1. The properties in suit were attached and brought to sale in execution of a simple money-decree After that decree was passed, the judgment-debtor (1st defendant) , executed a usufructuary mortgage over them in favour of the second defendant in this suit, who in his turn assigned his mortgage rights to the present plaintiff. When the present plaintiff sued to recover possession of the properties on the strength of the mortgage, an objection was raised by the 3rd defendant, who was the auction-purchaser at the sale a in execution of the simple money-decree, that the suit was barred by limitation.
2. It appears that the plaintiff's assignor applied a few days before the sale to have the properties sold subject to his mortgage and asked the Court to have it so stated in the sale proclamation. The claim was dismissed as being made too late. The date of the order was 24th August, 1911. The present suit was not instituted till 1916 and is clearly out of time if Article 11 of the Limitation Act applies to it. The Subordinate Judge, dissenting from the view of the District Munsif, held that the suit was in time as the mortgagee's application in August 1911 was, in his opinion, directed towards the settling of the terms of the sale proclamation and as such, fell under Order 21 Rule 66, of the Code of Civil Procedure, and not under Article 58.
3. The respondent seeks to support the lower Appellate Court's order on the ground that there was no prayer in the application that the attachment should be raised, nor any declaration in the order that the mortgage was no longer subsisting. He further argues that, assuming the order of August 24th was an order upon a claim petition, such an order will only bind those who were parties to it and therefore an auction-purchaser who was not a party to those proceedings cannot take advantage of the fact that the claim was dismissed. I am of opinion that none of these representations and arguments can avail the plaintiff who has come to Court after the period prescribed by law.
4. In the first place I may say I am not much influenced either by the fact that Exibit I terms itself a claim petition and that the second defendant in three places describes himself in that petition as a claim petitioner, or on the other hand by the fact that the provision of law under which it was presented is given as Order 21 Rule 66 of the Code of Civil Procedure. We must look at the substance of the application. It was one to have it recognised by the Court that the property about to be sold was subject to an encumbrance in favour of the petitioner.
5. The effect of the dismissal of this application was to create a belief in the minds of those who bid for the property that the property was free of encumbrance.
6. Can the mortgagee or his representative be allowed to ignore the Court's order, to which he was a party, and proceed as if there had been no such proceedings and as if what was sold was an encumbered property?
7. I think the dismissal of his application was not a nullity. In Lakshmana Chettiar v. Parasivan Pillai : (1919)37MLJ159 which followed our earlier decision in Ponnuswami Pillai v. Samu Ammal : (1916)31MLJ247 it was pointed out that one form of order to be made under the head of investigation of claims and objections in Order 21 of the Code of Civil Procedure is that definitely provided for in Rule 62 which permits a Court to continue an attachment subject to a mortgage in favour of a person not in possession. The learned Judges observed if one particular form of order on the claim on a mortgage can be passed then any claim that relates to an alleged mortgage or the existing liability under a mortgage must be a claim under Rule 58. I think that we should follow the above two decisions of this Court, and that Ganesh Krishna v. Damoo (I.L.R. 1916) Bom. 64 which was a case of a mortgagee asserting his title in response to a notice of the Court calling for objections to a sale proclamation is distinguishable.
8. The case of Ayya Pattar v. Attupurath Manakkal 52 Ind.Cas. 938 may be distinguished on the ground that the application in that case was merely to have certain objections to an auction recorded and did not ask for any order on the merits of the petition.
9. The Full Bench decision in Venkatarathnam v. Rangayanayakamma I.L.R. (1918) Mad. 985 : 1918 M.L.J. 335 conclusive on the point that an order dismissing a claim petition for delay, delay being one of the grounds under which claims may be dismissed under the proviso to Rule 58, is an order which becomes final against its claimant under Rule 63 unless he files a suit within one year of the order. This disposes of the respondent's first two objections and of the Subordinate Judge's reasoning. As regards the third objection it is obvious that the auction-purchaser is very much interested in obtaining a good title to his purchase and being a party (third defendant) to this suit he can raise any objection such as limitation that may serve as a bar to the maintenance of the suit.
10. Now that the time has expired for instituting a suit to establish the right that was in effect negatived in the claim proceedings, the question is not one of estoppel or res judicata arising out of the former proceedings, but one of limitation. This does not depend, on any nice question of law whether the auction-purchaser represents the mortgagee's or the judgment-debtor's interests after the sale, it is a sufficient answer to the respondent's objection to say that the plaintiff is necessarily bound by the final order on his assignor's claim petition and that any defendant, especially one who is in possession of the property sought to be recovered by the suit, can raise the plea of limitation.
11. This appeal must be allowed and the District Munsiff's decree restored with costs here and in the lower Appellate Court.
Sadasiva Aiyar, J.
12. I entirely agree. An ingenious argument was advanced, namely that because the auction-purchaser is the representative of the judgment-debtor and because the judgment-debtor was not a party to the order on the claim petition, he cannot take advantage of the order on the claim petition when it is passed against the claimant any more than he would be bound by that order if it had been in favour of the claimant; and for this proposition Vedapalli Narasimham v. Dronamaraju Seetharamamurthy I.L.R. (1907) Mad. 163 was quoted. In that case and in the cases following it and in the Full Bench case in Krishnasawami Naidu v. Somasundaram Chettiar I.L.R. (1906) Mad. 335 which it professes to follow, no sale had taken place on the basis of the order disallowing the claim petition and the only question was whether as between the claimant on the one hand and the judgment-debtor on the other, would be bound by the order on the claim petition. But it has never been held that the claimant is not himself bound by the order in favour, of the decree-holder disallowing the claim of the former (unless of course, he sets aside the order within one year) and if the court auction purchaser cannot take advantage of that order in favour of the decree-holder the result would be that such an order becomes absolutely futile and would have no effector even evidentiary value as regards the extent of title conveyed under the auction sale to the purchaser therein. In other words the unsuccessful claimant who has not made the Judgment-debtor a party to the claim-proceedings can again put forward his claim against the auction purchaser whether as plaintiff or as defendant. No case has been quoted in which it has been held that such a startling result follows the omission to make the judgment-debtor a party to the claim proceedings. On the other hand, it has been held in several cases that the Judgment-debtor is not a necessary party to a claim proceeding and that the proper parties to such proceeding are the decree-holder and the claimant. Of course, if the judgment-debtor intervenes and actively opposes the claim along with the decree-holder and the claim petition succeeds, he may be bound by the order unless he sets it aside within one year as the order may be then said to be passed against him also. But ordinarily, it is the decree-holder's right to bring the property to sale against the claim of the claimant's right to have the property released (or sold subject to the claimant and the claim) which are litigated in such a petition. The auction-purchaser is entitled to take advantage of the order against the claimant in such a case (if it is not set aside by a suit within one year) not because the purchaser is the representative of the decree-holder but because the order which established the right of the decree-holder to bring the property to sale against the claim of the claimant cannot be given effect to otherwise and was clearly intended by the legislature to have the effect of precluding the claimant from putting forward his claim again in opposition to the auction-purchaser at the sale held in pursuance of the order against the claimant. The conclusive establishment of the decree-holder's right to bring the property to sale free from the claimant's alleged encumbrance involves the right of the purchaser at the sale to get a title to the property free from such encumbrance.
13. I concur in allowing the appeal with costs.