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Subramanian Chettiar v. A.K.A Ramachandra Reddiar.

Madras High Court
Jan 8, 1946
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Concise Analytical Summary of the Opinion

Factual and Procedural Background

These two connected appeals arise from an order refusing to enter up satisfaction of a mortgage decree. The mortgage was granted on 13 September 1925. Defendants 1–4 were the mortgagors; defendants 5–12 were subsequent purchasers of portions of the hypotheca. The 13th defendant purchased three items originally bought by the 9th defendant and sold one of those items to the 14th defendant.

The suit (O.S. No. 20 of 1936) to enforce the mortgage resulted in a preliminary decree for Rs. 1,13,836-4-10 on 13 September 1937. After the Madras Agriculturists' Relief Act, 1938 was enacted in March 1938, various parties applied under Section 19 for scaling down of the debt as agriculturists. The mortgagors and defendants 9–12 obtained reduction; defendants 5–8 were initially refused relief but later, on appeal (A.S. No. 295 of 1939), had their liability reduced pursuant to this Court's decision (referenced Vide Machiappa Chettiar v. Ramachandra Reddiar).

The final decree was passed on 18 March 1939. Amendments reflecting the scaling down were effected as to those who obtained relief. The 13th defendant (appellant in C.M.A. No. 410 of 1944) did not make his own application under the Act and later sought to have satisfaction entered against himself on the ground that the scaled amount paid into Court by the mortgagors discharged the indivisible mortgage debt and thus freed his purchased property from encumbrance. The 9th defendant filed a similar application, relying on an indemnity clause in his sale to the 13th defendant and seeking satisfaction on the basis of the payment into Court.

Legal Issues Presented

  1. Whether payment into Court of the scaled down amount by the mortgagors (who obtained relief under the Madras Agriculturists' Relief Act, 1938) operates to discharge the mortgage and the decree as a whole so as to enable purchasers (including the 13th defendant who did not himself apply) to have satisfaction entered against them.
  2. Whether the terms of the preliminary and final decrees and the earlier refusal to amend the decree (C.M.P. No. 4851 of 1942) preclude the 13th defendant from claiming satisfaction on the basis of the payment into Court.
  3. Whether the 9th defendant, who obtained relief under the Act but has sold items to the 13th defendant, can apply for entering up satisfaction of the decree in respect of the properties sold by him and now in the hands of his vendee.

Arguments of the Parties

13th Defendant / Appellant (C.M.A. No. 410 of 1944)

  • The mortgage debt is indivisible; payment of the scaled down amount by the mortgagors discharged the whole debt and therefore the properties purchased by him should be freed from the encumbrance.
  • There is nothing in the decrees that precludes application of the principle established in earlier decisions (that payment of the reduced amount by the mortgagor discharges the mortgage as against all persons interested).
  • The order of this Court rejecting C.M.P. No. 4851 of 1942 (which sought an express amendment to add defendants 13 and 29 to the decree) cannot have the effect of denying relief in other appropriate proceedings where payment has in fact been made into Court.

9th Defendant

  • Sought entry of satisfaction in respect of properties he sold, pointing to an indemnity clause in the sale to the 13th defendant under which the 9th defendant would be liable to make good any loss his vendee might sustain by enforcement of the decree; he therefore prayed that the entire decree be entered as satisfied by the payment into Court of the scaled down amount.

Decree-holder / Respondent (represented by the Advocate-General)

  • Argued that the decrees fixed liability of each set of defendants separately and independently, so that where liability of one set was reduced expressly, the decree should be construed to leave the original full amount operative as regards other defendants not explicitly relieved.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Machiappa Chettiar v. Ramachandra Reddiar (1942) 1 M.L.J. 510 Used to support the proposition applied by A.S. No. 295 of 1939 that where mortgagors (being agriculturists) obtain statutory reduction, the reduction enures to the benefit of purchasers of portions of the hypotheca under the general law. The Court relied on the outcome of A.S. No. 295 (which invoked this authority) to conclude that defendants 5–8's liability was reduced to the scaled amount; this line of authority informed the Court's understanding that payment of the reduced amount by mortgagors discharges the encumbrance as against all persons interested.
Arunachalam v. Seetharam (1941) 1 M.L.J. 561; I.L.R. 1941 Mad. 930 Recognized for the principle that when an agriculturist-mortgagor obtains the benefit of the Act and pays the scaled down amount, the entire mortgage debt is discharged against all persons interested in the security, including non-applicant purchasers. The Subordinate Judge and this Court treated this decision as one of the authorities establishing the applicable principle; the Court applied that principle in allowing C.M.A. No. 410 and holding that payment by mortgagors discharged the decree as a whole.
Marina Ammayi v. Mirza Bakhar Beg Saheb (1941) 1 M.L.J. 547 Also cited for the same principle regarding the effect of payment of the scaled down amount by agriculturist-mortgagors upon third-party purchasers. Used along with the other decisions to support the conclusion that the scaled down payment, when made by those entitled to relief, frees the hypotheca as against all interested persons.
Satyanarayanamurthi v. Sathiraju (1942) 1 M.L.J. 506 Again cited for the principle that payment of the reduced debt by agriculturist-mortgagors discharges the mortgage against all persons interested, even if they did not personally obtain relief under the Act. Formed part of the cluster of decisions relied upon by the Court to justify treating the payment of the scaled down amount as discharging the hypotheca for all concerned, and to allow C.M.A. No. 410.

Court's Reasoning and Analysis

The Court proceeded in the following analytical steps, grounded in the facts and authorities set out in the record:

  1. Identification of applicable principle: The Court acknowledged a settled line of decisions (Arunachalam v. Seetharam; Marina Ammayi v. Mirza Bakhar Beg Saheb; Satyanarayanamurthi v. Sathiraju and the decision considered in A.S. No. 295, Vide Machiappa Chettiar v. Ramachandra Reddiar) that, where an agriculturist-mortgagor obtains statutory reduction under the Madras Agriculturists' Relief Act and pays the scaled down amount, the payment discharges the mortgage debt and frees the hypotheca against all persons interested, including purchasers who themselves did not apply for relief.
  2. Assessment of the effect of the earlier refusal to amend: The Court distinguished the earlier refusal (C.M.P. No. 4851 of 1942) to amend the decree in Appeal No. 24 of 1938 to add defendants 13 and 29. It held that that refusal was limited to refusing the specific prayer for an express amendment at that stage and did not, in itself, bar the 13th defendant from seeking the substantive relief of satisfaction in other appropriate proceedings if he was otherwise entitled by law to the benefit of the mortgagors' scaled payment.
  3. Construction of the decrees: The Court examined the language of the preliminary and final decrees. The preliminary decree originally ordered payment by all listed defendants the principal sum (Rs. 1,13,836-4-10). After applications, a paragraph was inserted scaling the debt down to Rs. 36,000 as regards defendants 1–4, 9 and (eventually) 5–8. The final decree contained a paragraph specifying that items in possession of defendants 1–4 and 9–12 were liable only for Rs. 36,000.
  4. Rejection of the Advocate-General's apportionment argument: The Advocate-General argued the decrees allocated independent liabilities to separate sets of defendants, such that reduction for one set should not affect the full amount as to others. The Court rejected this construction. Reading the decrees as a whole, it concluded there was no apportionment of liability; the decree was for a single liability arising from the mortgage. Given the settled authorities, the Court held that payment of the scaled down debt by (or at the instance of) the mortgagors must be treated as discharging the hypotheca for all persons interested, including the 13th and 29th defendants.
  5. Application of principle to parties' applications: On that basis, the Court allowed C.M.A. No. 410 (13th defendant's appeal) and held that the payment into Court of the scaled amount discharged the decree as a whole so far as the 13th and 29th defendants were concerned.
  6. Consideration of the 9th defendant's position: The Court noted that the 9th defendant, having obtained relief under the Act, was personally liable only for the scaled down amount for properties remaining in his possession. But the Court found the 9th defendant could not, as a matter of right, apply for entry of satisfaction in respect of properties he had sold and which were in the hands of his vendee. Although an indemnity claim might arise against the 9th defendant, that possibility did not entitle him to the relief he sought. Since the 13th defendant's appeal was allowed, the 9th effectively obtained the practical benefit he sought, but his appeal (C.M.A. No. 582 of 1944) had to be dismissed.

Holding and Implications

Holding:

  • C.M.A. No. 410 of 1944 (13th defendant): ALLOWED. The Court held that payment of the scaled down amount (Rs. 36,000 with interest and incidental charges) into Court by or at the instance of the mortgagors discharged the decree as a whole, and that the 13th defendant (and the 29th defendant) were entitled to have satisfaction entered accordingly.
  • C.M.A. No. 582 of 1944 (9th defendant): DISMISSED. The 9th defendant's appeal seeking entry of satisfaction in respect of properties sold by him was dismissed, though the practical effect of allowing the 13th defendant's appeal gave the 9th the benefit he sought in substance.

Implications:

  • Direct effect on the parties: The scaled down payment made by the mortgagors operates to discharge the mortgage and the decree as against purchasers (including those who did not themselves apply under the Act) — specifically the 13th and 29th defendants in this case are entitled to have satisfaction entered.
  • The 9th defendant cannot obtain entry of satisfaction in respect of properties he has sold and which are now in the hands of his vendee merely on the basis of an indemnity clause; any claim he may have against his vendee remains a separate matter (i.e., an indemnity claim) and does not convert into a right to enter satisfaction against the vendee's property.
  • No broader or novel precedent beyond the application of the established line of decisions was purportedly set by this opinion; the Court applied existing authorities and the construction of the decrees to the facts. The opinion resolves the parties' rights in these appeals without asserting a new principle beyond the prior authorities cited.

No order as to costs was made in either appeal.

Show all summary ...

1. These two connected appeals arise out of an order refusing to enter up satisfaction of a mortgage decree passed against the appellants and other defendants. The mortgage was granted on the 13th September, 1925. Defendants 1 to 4 were the mortgagors and 5 to 12 were subsequent purchasers of portions of the hypotheca. The 13th defendant is a purchaser of three items out of those purchased by the 9th defendant and he has sold one of these three items to the 14th defendant.

2. The suit (O.S. No. 20 of 1936) was brought to enforce the mortgage against all these defendants and a preliminary decree for Rs. 1,13,836-4-10 was passed on the 13th September, 1937. The Madras Agriculturists' Relief Act, 1938, having been passed in March, 1938, the mortgagors applied under Section 19 to the Court which passed the decree for scaling down the debt in accordance with the provisions of the Act claiming to be agriculturists. Defendants 9 to 12 as well as defendants 5 to 8 also applied by separate petitions for similar relief. The applications of the mortgagors and of the defendants 9 to 12 were allowed and the amount was scaled' down to Rs. 36,000. The application of defendants 5 to 8 was rejected on the ground that they were not agriculturists within the meaning of the Act. They appealed to this Court in A.S. No. 295 of 1939 which was heard with A.S. Nos. 23 and 24 of 1938 preferred against the preliminary decree on questions determined in the suit. These two appeals were dismissed and the preliminary decree was confirmed on 3rd February, 1942. A.S. No. 295 of 1939 was allowed, the Court holding on the strength of a series of decisions, that the mortgagors being agriculturists even though the purchasers of portions of the hypotheca were non-agriculturists, the statutory reduction of the debt under the Act at the instance of the mortgagors enured to the benefit of such purchasers, not by virtue of any provisions of the Act, but under the general law. Vide Machiappa Chettiar v. Ramachandra Reddiar (1942) 1 M.L.J. 510. The liability of defendants 5to 8 also was thus reduced to the scaled down amount, namely, Rs. 36,000 and the preliminary decree was amended accordingly. The 13th defendant who is the appellant before us in C.M.A. No. 410 of 1944 did not make any application of his own for relief under the Act, although he was an agriculturist because, as he says, he was under the impression that he would have the benefit of the scaling down ordered at the instance of his vendor, the 9th defendant. After the reduction of the decree amount as a result of these applications, the final decree was passed on the 18th March, 1939. The final decree gave effect to the scaling down of the amount only so far as defendants 1 to 4 and 9 to 12 Were concerned as the appeal by defendants 5 to 8 was disposed of only on 3rd February, 1942. It is common ground that, consequent on the decision of this Court, the decree was further amended in respect of defendants 5 to 8 also. The 13th defendant and the 29th defendant who was brought on record as the legal representative of the 14th defendant subsequently filed an application (C.M.P. No. 4851 of 1942) in this Court in Appeal No. 24 of 1938 preferred against the preliminary decree and already disposed of as aforesaid, praying that this Court should " amend the decree herein by adding the words 'defendants 13 and 29' in paras. 1 and 2 of the decree of this Honourable Court, dated 3rd February, 1942." The Court rejected that application on the ground that it was" much too late to give effect to defendant 13's contentions now." Subsequently, the decree-holder initiated execution proceedings and in the course of such execution proceedings the scaled down amount, namely, Rs. 36,000 with subsequent interest and incidental charges was deposited in Court at the instance of the defendants 1 to 4 and others who had obtained relief under the Act, and satisfaction of the decree was entered so far as they were concerned. The 13th defendant then filed E. A. No. 91 of 1944 out of which C.M.A. No. 410 of 1944 arises for entering up satisfaction of the decree even as against himself on the ground that the mortgage debt being indivisible and having been discharged by the payment of the scaled down amount by the mortgagors, the whole debt was wiped out and the property purchased by him became automatically freed from the encumbrance. The 9th defendant applied in E.A. No. 104 of 1944 for a similar relief pointing out that in his sale to the 13th defendant there was an indemnity clause under which he was liable to make good to his vendee any loss which the latter might sustain by reason of the decree-holder enforcing his claim against the 13th defendant. The 9th defendant therefore prayed that the entire decree should be entered as satisfied by the payment into Court of the decree amount as scaled down.

3. The Subordinate Judge while recognising the principle laid down by the decisions of this Court in Arunachalam v. Seetharam (1941) 1 M.L.J. 561 : I.L.R. 1941 Mad. 930, Marina Ammayi v. Mirza Bakhar Beg Saheb (1941) 1 M.L.J. 547 and Satyanarayanamurthi v. Sathiraju (1942) 1 M.L.J. 506, namely, that when an agriculturist-mortgagor obtains the benefit of the Act and pays the amount of the debt as scaled down, the entire mortgage debt is discharged against all persons interested in the security even though such persons may not be agriculturists entitled to claim relief in their own right under the Act, was of opinion that the terms of the preliminary and final decrees as amended as well as the order of this Court rejecting the C.M.P. No. 4851 of 1942 precluded the 13th defendant from claiming that the decree was satisfied by the payment into Court of the reduced amount by the other defendants. Mr. Muthukrishna Aiyar, learned counsel for the 13th defendant, appellant in C. M. A. No. 410 of 1944, contests this view claiming that there is nothing in the decrees to preclude the application of the principle of the decisions referred to above in favour of his client at this stage when the decree amount as scaled down has been paid into Court, and that the order of this Court in C. M. P. No. 4851 of 1942 cannot have the effect of denying to the appellant the relief which he now seeks on the basis of such payment in the execution proceedings. We are inclined to agree that, so far as the order of this Court in C. M. P. No. 4851 of 1942 is concerned, it cannot have the effect of depriving the appellant of the benefit of the reduction of the decree debt effected at the instance of the mortgagors if the appellant is otherwise entitled under the law to such benefit, for all that this Court refused to allow was the prayer of the appellant to have the decree in Appeal No. 24 of 1938, expressly amended so as to give effect to the principle of the decisions referred to above even as regards his own liability under the decree. From the rejection of that prayer as having come too late, it cannot follow that the appellant cannot claim the benefit of the scaling down in other appropriate proceedings if he is entitled to such benefit under the law.

4. Turning now to the language of the decrees, Clause 2 (i) of the preliminary decree as originally passed ordered and decreed that defendants 1 to 4, 5 to 13, 15 and 25 to 29 do pay into Court on or before the 13th March, 1938, or any later date up to which time for payment may be extended by the Court, the said sum of Rs. 1,13,836-4-10 with interest as above.

5. It then followed the usual lines laid down in the Code and contained directions as to the sale of the properties in case of default, etc. After the applications of the mortgagors, defendants 5 to 8 and 9 to 12 were allowed and the amount was scaled down as aforesaid, to Rs. 36,000 a paragraph was added in the decree in the following terms:

It is further ordered and decreed that the debt due by defendants 1 to 4, 9th defendant and defendants 5 to 8 is scaled down to the principal sum of Rs. 36,000 with interest at 6 1/4 per cent. per annum from 1st October, 1937, till 13th March, 1938, and thereafter at six per cent. per annum with full costs of Rs. 3,146-13-6 with interest on costs at six per cent. per annum from 13th September, 1937, to the date of realisation.

The words "defendants 5 to 8" are not found in the printed decree, but it is admitted that they have been added in the decree as finally amended. In the final decree passed on 18th March, 1939, also the amendments were carried out by the insertion of paragraph 3 whereby it was:

ordered and decreed that out of the items of the hypotheca, the items which are in the possession of defendants 1 to 4 and 9 to 12 be and are liable only for the sum of Rs. 36,000 with interest thereon at 6 1/4 per cent. per annum from 1st October, 1937, to 13th March, 1938, and thereafter at six per cent. per annum with full costs as allowed under the preliminary decree.

Here too we are told that the words "defendants 5 to 8" have been subsequently added in that para. The rest of the decree as originally passed was in the usual terms. It is argued by the learned Advocate-General for the decree-holder-respondent, that the true effect of these decrees was to fix the liability of each set of defendants separately and independently, so that, when the lability of one set of defendants was reduced by the application of the provisions of the Act and a similar reduction was not expressly made as against other defendants, the decree must be construed as operating in respect of the full amount as originally decreed as regards the latter. We are unable to agree with this view. Reading the decrees as a whole it is clear to our minds that there is no apportionment of the liability under the mortgage as between the several sets of defendants. The decree was for a single amount even as the amount due under the mortgage was a single liability. The amount has no doubt been reduced as regards persons who sought and obtained relief under the Madras Agriculturists' Relief Act. But according to the decisions to which reference has been made already, if the reduced debt of the mortgagor is paid, the hypotheca is freed from the encumbrance as against every person who claims interest in any part thereof. We are unable to see anything in the language of the decree which prevents us from giving effect to that principle now that the scaled down amount has been admittedly paid by or at the instance of the mortgagors. The effect of such payments must accordingly be held to be to discharge the decree as a whole even as against the others including the 13th and 29th defendants who did not actually apply for the benefit of the Act in their own right as agriculturists. In this view, C.M.A. No. 410 of 1944 must be and is hereby allowed.

6. As regards C.M.A. No. 582 of 1944, preferred by the 9th defendant, he, as already observed, sought and obtained relief under the Act, and so far as he is concerned, only the scaled down amount was payable under the decree as amended. It cannot therefore be executed for any larger sum against the properties remaining in his possession. But it is difficult to see how he can apply for entering up satisfaction of the decree in respect of the properties sold by him and now in the hands of his vendee the 13th defendant. It may be that the result of rejecting the application of the 13th defendant would give rise to a claim by way of indemnity against the 9th defendant but we do not consider that that is sufficient to entitle the 9th defendant to make an application for entering up satisfaction of the decree as against the 13th defendant. As, however, We are allowing the appeal of the 13th defendant, the 9th defendant practically gets the relief that he wants. His appeal however must fail and we dismiss it. In the circumstances we make no order as to costs in either of the appeals.