1. The question for decision in this appeal is whether the respondents are entitled, as held by the lower Appellate Court, in execution of a decree on a mortgage to bring the property to sale free from a prior mortgage. The appellant mortgaged the property first to Umrao Singh and afterwards to Bhup Singh. Umrao Singh sued on his mortgage without impleading Bhup Singh and obtained a decree for sale, which he transferred to the appellant's brother Bahal. Bhup Singh transferred his mortgage to the respondents, who obtained a decree for sale subject to the prior mortgage, Bahal died leaving the appellant as his sole heir. The respondents have now applied for execution of their decree, and they claim to be entitled to bring the property to sale free from the prior mortgage, on the ground that, when Bahal died and the benefit of the prior mortgage passed to the appellant, that mortgage merged in the appellant's proprietary right and was extinguished. The appellant on the other hand contends that no merger took place. The first Court held with the appellant, but the lower Appellate Court accepted the contention of the respondents. Hence this appeal.
2. Section 101 of the Transfer of Property Act was referred to in the course of the arguments, but that Section appears to apply only to the converse case of the owner of an encumbrance becoming the absolute owner of the property, though it is not easy to see why the words 'is or' were inserted in the Section. There being no legislative provision on the question for decision, the case must be decided according to broad principles of equity and good conscience, with such assistance as may be afforded by reported decisions of the Courts. We have not been referred to any case that is precisely in point, but there are several cases which bear more or less closely on the point now before us. The question whether an encumbrance acquired or paid off by the absolute owner of the property is to be considered extinguished or kept alive for his benefit is, according to a long line of authorities, generally one of intention. In the case of Thorne v. Cann (1895) A.C. 11 : 64 L.J. Ch. 1 : 11 R. 67 : 71 L.T. 852 Lord Mac-naghten said: 'Nothing, I think, is better settled than this, that when the owner of an estate pays charges on the estate which he is not personally liable to pay, the question whether those charges are to be considered as extinguished or as kept alive for his benefit is simply a question of intention. You may find the intention in the deed or you may find it in the circumstances attending the transaction, or you may presume an intention from, considering whether it is or is not for his benefit that the charge should be kept on foot.' The decision in Johnson v. Webstar (1854) 4 De G.M. & G. 474 : 3 Eq. R. 99 : 24 L.J. Ch. 300 : 1 Jur. (N.S.) 145 : 3 W.R. 84 : 2 Sm. & G. 136 : 43 E.R. 592 : 24 L.T. (O.S.) 178 : 102 R.R. 225 shows that the rule is the same where the owner of an estate inherits a charge thereon. In the absence of expressed intention to the contrary, it will be presumed that when a person claiming to be absolute owner of property acquires or pays off a mortgage thereon, and there is no subsequent encumbrance, he intends to extinguish the mortgage, but 'where there is an encumbrance intermediate between the mortgage paid off or acquired and the ownership of the property, the presumption is the other way See Johnson v. Webster (1854) 4 De G.M. & G. 474 : 3 Eq. R. 99 : 24 L.J. Ch. 300 : 1 Jur. (N.S.) 145 : 3 W.R. 84 : 2 Sm. & G. 136 : 43 E.R. 592 : 24 L.T. (O.S.) 178 : 102 R.R. 225; Mohesh Lal v. Mohant Bawan Das 10 I.A. 62 : 9 C. 961 : 13 C.L.R. 221 : 7 Ind. Jur. 382 : 4 Sar. P.C.J. 424; Adams v. Angell 25 W.R. 139 affirmed 5 Ch. D. 634 : 46 L.J. Ch. 352 : 36 L.T. 334 and Gokaldas Gopaldas. v. Puranmal Premsukhdas 10 C. 1035 : 11 I.A. 126 : 8 Ind. Jur. 396 : 4 Sar. P.C.J. 543 it would be very much to the advantage of the appellant to keep the first mortgage alive, and in various ways which need not be detailed he has shown that he wishes to keep it alive. The question is whether the rule stated above, which is founded on the clearest equity and has, as we have shown, been applied by their Lordships of the Privy Council to Indian cases, applies to the case before us in which both mortgages were made by the owner of the property, who however wishes to hold one up against the other. In England and also in India it has been held that if the owner of an estate creates and pays off a mortgage, the mortgage merges in the owner's estate, and that an owner who has paid off a prior encumbrance cannot set it up against his own mortgage See Otter v. Vaux (1856) 2 K. & J. 650 affirmed 43 E.R. 1881 : 106 R.R. 235 : 6 De. G.M. & G. 638 : 26 L.J. Ch. 128 : 3 Jur. (N.S.) 169 : 5 W.R. 188 the dictum of Chitty, J. in Platt v. Mendel (1884) 27 Ch. D. 246 : 54 L.J. Ch. 1145 : 51 L.T. 424 : 32 W.R. 918 and Bhaju Chaudhri v. Chuni Lal 11 C.W.N. 284 : 5 C.L.J. 95. Like the general rule, this exception to it seems to us to be founded on the plainest equity. Does the fact that the appellant inherited the prior mortgage furnish any ground for distinguishing the present case from the cases last referred to? We think not. Indeed we are inclined to think that the fact that the appellant acquired the rights of the prior mortgagee without having to pay for them, makes the case somewhat stronger against 'him than it would have been if he had paid for them. It seems to us that it would be inequitable to allow the appellant to set up a mortgage which he himself created, but on which he has had to pay nothing, against a subsequent mortgage which he under took personally to discharge. Acquisitions by a mortgagor enure as a rule for the benefit of his mortgagee, thereby increasing the value of his security, see Raja Kishen Datt v. Raja Mumtaz Ali Khan 5 C. 198 at p. 210 : 5 C.L.R. 213 : 6 I.A. 154 : 4 Sar. P.C.J. 17 : 7 Suth. P.C.J. 637 rafique & Jackson's P.C. No. 58 : 3 Ind. Jur. 426 : 3 Shome L.R. 1 and Ajudhia Prasad v. Man Singh 25 A. 46 : A.W.N. (1902) 176. On the whole we are of opinion that the decision of the lower Appellate Court is correct. To avoid misapprehension we may add that it has not been shown that the appellant's brother left any debts. The prior mortgage would, of course, be liable in the hands of the appellants for the debts of his brother. There could be no question of merger to the prejudice of the brother's creditors.
3. The appeal is dismissed with costs.