A mortgagee who purchases the equity of redemption in execution of a rent decree holds the property in trust for the mortgagor.

Judgment

SUBBA RAO, J. : This is an appeal by special leave against the judgment of the High Court of Judicature for Orissa dated March 3, 1955, setting aside the judgment of the Court of the district Judge, Mayurbhanj and restoring that of the Subordinate Judge, Balasore.

2. The facts leading up to this appeal may be briefly stated. The land in dispute originally belonged to one Bhagaban Parida, On July 16, 1924, he executed a registered kabala for a consideration of Rs. 2,000/- in favour of one Priyanath Sasmal. On June 2, 1928, Priyanath Sasmal executed a usufructurary mortgage bond (Ex. B) for Rs. 1,500/- in favour of Lakshminarayan Pani, the father of the appellants herein. Under the terms of the said usufructuary mortgage, the mortgaged property was put in possession of the mortgagee. One of the terms of the mortgage deed was that the initial responsibility for the payment of rent was that of the mortgagor and that, if for any reason he did not pay the arrears of rent, the mortgagee was under an obligation to pay off the arrears to the landlord and to obtain a receipt acknowledging the payment. the mortgagee did not pay the arrears of rent, with the result that for arrears of rent the said property was brought to sale and ultimately purchased by the mortgagee for a sum of Rs. 3000/- on September 22, 1936. The sale was confirmed on November 4, 1936, and the mortgagee took possession through Court on December 21, 1938. The mortgagor filed a suit against the mortgagee in the Court of the Subordinate Judge, Balasore, for redemption of the mortgage & for possession. As the mortgagor died after the filing of the suit, his widow and son were brought on record as his legal representatives. The defence of the appellants to that suit was that possession was not delivered to their father, the mortgagee, under the terms of the mortgage deed, that the debt was discharged, that their father had purchased the equity of redemption in execution of the rent decree, and that the mortgagor had no longer any right to sue him for redemption. The learned Subordinate Judge and, on appeal, the District Judge concurrently found that in fact possession was delivered to the mortgagee on the basic of the mortgage deed and that the plea of discharge was not true; but, while the trial court held that after the purchase of the property by the mortgagee in execution of the decree for rent he was holding the property only on behalf of the mortgagor, the appellate court came to the conclusion that after the said purchase the relationship of mortgagor and mortgagee came to an end; with the result the trial court decreed the suit and the appellate court, setting aside that decree, dismissed the suit. The legal representatives of the mortgagee preferred a second appeal to the High Court against the judgment and decree of the District Judge. A division bench of the High Court agreed with the conclusion of the trial court, set aside the decree of the District Court and restored that of the trial court. Hence the present appeal.

3. Learned counsel for the appellants i.e., the legal representatives of the mortgagee, contended that in execution of the rent decree the mortgagee became the purchaser of the equity of redemption, with the result that the relationship of mortgagor and mortgagee ceased to exist and, therefore, the respondents could not sue for redemption and their remedy, if any ,was to sue for setting aside the sale on the ground of fraud or otherwise.

4. On the other hand, learned counsel for the respondents contended that, as the sale was the result of manifest dereliction of duty imposed upon the mortgagee by the terms of the transaction, the purchase by the mortgagee would only be in trust for the mortgagor and, therefore, the suit for redemption was maintainable.

5. To appreciate the rival contentions it is necessary to notice briefly the law on the subject. The relevant section governing the facts of the case is S. 90 of the Indian Trusts Act,1882 (2