Yerlagadda Mahalakshmi vs Midde Somaraju and Others

Varadachariar, J.—The appellant sued to recover money due under a mortgage deed for Rs. 3,000 executed in his favour by defendants 1

to 3 and their father on 13th March, 1917. The seventh defendant was the principal contesting defendant. His defence was in the main founded

upon certain events that happened in 1918 and 1920.

In August, 1918, a third party who had a money claim against the mortgagors attached some of the mortgaged items, before judgment, pending

his money suit against them. On 2nd October, 1918, the mortgagors purported to sell the mortgaged items to the plaintiff under the original of Ex. I

partly for the mortgage amount and partly for a further consideration of Rs. 441. When the money decree-holder attempted to bring the properties

to sale on the basis of the attachment already made, the plaintiff filed a claim petition (Ex. G) on 29th September, 1920. In this petition she claimed

one of two reliefs: she set up her sale and asked that the property should be released from attachment, in the alternative, she asked that even if the

sale should be held to be invalid as against the attaching decree-holder, the execution sale should be directed to be held subject to the mortgage in

her favour. It appears from the endorsement on Ex. G that the decree-holder himself had referred in his sale proclamation to the mortgage in the

plaintiff''s favour but suggested that it was supported by consideration only to the extent of Rs. 2,500. When the matter carne on for final disposal

the executing Court held that the sale having been effected subsequent to the attachment was invalid as against the decree-holder and it directed

the sale to be held subject to the mortgage ""referred to by the decree-holder."" The property was accordingly sold subject to the mortgage and

purchased by the decree-holder himself, who in turn conveyed it to the seventh defendant as the result of a decree for specific performance of an

agreement entered into between them. The result of the execution sale was that the plaintiff was deprived of possession of items 1, 2 and 4 to 6 of

the plaint schedule and retained possession only of items 3 and 7. The plaintiff accordingly filed this suit for the recovery of the amount due under

the mortgage, contending that as the sale had failed, he was entitled to fall back upon the mortgage. The seventh defendant contended that the sale

must be deemed to have extinguished the mortgage and that the subsequent events could not revive the plaintiff''s claim under the mortgage. The

learned Subordinate Judge gave effect to this contention and dismissed the suit. The seventh defendant raised other contentions which formed the

subject-matter of the other issues raised in the case. One of them was a plea of partial discharge which forms the subject-matter of the fourth issue.

Another was a claim that the plaintiff should give credit as against the mortgage amount and the interest due thereon for the profits realised by him

during the time that he had been in possession of the properties sold to him. Finally there was a question of the amount which the plaintiff was

entitled to recover in view of the fact that he still retains as vendee two items of the hypotheca.

So far as the lower Court dismissed the plaintiff''s suit, we are unable to concur in its decision. The decision is mainly based on the judgment of

this Court in Daso Polai Vs. Narayana Patro and Others, . We shall presently show that that case is distinguishable on its facts; but we think it right

to add that we are, with all respect, unable to concur in some of the observations in that case, in the present case, the order Ex. G-1 was clearly an

order under Order 21, Rule 62, Civil Procedure Code. As we have already stated, the plaintiff put forward alternative claims in his claim petition -

one on foot of the sale in his favour and the other on foot of the mortgage. The Court rejected the claim based on the sale but upheld the claim

based on the mortgage. Neither party took steps to impeach that order and it became conclusive between the claimant and the decree-holder in

the money suit. The Court accordingly purported to sell only the equity of redemption and the decree-holder (who became the auction purchaser)

having purchased only the equity of redemption could convey only that interest to the present seventh defendant. In respect of these facts the

position in Daso Polai Vs. Narayana Patro and Others, was very different. The claim petition there was dismissed as preferred too late and as no

suit was brought by the claimant under Order 21, Rule 63, Civil Procedure Code, that order became final. It was in those circumstances

impossible to imply any adjudication that the claim founded on the mortgage was well founded. The learned Judges had therefore to hold that the

reference to the mortgage in the sale proceedings amounted to nothing more than a notice to intending purchasers under Rule 66 of Order 21, Civil

Procedure Code. It is on that footing that they held that the Court auction purchaser was not precluded from contesting the existence or validity of

the mortgage. On the facts of the present case as we have set out above neither the decree-holder in the money suit nor the Court auction

purchaser nor the seventh defendant as the purchaser from him could go behind the order in the claim proceedings which upheld the mortgage

claim. We may also point out that in Daso Polai Vs. Narayana Patro and Others, , the learned Judges laid stress on the fact that even in the claim

petition the claim based on the mortgage was never put forward and that the claimant insisted that the mortgage had been discharged by the sale

deed in his favour. The conclusion reached in that case that the mortgage had been extinguished has largely been based upon this ground. That

ground also will not avail the seventh defendant in this case because as already stated the claim was put forward both on the mortgage and on the

sale. The portion of the judgment with which we are unable to agree is the interpretation which the learned Judges have placed on Section 101 of

the Transfer of Property Act. With all respect we think that in a case like the present it must be presumed that it is to the advantage of the

mortgagee to keep his interest as mortgagee and his interest as purchaser of the equity of redemption distinct because of the intervening attachment

against which his sale cannot be effective.

The question in this class of cases is not whether the sale is not effective as between the vendor and the vendee, but whether there being the

possibility of the sale proving ineffective as against a third party, it is not to the interest of the mortgagee not to treat his mortgage, as extinguished

by the sale. In the application of this principle of presumed intention, it makes no difference whether the third party is allowed to claim in preference

to the sale, on the ground of his being a subsequent encumbrancer or on the ground of his being an attaching decree-holder. If the decree in

pursuance of which the attachment was made is paid off, the sale will of course stand as between the vendor and the vendee and the mortgage will

be satisfied. But if in pursuance of the attachment the properties are brought to sale in execution, the vendee is deprived of his rights under the sale

to the extent to which the properties are sold in execution and we think that there is no meaning in saying that even to this extent, the sale is

operative as between the vendor and the vendee. This seems to us to be the principle of the decision in Gopal Sahoo v. Gunga Pershad Sahoo

I.L.R.(1882) 8 Cal. 530 which we are prepared to follow. The learned Subordinate Judge distinguished that case as a decision under the CPC of

1882 according to which he thought that a transfer pending an attachment was wholly void whereas under the present Code, it is voidable only as

against the rights enforceable under the attachment. This distinction drawn by the learned Judge is obviously erroneous. The law has always been

that transfer pending an attachment is void only as against the rights enforceable under the attachment.

The learned Counsel for the respondent drew our attention to a decision of the Allahabad High Court in Lachman Prasad v. Lachmeshwar

Prasad (1922) 20 A.L.J. 151 : 66 I.C. 203. With all respect, we are unable to follow that decision. The sale was there made to the father of the

mortgagee and the father was a member of a joint Hindu family with the mortgagee. The sale deed directed that a portion of the consideration

should be applied by the vendee to discharge the mortgage bond in favour of his son. The learned Judges observed that the father and the son must

be treated as virtually one and the same person and that the direction to the father to pay off the mortgage must be treated as an extinction of the

mortgage debt. We do not find any reference in the judgment to the principle of Section 101 of the Transfer of Property Act. In the leading case in

(1884) L.R. 11 I.A. 126 (Privy Council) their Lordships of the Privy Council referred to the practice prevailing in England of circumventing the

doctrine of Toulmin v. Steere (1817) 3 Mer. 210 : 36 E.R. 81 by taking a conveyance of the equity of redemption in favour of trustees for the

benefit of the prior mortgagee and added that in India it was unnecessary to resort to this conveyancing device and as a rule of equity the principle

of presumed intention to keep the mortgage alive might be applied. It seems to us that what was done in the Allahabad case was practically the

conveyancing device referred to by their Lordships of the Privy Council in (1884) L.R. 11 I.A. 126 (Privy Council) and if even under the decision

in Toulmin v. Steere (1817) 3 Mer. 210 : 36 E.R. 81 such a device would have prevented the extinction of the mortgage, we venture to think with

all respect that it would be a fortiori so in this country.

Though Section 101 of the Transfer of Property Act has generally been invoked in cases where the rights of mesne encumbrancers come up for

decision, the principle of the section is not limited to those cases. It only lays down a general rule of presumed intention and where the later

conveyance will be inoperative as against any intermediate right whether founded on an encumbrance or on an attachment, the principle must be

held equally to apply. In Dinabundhu Shaw Chowdhry v. Jogmaya Dasi (1901) 12 M.L.J. 73 : L.R. 29 IndAp 9 : ILR 29 Cal. 154 (P.C.) this

question had to be considered in respect of the effect of an intermediate attachment, as in the present case, and their Lordships observed (at p.

164):

It is idle to contend that there was any intention to extinguish the old mortgages for the benefit of the execution creditor or any purchaser at the

sheriff''s sale.

We must accordingly hold that the plaintiffs'' claim under the suit mortgage has not been extinguished by the subsequent sale and that it is

enforceable in the events that have happened.

Mr. Somasundaram next contended that according to the proper construction of the order (Ex. G-1) the mortgage must be held to be valid only

to the extent of Rs. 2,500. We do not think that is the effect of the order. The only point then decided was that as between the sale and the

mortgage the Court upheld the mortgage and negatived the claim under the sale. This is made clear by the use of the words ''mortgage referred to

by the decree-holder'' instead of words like ''mortgage admitted by the decree-holder''. The Court has now found that the mortgage was fully

supported by consideration and nothing has been shown against the correctness of that finding.

It remains to deal with two other questions raised by Mr. Somasundaram on behalf of the seventh defendant. He first contended that the lower

Court''s finding on the fourth issue was not in accordance with the evidence and that the issue should have been found in his client''s favour. This

relates to a plea of discharge, it being the seventh defendant''s case that in or about April, 1925, he paid to the plaintiff a sum of Rs. 1,950 in full

quit of so much of the mortgage debt as would be recoverable from the properties agreed to be purchased by the seventh defendant. Though the

seventh defendant is not able to fix the exact date of payment, he states that the agreement between himself and the Court auction purchaser was in

February, 1925, and that the payment to the plaintiff was about two months later. Though the learned Sub-Judge has not discussed in detail the

evidence bearing upon this question, he has clearly indicated that he was not impressed by the evidence adduced in support of the plea of

discharge. We have been taken by Mr. Somasundaram through the relevant portions of the oral evidence, and we see no reason to come to a

different conclusion. The seventh defendant has not thought fit to take any voucher for the payment of such a large sum of money nor has he even

cared to insist upon the payment being endorsed on the mortgage bond. Even according to his version, the plaintiff promised to make the

endorsement in due course and yet, after the plaintiff had failed to do so for more than a year, the seventh defendant never even thought fit to send

any notice to the plaintiff complaining of her conduct. Further, the seventh defendant''s evidence as to the circumstances under which the alleged

payment was made and the manner in which he found the money to make the payment, is not at all convincing. It is very doubtful if at or about this

time he had the money to pay at all. D.W. 1 whose help has been availed of to support this story apparently because he had to receive some

money from the plaintiff, is the son-in-law of the seventh defendant''s brother and assuming it to be true, that he had to receive a sum of Rs. 200

from the plaintiff and did receive it about this time, we are not, by any means satisfied that there is any connection between that transaction and the

alleged payment by the seventh defendant to the plaintiff. The remaining witnesses who support this story of payment do not really seem to have

had anything to do with the transactions between the plaintiff and the seventh defendant and, as one of them admits, it is probably the seventh

defendant''s local influence that has enabled him to get these witnesses to support his story. We must accordingly find against the seventh defendant

on his plea of alleged discharge.

The second issue raised the question of the accountability of the plaintiff for the profits received by her from the lands which had been

purchased by the seventh defendant. The law on this point is not, by any means, settled. We may observe in passing that the observations in

Muthammal v. Razu Pillai I.L.R.(1917) 41 Mad. 513 are not wholly reconcilable with the view taken in Natesan Chettiar v. Ramalinga Chettiar

(1937) 46 L.W. 332. As we do not propose to decide the question as an abstract question of law in this case, we do not think it necessary to

refer to the cases in detail. We only wish to guard ourselves against being understood as concurring in all the observations in Natesan Chettiar v.

Ramalinga Chettiar (1937) 46 L.W. 332. For instance, the statement that a purchase by a prior mortgagee in execution of a decree obtained in his

suit without impleading the puisne mortgagee therein is a nullity and will not be effective even to pass the title of the mortgagor as against the puisne

mortgagee seems to us too broadly stated. In the circumstances of the present case and in view of the fact that a petition has been filed before us

on behalf of the seventh defendant for relief under the Agriculturists'' Relief Act (IV of 1938), we think it best to hold that no accounting is

necessary and it would be more equitable to say that after 23rd October, 1920, the plaintiff is not entitled to claim interest as against the seventh

defendant to the extent of the proportion of the mortgage debt recoverable from the properties in the seventh defendant''s possession. In this view,

there is no occasion in our opinion, to deal with the petition under Madras Act IV of 1938 either. As the plaintiff has become the owner of the

equity of redemption in some of the items of the mortgage property, the mortgage must be held to have been split up and the plaintiff will be entitled

to a decree only for a proportionate share of the mortgage debt as against the properties purchased by the seventh defendant.

The parties are not able to agree before us as to the proportion. The lower Court will ascertain the amount due for principal and interest as per

terms of the mortgage bond, on 23rd October, 1920, the date on which the seventh defendant''s vendor became the Court auction purchaser; out

of that amount, there will be a decree for sale of the properties purchased in that Court sale by the seventh defendant''s vendor for an amount

bearing the same proportion to the mortgage debt due on that date as the said properties bear to the entirety of the mortgaged properties valued as

on the date of the mortgage.

The appeal is allowed and the case will be sent back to the lower Court to give effect to the above directions and pass a preliminary decree for

sale for the amount ascertained as above. The plaintiff and the seventh defendant will pay and receive proportionate costs both here and in the

Court below.