Supreme Court of India

RUKMANI AMMAL AND ANR.versusJAGDEESA GOUNDER

Citation: 2005 INSC 555
Decided: 9 November 2005
Disposal: Appeal(s) allowed
Bench: ARIJIT PASAYAT

Holding

A mortgagee who purchases the mortgaged property in a court‑sanctioned auction ceases to be a mortgagee, becomes an absolute owner, and his possession is adverse; consequently the plaintiff’s suit for declaration of title is not maintainable and is barred by limitation.

Summary

The case involved a usufructuary mortgage where the mortgagee, Rukmani Ammal, purchased the mortgaged property in a court‑sanctioned auction in 1966. The plaintiff, Jagdesa Gounder, who had bought a portion of the property from the original owner in 1964, sued for declaration of title and possession. The Supreme Court held that the mortgagee’s purchase terminated her status as mortgagee, making her possession adverse to the mortgagor, and that the plaintiff should have filed a suit for redemption under Order 34 of the CPC. The suit for declaration of title was therefore not maintainable and was barred by the 12‑year limitation period under the Limitation Act, 1963. The earlier money suit’s decree and the non‑joinder of the plaintiff did not bind him, and the Tamil Nadu Debt Relief Act, 1979 was inapplicable. Consequently, the appeal was allowed and the lower appellate court’s decree dismissing the plaintiff’s suit was restored.

Issues considered

Whether a mortgagee who acquires the mortgaged property in a court‑approved auction ceases to be a mortgagee and becomes an absolute owner, rendering his possession adverse to the mortgagor.
Whether the plaintiff’s suit for declaration of title and possession is maintainable, or whether a suit for redemption of mortgage under Order 34 of the CPC is required.
Whether the suit is barred by the limitation period prescribed in the Limitation Act, 1963.
Whether the non‑joinder of the plaintiff in the earlier money suit affects the binding nature of that decree and the subsequent auction sale.
Whether the Tamil Nadu Debt Relief Act, 1979 discharges the mortgage after ten years of possession.

Legislation cited

Code of Civil Procedure, 1908s. Order 34, s. Order 9 Rule 9
Limitation Act, 1963s. Article 61

Subjects

mortgageusufructuary mortgageadverse possessionlimitation periodredemption suitCode of Civil ProcedureTamil Nadu Debt Relief Actnon‑joinderauction saletitle and possession

Judgment

RUKMANI AMMAL AND ANR. A
v.
JAGDEESA GOUNDER

NOVEMBER 9, 2005

[ARIJIT PASAYAT AND C.K. THAKKER, JJ.] B

Limitation Act, 1963-Artic/e 63-Possession of mortgage property by
mortgagee-When becomes adverse against mortgagor-Held: On sale of
mortgage property in favour of mortgagee, his/her status as mortgagee comes C
to an end and upon purchase, claims property as absolute owner-Possession
becomes adverse to the mortgagor-original owner.

Code of Civil Proceduri:., 1908-0rder 34-Sale of part of property
already mortgaged by mortgagor, to purchaser-Suit for declaration of title
and possession of property by purchaser against mortgagee 12 years later- D
Maintainability of-Held: Suit for redemption of mortgage should have been
filed and suit for declaration of title and possession is not maintainable -
Mortgagee was in possession of the property, and also purchaser was claiming
through mortgagor-Moreover, suit being filed after 12 years was time barred-
Limitation Act, 1963-Article 63.
E
Order 1, Rule 9-Non-impleadment of subsequent purchaser in money
suit-Sale of property in execution of money decree and plaintiff becoming
owner of property-Effect of-Held: Non-joinder is of no consequence since
it was an independent transaction, he was neither necessary nor proper party
and as such sale would bind him.
F
Tamil Nadu Debt Relief Act, 1979-Mortgaged property sold in favour
of mortgagee after four years-Plea of mortgagor and subsequent purchaser
that mortgagee in possession of property for more than ten years as
usufructuary mortgagee, as such mqrtgage statutorily discharged-Held: After
auction sale, mortgagee became owner ofproperty-Hence, provisions of the G
Act not applicable and benefit cannot be claimed

'A', original owner of the property, mortgaged the property to
defendant No. 1 in 1962 and since then defendant No. I was in possession
· of the property as usufructuary mortgagee. 'A' took another loan from
IM H
106 SUPREME COURT REPORTS [2005) SUPP. 5 S.C.R.

A defendant no 1 on other pro-note. In 1964 'A' sold part of the property
to respondent-plaintiff and the sale deed recited the factum of mortgage.
by 'A' to defendant no. 1. Since 'A' did not repay the amount under the
separate pro-note, defendant no 1 filed money suit against 'A' and a deeree
was passed against 'A'. In execution proceedings, the suit property was
B sold in public a•1ction in 1966 and defendant no. 1-mortgagee purchased
the same with the permission of the Court, sale certificate was issued and
she took possession of the property. Subsequently, defendant no 1 sold the
property to defendant No. 2.

In 1980, respondent - plaintiff filed a suit for declaration of title and
C possession of part of the property against defendant No. 1. Respondent -
plaintiff alleged that the respondent - plaintiff had. purchased part of the
suit property and had become owner of that' portion; that defendant no.
1 was in possession of the property only as mortgagee of the property and
continued to remain the same even after auction sale by court; that
defendant no. 1 being in possession for more than ten years as mortgagee,
D mortgage was statutorily discharged under the Tamil Nadu Debt Relief
Act, 1979 and as such was bound to deliver possession of the property.
Defendant no. 1 contended that the suit was not maintainable since
respondent - plaintiff ought to have instituted a suit for redemption of
mortgage and not for declaration of title; that after the auction sale an<!
E confirmation thereof by Court, defen~ant no. 1 became owner of the
property as she acquired title by adverse possession; that the debtor was
not entitled to any benefit under the 1979 Act; and that the suit was barred
by limitation.

Trial Court passed decree in favour of respondent - plaintiff for title
F and possession of the property. Defendant no. 1 then filed an appeal. Lower
Appellate Court allowed the appeal and set aside the decree passed by the
trial court holding that after the auction sale by the Court and its
confirmation, defendant No. 1 no more continued to be mortgagee in
possession and her title was adverse to the mortgagor; that suit for
redemption of mortgage should have been filed and not for declaration
G of title and possession of mortgage-property; that the suit was barred by
limitation; and that defendant no. 1 filed money suit against 'A' and even
though plaintiff was not impleaded, decree passed and sale of property
was binding on the plaintiff, Aggrieved respondent - plaintiff fil~d Second
Appeal. High Court upheld the order of trial court and allowed the appeal.
H Hence, the present appeal.
RUKMANI AMMAL v. JAGDEESA GOUNDER 107

Appellant - defendants contended that the Lower Appellate Court A
rightly dismissed the suit filed by the respondent - plaintiff; and the High
Court erred in restoring the decree passed by trial court in favour of the
respondent-plaintiff for title and possession of the property.

Allowing the appeal, the Court
B
HELD: 1.1. In the instant case, it is correct to say that once the
property was sold to defendant no. 1 who was mortgagee in possession,
she could not be continued as mortgagee inasmuch as after the sale, she
was claiming the property as an absolute owner thereof, her status as
mortgagee came to an end with the purchase of property and in the eye C
of law, it could be said that she was claiming title over the property which
was adverse to the owner of the property; and that when 'A' sold part of
the suit property to the respondent - plaintiff, the property was already
mortgaged to defendant No. 1 who was in possession of the property and
that since the respondent - plaintiff was claiming through A - original
owner, the respondent - plaintiff ought to have filed a suit for redemption D
of mortgage and not for declaration of title and possession of property;
and as such respondent's suit was not maintainable. (113-E-F; 116-F-G]

1.2. The auction took place on August 3, 1966 and the. sale was
confirmed and sale certificate was issued in favour of d~fendant No. 1 on
September 5, 1966. Admittedly, the respondent~ plaint_iff filed suit in 1980, E
which was, after a period of twelve years and it was barred under Article
61 of the Limitation Act, 1963. Hence, Lower Appellate Court was right
in dismissing the suit. (116-E-G)

Padma Vithoba Chakkayya v. Mohammed Multani and Anr., AIR (1963) p
SC 70: [1963) 2 SCR 229 and Soni Lalji Jetha (deceased) through his LRs.
v. Soni Ka/idas Devchand and Ors., AIR (1967) SC 978: (1967) 1SCR974,
relied on.

L. Shankaran Laxmi and Ors. v. Adim Kunju, AIR (1965) Ker 132 and
K. Gopa/an Thanthri v. lttira Ke/an and Ors., AIR (1970) Ker 305 (FD), G
referred to.

2. In the suit for recovery of money, decree passed therein and
execution proceedings and auction sale did not relate to mortgage dues
but an independent transaction and a separate pro-note and recovery of
H
108 SUPREME COURT REPORTS (2005] SUPP. 5 S.C.R.

A that amount. In such suit, respondent was neither necessary nor proper
party and non-joinder of plaintiff was of no consequence. Further, in
execution of money-decree in that suit, defendant no.I purchased the
property with the leave of the court and became the owner of the property
and plaintiff had no right to raise an objection against the right of
B defendant no. 1. (117-CI -

Ramaswami Gounder v. Ramaswami Gounder (1974) 1 Mad LJ 350:
87 L W 454, referred to.

3. Regarding deemed discharge of debt under the Tamil Nadu Debt
C Relief Act, 1979, on auction-sale in favour of defendant no. 1 in 1966, she
became the owner of the property or in any case, she was claiming to be
in adverse possession of the suit property. After 1966, defendant no. 1 was
not holding the property as mortgagee in possession. Hence, the provisions .
1
of the Act were not applicable and neither 'A' nor respondent - plaintiff
could claim benefit of the said Act. [117-EJ
D
CIVIL APPELLATE. JURISDICTION : Civil Appeal No. 6544 of 1999.

From the Judgi:nent" and Order dated 11.11.98 of the Madras J:ligh
Court in S.A. l:'Jp. 1939 of 1986.

E R. Sundaravaradan,'R;N. Keshwani and Ramlal Roy for the Appellants.
: '

A.T.M. Sampath and Mrs. R. Meena Kumari for the Respondents.

The Judgment of the Court was delivered by

F C.K. THAKKER, J. The present appeal is directed against the judgment
and decree passed by the High Court of Madras in Second Appeal No. 1939
of 1986. By the said appeal, the High Court set aside the judgment and
decree passed by the Subordinate Judge, Tindivanam in Appeal No. 6 of
1983 which in tum set aside the judgment and decree passed by District
Munsif, Tindivanam in Original Suit No. 63 of 1983.
G
To appreciate the controversy raised in the present Appeal, factual
background may be stated in brief:

The appellants herein were original defendants and respondent was the
H original plaintiff. One Annamalai was the absolute owner of the property
RUKMANI AMMAL v. JAGDEESA GOUNDER [THAKKER, J.] l 09
bearing R.S. 81 situated at village Peravur in Taluka Tindivanam, admeasuring A
1 acre and 52 cents (hereinafter referred to as the 'suit property'). Annamalai
mortgaged the said property by a usufructuary mortgage to defendant No. 1
Rukmani Ammal by a document Ex: B-5 dated June 27, 1962 to secure
repayment of Rs. 400 on a pro-note. Defendant No. 1 was put in possession
of the property. Annamalai had also taken another loan from Rukmani Ammal
on another pro-note executed by him. On August 13, 1964, Annamalai sold B
67 cents from the suit property to plaintiff-Jagdesa by a registered sale-deed
Ex. A-1 for Rs. 800/-. There was a recital in the sale-deed that the defendant
No. 1 was in possession of property as a mortgagee and the plaintiff had thus
purchased the equity of redemption from Annamalai. Since the defendant
No. 1 was not repaid the amount of another loan under pro-note, she instituted C
a money suit being Small Cause Suit No. 176 of 1965. wherein a decree was
passed. The suit-property was put up for sale in execution of money decree.
The auction took place on August 3, 1966. The defendant No. l purchased
.the property with the leave of the Court. Sale was confirmed on September
5, 1966 and sales certificate Ex. B-7 was issued in her favour, and she took
delivery of possession through Court on January 18, 1967. The property was D
subsequently sold by Rukmani Ammal (Defendant No. l) to Krishna Gounder
(Defendant No. 2) on August 16, 1979 by a sale-deed, Ex. B-19.

On March l, 1980, the plaintiff issued a notice to defendant No.
asking her to hand over possession of 67 cents from the property to the E
plaintiff but the defendant No. l refused to do so. The plaintiff, therefore,
filed a suit on June 6, 1980 for declaration of title and also for possession of
property. It was alleged by the plaintiff that defendant No. l was mortgagee
in possession of the property and since the mortgage was usufructuary one
and the defendant No. l was in possession for a continuous period of ten
years, the mortgage was deemed to be discharged under the Tamil Nadu Debt F
Relief Act, 1979 and defendant No. 1 was bound to deliver possession of the
property to the plaintiff. It was also alleged by the plaintiff that he was not
aware of Small Cause Suit No. 176 of 1965 by defendant No. l nor the
decree passed in the said suit and attachment and sale of property; that the
Court auction was illegal and invalid as no notice was issued to the plaintiff G
before undertaking auction sale nor an opportunity was afforded to him. The
auction, therefore, would not bind him as it was fraudulent. A prayer was
accordingly made to declare auction sale invalid and to put plaintiff in
possession of the property. According to the plaintiff, he purchased 0.67
cents out of l acre, 52 cents of the suit property and had become owner of
that portion. H
110 SUPREME COURT REPORTS [2005) SUPP. 5 S.C.R

A The suit was resisted by defendant No. l, inter alia, contending that it
was not maintainable inasmuch as the plaintiff ought to have instituted a suit
for redemption of mortgage and not for declaration of title. It was also
contended that a decree was passed in favour of defendant No. 1 in the
previous suit and in execution of the said decree, the property was sold in
B public auction and after obtaining leave of the Court, the defendant No. l
purchased the property and had become full and absolute owner thereof. She
further contended that the debtor was not entitled to· aiiY benefit under the
Tamil Nadu Debt Relief Act. In any ·case, after the auction sale and
confirmation thereof by a Court, her possession of property was as owner of
the property and thus, she was· in adverse possession. She had become owner
C as she had acquired title by adverse possession and the suit filed by the
plaintiff was barred by limitation. It was also stated that the sale in favour of
defendant No. 1 was confirmed by a competent Court of law. The defendant
No. 1 had also sold the property to defendant No. 2 on August 16, 1979
under the sale-deed, Ex. 8-19 and thereafter the suit of the plaintiff against
her was not maintainable and was liable to be dismissed. Defendant No. 2
D remained ex-parte.

The trial Court, on the basis of allegations and cou~ter allegations of
the parties, framed necessary issues and by judgment and decree, dated
November 18, 1982, held that the claim put forward by the plaintiff was well
E founded and he was entitled to a decree for possession as prayed by him to
the extent of 67 cents. The Court observed that defendant No. 1 was in
possession only as a mortgagee of the property and even after auction sale
by .the Court, she continued to remain in possession as the mortgagee and
could not get title by adverse possession. The trial court also held that as
defendant No. 1 was in possession of property since more than ten years, the
F mortgage was statutorily discharged and the defendant No. 1 was bound to
hand over possession of the property to the mortgagor. As the plaintiff had
purchased 67 cents in R.S. 81, he was the absolute owner and was entitled
to that portion of the property. Accordingly, relief was granted in favour of
the plaintiff.

G Being aggrieved by the decree passed by the trial Court, the defendant
No. 1 preferred an appeal in the Coui:t of the Subordinate Judge, Tindivanam.
The lower Appellate Court held that it was no doubt true that Annamalai was
the owner and mortgagor of'the property and defendant No. 1 was in possession
as a mortgagee of the suit property. The Court, however, held that after the :·
.H auction sale by the Court on August 3, 1966 and confirmation of sale and
RUKMANI AMMAL v. JAGDEESA GOUNDER [THAKKER, J.] 111
grant of sale certificate in favour of defendant No. 1 on September 5, 1966, A
she no more continued to be mortgagee in possession and her title was
· adverse to the mortgagor. Her possession was thereafter adverse possession
so far as the owner was concerned. In the circumstances, relying on a decision
of this Court in Soni Lalji Jetha (deceased) through his LRs v. Soni Kalidas
Devchand & Ors., AIR (1967) SC 978 : [1967] 1 SCR 974, the Court held B
that the defendant No. 1 had become owner by adverse possession and the
suit filed by the plaintiff was not maintainable. The Court also held that the
suit ought to have been filed under Order 34 of the Code of Civil Procedure,
1908 for redemption of mortgage and not for declaration of title and possession
of mortgage-property. According to the appellate Court, the suit filed by the
defendant No. I against Annamalai was for recovery of money and the C
plaintiff-Jagdesa was not necessary party to the said suit and the decree
passed in that suit and sale of the suit-property in execution was binding to
the plaintiff also. Accordingly, the appeal was allowed. Judgment and decree
passed by the trial Court was reversed and the suit filed by the plain.tiff was
dismissed.
D
The plaintiff was aggrieved by the decree of the lower Appellate Court
and filed Second Appeal in the High Court of Madras. The High Court,
relying on the fact that the defendant No. l was only mortgagee in possession
and the mortgagor was entitled to redeem the mortgage, held that defendant
No. 1 continued to be a mortgagee only and she would not become owner E
of the property by adverse possession. Therefore, according to the High
Court, the trial Court was right in passing decree in favour of the plaintiff for
title and possession of the property and the lower Appellate Court committed
11n error in allowing the appeal and setting aside the decree. The High Court
also held that the decree passed in favour of defendant No. l in Small Cause
Suit was ~ot binding to the plaintiff as he was not joined as a party defendant F
in that suit. The High Court, therefore, allowed the appeal and decreed the
suit of the plaintiff.

The appellants-defendants have challenged the decree passed by the
High Court in the present appeal.
G
We have heard learned counsel for the parties. Learned counsel for the
appellants contended that the High Court committed an error of law in holding
that the suit filed by the plaintiff for declaration of title and possession of
property was maintainable. According to the learned counsel, the plaintiff
ought to have filed a suit for redemption under Order XXXIV of the Code
H
112 SUPREME COURT REPORTS [2005) SUPP. S S.C.R.

A of Civil Procedure, 1908. He, having purchased equity of redemption, could
not have filed a suit for declaration and possession of mortgage property but
for redemption of mortgage. The counsel also contended that the Hig~. Court
was not right in holding that defendant No. 1 had· not become owner of the
property by adverse possession since she was a mortgagee of the suit property.
B · Once the mortgagee purchased the property in execution proceedings and in
auction-sale with leave of the Court, she had become owner of such property.
Sale was confirmed and·sale· certificate was issued in favour of defendant No.
1. Even if it is assumed that the title of the mortgagee was defective, the
status of the deftndant No. 1 was changed from mortgagee into a person
claiming ownership of property and the suit filed by the plaintiff was barred
C by the law of limitation. It was also submitted that the High Court was wrong
in holding that the decree passed in Small Cause Suit was of no effect as the
plaintiff was not joined as defendant in that suit. The learned counsel for the
appellants, therefore, submitted that the appeal deserves to be allowed by
confirming the judgment and decree of the lower Appellate Court and by
dismissing the suit filed by the plaintiff.
D
The learned counsel for the respondent-plaintiff, on the other hand,
supported the decree passed by the trial Court and confirmed by the High
Court. He submitted that defendant No. 1 was mortgagee in possession and
as the sale in favour of the plaintiff was in accordance with law, defendant
E No. I continued to be mortgagee in possession. The counsel submitted that it
is settled law that "once a mortgage, always a mortgage". It was, therefore,
open to the mortgagor or a.person claiming through such mortgagor to redeem
the property. Since the plaintiff was claiming the right and title of the
mortgagor, it was open to him to file a suit for declaration and possession of
the property to the extertt of 67 cents and by passing a decree in favour of
F plaintiff, no illegality had been committed by the trial Court. As the lower
Appellate Court had committed an error in setting aside the said decree, the
High Court was right in correcting the error and in restoring the decree of the
Trial Court. He, therefore, submitted that the appeal deserves to be dismissed ..

Having heard the learned counsel for the parties and having considered
G the relevant provisions of law in the light of decisions cited before u~, in our
view, the appeal deserves to be allowed by setting aside the decree passed by
the trial Court and confirmed by the High Court and by restoring the decree
of the first Appellate Court.

From the facts, it is clear and is not disputed before us that Annamalai
H I
RUKMANI AMMAL v. JAGDEESA GOUNDER [THAKKER, J.] 113

was the original owner of the property who mortgaged it to defendant No. 1. A
Thus, Annamalai was mortgagor and Rukmani Ammal-defendant No. l was
mortgagee. Since it was an usufructuary mortgage, defendant No. 1 was put
in possession of the property as mortgagee. It was in June, 1962. It is also
not in dispute that defendant No. l had advanced another loan on a different
pro-note to Annamalai. Annamalai sold part of the property to the present
plaintiff on August 13, 1964 when the property was in possession of defendant B
No. l as mortgagee. It has come on record that since the amount under
separate pro-note was not repaid by Annamalai to defendant No. 1, the latter
filed Small Cause Suit for recovery of money due and a decree was passed
against Annamalai by a competent court. In execution proceedings, the suit
property was sold by the Court in public auction and defendant No. I, with C
the permission of the Court, purchased it on August 3, 1966. Auction was
confirmed and sale certificate was issued in favour of defendant No. l on
September 5, 1966. It is, therefore, clear that according to defendant No. 1,
he became absolute owner of the property in view of purchase of property
in Court auction by her as the sale was confirmed and sale certificate was
issued. In our opinion, the learned counsel for defendant No. l is right in D
contending that when Annamalai sold part of the suit property to the plaintiff
in 1964, the property was already mortgaged to defendant No. I who was in
possession of the property. Defendant No. l is, therefore, right in submitting
that the plaintiff ought to have filed a suit for redemption of mortgage and
not for declaration of title and possession of property. The learned counsel E
for defendant No. l is also right in submitting that once the property was sold
to defendant No. I who was mort1;,agee in possession, she could not be
continued as mortgagee inasmuch as after the sale, she was claiming the
property as an owner thereof. Her status as mortgagee came to an end with
the purchase of property and in the eye of law, it could be said that she was
claiming title over the property which was adverse to the owner of the property. F
In this connection, our attention was invited by the learned counsel to few
decisions:

In Padma Vithoba Chakkkayya v. Mohammed Multani & Anr. AIR
(l 963) SC 70 : [1963) 2 SCR 229, this Court held that once a person gets G
possession of property as mortgagee, he cannot by a unilateral act or declaration
claim a title over the property by adverse possession against the mortgagor
since in law his possession is that of the mortgagor. But if mortgagor and
mortgagee subsequently enter into a transaction under which the mortgagee
is to hold the property thereafter not as a mortgagee but as owner, that would
be sufficient to start adverse possession against the mortgagor even if the H
114 SUPREME COURT REPORTS [2005] SUPP. S S.C.R.

A transaction is for any reason inoperative under the law.
The Court stated:

"On the finding reached above that the first defendant entered
into possession of the properties as usufructuary mortgagee in 1916,
B the question is what are the rights of the appellant. On the basis of
the sale deed by the second defendant in favour of Rajanna, he would
be entitled to redeem the mortgage. But the present suit is not one for
redemption of the mortgage but for ejectm~nt and that by itself would
be a ground for dismissal of the.suit. But in view of the fact tilat this
litigation had long been pending, we consider it desirable to decide
c the rights of the parties on the footing that it is a suit to redeem the
usufructuary mo1tgage, without driving the parties to a separate action.
We have now to consider the defence of the first defendant to the
suit, treating it as one for redemption. Now the contention of Mr.
Ranganathan Chetty for the respondent is that he had been in
D possession of the properties as owner ever since 1923, when the
second defendant sold them to him, that he had thereby acquired a
prescriptive title to them, and that the right of the appellant to redeem
was thereby extinguished. It is not disputed that when a person gets
into possession ofproperties as mortgagee, he cannot by any unilateral
act or declaration of his prescribe for a title by adverse possession
E against the mortgagor, because in law his possession is that of the
mortgagor. But what is contended is that if the mortgagor and
mortgagee subsequently enter into a transaction under which the
mortgagee is to hold the properties thereafter not as a mortgagee but
as owner that would be sufficient to start adverse possession against
F the mortgagor if the transaction is for any reason inoperative under
the law. This contention, in our opinion, is well founded Though
there was at one time a body of judicial 'lpinion that when a person
enters into possession as a mortgagee he cannot under any
circumstances acquire a title by prescription against the owner, the
law is now fairly well settled that he can do so where there is a
G change in the character of his possession under an agrerment with the
owner, vide Karnam Kanda Sarni v. Chinnabba, AIR (1921) Mad.
82)." (emphasis supplied)

A similar question came up for consideration in Soni Lalji Jetha. There
it was held by this Court that a mortgagee in possession under the terms of
H

. ,
RUKMANI AMMAL v. JAGDEESA GOUNDER [THAKKER, J.] 115
mortgage cannot, by merely asserting rights of ownership in the mortgage A
property, convert his possession as mortgagee into possession hostile to the
mortgagor. But the mortgagor can sell the mortgage property to his mortgagee
and thereby put the mortgagee's estate to an end and thereafter all the right,
title and interest in the property would vest in the mortgagee. Such a sale
would be valid and binding and thereafter the character of possession as a B
mortgagee would be converted into possession as an absolute owner. Even if
such a sale is held to be voidable and not binding on a subsequent purchaser,
the character of possession based on assertion of absolute ownership by the
mortgagee does not alter, and if such possession continues throughout the
statutory period it ripens into a title to the property.

The Court in the circumstances stated:
c
"It is true that as mortgagees-in-possession Kanji and Lalji derived
their title to possession through the mortgagors and by virtue of their
rights under the said mortgage. They were entitled, therefore, to
continue to be in possession under the said mortgage and so long as D
it subsisted. By merely asserting rights of ownership in the said shops
they could not convert their possession as mortgagees and unilaterally
alter their lawful possession as mortgagees into possession hostile to
the mortgagors. But it is a well settled proposition that a mortgagor
can sell the mortgaged property to his mortgagee and thus put the
mortgage's estate to an end and thereafter all the right, title and E
interest in the property would vest in the mortgagee. Such a sale
would be valid and binding as between them and thereafter the
character of possession as a mortgagee would be converted into
possession as an absolute owner. Even if such a sale is held to be
voidable and not binding on a subsequent purchaser the character of F
possession based on assertion ofabsolute ownership by the mortgagee
does not alter, and ifthat possession continues throughout the statutory
period it ripens into a title to the property. " (emphasis supplied)

In L. Shankaran Laxmi & Ors. v. Adim Kunju, AIR (1965) Ker 132, a
Division Bench of the High Court of Kerala held that once a mortgagee G
purchases the property in execution proceedings, he claims to be the owner
of the property and does not remain to be mortgagee. The Court stated that
unless there is a default in performance of some obligation by the mortgagee,
the purchased by mortgagee in execution of decree with the leave of the
Court makes him the owner of the property.
H
116 SUPREME COURT REPORTS [2005] SUPP. 5 S.C.R.

A In K. Gopalan Thanthri v. lttira Ke/an & Ors., AIR (1970) Ker 305
(FB), it was held by the Full Bench of the High Court of Kerala that after the
sale of mortgage property in favour of mortgagee, possession of mortgagee
becomes adverse to tarwad and if a suit for redemption is not filed within the
stipulated period of twelve years, it would become barred by limitation.

B In the case in hand, Annamalai was the owner of the property. He
mortgaged it to defendant No. l in 1962 and since then defendant No. l was
in possession of the property as mortgagee. Annamalai then sold part of the
property to the plaintiff in 1964 and the sale-deed recited the factum of
mortgage by the owner to defendant No. l. In a suit for recovery of money
C by defendant No. I against Annamalai, a decree was passed and in execution
proceedings, the property was purchased by the mortgagee (defendant No. I)
in I 966. The auction was confirmed and sale certificate was issued in favour
of defendant No. I on September 5, 1966. The submission of defendant No.
I is well founded that thereafter she did not continue to remain mortgagee
but became absolute owner or claimed to be the absolute owner of the property.
D As held by this Court in the cases referred to hereinabove, once the mortgagee
is claiming to be an absolute owner of the property, his/her status as mortgagee
comes to an end and his/her possession becomes adverse to the original
owner. Even if such sale is voidable (and not void), it will not alter legal
position and adverse title of the original mortgagee continues and if the
E period of twelve years expires, he/she becomes owner of the property by
adverse possession.

In the case.on hand, the auction took place on August 3, 1966 and the
sale was confinned and sale certificate was issued in favour of defendant No.

F
l on September 5, 1966. Admittedly, the suit was filed by the plaintiff on
June 26, 1980, that is, after a period of twelve years. In. the circumstances,
....
in our opinion, the lower Appellate Court was right in dismissing the suit. It
was barred under Article 61 of the Limitation Act, 1963. The lower Appellate
Court, in our opinio,n, was also right in observing that since the plaintiff was
claiming through Annamalai (original owner), he ought to have filed a suit
for redemption of mortgage and not for declaration and possession of the
G property. Such suit was not maintainable as held by this Court in Padma
Vithoba.

Though the trial court as well as the High Court, relying upon an earlier
decision in Ramaswami Gounder v. Ramaswami Gounder, (1974) I Mad LJ
H 350 : 87 L W 454 held that failure of defendant No. I in impleading the
RUKMANI AMMAL v. JAGDEESA GOUNDER [THAKKER, J.] 117

plaintiff in previous suit was fatal and the decree passed in favour of defendant A
.
No. l against Annamalai could not bind the plaintiff and hence, auction sale
in favour of defendant No. l could not adversely affect the rights of the
plaintiff, in our opinion, the lower Appellate Court was right in distinguishing
the said case. In that case, suit was instituted by the mortgagee for recovery
of money due under the mortgage and got a decree in his favour. The Court,
therefore, held that when the mortgagor had sold the property to a third party
B
and the mortgagee in the suit did not implead such purchaser as party-
defendant, the decree in favour of the mortgagee would not bind the purchaser
and his right of redemption would not get adversely affected.

In this case, the Small Cause Suit, decree passed therein and execution
proceedings and auction sale did not relate to mortgage dues but an
c
independent transaction and a separate pro-note and recovery of that amount.
In such suit, plaintiff-Jagdesa was neither necessary nor proper party and
non-joinder of Jagdesa was of no consequence. As in execution of money-
decree in that suit, defendant No. l purchased the property with the leave of
the Court, she became the owner of the property and plaintiff-Jagdesa had no D
right to raise an objection against the right of defendant No. I.

Regarding deemed discharge of debt under the Tamil Nadu Debt Relief
Act, it may be stated that as held by us, after 1966, defendant No. I was not
holding the property as mortgagee in possession. On auction-sale in her
favour, she became the owner of the property or in any case, she was claiming E
to be in adverse possession of the suit property. As her possession after 1966
was not as mortgagee in possession, the provisions of the above Act were not
applicable and neither Annamalai nor plaintiff could claim benefit of the said
Act.
F
On all the above grounds, in our opinion, the trial Court as well as the
High Court were in error in passing decree in favour of the plaintiff. The
appeal, therefore, deserves to be allowed and is accordingly allowed. The
decree passed by the trial Court and by the High Court is set aside and the
decree passed by the lower Appellate Court is restored and the suit filed by
the plaintiff is ordered to be dismissed, however, with no order as to costs. G
N.J. Appeal allowed.

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