1. This is a defendants' appeal arising out of a suit for a refund of Rs. 805-6 which sum was paid to the defendants, under an order of the execution Court, dated the 26th Juno 1920. It is connected with S.A. No. 1411 of 1922.
2. The facts of this case are slightly complicated and it is necessary to state them in their chronological order. On the 26th February, 1896, Dubri and two other persons made a mortgage of 16 gandas share to Mt. Dilao for a sum of Rs. 262. On the 23rd January, 1897 D ubri executed a sale-deed of 8 gandas shara in favour of Abdul Kahim Khan for a sum of Rs. 826, and also made a mortgage in favour of Abdul Rahim's mother, Mt. Shahansah Begum, for a sum of Rs. 449. Out of the sum of Rs. 826, which was the sale consideration, a sum of Rs. 178 had been left in the hands of Abdul Rahim for payment to the prior mortgagee, Mt. Dilao. A further sum of Rs. 271 was left in his hands for payment to one Debi Sahai, and other sums for payment to certain other creditors.
3. It is admitted that Abdul Rahim did not pay the sum of Rs. 878 or any part of it to Mt. Dilao. Mt. Dilao, on the 6th June, 1910, brought a suit on the basis of the mortgage of 1885 impleading Abdul Rahim and Mt. Shahanshah Begum as well as the representatives of the mortgagors. This suit was decreed on the 28th July, 1910, and ultimately, in execution of this decree, the 16 gandas share was sold at auction on the 24th March, 1920 and purchased by the decree-holder's representatives for a sum of Rs. 3,500. The purchasers deposited Rs. 1,610 in cash and filed a receipt for the balance in full satisfaction of the decretal amount.
4. We may mention that in the meantime Mt. Shahanshah Begum brought a suit, on the 19th September 1910, on the basis of her mortgage-deed of 1897, but did not implead the prior mortgagee, Mt. Dilao. She obtained a decree, on the 25th November, 1910, for sale of the 8 gandas share against the representatives of the mortgagors, and a final decree for sale on the 27th June 1914.
5. It is not disputed before us that after having obtained the final decree for sale in 1914, Mt. Shahanshah Begum took no steps by way of executing that decree. However, after the property had been sold at auction on the 20th March, 1920, in execution of the prior mortgagee's decree and a surplus of the sale proceeds had been deposited in Court, an application was made by Mt. Shahanshah Begum as well as by Abdul Rahim for the payment of the surplus to them.
6. The Court, on the 26th June, 1920, ordered that half the surplus was to be made to Mt. Shahanshah Begum and the other half to Abdul Rahim. No part of the sum was allowed to be taken out by the representatives of the mortgagors.
7. The representatives of the mortgagors have, therefore, instituted the present suit and the connected suit for a refund of the mounts, so paid, It was a point in dispute as to whether the claim was within time, but this was decided in favour of the plaintiff by both the Courts and has not been raised here before us.
8. The main question, which we have to consider in this appeal, is whether the execution Court's order directing that the surplus of the sale proceeds should be paid to Mt. Shahanshah Begum, the subsequent mortgagee, was right.
9. It is contended on behalf of the defendants-appellants that even if the application for execution of the subsequent mortgagee's decree had been barred by time, it was only his remedy to execute the decree that was barred, but the mortgage debt was still subsisting. It is, therefore, strongly urged that under Order 34, Rule 3, the subsequent mortgagee, even though her remedy was barred by time, was a person who was interested in the property sold and therefore, was entitled to part of the surplus.
10. On the other hand, the Courts below have held that inasmuch as the decree had become barred by time, the subsequent decree-holder had no rights whatsoever left and was not a person to whom any part of surplus of the sale proceeds should have been paid.
11. It is true that Section 28 of the Limitation Act would not in terms apply to a case of this kind. There may also be some force in the contention that an application for payment of the residue of the sale proceeds cannot, strictly speaking, be called an application in execution. All the same it cannot be disputed that after the decree absolute, the mortgage security had merged in the decree and whatever rights Mt. Sbahanshah Begum then proposed were the rights which she acquired under that decree. If owing to her own default she allowed her remedy to be barred by time, it seems quite proper that the mortgagors should be allowed to resist her claim to take a portion of the sale proceeds.
12. The principle involved in this case is, in our opinion covered by the decision of their Lordships of the Privy Council in the case of Het Ram v. Shadi Ram A.I.R. 1819 P.C. 34. In that case the first mortgage was executed in the year 1880 followed by a subsequent mortgage of the year 1881. The prior Mortgagee brought a suit for sale on the basis of his prior mortgage without impleading the subsequent mortgagee and obtained a decree. He, however, also acquired in some other way the rights and interest of the mortgagor subject of course to the subsequent mortgage. He made no attempt to execute this decree for sale obtained on the previous mortgage and allowed the ordinary period of limitation to expire.
13. Later on the subsequent mortgagee instituted a suit on his subsequent mortgage impleading the prior mortgagee not as such but as a representative of his mortgagor. The point raised by the prior mortgagee was that the sale on the basis of the subsequent mortgage should be ordered subject to his prior charge. Their Lordships of the Privy Council repelled this contention and pointed out that when the prior mortgagee obtained a decree, that decree was a substitute for his rights under the mortgage. That when the right to execute that decree became barred by time, under Article 179 of the Limitation Act, the decree ceased to be operative. It really became wholly ineffective long before that suit was instituted.
14. It is worthy of note that in that case if the plea of the prior mortgagee had been allowed, the result would have been that if the property was sold in execution of the decree of the second mortgage, the sale proceeds would have to be distributed under Section 97 of the Transfer of Property Act corresponding with Order 34, Rule 13 of the new Code of Civil Procedure.
15. The question which arises in the present case, although it did not arise at that time, is certainly one which would have arisen if the plea of the prior mortgagee had been upheld.
16. We are, therefore, of opinion that it is impossible to distinguish the present case from that case. It is, however, urged very strongly on behalf of the appellants that that was a case falling under Section 89 of the Transfer of Property Act and is, therefore, distinguishable. It was decided by their Lordships in that ease that the true construction of Section 89 of the Transfer of Property Act was that on the making of the order absolute for sale under that section, the security as well as the defendant's right to redeem were both extinguished, In our opinion that circumstance makes no difference whatsoever. The view expressed therein that after the passing of the decree for sale the mortgage security was substituted by a new right under the decree, still holds good. After Mt. Shahanshah Begum obtained a decree for sale, she became a decree holder and not a mere mortgagee. If she allowed her rights under that decree (and she had no other rights left) to become barred by time she cannot be said to be a person who still had an interest in the property sold. We, therefore, are of opinion that the order of the execution Court directing that half of the surplus of the sale proceeds should be paid over to Mt. Shahanshah Begum was not a correct one. We accordingly uphold the decree of the Court below and dismiss the appeal with costs including fees in this Court on the higher scale.