SONAULLA KARIKAR Vs. ABU SAYAD MAHAMMAD ISMAIL

JUDGEMENT

(1.) The predecessor of defendants 1 to 4 borrowed a sum of Rs. 55 from the plaintiff in January 1915, and executed the mortgage bond in suit. In November 1916 the mortgagors sold the mortgaged property to defendant 5. In December 1916 they sold the same property to the plaintiff mortgagee for Rs. 300, out of which Rs. 123 was paid in cash to the mortgagor and Rs. 177 was credited towards the mortgage of 1915. The mortgagors put the plaintiff in possession of the property. Thereafter, defendant 5 brought a suit in 1923 against the plaintiff for recovery of possession of the property and succeeded in obtaining a decree, in execution of which the plaintiff lost possession of the property. That litigation ended on 27 June 1925, and, on 29 August 1925, the plaintiff instituted the present suit on the bond of January 1915, for recovery of the amount due under it. Defendant 5 entered appearance and contested the suit and the only defence with which we are now concerned is his contention that the plaintiff's mortgage bond of 1915 is no longer operative and the mortgage lien has been extinguished by the plaintiff's purchase of the property in December 1916. The trial Court overruled this objection and also other objections taken on behalf of the defendants and allowed the plaintiff a partial decree. The plaintiff and defendant 5 both appealed and the learned Subordinate Judge gave effect to the objection taken by defendant 5 on the ground stated above and as a result allowed the defendant's appeal and dismissed =the plaintiff's appeal without discussing the other questions raised in this case which in view of his judgment were not considered necessary. The plaintiff is the appellant in this case and it is argued on his behalf that the view of law taken by the lower appellate Court is erroneous.

(2.) The learned Subordinate Judge has relied on Section 101, T.P. Act and held that the plaintiff having purchased the mortgaged property in December 1916, the mortgage charge was extinguished, and hence the plaintiff is not entitled to maintain the suit on the mortgage bond of 1915. In my judgment, this view of the law, in the circumstances of the case, cannot be supported. According to the facts as stated above, in December 1916, when the mortgagors sold the property to the plaintiff, they had no subsisting title to it, and, therefore, they could pass no title to the plaintiff. Section 101, T.P. Act says that, where the owner of an incumbrance on immovable property becomes absolutely entitled to that property, the encumbrance shall be extinguished. The principle underlying this section is an application of the well-known doctrine of merger. Where the full interest and the limited interest coalesce, the limited interest is extinguished. But in the present case there was no combination of the two interests. The word "absolutely" is used in the section to indicate that the interest in which the encumbrance should merge must be the absolute interest and not a limited one. And the incumbrancer must become entitled to the absolute interest. The property in this case had already been purchased by defendant 5 and so the plaintiff did not become entitled to the property. Hence Section 101, T.P. Act, has no application to the present case.

(3.) Another point of view is that the sale by the mortgagors to the plaintiff in December 1916, was a fraudulent transaction. The mortgagors had, a few days before the sale, already parted with their interest in the property by sale to defendant 5. Fraud perpetrated by a party to the transaction will not give it validity except in the case of a subsequent holder of the property in good faith and for valuable consideration. Where the transaction is vitiated by fraud, it affects not only the right of the party to the fraud, but even an innocent party who was apparently not a party to the fraud. The law is thus stated in Ghose's Mortgage, 5 Edition Vol. 1, p. 487: Where a release has been obtained by fraud or misrepresentation, it will, of course, be inoperative as between the parties, and the mortgagee would be restored to his original position on discovery of such fraud or misrepresentation. And this right may be exercised even against a person who is innocent of the fraud, provided he has not given any valuable consideration. that is, subsequent to the fraud and in the honest belief of the genuineness of the transaction. But it is difficult to hold that defendant 5, though not a party to the fraud, was not privy to it or did not help the mortgagor in practising the fraud on the plaintiff. He purchased the property before the plaintiff, but did not take possession of it. His document was registered many months after it was executed. So that, on the date when the plaintiff purchased the property and obtained possession of it, he had no reason to believe that the mortgagors had lost their interest in it and were not, therefore, in a position to pass it. This the mortgagors could only do because of the negligence or intentional omission by defendant 5 to take possession of the property when he purchased it. On this ground also defendant 5 is not entitled to succeed. Then again, when defendant 5 purchased the property, ha took it subject to the plaintiff's mortgage. He cannot get rid of it by the fraudulent act of the mortgagors.