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DAMODARAM SANJIVAYYA NATIONAL LAW

UNIVERSITY

SABBAVARAM, VISAKHAPATNAM, A.P., INDIA

USUFRUCTUARY MORTGAGE

TRANSFER OF PROPERTY

Prof. JOGI NAIDU Sir

Name of the Candidate: Sk. Roshan

Roll No : 2018LLB083
Semester : 4th Semester
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Acknowledgement:

I would sincerely forward my heartfelt appreciation to our respected Transfer of Property

professor, Prof. Jogi Naidu Sir for giving me a golden opportunity to take up this project
regarding “Usufructuary Mortgages”. I have tried my best to collect information about the
project in various possible ways to depict clear picture about the given project topic.
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CONTENTS:

1. INTRODUCTION…………………………………………………………..…04

2. CASE LAW -1…………………………………………………………………..06

3. CASE LAW -2………………………………………………………………......12

4. CASE LAW -3………………………………………………………………..…23

5. CASE LAW -4……………………………………………………………..........28

6. CASE LAW -5………………………………………………………………..…31

7. BIBLIOGRAPHY……………………………………………………………....36
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INTRODUCTION:

USUFRUCTUARY MORTGAGE:

Where the mortgager delivers possession or expressly or by implication bind himself to

deliver possession of the mortgaged property to the mortgagee, and authorises him to retain
such possession until payment of the mortgage money, and to receive the rents and profits
accruing from the property or any part of such rents and part of such rents and to appropriate
the same in lieu of interest, or in payment of the mortgage-money, the transaction is called a
Usufructuary mortgage and the mortgagee a usufructuary mortgagee.

Section- 58(d):

1. Where the mortgagor delivers possession or binds himself (expressly or by

implication) to deliver possession of the mortgaged property to the mortgagee and
2. authorises him to
a. retain such possession until the payment of the mortgage-money, and
b. receive the rents and profits accruing from the property, and to appropriate the
same in lieu of interest or in payment or mortgage money or party in both,

the transaction is called a usufructuary mortgage and the mortgagee a usufructuary

mortgagee.

In a usufructuary mortgage, the possession of the property is given to the mortgagee. The
mortgagee is given the right to the usufruct of te property i.e., rent, produce or profits of the
property. The mortgagor himself doesn’t remain personally liable to pay the mortgage money
because either the mortgagee is let into possession or he is permitted to repay himself out of
the rents and the profits of such property.

ESSENTIAL ELEMENTS:

The essential elements of the usufructuary mortgage are,

1. there is delivery of possession to the mortgagee or an express or implied undertaking

of the mortgagor to deliver such possession,
2. Retention of the possession by the mortgagee till the payment of the mortgage money
or he has to receive rents and profits of the property either in the lieu of the interest on
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mortgage-money or in payment of the mortgage-money or party in payment of either

interest or mortgagee-money
3. There is no personal liability of the mortgagor
4. Mortgagee cannot foreclose or sue for sale of mortgage-property
5. The mortgagor is entitled to redeem the property when the amount due is personally
paid or the debt is discharged by rents and profits received by the mortgagee.
6. No time limit is fixed for the repayment
7. Where the mortgage is for 100/- or more, it must be registered but where it is less than
100/- it may be by registered deed or by delivery of property.
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CASE LAW-1

S. SRINIVASA AIYANGAR AND Ors v. RADHAKRISHNA PILLAI

CITATION: (1914) 26 MLJ 47

BENCH: SADASIVA AIYAR

FACTS:

This is an appeal against an Order of remand. The appellants are the defendants.

The plaintiff sued for redemption of a mortgage created in 1884. This mortgage document
(Exhibit A) begins by calling itself a usufructuary mortgage and in two or three places in the
course of the deed, it is expressly called a usufructuary mortgage deed. It, however, contains
a clause that if the mortgage amount was not paid on a date which is stipulated in the
document at an interval of exactly nine years from the date of the document the mortgage was
to work itself out as a sale for the principal ' amount due on the mortgage bond. Possession
was given to the mortgagee in accordance with the nature of the document and its spirit. At
the end, there is a covenant to this effect. "I, the mortgagor, shall pay to you the costs of the
construction of earth work. etc., on the date fixed for redemption as per your accounts along
with the mortgage money."

ISSUES:

1. What is the nature of this document? 

CONTENTIONS OF APPELLANTS:

It is contended by the appellant's learned Vakil that this is a combination of three kinds of
mortgages, a simple mortgage, a usufructuary mortgage and a mortgage by a conditional sale.

Reliance was placed upon the decision in Amarchand v. Kilamorar (1903) I.L.R. 27 B.600. In
that case the respondent was not represented, and I think that that case was wrongly decided.
Reference was also made to Ramayya v. Guruva1 . No doubt there is an observation in that
case that the Subordinate Judge who decided the case in the Lower Court treated the
mortgage in question in that case as an anomalous mortgage; but I do not think that the
learned judges of this Court intended to state that that opinion of the Subordinate Judge was
1
(1890) I.L.R. 14 M. 232
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correct. Again, reference was made to Ammanna v. Gurumurthi2. There is an observation

there that the transaction evidenced by the document in question in that case was a mortgage
by way of conditional sale as defined in Section 58, Clause (c) of Act IV of 1882. That
observation was not necessary for the decision in that case, and with the greatest respect I
dissent from that observation, though it seems to be accepted without criticism by Shephard
and Brown (Page 238) and by Gour (paragraph 1044) in their Commentaries on the Transfer
of Property Act. In the result I hold that the mortgage deed in this case is not an anamolous
mortgage as defined in Section 98 of the Transfer of Property Act, but it is a combination of a
simple mortgage and an usufructuary mortgage and hence that it is redeemable. That in the
case of such a mortgage, the provisions of Section 60 would apply seems to me to be clear
from the observations in p. 707 of Macpherson in his book on the Law of Mortgage. The case
in Perayya v. Venkata3 also shows that the right of redemption is not extinguished by the
existence of a covenant at the end of the mortgage deed similar to the terms given in the
present mortgage deed. See also Ankimer v. Subbiah4 5where even less onerous terms were
held not to destroy the right of redemption.

In this view, it is not necessary for me to consider the question whether the learned District
Judge was right in his view that, even if it was an anomalous mortgage, Section 60 of the
Transfer of Property Act would allow the mortgagor to redeem the mortgage and that the
terms of Section 98 should be read subject to the provisions of Section 60 and other sections
of the Transfer of Property Act; I need only, say that I would find it very difficult to hold that
the express terms of Section 98 which are intended to apply specially to anomalous
mortgages can be controlled by the provisions of previous sections of the Act which deal with
other matters.

CONTENTIONS OF RESPONDENTS:

The plaintiff's contention, on the other hand, is that it is a usufructuary mortgage with a
covenant at the end clogging the equity of redemption. I am inclined to think that it is a
combination of a simple mortgage and a usufructuary mortgage with a covenant clogging the
equity of redemption. I think it cannot be called a mortgage by a conditional sale, as it was

2
(1892) I.L.R. 16 M. 64
3
(1888) I.L.R. 11 M. 403
4
(1911) I.L.R. 35 M. 744
5
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executed after the Transfer of Property Act came into force, and it does not come within the
definition of a mortgage by a conditional sale found in Section 58 Clause (c) of the Transfer
of Property Act. There is no ostensible sale of the mortgaged property on the date of the
document. It is what was known as the Hindu form of a mortgage by a conditional sale before
the Transfer of Property Act was enacted ; but it seems to me that the definition given in
Section 58 Clause (c) of the Act was expressly framed so as to exclude this Hindu form of
mortgage by conditional sale from the definition of mortgage by conditional sale in
the Transfer of Property Act, That Hindu form of mortgage by conditional sale which began
as a mortgage and worked itself out as a sale on breach of certain conditions by the
mortgagor formed the subject of several decisions of the High Courts and the Privy Council,
and because much confusion resulted from conflicts between those decisions, their Lordships
of the Privy Council expressly stated in Thumbusatni Moodely v. Hussain Rowthen 6. "An
Act" of the Legislature " affirming the right of the mortgagor to redeem until foreclosure by a
judicial proceeding, and giving to the mortgagee the means of obtaining such a foreclosure,
with a, reservation in favour of mortgagees whose titles, under the law as understood before
1858, had become absolute before a date to be fixed by the Act, would probably settle the law
without injustice to any party." I think that the Transfer of Property Act, so far as the Hindu
form of mortgage by conditional sale was concerned, treated it as a mortgage either simple or
usufructuary according to its terms and treated the condition as to its afterwards working out
as a sale as not enforceable by enacting Section 60 in the Act which gives to mortgagors
generally a right to redeem. A mortgage deed which begins as a mortgage transaction cannot,
in my opinion, be called a mortgage by conditional sale, though it is a mortgage which gives
the mortgagee after a certain time and on breach of certain conditions by the mortgagor a
right to claim a title as vendee. It is a mortgage with a clause providing for a future
conditional sale and not a mortgage by means of a present sale transaction.

 If, then, this document is not a mortgage by conditional sale it is clearly a usufructuary
mortgage according to the definition in Section 58 Clause (d) of the Transfer of Property Act.
I think, that as there is the covenant at the end by the mortgagor which expressly says, " I
shall pay some monies along with the mortgage money on the date of redemption" the
document might according to its literal construction be treated as containing a personal
covenant to pay the mortgage money; and following Rama Brahmam v. Venkata-narasa

6
(1875) I.L.R. 1 M. 23
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Pantulu7 would hold that, owing to the existence of that covenant, it is also a simple
mortgage. Hence the document becomes a combination of a simple and usufructuary
mortgage.

It was next contended that even a combination of a simple and a usufructuary mortgage is an
anomalous mortgage under the definition of Section 98 of the Transfer of Property Act. That
section is as follows: " In the case of a mortgage not being a simple mortgage or a mortgage
by conditional sale, an usufructuary mortgage an English mortgage or a combination of the
first and third, or the second and third, of such forms; the rights and liabilities of the parties
shall be determined by their contract as evidenced in the mortgage deed, and so far as such
contract does not extend, by local usage." The construction sought to be put by the appellant's
learned Vakil upon this section is that the words " in the case of a mortgage being" should be
understood before the words, "a combination of the first and third." I do not think that this is
a reasonable construction of the section. I think the meaning is "or in the case of a mortgage
not being a combination etc."

REASONING:

I agree with my learned brother in the interpretation he has put on Section 98 of the Transfer
of Property Act. I find it quite impossible to read the words " or a combination of the first and
third, or the second and third, of such forms" as not being governed by the negative which
comes at the beginning of the sentence. If a different construction is to be put upon this
section it would be necessary to imply the words "in the case of" between the words "or" and
"a combination" etc. This would be a violation of the meaning of the plain English of the
sentence. I am unable to follow the statement of the learned Judges who decided Amarchand
v. Kilamorar8 that a combination of a simple mortgage and a usufructuary mortgage is an
anamolous mortgage provided, for by Section 98. Mr. Gour in paragraph 1603 of his book on
the Law of Transfer in British India treats this statement as an oversight and in paragraph
1606 speaks of there being six and only six forms of mortgages eliminated by this section
from the category of anamolous mortgages.

10. As regards the mortgage deed Ex. A, as I read the document I am inclined to treat it as
either a usufructuary mortgage deed with a clause containing a clog on the equity of

7
(1912) 23 M.L.J. 131 I
8
(1903) I.L.R. 27 B. 600
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redemption, or a usufructuary mortgage deed combined with a mortgage by conditional sale.

In either case, it will be subject to the conditions of Section 60 of the Transfer of Property
Act, and no act of the parties other than a transaction outside the mortgage deed itself will
extinguish the right of redemption. Vide Perayya v. Venkata9.

11. The words which provide for the payment of repairs, improvements etc., along with the
mortgage money are evidently intended to take effect in the event of the mortgage being
redeemed. I do not consider that they constitute a personal undertaking to pay, nor are there
any other words in this document which can be construed as a personal covenant, express or
implied to pay the mortgage money. Compare Gopalasami v. Arunachella10. In this respect
this case may be distinguishable from that of Kangayya Gurukkal v. Kalimuthu Annavi11 ,
in which a personal promise to pay was contained in the words " We shall cause Rs. 200 to be
paid and we shall redeem our land."

12. If Section 58 Clause (c) of the Transfer of Property Act is to be read strictly, it is

necessary that there should be an ostensible sale of the mortgaged property to constitute a
mortgage by conditional sale. There are no words in Ex.A which by themselves create a sale;
but the document implies that, if payment is not made by the stipulated date, the property
shall be held and enjoyed by the mortgage as if he had obtained it by absolute sale. In some
cases, such words have been treated as a mortgage usufructuary by conditional sale. Instances
are given in paragraph 1605, p. 1025 of of Mr. Gour's book. The next paragraph describes
anomalous mortgages.

JUDGEMENT:

 In Tukaram v. Ramchand12, the document which passed the ownership of the property
usufructuarily mortgaged in case of failure to pay the mortgage money on the prescribed date,
was construed, as an anamolous mortgage. But in that case, the usufructuary mortgage seems
to have been combined with a lease and that may have led the learned Judges to treat it as an
anomalous mortgage. Whether the present document be treated as an usufructuary mortgage
combined with a mortgage by conditional sale, as the Lower Appellate Court treated it, or an

9
(1888) I.L.R. 11 M. 403
10
(1892) I.L.R. 15 M. 304
11
(1903) I.L.R. 27 M. 526
12
(1901) I.L.R. 26 B. 252
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usufructuary mortgage with a clog on the equity of redemption, in either case, the Judgment
of the Lower Appellate Court will have to be upheld and this appeal dismissed with costs,
and I therefore, agree in the order proposed by my learned brother.

CASE LAW -2
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M. RAMANATHA PILLAI v. K.V. ANNAMALAI CHETTIAR AND ANR

CITATION: AIR 1963 Mad 342

BENCH: GANAPATIA PILLAI

FACTS:

The first defendant is the appellant. The suit out of which this appeal arises was laid by the
first respondent as plaintiff for recovery of Rs. 365 due under an othi deed, dated 28th July
1943. This was executed by the appellant both on his own behalf and as guardian of his elder
brother's sons, defendants 2 and 3, who were minors on the date of the othi deed. The sum
claimed consisted of Rs. 200 principal and interest at 51/2 per cent, per annum from the date
of the mortgage deed. Contentions were raised as regards the validity and binding character
of the mortgage in regard to the share of defendants 2 and 3 and also on the question of the
mortgage being a real transaction. I am not concerned with these questions in this appeal.
But, a question of limitation was raised on the ground that since the mortgagee was entitled to
possession of the mortgaged property and such possession was not delivered the suit ought to
have been filed within twelve years from the date of the mortgage deed and not within twelve
years from the date of the expiry of the three years period fixed in the mortgage deed for
repayment of the mortgage amount. Both the lower Courts have negative this contention.
That is the only point arising for my consideration now.

2. The facts are not in dispute. The date of the mortgage deed, Ex. A.1, is 28th July 1943. The
period fixed for repayment in the mortgage deed is three years. It was alleged that the
mortgaged property was leased back to the mortgagor on the basis of a tenancy from year to
year. But, at the end of the first year no rent was paid, nor possession of the property
surrendered. Both the lower Courts proceeded on the assumption that this lease was not given
effect to and consequently the mortgagee was not given possession of the property. The suit
was filed on 29th July 1958. It would therefore be within time under Article 132 of
the Limitation Act if the starting point for limitation was the end of three year period fixed in
the mortgage deed for repayment of the mortgage money. But it would be barred by time if
the mortgagee had exercised option under Section 68(1)(d) of the Transfer of Property Act
and brought the suit for the money due on the mortgage since possession was not given to
him
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ISSUES

1. Whether he ought to give credit to the mortgagor for the full value of the two items
purchased by him an proceed against the other property only for the balance?

CONTENTIONS OF APPELLANTS

 Mr. Natesan, learned counsel for the appellant, raised two points.

The first was that the provisions of Section 68(1)(d) of the Transfer of Property Act
(hereinafter called the Act) cast an obligation upon the mortgagee in this case to file a suit for
the mortgage money within twelve years from the date of default of the mortgagor to give
possession and consequently; the suit would be barred by limitation.

The second contention was that even if this provision in the Act is regarded as a provision for
the benefit of the mortgagee upon which she could base her cause of action as an alternative
to the cause of action based upon the covenant in the mortgage deed for repayment of the
mortgage money, still the original mortgagee in this case had exercised the option to avail
herself of the remedy provided under Section 68(1)(d) of the Act by the notice Ex. A.7,
issued on 15th September 1944 and consequently she was not entitled to rely on the personal
covenant to bring a suit within twelve years from the end of the three year period fixed in the
mortgage deed for payment. If this argument is correct and an election was made by the
mortgagee on 15th September 1944, the date of Ex. A. 7, the suit would be barred by faro
because it was admittedly filed more than three years after the date of Ex. A. 7. The first
respondent who filed the suit was an assignee of the mortgage from the mortgagee, but that
fact does not enter into the merits of the question which I have to decide.

4. Article 132 of the Limitation Act provides a twelve year period of limitation for suits to
enforce payment of money charged on immoveable property. This period of twelve years
begins to run from the date when the money used for becomes due. According to counsel for
the appellant the money sued for became due under the personal covenant in the mortgage
deed on the expiry of the three year period and alternatively it also became due under Section
68(1)(d) of the Transfer of Property Act when the mortgagee (sic) defaulted to give
possession of the mortgaged property to the mortgagor (sic).
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The argument was that the mortgagee cannot have two causes of action for the same claim
and where the statute gave a right to sue for money, it must prevail over the right contained in
the contract. This argument proceeds on the misconception that there are two separate causes
of action in this case for the same right or relief, viz., recovery of money due under the
mortgage. The nature of the right conferred under Section 68(1)(d) if analysed would turn out
to be nothing but compensation to the mortgagee for the default of the mortgagor to surrender
possession of the mortgaged property. A statutory right is given to the mortgagee to claim the
mortgage amount in cases falling under Section 68(1)(d) of the Act which is only in the
nature of compensation to the mortgagee and not an alternative remedy for recovery of the
mortgage money based on the right founded upon the personal covenant contained in the
mortgage deed to repay the mortgage money. It is true the amount recoverable by the
mortgagee under Section 68(1)(d) is identical in quantity with the mortgage money
mentioned in the mortgage deed. But, that would not affect the nature of the claim dealt with
in the statutory provision. Consequently, merely because the amounts sued for in either case
would be the same it could not be said that the cause of action is the same though satisfaction
for one cause of action would extinguish the other.

Really the cause of action under the mortgage deed is based upon contract while the cause of
action for the recovery of the amount of the mortgage claim money by virtue of the
provisions of Section 68(1)(d) is in the nature of a right to claim compensation.

In cases of usufructuary mortgages containing a personal covenant by the mortgagor to pay

the mortgage money and default takes place in giving possession of the mortgaged property
there is only one cause of action or recovery of the mortgage money because in such a
case Section 68(1)(d) would not be attracted if the suit is laid for the mortgage money after it
becomes due according to the tenor of the mortgage deed. There is therefore no force in the
contention that in a case where a mortgagee as here has both a cause of action based upon the
personal covenant in the mortgage deed and a right to recover the mortgage money by virtue
of the provisions of Section 68(1)(d) of the Act, he gets two causes of action for the same
claim.

In my view, there are two causes of action no doubt, but they are not for same claim. The
object with which Section 68 was enacted would sup-
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port my view because the right to sue for the mortgage money was conferred upon a
usufructuary mortgagee who would normally be not entitled to such a right because by the
definition of "usufructuary mortgage" no personal covenant to repay the mortgage amount is
involved in that class of mortgages. Thus Section 68 was, really intended by the Legislature
to confer upon a usufructuary mortgagee a right to sue for the mortgage money if he
otherwise would not have had that right. To construe Section 68 in the manner contended for
by Mr. Natesan, would mean that the legislature compelled a mortgagee who had a right to
sue for the mortgage money by reason of the personal covenant in the mortgage deed to
abandon that right and to rest in his claim solely upon Clause (d) of Section 68(1). The object
of that provision was to confer a right which did not already exist in the mortgagee and not to
take away any right which he already possessed by reason of the contract.

5. The nature of the right conferred by Section 68(1)(d) has been the subject of judicial
pronouncements in many High Courts. It may be really not necessary to traverse the entire
field of case law on the subject because the preponderance of judicial opinion is that this is in
the nature of a privilege given to the mortgagee which he was free to reject in suitable cases.
This implies that this privilege of suing for the mortgage money conferred by Section 68(1)
(d) could not be converted into an obligation when alone Mr. Natesan's. contention could
prevail.

6. Mr. Natesan attempted to show that in interpreting the language of Article 132 of
the Limitation Act regarding the point when the period of limitation starts, the term "when
the money sued for becomes due" should be held equivalent to "when the money becomes
payable". The term "when the bill, note or bond becomes payable" in Article 80 of
the Limitation Act, has come up for consideration in many' decisions, but it will serve no
useful purpose to review them as the principles laid down in those decisions cannot apply
to Article 132.owever, certain observations occurring in the Full Bench decision in
Subbamma v. Narayya13 were relied on by Mr. Natesan in this connection.

7. There a suit was brought for sale of usufructuarily mortgaged property on the allegation.
Mr. Natesan also referred to the Privy Council decision in L. Narsingh Partab Bahadur Singh
v. Mohammed Yaqub Khan where the question was whether in the case of a combination of a
simple mortgage and a usufructuary mortgage the mortgagee could claim the rights conferred
under S. 67 of the Act to bring the property to sale for non-payment of the mortgage amount.
13
ILR 41 Mad 259
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The controversy before the Privy Council was whether the mortgage in question fell under
the classification anomalous mortgage and therefore was hit by the provisions of Section 98.
The conclusion that the mortgage deed in that case attracted Section 68 has no relevance to
the question which I have to decide here.

14. Mr. Natesan then referred to the decision in Lasa Din v. Mt. Gulab Kunwar14, and the
decisions which followed it. But, in my opinion, these decisions have no bearing on the
question I have to decide because they were concerned with the provisions in the mortgage
deeds and other debt documents giving the right to the mortgagor to pay the amount of the
mortgage money in instalments and providing that on default of payment of any one
instalment the entire mortgage money would become due.

15. The question of limitation now raised has been considered by a Bench of the Bombay
High Court in Sidramaya v. Danava. There the nature of the right conferred upon a
mortgagee under Section 68(1)(d) was analysed in all its bearings and it was held that it did
not amount to an obligation but only amounted to a concession to the mortgagee. It was
further held there that if the mortgagee was entitled to enforce payment of the mortgage
money both by reason of the personal covenant contained in the mortgage deed and also by
reason of the provision in Section 68(1)(d), it was open to him to wait till the expiry of the
period fixed for payment in the mortgage deed and to bring a suit within 12 years after the
expiry of that period despite the accruing of the right to sue for the mortgage money earlier
under Section 68(1)(d). I am in respectful agreement with the view expressed by the Bench
on this question. It is unnecessary for me to notice at length the grounds for the conclusion
mentioned by the learned Judges constituting the Bench because I have already indicated in
this judgment the principal grounds which have been relied on in that judgment.

The next contention of Mr. Natesan based upon Ex. A.7 amounts to this that a notice issued
by the mortgagee containing a demand for payment, of the mortgage money basing the claim
upon Section 68(1)(d) would amount to an irrevocable election to choose the statutory cause
of action implying an abandonment of the cause of action based upon the personal covenant
in the deed.

14
AIR 1932 PC 207
 Page 17 of 36

18. In Rajendra Bahadur v. Raghubir Singh15, it was held by a Bench of the Oudh Chief
Court that the occurring of default in payment of the interest due under the mortgage deed
which was made payable at stipulated periods even before the date fixed for the repayment of
the principal gave an option to the mortgagee to sue for the entire mortgage money together
with interest and a suit laid after issuing of notice to the mortgagor calling upon him to pay
the entire amount was not premature.

In taking this view the Bench followed the Privy Council decision in ILR 7 Luck 442: (AIR
1932 PC 207), where it was observed that in such a case as soon as the mortgagor defaulted
in paying the interest due under the mortgage, the mortgage money became payable within
the meaning of Article 132 of the Limitation Act provided the option had been exercised by
the mortgagee to enforce the mortgage.

19. I am unable to see how this decision has any bearing on the question whether an option is
exercised by the mortgagee. The mere issue of a notice to the mortgagor, to pay the mortgage
money on the happening of the contingency contemplated under Section 68(1)(d) does not
amount to an unequivocal act or election to abandon the remedy based upon the cause of
action contained in the deed in preference to the remedy provided under Section 68(1)(d).

20. Mr. Natesan next referred to the fact that interest was claimed in the plaint from the date
of the mortgage deed and not from the date of notice Ex. A.7. I do not see how this has any
bearing on the question as to the starting point for the period of limitation though the right to
claim interest from the date of the mortgage, may be doubted.

CONTENTIONS OF THE RESPONDENTS:

The defendant, viz., the mortgagor did not give possession to the mortgagee. The question
which arose for consideration of the Full Bench was whether the usufructuary mortgagee was
not entitled to sue for sale of the mortgaged property when the mortgagor failed to deliver
possession of the property to the mortgagee and consequent ly whether he was bound to sue
for the money alone. The Full Bench held that when under a usufructuary mortgage
possession was not given it ceased to be a usufructuary mortgage and the power of bringing
the property to sale on failure to pay the mortgage money could not be exercised by him

15
AIR 1934 Oudh 473
 Page 18 of 36

under the contract but he was entitled to sue for the money under Section 68 of the Act. In
setting out this conclusion Wallis C. J. made the following observations :

“A mortgagee to whom possession has not been given is not a usufructuary mortgagee.
Consequently he does not come within the proviso and is entitled to sue for foreclosure or
sale under the section (Section 69), in the absence of a contract to the contrary, “at any time
after the mortgage money has become payable to him," Section 68 entitles the mortgagee to
sue the mortgagor for the mortgage money 'where the mortgagee being entitled to possession
of the property,, the mortgagor fails to deliver the same to him, or to secure the possession
thereof to him without disturbance by the mortgagor or any other person. The first of these
events having happened, the mortgagee has become entitled to sue for the mortgage money,
or in other words, the mortgage money has become payable to him, and he is entitled
under Section 67 to sue for foreclosure or sale, in the absence of a contract to the contrary
which cannot be implied".

8. The Full Bench concluded that once the mortgage money became payable under any clause
in Section 68 there could be no reason for refusing to give effect to Section 67 which allows a
suit for foreclosure or sale at any time after the mortgage money has become payable.

9. It is true the learned Judges constituting the Full Bench considered that the right of a
mortgagee to enforce a payment of the mortgage money under Section 68 carried with it the
right to sue for foreclosure for sale. In describing this right, the learned Judges have
mentioned that in a case falling under Section 68, the mortgage money becomes payable to
the mortgagee. But the question for their determination was not whether by thus becoming
payable the mortgagee loses the benefit of the personal covenant contained in the mortgage.
They were not concerned with that question in the case before them as that was a case of
usufructuary mortgage, pure and simple, containing no personal covenant for payment. The
observations in question cannot therefore be relied upon as an authority upon Article 132 for
construing the term "When the money sued for becomes due." The contention of Mr. Natesan
that these observations would imply that in a case covered by Section 68(1)(d) the mortgage
money becomes payable not only for the purpose of conferring the right to bring a suit for
foreclosure or sale but also for the purpose of limitation cannot therefore be accepted as
correct.
 Page 19 of 36

10. Learned counsel then referred to the decision in Gangaram v. Raghubans16, in support
of his argument. There the question was when the unpaid purchase money under a sale
became due. Section 55(5)(b) of the Act provides for the liability of the purchaser to pay or
tender, at the time and place of completing the sale, the purchase money to the seller or such
person as be directs.

The facts in that case were : out of the consideration for the sale a portion was paid in cash
and the balance was left with the purchaser to be paid to the mortgagee holding mortgages
over the property sold. There was no indication in the sale deeds as to when the purchaser
was bound, to pay the amount due to the mortgagee. The purchaser not having paid the
amount reserved with him for payment to the mortgagee, he obtained a decree for recovery of
the mortgage money due and the seller satisfied this decree by payment. Thereafter a suit was
brought by him enforce the statutory charge for recovery of the balance of purchase money
due and the question arose when that amount became due under the Article 132 of
the Limitation Act.

The Bench held that in the absence of a contract to the contrary between the parties, the
direction to the buyer to pay the price to the seller or to a third party was not , a contract
inconsistent with the existence or continuance of the statutory charge under Section 55(5)
(b) and since there was nothing to indicate that the seller had agreed to postpone payment of
the unpaid purchase money to a future date, that amount was payable to the seller or to the
third party indicated in the deed of sale on the date of the sale itself and the statutory charge
could be enforced within 12 years from the date of the sale as the money became due on the
date of the sale itself. Mr. Natesan contends that ore the analogy of this decision it should be
held that the money claimed in this litigation became due under Article 132 of the Limitation
Act on the date when the right under Section 68(1)(d) arose.

11. A statutory charge differs from the right to compensation provided under Section 68(1)
(d) of the Act, because I think it does not create a new cause of action, but only provides a
new remedy for an existing cause of action. A right to recover unpaid purchase money
under Section 55(5)(b) of the Act is based upon the covenant in the sale deed to pay the
purchase money. That covenant could be enforced in more than one way according to the
terms of the contract. The statute, however, provides that in the absence of a contract to the
contrary, the seller would be entitled to a charge for the unpaid purchase money upon the
16
ILR 27 Pat 898
 Page 20 of 36

property sold. This does not mean that a new cause of action is given to the seller under this
statutory charge for claiming the amount due as unpaid purchase money.

12. In another view also this decision can be distinguished because there the money in the
hands of the purchaser remained the money of the vendor and the purchaser was only an
agent of the vendor with a direction to pay it to a particular individual. The fact that the agent
did not carry out the direction of the principal would make no difference in the character of
the claim made by the principal for the recovery of the money left in the hands of the
purchaser. The cause of action for the recovery of that money was the original cause of
action, viz.,that contained in the contract for sale. This decision would therefore have no
application here.

There is one other point which I would like to mention as supporting my View, viz., that the
mortgagee in this case not bound to sue for recovery of the money within 12 years from the
date when the mortgagor failed to deliver possession. A right to redeem the mortgage is a
statutory right and it arises under Section 60 of the Act after the principal money secured by
the mortgage "has become due". This section was amended in 1929 and the phrase "after the
principal money has become payable" was altered and the phrase introduced by
the Amending Act was "after the principal money has become due". This alteration, in one
sense, supports my view that what was intended by Article 132 when it used the expression
"when the money sued for becomes due" was the point of time indicated by the contract
between the parties as the date fixed for repayment and not the point of time indicated
by Section 68(1)(d). If the mortgagor has a right to redeem the mortgage only after the
principal amount has become due according to the terms of the contract contained in the
mortgage deed, it stands to reason that the mortgagor could not be given an earlier right for
redemption unless the mortgagee chooses to file a suit for recovery of the mortgage money
under Section 68(1)(d).

Supposing in a case where a mortgagee is entitled to sue for the mortgage money both on the
personal covenant contained in the mortgage deed and under Section 68(1)(d) and, further
supposing that the mortgagee does not choose to sue for the mortgage, money under Section
68(1)(d), but waits for the expiry of the period for repayment fixed in the mortgage deed,
could it be said that a right of redemption is conferred upon the mortgagor even before the
time fixed for payment arrives merely on the ground that under Section 68(1)(d) a right to sue
for the mortgage money had already accrued to the mortgagee. Of course, if a suit for
 Page 21 of 36

recovery of the mortgage money is actually brought by reason of Section 68(1)(d) even

before the expiry of the period fixed in the mortgage document for payment of the mortgage
amount, the Court is bound to give the option to the mortgagor to pay the amount and redeem
the mortgage before ordering sale of the mortgaged property. Thus a right of redemption is
given to the mortgagor in such a case only if and when the mortgagee exercises the right to
sue for the money under Section 68(1)(d) before the date fixed for payment. In no other case
could a mortgagor claim the right of redemption before the date fixed for payment under the
mortgage deed.

To take any other view would lead to the anomaly that by his own default the mortgagor
would hasten the time when he could redeem the mortgage. This would be nullifying the
intention of the parties to the contract when they had fixed a period for, re-payment which
carries the implication that before the expiry of that period the mortgagor could not exercise
the right of redemption. I therefore agree with both the lower Courts that the suit in this case
was not barred by limitation since the mortgagor (sic) was entitled to wait for a period of 12
years after the date fixed for payment in the mortgage deed before filing the suit on the
personal covenant for recovery of the mortgage money.

JUDGEMENT:

In my view a real election would arise in the case of a mortgagee electing to sue for the
mortgage money under the provisions of Section 68(1)(d) of the Act only as between two
remedies, viz., suing for recovery of possession of the mortgaged property and suit for
recovery of the mortgage money. In electing for the one and not for the other it could be well
said that the mortgagee in such a case had abandoned the other remedy. But, there is no
option or election in a case like the present the right to sue for the mortgage money is already
secured by the mortgage deed. An election involves the principle that one has to choose
between two inconsistent rights of remedies. There could therefore be no election in any legal
sense in the case of a mortgagee entitled to sue for the mortgage money both by reason of
covenant in the contract and the provisions of Section 68(1)(d) who chooses to enforce the
covenant and not the statutory right for getting payment. I therefore overrule this contention
also.

In the result, the second appeal fails and is dismissed with costs. No leave.
 Page 22 of 36

CASE LAW -3

MAHARAJA RAM NARAYAN SINGH v. ADHINDRA NATH MUKHURJI

CITATION: (1916) 18 BOMLR 862

 Page 23 of 36

BENCH: SHAW, SUMNER EDGE AND A. ALI

FACTS:

The deed upon which the suit was brought was made on the 14th April, 1896, by Maharaja
Nam Narayan Singh in favour of Rai Babu Jadu Nath Mukhurji, a Government Pleader, who
had been employed as a pleader by the Maharaja. The consideration was Rs. 1,30,000 which
were advanced by Jadu Nath Mukhurji to Maharaja Nam Narayan Singh. The principal
moneys, together with interest, at the rate of 10 annas per centum per mensem were to be
repaid as provided by the deed, by and out of the rents and cesses of certain Mokurari villages
of Maharaja Nam Narayan Singh, which were mortgaged with possession to Jadu Nath
Mukhurji. A schedule to the deed shows how the repayment with interest was to be effected,
and that on the determination, on the 14th January, 1903, of the period for which the
mortgage was granted it was contemplated that the debt with interest would be satisfied, and
a balance of Rs. 230-11-3 would be payable to the Maharaja by Jadu Nath Mukhurji. The
total period for which the mortgage was granted was from the Samvat year 1953 to the
Samvat year 1959, that is, from A.D. 1896 to the 14th January, 1903, and the times when
possession of the different Mokurari villages was to be given to Jadu Nath Mukhurji were
specified.

It is desired that the said pleader Zarbharnadar should realise in full his dues, principal with
interest, by remaining in possession of each of the said properties during the said years and
by collecting the rents with cesses thereof. The details of the time when and the manner in
which the principal and interest will be realised by the said pleader Zarbharnadar are given at
the foot of this deed. The specifications of the villages with Jummabandis, pergunnahs,
stations, sub-registry, district registry and zillahs wherein the said villages lie are given herein
below. The said pleader Zarbharnadar should realise year after year from the Elakadars and
tenants mentioned in this deed in accordance with the above specifications. If any Elakadars
or tenants mentioned in this deed put off paying the rents, &c., then it is and will be in the
power of the said pleader Zarbharnadar to realise the same with interest, damages, and costs
by instituting suits in Court in his own name as Zarbharnadar plaintiff, with prayer for
ejectment or in any other proper way. In case of ejectment, the said pleader Zarbharnadar will
realise the Zarbharna money from the Kham Tehsil or from Thikadsr of such village, and
amount of excess jumma 'resulting from the Kham jamma or Thikadari jummma in respect of
the resumed villages over the jumma mentioned in the bond, whatever it may be, shall be
 Page 24 of 36

paid on taking receipt by the said Zarbharnadar or his heirs to me the executant, or my heirs,
year after year. I, the executant, will give the thicca pottah of the resumed villages. The
Zarbharnadar shall have no right to grant the thioca pottah of such villages. If, for any reason,
the jumma of any village as mentioned in the bond decreases, the said Zarbharnadar shall be
entitled to get from me, the executant, the amount of decrease with interest at the above-
mentioned rate. After the expiry of the term of the Zarbharna, I, the executant, shall have
right to take possession of the resumed villages as well as of the other villages mentioned in
this bond on account of the expiry of the term and redemption of mortgage, and the said
pleader Zarbhafnadar shall have no right whatever to the same.

During the term of the Zarbharna, I, the executant, or my heirs and representatives, shall on
no account collect the rents with cesses of the Zarbharna properties mentioned in this bond.

If by mistake, I, the executant, or my heirs make any collection, then I or my heirs shall be
liable to pay the amount collected with interest at the above rate to the said pleader
Zarbharnadar. Except in such a case for no other reason and on no other account, the
Zarbharnadar has and shall have any claim whatever against me, the executant, or my heirs
and representatives, on the ground of realisation and non-realisation. If a/ claim is made, it is
and shall be totally null and void. The said pleader Zarbharnadar shall not be in any way
liable for the Government revenue, Boad and Public Works cesses or any other public
demand. These things shall concern me, the executant. The sum of Rs. 2,30,113, the excess
amount payable by the Zarbharnadar to me, the executant, in 1959, as stated in the account
mentioned in this deed, shall be paid to me, the executant, on taking receipt; by the said
Zarbharnadar in pours of the said year. In case of default on the due date aforesaid, interest at
the above rate up to the date of realisation shall be paid on the excess amount by the
Zarbharnadar.

ISSUES

1. whether the plaintiffs have in their plaint stated any cause of action which is shown by
their plaint n3 maintainable and not barred by limitation, and for this purpose it is
 Page 25 of 36

necessary to consider the causes of action which are alleged in the plaint and the
agreement upon which the Rs. 1,30,000 were advanced, which is to be found in the
document of the 14th April, 1896?

CONTENTIONS OF APPELLANTS

The clear intention of the parties, to be inferred from the deed, was that the mortgage money
should be repayable from the usufruct and not personally by the Maharaja. On the
termination of the mortgage period possession of the Mokurari villages which had seen
mortgaged was given to the Maharaja or his representatives. Jadu Nath Mukhurji died in
1902,

On the 13th January, 1909, this suit was instituted against Raja Ram Narayan Singh, son of
Maharaja Nam Narayan Singh who had died. The plaintiffs, who claim to represent Jadu
Nath Mukhurji, alleged in their plaint that Rs. 85,372 : 14: 9 only had been realised under the
deed, and prayed for the following reliefs :-

(a). That a decree be passed for Rs. 1,57,985 : 5 : 3, or a decree be passed ordering, according
to Order XXXIV, Rule 4, of the Code of Civil Procedure" (1908), that (i) An account be
taken of what will be due to the plaintiffs for principal and interest on the bond (the mortgage
deed) and for cost of the suit; that (2) defendant do pay into Court the amount so due on a day
within six months from the date of the decree; that (3)in default of payment as aforesaid the
charged properties, as per Schedule B, or a sufficient part thereof be sold and the sale
proceeds be applied in payment of what is declared due to the plaintiffs as aforesaid, together
with subsequent interest and subsequent cost.

(b). That if in the opinion of the Court the plaintiffs be not entitled to a decree under Order
XXXIV, Rule 4, a simple money decree for the amount of Rs. 1,57,985 : 5 : 3, or whatever
may be due with cost and subsequent interest, be passed against the defendant, to be realised
out of the properties which devolved on him after his father's death.

In order to understand the object and meaning of these alternative claims it must be
mentioned that the plaintiffs' case was that the deed of the 14th April, 1896, was not a
usufructuary mortgage, but that it had created a charge within the meaning of Section 100 of
the Transfer of Property Act, 1882, upon the Mokurari villages. It had, however, been treated
by Maharaja Nam Narayan Singh and Jadu Nath Mukhurji as a usufructuary mortgage, and
 Page 26 of 36

under it Jadu Nath Mukhurji obtained and held possession of the Mokurari villages, and it
contained the terms upon which the Rs. 1,30,000 were advanced, and the terms upon which
that advance was to be repaid. That document certainly did not create a charge within the
meaning of Section 100 of the Transfer of Property Act, 1882; it was a usufructuary
mortgage, which could not be enforced as a mortgage.

 The case, which the plaintiffs attempted to make in the Courts below, was substantially
based upon the existence of a personal liability in debt on the part of the mortgagor even after
the determination of the period of the usufructuary mortgage and arising by implication from
its terms. Since in their opinion this case fails, their Lordships think it unnecessary to discuss
the other causes of action pleaded, which, though possibly capable of being sustained in other
suits if brought within the periods of limitation, are not established in the present suit. It is
enough to add that their Lordships are not satisfied that any of these alleged causes of action,
even if they were otherwise maintainable, were not barred by limitation when this suit was
instituted.

8. An examination of the schedule attached to the plaint shows that the amount claimed is to a
considerable extent composed of charges in respect of collection expenses, of costs of suits,
of interest upon such collection expenses and costs, and of compound interest.

CONTENTIONS OF RESPONDENTS:

 In order to understand the object and meaning of these alternative claims it must be
mentioned that the plaintiffs' case was that the deed of the 14th April, 1896, was not a
usufructuary mortgage, but that it had created a charge within the meaning of Section 100 of
the Transfer of Property Act, 1882, upon the Mokurari villages. It had, however, been treated
by Maharaja Nam Narayan Singh and Jadu Nath Mukhurji as a usufructuary mortgage, and
under it Jadu Nath Mukhurji obtained and held possession of the Mokurari villages, and it
contained the terms upon which the Rs. 1,30,000 were advanced, and the terms upon which
that advance was to be repaid. That document certainly did not create a charge within the
meaning of Section 100 of the Transfer of Property Act, 1882; it was a usufructuary
mortgage, which could not be enforced as a mortgage. Even if it could be regarded as an
enforceable usufructuary mortgage the plaintiffs could not, by reason of Section 67 (a),
institute a suit for sale based upon it. 1 Their Lordships are in this appeal placed in a
disadvantageous position by reason of the respondents not having appeared, but it is
 Page 27 of 36

necessary for them to consider whether the plaintiffs have in their plaint stated any cause of
action which is shown by their plaint n3 maintainable and not barred by limitation, and for
this purpose it is necessary to consider the causes of action which are alleged in the plaint and
the agreement upon which the Rs. 1,30,000 were advanced, which is to be found in the
document of the 14th April, 1896. The Subordinate Judge and the High Court have assumed
from the mention in that document that the Rs. 1,30,000 had been advanced that it might be
inferred that it was the intention of the parties that the Maharaja Nam Narayan Singh should
be personally liable to repay the advance. Their Lordships do not draw that inference from
that document. On the contrary, their Lordships draw the inference from that document that
the Maharaja Nam Narayan Singh did not intend that he should be personally liable for the
repayment of any portion of the money advanced, except to the extent and in one or other of
the events mentioned in the extracts which have been already given, and that Jadu Nath
Mukhurji was, in advancing the Rs. 1 ,30,000, content to rely upon the security of a
usufructuary mortgage of the Mokuiari villages. Although the document of the 14th April,
1896, was by reason of its not having been attested as required by the Transfer of Property
Act, 1882, not enforceable as a mortgage, Jadu Nath Mukhurji got possession under it of the
Mokurari villages, and held possession for the agreed period.

JUDGEMENT:

 Lokendra Nath Mukurji, a son of Jadu Nath Mukurji, in his evidence stated that when his
father died in 1902 all his books were with him, and they were not found after his death, and
admitted in cross-examination that] in a previous suit he had deposed that the zarbharna
(usufructuary mortgage) account was in a state of confusion, " and that was sometime in
1906." This may account for the vague nature of the allegations in the plaint, and for the
delay in instituting the suit.Their Lordships will humbly advise His Majesty that this appeal
should be allowed, that the order of the High Court and the preliminary decree of the
Subordinate Judge should be set aside, and that the suit should be dismissed with costs
throughout. The respondents must pay the costs of the appeal.

CASE LAW- 4

JANG BAHADUR v. BHAGAT RAM SHEO PRASAD

CITATION: AIR 1930 All 110

 Page 28 of 36

FACTS:

This is a judgment-debtor's appeal arising under the following circumstances: The appellant,
Jang Bahadur, held an usufructuary mortgage over a considerable property, the amount of the
mortgage being over Rs. 35,000. The respondents, holding a simple money decree against the
appellant, got the interest of the appellant as mortgagee attached and sold. The sale was
effected for Rs 2,500 only and the respondents them selves made the purchase. The appellant
applied for the setting aside of the sale on the ground of fraud. The application was not heard
on the ground that Order 21, Rule 89, Civil P. C, had no application, inasmuch as the
property sold was moveable property. The appellant challenges the correctness of this
decision and the only question which we have to, answer in this appeal is whether the
mortgagee's interest in a usufructuary mortgage is, immovable property within the meaning
of Rule 89, Order 21, Civil P.C.

ISSUES

What is the nature of the Mortgage?

CONTENTIONS OF BOTH THE COUNSILS:

 In our opinion the answer to the question can be found out, from two sources. Either the
answer will be furnished by the Transfer of Property Act which defines a mortgage or from
the General Clauses Act which defines immovable property. Whichever source, we look into,
we find that the answer will be the same. Under Section 58, T.P. Act, a mortgage is a transfer
of an interest in an immovable property. It follows, therefore, that what the mortgagee holds
is a part of the interest in immovable property originally owned by the mortgagor. If we look
to the definition given in the General Clauses Act (for the Civil Procedure Code itself gives
no definition) we find it as follows:

Immovable property shall include land, benefits to arise out of land

3. The definition of usufructuary mortgage as given in Section 58, T.P. Act, shows that the
mortgagee is entitled to take possession of the property and to receive the rents and profits in
payment of his mortgage money. Obviously, his interest is something which arises out of
land. It has been conceded before us that at the date of the attachment and sale the judgment-
debtor was in possession and his name was recorded in the khewat.
 Page 29 of 36

4. Several cases have been cited before us by the learned Counsel for the respondents.
Among these, two come from this Court. The one, Karimunnissa v. Phul Chand17, was a
case of a simple mortgage and nothing was said there which might possibly apply to a
usufructuary mortgage. The other case Umra Singh v. Lal Singh 18, proceeded entirely on
the consideration of the incidents of a simple mortgage. It may be that, if we apply the
definition of mortgage as given in the Transfer of Property Act, a simple mortgage and a
usufructuary mortgage will stand on the same footing. Whether they do so stand or not for the
purposes of the Civil Procedure Code we need not decide. It is enough to say, that there are
essential differences between the incidents of a simple mortgage and those of a usufructuary
mortgage. If we apply the definition, as given in the General Clauses Act, a difference might
possibly be drawn between a simple mortgage and a usufructuary mortgage. The two cases
from this Court therefore are no sure guide. We express no opinion as to their correctness or
otherwise.

5. In Madras it seems to have been definitely held that a simple mortgage and a usufructuary
mortgage stand on the same footing, where the nature of the mortgagee's interest is
concerned. It has been held there that in both cases the interest is a moveable property. The
latest Madras case seems to be Peetikayil Nammad v. Othenam Nimbor19, which regards
the point as settled by authorities in that Court. The Bombay High Court seems to have taken
a different view as also the Calcutta High Court. There is a Full Bench decision of the
Calcutta High Court, reported in Paresh Nath Singha v. Nabogopal Chattopadhya 20 which,
although given under the old Civil Procedure Code, would be an authority for the proposition
that the mortgagee's interest in a usufructuary mortgage is an immovable property, within the
meaning of the Civil Procedure Code. We hold that the property sold was immovable
property within the meaning of Order 21, Rule 89, Civil P. C, and the appellant's application
should have been heard on its merits. We set aside the order of the Court below and remand
the case to it for disposal according to law. Costs here and hitherto will abide the result.

JUDGEMENT:

17
[1893] 15 All. 134
18
A.I.R. 1924 All. 796
19
[1914] 27 M.L.J. 239
20
[1902] 29 Cal. 1
 Page 30 of 36

It is enough to say that there are essential differences between the incidents of a simple
mortgage and a usufructuary mortgage. If we apply the definition as given in the General
Clauses Act, a difference might possibly be drawn between a simple mortgage and those of a
usufructuary mortgage. The 2 cases from this court therefore are no sure guide. We express
no opinion as to their correctness or otherwise.

CASE LAW- 5

DALEL SINGH Etc v. RAMPAL AND Ors

CITATION: RSA No. 4018 of 2013

 Page 31 of 36

BENCH: JUSTICE ANIL KSHETRAPPAL

FACTS:

Plaintiffs-appellants are in the regular second appeal against the concurrent finding of fact
arrived at by the Courts below dismissing the suit for declaration that the order passed by the
Collector under Redemption of Mortgages (Punjab), Act, 1913 is wrong and illegal with a
consequential relief of permanent injunction. Detail facts have been noticed by the Courts
below. However, to complete narration of facts, the necessary facts are being noticed.

Yaad Ram was owner of 47 bighas and 8 biswas of land vide sale deed dated 26.06.1879 (Ex.
P-3). He sold 23 bighas and 14 biswas of land in favour of predecessor-in-interest of the
plaintiffs for a sum of Rs.200. After little more than one year i.e. on 05.08.1880, he also 1 of
8 mortgaged 23 bighas and 14 biswas of land (equivalent to the land sold) for a sum of
Rs.225/- in favour of predecessor-in-interest of the plaintiffs. The plaintiffs filed a suit for
declaration claiming that they have become owners as limitation for redemption of the
mortgage has elapsed. The suit was dismissed vide judgment and decree dated 28.05.2005.
The plaintiffs- appellants filed appeal, however, during the pendency of the suit, the
plaintiffs-appellants withdrew the suit on 09.09.2008. No permission of the Court to file the
fresh suit was sought.

The successors of mortgagor filed an application before the competent authority under the
Redemption of Mortgages (Punjab), Act, 1913 and deposited the mortgage amount. The
application was allowed by the authority after returning a finding that the mortgage was an
usufructuary mortgage. The order passed by the authority has been challenged in the present
suit under Section 12 of the Act of 1913.

ISSUES:

1. Whether deed of mortgage is a mortgage by conditional sale?

2. Whether limitation for redemption of the mortgage would begin to run after the expiry of
the period prescribed in the mortgage for treating the property as sale?

3. Whether the present suit filed by the appellants is barred under Order 23 Rule 1 of the
Code of Civil Procedure?
 Page 32 of 36

CONTENTIONS OF APPELLANTS:

Two contentions have been raised by learned counsel appearing for the appellants.

1. The mortgage deed was a mortgage by conditional sale as the mortgage provided that if the
property is not redeemed within four years, the property mortgaged would be treated as sale.
In the present case, Courts have erred in treating the mortgage to be usufructuary mortgage.

2. Even if the mortgage deed is not a mortgage by conditional sale, still period to redeem the
mortgage having been prescribed, the limitation for redemption would begin to run on expiry
of such period, therefore, also the order passed by the authority under the Act of 1913 is
illegal.

 The argument of learned counsel is that even if in the present case the mortgage is an
usufructuary mortgage, however, the limitation period as prescribed in the Limitation Act has
elapsed as in the present case the period would begin to run on expiry of period as provided
in the mortgage deed for treating the property as a sale. He, while elaborating has submitted
that in the present case, the mortgage deed is not the one which does not prescribe any period
5 of 8 for redemption. The period of redemption has been prescribed that is four years and
therefore, the limitation would begin to run after expiry of period of four years for the date of
the mortgage. He further submitted that the Hon'ble Supreme Court in the case of Singh Ram
Vs. Sheo Ram and others (2014) 9 SCC 185 has upheld a Full Bench decision of this Court in
the case of Ram Kishan and others Vs. Sheo Ram and others21, wherein it was held that in
case of usufructuary mortgage not prescribing any period for redemption, the limitation
would not begin to run till the amount is tendered. He submitted that the Hon'ble Supreme
Court was hearing an appeal arising from the judgment of the Full Bench should be read in a
manner upholding the aforesaid judgment and therefore, the period for redemption has
expired.

CONTENTIONS OF RESPONDENTS:

Two contentions have been raised by learned counsel appearing for the appellants.

21
2008(1) RCR (Civil) 334
 Page 33 of 36

1. The mortgage deed was a mortgage by conditional sale as the mortgage provided that if the
property is not redeemed within four years, the property mortgaged would be treated as sale.
In the present case, Courts have erred in treating the mortgage to be usufructuary mortgage.

2. Even if the mortgage deed is not a mortgage by conditional sale, still period to redeem the
mortgage having been prescribed, the limitation for redemption would begin to run on expiry
of such period, therefore, also the order passed by the authority under the Act of 1913 is
illegal.

REASONONG:

On careful reading of Section 58 which defines various types of mortgage, it is apparent that
the mortgage by conditional sale can only be in the eventuality there is a sale of the property.
The mortgage by conditional sale is defined in Section 58(c) of the Transfer of Property Act,
1882 which is extracted as under:-

"58(c) Mortgage by conditional sale.--Where the mortgagor ostensibly sells the mortgaged
property-- on condition that on default of payment of the mortgage-money on a certain date
the sale shall become absolute, or on condition that on such payment being made the sale
shall become void, or on condition that on such payment being made the buyer shall transfer
the property to the seller, the transaction is called a mortgage by conditional sale and the
mortgagee a mortgagee by conditional sale:

Provided that no such transaction shall be deemed to be a mortgage, unless the condition is
embodied in the document which effects or purports to effect the sale."

It is apparent that the deed should be in the form of sale and not in the form of mortgage
deed. First part of Section 58(c) provides that where the mortgagor ostensibly sells the
mortgage property on condition that on default of payment of mortgage money on a certain
date, the sale shall become absolute. Thus, there is a requirement that it should be a sale not
by a mortgage deed which would become sale after a particular period in the eventuality of
non-payment of the mortgage money. As regards second part, that also provides that it should
be a sale which would become void on payment of the money. Similarly, there is another
eventuality provided when there is a sale deed which incorporates in itself a condition that on
payment of the amount agreed to between the parties, the buyer 4 of 8 shall re-transfer the
property to the seller. Hence, in the present case, the mortgage is not by conditional sale.
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A perusal of above provisions shows that Article 61 refers to right to redeem or recover

possession. While right of mortgagor to redeem is dealt with under Section 60 of the T.P.
Act, the right of usufructuary mortgagor to recover possession is specially dealt with
under Section 62. Section 62 is applicable only to usufructuary mortgages and not to any
other mortgage. The said right of usufructuary mortgagor though styled as 'right 6 of 8 to
recover possession' is for all purposes, right to redeem and to recover possession. Thus, while
in case of any other mortgage, right to redeem is covered under Section 60, in case of
usufructuary mortgage, right to recover possession is dealt with under Section 62 and
commences on payment of mortgage money out of the usufructs or partly out of the usufructs
and partly on payment or deposit by the mortgagor. This distinction in a usufructuary
mortgage and any other mortgage is clearly borne out from provisions of Sections
58, 60 and 62 of the T.P. Act read with Article 61 of the Schedule to the Limitation Act.
Usufructuary mortgage cannot be treated at par with any other mortgage, as doing so will
defeat the scheme of Section 62 of the T.P. Act and the equity. This right of the usufructuary
mortgagor is not only an equitable right, it has statutory recognition under Section 62 of the
T.P. Act. There is no principle of law on which this right can be defeated. Any contrary view,
which does not take into account the special right of usufructuary mortgagor under Section
62 of the T.P. Act, has to be held to be erroneous on this ground or has to be limited to a
mortgage other than a usufructuary mortgage. Accordingly, we uphold the view taken by the
Full Bench that in case of usufructuary mortgage, mere expiry of a period of 30 years from
the date of creation of the mortgage does not extinguish the right of the mortgagor
under Section 62 of the T.P. Act.

22. We, thus, hold that special right of usufructuary mortgagor under Section 62 of the T.P.
Act to recover possession commences in the manner specified therein, i.e., when mortgage
money is paid out of rents and profits or partly out of rents and profits and partly by payment
or deposit by mortgagor. Until then, limitation does not start for purposes of Article 61 of the
Schedule to the Limitation Act. A usufructuary mortgagee is not entitled to file a suit for
declaration that he had become an owner merely on the expiry of 30 years from the date of
the mortgage. We answer the question accordingly."

JUDGEMENT:

Once, the Hon'ble Supreme Court has laid down by a judgment 7 of 8 of a Larger Bench, this
Court being bound thereof declines to go into this issue.
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Next issue which needs determination, when the plaintiffs themselves had filed a suit for
declaration that they have become owner by prescription of time. The plaint filed by the
plaintiffs in previous suit is available, the judgment passed by the trial Court as well as the
order passed by the First Appellate Court are available on the file. Thus, the plaintiffs-
appellants now cannot claim that they have become owners of the property.

In view of the aforesaid discussion, there is no ground to interfere with the findings of fact
arrived at by the Courts below.

The pending miscellaneous application, if any, shall stand disposed of in view of the above-
said judgment.

Hence, the appeal is dismissed.

BIBLIOGRAPHY

INTERNET RESOURCES:

1. https://www.manupatra.in

2. https://advance.lexis.in

3. https://heinonline.in
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4. https://westlaw.in