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Judgment
Madhavan Nair, J.—3rd defendant is the appellant. This appeal arises out of a suit instituted by the plaintiff for the recovery of Rs. 8,140
being the balance due on a registered mortgage bond, Exhibit A, dated 28th July, 1915, executed by the late Anantharatnam Iyer, father of
defendants 1 and 2, in favour of the plaintiff for Rs. 5,000 payable with interest. The plaintiff has been given a decree.
In A.S. No. 111 of 1912 on the file of the High Court of Madras, K. V. Rangaswami Iyengar and K. V. Srinivasa Iyengar obtained a decree
against Anantharatnam Iyer for Rs. 30,000 together with interest. Under this decree a charge in their favour was created over the suit properties
and the amount was made payable within five years from the date of the decree. It was also stated in the decree that if payment was not made in
accordance with the decree the appellants will be at liberty to realise the amount by executing the decree. This decree is Exhibit I and it is dated
22nd July, 1914. The exact terms of the decree with which we are concerned in this appeal are as follows:
That the plaintiff do pay Rs. 30,000 to the defendants with interest at 9 per cent, per annum from this date, the said amount of principal and interest
being a charge on the suit properties more particularly set forth in the schedule hereto ; that the plaintiff do pay the interest above provided every
year on or before the 30th of July beginning with 30th of July, 1915 and do pay the principal amount of Rs. 30,000 within 5 years from this date
provided that if in any year default is made in the payment of interest as stated above, the principal shall become payable immediately on such
default ; that on plaintiffs failure to pay in accordance with Clause (2) above, the defendants be at liberty to realise the amount due to them as per
the above clauses by executing this decree as a decree for sale of the suit properties.
On the 28th July, 1915, the suit mortgage, Exhibit A, already referred to, was executed by Anantharatnam Iyer in favour of the plaintiff. In that
document, amongst other things, it was stated by the mortgagor
that there is no encumbrance whatever touching the said properties. I have executed this bond by declaring and making you believe that the
aforesaid properties have not been subject to any kind of encumbrance whatever prior to this.
On 21st September, 1919, Anantharatnam Iyer executed a mortgage of the suit properties and other properties, Exhibit II, in favour of the 3rd
defendant for a sum of Rs. 37,500. As will appear from this document, one of the items of consideration was a sum of Rs. 33,075, the amount
required for the discharge of the decree in A. S. No. 111 of 1912 on the file of the High Court obtained by K. V. Rangaswami Iyengar and
another against Anantharatnam Iyer. It is admitted that this amount was deposited in Court and the decree in A.S. No. 111 of 1912 was
discharged. In Exhibit II amongst other things it was stated
that this hypothecation bond alone shall have a prior claim to the said properties even though there are two hypothecations effected in respect of
the said properties etc.
In the suit, the 3rd defendant contended that he is entitled to priority by subrogation over the plaintiff''s mortgage to the extent of Rs. 33,075
with interest thereon made payable out of the consideration of Exhibit II in discharge of the decree Exhibit I, which was paid in full satisfaction of
that decree.
The learned Judge expressed the opinion that the 3rd defendant''s right of subrogation is undeniable; but he held that effect could not be given to
that right as Exhibit I created only a ''charge'' and the plaintiff had no notice of that ''charge''. The conclusion of the learned Judge may be stated in
his own words. After saying that the right to subrogation is undeniable he stated thus:
It is again urged on behalf of the plaintiff that Exhibit I creates only a charge, that she had no notice of the charge, that the charge does not involve a
transfer of interest in the property on which it is created while there is such a transfer of interest in the case of a mortgage and that as she is a bona
fide mortgagee without notice of the charge created by Exhibit I she cannot be affected by the charge. I think that this contention is well, founded.
On behalf of the appellant Mr. Varadachari argues that the absence of notice, which is a question of fact, was not raised as a ground of
complaint by the plaintiff either in the pleadings or in the issues, and that having regard to the fact that the right of subrogation is claimed with
respect to the discharge of a decree anterior to the plaintiff''s mortgage to which the suit property was already subject, no question of notice can
possibly arise in the case. The respondent tries to meet this argument by saying that the execution of the decree creating the charge (Exhibit I) has
become barred by limitation and therefore subrogation with respect to that decree cannot be allowed. He also adds that the appellant is- estopped
from putting forward his claim of subrogation.
Section 100 of the Transfer of Property Act deals with charges. After defining a charge the second paragraph of the section says:
No charge shall, be enforced against any property in the hands of a person to whom such property has been transferred for consideration and
without notice of the charge.
These words which were introduced into the Section by the Amending Act of 1929 did not exist in Section 100 of the old Act which, strictly
speaking, governs the present case. But it may be said that the amendment does not alter the law but shows more clearly what the rights and
liabilities of a charge-holder are. So, if the respondent can rely upon this provision, the absence of the specific provision in the old Act is
immaterial. This is conceded by the appellant. It is clear from the terms of the decree, Exhibit I, already extracted, that it created a charge over the
suit properties for Rs. 30,000. It is so specifically stated in the decree itself. At one stage of the argument the respondent''s learned Counsel tried
to show that subrogation cannot be claimed in connection with a discharge of liability due under a charge; and that the claim should be confined in
law to the discharge of prior mortgages existing on the property. But this argument was not seriously pressed and his arguments were confined to
the two points already noted.
On principle it appears to us that no question of notice relating to the charge can arise in this case. By discharging the liability under the charge
decree, Exhibit I, the appellant has subrogated himself into the rights of the holders of the decree. If they were seeking to enforce their rights under
the decree, can it be said that those who claim rights in the properties that came into existence during the pendency of the suit or after it, can plead
that their interests are not affected because they had no notice of the suit or the decree ? We think not. The true legal position may be examined
from two alternative standpoints. Section 52 of the Transfer of Property Act which deals with the doctrine of Us pendens says in the explanation to
the section introduced by Act XX of 1929 that for the purposes of the section the pendency of a suit or proceeding shall be deemed ""to continue
until the suit or proceeding has been disposed of by a final decree or order and complete satisfaction or discharge of such decree or order has
been obtained, or ... . . . ."" This explanation seems to embody the Madras view that the Us in a mortgage suit continues until the actual sale in
execution of the decree. In Abdul Muhamad Rowther v. Seethalakshmi Ammal (1930) 33 L.W. 109 it was held that
When subsequent to a razinama decree making the future maintenance of a widow of a deceased coparcener a charge on certain coparcenary
properties, the surviving coparceners sold the same properties to a stranger and the widow in execution of her decree, without giving any notice of
the proceedings in execution to the same stranger-purchaser, purchased the properties herself and the said stranger-purchaser brought the present
suit to, set aside the sale to the widow on his paying the amount of the maintenance claim for which the properties were sold in execution, it was
held that the claim of the stranger-purchaser was not maintainable as his purchase was subject to lis pendens and that the widow was entitled to
execute her decree without giving any notice to him.
Till the previous litigation A.S. No. 111 of 1912 may be said to have ended by the discharge of the decree passed in it, the plaintiff cannot
have any claim on the properties as against the holders of that decree now represented by the 3rd defendant. The same position may be put also
somewhat differently. Exhibit I embodying as it does a decree of the Court, the enforcement of the charge created by it cannot in any way be
affected by the question whether the plaintiff had notice of the decree or not. From whichever standpoint one may look at the question, it is clear to
us that the question of want of notice of the charge cannot arise in this case.
The next question is whether the enforcement of the claim under Exhibit I is barred by limitation, for it is conceded that, if it is so barred, then
the appellant cannot claim any right of subrogation. Under Exhibit I the principal amount of Rs. 30,000 was to be paid in five years from the date
of the decree, 22nd July, 1914, that is, the amount was to be paid by the year 1919. It is argued that if the appellant is to be considered as
enforcing rights under that decree, then those rights should have been enforced before the expiry of three years from 1919, that is, 1922, and since
the present suit has been instituted only in 1927, the right to enforce the charge created by the decree is barred by limitation and so no claim for
subrogation can arise at all. This argument cannot be accepted in view of the decision of the Privy Council in 9 CWN 577 (Privy Council) , and the
decisions of this Court in Sundara Reddiar v. Subbiah Koundan (1912) 24 M.L.J. 28 and Avudai Animal v. Chinna Rawiasami Naick (1924) 20
L.W. 651. In this connection see also Kotappa v. Raghavayya ILR (1926) Mad. 626 : (1926) 52 M.L.J. 532. These decisions show that the
proper remedy for a person in the position of the 3rd defendant, who has discharged the decree under Exhibit I by payment, is not to proceed in
execution of the charge decree but to institute a fresh suit on the right acquired by him by paying off the decree. The amount due under the decree
having been paid off, no question of executing the decree can arise. That being so, a suit is his only remedy. For these reasons'', Mr. Bhashyam
Aiyangar''s contention that the decree should have been executed within three years after 1919 cannot be accepted, for there is no decree to
execute after payment of the decree amount. The proper remedy of the subrogee would be to institute a suit to recover the amount. If this view is
to prevail, as we think it must, then the contention of the respondent that the charge created by Exhibit I has become barred by limitation and so
the 3rd defendant is not entitled to subrogation to its rights, cannot be accepted.
The last question is whether the appellant is now estopped from enforcing his claim. The plea of estoppel was not specifically raised in the
Lower Court, but we will deal with it. The plea is based on the statement made by Anantharatnam Iyer, the mortgagor, in Exhibit A, the mortgage
executed in favour of the plaintiff. In it he stated that ""there is no encumbrance whatever touching the properties"". It is argued that this statement
made by the mortgagor would bind the 3rd defendant and he cannot therefore assert a claim to the effect that a prior encumbrance did exist on the
properties. The short answer to this argument is that it overlooks the important fact that the appellant by claiming the right of subrogation claims a
legal right which the mortgagor cannot claim. It is the discharge of the prior encumbrance that entitles him to put forward his claim of subrogation,
and this being quite an independent right, we do not think there is any substantial foundation for urging the plea of estoppel.
For the above reasons, differing from the Lower Court, we hold that the appellant is entitled to priority to the extent of Rs. 33,075 with interest
thereon as claimed by him. The decree of the Lower Court can be modified accordingly. The plaintiff-respondent will pay the appellant his costs of
the appeal and also his costs in the Lower Court.