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Smart Summary

Structured Summary of the Provided Opinion

Factual and Procedural Background

The plaintiffs (now appellants) sued for a mortgage decree in respect of properties other than those expressly described in a mortgage dated 11 September 1926. That mortgage covered 4.24 acres comprising plots Nos. 1757, 1759 and 1769. The mortgagor was the karta of a joint Hindu family; that family and certain other persons (who were not parties to the suit) were co-sharers in the larger holding and thus stood as tenants-in-common in respect of those properties.

In 1929, between the joint family and the other co-sharers a partition took place. In lieu of plots originally identified (including 1757 and the others that formed part of the mortgage), the joint family obtained plot 1759 and plots 1771 to 1776. These allotted plots exceeded by about an acre the area originally covered by the mortgage. The respondent purchased plots 1771 to 1776 immediately after that partition (30 July 1930). The trial and lower appellate courts had decided issues in favour of the respondent, and the present appeal turns on a question of law concerning the applicability of the doctrine of substitution to the substituted (partition-allotted) plots and the effect of Section 98 of the Transfer of Property Act.

Legal Issues Presented

  1. Whether the doctrine of substitution (i.e., that a mortgage of an undivided share can be enforced against properties allotted in lieu of that share on partition) applies in the circumstances of this mortgage and partition.
  2. Whether Section 98 of the Transfer of Property Act (governing anomalous mortgages) prevents application of the general principle of substitution to this case.
  3. Whether a mortgage executed by the karta on behalf of the whole joint Hindu family (where the family and non-family co-sharers are tenants-in-common) can be treated as a mortgage enforceable against properties allotted in lieu after partition.

Arguments of the Parties

Appellants' Arguments

  • The appellants relied on the principle articulated in the leading Privy Council decision reported at 1 IA 1061 and followed in Vol. 59 IA (reported at p. 4052), that a mortgage of an undivided share may be enforced against properties allotted in lieu under partition (the doctrine of substitution).
  • They argued that the present facts fall squarely within that principle because the mortgage was effectively of the joint family's interest in the common tenancy and the substituted plots represent the allotted in-lieu property.

Respondent's Arguments

  • Mr. De, for the purchaser-respondent, contended initially that the defendant-mortgagor had no right to mortgage his undivided share and that, if he had done so, the outcome would be the same as in the authority cited as 20 IA 116.
  • At the lower appellate level the judge treated the mortgage as anomalous and held that Section 98 of the Transfer of Property Act governed the case, excluding application of the general doctrine of substitution.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
1 IA 1061 (Privy Council) The principle that a mortgage of an undivided share may be enforced against properties "which, under a batwara or revenue partition, have been allotted in lieu of" the share of the actual mortgage; mortgagees take the security subject to sharers' right to enforce partition and convert undivided shares into defined portions. The court found the facts of the present case analogous to the Privy Council's decision and held that the Privy Council's principle was applicable, undermining the lower appellate judge's conclusion that substitution did not apply.
59 IA 4052 — Mohammad Afzal Khan v. Abdul Rahman Followed the same principle as in 1 IA 1061 concerning enforcement of a mortgage of an undivided interest against substituted/allotted plots after partition. The court treated this authority as a supporting instance of the same rule and stated that the present case would be covered by those authorities if the mortgage had been of the undivided interest in the plots; the court saw no material distinction.
20 IA 116 Cited by the respondent as representing an outcome the respondent argued should apply if the mortgagor lacked the right to mortgage an undivided share. The court recorded the respondent's contention invoking 20 IA 116 but did not adopt it; instead the court distinguished the present facts (mortgage by the whole joint family as karta) from the situation relied upon by the respondent.

Court's Reasoning and Analysis

The court proceeded by first analysing the nature of the mortgagor's interest and the character of the mortgage. It emphasised that the mortgage was executed by the karta on behalf of the whole joint Hindu family, and that the family members together with other persons (not members of the joint family) were co-sharers as tenants-in-common. The court rejected the suggestion that this was a mortgage by one member of the family of an undivided share; instead it treated the instrument as a mortgage of the joint family's interest in the common tenancies.

The court then considered the lower appellate judge's reliance on Section 98 of the Transfer of Property Act, which provides that in the case of an anomalous mortgage the rights and liabilities of the parties shall be determined by the deed. The judge below had concluded that because the mortgage was anomalous this statutory provision excluded the application of general principles (specifically substitution).

The appellate court held that the lower judge was wrong in this respect. The court explained that Section 98 means that insofar as the Transfer of Property Act itself prescribes rights and liabilities, those statutory provisions do not apply to an anomalous mortgage and the deed governs. However, the court explicitly treated the doctrine of substitution as a general principle of law that is not a statutory provision found in the Transfer of Property Act; therefore Section 98 does not oust the doctrine of substitution. The court further noted that it would be absurd and unjust to hold otherwise.

Relying on the authority of the Privy Council in 1 IA 1061 (and its later follow-up in 59 IA), the court concluded that the principle permitting enforcement of a mortgage of an undivided share against properties allotted in lieu on partition applied to the present facts. The court found the facts indistinguishable from the cited authorities because the mortgage represented the joint family's interest and the substituted plots represented allotments in lieu after partition.

Finally, the court observed that the lower appellate judge should have remanded the matter to the trial court (as the judge had intimated) to determine the precise proportion of the substituted plots that should be subject to the decree — i.e., to quantify what part of the allotted plots corresponded to the proportion of the joint property that was mortgaged. The court also noted Section 99 of the Estates Partition Act in relation to the determination of proportion, and allowed the appeal with costs as against the contesting respondent.

Holding and Implications

Core Ruling: The appeal was ALLOWED. The court held that the lower appellate judge was wrong to conclude that Section 98 of the Transfer of Property Act precluded application of the doctrine of substitution, and that the authorities (1 IA 1061 and 59 IA 4052) support applying substitution to the present facts.

Direct consequences and remedial direction:

  • The court allowed the appeal with costs throughout as against the contesting respondent.
  • The court indicated the proper course was to remand the case to the trial Court to determine the proportion of the substituted plots which should be the subject matter of the decree — i.e., to quantify the share of the allotted plots corresponding to the mortgaged interest.
  • Leave to appeal was refused (as recorded in the opinion).

Broader implications: The decision applies established authorities concerning enforcement of mortgages on undivided interests against allotted-in-lieu properties and clarifies that Section 98 (anomalous mortgages being governed by the deed) does not displace the general principle of substitution. The opinion does not purport to lay down a new precedent beyond applying and endorsing the cited authorities.

W.D/A.L
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    Ganga Prasad Sao v. Dulari Saran Singh

    1. The plaintiffs are the appellants in this appeal which arises out of an action in which they asked for a mortgage decree against certain properties other than those which are the subject of their mortgage which was dated 11th September 1926. This mortgage covered an area of 4.24 acres consisting of plots Nos. 1757, 1759 and 1769. The mortgagor was the karta of a joint Hindu family, a family who were co-sharers as regards these properties, and others with other persons not members of the joint family. It is clear therefore that the position of the joint family together with those persons who were, their co-sharers and who were, as I say, not parties to this action, was that of tenants-in-common. In 1929 as between the joint family and these other persons a partition took place and in lien of plots 1757 and the other plots which I have mentioned as the subject matter of the mortgage, they obtained 1759 (which was one of the old plots) and plots 1771 to 1776. These plots were about an acre in excess of the area which the mortgage of 11th September 1926 covered. The defendant-respondent comes in under a purchase immediately after the partition of plots 1771 to 1776 on 30th July 1930. We are not very seriously concerned with this purchase however although the issues which were raised in the Court below on behalf of the respondent had been decided in his favour. The matter is to be determined on the question of law. It is only necessary to state that the lower appellate Court came to the conclusion that the doctrine of substitution did not apply in this case as this was an anomalous mortgage. I should perhaps have stated that under the mortgage deed itself the plaintiffs were to be in possession for five years, and, after that period, to continue to do so if they chose. If they decided not to take that course, they could sue for the mortgage money. The mortgage being an anomalous mortgage as I have stated, the Judge in the Court below held that the matter was governed by Section 98 of the Transfer of Property Act, and the general principles of law did not apply: By that I mean the doctrine of substitution. In my opinion, so far as the effect of S. 98 is concerned, the learned Judge is clearly wrong. But in any event the point taken by the Judge in the Court below would not bar the plaintiffs' claim as against what I may call the substituted properties as the mortgage deed itself makes a provision for substitution as will appear from the following clause:

    If the said rehandar, after the expiry of the term of the rehan, does not like to keep the rehan intact, in that case the said rehandar shall be competent to realize the said rehan money from the person and the mortgaged and other moveable and immoveable, nami and benami properties of me, the executant, my heirs and representatives by taking proper steps.

    2. But I am not proposing to decide the case on that footing. The term of the bond which I have just read was a point advanced by Mr. Jayaswal but not very seriously pressed. The contention made on behalf of the appellants is that the principle as laid down in the leading case in 1 IA 1061 and followed subsequently in 59 IA 4052 applies. The principle there laid down was that in the case of a mortgage of an undivided share the mortgage may be enforced against properties “which, under a batwara or revenue partition, have been allotted in lieu of” the share of the actual mortgage. The same principle as I have said was followed in the later case reported in Vol. 59 of the Indian Appeals. Mr. De on behalf of the purchaser-respondent contends in the first instance that the defendant-mortgagor had no right to mortgage his undivided share and, should he do so, the result would be the same as in 20 IA 116.3 But the answer to that is the statement which I made at the commencement of my observation, namely, that this was the case of one party being a joint family mortgaging what they were clearly entitled to mortgage having regard to the fact that their co-sharers were not members of the same family but persons other than members of the joint family. They were therefore in a position of tenants-in-common as I have already stated. It was a mortgage, to repeat myself, by the whole of the joint Hindu family represented by the karta and not a mortgage of an undivided share by one member or some members of a number of persons comprising a joint family. It is exactly that case to which their Lordships of the Judicial Committee of the Privy Council in 1 IA 106 refer. At p. 119 of the Report Sir Montague E. Smith is reported to have made this statement:

    Now, what was the subject of this mortgage? It was an undivided moiety in two out of three villages forming a joint and undivided estate. The sharers, however, do not appear to have been members of a joint and undivided Hindu family, but to have enjoyed their respective shares (at all events their shares in two villages named in severalty). It is therefore clear that the mortgagor had power to pledge his own undivided share in these villages; but it is also clear that he could not, by so doing, affect the interest of the other sharers in them, and that the persons who took the security took it subject to the right of those sharers to enforce a partition, and thereby to convert what was an undivided share of the whole into a defined portion held in severalty.

    3. I want to repeat at this stage that this was not a mortgage by one member of a Hindu family; it was a mortgage by all the members of a Hindu family forming together with their other co-sharers, tenants-in-common. The facts are exactly met by the extract of the judgment of the Privy Council I have just read.

    4. Again similar reference is made at p. 411 of 59 IA in the case of Mohammad Afzal Khan v. Abdul Rahman. It would appear from the facts of the present case that these plots were in separate possession of this family; whether they were in possession of other plots is quite immaterial. In those circumstances it would quite clearly be a case covered by the authorities to which I have referred supposing that the mortgage had been of the undivided interest in these plots. It does not appear exactly what the interest of the family in the whole property was—I mean what proportion of the 16 annas. But supposing it had been eight annas, if the mortgage had been of eight annas interest in these properties, there is no doubt as I have stated that the principle laid down by their Lordships of the Judicial Committee of the Privy Council would have applied. Does it make any difference if this one co-sharer was one tenant-in-common represented by the joint Hindu family and purported to mortgage 16 annas interest—the interest mortgaged under the mortgage deed? I cannot say that it does. What I understand the mortgage deed to be is the mortgage of the whole of the joint family's interest in this common tenancy: to put it in other words, the plots mortgaged represented in substance the total share of the joint family in the joint family property or, perhaps more properly described, in the common tenancies. If it represented the whole 16 annas of these plots which was in excess of the mortgagor's share, it might have given rise to certain difficulties; but with that we are not concerned. I repeat myself by stating that I cannot say that the mere mention of 16 annas of these properties makes any difference to the application of the principle, especially having regard to the fact that there is a clear representation and statement at the end of the mortgage deed that these properties were joint with other properties. It is impossible in my judgment to distinguish this case from the facts of the cases of the Privy Council to which I have made reference. It seems to me therefore that the decision of the learned Judge was wrong.

    5. I would add one word as regards Section 98 of the Transfer of Property Act, which provides that, “In the case of an anomalous mortgage the rights and liabilities of the parties shall be determined by the deed”. I understand that to mean that so far as the Act provides for the rights and liabilities of the mortgagor, these provisions do not apply to the case of an anomalous mortgage. An anomalous mortgage is governed by the deed itself; but substitution is a general principle of law not provided for in the Transfer of Property Act and in my judgment S. 98 in no way affects it. It would lead to rather absurd and unjust results if one were to hold otherwise. In my opinion the learned Judge in the Court below was wrong and his proper action should have been to remand the case to the trial Court, as he intimated in the latter part of his judgment, for the purpose of determining what proportion of the substituted plots should be the subject matter of the decree as representing the proportion of the joint property which was mortgaged under the mortgage deed. I should have referred to Section 99 of the Estates Partition Act. I would therefore allow the appeal with costs throughout as against the contesting respondent 7. Leave to appeal is refused.

    W.D/A.L

    6. Appeal allowed.

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    Comments

    Ganga Prasad Sao v. Dulari Saran Singh
    (Mar 3, 1937)