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Rm. Ar. Adaikkappa Chettiar Vs. the Kumbakonam City Union Bank Ltd. and anr. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai High Court
Decided On
Case NumberAppeal No. 278 of 1969
Judge
Reported inAIR1975Mad223
ActsRegistration Act, 1908 - Sections 47; Transfer of Property Act, 1882 - Sections 101
AppellantRm. Ar. Adaikkappa Chettiar
RespondentThe Kumbakonam City Union Bank Ltd. and anr.
Appellant AdvocateK. Gopalchari and ;G. Krishnan, Advs.
Respondent AdvocateV. Krishnan, ;P. Veeraraghavan and ;K. Sankaran, Advs.
Cases ReferredRama Aiyar v. Bagavathimuthu
Excerpt:
.....was result of collusion between him and defendants no. 1 and 2 and was executed subsequent to date of mortgage and antedated - facts revealed between date of execution of mortgage and date of its registration security bond came into existence - mortgage was registered by time plaintiff started advancing money under security bond - as such mortgage deed takes priority over and treated as earlier mortgage subject to which security bond could be enforced. (ii) merger - whether there had been merger of equity of redemption purchased by tenth defendant in court-auction with mortgage - existence of intervening mortgage or charge prevents merger - as such charge in favour of plaintiff prevented merger. - - the plaintiff failed to examine any of the attestors to ex. 7-5-1963. for..........findings that he granted a decree treating the mortgage in favour of the tenth defendant as a mortgage subsequent to the security bond in favour of the plaintiff.4. the two points that arise for determination are:(1) whether ex. b-1, the mortgage in favour of the tenth defendant was the result of collusion between him and defendants 1 and 2 and was executed subsequent to the date of ex. b-l and ante-dated?(2) whether as a result of purchase by the tenth defendant of the equity of redemption in the hypotheca in court auction in o. s. no. 115/65 on the file of the district munsif's court, kumbakonam, there has been a merger of the mortgage in favour of the tenth defendant with the equity of redemption pur-cased by him under the hammer of court?5. point 1 : in the plaint the plaintiff.....
Judgment:

Maharajan, J.

1. The tenth defend-ant appeals. The suit out of which the appeal arises was instituted by the Kumba-konam City Union Bank Ltd., for recovery of Rs. 26,137.10 with a charge on the properties described in the plaint schedule. Defendants 1 to 3 for themselves and on behalf of their minor sons, defendants 4 to 9 executed Ex. A-1, a registered security bond on 12-7-1963 in favour of the plaintiff. The security was furnished to cover loans to be advanced by the Bank subsequent to the date of the bond. Pursuant to the bond, defendants 1 and 2 are alleged to have borrowed Rs. 21,000/- from the plaintiff on 28-9-1964 by executing a promissory note on that date. It was to recover this loan with interest and a charge on the property that the plaintiff instituted the suit, impleading the tenth defendant as a subsequent mortgagee.

2. The tenth defendant, who is a Nattukottai Chettiar money lender (Adaikappa Chettiar) filed an answer in which he claimed that on 7-5-1963 itself defendants 1 and 2 had executed Ex. B-1, a mortgage in his favour for Rs. 3,000/- receiving the entire consideration on the date of execution itself. He therefore claimed that the decree in favour of the plaintiff should be subject to the prior mortgage in his favour.

3. The learned Subordinate Judge has in a judgment bristling with a number of self-contradictions, decreed the suit as prayed for with costs. At one portion of the judgment he says that 'whatever it may be, it is a conflicting question which cannot be gone into here and has to be agitated only in a separate suit on payment of separate Court fee'. Evidently the reference to the 'conflicting question' is to the conflict between the tenth defendant and the plaintiff. After having made this observation, he proceeds to suggest in the body of the judgment that he does not accept the plea of the plaintiff that there was any collusion between defendants 1 and 2, on the one hand, and the tenth defendant, on the other, in bringing about Ex. B-1. But, however, in the penultimate paragraph of his judgment he jumps to an unreasoned conclusion, which he states in the following words:

'I find on issue-2 holding that D-10 and D-1 to D-3 have colluded together and brought about the mortgage in favour of D-10 after antedating the same and on issue-6 that the mortgage in favour of D-10 is discharged by his purchase in Court auction in O. S. 115 of 1965 on the file of the District Munsif's Court, Kumbakonam.'

It was on the basis of these findings that he granted a decree treating the mortgage in favour of the tenth defendant as a mortgage subsequent to the security bond in favour of the plaintiff.

4. The two points that arise for determination are:

(1) Whether Ex. B-1, the mortgage in favour of the tenth defendant was the result of collusion between him and defendants 1 and 2 and was executed subsequent to the date of Ex. B-l and ante-dated?

(2) Whether as a result of purchase by the tenth defendant of the equity of redemption in the hypotheca in Court auction in O. S. No. 115/65 on the file of the District Munsif's Court, Kumbakonam, there has been a merger of the mortgage in favour of the tenth defendant with the equity of redemption pur-cased by him under the hammer of Court?

5. Point 1 : In the plaint the plaintiff did not take the plea that Ex. B-l was the result of any fabrication of ante-dating, though, of course, in the replication statement filed by the plaintiff this plea was formulated for the first time. Be it noted that the registered security bond obtained by the plaintiff from defendants 1 to 3 is dated 12-7-1963 whereas the mortgage bond executed in favour of the tenth defendant by defendants 1 and 2 is dated 7-5-1963, that is to say, over two months earlier. A perusal of Ex. B-1 does not disclose any symptom of fabrication. Ex. B-1 con.sists of three stamp papers, each of which has been purchased on 6-5-1963. The document purports to have been executed on 7-5-1963. P. W. 1 the only witness for the plaintiff says that he was ignorant of the subsequent mortgage in favour of the tenth defendant. The plaintiff failed to examine any of the attestors to Ex. B-1 to throw suspicion upon the circumstances surrounding the execution thereof. On the other hand, the tenth defendant examined himself as D. W. 1 and the scribe of Ex. B-1 as D. W. 2. Both of them swear from the witness box that Ex. B-l was executed on the date it bears and that the mortgagors received the entire consideration from the mortgagee at the time of execution. The testimony of these two witnesses remains unchallenged and uncontradicted by any evidence on the side of the plaintiff: In these circumstances we feel constrained to hold that Ex. B-l is a genuine document and that it was executed on the date it bears, namely. 7-5-1963. For reasons which are best known to the executants, they failed to have the document registered on the date of execution. We may also note that the executants are Nadars whereas the tenth defendant, the mortgagee is a Nattukottai Chettiar and there is nothing in the relationship between the parties which smacks of collusion. It is the complaint of the tenth defendant that defendants 1 and 2 evaded presentation of the document before the Sub Registrar with the result that he was constrained to present the same before the Sub Registrar within the prescribed period and on the Sub Registrar refusing to register the same, because the executants did not appear before him and admit execution, the tenth defendant preferred an appeal to the District Registrar who ultimately directed registration. Actual registration took place on the 8th of January 1964. Now, under Section 47 of the Registration Act, 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. We may also note that in K. J. Nathan v. Maruthi Rao : [1964]6SCR727 it has been held that the registration of a document takes effect by reason of Section 47 of the Registration Act from the date of execution. It is true that between the date of execution of Ex. B-1 and the date of registration thereof, Ex. A-1 came into existence. Actually no money was advanced under Ex. A-l. The plaintiff started advancing money only on 28-9-1964. By that time, Ex. B-l had been registered. We have little hesitation in disagreeing with the finding of the learned Subordinate Judge and holding that Ex. B-l takes priority over Ex. A-l and must be treated as an earlier mortgage subject to which alone Ex. A-1 can be enforced.

6. Point 2 : The next point that arises for determination is whether there has been a merger of the equity of redemption purchased by the tenth defendant in Court-auction with Ex. B-1, the mortgage obtained by him. The Court-acution purchase was made on 15-2-1967 under Ex. B-2. On that date there were two subsisting encumbrances. One was Ex. B-1, the registered mortgage which the tenth defendant had obtained on 7-5-1963 and the other was Ex. A-1, the registered security bond which the plaintiff had obtained on 12-7-1963. There was thus an intervening charge which was subsequent to the mortgage in favour of the Court-auction purchaser.

7. Under Section 101 of the Transfer of Property Act, as it was before the amendment of 1929, where the owner of a charge or other incumbrance on immovable property is or becomes absolutely entitled to that property, the charge or incumbrance shall be extinguished, unless he declares, by express words or necessary implication, that it shall continue to subsist, or such continuance would be for his benefit. Interpreting the legal position as it was before the amendment a Division Bench of this Court ruled in Rama Aiyar v. Bagavathimuthu AIR 1936 Mad 473 that where a prior mortgagee purchases the property of the mortgagor as against the puisne mortgagee, his claim is covered by Section 101 of the Act and he will still be entitled to keep his prior mortgagee's interest apart from the mortgagor's equity of redemption vested in him, and the subsequent mortgagee shall not be entitled to sell such property without redeeming the prior mortgage or otherwise than subject thereto. This was the position before the amendment. But after the amendment the interest of a person like the tenth defendant is statutorily protected and the existence of an intervening mortgage or charge ipso facto prevents merger. This would be so by force of the amended section and regardless of any declaration contemplated by the un-amended section. Section 101 as amended prescribes that any mortgagee of immovable property may purchase the rights in the property of the mortgagor without thereby causing the mortgage to be merged as between himself and any subsequent mortgagee of the same party and no such subsequent mortgagee or charge-holder shall be entitled to foreclose or sell such property without redeeming the prior mortgage or charge or otherwise than subject thereto.

8. In Mulla's Transfer of Properly Act -- Sixth Edition page 632, the learned author says as follows:--

'The rule of intention is a technical rule, for it is presumed in cases of benefit when there is no actual intention and it is an artificial rule applied even in cases where the party is not even aware of the benefit. The Legislature has therefore discarded it and adopted the simple rule that the existence of a subsequent incumbrance prevents merger. In theory this is correct, for there can only be merger when the ownership and the charge meet: and in such a case it is to the advantage of the owner that the charge should merge, for that simplifies title. But this union cannot occur if any interest of a third person intervene and if there is any outstanding interest, for then there can be no union of the charge and absolute ownership. Thus there is no merger if a leasehold interest is outstanding when the mortgagee purchases the equity of redemption.'

9. What intervenes in this case is not even a mere leasehold interest, but a charge in favour of the plaintiff and under the statute, there can be no merger in the circumstances. We therefore disagree with the Court below and hold that there has been no merger,

10. In the result we allow the appeal and confirm the decree in favour of the plaintiff with the modification that it shall be subject to the earlier mortgage Ex. B-1 in favour of the tenth defendant. The plaintiff will pay the appellant the costs.

11. At this stage learned counsel for the appellant says that whereas Ex. A-1 was executed by defendants 1 to 3 for themselves and as guardians of minor defendants 4 to 9, Ex. B-l has been executed only by defendants 1 and 2 and that it may be open to the defendants who did not join in the execution of Ex. B-l to attack the binding character of the mortgage covered by Ex. B-1. This is a question we leave open for consideration in appropriate separate proceedings.


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