Case: Mathuralal Vs. Keshar Bai And Another

1. This is an appeal by special leave from a judgment of the Madhya Pradesh High Court dated 6th February 1967 dismissing a Second Appeal by the appellant before this Court against a decree passed by the Additional District Judge of Ratlam for ejectment of the appellant from a house mortgaged by the predecessor-in-interest of the appellant to one Kesharimal for Rs. 3,100/- and further decreeing a claim for arrears of rent amounting to Rs. 731-35 and mesne profits at the rate of Rs. 20/- per month until eviction2. The relevant facts are as follows. On July, 29, 1945 Mathuralal, predecessor-in-interest of the appellant, mortgaged his house in Ratlam to Kesharimal for a sum of Rs 3,100/ with possession. The deed of mortgage contained the following terms :-1. That interest would run on Rs, 3,100/- at Re. 0-10-0 per cent per mensem till realisation2. The period of redemption would be two years3. During the period of mortgage. "the tenant as may be shall execute the rent notes in favour of the mortgage and whatever rent shall be realised will be credited in lieu of interest and if the amount of rent shall exceed the amount of interest, the difference shall be deducted from the original sum due, but if the amount of interest shall exceed the amount of interest, the difference shall be deducted from the original sum due". But if the amount of interest shall exceed the amount of rent, then the mortgagor shall pay it4. Notwithstanding any vacancy during the period of the mortgage the rent would continue5. During the period of the mortgage an account of the rent and interest shall be settled after every six months6. The mortgagor undertook to keep the house in repairs during the period of the mortgage and in default of repairs by him the mortgagee was to be entitled to execute the necessary repairs and add the cost to his dues7. "The burden of the mortgage money shall be on the mortgaged house. In case the amount is not realised from the house, the mortgagee shall have a right to take steps to realise his money" from the mortgagor and his property of every kind3. On the same day the mortgagor executed another document in favour of the mortgagee reciting that his house in Ratlam was mortgaged with possession to the creditor who was "having its possession" and the mortgagor had taken the same on rent at Rs. 20 Per month on the following terms :-1. The executant would pay the rent every month regularly and in default of payment of two months rent the mortgagee would be entitled to get him evicted2. The executant would white-wash and repair the house and keep it in good condition3. Kesharimal would be entitled to increase or decrease the rent4. The executant would vacate the house whenever asked to do so5. The executant would hand over possession of the house in the same condition in which he had received it4. Kesharimal filed a suit on his mortgage in 1954 and a preliminary decree for sale for the amount of Rs. 5,637-6-0 besides interest at the rate of Re. 0-10-0 per cent per mensem for six months on the sum of Rs. 3,600 was duly passed. The defendant was directed to pay the full amount of the decree before the 24th May 1955 and in case of his doing so the property was to be released from the mortgage and the plaintiffs were to hand over all the documents which they had in their possession, but in case of failure to pay the plaintiffs would be entitled to file an application for the execution of the decree and get the property auctioned; and in case of non-satisfaction of the decree by the sale, the plaintiffs were to be at liberty to recover the balance of the decretal claim by a personal decree against the defendant5. It appears that Kesharimal had died during the pendency of the suit and his legal representatives were brought on record and the preliminary decree passed in their favour. Whatever be the reason no application for a final decree for sale of the property was made within the period fixed under the Limitation Act. The application for this purpose made by the executors to the estate of Kesharimal was dismissed on July 29, 1960 as barred by limitation. On December 27, 1960 the said executors filed a suit for ejectment against the appellant alleging that the rent for the premises had remained unpaid from September 29, 1957 till November 28, 1960. An amount of Rs. 731-75 was arrived at by totalling the rent for the period mentioned and mesne profits from 29th November 1960 to 26th December 1960 at the same rate and incidental charges and expenses and deducting therefrom the rent for two months which was barred by the lapse of time the plaintiffs asked for a decree for ejectment and further mesne profits. The trial Judge dismissed the suit. But on appeal this was set aside and the plaintiffs claim allowed in full. The High Court in Second Appeal maintained the decree of the appellate Court.

Court's reasoning:
15. The reasoning of the Rajasthan judgment seems to be logical and commends itself to us.In all such cases the easing back of the property arises because of the mortgage with possession but we find ourselves unable to hold that the mortgagee does not secure to himself any rights under the deed of lease but must proceed on his mortgage in case the amount secured to him under the deed of lease is not paid. If the security is good and considered to be sufficient by the mortgagee there is no reason why he should be driven to file a suit on his mortgage when he can file a suit for realisation of the moneys due under the rent note. The position of the creditor is strengthened whereas in this case the interest on the amount of the mortgage is not the same as the rental fixed. If during the continuance of the security the mortgagee wants to sue the mortgagor on the basis of the rent note and take possession himself or to induct some other tenant thereby securing to himself the amount which the mortgagor had covenanted to pay, there can be no legal objection to it. Under the provisions of order 34, Rule 4, he cannot deprive the mortgagor of his right to redeem excepting by proceeding an his mortgage. Although we express no final opinion on this point it may be that a mortgagee who secures a decree for payment of arrears of rent cannot put the property to sale for realisation of the amount decreed but there can be no objection to his suing for possession if the rent note entitles him to do so. So long as the mortgagor had a right to redeem the mortgage he can always pay off the mortgagee and get back possession. This position would continue so long as the property is not sold under a final decree for sale under the provisions of Order 34,Civil P. C16.In our opinion the second con tension put forward on behalf of the appellant has no force. The rights of a mortgagee do not merge in his rights under the preliminary decree for sale. As already mentioned, the mortgagee lost his right to recover the money by sale of the mortgaged property; otherwise his security remained intact and the mortgagor continued to have his right to redeem the property17. As regards the third point the only statutory provision to which a reference was made was Section 28 of the Limitation Act of 1908 which provided that:"At the determination of the period hereby limited to any person for instituting a suit for possession of any property, his right to such property shall be extinguished"If the right of the mortgagee arose on the strength of the rent note which continued to be in force notwithstanding that the period for applying for a final decree for sale had expired, there could be no extinction of his right to sue for possession because of Section 28 of the Limitation Act.