1. This is a reference by the District Judge of Poona under Section 54 of the Dekkhan Agriculturists' Relief Act. The principal question referred to us, put in the simplest language, is whether a mortgagee having two mortgages of different dates upon the same property may sue upon the mortgage of later date first, and having had the property sold without reference to the prior mortgage can thereafter bring a separate suit on the prior mortgage. We think that he cannot do so. In our opinion, the question is not to be answered under Order II, Rule 2. The causes of action certainly are distinct. It could hardly be seriously contended, we think, that in such circumstances if the mortgagee allowed the prior mortgage to be time-barred, he could not sue upon the puisne mortgage, or again, that by doing so, he could revive the prior mortgage which had become time-barred. Thus, it is clear, that the causes of action are not the same. The answer then will have to be sought by reference, we think, to the general principles of the law of mortgage and res judicata. The rule is that where there are several mortgages upon the same property, any mortgagee suing upon his mortgage must make all the other mortgagees, as well as the mortgagor, parties to the suit. To this rule there are exceptions. Until the alteration of Section 85 by Order XXXIV, Rule 1, the Courts appear to have put a very strict interpretation upon the words of old Section 85 of the Transfer of Property Act. But there can be no doubt that under the general law of mortgage as administered in England a puisne mortgagee might sue his mortgagor, if he chose to do so, for foreclosure and sale, without making a prior mortgagee a party to the suit, and the result of such a suit between a puisne mortgagee and his mortgagor would be to have the property sold, as it is said, subject to the prior mortgage. Accurately stated, in all cases of that kind what is really sold is not the property at all but the right to redeem the prior mortgage upon it.
2. Similarly, when a puisne mortgagee sues the mortgagor and joins a prior mortgagee, the effect of the suit between the puisne mortgagee and the mortgagor is exactly the same as though the prior mortgagee had not been a party to it, assuming (1) that the mortgagee has insisted upon his rights; (2) that neither the puisne mortgagee nor the mortgagor has redeemed him in the suit. Then the result would be that the property would be sold subject to that prior mortgage as between the puisne mortgagee and the mortgagor. In other words, again, what would be sold would not be the property but the right to redeem the prior mortgagee. It is equally clear, we think, that in a suit so framed if the prior mortgagee did not choose to assert his rights, although a party to the suit, the result would be that the property would be sold free of that mortgage, and that the prior mortgagee would be disentitled to assert any rights he might otherwise have had under his prior mortgage against a purchaser at any such sale. That rule depends upon the principle of res judicata. This is very clearly apparent from the dicta of their Lordships of the Privy Council in Sri Gopal v. Pirthi Singh (1902) 4 Bom. L.R. 827; I.L.R. 24 All. 429.
3. In our opinion, precisely the same result is worked out where the puisne mortgagee suing on his puisne mortgage is himself a prior mortgagee. By no stretch of fictional forms or fictional ideas can it be said, we think, that, in such circumstances he is not a party to the suit. He is just as much a party as though he had been impleaded by a puisne mortgagee other than himself. So that where a mortgagee holds two mortgages of different dates upon the same property, and sues upon the later mortgage, he must be deemed to be a party to the suit in a position to assert any rights he might have under his prior mortgage. There might be no objection in such circumstances to his reserving those rights, as though he and the prior mortgagee were different persons, and so have the property put to sale subject to the prior mortgage. But if he makes no mention of his rights as prior mortgagee, then he is in the same position, we conceive, as a prior mortgagee would be, if being duly impleaded, he did not attempt to assert his rights. In such cases the decision in Sri Gopal v. Pirthi Singh is conclusive, establishing that such a prior mortgagee would be precluded from bringing another suit upon his prior mortgage against the purchaser at the sale; that is to say, the matter would be res judicata against the prior mortgagee.
4. This being our view, it follows that we must answer the question asked us by the learned District Judge in the negative. He has referred to us a subsidiary question under the special provisions of Section 13(b) of the Dekkhan Agriculturists' Relief Act upon which, I believe, my brother Hayward will express our opinion, though, in the view we take, it is not essential to the decision of the suit upon which the first question has been referred to us.
5. We wish to express our thanks to the learned gentlemen who afforded us much assistance as amicii curiae during the argument.
6. I entirely concur with regard to the first question that prior and subsequent mortgages in favour of one mortgagee cannot be considered one cause of action so as to bar separate suits under Order II Rule 2. They must, in my opinion, ordinarily constitute two different causes of action, as causes of action are said to comprise all facts material to prove the particular suits, and, clearly in the case of separate mortgages, there would be different facts which would have to be proved to establish the separate suits. So that there could be no bar to separate suits under Order II, Rule 2.
7. I also concur with regard to the further question which thereon arises, that the prior mortgage must be considered as necessarily brought in by way of defence in a suit on the subsequent mortgage in favour of the same mortgagee under Order XXXIV, Rule 1, and that failure to plead the prior mortgage in the suit on the subsequent mortgage would give rise to res judicata under Section 11, Explanation IV, of the Civil Procedure Code. The several decisions quoted before us in support of this proposition, namely, Dorasami v. Venkataseshayyar I.L.R. (1901) Mad. 108; Keshavram v. Ranchhod (1905) 7 Bom. L.R. 811; I.L.R. 30 Bom. 156 and Hari Narain Banerjee v. Kusum Kumari Dasi I.L.R. (1910) Cal. 589, all proceeded on the assumption that prior mortgagees were in all cases necessary defendants in suits brought by subsequent mortgagees under Section 85 of the Transfer of Property Act. But it has since been made clear that they are not necessary defendants and that it is a matter of the choice of the subsequent mortgagees by the Explanation to Order XXXIV, Rule 1 of the Civil Procedure Code. So the further question which has arisen must be thus stated: whether the prior mortgagee can practically be left out of the suit by the subsequent mortgagee where the two mortgages are vested in the same mortgagee, so as to avoid the penalty of res judicata which would otherwise result under the decision of the Privy Council in Sri Gopal v. Pirthi Singh (1902) 4 Bom. L.R. 827; I.L.R. 24 All. 429. The matter is in my opinion not free from difficulty, but after consideration it does not seem to me practicable to hold the prior mortgagee in such a case not to be a party, when he is himself actually represented in the case, with full knowledge of the prior mortgage as subsequent mortgagee. Nor would there be any prejudice to him in so holding because he would be able, if he so desired, to keep his prior mortgage alive by requiring that the sale of the property should be subject to the prior mortgage, or in the alternative he might allow the sale free of the prior mortgage and recover the amount due on the prior mortgage out of the proceeds of the sale on the subsequent mortgage. This is clear from the provisions of Rules 12 and 13 of Order XXXIV. On the other hand, if the prior mortgagee were held in such a case not to be a party and not bound to disclose his prior mortgage though himself the subsequent mortgagee, the ruling would, in my opinion, open the door to possible fraud in the subsequent dealings with the property and would tend to defeat the general policy of finally settling all questions regarding mortgaged property in one suit, and of limiting litigation, underlying the various provisions of the Transfer of Property Act and the Civil Procedure Code.
8. With regard to the subsidiary question whether in any case the prior mortgage and the subsequent mortgage must not be held to be one cause of action in view of the special provisions of Sections 12 and 13 of the Dekkhan Agriculturists' Relief Act, it is not strictly necessary, in view of our decision on the proceeding questions, to come to any definite decision; not does it appear to me that the materials before us are sufficient to enable us to arrive at such a decision. It will be sufficient, therefore, merely to indicate that it would depend on the questions of fact, as pointed out in the decisions in Mahadu v. Rajaram (1887) P.J. 216 and Gopal Purushotam v. Yashwantrav (1887) P.J. 273 whether the two mortgages can be said to be independent transaction or transactions 'out of which the suit has arisen' within the meaning of Section 13 of the Dekkhan Agriculturists' Relief Act. If it had been found as matter of fact that the transactions were transactions 'out of which the suit has arisen,' then they would have constituted the same cause of action, and the subsequent suit would have been barred under Order II, Rule 2, by reason of the special provisions of Section 13 of the Dekkhan Agriculturists' Relief Act.
9. So that the reply to the questions put to us must, in my opinion, be that the subsequent suit on the prior mortgage was barred by reason of the decree in the previous suit on the subsequent mortgage as res judicata under Section 11, Explanation IV, of the Civil Procedure Code, and that in any case, if the two mortgages had been found as a matter of fact to have been transactions 'out of which the suit has arisen', the subsequent suit on the prior mortgage would have further been barred in view of the previous suit on the subsequent mortgage by the provisions of Order II, Rule 2, and the special provisions of Section 13 of the Dekkhan Agriculturists' Relief Act.