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DIn Dayal Vs. Gursaran Lal and ors. - Court Judgment

LegalCrystal Citation
CourtAllahabad
Decided On
Judge
Reported in59Ind.Cas.67
AppellantDIn Dayal
RespondentGursaran Lal and ors.
Cases ReferredSri Chand v. Murari Lal
Excerpt:
.....have acquired it without any charge. 1. his second contention is that, inasmuch as all the seven houses mortgaged by ganga pershad were subject to a common charge and one of them was sold to gurdayal, he was entitled to have the charge satisfied out of the remaining six houses first. on the contrary, says the distinguished judge, there seems strong ground to contend that the original incumbrance or lien ought to be borne rateably between them according to the relative values of the estate (story's equity, section 1233 a).'again, at page 368, towards the conclusion of the discussion of the subject, the learned author writes that, robbing peter to pay paul, is not, as lord macnaughten said in a resent case, a principle of equity, and it is satisfactory to find that in the only case in..........sold the house to his brother dindayal and gave possession to him. on the 10th of january 1910, nanak pershad, the plaintiff, obtained a simple money decree against ganga pershad for the sum of rs. 166 and, in execution of this decree, he attached the houses nos. 2 and 3, and applied for their sale. kallumal, the mortgagee, applied to the court executing the decree, praying that the houses may be sold subject to his charge under the mortgages in his favour, and that a proclamation may be made to that effect. this application was allowed and the houses nos. 2 and 3 were sold and purchased by nanak pershad on the 12th of june 1911 subject to the mortgage charge of kallumal. the sale was confirmed on the 14th of july 1911. on the 6th of june, ganga pershad had applied to the insolvency.....
Judgment:

Abdul Raoof, J.

1. This appeal has arisen out of a suit for contribution brought by Nanak Pershad, plaintiff, in whose place the present respondents have been substituted as his legal representatives, against Din Dayal, defendant appellant. In order to understand the contentions raised by the parties, it is necessary to set out, in some detail, the facts which are either found or admitted by the parties.

2. A list of seven houses is attached to the plaint. One Ganga Pershad is stated to have been the owner of these houses. On the 16th of August 1903 the said Ganga Pershad contracted to sell house No. 1 to one Gurdayal, brother of the defendant-appellant, for Rs. 80, out of which Rs. 40 was paid in advance at once. On 20th of April 1905, he mortgaged the house No. 1 along with the six other houses to one Kallumal for Rs. 600. On the 16th August 190(sic) he executed a second mortgage for Rs. 400 in favour of the same Kallumal, mortgaging the same houses. On the 5th of January 1907 Gurdayal sued for the specific performance of the contract of sale of 1903, and obtained a decree on the 5th of February 1907. On the 24th of April 1907, a sale-deed was executed, in pursuance of the decree, in favour of Gurdayal, with respect to the house No. 1 and possession was delivered to him. On the same date, Gurdayal sold the house to his brother Dindayal and gave possession to him. On the 10th of January 1910, Nanak Pershad, the plaintiff, obtained a simple money decree against Ganga Pershad for the sum of Rs. 166 and, in execution of this decree, he attached the houses Nos. 2 and 3, and applied for their sale. Kallumal, the mortgagee, applied to the Court executing the decree, praying that the houses may be sold subject to his charge under the mortgages in his favour, and that a proclamation may be made to that effect. This application was allowed and the houses Nos. 2 and 3 were sold and purchased by Nanak Pershad on the 12th of June 1911 subject to the mortgage charge of Kallumal. The sale was confirmed on the 14th of July 1911. On the 6th of June, Ganga Pershad had applied to the Insolvency Court at Cawnpore to be declared an insolvent, mentioning the name of Nanak Pershad in the list of the creditors given in his application. On the 22nd of July an order of adjudication was made. On the same date, on the application of Kallumal, mortgagee, the Insolvency Court ordered the houses Nos. 2 and 3 to be sold by the Receiver to discharge his mortgage. On the 25th of July Nanak Pershad put in an application in the Insolvency Court objecting to the sale of the houses by the Receiver on the ground that they had been purchased by him before the order of adjudication and that they had not vested in the Receiver. The only order made by the Insolvency Court on this petition was 'shamil misil rahe' (Let it be placed on the record). On the 29th of July 1911, the Receiver applied to the Insolvency Court for an injunction prohibiting Nanak Pershad from taking possession of houses Nos. 2 and 3, and an order was made accordingly. On the 3rd of August 1911, Nanak Pershad applied to have the injunction set aside, stating that he was the owner of the houses, and that he was not a creditor of the insolvent. This application was rejected and the reason for its rejection was stated by the Court that, he had not purchased the houses free from incumbrance. On the 14th of December, however, Nanak Pershad was required to pay off the mortgage of Kallumal by the end of January 1912. The houses were subsequently sold by the Receiver on the 25th of July 1912 for the sum of Rs. 1,875. Out of this sum Rs. 1,629-10 3 were paid to Kallumal in satisfaction of his two mortgages, on the 1st of August 1912. The balance of Rs. 245 5 9, after deducting the Receiver's fee, was handed over to Nanak Pershad. On these facts the plaintiff sued to recover Rs. 1795.3 with interest from the 1st of August 1912, total Rs. 292 6.3, by way of contribution from the defendant as the purchaser of the house No. 1. There was some dispute as to the valuation of the house No. 1, and as to the proportionate amount claimable in respect of it, but this was settled by mutual agreement which was recorded in a rubkar dated the 1st of July 1915, which is to be found on the record as paper No. 32C. The defendant contested the suit mainly on the following grounds:

3. That the house No. 1 had been purchased on the 24th of April 1907 in pursuance of the contract of sale of 1903, and that, as there was no mortgage existing at the date of the contract and that also as Gurdayal, the vendee, had no notice on the 24th of April 1907 of the mortgagee of the 24th of April 1905 and the 16th of August 1906, the charge created under those mortgage's was not binding on him and that no contribution could be claimed against him. Some other minor pleas were also raised in the written statement but, as those were decided against the defendant by the Courts below and as to which there is no further contention, it is not necessary to mention them here. There is, however, one plea, which, though not taken in the written statement, appears to have been urged in the Court below and is also urged in this Court. Shortly put, the plea comes to this, 'that the mortgages of Kallumal were not redeemed by the plaintiff but were paid off by the sale of the houses Nos. 2 and 3 by the Receiver; therefore, the plaintiff had no right to claim contribution.

4. The Court of first instance repelled all the pleas raised in defence and passed a decree in favour of the plaintiff for the recovery of Rs. 223 10 11 by the sale of the house No. 1. On an appeal to the lower Appellate Court the judgment and decree of the first Court were upheld. The defendant has now preferred a second appeal to this Court and the following grounds have been urged against the decision of that Court. As to the effect of the mortgages of Kallumal on the house No. 1, the contention of the learned Vakil for the appellant is two-fold. In the first place, he contends that the mortgagee having been effected after the contract of sale, the mortgagor had no power to bind the interest of Gurdayal, who, having purchased the house on the 24th of April in good faith and without notice, must be taken to have acquired it without any charge. The agreement to sell conferred no title on Gurdayal, as, according to Section 54 of the Transfer of Property Act, a contract of sale of itself does not create any interest in or charge on any property with respect to which the contract is made. On the date on which the sale-deed was executed. Gurdayal, therefore, had no interest, in or charge on the house No. 1. The two mortgages in favour of Kallumal were registered and according to the rulings of this High Court, Gurdayal must be taken to have had notice of them when he purchased the house No. 1. His second contention is that, inasmuch as all the seven houses mortgaged by Ganga Pershad were subject to a common charge and one of them was sold to Gurdayal, he was entitled to have the charge satisfied out of the remaining six houses first. In support of this contention, he has relied on the provision of Section 56 of the Transfer of Property Act, and has argued that Gurdayal and his transferee, the present defendant-appellant, can claim the same equity against the representatives of Ganga Pershad, the seller, as they had a right to claim against him under the section. He has relied on 'Dart on the Law of Vendors and Purchasers', 7th Edition, Volume II, page 946, Chapter XIV, Section 6. The law on the point is thus stated there:

Where an estate subject to a paramount charge becomes divided among several purchasers, it becomes a matter of some difficulty to determine the proportions in which they are to bear it and between themselves. The authorities seem to lead to the following conclusions, viz.,

If two estates, X and Y, are subject to a common charge and estate X is sold to A, A will, as against the vendors, and his representatives, have a prima facie equity, in the absence of express agreement, and whether or not he had notice of the charge to throw it primarily on estate Y in exoneration of estate X.

If, then, estate Y is subsequently sold to B with notice of the charge and of the prior sale X to A, B purchases with notice of A's equity, and the entire charge must rest primarily upon Y.

5. In my opinion the passage above quoted is against the appellant's contention. In this case, it is not shown that Nanak Pershad, the purchaser of the houses Nos. 2 and 3, had notice of the purchase of the house No. 1 by Dindayal and of his equity against Ganga Pershad, the seller. A faint attempt was made to argue that Nanak Pershad must be taken to have had notice of the decree for specific performance dated the 5th of February 1907, and of the sale-deed, dated the 24th of April 1907, which was executed in pursuance of the said decree, but no rule of law or decision was cited in support of this argument. He has also relied on Ghosh's Law of Mortgages in India, Volume 1, pages 365 and 366, 4th Edition, where this question is fully discussed with special reference to the rules laid down in 'Dar(sic) on Vendors and Purchasers' to which reference has been made above. But the conclusion at which the learned author has arrived is not favourable to the appellant's case. At page 367 the learned author states, 'The correctness of the doctrine, however, has been questioned by Mr. Justice Story, who thinks that there is great reason to doubt whether it is maintainable upon principle; for, as between the subsequent purchasers, it is difficult to perceive that either has any superiority of right or equity over the other; on the contrary, says the distinguished Judge, there seems strong ground to contend that the original incumbrance or lien ought to be borne rateably between them according to the relative values of the estate (Story's Equity, Section 1233 a).' Again, at page 368, towards the conclusion of the discussion of the subject, the learned author writes that, 'Robbing Peter to pay Paul, is not, as Lord Macnaughten said in a resent case, a principle of equity, and it is satisfactory to find that in the only case in our reports in which the question has been discussed, the Calcutta High Court refused to follow the rule of the inverse order and, if I may venture to say so, rightly, for there is no sound reason, in the absence of special circumstances, for preferring one purchaser for value, to another'. The Calcutta case referred to in this quotation is Magniram v. Mehdi Hossein Khan 31 C. 95 : 8 C.W.N. 30. It was held in that case that the rule of marshalling in the case of purchasers as laid down in Section 56 of the Act did not apply to a case between purchaser and purchaser; Section 56, being limited in its operation to the case in which the party claiming marshalling is a purchaser and the party against whom it is claimed is the original mortgagor. The learned Judges at pages 102 and 103, observed as follows:

As to the third point the argument is this: that as when the defendant first party purchased their two properties from the mortgagors and remaining two properties were still in the hands of the mortgagors, the purchasers might well have thought that the mortgage debt would be paid wholly out of the properties still in the hands of the mortgagors; and the plaintiff, a subsequent purchaser, must be taken to be in the shoes of the mortgagors. And if that is so, the sale at the instance of the prior mortgagee should be, as it has been, in the inverse order of sales to the different purchasers, that property being sold in satisfaction of the mortgage decree first, which was purchased from the mortgagors last. We are unable to give effect to this contention. Though, as between the mortgagor and the purchaser from the mortgagor, property in the hands of the mortgagor should be sold first, without giving the mortgagor any claim for contribution, yet, when all the properties have passed to one hands of purchasers for value, there is no sufficient reason for holding that later purchasers should not be entitled to contribution as the earlier ones. It appears to us that the rule best in accord with principles of justice, equity and good conscience is to make the mortgaged properties in the hands of different purchasers liable to contribute to the mortgage-debt in proportion to their values.

6. The decision in this case fully governs the present case and that is why I have largely quoted from it. The authorities above mentioned clearly show that, as between purchaser and purchaser, the rule of equity embodied in Section 56 of the Transfer of Property Act can have no application.

7. The next question which I have to decide is, whether the fact that the common charge under the mortgages of Kallu was discharged out of the houses Nos. 2 and 3, gave to the plaintiff the right of contribution against other properties under the circumstances of this case. On this question, also, the argument of Mr. Katju has been two-fold. In the first instance, he has argued that the application of Ganga Pershad to the Insolvency Court to be declared an insolvent was made prior to the auction sale of the houses Nos. 2 and 3; consequently, the order of adjudication by the Court on the 22nd of July 1911 vested the ownership of the two houses in the Receiver from the date of the petition, that is, the 6th of June 1911, as it related back and took effect from that date, under Clause 6 of Section 16 of the Provincial Insolvency Act. He, therefore, contends, that the plaintiff never acquired the ownership of the houses Nos. 2 and 3, and is not entitled to claim contribution from the defendant. His second contention is that the houses in question were not sold by the plaintiff in order to discharge the mortgages in favour of Kallu. They were actually sold by the Receiver under the order of the Court and the proceeds of the sale were applied to the satisfaction of the common paramount charge. The first contension ignores the special provision of Section 34 of the Provincial Insolvency Act. It cannot be denied 'that the order of adjudication was made on a date subsequent to the date on which the plaintiff sold the two houses in execution of his simple money-decree and realized the assets. Clause 1 of Section 34 provides that, 'Where execution of a decree has been issued against the property of a debtor no person shall be entitled to the benefit of the execution against the Receiver except in respect of assets realized in the course of the execution by sale or otherwise before the date of the order of adjudication.' The provisions of Section 16, Clause 6, cannot control the provision of Section 34 of the Act in this respect. As noted above, Nanak Pershad had not only attached the houses in execution of his money decree but the execution had proceeded further and the assets had been realized long before the order of adjudication was made. In the case of Basarmal Awatmal v. Khemchand Daryanomal 11 Ind. Cas. 433, the learned Judicial Commissioner of Sindh had to construe Section 34 of the Provincial Insolvency Act, with reference to facts very much similar to the facts of this case, and the decision in that case fully applies to the circumstances of the present case. I agree in the interpretation put by the learned Judicial Commissioner upon the provisions of Section 34 and hold that the ownership of the houses in question did not vest in the Receiver. This view is also supported by the decision in the case of Sri Chand v. Murari Lal 16 Ind. Cas. 183 : 10 A.L.J. 252 : 34 A. 628.

8. His second contention under this head is, that as Nanak Pershad, plaintiff, had not availed himself of the permission accorded to him by the Insolvency Court by the order of the 14th of December 1911, to pay off the mortgages of Kallumal by the end of January 1912, and the houses had actually been sold by the Receiver on the 25th of July 1912 it cannot be said that the plaintiff had discharged the common burden and had redeemed the mortgages, so as to have the right of contribution against other properties. This argument ignores the clear provisions of Section 82 of the Transfer of Property Act. The section provides: 'Where several properties, whether of one or several owners, are mortgaged to secure one debt, such properties are, in the absence of any contract to the contrary, liable to contribute rateably to the debt secured by the mortgage....'

9. It cannot be denied, on the facts stated above, that the house No. 1 and the houses Nos. 2 and 3, together with the other houses, had been mortgaged to secure the debt due to Kallumal. No contract to the contrary being either alleged or proved, they must all be held liable to contribute rateably to the debt secured by the mortgages in Kallumal's favour. In connection with this question we ought not, also to lose sight of the provisions of Clause 3 of Section 34 of the Insolvency Act, according to which a person who in good faith purchases the property of a debtor under a sale in execution, shall in all cases acquire a good title to it against the Receiver. This clause supplies a complete answer to the argument of the appellant that the purchase of the houses Nos. 2 and 3 by the plaintiff in the execution of sale cannot be said to be the realization of assets in the course of an execution by sale. Moreover, I do not think that such a narrow construction should be put upon the provisions of Section 34. As found by the lower Appellate Court, there are circumstances in this particular case which go to show that neither the Insolvency Court nor the Receiver ever treated the houses as having vested in the Receiver. The sale by the Receiver of the houses, in order to satisfy the mortgages of Kallumal, therefore, must be taken to have been effected, with the consent, and on behalf, of Nanak Pershad the plaintiff.

10. Some argument was addressed also on the question of the proportionate amount of money which ought to be contributed by the house No. 1 but, having regard to the agreement of the parties which was recorded in the robkar dated the 1st of July 1915, paper No. 32C on the record, this contention, is not open to the appellant. In this view this appeal cannot succeed. The judgment and decree of the lower Appellate Court are right and the appeal must be dismissed. I, accordingly, dismiss it with costs, including in this Court fees on the higher scale.

Judgment

In our opinion the decision of the learned Judge of this Court is correct. We, therefore, dismiss this appeal with costs.


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