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Dhonavakonda Gopalarao v. Thatha Venkatadri .
Structured Summary of the Opinion
Factual and Procedural Background
The plaintiff (appellant) is challenging a decree of the District Judge of Nellore in A.S. No. 4 of 1950 which dismissed his suit. The factual sequence set out in the opinion is as follows:
- 1st defendant mortgaged a house to the plaintiff by a simple mortgage under Exhibit A-1 dated 19 April 1934 and executed a second simple mortgage of the same property in favour of the 4th defendant on 10 November 1939.
- The plaintiff purchased the house from the Official Receiver in the insolvency of the 1st defendant under Exhibit A-2 dated 7 April 1942 and took possession.
- The 4th defendant filed O.S. No. 309 of 1946 on his mortgage and obtained a decree for sale of the house subject to the prior mortgage (Exhibit A-1) in favour of the plaintiff.
- The plaintiff then instituted O.S. 240 of 1948 to enforce his prior mortgage (Exhibit A-1) by sale of the hypotheca. To avoid the bar of limitation he relied on an acknowledgment of liability contained in the 1st defendant's insolvency petition (I.P. No. 4 of 1939).
- The 4th defendant pleaded that the plaintiff's suit for sale was barred by limitation.
- At trial the plaintiff amended his plaint to include an alternative prayer for a declaration of the amount due under the mortgage. The trial court held the suit for sale barred by limitation but granted a declaratory decree of the amount due.
- The plaintiff did not appeal the trial court's refusal of relief by sale. The 4th defendant appealed to the District Court of Nellore, which allowed the appeal and dismissed the suit entirely, holding the plaintiff was not entitled to the declaration.
- The plaintiff then preferred this second appeal to the court that delivered the present opinion.
Legal Issues Presented
- Whether the plaintiff's suit for sale on the mortgage (Exhibit A-1) was barred by limitation.
- Whether, if the suit for sale was barred by limitation, the plaintiff was nevertheless entitled to a declaratory decree as to the amount due under the mortgage.
Arguments of the Parties
Appellant's Arguments
- The appellant contended that the suit for sale on the mortgage was not barred by limitation.
- Alternatively, the appellant argued that even if the suit for sale was barred by limitation, the declaration of the amount due under the mortgage should not have been refused by the appellate court.
- It was also argued for the appellant that the acknowledgment of liability filed by the mortgagor in I.P. No. 4 of 1939 should save the suit from the bar of limitation because, in this case, the mortgagor retained an equity of redemption when the acknowledgment was made (distinguished from some prior decisions where the mortgagor had parted with all interest).
4th Defendant's Arguments (Puisne Mortgagee)
- The 4th defendant pleaded that the plaintiff's suit for sale on the mortgage was barred by limitation.
- Implicit in the plea was the contention that any acknowledgment made by the mortgagor in his insolvency petition did not bind the 4th defendant (a subsequent encumbrancer whose interest had been derived prior to the acknowledgment).
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Mahomed Khaleel v. Les Tanneris Lyonnaise, (1926) 51 M.L.J. 570; L.R. 53 I.A. 84; I.L.R. 49 Mad. 435 (P.C.) | Procedural rule that a direct appeal to a higher court from the decree of a munsif is not permissible; requirement to appeal first to the district court from the trial court's decree. | The court relied on this authority to hold that the plaintiff could not agitate the limitation point on second appeal without having appealed to the district court against the trial court's decree dismissing the suit for sale. |
| Pavayi v. Palanivelu Goundan, (1940) 1 M.L.J. 766; I.L.R. (1940) Mad. 872 (Full Bench) | Authority on whether an acknowledgment by a mortgagor binds subsequent encumbrancers (puisne mortgagees or purchasers) for the purposes of extending limitation under section 19 of the Limitation Act. | The lower appellate court relied on this full bench decision to hold that the acknowledgment did not bind the puisne mortgagee and that the suit on the mortgage was barred by limitation; the present court cited and endorsed the principle applied in that decision. |
| Balding v. Lane, (1863) 1 De G. J. & S. 122; 46 E.R. 47 | Principle from Lord Westbury that it would be unjust to construe a provision (corresponding to section 19) so as to allow a mortgagor by his acknowledgment to deprive subsequent encumbrancers of the benefit of the statute of limitation. | The court cited this observation to support the view that acknowledgments by a mortgagor should not operate to the disadvantage of subsequent encumbrancers who acquired their interest before the acknowledgment. |
| Surjiram Marwari v. Barhamedeo, (1905) 1 C.L.J. 337 | Application of the principle to section 19 of the Limitation Act and the reasoning that an acknowledgment operates against another only if that other derived title or liability from the person making the acknowledgment after it was given. | The court relied on Mukherjea J.'s reasoning in this case as a doctrinal basis for limiting the effect of acknowledgments under section 19. |
| Bank of Upper India v. Skinner, (1942) 2 M.L.J. 559; L.R. 69 I.A. 130; I.L.R. 23 Lah. 686 (P.C.) | Privy Council acceptance of Mukherjea J.'s reasoning: acknowledgments by mortgagors do not bind purchasers or assignees where the purchaser/assignee acquired their interest before the acknowledgment; acknowledgments made after the mortgagor has parted with interest do not bind the purchaser. | The court cited the Privy Council's conclusion and reasoning to support the proposition that the mortgagor's acknowledgment in I.P. No. 4 of 1939 did not bind the 4th defendant whose interest was derived prior to the acknowledgment. |
| Naranappa Naicker v. Ramalingam Pilial, (1950) 2 M.L.J. 13 | Support for the proposition that an acknowledgment by the mortgagor does not extend limitation against a subsequent mortgagee whose title derived before the acknowledgment. | The court cited this decision as further authority supporting its view on the inapplicability of the mortgagor's acknowledgment to bind the puisne mortgagee. |
Court's Reasoning and Analysis
The court's reasoning proceeds in two principal strands: (A) procedural/appealability issues and the bar of limitation on the suit for sale, and (B) the propriety of granting declaratory relief where the suit for enforcement is time-barred.
A. Procedural Bar to Raising Limitation on Second Appeal
- The trial court dismissed the plaintiff's suit insofar as it sought sale of the hypotheca on limitation grounds, while granting a declaration of the amount due. The plaintiff did not appeal against the trial court's dismissal of the suit for sale.
- When the 4th defendant appealed, the District Court declined to grant declaratory relief and dismissed the suit. The present appeal is a second appeal. The court held that the plaintiff cannot raise the question of limitation on second appeal without having appealed to the district court against the trial court's decree dismissing the suit for sale.
- The court relied on Mahomed Khaleel (P.C.) for the procedural principle that the plaintiff's course amounted to a direct appeal not permitted by the procedure; thus the limitation issue could not properly be agitated on second appeal in these circumstances.
B. Substantive Limitation and Effect of Acknowledgment
- On the substantive question the court concluded that the suit for sale on the mortgage Exhibit A-1, filed more than 12 years after the money became due, was barred under Article 132 of the Limitation Act.
- The court examined whether the mortgagor's acknowledgment in his insolvency petition (I.P. No. 4 of 1939) could save the suit from limitation as against the 4th defendant (a puisne mortgagee whose mortgage predated the acknowledgment).
- The court adopted the principle established in the cited authorities (Pavayi full bench; Balding v. Lane; Surjiram Marwari; Bank of Upper India v. Skinner; Naranappa Naicker) that an acknowledgment by the mortgagor is operative against another person only if that person derived title or liability from the mortgagor after the acknowledgment was given.
- Consequently, an acknowledgment cannot extend the time against a subsequent mortgagee whose title was derived prior to the acknowledgment. The court applied this principle to hold that the 1st defendant's acknowledgment did not bind the 4th defendant and so did not save the suit from limitation.
C. Declaratory Relief
- The court addressed the appellant's argument that, even if the suit for sale was barred, a declaration of the amount due would be useful if the 4th defendant executed his mortgage decree and the property were sold subject to the plaintiff's mortgage.
- The court observed that, if the plaintiff's prior mortgage could operate as a shield only in defence, it could not be used offensively to prosecute a suit on the mortgage beyond the limitation period (metaphorically distinguishing shield from weapon).
- It concluded that a declaration of the amount due would be premature and unnecessary at this stage because the amount payable would become relevant only when a purchaser in execution of the puisne mortgagee's decree sought delivery of possession.
- The court noted that section 42 of the Specific Relief Act vests discretion in courts to grant declaratory relief and that this discretion should not be exercised to grant "eccentric declaratory decrees" or a bare declaration that would amount to an abuse of power where the substantive enforcement suit is time-barred.
- The court further observed that Order 34, Rules 2 and 3 of the Civil Procedure Code requires that a declaration of the amount be made in a suit to enforce the mortgage by sale, and that a suit for a declaration must itself be brought within six years of accrual of the cause of action; the plaintiff had no denial of the mortgage to give rise to a separate cause for a declaration within six years.
- On these bases the court held that the trial court's grant of a declaratory decree was not appropriate and upheld the lower appellate court's refusal to grant the declaration.
Holding and Implications
DISMISSED.
Direct effect on the parties:
- The plaintiff's second appeal is dismissed with costs; the decrees below stand insofar as the appellate court dismissed the suit and refused the declaratory relief.
- The court held that the plaintiff's suit for sale on Exhibit A-1 was barred by limitation under Article 132 and that the mortgagor's acknowledgment in I.P. No. 4 of 1939 did not extend time as against the 4th defendant (a puisne mortgagee whose interest predated the acknowledgment).
- The plaintiff is not entitled to a bare declaratory decree of the amount due because the enforcement suit is time-barred and such a declaration would be premature and an abuse of the court's discretion under Section 42 of the Specific Relief Act.
The opinion does not assert that it establishes any new principle of law; it expressly relies upon and applies existing authorities discussed in the judgment.
(1) Plaintiff is the appellant in this second appeal preferred against the decree of the district judge of nellore in a. S. No. 4 of 1950 dismissing the plaintiff's suit. The 1st defendant mortgaged his house in favour of the plaintiff under exhibit a - 1, dated 19th april, 1934 and executed a second mortgage of the same property on 10th november, 1939, in favour of the 4th defendant. Both were simple mortgages. The plaintiff purchased the house under exhibit a - 2, dated 7th april, 1942, from the official receiver in the insolvency of the 1st defendant and took possession. The 4th defendant filed o. S. No. 309 of 1946 on his mortgage and obtained a decree for sale of the house subject to the previous mortgage, exhibit a - 1, in favour of the plaintiff. Thereafter, the plaintiff brought the present suit o. S. 240 of 1948 to enforce his mortgage exhibit a - 1 by sale of the hypotheca. To save the suit from the bar of limitation, the plaintiff relied on an acknowledgment of liability in respect of exhibit a - 1 made by the 1st defendant, mortgagor, in the schedule of debts filed by him in his insolvency petition no. 4 of 1939. The 4th defendant pleaded that the plaintiff's suit for sale on foot of exhibit a - 1 was barred by limitation. Realising the possibility of an adverse decision on the issue as to limitation, the plaintiff had his plaint amended in the trial court by introducing an alternative prayer for a declaration of the amount due under his mortgage. The trial court held that the plaintiff's suit for sale on foot of his mortgage was barred by limitation but granted a decree declaring the amount clue under the mortgage. There was no appeal by the plaintiff against the decree refusing him relief by way of sale in enforcement of his mortgage. The 4th defendant, the puisne mortgagee, appealed to district court of nellore which allowed the appeal and dismissed the suit, holding that the plaintiff was not entitled to the declaration granted by the lower court. Hence, this second appeal by the plaintiff.
(2) Two points were argued before me by the learned advocate for the appellant. First, he contended that the suit for sale on the mortgage was not barred by limitation and secondly that even if it was so barred, the declaration of the amount due under the mortgage should not have been refused in the circumstances of this case.
(3) As regards the first point, there is a twofold obstacle in the plaintiff's way. The trial court dismissed the suit in so far as it prayed for sale of the hypotheca on the ground that the claim was barred by limitation. The plaintiff did not appeal against the decree but was content with the declaration of the amount due under the mortgage granted by the trial court. On appeal by the 4th defendant, the appellate court declined to grant any declaratory relief and dismissed the suit. In such circumstances, the plaintiff cannot agitate the question of limitation on second appeal to this court without appealing to the district court against the decree of the trial court dismissing his suit for sale of the hypotheca. The plaintiff has in effect directly appealed to this court from the decree of the district munsif and this course is not permissible. See mahomed khaleel v. Les tanneris lyonnaise, (1926) 51 m. L. J. 570: l. R. 53 i. A. 84 : i. L. R. 49 mad. 435 (p. C.).
(4) It was next contended that a suit for sale on the mortgage would be in time and therefore the lower appellate court erred in reversing the decree of the trial court declaring the amount due under the mortgage. I am of opinion that the plaintiff's suit for sale on the mortgage, exhibit a - 1, instituted as it was more than 12 years after the money became due, was barred under article 132 of the limitation act and that the acknowledgment of liability under exhibit a - 1 made by the mortgagor in his insolvency petition no. 4 of 1939 was ineffective to save limitation against the 4th defendant, the puisne mortgagee, whose mortgage had been executed long before the date of the insolvency petition. The lower appellate court relied on a decision of the full bench in pavayi v. Palanivelu goundan, (1940) 1 m. L. J. 766 :i. L. R. (1940) mad. 872 (f. B.). And held that the suit on the mortgage was barred by limitation and that the acknowledgment by the mortgagor did not bind the 4th defendant, the puisne mortgagee. It was argued by the learned advocate for the appellant that in the full bench case the mortgagor had parted with all his interest in the mortgage property when he acknowledged liability for the mortgage debt, whereas in the present case he remained the owner of the equity of redemption when he filed i. P. No. 4 of 1939 acknowledging the mortgage debt under exhibit a - 1. It is true that leach, c. J. , who delivered the judgment of the full bench posed the question for decision in these terms :
"the question is whether the mortgagor who has lost all interest in the mortgaged property can, by an acknowledgment within the meaning of section 19 or by the payment of interest or principal within the meaning of section 20 (limitation act) bind the person on whom his interest has devolved."
(5) This question was answered by the full bench in the negative. An examination of the cases relied on by the learned chief justice shows that the decision did not turn upon the fact that the mortgagor had parted with all interest in the property before he made the acknowledgment. It would have made no difference in the principle applicable if the mortgagor had retained an interest in the mortgaged property at the date of his acknowledgment. In balding v. Lane, (1863) 1 de. G. J. And s. 122 : 46 e. R. 47. Lord westbury, l. C. , observed that it would be unjust to construe the provisions of the english statute corresponding in section 19 of the limitation act in such a way as to give the mortgagor a statutory power to deprive by his acknowledgment given to a prior encumbrancer, the subsequent encumbrances of the benefit of the statute. To quote the words of the lord chancellor,
"the court is bound by every principle of judicial interpretation to find, if possible, a construction of the statute which does not involve consequences so inconsistent with natural justice."
(6) This principle was applied to section 19 of the limitation act by mukherjea, j. , in surjiram marwari v. Barhamedeo, (1905) 1 c. L. J. 337, 343, 348. The reasoning and the conclusion of mukherjea, j. , in the above case were accepted in their entirety by the privy council in bank of upper india v. Skinner, (1942) 2 m. L. J. 559 : l. R. 69 i. A. 130 ; i. L. R. 23 lah. 686 (p. C.). After an elaborate discussion of the topic, mukherjea, j. , came to the following conclusion : -
"i think that the proper construction to be put upon the section (section 19 of the limitation act) is that it makes an acknowledgment given by one person operative as against another on the ground that the lalter derived title or liability from the former it contemplates that the derivation of title or liability (which is the essential condition for the extended operation of the acknowledgment) takes place after the acknowledgment has been given."
(7) In bank of upper india v. Skinner, (1942) 2 m. Lj. 559 : l. R. 69 i. A 130 : ll. R. 23 lah. 686 (p. C.). As in the full bench case already cited, the mortgagors had parted with all their interest in the mortgaged property before the acknowledgments were made. That was the reason why the judicial committee concluded its judgment in bank of upper india v. Skinner in these words : -
"on the whole, therefore, then lordships come to the conclusion that the acknowledgments made in this case by the mortgagors after they had parted with all their interest to the purchaser, do not bind the purchaser."
(8) The earlier passages in the judgment of the judicial committee contain a decision of the principle which does not turn upon the mortgagor having parted with all his interest in the property or retaining an interest at the time when the acknowledgments were made. The principle on which the judicial committee rested its decision would be equally applicable, whether or not the mortgagor retained an interest in the mortgaged property at the time of the acknowledgments. The principle underlying the decisions of the full bench and of the judicial committee was this : an acknowledgment by the mortgagor of a mortgage debt would be effective against the assignee of the equity of redemption or a puisne mortgagee only if the assignee or the puisne mortgagee derived his title from the mortgagor after the acknowledgment was made by him. If a person sought to be bound by an acknowledgment has, prior to such acknowledgment, acquired an interest in the property, the acknowledgment would not save limitation against him under section 19 of the limitation act even if the person making the acknowledgment had not parted with all his interest in the property at the time of the acknowledgment. It follows therefore that a mortgagor cannot give an acknowledgment of a prior mortgage debt so as to extend time against a subsequent mortgagee whose title or interest had been derived from the mortgagor before the acknowledgment was given by him. I am supported in this view by the decision in naranappa naicker v. Ramalingam pilial, (1950) 2 m. Lj. 13.
(9) It was next urged that there was no reason for disallowing the declaration granted by the trial court as regards the amount of the debt due under the mortgage exhibit a - 1 even though the suit for realisation of the debt was barred by limitation. It was argued that this declaration would be useful to the plaintiff if the 4th defendant the puisne mortgagee executed his mortgage decree in o. S. No. 309 of 1946 and the property was sold and purchased subject to the plaintiff's mortgage as directed by the decree in the puisne mortgagee's suit. In that event, it is pointed out that the purchaser would not be entitled to obtain possession of the property without discharging the prior mortgage, exhibit a - 1, in favour of the plaintiff and a declaration of the amount due under exhibit a - 1 was all that was necessary. Assuming but not deciding that the plaintiff could hold his prior mortgage as a shield, in such circumstances, he could use it only in defence. The very metaphor of the shield is significant in this connection and the plaintiff cannot use the prior mortgage as a weapon of attack by filing a suit on the mortgage beyond the period prescribed by article 132. The question whether any and, if so, what amount is payable to the plaintiff under exhibit a - 1 would arise only when a purchaser in execution of the puisne mortgagee's decree seeks to obtain delivery of possession of the property from the plaintiff. In this view, a declaration of the amount now due under exhibit a - 1 would be premature and unnecessary. Section 42 of the specific relief act gives the court a discretion in the matter of granting declaratory relief. The section does not authorise the court to grant eccentric declaratory decrees in any form the plaintiff wants. In my opinion, it would be an abuse of the power to grant declaratory decrees, if as in this case, the plaintiff who has lost his right to recover his mortgage debt could nevertheless be given a declaration of the amount due on the mortgage. Such a declaration has to be made in a suit to enforce the mortgage by sale and is required to be made by the terms of order 34, rules 2 and 3, civil procedure code. The plaintiff's suit to enforce the mortgage by a sale of the hypotheca having become barred, he is not entitled to a bare declaration of the amount due on the mortgage. Moreover, a suit for a declaration has to be brought within six years of the accrual of the cause of action and there was no denial of the plaintiff's mortgage so as to give him a right to sue for a declaration.
(10) For these reasons, i agree with the conclusion of the lower appellate court and dismiss the second appeal with costs. Appeal dismissed.
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