Kedar Nath Goenka and Another vs Bhagwat Prasad Kumar and Others

Courtney-Terrell, C.J.—This is an appeal from the decision of the Subordinate Judge of Monghyr in a suit to enforce a mortgage. The essential facts may be very shortly stated. The mortgagees suit is on a mortgage executed on 5th October 1917, for a sum of Rs. 6,291. It has been dismissed on the ground that the mortgage debt has been satisfied by the sale by the mortgagors to the mortgagee plaintiffs of the equity of redemption of the mortgage deed. The mortgage in question came about in the following way: On 4th October 1909, defendants 1, 2 and 3 executed a mortgage bond to the plaintiffs for Rs. 19,000 odd. On 5th October 1917 calculation was made as to the amount which remained due on this bond in respect of principal and interest and the sum so found was Rs. 38,000 odd. A new transaction was entered into. The mortgagors borrowed from the mortgagees another Rs. 5,300 odd and then executed in favour of the mortgagees two documents one of them a simple mortgage bond (the mortgage bond now sued upon) for Rs. 6,291 and seven properties were mortgaged by that" deed. As to two of these properties the mortgagees were given an anomalous usufructuary mortgage for Rs. 37,000 odd. The debt on these mortgages continued swelling up, and, on 24th October 1928, the total dues by the defendants to the plaintiffs amounted to Rs. 49,500 odd. Therefore the mortgagees and the defendants entered into a deed of sale and the defendants conveyed properties 1 and 2 out of the seven properties, the subject of the original mortgage, to the mortgagees for and in respect of the said sum of Rs. 49,500 odd and the mortgage debt was put an end to. In the sale deed the following expression occurs: after reciting that the consideration price for the conveyance of the properties 1 and 2 was to be Rs. 49,500. the deed continued thus:

Keeping intact the effects of the mortgage created under the mortgage (simple) and sudbharna (usufructuary) mortgage bonds aforesaid; (and we) put the said purchaser in possession of the vended property in our place, admitted him to be the absolute owner, and set off the whole and entire consideration in respect of the dues of the said purchaser under both (his) said bonds.

The reference to the keeping intact of the effects of the mortgage has been relied upon by the plaintiffs in this case, and it is argued on their behalf that it was intended that, not with standing the deed of sale and the apparent extinction of the mortgage debt, the mortgagees should remain in possession of the full rights under their mortgage bond. In other words, the argument amounts to the contention that by virtue of the sale deed the mortgagees became not only mortgagees again but further, proprietors by virtue of the conveyance. This would be an entirely anomalous situation for which I am sure there is no precedent. The words as to keeping alive the mortgage bond are merely an assertion of the same rights that are conferred by reason of Section 101, T.P. Act, and they are intended merely to preserve to the mortgagee a shield against the claims of persons setting up a subsequent charge upon the same properly. They have no reference in their proper construction either in the deed or in the Act to the maintenance of any mortgage rights by the mortgagee against the mortgagor. Properties 1 and 2, which were the subject of the sale deed, consisted of a three annas odd share in mauza Sikandarpur which was the property mortgaged. After the execution of the sale deed the plaintiffs registered themselves as proprietors of the property conveyed.

They subsequently found out the position of the defendants second party. These are persons who had obtained a money decree against defendant 3. Defendant 3, who is one of the mortgagors, had a one anna odd share in the said properties and the plaintiffs found that they were in a position of doubt as to whether those defendants second party, (who in execution of their money decree had attached that one anna odd share of defendant 3), had any right to do so and they took up the position in their plaint that they had not received that which they had bargained to receive under the sale deed and therefore the sale deed had no effect upon the rights under the mortgage deed sued upon and they therefore purported to sue defendants 1, 2 and 3 impleading the defendants second party and claiming a mortgage decree for sale of the said properties. The defendants second party, as I have said, having attached this one anna odd share of defendant 3, put it up for sale on 6th August 1928, before the date of the sale deed in question and bought it in and got delivery of possession. The case on behalf of the plaintiffs is put, I think, in two alternative ways. First of all, it is contended that under the sale deed the rights of the plaintiffs were preserved as mortgagees not with standing that they also became proprietors under the sale deed. This contention I have already dealt with. Secondly, it is said that owing to the failure of the defendants first party to deliver the property contracted to be delivered, that is to say, the three annas share and being only in a position to deliver a two annas share in Shikandarpur, there has been a total failure of consideration.

For a short time during the argument I was, speaking for myself, attracted by this proposition, but an examination of the fact shows that it is not a case of total failure of consideration, but a failure of consideration with regard to a quantum only. Unless it could be satisfactorily argued that the sale deed was of no effect on a total failure of consideration the decision cannot be otherwise than that the mortgage debt was extinguished by the execution of the sale deed. This proposition has been clearly exemplified by the decision in Lachman Prasad v. Lachmeshwar Prasad 1922 All 76 and the learned Judges in that case pointed out that there had been a partial failure of consideration; but where a person contracts to sell something and fails to carry out the contract partially there is an appropriate remedy for breach of contract and the contract is not wholly void, and they pointed out that in such circumstances the execution of the sale deed put an end to the mortgage debt. In short, a new contract is entered into by which the former relationship of a mortgagor and mortgagee is terminated and the new relationship of a vendor and vendee is substituted.

For a breach of that new contract a remedy is open to the person who is damaged by its breach, but there can be no question of the rights under the old contract surviving. The case principally relied upon by Mr. Mullick on behalf of the plaintiffs Upendra Nath Samanta v. Saroda Prasad Ghosh 1932 Cal 772, is clearly distinguishable. There was no question of merger there of the rights of the mortgagee by reason of the transfer, because the property which was purported to be transferred was not the property which had been mortgaged. There having been no merger, therefore, the rights of the mortgagee survived the contract of sale. Here the property actually transferred, though not actually delivered, was the property which was the subject of the equity of redemption and was the property which had been the subject of the mortgage. For these reasons, in my opinion, the appeal fails, the learned Subordinate Judge having rightly dismissed the suit on the ground that it was not maintainable, the mortgage bond having been discharged by the execution of the sale deed. I would, therefore dismiss the appeal with costs.

Dhavle, J.

I agree. The appellants took the sale deed in satisfaction of the moneys due under the mortgage and the sudbharna. It is not their case definitely that the sale deed has failed in part, but they brought the suit on the footing that the defendants second party claimed a prior title in respect of the share of defendant 3 who was one of the mortgagors. Whether those defendants have a good title or not as against the appellants has not yet been determined; they asserted it against the appellants in the land registration proceedings, and there it was the appellants that succeeded. That title involves questions of fact on which no issue was framed in the lower Court nor any evidence given. Assuming, however, that the sale deed taken by the appellants does fail in respect of the part claimed by the defendants second party, it is impossible to let the plaintiffs sue on the mortgage, while keeping the bulk of the property conveyed to them by the sale deed. As a matter of fact they stand registered at present in the collectorate registers as owners of the entire mortgaged property. The provision in the sale deed regarding "keeping intact the effects of the mortgage created under the mortgage (simple) and sudbharna (usufructuary) bonds" does not seem to me to have the effect of keeping up the mortgage as against the mortgagors: indeed, it is conceded that it was not open to the appellants by any arrangement with the mortgagors to constitute themselves mortgagees and owners at one and the same time. Plainly, that provision was made in the sale deed merely in view of Section 101, T.P. Act, which entitled the "owner" of a mortgage, by express words or necessary implication, to provide that the mortgage shall continue to subsist. The section makes the mortgage available not as against the mortgagor but as against puisne incumbrances and others occupying the same position; while as against the mortgagor, the mortgagee''s rights are replaced by his rights under the sale deed taken in discharge of the mortgage debt.

Mr. Mullick for the appellants has contended that no distinction was made in Gopal Sahoo v. Gunga Pershad Sahoo (1882) 8 Cal 530., between total failure of consideration and partial failure of consideration for a sale deed taken by the mortgagee. In the particular case there was a total failure of consideration, and their Lordships held that the mortgagee was accordingly entitled to fall back upon the mortgage. When however, as in the present case, there is only a partial failure of consideration, the position is entirely different. So far as the mortgagors as such are concerned, they are discharged by the sale deed, though it may be that the mortgagees as purchasers will be entitled to damages for the failure of the vendors to make out a good title to some part of the property conveyed. The sale not failing as a whole, the relation of mortgagor and mortgagee, which was replaced by that of vendor and purchaser, cannot be recalled as against the mortgagors-vendors, cf. Lachman Prasad v. Lachmeshwar Prasad 1922 All 76, even irrespective of the consideration that the purchaser cannot both approbate and reprobate the sale. The appellants cannot, therefore, in view of their acceptance of the sale deed sue on the mortgage, making the mortgagors the defendants first party nor could they have sued on that document leaving out the mortgagors. The suit brought by them was, therefore, defective not merely in a technical sense but on a matter of substance, and was rightly dismissed by the lower Court.