P L D 1971 Karachi 671 (PLP)

2. In his written statement the defendant has denied all the allegations made in the plaint except that he had received a loan of Rs. 40,000 from the plaintiff on the terms contained in the mortgage deed executed by him. He has denied that he has committed default in payment, as alleged or at all, and he has further submitted that the amount claimed by the plaintiff has not yet become due and payable, and that on a proper construc tion of the mortgage deed it will become due and payable only on the expiry of 10 years in 1977. He has therefore submitted that the suit is premature and should be dismissed with costs.

3. Mr. Munawar Abbas, learned counsel for the defendant, admitted that the defendant had committed default both in the payment of interest and of the annual instalments for the repayment of the said amount. However, he submitted several arguments to show that the suit was not maintainable or premature, and I shall now consider these arguments.

4. Learned counsel's first submission was that, although there was a default clause in the mortgage deed entitling the plaintiff to sell the mortgaged property, that default clause referred not to default in the payment of instalments to the plaintiff but to default in the performance of the other covenants accepted by the defendants in the mortgage-deed of 20th May 1967. In order to appreciate learned counsel's argument I may briefly refer here to the terms of this mortgage deed. After the usual recitals of the defendants' ownership of the property mortgaged, clause 1 states that the plaintiff shall advance a total amount of Rs. 40,000, whilst clause 2 states that the mortgagor "hereby covenants with the mortgagees to repay to the mortgagees the said principal sum of Rs. 40,000 in ten equal instalments". The next clause deals with the defendants' liability for interest, whilst clause 4 states that the principal amount shall be repaid on or before 1st June 1977, which is described as the due date. Thereafter the Deed sets out the rights and liabilities of the parties and contains many of the usual covenants given by mortgagors. It is however material to state that the defendant is entitled to remain in possession of his property unless he commits default and the plaintiff is entitled to take possession of his property in the event of his default. The default clause, on which the plaintiff relies, is contained on page 10 of the deed and is as follows:-- "Provided always and it is hereby agreed and declared that in the event of any damage . . . . or any default shall be committed by the Mortgagor in the performance of any of the covenants herein contained and on the part of the Mortgagor to be observed and performed or if distress or execution be levied upon the said premises or on any party thereof or a Receiver be appointed thereof then in any of the aforesaid cases notwithstanding anything herein contained to the contrary the whole of mortgage debt. shall, at the option of the Mortgagees, become immediately payable as if the due date had elapsed and the security hereby constituted at the option of the Mortgagees, becomes immediately enforceable and in such case all such rights and remedies shall be available to the Mortgagees under the terms of these presents or by law upon default bang made in payment of the principal money and interest hereby secured." Mr. Munawar submitted that this clause being a penal clause had to be construed strictly, that it referred to breach of covenant on the part of the defendant, that the failure to pay instalments of the principal amount was a breach of contract but not a breach or the covenants contained in the mortgage deed, therefore the plaintiff could not rely on it in support of its claim. I agree with learned counsel that, as this clause is a penal clause, it is to be construed strictly, therefore, if there was any possibility of reasonably confining its operation to breach of other covenants on the part of the defendants I would do so, but the language of the clause is plain and as, according to clause 2, the liability for the payment of instalments is a covenant expressly accepted by the defendant, it is clear that his failure to pay the instalments of the principal amount due from him was a breach within the meaning of this clause, which entitles the plaintiff to enforce all its rights, including the right for the sale of the mortgaged property immediately.

5. Mr. Munawar Abbas then submitted a very ingenious argument on the basis of clause 2 of the mortgage-deed, and section 60 of the Transfer of Property Act. Under section 60 a mortgagor cannot sue for the redemption of his property until "after the principal money has become due". Now clause 2 of the mortgage deed expressly states that the principal amount shall be paid over a period ;of 10 years commencing from 1st June 1968, whilst clause 4 states that 1st June 1977 (when the last installment would fall due under clause 2) is the due date, therefore on the principle that a mortgagee can sue only when his right to sue and the mortgagor's to redeem have coalesced, learned counsel submitted that the plaintiff was not entitled to sue for the sale of the mortgaged property before 1st June 1977, as that was expressly made the due date under the mortgage. In support of this submission learned counsel referred me to the observations of the Privy Council in Issa Din v. Mt. Gulab Kunawar and others (1). In reference to the default committed by the mortgagor in that case in the payment of his instalments the Privy Council observed as follows :

"If on the default of the mortgagor-in other words, by the breach of his contract the mortgage money becomes immediately 'due' it is clear that the intention of the parties is defeated and that what was agreed to by them as an option in the mortgagee is in effect converted into an option in the mortgagor. For if the latter after the deed has been duly executed and registered finds that he can make a better bargain elsewhere, he has only to break his contract by refusing to pay the interest and 'eo instanti', as Lord Blanesburgh says, he is entitled to redeem. If the principal money is "due" and the stipulated term has gone out of the contract it follows in their Lordships' opinion that mortgagor can claim to repay it, as was recognized by Wazir Hasan, J., in his judgment in the Chief Court. Their Lordships think that this is an impossible result. They are not prepared to hold that the mortgagor could in this way take advantage of his own default; they do not think that upon such default he would have the right to redeem and in their opinion the mortgage money does not 'become due' within the meaning of Article 132, Limitation Act, until both the mortgagor's right to redeem and the mortgagee's right to enforce his security have accrued. This would of course, also be the position if the mortgagee exercised the option reserved to him." I am in respectful agreement with these observations, but it is relevant to bear in mind that they had reference to the provisions of Article 132 of the Limitation Act and not section

60. Further, the principles laid down in the judgment are that the mortgagor cannot take advantage of his own default and that a mortgagee can sue for the sale of the mortgaged property only when the mortgagor is entitled to sue for its redemption. In the instant case, the mortgagor will be able to take advantage of his own default if I accept Mr. Munawar Abbas's argument, therefore the real point for determination is whether learned counsel's submis sion that the mortgagee is claiming a unilateral right is correct. For the purpose of his argument Mr. Munawar Abba, relied on clause 4 of the mortgage deed which states that 1st June 1977, shall be the due date. But in the event of default, the due dale is automatically accelerated under the clause which I have quoted (1) A I R 1932 P C 207 above, therefore I do not see any merit in learned counsel's` argument that the defendant cannot now redeem the mortgage, and as he can do so the plaintiff should also be entitled to sue for the sale of the mortgaged property.

6. Additionally Mr. Naimuddin, who. has been of great assistance to me in this case, referred me to a judgment of a Division Bench of the Mysore High Court in Subbamma v. Krishna Lyengar (A I R 1962 Mys. 5) which I have found of great. assistance. In reference to the rights and liabilities of the parties under section 60 and Article 132 the learned Judges have observed in para. 5 of their judgment as follows :- "The following principles of law are deducible from the several decisions: (1) The time stipulated in a mortgage deed is for the benefit of the mortgagee; (2) If a default clause making the entire mortgage money repayable on failure to pay interest in any year is incorporated in the bond, the entire money does not become 'due' automatically on the mortgagor's default in payment of interest and that the mortgagor cannot take advantage of his own default and repay the amount before the time stipulated; (3) The mortgage money in such cases 'becomes due' only when; the mortgagee in exercise of his option takes steps to call for the entire amount ; (4) Once the mortgagee exercises his option and calls for the entire mortgage money, the stipulated term goes out of the contract with the result the right of the mortgagor to redeem and the right of the mortgagee to enforce the security would both accrue and (5) the mortgage money becomes then due within the meaning of Article 132 of the Limitation Act." In the light of these observations, as the plaintiff has exercised its rights under the mortgage deed, the defendant is automatically entitled to redeem the property, therefore the rights of both parties have coalesced and the plaintiff is not prevented by section 60 from suing for the sale of the mortgaged property.

7. I therefore allow the plaintiff's claim and pass a preliminary decree in its favour. The defendant is given six months' time to pay the mortgage amount. I leave the parties to bear their own costs. S. A. H. Suit decreed.