Rai Benode Behari Bose vs Babu Hira Singh and Others

On the 24th of April 1907 Ambika Charan Mitra and Amrita Krishna Mitra, his son, mortgaged certain properties to Kumar Promatha Nath Malia, who obtained a decree on the 9th of August 1909 and transferred it on the 14th January 1911 to Rai Benode Behari Bose Bahadur. Rai Benode Behari Bose being of opinion that the property was worth more than the amount secured under the decree which he had purchased from the former mortgagee decree-holder, advanced further sums upon a second mortgage to the Mitras on the 16th of January 1911 and the 8th of May 1911. In 1918 Rai Benode Behari put the second mortgage into suit; and subsequently obtained a decree and purchased the property himself. The sum realized in execution of this decree exceeded the amount due under the decree by a considerable sum.

Pending the suit upon the second mortgage Rai Benode Behari put up for sale the mortgaged property upon the decree obtained on the 1st mortgage and the proceedings in execution reached the stage of a date being fixed for the sale after due issue of the sale proclamation. Upon the date fixed for the sale the judgment debtor came into Court with a petition asking for time to raise money from Hira Singh to pay off the mortgage decree. Rai Benode Behari himself signed this petition and upon this joint petition of Rai Benode Behari and the judgment-debtor time was granted to borrow money from Hira Singh and to pay off Rai Benode Behari''s debt. In due course the debt of Rai Benode Behari upon the first mortgage was extinguished by payment made admittedly from the purse of Hira Singh.

Hira Singh on the 9th of May 1913 took a mortgage for Rs. 7, 000 from the Mitras, wherein it was distinctly stated that the mortgage lien held by Rai Benode Bahari was to be kept alive for the benefit of Hira Singh who was paying the money.

Upon the purchase of the property by Rai Benode Behari and possession being taken thereof, Hira Singh has brought the present suit for an account upon the first mortgage and for a declaration that the amount now due upon the mortgage, which can be traced to the payment of the debt of Rai Benode'' Bahari, should rank as a charge upon the property prior to the charge obtained by Rai Benode Behari by virtue of his purchase under the decree upon the second mortgage. Hira Singh also claims that Rs. 1,000, the amount of rent which was paid from a loan taken from him by the Mitras, should be a charge upon the properties mortgaged.

The learned Subordinate Judge has refused to give the plaintiff a charge, in regard to the sum advanced for payment of rent; but has made a decree directing that an account be taken and that all sums now due on account of the payment made in satisfaction of the first mortgage decree of Rai Benode Behari do rank prior to the second mortgage decree of Rai Benode Behari; and that all other sums due under Hira Singh''s mortgage shall be postponed to the second mortgage.

Rai Benode Behari appeals against that portion of the decree which gives priority to Hira Singh''s charge upon the property; and Hira Singh appeals against the order refusing the charge in connection with the payment made for rent.

The appeal of Hira Singh, First Appeal No. 75 of 1916, is not seriously pressed. We need say with regard to it only that there was no payment of rent made by Hira Singh. There was merely a further loan granted to the mortgagor. Though the money borrowed was actually deposited to set aside the sale of the mortgaged lands, the transaction created no charge. The appeal of Hira Singh is, therefore, dismissed with costs.

The appeal of Rai Benode Behari will also be dismissed. The petition filed for time to be given for borrowing the money from Hira Singh makes it unnecessary for us to discuss the nice question whether in all cases a transaction resulting in subrogation can be held to be covered by Section 52 of the Transfer of Property Act. The essence of Section 52 is that a transaction entered into during the pendency of a suit cannot prejudice the interests of a party to the suit who is not a party to the transaction. Rai Benode Behari himself consented to the postponement of the sale upon the first mortgage in order that money might be borrowed, from Hira Singh. He, therefore, knew that Hira Singh was about to lend money to liquidate the mortgage debt. The passage to be found at page 1046 in Volume X, Indian Law Reports, Calcutta Series in the case of Gokaldas Gopaldas v. Puranmal Premsukh Das 10 C. 1035 : 11 I.A. 126 : 8 Ind. Jur. 396 : 4 Sar. P.C.J. 543 : 5 Ind. Dec. (N.S.) 692 (P.C.) which report begins at page 1035, must be taken as conclusive that irrespective of the clause in Hira Singh''s document definitely keeping alive the mortgage of Rai Benode Behari, the payment of the mortgage debt by Hira Singh was in itself sufficient to warrant the presumption that the prior mortgage would be kept alive. We must presume that Rai Benode Behari was, when the petition for time was filed, within reach of legal advice. He must have been aware that the entry of a third party would create a lien prior to his second charge. He nevertheless acquiesced in the granting of time for the entry of that third party with the deliberate intention of realizing his money as rapidly as possible. We must presume that the transaction as a whole was for his benefit as he thought at the time, and was not a transaction calculated to prejudice his interests as contemplated in Section 52. We hold that this part of the case was rightly decided by the learned Subordinate Judge and that Hira Singh, the plaintiff, is entitled to ask for an account upon his prior charge and to recover the sum advanced for the payment of the first mortgage debt of Rai Benode Bhari.

The learned Subordinate Judge has, however, given no indication in his judgment as to the rate at which interest should run. The interest due under the mortgage document was Rs. 1-8 per cent. per mensem. At the time that Rai Benode Bahari''s debt was paid a decree had been made and the property was up for sale. The terms of the decree were that interest should run after the 10th of February 1910 at 6 per cent. per annum. We are informed that one of the conditions of the granting of time to pay the decretal amount was that the rate of interest should be increased to 12 per cent per annum. This appears to have received the sanction of the Court on the 18th of January 1911. The increase of the rate of interest from 6 per cent. to 12 per cent. seems to us suspiciously like a penalty; and indeed the debt having been extinguished, so far as Rai Benode Behari was concerned, on the date of the payment made by Hira Singh, interest should not be calculated at more than 6 per cent. per annum in making up Hira Singh''s account. We modify the learned Subordinate Judge''s decree to this extent; that in taking that account interest be calculated at six per cent.

The appeal of Rai Binode Behari will be decreed in part with costs to the extent of success and failure on both sides.