2003 (1) TMI 769 - SC - Indian Laws

Usufructuary mortgagor cannot seek time extension under Order XXXIV Rule 7; redemption right continues until extinguished

SC held that in mortgages other than usufructuary mortgages, both mortgagor and mortgagee may seek a final decree under Order XXXIV CPC, but sub-rule (2) ... Doctrine of redemption of mortgaged property - maxim ‘once a mortgage always a mortgage’ - extension of time to make the payment - barred by limitation - HELD THAT:- In the case of the mortgage other than usufructuary mortgage, the mortgagee can file an application to pass a final decree that the mortgaged property or a sufficient part thereof be sold, and the proceeds thereof be paid into Court and applied in payment of what is found due to the defendant, and the balance, if any, be paid to the plaintiff or other persons entitled to receive the same. Sub-rule (1) of Rule 8 shows that only a mortgagor can apply to the Court to pass a final decree on payment of the amount found or declared due under the preliminary decree on making this deposit and upon filing the application as provided for in sub-rule (1) of Rule 8 the mortgagor can request the Court to order the mortgagee to put him in possession of the properties which were the subject matter of the mortgage. The amount determined by the Court which the mortgagor is liable to pay to the mortgagee can be deposited before the right of redeem is lost. It may be noticed that even sub-rule (2) of Rule 7 of Order XXXIV does not apply to the usufructuary mortgage. It may be noticed that by reason of the amendment introduced in 1929 the right conferred earlier on a usufructuary mortgage to bring the property to sale in case of the mortgagor not making the payment within the time fixed in the decree was taken away; As sub-rule (2) of Rule 7 is applicable only in a case of mortgages other than the usufructuary mortgages, a usufructuary mortgagor is not entitled to seek extension of time and in that view of the matter the fact that such an application made by the First Respondent herein was rejected becomes irrelevant. In Mohd. Abdul Khader Mohd. Kastim’s case, this Court was concerned with the question as to whether in absence of any time having been fixed by the court passing the preliminary decree directing the appellant to deposit the redemption money, the decree passed in terms of Order XXXIV could be called a preliminary decree at all. This Court examined the preliminary decree and held that the obligation and counter obligation made therein are separate in, nature and by reason thereof the appellant was required to deposit the redemption money within the statutory period of six months provided under Order XXXIV Rule 7 C.P.C. This Court in the facts of that case had not and could not have laid down a law to the effect that the deposit must be made within a period of six months as otherwise the application for passing a final decree was to become barred by limitation. In the said case, the contentions raised herein had not been raised obviously because no such question arose for consideration and any passing observation made therein without any argument and without any precedent cannot be treated to be a declaration of law in terms of Article 141 of the Constitution of India. We, therefore, do not find any merit in this appeal which is accordingly dismissed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether an application by a mortgagor for preparation of a final decree in a suit for redemption of an usufructuary mortgage is governed by a period of limitation under Article 137 of the Limitation Act, 1963. 1.2 Whether failure by the mortgagor to deposit the mortgage money within the time fixed in the preliminary decree in a redemption suit of an usufructuary mortgage extinguishes the mortgagor's right of redemption or bars a subsequent application for final decree. 1.3 Whether rejection of the mortgagor's application for extension of time to deposit the amount under the preliminary decree affects the subsistence of the right of redemption or the maintainability of a later application for final decree. 1.4 How Order XXXIV Rules 7 and 8 of the Code of Civil Procedure operate, in conjunction with Section 60 of the Transfer of Property Act and Articles 61 and 137 of the Limitation Act, in relation to redemption of usufructuary mortgages and passing of final decrees. 1.5 Whether earlier decisions of the Court, particularly in K. Parameswaran Pillai and Mohd. Abdul Khader, correctly stated the law on limitation for applications for final decree in suits for redemption of usufructuary mortgages. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Limitation for application for final decree in redemption of usufructuary mortgage Legal framework 2.1 The Court considered Section 60 of the Transfer of Property Act (statutory right of mortgagor to redeem until extinguished by act of parties or decree of a court), Article 61 of the Limitation Act (30 years for a suit to redeem or recover possession of mortgaged immovable property), Article 137 (3-year residuary period for applications), and Order XXXIV Rules 7 and 8 CPC (preliminary and final decrees in mortgage suits). Interpretation and reasoning 2.2 The Court emphasized that the right of redemption is an incident of a subsisting mortgage, is very valuable, and subsists so long as the mortgage subsists, unless extinguished in the manner provided in the proviso to Section 60, i.e., by act of parties or by decree of a court in the prescribed form. The maxim 'once a mortgage, always a mortgage, and nothing but a mortgage' and 'and therefore always redeemable' was treated as foundational, especially in the Indian statutory context. 2.3 The Court noted that Article 61 specifically governs limitation for a suit to redeem or recover possession, granting 30 years from accrual of the right to redeem. Article 137 applies residually to applications where no specific limitation is provided, but cannot be construed to cut down the substantive right of redemption recognized in Section 60 and Article 61, in the absence of an extinguishing act or decree. 2.4 Examining Order XXXIV Rules 7 and 8, the Court held that the scheme distinguishes between classes of mortgages: in non-usufructuary mortgages, the mortgagee can, on default, seek a final decree for sale or foreclosure; in usufructuary mortgages, such a right is not conferred on the mortgagee, and Rule 7(1)(c)(ii) does not apply. Rule 8(1) confers a right on the mortgagor to seek a final decree, and in usufructuary mortgages that right is aligned with the continuing right of redemption under Section 60. 2.5 The Court reasoned that, having regard to the particular redeeming features of usufructuary mortgages-delivery and retention of possession by the mortgagee until repayment, enjoyment of rents and profits in lieu of interest or towards the mortgage money, and the absence of a remedy by sale or foreclosure-any limitation rule for applications for final decree cannot operate to extinguish the statutory right of redemption except as contemplated in Section 60. 2.6 Authorities from Privy Council, Federal Court and this Court were cited to reaffirm that: (a) the right of redemption survives even after preliminary and, in some cases, final decrees, until a proper foreclosing/ debarring decree or confirmation of sale in the prescribed form; (b) successive suits for redemption are permissible so long as the right is not extinguished; and (c) there is no merger of mortgage-debt into decretal-debt so as to destroy the equity of redemption merely by passing of a decree. Conclusions 2.7 For an usufructuary mortgage, the mortgagor's right to apply under Order XXXIV Rule 8 for a final decree in a redemption suit is not barred by a three-year limitation under Article 137 from the date fixed in the preliminary decree; the substantive right of redemption persists until extinguished in accordance with Section 60, and, in the absence of such extinguishment, the application cannot be held time-barred on that basis. Issue 2: Effect of default in deposit within time fixed in preliminary decree in usufructuary mortgage redemption suits Legal framework 2.8 The Court analysed Order XXXIV Rule 7(1)(c)(i)-(ii) and Rule 8 CPC, Section 60 of the Transfer of Property Act, and case-law on the consequences of default in payment under preliminary decrees in mortgage suits. Interpretation and reasoning 2.9 Under Rule 7(1)(c)(ii), in cases of mortgages other than usufructuary mortgages, default in payment permits the mortgagee to apply for a final decree for sale or foreclosure. However, 'a bare perusal' shows that this provision expressly does not apply to usufructuary mortgages. The 1929 amendment removed an earlier right of a usufructuary mortgagee to bring the property to sale on such default. 2.10 In the scheme of Order XXXIV, in usufructuary mortgages, there is no provision enabling the mortgagee to seek a final decree on default, nor any provision stating that default in complying with the preliminary decree ipso facto extinguishes the right of redemption. Instead, Rule 8(1) continues to allow the mortgagor to apply for a final decree so long as there is no decree debarring redemption or confirmed sale in the prescribed foreclosure/sale forms. 2.11 The Court accepted and reiterated the view, supported by several High Courts, that even where a preliminary decree in a redemption suit fixes time for payment, default in payment within that time 'does not operate to debar the plaintiff-mortgagor from all right to redeem the mortgaged property', particularly in case of usufructuary mortgages. 2.12 The Court also recognized that even after default under a preliminary decree, a fresh suit for redemption remains maintainable so long as the mortgage and the right of redemption subsist and are not extinguished by proper decree or act of parties, further supporting the conclusion that such default cannot itself terminate the right. Conclusions 2.13 In a suit for redemption of an usufructuary mortgage, failure of the mortgagor to deposit the mortgage amount within the period fixed in the preliminary decree does not, by itself, extinguish the right of redemption or debar the mortgagor from later seeking a final decree, in the absence of a decree in the prescribed form debarring redemption or an act of parties extinguishing that right. Issue 3: Effect of rejection of application for extension of time to deposit Legal framework 2.14 The Court considered Order XXXIV Rule 7(2) CPC (power to extend time) and its inapplicability to usufructuary mortgages, and Section 60 of the Transfer of Property Act on extinguishment of the right of redemption. Interpretation and reasoning 2.15 Rule 7(2) empowering extension of time to deposit applies only to mortgages other than usufructuary mortgages. A usufructuary mortgagor is, therefore, not entitled to seek extension under that provision. Consequently, the rejection of such an application is legally of no effect as regards the subsistence of the right of redemption because the provision itself does not apply to usufructuary mortgages. 2.16 Since the right of redemption can only be lost in the manner specified in the proviso to Section 60-by a decree in proper form or by act of parties-and admittedly no such decree extinguishing the right nor any extinguishing act of parties was shown, the Court held that the rejection of an extension application does not affect the mortgagor's substantive right to redeem or his entitlement to apply for a final decree. Conclusions 2.17 In the context of an usufructuary mortgage, rejection of the mortgagor's application for extension of time to deposit the amount fixed in the preliminary decree does not extinguish the right of redemption and does not bar a subsequent, otherwise competent application for preparation of a final decree. Issue 4: Interaction of Order XXXIV, Section 60 T.P. Act, and Articles 61 and 137 Limitation Act in usufructuary mortgage redemption Legal framework 2.18 The Court discussed: (i) Section 58(d) T.P. Act (definition of usufructuary mortgage); (ii) Section 60 T.P. Act (right to redeem); (iii) Article 61 Limitation Act (suit for redemption/recovery of possession within 30 years); (iv) Article 137 (residuary limitation for applications); and (v) Order XXXIV Rules 7 and 8 CPC (preliminary and final decrees in mortgage suits and the distinct rights conferred on mortgagors and mortgagees depending on the type of mortgage). Interpretation and reasoning 2.19 The Court contrasted the nature of usufructuary mortgage-delivery of possession to mortgagee, enjoyment of rents and profits in lieu of interest or towards mortgage money, absence of remedy by sale/foreclosure-with other types of mortgages where sale or foreclosure is available. This structural difference justified a different legal treatment under Order XXXIV and the Limitation Act. 2.20 It held that Order XXXIV Rules 7 and 8 do not confer any right on a usufructuary mortgagee to apply for a final decree for sale or foreclosure, whereas they expressly confer such rights on mortgagees in other forms of mortgages. In usufructuary mortgages, only the mortgagor is given the right to apply for a final decree under Rule 8(1), aligning with the continuing statutory right to redeem under Section 60. 2.21 The Court reiterated that the extinguishment of the right of redemption is tightly circumscribed by the proviso to Section 60 and by the specific foreclosure/sale forms in Order XXXIV. It drew support from several judgments affirming that: (a) the right of redemption exists until a proper decree debarring redemption is passed and sale is confirmed where applicable; (b) successive redemption suits are permissible while the right subsists; and (c) provisions like Order XXXIV Rule 5 in execution proceedings similarly protect the mortgagor's continuing right to redeem up to the point of confirmation of sale. 2.22 Within that framework, Article 61 regulates suits for redemption; Article 137 cannot be used to bring about an indirect extinguishment of the statutory right of redemption by barring an application for final decree in a manner inconsistent with Section 60 and Order XXXIV's foreclosure/debarment scheme. The right to apply for a final decree in a usufructuary mortgage is an incident of the still-subsisting right of redemption; it is not an independent right whose limitation can be construed so as to defeat the main substantive right contrary to the statutory scheme. Conclusions 2.23 In the case of usufructuary mortgages, the provisions of Section 60 T.P. Act and the specific mortgage procedure in Order XXXIV prevail in determining the subsistence and enforceability of the right of redemption; Article 137 cannot be applied so as to extinguish that right by treating the application for final decree as time-barred before the right itself is extinguished in the manner contemplated by law. Issue 5: Correctness and applicability of earlier decisions on limitation for final decree in usufructuary mortgage redemption suits Legal framework 2.24 The Court examined its earlier decisions in K. Parameswaran Pillai and Mohd. Abdul Khader and referred to various High Court judgments dealing with the commencement and application of limitation for final decree applications in mortgage suits. Interpretation and reasoning 2.25 In K. Parameswaran Pillai, the Court had, on facts, distinguished between usufructuary and other mortgages and suggested that for non-usufructuary mortgages, limitation under Article 137 for an application under Order XXXIV Rule 8(1) starts from the expiry of the period fixed in the preliminary decree, whereas in usufructuary mortgages limitation does not begin until deposit is made, though there is a conditional preliminary decree. 2.26 The Court held that the observations in K. Parameswaran Pillai were made in the particular factual context (including subrogation and specific preliminary decree terms), and cannot be read as a general rule curtailing the statutory right of redemption in usufructuary mortgages contrary to Section 60 and the structure of Order XXXIV. The case was treated as distinguishable on facts. 2.27 Regarding Mohd. Abdul Khader, the Court noted that the question decided there was whether a decree could be treated as a preliminary decree under Order XXXIV where no time was fixed for deposit and whether deposit had to be made within six months as per Rule 7. The contentions concerning the period of limitation for the final decree application and its impact on the right of redemption in usufructuary mortgages were neither raised nor decided. 2.28 The Court held that any passing observation in Mohd. Abdul Khader that might suggest a limitation-bar on the right to seek a final decree in a manner inconsistent with the principles articulated in the present judgment could not be regarded as a binding declaration of law under Article 141, being made without argument and without consideration of the relevant precedents and statutory scheme. Conclusions 2.29 The decision in K. Parameswaran Pillai was fact-specific and does not govern the present case; it does not justify applying Article 137 to bar an application for final decree in a redemption suit of an usufructuary mortgage where the right of redemption is still subsisting. 2.30 Any observation in Mohd. Abdul Khader inconsistent with the present ruling on the subsistence of the right of redemption and the non-extinguishment of that right by mere delay or by Article 137 is not good law and is expressly overruled to that extent. Overall disposition 2.31 Applying the above principles, the Court held that: (i) the mortgagor's right of redemption in the usufructuary mortgage had not been extinguished by any decree or act of parties; (ii) failure to deposit within the time fixed in the preliminary decree and rejection of the application for extension did not debar redemption; and (iii) the application for final decree in the redemption suit was not barred by limitation as alleged. The appeal was dismissed and the High Court's view- that there is effectively no limitation in the circumstances for seeking a final decree in respect of redemption of an usufructuary mortgage while the right of redemption subsists-was affirmed.