1. This appeal arises out of a suit for the recovery of a sum of money. The plaint also claimed that the amount should be recovered by sale of the suit property on the footing of a charge on the property. Defendant 1, who was admittedly the owner of the property at one time, is the mother of defendants 2 and 3. It is common ground that in 1924: this property had been given as security to one Kuppu Rao. In 1926 a suit was instituted by Kuppu Rao for the recovery of the amount due to him. He died pending that suit and the Administrator-General who took charge of his estate continued the suit and obtained a decree. In execution of that decree, the property was advertised for sale on 25th January 1928. The documentary evidence in the case, read in the light of the oral evidence, establishes that some days before the sale, attempts were made by defendants 1 and 2 to raise money to pay off the mortgage decree and prevent the sale of the pro-party. It is the plaintiff's case that his money was advanced for this purpose, through his cousin P.W. 6, and that the understanding, as evidenced by Ex. A, was that defendant 1 was to execute a hypothecation bond for the entire amount advanced by the plaintiff. As the defendants impeached the genuineness of Ex. A mid of some of the other documents produced on the plaintiff's side, it will be convenient to refer in the first instance to documents which have not been impeached. It is sufficient at this stage to state that no mortgage was in fact executed; but the plaintiff claims a charge on the principle of subrogation as his money had been utilized to pay off the mortgage decree in favour of Kuppu Row's estate. The contesting defendants deny even the fact that plaintiff's moneys went to pay off that decree and they contend that the plaintiff is not entitled to invoke the principle of subrogation.
2. P.W.6 was the proprietor of Dowden & Co., and there are in the record certain Jotters that passed between him and the Administrator-General, and as their genuineness has not been challenged their contents may be taken as fairly true ; their truth has also been sworn to by P.W. 6. These letters make it clear that the money which was paid to satisfy Kuppu Rao's decree was paid to the Administrator-General by Dowden & Co., on behalf of the present plaintiff who was the cousin of P.W. 6. It is also significant that in one of them there is express reference to the intention to take necessary documents from the defendants before paying the balance due under the mortgage decree. A short time was obtained to make payment of the balance and the decree amount was finally discharged by a further deposit by Dowden & Co. made in the name of the plaintiff. Though the execution records relating to that mortgage unit were not exhibited in the lower Court, we have, with the consent of the advocates on both sides, inspected them here. They only show that the decree was reported satisfied and that the sale warrant was accordingly returned unexecuted. Barring a passing reference in one petition to a payment having been made by one Narasimha Rao on behalf of the defendants, there is nothing further in the records of that case to show that the decree was discharged by the present plaintiff or that there was any arrangement between the present plaintiff and the defendants in that suit in respect of their executing a security bond in favour of the plaintiff to secure repayment of the sum advanced by him. The admitted documents, taken with the evidence of P.Ws. 6 and 7 suffice, in our opinion, to show that the present version of defendants 1 and 3 that it is they who found the money to pay off Kuppu Rao's mortgage decree and that they had no transaction whatever with the plaintiff in that connexion cannot be true. It has not been suggested what motive P.W. 6 had in 1928 to make a reference to the present plaintiff as the person whose money was being paid to the Administrator-General in satisfaction of the mortgage decree unless the statement represented the truth, Nor is it easy to understand why there should be any reference to documents being taken from the defendants in that suit, if it was the defendants' money which was being paid in discharge of that decree.
3. If, as seems to follow from the above facts, it was plaintiff's money which was in fact paid to discharge Kuppu Rao's decree and there was an intention to take formal documents from the defendants in due course to secure repayment thereof, there is little force in the objection raised on behalf of the defendants to the genuineness of the letters, Exs. A, Y and Z on which the claim in the present suit is founded. These letters show that the money was lent on the express understanding that its repayment should be secured' by a hypothecation bond to be executed by defendants 1 and 2. But as the parties-hoped that they might sell the property privately and pay off the amount due to the plaintiff, there was considerable delay in the execution of the hypothecation bond. On a notice, Ex. J, being sent by an advocate on behalf of the plaintiff to the defendants, bringing these facts to their notice, Exs. Y and Z were executed by defendants 1 and 2, and in these documents they reiterated their promise to execute a formal mortgage deed within 15 days if by that time they were not able to pay up the money by the sale of the property. These documents are formally proved by persons who were present at their execution by defendants 1 and 2, and we see no reason to differ from the view of the learned trial Judge that they are genuine documents executed by defendants 1 and 2. If matters stood there, there can be little doubt that notwithstanding the non-execution of a formal mortgage deed, as originally contemplated by the parties, the plaintiff will be entitled to invoke the doctrine of subrogation. The case is clearly governed by the principle of the decision in Dinobundhu Shaw Chodhry v. Jogmayya Dasi (1902) 29 Cal 154 and the mere fact that at the time when the money was lent by the plaintiff to P.W. 6, no deed of mortgage had really been executed or that the parties intended to secure repayment by a formal deed of mortgage will not affect the applicability of the rule of subrogation to the case : cf. (1910) 2 Ch 277.2
4. Towards the end of 1931 it unfortunately happened that defendants 1 and 2 foil out, and defendant 1 who seems to have been dissatisfied with the conduct of defendant 2, who had become an insolvent and had incurred considerable losses in business, thought fit to settle the suit property on defendant 3, her younger son. This was carried out by a deed of settlement dated 19th November 1931. The settlement deed makes no reference to the arrangement with the plaintiff, nor does it make any provision for payment of the money due to the plaintiff under Exs. A, Y and Z. Whether even at that time the mother and the younger son had the fraudulent intention of cheating the plaintiff out of his money it is not easy to say, though the attitude taken up by them during the trial of the suit in totally denying the plaintiff's claim makes one suspicious whether it was not their deliberate object to defeat the transaction which had been brought about by defendant 2. Any how, as defendant 3's claim is only under a deed of settlement, he cannot set up his title thereunder against the plaintiff's claim unless the defence that the plaintiff never paid any money or that plaintiff has at best only a personal claim and not a right to a charge on the suit property is made out. In the view we have already expressed both these defences fail and the plaintiff will undoubtedly be entitled to a decree in enforcement of a charge on the suit property against defendants 1 and 3.
5. The claim of defendant 4 has, as the learned trial Judge points out, given rise to greater difficulty. She claims to have lent money to defendant 3 in ignorance of plaintiff's rights and has obtained a mortgage over the suit property. The plaintiff's case is that the mortgage deed, Ex. 6, executed by defendant 3 in favour of defendant 4 on 23rd December 1931, is a sham transaction and does not represent any real loan. Alternatively the plaintiff has also suggested that defendant 4 must have had notice of the plaintiff's claim and can at best rank only as a puisne mortgagee. The learned trial Judge has accepted defendant 4's case to this extent that he has found that defendant 4 was an innocent mortgagee who has advanced money. But he postponed defendant 4's claim to that of the plaintiff on the ground that defendant 4 has been negligent in lending the money without calling for the title deeds relating to the mortgaged property. It is now clear that these title deeds which were produced into Court during the pendency of Kuppu Rao's suit have remained in Court and were not taken possession of by any of the parties. The circumstance that in some notice given by a lawyer on behalf of defendants 1 to 3 an attempt was made to explain away plaintiff's possible possession of title deeds on a wrong assumption of plaintiff being in possession thereof cannot have much significance in face of this proved fact. On behalf of defendant 4 it has been contended that even on the footing that the plaintiff is entitled to claim to be subrogated to the position of Kuppu Rao, plaintiff must be postponed to defendant 4 on the ground of gross negligence in not taking active steps to have a legal mortgage executed in due course as contemplated by Exs. A and Y.
6. That the plaintiff had been very unbusinesslike in securing his rights cannot be denied. It is however not clear whether the case is directly within the terms of Section 78, T.P. Act. Plaintiff can only claim an equitable right of subrogation and cannot claim to be a mortgagee in whose favour a mortgage deed as contemplated by the Transfer of Property Act has been executed. Evan if the case should be held to be governed by Section 78, there is a considerable force in the contention advanced on behalf of defendant 4 that if defendant 4 was really a bona fide lender, she has been misled into lending her money in ignorance of the plaintiff's right, as the plaintiff had not taken diligent steps to have a legal mortgage executed in his favour. The argument of the learned Judge that defend, ant 4's failure to call for the title deeds is sufficient to postpone her claim to the plaintiff's does not seem to us sustainable. It may be well founded if the plaintiff had the custody of the title deeds, because it is only in favour of the person in possession of the title deeds that the doctrine of constructive notice can be invoked on the ground of the omission of the other party to call for them. It being established in this case that the title deeds remained in Court, there is no basis for a finding against defendant 4 as a question of law merely on the ground of her failure to call for the title deeds. This failure however will have a material bearing in determining the question whether defendant 4 was in fact an honest lender.
7. Looking at the matter from another point of view, the plaintiff must be regarded as a parson who had an agreement in his favour for the execution of a formal deed of mortgage. If defendant 4 was not a transferee for value without notice of the agreement in plaintiff's favour, plaintiff will undoubtedly be entitled in a suit for specific performance to get a security which will have precedence over defendant 4's claim. There is no reason why that consideration should not be kept in view in dealing with the relative rights of parties even on the footing that the plaintiff has become a mortgagee by sub-rogation. The question therefore that arises for decision from either point of view is whether defendant 4 was a bona fide lender without notice of the plaintiff's claim. The only relevant evidence on that point is that of her husband, D.W. 3. I am free to admit that his evidence is far from convincing, and on several matters it is undoubtedly open to criticism. There is however one consideration which defendant 4 is entitled to urge, namely that there is on record no suggestion of any reason or motive for defendant 4 or her husband to get mixed up in any fraudulent scheme of defendants 1 and 3 to cheat the plaintiff's claim and much less of any reason for D.W. 3 to perjure himself to support such a scheme. Notwithstanding the defects in the evidence of D.W. 3, the learned trial Judge seems to have been prepared to accept his evidence and has found in positive terms that defendant 4 was an innocent lender. The circumstances of the case are not in our opinion such as to justify our dissenting from that finding of fact. The result is that while the plaintiff will be entitled to a decree as on charge against the suit property, his claim will be postponed to that of defendant 4 under Ex. 6. The decree of the lower Court will be modified accordingly. Appeal No. 80 is allowed to this extent :
the appellant will be entitled to the costs of the appeal from the plaintiff. Appeal No. 13 is dismissed with costs of the plain, tiff. The appellant in Appeal No. 13 will pay the cour-fee due to Government on the memorandum of appeal.
Leach C., J.
8. I agree with the judgment of my learned brother and I have nothing to add.