Narayan Deorao Javle (Deceased) Vs Krishna (2021): Equity Of Redemption Is A Right Which Is Subsidiary To The Right Of Ownership

Date of Judgement:

17th August 2021

Coram:

Justice Hemant Gupta and Justice A. S. Bopanna

Parties:

Appellants: Narayan Deorao Javle (deceased) through LRS.

Respondents: Krishna & Ors.

Subject

The judgement considered several elements that involve the right of redemption of the purchaser of a mortgaged property.

Overview

• A property was mortgaged to secure a sum of Rs. 700/- on 30th April 1954. Thereafter, a part of the mortgaged property was sold to the Appellant for consideration of Rs. 1000 on 18th May 1964.
• The mortgagee filed a suit in 1965 for recovery of the mortgaged money, in which the appellant was not made a party. A preliminary decree was passed directing the mortgagors to return the amount on or before 27th March 1967.
• Since the Respondents failed to pay the amount, the preliminary decree was converted into a final decree on 4th June 1969 whereby the right of the mortgagor to redeem the mortgaged property was foreclosed. Accordingly, the mortgagee took possession of the property in 1980.
• Aggrieved by the order, the Appellant filed a civil suit on 23rd January 1984 against the mortgagee and the original mortgagors, seeking redemption of the property. The Trial Court dismissed the suit, and the matter was appealed before the First Appellate Court.
• The First Appellate Court set aside the decree of foreclosure, and held that the Appellant ought to have been made a party to the original suit filed by the mortgagee under Sections 59A and 91 of the Transfer of Property Act, failure of which would make the decree ineffective.
• When the order of the First Appellate Court was placed before the High Court, the Bench held the suit of the Appellant seeking redemption of the mortgaged property as invalid. Thereby, it set aside the order of the First Appellate Court and restored the decree of the Trial Court.
• The Appellant appealed to the Supreme Court contending that the Appellant is not only a proper party but also a necessary party to the suit, since the mortgagors had lost the title before the suit was filed.
• The Respondents, on the other hand, argued that the mortgagee was not notified about the sale deed between the mortgagors and the Appellant, and therefore he couldn’t implead him as a party.

Issues Involved

• Whether the Appellant was a necessary party in a suit for foreclosure filed by the mortgagee after the purchase?
• Whether the decree obtained in a suit for foreclosure operates as Res Judicata and the right of redemption stands extinguished by the decree of the Court?
• Whether the plaintiff is entitled to redeem the share of the property purchased by him on the payment of the entire mortgage amount?

Important Provisions

1.  Section 59A of Transfer of Property Act, 1882: This Section reads: “Unless otherwise expressly provided, references in this Chapter to mortgagors and mortgagees shall be deemed to include references to persons deriving title from them respectively.”
2.  Section 60 of Transfer of Property Act, 1882: This Section gives a mortgagor the right to redeem the mortgaged property on payment of the mortgage amount. The right of redemption includes: I) delivery of the mortgage deed and other relevant documents related to the mortgaged property kept in possession of the mortgagee to the mortgagor; II) if the mortgagee is in possession of the mortgaged property, to deliver the same to the mortgagor; III) re-transfer the mortgaged property to him or to a third person as he may direct, or to execute and to have registered an acknowledgement in writing that the rights in derogation of his interest transferred to the mortgagee has been extinguished. However, the said right is subject to two restrictions, that is, the right should not be extinguished by act of the parties or it should not be extinguished by the decree of a Court.
3.  Section 91 of Transfer of Property Act, 1882: This Section lists the persons who can seek redemption of mortgaged property other than the mortgagor himself. Accordingly, (a) any person who has any interest in, or charge upon, the property mortgaged the right to redeem; (b) any surety for the payment of the mortgage amount or any part thereof; or (c) any creditor of the mortgagor who has, in a suit for the administration of his estate, obtained a decree for sale of the mortgaged property, are eligible to seek redemption under Section 60 of the Act.
4. Order XXXIV, Rule 1, Code of Civil Procedure, 1908: It states that all persons who have an interest either in the mortgage-security or in the right of redemption should be joined as parties to any suit relating to the mortgage.

Judgement Analysis

The Supreme Court’s judgement in the instant case can be divided into three parts based on the issues raised:

1) The Bench observed that since the parties reside in the same village, there is a ‘constructive notice’ of the purchase, and the argument of the mortgagee on non-service of notice is baseless. It also opined that the Appellant is a proper and necessary party to the suit, and that he has the right to seek redemption of the mortgaged property. 

• “Once the plaintiff has purchased property, the equity of redemption is part of the title and as an owner, he could seek redemption of the suit land.” (Paragraph No. 11)
• “The equity of redemption is a right which is subsidiary to the right of ownership. Such right is not over and above the right of ownership purchased by the plaintiff.” (Paragraph No. 19)

2) It was held that the decree of the Trial Court is itself void because the Appellant was not made a party in the suit, and therefore, the decree cannot be binding on him.

• “The findings recorded by the High Court that the Appellant is bound by the decree passed in the suit for foreclosure is not tenable inter alia because the appellant was not impleaded as a party, though mandated under Section 91 of the Act and Order XXXIV Rule 1 of the Code”. (Paragraph No. 23)

3) The Court opined that the Appellant’s right to redeem the mortgaged property stands valid. Though Section 60 states that right of redemption extinguishes with a decree of a Court, yet it cannot be applied in this case as the Trial Court’s order is not a valid decree.

“The decree of foreclosure passed in the suit filed by the mortgagee will not extinguish the right of the mortgagor to redeem land in view of the fact that he was not impleaded as a party in the suit though he has purchased part of the mortgaged property by virtue of registered sale deed”. (Paragraph No. 30)

4) With these observations, the Supreme Court allowed the appeal and set aside the order of the High Court and restored the First Appellate Court’s decree.

5) Accordingly, it directed the Appellant to pay the mortgage amount within three months, and thereafter seek restoration of possession that was taken from him by the decree of foreclosure.

Conclusion

The right of redemption is a right which is exercised by the mortgagor to regain those rights and interests that he had temporarily lost with respect to his property, as a consequence of the mortgage. In India, the right is a statutory and legal right under the Transfer of Property Act. This right arises when the mortgage money has become due and may be exercised at any time thereafter, subject to the limitation period prescribed therefor. Since the Appellant, in this case, is a mortgagor by virtue of Section 59A of the Act, he also vests with the right of redemption. Such a right, as observed by the Supreme Court, is subsidiary, and not over and above, the ownership right purchased by the Appellant.

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