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Subraya Venkatesh Buddu Shetti Vs. Ganpa Narayan Naik - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtMumbai
Decided On
Case NumberSecond Appeal No. 797 of 1907
Judge
Reported in(1911)13BOMLR678
AppellantSubraya Venkatesh Buddu Shetti
RespondentGanpa Narayan Naik
Excerpt:
.....(iv of 1882), sections 56, 81, 88-marshalling of security -mortgagee ordered to proceed against mortgage property free from other mortgages-mortgagee not making payments as provided in mortgage-deed- failure of consideration-subsequent payment. - - 4. venkatesh shetti, the mortgagee, having failed to pay to nagappa, defendant i sold to defendant 5, on the 10th of july 1897, some of the lands mortgaged under exhibit 42 and other property not covered by that deed; 5 and satisfied nagappa's mortgage. 400 ;further, the courts have directed by the decree that' in the event of defendants i to 3 failing to pay the amount found due on the mortgage, plaintiffs should first proceed against that portion of the mortgaged property which is in the hands of those defendants and bring to sale the..........(exhibit 60) to defendant no. 4 for rs. 500 four only out of the ten lands covered by plaintiffs' mortgage, exhibit 42.7. in 1902, defendant 4 sued defendant i on his mortgage, and in execution of the decree for sale obtained therein, became purchaser through court of the four lands covered by his mortgage, exhibit 60.8. the result was this. plaintiffs were mortgagees of defendant i for rs. 400 under exhibit 42, but they did not, as agreed, pay rs. 200 out of that amount to defendant i's previous mortgagee, nagappa, until after defendant i had sold some. of the mortgaged lands to defendant no. 5 and satisfied nagappa's mortgage. defendant no. 4, a mortgagee subsequent of some other lands mortgaged under exhibit 42, became court purchaser of those lands in execution of a decree on his.....
Judgment:

N.G. Chandavarkar, J.

1. It is necessary to state at the outset the' facts found by the lower Court of appeal, so far as they are material for the purpose of the two questions of law argued before us.

2. The facts are briefly these.

3. On the 3rd of January 1896, defendant 1, as manager of the undivided Hindu family consisting of himself and defendants 2 and 3, mortgaged by a registered deed (Exhibit 42) ten lands to one Venkatesh Shetti, deceased, represented in this litigation by the plaintiffs, for a debt due from the family. The consideration for the mortgage was Rs. 400, of which Rs. 200 were paid at the time of its execution to the mortgagor; as to the balance, the mortgagee covenanted by the mortgage-deed to pay it to one Nagappa, a previous mortgagee of defendant I'S family.

4. Venkatesh Shetti, the mortgagee, having failed to pay to Nagappa, defendant I sold to defendant 5, on the 10th of July 1897, some of the lands mortgaged under Exhibit 42 and other property not covered by that deed; and by means of the proceeds of the sale defendant I through defendant 5 redeemed the mortgage to Nagappa.

5. On the 15th of March 1898, Venkatesh Shetti, the mortgagee under Exhibit 42, paid to defendant I Rs. 200.

6. On the 30th of March 1898, defendant I mortgaged under a registered deed (Exhibit 60) to defendant No. 4 for Rs. 500 four only out of the ten lands covered by plaintiffs' mortgage, Exhibit 42.

7. In 1902, defendant 4 sued defendant I on his mortgage, and in execution of the decree for sale obtained therein, became purchaser through Court of the four lands covered by his mortgage, Exhibit 60.

8. The result was this. Plaintiffs were mortgagees of defendant I for Rs. 400 under Exhibit 42, but they did not, as agreed, pay Rs. 200 out of that amount to defendant I'S previous mortgagee, Nagappa, until after defendant I had sold some. of the mortgaged lands to defendant No. 5 and satisfied Nagappa's mortgage. Defendant No. 4, a mortgagee subsequent of some other lands mortgaged under Exhibit 42, became Court purchaser of those lands in execution of a decree on his mortgage.

9. Plaintiffs now sue to recover on their mortgage, Exhibit 42. Both the lower Courts have given them a decree treating their mortgage as one for Rs. 200 only, instead of Rs. 400 ; further, the Courts have directed by the decree that' in the event of defendants I to 3 failing to pay the amount found due on the mortgage, plaintiffs should first proceed against that portion of the mortgaged property which is in the hands of those defendants and bring to sale the properties sold respectively to defendants 5 and 4, only in case the decree is not satisfied by a sale of the former.

10. Plaintiffs impugn on this second appeal the correctness in law of both these restrictions on their right under their mortgage, Exhibit 42.

11. First, it is contended for them that as they paid the balance of Rs. 200 to defendant I, they are entitled to treat the mortgage, Exhibit 42, as one for the full consideration of Rs. 400. The finding of the Court below disposes of that contention. According to that finding, the mortgagee had kept the amount of Rs. 200 for payment to Nagappa. He was bound to pay the amount to the latter either at once or within a reasonable time after the contract to pay. He did not perform the contract and defendant I was in consequence compelled to sell some of the mortgaged lands to defendant No. 5 and to satisfy Nagappa's debt out of the sale proceeds. There was, therefore, partial failure of consideration for the mortgage, Exhibit 42, and the subsequent payment of Rs. 200 to defendant I by the plaintiffs could not serve in law to undo the effect of that failure, so as to prejudice the rights of defendant 5. Those rights are as of the date on which the sale to him took place. The plaintiffs' contention, that the subsequent payment of Rs. 200 must be treated as a future advance made under Exhibit 42 so as to entitle him to tack on the amount to the sum of Rs. 2oo,paid according to its terms on the date of its execution, ignores the fact that there was no contract for any future advance in that deed. Nor can the plaintiffs hold defendant I personally liable for the sum of Rs. 200, the personal liability having become barred by limitation.

12. The next question is whether the lower Courts have rightly decreed that, in the event of defendants rule to 3's failure to pay the decretal amount found due upon the mortgage, Exhibit 42, the plaintiffs should first proceed by way of sale against that portion of the mortgaged property which is in the hands of the former, and that they should proceed against the property purchased through Court by defendant No. 4, in case the proceeds of that sale are not sufficient to extinguish the decretal debt. The Subordinate Judge relied on Section 56 of the Transfer of Property Act in support of this portion of the decree. That section applies only as between a seller and his buyer, not as between a mortgagee of the seller and the buyer. The District Judge relies on Section 81.

13. Defendant No. 4 is now, no doubt, a purchaser at a Court sale of some of the lands mortgaged under Exhibit 42. But before his purchase he had been a puisne mortgagee under Exhibit 60, and the doctrine of law is that a mortgagee, who purchases mortgaged property in execution of his decree for sale on his mortgage, becomes a purchaser by estoppel; that is to say, he purchases the interests of both the mortgagor and the mortgagee : Khevraj v. Lingaya ILR (1873) 5 Bom. 2. Defendant No. 4 is, therefore, entitled to say that he must be treated as a puisne mortgagee for the purposes of plaintiffs' mortgage, and that he must be allowed the benefit of Section 81 of the Transfer of Property Act.

14. But then that section requires that the puisne mortgagee should have had no notice of the former mortgage. Here it is found-by the Courts below that defendant No. 4 had notice. Section 81, therefore, cannot avail him.

15. Though the decree of the Court below cannot be supported on. the ground of either of the sections mentioned, the Court has power, under Section. 88 of the Transfer of Property Act, to pass in such a suit a decree for sale, ordering that, in default of the defendant paying as mentioned in the decree, the mortgaged property or a sufficient part thereof be sold. The lower Court's decree directing the sale of the portion of the mortgaged property which is in the hands of the mortgagors (respondents 1 to 3) first, before the appellants proceed against the property in the hands either of respondent No. 4 or respondent No. 5, must be upheld as being in substantial compliance with Section 88, unless the appellants are able to satisfy the Court that the direction in question has prejudiced or is likely to prejudice their rights: Appayya v. Rangayya (1). No such complaint having been made in the lower Court of appeal, it should not be allowed in second appeal. On these grounds the decree must be confirmed with costs.


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