Syed Ibrahim Sahib vs Arumugathayee and Another

The plaintiff''s suit in this case is to enforce payment of the amount due to her on two mortgages executed by the first defendant''s father in July

1891. Of these the first, Exhibit C, is a usufructuary mortgage for Rs. 500. The second, Exhibit D, is a simple mortgage for Rs. 200. On the 4th

September 1896 a sale-deed was executed by the first defendant''s father in plaintiff''s favour. The consideration Rs. 900 for the sale-deed was

made up of Rs. 700, the principal amounts due on the two mortgages, Rs. 130, the interest on the simple mortgage bond, Rs. 55, the amount due

to plaintiff for municipal tax which the vendor had covenanted to pay by the terms of the usufructuary mortgage-deed and certain sundry amounts

which he had borrowed from the plaintiff and Rs. 15 paid in cash. The second defendant had obtained from the vendor a mortgage of the same

property in 1893. He instituted a suit on it in 1905, brought the properties to sale and purchased them. The present plaintiff was the second

defendant in that suit. The decree directed the sale of the property subject to the plaintiff''s prior encumbrances.

The plaintiff claimed to recover in this suit as due to her under her mortgages Rs. 830, the amount due up to the 4th September 1896 as fixed in

the sale-deed, Exhibit E, and Rs. 300-for interest subsequent to that date up to the 17th July 1908, the date of the plaint. She also claimed Rs. 98-

5-4, the total amount of municipal tax paid by her for the property and Rs. 171-10-8 for repairs and improvements made by her.

The second defendant alleged that the plaintiff was not entitled to recover anything, contending that her mortgage rights over the property were

destroyed by her purchase in the year 1896 and that she was not in law entitled to recover anything either on account of municipal assessment or

repairs and improvements.

Both the lower Courts have held that the mortgages must be regarded as kept alive as against the second defendant. The District Munsif

allowed the interest claimed on the simple mortgage bond up to the date of plaint and further interest from the date of plaint to the date fixed for

payment at l 1/8; per cent, per mensem, the rate stipulated in Exhibit D. He disallowed the amount claimed for municipal assessment and repairs

and improvements. On appeal the District Judge held that the plaintiff was entitled to add the amount paid by her for municipal assessment and also

the amount spent by her for restoring a room which had fallen down. The amount added to the Munsif s decree for the expenses of the repairs was

Rs. 128-60.

In Second Appeal the liability for Rs. 830 which was fixed as the principal and interest due on the mortgages on the date of the plaintiff''s sale-

deed is not objected to; but the remainder of the decree is impeached.

A preliminary objection has been taken by the learned vakil for the respondent on the ground that the liability for the debt not being resisted in

Second Appeal and the appeal being valued only with respect to the interest decreed from the date of Exhibit E (the sala-deed) the appellant is not

entitled to attack the decree for the interest on the debt subsequent to the sale-deed. In the memorandum of Second Appeal the grounds taken

urge the second defendant''s non-liability to the plaintiff for anything on the footing of her mortgages. But the appellant did not want to impeach in

this Court the plaintiff''s right to recover the amount found due on the date of Exhibit E. The preliminary objection is not sustainable. There is

nothing to prevent the appellant from attacking only a portion of the decree, although the reason for the attack might cover the whole decree. The

objection must therefore be disallowed.

The question whether the plaintiff''s mortgages were destroyed by the sale (Exhibit B) was argued at the bar. A distinct argument was also urged

on the point whether the plaintiff can claim interest subsequent to Exhibit E. It is unnecessary to decide whether the right under the mortgages is

altogether destroyed, as the appellant''s contention with regard to the claim for interest must be upheld on a point which is consistent with the

mortgages being alive as against the appellant. The respondent contends that Section 101 of the Transfer of Property Act is applicable to the case,

and that the encumbrances under the mortgages C and D must be taken to have continued to subsist as against the appellant after the date of

Exhibit E as their subsistence was for the plaintiff''s benefit, and that she is therefore entitled not only to the principle but also to the interest which

Exhibit D gave her according to its terms. The appellant argues that Section 101 is not applicable and that, even if on the principle underlying that

section the plaintiff is entitled to have the benefit of the encumbrances as against the second defendant, she is not entitled to the interest. And he

draws attention to a passage in Dr. Rash Behary Ghose''s work on Mortgages in which the learned author says that the Transfer of Property Act

does not expressly provide for a case where the payment of the charge is contemporaneous with the purchase of the equity of redemption. It is

unnecessary to consider whether the case comes within the express language of Section 101 or not, as the conclusion to be come to on the

question of the plaintiff''s right to subsequent interest would be the same whether the language of Section 101 itself would be applicable or only the

principle recognised in that section. The section declares that the charge or encumbrance existing before the purchase of the property by the owner

of the charge or encumbrance shall be extinguished unless its continuance would be for his benefit. The encumbrance is kept alive as against a

puisne encumbrancer in the circumstances referred to in the section. It does not of course continue against the owner whose equity of redemption

the encumbrancer has purchased. Beyond declaring that the encumbrance will subsist where It is for the benefit of the encumbrancer the section

does not state what the exact rights on the encumbrance would be after the date of the purchase. Suppose a first mortgagee takes a further

mortgage on the property for the amount duo on his first mortgage after the execution of a second mortgage in favour of a third party by the

mortgagor, and suppose farther that according to the terms of the substituted mortgage the rate of interest agreed upon is less than that fixed in the

previous mortgage instrument. It is quite clear that although the first mortgagee may claim priority for his mortgage as against the second mortgagee

notwithstanding its merger in the substituted mortgage instrument, he cannot be entitled to the higher rate of interest fixed in his first mortgage-deed

as he agreed under the substituted mortgage to receive a less rate from that date. The rule embodied in Section 101 is one which in equity and

justice should be enforced to; protect the rights created under the first mortgage and the question in each case is what is the measure of protection

which equity and justice require to be given. Now on the date of Exhibit E, the plaintiff agreed with her mortgagor to take the property for the price

agreed upon according to that exhibit. She thenceforward enjoyed the property in lieu of the price she gave for it, although she was previously in

possession of it as usufructuary mortgagee under Exhibit C. What was enjoyed by her till then as compensation for the amount advanced on the

usufructuary mortgage, she agreed subsequently to enjoy in consideration of the whole price fixed on Exhibit E. She cannot therefore claim any

further compensation from that date for any portion of the price. See Umes Chunder Sircar v. Zahur Fatima (1891) 18 Calc. 164 If for instance,

she took a fresh mortgage instead of a sale-deed and gave up all claim to future interest, her covenant to that effect would be binding on her in a

suit against the second mortgagee quite as much as it would bind her against her mortgagor himself. No case expressly deciding this point was cited

on either side, but we observe that in several cases where priority was allowed for a previous mortgage on the ground that it was not extinguished

no interest after the date of merger aw against the previous owner of the equity of redemption was allowed. See Gangadhara v. Sivarama (1885) 8

Mad. 246, Seetharama v. Venkatakrishna (1893) 16 Mad. 94 and Vanmikalinga Mudali v. Chidambara Chetty (1906) 29 Mad. 37. Where a

previous mortgage was merged in a subsequent one, interest was allowed as against a puisne encumbrancer only at the rate stipulated in the

substituted mortgage. Sea Chetwyud v. Allen (1899) 1 Ch. 353, and Mohesh Lal v. Bawan Das (1883) 9 Calc. 961 Syamalarayudu v.

Subbarayudu (1898) 21 Mad. 143, cited for the respondent is not in point as it does not appear that the plaintiff in that case was in possession of

the property enjoying it in consideration of the amount paid by him to discharge the prior encumbrance. We must therefore disallow the amount of

Rs. 300 awarded to the plaintiff for interest subsequent to the date of Exhibit B when the second defendant became the purchaser of the property,

i.e., 24th March 1908 [4th September 1896?].

The next question argued in Second Appeal relates to the plaintiff''s claim for the amount paid by her for municipal tax. According to the

provisions of Exhibit C the usufructuary mortgage deed, the mortgagor the first defendant in this suit agreed to pay all municipal taxes himself. The

plaintiff''s right with respect to the taxes was under the personal covenant entered into by the mortgagor. It is unnecessary to consider whether

taxes due to a municipality would come within the expression ""charges of a public nature"" which the mortgagee in possession is bound to pay under

Clause (c) of Section 76 of the Transfer of Property Act and the mortgagor is bound to pay when the mortgagee is not in possession under Clause

(c) of Section 65. In this case the mortgagee notwithstanding her being in possession was not bound to pay the municipal tax as the mortgagor

expressly covenanted to pay it. The obligation of the mortgagor was not under Clause (c) of Section 65 of the Act, but under his covenant. The tax

does not come under the expenses which the mortgagee is entitled to incur u/s 72 and add to the principal money due under the mortgage

instrument, as the payment was not required either for the preservation of the property or for the protection of the mortgagor''s title to it. It may be

observed that the District Judge is wrong in supposing that the doors and windows of a house could be sold as moveable property of the

mortgagor. Section 103 of the District Municipalities Act before its amendment in 1899 allowed the seizure only of moveable property in the

possession of the occupier where he was the defaulter. The plaintiff was not the defaulter in this case. Covenants entered into by the mortgagor

cannot be enforced against a puisne encumbrancer nor can the doors and windows of the house regarded as moveable property. See Peru Bepari

v. Renuo Maifarash (1885) 11 Calc. 164, Queen-Empress v. Shaik Ibrahim (1890) 13 Mad. 518 and Purushottama v. Municipal Council of

Bellary (1891) 14 Mad., 467

We must therefore disallow the amount awarded for municipal tax.

With respect to the award of Rs. 128 for the costs incurred by the plaintiff in making repairs, it is not contended before us that the repairs were

not of such a character as would entitle a mortgagee to reimbursement but it is argued that the plaintiff did not spend the amount as mortgagee but

as purchaser of the property as the repairs were made after the date of Exhibit E. No doubt the plaintiff had become the purchaser in 1896, but the

contention, though it looks plausible, is not entitled to succeed. As the mortgage subsisted after the purchase, the plaintiff must be held entitled to

add all monies to the principal amount which she would be entitled to do u/s 72, if the sale did not take place. All rights incidental to the mortgage

must subsist with the mortgage right itself. If the prior mortgagee spends money for preservation of the property from destruction, forfeiture or sale,

it would be inequitable to hold'' that the puisne encumbrancer should have the benefit of the expenditure incurred for that purpose without paying

for it. The value of the property over which the puisne encumbrancer is entitled to a charge is enhanced by the expenditure and he cannot claim the

benefit of the expenditure without making payment for it. The objection to the award for the repairs must be disallowed.

The result is that this Second Appeal must be allowed except with regard to the award for repairs. The decree of the District Judge will be

modified as indicated above.

Both parties will pay and receive proportionate costs in all the Courts.

The time for redemption will be extended to three months from this date.