1. Yeswara Ramana, the then owner of the land in suit, mortgaged it with other plots to Puttu Gangana on the 30th March 1863, and on the 8th July 1865 he again mortgaged it by registered deed to the respondent, who, in 'pursuance of the terms of the contract, immediately entered into, and has since continued in possession. On the 30th November 1865 the respondent advanced a further sum of Rs. 99 on the same security. In 1868 Original Suit 26 of 1868 was brought on the first mortgage and a decree obtained, which directed the sale of the property mortgaged. The respondent was not made a party to that suit, but, when the land occupied by him as mortgagee was attached, he preferred an objection, which was disallowed without inquiry.
2. At the sale held on the 12th April 1871, in pursuance of the decree, Paradesi Pillai became the purchaser of the land in suit, and formally received possession, but the actual possession of the respondent was not disturbed.
3. On the 12th November 1878 the appellant purchased Paradesi Pillai's interest; and, as the respondent refused to yield possession, he instituted this suit to eject him.
4. The Lower Appellate Court has held that the first mortgagee should have inquired under what title the respondent occupied the land and should have made him a party to Original Suit 26 of 1868, so as to have afforded the respondent the opportunity of redeeming the mortgage, and that, as he failed to do so, the respondent is not bound by the decree, nor are his rights affected by the sale which was made in execution of the decree.
5. The Judge decreed that the respondent should pay to the appellant, within three months from the date of the decree, Rs. 450, the price for which the land was sold to Paradesi Pillai, together with interest at the rate of 6 per cent. per annum from the date of the sale to the date of payment, and that, in default, the appellant should be put in possession of the land, and the respondent for ever foreclosed.
6. It is contended that the first mortgagee was not bound to make the second mortgagee a party to the suit in which the order for sale was obtained, and that the sale is binding on the respondent notwithstanding that he had not been made a party to the suit.
7. The decisions of the Indian Courts on the point raised in this appeal are conflicting. The appellant relies on Muthoba Nath Pal v. Chundermoney Dabia I.L.R. 4 Cal. 817 and on an observation made by Mr. Justice West in S.B. Skringarpure v. S.B. Pethe I.L.R. 2 Bom. 663.
8. A consideration of the nature and incidents of a mortgage leads us to the conclusion that the rulings opposed to the ruling and dictum cited are the more sound.
9. The effect of a mortgage is to transfer to the mortgagee a portion more or less extensive according to the nature of the mortgage of the rights of the mortgagor.
10. In the absence of a condition restricting his powers, a mortgagor is clearly not precluded by the fact that he has entered into a contract of mortgage from dealing with the interest remaining in him as freely as he may deal with any other property, provided of course that, apart from the contract of mortgage, he enjoys a power of alienation. Where, by a condition of the mortgage contract, he engages to abstain from alienating the interest remaining in him, there is against a conflict of opinion as to the effect of the condition in respect of mortgages of immoveable property. In Radha Pershad Misser v. Monohur Das I.L.R. 6 Cal. 319 it is stated by the learned Chief Justice that such a covenant, i.e., an agreement restrictive of alienation, creates only a personal liability as between the mortgagor and mortgagee. On the other hand, it was held in Chunni v. Thakur Das I.L.R. 1 All. 126 that such a condition is operative to the extent and for the purpose contemplated by the parties, and that a transfer of the interests of the mortgagor is voidable in so far as it is in defeasance of the rights of the mortgagee, and the decision accords with what is declared to be the general rule by Mr. Justice Macpherson (Macpherson on Mortgages, Ed. vi., 126). This decision may be reconciled if it be held the condition binds a purchaser for value only when he has notice of it, and that in the one case the purchaser had and in the other he had not such notice.
11. However this may be, and the point does not call for decision in the case before the Court, it is clear that even where such a condition has been imported into a mortgage, it does not absolutely debar the mortgagor from dealing with the interest remaining in him. Where the mortgagor has transferred in whole or in part such interest, the transferree acquires against the mortgagee similar rights to those possessed by the mortgagor, so far as they are necessary for the enjoyment and preservation of the interest transferred to him. If the mortgagee desires to foreclose the mortgagor or to bring the property to sale, a purchaser from the mortgagor or a second mortgagee is entitled to redeem the first mortgage and thus to protect his own interest in the property mortgaged. Hence it has been held that to render a decree for foreclosure on sale effectual, the mortgagee must make subsequent purchasers or incumbrancers, parties to the suit, at least if he have notice of them or circumstances exist which should have put him on inquiry as to the claim by them of an interest in the mortgaged property. In Brajanath Kundu Chowdhry v. Khilatchandra Ghose 8 B.L.R. 105 it was held by the Judicial Committee that a purchaser from a mortgagor of property in the Mofussil was not bound by foreclosure proceedings to which he had not been made a party.
12. The dictum of Mr. Justice West was pronounced in a case in which it was unnecessary to decide the point as the purchase had been made pendente lite and the purchaser was held on that ground to be bound by the decree.
13. The dictum is overruled in Naru v. Gulab Sing I.L.R. 4 Bom. 84.
14. The District Judge appears to have had in view the decree passed by the High Court in that case in framing the decree under appeal.
15. It is not clear which were the precise grounds on which Mr. Justice Markby rested his judgment in Muthoba Nath Pal v. Chundermoney Dabia. Mr. Justice Prinsep gives as the reason for the conclusion at which he arrived that, when a mortgagee puts up mortgaged property to sale, in execution of decree, he sells the entire interest that he and the mortgagor could jointly sell.
16. It is no doubt true that the interest which would pass by the sale under a mortgage decree made in the presence of all parties interested would be the entire interest which the mortgagor could convey at the time of the mortgage, but the mortgagor has no longer in him all the rights he possessed at the time of the mortgage, and if the decision under consideration-is right, the sale passes not only the rights of the mortgagee, but the rights of the second mortgagee who has had no notice of the demand. As a matter of procedure, to render the decree effectual against them, all persons who have subsequently to the mortgage derived interests from the mortgagor must be made parties at least if their claims could have been ascertained on an inquiry conducted with reasonable care. In Radha Pershad Misser v. Monohur Das the mortagagee sued on his mortgage, obtained a decree for sale, and became the purchaser. Subsequently to the mortgage and before suit the mortgagor had granted a Zuripeshgi lease of the properties included in the mortgage.
17. The Zuripeshgidar was not made a party to the suit. It was held by the learned Chief Justice and Mr. Justice Mitter that the purchaser could not oust the Zuripeshgidar, and it was intimated his only course would be to bring a suit against the Zuripeshgidar to have his right declared to sell the property to satisfy his mortgage debt so as to give the Zuripeshgidar the opportunity of redeeming.'
18. For English authorities, we may refer to Peto v. Hammond 29 Beav. 91, where all the purchasers of the estate which had been sold in lots were held to be necessary parties and Goldsmid v. Stonehewer 9 Hare App. 39 17 Jur. 199 where the same rule was declared in the case of cestui que trusts under a settlement. See Fisher on Mortgages, Chapter VII; Coote, 4th Edition, p. 1009.
19. Inasmuch then as the respondent was not made a party to the suit in which the decree for sale was pronounced, though his possession should have put the mortgagee on inquiry, he was not bound by the decree nor affected by the sale, and he was entitled to ask that the suit should be dismissed. He has not, however, taken exception to the decree, and we need not disturb it in his interest. Nor has appellant taken exception to the amount which the decree directs the respondent to pay to entitle him to retain possession and therefore we need not consider whether it should have been ascertained in reference to the price paid by the auction-purchaser or in reference to the proportionate share of the mortgage debt to which the land in suit was subject. The effect of the decree will be that, on payment of the sum ordered with interest, the respondent would be entitled to possession as mortgagee both in respect of his original debt and of the sum he is now required to pay for its protection.
20. The appeal is dismissed with costs.