S.B. Sen, J.
This is an appeal by mortgagor against a preliminary decree for sale of the mortgaged property. The Respondent Manilal filed a suit on the basis of a mortgage executed by the Appellant Abdul Hamid on the 2nd March 1949. The mortgage was a possessary mortgage. The property, a house, was already with tenants on the date of this mortgage. The period for redemption was two years. The consideration of this mortgage consisted of Rs. 3,000 due on an earlier mortgage and Rs. 9,000 fresh amount advanced. The mortgagee was to remain in possession of the property and in lieu of interest he had to enjoy the whole of usufruct. He would not be accountable for the same. The mortgaged house required repairs and the mortgagor agreed to repair the same and in case he did not do so, the mortgagee would be entitled to repair the same at his own expenses and charge the same with interest at the rate of 1 per cent per annum.
The Plaintiff-respondent, after the period of redemption of two years, gave a notice to the mortgagor on 7-3 1951 (Ex. P/34). The mortgagor Abdul Hamid replied offering to redeem the mortgage on condition that the mortgagee gave vacant possession. On 8-5-1955, the mortgagee, therefore, brought a suit in which he claimed Rs. 12,000 as sum advanced, Rs. 381-15 as the cost of repairs with interest, totaling in all to Rs. 12,381-15.
The principal defense was that the Defendant was an agriculturist and is entitled to installments. The amount received from the property was much more than the interest that could be allowed under the Madhya Bharat Interest Act and the last and the most important contention was that after the tender was made as per Ex. P/35 by which the Appellant offered to redeem the mortgage on condition of vacant possession, the mortgagee would not be entitled to charge any interest and whatever amount he had received from the date of the tender, would go towards reduction of the principal of Rs. 12,000.
The trial Court held that the Appellant was an agriculturist and therefore granted installments at Rs. 4,000 per year. It further held that the income from the mortgage property was less than the maximum interest allowed under the Madhya Bharat Interest Act viz-, 6 per cent per annum. Therefore, there was no question of the applicability of Section 3 of the Act. It was further held that the tender by Appellant was a conditional one and as such was not a valid tender. A decree was accordingly passed. The Defendant has come up in appeal.
The chief point raised before is that the tender was good and the demand for vacant possession of the mortgage property was justified. In addition to this, he also contended that the income from the property was much more than the amount of interest at the rate of 6 per cent per annum on the mortgage amount. The Plaintiff also filed a cross-objection which, however has not been pressed ultimately.
The Appellant has not challenged the finding of the Court that his tender was subject to the Respondent giving him vacant possession of the mortgage property. In order to show that he had sufficient money with him on that date and that he had capacity to tender and that it was not merely a hoax he examined himself and also witnesses Jagannath and Man gill. Mangilal simply says that he had agreed orally to purchase the house in question for Rs. 18,000 but he had put up a condition that vacant possession would be given. He says that this agreement was entered into in order to pay off or redoem the mortgage. Mangilal had gone to the place and had told him that the Defendant Abdul Hamid was willing to pay the money, provided that actual possession was delivered. To this the reply given by the Plaintiff was that he was in possession of only two blocks whereas remaining ten blocks were in possession of tenants and therefore he might get them vacated. There is nothing in writing about this agreement with mangilal. A perusal of the cross-examination of this witness would indicate that he was simply trying to help the Defendant. He had already a large amount to recover from the Defendant-appellant; the tenants were occupying the premises for a long time and looking to the present condition of the accommodation control legislation, Mangilal''s condition of having vacant possession does not appear to be true.
Other evidence is of Jagannath (P.W. 2). According to him the Defendant had told him about the notice from the Plaintiff demanding the mortgage money and the Appellant told him to inform the Plaintiff that if vacant possession of the house were given, he would pay the money. This information was carried by him. It is not known why this Jagannath should go and convey this information to the Plaintiff.
The oral evidence just discussed above does not appeal to us. Normally, when demand is made for possession after a tender, it is by a notice. But there is no such notice. On the other hand, the Plaintiff made a demand by notice dated 7-3-1951. It was in reply to this notice that the Defendant made a demand of vacant possession. At best, if we take the evidence adduced by the Appellant in this connection at its face value, it means that the Appellant would have paid the money if Mangilal had purchased the house. This shows that the Appellant had not the ready money with him. It was subject to Mangilal''s purchase subject to his getting vacant possession. Therefore, it is clear that even Appellant''s getting the money depended upon certain circumstances. It is true that the Respondent did not challenge the capacity or immediate ability of the Appellant to pay the money specifically, yet from the very nature of the evidence that the Appellant had led, this matter becomes apparent.
Under Section 38 of the Contract Act, an offer to be an effective and legal one, must fulfill the following conditions:
(i) it must be unconditional;
(ii) it must be made at a proper time and place, and under such circumstances that the person to whom it is made may have a reasonable opportunity of ascertaining that the person by whom it is made is able and willing there and then to do the whole of what he is bound by his promise to do.
(iii) if the offer is an offer to deliver anything to the promise, the promise must have a reasonable opportunity of seeing that the thing offered is the thing which the promisor is bound by his promise to deliver.
The first circumstance noted above is that it must be unconditional. Ex. P-35, which is the only written document about the tender, speaks of a condition. The condition precedent is that vacant possession should be given. Whether on such a condition he could legally claim or not is a matter to be discussed later; but it is clear that the offer was not unconditional.
The second condition for a valid offer is that the debtor must be able and willing there and then to do what he is bound by his promise to do. The evidence led by the Appellant is that the money was not ready with him. It was in the hands of one Mangilal who had nothing else with him except his story or words that he would have purchased the house provided vacant possession was delivered. We have already observed that such an offer does not appear to be a genuine one. It cannot therefore be said that the Appellant was able and willing there and then to do the whole of what he was bound by his promise to do.
Learned Counsel for the Appellant has submitted that the mortgagee was bound to return the mortgage property and deliver possession of it as soon as he tendered the mortgage money. According to him, possession means vacant possession. We have already indicated that we are not inclined to accept his capacity to pay the money there and then, for reasons already stated.
Assuming that this second condition of Section 38, was fulfilled, even then the tender or the offer was conditional under the circumstances of the case.
The mortgagee is undoubtedly bound to deliver possession, but he cannot be asked to give possession in a better manner than what he was given by the mortgagor himself. What the mortgagor wanted was that the tenants should vacate the premises. But at the time when the mortgage in suit was executed and possession delivered, the tenants were already in existence. It may be and it has been admitted by both the parties that there was an earlier mortgage a possessory one too, when the mortgagee let in the tenants and at the time of the mortgage in suit, the tenants continued. The original mortgage was washed away and no grievance was made about the tenants being in possession. Not only that but even the mortgage in suit recognises these conditions.
We quote below the particular pertinent conditions:
From the above terms it is clear that the mortgagee was entitled to realise the rent and take it in lieu of interest. When the tenants were in existence at that time, and if the parties meant that at the time of redemption, the tenants should not remain there, such a condition would have been introduced. But when on the other hand, the mortgagor allows the mortgagee to receive rent from the tenants and account it towards the interest, it is clear that the mortgagor gave possession of the mortgage-property to the mortgagee with tenants and that he would allow to continue them.
Apart from the above conditions which appear in the mortgage-deed itself, u/s 76 (a) , Transfer of Property Act, a mortgagee must manage the property as a person of ordinary prudence would manage, as if it were his own. Allowing the premises to be let out on hire is not acting against the right given to the mortgagee under that section, when the mortgage allowed the mortgagee to receive rent and credit it towards the interest he allowed the mortgagee to let the premises on hire. He has therefore no right to demand vacant possession as a condition precedent for his tender.
Learned Counsel for the Appellant relied on a decision in R. Samudra Vijayam Chettiar v. Srinivasa Alwar and Ors. AIR 1956 Mad. 301 for the proposition that a mortgagee is bound to return vacant possession. In particular the following observations were relied on:
Two questions arise for consideration. The first is as regards the obligation of a usufructurary mortgage, who has let a tenant into possession after the execution of the mortgage in his favour to put the mortgagor in actual possession of the property on redemption. It is not disputed that when a mortgagor puts a mortgagee in possession former has a right, when he has discharged the mortgage debt to redelivery of the possession of the property from the mortgagee.
The position, however, that is sought to be maintained by Learned Counsel for the Respondent is that this obligation is fulfilled by the mortgagee issuing a notice to the tenant whom be had inducted into possession to deliver possession to or attorney to the mortgagor, and that he was not concerned to see whether the tenant did so or not. I cannot agree that this is the law.
In cases where such tenant attorns to the mortgagor and the mortgagor accepts the attornment there would doubtless be an effective delivery of possession which would terminate all further liability on the part of the mortgagee; but where there is no adornment either because the mortgagor refuses to accept the person in occupation as his tenant or because though the mortgagor is willing to accept the person in possession as his tenant, the latter refuses to do so, the mortgagor is entitled to insist that ''khas'' possession should be delivered to him and not merely such possession as is involved by a mere direction by the mortgagee to his tenant to attorn to the mortgagor.
He has also relied on the observations in a decision reported in
A monthly tenancy created by a mortgagee in possession in respect of the mortgaged properties would come to an end when the mortgagor subsequently files a suit and obtains a decree for redemption. The decree would be binding on the tenant and be is not entitled to claim the protection of the Bombay Rents, Hotel and Lodging House rates Control Act when the mortgagor seeks to evict him from the mortgaged premises.
The right of a mortgagee u/s 76(a) of the Transfer of Property Act of making prudent management of property in his possession must necessarily be co-terminus with his right to continue as a mortgagee and it must come to an end as soon as his right to continue in possession ends. If during that period the mortgagee creates a lease then by virtue of Section 111 (c) , Transfer of Property Act the lease also necessarily terminates when the authority of the mortgagor to lease the property ends. This section must apply to all powers and authorities derived either from the Transfer of Property Act or from any other law. The mortgagee''s rights cannot be any higher than that of any other lessor whose rights are limited in point of time by the very nature of the relationship between the lessor and the owner. If once this position is reached, the Court must hold that the mortgagor is entitled to get possession of the property unless there is some provision in law which creates an exception of this decision.
If we go superficially by these observations, it may mean that the mortgagee is bound to deliver vacant possession: but the facts of these cases are different from those we are considering. In the Bombay case i. e. Kamlakar and Company v. Gulamshafi Imambhai (supra), the facts were that subsequent to the usufructuary mortgage, the mortgagee let into possession. But in the present case the tenants were already in the premises before the mortgage in suit was executed. If there was any difficulty in delivering vacant possession, it was not the creation of the mortgagee. No doubt, as the Learned Counsel for the Appellant contends, the tenancy was created by the mortgagee in an earlier mortgage. But we are considering the rights and liabilities of the mortgage in suit. If he had let into the premises to certain tenants under the old mortgage, that mortgage has been satisfied and redeemed. The mortgagor did not make any grievance about the tenants being in possession.
Apart from this factual difference, Bombay view does not seem to have taken notice of the Supreme Court decisions reported in
The general rule is that a person cannot by transfer or otherwise confer a better title on another than he himself has. A mortgagee cannot, therefore, create an interest in the mortgaged property which will enure beyond the termination of his interest as mortgagee. Further, the mortgagee who takes possession of the mortgaged property, must manage it as a person of ordinary prudence would manage it if it were his own; and he must not commit any act which is destructive or permanently injurious to the property. It follows that he may grant leases not extending beyond the period of the mortgage; any leases granted by him must come to an end at redemption. A mortgagee cannot during the subsistence of the mortgage act in a maimer detrimental to the mortgagor''s interest such as by giving a lease which may enable the tenant to acquire permanent or occupancy rights in the land, thereby defeating the mortgagor''s right to khas possession; it would be an act which would fall within the provisions of Section 76 , Sub-clause (a), Transfer of Property Act.
A permissible settlement by a mortgagee in possession with a tenant in the course of prudent management and the springing up of rights in the tenant conferred or created by statute based on the nature of the land and possession for the requisite period is a different matter altogether. It is an exception to the general rule. In such a case the tenant cannot be ejected by the mortgagor even after the redemption of the mortgage. He may become an occupancy raiyat in some cases and a non-occupancy raiyat in other cases. But the settlement of the tenant by the mortgagee must, have been a bona fide one.
It is not the case of the Appellant that, the tenancy was created mala fide nor is it a case of the Appellant that it is against the terms of the mortgage deed. On the other hand, as we have already noticed, the terms clearly indicate the creation of a tenancy as interest had to be satisfied from the rent of the tenants as per terms of the mortgage deed.
In the later case viz., Harihar Prasad Singh and Anr. v. Deonarain Prasad and otherrs AIR 1956 SC 305, their Lordships have observed:
A person cannot confer on another any right higher than what he himself possesses and, therefore, a lease created by a usufructuary mortgagee would normally terminate on the redemption of the mortgage. Section 76 (a) enacts an exception to this rule. If the lease is one which could have been made by the owner in the course of prudent management, it would be binding on the mortgagor, notwithstanding that the mortgage has been redeemed. Even in such a case, the operation of the lease cannot extend beyond the period for which it was granted.
This view of the Supreme Court has further been confirmed in a later decision in
The law undoubtedly is that no person can transfer property so as to confer on the transferee a title better than what he possesses. Therefore, any transfer of the property mortgaged, by the mortgagee must cease, when the mortgage is redeemed. Section 76 (a) , Transfer of Property Act, provides that mortgagee in possession "must manage the property as a person of ordinary prudence would manage it if it were his own". Though on the language of the statute, this is an obligation cast on the mortgagee, the authorities have held that an agricultural lease created by him would be binding on the mortgagor even though the mortgage has been redeemed, provided it is of such a character that a prudent owner of property would enter into it in the usual course of management. This being in the nature of exception, it is for the person who claims the benefit thereof to strictly establish it. Where there is no prohibition against letting of lands by the mortgagee, the only consequence is that the parties will be thrown back on their rights under the Transfer of Property Act, and the lessees must still establish that the lease is binding on the mortgagors u/s 76 (a) of that Act.
It may thus be said that the contention of Learned Counsel for the Appellant that he is entitled to vacant possession in the present case is not justified.
It has not been pleaded by the Appellant that the tenants were let in mala fide. It has also not been pleaded by him that the Respondent-mortgagor has let in the tenants against the terms of the mortgage deed. It has also not been pleaded by the Appellant that he has acted beyond the scope contemplated u/s 76 (a) , Transfer of Property Act. In order to bring the present case within the four corners of the view expressed by the Bombay High Court, in
It has then been argued that it might be difficult for the mortgagee-respondent to deliver possession because he has got to take proceedings under the Accommodation Control Act or because he cannot immediately push out the occupants as mere trespassers. But that should not matter in the Appellant''s getting a relief contemplated u/s 76 (i) of the Transfer of Property Act. It is necessary to quote here Section 76 (i) of the Transfer of Property Act:
When the mortgagor tenders, or deposits in manner hereinafter provided, the amount for the time being due on the mortgage, the mortgagee must, notwithstanding the provisions in the other clause of this section, account for his receipts from the mortgaged property from the date of the tender or from the earliest time when he could take such amount out of Court, as the case may be, and shall not be entitled to deduct any amount there from on account of any expenses incurred after such date or time in connection with the mortgaged property
Under the above provision, the Appellant claims that if the mortgagee found it difficult to deliver vacant possession, at least the consequences contemplated under the above section should follow and the running of interest should cease and the mortgagee should be liable for accounts.
In Rourke v. Robinson 1911 Vol. Chancery Division 480, it has been observed:
It is the duty of a mortgagee on being paid by the mortgagor the principal, interest and costs due upon the mortgage, and contemporaneously with such payment, to hand to the mortgagor the title deeds together with a duly executed recoveyance of the mortgaged property.
There can be no doubt about the above proposition; but the Appellant''s contention cannot be accepted in the present case for two reasons. Firstly, as we have already seen, tender was conditional and secondly, condition No. 2 of Section 3S of the Contract Act has not been fulfilled. The words used in Section 76 (i) , Transfer of Property Ace are "when the mortgagor tenders". According to Halsbury''s Laws of England, Third Edition, Volume 8, page 169, the principle of ''tender'' is that the promisor has always been ready to perform the contract, and has in fact performed it as far as he was able, but has been prevented from completely performing it by the refusal of the promise to accept performance. There has been no refusal, on the part of the mortgagee to accept performance.
Where therefore a mortgagor who had given notice to the mortgagee that he Would attend for that purpose made a tender of the amount due upon the mortgage and the mortgagee refused to hand over to the mortgagor then and there an indorsed recoveyance of the mortgaged property with title deeds, and an action or redemption was subsequently brought by the mortgagor, the Court refused to allow the mortgagee interest and costs subsequent to the date of the tender and ordered him to pay the costs of the action."He has never refused to accept the money. Nor has he ever refused to deliver possession as would be compatible under the circumstances of the case. In Shrinarayan Rambilas and Ors. v. Bhaskar Waman and Ors. 1954 N L J 64 : A I R 1954 Nag. 193, a Division Bench of this Court has observed:
Interest does not cease on the giving of merely a notice unaccompanied by any actual tender of mortgage amount.
What their Lordships means is that such a notice does not amount to a valid tender. The notice Ex. 35 is, therefore, of no consequence to bring in the aid of Section 76 (i) of the Transfer of Property Act. Moreover, as we have already noticed, Mangilal''s story of purchasing the property is doubtful. At least it shows that the mortgagor had no ready money with him. If he had, he would have certainly acted u/s 83 of the Transfer of Property Act and consequences of Section 76 (i) , would have followed. Thus we see that from whichever angle the Appellant''s case is taken, regarding the tender there has been no valid tender so as to take the mortgagee-respondent liable to accounts u/s 76 of the Transfer of Property Act or for reduction of the mortgage money to the extent of the rent received or would have received from the tenants.
The Appellant also contended that the return in the form of rent from the tenants was more than 6 per cent per annum on Rs. 12,000. This argument is based on the ground that the Madhya Bharat Interest Act allows interest at the rate of 6 per cent per annum and as the mortgagee had received as rent an amount which would be more than the amount of interest at that rate, the mortgagor would be entitled to get credit for the excess. The trial Court has repelled this contention and we have also no reason to differ from it. The Defendant-appellant has checked the accounts of the mortgagee. The oral evidence indicates that the rent actually collected was much less than Ks. 150 per month which the Appellant claims as interest. The trial Court has also calculated the rent collected from each tenant by the mortgagee. In no case the calculation has shown that the rent was Rs. 150 or even near about. On the other hand, it was found to be much less. The Court has rightly rejected the hypothetical evidence regarding the rent which could be realised from the tenants.
We have already said that there was cross-objection mainly on the question of installments and the mortgagor being an agriculturist. The installment that was allowed was Rs. 4,000 per year. Nothing has been paid by the mortgagor so far. The whole sum has, therefore, become due and no question of refusing to grant installments arises.
For the reasons stated above, we dismiss the appeal. We also dismiss the cross-objection as not being pressed. The Appellant should bear costs of the appeal and pay that of the Respondent.
