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Chinni Venkatachalam Chetti Vs. Athivarapu Venkatrami Reddi - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Reported inAIR1940Mad929; (1940)2MLJ456
AppellantChinni Venkatachalam Chetti
RespondentAthivarapu Venkatrami Reddi
Cases ReferredIn Wilson v. Wilson
Excerpt:
- - the deed of transfer is dated 24th september, 1935. the sixth defendant full1 well knew that the property comprised in the lease deed was subject to the two mortgages in favour of the plaintiff because it was distinctly recited in the counter-affidavit filed by the guardian of defendants 1 to 3 objecting to the sale that the property was subject to two mortgages in favour of the plaintiff. ramachandra rao is well founded. we know perfectly well that a mortgagee of land has a right, from the very day of his mortgage, to receive the rents......mortgages such as these in question in the suit do not operate as an absolute conveyance of the property mortgaged. further the mortgagee is not entitled to possession of the property unless possession is stipulated for as in the case of a usufructuary mortgage. having regard to these differences let us see how far the contention of mr. ramachandra rao is well founded. even in english law in the case of a mortgage of a growing crop on the land a mortgagee is not entitled to claim the crop when it has been removed by the mortgagor but before removal if the mortgagor intervenes and claims it and takes appropriate proceedings, the mortgagee will become entitled to it. {vide fisher on mortgage, 8th edition, page 716.) in wilson v. wilson (1872) l.r. 14 eq. 32 , vice-chancellor malins.....
Judgment:

Venkataramana Rao, J.

1. This appeal arises out of a suit to enforce two deeds of mortgage dated 24th June, 1924 and 24th April, 1930, executed by the deceased father of defendants 1 to 3 to the plaintiff. Both the deeds of mortgage not only gave security to the plaintiff over the immovable property comprised therein but also over the produce realised therefrom every year.

2. The operative portions in the deeds of mortgage run thus:

The produce realised therefrom every year have been hypothecated to you.

3. The question for decision in this appeal is whether the plaintiff is not entitled to enforce his mortgage security over a sum of Rs. 364 which was deposited into Court during the pendency of the suit being the net sale proceeds of the crops of Fasli 1345 on lands which are items 1, 2, 8, 9, 10 and 11 of Schedule A to the plaint comprised in the deeds of mortgage. The question arises in this way. On the 14th of May, 1933, the father of defendants 1 to 3 executed a registered lease deed of the said lands in favour of defendants 7 and 8 for a period of five years commencing from Fasli 1343. The rent reserved thereunder was 10 putties of paddy and 80 bundles of hay worth Rs. 10. The sixth defendant in execution of a money decree obtained by him against defendants 1 to 3 as representatives of their father in O.S. No. 149 of 1934 on the file of the District Munsif's Court of Nellore attached the immovable properties which were comprised in the deeds of mortgage. Objections were raised as regards the sale of the properties in pursuance of that attachment and the matter was compromised by the mother of defendants 1 to 3 executing a deed of transfer of the said lease in favour of the sixth defendant for the unexpired period of three years in satisfaction of his decree and the sale and other proceedings were stayed. The deed of transfer is dated 24th September, 1935. The sixth defendant full1 well knew that the property comprised in the lease deed was subject to the two mortgages in favour of the plaintiff because it was distinctly recited in the counter-affidavit filed by the guardian of defendants 1 to 3 objecting to the sale that the property was subject to two mortgages in favour of the plaintiff. The plain tiff also obtained a money decree against defendants 1 to 3 in S.C.S. No. 117 of 1934 on the file of the District Munsif's Court of Nellore in respect of an unsecured debt due by their father and in execution of that decree attached the standing crops on the lands which were the subject-matter of the lease. Two claim petitions were put in, one by the tenants, defendants 7 and 8 and the other by the sixth defendant. Both the claims were allowed on the ground that the possession of crops was not with the plaintiff. The crops were thereafter harvested and before they could be removed they were again attached by the eleventh defendant in execution of a money decree. The plaintiff filed the present action and applied for the appointment of a receiver to take possession of the said crops. By an order dated 7th July, 1936, the crops were directed to be sold and after meeting certain outgoings the balance was directed to be deposited into Court and from and out of the amount so deposited defendants 7 and 8 were asked to take their lessees' share. It is with respect to the remaining amount that a controversy has arisen between the plaintiff and the sixth defendant. Under both the deeds of mortgage the plaintiff is given security over the produce. Under Section 3 of the Transfer of Property Act immovable property does not include growing crops. Therefore the deeds of mortgage will operate in respect of the produce on the land as a mortgage of movable property. Under the Indian Law there can be a valid mortgage of movable property. Vide Misri Lal v. Mozhar Hossain I.L.R.(1886)Cal. 262. The moment the crop comes into existence the mortgagee gets title to the crop. The principle of law that is usually applied is that enunciated by Jessel, M.R., in Collyer v. Isaacs (1881) 19 Ch. D. 342, namely:

A man can contract to assign property which is to come into existence in the future, and when it has come into existence, equity, treating as done that which ought to be done, fastens upon that property, and the contract to assign them becomes a complete arrangement.

4. This principle was applied in a case reported in Baldeo Parshad Sahu v. A.B. Miller I.L.R.(1904)Cal. 667, where the validity of a mortgage of the produce of a factory, namely, indigo cakes that were manufactured, came into question. The. learned Judges Brett and Mitra, JJ., referring to Collyer v. Isaacs (1881) 19 Ch. D. 342, observed thus:

The property hypothecated was the indigo cakes manufactured every season by the Pupri Indigo Factory from the crops grown on the lands of the factory from the date of the mortgage deeds, until such time as the total mortgage money with interests and costs of Court shall be paid by the mortgagor.

5. They held in that case that the title secured under such mortgage would prevail over the title of a purchaser under a later mortgage of the said cakes. The facts of that case were as follows : On the 22nd September, 1891, there were two mortgages executed of the factory and its produce by the proprietor Mr. Wilson in favour of one Chowdhry Mahadeo Pershad who obtained decrees thereon and thereafter assigned his interest in those decrees to Messrs. Moran & Co. Messrs. Moran & Co. subsequently became bankrupt and the interest of the firm was represented by the Official Assignee. In 1896 Mr. Wilson mortgaged only the indigo cakes to be manufactured in 1895 and 1896 and in 1896 and 1897 to the plaintiffs who were aware of the prior mortgage in favour of Chowdhry Mahadeo Pfershad. Subsequent to the date of the mortgage in 1896 Mr. Wilson made over to the plaintiffs in that case a quantity of indigo cakes manufactured in 1896* and 1897. The Official Assignee intervened and claimed them and the question of title was made the subject-matter of a legal proceeding. Pending the adjudication the cakes were sold and the money was brought into Court. It was held that the Official Assignee was entitled to the money in preference to the plaintiffs. The ground on which the learned Judges decided is thus put:

We think that it is clear that where, as in this case, there were mortgages to the creditor of property which was to come into existence in future, and when the creditor had already paid the consideration, the property, that is to say, the indigo cakes, were bound from the moment that Mr. Wilson acquired them, and from that moment he became the trustee of the property for the creditor, who as cestui que trust acquired an equitable estate or interest in the property. The delivery after acquisition of the cakes to the plaintiff's servant, if there was in fact such a delivery, could not have destroyed the equitable interest of Messrs. Moran & Co. already existing in them, unless indeed the plaintiffs were bona fide transferees for value without notice.

6. It seems to us that the principle of this decision would apply to the present case. The sixth defendant took the assignment with notice of the mortgages in favour of the plaintiff. The standing cropon the land before it was removed was claimed by the plaintiff. Therefore the plaintiff's title to the moneys in Court must prevail over that of the sixth defendant.

7. But it is contended by Mr. Ramachandra Rao that so long as the plaintiff as mortgagee did not take possession of the crop, the mortgagor would be entitled to deal and dispose of it and in this case as the mortgagee never interfered with the possession of the mortgagors the sixth defendant was entitled to receive the rent from the crop and in lieu thereof its value in preference to the plaintiff and he relied on a case in Ex parte National Mercantile Bank In re Phillips (1880) 16 Ch. D. 104, where Jessel, M.R., stated that under the ordinary law prevailing in England rents and profits of land in mortgage belong to the mortgagor so long as he is allowed to remain in possession and therefore the mortgagor is entitled to sever the crops, which when severed became chattels under the deed and vested in his trustee in bankruptcy. It seems to us that before applying the principle of the English decision we must make note of the fact that in England the growing crop is treated as an interest in land and therefore immovable property. Jessel, M.R., recognises this in the decision relied on. A mortgage of land operates as an absolute conveyance of the property. But in India mortgages such as these in question in the suit do not operate as an absolute conveyance of the property mortgaged. Further the mortgagee is not entitled to possession of the property unless possession is stipulated for as in the case of a usufructuary mortgage. Having regard to these differences let us see how far the contention of Mr. Ramachandra Rao is well founded. Even in English Law in the case of a mortgage of a growing crop on the land a mortgagee is not entitled to claim the crop when it has been removed by the mortgagor but before removal if the mortgagor intervenes and claims it and takes appropriate proceedings, the mortgagee will become entitled to it. {Vide Fisher on Mortgage, 8th Edition, page 716.) In Wilson v. Wilson (1872) L.R. 14 Eq. 32 , Vice-Chancellor Malins defines the right of a mortgagee thus:

We know perfectly well that a mortgagee of land has a right, from the very day of his mortgage, to receive the rents. We also know that if he does not choose to enter into possession or give notice to the tenants, but regards his security as sufficient and allows the mortgagor to receive the rents, those rents can never be recovered back again as rents. The mortgagor has a continuing right to receive the rents until the right is intercepted by some action on the part of the mortgagee.

8. Here the mortgagee has really intercepted the sixth defendant from removing the crops. Again, the argument based on the question of possession is not sound. Even in English Law a distinction is drawn between a case of mortgage of chattels and a case of mortgage of lands. In Ex parte Official Receiver In re Morrit (1886) 18 Q.B.D. 222, Cotton, L.J., in considering the exact rights of sale which a mortgagee of personal chattels possesses remarked thus:

A pledge of personal chattels as a rule is and must be accompanied by delivery of possession. It is out of the possession given him under the contract that the pledgee's rights spring.... A mortgage of personal chattels involves in its essence, not the delivery of possession, but a conveyance of title as a security for the debt

9. Much more so in India where, as pointed out above, the plaintiff mortgagee will not be entitled to claim possession. His right is only to enforce the mortgage by suing for a sale of the property or by the appointment of a receiver to secure possession of it in order that his security may be realised. He applied for the appointment of a receiver before the crops were removed from the land and it was on this application for the appointment of a receiver that a consent order was made by which the crops were sold and the sale proceeds deposited into Court It may be that so long as he allows the mortgagor to remove the crops and does not secure them during the year the crops were raised, he loses his right to them. His rights will not also prevail against a bona fide assignee from the mortgagor without notice of the mortgage in favour of the plaintiff. Therefore the case in 16 Ch. D. is not of much assistance to the sixth defendant.

10. In the result we set aside the judgment of the lower! Court in this behalf and allow the appeal with costs Rs. 100 to be paid by the respondent in the appeal. He will pay back whatever costs were paid by the appellant to the respondent in the lower Court.


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