KESAVA PILLAI MADHAVA PILLAI Vs. NARAYANARU SANKARARU

JUDGEMENT

(1.) The appellant who is the son of the original mortgagee is the first defendant in a redemption suit. Ext. A is the mortgage deed dated 16.4.1081 and it provided that the mortgagee would pay over to the mortgagor (first plaintiff's ancestor) thirty two parahas and five and two-thirds edankalies of paddy every year as Michavaram. The mortgagee failed to pay any Michavaram and the plaintiffs who have succeeded to the interests of the mortgagor have instituted the suit, out of which the present appeal arises, for redemption and for an account for all the thirty-six years prior to the date of suit during which Michavaram remained unpaid. In settling the accounts the plaintiffs claimed the michavaram due for the whole period of thirty-six years partly by way of set off against the mortgage amount and the balance amounts to Rs. 1780/- in cash. They also prayed for recovery of the mesne profits of the properties from the date of suit. The lower court allowed the suit and, in appeal, two contentions were raised on behalf of the appellant, firstly, that the decree for arrears of Michavaram except for a period of six years preceding the date of suit was unsustainable in law, and secondly that after the date of suit it was not mesne profits that should have been awarded but only Michavaram at the contract rate. Both points have to be decided on the principles governing the legal relationship between mortgagor and mortgagee.

(2.) The general rule relating to all possessory mortgages is that as soon as the moneys due under the mortgages has been fully satisfied out of the rents and profits received by the mortgagee, his duty is to delivery up the property to the person entitled to possession of it, his position being that of a trustee for the owner. The accounting period is not limited by time except when relinquishment of possession takes place and so long as possession continues so long does the liability continue. Though a mortgagee cannot be compelled by the mortgagor to quit possession except upon payment of principal and interest or so much thereof as has not been satisfied out of the rents and profits received, as from the date when principal and interest have been discharged he will until conveyance be liable as a rule to account with yearly rests. In discussing the mode of determining the liability of the mortgagee for rent and profits during the period of occupation, it was observed by North, J. in Ashworth v. Lord 36 Chancery Division 545, as follows: "But, after they have been paid in full, they are, as was pointed out by the Master of the Rolls in Wilson v. Metaclfe, 1 Russ. 530, persons who are in receiving the rents after their debt has been fully paid, availing themselves of another man's money for their own use and benefit, and they ought to be charged with interest. Int hat case annual rests were directed to be made from the time at which the mortgage debt was fully paid, and that is what I have always understood to be the practice in the few cases in which the point has arisen". The law is succinctly stated in the following words in Fisher and Lightwood's Law of Mortgage, seven edition, page 736. "As soon as no principal remains due, the effect of the order is to charge the mortgagee with compound interest on the excess of rents and profits over outgoings at each rest. And generally, when the mortgagee has been paid off his interest and principal out of rents and profits, and nevertheless continues in possession he becomes a debtor to the mortgagor in respect of subsequent receipts and annual rests will be directed in the account against him, although no rests were directed in the original order for accounts."

(3.) The Indian Law is not different. By S.76(h) of the Indian Transfer of Property Act, which deals with possessory mortgages, all receipts by the mortgagee from the mortgage holding must after deductings on account of collections and interest due on the mortgage amount be applied in reduction or discharge of the mortgage money and if there is a surplus it shall be paid to the mortgagor. This is a statutory obligation which is not limited to any period of time. In Parasurama Pattar v. Venkatachalla Pattar, 25 MLJ 561, following the decisions of the Calcutta High Court on the subject, a Division Bench of the Madras High Court stated as follows: "At the time of redemption, when the mortgagor is required to pay the amount due by him under the mortgage, the mortgagee is also bound to give him credit for all payments which he is bound to make under it. The rule, of course, will not apply to any payments that the mortgagee is liable to make to the mortgagor otherwise than under the contract of mortgage." In Thekkamannangath Raman alias Kochu Poduval v. Kakkasseri Pozhiyot Manakkal Karnavan, 28 MLJ 184, Sadasiva Iyer, J. points out that no question of limitation arises as between mortgagor and mortgagee when accounts are taken at the time of redemption. A contention that the accounting period should be limited to twelve years was repelled by the Allahabad High Court in Banwari Singh v. Sakhraj Singh, (AIR 1931 Allahabad 585), where Niamatullah, J., who delivered the judgement of the Court pointed out that, on account being taken, sums due from one to the other during the continuance of the mortgage should be included.