A three-judge
bench of the Supreme Court of India (“Supreme Court”) has recently, in Singh Ram (D) Thr. L.Rs. v. Sheo Ram &Ors., held that for the purpose of Article 61 of the Limitation Act,
1963 (“Limitation Act”), limitation period for ‘usufructuary mortgagor’ to
recover mortgaged property starts 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.
The controversy
in the present appeal (clubbed in several other appeals) involved a suit property,
mortgaged by the predecessor of the Respondents to the predecessor of the
Appellants in 1903. As the property was not redeemed even after a period of ‘60
years’, the Appellant-Plaintiffs filed a suit for a declaration that the Respondent-Defendants
had lost rights over the property; as a consequence, the former had become
‘owners by prescription’. In other words, it was the contention that the mortgagor,
as a result of the expiration of limitation period, i.e., 60 years, had lost their
right to seek redemption of the property. [Under the Old Limitation Act, 1908, limitation period under Article 148 (Schedule I; right to redeem mortgaged property) was 60 years; however, under the Limitation Act (1963), it has been reduced down to 30 years under Article 61 of the Schedule]
The trial court did not accept the
content(s) of the Appellants and held that in cases of ‘usufructuary mortgage’, limitation starts from the date when mortgagee
demands the money and mortgagor refuses the same. The decision of the trial
court was affirmed by the first appellate court and the High Court (second
appellate court). While affirming the decision, the High Court made the following
observations:
(i)
Mortgage
is essentially and basically a conveyance in law or an assignment of
chattels as a
security for the payment
of debt or
for discharge of
some other obligations for which
it is given.
(ii)
The mortgagee remains in possession of
the mortgaged property;
enjoys the usufruct thereof and,
therefore, not to lose anything by
returning the security
on receipt of
mortgage debt.
(iii)
§ 62 of
the Transfer of Property Act, 1882 ("Property Act") is
a special provision
dealing only with the
rights of usufructuary
mortgagor.
(iv)
Right of foreclosure will not accrue
to the mortgagee
till such time the mortgagee remains in possession of the mortgaged
security and is
appropriating usufruct of the mortgaged land towards the interest on the
mortgaged debt.
(v)
The mortgage cannot be extinguished by any
unilateral act of the mortgagee.
§ 58(d)
of the Property Act defines ‘usufructuary mortgage’ as a mortgage where the
possession of the property is with the mortgagee until mortgage-money is paid
and the mortgagee is allowed to receive rent and profits out of the property
for setting off the interest or payment of mortgage-money. § 60 of the Property
Act confers on a mortgagor a right to
redeem mortgaged property on payment or tender of the mortgaged money (redemption
means an act of reclaiming or regaining possession by paying a specific price; see: Black’s Law Dictionary, 9th
Ed.). According to Article 61 of the
Limitation Act, 1963 (“Limitation Act”), the limitation period for exercising this
right to redeem or recover the mortgaged property is 30 years from the time
when such right accrues. However, for a usufructuary mortgagor, the right to
recover mortgaged property (according to § 62 of the Property Act) accrues 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. § 62 of the Property Act
creates a special right in favour of ‘usufructuary mortgagor’ and is distinct
from other forms of mortgages. According to the Supreme Court, while in other
cases of mortgages, right to redeem is covered under § 60, application of § 62
is limited to usufructuary mortgages:
“...........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 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............”
While
deciding the present appeal, the three-judge bench was called upon to analyse
the conflicting opinions between Prabhakaran
& Ors. vs. M. Azhagiri Pillai & Ors. [2006 (4) SCC 484] and several
other decisions of the Supreme Court and High Courts, including Jayasingh Dhyanu Mhoprekar &
Anr. vs. Krishna
Babaji Patil & Anr. [1985 (4) SCC 162]. In Prabhakaran (supra), it was held that in
cases of usufructuary mortgages, right to redeem accrues immediately on
execution of the mortgage deed and the mortgagor has to file a suit for
redemption within 30 years from the date of the mortgage. On the other hand, in
Jayasingh Dhyanu Mhoprekar (supra),
it was emphasised by the court that when right of redemption is exercised by
the mortgagor, the mortgagee has to give up the possession of the property. In
the present appeal, the reasoning in Prabhakaran
(supra) was held not to be correct in law because it did not take into account
the special right of usufructuary mortgagor under § 62 of the Act. Hence, it
was held that in cases of usufructuary mortgages, 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 Property Act.
Apart
from these, the court suo moto discussed
some other cases viz. Harbans v. Om
Prakash, (2006) 1 SCC 129 [limitation for redemption does not start from date
of mortgage in a usufructuary mortgage], Parichhan
Mistry (Dead) by L.Rs. & Anr.vs. Acchiabar Mistry & Ors., (1996) 5
SCC 526 [a usufructuary mortgagee cannot by mere assertion of his own or by a
unilateral act on his part, convert his position on moiety of the property as
mortgagee into that of an absolute owner],
Achaldas Durgaji Oswal (Dead) Thr.
L.Rs.vs. Ramvilas Gangabisan Heda (Dead) Thr. L.Rs. & Ors., (2003) 3
SCC 614 [right of redemption
was not lost despite failure
of a mortgagor in a usufructuary mortgage to make deposit in terms of a preliminary decree for redemption], Prithi Nath Singh vs. Suraj Ahir, (1963) 3 SCR 302 [§ 60 and §
62 create distinct rights – the former creates right during the existence of
mortgage deed and the latter creates right after the money is paid-off], Hamzabi
& Ors. vs. Syed Karimuddin
& Ors., (2001) 1 SCC 414 [the right of the mortgagor to redeem had its
origin as an equitable principle for giving relief against forfeiture even
after the mortgagor defaulted in
making payment under
the mortgage deed], and Sampuran
Singh & Ors. vs. Smt.
Niranjan Kaur(smt.) & Ors., (1999) 2 SCC 679 [‘contrary view’ - When there
is no restriction
the mortgagors have a
right to redeem
the mortgage from that
very date when
the mortgage was executed].
According
to the Supreme Court, conflict in the decisions had arisen where courts failed to note the distinct nature of § 60 and § 62 of the Act:
“.......In cases where
distinction in usufructuary mortgagor’s right under Section 62 of the T.P. Act
has been noted, right to redeem has been
held to continue
till the mortgage
money is paid
for which there is no time limit
while in other cases right to redeem has been held to accrue on the date of
mortgage resulting in extinguishment of
right of redemption after 30 years.”
As a
consequence, it was ultimately held that for the purposes of Article 61 of the
Limitation Act, limitation period for ‘usufructuary mortgage’ starts 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.
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