Mohammad Fiayaz Khan v. Lala Pritam Singh — 1958 DIGILAW 298 (ALL)

JUDGMENT D.N. Roy, J. - This is a plaintiff's appeal arising out of a suit for the recovery of Rs. 13,938-8-0 on account of principal and interest, or whatever excess amount is found due by the defendant on accounting, together with future and pendente lite interest and costs of the suit upto the day of realization. The plaintiff mortgaged with possession under a possessory mortgage deed dated 5th November, 1932, his entire property in villages Paraura and Muhkampur for Rs. 60,000/- to Roramal father of the defendant. Under the conditions of the mortgage it was agreed upon that the interest would be paid at the rate of 6 per cent. per annum and that the mortgagee would be entitled to get Rs. 200/- annually as the costs of collection. It was stated in the mortgage deed that at the time of the mortgage the net profits from these two mortgaged villages, which were put in possession of the mortgagee, after remission of rent and payment of Government revenue, was Rs. 5,938-11-5 per annum. It was further stated that the mortgagee would be liable to pay to the mortgagor, after deducting Rs. 3,600/- per annum as interest and Rs. 200/- per annum as costs of collection of rent, the net profit of Rs. 2,138/11/5 per annum. 2. On the 15th of November, 1935, an application under Sec. 4 of the U. P. Encumbered Estates Act was made by the plaintiff-debtor. That application was forwarded in due course by the Collector to the Special Judge First Grade. Before the Special Judge written statements were filed by the debtor and also by the creditor under the provisions of the U. P. Encumbered Estates Act. In the Debtor's written statement the nature and extent of the landlord's proprietary rights in the land, and the nature and extent of the land-lord's property which was liable to attachment and sale under Sec. 60, C.P.C. exclusive of his proprietary rights in land, had been specified in terms of Sec. 8 (1) (b) and (c) of the U.P. Encumbered Estates Act. In those particulars the profit accruing out of the estate for the period 1346 to 1351F, which period was subsequent to the date of the making of the written statements by the debtor and the creditor, had not been stated and could not have been stated "as property liable to attachment and sale under Sec. 60, C. P. C." Before the Special Judge a compromise signed by the creditor and by the debtor applicant had been made on the 30th of April 1936 which is Ex. 12 on the record and is printed at pp. 24 to 26 of our paper book. That compromise, inter alia, stated that Rora Mal the mortgagee in his capacity as a mortgogee had been in possession of the property mortgaged since the date of the mortgage, subject to the conditions mentioned in the mortgage deed and had been making collections and assessment. It contained certain other terms, but it did not specify what sum was due and legally recoverable from the mortgagor to the mortgagee on the date of the making of the application under Sec. 4 of the U. P. Encumbered Estates Act, which was the crucial date because of the provisions of Sec. 14 (2) of the U. P. Encumbered Estates Act. That section provides that the Special Judge shall examine each claim and after hearing such parties as desire to be heard and considering the evidence, if any, produced by them, shall determine the amount, if any, due from the landlord to the claimant on the date of the application under Sec. 4. Upon the footing of the compromise Ex. 12 no decree was prepared by the Special Judge in favour of Rora Mal the creditor. On the 16th of August 1942, the Special Judge came to notice that the compromise of the 30th of April, 1936 could not be made the subject of a decree and consequently he passed an order to the effect that it could not be treated as adjustment of a claim and the compromise therefore stood abrogated and he would proceed to determine the amount which was legally recoverable on the date of the making of the application under Sec. 4. Meanwhile Rora Mal died and his son Pritam Singh was brought on the record in his place. Meanwhile Rora Mal died and his son Pritam Singh was brought on the record in his place. On the 24th of March, 1944, when the Special Judge proceeded to determine the claims, the pleaders of the parties made a statement which is Ext. A-7 on the record printed on page 39 of the paper book. The statement was to the following effect:- "The amount due to Pritam Singh, son of Rora Mal in respect of the usufructuary mortgage deed, dated the 5th of November, 1932 may be fixed at Rs. 60,000 up-to the date of application under the Encumbered Estates Act, i.e. upto the 15th of November, 1935 and a decree for Rs. 60,000/- may be passed against the applicant." Upon the footing of that statement the learned Special Judge passed a decree for that sum on that very date. The decree is Ex. A-2 printed on page 37 of the paper-book and it is to the following effect:- "It is ordered and decreed that the applicant should pay to the creditor Rs. 60,000/- together with interest at the rate of Rs. 2 per cent per annum from the date of ejectment from the property mortgaged to the date of realization." 3. This decree, in view of Sec. 14 (7) (b) (i), was a simple money decree. Under Sec. 35 of the U. P. Encumbered Estates Act, if at any time after the decree granted by the Special Judge has been sent to the Collector under the provisions of Sec. 19 of the Act any person entitled to possession of any property under the provisions of this Act applies to the Collector to be put in possession of such property the Collector shall deliver possession of such property to him. After the simple money decree had been passed in favour of Pritam Singh the Creditor, the debtor applicant Mohammad Faiyaz Khan became entitled to possession over the property in terms of Sec. 35 of the Act. 4. It appears that in his written statement the creditor had contended that the plaintiff had taken the responsibility upon himself to look after the work of collection of rent and he kept the accounts and the receipts, and that those accounts should be gone into. 4. It appears that in his written statement the creditor had contended that the plaintiff had taken the responsibility upon himself to look after the work of collection of rent and he kept the accounts and the receipts, and that those accounts should be gone into. Obviously the contention was that there should be certain adjustment in the determination of the claim when the simple money decree is to be passed by the Special Judge, regard being had to the provisions of Sec. 14 (2) and Sec. 14 (7) of the Act. When the statement Ex. A-7 dated 24th of March 1944 was given by the pleaders for the parties to the effect that the amount due to the creditor Pritam Singh in respect of this usufructuary mortgage up to the date of the making of the application under Sec. 4 of the Act, i.e., upto the 15th of November, 1935, was Rs. 60,000/- it will be taken that proper regard had been taken by the parties on the question of any adjustment which was necessary between them upto the date of the application under Sec. 4. During the pendency of the proceedings before the Special Judge, effort was made by the debtor-applicant by his application Ex. A-3 dated the 11 the of April 1942, application Ex. A-8 dated the 16th of March 1944 and application Ex. A-4 dated the Order 23rd March, 1944 to the effect that certain realisation had been made by the mortgagee during the pendency of the proceedings and certain payments were due from the mortgagee to the mortgagor during that period and that adjustments thereof should be made. In the last application Ex. A-4 it was said that under a rough account Rs. 16,000/- towards principal was due to the debtor-applicant from the mortgagee and about Rs. 5000/- were due as interest, in all Rs. 21,000/- and that they were fit to be deducted from the actual mortgage money. In the last application Ex. A-4 it was said that under a rough account Rs. 16,000/- towards principal was due to the debtor-applicant from the mortgagee and about Rs. 5000/- were due as interest, in all Rs. 21,000/- and that they were fit to be deducted from the actual mortgage money. Obviously since Sec. 14 (2) of the Act did not envisage that any accounting should be done for a period subsequent to the date of the application under Sec. 4 and the Special Judge was required to determine the amount due from the landlord to the claimant on the date of the application under Sec. 4, that matter was left undetermined by the special Judge specially in view of the statement of the pleaders of the parties made on the 24th of March 1944 already referred to above. 5. In the present suit the plaintiff, who was the debtor-applicant before the Special Judge, claimed a sum of Rs. 13,938/8/- from Pritam Singh for the years 1346 F. to 1351F. (both years inclusive) as the amount which was due to him from Pritam Singh towards the surplus amount realised by him from out of the mortgaged property, the period having fallen during the pendency of the proceedings in the Encumbered Estates case. A two-fold defence was raised by the defendant as against the claim. It was urged on his behalf that Sec. 11 of the C. P. C. and Sec. 14 of the Encumbered Estates Act barred the suit. It was further urged on his behalf that the claim was time barred. A plea was also raised that during the period in question it was Mohammad Faiyaz Khan the plaintiff who was in realisation of the usufruct of the property and consequently he could not claim an accounting. The court below held that Sec. 11 of the C. P. C. and Sec. 14 of the U. P. Encumbered Estates Act barred the suit and the suit was further barred by Sec. 47 of the Code, as also by Order 2, Rule 2. The court below held that Sec. 11 of the C. P. C. and Sec. 14 of the U. P. Encumbered Estates Act barred the suit and the suit was further barred by Sec. 47 of the Code, as also by Order 2, Rule 2. The court below further held that Article 105 of the Limitation Act applied to the suit; that the suit was therefore barred by time in respect of the first three years of profits but it was within time for the subsequent three years and that it was the plaintiff who made collections during the period in question and not the defendant and consequently the defendant was not liable to render any accounts to the plaintiff. The court below accordingly dismissed the suit. 6. The first question which we have got to consider is whether it was the plaintiff or it was the defendant who was in possession over the property during the period whether or not the defendant was at all accountable to the plaintiff. The mortgage-deed mentioned that the mortgagee had been put in possession over the property. It was no doubt true as was proved by the letters Ext. A-16, A-17, A-18, A-19, A-20 and A-21 of the plaintiff as also by the statement of Mohammad Istehsan a witness for the defendant that Rora Mal remained in possession upto the end of Kharif 1351F. and that he used to appoint 'karindas' on the recommendation of Mohammad Faiyaz Khan defendant and that Rora Mal used to maintain accounts and the account books used to remain in the possession of the 'karindas.' From the mere fact that the plaintiff Mohammad Faiyaz Khan made certain suggestions to Rora Mal from time to time in the appointment of 'karindas' and as to how the collections should be made it would not be correct to say that Faiyaz Khan himself had been collecting the rents and had been in possession of the property and therefore the mortgagee's liability to account to him for the excess profit ended. The statement of Mohammad Istehsan, the witness for the defendant, was completely overlooked by the court below and a wrong construction had been put upon the plaintiff's letters aforesaid when the court came to the conclusion that it was the plaintiff who used to pay part of the profits as an interest to the defendant and that the defendant did not use to make collections or to pay the profits to the plaintiff and consequently the defendant was not liable to render any accounts to the plaintiff. The fact that it was the mortgagee who was in possession and that he made collections during that time was further strengthened by the statement of counsel made on the 30th of April 1936 which, though not effective as a compromise on which a decree under Sec. 14 of the U. P. Encumbered Estates Act could be founded, was nevertheless an admission by the party concerned to the effect that Rora Mal the mortgagee had been in possession of the property mortgaged since the date of the mortgage and had been making collections since then. That the mortgagee was still in possession on the date of the passing of the decree by the Special Judge is strengthened by the fact that when the special Judge made the decree on the 24th of March 1944 he directed that the debtor applicant should pay to the creditor not only the sum of Rs. 60,000/- but interest at the rate of Rs. 2 per cent. per annum from the date of ejectment of the property mortgaged to the date of realization. We are, therefore, unable to support the finding of the court below to the effect that it was the plaintiff who used to make collections and that therefore the defendant is not liable to render any accounts to the plaintiff. We are of opinion that the defendant as mortgagee was in possession over the property during the relevant period and that he cannot evade his liability to render accounts to the plaintiff for that period. We are of opinion that the defendant as mortgagee was in possession over the property during the relevant period and that he cannot evade his liability to render accounts to the plaintiff for that period. In order to determine the question as to whether Sec. 11 and Order 2, Rule 2, of the C. P. C. and Sec. 14 of the U.P. Encumbered Estates Act barred the present suit the learned Civil Judge relied upon certain decisions of the Board of Revenue, principally upon the decision in Vilayat Ali v. Mohammad Ismail, 1942 R. D. 939. In that case it was observed:- "Where a simple money decree with pendente lite and future interest is passed in favour of a usufructuary mortgagee under Sec. 14 (7), Encumbered Estates Act, the debtor applicant is entitled to have the profits of the property enjoyed 1942 R. D. 939 by the mortgagee from the date of the application under Sec. 4 up to the delivery of possession under Sec. 35, set-oil against the decree. The Collector acting under Ch. 5, Encumbered Estates Act, is an executing Court executing the decrees of the special judge. Since there is no provision in the Encumbered Estates Act for a claim to set-off, Sec. 47, Civil Procedure Code, applies and this empowers the collector and the S.D.O. to determine all questions arising between the parties or their representatives and relating to the execution, discharge, or satisfaction of the decree of the special Judge. A claim to set-off can therefore be entertained by the S.D.O. in liquidation proceedings under Sec. 47, C. P.C.A claim to set-off cannot be treated as a claim to part adjustment of the decree under O. 21, R. 2 (2), C.P.C. because for adjustment under that rule there must be an agreement between the parties relating to the execution of the decree and there can be no such agreement in a claim to set-off. Since O. 21, R. 2, C. P. C. does not apply and there is no express provisions for such an application for set-off, there is no limitation, and the S.D.O. has jurisdiction to entertain the claim at any time while executing the decree." 7. The view of the Court propounded above in 1942 R. D. 939 and in certain other similar cases had not had the approval of this Court in Dharam Singh v. Chajju Singh, 1945 O.W.N. 259 (H.C.). The view of the Court propounded above in 1942 R. D. 939 and in certain other similar cases had not had the approval of this Court in Dharam Singh v. Chajju Singh, 1945 O.W.N. 259 (H.C.). The Board's case in 1942 R. D. 939 came to the notice of the Oudh Chief Court in Ram Paltan v. Murli Dhar, A.I.R. 1946 Oudh 83 and in that case it was held that where an application under Sec. 4, U. P. Encumbered Estates Act, is filed by the mortgagor before the expiry of the term of the mortgage under which the mortgagee was to remain in possession for a term of years in lieu of principal and interest and a simple money decree with pendente lite and future interest is passed under Sec. 14 (7) in favour of the usufructuary mortgagee, the applicant is entitled to bring a suit for profits against the mortgagee for the period intervening his application under Sec. 4 and the date of the decree; that such a suit is not barred either under Sec. 47 or under any of the provisions of the U. P. Encumbered Estates Act, provided the applicant mortgagor 2 1945 O. W. N. 259 (H.C.) A. I, R. 1946 Oudh 83 does not claim such profits as a set-off in the liquidation proceedings taken before the collector under Ch. V of the Act; that the reason is that a Collector acting under Ch. V though not an executing Court in the ordinary sense of the words has all the powers of an executing Court, including the power to grant a set-off in respect of the profits realised by the mortgagee during The period intervening the date of the application and the date of the decree. In the present case, as we have already said. the matter was raised before the Special Judge before the passing of the Decree under Sec. 14 (7) of the Act; but the Special Judge did not go into the question and, we think, rightly, because what he was required to determine was what was due on the date of the making of the application under Sec. 4 and not subsequently. The learned Judge was, therefore, clearly in error when he came to the conclusion that Encumbered Estates Act proceedings are also proceedings for redemption of mortgaged property and the account between the parties must be taken up to the date of the decree which is a final decree. Sec. 14 (2) of the Act forbids the Special Judge from entering into adjudication of any matter on the question of claims subsequent to the date of the application under Sec. 4. Consequently when the decree was passed by the Special Judge, the Special Judge could not take account of any realisation which might be said to have been made by the mortgagee subsequent to the making of the application under Sec. 4. The learned Civil Judge was again in error when he said:- "It appears from the facts stated above that the parties came to terms as regards the amount due upto the date of the decree, but in the compromise statement it was written that the amount was to be fixed as clue on the date of the Sec. 4 application The proceedings in the Encum barred Estates Act case show that the intention of the parties was that their disputes should be settled till the date of the decree." 8. After making that observation the learned Civil Judge came to the conclusion that the dispute regarding profits could not be reagitated again in the present suit and it was barred by Sec. 11 of the Code and also by or. 2, R. 2 of the C. P. C. because the plaintiff could have claimed his share of the profits up to the date of the decree in the proceedings before the Special Judge. These observations and findings cannot, in our opinion, be supported regard being had to the provisions of the law which we have already stated. It is not pretended that in the liquidation proceedings taken before the Collector under Ch. V. of the Act any claim of set-off was made by the present plaintiff. These observations and findings cannot, in our opinion, be supported regard being had to the provisions of the law which we have already stated. It is not pretended that in the liquidation proceedings taken before the Collector under Ch. V. of the Act any claim of set-off was made by the present plaintiff. There is no provision under the Encumbered Estates Act where the Collector can embark upon an enquiry after the decrees have been transmitted to him under Sec. 19 of the Act as to whether any and what amount has been realised by the mortgagee during the period of the making of the application under Sec. 4 and the period when the mortgagee has been dispossessed from the property in view of the provisions of the Act so that such amount may be adjusted against the claim which has been found due to the creditor by the Special Judge. We doubt very much the reasoning upon which that part of the decision in Ram Paltan Murli Dhar, A.I.R. 1946 Oudh 83 was founded where it was held that a suit in the Civil court will be barred under Sec. 47 provided the applicant mortgagor does not claim such profits as a set-off in the liquidation proceedings taken before the Collector. In our opinion, and for reasons which we have already stated, the suit was neither barred by Secs. 11, 47 and Order 2, Rule 2, of the C. P. Code nor by Sec. 14 of the U.P. Encumbered Estates Act. 9. On the question of limitation we again find ourselves unable to agree with the Civil Judge that it was Article 105 of the Limitation Act which was applicable. The mortgage in question was a registered mortgage deed. A suit of the present nature would be governed by Article 120 of the Limitation Act which lays down a period of six years for the claim. The present suit was for a period of six years beginning from 1346 F. to 1351 F. i.e., 1939 to 1944, both years inclusive. It was stated in the plaint that the cause of action for this suit arose on 1st August, 1939, the day on which the excess amount became payable for 1346 F. and on the same date on each succeeding year when the amount for other years became payable by the defendant. It was stated in the plaint that the cause of action for this suit arose on 1st August, 1939, the day on which the excess amount became payable for 1346 F. and on the same date on each succeeding year when the amount for other years became payable by the defendant. The suit having been filed on the 30th of July 1945 was clearly within time. 10. In view of our findings the decree of the lower court cannot be upheld and ought to be set aside and the case must go to that court for determination of the question as to what amount is due and legally recoverable by the plaintiff from the defendant. In the result, we allow this appeal and set aside the decision of the court below dated 18th of December 1946 and remand the suit to that court for decision in accordance with law. The appellant shall get his costs in this Court from the respondent. Costs in the court below shall abide the event.