1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION SECOND APPEAL NO.439 OF 1987 Narayan Krishna Gade & Anr. .. Appellants Versus Shankar Sakharam Kenjale since deceased through his legal representatives. .. Respondents Mr. D.A. Nalawade for the appellants. Mr. A.A. Kumbhakoni i/by Mr.T.D.Deshmukh for the respondents. CORAM : A.S. OKA, J. DATE ON WHICH SUBMISSIONS ARE HEARD :30th March 2009. DATE ON WHICH JUDGMENT IS PRONOUNCED : 08th June 2009. JUDGMENT: 1. By the judgment and order dated 07th January 2008 this appeal was finally decided. As per the order passed by this Court on Civil Application No.1697 of 2008 for restoration filed by the respondents, the judgment and order dated 07th January 2008 was set aside and the appeal was ordered to be re-heard. The said order was passed on 29th January 2009 on the said Civil Application No.1697 of 2008. By an administrative 2 order passed by the Hon'ble the Chief Justice the said Civil Application No.1697 of 2008 as well as the second appeal has been specially assigned to this Court. 2. The appellants are the original plaintiffs. The respondents are legal representatives of the original defendant. The suit filed by the appellants for redemption of mortgage was dismissed by the trial Court. In an appeal preferred by the appellants, the said decree was confirmed by the District Court. 3. The appellants filed a suit for redemption of mortgage against the original defendant. The respondents are the legal representatives of the original defendant. It is the case of the appellants that late Ramchandra @ Chandrarao Chandu Gade mortgaged the suit property in the year 1947 in favour of the original defendants. The Deed of Mortgage was executed by late Ramchandra on 14th May 1947 on accepting a sum of Rs.900/- as mortgage money. It is alleged that as per the Mortgage Deed, period of ten years was mentioned for repayment of 3 mortgage amount and the respondent was placed in possession of the mortgaged property. According to the case of the appellants they are legal representatives of the mortgagor late Ramchnadra. According to the case of the appellants they had offered to pay a sum of Rs.900/- to the defendant and on accepting the amount they requested the defendant to reconvey the suit property. However, the request was not accepted by the defendant. According to the case of the appellants, the second appellant executed a Gift Deed in favour of the first appellant. The second appellant is the widow of late Ramchandra. The original defendant by filing a written statement contended that the transaction was of out and out sale with an option to repurchase. It was contended that time of ten years provided in the document was the essence of the contract. The defendant also disputed the fact that the appellants are entitled to file the suit. It was contended that the suit property was an inam land and inam or watan was abolished by the Bombay Pargana and Kulkarni Watans (Abolition) Act, 1950. It was contended that the mortgagor i.e the said Ramchhandra did not pay 4 occupancy price payable under the said Act of 1950 for obtaining re-grant of the property and the amount was paid by the defendant and re-grant of the suit property was obtained by the defendant in the year 1960 by paying occupancy price. It was contended that on account of failure of predecessor of the appellants to pay occupancy price, the land was resumed by the government and subsequently it was re- granted in favour of the defendant as he paid occupancy price. It was submitted that the government was a necessary and proper party to the suit. 4. The trial Court dismissed the suit. However, the trial Court held that the suit transaction was in the nature of a mortgage. The trial Court held that the appellants were entitled to maintain the suit in their capacity of the legal representatives of late Ramchandra. The trial Court also held that the State Government was neither a necessary nor a proper party to the suit. The trial Court, however, held that there is a default on the part of the late Ramchandra in paying the occupancy price and therefore, the land stood resumed by the Government. The trial Court held 5 that as the defendant by paying the amount got the suit property re-granted in his favour, the appellants were not entitled to decree for redemption. The trial Court did not accept the argument that the defendant had received benefit by re-grant which was for and on behalf of the mortgagor. The trial Court thus held that the appellants have lost their right of seeking redemption. 5. In the appeal preferred by the appellants before the District Court, a finding was recorded that the right of the appellants to redeem the suit property has been extinguished by the provisions of the Bombay Pargana and Kulkarni Watans (Abolition) Act, 1950 (hereinafter referred to as the Abolition Act). It must be stated here that the learned District Judge in the judgment noted that before the District Court the respondent i.e the original deendant did not dispute that the appellants were the legal representatives of the mortgagor Ramchandra. The learned District Judge also noted that the defendant did not dispute the finding of the trial Court that 6 the transaction dated 14th May 1947 was a mortgage transaction. Thus, the only objection of the defendant to the prayer for grant of decree of redemption of mortgage was on the ground that the mortgagor or his heirs did not pay necessary amount for re-grant of the suit property and after payment of necessary amount by the original defendant, the suit property has been granted in favour of the defendant who has become the owner thereof. The District Court held that by virtue of the resumption of the suit property under the Abolition Act and its re-grant under the said Act in favour of the defendant the right of the appellants to redeem the mortgage shall be deemed to have been extinguished. 6. The second appeal was admitted on 25th November 1987. This Court while admitting the appeal observed that grounds 6, 9 and 10 involved substantial questions of law. The said grounds read thus: 6. The learned District Judge failed to note that even though the suit property was watan property and was resumed under `The Bombay Pargana Watan Abolition Act' and even though the regrant order was passed in favour 7 of the defendant, it does not mean that either ownership or title vested in the respondent and the appellant were deprived of all their rights, interest and title in the mortgaged property. 9.The learned Judge failed to note that the respondent had never got ownership of the suit property, that the respondent was only an agent or trustee of the appellants and that whatever the respondent did in connection with the regrant proceedings had done either in the capacity of an agent or the trustee of the appellants. 10.The learned Judge erred in holding that of the watandar or the appellants to pay the occupancy price after the coming into force of the Abolition Act extinguished the relation of appellants and respondent as the mortgagor and mortgagee respectively without specifying any particular provision of any particular Act. 7. The learned counsel appearing for the appellants placed reliance on a decision of the Apex Court in the case of Jayasingh Dnyanu Mhoprekar and another Vs. Krishna Babaji Patil and another [(1985) 4 Supreme Court Cases 162]. He submitted that the original defendant could obtain re-grant in his favour only on the basis of his possession as a mortgagee. He submitted that the original defendant was holding the mortgaged property for the benefit of the mortgagor and thus the original defendant was in a fiduciary position in respect of the rights acquired by way of re-grant. He placed reliance on 8 section 90 of the Indian Trusts Act, 1882 (hereinafter referred to as the Trusts Act). He also placed reliance on another decision of the Apex Court in the case of Namdev Shripati Nale Vs. Bapu Ganapati Jagtap and another in Civil Appeal No.172 of 1980. He submitted that by virtue of redemption of the suit property under the Abolition Act and by virtue of re-grant of the suit property in favour of the original defendant, the rights of the appellants as mortgagors are not at all extinguished. He submitted that the re-grant was naturally for the benefit of the mortgagor as but for the possessory mortgage, the original defendant could not have obtained re-grant. 8. The learned counsel appearing for the respondents submitted that both the aforesaid decisions of the Apex Court have no application to the present case considering the peculiar facts of the case. He submitted that one Laxmibai was the original watandar who had inducted the mortgagor Ramchandra as a permanent mirashi tenant of the suit property. He pointed out that the suit mortgage was executed on 14th May 1947. He submitted that admittedly the original defendant was placed in possession of the suit property under the said mortgage. The Abolition Act 9 came into force on 25th January 1951 by which the watan was abolished. He pointed out that by virtue of section 4(1) of the Abolition Act, the holder was required to pay re-grant amount on or before 30th April 1956. As per the Deed of Mortgage, the mortgage money was payable by the appellants on or before 13th May 1956 which was not paid. He placed reliance on government circular dated 17th May 1956 which provided that the resumed watan lands which have not been granted to the ex-holder should be granted to the persons in actual possession of the land on payment of occupancy price. He pointed out that government circular dated 03rd May 1957 provides that as per circular dated 02nd February 1953 a person who has acquired permanent tenancy rights in possession is entitled to re-grant on payment of occupancy price. He submitted that on the date on which the Abolition Act came into force, the mortgagor Ramchandra who claimed to be a mirashi tenant of the watandar Laxmibai was not in possession as he had already parted with possession under the mortgage. Therefore the occupancy price has been paid by the original defendant in his capacity as a person in actual possession. He submitted that the defendant has paid by the amount of occupancy price in his capacity as a person in actual possession. He 10 submitted that the defendant has not paid the occupancy price as mortgagee of the appellants. He submitted that the original defendant obtained re-grant of the suit property not as a mortgagee but on the basis of his right as a person actually in possession. He submitted that the appellants were never entitled to re-grant as their predecessor Ramchandra was not in possession on the date on which the Abolition Act came into force. He submitted that only the watandar Laxmibai could have claimed the re-grant. The learned counsel sought to distinguish the decision of the Apex Court in the case of Jayasingh (supra) by pointing out that this was a case where the mortgagor who was a permanent mirashi tenant was in possession on the date on which Abolition Act came into force. He placed reliance on certain observations made by the Apex Court in the decision in the case of Dattatraya alias Prakash and others Vs. Krishna Rao alias Lala Saheb Baxi through legal representatives and others (1993 Supp (1) Supreme Court Cases 32). He, therefore, submitted that the District Court has rightly held that the appellants were not entitled to a decree of redemption of mortgage. 9. I have given careful consideration to the 11 submissions. It will be necessary to refer to the decision of the Apex Court in the case of Jayasingh Mhoprekar (supra). This was a case where the 1st plaintiff and his brother were holding a half share in the suit lands admeasuring 22 acres and 13 gunthas as permanent mirashi tenants and were in actual possession of their share in the said lands. On 20th May 1947 the plaintiff no.1 and his brother executed a mortgage in favour of two persons, namely, Dnyanu Mhoprekar and Ananda (2nd defendant) by which they mortgaged their share in the suit lands with possession. The 1st defendant was the son of said Dnyanu Mhoprekar. The suit for redemption was filed by the plaintiffs in the year 1965. The stand taken by the 1st defendant was that after the abolition of watans, the suit lands have been granted in favour of Dnyanu and the 2nd defendant after receiving occupancy price in February 1964. A specific contention was raised that in view of the said re-grant, the right of mortgagors and/or their legal representatives to redeem the mortgage has been extinguished and the said Dnyanu and the said defendant have become absolute owners of the suit lands. The trial Court dismissed the suit. The District Court in an appeal reversed the decree and passed a decree. A Second Appeal was preferred before 12 this Court which was dismissed and the defendants filed an appeal before the Apex Court. In paragraph 5 the Apex Court considered the provisions of sections 4 and 4A of the Abolition Act as regards re-grant. While dealing with the facts of the case the Apex Court held thus: ... After the Act came into force, the Paragana Watan which comprised the mortgaged property also came to be abolished. It appears that the holders of the watan i.e the members of the Deshmukh family did not pay the occupancy price as provided in Section 4 of the Act within the prescribed time and apply for the occupancy right. Thereupon action was taken by the State Government to grant the lands in favour of the persons who were in actual possession thereof in accordance with the directions contained in the Order passed by the State Government in G.R.R.D. No.PKA-1056-IV-L dated May 3, 1957 and in G.R.R.D. No.2760- III-48810-L dated November 23, 1960 which directed that wherever the holder or the watandar had failed to pay the occupancy price as required by Section 4(1) of the Act before the prescribed period the lands in question should be granted in favour of the permanent Mirashi tenants who were in actual possession of such lands. In those proceedings the plaintiffs who were permanent Mirashi tenants of the half share in the lands covered by the survey numbers in question deposited in the Government Treasury on July 29, 1963 as per challan Ex.45 Rs.182.41 being the requisite occupancy price equivalent to 24 times the assessment requesting that the grant should be made in their favour. The defendants and Pandu Krishna who were in possession of the entire extent of land covered by the survey numbers also deposited the occupancy price claiming the whole land, that is, both the one-half share of the plaintiffs which had been mortgaged by them and the other half share which Pandu Krishna 13 had acquired from Ganu Vithu and Pandu Vithu the other branch of the plaintiff's family. The Prant Officer instead of granting the one-half share of the land which belonged to the plaintiffs in their favour ordered that the entire extent of land measuring 22 Acres and 13 Gunthas should be granted in favour of the defendants and Pandu Krishna as they were in possession of the whole land by his order dated February 5, 1964 in WTN/LGL/SR-772. ... 10. In paragraph no.6 of the judgment, the Apex Court observed that the only question which arose for its decision was that whether by reason of grant made in favour of the defendants, the right of the plaintiff to redeem the mortgage can be treated as having been extinguished. In the further part the Apex Court has held thus: ... 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 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 . It is no doubt true that the father of the first defendant and the second defendant have been 14 granted occupancy right by the Prant Officer by his order dated February 5, 1964 along with Pandu, the uncle of defendant 1. But it is not disputed that the defendants would not have been able to secure the said grant in their favour but for the fact that they were in actual possession of the lands. They were able to be in possession of the one-half share of the plaintiffs in the lands in question only by reason of the mortgage deed. If the mortgagors had been in possession of the lands on the relevant date, the lands would have automatically been granted in their favour, since even after the coming into force of the Act and the consequent abolition of the watans by virtue of Section 8 of the Act. The question is whether the position would be different because they had mortgaged land with possession on the relevant date. 11. Thereafter, the Apex Court referred to section 90 of the Trust Act. In paragraph no.9 the Apex Court held thus: 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 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 in permanent Mirashi tenants entitled to the grant under the Government orders referred to above. ... (Emphasis added) 15 In the facts of the case before the Apex Court the plaintiffs mortgagors were not the watandars, but they were permanent mirashi tenants of the land as in this case. They had executed possessory mortgage in 1947 i.e prior to coming into force of the Abolition Act. Therefore, the law laid down by the Apex Court will squarely apply to this case. 12. It will be also necessary to refer to the decision of the Apex Court in the case of Namdev Nale (supra). The said decision also arose out of a suit for redemption of mortgage. This was also a case where the plaintiff mortgagor had failed to pay the occupancy price on or before 25th January 1956 as per the provisions of the Abolition Act and on payment of occupancy price, the land was re-granted to the mortgagee. The Apex Court considered the provisions of the Abolition Act. The Apex Court observed thus: ... We are of the view that the occupancy price payable under section 4 of the Act to obtain a regrant, will be covered by the expression `all public charges accruing due in respect of the property', `all other charges of public nature' as specified in sections 65(c) and 76(c) of the Transfer of Property Act respectively. In the absence of a contract 16 to the contrary, during the pendency of the mortgage, when the mortgagee is in possession of the mortgaged property, he was bound to pay or remit the occupancy price under section 4 of the Act for and on behalf of the mortgagor, so as to prevent the happening of the consequences stated in the proviso. . The Apex Court further observed that: ... That was only because the first respondent, as a possessory mortgagee, was in possession of the property. He took advantage of his position as a possessory mortgagee. In so doing he faulted. So, on facts, it is clear that the first respondent obtained re-grant in his favour or obtained an advantage in his favour, by availing himself of his position as a mortgagee. In law, the advantage obtained by the first respondent, the qualified owner, must be held to be for the benefit of the persons interested-the mortgagor- appellant. 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 re-grant. 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 re-grant was obtained in his name by posing himself as a tenant, which was possible only because he was in possession of the land (as 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 Trust 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, 17 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 and anr. Vs Narmada Bala Sasmal and anr. (1962 (1) SCR 290) and by K.K. Mathew, J (as his lordship then was) in Nabia Yathu Ummai vs. Muhammed Mytheen & Ors. (1963 KLJ 1177). The said decisions have our respectful concurrence. 13. Now coming back to the present case, as observed by the District Court in the first paragraph of the judgment, the original defendant did not dispute before the District Court that Ramchandra, the predecessor of the appellants was the mortgagor and the original defendant was the mortgagee and the transaction dated 14th May 1947 between Ramchandra and the original defendant was a mortgage transaction. Thus, before the District Court the original defendant did not dispute that there was a mortgage executed by deceased Ramchandra in favour of Shankar (father of the 1st respondent). It is not in dispute that the entry of the predecessor of the respondents in the suit property is only in his capacity as the mortgagee under the mortgage dated 14th May 1947. The respondents have not claimed that the original 18 defendant was in possession of the suit property in any other capacity save and except as the mortgagee thereof. As a mortgagee, the original defendant was a person in actual possession and therefore the original defendant could obtain re-grant in his favour. As stated earlier, a submission was sought to be made that the original defendant paid occupancy price and obtained re-grant not in his capacity as the mortgagee but in his capacity as the person in actual possession as per the government Circular/G.R. dated 17th May 1956. In the case of Jayasingh Mhoprekar