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1875 Supreme(SC) 14
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
SIR JAMBS W COLVILE, SIR BARNES PEACOCK, SIR MONTAGUE E. SMITH, AND SIR ROBERT P. COLLIER
THUMBASAWMY MUDELLY - Appellant
Versus
MAHOMED HOSSAIN ROWTHEN - Respondents
On Appeal from the High Court at Madras.
Decided On : June 5, 8, 9, 26, 1875.
Agent for the Appellants:Mr. T. L. Wilson. Agent for the Respondents: Mr. Horace Earle.
A mortgage by conditional sale becomes an absolute sale automatically upon breach. However, if the deed requires a settlement of accounts as a prerequisite for the transfer of title, the title does not pass automatically upon default of payment.
Headnote:(A) Limitation Act XIV of 1859 - Right of redemption - Mortgage by conditional sale - Distinction between a mortgage by conditional sale and a usufructuary mortgage with a provision for purchase - In a mortgage by conditional sale, the essential characteristic is that upon breach of condition, the contract executes itself and becomes an absolute sale without further act of the parties or accountability between them. (Paras 85-86)
(B) Right of redemption - Conflict between ancient law of India and English Courts of Equity - While English equity recognizes a right of redemption notwithstanding the expiration of the stipulated time, the ancient law of India enforced the letter of the contract in mortgages by conditional sale. (Paras 87-88)
(C) Settlement of accounts - Where a deed provides that a settlement of accounts is a necessary preliminary to the mortgagee purchasing the property upon default, the title does not automatically pass to the mortgagee upon the mere failure to pay installments. (Para 86)
Facts of the case:
Proprietors of land executed a deed of usufructuary mortgage to secure a loan. The deed stipulated repayment in installments and required a settlement of accounts by a fixed date. It provided that if a balance remained after such settlement, the mortgagee could purchase the land at a fixed rate. The installments were not paid, and no settlement of accounts took place. The mortgagees remained in possession of the land. The mortgagors subsequently sued for the recovery of the land and mesne profits.
Findings of Court:
The security was not a mortgage by conditional sale because the transfer of title was not automatic upon default but was contingent upon a settlement of accounts. Since no such settlement occurred, the mortgagees did not acquire absolute title.
Issues: Whether the mortgagees became absolute proprietors upon the default of payment as per the terms of the deed, or whether the transaction remained a mortgage subject to the right of redemption.
Ratio Decidendi: The court held that the transaction was distinguishable from a mortgage by conditional sale because the latter executes itself upon breach. In this case, the contemplated settlement of accounts was a necessary preliminary to the performance of the contract for purchase; without such settlement, the title could not pass.
Result: Appeal dismissed.
Legal Category Hierarchy
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property law
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mortgages
- usufructuary mortgage
- mortgage by conditional sale
- right of redemption
- foreclosure
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mortgages
Judgement
The Respondents represented certain persons who, in 1815, were the mirasi proprietors of eight shares in Rajagiri, which comprised within its limits the village of Manmoda.
The Appellants were the grandsons of one Saminadha Mudaliar who had money transactions with the said mirasi proprietors.
On the 2nd of July, 1815, the mirasidars executed a document in the name of Appavoo, but really for the benefit of Saminadha, which recited that they had borrowed from him 1000 pons in cash, and that they owed him a further sum of 1500 pons for a debt due by them to a third party which the latter had assigned over. For this sum the instrument stated that " we have mortgaged to you, and put you in possession of 25 velies, 7 maws, and 76 7/16 gulies of land in the village of Manmoda" The stipulations for payment were as follows —
"This principal sum of two thousand and five hundred pons we agree to pay, with interest, at one fanam per ten pons per mensem (the following are) the particulars of payments; instalments (are as follows) ; as the said pidagai (hamlet) of Manmoda has been mortgaged to you, and possession given, you shall employ men and carry on cultivation in the said pidagai (hamlet), and out of the income realized pay in the first instance pons 218 and fanams 1 1/2 (two hundred and eighteen pons and one and a half fanums), the amount of Jamalandis (assessment) fixed on the said land, to the cirkar (government), year after year, and obtain receipts (for the same). We shall debit ourselves 48 pons per annum, at 4 pons per mensem, on account of the salary of your nominee in the said pedagais (hamlets), and you shall take to the credit of your bond any surplus that may remain. The instalments for this money (are as follows) To be paid on the 30th of Panguni of Yuva corresponding to (9th of April, 1816), pons 500; on the 30th of Panguni of Dhata (corresponding to 10th of April, 1817) pons 500. On the 30th Panguni of Iswara, corresponding to ... pons 500; on the 30th Panguni of Bahudhania, corres-ponding to ... pons 500; and in the year Pramadhi, corresponding to ( 1819-20) ... a settlement of the accounts of the receipts and disbursement shall be made, and any amount that may be due after deducting payments made out of the principal and interest as aforesaid we undertake to pay in cash in full on the 30th of Panguni of the said year, corresponding to the . . . and to redeem the mortgage. If by the 30th Panguni of the said Pramadhi, corresponding to the (9th of April, 1820), the money be not paid up in full, and a balance still remain due, you yourself shall take, hold, and enjoy such of the lands (herein) as you may like, and as may be equivalent to the balance due, at pons fifty per veli, as if under the terms of a deed of absolute sale. The said pedagai (hamlet) consists of velies 25, maws 7, annd gulies 76 7/16, and their value is pons 1269 and fanams 3 3/4. If the balance due exceed this amount, the 25 velies, 7 maws, and 76 7/16 gulies of the land aforesaid shall pass (to you), as under an absolute sale, for one thousand two hundred and sixty-nine pons and three and three quarters fanams. and any balance that may thereafter remain due you shall recover from our other property."
None of the instalments were ever paid, and no settlement of accounts took place in 1820, or
Law. Rep. 2 Ind. App. 241( 1874- 1875) Thumbasawmy Mudelly V. Mahomed Hossain Rowthen
83
subsequently.
From the date of the mortgage up to date of suit the Appellants or their ancestors were in full possession of the lands. They executed leases thereof and paid the Government kist.
The Respondents sued in the Civil Court of Tanjore on the 20th of December, 1870, to recover the lands and Rs. 9522 14a. as profits received by the Defendants in excess of the amount due to them.
On the 25th of March, 1872, the Civil Court decreed in favour of the Respondents for the land sued for and Rs. 6342 mesne profits prior to date of writ, together with subsequent mesne
