A JAYASINGH DNYANU MllOPREKAll & ANR.

KRISHNA llAllAJI PATIL & ANR.

JULY 17, 1985"

[E.S.VENKATAIW!IAH AND R.B.MISRA, JJ.]

Mortgage - Redemption of mortgage - Right to redeem the mortgage, extinguishment of - Whether by virtue of the granf of mortgage lands by the Prant Officer to the mortgagees in physical possession under section 8 of the Bombay Paragana and Kulkarni Watans (Abolition) Act, 1950, the right of mortgagees and/or c their legal representatives to redeem the mortgage had become extinguished - Bombay Paragana and Kulkarni (Abolition) Act, 1950 sections 3 (4),4-A and 8 read with section 90 of the Indian Trust Act, 1882, scope of.

Krishna Bsbaji Patil, respondent No.l herein and his brother Bendu Bsbaji Patil were holding a half-share in the lands D bearing survey numbers 221/1,222/2,226/8 and 226/12 in all measuring 22 Acres and 13 Gunthas situated at Monja Shirai, Peta Shirola, District Sangli in !Wlarashtra, as permanent Mirasi tenants and were in actual possession of their share in the said lands. The lands in question were Paragana Watan lnam lands and the Watandars belonged to the family of Kokrudkar Deshmukhs • On E May 20, 1947 they executed a mortgage deed in favour of two

persons by name Dnyanu Krishna Mhoprekar and Ananda Santu Mhoprekar mortgaging their share in the above lands with possession by way of security for a loan of Rs.1,000 which they borrowed under the mortgage deed. The mortgage deed was for five years. The mortgagees were entitled to appropriate the income F f.rom the 1110rtgaged property towards interest. ·

During the subsistence of the mortgage, the Bombay Paragana and Kulkarni Watans {Abolition) Act, 1950 Bombay Act No. 50 was passed under which all the Paragana and Kulkarni Watans were abolished and the State Government resumed the watan lands.

' G Dnyanu Krishna Mhoprekar, one of the mortgagees died in or abou:

the year 1955 leaving behind him Jayasingh Dnyanu Mhoprekar, the appellant 1 herein as his heir and the Karta of his joint family.

Bandu Babaji Patil, one of the mortgagors also died iI) the year 1955 leaving behind him three sons, plaintfff No. 1 being the Karta of the family.

J.D.MHOPREKAR v. K.B.PATIL 309

After the coming into force of the Watans Abolition Act, A the holders of the Watan i.e. the members of the Deshmukh family did not pay the occupancy price as provided in section 4(1) of the Act within the prescribed time and apply for the occupancy right of such lands. Thereupon in the proceedings initiated to grant the lands in favour of the penaanent Mirasi tenants. who were in actual possession thereof, the respondents, who were B permanent Mirasi tenants of the half-share in the lands covered by the survey numbers in question deposited in the Government Treasury on July 29, 1963 a sum of 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 appellants mortgagees and their heirs in possession of the half-share and C another Pandu Krishna who by virtue of the sale deed, by the other branch of the respondent 's family in his favour is in, possession of the other half share in the lands also deposited the occupancy price claiming the whole land.

The Prant Officer, by his order dated February 5,1964, D instead of granting occupancy right in respect of the one-half 9li:are of the land which belonged to the respondents in their favour ordered that l:he entire extent of land measuring 22 Acres and 13 Gunthas should be granted in favour of the appellants and one Pandu Krishna as they were in physical possession. The respondents questioned the said proceedings before higher authorities and pending a decision thereat, made an abortive attempt E to redeem the mortgage in a proceeding under section 83 of the Transfer of Property Act, 1882 in. Miscellaneous Application No.41: of 1963. Thereafter, the respondent instituted a suit for redemption in Regular Civil Suit No.67 of 1965 on the file of the Civil Judge, Junior Divison, Islampur. In the written statement, it was pleaded inter alia that since after the abolition of the watans, F the mortgaged -i:aiids had been given to the appellants by the Government after . receiving the occupancy price amount! ng to Rs.364.81 on February 5, 1964 the right of the mortgagors and/or their legal representatives to redeem the mortgage had become absolute owners of the suit lands. After the trial, the suit was dismissed bY the Civil Judge, Aggrieved by the decree of the G Trial Court, the respondents preferred an appeal before the District Court, Sangli in Civil Appeal No. 278 of 1966. In that appeal the decree of the trial Court was reversed and a decree for redemption was passed. Under that decree the respondents were directed to pay, in addition to the amount of Rs.1,000 borrowed under the mortgage deed a sum of Rs.182.41 which was equivalent H to one-half of the amount paid by appellant No. 1 and others in

SUPHEME COURT REPORTS [1985] SUPP.2 s.c.R.

A order to obtain the grant from the Government. Accordingly an appropriate preliminary decree was drawn up under order XXXIV, Rule 7 of the Code of Civil Procedure. Aggrieved by the said decree the appellants filed a second appeal before the High Court of Bombay in SA No. 37 of 1969 which was dismissed on rch 3, 1971 and thus the decree made by the first appellate court was ll affitined. Hence the appeal by special leave.

Dismissing the appeal, the Court

HELD 1.1 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 the right can take place by a C contract between the parties, by a merger or by a statutory provision which debars the mortgagor from redeeming the mortgage. A OXlrtgagee who has entered into possession of the mortgaged property under a mortgage' will have to give up possession of the property when a 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 D flows from the legal principle which is applicable to all mortgages, namely "Once a mortgage, always a mortgage." [315

D-11,

316 A]

1.2 It is no doubt true that the father of the first appellant and the second appellant have been granted occupancy E right lly the Prant Officer by his order dated February 5, 1964 along with Pandu, the uncle of appeltant No. l.

But the appellants 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 respondents in the lands in question only by reason F of the mortgage deed.

If the mortgagors had been in posssession of the lands on the relevant date, the lands would have automatically been granted in their favour, since the right of the tenants in the watan lands were allowed to subsist even' after the coming into force of the Act and the consequent abolition of the watans by virtue of section 8 of the Bombay Paragana and Kulkarni G Watans (Abolition) Act,1950. The fact that they had mortgaged land with possession on the relevant date would not make their position any different. [316 A-DJ

l.3 Section 90 of the Indian Trusts Act, 1882 clearly shows that if a mortgagee by availing himself of his position as_ H a mortgagee gains an advantage which would be in derogation of the right of a mortgagor, he has to hold the advantage so derived

J, D.MllOPl\EKAR v. K.B.PATIL [VENKATARAMIAll, J.j 311

by him for the benefit of the mortgagor. Section 90, therefore,. casts an obligation on a mortgagee to hold the rights reqllired by him in the mortgaged property for the benefit of the mortgagor in such circumstances as the mortgagee is virtually in a fiduciary position in respect of the rights so acquired 8nd he cannot be allowed to make a profit out Of the transaction. [317

C-D, F-GJ

In this case the mortgagees i.e. Dnyanu, and Ananda could each get l/ 4th share in the total extent of land measuring 22 Acres and 13 Gunthas only. by availing themselves of their position as mortgagees. 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 the permane11t Mirasi tenants entitled to the grant under the Government orders. The appellants could not have asserted their right to the grant of the land when the plaintiffs had deposited the requisite occupancy price well in time. The mortgagees obtained the grant in their favour by making an incorrect representation to the Gov.ernment that they were permanent Miras! tenants although they were only mortgagees. As such the appellants sre liable to surrender the advantage they have derived under the grant in favour of the respondents even if the order of grant has become final before the Revenue authorities, of course, subject to the payment of the expenses incurred by them in securing the grant. [317 D-F, G-ti]

CIVIL APPELLATE JURISDICTION Civil Appeal No. 1599(N) of 1971.

From the Judgment and Order dated 3.3.1971 of the Bombay High Court in S.A. No. 37 of 1969.

P.H. Parekh, C.S. Singh and Miss Indu Malhotra for the Appellants.

V.A. Bobde, A.G •. Ratnaparkhi and Miss A. Chauhan for the G Respondents.

The Judgment of the Court was delivered by

VENKATARAMIAH, J.

This appeal by special leave arises out of a suit for redemption. Krishna Babaji Patil (Plaintiff No.l) H and his brother Bandu Babaji Patil were holding a half share in the lands bearing Survey Nos. 221/1, 222/2, 226/8 and 226/12 in

A all measuring 22 Acres and l3 Gunthas sltuateq at Monje Shirai, Peta Shirola, Distri~.t Sangli as permanent Mi.rasi tenants and were in actual possession of their sha•~ .in the said lands. The lands in question were Paragana Watan Inam lands and the Watandars belonged .to the fami1y of Kokrudkar Deshmukhs. On May 20, 1947 Krishna Ba, baji Patil (Plaintiflf No. 1) apd llandu Babaji li Patil executed a mortgage cjeed in favour of two persons by ruune Dnyanu Krishna Mhoprekar and .Ananda Santu Mhoprekar (Defendent No, 2) mortgaging thel.r share in the above lands with possession by way of security for a loan of Rs .1000 which they borrowed under th" mortgage deed. The mortgage was for five years• The mortgagees were entitled to appropriate the incdme from themort-

' ' gaged property towards interest. Dnyanu Krishna Mhoprekar, one of C the mortgagees, died in or about the year 1953 leaving beh:lnd him Jayasingh !Jnyanu Mhoprekar, (Defendant No. l) as his heir and the 'Karta' of his joint family, Bandu Babaji Patil, one of the mortgagors, referred to above, died in the year 1955 leaving behind him his son plaintiff No. 2 and two other sons as his ;

heirs. Plaintiff No. 2 is the 'Karta' of that branch of the family.

The remaining orue-half share in the lands comprised in the above Survey Numbers belonged to Ganu Vithu and Pandu Vithu who were members of the other branch of the family of the mortgagors.

They had also mortgaged their share in favour of one Pandu Krishna who was no other than the brother of Dnyanu and the father of Ananda Santu Mhoprekar (Defendant No. 2). Defendant No. 2 had, however, been given in adoption to Sarttu. Subsequently Ganu Vithu and Pandu Vithu sold their share in favour of the motgagee Pandu Krishna. Thus the family of the defendants was in possession of both the shares in the lands bearing Survey Nos. 221/l, 222/2, 226/8 and 226/12.

The plaintiffs instituted the suit for redemption in Regular Civil Suit No. 67 of 1965 on the .file .of the Civil Judge, Junior Divison, lslampur out of which this appeal arises after an abortive attempt to redeem the mortgage in a proceeding under section 83 of the Transfer of Property Act, 1882 in Miscellanous G Application No.li4 of 1963. The suit was resistd by the defendants. In , the written statement filed by the Defendant No.l it was pleaded inter alia that since after the bolition of the

~~ ~- I Watans the mortgaged lands had been granted in favour of Dnyanu (the father of defendant No. l Jayasingh), Ananda (Defendant No.2) and Pandu Krishna (brother of Dnyanu) by the Govermnent Ii after receiving the occupancy price amounting to Rs.364.81 on

..,

J.D.MHOPREKAR v. K.B.PATIL

[VENKATARAMIAH, J. J 313

February 5, 1964 the right of the mortgagors and/or their legal representatives to redeem the mortgage had become extinguished and that the grantees of the land had become absolute owners of the suit lands. After the trial, the suit was dismissed by the Civil Judge. Aggrieved by the decree of the Trial Court, the plaintiffs preferred an appeal before the District Court, Sangli in Civil Appeal No. 278 of 1966. In that appeal which was heard by the Assistant Judge, Sangli the decree of the Trial Court was reversed and a decree for redemption was passed. Under that decree the plaintiffs were directed to pay, in addition to the amount of Rs .1, 000 borrowed under the mortgage deed a sum of Rs.182.41 which was. equivalent to one-half of the amount paid by defendant N0.l and others in.order to obtain the grant from the Government. Accordingly an appropriate preliminary decree was drawn up under Order XXXIV, Rule 7 of the.Code of Civil Procedure.

Aggrieved by .the decree of the learned Assistant Judge, Sangli, the defendants filed a second appeal before the High Court of Bombay in S•A No. 37 of 1969. The Second Appeal was dismissed on March 3, 1971 .and the decree made by the first appellate court was affirmed.

This appeal by special leave is filed against the judgment and decree of the High Court.

Admittedly , the lands in question were comprised in a Paragana Watan.

Under the Bombay Paragana and Kulkarni Watans (Abolition) Act, 1950 (Bombay Act No. 50 of 1950) (hereinafter

referred to as 'the Act') all the Paragana Watans were abolished.

E Section 3 of the Act provided :

"3. With effect from and on the .appointed day, notwithstanding anything contained in any law, usage,

setlement, grant, sanad or order -

(1) all Paragana and Kulkarni watans shall be deemed to have been abolished;

(2) all rights to hold office and any liability to render service appertaining to the said watans are

hereby extinguished; G

(3) subject to the provisions of section 4, all watan land is hereby resumed and shall be demed to be subject to the payment of land revenue under tbe provisions of the Code .and the rules made thereunder as if it were an unalienated land: H

SUPREME COURT REPORTS (1985] SUPP.z s.c.R.

I A Provided that such resumption shali not affect the ' ' validity of any alienation of such W'iotan land made in accordance with the provisions of section 5 of the Watan Act or the rights of an alienee thereof or any person claiming under or through him; I

(4) all incidents appertaining to the said watans are ' hereby extinguished."

Section 4 of the Act provided that a watan land resumed under the provisions of the Act should subject t!o the provisions of section 4A thereof be regranted to the holdet of the watan to which it appertained on payment of the occupancy price equal to C twelve times of the amount of the full assessment of such land within five years from the date of the coming into force of the Act and the holder sho~Lld be deemed to be an oc9upant within the meaning of the Bombay Land Revenue Code, 1879 in respect of such land and would primarily be liable to pay land revenue to the State Government in accordance with the provisions of the said

Code and the rules made thereunder. Under the ffrst proviso to sub-section (1) of section 4 the occupancy prce payable was fixed at six times the amount of the full asseksment of such land in certain cases.

The second provis6 to sub-section '

(1) of section 4, however, provided that if the holder failed to pay the. occupancy price within a period of five years, as provided therein, he should be deemed to be, unauthorisedly occupying the land and would be liable to be summarily ejected in accordance with the provisions of the Bomblty Land Revenue Code.

Section 8 of the Act provided that if any watan land had been lawfully leased and such lease was subsisting on the appointed day, the provisions of the Bombay tenancy and Agricultural Lands Act, 1948 would apply to the said lease anti the rights and liabilities of the holder of such land and te tenants would subject to the provisions of the Act be governed by the provi- ' sions of the liombay Tenancy and Agricultural Lands Act, 1948.

After the Act came into force, the Paragana watan which comprised the mortaged property also came to be abolished.Jlt appears that the holders of the watan i.e. the members of the Deshmukh family did not pay the occupancy price as provided in ection 4 of the Act within the prescribed time and apply for the 6ccupancy 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 wtth the directions contaied in the Order passed by the State Government in 'G.R.R.D. Nof PKA-1056-IV-L dated May 3, 1957 and in G.R.R.D. No. 2760-U~-48810-L dated November 23, 1960 which directed that wherever the holder or the

J.D.MHOPREKAR v.' K.B.PATIL

[VENKATARAMIAH, J.] 315

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 Mirasi tenants whb were in actual possession _of suc_h lands. In those proceedings the plaintiffs who were permanent Mirasi 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 halt share which Pandu Krishna .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 th.eir 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/SR772.

He, however, ordered that Dnyanu (father of defendant No. l) would get 1/4 share, Ananda ((Defendant No. 2) l/4 share and Pandu Krishna the remaining 1/2 share. It may be noted that Dnyanu was dead by then. But his son defendant No.l claimed that he should be treated as the grantee in his father's place.

The plaintiffs having questioned the said proceedings before higher authorities, no final decision appears to have been given yet. , It appears. that a final judgment _in those civil proceedings is awaited by the revenue authorities as can be seen from t_he letter dated December 3, 1965 (Ex.43)and the letter dated June 6, 1966 (Ex.44) written by the Mahalkari of Shirala during the pendency. of the suit which has given rise to this appeal.

The only question which arises for decision in this case is whether by reason of the grant made in favour of the def endailts

the right to redeem the mortgage can be treated as having become extinguished. 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 the right can take place by' a contract between the parties, by a W.erger or by a statutory. provision which debars the mortgagor from redeeming the mortgage.

A mortagee who has entered into possession of the mortgaged property under a mortgage will have to give up possession of the

property when a 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 either valid ground.

This flows from the legal principle which is applicable to all mortgages, namely "Once a wrtgage, always a mortgage".

It is no doubt true that the father of the first defendant-and the second defendant have been granted occupancy right by the Prant Officer by his order dated February 5, 1964 along with, Pandu, the uncle of defendant , No. l. 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 tre one-half share of the pl'.!.intiffs 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 the rights , of the tenants in the watan lands were allowed to subsist 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.

the At this stage it is appropriate to refer to section 90 of Indian Trusts Act, 1882 which reads as unde: :-

"90. Advantage gained by qualified owner - Where a tenant for life, co-owner, mortgagee or other quali~ fied owner of any property, by availing himseH of his position as such, gains an advantage in derogation of the rights of the other persons interested in the property, or where any such owner, as representing all persons interested in such property, gains any advantage, he must hold, for the benefit of all persons so interested, the advantage so gained but subject to repayment by such persons of their due share of the expenses properly incurred, and to an indemnity by the same persons against liabilities properly contracted, in gaining such adavantage."

Illustrations (b) and (c) to section 90 of the Indian Trusts Act, 1882 read thus:

"(b) A village belongs to a Hindu family, A, one of its members, pays aazrana to Government and thereby procures hls name to be entered as the inamdar of the

J.D.Ml!OPREKAR V• K.B.PATIL [VENKATARAMIAfl, J.] 317

village. A holds the village for the benefit of him- A self and the other members.

(c) A mortgages land to B, who enters into possession.

B allows the Government revenue to fall into arrar with a view to the land being put up for sale and his

becaning himself the purchaser of it. The land is B accordingly sold to B. Subject to the repayment of the amount due on the mortgage and of his P.xpenses properly incurred as mortgagee, B holds the land for the benefit of A."

An analysis of section 90 of the Indian Trusts Act, 1882 set C 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 .illOrtgagor, 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 lridian Trusts Act, 1882 are satisfied in this case.

D The mortgagees i.e. Dnyanu, the father o{ defendant No. l and Ananda the second defendant could each get 1/ 4th share in the total extent of iland measuring 22 Acres and 13 Gunthas only by availing themselves of their position as morgagees.

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 E mortgagors who wer~ the permanent Mirasi tenants entitled to the grant under the Government orders teferred to above.

The defendants could not have asserted their right to the grant of the land when the plaintiffs had deposited the requisite ucc•Jpancy price well in time. It is seen that the mortgagees obtained the grant in their favour by making an incorrect representation F to the Government that they were permanent Mirasi tenants although they were only mortgagees.

Section 90 of the Indian Trusts Act, 1882 clearly casts an obligation on a mortgagee to hold the rights acquired by him in the mortgaged property for the benefit of the mortgagor in such circumstances as the mortgagee is virtually in a fiduciary position in respect of the rights so G acquired, and he cannot be allowed to make a profit out of the transactiOn.

The defendants are, therefore, liable to surrender the advantage they have derived under the grant in favour of the plaintiffs even if the order of grant has become final before the Revenue authorities, of course, subject to the payment of the expenses incurred by them in securing the grant.

The decree of H

A the 1st appellate court accordingly has directed that Rs.182.41 should be paid by the plaintiffs to the defendants alongwith the mortgage money.

It was, however, argued on behalf df the appellants before B us that since Pandu Krishna, the other grantee, has npt been impleaded no relief can be granted to the plaintiffs. There is no merit in this contention because the order of the Prant

Offier makes the grant in specific shares. Dnyanu, the father of defendant No. 1 and Ananda (defendant No. 2) are granted 1/4 c share each and only the remaining 1/2 share is given to Pandu Krishna. We are concerned in this case' only with the half share granted in favour of the.mortgagees. This decree relates only to that one-half share which had been mortgaged. Pandu Krishna, the other grantee, can have no interest in the one-half share which D is the subject matter of these proceedings. This contention is, therefore, rejected.

The High Court was, therefore, judgment of the first appellate court. is dismissed with costs.

S.R.

right in affirming the The appeal fails and it

Appeal dismissed.