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Raichand Gulabchand Vs. Dattatraya Shankar Mote and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtMumbai High Court
Decided On
Case NumberA.F.O.D. No. 668 of 1957 with C.A. No. 2298 of 1962 and First Appeal No. 40 of 1960
Judge
Reported inAIR1964Bom1; (1963)65BOMLR510; ILR1963Bom509
ActsTransfer of Property Act, 1882 - Sections 3, 5, 58 and 100; Registration Act, 1908 - Sections 52 and 55; Code of Civil Procedure (CPC), 1908 - Order 21, Rule 66 - Order 34, Rule 4
AppellantRaichand Gulabchand
RespondentDattatraya Shankar Mote and ors.
Appellant AdvocateM.P. Amin, ;R.B. Kotwal, ;N.A. Shah and ;M.P. Amin and ;M.H. Mehta, Advs.
Respondent AdvocateV.N. Gadgil, ;N.N. Avadhani, ;M.L. Pendse, ;U.R. Lalit and ;M.V. Paranjape, Advs.
Excerpt:
.....to consider the question as to whether in any case the lis began from the date of the award decree. the plaintiff would be liable in every case to be defeated by the defendant's alienating before the judgment or decree and would be driven to commence his proceedings de novo, subject again to be defeated by the same course of proceeding. it is sufficient, therefore, in the present case, to say that merely because a charge was created by the decree, the suit did not involve at any stage any question as to any right in the immovable property directly and specifically, and if this condition is not satisfied, then, clearly, section 52 has no application whatsoever and the case must depend for its decision on only section 100 of the act. 8 contends that he is a subsequent mortgage..........that from inspection of the records it could not have been possible for any one to find out if the suit property was charged and the plaintiff, therefore, could not be fixed with notice, either actual or constructive, of the above decretal charge in favour of defendants nos. 9 to 13. it is under these circumstances that the question falls to be decided whether the plaintiff is bound by the charge created in favour of defendants nos. 9 to 13.5. the case must be decided by reference to section 100 of the transfer of property act. unlike other transfers contained in the transfer of property act, in respect of a charge under section 100, the second paragraph of the section provides for two exceptions or two saving clauses, viz.;'(1) nothing in this section applies to the charge, of a trustee.....
Judgment:

Patel, J.

1. These two appeals arise out of connected proceedings. It will be sufficient to state the facts in First Appeal No. 40 of 1960 to understand the nature of the litigation, we will call defendants Nos. 1 to 7 'Datars', who were the debtors in the proceedings. Defendant No. 8 was the creditor and defendants Nos. 9 to 13 were also another set of creditors. It appears that Dates were indebted to several persons, amongst whom were defendants Nos. 9 to 13. Defendants Nos. 9 to 13 filed a suit for recovering a sum of Rs. 1,34,000 and interest from Datars. On the 31st of March 1941 a decree was made in their favour, by which a charge was created on 3 sets of properties belonging to Datars. Two properties were situated at Poona, onein Shukrawar Peth and another in Budhawar Peth. The third property was at Kalyan. This decree, creating the charge was registered on the 17th of April 1941. As ill luck would have it, it was only against the Shukrawar Peth property that the charge was mentioned in the indexes of the Registrar.

The charges on other properties were not mentioned at all. Even the property cards of City Survey Department and the Municipal records did not contain a reference to the charges on any of these properties. On the of June 1949 Dates created a mortgage in favour of the plaintiff, who is the appellant before us, for a sum of Rs. 1,00,000 on the Budhawar Peth property. Subsequently, on the 13th ofSeptember 1949, further mortgage was created on the same property in favour of the plaintiff for a sum of Rs. 50,000. Thereafter, on the 27th of July, 1951, a charge was created by an award in favour of defendant No. 8 the Bank of Maharashtra, Pepma, for a sum of Rs. 59,521-11-0 on the Budhwar Peth property. Subsequently, it appears; a decree was made on the award. It seems that in the meantime the other two properties were sold and realisations to the tune of Rs. 1,15,000 were recovered by defendants Nos. 9 to 13. These defendants Nos. 9 to 13, thereafter, filed a Darkhast for execution of their decree, being Darkhast No. 32 of 1952, and claimed a sum of Rs. 1,57,164 being the balance of the amount due to them and accruing interest out of this property. This property was brought to sale in execution of the decree and was purchased in auction by defendants Nos. 9 to 13, i.e. the decree-holders themselves.

2. In execution of decree of defendants Nos. 9 to 13 notices under Order 21, Rule 66 of the Code of Civil Procedure were issued and the plaintiff appeared in, the Darkhast proceedings and made his claim. The learned Judge rejected the prayer and vacated the notices issued to the mortgagees and charge-holders, i.e. the plaintiff and defendant No. 8. Against this judgment, the plaintiff has filed of an appeal in execution, being the Appeal No. 668 of 1957 before us. He then instituted on the 5th of June 1958 this suit for realisation of the total sum of Rs. 2,18,564 by sale of the mortgaged property. Defendants Nos. 1 to7 are the original mortgagors, defendant No. 8 is the Bank of Maharashtra, the subsequent charge-holder, and defendants Nos. 9 to 13, the original charge-holders, who, by then, had purchased the mortgaged properly.

3. The real contesting defendants are defendants Nos. 9 to 13. They contend that the property is not liable to sale, since they are prior charge-holders and had acquired the property at the Court sale in execution of their Darkhast for enforcement of their charge. Defendant No. 8 is interested in incorporating its claim as subsequent mortgagees in the decree, which may ultimately be passed in favour of the plaintiff. The short and narrow issue, therefore, which arose, before the Court, below was whether defendants Nos. 9 to 13 had priority over the mortgage of the plain-tiff. The learned trial Judge found this issue against the plaintiff and, therefore, did not give the plaintiff the relief in respect of the property. He declared that Rs. 2,18,564 was due under the suit mortgages at the date of the sum and directed defendants Nos. 1 to 7 to pay the same to the plaintiff with future running interest at 4 per cent per annum on Rs. 1,50,000 from the date of the suit tilt realisation together with the costs of the suit. He also gave consequential directions as to costs.

4. The question is, whether the plaintiff is bound by the charge created in favour of defendants Nos. 9 to 13 by the decree dated the 31st of March 1941. The trial court has found that the charge decree obtained by defendants Nos. 9 to 13 was duly registered and the evidence on re-cord disclosed that the charges were not entered in the properly cards and in the indexes of the Registration Department except in respect of Shukrawar peth house, as to the property in Budhawar Peth, no mention of the charge was made in land records. It, therefore, found that from inspection of the records it could not have been possible for any one to find out if the suit property was charged and the plaintiff, therefore, could not be fixed with notice, either actual or constructive, of the above decretal charge in favour of defendants Nos. 9 to 13. It is under these circumstances that the question falls to be decided whether the plaintiff is bound by the charge created in favour of defendants Nos. 9 to 13.

5. The case must be decided by reference to Section 100 of the Transfer of Property Act. Unlike other transfers contained in the Transfer of Property Act, in respect of a charge under Section 100, the second paragraph of the Section provides for two exceptions or two saving clauses, viz.;

'(1) Nothing in this section applies to the charge, of a trustee on the trust-property for expenses properly incurred in the execution of his trust,' and '(2) save as otherwise expressly provided by any law for the time being in force, no charge shall be enforced against any property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge'. If the mortgages in favour of the plaintiff which are sought to be enforced in this suit are 'property in the hands of' the plaintiff and the plaintiff is 'a person to whom such property has been transferred' within the meaning of the above quoted portion of Section 100, the plaintiff would be entitled to succeed as against defendants Nos. 9 to 13, as the plaintiff is held not to have had any notice or the decretal charge in favour of those defendants. The question is, in the first place, whether a mortgage with or without possession amounts to a transfer and, in the second place, whether such transfer is included in this exception.'

6. Section 5 defines 'Transfer of Property' to mean

'an act by which a living person conveys property, inpresent or in future, to one or more other living personsor to himself, or to himself and one or more other livingpersons.'

The word 'property' in its most comprehensive sense includes all legal rights of a person, except his personal rights, which constitute his status or personal condition. In Jones v. Skinner, (1835) 42 RR 274, the Master of the Rolls described the word 'property' as being 'the most comprehensive of all the terms which can be used, inasmuch as it is indicative and descriptive of every possible interest which the party can have' and the authorities snow that in the Act the word 'property' has been used in this comprehensive sense, see Ram Shankar Lal v. Ganesh Prasad ILR 29 All 385. It would be clear, therefore, that a transfer, which may either be of the entire property or of any interest in the property, must be hem to be a transfer. Even if the transfer only relates to some small right or interest in an immovable property, then it must be regarded as a transfer of immoveable property. Section 58 of the Transfer of Property Act defines a mortgage and says:

'A mortgage is the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced......'.

A mortgage, therefore, must be regarded as a transfer of an interest, unlike a charge which only creates a right toobtain the recovery of the money out of the property, over which a charge is created. In respect of the mortgages in his favour the plaintiff, therefore, is a transferee of the property in the sense that he is a transferee of an interest in the property, over which the charge in favour of defendants Nos. 9 to 13 had been created. In our view, when Section 100 provides that the charge shall not be enforced against any property, it means 'such interest in the property that is transferred', and it must be regarded to be 'in the hands of the person', to whom it has been transferred. The only condition is that the transfer of such property must be for consideration and without notice of the charge.

7. If, therefore, one must conclude that there was consideration and that the plaintiff had no notice of the charge, then the charge will not be binding on the mortgagee's interest with the plaintiff. As shown by the finding of the learned trial Judge, and which finding has not been disputed before us, it must be held that the plaintiff had no notice of the charge in favour of defendants Nos. 9 to 13. Apart from this, Section 3 of the Transfer of Property Act, which is the defining section, says that a person is said to have notice of a fact when he actually knows that fact, or when, but for wilful abstention from an inquiry or search which he ought to have made, or gross negligence, he would have known it. It is an admitted position that even on a careful inquiry the plaintiff could not have known that this property was charged in favour of defendants Nos. 9 to 13, inasmuch as neither the property cards, nor the Municipal Records, nor the indices contained a reference to this charge in respect of this property. The explanation in Section 3 which provides for fixing a party with constructive notice in respect of registered transactions, contains a proviso that in order to amount to constructive notice, (1) the instrument has been registered and its registration completed in the manner required by the Registration Act and the rules made thereunder, (2) the instrument has been duly entered or filed in books kept under Section 51 of the Act and (3) the particulars regarding the transaction to which the instrument relates have been correctly entered in the indexes kept under Section 55 of that Act. It is clear, therefore, that though in some cases by legal fiction, constructive notice may he imputed to a party, in the present case, it cannot be imputed to the plaintiff, since the third condition required for the purpose is not satisfied. Therefore, on this construction of Section 100, the plaintiff is entitled to succeed.

8. It is argued by Mr. Paranjape, that once a charge is created on the property, in order that the proviso should apply, the subsequent transferee must be of the entirety of the property and not only of a part i.e. of an interest in the property. He says that, that could be the only meaning that could be attached to the words 'any property in the hands of a person to whom such property has been 'transferred', emphasis being on the words 'in the hands...' This argument cannot be accepted. Take, for example, the case of a property, which has been charged in its entirety, of which physical half portion is transferred to a subsequent purchaser for value without notice. It is impossible to argue and Mr. Paranjape practically did not argue, that in such a case the proviso will not apply. If it does not apply to such a case, it is difficult to appreciate how it can apply to a case, where the property is not physically partitioned but where an interest in that property only is divided and transferred to another. Mr. Paranjape emphasised that the words 'such property' mean immoveable properly, which has been charged in the earlier part of the sec-tion. This cannot be so, for the ordinary rule of construction is ad proximal antecedents fiat relations immediate sententia. The word 'such' is a relative word and it applies to the nearest antecedent noun in the same sentence, i.e. to 'any property in the hands.....' and this is made more clear by the words 'has been transferred' after the word 'such'. The word 'Such can have no relation to something which Is mentioned in the first part of the section, it was then argued that in any case the words 'in the hands of a person' must necessarily show that, that person must be in possession of the property and, in support of this reliance has been placed on Surayya v. Venkataramanamma AIR 1940 Mad 701, Where it was said by Mr. Justice Horwill:

'If the appellant is treated as a simple mortgagee, he cannot by any stretch of the imagination be considered to have the property in his hands.'

With respect there is no justification for construing the words 'in his hands' literally, if the words were to be construed literally, the section would not apply to a purchaser who is not in actual physical possession, but is in possession through his agent or his tenant or his mortgagee. The words 'in the hands' can and must only mean 'held by' or 'owned by' and cannot mean physical holding of the property. They only mean the holding of the title and nothing else. These words do not indicate that the section was only intended to apply to a purchaser or a mortgagee in possession. Section 58 of the Transfer of Property Act does not make any difference between a mortgagee, who is a simple mortgagee, and a mortgagee with possession. It only slightly alters the rights that are available to the mortgagee, but the actual transfer is the transfer of a subordinate interest in the mortgaged property and that is the same in both the cases. In our view, therefore, the learned Judge was in error in holding that the plaintiff was bound by the charge in favour of defendants Nos. 9 to 13.

9. It is then contended by Mr. Paranjape that whatever may be the position under Section 100 of the Transfer of Property Act, he is still entitled to protection under Section 52 of the Transfer of Property Act, i.e. by the doctrine of its pendens. Mr. Amin objected that this argument was not taken in the trial Court and, therefore, it should not be allowed to be taken up in this Court. It would appear to be a question of law, since no evidence is necessary to consider this argument, and if that is so we cannot, in fairness, disallow the contention. The question, however, is; whether it is strong enough to negative the plaintiff's claim. Now, in the present case, it is an admitted position that originally only money debt was due to defendants Nos. 9 to 13 from Datars. They had filed a money suit, being Suit No. 741 of 1938 in Court and it was only practically 3 years afterwards that at the time of passing of the decree that a charge was created on the properties belonging to Datars. The properties therefore, were not the subject matter of the suit, no issue was involved in respect of the properties and they were never specifically involved in the suit. In order that Section 52 should apply, (1) the suit or the proceeding, not collusive, must be pending and (2) any right to immoveable property must be directly and specifically in question in the suit. Both these conditions, therefore, must be satisfied before any possible protection can be claimed. Once the suit is filed, then it does not end under the explanation only by a decree being passed. Under the explanation, the suit continues until it has been disposed of by a final decree and complete satisfaction or discharge ofsuch a decree has been obtained or has become unobtainable for reasons mentioned therein. This must evidently apply to a case, where the property is in dispute in the suit itself and not which becomes the subject matter of a decree subsequently by an agreement of parties. It is obvious that if the Court had to make a decree in invitum a charge could not possibly have been created on this property. If a charge has been created by consent of parties this is something extraneous to the suit and cannot really be included in the operative part of the decree, but must be appended as a schedule to the decree. If, however, it is included in the operative part of the decree, then, no doubt, the decree can be executed, but that does not make it the subject-matter of the suit. Merely because a charge is created by a consent decree, no lis is introduced in respect of it in the suit, nor can it be said that the lis commenced at least from, the date of the decree. There is no commencement at all so far as the lis is concerned. The lis was the simple claim of money and nothing more.

10. It is true that though by the making of the decree there was no lis, still once the application for execution is filed and proceeding commenced, the property becomes the subject-matter in dispute and, therefore, it may tall within the meaning of 'the proceeding in respect of the property'. It is not necessary to consider whether that proceeding will, end with the dismissal of the Darkhast without realisation of the amount. In the present case, on the date, on which the mortgage in favour of the plaintiff was created, no Darkhast was pending and, therefore, it cannot be said that under the decree at least a proceeding bringing the property in dispute was pending.

11. Mr. Paranjape invited our attention to the case or Kallawa Shidlingappa v. Parappa Sankappa, ILR (1945) Bom 885 : AIR 1946 Bom. 207, where a Division Bench of this Court applied the principle of the above section to the case of an award decree, where a charge was created by the award. As explained by Mr. Justice Divatia, the lis commenced as soon as an application was made to have a decree in terms of the award, which created the charge over the property and, therefore, the section applied, an application for this purpose always being treated as a suit. Clearly, therefore, this authority has no application to the facts of the present case, because it is not the case of any one that at any time a charge was sought on this properly in the suit. It is argued with emphasis that the learned Judges were of the view that lis pendens operated at least from the date of the decree in any case. However, the sentence commencing at the end of page 892 (of ILR Bom) ; (at p. 210 of AIR) clearly shows that they did not deem it necessary to consider the question as to whether in any case the lis began from the date of the award decree. They merely pointed out the authority, which was cited at the Bar. They preferred to follow the principle laid down in Pranjivan Govardhandas v. Baju ILR 4 Bom 34, and held that the lis commenced with the application to take a decree in terms of the award,

12. Mr. Paranjape relied on the judgment of Vennataramana Rao, J. in Jagannatha Kone v. Ramchandra Naidu, AlR 1936 Mad 589 where the learned Judge held that where the property was given in security in a suit, the doctrine of lis pendens should apply. It is not necessary for us to consider whether, in such a case, the doctrine would apply. Suffice it to say that, though the learned Judge pointed out that there were pending proceedings, that the Court had jurisdiction over the person and the property and that the property was specifically described at the time of furnishing the security, he did not refer toanother important requirement of the section, viz., right to the property being directly and specifically in question in the proceedings. How the case of a security, which is furnished during, the pendency of the suit, satisfies that condition, is difficult to appreciate, me foundation of the doctrine of lis pendens is explained in various ways. Turner L. J. in Bellamy v. Sabine, (1857) 1 De G.& J. 566 said:

'It is, as I think, a doctrine common to the courts both of law and of equity, and rests as I apprehend, upon this foundation -- that it would plainly be impossible that any action or suit could be brought to a successful termination, if alienations pendente lite were permitted to prevail. The plaintiff would be liable in every case to be defeated by the defendant's alienating before the judgment or decree and would be driven to commence his proceedings de novo, subject again to be defeated by the same course of proceeding.'

Story's explanation based on presumption of every one knowing what passes in Courts and imputing constructive notice has not been approved in India, see Krishnappa v. Bahiru, 8 Bom H.C. R. 55. Whichever reason is adopted, there seems to be little doubt that in a case such as this the section cannot apply. It is sufficient, therefore, in the present case, to say that merely because a charge was created by the decree, the suit did not involve at any stage any question as to any right in the immovable property directly and specifically, and if this condition is not satisfied, then, clearly, Section 52 has no application whatsoever and the case must depend for its decision on only Section 100 of the Act.

13. The decree of the trial Court must, therefore, be set aside except as to defendants Nos. 1 to 7. There will be a declaration in Suit No. 57 of 1958 (i.e. Appeal No. 40 of 1960) as follows:--

'It is hereby declared that the property sold in Special Suit No. 741 of 1938 in Darkhast No. 32 of 1952 is sold subject to the mortgagee rights of the plaintiff and that defendants Nos. 9 to 13 have purchased the property subject to that mortgage'.

We direct that a preliminary decree for sale under Order 34, Rule 4 of the Code of Civil Procedure be drawn up in favour of the plaintiff, giving three months time for payment.

14. Mr. Lalit on behalf of defendant No. 8 contends that he is a subsequent mortgage charge-holder and, therefore, his dues also must be shown in the decree and a direction be given for payment to him as well under the provisions of Order 34, Rule 4. Mr. Paranjape contends that though at the date of the suit his dues could not be barred by time because the suit was dismissed and the appeal is now being allowed, it may be that the dues may be barred to-day and, therefore, no decree can be made in favour of defendant No. 8. An appeal is a re-hearing of suit and we do not see why if we have to set aside the decree the trial Court, relief cannot be given to defendant No. 8. No authority is cited before us in support of the contention that is now sought to be made. We accordingly direct that the dues of defendant No. 8 shall also be shown in the decree and be directed to be paid out of the balance of the sale proceeds of the mortgaged property as provided by Order 34, Rule 4.

15. The costs of both these appeals in both the Courts will be paid by defendants Nos. 9 to 13 personally and also out of the mortgaged properly.

16. There will be no order on Civil Application No. 2298 of 1962.

17. Order accordingly.


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