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Tota Ram and ors. Vs. Ram Lal and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtAllahabad
Decided On
Reported inAIR1932All489
AppellantTota Ram and ors.
RespondentRam Lal and ors.
Excerpt:
- - the appellants were impleaded as the third mort gagees and they pleaded inter alia that they had satisfied paras ram's mortgage and without paying that amount the plaintiffs were not entitled to get the property in question sold by auction. in the circumstances the rule laid down by the legislature would be a safe guide to follow as laying down correctly the rule of justice, equity and good conscience for cases arising before the passing of act 20 of 1929. 11. the result is that in our opinion the question for our decision must be answered in favour of the appellants, and we must hold and do hold that the appellants are subrogated to the position of the first mortgagee......following point of law, namely:where a third mortgagee professes to keep in his hand a part of the mortgage money in order to pay off the first and second mortgages and pays of only the first mortgage, whether in a suit by the second mortgagee to enforce his mortgage it is open to the third mortgagee to insist on his being treated as a first mortgagee whose mortgage must be paid of before the plaintiff brings the mortgaged property to sale.2. the facts of the case are stated in the referring judgment and briefly are as follows:one ram chandra was the owner of a certain property. he mortgaged the same for a sum of rs. 200 to one paras ram on 19th october 1915. the next year on 16th october 1916, he made a simple mortgage of the same property in favour of one ram lal and one ganga sahai,.....
Judgment:

Mukerji, J.

1. This case has been referred to a Full Bench for a decision of the following point of law, namely:

Where a third mortgagee professes to keep in his hand a part of the mortgage money in order to pay off the first and second mortgages and pays of only the first mortgage, whether in a suit by the second mortgagee to enforce his mortgage it is open to the third mortgagee to insist on his being treated as a first mortgagee whose mortgage must be paid of before the plaintiff brings the mortgaged property to sale.

2. The facts of the case are stated in the referring judgment and briefly are as follows:

One Ram Chandra was the owner of a certain property. He mortgaged the same for a sum of Rs. 200 to one Paras Ram on 19th October 1915. The next year on 16th October 1916, he made a simple mortgage of the same property in favour of one Ram Lal and one Ganga Sahai, son of Tika Ram. The second mortgage was for a sum of Rs. 400 and' Ram Lal and Ganga Sahai kept a portion of the mortgage money with themselves to pay off Paras Ram. Ram Lal and Ganga Sahai however did not pay off Paras Ram and their suit out of which the present appeal has arisen is for recovery of a sum of Rs. 176 principal amount and interest.

3. Ram Chandra sold the property on a date which is unknown to one Ganga Sahai, son of Shimbhoo and this Ganga Sahai made a simple mortgage of the property sold to the present appellants, (defendants 3 to 5), Ram Chandra, Tota Ram and Durga, for Rs. 2,000 on 29th July 1926. Out of the mortgage consideration of Rs. 2,000 a sum of Rupees 676-3-0 was left with the mortgagees for payment to Paras Ram, a sum of Rupees 730-8-0 was left with the mortgagees to pay the second mortgage held by the plaintiff-respondents, Ram Lal and Ganga Sahai, son of Tika Ram, a sum of Rs, 557-13-6 was similarly left with the mortgagees to pay off a simple money decree held against the vendor and a sum of Rs. 35-7-6 was paid in cash to the vendor. On 29th November 1926, the heirs of Paras Ram were paid by the appellants a sum of Rs. 704-12-0 in full satisfaction of the first mortgage, dated 19th October 1915. The second mortgage not having been discharged, Ram Lal and Ganga Sahai, son of Tika Ram have claimed their money. The appellants were impleaded as the third mort gagees and they pleaded inter alia that they had satisfied Paras Ram's mortgage and without paying that amount the plaintiffs were not entitled to get the property in question sold by auction. We have to consider whether in the circumstances of the case the appellants were subrogated to the position of Paras Ram. The point raised in this appeal has given rise to conflicting decisions, although it must be said that in this. Court the majority of cases has decided that a third mortgagee paying off the first mortgage in the circumstances of the present case is not entitled to be subrogated to the position of the first mortgagee. The earliest important case-on this point is the Full Bench decision in Muhammad Saddiq v. Ghaus Muhammad [1911] 33 All. 101 It was a case of a purchaser from the mortgagor paying off the first mortgage, and it was held in the circumstances of the case that it was never the intention of the purchaser to keep the first mortgage alive. It was pointed out that at the date of the sale the intention of the purchaser was to pay off and extinguish the first mortgage and not to keep it alive. Then it was pointed out that if the date of payment be the crucial date on which the intention to keep alive or extinguish was to be entertained then the written statement showed that no idea of keeping alive the first mortgage was entertained at the date of payment because it was not even mentioned by way of defence and the point was raised subsequently as an 'afterthought.'

4. This case and the Privy Council case of Mahesh Lal v. Mohunt Bawan Das [1883] 9 Cal. 961 were cases of purchasers whose interest it might be to extinguish the mortgage and to hold the property free from it for their own benefit. Both the cases-were decided on the peculiar facts of the case and their Lordships took care to point out the questions of fact which determined their decision. The principle-of merger which was contained in a codified form in Section 101, T.P. Act before its amendment and which is still to be found in the amended section of the same Act, does not lay down that there-may be a merger, where the person paying off the earlier charge was only a charge holder or mortgagee and not a full owner. It is only in the case of a larger interest being acquired that a smaller interest disappears on the principle of merger. This was entirely overlooked in some subsequent cases decided in this Court and a doctrine of agency was evolved. It was said that the money with which the third or any subsequent mortgagee pays the first mortgage is the property of the mortgagor and as no subrogation is allowed to a mortgagor, the third or subsequent mortgagee in making the payment is acting only as an agent of the mortgagor and he is not entitled to be subrogated to the position of the first mortgagee. Such a case was that of Makhan Lal v. Nathi A.I.R. 1923 All. 509. There the learned Judge applied the case of Muhammad Sadiq v. Ghaus Muhammad [1911] 33 All. 101 without distinguishing the feature of the earlier case that there the person making the payment was a purchaser from the mortgagor. This case has been followed by other cases in this Court but a contrary view has also been taken in this Court : see for example Shiam Lal v. Basir Uddin [1906] 28 All. 778 and Chhote Lal v. Bansidhar : AIR1926All653 . In Madras the case of Vanmikalinga v. Ghidambara [1906] 29 Mad. 37 and in Calcutta the case of Jagatdhar v. Brown [1906] 33 Cal. 1133 take the same view as this Court did in the two cases just mentioned.

5. The doctrine of agency has much to be said against it. To start with there does not appear to be any difference in principle between a case where a purchaser or a third mortgagee advances some money to the vendor or the mortgagor, as the case may be and then pays off the first mortgage and the case where a purchaser or a third mortgagee professes to take the transfer for a larger sum than in the earlier case and keeps with him the money needed for paying off the earliest mortgage and actually does not hand over the money to the vendor or the mortgagor, but uses the money to pay off the first mortgage. It is conceded that in the first case a subrogation does arise, but it is denied that it arises in the second case. The principle of subrogation has been brought into existence on the ground that the person who has discharged a burden should not lose, the money spent on discharging the burden and a subsequent mortgagee who has contributed nothing to discharge the burden should not have the benefit of the discharge for which he has not contributed. The Privy Council cases of Dinbandhu v. Jogmaya [1902] 29 Cal. 154 and Ibrahim Husain v. Ambika Prasad [1912] 39 Cal. 527 are entirely in our opinion inconsistent with the theory of agency propounded in some cases by the High Courts. The question however has become very much simplified and it may be said has entirely disappeared from the arena of controversy owing to the amendment of the Transfer of Property Act.

6. Before its amendment in 1929 the Transfer of Property Act did not even contain the word 'subrogation' and the law of subrogation had to be deduced from English cases and from general principles of equity. Section 74, T.P. Act, which has since been repealed contained only the rudiments of the law of subrogation and was not of much use. Section 92 as it now stands after amendment of 1929 does not recognize any doctrine of agency. It is couched in the simplest, widest and clearest language possible and the relevant portion runs as follows:

Any of the persons referred to in Section 91 (other than the mortgagor) and any co-mortgagor shall, on redeeming property subject to the mortgage, have so far as regards redemption, foreclosure or sale of such property, the same rights as the mortgagee whose mortgage ha redeems may have against the mortgagor or any other mortgagee.

7. Mr. Panna Lal who has argued the case for the respondents with his usual ability, has not denied that, if para. 1, Section 92, applied to the case, the appeal must succeed and the appellants must be treated as the first mortgagee. This is also clear because the appellants as the third mortgagees are among the persons who are entitled under Section 91, T.P. Act, to redeem the property : they have redeemed the property subject to the first mortgage and they have thereby, according to the terms of the rule of law, the same rights as the first mortgagee whose mortgage they have redeemed, against the mortgagor and any other mortgagee, the last expression including the plaintiffs-respondents. The fact that a part of the so called mortgage money was left with the third mortgagees, does not in any way destroy the facts that the appellants are the third mortgagees and it is they who have redeemed the first mortgage. It is clear therefore that if Section 92 as amended by Act 20 of 1929 applies the appeal must succeed.

8. Mr. Panna Lal however argued that Section 92 had no application because of the provision contained in Section 63, Act 20 of 1929. Section 63 deals with two portions of the Amendment Act. It first says that certain provisions of the Act (20 of 1929) shall not be deemed in any way to affect the terms or incidence of any transfer of property made or effected before the 1st day of April 1930 or to affect the validity or invalidity or consequences of anything done or suffered before the aforesaid date and so on. The provisions contained in Sections 92 and 101, T.P. Act, are dealt with by Sections 47 and 51 and these are not to be found in the first provision of Section 63, Act 20 of 1929. The second portion of Section 63, Act 20 of 1929, runs as follows:

And nothing in any other provision of this Act shall render invalid or in any way affect anything already done before the 1st day of April 1930 in any proceeding pending in a Court on that date; and any such remedy and any such proceeding as is herein referred to may be enforced, instituted or continued, as the case may be, as if this Act had not been passed.

9. Section 47, Act 20 of 1929 dealing with Section 92, T.P. Act and Section 51, Act 20 of 1929 dealing with Section 101, T.P. Act, fall under this Clause 2, Section 63, Act 20 of 1929. In our opinion there is nothing in Clause 2 which affects the present case. These sections are to have retrospective effect except in so far as they are not to have that effect according to the rule laid down. Now is there anything in this case which has already been done before the 1st day of April 1930, in any proceeding pending in a Court on that date? Then again is there any remedy and any such proceeding as is referred to in Act 20 of 1929 which is being affected by the new provisions of Sections 92 and 101? We do not find that such is the case. Indeed Mr. Panna Lal has not been able to point out to us what has been done in this case before 1st April 1930 which is being undone by the new rule of law and what is the remedy or proceeding which is being affected by the new provisions of Sections 92 and 101. All that has been done is to lay down a rule of subrogation which was not contained in the unamended Act. The rule was based on general ideas of equity, and it cannot be said that the new Act is going to affect any remedy or any proceeding which was lawful under the old Act. In our opinion therefore Sections 92 and 101, Amendment Act, have retrospective effect.

10. Supposing however that the said sections have no retrospective effect, we have got this position. This Court itself was divided as to the rule of subrogation in the circumstances of this case and there are conflicting decisions of other High Courts. Opinion is likely to differ as to how far the Privy Council case in Dinbandhu v. Jogmaya [1902] 29 Cal. 154 and Ibrahim Husain v. Ambika Prasad [1912] 39 Cal. 527 quoted above affect the decisions of the High Courts. In the circumstances the rule laid down by the legislature would be a safe guide to follow as laying down correctly the rule of justice, equity and good conscience for cases arising before the passing of Act 20 of 1929.

11. The result is that in our opinion the question for our decision must be answered in favour of the appellants, and we must hold and do hold that the appellants are subrogated to the position of the first mortgagee. We direct that the case be returned to the Bench making the reference with the answer given above.


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