Basmati Devi vs Chamroo Sao And Ors

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

Court: Supreme Court of India

Case Number: Civil Appeal No.241 of 1961

Decision Date: 3 April 1964

Coram: K.C. Das Gupta, Raghubar Dayal

In this matter, the Supreme Court of India recorded that the petition was filed by Basmati Devi against Chamroo Sao and others, with the judgment rendered on 3 April 1964. The opinion was authored by Justice K C Das Gupta, joined by Justice Raghubar Dayal. The bench was identified as Gupta, K C Das. The citation for the decision was reported in 1964 AIR 1707 and 1964 SCR (7) 633, with a citator reference of RF 1966 SC 126 (7). The case concerned the execution of mortgage bonds, specifically the liability of both mortgagor and mortgagees to pay rent, the sale of mortgaged lands for default of rent, purchase of such lands by mortgagees, the existence of a right of redemption, and the applicability of section 90 of the Trusts Act. The headnote summarised that the plaintiff, Basmati Devi, instituted a suit seeking redemption of a large number of usufructuary mortgages in favour of the defendants. The plaintiff’s contention was that the mortgage bonds required the mortgagees to pay rent to the landlord, yet the mortgagees had failed to do so for several years. Consequently, the landlord instituted a suit for arrears of rent, obtained a decree, and the lands were sold in execution of that decree. The plaintiff asserted that the purchasers of the mortgaged lands were merely benamidars of defendants 1 and 2 and other mortgagees, and that the right of redemption remained unaffected by the court sale because the purchase was intended for the plaintiff’s benefit. Defendants 1 and 2 opposed the suit, arguing that the court sale extinguished the right of redemption and that the purchasers were not benamidars of the defendants. The trial court dismissed the suit; however, on appeal, the Additional District Judge set aside that judgment and issued a preliminary decree for redemption. Defendants 1 and 2 then appealed to the High Court, where a Division Bench held that section 90 of the Trusts Act did not apply because the court sale resulted from defaults by both the mortgagor and the mortgagees. Accordingly, the High Court set aside the earlier appellate decree and restored the trial court’s dismissal. The Supreme Court held that the mortgagor’s default did not change the fact that the mortgagee had also defaulted in paying rent for which he was liable. By his own default, the mortgagee contributed to the necessity of filing a suit for arrears and ultimately to the execution sale of the property. This contribution was a direct consequence of his role as mortgagee; therefore, when he purchased the property at the execution sale, he obtained a clear advantage.

In this case, the Court observed that the mortgagee had taken advantage of his position as a mortgagee, and that the law treated such conduct as improper even when the mortgagee’s obligation to pay rent was less than the majority of the rent due on the property. Accordingly, the Court applied section 90 of the Trusts Act to the facts presented. The judgment concerned Civil Appeal No 241 of 1961, which appealed the decree dated 4 March 1958 issued by the Patna High Court in appeal from Appellate Decree No 1335 of 1952. Counsel for the appellants was R S Sinha and R C Prasad, while counsel for the first and second respondents was Sarjoo Prasad and B P Jha. The judgment was delivered on 3 April 1964 by Judge Das Gupta. The appeal arose out of a suit seeking redemption of a large number of usufructuary mortgages held by the defendants. The plaintiff owned 1.67 acres of land recorded in Khata 56 and 10.56 acres recorded in Khata 57 in the village of Sarifabad. He mortgaged 1.27 acres from Khata 56 and 8.24 acres from Khata 57 to the various defendants by executing separate mortgage bonds. The plaintiff later sold part of the remaining land and settled the balance with the first defendant on Batai terms. The plaintiff contended that the mortgage bonds required the mortgagees to pay rent to the landlord, but the mortgagees failed to pay rent for several years. The landlord consequently filed a suit for rent arrears and obtained a decree. In execution of that decree, the lands were put up for sale. The purchasers at the auction were identified as Besolal and Mst Kirti Kuer, who, according to the plaintiff, were merely benamidars of defendants 1 and 2 and the other mortgagees. The plaintiff argued that the purchase benefitted the mortgagor, that is, himself, and therefore the mortgagees’ right of redemption remained unaffected. He prayed for a declaration that the purchase was for his benefit and for the redemption of the mortgagees. The defendants, specifically the first and second respondents, contested the suit. Among them, Chamroo Sao was the purchaser, and Besolal, the second defendant, was the son of the other purchaser, Mst Kirti Kuer. They denied that Besolal and Mst Kirti Kuer were their benamidars and asserted that the right of redemption had been extinguished by the court‑ordered sale. The trial court held that the plaintiff had not demonstrated that the auction purchasers were benamidars of the mortgagees and dismissed the suit. On appeal, the Additional District Judge of Patna reached the opposite conclusion, holding that although the purchase was recorded in the name of Besolal and Mst Kirti Kuer, it was in reality effected by the first and second defendants. He also accepted the plaintiff’s claim that, under the terms of the mortgage bonds, the mortgagees were liable to pay rent and that the rent‑sale had been precipitated by the default of both the mortgagor and the mortgagee. Consequently, the Judge concluded that the equity of redemption in favour of the plaintiff still subsisted and that he was entitled to redeem the mortgaged property, leading him to set aside the trial court’s judgment and to issue a preliminary decree of redemption.

In this case, the Court observed that because both the mortgagor and the mortgagee were in default, the mortgagee could not be permitted to profit from the sale of the mortgaged property. Accordingly, the learned judge held that the equity of redemption remained alive in favour of the plaintiff and that the plaintiff was therefore entitled to redeem the mortgaged lands. On that basis the judge vacated the Trial Court’s judgment and issued a preliminary decree of redemption. Both defendants subsequently challenged that decree before the Patna High Court. Their appeal was initially heard by a single High Court judge, Justice Sahai. After examining the evidentiary record, that judge concluded that the liability for rent on 2.67 acres fell on Defendant 1; that Defendant 2 was responsible for rent on the portion of land comprising 0.87 acres that had been purchased and an additional 1.76 acres taken on lease, a total of 2.43 acres; that the remaining defendants together bore rent for 3.83 acres; and that the plaintiff’s own liability amounted to approximately 3.39 acres from the total of 1.67 acres recorded in Khata No. 56 and 10.65 acres recorded in Khata No. 57. The judge then identified the pivotal question as whether Section 90 of the Indian Trusts Act would preserve the plaintiff’s equity of redemption when the sale had been precipitated by the combined defaults of the mortgagor and the mortgagee, particularly where the mortgagee’s own default in purchasing the property at the sale was also material. He referred this question to a Division Bench for determination.

The Division Bench examined the applicability of Section 90 of the Trusts Act and held that the provision did not extend to the present circumstances. Relying on a series of earlier decisions of the same High Court, the bench concluded that the statute was inapplicable where the sale resulted from the defaults of both parties. Consequently, the High Court allowed the defendants’ appeal, set aside the preliminary decree of redemption, and reinstated the original Trial Court decree. The present appeal, filed by Mst. Basmati Devi in her capacity as the legal representative of the original plaintiff, challenges that High Court decision. The appellant contends that the High Court’s interpretation of Section 90 is erroneous and defeats the purpose of the provision. The appellant further submits that Section 90 of the Indian Trusts Act, which states: “Where a tenant for life, co‑owner, mortgagee or other qualified owner of any property, by availing himself 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 …,” should prevent a mortgagee from taking advantage of his position through purchase at a sale that is occasioned by his own default as well as that of the mortgagor.

Section 90 of the Indian Trusts Act states that any advantage obtained by a tenant for life, co‑owner, mortgagee or other qualified owner must be held for the benefit of all persons interested. The advantage must be subject to repayment of each person’s proper share of expenses and to an indemnity by those persons against liabilities properly contracted in obtaining such advantage. The Court was required to consider whether, in the present circumstances where both the mortgagor and the mortgagee defaulted, the decree and a subsequent sale in execution of that decree were obtained. It then had to decide if the mortgagee could be said to have taken advantage of his position by purchasing the property at that sale. The High Court had expressed the view that unless the sale resulted solely from the mortgagee’s default, the mortgagee could not be said to have exploited his position in making the purchase. According to the learned Judges, even if the mortgagee had performed his duty by paying the rent for which he was liable, the sale would still have occurred. That was because the mortgagor had failed to pay the portion of rent that was his responsibility. Consequently, the High Court concluded that although the mortgagee had benefited from the fact that the property was put up for sale, he had not taken advantage of his status as mortgagee. The Court of this jurisdiction disagreed with that conclusion. In its opinion, the mortgagor’s default did not change the fact that the mortgagee also defaulted by failing to pay the rent that he was obligated to pay. By virtue of that default, the mortgagee contributed to the circumstances that compelled the plaintiff to institute suit for arrears of rent and ultimately caused the property to be sold under execution of the decree. That contribution was a direct result of the mortgagee’s position as mortgagee. Therefore, when the mortgagee purchased the property himself at the sale conducted under the rent decree, he clearly obtained an advantage by using his position as mortgagee. The Court held that this principle applied even where the mortgagee’s liability amounted to less than the major portion of the rent due on the holdings.

The Court noted that it was unnecessary to decide whether the same principle would apply where the mortgagee’s share of the rent was so small. In such a situation, the property would ordinarily not be sold for that amount. With this view, the Court was unable to agree with the reasoning of the High Court that the mortgagee had not taken advantage of his position. Counsel for the respondents, appearing before the Court, urged that the plaintiff’s suit should fail with respect to the lands recorded in Khata No. 57. He contended that the mortgagees were not liable to pay any portion of the rent on that holding. Counsel drew the Court’s attention to Exhibit 2, the mortgage bond executed in favour of Chamroo Sao, and emphasized the statement therein that the annual rent payable to the zamindar was the concern of the executant. The Court emphasized that the mortgagee’s participation in the sale, irrespective of the proportion of rent he owed, fell within the ambit of Section 90 of the Trusts Act. The Court therefore rejected the argument that the mortgagees were not liable for any rent on the holding recorded in Khata No. 57. The reference to the mortgage bond was intended to show that the mortgagees had expressly undertaken responsibility for the rent. Accordingly, the appellate court allowed the appeal in this aspect, granting relief to the respondents concerning the lands in Khata No. 57.

The Court examined the statement contained in the mortgage bond executed in favour of Chamroo Sao, which declared: “Annual rent payable to the zamindar is the concern of me, the executant.” The argument premised on this clause asserted that the parcel of land recorded in Khata No 57 remained a separate and distinct holding from the parcel recorded in Khata No 56. This contention directly contradicted the written pleading of the defendants, whomaintained that the two parcels had been merged into a single holding that carried a single rent obligation. Because the oral testimony and the documentary material presented in the Paper Book prepared for the appeal did not conclusively demonstrate whether the two parcels had indeed been amalgamated, the Court ordered the production of a specific document identified as Exhibit B, which appeared likely to clarify the issue.

Exhibit B was subsequently produced. It consisted of a copy of a judgment rendered in a suit between the same parties, in which the precise question of whether Khata No 57 and Khata No 56 had been consolidated into one holding was expressly addressed. That judgment held that consolidation had taken place. Accordingly, the Court found that the consolidation occurred before the second rent suit was instituted, and that the second rent suit was filed against the now‑consolidated holding. Moreover, the consolidated holding was the property that was later sold in execution of the decree. The Court therefore concluded that the mortgage bond, Exhibit 2, in which the mortgagor agreed to pay rent to the zamindar with respect to the land described in Khata No 57, did not undermine the High Court’s determination that liability for the rent of the sold holding was shared between the mortgagor and the mortgagees, and that the default of both parties precipitated the execution sale.

On the basis of these findings, the Court allowed the present appeal. It set aside both the judgment and the decree of the High Court and restored the decree originally issued by the Additional District Judge of Patna. The Court further directed that a Pleader Commissioner be appointed by the trial court, upon the payment of a deposit of Rs 50 by the appellant within two months from the date of this order, to prepare accounts showing the amount due to the defendants as of the decree date. The Court ordered that a preliminary decree for redemption be entered in the usual terms.

Regarding court fees, the Court noted that the suit and the appeal before the District Judge had been filed in forma pauperis. The High Court had previously ordered the plaintiff to pay the court fee on both the plaint and the memorandum of appeal. The present Court set aside that order and instead directed that the first and second defendants in the suit bear the liability for the court fee payable on the plaint as well as on the memorandum of appeal. The appeal before this Court had likewise been filed by the appellant as a pauper. Since the appellant succeeded in the appeal, the Court ordered that the contesting respondents, namely the first and second defendants, must also pay the court fee payable on the memorandum of appeal to this Court. The Court further ordered that the appellant be awarded her costs from the first and second defendants throughout the proceedings.

The Court directed that the first defendant and the second defendant each were to bear the costs of the proceedings in their entirety, meaning that they were liable for all expenses incurred from the commencement of the suit through to the final resolution of the matter. In addition, the Court held that the appeal brought by the appellant was successful and therefore allowed. Consequently, the order of the lower tribunal was set aside and the liability for court fees and associated costs was transferred to the first and second defendants for the whole duration of the case, including the fees applicable to the memorandum of appeal. The decision thus required the first defendant and the second defendant to pay the full amount of costs that had arisen, and it confirmed that the appellant’s appeal had been granted by the Court.