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Shib Narain Mondal v. Baikuntha Nath Santra
Factual and Procedural Background
The plaintiff sued to enforce a mortgage purportedly executed on 12 November 1897 by the first three defendants (owners of the disputed property). The same mortgagors executed a registered mortgage on 2 August 1898 in favour of Kortick Jana. On 15 December 1905 the mortgagors' right, title and interest were sold in execution of a money-decree and passed to defendant 4. The 1898 mortgagee sued to enforce his security against the mortgagors and defendant 4; by consent decree defendant 4 satisfied that decree on 14 December 1907 using money raised by a mortgage he executed in favour of defendants 5 and 6 on 10 December 1907. The plaintiff commenced the present action on 27 August 1909, joining the mortgagors, defendant 4 (purchaser of the equity of redemption) and defendants 5 and 6 (mortgagees from defendant 4). The trial Court decreed for the plaintiff. On appeal the Subordinate Judge dismissed the suit, holding the 1897 mortgage to be fictitious and the 1898 mortgage genuine. The plaintiff appealed to this Court.
Legal Issues Presented
- Whether defendant 4, who is both purchaser of the equity of redemption and (through the registered 1898 mortgage) a prior encumbrancer, is entitled to dispute the genuineness of the plaintiff's alleged 1897 mortgage.
- Whether the twofold character of defendant 4 (equity of redemption holder and prior encumbrancer) results in a merger that prevents him from raising the defence that the 1897 mortgage is fictitious.
Arguments of the Parties
Appellant's Arguments
- The appellant (plaintiff) challenged the Subordinate Judge's dismissal on the ground that defendant 4, now occupying the position of a prior mortgagee, is not entitled to question the validity of the plaintiff's mortgage and that, at least, the plaintiff's mortgage should take rank as a subsequent encumbrance.
- The appellant argued that when the two interests (equity of redemption and prior encumbrancer) combined in the same person there was a merger, preventing defendant 4 from disputing the mortgage's validity.
Defendant(s)' Arguments
- The Subordinate Judge's view, accepted by respondents, was that the mortgage of 12 November 1897 was fictitious while the 2 August 1898 mortgage represented a genuine, registered transaction; defendant 4 (as purchaser of the equity of redemption) therefore relied on the defence that the 1897 mortgage was fictitious.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Gokal Das Gopal Das v. Puranmal Premsukhdas. [1884] 10 Cal. 1035 | Authority that a person who combines the character of purchaser of the equity of redemption and prior encumbrancer may use the prior (registered) mortgage as a shield; establishes that no merger prevents raising the defence of a fictitious transaction. | The Court relied on this decision to hold that defendant 4 was entitled to use the 1898 mortgage as a shield and therefore to dispute the genuineness of the 1897 mortgage; consequently defendants 5 and 6 (subsequent encumbrancers from defendant 4) could also contest the plaintiff's claim. |
Court's Reasoning and Analysis
The Court examined the two competing mortgages and the position of defendant 4, who held both the equity of redemption (as purchaser in execution) and, through a registered instrument of 1898, the position of a prior encumbrancer. The Court observed that, if both mortgages were genuine, priority would prima facie belong to the 1898 mortgagee under Section 50 of the Registration Act; that would place defendant 4 in the position of a prior encumbrancer entitled to priority.
The Court then considered whether that position barred defendant 4 from disputing the genuineness of the plaintiff's 1897 mortgage. It rejected the appellant's merger argument, relying on the Judicial Committee decision in Gokal Das Gopal Das v. Puranmal Premsukhdas to conclude that combining the two interests in the same person did not preclude defendant 4 from raising the defence that the 1897 mortgage was fictitious. Accordingly, defendant 4 could use the registered 1898 mortgage as a shield and dispute the plaintiff's claim; the same right extended to defendants 5 and 6 as subsequent encumbrancers from defendant 4.
Holding and Implications
APPEAL DISMISSED.
The decree of the Subordinate Judge dismissing the suit (on the ground that the 1897 mortgage was fictitious and the 1898 mortgage genuine) is affirmed and the appeal is dismissed with costs. The direct consequence is that defendant 4 (and defendants 5 and 6) may dispute the genuineness of the plaintiff's claimed 1897 mortgage; the opinion does not purport to establish a new general precedent beyond applying the cited authority to these facts.
1. This is an appeal by the plaintiff in a suit to enforce a mortgage security. The first three defendants are the admitted owners of the disputed property. On 12th November 1897, they executed an unregistered mortgage bond in favour of the plaintiff. On 2nd August 1898, they executed a registered mortgage bond in favour of one Kortick Jana. On 15th December 1905, the right, title and interest of the mortgagors in the mortgaged properties was sold in execution of a money-decree against them and passed into the hands of defendant 4. The mortgagee of 1898 sued to enforce his security as against the mortgagors and the purchaser of the equity of redemption, defendant 4. A decree was made by consent of parties, which was satisfied by defendant 4 on 14th December 1907, with money raised by him upon a mortgage executed by him on 10th December 1907 in favour of defendants 5 and 6. On 27th August 1909, the plaintiff commenced the present action to enforce his security, and he joined as defendants the mortgagors (first three defendants), the purchaser of the equity of redemption (defendant 4), and the mortgagees from the latter (defendants 5 and 6). The Court of first instance decreed the suit. On appeal, the Subordinate Judge has dismissed the suit, because, in his opinion, the mortgage sought to be enforced was fictitious, while that of 2nd August 1898 represented a genuine transaction. The plaintiff has appealed to this Court, and on his behalf the decision of the Subordinate Judge has been challenged on the ground that as defendant 4 now occupied the position of a prior mortgagee, he is not entitled to question the validity of the mortgage in suit which can, at least, take rank as a subsequent encumbrance. In our opinion, there is no foundation for this contention.
2. There is no controversy that if the two mortgages of 1897 and 1898 be assumed to be genuine, the mortgagee of 1898 or his representative in-interest is entitled to priority, under Section 50 of the Registration Act, as his title is based on a registered instrument. Consequently, prima facie, defendant 4 is in the position of a prior encumbrancer, and it is immaterial to him whether he is sought to be redeemed by the mortgagors or by a person who claims as a subsequent encumbrancer from them. But this doctrine has no application to the circumstances of the case before us. As already stated, defendant 4 is also the purchaser of the right, title and interest of the mortgagors at a sale held in execution of a money-decree against them. He therefore combines in himself a two-fold character; he is the holder of the equity of redemption and the is also in the position of a prior encumbrancer.
3. In his character as holder of the equity of redemption, the defence is undoubtedly, available to him that the mortgage in suit is fictitious. Is that defence, then, not available to him because he has also acquired the position of a prior encumbrancer? It has been argued for the appellant that when the two interests combined in the same person, there was a merger. This contention is obviously unsound, because the decision of their Lordships of the Judicial Committee in the case of Gokal Das Gopal Das v. Puranmal Premsukhdas . [1884] 10 Cal. 1035 shows conclusively that defendant 4 is entitled to use the mortgage of 1898 as a shield for his protection. We must hold accordingly that it was open to defendant 4, and consequently, to the subsequent encumbrancers from him (defendants 5 and 6) to dispute the genuineness of the mortgage transaction on which the plaintiff seeks to found his claim.
4. The result is that the decree of the Subordinate Judge is affirmed and this appeal dismissed with costs.
V.B/R.K
5. Appeal dismissed.
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