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N.S. Ramaswami Mudaliar and ors. Vs. Gopalasubba Nayakan and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Reported inAIR1928Mad1109
AppellantN.S. Ramaswami Mudaliar and ors.
RespondentGopalasubba Nayakan and ors.
Cases ReferredSubramania Pillai v. Palaniappa Mudali
Excerpt:
.....is why they distinctly stated in ex. when there is an express recital to that effect, there must be very strong and cogent evidence to show that the plaintiffs wanted to keep alive their mortgage of 1906 what is strongly urged by mr......3 had obtained a final decree in o.s. no. 102 of 1916. he was about to bring the property to sale. defendants 1 and 2 who were in possession of the property could not resist the execution of the decree in o.s. no. 102 of 1916. they attempted by sales under exs. b and d to discharge the debt due to defendant 3. the vendees under exs. b and d did not discharge the debt. the plaintiffs either to assist defendants 1 and 2 in fighting defendant 3 or for their own purposes, wanted to take possession of the property and accordingly exs. g and g (1) and g (2) were brought into existence and sales ware effected by exs. h and h (1) and as observed by the vakil for the respondents, five documents were brought into existence within the space of four months. the vendees under exs. b, c and d.....
Judgment:

Devadoss, J.

1. This appeal is against the decree of the Subordinate Judge of Dindigul dismissing the plaintiffs' suit for recovery of the principal and interest due on a mortgage bond. The facts of the case are: The plaintiffs' father and defendant 4 were the Karaswoms or stake-holders of a half-yearly auction chit to which defendant 1 was a subscriber. He bid for and obtained the chit in an auction and executed and registered a hypothecation bond on 3rd February 1906 for Rs. 2,000 as security for payment of future instalments. Defendants 1 and 2 are members of an undivided Hindu family. They executed a simple mortgage dead in favour of defendant 3 for Rs. 4,000 on 15th February 1909 (Ex. 1). On 1st February 1913, defendants 1 and 2 executed three sale-deeds in favour of third persons, Exs. B, C, and D with the direction that the vendees should pay off the mortgage amount due to the plaintiffs and the amount due to defendant 3. The vendees not having paid the amount due under Ex. 1, defendant 3 brought O.S. No. 102 of 1916 on Ex. 1 impleading defendants 1 and 2 and the purchasers under Exs. B, C and D is defendants in the case. He did not implead the plaintiffs as defendants. A preliminary decree was passed on 20th October 1916 and a final decree was passed thereafter. Defendants 1 and 2 got releases from' the vendees under Exs. B, C and D of their rights in the property sold to them by Exs. G, G (1), and G (2), on 1st August 1917, 4th October 1917 and 26th November 1917 respectively. Defendants 1 and 2 conveyed all their properties which they purported to sell under Exs. B, C and D, to plaintiff 1 in discharge of the mortgage debt under Ex. A, by two documents Exs. H and H (1) for Rs 7,500 and Rs. 5,000 respectively on 9th October 1917 and 5th December 1917 and gave the plaintiffs possession of the properties. Defendant 3 brought the properties to sale in execution of his decree in O.S. No. 102 of 1916, bought the property himself and obtained possession through Court. Owing to the obstruction of the plaintiffs to the peaceful possession of defendant' 3, proceedings were taken under Section 145 Criminal P.C., and the Magistrate upheld the possession of defendant 3, whereupon the plaintiffs brought this suit on their hypothecation bond of 1906, Ex. A. Defendants 1 and 2 remained ex parte, and defendant 3 contested the suit on various grounds. The Subordinate Judge held that the vendee under Ex. C had undertaken to discharge the amount due under Ex. A and as the plaintiffs have acquired the right of the vendee under Ex. G, they could not fall back upon their original mortgage, Ex. A, and sue thereon.

2. The contention of Mr. Bhashyam for the appellants is that the plaintiffs must be presumed to have kept alive the mortgage under Ex. A when they purchased the property under Ex. H and H (1) and that they are entitled to sue on it. It is a question of fact in each case' whether a person who acquires an interest in immovable property and discharges a prior encumbrance intends to keep alive that encumbrance as a shield against a puisne encumbrancer. This principle was clearly enunciated by the Privy Council in Gokaldas Gopaldas v. Puranmal Premsukh Das [1884] 10 Cal. 1035. Their Lordships held that the principle enunciated in the well-known case of Toulmin v. Steers 3 Mer. 210 was not applicable to India and observed at p. 1016:

The obvious question to ask in the interest of justice, equity and good conscience, is, what was the intention of the party paying off the charge. He had a right to extinguish it and' a right to keep it alive. What was his intention? If there is no express evidence of it, what intention should be ascribed to him. The ordinary rule is that a man having a right to act in either of two ways shall be assumed to have acted according to his interest.

3. This principle is embodied in Section 101, T. P. Act, which is in these terms:

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.

4. The plaintiffs have acquired the absolute or full title to the property purchased by them and the question is whether they by express words or by necessary implication, declared their intention to keep the mortgage of 1906 alive, or whether the keeping alive of that mortgage would be for their benefit. It is not an absolute rule of presumption that whenever it would be for the benefit of a person to acquire absolute title to property he keeps alive the charge or incumbrance on the property in his favour. All that can be said is that in the absence of special circumstances to show the contrary, the presumption is that when a subsequent encumbrancer pays off a prior incumbrance with the consideration money of his own incumbrance, he does so with the intention of keeping the prior incumbrance alive for his own benefit: vide Chidambaram Nadan v. M. Nagendrayyan : (1920)39MLJ445 . It is unnecessary to consider in detail the cases in Gopal Chunder v. Herembo Chunder [1889] 16 Cal. 523, Dinobandhu Shaw v. Jogmaya Dasi [1902] 29 Cal. 154 and Syed Ibrahim Sahib v. Arumugathayee [1915] 38 Mad. 18, as these cases were decided upon the facts appearing in evidence in them. Where a person who was a mortgagee over property becomes purchaser thereof, he [cannot ask for subrogation so far as his own mortgage is concerned. The principle of subrogation does not apply to such a case. The ease in Govindaswami Thevan v. Doraiswami Pillai [19 34 Mad. 119, which is relied upon by the lower Court does not apply to the present case. There it was held that where a purchaser undertakes to pay off two prior encumbrances but discharges one only, he cannot claim to stand in the shoes of the mortgagee whose mortgage amount he discharged. It was held that his right to use the prior mortgage as a shield is based on a presumed intention to keep alive the prior mortgage for his own benefit and such a presumption is rebutted when he undertakes to discharge both the mortgages. In Surji Ram Marwari v. Barhandeo Persad [1905] Cri.L.J. 288, it was similarly held,

if a person purchases property which is subject-to two mortgages, and retains a portion of the purchase money for payment to the mortgagees but pays the first of the two incumbrancers and. not the second, he cannot treat the first mortgage as kept alive to be used as a shield against the second, nor can he claim to be subrogated to the position of a mortgagee whose debt he has satisfied.

5. Some observations of Mookerjee, J., in that judgment are relied upon by the contesting 'respondents as supporting their case that the plaintiffs did not intend to keep alive their mortgage of 1906 when they purchased the property. In Srinivasachari v. Ganaprakasa Mudaliar [1907] 30 Mad. 67 it was held

that where a person paying off a prior mortgage purchases a portion of the mortgaged properties in consideration of the amount so paid by him, the lien acquired by such payment is extinguished and cannot be used by such purchaser as a shield against subsequent mortgagee.

6. Ayling and Oldfield, JJ., make the following observation with regard to the cases in Srinivasachari v. Gnanapraprahasa Mudaliar [1907] 30 Mad. 67 and Govindasivami Thevan v. Doraiswami Pillai [19(sic)0] 34 Mad. 119 in Subramania Pillai v. Palaniappa Mudali [1913] 26 M.L.J. 94:

These Cases are simply authority for holding that, where a person who has actually acquired the equity of redemption pays off a prior mortgage, he cannot claim the right of subrogation in respect of that mortgage as against a puisne mortgagee. Such a person does not really come within the scope of the Privy Council ruling in Gokuldas's case [1884] 10 Cal. 1035. Any doubt as to his intention is cleared up by Section 101, T. P. Act. Unless he declares his intention to keep the mortgage alive, it becomes extinguished by the mere fact of discharge.

7. In Ex. H, dated 9th October 1917, the recital is

The sum of Rs. 7,500 aforesaid has been paid to us by way of our endorsing payment this date on your hypothecation bond aforesaid.

8. In Ex. H(1) which is a later document executed on 5th December 1917, there is a clear expression as to the intention of the parties:

The said sum of Its. 5,000 has been paid, and endorsement of payment has been made on the said hypothecation bond and the whole bond has been discharged. As we have received the money in this manner, you are to hold and enjoy the undermentioned property with all rights and privileges, etc.

9. The circumstances 'under which both Exs. H and H (1) came to be executed also have to be considered in this connexion. Defendant 3 had obtained a final decree in O.S. No. 102 of 1916. He was about to bring the property to sale. Defendants 1 and 2 who were in possession of the property could not resist the execution of the decree in O.S. No. 102 of 1916. They attempted by sales under Exs. B and D to discharge the debt due to defendant 3. The vendees under Exs. B and D did not discharge the debt. The plaintiffs either to assist defendants 1 and 2 in fighting defendant 3 or for their own purposes, wanted to take possession of the property and accordingly Exs. G and G (1) and G (2) were brought into existence and sales ware effected by Exs. H and H (1) and as observed by the vakil for the respondents, five documents were brought into existence within the space of four months. The vendees under Exs. B, C and D were evidently tools in the hands either of plaintiffs or of defendants 1 and 2. If the plaintiffs wanted to enforce their right under the mortgage of 1906, Ex. A, they could have brought a suit against defendants 1 to 3 and recovered the amount by sale of the hypotheca. In Exs. H and H (1) there was no present advance. The only consideration for the sale was the previous mortgage in favour of the plaintiffs. Probably, the plaintiffs thought that if that mortgage was left outstanding, it might be said there was no consideration for the sale. That is why they distinctly stated in Ex. H (1) that the whole bond had been discharged. When there is an express recital to that effect, there must be very strong and cogent evidence to show that the plaintiffs wanted to keep alive their mortgage of 1906 What is strongly urged by Mr. Bashyam Ayyangar is that, if it was for the plaintiffs' benefit to keep alive the mortgage, they must be demand to have kept it alive. As already observed, there is no absolute rule of law that such a presumption should be made in all cases. Taking all the circumstances of this case into consideration, we have no hesitation in holding that at the time when Exs. H and H (1) were executed, the intention of the parties was that the sale was to be in satisfaction of the amount due on the mortgage and it was not the plaintiffs' intention to keep alive the mortgage of 1906 after the dates of Exs H and H (1).

10. The presumption that is embodied in Section 101 is an equitable presumption and a person is not entitled to have the benefit of the presumption if his conduct has not bean above the board. The Court is not bound to raise that presumption where the circumstances under which the transaction took place are, if not fraudulent, of a very suspicious character.

11. The Subordinate Judge has found that it has not been proved that the debt under Ex. A had been discharged. Though there is no direct evidence of discharge, yet in the circumstances of the case, one cannot resist the impression that Ex. A must have been discharged in the usual course by payment of the chit instalments. Ex, A was executed as already observed as security for payment of future instalments. The chit transaction came to an end in 1911, In 1912, Ex. J, a notice was sent by a vakil on behalf of the plaintiffs to defendant 1 demanding the recovery of Rs. 2,000, and interest. There is no mention in it of the amount of interest. The plaintiffs have not produced the account books of the chit transaction and plaintiff 1 says that he did not keep an account. Ex. M, a note book is produced which gives the names of the persons who bid at the auction and the names of the subscribers. The defaulters' names are marked with a cross. The amount of subscription in default is not shown. We cannot place any reliance on Ex. M as proving that defendants 1 and 2 were defaulters. No doubt the onus is upon the defendants to prove discharge but the following circumstances lend colour to the contention of defendant 3 that there was nothing due under Ex. A after 1911. Ex. 1, the mortgage to defendant 3 was attested by defendant 4 who was one of the 'karaswoms of the chit, and the recital in Ex. 1 is 'we have not subjected the aforesaid lands to any other encumbrances.' Though mere attestation is not sufficient notice of the contents of a document, yet knowing the customs and habits of the people, we may safely conclude that the object of obtaining the attestation of defendant 4 was to show that there was no default in payment of the subscriptions to the chit and therefore no amount was due under Ex A, on account of the default of defendants 1 and 2 in paying their subscriptions regularly. Plaintiff 1 in his deposition says that he was not aware of the existence of Ex. 1 till disputes arose as regards possession of the property This is manifestly false, for in 1917 when Exs. H and H (1), were executed in his favour, he obtained Exs. B, C and D. He must have known that defendant 3's mortgage was outstanding. Though notice was sent in 1912 demanding Rs. 2,000, yet no suit was brought on Ex. A for nine years. The suggestion that defendant 4 was quarelling with the plaintiffs is not sufficient explanation for not bringing .a suit. The conduct of defendants 1 and 2 in executing three documents, Exs. B, C and D in 1915 and getting releases without any consideration under Exs. G, G (1) and G (2) 'and conveying the properties to the plaintiffs, shows that all these transactions were collusive and intended to defeat defendant 3 of his legitimate claim. Defendant 1 has not gone into the box to support the claim of the plaintiffs, nor has any of the vendees under Exs. B, C and D been examined in the case. Though a positive finding cannot be given in favour of defendant 3 that Ex A was discharged by the regular payment of subscriptions, yet the circumstances and the conduct of the parties leads one to entertain very serious doubts as to any amount outstanding on Ex. A. The plaintiffs must have known that they were getting sale deeds in consideration of a mortgage more than 11 years old and that it would not be easy to sustain a suit on it as against defendant 3 and therefore they wanted the sale to be in full discharge of the mortgage.

12. The respondents' vakil raises the question of limitation. Ex. A provides for the whole of the amount becoming due on default being made in the payment of subscriptions, but the plaintiffs were not bound to take advantage of that provision and they are entitled to sue within 12 years of 'the close of the chit. The termination of the chit transaction was In 1911 and this suit was brought on 25-12-1921. The suit is therefore within time. In the result the appeal fails and is dismissed with costs of respondent 12.


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