Seshama Raju and Others vs Mosur Subramania Sastri

Horwill, J.—The question that arises in this appeal is with regard to the priority of the representatives of two mortgagees to the village of

Mylaravada. The earlier mortgage was one of the 6th March, 1891 in favour of one Seshama Raju for Rs. 7,500 and the property mortgaged

consisted of the village of Mylaravada and another of the name of Veeranathur. The appellants are the representatives of that Seshama Raju. The

other mortgage was one of the 9th June, 1894, in favour of Saravana Pillai and one Guruswami Ayya with whom we are not now concerned--for

the sum of Rs. 54,763-12-11; and the mortgaged property consisted of 129 villages, including the village of Mylaravada. On the earlier mortgage,

O.S. No. 7 of 1903 was filed in the Court of the District Judge of North Arcot; and in that suit Saravana Pillai was impleaded as the 14th

defendant. He had by then acquired the interest of Guruswami Ayya in the mortgage of 1894. Saravana Pillai filed a written statement in which he

admitted the mortgage, but asked on equitable grounds that the village of Veeranathur should be sold first. A preliminary decree was passed on the

28th March, 1904, and the final decree--or order absolute as it was termed in those days--on the 6th February, 1907. That decree was executed;

and on the 22nd December, 1916, the village of Mylaravada was sold to the 78th defendant, whose legal representatives the appellants are, for

Rs. 35,768 of which Rs. 15,382-7-9, was paid to prior mortgagees and the remainder taken by the decree-holder in full discharge of his mortgage

decree. The village of Veeranathur had not therefore to be sold. A suit on the later mortgage was filed and numbered as O.S. No. 33 of 1906 in

the Court of the Subordinate Judge of North Arcot by the heirs of Saravana Pillai, which suit was afterwards numbered as O.S. No. 18 of 1911.

The plaintiff gave a long list of mortgages; but he did not mention in his plaint the mortgage of the 6th March, 1891, which was the subject of O.S.

No. 7 of 1903. The reason presumably was that by the time O.S. No. 33 of 1906 was filed the mortgage of the 6th March, 1891, was already

embodied in the decree in O.S. No. 7 of 1903. Defendants 78 to 80, who are the appellants'' legal representatives, were however impleaded,

because they also held prior mortgages with regard to four other villages of the 129 villages which were the subject of the mortgage of the 9th

June, 1894. They were also impleaded as attaching decree-holders. These defendants filed a written statement asking that the property should be

sold subject to their mortgage rights in various mortgages, but they made no mention of their mortgage of the 6th March, 1891, the reason

presumably being that as they had already obtained a decree on that mortgage, to which Saravana Pillai was himself a party, that mortgage could

no longer be disputed or be the subject of other litigation. A preliminary decree was passed in that suit on the 19th March, 1913. As the matter

was taken in appeal, the final decree was not passed until the 1st December, 1920. The decree was to the effect that all 129 villages should be

sold subject to the prior mortgages mentioned in the plaint, which did not, of course, include the mortgage of the 6th March, 1891; because that

mortgage was not referred to in the pleadings of either the plaintiff or of the defendants 78 to 80. On the 21st February, 1902, Saravana Pillai had

sub-mortgaged his rights under the later mortgage to Subbaraya Chetti whose assignee is the respondent in this appeal. He filed a suit which was

numbered as 1 of 1926 on the file of the Sub-Judge of Ghittoor in which he impleaded only his mortgagors. He obtained a decree and is now,

seeking to execute the decree in O.S. No. 33 of 1906 as one of the ways of enforcing his decree in O.S. No. 1 of 1926. As far as the execution

of this decree is concerned, he is in precisely the same position as Saravana Pillai, who obtained the decree. What other rights he may have

because the sub-mortgagee, Subbaraya Chetty, was not impleaded in O.S. No. 7 of 1903 we need not now consider.

As Seshama Raju had already obtained a decree in O.S. No. 7 of 1903 on his mortgage of the 6th March, 1891, and nothing was said about

that mortgage in O.S. No. 33 of 1906 or in the decree, it is difficult to see how, as contended by the respondent, the prior rights of Seshama Raju

established in the earlier suit can have become lost by the fact that the decree in O.S. No. 33 of 1906 by which the hypotheca was directed to be

sold subject to certain prior mortgages, did not refer to the mortgage of 1891; but the lower Court has held that because defendants 78 to 80 did

not put forward their decree or their mortgage as a defence in O.S. No. 33 of 1906 they are now precluded by the principle of res judicata from

placing any reliance on the decree in their favour in O.S. No. 7 of 1903. The learned Judge has based his decision primarily on two Privy Council

decisions, namely, Mohamed Ibrahim Hosain Khan v. Ambika Pershad Singh (1942) 22 M.L.J. 468 : 1942 L.R. 39 IndAp 68 : ILR 39 Cal. 527

and Sri Gopal v. Pirthi Singh 2. In the former case, a subsequent mortgagee had a right by subrogation to priority to another mortgage; but when

he was impleaded in the suit filed by the prior mortgagee he failed to put forward his right by subrogation to priority. It was held that as he did not

do so he could not in a subsequent suit claim any priority. In the latter case, a fifth mortgagee claimed priority to all the four prior mortgages which

were the subject of the suit by reason of having paid off a mortgage that was earlier than any of the four prior mortgages. One of the mortgagees,

who held three of the four prior mortgages, put forward in his written statement his prior rights with regard to two of the three mortgages, But failed

to say anything about the third. The Courts held, as a finding of fact, that the fifth mortgagee had not proved that he had discharged any mortgage

debt prior to the four mortgages which were the subject of the suit. Their Lordships nevertheless held that as the holder of the three prior

mortgages had only set up two of the three prior mortgages as being prior to the fifth mortgage, they were barred by the principle of res judicata

from claiming in a subsequent litigation priority for the third mortgage, with regard to which they had said nothing in the earlier suit. It is seen that in

one of these cases the principle of res judicata was applied where a subsequent mortgagee, impleaded as such, failed to put forward claims which

would have given his mortgage priority to the mortgage of the plaintiff, and in the other where a prior mortgagee, whose priority had been

impugned, failed to assert his priority with regard to one of his mortgages. In the present case, the priority of the mortgage of 1891 was never in

question. In O.S. No. 7 of 1903 it was admitted by Saravana Pillai, and in the subsequent suit, O.S. No. 33 of 1906, no reference was made to

the mortgage by either of the parties; and the priority of the earlier mortgage was therefore not impugned in any way. This difference distinguishes

16 CWN 505 (Privy Council) and (1902) L.R. 29 I.A. 118 (Privy Council) from the present case. The learned Advocate for the respondent has

argued with regard to (1902) L.R. 29 I.A. 118 (Privy Council) that as it was found that the fifth mortgagee had not proved that he had paid off the

earlier mortgage, the parties were left precisely in the same position as they are in the present case, in which a decree was passed subject to certain

prior mortgages with no mention of the prior mortgage which was the subject of the subsequent litigation. Their Lordships put the matter in this

way:

The materiality of the mortgage here referred to is evident. If Mussammat Janki''s (fifth mortgagee''s) claim had succeeded to its full extent she

would have established her priority over all the four bonds in question. As it was, she only established her claim subject to the specified securities

of Sri Gopal and Murli (holders of the second mortgage) and Sarnam Singh (holder of the other three prior mortgages), which did not include the

bond now sued on. The appellant would have been entitled to plead and prove this bond as a bar to any decree being made for sale except

subject to that bond. Had he done so, it would have been included in the '' details of liens '' at the end of the decree and the right of Mussammat

Janki would have been expressly subordinated to that charge also.

A case almost identical with that now under consideration in this appeal was dealt by a decision of the Privy Council in (1920) ILR 47 662

(Privy Council) . In that case, the third mortgagee, who was also the first mortgagee, referred in a suit filed on the third mortgage to his own earlier

first mortgage but said nothing of the second mortgage. The second mortgagee was impleaded as a party though for what precise purpose was not

clear. The second mortgagee remained ex parte and did not set up his claim on his second mortgage. The result was that a decree was passed to

sell the property subject to the first mortgage. It was nevertheless held that the second mortgagee was not barred from contending in a subsequent

litigation that his mortgage had priority to the third mortgage. Their Lordships held that unless a prior mortgage is expressly impugried it is not a

subject of the suit and that it is therefore unnecessary for the prior mortgagee to say anything about his rights. They said:

Bakhtaur Mull''s (second mortgagee''s) position therefore was that he was a prior mortgagee with a paramount claim outside the controversy of the

suit unless his mortgage was impugned. Consequently, to sustain the plea of res judicata it is incumbent on the Sahus (representatives of the first

and third mortgagees) in the circumstances of this case to show that they sought in the former suit to displace Bakhtaur Mull''s prior title and

postpone it to their own. For this it would have been necessary for the Sahus as plaintiffs in the former suit to allege a distinct case in their plaint in

derogation of Bakhtaur Mull''s priority.

As it was found that they had not done so, it was held that Bakhtaur Mull had a right to assert his priority in the later suit. In our opinion, the

appellants are in a stronger position than Bakhtaur Mull was in (1920) ILR 47 662 (Privy Council) for the reason why no mention was made of the

earlier mortgage by the plaintiffs in the later suit was clearly that a decree had been passed which was binding on the principal parties to the suit

and could not therefore be a subject for contention in the later suit. Many other cases have been cited by the learned advocate for the respondent;

but none seen by us has sought to modify the simple proposition"" apparently, laid down in (1920) ILR 47 662 (Privy Council) namely, that a prior

mortgagee, is not bound to assert his priority unless his right is impugned. On the other hand, if a subsequent mortgagee has priority by reason of a

right to subrogation, he is obliged to put forward that right. If, in addition to having a subsequent mortgage, a defendant has a prior independent

mortgage, he is not bound to say anything about the prior mortgage.

After Saravana Pillai or his heirs had failed to redeem the mortgage of the 6th March, 1891, within the time allowed by the decree in O.S. No. 7

of 1903, the position of the parties was that Seshama Raju and his heirs were entitled to bring the village of Mylaravada to sale; and the only right

that Saravana Pillai and his heirs had was to such sum as might remain after Seshama Raju and his heirs had satisfied their mortgage. As already

stated, after certain prior mortgagees had been paid and Seshama Raju had satisfied his own mortgage decree, there was admittedly nothing left of

the sale proceeds of Mylaravada village. Saravana Pillai and his heirs therefore had no right whatsoever to that village or to the sale proceeds

thereof. The learned advocate for the respondent however contends that as the plaintiffs obtained a decree for sale of that village in O.S. No. 33 of

1906, and as the question of the earlier mortgage and the decree resulting therefrom was not the subject of O.S. No. 33 of 1906, it was a matter

entirely outside the scope of the execution petition to consider what the ultimate rights of the parties would be to Mylaravada village. The learned

advocate for the respondent has cited a large number of cases in which it has been held that questions of paramount title are foreign to a mortgage

suit and a foritori to an execution application for sale of the mortgaged property in pursuance of a decree for sale. In all the cases cited to us

however there was some question for inquiry and decision by a separate litigation; but in the present case there is nothing whatsoever to decide;

and if the execution Court here refused to go into this matter and the parties were forced to another suit, nothing could be done in that suit except

to discuss once again this question of res judicata. It was the respondent who invited the Court to consider this question of res judicata and he

cannot now complain that the lower Court and this Court have considered it and decided it against him. It would be entirely without purpose, after

considering this question and holding that the respondent has no right at all to bring the village to sale to allow the sale to proceed and drive the

appellants to a suit.

The appeal is therefore allowed with costs in this Court and in the lower Court and the execution petition as far as it relates to the sale of

Mylaravada village dismissed. The execution petition will of course have to proceed because it relates also to 128 other villages.