MALISETTI VIRANNA AND ANR. Vs. KONDEPARTHI PALLAYYA

JUDGEMENT

(1.) THE first defendant entered into an agreement with the plaintiff on 29th May, 1942, to sell the suit property to him for a sum of Rs. 1,300. This agreement is Ex. P -1. A sum of Rs. 150, which had been already received by the first defendant under an arrangement that the plaintiff should lend the first defendant a sum of Rs. 400 and enjoy the property for four and a half years appropriating the income towards interest, was treated as the advance for the agreement to sell. The balance of consideration was to be paid at the time of the registration of the sale deed which was to be executed in a month. On 17th July, 1942, the first defendant executed a deed of mortgage in favour of the plaintiff, Ex. P -2, for a sum of Rs. 400 providing that the properties were to be enjoyed by the plaintiff for a period of five years (from Chitrabanu to the end of Vyaya) the income to be appropriated towards the interest. At the end of the period, if the principal sum was not paid the mortgage was to be renewed for another term of five years. Then follows the material clause with which we are concerned in this appeal and it is in these terms:

(2.) THE first defendant sold the property on 2nd September, 1943, under Exhibit D -1 to the second defendant for a sum of Rs. 2,500. The plaintiff has brought the suit to enforce the terms of Ex. P -i, the agreement to sell in his favour, alleging that the second defendant purchased the property with notice of the agreement. The. District Munsiff held that Ex. P -1 was superseded by the mortgage Ex. P -2 and that there was no prohibition under the mortgage to sell the property to any one, else. He dismissed the suit. On appeal, the District Judge concurred with the District Munsiff that the terms of the mortgage governed the rights of the parties; but he held that there was a right of pre -emption conferred on the plaintiff which he could enforce. He remanded the suit for consideration of the other issue, namely,

(3.) CAN a right of pre -emption conferred on the mortgagee under the mortgage be enforced ? Obviously not. It serves as a clog on the equity of redemption - not directly but all the same pointedly. The right is not extinguished in the sense that there is a term that if the mortgage is not paid on the due date there is to be a conveyance for the amount due. Nor is there any condition that the mortgagor shall not redeem except on payment of something more than what is really due. Nevertheless a term under which the mortgagor agrees, as part and parcel of the mortgage transaction, to sell the property to the mortgagee for a named price fetters the equity in the sense that when necessity arises for him to sell the property so that he can redeem the mortgage, he cannot sell except to the plaintiff and for the price mentioned. This is prohibited by law. So long as there is the right conferred upon the mortgagee to enforce specific performance of the agreement to sell, it does not very much matter whether the option is that of the mortgagee or the mortgagor. It is unnecessary to cite any other authorities in support of this view than Samuel v. Jarrah Timber and Wood Paving Corporation, (1904) A.C. 323 followed in Venkata Satyanarayana v. : AIR1947Mad51 . Though the rule prohibiting such a contract is founded more on sentiment than on principle, as pointed out by Lord Macnaghten in the English case it was still held that a mortgagee is not allowed at the time of the loan to enter into a contract for the purchase of the mortgaged property. There is plenty of legal learning on the meaning of the rule, " once a mortgage always a mortgage," and the exceptions engrafted on it by decisions. But it is futile to contend against a strong current of decisions in force for nearly one and a half centuries, if not more. Lord Lindley points out at page 329 referring to Reeve v. Lisle, (1902) A.C. 461 that the decision would not have been affirmed if the agreement to buy the equity of redemption had been one of the terms of the mortgage transaction itself.