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Ghulam Asadullah Khan and ors. Vs. Mohamed Ali Khan and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Reported inAIR1943Mad360; (1943)1MLJ131
AppellantGhulam Asadullah Khan and ors.
RespondentMohamed Ali Khan and ors.
Cases ReferredAscherson v. Tredegar Dry Dock and Wharf Co.
Excerpt:
.....under the mortgage and thus save the plaintiffs from the harm of their properties being brought to sale by the society, even though those properties were considered by the society as ample security for the plaintiffs' own share of the liability of rs. this plea, however good in common law, is unsustainable in equity and this has been laid down in many english decisions. 5. the present action is therefore clearly maintainable. there is no doubt on (he correspondence which has been referred to that the plaintiffs' properties are in danger of being brought to sale for the default of the defendants who would not pay their share of the liability and would not enter into a separate arrangement with the society for making good the deficiency of rs. 8. though the defendants are to blame for the..........of interest on their share of the liability and that if their properties were also brought to sale the defendants would be liable for any loss the plaintiffs might sustain. it is stated that for this letter there was no reply. on 14th march, 1940, the society wrote to the plaintiffs' advocate that they had nothing whatever to do with the family arrangement between his clients and the other mortgagors; in other words, they wanted the whole amount remaining due to be paid to them. thereupon the plaintiffs' advocate sent to the defendants the letter, ex. p-14, on 13th november, 1940, calling on them to pay to the society the balance of their share of the liability and informing them that in default, legal steps would be taken against them. once more the society brought houses nos. 51.....
Judgment:

Chandrasekhara Ayyar, J.

1. This is a quia timet action by eight plaintiffs against three defendants, all of whom are the heirs and legal representatives of a gentleman called Madhi Hussain Khan, who died on 26th July, 1932, leaving a will under which he appointed the first plaintiff as the sole executor. The first four plaintiffs are the sons and plaintiffs 5 to 8 are the daughters of Madhi Hussain Khan. Defendants 1 and 2 arc his sons and the 3rd defendant is his widow. The first plaintiff obtained probate of his father's will. On 10th July, 1933, he mortgaged a part of the estate, namely, houses bearing Nos. 50, 51, 51-A, 52 and 53, Peters Road, Royapettah, with the Egmore Benefit Society for a sum of Rs. 30,000 and paid off some debts due by the cstate. This mortgage in favour of the Society contained a power of sale under Section 69 of the Transfer of Property Act. Subsequently all the heirs entered into an agreement about the distribution of the estate and the discharge of their liabilities. Under this agreement plaintiffs 2 to 8 were to take houses Nos. 50, 51, 51-A and 53, Peters Road, Royapettah and were liable to the Egmore Benefit Society in a sum of Rs. 23,070 as representing their share of the amount due under the mortgage deed executed by the executor, while defendants I to 3 were to take house No. 52, Peters Road, Royapettah and were liable to the Society in a sum of Rs. 9,780 in respect of the same mortgage as representing their share.

2. This agreement was followed on 30th August, 1938, by two deeds, one of which Ex. P-2 was executed by the executor in favour of several heirs making the allotment of properties and distributing the liabilities as per the agreement, and the other is Ex.P-3 which is a deed of release and indemnity as between the several heirs inter se undertaking to pay and discharge the several liabilities imposed upon each within three months from the date of the deed or to make within the same period the necessary arrangements to release the properties of the other branch or branches from the liabilities they are subject to. This deed further provides as follows:

The heirs further jointly and severally covenant with the executor and each other that they, the heirs and each of them will at all times hereafter keep the executor and estates of the remaining heirs indemnified from and against all claims and demands whatsoever for or in respect of any liability allotted to each branch and hereby undertaken by them to pay and discharge. Each branch further undertakes not to alienate, incumber, or create a charge over the properties conveyed to it till all the liabilities imposed upon and undertaken by it are cleared, except for discharging the liabilities; imposed upon each or to pay their advocate's fee.

The plaintiffs paid to the Egmore Benefit Society by selling House No. 50, Peters Road, Royapettah, a sum of Rs. 14,700 in April, 1939, and their assertion that they have paid every pie of interest due to the Society on their share of the liability up to this date has not only not been challenged but is proved beyond any doubt by the pass book Ex. P-26. The Society refused at first to recognise the arrangement come to among the heirs concerning the division of the mortgage liability and insisted on their right to bring all the properties to sale for the amount of principal and interest due after giving credit to the payment of Rs. 14,700 and to the sums paid by way of interest by the plaintiffs. This will be seen from Ex. P-9. The position then was this. Under the agreement the plaintiffs were due to pay to the Society only Rs. 8,500 for their share, while the defendants were liable to pay to the Society not only a sum of Rs. 9,780 but something more for interest which they had defaulted to pay. The Society advertised the properties for sale on 31st December, 1939, but the sale was stopped at the request of the plaintiffs for time. The plaintiffs wrote to the defendants Ex. P-12 on 28th November, 1939, pointing out that the sale was the direct consequence of their non-payment of interest on their share of the liability and that if their properties were also brought to sale the defendants would be liable for any loss the plaintiffs might sustain. It is stated that for this letter there was no reply. On 14th March, 1940, the Society wrote to the plaintiffs' advocate that they had nothing whatever to do with the family arrangement between his clients and the other mortgagors; in other words, they wanted the whole amount remaining due to be paid to them. Thereupon the plaintiffs' advocate sent to the defendants the letter, Ex. P-14, on 13th November, 1940, calling on them to pay to the Society the balance of their share of the liability and informing them that in default, legal steps would be taken against them. Once more the Society brought houses Nos. 51 and 51-A which were allotted to the plaintiffs for sale on 22nd December, 1940, and the plaintiffs wrote to the Society requesting them to bring house No. 52 to sale first as the liability was primarily that of the defendants, who had committed default in the payment of interest as a result of which penal interest was running. Accordingly house No. 52 was brought to sale by the Society and was purchased by the Society for Rs. 8,100 in June, 1940, but the sale did not materialise and was not treated as a good one on objection raised by the defendants to the purchase by the mortgagees themselves. On 6th December, 1940, the plaintiffs wrote another letter to the defendants asking them to separate the two liabilities and to execute a separate mortgage in favour of the Society for their share of Rs. 9,870 plus interest due up till 30th November, 1940. This again elicited no reply. The Society took up a reasonable attitude in March, 1941, as will be seen from Ex. P-20, where they say that if the amount due to them was secured, they would have no objection to effect being given to the terms of the partition deed by allowing the two sets of heirs to execute separate mortgages in respect of the properties allotted to their respective shares. This letter is important as it shows that for Rs. 8,500 which was due by the plaintiffs in respect of their share of the liability houses Nos. 51 and 51-A were considered sufficient security, whereas for the remainder that was due by the defendants there was adequate security only for Rs. 7,700, out of which Rs. 1,700 represented the value of the additional security that was offered by them, namely, Nos. 25 and 26, Mosque Street. The Society wanted the mortgagors to pay the difference amount of Rs. 3,755 and odd, which was of course the liability of the defendants under the terms of the agreement. The defendants made no arrangement for payment of this amount. The proposal made by the Society could not therefore come into effect and once again a sale was advertised for 27th. May, 1941, of houses Nos. 51, 51-A, 52 and 53, Peters Road, Royapettah.

3. It was in this posture of affairs that the present suit came to be filed on 12th May, 1941, calling upon the defendants to make good their liability and the contract of indemnity by bringing their share of the amount due under the mortgage and thus save the plaintiffs from the harm of their properties being brought to sale by the Society, even though those properties were considered by the Society as ample security for the plaintiffs' own share of the liability of Rs. 8,500. The defendants say in their written statement that the plaintiffs, who are themselves defaulting parties, cannot maintain the present suit, and that if they had paid to them the sums which they had to pay under the agreement of allotment, it would have enabled them to pay over the sums to the Society in reduction of interest due and also a portion of the principal, and that the plaintiffs must be held responsible for the inability of the defendants to discharge their share of the liability which they undertook to discharge under the agreement. . The suit is the result of ill-feelings between the parties and as the Society had not taken any effective steps for bringing the properties to sale and as the plaintiffs have not suffered any damages, the action was premature and misconceived.

4. The only issue that has been framed in this case is whether the suit is maintainable. I take it that this was framed because of the plea raised by the defendants that as no damages have yet been suffered and as the plaintiffs have not been made to pay what the defendants should pay, there was no cause of action for the plaintiffs. This plea, however good in common law, is unsustainable in equity and this has been laid down in many English decisions. It is necessary to refer only to a law of them. Wooldridge v. Morris (1868) L.R. 6 Eq. 410 is one of such cases where it was held that a surety, though he had not actually paid anything, was entitled to maintain a bill against the executors for payment of the debt and indemnity. In that case the bond was an actual bond for indemnity and the person to be indemnified was a surety on another bond. Lacey v. Hill (1874) L.R. 18 Eq. 182 is another such case. Sir George Jessell, M.R., at page 191, says:

Whatever may be the case at law (as to which I say nothing, because it is not necessary), i( is quite plain that in this Court any one having a right to be indemnified has a right to have a sufficient sum set apart for that indemnity. It is not very material to consider whether he is entitled to have that sum paid to him, or whether it must be paid direct over to the creditor. If the creditor is not a party, I believe that it has been decided that the party seeking indemnity may be entitled to have the money paid over to him.

The case of Wolmirshausen v. Gullick (1893) 2 Ch. 514 was between two co-sureties and the question was whether one co-surety can compel the other to contribute towards the common liability even before he had paid his share of the liability and it was held by Wright, J, that he could. Reference may be made also to Ascherson v. Tredegar Dry Dock and Wharf Co., Ltd. (1909) 2 Ch. 401. and In re Richardson : Ex parte The Governors of St.Thomas Hospital (1911) 2 K.B. 705. The argument that the jurisdiction to relieve the surety was limited to cases where the creditor refused to sue the debtor was negatived in the earlier of these two cases and it was laid down that the surety was entitled to come in equity to compel the principal debtor to pay what was due from him, to the intent that the surety might be relieved. The distinction between an action at common law and in equity is pointed out in the later case at page 709 where it is said that the common law view ' first pay and then come to the Court under your agreement to indemnify' is not the view taken in the exercise of equitable jurisdiction.

5. The present action is therefore clearly maintainable. There is no doubt on (he correspondence which has been referred to that the plaintiffs' properties are in danger of being brought to sale for the default of the defendants who would not pay their share of the liability and would not enter into a separate arrangement with the Society for making good the deficiency of Rs. 3,755. So far as the plaintiffs' share of the liability is concerned, it is only Rs. 8,500 and as pointed out already, the Society has accepted the position that the properties allotted to them are ample security for this amount.

6. The only questions that we have to consider are, what is the form of the decree to be made in the present case and what is the proper order as regards costs. Under the contract of indemnity Ex. P-3 the defendants undertook to discharge their liability within three months and to indemnify the plaintiffs against any claims or demands whatsoever for or in respect of any such liability. The three months have long ago expired and so far nothing has been done by them with the result that the properties of the plaintiffs have been brought to sale on more than one occasion which would not have happened if the amount still due on the mortgage was only what is due by the plaintiffs. They have furnished sufficient security for the same and which security the Society was prepared to accept as adequate. We must see that the plaintiffs are not damnified by any default or negligence of the defendants, but at the same time we have to take care against the possibility of the plaintiffs not paying their share of the amount and the Society proceeding against the defendants' property in consequence.

7. There will be a decree directing (1868) L.R. 6 Eq. 410 the defendants to pay up within three months from this date their share of the liability to the Egmore Benefit Society or enter into a separate arrangement with the Society for such payment within the same period and that in default of their doing so, they shall bring into Court a sum of Rs. 11,256-4-11 being the amount due by them under the mortgage up to and inclusive of the 30th June, 1942, so that the said amount together with any subsequent interest that the defendants may be called upon to pay under this decree for the subsequent period may be paid over to the Egmore Benefit Society. On such payment being made or on the defendants entering into a separate arrangement for such payment, the defendants will be at liberty to apply to this Court for a direction that the plaintiffs do, by payment of their share of the liability under the mortgage or otherwise, secure for the defendants a release of the Society's claims over the defendants' properties.

8. Though the defendants are to blame for the present situation, I cannot admit that the relief to which the plaintiffs are entitled is really anything like the sum of Rs. 11,000 and odd which the defendants have to pay to the Society for their share of the liability ultimately. No damages have yet been sustained and we are only making a provision in anticipation for any loss that may occur as a result of the defendants' default and breach of the contract of indemnity. Further, we have to take into account the fact that the plaintiffs who are liable under the arrangement to pay the defendants certain amounts did not do so and suits had to be filed against (them for the purpose. In one of the decrees the plaintiffs have managed to obtain an order for payment by instalments. Even the Society would have been content if the defendants had paid up or furnished security for the difference of Rs. 3,755. Had this been done, there would have been no trouble at all. Having regard to all these facts and circumstances, I think the proper order as to costs should be that the plaintiffs will get taxed costs of this suit, the court-fee being limited to the minimum payable and advocate's fee being calculated on Rs. 5,000.

9. The first defendant will be discharged from his receivership without any obligation to file or pass accounts.

10. By consent the restraint on alienation will continue until further orders of this Court.


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