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Cheeru Elayachi Vs. Seemon Chacko and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtKerala High Court
Decided On
Case NumberSecond Appeal No. 671 of 1961
Judge
Reported inAIR1966Ker139
ActsTransfer of Property Act, 1882 - Sections 82
AppellantCheeru Elayachi
RespondentSeemon Chacko and ors.
Appellant Advocate T.N. Subramania Iyer, Adv.
Respondent Advocate P.N. Sankaranarayana Pillai, Adv. (for Nos. 1 to 3) and; N. Parameswaran Moothath, Adv. (for No. 9)
DispositionAppeal allowed
Cases ReferredMainwaring v. Verdea
Excerpt:
- .....i ch 90; and the proposition extracted by' him is:'where the mortgagor transfers a part of the mortgaged properties without reference to the mortgage and retains the remaining mortgaged properties, the mortgagor is not entitled to any indemnity or contribution, as was held in 'tn re darby's estate'.'3. at this stage it will be instructive to advert to the other three propositions deduced from the same english decision as they appear at page 505 of mulla's transfer of property act, 4th edition. they are:(1) where the mortgagor transfers the whole of the mortgaged properties subject to the mortgage, the transferee in equity is called upon to indemnify the mortgagor who may have to pay the mortgage on his personal covenant. the reason obviously is that the properties in their entirety.....
Judgment:

T.C. Raghavan, J.

1. The facts necessary to understand the only question raised in the ease may be stated. The first defendant was the owner of four items of properties: and he created a hypothecation over all of them, Defendants 11, 12 and 13 purchased item 2, the 20th defendant item 1 and some other defendants item 3, thus leaving item 4 alone in the possession of the first defendant. He, thereafter, created another possessory mortgage on item 4 in favour of the plainliff-appellant; and the latter is now in possession of item 4 A suit was brought on the original mortgage on all the four items; and the appellant paid off the entire debt to save his subsequent mortgage on item 4 Then he filed the suit giving rise to the second appeal for contribution from the other three items; and the trial court granted a decree in his favour directing the three items to pay proportionately. Defendants 11, 12 and 13, the-owners of item 2, filed an appeal before the lower appellate court; and the 20th defendant, the owner of item 1, filed a cross-appeal. The lower appellate court allowed the appeal and the cross-appeal and dismissed the suit against items 1 and 2. Further, the Subordinate Judge remanded the rest of the suit to the trial Court directing the trial Court to issue notice to interested parties and to decide the case regarding the other item also in the light of his judgment. The question for consideration in the second appeal by the plaintiff is whether the decision of the lower appellate court requires variation.

2. The Subordinate Judge, I am afraid has proceeded on a superficial reasoning basing upon a proposition extracted from an English decision. The decision of this Court in Ayyappan Ramari v. Kunju Varki Ilhappiri. 1957 Ker LT 656: (AIR 1958 Ker 386) was cited before both the lower courts; and that decision was followed by the trial Court. But the lower appellate court said that decision did not apply to this case. The appellant, as subsequent mortgagee of item 4 was interested in paying off the earlier mortgage, which was what he did. The question then is whether he can claim contribution from the other items, which were also included in the earlier mortgage. The decision relied on by the Subordinate Judge is In re Mainwaring; Mainwaring v. Verdea, (1986) I Ch 90; and the proposition extracted by' him is:

'Where the mortgagor transfers a part of the mortgaged properties without reference to the mortgage and retains the remaining mortgaged properties, the mortgagor is not entitled to any indemnity or contribution, as was held in 'Tn re Darby's Estate'.'

3. At this stage it will be instructive to advert to the other three propositions deduced from the same English decision as they appear at page 505 of Mulla's Transfer of Property Act, 4th Edition. They are:

(1) Where the mortgagor transfers the whole of the mortgaged properties subject to the mortgage, the transferee in equity is called upon to indemnify the mortgagor who may have to pay the mortgage on his personal covenant. The reason obviously is that the properties in their entirety have been transferred to the assignee and that they are transferred subject to the mortgage, so that the properties have to meet primarily the liability before the personal covenant is enforced

(2) Where the mortgagor transfers the whole of the mortgaged properties, but not subject to the mortgage, i.e., without disclosing the mortgage or representing that the mortgage has been paid off. then the mortgagor must indemnify the assignee and the assignee is not called upon to indemnify the mortgagor. The reason is that having made the transferee believe that there is no encumbrance and having made him part with the full price of the properties, equity requires that the mortgagor should indemnify him.

(3) Where the mortgagor transfers a pari of the mortgaged properties subject to the mortgage and retains the rest, the prima facie rule is that the mortgage debt, as between the transferor and the transferee, should be borne rate-ably between them. The reason is obvious.

4. It is here that the proposition extracted by the Subordinate Judge comes in as the fourth proposition deduced from the English case. The reason for this rule is that having made the transferee believe that there is no mortgage on the properties and thus made him pay the full price, it is but equitable that the mortgagor should indemnify the transferee.

5. It is apparent that these are all equities between the mortgagor and a transferee from him. In the case before me there is no scope for the application of any of these equities, because the controversy here is among the transferees from the same mortgagor, the first defendant; and not between the mortgagor and his transferee. The first defendant created a mortgage on four items; and thereafter transferred three of the items by way of sale to some of the other defendants and the fourth item to the appellant by way of a possessory mortgage. To none of them did he disclose the earlier mortgage, so that there is not special equily in favour of any one as against any other. In such a ease, the principle of contribution as laid down in Avyappan Hainan's case, 1957 Ker LJ 656: (AIR 1958 Knr 986) already referred to must apply. I may also point out that the English rule of inverse order is not applied in India, so that, of the three sets of transferees, who purchased first and who followed next is also of no consequence.

6. Another thing I wish to point out is the inequity that might result from the decision of the lower appellate court. If the entire mortgage is to be paid by the appellant from item 4 subsequently mortgaged to him, it is apparent that there will not be any thing remaining to moot his subsequent mortgage Ho is not bound to pay the entire mortgage, nor is the item in his possession bound in equity to pay it. The liability of the item in his possession is only to pay a proportionate share towards the mortgage debt; and the other three items must also contribute pro rata.

7. There is yet another aspect. In any view of the matter, the cross-appeal by the 20th defendant should not have been allowed, The owners of item 2, defendants 11, 12 and 13, filed the appeal; and the cross-appeal by the 20th defendant was not directed against them. It was directed against the plaintiff, who was only a co respondent in the appeal before the lower appellate court. The cross-appeal against a co-respondent was obviously incompetent

8. The second appeal is allowed, the decision of the lower appellate court is set aside and the decision of the trial Court is restored Defendants 11, 12 and 13 will pay half the costs of the appellant in this Court and in the lower appellate court; and the 20th defendant will pay the other half in both the courts

9. Leave granted.


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