KAPURI SAHU Vs. MATHURA DAS MARWARI

JUDGEMENT

(1.) This is an appeal from a decision of the Subordinate Judge of Bhagalpur, in a suit by the plaintiff to recover a sum of Rs. 8,817 on a mortgage bond dated June 18, 1924, executed, by the defendant No. 1 as karta of the family and as guardian of defendants Nos. 2 to 5 inclusive. Defendants Nos. 6 to 14 have been impleaded as subsequent purchasers of portions of the mortgaged property. We are only concerned with the contentions of defendants Nos. 7 and 8 who have launched this appeal against the decision in favour of the plaintiff by the Subordinate Judge. The defendants Nos. 7 and 8 were purchasers at an auction sale of a portion of the mortgage properties which had been sold on March 21,1926, for arrears of Government revenue and owing to the effect of Section 51 of the Revenue Sale Act, the sale being of a portion of the estate was subject to incumbrance. The estate having been sold and the Government revenue having been paid there was in deposit at the Collectorate a sum representing the surplus sale proceeds. We have been informed and it is not contested by any of the parties that since the suit by the plaintiff these proceeds have been withdrawn by certain other parties, and are no longer in existence. The plaintiff mortgagee sued and asked not only that he should be entitled to take the surplus sale proceeds by reason of Section 73 of the Transfer of Property Act, but also that he should be able to pursue his mortgage remedy against the mortgaged property of which defendants Nos. 7 and 8 had come into possession by reason of the auction sale. To that contention the Subordinate Judge acceded and passed a mortgage decree. It has been contended in appeal that under Section 73 of the Transfer of Property Act the mortgagee has an option and he must elect whether he will, go for the surplus sale proceeds or whether he will rely upon his mortgage rights against the property which was sold subject to the mortgage. It was contended that the surplus sale proceeds must be treated as substituted for the mortgaged property at the option of the mortgagee. An examination of Section 73 of the Transfer of Property Act and a comparison of that section with the section now repealed which it replaced w ill snow that that contention cannot be supported. As the section stood before amendment it was as follows: Where mortgaged property is sold through failure to pay arrears of revenue or not due in respect thereof the mortgagee has a charge on the surplus (if any) of the proceeds, after payment there out of the said arrears, for the amount remaining due on the mortgage, unless the sale has been occasioned by some default on his part.

(2.) The section there was clearly dealing with a sale for arrears of revenue of the entire mortgaged property and by reason of Section 37 of the Revenue Sale Act where the whole of the estate is sold for arrears of revenue, incumbrances are extinguished and the sale of the property is free from incumbrances and therefore in such a case there is in truth substitution of the sale proceeds for the mortgaged property, because the mortgagee's lien over the mortgaged property was extinguished. As the law then, stood there was no provision for a similar right on the part of the mortgagee in the case where a portion only of the estate had been sold. That defect in the law was remedied by the new section. The new section begins with these words: Where the mortgaged-property or any part thereof or any interest therein is sold owing to failure to pay arrears of revenue or other charges of a public nature or rent due in respect of such property, and such failure did not arise from any default of the mortgagee, the mortgagee shall be entitled to claim payment of the mortgage money, in whole or in part, out of any surplus of the sale proceeds remaining after payment of the arrears and of all charges and deductions directed by law.

(3.) The new section therefore gives to the mortgagee rights against the sale proceeds. If the sale was of the whole of the estate, then the rights given under the section as in the case of the section which it replaced corresponded with the right of substitution. Where however the right of substitution did not exist and where the sale was of a portion of the mortgaged property nevertheless the right of the mortgagee to go against the sale proceeds was conferred by the Act. Nothing is said in the section against the contention of the right of the mortgagee in addition to such rights as were conferred by the section to proceed against the mortgaged property, and by reason of Section 54 of the Revenue Sale Act and by reason of the fact that the mortgage rights still subsisted the mortgagee retained the right to proceed against the mortgaged property. The long series of cases that were decided on the old section were, it is true, based upon the doctrine of substitution and such doctrine was properly applicable because the rights under the old section to proceed against the sale proceeds were limited by the form of the section to the case only in which the whole of the mortgaged property was sold. In my opinion therefore the learned Subordinate Judge was right in his view of the law that notwithstanding the claim against the sale proceeds (which by reason of the fact that all the sale proceeds have been withdrawn is no longer of any value to the mortgagee and is no longer of importance) the mortgagee has the right to follow the mortgaged-property in the hands of the purchaser.