Sidhakamal Nayan Ramanuj Das vs Bira Naik And Ors.

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 10 April 1953

Coram: Bose, J.

In this appeal, the defendant challenged a suit that sought possession of, and alternatively, redemption of, the lands named in the plaint. The first plaintiff occupied the lands as a tenant under the Orissa Tenancy Act and, on 13 September 1930, granted a simple mortgage over the same to the defendant. When the rent due from the first plaintiff to the landlord fell into arrears, the landlord instituted legal proceedings and obtained a decree, after which the property was ordered to be sold. To protect his mortgagee interest, the defendant paid the arrears and, relying on Section 225 of the Orissa Tenancy Act, obtained possession of the property on 27 November 1934, a fact that is now acknowledged and no longer contested.

The rent subsequently fell into arrears again, prompting the landlord to sue a second time. No payment was made, and the property was again offered for sale. The defendant purchased the property on 24 June 1937 for a nominal sum of Rs 129, and the court subsequently granted him possession, although he had already been in actual physical possession at all material times. The plaintiffs alleged that the second purchase and attendant transactions were collusive and fraudulent, but the court found against those allegations, leaving the matter settled. On 17 September 1943 the first plaintiff transferred the right to redeem to the second plaintiff. The plaintiffs contend that, as a mortgagee in possession, the defendant was bound to pay the rent and therefore could not lawfully exploit his own default to deprive the mortgagors of their property. They further argue that when the defendant purchased the property at auction, he acted as a trustee for the plaintiffs and therefore must return the property, being reimbursed only for the expenses he incurred. The court, however, observed that the situation is governed by Section 90 of the Trusts Act in the absence of any special statutory provision. Under that provision, a mortgage can be terminated only by an agreement of the parties, by merger, or by a court order, and the principle that “once a mortgage, always a mortgage” applies. Consequently, when the defendant entered into possession, he did so as a mortgagee, and the plaintiffs retain a right to redeem unless there exists a contractual waiver, a merger, or a specific statute that bars redemption. No such contract is pleaded, and the only relevant statute to be examined is the Orissa Tenancy Act.

In this case the Court examined the provisions of the Orissa Tenancy Act. The defendant had obtained possession of the property under Section 225 of that Act. Even if the defendant had not previously been a mortgagee, Section 225 made him a statutory mortgagee and therefore he remained liable to redeem the property. The Court observed that Sub-section (2) of Section 225 expressly preserved the defendant’s existing mortgagee rights, so his status as a mortgagee was not destroyed. When the defendant later purchased the property in the second sale, that purchase did not extinguish the plaintiffs’ right to redeem because at that time the defendant was standing in the plaintiffs’ shoes as a mortgagee in possession under Section 225(1). Consequently the effect of the purchase on title was exactly the same as if the plaintiffs, having failed to satisfy the decree and having exhausted all last-minute acts of grace permitted to judgment-debtors, had themselves bought the property. The purchase merely restored the defendant to the position of mortgagee in possession under Section 225(1). The Court further noted that there was no question of extinction by merger of a lower estate into a higher estate, because what the defendant purchased was the tenant’s estate and not the landlord’s estate. Regarding the procedural history, the Court recorded that the first Court and the first appellate Court had dismissed the plaintiffs’ suit, but the High Court, on second appeal, decreed a preliminary decree for redemption and made provision therein for adjustment of the equities. The Court upheld that decree. Finally, the Court held that the appeal failed and was dismissed, and directed that each party bear its own costs throughout. The Court remarked that the plaintiffs were primarily in the wrong for allowing their rent to fall into arrears and that they had raised an allegation of fraud which they failed to substantiate, and that these circumstances justified the direction that each side pay its own costs.