1996 Supreme(Mad) 47

High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE SRINIVASAN & THE HONOURABLE MR. JUSTICE S.S. SUBRAMANI
Bhagwandas & Others
Versus
K.G. Purushothaman & Others
O.S.A. Nos. 28 & 29 of 1986
Decided On :Decided On : 12-01-1996

The mortgagee is not a trustee for the mortgagor and that the sale under Section 69 of the Transfer of Property Act cannot be attacked by the mortgagor except when there is fraud or collusion between the mortgagee and the purchaser.

Headnote:

The court held that the mortgagee is not a trustee for the mortgagor and that the sale under Section 69 of the Transfer of Property Act cannot be attacked by the mortgagor except when there is fraud or collusion between the mortgagee and the purchaser. If the price for which the property is sold is so low as by itself will lead to an inference of fraud on the part of the mortgagee and the purchaser, the Court can interfere. But, the burden is on the mortgagor to plead and prove such fraud or the gross inadequacy of price from which an inference can be drawn by the Court of the fraud. In the absence of such proof, the Court cannot and will not interfere with the sale even if the sale price is lesser than the market value of the property or there was want of publicity or want of notice as required by the instrument or that many bidders had not participated in the auction.

Fact of the Case:

The plaintiffs, four in number, were mortgagors. Plaintiffs 3 and 4 were sons of the first plaintiff. The second plaintiff was a partnership firm, whose partners were originally the first plaintiff and his mother Jagadambal Ammal who died on 13-10-1980. According to the deed of partnership, the firm does not get dissolved by the death of a partner, but the heirs of such deceased person would get into the shoes of the deceased. The subject matter of dispute was a property comprising land of an extent of 3 grounds and 726 sq. ft. and a superstructure thereon situated in No. 23, Millers Road, Kilpauk, Madras-10. The first plaintiff was the owner of the said property and also of the adjacent properties having obtained the same under a deed of gift settlement executed by his father on 28-9-1963. He sold the adjacent properties to his father in 1970 and retained the suit property. He leased the land to the second plaintiff partnership firm on 24-1-1970 for the purpose of putting up buildings and doing business of letting out the same to tenants and realising rents therefrom. Though it is said that the building was put up thereafter, there is evidence on record to show that major portion of the building was constructed even in 1969 by the first plaintiff after obtaining permission from the Corporation of Madras. Some additions would appear to have been made in 1970. The firm had incurred several debts and executed mortgages. In Order to discharge the same, plaintiffs 1 to 3 along with Jagadambal, the first plaintiffs mother, executed a simple mortgage on 18.1.1980 in favour of the first defendant for a sum of Rs. 55,000/- borrowed from him. On the same day, a second mortgage was executed by the same persons in favour of the second defendant, who was a minor, represented by her father, for a similar sum of Rs. 55,000/- borrowed from her. A third mortgage was also executed on that date in favour of the third defendant for a sum of Rs. 40,000/-. All the three simple mortgages contain clauses conferring power of sale on the mortgagees under Section 69 of the Transfer of Property Act. The mortgagors committed default in payment of interest and notices were issued by the mortgagees calling upon the mortgagors to pay the amounts due. In June 1981, the mortgagees entrusted the relevant documents to Auctioneers by name Murry & Co., the fourth defendant in the suit, with a request to advertise sale of the premises in public auction. The fourth defendant sent letters to the plaintiffs in the beginning of June 1981 informing them that the property will be sold in public auction as per the instructions of the mortgagees. It appears that the mortgagors paid the arrears of interest and defendants 1 to 3 instructed the fourth defendant that they were withdrawing the notices with a view to give one more chance to the plaintiffs to pay the interest regularly and instructed them not to proceed further. There was further default on the part of the plaintiffs and a notice was issued on behalf of the defendants to plaintiffs 1 and 2 calling upon them to pay the entire amount due forthwith and informing that in default the property would be brought to sale without the intervention of Court (Vide Exs. P-7, P-8 and P-9). As there was no compliance, the fourth defendant was instructed by defendants 1 to 3 to advertise and sell the property. The fourth defendant sent letters on 11-12-1981 to the plaintiffs informing them of the proposed public auction. Acknowledging receipt of the said letters, the first plaintiff sent a reply on 20-12-1981 (Ex. D-14) stating that he would arrange to settle the entire amount to the mortgagees and prayed for 15 days time to do so. He sent copies of the said letter to defendants 1 to 3. But he did not make arrangements to settle the dues, though he paid some amounts towards interest due. On behalf of defendants 1 to 3, a letter was sent by the second defendants guardian on 21-1-1982 to plaintiffs 1 and 2 informing them that the papers would be place d with the auctioneers for holding a public auction (Ex. P-13). As there was no compliance with the said notice, the fourth defendant printed auction notices and sent copies thereof to the plaintiffs in February 1982. There was proclamation by torn in the property on 2-2-1982. There was also advertisement in ‘The Hindu’ and ‘Dhina Thanthi’. The auctions were to be held on 17-2-1982, 18-2-1982 and 22-2-1982 in pursuance to the first mortgage, second mortgage and the third mortgage respectively.

Finding of the Court:

The court found that the plaintiffs had failed to prove that the sale price of Rs. 6,80,000/- for which the property had been sold to the 6th defendant by the second defendant was so inadequate as to enable the Court by itself to draw an inference of fraud. The court also found that there was no evidence on record to prove that the value of the property was Rs. 25,00,000/- and above as had been found by the learned judge; nor was there any evidence to make out that the property had been sold for such inadequate price that an inference of fraud could be drawn therefrom.

Issues: 1. Whether the sale price of Rs. 6,80,000/- for which the property had been sold to the 6th defendant by the second defendant was so inadequate as to enable the Court by itself to draw an inference of fraud? 2. Whether there was any evidence on record to prove that the value of the property was Rs. 25,00,000/- and above as had been found by the learned judge? 3. Whether there was any evidence to make out that the property had been sold for such inadequate price that an inference of fraud could be drawn therefrom?

Ratio Decidendi: The court held that the mortgagee is not a trustee for the mortgagor and that the sale under Section 69 of the Transfer of Property Act cannot be attacked by the mortgagor except when there is fraud or collusion between the mortgagee and the purchaser. If the price for which the property is sold is so low as by itself will lead to an inference of fraud on the part of the mortgagee and the purchaser, the Court can interfere. But, the burden is on the mortgagor to plead and prove such fraud or the gross inadequacy of price from which an inference can be drawn by the Court of the fraud. In the absence of such proof, the Court cannot and will not interfere with the sale even if the sale price is lesser than the market value of the property or there was want of publicity or want of notice as required by the instrument or that many bidders had not participated in the auction.

Final Decision: The court set aside the judgment and decree passed by the learned judge in C.S. No. 129 of 1982 and dismissed the said suit. Consequently, the plaintiff in C.S. No. 492 of 1982 was entitled to recover possession of the property from the defendants therein. The plaintiff was entitled to recover mesne profits from the defendants.