is applicable to all  mortgages, namely "Once a mortgage, always a mortgage".....

9. An analysis of Section 90 of the Indian Trusts Act, 1882  set out above shows that if a mortgagee by availing himself of  his position as a mortgagee gains an advantage which would  be in derogation of the right of a mortgagor, he has to hold  the advantage so derived by him for the benefit of the  mortgagor. We are of the view that all the conditions  mentioned in Section 90 of the Indian Trusts Act, 1882 are  satisfied in this case. The mortgagees i.e. Dnyanu, the father  of Defendant 1 and Ananda the second defendant could each  get one-fourth share in the total extent of land measuring 22  Acres and 13 Gunthas only by availing themselves of their  position as mortgagees. The grant made in their favour is an  advantage traceable to the possession of the land which they  obtained under the mortgage and that the said grant is  certainly in derogation of the right of the mortgagors who  were the permanent Mirashi tenants entitled to the grant  under the Government Orders referred to above. The  defendants could not have asserted their right to the grant of  the land when the plaintiffs had deposited the requisite  occupancy price well in time. It is seen that the mortgagees  obtained the grant in their favour by making an incorrect  representation to the Government that they were permanent  Mirashi tenants although they were only mortgagees. Section  90 of the Indian Trusts Act, 1882 clearly casts an obligation  on a mortgagee to hold the rights acquired by him in the  mortgaged property for the benefit of the mortgagor in such  circumstances as the mortgagee is virtually in a fiduciary  position in respect of the rights so acquired and he cannot  be allowed to make a profit out of the transaction\005.." 11)     In Namdev Shripati Nale vs. Bapu Ganapati Jagtap  and Another, (1997) 5 SCC 185 in a similar situation this  Court held thus: "6. \005 \005 We are of the view that in the totality of the facts  and circumstances, the provisions of Section 90 of the  Indian Trusts Act are attracted. The first respondent- mortgagee gained an advantage by availing himself of his  position as a possessory mortgagee and obtained the  regrant. This he did by committing a wrong. He committed a  default in not paying the occupancy price within the time  limited by law for and on behalf of the mortgagor. The  regrant was obtained in his name by posing himself as a  tenant, which was possible only because he was in  possession of the land (as a possessory mortgagee). The  advantage so gained by him in derogation of the right of the  mortgagor should attract the penal consequences of Section  90 of the Indian Trusts Act. We hold that the default  committed by a possessory mortgagee, in the performance of  a statutory obligation or a contractual obligation, which  entails a sale or forfeiture of right in the property to the  mortgagor, will attract the provisions of Section 90 of the  Indian Trusts Act. In such cases any benefit obtained by the  qualified owner, the mortgagee, will enure to or for the  benefit of the mortgagor. The right to redeem will subsist  notwithstanding any sale or forfeiture of the right of the  mortgagor. We are of the view that the law on this point has  been laid down with admirable clarity by this Court in  Mritunjoy Pani v. Narmanda Bala Sasmal (1962) 1 SCR 290  and by K.K. Mathew, J. (as his Lordship then was) in Nabia  Yathu Ummal v. Mohd. Mytheen. [1963 KLJ 1177].  The said

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 8  

decisions have our respectful concurrence.

12)     Though Mr. Sanyal, learned senior counsel heavily relied  on a decision of three-Judge Bench in Sachidanand Prasad  vs. Babu Sheo Prasad Singh, [1966] 1 SCR 158, on going  through the factual scenario, we are satisfied that the same is  not helpful to the stand taken by the appellants.  13)     Though the mortgagee purchased the mortgaged property  pursuant to the decree in O.S. No. 120/51-52, as explained  and interpreted the provisions of Order XXXIV Rule 14 CPC  and Section 90 of the Indian Trusts Act, in the absence of  recourse to Rule 14 of Order XXXIV, we hold that the  relationship of mortgagor and mortgagee continues to subsist  even thereafter, and his purchase is only in trust for the  mortgagor.  In view of the same, the right to redeem the  mortgage is not extinguished and in the eye of law the  purchase of the mortgaged property in pursuance of the  decree for rent arrears must be deemed to have been made in  trust for the mortgagor.  In such circumstances, the High  Court was right in granting preliminary decree for redemption.   Insofar as the period of limitation is concerned, article 61 of  the Limitation Act, 1963 applies and for a mortgagor to redeem  or recover possession of immoveable property mortgaged; the  period of limitation provided is 30 years when the right to  redeem or to recover possession accrues.  In view of the same,  since the mortgagee purchased the mortgaged property in  court auction on 11.09.1952 and the suit for redemption of  mortgaged property was filed within the time prescribed, the  High Court cannot be faulted for granting preliminary decree  for redemption.  14)     In view of the above discussion and conclusion, the  appeal fails and the same is dismissed with no order as to  costs.