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Case Number

Appeal No. 255 of 1945.

Attorney(S)

Messrs. V.K Thiruvenkatachari, N.V.B Shankara Rao and G. Vasanta Pai for Appt.
Messrs. P. Satyanarayana Rao and G. Venkatarama Sastri for Respt.

Judges

Wadsworth
Govindarajachari, J.

Acts

Ss. 85 to 90 of the Transfer of Property Act, those sections
O. 23, Rule 1, sub-rule (3) of the Code of Civil Procedure
TRANSFER OF PROPERTY ACT
1934, S. 20(2) of the Indian Limitation Act
S. 19 or S. 20(1) of the Limitation Act.
S. 20(2) of the Indian Limitation Act
Sec. 20(2) of the Limitation Act

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Smart Summary

Annotated Summary of the Judgment (Delivered by Govindarajachari, J.)

Factual and Procedural Background

The dispute arises out of a simple mortgage dated 24 March 1908 executed by Kidambi Narasimhacharyulu for himself and as guardian of his then minor sons (defendants 2 and 3). The mortgage for Rs. 9,500 was to be repaid in 12 annual instalments and contained a provision that default in the first three instalments consecutively would render the entire principal and interest payable.

Key events and procedural history (as set out in the opinion):

1915: A receiver was appointed in O.S. No. 83 of 1915 (Subordinate Judge's Court, Bezwada) who subsequently gave three mortgages over the same properties in favour of the present first defendant (in 1918).
1919: The equity of redemption of the Kidambis in those properties (and other interests) were sold in execution in O.S. No. 69 of 1912 and purchased by Pyda China Ramakrishnayya (fourth defendant) and Addanki Lakshmanacharyulu (who later conveyed to Pyda).
23 March 1921: Chaturvedula Suryanarayana (mortgagee under 1908 bond) filed O.S. No. 32 of 1921 against the Kidambis and Pyda to recover the entire amount due after default on the first three instalments. The present first defendant (holder of three 1918 mortgages) was not made a party to that suit.
6 February 1922: Pyda executed a sale deed conveying his equity of redemption to Chaturvedula Suryanarayana for a stated consideration of Rs. 36,000 and the deed recited “both of us have filed razinama in the Court.” The deed also contained a proviso preserving the benefit of the first mortgage as against subsequent mortgagees.
8 February 1922: O.S. No. 32 of 1921 was dismissed; the available register extract states dismissal “as per adjustment reported in I.A. No. 113 of 1922.” Neither party could produce the certified judgment or decree.
O.S. No. 3 of 1930: The present first defendant filed this suit on his 1918 mortgages impleading Pyda, the Kidambis and Chaturvedula Venkata Subramanyam (son of Suryanarayana). The decree dated 1 September 1931 directed sale of the hypotheca “subject to the prior mortgage of the 6th defendant dated 24-3-1908” and the sale proclamation noted the 1908 mortgage (with a remark that it was “executed fraudulently and without consideration”). The plaintiff in O.S. No. 3 (the present first defendant) purchased at auction and obtained possession (delivery said to be given on 13-5-1935).
Insolvency and subsequent litigation: Chaturvedula Venkata Subramanyam was adjudicated insolvent (I.P. No. 24 of 1934). The Official Receiver obtained possession for part of fasli 1344–1345 and later sold the insolvent's right in the 1908 mortgage to the present plaintiff on 8 January 1942. The plaintiff also bought the shares of the insolvent's two sons on 21 September 1942.
3 March 1943: The present suit was filed by the plaintiff on foot of the 24-3-1908 mortgage seeking a mortgage decree restricted to Rs. 12,000 (although he asserted a much larger sum might be due). The lower Court decreed the suit as prayed for.
Appeal: The present appeal was filed by the first defendant (appellant) raising two principal points, summarized below.

Legal Issues Presented

Whether the plaintiff's suit based on the 24 March 1908 mortgage is barred by limitation (specifically whether any of Sections 19, 20(1) or 20(2) of the Limitation Act apply, and if a fresh cause of action arose after annulment of the 1922 sale or after the decree in O.S. No. 3 of 1930).
Whether the present suit is barred by Order 23, Rule 1, sub-rule (3) of the Code of Civil Procedure on the ground that O.S. No. 32 of 1921 (dismissed) and the present suit are in respect of the same subject-matter and the present plaintiff is representative in interest of the plaintiff in the earlier suit.

Arguments of the Parties

Appellant's (First Defendant) Arguments

Limitation: The suit (filed in 1943) is barred by limitation as it was brought 35 years after the 1908 mortgage. There are no acknowledgments of liability or payments by the mortgagor to invoke S.19 or S.20(1) of the Limitation Act.
Res Judicata / Bar under CPC O.23, R.1(iii): The dismissal of O.S. No. 32 of 1921 (the earlier suit) amounted to a dismissal following mere withdrawal of the plaintiff; the two suits concern the same subject-matter (the 1908 mortgage) and the plaintiff in the present suit represents the plaintiff in the earlier suit, so the present suit is barred under O.23, R.1(iii).

Respondent's (Plaintiff) Arguments

Limitation — three alternative positions:
- Relying on decisions such as Ranee Surno Moyee v. Shooshee Mokhee Burmonia, Huro Pershaud Roy v. Gopaldas Dutt, and Muthuveerappa Chetti v. Adaikappa Chetti: the plaintiff contends that the mortgage debt was satisfied by Pyda's sale deed of 6-2-1922, and when that satisfaction was annulled (Pyda's sale being set aside) a fresh cause of action arose, so the 1943 suit is within time.
- Relying on Ramasubba Aiyar v. Arunachalam Chettiar (and Batey Krishna v. Parsotam Das): the decree in O.S. No. 3 of 1930 (dated 1 September 1931) directing sale subject to the 1908 mortgage is the starting point of limitation.
- Relying on Doraiswami v. Periakaruppan and S.20(2) of the Limitation Act: because the mortgagee (or his successors) were in possession of the mortgaged property from 6-2-1922 until about 1934, such possession must be treated as possession by the mortgagee and the receipt of rents is tantamount to payment within Sec.20(2), bringing the suit within time.
Res Judicata / O.23, R.1(iii): The dismissal of O.S. No. 32 of 1921 was not a mere withdrawal; it was dismissal following an adjustment/satisfaction reported to the Court and thus recorded (Order 23, Rule 3). Alternatively, even if dismissal followed a mere withdrawal, the presence of the puisne mortgagee (first defendant) in the later suit makes a material difference so the two suits are not the “same” within O.23, R.1(iii).

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Ranee Surno Moyee v. Shooshee Mokhee Burmonia and others	Cited for principle that where a debtor provides a satisfaction which is subsequently annulled at his instance, a fresh cause of action (in the nature of the original cause) may arise upon annulment.	The court held this principle inapplicable to the present case because the first defendant had no part in providing the satisfaction; Pyda's sale was set aside in proceedings to which the present parties were not parties; and even if Pyda's sale had stood the plaintiff would still have to sue the first defendant to work out extinguishment of puisne mortgages.
Huro Pershaud Roy v. Gopaldas Dutt	Same underlying principle as in Ranee Surno Moyee regarding annulment of a debtor-provided satisfaction creating a fresh cause of action.	Court treated the decision as inapplicable for the same reasons it rejected Ranee Surno Moyee — distinguishing facts and parties.
Muthuveerappa Chetti v. Adaikappa Chetti	Also cited for the doctrine that annulment of a satisfaction provided by the debtor can give rise to a fresh cause of action.	Court found the decision inapplicable on the facts: the appellant was not the provider of the satisfaction and was not a party to the proceedings that set aside the sale.
Ramasubba Aiyar v. Arunachalam Chettiar	Cited for the proposition that a decree (dated 1 Sept 1931 in the present case) which recognised a prior claim might be the starting point of limitation.	Court rejected this use: distinguished facts — the decree merely recognised the prior mortgage of 1908 and did not create any new right or fresh cause of action commencing on 1 Sept 1931.
Batey Krishna v. Parsotam Das	Referred together with Ramasubba Aiyar on the issue whether a decree recognising a prior claim can be the starting point of limitation.	Court held that the present decree did not create a fresh right and therefore the cases were distinguishable and not applicable.
Doraiswami v. Periakaruppan	Relied upon for the principle that possession by mortgagees (and receipt of rents) may be treated as possession in their capacity as mortgagees and under Sec.20(2) of the Limitation Act the receipt of rents is tantamount to payment for limitation purposes.	Court accepted this principle and, on the undisputed facts of possession by the mortgagee (and successors) between 1922 and 1934, applied Sec.20(2) to hold the suit within time.
Mulla Veetil Seethi v. Achuthan Nair	Held that the rights of a puisne mortgagee or purchaser of the equity of redemption who were omitted from a mortgage suit remain unimpaired by that suit and by a sale in execution of the decree in that suit; a prior mortgagee's suit does not extinguish the rights of such omitted persons.	Court treated this decision as fundamental. It applied the principle to conclude that omission of the puisne mortgagee from O.S. No. 32 of 1921 left the puisne mortgagee's rights unimpaired and that a fresh suit against the puisne mortgagee is not barred under O.23, R.1(iii).
Chinnu Piliai v. Venkataswami Chettiar	Held that a puisne mortgagee can maintain a suit for sale subject to a prior mortgage even though the prior mortgagee had previously sued for sale without impleading the puisne mortgagee; the puisne mortgagee is not obliged first to redeem the prior mortgage.	Court cited this to support the proposition that subsequent suits against omitted puisne mortgagees are permissible and different in nature from the earlier suit in which they were not impleaded.
Venkat Reddi v. Kunjappa Goundan	Discussed that, following repeal of Ss. 85–90 of the Transfer of Property Act and their replacement by O.34 of the Civil Procedure Code (1908), there is no extinguishment of the right to redeem or of the security on passing an order absolute for sale; mortgage remains alive for persons not made parties to the mortgage suit.	Court relied on this to reinforce that rights of those not impleaded remain alive and that a second suit is not barred simply because a prior suit and sale in execution occurred without impleading them.
Hetram v. Shadiram	Earlier authority on extinguishment by sale under certain provisions (mentioned in the context of comparison with later law).	Court noted that Ss.85–90 (under which Hetram had effect) had been repealed and that later decisions (including Sukhi v. Ghulam Safdar Khan) distinguished Hetram; used as part of wider discussion on whether prior sale extinguishes rights of omitted parties.
Sukhi v. Ghulam Safdar Khan	Privy Council decision distinguishing Hetram v. Shadiram and relevant to continuity of rights where parties were not impleaded.	Court referred to this decision in the chain of authorities showing that omission of a party does not necessarily extinguish his rights.
Sambasiva Aiyar v. Subramania Pillai	Accepted that a first mortgagee may sue again (file a fresh suit) against persons not impleaded in an earlier suit for sale or payment on the original mortgage; rights of omitted persons remain unaffected.	Court cited the case in support of the proposition that the present suit (against owner of equity and puisne mortgagee) is different in nature from the earlier suit (in which the puisne mortgagee was omitted) and therefore not barred.

Court's Reasoning and Analysis

The Court addressed the two principal issues in turn and applied both factual findings and established authorities as follows.

1. Limitation

The appellant's objection on limitation was that the cause of action accrued more than 35 years earlier and no acknowledgements or payments brought the suit within S.19 or S.20(1).

The respondent's three alternative contentions were considered sequentially:

Respondent's reliance on decisions (Ranee Surno Moyee, Huro Pershaud Roy, Muthuveerappa Chetti) that an annulled debtor-provided satisfaction gives rise to a fresh cause of action — the Court rejected application of these authorities here. Reason: the present first defendant did not provide the asserted satisfaction (Pyda did); Pyda's sale was set aside in proceedings to which neither predecessors-in-title of the plaintiff nor the first defendant were parties; and even if Pyda's sale had stood the plaintiff would still be required to sue the first defendant to extinguish puisne mortgages. These distinguishing facts made those authorities inapplicable.
Respondent's argument that the decree in O.S. No. 3 of 1930 (dated 1 Sept 1931) is the starting point of limitation (relying on Ramasubba Aiyar and Batey Krishna) — the Court rejected this. Reason: unlike the authorities cited, the decree here merely recognised the prior mortgage of 1908 and did not create a new right or fresh cause of action commencing on that date.
Respondent's argument based on Doraiswami v. Periakaruppan and S.20(2) (possession by mortgagee/receipt of rents equating to payment): the Court accepted this line. The undisputed facts showed possession by Chaturvedula Suryanarayana from 6-2-1922 until his death in 1929, thereafter by his son until December 1931, then possession by the receiver in a partition suit until mid-1934, and by the Official Receiver for part of fasli 1345 until the first defendant took possession. The Court held that if these possessory facts are to be treated as possession qua mortgagees, S.20(2) applies and the present suit, filed within 12 years of such possession, is within time.

The appellant contended that the 1922 sale's invalidity must be adjudicated as between the present parties before treating the possessory period as possession by mortgagees. The Court found that the High Court judgments in Civil Miscellaneous Appeals Nos. 30 and 530 of 1938 constituted an adjudication binding on the plaintiff and the first defendant, because the first defendant had been a party to those petitions and had there asserted the invalidity of Pyda's sale. The High Court's references to the invalidity of Pyda's sale and its statement that the Official Receiver could only claim the interest of a mortgagee led the Court to treat possession of the Chaturvedulas as possession in their capacity as mortgagees.

Conclusion on limitation: on the facts and authorities relied upon by the Court (notably Doraiswami and Sec.20(2)), the suit was within time.

2. Objection under Order 23, Rule 1(iii) CPC

The appellant argued that the dismissal of O.S. No. 32 of 1921 barred the present suit under O.23, R.1(iii) because both suits concerned the same subject-matter (the 1908 mortgage) and the present plaintiff represented the plaintiff in the earlier suit.

The Court analysed two strands:

What happened in O.S. No. 32 of 1921: the Court noted Pyda had executed a sale deed conveying his equity of redemption to the plaintiff (reciting satisfaction and filing of razinama), and two days later the suit was dismissed “as per adjustment reported in I.A. No. 113 of 1922.” Although the certified decree was not produced, the Court regarded it as likely that the adjustment or satisfaction was reported and recorded and that the dismissal was not a mere unilateral withdrawal by the plaintiff. The Court placed the burden on the appellant to show the case fell squarely under O.23, R.1(iii) and concluded he had not done so.
Even if the dismissal were treated as a withdrawal (O.23, R.1), the Court held the two suits were not the same in nature because of the omission of the puisne mortgagee in the earlier suit. The Court relied on a body of authorities (beginning with Mulla Veetil Seethi v. Achuthan Nair) holding that the rights of a puisne mortgagee or purchaser of the equity of redemption omitted from a mortgage suit remain unaffected by that suit and by sale in execution. The consequence is that a fresh suit including the omitted puisne mortgagee (or purchaser of the equity) is not barred: such a suit aims to obtain a decree binding on the omitted mortgagee and is therefore different in nature from the earlier suit in which that person was not impleaded.

Citing the Full Bench in Mulla Veetil Seethi and subsequent decisions (Chinnu Piliai, Venkat Reddi, Sambasiva Aiyar, etc.), the Court emphasised the consistent principle that omission of a necessary party leaves that party's rights unimpaired and that the prior plaintiff's failure to implead does not bar a subsequent suit against the omitted party. The present suit, being directed at obtaining a decree binding on the puisne mortgagee, is of a different character from O.S. No. 32 of 1921 (in which the puisne mortgagee was not a party).

Conclusion on O.23, R.1(iii): the Court held the present suit is not barred by Order 23, Rule 1(iii), even if the manner of disposal of O.S. No. 32 of 1921 were treated as falling under O.23, R.1 rather than O.23, R.3.

Holding and Implications

Holding: The appeal is dismissed with costs. (The lower Court's decree in favour of the plaintiff was maintained.)

Implications and direct consequences:

The plaintiff's suit based on the 24 March 1908 mortgage was held to be within time under the Limitation Act (application of Sec.20(2) in view of mortgagees' possession and relevant adjudications).
The present suit was held not to be barred by Order 23, Rule 1(iii) of the Code of Civil Procedure; omission of the puisne mortgagee from the earlier suit did not extinguish his rights nor bar a subsequent suit directed to make a decree binding on him.
The direct practical effect: the decree of the lower Court in favour of the plaintiff is affirmed and the appellant must pay costs as ordered by this Court.
No novel legal principle was announced: the Court applied established authorities (cited in the opinion) and factual adjudications (including the High Court decisions earlier referred to) to resolve the issues; the decision operates to affirm the applicability of the cited principles to the specific facts of this litigation.

Note: This summary is based exclusively on the text of the provided opinion. Where the opinion did not supply documents (for example a certified copy of the 1921 decree) the Court relied on available records and prior adjudications, as described in the opinion itself.

N.R.R

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Kowtha Sooryanarayana Rao v. Sarup Chand Rajaji.

JUDGMENT

(Delivered by Govindarajachari, J.)

The facts of this case are somewhat complicated. On 24th March 1908 one Kidambi Narasimhacharyulu executed for himself and as guardian of his then minor sons who are defendants 2 and 3 in the present suit a deed of simple mortgage for Rs. 9,500 in favour of one Chaturvedula Suryanarayana mostly for the discharge of antecedent debts which he had incurred. The mortgage was to be repaid in 12 annual instalments and it was provided that if default was committed in respect of the first, second and third instalments consecutively the entire amount of principal and interest should then become payable. A receiver appointed in O.S No. 83 of 1915 on the file of the Subordinate Judge's Court. Bezwada gave three mortgages over the same properties in favour of the first defendant in the present suit in the year 1918. In 1919 the equity of redemption of the Kidambis in those properties as also their interest in certain other properties were brought to sale in execution of a money decree against them in O.S No. 69 of 1912 on the file of the District Court of Kistna and were purchased by Pyda China Ramakrishnayya, the fourth defendant in the present suit and one Addanki Lakshmanacharyulu who subsequently conveyed his interest to Pyda. The mortgagors having defaulted in the payment of the first three instalments due under the mortgage of 1908 Chaturvedula Sooryanarayana filed O.S No. 32 of 1921 on the file of the Subordinate Judge's Court, Bezwada, to recover the entire amount of principal and interest due under it, the defendants to that suit being the Kidambis and Pyda. Though the suit was filed on 23rd March 1921, the present first defendant who had, as already stated, obtained three mortgages over the same properties in 1918 was for some unknown reason, not made a party to it. On 6th February 1922 Pyda executed a sale deed whereby he conveyed his equity of redemption in the hypotheca to Chaturvedula Sooryanarayana for a stated consideration of Rs. 36,000 which represented the amount claimed in O.S No. 32 of 1921, costs and subsequent interest. The sale deed stated that the vendor received the sale amount by way of payment of the mortgage debt. It then recited that “both of us have filed razinama in the Court.” The mortgages granted to the present first defendant by the receiver in O.S No. 83 of 1915 were next referred to and it was distinctly provided that the vendee should retain the benefit of the first mortgage as against the subsequent mortgagee. On 8th February 1922, O.S No. 32 of 1921 was dismissed. There is some obscurity as to what exactly happened at the time of its dismissal. Neither party in the present litigation is able to produce a certified copy either of the judgment or of the decree and the only material that is available is an extract from the suits register. It is stated therein that the suit was dismissed “as per adjustment reported in I.A No. 113 of 1922.” The present first defendant filed O.S No. 3 of 1930 in the Court of the Subordinate Judge of Masulipatam on foot of his three mortgages of 1918 impleading amongst others Pyda, the Kidambis and Chaturvedula Venkata Subramanyam the son of Sooryanarayana who had died in 1929. Chaturvedula Venkata Subramanyam was the sixth defendant. By the time O.S No. 3 of 1930 came on for hearing Pyda's sale was held to be one brought about in furtherance of a scheme to defraud the creditors of the Kidambis, in a contest which arose between Pyda and an unsecured creditor of the Kidambis. In the judgment in O.S No. 3 of 1930 Ex. P-7 it is mentioned that it was stated on behalf of the plaintiff therein, i.e, the present first defendant that Pyda's sale had been set aside since the institution of the suit. The 6th defendant would appear to have put forward the sale in his father's favour by Pyda on 6th February 1922, but in view evidently of the fact that Pyda's sale was itself declared to be invalid, no attempt was made on behalf of the 6th defendant to prove the sale he was relying on. The priority of the 6th defendant's mortgage having been conceded by the plaintiff's pleader, the decree passed in O.S No. 3 of 1930 provided that the hypothecated properties should be sold “subject to the prior mortgage of the 6th defendant dated 24-3-1908. The sale proclamation in O.S No. 3 of 1930 also stated that the hypotheca was being sold subject to the mortgage of 1908; but a remark was added “that it was executed fraudulently and without consideration.” The plaintiff-decree-holder in O.S No. 3 of 1930 himself purchased the hypotheca in Court auction and the sale certificate issued in his favour again mentioned that the sale was subject to the mortgage of 24th March 1908. He applied for possession under O. 21, R. 95 of the Civil Procedure Code, notwithstanding that the property was in the possession of tenants and delivery is said to have been given to him on 13-5-1935. It is not suggested that the tenants were turned out of possession but in view of the later proceedings it is unnecessary to consider the validity or effect of this delivery which is said to have been given to him. Meanwhile Chaturvedula Venkatasubramanyam was adjudicated insolvent in I.P No. 24 of 1934 and the Official Receiver in whom the insolvent's estate was vested and who was not made a party to the application of the auction purchaser (present first defendant) in O.S No. 3 of 1930 under O. 21, R. 95 succeeded in obtaining possession of the lands in Fasli 1344 (1934-1935). This led to certain petitions filed by the present first defendant in I.P No. 24 of 1934 whereby he prayed that the property purchased by him should be excluded from the schedule of assets of the insolvent and that the Official Receiver should be directed not to sell the property or deal with it in any way. These proceedings culminated in the judgment of the High Court in C.M.A Nos. 30 and 530 of 1938 wherein it was held that the Official Receiver could sell the right of the insolvent in the mortgage of 1908, but that he could not resist the application for delivery made by the present first defendant. The first defendant accordingly obtained possession of the properties in fasli 1345 (1935-1936). The Official Receiver sold the insolvent's right in that mortgage to the present plaintiff on 8-1-1942. The shares of the insolvent's two sons were also sold by them to the plaintiff on 21-9-1942. In the present suit which was filed on 3-3-1943 on foot of the mortgage bond dated 24-3-1908 the plaintiff prays for a mortgage decree for Rs. 12,000 to which amount he restricted his claim notwithstanding that according to him an amount of nearly Rs. 80,000 would be due under the terms of the mortgage. The second and third defendants are the Kidambis and the 4th defendant is Pyda. The contesting defendant is the first. The lower Court decreed the suit as prayed for and in this appeal which has been filed by the first defendant two points are pressed on his behalf.

It is first contended that the present suit is barred by limitation as it is laid 35 years after the execution of the mortgage and there are no such acknowledgments of liability or payments by the mortgagor as would attract the operation of S. 19 or S. 20(1) of the Limitation Act. On behalf of the plaintiff respondent it is argued that the matter can be viewed in any one of three different ways and that in whichever way it is viewed the suit would be in time. It is stated relying on the principle underlying Must. Ranee Surno Moyee v. Shooshee Mokhee Burmonia and others (1), Huro Pershaud Roy v. Gopaldas Dutt and etc. (2) and Muthuveerappa Chetti v. Adaikappa Chetti (3) that the mortgagee's claim was satisfied by the sale deed of 6-2-1922 and that when this satisfaction was annulled by the setting aside of Pyda's sale on 2-5-1931 a fresh cause of action arose on the mortgage and that the present suit which is within 12 years of such setting aside is therefore within time. These decisions were concerned with a very peculiar type of cases where a debtor provides satisfaction which is subsequently annulled at his instance and it is consequently held that a fresh cause of action in the nature of the original cause of action arises on such annulment, the original cause of action being one which could not be sued upon so long as the satisfaction stood. It would be noticed that the first defendant who is raising the question of limitation here had nothing whatever to do with the providing of the satisfaction which is said to have been subsequently annulled, the claim of the plaintiff being that the mortgage of 1908 was satisfied by the sale deed executed by Pyda on 6-2-1922. Further Pyda's sale was set aside in a proceeding to which neither the predecessors in title of the plaintiff nor the first defendant were parties. Moreover even if Pyda's sale stood the plaintiff could sue and has to sue the first defendant in order to work out the extinguishment of the puisne mortgages held by the latter. We consider that these distinguishing features of the present case render the decisions cited by the respondent altogether inapplicable.

It is then argued for the respondent relying on the decisions in Ramasubba Aiyar v. Arunachalam Chettiar and Batey Krishna v. Parsotam Das that the decree in O.S No. 3 of 1930 which directed the hypotheca to be sold subject to the mortgage of 1908 and which is dated the 1st day of September 1931 is the starting point of limitation. This argument again we are unable to accept. The former of the two decisions quoted was concerned with a judgment and decree of the High Court which, while giving possession of certain properties to one party expressly declared in favour of the other party who was being dispossessed, a charge for the amount which he had paid for the discharge of certain mortgages on those properties. In the latter case the facts of which are fully set out in Ramasubba Aiyar v. Arunachalam Chettiar the prior claim of a person who discharged two mortgages of 1909 and 1915 was recognised in a suit for foreclosure brought by a subsequent mortgagee and a charge was declared in the former's favour “and presumably incorporated in the foreclosure decree.” We see much difference between those cases and the present one. There is here no declaration of a right which came into existence on 1st September 1931. The decree is in the usual form of a mortgage decree passed in a suit by a puisne mortgagee against the prior mortgagee and the mortgagor and it does no more than recognise the fact of a prior mortgage created in 1908. We are altogether unable to construe it as creating a new right in favour of the plaintiff's predecessors in title or as affording a fresh cause of action.

Reliance has next been placed by the respondent on a decision in Doraiswami v. Periakaruppan and S. 20(2) of the Indian Limitation Act and it is argued that the mortgagee who went into possession of the mortgaged properties under the sale deed dated 6th February 1922 and retained such possession till about 1934 must in view of the setting aside of Pyda's sale in 1931 be deemed to have been in possession of the properties as mortgagee. This line of reasoning found favour with the lower Court and in our opinion rightly. The relevant facts are not in dispute. Chaturvedula Suryanarayana took possession of the mortgaged properties on 6th February 1922 and the sale deed executed by Pyda in his favour recites it. He continued to be in possession till his death in 1929 when the properties passed into the hands of his son, who retained possession till December 1931 when the receiver in a partition suit between him and his sons (O.S No. 65 of 1931) took possession of all their properties including the suit properties and continued to be in possession till about the middle of 1934. The Official Receiver in the insolvency of Venkatasubramaniam appears to have taken possession of the suit properties in fasli 1344 (1934-1935) and continued to be in such possession for part of fasli 1345 till the first defendant went into possession. Between 1922 and 1934 therefore the mortgagees were in possession and the Official Receiver in the insolvency of one of them was in possession for another year. If the mortgagees can be held to be in possession qua mortgagees between 1922 and 1934, S. 20(2) of the Indian Limitation Act would clearly apply and the present suit would be in time. Mr. Tiruvenkatachari does not dispute the principle laid down in Doraiswami v. Periakaruppan nor are the facts as to possession which we have just set out in dispute. He argues however that in order to invoke the principle in Doraiswami v. Periakaruppan it must first be decided whether Pyda's sale was invalid with the consequence that the sale by Pyda to Chaturvedula Suryanarayana on 6-2-1922 would also be invalid and that the lower Court went wrong in assuming that Pyda's sale was invalid without adjudicating on it as between the present parties, the declaration as to the invalidity of Pyda's sale given in 1931 as between him and the creditors of the Kidambis being an adjudication which is not binding on the present parties. No doubt the learned Subordinate Judge did not go into the question whether Pyda's sale was invalid or not. But a remittal of the case to the lower Court for an investigation of this question is unnecessary as in our opinion, the judgment of the High Court in C.M.As Nos. 30 and 530 of 1938 dealt with this matter and constitutes an adjudication binding on the plaintiff and the first defendant. The first defendant was the petitioner and the Official Receiver in the insolvency of Chaturvedula Subramaniam was the respondent in the petitions which resulted in those civil miscellaneous appeals. The pleadings in those petitions are not available but it appears from Ex. D-2, the order of the District Judge of West Godavari therein that the first defendant filed in support of his case the judgment and decree in O.S No. 18 of 1928 wherein Pyda's sale was declared to be invalid and it is clear therefore that the first defendant was asserting the invalidity of Pyda's sale while the Official Receiver was seeking to resist the first defendant's claim to be put in possession of the properties on the ground that Chaturvedula Venkatasubramaniam and his sons were the owners of the property and that in the right of Venkatasubramaniam he was entitled to retain possession as owner. It was pointed out on behalf of the first defendant that Chaturvedula Suryanarayana's son and grandsons were not entitled to be in possession as owners having regard to the invalidity of Pyda's sale. The judgment of the High Court refers in more than one place to the invalidity of that sale and consequently of the sale of 1922 by Pyda to Chaturvedula Suryanarayana and proceeds to state that the first defendant was entitled to obtain possession of the properties, and that the Official Receiver could claim only the interest of a mortgagee. If because of this decision it must be taken as between the present parties that Pyda's sale was invalid and consequently that no title passed to Suryanarayana under the sale deed dated 6-2-1922 it is not denied that the possession of Chaturvedulas must be deemed to be possession in their capacity as mortgagees, and that the receipt of rents is tantamount to payment within the meaning of Sec. 20(2) of the Limitation Act with the result that the present suit which is filed within 12 years of such possession must be held to be within time.

The second contention raised on behalf of the appellant is that the present suit based on the mortgage of 1908 is barred under O. 23, Rule 1, sub-rule (3) of the Code of Civil Procedure having regard to the dismissal of O.S No. 32 of 1921. That suit, it is argued, was dismissed following upon the mere withdrawal of the plaintiff and it is claimed that O.S No. 32 of 1921 and the present suit are in respect of the same subject matter within the meaning of O. 23, R. 1(iii) because they are both based on the mortgage of 1908 and the plaintiff in the present suit is the representative in interest of the plaintiff in the previous suit. It is recognised that the first defendant who is in the position of a puisne mortgagee under his mortgages of 1918 was not a party to O.S No. 32 of 1921, but it is said that this makes no difference. The argument is that since the owner of the equity of redemption is a necessary party to a mortgagee's suit for sale and since the first defendant is the present owner of the equity of redemption and in that right the representative in interest of the Kidambis who were defendants to O.S No. 32 of 1931 the subject matter of the two suits is the same and the parties are substantially the same notwithstanding that the first defendant was not a defendant in O.S No. 32 of 1921 and notwithstanding that he is a puisne mortgagee also. The Kidambis also are parties to the present suit, but admittedly they have now no right of any kind. On behalf of the respondent it is answered that the dismissal of O.S No. 32 of 1921 was not a dismissal following upon the mere withdrawal of the plaintiff from the suit, but that it was really a case where it was reported to the Court that the suit was adjusted and that the defendant satisfied the plaintiff in respect of the whole of the subject matter of the suit and the Court consequently ordered the adjustment or satisfaction to be recorded and proceeded to pass a decree in accordance therewith as contemplated by O. 23, R. 3 of the Code of Civil Procedure. In the alternative it is argued that even if O. 23, R. 3 does not apply and the dismissal of the suit is held to have followed a mere withdrawal of the plaintiff, the two suits cannot be regarded as relating to the same subject matter as the presence of the first defendant the puisne mortgagee in the later suit and his absence in the earlier would make a material difference in their nature.

Dealing first with the controversy as to what happened in the suit of 1921 it will be recalled that Pyda who was the fourth defendant in O.S No. 32 of 1921 and who, it was then assumed, was entitled to the equity of redemption executed a sale deed conveying the same, in satisfaction of the suit claim, subsequent interest and costs, that it was expressly recited in that deed that the plaintiff and Pyda “filed rasinama in the Court” and that two days thereafter the suit itself was dismissed “as per adjustment reported in I.A No. 113 of 1922.” What exactly the prayer in I.A No. 113 of 1922 was, neither party is in a position to say; but we may not be wrong in assuming that it must have related to the adjustment of the suit claim by the execution of the sale deed. It seems to us in all the circumstances that it is quite likely and probable that the adjustment or satisfaction was reported to the Court and that the parties invited the Court to dismiss the suit as there was nothing further to be done in view of its adjustment or satisfaction. The mere fact that the decree is one of dismissal does not mean that there was a mere withdrawal of the plaintiff from the suit as contemplated by O. 23, R. 1 as there can quite conceivably be a dismissal of a suit even where the suit is adjusted or the claim is satisfied and the adjustment or satisfaction is merely recorded without however any need to pass a decree in terms thereof as there may remain nothing further for either party to do. It is for the first defendant who is invoking the bar of O. 23, R. 1(iii) to make out satisfactorily that the case falls under that provision. It seems to us that he has failed to do so and notwithstanding that there is no document now available showing that the adjustment or compromise was recorded by the Court it is only reasonable to assume that it must have been so recorded in view of the various circumstances to which we have already alluded.

We also accept the alternative argument of the respondent. The question therein involved has been fully argued before us by both the learned Counsel. The complications that arise by reason of the failure to implead in a mortgage suit the puisne mortgagee or the owner of the equity of redemption in a portion of the hypotheca have been the subject of consideration in a series of cases. There is an elaborate discussion in several of them as to the rights and remedies of the person who has been so omitted as also of the person who has failed to implead all the necessary parties in his suit. Whatever might have been the oscillations of judicial opinion in the other High Courts, this High Court has been consistently holding since Mulla Veetil Seethi v. Achuthan Nair if not even earlier, that the rights of a second mortgagee or of a purchaser of the equity of redemption who is left out of a mortgage suit filed by a first mortgagee remain altogether unaffected by such suit and by the sale in execution of the decree therein. The consequences of this position, which may be regarded as fundamental, have been worked out in the several decisions to which we shall now proceed to refer to the extent that they bear on the question with which we are directly concerned in the present case, namely, whether the second suit by the first mortgagee impleading the second mortgagee and the owner of the equity of redemption is so identical in its nature with the first suit to which the owner of the equity of redemption alone is a party to come within the mischief of O. 23, R. 1(iii) of the Code of Civil Procedure.

In Mulla Veetil Seethi v. Achuthan Nair first mortgagee purchased the mortgaged property in execution of a decree on his mortgage, but as the second mortgagee with possession was not a party to the mortgage suit the first mortgagee had, after his purchase, to file a suit for possession against the second mortgagee claiming in the alternative the recovery of the mortgage money and the following reference was made to a Full Bench.

“Whether a first mortgagee who has purchased the mortgaged properly in execution of a decree on his mortgage and sues for possession or in the alternative, for the recovery of his money is entitled to a decree for possession subject to a redemption by a puisne mortgagee with possession who was not a party to the suit by the first mortgagee?”

The Full Bench answered the question in the negative. It was contended on behalf of the first mortgagee that the second mortgagee was only entitled to redeem the first mortgage and that he could not resist the first mortgagee-purchaser's suit for possession. This was refuted and it was held that the second mortgagee's rights (whatever they were) at the date of his mortgage—whether to possession (if his mortgage be one with possession and the previous mortgage without it) or to sale or foreclosure under S. 67 of the Transfer of Property Act—remain altogether unaffected by the first mortgagee's suit to which the former was no party. He has also the right to redeem the prior mortgage which is preserved in law in spite of the purchase by the prior mortgagee of the equity of redemption. But it is pointed out that redemption is a right which the puisne mortgagee may seek to enforce and not a liability which he may be compelled to discharge. After an elaborate examination of the principles of the law of mortgages and the provisions of the Transfer of Property Act and on a full review of the decided cases the Full Bench laid down certain propositions, the second of which runs as follows:

“The purchaser of the equity of redemption after the first mortgagee and the second mortgagee both stand on the same footing with reference to their respective rights against the first mortgagee when they have not been impleaded in the suit instituted by him on his mortgage.”

This decision is important as laying down the broad principle that the rights of the second mortgagee or the purchaser of the equity of redemption are left altogether unimpaired by a suit filed by the first mortgagee without impleading them and if their rights are unaffected by proceedings to which they are not parties, it stands to reason that the rights of the first mortgagee against them should remain equally unaffected notwithstanding his defective suit against certain others. Further it is stated in the order of reference to the Full Bench that “it is not contended that the plaintiffs (the first mortgagees) are not entitled to file a fresh suit for sale against the puisne mortgagee.” The next case of importance is Chinnu Piliai v. Venkataswami Chettiar which is in many respects similar to Mulla Veetil Seethi v. Achuthan Nair . There too, a prior mortgagee sued for sale on his mortgage without making the puisne mortgagee a party and obtained a decree. In execution of that decree the property was brought to sale, and was purchased by a stranger. The puisne mortgagee filed a suit for sale on his mortgage subject to the prior mortgage making the purchaser a party to his suit. It was held that he could maintain such a suit. The contention on behalf of the persons resisting the suit was that the puisne mortgagee had first to redeem the prior mortgage and then only bring the mortgaged property to sale but this was rejected and it was decided that the puisne mortgagee was under no such obligation and that the right of a puisne mortgagee to sue for sale subject to the prior mortgage is in no way impaired by the prior mortgagee's suit to which the puisne mortgagee was not a party. In the course of an elaborate consideration of the several complicated positions that arise in such cases Srinivasa Ayyangar, J. observes that:

“where the first mortgagee had omitted to make the second mortgagee a party and proceeded to sale, the purchaser whether himself or another can bring a fresh suit for sale making the second mortgagee a party.”

Venkat Reddi v. Kunjappa Goundan was a case where a purchaser of a portion of the hypotheca was left out of a mortgage suit. A stranger who purchased in execution of the mortgage decree filed a suit for sale against the mortgagor, the mortgagee and the purchaser who had been left out in the previous suit. It was first contended on behalf of the person last named relying on Hetram v. Shadiram , that the mortgage had been extinguished by the decree and sale in execution. But it was pointed out that while that was undoubtedly the position under Ss. 85 to 90 of the Transfer of Property Act, those sections had been repealed and replaced by the provisions of O. 34 of the Code of Civil Procedure of 1908 under which there is no such extinguishment of the right to redeem or of the security on the passing of an order absolute for sale and that “the mortgage is kept alive for all purposes as regards persons having an interest but not made parties to the mortgage suit.” The later decision of the Privy Council in Sukhi v. Ghulam Safdar Khan distinguishing Hetram v. Shadiram was particularly referred to. The next argument in resistance of the suit was that there could be no second suit on the same mortgage. This contention was dealt with in the following paragraph which we would fully set out.

“It is difficult to see how a second suit against a person not impleaded in the previous suit would be barred under any of the provisions of the Civil Procedure Code. It is no doubt true that the first mortgagee who had notice of a puisne encumbrance could have impleaded that puisne encumbrancer in the suit on the first mortgage but the failure to do so would not necessarily bar the second suit against the puisne encumbrancer unless there is anything in the Code barring such a suit. The cause of action is not the same as in the previous suit nor would the points to be decided necessarily be the same.”

Though the case itself was one in which there was a failure to implead the purchaser of the equity of redemption in a portion of the hypotheca, no distinction was made between the case where such a purchaser was left out of a mortgage suit and the case where a puisne mortgagee was so left out. In fact in the paragraph just quoted it is the latter case that is directly considered.

The decision in Sambasiva Aiyar v. Subramania Pillai (4) may also be usefully referred to. In this case the first mortgagee (S.A) failed to implead in a suit for sale the purchasers of two items of the hypotheca (S.P and others). The puisne mortgagee was however a party. S.A himself purchased the mortgaged properties in execution of his mortgage decree. He failed to obtain possession of the properties which had been purchased by S.P and others prior to the mortgage suit. S.A therefore filed a suit against S.P and others for delivery of possession of those properties and alternatively for the payment of the amount, and failing which for the sale of the two properties. The Court held that S.A filled two capacities, viz., qua mortgagee and qua purchaser of the items mortgaged to him. It was further held that “if S.A filed the suit against S.P and others on foot of the original mortgage in his capacity as mortgagee, he could sue for the whole of the mortgage amount impleading besides the mortgagor the purchasers of the equity of redemption in the mortgaged properties, viz., S.P and others in which case S.P and others would have to redeem the whole of the mortgage debt though they purchased only a few of the items mortgaged, but the cause of action for such a suit would date from the date of the mortgage.” What is of interest to us in the present case is that the Bench which decided Sambasiva Aiyar v. Subramania Pillai had no difficulty whatever in upholding the right of S.A to sue a second time on foot of his mortgage notwithstanding that the mortgagors and puisne mortgagee were parties to the earlier suit also.

In view of these decisions it seems to us that the present suit which is filed not only against the owner of the equity of redemption but also against the the puisne mortgagee is essentially different in its nature from O.S No. 32 of 1921 which was filed against the owner of the equity of redemption alone. The object of the present suit is to obtain a decree which would be binding on the puisne mortgagee whereas no such decree could be obtained in the prior suit as the puisne mortgagee was not a party to it. The fact that the equity of redemption has to be and is represented in the present suit does not, in our opinion, alter the real nature of the suit whose main purpose is to give an opportunity to the puisne mortgagee to pay off the first mortgage or if no such payment is made to work out the extinguishment of his mortgage. The principle which is fundamental, viz., that no person who is not impleaded in a suit can have his rights in any way lessened or reduced has been applied in Mulla Veetil Seethi v. Achuthan Nair and the later decisions to some of which we have already made reference, as much in cases where the owner of the equity of redemption is left out as where the puisne mortgagee is left out and it seems to us that the necessary corollary and consequence of this principle is that if the rights of parties who were not impleaded remain unimpaired, the rights of the persons who failed to implead them should remain unimpaired too.

Order 23, R. 1(iii) does not expressly provide that the bar which it imposes applies only as between the parties to the prior suit, but that, is its obvious intendment.

We are therefore of the opinion that the present suit is not barred under O. 23, R. 1(iii), even if it should be held that the manner of disposal of O.S No. 32 of 1921 brings it under O. 23, R. 1 and not under O. 23, R. 3.

The appellant having failed on both his points, the appeal is dismissed with costs.

N.R.R

Kowtha Sooryanarayana Rao v. Sarup Chand Rajaji.

Annotated Summary of the Judgment (Delivered by Govindarajachari, J.)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's (First Defendant) Arguments

Respondent's (Plaintiff) Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

1. Limitation

2. Objection under Order 23, Rule 1(iii) CPC

Holding and Implications

Kowtha Sooryanarayana Rao v. Sarup Chand Rajaji.

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