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A.M.E.P. Mohammed Ismail and ors. Vs. S.A.S. Alagappa Chettiar - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai High Court
Decided On
Reported in(1977)1MLJ76
AppellantA.M.E.P. Mohammed Ismail and ors.
RespondentS.A.S. Alagappa Chettiar
Cases ReferredSharda Marain v. U.P. Oil Industries
Excerpt:
.....below which refused to grant a stay of the further proceedings by the respondent pursuant to his mortgage decree as above. in situations like the one with which we are confronted in this case, if the memorandum of deposit is registered the mortgagee can successfully plead preference over other creditors who by course of law and in equity also should stand behind him and cannot claim any precedence over him. it cannot in equity or in good conscience be said to be hit by the principle of lis pendens. 10. some course which though not via media but one which is intelligible and at once equitable too has to be found out so as to protect the rights of both the court-auction-purchaser as well as the mortgage-decree-holder. the doctrine of substituted security as well as the principles touched.....ordert. ramaprasada rao, j.1.the petitioners are the court-auction-purchasers in a money decree sale while the respondent is a decree-holder over a mortgage by deposit of title deeds effected by the common judgment-debtor. it is convenient to trace out the relevant dates during which the respondent secured a right over the property of the common judgment-debtor. the judgment-debtor mortgaged by deposit of title deeds his property which would be hereinafter referred to as the property. this deposit was made on 15th february, 1971. it is conceded that the deposit of such deeds was not registered though it could have been done in law. the result was the bargain between the judgment-debtor and the respondent was only known as between themselves. the respondent not having had satisfaction.....
Judgment:
ORDER

T. Ramaprasada Rao, J.

1.The petitioners are the Court-auction-purchasers in a money decree sale while the respondent is a decree-holder over a mortgage by deposit of title deeds effected by the common judgment-debtor. It is convenient to trace out the relevant dates during which the respondent secured a right over the property of the common judgment-debtor. The judgment-debtor mortgaged by deposit of title deeds his property which would be hereinafter referred to as the property. This deposit was made on 15th February, 1971. It is conceded that the deposit of such deeds was not registered though it could have been done in law. The result was the bargain between the judgment-debtor and the respondent was only known as between themselves. The respondent not having had satisfaction towards the amount advanced by him filed O.S.No. 262 of 1972 on the file of the Subordinate Judge, Madurai and obtained a final decree finally on the 9th of August, 1974. He filed E.P.No. 338 of 1973 pursuant to the final decree and obviously for the purpose of bringing the hypotheca to sale. This was on 17th September, 1973.

2. The petitioners, on the other hand attended an auction of the very same property which was the subject-matter of attachment and sale in a money decree obtained by a third party in O.S.No. 544 of 1971 on the file of the same Sub-Court. They having been declared as the highest bidders, their deposit of a sum of Rs. 75,000 was accepted and the sale was confirmed in their favour on 2nd April, 1974. Further to such confirmation of the sale the petitioners took delivery of the property on 4th July, 1974 and caused a recording of such delivery to be made in the Court records on 20th July, 1974.

3. We have already referred to the fact that the respondent pursuant to the mortgage decree obtained by him in O.S.No. 262 of 1972 filed E.P.No. 338 of 1973 to bring the property to sale. Coming to know of such proceedings undertaken by the respondent, the petitioners filed E.A. No. 777 of 1974 in E.P. No. 338 of 1973 in O.S. No. 262 of 1972 to stop the sale. The petitioners urged that they having purchased the totality of the property in execution of the money decree in O.S. No. 544 of 1971, the short history of which has already been set out, the respondent has no further right to bring the property to sale in execution of his mortgage decree-We have already referred to the fact that the sale in favour of the petitioners was confirmed on 2nd April, 1974. Whilst the petitioners were taking proceedings to obtain delivery of property purchased by them in Court-auction, the respondent filed E.A. No. 477 of 1974 in O.S. No. 544 of 1971, Sub-Court, Madurai to withdraw that amount to which he is entitled to pursuant to the mortgage decree obtained by him in O.S. No. 262 of 1972. Curiously enough, the judgment-debtor is said to have opposed this application. The more curious thing about it is that when the lower Court dismissed the petitioner's application for stay of sale which was sought for in E.A. No. 777 of 1974 already referred to the respondent withdrew his application for payment out of the amount in Courts deposit and obviously therefore E.A. No. 477 of 1974 in O.S. No. 544 of 1971 on the file of the Sub-Court, Madurai was closed.

4. The petitioners are not satisfied with the order of the Court below which refused to grant a stay of the further proceedings by the respondent pursuant to his mortgage decree as above. Hence the revision.

5. The Court below thought that as the property has been under a mortgage in favour of the respondent prior to the Court-auction sale in favour of the petitioners and as the said mortgage has fractioned into a mortgage decree, the petitioners have no right to seek for a stay of sale of the property.

6. Mr. Veluswami, learned Counsel for the petitioners who challenged the order of the Court below raises two contentions. The first one is that under Section 73 of the Transfer of Property Act, the respondent's right is now circumscribed to the substituted security, namely, the proceeds of the sale of the property in Court auction which were deposited by him after the Court-auction which was held on 11th February, 1974. He therefore contends that the respondent's right is to proceed against such a substituted security and seek for consequential and incidental remedies. Secondly, he would say that as the respondent has elected to withdraw the deposit in O.S. No. 544 of 1971 made by the petitioners consequent upon themselves having been declared as Court auction purchasers, he cannot re-trace back and seek for further proceedings with his mortgage decree by a sale of the imaginary hypotheca still subsisting for his benefit.

7. On the other hand, Mr. Varadarajan, would say that the entire proceedings in the money suit were during the pendency of the mortgage suit and therefore the result in that money suit is affected by the doctrine of lis pendens under Section 52 of the Transfer of Property Act. On that ground he would say that the money decree-holder and even so the Court-auction-purchasers, namely, the petitioners herein are postponed to his rights and that the petitioners cannot interdict the normal steps which the mortgage decree-holder could take in execution of his mortgage decree.

8. In the cage of a mortgage by deposit of title deeds, no doubt the mortgagee stands on the same level and footing of a simple mortgagee as is commonly known and as is statutorily described under the provisions of the Transfer of Property Act. But every creditor should also be shrewd and alert so that for purposes of safeguarding his own interest, he should alert the public at large and keep them also informed of his rights over the properties of the judgment-debtors. It is only for such publicity and for the purpose of enabling the general public at large to know such bargains, though not secret, but not known, that a provision has been nude under the Stamp Act read with the Registration Act which enables Such a mortgage by way of deposit of title deeds commonly known as the equitable mortgage, to register the memorandum of deposit with the concerned Registrar of Assurances so that a public notice may be given of his rights over the concerned property. This safeguard was not availed of by the respondent in the instant case. Stress is made on the only fact that the respondent is a mortgagee in the usual and popular sense of the term. But a distinction has to be made between cases where there is a registered simple mortgage over a property and a mortgage by deposit of title deeds. The distinction lies in this. Whilst in the former case, the public come to know of such an encumbrance, since such mortgages are compulsorily registerable, in the latter cases in the absence of the registration of the memorandum of deposit, it remains as a bargain known and only known to the debtor and to the creditor concerned. It is such lack of publicity that distinguishes the two types of mortgages. It is always therefore advisable for the equitable mortgagee in order to claim rights on a per with the simple mortgagee to cause registration of the memorandum of deposit of title deeds. It is no doubt optional. In situations like the one with which we are confronted in this case, if the memorandum of deposit is registered the mortgagee can Successfully plead preference over other creditors who by course of law and in equity also should stand behind him and cannot claim any precedence over him.

9. If therefore it is a peculiar drawback which is attached to a mortgage by deposit of title deeds, the question arises in this case whether the doctrine of lis pendens propounded by the learned Counsel for the respondent would strictly apply. The respondent was pursuing his remedies under the mortgage as a mortgagee by deposit of title deeds. Equally the other money creditor was pursuing his remedy by Sling a suit on the debt and by seeking an attachment of the property and latterly to bring the attached property to sale. These two courses adopted by the two creditors of the same judgment-debtor are totally independent of each ether and one cannot therefore be said to be hit by the doctrine of lis pendens particularly in a case where the money suit proceeds without any knowledge or information about the suit based on deposit of title deeds. It cannot in equity or in good conscience be said to be hit by the principle of lis pendens. The decision in Annamalai Mudaliar v. Kuppuswami Reddiar : (1962)2MLJ336 . might relate to a case where the mortgage was a regular mortgage or a registered simple mortgage. In any event, that is not a case where the mortgage was a mortgage by deposit of title deeds. The principle in the above case would not apply to the instant situation.

10. Some course which though not via media but one which is intelligible and at once equitable too has to be found Out so as to protect the rights of both the Court-auction-purchaser as well as the mortgage-decree-holder. It is in this context the principle of proceedings against substituted security under Section 73 of the Transfer of Property Act looms large. Though Section 73 of the Act in terms applied to revenue sales or sales of a public nature, yet by practice and tradition this doctrine has been extended even to judicial sales. Vide Mulla's Transfer of Property Act--6th Edition--page 519.

11. The Allahabad High Court in Sharda Marain v. U.P. Oil Industries : AIR1964All558 . recognised this principle and said that under the doctrine of substituted security if the subject of the mortgage or charge is changed or transformed, the mortgage or charge attaches to the new form which it had assumed. In other words, if by process of law or by a compelling situation sanctioned by law, the security given to a creditor metamorphoses itself and changes into something other than the property which constituted the original security, then a mortgagee or a charge-holder over the quandom property is not helpless but he could trace his right to such metamorphosed security under the doctrine of substituted security enunciated in Section 73 of the Act.

12. In my view, having regard to the fact that the Court-auction-purchasers were kept in the dark about the rights of the respondent and they having proceeded bona fide by participating in the public sale by depositing a large sum of about Rs. 75,000 by having perused their rights and secured the confirmation of such sale and lastly by taking delivery of such property pursuant to the public sale, cannot now be asked to surrender the property to someone else for no fault of theirs. The fault lies in the respondent because he did not cause a publication to be made of his rights which he could have done. He could have exercised that option but he did not by registering the memo of deposit of title deeds. It is in these circumstances I accept the contention of the learned Counsel for the petitioners that the principle adumbrated in Section 73 of the Transfer of property Act would apply and the right course for the respondent would be to have recourse to the substituted security and get relief.

13. There is also another difficulty with which the respondent is faced in the instant case. On 2nd May, 1974, a date after the Court-auction-sale held in pursuance of the money-decree was confirmed, he applied for withdrawal of the moneys in Court deposit and which deposit was made by the petitioners as Court-auction-purchasers. Obviously that was done in the light of Section 73 of the Transfer of Property Act but was faced with a hesitant or meaningless opposition by the judgment-debtor. It is said that that application for withdrawal of the moneys in Court was withdrawn. I am unable to appreciate this stand. The mortgage decree-holder in O.S. No. 262 of 1972 is Only interested in getting back his money. He ought to have pressed his application for withdrawal of the moneys in Court in a manner known to law. The point however is that when the respondent was aware that he had two alternative remedies in him he elected to choose one and applied for withdrawal of the money deposited by the petitioners in Court pursuant to the Court-auction-sale. In the same process of activity, apparently undertaken by the respondent in the matter of realising the fruits of his mortgage decree, he snapped it and made a specific application to withdraw the moneys in Court deposit. This is sufficient to demonstrate that he has elected as between two alternative rights available to him. But he having elected Once, he cannot re-trace his step back. To allow him to do so would be to encourage approbating and reprobating. On this ground also the respondent is not entitled to relief. But unfortunately he has withdrawn his application after the dismissal of the petitioners' application in which they sought for a stay of sale of the property pursuant to the mortgage decree. It is not clear as to why he did so But this ought not to stand in the way of the respondent to get his reliefs in law. The doctrine of substituted security as well as the principles touched upon by me are only to discourage unjust enrichment and to ensure the recognition of fair and legitimate rights of citizens. It therefore, follows that notwithstanding the fact that the respondent has for some reason withdrew his application E.A. No. 477 of 1974, it would not prevent him from making a similar supplication for a similar relief and obtain the moneys from Court. The observation in this Civil Revision Petition would not in any manner detract or under-estimate the rights of the respondent to obtain his legitimate relief for obtaining payment out of the moneys deposited by the petitioners in the money suit.

14. As the two contentions of the learned Counsel for the petitioners are well-founded, the order of the Court below is set aside and the Civil Revision Petition is allowed. There will be no order as to costs.


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