RSA No. 1029 of 1988 (1) IN THE HIGH COURT OF PUNAJB AND HARYANA AT CHANDIGARH Regular Second Appeal No. 1029 of 1988 Date of Decision: December 12, 2007 Ram Kishan and others ............ Appellants versus Sheo Ram and others ............. Respondents CORAM: Hon'ble Mr. Justice Uma Nath Singh Hon'ble Mr. Justice Hemant Gupta Hon'ble Mr. Justice Rajive Bhalla PRESENT: Shri J.S. Bhatia, Advocate for the appellants. Shri Raghvinder Singh, Advocate for the respondents. 1.Whether Reporters of local papers may be allowed to see the judgment ? 2. To be referred to the Reporters or not ? 3.Whether the judgment should be reported in the Digest ? HEMANT GUPTA, J. The appellant, a mortgagee, filed a suit for declaration to the effect that they have become owners of the agricultural land measuring 13 Kanals 6 Marlas by prescription. The case set up was that one Ami Chand son of Devi Singh mortgaged with possession agricultural land measuring 14 Bighas for a sum of Rs.80/- with Hardhan Singh son of Jit Ram on 11.8.1903. During consolidation operations, the land measuring 13 Kanals 6 Marlas was allotted in lieu of the original mortgaged land. The plaintiff claims to be in continuous possession of the suit land as mortgagees, whereas Munshi Ram, predecessor-in-interest of defendants, RSA No. 1029 of 1988 (2) was recorded as mortgagor. The mortgagees sought the declaration on the ground that the suit land has not been got redeemed during the period of more than 60 years and, therefore, the defendants have lost all right, title and interest in it. Though the defendant denied the factum of mortgage, but the trial Court returned a finding that it was a case of usufructuary mortgage and no period for payment of mortgage amount was fixed. It was observed that it is not the case of the plaintiff that they had made a demand for mortgage amount, which was refused by the defendant. Thus, no cause of action had accrued to the plaintiff which could only accrue on demand of the mortgage amount from the defendants and refusal of the same by the defendants. The trial Court, thus, dismissed the suit holding that the plaintiffs have not become owners of the suit land. The appeal against the judgment and decree passed by the learned trial Court was also dismissed and hence, the mortgagees are in second appeal claiming declaration in respect of their ownership over the suit property. Initially this appeal was admitted to D.B. in view of the important questions of law likely to arise in many cases. Later, in Regular Second Appeal No. 893 of 2006, the mortgagee, who was in appeal, raised an argument that in case of usufructuary mortgage, where no time limit is fixed to seek redemption, the time to seek redemption will arise on the date of mortgage itself. The said appeal was admitted to Division Bench in view of the important question of law. Many other appeals were ordered to be heard with these appeals. The Division Bench while hearing the present appeal along with other appeals framed the following questions for opinion of the RSA No. 1029 of 1988 (3) larger Bench:- 1. Whether the right to seek redemption would arise on the date of mortgage itself in case of usufructuary mortgage when no time limit is fixed to seek redemption? 2. Whether there is any time limit in the case of a usufructuary mortgagor to get his property redeemed? The Transfer of Property Act, 1882 (for short 'the Act') is as such not applicable to the States of Punjab and Haryana. Sections 54, 107 and 123 of the Act were extended to the then State of Punjab with effect from 1.4.1955 and to the Pepsu area of the State of Punjab with effect from 15.5.1957. Section 59 was extended to whole of Punjab with effect from 10.6.1968. Section 58 (g) of the Act, has been extended to district headquarters in the State of Punjab vide notifications dated 28.8.1975; to all the block headquarters vide notification dated 23.6.1979; Mandi Gobindgarh in District Fatehgarh Sahib and Mohali in Ropar vide notification dated 28.5.2001.The provisions of Sections 59 and 58 (f) have been extended to the State of Haryana with effect from 5.8.1967 and 10.5.1972, respectively. Section 58 of the Act was extended to the area of Chandigarh with immediate effect vide notification dated 18.12.1982. The provisions of Section 118 of the Act were extended to urban area of the State of Punjab vide notification dated 10.8.1989. The facts remains that the provisions of Section 58 (d) of the Act and other provisions in respect of usufructuary mortgage have not been made applicable to the areas falling within the jurisdiction of this Court, though such mortgages are required to be made by way of registered document in the State of Punjab w.e.f. 10.6.1968 and from 5.8.1967 in the State of Haryana. It is also equally well settled that if the provisions of the RSA No. 1029 of 1988 (4) Act are not applicable to the area, the principles of justice, equity and good conscience are to be applied while determining the rights of the parties. The Constitution Bench of the Hon'ble Supreme Court in Murari Lal v. Dev Karan, AIR 1965 SC 225, considered the question “Does the equitable doctrine ensuing the mortgagors equity of redemption in spite of a clog created on such equity by stipulation in the mortgage deed apply to the present case ? That was a case arising from Alwar (Rajasthan) where the provisions of the Act did not apply. The Court concluded as under:- “These decisions show that the High Courts in India conformed to the view that whether or not there is a statutory provision directing the Judges to give effect to the principles of justice, equity and good conscience, it is their duty to enforce that principle where they are dealing with stipulations introduced in mortgage transactions which appear to them to be unreasonable, oppressive or unjust.” xxx xxx xxx “..... In fact, in Namdeo Lokman Lodhi v. Narmadabai this Court has emphatically observed that it is axiomatic that the courts must apply the principles of justice, equity and good conscience to transactions which come before them for determination even though the statutory provisions of the Transfer of Property Act are not made applicable to these transactions. These observations, in substance, represent the same traditional judicial approach in dealing with oppressive, unjust and unreasonable restrictions imposed by the mortgagees on needy mortgagors when mortgage documents are executed.” In the judgment reported as Harbans Singh and another RSA No. 1029 of 1988 (5) v. Guran Ditta Singh and another, (1991) 2 SCC 523, the Hon'ble Supreme Court while dealing with the mortgage in a case arising out of Punjab, held to the following effect:- “We hold that applying the principle of justice, equity and good conscience though Section 60 of the Transfer of Property Act per se did not apply, the principles of Section 60 would apply. Though the application for redemption was dismissed under Section 11 of the Act and became conclusive under Section 12 the mortgagor's right to redemption is not barred. A suit for redemption under Section 60 of Transfer of Property Act will be maintainable and civil court has jurisdiction to grant the decree of redemption.” Thus, the provisions of the Act in respect of usufructuary mortgage are required to be interpreted keeping in view the principles of justice, equity and good conscience and keeping in view the fact that the stipulations introduced in the mortgage transactions are not unreasonable, oppressive and unjust. The relevant provisions contained in Sections 58 (a), 58 (d), 60, 62, 67 of the Act and Articles 61, 62 and 63 of the Limitation Act, 1963 (hereinafter to be referred as “the Limitation Act”), are being reproduced as under:- “58. "Mortgage", "mortgagor", "mortgagee", "mortgage-money" and "mortgaged" defined. (a) A mortgage is the transfer of an interest in specific immovable 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. xxx xxx xxx (d) Usufructuary mortgage-Where the mortgagor delivers RSA No. 1029 of 1988 (6) possession or expressly or by implication binds himself to deliver possession of the mortgaged property to the mortgagee, and authorises 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 a usufructuary mortgage and the mortgagee a usufructuary mortgagee. xxx xxx xxx 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 the act of the parties or by decree of a court. (emphasis supplied) xxx xxx xxx 62. Right of usufructuary mortgagor to recover possession RSA No. 1029 of 1988 (7) In the case of a usufructuary mortgage, the mortgagor has a right to recover possession of the property together with the mortgage-deed and all documents relating to the mortgaged property which are in the possession or power of the mortgagee,- (a) where the mortgagee is authorised to pay himself the mortgage-money from the rents and profits of the property,-when such money is paid; (b) where the mortgagee is authorised to pay himself from such rents and profits or any part thereof a part only of the mortgage-money,-when the term (if any) prescribed for the payment of the mortgage-money has expired and the mortgagor pays or tenders to the mortgagee the mortgage- money or the balance thereof or deposits it in court hereinafter provided. xxx xxx xxx 67. Right to foreclosure or sale In the absence of a contract to the contrary, the mortgagee has, at any time after the mortgage- money has become due to him, and before a decree has been made for the redemption of the mortgaged property, or the mortgage-money has been paid or deposited as hereinafter provided, a right to obtain from the Court a decree that the mortgagor shall be absolutely debarred of his right to redeem the property, or a decree that the property be sold. A suit to obtain a decree that a mortgagor shall be absolutely debarred of his right to redeem the mortgaged property is called a suit for foreclosure. Nothing in this section shall be deemed- (a) to authorise any mortgagee other than a mortgagee by conditional sale or a mortgagee RSA No. 1029 of 1988 (8) under an anomalous mortgage by the terms of which he is entitled to foreclose, to institute a suit for foreclosure, or a usufructuary mortgagee as such or a mortgagee by conditional sale as such to institute a suit for sale; or Articles 61, 62 and 63 of the Limitation Act, 1963 61. By a mortgagor- (a) to redeem or recover possession of immovable property mortgaged; Thirty years When the right to redeem or to recover possession accrues. (b) to recover possession of immovable property mortgaged and afterwards transferred by the mortgagee for a valuable consideration; Twelve years When the transfer becomes known to the plaintiff. (c) to recover surplus collections received by the mortgagee after the mortgage has been satisfied. Three years When the mortgagor re-enters on the mortgaged property. 62. To enforce payment of money secured by a mortgagee or otherwise charge upon immovable property. Twelve years When the money sued for become due. 63. By a mortgagee- (a) for foreclosure, Thirty years When the money secured by the mortgagee become due. (b) for possession of immovable property mortgaged. Twelve years When the mortgagee becomes entitled to possession. The primary reliance of the learned counsel for the appellant is on the judgment of the Hon'ble Supreme Court in Prabhakaran and others v. M. Azhagiri Pillai, (2006) 4 SCC 484 and Sampuran Singh and others v. Niranjan Kaur (Smt.) and others, (1999)2 SCC 679, to RSA No. 1029 of 1988 (9) contend that in case of usufructuary mortgage, where no time limit is fixed for redemption, the right to redeem will accrue to the mortgagor on the date of mortgage itself and therefore, failure to redeem the mortgage within the period prescribed under Article 61 of the Act will lead to closure of the option of the mortgagor to seek redemption. Thus, the appellants are entitled to the declaration in respect of their title over the suit property. Reference is also made to the Full Bench judgment of this Court reported as Shri Chand and others v. Nathi, 1983 PLR 288; Satnam Singh alias Shamsher Singh and others v. Roshan Lal and others, 1986 PLJ 504 and B. Ramman Lal v. Raghunath Shanker and another, AIR 1941 Allahabad 56, to contend that the right of redemption in the cases of usufructuary mortgage, where no time limit is fixed arises on the date of mortgage itself. It is contended that in terms of Section 60 of the Act, the failure to redeem the property within the time prescribed, entitles a mortgagee to seek declaration to debar a mortgagor to seek redemption as contemplated in the proviso of the aforesaid Section. It is also argued that the principle that once a mortgage is always a mortgage means that once a transaction is in the form of mortgage, it cannot be converted into any other transaction even of by the acts of the parties and that dehors the provisions of the statute and principles of law, the nature of the transaction as a mortgage would remain intact till the period of limitation alone. On the other hand, learned counsel for the mortgagor- respondents relied upon Ganga Dhar v. Shankar Lal and others, AIR 1958 SC 770, Jayasingh Dnyanu Mhoprekar and another v. Krishna Babaji Patil and another, AIR 1985 SC 1646; Panchanan Sharma v. Basudeo Prasad Jaganani and others, AIR 1995 SC 1743 and Harbans RSA No. 1029 of 1988 (10) v. Om Prakash and Ors., AIR 2006 SC 686, to contend that the usufructuary mortgagor has a right to redeem the property at any point of time in a case where no time limit is fixed for redemption. It is contended that in case where time limit is fixed, the right of redemption will arise on the date fixed for redemption but where no time limit is fixed, the mortgagor has the right to seek redemption at any time on payment of the mortgage debt. Before we refer to the judgments cited by the counsel for the parties and other precedents in respect of the issues arising in the present appeal, we would like to refer certain general principles in respect of usufructuary mortgage. In Santley v. Wilde, 1895-89 All India England Reports 1338, a judgment of Court of appeal, it has been held as under:- “The principle is this : a mortgage is a conveyance of land or an assignment of chattles as a security for the payment of debt or the discharge of some other obligation for which it is given. This is the idea of a mortgage and the security is redeemable on the payment or discharge of such debt or obligation, any provision to the contrary notwithstanding. That, in my opinion, is the law. Any provision inserted to prevent redemption on payment or performance of the debt or obligation for which the security was given is what is meant by a clog or fetter on the equity of redemption and is therefore void. It follows from this, that “once a mortgage always a mortgage”. xx xx xx xx “The courts of equity have fought for years to maintain the doctrine that a security is redeemable on the performance of the obligation for which it was given. If the obligation is the payment of debt, the security is RSA No. 1029 of 1988 (11) redeemable on the payment of that debt. That in my opinion is the true principle applicable to the cases, and that is what is meant when it is said that there must not be any clog or fetter on the equity of redemption.” In authoritative commentary on the Act, by Mulla (9th Edition), certain statements are relevant. They read as follows : “In an usufructuary mortgage, a transfer is made of the right of possession and enjoyment of the usufruct. The rights of a usufructuary mortgagee forms part of the bundle which constitute ownership. The remainder still remains with the mortgagor and can be transferred by him. The mortgagor' right is as indicated in section 60 of the Act i.e. after the principal money has become due, the mortgagor has a right to pay the mortgage money and on such payment, he has the right to require the mortgagee to deliver possession. This right cannot be extinguished except by the act of parties or by a decree of a Court. This right is called the right to redeem and a suit to enforce it is called a suit for redemption. Thus the scope of a suit for redemption is preliminary to enforce the right to make a payment of the mortgage money. A claim to redeem a mortgage actually does not attach to the land, although the decree passed in the suit may ultimately affect possession which is also an interest in land. The section is not prefaced by any such words as 'in the absence of a contract to the contrary'. The right of redemption is therefore a statutory right which cannot be fettered by any condition which impedes or prevents redemption. Any such condition is void as a clog on redemption.....” xxx xxx xxx “......The mortgagor' right of redemption is exercised by the payment or tender to the mortgagee at the proper time and the proper place, of the mortgage money. When it is RSA No. 1029 of 1988 (12) extinguished by the act of parties, the act must take the shape and observe the formalities which the law prescribes. The expression ' act of the parties' refers to some transaction subsequent to the mortgage and standing apart from the mortgage transaction. A usufructuary mortgagee cannot by mere assertion of his own or by a unilateral action on his part, convert his position on moiety of the property as mortgagee into that of an absolute owner...” The authoritative work of Dr. Rashbehary Ghose's “Law of Mortgage”, which has received the approval of the Full Bench of Lahore High Court in Lachhman Singh v. Natha Singh through Harnam Singh and others, AIR 1940 Lahore 401 and recently in Achaldas Durgajit Oswal (Dead) through LRs. v. Ramvilas Gangabisan Heda (dead) through LRs. and others, (2003)3 SCC 614, the maxim `once mortgage, always a mortgage has been explained as under (Eighth Edition – Page Nos. 280-281) under the heading “Once a Mortgage, always a mortgage”:- “In 1681 Lord Nottingham in the leading case of Harris v. Harris [(1681) 1 Vern 33] firmly laid down the principle: `Once a mortgage, always a mortgage.' This is a doctrine to protect the mortgagor's right of redemption: It renders all agreements in a mortgage for forfeiture of the right to redeem and also encumbrances of or dealings with the property by the mortgagee as against a mortgagor coming to redeem. In 1902 the well-known maxim, `once a mortgage, always a mortgage' was supplemented by the words `and nothing but a mortgage' added by Lord Davey in the leading case of Noakes v. Rice [1902 AC 24 (HL): 1900-3 All ER Rep 34], in which the maxim was explained to mean `that a mortgage cannot be made irredeemable and a provision to that effect is void'. The maxim has been supplemented in the RSA No. 1029 of 1988 (13) Indian context by the words `and therefore always redeemable', added by Justice Sarkar of the Supreme Court in the case of Seth Ganga Dhar v. Shankarlal [1959 SCR 509 (513): AIR 1958 SC 770]. It is thus evident that very conception of mortgage involves three principles. First, there is the maxim: `Once a mortgage, always a mortgage.' that is to say, a mortgage is always redeemable and if a contrary provision is made, it is invalid. And this is an exception to the aphorism, modus et conventio vincunt legem (custom and agreement overrule law). Secondly, the mortgagee cannot reserve to himself any collateral advantage outside the mortgage agreement. Thirdly, as a corollary from the first another principle may be deduced, namely, `once a mortgage, always a mortgage, and nothing but a mortgage'. In other words, any stipulation which prevents a mortgagor from getting back the property mortgaged is void. That is, a mortgage is always redeemable. The maxim `once a mortgage, always a mortgage' may be said to be a logical corollary from the doctrine, which is the very foundation of the law of mortgages, that time is not of the essence of the contract in such transactions; for the protection which the law throws round the mortgagor might be rendered wholly illusory, if the right to redeem could be limited by contract between the parties [For a very curious case mentioned in the books in which the mortgagor was permitted to redeem, although he had solemnly sworn on the Bible never to exercise the right, see Stisted's case cited in East India Co. v. Atkyns 1 Comyn 348]. Right to redeem is an incident of a subsisting mortgage and is inseparable from it so that the right is co-extensive with the mortgage itself. The right subsists until it is appropriately and effectively extinguished either by the RSA No. 1029 of 1988 (14) acts of the parties concerned or by a proper decree of the competent court.” With the said comments of the leading commentators on the subject, we revert to precedents on the subject. A Full Bench of the Lahore High Court in Lachhman Singh's case (supra) has delineated the characteristics of an usufructuary mortgage as under:- “It will be seen that the characteristics of a usufructuary mortgage, as defined above, are : (1) that the possession of the mortgaged property is delivered, or agreed to be delivered, to the mortgagee; (2) that he is to appropriate the rents and profits either (a) in lieu of interest, or (b) towards the principal, or (c) partly in lieu of interest and partly in payment of the principal; (3) that in none of these cases the mortgagor incurs any personal liability to repay; and (4) as the mortgagor has not bound himself to repay (but may repay if and when he chooses) there can be no “forfeiture” and therefore the remedies by way of foreclosure or sale are not open to the mortgagee.”(emphasis supplied) Thus, any personal liability on the part of mortgagor is excluded in case of usufructuary mortgage and a usufructuary mortgagee is not entitled to sue for sale of the property. If there is any stipulation to the contrary, the transaction ceases to be one of usufructuary mortgage and is described as anomalous mortgage. The Court