Judgment Case ID: 1176

Judgment:
Appeal No. 119 of 1957. Appeal by special leave from the judgment and decree dated March 3	 1955	 of the Orissa High Court in Appeal No. 593 of 1950. B. Patnaik	 for the appellants. D. N. Mukherjee	 for the respondents. March 14. The Judgment of the Court was delivered by SUBBA RAO	 J. This is an appeal by special leave against the judgment of the High Court of Judicature for Orissa dated March 3	 1955	 setting aside the judgment of the Court of the District Judge	 Mayurbhanj	 and restoring that of the Subordinate Judge	 Baladore. The facts leading up to this appeal may be briefly stated. The land in dispute originally belonged to one Bhagaban Parida. On July 16	 1924	 he executed a registered kabala 'for a ' consideration of Rs. 2	000 in favour of one Priyanath Sasmal. On June 2	 1928	 Priyanath Sasmal executed a usufructuary mortgage bond (exhibit B) for Rs. 1	500 in favour of 292 Lakshminarayan Pani	 the father of the appellants herein. Under the terms of the said usufructuary mortgage	 the mortgaged property was put in possession of the mortgagee. One of the terms of the mortgage deed was that the initial responsibility for the payment of rent was that of the mortgagor and that	 if for any reason he did not pay the arrears of rent	 the mortgagee was under an obligation to pay off the arrears to the landlord and to obtain a receipt acknowledging the payment. The mortgagee did not pay the arrears of rent	 with the result that for arrears of rent the said property was brought to sale and ultimately purchased by the mortgagee for a sum of Rs. 300 on September 22	 1936. The sale was confirmed on November 4	 1936	 and the mortgagee took possession through Court on December 21	 1938. The mortgagor filed a suit against the mortgagee in the Court of the Subordinate Judge	 Balasore	 for redemption of the mortgage and for possession. As the mortgagor died after the filing of the suit	 his widow and son were brought on record as his legal representatives. The defence of the appellants to that suit was that possession was not delivered to their father	 the mortgagee	 under the terms of the mortgage deed	 that the debt was discharged	 that their father had purchased the equity of redemption in execution of the rent decree	 and that the mortgagor had no longer any right to sue him for redemption. The learned Subordinate Judge and	 on appeal	 the District Judge concurrently found that in fact possession was delivered to the mortgagee on the basis of the mortgage deed and that the plea of discharge was not true; but	 while the trial court held that after the purchase of the property by the mortgagee in execution of the decree for rent he was holding the	 property only on behalf of the mortgagor	 the appellate court came to the conclusion that after the said purchase the relationship of mortgagor and mortgagee came to an end; with the result the trial court decreed the suit and the appellate court	 setting aside that decree	 dismissed the suit. The legal representatives of the mortgagor preferred a second appeal to the High Court against the judgment and 293 decree of the District Judge. A division bench of the High Court agreed with the conclusion of the trial court	 set aside the decree of the District Court and restored that of the trial court. Hence the present appeal. Learned counsel for the appellants i.e.	 the legal representatives of the mortgagee	 contended that in execution of the rent decree the mortgagee became the purchaser of the equity of redemption	 with the result that the relationship of mortagor and mortgagee ceased to exist and	 therefore	 the respondents could not sue for redemption and their remedy	 if any	 was to sue for setting aside the sale on the ground of fraud or otherwise. On the other hand	 learned counsel for the respondents contended that	 as the sale was the result of manifest dereliction of duty imposed upon the mortgagee by the terms of the transaction	 the purchase by the mortgagee would only be in trust for the mortgagor and	 therefore	 the suit for redemption was maintainable. To appreciate the rival contentions it is necessary to notice briefly the law on the subject. The relevant section governing the facts of the case is section 90 of the (2 of 1882). The material portion of the section reads	 "Where a mortgagee by availing him	self of his position as such	 gains an advantage in derogation of the rights of the other persons interested in the property he must hold	 for the benefit of all persons so interested	 the advantage so gained	 but subject to the 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 advantage. " Illustration (c) to that section says	 "A mortgages land to B	 who enters into possession. B allows the Government revenue to fall into arrears with a View to the land being put up for sale and his becoming himself the purchaser of it. The land is accordingly sold to B. Subject to the 294 repayment of the amount due on the mortgage and of his expenses properly incurred as mortgagee	 B holds the land for the benefit of A." The following three conditions shall be satisfied before section 90 of the can be applied to a case: (1) the mortgagee shall avail himself of his position as mortgagee; (2) he shall gain an advantage; and (3) the gaining should be in derogation of the right of the other persons interested in the property. The section	 read with illustration (c)	 clearly lays down that where an obligation is cast on the mortgagee and in breach of the said obligation he purchases the property for himself	 he stands in a fiduciary relations ship in respect of the property so purchased for the benefit of the owner of the property. This is only another illustration of the well settled principle that a trustee ought not to be permitted to make a profit out of the trust. The same principle is comprised in the latin maxim commodum ex injuria sua nemo habere debet	 that is		convenience cannot accrue to a party from his own wrong. To put it in other words	 no one can be allowed to benefit from his own wrongful act. This Court had occasion to deal with a similar problem in Sidhakamal Nayan vs Bira Naik (1). There	 as here	 a mortgagee in possession of a tenant 's interest purchased the said interest in execution of a decree for arrears of rent obtained by the landlord. It was contended there	 as it is contended here	 that the defendant	 being a mortgagee in possession	 was bound to pay the rent and so cannot take advantage of his own default and deprive the mortgagors of their interest. Bose	 J.	 speaking for the Court	 observed at p. 337 thus: "The position	 in our opinion	 is very clear and in the absence of any special statutory provision to the contrary is governed by section 90	 Trusts Act. The defendant is a mortgagee and	 apart from special statutes	 the only way in which a mortgage can be terminated as between the parties to it is by the act of the parties themselves	 by merger or by an order of the Court. The maxim "once a mortgage always (1) A.I.R. 1954 S.C. 336. 295 a mortgage" applies. Therefore	 when the defendant entered upon possession he was there as a mortgagee and being a mortgagee the plaintiffs have a right to redeem unless there is either a contract between the parties or a merger or a special statute to debar them." These observations must have been made on the assumption that it was the duty of the mortgagee to pay the rent and that he made a default in doing so and brought about the auction sale of the holding which ended in the purchase by him. The reference to section 90 of the supports this assumption. Learned counsel for the appellants relied upon the decision of the Judicial Committee in Malkarjun Bin Shidramappa Padare vs Narhari Bin Shivappa (1) in support of his contention that a mortgagor cannot seek the relief of redemption without first getting the sale set aside. There	 a mortgaged property was sold in execution of a decree against the mortgagor and the plaintiff neglected or refused to pray that it might be set aside. The Judicial Committee held that an execution sale could not be treated as a nullity if the court which sold it had jurisdiction to do so; and it could not be set aside as irregular without an issue raised for that purpose and investigation made with the judgment creditor as a party thereto. That was not a case where the mortgagee who had an obligation to discharge under the mortgage deed made a default with the result the. property was sold and purchased by the mortgagee himself. The proposition enunciated by the Judicial Committee would apply to a case where the equity of redemption was extingui shed by the court sale. This may apply to a case	 where the mortgagee	 after obtaining leave to bid.	 purchases at a sale in execution of his decree or a decree obtained by a third party. In such a case there may be scope for the argument that the equity of redemption is extinguished and	 therefore	 the mortgagor cannot get relief till the sale is set aside in the manner known to law. But when the sale is (1) (1900) L.R. 27 I.A. 216. 296 brought about by the default of the mortgagee	 the mortgage is not extinguished and the relationship of mortgagor and mortgagee continues to exist and	 therefore	 there will not be any necessity for setting aside the sale. The legal position may be stated thus: (1) The governing principle is "once a mortgage always a mortgage" till the mortgage is terminated by the act of the parties themselves	 by merger or by order of the court. (2) Where a mortgagee purchases the equity of redemption in execution of his mortgage decree with the leave of court or in execution of a mortgage or money decree obtained by a third party	 the equity of redemption may be extinguished; and	 in that event	 the mortgagor cannot sue for redemption without getting the sale set aside. (3) Where a mortgagee purchases the mortgaged property by reason of a default committed by him the mortgage is not extinguished and the relationship of mortgagor and mortgagee continues to subsist even thereafter	 for his purchase of the equity of redemption is only in trust for the mortgagor. Let us now apply the aforesaid principles to the concurrent findings arrived at by the courts below. All the courts concurrently found that in fact possession was delivered to the mortgagee on the basis of the mortgage deed	 exhibit B. They have also found that the plea of discharge taken by the appellants was not true. The High Court found that under the mortgage deed the mortgagee had a duty to pay the arrears of rent to the landlord	 but he made a default in paying the said arrears. The High Court farther held that the sale was the result of manifest dereliction of the duty imposed upon the mortgagee by the very terms of the transaction. The said findings clearly attract the provisions of section 90 of the . In view of the aforesaid principles	 the right to redeem the mortgage is not extinguished and in the eye of law the purchase in the rent sale must be deemed to have been made in trust for the mortgagor. In the promises	 the High Court was right in holding that the suit for redemption was maintainable. 297 No other point was raised before us. The appeal fails and is dismissed with costs. Appeal dismissed.

Summary:
Usufructuary mortgage bond was executed in favour of the father of the appellant who was put in possession of the mortgaged property. One of the terms of the usufructuary mortgage was that in case of failure of payment of rent by the mortgagor	 the mortgagee was to pay off the arrears of rent to the landlord	 which obligation the mortgagee did not honour as a result of which the property was brought to sale and ultimately purchased by the mortgagee. The mortgagor filed a suit against the mortgagee	 the appel lant 's father	 for redemption of the mortgage and !or possession. 	 The defence inter alia was that the mortgagee had purchased equity of redemption in execution of the rent decree and that the mortgagor had no longer any right to sue him for redemption and their remedy	 if any	 was to sue for setting aside the sale on the ground of fraud or otherwise. Held	 that section go of the Trusts Act read with the illustration (c) lays down the principle that no one can be allowed to benefit for his own wrongful act. Held	 further	 that the legal position with regard to mort gagor and mortgagee was that: (1) the governing principle is that "once mortgagee 291 always a mortgagee" till the mortgage is terminated by the act of the parties themselves	 by merger or by order of the Court; (2)where a mortgagee purchases the equity of redemption in execution of his mortgage decree with the leave of court or in execution of a mortgage or money decree obtained by a third party	 the equity of redemption may be extinguished; and	 in that event	 the mortgagor cannot sue for redemption without getting the sale set aside; and (3)where a mortgagee purchases the mortgaged property by reason of a default committed by him the mortgage is not extinguished and the relationship of Mortgagor and mortgagee continues to subsist even thereafter	 for his purchase of the equity of redemption is only in trust for the mortgagor. In the instant case the right to redeem the mortgage was not extinguished and in the eyes of law	 the purchase in the rent sale was deemed to have been made in trust for the mortgagor and the suit for redemption was maintainable. Sidhakamal Nayan vs Bira Naik	 A.I.R. 1954 S.C. 336	 relied on. Malkarjun Bin Shidramappa Pasare vs Narhari Bin Shivappa	 (1900) L.R. 27 I.A. 216	 distinguished.