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Subramania Iyer v. T.D Ramaswami Pillai Alias Ramakrishna Pillai And Others

Madras High Court

Aug 5, 1958

Judgment

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Structured Summary of the Opinion — Execution Proceedings (O.S. No. 4 of 1946)

Factual and Procedural Background

This appeal arises from execution proceedings in O.S. No. 4 of 1946 (Sub-Court, Tanjore). The original suit was a partition suit instituted by Ramaswami Pillai and Palanisami Pillai (respondents 1 and 2 here) against Arumugam Pillai and others (including the 4th defendant). Item 14 of the plaint was a house. During the suit's pendency a family partition among defendants resulted in item 14 falling to the 4th defendant, who mortgaged that property to Subramania Iyer (the present appellant) by Ex. A.1 dated 17-4-1948.

The trial court dismissed the partition suit on 21-12-1946 except as to item 15. The plaintiffs appealed to the District Court and then to the High Court, Madras, ultimately obtaining a preliminary decree for partition and a decree for costs against contesting defendants.

At final decree stage, item 14 (described alternatively as item 4 in the decree proceedings) was ordered sold under the Partition Act and purchased by the plaintiffs for Rs. 2,500. The plaintiffs were allowed to retain Rs. 1,250 (their own half-share) and were directed to pay Rs. 1,250 (representing the 4th defendant's half-share) into court. The plaintiffs did not pay that sum; instead they filed E.P. 8 of 1955 seeking delivery of item 14 and applied to set off the purchase money against their decree for costs. The appellant (mortgagee) filed E.A. No. 37 of 1955 claiming entitlement to the Rs. 1,250 as representing the mortgagor's (4th defendant's) share. Both lower courts rejected the appellant's claim, and the appellant appealed.

Legal Issues Presented

Whether the mortgagee (appellant) of the 4th defendant's interest in the house (a mortgage pendente lite) has a superior right to the Rs. 1,250 representing the 4th defendant's share of the sale proceeds, so as to prevent the plaintiffs from setting off that sum against their decree for costs.
Whether the plaintiffs can set off the purchase money (or part of it) under Order XXI, Rule 19 of the Civil Procedure Code against their decree for costs when that sum represents the share of a judgment debtor who has already mortgaged that share to a third party.

Arguments of the Parties

Appellant's Arguments (Subramania Iyer)

The sum of Rs. 1,250 is the value of the 4th defendant's share in item 14 and the appellant's mortgage security attached to that sum; therefore the appellant is entitled to payment of Rs. 1,250 as representing the mortgagor's share.
The plaintiffs cannot set off the amount payable as purchase money against their decree for costs because the appellant's rights as mortgagee are superior to the plaintiffs' claim to set off.

Respondents' Arguments (Plaintiffs: Ramaswami Pillai and Palanisami Pillai)

The appellant, being a mortgagee pendente lite, should have rights subordinate to those of the plaintiffs whose decree for costs arose in the litigation.
Invoked Section 52 of the Transfer of Property Act to argue about transfers during litigation and their effect on rights of parties to the suit (the respondents relied on the proposition that an alienation pendente lite cannot affect the rights of other parties under any decree).
Reliance on authorities such as the Privy Council decision (Mahalingam Chettiar v. Ramanathan Chettiar) and the Supreme Court decision (T. S. Swaminatha Odayar v. Official Receiver Of West Tanjore) to support their position on set off and charges/liens arising on partition or cross-decrees.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Mahalingam Chettiar v. Ramanathan Chettiar, 1940-2 Mad LJ 677 : AIR 1940 PC 173	The rule that a holder of a decree has a right of set off under O. 31, R. 18 of the CPC against cross-decrees for same or lesser amount, and that such a right cannot be defeated by attachment of the cross-decrees by third parties.	The court noted the Privy Council's holding but distinguished it: the rule of automatic set off between cross-decree holders cannot defeat an earlier charge by a stranger. Thus Mahalingam Chettiar does not assist where there is an anterior mortgage or charge affecting the sum sought to be set off.
T. S. Swaminatha Odayar v. Official Receiver Of West Tanjore, 1957-2 Mad LJ (SC) 53 : AIR 1957 SC 577	Where owelty is awarded in partition, an owelty provision normally creates a charge or lien on the land taken under the partition; such a lien is implied by the terms of the partition.	The court held this authority inapplicable to the present facts: the Rs. 1,250 is the mortgagor's share and, although liable to attachment or set off only to the extent of the 4th defendant's interest, the prior mortgage in favour of the appellant takes precedence over the plaintiffs' later money claim.

Court's Reasoning and Analysis

The court proceeded through the following analytical steps, applying statutory principles and the facts established in the record:

Characterisation of sale proceeds under the Partition Act: the proceeds of a sale of partitioned property represent the respective shares of the persons whose interests are sold. Here the house fetched Rs. 2,500; the plaintiffs retained Rs. 1,250 as their half-share, and Rs. 1,250 represented the 4th defendant's share.
Effect of mortgage on the 4th defendant's share: the 4th defendant had earlier mortgaged the property to the appellant (Ex. A.1 dated 17-4-1948). The court held that the mortgage attached to the 4th defendant's share of the sale proceeds — i.e., the Rs. 1,250 — so that the appellant's security is valid against that sum.
Distinction between personal money claims and proprietary rights: the plaintiffs' claim to set off under Order XXI, Rule 19 CPC is a personal right to set off what is due to the judgment debtor. The court emphasised that such a personal right cannot operate to defeat a prior proprietary security (the mortgage) that attaches to the specific share in the sale proceeds.
Application of Section 52, Transfer of Property Act: the court explained that Section 52 makes an alienation pendente lite ineffective only so far as it affects rights of other parties under any decree; it does not render the transfer invalid as between the transferor and transferee. Accordingly, a mortgage pendente lite does not become void; rather, the decree will render the transferee's rights subservient where appropriate. In this case the mortgage continued to bind the 4th defendant's share.
Precedence of an anterior charge over later set off: relying on the distinction from Mahalingam Chettiar, the court held that the right of set off which arises later (or which is a purely personal right) is subject to any prior charge on the sum to be set off. Therefore, the priority of the mortgagee's charge over the Rs. 1,250 takes precedence over the plaintiffs' attempt to set off that amount against their decree for costs.
Rejection of respondents' reliance on owelty authority: the court observed that the owelty principle in T. S. Swaminatha Odayar (creation of a charge or lien on land by partition owelty) did not support the respondents' position that the plaintiffs' decree for costs created a charge over the owelty money in favour of the plaintiffs that could defeat a prior mortgage.
Practical consequence: the court concluded that the plaintiffs must deposit Rs. 1,250 into court and that sum would be available to the appellant as security for his mortgage; the lower court's contrary conclusion could not be sustained.

Holding and Implications

Holding: The appeal is allowed. The court held that the appellant (Subramania Iyer) — as mortgagee of the 4th defendant's interest — was entitled to protection of his charge over the Rs. 1,250 representing the 4th defendant's share. E.A. No. 37 of 1955 on the file of the Sub-Court, Tanjore, is therefore allowed.

Direct consequences for the parties:

The plaintiffs (respondents 1 and 2) must deposit Rs. 1,250 into court; that sum will be available as security for the appellant's mortgage claim.
The judgment of the lower court rejecting the appellant's claim is set aside; the appellant will have costs of the appeal. Leave was refused.

Broader implications: The court applied established statutory principles (Partition Act proceeds representing shares; Section 52 Transfer of Property Act; and the principle that a prior proprietary charge defeats later personal set off rights). The opinion expressly distinguishes precedents relied upon by the respondents and does not purport to establish a novel rule of law; accordingly, no new broader precedent is announced beyond the application of these principles to the facts of this case.

V.R.B

Disposition: Appeal allowed.

Show all summary ...

1. This appeal arises in execution proceedings of O.S No. 4 of 1946, on the file of the Sub-Court, Tanjore. The appellant was a third party to the suit and his connection with the matter will presently be adverted to O.S No. 4 of 1946 was a suit for partition by Ramaswami Pillai and Palanisami Pillai, respondents 1 and 2 herein, against Arumugam Pillai and others, respondent 8 to 10. According to the plaintiffs they were entitled to a half share in the suit properties, whereas defendants who are the members of the other branch would be entitled to the other half share. One of the items in the suit was item 14 in the plaint, a house. During the pendency of the suit there was a partition amongst the members of the defendants' family as a result of which item 14, namely, the house, fell to the share of the 4th defendant. He mortgaged that property under Ex. A.1 on 17-4-1948 to the present appellant, Subramania Iyer. In the meanwhile on 21-12-1946 the partition suit was dismissed by the trial court except in regard to item 15.

2. The plaintiffs took up the matter in appeal to the District Court of Tanjore and thereafter to the High Court, Madras, and finally succeeded in obtaining a preliminary decree for partition. There was also a decree in favour of the plaintiffs against the contesting defendants for costs which amounted to fairly a good sum of money. It must be stated at this stage that Subramania Iyer the present appellant, an alienee pendente lite from one of the parties to the litigation, namely, the 4th defendant, was not impleaded as a party to the suit or the appeal.

3. At the stage of the final decree proceedings it was held expedient that item 4 should be sold under the provisions of the Partition Act; the plaintiffs purchased the same for a sum of Rs. 2500/- They were allowed to set off the amount due to their share, namely, Rs. 1250 out of the sale price, and were directed to pay the balance of Rs. 1250 into court.

4. Without however paving the money, the plaintiffs filed E.P 8 of 1955 for delivery of item 14 and applied to set off of the amount due by them towards the half share of purchase price against the decree for costs which they obtained in the High, Court. The appellant, the mortgagee of the interest of the 4th defendant in the property applied in E.A No. 37 of 1955 praying that it should be held that he was entitled to payment of Rs. 1250 as representing the share of the mortgagor, namely, the 4th defendant.

5. He claimed that the security under the mortgage attached to the sum which was payable by the plaintiffs as purchase money towards the 4th defendant's share of item 14. Both the courts have rejected the claim of the appellant. The appellant has therefore filed the present appeal against the order of the lower court.

6. On behalf of the appellant it is contended that the plaintiffs would not be entitled to set off the amount payable by them as purchase money against what was due to them from the defendants by way of costs as the appellant's right as a mortgagee of the 4th defendant's interest in the house was superior to their claim.

7. It is stated that the sum of Rs. 1250 which the plaintiffs were bound to pay as purchase price represented the value of the 4th defendant's share in item 14 and that the security which Subramania Iyer had over the property attached to that money and any claim for set off in respect of the money claim which the plaintiffs may have against the 4th defendant would not prevail over the security.

8. It is clear that under the provisions of the Partition Act, if a property is sold, the proceeds of the sale would represent the shares of the persons which have been so sold. In the present case, the plaintiffs purchased the property. It is not clear as to whether the property was sold under Section 2 or Section 4 of the Partition Act, but it is admitted that the price of the house was fixed at Rs. 2500.

9. It is also admitted that the plaintiffs would be entitled only to half a share thereof in their own right and that they having purchased the house were allowed to retain one half of the price representing their share in the proceeds and were directed to pay the other half, namely, Rs. 1250 the share of the 4th defendant. It is undoubted that over the sum of Rs. 1250 (being the share of the 4th defendant) the security which the appellant had would prevail.

10. The right of the 4th defendant to that sum would be only subject to that security as the 4th defendant would be bound by the mortgage, which he granted to the appellant. The plaintiffs who had only a money claim against the defendants (appellant not being one of them) in respect of costs decreed could attach or set off only what was due to the 4th defendant; that right being subject to the mortgage claim of the appellant, could not prevail over it. The plaintiffs, therefore, cannot set off under the provisions of Or. XXI, rule 19 of the CPC against what does not really belong to the fourth defendant.

11. It: is contended on behalf of the respondents that the appellant's rights should be held to be subordinate to those of the plaintiffs as the appellant was only a mortgagee pendente lite. Section 52 of the Transfer of Property Act states that a property in respect of which a suit is pending cannot be transferred or otherwise dealt with by any party to the suit so as to affect the rights of any other party thereto under any decree or order which may be passed therein.

12. Such a transfer however will be held void only, so far as it affects the right of any other party to the litigation. The decree in the suit does not have the effect of annulling a conveyance or mortgage but would only render it subservient to the rights of the parties to the litigation. That is to say, if the appellant got a mortgage of the entire house (as he did) and it was ultimately declared in the partition suit that the plaintiffs would be entitled to a half share therein, the mortgagee would be bound by that declaration and his security would be dismissed to half of the property.

13. The effect of Section 52 of the Transfer of Property Act is that the right of successful party in the litigation in regard to that property would not be affected by the alienation but it does not mean that as against the transferor, the transaction is invalid. Nor does it mean that any other money claim which the plaintiffs may have in the course of the suit would prevail over the rights of the transferee of or mortgagee over the property.

14. The decree for costs in the present case was not made a charge on the property of the 4th defendant. Even then a question may arise whether the charge would be effective from the date of suit or the date of decree. It remained only as a money claim and the plaintiffs would have a right only to proceed against the interest of their judgment debtor, namely, the 4th defendant, that interest being subject to the mortgage claim of the appellant.

15. I am therefore of the opinion that plaintiffs 1 and 2 would have to deposit the sum of Rupees 1250 into court and that would be available for the appellant as security for his mortgage. The learned advocate for the respondents referred me to the decision of the Privy Council in Mahalingam Chettiar v. Ramanathan Chettiar, 1940-2 Mad LJ 677 : (AIR 1940 PC 173). In that case there were cross decrees in separate suits for payment of money between the same parties. A third party effected attachment of one of the decrees.

16. The decree holder in the cross decree stated that he had a prior right to set off his decree against what was due from the judgment debtor under his decree. The Privy Council held that the right given to the holder of a decree under O. 31, R. 18 of the CPC of setting off of cross decrees for the same or lesser amount cannot be defeated by the attachment of the cross decrees by third parties.

17. This decision proceeded on the footing that as soon as cross decrees are passed there is a right of set off between the cross decree-holders and any attachment by a stranger decree-holder thereafter would be only subject to that right of set off which came into existence the moment the decrees were passed. This rule cannot in my opinion apply to a case where there is an anterior charge over one of the decrees, for then the right to set off can only be subject to the charge.

18. I have held in the present case that the mortgage in favour of the appellant was valid against the 4th defendant and therefore the right to set off which is only a personal right against (sic) cannot as such have an operation over the property. In the decision referred to above the Privy Council left open the question as to what would be the result if the cross-decree was attached by a stranger decree-holder even before it was passed.

19. The decision in T. S. Swaminatha Odayar v. Official Receiver Of West Tanjore.., 1957-2 Mad LJ (SC) 53: ((S) AIR 1957 SC 577) was next referred to. In that case the Supreme Court held that where an owelty is awarded to a member on partition for equalisation of the shares on an excessive allotment of immovable properties to another member of the joint family such a provision of owelty ordinarily creates a charge or a lien on the land taken under the partition and such a lien would be implied by the very terms of the partition.

20. I am unable to appreciate how this case can have any application to the matter in dispute. For the sum of Rs. 1250 which the plaintiffs have to pay, the 4th defendant may have a charge over the properties of the plaintiff, but that does not mean that the plaintiffs have a charge in respect of their decree for costs against the owelty money. There is a further answer to this contention.

21. The sum of Rs. 1250 represents the share of the 4th defendant in the property. It may, no doubt, be liable to attachment or set off under O. 21, R. 19 of the CPC to the extent of the interest which the 4th defendant has in the money on the date of the decree; but long prior to it there was a mortgage created over his share in favour of the appellant. The respondents 1 and 2 whose rights under the decree for money came in long afterwards cannot sustain their claim in preference to that of the appellant. I am of the opinion that the judgment of the lower court cannot be sustained. This appeal is, therefore, allowed and E.A No. 37 of 1955 on the file of the Sub Court, Tanjore, will stand allowed. The appellant will have his costs in the appeal. Leave refused.