RUKMINI AMMA & ORS.versusRAJESWARY (DEAD) THROUGH LRS. & ORS.

                    [2013] 5 S.C.R. 579


                  RUKMINI AMMA & ORS.                          A
                              v.
      RAJESWARY (DEAD) THROUGH LRS. & ORS.
         (Civil Appeal Nos. 1475-1476 of 2005)

                      MARCH 22, 2013
                                                               B
      [DR. B.S. CHAUHAN AND FAKKIR MOHAMED
                IBRAHIM KALIFULLA, JJ.]

        Mortgage - ~edemption - Permissibility - Land
  mortgaged - During subsistence of the mortgage, the land C
  sold in auction by Revenue authorities for appropriation of
  agricultural income tax liabilities of the mortgagor - The land
  was purchased by the mortgagee - After about 30 years,
  mortgagor filing suit for redemption - Suit dismissed by trial
  court, but decreed by first appellate court and High Court - D
  On appeal, held: Mortgagor not entitled to redemption - The
. sale of land in auction by Revenue authorities to the
  mortgagee has extinguished the redemption rights of the
  mortgagor - Under the contractual terms of the mortgage
  deeds, there was no obligation on the part of the mortgagee E
  to clear the tax liability of the mortgagor - Obligation of the
  mortgagee to pay Government dues, can only be relatable to
  the dues, arising against the land mortgaged and not against
  the person of the mortgagor - Even under s. 76(c) of the
  Transfer of Property Act, the liabilities contemplated to be F
  cleared by the mortgagee, will not include the Income tax
  liability of an assessee - Transfer of Property Act, 1872 - s.
  76(c) - Trust Act 1882 - s.90.

      Predecessor-in-interest of the respondents created.
 usufructury mortgage in favour of predecessor-in-interest G
 of the appellants, initially in 1958 (Exbt B-1) and then in
 1959 and 1961 (Exbts B-2 and A-1 respectively) for further
 sums. While the mortgage was subsisting, the property

                             579                               H
    580      SUPREME COURT REPORTS              [2013] 5 S.C.R.


A   in question was attached under the Revenue Recovery
    Act for appropriation of agricultural income tax liabilities
    of the mortgagor. The property was sold in public
    auction and the same was purchased by the son of the
    mortgagee, being the highest bidder in the auction.
B
       The mortgagor-respondents, after a lapse of 30 years,
  filed the present suit for redemption of the mortgage. Trial
  Court dismissed the suit. The first appellate court
  decreed the same, holding that the, mortgagee was
C entitled to redeem the property in question because as
  per terms of the mortgage deeds (Exbts A1, B-1 and B~
  2), the liability to pay the revenue dues and other does
  to the Government was on the mortgagee; also in view •
  of s.76(c) of Transfer of Property Act, it was the duty of
  the mortgagee to pay the Government dues towards the
D agricultural income; and also because the revenue sale
  was fraudulently brought out by the mortgagee to defeat
  the right of the mortgagor. The judgment of the first
  appellate court was upheld by the High Court. Hence the
  present appeals.
E
          Allowing the appeals, the Court

         HELD: 1.1. The sale effected under Exhibit 85 to meet
    the agricultural income tax liability of the mortgagor has
F   extinguished the mortgagors' right and consequently the
    suit was liable to be dismissed. [Para 27] [603-D]

      1.2. The levy of income tax on the agricultural income
  would be based on whatever the mortgagor derived from
  the produce of the lands owned by him including the
G mortgaged lands and, therefore, such liability towards
  agricultural income tax cannot be held to be Government
  dues simpliciter in order to fasten the liability on the
  mortgagee. [Para 15] [595-C-D]

          S.S. Rajalinga Raja vs. State of Madras 1967 (1) SCR
H
 RUKMINI AMMA v. RAJESWARY (DEAD) THROUGH 581
                    LRS
950 - relied on.                                                A
    Plakkad Estate (P) Ltd. and Ors. vs. Agricultural Income
Tax Officer and Ors. (1980) 125 ITR 564 (Ker); R.
Vaidyanatha Mudaliar vs. State of Madras (1976) 104 ITR 444
(Mad) - referred to.
                                                                B
       1.3. An Agricultural income tax levied and demanded
  against an assessee can never be held to be a liability
  qua the land but can only be held to be a liability qua the
. land owner or the one who was responsible for the
  cultivation of such lands and the income derived from the     C
  produce so cultivated. [Para 16] [596-H; 597-A-B]

     1.4. The agricultural income tax payable by the
mortgagor cannot be held to be an assessment of tax
made with reference to the extent of land mortgaged by 0
him. What was assessed by way of agricultural income
tax was based on the total agricultural income derived by
the land holder from and out of the entirety of the land
held by him which may also include the lands mortgaged.
It cannot, therefore, be held that merely because, what
was sought to be recovered was Agricultural Income Tax, E
such liability should be held to be linked to the property
mortgaged. [Para 19] [598-G-H; 599-A-B]

     1.5. A clear distinction, therefore, has to be drawn
between a statutory tax liability pertaining to the land F
simpliciter vis-a-vis the land owner and the other liability
by way of income tax to be borne by the same land owner
as an assessee to income tax on the agricultural income
earned by him. Therefore, when it came to the question
of meeting the tax liability of the land owner, such liability G
might have accrued based on the commodity generated
from whatever extent of land held by the land owner
which cannot be spelt out or linked in exactitude to any
particular land, inasmuch as the assessment of such tax
liability is on the total income generated by the assessee H
    582    SUPREME COURT REPORTS              [2013] 5 S.C.R.


A from the overall sale of commodity or produce genera~ed
  from whatever land held and possessed by the assessee.
  The said agricultural income tax payable by the
  mortgagor, as against any statutory due relatable to the
  land in question which is subject matter of mortgage is,
B therefore, clearly distinguishable. [Para 20] [599-C-E]

         1.6. The agreed terms under the mortgage deeds,
    namely, 81, 82 and A1 to the effect that it was the
    obligation of the mortgagee to pay the Government dues,
C   can only be relatable to such of those statutory dues,
    which would have arisen against the land mortgaged, and
    not against the person of the mortgagor. Therefore, the
    emergence of Exhibit 85 sale certificate, based on the
    revenue recovery proceedings, to meet the agricultural
    income tax liability of the mortgagor cannot be held to be
D   a factor for which the entire responsibility can be thrown
    upon the mortgagee. If the mortgaged properties were,
    thus, brought to sale to meet the agricultural income tax
    liability of the mortgagor, it was upon the mortgagor
    himself to have met that liability in order to ensure that
E   the property was kept intact, free from any encumbrance
    even at the hands of the mortgagee. Therefore, the
    purchase made by the son of the mortgagee cannot be
    held to be a fraudulent sale or a deceptive one in the
    absence of any specific allegation to that effect at the
F   instance of the mortgagor. In the plaint, except alleging
    fraud on the mortgagee, by stating that it was a collusive
    sale, there was nothing brought out in evidence either
    oral or documentary to support the said stand. (Para 21]
    (599-G-H; 600-A-D]
G
      The Commissioner of Income-tax, West Bengal, Calcutta
  vs. Raja Benoy Kumar Sahas Roy (1958) SCR 102;
  Commissioner of Income-tax vs. State of U.P. (1965) 3 SCR
  700; Tata Tea Limited vs. State of West Bengal (1988) 3 SCR
H 961; Karimatharuvi Tea Estates Ltd. vs. State of Kera/a and
 RUKMINI AMMA v. RAJESWARY (DEAD) THROUGH 583
                    LRS
Ors. (1963) 1 SCR 823; Anglo American Co. vs. C.A.J. T.      A
(1968) 2 SCR 749 - relied on.
     1.6. Under the contractual terms under Exhibits 9·1,
82 and A1, there was no obligation on the part of the
mortgagee to clear the agricultural_ income tax liability. of 8
the mortgagor. Even going by Section 76(c) of the
Transfer of Property Act it can be visualized that what is
noted as Government dues are charges of a public nature,
rent accruing during the period of possession of the land
in question including arrears, if any, default of which may C
result in bringing the property for sale. Certainly such
liabilities noted and contemplated to be cleared by the
mortgagee cannot and will not include the income tax
liability of an assessee which is purely personal and not
of a public nature. Therefore, Section 76(c) can have
limited application to the specific Government dues of D
public nature as well as those which are referable to the
land and not to the personal statutory dues of the owner
of the land. For the very same reason, Section 90 of the
Indian Trust Act will also have no application. [Para 26]
[602-E•F-H; 603-A-C]                                          E

     2. Some payments made towards either sales tax .or
agricultural income tax by the mortgagee in the years
1957-58 to 1961-62 cannot be held to have estopped the
mortgagees from raising a plea purely based on legal and     F
statutory construction. The First Appellate Court as well
as the High Court failed to appreciate the issue involved
in the proper perspective. [Para 25] [602-C-D]
     3. The, respondents were aware of the sale, prior to
filing of the suit in the year 1993. In Exhibit 88 wbil.e G
replying to the legal notice- issued on behalf of the
mortgagee on 23.01.1971, it was specifically pointed out
that the property was sold in public auction to meet the
agricultural income tax liability of the mortgagor, but yet,
the respondents neither took any steps·to set aside the H
    584      SUPREME COURT REPORTS             [2013] 5 S.C.R.


A said sale in the manner known to law nor was any
  document placed before the Court to show that the said
  statement contained in Exhibit 88 was not true or was not
  known to the respondents earlier. In the above said
  background the factum of the filing of the suit nearly after
B 30 years of the mortgage is very relevant. If really the
  respondents were serious. about the consequences·
  which flowed from the public auction sale or were really
  aggrieved of the sale effected under Exhibit 85, the
  respondents should have been prompt in taking any
c steps for redressal of their grievance in order to save the
  property mortgaged. Having failed to evince any such
  keen interest in protecting their property, it is too late in
  the day for the respondents to have approached the
  Court at their own sweet will (i.e.) after nearly 30 long
0 years of the mortgage and file a simple suit for
  redemption without taking any steps to question a sale
  which was effected by way of public auction and that too
  by invoking the provisions of the Revenue Recovery Act
  which sale once effected would enure to the benefits of
E the purchaser free from all encumbrance as provided in
  Section 44 of the Travancore Revenue Recovery Act,
  1951 which was the relevant statute applicable at that
  point of time. [Paras 22 and 23] [600-E-H; 601-A-D]

        Mritunjoy Pani and Anr. vs. Narmada Bala Sasmal and
F   Anr. 1962 (1) SCR 290; Namdev Shripati Nale vs. Bapu
    Ganapati Jagtap and Anr. (1997) 5 SCC 185: 1997 (2)
    SCR 980; M.R. Satwaji Rao (Dead) by LRs. vs. B. Shama
    Rao (Deaf}) by LRs. and Ors. (2008) 5 SCC 124: 2008 (6)
    SCR 90 - referred to.
G
                        Case law Reference
          1967 (1) SCR 950      relied on           Para 14
          1962 (1) SCR 290      referred to         Para 9
H         1997 {2) $CR 980      referred to         Para 9
RUKMINI AMMA v. RAJESWARY (DEAD) THROUGH 585
                   LRS

    2008 (6) SCR 90                 referred to        Para 9         A

    (1976) •104 ITR 444 (Mad) referred to              Para 15
    (1980) 125 ITR 564 (Ker)        referred to        Para 16
    (1958) SCR 102                  relied on          Para 24        B
    (1965) 3 SCR 700                relied on          Para 24
    (1965) 3 SCR 700                relied on          Para 24

    (1988) 3 SCR 961                relied on          Para 24
                                                                      c
    (1963) 1 SCR 823                relied on          Para 24
    (1968) 2 SCR 749                relied on          Para 24

    CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.
1475-1476 of 2005.                                                    D

    From the J4Pgments & Orders dated 07.08.2002 of the
High Court of Kerala at Ernakulam in CMA No. 91 of 2002 and
order dated 10.12.2002 in Review Petition No. 746 of 2002 in
CMA No. 91 of 2002.
                                                                      E
    K.V. Viswanathan, B. Raghunath, T. Sakthikumaran, K.V.
Vijay~kumar for the Appellants.

     Santosh Paul, Ashu Gupta, M.J. Paul, R. Nedumaran for
the Respondents.                                                      F

     The Judgment of the Court was delivered by

      FAKKIR MOHAMED IBRAHIM KALIFULLA, J. 1. The
defendants are the appellants. The challenge is to the judgment
of the High Court of Kera la at Ernakulam dated 10.12.2002            G
passed in R.P. 746/2002 in C.M.A.91/2002. The respondents
No~ 1 to 7 are the legal heirs of one Varadaraja Naicker. The
said Varadaraja Naicker created ~ usufructury mortgage
relating to plaint scheduled properties in favour of predecessor-
in-interest of the appellants initially for a sum of Rs.10,000/- on   H
   586      SUPREME COURT REPORTS                   [2013] 5 S.C.R.


A 17 .11.1958. The suit properties were mortgaged for a further
   sum of Rs.6000/- with the same mortgagee on 29.10.1959.
   Again on 08.02.1961 an additional mortgage was executed in
   respect of the suit scheduled properties for a further sum of
   Rs.5000/-. While the mortgage was subsisting, for the recovery
B of arrears of income tax payable by the mortgagor Mr.
   Varadaraja Naicker, the suit scheduled properties were
   attached under the Revenue Recov~ry Act. After following the
   due process, the property was sold in public auction and the
   son of mortgagee by name P. Duraisingam made a highest bid
C in the auction, pursuant to which he made the payment and the
   sale deed Exhibit 85 dated 04.12.1964 came to be executed
   in his favour. Thus, P. Duraisingam became the owner of the
   suit property vide sale deed No.179 dated 04.12.1964. The
   arrears of agricultural income tax was in a sum of Rs.2722.99.
D· The highest bid amount of P. Duraisingam was Rs.2820/-. After
   a lapse of more than 30 years, after the mortgage, the
   successor-in-interest of the mortgagor, namely, respondent
   Nos.1 to 7 filed the suit in the year 1993 in O.S. No.289/93 on
   the file of the Sub-Court, Thodupuzha. The suit was for
E redemption of the mortgage and the suit scheduled properties
   by directing the defendants to put the plaintiffs in possession
   on receiving the mortgage amount. The other prayers were for
   direction to the defendants to surrender the mortgage deeds
   and execute necessary conveyances or other documents to
F dispel the cloud on defendants' title to the suit property.

       2. The suit was resisted at the instance of the appellants,
  inter alia, contending that the suit was barred by limitation, hit
  by Order II Rule 2, Code of Civil Procedure (in short 'CPG') by
  virtue of an earlier suit filed by the mortgagor, that the mortgagor
G lost possession of B and C scheduled properties as early as
  in the year 1964 pursuant to revenue recovery proceedings for
  appropriation of agricultural income tax liabilities of the
  mortgagor and hence there was no right in the plaintiffs to seek
  for redemption. It was further contended that since B and C
H scheduled properties were sold in public auction towards
RUKMINI AMMA v. RAJESWARY (DEAD) THROUGH 587
LRS [FAKKIR MOHAMED 18RAHIM KALIFULLA, J.]
agricultural income tax arrears of the mortgagor by way of A
revenue recovery proceedings, the mortgagee suffered a loss
of income which the plaintiffs were liable to compensate.

      3. The Trial Court framed as many as seven issues for
consideration, which included maintainability of the suit, question   8
of limitation and impediment under Order II Rule 2 CPC. The
vital issues were issue Nos.4, 5 and 6 which read as under:

     "(4) Whether the defendants have effected any
     improvements in the mortgaged properties, if so what is
     the quantum?                                                     C

     (5) Whether the plaintiffs have lost their rights or
     redemption of plaint 8 and C schedule properties by virtue
     of the revenue sale?

     (6) Whether the defendants are entitled to claim tax and         D
     levies allegedly paid by them?"

      4. In the suit Exhibits A 1 and A 1(a), certified copy of the
mortgage deed No.86/1961 and its translation, were filed while
on behalf of the defendants as many as 52 documents were E
marked. One V. Sethuram was examined as P.W.1 and one
R. Rajasekharan was examined as D.W.1. The Trial Court by
relying upon Exhibit 85, the sale certificate, issued in favour of
Duraisingam by the Sub-Collector, Devicolum dated
04.12.1964, as well as, Exhibit 86, issued notice to the F
mortgagee at the instance of the plaintiffs and Exhibit 88, copy
of the reply notice issued on behalf of the mortgagee to the
plaintiffs, held, in its judgment dated 26.11.1997, that the
mortgagor(s) rights got extinguished by Exhibit 85 revenue sale.
The Trial Court, however, held that the suit was not barred by G
limitation and was also not hit by Order II Rule 2 CPC. Ultimately,
the Trial Court held that in view of its findings on issue No.5,
namely, that mortgagors right got extinguished by Exhibit 85,
nothing survive on issue Nos.4 and 6 which related to the
question as to whether any improvements made by the H
    588      SUPREME COURT REPORTS                    [2013) 5 S.C.R.


A   mortgagee and their entitlement to claim tax and levies allegedly
    paid by them. The Trial Court, ultimately, concluded that the
    plaintiffs were not entitled to get the decree as prayed for.

         5. The plaintiffs took it upon in appeal vide A.S. No.25/98
    before the District Judge, Thodupuzha. The First Appellate
8
    Court also dealt with the issues on limitation, Order II Rule 2
    CPC and the vital issue, namely, whether the plaintiffs lost their
    right of redemption of the plaint 8 and C scheduled properties
    by virtue of the revenue sale. The First Appellate Court after
C   noticing Exhibit 85, sale certificate, which disclosed the
    purchase of the suit scheduled property by the son· of the
    mortgagee and after analyzing the oral evidence of P .W .1
    wherein it was alleged that the revenue sale was a fraudulent
    one as pleaded in the plaint, held, in its judgment dated
    21.12.2001, that as per the terms of Exhibits A1, 81 and 82,
D   the liability to pay the revenue dues and other dues to the
    Government was on the mortgagee in the absence of any other
    contract to the contrary. It was also held that by virtue of Section
    76(c) of the Transfer of Property Act, it was the responsibility
    of the mortgagee to have paid the Government dues to the
E   agricultural income tax and saved the property from public
    auction sale. The First Appellate Court, ultimately, concluded
    that the revenue sale was fraudulently brought out by the
    mortgagee to defeat the rights of the plaintiffs and consequently
    the rights of the plaintiffs to redeem ,8 and C scheduled
F   properties cannot be defeated. The First Appellate Court
    consequently allowed the appeal, set aside the judgment and
    decree of the Trial Court and decreed the suit. The suit was
    remanded back to the Trial Court for passing a preliminary
    decree for redemption in accordance with law with a further
G   direction to the parties to appear before the Court on
    21.01.2002.

        6. As against the above order of remand by the First
    Appellate Court the appellants herein preferred C.M.A. No.91/
    2002. The High Court by its judgment dated 07.08.2002
H
RUKMINI AMMA v. RAJESWARY (DEAD) THROUGH 589
LRS [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]

dismissed the same. Thereafter, the appellants preferred         A
Review Petition No.746/2002 in C.M.A. No.91/2002 which
came to be dismissed again by the High Court by its order
dated 10.12.2002.

    7. We heard Mr. K.V. Viswanathan, learned Senior
                                                                 8
Counsel for the Appellants and Mr. Santosh Paul, learned
counsel for the Respondents.

     8. The learned senior counsel mainly concentrated on the
merits of the suit prayer for redemption and was not keen on
the issues relating to limitation or the one raised under Order II C
Rule 2 CPC. Even, in the impugned judgments, both passed
in the main appeal as well as in the review petition, we do not
find any submission made on the issue of limitation, as well as,
on Order II Rule 2 CPC. Therefore, the only question to be
examined is as to whether the suit prayer for redemption as D
propounded by the Respondents and their predecessors is
valid in law. Learned senior counsel in his submissions
contended that the present suit came to be filed after 30 years
of the mortgage which disclose that on behalf of the mortgagee
a feeble attempt was made for redemption of the suit B and C E
scheduled properties when the property was already brought
to sale as early as in the year 1964 for the satisfaction of
agricultural income tax dues payable by the mortgagor which
was his personal liability. The learned Senior Counsel in
support of the above submission contended that the sale took F
place on 04.12.1964 which was never challenged by the
respondents either immediately after the sale or till this date
and, therefore, the consequences which flowed from such sale
which occurred by way of revenue recovery proceedings
extinguished the rights of the respondents vis-a-vis the suit G
scheduled property. In support of the said submission, learned
senior counsel relied upon the decision of this Court in S.S.
Rajalinga Raja Vs. State of Madras - 1967 (1) SCR 950.
According to learned senior counsel Section 76(C) of the
Transfer of Property Act and Section 90 of the Trust Act have
                                                                   H
     590     SUPREME COURT REPORTS                  [2013) 5 S.C.R.


A no application to the case on hand. Learned senior counsel also
  relied upon Section 44 of the Revenue Recovery Act which
  specified that once the sale is effected by way of revenue
  recovery proceedings such sale would entitle the purchaser to
  own the property free from all encumbrances. The learned
B senior counsel; therefore, contended that the judgment of the
  Trial Court in having held that the revenue sale brought about
  under Exhibit BS extinguished whatever right possessed by the
  mortgagor vis-a-vis the mortgaged property was well justified.
  The learned senior counsel, therefore, contended that the order
c of the First Appellate Court and the confirmation of the same
  by the High Court in the main appeal as well as in the review
  petition are liable to be set aside.

           9. As against the above submissions, Mr. Santosh Paul,
     learned counsel for the contesting respondents/mortgagor
D    contended that admittedly as per the mortgage deeds, namely,
     the one dated 17.11.1958, 29.10.1959 and 08.02.1961 there
     was a clear stipulation to the_effect that the mortgagee is bound
     to meet all State dues which would include payment of
     agricultural income tax payable by the mortgagor. The learned
E    counsel, therefore, contended that by virtue of the contractual
     terms agreed between the mortgagor and mortgagee it was
     the responsibility of the mortgagee to have cle~d the dues
     towards agricultural income tax and saved the p~erty from
     any public auction by way of sale towards Governme'nt-f ues
F    and, therefore, the plea of the appellants in attempting to take
     umbrage under the decision of this Court as well as Section
     44 of the Revenue Recovery Act cannot be countenanced. The
     learned counsel further contended that even as per Exhibit 88,
     the appellants themselves admitted to have paid sales tax dues
,G   as well as on one occasion agricultural income tax to the tune
     of Rs.502.25 for the period 1956-57 to 1959-60 and, therefore,
     the appellants cannot now be permitted to turn around and state
     that it was not the responsibility of the mortgagee to have
     cleared the State dues. The reamed counsel further contended
H    that the mortgagee having understood the terms of the mortgage
RUKMINI AMMA Ii. RAJESWARY (DEAD) THROUGH 591
LRS [FAKKIR MOHAMED 18RAHIM KALIFULLA, J.]
agreement and acted upon the same, failed in his duty in not A
clearing the agricultural dues and thereby fraudulently brought
the property for sale in public auction. The learned counsel
pointed out that the purchase made in ttie public auction by the
son of the mortgagee whose successor-in-interest are the
appellants in this Court sufficiently demonstrated that the 8
mortgagee fraudulently brought the property for sale by allowing
his son to raise a bid for a sum which was more or less equal
to the sum due by way of agricultural income tax. In such
circumstances, according to learned counsel, since the sale
under Exhibit 85 was maneuvered by the appellants themselves c
there was total lack of bone fide in their stand and, therefore,
the redemption prayed for by the respondents, as granted by
the First Appellate Court and confirmed by the High Court, does
not call for interference. Learned counsel placed reliance upon
Mritunjoy Pani and another Vs. Narmada Bala Sasmal and D
another-1962 (1) SCR 290, Namdev Shripati Nale Vs. Bapu
 Ganapati Jagtap and another - (1997) 5 sec 185 and M.R.
Satwaji Rao (Dead) by LRs. Vs. B. Shama Rao (Dead) by
LRs. and ,others - (2008) 5 SCC 124 in support of his
submissions.
                                                                   E
      10. Having heard learned counsel for the respective
 parties and having bestowed our serious consideration to the
judgments of the Trial Court, the First Appellate Court as well
 as the orders impugned in these appeals, we find that,·as rightly
 contended by learned senior counsel for the appellants, the sole F
 question that arise for consideration in these appeals is whether
 the sale of the suit scheduled property covered by Exhibit 85
 through revenue recovery proceedings for recovery of
 agricultural income tax extinguished the rights of the mortgagor.
     11. In order to appreciate the point raised in these appeals   G
the relevant facts which are required to be noted are, the terms
of the mortgage deeds, namely, Exhibit 81dated17.11.1958,
Exhibit 82 dated 29.10.1959 and ExhibitA1dated08.02.1961.
In all the three documents it is specifically stated "pay the
                                                                    H
    592      SUPREME COURT REPORTS                  [2013] 5 S.C.R.


A Government kist". Such condition was imposed on the
  mortgagee which was also accepted by the mortgagee. The'
  other relevant document would be Exhibit 88 reply to the legal
  notice issued on behalf of the mortgagee dated 23.01.1971
  wherein it was tacitly admitted that when the property was Jn
9 the possession of the mortgagor he was liable to pay sales tax
  and agricultural tax dues to the Government for that period and
  that in order to avoid sale of the property the mortgagor made
  such payments in a sum of Rs.388.26 by way of sales tax for
  1958-59, Rs.560.25 as sales tax for 1957-58, Rs.903.97 as tax
c dues for 1959-60-1961-62 apart from a sum of Rs.502.25
  towards agricultural income tax due for the period 1956-57-
  1959-60. It was also mentioned therein that in all a sum of
  Rs.2254. 73 was paid on that account by the mortgagee and
  that a suit was also filed in Devicolum Munsif Court for recovery
  of the said sum. It was, however, stated that the said suit was
D dismissed on the footing that the question of payment of those
  amounts would arise at the time of redemption. Exhibit 88 also
  disclose that the subsequent sale effected for the recovery of
  agricultural income tax though was known to the mortgagor, he
  failed to take any steps to avoid the sale and in the
E circumstances the mortgagee cannot be held responsible for
  the sale effected under Exhibit 85. The other relevant document
  is Exhibit 85, the sale certificate, dated 04.12.1964 issued by
  the Sub-Collector, Devicolum in favour of Duraisingam son of
  mortgagee himself for recovery of the agricultural income tax
F which the mortgagor failed to pay.

        12. When we examine the pleadings of the parties, in the
  plaint averments, it was pleaded on behalf of the appellants that
  all the mortgage deeds specifically mandated the mortgagee
G to pay all taxes and other levies to the State, that in spite of the
  said obligation cast upon the mortgagee he deliberately
  committed default in paying the tax and brought the 8 and C
  scheduled properties for revenue sale and thereby failed to
  keep the mortgaged property intact. It was further pleaded that
H the property was brought to sale by the mortgagee fraudulently
RUKMINI AMMA v. RAJESWARY (DEAD) THROUGH 593
LRS [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]
and deceptht~ly behind the back of the mortgagor and the fact      A
that in the revenue sale the property was purchased bythe son
of the mortgagee for-a- paltry sum of Rs.2820/- supported the
above stand of the Appellants.

     13. The further contention was that the mortgagee being
                                                                   8
in the position of the trustee any title obtained by fraud or
collusion by committing breach of trust cannot be permitted to
set up any claim against the mortgagor or their successors.
While filing the suits, the Respondents' claimed to have
deposited the mortgage amount of Rs.25,000/- and pleaded
for redemption. On behalf of the appellants while refuting the     C
allegation of fraudulent or deceptive sale of the mortgage
property, it was contended that the payment of agricultural
income tax had no direct link to the property mortgaged by way
of Government dues and, therefore, the sale effected under the
Revenue Recovery Act and the purchase made by the son of           D
the mortgagee cannot be held to be a fraudulent sale, much
less a sale behind the back of the mortgagor. In other words,
according to the appellants the sale and purchase was effected
independently and it· had nothing to do with the privity of the
contract between the mortgagor and mortgagee under Exhibits        E
81, 82 and A1.

      14. Keeping the above stand of the respective parties in
mind, in order to appreciate the legal question raised before
us, it will be appropriate to make a reference to the Full Bench
                                                                   F
Decision of this Court in Rajalinga Raja (supra). That was also
a case where interpretation of Section 3 of the Madras
Plantations Agricultural Income Tax, 1955 came up for
consideration. Though, the interpretation came to be made
under a different circumstance which pertains to the expression
'agricultural income', we feel that the interpretation placed by   G
this Court on the said expression can be usefully referred to
for deciding the issues involved in these appeals. At pages
952-953 the proposition has been set out as under:

                                                                   H
    594      SUPREME COURT REPORTS                   (2013] 5 S.C.R.


A         "Prima facie, s. 3 of the Act read with the definition of
          'agricultural income' charges to tax the monetary return
          either as rent or revenue or agricultural produce from the
          plantation. The expression "income" in its normal
          connotation does not mean mere production or receipt of
B         a commodity which may be converted into money. Income
          arises when the commodity is disposed of by sale.
          consumption or use in the manufacture or other processes
          carried on by the assessee qua that commodity. There is
          no reason to think that the expression "income" in the Act
          has any other connotation. A tax on income whether
c         agricultural or non-agricultural is. unless the Act provides
          otherwise. a tax on monetary return - actual or notional.
          Section 4 of the Act supports that view, for in the total
          agricultural income is comprised all agricultural income
          derived from a plantation in the State. It is not necessary, ·
D         however, for income to accrue that there must be a sale
          of a commodity: consumption or use of a commodity in the
          business of the assessee from which the assessee obtains
          benefit of the commodity may be deemed to give rise to
          income. Therefore, merely because the produce of his
E         plantation was received in the earlier years, assuming that
          the appellant's case is true, income derived from sale of
          that produce in the year of account is not exempt from tax
          under the Act, in that year."

F                                                 (Emphasis added}

         The crucial set of expressions stated therein that "a tax on
    income whether agricultural or non-agricultural is, unless the Act
    provides otherwise, a tax on monetary return - actual or
    notional" are more relevant.
G
        15. We can also make a useful reference to a Division
    Bench decision of the Madras High Court in R. Vaidyanatha
    Mudaliar Vs. State of Madras - (1976) 104 ITR 444 (Mad}
    which has followed the above decision of this Court. Paragraph
H
 RUKMINI AMMA v. RAJESWARY (DEAD) THROUGH 595
 LRS [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]
17 will throw some light on this issue which reads as under:          A

     "17. It is, therefore, clear that "agricultural income" arises
     not necessarily by any supervening trading or commercial
     activity or mechanical process, but by the factum of
     production, receipt and derivation of the produce from the
                                                                      8
     land."

                                              (Emphasis added)

     The conclusion that agricultural income is derived from the
produce of the land in our opinion can be the only outcome in         c
respect of an income that a land owner can earn from the lands
owned by him. Applying the said principle to the case on hand,
we can conclude that the levy of income tax on the agricultural
income would be based on whatever the mortgagor derived
from the produce of the lands owned by him including the              D
mortgaged lands and, therefore, such liability towards
agricultural income tax can by no stretch of imagination be held
to be Government dues simpliciter in order to fasten the liability
on the mortgagee.

     16. In yet another decision of the Kerala High Court in          E
Plakkad Estate (P) Ltd. and Ors. Vs. Agricultural Income Tax
Officer and Ors. - (1980) 125 ITR 564 (Ker), a Single Judge
after referring to the principle set out in Rajalinga Raja (supra),
while dealing with a converse situation held as under in
paragraphs 20 and 21:                                                 F

     "20. The agricultural produce derived or received by a
     mortgagee in possession from the mortgaged lands,
     therefore, becomes chargeable to tax under the Act only
     in the event of the mortgagee, who admittedly obtains the        G
     same, sells, consumes or uses it. Over none of these acts
     the mortgagor has any control. He may not even know of
     the quantum of produce obtained by the mortgagee so that
     he cannot include it in his return with any amount of
     certainty. For the sin of being compelled to borrow money
                                                                      H
    596       SUPREME COURT REPORTS                  [2013] 5 S.C.R.


A         by furnishing possessory-landed-security, he is visited with
          the punishment of being taxed unlike others, on the
          agricultural income derived or received by another; an
          income, as regards the derivation or receipt of which he
          has no control and as regards the quantum whereof he is
B         not in a position to ascertain .....

          21. What Section 4(2) says is that agricultural income
          derived from the land in the possession of the mortgagee
          shall be deemed to be the agricultural income received by
          the mortgagor. This means that even where bare
c         agricultural lands wherefrom no agricultural income is
          derived have been possessorily mortgaged and the
          mortgagee makes improvements thereon or raises other
          crops on such land and thereby earns agricultural income,
          he need not pay agricultural Income Taxjn respect of such
D         income, and the mortgagor who does not earn any such
          income from the lands is liable to pay such tax. Section 4(2)
          puts the creditor in an advantageous position by providing
          that his debtor shall pay the agricultural Income Tax which
          normally and but for that provision is payable by the former.
E         There is no rationale to support this discriminatory
          treatment of the debtor."

        The conclusion is, -therefore, inescapable that while the
  lands are in the possession of a mortgagee and thereby liable
F to pay the Government dues when it comes to the question of
  payment of agricultural income tax it cannot be held that such
  liability would come within the expression 'Government dues'
  in as much as such tax liability is not qua the land mortgaged
  but qua the owner of the land who was benefited by the produce
  of such lands which alone falls within the definition of
G 'Agricultural Income'. Let us visualize a situation where there
  was no yield from the land in question, though a land tax or other
  local levies may be payable for the mere possession of the land,
  there would be no scope for levy of any income tax. If the said
  situation is understood, it can be held that agricultural income
H
 RUKMINI AMMA v. RAJESWARY (DEAD) THROUGH 597
 LRS [FAKKIR MOHAMED 18RAHIM KALIFULLA, J.]
tax levied and demanded against an assessee can never be             A
held to be a liability qua the land but can only be held to be a
liability qua the land owner or the one who was responsible for
the cultivation of such lands and the income derived from the
produce so cultivated.
                                                                     8
    17. Keeping the above principle in mind when we examine
the points raised in these appeals, the question for
consideration would be whether the sale of the property by way
of public auction by invoking the provisions of the Revenue
Recovery Act for the dues towards agricultural income tax
payable by the mortgagor can be held to have attracted Section       C
76(c) of the Transfer of Property Act and thereby put the
mortgagee to peril. It is true that the deed of mortgage covered
by Exhibits 81, 82 and A 1 specifically stipulated that it was the
responsibility of the mortgagee to meet all Government dues.
That part of the stipulation contained in the mortgage deed,         D
covered by Exhibit 81, states:

     " ...... and also for the maintenances.of the minors received
     a cash of Rs.10,000/- from you today and vou can enjoy
     the scheduled mentioned propertv up to the stipulated           E
     period and pay the Government Kist.. .. ."

     In Exhibit 82 it is stated:

     " ...... In case if any encumbrance i$ renewal my other
     properties will be the guarantee yo·u have to pay the           F
     Government kist as before."           ·

     In Exhibit A 1 it is stated

     "I have let the property as further mortgage the possession
     in your enjoyment and you can enjoy the same as before          G
     and you may pay the government kist."

                                              (Emphasis added)

     18; What is to be found out is what was specifically agreed     H
    598     SUPREME COURT REPORTS                 [2013] 5 S.C.R.

A by the mortgagee to meet by way of Government dues. Can it
  be said to be whatever dues that may arise at the instance of
  the Government as against the mortgagor whether it related to
  property mortgaged or on any other account. To find an answer
  to the above relevant question, the set of expressions "you can
B enjoy the scheduled mentioned property upto the stipulated
  period" and preceding the expression "pay the Government
  kisr would be more relevant. With that view when we read the
  above extracted part of the terms contained in the documents,
  namely, B1, B2 and A 1 it is relevant to note that when the
C mortgagee was given rights to enjoy the scheduled mentioned
  property up to the stipulated period, it would be equally
  responsible for him to meet whatever Government dues that
  may arise with p~rticular reference to the property mortgaged
  and when that property would be under his control and
D enjoyment We are of the considered view that, that can be the
  only way to understand, explain and interpret, the said part of
  the terms contained in the mortgage deed.

       19. Once, we are able to reach the above conclusion with
  particular reference to the terms contained in the mortgage
E deeds the other question that falls for our consideration would
  be whether the agricultural income tax payable by the mortgagor
  can be held to be part of Government dues relatable to the
  properties mortgaged which would have mandated the
  mortgagee to have cleared such dues by virtue of the above
F referred to agreed terms. In this respect, we find that the ratio
  laid down by this Court in Raja/inga Raja (supra) assumes
  significance. As held in the said decision a tax on income 1
  whether agricultural or non-agricultural is unless otherwise
  stipulated in the Act itself will be a tax on monitory return whether
G actual or notional. To be more explicit, it is relevant to state that
  agricultural income tax payable by the mortgagor cannot be held '
  to be an assessment of tax made with reference to the extent
  of land mortgaged by him. What was assessed by way of
  agricultural income tax was based on the total agricultural
H income derived by the land holder- from and out of the entirety
                                                                      ·'
RUKMINI AMMA v. RAJESWARY (DEAD) THROUGH 599
LRS [FAKKIR MOHAMED 18RAHIM KALIFULLA, J.]
of the land held by him which may also include the lands            A
mortgaged. It cannot, therefore, be held that merely because,
what was sought to be recovered was Agricultural Income Tax,
such liability should be held to be linked to the property
mortgaged.
                                                                      8
      20. It can also be explained by stating that while the
agricultural income tax would be relatable to the assessee as
owner of the land and from the income derived from the
commodity or produce of the land owned by him, that by itself
cannot be a circumstance to hold that the such tax should be
held to be part of Government dues attributable to simple C
holding of such lands either by way of land tax or such other
similar statutory liabilities on the land mortgaged. A clear
distinction, therefore, has to be drawn between a statutory tax
liability pertaining to the land simpliciter vis-a-vis the land owner
and the other liability by way of income tax to be borne by the D
same land owner as an assessee to income tax on the
agricultural income earned by him. Therefore, when it came to
the question of meeting the tax liability of the land owner such
liability might have accrued based on the commodity generated
from whatever extent of land held by the land owner which cannot E
be spelt out or linked in exactitude to any particular land,
inasmuch as the assessment of such tax liability is on the total
income generated by the assessee from the overall sale of
commodity or produce generated from whatever land held and
possessed by the assessee. The said agricultural income tax F
payable by the mortgagor, as against any statutory due
relatable to the land in question which is subject matter of
mortgage is, therefore, clearly distinguishable.

     21. It is relevant to note that the agreed terms under the
mortgage deeds, namely, 81, 82 and A1 to the effect it is the        G
obligation of the mortgagee to pay the Government dues, can
only be relatable to such of those statutory dues which would
have arisen against the land mortgaged and not against the
person of the mortgagor. Having regard to the above
                                                                     H
    600      SUPREME COURT REPORTS                  [2013) S S.C.R.


A conclusions of ours we find force in the submission of the
   learned senior counsel for the appellants that the emergence
 · of Exhibit BS sale certificate dated 04.12.1964 based on the
   revenue recovery proceedings to meet the agricultural income
   tax liability of the mortgagor cannot be held to be a factor for
B which the entire responsibility can be thrown upon the
   mortgagee. If the mortgaged properties were, thus, brought to
   sale to meet the agricultural income tax liability of the mortgagor
   it was upon the mortgagor himself to have met that liability in
   order to ensure that the property was kept intact free from any
C encumbrance even at the hands of the mortgagee. Therefore,
   the purchase made by the son of the mortgagee cannot be held
   to be a fraudulent sale or a deceptive one in the absence of
   any specific allegation to that effect at the instance of the
   mortgagor. To our dismay in the plaint except alleging fraud on
   the mortgagee by stating that it was a collusive sale there was
D nothing brought out in evidence either oral or documentary to
   support the said stand.

        22. In this context the stand of the appellants that no steps
  were ever taken on behalf of the respondents to challenge the
E revenue sale covered by Exhibit BS assumes significance. It is
  not, as if the, respondents were not aware of the sale prior to
  filing of the suit in the year 1993. In Exhibit BS while replying to
  the legal notice issued on behalf of the mortgagee on
  23.01.1971 it was specifically pointed out that the property was
F sold in public auction to meet the agricultural income tax liability
  of the mortgagor, but yet, the respondents neither took any
  steps to set aside the said sale in the manner known to law nor
  was any document placed before the Court to show that the said
  statement contained in Exhibit BS was not true or was not
G known to the respondents earlier.

         23. In the above said background the factum of the filing
    of the suit nearly after 30 years of the mortgage was very
    relevant. If really the respondents were serious about the
    consequences which flowed from the public auction sale or
H
 RUKMINI AMMA v. RAJESWARY (DEAD) THROUGH 601
 LRS [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]
were really aggrieved of the sale effected under Exhibit 85, the A
respondents should have been prompt in taking any steps for
redressal of their grievance in order to save the property
mortgaged. Having failed to evince any such keen interest in
protecting their property, it is too late in the day for the
respondents to have approached the Court at their own sweet 8
will (i.e.) after nearly 30 long years of the mortgage and file a
simple suit for redemption without taking any steps to question
a sale which was effected by way of public auction and that too
by invoking the provisions of the Revenue Recovery Act which
sale once effected would enure to the benefits of the purchaser c
free from all encumbrance as provided in Section 44 of the
Travancore Revenue Recovery Act, 1951 which was the
relevant statute applicable at that point of time. In the light of
our above conclusions, we do not find any scope to apply any
of the decisions relied upon by learned counsel for the D
respondents.

     24. In the various decisions relied upon by the learned
counsel for the respondents 1 to 7 reported in The
Commissioner of Income-tax, West Bengal, Calcutta Vs. Raja
Benoy Kumar Sahas Roy- (1958) SCR 102, Commissioner E
of Income-tax Vs. State of U.P. - (1965) 3 SCR 700, Tata Tea
Limited Vs. State of West Bengal - (1988) 3 SCR 961,
Karimatharuvi Tea Estates Ltd. Vs. State of Kera/a & Ors. -
(1963) 1 SCR 823, Anglo American Co. Vs. C.A.I. T. - (1968)
2 SCR 749, the common principle stated was that agricultural F
income must necessarily be derived from the land. No one can
dispute the said principle when it comes to the question of
ascertaining the income earned by an assessee based on the
agricultural operations by way of cultivation, etc., on the land
possessed or owned by such assessee. But when it comes to G
the question of meeting the liability on such agricultural income
by way of agricultural Income Tax, can it be said that such
liability would simply fall within the expression 'Government
dues' or the person~ liability of the person who had the
advantage of earning such agricultural income by selling away H
     602      SUPREME COURT REPORTS                 [2013] 5 S.C.R.

 A the produce derived from such land. The definite answer to the
   question can only be that such liability cannot be brought within
   the expression of 'Government dues' simpliciter but the
   exclusive liability of the person who derived such income. We,
   therefore, find that the decisions relied upon by the respondents
 B No.1 to 7 rather than supporting their stand fully supports our
   conclusion.

        25. Since, the above conclusions of ours are drawn based
   on pure interpretation of statutory construction, it is relevant to
 C hold that some paymerits made towards either sales tax or
   agricultural income tax by the mortgagee in the years 1957-58
   to 1961-62 cannot be held to have estopped the appellants
   from raising a plea purely based on legal and statutory
   construction. In the light of our above conclusions, we are
   convinced that the First Appellate Court as well as the High
 D Court miserably failed to appreciate the issue involved in the
   prope~. perspective.

         26. As far as the contention made on behalf of the
    respondents-plaintiffs based on Section 76(c) of the Transfer
  E of Property Act in the light of our conclusion to the effect that
    under the contractual terms under Exhibits B1, B2 and A 1, we
    hold that there was no obligation on the part of the mortgagee
    to clear the agricultural income tax liability of the mortgagor.
    Relevant part of Section 76(c) needs extraction which reads as
. F under:

           "he must, in the absence of a contract to the contrary, out
           of the income of the property, pay the Government revenue,
           all other charges of a public nature and all rent accruing .
           due in respect thereof during such possession, and any
 G         arrears of rent in default of payment of which the property
                         .
           may be summarily sold;"

         Even going by Section 76(c) of the Transfer of Property
   Act it can b~ easily visualized that what is noted as Government
 H dues are charges of a public nature, rent accruing during the
RUKMINI AMMA v. RAJESWARY (DEAD) THROUGH                    603
LRS [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]
period of possession of the land in question including arrears,     A
if any, default of which may result in bringing the property for
sale. Certainly such liabilities noted and contemplated to be
cleared by the mortgagee cannot and will not include the
income tax liability of an assessee which is purely personal and
not of a public nature. Therefore, Section 76(c) can have limited   B
application to 'the specific Government dues of public nature
as well as those which are referable to the land and not to the
personal statrutory dues of the owner of the land. For the very
same reason and for the reasons which we have elaborately
stated in the earlier paragraphs, Section 90 of the Indian Trust    c
Act will also' have no application.

     27. WEi, therefore, conclude that the sale effected under
Exhibit 85 to meet the agricultural income tax liability of the
mortgagor has extinguished the mortgagors right and
consequently the suit was liable to be dismissed. We, therefore,    D
while setting aside the judgments and orders impugned in these
appeals as well as that of the First Appellate Court, restore the
judgment of the Trial Court. Appeals stand allowed. No costs.

K.K.T.                                        Appeals allowed.