1. The 3rd defendant is the appellant. He held a mortgage dated the 26th May, 1919, over the suit property which consists of two items. A mortgage of the same property had been executed in favour of the plaintiffs on 10th July, 1919. On 23rd November, 1925, the first item of the suit property was sold to the 3rd defendant in discharge of the mortgage over the two items. The 3rd defendant thus became the owner of the 1st item and as a result of his purchase the 2ad item was freed from his mortgage. When he purchased item No 1, the 3rd defendant did not know about the existence of the mortgage in plaintiffs' favour. The suit property belonged to the father of defendants Nos. 1 and 2. The second appeal arises out of a suit instituted by the plaintiffs to enforce their mortgage over the two items. The appellant contended that his prior mortgage-right over the first item should be regarded as still alive and that the plaintiffs should redeem it before they could succeed. This contention was rejected by the lower Courts and the only question argued in the second appeal is whether this contention should have been upheld.
2. It is common ground that the question should be decided with reference to the intention of the appellant as to when he purchased item No 1, whether he had intended to keep his own mortgage over it alive as a shield against the other mortgagees. Section 101 of the Transfer of Property Act provides that if a mortgagee or a charge-holder of property acquires the interest of the mortgagor or the owner, his own charge or mortgage becomes extinguished unless he declares by express words or necessary implication that it shall continue to subsist or such continuance would be for his benefit. The section raises a presumption in favour of merger rebuttable by proof of an intention to the contrary. This is no evidence regarding the intention of the 3rd defendant either way. In Gokaldas Gopal das v. Puranmal Premsukhdas 10 C.1035, 11 I. A. 126 : 8 Ind. Jur. 396 : 4 Sar.P.C.J.543 (P. C.). their Lordships of the Privy Council held that, where a man who pays off a mortgage has a right to extinguish it and a right to keep it alive, in the absence of express evidence of intention, he should be assumed to have acted according to his interest. See also Mohamed Ibrahim Hossain Khan v. Ambika Pershad Singh 14 Ind. Cas. 496 : 39 C. 527 : 11 M.L.T.265, (1912) M.W.N.367 : 2 A.L.J.332 : 14 Bom.L.R.280 : 16 C.W.N.505 : 150.L.J.411 : 22 M.L.J.468 : 39 I.A.68(P. C). In Ayyareddi v. Gopala-kvishnayya 79 Ind. Cas 592 : 47 M.190 : 19 L.W.215: 22 A.L.J.45 : 46 M.L.J.164 : A.I.R.1924P. C.36 : 26 Bom.L.R.204 : 34 M.L.T.1: 2 Pat.L.R.99 : 10 O & A. L. R. 269 : (1924) M.W.N.290 : 39: G. L. J. 204 : 28 C.W.N.1025 : 511, A. 140 : L. R. 5 A. (P. C.) 49 : 1 O. W. N. 27 (P. C.)., the Privy Council has again remarked as follows:
It is now settled law that where in India there are soveral mortgages on a property, the owner of the property, subject to the mortgages may, if he pays off an earlier charge treat himself as buying it and stand in the same position as his vendor, or to put it in another way, he may keep the incumbrance alive for his benefit and thus come in before a later mortgagee.
3. As pointed out by Sir Gour in his Transfer of Property Act, Vol. II the Privy Council' by laying emphasis on the proviso and the intention of the parties in Section 101' were inclined to minimise the force though without entirely ignoring the existence of the initial statutory presumption in Section 101 of the Transfer of Property Act,' In Thiruvengadam Pillai v. Sabapathi Pillai 90 Ind. Cas. 767 : 49 M. L. J. 361 : (1925) M. W. N. 608 : A.I.R.1925Mad.1217. Phillips. J, went to the extent of holding that 'when a person purchasing property discharges a prior mortgage on the same and claims subrogation therefrom, the Court should start with the presumption that a person paying off a mortgage intends to keep it alive if it is for his benefit to do so:' (See the head note). Effect to the decisions of the Privy Council has been given in the new Section 101 of the Transfer of Property Act which replaces the old section. The new section runs as follows:
Any mortgagee of, or person having a charge upon, immovable property, or any transferee from such mortgagee or charge-holder, may purchase or otherwise acquire the rights in the property of the mortgagor or owner, as the case may be, without thereby causing the mortgage or charge to be merged as between himself and any subsequent mortgagee of, or person having a subsequent charge upon the same property : and, no such subsequent mortgagee or charge-holder shall be entitled to foreclose or sell such property without redeeming the prior mortgage or charge, or otherwise than subject thereto.
4. If we give effect to the principle of the Privy Council decisions, in the present, case, there being no intention either way, I think it should be assumed that the appellant intended to keep alive his mortgage since it was to his interest to do so, there being another mortgage on the same property. In Srinivasachari v. Gnanaprakasa Mudaliar 30 M.67 : 2 M.L.T.36. the decision relied on by the lower Court, it was held that 'where a person paying off a prior mortgage, purchases a portion of the mortgaged property 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 agaist a subsequent mortgagee.' This decision no doubt supports the respondents This case has been referred to and distinguished in Govindasami Tevan v. Dorasamy Pillai 6 Ind. Cas. 781 : 34 M.112 : 20 M.L.J.380 : 8 M.L.T.132 : (1910) M.W.N.390. and Subramania Pillai v. Palaniappa Mudali 21 Ind. Cas. 978 : 26 M.L.J.94 : 14 M.L.T.585. In Kutti Tevan v. Rayappa Goundan 65 Ind. Cas, 961 : 14 L.W.422 : (1921) M. W. N. the 8th defendant had bought the equity of redemption in 3/10 (that is, item No. 6 of the property over which he held a mortgage) and the learned Judges observed thus:
If the 8th defendant's mortgage was executed first, he must, on the facts found, be regarded as having intended to keep alive his mortgage rights when he purchased the equity of redemption in item No. 3.
5. This observation supports the appellant and in my opinion gives full effect to the spirit of the Privy Council decisions. No doubt the observation is in the nature of an obiter dictum and it does not refer to the decision in Srinivasachari v. Gnanaprakasa Mudaliar 30 M.67 : 2 M.L.T.36. The decisions of the other Courts in Madho Singh v. Paveham Singh : AIR1927All211 .; Jasodha Kumar Roy v. Kali Kumar Dey : AIR1930Cal619 . and Kalimuddin Shaik v. Baidyanath Saha : AIR1930Cal572 . brought to my notice by the learned Advocate for the appellant fully support him. Having regard to the decisions of the Privy Council the general trend of the decisions of this Court and the new Section 101 of the Transfer of Property Act, I am not inclined to treat the authority of Srinivasachari v. Gnanaprakasa Mudaliar (5) on this particular point as going beyond the actual decision. I would, therefore, hold that the plaintiffs are not entitled to a decree for sale without paying the mortgage amount due to the 3rd defendant under his mortgage. The decree of the lower Court will be modified accordingly. The appellant will get his costs throughout.