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A.V.A. Audinatha Ayyengar Vs. S.S. Bharathi and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Reported inAIR1929Mad890
AppellantA.V.A. Audinatha Ayyengar
RespondentS.S. Bharathi and ors.
Cases ReferredSubbammal v. Muthu Pathan
Excerpt:
- - 2. it is now well settled law that, when a mortgagor pays off a prior mortgage by purchase of the property for himself, he cannot be heard to plead the prior mortgage as a shield against the subsequent encumbrancer. such misrepresentation is alleged in the present case in that the mortgage deed to the plaintiff failed to recite the prior encumbrances but i do not think it necessary to discuss this question. if he wished to secure possession of the property he had to make the payment, but if he failed to make the payment no one could compel him to do so. these are considerations which should have been put forward in the lower court and the only reason for not doing so is the allegation that these defendants were badly advised. 38 of 1920 and that therefore defendant 16 can have.....phillips, j.1. the plaintiff-appellant has brought this suit upon a mortgage executed by defendants 1 and 2 and this appeal relates only to the properties mentioned in plaint schedule 2 in which defendant 16, the only contesting respondent, is interested. these properties were mortgaged in 1911 for rs. 15,000 and again in 1913 for rs. 9,000. the plaintiff's mortgage which was executed in 1914 is the third mortgage on the properties. the first mortgagee brought a suit, o.s. no. 65 of 1916, and obtained a decree for sale. the mortgagee himself purchased the property in 1919 for rs. 19,000 and odd and. resold it to a vakil, mr bharathi, defendant 5 in this suit, for rs. 22,000. defendant 1 then filed a suit, o.s. no. 38 of 1920, contending that the purchase by mr. bharathi was on his behalf......
Judgment:

Phillips, J.

1. The plaintiff-appellant has brought this suit upon a mortgage executed by defendants 1 and 2 and this appeal relates only to the properties mentioned in plaint Schedule 2 in which defendant 16, the only contesting respondent, is interested. These properties were mortgaged in 1911 for Rs. 15,000 and again in 1913 for Rs. 9,000. The plaintiff's mortgage which was executed in 1914 is the third mortgage on the properties. The first mortgagee brought a suit, O.S. No. 65 of 1916, and obtained a decree for sale. The mortgagee himself purchased the property in 1919 for Rs. 19,000 and odd and. resold it to a vakil, Mr Bharathi, defendant 5 in this suit, for Rs. 22,000. Defendant 1 then filed a suit, O.S. No. 38 of 1920, contending that the purchase by Mr. Bharathi was on his behalf. That suit was compromised on 10th March 1921 and it was de-creed that the plaint properties should be handed over to defendant 1 on payment of Rs. 29,000 before 13th July 1921. On 11th July defendant 1 entered into an agreement with defendant 16 to sell the properties to him for Rs. 33,000, the consideration being paid on 11th July in order that defendant 1 might pay Rs. 29,000 into Court on the 13th and obtain possession of the properties In his plaint the plaintiff alleged that the purchase by Mr, Bharathi was for the benefit of defendant 1, and as defendant 1 the original mortgagor was in possession of the mortgage property, that property was liable under the plaintiff's mortgage.

2. It is now well settled law that, when a mortgagor pays off a prior mortgage by purchase of the property for himself, he cannot be heard to plead the prior mortgage as a shield against the subsequent encumbrancer. This is decided in Otter v. Lord Vaux 69 E.R. 943, a decision which was confirmed on appeal in Otter v. Lord Vaux 43 KB. 1381. That principle has been accepted in this country in Bhaja Chowdhury v. Chuni Lal Marwari [1907] 5 C.L.J. 95, Ganga,' Sahai v. Tulshi Ram [1903] 25 All. 371 and Raghunath Sahay Singh v. Lalji Singh [1896] 23 Cal 397. In Otter v- Lord Vaux (2), the mortgagor' purchased at a sale effected by the mortgagee in pursuance of a power of sale given under his mortgage; but the question whether, had there been intermediate purchasers of the property before it came into the hands of the mortgagor,, the same principle would prevail was left undecided. The further question has now been decided in this Court in Manappa Boy v. Krishnayya [1906] 29 Mad. 113, where the principle was applied to a purchase by the mortgagor, not direct from the mortgagee or in execution of the mortgagee' s-decree, but after the property had passed through other hands. The liability of the mortgagor to discharge subsequent encumbrances out of the mortgage property is put on two grounds in Otter v. Lord Vaux: any purchase of his property from the mortgagee must be deemed to be payment in discharge of the mortgage debt thus freeing the property from the prior encumbrance for the benefit of the subsequent mortgagee and (2) the mortgagor is bound to fulfil his promise-to the subsequent mortgagee to repay him his loan on the security of the mortgage property and this is a promise which will be enforced when possible.

3. The decision in Manjappa Roy v. Krishnayya [1906] 29 Mad. 113, is based upon Section 43. T.P. Act. Mr. Varadachariar for the respondents, while not disputing the correctness of the decision, contends that Section 43, T.P. Act, is not applicable, but that the decision must be based on the obligation of the mortgagor to discharge his promise to the subsequent mortgagee. If the correctness of the decision be admitted, and with all respect I think that it should then in the present case it is not really material to hold that Section 43, T.P. Act, is applicable. The right to bring Section 44 into play is based on a misrepresentation by the person transferring immovable property. Such misrepresentation is alleged in the present case in that the mortgage deed to the plaintiff failed to recite the prior encumbrances but I do not think it necessary to discuss this question.

4. The Subordinate Judge has held that defendant 16 is a bona fide purchaser of the property without notice and that, by the payment of the consideration for the sale, has acquired an equity which is entitled to priority over the plaintiff's (mortgage right. Defendant 16's purchase in July 1921 was during the pendency of the present suit which was filed on 23rd March 1921; and in his written statement defendant 16 does not plead that he had no notice of this suit, although he pleads that he is a bona fide purchaser for value. That he had also notice of the prior litigation in respect of this land is clear from his agreement with defendant 1, Ex. 8. He cannot, therefore, be treated as a bona fide purchaser without notice of the plaintiff's claim.

5. The question that really arises for consideration is whether his payment of Rs. 30,000 for the purpose of Rs. 29,000 being paid into Court in pursuance of the razinama decree, which ordered delivery to defendant 1 on such payment, raises an equity in favour of the lender which has priority over plaintiff's equity. It is suggested that this equity is of the nature of subrogation or of a salvage lien; but, in the circumstances, I do not think that either of these equities can be established. Undoubtedly, subrogation itself cannot be pleaded, for there is no discharge of any prior mortgage to which the payment can be ascribed. Similarly, there can be no salvage lien, nor any lien under Sections 69 and 70, Contract Act; for defendant 16 had no interest in the property at the time of payment, nor did he make the payment for the plaintiff against whom his claim for reimbursement is now made; these two considerations are requisite in order to bring a person under Sections 69 and 70, Contract Act, as laid down in Veeraraghava Ayyar v. Lakshmana Ayyar : (1913)25MLJ312 and also in Umrai Lal v. Rukmin Kuar [1916] 14 A.L.J. 953. Mr. Varadachariar for respondents does not rely on salvage lien but contends that the principle embodied in it and also in the doctrine of subrogation can be extended to a loan made for the purchase of property by the lender when the lender has necessity for that money in order to effect the purchase. This extends the principle very far, for, while the principle has been recognized when there has been a prior obligation on the borrower to discharge some existing debt, that condition does not exist here, for the suggestion that defendant 1 was obliged to pay this Rs. 29,000 in order to secure the property cannot be sustained; it was entirely at his own will and pleasure that any payment was made; if he wished to secure possession of the property he had to make the payment, but if he failed to make the payment no one could compel him to do so. The money was, therefore, lent by defendant 16 for the purpose of a voluntary payment by defendant 1. The mere fact that defendant 16 took a sale deed of the property which defendant 1 was enabled to acquire by the loan cannot affect the question, nor give him any lien on the property. It may seem a case of hardship that defendant 16's claim should be postponed to the plaintiff's mortgage lien; but, when a person deals with property which is the subject matter of pending suit, he always does so at his own risk. The plaintiff in his plaint claimed that this property was subject to his mortgage on the ground that defendant 1 was really the owner thereof, the purchase by Mr. Bharathi having been made for his benefit.

6. The benami nature of the transaction has not been proved in this suit and was given up by the defendant in O.S. No. 38 of 1920 when that suit was compromised. Under that compromise, however, which took place a few days before the plaintiff filed this suit, the defendant had an interest in the property against which the plaintiff was entitled to proceed; but, when the defendant parted with the property, such property would not be liable in the hands of a third party for the plaintiff's claim, which after the Court sale in execution can only be enforced against the property in the mortgagor's hands. The sale to defendant 16 did undoubtedly affect the plaintiff's interests in the suit land and it is not now disputed that the plaintiff would be entitled to a charge on Rs. 1,000 received by defendant 1 in excess of the amount paid by him into Court. The charge on money in the hands of a mortgagor can hardly be treated as equivalent to a charge on immovable property for the same amount. Therefore, by this transaction pendente lite the plaintiff's right was seriously affected and therefore the transaction would come under Section 52, T.P. Act. Whether the property vested in defendant 1 on the date of the compromise decree subject to the payment of Rs. 29,000 or whether it did not vest in him until the payment of Rs. 29,000, it was open to defendant 1 to pay the money and obtain the property. If he did so, the property became liable in toto for the plaintiff's mortgage. When therefore, defendant 1 deposited the money in Court and became the absolute owner of the property, the plaintiff's right to proceed against the property revived and he is entitled to enforce it unless there is some equity in favour of defendant 16 which has priority over his claim. As I have pointed out, defendant 16 lent money for a mere voluntary payment by defendant, 1 by which both defendant 1 and defendant 16 thought that they would be benefited, defendant 1 to the extent of Rs. 1,000 in cash and defendant 16 by the possession of the property. There being no prior obligation to be discharged no equity arises in favour of defendant 16.

7. It is true that in Bhagwati Prasad v. Radha Kishen [1893] 15 All. 304 (P.C.) the Privy Council held that the lender of money for the purchase of an estate was entitled to an equity, but in that case it was the intention of all the parties that the property should be hypothecated for the loan and it was held that in the circumstances an equity arose in favour of the lender. It is only upon the facts of that case that the judgment is based and the legal nature or origin of the equity is not discussed. In a similar case this decision was followed : Subbammal v. Muthu Pathan : (1903)13MLJ228 . There are no special circumstances in this case in any way analogous to those in the above cases. The question of lis pendens was dealt with in a somewhat different form in Dinobundhu Sha v. Jogmaya Dasi [1902] 29 Cal. 154, by the Privy Council where the meaning of Section 276, Civil P.C. was considered. It was there held that when a transaction affected property which had previously been attached, it could not be said that it interfered with the rights of the attaching creditor and was therefore invalid. The property which on the date of attachment was subject to two mortgages was again mortgaged to a third; party whose money was utilised for discharging the earlier mortgages. It was held that the discharge of the prior mortgages could not enure to the benefit of the attaching creditor contrary to the intention of the parties to the subsequent mortgage. That case is therefore easily distinguishable from the present one,, even if the doctrine of lis pendens be considered to be wholly analogous to the rule governing a transaction in respect of attached property. In the circumstances, I think that the Subordinate Judge was wrong in allowing defendant 16's loan to have priority over the plaintiff's mortgage right. The appeal must be allowed with costs throughout and the decree modified by making the plaint Schedule 2 properties liable for the plaintiff's mortgage.

8. A memorandum of objections has been filed by respondents 4 to 7 (defendants-20 to 23). Defendant 2 in his written statement had denied his ownership of one item in the plaint and on enquiry made by the plaintiff these defendants were added as parties on the understanding that they claimed this item of property. They were served with notice of the suit and two of them appeared in Court; they took no further action and allowed the suit to proceed ex parte. They now come forward and ask for permission to file number of documents in support of their claim, which in their absence has been found against them. They ask that the case should be reopened so far as they are concerned, or that they should be exonerated from the suit, as it is not proper that the title of third parsons should be investigated in a mortgage suit. These are considerations which should have been put forward in the lower Court and the only reason for not doing so is the allegation that these defendants were badly advised. It is not stated in the affidavit that they ever took professional advice; but, whether they did or not, this can hardly be sufficient ground for giving them the great indulgence asked for. They may or they may not, have title to the property claimed; but they certainly ought to have put forward that case in the lower Court and not waited until a decree had been passel against them. There is no reason for treating these parties with special indulgence and consequently we cannot reopen this ease. The memorandum of objections must be dismissed with costs of plaintiff.

Madhavan Nair, J.

9. The question for decision in this appeal is whether the mortgage executed by defendant 1 in favour of the plaintiff-appellant is entitled to priority over the sale deed executed by him in favour of defendant 16 in so far as the mortgage deals with the properties covered by the sale deed.

10. The facts necessary for deciding this question may be summarised as follows: The properties had been mortgaged by defendant 1 to one Samu Ayyar of Kalladakuriohi. Afterwards he mortgaged these and other properties to the plaintiff under Ex. A on 25th August 1914. This was the third mortgage over the properties. The heirs of Samu Ayyar sued on the prior, i.e., the 1st mortgage in O.S. No. 65 of 1916 and obtained a decree for sale. The present plaintiff as a puisne mortgagee had been impleaded as defendant 5 in that suit. In execution of the decree the decree-holders themselves purchased the properties, and obtained delivery of possession. Subsequently they sold the properties to one Bharathi, defendant 5 in the present suit. Defendant 1 then instituted O.S. No. 38 of 1920 against Bharathi in which be alleged that the properties had been purchased for his own benefit and that Bharathi was entitled only to be pail back the purchase money with interest. Bharathi contended that the purchase was made for himself and that defendant had no right to the properties. Eventually the suit was compromised, it being agreed : see Ex. 5, that defendant 1 should take over the properties on depositing in Court Rs. 29,000 to the credit of Bharathi within 13th July 1921. As defendant 1 had no money with him for making the deposit, he entered into an agreement with defendant 16, a Nattukottai Chetty : see Ex. 8 dated 11th July 1921 by which defendant 16 undertook to give him Rs. 30,000 for making the deposit in Court as per terms of the compromise decree and defendant undertook to_ sell him the properties in question. In accordance with this contract, defendant 16 supplied the amount and it was deposited in Court by defendant 1 on the due date. On 14th July 1920, that is, on the next day, defendant executed the sale deed of these properties Ex. 9 to defendant 16. In the meanwhile, the plaintiff instituted the present suit and contended that though the sale in execution of the decree in O.S. No. 65 of 1916 extinguished his mortgage over the properties sold, in equity it should be deemed to have become re-attached to those properties when defendant 1 became entitled to them once again by reason of the compromise decree in O.S. No. 38 of 1920 and that therefore defendant 16 can have rights against these properties only after his claims' as a mortgagee are satisfied. Defendant 16 the contesting respondent resisted this claim on the ground that as it was admittedly his money that enabled defendant 1 to purchase the properties, his rights as purchaser of the properties should have priority over defendant 1's rights. The learned Subordinate Judge recognized the equity claimed by the plaintiff, but in the circumstances of the case, he thought that under para. 2, Section 43, T.P. Act, defendant 16's claims over the properties should be considered to be superior to those of the plaintiff. After referring to Section 43 he formulated his conclusion thus:

It is quite clear that defendant 16 is a bona fide purchaser for value without notice of the plaintiff's equity. The equity in favour of the plaintiff arose only when the property revested in defendant 1, defendant 16 had, by that time, secured an equity by reason of his having advanced Rs. 30,000 towards the contract for sale. Under such circumstances, I am inclined to hold that plaintiff cannot claim to have any equity superior to that of defendant 16.

11. It may be stated here that the learned Counsel for the respondent does not rely on Section 43, T.P. Act in support of his case.

12. On behalf of the appellant his learned Counsel has pressed before us the arguments which he urged before the lower Court and has sought to support them by the principles deducible from the decision in Otter v. Lord Vaux. The law is well settled that if in execution of a decree for sale obtained in a suit instituted by the 1st mortgagee in which not only the mortgagor but also the 2nd mortgagee was a party, the property is purchased by a stranger, it passes into his hands free from all incumbrances and the 2nd mortgagee is entitled only to the surplus sale proceeds after the claim of the 1st mortgagee has been satisfied; it however, the mortgagor himself purchases the property, then it passes into his hands subject to the rights of the 2nd mortgage, it being his duty as the owner of the estate to discharge the debt of the 2nd mortgagee for which he had 'pledged the estate. This right which exists in favour of the 2nd mortgagee has been recognized in the decision of Otter v. Lord Vaux. In that case the mortgagor having made two successive mortgages of his estate to two different persons purchased the estate from the 1st mortgagee selling under a power of sale contained in his mortgage. As a large portion of the purchase money had been borrowed by the mortgagor from his sister, after the purchase he executed in her favour a bond which she accepted. It was held that the mortgagor cannot by this purchase defeat the title of the 2nd mortgagee; and it was stated in the judgment that since the property was purchased by the mortgagor outright for himself though with money borrowed from his sister, she takes the same title as he takes and cannot claim any preferential rights to the property over the 2nd mortgagee. This case has been followed in various decisions of the Indian Courts : sea Bhajan Chowdhury v. Chuni Lal Marwari, Ganga, Sahi v. Tulsi Ram and Raghunatha Sahay Singh v. Lalji Singh. But it is argued on behalf of the respondent that it should not be applied to the present case having regard to certain special circumstances. It is contended that in the present case the properties before they were purchased by the mortgagor had been sold to a stranger from whom it was that he had purchased them, that this would make a difference with regard to his rights and that with regard to the competing rights over the properties of the 2nd mortgagee and the person who lends the money to the mortgagor to make its purchase, it should be held that the latter's claim to the properties are superior to those of the former. It seems to me as I shall show presently that there is no substance in- this contention.

13. The question whether the charge in 'favour of the 2nd mortgagee would or would not revive in the hands of the mortgagor when the property comes into his hands by purchase 'from a stranger who had purchased under the power of sale' was no doubt left open in Otter v. Lord Vaux; but I think the reasoning in the judgment would apply equally to the case of a mortgagor purchasing the property from a stranger; and in such a case also the 2nd mortgagee would be entitled to proceed against the property in the hands of the mortgagor. The principle of the decision is contained in the following passage in the judgment of the Lord Chancellor:

The case is therefore to all intents and purpose that of a mortgagor liable to pay a sum of money to his first incumbrancer paying it and getting a transfer; that that transfer is something which upon general principle he cannot set up against a creditor claiming by a title subsequent to that of a person whose charge he has so paid off; and all persons who are entitled to any portion of the inheritance under him are also entitled to the benefit of his having liquidated a demand prior to their title.

14. If the mortgagor is to be considered as having paid a sum of money to the first mortgagee and got back the estate for the benefit of the subsequent incumbrancers with whom he had contracted debts giving the property as security for money advanced by them, then I cannot see how the fact that the property has come into his hands by purchase from a stranger can relieve him from the obligation of meeting the just demands of the subsequent incumbrancers to whom he has mortgaged it. The same principle should apply to both the cases irrespective of the question whether the property was purchased by the mortgagor himself at the execution sale, or whether it was purchased by him from a stranger who had purchased it when it was sold in execution. This view is supported by the opinion of Sir Rashbehary Ghose in his Tagore Law Lectures on the Law of Mortgages Vol. 1 p. 303, wherein referring to Otter v. Lord Vaux, he states thus.:

If, however, the indebtedness subsists, there is no reason why the charge should not revive in the hands of the mortgagor, notwithstanding any mesne transfer.

15. The right of a second mortgagee to proceed against the mortgaged property which has come into the hands of the mortgagor by purchase from a stranger who had purchased it at an execution sale was recognised in Manjappa Rai v. Krishnayya, though the learned Judges do not discuss the question with reference to the decision in Otter v. Lord Vaux. The facts of the case as may be seen from the printed papers show that the property in that case was purchased by the mortgagor from a stranger as in the case before us and not directly by him at the execution sale. The learned Judges base their conclusion on Section 43, T.P. Act; but with great respect, I think, it is difficult to hold that Section 43 would apply to the case, as it cannot be said ordinarily that when a person makes successive mortgages over his property he ' erroneously represents' to the mortgagees ' that he is authorised to transfer immovable property' which is one of the conditions required for the operation of the section. However, the conclusion arrived at by the learned Judges is in conformity with the general principle underlying the decision in Otter v. Lord Vaux. I, therefore, hold that the properties in the hands of defendant 1 in this case is subject to the mortgage rights of the plaintiff.

16. The next branch of the argument relates to the question whether the rights of the appellant over the properties are superior to those of defendant 16 On this point also the decision in Otter v. Lord Vaux, supports the appellant. As already pointed out it is stated in the judgment in that case that since the property was purchased by the mortgagor for himself though with money borrowed from his sister, she takes the same title as he takes and cannot claim any preferential rights over the second mortgagee. The following passage in the judgment deals with this question:

Mr. Llewellyn (i.e., the mortgagor) wished to purchase, but had not the means to do so; he, therefore, borrowed of his sister & 900 and gave her a bond which she accepted; but that cannot place her in a different position. When Mr. Llewellyn purchased, ha purchased outright though he owed some money to his sister, and she claims as an incumbrancer under him, and takes the same title as he takes. It might no doubt have been, as it was put in argument, that without purchasing, the security might have been transferred to the sister so as to make her merely the transferee of the security; but that is not what the parties chose Co do. The sister becomes a creditor of her brother; he, therefore, makes himself her debtor, and she cannot be in a different position to that in which he is himself.

17. If we apply this reasoning to the facts of the present case, what we have to find cut is whether the purchase of the properties was made by the mortgagor for himself or for defendant 16. In this connexion the learned advocate for the respondent refers to the decision in Dinobundhu Shaw Chowdhury v. Jogmaya Dasi. In that case, the suit property was subject to two mortgages when it was attached on 5th October 1891 by the Sheriff at the instance of a judgment-creditor. At the time of the attachment the mortgagor was making arrangements with one Mustafi for an advance of Rs. 40,000 to enable him to pay off the two mortgages. The mortgagor was to obtain the deeds from the mortgagees and to hand them over to Mustafi giving him a mortgage for his advance. What the mortgagor did was that ho paid off the two old mortgages, took a re-conveyance to himself and then executed a fresh mortgage bond for Rs. 40,000 to Mustafi on 7th October 1891. Subsequent to this transaction part of the property was sold under execution to the appellant before the Privy Council.

18. The question for decision was whether the purchase of the property by the appellant at the Sheriff's sale was subject to or freed from a prior lien, claimed by the respondents. The learned Judges of the Privy Council held that the intention was that the earlier mortgages should not be extinguished on being paid off but were to be kept alive for the benefit of the respondent, the object being to give the only charge on the property. This decision in my opinion does not help us in deciding the present case as here, no question of sub-orgation arises. Defendant 16 has really put forward a claim to priority by way of subrogation but strictly speaking the plea of subrogation cannot arise in this case as the payment made by defendant 16 cannot be referred to any prior charge at all. He is the position of a mere volunteer who has lent money to defendant 1 to purchase the properties; and if defendant 1 sells him these properties, the fact that those were purchased with the money lent by him cannot enable defendant 16 to defeat the rights of a prior charge holder if there happens to be an already existing charge over the properties. The real question, therefore, is whether the properties had become defendant 1's by purchase, for, the moment he became entitled to the properties, the charge of the plaintiff, as I have already shown, would attach itself to them. The circumstances of the case show conclusively that the properties were purchased by the mortgagor for himself and for no other person. The razinamah which terminated the suit does not make any reference to defendant 16. In para. 2 it says that if the plaintiff pays in cash the money to defendant 3, i.e., Bharathi:

the plaintiff himself shall get with absolute rights the sale properties.

19. The agreement Ex. 8 under which defendant 16 agreed to pay the money to the mortgagor refers to the properties mentioned in the plaint as having become his property according to the said decree. In the written statement of the mortgagor, i.e., defendant 1, in the present suit, he says that under the razinamah the said properties came to this defendant. Defendant 16 says also in his written statement that the properties were got by defendant 1 under the razinamah decree and from him he purchased the properties for Rs. 30,000. It is also a matter for notice that the money was deposited in Court by defendant 1 himself and not by defendant 16. All these circumstances show that defendant 1 intended to purchase the properties outright for himself. The most important circumstance which leads one to this conclusion is the fact that though defendant 1 had to deposit only Rs. 29,000 in Court, he, as a matter of fact, obtained Rs. 30,000 from defendant 16 as the value of those properties thus making a profit of Rs. 1,000 for himself by the transaction. This clearly shows that when he purchased the properties in pursuance of the razinamah, he intended to purchase them for himself and what he sold to defendant 16 wag his own property from which he made for himself a gain of Rs. 1,000 by the sale transaction. The point as to whether the title to the property passed to defendant 1 on the date of the razinamah decree or only subsequently is not of much importance as the question to be decided is whether defendant 1 had become the' owner of the properties. In the circumstances already pointed out, I cannot agree with the contention that when defendant 1 purchased the properties in question he did so for the benefit of defendant 16 to whom he afterwards sold them. Defendant 1 having acquired ownership over the properties, they become at once subject to the rights of the second mortgagee in his hands.

20. In support of the above conclusion reference may be made to the decisions in Veeraraghava Ayyar v. Lakshmana Ayyar and Umrai Lal v. Rukmin Koer, in both of which the plea of subrogation put forward by the appellants herein was overruled. In Veeraraghava Ayyar v. Lakshmana Ayyar while certain immovable property was under attachment the plaintiff obtained a, mortgage decree and undertook as a part of the consideration thereon to discharge the amount of the decree but failed to do so and the property was sold. The judgment-debtor then had recourse to the appellant and giving him a mortgage of the same property obtained from him the payment required under Section 310-A, Civil P.C. and got the sale set aside. The appellant claimed that his mortgage should be given priority to that of the plaintiff, relying on Section 101, T.P. Act, amongst other grounds : see the third ground urged in the High Court. All his contentions were overruled. In Umrai Lal v. Rukmin Koer the facts were as follows : A Hindu widow obtained a decree for possession of her husband's estate on payment of a certain sum of money, which had been spent in the discharge of debts which were binding on the estate. She raised the money by a mortgage executed in favour of one U and obtained possession.

21. She had previous to this executed two other mortgages in favour of one K and one M to enable her to prosecute the suit. U sued on his mortgage and claimed priority over the mortgages of K and M on the principle of subrogation : see the headnote. It was held in the circumstances of the case that the principle of subrogation did not apply to the case and that U's mortgage could not have priority over the mortgages in favour of K and M. In the course of the judgment, the learned Judges point out that the mere fact that money was borrowed and used for the purpose of paying off a previous charge does not entitle the lender to the benefit of the discharged security, and then their Lordships proceed to point out the circumstances in which such benefit can be claimed by the loader of the money; but no such circumstances can be found in the present case.

22. The equity in favour of his client has not been claimed by the learned Counsel for the respondent on the principle of salvage lien or on any other principle such as that embodied in Section 69 or 70, Contract Act; but he has called our attention to the decision in Bhagwati Prasad v. Radha Kishen Sewak Pande, following which he says that his client should be declared entitled to hold the properties against the appellant. In that case the Privy Council held that the lender of money for purchasing an estate is entitled to a declaration that the advance for the purchase formed an equitable charge upon the property against the real purchaser; but the nature of the equity is not explained in the judgment and the decision seems to turn upon the special facts of the case and the intention of the parties. This decision was applied in Subbammal v. Muthu Pathan, having regard to the special circumstances of that ease. In the present case I do not think that there are any circumstances for recognizing any equity in favour of defendant 16. In this connexion I may mention that I cannot agree with the opinion of the Subordinate Judge that defendant 16 is a bona fide purchaser of the properties without notice of the plaintiff's claim. In my opinion the inference to be drawn from the facts of the case is that he must have had notice of the plaintiff's claim when he purchased the properties. His purchase was in July 1921 and by that time the present suit had been filed by the appellant. In his written statement, defendant 16 does not say that he had no notice of the present suit. Ex, 8, the agreement, shows that ha was aware that the property had al-;ready been the subject matter of litigation. In these circumstances I must hold that defendant 16 has not made out any equity in his favour on the ground that he is a bona fide purchaser of the property without notice of the plaintiff's claim.

23. In the view that I am taking of the case, it is not necessary to examine the question whether the plaintiff is not entitled to succeed in his claim on the ground of lis pendens in view of the fact that the property was purchased by defendant 16 during the pendency of the present suit.

24. For the foregoing reasons, I must hold that the plaintiff is entitled to proceed against the properties which had been sold in execution of the decree in O.S. No. 65 of 1916 and which defendant 16 subsequently purchased under Ex. 9. The appeal is therefore allowed with costs and the decree of the lower Court is modified as indicated above.

25. For the reasons given by my learned brother, I agree that the memorandum of objections should be dismissed with costs of the plaintiff.


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