Brahmandam Venkata Lakshminarayana Rao vs Allamneni Venkayya and Others

Spencer, J.—The question of law before us is whether the 14th defendant who purchased mortgaged properties from the original owners is

entitled by subrogation to priority over the plaintiff, a prior mortgagee, because out of the consideration for the sale the whole of the mortgage

decree in O.S. No. 17 of 1905 on the file of the District Court, Guntur and a portion of the mortgage decree in O.S. No. 16 of 1905 on the file of

the same court were satisfied.

The Subordinate Judge seems to have been of opinion that the principle enunciated in Hanumanthaiyan v. Meenatchi Naidu I.L.R.(1911) Mad.

183, that in order to sustain a claim for priority there must be a complete discharge of the prior mortgage and that partial discharge creates no

equitable rights of priority would only apply to cases referred to therein of advances being made by a number of persons which would give rise to

difficulties in working out the rights of several parties all claiming to rank as first incumbrancers; and he relied on Ummachankutti v. Ummarkutti

Haji (1915) 29 I.C. 583, as being a later ruling of this Court on this point of law.

The facts of that case were however quite dissimilar and the question decided therein was as to the power of a Court to give an equitable charge

to an assignee upon setting aside a sale in fraud of creditors.

The authority of Hanumanihiyan v. Meenatchi Naidu I.L.R(1911) . M. 183 has been in no way weakened by subsequent decisions of this

Court, ft was followed in Besinath Karumani v. Devidoss (1915) 29 I.C. 511 and Pingali Venkataramana Reddi by his authorised agent

Brahmanda Narasimha Rau Vs. Kotigari M. Rangiah Chetti and Others, and a similar view prevails in the Calcutta High Court vide Gurdeo Singh

v. Chandrikah Singh and Chundrikah Singh v. Rashbehary Singh I.L.R(1908) . Cal. 193 and in the Patna High Court vide (1918) 48 I.C. 719

Dulhin Sona Kuer v. Jomil Ahmed .

The decision in Udii Narain Misir v. Asharji Lal ILR (1907) All. 502 may at first sight appear to be an authority for the opposite view, but it

appears that in that case the mortgage security became split up which had the effect of bringing the equitable provisions of Section 82. Transfer of

Property Act, into play.

The English Cases quoted by the learned Judges of the Allahabad Court are Baroness Wenlock v. The River Dee Co. (1887) 19 Q.B.D. 155

and Chetwynd v. Allen (1899) 1 Ch. 853. In the former no question of priority arose. In in re Wrexham Mold and Connah''s Quay Railway 10

Lindley Master of Rolls explained the scope of the decision in Baroness Wenlock v. The River Dee Coy ILR (1907) All. 502 and dissented from

certain observations of Fry. L.J.

The other case cited viz., Chetvynd v. Allen (1899) 1 Ch. 853 was merely an instance of equitable relief being given to a party defrauded and

was not a case of subrogation.

The decree of the Lower Appellate Court so far as it gives priority to the 14th defendant for Rs. 12,632 paid under O.S. No. 16 of 1905 is

reversed and the first Court''s decree is restored with costs of appellant here and in the lower appellate Court to be paid by the 14th defendant. By

consent 17th defendant who is the first mortgagee, will be given priority to all other encumbrancer''s in respect of any portion of his mortgage

money remaining unpaid under mortgage dated 28-6-08 or any renewal thereof.

Odgers, J.

The only question is as to allowing the 14th defendant''s claim to priority in respect of Rs. 12,632 - advanced by him in discharge of the decree

in O.S. No. 16 of 1905. It is admittedly a partial discharge only. It was unfortunate that the case was argued exparte but in my opinion the law is

clear. In Hanumanthaiyan v. Meenalchii Naidu I.L.R.(1911) Mad. 183 it is observed: ""We think there can be no doubt on principle that before a

person advancing for the purpose of discharging the debt due under the first mortgage can establish his claim to the rights of the 1st mortgagee it

must be shown that the first mortgage had been extinguished."" In Ummachakutti v. Ummer Kutti Haji (1915) 29 I.C. 583 relied on by the Lower

Court, there were no conflicting equities and the case was one of an assignment in fraud of creditors. The doctrine of Hanumanthaiyan v.

Meenatchi Naidu I.L.R.(1911) Mad. 183 was held to be inapplicable, On the other hand, the case in Besinath Karumani v. Devi Doss (1915) 29

I.C. 511 of this Court fully establishes the position taken by the learned Judges in Hanumanthaiyan v. Meenatchi Naidu I.L.R.(1911) Mad. 183

which position is also supported by Pingali Venkataramana Reddi by his authorised agent Brahmanda Narasimha Rau Vs. Kotigari M. Rangiah

Chetti and Others, and by the Patna High Court in Dulhin Sona Kuer v. Jamil Ahmad (1918) 48 I.C. 779. There thus seems a strong body of

opinion in this Court for the proposition laid down in Hanumanthiyan v. Meenatchi Naidu I.L.R(1911) . Mad. 183 and I do not think the judgment

in Vythilinga v. Venkatachala ILR 16 Mad. 194 if it is in fact to the opposite effect, can outweigh the effect of the subsequent cases, especially as

the facts do not appeared early from the report and no reasons are given. The only modern case cited contra is Udit Narain Misir v. Asharfi Lal

I.L.R.(1907) All. 502 , in which two English decisions are quoted. That was a case where the security was split. ""No doubt the prior incumbrancer

is entitled to refuse a part payment of his mortgage debt. If however he accepts the part payment and allows the liability upon the property to be

discharged in part, the puisne incumbrancer benefits in exactly the same way as he would if the entire debt had been discharged, though not to the

same extent. His security is enhanced to the extent that the debt has been discharged. There seems no reason why the purchaser of the equity of

redemption should not be entitled to stand in the shoes of the prior incumbrancer where he has with the consent of that incumbrancer partially

discharged the liability"". Although the mortgage has not been entirely paid off by the 1.4th defendant, arrangements have been made with the

mortgagees, defendants 17 and 18, and they do not appear in this case. It cannot however be said and there is no evidence for holding that they or

either of them have consented to accept a part payment of the mortgage money thus splitting up the security.

In Baroness Wenlock v. The River Dee Co. (1887) 19 Q.B.D. 155 the principle adopted was that laid down in Blackburn Building Society v.

Cunliffe Brooks & Co. 22 Ch. D. 1, viz., that those who pay legitimate demands which they are bound in some way or other to meet and have had

the benefit of other people''s money advanced to them for that purpose shall not retain that benefit so as in substance to make those other people

pay their debts. There was no question of priority in the case. The lender was entitled to be subrogated to the rights of the creditors who have been

paid with his money as against the creditors who borrowed the money.

In Chetwynd v. Allen (1899) 1 Ch. 853 an equitable charge for �1,000 was held to be subsisting in the peculiar facts of that case. There

was no discussion on the question of subrogation. The advance was held in fact to be made on the terms that the lender should have the benefit of

the prior charge which priority he was held not to have lost by reason of his ignorance of his rights owing to the fraud of the borrower. I agree with

the order proposed.