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Attorney(S)
  • For the Appellant: T.R. Srinivasan, V.S. Rangaswami Iyengar, Advocates.
Judges
  • Rajamannar, C.J
  • Umamaheswaram, J.
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Attorney(S)
  • For the Appellant: T.R. Srinivasan, V.S. Rangaswami Iyengar, Advocates.
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  • Rajamannar, C.J
  • Umamaheswaram, J.
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Smart Summary

Summary of Opinion by Rajamannar, C.J. (Letters Patent Appeal under Cl. 15)

Factual and Procedural Background

The suit arose from a mortgage deed dated 24-1-1927 executed by Muthu Goundan in favour of Kanhavya Reddi for Rs. 1,000. The mortgaged property comprised three items. By a sale deed dated 4-6-1941, Muthu Goundan conveyed a moiety of items 1 and 2 to defendant 1. On the same day, a brother of Muthu Goundan sold the other moiety in items 1 and 2 to defendant 2. Item 3 remained in the possession of the mortgagor.

The plaintiff (the original respondent in the appeal) sued the purchasers (defendants 1 and 2) to recover the mortgage debt; the original mortgagor was not impleaded. Although the plaint schedule included item 3, at trial the plaintiff's vakil endorsed the plaint to disclaim any relief in respect of item 3 and exonerated it from the suit; the trial therefore proceeded only against defendants 1 and 2.

The learned Subordinate Judge dismissed the suit as against defendant 2 (holding the mortgage was not binding on the brother) — that dismissal became final after the plaintiff's appeal was dismissed as out of time by the District Judge of North Arcot. The Subordinate Judge decreed the suit against the share of Muthu Goundan in items 1 and 2 in the hands of defendant 1. Defendant 1's first appeal was dismissed by the District Judge. Defendant 1 then filed S.A. No. 1178 of 1947 (a second appeal) which was dismissed by Viswanatha Sastri, J. A Letters Patent Appeal under Clause 15 was then pursued; defendant 1 died pending the Letters Patent Appeal, and his legal representatives were brought on record.

Legal Issues Presented

  1. Whether the purchaser of a portion of mortgaged property (defendant 1) is entitled to the right of marshalling against the mortgagee under Section 56 of the Transfer of Property Act as amended by the Amending Act of 1929 (i.e., whether the amended provision applies notwithstanding that the mortgage was executed before the amendment).
  2. Whether the rights of the mortgagee to realise the whole mortgage debt from any part of the mortgaged property (as recognised under the original Section 56) were preserved by Section 63 of the Amending Act and/or by the General Clauses Act, including the related question whether any such right is a mere "privilege" which was not saved.
  3. Whether non-joinder of the original mortgagor — a person interested in the equity of redemption — required dismissal of the suit, abatement of recovery, or other relief (including whether the court should, in the exercise of its power under Order I Rule 10 CPC, implead the mortgagor at this stage).

Arguments of the Parties

Appellant's Arguments (Mr. K. Bhashyam Aiyangar)

  • First contention: Defendant 1 is entitled to marshalling under the substituted (amended) Section 56 of the Transfer of Property Act, because the substituted section (post-1929 amendment) expressly permits a purchaser of one of the mortgaged properties to have the mortgage debt satisfied out of the other property so far as it will extend. He argued the amended section should apply to the case despite the mortgage having been executed in 1927, on the basis that either the mortgagee had no such right at the date of the mortgage which remained unaffected, or that any right would only accrue on enforcement (which occurred after the amending Act), so the amended provision governs.
  • He relied on principles in the General Clauses Act (citing Section 6) to suggest that the amending Act did not save a mortgagee's "privilege" unless expressly preserved, and that Section 63 of the Amending Act did not save such a "privilege".
  • Second contention (non-joinder): Under Order 34 Rule 1 CPC, all persons interested in the equity of redemption must be made parties. The mortgagee had deliberately omitted to join the mortgagor (who was in possession of item 3) and therefore should not be permitted to recover the entire debt from the purchasers alone. At minimum he argued the mortgagee should be limited to recovering a proportionate share from the purchasers. He sought support from Periakaruppa Pillai v. Satyanarayanamurthi (AIR 1937 Mad 136).
  • Further, he asked the court to exercise its power under Order I Rule 10 CPC to implead the mortgagor or the mortgagor's representatives. He contended the plaintiff deliberately omitted the mortgagor fearing application of Madras Act 4 of 1938 (scaling down of mortgage debt), which might affect the mortgagee's claim or give benefit to the purchaser; he pointed out that the Full Bench decision in Venkatavadhamulu v. Ramayya Garu (AIR 1954 Mad 383 (FB)) had removed that danger.

The opinion does not contain a detailed, adversarial presentation of the respondent's separate arguments beyond the relief sought and both the plaintiff's procedural endorsement disclaiming item 3 at trial and the trial and appellate courts' rulings described in the background.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Perumal Pillai v. Raman Chettiar, AIR 1918 Mad 1030 (Full Bench) Established that under the original Section 56 a mortgagee releasing part of mortgaged property was not bound to abate proportionately; the mortgagee could recover the whole mortgage amount from any portion of the mortgaged property. The court relied on this Full Bench ruling to conclude that the original Section 56 did not entitle a purchaser to marshalling against the mortgagee; this precedent supported applying the pre-amendment rule to the present mortgage.
Periakaruppa Pillai v. Satyanarayanamurthi, AIR 1937 Mad 136 In a redemption suit, where the integrity of the mortgage was broken by the mortgagee, a person interested in a part of the equity of redemption could obtain partial relief (redeem the whole property subject to equities) though a relevant person had been omitted. The court distinguished this authority: it held the case was a redemption suit with particular facts (integrity broken) and therefore did not apply to the present suit for recovery of mortgage money; the principle could not be invoked to limit the mortgagee's recovery here.
Venkatavadhamulu v. Ramayya Garu, AIR 1954 Mad 383 (Full Bench) Addressed the effect of Madras Act 4 of 1938 on mortgage debts (relevant to the appellant's concern that a scaling-down statute might affect the mortgage debt). The court noted this Full Bench decision removed the appellant's asserted danger from Madras Act 4 of 1938; the court nevertheless declined to implead the mortgagor at this late stage despite that removal of danger.

Court's Reasoning and Analysis

The court undertook a stepwise analysis of the principal contentions raised by the appellant:

  1. Applicability of Section 56 (amended vs. original): The court began by recognizing that the substituted (post-1929) Section 56 would, on its face, permit a purchaser of one of the mortgaged properties to claim marshalling even against the mortgagee. However, because the mortgage in question dated from 24-1-1927 (prior to the Amending Act of 1929), the court examined whether the original or the amended provision governed the parties' rights.
  2. Reliance on prior authority and statutory saving: The court accepted the Full Bench decision in Perumal Pillai as authoritative on the construction of the original Section 56: under that provision a purchaser could not insist on marshalling against the mortgagee and the mortgagee could elect which part of the security to realise. The Amending Act contained Section 63 saving rights, titles and remedies acquired before 1-4-1930. The court treated Section 63 as a restatement of general principles of statutory interpretation and invoked the General Clauses Act (Section 6) principles to determine that the mortgagee's right to realise the debt from any part of the security was a right existing at the date of the mortgage and was therefore saved.
  3. On the appellant's submission that the mortgagee's entitlement was a mere "privilege" and therefore not saved, the court rejected that characterization: it held the mortgagee had a right accruing on the date of the mortgage to realise the entire debt from any part of the mortgaged property, and even if that were described as a "privilege" the General Clauses Act would protect it unless the amending statute expressly or by necessary intendment took it away.
  4. Non-joinder argument: The court addressed appellant's contention under Order 34 Rule 1 CPC that those interested in the equity of redemption should have been impleaded. While acknowledging the rule, the court observed that Order I Rule 9 CPC limited the remedy of dismissal for non-joinder in the circumstances relied upon by the appellant. The court distinguished Periakaruppa Pillai (a redemption suit where the integrity of the mortgage had been broken) as inapplicable to the present case (a suit for recovery where the plaintiff had disclaimed relief in respect of item 3 at trial).
  5. Impleading the mortgagor at this stage: Although the appellant asked the court to use its power under Order I Rule 10 CPC to add the mortgagor now (arguing the plaintiff had deliberately omitted the mortgagor out of fear of Madras Act 4 of 1938), the court declined. It observed that the Full Bench decision in Venkatavadhamulu had removed the specific statutory danger cited by the appellant, and the court saw no justification for impleading the mortgagor at this late stage and remanding the matter for retrial.
  6. Effect of the release of an item by the mortgagee: The appellant advanced a contention that the mortgagee's release of one of the items might itself split the mortgage and entitle the purchaser to relief. The court found no authority to support that proposition and declined to accept it, holding that release of one item did not have that effect.
  7. Final synthesis: Applying the original Section 56 (as interpreted in Perumal Pillai), the court concluded that the purchaser (defendant 1) had no right to marshalling against the mortgagee, that the non-joinder did not require dismissal nor limit recovery in the manner sought by the appellant, and that defendant 1 retained, independently, a right to contribution against the mortgagor which was not affected by the decree in favour of the mortgagee.

Holding and Implications

Holding:

DISMISSED WITH COSTS. The Letters Patent Appeal was dismissed and the decree of the courts below (which had decreed recovery against the share of Muthu Goundan in items 1 and 2 in the hands of defendant 1 and dismissed relief as against defendant 2) was affirmed.

Implications and direct effects:

  • The court held that the rights of the parties are governed by the original Section 56 of the Transfer of Property Act (as interpreted by the Full Bench in Perumal Pillai), under which a purchaser of part of the hypothecated property cannot claim marshalling against the mortgagee; the mortgagee may realise the entire mortgage debt from any part of the mortgaged property.
  • The Amending Act and Section 63 did not displace that existing right of the mortgagee in the circumstances of this case; the court rejected the argument that the mortgagee's entitlement was an unsaved "privilege".
  • The court refused to order impleading of the mortgagor at this late stage under Order I Rule 10 CPC and declined to remand the suit for retrial.
  • The court expressly noted that defendant 1's right to contribution against the original mortgagor remains unaffected by the decree granted to the mortgagee.
  • The court found no authority for the proposition that the mortgagee's release of an item of security by itself splits the mortgage; it declined to treat such release as producing that effect.
  • The opinion applies existing authorities to the facts and does not purport to establish a new legal principle beyond the application and reaffirmation of prior Full Bench and appellate rulings.
V.R.B

Order: Appeal dismissed.

Show full summary ...

    Subbarama Reddiar And Others v. Raghava Reddi And Another

    Rajamannar, C.J:— This is an appeal under Cl. 15, Letters Patent against the judgment of Viswanatha Sastri, J., dismissing S.A No. 1178 of 1947, with his leave. The appeal arises out of a suit brought by the original respondent to recover the amount due-under a mortgage deed dated 24-1-1927, executed by one Muthu Goundan to one Kanhavya Reddi for Rs. 1000. The respondent claimed under an assignment from the original mortgagee. The mortgaged property comprised three items. Subsequent to the mortgage, by a sale deed dated 4-6-1941, Muthu Goundan conveyed to defendant 1 a moiety of items 1 and 2 of the mortgaged properties. On the same day, a brother of Muthu Goundan sold the other moiety in these items to defendant 2. The third item continued to remain with the mortgagor.

    2. The suit was brought against the purchaser as defendants 1 and 2, but the original mortgagor was not made a party. They plaint schedule, however, included item 3 also, though the mortgagor who was in possession of it was not made a party. But at the time of the trial, the plaintiff's vakil made an endorsement on the plaint that he did not claim any relief against item 3 and that the plaintiff exonerated it from the suit. The suit was, therefore, tried only against defendants 1 and 2. The learned Subordinate Judge who tried the suit dismissed it as against defendant 2 as he held that the mortgage executed by Muthu Goundan was not binding on his brother whose share in items 1 and 2 was purchased by defendant 2. That dismissal became final because the appeal filed by the plaintiff was dismissed as out of time by the learned District Judge of North Arcot. The learned Subordinate Judge decreed the suit against the share of Muthu Goundan in items 1 and 2 in the hands of defendant 1. There was an appeal by defendant 1, but that was dismissed by the learned District Judge. He then preferred a second appeal to this court, viz., S.A No. 1178 of 1947, which was also dismissed by Viswanatha Sastri, J. Pending the Letters Patent Appeal, defendant 1 appellant died and his legal representatives were also brought on record.

    3. Mr. K. Bhashyam Aiyangar, learned counsel for the appellants, raised two contentions in the main. But both the contentions were founded on the fact that the original mortgagor, Muthu Goundan, had not been made a party to the suit. The first contention was that defendant 1 was entitled to the right of marshalling conferred by Section 56 of the Transfer of Property Act as it now stands after the amending Act of 1929. The view taken by Viswanatha Sastri, J. was that the section as it now stands does not apply to the present case which is covered by the section as it stood before the amendment. The section as it stood originally was as follows:

    “Where two properties are subject to a common charge, and one of the properties is sold, the buyer is, as against the seller, in the absence of a contract to the contrary, entitled to have the charge satisfied out of the other properties, so far as such property will extend”.

    4. It was well established that this provision did not entitle the purchaser to claim marshalling as against the mortgagee himself. The mortgagee had a right to proceed against whatever property he chose to realise the sum due to him under the mortgage and he could not be compelled to split his security. The purchaser of a portion of the property was not entitled to insist on an abatement of the amount due in respect of the mortgage proportionate to the value of the property in his hands. That this was the law, in any event so far as this court was concerned, on the construction of the original section, was not seriously disputed by Mr. Bhashyam Aiyangar. Indeed, he could not do that, having regard to the ruling of the Full Bench of this Court in — ‘Perumal Pillai v. Raman Chettiar’, AIR 1918 Mad 1030 (FB) (A).

    5. It was there held that a mortgagee releasing from the suit a portion of the mortgaged property was not bound to abate a proportionate part of the debt and was entitled to recover the whole of the mortgage amount from any portion of the mortgaged property. The contention of Mr. Bhashyam Aiyangar, therefore, was that the section which was substituted for the original Section 56 of the Amending Act and which stands today should be applied to his case. That provision does certainly give right to the purchaser of one of the properties mortgaged to claim marshalling even as against the mortgagee, because it says he will be entitled to have the mortgage debt satisfied out of the property not sold to him so far as the same will extend. In the present case, the date of the mortgage is 24-1-1927, that is to say, prior to the passing of the Amending Act.

    6. Section 63 of the Amending Act 20 of 1929 provides ‘inter alia’ that nothing in the provisions of the Act mentioned in that section which include the provision substituting for the old S. 56 of the present section, shall be deemed in any way to affect the terms of incidents of any transfer of property effected before 1-4-1930, or any right, title, obligation, or liability already acquired or incurred before such date, or any remedy or proceeding in respect of such title, obligation or liability. This, it may be remarked, is merely a statement of the general law relating to interpretation of statutes, some of the principles of which are found embodied in the General Clauses Act. Mr. Bhashyam Aiyangar contended firstly, that the mortgagee had no right on the date on which the mortgage was executed, that is, before the coming, into force of the Amending Act, which continued to remain unaffected by the amendment, and secondly, that even if there is any right, it would accrue only at the time of the enforcement of the mortgage, which was certainly long after the amending Act.

    7. He tried to build up some argument on the fact that the provision in the General Clauses Act (S. 6) mentions in addition to right, obligation, liability etc., also “privilege”. Privilege is not mentioned as such in Section 63(c) of the Amending Act of 1929 and therefore any privilege which the mortgagee might have had of recovering the entire amount of the mortgage money payable to him from any part of the security was not saved by Section 63 of the Amending Act. We are unable to agree with this contention.

    8. We have no hesitation in holding that the mortgagee had a right which accrued to him on the date of the mortgage itself of realising, if he chose, the entire amount due to him from any part of the mortgaged property. Such a right was not subject to any right of marshalling at the instance of the purchaser of a portion of the hypotheca. To speak of this right as a mere privilege is not correct. Even assuming that all that the mortgagee had was privilege, even then under Section 6 of the General Clauses Act, that privilege itself would not be taken away except by express enactment or necessary intendment by the amending Act. We therefore agree with the learned Judge, Viswanatha Sastri, J. that notwithstanding the amending Act which came into force by the time of the institution of the suit, the rights of the parties are governed by the original S. 56 under which the purchaser of any portion of the hypothecated property did not have the right of marshalling as against the mortgagee.

    9. Mr. Bhashyam Aiyangar's next contention was a plea of nonjoinder. Under O. 34 R. 1 of the CPC all the persons interested in the equity of redemption are to be made parties. So the mortgagee could not be allowed to deliberately exclude the mortgagor himself who certainly was interested in the equity of redemption so far as item 3 was concerned and claim to recover the entire money from the purchaser only. So his argument ran. Having regard to the terms of O. 1, R. 9 of the CPC, learned counsel could not insist upon a dismissal of the suit. But he argued that even if the suit be not dismissed the mortgagee should not be given anything more than a proportionate share of the mortgage money, to be recovered from the part of the mortgaged property in the hands of the purchaser. Mr. Bhashyam Aiyangar sought to rely upon a decision of this court in — ‘Periakaruppa Pillai v. Satyanarayanamurthi’, AIR 1937 Mad 136 (B), as lending him some support to his argument.

    10. But we think that decision has no application whatever to the facts of this case. That was a suit for redemption, and it was held that in spite of the integrity of the mortgage being broken by the mortgagee, one of several mortgagors or a purchaser of a portion of the equity of redemption was entitled to redeem the whole property subject to the equities in favour of other persons. In that case, one of the persons interested in the equity of redemption was not made a party. It was found, that he had been deliberately omitted. Such omission, however, did not entail a dismissal of the suit, but the plaintiff could not be given the only relief of redeeming that part of the mortgaged property in which the plaintiff was interested on payment of a proportionate amount but he was not entitled to the larger relief of redemption of the entire property.

    11. In that case, it had been found that the integrity of the mortgage has been broken by the mortgagee himself. It was therefore possible to direct a partial redemption at the instance of a person interested in a part of the equity of redemption. We fail to see how the principle of this decision can apply to the present case. As the suit cannot be dismissed on account of the omission to implead the mortgagor as a party and as defendant 1 purchaser cannot claim any abatement by reason of the fact that, the mortgagee had given up the items in the possession of the mortgagor, the decree passed by the courts below and confirmed by the learned Judge in second appeal was the proper decree to be passed.

    12. Mr. Bhashyam Aiyangar wanted us even now to exercise the power which we undoubtedly have under O. 1 R. 10 of the CPC, to implead the mortgagor or her representatives as parties to the suit.

    13. He pointed out that the plaintiff deliberatley omitted to join the mortgagor as a defendant because he was afraid that on an application of the provisions of Madras Act 4 of 1938 the mortgage debt would be scaled down and even the purchaser may become entitled to the benefit of the scaling down. But that danger is now completely averted by reason of the decision of the Full Bench of this court in — ‘Venkatavadhamulu v. Ramayya Garu’, AIR 1954 Mad 383 (FB) (C). This may be true, but we see no justification for impleading the mortgagor at this late stage and to remand the suit to the trial court practically for a re-trial of the suit.

    14. As laid down in AIR 1918 Mad 1030 (FB) (A), the right of defendant 1 to contribution against the original mortgagor is not affected by the decision in this suit granting relief to the mortgagee. We are therefore convinced that this is not a case in which we should add the mortgagor as a party at this late hour. Mr. Bhashyam Aiyangar made a faint attempt to argue that the release of one of the items mortgaged by itself brought about a splitting up of the mortgage. We are unable to agree with the contention in the absence of any, authority. We are incilned to hold that it has no such effect. We agree with Viswanatha Sastri, J. that the conclusion arrived at by the two courts below is correct.

    15. The Letters Patent Appeal is, therefore, dismissed with costs.

    V.R.B

    16. Appeal dismissed.

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    Comments

    Subbarama Reddiar And Others v. Raghava Reddi And Another
    (Feb 10, 1954)