Expiry of Limitation Period Does not Extinguish Usufructuary Mortgagor's Right to Recover Possession

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.

Gift of Property under Muslim Law cannot be Conditional but Absolute

In a recent decision [V. Sreeramachandra Avadhani (D) by L.Rs. v. Shaik Abdul Rahim & Anr], the Supreme Court of India (“Supreme Court”) has had the occasion to deal with an intricate question under Muslim Succession Law – whether there can be a conditional gift of a (immovable) property? In 1952, Sheikh Hussein gifted a ‘titled house’ (through an executed gift deed) to his wife, Banu Bibi. It was stipulated in the deed that Banu Bibi would enjoy the property during her lifetime and would not alienate it. However, the property could devolve in favour of her off spring after her death, and in case she does not have any children, the property would be returned back to Hussein or his near successors. Notwithstanding the conditions under the deed, Banu Bibi sold the house in 1978 to V. Sreeramachandra Avadhani (Appellant – represented by his Legal Representatives). Consequently after Banu Bibi’s death, the Respondents (Shaik Abdul Rahim and Abdul Gaffor) staked claim over impugned house on the ground that, (i) Babu Bibi only had a ‘life interest’ in the property and could not have alienated it, and (ii) being legal representatives of Sheikh Hussein, right and title over the property came to be vested on them.

Principal Senior Civil Judge dismissed Respondents’ claim for the reason that since the gift deed was not in nature of usufruct, the gifted property came to be ‘irrevocably’ vested on Babu Bibi. As such, the conditions in the gift deed, limiting her rights, were void [Relied on: Nawazish  Ali Khan  v. Ali  Raza Khan, AIR 1948  PC 34]. Against this order, the Respondent filed first appeal. While reversing the order of Senior Civil Judge, the First Appellate Court relied on the ‘text’ of the gift deed that had limited the rights of Banu Bibi and had provided that the property would be returned back to Hussein or his near successors. Dissatisfied with the judgement of First Appellate Court, the Appellant filed an appeal before the High Court of Judicature of Andhra Pradesh (“High Court”). Appellant did not get any relief and the High Court, again relying on the text of the gift deed, affirmed the First Appellate Court’s order.