TMI Blog1981 (12) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... er. Issue No. (7) raised the question of adverse possession and limitation. The court held in favour of the plaintiff on issue No. (3). On issue No. (7), the finding was that Parameswaran Nair's possession was permissive and not adverse to the owners of the A Schedule properties. Following the observations in Madhava Pillai v. Sankararu (1950 Ker LT 356) that a mortgagee was bound to deliver up the property after satisfaction of the mortgage debt, as his position was that of a trustee for the owner, the trial Court said:-- .....the possession of Parameswaran Nair, and the defendants under him, after Ext. D-2 is in trust for the owner of the equity of redemption ..... A decree was therefore passed for recovery of the A Schedule property with mesne profits from the date of deposit of value of improvements. 3. The question thereafter arose whether the liability to pay mesne profits in accordance with the decree was a liability exempted from the definition of 'debt' in the Kerala Debt Relief Act, 17 of 1977. Section 2(3) of the Act defines 'debt' as any liability in cash or kind incurred by a debtor, whether payable under a contract, or under a decree or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts Act, 1882 defines trust as an obligation annexed to the ownership of property, and arising out of confidence reposed in and accepted by the owner or declared and accepted by him, for the benefit of another, or of another and the owner. The word trust in its popular sense is often employed to connote duties, relationships and responsibilities in all cases where confidence is reposed; but in law 'trust' is a right, enforceable in equity, to the beneficial enjoyment of property the legal title to which is vested in another. It arises from the relationship between two persons by virtue of which one of them holds property for the benefit of the other. It imposes an obligation on the trustee i.e. the person who has control over the property, to deal with it for the benefit of another called the beneficiary. A trustee is a person holding the legal title to property under an express or implied agreement to apply it and the income arising from it to the use and for the benefit of another person. The definition in Section 3 conceives of:-- (i) a person in whom the legal ownership of property vests: (ii) an obligation on the part of such owner, annexed to such ownership, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his position as a mortgagee and that the advantage is in derogation of the rights of others interested in the property. As Leach. C. J. pointed out in Jagannath v. Sri-pathi Babu (AIR 1945 Mad 297), a mortgagee in possession is not a trustee in the strict sense of the term, but he holds a fiduciary character in certain respects, as in cases governed by Sections 90 and 95 of the Trusts Act. 8. Turning to the decisions cited, the main attempt of counsel for the decree holder is to suggest that a mortgagee stands in a fiduciary position during the subsistence of the mortgage and even thereafter, till the property is delivered up. Reliance is placed on Madhava Pillai v. Sankararu (1950 Ker LT 356) noticed earlier. The suit there was for redemption. The mortgagee had not paid any michavaram during the 30 years he was in possession. The plaintiff claimed the entire michavaram so due, and also mesne profits from the date of suit The defendant contended that michavaram could be claimed only for six years prior to the date of suit. The question thus arose whether the rest of the claim was barred by limitation. This Court held that the liability of a mortgagee under Section 76(h) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Law of Mortgages of Real and Personal Property by Francis Hilliard :-- .....A mortgage is but a security for the payment of the debt and when that is paid or extinguished, it can never be resuscitated. By payment the whole mortgage is extinct; as much so as if released or paid and cancelled on record. It ceases to operate either at law or in equity, and the whole title vests in the mortgagor..... Reference was also made to Coote's Treatise on the Law of Mortgages to point out that before the Law of Property Act, 1925 the position of a mortgagee, after he was paid off, was that of a trustee holding the legal estate for the benefit of the mortgagor: but from 1926, the position was that the mortgagee had no legal estate or interest in the land after payment off . As I understand the above passages, a mortgagee who has been paid off has no legal estate, interest or ownership in the property to which an obligation could be annexed for the benefit of the mortgagor. The whole title thereafter is in the mortgagor; there is no dissociation of the beneficial interest from the legal title so as to postulate the continued existence of a trust. 10. In Saithu Muhammad v. Abdur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for consideration in Linga Reddi v. Subbarami Reddy (AIR 1942 Mad 202). A next friend of certain minors realised over ₹ 6000/-in a suit filed on their behalf and draw the money from court on the strength of a security bond executed by a surety. The minors, when they came of age, instituted a suit against their guardians impleading the surety also as a party. When that suit was decreed, the surety claimed the benefit of Section 4(f), but the claim was rejected by the District Court on the ground that his liability had arisen out of breach of trust. Disagreeing with this view, the High Court said that the surety's liability was primarily based on contract. That contract was enforceable if the next friend who had drawn the money from the court committed breach of trust, but still, the proximate or immediate basis of the surety's liability was the contract. Their Lordships observed:-- It seems to us that the words of this clause 'arising out of a breach of trust' should not be read so as to cover any liability which is in any way connected with a breach of trust. As we read this clause, its object is not to place creditors who have lost money owing to breach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laintiff had no case that the first defendant was holding the properties in trust for the benefit of the plaintiff also and that the first defendant had committed a breach of her obligations arising out of a fiduciary relationship. On the other hand, the suit proceeded on the basis that the first defendant was unauthorisedly retaining possession of the properties and that she should be made answerable for mesne profits for her wrongful possession of the properties. In view of such a stand taken by the plaintiff, it is not now open to her to take up an entirely different position and to contend that the first defendant was holding the plaintiff's share of the properties as a trustee for the plaintiff, (Pp. 990-991). If this be the approach to be made in the present case also, I should say that O. S. 383/63 was a simple suit for recovery with mesne profits on the basis that the mortgage had been extinguished; there was no whisper about any fiduciary relationship or breach of trust or of confidence, either in relation to the claim for recovery or in relation to the claim for mesne profits. 16. That apart, the preponderance of judicial opinion disclosed by the cases cited see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e preserved by Clauses (f), (l) and (m), Agricultural finance is the subject matter of Clause (n). A close examination of these exemptions disclose a variety of policy considerations. Viewed in this background, it is possible to think that the policy behind Clause (c) is only to ensure that tort-feasors and persons responsible for breach of trust do not get away with the fruits of their wrongs. Trusts have always been considered as something sacred. Sections 11 to 20 of the Trusts Act impose stringent duties and liabilities on trustees, Sections 46 to 54 impose some disabilities also. 'Breach of trust' is defined in Section 3 as breach of duties imposed on trustees by law. It appears to me that what is attempted to be excluded by Clause (c) of Section 2(3) of Act 17/77 is only a liability arising out of breach of trust as understood in law. If reposing of confidence alone is sufficient, a bailee of goods will also be a trustee. There are also many other contracts based on confidence. If the term trust is understood in that popular sense, many types of contractual liabilities will stand excluded from the definition of debt; and it is not easy to assume that the legislature ..... X X X X Extracts X X X X X X X X Extracts X X X X
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