N. Ananthayya Holla vs Thimmaju Hengsu

Ramaswami Gounder, J.—This second appeal is posted before this Bench on, an order of reference made by one of us (Govinda Menon,

J.), and which runs thus:

The decision in Eswara Krishna Aiyar and Another Vs. Mariya Susai Reddiar and Others, , on which the Lower Appellate Court relies runs

somewhat counter to another Bench decision in Arunagiri Mudaliar v. Radhakrhhna Ayyar (1941) M.L.J. 520, as well as the decision in AIR

1942 50 (Privy Council) Post before a Bench.

The facts giving rise to this appeal may be briefly stated. The mulgeni right in the plaint-schedule properties belonged to one Subbu Punjathi by

purchase in April, 1908. A few months later, in August, 1908, the muli right in the properties was purchased by her and her son, Ramayya Punja.

Subbu Punjathi had a daughter who is the present plaintiff. In January, 1936, Subbu Punjathi and her son, Ramayya Punja, executed a mortgage in

favour of the plaintiff for a sum of Rs. 2,000. It must be borne in mind that Subbu Punjathi owned the entirety of the mulgeni right and half of muli

right in the suit properties, and her son, Ramayya Punja, was entitled to a moiety only in the muli right; and the entire rights of both were mortgaged

to the plaintiff. In March, 1941, and under document, Exhibit A-5, the mother, Subbu Punjathi, transferred all her rights in favour of the plaintiff

herself for Rs. 1,500 made up of Rs. 1,289 being the mother''s half share of the mortgage liability, and the balance of Rs. 211 paid in cash. Thus,

the plaintiff who held the mortgage rights in respect of the entire rights also became the proprietor by purchase from her mother, of the latter''s

mulgeni right and half muli right. As regards the moiety of muli right which the son, Ramayya Punja, owned, a creditor of his, namely the defendant

who had obtained a decree in S.C.S. No. 4 of 1045, brought that right to sale, subject to the undischarged moiety of the mortgage amount, and

purchased it himself. Thus, the defendant became entitled to half of muli right. While so, the plaintiff as the mortgagee commenced the present

action, out of which this second appeal arose, to recover the moiety of the mortgage amount yet remaining due on her mortgage by the sale of half

the muli right purchased by the defendant, leaving out the mulgeni right and the other half of the muli right purchased by herself from her mother.

Among other contentions, the defendant put forward the contention that he was liable to pay only a proportionate amount of the debt, and not the

entirety of the balance remaining due on the mortgage. His contention was, of course, based on the last paragraph of Section 60 of the Transfer of

Property Act, namely, that in as much as the mortgagee herself had purchased the interest of the co-mortgagor, the mortgagee cannot throw, on

the remaining properties the entire burden of the mortgage amount remaining due, but that the plaintiff as the mortgagee would be entitled to a

decree only for such amount as the defendant would be liable to contribute u/s 82 of the Transfer of Property Act in respect of Ramayya Punja''s

half share in the muli right.

It is admitted that the mulgeni rent payable to the owner of the muli right was 24 muras of rice and Rs. 10-10-0 in cash. According to the

evidence of the defendant examined as D.W. 1, the total income of the suit properties would be 40 muras of rice; whereas P.W. 1, the son-in-law

of the plaintiff, would put it at 37 muras. But he spoke to 70 kattas of jaggery in addition and also the possibility of two crops in good years. We

may therefore accept 40 muras of rice as the total income of the suit properties, as representing the annual value of the properties. Of that income,

Ramayya Punja''s half shire of muli right would be 12 muras of rice, so that, 28 muras would represent the interest of the mother, Subbu Punjathi.

In other words, if contribution is levied u/s 82 in respect of the interest owned by the two mortgagors, it must be in the proportion of 28 : 12, and

the defendant''s contention, therefore, is that out of the total amount of the mortgage amount, his liability should be worked out on that proportion.

The learned Counsel for the defendant who is the present appellant also pointed out that a sum of Rs. 250 was given credit to in the plaint as the

arrears of Mulgeni rent due to his predecessor, Ramayya Punja, but that it had been deducted out of the total amount due on the mortgage. That

sum of Rs. 250 for mulgeni rent was an amount payable to the defendant, and so, that should have been deducted not from the total amount of the

mortgage, but from out of such amount as the defendant should be held liable for in respect of the mortgage. Both the lower Courts held, relying on

Eswara Krishna Aiyar and Another Vs. Mariya Susai Reddiar and Others, , that the plaintiff was entitled to throw the entire burden of the

mortgage amount remaining due on the defendant''s share, and accordingly passed a decree in favour of the plaintiff.

The learned Counsel for the appellant contended that the lower Courts were erroneous in applying the said decision to the facts of the present

case, and that this case falls directly within the exception of the last paragraph of Section 60 of the Transfer of Property Act. That paragraph

provides that nothing in that section shall entitle a person interested in a share only of the mortgaged property to redeem his own share only, on

payment of a proportionate part of the amount remaining due on the mortgage except only where a mortgagee or if there are more mortgagees than

one, all such mortgagees, has or have acquired, in whole or in part, the share of a mortgagor. The rule enunciated in that paragraph prohibits what

may be called partial redemption of a part of the property on payment of a proportionate part of the mortgage amount. The mortgage security

being one and indivisible, the mortgagee has got a right to insist upon a redemption of the entire mortgage. But there is an exception created to that

rule, in cases where the mortgagee acquires in whole or in part the share of a mortgagor.

In the first place, it will be seen that exception can come into play only where there is a person interested in a share only of the mortgaged

property and seeking to redeem his own share only on a payment of proportionate part of the amount remaining due on the mortgage, and a

mortgagor whose share the mortgagee had acquired. In other words, it contemplates more than one person owning a share in the mortgaged

property, either jointly or in common, or, in separate portions. Therefore, if there is only one mortgagor owning the entirety of the mortgage

security and if the mortgagee should acquire a part of the security, then, there can be no question of the said exception coming into play at all. In

such a case, the purchase money may go in redemption of the mortgage amount, and the mortgagee will be entitled to enforce his mortgage against

the remaining properties for the whole of the remaining amount due on his mortgage. Such was the case in Eswara Krishna Aiyar and Another Vs.

Mariya Susai Reddiar and Others, . In that case, the first defendant who owned two one-anna shares in a certain village executed a mortgage for

Rs. 2,000 in 1913 in favour of the plaintiff''s predecessor. Then, in 1914, in respect of the same shares, the first defendant executed a second

mortgage in favour of the fourth defendant, the appellant in that case. Then in 1915, the first defendant, sold one of the two one-anna shares in

favour of the plaintiff''s predecessor for a sum of Rs. 1,500, It made no reference at all to the mortgage of 1913. The consideration of Rs. 1,500

was all paid in cash. Then, in 1920, the first defendant created two further mortgages in favour of the fifth defendant and somebody else. Finally, in

1925, he executed a further mortgage in respect of the remaining one-anna share in favour of the plaintiff''s predecessor as a renewal of the

mortgage of 1913; and it was on that mortgage that the suit was laid by the plaintiff for the full amount without giving credit for the one-anna share

sold in 1915. It was contended for the fourth and fifth defendants that the effect of the sale of one-anna share in 1915 was not only to take that

share out of the security but to extinguish half of the mortgage debt. No question of contribution arose in that case, because there was only one

mortgagor, and from that mortgagor, the mortgagee purchased a part of the mortgage security. Therefore, the question that arose in that case was

whether the value of that one-anna share should go in reduction of half the mortgage amount. The defendants'' contention was upheld and the

reduction contended for by them was allowed. In that sale-deed, there was no reference to the mortgage at all and the whole of the consideration

of Rs. 1,500 was paid in cash. But still, the learned Judge held that the property might well have been worth Rs. 5,000 or even Rs. 10,000; that is

to say that Rs. 1,500 did not represent the full value of the property and that what was sold for that amount was only the equity of redemption and

therefore the mortgagee''s interest in the property should be valued and adjusted towards the mortgage claim. In answering that question, the

learned Judge had to consider whether the sale was only of the equity of redemption or of the whole of the mortgaged property; and he postulated

this test:

Did the mortgagee make an allowance for the mortgage money or part of it which was due to him in calculating the consideration for the sale?

The answer was that if the sale-price represented only the value of the equity of redemption, then, it must be held that the mortgage was satisfied to

the extent of a moiety and if, on the other hand, that sum represented the full value of the property which was paid in cash, then there was nothing

to be adjusted towards the mortgage amount. That decision does not help us in the present discussion, though it illustrates the instance of there

being only one mortgagor and the mortgagee purchasing a part of the mortgaged property from him. In such a case, the exception embodied in the

last paragraph of Section 60 does not come into operation. The question in such cases would be whether the sale price should go in satisfaction of

the mortgage or not.

The second class of cases to which that exception would not apply is where the mortgagee acquires the share of a mortgagor in execution of a

decree on a prior mortgage. The principle of that rule is that the purchase in execution of a prior mortgage decree releases the property from the

burden of the subsequent mortgages, and so, free also from any claim for contribution by the mortgagee who purchases such property. That is

illustrated by the decision in 14 CWN 1034 (Privy Council) . In that case, the mortgaged property consisted of two villages of Kachaura and

Agrana. In 1868, one Gardiner mortgaged the whole of Kachaura to Nand Kishore, the predecessor-in-title of the defendants, and one Dwarka

Das. In 1870 Gardiner again mortgaged Kachaura together with Agrana to Nand Kishore. The mortgagee obtained a decree on the mortgage of

1868, and under that decree, the whole of Kachaura was sold and was purchased by the mortgagee himself. But there was the mortgage of 1870

in respect of both Kachaura and Agrana. The plaintiffs acquired the equity of redemption in Agrana and brought the suit out of which the appeal

arose for redemption on payment of a proportionate amount of the mortgage money. The Judicial Committee affirmed the decree of the High

Court that Agrana was liable for the whole mortgage debt and the appellants could not therefore redeem it on payment of only a proportionate

amount. The same principle is illustrated in Rameshwar Prasad Agarwala v. Devendra Narayan Ojha (1943) ILR 22 Pat. 637 where certain

properties belonged to three brothers, Sivendra, Ramendra and Devendra and in a partition suit pending amongst the three brothers, a receiver

was appointed in respect of one item of property, namely, Bhakura village. With the sanction of the Court, the receiver executed a mortgage of the

entire property on 12th June, 1929. But, in favour of the same mortgagee, the second brother, Ramendra, had executed an earlier mortgage on

3rd June, 1929, in respect of his one-third share. In execution of that mortgage, the mortgagee who was the plaintiff in that case purchased that

one-third share in 1937. Subsequent to the mortgage by the receiver, the first brother, Sivendra, mortgaged his one-third share to the same

mortgagee in September, 1929, and that share also was purchased by the mortgagee in execution of a decree obtained on that mortgage. Thus, the

mortgagee had purchased the two-third share of the first two brothers. There remained only the one-third of Devendra; but it was covered by the

receiver''s mortgage. The mortgagee obtained a decree on that mortgage, and in the final decree proceedings, the question arose what amount the

mortgagee was entitled to claim as against Devendra''s share. Though he had purchased the shares of the two brothers, the purchase of

Ramendra''s share was in execution of a decree on a mortgage which was anterior to the receiver''s mortgage; and so, the contribution was levied

only on the shares of Sivendra and Devendra, with the result that the mortgagee was held entitled to claim a half share of the mortgage amount as

against the share of Devendra.

The third class of cases which would not fall within the aforesaid exception in the last paragraph of Section 60 of the Transfer of Property Act is

this. It has been held by a Full Bench of our High Court in V. Perumal Pillai Vs. R.M.M.R.M. Raman Chettiar, that a mortgagee voluntarily

releasing from the suit a portion of the mortgaged property is not bound to abate a proportionate part of the debt and is entitled to recover the

whole of the mortgage amount from any portion of the mortgaged property, though a release of certain items by the mortgagee may not have the

effect of releasing those items from liability for contribution u/s 82 of the Transfer of Property Act. That decision was given prior to the amendment

of 1929, which inserted the word ''only'' after the word ''except'' in the last paragraph of Section 60. That amendment was apparently intended to

confirm the view taken by the Full Bench of our High Court. Even apart from that, the principle of that decision was affirmed by the Privy Council

in AIR 1942 50 (Privy Council) , where it was held that u/s 60 of the Transfer of property Act, the integrity of a mortgage is not broken except

when the mortgagee had purchased or otherwise acquired as proprietor a certain portion of the property mortgaged. At page 621, their Lordships

observed:

But the exception is made in the latter case (purchase by the mortgagee) not on the footing that it is unjust that the full burden of the security should

be imposed on the other parts of property, but because their claim to contribution has now become a claim against the mortgagee or his interest in

the equity of redemption. Circuity of action is thought to be avoided if partial redemption be permitted.

If, therefore, it is open to a mortgagee to release a part of the mortgaged property without any obligation to abate a proportionate part of the

mortgage amount and if subsequent to such release he purchases the property, then, such a case would not fall within the exception of the last

paragraph of Section 60. In such a case he would not be purchasing the property qua mortgagee. By his release, the property goes out of the

mortgage without any corresponding obligations on his part; and if he purchases the property, then, he would be purchasing a property

unconnected with the mortgage, so that, the purchase, if at all, may bring about only a reduction of the mortgage amount and would not affect his

right to proceed against the other properties for the balance remaining due on the mortgage. That class of cases is well illustrated by the decision in

Eswara Krishna Aiyar and Another Vs. Mariya Susai Reddiar and Others, . That arose out of a suit filed to enforce a mortgage executed by

defendants 1 to 3 in favour of defendant 5, covering two sets of properties called Orathur properties belonging to defendants 1 and 2 and

Perumbakkam properties belonging to defendant 3. As it was a usufructuary mortgage, there was a lease back, and in respect of that lease there

were arrears of rent due to the mortgagee from defendant 3 of over Rs. 19,000. For a consideration of Rs. 15,000 forming part of the arrears of

rent, defendant 3 sold Perumbakkam village to the mortgagee, defendant 5. Subsequently the mortgage was assigned by defendant 5 to the

plaintiffs. The interest of defendants 1 and 2 in Orathur properties had passed to defendant 8. Thus, it will be seen that there were two mortgagors

owning two different sets of properties. The mortgagee, defendant 5, became himself the purchaser of one set of properties, while the interests of

the other mortgagors, defendants 1 and 2, devolved on defendant 8. The suit was laid for the full amount. The main defence of defendant 8 was

that the plaintiffs were not entitled to recover the full amount, but only a proportionate share. The learned District Judge accepted the contention

and gave a mortgage decree for the proportionate part of the mortgage amount. On appeal, Venkataramana Rao and Kunhiraman, JJ., allowed the

appeal and granted a mortgage decree for the amount claimed in the plaint. It will be seen that in that case, the mortgagee purchased

Perumbakkam properties from defendant 3 after paying the full value, namely, Rs. 15,000 being the arrears of rent due from defendant 3. The

whole of the consideration for the purchase was de hors the mortgage and the full value of the property was paid, disregarding the mortgage. In

such circumstances, that transaction was interpreted by the learned judges as embodying a release of the property from the mortgage and a

purchase by the mortgagee. At page 1012, their Lordships observed:

When a mortgagee purchases the property free of his mortgage and pays the full value of the property, the substance of the transaction is that the

mortgagee gives up his mortgage right and purchases the property as if it were an unencumbered property paying the full value therefor. The

acquisition by the mortgagee in such a case would be not as a mortgagee. If the acquisition is viewed as an acquisition by the mortgagee in the

character of a mortgagee, it would mean that the mortgagee was also purchasing his own interest. Therefore the transaction can only be viewed as

a release of his mortgage right and then a purchase by him.

And, again, at page 1014, they observed:

Therefore, the principle underlying the decision shows that it is not in every case a purchaser acquiring the mortgaged property or a portion thereof

must be deemed to be acquiring the share of the mortgagor within the meaning of Section 60, but it is only in cases where the mortgagee in the

character of a mortgagee acquires the equity of redemption outstanding in the mortgagor. Therefore, if before or at the time of acquisition the

mortgagee renounces his character of mortgagee and purchases the property, the last clause of Section 60 would have no application.

Mr. Lakkappa Rai, the learned Counsel for the plaintiff-respondent, contended that the present case would fall within this class of cases, and,

therefore, outside the exception contemplated in the last paragraph of Section 60. This contention must be examined with reference to the recitals

in the sale-deed, Exhibit A-5, and the circumstances in which the purchase was made. This is a case where, apart from the mortgage amount, the

vendor was not owing any other amount to the vendee the plaintiff, and the only liability was under the mortgage. The vendor apparently thought

that she was liable for a moiety of the mortgage amount, and so, she sold all the interest she held in these properties in discharge of that liability and

for cash, Rs. 211. In such circumstances, can it be said that the plaintiff as mortgagee released the vendor''s interest before she purchased it? The

learned Counsel contended that the exception would come into play only if the sale is of the equity of redemption and not of the whole of the

property and that what was sold under this document is the whole of the property. Of course, all that a mortgagor would be entitled to convey is

only the equity of redemption, and there can be no question of a mortgagor being able to convey the whole of the property. That the mortgagor

can do, only if by a release the equity of redemption is enlarged into full ownership: and that is the principle which was enunciated in Eswara

Krishna Aiyar and Another Vs. Mariya Susai Reddiar and Others, . cited above. In this case, the question, therefore is whether, on the terms of

the sale deed, there is any warrant for the inference that there must have been such a release by the mortgagee before she purchased it. In our

view, the important circumstance is that a moiety of the mortgage amount was itself the substantial portion of the consideration for the sale. The

inference as to release would be appropriate in a case where the purchase is made for an entirely independent consideration, as was the case in

Eswara Krishna Aiyar and Another Vs. Mariya Susai Reddiar and Others, .. In the present case, as we said as the mortgage amount itself forms

the substantial portion of the consideration, it only means that the equity of redemption was sold for a cash consideration of Rs. 211. That sale

deed could well have been drafted as if the property was sold subject to the mortgage and for a cash consideration of Rs. 211, in which case the

learned Counsel for the respondent himself conceded that he would be put out of Court. It does not make much difference how the recitals are

formulated in the document. In our view, the substance of the transaction was the purchase of the equity of redemption for a consideration of Rs.

We therefore, hold that the present case would not fall within the principle of the decision in Eswara Krishna Aiyar and Another Vs. Mariya

Susai Reddiar and Others, , but would be covered by the exception to the last paragraph of Section 60.

There is only one other decision to which our attention was invited, namely, R. Arunagiri Mudaliar Vs. T.R. Radhakrishna Aiyar and Others, .

For the purpose of the present appeal that is not a very material decision, as it only illustrates the application of the exception embodied in the last

paragraph of Section 60. In that case, 22 items were subject to a mortgage in favour of the plaintiff. Of those items 1 to 3 belonged to defendant 1,

and items 4 to 22 were purchased by him subject to an earlier mortgage. In execution of the decree obtained on the earlier mortgage items 4 to 10

were purchased, and so, those items went out of the picture. The remaining items were only 1 to 3 and 11 to 22. Defendant I had executed a

second mortgage in respect of items 4 to 22 in favour of the plaintiff, and in execution of a decree obtained on that mortgage, he became the

purchaser of items 11 to 22. Thus, while items 1 to 3 belonged to defendant I, the mortgagee-plaintiff became the owner of items 11 to 22 in

execution of a decree obtained on his second mortgage. The plaintiff brought a suit to recover the entire amount due on the mortgage from items 1

to 3. It was held that the plaintiff was entitled to claim only the proportionate amount. At pages 525-526, it was observed:

Applying this principle, therefore, we are of opinion that in the absence of any other circumstances such as we have mentioned above, it must be

held that the plaintiff''s right to recover his money under the mortgage, was, on his purchasing, the equity of redemption in a portion of the property

mortgaged with him, extinguished pro tanto; or in other words, he remained entitled to recover only a proportionate part of the amount due on the

mortgage.

For reasons given, we hold that the present case falls within the exception to the last Paragraph of Section 60, and as such, the plaintiff can claim

only the proportionate amount.

The learned Counsel for the respondent contended that in this case there was a contract to the contrary within the meaning of Section 82. It

has been held by a Full Bench of our High Court in Damodarasami Naicken and Others Vs. Govindarajulu Naidu and Another, , that the words ""in

the absence of a contract to the contrary"" in Section 82 of the Transfer of Property Act relate to a contract to which the mortgagee is a party and

such a contract will run with the land. It was further held that there was nothing, however, to preclude the mortgagors from agreeing between

themselves what their rights and liabilities with regard to the contribution inter se shall be. But such a contract will not run with the land and cannot

affect a third party unless he agrees to be bound by it. In this case, our attention has not been drawn to any evidence on which we could conclude

that there was any contract to the contrary even amongst the mortgagors inter se, let alone any contract to which the mortgagee could be said to

have been a party. In the sale deed, Exhibit A-5, there is no doubt the recital that the mother was liable for a half share of the mortgage liability,

and a similar statement in the proclamation of sale by the defendant that the property was brought to sale subject to the other moiety of the

mortgage liability. But all that will not constitute an agreement between the mortgagors inter se or between them and the mortgagee.

The learned Counsel for the defendant-appellant also contended that he would be entitled to the benefit of the Madras Act IV of 1938-a relief

which was claimed in the lower Courts but refused on the basis of the decision in Kaligoundan v. Annamalai (1943) 2 M.L.J. 53. But it has been

over-ruled by the Supreme Court in Cheruvu Nageswaraswami Vs. Rajah Vadrevu Viswasundara Rao and Others, . It was observed in that case

at page 256:

It is not necessary that the applicant for relief himself should be liable for the debt on the date that Act came into force. The right to claim relief as is

well settled by decisions (Vide Perianna Goundan Vs. Sellappa Goundan and Others, , of the Madras High Court is not confined to the person

who originally contracted the debt, but is available to his legal representatives and assigns as well; nor is it necessary that the applicant should be

personally liable for the debt. The liability of a purchaser of the equity of redemption to pay the mortgage debt undoubtedly arises on the date of his

purchase; but the debt itself which has its origin in the mortgage bond did exist from before his purchase, and if it was payable by an agriculturist at

the relevant date, the purchaser could certainly claim the privileges of the Act if he himself was an agriculturist at the date of his application. The

material question, therefore, is whether the mortgage debt was payable by an agriculturist on 22nd March, 1938?

It would therefore follow that the defendant as the purchaser of Ramayya Punja''s interest in 1946 would be entitled to the relief under the Act.

Even if he did not own any other properties, by reason of this very purchase he became an agriculturist by the time the suit was filed. Nothing has

been proved to deny him the benefit of the Act. The only thing that can be stated against this relief, is that Ramayya Punja, though he owned

agricultural lands, might not have been entitled to the benefit of the Act, because he might have paid profession-tax. But there is no evidence

whether he paid any profession tax, or, when and how much he paid. We hold that the defendant is entitled to claim the benefit of the Act.

We therefore allow the appeal and direct a decree to be passed by the trial Court in accordance with our findings. The appellant will be

entitled to his costs of this appeal; but the parties will bear their own costs in both the Lower Courts.