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Bengal Coal Co. Ltd. Vs. Sita Ram Chatterjee - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtKolkata
Decided On
AppellantBengal Coal Co. Ltd.
RespondentSita Ram Chatterjee
Cases ReferredPran Ballav Saha v. Bhagaban Chandra
Excerpt:
- .....the father of defendant 1, and father-in-law of defendant 2. he executed the mortgage in favour of pran krishna chatterjee who was defendant 14 to the suit. the principal amount secured by the mortgage was rs. 6,700 and the interest was to run at the rate of 12 per cent per annum. the properties which were hypothecated by the deed of mortgage consisted of 19 items which are mentioned in the schedules to the plaint. at the time of the execution of the bond pran krishna happened to be a member of a joint hindu family, governed by dayabhaga school of hindu law, consisting of himself, his brothers and his nephews. he had accordingly one sixth share, according to the defence case, in the mortgage money. on 1st september 1919 there was an agreement between him and his five cosharers in which.....
Judgment:

D.N. Mitter, J.

1. This is an appeal by defendant 11, Bengal Coal Co. Ltd. from a preliminary decree in a suit to enforce a mortgage security. The suit was commenced by the plaintiff to recover a sum of Rs. 16,900 alleged to be due on mortgage bond executed on 24th January 1915, by one Ram Saday Nayek, who is the father of defendant 1, and father-in-law of defendant 2. He executed the mortgage in favour of Pran Krishna Chatterjee who was defendant 14 to the suit. The principal amount secured by the mortgage was Rs. 6,700 and the interest was to run at the rate of 12 per cent per annum. The properties which were hypothecated by the deed of mortgage consisted of 19 items which are mentioned in the schedules to the plaint. At the time of the execution of the bond Pran Krishna happened to be a member of a joint Hindu family, governed by Dayabhaga School of Hindu law, consisting of himself, his brothers and his nephews. He had accordingly one sixth share, according to the defence case, in the mortgage money. On 1st September 1919 there was an agreement between him and his five cosharers in which it was recited that the parties had separated in June 1919. It was also recited in the said agreement that all the properties acquired and the monies lent were ejmali properties and whatever would be acquired in future would be separate properties of each individual party who would acquire them. It is said that Pran Krishna had no more than one sixth of the mortgage money after this agreement. He was no longer the karta and it is said that he had nothing more than his individual share. On 1st October 1925, Pran Krishna assigned his rights as mortgagee to the plaintiff Sita Ram Chatterjee, who is a cousin of Pran Krishna Chatterjee. The total sum due on that date was Rs. 15,075 and in that document it was recited that Rs. 8,375 of that amount were kept in deposit to carry on litigation, and the balance of Rs. 6,700 was fixed as consideration of the mortgage bond.

2. It is said that the plaintiff took the conveyance in the benami of his brother defendant 13. It is now necessary to indicate the position of different defendants with reference to this mortgage. Defendants Nos. 1 and 2 are heirs of the original mortgagor. Defendants 3 to 11 are purchasers of the equity of redemption in the several mortgaged properties. It may be noted here that defendant 10, one of the purchasers of the equity or redemption, is the wife of the plaintiff. Defendant 12 is a lessee under defendant 1, of some portion of the equity of redemption. Defendant 13 is the brother of the plaintiff. Defendant 14 is Pran Krishna Chatterjee, the original mortgagee. Lastly defendants 15 to 19 are the cosharers of Pran Krishna Chatterjee. The plaintiff alleges that no portion of the mortgage money was paid and prays for an ordinary mortgage decree for sale. The defences of defendant 11 who is the appellant are first that if the assignment were legal and valid it could not give the plaintiff more than one-sixth share of his rights as mortgagee in the mortgage security as this was the share which Pran Krishna had in the mortgage bond when the assignment took place of the mortgage money. It is said that at the time of the assignment he lost his representative character as karta. With regard to this defence the Subordinate Judge has found that Pran Krishna had only one sixth share in the mortgage money and the finding on this point is in favour of the defendants. He has however held that the defendants are precluded from saying that Pran Krishna had no larger interest or interest in the whole of the mortgage money but that he was only entitled to the one-sixth share of the mortgage money. The Subordinate Judge has also found that the other brothers of Pran Krishna who are parties to the present proceeding do not say that they have got any interest in the mortgage money.

3. The Subordinate Judge also finds that the co-sharers of Pran Krishna are estopped from contending that Pran Krishna alone was not entitled to the mortgage money or that the assignment was not in respect of the whole of the mortgagee's right by reason of Section 41, T.P. Act. The second defence raised is that the assignment was not valid as there was no consideration for it and that it was really a collusive document executed with the sole intention of cheating the creditors or defeating the rights of the creditors. The third defence' is that defendant 10, who is a purchaser of a portion of the equity of redemption is the wife of the plaintiff and is really his benamidar in the matter of the purchase and it is contended that the mortgagee himself being a purchaser of a portion of the equity of redemption, the integrity of the mortgage has been broken and that the purchasers of this portion are entitled to redeem on payment of a proportionate share of the mortgage money. The finding of the Subordinate Judge is that benami character of the transaction has not been established. The fourth defence taken by defendant 11 is that the company is entitled to rely on the doctrine of marshalling having regard to the provisions of Section 56, T.P. Act as it stood before its amendment by the Act of 1929. The Subordinate Judge has come to the conclusion that right of marshalling is not available to defendant 11 as it is not shown that he has purchased the equity of redemption without notice. The fifth defence is that one Dukharam Banerjee was a necessary party to the suit, that he was a purchaser of a portion of the equity of redemption of property No. 12 of the Schedule to the plaint, that the plaintiff had full knowledge of his purchase, and that as the plaintiff had not impleaded him in the suit, there should be a proportionate abatement and apportionment of the mortgage money. The Subordinate Judge has not acceded to this contention but has granted decree to the effect that the mortgaged properties other than the eight annas share of property No. 12 which belongs to Dukharam will be applied towards the satisfaction of the decree. As has already been stated, the Subordinate Judge has granted a preliminary decree on the lines indicated in the judgment of the Subordinate Judge. See p. 112, of 1st part of the paper book.

4. It is against this decision that the present appeal has been taken by defendant 11 and all the defences to which reference has already been made have been repeated by Dr. Mukerji, who appears for the appellant (defendant 11). He rests his grounds of appeal on the five defences which have already been set forth above. It is necessary to consider therefore the soundness of the contentions raised by way of defence and raised in the grounds taken before us. With regard to the first ground taken that if the assignment were legal and valid, the plaintiff could not get more than 1/6th share of the mortgage money, as this was the share which Pran Krishna had when the mortgage transaction and assignment took place. It is not necessary to deal with questions on which the Subordinate Judge has founded his decision with regard to this part of the defence as to whether it is open to the purchasers of the equity of redemption to contend that the assignment is not in respect of the entire rights of the mortgagee but it is only in respect of the portion of the rights of the mortgagee as it existed on the date of the assignment, for it is clear that in the present proceedings the other co-sharers of Pran Krishna were parties. They would be estopped by reason of the principles embodied in Section 41, T.P. Act, from contending that Pran Krishna has only one-sixth share in the mortgage money seeing that they have by their conduct represented to the outside world that Pran Krishna was entitled to deal with the entire rights of the mortgagee and they were fully bound by this representation to the outside world.

5. The Subordinate Judge has rightly applied the principle that estoppel would surely be available against the other co-sharers of Pran Krishna. They were all parties to the present suit and defendant 11 is not at all prejudiced if a decree is passed on the footing that Pran Krishna was entitled to deal with 16 annas of the rights in the mortgage money for the decree as against defendant 11 is being passed in the presence of the co-sharers of Pran Krishna, that is, defendants 15 to 19, who would be bound by this decree. There can be no question that in so far as the original mortgage transaction is concerned, as between the mortgagor and the mortgagee the principle of estoppel comes into play and it has been conceded by Dr. Mukherjee that it is not open to the mortgagor to dispute the title of the mortgagee and to say that although Pran Krishna at the inception purported to deal with 16 annas of the mortgage money as his own, he was in reality not the owner or possessor of the entire mortgage money. That is the position which is established on the authorities. Reference might be made in this connexion to Dr. Bigelow's well-known treatise on Estoppel (6th Edn.) at p. 588. The same rule applies also to the mortgage transaction in this case and the whole law has been summarised in Sir Bash Behari Ghose's Treatise on the Law of Mortgage (5th Edn.) at p. 322: 'As a rule', says the learned author,

any person who comes into possession of the mortgaged property under the mortgagor is treated 'as being in privity with him and is estopped from denying the title of the mortgagee.

6. It has therefore been rightly conceded that as between the mortgagor and the mortgagee the principle of estoppel applies. But as we have said we are relieved from deciding the other question, namely, as to whether the purchasers of the equity of redemption or the mortgagors for the matter of that, can question the rights of the assignee of the mortgagee's right, and contend that the mortgagee is not entitled to the entire mortgage money, seeing that the co-sharers of Pran Krishna were all parties to the present proceeding and they did not question the rights of Pran Krishna, defendant 14, to the entire mortgage money.

7. We are therefore of opinion, although for a somewhat different reason that the learned Subordinate Judge has arrived at the right conclusion in negativing the first defence. The next ground which was indicated by the second defence is that there is no consideration for the assignment. (After examining the evidence, his Lordship held that the assignment was a valid one and was for consideration. The judgment then proceeded.) The third ground taken is that defendant 10 who is the wife of the plaintiff is really a benamidar for him. We have been referred to the evidence which establishes that the wife purchased this property out of funds which belonged to her. It is said that she collected all this sum of Rs. 1,000 which was the consideration for the kobala out of the presents which were given to her grandsons at the time of Anna Prashan ceremony. Then one of the plaintiff's sons has also deposed to the fact that the consideration for kobala which was executed in her favour by defendant 1, proceeded from his mother's funds. The deed stands in her name and the burden lay on those who assert that she is the ostensible owner and not the real owner to prove that she is in fact only an ostensible owner. Such evidence, it has been rightly pointed out, is absolutely lacking in this case. The only witness who has been examined on the side of the defendants in this behalf says at one time that the money might have proceeded from the funds of her husband the plaintiff and at another time that the money might have come from the presents at the Anna Prashan ceremony. In this view we are in agreement with the Subordinate Judge that the benami character of the transaction has not been established. In this view, the other question as to whether there was a splitting up of the mortgage does not arise. The fourth point which has been raised is that the Subordinate Judge has gone wrong in disallowing the marshalling which has been claimed by defendant 11 under S. '56, T.P. Act. The enactment which will govern the present case is the Transfer of Property Act as it stood before the amendment of 1929. Section 56 of the Act before amendment of 1929 runs as follows:

Where two properties are subject to a common charge, and one of the properties is sold, the buyer is, as against the sellor, in the absence of a contract in the contrary, entitled to have the charge satisfied out of the other property, so far as each property will extend.

8. This section in terms does not apply to the facts of the present case seeing that more than two properties are subject to a common charge in the present case. The scope of the section has been widened by the amendment of 1929, which provides for cases where there are more than two properties. This section, therefore, is out of way. But it is said that as the statute does not make provisions for cases when there are more than two properties subject to a common charge, they must be governed by the principles which regulate cases of this kind in the English Courts of Chancery. But it has been held in cases which are outside Section 56 that in order to claim the benefit of the doctrine of marshalling, it must be shown that the purchaser of one of several properties comprised in the mortgage must be bona fide purchasers of value without notice. We might refer to Rodh Mal v. Ram Harak (1885) 7 All 711, where Mahomood, J., observes that the equities which apply to a puisne incumbrancer in the marshalling of securities apply also to a bona fide purchaser for value without notice of a portion of property, the whole of which was subject to a prior incumbrance. It is true that in the deed of transfer in favour of defendant 11 there is a representation that there are no other incumbrances of properties, but at the same time there is the evidence in this case that defendant 11 made no enquiry whatever as to the existence of encumbrance of property. He had notice within the meaning of the Transfer of Property Act as it existed before the amendment. We are not unmindful of the decision of their Lordships of the Judicial Committee of the Privy Council in Tilakdhari Lal v. Khedan Lal, 1921 PC 112 that mere registration is not notice. Here there was no enquiry and notice and the mortgage can be inferred from the evidence which amounts to gross negligence in not making any enquiry about existence of previous encumbrance. We are of opinion that defendant 11 is not a bona fide purchaser without notice Therefore he is not entitled to take the benefit of the doctrine of marshalling as understood by the equity Courts. This disposes of the fourth ground.

9. The fifth ground taken is that Dukharam Banerjee is a necessary party and there should be proportionate abatement of the mortgage money and the mortgage decree should be reduced by a sum of Rs. 299. This is a ground which seems to be well founded and must prevail. The plaintiff had full notice of the fact that Dukharam was a purchaser of a portion of the equity of redemption and not withstanding this he did not make Dukharam a party to the suit. On 28th February 1929 it was stated in one of the written statements that Dukharam should be made a party. On the 29th March of the same year the plaintiff filed his petition for addition of other parties but did not implead Dukharam. In these circumstances we think that the decree of the Subordinate Judge must be varied by reducing the principal amount by Rs. 299. It is next pointed out that the decree is bad in this that it allows interest at one per cent per month on Rs. 6,700 and at six per cent per annum on the rest, namely Rs. 13,928-10-0 annas. This portion of the decree has been taken exception to and very rightly by the advocate for the appellant. The decretal portion which is printed at p. 114 of the paper book runs thus:

It is hereby declared that the amount due to the plaintiff on account of principal, interest, and costs calculated up to 15th April 1930 is Rs. 20,628-10-0, and out of Rs. 20,628-10-0 the principal sum of Rs. 6,700 shall carry interest at one per cent per month and the balance Rs. 13,928-10-0 shall carry interest at the rate, of six per cent per annum until realization.

10. This decree is wrong. The proper form of a decree should be as follows: It is hereby declared that the amount due to the plaintiff on account of principal is Rs. 6,700 less Rs. 299. The plaintiff is entitled to interest on Rs. 640 at the rate of one per cent per month up to the period of grace which we fix at three months from now and after that the principal with interest shall carry an interest at the rate of six per cent per annum until realization. If the sum of Rs. 640 plus interest at one per cent per month be not paid within three months from this date the mortgaged properties will be sold. It is a matter which has been agreed to between the plaintiff and defendant 11 that as it is an option with the plaintiff when the occasion arises for the sale of mortgaged properties to bring the mortgaged properties to sale in any order he likes, the sale of property No. 18 the equity of redemption in which has been purchased by defendant 11 be the last, that is, after selling the other properties covered by the mortgage, this property No. 18, will be sold. We simply record here our judgment in accordance with agreement which has been reached between the plaintiff and defendant 11.

11. Mr. Bankim Chandra Mukherjee who has appeared for defendants 4, 9 and 10 has raised some grounds by way of cross-objection. A preliminary objection has been taken by Mr. Bose that he is not entitled to urge the cross-objection against co-respondents and reliance has been placed on the decision in Co-operative Hindusthan Bank Ltd. v. Surendra Nath De, 1932 Cal 524. It is not necessary to decide on this preliminary objection seeing that the cross-objection fails on merits. The objection is to the effect that as the mortgagee has relinquished his claim against Dukharam in Court the purchaser of the other portion is entitled to redeem piece meal, i.e., by paying proportionate share of the mortgage money. In support of this contention reference has been made to a recent decision of this Court in Pran Ballav Saha v. Bhagaban Chandra, 1934 Gal 775 and I was a party to that decision. That case, however, rested on a very different set of facts. The mortgagee had released a portion of the mortgaged property without any notice of right of a third party who had purchased a portion of the equity of redemption. But that is not so in the present case. Therefore we think that there is no substance in the cross-objection. The cross-objection is accordingly dismissed. The result is that the decree of the Subordinate Judge is varied on the lines which we have already indicated. Subject to that variation the decree of the Subordinate Judge will stand affirmed. As the plaintiff-respondent has substantially succeeded, the plaintiff-respondent is entitled to costs in this appeal. No order is made as to costs in the cross-objection.

Patterson, J.

12. I agree.


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