Gyarsi Rai And Others vs Dhansukh Lal And Others

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

Court: supreme-court

Case Number: Civil Appeal No. 257 of 1963

Decision Date: 18 November 1964

Coram: N. Rajagopala Ayyangar, Raghubar Dayal, Subba Rao J.

In this matter, the parties were Gyarsi Rai and several others as petitioners and Dhansukh Lal together with others as respondents. The judgment was delivered on 18 November 1964 by a bench of the Supreme Court of India consisting of Justice N. Rajagopala Ayyangar and Justice Raghubar Dayal. The case was reported in the 1964 AIR 1055 and the 1965 SCR (1) 154. The subject of the suit was the enforcement of a mortgage in which the mortgagee was in possession of the mortgaged property. The petitioners, who were the legal representatives of the mortgagee, sought a preliminary decree that would declare the amount due under the mortgage without requiring the mortgagee to render an account of the profits earned from the property. The trial court applied the provisions of Order 34, Rules 4 and 2 of the Code of Civil Procedure and framed a preliminary decree in Form 5A of Appendix D to the First Schedule, thereby declaring the sum claimed to be due. The decree was made without accounting for the net profits that the mortgagee had realized from the mortgaged premises, a step that under Section 76(h) of the Transfer of Property Act would normally be required.

After the preliminary decree was pronounced, the respondents, who were the mortgagors, moved the trial court for an order directing the mortgagee to render accounts of the profits. The trial court dismissed this application. The High Court, on revision, set aside the dismissal, remanded the case to the trial court and instructed that the amount due under the mortgage should be declared only after the mortgagee’s accounts had been taken. The mortgagee’s legal representatives, who were the appellants before the Supreme Court, obtained special leave to appeal. They argued that the preliminary decree had finally resolved the rights of the parties and therefore no further claim for accounting could arise. The respondents contended that the appellants had withdrawn a sum that had been deposited in the court as part‑payment of the decree after giving an assurance that they would furnish an account of the profits, and that this assurance barred the appellants from later denying any liability to account. The Supreme Court held that, in a suit for sale of mortgaged property, the court may either direct an account of the amount due as of the date of the preliminary decree or may simply declare that amount. When the decree is framed in Form 5A, the court is obliged to determine the sum due at the date of the preliminary decree, which requires ascertaining the net profits actually realized by the mortgagee. Consequently, the determination of those net profits is a substantive issue that must be resolved before the preliminary decree can be properly made.

The Court explained that when a party does not raise a specific plea and the trial judge does not consider the net profits while drafting the preliminary decree, any later request by the mortgagee for an account of those profits is barred by the doctrine of res judicata. The Court clarified that a preliminary decree is conclusive with respect to any matters that ought to have been raised before the decree was issued. Consequently, in the present case the mortgagor was unable to demand an account of profits for the period that preceded the preliminary decree. The Court further observed that this limitation does not extend to the net receipts that the mortgagee actually realized after the date of the preliminary decree, because no dispute concerning those later receipts could have been presented before the decree. The Court noted that a suit continues to exist even after the preliminary decree is rendered and proceeds until a final decree is passed. Accordingly, any sum paid by the judgment‑debtor to the decree‑holder is to be set off against the mortgagee’s liability. By the same reasoning, the net receipts that are statutorily credited to the mortgagee must also be taken into account when determining the mortgagor’s ultimate liability. The Court referred to the relevant authorities and case law in support of these propositions. The Court then turned to the question of estoppel, stating that estoppel can arise only when the person to whom a representation is made relies on that representation to his detriment. The Court found that the respondents, by depositing the decretal amount, merely satisfied the legal obligation imposed by the decree and that this act could not be described as detrimental to them in any sense of the word.

In the judgment, the Court recorded that the appeal was filed under civil appellate jurisdiction as Civil Appeal No 257 of 1963, seeking special leave from the judgment and order dated 5 April 1961 of the Rajasthan High Court in S B Civil Revision No 181 of 1956. Counsel for the appellants and counsel for the respondents were listed. The Court noted that the appeal challenged the decision of a Division Bench of the Rajasthan High Court in the referenced revision proceeding. The factual background set out that the properties forming the subject of the suit originally belonged to one Noor Mohammad together with his wife and son. On 14 September 1936 those mortgagors transferred possession of the properties to B F Marfatia in exchange for a mortgage loan of Rs 25,000. Subsequently, on 22 February 1938, the same mortgagors executed a simple mortgage on the identical properties in favour of Novat Mal for Rs 5,000. On 21 December 1942, Radha Kishan, Har Prasad and Pokhi Rain acquired the equity of redemption through an auction sale conducted under a money decree against the mortgagors. Later, on 14 February 1950 and 13 March 1950, Seth Girdhari Lal, the husband of the first appellant, purchased the mortgagee’s rights of Novat Mal and of Marfatia respectively. On 1 May 1950 Girdhari Lal was placed in possession of the mortgaged properties. Subsequently, on 22 July 1950, respondents numbered nine to eleven bought the equity of redemption of the properties from Radha Kishan, Har Prasad and Pokhi Ram. Finally, on 10 August 1950 Girdhari Lal’s position with respect to the properties was further confirmed.

Lal filed Civil suit number 739 of 1950 in the Court of the Senior Subordinate Judge at Ajmer, seeking enforcement of the two mortgages that he held. In his pleadings he claimed that the amount due to him under those mortgages was Rs 48,919‑12‑6. On 25 April 1953 the Senior Subordinate Judge delivered a preliminary decree ordering the defendants to pay a sum of Rs 34,003‑1‑6 together with proportionate costs and future interest, but he specifically disallowed any interest accruing from 14 September 1936 up to 13 March 1950 on the first mortgage of Rs 25,000. The plaintiff‑mortgagee appealed this part of the decree by filing Civil Appeal number 71 of 1953 before the Judicial Commissioner at Ajmer, challenging the disallowance of interest. The defendants, in turn, filed cross‑objections to that portion of the decree which imposed costs upon them. On 25 July 1953 the defendants moved the trial court under Order XXXIV, Rule 5(1) of the Code of Civil Procedure, seeking permission to deposit the decretal amount in court, requesting that possession of the mortgaged properties be restored to them, and asking that the decree‑holder be ordered to render accounts of any profits he had received from those properties. Four days later, on 29 July 1953, the respondents deposited Rs 35,155‑2‑6 with the trial court. The decree‑holder objected to this deposit on 17 August 1953, contending that the amount deposited was substantially less than the sum due under the decree. On 27 August 1953 the trial court issued an order allowing the decree‑holder to withdraw the deposited amount, while reserving the issue of the exact amount payable under the decree for later determination. On 25 August 1954 both the decree‑holder’s appeal and the defendants’ cross‑objections were dismissed. Subsequently, on 7 December 1954 the defendants filed another application in the trial court asking the court to determine the precise amount due under the decree and to direct the decree‑holder to account for all realizations from the mortgaged properties. The Supreme Court, on 14 March 1955, granted special leave to the decree‑holder to appeal the Judicial Commissioner’s judgment dismissing Civil Appeal 71 of 1953. On 15 February 1956 the trial court rejected the defendants’ application for such directions, holding that the mortgage deed had merged into the preliminary decree and that the decree contained no directive requiring the plaintiff to render accounts. The defendants then filed, on 29 February 1956, an application before the Judicial Commissioner at Ajmer under Section 152 of the Code of Civil Procedure, seeking to amend the preliminary decree to include a direction compelling the plaintiff to render an account of any profits earned from the mortgaged properties. The Judicial Commissioner dismissed this request on 12 April 1956. Thereafter, on 25 April 1956 the defendants instituted a revision petition before the Judicial Commissioner challenging the trial court’s order of 15 February 1956.

In this case, after the Supreme Court granted special leave to appeal against the decree of the Appellate Court that confirmed the preliminary decree, the Judicial Commissioner, on 1 August 1956, ordered that the hearing of the revision petition be postponed until after the Supreme Court decided Civil Appeal No 383 of 1956. On 17 February 1957 the decree‑holder died and his legal representatives, who are the present appellants, were entered as parties. On 16 December 1960 the Supreme Court delivered judgment in that appeal, modifying the preliminary decree and directing the Trial Court to pass a fresh final decree. On 5 April 1961 the High Court accepted the defendants’ revision petition, remanded the matter to the Trial Court and directed the Trial Court to take an account of the receipts from the mortgaged properties and of the expenses properly incurred in managing those properties, as contemplated under sections 76(g) and 76(h) of the Transfer of Property Act, and to determine the sum remaining to be paid to the mortgagees, taking into account the Supreme Court’s decision. The present appeal therefore arose from that order.

Counsel for the appellants, identified as counsel for the appellants, set out three main arguments. First, he contended that a preliminary decree settles the parties’ rights by deciding all controversies relating to a mortgage transaction and provides all necessary directions, whereas a final decree merely works out those rights; consequently, once a preliminary decree is passed, the mortgage merges into it and no further relief can be granted on the terms of the mortgage. Accordingly, because the preliminary decree in the present case did not contain a direction for the mortgagee to render an account of the profits from the mortgaged properties, the court, he argued, had no jurisdiction to order such an account on an application filed by the mortgagors after the preliminary decree. Second, he maintained that the High Court erred in holding that the appellants were estopped from raising the plea that the mortgagee was not liable to render accounts for the period between the filing of the plaint and the date of the preliminary decree. Third, he submitted that the High Court should have taken into consideration the equities in favour of the mortgagee.

Counsel for the respondents, identified as counsel for the respondents, summarized his contentions. He asserted that the relationship between mortgagor and mortgagee continues until a final decree is passed, and that the statutory liability of a mortgagee to account for profits received and to apply them to the mortgage debt also subsists until that date. Therefore, the fact that the amounts realized by the mortgagee were not credited at the time the preliminary decree was made did not relieve the mortgagee of his liability. He further argued that although the rents could have been taken into account when the preliminary decree was rendered, the mortgagee was not bound to appropriate those amounts before the decree; he could appropriate them after the decree even though the receipts were realized earlier. Finally, he emphasized that the mortgagee had not denied his duty to account for the profits realized before the preliminary decree, and consequently could not evade his statutory obligation to account for those profits and to appropriate them against the mortgage debt until the mortgagor‑mortgagee relationship terminated.

It was submitted that the mortgagee remained liable to render an account for the rents and profits he collected from the mortgaged premises, even after the preliminary decree had been passed. The argument further maintained that, although those rents could have been included in an account at the moment the preliminary decree was issued, the mortgagee was not required to apply the collected sums against the outstanding mortgage debt before that decree. The mortgagee, it was said, retained the ability to credit the amounts after the decree, even though the receipts themselves had been obtained prior to the decree. Moreover, the contention emphasized that the mortgagee had never denied his duty to account for the profits he had earned from the mortgaged properties before the preliminary decree was entered. Consequently, he could not escape the statutory obligation to account for those profits and to apply them toward the mortgage liability until the contractual relationship between mortgagor and mortgagee ceased to exist.

The principal issue before the Court was whether the preliminary decree issued in the suit prevented the mortgagors from asserting that the mortgagee must account for the profits he derived from the mortgaged premises while they remained in his possession. If the decree did not bar such a claim, the Court needed to determine the temporal scope of the mortgagee’s liability to render accounts for those profits. The suit that gave rise to the dispute was filed on August 10, 1950, and the preliminary decree was rendered on April 25, 1953 under Order XXXIV, Rule 4 of the Code of Civil Procedure. The decree did not contain any specific direction obligating the mortgagee to produce an account of the profits realized from the mortgaged properties while he held possession. The petitioners therefore contended that, in the absence of an express direction in the preliminary decree, the mortgagee escaped the statutory duty imposed by Section 76 of the Transfer of Property Act to render such an account.

To assess this contention, reference was made to the pertinent provisions of the Code of Civil Procedure and the Transfer of Property Act. Order XXXIV, Rule 4 of the Code provides that, in a suit for sale, if the plaintiff succeeds, the Court shall issue a preliminary decree in accordance with clauses (a), (b) and (c) of sub‑rule (1) of Rule 2. In a foreclosure suit, Rule 2 further directs that, upon the plaintiff’s success, the Court shall pass a preliminary decree ordering an account of what is due to the plaintiff as of the date of that decree, covering principal and interest on the mortgage. Form 5 of Appendix D to the First Schedule of the Code sets out the format for directing that such an account be taken, while Form 5A provides for a decree that by itself declares the amount due to the plaintiff on the mortgage. Section 76(h) of the Transfer of Property Act states that when, during the continuance of the mortgage, the mortgagee takes possession of the mortgaged property, any receipts from that property, or a fair occupation rent where the property is personally occupied, shall, after deducting properly incurred expenses for management, be credited against the mortgagee’s entitlement, and any surplus shall be payable to the mortgagor. The Court therefore needed to examine whether these statutory provisions imposed a continuing duty on the mortgagee to account for profits realized before the preliminary decree, notwithstanding the absence of an explicit direction in that decree.

The Court referred to the provision of Section 76(h) of the Transfer of Property Act, which stipulated that the collection of rents and profits, together with other expenses listed in clauses (c) and (d) and the interest thereon, must be debited against the mortgagee in order to reduce any amount periodically due to him as interest, and that any excess of such receipts over the interest due should be applied to reduce or discharge the mortgage‑money, with any surplus payable to the mortgagor. The Court then summarized the effect of this provision. In a suit for sale of mortgaged property, the Court could order an account of the sums due to the plaintiff as of the date of the preliminary decree, and in such a case the decree would be framed in Form No 5 of Appendix D to the First Schedule of the Code. Alternatively, the Court could directly declare the amount due on that date, and the decree would then be framed in Form No 5A of the same Appendix.

When a decree was made in Form 5A, the Court was obliged to determine the exact sum owed to the mortgagee on the date of the preliminary decree. The Court observed that it was impossible to declare the amount due unless the net profits realized by the mortgagee from the mortgaged property were first debited against him, as required by Section 76(h). The statutory liability of the mortgagee to render an account up to the date of the preliminary decree formed a disputed issue that had to be resolved within the suit before that date. Accordingly, the Court had to calculate the amount due under the mortgage deed, deduct the net realizations in accordance with Section 76(h), and then ascertain the balance remaining payable to the mortgagee at the time of the preliminary decree. The Court further noted that if the mortgagee failed to raise this plea, he would be barred by the principle of res judicata from later raising the same issue, because the matter would be considered directly and substantially in issue in the suit up to that stage. It is settled law that although a mortgage suit remains pending until a final decree is passed, any matters that were decided or should have been decided by the preliminary decree become final. For example, if the mortgagor had made certain payments to the mortgagee before the preliminary decree and those payments were not credited, resulting in a larger sum declared due to the mortgagee, the mortgagor could not reopen the question after the preliminary decree because the decree had become final with respect to disputes that ought to have been raised earlier. In the same vein, under Section 76(h), the net receipts from the mortgaged property must be statutorily debited against the mortgagee in order to deduct the amount due under the mortgage.

The Court explained that the provision under section 76(h) of the Transfer of Property Act requires the net receipts from the mortgaged property to be debited against the mortgagee in the manner prescribed by law, from time to time. The underlying principle of this clause is that the usufruct of the mortgaged property represents the mortgagor’s money. Applying the same reasoning as that used for voluntary payments, the Court observed that if a preliminary decree, whether because of an erroneous decision or because of an omission of a necessary plea, fails to consider the net realization when determining the amount due to the mortgagee, such an omission amounts to the Court refusing to give credit for those receipts. Accordingly, the Court held that, in the present case, the amounts that were statutorily required to be debited to the mortgagee under section 76(h) before the date of the preliminary decree could not be taken into account, because the Court had not considered those amounts when it issued the decree. By contrast, the same conclusion could not be applied to the net receipts that the mortgagee realized after the preliminary decree. The Court noted that none of the principles relied upon by counsel for the appellants assisted them on this point. It reaffirmed the well‑settled proposition that a preliminary decree is final with respect to the matters that were required to be decided before its issuance, citing Venkata Reddy v. Pethi Reddy and section 97 of the Code of Civil Procedure. The Court further observed that a mortgage suit typically produces two decrees – a preliminary decree and a final decree – and that, ordinarily, the preliminary decree determines the parties’ rights while the final decree works out those rights, referring to Talebali v. Abdul Azia and Kausalya v. Kauleshwar. The Court also acknowledged that the mortgage merges into the preliminary decree and thereafter the parties’ rights are governed by that decree, as stated in Kusum Kumari v. Debi Prosad Dhandhania. However, the Court found no relevance of those principles to the specific issue concerning the mortgagee’s liability to account for net receipts under section 76(h).

The Court clarified that a preliminary decree is limited to the matters that are germane to the suit up to the date of its passage. Consequently, any net receipts of the mortgaged property that the mortgagee obtains after the preliminary decree fall outside the scope of that decree and are comparable to payments made by a mortgagor to a mortgagee after the preliminary decree. Recognising the difficulty this presented, counsel for the appellant, Mr Sharma, argued that the question of the statutory liability of the mortgagee to account for the receipts should be deemed to have been decided in favour of the mortgagee by the preliminary decree. The Court observed that, while the mortgagee could, if he wished, have raised the untenable contention that, for some reason, he was not under a statutory liability to account for receipts under section 76(h), the preliminary decree did not expressly or implicitly negate the mortgagee’s liability for the period subsequent to its issuance. The Court noted that the mortgagee’s general statutory liability was acknowledged, but that the liability had not been quantified up to the date of the preliminary decree nor deducted from the mortgage amount, and that the liability for the post‑decree period remained neither expressly nor implicitly barred by the preliminary decree.

The Court observed that the mortgagee was required to account for receipts under section 76 of the Transfer of Property Act. It noted that, had the Court mistakenly ruled in the mortgagee’s favour, such a finding could have become binding on the mortgagor regarding the mortgagee’s liability to account for receipts even for the period after the preliminary decree. The Court clarified that the mortgagee had admitted his general statutory liability, but for some error the liability had not been quantified up to the date of the preliminary decree nor deducted from the mortgage amount. Consequently, the mortgagee’s liability for the period after the preliminary decree had neither been expressly denied nor implicitly negated by the preliminary decree.

In support of this view, the Court referred to the decision of the Judicial Committee in Madan Theatres, Ltd. v. Dinshaw & Co. Ltd. (1945) L. R. 72 I. A. 277, 286. That case considered whether, after a preliminary decree, an adjustment of the suit could be made under Order XXIII, rule 3 of the Code of Civil Procedure. The Judicial Committee held that a decree holder is not compelled to agree to an adjustment or to accept payment outside the court, but the debtor may allege and prove that an adjustment or partial payment has taken place and been received. The Committee affirmed that the suit continues until a final decree is passed and that there is no prescribed time limit for recording any agreement, unlike the limitation in Order 21, rule 2. Accordingly, any payment made by the judgment‑debtor to the decree‑holder after the preliminary decree would be deducted from the mortgage liability. By the same reasoning, the net receipts that the mortgagee is statutorily required to debit would be taken into account when fixing the mortgagor’s ultimate liability.

The Court then examined a later authority, Satyanarayana v. Suryanarayana, where Clark, J. addressed a similar issue. In that case the appellant had mortgaged property to the respondent’s father, who subsequently took possession. A preliminary decree was granted in favour of the mortgagee. After the preliminary decree, the mortgagor sought an order for an account of the profits received by the mortgagee between the date of the preliminary decree and the date of the final decree. The mortgagor’s counsel argued that, because the preliminary decree contained no provision for such an account, the court could not order one. The learned judge rejected this contention, stating that the mortgagor’s entitlement to an account is well‑settled law. He explained that a mortgage suit persists until a final decree is issued and the legal relationship between mortgagor and mortgagee continues throughout that period. Accordingly, a mortgagee who is in possession remains liable under section 76 of the Transfer of Property Act for the entire duration of the suit, regardless of the absence of an explicit provision in Order 34, rule 8 concerning accounts. The judgment emphasized that the mortgagor’s right to an account is unequivocally established by the statute.

The Court explained that a mortgagor who obtains a final decree is legally entitled to have an account taken of the profits that the mortgagee, who is in possession, receives between the date of the preliminary decree and the date when possession is finally handed over. The Court further observed that when the rules of Order 34 are read in their entirety, they plainly require that such an account be taken; therefore, even if the rules did not expressly impose the duty, the mortgagor’s right to an account is unquestionably established by Section 76 of the Transfer of Property Act. The Court stressed that whenever a suit is filed for either the sale of the mortgaged property or for redemption of the mortgage, it is the Court’s duty to decide, in that same suit, every claim that either the mortgagor or the mortgagee may have under the mortgage up to the moment the final decree is pronounced. Those claims must be included in the mortgage proceeding, and any party who omits them will subsequently be barred from invoking a separate suit to enforce those omitted claims, as provided by Order 2, Rule 2 of the Civil Procedure Code. The learned Judge supported these statements by referring to several earlier decisions. Although those observations appear broad enough to cover the mortgagee’s liability to account for net receipts from the mortgaged property even for the period preceding the preliminary decree, the factual material in the cited case (1 A. 1. R. 1949 Mad. 613, 614) shows that the Judge was in fact limiting his consideration to the mortgagee’s liability only for the period after the preliminary decree had been made, despite the fact that the preliminary decree itself did not contain any direction requiring the mortgagee to account for those receipts. The Court agreed with those observations, subject to the limitation noted, and therefore held that, with respect to the net receipts that accrued from the mortgaged properties after the preliminary decree was issued, the Court was correct in crediting those receipts to the mortgagor when fixing his liability. The counsel for the appellant, Mr Viswanatha Sastri, then submitted that the doctrine of estoppel prevents the mortgagee from denying his liability to account for the net receipts that accrued from the mortgaged properties for the period beginning on the date the plaint was filed and ending on the date of the preliminary decree. The estoppel argument was based on the following facts: on 25 July 1953, the respondents filed an application in the Court of the Senior Subordinate Judge at Ajmer in which they stated that, according to the preliminary decree, the amount due amounted to Rs 958‑4‑0; that the appellants had realised rent from the tenants amounting to Rs 4,250 up to the date of that application; that the costs awarded by the Court against the respondents, which were under appeal, amounted to Rs 2,553‑1‑6; and that, after deducting those sums, the balance payable to the appellants was Rs 35,155‑2‑6. Their prayer in that petition was that the appellants be directed to deliver possession of the said properties to them and also be called upon to render a true and correct account of the recoveries made by the mortgagee as rent from the date of the suit to the date when the mortgagee handed over possession of the properties.

The Court recorded that the respondents had asked the mortgagee to provide a true and correct account of the rentals he had collected from the date the suit was filed until the date he surrendered possession of the mortgaged properties. In response, the mortgagee filed a counter‑affidavit in which he conceded that he had received only Rs 4,488‑2‑0 as rent for the period from 10 August 1950 to 28 July 1953, and that he had incurred management expenses amounting to Rs 1,897 during the same period. He further asserted that, according to the “present” decree, the respondents ought to deposit Rs 30,515‑10‑0 with the Court. By adding the net rent receipts for the said interval to the amount the respondents were directed to deposit, the mortgagee arrived at a total figure of Rs 39,515‑10‑0, thereby demonstrating that he acknowledged an obligation to render an account of the receipts from the mortgaged premises. After the respondents had deposited Rs 35,515‑2‑6, they filed, on 7 December 1954, an application before the Subordinate Judge stating that they were ready to deposit any remaining sums that might, after a full settlement of accounts, be found payable to the mortgagee. In the same application they prayed that the mortgagee be ordered to produce detailed accounts of all rents and profits he had realized so that the Court could examine those accounts and determine the exact amount due to the mortgagee. The mortgagee answered with a counter‑affidavit stating that the plaintiff (the respondents) had no objection to an account of the rent collected and of the expenses incurred in managing and preserving the mortgaged property, but that he claimed a right to retain possession of the property and to enjoy its usufruct until the last penny due on his mortgage, including Rs 14,916‑11‑0 of interest wrongly disallowed by the learned Court, was paid to him, or until that interest was finally disallowed by the Supreme Court on appeal. Thus, while the mortgagee plainly admitted his liability to account for the net receipts, he also contended that his right to possession would continue until the disputed interest was satisfied. On 27 August 1953, the Senior Subordinate Judge ordered that the sum deposited by the mortgagors, after deducting the amount attached by the Income‑Tax Officer, could be released to the mortgagee. Since, at that stage, the appeal and the cross‑objections filed by the mortgagee and the respondents respectively had not been decided, the learned Subordinate Judge left unresolved the precise amount that would ultimately be due to the mortgagee after the pending matters were finally disposed of.

It was observed that the amounts in question had been withdrawn by the mortgagee. The record showed that the respondents had placed a sum of Rs 35,515‑2‑6 with the Court after they had taken the net proceeds that the mortgagee claimed to have obtained from the mortgaged properties. In the same pleading the respondents asked that the mortgagee be ordered to produce true and correct accounts covering the period from the filing of the suit until the date when he handed over possession of those properties to the respondents. The mortgagee acknowledged that he was bound to render an account of the receipts, but he contended that he should continue to occupy the properties until the interest, which the Court had disallowed, was paid to him. From these facts it was argued that the respondents would not have allowed the mortgagee to draw the amount unless he had first admitted his liability to account for the net receipts arising from the mortgaged properties, and that, having drawn that amount on the basis of such admission, the mortgagee is now estopped from denying the said liability. Section 115 of the Evidence Act provides that when a person, by his declaration, act or omission, intentionally causes another to believe a certain fact to be true and to act on that belief, he may not later repudiate the truth of that fact. The Judicial Committee, in the case of C D Sugar Co. v. C N Steamship, explained the doctrine of estoppel under section 115 as “a complex legal notion, involving a combination of several essential elements, the statement to be acted upon, action on the faith of it, resulting detriment to the actor.” To invoke estoppel, three conditions must be fulfilled: first, a representation must be made by one person to another; second, the other person must act upon that representation; and third, that action must cause detriment to the interests of the person to whom the representation was made. In the present matter the first two conditions appear to be satisfied because the appellant represented to the respondents that he was liable to render accounts for the net proceeds of the mortgaged properties from the date of the plaint up to the date of the preliminary decree, and relying on that representation the respondents permitted the appellant to withdraw from the Court the amount of approximately Rs 35,515 that they had deposited. The remaining issue is whether the respondents suffered any detriment as a result of that representation. The respondents were required to pay the decretal sum to the appellant in order to obtain possession of the properties. The sum they actually paid was lower than the amount prescribed by the decree. By making that payment they merely discharged the legal liability imposed by the decree. Such discharge of a statutory obligation does not, in any sense, constitute a detrimental act that would satisfy the third element of estoppel.

The Court observed that the discharge of the respondents’ legal liability under the decree could not be described as detrimental to them. Whether the appellant’s representation was actually made or not, the respondents were obligated to pay the stipulated amount. By making that payment they obtained a benefit, because from the date of payment the interest on the sum ceased to accrue. Consequently the Court found no basis for applying the doctrine of estoppel in the present circumstances.

Accordingly, the Court held that the order of the Rajasthan High Court was affirmed in substance, except for the specific direction it had given to the Subordinate Judge. The High Court had directed the Subordinate Judge to consider all the receipts of the mortgaged properties covering the period from August 10 1950, (1) A. 1. R. 1947 P. C 40, to July 25 1953. The present judgment modifies that portion of the High Court’s order.

The Court ordered that the parties shall bear and receive costs in proportion to their respective positions, both in the present proceedings and in the High Court. The order of the High Court is thereby modified, and the case is remitted with the revised directions.