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Narainasami Naidu Vs. Naraina Row Gaikkavadi - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Reported in(1894)4MLJ17
AppellantNarainasami Naidu
RespondentNaraina Row Gaikkavadi
Cases ReferredDimech v. Corlett
Excerpt:
- - moreover, the second transaction in this case was a hypothecation which created a charge on the property and there is no reason why the charge should not be satisfied when a portion of the purchase-money was retained for meeting prior encumbrnces. best, j......charge. upon these facts the lower appellate court held that respondent had a right to redeem the prior mortgage or to bring the mortgaged property to sale and decreed, inter alia, that unless appellant paid the sum due to respondent and redeemed the mortgage in six months the mortgaged property be sold in execution of respondent's claim. for appellant it is contended that there ought to be no decree for sale, and that a puisne encumbrancer's remedy as against a prior encumbrancer is limited to a right to redeem and does not include a right to bring the property to sale. i do not consider this contention to be tenable. that a second mortgagee has a right to redeem a prior mortgage is not disputed, the real question being whether he can also claim a direction that the property be sold so.....
Judgment:

Muthusami Aiyar, J.

1. The parties to this appeal are prior and subsequent mortgagees of the land in dispute which is 17 maws and odd in extent. The land in question originally belonged to Saminatha Bosalai and his coparceners. On the 10th March 1881 they sold it together with other property to 1st defendant for Rs. 1,500 (Exh. J). The purchaser mortgaged it and other property to one Vengusami for Rs. 3,000, under Exh. I, dated the 19th March 1881. The mortgagee instituted Original Suit No. 84 of 1882 and obtained a mortgage decree, in execution of which he purchased the 7 velies mortgaged to him (including the land in dispute) and other land, and obtained possession of the same on the 2nd October 1885. On the 20th January 1886 the purchaser at the execution sale sold the lands to appellant's father for Rs. 8,750 by Exh. H. This document recites that out of the purchase-money, viz., Rs. 3,750, Rs. 760 were retained by the purchaser for payment of prior encurnbran6es. Thus appellant's claim as the purchaser at the court sale in Original Suit No. 84 of 1882 has to be traced to the mortgage executed to Vengusami on the 19th March 1881. The plaintiff respondent's hypothecation bond A was executed by 1st defendant in plaintiff's favor on the 29th August 1881 about five months subsequently to the mortgage in favor of Vengusami. This hypothecation was executed to pay off the debt under the decree in Original Suit No. 185 of 1872 on the file of the Additional Munsif of Tanjore in execution of which the land now in dispute and other lands were under attachment since the 7th June 1881. Thus, respondent's claim is derived from the mortgage of the 29th August 1881. To Original Suit No. 84 of 1882 the plaintiff-respondent was not made a party and he is not, therefore, debarred from enforcing his charge. Upon these facts the Lower Appellate Court held that respondent had a right to redeem the prior mortgage or to bring the mortgaged property to sale and decreed, inter alia, that unless appellant paid the sum due to respondent and redeemed the mortgage in six months the mortgaged property be sold in execution of respondent's claim. For appellant it is contended that there ought to be no decree for sale, and that a puisne encumbrancer's remedy as against a prior encumbrancer is limited to a right to redeem and does not include a right to bring the property to sale. I do not consider this contention to be tenable. That a second mortgagee has a right to redeem a prior mortgage is not disputed, the real question being whether he can also claim a direction that the property be sold so as to throw the burden of redemption 011 the prior instead of the subsequent mortgagee. He is certainly entitled to say that the mortgage property is sufficient for payment of both debts, that if sold on account of them there will be a surplus after satisfying the prior mortgage and that that surplus should be appropriated in payment of the second mortgage. The only ground on which the prior mortgagee could resist such demand is that the property in question was not sufficient to satisfy both mortgages and that it was exhausted in satisfying the first mortgage which has a priority of claim to payment. Upon the finding that Es. 760 was reserved out of the purchase-money for payment of prior encumbrances, this defence is not available to the appellant. In Perumal v. Kaveri Second Appeal No. 1262 of 1891, I. L. R. 16 M 121 no portion of the purchase-money was reserved for paying off tho prior encumbrances and there was no undertaking to pay the second mortgage as in this case. Moreover, the second transaction in this case was a hypothecation which created a charge on the property and there is no reason why the charge should not be satisfied when a portion of the purchase-money was retained for meeting prior encumbrnces. As regards interest, the Subordinate Judge's decree is in accordance with the decision reported at I. L. R. 11 M 294 Basarayya v. Subbarazu.

2. I would dismiss this appeal with costs.

Best, J.

3. The finding of the Subordinate Judge is that 3rd and 4th defendants (should be 3rd defendant's father and 4th defendant) undertook to pay plaintiff's debt, 'and retained money for that purpose.' On this finding there can be no question as to the propriety of the decree which makes the debt a charge on the property mortgaged of which 3rd defendant is now the sole owner.

4. The case is distinguishable from Gokuldoss Gopaldoss v. Rambux Seachand L. E 11 I. A 126 ; because according to the Subordinate Judge's finding the appellant's father when purchasing from Vengusami bound himself to pay off the plaint debt and retained Es. 760 of the purchase-money, for the purpose of paying off the debt. Of, L. R. 11 I. A 132 For the same reason this case is also distinguishable from Second Appe.al No. 1262 of 1891, to which our attention was called by the appellant's Vakil.

5. As to the contention that Exh. M. has been misconstrued by the Subordinate Judge it appears from M, that 3rd defendant's father and 4th defendant then ignored Subbammal's debt and expressly denied the liability of the plaint property for that debt whereas their present plea is that the Es. 760 were retained for the payment of that very debt.

6. The only other objection urged on behalf of appellant is as to the interest awarded at 18 per cent. It is objected that this is a penal rate and therefore not enforceable. The bond which is dated 29th August 1881 stipulates for payment of the principal amount on the 30th August 1883 with interest at 12 per cent per annum and provides that in default of payment on the above date, the interest shall be at the enhanced rate of 18 per cent from the date of the bond. The question has recently been considered by a Full Bench of the Allahabad High Court in Banke Behari v. Sundar Lal I.L.R 15 A 232 and the conclusion arrived at is that such stipulations in contracts substituting in a given state of circumstances a higher for a lower rate of interest cannot be treated as penalties, but must be interpreted--as other parts of a written contract should be interpreted--according to the expressed intention of the parties. To the same effect also is the decision of this Court in Appa Rau v. Suryanarayana I. L. R. 10 M 203 where the true principle of decision is stated to be that a court 'should not interfere to protect persons who, with their eyes open, choose knowingly to enter into oven somewhat extortionate bargains, but that it is only when a person has entered into such a bargain in ignorance of the unfair nature of the transaction, advantage having been taken of youth, ignorance or credulity, that a court of equity is justified in interfering.' See also Basaxayya v. Subbarazn I. L. R. 11 M 294 and the decision of the Privy Council in Balkishen Das v. Bun Bahadur Singh I. L. R. 10 C 305

7. As observed by the Privy Council, in Dimech v. Corlett 12 Moore's P.C. Cas., at p. 229--'the hinge on which the decision in every particular case turns is the intention of the parties collected from the language they have used.' In the present case the language, is clear enough and there is no reason, for supposing that the executant of the bond when he expressly staged that in default of paying the principal and interest at 15 per cent on the date agreed upon for the payment the interest should be payable 'from the date of the bond' at the higher rate of 18 per cent did not understand or intend what he said.

8. I would therefore uphold the Subordinate Judge's decree in its entirety and dismiss this appeal with, costs.


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