Subbakke Shettithi vs Anthamma Shettithi

Varadachariar, J.—The plaintiff became the owner of certain properties in 1925 by purchase from her father under Ex. F. At the date of this

transfer, the properties were subject to the liabilities imposed upon them by the decree in O.S. No. 248 of 1917 in which her father was defendant

That was a suit by a sub-mortgagee from the first mortgagee and plaintiff''s father was impleaded therein because he held a second mortgage

over the same properties. In 1915 the present defendant as assignee from the first mortgagee had filed O.S. No. 52 of 1915 against the

mortgagors and the plaintiff''s father as second mortgagee but without impleading the sub-mortgagee. It is stated that at that time the second

mortgagee might not have been aware of the sub-mortgage, but it is unnecessary to speculate as to that matter. A decree was passed in C.S. No.

52 of 1915 for the full amount of the first mortgage. The result in law would be that the first mortgagee decree-holder when he receives that

amount would be bound to apply the requisite part of that amount in paying off the sub-mortgage so as to be able to re-transfer the mortgaged

properties to the second mortgagee or the mortgagor free of all encumbrances created by the first mortgagee.

Before the decree amount in O.S. No. 52 of 1915 was paid, the first mortgagee decree-holder seems to have assigned that decree to his

daughter and when she took out proceedings in execution, the second mortgagee paid the amount into Court on 12th June 1920. The terms of the

assignment by the decree-holder to his daughter do not appear and as no defence was put forward in this suit based on the fact of that assignment

I do not think it is necessary to pursue that matter further. I see no objection to deal with the case on the footing adopted by the lower appellate

Court that the amount of first mortgage has been received by the defendant first mortgagee decree-holder whether as consideration for the transfer

or through his daughter in the course of the execution. In either view his obligation to release the property from the sub-mortgagee can admit of no

doubt.

In the sub-mortgagee''s suit (O.S. No. 248 of 1917) the present defendant did not take any steps to satisfy that mortgage or the decree and the

present plaintiff who had in the meanwhile become the owner of the. property under Ex. F, was obliged to satisfy the decree-holder by the

execution of Ex. C, in 1926. She accordingly files this suit in 1927 to recover from the defendant the amount which she was obliged to pay in

discharge of the sub-mortgage. She contends that both under law and under the terms of the decree in O.S. No. 52 of 1915 it was the duty of the

defendant as first mortgagee to apply the amount received in discharge of the first mort-gage to pay off the sub-mortgagee and as the plaintiff to

protect her own interest in the mortgaged properties has been compelled to pay off the sub-mortgage amount she is entitled to recover the same

from the defendant.

The lower appellate Court has held that the plaintiff has no cause of action against the defendant, because,

long before the date of Ex. C, the defendant had been divested of all rights in the properties as the amount due to him under the decree in O.S.

No. 52 of 1915 had been paid as long ago as 1920.

This ground seems to me to be untenable. The liability of the defendant does not depend upon the continuance of his interest in the mortgaged

properties, but upon the fact that when he received the full amount due under the first mortgage, he owed a duty, towards all persons interested in

the mortgaged property, to free that property from the sub-mortgage which had been created by the first mortgagee. This he has admittedly not

done.

The District Munsif put his judgment upon a slightly different ground, viz., that the right to insist upon the discharge of the sub-mortgage can be

availed of only by the original mortgagors and not by the plaintiff''s father or by the plaintiff. This again rests upon a misconception of the position.

The right has accrued to the plaintiff because she as the owner of the property at the date of Ex. C was put to the necessity of discharging the

decree in O.S. No. 248 of 1917 when in fact that debt should have been discharged by the defendant. The other ground as signed in the District

Munsif''s judgment, viz., that, because the plaintiff''s father did not deposit the amount of the decree in O.S. No. 52 of 1915 with, in the time fixed

in the preliminary decree, he lost the right to insist upon the sub-mortgage being discharged by the first mortgagee is equally untenable. By omitting

so to deposit, he no doubt left it open to the mortgagee to recover the amount by proceedings in execution; but when the amount was so

recovered the first mortgagee decree-holder came under a legal obligation to pay there from the sub-mortgagee and any person, who to protect his

interest in the property is compelled to pay, the sub-mortgagee has got sufficient locus standi to claim reimbursement from the defendant.

It has been contended before me, on behalf of the respondent that -defendant 1 was not under any kind of contractual liability towards the

plaintiff or her father in this matter nor was he under a personal liability to discharge the sub-mortgage and that therefore a suit like the present

cannot fall u/s 69, Contract Act. I am unable to agree with this contention. If there is a direct contractual relation between the parties, there will be

no occasion to rely upon Section 69 at all. As explained already, the liability of the defendant to the plaintiff arises from two facts : one, that the

defendant received the full amount of the first mortgage decree from the plaintiff''s father and yet failed to apply it in the manner required by law

and by the terms of the preliminary decree, so as to release the property from the sub-mortgage and two, that by reason of her interest in the

property, the plaintiff has been obliged to pay off the sub-mortgage. In principle, I think the case is governed by the analogy of the decision of the

Judicial Committee in Bhagawati v. Banarasi Das 1928 P.C. 98. The fact that the question there arose directly between the vendor and the vendee

makes no difference for the present purpose, because in that case also the obligation of the vendor was one cast upon him by law, (i.e.). by

Section 55, T.P. Act, to discharge undisclosed encumbrances and their Lordships held that when the vandee was compelled to discharge such

encumbrances in order to protect his interest in the property he was entitled to reimbursement on the principle of Section 69, Contract Act.

Reliance was placed on behalf of the respondent on the decision of the Judicial Committee in Nathu Khan v. Burtonath Singh 1922 P.C. 176.

There, the position was different. The liability of the second vendee in that case arose out of specific covenants in his purchase and their Lordships

held that that was a matter between the vendor and the vendee and that the prior vendee of the same properties could not avail himself of those

covenants. On the very principle of the case in Bhagawati v. Banarasi Das 1928 P.C. 98 the remedy of the first vendee when he was forced to

discharge the encumbrances on the property would have been against his vendor only and such a claim not being by itself a charge on the property

it could not be enforced against the second vendee, unless ofcourse the circumstances were sufficient to support the invocation of the doctrine of

subrogation.

I therefore hold that the decree of the Courts below is not right, that the same should be set aside and a decree passed in favour of the plaintiff

for rupees 688-11-0, as on the date of plaint with interest on Rs. 618-10.5 at 6 per cent, per annum from the date of plaint up to 31st March

1928 and interest at the same rate on the aggregate amount from 31st March 1928 up to the date of payment. The plaintiff will be entitled to costs

throughout.