Maulavi Muhammad Musa vs Babu Aidal Singh and Others

Das, J.—I am of opinion that this appeal must be dismissed. In order to understand the point that has been argued before us, it is necessary to state the following facts. On the 23th October 1904 the mortgagor-defendant executed a mortgage-bond in favour of one Munshi Singh in respect of certain properties including a 2 annas 15 dam share in Mouza Deojibagh, which is the subject-matter of the present appeal. By two subsequent transactions, one dated the 22nd June 1910, the other dated the 12th November 1912, the defendant No. 17, the appellant before us, acquired a good title to 2 annas 15 dam share in Mouza Daojibagh subject to the mortgage in favour of Munshi Singh. In 1913 Munshi Singh sued upon his mortgage and sited defendant No. 17 as a defendant in his action. He got the usual mortgage decree on the 22nd December 1913 and the final decree on the 28th January 1915. Defendant No. 17 it will be noticed, did not appear in the action, nor did he make any attempt to save the property which he had purchased. But the mortgagor-defendants, with a view to save the properties from sale, borrowed Rs. 13,000 from the plaintiffs and, as a security for the loan, executed a mortgage-bond in favour of the plaintiffs in respect of certain properties with which defendant No. 17 is not concerned. It was found, however, that there was a much larger sum of money then due to Munshi Singh, and Munshi Singh proceeded to sell the mortgaged properties, including the property in which defendant No. 17 was interested, in execution of his mortgage-decree. The mortgagor-defendants then applied to have the sale set aside under Order XXI, Rule 90, of the Code, but, before the application could be heard and disposed of, they raised further loans from the plaintiffs, discharged the debt due to Munshi Singh and induced the auction-purchaser to consent to have the sale set aside. These loans were raised on the 29th October 1915 and the 3rd December 1915, respectively, on the security of certain properties including 2 annas 12 dam share in Deojibagh in which defendant No. 17 was interested. The present suit was brought to enforce the securities of the 26th October 1914, 29th October 1915 and the 3rd December 1915 respectively.

We are in this appeal concerned only with the question whether the plaintiffs are entitled to a decree in respect of 2 annas 12 dam share of Deojibagh. The position taken up by the appellant is this: that his purchase being antecedent to the transaction of the 29th October 1915 and the 3rd December 1915, respectively, his interest in the property purchased by him, cannot be affected by these transactions. I am unable to agree with this contention. Defendant No. 17 was a defendant in Munshi Singh''s action, and had the right and the opportunity to redeem the mortgages. He did not, however, avail himself of that opportunity, but left it to the mortgagor-defendants to redeem the mortgages. Upon such redemption, the mortgagor-defendants became subrogated to the position of Munshi Singh in relation to defendant No. 17 and became entitled to enforce the mortgage as against defendant No. 17 just as Munshi Singh could. But, in order to pay off Munshi Singh, the mortgagor-defendants had to borrow money from the plaintiffs. In my opinion, the plaintiffs stand exactly in the position of Munshi Singh or the mortgagor defendants in relation to defendant No. 17.

The proposition in the form in which I have stated it was not contested by the learned Vakil for the appellant; but he argued that neither the mortgagor defendants nor the plaintiffs could claim the right to enforce the security as against defendant No. 17, as it must in law be considered to have been extinguished by the final decree passed in Munshi Singh''s action on the 28th January 1915. If the learned Vakil be right in his contention, then, it must be conceded that the position of the plaintiffs is one of difficulty. But there is neither principle nor authority for the view which has been strenuously pressed before us by Mr. Purnendu Narain Sinha on behalf of the appellant. So far as principle is concerned, it will be found in the settled view of equity that, though a personal covenant is extinguished by a judgment upon it, the charge remains notwithstanding the judgment which does not determine the security or put an end to the charge: See People v. Sylvester (1883) 22 Ch. D. 98 : 52 L.J. Ch. 54 : 47 L.T. 329 : 31 W.R. 116. The question is also covered by authorities: see Bibijan Bibi v. Sachi Bewah.

On the last mentioned case an ingenious argument was advanced to us by Mr. Sinha. It was argued that, however correct the decision might have been u/s 89 of the Transfer of Property Act, the position now is different under the Civil Procedure Code. The only basis of the argument is, that Section 89 of the Transfer of Property Act now finds its place in the CPC as Order XXXIV, Rule 5. Section 89 of the Transfer of Property Act ran as follows: "If in any case u/s 88 the defendant pays to the plaintiff or into Court on the day fixed as aforesaid the amount due under the mortgage, the costs, if any, awarded to him and such subsequent costs as are mentioned in Section 94, the defendant shall (if necessary) be put in possession of the mortgaged property, but if such payment is not so made, the plaintiff or the defendant, as the case may be, may apply to the Court for an order absolute for sale of the mortgaged property, and the Court shall then pass an order that such property, or a sufficient part thereof, be gold, and that the proceeds of the sale be dealt with as is mentioned in Section 88; and thereupon the defendant''s right to redeem and the security shall both be extinguished." The question constantly arose in the Law Courts as to whether there was any right in the mortgagor judgment-debtor to stop the sale of the mortgaged property by payment of the debt before the sale actually took place, although an order absolute for sale might have already been passed. The CPC conceded that right to the judgment-debtors; but it used to be argued that as the right to stop the sale by payment of the debt was in fact the right of redemption, such a right could not exist after an order absolute for sale had been passed, as Section 89 of the Transfer of Property Act provided that, upon an order absolute for sale the defendant''s right to redeem and the security shall both be extinguished. The difficulty in the construction of Section 89 lead to a conflict of decisions; but that conflict was put an end to by the decision of the Special Bench of the Calcutta High Court in the case already cited. The Calcutta High Court took the view that the concluding words of Section 89, viz., "thereupon the defendant''s right to redeem and the security shall both be extinguished," related to the actual sale and distribution of the proceeds and not to the order absolute for sale. In other words, the defendants'' right to redeem and the security remain in full force until the actual sale and the distribution of the proceeds.

Section 89 of the Transfer of Property Act has now been repealed and re-enacted in Order XXXIV, Rule 5 of the Code; but there is this important matter for consideration, that the concluding words of Section 89, to which I have already referred, have not been re-enacted. I regard the omission to re-enact the concluding words of Section 89 as deliberate. It marks the sense of the Legislature that those words were capable of being misunderstood as in fact they were misunderstood. In my opinion, the provision of Order XXXIV, Rule 5, is far more unfavourable to the appellant than the provision of Section 89 of the Transfer of Property Act.

It was, however, argued that the mortgagor judgment debtor may have the right to stop the sale by payment of the debt before the sale, but that is a right which is now conferred on him by the Code and not by the law of mortgage. In other words, the right to stop the sale is in no sense a redemption of the mortgage. In my opinion the problem is not solved by a reference to the Code; but I do not appreciate the distinction between the right to redeem, and right to stop the sale by payment of the judgment-debt. In order to solve the problem, we must examine the view which equity took of a mortgage transaction. That view will be found in the judgment of Fry, L.J., to which I have referred. I hold that the final decree passed in Munshi Singh''s action did not extinguish the security, and that the plaintiffs, by virtue of the advance made to the mortgagor-defendants who, for their own protection, were obliged to discharge the mortgage debt of the appellant to Munshi Singh, are surrogated to the position occupied successively by Munshi Singh and the mortgagor-defendants in relation to the appellant, and are entitled to enforce the security as against the appellant. I would dismiss this appeal with costs.

John Bucknill, J.

This was an appeal from a decision of the Subordinate Judge of the Second Court of Patna, dated the 22nd of December 1917. The circumstances under which this litigation took place were very simple; but in order to understand exactly how this appeal arises it is necessary to refer to them very shortly.

Some of the defendants in the action had borrowed money from one Munshi Singh on mortgage. After this transaction these defendants sold to one Maulavi Muhammad Musa, who was the 17th defendant in these proceedings and who, having since died, is here duly represented, a certain portion of the property mortgaged. It is stated that Maulavi Muhammad Musa did not in fast have, at the time of his purchase, any notice of the encumbrance upon the property which he bought; whether this is really true or not, does not seem to be here very material. In 1913 Munshi Singh brought an action upon his mortgage; in that suit Maulavi Muhammad Musa was joined with many others, as one of the defendants; amongst those others was the present plaintiff; Munshi Singh obtained a preliminary decree and this decree was made absolute in 1915. The properties were sold and purchased by certain persons but possession was never granted to the auction-purchasers because an agreement was some to under which, Munshi Singh''s claim was satisfied. What, so far as here is material, really took place in connection with this compromise is that the present plaintiff, Babu Aidal Singh, made arrangement primarily with the judgment-debtors to pay off the amount due to Munshi Singh, and, for the security of what he advanced for this purpose, took certain mortgages from the judgment debtors of the properties, which included that property which had been purchased by Maulavi Muhammad Musa, subject to Munshi Singh''s prior encumbrance. In 1916 the plaintiff brought the present suit upon his mortgage-bonds; again, many persons interested were joined as defendants and, as I have stated before, Maulavi Muhammad Musa, and now his representative, since his death, was the 17th defendant. He obtained a decree, but Maulavi Muhammad Musa or his representative at the trial end hers on appeal contends that the plaintiff cannot sell the property which had been purchased originally by him (Musa). I find it somewhat difficult to understand exactly what was the legal proposition put forward by the learned Vakil for the appellant. But, so far as I could gather, it seems to have been contended that the appellant was not a party to the agreement by which the plaintiff paid off the debt due to Munshi Singh and that in consequence Munshi Singh''s encumbrance was by the compromise permanently taken off the property which the appellant had purchased; that, therefore, Munshi Singh''s judgment debtors could not mortgage the property which the appellant had purchased from them because by the payment by the plaintiff of the judgment-debtor''s debt to Munshi Singh the appellant had his title cleared of any burden. In order to see whether there is any force in this contention one must endeavour to ascertain exactly what really took place.

It must, in the first place, be admitted for both legal and equitable purposes here that the appellant''s purchase was undoubtedly subject to Munshi Singh''s mortgage; when Munshi Singh brought his suit the appellant was joined as a defendant, he had obviously then an opportunity of paying off the amount due in order to protect his encumbered ownership got the property which he had bought. But apparently be did nothing, for it would seem that he did not appear at the hearing of the suit and a decree was passed against him, as it was against several other defendants, ex parte. What was the effect of this? There was thus a decree against him which was in due course made absolute. The property was then put up for sale, and was actually sold; but, before the delivery of possession, the arrangement to which I have referred already was come to. We have not, unfortunately, got before us the full record of the execution proceedings, but it would appear that on the 1st of December 1915 the compromise petition was filed whilst on the 4th of the same month the order sheet of the Subordinate Judge reads: "The parties have filed a Solehnama. The case need not be tried; the case is disposed of according to the Solehnama." It is difficult to see what attitude could possibly have been taken up by the appellant with reference to this compromise which would have been effective to protect his interest unless he did come forward either at the trial of the case (which he did not) or as an auction-purchaser (which he did not) or as one who was ready to undertake the obligation undertaken by the plaintiff. I do not know whether he was actually, served with the final petition for compromise which was ultimately effected. I am inclined to assume that he was and to think that, even if he was not, it makes no difference to his position, The plaintiff, to my mind, when be had paid off the judgment-debtor''s indebtedness to Munshi Singh, satisfied the decree and, what is more important, the Subordinate Judge finds as a fact that it was the intention of the judgment debtors and of the plaintiff that the plaintiff should be (as he was) placed in the position in which Munshi Singh had been (and no doubt in a better position supplementary with regard to encumbrances upon the judgment-debtors property). It is suggested that the plaintiff cannot in equity be thus surrogated to Munshi Singh''s status, but I cannot see that there is any force in this contention. Where a person in agreement with judgment-debtors undertakes to relieve them from their debt to the judgment-creditor ON the condition that he takes over from the judgment-creditor the security which that judgment-creditor possesses, it, in my opinion, constitutes a subrogation the validity of which does not allow serious argument. The appellant had his rights throughout the course of the proceedings; he never chose to exercise them in any way; he allows judgment to go against him ex parte; and, therefore, has permitted his right, which, after all, was no more than an equity of redemption, to be extinguished by operation of law. With the subsequent compromise, it seems to me, that he was in no way concerned and that it would be absurd to suggest that having never, when he could, availed himself of his equities, he should be now heard to say that, having not done so, his equity should be given effect to.

I think that the Subordinate Judge was correct in his view and that the appeal must fail. I, therefore, consider that the appeal should be dismissed with costs.