Raghu Nath v. Competent Officer, Delhi & Ors.

Judgment

CIVIL APPELLATE JURISDICTION': Civil Appeal No. 36 of 1967. Appeal by special leave from the judgment and order dated Augu~t 25, 1966 of the Punjab High Court Circuit Bench at Delhi i.n Letters :Patent Appeal No. 36-D of i966. Bishan Narain, appellant. R. Mahalingier and Ganpat Rai, for the R. H. Dhebar and S. P. Nayar, for respondent Nos. 1 and 3., The Judgment of the Court was delivered by . Shelat, J. In 1933 the appellant built a bungalow Situate at 27, Curzon Road, New Delhi on a plot acquired by h!Jn under a permanent lease from the Secretary of State for India. In 1943 he mortgaged the said property with possession in favour of one. K. B. Bunyad Hussain but obtained a lease thereof at the same time. from the mortgagee and continued to reside therein as ~ l ! I I a tenant.

In Novemb~r 1949, the mortgagee left for Pakista~ ''.here~pon the Custodmn of Evacuee Property under the Admt- 01~tra1Jon o~ Ifvact.Iec Property Act, 1950 (hereinafter referred ~0 Jt ~<; the '\dmimstratiOn Act) declared him to be an evacuee and Jus 111~rest m the said property as the mortgarree as evacuee property. Th~ appellant alleged. that sometime in eNovember 1949 the l l I .. 1 ;, RAGHU NATH V. COMPETENT OFFICER (She/at, J.) Custodian forcibly dispossessed him and either allotted or let out, or allowed the said premises to be occupied by certain persons. In 1954, the appellant made an application to the Competent Officer under the Evacuee Interest (Separation) Act, 1951 (hereinafter r~ferred to as the Separation Act) for separating his interest as the mortgagor and tenant in the said property. In those proceedings a sum of Rs. 1,45,735/- was ultimately held to be due as the mortgage debt under the said mortgage.

The appellant claimed that he was entitled to obtain vacant possession of the said property against payment by him of the mortgage debt. The claim was rejected on the ground that there was no agreement between the appellant and the Custodian for getting tb,e vacant possession and also on the ground that the Competent Officer, under the Separation Act, had no power to direct the Custodian to hand over to the appellant vacant possession. From that time onwards the appellant made diverse applications to the Competent Officer and the Appellate Officer under the Separation Act for obtaining vacant possession against payment · of the mortgage debt. In one such P.pplication made in 1958 he alleged that a compromise had been arrived at between him and the Custodian under which he would pay the mortgage debt and the Custodian thereupon would simultaneously hand over to him vacant possession.

By his order dated March 23, 1959, the Appellate Officer, however, held that no such comptmnise had been entered into by the Custodian and that the correspondence between the appellant and that authority merely indicated that what was agreed to was that upon the appellant lodging certain verified claims an open portion shown as A, B, C and D in 'he plan of the property would be handed over to him. On this finding the Appellate Officer dismissed the appellant's application as he had·neither paid the mortgage money nor put in the verified tlaims as suggested in t.he said correspondence and confirmed the order of the Competent Officer under which the property had been ordered to be sold in the absence of any agreement with the Custodian or the payment of the mortgage debt.

The appellant then filed a writ petition in the High Court of Punjab (in the Circuit Bench at Delhi) for quashing the said Nder of sale and for a direction to the Competent Officer to hand over vaca·nt possession against payment by him of the mortgage debt. A learned Single Judge dismissed the p~tition holding that !he Competent Officer had no jurisdiction to order such vacant pos~es­ sion against the Custodian or against the tenants or allot~ees inducted on the property by the ·Custodian. The Letters P3!ent appeal against that judgment and order was also dismissed. The appellant then filed the present appeal after obtaining special leave from this Court. [1971] 1 S.C.H. It is not disputed that until the time when the Competent Officer passed his order for sale of the property and the Appe1late Officer confirmed it the appellant had not paid the mortgage amount. nor was there any agreement between him and the Custodian whereunder the latter would hand over vacant possession of the property against payment of the mortgage debt.

However. it is conceded by counsel for respondents 1 and .3 that the appellant ha.; since then paid the entire mortgage debt and the Competent Officer has under s . .I 0 of the Separation Act accepted that amount. Two questions on these ~acts, therefore, arise for deter· mination: ( I) whether the order for sale passed by the Competent Officer and confirmed by the Appellate Officer was rightly passed although th,e appellant had repeatedly offered to pay the mortgage debt on condition. however, that he would be given vacant po~se.s­ sion at the same time, and (2) assuming that the Competent ·Officer had no power to direct the Custodian to hand over vacant possession. what was the effect of the/repayment of the mortgage debt by the appellant since then :~.rur the acceptance thereof by lhe CQmpetent Officer.

The rights in the property in question which vested in the C\l)todian were those of the mortgagee on his being declared un eva~uee and his rights as such mortgagee in the property in ques· tion. as evacuee property. Under the Transfer of Property Act, 188:2 the interest which the Custodian could claim was the .inte!·est in the property transferred to the mortgagee for securing repayment of the money advanced by him. Since the mortgage wa.; usufructuary, the mortgagee, and after his having been declar· cd ln evacuee, the Custodian. could claim and retain possession till the mortgage debt was paid and the mortgage was discharged. If the property is let out in the meantime. the mortgagee and those claiming his interest therein are entitled to receive the rents and profits accruing from the property in lieu of interest or towards parr payment of the mortgage debt. Under s.

60 of that Act, the · mortgagor has a right at any time after the principal amount has become due to require the mortgagee on payment or tender of the mortgage debt (a) to deliver to him the mortgage deed and all otha documents relating to the mortgaged property which are in themortgagee's possession or power, (b) to deliver possession where the mortgagee is in possession of the mortgaged property and (c) to retransfer the mortgaged property to him or to such thirJ person as he may direct at his cost. Under s. 76. the mort· gage.: in possession has to manage the property as a person of ordmary prudence would manage it if it were his own. Under s. 83. the mortgagor, provided his right of redemption is not barred, . H may deposit in the court where he might have. instituted a suit for redemption to the account of the mortgagee the mortgage debt then due.

The court thereupon has to issu~ !l notice to the mort- RAGHU NATH V, COMPETENT OFFICER (Shelat, /.) gagee and. on the mortgagee stating the amount due to him ~a his willingness to accept the money so deposited in full discharge of the mortgage debt, pay the amount to the mortgagee On hiS depositing the mortgage deed and ali other documents relating to the mortgaged property. Where the mortgagee is in possession· of the property, the court before paying the amount has to ask him to deliver possession thereof to the mortgagor. When the mortgagor has tendered or deposited in court the mortgage debt to~ gether with interest thereon and has done all that is to be done by him to enable the mortgagee to take such amount out of court, and a. notice, as aforesaid, has been served on the mortgagee under s. 83 interest ceases to run.

If the mortgagee thereafter refuses to accept the amount so deposited or to deliver the mortgage deed and other documents or possession of the property where it is in his possession, the remedy of the mortgagor is to file a suit for redemption. The position, therefore; is that upon the mortgage being paid off, the mortgagor is entitled to have the property restored to him free from the mortgagee's security. The repayment of the debt would be ¢ade. against delivery of possession· and of the mortgage deed and other documents, and these have to be simultaneous transactions. A tender of the mortgage deed or -a deposit thereo~ in court conditional upon the mortgagee than and there deliverin~ possession or executing reconveyance, if required, and handing over the deeds would be a good tender so that if it were to be refused interest would cease running.

It follows that a mortgagee is not pennitted to deal with the property in such a-way that upon discharge of the debt the property cannot be restored. [see Fisher & Lightwood's Law of Mortgage {8th ed.) p. 4821. ls the position of a mortgagor any the different than under the Transfer of Property Act by reason of the evacuee property legislation? In other words, could not the appellant have tendered to the Competent Officer the mortgage amount due by him on con..- dition that he should. be given physical and not merely symbolical possesc;ion of the mortgaged property. Upon the mortgagee being declarea an evacuee and his interest a~ st_Ich mo~gagee in the premises in question an evacuee property, hts mterest 1n the mortgaged property vested under s. 8 of the Administration Act in the Custodian from the date of the notice issued under s. 7 of the Act. Under s.

8 ( 4) any person in posses~ sion of the mortgaged property would be deemed thenceforth to be holding the property on behalf of the Custodian and would be bound on demand by him to surrender possession to him. Tlie Act having under s. 4 an overriding effect on any other law for the time being in force or a~y instrument having effect by virtue of any such Act, the Custod1an, under the powers conferred on bii:n by s. 10, could take all such measures he might consider necessary for securing, admini~tering, preserving and managing any evacuee property including transferring "in any manner whatsoever" the evacuee property "notwithstanding to the contrary contained in any law or agreement relating thereto". Under s.

12, the Custodian is empowered, notwithstanding anything contained in any other law for the time being in force, to cancel any allotment, terminate any lease, or amend the terms of such lease or agreement under which any evacuee property is held or occupied by a person whether such allotment, lease or agreement was granted or entered into before or after the commencement of the Act. Under sub-s .. 3, he is authorised to eject such person and take possession, if such person fails to surrender possession on demand made by him in the manner provided by s. 9 i.e., by eyen using--such force as would be necessary for taking possession. It is conceded by the respondents that under these powers the Custodian had taken over possession of the mortgaged property and the property has since then been in possession of persons who were either allotted portions of it or who were inducted therein as tenants by the Custodian.

It is also conceded that the Custodian bas refused, notwithstanding demands made by the appellant, to evict these persons from the property and hand over vacant possession to the appellant even on the appellant tendering the., mortgage amount. This was presumably done by reason of the fact that though s. 12 empowers· him to cancel an allotment or a tenancy made or ere~ red by him, r. 14(2) of the Administration of Evacuee Property (Central) Rules, 1950 lays down that in the case of a lease or an allotment granted by the Custodian he may evict a person on a ground justifying eviction of a tenant under a law relating to the Rent Control or for any violation of the conditions of the lease or allotment. From the provisions dealing with the vesting of the evacuee pro· perty, the pow.ers of the Custodian, appeals and revisions from his ordei and the overriding nature of the provisions of the Act it is clear that the Administration Act is a self-contained code.

In ·1951, Parliament passed the Evacuee Interest (Separation). Act, LXIV of 1951 (hereinafter referred to as the Separation -Act). The statement of objects and reasons shows that it was passed on ac_count of the difficulty of administering evacuee pro-. perties in which there were both evacuee and non-evacuee interests and to solve the hardship felt by ndn~evacuees, who by reason of ~uch properties being in possession of the Custodian, were unable to obtain satisfaction of their claims in view of the prohibitive provisions of the Administration Act and in particular its s. 17. The Act, as its long title declares, was passed for the separation of interests of evacuees from those of non-evacuee persons in composite properties. Sections 4 and 5 of the Act provide for the appointment of Competent Officers and their jurisdiction. Sec. 7 provides for submission of claims by a person claiming interest in RAGHU NATH V, COMPETENT OFFICER (Shelat, J,) S57 a composite property. Cl. (e) of sub-s.

2 requires that where a claim is made by a mortgagor the total amount due on the mortgage debt and the particulars necessary to determine the same should be set out in such a claim. Sec. 8 provides for an inquiry to be made by the Competent Officer and provides that the order to be made by him shall contain, amongst other things, the amount due to the evacuee in a case where the claim is made by a mortgagor. Sub-s. 2 of ·s. 8, however, provides that where the Custodian has determined that the property in question or any interest therein is evacuee property, such determination is binding on the competent officer. The proviso to that sub-section lays down that nothing contained in sub-s. 2 shall debar the competent officer from determining the mortgage debt in respect of such property or any interest therein or from separating the interest of the evacuee from that of the claimant under s. 10. Sec. 10 provides that notwithstanding anything to the contrary in any law or contract or any decree or order of the civil court or other authority, the competent officer may, subject to any rules that may be made in this behalf, take all such measures as he may consider necessary for the purpose of separating the interest of the evacuee from ~hose of the claimant in any composite property and in particular may:

"(b) in the case of ·any claim of a mortgagor or a mortgagee,- ( i) pay to the Custodian or the claimant the amount payable under the mortgage debt and redeem the mortgaged property; or (ii) (iii) sell the mortgaged propert,Y for satisfaction of the mortgage debt and dtstribute the sale proceeds thexeof; or partition the property between the mortgagor and the mortgagee having regard to the share to which the mortgagee would be entitled in lieu of his claim~" Cl. (c) empowers him to adopt a combination of all or some of these measures. The proviso to the section provides that in any case where the claimant is a mortgagor and tenders the amount due, the competent officer shall accept the same in full satisfaction of the mortgage debt.

The competent officer, by virtue of the provi.5o, is thus under an obligation, where the claimant is a mortgagor and tenders the mortgage amount due, to accept such amount in full satisfaction of the mortgage debt and thereupon interest en the mortgage amount would cease to run. Under cl. (b), he is also empowered in such a case to redeem the mortgaged property. The argument was that where the mortgage amount is tendered by the mortgagor and the competent officer accepts it in satis- 1 faction of the debt due under the mortgage, the mortgage debt is satisfied, interest thereon ceases to run and the mortgage is discharged. Consequently, there would be no question of the competent officer adopting any of the measures provided in sub-cis. (ii) and (iii) of cl. (b) of the section, that is to say, there could be no occasion for him either to sell th~ property for satisfaction of the mortgage debt or to partition the property between the.

B mortgagor and the mortgagee, as, on satisfaction of the mortgage debt the mortgage is discharged and the mortgagee's interest in the mortgaged property ceases or comes to an end. The only measure which in that event he can adopt would be that under cl. (b) (i), i.e, to pay to the Custodian the mortgage debt and redeem the mortgaged prope1·ty. It was, said that that being tlie QOsition under s. "1 0, the appellant was entitled to tender the mortgage amount in satisfaction of the debt due under the mortgage ·on condition that the mortgage should be redeemed and possession ·of the property &iven to him. The Competent Officer in the proceedings befQre him under s. 7 was bo~nd to accept the mortgage amount and redeem the mortgaged property. The argument wouJd be valid if s. 10 had been untrammelled and the powers given therein to the Competent Officer were not made subject to the · rules which may be made under the Act. The .

Legislature, it seems had a purpose in making the pJwers contained in s. 10 and their exercise by the Competent Officer subject to the rules. It must have been aware of ( i) that the Administration Act is, as aforesaid, a self-contained code, (ii) that the Custodian appointed thereunder is not an authority subject to the power or control of the Competent Officer, and (iii) that the Administration Act, by ss'.- I 0 and 12 thereof, confers several power~ on the Custodian incl.uding the power to trun!lfer the property vested in him. He can therefore. create a lease or grant allotment and thus induct on the property tenants or allottees. Under s. 12 of that Act the Custodian has been empowered to cancel or tenninate a lease or allotment. But no such power is conferred on the Competent Officer either under s. 10 or under any other section of the Sepa· ration Act. nor have the powers of the Custodian been made sub· ject to the powers of the Competent Officer or his orders.

On the other hand. it would appear from a reading of the provisions of the Separation Act that the object of enacting it was to enable , non-evacuees to have their interests separated in composite properties and to grant power to the competent officer to achieve that -object. But we do not find anywhere in either of the two At;ts any provision by which the Custodian is made subject to the power or control of the Competent Officer or enabling the Competent Officer to pass any order which would curtail or otherwise affect ·· the powers of the Custodian. It would seem thatthe two Acts have different objects and schemes and the authorities established .under them are independent of each other. ·The powers conferred RAGHC NATH 1'. Cm11' ETE!'« OFFICER (She/at, J.)

859• on the Competent Officer had. therefore. to be so provided that they could be exercised in harmony and consistently with the pro· visions of the Administration Act and the duties and functions of the Custodian thereunder. lt was for that reason that the Legislature laid down in s. I 0 of the Separation Act that the powers con· ferred 1:hereunder on the Competent Officer were to be subject to the rult~s made under that Act. Had it not been so, there would have resulted a conflict in the exercise of the respective powers given 10 the ·Custodian and the Competent Officer by the tWO· Acts. and consequently. a failure in the smooth working out of the provisions of the two Acts. Rule II B of the Rules made under the Separation Act provides that a Competent Officer ''having regard to the provisions of the proviso to s.

I 0 of the Act'' shall, for the purpose of separat· ing the evacuee interest from other interests in a composite pro·· perw, adopt any of the measures in the order of preference set out tbefein. Cl. (b) of that rule provides that in the case of a claim by ~ mortgagor or a mortgagee ( 1) where both the Custodian and Claimant agree. the Competent Officer can exercise the powers. conferred on him under sub-c1. (i) or sub-cl. (iii) of cl. (b) of s. 10 of the Act and (it) where there is no such agreement, he can sell the nwrtgaged property for satisfaction of the mortgage debt and distribute the sale proceed~; thereof. The effect of this rule· read in !;Onjunction with s. 10 of the Act. however harsh it may apparently ·seem to be, is that though the Competent Officer has _ to accept the mortgage amount tendered by a mortgagor and thus discharge the mortgage debt and interest th.er~upon ceases to run on the principal amount and though he can adopt any one of themeasures set out in s.

10, including redemption of tpe mortgage, he cannot order such redemption and direct th~ Custodian to deliver vucant possessi011 uf the property in the absence of an agreement between the Custodian and the mortgagor claimant. It follows that in Lhe absem·e of such agreement the mortgagorclaimant <:annot demand from the Competent Officer that the latter 'ihou1d accept the mortgage amount 'l:endered by him and direct simultaneous delivery of possess,ion of the mortgaged property. The power to redeem the mortgaged property being subject to rule 1 l B ( b). the only thing that the Competent Officer can at the most do is to order symbolical possession. but he cannot direct the Custodian to give vacant possession. The reason is clear, for, such an order \l.·ould in effect be an order directing the Custodian to cancel the lea~e~ or allotments granted by him and eject the ten:1r.ts or allottces from the. property. Such an order would at once be in contiict with r.

14 of the Administration of Evacuee Property (Central) Rules. 1950. That rule provides that while exercising his power under s. 12 of that Act, namely, the power to cancel or vary the tenns of a lease or allotment. the Custodian,· 8 60 in the case of a lease or allotment granted by him, can evict a person only on any of the grounds justifying eviction of a tenant under any rent control law for the time being in force in the State concerned or for any violation of the conditions of the lease or !he allotment. CJ. 4 of that rule further lays down that before can·· ceiling or ·varying the terms of the lease or before evicting ~my Jesse the Custodian must serve a show cause notice on such le~see and afford him a reasonable opportunit:r of being heard.

If tbe Custodian is satisfied on hearing the concerned lessee that he is not liable to eviction under a rent control Act in force in the · State where the property is situate or has not contravened any · of the provisions of the lease, he cannot cancel the lease nor can he evict .the lessee except only as provided by cl. ( 5) of that rule on the ground that such eviction is necessary or expedient for the preser· vation or proper administration or management of such property · .(.)I for carrying out any other object of the Act. He, therefore, cannot evict a tenant or an allottee on the ground that it is neces~ sary to do so for the separation of an interest of a non~evacuee mortgagor as that would not be one of the purposes of the Admi~ nistration Act.

The result which emerges from the discussion of the relevant provisions of the two Acts ~nd the rules thereunder made is (i) that though the Competent Officer must accept the mortgage amount when tendered by a mortgagor and the mortgage debt thereupon would be satisfied, he cannot exercise the power to redeem the mortgaged property and order the Custodian to deliver up its vacant possession to the mortgagor in the absence of any agreement between the mortgagor and the Custodian, and ( il) that in exercising his jurisdiction under s. 10 the Competent Officer cannot direct the Custodian to cancel or vary the terms of the leases or aHotments made or granted by him, firstly because he has no such power under s. 10 or any other provision of the Separation Act, and ~econdly, because such an order would am0unt to compelling the Custodian to act in a manner contrary to lhe provisions of the aforesaid r. -14.

The exercise of the power to redeem being subject to the rules, it would not be competent for the Competent Officer, by reason of r. 11 B (b), to order delivery of possession by the Custodian in the absence of an agreement between him and the mortgagor-claimant. In view of this position, the appellant dould not have in~~sted that he would tender or pay the mortgage debt only against deli~ very of vacant possession of the property in the absence of any agreement between him and the Custodian. The only thing which the Competent Officer could do in the circumstances wac to accept the mortgage amount whereupon interest would cea~e to run. It is not in dispute that the appel1ant, insisting as he was 1 I I I RAGHUNATH v. COMPETENT OFFICER (She/at J ) all throughout upon bein" given vac possession, did not actuaily tender oarn~~~d not merely symbolical gage debt.

The mortgage debt, theref e payll?ent of the m~>rt-­ The mortgage also stood intact and ;re, remamed outstandmg. which the Competent Officer could ado e~efo~e, t~e o~ly measure adopted was to order sale of the ro ert an W~lch m fact he debt from the sale proceeds tber~f p ftt and Jallsfy _the mortgage and which was confirmed by the A. ella~e or er Which ~e pass~ cumstances then prevailing validly ~~d conlOpffietcertlwas 1 .~ theThclrll t, en y rnaue appe_ an .s gnevanc_e ag:unst It, therefore, could not be s~tained [c/. 1n th1s connection the position of an auction decided in Ek Nmvas Khan v. The Competent O[fice~(f)].aser as. But it is con_ceded that since the passing of the said order the· a~~ellant_ l~a~ patd up the full mortgage amount and the Competent O,ficer has, as he was bound to do under s. 10, proviso. acce:_Jted that amou~t. Presumably thnt amount has been paid by him to the C:ustodJan. Ther~fore, the mortgage debt is no longer outstandmg.

Though th1s event has happened after the impuoneu order was passed, we must in fairness take notice of the fact"tbat the mortgage debt is no longer outstanding and the mortgaged property is now free f-rom the mortgagee's security, and therefore, from the interest vested in the Custodian. It is true that the Competent Officer. as already stated, can adopt any of the three measures set out ins. IO(b) of the Separation Act or adopt a combination or all or some of them, but as emerging from the discussion ~hove, he cannot redeem the property and order delivery of vac~nt possession in the absence of an agreement between the Custod1an and the appellant. Th:l! is quite clear. But the _order of sale passed by him and confirmed by the Appellate Officer n!so cannot stand, fil'$tly, because the mortgage debt now sta.nds s.at1sfied, ana secondly because he can order sale only for satisfaction of the mort"U"~ debt and for distribution of the sale procee.ds thereof be "

"' trra"ee There bemg now no tween the mortoagor an t e mor "' e- •1 now . question of the s~isfaction of the n~ortgage 1~~~ i~: th~ mortstands satisfied and the property 1bemg :n~~~ta~d :llld cannot be gagec's security, the order for sa~ canna om etent Officer canallowed to stand. At the s:un_e ume th~ ;oss~sion although the not order the Custodian to dehver vac~n d the Competent Officer appe11ant has paid the mor~gagc amoun ~':raoe debt. In view of has accepted it in satisfact_IO.n .Of .the r~ th; powers and duties of ss. 10 and 12 of the Admm1strallon lcs made under that the Custodian thereunder and unders ~ ~r~ion Act and r. liD of Act. the provisions of s. I 0 of the thl~" that could be offt:red and the rules made thereunder. the onlr 1 p<>ossession of the property. !lil'!!n to the appellant was syW~~~~convcnient, and may e\'en Su::h a result. no doubt. won 1 (1 1 A .I R. I'J(i() i\11. 61C.. :; . ·;j I ' 'I \ :1 .f :: ~ .,1 f; ' I ' I l ; ! 'I I I I •. I I ·UI ·'

I I I ·.· I ., I ., ·i II I -I ! 1' :..,.,. :appear to be harsh and unfair as the appellant would be driven to file proceedings for eviction of tenants and allottees now in posses:: sion of the prpperty. (see The All India Film Corporation Ltd. v. Raja Gyan 'Nath) ( l). ln view of the payment of the mortgage amount by the appel- .lant and the acceptance of it by the Competent Officer, the order directing sale has now become untenable and has, therefore, to be set aside. The mortgage stands discharged anct the Competent Officer is bound to direct symbolical possession of the mortgaged . property to the appellant. To this extent the appeal succeeds. The order for costs of the appeal would ordinarily follow the ·result,. but in view of the fact that the Competent Officer was entitled to pass t~e order of sale in the circumstances then prevailing it is fair" and equitable, though his order is set aside, that . the parties should bear their own costs. V.P.S. Appeal allowed in part.

(1) {1970] :! S C.R. 5~1.