KANDASWAMI CHETTI Vs. ADIMOOLA CHETTI (DEAD)

JUDGEMENT

(1.) The plaintiff in this case attached before judgment two bulls belonging to his judgment-debtor, Veera Pillai. The defendants put in a claim petition that they had a hypothecation right over the bulls and their claim petition was allowed in their favour. The plaintiff has brought the suit for a declaration that he is entitled to execute the decree obtained by him against Veera Pillai and that the bulls are not subject to any charge in favour of the defendants. Both the lower Courts have held that the hypothecation of the bulls in favour of the defendants prevailed over the right of the plaintiff to attach the bulls and dismissed his suit. The judgment- debtor had two bulls which he hypothecated to the defendants. He sold these bulls in a shandy for Rs. 115 and purchased, four or five days after, the bulls in question for Rs. 125. Mr. Rajah Iyer on behalf of the appellant contends that the hypothecation right of the defendants does not attach to the bulls purchased by the judgment-debtor with the sale proceeds of the bulls hypothecated. That the hypothecation of chattels is valid is now well settled by Narasiah V/s. Venkataramiah (1918) ILR 42 M 59 : 35 MLJ 450. In the case of a mortgage of immoveable property the mortgage right attaches to the property which is substituted for the mortgaged property. In Venkatarama Iyer V/s. Esumsa Rowthen (1909) ILR 33 M 429 : 20 MLJ 330 it was held that the mortgagee was entitled to a charge on the property which through no fault of his had taken the place of the mortgaged property. Krishnaswami Iyer, J., who delivered the leading judgment in the case, relied upon the principle contained in Section 73 of the Transfer of Property Act and held that the mortgagee is entitled to a charge on the pro-perty which has taken the place, in substitution, of the property actually mortgaged. At page 434 he observed " It is well known that the money or the 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." When properties are acquired under Land Acquisition Act by the Government and some other property is given in substitution the charge in favour of the mortgagee attaches to the property so substituted. But in order that the charge may attach to the newly acquired properly it must be clear from the evidence that the newly acquired property was the property sought to be substituted for the property actually mortgaged. Otherwise the mortgage charge on the mortgaged land would not attach to the property newly acquired. In Nidhi Lal V/s. Mazhar Hussain (1885) ILR 7 A 436 the facts were : N was in possession of six shops in a marketplace, two as mortgagee and the other four as proprietor. The Municipal Committee of that place decided to establish the market in a fresh place, and to use the site of the old market for other purposes, and arranged with N to take the sites of his six shops in the old market-place and gave him in lieu of them sites for six shops in the new. Under this arrangement he built six shops in the new market-place. Subsequently, the mortgagor of one of the old shops claimed possession of one of the six new ones on payment of the mortgage money and cost of constructing the shop. The Court held that the claim could not be allowed, inasmuch as it could be justified only by a proof of an agreement binding upon the parties at the time when the transaction occurred, that some specific one among the new shops should be substituted for the old one which was the subject of the mortgage, and it had not been found that any such agreement was made. As observed by the learned Chief Justice, " The plaintiff's claim was a mere vague attempt by the mortgagor to get hold of some shop or other without knowing or caring which one out of the six it is to be."

(2.) The question before me is whether this right of the mortgagee to proceed against the substituted property as being subject of his charge does apply to the case of hypothecation of chattels. In the case of hypothecation of chattels possession is not given to the hypothecatee. If possession is given to the hypothecatee the transaction would become a pledge. In the present case the old bulls which were hypothecated to the defendants were sold by the hypothecator, and he purchased two new bulls, four or five days after the sale of the old bulls, for Rs. 125. The contention of the respondent is that the new bulls having been purchased with the sale proceeds of the old bulls the right of the hypothecatee must extend to the new bulls. A good title can be acquired by a bona fide purchaser of bulls without knowledge of the hypothecation that is very clear from Narasiah V/s. Venkataramiah (1918) ILR 42 M 59 : 35 MLJ 450 where it is held that the lien of the hypothecatee does not attach to goods sold to a bona fide purchaser. Chidambara V/s. Muthaya (1882) ILR 5 M 330 is against the contention of the respondent. In that case M pledged his ship to C as security for a bond debt of Rs. 1,500, repayable by two instalments. S seized the ship in French territory for a debt due by M and the French Court sold the ship. C made a claim on the proceeds of the sale in the hands of the Court The Court held that " whether or not his lien was destroyed by the sale of the ship in French territory, C was not entitled to any of the proceeds of the sale either at the date of the sale or of his claim in the French Court. " The learned Judges observe at page 333 : " Plaintiff had no right whatever in the sale proceeds of the ship at the, date of the sale or at the date of the claim made by him which defendant resisted. Those proceeds, in so far as they were more than available for defendant's claim, belong to the Manjirasa. All that plaintiff could claim of Manjirasa was payment at the due date which had not arrived. He could not say of anything belonging to Manjirasa, save what had been pledged to him, that he was entitled to it, or had acquired any right to it. " They also held that the mere fact of the proceeds being in French could not make any difference as to the principle of their decision.

(3.) It is clear from these decisions that the mortgagee's right does not attach to the sale proceeds of the property hypothecated.