1. The following are the facta of this case:
First defendant mortgaged the plaint house to second defendant in 1884 under Exhibit II for a sum of Rs. 350. II was written on the 28th July 1884, but was not signed by first defendant till 5th December of that year after criminal proceedings had been instituted against first defendant by second defendant for cheating (see Exhibit W). On the 6th December 1884 first defendant's vakil put in a statement (Exhibit VI) admitting that first defendant had executed the document for Rs. 350, but pleading that she had only been paid Rs. 304-8-0. The complaint of second defendant was thereupon dismissed on the ground that the dispute between the parties was of a civil nature (Exhibit T). Second defendant then presented the document for registration; but first defendant denied its execution and the District Registrar, after inquiry, declined to register it. This was on the 23rd April 1885, On the following day first defendant executed to the first plaintiff the document E, mortgaging to the latter, with possession, a portion of the same house and several lands for a sum of Rs. 1,000.
3. In consequence of the District Registrar's refusal to register II, second defendant instituted a suit (No. 181 of 1885) for a decree, directing its registration (under Section 77 of the Registration Act), and though he failed in the Court of First Instance, he succeeded in the Appellate Court (see Exhibit XII). The document II was accordingly registered in December 1886; and Original Suit No. 89 of 1887 was subsequently instituted thereon and resulted in a decree in favour of second defendant, who caused the house in question to be sold in execution of the decree and himself purchased it at that sale on the 21st January 1889. First plaintiff was not made a party to the suit No. 89 of 1887. Hence her suit, out of which this second apppeal has arisen, in which, claiming to be in possession as mortgagee under Exhibit E, she prays (i) for cancellation of Exhibit II as fraudulent; (ii) for cancellation of the sale in execution of the decree obtained by second defendant in Original Suit No. 89 of 1887, as not binding on her ' even if it be held that the mortgage-deed of 28th July 1884 (Exhibit II) is genuine' (iii) for a declaration that she is entitled to redeem the said mortgage on paying the said mortgage amount with interest up to date; and (iv) for costs 'and such other and further relief as the nature of the case may require.'
4. Second plaintiff, who is son- of the first plaintiff, was added as a party in consequence of second defendant's allegation in his written statement that the suit was really brought by this second plaintiff in the name of his mother, but on behalf of his junior aunt, the first defendant. It is further explained in the second defendant's written statement that the reason of his not making first plaintiff a party to his suit No. 89 of 1887 was because the document E under which she claims was 'executed fraudulently and without consideration'; and it is added that her son, the second plaintiff, who contested that suit on behalf of his aunt, the first defendant, did not ask that plaintiff (i.e., first plaintiff) should be made a party thereto, nor did he say that he would pay the sum due to this defendant.
2. The following issues were recorded by the District Munsif:
(i) Is the first plaintiff a bond fide mortgagee for valuable consideration from first defendant?
(ii) Is the mortgage in favour of second defendant, on which decree has been passed in Original Suit No. 89 of 1887, & true and valid transaction for valuable consideration?
(iii) To what relief, if any, are plaintiffs entitled?
3. The District Munsif's finding on the first issue was in the negative and on the second in the affirmative. He consequently dismissed the suit with costs.
4. On appeal the Subordinate Judge has found both Exhibits E and II to be genuine and valid, and on the ground that first plaintiff not having been made a party to Original Suit No. 89 of 1887 is not bound by the decree passed in that suit, he has set aside the decree of the original Court and given one in favour of the plaintiffs, ' allowing them to redeem the second defendant's mortgage by paying him what is due to him under his decree until his purchase.' He has also directed second defendant to pay plaintiffs' costs.
5. In this second appeal by second defendant it is contended, firstly, that the plaint ought to have been rejected on the ground of inconsistency, seeking, as it did, to avoid the mortgage evidenced by Exhibit II, or to confirm the same and declare plaintiffs' right to redeem. It has been held that it is open to 'a defendant who is a stranger to the transaction to raise inconsistent pleas as to matters not necessarily or properly within his knowledge'--Narayanasami v. Ramasami I.L.R., 14 Mad., 172. Similarly it must, I think, be open to a plaintiff, who is not a party to the transaction in respect of which the allegations are made, to come into Court seeking relief in the alternative, dependent upon what may be found by the Court to be the true facts of the case.
6. It is next contended that as the suit was brought for a declaration merely, the Appellate Court was not justified in giving a decree for redemption. The Subordinate Judge has referred as authority for his procedure to Sankana Kalana v. Virupakshapa Ganeshapa I.L.R. 7 Bom. 146. It is to be observed, however, that the procedure was acceded to even in that case by Pinhey. J., one of the two Judges who took part in it, with an expression of disapproval, and only because ' the thing had been allowed so often in the Bombay High Court ' that he did ' not consider it either necessary or advisable to formally differ ' from his brother Judge on the point in that case. In this Court, however, the only authority that I have been able to find is against the indulgence allowed to the plaintiffs by the Subordinate Judge. See Venkatanarsammah v.Ramiah I.L.R. 2 Mad. 108.
7. It has, however, been further contended on behalf of the appellant that as only a portion of the plaint house is included in first plaintiff's mortgage-deed E, the Subordinate Judge is in error in giving to plaintiffs a decree for redemption of the whole of the house. Further stress is laid on the circumstance that second defendant has by reason of his purchase at the Court-sale acquired, in addition to the interest possessed by him as mortgagee under II, also the right of redemption, which includes the right to redeem the mortgage to first plaintiff under E.
8. Although in consequence of first plaintiff not having been made a party to Original Suit No. 89 of 1887 (as required by Section 85* of the Transfer of Property Act), she is not affected by the decree in that suit, yet second defendant, as purchaser of the right of redemption which belonged to the mortgagor, is entitled to all the equities that belonged to the said mortgagor. If the mortgagor had by private sale transferred his interest in the property to second defendant, first plaintiff could not have maintained a suit for redemption against the latter, and I am of opinion that she is equally unentitled to maintain a suit for redemption against second defendant, the purchaser at the Court sale, who now stands in the shoes of the mortgagor. All that first plaintiff is entitled to is to retain possession of the share of the house mortgaged to her till it is redeemed by second defendant, Baghunath Prasad v. Jurawan Bai I.L.R. 8 All. 105.
9. I would, therefore, allow this appeal, and, setting aside the decree of the lower Appellate Court, restore that of the District Munsif, and direct plaintiffs to pay second defendant's costs throughout.
Muttusami Ayyar, J.
10. I am also of opinion that upon the facts found the declaratory decree for redemption cannot be supported. Ordinarily, a second mortgagee has a right to redeem the first mortgage, but this right ceases when the first mortgage ceases. When the right arising from the first mortgage is united with the mortgagor's equity of redemption by purchase at a Court sale, a confusion of the two rights arises by their vesting in one and the same individual. The doctrine that a purchaser who pays off a pre-existing mortgage can use it as a shield only keeps the security alive for his protection. Again, the second mortgagee's right to redeem the prior mortgage is in its nature a right to consolidate the two securities into one as against the mortgagor and to hold them together until they are redeemed, and there can be no right to consolidate when the first security ceases to exist by payment or by a Court sale which extinguishes the first mortgage. At the date of the Court sale in Original Suit No. 89 of 1887, three distinct rights were in existence, those founded on the first and second mortgages and the mortgagor's equity of redemption. The interest which passed by the Court sale was whatever the mortgagor and the first mortgagee could convey together, and the result is that the rights that survived the actual sale are only two, viz., the equity of redemption vested in the original owner against the second mortgagee and the latter's right to be redeemed by him. Otherwise, there would be this anomaly: if the second mortgagee is allowed to redeem the first mortgagee and purchaser by paying him the purchase money, there would be no one entitled afterwards to redeem the second mortgage. The original mortgagor cannot redeem, because as between him and the first mortgagee he ceases to be the owner by the sale of his whole interest in the property. If the purchaser can redeem the second mortgage, the latter can have no right to redeem the former. The sale under the order of the Court extinguishes the first mortgage and the only right which survives it in the second mortgagee is the right to be redeemed. The case should be treated as if the original mortgagor conveyed his whole interest in the property by a voluntary sale in extinction of the first mortgage. Moreover, the plaintiff is a usufructuary mortgagee in possession of the house and, as such, she is not entitled to redeem after the extinction of the first mortgage. For these reasons I concur in the decree proposed by my learned colleague.
[Section 85:--Subject to the provisions of the Code of Civil Procedure, Section 437, all persons
Parties to suits for fore- having an interest in the property comprised in a mortgage
closure, sale and redemp- must be joined as parties to any suit under this chapter relating
tion. to such mortgage: Provided that the plaintiff has notice of such interest.]