Skip to content


Venkat Reddy Vs. Kunjappa Goundan and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty;Civil
CourtChennai
Decided On
Reported in(1924)46MLJ391
AppellantVenkat Reddy
RespondentKunjappa Goundan and ors.
Cases ReferredSivathi Odayan v. Rama Subba Aiyar
Excerpt:
.....a party to the previous suit was wilful or due to ignorance. where the purchaser in execution of a mortgage decree has purchased the property for an amount equal to or more than the amount due on the mortgage, the mortgagee who receives the purchase-money is fully satisfied and has no further claims on the mortgage which is discharged and it can only be kept alive for purposes of being used as a shield against the claimants of third persons. as we are of opinion that it is open to the purchaser as the assignee in law of the rights of the original mortgagee by virtue of his purchase in court sale to institute a second suit as against persons who were not parties to the prior suit, it is clear that he has got the same rights as the original mortgagee would have had if he had filed a suit..........fact that a prior mortgagee obtains a decree for sale on his mortgage and brings the property to sale in execution. they also held that if a puisne mortgagee files a suit on his own mortgage, the auction purchaser in execution sale in a prior mortgage can use the prior mortgage right as a shield and claim payment of the amount due under the prior mortgage decree as a condition of a decree for sale in favour of the puisne mortgagee and pointed out the change effected by order 34 rules (3) and(5) of the code which do not re-enact the last portion of section 89 of the transfer of property act and distinguish the case of het ram v. shadi ram ilr (1918) a 407 on the ground that that decision proceeded on section 89 of the transfer of property act. it is therefore unnecessary to consider the.....
Judgment:

1. The 4th defendant is the appellant. The suit as originally framed was one for foreclosing a mortgage executed by the 1st defendant and the father of the 2nd and 3rd defendants on the 3rd of April, 1914 m favour of the 5th defendant. The 4th defendant was the auction-purchaser of one half of the properties mortgaged in execution of a money-decree obtained against the father of the 2nd and 3rd defendants. He was not made a party to the suit on the mortgage. A decree was passed in the mortgage suit (O.S. No. 156 of 1917 filed by the 5th defendant) on the 5th of October, 1917 for Rs. 723-7-9 with costs and future interest. The plaintiff became the purchaser of the properties in execution of the mortgage decree for Rs. 757 on the 3rd of July 1918. When he attempted to take possession of the properties, the 4th defendant resisted the claim in so far as the half-share of defendants 2 and 3 was concerned and the plaintiff was referred to a suit. He then filed the present suit out of which this Second appeal arises.

2. The prayers in the plaint are that the plaintiff's rights as auction-purchaser may be declared; that the 4th defendant may be directed to pay the plaintiff the balance of the mortgage debt and interest from the date of the mortgage up to the date of the plaintiff's sale which he says amounts to Rs. 867-8-0 with future interest and then to redeem the plaint properties, that in the event of the properties not being redeemed, the 4th defendant should be deemed to have lost his equity of redemption, and that on the happening of such an event the 4th defendant should be directed to deliver possession of the properties to the plaintiff. A prayer was subsequently added asking for a sale of the properties if they are not redeemed and possession given and for the recovery of any balance from the defendants.

3. The 1st defendant filed a written statement pleading that he is not in possession of the plaint properties, that he never obstructed the plaintiff-from taking possession and that there is no cause of action against him. Defendants 2 and 3 filed no written statements. The 4th defendant filed a written statement pleading inter alia that his father bought one-half share in the plaint properties in Court sale and was put in possession, that his father was and after his death he the 4th defendant is in lawful possession, that the plaintiff and his mother-in-law (the mortgagee) had notice, that although they had notice, the plaintiff in O.S. No. 156 of 1917 when she sued on the mortgage did not implead the 4th defendant as a party, that the decree in that suit docs not bind the 4th defendant, that when a final decree was passed in the mortgage suit the mortgage became extinguished and no cause of action exists as on the mortgage, that he never obstructed the plaintiff from taking possession of the properties, that a suit for foreclosure would not lie as the mortgage was a simple mortgage, that the plaintiff does not derive any rights under the mortgage, he being simply an auction-purchaser in a Court sale and not a party to the original mortgage, that even assuming that the 4th defendant has to redeem, he is not bound to redeem the whole mortage, that the persons whose share he bought were divided from the 1st defendant and they received only Rs. 100 out of the mortgage money and that he is only bound to pay Rs. 100 and not the whole amount due on the mortgage if he should be directed to redeem the property. On the amendment of the plaint by adding a prayer for sale an additional written statement was filed by the 4th defendant pleading that the plaintiff has no right to bring the properties to sale, that his claim for such a relief is barred by limitation, that the mortgage was discharged before the date of the suit and that there was no mortgage on which any decree could be passed.

4. The District Munsif passed the usual mortgage decree for sale in favour of the plaintiff for Rs. 1,041-13-7 with costs and further interest. An appeal was filed by the 4th defendant against this decree which was dismissed by the Subordinate judge.

5. The two questions arising for determination in the Second Appeal are whether the plaintiff who is only an auction--purchaser in execution of a mortgage decree can sue on the original-mortgage either for foreclosure or sale and if so whether he can recover the whole amount due on the mortgage or only the difference between the amount for which he purchased the properties and the value of the property which is in the possession of the 4th defendant, he having admittedly got possession of the other half of the properties.

6. There can be little doubt on the facts that the original mortgagee not having made the 4th defendant a party to the mortgage suit, the right of the 4th defendant to redeem would not be extinguished and the 4th defendant would have all the remedies open to him which he would have had if he had been made a party. It is contended by the appellant that the plaintiff in the mortgage suit who had notice of the 5th defendant's rights not having joined him but having elected to proceed to sell the properties in his absence and to obtain a final decree against the original mortgagors for any balance cannot now proceed as regards the property in the possession of the 4th defendant who claims as the son of the auction-purchaser in execution of a money decree against defendants 2 and 3 who admittedly were entitled to a half share in the properties. We do not think that this contention is sound. Order 34, Rule 1 of the Civil Procedure Code enacts that subject to the provisions of the Code all persons having an interest either in the mortgage security or in the right of redemption shall be joined as parties to any suit relating to the mortgage. It does not give the consequences of the failure to join and we think that in such cases the Only effect would be that the person not joined would not be affected by any decree that may be passed and would be entitled to enforce such rights as he might have had against the original mortgagor and the mortgagee or the auction purchaser in execution of a decree obtained by the mortgagee without joining the other encumbrancers or persons entitled to the property.

7. In dealing with this question it should be remembered that Section 85 of the Transfer of Property Act contained a proviso that the plaintiff should have notice of the interest of the persons whom the section says he ought to join. But Sections 85 to 90 were repealed by and incorporated in Order 34, of the Civil Procedure Code. Order 34, Rule 1 which corresponds to Section 85 does not contain any proviso but simply states that subject to the provisions of the Code, all persons having an interest either in the mortgage security or in the right of redemption shall be joined as parties to any suit relating to the mortgage. Section 89 of the Act which prescribed the procedure to be followed when the defendant fails to pay the amount due into Court enacted that the plaintiff may apply to the Court for an order absolute for sale of the mortgaged property and proceeded as follows:

And the Court shall then pass an order that such property, or a sufficient part thereof, be sold, and that the proceeds of the sale be dealt with as, is mentioned in Section 88; and thereupon the defendant's right to redeem and the security shall both be extinguished.' This section has been re-enacted as Order 34, Rule 5 of the Code and the words in Section 89 of the Transfer of Property Act to the effect that the defendant's right to redeem and the security shall both be extinguished on an order absolute being passed are omitted and consequently the mortgage is kept alive for all purposes as regards persons having an interest but not made parties to the mortgage suit.

8. It is difficult to see how a second suit against a person not impleaded in the previous suit would be barred under any of the provisions of the Civil Procedure Code. It is no doubt true that the first mortgagee who had notice of a puisne encumbrance could have impleaded that puisne encumbrancer in the suit on the first mortgage but the failure to do so would not necessarily bar the second suit against the puisne encumbrancer unless there is anything in the Code barring such a suit. The cause of action is not the same as in the previous suit nor would the points to be decided necessarily be the same.

9. In Sukhi v. Ghulam Safdar Khan (1921) ILR 43 A 469 (PC) Their Lordships of the Privy Council held that the rights of a puisne mortgagee not made a party to a previous suit on the mortgage to enforce the security are not affected by the fact that a prior mortgagee obtains a decree for sale on his mortgage and brings the property to sale in execution. They also held that if a puisne mortgagee files a suit on his own mortgage, the auction purchaser in execution sale in a prior mortgage can use the prior mortgage right as a shield and claim payment of the amount due under the prior mortgage decree as a condition of a decree for sale in favour of the puisne mortgagee and pointed out the change effected by Order 34 Rules (3) and(5) of the Code which do not re-enact the last portion of Section 89 of the Transfer of Property Act and distinguish the case of Het Ram v. Shadi Ram ILR (1918) A 407 on the ground that that decision proceeded on Section 89 of the Transfer of Property Act. It is therefore unnecessary to consider the decisions cited by the appellant's vakil which were based on the view that on the making of an order absolute on a mortgage-decree the mortgage is extinguished. It has been held that a mortgagee not made a party to a suit by another mortgagee can file a separate suit on his own mortgage. In Rangasamy Naicken v. Komarammal ILR (1902) M 484 the property was first mortgaged to the plaintiff and then to the 3rd defendant in the suit. The plaintiff brought a suit on his mortgage without making the 3rd defendant a party and obtained a decree and the share of the 1st defendant was sold in Court auction and purchased by the plaintiff who filed a suit for partition and for the recovery of the 1st defendant's share. The 3rd defendant contended that he was entitled to redeem the plaintiff and it was held that the plaintiff was not entitled to possession without redeeming the 3rd defendant and that it was immaterial whether the plaintiffs failure to join the 3rd defendant as a party to the previous suit was wilful or due to ignorance. In Goverdhana Dass v. Veerasami Chetti ILR (1902) M 537 the plaintiffs who had the first and second mortgages of the same property sued their mortgagors, obtained a decree, brought the property to sale and purchased it. They did not make the 3rd mortgagee a party to that suit. The plaintiffs then filed a suit against the mortgagors and the 3rd mortgagee and prayed that the 3rd defendant might be decreed to pay them the amount due under their decree and that, in default, it be declared that he is debarred of his right to redeem the prior mortgage, and that he be ordered to surrender possession of the property to the plaintiffs. It was held that the right of the 3rd mortgagee was not affected either by the decree or the sale, that the only effect of the sale was to transfer to the purchaser the equity of redemption of the mortgagor and that the only right which the 3rd mortgagee, could exercise was that which he could have claimed to exercise if he had been a party to the suit on the prior mortgage, namely, the right to redeem that mortgage with the view of enforcing his own mortgage. In Ram Prasad v. Bhikari Das ILR (1903) A 464 which was a case of a stranger purchaser, property subject to a mortgage was sold by auction in execution of a simple money decree and the purchasers were put in possession. A suit was then filed by the mortgagee for sale on his mortgage without making the previous auction-purchasers as parties and a decree was obtained in execution of which the property was again sold and purchased by a third party. ft was held in a suit by the purchaser at the sale held in execution of the mortgage decree claiming payment of the amount due under the mortgage or in default possession of the mortgaged property that the person who purchased the property in execution of the money-decree must be allowed to redeem on payment of what was found due on the mortgage at the time the mortgage decree was passed and that if the payment was not made within the time fixed, the plaintiff was entitled to a decree for foreclosure and possession of the property. Govardhana Doss v. Veerasami Chetti ILR(1902) M 537 was cited with approval. In Sham Dei v. Baljit Singh ILR (1909) A 119 a prior mortgagee brought the whole of the mortgaged property to sale without impleading a subsequent mortgagee of a portion and purchased the property himself. The subsequent mortgagee brought a suit in respect of the portion mortgaged to him without impleading the prior mortgagee and became the purchaser of the portion. The prior mortgagee who was unable to get possession from the subsequent mortgagee filed a suit to bring the property to sale for the realization of the un-recovered balance of the original mortgage money. It was held that a suit was maintainable by him and was not barred either by Section 13 01-43 of the C.P.C. (1882).

10. In Chinnu Pillai v. Venkatasami ILR (1915) M 477 Srinivasa Iyengar, J. after an exhaustive review of the authorities observed as follows: 'If the view which I have set forth is correct, in the case where the first mortgagee had omitted to make the second mortgagee a party, and proceeded to sale, the purchaser whether himself or another, can bring a fresh suit for sale making the second mortgagee a party; or he can as a defendant when the second mortgagee institutes a suit for sale, insist on a sale of the property free of his mortgage; or if he had not proceeded to sale before the second mortgagee's sale, he can, though not made a party, get the necessary relief by applying for sale free of encumbrances in the second mortgagee's suit.' Reference was made to the observations of Sadasiva Aiyar, J. in Lakshmanan Chetti v. Muthayya Chetti and Ors. (1920) 40 MLJ 126, where the learned Judge after referring to Jugdeo Singh v. Habibullah Khan (1907) 6 CLJ 612 observes that he was inclined to hold ' that where the first mortgagee had notice of a second mortgage (which he must be presumed to have where the second mortgage is registered and where he omits to make the second mortgagee a party as he was bound to do under Section 85 of the Transfer of Property Act and Order 34, Rule 1 of the present Civil Procedure Code, he ought not to be allowed to bring a second suit for sale against the second mortgage with or without the addition as party of the original mortgagor against whom he had already obtained a decree, simply because he finds his first decree valueless against the second mortgagee and is confronted with difficulties owing to the second mortgagee's putting forward his rights. It is however unnecessary to pursue this point further for the decision of this case. ' These observations are obiter, and we may point out that the recent decision of the Privy Council in Tilakdhari Lal v. Khedam Lal (10) has now settled the law that registration is not notice. We have already pointed out the difference in words between Section 85 of the Transfer of Property Act and Order 34, Rule 1 of the Civil Procedure Code. In view of the decisions which we have referred to above, we do not think that a second suit would be barred. The result of the authorities is where a mortgagee makes all the necessary persons parties, obtains a decree and sells the mortgaged property, the purchaser acquires the equity of redemption of the mortgagor and the property is sold free from the mortgage rights of the mortgagee in the working out of which rights the property is sold and the purchaser is entitled, if necessity arises, to take advantage of the lien which the mortgagor had and use it as a shield against the claim of third persons where the owner of the equity of redemption is not made a party, it still remains in the mortgagee and different considerations would arise.

11. This being the state of the law as regards puisne and subsequent encumbrancers, the question arises as to what the rights of a purchaser in a Court sale are where the purchaser purchases the items of property mortgaged in execution of a decree to which a prior purchaser in execution of a simple money decree obtained after the mortgage of a portion of the mortgaged property has not been made a party. Where the purchaser in execution of a mortgage decree has purchased the property for an amount equal to or more than the amount due on the mortgage, the mortgagee who receives the purchase-money is fully satisfied and has no further claims on the mortgage which is discharged and it can only be kept alive for purposes of being used as a shield against the claimants of third persons.

12. So far as the present plaintiff is concerned, he is a purchaser in Court sale in execution of a mortgage-decree and the price paid by him was sufficient to discharge the mortgage debt. The purchase by the 4th defendant was subsequent to the mortgage and in execution of a simple money-decree. If he had been made a party, he would have no right except the right to redeem the mortgage and if he did not do so, the sale in execution of the mortgage decree would have conveyed his interest also in the property. As we are of opinion that it is open to the purchaser as the assignee in law of the rights of the original mortgagee by virtue of his purchase in Court sale to institute a second suit as against persons who were not parties to the prior suit, it is clear that he has got the same rights as the original mortgagee would have had if he had filed a suit and the defendant cannot be in a better position than he would have been if he had been made a party to the original mortgage decree in execution of which the property was sold.

13. The next question is as to the amount payable by the 4th defendant. In Sivathi Odayan v. Rama Subba Aiyar ILR(1897) M 64 three items of property were mortgaged to a person for Rs. 5,000. Two of the items were sold and the proceeds applied towards the discharge of the mortgage. The third item was sold for Rs. 990 but the money was not paid towards the discharge of the mortgage and the person to whom the third item was sold transferred his right to the defendants in that suit. The original mortgagee filed a suit on the mortgage without making the transferees of the third item as parties. A decree was passed as regards the third item for Rs. 1,050. the amount then due on the mortgage against the original mortgagor and the intermediate transferees and the land was sold and purchased by the plaintiff for Rs. 270. The purchaser filed a suit for possession of the property against the defendants who were entitled to the third item of property. It was held that the defendants who were not parties to the previous suit are entitled to redeem on payment not of Rs. 270 the amount for which the plaintiff purchased the item of property in dispute but of Rs. 1,050 the amount due under the decree. Subramania Aiyar and Benson, JJ. after referring to Fisher on Mortgages, 5th Edition, Section 1734, Davis v. Barrett (1851) 14 Beav. 542 and Macrae v. Goodman 5 MPC 325 held that a person who was not made a party to a previous litigation on a mortgage was bound to pay not merely the sum actually paid by the auction-purchaser at the Court sale in execution of the decree in the previous suit but the amount actually due and payable on the mortgage so far as that item was concerned.

14. It is contended for the appellant that Section 60 of the Transfer of Property Act applies to the present case and that the appellant is entitled to redeem the property purchased by him in Court sale in execution of the money decree on payment of the proportionate amount as the item sold to him was liable to contribute rateably to the debt secured by the mortgage. Reference has been made to Venkatasami Naicken v. Ramanathan Chettiar (1910) 8 MLT 409 . In that case some items of property were mortgaged and the mortgagee in execution of the mortgage decree purchased four items himself. Before the date of the mortgage-decree one of the items purchased by the mortgagee was sold by the mortgagor to the appellant in that case who was not made a party to the suit brought by the mortgagee. It was held that the mortgagee must be taken to have split up his security and precluded himself from objecting to an apportionment, that the appellant was entitled to redeem his own share only on payment of the proportionate amount which the item sold to him was liable to contribute rateably to the debt secured by the mortgage and that the mortgagee was entitled to interest according to the mortgage-deed and not according to the decree. The learned Judges treated the sale in execution of the mortgage-decree as valid and observed as follows: 'Treating the sale then as valid, the mortgagee has acquired by purchase the interest of the mortgagor in some of the items and there is no doubt that he must be taken to have split up his security and precluded himself from objecting to an apportionment. It was then contended that the appellant must at least pay the proportionate share of the debt chargeable on the items other than those which he has purchased. When the mortgagee has split up his security and precluded himself from objecting to an apportionment, we are of opinion that he is not entitled to insist upon the appellant redeeming more than his own share on payment of the proportionate amount which item No. 4 (purchased by the appellant) is liable to contribute rateably to the debt secured by the mortgage. The words of Section 60 of the Transfer of Property Act art in favour of the view. ' Reference has also been made to Moro Raghunath v. Balaji Trimbak ILR (1888) B 45 . In this case the plaintiff purchased part of the lands comprised in his mortgage in execution of the mortgage-decree obtained by him. The other parts of the land were in possession of third persons and were purchased by them. The contention raised was that the plaintiff having purchased part of the lands comprised in the mortgage could not seek to burden the remaining lands included in the mortgage with the whole of the mortgage debt but that only a proportionate part of the debt must be satisfied. This contention was upheld. These cases are distinguishable as in the present case the mortgagee purchased in execution of his decree all the items of property mortgaged and has done nothing which would indicate an intention of splitting up his security. We think that the present case falls within the ruling in Sivathi Odayan v. Rama Subba Aiyar 8 M.L.J. 21 referred to.

15. As regards the amount payable, it will be the amount of the decree in execution of which the property was purchased by the present plaintiff.

16. As regards the interest, the plaintiff has been in possession of one half of the property as to which no objection has been taken. The whole difficulty has arisen out of the plaintiff's default in not making the 4th defendant a party to the original mortgage suit. We do not think that this is a case where interest ought to be allowed.

17. The decree of the lower Court will be modified accordingly. The parties will pay and receive proportionate costs. No personal decree. Time 6 months.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //