The legal effect of a contract of sale and delivery of possession in discharging the mortgage debt, and the applicability of the Madras Agriculturists Relief Act, 1938.

Patanjali Sastri, J.

1. This appeal arises out of a suit brought by the respondent for specific performance of a contract to sell certain lands or in the alternative for enforcement of a mortgage dated 18th July, 1927, for Rs. 1,500 payable with" compound interest at twelve per cent. per annum. The respondents case was that the manager of the appellants family one Ammiraju being otherwise unable to pay the mortgage debt entered into, an oral contract on 18th July, 1934, to sell the lands in question which formed part of the security in full discharge of the mortgage debt which by that time had swelled to Rs. 3,400. As the lands had been leased to a third party who had grown crops thereon, it was agreed that they should be delivered to the respondent as soon as the crops were harvested, and that the rent payable in respect of the lands should in the meanwhile be collected by Ammiraju and paid to the respondent. The respondent alleged that possession was accordingly delivered in 1935 and that since then he had remained in possession of the lands leasing them out and otherwise enjoying them as absolute owner. Though Ammiraju agreed to execute a sale deed whenever demanded, he and after his death the appellants put off doing so for some reason or other until in reply to the respondents notice in 1938 one of the appellants denied the contract, the others remaining silent. Hence the suit.

2. The appellants while admitting that the lands in question were placed in the possession of the respondent alleged that such delivery was not made in pursuance of any contract of sale which they denied but was given on the understanding that the respondent was to apply the usufruct in reduction of the mortgage debt. They further pleaded that they were agriculturists entitled to the benefits of the Madras Agriculturists Relief Act, 1938, and that if the interest due up to 1st October, 1937, was wiped out under the Act and the net yield of the lands was appropriated towards the principal sums originally and subsequently advanced as it should be no appropriation having been actually made before 1st October, 1937, a very small amount would be found payable under the mortgage. Even if the contract was found to be true it was said that it could not be specifically enforced as such enforcement would result in great hardship to the appellants in view of the change brought about by the aforesaid Act in the position of the parties. Such relief was also barred by limitation. The appellants also raised other pleas to which it is unnecessary for the purposes of this appeal to make any reference.

3. The Court below held that the contract of sale and delivery of possession in pursuance thereof were true and had the effect of discharging the mortgage debt, as to which no question of scaling down could therefore arise under the Agriculturists Relief Act, and that the claim to specific performance was not barred. It also overruled the other pleas raised by the appellants and passed a decree directing them to execute a sale deed in favour of the respondent conveying the lands in question and to pay the costs of the suit;.

4. In the appeal, Mr. Satyanarayana Rao, the earned Counsel for the appellants, made no attempt--and in our opinion rightly--to challenge the finding of the Court below as to the truth of the contract of sale and the delivery of possession in pursuance thereof. It is amply supported by the evidence oral and documentary and the probabilities of the case which have been reviewed at length by the learned Judge in his judgment. Mr. Satyanarayana Rao, however, took exception to the learned Judges view of the legal effect of the contract as putting an end to the mortgage debt even before the execution of the sale deed as contemplated by the parties. His whole attempt was to show that this case really fell within the principle laid down in a recent decision of this Bench in A.S. No. 328 of 1940 where we held that a contract of sale entered into by a