Sesha Ayyar and Another vs Krishna Ayyangar and Others

The plaintiffs are the holders of a mortgage for Rs. 10,000 executed on the 24th April 1889. Besides seeking to enforce the ordinary remedies

of mortgagees against their mortgagors and against the property comprised in the mortgage, they claim on the principle of contribution to charge

any balance which may still remain due to them against certain other property which, with the property comprised in their own mortgage, was

included in a prior mortgage executed in favour of Rangayya Goundan, It will be convenient to deal first with this latter claim, as to which it is

argued, firstly, that in point of law it cannot be maintained and, secondly, that it cannot properly be joined in a suit by the mortgagee on his own

mortgage. The claim arises in this way--

In execution of the decree on Rangayya Goundan''s mortgage, some of the property which is included in the latter mortgage of the plaintiffs was

sold and to that extent the plaintiffs'' security has been diminished. It was not competent to the plaintiffs, though they were parties to Rangayya

Goundan''s suit, to insist that he should prosecute his claim in the first instance; against the property other than that comprised in the plaintiffs''

mortgage, because the plaintiffs had notice of Rangayya Goundan''s mortgage and therefore could not call in aid the provision of section. 81 of the

Transfer of Property Act. Their case is that they, being interested in property X, comprised in both mortgages, are entitled, as against the

defendants who have become possessed of property Y, comprised in Rangayya Goundan''s mortgage only,, to make them contribute to Rangayya

Goundan''s claim, inasmuch as that claim has been paid off out of property X. It is not necessary to consider the effect of Section 56. The question

is whether, u/s 82 of the Act, the plaintiffs have any legal claim against a third parson in possession of property Y. The second paragraph of the

section clearly has no bearing on the present case; for that paragraph merely deals with a case in which,, the first mortgage having been paid off out

of the only property comprised in it, it remains to be determined how the second mortgage debt is to be borne as between the remainder of that

property and another property which is also made security for the second debt. In such a case contribution works, not in favour of the second

mortgagee, but in favour of other persons interested in one or other of the two properties comprised in his mortgage. Nor do we think that the first

paragraph of the section is applicable in the circumstances of the case. If the plaintiffs, instead of taking a mortgage on the 24th April 1889, had

bought the property then mortgaged to them and had; as purchasers, been included in Rangayya Goundan''s suit and had allowed that property to

be sold under his decree, what possible right could they have had to claim compensation at the expense of persons interested in other property

included in Rangayya Goundan''s mortgage? Ex hypothesi, Rangayya Goundan''s claim has been satisfied and nothing has been done to keep his

lien alive for the benefit of the plaintiffs. The first paragraph does not provide for the keeping alive of the lien after the mortgage debt bad been

paid, for it; merely declares the manner in which the debt shall be borne by the several properties. It would come into effect when the

administration of the estate of the mortgagor was under consideration and may be taken to recognize a lien possessed by the person who, being

interested in one of the mortgaged properties, pays off the debt and so acquires a right of contribution; but we do not think that the section gives

any further right. In the present case the plaintiffs, who certainly cannot be in a better position than they would be if they had simply bought part of

the mortgaged property subsequently sold under Rangayya Goundan''s decree, had the opportunity, and they might, by paying off the debt and

saving the property from sale, have acquired a right of contribution secured by a lien on the other property. They would then have stood in a

position analogous to that of one of several mortgagors who has redeemed the whole property and claims to take advantage of Section 95 of the

Act. But the plaintiffs did nothing, and therefore, no right of contribution arose and the other property stood free from any lien.

The principle of contribution is not peculiar to the law of mortgage. Whenever estates are subject to a common demand and that demand is

satisfied by the person interested in one of them, he has the right to call upon the other owners to contribute, and, if the demand was on account of

land revenue payable to Government, it has been held in this Court that he has in addition a lien on the land of others forming part of the entire

estate in respect of which revenue was payable Seshagiri v. Pichu ILR 11 Mad. 452. It has never been suggested that, in such cases, any lien

could come into existence unless there had been an antecedent payment and a consequent right of contribution. We are aware that in the

Allahabad High Court there are cases which seam to justify the notion that Section 82 of the Transfer of Property Act has a wider operation Ibu

Husain v. Ramdi ILR 12 All. 110; Baldeo Sahai v. Baij Nath ILR 13 All. 371 But the point does not seem to have been argued. The cases of

Chagandas v. Gansing ILR 20 Bom. 615 and Jagat Narain v. Qutub Husain ILR 2 All. 807 are illustrations of the ordinary claim for contribution.

In the passage cited in argument from Robbins on ''mortgages,'' volume 1, page 779, it is stated that one of the owners'' has paid off the debt; and

there is a close resemblance between the language of that paragraph and the language of the section. In our opinion section'' 82 does not justify the

notion that a man who has bought a property, which at one time was, with other property, subject to a mortgage, may, after the mortgage debt has

passed into a decree and after the decree has been satisfied by the sale of that other property, be held responsible for part of the mortgage debt,

and, therefore, the suit as against the defendants interested in property X was rightly dismissed. If the claim were maintainable, we should also be

prepared to hold that it ought not to have been joined with the ordinary claim on the mortgage. Accordingly we dismiss the appeal as regards

respondents Nos. 9, 10, 11 and 13 to 26, with coats payable to defendants Nos. 13 and 26.

It remains to consider the question raised by the ninth ground of appeal and also the objections taken on behalf of the first and second

respondents. The objections actually argued resolve themselves into the question whether, in view of the fact that the plaintiffs had another

mortgage of even date comprising the same property and had obtained a decree on that mortgage, they could maintain this suit. It appears that, on

the 24th April 1889, besides the mortgage already mentioned for Rs. 10,000, another mortgage for Rs. 500 was executed in the plaintiffs'' favour.

It cannot be doubted that it was owing to the accident that the plaintiffs already had a stamped paper which sufficed for a Rs. 500 mortgage that

the transaction was split up into two. In 1891 a suit; was brought on the Rs. 500 mortgage, decree was passed, and under the decree some

property was sold to the present fifth defendant. In the plaint it is stated that this sale was made subject to the plaintiffs'' mortgage for Rs. 10,000

and the averment, so far from being denied by the defendants, is admitted by the second and fifth defendants. It is argued, however, on their behalf

that Section 43 of the CPC prohibits the institution of the second suit which is now brought. Regarding the case as one of a mere personal claim on

the instrument of mortgage, we think it is clear that Section 43 does not apply. It may be true that the term ""cause of action"" is used in that section

in a peculiar way, but we do not think that when parties, for whatever reason, choose to agree that there should be two instruments and two

obligations,, the Courts are justified in saying that there is only one obligation. The case put by Sir V. Bhashyam Ayyangar, of a man advancing Rs.

10,000 on a deposit of title-deeds and then on another day advancing another such sum on the same security is, we think, distinguishable; for, in

that case, there would not be the declared intention of the parties that the two loans should be treated a& giving rise be distinct obligations. The

case would be in no way different from that in which successive loans were made without* any written instrument or security. It is then contended

that the fact that the same security is given by both instruments made it obligatory on the plaintiffs to join in one suit the two claims and that it was

not competent to them to ask in a suit on the Rs. 500'' mortgage for a sale of the property subject to the other mortgage. Whether the suit of 1891

on the Rs. 500 mortgage was a suits which, having regard to Sections 85 and 99 of the Transfer of Property Act, ought to have been maintained

and whether in that suit the relief given was lawfully given, are questions which we need not consider. We have to deal with the admitted fact that

under the decree, rightly or wrongly made in that suit, property was sold subject to the mortgage now sued on; and, unless it can be said that the

suit is barred by Section 43 of the Code of Civil-Procedure, we think we are bound to hold that the suit is maintainable. In our opinion that section

does not apply and this objection must be overruled.

There are two questions raised by the appellants, The District Judge has found that the plaintiffs waived their right to interest at She enhanced

rate. We cannot agree with this finding. In our, opinion the intention was to do no more than waive interest at the higher rate up to the date of the

promissory note which was given.

The other question relates to the point raised by the ninth issue. The District Judge has deducted Rs. 4,695 from the amount of the plaintiff''s

claim, and in doing so he professes to follow She ruling in Hart v. Tara Prasanna Mukherji ILR 11 Calc. 718, The sum deducted represents,

according to the Judge, the profit which the plaintiffs have made by their purchase at the sale in execution of Rangayya Goundan''s decree of a part

of the property comprised in their own mortgage. The case of Hart v. Tara. Prasanna Mukherji ILR 11 Calc. 718 so far resembles the present that

in both cases there is found a mortgagee buying at one execution sale part of the mortgaged property. In other respects the cases are totally

different. Here it is not the decree-holder who has bought, and the question does not arise between rival creditors of the mortgagor, but between

the mortgagee and his mortgagor see Sheonath Doss v. Janki Prosad Singh ILR 16 Calc. 132. Moreover, the judgment in the case, in so far as it

favours the notion that a mortgagee decree-holder, who buys having first obtained leave to bid, is in the position of a trustee cannot be supported;

for it has been distinctly decided by the Judicial Committee that leave obtained removes the disability under which, in the absence of leave, a

decree-holder labours. In the present case the plaintiffs not being decree-holders at the time of the purchase, it is argued that in their character of

second mortgagees they stood in a fiduciary position towards their mortgagors and therefore cannot be treated as independent strangers buying at

an auction sale. Shaw v. Bunny 34 L.J. Ch. 257 gives a complete answer on this point. There, Lord Justice Knight Bruce, affirming a decision of

the Master of the Rolls, held that the defendant who had bought a house sold by a first mortgagee in exercise of his power of sale had, though

himself a second mortgagee of the same house, acquired an irredeemable and absolute title such as a stranger buying under the circumstances

would have taken. It might have made a difference, be added, if the defendant ""had availed himself of his position as a mortgagee to procure some

facility or advantage relating to the purchase or connected with it."" This abatement of the law being clearly approved by the Judicial Committee in

Raja Kishendatt Ram v. Rajah Mumtaz Ali Khan L.R. 6 IndAp 145 : ILR 5 Calc. 198, we are bound to follow it, and therefore to disregard the

case of Erusappa Mudaliar v. Commercial and Land Mortgage Bank, Limited ILR 23 Mad. 377, which was cited, if that case conflicts with Shaw

v. Bunny 34 L.J. Ch. 257. No difference can be suggested between the position of a second mortgagee buying as the defendant; bought in Shaw

v. Bunny 34 L.J. Ch. 257 and the plaintiffs baying, as they aid, at the sale in. execution of the decree in which they were parties and which was

obtained at the suit of the first mortgagee, In either case the title conveyed is that which the mortgagor and mortgagee could have legally conveyed

at the date of the mortgage and the purchaser takes the property free from any claim by the second mortgage. We must, therefore, hold that the

plaintiffs took an absolute title such as strangers might have taken. They were under no sort of disability and there is nothing to show that they took

any advantage of their position (see Section 90, Indian Trusts Act).

This then being the state of things, it has to be asked how the plaintiff''s claim on their mortgage is affected by their purchase of part of the

property, When the facts are once understood it seems clear that the purchase has no effect at all, since presumably the whole value of the

unencumbered property was paid by the plaintiffs, There are, however, cases which seem to support the general proposition that a mortgagee who

purchases part of the mortgaged property must submit to some reduction of his claim. In several Allahabad cases language has been used which

may be held to justify that proposition Ballam Das v. Amar Raj ILR 12 All. 537; Chunna Lal v. Anandi Lal ILR 19 All. 196; Nand Kishore v.

Raja Hariraj Singh ILR 20 All. 23; and a case decided in this Court was also cited. In Nand Kiskore v. Raja Hariraj Singh ILR 20 All. 23, there

had been two mortgages to the same person and there were two decrees; a part of the mortgaged property included in the first mortgage was sold

in execution of another decree, a decree for money, and bought by the mortgagee, and another part of the property included in both mortgages

was sold under the decree on the second mortgage and bought by the mortgagee. The question was whether the decree on the first, mortgage was

absolutely discharged by these purchases, and the question was answered in the negative. It was assumed that to some extent the decree must

have been satisfied by the purchases and, regard being had to the special facts, the rightneas of that assumption cannot be questioned; for it is clear

that & person bidding at the sale under the decree on the second mortgage could only have expected to buy the property subject to the first

mortgage and that in calculating the amount of his bid be would take into account the proportionate part on the mortgage money on the property.

The mortgagee who cannot be supposed to have paid any higher price could cot be allowed to gain the difference between the value of the

property unincumbered and the value of it subject to the proportionate part of the debt, and therefore would rightly be made to submit to a

proportionate reduction of his claim. Chunna Lal v. Anandi Lal ILR 19 All. 196 is another case in which the sale was made subject to an existing

incumbrance see also Lakhmidas v. Jamnadas ILR 22 Bom. 304 Pirjada Ahmadmiya v. Shah Kalidas Kanji ILR 21 Bom. 544. It was otherwise

in Ballam Das v. Amar Raj ILR 12 All. 537, but that case is questioned by Banerji, J., in Nand Kishore v. Raja Hariraj Singh ILR 20 All. 23 and

is not easy to understand. The cases in which the property has been sold and bought subject to the mortgage which it is sought to enforce are

clearly distinguishable from the present case in which the purchasers, though they happened to be mortgagees, must be taken to have paid the full.

value of the unincumbered property.

No less distinguishable are those cases in which the mortgagee, having under his decree for sale bought part of the mortgaged property,

proceeds to execute his decree against other property or against the mortgagor personally. It is plain that in such a case the mortgagee must give

credit for the amount of his bid, it being. assumed that he had leave to bid and to set off the amount of his decree against the purchase-money. We

refer by way of illustration to. Sheonath Doss v. Janki Prosad Singh ILR 16 Calc. 132 and Gunga Pershad v. Jawahir Singh ILR 19 Calc. 4. See

Lakhmidas v. Jamnadas ILR 22 Bom. 304. There are, again, the oases in which, in consequence of a purchase made by the mortgagee from one

of the mortgagors, the question arises as between the mortgagee and the other mortgagors. Those oases also are radically different from the

present, because it cannot be supposed that a mortgages buying under such circumstances has dealt with the mortgagor as if he were the holder of

unincumbered property. On the contrary, it must be taken that, in calculating the price paid by the mortgagee, allowance has been made to him for

a proportionate part of the mortgaged debt. The case in Krishnasami Ayyar v. Janakiammal ILR 18 Mad. 153 belongs to the class of oases in

which a decree-holder, having bought at the sale in execution of his own decree, proceeds to further execution of the decree against the judgment-

debtor. It is thus distinguishable from the present because, here, it will be remembered, it was at the sale in execution of Rangayya Goundan''s

decree that the plaintiffs bought. For some reason which is not clear the Court held that the decree-holder ought to give credit, not for the mere

amount of his bid but for that sum plus ""the amount undertaken to be paid to the mortgagee.

On the facts of the present case, it being granted that the plaintiffs, with regard to their purchase at the sale in execution of Rangayya Goundan''s

decree must be treated as strangers and that the whole property free from incumbrance and free from the plaintiffs'' right of redemption was put up

for sale and bought, we can see no ground for holding that their claim under their mortgage is in any way impaired. The sale to the plaintiffs was not

effected at their instance and brought no gain to them. It had the effect of diminishing the security, but it leaves the plaintiffs'' claim as against the

other property included in their own mortgage as it was before, wholly unsatisfied.

The decree must be amended by substituting for the amount decreed the full amount of the claim minus the sum of Rs. 1,500-13-4 admitted to

have been received by the plaintiffs and with regard to interest, by giving interest at the enhanced rate from the date of the promissory note up to

the date fixed for payment. The decree must also be amended by fixing the 28th February 1901 as the day for payment. In the result, there will be

a decree for Be. 18,156-9-10 with interest at 15 per cent. on the principal Rs. 8,500 up to 28th February 1901, or till payment, if sooner. The

first, second, ninth, tenth and eleventh defendants must pay the costs of plaintiffs calculated on the amount allowed by the decree.

The appeal is dismissed as against the sixteenth respondent with costs and also against fifth respondent with costs.

The memorandum of objections is dismissed with costs.