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Devichand Ganesh Vs. Chintaman Yellappa - Court Judgment

LegalCrystal Citation
SubjectProperty;Civil
CourtMumbai
Decided On
Case NumberSecond Appeal No. 896 of 1942
Judge
Reported inAIR1945Bom116; (1944)46BOMLR763
AppellantDevichand Ganesh
RespondentChintaman Yellappa
DispositionAppeal dismissed
Excerpt:
transfer of properly act (iv of 1882), section 101-charge on property in favour of decree-holder created by judgment-debtor-sale of 'properly, in execution, by previous mortgagee-purchase of property by decree-holder-whether debt under charge extinguished-personal remedy against judgment-debtor whether barred.;a charge on immovable property, created by a compromise in favour of a holder of a decree for money by the judgment-debtor, is extinguished when the charge-holder purchases the property at a court sale brought about by a previous mortgagee of the property. what is extinguished in such a case is not merely the security created by the charge but the debt which was the source of the charge. hence, as the debt has ceased to exist, it is not open to the decree-holder to seek a personal..........plaintiff would be entitled to recover the whole, amount due. no instalments having been paid, the decree-holder filed darkhastp. 1641 of 1926 in september, 1926, to recover the amount of the decree by arrest of the judgment-debtors. on april 1, 1927, the decree-holder and the judgment-debtors arrived at a compromise in the following terms :the defendants do pay (the plaintiff) within one month from today the (whole) amount as per execution application together with interest on the principal sum of six hundred and seventy-five rupees at twelve per cent, from april 1, 1927. ii' the defendants do not pay, a charge for the said amount is created on the three houses mentioned below of the defendants in the shanivar peth (and) the plaintiff to recover (the said sum) by the sale of the said.....
Judgment:

Sen, J.

1. This is an appeal by the decree-holder in certain darkhast proceedings in which he sought to execute a decree obtained by him in Suit No. 161 of 1926 by attachment of the moveables of the respondent-judgment-debtors. The decree provided that the defendants were to pay Rs. 500 with interest at six per cent, by monthly instalments of Rs. 75, and that in case of two defaults the plaintiff would be entitled to recover the whole, amount due. No instalments having been paid, the decree-holder filed Darkhastp. 1641 of 1926 in September, 1926, to recover the amount of the decree by arrest of the judgment-debtors. On April 1, 1927, the decree-holder and the judgment-debtors arrived at a compromise in the following terms :

The defendants do pay (the plaintiff) within one month from today the (whole) amount as per execution application together with interest on the principal sum of six hundred and seventy-five rupees at twelve per cent, from April 1, 1927. II' the defendants do not pay, a charge for the said amount is created on the three houses mentioned below of the defendants in the Shanivar Peth (and) the plaintiff to recover (the said sum) by the sale of the said property.

The charged property had already been mortgaged by the judgment-debtors to one Mr. Shah, a pleader, in 1925, and the said Mr. Shah obtained a decree on his mortgage and brought the mortgaged property to sale in darkhast No. 1462 of 1928 ; and it was purchased by the son of the present decree-holder on March 21, 1929. It has been held in these proceedings by both the Courts below that that purchase, though in the name of the son, was really by the decree-holder himself. It appears that after this there were several darkhasts and in one of them there was a further compromise under which a sum of Rs. 351 was paid to the decree-holder and he relinquished the charge on one of the properties. Then the present darkhast No. 1875 of 1935 was brought to recover the balance due by attaching moveables belonging to the judgment-debtors. The judgment-debtors raised various pleas but they abandoned them except one, viz. that the judgment-debtors were not personally liable and hence the darkhast was not tenable.

2. The learned Subordinate Judge held that the decree-holder must proceed against the charged property; alone and that he was not entitled to proceed against the defendants personally ; and he accordingly dismissed the darkhast with costs. The decree-holder appealed to the District Court, and the learned Assistant Judge who heard the appeal held that the judgment-creditor was entitled to proceed personally against the judgment-debtors in case the property charged was found insufficient to satisfy the decretal debt. He, accordingly, remanded the case for disposal of the darkhast after dealing with certain issues which he raised, one of which was : ' Is the decree-holder not estopped from proceeding against the judgment-debtors ?' There was an appeal to the High Court, and Broomfield J. dismissed the appeal-, holding that the compromise was not intended to take away or did take away the personal remedy which had been given to the judgment creditor by the decree. After the remand, the trial Judge held that the decree-holder would be entitled to proceed personally against the judgment-debtors on the ground that the charged property Was not available or had been found insufficient to pay his debt. But he held that the decree-holder was stopped from proceeding against the judgment-debtors, and, therefore, dismissed the darkhast. The reason for holding that the decree-holder was so estopped appears to be that the decree-holder had deprived himself of the remedy of proceeding against the charged property by his own act, i.e. by his having purchased the property at the Court sale. He also thought that the auction purchase of the charged property had effected a merger and extinguished the debt, following Bai Revav. Valimahomed : (1922)24BOMLR720 and Krishnachandra Bhoumick v. Pabna Model Company, Ltd. I.L.R. (1931) Cal. 76 The decree-holder appealed to the District Court again, and the learned Assistant Judge who heard the appeal held that there was no merger of the charge under Section 101 of the Transfer of Property Act, that the Court sale was not subject to the charge created in the decree-holder's favour and that the appellant was not entitled to proceed against the moveables of the respondents (though a finding in the affirmative has been recorded against this issue in the earlier part of the judgment.) He took the view that the decree-holder still had the right to sue for sale on his mortgage (i.e. charge) subject to the first mortgage, and that he also had the right to redeem the first mortgage and to have the property sold to satisfy his own claim. He observed : ' It will be no answer to say that the property has been purchased by himself or that it has been subsequently sold away by him to a third party. If he cannot effectively pursue the mortgaged property, that is no fault of the judgment-debtor and the appellant has to thank himself for that result. The judgment-debtor is entitled to insist that the decree-holder should proceed against the charged property first, and as that remedy is open to the decree-holder, he cannot execute the decree against the judgment-debtors' moveables (see Raychand Jivaji v. Basappa Virappa : AIR1941Bom71 ).' The appeal was, accordingly, dismissed with costs.

3. Mr. Patwardhan on behalf of the appellant has contended that even if by the purchase of the property by the decree-holder the charge may have become unenforceable, the decree-holder cannot be deprived of his personal remedy which was originally granted to him under the decree which was held by this Court in Second Appeal No. 460 of 1938 to have been preserved to him, under the compromise. He has, therefore, contended that the reasoning of the learned Assistant Judge that the judgment-debtor is entitled to insist that the decree-holder should first proceed against the -charged property is untenable as now it is impossible for the decree-holder to recover his debt by enforcing the charge which would have to be enforced against himself.

4. Mr. Murdeshwar on behalf of the respondents has supported the judgment of the learned Assistant Judge and has contended that the decree-holder must proceed against the charged property first, and he has further contended in the alternative that there has been a merger of the charge under Section 101 of the Transfer of Property Act and that the effect of that merger must be that the debt itself to enforce which the charge was created has been extinguished.

5. As the decree-holder by purchasing the property at the Court sale has purchased the right, title and interest of the mortgagor, though the mortgagor's right might then have been subject to the charge created under the compromise, it is difficult to see how after becoming theowner of the property it is possible for him to enforce the charge. As to the second contention, the old Section 101 of the Transfer of Property Act was in these terms :

Where the owner of a charge or other incumbrance on moveable property is or becomes absolutely entitled to that property, the charge or incumbrance shall be extinguished, unless he declares, by express words or necessary implication, that itShall continue to subsist, or such continuance would be for his benefit.

In enacting the present amended section the Legislature has adopted the simple rule that the existence of a subsequent incumbrance prevents merger. But it does not appear to have been the; intention to amend or alter the old law which covered the case of the union of two estates which occurred when the purchaser of the equity of redemption acquired the rights of the mortgagee or when the mortgagee acquired the rights of the mortgagor. As pointed out by Sir Dinshah Mulla in his Transfer of Property Act, 2nd edn., p. 552 :

The first case is now covered by Sections 91 and 92. The scope of the present section is therefore confined Id cases in which the mortgagee or charge-holder acquires ownership, for the equity of redemption represents the estate of ownership.

Sir Dinshah Mullah hasi also pointed out, at p. 956 of the same book, that the decisions under the old section are still good law, the law having been altered not in substance but only in form or expression. At p. 557 he gives instances in which, on a mortgagee purchasing, the security was held to be merged under the rule of intention, in all of which cases there was no puisne mortgagee. On this point Sir Dinshah Mulla has cited the cases of Lakhmidas v. Jamnadas I.L.R. (1896) 22 Bom. 304 Bisheshur Dial v. Ram Samp I.L.R. (1900) All. 284 KrishnachandraBhoumik v. Pabnu Model Company, Ltd. I.L.R. (1931) Cal. 76 Ponnambala Pillai v. AnnamalaiChattiar I.L.R. (1920) Mad. 372 and Balamani Ammal v. Rama Aiyar A.I.R. (1925) Mad. 786.

6. In Lakhmidas v. Jamnadas defendants Nos. 1 and 2 had mortgaged three properties, A, B, and C, to the plaintiff and afterwards mortgaged property A to onePranjivan. Thereafter the plaintiff obtained a money-decree against defendants Nos. 1 and 2 in respect of another debt and in execution attached and sold their equity of redemption in property C and purchased it himself, thus becoming full owner of C. It was held that when the plaintiff purchased the equity1 of redemption in the purchased it subject to its due proportion of the mortgage-debt due to himself and that on his purchase the debt to that extent ceased to exist and the debt due to him on his mortgage was reduced by that amount. The expression ' the charge orincumbrance shall be extinguished ' in the old Section 101 was thus interpreted to mean that the debt which was the basis of the charge itself would be extinguished. In Bisheshur Dial v. Ram Sarup a mortgagee bought at auction the equity of redemption in a part of the mortgaged property in execution of a decree obtained by two other parsons, and it was held that such purchase had, in the absence of fraud, the effect of discharging and extinguishing that portion of the mortgage debt which was chargeable on the property purchased by him, that is to say, the portion of the debt which bore the same ratio td the whole amount of the debt as the value of the property purchased bore to the value of the whole of the property comprised in the mortgage. The decision in Lakhmidas v. Jamnadas was one of the decisions followed in that case. Kmhnachandra v. Pabna Model Company, Ltd. followed Bisheshur Dial v. RamSarup and so did Ponnambala Pillai v. Annamalai Chettiar.

7. In Balamani Ammal v. Rama Aiyar during the pendency of a mortgage suit the mortgagor's right, title and interest in the suit properties were acquired by the mortgagee by virtue of a sale in execution of a money decree. It was held that the mortgage suit must be dismissed as the mortgage; must be deemed to have been satisfied on the date on which the plaintiff had acquired in the execution sale the mortgagor's interest. None of these cases are subsequent to the date of the amendment of Section 101 and no case decided; after such amendment has been brought to my notice. But the principle of the decisions! in all these cases must, it seems to me, clearly apply to the facts of the present case. The charge created by the compromise in favour of the, decree-holder, therefore, must beseemed to have become extinguished when the charge-holder purchased the property in suit at the auction sale brought about by Mr. Shah, the mortgagee, under the decree obtained by him. It cannot, it seems to me, be held that what was extinguished was merely the security created by the charge, as in all the decisions mentioned above it was held that it was the debt itself which was wholly or in part extinguished.

8. If such be the result, can it be said that though the appellant is unable to enforce the charge he is entitled to have his decree executed personally against the respondent-judgment-debtors, in view of the decision by Broomfield J. in Second Appeal No. 460 of 1938 that the adjustment or compromise was not intended to take away or took away in fact the personal remedy which the decree had given to the judgment-creditor In Gurappa Gurushiddappa v. Amarangji Vanichand (1940) 43 Bom. L.R. 26 the view expressed in Raychand Jivaji v. Basappa Virappa : AIR1941Bom71 by Broomfield J. that when a charge is created by an act of the parties the specification of a particular fund or property negatives a personal liability and that the remedy of the charge holder is against the property charged only or at any rate against the property charged in the first instance, was dissented from. Beaumont C.J. remarked (p. 34) :.I can see no justification for holding that, by taking a charge upon specific property, the primary object of which, as I have pointed out, is to secure him against other creditors, the creditor abandons his right to proceedagainst other property of the debtor.

9. In the present case, however, the situation has been complicated by the decree-holder having already chosen to purchase the land on which he got a charge created in order to enforce his decree. The trial Court held that the existence of the charge enabled the decree-holder to obtain the property at a comparatively low price at the auction sale ; a few months later the said property was sold at a profit of Rs. 1,600, and for this reason the lower appellate Court has held that there is no equity in the appellant's favour. Thus the decree-holder has made good use of his position as the charge-holder. It seems to me, therefore, that as such, having already derived an advantage from the charge, he cannot be allowed to ignore the consequence that the debt which was the source of the charge was extinguished when he purchased the property on March 21, 1929. In such a case, therefore, the debt having ceased to exist, it cannot be open to the decree-holder to seek a personal remedy against the judgment-debtor.Tijeras is, therefore, now no decretal debt to recover, and it must be held that the darkhast has been rightly dismissed.

10. It seems to me that the proceedings would not have been so protracted as they have been if the appellant had taken the stand which he has now taken from the beginning. Not only did he not rely on the principle of Section 101 when the darkhast came to be originally heard, buthe did not take this point also when he appealed to the High Court in Second Appeal No. 460 of 1938. It does not seem to me, however, that on that account it can be held that the point is fes judicata, but I must hold that the appellant is to blame for not having based his casa earlier in these proceedings on the argument on which he is now succeeding.

11. The appeal will, therefore, be dismissed. There will be no order as to costs.


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