Mritunjoy Pani And Another vs Narmanda Bala Sasmal And Another

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 119 of 1957

Decision Date: 14 March, 1961

Coram: Subba Rao

The matter titled Mritunjoy Pani and Another versus Narmanda Bala Sasmal and Another was decided by the Supreme Court of India on 14 March 1961. The judgment was delivered by Justice Raghubar Dayal, who sat with Justices Subbarao K. and Raghubar Dayal. The official citation of the decision is 1961 AIR 1353 and it also appears in the 1962 Supreme Court Reports (first series) at page 290. The case concerned the law of mortgages, specifically the right of redemption and the circumstances under which a suit for redemption was maintainable. The Court examined the legal position of mortgagor and mortgagee under the Indian Trusts Act, 1882, with particular reference to Section 90 of that Act.

The factual background revealed that a usufructuary mortgage bond had been executed in favour of the father of the appellant, who subsequently took possession of the mortgaged property. The mortgage contained a term that required the mortgagee, in the event of the mortgagor’s failure to pay rent, to discharge the arrears of rent to the landlord. The mortgagee failed to honour this obligation, and consequently the property was put up for sale. The mortgagee ultimately purchased the property at that sale. The mortgagor then instituted a suit against the mortgagee—who was the appellant’s father—seeking redemption of the mortgage and possession of the property. In defence, the mortgagee argued that he had acquired the equity of redemption by executing the rent decree, that the mortgagor therefore no longer possessed any right to sue for redemption, and that any appropriate remedy would be to set aside the sale on the ground of fraud or some other defect. The Court held that Section 90 of the Trusts Act, read with illustration (c), established the principle that a person could not benefit from his own wrongful act. Further, the Court affirmed that the prevailing legal position was that (i) a mortgagee remained a mortgagee until the mortgage was terminated by the parties, by merger, or by a court order; (ii) where a mortgagee purchases the equity of redemption with the leave of the court or under a mortgage decree obtained by a third party, the equity of redemption may be extinguished, and in such a case the mortgagor could not sue for redemption without first having the sale set aside; and (iii) where a mortgagee purchases the mortgaged property because of a default committed by the mortgagee himself, the mortgage was not extinguished and the relationship between mortgagor and mortgagee continued, the purchase of the equity of redemption being held only in trust for the mortgagor. Applying these principles to the instant case, the Court concluded that the right to redeem the mortgage had not been extinguished, that the purchase in the rent sale was deemed to have been made in trust for the mortgagor, and that the suit for redemption was therefore maintainable. The Court relied upon Sidhakamal Nayan v. Bira Naik, AIR 1954 SC 336, and distinguished Malkarjun Bin Shidramappa Pasare v. Narhari Bin Shivappa, (1900) LR 27 IA 216.

119 of 1957 was the citation of the appeal that came before the Court by way of special leave. The appeal challenged the judgment and decree dated 3 March 1955 of the Orissa High Court, which had been rendered in Appeal No 593 of 1950. The parties were represented by counsel, with B Patnaik appearing for the appellants and D N Mukherjee for the respondents. The judgment was pronounced on 14 March 1961 and was delivered by Justice Subba Rao.

This appeal by special leave sought to set aside the decision of the Orissa High Court. That decision, in turn, had set aside the judgment of the District Judge of Mayurbhanj and had restored the decree of the Subordinate Judge of Balasore. The Court then gave a brief summary of the factual backdrop that gave rise to the present proceedings.

The land that was the subject of the dispute originally belonged to a person named Bhagaban Parida. On 16 July 1924, Bhagaban Parida executed a registered kabala in favour of Priyanath Sasmal for a monetary consideration of Rs 2,000. Subsequently, on 2 June 1928, Priyanath Sasmal executed a usufructuary mortgage bond, identified as Exhibit B, for a sum of Rs 1,500 in favour of Lakshminarayan Pani, who was the father of the present appellants.

According to the terms of that usufructuary mortgage, the mortgaged property was placed in the possession of the mortgagee, Lakshminarayan Pani. The mortgage deed also stipulated that the initial liability for the payment of rent rested upon the mortgagor. Moreover, the deed provided that if the mortgagor failed to pay any arrears of rent, the mortgagee was obligated to discharge those arrears to the landlord and to obtain a receipt confirming such payment.

The mortgagee, however, failed to discharge the arrears of rent. As a result of the unpaid rent, the property was ordered to be sold. The mortgagee himself purchased the property at the sale for Rs 300 on 22 September 1936. The sale was subsequently confirmed on 4 November 1936, and the mortgagee obtained possession of the property through a court order dated 21 December 1938.

Following these events, the mortgagor instituted a suit in the Court of the Subordinate Judge of Balasore seeking redemption of the mortgage and possession of the land. During the pendency of the suit, the mortgagor died, and his widow and son were impleaded as his legal representatives. The appellants, on their part, raised several defences. They claimed that possession had not been delivered to their father, the mortgagee, under the terms of the mortgage deed; that the debt had been discharged; that their father had purchased the equity of redemption by virtue of executing the rent decree; and that, consequently, the mortgagor no longer possessed any right to sue for redemption.

The learned Subordinate Judge, and later the District Judge on appeal, examined these submissions. Both courts held that, in fact, possession had been lawfully delivered to the mortgagee pursuant to the mortgage deed and that the allegation of discharge of the debt was untenable. While the trial court concluded that after the mortgagee’s purchase of the property in execution of the rent decree the mortgagee held the property only in trust for the mortgagor, the appellate court reached a different conclusion. The appellate court determined that the purchase by the mortgagee terminated the relationship between mortgagor and mortgagee, and, with the result the

The trial court had originally granted a decree in favour of the mortgagor’s estate. On appeal, the appellate court set aside that decree and dismissed the suit altogether. Dissatisfied with the appellate decision, the legal representatives of the deceased mortgagor filed a second appeal before the High Court, challenging both the judgment and the decree of the District Judge. A division bench of the High Court examined the matters and agreed with the view expressed by the trial court. Consequently, it overturned the decree of the District Court and reinstated the decree that had been passed by the trial court. The present appeal therefore arises from the High Court’s restoration of the trial‑court decree. Counsel for the appellants, who were the legal representatives of the mortgagee, argued that when the mortgagee purchased the equity of redemption in execution of the rent decree, the mortgagor‑mortgagee relationship was terminated. According to that submission, the respondents could no longer sue for redemption; their only possible recourse, if any, would be to seek setting aside the sale on grounds such as fraud or other irregularities. In contrast, counsel for the respondents maintained that the sale resulted from a clear breach of duty imposed on the mortgagee by the terms of the mortgage transaction. They contended that the mortgagee’s purchase of the property was therefore held in trust for the mortgagor, making the suit for redemption legally maintainable. To evaluate these opposing positions, the Court considered the applicable legal principles governing the situation.

The Court identified Section 90 of the Indian Trusts Act, 1882 as the relevant statutory provision. The essential wording of the section provides that where a mortgagee, by using his position as mortgagee, obtains an advantage that infringes upon the rights of other persons interested in the property, he must hold that advantage for the benefit of all such interested parties. This holding is subject, however, to the repayment by those persons of their proportionate share of any expenses properly incurred and to an indemnity against liabilities properly contracted in obtaining the advantage. The Act also contains Illustration (c), which describes a scenario in which a mortgagor mortgages land to a mortgagee who takes possession, deliberately allows the government revenue to fall into arrears so that the land is put up for sale, and then purchases the land himself. The illustration specifies that, subject to repayment of the mortgage debt and the mortgagee’s properly incurred expenses, the purchaser‑mortgagee holds the land for the benefit of the original mortgagor. Before Section 90 can be applied, three conditions must be satisfied: (i) the mortgagee must avail himself of his position as mortgagee; (ii) the mortgagee must gain an advantage; and (iii) the advantage must be obtained at the expense of the rights of other persons interested in the property. Reading the provision together with Illustration (c), the Court observed that when a mortgagee, bound by an obligation, breaches that duty by purchasing the property for his own benefit, he consequently stands in a fiduciary relationship with respect to the property, holding it for the benefit of the mortgagor and other interested parties.

The judgment reiterated the well‑settled principle that a trustee, or anyone in a fiduciary capacity, must not be allowed to obtain a profit from the trust or the property over which he has a duty. This principle is expressed in the Latin maxim commodum ex injuria sua nemo habere debet, which means that no convenience or benefit may arise from one’s own wrongful act. In other words, a person cannot be permitted to benefit from a wrongful conduct of his own. The Court earlier addressed a similar situation in the decision of Sidhakamal Nayan v. Bira Naik (1). In that case, as in the present matter, a mortgagee who was in possession of a tenant’s interest acquired that interest through the execution of a decree for arrears of rent that the landlord had obtained. The contention, echoed here, was that the defendant, being a mortgagee in possession, was obligated to pay the rent and therefore could not take advantage of his own default to deprive the mortgagors of their interest. Justice Bose, speaking for the Court, observed at page 337 that “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 of the 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 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 were premised on the assumption that the mortgagee had a duty to pay the rent, that he defaulted in that duty, and that his default caused the auction sale of the holding, which ultimately resulted in his own purchase of the property. The reference to section 90 of the Indian Trusts Act reinforces this assumption.

Counsel for the appellants invoked the Judicial Committee decision in Malkarjun Bin Shidramappa Padare v. Narhari Bin Shivappa (1) to support the argument that a mortgagor could not obtain the relief of redemption unless the sale was first set aside. In that precedent, a mortgaged property was sold in execution of a decree against the mortgagor, and the plaintiff neither raised nor prayed for the sale to be set aside. The Judicial Committee held that an execution sale could not be treated as a nullity when the court that authorized the sale possessed the jurisdiction to do so; moreover, the sale could not be set aside as irregular unless a specific issue was raised for that purpose and an investigation was conducted with the judgment creditor as a party to the proceedings. The Court clarified that the decision did not arise in a situation where the mortgagee, who owed a discharge obligation under the mortgage deed, defaulted, leading to a sale that the mortgagee himself purchased. The Judicial Committee’s proposition was applicable to cases where the equity of redemption was extinguished by a court‑ordered sale, which might arise when a mortgagee, after obtaining leave to bid, purchases the property at a sale in execution of his own decree or a decree obtained by a third party. In such circumstances, the mortgagor could argue that the equity of redemption is extinguished and therefore could not obtain relief until the sale is set aside according to established legal procedures. However, when the sale is caused by the default of the mortgagee, the mortgage relationship persists, the mortgage is not extinguished, and there is no necessity to set aside the sale.

In this case the Court observed that the mortgage deed had been violated by the mortgagee, whose default had led to the sale of the mortgaged property and its subsequent purchase by the mortgagee himself. The Court explained that the principle articulated by the Judicial Committee applied only where the equity of redemption was extinguished by a court‑ordered sale. That principle could be invoked in situations where, after obtaining leave to bid, the mortgagee bought the property at a sale in execution of his own decree or at a sale resulting from a decree obtained by a third party. In such circumstances the equity of redemption might be considered exhausted, and consequently the mortgagor could not obtain relief unless the sale was set aside in accordance with the law. However, the Court distinguished the present case because the sale had arisen from the mortgagee’s own default. When the sale was caused by the mortgagee’s failure to perform his obligations, the mortgage was not terminated and the legal relationship between mortgagor and mortgagee continued to exist. Therefore, there was no requirement to set aside the sale. The Court summarised the legal position as follows: first, the governing rule was that a mortgage remained a mortgage until it was terminated by the parties, by merger, or by a court order; second, where a mortgagee purchased the equity of redemption in execution of his own mortgage decree with the court’s permission, or in execution of a decree obtained by a third party, the equity of redemption could be extinguished, and the mortgagor could not sue for redemption without first having the sale set aside; third, where the mortgagee acquired the mortgaged property because of his own default, the mortgage was not extinguished, the parties’ relationship persisted, and the purchase of the equity of redemption was held only in trust for the mortgagor. Applying these principles to the findings of the lower courts, the Court noted that all the tribunals had concurred that possession of the property had been transferred to the mortgagee on the basis of the mortgage deed (Exhibit B). They had also agreed that the appellant’s claim of discharge was false. The High Court had held that, under the terms of the mortgage deed, the mortgagee was obligated to pay the landlord’s arrears of rent, but he had failed to do so. Consequently, the High Court concluded that the sale was the result of a clear dereliction of the duty imposed by the very terms of the transaction, a finding that attracted the provisions of section 90 of the Indian Trusts Act. In view of the foregoing principles, the Court held that the mortgagor’s right to redeem was not extinguished and that, in law, the purchase made in the rent sale was to be regarded as held in trust for the mortgagor. Accordingly, the High Court was correct in holding that the suit for redemption was maintainable. No further points were raised before the Court. For these reasons the appeal was dismissed with costs.

Having considered the material placed before it, the Court determined that the petition challenging the earlier judgment could not be sustained. Consequently, the Court ordered that the appeal be dismissed in its entirety, thereby leaving the decision of the lower tribunal undisturbed. In addition, the Court directed that the party who had initiated the appeal should bear all costs associated with the proceedings. The direction to pay costs was made in accordance with the principle that a party who is unsuccessful must bear the expenses incurred by the opposing side. No further relief was granted by the Court, and consequently the matter was closed in accordance with the Court’s final order, leaving no outstanding issues pending. Thus, the appeal concluded with a dismissal and an order that costs be awarded against the appellant. The final judgment reflects the Court’s view that the arguments raised on appeal did not overcome the findings of the lower court and therefore did not merit reversal. Accordingly, the decree of dismissal and the cost award constitute the complete relief granted by this judgment, leaving the parties with no further recourse in this matter. The order was pronounced in open court and entered into the official record as the final disposition of the appeal.