Panna Devi v. Subba Singh — 1979 DIGILAW 1006 (ALL)

JUDGMENT A.N. Verma, J. - This is a defendants' second appeal arising out of a suit for redemption of a mortgage in respect of house situate in the city of Gorakhpur. Both the courts below have decreed the suit. The defendant-appellants, who are successors-in-interest of the mortgagees have filed this second appeal challenging the decree passed by the courts below on various grounds which shall be set out later in this judgment. 2. Briefly stated, the facts which have been found by the courts below, and have not been disputed in second appeal are these :- 3. On 3-3-1905, one Sbrimati Lechman Bibi executed a mortgage of a single storyed that chet house in favour of Shrimati Abadi Begum for Rs. 400/-. On 8-8-1914, Shrimati Abadi Begum sold her rights in favour of one Shrimati Maina and Shrimati Tuaqi and delivered possession of the mortgaged property for a sum of Rs. 3900/-. Defendants nos. 9 and 10 in the suit are the heirs of Shrimati Lechman Bibi (this fact was disputed by the appellants but both the courts below have found that defendants nos. 9 and 10 are the heirs of Shrimati Lechman Bibi, and this finding was not challenged by the learned counsel for the appellants in second appeal). On 10-8-1963, defendants nos. 9 and 10 sold the right of redemption in favour of the plaintiff respondent, namely, Subba Singh. 4. Subha Singh aforesaid filed the present suit arraying the original appellants nos. 1 to 7 as defendants nos. 1 to 7 in the suit, Chhotak son of Shrimati Tauqi as defendant no. 8 and Mohammad Khalil and Ahmed Ali, the heirs of Lechhman Bibi as defendant nos. 9 and 10. 5. The plaint case in short was that Lechhman Bibi had executed the aforesaid mortgage for a sum of Rs. 400/-, the period of mortgage being sixty years, that the term fixing the period of mortgage at sixty years was a clog on the equity of redemption, that the mortgagor was entitled to redeem and possession over the mortgaged property without payment of any amount or on payment of such amount as the court might determine after accounts of the income and expenses have been taken that the defendants nos. 1 to 8 were the successors heirs of the transferee of the original mortgagee, that after the purchase of the mortgaged property on 8-9-1914, the defendants "amalgamated the property mortgaged consisting of three portions into one" and the whole property was now in the shape of a consolidated house, that the plaintiff-respondent-was entitled to file the present suit and that the stipulation fixing sixty years as the period of mortgage was liable to be ignored, as it was a clog on the enquity of redemption, that the defendants nos. 1 to 8 claimed a very heavy amount, for redemption, and hence the suit, that the property in suit has been in occupation of tenants from whom defendants nos. 1 to 8 and their predecessor have been realising aggregate of Rs. 225/- per month as rent from the years 1956, that the defendants have realised much than what was legally due to them, and consequently, the plaintiff was entitled more to redeem the mortgage without payment of any amounts, however, the plaintiff was ready to pay such amount as the court may determine on proper accounting. 6. The suit was contested by defendants nos. 1 to 7 alone. They asserted that the plaintiff has no right to claim redemption, that defendants nos. 9 and 10 were not the heirs of Shrimati Lachman Bibi, that the property mortgaged in the year 1905 was identifiable on the spot, that the original mortgaged property was completely demolished and raised to the ground, and in its place, the said defendants have constructed a double storyed pucca house between the years 1949 and 1952 at an expense of Rs. 50,000/-, that the valuation of the suit property was not less than Rs. 50,000/-, that the valuation of the suit property was not less than Rs. 52,960.84 which was beyond the pecuniary jurisdiction of the court in which the suit was filed, that the said defendant kept a yaddasht (memorandum) of expenses of repairs and reconstruction of the house, that the plaintiff was, therefore, not entitled to get possession over the house without the payment of the aforesaid amounts spent by the said defendants over the repairs and reconstruction of the house now standing over the site of the original house which was mortgaged to Shrimati Abadi Begum, and that the suit was premature as the period fixed for mortgage, namely, sixty years had not expired when the suit was filed that the said defendants were entitled to the benefit of Section 41 of the Transfer of property Act, that the defendants were in possession of the property in suit for more than twelve years in their own right, and the suit was, therefore, barred by limitation. 7. The trial court framed the following issues :- 1. Whether the suit is undervalued for the purpose of jurisdiction and court Fee ? 2. Whether the suit is beyond the jurisdiction of this court ? 3. Whether the court-fee paid is insufficient ? 4. Whether the terms of the mortgage-deed in suit amount to a clog on the equity of redemption ? 5. Whether the suit is premature ? 6. Whether the transaction in suit was an out and out sale and the deed dated 3-3-1905 was executed in the form of mortgage-deed only to avoid payment of 2 zare - Chahattum ? 7. Whether defendants no. 1 to 7 are the mortgagees or are they owners of the house in suit ? 8. Whether plaintiff is the holder of the equity of redemption ? 9. Whether the defendants nos. 9 and 10 are the heirs of the original mortgagor ? 10. Whether the property mortgaged is not identifiable ? If so, its effect? 11. Whether the defendant no. 1 reconstructed the house in suit at a cost of Rs. 52,960.84 ? 12. Whether, the defendants 1 to 7 effected repairs in the house in suit ? If so, what is the amount spent on it ? 13. Whether the defendants nos. 1 to 7 are entitled to the benefit of Section 14 of the Transfer of Property Act ? 14. 52,960.84 ? 12. Whether, the defendants 1 to 7 effected repairs in the house in suit ? If so, what is the amount spent on it ? 13. Whether the defendants nos. 1 to 7 are entitled to the benefit of Section 14 of the Transfer of Property Act ? 14. Whether the suit is barred by time ? 15. Whether the plaintiff is entitled to redeem the house in suit ? If so, on what terms ? 16. To what relief, if any is the plaintiff entitled ? 8. The trial court held that the plaintiff was entitled to claim redemption as a transferee of the heirs of the original mortgagor, that the terms of the mortgage did not amount to a clog on the equity of redemption, and in any case the period of sixty years having expired during the pendency of the suit, the plaintiff had a right to claim redemption that the defendants nos. 1 to 8 not having maintained true, and proper accounts of the repairs and cost of reconstruction etc. they were not entitled to claim these amounts from the plaintiff, that in view of the terms of mortgage-deed, the defendants-appellants were bound to keep a yaddasht (memorandum) of repairs and cost of reconstruction etc. incurred by them, and that having not been done, the plaintiff was entitled to claim redemption on payment of Rs. 400/- only, the original amount advanced under the mortgage. On these findings, the trial court passed the following decree :- "Plaintiff's suit is decreed with costs against defendants nos. 1 to 7. Plaintiff shall be entitled to redeem the property in suit on payment into court the mortgage debt Rs. 400/- within three months of the decree." 9. The defendants nos. 1 to 7 appealed without any success. The lower appellate court endorsed the findings of the trial court. However, the lower appellate court disagreed with the trial court as regards applicability of Section 76 of the Transfer of Property Act. The trial court had observed that the parties were agreed before it that the mortgage in question was an anomalous mortgage, and that consequently, the provisions of Section 76 of the Transfer of Property Act casting upon the mortgagee a duty to keep accounts with regard to the income and expenditure spent over reconstruction were not applicable to the facts of the present case. The lower appellate courts, however, disagreed with the trial court and held that the duty to keep yaddasht (memorandum) of all the amounts spent on the repairs and Reconstruction incurred by the defendants nos. 1 to 8 was imposed upon them by the terms of the mortgage-deed even if the provisions of clause (g) of Section 76 of the Transfer of Property Act did not apply. The lower appellate court agreed with the trial court in all other respects and held that inasmuch as the defendants-appellants had failed to maintain proper accounts of repairs and costs of reconstruction of the house they were not entitled to claim these amounts and that the plaintiff was, therefore, entitled to redemption of the property on payment of Rs. 400/- only to the defendants-appellants even though "the mortgagees must have spent money, may be in many thousands on repairs, demolition, alteration and constructions of the pucca double-storyed house in place of kachcha house originally mortgaged during all these years from 1905." 10. The lower appellate court also held that the terms fixing the period of mortgage sixty years did not amount to clog on the equity of redemption. Learned counsel for the respondent did not challenge this finding recorded by both the courts below against the plaintiff-respondent. 11. Aggrieved by the aforesaid decision, the defendants-appellants have filed this second appeal. 12. Learned counsel for the appellants' first and main contention was that both the courts below have committed a patent error of law in granting a decree for redemption in favour of the plaintiff-respondent on payment of Rs. 400/-only, the original amount, and in not calling upon the plaintiff-respondent to pay' for the costs of repairs undertaken by the appellants in the old house as well as the huge amount spent by the appellants over construction of the new double storeyed pucca house over the site of the old house which was mortgaged in the year 1905 before granting the plaintiff-respondent a decree for redemption. Learned counsel contended that even if the courts below were not disposed to accept the yaddasht (memorandum) produced by the appellants as worthy of reliance, that circumstances did not ipso facto entitle the plaintiff-respondent to claim redemption without payment of all the costs incurred by the appellants over the construction of the new house. 13. Learned counsel contended that even if the courts below were not disposed to accept the yaddasht (memorandum) produced by the appellants as worthy of reliance, that circumstances did not ipso facto entitle the plaintiff-respondent to claim redemption without payment of all the costs incurred by the appellants over the construction of the new house. 13. Learned counsel for the respondent on the other hand urged that the yaddasht (memorandum) was a condition precedent to the appellants' right to claim the costs of repairs and reconstruction, and the courts below having rejected the yaddasht (memorandum), produced by the appellants, the courts below are not only legally right but justified in granting a decree for redemption in favour of the plaintiff-respondent on payment of Rs. 400/-. 14. The second argument was that the property of which redemption is sought is different from and greater than the property originally mortgaged and the finding of the lower appellate to the contrary is wrong. 15. Having heard learned counsel for the parties at considerable length I am clearly of the view that this appeal must succeed on the first point urged on behalf of the appellants. 16. In order to appreciate the respective submission of the parties it would be convenient to reproduce here the substances of the material terms of the mortgage 1. Date of mortgage ... 3-3-1905 2. Amount of mortgage ... Rs. 400/. 3. Period of mortgage ... sixty years 4. Rate of interest .. Possession in lieu of interest. 5. The mortgagee has been put in possession over the mortgaged, house which the mortgagee might use herself or let it out on rent, and appropriate its rents and the mortgagor shall have no right to claim any rents or profits accruing from the mortgaged property, nor shall the mortgagee have a right to claim any interest from the mortgagor on the principal amount of the mortgage 6 The mortgagee shall have the right to demolish the mortgaged property completely and to reconstruct or construct a Single storeyed or double storeyed house in place of the original mortgaged house according to his requirements and wishes and the mortgagor or her heirs shall have no objection to such demolition and reconstruction. 7. The mortgagee shall be responsible for the repairs of the mortgaged property at his own expense and the mortagee shall keep a yaddasht (memoradum) of the repairs undertaken by him. 8. 7. The mortgagee shall be responsible for the repairs of the mortgaged property at his own expense and the mortagee shall keep a yaddasht (memoradum) of the repairs undertaken by him. 8. Apart from the principal, whatever amounts the mortgagee would incur on repairs, alterations, demolition and construction of a new house, the mortgagee would be entitled to interest at the rate of 2% per mensem and this amount will be added to the principal amounts every year. The mortgagee would be entitled to interest, simple and compound, on the total amount spent in the manner mentioned above and thus the charge on the mortgaged property would go on increasing. If the mortgagor or her legal representatives be desirous of redeeming the property after the period fixed in the mortgage deed, they would have to pay in addition to the principal, all such amounts which the mortgagee shall have spent on demolition, repairs, alterations and construction together with interest, thereon, simple and compound, in the manner mentioned above. 17. These then, are the material terms of the mortgage deed, in the light of which the respective submissions of the parties have to be considered. 18. The terms clearly provide that the mortgagor would not be, entitled to redeem the mortgage except upon payment of the principal as well as all such amounts which the mortgagee shall have spent on repairs, alterations, demolition and construction together with interests on such amounts at the rate of 2% per mensem compoundable at the end of every year. The terms, however, also lay down that the mortgagee shall keep a memorandum of repairs, and that produce at memorandum of expenses and costs incurred by the appellants. 19. Both the courts below are of the view that the liability of the plaintiff-respondent to pay the amount spent by the mortgagee on repairs, alterations, demolition and construction before being emitted to claim redemption was contingent upon the mortgaged maintaining and producing a true and accurate memorandum, and that if the mortgagee defaulted in this regard, it would automatically and ipso facto absolve the mortgagor from the liability to pay this amount. In my judgment, this view is, wholly unwarranted. The mortgage-deed does not admit of such a construction. 20. In my judgment, this view is, wholly unwarranted. The mortgage-deed does not admit of such a construction. 20. While it is true that the mortgage deed required the mortgagee to keep a memorandum, it does not make the liability of the mortgagor to pay for the amounts spent on repairs, alteration, demolition and construction contingent upon the existence of a true and accurate memorandum. The mortgage deed-provides in terms explicit and unambiguous that the mortgagor shall be entitled to redeem the mortgage not only upon payment of the principal but also the amounts spent by the mortgagee on repairs etc. This substantive liability could not legally or on plain terms of the deed extinguish ipso facto upon rejection by the court of the memorandum produced by the mortgagees. 21. In my view, the provision in the mortgage-deed about memorandum was intended merely to provide a safe-guard against the mortgagee laying an inflated and fanciful claim on account of repairs, demolition and construction based on imaginary or false date. In my view, if it is permissible to determine the amount spent on repairs, construction etc. by other means, there is no reason why the claim of the mortgagee to be paid the amounts spent by him on repairs, demolition and construction etc. cannot be considered. If the amounts of costs are capable of being estimated, the mortagee must be held entitled to claim these costs before the mortgagor is granted a decree for redemption. At least costs of construction of the new house admittedly constructed by the appellants were certainly capable of being estimated. 22. The courts below were, therefore, wrong in rejecting the claim of the appellants automatically and ipso facto upon the rejection of the memorandum produced by the appellants. 23. In deed even in regard to a case to which Section 76 (g) of Transfer of Property Act apply, the effect of the failure of the mortgagee to keep a true and accurate account of the income from the mortgaged property and expenses incurred in respect thereof is not to wipe out the liability of the mortgagor to pay the amounts spent by the mortgagee over the property mortgaged altogether. 24. Learned counsel for the appellants contended that the courts below have committed a grave error in law in granting a decree for redemption to the plaintiff-respondents a payment of Rs. 24. Learned counsel for the appellants contended that the courts below have committed a grave error in law in granting a decree for redemption to the plaintiff-respondents a payment of Rs. 400/- only (the principal amount) when admittedly on the own findings of and courts below, the appellants have spent j thousands and thousands in constructing a double storeyed pucca house after demolishing the old kuchcha house. 25. I am clearly of the view that the above contention of the learned counsel is correct. In support of his above contention, learned counsel for the appellants placed reliance on several decisions, which are as under :- 1. Kazim Hussain and another v. Debi Dayal and others, AIR 1934 Oudh 104. 2. Thakur Das v. Radha Kishan. AIR 1917 Labour 28. 3. 9/Sutherland Weekly Reports 275. 4. 12 Moore's Indian Appeals 157 at 194, 195, 198, and 199. 5. 63 Indian Appeals 598 ; and 6. AIR 1958 SC 941 . 26. The above cases undoubtedly support the submission of the learned counsel for the appellants. In the case reported in Kazim Hussain v. Debi Dayal AIR 1934 oudh 104 (supra), it has been held as follows :- "We agree that it cannot be laid down as a hard and fast rule that whenever a mortgagee has failed in the obligation imposed on him by Section 76 clause (g) Transfer of Property Act, he must necessarily be made liable on the basis of the gross rental. It is conceivable that there may be cases in which the raising of the presumption that all the tenants have paid their rents must be justified. It is conceivable that there may be cases in which the raising of the presumption that all the tenants have paid their rents must be justified. The presumption could not be carried beyond reasonable limits." Similar is the view of the Lahore High Court in the case of Thakur Das v. Radha Kishen, AIR 1917 Lahore 28 (supra) in which it was held thus :- "It is no doubt the duty of mortgagee to keep accounts of such expenditure and if he does not all presumption will be made in favour of the mortgagor but failure to keep accounts does not ipso facto defeat a claim for compensation which is proved in other ways." The observations made in these two cases clearly point to the conclusion that even in a case covered by Section 76 (g) of the Transfer of Property Act, the failure to maintain accounts does not ipso facto result in the consequence of the mortgagor becoming entitled to claim redemption without payment of the amount incurred by the mortgagee towards repairs etc. It is a different matter that on the facts of particular cases, the courts may raise a presumption against the mortgagee but as observed in the above case reported in AIR 1934 Oudh 104, the presumption cannot be carried too far. Moreover, even in regard to the duty imposed by Section 76 (g) of the Transfer of Property Act the consequences have been provided in the last paragraph of the said section which reads as follows :- "If the mortgagee failed to perform any of the duties imposed upon him by this section, he may when accounts are taken in pursuance of a decree made under this Chapter, be debited with the loss, if any, occasioned by such failure." It would thus appear that even in regard to a case covered strictly by the provisions of Section 76 of the Act, the consequence of not maintaining the full and accurate accounts of all sums received and spent by a mortgagee is only that when accounts are taken in pursuance of a decree made for redemption, the mortgagee is debited with the loss, if any, occasioned by such failure. The courts below were, therefore, not justified in throwing out the claim of the appellants to call upon the mortgagor to pay the amounts spent by them over repairs and reconstruction ipso facto upon the rejection of the memorandum. 27. Learned counsel for the plaintiff respondent vehmently argued that the appellants having failed to maintain a true and accurate yaddasht as required by them under the memorandum of appeal and, under Section 76 (g) of the Transfer of Property Act, every presumption should be drawn against the appellants and, therefore, the courts below cannot be said to be wrong in decreeing the suit for redemption only upon payment of Rs. 400/-. Learned counsel placed reliance on some decisions in support of this contention, which are as under :- 1. AIR 1972 Oudh 199 at p. 201 & 202. 2. AIR 1927 Madras 1156 ; and 3. 40 Indian Cases 371. In Kudan Lal v. Aisha Begum reported in AIR 1927 Oudh 198, it has been held that where a mortgagee in possession does not keep proper account, the court will make every presumption against him. Similarly, in AIR 1927 Madras 1156, it has been held that amount of repairs undertaken by a mortgagee in possession is a variable amount and where the mortgagee has not kept true and accurate account of repairs, he cannot be paid any amount for the same in the absence of clear evidence. The case reported in AIR 1927 Madras 1156 does lend support to contention of the learned counsel for respondent to some extent. But in this very case while disallowing the claim of the mortgagee for repairs on the ground that the amounts of repairs were variable elements the High Court of Madras held that the items of expenses such as Municipal taxes and quit rents paid by the mortgagee might be allowed to him, being amounts which are capable of being fixed and ascertained, even though the accounts maintained by the mortgagee may not have been accurate. These amounts were allowed to the mortgagee on the principle that it was possible to ascertain those amounts. These amounts were allowed to the mortgagee on the principle that it was possible to ascertain those amounts. These cases cited by the respondents counsel, therefore, do not lay down an inflexible rule that if and whenever the mortgagee failed to maintain true and accurate accounts, then even those costs incurred by the mortgagee which are capable of being estimated, must also be refused to the mortgagees. In any case, I would prefer to follow the view expressed in the cases reported in AIR 1917 Lahore 28 and AIR 1934 Oudh 104 on this aspect of the matter in preference to the view expressed in the decisions cited by learned counsel for the respondents. 28. It would thus appear that the view taken by the courts below is not sustainable in law even if the present case were governed by Section 76 of the Transfer of Property Act. However, both the courts below, though for different reasons have held that in view of the terms of contract as embodied in the mortgage deed, the provisions of Section 76 would not apply. The lower appellate court appears to have accepted the contention of the defendants on behalf of the mortgagees that the provisions of Section 76 of the Act would not apply because of Section 77 of the Transfer of Property Act. 29. It would thus appear that the; view taken by the courts below that if the appellants did hot keep true and accurate memorandum their claim was liable to be rejected outfight is warranted neither by the terms of the contract nor even by provisions of Section 76 of the Transfer of Property Act. The courts below have therefore, erred in law in decreeing the plaintiff-respondent's suit without providing for payment of costs incurred by the appellants over repairs, alterations; demolition and reconstruction of the house together with interest thereon. The courts below should have addressed themselves to the question whether it was not possible to determine these costs independently of the memorandum, by means of a proper estimation. The courts below could have appointed a commissioner to go into these items of costs and determine the same in regard to item of costs which were capable of being assessed and estimated, the plaintiff-respondent should have been made liable to pay these amounts in order to be entitled to a decree for redemption. The courts below could have appointed a commissioner to go into these items of costs and determine the same in regard to item of costs which were capable of being assessed and estimated, the plaintiff-respondent should have been made liable to pay these amounts in order to be entitled to a decree for redemption. If the court was not satisfied with the report of the Amin. It could have appointed another Commissioner to go into these costs. 30. The lower appellate court should now appoint a Commissioner to go into the various items of costs claimed by the appellants. Tho Commissioner can also estimate the costs of construction as they prevailed at the relevant time when the appellants undertook the construction of new houses. The Commissioner may also find out rents which were realised by the mortgagees from the property in dispute as well as the expenses incurred by the appellants towards taxes and repairs etc. The rents realised by the appellant would be liable to be adjusted against the amounts payable to the appellants on account of cost of repairs etc. and the interest payable thereon. Of course the appellants would be entitled to receive only those amounts of costs and expenses which are capable of being estimated. 31. As regards the second point urged by the learned counsel for the appellants as to the identity of the property, the courts below having concurrently held against the appellant on the issue, which was incontestably a pure question of fact, it is not permissible for this Court to interfere with the finding in second, appeal. Learned counsel for the appellants was unable to point out any error of law whatsoever in the finding recorded by the courts below on the point. I, therefore, find no merits in the second point urged by the learned counsel for the appellants. 32. The upshot of the above discussion is that this appeal succeeds and is allowed. The case is remanded to the lower appellate court for decision of the appeal filed by the appellants according to law having regard to the observations made by me in this Judgment. The parties will bear their own costs of this appeal. The record of the case will be sent down to the courts below immediately. As the case is an old one, the appellate court shall try and dispose of the appeal expeditiously. The parties will bear their own costs of this appeal. The record of the case will be sent down to the courts below immediately. As the case is an old one, the appellate court shall try and dispose of the appeal expeditiously. The interim order is hereby vacated.