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M.N. Nagendran Chettiar Vs. Lakshmi Ammal - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Reported inAIR1933Mad583; (1933)65MLJ108
AppellantM.N. Nagendran Chettiar
RespondentLakshmi Ammal
Cases ReferredChinnu Pillai v. Venkatasamy Chettiar I.L.R.
Excerpt:
- - so he thought that the best contention he could put forward was that the plaintiff should redeem his two mortgages and thus ensure his recovery of the whole amount due to him without running the risk of the property being sold for an amount inadequate for his two mortgages. then it was said 'or if there had been a sale making the purchaser a party in his capacity of the ultimate owner of the equity of redemption, and the purchaser in the second mortgagee's execution sale gets a good title to the property'.these remarks are not made with reference to a right to possession but with reference to the mode of working out the mortgage itself and nothing was said in this paragraph as to his getting a decree for sale subject to the earlier mortgages. the actual decision in the case was.....ramesam, j.1. the facts out of which this second appeal arises may be stated as follows. the respondent lakshmi animal obtained a deed of maintenance from her deceased husband's brothers in 1918, under which a house was charged with the payment of the maintenance to her. the owners of the house also executed a second mortgage of it in 1922. as the maintenance was not paid up to the year 1927, lakshmi animal filed a suit, o.s. no. 454 of 1927, without making the second mortgagee a party and obtained a decree. in execution of the decree she was appointed receiver on 27th january, 1930, for realisation of the profits of the house and appropriating the same towards her decree. she got possession of the house in april, 1930. the second mortgagee filed a suit on his mortgage, o.s. no. 12 of.....
Judgment:

Ramesam, J.

1. The facts out of which this second appeal arises may be stated as follows. The respondent Lakshmi Animal obtained a deed of maintenance from her deceased husband's brothers in 1918, under which a house was charged with the payment of the maintenance to her. The owners of the house also executed a second mortgage of it in 1922. As the maintenance was not paid up to the year 1927, Lakshmi Animal filed a suit, O.S. No. 454 of 1927, without making the second mortgagee a party and obtained a decree. In execution of the decree she was appointed receiver on 27th January, 1930, for realisation of the profits of the house and appropriating the same towards her decree. She got possession of the house in April, 1930. The second mortgagee filed a suit on his mortgage, O.S. No. 12 of 1928, without making Lakshmi Animal a party and obtained a decree and got the property sold. It was purchased by Nagendram Chetty, the appellant before us, on 28th January, 1931. He sought to obtain possession of the property but was resisted by the respondent. The appellant applied to the District Munsif under Order 21, Rule 97, Civil Procedure Code, for the removal of the respondent's obstruction. The application was allowed by the District Munsif. There was an appeal to the District Judge of Trichinopoly. The District Judge allowed Lakshmi Ammal's appeal. Nagendram Chetty files this second appeal. When the case came on for disposal before Madhavan Nair, J., he referred the matter to a bench of two Judges. When the case accordingly came on before Jackson, J. and Mockett, J., it was thought that there was some conflict between Chinnu Pillai v. Venkatasamy Chettiar I.L.R.(1915) Mad. 77 : 30 M.L.J. 347 and Chinnaswami Padayachi v. Darmalinga Padayachi (1932) 63 M.L. 394 and they referred the matter to a Full Bench. The case accordingly came on before us.

2. The first point to be noticed in the case is what the question now between the parties is, - who is entitled to possession until a regular suit is filed in which the two mortgage rights are brought face to face and can be worked out? The plaintiff-receiver in the first suit was the first mortgagee and is also entitled to possession by reason of the order of the Court appointing her a receiver for realisation of the mortgage amount. The purchaser in execution of the decree in the second suit stands in the shoes of the second mortgagee. By the general law a second mortgagee is entitled to redeem the first mortgagee. The first mortgagee before selling the property ought to afford an opportunity to the second mortgagee to redeem the first. Only after such an opportunity is given and not utilised can the first mortgagee sell the property free of both the mortgages for the realisation of the mortgage debt. Similarly the second mortgagee in suing on his mortgage might have impleaded the first mortgagee either offering to redeem the mortgage, or asking for the sale of the property subject to the mortgage, or praying for sale of the property free of both mortgages and a direction that the prior mortgagee's debt be first paid off and the amount due to himself should be paid out of the balance. Unfortunately the second mortgagee was not a party in the suit of the first mortgagee and the first mortgagee was not a party in the suit of the second mortgagee. Thus up to now there has been no suit in which the two mortgagees, or persons who stand in the position of the mortgagees, have been brought face to face so as to enable them to work out the rights under the mortgages according to the principles of law applicable to successive mortgages. Such a suit has yet to be filed. The question in this case is, - who, in the meanwhile, i.e., until such a suit settles the dispute between the parties finally, is entitled to possession? Prior to the decrees the mortgagors were the persons entitled to possession, the mortgagees being only simple mortgagees. By the order of appointment of Lakshmi Ammal as receiver she has got a right to possession from January, 1930 and the mortgagor's right to possession has passed to her. By the sale in execution of the second mortgage decree in January, 1931, the mortgagor's right to possession, if any, that remained in them passed to Nagendram Chettiar; but as already mentioned, the mortgagor's right to possession had already passed to Lakshmi Animal by the earlier order of January, 1930. Applying our mind only to the right to possession and not to the priority of the mortgages, it is thus seen that no right to possession passed to Nagendram Chetty because at the time of the sale the mortgagors had no right to possession, it having already passed to Lakshmi Animal. So far, I have stated the effect of the proceedings without reference to any of the authorities. The second mortgagee's right is not extinguished. His right is not affected by the first mortgagee's suit to which he was not a party. He still therefore has got a right to redeem the first mortgagee and realise by sale the amount of both the mortgages, or without redeeming he may obtain a decree for sale and a direction that after such amount as is due to the first mortgagee is paid the balance should be paid towards his own debt. These rights of his are not affected. Nor does any discussion about such rights arise in the present proceedings which are confined merely to the right to possession.

3. I will now examine the authorities. In Venkatanarasammah v. Ramiah I.L.R.(1879) Mad. 108 there were two mortgages in 1864 and 1868. The suit on the first mortgage was in August, 1871. The exact date of the suit on the second mortgage does not appear. It was also in the year 1871. The first purchaser was in the suit on the first mortgage. The learned Judges held that he was the person entitled to possession. Kernan, J., observed that this would be so until the rights of the mortgagees are worked out in a later suit. Innes, J., expressed no opinion on this matter and seemed to doubt whether the second mortgage is still on foot and capable of being enforced. As will appear from later authorities this doubt of Innes, J., was not justified. The second mortgagee's right is not lost because he is not a party to the first mortgagee's suit. In Chinnu Pillai v. Venkatasamy Chettiar I.L.R.(1915) Mad. 77 : 30 M.L.J. 347 Srinivasa Aiyangar, J., thus refers to Innes, J.'s observations:

The other learned Judge, though he did not express any final opinion, thought that the second mortgagee's right was practically extinguished. Nobody now contends that the latter view is correct.

4. I agree with these observations of Srinivasa Aiyangar, J. The second mortgagee's right was certainly not extinguished in that case. The only point before their Lordships was the right to possession, and as to that their decision was that the first purchaser was entitled to possession. The doubt of Innes, J., regarding the right of the second mortgagee to realise his mortgage amount was not necessary as the point did not arise. In Nanack Chand v. Teluckdye Koer I.L.R.(1879) Cal. 265 there were two mortgages dated July, 1868. Each mortgagee filed a suit. In one of the suits the property was sold on 28th June, 1869. In the other suit the sale was on 24th September, 1872. The learned Judges held that the person who purchased in 1869 was entitled to possession, and the priority of the mortgages need not be considered. In Dirgopal Lal v. Bolakee I.L.R.(1879) Cal. 269 there were two mortgages in the year 1868. In execution of the second mortgagee's decree the property was purchased on 22nd April, 1870. In execution of the first mortgagee's decree the purchase was on 29th April, 1870. It was held that the purchaser in execution of the second mortgagee's decree was entitled to possession. His possession was no doubt subject to the first mortgage right which was in the purchaser in the execution of the first mortgage suit; but until proper proceedings to enforce it are taken, the purchaser of 22nd April, 1870, was entitled to possession. The ground of the judgment is thus stated:

As this is a suit for possession, we consider that the party who first purchased the mortgagor's interest and obtained possession, is entitled to retain possession as against the other.

5. Both these decisions were by Garth, C.J. and Prinsep, J. The decision of Venkatanarasammah v. Ramiah I.L.R.(1879) Mad. 108 was not referred to in them. But all the three decisions are in accord with each other. In Venkata Somayazulu v. Kannam Dhora I.L.R.(1882) Mad. 184 there is first a mortgage of 30th March, 1863, without possession and a second mortgage of 8th July, 1865, with possession. In the suit by the first mortgagee on his mortgage the second mortgagee was not a party. The purchaser in the sale that followed, it was held, was not entitled to eject the second mortgagee who had a right to possession by reason of his possessory mortgage, but the priority between the two mortgages could be worked out in a subsequent suit. This case is peculiar in that one of the mortgages was a usufructuary mortgage and itself gave right to possession. In Rangayya Chettiar v. Parthasarathy Naicker I.L.R.(1897) Mad. 120 there were two mortgages. The first mortgagee obtained a decree without making the second one a party. It was held (by Shephard and Subramania Aiyar, JJ.) that the second mortgagee was entitled to a decree for sale subject to the right of the representatives of the first mortgagee if the purchaser did not elect to redeem. In a later case in Muhammad Usan Rowthan v. Abdulla I.L.R.(1900) Mad. 171 : M.L.J. 347 Shephard, J., pointed out that the language used in Rangayya Chettiar v. Parthasarathi Naicker I.L.R.(1896) Mad. 120 was open to exception. He observed:

The point actually decided had regard solely to the sufficiency of the decree made in favour of the second mortgagee.

6. There is no question in that case as to the first mortgagee's right to possession and the decree did in fact completely protect the rights of the first mortgagee who had bought. In the last mentioned case, Muhammad Usan Rowthan v. Abdulla I.L.R.(1900) Mad. 171 : 10 M.L.J. 347 the first mortgagee obtained a decree without making the second one a party. He purchased in execution sale and transferred his right of possession to a stranger. The second mortgagee afterwards bought another suit and obtained a decree for sale subject to the assignee's rights. The land was sold and was purchased by the second mortgagee. It was held that the assignee from the purchaser in the first mortgage suit was entitled to possession. Shephard, J. pointed out that the case was similar to Venkatanarasammah v. Ramiah I.L.R.(1879) Mad. 108 and to the two decisions in Nanack Chand v. Teluckdye Koer I.L.R.(1879) Cal. 265 and Dirgopal Lal v. Bolakee I.L.R.(1879) Cal. 269 and that these are distinguishable from Venkata Somayazulu v. Kannam Dhora I.L.R.(1882) Mad. 184. He criticised the language of his own judgment in Rangayya Chettiar v. Parthasarathi Naicker I.L.R.(1896) Maf. 120 and explained it. The facts of Ramanadhan Chetti v. Alkonda Pillai (1895) Mad. 500 : 5 M.L.J. 197 resemble those of Dirgopal Lal v. Bolakee I.L.R.(1879) Cal. 269. The second mortgagee who purchased the property in execution of his own decree was the earlier purchaser, the date of his sale being 29th January, 1889, while the sale in execution of the first mortgagee's decree was on 27th September, 1889. It was held that the former was entitled to possession. The decision in Akatti Moidin Kutty v. Chirayil Ambu I.L.R.(1902) Mad. 486 is similar to Ramanadhan Chetti v. Alkonda Pillai I.L.R.(1895) Mad. 500 : 5 M.L.J. 197 the first purchase being in execution of decree to second mortgage. In Kutti Chettiar v. Subramania Chettiar I.L.R.(1909) Mad. 485 : 19 M.L.J. 728 it was held that the purchaser in the first sale was entitled to possession and that the purchaser in the second sale took nothing. The purchaser in the second sale was not entitled to possession. The actual suit being for possession he was not entitled to a decree. But it was also observed that the rights of the second mortgagee were unaffected by the sale held in execution of the prior decree to which he was not a party but those rights cannot be enforced in a suit for possession but only in a suit for redemption or for sale. The decisions in Venkatanarasammah v. Ramiah I.L.R.(1879) Mad. 108 and Nanack Chand v. Teluckdye Koer I.L.R.(1879) Cal. 265 were again approved and it was held that 'not the dates of the mortgages but of the several purchases have to be considered in deciding the right to possession'. In Mulla Vittil Seethi v. Achuthan Nair : (1911)21MLJ213 the rights of a second mortgagee who was not made a party to the suit on the earlier mortgage were very much discussed. It was observed that his rights were not affected by such a suit. Substantially this is correct. His right to recover his mortgage money, his right to have an opportunity of redeeming the earlier mortgage or selling the property subject to the rights of the first mortgagee always remains. It may not be strictly right to say that his rights are not in any way affected at all by the earlier suit. There might be some difference in the kind of remedy that is open to him after the first suit resulting in a purchase, but in the main his rights are not substantially affected. The actual case is one where the second mortgagee was entitled to possession and in this respect it resembled the decision in Venkata Somayazulu v. Kannam Dhora (1882) I.L.R. Mad. 184. The next case I have got to refer to is the decision in Chinnu Pillai v. Venkatasamy Chettiar I.L.R.(1915) Mad. 77 : 30 M.L.J. 347. The learned advocate for the appellant Mr. Krishna-swami Aiyar contended that this case is in his favour and that as a result of the observations in this case the decisions in Venkatanarasammah v. Ramiah I.L.R.(1879) Mad. 108 in the two cases Nanack Chand v. Teluckdye Koer I.L.R.(1879) Cal. 265 Dirgopal Lal v. Bolakee I.L.R.(1879) C. 269 and Muhammad Usan Rowthan v. Abdulla I.L.R.(1900) Mad. 171 : 10 M.L.J. 347 and Kutti Chettiar v. Subramania Chettiar I.L.R.(1909) m. 485 : 19 M.L.J. 728 should be regarded as erroneous. There may be here and there expressions in the judgment which seem to support this contention of the learned advocate. But if one carefully considers the facts of the case and the question in dispute with reference to which the observations were made, I do not think this contention can be upheld. In that case there were three mortgages. The purchaser, in execution of a decree obtained without making the third mortgagee a party, held the rights of the two earlier mortgagees. The third mortgagee then filed a suit making the purchaser in execution of the earlier decree a party. Thus in this case we have not got a suit of the later mortgagee without making the person interested in the rights of the earlier mortgagees a party as in all the other suits. The actual question in the suit was not one of right to possession but one relating to the form of the decree for the mortgage amount claimed by the third mortgagee, whereas in all the other cases discussed a further suit between the persons entitled to the mortgage interests was contemplated as the only one which can solve the priorities between the mortgagees and the actual suit in the decision involved only the right to possession. In the case in Chinnu Pillai v. Venkatasamy Chettiar I.L.R.(1915) Mad. 77 : 30 M.L.J. 347 the actual suit was the suit relating to the mortgage amount and not a right to possession. The Subordinate Judge gave a decree that the property should be sold free of all mortgages but the purchaser who had the right of the prior mortgagees in him must be paid the amount due to him and only out of the balance should the plaintiff get the decree for the amount due to him, i.e., the decree he passed recognised the priority of the purchaser-defendant and the actual decree given was one subject to the rights of the purchaser-defendant. Only the form of the decree is not one directing a sale subject to the rights of the earlier mortgages but one directing a sale free of all mortgages and the priority of the mortgages was to be worked out on the sale proceeds. The defendant (purchaser in the earlier suit) filed the second appeal to the High Court. His contention was that the plaintiff should first redeem him and was not entitled to a decree for sale in the manner granted by the Subordinate Judge. A little examination of the merits of such a contention would show that it was unfounded. The property was either enough to pay the two earlier mortgages and would leave a balance for the third mortgage or it was not. The appellant's apprehension was that the property may not be enough for his two mortgages. So he thought that the best contention he could put forward was that the plaintiff should redeem his two mortgages and thus ensure his recovery of the whole amount due to him without running the risk of the property being sold for an amount inadequate for his two mortgages. But surely there is no justice in such an attempt. If the property is inadequate to pay the two mortgages there is no reason why the third mortgagee should pay him an amount larger than the value of the property. But if, on the other hand, the property is really worth more than the amount of the first two mortgages but there is an apprehension that it may not fetch its proper value in Court sale all that the appellant has to do is to bid at the sale up to the proper price so as to recover the whole of the amount due to him. If the bids exceed the amount due to him he can stop further bidding. Either way, whether he or another is the purchaser, once the bids passed beyond the amount due to him, the payment of his own debt was ensured and he could have no grievance against the decree actually passed. His insisting on a redemption by the plaintiff could not in any way be supported. It was with reference to such a contention against the actual decree by the Subordinate Judge that all the remarks in that judgment were passed. That decision was not a decision to the effect that the plaintiff in that case was entitled to a decree for sale of the property subject to the prior mortgages. That was not the decree passed by the Subordinate Judge, and upheld by the High Court. The casual remark at p. 80 relied on by the learned advocate for the appellant is as follows:

The learned pleader for the appellant says, that if we decide that the plaintiffs are entitled to a decree for sale subject to the previous mortgages, he is content to leave the decree as it is.

7. This is different from saying that the Court was prepared to pass a decree for sale subject to the prior mortgages and the case lays down no such proposition. In all such cases, if there had nsot been the accident of a prior suit and a prior purchase, the second mortgagee's right may take three shapes. (1) If nobody representing the first mortgagee's interest was made a party to the suit, he can get a decree for sale which, as a matter of fact, would afterwards be only subject to the rights of the first mortgagee or any one representing him. But if either the first mortgagee or a purchaser in execution of the first mortgagee's suit was a party to the second mortgagee's suit, then he can get a decree (1) for redemption and a further sale, or (2) for a sale free of the mortgages with a direction to pay off the prior mortgages and to recover his own amount out of the balance. In such a suit with purchaser as a party a decree for sale subject to the first mortgage is not open on account of the accident of the prior purchase. But this is not the same as saying that the second mortgagee's rights are affected. The right to recover his mortgage amount is still unaffected. But out of the three possible remedies involving differences in the matter of procedure, two are still open but not the third. This only concerns the form of the decree and his rights are still remaining unaffected. Equities of the situation require that the other two remedies are still remaining open to him but not the particular form of sale subject to the earlier mortgage. The learned advocate for the appellant suggested that Venkatanarasammah v. Ramiah I.L.R.(1879) Mad. 108 was dissented from in this case. There is no such thing. The observations of Innes, J. in his judgment raising the question whether a second mortgagee's right was totally extinguished or subsisted for being worked out in a later suit were dissented from. The learned Judge (Srinivasa Aiyangar, J.) sums up his propositions at the end of the judgment. In paragraph 7 it was said that the second mortgagee 'can bring his own action for sale making the mortgagor a party if there had been no sale in the first mortgagee's suit'. This is unexceptionable. Then it was said 'or if there had been a sale making the purchaser a party in his capacity of the ultimate owner of the equity of redemption, and the purchaser in the second mortgagee's execution sale gets a good title to the property'. These remarks are not made with reference to a right to possession but with reference to the mode of working out the mortgage itself and nothing was said in this paragraph as to his getting a decree for sale subject to the earlier mortgages. The actual decree was for sale free of all the mortgages. The actual decision in the case was perfectly correct and any other remarks which seem to support the appellant must be taken with reference to the facts of the case and cannot be taken to overrule the long catena of cases beginning with Venkatanarasammah v. Ramiah I.L.R.(1879) Mad. 108 and ending with Kutti Chettiar v. Subramania Chettiar I.L.R.(1909) Mad. 485 : 19 M.L.J. 728 In that case the purchaser, who stood also in the position of the purchaser of the mortgagor's right besides standing in the shoes of the earlier mortgagees might, if he liked, have offered to redeem the plaintiff's mortgage and sought a decree for sale to recover the amount of all the three mortgages, but this of course did not suit him. He wanted the plaintiff to redeem him, but the plaintiff could not be so compelled. The last decision is in Chinnaswami Padayachi v. Darmalinga Padayachi : AIR1932Mad566 (Waller and Pandalai, JJ.) which also examines the earlier decisions and is substantially to the same effect as indicated by me. The suit in Sukhi v. Ghulam Safdar Khan was not a suit for possession but was a suit in which the relative rights of all the mortgagees were being worked out and it was held that the person who obtained a foreclosure decree on the first mortgage without making the later mortgagees as parties could use his mortgage as a shield. It is substantially in accord with all the decisions I have examined. In my opinion, leaving aside Rangayya Chettiar v. Parthasarathi Naicker I.L.R.(1896) Mad. 120 which was doubted by Shephard, J. himself, all the decisions I have examined including that in Chinnu Pillai v. Venkatasamy Chettiar I.L.R.(1915) Mad. 77 : 30 M.L.J. 347 are consistent and there is no conflict between them provided we remember the particular right in question in each case and that the remarks in this judgment were made with reference to that particular right. In some of these judgments language is used for instance that I he second purchaser in the second suit purchased nothing. This would not be strictly accurate. He did purchase something. What is meant by 'nothing' is that he did not get the right to possession as against the earlier purchaser but as against the mortgagor he purchased something. But that incomplete something has got to be worked out in a later suit. The decision in Chandramma v. Seethan Naidu (1930) 61 M.L.J. 316 does not help the appellant as the suit was for possession, and to attempt to amend it into one to work out the mortgage was refused. I doubt the correctness of the decision in Venkatasubbarayudu v. Nagamma (1929) 59 M.L.J. 39. In my opinion, all other decisions are in accord. The decisions in Venkatanarasammah v. Ramiah I.L.R.(1879) Mad. 108 and Nanack Chand v. Teluckdye Koer I.L.R.(1879) Cal. 265 and Dirgopal Lal v. Bolakee I.L.R.(1879) Cal. 269 have never been disapproved and are good law. The appeal fails and ought to be dismissed with costs.

8. After the respondent's maintenance decree is satisfied, the appellant is entitled to possession but we think it will be subject to the respondent's charge for future maintenance.

9. C.M.A. No. 481 of 1930. - It follows that this appeal fails and is dismissed with costs. This does not affect the appellant's remedies in another suit for realisation of his mortgage amount.

Anantakrishna Aiyar, J.

10. The main question of law that arises for decision in these two appeals is the same, and it is this. When immovable property is hypothecated to one person (1st mortgagee) and thereafter a second (puisne) mortgage (without possession) is created over the same property by the mortgagor in favour of a third person (second mortgagee), and each of the mortgagees files separate suits to realise money due on his mortgage by sale, making the mortgagor only party to the suits, and in execution sales two different persons become purchasers, when a dispute is raised in execution proceedings or in a separate suit for possession simplicitur, which of the purchasers is entitled to such possession, before the rights of parties are worked out in a proper suit to which all persons interested are parties.

11. Both the mortgages are simple mortgages (hypothecations, without possession). In the first mortgagee's suit to recover money by sale, the second mortgagee was not made a party, but only the mortgagor. Similarly, in the second mortgagee's suit to recover money by sale, the first mortgagee was not made a party, but only the mortgagor. Each of the mortgagees obtained a decree in his suit, and in execution sale, separate persons became the auction purchasers in each. In the appeals before us, the question was raised in execution proceedings as to which of the auction purchasers was entitled to possession. The auction sales by Court were held on different dates. There is no question of lis pendens in these appeals. The question is which of the auction purchasers is entitled to possession in the circumstances.

12. In one of the suits, in execution proceedings a receiver was appointed with a view to realise the decree amount by taking possession of the properties and applying the income thereof towards the decree amount. As possession was taken in execution, we may take it that, from the legal point of view, the substantial question for decision in the two appeals is the same.

13. Both the mortgages were simple mortgages. Under Section 58 of the Transfer of Property Act, the right of a simple mortgagee so far as the mortgage property is concerned is to have the mortgage property sold and the proceeds of the sale applied so far as maybe necessary in payment of the mortgage amount due to him. See also Section 67. A simple mortgagee as such has no right to possession of the mortgage property, but his right is only a right of sale of the said property. There being no question of Us pendens raised in these appeals, it seems to me that in answering-the question the definition of simple mortgage and the exact rights of a simple mortgagee with reference to the mortgage property should be kept in view.

14. In Sri Rajah Papamma Rao v. Sri Vira Pratapa H.V. Ramachandra Razu Lord Hobhouse in delivering the judgment of the Privy Council made these observations at page 254:

If indeed the matter were new, it might reasonably be argued that the terms of a simple mortgage justify usufructuary possession; but long practice, now embodied in a statute, has settled that the remedy of the mortgagee is a judicial sale.

15. In Vyapuri v. Sonamma Bai Ammani I.L.R.(1915) Mad. 811 : 29 M.L.J. 645 (F.B.) Justice K. Srinivasa Aiyangar observed as follows:

In Roman Law there was, it seems, in later times, no distinction between a pignus and hypotheca and in both forms of mortgage the mortgagee was entitled to the possession of the mortgaged property. In pignus the possession was given to the mortgagee at the time of the transaction, while in hypothecation the mortgagee was entitled to obtain possession after the debt became due. [Hunter's Roman Law, pages 436 and 447 (Remedies), Salkowski's Roman Law at page 485 and Mackledey's Roman Law at page 285]. It is instructive to note that Lord Hobhouse thought that except for long practice and the Transfer of Property Act, it might be reasonably argued that a simple mortgagee in India is entitled to usufructuary possession under the terms of his contract after the mortgage debt became due.

16. Under the Transfer of Property Act a simple mortgagee is not entitled to possession of property, but his right is to have the mortgage property sold with a view to have the mortgage debt discharged. If all persons interested in the mortgage property or the right of redemption be made parties to a suit on a mortgage, the Court could pass the appropriate decree working out the rights of all persons interested. Unfortunately, in spite of facilities afforded by registration of documents, it often happens that the first mortgagee files his suit making his mortgagor only party to that suit, leaving out the puisne mortgagee or the purchaser of the equity of redemption. Similarly, a puisne mortgagee in his suit often makes only the mortgagor a party but not the purchaser of the equity of redemption; and though the puisne mortgagee is not bound to make the prior mortgagee party to such a suit, it is clear that a further suit on the prior mortgage would be inevitable. The expense and inconvenience incurred by making all subsequent mortgagees, and purchasers of the equity of redemption, parties to the suit should be taken to be nothing when compared with the trouble that otherwise invariably arises subsequently. As observed in Jones on Mortgages, Vol. II, paragraph 1395,

It is in many cases a matter of much expense and inconvenience to join as parties all the subsequent incumbrancers, but it is much more expensive and inconvenient to omit any.

17. One cannot impress too much on the litigants in India the importance of the above observation.

18. I am not suggesting that a suit filed by the first mortgagee without impleading the subsequent incumbrancers etc. should be dismissed on that ground. That is not what the Civil Procedure Code provides for. Whether the first mortgagee was personally aware of the existence of the subsequent incumbrances or not (see Ghose on Mortgages, Volume II, page 933), ' his ignorance cannot affect the right of any person interested in the equity of redemption' and a decree obtained by him would not prejudicially affect the rights of the subsequent incumbrancers who were not parties to his suit, though it will no doubt bind the persons who are actually parties to the decree. In such cases, the question arises whether the first purchaser in point of time is or is not entitled to have and retain his possession till a proper suit is instituted - to which he is mule a party - to adjudicate on the rights of all the persons interested. Similar questions have arisen for decision in this and other Courts.

19. But before I go into the decisions I should state that to my mind the principle is very clear. A simple mortgagee has no right to possession. The right to possession remains in the mortgagor who is entitled to deal with the same in any way he likes. He may create a subsequent usufructuary mortgage in favour of another and give him possession; or, the mortgagor may sell the equity of redemption to a stranger and put him in possession. In all these cases, the person who gets possession 1 pays consideration for the same, just in the same way as the prior simple mortgagee has paid consideration for acquiring an interest in the property as simple mortgagee. The rights of persons thus in possession could not be prejudiced by the conduct of the prior simple mortgagee in filing a suit to recover money by sale of the properties, to which suit, such persons in possession were not made parties. The right of the simple mortgagee to have a decree for sale is not in any way enlarged by his omission to make persons in possession parties to the suit. A person's right could not be enlarged by an omission made by him; nor could any person take advantage of a default or omission made by him. Questions of Us pendens apart, it seems clear, on principle, that a person who has acquired a right to possession on the date of a simple mortgagee's suit could not in any way be prejudiced regarding that right by the result of a decree or proceedings in that suit to which he was not a party. Such a person could not be compelled to redeem such prior mortgagee or subsequent purchaser in execution of such mortgagee's decree. The rights conferred by the prior mortgage should, in such circumstances, be worked out, as against such persons in possession, only by a fresh suit for sale, if it be otherwise maintainable.

20. In decided cases, one finds general expressions used by learned Judges in discussing rights of parties with reference to mortgage suits, which are likely to lead to confusion if some stray sentences from such judgments be sought to be taken as laying down the law, irrespective of the other sentences in such judgments, the facts of the case and the actual decision in the suit. One will have to see what the actual decision was, and what exact contentions were in fact put forward by the contending parties; also, who had possession and how the same was acquired and when, and the nature of the proceedings in which possession was taken. If these and other relevant circumstances are ascertained and kept in view, it seems to me that almost all the decisions except Venkatasubbarayudu v. Nagamma (1929) M.L.J. 39 by one learned Judge that were quoted to us could be reconciled. I am far from saying that there are not observations in some of the judgments which, taken by themselves, would not be too wide; further, there are some observations which are quite obiter, with reference to points not necessary for the actual decision in such cases. But the various decisions themselves seem to be generally reconcilable to one another and in accordance with sound legal principles, and, in my view, the law of mortgages, relating to the point now under consideration, should be taken to be well settled so far as our Courts are concerned.

21. I now proceed to consider the important decisions to which our attention was drawn.

22. In Venkatanarasammah v. Ramiah I.L.R.(1879) Mad. 108 (decided before the Transfer of Property Act), the first mortgagee became purchaser in execution of his decree in a suit to which the second mortgagee was not a party. As the date of sale under which the first mortgagee purchased was prior to the sale under which the second mortgagee claimed possession, it was held that the earlier purchaser was entitled to possession, subject to the substantial rights of the parties being worked out in a proper suit. To the actual decision of the learned Judges in that case, no exception could be taken; but there are observations in the course of the judgments which are open to objection. One of the learned Judges went so far as to observe whether the defendant's mortgage was still on foot and capable of being enforced, being apparently of opinion that the defendant's mortgage right if still existing was barred of any further remedy, though the other learned Judge simply remarked that the Court could not give effect to the defendant's mortgage in that suit, but must leave the defendant to assert his rights on foot of it as he may be advised.

23. In I.L.R. 5 Calcutta there are two cases relevant to the question, one Nanack Chand v. Teluckdye Koer I.L.R.(1879) Cal. 265 and the other Dirgopal Lal v. Bolakee I.L.R.(1879) Cal. 269 both by Sir Richard Garth, C.J. and Justice Prinsep. The learned Judges held that in such cases no question could arise as to which mortgage was prior in point of time, observing that the real question that has to be decided was which of the parties could prove a prior title to possession. In one of those cases both the mortgages bore the same date, and in the other case, the second mortgagee was the firs; purchaser in point of time.

24. In Ramanadhan Chetti v. Alkonda Pillai : (1895)5MLJ197 the first purchaser was held entitled to obtain possession, subject to the rights of parties being adjudicated in a proper suit. The learned Judges, Best and Subramania Aiyar, JJ., observed as follows at page 502:

For the purposes of this suit, the fact that, by reason of plaintiff's purchase of the plaint land, the mortgagor's interest therein had ceased to exist prior to the defendant's purchase is sufficient for holding that plaintiff is entitled to the declaration and injunction asked for in his plaint.

25. Similarly, in Muhammad Usan Rowthan v. Abdullah I.L.R.(1900) Mad. 171 : 10 M.L.J. 347 Shephard, J., observed (Boddam, J., concurring):

These cases are plainly distinguishable from the case in which the second mortgagee has taken possession under his mortgage. It stands to reason that the right to possession so obtained cannot be affected by the result of a suit on the first mortgage, in which the mortgagee in possession was not made a party.

26. And later on:

It is a necessary consequence of framing a decree in the manner in which the decree now being executed has been framed that further litigation should ensue. Practically the question we have to decide is, who shall take the first step in that litigation? In my view, it is the respondents who must take the first move, since the appellant was in lawful possession under a title prior to that acquired by the respondents.

27. There the second mortgage was one with possession and the second mortgagee was not made a party to the first mortgagee's suit. It was held that the first mortgagee was not entitled to dispossess such a second mortgagee in possession in execution proceedings.

28. In Akatti Moidin Kutty v. Chirayil Ambu I.L.R.(1902) Mad. 486 the learned Judges held that in such cases priority must be determined, not by reference to the dates of the mortgage documents, but according to the dates of the sales.

29. Entholi Kizhakkikandy Kanaran v. Vallath Koylil Unnooli I.L.R.(1902) Mad. 486 was a case decided by Boddam and Miller, JJ., where the first mortgagee had not made the subsequent purchaser of the equity of redemption in possession of the properties, party to his suit, and it was held that the auction purchaser in the first mortgagee's suit was not entitled to sue for possession simplicitur, as all that passed to him at the Court sale in such a suit was the right of the first mortgagee as a simple mortgagee.

30. Similarly, in Kutti Chettiar v. Subramania Chettiar I.L.R.(1909) Mad. 485 : 19 M.L.J. 728 it was held by Sir Arnold White, C.J. and Justice Abdur Rahim that the interests of the judgment-debtor passed to the purchaser at the first sale, and the purchaser at the second sale of the judgment-debtor's interest in the property took nothing, as the judgment-debtor had then no saleable interest in the property, and that the suit filed by the purchaser in the second sale simply to recover possession was not maintainable.

31. In Chandramma v. Seethan Naidu (1930) 61 M.L.J. 316 I had to consider practically the same question. The first mortgagee filed a suit against the mortgagor only, without making the purchaser of the equity of redemption who was in possession of the property a party to the suit. It was held that the auction purchaser could not dispossess such purchaser of the equity of redemption in similar circumstances. The case was similar to the one in Entholi Kizhakkikandy Kanaran v. Vallath Koylil Unnooli I.L.R.(1907) Mad. 500 : 17 M.L.J. 431. After discussing the rights of parties in such cases, the Court (Justice Reilly and myself) held that the auction purchaser's suit in such cases should not be one simply to recover possession, but should be one to enforce the first mortgage. That principle applies to the present case also. The question has been recently discussed by Waller and Krishnan Pandalai, JJ., in Chinnaswami Padayachi v. Darmalinga Padayachi : AIR1932Mad566 . The earlier cases are noticed in extenso, and the same result has been arrived at by the learned Judges. To the same effect is the decision of a Full Bench of five learned Judges of the Allahabad High Court reported in Hargu Lal Singh v. Gobind Rai I.L.R.(1897) All. 541 (F.B.) the facts of which were similar to the facts in Entholi Kizhakkikandy Kanaran v. Vallath Koylil Unnooli I.L.R.(1907) Mad. 500 : 17 M.L.J. 431 and Chandramma v. Seethan Naidu (1930) 61 M.L.J. 316.

32. The reference to the Full Bench on the present occasion has been caused because of 'a contradiction between Chinnaswami Padayachi v. Darmalinga Padayachi : AIR1932Mad566 and Chinnu Pillai v. Venkatasamy Chettiar I.L.R.(1915) Mad. 77 : 30 M.L.J. 347. On going through the judgment in Chinnu Pillai v. Venkatasamy Chettiar I.L.R.(1915) M. 77 : 30 M.L.J. 347 I find that there were three mortgages in that case and that the third mortgagee - the plaintiff in the later suit - was not joined as a party to the earlier suit on the second mortgage. The 1st defendant was the mortgagor. In execution of the second mortgagee's decree, the property was purchased by the 2nd defendant, who also redeemed the first mortgage (on which also a suit evidently had been brought and a decree obtained). The 2nd defendant contended that the plaintiff's only remedy was to redeem the first two mortgages which were then vested in him (the 2nd defendant). The Lower Court held that the properties should be sold free of all mortgages and that the proceeds of the sale should be applied first in payment to the 2nd defendant of the amounts due under the first two mortgages, and the balance, if any, should be applied towards the discharge of the third mortgage held by the plaintiff. Against that decree the 2nd defendant (who, as already stated, represented the first mortgagee and also the rights of the auction purchaser in the second mortgagee's suit) preferred an appeal to the High Court. The appeal was dismissed. No objection could be taken to the actual decree passed in that case. No doubt in the course of a very long discussion contained in the judgment, there are certain observations which, taken apart from the facts of the case, would be too wide and dubious, if not open to objection. But, as already remarked, the observations of the learned Judges especially in such mortgage suits should be taken along with the facts of the cases, keeping in mind, who was in possession of the property, and under what right, and also the decrees actually passed in such cases. The learned Judges, while in their turn criticising the decision in Venkatanarasammah v. Ramiah I.L.R.(1879) Mad. 108 and Venkatagiri v. Sadagopachariar (1911) 22 M.L.J. 129 have themselves made certain observations rather too wide, unless those are taken with the facts of the case and the actual decision thereon.

33. The Full Bench decision in Mulla Vittil Seethi v. Achuthan Nair : (1911)21MLJ213 is in favour of the view we are inclined to take, and is in consonance with the actual decision in the several cases quoted above. The facts of the case in Mulla Vittil Seethi v. Achuthan Nair : (1911)21MLJ213 resemble the facts of the cases in Entholi Kizhakkikandy Kanaran v. Vallath Koylil Unnooli I.L.R.(1907) Mad. 500 : 17 M.L.J. 431 and Chandramma v. Seethan Naidu (1930) 61 M.L.J. 316. The Full Bench held that the first mortgagee who purchased the property in execution of a decree on his mortgage was not entitled to a decree for possession against the puisne mortgagee with possession who was not impleaded in the first mortgagee's suit.

34. In Het Ram v. Shadi Ram (Hetram's case) the Privy Council observed:

As their Lordships have already indicated, the second mortgagee, not having been made a party, was not affected by the decree made in the (first mortgagee's) suit of 1892.

35. As already remarked, a simple mortgage does not confer on the mortgagee the right to possession of the property but only a right of sale thereof. The right to possession remains in the mortgagor who is entitled to transfer possession to anybody he likes, in spite of the fact that he has created, thereon, simple mortgages already. The person to whom such possession is transferred may be a second usufructuary mortgagee or the purchaser of equity of redemption from the mortgagor after the simple mortgage; or a purchaser in Court sale might have obtained possession in execution of a money decree to which the mortgagor was a party. Such a decree might be a mere money decree, or it may be a decree for sale passed at the instance of a simple mortgagee whether he be the first simple mortgagee or a puisne mortgagee. The purchaser of the mortgagor's rights in such cases would be entitled to be put into possession of the property. He has purchased such right to possession for valuable consideration; and that being so, he could not be deprived of such possession except by proceedings properly taken by such mortgagee or later purchaser in a suit properly brought for proper relief, making such purchaser in possession, party to the same. It is elementary law that a person's rights could not ordinarily be affected by proceedings to which he was not a party. The mortgagor could not represent such person in possession, in proceedings instituted after such person had acquired right to possession. Questions of Us pendens apart, the person who first acquired the right to pos session - that is, first in point of time - in proceedings to which the mortgagor was a party if the acquisition was by virtue of Court proceedings, or privately from the mortgagor if the same be effected outside Courts, would be entitled to have and also to retain such possession, till a proper suit is instituted by the mortgagee concerned (or the auction purchaser in his suit) after making also such person in possession, party to the same. It is not right to say that the right of the person thus entitled to, or actually in possession, is only to redeem the prior mortgage. No doubt such a person would be entitled to redeem the prior mortgage, but he could not be compelled to do so (as if that was the only thing he was entitled to), if, having regard to the value of the property and the amount of the prior mortgage, he should not think it profitable or worth his while to do so. A simple mortgagee, whether he be the first mortgagee or the puisne mortgagee, could not take advantage of his own omission in making persons in possession of the property, parties to his suit; nor could he contend that the right of such a person in possession is only to redeem the prior mortgage. A simple mortgagee's right is prima facie one to have the mortgaged property sold. Such a mortgagee does not acquire higher or further rights by filing (what may be called for the present purpose) an ineffective suit by omitting to make persons entitled to possession and puisne mortgagees, parties to the same. Such a result could not be avoided by the plea of want of notice, on the part of the prior mortgagee, of the subsequent transactions relating to the property. Equity of redemption and right to possession are valuable 'rights in rem', and persons who have properly acquired such rights could not be prejudiced in their legal rights simply because the prior simple mortgagee had not personal knowledge or notice of the same. Cases of choses in action might be different.

36. In some of the cases, the second mortgage was a usufructuary mortgage with possession. See Muhammad Usan Rowthan v. Abdulla I.L.R.(1900) Mad. 171 : 10 M.L.J. 347. It is clear that such second mortgagee could not be dispossessed by the auction purchaser in the first mortgagee's suit, when he was not made a party to such suit. In the other cases, both the mortgages were simple mortgages, but the second mortgagee sued first and obtained a decree, and in the auction sale the mortgagor's right to possession was purchased by a third person as the auction purchaser. When such auction purchase was made prior in point of time to the sale held in execution of the first mortgagee's decree, it was held that the first auction purchaser was entitled to, and also to retain, possession. The same result was arrived at when the first auction purchase was made in execution of the first mortgagee's suit, but emphasis was laid on such auction sale being prior in point of time to the auction sale held in execution of the second mortgagee's suit. It is expressly mentioned that the priority in the date of the mortgage does not matter, but that the deciding factor is the priority in the date of sale which carries with it the right to possession. I need not repeat that, in the present case, there is no complication caused by the application of the doctrine of Us pendens to these suits.

37. This is the view expressed by Dr. Rash Behari Ghose in his 'Law of Mortgage in India' See 4th Edition, pages 621 and 622.

The first mortgagee, or auction purchaser in the suit filed by the first mortgagee, could in such circumstances only call for the sale of the property, if he is not redeemed by the persons left out in such suits; he would be entitled to a first charge on the proceeds to the extent to which the purchase money was applied in payment of the mortgage debt.' (Page 621.)

38. And at page 623 the learned author expressly states:

I may here observe in passing that as between two rival purchasers, the title to the outstanding equity of redemption is determined by the priority, not of the respective mortgages, but of the respective sales.

39. Having regard to the actual decisions in Venkatanarasammah v. Ramiah I.L.R.(1879) Mad. 108 Chinnu Pillai v. Venkatasamy Chettiar I.L.R.(1915) Mad. 77 : (1915) 30 M.L.J. 347 and Chinnasami Padayachi v. Darmalinga Padayachi : AIR1932Mad566 I am not able to find any contradiction in principle' in the said decisions. I hold that the purchaser whose purchase is earliest in point of time is entitled to retain possession in such cases, and that the rights of a simple mortgagee, who omitted to make subsequent puisne mortgagee or subsequent usufructuary mortgagee or subsequent purchaser of the equity of redemption, party to his suit, should be worked out in a suit for sale to be instituted by him or his representative in interest.

40. In this view, it follows that the Civil Miscellaneous Appeal should be dismissed with costs.

41. In the Civil Miscellaneous Second Appeal, it is necessary to observe that as soon as the decree, in execution of which the receiver was appointed, is satisfied, the auction purchaser (appellant before us) would be entitled to possession, since no absolute right to possession (but only a qualified right to possession) passed away from the mortgagor before the subsequent auction purchase by the appellant. The auction purchase of the appellant in C.M.S.A. No. 182 of 1931 will have effect, subject to the other decree being satisfied. The decree-holder's right of charge in respect of maintenance for subsequent period will not be affected. No such distinction occurs in the other Civil Miscellaneous Appeal No. 481 of 1930 before us.

42. Subject to these observations, both the Civil Miscellaneous Appeal and the Civil Miscellaneous Second Appeal are dismissed with costs.

Cornish, J.

43. If the appellant here was suing to enforce his rights, acquired by purchase, of puisne mortgagee against the respondent as the prior encumbrancer, Chinnu Pillai v. Venkatasamy Chettiar I.L.R.(1915) Mad. 77 : (1915) 30 M.L.J. 347 would be applicable. In that case it was held that where a prior mortgagee has sued for sale without impleading the puisne mortgagee, and the property has been sold in execution, the puisne mortgagee is entitled to sue for a sale of the mortgaged property (the purchaser being made a party) free of all mortgages, the prior mortgage first being paid out of the sale proceeds. But the case with which we are called upon to deal has not reached that stage. It is one of proceedings in ejectment under Order 21, Rule 97, Civil Procedure Code. The appellant, the purchaser of the property at a sale in execution of the mortgage decree, complained that he had been resisted by the respondent in obtaining possession of the property. By Rule 99 of that Order the Court is directed, if satisfied that resistance is occasioned by any person (other than the judgment-debtor) claiming in good faith to be in possession of the property on his own account, to dismiss the application. I cannot imagine a stronger instance of a bona fide claimant resisting dispossession than the respondent. She had been put in possession by the Court as receiver in execution of her decree against the judgment-debtors in enforcement of a charge created by them in her favour upon the property. Her charge, her decree, and her possession were severally anterior in date to the mortgage, the mortgage decree, and the appellant's purchase under that mortgage. The appellant was not a purchaser from a person in possession of the property. Possession at the time of his purchase and before it was with the respondent. These facts are, in my opinion, quite sufficient to negative appellant's claim to eject the respondent. There is a string of cases commencing with Vekatanarasammah v. Ramiah (1879) I.L.R. 2 Mad. 108 down to Chinnasami Padayachi v. Darmalinga Padayachi : AIR1932Mad566 which have confirmed the principle that where the competition for possession is between purchasers under mortgages of different dates upon the property sold priority of date of purchase gives priority of title to possession. This principle appears to me to be unshaken by the criticism made in Chinnu Pillai v. Venkatasamy Chettiar I.L.R.(1915) Mad. 77 : (1915) 30 M.L.J. 347 and upon some of those cases. The Court in Chinnu Pillai v. Venkatasamy Chettiar I.L.R.(1915) Mad. 77 : 30 M.L.J. 347 was not commenting upon the soundness of the principle but upon certain expressions in the judgments under criticism. There is nothing in the judgment opposed to the claim of the respondent in this appeal to remain in possession. I agree that the appeals should be dismissed.


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