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Smart Summary

Factual and Procedural Background

Bisheshwar (father of defendants 1 and 2) executed a mortgage on 22 Dec 1905 in favour of Ram Lagan as to a 4-annas share in Mauza Parmanandpur (Touzi No. 126). Ram Lagan sued in 1912, obtained a decree on 24 Sep 1912, and purchased the mortgaged property at sale. Bisheshwar later executed two mortgages in 1911 and 1913 in favour of the plaintiffs. On 14 Dec 1914 Bisheshwar (with others) borrowed Rs.4,935 from the appellants (defendants 3 and 4) and executed a mortgage including the 4-annas share. The mortgage recited that Ram Lagan had recovered a decree and that decretal money needed to be deposited to set aside the sale; on 15 Dec 1914 Rs.4,192-11-9 was deposited in Court and a receipt (Exhibit A) acknowledged that this sum, advanced by the appellants, was used to deposit the decretal money. The Subordinate Judge held against the appellants on priority; this appeal raises the question of the appellants' priority.

Legal Issues Presented

  1. Whether the appellants (defendants 3 and 4) are entitled to priority in respect of the 4-annas share in Touzi No. 126 by reason of their advance which satisfied Ram Lagan's decretal claim (i.e., whether the prior charge in favour of Ram Lagan was extinguished or was kept alive).

Arguments of the Parties

Appellants' Arguments

  • The money advanced by the appellants was used to deposit the decretal money due to Ram Lagan (as shown by the recitals of the mortgage bond and Exhibit A), and thus the appellants' advance satisfied Ram Lagan's claim while keeping the charge alive for the appellants' benefit.

Respondents' Arguments

  • Reliance on the Judicial Committee decision in Het Ram v. Sadi Ram (Het Ram v. Shadi Ram) that upon an order absolute for sale under section 89 of the Transfer of Property Act the security is entirely extinguished — since an order absolute and sale occurred, the respondents argued the security was extinguished and their position should prevail.
  • The Subordinate Judge held that the allegation the decretal debt was satisfied out of the appellants' consideration was not supported by reliable evidence and noted there was no express agreement in the appellants' bond giving them priority.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Het Ram v. Sadi Ram That upon an order absolute for sale being passed under section 89 of the Transfer of Property Act the security is entirely extinguished and cannot be kept alive for any one's advantage. Respondents relied on this decision; the Court observed that if this decision were the last word respondents would likely succeed but did not accept it as controlling in view of subsequent consideration in Sukhi.
Het Ram v. Shadi Ram Same view as cited above regarding extinguishment of security after an order absolute for sale under section 89. Referred to by respondents; the Court treated this authority as reconsidered later and did not treat it as definitive.
Sukhi v. Ghularn Safdar Khan Held that earlier contrary decisions were not brought to notice in Het Ram; under the Civil Procedure Code (post-Transfer of Property Act amendments) the law remains that an owner acquiring rights at a sale under a first mortgage can, against a subsequent mortgagee not bound by the sale, set up the first mortgage as a shield. The Court regarded this decision as conclusive on the point and applied its principle to hold that the appellants' charge was kept alive and entitled to priority.

Court's Reasoning and Analysis

The Court accepted the factual finding that the appellants' money was used to satisfy Ram Lagan's decretal claim, relying on the recitals of the appellants' mortgage bond and Exhibit A. The Court rejected the Subordinate Judge's conclusion that the claim lacked reliable evidence and that there was no agreement conferring priority, noting that no express agreement was required and that the real question was whether the earlier mortgage was extinguished or kept alive by the transaction. The Court considered respondents' reliance on Het Ram but followed the subsequent Judicial Committee consideration in Sukhi v. Ghularn Safdar Khan, which held that the earlier view in Het Ram did not represent the law as it stands under the Civil Procedure Code and that a purchaser/owner at a sale under a first mortgage may assert the first mortgage against a subsequent mortgagee not bound by the sale. Applying Sukhi, the Court concluded the charge in favour of the appellants was kept alive and that the Subordinate Judge's decision could not be supported.

Holding and Implications

Decree modified.

Holding: The Court directed that the sale of the 4-annas share in Mauza Parmanandpur (Touzi No. 126) must be subject to the prior mortgage lien of the appellants to the extent of Rs. 4,192-11-9. The appellants were awarded costs in this Court and below against the plaintiffs.

Implications: The direct effect is that the appellants retain a prior mortgage lien for Rs. 4,192-11-9 on the 4-annas share and receive costs; the Court treated Sukhi v. Ghularn Safdar Khan as conclusive on the legal point considered.

    Ram Narayan Sah v. Sahdeo Singh

    Das, J.:— The only question raised in this appeal is whether the defendants 3 and 4, who are the appellants before us, are not entitled to priority in respect of 4-annas share in a property bearing Touzi No. 126. The material facts are as follows:—

    On the 22nd December, 1905, one Bisheshwar, the father of defendants 1 and 2, borrowed a sum of money from one Ramlagan and executed a mortgage in his favour in respect of a 4-annas share in a property known as Mauza Parmanandpur, bearing Touzi No. 126. Bisheshwar executed two further mortgages, one dated the 19th June, 1911, and the other dated the 27th April, 1913, in favour of the plaintiffs. In 1912, Ram Lagan brought a suit to enforce his mortgage, and on the 24th September, 1912, he recovered a decree as against Bisheshwar. Thereafter the mortgaged properties were put up for sale and were in fact purchased by Ram Lagan. On the 14th December, 1914, Bisheshwar, along with two other persons, borrowed a sum of Rs. 4,935 from the appellants and executed a mortgage in favour of the appellants in respect of certain properties including the 4-annas shares in Mauza Paramanandpur, bearing Touzi No. 126. The mortgage in favour of the appellants recited that Ram Lagan had recovered a decree as against them and that it was absolutely necessary for them to deposit the decretal money in Court in order to have the sale in favour of Ram Lagan set aside. On the 15th December 1914, Rs. 4,192-11-9 was actually deposited by Bisheshwar in Court and a receipt was granted to the appellants by Bisheshwar in respect of the money which, was advanced by the appellants to Bisheshwar, in which it was distinctly stated by Bisheshwar that out of the money which was advanced by the appellants to Bisheshwar he had deposited the decretal money due to Ram Lagan Singh, decree-holder. There cannot be the slightest doubt that the money actually advanced by the appellants went to satisfy the mortgage bond of Ram Lagan. The question, therefore, arises, was the charge in favour of Ram Lagan extinguished, or was it kept alive by the transaction which took place between the appellants and Bisheshwar? In my opinion there cannot be the slightest doubt that the charge was kept alive. It was manifestly to the interest of the appellants that the charge should be kept, alive and there is no reason at all to hold that they did not intend that which was manifestly to their advantage and for their benefit.

    The learned Subordinate Judge has taken the vie that the allegation that Ram Lagan's debt was satisfied out of the consideration money of the appellants' bond is not supported by any reliable evidence. In my opinion it is supported by the recitals of the bond and also by the receipt Exhibit A to which I have already referred. Then the learned Subordinate Judge says that there is no argument in the appellant's bond that the debt of the appellants will have priority over the plaintiffs' mortgage. Of course there is no such agreement nor could there be any such agreement. The question that the learned Subordinate Judge should have considered was this: was the mortgage bond of Ram Lagan extinguished or kept alive? and had the learned Subordinate Judge referred to the numerous authorities on the point, he would have had no sort of difficulty in coming to a proper conclusion on this point.

    It was lastly argued by the learned Vakil for the respondents that the Judicial Committee, in the case of Het Ram v. Sadi Ram, has taken the view that upon an order absolute for sale being passed under section 89 of the Transfer of Property Act, the security is entirely extinguished and cannot be kept alive for any one's advantage. It is of course conceded in this case that an order absolute for sale was passed in Ram Lagan's suit and that thereafter a sale of the property actually took place. If the decision of the. Judicial Committee in Het Ram v. Shadi Ram be the last word on the subject, then there can be very little doubt that the respondents will be entitled to succeed. But this case was considered by the Judicial Committee in the case of Sukhi v. Ghularn Safdar Khan. It was pointed out that various cases which have taken the opposite view were not brought to the notice of the Board in Het Rom's case and that whatever the difficulty might have been under the Transfer of Property Act, the position is entirely different now that we are governed by the Civil Procedure Code and not by the Transfer of Property Act. Their Lordships in the course of their judgment said as follows:—

    “Now the words being gone”, namely, the Concluding words in section 89 of the Transfer of Property Act which gave rise to a conflict of authorities on the subject, “their Lordships feel no difficulty in holding that the law remains as it certainly was before the Transfer of Property Act, 1882, namely, that an owner of a property who is in the rights of a first mortgagee and of the original mortgagor as acquired at a sale under the first mortgage is entitled at the suit of a subsequent mortgagee who is not bound by the sale or the decree on which it proceeded, to set up the first mortgage as a shield”. In my opinion this decision is conclusive on the point.

    I hold that the decision of the learned Subordinate Judge on the question that has been argued before us cannot be supported. I must accordingly modify the decree which has been passed by the learned Subordinate Judge and direct that the sale of the 4-annas share in Mauza Parmanandpur, bearing Tonzi No. 126, must be subject to the prior mortgage lien of the appellants to the extent of Rs. 4,192-11-9.

    The appellants will be entitled to their costs both in this Court and in the Court below from the plaintiffs.

    Adami, J.:— I agree.

    Decree modified.

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    Comments

    Ram Narayan Sah v. Sahdeo Singh
    (Jan 17, 1922)