NARANDAS KARSONDAS Vs S.A. KAMTAM & ANR..
Bench: RAY,A.N. (CJ)
Case number: Appeal Civil 1020 of 1975
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PETITIONER: NARANDAS KARSONDAS
Vs.
RESPONDENT: S.A. KAMTAM & ANR..
DATE OF JUDGMENT07/12/1976
BENCH: RAY, A.N. (CJ) BENCH: RAY, A.N. (CJ) BEG, M. HAMEEDULLAH SINGH, JASWANT
CITATION: 1977 AIR 774 1977 SCR (2) 341 1977 SCC (3) 247 CITATOR INFO : RF 1980 SC1334 (6)
ACT: Transfer of Property Act 1882 Sec. 5, 54 and 69__Mean- ing of transfer-Sale--Power of sale without intervention of Court--Whether extinguishes the right Of redemption---Indian Registration Act 1908.Sec. 17--Whether equity of redemption can be lost without execution of a registered document--Indian Con-tract Act 1872--Sec. 202--Power coupled with interest--Whether can be revoked-After power is acted upon--Law of Property Act 1925.--Sec. 100(1)(/)-Distinction between legal and equitable estate under English Law--Posi- tion under Indian law.
HEADNOTE: In 1964, respondent No. 1 Society was registered as a Housing Society. The Society wanted 12 plots to be con- structed for its 12 members. The Society, therefore, pur- chased a plot of land. In 1966, the Society mortgaged the land and the incomplete structure in favour of respondent No. 2. In March, 1971, the Special Liquidator of the Socie- ty was appointed under s. 102 of the Maharashtra Co- operative Societies Act, 1960. The mortgagee after demand- ing the dues from the mortgagor advertised the public auc- tion for the sale of the property. In the auction sale the appellant was declared as the highest bidder. The auction purchaser took the possession of the land and the incomplete structure. Society filed a dispute before the Officer on Special Duty under the Maharashtra Co-operative Societies Act against the auction purchaser and the mortgagee praying for an injunction against the completion of the sale. The Society in the meanwhile paid the mortgage money to the mortgagee. The Officer on Special Duty delivered his judg- ment in January 1975 and held that the Society was entitled to redeem the property because the conveyance was not com- plete. The appellant filed an appeal before the Maharashtra State Co-operative Appellate Court. In the appeal, plaint was allowed to be amended and a prayer for redemption was allowed to be introduced. The appellate Court held that there was no complete sale within the meaning of section
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69(3) of the Transfer of Property Act 1882 and the equity of redemption was, therefore, not lost and that the auction price was grossly inadequate and that the sale was not after a fair competition. One of the conditions of auction sale was that if the mortgagor deposited the mortgage money in court between the date of the sale and completion thereof and if as a result thereof the mortgagee was to reconvey the property to the mortgagor the auction purchaser Would be entitled to the refund of the amount paid without any inter- est and/or cost. In an appeal by Special Leave the appellant contended: (1) When under s. 69 of the Transfer of Property Act a mortgagor confers on the mortgagee a power of sale through court or without intervention of court, the power of sale extends to the entire legal estate of the mortgagor. (2) When such a power is conferred it is agency coupled with interest under s. 202 of the Indian Contract Act 1872. If the power is acted upon revocation even on payment of mortgage money cannot nullify acts already done pursuant to the said powers. (3) Knocking down at an auction sale by the mortgagee pursuant. to the power of sale extinguishes the mortgagor’s right of redemption. (4) In a suit for specific performance by auction pur- chaser, the purchaser will be entitled to specific perform- ance because it is a sale by mortgagor. Dismissing the appeal, 342 HELD: (1) Under section 69(1)(c) a mortgagee has power to sell without intervention of the court where power is con- ferred by the mortgage deed and the mortgaged property or any part thereof was on the date of the execution of the mortgage deed situated in certain big towns. [347D-E] (2) In India the word "transfer" is defined with refer- ence to the word ,"convey". The word "transfer" in English law in its narrower and more usual sense refers to the transfer of an estate in the,land. Section 205 of the Law of Property Act in England defines "conveyance as including mortgage, charge, lease, assent vesting declara- tion, vesting instrument". The word "conveys" in section 5 of the Transfer of Property Act and s. 17 of the Indian Registration Act is that contract for sale in respect of immovable property of the value of more than Rs.100 without registration cannot extinguish the equity of redemption. In India it is only on execution of the conveyance and regis- tration of transfer of the mortgagor’s interest by regis- tered instrument that mortgagors right of redemption will be extinguished. The conferment of power to sell without intervention of the Court in a mortgage deed by itself will not derrive the mortgagor of his right to redemption. The extinction of the right of redemption has to be subsequent to the deed conferring such power. The right of redemp- tion is not extinguished at the expiry of the period. The equity of redemption is not extinguished by mere contract for sale. [348B, D-E] Abraham Ezra Issac Mansoor v. Abdul Latif Usman I.L.R. 1944 Bombay 549, approved. Meenakshi Velu & Ors. v. Kasturi Sakunthala & Ors. I.L.R. (1967) 3 Mad. 161, overruled. Ellappa Naiker and Ors. v. Sivasubramania Manisaran (1936) 71 Madras Law Journal 607, approved. (3) Under the English doctrine, a contract of sale transfers an equitable estate to the purchaser. In India there is no equity or right in property accrued is favour of the purchaser by the contract between the mortgagee and the
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proposed purchaser. In India there is no distinction be- tween legal and equitable estates. In India there can be but one owner i.e. legal owner. [347G-H] Rani Chhotra Kumari v. Mohan Bikram (1931) 58 I.A. 279 and Rambaran Prasad v. Ram Mohit Hazra & Ors. (1967) I SCR 293, followed. (4) Under s. 100(1)(i) of the Law of Property Act, 1925, if a mortgagee exercises power to sell the mortgaged proper- ty by public auction or by private contract it is binding on the mortgagor before completion of the sale unless it is proved that the power was exercised in bad faith. The English decisions are based on the said provision of the English Law of Property ,Act and, therefore, they are not applicable to India. [346 B-D] Waring (Lord) v. London and Manchester Assurance Co. (1935) Chancery 310 and Property & Bloodstock Ltd. v. Emer- ton (1968) L.R. Chancery 94 distinguished.
JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1020 of 1975. (Appeal by Special Leave from the Judgment and Order dated the 18-4-1975 of the Maharashtra State Co-op. Appel- late Court in Appeal No. 54 of 1975.) J. L. Nain, U. R. Lalit, and V. N. Ganpure, for the appel- lant. V.M. Tarkunde, Sharad Manohar, P.H. Parekh and Miss Manju Jetley, for respondent No. 1. M.C. Bhandare, Mrs. S. Bhandare, N.S. Narasimhan, K.C. Sharma, ,A. K. Mathur and ,4. K. Sharma, for respondent No. 2. 343 The Judgment of the Court was delivered by RAY, C.J. This appeal by special leave is from the judgment dated 18 April 1975 of the Maharashtra State Co- operative Appellate Court. The question for consideration in this appeal is whether a mortgagor can exercise his right of redemption after a mortgagee under an English Mortgage with power to sell mortgaged property without the intervention of the court gives notice to the mortgagor to sell the mortgaged property by public auction and sells it by public auction. The appellant is the auction purchaser. The respondents are Flora Co-operative Housing Society in liquidation the mortgagors (hereinafter referred to as the Society) and the Maharashtra Co-operative Housing Finance Society Ltd., the mortgagee (hereinafter referred to as the mortgagee). In 1964 the Society was registered as a Housing Society with 12 members. The paid up capital of the Society was Rs.21,000/-. The Society wanted 12 flats to be constructed in one structure of ground and two upper floors. The Society purchased plot No. 153 in Santa Cruz at Bombay, measuring 1002 sq. yards. The price was Rs.1,02,000/-. In 1966 the Society mortgaged the land and the incomplete structure in favour of the mortgagee. The mort- gage was for the sum of Rs.70,000/-. It was an English mortgage. In 1968 the mortgagee advanced a further sum of Rs.42,000/-. In 1966 Fair Deal Builders entered into a contract with Society to build. The work was stopped. Thereafter in 1967 the Society entrusted the work to Maharaja Builders. In 1968 the contract with Maharaja Builders was terminated. The work was given in 1969 to Kamal Construction Company,
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who abandoned it in incomplete stage. On diverse dates between 29 August 1967 and 29 November 1970, notice was given by the mortgagee to the Society for non-payment to the mortgagor and to sell the property by public auction. On 9 March 1971 the Assistant Registrar of Co-opera- tive Societies, Maharashtra, appointed a Special Liquidator of the Society under section 102 of Maharashtra Co-operative Societies Act, 1960. The Assistant Registrar communicated the order of appointment liquidator to the mortgagee on 22 April 1971. The order of appointment of a liquidator was published in Maharashtra Government Gazette on 29 April 1971. The mortgagee advertised through Government auc- tioner for public auction of the property. The public auction was held on 14 April 1971. The claim was for Rs.1,22,888.22 paise. The appellant was declared the highest bidder for Rs.1,31,001/-. The terms of sale inter alia were that 25 per cent was to be paid in advance and the balance in 30 days. The sum of Rs.33,000/- was paid as 6--1546SCI/76 344 25 per cent advance and the balance purchase price of Rs.98,001/was paid to attorneys of the mortgagee. The auction purchaser took possession on 17 April 1971. On 13 August 1971 the Society filed a dispute before the Officer on Special Duty under the Maharashtra Co-operative Societies Act against the auction purchaser and the mortga- gee for injunction against completing sale. The Society obtained an ex-parte injunction restraining transfer. On 29 September 1971, the interim injunction was vacated. Thereafter the Society filed an appeal against the said order before the Appellate Tribunal. In the meantime the appellant filed a writ petition in the Bombay High Court under Article 227 of the Constitution. On 16 June 1972 there was an interim order by the High Court in the writ petition. The Society undertook not to dispose of property until disposal of dispute. Both par- ties were allowed to keep watchmen. The Society borrowed a sum of Rs.1,31,000/- and paid the same to the mortgagee on 15 October 1972. On 16 January 1975 the Officer on Special Duty delivered judgment. He held that the dispute was maintain- able under section 91 of the Maharashtra Co-operative Socie- ties Act. The Society was held not competent to challenge the auction sale held on 14 April 1971. It was also held that the validity of auction was not affected. The mortgagee was held entitled to exercise power of sale as a secured creditor without being affected by the winding up order against the Society. It was also held that the mortgagee did’ not commit any breach of the statutory provisions of section 69 of the Transfer of Property Act. The sale was pot vitiated. It was found that there was no irregularity at the auction and there is no ground for setting aside the-sale. The society was entitled to redeem the proper- ty because the conveyance was not complete. The auction purchaser filed before the Maharashtra State Cooperative Appellate Court an appeal against the said order. In appeal the plaint was allowed to be amended and prayer for redemption was allowed to be introduced. On 18 April 1975 the Maharashtra State Cooperative Appellate Court dismissed the appeal and held that the dispute as initiated by the Society fell within the ambit of section 97 of the Maharashtra Cooperative Societies Act. The Appel- late Court further held that there was no complete sale
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within the meaning of section 69(3) of the Transfer of Property Act and the equity of redemption was therefore not lost. It was further held that the auction price was grossly inadequate. The auction sale was not a sale after a fair competition. The Mortgage Deed provided inter alia as follows :-- 345 "it is hereby agreed and declared that it shall be lawful for the mortgagees at any time without any further consent on the part of the mortgagors to sell the said mortgaged premises ........ The aforesaid power shall be deemed to be a power to sell or concur in selling the said mortgaged premises in default of payment of the mortgage money without the intervention of the court within the meaning of section 69 of the Transfer of Property Act." Clauses (7), (8) and (33) in the Conditions of Sale may be referred to. Clause (7) provided as follows. Upon payment of the balance Of the purchase price, the purchaser shall be enti- tled to a conveyance from the vendors. The vendors shall in the conveyance of the property purchased by purchaser give the usual covenant required of a limited owner against encumbrances. The vendors shall give no other covenant required of an absolute of full owner. The vendors shall not be required to procure the consent of the mortgagors or of any other person in the conveyance. Clause (8) was as follows. After payment of the balance of the purchase money the purchaser shall be entitled to the rents and profits of the said property. The vendors as the mortgagees are not in possession of the property and will not do anything to deliver possession of the proper- ty to the purchaser. The vendors as the mortgagees shall not be able to give vacant or symbolic possession of the property to the purchaser. On payment of the balance of the purchase price the purchaser shall at his own cost be at liberty to take such steps as the purchaser may deem neces- sary for obtaining possession of the property from the mortgagors. Clause (33) provided as follows. If the mortgagors shall deposit all the amounts due to the vendors as mortga- gees in court or pay the same to the vendors or their attor- neys between the date of sale and the completion thereof and if as a result thereof the vendors have to reconvey the property to them or if the vendors cannot thus proceed with the sale and the sale is not completed on that account the vendors shall return the said deposit to the purchaser without any interest and/or costs and the vendors as such mortgagees shall not be held liable for any damage. Counsel for the appellant advanced these contentions. First, under section 69 of the Transfer of Property Act a mortgagor confers on the mortgagee a power of sale through Court Or without intervention of court. The power of sale is of the entire legal estate of the mortgagor. Second, when such a power is conferred it is agency coupled with interest under section 202 of the Indian Contract Act, the agency cannot be revoked without payment to mortgagee. Third,if the power is acted upon revocation even on payment cannot nullify acts pursuant to powers. Reliance was placed on sections 203 and 204 of the Indian Contract Act. Fourth, if the act done pursuant to power is that the property is put up for sale and it is knocked down it is an act done by the mortgagee for mortgagor In
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346 other words it is as if an act done by the mortgagor. The, sale pursuant to the power is a subsequent act within the meaning Transfer of Property Act and this subsequent act will extinguish the mortgagor’s right of redemption. Fifth, in a suit for specific performance by auction pur- chaser the purchaser will be entitled to specific perform- ance because it is a sale by mortgagor. Counsel for the appellant relied on two English deci- sions. These are: Waring (Lord) v. London and Manchester Assurance Co. (1), and Property & Bloodstock Ltd. v. Emer- ton(2) in support of the propositions that the mortgagor’s right to redemption would be extinguished when the mortgagee exercised the power of sale and the third party entered into a binding contract to purchase the property. The English decisions are based on the provisions of the English Law of Property Act. The provisions create a statu- tory power of sale, which gives to a mortgagee power to sell the mortgaged property, and it means that the mortgagee has power to sell out and out by private contract or by auction, and subsequently to complete the conveyance. The English decisions are that if a mortgagee exercises power under section 100(1)(i) of the Law of Property Act, 1925, to sell the mortgaged property by public auction or by private contract it is binding on the mortgagor before completion unless it is proved that he exercised it in bad faith. It was said in the Property & Bloodstock case (supra) that the contract for sale by the mortgagees to the pur- chaser precludes the mortgagor from his right of redemp- tion pending completion even if the property is sold subject to one or more conditions. The English decision naturally notices distinction between condition precedent and the terms of contracts of sale, namely, conditions dealing with matters of title for carrying out the contract. The mere fact that the label "condition" happens to be attached to conditions does not preclude its being in the latter catego- ry of "condition" or matter of title. The condition that the sale is subject to the reversioner’s licence being obtained where necessary. is held in the English decision to be commonly regarded as no more than a term of the contract relating to title. The provisions in the Transfer of Property Act relevant to the purpose of present appeal are sections 54, 60 and 69. Under section 54 of the Transfer of Property Act, sale is a transfer of ownership in exchange for a price paid or promised or part-paid and partpromised. Such transfer in the case of tangible immovable property of the value of one hundred rupees and upwards, or in the case of a rever- sion or other intangible thing can be made only by a regis- tered instrument. A contract for the sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties. An English Mortgage is defined in section 58(e) of the Transfer of Property Act. Where the mortgagor binds himself to repay the mortgage-money on a certain date, and transfers the mortgaged pro- (1) (1935) Chancery 310. (2) (1968) L.R. Chancery 94. 347 perty absolutely to the mortgagee, but subject to a proviso that he will retransfer it to the mortgagor upon payment of the mortgagemoney as agreed, the transaction is called an English mortgage. The Rights and Liabilities of Mortgagor are dealt with in section 60 of the Transfer of Property Act. It is that at any time after the principal money has become due, the
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mortgagor has a right, on payment or tender, at a proper time and place, of the mortgagemoney, 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 to have registered an acknowledgement in writing that any right in derogation of his interest transferred to the mortgagee has been extinguished. There is a proviso that the right conferred by this section has not been extinguished by the act of the parties or by decree of a Court. The right conferred by section 60 of the Trans- fer of Property Act is called a right to redeem. Therefore, the said section 60 provides for a right of redemption provided that the right has not been extinguished by the act of parties. Section 69 of the Transfer of Property Act deals with mortgagees’ power of sale. Under the said section 69(1)(c), a mortgagee has power of sale without the intervention of the Court where power is conferred by the mortgage deed and the mortgaged property or any part thereof was on the date of the execution of the mortgage deed, situate within the towns of Calcutta, Madras, Bombay or in any other town or area which the State Government, may, by notification in the official Gazette, specify. The principal question in this appeal is whether the right to redemption has been extinguished by any act of the parties. The English decisions are based on the provisions of the Law of Property Act, 1925. In England sale is ef- fected by the contract of sale, and in India an agreement for sale is not a sale or transfer of interest. In England, a mortgagee gets an equitable interest in the property. Under the English doctrine a contract of sale transfers an equitable estate to the purchaser. The Court does not assist the mortgagor by granting him a remedy unless there is collusion on the part of the mortgagee. In India there is no equity or right in property created in favour of the purchaser by the contract between the mortgagee and the proposed purchaser. In India, there is no distinction between legal and equitable estates. The law of India knows nothing of that distinction between legal and equitable property in the sense in which it was under- stood when equity was administered by the Court of Chan- cery in England. Under the Indian law, there can be but one owner that is, the legal owner. See Rani Chhatra Kumari v. Mohan Bikram (1) (1) (1931) 58 I.A. 279. 348 A contract of sale does not of itself create any inter- est in, or charge on, the property. This is expressly declared in s. 54 of the Transfer of Property Act. See Rambaran Prasad v. Ram Mohit Hazra(1) & Ors. C) The fidu- ciary character of the personal obligation created by a contract for sale is recognised in section 3 of the Specific Relief Act, 1963 and in section 91 of the Trusts Act. The personal obligation created by a contract of sale is de- scribed in section 40 of the Transfer of Property Act as an obligation arising out of contract and annexed to the owner- ship of property, but not amounting to, an interest or easement therein. In India, the word "transfer" is defined with reference to the word "convey". The word "transfer" in English law in
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its narrower and more usual sense refers to the transfer of an estate in land. Section 205 of the Law of Property Act in England defines: "Conveyance" includes a mortgage, charge, lease, assent, vesting declaration, vesting instru- ment. The word "conveys" in section 5 of the transfer of Property Act is used in the wider sense of conveying owner- ship. The right of redemption which is embodied in section 60 of the Transfer of Property Act is available to the Mortga- gor unless it has been extinguished by the Act of parties. The combined effect of section 54 of the Transfer of Proper- ty Act and section 17 of the Indian Registration Act is that a contract for sale in respect of immovable property of the value of more than one hundred rupees without registration cannot extinguish the equity of redemption. In India it is only on execution of the conveyance and registration of transfer of the mortgagor’s interest by registered instru- ment that the mortgagor’s right of redemption will be extin- guished. The conferment of power to sell without interven- tion of the Court in a Mortgage Deed by itself will not deprive the mortgagor of his right to redemption. The extinction of the right of redemption has to be subsequent to the deed conferring such power. The right of redemption is not extinguished at the expiry of the period. The equity of redemption is not extinguished by mere contract for sale. The mortgagor’s right to redeem will survive until there has been completion of sale by the mortagee by a registered deed. In England a sale of property takes place by agreement but it is not so in our country. The power to sell shall not be exercised unless and until notice in writing requir- ing payment of the principal money has been served on the mortgagor. Further section 69(3) of the Transfer of Proper- ty Act shows that when a sale has been made in professed exercise of such a power, the title of the purchaser shall not be impeachable on the ground that no case had arisen to authorise the sale. Therefore, until the sale is complete by registration the mortgagor does not lose right of redemp- tion. It is erroneous to suggest that the mortgagee is acting as the agent of the mortgagor in selling the property. The mortgagor exercises his right under a different claim. The mortgagee’s right is-different from, (1) [1967] 1 S.C.R. 293. 349 the mortgagor’s. The mortgagee exercises his right under a totally superior claim which is not under the mortgagor, but against him. In other words, the sale is against the mort- gagor’s wishes. Rights and interests of the mortgagor and the mortgagee in regard to sale are conflicting. In view of the fact that only on execution of convey- ance, ownership passes from one party to another it cannot be held that the mortgagor lost the right of redemption just because the property was put to auction. The mortgagor has a right to redeem unless the sale of the property was complete by registration in accordance with the provisions of the Registration Act. The decision in Abraham Ezra Issac Mansoor v. Abdul Latiff Usman(1) is correct law that the right to redeem a mortgage given to a mortgagor under section 60 of the Transfer of Property Act, is not extinguished by a contract of sale of the mortgaged property entered into by a mortga- gee in exercise of the power of sale given to him under the mortgage deed. Until the. sale is completed by a registered instrument, the mortgagor can redeem the mortgage on payment
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of the requisite amount. The Madras decision reported in Meenakshi Velu & Ors. v. Kasturi Sakunthala & Ors.(2) on which counsel for the appellant relied is contrary to the view expressed in Ellappa Naiker and others v. Sivasubramania Maniagaran,(3) and the aforesaid Bombay decision. We are entirely in agreement with the Bombay decision. The Madras decision Meenakshi Velu & Ors. v. Kasturi Sakun- thala & Ors. (2) which holds a contrary view on which coun- sel for the appellant relied is wrong. For the foregoing reasons, the appeal is dismissed with costs to respondent no 1. P.H.P. Appeal dismissed. (1)I.L,R, (1944) Bom. 549. (2) 1.1 .R, (1967) 3 Madras 161. (3) (1936) 71 Madras Iaw Journal 607. 350