Transfer of Property Act, 1882: ss. 60, 59A – Redemption of the mortgaged property – Right of – On facts, non-payment of the mortgage amount by the original mortgagors to the mortgagee – Suit for recovery of the mortgage amount by mortgagee against original mortgagors – Appellant had purchased a mortgaged property from original mortgagor, however, not impleaded as party in the suit – Due to the non-payment of the mortgage amount, appellant’s right of redemption was foreclosed and after the execution of the decree, mortgagee took possession of the property from the appellant – Appellant then filed suit against original mortgagors and mortgagee seeking right of redemption of the mortgaged property – Trial court dismissed the suit, however the first appellate court allowed the same – In appeal, the High Court dismissed the suit for redemption of the mortgage land – On appeal, held: Equity of redemption is a right subsidiary to the right of ownership – Appellant was a necessary party in a suit for foreclosure filed by the mortgagee after the purchase and was required to be impleaded – Since the appellant was not impleaded as a party, appellant is not bound by the decree passed in the suit for foreclosure – More so, decree in a suit for foreclosure was a result of collusion between the original mortgagors and the mortgagee so as to frustrate rights of a purchaser from the mortgagor – Thus, the decree passed in the suit for foreclosure was void and non-est – Such decree of foreclosure would not extinguish the right of the mortgagor to redeem land in view of the fact that he was not impleaded as a party in the suit though he has purchased part of the mortgaged property by virtue of registered sale deed – Thus, the judgment of the High Court is set aside and that of the first appellate court is restored.
Redemption – Equity of Redemption – Meaning of – Held: Equity of redemption means a right to redeem the property based upon equitable principles – Right of redemption recognised under the Act is a statutory and legal right which cannot be extinguished – Equity of redemption is a right which is subsidiary to the right of ownership.
Allowing the appeal, the Court
HELD: 1.1 The plaintiff has purchased property vide registered sale deed on 18.05.1964, much before the filing of the suit for foreclosure in the year 1965. The possession of the plaintiff was recorded in the revenue record after the purchase of the property, but still, the mortgagee chose not to implead the subsequent purchaser. The original mortgagor who has mortgaged the property had no subsisting title, interest or right in the property conveyed, therefore, the factum of compromise between the mortgagor and the mortgagee is ineffective and not enforceable against the purchaser i.e., the plaintiff. Once the plaintiff has purchased property, the equity of redemption is part of the title and as an owner, he could seek redemption of the suit land. [Para 11][491-F-H; 492-A]
1.2 No provision of law shows that the subsequent purchaser has to give notice to the mortgagee signifying purchase of the property, by a mortgagor. The factum of purchase coupled with the delivery of possession completes the title of the plaintiff over the land in question. Therefore, the decree obtained in such a suit at the back of the purchaser is void. The plaintiff rightly claimed that he was required to be impleaded, as he was a necessary party in a suit for foreclosure filed by the mortgagee after the purchase of part of the mortgaged land. The possession was taken from the appellant consequent to the decree of foreclosure granted in favour of the mortgagee. The findings recorded by the trial court that the plaintiff has purchased the property and not equity of redemption is clearly without any basis. In view of the fact that the possession was delivered and the fact that the parties are residents of the same village, there is ‘constructive notice’ of purchase of land by the appellant. [Paras 12, 13][492-A-B-C, D, E-F]
1.3 In terms of Section 91 of the Act, the plaintiff having stepped into the shoes of the mortgagor in respect of land purchased by him, has a right to redeem the land mortgaged. In addition, the Order XXXIV Rule 1 of the Code provides that all persons having an interest either in the mortgage- security or in the right of redemption shall be joined as parties to any suit relating to the mortgage including suit for foreclosure. The original mortgagors i.e., defendant Nos. 1 and 2 denied the plaintiff’s right to redeem the property though admitting they have borrowed Rs.1,000/- from the plaintiff. It was pleaded that the plaintiff was put in possession of the suit property for ten years and, therefore, plaintiff was required to resell the property to defendant Nos. 1 and 2. But the said defendant has not supported such plea in evidence. The defendant Nos. 1 and 2 entered into compromise with the mortgagee to pay the mortgage amount. The said mortgage amount was not paid which led to passing of the final decree. Thus, it is a case of collusion between the original mortgagors andthe mortgagee so as to defeat the right of the plaintiff. [Para 15][493-E-H; 494-A]
1.4 The Equity of redemption means a right to redeem the property based upon equitable principles. Right of redemption recognised under the Act is a statutory and legal right which cannot be extinguished. The equity of redemption is a right which is subsidiary to the right of ownership. Such right is not over and above the right of ownership purchased by the plaintiff. The expression equity of redemption is a convenient maxim but an owner, who has stepped into the shoes of the mortgagor, after the purchase from the mortgagor but before filing a suit for foreclosure is entitled toredeem the property in terms of Section
60 of the Act. [Para 16, 19][494-A-C; 495-C-D]
Allokam Peddabbayya & Anr. v. Allahabad Bank & Ors. (2017) 8 SCC 272 : [2017] 8 SCR 121 – distinguished. Dr. Govinddas & Anr. v. Shrimati Shantibai & Ors. (1973) 3 SCC 418; Achaldas Durgaji Oswal (Dead) through LRs v. Ramvilas Gangabisan Heda (Dead) through LRs & Ors. (2003) 3 SCC 614 : [2003] 1 SCR 340; Thumbasawmy Mudelly v. Mohd. Hossain Rowthen ILR (1875) 1 Mad 1; Jamila Begum (Dead) through Legal Representatives v. Shami Mohd. (Dead) through Legal Representatives & Anr. (2019) 2 SCC 727 : [2018]
13 SCR 1253 – referred to.
2.1 The only effect of filing of an application for stay of the execution would be that the appellant can be said to be aware of the fact thatthere is a decree for foreclosure passed against him which has not been stayed by virtue of the order of the Court. There is no determination of the claim as is contemplated in terms of Order XXI Rule 97 or Rule 99 of the Code having force of decree. The declining of stay of execution will not operate as res judicata only because Section 11 Explanation VII of the Code is applicable to the execution as well. [Para 22][496-C-D]
2.2 The findings recorded by the High Court that the appellant is bound by the decree passed in the suit for foreclosure is not tenable inter alia because the appellant was not impleaded as a party, though mandated under Section 91 of the Act and Order XXXIV Rule 1 of the Code. The mortgagee was aware of the transaction of purchase as well as for the reason that the possession of the appellant was recorded in the revenue record. The subsequent conduct of mortgagee who has taken possession from the appellant also corroborates the fact that the mortgagee was aware of the factum of sale and possession of the appellant but still have chosen not to implead him as a necessary party. Still further, it is apparent from the pleadings itself that the original mortgagor had colluded with the mortgagee. Therefore, the right conferred by Section 60 of the Act does not stand extinguished by decree of the Court which is to be binding and had to be passed in the presence of the necessary parties and should not be collusive. [Para 23][496-D-G]
2.3 The decree passed in the suit for foreclosure is a decree which is void and non-est. The decree is a result of collusion between defendants 1 & 2 and Defendant No. 3 so as to frustrate rights of a purchaser from the mortgagor. [Para 27][498-F-G] Samarendra Nath Sinha & Anr. v. Krishna Kumar Nag AIR 1967 SC 1440 : [1967] SCR 18; Mrutunjay Pani & Anr. v. Narmada Bala Sasmal & Anr. AIR 1961 SC 1353 : [1962] SCR 290 – referred to.
3.1 The appellant has a right to redeem land provided the right is not extinguished by decree of the Court. The decree passed at the back of the transferee mortgagor prior to the filing of the suit for foreclosure cannot be said to be a valid decree. [Para 28][499-A-B]
3.2 The appellant has purchased the land for a sum of Rs.1,000/-. No part of the sale consideration was paid to the owners or was kept by the appellant for payment to the mortgagee. Thus, it was unequivocal sale of complete rights in the land. Section 60 of the Act provides that a person interested in a share of the mortgaged property will not entitle him to redeem his own share on payment of a proportionate part of the amount remaining due on mortgage. Therefore, conversely, a purchaser from the mortgagor is entitled to redeem the share of the land purchased by him but on payment of the entire mortgage amount. Therefore, the decree of foreclosure passed in the suit filed by the mortgagee will not extinguish the right of the mortgagor to redeem land in view of the fact that he was not impleaded as a party in the suit though he has purchased part of the mortgaged property by virtue of registered sale deed. [Paras 29, 30][499-BD, G]
3.3 The judgment of the High Court is set aside and that of the First Appellate Court is restored. The appellant is given three months’ time to deposit the mortgage amount and when the amount is deposited, he would be entitled to seek restoration of possession which was taken from him in execution of a decree of foreclosure. [Para 31][499-H; 500-A]
Shivdev Singh & Anr. v. Sucha Singh & Anr. (2000) 4 SCC 326 : [2000] 2 SCR 878; Bank of Poona v.
Navrajasthan Cooperative Housing Society Ltd. AIR 1968 BOM 106; Banamali Tripathy v. Biswanath
Pattanaik AIR 1984 Orissa 145 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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