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Md. Shafiqullah Khan Vs. Md. Samiullah Khan - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAllahabad
Decided On
Reported inAIR1929All943
AppellantMd. Shafiqullah Khan
RespondentMd. Samiullah Khan
Cases ReferredLiquidation Estates Purchase Co. v. Willoughby
Excerpt:
.....ostensible owner believing him to be the true owner and without actual knowledge of shafiqullah's suit, the transfer taken by him is voidable at the option of shafiqullah and the latter cannot be deprived of the benefit of section 52 of any supposed estoppel operating against him. and the section provides that in order to defend the transfer of such a nature the transferee must show that he had taken reasonable care to ascertain that the transferror had power to make the transfer and has acted in good faith. the fact that such a suit has been brought in good faith is one which the transferee must be able to ascertain by taking reasonable care. but having regard to the finding of the district judge that the plaintiff acted in good faith and was induced by the previous conduct of..........finding of the lower appellate court is that samiullah had no knowledge of the institution of the suit by shafiqullah, that he acted in good faith and took the property from nuhullah and others believing them to have title and that this belief was induced in his mind by the previous conduct of shafiqullah khan who had allowed the names of nuhullah and others to remain in the revenue papers and had allowed them to remain in possession of the property. he accordingly held that the mortgagee samiullah was protected under section 41, t.p. act, and shafiqullah khan was estopped from setting up his own title. in the opinion of the learned judge the fact that the mortgage had been taken during the pendency of the suit did not help the defendant because the principle of lis pendens could not.....
Judgment:

Sulaiman, J.

1. This is a defendant's appeal arising out of a suit for recovery of money by sale. It appears that one Inayatullah Khan was the former owner of the property in suit and made a simple mortgage in favour of Ahmad Said Khan for Rs. 6,000 on 12th June 1912. He died in 1916. The defendant Muhammad Shafiqullah Khan is admittedly his son. There were three other persons, Nuhullah, Hakimullah and Halimullah, defendants 1, 2 and 3 who asserted themselves to be the legitimate sons of Inayatullah Khan, but whose legitimacy had been denied by Shafiqullah Khan. The names of these four persons were entered in the revenue papers against the property left by Inayatullah.

2. The mortgagee Ahmad Said Khan brought a suit on his mortgage and obtained a decree for sale. In 1919 Shafiqullah Khan paid one-fourth of the decretal amount and got a one-fourth share of the mortgaged property released from the mortgage.

3. On 19th May 1920, defendants 1, 2 and 3 borrowed Rs. 1,000 on a promissory note from one Tota Ram and on 20th May 1920, they deposited the amount and thereby partially discharged the mortgage decree.

4. On 19th July 1920 defendants 1, 2 and 3 executed a mortgage deed in favour of the plaintiff-respondent Samiullah Khan for Rs. 3,000. It is this deed which is the basis of the present suit. The mortgage money consisted of the following three items: Rs. 180 previously taken for expenses of the deed, 1,020 left with the mortgagee to be paid to Tota Ram, and Rs. 1,800 received in cash at the time of the registration. So far as the deed went there was no recital of the necessity for borrowing Rs. 1,800. It is, however, clear that Rs. 1,800 were paid before the Sub-Registrar in the afternoon of 19th July 1920 to the mortgagors and the mortgagors deposited Rs. 1,783-7-9 in Court on 20th July 1920 and thereby discharged the outstanding balance of the decretal amount.

5. It may here be mentioned that just four days before the mortgage namely on 15th July 1920 Shafiqullah had instituted a suit against Nuhullah and others for recovery of possession of the property standing in their names.

6. This suit was dismissed by the first Court in 1921 but was ultimately decreed by the High Court on 8th June 1925 and the decree of the High Court was affirmed by their Lordships of the Privy Council on 2nd May 1929. It was accordingly held inter parties that Nuhullah and the two others were not the legitimate sons of Inayatullah and that Shafiqullah was the sole heir to the inheritance left by him.

7. On 10th August 1925 the present suit was instituted by the mortgagee Samiullah against Nuhullah and others. By a subsequent order Shafiqullah Khan also was brought on the record.

8. The principle pleas taken by Shafiq Ullah Khan were that the mortgage had been taken pendants lite and was a nullity as against him, that Samiullah Khan was not a bona fide transferee from an ostensible owner and that he had no right to maintain the suit.

9. The first Court decreed the claim for a portion of the amount and dismissed the rest of the claim. Two appeals were preferred before the District Judge who has decreed the claim in full.

10. On the question of the benefit of Section 41, T.P. Act, the finding of the lower appellate Court is that Samiullah had no knowledge of the institution of the suit by Shafiqullah, that he acted in good faith and took the property from Nuhullah and others believing them to have title and that this belief was induced in his mind by the previous conduct of Shafiqullah Khan who had allowed the names of Nuhullah and others to remain in the revenue papers and had allowed them to remain in possession of the property. He accordingly held that the mortgagee Samiullah was protected under Section 41, T.P. Act, and Shafiqullah Khan was estopped from setting up his own title. In the opinion of the learned Judge the fact that the mortgage had been taken during the pendency of the suit did not help the defendant because the principle of lis pendens could not operate to set aside the estoppel.

11. Under Section 52, T.P. Act, during the active prosecution of a suit the property in dispute cannot be transferred or otherwise dealt with by any party so as to affect the rights of any other party under any decree that may be made therein. The section is imperative and becomes operative from the very moment of the institution of a bona fide suit which is not in any way collusive: Faiyaz Husain Khan v. Prag Narain [1907] 29 All. 339. It would, therefore, follow that the mortgage in favour of Samiullah Khan was invalid as against Shafiqullah Khan when ultimately he succeeded in the suit. It is, however, argued that the effect of the estoppel arising under Section 41 is to prevent Shafiqullah Khan from exercising his option to avoid the transfer under Section 52. Now under Section 41, not only should the transferrer be the ostensible owner of the property with the consent express or implied of the true owner but he must also transfer the same with such consent express or implied. There can be no doubt that the adverbial clause 'with the consent express or implied' modifies not only the verb 'is' but also the verb 'transfers.' It must, therefore, be held that the consent express or implied must continue up to the time of the transfer.

12. If the principle underlying Section 52 were based on the presumption of a constructive notice of the pendency of the suit by persons who take transfers from the parties thereto, the conclusion would be clear that the previous consent express for implied must be deemed to be revoked by the subsequent constructive notice of the pendency of the suit. Storey in his Equity Jurisprudence has put forward the proposition that the doctrine of lis pendens is based on some such constructive notice. I am of opinion that the remark of their Lordships of the Privy Council in the case of Faiyaz Husain Khan v. Prag Narain [1907] 29 All. 339, (at p. 345), precludes us from saying that the doctrine of lis pendens is founded upon any equitable principle of implied or constructive notice. All the same it is perfectly clear that when the Court is to record a finding whether a transfer takes place with the express or implied consent of the true owner it must take into account the fact that before the transfer the suit which is to establish the title of the principal owner against an ostensible owner was actually pending and the consent if it had existed before, had been definitely revoked. The institution of the suit is in itself a very strong and unmistakable proof of the fact that the consent did not subsist. I would not go so far as to say that a consent express or implied, once existing, can be revoked secretly without intimation to the parties who are acting upon that consent, but I have no doubt in my mind that the estoppel arising under Section 41 cannot be such as to override the imperative provisions of Section 52. Cases of an express consent given while a suit is pending or is intended to be filed may amount to an existing fraud which would alter the position of the parties completely. But in the absence of such fraud I do not see how Section 41 can override Section 52. Section 41 is a general section dealing with estoppel in the circumstances mentioned therein. Section 52 is a special section which applies to transfers during the pendency of a suit. In the presence of a special provision of law applicable to pending suits, the general provisions of estoppel contained in Section 41 would not apply. I have therefore no hesitation in holding that in spite of the finding of the District Judge that Samiullah Khan took the mortgage in good faith from an ostensible owner believing him to be the true owner and without actual knowledge of Shafiqullah's suit, the transfer taken by him is voidable at the option of Shafiqullah and the latter cannot be deprived of the benefit of Section 52 of any supposed estoppel operating against him. In this view the plaintiff's suit based on an enforcement of the mortgage taken pendente lite cannot be sustained.

13. If, however, he has paid off a prior Incumbrance and is entitled under the law to claim a charge in respect of such payment, the doctrine of lis pendens would not affect him, for the taking over of the prior debt would not amount to any dealing with the property in suit. It would be a mere continuance of a preexisting paramount liability. The next question is whether the plaintiff is entitled to any decree for money against Shafiqullah Khan. The other defendants have not appealed from the decree passed against them.

14. The learned District Judge has found as a fact that having regard to the close proximity of the dates and the other circumstances there can be no doubt that Rs. 1,800 borrowed on 19th May was deposited on 20th to satisfy Haji Ahmad Said Khan's decree. He has not definitely recorded a clear finding, but having regard to the fact that he has believed the evidence of Samiullah Khan and Nuhullah Khan, we may assume that the money had been borrowed by defendants 1, 2 and 3 in order to satisfy the mortgage debt. The counsel for the party hag to concede that there is no direct evidence on the record to show that at the time when the money was borrowed by Nuhullah and others from Samiullah there was an understanding that on the payment of the mortgage decree the security would be kept alive for the benefit of the subsequent mortgagee Samiullah Khan. The evidence on either side on this point is nil, and we have merely to depend on presumptions.

15. It may be taken as settled law that the mere fact that a previous mortgage has been paid off is not conclusive to decide that mortgage has not been extinguished: Mohesh Das v. Baman Das [1883] 9 Cal. 961 (at p. 977). That was a case of the purchaser of the equity of redemption and not of a subsequent mortgagee, but the principle laid down therein has been applied by the Courts to the cases of subsequent mortgagees also provided there are no intermediary incumbrances. Woomesh Chandra v. Roma Nath [1909] 1 I.C. 683, Sundaramayya v. Munnareddi Yanadamma : (1911)21MLJ180 , Kandaswami Naicker v. Venkata Reddiar A.I.R. 1925 Mad. 219 and Umrai Lal v. Rukmin Kuar [1916] 14 A.L.J. 953.

16. In face of these authorities I do not think that it can be laid down that in every case where a subsequent mortgages pays off a prior mortgagee he is entitled to subrogation. Where the prior mortgage-debt is paid off out of the amount left in the hands of the subsequent mortgagee for which there is a charge created by the deed itself, Section 74 would apparently be inapplicable. That section implies tender by the subsequent mortgagee on his own account and not as an agent of the mortgagor and gives to him a charge which would not otherwise have existed. In cases where money is paid out of the sums left in the hands of the subsequent mortgagee the hypothecated property is already a security for the entire amount. It therefore seems to me that although in cases where the subsequent mortgagee pays an additional sum to which Section 74 would be applicable, no enquiry into the intention to keep the debt alive is required to be made, the real intention has to be ascertained in other cases and such intention, if not expressly declared, can only be inferred from all the surrounding circumstances. In the present case I have already stated that the mortgage-deed did not itself recite the necessity for Rs. 1,800. If the mortgagee intended to keep it alive one would have expected him to take care to have a clear statement recorded to that effect, On the plaintiff's own showing he believed that his mortgagors were the true owners and there was no apprehension in his mind that any other claimant would come forward to oust him. It is also clear that there was no other intermediary mortgage. Thus there was no apparent reason why the mortgagee should intend to keep alive the previous mortgage debt for the payment of which the money was being advanced. In this connexion it may also be noted that the old mortgage had merged into a decree and was no longer in existence as a mortgage, and all that was left to be done was to save the property from sale by payment of the decretal amount. We also have the fact that the amount was taken by the mortgagors in cash and paid by them directly and not left in the hands of the mortgagee for the discharge of the prior debt. It could never have been the intention of the parties that the previous mortgage debt would be kept alive for the benefit of the subsequent mortgagee as against the mortgagors. In the absence of any direct evidence or of any circumstances indicating why there should have been a reason for entertaining the intention to keep the previous mortgage-debt alive, it is impossible to hold that the previous mortgage debt was not extinguished by the payment, but was kept alive for the benefit of the subsequent mortgages.

17. Even if we assume that the subsequent mortgagee has himself paid the amount of the prior mortgage which Shafiq-ullah was bound by law to pay and the case is covered by Section 69, Contract Act, and he is entitled to be reimbursed, the claim against Shafiqullah is hopelessly beyond time. It would undoubtedly be governed by Article 61, Lim. Act, being money payable to the plaintiff for money paid for the defendant. The suit was brought much more than three years after such payment.

18. I would accordingly allow the appeal and setting aside the decree of the lower appellate Court dismiss the plaintiff's suit in to.

Pullan, J.

19. I am in agreement with the judgment of my learned brother but wish to add a few observations on two of the questions raised. The first question is the alleged conflict between Sections 41 and 52, T.P. Act. Section 41 is a provision which can be invoked by the transferee who has received property by transfer from the ostensible owner. And the section provides that in order to defend the transfer of such a nature the transferee must show that he had taken reasonable care to ascertain that the transferror had power to make the transfer and has acted in good faith. Taking reasonable care involves some enquiry as to the opinion of other persons interested in the property and the section lays down as a preliminary that the transaction must be with the consent, express or implied, of such persons. It is not enough for the transferee to say that as far as he knows the other persons interested in the property have no objection to the transfer. He must take some definite step to ascertain whether they consent or not. This again does not mean that they consented in the past, but the transferee must ascertain if they consent at the time of transfer. A person who has filed a suit challenging the whole right of the transferors to dispose of the property, ipso facto does not consent to the transfer. The fact that such a suit has been brought in good faith is one which the transferee must be able to ascertain by taking reasonable care. Section 52 states the law as to the transfer of property when a bona fide suit has been brought challenging the right of a transferror. I would say that this section overrides Section 41. I would rather say that the sections are mutually exclusive. Where a suit such as that brought by Shafiqullah has been instituted prior to the transfer Section 41 does not arise.

20. Secondly I wish to add a few words on the subject of subrogation. The only section of the Transfer of Property Act which applies to subrogation is Section 74, and that section is confined entirely to a case of a subsequent mortgagee who tenders the amount of his mortgage to the next prior mortgagee. On general principles I am averse to extending Indian statutes in order to make them cover analogous cases. The proposed extension in the present case appears to me to be objectionable on several grounds. In the first place I have seen no authority which would permit a plaintiff to base his claim on a principle which is intended to be set up as a shield, but not used as a weapon of offence. Again, even if it were granted that the plaintiff can base his suit on such a plea it appears to me that he must have made his intention clear at the time when he entered into the transaction, and not kept it in reserve for use when he is seeking his remedy by litigation. When the plaintiff advanced the money on this mortgage he had possibly the knowledge that the cash advanced by him was to be spent in paying off the prior mortgage, but it is impossible to infer either from the facts known to us or from the probabilities of the case that he had any intention of reviving in his own favour the prior mortgage which had already been merged in a decree of the Court. Lord Macnaughten in the case of Liquidation Estates Purchase Co. v. Willoughby [1898] A.C. 321 laid stress on the importance of the intention of the parties at the time. He said:

The answer to this question depends upon the intention of the parties at the time and that intention must be found from the terms of the deed and the circumstances under which it was executed.

21. For these reasons I agree in the order proposed.

22. This appeal is allowed and the decree of the lower appellate Court set aside and the plaintiff's suit is dismissed in to. But having regard to the finding of the District Judge that the plaintiff acted in good faith and was induced by the previous conduct of Shafiqullah Khan to believe that his mortgagors were the true owners, we think that this is a fit case in which the parties should bear their own costs throughout.


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