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Berhamdeo Pershad Vs. Tara Chand - Court Judgment

LegalCrystal Citation
SubjectProperty;Limitation
CourtKolkata
Decided On
Judge
Reported in(1906)ILR33Cal92
AppellantBerhamdeo Pershad
RespondentTara Chand
Cases ReferredHeera Lall Chowdhry v. Janokeenath Mookerjee
Excerpt:
mortgage - limitation act (xv of 1877), schedule ii, articles 62, 120, 182--suit--charge--charge on surplus proceeds of prior mortgagees' sale--money had and received--sale--rights of subsequent mortgagees--right to surplus sale-proceeds. - henderson, j.1. this appeal and appeal no,. 381, which are appeals from the same decree, have been heard practically together.2. the circumstances under which the suit was brought are these : on the 21st may 1887, one kalu babu, the ancestor of the defendants, who are described in the cause title as the first party, executed a mortgage, by which he mortgaged mouzah chuck and certain other mouzahs in favour of the appellants. on the 9th september 1887 he executed another mortgage, by which he mortgaged mouzah chuck and other mouzahs in favour of the plaintiffs, undertaking to repay the money secured by the mortgage in the month of kartic 1296, and on the 19th july 1889 he executed a second mortgage in favour of the appellants in respect of mouzah chuck and other mouzahs. ' a 1890 the.....
Judgment:

Henderson, J.

1. This appeal and appeal No,. 381, which are appeals from the same decree, have been heard practically together.

2. The circumstances under which the suit was brought are these : On the 21st May 1887, one Kalu Babu, the ancestor of the defendants, who are described in the cause title as the first party, executed a mortgage, by which he mortgaged Mouzah Chuck and certain other mouzahs in favour of the appellants. On the 9th September 1887 he executed another mortgage, by which he mortgaged Mouzah Chuck and other mouzahs in favour of the plaintiffs, undertaking to repay the money secured by the mortgage in the month of Kartic 1296, and on the 19th July 1889 he executed a second mortgage in favour of the appellants in respect of Mouzah Chuck and other mouzahs. ' a 1890 the appellants filed a suit, No. 16 of 1890, to enforce their first mortgage, but, although they made the plaintiffs parties to that suit, no mention was made of their second mortgage of the 19th July 1889. On-the 8th October 1890 a decree was made for sale of the mortgaged properties and in due course Mouzah Chuck was sold, and after paying off the amount due upon the mortgage sued upon out of the sale-proceeds there remained a balance of Rs. 12,197-8-3 in deposit in the Court of the Subordinate Judge.

3. In a suit filed somewhat* later, No. 136 of 1890, to which the plaintiffs were not made parties, the appellants on the 14th January 1891 without notice to the plaintiffs obtained a decree upon their mortgage of the 19th July 1889, and in satisfaction of that decree they on the 22nd April 1892 withdrew the sum of Rs. 12,197-8-3. In the meantime the plaintiffs had Hone nothing to enforce their rights under their mortgage, but on the 17th November 1900 they filed the present suit, alleging inter alia that the sum of Rs. 12,197-8-3, the surplus sale-proceeds of the sale of Mouzah Chuck in law and equity stood in the place pro tanto of Mouzah Chuck and was, therefore, subject to their mortgage and insisting that the appellants were not entitled to withdraw the same in satisfaction of the decree of the 14th January 1891 and seeking to follow it in their hands. The appellants in their written statement alleged that the plaintiffs, having been parties to the suit in which Mouzah Chuck had been sold, had lost their lien by their own negligence in not having taken steps to have the money applied to the debt under their mortgage. They also submitted that the plaintiffs' lien had been lost in consequence of their not having redeemed the earlier mortgage of the 21st May 1887 and they pleaded that the suit was barred by limitation as against them.

4. In the Court below the following issues, in which the appellants were concerned, were, amongst others, framed, namely:

(1) was the suit barred by limitation with regard to the surplus sale-proceeds as against the appellants?

(2) had the plaintiffs lost their lien on such proceeds?

(3) were the plaintiffs entitled to claim the surplus proceeds or any portion of it and, if so, were they entitled to interest thereon and, if so, at what rate?

5. The Subordinate Judge held that the plaintiffs' claim to the surplus was not barred by limitation as pleaded: that the plaintiffs had not lost their lien on the surplus proceeds; and that the appellants were aware of the plaintiffs' lien and had* deliberately withdrawn the surplus proceeds in order to defraud the plaintiffs. He held that the plaintiffs were not entitled to interest on the surplus, because, instead of suing earlier upon their mortgage, they had waited until the last day on which they could sue, when their claim had grown to enormous proportions.

6. Before us it was contended that the plaintiffs, having been-parties to the first suit brought by the appellants and not having redeemed the prior mortgage, their only remedy was to apply in the proceedings in which Mouzah Chuck was sold and not to bring a separate suit. It was argued that the matter was governed by Sections 244 (c) and 295 of the Code, of Civil Procedure, that the question of the right of the plaintiffs to enforce their lien against the surplus sale-proceeds was a question arising between the parties to the suit, in which Mouzah Chuck was sold (that is, between the appellants and the plaintiffs) relating to the execution, discharge or satisfaction of the decree, and therefore, under Section 244, one to be determined by the order of the Court executing the decree and not by separate suit. Now, in the first place, the decree of the appellants having been satisfied the appellants had no further interest in the surplus sale-proceeds except under their subsequent mortgage, which Avas not before the Court which passed the decree or the Court in which the proceedings were had for the purpose of selling the property. There could therefore be no question arising between the parties to the suit as such. In the next place, the decree having been satisfied there could be no question relating to the execution, discharge or satisfaction of the decree within the meaning of Section 244. In my opinion that section has no application to the facts of this case. Nor has Section 295, which was also relied upon. That section deals with the position where assets are realised in execution of a decree and more persons than one have prior to the realization applied to the Court by which such assets are held for execution of decrees for money against the same judgment-debtor and have not obtained satisfaction. In such case the assests, after deducting the costs of the realization, shall be divided rateably among all such persons, provided that when immovable property is sold in execution of a decree ordering its sale for the discharge of an incumbrance thereon the proceeds shall be applied--

first, in defraying the expenses of the sale;

secondly, in discharging the interest and principal money due on the incumbrance; and

thirdly, in discharging the interest and principal money due on subsequent inoumbrances.

7. Here, although assets had been realized, application had not been made by more persons than one prior to the realization for satisfaction of decrees for money. The present plaintiffs had not obtained any decree, for money or otherwise. Moreover, the amount due on their incumbrance had not been ascertained and no steps bad been taken to have it ascertained, and therefore the Court executing the decree of the appellants was not in a position, after defraying the expenses of the sale and the prior incumbrance of the appellants, to apply the surplus proceeds in discharging the interest and principal money due on the plaintiffs' mortgage. In my opinion that section also does not apply. Reference, was also made to sections 96 and 97 of the Transfer of Property Act, but these sections apply to the sale of property subject to prior mortgage and not to the circumstances of this case, and need not be considered.

8. It was next contended before us that Article 120 of the Limitation Act applied to the suit so far as the surplus-proceeds are concerned and that, as to these, the suit was barred by limitation, the surplus proceeds having been drawn on the 22nd April 1892 and the suit not having been brought until the 17th November 1900, that is to say, more than six years afterwards. But the plaintiffs' suit is really a suit brought to enforce their mortgage against all the properties the subject of that mortgage. Among these properties was Mouzah Chuck. It is true that mouzah has been sold and that, after the sale, all that remained of it, to which the plaintiffs' lien could attach, was the surplus sale-proceeds. The contention, as I understood it, was not that the lien did not attach to the surplus proceeds, but that the plaintiffs' lien had been extinguished in consequence of the plaintiffs' neglect to take steps in time to obtain payment of the amount. In my opinion it cannot be argued with any show of reason that the plaintiffs' lien did not attach to these surplus sale-proceeds. In the Court of the Subordinate Judge, where they were in deposit, they continued to be portion of the security to which plaintiffs were entitled to look for satisfaction of their mortgage. It so happened that the entire Mouzah Chuck was sold and that it realized more than was sufficient to discharge the first incumbrance. But suppose that a portion only of the mouzah sufficient to discharge that incumbrance had been sold, there can be no question that the plaintiffs' lien would still have continued to attach to the remainder, and that the plaintiffs would have been entitled to enforce their lien against that and against the other properties covered by their mortgage. I am unable to see any real difference between the two cases. Article 120 of the Limitation Act applies to suits for which no period of limitation is elsewhere in schedule II provided. If it applies in the present case, then the suit, not having been brought within six years from the time when the right as against the appellants accrued, that is from the date of the withdrawal of the money, would no doubt be barred. But in my opinion Article 120 does not apply, but Article 132 does. The suit was to enforce payment of money charged upon immoveable property. It was a suit upon a mortgage to enforce payment of the money to secure which the mortgage was granted. That money was by the mortgage deed charged upon immoveable property. The suit therefore comes within the precise terms of Article 132, and the plaintiffs therefore had twelve years to bring it from the date on which the money became due, that is, in the month of Kartick 1296; and the last day in Kartick in that year corresponds with the 18th November 1888. The suit having been instituted on the 17th. November 1900 was therefore not barred. In this view I am to some extent supported by Jogeshur Bhagat v. Ghanashan Dass (1901) 5 C.W.N. 356 and Kamala Kant Sen v. Abul Barkat (1899) I.L.R. 27 Calc. 180 and Podmanath Bombishenoi v. Khemu Komar Naik (1898) I.L.R. 18 Bom. 684, at p. 687. The plaintiff's mortgage was undoubtedly charged on a number of immoveable properties; and the fact that one of those properties should subsequently have been converted into money can in my opinion make no difference to the character of the suit. This suit was not a suit brought under the penultimate clause of Section 295 of the Civil Procedure Code. With regard to the position of the appellants and the plaintiffs respectively after the sale of Mouzah Chuck and the discharge of the first mortgage I may refer to the following remarks of the Privy Council in Raja Kishen Datt Ram v. Raja Mumtaz Ali Khan (1879) I.L.R. 5 Cale. 198 : L.R. 6 I.A. 145, 160: 'The effect of a sale under a power of sale is to destroy the equity of redemption in the land and constitute the mortgagee exercising the power a trustee of the sale-proceeds after satisfying his own charge, first, for the subsequent incumbrancers and ultimately for the mortgagor.' In Padmanabh Bombishenvi v. Khemu Komar Naik (1893) I.L.R. 18 Bom. 684 it was said that the same must be the result when the Court sells to satisfy the first mortgage. In that case, after satisfaction of a prior mortgage out of the sale-proceeds, the balance to which the plaintiff, who was in the position of a second mortgagee, was entitled by virtue of his mortgage had improperly passed into the hands of the defendants, the mortgagor and a creditor, who had attached it under a money decree, and the plaintiff sued to recover the amounts in their hands, alleging that he had a superior right. In the present case the appellants having obtained possession of the surplus proceeds with the knowledge that they were subject to the claim of the plaintiffs in priority to their own claim may, according to the view expressed by the Bombay High Court, be taken to hold the same under an implied trust for the plaintiffs. It is perhaps not very material, but I have no doubt in my own mind that the appellants deliberately withdrew the surplus proceeds with the intention of defrauding the plaintiffs, although the only evidence to support a case of fraud is the fact that they gave the plaintiffs no notice of their second suit.

9. In my opinion the appellants have altogether failed to show that the plaintiffs' lien in respect of the sale-proceeds had been extinguished or that they had themselves any right to retain the money withdrawn by them against the plaintiffs. Although in their written statement they denied it, they certainly were aware of the plaintiffs' mortgage when they withdrew the money. It is not suggested that the plaintiffs wore aware at the time of the withdrawal: when they came to know of it does not appear.

10. With regard to the claim by the plaintiffs for interest on the money in the hands of the appellants the claim was not pressed, and I think rightly so. The plaintiffs have calculated the interest due upon their mortgage and they now seek to enforce payment of the entire claim for principal and interest on that basis against the properties (including the surplus proceeds in the hands of the appellants) covered by their mortgage: and that I think is all they are entitled to do.

11. The result is that in my opinion this appeal must be dismissed and the appellants must pay the costs of this appeal of the plaintiffs (respondents) and of such of the respondents who have appeared, with the exception of the respondent No. 51, who was not served with notice and as to whom the appeal was dismissed by the order of this Court dated the 2nd March 1903.

12. My learned brother does not agree with the view taken in this judgment as to the question of limitation. He is of opinion that the suit so far as it is for the purpose of following the sale-proceeds in the hands of the appellants is barred, and he would allow the appeal. Under these circumstances the matter must be brought to the notice of the Chief Justice in order that the appeal may be referred to a third Judge.

Geidt, J.

13. Mouzah Chuck was sold in execution of a mortgage decree obtained by the appellants, and after satisfaction of the mortgage debt a sum of Rs. 12,197-8-3 was left in deposit in the Court of the Subordinate Judge of Monghyr. The plaintiffs held a second mortgage of Mouzah Chuck and other properties and, though they were made parties to the appellants' suit, did not prove their mortgage, nor did they make any attempt' to obtain in satisfaction of that mortgage any portion of the sum above mentioned. The appellants held a third mortgage of Mouzah Chuck, and on this mortgage they also brought a suit, to which however the plaintiffs were not made parties. They obtained a decree, and in execution withdrew the Rs. 12,197-8-3 lying in deposit. The date of this withdrawal was 22nd April 1892.

14. The mortgagor had covenanted to repay the debt due to the plaintiffs in the month of Kartic 1296. The last day of that month is identical with the l-8th November 1888. The present suit was instituted on 17th November 1900, and was brought to realize the whole debt secured by the plaintiffs' mortgage, one of the properties comprised in which was, as I have said, Mouzah Chuck. It is with this mouzah alone that the present appeal is concerned. Mouzah Chuck having been sold in execution of the decree on the prior mortgage, to which the plaintiffs were parties, was no longer available to them as security for their debt; but the plaintiffs claimed to be entitled to follow into the appellants' hands the balance of the sale-proceeds of Mouzah Chuck as representing their original security. The plaintiffs' mortgage was prior to that mortgage of the appellants, in satisfaction of which the litter had withdrawn these proceeds. The plaintiffs were undoubtedly entitled to preference over the appellants, and the only substantial question in this appeal is whether the plaintiffs' claim in respect of this money is barred by limitation. On this point the Subordinate Judge has held that the suit is not barred. The reasons assigned for this view are that the appellants, though aware of the plaintiffs' mortgage, neither made them parties to their suit on the subsequent mortgage nor gave them notice of their withdrawal of the money. By these omissions the appellants, in the view of the Subordinate Judge, committed a fraud on the plaintiffs and the lion of the latter on the twelve thousand rupees odd. remained intact. The Subordinate Judge has not indicated the article of the Limitation Act within which the suit falls, and I gather from his finding of fraud that in his view the period of limitation has been extended by Section 18 of the Limitation Act. If this be his meaning he has still failed to discuss, for the purposes of that section, the time from which the fraud became known to the plaintiffs.

15. The Subordinate Judge's reasons for holding that the suit was not barred by limitation were not supported at the hearing of this appeal. It was, however contended, on behalf of the respondents, that the suit even as regards the sale-proceeds of Mouzah Chuck falls within Article 132 of the second schedule to the Limitation Act, as a suit brought to enforce payment of money charged upon immoveable property, and that they had therefore twelve years from the date on which the money sued for became due. It is urged that the sale-proceeds lying in the Subordinate Judge's Court represented Mouzah Chuck and that the plaintiffs have the same term within which to bring their suit in respect of this money as they would have had if the mouzah itself still formed part of their security. In support of this contention the learned pleader for the respondents cites two cases decided by this Court, viz., Kamala Kant Sen v. Abul Barkat (1899) I.L.R. 27 Calc l80 and Jogeshur Bhagat v. Ghanasham Dass (1901) 5 C.W.N. 356. The decisions in these cases are founded on Section 73 of the Transfer of Property Act, which lays down that, where mortgaged property is sold through failure to pay arrears of revenue or rent due in respect thereof, the mortgagee has a charge on the surplus, if any, of the proceeds, after payment there out of the said arrears for the amount due on the mortgage, unless the sale has been occasioned by some default on his part. The Judges, who decided those cases, held that under this section the lien which existed on the property charged is now transferred to the purchase money; and they saw nothing 'in the Limitation Act which would shorten the time within which the plaintiff could sue to recover the money, the suit being a suit, not on the personal covenant, but a suit to recover money as charged on the mortgaged property.' Assuming, as we may do for the purposes of this appeal, that those cases were rightly decided, the present case is somewhat different. The plaintiffs' claim to the money withdrawn by the appellants does not rest on the provisions of Section 73 of the Transfer of Property Act, for there has been no sale through failure to pay arrears of revenue or rent, and the reasons given for the decision in these cases do not apply to the case before us.

16. To bring the case within Article 132 of the Limitation Act it must be shown that the plaintiffs' suit as regards the twelve thousand rupees odd withdrawn by the appellants in April 1892 is a suit 'to enforce payment of money charged upon immoveable property.' As soon as Mouzah Chuck was sold in execution of the appellants' prior mortgage in execution of a decree to which the plaintiffs were parties, the plaintiff's lien on that mouzah was discharged and they had no longer any charge on that mouzah. All they were entitled to as regards their mortgage on Mouzah Chuck was the money left in deposit after satisfying the prior mortgage. The date on which the mortgagor had promised to pay the plaintiffs' debt had passed, and it was open to the plaintiffs to obtain the balance of the sale-proceeds and apply it in satisfaction of their mortgage debt. When the appellants withdrew this money, the plaintiffs had a fresh cause of action as against them for appropriating money to which the plaintiffs were entitled, and it seems to me impossible to describe the plaintiffs' suit in respect of this money as one to enforce payment of money charged upon immoveable property. The suit is to recover money wrongly withdrawn by the appellants, and the plaintiffs' title to the money consisted in the fact that it was the balance of the sale-proceeds of immoveable property mortgaged to themselves after satisfying the prior mortgage. But the circumstance that the plaintiffs' title to the money arose in this way cannot in my opinion make the suit as regards the sale-proceeds a suit to enforce payment of money charged upon immoveable property, seeing that the lien on the mouzah had been discharged.

17. It does not appear to me necessary to discuss whether, before the appellants withdrew the money from deposit, the plaintiffs' claim to that money could have been enforced by separate suit or by application in the execution department. As the plaintiffs were parties to the appellants' suit, and their mortgage had already matured, it was open to them to have proved their mortgage and they would have been undoubtedly entitled on doing this to the balance of the sale-proceeds. Their mortgage lien, as I have pointed out, was discharged by the sale in execution of the decree on the prior mortgage, and they had no longer any subsisting interest in Mouzah Chuck, but only in the balance of 'the sale-proceeds. The learned pleader for the plaintiffs pointed out that, if Article 132 were held not to apply, a second mortgagee might be put to great hardship. For instance, if the mortgagor in this case had promised to repay the money, say, in 1900, the plaintiffs would not have been entitled to sue for the money withdrawn by the appellants in 1892 till (ho year 1900, more than six years after the withdrawal of the money and their suit could therefore never have been brought. It would however always be open to the second mortgagee to secure himself against the apprehended loss by redeeming the first mortgage and adding the amount to his own mortgage debt.

18. I am of opinion that Article 132 of the second schedule to the Limitation Act does not apply to the plaintiffs' suit to recover the sale-proceeds of Mouzah Chuck withdrawn by the appellants and that the article most favourable to the plaintiffs is No. 120, which provides a period of six years for a suit, for which no period of limitation is elsewhere provided. As more than six years have elapsed since the date of the withdrawal of the money by the appellants, I am of opinion that this portion of their claim is barred by limitation.

19. It was also argued that the appellants were trustees for the plaintiffs in respect of the sale-proceeds, and that in this view there is no period of limitation. In support of that contention reliance was placed on the dictum of the Privy Council in Raja Kishen Bait Ram v. Raja Mumtaz Ali (1879) I.L.R. 5 Calc. 198; L.R. 6 I.A. 145. That was a case of a sale by a mortgagee under a power of sale. He had exercised that power and the sale-proceeds were in his hands and remained in his hands after he had satisfied his own charge. In the case before us the sale of Mouzah Chuck was held by the Court after a suit to which the plaintiffs were parties. The sale-proceeds were deposited in Court, and while they were lying in Court it is impossible in my opinion to say that the appellants were in any way trustees for the plaintiffs, who were competent to claim and withdraw the money in satisfaction of their own mortgage. Nor in my opinion can the further act of* the appellants in withdrawing the money from Court in any way constitute the appellants trustees for the plaintiffs,

20. I am of opinion that the contention on behalf of the plaintiffs fails. I would therefore allow the present appeal and dismiss the plaintiffs' suit as regards the sale-proceeds of Mouzah Chuck.

21. On account of this difference of opinion, the appeal was referred to and was re-argued before Sale J.

22. Dr. Rashbehary Ghose (Babn Jogesh Chunder Dey with him) for the appellants. In so far as it is directed against the appellants this is a suit by a person for money, which he says has been wrongly paid to them. Section 295, Clause c, of the Civil Procedure Code, lays down that, when immoveable property is sold in execution of a decree for sale on a prior mortgage, the surplus, after defraying the expenses of the sale and discharging the interest and principal due on the mortgage in suit, is to be applied in discharging the interest and principal due on subsequent incumbrances; that is the ordinary law; the surplus therefore belongs to the subsequent incumbrances. In the mofussil in a first mortgagee's suit only an account is taken of what is due to the plaintiff and not of what is due to the subsequent mortgagee defendants. This is not a suit to enforce a charge on land; it is an action for recovery of money, which really belongs to the plaintiff. If there were no second mortgage the surplus would have been payable to the mortgagor--if it had been wrongly paid to another a suit by the mortgagor to recover it would be governed by the three years' rule of limitation or by Article 120. If then the owner himself would have been bound to sue within this period the second mortgagee cannot claim a longer period. It is not a suit to realise the security by sale or foreclosure; the cases relied on by Henderson J. are all based on Section 73 of the Transfer of Property Act, which says that the mortgagee has a charge on the surplus and not that the surplus belongs to him; he must therefore [enforce the charge in the usual way. But when property is sold by order of Court in a suit to which the second mortgagee is a party, he is not bound to bring an action; he may then and there apply to the Court for the money, which really belongs to him. When a mortgagee sells under his power and retains the surplus, an action by a puisne to recover the surplus from the prior mortgagee must be brought within six years in England; the action is not one to realise the security. In Venkata Viraragavayyangar v. Krishnasami (1883) I.L.R. 6 Mad. 344, 347, where land was acquired under the Land Acquisition Act a mortgagee's action to recover the money was held not to be one for a right to land and the suit* was only saved from limitation on the ground of fraud: according to the view taken by Henderson J., the mortgagee would have twelve years to recover the money. If the property was converted by the first mortgagee one day before the expiry of the period of the second mortgagee's suit and if a third party took away the money, according to this view he would have one day to sue; but according to the view, for which I contend, he would have three or six years from the date of conversion : this view therefore is more to his advantage. In England, where the uspal order in a mortgagee's suit is not sale but foreclosure, cases like the present are not common; but in America, where the usual order is for sale, 'such cases are common, and a suit like the present would be a suit at law and not in equity: that is, it would not be a suit for realization of a security. Jones, 1940 Pin grey, p. 1792. The analogy from English law, that, in cases where a first mortgagee has sold under his power, a puisne mortgagee's suit for the surplus sale-proceeds must be brought within six years, strongly supports my contention. Ashburner, p. 517.

23. Jogeslmr Bhagat v. Ghannsham Dans (1901) 5 C.W.N. 356, relied en by Henderson J., was based on Section 78 of the Transfer of Property Act, but surplus sale-proceeds standing to the credit of a puisne cannot be said to be money on which the puisne has a charge: it is his money. The second mortgage in this case includes property ether than that which was sold by the first mortgagee, and that has obscured the question; the present suit is a suit to realise the security as regards the other properties included in the second mortgage.

24. The mortgagee in the present case may claim interest on the money taken by me, but the interest would not be at the rats mentioned in his bond, as would be the case if the suit had been on account of his mortgage, but the rate would be in the discretion of the Court. Raja Kishendatt Ram v. Raja Mumtaz Ali Khan (1879) I.L.R. 5 Calc. 198 : L.R. 6 I.A. 145, 160. shows that a mortgagee selling under his power is a trustee-(constructive, not in the sense that there can be no limitation). in respect of the surplus. Padmanabh Bombshenvi v. Khemu Komar Naik (1893) I.L.R. 18 Bom. 684, 687 says that the surplus becomes payable to the second mortgagee--that is, he has a present right to the money These cases really support my contention.

25. Babu Nalini Ranjan Chatterjee (Baba Kshetra Mohan Sen with him) for the respondents. It is a suit to enforce payment of money charged on land; the fact that a portion of the mortgaged property has been converted into money does not change the character of the suit. The plaintiffs could not split up their mortgage; they could bring only one suit to enforce the security, which include properties other than that sold by the first mortgagee. There can be no doubt that the money claimed in the suit is charged on land; the appeliauts were' brought before the Court as defendants only for the surplus proceeds withdrawn by them The argument based on Section 295 of the Civil Procedure Code does not apply; assets are to be distributed under that section only when prior to realization more persons than one had applied; the plaintiffs could not participate in the sale-proceeds at that time as they had obtained no decree: their mortgage had not then even been proved. The surplus salsa-proceeds were merely a substitute for the mortgaged property. The money did not belong to us; we had to sue on and prove our mortgage; before that the money would not belong to as except in the sense that we had a charge on the money. The same rule of limitation which applies to a suit on a mortgage when the property was sold for arrears of revenue would apply to a suit on the mortgage, when the property has been sold by a prior mortgagee; the period of limitation would not be shortened merely because the mortgaged property has been converted into money. Jogeshur Bhagat v. Ghunasham Dass (1901) 5 C.W.N. 356. It is said that we could at once have obtained the money; but we could not have got the money, unless we obtained a decree on our mortgage or unless our right had been declared in the first mortgagee's suit.

26. It was held prior to the passing of the Transfer of Property Act that when mortgaged property is converted into cash the charge is transferred to the cash--see Jogeshur Bhagat v. Ghanasham Dass (1901) 5 C.W.N. 356. The money here is a substitute for the property Macpherson on Mortgages, pp. 291-292; Ghose on Mortgage , pp. 332, 333, 548, 864; and the security would attach to the money; Ram Kant Chowdhry v. Brindabun Chunder Doss (1871) 16 W.R. 246, Heera Lall Chowdhry v. Janokeenalh Mookerjee (1871) 16 W.R. 222 Kristodass Kundoo v. Ram Kant Roy Chowdhry (1880) I.L.R. 6 Calc. 142; also Gosto Behary Pyne v. Shil Nath Dutt (1892) I.L.R. 20 Calc. 241, which was a case of conversion by sale under Patni Regulation. On the question of limitation, see Ghose on Mortgage, p. 989. It makes no difference whether Section 73 of the Transfer of Property Act applies or not; if Article 132 applies, when conversion is by sale for arrears of revenue, it applies to all cases of conversion, provided only that the charge attaches to the surplus sale-proceeds. The argument that the mortgagee cannot have a longer period than the mortgagor is not of weight. As regards the American authorities, the law in this country is that, if mortgaged property is converted into land the mortgagee's-lien is transferred to the money; and a portion of the law is codified in the Transfer of Property Act. Padmanabh Bombshenvi v. Khemu Komar Naik (1893) I.L.R.18 Bom. 684, 637.

27. The argument of the appellant is based on the assumption that the money was ours, but it was not ours except in the sense-that we had a charge; but the charge had to be enforced by a suit on our mortgage, and that is our present suit.

28. Babu Jogesh Chunder Bey in reply. The case of Ram Kanta Chowdhry v. Brindabun Chandra Dass (1871) 16 W.R. 246 was a case between mortgagee and mortgagor, and the law laid down in Heera Lall Chowdhry v. Janokeenath Mookerjee (1871) 16 W.R. 222 has now been codified in Section 73 of the Transfer of Property Act. In the present case the second mortgagees were party to the first mortgagee's suit and the decree in that suit was made in their presence.

Sale, J.

29. The question of this appeal is whether the suit, so far as it relates to a claim to recover from the appellants the sum of Rs. 12,197-8-3 with interest, is a suit to enforce payment of money charged upon immoveable property within the meaning of Article 132 of schedule II of the Limitation Act.

30. The sum in question represented the surplus sale-proceeds of Mouzah. Chuck, which was a property which had been sold by the appellants under a mortgage decree obtained by them in a suit instituted by them as first mortgagees of that property and to which suit plaintiffs were made party defendants, they being second mortgagees of the same property.

31. The plaintiffs took no steps in that suit or otherwise to enforce their claim in respect of these surplus sale-proceeds in satisfaction of the second mortgage, and subsequently the appellants, being third mortgagees of the same property, instituted another and separate suit on this third mortgage to which suit the plaintiffs were not made parties, and obtaining a decree therein drew out of Court the whole of the surplus sale-proceeds in satisfaction pro tanto of their third mortgage.

32. The present suit has been instituted by the plaintiffs on their mortgage bond to enforce their claim as mortgagees by sale of the properties mortgaged to them, excepting only Mouzah Chuck, which, as already stated, had been sold by the appellants under the decree obtained by them on their prior mortgage.

33. To this suit to enforce their mortgage the plaintiffs have joined as party defendants the representatives of the deceased mortgagor, and they have included in this suit a claim against the appellants in respect of the sale-proceeds of Mouzah Chuok, which it is charged was drawn out of Court and appropriated by the appellants with notice of the plaintiffs' prior rights thereto. The plaintiffs' claim is that this sum, representing the surplus sale-proceeds of Mouzah Chuck, which was one of the properties included in their mortgage, represents, having regard to the facts mentioned, a part of their mortgage security, and that they are entitled to follow it into the hands of the appellants and they have accordingly joined the appellants as party defendants to the suit.

34. The allegations in the plaint relative to Mouzah Chuck are to the effect that the mouzah having been already sold by the appellants under their prior mortgage the plaintiffs cannot claim to have the mouzah resold, but they say and claim that the surplus sale-proceeds of Mouzah Chuck stand in law and equity in the place of the said property, and that the surplus sale-proceeds, so far as the appellants are concerned, must be treated as if that sum were still in Court subject to the plaintiffs' claim thereto, the appellants having drawn that sum with notice of the plaintiffs' claim. Accordingly by prayer 4 of their plaint the plaintiffs pray that it may be declared that the surplus proceeds of the sale of the mouzah stand in the place of the property mortgaged, and that the appellants may be ordered to refund the same with interest.

35. The learned Subordinate Judge treated the surplus sale-proceeds in the hands of the appellants as a part of the mortgage security to which the plaintiffs were entitled under their mortgage and accordingly he decreed that the plaintiffs were to sell the other properties mortgaged to them and apply the sale-proceeds in satisfaction of their mortgage debt, and then, if there was a balance still due to them, he declared their right to follow the surplus sale-proceeds in the hands of the appellants and apply the same in satisfaction pro tanto of their mortgage debt.

36. The question then is whether this decree is right in form; because, if so, it follows that the plaintiffs' suit may rightly be regarded as one to enforce a claim for money charged upon immoveable property. The money claimed to be recovered in the suit was money charged upon immoveable property. Mouzah Chuck, which formed a part of the mortgage security, having been sold, the surplus sale-proceeds were in my opinion rightly treated as part of the mortgage security, which the plaintiffs were entitled to follow in satisfaction of their maortgage debt. If the money had remained in Court, it cannot be doubted that it would have been rightly dealt with as a part of the plaintiffs' mortgage security, applicable in satisfaction of his mortgage debt. That the appellants appropriated this money, with notice of plaintiffs' right to regard it as part of their mortgage security, cannot surely affect either the plaintiffs' right to follow the money or alter the nature of the suit to which the plaintiffs must have recourse to enforce that right.

37. When property is sold under a decree obtained by the first-mortgagee the right of the puisne incumbrancers to follow the surplus sale-proceeds after the decree-holder's claim has been satisfied is an equitable right. The property so sold doubtless passes into the hands of the purchaser discharged from all encumbrances, but equity regards the rights of the puisne incum-brancers not as extinguished or discharged by the sale, but transferred thereby to the surplus sale-proceeds. This principle is recognised and constantly acted upon in suits instituted on the Original side of this Court by a first mortgagee on his mortgage, to which suit puisne mortgagees are made parties' In order to avoid a multiplicity of mortgage suits a decree for account and sale is made on the plaintiffs' mortgage, and the defendants, if they appear and prove their mortgages, are entitled to ask for a decree for an account on each of their mortgages and a declaration of their right to participate in the surplus sale-proceeds in order of priority. An account is then taken of what is due on each mortgage, the sums so found due to each mortgagee are included in one report, and the sale-proceeds are subsequently divided between the plaintiff and the puisne mortgagees in accordance with their claims as found by the report.

38. The Subordinate Judge has made a decree in favour of the plaintiffs in this suit in the terms which would have been adopted by this Court on its Original side, if the appellants' first suit had been a suit on the Original side of this Court, and it the plaintiffs had appeared in that suit and claimed to prove their mortgage.

39. It is contended however for the appellants that, inasmuch as the money claimed is money which is no longer in Court, but which has been appropriated by them under their decree in the second suit, the present plaintiffs can only claim to recover it as money had and received. The argument in my opinion overlooks the fact that the plaintiffs can only establish their right to this money not as owners thereof, but as part of the mortgage security to which they are entitled under their mortgage. In a suit framed to establish this right it would be incumbent on the plaintiffs to prove, as they have proved in the present suit, that their right under their mortgage is a subsisting right, that their mortgage debt or a sufficient part thereof still remains unsatisfied, that the money sought to be followed is a part of the sale-proceeds of a property mortgaged to them under their mortgage, that this property was sold under the decree of a prior mortgagee, that the surplus sale-proceeds were paid into Court after the claim of the first mortgagee had been satisfied, that in equity the plaintiffs were entitled to have such sale proceeds applied in satisfaction of their mortgage debt, and that the defendants had appropriated this money with notice of the plaintiffs' equitable right. The plaintiffs could only succeed in such a suit so far and to the extent that they could show that they had a mortgage debt due to them, which still remained unsatisfied, and that the money which they sought to follow was money which they were entitled under the mortgage to regard as part of their mortgage security.

40. There would be great force in the appellants' contention, if the plaintiffs had appeared in the first suit filed by the appellants and had been permitted to prove their mortgage and an order had been made declaring them entitled to the sum which is now in dispute in this case. If under these circumstances the money had been withdrawn from Court by the appellants it might have been reasonably urged that the plaintiffs' right to sue was in respect of money had and received.

41. The present suit, so far as regards the claim against the appellants is concerned, is a suit to establish the plaintiffs' right as mortgagees. It is therefore, in my opinion, a suit to enforce a claim for money charged upon immoveable property and falls within Article 132, Schedule 2, of the Limitation Act.

42. The cases, which have been cited and which were decided under Section 73 of the Transfer of Property Act, in my opinion support the conclusion at which I have arrived. That section declares a charge to exist on surplus sale-proceeds in favour of incumbrarncers, when property has been sold to satisfy revenue claims. But the right, which is declared by statute in this instance, equity, recognizes in favour of all subsequent incumbrancers in respect of the surplus sale-proceeds of properties sold to satisfy the claims of a first mortgagee. The principles therefore laid down by these cases for the purpose of following surplus sale-proceeds in the hands of third parties should govern, in my opinion, the present case.

43. I agree with my brother Henderson in the decree which he proposes to make in this appeal.


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