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The Official Assignee of Madras Vs. F. Byramshaw and anr. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Reported in(1931)61MLJ512
AppellantThe Official Assignee of Madras
RespondentF. Byramshaw and anr.
Cases Referred and Thanmul Sowcar v. Ramadoss Reddiar I.L.R.
Excerpt:
.....be considered is whether (the mortgagee, who is the mortgagee of both, having elected to take the mortgage debt out of one) a subsequent second mortgagee of that one can claim to have the debt of the other mortgagee, who is mortgagee in respect of both, rateably apportioned between the two properties in accordance with the values of those properties so as to leave the said second mortgagee a fair share of the equity of redemption of that property over which he has a mortgage ? 3. as to the first of the two questions above mentioned i am satisfied that there is a distinction on the one hand between contribution and rateable apportionment and on the other between rateable apportionment and marshalling. 887. where, however, there are no express statutory provisions and a rule of equity has..........be considered is whether (the mortgagee, who is the mortgagee of both, having elected to take the mortgage debt out of one) a subsequent second mortgagee of that one can claim to have the debt of the other mortgagee, who is mortgagee in respect of both, rateably apportioned between the two properties in accordance with the values of those properties so as to leave the said second mortgagee a fair share of the equity of redemption of that property over which he has a mortgage ?3. as to the first of the two questions above mentioned i am satisfied that there is a distinction on the one hand between contribution and rateable apportionment and on the other between rateable apportionment and marshalling.4. contribution is a right which is given to a mortgagor; marshalling is a right that is.....
Judgment:

Stone, J.

1. This summons raises a point which is of importance, and, so far as India is concerned, is a point of first impression, there being, so far as I am aware, no reported case dealing with the matter in question, although Thanmul Sowcar v. Ramadoss Reddiar I.L.R. (1927) 51 M. 648 : 55 M.L.J. 358 is a case which glances at it. Having had the advantage of the argument by the Advocate-General assisted by Mr. Duraiswami Aiyar, I assume that there are no cases in India as I am sure, had there been, they would have brought such cases to my attention.

2. The points raised are two, firstly, does the doctrine of rateable apportionment apply in India in virtue of the provisions of the Transfer of Property Act or otherwise, and secondly, if it does apply, can it be applied in the circumstances of this case? This is one of those cases where the same mortgagor mortgages two properties (in this case 'Bonaly' and 'Maid-stone,' which can be related to A and B which I shall hereafter mention) both together and each separately. The question that falls to be considered is whether (the mortgagee, who is the mortgagee of both, having elected to take the mortgage debt out of one) a subsequent second mortgagee of that one can claim to have the debt of the other mortgagee, who is mortgagee in respect of both, rateably apportioned between the two properties in accordance with the values of those properties so as to leave the said second mortgagee a fair share of the equity of redemption of that property over which he has a mortgage ?

3. As to the first of the two questions above mentioned I am satisfied that there is a distinction on the one hand between contribution and rateable apportionment and on the other between rateable apportionment and marshalling.

4. Contribution is a right which is given to a mortgagor; marshalling is a right that is given to a mortgagee, Contribution arises where the owner of one of several mortgaged estates pays off the mortgage debt and the right that he has, is a right to call upon the owners of the other of the estates mortgaged to secure the debt paid off, to contribute. This, in India, is a right which finds expression in Section 82 of the Transfer of Property Act. It obviously has no application here and I only mention it because in cases here and in Ireland the right of contribution and the right of apportionment appear to have been confused to some extent.

5. Marshalling is a right which a puisne mortgagee has--and it also applies in cases other than mortgage cases--as against the mortgagor or volunteers claiming under the mortgagor to so use the equity of redemption as to do equity to the puisne mortgagee by substituting for the security another security, if the security has been in whole or in part rendered unavailable by an earlier mortgagee, being a mortgagee of both securities, choosing to realise his debt out of the security of which the puisne mortgagee is the mortgagee to the advantage of the other security of which no one is a puisne mortgagee. This right is not available if there is a puisne mortgagee of the other security, for it is only available against the mortgagor and volunteers, that is, it does not apply where the rights of another mortgagee are involved. This right in India finds expression in Section 81 of the Transfer of Property Act. It is conceded that the right, as so expressed, does not here arise.

6. The right of rateable contribution is distinct from both and is not the subject of any particular section of the Transfer of Property Act.

7. It is clear that rules of equity have no application where there are clear rules of statute, vide Gopi Lal v. Abdul Hamid (1928) 26 A.L.J. 887. Where, however, there are no express statutory provisions and a rule of equity has been developed by the Chancery Courts in England, which is in accordance with good conscience and fair dealing, then, in my opinion, those rules have application in India. I am of opinion that the equitable rule of apportionment--rateable apportionment--is in accordance with the principles of justice and fair dealing and, though not the subject of any special statutory provision, is not excluded by any statutory provision and is accordingly applicable in India. This right is one which is possessed by a mortgagee against the mortgagor. It is a lesser right than the right of marshalling. It is the right to have the equity of redemption of two or more properties jointly mortgaged to A rateably apportioned as between puisne mortgagees. It arises where the mortgagee under the joint mortgage exercises the right he unquestionably has of paying off his mortgage debt out of any one or more of the properties mortgaged to him and exercises that right by throwing the burden wholly (or more than rateably) on one property. The reason of the thing is, in my opinion, as follows: Let properties A and B of equal value be mortgaged to X to secure an advance equal to the value of either and let a second mortgage on A be taken by Y and a second mortgage on B be taken by Z. In these circumstances X may pay himself how he will and may take the whole of A leaving B unencumbered. Thus, as between Y and Z, X's free election may work to the disadvantage of Y or Z. But in equity, Y and Z, as against the mortgagor, are equal in right. Y and Z are both second mortgagees. It is not therefore fair that the chance of the exercise of election by X should advantage the mortgagor or work to the disadvantage of either mortgagee. Therefore, when considering the relative rights of the mortgagor on the one hand and of the mortgagees Y and Z on the other, those mortgagees have the right against the mortgagor and volunteers, but subject to the rights of others to be put in that position which they would have held had X elected to do this, namely, take his debt out of the two properties A and B in the proportion of the values of these properties. Those 'values' are the values of the equity of redemption at the time when the mortgagee electing is free to realise. In this case (because 'Bonaly' had over it a mortgage earlier in time than the mortgage possessed by the gentleman that I have referred to as X, that is to say, Byramshaw, in this case) when considering the value of 'Bonaly' from the point of view of the election on the part Mr. Byramshaw, one does not take it at the sale value of Rs. 40,000, but one takes it subject to an earlier mortgage which existed. That is, if X is not the first mortgagee but if a still earlier mortgagee has to be provided for before X can pay himself out, one considers the value of the equity of redemption of A and B. If such earlier mortgagee is a mortgagee of both, that sum is worked out by applying the principle of rateable apportionment in his case also, and in that case the sum would work out the same as though there were no such earlier mortgagee. But if the earlier mortgagee had the mortgage on A only, then the value of A at the time X pays himself out, for the purpose of rateable apportionment calculation when we come to Y and Z would be the realised value of A less the mortgage of the earlier encumbrances as in the case I have just put. The above proposition, I believe, will be found to be in accordance with Barnes v. Racster (1842) 1 Y. & C.C.C. 401 : 62 E.R. 944, Smyth v. Toms (1918) Ir. Rep. 338, Flint v. Howard (1893) 2 Ch. 54 and Thanmul Sowcar v. Ramadoss Reddiar I.L.R. (1927) 51 M. 648 : 55 M.L.J. 358, except that I demur to the suggestion made in certain of the above cases that the apportionment is based upon contribution and I do so for the reasons given above.

8. However, in this case, there is a further difficulty caused by the factor that X and Z are the same. This being so, how can X's undoubted right to elect be reconciled with the doctrine of apportionment? Clearly in the case I put, X has a right to throw all his mortgage debt on to A leaving B free for his second mortgage. But, if as between Y and Z, the mortgagor is made to treat the position as though X has not elected, the effect upon X (being the same person as Z) is to take away X's right to elect. I am accordingly of the opinion that the right of rateable apportionment can only be invoked when it does not conflict with an earlier mortgagee's right to elect out of which fund to realise his debt and accordingly cannot be invoked where such election has in fact been exercised if the second mortgagee as to one property is the same person as the first mortgagee of that and another property. That is to say, in principle, the right of rateable apportionment is the right possessed by a mortgagee against a mortgagor and volunteers claiming under the mortgagor, as in the case of marshalling, and it does not apply where in fact its operation would affect the interests of third parties other than volunteers. In this case it certainly would affect the right of a third party, namely, Byramshaw, and it is no more applicable in the circumstances of this case than is the doctrine of marshalling. Accordingly I negative the right in the present case though I am of opinion that it is not: excluded by the fact that the Transfer of Property Act does not specifically mention this right. The sum in question will be distributed in accordance with the above. Taxed costs of the application, on the original side scale, for two counsel, the amount of costs to be added to the mortgage debt.


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