1. Both the above appeals are directed against the Judgment and Decree of the then Second Additional Civil Judge, Bangalore, in 0. S. No. 274 of 1964 disposed of on July 19, 1974.
2. R. F. A. No. 67 of 1975 is preferred by the legal representatives of defendant-15, who died during the pendency of the litigation, in the Court below. R. F. A. No. 122 of 1975 is preferred by defendant-12 in the said suit.
3. The facts leading to the above mentioned suit may be briefly stated as follows:
Defendants 1 and 2 one Annaiyappa and B. N. Ramaiah, on July 9, 1949, executed a deed of simple mortgage in favour of one T. Lakshminarayana Setty for valuable consideration of Rs. 30,000/- agreeing to pay interest at 12% p.a. Before the registration of the deed of mortgage, the said defendants 1 and 2 sold part of the mortgaged property to defendants, among others, by separate sale deeds on July 21, 1949. On that day, the deed of simple mortgage earlier executed in favour of T. Lakshminarayana Setty had not been registered. T. Lakshminarayana Setty died probably during insolvency proceedings initiated against him. In the result, the Official Receiver appointed in the insolvency proceedings, filed 0. S No. 274/1964 to recover the mortgage amount. There were as many as 22 other defendants than defendants 1 and 2 the mortgagors. However, the suit was not contested by any of the defendants and an ex parte preliminary decree was passed by the Court. Subsequently, on an application made by the plaintiff final decree also came to be passed. When the plaintiff brought the suit property for sale in execution of the decree, defendants 12 and 15 filed applications in Misc. Case No. 187 of 1967 on the file of the Principal Civil Judge, Bangalore, under O. 9, R. 13 C. P. C., praying for setting aside the decree that had been passed in the original suit. These applications were allowed by the Court and the entire decree was set aside as against all the defendants. However, in C. R. P. No. 444 of 1970 and 481 of 1970, the Official Receiver, who was acting for the plaintiff, who had been then declared insolvent, challenged the setting aside of the ex parte decree in this Court. This Court allowed the Revision Petition in part. This Court while allowing the Revision Petition, confirmed the order of the Court below in so far as it set aside the ex parte decree against defendants 12 and 15 only, but confirmed the decree in regard to the other defendants. In the circumstances, the Court below was seized of the matter on remand by the High Court and tried the same against defendants 12 and 15 only.
4. Defendant 12 and legal representatives of defendant-15 in their separate written statements denied any knowledge about the mortgage in favour of the plaintiff, i.e., T. Lakshminarayana Setty. The 12th defendant claimed that he purchased a site measuring 45' X 30' from defendants 1 and 2 under a registered sale deed dt. 21-7-1949, pursuant to an agreement for sale executed in their favour on 15-6-1949. The 15th defendant claimed to have purchased a site measuring 45' X 30' from defendants 1 and 2 under a registered sale deed of even date. Further, they contended that houses had been put up on those sites at a cost of Rs. 40,000/-. In the circumstances, they contended that the purchases had been made from defendants 1 and 2 for valuable consideration and that they were bona fide purchasers for value without notice of the alleged mortgage in favour of plaintiff and as such the sites purchased by them were not bound by the mortgage in favour of plaintiff.
5. On the above stand taken, in the light of the suit claim, the trial Court framed the following issues:
(1)Whether the plaintiff proves the execution of the suit mortgage deed dt. 9-7-1949 by the defendants 1 and 2?
(2) Whether the defendants 12 and 15 are bona fide purchasers for value without notice?
(3) Whether the suit is bad for non joinder of the parties and also mis-joinder?
However, the learned trial Judge in the course of the hearing of the case, recast issue No. 2 in the following terms:
Whether defendants 12 and 15 are bona fide purchasers for value without notice? If so, whether the mortgage in favour of the plaintiff is not binding on defendants 12 and 15 and the sites purchased by them?
6. On evidence, he found in the affirmative on issue No. 1. The Court was impressed by the fact that defendants 1 and 2 had earlier filed a suit contending that the mortgage document was not supported by consideration and that suit came to be dismissed.
7. Therefore, what remained was only issue No. 2. That also was held against the defendants. On the admitted and undisputed facts, in accordance with S. 47 of the Registration Act, 1908 the mortgage deed had taken effect from the date of execution by operation of law and therefore, the sale in favour of defendants 12 and 15 subsequently, though registered earlier, could not be held to remain unaffected by the prior mortgage created. Defendants had strenuously contended that what really applied to the facts of the case was S. 40 of the T.P. Act and that S. 47 of Registration Act was not attracted. However, the trial Court after considering the various authorities cited before it, came to the conclusion that what governed the case was only the provisions contained in S. 47 of the Registration Act and that S. 40 of the T.P. Act would not be of any assistance to defendants 12 and 15.
8. Sri Sreepada Rao, learned counsel for the appellants before us has, inter alia, contended that the mortgage in question in favour of plaintiff was an obligation arising out of a contract between plaintiff and defendants 1 and 2 and the said obligation was annexed to the property in the normal course and, therefore, defendants 12 and 15 who were transferees without notice of such obligation created were not bound by the mortgage in terms of second para of S. 40 of the T.P. Act (hereinafter referred to as the 'T.P.Act').
9. In order to examine the merit of this contention, we feel obliged to set out some of the relevant facts once again in some detail. It was in evidence before the trial Court that defendants 1 and 2 purchased the land in question under Exhibit P-12 dt. 9-7-1949. Their vendor was one Krishnaswami Pillai. On that very same day, the original of Exhibit P-3, the deed of simple mortgage, was executed by defendants 1 and 2 in favour of plaintiff apparently in respect of the same land which they had purchased from Krishnaswami Pillai. It is seen from Exhibit P-3 that the land mortgaged was described by boundaries having on its eastern side Krishnaswami Pillai's house and temple of Anjaneya as well as vacant land belonging to Krishnaswami Pillai, on the west: Municipal Road, 9th cross and 5th cross, on the north: cremation ground and one Narasimhaiah's garden land as well as Krishnaswami Pillai's lands together with the road coming to the cremation ground from Guttahalli and so situate in the middle of the aforesaid boundaries about 60 yards away from the land of Krishnaswami Pillai measuring north-south : 84 yards, east-west : 123 yards. This measurement and boundaries correspond to the land sold by Krishnaswami Pillai to defendants 1 and 2 under Exhibit P-12.
10. As evidenced by the endorsements on Exhibit P-3, a duly certified copy of the suit mortgage deed, it is clear that on 17-8-1949 it was presented for registration at the Bangalore Taluk Sub-Registrar's Office. Sub-Registrar refused registration on 17-11-1949. However, on 22-12-1949 at 4 p.m. it was re-presented pursuant to the order of the Bangalore Urban District Registrar in Regular Appeal No. 5/49 on his file, disposed of on 21-12-1949. In that circumstance, the document came to be registered only on 27-12-1949.
11. It is not in dispute that defendants 1 and 2 in the meanwhile had sold, among other sites, two sites measuring 45' X 30' to defendants 12 and 15 by deeds of sale registered on 21-7-1949 (See : Exhibits D-5 and D-8). That the sites purchased under Exhibits D-5 and D-8 are part of the larger area of land mortgaged to the plaintiff under Exhibit P-3 is not disputed. Therefore, the question which realty falls for determination by us is whether in the circumstances of the mortgage deed having been registered at an admittedly later date than the sale deeds at Exhibit D-5 and D-8, defendants 12 and 15 had been given an opportunity of knowing about the mortgage effected on 9-7-1949 as the same could not have been entered in the books of the Sub-Registrar even if diligent enquiries had been made and necessary encumbrance certificates obtained by the defendants?
12. In other words, the argument is founded upon the second para of S. 40 of the T. P. Act read with the definition of the expression 'a person is said to have notice' under S. 3 of the T.P. Act. Our attention has been specially drawn to the proviso to the explanation thereunder which provides for the manner in which public notice is made available in accordance with the Registration Act, 1908 and the Rules made thereunder. The thrust of the argument is, if on 21-7-1949 there was no entry relating to the transaction between plaintiff and defendants 1 and 2, then the question of defendants 12 and 15 having notice of the mortgage would not at all arise. In that circumstance, defendants 12 and 15 should be construed as purchasers for valuable consideration without notice of the mortgage and, therefore, entitled to the protection of the second para of S. 40 of the T.P. Act.
13. In order to appreciate the argument, it would be useful to extract para 2 of S. 40 of the T.P.Act.
'Where a third person is entitled to the benefit of an obligation arising out of contract and annexed to the ownership of immoveable property, but not amounting to an interest therein or easement thereon, such right or obligation may be enforced against a transferee with notice thereof or a gratuitous transferee of the property affected thereby, but not against a transferee for consideration and without notice of the right or obligation nor against such property in his hands.'
From the para extracted above, it is difficult to see how the benefit of protection mentioned in that para could be made available to the defendants-appellants. The para speaks of benefit of an obligation arising out of a contract and annexed to the ownership of immoveable property, but not amounting to an interest therein or easement thereon.
14. It is now settled that a contract for sale does not create an interest in land, but creates a personal obligation of a fiduciary character which can be enforced by a suit for specific performance not only against the vendor but also against a volunteer and a purchaser for consideration with notice. On the facts of the case before us, it is clear that in June, 1949 defendants had acquired a personal right to enforce specific performance of a contract for sale, but when on July 21, 1949, defendants were party to a sale deed and purchased the property what was merely a personal obligation under the agreement for sale became an acquisition of interest in the property. Under S. 58 of the T.P. Act, mortgage is a mode of transfer by which an interest in property is created. An interest in property then would not remain simpliciter an obligation or benefit of an obligation arising out of a contract and thus stands excluded from falling within the protection of the second para of S. 40 of the T.P. Act.
15. Sri Sreepada Rao placed strong reliance on the observations made by the Division Bench of the Calcutta High Court in the case of Satya Mandalini v. Sahadur Mondal : AIR1962Cal40 . 'Transferee without notice' fell for consideration in that case and their Lordships of that Court observed that they were not unmindful of not ignoring the importance of that expression occurring in S. 27(b) of the Specific Relief Act as it was then. They necessarily had to do that because the suit was one for specific performance and the defence was taken under S. 27(b) of the Specific Relief Act as it was then. It was in that context, they construed the similarity of language occurring in S. 27(b) of the Specific Relief Act, S. 40(2) of the T.P.Act (really second para of S. 40 of the T.P.Act.) and Ss. 91 and 95 of the Trusts Act. Ultimately the decision went in favour of the 4th defendant who had purchased certain immoveable properties from the 1st defendant therein even though plaintiff had an earlier agreement for sale, prior to the purchase made by the 4th defendant. There also the Calcutta High Court applied the rigour of S. 47 of the Registration Act, 1908 and dismissed the suit.
We, therefore, are satisfied that the learned Judge came to the correct conclusion though not on the reasoning which we have given.
16. What remains to be said is only this: the case entirely rested on the meaning to be attached to the legal fiction created by S. 47 of the Registration Act, 1908. The matter is no longer open to question in the light of the decision of the Supreme Court in the case of K. J. Natham v. Maruthi Rao, : 6SCR727 . In fact, the facts of that case are closer to the facts of the case with which we are concerned. In the said case before the Supreme Court, the dispute was between two mortgages, one claiming priority over the other only on the basis of the date of registration. Certain properties involved in that case had been mortgaged by deposit of title deeds at an earlier point of time and later subjected to another mortgage in favour of one of the defendants which was registered. Subsequently, the equitable mortgage by deposit of title deeds also came to be registered. Therefore, the question arose as to which of the mortgages had to have priority. Applying S. 47 of the Registration Act, the Supreme Court unequivocally ruled that the instrument creating the equitable mortgage took effect from the date of its execution though registered later and it had to have priority.
17. For the reasons stated above, we do not find any merit in these appeals and they are accordingly dismissed. But the parties will bear their own costs in this Court.
18. Appeals dismissed.