1. The facts of the case on which the decision of this appeal turns are as follows:
The plaintiffs, respondents to this appeal, sold certain zamindari shares for Rs. 900 to Adit Singh and four others. On the same date they sold for Rs. 150 to Adit Singh alone, two rent Court decrees in their favour. Adit Singh could not pay down the purchase-money of this sale, and as security therefor he mortgaged to the plaintiffs his share in the property which had been purchased from them by the former of these two sale-deeds. The mortgage was created on the same date but subsequent to the sale. The present appellants brought a suit to pre-empt the zamindari. To this suit they joined as parties the vendors and the vendees, the former being the mortgagees under the subsequent mortgage.
2. These vendors did not defend the suit and the appellants obtained a decree conditional on payment of the full consideration for the sale. This sum they paid and then were placed in possession. The vendors (mortgagees) have now sued to enforce their mortgage. Adit Singh having died, they made his two sons parties to the suit and they also impleaded the pre-emptors, as owners of the mortgaged property. They asked for a decree for sale of the property in the first instance, and in the alternative, for a decree against the persons and property of the sons of Adit Singh. The first Court granted them a decree for sale and dismissed their alternative claim.
3. They preferred no appeal bat the present appellants (pre-emptors) did. The lower appellate Court held that the property was not liable for the mortgage debt, in the hands of the pre-emptors, and dismissed the suit as against the appellants. A second appeal was preferred to this Court and the learned Judge, who heard it, held in favour of the plaintiffs, that the property was liable in the hands of the pre-emptors for the mortgage debt, decreed the appeal and remanded the case for decision on the merits. The defendants pre-emptors have, therefore, preferred this appeal under the Letters Patent. The sons of Adit Singh were not parties to the second appeal and are not parties to this appeal.
4. It is urged that the learned Judge of this Court was mistaken in the facts of the case as he was under the misapprehension that the mortgagees were not parties to the preemption suit. His judgment shows this to be correct. The mortgagees were the vendors of the property which was the subject of the pre-emption suit. They were, therefore, parties, though they did not defend. No mention of the mortgage is to be found in the judgment of the suit for pre-emption.
5. It is next urged that the right of pre-emption is not a right of re-purchase but a right to be substituted for the vendee as he stood at the moment of the sale; that the vendee's right as a purchaser was not an indefeasible right, as it was subject to the appellants' right of pre-emption, and the vendee, therefore, could not defeat the pre-emptive right by subsequently mortgaging the property, and thus force the pre-emptor to take the property subject to a mortgage thus created. In our opinion this contention is well-founded. In the case of Gobind Dayal v. Inayatullah 7 A. 775. the right of pre-emption was defined as a right of substitution entitling the pre-emptor to stand in the shoes of the vendee in respect of all the rights and obligations arising from the sale. It is in effect as if the vendee's name had been rubbed out of the sale-deed and the pre-emptor's name inserted in its place. It is true that the pre-emptor's right accrues on the date on which he pays into Court the amount of the consideration under the pre-emption decree, but the property which he secures is that which passed under the sale-deed and not that property subject to a mortgage created by the vendee subsequently to the sale, i.e., he pre-empts the property and not the equity of redemption (the mortgage not being one in existence at the date of the sale).
6. The rulings reported in Seri Mal v. Hukam Singh 20 A. 100 and Narain Singh v. Parbat Singh 23 A. 247 do not govern the present case. In both of those cases the stranger vendee re-sold the property to a co-sharer in the village (who had a right of pre-emption equal to or better than that of the pre-emptor), on a date prior to the institution of the suit for pre-emption. This, it was held, defeated the plaintiffs' right to pre-empt. The principle on which these rulings were based is that the wrong which the plaintiff had come into Court to set right viz., the introduction of a stranger into the co-parcenary body, no longer existed on the date of suit, having been removed by the re-sale to a co-sharer with a pre-emptive right at least equal to that of the pre-emptor. That principle does not operate in the circumstances of the present suit, where a portion only of the property has been mortgaged to the original Vendor who parted with his share. On behalf of the respondents it is contended that the vendee has every right to enjoy the usufruct of the property until it is pre-empted and that a right to mortgage it is one of the rights of enjoyment thereof. Reference is made to the case of Deo Bat v. Ram Autar 8 A. 502 but it was no where held in that case that the vendee was entitled to create a mortgage on the property binding on the pre-emptor. It was held that a pre-emptor, before his pre-emption is actually enforced, possesses no such right in the subject of pre-emption as would entitle him to any benefit arising out of the property which he is entitled to take but has not yet taken.
7. In support of the contention that a vendee is entitled to deal with the property as he likes until the pre-emption suit is instituted, attention is called to an unreported decision of a Bench of this Court in S.A. No. 724 of 1906, Allahdad Khan v. Munshi Abdul Hakeem, decided on 15th April 1907.
8. In that case the vendee had re-sold to another stranger prior to the institution of the suit and the latter was in possession. The vendee pleaded that he had sold and had no longer any interest in the property and so the 2nd vendee was made a party to the suit, but the plaintiff did not amend his plaint nor seek to pre-empt both sales and for this reason his suit failed. It is clear, however, that if he had amended his plaint his claim would have been decreed, granting that he had a right of pre-emption. This clearly indicates that the 1st vendee had no power to so dispose of the property to a stranger as to defeat the pre-emptive right. In the present case, however, the second transfer is only a mortgage.
9. Our learned brother was of opinion that possibly it would have been sufficient in the present case, if the mortgagees had been made parties to the pre-emption suit so that the sale price might not have been paid to the mortgagor behind their backs. As a matter of fact they were impleaded but on their behalf it is contended that they could not have pleaded the mortgage as a defence to the suit. This may be so, but at least they had an opportunity of placing their hands upon the money paid into Court by the pre-emptor and if they have not done so it is their own fault. Their mortgagor's right to the property was subject to the appellant's right of pre-emption. He could not pass a better title than he had himself and they took the mortgage at their own risk. To allow a vendee thus to mortgage property, while subject to the pre-emptor's right so as to bind it in the hands of the pre-emptor, would open the door to fraudulent transactions calculated to defeat the right of preemption. The very nature of this right, the right to be substituted for the vendee as he stood at the moment of sale, shows that it cannot be allowed to be defeated in this manner. Under Muhammadan Law also a subsequent disposition of the property by the vendee is voidable at the option of the pre-emptor. (vide Amir Ali's Muhammadan Law).
10. We, therefore, allow this appeal, set aside the judgment and decree of this Court and re-instate that of the Court of first appeal.
11. Applleants will have their costs in all Courts including in this Court fees on the higher scale.