Sri Rajah Papamma Rao Bahadur v. Sri Vira Pratapa Korkonda BS650048

Sri Rajah Papamma Rao Bahadur v. Sri Vira Pratapa Korkonda BS650048 PRIVY COUNCIL

Before:-Lord Watson, Lord Hobhouse, Lord Shand, Lord Davey, and Sir Richard Couch.

0 D/d. 12/ 22.02.1896

Sri Rajah Papamma Rao Bahadur - Defendant

Versus

Sri Vira Pratapa Korkonda, H.V. Ramachandra Razu - Plaintiffs

On Appeal From the High Court at Madras.

The Respondent did not appear.

Solicitors for the Appellant :- Burton, Yeates & Hart.

Mortgagor and Mortgagee - Simple mortgage - Decree for Possession - Construction.

[Para ]

Where under decree upon a "simple mortgagee' a mortgagee obtained possession of the mortgaged property instead of a judicial sale:-

Held, that such decree did not import foreclosure. The possession obtained thereunder was as mortgagee and involved liability to account and to redeemed.

Appeal from a decree of the High Court (February 21, 1893), reversing a decree of the Subordinate Judge of Ellore (September 5, 1891), which dismissed the respondent's suit.

Only July 15, 1870, certain person executed a mortgage deed to the ancestor of the first and second defendants, where they undertook to repay a sum of Rs. 2011, with interest, by four annual instalments, as security for which they mortgaged the village of Khandrika Stiramavaram. The condition of the bond was as follows: "If the debt is not discharged according to the instalments, you should recover the same by means of the mortgaged property, the crops of our cultivation, and other property, and from our persons, according to your wish." This bond was specially registered.

In 1876 the mortgagee sued the mortgagors upon this Bond, and prayed for a decree directing the defendants to pay the amount then due with subsequent interest, "by means of the undermentioned mortgage property and other property."

The District Judge of Godaveri decreed in favour of the plaintiff. The ninth paragraph of his judgment was as follows: "In accordance with the custom prevailing in the Courts in this Presidency, three months' time will be allowed to the defendants within which to pay up the whole sum now decreed, principal and interest and costs, falling which the plaintiff shall be put in possession of the immoveable and moveable property specified in the bond sued upon and in the plaint and schedule as provided in the terms of the bond." The decree was in the same terms.

On September 18, 1879, the mortgagors applied for a review of the above decree, on the ground that the same was not warranted by the terms of the bond and plaint, alleging that the Judge had wrongly treated the bond as one of conditional sale, and that they had retained in ignorance of the terms of the decree until application was made for execution.

On November 10, 1879, the petition for review was rejected as being out of time, and on November 21, the Court made the following order: "According to the decree the plaintiff will be put in possession of the village."

In 1883 the mortgagors sold the village to a person who again sold it to the present appellant in April, 1884; and on March 10, 1891, the representatives of the mortgagors sued the representatives of the mortgagee and the appellant, and prayed for an account to be taken under the mortgage, and for return of possession of the village. They alleged that the whole debt had been discharged out of the proceeds of the village in 1885.

The defendants filed written statements whereby they alleged that the village became absolutely theirs by virtue of the decree above mentioned.

On September 5, 1891, the original Judge dismissed the suit, with costs. In his judgment he said, "I understand, from the provisions of three months' grace allowed in the decree for discharging the debt, the District Judge meant that the mortgage would be foreclosed by the default made, and that afterwards the lands could be delivered to the decree holder unconditionally, as was subsequently done."

Against this decree the plaintiffs appealed to the High Court of Madras, which on February 21, 1893, reversed the decree of the original Court, and remanded the suit for decision on its merits. In its judgment of the High Court said, "The reasonable construction of the decree is that it intended to put the mortgagee in possession on condition that he should recoup himself the mortgage debt and interest out of the usufruct of the mortgaged property as provided in the Bond, and remain in possession until the debt and interest were thereby liquidated."

Mayne, for the appellant, contended that the High Court had misconstrued the decree of the District Court of Godaveri. The real intention of that decree was that mortgage should be foreclosed. No doubt that was not the right remedy to have given, having regard to the character of the mortgage. But it had become final, and consequently the mortgagors, who might have corrected it either by appeal or in review, lost all title to the land after the three months of grace. Besides, the respondents should have sought their remedy (if any) in execution proceedings in the former suit, and not have brought a fresh suit in order to construe the decree in a former suit.

JUDGMENT

The judgment of their Lordships was delivered by

1896 Feb. 22.

Lord Hobhouse :- The Plaintiffs in this suit, who are respondents in the appeal, represents the mortgagors of the property in dispute; and the defendants, one of whom is appellant, represent the mortgagee. The present question is, what was the effect of a decree of the District Judge which was passed on September 16, 1876, and which directed that the mortgagees should be put into possession of the property?

The mortgage was effected by deed dated July 15, 1870, for securing Rs. 2011 and interest. The debt was to be paid by four instalments. On failure to pay "you should recover the same by means of the mortgaged property, the crops of our cultivation, and our other property, and from our person." Though it is not here expressed that the mortgagee's remedy is to be by sale under decree, the mortgage falls within the class of "simple mortgages" as classified in Sir A. Macpherson's work on Mortgages, p. 12, and in the Transfer of Property Act, 1882. In such a mortgage there is no transfer of ownership, and the mortgagee must enforce his charge by judicial sale.

In the year 1876 the mortgagee, being unpaid, filed a plaint, and prayed for a decree directing the mortgagor's to pay debt and costs and interest until realisation of the money by means of the mortgaged property and other property. That is precisely the relief to which a simple mortgagee is entitled, whether before the Act of 1882 or since.

The difficulty has arisen from the decree which the Court thought fit to make on this plaint. After affirming the mortgagee's right to a decree for the money, the district Judge said that, "In accordance with the custom prevailing in the Courts in the Presidency, three month's time will be allowed to the defendants within which to pay up the whole sum now decreed, principal and interest and costs, failing which the plaintiff shall be put in possession of the immoveable and plaint and property specified in the bond sued upon and in the plaint and schedule as provided in the terms of the bond." And he made a decree accordingly.

The decree was not according to law. In default to payment, a simple mortgage gives to the mortgagee a right, not to possession but to sale, which he must work out in execution proceedings. In referring a Madras custom, the District Judge probably meant only a practice of the Courts to give three months for payment. If he meant a custom to give possession on a simple mortgage, as the High Court think he did, there is no such custom. And Mr. Mayne frankly admitted that the mortgagee was not entitled to the relief given; and that there is no ground for thinking that the decree was agreed on in Court, or consented to by the mortgagor.

The mortgagor, however, did not appeal, and did not seek relief by way of review until it was too late. The decree, therefore, stands, and in binding on the parties; and the mortgagee took possession under it. He has since hold the property, but that does not affect the rights of the mortgagor. The question is, in what character was the possession taken? If in the character of a mortgagee, the mortgagor had a right to redeem, which was not barred by time when this suit began.

Mr. Mayne contends that the decree was intended as foreclosure, and is so in effect. The only other kind of possession which can be suggested in usufructuary possession, lasting until the debt is discharged by the profits of the estate; and Mr. Mayne urges that there is nothing in the judgment to suggest such a possession, and that "the terms of the bond" do not warrant possession of any kind. All that is true; but it does not compel the inference that the decree amounts to a foreclosure. There is nothing in the judgment to suggest a foreclosure any more than usufructuary possession; nothing indeed to throw light on the terms of the decree. All we known is that possession was given under some error.

If it were necessary to speculate nicely on the meaning of the Judge, their Lordships would be disposed to agree with the High Court, who consider that when the Judge used the expression "as provided in the terms of the bond" he was thinking that the right given by the mortgage to recover by means of the mortgaged property and the crops meant a right to enter and take the profits. That is certainly more in accordance with "the terms of the bond" that is a foreclosure; which is not a recovery of the debt by means of the property, but a substitution of the property for the debt. If, indeed, the matter were new, it might reasonable be argued that the terms of a simple mortgage justify usufructuary possession; but long practice, now embodies in a statute, has settled that the remedy of the mortgagee is a judicial sale.

It is, however, hardly necessary to follow the High Court into this speculation. It is sufficient that the mortgagee, not being entitled to foreclosure, and not asking for it, got a decree which did not purport to work foreclosure. It purported to give possession "as provided in the terms of the bond." That was impossible, for there were no such terms; but it purported to do that, and did not purport to end to the bond and to the relations of the mortgagor and mortgagee altogether. It could, though subject to the correction on appeal, give possession, and did so. The mortgagee thereupon became mortgagee in possession; and as such he must submit to be redeemed.

Their Lordships will humbly advise Her Majesty to dismiss this appeal.