N S RAMASWAMY MUDALIAR Vs. GOPALASUBBA NAYAKAN

JUDGEMENT

(1.) This appeal is against the decree of the Subordinate Judge of Dindigul dismissing the plaintiffs suit for recovery of principal and interest due on a mortgage-bond. The facts of the case are: The plaintiffs father and the 4 defendant were the Karaswoms or stakeholders of a half yearly auction chit to which the 1 defendant was a subscriber. He bid for and obtained the chit in an auction and executed and registered a hypothecation bond on the 3 February, 1906, for Rs. 2,000 as security for payment of future instalments. Defendants Nos. 1 and 2 are members of an undivided Hindu family. They executed a simple mortgage-deed in favour of the 3 defendant for Rs. 4,000 on the 15 February, 19l)9. (Ex. 1). On the 1 February, 1913, defendants Nos. 1 and 2 executed three sale deeds in favour of thirds persons, Exs. B, C and D with the direction that the vendees should pay off the mortgage amount due to the plaintiffs and the amount due to the 3 defendant. The vendees not having paid the amount due under Ex. I, the 3 defendant brought O.S. No. 102 of 1916 on Ex. I impleading defendants Nos. 1 and 2 and the purchasers under Exs. B, C and D as defendants in the case. He did not implead the plaintiffs as defendants. A preliminary decree was passed on the 20th October, 1916, and a final decree was passed thereafter. Defendants Nos. 1 and 2 got releases from the vendees under Exs. B, C and D of their rights in the property sold to them by Exs. G, G (1) and G (2) on 1 August, 1917, 4 October, 1917, and 26 November, 1917, respectively. Defendants Nos. 1 and 2 conveyed all their properties which they purported to sell under Exs. B, C and D to the 1 plaintiff in discharge of the mortgage-debt under Ex. A by two documents, Exs. H and H (1) for Rs. 7,500 and Rs. 5,000 respectively on the 9 October, 19l7, and 5 December, 1917, and gave the plaintiffs possession of the properties. The 3 defendant brought the properties to sale in execution of his decree in O.S. No. 102 of 1916, bought the property himself and obtained possession through Court. Owing to the obstruction of the plaintiffs to the peaceful possession of 3 defendant, proceedings were taken under Section 145 of the Criminal Procedure Code and the Magistrate upheld the possession of the 3 defendant whereupon the plaintiffs brought this suit on their hypothecation bond of 1906, Exhibit A; defendants Nos. 1 and 2 remained ex parte and the 3 defendant contested the suit on various grounds. The Subordinate Judge held that the vendee under Ex.C had undertaken to discharge the amount due under Ex. A and as the plaintiffs have acquired the right of the vendee under Ex. C, they could not fall back upon their original mortgage Ex. A and sue thereon. The contention of Mr. Bhashyam for the appellants is that the plaintiffs must be presumed to have kept alive the mortgage under Ex. A when they purchased the property under Exs. H and H (1) and that they are entitled to sue on it. It is a question of fact in each case whether a person who acquires an interest in immoveable property and discharges a prior encumbrance intends to keep alive that encumbrance as a shield against a puisne encumbrancer. This principle was clearly enunicated by the Privy Council in Gokaldas Gopaldas V/s. Rambaksh Seochand 10 C. 1035 : 11 I.A. 126 : 8 Ind. Jur. 396 : 4 Sar. P.C.J. 543. Their Lordships held that the principle enunciated in the well-known case of Toulmin V/s. Steere (1817) 3 Mer. 210 : 36 E.R. 81 : 17 R.R. 67 was not applicable to India and observed at page 1016 Page of 10 C. [Ed.]. The obvious question to ask in the interest of justice, equity and good conscience is, what was the intention of the party paying off the charge? He had a right to extinguish it and a right to keep it alive. What was his intention? If there is no express evidence of it, what intention should be ascribed to him? The ordinary rule is that a man having a right to act in either of two ways, shall be assumed to have acted according to his interest.

(2.) This principle is embodied in Section 101 of the Transfer of Property Act which is in these terms: Where the owner of a charge or other incumbrance on immoveable property is or becomes absolutely entitled to that property, the charge or incumbrance shall be extinguished, unless he declares, by express words or necessary implication, that it shall continue to subsist or such continuance would be for his benefit." The plaintiffs have acquired the absolute or full title to the property purchased by them and the question is whether they by express words or by necessary implication declared their intention to keep the mortgage of 1906 alive or whether the keeping alive of that mortgage would be for their benefit. It is not an absolute rule of presumption that whenever it would be for the benefit of a person to acquire absolute title to property he keeps alive the charge or encumbrance on the property in his favour. All that can be said is that in the absence of special circumstances to show the contrary, the presumption is that when a subsequent encumbrancer pays off a prior incumbrance with the consideration money of his own incumbrance, he does so with the intention of keeping the prior incumbrance alive for his own benefit. Vide Chidambara Nadan V/s. Musuvathi Muni Nagendrayyan 58 Ind. Cas. 813 : (1920) M.W.N. 534 : 12 L.W. 393 : 39 M.L.J. 445 : 28 M.L.T. 300. It is unnecessary to consider in detail the cases in Gopal Chunder Sreemany V/s. Herembo Chunder Holdar 16 C. 523, Dinobundhu Shaw Chowdhry V/s. Jogmaya Dasi 29 C. 154 : 29 I.A. 9 : 6 C.W.N. 209. 12 M.L.J. 73 : 4 Bom. L.R. 238 : 8 Sar. P.C.J. 217 (P.C.) and Ibrahim Sahib V/s. Armugathayee 16 Ind. Cas. 877 : 38 M. 18 as these cases were decided upon the facts appearing in evidence in them. Where a person who was a mortgagee over property becomes purchaser thereof he cannot ask for subrogation so far as his own mortgage is concerned. The principle of subrogation does not apply to such a case. The case in Govindaswami Thevan V/s. Doraiswami Pillai 6 Ind. Cas. 781 : (1910) M.W.N. 390 : 20 M.L.J. 380 : 8 M.L.T. 132 : 34 M. 119 which is relied upon by the lower Court does not apply to the present case. There it was held that where a purchaser undertakes to pay off two prior encumbrances but discharges one only, he cannot claim to stand in the shoes of the mortgagee whose mortgage amount he discharged. It was held that his right to use the prior mortgage as sheild is based on a presumed intention to keep alive the prior mortgage for his own benefit and such a presumption is rebutted when he undertakes to discharge both the mortgages. In Surjiram Marwari V/s. Barhamdeo Persad 2 C.L.J. 288 it was similarly held "if a person purchases property which is subject to two mortgages, and retains a portion of the purchase-money for payment to the mortgagees but pays the first of the two in-cumbrancers and not the second, he cannot treat the first mortgage as kept alive to be used as a shield against the second, nor can he claim to be subrogated to the position of a mortgagee whose debt he has satisfied." Some observations of Mookerjee, J., in that judgment are relied upon by the contesting respondents as supporting their case that the plaintiff did not intend to keep alive their mortgage of 1806 when they purchased the property. In Renga Srinivasachari V/s. Gnanaprakasa Mudaliar 30 M. 67 : 2 M.L.T. 36 it was held that "where a person paying off a prior mortgage, purchases a portion of the mortgaged properties in consideration of the amount so paid by him, the lien acquired by such payment is extinguished and cannot be used by such purchaser as a shield against a subsequent mortgagee." Ayling and Oldfield, JJ., make the following observation with regard to the cases in Renga Srinivasachari V/s. Gnanaprakasa Mudalair 30 M. 67 : 2 M.L.T. 36 and Govindaswami Thean V/s. Doraiswami Pillai 6 Ind. Cas. 781 : (1910) M.W.N. 390 : 20 M.L.J. 380 : 8 M.L.T. 132 : 34 M. 119 in Subramania Pillai V/s. Palaniappa Mudali 21 Ind. Cas. 978 : 26 M.L.J. 94 : 14 M.L.T. 585: "The cases are simply authority for holding that, where a person who has actually acquired the equity of redemption pays off a prior mortgage, he cannot claim the right of subrogation in respect of that mortgage as against a puisne mortgagee. Such a person does not really come within the scope of the Privy Council ruling in Gokaldas's case 10 C. 1035 : 11 I.A. 126 : 8 Ind. Jur. 396 : 4 Sar. P.C.J. 543. Any doubt as to his intention is cleared up by Section 101 of the Transfer of Property Act. Unless he declares his intention to keep the mortgage alive, it becomes extinguished by the mere fact of discharge.

(3.) In Ex. H dated 9 October, 1917, the recital is the sum of rupees seven thousand and five hundred aforesaid has been paid to us by way of our endorsing payment this date on your hypothecation bond aforesaid." In Ex. I which is a later document executed on the 5th December, 1917, there is a clear expression as to the intention of the parties: "The said sum of Rs. 5,000 has been paid and endorsement of payment has been made on the said hypothecation bond and the whole bond has been discharged. As we have received money in this manner you are to hold and enjoy the undermentioned property with all rights and privileges etc." The circumstances under which both Exs. H and H (1) came to be executed also have to be considered in this connection. The 3 defendant had obtained a final decree in O.S. No. 102 of 1916. He was about to bring the property to sale. Defendants Nos. 1 and 2 who were in possession of the property could not resist the execution of the decree in O.S. No. 102 of 1916. They attempted by sales under Exs. B and D to discharge the debt due to the 3rd defendant. The vendees under Exs. B and D did not discharge the debt. The plaintiffs either to assist defendants Nos. 1 and 2 in fighting the 3 defendant or for their own purposes, wanted to take possession of the property and accordingly Exs. G and G (1) and G (2) were brought into existence and sales were effected by Exs. H and H (1) and, as observed by the Vakil for the respondents, five documents were brought into existence within the space of four months. The vendees under Exs. B, C and D were evidently tools in the hands either of the plaintiffs or of defendants Nos. 1 and 2. If the plaintiffs wanted to enforce their right under the mortgage of 1906, Ex. A, they could have brought a suit against defendants Nos. 1 to 3 and recovered the amount by sale of the hypotheca. In Exs. H and H (1) there was no present advance. The only consideration for the sale was the previous mortgage in favour of the plaintiffs. Probably, the plaintiffs thought that if that mortgage was left outstanding, it might be said that there was no consideration for the sale. That is why they distinctly stated in Ex. H (1) that the whole bond had been discharged. When there is an express recital to that effect, there must be very strong and cogent evidence to show that the plaintiffs wanted to keep alive their mortgage of 1906. What is strongly urged by Mr. Bhashyam Ayyangar is that, if it was for the plaintiffs benefit to keep alive the mortgage, they must be deemed to have kept it alive. As already observed, there is no absolute rule of law that such a presumption should be made in all cases. Taking all the circumstances of this case into consideration, we have no hesitation in holding that at the time when Exs. H and H(1) were executed the intention of the parties was that the sale was to be in satisfaction of the amount due on the mortgage and it was not the plaintiffs intention to keep alive the mortgage of 1906 after the dates of Exs H and H (1).