Palaniswami Goundan vs Ramaswami Goundan and Another

Subba Rao, J.—This appeal raises two points of law, (1) whether the suit was maintainable and (2) whether it was barred by limitation.

The facts of the case have been fully and accurately set out in judgments of the lower Courts and also in that of Wadsworth, J., in the second

appeal. We need not restate them except to the extent necessary for appreciating the contentions of the parties. One Sinnayya Goundan executed

a mortgage deed, Exhibit P-1, dated 12th July, 1922, in favour of one Periya Goundan for a sum of Rs. 500. On 24th June, 1924, the same

Sinnayya Goundan executed a second mortgage deed in regard to the same property in favour of one Rama Boyan. On 24th September, 1928,

Sinnayya Goundan for himself and as guardian of his then minor sons executed a usufructuary mortgage in favour of Periya Goundan, that is, the

mortgagee under Exhibit P-1 and also another by name Sinnammal for a sum of Rs. 1,300. The consideration for the mortgage was made up of

two items; (1) a sum of Rs. 650 due to Periya Goundan under Exhibit P-1 and (2) a sum of Rs. 650 paid by Sinnammal to the mortgagor. On 10th

September, 1929, under Exhibit P-3 Periya Goundan assigned his half share of right in the mortgage dated 24th September, 1928, in favour of first

plaintiff for a sum of Rs. 650. Rama Boyan filed O.S. No. 275 of 1940, in the file of the District Munsif''s Court, Tirupur, to enforce his mortgage

impleading Ramaswami and Chinnammal as defendants 3 and 4. Ramaswami and Chinnammal filed written statements setting up rights to priority

by reason of their discharging, Exhibit P-1 by executing the usufrucuary mortgage deed, Exhibit P-2. Exhibit P-4 is the copy of the Judgment,

dated 22nd August, 1941 in that suit. The learned District Munsif found in their favour and gave a declaration that they were entitled to priority in

respect of the principal amount covered by Exhibit P-1. In execution of the decree in that suit the mortgage properties were sold and purchased by

the defendant subject to the prior mortgage dated 12th July, 1922, and he obtained possession on 14th April, 1943. Ramaswami and Chinnammal

filed O.S. No. 321 of 1943, on the file of the Court of the District Munsif of Tirupur on 14th July, 1943 to enforce their mortgage rights under the

mortgage deed, dated 12th July, 1922, against the auction-purchaser, Palaniswami Goundan in execution of the decree in O.S. No. 275 of 1940.

He was the sole defendant to the suit. He raised various contentions which are reflected in the following issues:

(1) Whether the suit is in time ?

(2) Whether both the plaintiffs are entitled to priority?

(3) Whether the debt is wiped out by the enjoyment of the hypotheca by the plaintiffs ?

(4) To what reliefs are the plaintiffs entitled?

The learned District Munsif rejected all the pleas of the defendant and decreed the suit as prayed for. The learned Subordinate Judge on appeal

held in favour of the plaintiffs on the question of limitation and also in regard to the plea under the Madras Agriculturists Relief Act but held that it

was not competent for the plaintiffs to institute a suit as the mortgage deed, Exhibit P-1, was not assigned to them. He allowed the appeal.

Wadsworth, J., in the second appeal preferred by the plaintiffs against the decree and Judgment of the learned Subordinate Judge held that the suit

was not barred by limitation and that the plaintiffs were entitled to maintain the suit. In the result he set aside the decree of the lower Court and

decreed the suit with costs throughout. The defendant has preferred the above Letters Patent appeal against the Judgments of Wadsworth, J.

The learned Counsel for the appellant raised again the two points which were argued by him before Wadsworth, J., without success. His first

contention was that the first plaintiff could not maintain the suit as there was no assignment of the prior mortgage, Exhibit P-1, in his favour, and that

he could not maintain the suit on the Judgment in O.S. No. 275 of 1940, because that Judgment merely declared a pre-existing priority and did not

purport to create any charge. This argument ignores the scope of the decision in O.S. No. 275 of 1940, and the legal effect of the purchase by the

defendant of the property subject to the rights of the parties declared in that suit. As we have already stated to that suit the present plaintiffs were

impleaded as defendants 3 and 4 and the learned District Munsif declared the right to priority in favour of defendants 3 and 4 in respect of the

principal amount of Rs. 500, under Exhibit P-1. The relevant portion of the Judgment reads as follows:

It is clear that defendants 3 and 4 are entitled to priority in respect of Exhibit P-1. The principal amount on Exhibit P-1 is Rs. 500. Defendants 3

and 4 are entitled to priority in respect of this principal amount.

The question of interest due under Exhibit P-1 was left open as the plaintiffs pleaded that the interest was wiped off under the Madras

Agriculturists Relief Act. It is, therefore, manifest that the right of defendants 3 and 4 under Exhibit P-1 were declared in clear and unambiguous

terms and defendant having purchased the property in execution of the decree subject to'' the rights so declared by the Judgment is now obviously

precluded from questioning right of the plaintiffs to enforce their right under Exhibit P-l.. Presumably for the same reason Mr. Ramaswami Iyengar,

the learned Counsel for the appellant, had not seriously contended against the maintainability of the suit before Wadsworth, J., in the second

appeal.

The second contention of Mr. Ramaswami Iyengar relates to the question of limitation. He argued that the decree in O.S. No. 275 of 1940 did

not for the first time create a charge but only declared a pre-existing right. If the suit was to be considered, indeed it was so conceived, as one to

enforce the mortgage dated 12th July, 1922, as it was filed only on 14th July, 1943 it was clearly barred by limitation, under Article 132 of the

Limitation Act. The question is whether the bar of limitation was saved by payments made within the meaning of Section 20(2) of the Limitation

Act. Section 20, Sub-section (2) of the Limitation Apt reads as follows:

Where the mortgaged land is in the possession of the mortgagee, the receipt of the rent"" or produce of such land shall be deemed to be a payment

for the purpose of Sub-section (1).

It has been held in a decision reported in Ramacharan v. Nimai (1921) 35 C.L.J. 58, that Section 20, Clause (2) of the Limitation Act does not

expressly refer to the intention of the party who receives rent or produce and that wherever the mortgage land is in the possession of the

mortgagee, any such receipt of rent or produce of the land should be deemed to be a payment for the purpose of Sub-section 1. It is enough, if the

mortgaged lands were in the possession of the plaintiffs or their predecessors interest when the rights under the mortgage deed, Exhibit P-1 were

subsisting. It was, therefore, argued by the learned Counsel for the respondent that when Periya Goundan was put in possession of the property

under Exhibit P-2 there was not only his right as the usufructuary mortgagee under Exhibit P-2 but also his mortgage right under Exhibit P-1 was

subsisting to enable him to claim priority over Rama Boyan, whereas Mr. Ramaswami Iyengar for the Appellant argued that Peria Goundan''s

possession could be referred only to the usufructuary mortgage under Exhibit P-2 and that though he might claim priority over Rama Boyan, the

second mortgagee, his mortgage right under Exhibit P-1 was not subsisting as it had been discharged by the execution of the usufructuary

mortgage. To resolve this conflict of arguments it may not be inappropriate to consider the scope of the decree in O.S. No. 275 of 1940, its legal

effect on the rights of the parties and the rights of the subrogee generally. As we have already stated and it is not disputed by Mr. Ramaswami

Iyengar that the decree in O.S. No, 275 of 1940, did not for the first time create any charge but that it declared a pre-existing right in favour of the

plaintiffs under Exhibit P-1. The rights of a subrogee are fairly well settled so far as this Province is concerned. They have been summarised

succinctly and with lucidity by a well-known author in the following terms:

The rights of the subrogee are identical with those of the mortgagee whose mortgage he discharges. He can therefore sue on the mortgage

provided of course he does so within the period within which the mortgagee must have sued. The limitation for the suit runs from the date when the

mortgage money becomes due and not from the date of payment.

In Kotappa v. Raghavayya (1926) 52 M.L.J. 532 : ILR 50 Mad. 626., the question for decision was whether the subrogee could enforce his right

within 12 years from the date on which the suit on the hypothecation should have been brought or within 12 years from the date of payment.

Madhavan Nair, J., as he then was, who delivered the leading judgment observes at page 635:

A subsequent mortgagee has the right to pay off the prior mortgagee. By making such payment he acquires in respect of the property all the rights

and powers of the mortgagee when he has paid off. One of such rights is this power to enforce his charge against the property subject to the law of

limitation. If, therefore at the time when the subsequent mortgagee seeks to enforce the security by virtue of subrogation, a suit by the first

mortgagee is barred by time the subsequent mortgagee''s right is also barred.

Wallace, J., at page 631 puts the legal position in a different manner though to the same effect. He observes

Thus the plaintiff''s remedy was held to be a suit on his subrogated rights under the first mortgage charge. So far as the first mortgagee was

concerned, the charge was satisfied. So far as the mortgagor was concerned, the charge had only been transferred from the first mortgagee to the

second mortgagee, who had now put himself in the proper legal position to enforce it.

The said principle was recognised by Horwill, J., in the decision reported in Perumal Reddiar and Others Vs. Suppiah Thevar and Others, . The

learned Judge states the law tersely in the following words:

There can be no doubt that the law in Madras is that when a person becomes subrogated to the rights of the mortgagee by redeeming a mortgage,

he is in precisely the same position as the mortgagee and must, therefore bring his suit for recovery of the amount paid by him within 12 years of

the original mortgage.

Therefore though Exhibit P-1 had been discharged by execution of Exhibit P-2 the plaintiffs, who have been held by the decision in O.S. No. 275

of 1940, to have been subrogated to the rights of the mortgagee under Exhibit P-1, have the same rights which the mortgagee Periya Goundan had

under Exhibit P-1. Applying this principle the position will be this. When Periya Goundan was in possession of the property under Exhibit P-2 he

had two rights, his right as subrogee under Exhibit P-1 and his right as the usufructuary mortgagee under Exhibit P-2. As he received the produce

when his rights under Exhibit P-1 were subsisting he would directly come under the provisions of Clause (2) of Section 20 of the Limitation Act.

But Mr. Ramaswami Iyengar contended that he received the produce only in his capacity as the usufructuary mortgagee and he had never the

intention of receiving the produce in his capacity as mortgagee under Exhibit P-1. We have already pointed out that the intention of the mortgagee

is irrelevant for the application of Clause (2), of Section 20 of the Limitation Act. To get the benefit of that clause only two conditions need be

satisfied. One is that the person receiving the rents or produce must be a mortgagee and the other is that he should be in the possession of the land.

These two conditions are satisfied here in this case and it is conceded that if Clause (2) of Section 20 applies the suit is clearly within time.

Mr. Ramaswami Iyengar strongly relied upon the decision reported in Anpurna Kunwar v. Ram Padarath ILR (1926) All. 430. In that case a

suit was brought to enforce a simple mortgage of 15th March, 1898. The mortgage was for a sum of Rs. 13,200. On 1st November, 1898, the

mortgagor executed a second mortgage of the same villages. On 4th May, 1900, the mortgagor executed a usufructuary mortgage in favour of the

plaintiffs for a sum of Rs. 17,712 due on the mortgage of 15th March, 1898, and the other items in all amounting to Rs. 22,500 giving possession

of the properties mortgaged. Under this the mortgagee was entitled to sue for the amount due to him only on dispossession and he would in that

case be entitled to recover also from the property hypothecated under the bond of 15th March, 1898. The plaintiffs were dispossessed of one of

the villages mortgaged on 24th February, 1911. The plaintiffs filed the suit on 9th December, 1922, The suit was brought to enforce the. mortgage

dated, 15th March, 1898. It was held that the suit would be barred unless the produce or rents received by the plaintiffs in the capacity of the

usufructuary mortgagees saved the bar of limitation within the meaning of Clause (2) of Section 20 of the Limitation Act. The learned Judges held

that the usufruct of the two villages was given to satisfy the interest on the principal amount covered by the usufructuary mortgage and not the

interest due on the prior mortgage, dated 15th March, 1898, and therefore that the suit was barred by limitation. If that decision meant to lay down

the rule of law that the intention of the mortgagee was material in the application of Clause (2) of Section 20 of the Limitation Act, with great

respect we are inclined to differ from those observations but that decision, in our view, may be sustained on the peculiar facts of that case. As we

have already pointed out, on the express terms of the usufructuary mortgage the plaintiffs'' rights to enforce the mortgage of 15th March, 1898,

would arise only after he was dispossessed. Therefore he was in possession under the usufructuary mortgage and the rights under the first

mortgage were in suspension as it were and therefore when they were in possession their rights under the simple mortgage of 15th March, 1898,

were not subsisting. In our view that decision cannot help the appellants in the present case. The learned Counsel for the respondent contended

that as his rights under the usufructuary mortgage were defeated by reason of the decree in O.S. No. 275 of 1940, filed by the second mortgagee

his possession under the usufructuary mortgage must be deemed to have been possession under his first mortgage. This argument was founded

upon the decision reported in Doraisami Naicken Vs. Peru Su Aru Periakaruppan Chettiar and Others, . In that case the mortgagee had obtained

possession under an invalid agreement for sale but as the sale was held to be invalid he was made accountable to rents and profits as if he were the

mortgagee in possession. The learned Judges in applying Section 20 of the Limitation Act observed:

The fact that his sale proved to be invalid could not vitiate his title as mortgagee and the rent and profits which he received must be in the

circumstances be deemed to have been received by him as the mortgagee. We may have thought that he was receiving them as the full owner of

the property but as he did not in fact hold that position he could only have received them in the capacity actually held by him, namely, that of the

mortgagee.

The learned Counsel for the appellants pointed out that that principle could not be invoked in the present case as the usufructuary mortgage had

not been held to be invalid and, therefore, the possession of the mortgagees was only under the usufructuary mortgage and could not be deemed to

be possession under the earlier mortgage. It was argued that as the usufructuary mortgage was not frustrated and was wholly operative between

the parties to the transaction the said principle had no application to the facts of the present case. In the view we have taken it is not necessary to

decide that point in this case and to give our final opinion on this contention.

In the result the appeal fails and is dismissed with costs.