ARUNACHALAM CHETTY Vs. OSRAMASAMY AYYAR

JUDGEMENT

(1.) Defendants 1 and 2 executed a mortgage in favour of the plaintiff and Vena Odayan, father of defendants 3 to 5. In 1921 under Ex.1, defendants 1 and 2 sold the mortgage property with the exception of 22 acres and a house to defendant 3 for Rs. 10,000. The consideration was made up of two sums, one of Rs. 9,460 in discharge of this mortgage and a cash payment of Rs. 540. It was recited that the father of defendants 3 to 5 was to take Rs. 4,730 for his share of the mortgage money and was to pay a similar amount to the plaintiff. Defendants 1 to 5 have filed a joint appeal although their cases are not identical.

(2.) On behalf of defendants 1 and 2 it is contended that by executing Ex.1, they fully discharged the plaint mortgage, it being alleged that the plaintiff was a consenting party to Ex. 1. The Subordinate Judge has found that the plaintiff was not a party to this agreement and that it was arrived at behind his back. The mortgage amount was calculated by allowing interest at 10 1/2 per cent, the original rate, and not at the rate provided in case of default of payment. The difference would amount to over Rs. 1,000. The arrangement, therefore, arrived at was in effect a remission of a large portion of the mortgage amount and, if the plaintiff was a party to this remission, it is difficult to believe that he would at once have resiled from this agreement and claimed the full mortgage money. The plaintiff was not present either when Ex. 1 was executed, nor the next day when it was registered, and there is nothing whatever in writing to show that the plaintiff was a consenting party. No endorsement was made on the mortgage and the plaintiff's consent is sought to be proved by oral evidence. We have been taken through this oral evidence by the appellant's vakil and there is certainly no reason for coming to any other conclusion than that arrived at by the trial Judge, namely, that the defendant's story that the plaintiff agreed to the transaction is false. Ex. 1 prima facie is not binding on the plaintiff, but it is contended that inasmuch as defendants 1 and 2 discharged the mortgage to one of the joint mortgagees it is effectual as a discharge against; the other. The case relied on for this proposition is Barbar-Maran V/s. Ramana Goundan [1897] 20 Mad. 461, but in that case it was held by this Court that when a mortgage was completely discharged by payment to one mortgagee it must also be deemed to be a discharge as against the co-mortgagee. This decision is not in accordance with the view of the Calcutta High Court, but it is based on the fact that the mortgagors liability under the suit contract had been fully discharged and consequently they could not be held liable any further. Accepting this proposition it does not follow that in the present case the arrangement arrived at in Ex. 1 is equally binding on the plaintiff. Under Ex. 1 the liability of defendants 1 and 2 was not fully discharged, but a remission was granted by one of the co-mortgagees in respect of a considerable sum of money due under the mortgage. What really happened was the substitution of a new agreement for the old contract between the parties and in order to render that effective, the consent of all the prior contracting parties is essential. Two English cases have been cited <JGN>Phillips</JGN> V/s. Clagett [1843] 11 M.&W. 84 and Wallace V/s. Kelsall [1841] 7 M.&W. 264. In both these oases it was held that a release by a co-promisee is binding on the other promisee, but in both the oases it was held that there was no fraud on the other promisee and in the former case that even if there was fraud the defendant at least was not a party to it. In the judgments in these cases it is expressly laid down that a Court in the exercise of its equitable jurisdiction may interfere to prevent a defendant from pleading a release, where it would be manifest fraud on a third party seeking to enforce a demand against the defendant, and where the defendant himself is a party to the fraud.

(3.) Although in the present case there may have been no fraudulent intention on the part of defendants 1 and 2, yet the agreement with the father of defendants 3 to 5 to discharge their debt by payment of an amount less than what was due would undoubtedly constitute a fraud on the rights of the plaintiff. Not only has he to rely on his co-mortgagee alone for the payment of half the mortgage money, but his co-mortgagee has not received from the defendants the full amount due under the mortgage and also released the security of the immovable property which the plaintiff had before the agreement was arrived at. It cannot, therefore, be said that in this case the arrangement did not constitute a fraud on the rights of the plaintiff and it is well-recognized law that in such cases the plaintiff would not be bound. A case directly in point is Janhari Singh V/s. Ganga Sahai [1919] 41 All. 631 where two mortgages in favour of B and J were purported to be discharged by a third mortgage in favour of B alone who claimed to be solely entitled to the prior mortgagee. It was there held that J could sue for his share of the mortgage debt. This principle is also laid down by the Privy Council in Sunitibala Debi V/s. Dhara Sundari Debi A.I.R. 1919 P.C. 24.