1. The plaintiff is the appellant in this second appeal which arises out of a suit filed by him to enforce the mortgage, Ex. A-4, executed by the first defendant in favour of the plaintiff for a sum of Rs. 700 on 5-12-1953. The second defendant claimed rights under a sale deed, Ex. B-4, executed by the first defendant on 28-12-1953, for a sum of Rs. 1000. The plaintiff's mortgage was registered on 3-7-1954. The first defendant remained ex parte and the second defendant alone resisted the suit on the ground that the mortgage in favour or the plaintiff is a sham and nominal document fraudulently brought into existence antedating it after the sale deed Ex. B-4, in favour of the second defendant. He further contended that when he purchased the property from the first defendant, he purchased it in good faith for valuable consideration and without knowledge that the first defendant had already executed a mortgage deed, Ex. A-4, which was registered on 3-7-1954. The trial Court dismissed the plaintiff's suit holding that the mortgage, Ex. A-4, in favour of the plaintiff was a sham and nominal document and that it was brought into existence ante-dating the same with a view to defeat the rights of the second defendant. It also held that the second defendant purchased the property without any knowledge of the rights of the plaintiff under the alleged mortgage, Ex. A-4. But on appeal, by the plaintiff, the lower appellate Court came to a contrary conclusion and held that the mortgage, Ex. A-4, was not an ante-dated transaction, but it was a perfectly bona fide and genuine transaction. But, on the other point, it concurred with the view of the trial Court that the second defendant purchased the property without the knowledge of the mortgage in favour of the plaintiff and therefore the mortgage would not be enforceable against the property purchased by the second defendant. Hence this appeal by the defeated plaintiff.
2. Mr. Shanmugham, learned counsel for the second defendant, drew my attention to several suspicious features in the case and the discrepancies in the evidence adverted to by the trial Court in support of its conclusion that the mortgage, Ex. A-4, is not a genuine document transaction, but that it was ante-dated and brought into existence as a result of collusion between the plaintiff and the first defendant who are near relations, having married sisters. Learned counsel also relied upon the notices which passed between the parties and laid considerable stress that when the first defendant in his reply notice. Ex. A-5, stated that sufficient money was reserved with the second defendant to discharge the mortgage debt due to the plaintiff, the plaintiff did not pursue the second defendant and waited for nearly eight years to demand payment of the amount. While I see some force in the points raised by Mr. Shanmugham, the findings of fact, reached by the lower appellate Court have to be accepted as final in view of the provisions of Section 100, C.P.C. The lower appellate Court did have adequate materials and evidence to reach the conclusion it did, and even assuming that this Court may take a different view on the evidence, it is not a ground for interference in second appeal. The result is that the mortgage in favour of the plaintiff is a perfectly true and bona fide transaction and the mortgage deed, Ex. A-4, was executed on 5-12-1953, 23 days prior to the sale deed in favour of the second defendant.
3. Even so, it is urged on behalf of the second defendant that on the concurrent findings of the courts below that the second defendant is a bona fide purchaser without knowledge of the mortgage. Ex. A-4, (at that time it was not registered), the mortgage though registered subsequently, would not be enforceable against the property purchased by the second defendant. I am unable to agree with the view of the courts below that the second defendant had no knowledge of the mortgage, Ex. A-4. The title deeds are now produced by the plaintiff, his case being that as soon as the mortgage deed. Ex. A-4, was executed, the title deeds were handed over by the first defendant to the plaintiff. On the finding, that the mortgage deed, Ex. A-4, is a perfectly genuine and bona fide transaction, it has to be accepted that the title deeds too were handed over to the main-tiff on the date of Ex. A-4. The second defendant is guilty of gross negligence in not having insisted upon the handing over of the title deeds to her at the lime of the sale deed, Ex. B-4, The fact that she applied for an encumbrance certificate and obtained one which did not disclose the mortgage, Ex. A-4 (as it had not been registered at that time), is not sufficient to hold that the second defendant is a bona fide transferee in good faith and without knowledge of the prior mortgage, Ex. A-4, A person who purchases the property ought to insist upon the handing over of the title deeds by the vendor and should not lightly accept any explanation given by the vendor for his not immediately handing over the title deeds, or his oral promise that the title deeds would be handed over later on. The fact that the title deeds were not handed over to the second defendant is a powerful circumstance which should have excited the suspicion of the second defendant and if she had pursued the matter, she would have certainly come to know that the title deeds were handed over to the plaintiff, when Ex, A-4 mortgage was executed by the first defendant. I am clearly of the view that on the facts of the instant case, the second defendant cannot claim to be a bona fide transferee and in good faith as he is guilty of gross negligence in not having insisted upon the handing over of the title deeds to her at the time of her sale deed, Ex. B-4.
4. Even assuming that the second defendant was not aware of the plaintiff's mortgage, it would make no difference because, though the mortgage deed was registered on 3-7-1954, it will take effect from the date of execution (5-12-1353) in view of the specific provision to that effect in Section 47 of the Registration Act.
5. Sri D. Ramaswami Iyengar, learned counsel for the appellant, invited my attention to some of the decisions arising under Section 47 of the Registration Act. In all those cases, it was held that the prior transferee will be entitled to enforce his right of priority even if the subsequent transferee had no knowledge of the prior transaction in view of Section 47 of the Registration Act read with Section 48 of the Transfer of Property Act, Section 48 of the Transfer of Property Act embodies the well-established rule of priority founded on law and justice that if a person purports to create by transfer at different times, rights over the same immoveable property and such rights cannot all co-exist or be exercised to their full extent together, each later created transfer shall be subject to rights previously created. By reason of Section 47 of the Registration Act the plaintiff's mortgage. Ex, A-4, took effect and became operative on a date earlier than the second defendant's sale, Ex. B-4 and under Section 48 of the Transfer f Property Act, Ex. B-4 must necessarily yield to Ex. A-4.
6. The argument of Mr. Shanmugham on behalf of the respondent, (second defendant) is that under the provisions of the Transfer of Property Act and Registration Act a mortgage for a sum of Rs. 700 will become valid and create rights over the property in question only if the deed of mortgage is registered and not otherwise and that so long as the mortgage deed had not been registered, the mortgage cannot be said to have taken effect in any manner so as to affect the title of the mortgagor with the result that before the deed of mortgage was registered, the owner of the property would be absolutely free to create rights over the property and that the rule of priority embodied in Section 48 of the Transfer of Property Act, will have no application where the subsequent or second transaction is completed by the execution of a deed and also duly registered before the registration of the first deed of transfer. In the words, his contention is that the rule of priority in Section 48 of the Transfer of Property Act would not apply in case's where the first transaction is not registered as required by law and in the meanwhile the second transaction comes into existence. In support of his contention he placed reliance upon some of the observations of the decision of the Supreme Court in Ramsaranlal v. Mt. Dominikuer : 42ITR53(SC) in which it was held that with regard to the right of pre-emption, the crucial date is not the date when the sale deed is executed, but when the sale became effective after registration. That decision is easily distinguishable and the principle underlying that decision has no application to the situation in the instant case.
It is true that under Section 49 of the Registration Act unless the document is registered it shall not affect the immoveable property concerned nor could the document be received in evidence. The Question is not what will be the consequence if the document is not registered at all but the crucial point is when once the document is registered, from what dale it takes effect and becomes operative? The right of priority will have to be determined by the combined operation of Section 48 of the Transfer of Property Act and Sections 47 and 49 of the Registration Act. Any undue emphasis upon Section 49 of the Registration Act in isolation would render nugatory and useless the equally important provisions in Section 47 of the Registration Act and Section 48 of the Transfer of Property Act. Once the document is registered, Section 49 of the Registration Act has no relevance and the document lakes effect from the date of its execution by reason of Section 47 of the Registration Act with the result that the rights of priority of the successive transferees will necessarily have to be determined in accordance with the rule embodied in Section 48 of the Transfer of Property Act.
The acceptance of the argument that till the registration, the first transaction does not exist in the eye of law for any purpose whatsoever so as to leave the property as absolutely free property in the hands of the owner would result in serious injustice besides absurd and anomalous consequences. Suppose a prior transferee had advanced the entire consideration and waits merely, for considerations of convenience to register the document within the time fixed under the statute, it will be open to the vendor to deal with the property in derogation of the prior transaction and the second purchaser will get priority even though he is informed by the first purchaser that the first sale had been executed, the full price thereunder had been paid and that all that remained was merely the legislation of the sale deed within the time provided by the statute. This will be the result if the argument of the respondent is accepted. It will be noticed that this extreme argument founded upon Section 49 of the Registration Act has nothing to do with the question whether a second transferee is a bona fide transferee or a purchaser with knowledge. The contention is purely a legal one based upon the provision in Section 49 of the Registration Act that unless the document is registered, the transaction shall not affect any immoveable property or will be received as evidence of any transaction affecting such property. I am not prepared to accept this argument which completely renders nugatory and useless the other equally important provisions of the Registration Act and the Transfer of Property Act. Section 49 of the Registration Act would cease to apply the moment the document is registered and as regards the rights of parties, we are thrown each only upon Section 47 of the Registration Act and Section 48 of the Transfer of Property Act. Section 48 of the Transfer of Property Act is founded upon the equally important principle that no man can convey a better title than what he has. If a person had already effected a transfer, he cannot derogate from his grant and deal with the property free from the rights created under the earlier transaction. His prior title as absolute and free owner is curtailed or diminished by rights already created under the earlier transaction. Section 48 of the Transfer of Property Act is absolute in its terms and does not contain any protection or reservation in favour of a subsequent transferee who has no knowledge of the prior transfer. Knowledge or no knowledge, a subsequent transferee cannot claim any priority as against an earlier transferee. Whenever the Legislature desires to protect the rights of a transferee in good faith for consideration specific provision to that effect is made--vide for instance, Section 27 of the Specific Relief Act, 1877 and, Sections 38 to 41 of the Transfer of Property Act. In all other cases, the well-settled rule that a man cannot derogate from his grant will have to be applied.
7. Instances may arise when the right of priority embodied in Section 48 of the Transfer of Property Act may not avail in cases where the prior transferee is guilty of fraud and misrepresentation or gross negligence as a result of which the subsequent transferee is induced to enter into a transaction with the owner of the property as though there is no other prior transfer. Section 78 of the Transfer of Property Act contains a provision where the rights of a prior mortgagee are postponed in favour of the second mortgagee when the prior mortgagee is guilty of fraud, misrepresentation or gross negligence. Though this Section 78 in terms applies only to mortgages, the principle underlying it would apply to transactions like sales also. The condition for the postponement of priority is that a prior transferee must be guilty of fraud, misrepresentation or gross negligence. The question immediately arises where the prior transferee could be said to be guilty of gross negligence because he waits, during the period allowed by law, for the registration of the document, thereby giving opportunities to the owner to deal with the property and create rights in favour of third parties. The argument on behalf of the respondent (second defendant) is that as between two innocent parties, the prior transferee and the subsequent transferee, the former should bear he consequences of his having delayed the registration of the document and thereby facilitated or enabled the owner to enter into a subsequent transaction. In other words, the first transferee should suffer for the fraud or the over-reaching on the part of the owner which was only due to the fact that the document was not registered and the subsequent transferee could not discover the encumbrance even if he had obtained an encumbrance certificate. It is this aspect which came up for direct decision in Surendranath Ghosh v. Kari-das Biswas : AIR1933Cal398 . In that case, the subsequent transferee was found to be a bona fide transferee without knowledge of the prior transaction. This identical argument that on account of the delay in the registration of the first transaction the first mortgagee had held out to the world that the property would be free from any encumbrance and so induced the subsequent mortgagee to advance moneys and this enabled the mortgagor to commit fraud and that in such circumstances, the rights of priority of the first mortgagee will be postponed, because, by the delay in the registration, he has facilitated this fraud was not accepted. It was held that when the statute gives four or eight months time, as the case may be, for registration, the mortgagee cannot he held to be guilty of negligence in taking his own time for registration provided it is within the time limit. It is sufficient to refer to the following observations at pages 231 and 232--
'In my view, when a mortgage is registered within the period of four months allowed by Section 23 of the Registration Act it is prima facie registered within a reasonable time. Where a prior mortgagee has done nothing towards inducing a subsequent mortgagee to advance money, but has simply availed himself of the time given to him by the law for registering his mortgage, he cannot be said to be guilty of 'gross negligence' within the meaning of Section 78 of the Transfer of Property Act. Section 47 of the Registration Act lays down that a registered document shall operate from the time from which it would have commenced to operate if no registration thereof had been required or made, and not from the time of its registration and, in my view, where a mortgage is prior in date and has been validly registered within the timu allowed by the law, it cannot be postponed to a subsequent mortgage merely because the prior mortgagee had omitted to get his mortgage registered until after the execution of a subsequent mortgage. There is no special hardship on the subsequent 'encumbrancer, because, as in this country documents do not take effect from the date of registration every person who acquires property takes it subject to the risk that there may be a prior title created within the preceding four months or in some instances even eight months (Ss. 23 and 24 of the Registration Act). See Jadunandan Prosad Singh v. Deo Narain Singh, 16 CWN 612 '.
8, Reference may next be made to a decision of this Court in Duraiswami Reddi v. Angappa Reddi : AIR1946Mad140 in which too it was held that the prior transferee would be entitled to enforce his rights though his document is registered later and even if the subsequent transferee entered into the transaction bona fide without knowledge of the first transaction. It was held that this result was implicit and was a direct consequence of the combined operation of Section 47 of the Registration Act and Section 48 of the Transfer of Property Act. It is also observed that the right of priority of the first transferee would be postponed only if the later transferee establishes any infirmitive circumstance like fraud, estoppel or gross negligence. Reference may be made to the following observations at page 426--
'Such a plea, if allowed, would lead to much fraud. If a later document registered earlier is to prevail over an earlier document registered later it would always be easy for the vendor and the later purchaser to enter into a transaction within the time given for registration of the earlier document and get the new deed registered immediately and thus defeat the purchaser under the earlier deed.'
This decision was followed in a later decision of this Court in Ramaswami Pillai v. Ramaswami Naicker : AIR1960Mad396 , as well as in the Bench decision of the Andhra Pradesh High Court in Jagannatha Rao v. Raghavarao, 1963-2 Andh WR 267. In the latter case, the decision of the Supreme Court referred to earlier : 2SCR474 , was referred to and distinguished.
9. My attention was also drawn to a recent decision of the Supreme Court in K. H. Nathan v. Maruthi Rao : 6SCR727 in which also it was held that the mortgage deed became effective and operative from the 5th July 1947, when the mortgage was registered and would prevail over a transfer which took place between the date of execution and registration of the earlier transaction. It is true that in that decision nothing was stated as to what would be the position if the subsequent transferee happens to be a bona fide transferee without knowledge of the earlier transaction.
10. From the foregoing it will be seen that the prior transferee will get priority, the moment his deed of transfer is registered. This right of priority is the direct consequence of Section 47 of the Registration Act, and Section 48 of the Transfer of Property Act. The fact that a subsequent transferee is a bona fide transferee is not a ground by itself for postponing the rights of a prior transferee. The normal rule is that no man can derogate from his own grant, and whenever the Legislature wanted to protect the rights of a subsequent transferee in good faith and for consideration specific provision has been enacted. In all other cases, the right of priority embodied in Section 48 of the Transfer of Property Act would apply. The right of priority of the prior transferee will be postponed only if he is guilty of any fraud, misrepresentation or gross-negligence. The prior transferee cannot be said to be guilty of any negligence merely because he takes his own time to get the document registered, within the time allowed by the statute. By that conduct of waiting which the statute permits him, he could not be said to be facilitating the owner of the property to commit fraud. What a man does, what the law of the land permits him to do, cannot amount to gross negligence. A subsequent transferee must necessarily take the risk of the owner having entered into a prior transaction concerning the property and that transaction remaining unregistered but being completed, by registration, subsequent to the second transaction. That is an inevitable risk which the subsequent transferee must take by reason of the specific provision in Section 47 of the Registration Act. In the instant case, there is no question of the plaintiff being guilty of any gross negligence and his rights of priority will have to be recognised under Section 48 of the Transfer of Property Act.
11. For all these reasons, the second appeal is allowed and the plaintiff's suit decreed. There shall be a preliminary decree as prayed for in favour of the plaintiff. Three months time for redemption. The plaintiff will be entitled to his costs in the trial Court. The parties will bear their own costs both in the lower appellate Court and in this Court. Leave refused.