ARUMUGASUNDARA MAHARAJA PILLAI Vs. KNARASIMHA IYER

JUDGEMENT

(1.) In 1882 the 1st defendant executed a mortgage, Exhibit A, of the suit properties in favour of one Mahalinga Aiyar, who transferred it on 15th August 1892 by Exhibit B to the father of the 1st plaintiff, whose son, the 1st plaintiff, was married to the 1st defendant s daughter. On 13th February 1893, the plaintiff s father obtained a lease, Exhibit E, of the suit properties from the 1st defendant at a rent of Rs. 300, which would appear to have been an undervalue. On 9th February 1897 the 1st defendant executed a fresh mortgage, Exhibit F, in favour of the 1st plaintiff s father for the amount found due on the mortgage Exhibit A. Subsequently in December 1899, the 1st defendant s equity of redemption was sold in execution by a decree- holder (see Exhibit K) and except as regards 9-5/8 f-awnies was purchased at the Court sale for Rs. 182 by one Sundara Raja Aiyangar, who a few days later by Exhibit 3 transferred the interest he had acquired to the 1st plaintiff for the same sum of Rs. 182. Between four and five years later, the 1st plaintiff re-conveyed the suit properties except the 9-5/8 cawnies to the 1st defendant for Rs. 185. The document reads at first sight like an out-and-out sale but beneath the signature of the vendor and his witnesses there is a further statement signed by the 1st plaintiff alone, to the effect that the sale was subject to two mortgages one of which was the suit mortgage. In 1910 the 1st plaintiff and his sons instituted the present suit on the mortgage so reserved and obtained a decree and one of the main contentions raised by the present appellants, who represent subsequent alienees from the 1st defendant, is that the suit mortgage was extinguished when under Exhibit 3 the 1st defendant s equity of redemption in the suit properties was acquired by the 1st plaintiff. This acquisition must be considered to have been made on behalf of his joint family, which included a younger brother since deceased and the 1st plaintiff s sons who are co-plaintiffs with him in this case, and it was treated as joint family property in Exhibits 10 and 11. It may, therefore, be said that by Exhibit 3 the mortgagees acquired the equity of redemption except as regards 9-5/8 cawnies. The owners of these items are not parties to the present suit and though the items acquired by them may be liable for their proportionate share of the mortgage-debt, that does not appear to affect the question whether there has been a merger as regards the items of the mortgaged properties which have been acquired by the mortgagees.

(2.) This question of merger has recently been considered by the House of Lords in Whiteley v. Delaney (1914) A.C. 132 : 83 L.J. Ch. 349 : 110 L.T. 434 : 58 S.J. 218 and by the Privy Council in Bhawani Kumar v. Mathura Prasad Singh 16 Ind. Cas. 210 : 40 C. 89 : 16 C.W.N. 985 : 23 M.L.J. 311 : 12 M.L.T. 352 : (1912) M.W.N. 944 : 14 Bom. L.R. 1046 : 16 C.L.J. 606. As pointed out in the former case by the Lord Chancellor, where the mortgagor himself has purchased the interest of the 1st mortgagee he cannot derogate from his own bargain by setting up the mortgage so purchased against the 2nd mortgage created by himself: Otter v. Lord Vault 2 K. and J. 650 affirmed 6 Dec. M. and G. 638 : 26 L.J. Ch. 128 : 3 Jur. (N.S.) 169 : 5 W.R. 188 : 69 K.R. 943 : 106 R.R. 235. Next there is the case of a third party purchasing the mortgaged property and paying off a prior mortgage out of the purchase- money as in Toulmin v. Steere 3 Mer. 210 : 17 R.R. 67 : 36 E.R. 81. The Privy Council have held that decision to be inapplicable to India in Gokaldas Gopaldas v. Puranmal Premsukh Das 11 T.A. 126 : 10 C. 1035 : 8 Ind. Jur. 396 : 4 Sar. P.C.J. 543 and the Lord Chancellor in the case just cited, whilst refraining from expressing any opinion as to whether or not it was correctly decided, observed that it amounted to no more than this that in such circumstances the presumption was that the purchaser did not intend to keep the mortgage alive. So that even here the question was treated as one of the intention of the purchaser. Lastly we have cases like the present where it is an encumbrancer who acquires the equity of redemption see Hayden v. Kirkpatrick 34 Beav. 645 : 11 Jur. (N.S.) 836 : 13 L.T. 56 : 13 W.R. 1010 : 55 E.R. 784 : 145 R.R. 717 and to these cases Section 101 Transfer of Property Act, expressly applies. The section is as follows: Where the owner of a charge or other inoumbrance on immoveable property is or becomes absolutely entitled to that property, the charge or incurnbrance shall be extinguished, unless lie declares, by express words or necessary implication, that it shall continue to subsist or such continuance would be for his benefit". The word "absolutely" cannot mean that there are no mesne incunibrances outstanding, as the very object of the exception to the section is to protect the prior mortgagee against such incumbrances. When, as in the recent cases of Bhawani Kumar v. Mathura Prasad Singh 16 Ind. Cas. 210 : 40 C. 89 : 16 C.W.N. 985 : 23 M.L.J. 311 : 12 M.L.T. 352 : (1912) M.W.N. 944 : 14 Bom. L.R. 1046 : 16 C.L.J. 606 and Laxman Uanesh Rajendra v. Mathurabai Narayan Govind 23 Ind. Cas. 121 : 38 B. 369 : 16 Bom. L.R. 26 there are no such incumbrances, there can scarcely be any room for the exception, and there is a merger under the section. In the former case where under the local revenue law, land was sold for arrears of revenue subject to any mortgage subsisting at the date the arrears fell due, and it appeared that the arrears fell due between the date when the mortgagee purchased the property under his mortgage-decree and the confirmation of the sale to him, it was held that the mortgage-debt was extinguished as from the date of the purchase and that there was consequently no mortgage subsisting at the date when the arrears fell due. The only mortgage of any of the suit properties effected by the 1st defendant subsequently to the suit mortgage and before he parted with his interest in the equity of redemption under Exhibit K was in favour of the father of the 31st defendant of items 53 and 56 for Rs. 160 under Exhibit 19. The 1st defendant whose evidence must be received with caution deposes that subsequently to the original mortgage, Exhibit A, which was renewed by the suit mortgage, Exhibit F, he executed two mortgages in favour of one Ramasami Iyer, a District Registrar, and these mortgages if are still outstanding.on the date of Exhibit 3 would have been postponed to the suit mortgage. It appears, however, from Exhibits 43 and 44 that on the 7th December 1889 the 1st defendant sold two villages for Rs. 30,000 to one Thimma Reddy, who undertook to discharge these mortgages out of the purchase- money and as we find no reference to them either in Exibits F, L or 19--the mortgage-deeds have not been produced--I think it is not shown that these mortgages were outstanding at the date of Exhibit 3 as to afford any ground for supposing that it was the intention of tha 1st plaintiff to keep the suit mortgage alive as a protection against them or to bring the case within the exception to Section 101 of the Transfer of Property Act.

(3.) The subsequent mortgage of two items only for the small sum of Rs. 160 under Exhibit 19 could not affect the mortgagee s intention as regards the other items. We find the 1st plaintiff and his brother in 1901 pleading in the plaint, Exhibit 11, that by virtue of Exhibit 3, the entire interest in the suit lands, which were included in the properties mortgaged under Exhibit F, belonged exclusively to them and in 1903 by Exhibit 10, they mortgaged the suit properties for Rs. 2,000 without any reference to any subsisting mortgage on them. In these circumstances and apart from Exhibit L, I do not think it is shown that there was not a merger under the terms of Section 101, Transfer of Property Act, when the mortgagees acquired the equity of redemption under Exhibit 3. As to Exhibit L, I cannot agree with the Subordinate Judge that the reservation of the suit mortgage inserted out of its proper place in that document is sufficient evidence of an intention, on the part of the mortgagees at the date of the purchase of the equity of redemption some five years previously, to keep alive the suit mortgage: it might be otherwise if the purchaser of the equity of redemption under Exhibit 3 by the 1st plaintiff was benami for the 1st defendant, but that is not the plaintiffs case and is negatived by the way in which the plaintiffs subsequently dealt with the property as full owners.