PERIA VEEDU ABDUL MAJID SAHIB Vs. ARUNACHALA MUDALIAR

JUDGEMENT

(1.) The 3 defendant is the appellant. He held a mortgage, dated 26 May, 1919, over the suit property which consist's of two items. A mortgage of the same property had been executed in favour of the plaintiffs on 10 July, 1919. On 23rd November, 1925, the first item of the suit property was sold to the 3 defendant in discharge of the mortgage over the two items. The 3 defendant thus became the owner of the first item and as a result of his purchase the second item was freed from his mortgage. When he purchased item 1, the 3 defendant did not know about the existence of the mortgage in plaintiffs favour. The suit property belonged to the father of defendants 1 and 2. The second appeal arises out of a suit instituted by the plaintiffs to enforce their mortgage over the two items. The appellant contended that his prior mortgage right over the first item should be regarded as still alive and that the plaintiffs should redeem it before they could succeed. This contention was rejected by the Lower Courts and the only question argued in the second appeal is whether this contention should have been upheld.

(2.) It is common ground that the question should be decided with reference to the intention of the appellant as to when he purchased item 1, whether he had intended to keep his own mortgage over it alive as a shield against the other mortgagees. Section 101 of the Transfer of Property Act provides that if a mortgagee or a charge-holder of property acquires the interest of the mortgagor or the owner, his own charge or mortgage becomes extinguished unless he declares by express words or necessary implication that it shall continue to subsist or such continuance would be for his benefit. The section raises a presumption in favour of merger rebuttable by proof of an intention to the contrary. This is no evidence regarding the intention of the 3 defendant either way. In Gokaldas Gopaldas V/s. Puranmal Premsukh Das (1884) L.R. 11 I.A. 126 : I.L.R. 10 C. 1035 (P.C.) their Lordships of the Privy Council held that, where a man who pays off a mortgage has a right to extinguish it and a right to keep it alive, in the absence of express evidence of intention, he should be assumed to have acted according to his interest. See also Mahomed Ibrahim Hossain Khan V/s. Ambika Pershad Singh (1912) L.R. 39 I.A. 68 : I.L.R. 39 C. 527 : 22 M.L.J. 468 (P.C.) in Ayya Reddi v. Gopalakrishnayya (1923) L.R. 51 I.A. 140 : I.L.R. 47 M. 190 : 46 M.L.J. 164 (P.C.) the Privy Council has again remarked as follows: It is now settled law that where in India there are several mortgages on a property, the owner of the property, subject to the mortgages may, if he pays off an earlier charge, treat himself as buying it and stand in the same position as his vendor, or to put it in another way, he may keep the incumbrance alive for his benefit and thus come in before a later mortgagee.

(3.) As pointed out by Sir Gour in his Transfer of Property Act, Vol. II, the Privy Council "by laying emphasis on the proviso and the intention of the parties in Section 101" were inclined to minimise the force though without entirely ignoring the existence of the initial statutory presumption in Section 101 of the Transfer of Property Act." In Tiruvengadam Pillai V/s. Sabapathi Pillai Phillips, J., went to the extent of holding that when a person purchasing property discharges a prior mortgage on the same and claims subrogation in respect thereof, the Court should start with the presumption that a person paying off a mortgage intends to keep it alive if it is for his benefit to do so." (See the head note.) Effect to the decisions of the Privy Council has been given in the new Section 101 of the Transfer of Property Act which replaces the old section. The new section runs as follows: Any mortgagee of, or person having a charge upon, immovable property, or any transferee from such mortgagee or charge-holder, may purchase or otherwise acquire the rights in the property of the mortgagor or owner, as the case may be, without thereby causing the mortgage or charge to be merged as between himself and any subsequent mortgagee of, or person having a subsequent charge upon the same property; and no such subsequent mortgagee or charge-holder shall be entitled to foreclose or sell such property without redeeming the prior mortgage or charge, or otherwise than subject thereto.