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  • Horwill, J.
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Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

The opinion describes a dispute over ten items of suit property arising from multiple mortgages, sales and attachments between 1914 and 1928.

Key factual milestones (as set out in the opinion):

  • 1 October 1914: Defendant 1, on behalf of himself and his sons, mortgaged four items of the suit property to defendant 8 (who also represented defendants 6 and 7).
  • End of August 1916: Defendant 1 purchased the remaining six items of the suit property but lacked funds to pay the full consideration.
  • 30 August 1916: Defendant 1 mortgaged all ten properties in favour of the plaintiff to raise funds.
  • 1921: Defendants 6 and 7 instituted O.S. No. 28 of 1921 (a suit for sale) in respect of the four items originally mortgaged to them; they bought that property at auction. The plaintiff was not impleaded in that suit.
  • Because the sale proceeds did not cover the full mortgage debt, defendants 6 and 7 obtained a personal decree against defendant 1 and, in execution, attached the remaining six items on 31 May 1926.
  • 1 October 1926: During the subsistence of that attachment, the six attached items were sold to the plaintiff for Rs. 500, the consideration being credited to the mortgage debt (not paid in cash).
  • October 1928: Delivery proceedings resisted the purchaser (defendants 6 and 7) of the six items; the plaintiff was unsuccessful in a claim petition and, as a result, brought the present suit on 6 December 1928 seeking sale of all ten items.

Legal Issues Presented

  1. Whether, in view of the plaintiff's purchase of the six attached items while the attachment subsisted, the plaintiff is precluded from bringing a mortgage suit in respect of those six items (i.e., whether the sale extinguished the mortgage and barred suit).
  2. Whether the plaintiff is entitled to bring to sale the shares of defendants 2 to 5 in the four items (i.e., whether the mortgage of 30 August 1916 binds defendants 2 to 5 in respect of those four items).

Arguments of the Parties

Appellants' Arguments

  • Although the sale was not binding on defendants 6 to 8 because of the prior attachment, the appellants argued that a sale nevertheless extinguished the mortgage; consequently, no mortgage suit could be maintained with respect to the six items purchased by the plaintiff.
  • Appellants and other authorities argued that a purchaser at court auction and a private purchaser stand in the same position for many purposes, implying that a mortgage might be regarded as kept alive only for certain purposes and not for sustaining a mortgage suit after a sale.

Respondent / Plaintiff's Arguments (as presented in the opinion)

  • Relying on Section 101 of the Transfer of Property Act (as it stood before amendment), it was argued that the mortgage could be regarded as continuing if it was in the interest of the purchaser to keep the mortgage alive; the statute, as contended, makes a continuance possible without reference to the purchaser's subjective intention.
  • It was found that the plaintiff had no knowledge of the attachment, but because it was in his interest at the time of sale to keep the mortgage alive, the mortgage should be deemed to have continued for his benefit and therefore he should be permitted to bring the mortgage suit.
  • The plaintiff's counsel additionally argued (on the point of liability of the sons/other co-owners) that even if the purchase was not for family necessity, the sons had not repudiated their father's act; therefore the sale would remain binding until repudiation. It was also argued that any necessary assent by defendants 2 to 4 could be implied from defendants 6 to 8 treating the six items as property of defendants 1 to 5 (by attaching them).

Defendants 6–8's Arguments (as presented in the opinion)

  • Defendants 6 to 8 relied on precedent (Daso Polai v. Narayana Patro (1933) 20 A.I.R. Mad 879) to argue that an extinguished mortgage cannot be revived when the property is attached; they distinguished that case on timing grounds (in Daso Polai the attachment occurred long after purchase; in the present case the purchase occurred during the attachment).
  • They argued that the mortgage of 30 August 1916 did not bind defendants 2 to 4 in respect of the four items, on the basis that the mortgage and the prior sale (by which defendant 1 obtained the six items) were in substance one transaction—i.e., the mortgage was immediately given to raise money to pay for the purchase—such that the sons should not be bound.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Venkatasarrii Chettiar v. Sankara Narayana Chettiar (1985) 22 A.I.R. Mad 12 Supports the proposition (by analogy) that an auction-purchaser may, for certain purposes, be treated similarly to a private purchaser and that a mortgage may be considered to subsist for some purposes enabling separate suits against puisne mortgagees. Cited by respondent to reinforce the argument that a mortgage could be deemed to continue for the purchaser's benefit; the Court considered it but did not accept it as decisive in the face of Section 64 Civil P.C. reasoning and the Privy Council authority it relied upon.
Venkat Reddy v. Kunjappa Goundan (1924) 11 A.I.R. Mad 650 Earlier authority upon which the above-mentioned Madras decisions rely, to the effect that where a puisne mortgagee is not impleaded, an auction purchaser may maintain a separate suit against such puisne mortgagee. Referred to as supporting authority for the argument that, despite sale, for certain purposes the mortgage may be considered to subsist; the Court treated it as part of the body of authorities but grounded its conclusion on Section 64 CPC and Privy Council reasoning instead.
Daso Polai v. Narayana Patro (1933) 20 A.I.R. Mad 879 Holds that an extinguished mortgage cannot be revived when the property is attached (the case involved an attachment taking place considerably after purchase). Cited by defendants 6–8 to oppose revival of mortgage; the Court distinguished it on the timing fact (purchase here was during the attachment) and therefore treated its relevance as limited.
Dinotundu Shaw Chowdhury v. Jpgmoya Dasi (1902) 29 Cal 154 (Privy Council) Explains that Section 276 (present Section 64 Civil P.C.) prevents an execution creditor from deriving a benefit (an unencumbered fee) from transactions during attachment; transactions prejudicial to the execution creditor are void as against him, but the section does not render void transactions which do not prejudice him. The Court relied on this Privy Council authority to hold that a purchase made during attachment must be deemed non-existent as against claims enforceable under that attachment; used to conclude that the sale to the plaintiff was void as against defendants 6–8 and that the prior mortgage continued as against them.

Court's Reasoning and Analysis

The Court proceeded by addressing each legal issue and applying statutory provision(s) and precedent strictly as presented in the opinion.

  1. On whether the plaintiff's purchase during attachment extinguished the mortgage:
    • The Court placed decisive importance on Section 64 of the Civil P.C. (referred to in the opinion as Section 64 and as the present Section 276 in the Privy Council authority). The Court observed that Section 64 provides that where an attachment has been made, any private transfer shall be void as against all claims enforceable under that attachment.
    • Applying that provision, the Court held that the plaintiff's purchase of the six items while the attachment was subsisting must be deemed non-existent as against defendants 6 to 8 (the decree-holders). Because the sale is void as to them, the seller's mortgage status is restored vis-à-vis those decree-holders and the mortgage is not extinguished by the sale.
    • The Privy Council decision in Dinotundu Shaw Chowdhury v. Jpgmoya Dasi was relied on to illustrate that Section 64 is not to be construed so as to confer unintended benefits upon an execution creditor (or purchaser by execution), and to support the proposition that transactions during attachment cannot be construed to defeat prior encumbrances so as to give the execution creditor an unencumbered fee contrary to the intention of parties and the object of the section.
    • The Court distinguished authorities (e.g., Daso Polai) that held extinguished mortgages could not be revived where attachment occurred long after purchase, by noting the factual difference here: the purchase occurred during the attachment period.
    • On the basis of that statutory and precedential analysis, the Court concluded that, as against defendants 6–8, the old mortgage dated 30 August 1916 subsisted over all items of the property just as it did prior to the October 1926 sale.
  2. On whether the mortgage bound defendants 2 to 4 (the shares in the four items):
    • Defendants 6–8 argued that the August 1916 mortgage and the antecedent sale were in substance one transaction—so that the sons (defendants 2–4) should not be bound.
    • The Court found no evidence that the vendor was a party to the mortgage transaction or that the plaintiff had any role in the original sale; although the mortgage was effected to raise money for the purchase, that alone did not make the mortgagee a party to the sale.
    • The Court therefore treated the mortgage as a distinct transaction and concluded that because the money was raised to pay antecedent debts incurred in making the purchase, the mortgage is binding on defendants 2 to 4 as well.
    • The Court noted other submissions (e.g., that sons had not repudiated their father's purchase, or that assent could be implied by conduct) but declined to decide these alternative points definitively because of its primary finding that the mortgage debt is binding on defendants 2 to 5.

Holding and Implications

Core Ruling:

The appeal is dismissed; the memorandum of cross-objections is allowed with costs throughout.

Direct consequences and practical implications (as stated in the opinion):

  • Because the sale of the six items to the plaintiff occurred during the subsistence of an attachment, that purchase is treated as non-existent as against the decree-holders (defendants 6–8) under Section 64 Civil P.C.; consequently the mortgage of 30 August 1916 continues to subsist as against defendants 6–8 in respect of all ten items.
  • The mortgage of 30 August 1916 is held to bind defendants 2 to 4 in respect of the four items (the Court found the mortgage to be a distinct transaction and binding on them).
  • The plaintiff may therefore proceed on the mortgage; the Court also made procedural directions: time for redemption is three months from the date of the judgment, and leave to appeal is granted.
  • As to costs: the appeal itself gave rise to no discussion and there is no order as to costs of the appeal; the memorandum of cross-objections is allowed with costs throughout.

The opinion does not state that a new legal principle or precedent is being established beyond its application of Section 64 Civil P.C. and existing authorities; the decision is grounded on the statutory effect of attachment and the cited Privy Council authority.

Show full summary ...

    Mariyappa Nadar And Another v. Ramanuja Naick And Others

    1. On 1st October 1914, defendant 1, on behalf of himself and his sons, mortgaged four items of suit property to defendant 8, who represents also defendants 6 and 7. Towards the end of August 1916, defendant 1 purchased the remaining six items of the suit property; but as ha had not sufficient money to pay for the whole of the consideration, he mortgaged all the ten properties in favour of the plaintiff on 30th August 1916. In 1921 defendants 6 and 7 brought O.S. No. 28 of 1921, a suit for sale, with regard to the four items of property mortgaged to them and the property was bought in auction by defendants 6 and 7. The plaintiff was not imp leaded in that suit. As the property did not fetch an amount sufficient to meet the whole of the mortgage debt, defendants 6 and 7 obtained a personal decree against defendant 1 for the remainder; and in execution of that decree, they attached on 31st May 1926 the remaining six items of the suit property. On 1st October 1926, while the attachment was subsisting, these six items of property were sold to the plaintiff for Rs. 500, the consideration not being paid in cash, but credited to the mortgage debt by way of partial discharge. In October 1928, defendants 6 and 7, who had brought the six items to sale in pursuance of, their attachment, were resisted in delivery proceedings. The plaintiff was unsuccessful in the consequent claim petition and he therefore brought the present suit on 6th December 1928, which is a suit for sale of all the ten items of property.

    2. The questions that arise in this appeal are whether, in view of the fact that the plaintiff purchased the six items, he is precluded from bringing a mortgage suit against the six items and whether the plaintiff is entitled to bring to sale the share of defendants 2 to 5 in the four items. The Courts below decided both these points in favour of the appellants, except for a small change made by the Appellate Court, and these points have been made the subject of a memorandum of cross-objections. the appeal arises1 because of an apparent omission of the lower Appellate Court in not making it clear that the Rs. 500 could be paid only out of the sale proceeds for the 3/8th share of the four items. Admittedly, this is a mistake and so no discussion on that point is necessary. It is only the memorandum of cross-objections that needs further discussion.

    3. The argument advanced on behalf of the, appellants was that although, because of the prior attachment, the sale is not binding on defendants 6 to 8, yet as there was a sale the mortgage was extinguished thereby and no mortgage suit therefore lies with respect to these six items of property. The argument on behalf of respondent 1 was that by virtue of Section 101, Transfer of Property Act, as it was before the amendment, there was a continuance of the mortgage if it was in the interest of the purchaser to keep the mortgage alive for Section 101 makes no mention of intention. Although it has been found that the plaintiff had no knowledge of the attachment; yet as it was in his interest at the time of the sale to keep the mortgage alive, it must ho deemed that the mortgage did continue for his benefit even after the sale; and as it was not extinguished, he is permitted to bring this suit on the mortgage. This argument was sought to be reinforced by an argument from analogy based on Venkatasarrii Chettiar v. Sankara Narayana Chettiar (1985) 22 A.I.R. Mad 12 which follows Venkat Reddy v. Kunjappa Goundan (1924) 11 A.I.R. Mad 650. The earlier decision is to the effect that if in a mortgage sale a puisne mortgagee is not imp leaded, the auction purchaser is entitled to bring a separate suit against the puisne mortgagee, which necessitates the conception that in spite of the fact that the mortgage was extinguished by a sale of the property, yet for certain purpose it is considered to continue. The opinion of Ananthakrishna Ayyar J. was there referred to with approval and the reason given by Ananthakrishna Ayyar J. for holding that the mortgage must be considered to be subsisting is that :

    The circumstance that the mortgagee filed a suit against a wrong person does not affect the rights of the real owners of the equity of redemption. If it does not affect them at all, one fails to see how they could be heard to say that by virtue of the prior suit, which admittedly does not affect them, a (second) suit against them is not maintainable. So far as they are concerned the second is the only suit against them and the first suit and the proceedings connected with the same must be taken to be non est in the eye of the law.

    4. Many cases have been cited to show that no distinction can be drawn between the rights obtained by a purchaser in a Court auction and those of a private purchaser of a mortgaged property and that the position of an auction-purchaser is therefore precisely the same as that of the plaintiff, who purchased the mortgaged property. It is therefore argued that for certain purposes the mortgage can be considered to be kept alive. This principle, it is argued, was recognized by Section 101, Transfer of Property Act. A reference has been made on behalf of defendants 6 to 8 to Daso Polai v. Narayana Patro (1933) 20 A.I.R. Mad 879 in which it was held that an extinguished mortgage cannot be revived when the property is attached; but in that case the attachment took place a considerable time after the property was purchased. In the present case the purchase was made during the continuance of the attachment.

    5. Whatever may be the merits of the above argument, it seems to me that in view of the terms of Section 64, Civil P.C., the purchase from the point of view of defendants 6 to 8 must be deemed to have been non-existent. It has to be remembered here that defendants 1 to 5 have no interest in the suit at all; for, their property has been sold and no personal remedy against them now exists. Section 64, Civil P.C. goes so far as to say that where an attachment has been made, any private transfer shall be void as against all claims enforceable under that attachment. If the sale is void, then the plaintiff becomes a simple mortgagee. The fact that as against defendants 1 to 5 he is something more than a mortgagee cannot affect his position vis a vis defendants 6 to Section Certain remarks in the judgment of their Lordships of the Privy Council in Dinotundu Shaw Chowdhury v. Jpgmoya Dasi (1902) 29 Cal 154 are I think very pertinent to the subject now Under consideration. There, pending attachment, the judgment-debtor mortgaged the property, and according to the terms of the mortgage, the mortgagee was to discharge two prior mortgages which existed even before the attachment. The decree-holder then sought to sell the property free from the mortgages. His argument was that by his mortgage the prior mortgages had been extinguished, that therefore the property could not be sold subject to mortgages that had already been extinguished, and that the subsequent mortgage was not binding on him at all. The result of this argument was that he was to derive a benefit from the mortgage made during the attachment. Their Lordships of the Privy Council however repelled these arguments. They said:

    Nothing can be clearer than that the intention of the parties to this transaction was to give to Mustafi a charge for Rs. 40,000 on the property in question in priority to all other charges if any. The property being represented as unencumbered, the statement in the judgment of the High Court that it was intended to keep the two old mortgages alive is open to criticism. But it does not affect the substance of the case. The respondents were intended to have the first and only charge, and it is idle to contend that there was any intention to extinguish the old mortgages for the benefit of the execution creditor or any purchaser at the sheriff's sale.

    6. Towards the end of the judgment they add:

    The last point urged by the appellant's counsel was that, whatever the intentions of the parties may have been; Section 276 (the present Section 64) of the Civil Procedure Code rendered the mortgage for Rs. 40,000 wholly void as against the appellant. So to construe this section would be quite wrong. So far as the mortgage for Ks. 40,000 prejudiced the execution creditor, it is void as against him; but the section does not render void transactions which in no way prejudice him; and to hold the mortgage void so as to confer upon him a benefit, which no one ever intended he should have, is entirely to ignore the object of the section and to prevent its obvious meaning. It is impossible to hold that the effect of that section is to give an execution creditor an unencumbered fee simple instead of an equity of redemption against the intention of the parties.

    7. It seems to me that the present case is an even stronger one from the plaintiff's point of view. In that case there was a basis for an argument that the mortgagee intended to extinguish the prior mortgages and that as the prior mortgages were paid off they ceased to exist and that the subsequent mortgage was not binding on the decree-holder; but in the present case the effect of rendering the sale void as against the decree-holder is to place the plaintiff in precisely the same position as if the sale had never taken place. The decree-holder cannot be heard to say in the same breath that there was no sale binding on him because the property was under attachment and that there was a sale which extinguished the mortgage. I therefore bold that the effect of the attachment is that as far as defendants 6 to 8 were concerned, the old mortgage of 30th August 1916 exists over all the items of the property just as it did prior to the sale in October 1926. The plaintiff does not desire any decree against defendants 1 to 5 because the personal remedy has now been lost by lapse of time and they have now no rights in the properties mortgaged.

    8. The other question raised in this appeal is whether the plaintiff is entitled to proceed against the share of defendants 2 to 4 in items 1 to 4. The argument of defendants 6 to 8 is that the mortgage of 30th August 1916 is not binding on defendants 2 to 4. With regard to the other six items defendants 6 to 8 cannot raise any objection; for, if the purchase of the property was by defendant 1 only, then undoubtedly, the plaintiff can proceed against the whole of that property; if the purchase was by defendants 1 to 5, then also the property will be liable, because the purchase of the property in August 1916 was for their benefit, so that the plaintiff will be entitled to a decree against the six items. The dispute is therefore with regard to the four items of property. It is argued on behalf of defendants 6 to 8 that although the evidence shows that the mortgage actually took place a few days after the sale of the six items to defendant 1, the mortgage and the sale are in effect one transaction; for defendant 1, knowing that he had no money to pay the vendor, had at once to mortgage the property to raise money to pay the sale price. These two acts can however amount to one transaction only if the parties to the mortgage and the sale looked upon them as one transaction; but there seems to be no evidence in this case that the vendor had anything to do with the mortgage or, more important still, that the plaintiff had anything to do with the sale. The mortgage does of course show that it was effected in order to raise money for the purchase of lands; but that does not make the mortgagee a party to the sale, although he knew that the sale had taken place and that the purpose of the money advanced by him was to pay off the money due to the vendor of the six items. I therefore hold that the mortgage was a distinct transaction, and as the money was raised to pay off antecedent debts the mortgage is binding on defendants 2 to 4 also.

    9. Another argument of the learned Counsel for the plaintiff is that even if the purchase was not for family necessity, it was not on that account necessarily void. The sons need not and have not repudiated the act of their father and until they do so the sale is binding an any person who may take the property from them. It is further argued that if the assent of defendants 2 to 4 or those who acquired interest is necessary in order to make the property of defendants 2 to 4 liable, then that assent has been given by implication in the conduct of defendants 6 to 8 in attaching the six items which were purchased by defendant 1 as the property of defendants 1 to 5. It is unnecessary for me to express any definite opinion on the validity of this argument in view of my finding that the mortgage debt is binding on defendants 2 to 5. The result is that in view of my findings on the memo of cross-objections the appeal is dismissed; but as the appeal has not given rise to any discussion, there will be no order as to costs. The memorandum of cross-objections is allowed with costs throughout. Time for redemption throe months from this date. Leave to appeal is granted.

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    Comments

    Mariyappa Nadar And Another v. Ramanuja Naick And Others
    (Sep 23, 1937)