Thenappa Chettiar and Another vs Marimuthu Nadan and Others

The plaintiffs are mortgagees of certain property including items Nos. 2 and 4. The 3rd and 4th defendants are prior mortgagees of those two

items. The 3rd defendant sued on his mortgage in O.S. No. 2 of 1900, making 4th defendant a party but not the plaintiffs. The 3rd defendant

himself purchased item No. 2 at the sale held under the decree obtained by him in his suit, and the 4th defendant purchased item No. 4 at the same

sale, the plaintiffs have now to redeem the prior mortgages, and the present question is as to the conditions of redemption. The plaintiffs claim to

proceed on the footing that the mortgages were enforced by the decree in O.S. No. 2 of 1900 and to take the account on that footing; the prior

mortgagees claim payment on the footing that their mortgages are still existing. The practical question is one of the rate of interest to be paid on the

mortgage money. In our opinion, the decision of the Privy Council in Umes Chunder Sircar v. Zahur Fatima ILR (1839) C. 164 concludes the

question of the terms of redemption, and we cannot, therefore, follow the case of Gangadas Bhattar v. Jogendra Nath Mitter 11 C.W.N. 403. The

learned judges do in that case, no doubt, find themselves able to hold that their decision is not inconsistent with that of the Privy Council. But we

find ourselves unable to reconcile the two cases. It is true that the Privy Council allow interest at the contract rate only up to the date on which

Zahur, the prior mortgagee, took possession under the sale held in execution of her own decree, but the reason for that is clearly explained by their

Lordships at the top of page 180 of the report in the Calcutta series, and there is nothing to indicate that the interest after possession, which they

held might fairly be taken to be equivalent to the profits, was interest at the post diem rate awarded by the Court, and not interest at the rate

provided by the contract.

On the other hand, their Lordships'' observations show clearly, we think, that the decree in the prior mortgagees'' suit is to be disregarded in

considering the terms of redemption as between the prior and puisne mortgagees.

After pointing out wherein lies the Court''s power to regulate interest after decree, their Lordships continue: ""the decree can only operate as

between the parties to the suit and those who claim under them. The plaintiff getting the security of a decree has his interest reduced in the

generality of cases. But the plaintiff in this case comes to take away from Zahur the benefit of the decree. It would be unjust if he could use the

decree to cut down her interest, while he deprives her of the whole advantage of it. His case is that, as to him, Zahur is still but a mortgagee, and if

so, she should be allowed such benefit as her mortgage gives her. If Zahur had not got a decree and the plaintiff had come to redeem her

mortgage, he must have paid whatever interest her contract entitled her to; and the Court would have had no jurisdiction to cut it down, and that is

the position in which the parties are placed by the decree in this suit.

This passage from their Lordships'' judgment leaves no room for the contention urged before us that the puisne mortgagee ought to be allowed

to choose whether to adopt or to disregard the account directed by the decree. To allow him to do so would be to allow him to do what their

Lordships say it would be unjust to allow him to do. The fact is that, the puisne mortgagee not being a party, the suit ought not to affect either his

rights or his liabilities. It is contended that the prior mortgagee, by excluding him from the suit, can obtain an advantage for himself, but that

advantage is entirely dependent on the will of the puisne mortgagee; he can redeem when he pleases, before, pending, or after, the suit. If he has no

notice of the prior incumbrance or of the suit, he is no worse off after the decree than before the suit. Either way he is bound by the prior mortgage.

The equitable considerations which appear to have prevailed with the learned Judges in Gangadas Bhattar v. Jogendra Nath Mitter 11 C.W.N.

403 seem to be applicable only to a case in which the prior mortgagee has notice of the subsequent encumbrance, and the subsequent

encumbrance, has no notice of the prior mortgage. In such a case it may be just to penalize the prior mortgagee for his disregard of the provisions

of Section 85 of the Transfer of Property Act. The present case is not such a case, and is, we think, covered by the Privy Council decision.

The District Judge has taken an account of the profits received by the prior mortgagee after entering into possession, and has set them off

against the interest. That being so, we do not think we can take the profits as the equivalent of the interest, as was done in the Privy Council case.

The rule there adopted is not laid down as a rule of law but as a rule ""just and convenient and not objected to by either party.

We, therefore, accept the District Judge''s finding and adopt his account for the final decree. If the plaintiffs do not redeem the 3rd and 4th

defendants, the plaintiffs will have no costs from the 3rd and 4th defendants and will pay their costs. Six months will be allowed for redemption.