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Judgment
Gokulakrishnan, J.—The third defendant is the appellant before this Court. The plaintiff, who is the first respondent herein, filed the suit O.S.
No. 307 of 1969 in the Sub-Court of Madurai, praying for passing a preliminary mortgage decree for sale of the properties set out in Schedules A,
B and C and Schedule II to the plaint directing the defendants to pay a sum of Rs. 54,620.58 with subsequent interest and costs within a time to
be fixed by the court and for proceeding against the compensation amount in respect of 15 cents in item II (1) III in Schedule C to the plaint. The
plaintiff allegations were as follows: In or about 1964, accounts were looked into and it was found that defendants 1 and 2 were liable to pay a
sum of Rs. 91,000 to the plaintiff. Since the plaintiff pressed for the payment of the said amount, defendants 1 and 2 executed a registered deed of
mortgage on 1st June, 1964, in respect of the properties detailed in Schedules A, B and C to the plaint in favour of the plaintiff for due repayment
of Rs. 50,000, with interest at 3 present per annum. At the time of the mortgage, defendants 1 and 2 assured the plaintiff that there was an earlier
mortgage over the hypotheca, dt. 4th October, 1962 only for a sum of Rs. 33,000, in favour of one Vr. G. Rm. Ramaswami Chettiar. Later on, it
transpired that the said Ramaswami Chettiar filed a suit against defendants 1 and 2 alleging that the mortgage was for Rs. 55,000 and that
defendants 1 and 2 suffered a mortgage decree in O.S. No. 212 of 1965 on the file of the Sub-Court, Madurai, for the amount sued for. The
plaintiff was ignorant of such a decree and he ignored the same. On 6th October, 1966. the plaintiff issued a registered lawyer''s notice calling upon
defendants 1 and 2 to repay the said mortgage amount. To that, defendants 1 and 2 sent a reply through their lawyer, on 27th October, 1966
raising false and frivolous contentions.
It has been further averred in the plaint that defendants 1 and 2 sold the property shown as C Schedule (item 1) to the plaint with a direction to
pay a sum of Rs. 3,250 with plaintiff''s consent. As directed in the sale deed, dt. 5th October, 1966, a sum of Rs. 3,250 has been appropriated for
interest for 26 months. Item 1 of the C Schedule is. therefore, no longer available for the plaintiff; Item 2 of the C Schedule is 21 cents in extent.
Fifteen cents out of this area have been acquired under the Land Acquisition Act and proceedings were pending at the time of the suit in that
connection. Some compensation has been awarded and defendants 1 and 2 are reported to have asked for enhanced compensation. The plaintiff
has to obtain the compensation amount from the Land Acquisition Officer. The remaining extent of 6 cents in item 2 of the C Schedule is alone
available for being proceeded against by the plaintiff and that has been described in as C schedule item II (2) to the plaint.
With the abovesaid allegations, the plaintiff submitted that he was obliged to file the suit fox sale of schedules A, B and C and schedule II (2) to
the plaint and to proceed against the compensation money for 15 cents acquired in item II (1) and III of C schedule. He has valued the suit for
purposes of court-fee and jurisdiction at Rs. 54,620.80.
Defendants 1 and 2 remained ex parte. The third defendant filed a written statement. He denied the alleged borrowing by defendants 1 and 2
from the plaintiff and also denied knowledge of the debt due to the plaintiff by defendants 1 and 2 in a sum of Rs. 91,000 on that account in 1964
itself. He also denied knowledge of the alleged mortgage deed, dt. 1st June, 1964 for Rs. 50,000 and pleaded that the plaintiff must strictly prove
the truth, validity and binding nature of the mortgage deed and also as to whether the hypothecation bond is supported by consideration.
According to the third defendant, defendants 1 and 2 borrowed a sum of Rs. 55,000 from one, Vr. S. Rm. Ramaswami Chettiar on 4th October,
1962 for the purpose of their cinema business and they executed a promissory note therefore in his favour for the said amount agreeing to pay
interest thereon at 1 per cent per mensem. Defendants 1 and 2 also deposited their title deeds relating to the plaint A and B schedule properties as
collateral security therefore and thereby created an equitable mortgage for the said debt. Subsequent to that also, defendants 1 and 2 borrowed a
further sum of Rs. 22,000 from the said Ramaswami Chettiar on 29th August, 1963, on the foot of another promissory note agreeing to repay the
said amount together with interest thereon at 15 per cent per annum. Defendants 1 and 2 also agreed that the properties covered by the title deeds
already deposited by them with the said Ramaswami Chettiar relating to the plaint A and B schedule properties might be treated as collateral
security for the said debt also. They have thereby created a second equitable mortgage over the plaint A and B schedule properties for the said
debt also. Since they paid only a portion of the said debt, Ramaswami Chettiar filed a suit in O.S. No. 212 of 1965 for the recovery of the said
sum of Rs. 54,443.64 with subsequent interest thereon and also the costs of suit by enforcing the equitable mortgage over the plaint A and B
schedule properties. After obtaining a decree in the said suit for the said amount, Ramaswami Chettiar brought the plaint A and B schedule
properties to sale in court-auction through E.P. No. 146 of 1967 and the third defendant purchased the said properties in the said court-auction on
3rd February, 1968 for proper and valuable consideration.
It has been further averred in the written statement of the third defendant that the plaintiff, who appears to have been aware of all the said
proceedings kept quiet without seeking to come on record as a party defendant therein and has now laid this action in collusion with defendants 1
and 2 and at their instance. Defendants 1 and 2 filed E.A. No. 207 of 1968 to set aside, the court-auction sale in favour of the 3rd defendant on
several false contentions, and the said application was dismissed. Defendants 1 and 2 preferred an appeal against the said order in the High Court.
It was only at this juncture, the present suit was sought to be laid at the instance of defendants 1 and 2 to harass and cause annoyance to the third
defendant who is a bona fide purchaser of the plaint A and B schedule properties for valuable consideration.
The 3rd defendant has further contended that the plaintiff is only a subsequent mortgagee and the mortgages in favour of Ramaswami Chettiar
were clearly prior to the suit mortgage. The plaintiff having obtained a mortgage only in respect of the equity of redemption in the plaint A and B
schedule properties, it is not open to him to ignore the mortgages in favour of Ramaswami Chettiar or the sale in favour of the 3rd defendant in
court-auction held in execution of the mortgage decree obtained by Ramaswami Chettiar. The 3rd defendant, as a court-auction purchaser in
execution proceedings pursuant to the decree obtained on the said prior mortgages has acquired the rights of the prior mortgage decree holder
Ramaswami Chettiar and as such the plaintiff is not entitled to bring the plaint A and B schedule properties to sale without first paying the prior
mortgage amounts due to the third defendant.
Finally, the 3rd defendant inter alia alleged that he is a bona fide purchaser in execution of the prior mortgage decree and that the plaintiff''s right,
if any, can prevail only subject to the rights of the 3rd defendant. With these averments, the third defendant prayed for a suitable decree in the light
of the submissions made by him and also for suitable directions for the payment of the third defendant''s costs.
On the above pleadings, the learned Subordinate Judge of Madurai framed the following issues:-
Whether the suit hypothecation bond is true, valid and binding on the 3rd defendant?
Whether the plaintiff is not entitled to bring the A and B schedule properties to sale without first paying the prior mortgage amount due to the 3rd
defendant?
To what relief, if any, is the plaintiff entitled ?
The learned Subordinate Judge held that Ex. A.1 is true and valid and binding on the 3rd defendant and that the auction-purchaser in execution of
the prior mortgage decree cannot claim payment of the amount due under the prior mortgage as a condition for a decree for sale in favour of the
puisne mortgagee. The trial court, after observing:-
that Mulla Vittil Seethi v. Achutan Nair 21 M.L.J. 213 still holds the field and Sukhi v. Ghulam Safdar Khan 42 M.L.J. 15 = 14 L.W. 162 (P.C.)
cannot be taken to lay down the principle that the court-auction purchaser in execution of the first mortgage decree is entitled to compel payment
of the mortgages first before a decree for sale is passed. That the 3rd defendant can use the prior mortgage as a shield cannot be and is not
disputed by the plaintiff. It is only the nature and extent of that right that is called in question. Considering the fact that the court-auction purchaser
as well as the puisne mortgagee and the prior owners of the properties are before court I hold that there should be a finality to the dispute. We
need not pass a decree making it a condition precedent to pay off the 3rd defendant first before the properties are brought to sale. However, the
properties can be sold free of encumbrance and the sale proceeds can be applied first in satisfaction of the claim of the 3rd defendant and then of
the plaintiff. (Of course, we cannot order payment of the entire mortgage amount). That cannot be said to do violence to the principles laid down in
Mulla Vittil Setthi v. Achutan Nair, 21 M.L.J. 213
passed a preliminary mortgage decree as prayed for with costs subject to the following condition:-
A and B schedule properties shall be sold free of encumbrance and the sale proceeds shall first go in satisfaction of 3rd defendant''s amount and
the balance should go towards satisfaction of the plaint claim. Time for payment two months.
Aggrieved by the judgment and decree of the trial court, the 3rd defendant has preferred the above appeal. According to Mr. Peter Francis, the
learned counsel appearing for the appellant, a court-auction purchaser in execution of a first mortgage decree in respect of the property holds a
dual capacity, i.e., one as representative of the mortgagor and the other as representative of the first mortgagee, and that he is in law entitled to
exercise the option of either redeeming the puisne mortgage or using the first mortgage as a shield against the second mortgagee. The learned
counsel would further contend that if the court-auction purchaser is entitled to use the prior mortgage as a shield, he is in law entitled to claim that
the second mortgagee should redeem up, and that, in such a contingency, the second mortgagee, is bound to pay the amount due on the first
mortgage, and not merely the amount obtained in court-auction.
Mr. Sarvabhauman, learned counsel appearing for the first respondent-plaintiff, based his argument on the Full Bench decision of our High
Court in Mulla Vittil Seethi v. Achutan Nair 21 M.L.J. 213 while Mr. Peter Francis, the learned counsel appearing for the appellant contended that
the Privy Council decision in Sukhi v. Ghulam Safdar Khan 42 M.L.J. 15 = 14 L.W. 162 (P.C.) is in his favour and as such the Privy Council
decision must prevail over the said Full Bench decision. Apart from the abovesaid two decisions, the learned counsel appearing for the parties
cited various other decisions in support of their respective contentions. We will presently deal with these decisions.
The facts in Mulla Vittil Seethi v. Achuthan Nair 21 M.L.J. 213 are as follows-The plaintiffs were first mortgagees. The first defendant had a
subsequent usufructuary mortgage. In a suit upon the first mortgage, & decree for sale was passed. The first defendant was not a party to the
same. In execution of the decree, the plaintiffs became purchasers. The suit was for possession and in the alternative for the recovery of the
mortgage money. The courts below passed a decree for possession in default of payment of the amount due under the first mortgage. The first
defendant preferred the second appeal. When the second appeal came up before a Division Bench of this Court, the first defendant- appellant
argued that, as he was not a party to the plaintiff''s former suit, his mortgage interest, which included his right to possession, could not be affected
and that the suit should be dismissed. The plaintiff-respondent urged that the first defendant was merely entitled to redeem the first mortgage as he
was given no opportunity to do so in the former suit. The plaintiffs being simple mortgagees, were not entitled to sue for foreclosure. As the first
defendant was not a party to the former suit, his interest could not be affected by it. The mortgagor''s equity of redemption only amounted to the
interest that remained after deduction of the first defendant''s mortgage right. The mortgagor had no right to possession after giving a usufructuary
mortgage to the first defendant. The mortgagor''s interest that was sold did not include a right to possession. Hence the plaintiffs could not purchase
such a right. Various decisions which subscribed to the views of either party were cited before the Division Bench. The Division Bench after
discussing those decisions and finding a conflict between them, stated as follows:-
We shall assume that one mortgagee is not a patty to the suit of the other. It follows that the interest of the mortgagee who is not a party should
not be affected by the suit of the other, for there can be no representation of his interest in the suit by any other person claiming an interest in the
property. If the second mortgages hat no right to possession, the purchase by the first mortgagee by private or court sale must give him the right to
possession. If possession goes with the second mortgagee, the sale under the decree of the first mortgagee must prima facie lave the possession
unaffected. The same result must follow in the case of the second mortgagee acquiring a right to possession under a prior sale in execution era
decree on his mortgage. It is on the other hand clear that the first mortgagee is entitled to sell and purchase all the interest of his mortgagor as at the
date of the mortgage. This cannot, however, be done is the absence of the representatives of the subsequent interests carved out by the mortgagor
after the first mortgage. The mortgagee must be entitled, if he had once failed to implead the subsequent encumbrancer, to enforce his remedy of a
sale of the subsequent incumbrancer''s interest by a fresh suit Should he be driven to such a suit on the footing that the prior proceeding can in no
sense affect any of the rights of the subsequent mortgagee including the right to possession however acquired, or is it open to the court the first
mortgagee''s suit for possession after his purchase, to give the second mortgagee his only right in a properly instituted suit by the first mortgagees,
namely, his right to redemption? We think it right to ask for an authoritative ruling of the Full Bench on the following question:
Whether a first mortgagee who has purchased the mortgaged property in execution of a decree on his mortgage and sues for possession, or in that
alternative, for the recovery of his money is entitled to a decree for possession subject to redemption by a puisne mortgagee with possession who
was not a party to the suit by the first mortgagee?
On such a reference, a Full Bench of this court consisting of Sir Charles Arnold White Kt, C.J., Krishnaswami Aiyar and Ayling, JJ., after fully
discussing the various decisions in respect of the right of a first mortgagee under different circumstances, laid down the following propositions:
A second mortgagee is entitled to the same rights as the first mortgagee with reference to his security, having regard to the nature of his
mortgage.
The purchaser of the equity of redemption after the first mortgagee and the second mortgagee both stand on the same fooling with reference to
their respective rights against the first mortgagee when they have not been impleaded in the suit instituted by him in his mortgage.
These rights are unaffected by the suit of the first mortgagee to which they are not made parties and the decree passed therein and the sale made
in pursuance thereof.
The purchaser in such a suit, whether it is a first mortgagee or a stranger, does not acquire the rights of the mortgagor as at the date of the first
mortgage but only those that subsist in him at the date of the suit.
Laying down thus the proposition of law, the Full Bench stated-
It follows that the question referred must be answered as stated already against the plaintiff.
Thus, the Full Bench has recognised the right of a usufructuary mortgagee by holding that the purchaser''s right to step into the shoes of the
mortgagor is limited to the mortgagor''s right on the date of the suit and not on the date of the first mortgage. In the Full Bench case, the first
defendant was a usufructuary mortgagee while the plaintiffs were purchasers of the hypotheca on the foot of a decree obtained by a simple first
mortgage.
As far as the present case is concerned, the plaintiff is a puisne mortgagee under defendants 1 and 2. The first mortgagee Ramaswami Chettiar
filed O.S. No.212 of 1965 to recover the amount due under the equitable mortgage in his favour and obtained a decree in his favour and brought
the plaint A and B schedule properties to sale in court-auction, and the 3rd defendant purchased the properties on 3rd February, 1968 in the
court-auction. The 3rd defendant contended in this suit that he has acquired the rights of the prior mortgagee decree-holder Ramaswami Chettiar
and as such the plaintiff is not entitled to bring the A and B schedule properties to sate without first paying the prior mortgage amount due to him.
No doubt, the purchaser of the hypotheca in execution of the decree on the foot of the first mortgage can use the first mortgage as a shield in his
defence when the puisne mortgagee files a suit for redemption of the mortgage in his favour. The decision rendered by the Full Bench was in
respect of the right of a puisne usufructuary mortgagee who had possession of the hypotheca when the purchaser in court-auction in execution of
the simple first mortgage decree filed a suit for possession or in the alternative for recovery of the mortgage money. On such facts, the Full Bench
gave a decision to the effect that the purchaser in a suit, whether it is the first mortgagee or a stranger, does not acquire the rights of the mortgagor
at the date of the first mortgage but only those that subsist in him at the date of the suit. Hence the right of the plaintiff in the Full Bench case was
recognised subject to the right of possession of the usufructuary puisne mortgagee. Thus, the question whether the purchaser of the hypotheca in
the court-auction in execution of the decree of the first mortgagee is entitled to claim only the amount for which he purchased the property in the
court sale, and not the amount due on the first mortgage, has not been considered by the Full Bench in that perspective.
Mr. Peter Francis referred to Sukhi v. Gulam Safdar Khan 42 M.L.J. 15 = 14 L.W. 162 (P.C.) and stated that the said decision of the Privy
Council supports his view. This Privy Council decision is subsequent to the Full Bench decision rendered in Mulla Vittil Seethi v. Achuthan Nair 21
M.L.J. 213. The facts of the Privy Council case are as follows- One, Nand Ram and others, the owners of the property in question and of other
properties, executed two simple mortgages in favour of one Kirpa Ram on 3rd January, 1874 and 10th June, 1875. Kirpa Ram was no more and
his wife was the plaintiff. Subsequent to the above two mortgages, Nand Ram and others executed another mortgage of the property in question
by way of conditional sale in favour of the first respondent Gulam Safdar Khan and another. This mortgage was dated 15th January, 1883. In
1886 Kirpa Ram, the mortgagee raised an action, for payment and sale, but he omitted to implead the holders of the mortgage of 1883, and
obtained a decree for sale. The property was sold and Kirpa Ram himself purchased it at the judicial sale. Kirpa Ram died leaving a will dated
1895 in favour of his widow, the plaintiff. She obtained probate in 1898 and thereafter made a gift of the properties to which she had succeeded,
including the properly in question, to Jag Ram and Net Ram her nephews. They at the same time covenanted to pay Rs. 1,200 a year for
maintenance, and in security of this obligation they hypothecated the properties, including the property in question, by way of mortgage. The
mortgage was dated 14th October 1902, and was duly registered. In 1910 the mortgagees in the mortgage of 1883 brought a suit on their
mortgage against Jag Ram and Net Ram, but omitted to implead the plaintiff. Jag Ram and Net Ram put forward the mortgages of 1874 and 1875
as a shield, and accordingly the respondents had to pay into the court the sum of Rs. 2,964. Having so done, and Jag Ram and Net Ram not
choosing to redeem, the respondents were adjudged owners of the property. This was finally settled in 1913. In 1914, the plaintiff raised the
present suit in respect of her mortgage, the sums due under the agreement to pay maintenance amounting to over Rs. 1,00,000. It was not
defended by Jag Ram and Net Ram but appearance was made for the respondents who held the property by virtue of the decree they had
obtained in 1913, upon their mortgage of 1883. The Subordinate Judge decreed the suit but on condition that the plaintiff repaid to the
respondents the sum of Rs 2,954 which they had paid to the first mortgagee. On appeal, the High Court altered this by adding the condition that
the plaintiff should pay the sum of Rs. 8,649-13-7, being the sum found due to the respondents in the suit of the mortgage of 1883, in respect of
which they were given the foreclosure decree of the property. Against the decision of the High Court, the matter was taken up to the Privy Council
by the plaintiff. The Privy Council, in their judgment, observed-
An owner of a property who is in the right of a first mortgagee and of the original mortgagor as acquired at a sale under the first mortgage is
entitled at the suit of a subsequent mortgagee who is not bound by the sale or the decree on which it proceeded, to set up the first mortgage as a
shield. From this it follows that the omission by the respondent Ghulam Safdar Khan to make the plaintiff a party to the suit instituted by him to
execute his mortgage of 1883, does not prevent him from setting up that mortgage in cases where he would have been so entitled before the Act of
1882; and the present dispute is within the benefit of this ruling.
But then there is the question of the position due to the original mortgagees of Rs. 2,924, and unfortunately this seems not to have been very
carefully considered in the judgment below. The Subordinate Judge held that the defendants were entitled to set up this as a shield, because the
defendants had paid this sum to the original first mortgagee as a condition of getting the property; and that as the plaintiff''s title flowed from the first
mortgagees, she could have no higher right than the first mortgagees, and must be bound by anything done by them. The High Court seemed to
think that the same arguments that applied to the mortgage of 1883 also applied to the earlier mortgages. The situation, however, must be looked
at more closely than this. The general principle is stated rightly by the High Court.
It is this: ''The plaintiff is a puisne mortgagee seeking to enforce her mortgage, the prior mortgagee in his suit having failed to make her a party. It is
the duty of the court to give the plaintiff the opportunity of occupying the position which she would have occupied If she had been a party to the
former suit. Now fine original mortgagee having brought the estate at the sale in the suit was the owner of both the mortgage and the equity of
redemption merged in one by the decree of the court. He was succeeded by his widow and she made a gift to Jag Ram and Net Ram, When they
in turn mortgaged to the widow, the present plaintiff they mortgaged both the original mortgage and the equity of redemption merged as aforesaid.
When in the suit of the present defendants on the mortgage of 1883, Jag Ram and Net Ram, so to speak, revived the original mortgage as a shield,
they revived something which in a question with the widow they had mortgaged. Whether the decision of the court that the sum in the prior
mortgages should be made a condition of the decree in the suit was right or wrong-for if Net Ram''s case had been decided it would have been
wrong, the sale having taken place in 1886-is immaterial, for the present defendants acquiesced in and paid under the judgment.
If the widow had been made a party to the suit, as she ought to have been she would have been entitled in right of her mortgage to have been put
in possession of the amount which was being put forward as a shield by Jag Ram and Net Ram against the then plaintiffs and the present
respondents. She was not made a patty, and the result was that owing to the laches of the present defendants jag Ram and Net Ram were allowed
to carry off in money the part of the estate represented by the value of the first mortgage which they had really impledged by their to the widow. It
follows that to carry out the general principle expressed above, the widow must not be deprived of the rights which had she been called she could
have made good.
The result must that unless the respondents pay the plaintiff Rs. 2,925 with interest thereon at 6 per cent from 3rd December, 1914, the plaintiff
must get her decree for sale of so much of the estate as will realise that sum. If, however, the respondents pay that sum of the said sum is realised
by sale of part of the estate, then the plaintiff can only have decree and sale of the rest of the estate on condition that she pay to the respondents
Rs. 8,649--13--7. being the sum in the decree of 1883, has brought out by the High Court. The respondents will have a right to recover from Net
Ram and Jag Ram the sum wrongly carried off by them in fraud of their own mortgage to the present plaintiff, but the right cannot be given effect to
in this suit"".
From the above excerpt from the decision of the Privy Council it is clear that the Privy Council gave relief to the puisne mortgagee only after his
paying the decree amount of the action of the respondent Ghulam Safdar Khan in respect of the mortgage d. 15th January, 1883. But, the Privy
Council directed the respondent to pay the sum of Rs. 2,954 to the plaintiff on the ground that Net Ram and Jag Ram had wrongly carried away
that amount in fraud of their own mortgage to the plaintiff, and that the respondent had not made the plaintiff a party to the suit filed by him in 1910.
Thus, it cannot be said that decision in the Privy Council case supports the view put forth by Mr. Peter Francis directly. The facts and
circumstances as referred to above in the Privy Council case, are completely different and as such the contention of the third defendant that he
should be paid the whole of the first mortgage amount instead of the actual amount for which he purchased the hypotheca in court-auction, basing
the same on the above Privy Council decision, in our view, cannot be sustained.
The proposition that the court-auction purchaser of the first mortgagee''s right can use the first mortgage as a shield in his defence when the
puisne mortgagee who was not made a party in the first mortgagee''s suit institutes proceedings for redemption, cannot be denied. But to what
extent the shield can be used both in equity and according to law. is the question that has to be decided. The Privy Council decision arose out of a
suit filed by a mortgagee to recover over a lakh of rupees from persons who became the owners of the suit property by virtue of a suit on a
mortgage which was anterior in point of time to the mortgage of the plaintiff. The Privy Council recognised the right of the puisne mortgagee who
was not made a party in the prior mortgagee''s suit and granted her a decree provided she paid the respondents the sum of Rs. 8,649-13-7 which
was the amount of the decree obtained by the respondents in respect of the mortgage deed, d. 15th January, 1883 in their favour. As already
noticed, the Privy Council also directed the respondents to pay the plaintiff Rs. 3,925. Thus, apart from the facts and circumstances of the Privy
Council case being different, the amount the plaintiff was directed to pay the respondents was equivalent to the amount of decree they had
obtained in respect of their mortgage of the year 1883. Therefore, the decision of the Privy Council cannot be taken as authority for the
proposition now put forth by the appellant herein.
The various other decisions cited by the respective counsel on either side deal with the right of the sub-mortgagee, the right of third party
purchasers, the right of the mortgagee-purchaser, the right of two different mortgagees purchasing portions of the property mortgaged and the right
of priority for possession of the purchased mortgaged property. In all the decided cases, one finds general expressions used by the learned Judges
in discussing The rights of parties with reference to a mortgage suit which are likely to lead to confusion if some stray sentences from such
judgments be sought to be taken a laying down the law, irrespective of the other sentences in such judgments, the facts of the case and the actual
decision in the suit. One will have to see what the actual decision was, and what exact contentions were in fact put forward by the contending
parties; also who had possession and how the same was acquired and when, and nature of the proceedings in which possession was taken. If
these and other relevant circumstances are ascertained and kept in view, it seems to us that almost all the decisions that were quoted to us could be
reconciled. We are far from saying that there are not observations in some of the judgments which taken by themselves would not be too wide;
further there are some observations which are quite obiter, with reference to points not necessary for the actual decision in such cases. But, the
various decisions themselves seem to be generally reconcilable to one another and in accordance with sound legal principles, and, in our view, the
law of mortgages, relating to the point now under consideration, should be taken to be well settled so far as our courts are concerned. In this
connection, we may usefully refer to the Full Bench decision in Nagendra Chettiar v. Lakshmiammal 65 M.L.J. 105 = 38 L.W. 169 (F.B). In this
Full Bench decision, the right of two auction-purchasers were discussed and it was decided that the auction-purchaser prior in point of time is
entitled to be in possession of the facts and circumstances of that particular case. Only in this Full Bench decision of our High Court it has been
observed that the decisions rendered in various judgments regarding the rights of parties in mortgage suits should be read in relation to the context
of the particular case; or otherwise it will lead to confusion.
We may usefully refer to the decision in Venkataramana Reddi v. Rangiah Chetti 41 M.L.J. 399. In that case, a prior mortgagee sued on his
mortgage and obtained a decree for sale without being aware, and therefore, without impleading the puisne mortgagee as a party to the suit. In
execution of the decree, an item of the mortgaged properly was sold and with the purchase money, a portion of the decree amount was paid off.
The purchaser at the execution sale in his turn mortgaged that item to the defendant to secure moneys already borrowed by him for the purpose of
depositing the purchase money at the court sale. The defendant obtained a decree on his own mortgage, executed it and purchased the rights of his
own mortgagor in the item mortgaged to him. Subsequently, in a suit by the puisne mortgagee to enforce his mortgage, the defendant pleaded that
he was entitled to a prior charge on the item sold in execution of the decree on the first mortgage, to the extent to which that decree was satisfied.
On these facts, the Full Bench held that the purchaser at the execution sale having released the item purchased by him from all liability under the
decree on the prior mortgage was entitled to a prior charge on that item in respect of the moneys paid by him towards the decree on the prior
mortgage, that notwithstanding the fact that the prior mortgagee had a decree on his mortgage and sold the property in execution thereof, it was
open to the purchaser to hold his right to the prior charge as a shield against the puisne mortgagee in the suit by the latter to enforce his mortgage,
that the right of the defendant to hold the prior charge as a shield was not affected by limitation, that the purchaser had not a general right of
subrogation by reason of the fact that he had paid off a portion of the decree on the prior mortgage and that the defendant being a mortgagee from
the purchaser was entitled to avail himself of all the rights which his own mortgagor had in that particular item of the mortgaged property which was
freed from all liability by the purchaser including the right of priority as aforesaid. There is a specific observation in that judgment: ""It is immaterial
whether the purchaser is the mortgagee who sued, or another person, except that the latter would be subrogated to the right of the mortgagee only
to the extent to which the debt was paid out of the price."" It has been further observed in that judgment that-
A court-auction sale of one of the mortgaged properties which satisfies a portion of the decree amount prevents that particular property from
being brought to sale again for the balance and the inconvenience mentioned in Hanumanthaiya v. Meenakshi Naidu 35 Mad 183 namely, the
contingency of a number of persons claiming to be entitled to rank as first encumbrances would not arise in such a case. I also think (with great
respect) that the inconvenience may not in practice be so very great after all. If several persons pay separate sums which discharge (taken
together) the first mortgagee, they can get charges respectively in proportion to the amounts paid by them all in priority to the second mortgagee,
out of the sale proceeds of the mortgaged properties when they are sold outright.
In that judgment, the Bench has referred to a decision of one of the learned Judges of that Bench sitting along with Napier, J. reported in Bismath
Karumani v. Devidoss 29 I.C. 511 which is to the effect that a person who advances money to partially discharge a prior mortgage cannot claim
subrogation where the prior mortgagee had not released his mortgage rights over the property so purchased and observed that that judgment
seemed to imply that even though the prior mortgage had only been partially discharged by the purchase money of one of the mortgaged properties
sold, if the mortgagee had released his claim over that one property for the balance of the mortgage amount still due to him, the court might be
justified in recognising in the purchaser of that property the right to a prior charge over the second mortgagee to the extent of the purchase money
so far as that particular property so released was concerned and it was immaterial whether the sale was a private sale or a court-auction sale.
Applying the principles laid down in the various decisions and also the decision rendered in Venkataramana Reddi v. Rangiah Chetti 41 M.L.J.
399 it is clear that a third party auction-purchaser can use the first mortgage as a shield when a puisne mortgagee brings a suit to enforce his
mortgage only to the extent of the money for which he purchased the property. The auction-purchaser no doubt gets into the shoes of the
mortgagor and the first mortgagee and the liability incurred by the auction-purchaser, who is a third party in the case, is only that amount he paid
for such purchase at the court-auction. The right of the first mortgagee by virtue of the purchase by the third party auction-purchaser is
superimposed by the right of the purchaser; and the auction-purchaser in equity is only entitled to get that amount which he paid at the auction for
the purchase of the property.
The argument of Mr. Peter Francis, the learned counsel appearing for the appellant, that he can get the whole of the first mortgage amount,
inasmuch as he has stepped into the shoes of the first mortgagee and the mortgagor, in our view, is not sound either in law or in equity. The
decisions we have referred to above including that in Venkataramana Reddi v. Rangiah Chetti 41 M.L.J. 399 in our view do not support the
contentions advanced by Mr. Peter Francis, The appellant contends that the second mortgagee is bound to pay the entire amount due on the first
mortgage and not merely the amount he had paid for the purchase of the property in court-auction, and that the appellant can use the first mortgage
as a shield against any claim put forth by the puisne mortgagee. The trial court has clearly found that the third defendant can use the prior mortgage
as a shield but he can get only that amount he had paid for the purchase of the property at the auction, and not the entire first mortgage amount.
We are in complete agreement with the said finding recorded by the learned Subordinate Judge, Madurai and as such we confirm the judgment
and decree of the trial court. In these circumstances, the appeal is dismissed with costs.