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K.S. Muthuswami Chettiar Vs. Ramaswami Samiyar and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Reported inAIR1942Mad751; (1942)2MLJ444
AppellantK.S. Muthuswami Chettiar
RespondentRamaswami Samiyar and ors.
Cases ReferredPalamalai Mudaliar v. The South Indian Export Company
Excerpt:
- - 3. before proceeding to discuss the question further, it will be well to set out the facts. in these circumstances the appellant clearly cannot claim to be subrogated to the rights of the mortgagee whose debt he discharged. , stated that it was well-established law that if a transaction offends against section 53 of the transfer of property act, it cannot ordinarily be upheld, even to the extent to which it may be found to be supported by consideration, but an exception has been made in the transferee's favour in cases in which a part of the consideration has been applied in the discharge of preexisting secured debts and it has been held that the transferee might in such cases be entitled to the benefit of the doctrine of subrogation......and the mortgagee is the governing factor. in the case of a charge no interest is transferred. a person entitled to a charge granted by the court is confined strictly to the terms imposed by the court and does not stand in the shoes of the mortgagee.3. before proceeding to discuss the question further, it will be well to set out the facts. on the 15th june, 1934, the appellant bought the properties in suit from the 2nd respondent and the father of the 3rd respondent, who were joint. the consideration alleged was rs. 3,500 of which rs. 2,000 was to be paid in the discharge of a mortgage on the properties, rs. 71-4-0 in cash, and the balance in the discharge of unsecured debts. on the 3rd july, 1934, the appellant paid the amount due to the mortgagee, but he did not discharge the other.....
Judgment:

Alfred Henry Lionel Leach, C.J.

1. The question for decision in this appeal is whether a transferee of immovable property is entitled to a charge on it in respect of the amount disbursed by him in paying off a mortgage on the property when he is not entitled to be subrogated to the rights of the mortgagee by reason of the fact that there does not exist a registered agreement of the nature of that contemplated in the third paragraph of Section 92 of the Transfer of Property Act.

2. The first paragraph of the section states that any of the persons referred to in Section 91 (other than a mortgagor) and a co-mortgagor shall, on redeeming the property subject to the mortgage, have, as regards redemption, foreclosure or sale, the same rights as the mortgagee whose mortgage he redeems may have against the mortgagor or another mortgagee. The second paragraph says that the right conferred by the section is called the right of subrogation and a person acquiring such right is said to be subrogated to the rights of the mortgagee whose mortgage he redeems. In the third paragraph it is provided that a person who has advanced to a mortgagor money with which the mortgage has been redeemed shall be subrogated to the rights of the mortgagee, if the mortgagor has, by a registered instrument agreed that he shall be so subrogated. In the present case there is no registered agreement, but it is contended by the appellant that this does not prevent the Court from granting him in the exercise of its equitable jurisdiction, a charge over the properties in suit. The argument is that Section 92 only applies in a case of subrogation, which means that the person redeeming the mortgage stands in the shoes of the mortgagee in every respect. A person who is merely entitled to a charge is not in the same position as a mortgagee. In the case of a mortgage there is a transfer of an interest in the property and the contract entered into between the mortgagor and the mortgagee is the governing factor. In the case of a charge no interest is transferred. A person entitled to a charge granted by the Court is confined strictly to the terms imposed by the Court and does not stand in the shoes of the mortgagee.

3. Before proceeding to discuss the question further, it will be well to set out the facts. On the 15th June, 1934, the appellant bought the properties in suit from the 2nd respondent and the father of the 3rd respondent, who were joint. The consideration alleged was Rs. 3,500 of which Rs. 2,000 was to be paid in the discharge of a mortgage on the properties, Rs. 71-4-0 in cash, and the balance in the discharge of unsecured debts. On the 3rd July, 1934, the appellant paid the amount due to the mortgagee, but he did not discharge the other debts and did not pay the Its. 71-4-0. On the 23rd April, 1934, the 1st respondent filed a suit against the 2nd and 3rd respondents to recover the amount claimed by him to be due on a promissory note, and on the 23rd December, 1935, obtained a decree for Rs. 3,300 inclusive of interest and costs. On the 23rd November, 1936, the 1st respondent attached the properties in suit. The appellant objected to the attachment, but his objection was overruled by an order of the Court, dated the 31st August, 1937. On the 6th October, 1937, the appellant filed the present suit under the provisions of Order 21, rule 63 of the Code of Civil Procedure. The defence raised was that the transfer of the properties to the appellant on the 15th June, 1934, constituted a fraud on the creditors and therefore was void, under Section 53 of the Transfer of Property Act. The Subordinate Judge of Dindigul, in whose Court the suit had been filed, held that the sale did constitute a fraud on the creditors, but declared that the appellant was entitled to a charge on the properties in respect of the Rs. 2,000 which he had paid to the mortgagee and on this footing he dismissed the suit. On appeal the District Judge of Madura agreed with the Subordinate Judge. The 1st respondent then appealed to this Court, and his appeal was heard by Wadsworth, J., who disagreed with the opinion of the Courts below that the appellant was entitled to a charge. The learned Judge held that a person could not obtain a valid charge without there being a registered agreement. In his opinion the section made no difference between a person claiming a charge and a person claiming the right of subrogation. The present appeal is from this decision.

4. In Lakshmi Amma v. Sankaranarayana Menon (1935) 70 M.L.J. 1 : I.L.R. 59 Mad. 359. a Full Bench of this Court held that the first paragraph of Section 92 of the Transfer of Property Act applies only to a case in which a person who has a pre-existing interest in the property pays off a prior charge for the protection of his own interest and that the third paragraph refers to a case in which a person acquires an interest in property only by reason of advancing money to pay off an existing mortgage debt. Admittedly the appellant had no pre-existing interest in the properties, and consequently the third paragraph of the section applies to him. In these circumstances the appellant clearly cannot claim to be subrogated to the rights of the mortgagee whose debt he discharged. Mr. Raja Aiyar, on behalf of the appellant, has, however, placed great reliance on the judgment of this Court in Palamalai Mudaliar v. The South Indian Export Co., Ltd. (1909) 20 M.L.J. 211 : I.L.R. 33 Mad. 334. where a transfer was set aside on the ground that it fell within the mischief of Section 53 of the Transfer of Property Act, but on the condition that the defendant had a charge for Rs. 7,500 the amount which he had expended in discharging a mortgage on the property. He says that this decision recognises a difference between a right of subrogation and a right to a charge.

5. The judgment in Palamalai Mudaliar v. The South Indian Export Company, Ltd. (1909) 20 M.L.J. 211 : I.L.R. 33 Mad. 334. does not indicate that the learned Judges had in mind the technical distinction between a person who is entitled to a mortgage and a person who is entitled to a charge, a distinction which Mr. Rajah Aiyar has so much emphasized. In Muthuvasu, Chettiar v. Velumuruga Nadar : (1939)2MLJ362 . Varadachariar, J., stated that it was well-established law that if a transaction offends against Section 53 of the Transfer of Property Act, it cannot ordinarily be upheld, even to the extent to which it may be found to be supported by consideration, but an exception has been made in the transferee's favour in cases in which a part of the consideration has been applied in the discharge of preexisting secured debts and it has been held that the transferee might in such cases be entitled to the benefit of the doctrine of subrogation.

6. Other cases have been quoted to the Court, in the course of the arguments and it would appear that the expressions 'charge' and 'subrogation' have been used much in the same sense. We are however, prepared to accept the proposition that a person who is entitled to be subrogated to the rights of a mortgagee is in law in a somewhat different position to a person who is merely entitled to a charge under an order of the Court. But this does not mean that the appellant is entitled to ask the Court to give him a charge. Since the amendment of the Act in 1929 the Court cannot hold a transferee who has discharged an encumbrance on the property to be subrogated to the rights of the mortgagee unless an agreement in writing has been entered into between him and the transferee and the document has been registered. That being the position, is the Court to defeat the very object of the amendment by giving equitable relief in the form of a charge? Equity follows the law and in my opinion that maxim applies in full force here. To accept the argument which has been presented to the Court would mean setting the section at naught, and this cannot be done.

7. This is sufficient to dispose of the appeal, but there is a further factor. Equity will not grant relief to a person who comes into Court with unclean hands. We are aware that in some cases -the case in Palamalai Mudaliar v. The South Indian Export Company, Ltd. (1909) 20 M.L.J. 211 : I.L.R. 33 Mad. 334. is one in point-the Court has granted equitable relief to a person whose hands have not been altogether clean, but this does not mean that the Court is going to grant relief to a person who has been a prima mover in the committal of fraud on another's creditors. The appellant in this case is the maternal uncle of the 3rd respondent and took a prominent part in bringing this transaction about. Each case must be decided on its own particular facts, but the facts in this case are such that we should not have been prepared to grant relief to the appellant even if his first argument had proved to be acceptable.

8. The appeal fails and will be dismissed, but we make no order as to costs. The hearing of the appeal commenced on the 26th February, 1942. As it was not concluded it was adjourned to the 2nd March, but at the request of the learned advocate for the 1st respondent and for his personal convenience the adjournment was extended until to-day. When the Court rose on the 26th February the learned advocate for the respondent had just commenced his address. When the case was called on to-day the Court was informed that he was in another Court, but would be free to appear in this Court in ten minutes' time. It was his duty to be here when called upon to resume his argument, but, as he was not and the Court has not had his assistance to a material extent his client is not entitled to an order for costs.


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