1. In this suit (No. 25 of 1900), which was instituted by the Rajah of Karvetnagar for the recovery of 4 villages, Kolathur, Melapudi, Kelapudi and Pemmanallur, Sir Subramania Aiyar, Benson and Bashyam Ayyangar, JJ., for the purpose of disposing of the appeal preferred to the High Court from the decree of the Subordinate Judge of North Arcot, directed the lower Court on the 15th December 1903 to determine the following issues:
1. What are the amounts, if any, still duo to the defendants Nos. 2 to 6 on their respective simple or usufructuary mortgages?
2. Whether all or any of the defendants Nos. 2 to 6 are bonafide mortgagees for value without notice (vide, definition in Section 3 of the Transfer of Property Act) of the plaintiff's title? and
3. What sums, if any, are payable by the plaintiff to defendants Nos. 1 to 6 respectively before recovering possession of the plaint villages?
2. The results of the enquiry were submitted in due course, but as the findings calculated the sums due by the plaintiff to the defendants and by the 1st defendant to defendants Nos. 2 to 6 only up to the 6th July 1903, the High Court before dealing with the objections to the finding directed the lower Court on 21st November 1911 to ascertain what would be due till the 8th July 1912 and also ordered that a Receiver may be appointed for the property from that date. We have now before us the revised findings and shall proceed to deal with the objections to them.
3. There are six defendants in this suit; the 6th defendant did not appear before us. He has a mortgage subsequent to that of the 4th defendant. The 1st defendant was an officer of the Karvetnagar Raj and all the four villages stand in his name, but it has been held by this Court that he is only the legal owner of the property, the plaintiff being the beneficial owner. It has also been held that before the plaintiff could recover the villages he was bound to pay the 1st defendant the principal sum of Rs. 99,563-15 6 with such interest thereon as might b) found due to him, while on the other hand the 1st defendant was liable for the income derived from the villages from the date of Exhibit B, that is, 25th August 1883. Defendants Nos. 2 to 6 hold mortgages on these villages executed in their favour by the 1st defendant and it has been ruled that if they became mortgagees under the 1st defendant without notice of Exhibit B, express or constructive, and in the bona fids belief that the 1st defendant was the owner, they would be entitled to be paid the full amount due to them under their respective mortgages before the plaintiff could recover the villages. If they were not such bona fide mortgagees for value, they should be treated merely as sub-mortgagees under the 1st defendant on the footing that he was a usufructuary mortgagee for the amount due to him.
4. The first contention raised before us on behalf of the appellant is that the onus lay on the defendants Nos. 2 to 6 to show that when they obtained their respective mortgages they had no notice of Exhibit B and that they were bona fide mortgagees for value. The District Judge failed to determine for himself this question as he should have done. He has submitted his finding in an alternative form; if the burden of proof lay on the defendants, they had failed to discharge that burden; if the onus was on the plaintiff, he found it proved by the evidence that the defendants Nos. 2 and 3 were not bona fide mortgagees without notice but that the defendants Nos. 4, 5 and 6 were bona fide mortgagees without notice.
5. A number of decisions have been cited to us, but we think that the proper principle governing the present case is that which has been applied to purchasers from benamidars. That principle has been most clearly laid down in Ramcoomar Koondoo v. McQueen 11 B.L.R. 46: 18 W.R. 166 : 3 Sar. P.C.J. 160 by their Lordships of the Privy Council. They say: 'it is a principle of natural equity, which must be universally applicable, that where one man allows another to hold himself out as the owner of an estate, and a third person purchases it, for value from the apparent owner in the belief that he is the real owner, the man who so allows the other to hold himself out shall not be permitted to recover upon his secret title, unless he can overthrow that of the purchaser by showing, either that he had direct notice, or something which amounts to constructive notice, of the real title or that there existed circumstances which ought to have put him upon an enquiry that, if prosecuted, would have led to a discovery of it.' The rule was re-affirmed in Mahomed Mozuffer Hossein v. Kishori Mohun Roy 22 I.A. 129 : 5 M.L.J. 101. See also Bhugwan Doss v. Upooch Singh 10 W.R. 185.
6. In the present case the 1st defendant no doubt was more than a mere benamidar, he had a lien on the property for large payments made by him. But all the same the plaintiff or his predecessors-in-title allowed him to appear before the world in the character of owner, and that is the essential fact which brings into play the principles of natural equity expounded by the Judicial Committee. The fact that he has an interest of his own in the property is no intimation to a purchaser of the right of the real owner. The other decisions brought to our notice referred to cases of a different nature. In Varden Seth Sam v. Luckpathy Royjee Lallah 9 M.I.A. 303: 1 Suth. P.C.J. 480 : 1 Sar. P.C.J. 857 what was set up against the purchaser was a prior equitable charge by deposit of title-deeds; in Akshoy Kumar Banerjee v. Corporation of Calcutta 27 Ind. Cas. 261 it was a statutory charge and in Mulji Jetha & Co. v. Macleod 5 Bom. L.R. 991 the contest was between the cestui que trust of certain joint stock shares and the purchasers and pledgees deriving their title from the holder in whose hand the shares were impressed with the trust. In another class of cases to which reference has been made, viz., Thiruvenkatachariar v. Venkatachariar 23 Ind. Cas. 621 : 26 M.L.J. 218; Himatlal Motilal v. Vasudeo Ganesh Mhashar 16 Ind. Cas. 621 and Lalubhai Surchand v. Bai Amrit 2 B.K 299 the competition lay between a person to whom the owner had agreed to sell certain properties and a person to whom he actually sold the properties subsequently. It is not necessary for us to discuss these cases in detail. But we must point out that the proposition enunciated in Attorney-General v. Biphosphated Guano Co. 11 Ch. D. 327: 27 W.R. 621 and Wilkes v. Spooner (1911) 2 K.B. 473 : 104 L.T. 911 : 27 T.L.R. 726 and relied on in Akshoy Kumar Banerjee v. Corporation of Calcutta 27 Ind. Cas. 261 that the defence of a bona fide purchaser for value without notice is a single defence and cannot be split up has, in its general aspect, reference more to the form of pleadings, as clearly stated by West, J. in Lalubhai Surchand v. Bai Amrit 2 B. 299 and cannot be treated as decisive of the question of onus in all cases in which such a defence is pleaded, if the latter were the case as we are asked to infer from the judgment in Akshoy Kumar Banerjee v. Corporation of Calcutta 27 Ind. Cas. 261 : 21 C.L.J. 177 then the ruling in the benami cases, Ramcoomar Koondoo v. McQueen 11 B.L.R. 46 Mahomed Mozuffer Hossein v. Kishori Roy 22 C.A 909; Bhugwan Boss v. Upooch Singh 10 W.R. 185 would not be good law, as it undoubtedly is. We hold that in this case it is for the plaintiff to show that the defendants Nos. 2 to 6, when they obtained their mortgages from the 1st defendant, had notice of the plaintiff's title.
[Their Lordships then discussed the evidence and allowed the appeal in part.]