“Once a mortgage, always a mortgage” any right acquired by mortgagee in the mortgaged property is for the benefit of the mortgagor: SC

The SC on April 17, 2020 {SHANKAR SAKHARAM KENJALE (DIED) THROUGH HIS LEGAL HEIRS v. NARAYAN KRISHNA GADE AND ANOTHER} held that the failure on the part of the mortgagor to pay the occupancy price and seek a re-grant is not fatal to his rights as a Mirashi tenant as the tenancy in his favour continued to subsist despite the introduction of the Abolition Act.

It was held that it is well-settled that the right of redemption under a mortgage deed can come to an end or be extinguished only by a process known to law, i.e., either by way of a contract between the parties to such effect, by a merger, or by a statutory provision that debars the mortgagor from redeeming the mortgage. It was held that in other words, a mortgagee who has entered into possession of the mortgaged property will have to give up such possession when a suit for redemption is filed, unless he is able to establish that the right of redemption has come to an end as per law. This emanates from the legal principle applicable to all mortgages – “Once a mortgage, always a mortgage”.

It was observed by the SC Bench comprising of  Justice Mohan M. Shantanagoudar & Justice R. Subhash Reddy, in this regard, it is apposite to note Section 90 of the Indian Trusts Act, 1882, a bare reading of this provision indicates that if a mortgagee, by availing himself of his position as a mortgagee, gains an advantage which would be in derogation of the right of the mortgagor, he must hold such advantage for the benefit of the mortgagor.

It was held that the fact that the lessor/Mirashi tenant Ramachandra did not claim re-grant is not relevant inasmuch the right of redemption of a mortgagor is not extinguished by virtue of re-grant in favour of the original defendant inasmuch as the re-grant was obtained and the property was held by the original defendant for the benefit of the mortgagors. It was held that re-grant made in favour of the original defendant is an advantage traceable to the possession of the suit property obtained by him under the mortgage and the said re-grant certainly subserves the right of mortgagor who was a Mirashi tenant in respect of the suit property.

It was observed that Section 90 of the Indian Trusts Act, 1882 casts a clear obligation on the mortgagee to hold any right acquired by him in the mortgaged property for the benefit of the mortgagor, as he is seen to be acting in a fiduciary capacity in respect of such transactions. It was held, therefore, the advantage derived by the Appellants (mortgagee) by way of the re-grant must be surrendered to the benefit of the Respondents (Mirashi tenant––mortgagor), subject to the payment of the expenses incurred by them in securing the re-grant. It was held that this is because the Mirashi tenant—mortgagors’ right to redeem the mortgage was not extinguished but was protected by virtue of the Abolition Act as well as under the provisions of the Bombay Tenancy and Agricultural Lands Act, 1948; in other words, the tenancy in his favour continued to subsist.

In the present case, the land in question was Paragana watan property/Inam land ( ‘suit land’). Such watan properties and watans  were governed by the provisions of the Bombay Hereditary Offices Act, 1874 (in short ‘Watan Act’). On 14.05.1947,  Ramchandra (referred ‘Mirashi tenant—mortgagor’) executed a mortgage deed in favour of one Shankar Sakharam Kenjale (referred ‘mortgagee’) mortgaging the suit land with a condition of sale for an amount of Rs. 900/- advanced by Shankar Kenjale for the purpose of Ramchandra’s household and personal sundry expenses. Meanwhile, the Bombay Paragana and Kulkarni Watans (Abolition) Act, 1950 (referred ‘the Abolition Act’) came into force with effect from 25.01.1951 with a view to abolish Paragana and Kulkarni watans. Paragana and Kulkarni watans were abolished and watan lands were resumed to the Government, subject to Section 4 of the Abolition Act, which empowered the holder of the watan to seek re-grant of the land upon payment of the requisite occupancy price within prescribed period. Relying on a Government Resolution dated 17.05.1956 permitting persons in actual possession of the watan lands to seek re-grant, the mortgagee (successor of the Appellants herein) paid the requisite occupancy price and obtained a re-grant of the suit land in his favour in the year 1960. The Respondents herein (successors of the mortgagor) then filed a suit for redemption of mortgage against Shankar Sakharam Kenjale (mortgagee). 

The neat question of law which fell for consideration before the SC was, whether the permanent Mirashi tenant—mortgagor’s (Respondents) right of redemption ceased to exist by virtue of the resumption of the suit land under the Abolition Act and its subsequent re-grant in favour of the mortgagee (Appellants)? It was answered in negative by the SC.

Vide the impugned judgment, in the present case, the High Court set aside the findings of the Trial Court and the First Appellate Court and directed the Trial Court to draw a preliminary decree of redemption of mortgage in favour of the Respondents herein.

In view of the foregoing, the SC held that the High Court was justified in decreeing the suit filed by the Respondents herein and setting aside the judgments of the Trial Court and the First Appellate Court. Accordingly, the appeal was dismissed by the SC.