1981 (12) TMI 181 - HC - Indian Laws

Court grants recovery decree for property & profits, denies exemption under Kerala Debt Relief Act

The court ruled in favor of the plaintiff, granting a decree for recovery of the property and mesne profits. It held that the defendants were obligated to ... - Issues Involved:1. Whether the mortgage had come to an end as alleged and whether the plaintiff was entitled to recover.2. Adverse possession and limitation.3. Liability to pay mesne profits and its exemption under the Kerala Debt Relief Act, 17 of 1977.Issue-wise Detailed Analysis:1. Whether the mortgage had come to an end as alleged and whether the plaintiff was entitled to recover:The court held in favor of the plaintiff on this issue. The suit was based on the premise that the mortgage had ended when Parameswaran Nair acquired the C Schedule rights along with the obligation to discharge the mortgage. The trial court observed that a mortgagee was bound to deliver up the property after satisfaction of the mortgage debt, as his position was 'that of a trustee for the owner.' Therefore, a decree was passed for recovery of the A Schedule property with mesne profits from the date of deposit of value of improvements.2. Adverse possession and limitation:On this issue, the court found that Parameswaran Nair's possession was permissive and not adverse to the owners of the A Schedule properties. The trial court's observation was that the possession of Parameswaran Nair, and the defendants under him, after Ext. D-2, was in trust for the owner of the equity of redemption.3. Liability to pay mesne profits and its exemption under the Kerala Debt Relief Act, 17 of 1977:The court below held that the observation in the judgment that Parameswaran Nair and his successors were holding the properties in trust for the owners of the equity of redemption was conclusive. Therefore, the defendants were bound to account for the mesne profits, and their failure to do so amounted to a breach of trust, taking the liability out of the definition in Section 2(3) of the Act. Consequently, the revision petitioner was held ineligible to claim the benefit of Act 17/77.However, the approach made by the court below was not satisfactory. The trial court's observation about Parameswaran Nair holding the property in trust was related to the issue of adverse possession and not mesne profits. The question of mesne profits was separately considered and decided under issue No. (8).The court then examined whether a person continuing to occupy property after the extinguishment of the mortgage and being held liable for mesne profits constitutes a liability arising out of breach of trust. The court analyzed various legal definitions and precedents, concluding that a mortgagee is not a trustee for all purposes but may hold a fiduciary character in certain respects.The court referred to several decisions to illustrate that a mortgagee in possession has obligations similar to those of a trustee, but these obligations do not make the mortgagee a trustee in every circumstance. For example, the court noted that a mortgagee must manage the property prudently and keep accounts, similar to a trustee's duties. However, these instances are insufficient to conclude that a mortgagee is a trustee for all purposes.The court also discussed the legal definitions of 'trust' and 'breach of trust,' emphasizing that a mortgagee who has been paid off has no legal estate, interest, or ownership in the property to which an obligation could be annexed for the benefit of the mortgagor.The court concluded that the liability in this case is not excluded by Section 2(3)(c) of Act 17/77, as the term 'trust' should be understood in its legal sense, not its popular sense. Therefore, the order impugned was set aside, and the matter was remitted back to the court below to consider whether the petitioner is a 'debtor' entitled to the protection of Section 3 of the Act.Conclusion:The court set aside the lower court's order and remitted the matter back for reconsideration on whether the petitioner is a 'debtor' entitled to the protection of the Kerala Debt Relief Act, 17 of 1977. No costs were awarded.