1. On 23rd February 1916 defendant 1 executed the mortgage deed, Ex. A, in favour of the plaintiff for Rupees 20,000. In this document were recitals by which the plaintiff held himself responsible for any loss that might accrue to defendant 1 on the ground of his not paying off certain debts out of the consideration. On the other hand, defendant 1 held himself liable on the security of the same property for any excess amount that might be spent by the plaintiff in preserving his mortgage rights. In Ex. A there was a definite recital that there were no prior mortgages. In fact however there was a mortgage evidenced by Ex. M dated 15th January 1900 for Rs. 400 on items 1 to 5 of the same property. In 1916 the mortgagee of that prior mortgage brought O.S. No. 180 of 1916, to which both the present plaintiff and defendant 1 were parties. During the course of the suit, on 8th June 1917, defendant 2, by Ex. J., purchased the equity of redemption. The property was brought to sale and both the plaintiff and defendant 2 filed petitions, Exs. C and I, to set aside the sale on payment of the decree amount. The plaintiff had filed the earlier petition and it was the plaintiff who was allowed to pay off the decree amount.
2. The plaintiff, relying on the recital in Ex. A that on the same security defendant 1 would be liable for any excess amount spent by the plaintiff in preserving the mortgaged property, has brought this suit for sale of the whole of the property subject to his own mortgage. The suit is opposed by defendant 2, who purchased the property in 1917. The District Munsif of Kundapur held that the recital in Ex. A relied on by the plaintiff was not intended to have any reference to prior mortgages and so dismissed the suit. In appeal the District Judge of South Kanara, while upholding the District Munsif's finding with respect to the interpretation of the relevant clause in Ex. A, held that the plaintiff is entitled by the principle of subrogation enunciated in Section 74 of the old T.P. Act to maintain the suit against such items of the property as were mortgaged by Ex. M and that the right of subrogation thus acquired was one that placed him in the position of a mortgagee under Ex. M. As this document was executed in 1900, this suit is prima facie out of time. The District Judge however held that there was an acknowledgment of the mortgage debt by Ex. N on 29th May 1914 and again by Ex. I on 6th October 1918. He therefore gave a decree to the plaintiff for the mortgage amount due under Ex. M from the date of the mortgage.
3. In appeal it is contended, firstly, that as the plaintiff did not show in his plaint how the suit was not barred by limitation, he ought not to have been given a decree, and secondly, that Ex. I was not an acknowledgment of the mortgage debt and that the suit was not therefore in time it is no doubt true, as a general principle, that a plaintiff must show in his plaint how his suit is in time; for the question whether the suit is in time must, if denied, be one of the issues in the case, and if the plaintiff does not explain how his suit is in time, it is impossible for the defendant to meet his case. The District Judge held, and I think he is correct, that the plaintiff had set out in his plaint all the facts from which one could imply subrogation; and it also appears that the documents relied on to save time had necessarily to be filed in the suit and that in this particular case the defendant was in no way prejudiced. When the question was argued in the first Appellate Court, defendant 2 does not seem to have raised any objection to this omission; and I find no objection raised in the memorandum of cross-objections. I am not therefore prepared to interfere with the decree of the lower Appellate Court on this account.
4. An acknowledgment, to save limitation must either be a direct acknowledgment of the debt or an acknowledgment of such a kind that an acknowledgment of the debt is inevitably implied. Ex. I is the petition filed by defendant 2 to set aside the sale in pursuance of the mortgage decree and in it ha states that the property that had been sold had been sold to him by defendant 1 for Rs. 40,000, that the amount due under the decree is included in some other alienation, and that he had learnt that as the alienee did not pay the decree amount, the property covered by the sale in his favour had been sold. It is seen therefore that be files this petition because the property has been sold, i.e. he acknowledges the liability of the land under this decree and admits that he must satisfy the decree if the sale is to be set aside. An acknowledgment of a decree debt is obviously not necessarily the same as an admission that if the debt which had ripened into a decree had still been alive at the time of the acknowledgment he would have been liable. A similar case arose in an unreported case of this Court, C.M.S.A. No. 87 of 1919, where the same principle was enunciated. I therefore, disagreeing with the lower Court, find that Ex. I does not save limitation.
5. The plaintiff has three answers to defendant 2's case. The first, which is the subject of his memorandum of cross objections, is that Ex. A makes express provision for the safe-guarding of the plaintiff against prior mortgages. The second is that Ex. O dated 28th March 1919, which was a deed of transfer by defendant 1 to another, is an admission. The third is that time runs against the plaintiff not from the date of the mortgage but from the date of his demand to set aside the sale. With regard to the first point, I have been taken through Ex. A again, and I agree with the two lower Courts that it is not clear from Ex. A that any provision was made to safeguard the plaintiff against the existence of prior mortgages. There is a recital in Ex. A: that there were no prior mortgages and from the wording of the document it would seem that the plaintiff accepted that statement.
6. By Ex. O defendant 1, after he had parted with the equity of redemption and had therefore no interest in the property at all, fraudulently conveyed the property to another, In it he naturally makes no reference to his sale to defendant 2 but he does refer to the mortgage in question. Mr. Somayya for the plaintiff relies on a case reported in Modhugari Narayana v. Venkataramanna : AIR1935Mad899 , which follows Krishnachandra Saha v. Bhairab Chandra Saha (1905) 32 Cal 1077. Ramesam J., in the Madras case, has reviewed all the previous decisions on the point and he holds that in all cases a mortgagor, even after he has parted with his equity of redemption, can bind his successors-in-title by his admissions.
7. In the earlier cases, such as Lakshmanan. Chetty v. Muthaya Chetty AIR 1920 Mad 1026 and Yegnanarayana v. Venkata Krishna Rao AIR 1925 Mad 1108, it had been held that acknowledgments by a mortgagor who has parted with his equity of redemption would be binding on his successors-in-title only if he still had some interest in the property. This is what Pandalai, J. says in Muthu Chettiar v. Muthusami Ayyangar : AIR1932Mad516 , and this would seem to be in accordance with the wording of Section 19, Lim. Act, which refers to an acknowledgment of liability by a party against whom a right is claimed or by a person through whom he derives title. If the mortgagor has no interest whatever in the property and is not personally liable for the mortgage debt, it would seem that he has no liability to acknowledge. To allow limitation to be saved by admissions where there is no liability would open the door to fraud. Jackson, J. in Muthu Chettiar v. Muthusami Ayyangar : AIR1932Mad516 , in laying down the law that an admission after sale of the equity of redemption will save limitation, does not make any qualification; but Pandalai, J. does. In that case, as in all the earlier cases, the mortgagor did have some liability to acknowledge.
8. In Lakshmi Naidu v. Gunnamma AIR 1935 Mad 101, a passing reference with approval is made to Muthu Chettiar v. Muthusami Ayyangar : AIR1932Mad516 , but there too there was a liability to acknowledge. There was also a liability in Modhugari Narayana v. Venkataramanna : AIR1935Mad899 , in which Ramesam, J. relied on the judgments of Jackson, J. in Muthu Chettiar v. Muthusami Ayyangar : AIR1932Mad516 and the learned Judges in Lakshmi Naidu v. Gunnamma AIR 1935 Mad 101 and Krishnachandra Saha v. Bhairab Chandra Saha (1905) 32 Cal 1077, who discussed the question generally, and came to the conclusion that an acknowledgment by a mortgagor after sale of the equity of redemption would bind those who succeeded to his title. Presumably, the reason why no case where there had been an acknowledgment by a person who had no right at all has been quoted is that it is very difficult to conceive of a case in which there can be an acknowledgment by a person who had no interest. If a person had no interest, no occasion could arise on which he would be called upon to give an acknowledgment. Even in the present case, defendant 1 in making the acknowledgment, was making a statement against his own interest; for the making of such an acknowledgment naturally lessened the amount of consideration. The acknowledgment was therefore one to which some value can be attached. I feel bound to follow the Division Bench ruling in Modhugari Narayana v. Venkataramanna : AIR1935Mad899 , and I do not think that it can work any hardship; because if such a rare case did arise in which a mortgagor made an admission which was not against his interest, it would presumably be held that such an admission was no acknowledgment at all. I therefore find that Ex. O does amount to an acknowledgment and that the suit is therefore in time.
9. The third contention raised on behalf of the plaintiff is that time runs from the date of payment, and as an example of the injustice that might result from any other interpretation of Section 74 of the old T.P. Act, it is pointed out that if a suit on mortgage is filed just within 12 years, then the sale might not take place until more than 12 years had elapsed and that by the time a person made the payment, more than 12 years would have elapsed from the date of the mortgage; and that his remedy would be barred before he even made the payment. I should imagine however that this could not happen if a mortgagee was really diligent; because he could always ascertain from the Registrar's office if there were any prior mortgages; and it would be in his own interest to see that he was not left in a position in which he would have no remedy for any payment that he might make to save the property. The principle enunciated in Section 74, T.P. Act, is the old English principle of subrogation. It was a purely equitable relief and enabled a person who pays off the amount due under a mortgage to be placed in the same position as the mortgagee was under his mortgage. I can understand an argument that from the date of payment the person who made the payment would have some sort of personal remedy; but I do not see under what principle of law he would be entitled to a charge on the property from the date of payment.
10. There seems to be no provision in the Transfer of Property Act or elsewhere that would justify a presumption that from the date of payment some sort of charge was established. Such a charge would not be by subrogation but something entirely different. I have been referred by Mr. Somayya to Bora Shib Lal v. Munni Lal AIR 1922 All 153 and Parvati Ammal v. Venkatarama Aiyar AIR 1925 Mad 80, in both of which cases there were remarks and findings which justify Mr. Somayya's contention. The question came up for consideration in Kotappa v. Raghavayya : AIR1927Mad631 by Wallace and Madhavan Nair, JJ. Wallace, J. was the Judge who decided Parvati Ammal v. Venkatarama Aiyar AIR 1925 Mad 80 and his judgment in Kotappa v. Raghavayya : AIR1927Mad631 was devoted to explaining why he had come to his decision in Parvati Ammal v. Venkatarama Aiyar AIR 1925 Mad 80, which he then considered to be wrong. Madhavan Nair, J. in his judgment referred to Bora Shib Lal v. Munni Lal AIR 1922 All 153 and Parvati Ammal v. Venkatarama Aiyar AIR 1925 Mad 80 and dissented from them. He says:
The fact that a decree has been passed and the mortgage has become merged in a decree does not therefore make any difference. The obtaining of a decree does not put an end to the charge on the property; after the passing of the decree the charge attaches itself to the decree and the puisne mortgagee, by making the payment, becomes entitled by virtue of Section 74, T.P. Act, to enforce that charge.
11. In Kotappa v. Raghavayya : AIR1927Mad631 , the person who had paid off the mortgage debt and claimed subrogation was the defendant, as he was in Karuppan Chettiar v. Venkataperumal : AIR1929Mad465 . In the latter case, it was held that whatever may be the law of limitation with regard to the bringing of a mortgage suit by a mortgagee-plaintiff, it was always open to the defendant to hold up the mortgage as a shield against a suit for possession if that mortgage had not been discharged. Kotappa v. Raghavayya : AIR1927Mad631 was referred to and it was pointed out that if that decision went as far as to say that the defendant was barred by limitation from setting forth such a plea it was wrong. The correctness of Kotappa v. Raghavayya : AIR1927Mad631 in describing the effect of subrogation and its effect on the question of limitation against a plaintiff was not however doubted. From a review of the above cases it would seem that the rights of the plaintiff were the rights of the mortgagee before he brought the suit and that time begins to run from the original date of the mortgage. The subrogated mortgagee-plaintiff can therefore put forward to save limitation only such pleas as were available to the original mortgagee and such acknowledgments as might have occurred since he acquired his right to subrogation.
12. In view of my finding that Ex. O saves limitation, it follows that the appeal has to be dismissed with costs. A memorandum of cross-objections has been filed in respect of the interpretation of Ex. A, objecting to the limitation imposed by the lower Appellate Court with regard to the property that could be proceeded against by the plaintiff in satisfaction of his subrogated right. I have already held that Ex. A has been correctly interpreted. The memorandum of cross objections also refers to certain miscellaneous claims all disallowed by the lower Appellate Court; but in view of my findings above, they do not arise and are not pressed. Another objection raised in the memo of cross objections is that the costs of the plaintiff were disallowed in the trial Court, the reason given by the lower Appellate Court being that the plaintiff had not set forth his true case in the plaint and had also to some extent not succeeded. I do not feel justified in interfering with this order. Both sides agree that as the plaintiff is found only to have the rights of the prior mortgagee against items 1 to 5, he is entitled to sell them free of the usufructuary mortgage and not, as the lower Appellate Court has ordered, subject to the mortgage. With the exception of this modification, the memorandum of cross-objections is dismissed with costs. Leave to appeal refused.