Chinnah Goundan and Others vs Subramania Chettiar and Another

Ramachandra Iyer, J.—This is an appeal against a preliminary mortgage decree passed by the Subordinate Judge of Vellore O. S. No. 89

of 1949. Defendants 2 to 4 (sic) are the plaintiffs. The three items of properties which are the subject-matter of the decree originally belonged to

two persons. Mottayya and Ramaswami. They mortgaged the properties in the year 1921 under three documents, Exs. A-1, A-2 and A-3, to one

Venkatachala.

Venkatachala in turn executed a mortgage on 1-2-1923 under Ex. A-4 in favour of one Muthukumara whereby he created a security over his

mortgage rights acquired under Exs. A-1 to A-3 and his other properties for a sum of Rs. 7500. Muthukumara, whose interests with regard to that

debt subsequently devolved on his brothers Narayanaswami, was then in the position of a sub-mortgagee with reference to the suit properties.

A few months later Venkatachala purchased the equity of redemption in the suit properties from Mottayya and Ramaswami. In 1929,

Venkatachala mortgaged under Ex. B-2 his interest in the suit properties to one Vaidyalinga. In execution of a money decree against Venkatacliala,

his rights, viz., the equity of redemption in the suit properties, were sold in court auction, and purchased by one Nalesa, Natesa obtained

possession of the suit properties through court in February 1934.

Thereafter Narayanawami filed O. S. No. 3 of 1936 in the District Court of North Arcot at Vellore, for enforcing the mortgage Ex. A-4. While

Vaidyalinga, the subsequent mortgagee of the said properties was impleaded as a party to that suit, Natesa, the owner of the equity of redemption,

was not so impleaded. The suit properties were mentioned as items Nos. 9, 12 and ''13 in that suit but in view of the fact that Natesa was not

impleaded there was no effective representation of the persons interested in the right of redemption of Exs. A-1 to A-3.

In O. S. No. 3 of 1936 a preliminary mortgage decree was passed on 31-8-1938 and the same was followed by a final decree on 29-10-1940.

In the interval, that is, on 1st May 1940 Vaidyalinga purchased the rights of Natesa in the suit properties. The decree-holder Narayanaswami filed

E. P. No. 35 of 1942 for sale of the mortgaged properties including the suit properties. Vaidyalinga objected to the sale of the suit properties on

the ground that his predecessor-in-title, Natesa, the owner of the equity of redemption was not a party to the suit and, therefore, the decree could

not bind his interests.

The executing court overruled the objection and directed the suit properties to be sold. Against that order Vaidyalinga preferred an appeal C. M.

A. No. 368 of 1946 to this court. Lakshmana Rao and Horwill JJ., who heard the appeal held that as Natesa was not made a party to the suit,

neither he nor Vaidyalinga who subsequently obtained his rights would be bound by the decree regarding the suit properties.

But as there was no finding by the executing court as to whether those persons did acquire the rights claimed, the learned Judges remitted the case

to the executing court for an enquiry in that regard and directed that if it was proved Natesa acquired the equity of redemption in the suit properties

prior to the institution of O. S. No. 3 of 1936 and that Vaidyalinga acquired those rights from him, the court should proceed to sell only the

mortgage right under Exs. A-1 to A-3. But if on the other hand Vaidyalinga failed to prove those points, the suit properties, that is, those covered

By Exs. A-1 to A-3 could themselves he sold.

In furtherance of the order of remand, the District Judge of North Arcot enquired into the matter and held that Natesa had validly acquired the

equity of redemption in the suit properties prior to the institution of O. S. No. 3 of 1938 and that Vaidyalinga had acquired his rights. He,

therefore, directed execution should proceed not against the properties as such but by sale of the mortgage rights under Exs. A-l to A-3. That

order has become final between the parties.

The decree-holder put up the other mortgaged items for sale and purchased them himself. He then assigned the decree to the plaintiff in the

present suit. Conformably to the order of the court, the plaintiff sought execution for the realisation of the balance due under the mortgage decree

by sale of the mortgage right over the suit proper-lies. That was by his application in E. P. No. 15 of 1946 which resulted in the sale of the

mortgage right, the plaintiff himself becoming the purchaser. The sale certificate Ex. A-10 which was issued to him specifically stated that what was

only sold was the mortgage right. In the meanwhile Vaidyalinga''s rights had been acquired by defendants 2 to 4.

The plaintiff thereupon instituted the present suit for recovery of Rs. 5250 as representing the balance due under the mortgage decree (after

some small remission) and prayed for the sale of the properties covered by Exs. A-1 to A-3. Paragraphs 7 and 8 of the plaint make it clear that

what was sued for was the balance of money due under Ex. A-4 and not that due under Exs. A-1 to A-3. The case for the plaintiff was that as the

equity of redemption in the suit properties was not sufficiently represented in the previous suit, he by the present suit was giving an opportunity to

the defendants to redeem the properties and if the defendants failed to redeem, a decree for sale of the properties should be passed.

The defendants raised several contentions regarding the maintainability of the suit and they were embodied in the several issues framed in the case.

Before the learned Subordinate Judge it was specifically stated on behalf of the plaintiff that the suit was not one to enforce the mortgages Exs. A-1

to A-3. The learned Subordinate Judge held that the plaintiff''s claim was based neither on Ex. A-4 nor on Exs. A-1 to A-3, but on the judgment in

O. S. No. 3 of 1936 which according to him gave the mortgagee a fresh cause of action.

In that view he did not give any finding on the question whether the mortgages under Exs. A-1 to A-3 were valid, duly executed and supported by

consideration or whether the claim thereunder was within the period of limitation. After disposing of certain other issues with which we are not

concerned in this appeal, he passed a preliminary mortgage decree for sale of the Suit properties. That decree is the subject of this appeal by

defendants 2 to 4.

As stated already, the basis of the judgment of the lower court was that the plaintiff had obtained a right to sue for the balance of the decree

amount on the basis of the judgment to which the defendants were not parties, independent of his rights either under Ex. A-4 or Exs. AT to A-3. In

coming to that conclusion he relied on two decisions of this court reported in Vadavatte Gopalan Nair Vs. Moideen Madar Rowthen, and

Ramanuja Krishna Aiyangar and Another Vs. Ramanuja Alwarappa Aiyangar, . In the former case, a necessary party interested in equity of

redemption was not impleaded to a mortgage Suit, the decree in which resulted in a sale.

The purchaser filed a suit on the mortgage again as against the party omitted to be impleaded in the previous litigation. It was held by Madhavan

Nair J. that the suit would not be barred by limitation as there would be a fresh cause of action by reason of the decree in the imperfectly

constituted suit. In coming to that conclusion the learned Judge followed the earlier but subsequently reported decision in Sambasiva Ayyar Vs.

Subramania Pillai and Others, .

In the latter case a mortgagee brought a suit to enforce his mortgage, obtained a decree for sale and in execution purchased the property. When he

tried to take possession he was obstructed by certain persons interested in the equity of redemption who were not parties to the suit. The

mortgagee thereupon brought a suit on his mortgage as against those persons. It was contended that such a suit was barred by limitation.

The learned Judges held that the second suit could not be barred by limitation as it was based on a cause of action which came into existence by

reason of the judgment in the imperfectly constituted prior suit. In coming to that conclusion the learned Judges observed that the court auction-

purchaser if he happened to be a stranger would have a right to sue as it were for contribution against the owner of the equity of redemption who

was not impleaded as a party to the previous suit, to recover such proportionate amount to which the item purchased by him would be liable on a

charge of that item, the owner having a right to redeem by paying off such portion.

If, however, the purchaser happened to be the mortgagee decree-holder it was held that he would have one of two alternative remedies (1) as a

purchaser, to the rights aforesaid, (2) as a mortgagee, to bring a fresh suit on the entire mortgage by impleading the party omitted to be impleaded

in the previous suit. In the former case it was held the cause of action would be the judgment or obstruction when the purchaser attempted to take

possession.

The rule so stated would invest in the mortgagee a cause of action by reason of a judgment against persons who were not parties thereto. Even

apart from that, the remedies might lead to complications in working them out. Let us suppose that in an imperfectly constituted suit one item of

mortgaged property was purchased by a stranger and another item by the mortgagee decree-holder, the former could on the principle recognised

above be redeemed by the owner of the equity of redemption by paying an aliquot share of the mortgage debt chargeable on his property, the

mortgagee purchaser could by electing to sue on his alternative right sue on the entire mortgage and make the property liable over again.

The principle of the decision in Sambasiva Ayyar Vs. Subramania Pillai and Others, cannot be reconciled with some of the earlier and later cases,

viz., (Chinta) Chandramma and Another Vs. Gunna Seethan Naidu, and Adikesavalu v. Munuswami, 1918 2 Mad LJ 486: AIR 1049 Mad 255,

which would support the view that if the mortgage decree becomes ineffective by reason of the failure to comply with the provisions of Order

XXXIV, Rule 1, C. P. C. the mortgagee could again sue on the mortgage, but that the infructuous suit would not save the running of time.

In Kowtha Sooryanarayana Rao Vs. Sarup Chand Rajaji, , it was held that on principle, if the rights of parties who were not im-pleaded remained

unimpaired the rights of person who failed to implead them should remain unimpaired and the mortgagee was held entitled to sue again on the

mortgage. In view of the conflict mentioned above, this appeal was directed to be posted before a Full Bench.

The learned advocate for the appellants contends that on the pleadings and the circumstances of this case it would not be necessary to consider

whether Sambasiva Ayyar Vs. Subramania Pillai and Others, was correctly decided. He contends that the suit in the present case was laid on Ex.

A-4 as such, and not on the basis of either Exs. A-1 to A-3 or even on any proportionate liability of the suit property as contemplated in that

decision.

On a reading of the plaint it is clear that there is a combination of two claims in the suit, one on the basis of the mortgage, Ex. A-4, the balance

of money due thereunder being the subject matter of the suit, and the other on the basis of Exs. A-1 to A-3 by reason of the plaintiff claiming that

he as a purchaser of those rights was entitled to the decree sought. This combination of the two claims was however resolved by the plaintiff

making his position clear at the trial that he was not suing on the basis of Exs, A-l to A-3.

The plaint was also not based on the foot of the proportionate liability of the suit properties as in the first of the cases contemplated by Ramesam J.

in Sambasiva Ayyar Vs. Subramania Pillai and Others, . There is, therefore, no justification for the view of the lower Court that the suit was based

(assuming that such a suit was maintainable) on the judgment in O. S. No. 3 of 1936. On the facts of this case we cannot but come to a conclusion

that the plaintiff has sought relief only as a mortgagee under Ex. A-4.

The question then is whether in the circumstances of this case a suit on the basis of Ex. A-4 is maintainable or whether the plaintiff''s remedy is

only to enforce the mortgages Exs. A-l to A-3. If the remedy of the plaintiff is only to enforce the latter, the question whether a suit on Ex. A4

could be said to be within time by reason of accrual of a fresh cruise of action on the basis of the judgment cannot arise. Nor is it necessary to

canvass the correctness of the view expressed in Sambasiva Ayyar Vs. Subramania Pillai and Others, in regard to the maintainability of a suit on

the Judgment in O. S. No. S of 1936, as we have found that the present suit was not laid on such a basis.

Before considering that question it is necessary to find the remedies available under the law to a sub-mortgagee. A debt secured by a mortgage

being the property of the mortgagee, he can, in his turn assign or create a security over it. If he chooses to create a mortgage over it, such a

mortgage is called a sub or derivative mortgage. The sub-mortgagee will have the security of the mortgage right created by the original mortgagor

for the payment of his debt. In relation to the sub-mortgage, the mortgagee will be the mortgagor. He will therefore have a right to pay off his debt

and redeem the property.

There will be a corresponding right in the sub-mortgagee to sue on the sub-mortgage and to enforce the sub-mortgage as against the security, that

is, the mortgage right. In neither of these proceedings will the mortgager be interested. Order XXXIV Rule 1 C. P. C. states that all persons

interested in the mortgage security or in the right of redemption should be joined in a suit relating to a mortgage. In a sub-mortgage the only person

interested in the mortgage security is the sub-mortgagee and the | person interested in the right of redemption would be the mortgagee. The

mortgagor will not be a necessary party to either of the suits mentioned above.

The mortgagor who has a right to redeem his mortgage cannot be deprived of his right to redeem by the creation of a sub-mortgage by his

mortgagor. The redemption of the mortgage will put an end to the sub-mortgage and the sub-mortgagee being a person interested in the mortgage

right would be a necessary party to a suit for redemption by the mortgagor. The sub-mortgagee who, to a limited extent, is an assignee of the

mortgtge right will have a corresponding right to sue the mortgagor by reason of his derivative title.

In enforcing his sub-mortgage he can bring to sale the properties mortgaged to his mortgagor, viz., the mortgagee, instead of merely bringing to sale

the interest of the latter. In such a case the form of the decree would be to direct an account being taken between the mortgagee and the

mortgagor, and also between the sub-mortgagee and the mortgagee, and declare their respective rights in the sale proceeds of the mortgaged

properly. Form No. 11 to Appendix D to the First Schedule to the CPC provides for such a case. In A.L.A.R.R.M.V. Vellayan Chettiar Vs.

Mahalinga Pathan and Others, , Venkataramana Rao J. observed :

Ordinarily a sub-mortgagee''s right just like any other mortgagee is to enforce his mortgage and bring to sale the property mortgaged to him, that

is, the interest of the mortgagee in the property mortgaged to the latter. But the law permits him to enforce sale of his said property under

circumstances and conditions which would entitle the original mortgagee to bring the properties to sale. To such a suit the original mortgagor should

be made a party. The principle on which this is allowed is that a sub-mortgagee''s claim is by a derivative title from the mortgagee and he is in fact

an assignee of the mortgagee. When the mortgagee effects a mortgage of his mortgage interest he is creating a transfer of his rights as mortgagee

though not absolutely. Therefore when a sub-mortgagee sues for sale of the property he is enforcing the right of the original mortgagee.

Thus the two remedies which a sub-mortgagee has got are distinct and should in our opinion be mutually exclusive, the first being based on the

covenant, the second on a derivative title to the mortgage right. Ramshankarlal v. Ganesh Prasad, ILR 29 All 385 was a case where a Full Bench

of the Allahabad High Court considered the right of the sub-mortgagee to the first of the two remedies mentioned above. It was held that a sub-

mortgagee of mortgage rights in immove able property was entitled to a decree for sale of the mortgage tight of his mortgagor, viz., the mortgagee.

In Amratlal v. Naranbhai, 9 Ind Cas 765, a derivative or sub-mortgagee was held entitled to sue the mortgagee without making the original

mortgagor a party and that the rights of the mortgagor could not be affected by any decree in such a suit and that even if the decree in the suit

spoke generally of the sale of the mortgaged property, the mortgaged property would not include the interest of the mortgagor in the property.

The second remedy available to a sub-mortgagee has been recognised in Muthu Vijaya v, Venkatachellam Chetty, ILR 20 Mad 35, where it

was held that a sub-mortgagee was entitled to a decree for the sale of the original mortgagor''s interest in the circumstances which would have

entitled the mortgagee on the date of the sub-mortgage to claim that relief. Subramania Iyer J., observed at page 38,

The original mortgagor and the sub-mortgagee, as the holders of different interest in one and the same specific property, stand to one another in a

relation that gives rise to certain rights and duties inter se. It is admitted that a mortgagor whose right to redeem originally existed as against the

mortgagee alone, becomes by virtue of the sub-mortgage, entitled to exercise that right as against the sub-mortgagee also, who consequently must

be made a party to redemption proceedings. Now, as the sub-mortgagee may be redeemed by the original mortgagor, it ought to be held that the

former may foreclose the latter, where that relief can be claimed or, where such relief cannot be granteed, he may obtain an order, for sale and

thereby put an end to the other party''s right to redeem. For it is only Just and reasonable that, whilst the law, on the one hand, recognises a right in

the original mortgagor to redeem the sub-mortgage, it should give the latter, as against the former, the generally correlative right (Daniel''s Chgncery

Practice, 6th Edn. at p. 1412) to foreclose or sell.

In T.S. Moidheen Pichai Sahib Vs. Nagoore Meera Rewther and Others, , a sub-mortgagee sued for sale of the property impleading both the

mortgagor and mortgagee. The Court decreed the suit on the claim in the sub-mortgage which was smaller than the amount due on the mortgage.

The mortgagee thereafter filed his suit on the mortgage. It was held that the causes of action for the two suits were different and that the decision in

the former suit would not operate as res judicata in regard to the latter suit.

K. Vengannan Chettiar and Sons Vs. N. Ramaswami Pillai, , was a case where originally a sub-mortgagee filed a suit impleading both the

mortgagee and mortgagor praying for sale of the mortgaged property. The plaint was sought to be amended by abandoning the relief as to sale of

the property and restricting it to sale of the mortgage right. The learned Judges held that the amendment seeking a different relief was based on the

same cause of action, namely, the sub-mortgage. Leach C. J., observed at p.107 (of ILR Mad) : (at p. 499 of AIR):

A sub-mortgagee has two courses open to him. He can, if he wishes, limit his suit to the sub-mortgagor, in which case he only asks for the sale of

the sub-mortgagor''s interest in default of payment of the decretal amount. On the other hand, he may join the original mortgagor and ask for a

decree for the sale of the mortgaged property in default of payment. In this case the relief to which he is entitled is to be gathered from Form No.

XI in Appendix D to the Civil Procedure Code.

It is unnecessary for the purpose of the present case to decide whether the cause of action for the two remedies open to a sub-mortgagee are

the same or distinct. But the two remedies available to a sub-mortgagee are based on different rights and can only be alternative ones. If the sub-

mortgagee has elected one of the two remedies and obtained a decree the cause of action on the sub-mortgage would be merged in the judgment

and it would not be open to him to revive it for relief on the basis of the alternative remedy.

In the instance case the sub-mortgagee should having regard to the judgment of this court in C. M. A. No. 368 of 1946 be deemed to have

elected the first of the two remedies open to him. He had obtained a decree, completely executed the same exhausting the entire mortgage security.

There was no defect in the representation of any interest as the suit was only in respect of the mortgage right under Exs. A. 1 to A. 3, the

mortgagee the owner thereof being a party. If a stranger had purchased those rights, the security which the sub-mortgagee got would have been

transferred to the proceeds and he would have a further right to sue on the sub-mortgage.

Such a right would be inconsistent with the stranger purchaser''s right to sue on the mortgage (Exs. A. 1 to A. 3) which he undoubtedly obtained

by virtue of his purchase. There will be no difference if the purchaser happens to be the mortgagee decree-holder. In that case he as the full

assignee of the mortgage rights, freed from the sub-mortgagee by reason of the court sale, could only sue on the mortgage (Exs. A. 1 to A. 3). To

allow the mortgagee to fall back on Ex. A. 4 would be to nullify the court sale which had the effect of the merging the interests of the sub-

mortgagee and the original mortgagee.

The contention on behalf of the plaintiff is that originally the mortgagee had sued for the sale of the properties and as he could not obtain a sale

by reason of his failure to implead the mortgagor''s representatives the principle of the decision in M.N. Nagendran Chettiar Vs. Lakshmi Ammal, ,

would apply and that he could therefore sue again on the mortgage. We cannot agree with this contention.

Ry reason of the order of this court in C. M. A. No. 368 of 1946 and the consequent judgment of the District Court in E. P. No. 35 of 1942, it

should be held that the mortgagee filed a suit only for the limited relief of the sale of the mortgage right; at any rate that was what he was held

entitled to.

The mortgagor was not a necessary party to-such a suit and his absence in the record could not render the judgment ineffective against any person

or be contrary to the provisions of Order XXXIV, Rule 1, C. P. C. ILR 56 Mad 84G : AIR 1933 Mad 5S3 and the several cases that followed it

held that where a mortgagee brings a suit on the mortgage but without impleading all the persons interested in the equity of redemption on the date

of suit, obtains a decree in execution whereof the mortgaged properly is sold, the persons who were not made parties would not be affected by

these proceedings and they would have their right of redemption unimpaired.

If they happened to be in possession, the court, sale could not entitle the purchaser to eject them. In such a case the remedy of the mortgagee or

the purchaser who by reason of his purchase obtained, the right of the mortgagee at least would be to file a fresh suit on the mortgage, if in the

instant case the suit had been laid for sale of the mortgaged properties, that is, if the order in E. P. No. 35 of 1942 had been otherwise, it may be

that the mortgagee or the purchaser could on the principle above mentioned file another suit on Ex. A. 4 after impleading defendants 2 to 4.

But for the reasons slated by us already that is not the case here. The present is a plain case where the sub-mortgagee brought to sale the mortgage

right in a properly constituted suit and where the decree has been fully executed. The claim of the sub-mortgagee has been worked out and there is

no right of redemption outstanding in respect of the sub-mortgage. The right of the plaintiff is only under his purchase in court auction which gave

him a valid title as a mortgagee under Exs. A-1 to A-3 and a suit under Ex. A-4 can no longer lie. The result is that this appeal is allowed and the

plain tiff''s suit is dismissed. The parties will bear their respective costs here and in the court below.