Ram Khelawan Singh and Others vs Ramnandan Prasad Singh and Others

Ramaswami, J.—The plaintiffs brought the suit alleging that on 14th May 1918 defendants 1st party had executed a simple mortgage bond in their favour for a sum of Rs. 221-8-0 with respect to properties mentioned in Schedule A of the plaint. On 27th February 1928, defendants 1st party executed a second mortgage bond in favour of defendants 2nd party as regards properties covered in part by Schedules. A and B of the plaint. On 14th May 1929, the defendants 1st party sold to the plaintiffs by registered kebala the properties described in Schedule B of the plaint. Out of the price of Rs. 600 a sum of Rs. 452-12-0 was set off on account of the amount due on the mortgage bond of 1918 and the balance of Rupees 147-4-0 was set off with respect to two hand-notes. In 1936 defendants 2nd party instituted a suit on their bond and obtained a mortgage decree. In execution of the decree defendants and party purchased the properties described in Schedule. B of the plaint. They obtained delivery of possession through Court, thus dispossessing the plaintiffs. The plaintiffs claimed that according to the terms of sale deed they were entitled to enforce the mortgage bond of 1918, should any defect be discovered in the properties conveyed. The plaintiffs accordingly asked for a mortgage decree for a sum of Rs. 452-12-0 be-sides interest. Defendants 1st party did not appear but defendants 2nd party contested the suit on the ground that it was time-barred. The learned Munsif held that the plaintiffs were not entitled to a mortgage decree. But he pronounced a money decree ex parte for the amount claimed against 1st party defendants.

In appeal the learned Subordinate Judge held that the plaintiffs were alse entitled to a mortgage decree against the defendants.

On behalf of defendants 2nd party who have preferred this appeal learned advocate presented the argument that the Subordinate Judge was erroneous to hold that the suit was not barred by time. The Subordinate Judge considered that by executing the sale deed of 14th May 1929 defendants 1st party had made acknowledgment which provided a fresh start for limitation; that defendants 2nd party were bound by the acknowledgment and had only a right to redeem as a subsequent mortgagee purchaser. The opinion of the Subordinate Judge is incorrect. In Surjiram Marwari v. Barhamdeo Prasad CRI.L.J. 337, Sir Asutosh Mookerjee held that the acknowledgment of a mortgagor in favour of first mortgagee would not operate against second mortgagee whose title originated before the acknowledgment had been given. He relied upon the observation of Lord Westuury in Bolding v. Lane (1863) 1 GJS 122, where that eminent Judge in reversing the decision of Vice-Chancellor Stuart to the effect that an acknowledgment by a mortgagor in favour of the first mortgagee operates as against a second mortgagee whose title originated before the acknowledgment was given remarked as follows:

This decision leads to very extraordinary and alarming consequences. If it be well founded, then according to the true intent and meaning of this Statute, the right of one man may be taken away by the Act of another. If the second mortgagee be in possession, and the first mortgagee seeks to recover his principal and arrears of interest for twenty years by a suit for, foreclosure or sale, is the second mortgagee to be at liberty to plead or insist on this enactment? It is impossible to deny his right so to do. But according to this decision, if the first mortgagee obtains at any time the acknowledgment in writing of the mortgagor or his representative, the right of the second mortgagee is defeated, and all the arrears are recoverable against the second and subsequent mortgagees. That is to say, the mortgagor or his representative, who may have no interest whatever in the lands (for the ultimate equity of redemption may not be worth one shilling), shall be enabled to charge the estate anew with any amount of arrears of interest as against the second and subsequent mortgagees. The Court is bound by every principle of judicial interpretation to find, if possible, a construction of the statute which does not involve consequences so inconsistent with natural justice....

In Bank of Upper India Ltd. v. R.H. Skinner AIR 1942 P.C. 67, the Judicial Committee approved the judgment of Sir Asutosh Mookerjee and held that Section 19(1), Limitation Act would not apply in the case of a mortgage where the mortgagor''s written acknowledgment to the mortgagee was of a date subsequent to a transfer by the mortgagor of his remaining interest in the property mortgaged to a third party. Again in Munshi Lal v. Hira Lal A.I.R.1947 All. 74, a Full Bench held that an acknowledgment given by a mortgagor in favour of a prior mortgagee did not preclude an inter-mediate mortgagee, whose title accrued before the acknowledgment was given, from relying on the Limitation Act as a bar. In my opinion, the section must be construed according to the principle enunciated in these decisions. It follows that in the present case the acknowledgment in the sale deed of 14th May 1929 would not operate against the defendants 2nd party in whose favour defendants 1st party had already executed a mortgage on a previous date.

On behalf of the respondents it was, however, pointed out that in the sale deed of 14th May 1929 there was a stipulation that if as a result of any flaw or defect.

the vendee was dispossessed of the whole or any part of the vended property, then in that case the executant and all his heirs and representatives would be liable to return the consideration money principal with interest at the rate of Rs. 3-2-0 per hundred rupees per month.

There was a further stipulation that

in case of any flaw or defect discovered and proved in the vended property as a result whereof the vendee was put to any loss in respect of the vended property, then the mortgage lien under the mortgage bond and the aforesaid handnotes, in satisfaction of which debt this deed of sale was executed, would affect this deed of sale also; that the

vendee has and shall have the right to institute a suit in competent Court in respect of the mortgage bond and the aforesaid handnote and realise the entire amount aforesaid principal with simple and compound interest and coats in Court, from the person and other assets and the entire movable and immovable properties of the executant and all his representatives;

that

at that time no objection on the part of the executant or all his representatives as regards the said bond and the handnotes being time barred shall be tenable in Court.

On the stipulations of the sale deed the learned advocate on behalf of the respondents addressed a twofold argument. In the first place he con-tended that since the plaintiffs had been dispossessed and the consideration had failed, a fresh cause of action arose u/s 65, Contract Act. Learned advocate maintained that the original mortgage bond of 1918 was revived and the period of limitation under Article 132 would run from the date of dispossession of the plaintiffs. Reference was made to the dictum of the eminent Judge Asutosh Mookerjee in Surjiram Marwari v. Barhamdeo Pd. CRI.L.J. 337, that when a mortgagee took a conveyance of a portion of the mortgaged property in satisfaction of his claim and the conveyance subsequently proved to be inoperative, the mortgage debt was revived and could be enforced by suit and the period of limitation for such a suit would run from the date of the revival of the cause of action. But Harington J. considered it unnecessary to decide the question of limitation. Both the learned Judges concurred that the appeal should be allowed on the ground that the decree of the Subordinate Judge was illegal since it was not open to a mortgagee to throw the burden of the entire debt upon a portion only of the mortgaged property and release the remainder for the reason that it is subject to prior charges. But the dictum of Sir Asutosh Mookerjee does not appear to be correct, for it is inconsistent with the decision of the Judicial Committee in Soni Ram v. Kanhai Lal 40 I.A. 74 in which the appellant in 1907 instituted a suit for the redemption of a usufructuary mortgage made in 1842. In 1866 and 1867 the widow and daughter of the mortgagee executed deeds of sale of the mortgage interest which acknowledged the existence of the mortgage. For the period between 1883 and 1898 there was under these deeds (sic) of sale a junction of the mortgagor and mortgagee interest in one person. The defendants to the suit were the sons of the mortgagee''s daughter. In holding that the suit was barred and that statutory time continued to run during the period from 1883 to 1898, Sir John Edge observed:

In this case the right to redeem the mortgage of 2nd January 1842, accrued to the mortgagors the moment the mortgage was executed, and the 60 years'' period of limitation must be computed as having begun on 3rd January 1842. There is nothing in Act XV [15] of 1877 which would justify this Board in holding that, once that period of limitation had begun to run in this case, it could be suspended. Their Lordships consider that if they were to hold that, by reason of the fusion of interests between 1883 and 1898, the period of limitation was suspended, they would this not being a suit to which the proviso to Section 9 of Act XV [15] of 1877 applies be deciding contrary to the express enactment of that section that ''when once time has begun to run, no subsequent disability or inability to sue stops it.

On behalf of the respondents the argument was addressed that a fresh cause of action arose as soon as they were dispossessed in execution of the mortgage decree. u/s 65, Contract Act, when an agreement is discovered to be void, any person who has received any advantage under such agreement is bound to restore it or to make compensation for it to the person from whom he received it. But such a case would fall within Article 97 and the plaintiffs would be barred by time. In Bassu Kuar v. Dhum Singh 15 I.A. 211 a debtor agreed to convey certain property to this creditor and to set off the debt against part of the consideration for the conveyance. A sale deed was executed, but a dispute arose as to whether it had been executed in accordance with the contract. Litigation was commenced by the debtor to enforce the agreement, and he was unsuccessful. The creditor then sued to recover the debt, and was met by the plea of limitation. The Judicial Committee held that the limitation began to run when the agreement became wholly ineffectual, and that from that date, a fresh obligation was imposed upon the debtor u/s 65, Contract Act, to pay his debt: that such a case fell within Article 97, Limitation Act and would be barred after three years from the date when the consideration failed.

For the respondents the extreme argument was advanced that by the terms of the contract the mortgage bond of 1918 was revived due to the default of the appellants; and that the period of limitation should be computed under Article 132 from the date when respondents were dispossessed in execution of the mortgage decree. It is impossible to accept this argument. It was decided by the Judicial Committee so far back as 1849 in East India Co. v. Odit Charan Pal 5 M.I.A. 43, that if to an action the statute of limitation is pleaded and proof is given that the action clearly commenced after the period of limitation had expired, the defendant notwithstanding the existence of any agreement is entitled to a verdict. In Kristo Komul Singh v. Huree Sirdar 13 W.R. 44, a Full Bench of the Calcutta High Court decided to the same effect. In Jawahar Lal Vs. Mathura Prasad and Another , King J. considered that parties cannot by contract alter the statutory starting point of limitation, and that such a contract would be void. It is also well settled that there can be''no estoppel against an Act of the Legislature; Jagatbandhu Saha v. Radhakrishna Pal 36 Cal. 920 and Abdul Aziz v. Kanthu Mullik 38 Cal. 512. In my opinion the parties cannot waive the statute by agreement. An agreement by a person against whom a cause of action has arisen that he would not take advantage of the statute cannot affect its operation on the original cause of action unless such agreement constitutes an acknowledgment of liability which the statute itself provides as an exception to the rule. It is manifest that in the present case the breach of condition of the sale deed would not have the effect of extending the period of limitation for enforcing the mortgage bond of 1918.

For the respondents learned advocate lastly suggested that the indemnity clause of the sale deed of 1929 would itself constitute a mortgage within the meaning of Section 58, T.P. Act. The relevant portion of the sale deed is to the following effect:

I further stipulate that in case any flaw or defect as a result of any act of me the executant, is discovered and proved in the said vended property, as a result whereof the said vendee is put to any loss is respect of the vended property, then the mortgage lien under the mortgage bond and the aforesaid handnote, in satisfaction of which debt this deed of sale is executed, shall affect this deed of sale also. The said vendee has and shall have the right to institute a suit in competent Court in respect of the mortgage bond and the aforesaid handnotes and realise the entire amount aforesaid principal with simple and compound interest and costs in Court, from the person and other assets and the entire moveable and immovable properties of me the executant and all my heirs and representatives.

Learned advocate referred to Narayanasamy Rao v. Ramasamy Naicker AIR 1920 Mad 650, in which an indemnity bond was executed by a vendor of immovable property in favour of the vendee which covenanted for the payment of compensation to the latter if he was deprived of possession and provided for the sale of certain specific property to secure payment of compensation. The learned Judges held that there was a creation of mortgage in respect of the property so specified, and that such mortgage had priority over intermediate mortgages created at a time when there was no debt by the vendor to the vendee. But the facts of the present case are different. There is no separate indemnity bond executed by the vendor nor is there provision that specific properties should be sold in lieu of compensation if; the vendee should suffer loss on account of any defect in the title to the properties conveyed. In my opinion the stipulation in the sale deed cannot be construed to create a fresh mortgage with respect to the properties in dispute.

Upon these grounds I would set aside the decree of the learned Subordinate Judge and order that the plaintiffs should be granted only a money decree for the amount claimed against the defendants 1st party and the suit should be dismissed against the defendants 2nd party who are entitled to costs throughout.

I should accordingly allow this appeal.

Imam J

I agree.