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Gurram Ramaohana Rao and ors. Vs. Koda Kanakacharyulu and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtAndhra Pradesh High Court
Decided On
Case NumberLetter Patent Appeal No. 52 of 1976
Judge
Reported inAIR1980AP305
ActsTransfer of Property Act, 1882 - Sections 52, 68 and 94; Code of Civil Procedure (CPC), 1908 - Order 34, Rule 4
AppellantGurram Ramaohana Rao and ors.
RespondentKoda Kanakacharyulu and ors.
Appellant AdvocateY. Suryanarayana, Adv. for ;C.S.K.V. Ramamurthy, Adv.
Respondent AdvocateN. Subba Reddy, Adv.
Excerpt:
.....in favour of the plaintiff respondent but he was also put in possession of the property purchased by him on 18-4-1963. in taking into consideration the equities between the parties who are equally entitled to redeem the prior mortgage, specially among the auction purchasers of the property, in execution of the decrees, several factors have to be kept in view......full bench therein were:1. whether the auction purchaser, in execution of a decree obtained on a prior mortgage without impleading the subsequent mortgagee acquires, at least, the rights of the mortgagor who was a party, including his rights to possession in cases where both the mortgages were simple? 2. where sale in execution of a decree obtained on foot of a puisne mortgage takes place during the pendency of the suit on the prior mortgage. (a) whether the sale in the subsequent mortgagee's suit is affected by the rule of lis pendens so as to make the purchaser's right subject to the result of the prior mortgagee's suit; and (b) whether, apart from the effect of the rule of lis pendens, the purchaser in the prior mortgagee's suit is entitled to possession in preference to the.....
Judgment:

Madhava Reddy, J.

1. This Letters Patent Appeal is directed against the judgment of our learned brother Ramchandra Raju, J., in Second Appeal No. 317/71. The plaint schedule house situated at Vijayawada originally belonged to one Majji Krishnamurthy It was mortgaged on 19-5-1950. It was subjected to a second mortgage on 22-5-1950 for a sum of Rs. 2,000/- in favour of one V. Satyanarayana. The house owner fell in arrears of property tax due to Vijayawada Municipality for the years 1950-51 to 1953-54. The Vijayawada Municipality filed a suit O. S. No. 372/1954 on the file of the District Munsif's Court, Vijayawada for the recovery of the arrears of property tax amounting to Rs. 80-8-5. That suit was decreed on 17-9-54. The arrears of property tax constitutes a first charge on the house. In execution of the said decree, the house was brought to sale on 25-2-1963. At the Court sale, the plaintiff respondent herein became the highest bidder. This sale was held subject to the two mortgages referred to above. The sale was confirmed on 30-3-1963 and the plaintiff was put in possession on 18-4-1963 of the house sold to him at the court auction. While the suit O. S. NO. 372/54 filed by the Vijayawada Municipality was pending the second mortgagee of the suit house filed a suit O. S. No. 67/1954 on the file of the District Munsif's Court. Vijayawada to recover a sum of Rs. 2,800/- and odd due under the said mortgage. A preliminary decree for the recovery of a sum of Rs. 3513-4-0 was passed in favour of the mortgagee on 30-8-1954. The final decree therein was made on 13-12-1954 for sale of the house. In execution of the said final decree, sale was held on 22-4-1957. The predecessor of the 1st defendant who is the appellant in this Letters Patent Appeal obtained a transfer of this decree in his favour on 19-8-1960. Before confirmation of sale the mortgagee transferred his rights to one Raghvaiah who died in the rights to one Raghavaiah who died in the year 1960. The sons of Raghavaiah succeeded to his rights in the suit house. The sale was ultimately confirmed on 5-8-1963 in E. P. No. 219/1962. The defendant filed an application for delivery of possession of the house. The plaintiff respondent herein, who is the auction purchaser in execution of the decree in O. S. NO. 372/54 on the file of the District Munsif's Court, Vijayawada filed by the Vijayawada Municipality, opposed the application and also filed a separate suit O. S. No. 383/1968 on the file of the IV Additional District Munsif, Vijayawada for redemption of the mortgages. The dispute now is thus between the auction purchaser in execution of the decree in the suit instituted by the Vijayawada Municipality O. S. No. 372/54 and the transferee decree holder auction purchaser in the suit O. S. No. 67/54 on the file of the District Munsif's Court, Vijayawada filed by the second mortgagee. The trial Court decreed the suit for redemption. On appeal the learned Subordinate Judge, Vijayawada confirmed the said decree and dismissed the appeal A. S. No. 146/68. Our learned brother Ramchandra Raju, J., also dismissed Second Appeal No. 317/71 directed against the concurrent judgments of both the courts below. However having regard to the substantial question of law involved in this appeal he granted leave to appeal.

2. The relevant facts which give rise to the questions of law in this Letters Patent Appeal are not in dispute. From the above narration of facts it is clear that the plaintiff respondent in the present suit is the purchaser of the suit house at a court auction held in execution of the decree in O. S. No. 372/54 on the file of the District Munsif's Court, Vijayawada in favour of Vijayawada Municipality for the recovery of property tax. The property tax constitutes a first charge on the house in favour of the Municipality. The sale itself was held on 25-2-1963. Though this suit was filed later than the suit O. S. No. 67/54 filed by the second mortgagee it was decreed on 17-9-54 earlier than the suit filed by the second mortgagee which was decreed on 13-12-54. While the sale in execution of the decree in O. S. No. 67/54 was held on 22-4-57 the sale in execution of the decree in O. S. No. 372/54 was held on 25-2-1963. But while the sale in execution of the decree in O. S. No. 67/54 was confirmed on 5-8-1963 the sale in execution of the decree in O. S. No. 372/54 was confirmed earlier on 30-3-1963. Even the possession of the suit house was delivered to the auction purchaser i.e. the plaintiff respondent herein on 18-4-1963 even before the sale (was confirmed) in favour of the auction purchaser in execution of the decree in O. S. No. 67/54.

3. The contention of the defendant applicant herein is that since the suit O. S. No. 372.54 was instituted later and the sale in execution of the decree therein also was held later while the suit O. S. No. 67/54 was instituted and pending all the proceedings in O. S. No. 372/54 and in E. P. No. 219/62 are hit by the doctrine of lis pendens and as such even though the sale was confirmed earlier in execution of the decree in O. S. No. 372/54, the plaintiff respondent auction purchaser does not have a right of redemption. It must yield to the decree in O. S. No. 67/54 and the auction purchaser in execution of the decree. The plaintiff respondent has no right to redeem in preference to the auction purchaser in execution of the decree in O. S. No. 67/54. In support of his contention reliance is placed by the appellant's counsel on a Full Bench judgment of the Allahabad High Court in Ram Sanehi Lal v. Janki Prasad, (AIR 1931 All 466) (FB). The questions referred to the Full Bench therein were:

1. Whether the auction purchaser, in execution of a decree obtained on a prior mortgage without impleading the subsequent mortgagee acquires, at least, the rights of the mortgagor who was a party, including his rights to possession in cases where both the mortgages were simple?

2. Where sale in execution of a decree obtained on foot of a puisne mortgage takes place during the pendency of the suit on the prior mortgage.

(a) Whether the sale in the subsequent mortgagee's suit is affected by the rule of lis pendens so as to make the purchaser's right subject to the result of the prior mortgagee's suit; and

(b) Whether, apart from the effect of the rule of lis pendens, the purchaser in the prior mortgagee's suit is entitled to possession in preference to the purchaser in the puisne mortgagee's suit in case both mortgages were simple, even though the sale in the second mortgagee's suit took place before the sale in the prior mortgagee's suit.

The Bench of five Judges held:

'Thus the equity of redemption of the mortgagor is in dispute in such a suit and the doctrine of lis pendens would undoubtedly attach to it. If in another proceeding, whether it be in execution of a simple money decree or in enforcement of a subsequent mortgage, the same proprietary interest of the mortgagor is simultaneously sought to be sold Sec. 52 would apply. Similarly if while a suit of a subsequent mortgagee for the enforcement of his mortgage against the mortgagor, without impleading the prior mortgage, is pending, any attempt on the part of the prior mortgagee to get that interest sold in his own decree would be equally governed by Sec. 52.'

Sulaiman, acting Chief Justice who rendered the leading opinion came to the following conclusions:

'1 (A) If the purchaser in execution of the prior mortgagee's decree is not in possession and is suing as plaintiff the purchaser in execution of the subsequent mortgagee's decree.

(a) he can enforce his remedy, if limitation on the prior mortgage has not yet run out, but

(b) he cannot recover the mortgage money, if limitation has run out.

(B) (a) if he was the earlier purchaser in point of time, he can redeem the second mortgage and recover possession, even though the prior mortgage is barred by time.

(c) But if he was the later purchaser in point of time, then his suit even for redemption cannot be decreed.

2. If the purchaser in execution of the second mortgagee's decree is suing the purchaser in execution of the prior mortgagee's decree, who is the defendant in possession, then,

(a) if the purchaser under the second mortgage was the earlier purchaser in point of time, he must redeem the prior mortgage, and the purchaser under the prior mortgage cannot compel the purchaser under the second mortgage to submit to redemption by him;

(b) if the purchaser under the second mortgage was later in point of time, then he must first redeem the prior mortgage, but the purchaser under the prior mortgage will have the right to redeem the purchaser under the second mortgage next, and retain possession of the mortgagor's property'.

With this view concurred Banerjee, J. Young J., and Pullan, J., while Mukerji, J., dissented. The Court thus answered the first question in the affirmative.

'If either no suit by the subsequent mortgagee is pending or the purchase in execution of the prior mortgagee's decree was earlier in point of time: If the mortgagee be the earlier purchaser, the rights of the mortgagor to obtain possession will ultimately vest in him: if this mortgage is not time barred, he must redeem the subsequent mortgage.

The answer to (a) of the second question is in the affirmative.

The answer to (b) of the second question is that if lis pendens does not apply and the second mortgagee is the earlier purchaser, the prior mortgagee will have the right to take possession as plaintiff if a suit on his mortgage be not time barred. If the second mortgagee redeems him, the second mortgagee will retain the property. If the prior mortgage has become barred by time, the prior mortgagee can not obtain possession'.

This view of the Allahabad High Court was consistently followed by that Court. Suffice to refer to the case in Hakim Mohd. V. Sahab Collector Bahadur, : AIR1958All24 wherein it was observed:

'Although Sec. 52, T. P. Act does not apply in terms to sales held in execution of a decree, the principle of lis pendens applies to such Court sales also ......'

The Court further observed:

'The lis in a mortgage suit begins from the date on which the suit is instituted and continues till the decree is satisfied'.

The Court also observed:

'The auction purchaser must also be deemed to be a party to that suit'.

In Rattan Chand v. Prite Shah, discussing the position of the auction purchaser in execution of a prior mortgage as against subsequent mortgagees, the Court held:

'The auction purchaser in execution of the decree based on the first mortgage occupies a dual capacity of a first mortgage occupies a dual capacity of a first mortgagee as well as the owner of the equity of redemption, and while in his first capacity he can use the first mortgage as a shield against the second mortgagee, in his second capacity he can redeem all subsequent mortgages'.

In coming to this conclusion, the Court relied upon Mt. Sukhi v. Ghulam Safdar Khan, (AIR 1922 PC 11) and Abdul Gaffor v. Sagun, (1949) ILR 27 Pat 526. A single Judge of the Bombay High Court in T. L. Desai v. Yogabai Paranjape. : AIR1962Bom191 also took the same view as the Allahabad High Court and held:

'Where a sale in execution of a decree obtained on foot of a puisne mortgage takes place during the pendency of the suit on the prior mortgage, it is affected by the rule of lis pendens so as to make the purchaser's right subject to the result of the prior mortgage suit'.

We deem it unnecessary to multiply the decisions in this regard.

4.The Madras High Court in Chinna swami v. Darmalinga, (AIR 1932 Mad 566) however took a different view and expressly dissented from the view expressed by the Full Bench of the Allahabad High Court in Ram Sanehi lal v. Janki Prasad, (AIR 1931 All 466) (FB). The Court held:

'The rule of lis pendens only applies to transfers by the plaintiff or defendant of their respective interests after the suit including transfers by Court sale in money decrees against either party. But it does not apply to previously exiting transfers (including mortgages) or legal proceedings to enforce such transfers by those entitled. On principle, the sale in pursuance of a mortgage decree the mortgage having been executed before the institution of the suit is not affected by the doctrine of lis pendens'.

Referring to the view of the Full Bench of Allahabad High Court in Ram Sanehi lal v. Janki Prasad. (AIR 1931 All 466), Pandalai. J. observed:

'In my view the opinion expressed by Mukherjee, J., (Dissenting opinion) in Ram Sanehi Lal v. Janaki Prasad, AIR 1931 All 466 at pp. 485 to 487, on the subject of lis pendens in mortgage suits is correct. It is the rule only applies to transfers by the plaintiff or defendant....' The said view was consistently followed and approved by the later Bench decision of the Madras High Court in Natesa Chettiar v. Subbunarayana, (AIR 1945 Mad 91) in the following words: 'The transfer to which the provisions of Section 52 can properly be applied is the creation of the mortgage itself, not the subsequent sale in the enforcement of the mortgage'.

On principle the doctrine of lis pendens enunciated in Section 52 of the Transfer of Property Act though applicable only to transfers inter vivos by act of parties or in the case of involuntary transfers and not to transfers made through the intervention of the Court, the basis for the application of that principle is that the right vesting in the parties is transferred during the pendency of a litigation. But where successive mortgages are created before the institution of any suit in a Civil Court the question of the subsequent mortgage being affected by the doctrine of lis pendens cannot arise. So also if for enforcement of the right created under successive mortgages suits are filed by the mortgagees the doctrine of lis pendens cannot apply. The mortgagee does not trace his right to the earlier mortgagee. It is an independent right unaffected by earlier mortgage. Any sale effected in execution of the decree by the subsequent mortgagee cannot affect the rights of the prior mortgagee and the extension of the principle of lis pendens to court sales in execution of the mortgage decree also cannot apply or affect the earlier mortgagee or the purchasers of the equity of redemption under the earlier mortgage. Apart from the fact that the judgments of the Madras High Court rendered prior to July, 1953 are binding on this Court even on principle we do not think that the majority view in Ram Sanehi lal v. Janki Prasad, (AIR 1931 All 466) (FB) should prevail. The view of Mukherjee, J., as elucidated by the several decisions of the Madras High Court referred to above in our views lays down the correct position of law with regard to the application of the doctrine of lis pendens to transfers effected through court sales and in execution of mortgage decrees. In this view of the matter we must hold that although the suit O. S. No. 67/1954 i.e., the second mortgagee's mortgage suit was instituted earlier and the sale in execution of that decree was also held earlier on 22-4-57, than the suit O. S. 372/54 in execution of which decree sale was held on 25-2-1963 this subsequent sale is not hit by the doctrine of lis pendens. Hence the sale confirmed in favour of the auction purchaser in O. S. NO. 372/54 in E. P. No. 219/62 on 30-363 is also not affected by the doctrine of lis pendens.

5.It may at this stage be clarified that notwithstanding the fact that the sale was held both in the Municipality's suit and in the second mortgagee's suit and the sale in favour of the auction purchasers were confirmed in both the cases, even if the doctrine of lis pendens were to apply, the sales would not be void. They would only be subject to the result of the suit. What the auction purchaser under a subsequent mortgage acquires is the mortgagor's right to equity of redemption which alone vested in the mortgagor. The subsequent mortgagee into whose shoes the auction purchaser has stepped has the right to redeem the earlier mortgage and become the owner of the property. Likewise the auction purchaser in the suit O. S. NO. 372/54 whose purchase was confirmed earlier and who was also put in possession of the property on 18-4-1963 had acquired the right of the mortgagor i.e., the equity of redemption and had also the right to redeem the property. Thus on the facts of this case a situation is created where the doctrine of lis pendens does not in any way affect the sale in favour of either of the auction purchasers and the sales in their favour are not invalid for that reason whatsoever. Each has a right to redeem the other mortgage. The question therefore is one of adjusting the equities between the parties. Our conclusion that the doctrine Lis Pensens does not apply is further fortified by what is contained in Section 94 of the Transfer of Property Act which reads as follows:

'Where a property is mortgaged for successive debts to successive mortgagees, a mesne mortgagee has the same rights against mortgagees posterior to himself as he has against the mortgagor'.

If the contention of the learned counsel for the appellant is accepted and the doctrine of Lis Pendens is applicable then the provisions of Section 94 of the Transfer of Property Act would be rendered nugatory.

6. When we come to the question of adjusting equities that most necessarily depend on the facts and circumstances of each case. If the plaintiff respondent was a prior mortgagee inasmuch as the property tax due in respect of the plaintiff schedule house constitutes a first charge in respect of the Municipality which instituted the suit O. S. No. 372/54 and obtained a decree earlier and brought the properties to sale which sale was confirmed earlier than the sale in O. S. 67/54, then obviously the obviously the plaintiff respondent has the right to redeem the second mortgage into whose shoes the auction purchaser in O. S. 67/54 has stepped. In Sarvothama Rao v. Raj Row Sahib, (AIR 1921 Mad 648). Ramesam, J., Speaking for the Court held.

'A prior mortgagee purchasing the equity of redemption in execution of his own decree to which the puisne mortgagee was not a party, can redeem the latter and the latter cannot contend that he cannot be redeemed by the former until he has redeemed the prior mortgage'.

A Full Bench of the Madras High Court in Venkatrama Aiyar v. Rangiyan Chetty, (AIR 1924 Mad 449) held:

'Where a first mortgagee sues on his mortgage without making the second mortgagee a party and brings the property to sale and purchases it in execution, the right of the second mortgagee to redeem the first mortgagee is not extinguished by the proceedings in such a suit to which he was not a party. How ever this rule cannot apply where the so called second mortgage did not exist either at the time of suit or decree or even at the time of the sale in execution of the decree on the first mortgage'.

In Mulla Vittil Seethi v. Achuthan Nair, (1911) 21 Mad LJ 213) the Full Bench held:

'A first mortgagee who has purchased the mortgaged property in execution of a decree on his mortgage is not entitled to a decree for possession against a puisne mortgagee with possession who was not impleaded in the first mortgagee's original suit, even subject to the puisne mortgagee's right of redemption.

.......... ........... ........ A second mortgagee is entitled to the same rights as the first mortgagee with reference to his security, having regard to the nature of his mortgage.

The purchaser of the equity of redemption after the first mortgage and the second mortgagee, both stand on the same footing with reference to their respective rights against the first mortgagee when they have not been impleaded in the suit instituted by him on his mortgage.

These rights are unaffected by the suit of the first mortgagee to which they were not made parties or the decree therein or the sale held in pursuance of the said decree.

The purchaser in such a suit, whether it is a first mortgagee or a stranger, foes not acquire the rights of the mortgagor as at the date of the first mortgage, but only those that subsist in him at the date of the suit'.

On the date of the suit O. S, 67/54 the plaint schedule property which was the subject matter of the second mort5gage was already subject to the first charge of the municipality and the first mortgage and hence the rights acquired by the auction purchaser in execution of the municipality's suit O. S. 372/54 are in no way affected. Though that does not mean that the second mortgagee's rights are extinguished his rights would be subject to the rights of the purchaser under the auction in execution of the decree in O. S. 372/54. In a recent case Shanmugha Nadar v. Sivan Pillai : AIR1967Mad418 , that the plaintiff respondent who is the auction purchaser has a right to redeem is recognised in the following words.

'Where in a suit by the prior mortgagee the puisne mortgagee was not impleaded, the sale in that suit cannot prevail over the sale in the puisne mortgagee's suit even though the prior mortgagee was not made a party to it. Hence the auction purchaser in the sale in the puisne mortgagee's suit has the right to redeem the property from the auction purchaser in the earlier sale held in the prior mortgagee's suit.

The right of the puisne mortgagee to redeem a prior mortgagee cannot be prejudiced by a court sale at the instance of the prior mortgagee without impleading the pusine mortgagee. Though in law the purchaser in the prior mortgagee's sale as an assignee of the mortgagee is entitled to redeem, his right of redemption in law or in equity cannot prevail over the puisne mortgagee's rights to redeem'.

The right of redemption thus vesting in the plaintiff respondent cannot be taken away either in view of any provision of law or on any consideration of equity. In fact in Natesa Chettiar v. Subbunarayana, (AIR 1945 Mad 91) it was held:

'A puisne mortgagee is within his rights in filing his suit without impleading the prior charge holder, but, although no specific provision of the Civil P. C. compelled him to implead the prior charge holder who has purchased the property in enforcement of the charge without making the puisne mortgagee a party in taking his proceedings in execution he ought to do so. If the refusal to implead the prior charge holder in the execution proceedings is deliberate, the puisne mortgagee can claim no equitable relief'.

Thus, in judging the equities in the case the fact that the plaintiff in O. S. 67/54 did not implead the auction purchaser in execution of the decree in O. S. 372/54 must go against him. The sale was confirmed in favour of the auction purchaser in 1963. The auction purchaser in O. S. 67/54 was well aware of that fact, for, not only the sale was confirmed in favour of the plaintiff respondent but he was also put in possession of the property purchased by him on 18-4-1963. In taking into consideration the equities between the parties who are equally entitled to redeem the prior mortgage, specially among the auction purchasers of the property, in execution of the decrees, several factors have to be kept in view. While the two suits were filed in the same year 1954 the decree in O. S. 372/54 in execution of which the plaintiff respondent has purchased the property, was decreed earlier on 17-9-1954 than the suit O. S. 67/54 which was decreed on 13-12-1954. The sale in execution of the decree in O. S. 372/54 was confirmed on 30-3-1962 while the sale in execution of the decree in O. S. 67/54 was confirmed five months later. Further at least four months before the sale was confirmed the plaintiff respondent was put in possession of the property and ever since that date the plaintiff respondent is in possession of the property and ever since that date the plaintiff respondent is in possession of the property. Further after the E. P. Filed by the appellant defendant was dismissed in 1963 he has not taken any steps either of filing an E. P. or of filing a suit to redeem the prior mortgage or satisfy the charge. He has not even filed a suit claiming his superior right to redemption. Except resisting the plaintiff, who has taken the initiative to file a suit for redemption, the appellant has not taken any steps whatsoever. These factors are necessarily to be taken into account by the Court in adjusting the equities between the two auction purchasers who acquire a right to redeem the other mortgage. On the facts and circumstances of the case we have no option but to hold that the equities, judged from any angle, are all in favour of the plaintiff respondent who has been diligently pursuing the matter and has exercised his option to redeem the other mortgage. Though from somewhat different reasons, we find ourselves in agreement with the conclusion reached by our learned brother that the suit should be decreed. This appeal by the 1st defendant therefore fails and is accordingly dismissed but in the circumstances without costs.

7. Before parting with this case, we must record our appreciation and thanks to Mr. Y. Suryanarayana, the learned counsel who has very promptly assisted the Court in placing all the authorities before us on the questions arising in this appeal.

8. Appeal dismissed.


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