1. This was a suit brought by the plaintiff-respondent, who held a mortgage of a patni taluk, which has subsequently been sold for arrears of rent and free of the mortgage, to recover from the principal defendants the surplus proceeds of the patni sale which they have taken in satisfaction of decrees held by them against the defaulting patnidars.
2. The defence of the defendants Nos. 1 and 2, who are the appellants before us, raised (amongst other points not necessary now to consider) this : namely, that as there was left sufficient money in deposit in the Collectorate over and above the amount taken by them, they are not liable for the plaintiff's claim.
3. The Courts below have disallowed this contention of the defendants Nos. 1 and 2, and the only point argued in this appeal on their behalf is, whether the defendants are liable for any portion of the plaintiff's claim when the money taken by them out of the surplus sale proceeds still left enough in deposit in the Collectorate to enable the plaintiff to realize the mortgage debt from it.
4. The provision of the law bearing on the subject is to be found in Section 73 of the Transfer of Property Act (IV of 1882), which enacts that 'when 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 thereout of the said arrears, for the amount remaining due on the mortgage, unless the sale has been occasioned by some default on his part.' It is not denied that a literal construction of this section would give the mortgagee a claim on the whole and on every part of the surplus proceeds; but it is contended that the section ought to receive a more liberal construction, and that it ought to be construed so as to allow unsecured creditors of the mortgagor to realize their claims out of the surplus sale proceeds so long as they do not reduce the amount below the mortgage debt. And as in the present case the money taken out by the appellants did not reduce the amount in deposit in the Collectorate below that limit, it is argued that they ought to be exonerated from all liability.
5. We do not consider this contention to be sound. For though, if the amount that had been left in deposit in the Collectorate after the appellants had drawn out their money had still remained there, the mortgagee might have satisfied his claim without bringing any suit against them, still, as there is nothing in the law to prevent other creditors of the mortgagor from drawing the money in deposit in satisfaction of their claims as has been done in this case it must be held that any one who takes any portion of such money does so under the liability of being sued in case the mortgagee finds any difficulty in getting himself paid. To hold that unsecured creditors taking portions of the sale proceeds are exempt from liability to the mortgagee so long as they leave enough in the hands of the Collector would evidently have the effect of diminishing the mortgagee's security. For the persons who may take out money from the amount in deposit subsequently may not be sufficiently solvent, and the mortgagee may not be able to realize his money from them with the same facility that he might have in his realization if he got a decree against all the persons who took any portion of the money. We think that the proper view to take of the matter is to regard the surplus sale proceeds as the shape into which the mortgage security is converted, and as before such conversion the security could not be split up into parts, and the mortgagee was entitled to realize his money out of the whole of it, its conversion by sale into money ought not to affect his rights in this respect. The point taken before us therefore fails, and the second appeal must be dismissed with costs.