(1) This second appeal is on reference before us and raises a point of limitation on which it is said the High Courts in India are divided in their views.
(2) For a proper appreciation of this point and the other points which incidentally arise for consideration, it is necessary to state essential facts of the case. Defendants 11 to 13 are brothers. Defendants 14 to 16 are sons of 11th defendant and defendants 17 to 18 are sons of defendant No. 12. Defendants 11 and 12 for themselves and as guardian of their minor brother defendant No. 13 and also of their sons borrowed from the plaintiff-appellant a sum of Rs. 1500/- on 6-8-1934 executing a simple mortgage in relation to seven items of property including plaint schedule items 1, 2 and 3 with which we are concerned in this appeal. Item 1 property originally belonged to one Sista Subramanyam. It was purchased by the 12th defendant. The said defendant for himself and as guardian of his minor sons had earlier mortgaged items 1 and 3 and another property to one Vejju Mahalakshmi under EX. B-3 for a sum of Rs. 900/- on or about 13-1-1934. Then on 10-6-1934 the same defendants executed an agreement of sale for item 1 in favour of one Berika Krishnarao for a sum of Rs. 700/- under Ex. B-5, This amount was stated to have been obtained for part payment of mortgage debt and it was paid to Mahalakshmi on or about 10-7-1934.
Shortly after the suit mortgage, which as already stated, took place on 6-8-1934, the 12th defendant and his son sold item 1 pursuant to the agreement of sale to B. Krishnarao on 19-11-1936 under a sale deed (the original of Ex. B-4) and put him in possession for some time and sold the said property to Venkadaru Sarvayya on 30-6-1937 (Ex. B-6) who in turn sold the same to Vejju Subbarao, father of defendants 1 to 5, for a sum of Rs. 1000/- on 7-5-1943 under s registered sale deed Ex. B-7 and put him in possession thereof. In family partition this item fell to the share of defendants 1,2 and 4 to 6 and they are in possession of the property. During the period Sarvayya was in possession, plaintiff brought an action for recovery of his mortgage amount on 5-4-1940 but he did not implead him as a party to the suit even though he was fully aware of the fact that he was in possession of the property as a purchaser of equity of redemption of item 1. In fact before he brought the suit he had lodged a criminal complaint in 1939 against the mortgagors for cheating him. He had even examined Sarvayya in that case as a witness. At any rate, it is not at all disputed that he was not aware of the alienations before he brought his action O. S. No. 170/1940.
Even in relation to items 2 and 3, he had come to know long prior to the date of the suit and before the date of the criminal complaint, that the mortgagors had no title even at the time of mortgage in relation thereto and the said items were in possession of defendants 7 to 10. He did not implead the said defendants in the said action. Of course in an action on mortgage defendants 7 to 10 were not necessary parties under O. 34 R. 1 C. P. C. The suit was decreed against the mortgaged and in execution thereof only four items of mortgaged property were brought to sale. The plaintiff became the auction purchaser of items 1 to 3. He purchased item 1 for Rs. 1250/- and items 2 and 3 for Rs. 850/- He applied for delivery of possession of item 1 after the sale was confirmed.
At that time Vejju Subbarao, as transferee from Sarvayya was in possession of the said property. On his obstruction, the auction purchaser plaintiff filed E. A. No. 40 of 1945 which was dismissed on the ground that the obstructor was not a party to the suit. Then he filed a suit O. S. No, 252/1948 under Or. 21, R. 103 C. P. C. to establish his right to the present possession of the property by getting the order set aside. The suit was dismissed. He went in appeal but with little success. his second appeal 258 of 1955 was also dismissed by the High Court on 29-1-1958. Therein the learned Judge having held that the order refusing amendment of the plaint as prayed for was justified remarked thus:
'Even the present suit must have been filed only to enforce the mortgage, if of course his right under the mortgage is subsisting. he can do that even now subject of course to the same qualification.'
These remarks appear to have prompted the plaintiff to bring the present suit on 19-3-1958.
(3) It would thus appear from the above facts that in relation to item 1 the allegation in favour of Barika Krishnarao though effected subsequent to the mortgage was in pursuance of an agreement of sale anterior to the mortgage itself, and the mortgagee in spite of knowledge did not implead the alienees in his action on mortgage in compliance with O. 34, R. 1, C. P. C. Further his action for possession as against the alienees brought subsequently under O. 21, R. 103 C. P. C. had failed conclusively as against him. It is only thereafter and in the circumstances mentioned above he has brought the present suit. Similarly after the bid in relation to items, 2 and 3 was knocked down in his favour, the plaintiff looked into the revenue accounts and was satisfied that the said items stood in the name of Kanchugummam Venkayamma and that she was paying taxes, etc. he them filed E. A. No. 328/1946 under O. 21, R. 91 C. P. C. for setting aside the sale. But his petition was dismissed and that decision was confirmed in appeal in C. M. A. No. 26/;1948 by the Subordinate Judge and also by the High Court in C. R. P. No. 1014/.1949 on 20-3-1952.
Six years thereafter the present suit has been brought. The specific prayers contained therein are: (1) that an opportunity may now be given to defendants 1 to 6 and they may be called upon to redeem item 1 of the plaint schedule from the mortgage liability and in default possession of the said item may be delivered to the plaintiff; (2) that the title of defendants 11 to 18 to items 2 and 3 may be determined and the plaintiff be put in possession thereof and (3) that if that cannot be done a decree may be granted against the mortgagors for the total sum representing the amount for which the plaintiff purchased the said items in the auction together with Interest thereon from the date of purchase and also the costs that he had to pay to defendants 1 to 6 in O. S. No. 352/1948.
(4) It is obvious that the suit is not essentially on mortgage, though it has reference thereto. It was strenuously opposed by defendants except defendants 11,14 and 16 having remained ex parte. The trail Court dismissed the suit on the ground of limitation in relation to item 1 of the property and on the basis of want of title and limitation in relation to items 2 and 3. It refused to grant any relief as against the mortgagor because the mortgagee did nor bring to sale the remaining items of hypotheca and without that he cannot possibly ask for a money decree against the mortgagors. Further, the claim in that behalf had become barred by time. The appellate Court upheld the order of the trail Court.
(5) The main contention raised in this appeal and which was also urged unsuccessful in the courts below is that the plaintiff's suit filed within 12 years from the date of auction-purchase is well within time in that it is not a suit to enforce the mortgage by sale of the property but one for recovery of possession of the auctioned items of property giving an opportunity to the purchase of equity of redemption to retain possession by paying the mortgage-debt. Such an action, it is contended, is open to a mortgagee auction purchase within 12 years from the date of sale though as a mortgagee his action, for sale might have become time-barred. In such an action, it is urged, the time begins to run from the date of court auction and not from the date when the mortgage amount fell due. In support of this contention, reliance has been placed mainly on Sambasiva Ayyar V. Subramania Pillai, AIR 1936 Mad 70.
There it was held that the mortgagee purchaser is execution of a mortgage decree to which purchaser of equity of redemption was not a party has two causes of action against such purchaser. One as a mortgagee and the other purchaser in court auction of the hypotheca. If he sues for sale as mortgagee time will run from the date the amount fell due under the mortgage. If he brings a suits as a purchaser for possession time begins to run from the date of his purchase, provided 'he had no knowledge of the sale of equity of redemption by the date of the previous suit. Otherwise the time shall run from the date of sale by the mortgagor or perhaps the date the mortgage amount was due, whichever is later. That case in fact was decided on the basis that the mortgagee had no knowledge of the purchase. Both the Courts below have therefore held that the instant case is distinguishable on facts in that the plaintiff herein had full knowledge of the alienation even before he brought the suit on mortgage and that the ratio decidendi in that case is therefore of on application to the facts of the present case. We have to consider whether the courts below were in error in holding so.
The authority relied on by the learned counsel as may be noticed dealt with a case whether the mortgagee sued in time on the mortgage for a mortgage decree against the only person interested in the equity of redemption, so far as he was aware of. At the time he laid his action he was ignorant of nay 3rd party's right in the property. He had no notice, actual or constructive of the purchase by the third party, of the interest of the mortgagor whether by private sale or otherwise till he was resisted in getting possession in pursuance of his auction purchase which took place under the mortgage decree. By that date, the time for bringing any action on the basis of mortgage against the said person had expired. The position in which the mortgagee suddenly found himself placed was most inequitable and this state was brought into being through no fault of his own. The learned Judges considered, therefore, whether the equities of the parties could not be worked out without any detriment or prejudice to their respective rights and without offence to any legal principle. Considering the relative rights of the parties and the interests of justice, they laid down the rule that the mortgagee purchaser can enforce his right to possession as a purchaser with in twelves years from the date of his purchase after giving the purchaser of equity of redemption an opportunity to retain possession on payment of mortgage debt.
(6) Where there is a mortgage, the rights in the property became split up. Some remain with the mortgagor while the others become vested in the mortgagee subject to the terms of the mortgage. The right which invariably remains with the mortgagor is the equity of redemption. This right is eventually forecloses or buys in case of sale the hypotheca, the two rights coalesce and he becomes entitled to full rights of ownership. But this he gets only in a properly framed suit. If any of the persons interested in the mortgage has not been implemented, as enjoined by Or. 34, R. 1 C. P. C. the decree obtained though binding on the parties thereto cannot affect the right of the person not impleaded. The omission to sue such a person not impleaded. The omission to sue such a person may be deliberate or out of ignorance. the effects in either case cannot be the same. They must naturally be different. If the omission is deliberate, certainly, the mortgagee who elects to so omit runs the risk of his subsequent action, as against that person getting time-barred. But the same consideration may nor prevail, if the simple mortgagee was not aware of the existence of the interest of third party at the time he brought the suit.
Stone ,J., in the above mentioned case in his leading judgment demonstrated how inequitable it will be if the same principle is applied to a mortgagee who could not did not know the existence of the purchase of the mortgagor's interest at the time he filed the suit. We respectfully at the time he filed the suit. We respectfully at the time he filed the suit. We respectfully agree with him in that behalf and also in his observation that in such a case the remedy already resorted to against the mortgagor ought not to become infructuous merely because the mortgagor had already got rid of his equity of redemption. Nor should he be left without any remedy against the purchaser of equity of redemption for, before he could know of the existence of such purchase, the twelve years period from the date of the mortgage debt had expired. As either of the parties has a right and interest in the property, the only way to do justice between them is to adjust their equities.
As remarked by stone, J, all that can be claimed by such purchaser of equity of redemption is that being a stranger to the mortgage suit, his right cannot be adversely affected by the suit. That right which he has and which must, remain unaffected is the right of redemption. That is what he bought and paid for when he became the purchaser. It should therefore be open to him to retain the property on paying the mortgage debt. Subject to this condition, the rights of the mortgagee which flowed from the mortgage, and recognised by mortgage decree and perfected by the purchase in execution thereof, should remain unaffected by omission to sue such a person of whose right he had no notice, actual or constructive.
(7) One would do well to bear in mind that if there be a properly constituted suit be reason of a mortgage decree passed therein any by purchase of the hypotheca in execution thereof the mortgagee but all the rights of a mortgagee but all the rights of a mortgagor as on the date of mortgage, subject of course to subsequent equities, if any. He will thus have the sum total of the rights of ownership. The rights so acquired in the property by reason of auction sale, are of course exercisable as from the date of such sale. If a trespasser is found in possession of the land by the date of auction-purchaser. Even of he had acquired right by adverse possession by that time as against the mortgagor, by reason of his entry on the land after the date of mortgage, he might at the most be deemed to have prescribed for the estate or interest of the mortgagor because the property by the date of his entry was already burden with a simple mortgage.
In that case, as against such purchaser, he has only a right to retain possession on payment of mortgage debt. Of course, if the mortgage purchaser takes no action even after the auction sale, within the period of 12 years certainly, the trespasser's right as against the mortgagee-purchaser shall be perfected by adverse possession. What applies to a trespasser must in our judgment apply to a purchase of equity of redemption as well, only if his existence was unknown to the mortgage on the date he brought the mortgage suit. If he was aware, different considerations would arise and the remedy as against the purchaser of equity of redemption shall be lost by efflux of time. Statute of limitation would effectively bar enforcement of any right of the mortgagee as against the purchaser of equity of redemption after the prescribed period in the same manner as it would have been barred as against the mortgagor.
This principle also has been in fact recognised in AIR 1936 Mad 70 (Supra). At P. 73, Stone J. has observed in express and in on uncertain terms that different considerations would arise if the mortgagee knew or ought to have known the existence of a third party's right on the date when he brought the mortgage suit. The other cases also relied on by the learned counsel enunciate principle to the like effect. Surendralal v. Ahammad Ali, ILR 60 Cal 1193 : (AIR 1933 Cal 912) dealt with a case where the mortgagee knew of the existence of the purchaser of the equity of redemption at the time he brought the suit. It was held therein that the purchaser of the court auction held in execution of the mortgage decree to which the purchaser of equity of redemption was not a party, has not remedy against such purchaser on expiry ofd 12 years after the money becomes due. Thus, where there is knowledge and the mortgagee does not elect to proceed against the purchaser, his remedy would be barred after the lapse of 12 years from the date the mortgage debt fell due. We think it unnecessary to discuss the other cases cited at the bar as most of them have been dealt with in AIR 1936 Mad 70(supra).
It is clear that the said decision makes a distinction between cases where the mortgagee brought a suit in ignorance and proper ignorance of the existence of any third party's rights at the time he brought his action on mortgage and the cases where he was aware of the rights of third persons. It is argued by the learned counsel, as it was also done in the courts below, that knowledge or ignorance should make no difference and that Ramesam, J. in his judgment did not make any difference at all. This argument is not well founded. The Judgment rendered by stone J. is the leading judgment and Ramesam J. had agreed with the conclusions and the reasons given by him. There was no difference of opinion and any observations made by Ramesam, J. cannot be deemed to be in conflict with the specific observations made by Stone J. at more than one place in his judgment to the effect that different considerations would arise if the knowledge was there. It is clear, therefore, that if the mortgagee had knowledge of a purchaser of equity of redemption and still he was not impleaded in the suit, he cannot avail of the decree obtained against the mortgagor alone nor can there be an occasions for working out the equities between the auction-purchaser and the purchaser of equity of redemption in possession is entitled in law to retain possession is entitled in law to retain possession till the property is sold in execution of the mortgage decree obtained against him.
If the mortgagee in spite of knowledge does not elect to bring the suit within the statutory period, the remedy of bringing the property to sale which is the only remedy given to him under sale which is the only remedy given to him under the mortgage is lost. If the remedy is so lost, the purchaser of equity of redemption gets an indefeasible right to continue in possession as against the mortgagee. That bring the case, there can be no question that the mortgagee is auction sale can effectively bring a suit against him for possession. That apart, as would appear from the facts of the case, his action brought under O. 21 R. 103 which was the only remedy to avoid the order passed under O. 21, R. 99 C. P. C. was conclusively decided against him and it was held that he was not entitled to possession of the property as against the purchaser of equity of redemption in possession . On that basis also, the suit for possession is untenable. In short, the facts of the present case do not attract the ratio on which AIR 1936 Mad 70 (supra) was decided, namely, that the mortgagee qua auction-purchaser can sue for possession within 12 years from the date of possession. As observed earlier, we are clearly of the view that if the mortgagee in spite of knowledge did not choose to sue the purchaser of redemption within time, he cannot sue for possession as an auction purchaser in execution of a decree which does not bind him. The suit as against defendants 1 to 6 therefore was rightly dismissed.
(8) Now remains the question of items 2 and 3 of plant schedule. While deciding the case against the plaintiff in that behalf, the course below have observed that it is the definite case of the plaintiff that the mortgagors had no title to those items even by the date of mortgage and that is the reason why he filed a criminal complaint against the mortgagors for cheating and further after he setting aside the sale on the ground that the mortgagors had no saleable interest in these items. Besides thereafter he did not apply for possession of the said properties in execution of the decree and this was obviously because the mortgagors had no title or possession of those items. In these circumstances and also in view of the clear admissions, the courts below thought that further inquiry in to the title was unnecessary. At any rate, the onus lay on the plaintiff to prove title and possession of the suit property which he failed to do. If at all any evidence has been brought on record, it went wholly against him. In these circumstance the courts below were not in error when they dismissed the claim in relation to these items.
(9) The last point is whether the plaintiff can ask for a money decree against the mortgagors. out of seven items of mortgage property, only four items were brought to sale and the remaining items were never attempted to be brought to sale. In these circumstances, there is no occasion for giving a money decree as against the mortgagors. besides, the claim for damages either on breach of covenant of sale or on the basis that the consideration of sale has failed is clearly out of time. In these circumstances, there is no reason to interfere with the concurrent there is no reason to interfere with the Courts below. The appeal falls, and is dismissed with costs.
10. Appeal dismissed.