Dhonavakonda Gopalarao vs Thatha Venkatadri

Viswanatha Sastri, J.—Plaintiff is the Appellant in this Second appeal preferred against the decree of the District Judge of Nellore in A. S. 4/50 dismissing the Plaintiff''s suit. The 1st Defendant mortgaged his house in favour of the Plaintiff under Ex. A-1 dated 19-4-1934 and executed a second mortgage of the same property on 10-11-1939 in favour of the 4th Defendant. Both were simple mortgages.

The Plaintiff purchased the house under Ex. A-2 dated 7-4-1942 from the Official Receiver in the insolvency of the 1st Defendant & took possession. The 4th Defendant filed O. S. 309 of 46 on his mortgage and obtained a decree for sale of the house subject to the previous mortgage, Ex. A-1, in favour of the Plaintiff. Thereafter the Plaintiff brought the present suit O. S. 240/48 to enforce his mortgage Ex. A-1 by sale of the hypotheca.

To save the suit from the bar of limitation, the Plaintiff relied on an acknowledgment of liability in respect of Ex. A-1 made by the 1st Defendant, mortgagor, in the schedule of debts filed by him in his Insolvency petition 4/39. The 4th Defendant pleaded that the Plaintiff''s suit for sale on foot of Ex. A-1 was barred by limitation. Realising the possibility of an adverse decision on the issue as to limitation, the Plaintiff had his plaint amended in the trial court by introducing an alternative prayer for a declaration of the amount due under his mortgage.

The trial court held that the Plaintiff''s suit for sale on foot of his mortgage was barred by limitation but granted a decree declaring the amount due under the mortgage. There was no appeal by the Plaintiff against the decree refusing him relief by way of sale in enforcement of his mortgage. The 4th Defendant, the puisne mortgage appealed to District Court of Nellore which allowed the appeal and dismissed the suit, holding that the Plaintiff was not entitled to the declaration granted by the lower court. Hence, this second appeal by the Plaintiff.

Two points were argued before me by the learned advocate for the Appellant. First, he contended that the suit for sale on the mortgage was not barred by limitation and secondly that even if it was so barred, the declaration of the amount due under the mortgage should not have been refused in the circumstances of this case.

As regards the first point, there is a two-fold obstacle in the Plaintiff''s way. The trial court dismissed the suit in so far as it prayed for sale of the hypotheca on the ground that the claim was barred by limitation. The Plaintiff did not appeal against the decree but was content with the declaration of the amount due under the mortgage granted by the trial court.

On appeal by the 4th Defendant the Appellate court declined to grant any declaratory relief and dismissed the suit. In such circumstances, the Plaintiff cannot agitate the question of limitation on second appeal to this Court without appealing to the District Court against the decree of the trial Court dismissing his suit for sale of the hypotheca. The Plaintiff has in effect directly appealed to this Court from the decree of the District Munsiff and this course is not permissible. See Mahomed Khaleef Shirazi and Sons v. Les Tanneris Lyou-naises ILR 49 Mad 435: (AIR 1926 PC 34) (A).

It was next contended that a suit for sale on the mortgage would be in time and therefore the lower appellate court erred in reversing the decree of the trial court declaring the amount due under the mortgage. I am of opinion that the Plaintiff''s suit for sale on the mortgage Ex. A-1, instituted as it was more than 12 years after the money became due, was barred under Article 132 of the Limitation Act and that the acknowledgment of liability under Ex. A-1 made by the mortgagor in his Insolvency petition 4/39 was ineffective to save limitation against the 4th Defendant, the puisne mortgagee, whose mortgage had been executed long before the date of the Insolvency petition.

The lower appellate court relied on a decision of the Full Bench in Pavayi and Others Vs. Palanivela Goundan and Others, and held that the suit on the mortgage was barred by limitation and that the acknowledgment by the mortgagor did not bind the 4th Defendant, the puisne mortgagee. It was argued by the learned advocate for the Appellant that in the Full Bench case the mortgagor had parted with all his interest in the mortgaged property when he acknowledged liability for the mortgage debt, whereas in the present case he remained the owner of the equity of redemption when he filed I. P. 4/39 acknowledging the mortgage debt under Ex. A-1. It is true that Leach C. J. who delivered the judgment of the Full Bench posed the question for decision in these terms:

The question is whether the mortgagor who has lost all interest in the mortgaged property can, by an acknowledgment within the meaning of Section 19 or by the payment of interest or principle within the meaning of Section 20 (Limitation Act) bind the person on whom his interest has devolved.

This question was answered by the Full Bench in the negative An examination of the cases relied on by the learned Chief Justice shows that the decision did not turn upon the fact that the mortgagor had parted with all interest in the property before he made the acknowledgment. It would have made no difference in the principle applicable if the mortgagor had retained an interest in the mortgaged property at the date of his ac knowledge,

In Bolding v. Lane (1863) 1 De G. J & S 122 (G) Lord Westbury L. C. observed that it would be unjust to construe the provisions of the English statute corresponding to S. 19, Limitation Act, in such a way as to give the mortgagor a statutory power to deprive by his acknowledgment given to a prior encumbrancer, the subsequent encumbrancer of the benefit of the statute.

To quote the words of the Lord Chancellor the Court is bound by every principle of Judicial interpretation to find, if possible, a construction of the statute which does not involve consequences so inconsistent with natural justice." This principle was applied to Section 19 of the Limitation Act by Mukherjea J. in Surjiram Marwari v. Barhamdeo Persad, 1 Cal LJ 337 343, 348 (D). The reasoning and conclusion of Mukherjea J. in the above case were accepted in their entirety by the Privy Council in Bank of Upper India v. Skinner, ILR (1942) 23 Lah 686: (AIR 1942 PC 07) (E). After an elaborate discussion of the topic, Mukherjea, J. came to the following conclusion:

I think that the proper construction to be put upon the Section (Section 19 of the Limitation Act) is that when it makes an acknowledgment, given by one person operative as against Anr. on the '' ground that the latter derives title or liability from the former, it completes that the derivation of title or liability (which is the essential condition for the extended operation of the acknowledgment) takes place after the acknowledgment has been given.

In ILR (1942) 23 Lah 686: (AIR 1942 PC 67) (E) as in the Pull Bench case already cited, the mortgagors had parted with all their interest in the mortgaged property before the acknowledgments were made. That was the reason why the Judicial Committee concluded its judgment in ILR (1942) 23 Lah 686: (AIR 1942 PC 67) (E) in these words:

On the whole, therefore, their Lordships come to the conclusion, that the acknowledgments made in this case by the mortgagors after they had parted with all their interest to the purchaser, do not bind the purchaser.

The earlier passages in the judgment of the Judicial Committee contain a decision of the principle which does not turn upon the mortgagor having parted with all his interest in the property or retaining an interest at the time when the acknowledgment was made. The principle on which the Judicial Committee rested its decision would be equally applicable, whether or not the mortgagor retained an interest in the mortgaged property at the time of the acknowledgments.

The principle underlying the decisions of the full Bench and of the Judicial Committee was this: An acknowledgment by the mortgagor of a mortgage debt would be effective against the assignee of the equity of redemption or a puisne mortgagee only if the assignee or the puisne mortgagee derived his title from the mortgagor after the acknowledgment was made by him. If a person sought to be bound by an acknowledgment has, prior to such acknowledgment, acquired an interest in the property, the acknowledgment would not save limitation against him u/s 19 of the Limitation Act even if the person making the acknowledgment had not parted with all his interest in the property at the time of the acknowledgment.

It follows therefore that a mortgagor cannot give an acknowledgment of a prior mortgage debt so as to extend time against a subsequent mortgagee whose title or interest had been derived from the mortgagor before the acknowledgment was given by him. I am supported in this view by the decision in Naranappa Naicker Vs. Ramalingam Pillai and Others, .

It was next urge that there was no reason for disallowing the declaration granted by the trial court as regards the amount of the debt due under the mortgage Ex. A-l even though the suit for realisation of the debt was barred by limitation. It was argued that this declaration would be useful to the Plaintiff if the 4th Defendant the puisne mortgagee executed his mortgage decree in Order Section 309/46 and the property was sold and purchased subject to the Plaintiff''s mortgage as directed by the decree in the puisne mortgagee''s suit.

In that event, it is pointed out that the purchaser would not be entitled- to obtain possession of the property without discharging the prior mortgage, Ex. A-l, in favour of the Plaintiff and a declaration of the amount due under Ex. A-l was all that was necessary. Assuming but not deciding that the Plaintiff could hold his prior mortgage as a shield, in such circumstances, he could use it only in defence.

The very metaphor of the shield is significant in this connection and the Plaintiff cannot use the prior mortgage as a weapon of attack by filing a suit on the mortgage beyond the period prescribed by Article 132. The question whether any and, if what amount is payable to the Plaintiff under Ex. A-l would arise only when a purchaser in execution of the puisne mortgagee''s decree seeks to obtain delivery of possession of the property from the Plaintiff.

In this view a declaration of the amount now due under Ex. A-l would be premature and unnecessary. Section 42 of the Specific Relief Act gives the court a discretion in the matter of granting declaratory relief. The section does not authorise the court to grant eccentric declaratory decrees in any form the Plaintiff wants. In my opinion, it would be an abuse of the power to grant declaratory decrees, if as in this case, the Plaintiff who has lost his right to recover his mortgage debt could nevertheless be given a declaration of the amount due on the mortgage.

Such a declaration has to be made in a suit to enforce the mortgage by sale and is required to be made by the terms of Order 34, Rules 2 and 4 Code of Civil Procedure. The Plaintiff''s suit to enforce the mortgage by a sale of the hypotheca, having become barred, he is not entitled to a bare declaration of the amount due on the mortgage. Moreover, a suit for declaration has to be brought within six years of the accrual of the cause of action and there was no denial of the Plaintiff''s mortgage so as to give him a right to sue for a declaration.

For those reasons I agree with the conclusion of the lower appellate court and dismiss the second appeal with costs.