HAZARIMAL Vs. DAMA

JUDGEMENT

(1.) 1. An absolute occupancy field was foreclosed and the mortgagee was placed in possession. Shortly afterwards, on 27th April 1927, the landlord applied for pre-emption. On 21st June 1927 the mortgagees, who were defendants 1 and 2, mortgaged this absolute occupancy field and other fields to the plaintiff for Rs. 1,000. On 19th November 1927 the Revenue Court fixed the pre-emption price at Rs. 2,000, and this sum was deposited in Court on 25th November 1927 and the landlord was placed in possession. Subsequently defendant 3 and the predecessor-in-title of defendants 6 to 9 attached this deposit of Rs. 2,000 in execution of simple money decrees that they had obtained against defendants 1 and 2 and withdrew the two sums of Rs. 187-11-0 and 884-14-0. The plaintiff contends that the deposit made by the landlord as the price of pre-emption takes the place of the mortgaged property and that he therefore has a prior claim over it. The first Court decreed the plaintiff's claim, but the learned District Judge on appeal hold that the mortgagee had an equitable lien on the deposit only so long as it was in Court and that he could not pursue it after it had passed into the hands of third persons. None of the cases cited at the Bar is precisely in point. In Venkatrama Iyer v. Esumsa Rowthen (1910) 33 Mad 429 the Judges remarked: There are numerous authorities in support of the position that the mortgagee is entitled to a charge upon the property which through no fault of the mortgagee has taken the "place of the mortgaged property. It is well known that the money or property given by Government in substitution for the lands taken up under the Land Acquisition Act is charged in favour of the mortgagee who had his claim upon the property so taken; but in that case the money had not passed into the hands of a third party. In Bhagwan Das v. Karam Hussain (1911) 33 All 708 it was held that the mortgagee's lien would attach to the surplus sale proceeds into which the property had been converted, but in that case, as in the similar case of Berhamdeo Pershad v. Tara Chand (1906) 33 Cal 92, the person into whose hands the money had passed was held to have had notice of the mortgagee's lien. The case must therefore be decided on general principles. Ghose, at p. 292 of his Law of Mortgage in India, 5th Edn., remarks: It is hardly necessary to point out that, if the mortgaged property is converted into money, under circumstances which would prevent the mortgagee from following such property, the security would attach to the money, unless the conversion is attributable to the default of the mortgagee.

(2.) SIMILARLY in Jones on Mortgage, at p. 714, 6th Edn., the author remarks: When the mortgaged property has been turned into money, or a claim for money in any way, as, for instance, by the taking of the properly" for public uses, or for the use of a corporation under authority of law, the rights of the mortgagee remain unaltered, and he is entitled to have the money in place of the land applied to the payment of his claim.

(3.) THERE can, I think, be no difference whether the security is taken away in pre-emption proceedings or in land acquisition proceedings, and the principle must be the same. The learned Judge has remarked that, if it was open to the mortgagee to pursue the sale proceeds into the hands of a third person, the result would be very far-reaching and might lead to considerable injustice. That appears to me to be overstating the position. In this particular case the attaching creditors knew that the deposit of Rs. 2,000 was the pre-emption price of an absolute occupancy field, which, if they had inquired, they would have found to have been mortgaged. I see no reason why owing to pre-emption the mortgagee's prior claim should give way to that of the attaching creditors. H-ad the mortgaged field not been pre-empted, the attaching creditor could not have sold it except subject to the mortgage, and I see no injustice in holding that their claim must give way to that of the mortgagee. On the general principles laid down above, the mortgagee is entitled to a prior lien on the money deposited in place of the mortgaged land, whether that money is placed into the hands of third persons or not. The appeal is therefore allowed with costs and the decree of the trial Court is restored.