Pannalal Pramanick vs Narayan Chandra Dutt

P.B. Mukharji, J.—This is an application by a Defendant puisne mortgagee in this suit by the same Sm. Nirmala Sundari Dasi. She asks for an order on this application to be transferred from the category of a Defendant to that of the Plaintiff in this suit and for consequential amendment of the plaint and she also asks for the reference now pending before the Registrar to be proceeded with for sale of the properties. She makes an alternative prayer in this notice of motion to be given the liberty to proceed with the reference in this suit for having the properties sold for the satisfaction of her claim on her mortgage in pursuance of the decree made in this suit, dated December 29, 1949.

The facts may be stated briefly. By an indenture of mortgage dated May 19, 1934, the mortgagor Defendant mortgaged premises Nos. 86/1, Cornwallis Street, 7/C, Kirti Mitter Lane, 13/1, Das para, and 31, Golaghat, Dum Dum, in favour of the applicant. This mortgage in favour of the applicant was subject to a number of prior mortgages. The applicant filed her mortgage suit being Suit No. 158 of 1935, and a preliminary mortgage decree was passed in that suit on March 8, 1935. The Registrar in his report made in that suit on August 23, 1935, reported the amounts due to the applicant.

This suit was filed by a prior mortgagee by the name Panna Lal Pramanick in respect of his mortgage relating to premises Nos. 70, Kirti Mitter Lane, 31, Golaghat, and 13/1, Das Para. The Plaintiff in this suit thereafter applied to this Court for joining the present applicant as a puisne mortgagee as a party to this suit and for final decree for sale of the properties for the benefit of the Plaintiff and the other puisne mortgagee Defendants in this suit. The final decree for sale was made by consent on December 29, 1949, in this suit. It was by an order of December 28, 1949, that the present applicant had been added as a party to this suit and thereafter the aforesaid final decree for sale was made. The relevant provision in the final decree will have to be noticed for determination of the point raised in this application. But before setting them out I must observe that in the form of the decree it is stated that it was a suit for reopening the mortgage transactions dated October 4, 1932, mentioned in the plaint of this suit and the decree made in Suit No. 1094 of 1935, for declaration that the Defendant Narayan Chandra Dutt, a mortgagee, is entitled to Rs. 4,630 under the mortgage dated October 4, 1932, and that the said Defendant Narayan Chandra Dutt was liable for the refund of the sum of Rs. 3,045-1-5. This decree dated December 29, 1949, was a consent decree. Its relevant provisions are:

It is hereby ordered and decreed with the consent of the parties by their respective advocates that the account of the Defendant Sm. Nirmala Sundari Dasi in respect of moneys due to her taken by the Registrar of this Court in her Suit No. 158 of 1935, be treated as her account in this suit and it is further ordered and decreed with the like consent that default having been made in payment of the amounts due to the Plaintiff and the said Defendant Sm. Nirmala Sundari Dasi, the said mortgage properties or a sufficient part thereof be sold but not until the expiry of six months... And it is hereby further ordered and decreed with the like consent that the money realised by such sale shall save as hereinafter mentioned be paid into Court and shall be duly applied after deduction therefrom of the commission payable thereon and the expenses of the sale, first in payment to the Plaintiff of the total amount paid by him to the Defendant Narayan Chandra Dutt and then in payment of the total amount due to the Plaintiff under the aforesaid decree in respect of her own mortgage.... and that the balance, if any, shall be applied in payment of the amount due to the said Defendant Nirmala Sundari Dasi.

Under this decree the Plaintiff in this suit proceeded before the Registrar for the sale of the properties and the applicant also took part in such reference for sale. The sale of the properties was fixed for May 17, 1952, but the Plaintiff on the said date stated that he did not want to have the sale proceeded with as the Plaintiff''s claim had been satisfied and the Plaintiff wanted to have the reference struck off. Upon this the issue has been raised by the present applicant, a puisne mortgagee Defendant, that having regard to the terms of the decree the sale should be proceeded with as the decree directed that there would be a sale in default of payment to the applicant as well. This is the point now for determination in this application.

The point raises important problems of law relating to the rights of a puisne mortgagee Defendant in a suit brought by a prior mortgagee for enforcing the prior mortgage. The law on this point has been controversial and requires to be clarified. The puisne mortgagee is added as a Defendant in such a suit only for the purpose of redeeming the prior mortgage if he wished and proving his mortgage and having the accounts taken. Such account of the puisne mortgagee is taken because if there is any surplus sale-proceeds after meeting the prior mortgagee Plaintiff''s claim he can participate in such surplus sale-proceeds as may be available for the satisfaction of the claim of the puisne mortgagee. Essentially and fundamentally, therefore, the rights of a puisne mortgagee Defendant in a prior mortgagee''s suit are first the right to redeem the prior mortgage and secondly the right to participate in surplus sale-proceeds. But apart from these rights it is difficult to see how such a puisne mortgagee can claim the carriage of proceedings in the suit and be substituted as a Plaintiff and have the properties sold for the satisfaction of such puisne mortgagee. After all, the suit was a suit by the prior mortgagee. If his claim has been satisfied then no further question of proceeding with the suit can normally arise. Except, therefore, the right to redeem and the right to participate in the surplus sale-proceeds, I do not find that from the purely legal point of view a puisne mortgagee should have any further rights.

The problem, however, is much larger when it is Judged from the more general aspect. After all, a mortgage suit is instituted where all subsequent mortgagees are impleaded as Defendants and where, they are expected to prove their mortgages and their accounts taken. It would seem to be unreasonable why in that context simply because the prior mortgagee at whose instance the sale had been ordered is paid off, the other subsequent mortgagees with their mortgages proved should be relegated to file different suits for enforcing their mortgages by sale and otherwise. From this point of view it will appear that the law encourages multiplicity of proceedings. But the balance of authorities which require to be examined on this point appears to settle this point in favour of the stricter and perhaps more technical view of the law. I will also attempt to show, after the examination of the authorities on the point, the law is not so insensible as it may appear.

In Vedavyasa Ayyar v. The Madura Hindu Labha Nidhi Co., Ltd. ILR (1918) Mad. 90, 94, it is said that the puisne mortgagee is not entitled to execute the decree for the amount due to him when no sale was held for the realisation of the amounts due to the prior mortgagee and that the remedy of the puisne mortgagee was a suit for sale. That decision also observes that from this point of view Section 47 of the CPC was no bar, nor was the decree in the previous suit a res judicata. Kumaraswami Sastri J. delivering judgment in that case, with which Phillips J. agreed, after referring to the decisions of L.J. Mackintosh v. N.S. Watkins (1904) 1 C.L.J. 31, Kissory Mohun Roy v. Kally Churn Ghose ILR (1894) Cal. 100, Sururijigur Begum v. Baroda Kant Mitter (1909) 11 C.L.J. 563, Govinda Taragan v. Veeran ILR (1911) Mad. 32, comes to the conclusion that in the form of decrees, such as the present one that I am considering, there is nothing to direct the mortgagor to pay off the subsequent mortgagees. It is true that the decree no doubt declares the amount due to such subsequent mortgagees. But the learned Judge observes:

This was only with the view of enabling them to share in the surplus, should the property be sold owing to non-payment of the sum due to the Plaintiff who was the first mortgagee.

It is said that the right of the subsequent mortgagees under the decree drawn up according to Form 7 of App. D of the CPC is contingent on the property being brought to sale for non-payment of the sum found due to the Plaintiff mortgagee and the decree cannot be read as a decree directing the mortgagor to redeem each of the puisne encumbrancers within the time limited for redeeming the first mortgagee. The learned Judge proceeds to observe:

The utmost that can be said is that if the first mortgagee for some reason or other does not apply for sale in spite of the fact that he has not been paid, the other mortgagees can apply for sale in order to work out the rights to share in the surplus, if any. This is quite different from their applying to sell the property to discharge the amount declared due to each of them.

At the conclusion Kumaraswami Sastri J. observes:

If the mortgagor pays off the amount for which alone a sale in default of payment was directed, it is difficult to see how under the express terms of the decree each puisne encumbrancer can come forward and ask for sale. No time is fixed in the decree for redeeming them. There is no direction in the decree directing the mortagagee to pay them any amount and the right to share which is dependent on there being a sale and a surplus after paying off the Plaintiff-mortagagee cannot be enforced if for any reason the sale cannot take place at the instance of the Plaintiff.

Much of the difficulty and confusion on this branch of the law has been caused by the English practice as mentioned in. Piatt v. Mendel (1884) 27 Ch. D. 246 and Daniel''s Chancery Practice. But having regard to the provisions of the Transfer of Property Act and the present Code of Civil Procedure, the Indian practice is entirely different. In one of the more recent decisions of this Court in Shiv Kumar Prosad v. The Trustee for the Improvement of Calcutta (1947) 51 C.W.N. 798, 802, 803, Chakravartti J. delivering judgment with which Ellis J. agreed, observes:

It is true that he (puisne mortgagee) gets a free adjudication of this rights; but the only practical relief which the decree gives him is that he is declared entitled to obtain satisfaction of his dues out of the surplus sale-proceeds, if any be left after satisfying the Plaintiff''s dues (see Form No. 9). The puisne mortgagee cannot apply for a final decree unless he himself pays off the prior mortgagee; and the right to apply for a sale arises only if the Plaintiff''s dues are not paid, but not if the puisne mortgagee''s dues are not.

The learned Judge proceeds to observe:

When he is impleaded as a Defendant in a prior mortgagee''s suit, he is brought before the Court whether he wishes to come or not and his rights are adjudicated on by the Court under the compulsion of Order XXXIV, Rule 4(5).

In referring to the Madras decision which I have just quoted where it was said that the puisne mortgagee could have a right to apply for a sale if the prior mortgagee did not, Chakravartti J. observes that the Madras decision was one under the old provisions of the Transfer of Property Act and such observation on that particular point was only in the nature of obiter dictum. Chakravartti J. lays down.:

This supposed right is not warranted by the Code of Civil Procedure, as it now stands: nor does it appear to us to have been warranted by the old provisions of the Transfer of Property Act.

This particular point which has been the source of so much confusion of law on the subject and so much of uncertainty in legal thought was very carefully considered by Pugh J. on the Original Side in Sarat Chandra Roy Chowdhury v. M.M. Nahapiet ILR (1910) Cal. 907, 909. The learned Judge there observes that prior to the CPC of 1908 there was a recognised practice on the Original Side of this Court to treat the preliminary decree as being in favour, not only of the first mortgagee, but also in favour of the second mortgagee, as observed by Sale J. in Kissory Mohun Roy v. Kally Churn Ghose (supra). This principle was extended further in the report of an application in the same suit ILR (1897) Cal. 191 and also under the name of In the matter of Kissory Mohan Roy v. Kali Charan Ghose (1896) 1 C.W.N. 106 where Sale J. allowed a second mortgage, who was a Defendant, under the liberty retained to him by the preliminary decree, to come in and obtain an order for sale of the property outside Calcutta, which was subject only to the second mortgage, not to the first. This previous practice on the Original Side of treating the suit as one for the benefit of the second mortgagee developed on the basis of the English practice laid down in Platt v. Mendel (supra). Pugh J. in Sarat Chandra Roy Chowdhury v. M.M. Nahapiet (supra) says:

It will be observed that this procedure being based upon the old practice of the Original Side, does not profess to be in agreement with the terms of the Transfer of Property Act.

And in support of that proposition he quotes the decision of Brett and Mookerjee JJ. in Mackintosh v. Watkins (supra) holding that under the Transfer of Property Act the proper procedure was different and that the second mortgagee was made a party to the suit only to have an opportunity of redeeming if he wished, and to participate in the surplus sale-proceeds.

Although, a priori, this legal situation may appear to be hard on the puisne mortgagee, in fact it is not so. Common fairness requires in accordance with equitable principle that before the mortgagor''s property is sold, he should have the right to redeem. The puisne mortgagee in a prior mortgagee''s suit does not give the mortgagor any right to redeem the puisne mortgage. Secondly, a puisne mortgagee should not have any right of Bale in a prior mortgagee''s suit without redeeming the prior mortgage. Indeed in Order XXXIV, Rule 5 of the Code as well as in present Form 6 of App. D of the Code for final decree for sale, this principle is expressly recognised by stating that the property is being sold not only because the mortgagor has failed to pay but also because the puisne mortgagee has failed to redeem the prior mortgagee.

Finding this difficulty Mr. P.P. Ghose, learned Counsel for the applicant, advanced the line of argument that although that may be the law, in this case it is the consent decree made in a suit for reopening a mortgage transaction and the terms of the decree are different from the terms usually to be found in mortgage decrees. Emphasis is, therefore, laid by Mr. Ghose on the words in the decree, "default having been made in payment "of the amounts due to the Plaintiff and the said Defendant Sm. "Nirmala Sundari Dasi, the said mortgage properties or a "sufficient part thereof be sold." Therefore, it is argued that the properties are being sold also because the money due to the applicant puisne mortgagee was not paid. But that stage is passed. The order for sale was taken by the Plaintiff and not by the applicant. It was after the final order for sale had been made at the instance of the Plaintiff that the sale was fixed for May 17, 1952, and was avoided by the mortgagor Defendant paying off the Plaintiff. Therefore, there is no other order for sale under which any sale can be continued or held. The applicant did not obtain any order for sale of the properties. The reason can be supported also by what follows in the terms of this consent decree. The terms of the consent decree lay down that the money that was going to be realised by the sale was to be paid first to Narayan Chandra Dutt, then to the Plaintiff and only thereafter if any balance remains, to the applicant. That to my mind indicates that even by the terms of this consent decree, the only right is a right to the balance that the applicant has got and nothing more. To accede to the prayers of the applicant will, therefore, mean supplanting the whole consent decree for sale and making a new decree altogether at this stage. Such a procedure will be unknown in law. The construction of this particular consent decree, therefore, does not appear to me to invest this puisne mortgagee with any novel and additional rights, apart from those found in the usual decrees in this respect.

For these reasons this application must fail and is dismissed with costs.