Mangeshwar Narain Rao vs S. Shiva Rao and Others

Phillips, J.—Plaintiffs sue to redeem a usufructuary mortgage of 1868 for Es. 1,650. In the mortgage-deed there is a provision that the

mortgagor is to take back possession and pay a stipulated rent. In default of payment of this rent, the mortgagee was to recover possession and

the mortgagor was to pay a sum equivalent to 12 per cent. on Rs. 1,650 as rent from, the date of the mortgage-deed until the mortgagee got back

possession. The mortgagor failed to pay rent as stipulated and the mortgagee obtained a decree in 1873 for possession and for Rs. 200 odd

claimed as rent and for future rent. It does not appear that this decree was ever satisfied, and the mortgagee now claims to add the decree amount

and subsequent interest to his mortgage money. Under the mortgage-deed the payment to be made by the mortgagor was made a charge on the

property and there was an undertaking to pay it back together with the mortgage amount. The question for consideration is whether the mortgagee

is entitled to demand the decree amount of 1873 together with subsequent interest before redemption. It is contended for respondent that the

amount due became merged in the decree, and that as the decree has now become barred the amount cannot now be claimed. It would appear

that under American Law the respondent''s contention is correct (Vide Jones on Mortgages Section 936), but the position is not so clear either in

English or Indian Law, for it would appear from a passage in 21 Halsbury p. 325 that the original charge would still remain unless the decree

became satisfied, and it is questionable whether a decree that has become barrel by limitation is on the same footing as a decree that has been

satisfied. It cannot be disputed that a mortgagee is entitled, when accounts are settled at the time of redemption, to put forward claims, for the

recovery of which a suit would be barred, and it is unnecessary to cite authority for this proposition, but whether an amount for which the

mortgagee has obtained a decree, the execution of which is barred by limitation can be treated on the same footing as a barred debt is

questionable, In Hewanchal Singh v. Jawahir Singh ILR (1888) Cal 307 it was held that when a decree had been obtained for interest due on a

mortgage the tender of the principal amount alone would not be a proper tender of principal and interest, but the question of whether the

mortgagee could demand the decree amount again was not specifically decided, and in that case the decree was still alive. The Judgment of the

Judicial Committee is very brief and gives no reasons for the decision. In the present case, we have not to consider whether the decree amount and

subsequent interest can be claimed, for it is not claimed on the ground that the amount was decreed, but on the ground that the whole amount can

be claimed under the mortgage-deed. On looking into the de?d it appears that the penalty that could be claimed by the mortgagee on default in

payment of rent by the mortgagor, was a sum equivalent to 12 per cent interest per annum on the principal amount and although it is called rent it is

really interest on the mortgage money, and out of the total decree amount Rs. 198 is really one year''s interest on the mortgage money. To allow a

claim for this amount with subsequent interest from 1873 to date of redemption would be to allow compound interest for which no provision is

made in the mortgage-deed, No doubt the deed provides for interest on arrears of rent but the decree does not really provide for arrears of rent

and although it does not enforce the stipulation that interest shall be payable from the date of the deed, but only from date of default, it is impossible

to go into that question now, and we can only assume that only one year''s interest was due at date of decree. This amount without subsequent

interest, can alone be claimed. The balance of Rs. 5-6-0 due under the decree is for road cess, but if the 198 Rs. awarded is treated as interest the

mortgagor was under no obligation to pay road cess, which is only payable upon rent. In this view the appellant mortgagee is only entitled to claim

Rs. 198 as the amount due to him at date of the decree.

Treating this Rs. 198 as interest upon the principal which is made a charge upon the property can it be said that the charge upon the property

has become merged in the decree ? It is contended for appellant that Order 34 Rule 14 of the CPC supports the view that the claim can be

enforced apart from the decree, but that rule only provides that a decree for money in satisfaction of a claim under a mortgage is no bar to a

subsequent suit for sale in enforcement of the mortgage, but it is no authority for saying that the decree amount can also be claimed in the

subsequent suit. It is urged then on the other side that to allow the decree amount to be claimed again would be contrary to the principle of Order

2, Rule 2, for by bringing a suit for money the claim to make it a charge upon the property must be deemed to be abandoned, but in order that this

argument should succeed it is necessary to show that a suit against the property could have been brought when the claim was made for money

alone. In this case it certainly could not have been, and consequently the mortgagee''s claim is not contrary to the principle of Order 2, Rule 2. It

may, however, be contended that fey obtaining a decree for money, which could be enforced at once the mortgagee abandoned the charge which

he could only enforce later, and there is considerable force in this contention. It is the view taken in Imdad Hasan Khan v. Badri Prasad ILR

(1898) All. 401 in which case Hewanchal Singh v. Jawahir Singh ILR (1888) Cal. 307 was considered, and I think that it is in this case the correct

view for having elected to enforce one remedy and having obtained that relief, the mortgagee cannot now be allowed to abandon the relief first

chosen and fall back upon the other when his right to enforce the first has been allowed to be barred by limitation. It is possible that the Allahabad

view that even while the decree is alive the other remedy cannot be enforced goes too far but it is unnecessary to consider that now.

This appeal accordingly fails and is dismissed with costs.

In view of the above finding the memorandum of objections relating to mesne profits from date of tender of the mortgage money must be

allowed with costs. The amount which has now been found to be correct was tendered through Court, and u/s 84 of the Transfer of Property Act

interest ceased from that date. Time for redemption extended to four months from this date. Mesne profits to be determined before final decree.

Krishnan, J.

The suit from which this second appeal arises was one for the redemption of a mortgage by conditional sale of 1868. The plaintiff-mortgagor

sought to redeem on payment of the mortage money alone, viz., Rs. 1,650. The mortgagee claimed that he should be paid in addition a sum of Rs.

2,474-12-0 which was stated to be the amount of rent and interest on it due to him under the decree in O.S. No. 199 of 1872. The way in which

this decree came to be passed is as follows. Though the mortgage was one with possession it was arranged in the mortgage-deed itself that the

mortgagor should himself continue in possession as the mortagee''s tenant paying a stipulated rent, every year before the end of March. There was

a condition added that if the mortgagor failed to pay the rent on the due date in any year the mortgagee was to have the right to take possession at

once, and to charge rent at an amount equal to 12 per cent, interest on the mortgage money which works at Rs. 198 a year; this amount was much

higher than the rent originally fixed. It was also arranged that 12 per cent, interest should be paid on the arrears of rent and that the mortgaged

property should be'' liable for the total amount. There was a further clause that on redemption the mortgagor should pay the mortgage money

together with any arrears of rsnt and interest due. In 1871 default was made in payment of the rent due and the mortgagee brought O.S. No. 199

of 1872 against the mortgagor and obtained a decree for possession and for arrears of rent and interest at 12 per cent, and for some road cess, in

all for a little over Rs. 200, with future rent and interest at the same rate. In execution of this decree possession was taken by the mortgagee but it

does not appear that he has been paid the rent decreed''. It is that rent with interest added to it for the last 40 years and more that he now claims to

be paid before redemption. It is not denied that his decree was long ago barred by limitation.

The first Court allowed his claim but the Appellate Court disallowed it and he has appealed to us to claim it. It was conceded on his behalf that

his claim was not sustainable so far as it was based on the covenant to themortgage-deed to pay the arrears of rent with the mortgage money, in

view of the ruling in Ramakrishna Kukkilaya Vs. Nekker Kuppanna alias Raghavendra Rao and Others, , but it was argued that as in the present

case there was a charge on the property for the rent due he could rely upon it and claim to be paid the amount of it b3fore redemption in spite of

his having obtained a decree for it and in spite of that decree having become barred by limitation. That there is a charge created by the language of

the document must be admitted; and in this particular there is a difference between the present case and the one in Ramakrishna Kukkilaya Vs.

Nekker Kuppanna alias Raghavendra Rao and Others, . But I do not think that makes any real difference in the result.

I am inclined to agree with appellant''s argument that the obtaining of a personal decree does not per se put an end to the charge on the

property. That that is the English rule, is clear from the statement of the law in Halsbury''s Laws of England Vol. 21 Section 579 and from the

cases cited there in support of it Lloyd v. Mason (1845) 4 Hare. 130 : 67 E R 509 and O''Brien v. Lewis (1863) 3 De G. J. & Sect 606 : 46 E.R.

There is no reason why the same rule should not be applied in India. In fact Order 34 Rule 14 of the CPC recognises the principle and gives

the right to bring a second suit to enforce the security. It seems to me also that their Lordships of the Privy Council adopted this rule in the case in

Hewanchil Singh v. Jawahir Singh ILR (1888) Cal 307 though the matter is not free from doubt as their judgment is very brief; it may however be

remarked that they make no difference between interest for the first year for which a decree had been obtained even before payment into Court

and that for the second year. It is no doubt possible to take their-ruling to refer to interest for the second year as has been done by the Allahabad

High Court in Ramakrishna Kukkilaya Vs. Nekker Kuppanna alias Raghavendra Rao and Others, . But I think having referencs to the facts of the

case as appear from the report and the argument before the Privy Council the learned Judges of the Allahabad Court have taken too narrow a

view of the effect of that decision.

On the authority of the same Allahabad case the respondent has contended that the obtaining of a decree, by itself, put an end to the

mortgagee''s right to rely upon the charge. It is not clear from the report whether the decree which the mortgagee had obtained there for

Government Revenue paid by him, was a subsisting one at the date of the suit for redemption or not, and also whether it had not been assigned

away. If it was subsisting and unassigned I am, with all respect to the learned Judges, inclined to think that their ruling on the point has gone too far.

They treat the case as one of election of remedies and hold that having elected to sue on the personal covenant the mortgagee could not rely on his

right u/s 72 of the Transfer of Property Act. I do not think the principle of election was properly applied as in the second suit the mortgagee was

only a defendant and was not seeking any remedy himself but was only setting up a condition for granting to the mortgagor the right of redemption

sought to be enforced by him. To apply the principle of election in such a case seems to me to be in effect equivalent to extending the scope of

Order 2 Rule 2 of the CPC or of Section 43 of the old Code which was then in force, to defences; which is unwarranted. The argument that if the

mortgagee is allowed to rely on, his security for amounts for which he has obtained decrees the mortgagor may be compelled to pay the same

amount twice over in cases where those decreed are assigned to third parties does not seem to me to be of any force as the security is attached to

the decree and an assignment of the decree can no longer be availed of by the mortgagee. In fact it is exactly like the transfer of any other part of a

mortgagee''s claim to third parties. As I have already pointed out it is doubtful-whether too narrow a view has not been taken of the effect of the

Privy Council decision by the learned Judges. Furthermore the English rule on the point was not brought to their notice. For all these reasons I

think the ruling in that case on the point in question, cannot be followed if the decree there was a subsisting one and was not assigned away. But

even assuming that a mortgagee does not lose his charge by obtaining a personal decree but can plead it and claim to be paid the amount of it in a

redemption suit the appellant must still fail as I think that can be done only as long as the claim under the decree is not barred by limitation.

When the appellant obtained his decree for rent his rights with regard to it were regulated thereafter entirely by the terms of that decree; the

claim to it was taken out of the operation of the contract between the parties and passed into the domain of judgment. It was not open after wards

to either party to ignore the decree and fall back on their antecedent rights and obligtions. In short the claim for arrears of reat became merged in

the decree and though the charge did not become extinguished, it became thereafter attached to the decree amount so far as it represented the

original rent. If the decree was satisfied or assigned away by the mortgagee he could no longer enforce any charge. I think on the; same principle if

the decree ceased to be enforceable by limitation the charge also failed. By the obtaining of the decree the claim for rent, even though it was

originally a part of the mortgage transaction was dissociated from the mortgage and became an independent claim on the property; and therefore

the principle recognised in the cases in Athan Kutti v. Subhadra Anterjanam (1916) 32 M.L.J. 317 5 L.W. 461, Ramakrishna Kukkilaya Vs.

Nekker Kuppanna alias Raghavendra Rao and Others, and Ramakrishna Kukkilaya Vs. Nekker Kuppanna alias Raghavendra Rao and Others,

that a mortgagee cannot be allowed to take advantage of a redemption suit to enforce his stale and time-barred claims unconnected with the

mortgage under redemption applied to it. The cases in Parasurama Pattar Vs. Venkatachalam Pattar and Others, and Nathamuni Pillai v.

Venkammal (1917) 5 L.W. 593 cited by the appellant referred to claims arising under one and the same mortgage transaction. In neither of them

had any decree been obtained for a part of the mortgage claim as in the present case and therefore the question arising here was not considered.

The principle stated in the last case following the English cases of Edmunds v. Waugh (sic) L.R 1 Eq. 418 and In re Marshfield, Marshfield v.

Hutchings (sic) 34 Ch. D. 721 that the limitation of a mortgagee''s right to recover must not be read as a good plea to be urged by a mortgager

endeavouring to redeem, applies only to claims arising under the particular mortgage under redemption and not to those ontside it. In the Privy

Council case in Hewanchall Singh v. Jawahir Singh ILR (1888) Cal. 307 and in the two English cases of Lloyd v. Mason (1845) 4 Hara 132 : 67

E.R. 590 and O''Brien v. Lewis (1863) 3.De. G. J. & Sec 606; 246 E.R. 772 above cited the decrees were alive. In fact in O''Brien''s case Lord

Justice Knight Bruce adds a direction ""for allowing against the judgment what has been, or shall be, obtained by means of the lien,"" showing that

the enforcement of the lien was for the purpose of paying the decree debt. No case has been cited by the appellant against the view I am taking.

On the other hand Jones in his Treatise on Mortgages Section 936 states the American rule clearly thus "" The merger of the note in a judgment

does not extinguish the debt and the mortgagee continues a lien till it is satisfied or the judgment is barred by the statutes of limitation,"" and cites

numerous American authorities in support of it. Though this is the American Law it seems to me it enunciates a principle which we may well accept.

It follows then that assuming the appellant could have asked at the time of redemption to be paid the amount of his decree in O.S. No. 199 of

1872 so far as it represented the rent due to him, if his decree had been kept alive, his right to do so ceased on that decree becoming barred by

limitation.

The second appeal therefore fails and I agree with my learned brother that it must be dismissed with costs. As a result I also agree that the

memorandum of objections should be allowed with costs and the other portions of his order.