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Judgment Summary — Horwill, J.

Factual and Procedural Background

Defendants 1 and 3 mortgaged the suit property to the plaintiff on 21 July 1924 (Ex. P-2). Previously, defendants 1 and 2 had mortgaged the property on 24 August 1921 (Ex. P-1a) to one Narayana Reddi. In 1933 the prior mortgagee instituted O.S. No. 429 of 1933, impleading the plaintiff as a puisne mortgagee; a decree was passed under that suit. On 29 July 1936 the plaintiff paid Rs. 667-8-0 to satisfy that decree, and satisfaction was entered on 18 June 1937. The plaintiff then brought O.S. No. 233 of 1937 seeking a decree against his mortgagors and against the hypotheca, claiming to be subrogated to the rights of the mortgagee under Ex. P-1a (24 August 1921).

The lower appellate Court held that the plaintiff was not entitled to a decree under Section 91 of the Transfer of Property Act because the mortgagors had no right in the property on the date of the plaintiff's mortgage (they had parted with their interest), and thus the plaintiff was not a "person interested" within Section 91. The lower appellate Court was, however, inclined to view the plaintiff as a person interested under Section 69 of the Contract Act and so potentially entitled to recover the money paid with interest, but held the suit to be time-barred under Article 61 of the Limitation Act (three years from payment).

Legal Issues Presented

  1. Whether the plaintiff, having paid off the prior mortgage debt in good faith, was a "person interested" and therefore entitled to be subrogated to the rights of the prior mortgagee (i.e., entitlement to redeem or sue as subrogee).
  2. Whether the plaintiff's right to sue for the sum paid arose (a) on the date of the original mortgage (giving twelve years under Article 132 of the Limitation Act) or (b) upon the decree/payment (giving twelve years from date of payment under Article 132 as argued in some decisions, or three years under Article 61 if viewed as a claim for reimbursement under Section 69/70 of the Contract Act).
  3. Whether payment gave rise to an equitable charge (or other form of charge) that would affect the period of limitation applicable to the plaintiff's suit.

Arguments of the Parties

Appellant's Arguments

  • The plaintiff (appellants' case) contended that, despite findings that the mortgagors had no title on the date of the plaintiff's mortgage, the plaintiff was a "person interested" because he paid in good faith believing the mortgagors had title; therefore he should be subrogated to the rights of the prior mortgagee.
  • The appellants relied on authorities (several cases cited) supporting the proposition that a person who pays off money believing the mortgagor has title may redeem and be subrogated, even where the mortgagor's title is defective or non-existent.
  • The appellants argued that payment might have created an equitable charge (or that the plaintiff should be treated as an equitable mortgagee), which could give rise to a fresh cause of action from the date of payment/decree and thus a fresh limitation period (twelve years from payment or an applicable article of limitation favourable to the plaintiff).
  • They relied specifically on Saradamba v. Pattabhiramayya as an authority supporting application of Article 120 in similar circumstances (as argued by counsel for appellants).

Respondent's Contentions

  • It was conceded by Mr. Sitarama Rao for the respondents that the plaintiff was entitled to be subrogated to the rights of the prior mortgagee when he paid off the sum on 29 July 1936.
  • The lower appellate Court (and thus the respondents' position on limitation) was that the plaintiff's suit was time-barred; the Court viewed Article 61 of the Limitation Act (three-year period for reimbursement claims for money paid for another) as applicable to the reimbursement claim under Section 69 (and to payments under Section 70) and therefore barred the suit.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Maramittath Theruvil Mootha-chettiam Veettil Kelu v. Kuttiyil MachiRaniy Chekaracheppan Authority for the proposition that even though a person has no title whatsoever, he may redeem if he believes in good faith that his mortgagor has title. Cited to support the appellants' contention that good-faith payment can confer a right to redeem/subrogation; used as background authority (not further analysed).
Kotappa v. Raghavayya Holds (Madras view) that a person subrogated to the rights of a mortgagee by redeeming a mortgage stands in the same position as the mortgagee and must bring suit within twelve years of the original mortgage. Adopted as the controlling Madras law; court held Kotappa remains good law for this High Court, and that the plaintiff's limitation must be calculated from the date of the original mortgage, rendering the suit time-barred.
Parvati Ammal v. Venkatarama Iyer Earlier judgment referred to by Wallace, J.; indicates there was some difference of opinion in earlier cases. Mentioned to note prior differences of opinion in various High Courts; not applied directly but used to contextualise Kotappa and subsequent conflict in authorities.
Batey Krishna v. Parsotam Das (Privy Council) Privy Council decision where a puisne mortgagee paying off the prior mortgagee's debt was held to be entitled to twelve years from the date of the payment. Distinguished: court held the Privy Council decision turned on the specific form of the decree which appeared to have created a charge; thus it did not overrule Kotappa and is not a general rule displacing the Madras view.
Shah Lal v. Munilal (also referenced as Shib Lal v. Munni Lal) Authority supporting the proposition that if the right is merely reimbursement of money, Article 61 (three years) applies. Followed (via Kotappa's reasoning) to support the view that a claim considered as reimbursement falls under Article 61; used to show an alternative characterization of the right that would attract a three-year period.
Sibanand Misra v. Jagmohan Lal Authority (I.L.R. Patna) cited alongside Shah Lal v. Munilal supporting the Article 61/reimbursement view. Followed by Madhavan Nair, J., in Kotappa and cited in the judgment for the proposition that reimbursement claims may attract Article 61.
Saradamba v. Pattabhiramayya Relied upon by appellants to argue that Article 120 might apply to claims under Section 69 of the Contract Act. Dismissed as not authoritative for the present question: the court notes that in Saradamba it was conceded the claim was not under Section 69 or 70 but was a claim by an executor de son tort, so it does not decide the proper article of limitation for Section 69 claims.

Court's Reasoning and Analysis

The Court accepted (and noted the respondents' concession) that the plaintiff was entitled to be subrogated to the rights of the prior mortgagee when he paid off the decree amount on 29 July 1936. The determinative question therefore was limitation: whether the subrogee's right to sue is to be treated as arising from the original mortgage (so that limitation runs from the date of the original mortgage) or from the decree/payment (so that limitation runs from the date of payment).

The Court analysed the conflicting authorities. It stated that the law in Madras (as laid down in Kotappa v. Raghavayya by Madhavan Nair, J., and followed by Wallace, J.) is that a person subrogated to the mortgagee's rights stands precisely in the mortgagee's shoes and must bring a suit for recovery within twelve years of the original mortgage. The Court observed that some other High Courts had taken a different view (that payment gives rise to a fresh period of limitation), and that the Privy Council in Batey Krishna v. Parsotam Das appeared to adopt the latter approach in that case.

However, the Court examined Batey Krishna and concluded that the Privy Council's decision turned on the specific form of the decree in that case, particularly that the decree's operative portion created a charge (i.e., a charge created by the decree rather than a declaration of an existing charge). The Court emphasised that the Privy Council's reasoning was tied to the particular decree and that not a single High Court decision was referred to in that Privy Council judgment. Consequently, the Court held that Batey Krishna did not implicitly overrule Kotappa, and that Kotappa remains good law in this High Court.

Given this conclusion, the Court held that the plaintiff's cause of action, as subrogee of the prior mortgagee, must be treated as having arisen on the date of the original mortgage, and the twelve-year limitation period runs from that date. On that basis the plaintiff's suit was out of time.

The Court further considered the lower appellate Court's alternative reasoning that the plaintiff might have a claim under Section 69 of the Contract Act as a right to be reimbursed for money paid for another, which would attract Article 61 (three-year period). The Court noted that Madhavan Nair, J., in Kotappa had observed that if the right is regarded merely as reimbursement, Article 61 would apply and bar recovery. The appellants' reliance on Saradamba v. Pattabhiramayya was rejected because that case involved a claim by an executor de son tort and expressly was not a Section 69/70 claim; therefore it did not settle which article of limitation applies to a suit under Section 69 of the Contract Act.

On the appellants' contention that payment created an equitable charge entitling the plaintiff to a fresh limitation period, the Court held there was no scope for invoking equitable principles to create a charge where the plaintiff is entitled under Section 92 to be subrogated to the mortgagee's rights. The plaintiff, having been subrogated, "stands in the shoes" of the mortgagee and is in a stronger position than if he had only an equitable charge. The Court quoted Madhavan Nair's reasoning in Kotappa to the effect that the puisne mortgagee obtains a charge under Section 74 of the Transfer of Property Act, and therefore there is no justification for treating the limitation period as commencing from the date of payment as if a new charge had been created by the payment.

The Court also addressed an ancillary procedural point: during the pendency of the suit the second defendant died and it was alleged that the first defendant was his heir. Because the plaint was not amended and no issue was taken below on that point, the Court declined to consider any claim arising from that fact on second appeal; the plaintiff was not obliged to amend his plaint for a cause of action that arose after filing and was left to pursue other remedies.

Holding and Implications

APPEAL DISMISSED WITH COSTS

Consequences and implications as stated in the opinion:

  • The plaintiff was acknowledged to be subrogated to the rights of the prior mortgagee upon payment (conceded by respondents), but the plaintiff's suit to recover the paid amount is time-barred because, under the law prevailing in this High Court (Kotappa v. Raghavayya), the limitation period for a subrogee's suit runs from the date of the original mortgage (twelve years), not from the date of payment/decree.
  • The Privy Council decision in Batey Krishna v. Parsotam Das was distinguished on its facts (the decree in that case appeared to create a charge) and was held not to displace the Madras view as stated in Kotappa for the purposes of this High Court.
  • The Court rejected the contention that an equitable charge arising from the payment would give the plaintiff a fresh limitation period, because the plaintiff, being subrogated under Section 92, stands in the position of the mortgagee (and obtains the charge under Section 74), so limitation must be calculated accordingly.
  • The Court did not decide claims arising from the death of the second defendant or the procedural question of bringing other parties on record because those matters were not properly raised or litigated before it on second appeal.
  • No new precedent displacing Kotappa v. Raghavayya was established by this judgment; the Court expressly held Kotappa remains good law for this High Court.

Disposition: The appeal is dismissed with costs.

Show full summary ...

    Perumal Reddiar And Others v. Suppiah Thevar And Others

    JUDGMENT

    Horwill, J.

    1. Defendants 1 and 3 mortgaged the suit property to the plaintiff on the 21 st July. 1924 by Ex. P-2. Prior to that mortgage, there was a mortgage by defendants 1 and 2 under Ex. P-1 a on the 24th August 1921 to one Narayana Reddi and in 1933 the mortgagee brought O.S. No. 429 of 1933 on his mortgage, impleading the plaintiff as a puisne mortgagee. A decree was passed; and on the 29th July 1936 the plaintiff paid Rs. 667-8-0 to satisfy the decree. Satisfaction of the decree was entered up on the 18th June 1937. The plaintiff then brought O.S. No. 233 of 1937 asking for a decree against his mortgagors and against the hypotheca claiming to be subrogated to the rights of the mortgagee under Ex. P-1 a of the 24th August 1921. The lower appellate Court held that he was not entitled to a decree, for his mortgagors had no right in the property whatsoever, because on the date of the mortgage in favour of the plaintiff they had parted with their interest in the property; and so the plaintiff was not a person interested within the meaning of Section 91 of the Transfer of Property Act. The lower appellate Court was inclined to hold that he was a person interested within the meaning of Section 69 of the Contract Act and would therefore be entitled to a decree for the money paid by him together with interest; but took the view that his suit was out of time. It held that Article 61 of the Limitation Act applied and that as the suit had not been brought within three years of the payment of money, it was barred by time.

    2. The first contention of the appellants the legal representatives of the plaintiff) is that depite the fact that it was found in this litigation that the plaintiff's mortgagors had no right to the property on the date of the mortgage, yet the plaintiff was a person interested, because he made the payment in good faith, believing that his mortgagors had title. Many cases have been cited in support of this contention. If the mortgagors had held the property under a title that was merely voidable, there would be no difficulty, because a person who acquires a right under a transaction that is voidable has a right until the transaction is declared void. Even in cases where the mortgagor had no title, it has been held that a person who pays off money in thebelief that his mortgagors had title, has an interest in the property and is therefore entitled to redeem under Section 91 of the Transfer of Property Act. It is unnecessary to discuss this question at any length; because it is conceded by Mr. Sitarama Rao for the respondents that the plaintiff was entitled to be subrogated to the rights of the prior mortgagees when he paid off the sum of Rs. 667-8-0 on the 29th July, 1936. Reference may however be made to Maramittath Theruvil Mootha-chettiam Veettil Kelu v. Kuttiyil MachiRaniy Chekaracheppan as an authority for the position that even though a person has no title whatsoever, he may redeem if he believes in good faith that his mortgagor has title.

    3. The more important question is whether the suit is in time; and that turns on the question whether, when the plaintiff became subrogated to the rights of the prior mortgagee, his right to bring a suit on the mortgage amount is deemed to have arisen on the date of the original mortgage or whether his right arose out of the decree itself, in which case he would have twelve years under Article 132 of the Limitation Act from the 29th July, 1936. There can be no doubt that the law in Madras is that when a person becomes subrogated to the rights of the mortgagee by redeeming a mortgage, he is in precisely the same position as the mortgagee and must therefore bring his suit for recovery of the sum paid by him within twelve years of the original mortgage. That was laid down very clearly by Wallace and Madhavan Nair, JJ., in Kotappa v. Raghavayya. The leading judgment was written by Madhavan Nair, J. Wallace, J., not only agreed with Madhavan Nair, J., but in a separate judgment considered an earlier judgment of his own in Parvati Ammal v. Venkatarama Iyer in which he was inclined to hold a somewhat different opinion. The only question now is whether Kotappa v. Raghavayya can be considered to be still good law in view of the later Privy Council decision in Batey Krishna v. Parsotam Das where a puisne mortgagee paying off the prior mortgagee's debt was held to be entitled to twelve years from the date of the payment. It is incredible that the Privy Council intended to lay down a general rule on the important question raised and decided in Kotappa v. Raghavayya on which there was some conflict of opinion in the various High Courts. The Madras view that the puisne mortgagee is entitled to twelve years from the date of the original mortgage is shared by the High Courts of Patna and Calcutta, whereas the Allababad and Rangoon High Courts considered that the payment gives rise to a fresh period of limitation and that the puisne mortgagee's suit on this payment would therefore be in time if filed within twelve years of payment. Not a single case of any High Court is referred to in Batey Krishna v. Parsotam Das. The decision turned on the form of the final decree passed by the Trial Court and not on any principle of subrogation. The decree was not before their Lordships, but they were satisfied that the decree followed the terms of the operative portion of the trial Court's judgment, which they set out in their judgment. They pointed out that there was a specific clause in the operative portion of the judgment which gave the puisne mortgagee a charge for the amount paid by him. It was in this form,

    A charge of Rs. 4542 or for such lesser amount if any as may be found due to defendant 3, in respect of the deed dated the 3rd April, 1917.

    The question that their Lordships had to consider was whether the decree declared a charge which had existed before or whether it created one. Their Lordships pointed to the concluding portions of the Subordinate Judge's judgment and said that it was clear that the decree had created a charge. It may be noted that the form which the decree took in that case was not the usual one in a suit for foreclosure; for under the circumstances of that case it was necessary for the Court to consider what were the rights of the various parties to the suit. I am therefore of the opinion that Batey Krishna v. Parsotam Das did not overrule by implication Kotappa v. Raghavayya which is still good law as far as this High Court is concerned. If that is so, then the suit is out of time.

    4. The lower appellate Court, as I have said, was of opinion, that a decree might have been passed under Section 69 of the Contract Act were it not for the fact that the suit was out of time. It was of opinion that Article 61 of the Limitation Act applied, which relates to a money suit for money payable to the plaintiff for money paid for the defendant, for which the period of limitation is three years from the time when money is paid. That description would apply equally well to a payment made under Section 69 as to one under Section 70 of the Contract Act. In Kotappa v. Raghavayya, Madhavan Nair, J., said:

    If his right to recover the amount is considered merely as a right for the reimbursement of the money, then the three years' period under Article 61, Schedule I of the Limitation Act during which the right may be exercised having admittedly passed he is now precluded from claiming the amount in this case.

    and followed Shah Lal v. Munilal I.L.R. (1921) All. 67 and Sibanand Misra v. Jagmohan Lal I.L.R. (1922) Pat. 780 : 68 Ind.Cas. 707. The learned advocate for the appellants relies on Saradamba v. Pattabhiramayya (1930) 60 M.L.J. 13 53, in which Article 120 was applied. It is said that the nature of the claim in that case was somewhat similar to that in this and that therefore Saradamba v. Pattabhiramayya (1930) 60 M.L.J. 13 53 is an authority for the position taken by the learned advocate for the appellants that Article 120 applies to a claim made under Section 69 of the Contract Act, it being argued that Article 61 of the Limitation Act would apply only to a claim under Section 70 of the Contract Act. In Saradamba v. Pattabhiramayya (1930) 60 M.L.J. 952, however it was conceded in argument that the claim made was not one either under Section 69 or under Section 70 of the Contract Act, but was a claim by an executor de son tort. That being so, this can be no authority on the question of the proper article of the, limitation act to be applied to a suit under Section 69 of the Contract Act.

    5. There remains for consideration the claim by the appellants that in paying off the mortgage amount on the 29th July, 1936, the plaintiff became entitled to an equitable charge on the property which had been mortgaged to the person whom he paid off. There is however no scope for the application of an equitable principle granting a charge when the plaintiff is Entitled under Section 92 to be surrogated to the rights of the mortgagee. He then stands in the shoes of the mortgagee and is in a stronger position than if he had had a more equitable charge. The reason for his wishing to be considered an equitable mortgagee by reason of the payment is to give scope for an argument that at the time of the payment he became entitled to a charge under the decree which would give twelve years from the date of the decree. A similar claim was considered by Madhavan Nair, J., in Kotappa v. Raghavayya (1926) 52 M.L.J. 532 : I.L.R. 50 Mad. 626 quoted above, where he said:

    It is conceded in Shib Lal v. Munni Lal, that the puisne mortgagee obtains the charge under Section 74 of the Transfer of Property Act. If so there is no justification for the conclusion that the period of limitation should be calculated from the date of payment as if a new charge had come into existence by such payment.

    7. One other point has been raised. During the pendency of the suit, the second defendant died; and it is said that the first defendant is his heir. If so, then it might be said that since the first defendant had purported to mortgage the property to the plaintiff on the 21st July, 1924, the plaintiff would be entitled to proceed against the property which had now come into the possession and ownership of the first defendant. After the second defendant died, the plaint was not however amended; and there was no issue on this question. It is therefore impossible for me in second appeal to consider any claim that the plaintiff might have on this head. He was not bound to amend his plaint, for the cause of action arose after the suit had been filed; and so the plaintiff can be left to pursue such other remedies as he might have against the first defendant in view of any changes that might have resulted from the death of the second defendant. Nor is it necessary or even proper to adjudicate on the various questions that have arisen with regard to the bringing on record of the fourth defendant.

    8. The appeal is dismissed with costs.

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    Comments

    Perumal Reddiar And Others v. Suppiah Thevar And Others
    (Nov 20, 1944)