Sabapathi Pillai and Others vs Chockalinga Pillai

This is an appeal against the order of the Subordinate Judge of Mayavaram in execution of a'' decree for sale in a mortgage suit. The appellant in

this court was the 2nd defendant in the suit. He was a co-parcener of the 1st defendant, the mortgagor, and was consequently impleaded as a

party. The decree directed the 1st defendant to pay a sum of Rs. 39291-15-0 with interest from the date of plaint and Rs. 1844-6-0 for the

plaintiff''s costs, and it directed the 1st defendant''s half share in the mortgaged property to be sold in case of default in payment. It also provided

that if the net proceeds of the sale were found insufficient to pay the amount due to the plaintiff the balance should be recovered from him

personally. So far as the 2nd defendant was concerned the decree stated "" It is further ordered that the 2nd defendant also be liable for the

plaintiff''s costs of the suit (1844-6-0)."" The respondent got the 1st defendant''s share of the property sold in execution. The sale proceeds which

amounted to Rs. 41,500 were insufficient to discharge the whole of the mortgage debt and interest and costs. The plaintiff then put in the present

application for execution against the 2nd defendant to recover the costs of the suit. He stated that he credited the amount of Rs. 41,500 realised by

the sale of the hypotheca towards the decree amount and interest and that he was entitled to recover the costs from the 2nd defendant under the

terms of the decree. The 2nd defendant contended, first, that the execution of the decree as against him was barred by limitation, and secondly,

that the sale proceeds should be first applied towards the interest on the mortgage amount and the costs of the suit, and the balance alone towards

the principal amount and that the plaintiff was not entitled to any relief against him as the amount realized by the sale had discharged the costs of the

suit due to the plaintiff. The Subordinate Judge disallowed the latter contention. No reference is made in his judgment to the plea of limitation. It

appears that the decree of the Original Court was confirmed in appeal within less than three years before the present application for execution.

Apparently, the objection as to limitation was not pressed. It has been urged before us by the learned vakil for the appellant, apparently, in

ignorance of the date on which the appellate decree was passed. We disallow the contention.

The principal question for decision in this appeal is whether, as contended by the appellant, the costs due to the plaintiff must be held to have

been discharged by the proceeds of the sale of the hypotheca. Mr. K. Srinivasa Aiyangar the learned Vakil for the respondent, contends that the

decree-holder was not under any obligation towards the appellant to appropriate the sale-proceeds towards the costs, and that, as the decree

expressly held the appellant liable for the costs, he is entitled to recover them from him. The appellant refers to Order 34 Rule 13 C. P. C, and

contends that, even if the rule is not in terms applicable to the case, the principle embodied in it should be applied. The respondent contends that

Rule 13 is applicable only to cases when a sale is directed under the preceding Rule 12.

That rule provides that "" where any property the sale of which is directed under this order is subject to a prior mortgage, the Court may with the

consent of the prior mortgagee, direct that the property be sold free from the same, giving to such prior mortgagee the same interest in the

proceeds of the sale as he had in the property sold."" Rule 13 enacts "" Such proceeds shall be brought into Court and applied as follows."" The

question is whether the expression ""such proceeds"" means the proceeds of any sale which is directed under Order 34, or the proceeds of a sale

directed under Rule 12 of that order only to be held free of a prior mortgage. The language of Rule 13 favors the latter contention, for the

application of the sale proceeds is directed to be as follows.

First, in payment of all expenses incident to the sale or property incurred in any attempted sale; secondly, in payment of whatever is due to the

prior mortgagee on account of the prior mortgage, and of costs, properly incurred in connection therewith; thirdly, in payment of all interest due on

account of the mortgage in consequence whereof the sale was directed, and of the costs of the suit in which the decree directing the sale was

made; fourthly, in payment of the principal money due on account of that mortgage; and lastly, the residue (if any) shall be paid to the person

proving himself to be interested in the property sold, or if there are more such persons than one, then to such persons according to their respective

interests therein or upon their joint receipt."" The second clause directing the application of the proceeds, in the second place, towards the payment

of whatever is due to the prior mortgagee, apparently refers to a prior mortgage free of which the property is ordered to be sold under Rule 12. It

is, therefore, reasonable to construe Rule ] 3 as in terms applicable only to cases where a sale is ordered under Rule 12 free of a prior mortgage.

There is no other rule laid down in the C.P.C. or elsewhere as to whether the proceeds of a sale held for the discharge of a mortgage, should be

first appropriated in payment of interest and the costs of the suit, and only afterwards to the principal. Section 73 of the code, in laying down the

rule applicable to the application of the proceeds of a sale directed by a decree for the discharge of an incumbrance, provides that the proceeds

should be applied first in defraying the expenses of the sale, secondly in discharging the amounts due under the decree; thirdly, in discharging the

interest and principal monies due on subsequent incumbrances (if any) &c.

It does not contain a provision that the costs and interests on the circumstances due under the decree should be discharged out of the sale

proceeds before the principal amount. The reason evidently is that the section is concerned only with the priorities as between different mortgages

on the property sold and decree for money executable by attachment and sale of property. Now, what was the object of Rule 13 in giving priority

to interest and the costs of the suit in a sale in execution of a mortgage decree over the principal amount due under the mortgage ? First, the

legislature wanted to give the mortgagee a charge on the proceeds for the costs of the suit which he would not have by virtue of his mortgage

alone.

Secondly, it also wanted to enact as between the mortgagor and the mortgagee that the interest should be discharged first, wrongly made.

This provision was also enacted for the benefit of the mortgagee. It would, probably, not necessarily follow that no one else would be entitled to

the benefit of the provision. For instance, a person liable as surety for interest alone due under a mortgage decree may be entitled to claim the

enforcement of the rule. A party impleaded on the ground of his having an interest in the mortgaged property would not ordinarily be liable for the

costs of the suit, and a direction making him liable therefore would generally proceed on some conduct of his justifying his being made responsible

for the costs. Mr. Srinivasa Aiyangar contends that such a person cannot claim the application of the rule and that, in any case, the rule being not

applicable to the present case in which no sale was directed under Rule 12 we should not apply the principle of the rule. We are unable to accept

the argument that the principle of the rule should not be applied in cases, where sale is not directed under Rule 12. There is no apparent reason and

none was suggested by Mr. Srinivasa Aiyangar for a different principle being applied with respect to the matter in question so far as the mortgage

for which the sale is held is concerned, according as it is held free of a prior mortgage or subject to it. We are of opinion that we must apply the

same rule in both cases. Such being the case, if the proceeds are wrongly applied by the Court towards the principal amount of the mortgage

before the discharge of the costs, is any other person also made liable by the decree for those costs entitled to object ?

We do not consider it necessary to decide the question in this case. The duty of applying the proceeds according to law is laid on the court and

not on the decree holder. He has not the right to make the appropriation according to his desire. The court in this case, did not, when the proceeds

were brought before it and paid over to the decree-holder direct the appropriation of the money towards the principal amount and interest. It is the

decree-holder that now wishes in his present application to do so. The court had to deal with the proceeds not only as between the latter and the

1st defendant. In the absence of any distinct order to the contrary, it must be taken to have followed the rule of law applicable to the case in

handing over the proceeds to the decree-holder, and to have directed, therefore, that the amount should be applied towards the costs of the suit

and the interest first and then the balance towards the principal. The result admittedly would be that the costs must be taken to have been

discharged, and the plaintiff is not entitled to take out execution against the ''2nd defendant.

We, therefore reverse the order of the Lower Court and dismiss the plaintiff''s application with costs here and in the Lower Court.