A. Venkatasami Chettiar vs Sankaranarayana Chettiar and Others

Horace Owen Compton Beasley, Kt., C.J.—This second appeal has been placed before a Bench because of a contention by the

appellant''s Advocate that the Bench decisions in Muthukumarasami Pillai v. Muthuswami Thevan (1926) 52 M.L.J. 148 and Mundlapati

Jagannadha Rao and Others Vs. Rachapudi Basavayya, throw doubt on the observations in Venkata Reddy v. Kunjappa Goundan ILR (1923) 47

Mad. 551 : 46 M.L.J. 391 on which the two lower Courts have relied.

The suit was really a controversy between two rival purchasers of the same mortgaged property. The plaintiff, was the purchaser in execution of

a decree passed on a prior mortgage which I will call Mortgage No. 1 whilst the first defendant was the purchaser in execution of a decree passed

on a puisne mortgage which I will call mortgage No. 2. No. 2 mortgagee brought his suit first and obtained a decree in 1922. Afterwards No. 1

mortgagee brought her suit and obtained her decree in 1924. To No. 2 mortgage suit No. 1 mortgagee was not made a party. To No. 1 mortgage

suit No. 2 mortgagee was not made a party. The plaintiff in the suit was the, purchaser in execution of No. 1 mortgage decree. It is conceded that

the purchase price paid by the plaintiff was more than sufficient to pay off the No. 1 mortgage debt. The plaintiff attempted to get delivery of

possession but was obstructed by the purchaser in No. 2 mortgage and failed to get possession through the Court. The plaintiff then filed the

present suit on No. 1 mortgage for a sale of the mortgaged property giving an opportunity to the purchaser under No. 2 mortgage to redeem it.

Both Courts found that the plaintiff was entitled to bring the suit and gave a decree accordingly. In both Courts the decision in Venkat Reddy v.

Kunjappa Goundan ILR (1923) 47 Mad 551 : 46 M.L.J. 391 was relied upon as showing that such a suit as this is maintainable. It is conceded

here very fairly by Mr. T.M. Krishnaswami Aiyar on behelf of the appellant that he is unable to distinguish the facts of this case from those in

Venkat Reddy v. Kunjappa Goundan ILR (1923) 47 Mad 551 : 46 M.L.J. 391 and that, if that decision is correct, this appeal must fail, This

admission simplifies matters very much and we have now only to see how far, if at all, that decision has been approved of or followed or whether

doubts have been thrown upon it by other decisions. I propose, in deciding this question, to consider only decisions of this High Court, Mr. T.M.

Krishnaswami Aiyar''s contention is that the plaintiff is not entitle to file his suit on No. 1 mortgage because such a suit cannot lie unless the Court-

auction sale in No. 2 mortgage suit has been set aside and that, as a period of 30 days alone is allowed for the setting aside of a Court-auction-sale

and the Court-auction-sale not having been set aside within that period, this suit is not maintainable. In support of this contention he refers to

Muthukumarasami Pillai v. Muthuswami Thevan ILR (1926) 50 Mad. 639 : 52 M.L.J. 148. There a decree-holder got the properties of some one

other than the judgment-debtor sold in execution of his decree, purchased them himself and entered up satisfaction. More than thirty days after the

sale, he found out his mistake and applied for further execution by setting aside the sale and it was held that the application for further execution

was unsustainable as the sale though of a stranger''s property was not void and as the prayer for setting it aside under Order 21, Rule 91, which

was necessary preliminary for further execution could not be granted being barred by Article 166 of the Limitation Act. In this case the principle of

caveat emptor was applied it being pointed out that a Court sale carries no guarantee that the property is the property of the judgment-debtor and

that the auction-purchaser takes the risk and bears the loss if it is subsequently discovered not to be the property of the judgment-debtor and that

there is no warrant for the proposition that a sale by the court of property which subsequently turns out not to belong to the judgment-debtor is

void. The sale not being void was voidable and could only be avoided by steps being taken under Order 21, Rule 91, within the period provided,

namely, 30 days, to get the sale set aside and until the sale is set aside, the auction-purchaser cannot apply to execute the decree. One passage

amongst others in that judgment relied upon by the appellant here reads in p. 644 as follows:

In the present case we are concerned with the processual law which obviously prohibits execution being taken out for a satisfied decree unless the

proceedings which resulted in the record of satisfaction are set aside and the same law says that such proceedings can only be set aside by an

application within 30 days of the sale.

From this it is argued that, the No. 1 mortgage debt having been fully satisfied, the plaintiff cannot sue on that satisfied mortgage and that he has

first of all to get that satisfaction set aside by getting the sale set aside which he has not done. Another case is Mundlapati Jagannadha Rao and

Others Vs. Rachapudi Basavayya, . There a decree-holder who had obtained a mortgage-decree brought to sale some only of the mortgaged

items in execution of his decree and purchased them in court-auction. As the price fetched was enough to satisfy the decree, satisfaction was

entered. After the sale was confirmed when he went to take possession of the property purchased he was obstructed by a stranger and his petition

to remove obstruction was dismissed. Thereupon he filed a petition to set aside the satisfaction that had been entered up and to bring to sale other

items included in the decree. Following Muthukwmaraswami Pillai v. Muthuswami Thevan ILR (1926) 50 Mad. 639 : 52 M.L.J. 148 it was held

that he was not entitled to execute the decree without having the Court sale set aside and that, not having done that within the period of limitation

provided by Article 166 of the Limitation Act, his petition was not maintainable. In neither of these cases it must be observed was it a case

between rival purchasers of the same mortgaged property but merely the ordinary case of property, after its purchase in Court auction being

claimed by another person a complete stranger not in pursuance of a mortgage decree at all but on some entirely different ground such as

ownership. In my view, this is an important distinction to be borne in mind here as showing that there is really no conflict between the two before

mentioned decisions and that in Venkat Reddy v. Kunjappa Goundan ILR (1923) 47 Mad 551 : 46 M.L.J. 391. In the latter case no question

arose as to the application of Order 21, Rule 91, CPC the question there being whether an auction-purchaser in execution of a mortgage decree in

a suit for sale on a mortgage to which the purchaser of a portion of the mortgaged property in execution of a money decree against one of the

mortgagors was not joined as a party is entitled to institute a subsequent suit for sale against the latter, the mortgagor and the mortgagee, whether

or not the mortgagee had, at the time of the previous suit, notice of the interest of the latter purchaser who had not been joined as a party and

Kumaraswami Sastri and Waller, JJ. were of the opinion that it was open to the purchaser as the assignee in law of the rights of the original

mortgagee by virtue of his purchase in Court sale to institute a second suit as against persons who were not parties to the prior suit and that it

followed that he had got the same rights as the original mortgagee would have had if he had filed a suit and the defendant could not be in a better

position than he would have been if he had been made a party to the original mortgage decree in execution of which the property was sold. It was

not even finally suggested in argument that the plaintiff''s claim stood to be defeated by any rule of caveat emptor. It is true that the judgment at

page 563 is with respect to the learned Judges who pronounced it not happily worded. Indeed it would appear to proceed on somewhat

inconsistent reasoning. But that it definitely lays down the law upon this point admits of no doubt whatever and, as far as we have been able to

discover, this decision has not really been doubted in subsequent decisions to which we were referred. A very recent decision of Ramesam and

Stone, JJ. in Sambasiva v. Subramania (1934) 1934 M.W.N. 1233 has been brought to our notice in which the decision in Venkat Reddy v.

Kunjappa Goundan ILR (1923) 47 Mad 551 : 46 M.L.J. 391 was noticed. In the judgment of Stone, J. that case is referred to as follows:

We must not be understood as saying that upon decree the cause of action upon the mortgage has gone. Under the Transfer of Property Act as it

stood before its amendment by the CPC this would have occurred but it is now decided that the mortgage is not wholly merged in the decree. It

can at least be used as a shield Sukhi v. Gulam Safdar Khan (1921) 48 I.A. 465 : ILR 43 All. 469 : 42 M.L.J. 391. It may indeed be sued on

despite the decree according to the decision in Venkat Reddy v. Kunjappa Goundan ILR (1923) 47 Mad 551 : 46 M.L.J. 391 as to which we

express no opinion though we observe it purports to follow Sukhi v. Gulam Safdar Khan (1921) 48 I.A. 465 : ILR 43 All. 469 : 42 M.L.J. 391

wherein the Judicial Committee use very guarded language in expressing the extent to which the mortgage remains available after decree. We

proceed on the view that a mortgagee circumstanced as here might according to Venkat Reddy v. Kunjappa Goundon ILR (1923) 47 Mad 551 :

46 M.L.J. 391 sue on the mortgage (which in most cases would give him the fullest remedy) or he might proceed on the cause of action derived

from his title as auction-purchaser.

Ramesam, J. referring to Chandramma v. Seethan Naidu (1930) 61 M.L.J. 316 says,

The Court then, following Venkat Reddy v. Kunjappa Goundan ILR (1923) 47 Mad 551 : 46 M.L.J. 391 took the view that the mortgage decree

does not extinguish the mortgage and the mortgagee or a purchaser from him can bring a suit on the mortgage against a purchaser of the equity not

made a party to the mortgage suit even though that person was known to exist at the time the mortgage suit was brought. It is then laid down that if

such a suit is brought i.e., a suit on the mortgage, time runs not from the date of the mortgage decree, but from the date the money is due. We

respectfully agree.

The latter sentence must be taken as applying to the question of limitation of course. It cannot be said that these judgments cast doubt upon the

correctness of Venkat Reddy v. Kunjappa Goundan ILR (1923) 47 Mad 551 : 46 M.L.J. 391. In Chandramma v. Seethan Naidu (1930) 61

M.L.J. 316, and Venkat Reddy v. Kunjappa Goundan ILR (1923) 47 Mad 551 : 46 M.L.J. 391 was also considered by Reilly and

Anantakrishna Aiyar, JJ. In that case it was held that a mortgagee or transferee of his interest cannot acquire higher rights by reason of litigation to

which owners of the equity of redemption were not made parties and that that being so if the puisne mortgagee or owner of equity of redemption

be entitled to other rights and remedies over and above the right of redemption such other rights and remedies would not be lost to them and the

plaintiff cannot be heard to say that those remedies were lost to them as a result of the suit to which they were not parties and following Venkat

Reddy v. Kunjappa Goundan ILR (1923) 47 Mad 551 : 46 M.L.J. 391 it was held that the only remedy for the plaintiff is that he can bring

another suit against the owners of the equity of redemption for sale. On page 326 Anantakrishna Aiyar, J., deals with Venkat Reddy v. Kunjappa

Goundan ILR (1923) 47 Mad 551 : 46 M.L.J. 391 and states his opinion that that case was correctly decided and in doing so gives very clear

reasons in support of that opinion. He says:

This leads to the consideration of the question as to what exactly are the remedies open to an auction-purchaser in the position of the plaintiff.

Sadasiva Aiyar, J., in the case reported in Lakshmanan Chetty v. Muthaya Chetti (1919) 40 M.L.J. 126 would seem to have been of opinion.... I

say ""opinion"" because it was not necessary for the decision of the case - that a second suit based upon the original mortgage was not available in

the circumstances. That question had to be considered on a later case by a Bench of this Court, Kumaraswami Sastri and Waller, JJ., in Venkat

Reddy v. Kunjappa Goundan ILR (1923) 47 Mad 551 : 46 M.L.J. 391. After referring to the observations of Sadasiva Aiyar, J., in the case

already mentioned, the learned Judges proceeded to consider whether there is anything in the Code of any other provision of law which would

disentitle the plaintiff from maintaining a second suit based upon the original mortgage. They came to the conclusion that he could do so, and, if I

may say so with respect, quite correctly. The circumstances that the mortgagee filed a suit against a wrong person does not affect the rights of the

real owners of the equity of redemption. If it does not affect then at all, one fails to see how they could be heard to say that by virtue of the prior

suit which admittedly does not affect them, a (second) suit against them is not maintainable. So far as they are concerned the second is the only suit

against them and the first suit and the proceedings connected with the same must be taken to be ""non est"" in the eye of the law * * * * It being

therefore clear that a second suit is maintainable to recover money due on the mortgage after making the necessary persons interested in the equity

of redemption parties to the suit the question will then arise as to the exact remedy that they would be entitled to in such a suit.

In this judgment reference is also made in Chinnu Pillai v. Venkatasamy Chettiar ILR (1915) 40 Mad. 77 : 30 M.L.J. 347 and to the

observations of Coutts Trotter, J., (as he then was) and K. Srinivasa Aiyangar, J., and as those observations have been set out in the judgment, it

is unnecessary to repeat them here and it is sufficient to say that I entirely agree with the opinion of Anantakrishna Aiyar, J., that those observations

lend strong support to the view expressed in Venkat Reddy v. Kunjappa Goundan ILR (1923) 47 Mad 551 : 46 M.L.J. 391 where Chinnu Pillai

v. Venkatasamy Chettiar ILR (1915) 40 Mad. 77 30 M.L.J. 347 is one of the cases relied upon. In view of the decisions to which I have just

made reference, I am of the opinion, that Venkat Reddy v. Kunjappa Goundan ILR (1923) 47 Mad 551 : 46 M.L.J. 391 was correctly decided.

That being so, the suit under appeal was maintainable and both the lower Courts were correct in so holding. This second appeal must, therefore fail

and be dismissed with costs of the second respondent.

King, J.

This appeal raises interesting questions of law in regard to the rights of successive mortgagees of the same property and of auction-purchasers of

that property in execution of decrees obtained in suits upon the mortgages in which the provisions of Order 34, Rule 1 have not been observed.

The facts of the present case are as follows:- The property was mortgaged first to one Balammal by Ex. A in 1910 and subsequently to Defendant

2 by Ex. II in 1916. In 1922 Defendant 2 brought a suit upon his mortgage without impleading Balammal and obtained a decree for sale in

execution of which defendant 1 purchased the mortgaged property obtaining his sale certificate on 30th November, 1927. In 1924, Balammal

brought a suit on her mortgage without impleading Defendant No. 2, and in execution of her decree for sale the property was purchased by the

plaintiff on 16th December, 1927. In 1928, plaintiff applied for delivery and was obstructed by Defendant No. 1 who by that time was in

possession of the property. An application in the same year to remove the obstruction was unsuccessful, and in 1929 plaintiff filed the present suit,

asserting that he had acquired the rights of the first mortgagee, and basing his claim on the first mortgage. The suit was resisted by defendants 1 and

2 on two main grounds, firstly, that it was not maintainable as the first mortgage had already been discharged, and secondly, that it was barred by

limitation. Both these grounds were found against the District Munsif of Periakulam and upon appeal by the Subordinate Judge of Dindigul and

plaintiff''s suit was decreed. Defendants 1 and 2 have accordingly filed this second appeal. At the hearing of the appeal the contention on the

question of limitation was abandoned, and the sole point for decision is therefore whether plaintiff''s suit was maintainable.

Now there is direct authority in this Court for the view which the Courts below have taken in a case reported in Venkat Reddy v. Kunjappa

Goundan ILR (1923) 47 Mad 551 : 46 M.L.J. 391. There are some superficial differences, no doubt, between that case and the one we are now

considering. In Venkat Reddy v. Kunjappa Goundan ILR (1923) 47 Mad 551 : 46 M.L.J. 391 there was no second mortgagee, the suit on the

mortgage being brought without impleading a purchaser of the equity of redemption in part of the mortgaged property, but when the auction-

purchaser of the mortgaged property attempted to take possession he was obstructed by the aforesaid purchaser of the equity of redemption, and

when he brought a suit against him on the mortgage that suit was held to be maintainable. Both in that case and in this the sale held by the Court

had realised enough for the complete discharge of the mortgage, and the learned Advocate for the appellants has frankly admitted that Venkat

Reddy v. Kunjappa Goundan ILR (1923) 47 Mad 551 : 46 M.L.J. 391 is a direct authority against him.

The sole ground therefore on which the appellants can succeed is by convincing us that Venkat Reddy v. Kunjappa Goundan ILR (1923) 47

Mad 551 : 46 M.L.J. 391 is no longer good law, and this has been attempted partly by a reference to two subsequent decisions and partly by an

intrinsic examination of Venkat Reddy v. Kunjappa Goundan ILR (1923) 47 Mad 551 : 46 M.L.J. 391 itself. The two subsequent decisions are

Muthukumaraswami Pillai v. Muthuswamy Thevan ILR (1926) 50 Mad. 639 : 52 M.L.J. 148 and Mundlapati Jagannadha Rao and Others Vs.

Rachapudi Basavayya, In Muthukumaraswami Pillai v. Muthuswamy Thevan ILR (1926) 50 Mad. 639 : 52 M.L.J. 148 is a case which has

nothing to do with mortgages. There a decree-holder brought to sale certain properties which he believed to belong to his judgment-debtor but

which eventually turned out to belong to another person of the same name. He had himself purchased the property and on discovering his mistake

applied for further execution. It was held that this could not be allowed as the sale though voidable was not void; he was barred by Article 166 of

the Limitation Act from applying to have it set aside; and without its being set aside further execution could not go on. Mundlapati Jagannadha Rao

and Others Vs. Rachapudi Basavayya, is a case of a mortgagee decree-holder bringing to sale only some and not all of the items of property

mortgaged to him. He purchased them himself and as the sum realised met his decree amount in full, satisfaction was entered. He then found

himself obstructed in attempting to take delivery, and failing in an application to have the obstruction removed, applied to proceed in execution

against the other items not included in the sale. It was held that he could not do so without first having the sale set aside, which the law of limitation

prevented his doing.

It will be seen at once that neither of those cases bears any very close resemblance to the present case. The principle on which they were

decided was that of ''caveat emptor''. The Court gives no warranty of title at a sale in execution, and if it should happen that the auction-purchaser

has purchased something in which the judgment-debtor had no interest, well, Order 21, Rule 91, is enacted for his benefit and if he does not

discover his mistake in time, that is his misfortune and the law can do nothing more for him. The learned Advocate for appellant seeks to apply this

principle to the present case, but there is this fundamental difference between the present case and the two cases on which he relies. There the

persons found to be entitled to the property sold in court-auction were complete strangers, and therefore there could be no doubt that the

respective judgment-debtors had no interest in the property. Here the matter is not so simple. Defendant 1 is not a stranger. He derives his title as

the representative of defendant 2 the puisne mortgagee, and the mortgagor, and it is impossible to say that plaintiff the auction-purchaser has

purchased property in which the first mortgagee''s judgment-debtor (the mortgagor) or defendant 1 as his successor-in-interest has no interest.

Plaintiff therefore could never have made the assertions necessary to file an application under Order 21, Rule 91. Indeed to establish the fact that

plaintiff has obtained no rights by his purchase, appellants can succeed only by another line of approach, viz., by showing that with the decree for

sale in the suit by the prior mortgagee the prior mortgage had become extinguished, and therefore plaintiff can have no right of further suit.

Now that the prior mortgage is not extinguished for all purposes is laid down by the Privy Council in AIR 1922 11 (Privy Council) on an

examination of the difference between the old law (as enacted in Section 89 of the Transfer of Property Act) and the present law (as enacted in

Rules 3 and 5 of Order 34 of the Code of Civil Procedure). In that case a prior mortgagee who had failed to implead a pusine mortgagee in his

mortgage suit was held to be entitled to set up his prior mortgage as a shield in a suit against him by the puisne mortgagee, so that he could not be

dislodged from the property which he had purchased in execution of his own decree without his mortgage-debt being discharged. It is true that

AIR 1922 11 (Privy Council) also relies upon the distinction between the old and the existing law in regard to the extinction of the mortgages and it

points out (on page 558):

It is difficult to see how a second suit against a person not impleaded in the previous suit would be barred under any of the provisions of the Civil

Procedure Code.... The cause of action is not the same as in the previous suit nor would the points to be decided necessarily be the same.

I am thus able to hold that the two later rulings relied upon by the appellant, dealing as they do with different facts, making no reference to

Venkat Reddy v. Kunjappa Goundan ILR (1923) 47 Mad 551 : 46 M.L.J. 391 and enunciating principle which is no new principle but one which

might easily have been put forward during the hearing of Venkat Reddy v. Kunjappa Goundan ILR (1923) 47 Mad 551 : 46 M.L.J. 391 itself, can

be held to overrule or impair the authority of Venkat Reddy v. Kunjappa Goundan ILR (1923) 47 Mad 551 : 46 M.L.J. 391.

It remains only to point out that Venkat Reddy v. Kunjappa Goundan ILR (1923) 47 Mad 551 : 46 M.L.J. 391 is no isolated authority. The

decision therein is based partly upon the discussion of the law by Srinivasa Aiyangar, J., in Chinnu Pillai v. Venkatasamy Chettiar ILR (1915) 40

Mad. 77 : 30 M.L.J. 347. No doubt what is there said is obiter but the reasoning is clear and the decision unqualified that a suit by an auction-

purchaser situated as the plaintiff is here, will lie. Again Venkat Reddy v. Kunjappa Goundan ILR (1923) 47 Mad 551 : 46 M.L.J. 391 has been

referred to with approval by both the learned Judges who decided Chandramma v. Seethan Naidu (1930) 61 M.L.J. 316 and the situation has, I

think, been put very clearly and convincingly in the following passage by Anantakrishna, Aiyar, J. (page 326):

The circumstance that the mortgagee filed a suit against a wrong person does not affect the rights of the real owners of the equity of redemption. If

it does not affect them at all one fails to see how they could be heard to say that by virtue of the prior suit, which admittedly does not affect them, a

second suit against them is not maintainable.

For these reasons, I agree with my Lord that this appeal should be dismissed with costs of Respondent 2.