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Citation Codes
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Case Number
Attorney(S)
  • Babu Jogindro Nath Chaudhri and Dr. Satish Chandra Banerji, for the appellants.
  • Mr. M.L Agarwala and Munshi Govind Prasad, for the respondents.
Judges
  • Hon'ble Sir Edward Maynard Des Chamier
  • Hon'ble Sir Charles Ross Alston
Acts
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Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • Babu Jogindro Nath Chaudhri and Dr. Satish Chandra Banerji, for the appellants.
  • Mr. M.L Agarwala and Munshi Govind Prasad, for the respondents.
Judges
  • Hon'ble Sir Edward Maynard Des Chamier
  • Hon'ble Sir Charles Ross Alston
Acts
See more information ...
Smart Summary

Structured Summary of the Provided Opinion

Factual and Procedural Background

The suit arose from a mortgage executed in January 1888 in favour of the predecessors of the appellants. The mortgage covered shares in several villages, including a two anna share in the village of Haria. In May 1895 the mortgagors sold a one anna six pie share in Haria to Asuda Bibi, leaving Rs. 500 of the purchase money to be paid to the appellants. That Rs. 500 was paid to the appellants in July 1896 and the appellants gave a receipt showing acceptance of the money in reduction of the mortgage debt. In 1906 the appellants released the one anna six pie share from the mortgage, stating that they did so in consideration of the 1896 payment.

The present suit was instituted in 1910. The appellants sought a decree allowing sale of the remainder of the mortgaged property to recover the whole amount remaining due on the mortgage after giving credit for the Rs. 500 paid in 1896. The respondents, who had taken a mortgage of the property in September 1895 (i.e., between the sale to Asuda Bibi and the 1896 payment or release), defended on the ground that the share sold to Asuda Bibi represented, roughly, half the value of the mortgaged property and that the appellants could only claim rateably against the remainder.

At first instance the Subordinate Judge rejected the respondents' defence and decreed the claim in full. On appeal the District Judge reversed that decision: he held the respondents' defence well founded and gave the appellants a decree only for an amount proportionate to the value of the property not released. The appellant then brought a second appeal which produced the present opinion.

Legal Issues Presented

  1. Whether a mortgagee who has released part of the mortgaged property (in consideration of a payment that did not represent that part’s due proportion of the mortgage debt) can, in a subsequent suit against a purchaser or a puisne mortgagee, obtain a decree for the whole remaining mortgage money by resorting to the remainder of the mortgaged property.
  2. Whether the fact that the prior mortgagee released part of the property (as distinct from merely refraining to ask for relief against part) changes the mortgagee’s rights to recover the whole balance from the remaining property and as against subsequently interested parties (puisne mortgagees or purchasers).
  3. Whether the rule should be confined to cases in which the prior mortgagee had notice of the puisne mortgage at the time of giving the release (the court noted this issue but found it unnecessary to decide it here because notice was present in this case).

Arguments of the Parties

Appellants' Arguments

  • The appellants contended that the case was covered by decisions of this Court referred to in the record (including Jai Gobind v. Jas Ram Weekly, Sheo Tahal Ojha v. Sheodan Rai, Sheo Prasad v. Behari Lal, Ghafur Hasan Khan v. Muhammad Kifait-ultah, and Pirbhu Narain Singh v. Amir Singh), and that those authorities entitled them to recover the whole mortgage debt (after credit for Rs. 500) from the remaining mortgaged property.
  • The appellants effectively relied upon prior All-India decisions to support the proposition that bringing part of the mortgaged property to sale (and other procedural points under Section 90 of the Transfer of Property Act) allowed recovery of the mortgage debt in the manner they claimed.

Respondents' Arguments

  • The respondents argued that the one anna six pie share sold to Asuda Bibi represented roughly half the value of the mortgaged property; therefore the appellants should only be entitled to proceed against the remainder of the mortgaged property for so much of the mortgage money as was rateably due from that remainder.
  • They relied on the proposition that a prior mortgagee who had released part of the property could not, to the prejudice of a subsequent purchaser or puisne mortgagee, claim the full balance against the remainder when the release had not accounted for the released part's proper share of the debt.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Jai Gobind v. Jas Ram Weekly (Notes 1898 p. 120) Held that a mortgagee who at the hearing asked for a decree only against the share of one mortgagor could obtain a decree for the whole mortgage money against that share where the plaintiff had merely abstained from asking relief against part of the property. The court distinguished this case from the present one: in Jai Gobind the mortgagee merely abstained from seeking relief against part, whereas in the present case the mortgagee had definitely released part of the property.
Sheo Tahal Ojha v. Sheodan Rai (1905) I.L.R. 28 All. 174 Held that a mortgagee suing for sale of part of the mortgaged property was not bound to implead persons interested in the remainder; involved withdrawal of claim against part found to belong to third parties. The court found this case inapplicable to the present facts because it did not involve puisne mortgagees or subsequent purchasers and did not raise the effect of a release by the mortgagee against co-mortgagors' shares.
Hari Kissen Bhagat v. Ve Lal t Hossin (1903) I.L.R. 30 Calc. 755 Calcutta High Court authority supporting the proposition that a mortgagee who releases part of the property must abate that part's proportion of the mortgage debt and cannot recover the whole from the remainder as against purchasers. The District Judge followed this decision and used it as persuasive authority for the proposition that a release binds the mortgagee and requires proportionate abatement.
Ponnusami Mudaliar v. Srinivasa Naickan (1908) I.L.R. 31 Mad. 333 Madras High Court decision holding that a mortgagee who released part of the mortgaged property in favour of a purchaser was bound to abate the mortgage money proportionately and could only recover the balance from the remaining property. The District Judge followed this decision; the present court accepted the correctness of that position and relied upon it in concluding the prior mortgagee could not obtain the whole balance from the remainder where part had been released for less than its due share.
Sheo Prasad v. Behari Lal (1902) I.L.R. 25 All. 79 Held that a mortgagee who obtained a decree for sale of part only of the mortgaged property was entitled to a decree under Section 90 of the Transfer of Property Act after bringing that part to sale. The court held this authority had no bearing on the present question because it concerned obtaining a sale-decree for part and consequent procedural rights under Section 90, not the effect of a prior release prejudicial to puisne mortgagees.
Ghafur Hasan Khan v. Muhammad Kifait-ultah (1905) I.L.R. 28 All. 79 Involved a prior mortgagee obtaining a decree nisi for sale of the whole but taking an order absolute for sale of part only; held that after sale of that part the mortgagee could obtain a decree under Section 90. The court stated this case did not affect the present question, because it concerned sale procedure under Section 90 rather than the prejudicial effect of a release of part of the property.
Pirbhu Narain Singh v. Amir Singh (1907) I.L.R. 29 All. 369 Held that where a mortgagee had brought part of the mortgaged property to sale and the remainder was not saleable, the mortgagee could still obtain a decree under Section 90 of the Transfer of Property Act. The court observed this case had no bearing upon the present controversy concerning the effect of a release of a part of the mortgaged property in favour of a purchaser or puisne mortgagee.
Mir Eusuff Ali Haji v. Panchanan Chatterjee (1910) 15 C.W.N. 800 Quoted with approval a statement from the American case Brooks v. Benham describing equitable contribution and subrogation principles: each parcel of land bears an equitable charge proportionate to its value; releasing a parcel may defeat subrogation and is done at the mortgagee’s peril. The court cited this case (and the Brooks statement within it) as persuasive authority supporting the rule that a mortgagee should not be permitted to release part for less than its proportion without accounting for that portion, because of the prejudice to puisne mortgagees and the equitable principle of subrogation.
Brooks v. Benham (American case, 66 Am. St. Rep. 87) Expressed the equitable principle that each parcel of land is equitably subject to the proportion of the debt corresponding to its value; release of a parcel can prevent subrogation and is done at the mortgagee's peril. The court quoted this passage (as reproduced in Mir Eusuff Ali Haji) to explain the equitable rationale (subrogation/contribution) for holding a prior mortgagee to account when releasing part of the mortgaged estate for less than its share of the debt.
Gopi Narain Khauna v. Bansidhar (1905) I.L.R. 27 All. 325 Authority in which the Privy Council recommended a form of decree providing for puisne mortgagees' successive rights of redemption and for working out parties' rights. The court cited this decision (and Seton on Decrees) to show that courts may frame decrees in suits by prior mortgagees to permit puisne mortgagees to exercise redemption rights; it supported the view that puisne mortgagees' substantive rights should be protected in such suits.

Court's Reasoning and Analysis

The court's analysis proceeded by (a) establishing the material facts; (b) reviewing the authorities cited by both sides; and (c) applying equitable principles and statutory framework to the present facts.

  1. Facts and procedural posture: The court noted that the appellants accepted Rs. 500 in 1896 as a reduction of the mortgage, and in 1906 they gave a formal release of the one anna six pie share. The respondents had intervening interests (they took a mortgage in September 1895). The courts below were split: the Subordinate Judge awarded the full claim, whereas the District Judge limited recovery to the proportionate value of the unreleased property.
  2. Distinction between abstention and release: The court carefully distinguished cases where the mortgagee merely refrained from asking relief against part of the property (e.g., Jai Gobind) from the present case where the mortgagee had actively released part of the property. The court held this distinction to be legally significant: an abstention does not extinguish the equitable contribution mechanism in the same way a release may.
  3. Review of prior authorities: The court observed that several All-India decisions relied upon by the appellants (including Sheo Prasad, Ghafur Hasan Khan, and Pirbhu Narain Singh) related primarily to procedural rights under Section 90 of the Transfer of Property Act (for sale of part and consequent decrees) and therefore did not directly address the particular question whether a prior mortgagee who releases part for inadequate consideration can later recover the full balance from the remainder against subsequent purchasers or puisne mortgagees.
  4. Acceptance of Calcutta and Madras view: The court found the decisions of the Calcutta and Madras High Courts (cited in the record) to be correct on the point in issue — namely, that a mortgagee who releases part of the mortgaged property for less than its due proportion of the mortgage must abate the mortgage money proportionately and cannot then recover the whole outstanding balance out of the remainder to the prejudice of purchasers or puisne mortgagees.
  5. Equitable principle — subrogation and contribution: The court adopted and cited the equitable rationale (as explained in the quoted American authority Brooks v. Benham, via the Calcutta decision in Mir Eusuff Ali Haji) that each parcel of mortgaged land is equitably charged with the proportion of the debt corresponding to its value, and that a person compelled to redeem may be subrogated to the mortgage title and claim contribution. A release of a parcel can defeat subrogation and is therefore "at the mortgagee's peril" if done without receiving that parcel's proper contributory share.
  6. Statutory context and protection of puisne mortgagees: The court reviewed Section 74 of the Transfer of Property Act (as quoted in the opinion) to emphasize that a puisne mortgagee has a statutory entitlement to redeem and, upon redemption, steps into the prior mortgagee's shoes. The court also referenced procedural forms (Seton on Decrees and Appendix D of the first schedule to the Code of Civil Procedure, 1908) to show that courts can fashion decrees protecting the rights of puisne mortgagees (for instance, by permitting successive rights of redemption).
  7. Application to the facts: Applying these principles, the court held that a first mortgagee cannot be allowed to release part of the mortgaged property for less than its due proportion of the mortgage money and then claim the full balance from the remainder against a subsequent purchaser or a puisne mortgagee. The court noted it was unnecessary to decide whether the rule should be confined to cases where the prior mortgagee had notice of the puisne mortgage because, on the facts, the appellants did have notice or must be deemed to have had notice.
  8. Conclusion of reasoning: For these reasons the court agreed with the District Judge's approach and concluded that the appellants were not entitled to recover the whole mortgage balance from the remaining property.

Holding and Implications

Holding: The court dismissed the appellants' second appeal with costs and held that a first mortgagee who releases part of the mortgaged property for less than that part's due proportion of the mortgage debt cannot, in a suit against a subsequent purchaser or a puisne mortgagee, obtain a decree for the whole balance of the mortgage money out of the remainder of the mortgaged property. The District Judge's decision limiting recovery to an amount proportionate to the value of the unreleased property was affirmed.

Implications:

  • Direct effect on the parties: The appellants are restricted to a decree proportionate to the value of the property that remained subject to the mortgage after the release; the appeal was dismissed and costs were awarded against the appellants.
  • Protection of puisne mortgagees/purchasers: The decision emphasizes that puisne mortgagees and purchasers are protected from being prejudiced by a prior mortgagee's unilateral release of part of the property for inadequate consideration; equitable principles of contribution and subrogation underpin that protection.
  • Procedural note: The court recognized that courts may, and now have forms to, make decrees in suits by prior mortgagees which protect puisne mortgagees' successive rights of redemption, so procedural mechanisms exist to protect the interests of all parties in complex mortgage priority situations.
  • On precedent: The court expressly accepted the correctness of certain High Court authorities (Calcutta and Madras) on this point and distinguished several All-India decisions relied on by the appellants as not directly addressing the precise question of release versus abstention.

This summary is based exclusively on the provided opinion and does not add information not contained therein.

Show full summary ...

    Jugal Kishore Sahu v. Kedar Nath

    1. This was a suit upon a mortgage made in January, 1888, in favour of the predecessor of the appellants. The mortgage covered shares in several villages, including a two anna share in a village called Haria. In May, 1895, the mortgagors sold a one anna six pie share in Haria to one Asuda Bibi, leaving with her Rs. 500, part of the purchase money, to be paid to the appellants. That sum was paid to the appellants in July, 1896, and a receipt was given by them, which shows that they accepted the money in reduction of the amount due on the mortgage. In 1906, the appellants released the |one anna six pie share from the mortgage, stating that they did so in consideration of the payment made to them in 1896, In the present suit instituted in 1910, the appellants claim to be entitled to bring the remainder of the mortgaged property to sale for the recovery of the whole amount remaining due upon the mortgage, after giving credit for the sum of Rs. 500 paid in 1896. The only defence with which we are concerned now is that of the respondents who took a mortgage of the property in September, 1895. They said that the share sold to Asuda Bibi was, roughly speaking, half the mortgaged property in value, and that the appellants were entitled to proceed against the remainder of the mortgaged property for only so much of the mortgage money as was rateably due from it. The Subordinate Judge rejected this defence and decreed the claim in full, but on appeal the District Judge held that the defence.was well founded and he gave the appellants a decree for an amount proportionate to the value of the property not released by them. The Subordinate Judge had relied upon the decisions of this Court in Jai Gobind v. Jas Ram Weekly notes 1898 p. 120 and Sheo Tahal Ojha v. Sheodan Rai (1905) I.L.R. 28 All. 174. The District Judge followed the depisions of the Calcutta High Court in Hari Kissen Bhagat v. Ve Lal t Hossin (1903) I.L.R. 30 Calc. 755 and the Madras High Court in Ponnusami Mudaliar v. Srinivasa Naickan (1908) I.L.R. 31 Mad. 333 and he distinguished the other cases on the ground that in them the mortgagee had merely refrained from proceeding against part of the mortgaged property, whereas in the present case the appellant had definitely released part of the property from the mortgage, and he held that the release had the same effect as a purchase of that part by the appellants would have had.

    2. In second appeal the appellants contend that the case is covered by the decisions of this Court mentioned above and also by the decision in Sheo Prasad v. Behari Lal (1902) I.L.R. 25 All. 79; Ghafur Hasan Khan v. Muhammad Kifait-ultah (1905) I.L.R. 28 All. 19 and Pirbhu Narain Singh v. Amir Singh (1907) I.L.R. 29 All. 369 and that we should follow those cases in preference to the decisions of the Calcutta and Madras High Courts.

    3. In the Calcutta and Madras cases the mortgagee had released part of the mortgaged property from the mortgage in favour of a person who had purchased that part from the mortgagor, and it was assumed in the Calcutta case and decided in the Madras case that the mortgagee was bound to abate a part of the mortgage money proportionate to the value of the property released and could only recover the balance from the property not released. With the possible exception of the case of Jai Gobind v. Jas Ram Weekly Notes 1898. p. 120 the cases in this Court which have been referred to do not in any way touch the question which we have to decide. In Sheo Prasad v. Behari Lal (1802) I.L.R. 25 All. 79 the mortgagee had asked for and obtained a decree for sale of part only of the mortgaged property. It was held that he was entitled to a decree under Section 90 of the Transfer of Property Act after bringing that part to sale. The only defendant to the suit was the mortgagor. In Gha fur Hasan Khan v. Muhammad Kifuit-ullah Khan (1905) I.L.R. 28 All. 79 a mortgagee obtained a decree nisi for sale of the whole of the mortgaged property, but took an order absolute for sale of a part only of it. It was held that after bringing that part to sale he was entitled to a decree under Section 90 of the Transfer of Property Act. These two cases obviously have no bearing upon the present case. In Sheo Tahal Ojha v. Sheodan Rai (1905) I.L.R. 28 All. 174 part of the mortgaged property was found to belong to persons who had not joined in the mortgage, and the mortgagee withdrew his claim against that part. It was held that a mortgagee suing for sale of part of the mortgaged property was not bound to implead the persons interested in the remainder of the property. In that case there were no puisne mortgagees or subsequent purchasers from the mortgagors. Eichards, J., pointed out that the effect of a release by the mortgagee of one of the mortgagors and of his share of the property behind the backs of the other mortgagors was not in question. It seems to us that that case also has no bearing upon the present case. In Pirbhu Naruin Singh v. Amir Singh (1907) I.L.R. 29 All. 369 a mortgagee obtained a decree for sale of the whole of the mortgaged property. After he had brought part of it to sale, it was discovered that the remainder was not saleable, being an occupancy holding. It was held that the mortgagee was entitled nevertheless to a decree under Section 90 of the Transfer of Property Act. That case in no way affects the present case. In Jai Gobind v. Jas Ram Weekly Notes 1898 p. 120 a mortgagee sued his two mortgagors, A and B, and a puisne mortgagee from B, for sale of the whole of the mortgaged property, but at the hearing he asked for a decree against the share of A only. It was held that he was entitled to a decree for the whole of the mortgage money against the share of A. That case is distinguishable from the present case, for in this case the plaintiff mortgagee has definitely released part of the property from the mortgage, whereas in that case the plaintiff merely abstained from asking for relief against part of the property, and if the defendant A redeemed the plaintiff's mortgage, there was nothing to prevent him from claiming contribution from B's share of the property.

    4. While mortgaged property remains in the hands of the mortgagor, the mortgagee may enforce his mortgage against any part of the property, and so long as there are no other persons interested in the property, the mortgagee may, as between himself and the mortgagor, release any part of the property from the mortgage. Bat when an estate subject to a mortgage belongs to or subsequently becomes the property of several co-sharers and one of those persons pays off the debt, he can call upon the other co-sharers to contribute rateably out of their shares to the payment of the debt, and when, after a mortgage has been made, another person purchases or takes in mortgage part of the property, the prior mortgagee cannot even with the consent of the mortgagor release any part of the property from the first mortgage to the prejudice of that person, that is to say, notwithstanding the release, the part released remains liable to contribute ratably to the payment of the mortgage debt.

    5. The question is whether a mortgagee who releases part of the property from the mortgage without receiving from the releases his proper share of the mortgage money, can, in a suit against a subsequent purchaser or mortgagee, obtain a decree against the rest of the mortgaged property for the balance of the mortgage money. The Calcutta and Madras High Courts hold that he cannot do so against purchasers of the property. Their view appeal's to be that the right to contribution between several properties rests upon the principle of subrogation. In the recent case of Mir Eusuff Ali Haji v. Panchanan Chatterjee (1910) 15 C.W.N. 800 the Calcutta High Court quote with approval the following statement of the law from an American case Brooks v. Benham 66 Am. St. Rep. 87:

    " While the whole of the debt is secured by the whole of the land, each parcel of the land as between the different properties is equitably subject to so much of the debt as corresponds to the proportion between its value and the value of all the land, and if its owner should be compelled to redeem the mortgage, he can resort to the others for a contribution, and for that purpose is entitled to the benefit of subrogation to the mortgage title. To release any particular parcel from the mortgage encumbrance is to make as respects that any subrogation impossible. The mortgagee, therefore, releases at his peril if he had notice of the conveyance out of which the equities arise, and if he does so without receiving from the release his proper contributory share of the debt, he is still chargeable with the residue of that share in favour of the owners of the remaining parcels."
    Whether this view is correct or not, it seems clear that a mortgagee cannot release part of the mortgaged property for less than its proportion of the mortgage debt and then sue the mortgagor and a puisne mortgagee for the whole of the balance of the mortgage money. Under Section 74 of the Transfer of Property Act a puisne mortgagee is entitled to redeem the next prior mortgagee as soon as the amount due on that mortgage has become payable, and when he has done so, he acquires all the rights and powers of the prior mortgagee as such. In England in a suit by a prior mortgagee against the mortgagor and puisne mortgagees the decree may provide for the exercise by the puisne mortgagees of their successive rights of redemption or for working out the rights of the parties in the event of any puisne mortgagee in front of the mortgagor redeeming the mortgaged property. A form for this purpose is to be found in Seton on Decrees, Volume, 5th Edition, p. 1641, 6th Edition, p. 1979, and was recommended for use in India by their Lordships of the Privy Council in the case of Gopi Narain Khauna v. Bansidhar ( 1905) I.L.R. 27 All. 325. It has not hitherto been the practice for courts in these Provinces to make such decrees, probably because there was till recently no form prescribed for the purpose, but such a form has been provided in Appendix D to the first schedule to the Code of Civil Procedure, 1908. It is clear, therefore, that a puisne mortgagee may in a suit by a prior mortgagee be given, not only the right to redeem the prior mortgage, but the right, when he has done so, to go on and enforce his own and the prior mortgage against the property. The puisne mortgagee might be seriously prejudiced if the prior mortgagee had released part of the property from his mortgage for less than its due proportion of the mortgage money and had nevertheless obtained a decree for the whole of the balance due on the mortgage.

    6. It seems to us that the decisions of the Calcutta and Madras# High Courts cited above are correct, and that whether they are correct or not, a first mortgagee cannot be allowed to release part of the mortgaged property for less than its due proportion of the mortgage money and then claim a decree against the mortgagor and a puisne mortgagee for the recovery of the whole of the balance of the mortgage money out of the remainder of the property. It may be suggested that this should be the rule only where the mortgagee has notice of the puisne mortgage when he gives the release. It is unnecessary to consider this, for there is no question that the appellants had notice or must be deemed to have had notice of the puisne mortgages when they gave the release. In our opinion, the decision of the District Judge is correct. We dismiss this appeal with costs.

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    Comments

    Jugal Kishore Sahu v. Kedar Nath
    (Jul 4, 1912)