1. This, appeal raises an interesting, point of equity arising in execution.
Appellant is the fifth judgment-debtor in a mortgage decree in O. S. No. 172 of 1935 involving .10 items of hypotheca comprising a total extent of about 32 acres. The date of the mortgage was 15-7-1922. The preliminary decree was passed on 19-8-1936 and the final decree in 1937. The appellant is only concerned with S. No. 430. six acres 20 cents of dry land, which was purchased by bis grand-father on 4-12-1926 by a sale-deed, Ex. II, from the original mortgagor. He appeals against the dismissal of E. A. No. 37 of 1951, which he filed in execution for a direction that this item of property be sold last in E. P. No. 579 of 1949 in the following circumstances.
2. On 24-11-1926 the mortgagor sold four items to the seventh respondent and on 17-6-1935 some other items to the eighth respondent. All these alienees were impleaded in the mortgage suit, O. S. No. 172 of 1935. The decree was later assigned to Athappa Goundan, the second respondent and was scaled down to Rs. 5000/-.
The assignee decree-holder filed E. P. No. 579 of 1949 for the sale of six items out of ten and sought to bring to sale only S. No. 430 first, although it is in the mortgage the penultimate item hypothecated. In the suit itself, the fifth defendant claimed priority on the ground that with the money lent under Ex. II, his grandfather discharged a previous mortgage of 1913. There was a finding in the suit that the fifth defendant was not entitled to priority as the discharge evidenced by Ex. II was at best a case of partial discharge.
In E. P. No. 278 of 1945 in which S. No. 430 was sought to be brought to sale first, the appellant took the same objection, which the Subordinate Judge overruled in the following brief order: 'No question of order of priority for sale arises in this case since the petitioned wants to bring to sale only one item. Objection overruled.' Then in E. P. No. 579 of 1949 pressed by the assignee decree-holder in which he persisted to seeking to bring to sale S. No. 430 first, the appellant filed E. A. No. 37 of 1951, which set out in detail circumstances under which he prayed that the sale should proceed in an inverse order and that S. No. 430 should be sold last. The Subordinate Judge disposed of it in a very unsatisfactory and brief order to the effect that the same objection was once before urged and overruled in E. P. No. 278 of 1945. The learned Judge did not go into the merits of the application at all and appears to have failed to appreciate them.
3. One of the allegations in the petition was that the execution petition was not 'bona fide' as the assignee decree-holder, who is a resident of the locality and a close relation of the parties, had taken the assignment with full notice of the equities attaching to the rival claims pf the appellant and the other alienees. It was also alleged that the assignee decree-holder was a leading and influential person, who was on inimical terms with the present appellant.
4. The ground oh which the appellant sought for equity in execution was a covenant in the sale-deed Ex. II, by which his grandfather in 1926 purchased S. No. 430, by the mortgagor that he would discharge the mortgage from the other items of hypotheca. The reason for this specific covenant was the existence of a prior mortgage of 1913 on this self-same item S. No. 430 in favour of the appellant's grandfather, which was discharged by the second mortgage. This is no doubt a case in which the appellant is not entitled to the statutory relief of marshalling under Section 81, Transfer of Property Act, which is open only, to a subsectuent mortgagee of one or more items of property originally mortgaged by the mortgagor. This however does not mean that the appellant is precluded from any equitable consideration in execution and that a decree-holder has an unfettered, right to bring any item of the hypotheca to sale in any order he pleases, and that an execution court is powerless to stop him.
5. On behalf of the assignee decree-holder, reliance is placed on the Full Bench decision --'Kommineri Appayya v. Mangala Rangayya', 31 Mad 419 (A), which laid down that a 'bona fide' purchaser, who purchased for value a portion of a mortgaged property without notice of such mortgage, has no right in a suit by the mortgagee to insist that the portion not sold to him must be proceeded against first and that the portion purchased by him must be sold only for the balance if any due.
The scope of this decision was considered by Schwabe C. J. and Waller J. in -- 'Raghavachariar v. Krishna Reddi', AIR 1924 Mad 509 (B) in a case in which an appellant purchased items 1 to 3 of several items of hypotheca without notice of the mortgage and the other items were usufructuarlly mortgaged, to persons who took with notice of the prior mortgage. The learned Bench directed items l to 3 to be sold, only if there was not sufficient realised from the sale of the other items to pay the decree amount. In that case, the executing court appears to have rejected the appellant's application solely on the ground that a similar application had been refused in the mortgage suit Itself.
31 Mad 419 (A) arose out of a judgment in the suit itself. The learned Bench took the view that there was nothing in 31 Mad 419 (A) to support the position that an executing court cannot direct one item to be sold first, and if the sale proceeds are sufficient to stop the sale of the other items, 'Ramaswamy Ctetty v. Madura MillsCo. Ltd.', AIR 1917Mad 372 (C) was a Bench decision there relerred to with approval, in which the executing court was held to have a discretion to direct sale of any particular item that will be sufficient to pay off the mortgage debt, although under Section 81, Transfer of Property Act, there was no statutory right of marshalling as between the parties. There can be no doubt from these decisions that an executing court can and should regulate when necessary the order of sale of items of hypotheca in execution.
The exercise of that right by the court in the words of Schwab'e C. J.
'must depend oh whether the appellant has got a good equitable right as between himself and the mortgagor, and as between himself and theother persons interested in the mortgaged property; and if he has a right to preference then it is the duty of the court to give him preference taking care of course that the mortgagee is not prejudiced.'
A mortgagee has a permanent right to have his claim satisiied by sale of every part of the mortgaged property, but he is not entitled to dictateto the court the order in which the mortgagedproperty should be sold. This is the view alsotaken in -- 'Qaiser Beg v. Sheo Shankar', : AIR1932All85 (D).
6. In the present case, I have no hesitation inholding on the footing of the specific covenant inEx. II by the mortgagor that he would, in viewof the prior mortgage of 1913 on this self-sameitem of hypotheca S. No. 430 discharge the mortgage out of the other hypothecated property, thatthe appellant is entitled to this item being soldlast in the E. P. in which it is sought to be broughtto sale. The fact that the appellant does notcome strictly within the four walls of Section 81 willcertainly not disentitle him 'in toto' to the benefitof a recognised equitable principle and leave him to the arbitrary mercy of the decree-holder inexecution.
7. There are clear indications in this execution that the assignee decree-holder has singled out the present appellant for invidious discrimination in seeking to bring S. No. 430 first to sale, although it is the penultimate item of hypotheca.
The learned Subordinate Judge did not go into the allegations of mala fides and of enmity the appellant made against the assignee decree-holder. It is true that a mortgage decree-holder has ordinarily a right to bring the items of hypotheca in his decree to sale in any order that he pleases that is most convenient for him to realise his decree as quickly as possible. This right cannot however include a right to single out one purchaser of an item of hypotheca, and insist on bringing that item to sale out of 'mala fide' motives such as spite or personal enmity.
In such a case, if the executing court has reason to believe that a decree-holder, in making a differentiation which the law allows him, is animated by mala fide motives, it can and should step in and direct an equitable order of sale without prejudice, of course, to the mortgagee's right to bring every bit of the hypotheca to sale in satisfaction of his decree. It is urged that if the assignee decree-holder is permitted to have his way and recover the entire decree by sale of S. No. 430 in the first instance, the result will be that the appellant is left with the option of paying the whole decree amount or submitting to his property being sold, and then filing a suit for. contribution from the other alienees.
I do not think it is necessary in this case to remit the execution application for further hearing on the allegations of mala fides and enmity, as I consider that the covenant in Ex. II by itself entitles the appellant to the equity that he seeks.
I allow the appeal with costs and direct S. No. 430 to be sold last out of the items sought to be brought to sale in E. P. No. 579 of 1919 in the event of sufficient amount not being realised to discharge the decree debt in full.