R. Arunagiri Mudaliar vs T.R. Radhakrishna Aiyar and Others

Abdur Rahman, J.—This appeal arises out of a suit for the recovery of Rs. 5,100 being the principal and interest due under a mortgage deed

Ex. A dated the 12th February, 1916, executed by the first defendant (who died during the pendency of the suit) in favour of the plaintiff. Twenty

two items of property were covered by the mortgage out of which items 1 to 3 belonged to the first defendant originally and items 4 to 22

belonged to another person--one Ramachandra Aiyar. Out of these nineteen items of property, seven items (that is, items 4 to 10) were mortgaged

with a Venkateswara Aiyar. Ramachandra Aiyar sold all the items that he owned (that is, items 4 to 22) to the first defendant in 1912 subject to

Venkateswara Aiyar''s mortgage and the first defendant mortgaged all the properties which he owned (that is, items 1 to 22) for Rs. 5,000 with the

plaintiff under Ex. A, A second mortgage for Rs. 2,500 in respect of the items 4 to 22 was created by the first defendant in favour of the plaintiff in

1918. This was not discharged and the plaintiff instituted a suit (O.S. 11 of 1922) in the Court of the Subordinate Judge of Vellore for the recovery

of the amount due to him under the latter mortgage. It was decreed and the equity of redemption of items 11 to 22 was sold in execution and

purchased by the third defendant for Rs. 104 on the 31st August, 1925, subject to the first mortgage Ex. A. It has been found by the Court below

and the finding has not been challenged before us, that the third defendant was merely a benamidar and that the property was really purchased in

auction by the plaintiff himself. At about this time items 4 to 10 which were mortgaged with Venkateswara Aiyar were brought to sale in execution

of the decree obtained by him on his mortgage and were purchased before 1925 by him. Since he was a prior mortgagee, these items of property

passed out of the story. The first defendant filed an insolvency application later (I. P. No. 32 of 1926) and was adjudicated on the 6th September,

1927. The Official Receiver of Vellore sold items 1 to 3 of the property in 1932 without disclosing the plaintiff''s incumbrance. Out of these three

items, two (that is, items 1 and 3) were purchased by the sixth defendant and the remaining second item by the seventh defendant in the name of

the eighth defendant. The present suit was instituted by the plaintiff for the recovery of the amount due under his mortgage dated the 12th February,

1916 (Ex. A). This was decreed but to a very small extent. The learned District Judge of North Arcot who passed this decree, held that inasmuch

as the plaintiff had purchased the items 11 to 22 of the property benami in the name of the third defendant, he was liable to contribute, u/s 82 of the

Transfer of Property Act to the defendants 6 to 8. Since it was admitted by the parties before the trial Court that the value of the items 4 to 10 as

compared to the items 11 to 22 be taken in the proportion of 2 : 11 and the value of these 19 items of property was at the time of the second

mortgage in 1918 found to be Rs. 12,000 and that of the items 1 to 3 at the time of the first mortgage in 1916 to be Rs. 500 only, the claim was

decreed for Rs. 203-15-2 for principal and for Rs. 44-5-0 in respect of interest against these defendants. The rest of the claim was dismissed. Not

being satisfied with the'' decree the plaintiff has preferred the present appeal.

It appears that the sixth defendant made certain improvements on the property purchased by him and one of the grounds urged on behalf of the

appellant before us is that the lower Court was wrong in ignoring the subsequent accession to the mortgaged property and depriving the plaintiff of

the advantage which he would get u/s 70 of the Transfer of Property Act which entitled him to such accession for the purpose of his security. This

is, however, a minor complaint, as it deals only with the value of security and not with the amount which is recoverable by the plaintiff. The main

point which has been urged by the learned Counsel for the appellant before us is that in so far as the suit was not by a mortgagor for contribution

but by a mortgagee for the recovery of his money by the sale of the mortgaged property, the lower Court was wrong in applying Section 82 of the

Transfer of Property Act and in assessing the value of the various mortgaged properties as it prevailed at the time when they were mortgaged with

the plaintiff in 1916 and in 1918. The appellant''s contention is that he could not have been debited for anything more than the proportionate value

of the items of property (11 to 22) purchased by him as found to be prevailing either on the date on which he instituted the present suit or on the

date when he purchased these items of property but in no case on the date on which these properties were mortgaged with him. Learned Counsel

for the respondent contends, on the other hand, that although the plaintiff was originally a mortgagee, he has, by his subsequent purchase of the

items 11 to 22 come to occupy the mortgagor''s position qua the items that he has purchased and would thus be liable to contribute on the

principle contained in Section 82 of the Transfer of Property Act. Since it has been held that the value of the property in a case of contribution

under this section has to be taken with reference to the date on which the mortgage was executed, it has been urged on behalf of the respondent

that the value of the property as existing on the date of the mortgage was correctly taken by the trial Court as a basis for its decision.

The narrative of facts makes it clear that the law applicable to the facts of this case will be what was in force before the amendment of the

Transfer of Property Act in 1929. Section 82 of the Transfer of Property Act before the amendment read as follows:

Where several properties, whether of one or several owners, are mortgaged to secure one debt, such properties are, in the absence of a contract

to the contrary, liable to contribute rateably to the debt secured by the mortgage, after deducting from the value of each property the amount of

any other incumbrance to which it is subject at the date of the mortgage.

This section embodied the well recognised principle that a property which is equally liable with the other property to pay a debt shall not escape

because the creditor has been paid out of the other property alone and must rateably bear the burden of a mortgage. As the mortgage debt is

indivisible and if several properties are hypothecated to a creditor and have passed to different purchasers subsequently, a creditor is as a rule,

entitled to proceed against all the properties that were mortgaged with him, the only way to satisfy the mortgagee would be to tender the whole

amount due under the mortgage. In such a case, it is only just that the person who satisfies the mortgage debt in its entirety should be indemnified

by the purchasers of the other mortgaged properties and no fairer rule can be suggested than that each of the purchasers should contribute

according to the value of the property purchased by him. This, however, is a right which exists between the owners of the mortgaged properties

and does not affect the mortgagee''s power to enforce his mortgage against all or any of the properties mortgaged to him. The contribution referred

to in Section 82 of the Transfer of Property Act refers to this right and is applicable between the mortgagors inter se. If this is correct, strictly

speaking, it would have no application to the present case which is not a suit by a mortgagor or a purchaser from a mortgagor in which any relief to

contribution is asked for; but is plainly a suit by the plaintiff for the enforcement of the mortgage in his favour. It may be argued and in fact it was

suggested by the learned Counsel for the respondents that the plaintiff, although primarily a mortgagee, has, on account of his purchase of a part of

the mortgaged property, placed himself in the mortgagor''s shoes to the extent of the property purchased by him and the present suit must,

consequently, be regarded as one not only by a mortgagee but by a representative of the mortgagor as well. This, however, is not quite correct, in

our opinion. The present suit is for sale and it is impossible for a mortgagor to bring a suit for that purpose. It may be that in these circumstances

some other principle of law is attracted and in construing the equities to which the mortgagor may be entitled, the principle of Section 82 may have

to be borne in mind, but that is really a different matter. Reliance was placed on the other hand, by the learned Counsel for the appellant on the last

para of Section 60 of the Transfer of Property Act which reads as follows:

Nothing in this 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.

This part of the section provides for the only exception in which a portion of the mortgaged property could be redeemed the general rule being,

as stated before, that a mortgage was indivisible. This part of the section, as is clear from its language, provides for redemption of a property by

the mortgagor and would have, ordinarily no bearing on a suit by the mortgagee for sale of the property, But since according to the provisions of

this section, a mortgagor or a person interested in a share only of the mortgaged property is entitled, after the integrity of the mortgage is broken up

by a mortgagee purchasing a portion of the mortgaged property or the equity of redemption therefor, to redeem his own share on payment of a

proportionate part of the amount remaining due on the mortgage, it has a greater bearing on the present case than Section 82. If the mortgagor or a

person interested in a share only of the mortgaged property is entitled to redeem his share on payment of a certain amount, it may be contended

and the contention would be sound in our opinion that the mortgagee who has purchased a share of the equity of redemption can only sue for the

recovery of the balance of the amount and not for the entire amount which was due to him under the mortgage. The principle, which is applicable

to cases of this character, is that if a mortgagee happens to purchase a portion of the mortgaged property there would be a merger and extinction

of liability under the mortgage to that extent unless it is found that it was to the benefit of the mortgagee to keep his mortgagee''s rights alive or that

he declared his intention either expressly or by necessary implication that he would keep his subsequently acquired rights distinct from his prior

rights which he held as a mortgagee. 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, that is to say, the portion of the debt which bears the same relation to the whole amount of

the debt as the value of the property purchased bears to the value of the whole of the properties comprised in the mortgage. The words ''remaining

due'' in the section are, to some extent, misleading and must not be taken too literally.

The question then is as to the date on which this value of of the property has to be calculated; or in other words, whether we have to take the

value of the mortgaged property as it existed on the date of the mortgage into consideration or the value as it existed on the date on which a

portion of the mortgaged property was purchased by the plaintiff--the date of the institution of the suit being in our opinion, entirely immaterial.

There is an observation at p. 98 by Mr. Justice Candy in Fakiraya v. Gadigaya ILR (1901)Bom. 88, that the value of the property would

apparently be the value at the time of the purchase of the equity of redemption in part of the mortgaged property; but this, as pointed out in

Nyaunglebin Co-operative Bank v. Maung Ba U ILR (1928) Rang. 417, was obiter and not required for the decision of that case. It is true that in

A.A.R. Ponnambala Pillai and Others Vs. Annamalai Chettiar (dead) and Others, , the value actually taken into consideration was the value which

was found to be existing three years after the date of the purchase, but there is nothing in that case to show that the value was any different either

on the date of the mortgage or on the date when the property was purchased and this point was not in any case considered there.

Learned Counsel for the appellant contends that since he is entitled to the benefit of any accession to the mortgaged property the value should

be calculated as at the date of his purchase for if that is not done, we would be according to him ignoring the principle enunciated in Section 70 of

the Transfer of Property Act. This argument, however, ignores the words used in the section which are to the effect that the mortgagee is entitled to

the benefit of accession to the mortgaged property, ""for purpose of the security"" only. Section 70 cannot, therefore, render any assistance in the

decision of the question. There is nothing in the last clause of Section 60 which would point to the conclusion that the value of the property has got

to be taken into consideration as it existed on the date of the plaintiff ''s purchase although undoubtedly the person interested in a share only of the

mortgaged property can redeem his share only on payment of a proportionate part of the amount remaining due on the mortgage. It is not clearly

stated in that section, however, as to how this proportionate amount is to be calculated. Nor are we able to discover any reason why two different

principles should be adopted in calculating the proportionate amount as between mortgagors inter se or as between a mortgagee who has

purchased the equity of redemption of a portion of the mortgaged property and the mortgagor or any other person who may be interested in the

other share of the mortgaged property. It seems to us that although Section 82 may not in terms apply to a case like the present, it lays down a

general rule and the last clause of Section 60 is an instance of the application of this rule to a mortgagee who happens to acquire a share of the

equity of redemption. The right to contribution (to use the expression in a general sense) comes into being after all when more properties than one

are mortgaged although it may not be capable of being enforced until the mortgagee has recovered his dues from one property or until, as in this

case, a portion of liability under the mortgage is extinguished by the mortgagee purchasing a share of the equity of redemption. Once such a right

becomes capable of being enforced between mortgagors inter se or what may be regarded as an equivalent of the same right as between a

mortgagee who has acquired a share of the equity of redemption and the other persons interested in the equity of redemption of the rest of the

property, we should in either case--on the principle recognised in Section 82 of the Transfer of Property Act--look back to the value of the

various properties as they existed on the date of the mortgage and abstain from considering the subsequent increase or decrease in their value. This

rule has in our opinion the merit of certainty and the persons who are interested in the equity of redemption of one or more of the mortgaged

properties, know the extent of their liability at the time of their purchase and have not to depend on the whims or fancies of a subsequent intending

purchaser of a share of the equity of redemption in some of the properties mortgaged--be it by a mortgagor or by any one else. We are thus in the

absence of any other specific provision either in Section 60 or anywhere else, constrained for the above stated reasons to hold that the principle

underlying Section 82 should be held to apply to cases of this kind and the mortgagee should not by his purchase be permitted to improve his

position and should be treated in the same manner as a stranger would have been if he happened to purchase the property. After all by purchasing

a share of the equity of redemption, the mortgagee has chosen to stand in his mortgagor''s shoes to that extent and it is only to avoid a multiplicity

of suits that the exact amount to which he is entitled has to be ascertained in the present suit. The decision in Nyaunglebin Cooperative Bank v.

Maung Ba ILR (1928)Rang 417, is not opposed to the conclusion at which we have arrived. It must be remembered that the provisions of Section

82 were and are to be applied in the absence of a contract to the contrary and from the circumstances existing in the Rangoon case it is apparent

that the parties intended that the property which was not actually built but which was going to be built should be covered by the mortgage which

was created.

We must, for the foregoing reasons, hold that the method adopted by the lower Court in arriving at the figure to which it did was, in view of the

admissions made by the parties before it, correct. The finding in regard to the value of the mortgaged properties in 1916 and 1918 was not

contested before us and having regard to the admission by the parties before the lower Court that the value of the properties of the items 4 to 10

when compared with the value of the items 11 to 22 be calculated in the proportions of 2 : 11, the conclusion arrived at by the lower Court is

inevitable. The lower Court has, however, made a small mistake in calculation. The proportionate liability of the items 1 and 3 would be 400 x

5100/10654 and similarly the liability for the 2nd item would be Rs. 100 x 5100/10654 Bearing the principle contained in Section 70, Transfer of

Property Act in mind, the plaintiff''s security must be held to extend to the whole of the property purchased by the sixth defendant along with the

improvements effected thereupon but inasmuch as the amount decreed in favour of the plaintiff has been, we understand, deposited in Court, this

direction would not confer any advantage on him. The appeal, therefore, fails and is dismissed. The respondents will have their costs of the appeal.

The appeal having been set down ''to bespoken to'' this clay the Court made the following

ORDER

The figures Rs. 6,120-1-0 should be substituted for Rs. 5,100 in page 10 of the judgment. The latter figure is an error due to a slip.