Pichaiyappa Chetti and Another vs Govindaraju Mudaly and Others

Sundaram Chetty, J.—This is a second appeal preferred by defendant 1 (on whose death during the pendency of this appeal, his legal

representative was added as appellant 2) and arises out of a suit brought by the plaintiff-respondent 1 for the recovery of a sum of money alleged

to be due under Ex. B, a registered mortgage-deed dated 20th May 1912 and executed by defendant 2''s late husband Kuppuswami Naidu in

favour of defendant 3 for Rs. 790. Both the lower Courts have given a decree in plaintiff''s favour for the recovery of the amount claimed by sale of

the mortgaged properties.

In order to show how this plaintiff sues to recover the sum due under the mortgage-deed Ex. B, which was executed not in his favour, but in

favour of defendant 3, the plaint alleges that after the death of the mortgagor (Kuppuswami Naidu), his widow, defendant 2, sold the suit

properties to plaintiff under the sale deed dated 7th July 1920 (Ex. A) for Rs. 1,470 for the purpose of discharging the mortgage-debt due to

defendant 3 under Ex. B, that the plaintiff and defendant 2 have paid the mortgage-amount to defendant 3, and that in these circumstances, the

rights under the mortgage-deed Ex. B, have accrued to the plaintiff. It is further alleged in the plaint, that defendant 1, though he was aware of this

mortgage, obtained a sale of the suit properties, and has been in enjoyment thereof, and that in any event, the suit properties are liable to the

plaintiff as a charge for the amount of the prior mortgage under Ex. B discharged by him. Defendant 1 contended that the plaintiff''s claim in this

form is invalid and legally unsustainable, that when he (defendant 1) purchased the suit properties, Kuppuswami Naidu said the suit mortgage-debt

had been discharged, that subsequent to his purchase the present plaintiff wilfully got another sale-deed executed, stating falsely that the mortgage-

debt was not discharged and that he is not entitled to sue on the mortgage-bond in question.

The facts which may be taken to be beyond dispute may be briefly stated at the outset. The original owner of the suit properties was the late

.Kuppuswami Naidu (the husband of defendant 2). He created two mortgages over them, the earlier under Ex. B in favour of defendant 3, and the

later under Ex. 2 in favour of defendant. On 21st August 1918 he sold the properties to defendant under Ex. 3 for Rs. 1,000, in discharge of the

mortgage-debt to defendant 1 under Ex. 2 and in consideration of the receipt of Rs. 25 in cash. This sale is an absolute one, and was found to be

valid in the prior litigation : vide Exs. C and D. After the death of Kuppuswami Naidu, his widow (defendant 2) sold the same properties to the

present plaintiff under the sale-deed Ex. A which is dated 7th July 1920. By the conveyance under Ex. 3 defendant 2''s husband parted with his

entire interest, and he had no right or interest whatever in the suit properties after that sale. Defendant 2, as his heir, had absolutely no right or

interest in these properties, when she purported to sell them to the plaintiff under Ex. A. The sale under Ex. A is void and no interest in the suit

properties passed to the plaintiff by this sale. The personal remedy under the mortgage-deed Ex. B was also clearly barred, when defendant

executed the sale-deed to plaintiff. She had,no interest in the equity of redemption, nor was the personal remedy against her husband subsisting.

Having these facts in view, it has to be seen whether the plaintiff has established his claim to be subrogated to the rights of the mortgagee under

Ex. B, by reason of the discharge of that debt with his (plaintiff''s) money (the consideration for the sale to him under Ex. A). On the question

whether Ex. B was already discharged by Kuppuswami Naidu himself, the finding of both the Courts below is in the negative. On the mere ground

that Ex. B was discharged with the money paid by the plaintiff, the learned District Judge allowed the right of subrogation to the plaintiff, as a

matter of course, without any consideration of the law on the point.

It is urged on behalf of the appellant that the lower appellate Court has ignored the fundamental principles on which the equitable right of

subrogation is founded. The question for determination in this case is not altogether free from difficulty.

It is clear that Section 74, T. P. Act, has no application to the present case, as it deals only with the right of subrogation, declared in favour of a

subsequent mortgage, by his discharging a prior mortgage. The plaintiff has therefore no statutory right of subrogation. Section 92, T. P. Act, (as

amended by Act 20 of 1929) has no retrospective effect, and cannot govern the present case.

The question is whether the plaintiff can invoke for his aid the doctrine of conventional subrogation. As to this I may refer to the exhaustive

judgment of Sundara Iyer, J., in Narayana Kutti Goundan v. Pechiammal [1912] 36 Mad. 426, wherein the learned Judge has quoted the

principles of law, citing Wilkins v. Gibson [1901] 113 Geo 1 in the following terms:

It has been said that subrogation was a ""benevolent"" doctrine and equity would apply it in any case in which justice required it; and under the

sanction of this classic expression cases can be found where it was applied without the semblance of an agreement. We think the safer and better

rule to be, and we therefore hold, that a subrogation will arise only in those cases where the party claiming it advanced the money to pay a debt

which, in the event of default by the debtor he would be bound to pay or where he had some interest to protect, or where he advanced the money

under an agreement, express or implied, made with the debtor, or creditor, that he would be subrogated to the rights and remedies of the creditor.

The principle is also laid down in Sheldon on Subrogation (Edn. 2) in para. 240 as follows:

The doctrine of subrogation is not applied for the mere stranger or volunteer, who has paid the debt of another, without any assignment or

agreement for subrogation, being under no legal obligation to make the payment, and not being compelled to do so for the preservation of any

rights or property of his own.

In the light of these principles, how does the plaintiff''s claim stand? As have stated already, the sale to the plaintiff under Ex. A, is void, as the

vendor (defendant 2) herself had no interest whatever in the properties, and nothing to convey. It cannot be said that the plaintiff had some interest

in these properties to protect, for which he paid off the prior mortgage debt. It was defendant 1 who was the owner of these properties; when the

plaintiff got the sale-deed Ex. A from defendant 2, defendant 2 was not the owner of the equity of redemption, nor was she under any legal

obligation to pay the mortgage debt under Ex. B, as even the personal remedy against the mortgagor had become barred. She was not the debtor

who was bound to pay that debt, nor was the plaintiff bound to pay that debt, in the event of default by defendant 2. There is nothing to warrant

the inference of an express or implied agreement with the creditor (mortgagee) that he (the plaintiff) would be subrogated to his rights. The

endorsement on Ex. B recites that it was defendant 2 who received the money from the plaintiff, and paid the mortgage debt. Even in the sale-deed

Ex. A, it is stated that the vendor (defendant 2) received the sale amount in cash from the plaintiff, got the mortgage deed cancelled and handed it

over to the plaintiff. This recital is consistent with the endorsement on Ex. B itself. There is absolutely no basis in this case, for inferring an express

or implied agreement with the debtor or creditor, that the plaintiff should be subrogated to the rights of the creditor (mortgagee under Ex. B). In

short, the plaintiff''s position in making this payment, seems to be only akin to that of a volunteer, who was under no obligation to pay, and had no

interest of his own to protect by making such payment.

A number of decisions have been relied on by either side.

The learned advocate for the appellant relies on Mohesh Lal v. Mohant Hawaii Das [1883] 9 Cal. 961, Karuppan Ambalagaran v. Sakuth

Levvai [1914] 22 I.C. 253, Govinda Padayachi v. Lokanatha Iyer AIR 1921 Mad. 51, Ponnammal Vs. Pichai Thevan and Others, and Shiam Lal

v. Ram Piari [1910] 32 All. 25. The case in Govinda Padayachi v. Lokanatha Iyer AIR 1921 Mad. 51 seems to be almost on all fours with the

present case. As in that case, on the date of the sale to plaintiff under Ex. A, the vendor (defendant 2) had no right to redeem the mortgage in

question, the equity of redemption having already been sold away by her husband (the mortgagor) to defendant 1, and the personal remedy against

the mortgagor not also subsisting, the learned Judges have observed at p. 118, in the said case, that when the mortgagor has no debt to pay and no

right in property to preserve he would, if he offered to repay the mortgage money, be as much a volunteer as any stranger; and there is every

reason against allowing him to intrude between the mortgagee and those actually interested in the property. The present plaintiff is exactly in that

predicament. He should be deemed to be a mere intruder between the mortgagee and the real owner (defendant l).

The decisions in Syamalarayudu v. Subbarayudu [1898] 21 Mad. 143, Chamaswami v. Padala Anandu [1908] 31 Mad. 439, Palamalai

Mudaliyar v. South Indian Export Co. [1910] 33 Mad. 334 and Sambu v. Nama [1911] 35 Bom. 438, relied on for the respondent, are

inapplicable to the circumstances of the present case. They are cases, where the person who made the payment to discharge an incumbrance had

some interest or concern in the property to protect, which he acquired under a voidable sale, which would be good until it is set aside at the

instance of a creditor, or a person claiming under a prior contract for sale, or under a sale whereby he was in actual possession of the property, but

which was subsequently found to be invalid. But in the cases dealt with in Karuppana Ambalagaran v. Sakuth Levrai and Shiam Lal v. Ram Piari,

the party who claimed the right of subrogation, acquired no interest whatever in the property, the sale being void, or purely nominal and colourable.

Similarly in the present case, defendant 2''s sale under Ex. A conferred no right or interest on the plaintiff in the suit properties, and there is no

allegation in the plaint that he was put in possession at least, but on the other hand, the allegation in para. 7 of the plaint is that defendant 1 obtained

a sale of the properties and has been in enjoyment thereof.

Some of the decisions relied on by the learned advocate for respondent 1 seem to allow the right of subrogation on grounds of justice, equity

and good conscience, where it is shown that the plaintiff obtained a sale in perfect good faith, bona fide believing that the transferor had title to the

property, though it subsequently turned out that the sale was altogether invalid. In these cases the distinction between a void and voidable sale, was

not kept in view, but the bona fide belief in the vendor''s title and good faith were considered sufficient to accord relief by applying the doctrine of

subrogation. The decision in Ammani Ammal v. Ramaswami Naidu [1919] 51 I.C. 57 is strongly relied on. Even in Govinda Padayachi v.

Lokanatha Iyer, this principle is recognized, by stating it with approval, and observing that the claim is allowed, when the mistake relates to the

actual existence of an interest, and there is also a good faith. But where a mistaken bona fide belief and good faith are the grounds for applying the

equitable rule of subrogation, they must be distinctly alleged in the pleadings and proved. They are not matters for legal prescription, but have to be

made out in the particular case. Such an allegation is conspicuous by its absence in the present plaint. In the absence of any such plea, there was no

room for an issue on this point. In no portion of the plaint, it is alleged that when he obtained the sale deed Ex. A. the plaintiff was under a bona

fide mistaken belief that defendant 2 had some right or title to the properties, or acted in good faith without the knowledge of the previous sale by

her husband. When no such plea was even sat up in the plaint, I do not think there is any justification for giving a now turn to the basis for the

plaintiff''s claim in this second appeal.

I am therefore of opinion that the plaintiff is not entitled to be subrogated to the rights of the mortgagee under Ex. B, as he has no statutory right

of subrogation, and as the doctrine of conventional subrogation too cannot be invoked for his aid. Even apart from this there is no scope for giving

relief, on any other recognized equitable ground.

The plaintiff''s claim to enforce the mortgagee''s rights under Ex. B, for which he has filed this suit must fail. I may refer to a representation

made by the advocate for respondent 1 (plaintiff) during the course of his arguments. that if the plaintiff''s claim is held to be unsustainable the ex

parte defendant 3 (the mortgagee under Ex. B) should be transposed as the plaintiff, and a decree should be passed in his favour. Plaintiff''s own

case is that the mortgage debt due under Ex. B to defendant 3, was discharged. There is no question of the validity of that discharge. Defendant 3

cannot be given a decree for the recovery of his mortgage money, after his debt has been paid to him.

In the result the decrees of the Courts below are set aside, and the plaintiff''s suit is dismissed. But on a consideration of the peculiar

circumstances of this case I think it reasonable to direct the parties to bear their own costs throughout, and I order accordingly.