1. This is an appeal by the plaintiff in a suit to enforce a mortgage security executed in their favour by the Mandal defendants on the 20th June, 1914. The Saha defendants have been brought before the Court, as a second mortgage was executed in their favour by the mortgagors on the 17th September, 1914. The claim was decreed in part by the Subordinate Judge. The plaintiffs, the first mortgagees, thereupon preferred this appeal, and the puisne mortgagees, when they entered appearance, filed a memorandum of cross-objection.
2. During the pendency of this appeal, on the 25th July, 1922, a petition of compromise was filed which purported to settle the differences between the appellants (the first mortgagees) and the respondents (the mortgagors). The second mortgagees respondents were not parties to this settlement. The effect of the compromise is to increase the amount payable under the decree to the first mortgagees. The compromise is thus detrimental to the interest of the second mortgagees, and the question consequently arises, whether a decree should be passed in accordance with the compromise, notwithstanding the opposition of the second mortgagees. The answer depends upon the true construction of Rule 3 of Order 23 of the Code of 1908, which provides as follows:
Where it is proved to the satisfaction of the Court that a suit has been adjusted wholly or in part by any lawful agreement or compromise, the Court shall order such agreement or compromise to be recorded and shall pass a decree in accordance therewith so far as it relates to the suit.
3. It is incumbent on the Court to pass a decree in accordance with the agreement or compromise, only if the agreement or compromise is lawful, in other words, if it is enforceable in law. One test may be applied to determine whether the agreement or compromise is lawful; were the parties competent to enter into the agreement or compromise in order to achieve the purpose they had in view? The decree of the Subordinate Judge directs the sale of the properties comprised in the first mortgage. As the second mortgagees are parties to the suit, the effect of such a sale would be to vest the properties in the purchaser, free of the interests of both the mortgagees. The sale proceeds would then have to be applied in satisfaction, first, of the dues of the first mortgagees, next, of the dues of the second mortgagees. Consequently, if the amount recoverable by the first mortgagees is increased, the balance available for the satisfaction of the dues of the second mortgagees would be diminished. The effect of the compromise is to alter the decree a decree wherein the mortgagors as well as the first and second mortgagees are interested. Such a decree plainly cannot be varied by consent of two out of the three persons interested. It is an elementary principle that consent decree cannot operate to a larger extent than the contract itself. As was observed by Parke J., in Wentworth v. Bullen (1829) 9 B. & C. 840, the contract of the parties is not the less a contract and subject to the incidents of a contract, because there is superadded the command of the Judge. The agreement between the first mortgagees and the mortgagors that the decree should be varied does not bind the second mortgagees and, a decree based thereon, cannot operate against them. If we accept the contention of the appellants, there will thus be two distinct and possibly contradictory decrees in the suit, for sale of the mortgaged properties and distribution of the sale proceeds, one, by consent, between the mortgagors and first mortgagees, another, on contest, between the mortgagors and the second mortgagees.
4. We have been pressed to hold, however, that it is no concern of the second mortgagees how the matters in difference between the mortgagors and the first mortgagees are made up. This argument is manifestly fallacious. The first mortgagees seek to cut off the equity of redemption of their own mortgage, That equity of redemption is now vested not merely in the mortgagor but also in the second mortgagees, and can be affected, either by an adjudication of the Court or by an agreement of all the parties interested. A useful analogy is furnished by the decisions in Nityamoni v. Gokul (1910) 13 C.L.J. 16; Gobind v. Bhagbat (1914) 27 I.C. 242, and Taraparsanna v. Kalikamohan : AIR1924Cal80 , where a similar question arose in respect of the subject matter of a partition suit. We hold accordingly that the compromise is not a lawful agreement or compromise within the meaning of Rule 3 of Order 23 of the Code and we must decline to make a decree in accordance with it.