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Dwarka Prasad v. Mahadeo Prasad

Allahabad High Court
May 7, 1930
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Judgment Summary — Structured Analysis

Factual and Procedural Background

The facts, as found by the Court below and not controverted on appeal, are as follows.

On 25 October 1883 the Raja of Basti made a simple mortgage of the property in suit for Rs. 1,999 in favour of four persons: Binda, Bisheshar, Ram Tahal and Ganga. Over time family changes and a partition occurred. By the date of the principal mortgagor's suit instituted in 1910, the mortgage rights stood vested in equal shares in Ram Tahal, Jagmohan, Ram Lal and Maharani (wife of Binda Kalwar). Maharani later died.

In 1910 Ram Tahal instituted Suit No. 585 in the Court of the Subordinate Judge, Gorakhpur, for recovery of the mortgage money. His co-mortgagees (Jagmohan, Ram Lal and Maharani) were impleaded as pro forma defendants; they did not dispute Ram Tahal's claim nor apply to be made plaintiffs. A preliminary decree was made in favour of Ram Tahal; he applied to make it final. Maharani's application to be made a co-plaintiff was dismissed as too late. A final decree was prepared, the property was sold in execution, and Ram Tahal purchased the property on 21 July 1913.

Subsequently Jagmohan Kalwar and Bhagwan Das (son of Ram Lal) brought the suit out of which this appeal arises, claiming two-thirds of the property purchased by Ram Tahal on the ground that they owned two-thirds of the mortgage money. Jagmohan died during the suit and his legal representatives were placed on the record. The lower Court dismissed the plaintiffs' suit on the ground that they could recover only a share in the money decreed in favour of Ram Tahal and had no right to the property. The plaintiffs appealed.

Legal Issues Presented

  1. Whether the plaintiffs (co-mortgagees owning two-thirds of the mortgage-money) have any right to share in the property purchased by Ram Tahal in execution of the decree.

Arguments of the Parties

Appellants' Arguments

  • The appellants (Jagmohan Kalwar and Bhagwan Das) claimed a two-thirds share in the property purchased by Ram Tahal because they owned two-thirds of the mortgage money.
  • The appellants, through counsel, offered to pay a fair share of the costs that Ram Tahal may have incurred in instituting the suit and executing the decree.
  • The appellants relied on multiple authorities (discussed in the opinion) supporting the proposition that a purchase made with a jointly-owned fund benefits all persons entitled to that fund.

Respondents' Arguments

  • The respondents (including Ram Tahal's successor) contended that the plaintiffs could obtain only a share in the mortgage money and not in the property itself.
  • The learned Subordinate Judge accepted a defence that because the purchase was made not only with mortgage money but also with costs paid by Ram Tahal personally, the plaintiffs had no right to share in the property.
  • The respondents relied on authorities such as Ganeshi Lal v. Jagannath and Makhan Lal v. Sohan Lal to support this view.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Ramji Das v. Mohan Lal [1914] 25 I.C. 735 Where co-mortgagees have equal title in mortgage-money and one purchaser buys in execution, the purchasers are entitled to equal shares in the property so purchased. The Court cited this to show a precedent where a co-mortgagee purchaser held the property for the benefit of co-mortgagees with equal share.
Kesri v. Ganga Sahai [1911] 33 All. 563; affirmed as Ganga Sahai v. Kesri A.I.R. 1915 P.C. 81 Where several decree-holders obtain a joint decree and one takes out execution and purchases, co-decree-holders can recover their proportionate share in the property purchased. The Court relied on this Full Bench and Privy Council authority as a controlling precedent supporting appellants' entitlement to share in property purchased by one co-holder.
Khub Chand v. Todarmal A.I.R. 1924 All. 813 One decree-holder who takes out execution and purchases holds it for the benefit of all decree-holders; follows Privy Council in Ganga Sahai v. Kesri. Used to reinforce the principle that a purchase in execution from a joint fund benefits all entitled persons.
Makhan Lal v. Sohan Lal A.I.R. 1925 All. 331 Exception where a purchaser (plaintiff) actively opposed the co-owner's interest from the beginning and obstructed the suit; in such peculiar circumstances the plaintiff was held not entitled to share. The Court distinguished this as a special case with peculiar facts and held it inapplicable to the present case.
Bandhu Ram v. Chinta Man Singh A.I.R. 1922 P.C. 215 Title to land purchased in suit depends on the title to the bond used to purchase it: if the bond was separate property, the land is separate; if the bond was held for others, they may share. The Court cited the Privy Council's remark to demonstrate that entitlement to purchased land depends on whether the fund (bond) was held jointly.
Jai Inder Bahadur Singh v. Sheo Inder Bahadur Singh A.I.R. 1924 Oudh 218 Persons entitled to share in an estate are also entitled to share in property purchased in execution of decrees obtained on bonds belonging to that estate. Invoked to show that purchasers who buy with estate/bond funds do so for all persons entitled to the fund.
Ganeshi Lal v. Jagannath [1916] 32 I.C. 171 Authority cited in support of the proposition that plaintiffs may be entitled only to their share of the money and not to the property. Noted by the Court as supportive of respondents' position but observed that it did not appear to have considered the Privy Council decision in Ganga Sahai v. Kesri or Section 88, Trusts Act.
Anrup Misr v. Ram Harakh A.I.R. 1929 All. 953 Case referred to by the respondents; described by the Court as distinguishable. The Court stated the case was obviously distinguishable and required no further remark.

Court's Reasoning and Analysis

The Court proceeded on the uncontested factual findings of the lower Court. The pivotal legal question was whether a purchase made in execution of a decree obtained by one co-mortgagee with a fund that originally belonged jointly to several persons gives the co-debtors (or co-mortgagees) a right to share in the property so purchased.

The Court reviewed the authorities. It observed that multiple decisions (including the Full Bench in Kesri v. Ganga Sahai and its affirmation by the Privy Council in Ganga Sahai v. Kesri) establish the principle that a purchase made out of a jointly-owned fund inures to the benefit of all persons entitled to that fund. The Court accepted the view expressed in cases such as Ramji Das v. Mohan Lal, Khub Chand v. Todarmal, and Jai Inder Bahadur Singh v. Sheo Inder Bahadur Singh to the same effect.

The Court also considered and distinguished contrary authority. Makhan Lal v. Sohan Lal was treated as a special, fact-specific exception (where the purchaser actively opposed or obstructed the co-owner's interest) and thus inapplicable to the present matter. Ganeshi Lal v. Jagannath, which supported the respondents, was noted but the Court observed that it did not appear to have been argued before that court with reference to the Privy Council decision (Ganga Sahai v. Kesri) nor with reference to Section 88 of the Trusts Act, 1882.

The Court invoked the principle embodied in Section 88, Trusts Act, 1882: a person who, by availing himself of a fiduciary position, gains a pecuniary advantage must hold it for the benefit of the persons whose interests he was bound to protect. The Court cited illustration (d) to Section 88 (a partner buying land with partnership funds holds it for the partnership) to show the legal logic applicable by analogy.

Applying these authorities and principles to the uncontested facts (that a joint fund existed and the purchase was made in full satisfaction of the decree), the Court concluded that the purchase in execution benefited those entitled to share in the underlying joint fund. The Court qualified this conclusion by recognizing that the plaintiffs must contribute a proportionate share of the costs incurred by Ram Tahal (assumed borne by him alone) in instituting the suit and executing the decree.

Because several other points were raised but not decided by the lower Court, the appellate Court remanded the suit for further adjudication of those points in light of the decision on the main issue.

Holding and Implications

APPEAL ALLOWED.

Holding: The Court held that the plaintiffs are entitled to share in the property purchased by Ram Tahal in execution of the decree, subject to their contributing a proportionate share of the costs incurred by Ram Tahal (or his successor) in instituting the suit and executing the decree.

Direct consequences ordered by the Court:

  • The decree of the Court below is set aside.
  • The suit is remanded under Order 41, Rule 23, Civil Procedure Code; the lower Court is directed to re-enter the suit on its original number and proceed to decide the remaining points in accordance with law.
  • Costs here and hitherto will abide the result (i.e., to be decided in due course as directed).

Broader implications: The opinion applies and reiterates established precedents (including the Privy Council authority) and the principle of Section 88, Trusts Act, 1882, to conclude that a purchase made out of a joint fund benefits all entitled persons. The Court did not purport to lay down a new doctrine beyond applying these authorities and remanding unresolved issues for determination.

Show all summary ...

1. The facts of this case, as found by the Court below, have not been controverted before us, and therefore we take them to be correct. It appears that so far back as on 25th October 1883 the Raja of Basti made a simple mortgage of the property in suit for a sum of Rs. 1,999 in favour of four persons Binda, Bisheshar, Ram Tahal and Ganga. The pedigree given below shows how these mortgagees were related to one another.

2. In course of time several of the members of the family died out, and there was a partition, with the result that at the date of the suit, that was instituted in 1910, for recovery of the money due on the mortgage, the family was no longer joint, and the mortgagee rights were vested in equal shares in Ram Tahal, Jagmohan, Ram Lal and Mt. Maharani, wife of Binda Kalwar. Mt. Maharani is now dead. The suit just mentioned, being suit No. 585 of 1910, was instituted by Ram Tahal in the Court of the Subordinate Judge of Gorakhpur, and the co-mortgagees of Ram Tahal, namely Jagmohan, Ram Lal and Maharani were impleaded as pro forma defendants, on the allegation that they did not join in the suit: see pp. 68 and 69 of the printed record. The pro forma defendants did not dispute Ram Tahal's claim to realize the money for himself and his co-mortgagees. None of them applied to be made plaintiffs. A preliminary decree was accordingly made in favour of Ram Tahal. Ram Tahal applied for the decree being made final. Mt. Maharani made an application that she might be made a co-plaintiff. This application was dismissed by the learned Subordinate Judge on the ground that it was too late. The final decree was prepared and the property was brought to sale. Sam Tahal himself purchased the property on 21st July 1913. There ended the first stage of the history of the case. By the suit, out of which this appeal has arisen, Jagmohan Kalwar and Bhagwan Das, son of Ram Lal, claimed two-thirds of the property purchased by Ram Tahal in execution of the decree on the ground that they owned two-thirds share, because they had two-thirds share in the mortgage money. Jagmohan died pending the suit, and his legal representatives have been brought on the record.

3. Various defences were set up. One of these that found favour with the learned Subordinate Judge was that the plaintiffs could get only a share in the money that was decreed in favour of Ram Tahal, but that they had no right to the property. The suit was accordingly dismissed, and the plaintiffs have appealed.

4. The short point to be decided is whether the plaintiffs have any right to share in the property purchased by Ram Tahal, They, through their counsel, have offered to pay a fair share of the costs that Ram Tahal may have incurred in instituting the suit and executing the decree.

5. The learned Subordinate Judge quoted several cases that were cited before him and was of opinion that none of these cases afforded him any sure guide. He, therefore, thought that he was free to decide the case for himself. He held that as the purchase was made not only with the mortgage money but also with the costs incurred by Ram Tahal out of his own pocket, the plaintiffs had no right to share in the property. To decide this case it has to be taken for granted that the costs of the suit and the execution were met by Ram Tahal alone. It is also a fact that the purchase was made in full satisfaction of the decree then outstanding in favour of Ram Tahal.

6. On behalf of the appellants the learned counsel has cited many cases; in our opinion they all go to support his contention. We need not notice all the oases, but shall notice only some of them. We shall take the cases in order of their dates of decision.

7. The first case is Ramji Das v. Mohan Lal [1914] 25 I.C. 735. In this case, which was decided by Sundar Lal, J., there were three joint mortgagees, and one of these purchased the equity of redemption. Out of the remaining two only one of them brought a suit for recovery of the two-thirds share of the mortgage money. The entire mortgage money was not claimed on the ground that the mortgagee owning a one-third share had become the mortgagor by purchasing the latter's rights. The plaintiff (one of the co-mortgagees) got a decree and having put the decree into execution purchased the property himself. Thereupon the remaining co-mortgagees brought a suit to recover a half share in the property so purchased by the decree-holder. The learned Judge affirmed the decree by which the suit had been decreed and observed as follows:

The property in suit was purchased for the mortgage-money in which both had equal title and share and were entitled to equal share in the property so purchased.

8. In coming to this conclusion the learned Judge professed to apply a Full Bench case of this Court, namely Kesri v. Ganga Sahai [1911] 33 All. 563.

9. The Full Bench case of Kesri v. Ganga Sahai [1911] 33 All. 563 was a case in which a joint decree had been obtained by several decree-holders and only one of them took out execution of the decree. He alone purchased the property, and when the co-decree-holders sought to recover their proportionate share in the property, it was held that they could. It will be noticed that the case before Sundar Lal, J., was not a case of co-decree-holders but was a case very similar to the case before us. In that case also, as in the present case, one of several co-mortgagees brought the suit. The Full Bench case of Kesri v. Ganga Sahai [1911] 33 All. 563 was carried in appeal before their Lordships of the Privy Council and the decision was affirmed: see Ganga Sahai v. Kesri A.I.R. 1915 P.C. 81.

10. In Khub Chand v. Todarmal A.I.R. 1924 All. 813 Sulaiman, J., held that where one of several decree-holders had taken out execution and had purchased a property in execution, he held it for the benefit of all the decree-holders. This was in accordance with the Privy Council decision in Ganga Sahai v. Kesri A.I.R. 1915 P.C. 81. Later on, the same learned Judge sitting with Ryves, J., in Makhan Lal v. Sohan Lal A.I.R. 1925 All. 331 decided in the peculiar circumstances of the case, that in that particular case the plaintiff Makhan Lal was not entitled to share in the property purchased. That was, however, a special case. Makhan Lal, from the very beginning, was opposing the defendant's suit and was putting obstacles to its success, It was held that in the circumstances it could not be said that the purchase had been made for the benefit of Makhan Lal as well. The facts of the case being entirely peculiar, that case can have no bearing on the one before us.

11. In the ease of Bandhu Ram v. Chinta Man Singh A.I.R. 1922 P.C. 215 the question arose whether a certain property had been purchased by the defendant out of a joint fund, and whether, therefore, it was liable to be shared by the plaintiffs. Their Lordships of the Privy Council did not discuss the question but remarked that the title to the property depends on the title to the bond. Their Lordships said:

It is sufficient to say that the title to the land in dispute must in their Lordships' opinion, depend on the title to the bond given by Pyare Mander to Rajdhari on 17th August 1891. If that bond was the separate property of Rajdhari, then the land which he purchased in the suit brought by him to enforce the bond was also his separate property.... But if he held the bond on behalf of himself and his two brothers...then he could in the circumstances of the case have no better title to the land and respondent 1 is entitled to retain the decree granted by the High Court.

12. There is one more case, namely Jai Inder Bahadur Singh v. Sheo Inder Bahadur Singh A.I.R. 1924 Oudh 218. In this case it was held that where properties had been purchased with bonds belonging to a certain estate the persons who are entitled to share in the estate were also entitled to share in the property purchased in execution of the decrees obtained on the bonds.

13. These cases all tend to establish that where there is a fund belonging jointly to several persons and one of these persons makes a purchase of land with that fund, that purchase inures to the benefit of all the persons entitled to share in the fund. This is really the principle laid down in Section 88, Trusts Act, 1882, It runs as follows:

Where a trustee...or other person bound in a fiduciary character to protect the interests of another person, by availing himself of his character, gains for himself any pecuniary advantage...he must hold for the benefit of such other parson the advantage so gained.

14. Illustration (d) to this section is as follows:

A, a partner, buys land in his own name with funds belonging to the partnership. A holds such land for the benefit of the partnership.

15. In this state of the law, the only possible answer to the question before us can be that the plaintiffs are entitled to share in the property subject, no doubt, to their paying to Ram Tahal's successor a proportionate share of the costs incurred by him.

16. On behalf of the respondents the learned counsel has drawn our attention to the cases, namely Ganeshi Lal v. Jagannath [1916] 32 I.C. 171 and Makhan Lal v. Sohan Lal A.I.R. 1925 All. 331, already discussed. The case in Ganeshi Lal v. Jagannath [1916] 32 I.C. 171 no doubt supports the respondents' case fully. But it does not appear that the attention of their Lordships was directed towards the Privy Council case decided a few months earlier, namely Ganga Sahai v. Kesri A.I.R. 1915 P.C. 81. Without referring to any authority and without considering Section 88, Trusts Act, two learned Judges of this Court came to the conclusion that in the circumstances similar to the present ones the plaintiff was entitled only to a share in the money and could have no right to share in the property which had been acquired with the money. In view of the numerous rulings in which the contrary view has been entertained we do not think that this case lays down the correct view of the law.

17. The learned counsel for the respondents also referred us to the case of Anrup Misr v. Ram Harakh A.I.R. 1929 All. 953. That case is obviously distinguishable and does not call for any remark.

18. The result is that this appeal must succeed, and the plaintiffs' right to share in the property must be affirmed subject no doubt to their contributing towards the costs incurred by Ram Tahal. Several other points were raised in the case and all these points have not been decided by the lower Court. These points will now have to be decided. We accordingly allow the appeal, set aside the decree of the Court below and remand the suit under Order 41, Rule 23, Civil P.C., and direct the Court below to re-enter the suit on its original number in the register and proceed to decide it in accordance with law. Costs here and hithertofore will abide the result.