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.
