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Sarju Kumar Mukerji vs B. Dwarka Prasad And Anr.

High Court Of Judicature at Allahabad|31 January, 1929


JUDGMENT Mukerji, J.
1. This appeal arises out of a suit instituted by the respondent B. Dwarka Prasad against two defendants, the second of whom, Rai Bahadur Dr. Sarju Kumar Mukerji is the appellant before us. The suit was based on a mortgage bond dated 20th February 1918 executed by defendant 1 Inayat Husain for a sum of Rs. 2,300, principal. The appellant was made a party expressly on the ground of being a subsequent transferee and his status as a prior mortgagee was denied, in the plaint. The appellant obtained a mortgage by conditional sale in his favour from Inayat Husain and others on 18th December 1920 in respect of a large number of properties including a share (now principally in dispute) in the village Palohi.
2. There were five other mortgages over some or other of the properties mortgaged to the appellant. These mortgages are given in some detail in the judgment of the Subordinate Judge of Allahabad dated 18th February 1925, and printed at p. 9 of the record. The appellant, having satisfied the decree obtained on the 3rd mortgage by one Mahtab Kuar, succeeded to her rights which accrued to Mahtab Kuar under her deed dated 21st August 1900. Mahtab Kuar had before she brought her suit, paid off the first mortgage dated 29th August 1895.
3. The appellant, Dr. Mukerji, brought the suit No. 161 of 1924 in the Court of the Subordinate Judge of Allahabad for foreclosure, on foot of his mortgage. It is the judgment in his case that has been mentioned above. To this suit B. Dwarka Prasad was party, as defendant 21. He claimed priority in respect of his mortgage of 1918. As against Dwarka Prasad Dr. Mukerji claimed priority because he had paid off (by payment of the decree held by Mahtab Kuar) the mortgage of 1895. In view of these conflicting claims the Subordinate Judge made a decree, the operative portion of which will be found in the judgment at pp. 13 and 14. In para. 5 at p. 14. he gave the then defendant 21, Dwarka Prasad, an opportunity to redeem two earlier mortgages namely of 1895 and 1896 and fixed a date for the purpose. The Judge, further, said that if Dwarka Prasad failed to pay off the earlier mortgages, he should be debarred from all rights to redeem those mortgages and the plaintiff's right to fore-close his mortgage would come into play. It was, however, aided that the right of foreclosure would not affect the mortgage of Dwarka Prasad bearing the date 1918 and that mortgage would remain enforcible later on, but would be subject "to the shields of the mortgages of 1895 and 1896." In this case we are not concerned with the mortgage of 1896. The mortgagee is not a party.
4. The share in Palohi is the bone of contention between the parties in this case and it was mortgaged in the mortgage of 1895 and is in mortgage with Dr. Mukerji.
5. The respondent B. Dwarka Prasad says that he would sell the properties mortgaged to him, including Palohi, but in the case of Palohi, he would sell it subject to the prior charge held by Dr. Mukerji, under the mortgage of 1895. On behalf of Dr. Mukerji it is contended that the respondent cannot sell the property subject to his (the appellant's) prior charge, but must pay him (the appellant) the full amount of the money due on the mortgage of 1895 before the share in Palohi is sold. The Court below has held that Palohi could be sold subject to the charge of 1895. The learned Subordinate Judge made a proposal to the defendant-appellant that Palohi might be sold free from encumbrance, that out of the sale proceeds, the entire amount of mortgage money that may be due under the mortgage of 1895 may be paid off and the balance of the sale proceeds may be given to B. Dwarka Prasad as the subsequent mortgagee. To this suggestion the appellant did not agree.
6. We have now to see whether the appellant can insist on being paid the full amount of the mortgage of 1895 before the property (Palohi) is sold on foot of the mortgage of 1918.
7. Nobody denies that the appellant is a prior mortgagee of Palohi under the mortgage of 1895. Under Order 34, Rule 1 Civil P.C., a subsequent mortgagee may bring the mortgaged property to sale without making the prior mortgagee a party to the suit. The property in such a case would be sold subject to the prior mortgage. It is clear, therefore, that under the statute, the respondent Dwarka Prasad has an absolute right to sell the property, Palohi, without at all paying the appellant. There can be no doubt that before the passing of the Civil Procedure Code of 1908, under the Transfer of Property Act, Section 85, it had been ruled by this Court that a property could not be sold subject to a mortgage. Under the ruling of this Court, a property was always to be sold free from incumbrances. That rule of law no longer prevails.
8. Sir Tej Bahadur Sapru, on behalf of the appellant contended, on foot of some authorities, to be presently mentioned, that his right to subrogation carried with it a right to be paid in cash. His argument was that if the property Palohi was going to be sold subject to the encumbrance of 1895, it would mean that Dr. Mukerji would have to institute a suit on foot of the mortgage of 1895 and it might be the case that such a suit would become time barred when it is instituted.
9. In the case of Mamraj v. Ramji Lal [1910] 7 A.L.J. 15 relied on by the appellant's counsel it was found that the defendant, the successor-in-title of the mortgagor, had discharged an earlier mortgage. It was held that it must be taken that the purchaser had intended to keep the first mortgage alive for his own benefit. Having said so, the learned. Judges said:
On the strength of these authorities, the appellant Mamraj is entitled to be paid by the plaintiffs the sum of Rs. 745, paid by him in discharge of the prior mortgage in favour of Umrao Singh before they can bring to sale the property mortgaged to them under their own mortgage.
10. It will be noticed that this decision was given on 25th May 1909, just within five months of the coming into force of the new Civil Procedure Code of 1908. In the case of substantive law, the old law would prevail and would have to be applied, viz., the law that was in force at the date when the respective rights of the parties arose. This explains why the learned Judge ordered the payment of the prior charge before the sale of the subsequently mortgaged property. There is no discussion in this case as to whether the prior mortgage should be paid or the person paying it should be left to bring his suit for sale on the prior mortgage. There being no decision on this point, this case is no authority on the point that is before us, even if we take it that the new law was to be applied on 25th May 1909, when the case was decided by the High Court.
11. The next case that was relied on by Sir Tej Bahadur Sapru, viz, Matiullah v. Banwari Lal [1910] 32 All. 138 does not support his contention. On the other hand the fact that the Court remitted an issue as to whether the prior mortgages, paid off by the subsequent purchaser, were barred or not goes to show that the payment subrogated the payer only to the rights and titles of the mortgagees who had been paid.
12. Section 74, T.P. Act, deals with the right of a subsequent transferee to pay a prior mortgagee and says:
The subsequent mortgagee shall... acquire in respect of property all the rights and powers of the mortgagee as such, to whom he has made such tender.
13. It is clear to us, therefore, that the only right obtained by the appellant is a right to the security furnished by the mortgage of 1895.
14. The case of Ram Sarup v. Ram Lal A.I.R. 1922 All 394 was next quoted by Sir Tej Bahadur Sapru. In that case, a prior mortgagee had purchased the property which was subject to a second mortgage made before his purchase. In a suit by the second mortgagee, the Court held that the prior mortgagee had a right to be paid off before the property could be brought to sale. It is not necessary to consider in this case how far the case in (3) was correctly decided. It is enough to point out that the learned Judges who decided the case, themselves drew a distinction between a case where the prior mortgage is paid off by a purchaser of the property and where a prior mortgage is paid off by a subsequent mortgagee. The case of Mati. Ullah Khan v. Banwari Lal [1910] 32 All. 138 already quoted was relied on before their Lordships and they accepted the correctness of the ruling. But they said:
The shield" of a subsequent mortgagee who acquires the rights of a prior mortgagee is essentially different in character from the shield of a mortgagee who acquires the rights of a mortgagor. The former can protect himself so long as the right under the earlier mortgage subsists. In the case of the latter, his rights as mortgagee merge in those of the mortgagor or remain in suspension, as it were till they are needed for the purposes of defence.
15. In the case before us, we have to look to the facts, as they stood at the date of the institution of the suit of B. Dwarka Prasad. On that date the present appellant was nothing but a subsequent mortgagee who had paid off a prior mortgage. We were told that since the judgment under appeal was delivered, the appellant has foreclosed his mortgage effectually by obtaining a final decree for sale and that he has now become the owner of the share in village Palohi. This is a fact of which we cannot take any cognizance, for the simple reason that the Court below could not anticipate what was going to happen. Thus, on the authority of the case of Ram Sarup v. Ram Lal A.I.R. 1922 All 394 relied on by the learned Counsel for the appellant himself, the appellant cannot insist on being paid. He must allow the property to be sold subject to the mortgage of 1895. The appellant's only remedy is to enforce such securities as he may have succeeded to, under the mortgage of 1895.
16. I have already mentioned that it is not necessary to decide how far the learned Judges were right in deciding that a prior mortgagee who had purchased the property subject to a second mortgage could with safety to himself, remain inactive, without enforcing the prior mortgage and whether when the second mortgagee brings his suit, the latter can bring the property to sale or not, subject to the prior mortgage, leaving the prior mortgagee to his remedy under the same. If it were necessary to decide the question, I might have had some difficulty in accepting the propositions of law. I may point out that a Bench of two Judges deciding Second Appeal No. 177 of 1923, Jagram v. Gauri Prasad on 19th January 1925 indicated some doubt as to its correctness. It is true that in Phul Chand v. Mt. Surji A.I.R. 1923 All. 457, Ryves and Daniels, JJ., said that it was "settled law" that the prior mortgagee who has purchased the property subject to a subsequent mortgage could insist on being paid by the second mortgagee, in his suit and could not allow the second mortgagee to sell subject to the prior mortgage. But their Lordships do not quote any authority and their opinion cannot be justified on principle. The principle is enunciated in Section 74, T.P. Act, and the satisfaction of the prior mortgage does not give any right beyond what is given by the mortgage itself.
17. The result is that the appeal must fail.
18. I would dismiss the appeal with costs.
Niamatullah, J.
19. I concur with my learned colleague in dismissing the appeal on its own merits. I express no opinion on the question whether, under any circumstances, the person, a purchaser or subsequent mortgagee, paying off a prior mortgage, can insist on the mesne mortgagee to pay the prior incumbrance discharged by him, before obtaining sale of the mortgaged property in enforcement of his own mortgage or whether he (the mesne mortgagee) can always bring the mortgaged property to sale subject to the prior incumbrance. That question does not arise in the present case and my learned brother has not decided it. The cases referred to by him are, as shown by him, easily distinguishable from the one before us.
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Sarju Kumar Mukerji vs B. Dwarka Prasad And Anr.


High Court Of Judicature at Allahabad

31 January, 1929