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Suleman Rahim Pathan Vs. Dattu Babaji Patil - Court Judgment

LegalCrystal Citation
CourtMumbai High Court
Decided On
Case NumberSecond Appeal No. 846 of 1961
Reported in(1963)65BOMLR696; 1963MhLJ966
AppellantSuleman Rahim Pathan
RespondentDattu Babaji Patil
DispositionAppeal dismissed
.....of the debt in a darkhast filed by the mortgagee against the purchaser to recover the entire mortgage debt.;ambu rama v. bhau halya (1956) 58 bom. l.r. 972 : s.c. [1957] bom. 283, doubted.;v. ramaswami ayyangar v. t.n.v. kailasa thevar [1951] s.c.r. 292 : s.c. [1951] a.i.r. s.c. 189, applied.;arunachalam v. seetharam [1941] a.i.r. mad. 584, marina ammayi v. bakhar beg [1941] a.i.r. mad. 557, nachiappa v. rama chandra [1942] a.i.r. mad. 527 subramanian v. ramachandra reddiar [1947] a.i.r. mad. 225 and girdharlal bhatia v. mangharam (1955) 58 bom. l.r. 267, referred to. - - 1. this second appeal arises out of execution proceedings and raises an interesting question as to the extent of liability of a purchaser of mortgaged property where the liability of the original mortgagor 'the purchasers' as defendants together with the original mortgagor shamrao jadhav. a mortgage decree was passed on july 31, 1937, for a sum of rs. 1,800 with interest at 6 per cent, per annum on rs. 900 plus costs and interest. on september 12, 1938, the decree-holder assigned the whole decree to respondent no. 1 whom we will call 'decree-holder'. the decree-holder filed a darkhast for execution of the decree against shamrao jadhav in 1945. as soon as the act was brought into force, the darkhast was transferred to the special court constituted under the act for adjustment of the debts of jadhav. the trial court declared him an insolvent under section 47 of the act and considering his property and his debts declared all his debts extinguished. jadhav had two creditors at.....

Patel, J.

1. This second appeal arises out of execution proceedings and raises an interesting question as to the extent of liability of a purchaser of mortgaged property where the liability of the original mortgagor is reduced by reason of the application of the provisions of the Bombay Agricultural Debtors Relief Act, 1947, which we will hereafter call 'the Act'.

2. The short facts are that one Shamrao Jadhav owned two survey Nos. 37 and 26 at Bisur. He mortgaged both these survey numbers to the predecessor-in-title of respondent No. 1, Dattu Babaji Patil. Thereafter the mortgagor Jadhav sold Section No. 26 to the appellant and respondents Nos. 3 and 4. The mortgagee instituted a suit to enforce the mortgage, being suit No. 21 of 1936, and joined the appellant and respondents Nos. 3 and 4 whom we will hereafter call 'the purchasers' as defendants together with the original mortgagor Shamrao Jadhav. A mortgage decree was passed on July 31, 1937, for a sum of Rs. 1,800 with interest at 6 per cent, per annum on Rs. 900 plus costs and interest. On September 12, 1938, the decree-holder assigned the whole decree to respondent No. 1 whom we will call 'decree-holder'. The decree-holder filed a Darkhast for execution of the decree against Shamrao Jadhav in 1945. As soon as the Act was brought into force, the darkhast was transferred to the special Court constituted under the Act for adjustment of the debts of Jadhav. The trial Court declared him an insolvent under Section 47 of the Act and considering his property and his debts declared all his debts extinguished. Jadhav had two creditors at this time, one of them being the present decree-holder. Both these creditors appealed to the District Court. The District Court confirmed the decision of the trial Court as to the other creditor but as regards the decree-holder, the learned Judge scaled down the decretal debt to Rs. 1,532-5-3 and transferred the decree for execution to the regular Court. The learned Judge while confirming the order of insolvency also held that S. No. 37 which was still retained by Jadhav could not be sold in execution of any decree against Jadhav. The transferred Darkhast was renumbered as Darkhast No. 290 of 1956. The decree-holder then filed another Darkhast, being Darkhast No. 272 of 1957, against the purchasers for recovery of the entire decretal amount out of S. No. 26.

3. The purchasers deposited in Court the amount of Rs. 1,532-5-3 in accordance with the decision of the special Court under the Act and contended inter alia that the decree should be marked satisfied. The trial Court accepted this contention but, in appeal, the District Court held that so far as they were concerned the debt was not reduced and the decree, therefore, could not be marked satisfied. The learned Judge accordingly remanded the darkhast to the executing Court for proceeding with it further. Against this judgment the present appeal is brought by one of the purchasers who is described as judgment-debtor No. 2.

4. Mr. Paranjpe argued that in view of the provisions of the Act it ought to be held that the liability of the purchasers was reduced to the same extent as the liability of the mortgagor was reduced by the Special Court. In any case he contends that under general law the same result must follow.

5. For the first argument Mr. Paranjpe relies upon Section 32 of the Act which says amongst other things:

(1) After determining the amount of debts scaled down in the manner provided in Section 31 the Court shall, save as otherwise provided in Section 33, make an award.

(2) The award shall be in the prescribed form and shall be drawn up subject to the following provisions:

(i) the amount of the secured debts scaled down shall be charged on the properties on which they may have been secured;...

Relying on this provision, the learned advocate argues that once the Act is applied, the whole mortgage transaction is displaced and in its place only a money-decree with a statutory charge on the property is substituted. There is, therefore, no mortgage nor does a mortgage decree remain which is operative against any of the debtors. If the section has to be read devoid of its context and the other provisions, then certainly, it may be possible to say that this result could be produced. But the whole scheme of the Act is that relief is intended to be given only to those who are 'debtors' as defined by the Act. In this connection, Section 6 which is relevant may also be referred to. It concerns a case where a debtor is liable along with a non-debtor on a joint and several liability and in such cases it provides that if the applicant is a 'debtor' under the Act but the others are not, then the Court shall proceed with the adjustment of the debts under the Act in so far as 'such applicant is concerned.' It is clear from this provision that in all cases where there are joint and several debts, the liability only of a 'debtor' as defined by the Act has to be adjusted and not of others, maxim 'expressio unius est exclusio alterius' applying. Sub-section (2) of Section 6 which applies to sureties is consistent with the fundamental principle that the liability of a surety is co-extensive with that of the debtor and provides that the surety shall be discharged from liability to the extent to which the debtor is discharged. The Legislature, if it had intended likewise to discharge the liability of joint debtors, would have made a similar provision. The subsequent provisions also show that the adjustment of the debt has to be made only in respect of such debtor. It follows, therefore, that it is only the mortgage liability of such debtor that is displaced under the Act and in its place is substituted a statutory charge in respect of the amount declared due in the award.

6. Mr. Paranjape attempted to draw an analogy of co-debtors one of whom may he a debtor under the Act and relied upon Ambit Rama v. Bhau Halya : AIR1957Bom6 where it was held by Mr. Justice J.C. Shah sitting singly that the liability of the co-debtor was also reduced to the same extent as that of the 'debtor'. The correctness of the decision, with respect, is doubtful. The learned Judge has relied substantially upon the principle of indivisibility of a mortgage. But this is not an absolute rule. Under the Transfer of Property Act, under certain circumstances the mortgage security becomes divisible, in V. Ramaswami Ayyangar v. T.N.V. Kailasa Thevar : [1951]2SCR292 it was recognised that the Madras Agriculturists' Relief Act was intended to give relief not generally to debtors but to a special class and to this extent it trenched upon the general law of indivisibility of a mortgage. We have seen the Madras Act and we do not find any special provision in it which permits splitting up of the mortgage security. The Madras Act permitted adjustment of debts only of the 'debtor' and, in the case of a Hindu family of which some members were agriculturists, provided for separation of such debts. The scheme under Bombay Act is slightly different in that a Hindu family in order to have its debts adjusted must satisfy the conditions that it is cultivating lands personally and its annual income from sources other than, agriculture does not exceed 40 per cent, of its total annual income. It is true that indirectly a member who is not an agriculturist may get benefit of the Act because the family as such can get the benefit. Even so, Section 6 is a clear indication that in the case of joint debts, only the debts of the 'debtor' are to be adjusted and this modifies the general law regarding indivisibility of mortgage and 'non-debtors' cannot claim the benefit of the reduction of the mortgage debt. With respect, there is no justification for affecting vested rights of mortgagee except to the extent intended by the Legislature and the intention is clearly expressed by Section 6 of the Act. It cannot be argued that if the debt was unsecured, then reduction of the liability of one of the debtors or even his discharge would have affected that of the other. There can be no reason why a different result ought to follow in the case of mortgages. In our opinion, the principle laid down in V. Ramaswami Ayyangar v. T.N.V. Kailasa Thevar applies in the present case and the mortgage ought to he deemed to be divided.

7. In the present case, it is not a question of joint and several liability. On the mortgage the liability may be of three kinds; (1) personal liability by the very terms of the mortgage deed, (2) the liability as the owner of the mortgaged property, that is, to the extent of the mortgaged properties, and (3) if the sale of the mortgaged property does not yield sufficient amount to pay off the mortgage decree, then a personal liability for the balance. If the property goes out of the possession of the mortgagor as by a sale of it, then only the personal liability of the original mortgagor remains and what is scaled down under the Act is his personal liability and not the liability on the property which falls on another shoulder. In our opinion, the analogy of Ambu Rama, v. Bhau Halya, cannot apply to the facts of the present case.

8. Mr. Paranjape further argues that on general principles of law, the result contended for by him must also necessarily follow. Apparently he is sup-ported in this contention by the following Madras decisions : Arunachalam v. Seetharam A.I.R. [1941] Mad. 584, Marina Ammayi v. Bakhar Beg A.I.R. [1941] Mad. 557, Nachiappa v. Ramachandra A.I.R. [1942] Mad. 527 and the last of which is Subramanian v. Ramachandra Reddiar [1947] Bom. L.R. Mad. 255. It may be stated that the later of these decisions purport to follow the first. In the first case the suit was filed by the plaintiff for recovery of the mortgage dues of Rs. 8,500 in the month of August 1937. Respondent No. 12 before the Court was a purchaser of all the properties subject to the mortgage in execution of a money decree against the mortgagors. It is not possible to find from the judgment the date on which he became a purchaser nor are we in a position to know whether he was originally made a party to the suit. If he became a purchaser during the pendency of the suit then the position would be different and he would be bound by such decree as may be passed against the original mortgagor being purchaser pendente lite and would be bound to pay such amount as is determined to be due to the mortgagor. We will assume for the sake of the present case that his purchase was prior to the date of the suit. The Court said (p. 585):.When respondent 12 purchased the properties in court-auction, he took them subject to the burden of the appellant's mortgage and if the burden is by reason of the provisions of Section 8 referred to above reduced without payment, the purchase proves to that extent an advantageous one, and there is nothing in the Act, to deprive him of the fruits of his lucky purchase, even though he is not an agriculturist. He gets the benefit of the scaling down not because the provisions of the Act apply to him, for obviously they do not, but because such benefit is a necessary incident of his purchase under the general law and the Act does not deprive him of it.

It seems reliance is placed on the assumed inviolability of the principles of general law of the indivisibility of the mortgage security. But ideas change and recent legislation has modified much law that was once firmly established and could not be questioned. The general law is based on the binding nature of the mortgage transaction on the purchaser. The amount payable may turn out to be more or less than the amount mentioned in the deed but that is to be in accordance with the terms of the deed. That principle, however, ought not to be permitted to effect the mortgagee when by statute the liability of a particular class of mortgagor is affected for his benefit only. The purchaser ought to he held by his bargain to be bound by the mortgage contract and we do not see any injustice in it. Moreover, if there is a statutory enactment which has the effect of modifying the general law, there is no reason why on the basis of such general law it should be carried beyond its legitimate bounds and produce in many cases unjust results. While overruling the decisions in Kailasa Thevar v. Ramaswami A.I.R. [1949] Mad. 238, the Supreme Court recognised that by the Madras Act in the case of joint and several liability the general law of indivisibility of a mortgage stood modified.

9. In Arunachalam v. Seetharam the Court further said (p. 585):.The appellant whose only right as a simple mortgagee is,

in the event of his (mortgagor's) failing to pay according to his contract, to cause the mortgaged property to be sold and the proceeds of sale to be applied, so far as may be necessary, in payment of the mortgage money....

cannot claim to proceed against the properties in the hands of respondent 12 for anything in excess of what is repayable under the mortgage.

We may, with respect, emphasize that the basis underlying this reasoning is that the original mortgagor must be considered to be the only mortgagor and the property liable only in respect of the original mortgagor's liability. That, however, cannot be accepted under the amended provisions of the Transfer of Property Act.

10. Section 59-A was added in 1929 by the amending Act XX of 1929 providing that reference in the Chapter to mortgagors and mortgagees shall include reference to persons deriving title from them respectively. It cannot, therefore, he gainsaid that the transferees, i.e. the purchasers now before us, must also be deemed to be mortgagors. We have, therefore, two sets of mortgagors, one the mortgagor liable under the contract executed by him, another, mortgagors liable by privity of estate under the provisions of the Transfer of Property Act. Though not always so, in some circumstances their liability may be co-extensive. If there is no personal covenant to pay and the original mortgagor is liable, he is liable only if the mortgage property does not realise sufficient amount to discharge the debt and that too for the balance. So far ass the purchaser is concerned, as a mortgagor his liability, is only to the extent of the property. By the inter-position of the Bombay Agricultural Debtors Relief Act the liability of the original mortgagor is reduced but the liability of the second class of mortgagors, i.e. purchasers, remains the same as under the contract by the very purchase of the property. Merely because the liability of the original mortgagor is reduced it cannot necessarily follow that the liability of those who purchase the property must also be reduced.

11. The mortgagee may discharge the original mortgagor and choose to sue only the purchasers for recovery of the mortgage amount by sale of the property. Undoubtedly he takes the risk of losing the chance of obtaining a personal decree as against the mortgagor in the event of the property not producing sufficient amount to satisfy the mortgage decree. That probably might be comparatively a remote chance. It cannot be contended in such a case that the suit is improperly filed for the obvious reason that the property is covered by the mortgage, and that it is in possession of the purchasers, who are made parties to the suit. In that event it cannot be insisted upon by the purchasers that their vendor should be made a party. Mr. Paranjape, however, countered this by suggesting that if the mortgagor made an application under the Bombay Agricultural Debtors Belief Act in order to avoid his own liability then certainly the debt would have been reduced. The answer to this is that the mortgagee could as well have said in such an application that he does not want to proceed against the original mortgagor but would be satisfied to proceed against the purchasers for the sale of the property in which event the Court cannot adjudicate upon that debt. We do not see how the general principles enunciated by the Madras Court can apply in such a case. In our view, therefore, it is not possible to say that the purchasers are entitled to the benefit of the reduction of the debt in favour of the original mortgagor.

12. It is argued that in any event the Court should apportion the liability between the two sets of debtors. No authority is cited for this proposition and we do not think under the provisions of the Transfer of Property Act or under provisions of any general law applicable to mortgages has the Court such authority. The property has been taken by the purchasers subject to the burden and the mortgagee has the choice to proceed against the property in their hands for realization of his dues.

13. It is contended that difficulties might arise if the purchasers proceed for contribution against the mortgagor and the purpose of the Act will be frustrated. In the present case the difficulty arises because the mortgage covered two properties one of which has been transferred by the mortgagor, to the purchaser. A similar argument was made in Girdharlal Bhatia v. Mangharam (1955) 58 Bom. L.R. 267 before Chagla C.J. and Tendolkar J. where the question arose under the Displaced Persons (Debt Adjustment) Act. A suit was filed against two partners one of whom was a 'debtor' under that Act. The debtor made an application under the Act to the Tribunal. Thereupon the other non-debtor defendant applied for stay of the suit. The Court rejected the application and made a decree against the defendant. Chagla C.J. said (p. 270):.It is an Act for the relief of displaced persons and not for the relief of non-displaced persons. It is an. Act to absolve a displaced person from his liability either in whole or in part. It is not an Act to absolve a non-displaced person of any of his liability.

and refused to speculate as to whether the Displaced Persons (Debt Adjustment) Act has or has not provided for the particular case of hardship against a displaced person who may be required to contribute. In answer to the argument that the two proceedings may result in two inconsistent decrees the learned Chief Justice said (p. 272):.if such an inconsistency is unavoidable, the Court must face it; but certainly should not avoid an inconsistency at the cost of the vested rights of the creditor to enforce his debt against a non-displaced person.

Accordingly, we do not see any reason why the mortgagee should be made to suffer for the purchasers' benefit, they being non-debtors they are not entitled to any reduction of the debt.

14. Mr. Bhasme is in the happy position of urging, and we think rightly, that in any event since the decree was made against the defendants it is not permissible now for them to contend in execution proceedings that the decree cannot be executed to its full extent. The decree must be executed according to its tenor and the Court cannot refuse to do so. He is supported in this contention by the decision in V. Ramaswami Aiyyangar v. T.N.V. Kailasa Thevar.

15. In the result the appeal fails and is dismissed. There will, however, be no order as to costs.

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