Lachmi Narayan Marwari v. Bhagwat Singh

Sultan Ahmed, J.:— This appeal arises-out of a suit for recovery of a sum of Rs. 2,300, principal and interest due on a mortgage bond, by sale of the mortgaged property.

2. The plaintiff's case was that the property in that suit was mortgaged in 1901 by one Earn Prasad (whose representatives-in-interest in the present suit am defendants 4 to 6) to defendant 7, who however admittedly was only a benamidar of the plaintiffs. The agreement in the mortgage bond was that the mortgagee-was to remain in possession for eight years, in lieu of interest; if he ceased to have possession, the mortgagor was to pay interest at the rate of 5 per cent per month. The mortgagee was also given the right to bring the property to sale if the mortgage money was not repaid.

3. In 1906 Ram Prasad executed another mortgage-a simple mortgage bond in respect of the same and other properties in favour of defendants 1, 2 and 3, who are Marwaris. In 1910 the Marwarissued on their mortgage bond making the present plaintiffs parties. They obtained a decree and, in execution, the property was sold and purchased by them. The plaintiffs brought the present suit on their mortgage bond of 1901. The suit, which was contested by the Marwari defendants, was partly decreed, and against this decree both the plaintiffs and Marwaris appealed to the District Judge.

4. Both the appeals were unsuccessful except that the rate of interest was modified. The Marwari defendants have now appealed to this Court.

5. The first question which arises in this, appeal is whether the suit is barred by the principle of res judicata. The facts are that the Marwaris in their suit in 1910 made the present plaintiffs-defendants (they were defendants 6 and 7 in that suit) and they actually appeared and set up their prior mortgage. No definite issue seems to have been raised in this suit as to whether they were or were not prior mortgagees, but the Deputy Commissioner, Subordinate Judge, in his judgment said:

“No order is passed as regards the claim of defendants 6 and 7 because they have failed to prove their prior mortgage.”

6. The question of res judicata has been discussed by the learned Subordinate Judge in the lower Court and he appears to have considered that, because no formal issue on the question of whether defendants 6 and 7, the present plaintiffs, were or were not prior mortgagees, was framed, the Deputy Commissioner, Sub-ordinate Judge, cannot have come and did not come, to any decision which would operate as res judicata.

7. The question which has therefore to be considered in this appeal is, whether the suit is barred by the principle of res judicata. It is absolutely clear that a paramount title cannot be drawn into controversy in an action for foreclosure. The prior mortgagee is not therefore a necessary party to an action by a puisne mortgagee for foreclosure, the chief object of which is only to cut off all rights subsequent to the mortgage and not prior to the mortgage. There was some doubt about the necessity of a prior mortgagee being made a party in a suit by a subsequent mortgagee; but all that doubt has been set at rest by O. 34, R. 1 of the present Code of Civil Procedure. At the same time the puisne mortgagee may make a prior mortgagee a party to the suit. If he does so the purpose of making the prior mortgagee a party should be clearly stated; but, if no purpose is given in the plaint or provided for in the decree, the prior mortgage will not be affected by the judgment in any way. Where no relief is claimed the subject-matter of the action is the interest of the mortgagor minus the interest of the first mortgagee, and in such a suit, in my opinion, no investigation as to the validity or extent of the prior mortgage can possibly be made.

8. The whole question has been very ??? discussed in “Jones on Mortgage” V. 2, Para. 1439, as follows:

“Persons having interests in the property, paramount to the mortgage sought to be foreclosed, dire generally neither necessary nor proper parities to the suit, because the only proper object of the proceedings is to bar all rights subsequent to the mortgage. The decree can have 11 effect upon the rights of parties having priority, whether they are made parties to the action or not.

In some cases prior mortgagees are made parties to the bill, so that the Court may, with their consent, order a sale of the whole estate an thus make a good and complete title in the purchaser. Sometimes, a prior mortgagee is made a party to the suit, with a view to his assenting, to a decree for the sale of the whole estate, in which case his mortgage is first paid, and the proceeds then applied to the second mortgage. In such case the legal presumption is that a purchaser at a foreclosure sale gives the full value of the property, and the whole proceeds of the property are then applied to the payment of the incumbrances in the order of their priorities. But it is proper to make the person who holds the prior legal title a party only when his debt is payable and he is willing to receive payment and for the purpose of making a sale of the whole title. He is not a necessary party except for such a decree. The Court may order a sale subject to a prior incumbrance, and unless the mortgagee with paramount title expressly consents to a sale of the mortgaged estate, the sale must be made subject to his mortgage; and no portion of the proceeds of the same can be applied in payment thereof.

“When a prior encumbrancer is made a party to a foreclosure suit, there should be an allegation of the purpose for which he is made a party; as for instance, that the amount of his mortgage may be ascertained and determined by the judgment of the Court, so that the mortgage can be paid out of the proceeds of the sale, or so, that the sale may be subject to the known amount of the lien. If such purpose is not indicated in the complaint, nor provided for in the judgment, the prior encumbrancer will not be affected by the judgment.”

9. An examination of the case law on the subject also leads to the same conclusion. In the case of Sri Gopal v. Prithi Singh(1), in the previous suit, the plaintiffs claimed priority over the prior mortgagees and claimed relief against them. The head-note of 24 All. 429 of this, decision is misleading, and gives one, the impression that their Lordships of the Privy Council laid down generally that whenever the prior mortgagee of the same property is made a party to a suit., he must set up his prior mortgage, and if; he omits to set up his prior charge, the suit subsequently brought by him will be barred. A reference to the judgment of Sir Alfred North will show that no such? wide proposition of law was laid down and that relief was claimed against the prior mortgagee. In the case of Gopat Lal v. Benarsi Pershad Chowdhury(2), the subsequent mortgagee had impleaded the prior mortgagees and had claimed to sell the property free from all incumbrances. Mahomed Ibrahim Hussein Khan v. Ambika Pershad Singh(3) and Mahabir Pershad Singh v. Prabhu Singh(4) are also cases where relief having been claimed against the prior mortgagee and he having failed to set up the prior mortgage, it was held that a subsequent suit by him was barred.

10. The decisions in Surjiram Marwari v. Barhamdeo Pershad(5), Dhapi v. Barham Deo Pershad(6) and Mahabir Pershad v. Prabhu Singh are clear authorities for the view that, unless relief is claimed against the prior mortgagee, the latter need not set up his prior mortgage. There is however the decision in the case of Gajadhar v. Bhagwanta(7) where it was held that, once the prior mortgagee is made a party, he must set up his mortgage even if no relief is claimed against him. The decision of the Judicial Committee of the Privy Council in Mahomed Ibrahim Hossein Khan v. Ambika Pershad Singh, on which the Hon'ble Judges of the Allahabad High Court took this view does not however lay down any such wide proposition. It will appear from the judgment of Sir John Edge, at p. 441 (of 15 C.L.J) that property in the previous suit was sold free from all charges and incumbrances. Taking the decision in Gajadhar v. Bhagwanta as the limit to which the Courts would go, it would mean that the prior mortgagee would be bound to disclose his prior mortgage in the previous suit if he is made a party. This admittedly had been done by the plaintiffs who set up their prior mortgage in the previous suit. Therefore the suit is clearly not barred under S. 11, Expl. 4, by reason of any omission, nor is the suit barred under Section 11 of the CPC, itself. Inasmuch as the subject-matter of the present suit is totally different from the subject-matter of the previous suit, there could be no decision in the previous suit with respect to the prior mortgage, nor indeed has there been any such decision. The learned Deputy Commissioner, Subordinate Judge, in his judgment in the previous suit said:

“No order is passed as regards the claim of defendants 6 and 7, because they have failed to prove their prior mortgage.”

11. On the face of this order, it is impossible to contend that there had been any decision. Therefore in any view of the case, the doctrine of res judicata in my opinion is inapplicable. I would therefore dismiss this appeal with costs.

12. Coutts, J.:— I agree.

V.S/R.K

13. Appeal dismissed.