C. Ganapathi Mudaliar vs Krishnamachariar and Others

Miller, J.—Dealing first with the question whether the plaintiff was represented in the former suit O.S. No. 5 of 1886, and the execution

proceedings which followed on the decree in that suit, I find no difficulty in accepting the District Judge''s conclusion on that point.

The only evidence in the plaintiff''s favour consists of two facts, first, in such of the documents relating to the execution proceedings as have been

preserved, the date given as that of the decree is that of the decree against the father of plaintiff and not that of the final decree against the plaintiff

and his brother and his father; that it is suggested shows that the decree against plaintiff was never executed. But the two decrees were identical

and the one was substituted for the other after the appointment of a new guardian for the plaintiff and his brother, and the failure of that guardian to

put in a defence. The date is therefore pro bably a mere mistake. Secondly the name of the plaintiff''s father in some of these documents appears as

his guardian, and not that of his maternal uncle Govindaraju who is proved to have been duly appointed his guardian for the suit in supersession of

his father. Obviously these irregularities may have been due to carelessness of the court officials, and the effect of this evidence is more than

counteracted by the fact that Govindaraju did as a matter of fact act in the execution proceedings. He preferred an appeal to the High Court, the

nature of which cannot at this date be ascertained, and he prosecuted unsuccessfully an application for stay of the sale pending the disposal of the

appeal. It is not shown that his locus standi was questioned by any one at that time, and it is clear that he could have had no locus standi except as

guardian of the present plaintiff. His own story is that all he did was done under the directions of the plaintiffs father and that may probably be true,

for it is shown that the plaintiff''s father himself declined to represent his sons in the suit. No proof was laid before us that the plaintiff''s father was in

collusion with the mortgagee; if he had been so he would probably have remained on the record as his son''s guardian; it is more likely that he

wanted to set up the familiar case that his sons were not bound by the debts contracted by him, and looked to Govindaraju to make good that

case. He and Govindaraju were late for court as Govindaraju says and so the suit was decided ex parte, but it has been argued here that

Govindaraju was negligent or corrupt. I find no reason to suppose that the plaintiff was not duly represented throughout the execution proceedings.

As a matter of fact it has not been | contended here that the plaintiff and his brother had any good defence to the suit. They were both born after

the mortgages; they attempted before the District Judge to show that their father''s debts did not bind them, but they failed there and have not

renewed the attempt here. The other question is whether by reason of the provisions of Section 90 of the Trusts Act the mortgagee-defendants

hold the equity of redemption for the benefit of the plaintiff, so that it is still open to him to redeem the mortgages.

It is urged that the sale was in contravention of the provisions of Section 99 of the Transfer of Property Act (since amended and incorporated in

the Civil Procedure Code), and by this illegality the mortgagee who brought about the sale gained an advantage in derogation of the rights of the

mortgagor and so became constructively a trustee for him. It is clear to me that Section 99 has no application. The sale was on a decree for sale,

inartistically drawn, no doubt, but clearly a decree for sale, made in a suit for sale on a mortgage on the land sold, and there can so far as I can see

be no objection to it u/s 99. Sufficient time was allowed for redemption before the sale and the fact that a date for payment was not fixed in the

decree has not therefore prejudiced the mortgagor. Then it is said that the mortgagee failed to bring into his suit for sale two prior mortgages one in

his own favour, and the other assigned to him before the sale, and having failed to bring them into the suit, he notified them as reserved in the

proclamation of sale, and so deterred investors from competing with him for the acquisition of the equity of redemption, Thus he gained an

advantage in derogation of the right of the mortgagor. Assuming that Section 90 of the Trusts Act is applicable to the case of a mortgagee who is

not in possession, and taking it that the proclamation of sale is an act of the mortgagee as such, I do not think that the mortgagee in this case has

been shown to have brought himself within the section.

The mortgagor has a right to a reasonable time for redemption : that he has had : he has no right to require that prior mortgages should not be

disclosed in the proclamation of sale: if he had any objection on that ground either to the decree or to the sale he could have made his objection

before the sale and not now, 25 years after it. So far as we know he did not then suggest that there was any illegality in the mortgagee''s

proceedings; if he did he failed to convince this Court that he had any grievance. Nor can it be said that there was any such illegality; however

convenient it may be to require a mortgagee to bring in all his mortgages in his suit for sale on one of them, the weight of authority in this Presidency

seems to be against the view that he can be compelled to do so. Kizakini Akath Abdul Rakmian Naha Vs. Kizakini Akath Mahomed Naha, .

Radhakrishna Aiyar v. Muhusamy Sholagan ILR (1908) M. 530 : 18 M.L.J. 564 and Sesha Aiyar v. Kirshna Aiyangar ILR (1900) M. 96 : 12

M.L.J. 383.

In these circumstances the plaintiff, it seems to me, must fail. He does not allege in his plaint that the mortgagee''s proceedings, though legal,

were contrived with a view to secure an advantage to himself, and there is no issue framed for the investigation of that question. Some evidence

was given as to the value of the property, and the District Judge finds that the mortgagee bought it cheap, but neither side considered that a very

material question before the District Judge.

To direct an issue now to this point so long after the sale would seem to be futile; moreover it would raise a question which properly should have

been and possibly was raised by the plaintiff''s guardian before the sale, or in an application to set aside the sale u/s 311 of the Code. I do not think

that the plaintiff can ask for an enquiry now and he did not in fact ask for it. I would dismiss the appeal with costs.

If it was necessary to decide the question, I should have no difficulty in accepting the conclusion of the District Judge that defendants Nos. 6 to

15 are bond fide transferees for consideration within the meaning of Section 96 of the Trusts Act, and so are not affected by the trust. There is

really no evidence pointing the other way.

Tyabji, J.

The question involved in this appeal is whether the plaintiff is entitled to claim that he has the equity of redemption in certain lands

notwithstanding that the defendant''s father through whom the defendants claim the lands (and whom I shall include in the terms ""defendants"")

purchased the lands in an auction sale in execution of a decree for sale; in other words, the question is whether the defendants are owners of the

lands or merely mortgagees. The decree for sale is dated 15th April 1886. It is not in strict accordance with the form laid down in the Transfer of

Property Act for decrees for sale to be passed at the instance of mortgagees, but for the purposes of the present appeal it is not disputed that it

must be taken to have ordered the sale of the mortgaged property for the purposes of satisfying the claims of the mortgagee. The plaintiff however

claims that the purchase by the defendants in execution of that decree cannot avail against the plaintiff''s right to redeem, mainly on three grounds.

The first of these grounds is that the plaintiff was a minor interested in the ancestral property forming the subject of the mortgage and yet he was

either not at all, or not properly, represented in the suit on the mortgage, and consequently that the equity of redemption which was vested in the

plaintiff was not sold in execution of the decree passed in such a suit. The suit on the mortgage is O.S. No. 5 of 1886 in the District Court of North

Arcot. In that suit the plaintiffs father was the first defendant; the plaintiff was the second defendant and a brother of the plaintiff now deceased was

the 3rd defendant. The first defendant there was described as the guardian of his minor sons 2nd and 3rd defendants. The acting District Judge in

his judgment dated 15th April 1886 states what occurred before him in the following terms.

The first defendant appeared and said he was not the guardian of his sons and admitted the claim in other respects. The first defendant is

undoubtedly the guardian of his minor sons. He cannot discharge himself of that responsibility by his bare assertion''. The learned District Judge

accordingly passed a decree against the first defendant personally and for sale of the property, leaving the 2nd and 3rd defendants parties to the

decree, as represented by their father the 1st defendant. Subsequently the same learned Judge held on an application by one Govindaraju Mudali

the maternal uncle of the 2nd and 3rd defendants in that suit that "" the appointment of the 1st defendant as guardian was illegal and accordingly set

aside the decree as against 2nd and 3rd defendants and appointed Govindaraju Mudaliar, guardian instead by order dated 10th November 1886.

The case stood posted to 15th November 1886 and Govindaraju Mudali was ordered to put in his written statement on the date. On that date he

did not appear. "" Thereupon on 15th September 1886 a decree was again passed for the recovery of the sums due on the mortgage ""from the 1st

defendant personally and by sale of the mortgaged property.'''' The two decrees thus passed on 15th April 1886 and 15th September 1886 in Suit

No. 5 of 1886 were substantially in identical terms the only material difference being that in the latter judgment and decree the 2nd and 3rd

defendants were represented by their maternal uncle Govindaraju as guardian and not by their father. The execution proceedings in the said suit

were begun on 16th August 1886 a month prior to the amended decree. The first step in execution was by application No. 57 of 1886 for

execution of the decree of 15th April 1886 as it then was. In pursuance of this application, on 21 St. January 1887 there was a proclamation for

the sale of the property. On 29th February 1887 the mortgagee decree holder obtained leave to bid at the Court sale. In the meantime

Govindaraju the newly appointed guardian of the minor sons of the mortgagor had applied to the High Court to stay the sale. The application, was

dismissed by Parker J. on 1st August 1887. The sale was consequently held on 19th September 1887 and the mortgagee the father of the present

defendants having been the highest bidder he obtained a sale certificate on the 1st of February 1888. There were some other proceedings in the

High Court, described in the final order of the High Court as an appeal against the order of the District Court of North Arcot dated 14th

September 1887 passed on Miscellaneous Petition No. 57 of 1887 and execution Application No. 57 of 188 5 ( O.S. No. 5 of 1886) and the

appeal was dismissed. It would appear however that Govindaraju the guardian of the minors was not a party to these proceedings nor were the

minors otherwise represented in them.

Under these circumstances the question is whether the minors are bound by the sale of 19th September 1887, evidenced by the sale certificate

of 1st February 1888. There is no doubt that though in the decree as ultimately passed the minors were represented by Govindaraju and not by

their father; still in the execution proceedings the father was stated to be the guardian. Yet it is clear that Govindaraju knew of the execution

proceedings, that he went up to the High Court for stay of the sale and was not able to satisfy that Court that there was any ground for staying the

sale. It cannot be said therefore that the misdescription of the person representing the minors was more than an irregularity. It misled no one. It did

not prevent the minor''s interests being watched by the guardian.

I am therefore of opinion that the execution must be taken to have been under the amended decree in which the minors were properly

represented, and that they are bound by the sale notwithstanding that in the execution proceedings the guardian was misdescribed.

Next it was argued that the sale was invalid because it was not in accordance with the Transfer of Property Act, Sections 99 and 67 of the

Transfer of Property Act were relied upon. The argument was that Section 99 of the Transfer of Property Act provides in effect that the sale of a

mortgaged property shall be made at the instance of the mortgagee only in pursuance of a mortgage suit in accordance with the provisions of the

Act. Assuming that the principle underlying Section 99 may be stated broadly as above it seems to me that there is no provision of the Transfer of

Property Act which was disregarded in the suit of 1886, so as to make the decree passed in the suit any the less effective against the parties to the

suit.

The facts relevant to this contention are as follows:

There were three mortgages on the property which is the subject matter equally of the present suit and of Suit No. 5 of 1886. These mortgages

were dated 12th December 1876, 7th January 1879 and 10th May 1881 respectively.

The holder of the second of these mortgages was the father of the present defendants.

He became the assignee of the 3rd and 1st mortgages on the 20th January 1886 and 2nd November 1886 respectively.

On 19th March 1886, i.e. after taking the first of these assignments the mortgagee instituted a Suit No. 5 of 1886, to which I have before

referred. This suit was based on the 3rd mortgage alone and the plaintiff made no mention of the other mortgage which was in favour of the same

mortgagee nor of the 1st mortgage which was in favour of a third party, but which also as I have stated was assigned to the plaintiff in the suit on

2nd November 1886, i.e., about 8 months after the plaint was filed. In this suit the two decrees were successively passed to which I have referred

in the earlier part of my judgment. The decree in neither form made any mention of any other mortgages on the property. But in execution

proceedings and when the property was proclaimed for sale, the other mortgages were mentioned as prior encumbrances and, the sale certificate

declared that the purchase at the sale by public auction was"" subject to encumbrances.

It may be argued at the highest that the mortgagee by not having sued on his prior mortgages lost the right of suing on them at a later date. But

how can that fact affect the suit on the later mortgages ? If it did in any way affect the interests of the mortgagor (who was the only other person

concerned), it is extraordinary that the point was not taken in his written statement. I am unable to hold that as a matter of law the decree obtained

in O.S. No. 5 of 1886 is the less binding because the suit was based on only one out of several mortgages. It seems to me therefore that the

decree for sale must be considered to bind the defendants.

The third ground on which it is contended that the plaintiff may redeem the properties is that the defendants were themselves the mortgagee-

decree-holders, as well the purchasers in execution of the decree, and that their purchase of the mortgaged property under the circumstances to

which I shall refer below, was an advantage gained by a mortgagee which must enure to the benefit of the mortgagors by virtue of Section 90 of

the Trusts Act.

In order that the plaintiff may succeed in this contention it must be shown that the mortgagee (a) availed himself of his position as such (b) that

by doing so gained an advantage (c) that such advantage was in derogation of the rights of other persons interested in the property.

The advantage that the mortgagee is alleged to have gained is that he had the property put up for sale subject to his own prior mortgages

(which it is alleged he was not entitled to do) and that, on this being done the bids at the auction sale must have been less high than they would

otherwise have been. It seems evident that the contention u/s 90 of the Trusts Act could not have been taken in this form in the lower Court. For

one necessary ingredient in it is that the properties as a matter. of fact brought a smaller price than they ought to have that the mention of the other

mortgages in favour of the decree-holder deterred other would-be purchasers from bidding for the property. The fact that the properties were

worth much more than they fetched in the auction sale is no doubt to be inferred from the finding by the learned Judge that the properties were

really worth between Rs. 50,000 and Rs. 60,000 at the time of the sale, though they fetched only Rs. 8341 at the auction sale. The learned Judge

however does not draw the inference, but on the contrary states in express terms that ""both sides pointed out that the question of price is not

material in the case."" But though the argument u/s 90 does not seem to have been taken in the same form in the lower court as before us, yet that

section was evidently relied upon, and is referred to in the judgment of the lower court. Under these circumstances the mere omission to notice the

importance of proving the actual price of the properties and deducing from it that some advantage was gained by the mortgagee, might not in itself

have been a sufficient reason in a case of such difficulty as the present for preventing us from asking any further finding on the issues necessary for

determining the applicability of Section 90. But there are other reasons why the course does not seem to me to be advisable. I shall indicate those

reasons in considering the facts that are now before us and in applying them to Section 90 of the Trusts Act.

The first difficulty in the way of the appellant''s contention is to show that in the suit of 1886 the mortgagee availed himself of his position as

such. What the mortgagee did was to sue on one of his mortgages without mentioning his other mortgages. The mortgagor did not apply that the

other mortgages should also be made subject of the suit in 1886, nor does it appear that the mortgagee did anything that he was enabled to do

because he was the mortgagee and by which the other mortgages were prevented from being included in the suit. The plaintiff in that suit had at the

time when the suit was instituted only one other mortgage on the property. He became the assignee of the third mortgage only after instituting the

suit. Can it be said that the holder of the third mortgage also availed himself of his position as mortgagee by permitting the suit being brought on

only one of the mortgages in derogation of the rights of the mortgagor ? If the other mortgagee was not doing anything in derogation of the rights of

the mortgagor can the plaintiff in the suit of 1886 be placed on a different footing.

I have already referred to the next point which must be considered in connection with Section 90 of the Trusts Act whether the mortgagee has

gained an advantage and whether as a matter of fact other bidders were deterred from bidding for the property.

The third point connected with Section 90 is assuming that some advantage was gained by the mortgagee was it in derogation of the rights of

the mortgagor ? It is difficult to say what rights of the mortgagor were violated. I have already given reasons for coming to the conclusion that the

suit was not instituted by the mortgagee in 1886 and that the decree was not passed in contravention of any law. Were any rights of the mortgagor

violated by the mortgagee being permitted to bid at the auction sale? The mortgagee was entitled to ask for permission to bid, and there is nothing

to show that in getting the permission he was guitly of any fraud or otherwise violated the rights of the mortgagor. The fact that there were other

mortgages outstanding and that they were both in favour of the decree-holder, ought to have been a consideration to be borne in mind by the

Court in permitting the mortgagee-decree-holder to bid at the auction sale in execution of the decree. But it would be wrong after the lapse of so

many years and in the absence of clear evidence to proceed on the basis that this matter was not placed before the Court and due weight was not

given to it, this is the more so as the sale was sought to be stayed by an order of the High Court and the High Court saw no reason to stop it. Then

can it be said that the rights of the mortgagor were violated by the properties having been put up for sale subject to the prior encumbrances ? It is

true that in the events that happened, the mortgagee having himself purchased the properties the saving of those encumbrances could have no effect

or meaning for the holder of the encumbrances having become the owner of the property he could not have a mortgage on his own property. But

when the mortgagee was permitted to bid, it did not mean that no other person was to bid. Had any other person been the purchaser at the auction

sale, he would I presume have had to purchase the property subject to the prior encumbrances and then it could not have been said that the saving

of the rights under the prior encumbrances, was unmeaning. So that the proclamation of sale subject to prior encumbrances cannot be said to be in

violation of the rights of the mortgagor, and if so, then the purchase in pursuance of that proclamation by a person who had obtained leave to bid

was not in such violation.

I come therefore to the conclusion that Section 90 of the Trusts Act cannot avail the appellants, because assuming that the mortgagee gained

some advantage at the expense of the mortgagor, I am unable to say in the circumstances of this case that the advantage was gained by the

mortgagee having availed himself of his position as such or that the advantage was gained in derogation of the rights of the mortgagor. I do not

come to this conclusion without some hesitation as there seem to be indications that the mortgagee took full advantage both of his own position and

of what seems to be incomprehensible torpor and incompetence of the mortgagor. It is difficult to understand why the mortgagor did not take any

of the steps that were available to him for safe guarding his interest why he did not apply that the other mortgages be included in the suit, why he

did not ask for the mortgagee to be put on terms before being permitted to bid at the auction sale as for instance that if the mortagee-decree-

holder wished to bid at the auction sale then the sale should not be subject to the previous encumbrances in favour of the decree-holder himself. It

may be that the mortgagee acted upon a scheme for bringing the mortgaged property to sale under such conditions as to permit of his buying it up

at a very low price. But if there was such a scheme it seems to have been so planned as hot to contravene any provision of the law. On the other

hand it is possible that there were satisfactory explanations for all these matters, and that the mortgagee acted not only within his strict rights, but

that he did not do anything which the Court would have disapproved or desired to prevent, The events are too distant and the mortgagor was too

careless of his own interests to allow the plaintiffs now to seek the assistance of the Court.

I agree that the defendants 6 to 15 are bona fide transferees for consideration.

For these reasons I agree that the appeal should be dismissed with costs.

Miller and Tyabji, JJ.

There will be one set of costs against the appellants: but so that out of the costs that are allowed the transferees (respondents 6,8, 10 to 13 and

15) will get their full costs, and the balance will be received by respondents 1 to 5.