RANGAPPA GANGAPPA LINGAYAT WANI Vs. SYED IMAMUDDIN

JUDGEMENT

(1.) 1. This appeal arises out of a suit instituted by the appellant Rangappa to enforce a mortgage executed in his favour by Syed Imamuddin, defendant 1, and his father, Syed Husen, since deceased, on 7th October 1916. The plaintiff held a previous mortgage dated 25th September 1914 executed by the same mortgagors. After the mortgage in suit the mortgagors executed another mortgage on 10th June 1920 in favour of Kesheosa, Madhosa, Laxmansa, Dattusa and Gopalsa, defendants 10 to 14, and yet another mortgage dated 16th January 1921 in favour of Badrinarayan Hanumantram who assigned their mortgagee rights to Hiralal Khupchand, defendants 15 and 16. It appears that there were two other mortgages dated 12th June 1916 and 13th June 1916 executed in favour of defendants 10 to 14. For the disposal of the present appeal the mortgages which are material are those executed on 25th September 1914, 7th September 1916 and 10th June 1920.

(2.) THE plaintiff-appellant returned the mortgage deed in suit to the mortgagors, with his endorsement of full satisfaction on 12th September 1919. It was after this apparent discharge of the mortgage in suit that the mortgagors obtained from defendants 10 to 14 Rs. 1,500 on the security of the mortgage dated 10th June 1920 and Rs. 600 on the security of the mortgage dated 16th January 1921. In 1927 the plaintiff-appellant brought an action, Civil Suit No. 3 of 1927, to enforce his first mortgage dated 29th May 1914 against the surviving mortgagor and the legal representatives of the deceased mortgagor, impleading in the suit defendants 10 to 16 as well. In that suit all the defendants, including defendants 10 to 16, pleaded two repayments of Rs. 400 and Rs. 600 made on 17th October 1916 and 27th July 1917 in partial satisfaction of the first mortgage, but the plaintiff contended that under an agreement with the mortgagors the repayments were appropriated towards the mortgage of 7th October 1916. The Court came to the conclusion that the repayments were intended to satisfy the mortgage of 1914 and passed a decree after crediting the same towards the mortgage of 1914. In the suit out of which this appeal arises the plaintiff averred that the repayments of Rs. 400 and Rs. 600 were intended to be appro. priated towards the reduction of the debt due on the mortgage of 29th May 1914 and claimed a decree for the entire sum due on the mortgage deed dated 7th October 1916. The defendants 10 to 16 who were subsequent encumbrancers raised two alternative pleas: (1) that the sums of Rs. 400 and Rs. 600 had been paid in full satisfaction of the mortgage deed dated 7th October 1916 on which the suit was founded; and (2) that if it he held that the aforesaid repayments could not be treated as having been made in discharge of the mortgage deed, in suit, they contended that the plaintiff was guilty of misrepresentation and gross negligence in endorsing full satisfaction of the mortgage deed in suit and handing over the document to the mortgagors who were enabled thereby to induce them to advance loans by creating a belief in their mind that the mortgage dated 7th October 1916 executed in favour of the plaintiff was discharged. The trial Court held that the finding in Civil Suit No. 3 of 1927 bound the defendants so as to estop them from pleading that the repayments of Rs. 400 and Rs. 600 were intended to be appropriated towards the mortgage in suit. It therefore passed a decree for the full amount due on the mortgage in suit against the mortgagors, defendants 1 to 9. Further it found that the plaintiff was guilty of gross negligence in endorsing full satisfaction of the mortgage deed in suit and returning the document to the mortgagors on account, of which defendants 10 to 16 were led to lend large sums to the mortgagors, and that consequently in view of Section 78, T.P. Act, the plaintiff was postponed to the subsequent transferees, defendants 10 to 16. In the decree it gave a direction that the plaintiff must bring the mortgaged property to sale subject to the equities created in favour of defendants 10 to 16.

(3.) SUBSEQUENT mortgagees can acquire priority only when they prove fraud, misrepresentation or gross negligence on the part of the prior mortgagee as required by Section 78, T.P. Act. The question therefore is whether the plaintiff in the suit can be regarded as having induced the subsequent mortgagees to advance money on the security of the property through his fraud, misrepresentation on neglect. There is no suggestion that the plaintiff was guilty of fraud in the sense that he made any representation which to his knowledge was falsa with an intention to deceive the subsequent mortgagees; but the respondents however do contend that the plaintiff's endorsement of full satisfaction made on the back of the mortgage bond in suit was tantamount to a misrepresentation within the meaning of Section 18, Contract Act. It can not be gainsaid that having regard to the fact which ought to have been within the knowledge of the plaintiff that the sums of Rs. 400 and Rs. 600 had been, paid in discharge of the mortgage of 1914, the endorsement containing an acknowledgment of full satisfaction of the mortgage in suit would amount in law to misrepresentation. It was a positive assertion in the manner not warranted by the information of the person making it, of that which is not true, though he believed it to be true. Anybody in the position of the subsequent mortgagees would be fully justified in attaching credence to the plaintiff's own endorsement and in misleading themselves into the belief that the mortgage in suit had been discharged. The plaintiff must be charged with having made a misrepresentation within the meaning of Section 18, Contract Act.