RAMANATHAN CHETTIAR Vs. AUDINATHA AYYANGAR

JUDGEMENT

(1.) This is an application for leave to appeal to the Privy Council against the decree of this Court in A.S. No. 176 of 1 927 dated 2 August, 1929. The amount of the subject matter involved in the suit is now by the accumulation of interest more than Rs. 10,000, but was below that sum at the time of the institution of the suit.. Leave is therefore claimed under Section 109 (c), Civil P.C., on the ground that the case is a " fit one " for leave to appeal to the Privy Council.

(2.) The facts of the case appear fully from the judgments of this Court. However a brief statement of them may be made here for the purposes of this petition. The first counter-petitioner was the holder of a third mortgage over some properties belonging to defendant 1. The heirs of the first mortgagee-over the properties instituted a suit on his mortgage making defendant 1, the second mortgagee and the present plaintiff, the third mortgagee, parties to it and obtained a decree for sale. The decree-holders purchased the properties in execution and afterwards sold them to one Bharati, defendant 5 in the present suit. Thereupon the mortgagor, defendant 1, instituted a suit against Bharati for a declaration that the purchase was made for his own benefit. This suit was contested by Bharati but eventually it was compromised, it being agreed that defendant 1 should take over the properties on depositing in Court Rs. 29,000 to the credit of Bharati within a specified date. Defendant 1 obtained Rs. 30,000 from defendant 16 in the present suit, undertaking to sell him the properties in question. He then deposited Rs. 29,000 in Court and made a gain for himself of Rs. 1,000. By this time the present suit had been instituted by the plaintiff for the enforcement of his mortgage over the properties. It has been found by this Court that when defendant 16 entered into an agreement with defendant 1 the former had distinct notice of the plaintiff's claim and that he was not a bona fide purchaser of the property.

(3.) As stated in the opening paragraph of my judgment in the appeal the question for decision was whether the mortgage executed by defendant 1 in favour of the first counter-petitioner (that is, the plaintiff-appellant) is entitled to priority over the sale deed executed by him in favour of defendant 16 in so far as the mortgage deals with the properties covered by the sale deed. We held that the plaintiff was entitled to priority. Whether he is so entitled to or not is a pure question of law. It is now well settled that if in execution of a decree for sale of the mortgaged property the mortgagor purchases the property for himself, it passes into his hands subject to the right of the subsequent mortgagee it being his duty as owner of the estate to discharge the debt of the subsequent mortgagee for which he had pledged the estate: see Otter V/s. Lord Vaux 43 E.R. 1381. It is also settled in this Court that the same principle would apply even if there had been intermediate purchasers of the property before it came into the hands of the mortgagor, a question that was left undecided in Otter V/s. Lord Vaux 43 E.R. 1381: see Manjappa Roi V/s. Krishnayya [1906] 29 Mad. 113. The petitioner accepts the correctness of this decision though the soundness of the particular reasoning on which it is based is questioned. How far the application of the above principles will be affected, if at the time when the mortgagor purchases the property from a stranger purchaser, he has already agreed to sell it to another person from whom he gets the money to purchase it is the question with respect to which the decision of the Privy Council is sought in this case. There is no specific decision or authority covering this point.