Translate
Text Highlighter

Bookmark

PDF

Share

Report a problem
AMICUS AI
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Sundara Aiyar
  • Sadasiva Aiyar, JJ.
Acts
Are you a practicing lawyer?
Enhance your digital presence and reach by creating a Casemine profile.
Upload pleading to use the new AI search
Click here to upload
Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Sundara Aiyar
  • Sadasiva Aiyar, JJ.
Acts
See more information ...
Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

The plaintiff sought to enforce payment due under two mortgages executed in July 1891 by the first defendant's father: Exhibit C (a usufructuary mortgage for Rs. 500) and Exhibit D (a simple mortgage for Rs. 200). On 4 September 1896 a sale-deed (Exhibit E / referred to as Exhibit B in parts of the opinion) was executed by the vendor (the first defendant's father) in favour of the plaintiff for consideration totalling Rs. 900, which comprised amounts applied to the two mortgages, interest, municipal tax the vendor had covenanted to pay, sundry borrowings, and a cash payment. The second defendant obtained a mortgage of the same property in 1893, sued in 1905, caused the properties to be sold and purchased them; in that suit the present plaintiff had been the second defendant and the decree directed sale subject to the plaintiff's prior encumbrances.

In the present suit the plaintiff claimed (a) Rs. 830 as the principal and interest fixed as due up to the date of the plaintiff's sale-deed (4 September 1896), (b) Rs. 300 as interest subsequent to that date up to the date of plaint (17 July 1908), (c) Rs. 98-5-4 for municipal tax paid by her, and (d) Rs. 171-10-8 for repairs and improvements made by her. Both lower Courts held the mortgages subsisted as against the second defendant; the District Munsif allowed interest on the simple mortgage up to the date of plaint but disallowed municipal tax and repairs; the District Judge allowed the municipal tax and some repairs (an addition of Rs. 128-60 to the decree for repairs).

The second defendant appealed further (Second Appeal). The liability for Rs. 830 as fixed on the date of the sale-deed was not contested on appeal; the appeal challenged the remainder of the decree (the post-Exhibit E interest, municipal tax, and repairs).

Legal Issues Presented

  1. Whether the plaintiff's mortgage rights were destroyed (merged) by her purchase of the property under the sale-deed, i.e., whether the mortgages subsisted as against the second defendant after the sale-deed.
  2. Whether the plaintiff was entitled to recover interest accruing subsequent to the date of the sale-deed (the claim of Rs. 300 for interest after 4 September 1896).
  3. Whether the plaintiff could recover municipal tax sums she had paid although the usufructuary mortgage deed (Exhibit C) contained a covenant by the mortgagor that he would pay municipal taxes.
  4. Whether the plaintiff could recover monies spent on repairs and improvements after the date of the sale-deed (whether such expenditure, made after purchase, was recoverable from the puisne encumbrancer).

Arguments of the Parties

Appellant / Second Defendant

  • Contended that the plaintiff's mortgage rights over the property were destroyed by her purchase in 1896; therefore she was not entitled to recover anything under her mortgages.
  • Argued that the plaintiff was not in law entitled to recover municipal assessment (tax) or repairs and improvements spent.
  • Maintained that Section 101 of the Transfer of Property Act was not applicable and that, even if the principle underlying Section 101 applied to preserve encumbrances as against a puisne encumbrancer, the plaintiff was not entitled to claim interest subsequent to the sale-deed.

Respondent / Plaintiff

  • Asserted that the mortgages must be regarded as kept alive as against the second defendant and relied on Section 101 of the Transfer of Property Act to show encumbrances continued to subsist as against the appellant because their continuance would be for the plaintiff's benefit.
  • Claimed not only the principal but also interest according to the terms of Exhibit D (the simple mortgage bond) including interest accruing after the sale-deed.
  • Maintained entitlement to municipal tax and to reimbursement for repairs and improvements she had made.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Umes Chunder Sircar v. Zahur Fatima (1891) I.L.R., 18 Calc., 164 (P.C.) Illustration that where a mortgagee becomes purchaser and accepts the property in lieu of the price, he cannot later claim further compensation (interest) for that portion of the price. The Court cited this case to support the conclusion that the plaintiff, having taken the property in lieu of the price under Exhibit E, could not claim further interest after that date.
Gangadhara v. Sivarama (1885) I.L.R., 8 Mad., 246 Authority cited in the context that where a previous mortgage was not extinguished, interest after the date of merger was not allowed against the previous owner of the equity of redemption. Used to show precedent where interest after merger was not allowed; contributed to disallowing post-sale interest here.
Seetharama v. Venkatakrishna (1893) I.L.R., 16 Mad., 94 Similar authority regarding non-allowance of interest after merger against the previous owner of the equity of redemption. Cited alongside other cases to demonstrate prior decisions denying post-merger interest.
Vanmikalinga Mudali v. Chidambara Chetty (1906) I.L.R., 29 Mad., 37 Authority showing that in several cases where priority was allowed for a previous mortgage no interest after the date of merger against the previous owner was allowed. Relied upon to support the conclusion disallowing interest accruing after the sale-deed.
Sea Chetwynd v. Allen (1899) 1 Ch., 353 Illustration that where a previous mortgage was merged in a subsequent one, interest as against a puisne encumbrancer was allowed only at the rate stipulated in the substituted mortgage. Cited to show the principle that post-merger interest cannot exceed the substituted mortgage's rate and thus to limit post-sale interest claim.
Mohesh Lal v. Bawan Das (1883) I.L.R., 9 Calc., 961 (P.C.) Authority similar to Sea Chetwynd: where a previous mortgage merged, post-merger interest as against a puisne encumbrancer is governed by the substituted instrument. Used to reinforce the court's view that post-purchase interest claim could not be sustained beyond the substituted terms.
Syamalarayudu v. Subbarayudu (1898) I.L.R., 21 Mad., 143 Mentioned by parties but the Court noted it was not in point on the facts before it. The Court observed it did not appear that the plaintiff in that case had been in possession enjoying the property in consideration of the amount paid to discharge the prior encumbrance, so it was not applicable here.
Peru Bepari v. Renuo Maifarash (1885) I.L.R., 11 Calc., 164 Authority supporting that covenants entered into by the mortgagor cannot be enforced against a puisne encumbrancer. Cited in the discussion on municipal tax to support disallowing recovery of tax paid where the mortgagor had covenanted to pay it.
Queen-Empress v. Shaik Ibrahim (1890) I.L.R., 13 Mad., 518 Authority relevant to the rule that covenants of the mortgagor do not bind subsequent encumbrancers in this context. Relied upon to conclude the plaintiff could not recover municipal tax from the puisne encumbrancer.
Purushottama v. Municipal Council of Bellary (1891) I.L.R., 14 Mad., 467 Authority used in the context of municipal tax enforcement and the nature of movable property liable to seizure. Used to support the court's view that the plaintiff was not entitled to recover municipal tax from the puisne encumbrancer and that doors and windows could not be regarded as movable property for seizure in the plaintiff's favour.

Court's Reasoning and Analysis

The Court first rejected a preliminary objection by the respondent that the appellant was not permitted selectively to attack only a portion of the decree on Second Appeal; the Court found nothing to prevent attacking a portion of the decree and disallowed that objection.

On the central questions, the Court observed that it was unnecessary to decide finally whether the mortgages were entirely destroyed by the sale-deed because the appellant's contention regarding post-sale interest could be resolved on principles consistent with the mortgages remaining subsisting as against the appellant (a puisne encumbrancer).

The respondent relied on Section 101 of the Transfer of Property Act (or the principle embodied in it) to argue the encumbrances continued to subsist for the plaintiff's benefit. The Court accepted the rule that an encumbrance existing before purchase by the owner of the charge will continue to subsist if its continuance is for the purchaser's benefit, and it may subsist as against a puisne encumbrancer. However, the Court emphasised that Section 101 does not prescribe the exact rights after purchase: equity and justice determine the measure of protection afforded by keeping the encumbrance alive.

The Court gave a concrete example: if a first mortgagee substitutes a fresh mortgage at a lower interest rate, even if priority is preserved, the mortgagee cannot claim the higher rate agreed in the earlier deed because the substituted mortgage governs. Applying that reasoning to the facts, the Court held that once the plaintiff agreed by Exhibit E to take the property for the agreed price and enjoyed it accordingly, she could not claim further compensation (interest) for any portion of that price after that date. The Court cited Umes Chunder Sircar v. Zahur Fatima and other authorities to support the principle that no post-merger interest is allowed against the prior owner, and where a prior mortgage was merged in a subsequent instrument, interest against a puisne encumbrancer is limited to the substituted terms.

On that basis the Court disallowed the Rs. 300 awarded for interest subsequent to the purchase date (the post-Exhibit E interest), concluding the plaintiff could not recover interest after she had taken the property in lieu of the price fixed by Exhibit E.

Regarding municipal taxes, the Court considered the express covenant in Exhibit C under which the mortgagor agreed to pay municipal taxes. The Court held the plaintiff's right as to taxes arose from that personal covenant of the mortgagor, not from statutory obligations imposed on a mortgagee in possession. Consequently, the plaintiff (although in possession) was not bound to pay municipal taxes under the statutory provisions and could not recover them from the puisne encumbrancer. The Court also rejected the District Judge's suggestion that doors and windows could be seized as movable property of the mortgagor for municipal recovery, noting Section 103 of the District Municipalities Act (pre-1899) allowed seizure only of movable property in the defaulter's possession and the plaintiff was not the defaulter. On these grounds the Court disallowed recovery of municipal tax.

On the claim for repairs (the award of roughly Rs. 128–128-60 as described at different points in the proceedings), the Court accepted that the repairs were of a nature that would entitle a mortgagee to reimbursement. The appellant argued the repairs were made after the plaintiff became purchaser (post-Exhibit E) and thus were expenditure as purchaser not as mortgagee. The Court rejected that contention: because the mortgage subsisted as against the appellant, the plaintiff was entitled to add monies she would have been entitled to under Section 72 (i.e., expenditure for preservation) if the sale had not occurred. The Court reasoned that it would be inequitable for the puisne encumbrancer to have the benefit of expenditures made to preserve the property without payment; expenditure that enhanced the value of the charged property must be reimbursed by the party who benefits.

Holding and Implications

Core Ruling: The Second Appeal is allowed except insofar as the award for repairs is concerned (the award for repairs is sustained). The decree of the District Judge is modified as indicated in the opinion.

Direct consequences and orders made by the Court:

  • The liability for Rs. 830 as fixed on the date of the sale-deed remains unchallenged and stands.
  • The sum of Rs. 300 awarded as interest subsequent to the date of the sale-deed (post-Exhibit E interest) is disallowed.
  • The amount claimed and awarded for municipal tax paid by the plaintiff is disallowed.
  • The award for repairs (approximately Rs. 128–128-60 as reflected in the proceedings) is sustained; the plaintiff is entitled to reimbursement for reasonable preservation-type expenditures made.
  • Both parties will pay and receive proportionate costs in all the Courts.
  • The time for redemption is extended to three months from the date of the opinion.

The opinion does not purport to lay down a novel rule of law; it applies established equitable principles (including the rule embodied in Section 101 of the Transfer of Property Act and authorities on merger and substituted mortgages) to the facts to determine the measure of protection afforded to an encumbrance kept alive after purchase. No broader precedent beyond the application to the present facts is expressly declared.

Show full summary ...

    Ibrahim Sahib v. Arumugathayee And Another

    1. The plaintiff's suit in this case is to enforce payment of the amount due to her on two mortgages executed by the first defendant's father in July 1891. Of these the first, Exhibit C, is a usufructuary mortgage for Rs. 500. The second, Exhibit D, is a simple mortgage for Rs. 200. On the 4th September 1896 a sale-deed was executed by the first defendant's father in plaintiff's favour. The consideration Rs. 900 for the sale-deed was made up of Rs. 700, the principal amounts due on the two mortgages, Rs. 130, the interest on the simple mortgage bond, Rs. 55, the amount due to plaintiff for municipal tax which the vendor had covenanted to pay by the terms of the usufructuary mortgage-deed and certain sundry amounts which he had borrowed from the plaintiff and Rs. 15 paid in cash. The second defendant had obtained from the vendor a mortgage of the same property in 1893. He instituted a suit on it in 1905, brought the properties to sale and purchased them. The present plaintiff was the second defendant in that suit. The decree directed the sale of the property subject to the plaintiff's prior encumbrances.

    2. The plaintiff claimed to recover in this suit as due to her under her mortgages Rs. 830, the amount due up to the 4th September 1896 as fixed in the sale-deed, Exhibit E, and Rs. 300-for interest subsequent to that date up to the 17th July 1908, the date of the plaint. She also claimed Rs. 98-5-4, the total amount of municipal tax paid by her for the property and Rs. 171-10-8 for repairs and improvements made by her.

    3. The second defendant alleged that the plaintiff was not entitled to recover anything, contending that her mortgage rights over the property were destroyed by her purchase in the year 1896 and that she was not in law entitled to recover anything either on account of municipal assessment or repairs and improvements.

    4. Both the lower Courts have held that the mortgages must be regarded as kept alive as against the second defendant. The District Munsif allowed the interest claimed on the simple mortgage bond up to the date of plaint and further interest from the date of plaint to the date fixed for payment at l 1/8; per cent, per mensem, the rate stipulated in Exhibit D. He disallowed the amount claimed for municipal assessment and repairs and improvements. On appeal the District Judge held that the plaintiff was entitled to add the amount paid by her for municipal assessment and also the amount spent by her for restoring a room which had fallen down. The amount added to the Munsif s decree for the expenses of the repairs was Rs. 128-60.

    5. In Second Appeal the liability for Rs. 830 which was fixed as the principal and interest due on the mortgages on the date of the plaintiff's sale-deed is not objected to; but the remainder of the decree is impeached.

    6. A preliminary objection has been taken by the learned vakil for the respondent on the ground that the liability for the debt not being resisted in Second Appeal and the appeal being valued only with respect to the interest decreed from the date of Exhibit E (the sala-deed) the appellant is not entitled to attack the decree for the interest on the debt subsequent to the sale-deed. In the memorandum of Second Appeal the grounds taken urge the second defendant's non-liability to the plaintiff for anything on the footing of her mortgages. But the appellant did not want to impeach in this Court the plaintiff's right to recover the amount found due on the date of Exhibit E. The preliminary objection is not sustainable. There is nothing to prevent the appellant from attacking only a portion of the decree, although the reason for the attack might cover the whole decree. The objection must therefore be disallowed.

    7. The question whether the plaintiff's mortgages were destroyed by the sale (Exhibit B) was argued at the bar. A distinct argument was also urged on the point whether the plaintiff can claim interest subsequent to Exhibit E. It is unnecessary to decide whether the right under the mortgages is altogether destroyed, as the appellant's contention with regard to the claim for interest must be upheld on a point which is consistent with the mortgages being alive as against the appellant. The respondent contends that Section 101 of the Transfer of Property Act is applicable to the case, and that the encumbrances under the mortgages C and D must be taken to have continued to subsist as against the appellant after the date of Exhibit E as their subsistence was for the plaintiff's benefit, and that she is therefore entitled not only to the principle but also to the interest which Exhibit D gave her according to its terms. The appellant argues that Section 101 is not applicable and that, even if on the principle underlying that section the plaintiff is entitled to have the benefit of the encumbrances as against the second defendant, she is not entitled to the interest. And he draws attention to a passage in Dr. Rash Behary Ghose's work on Mortgages in which the learned author says that the Transfer of Property Act does not expressly provide for a case where the payment of the charge is contemporaneous with the purchase of the equity of redemption. It is unnecessary to consider whether the case comes within the express language of Section 101 or not, as the conclusion to be come to on the question of the plaintiff's right to subsequent interest would be the same whether the language of Section 101 itself would be applicable or only the principle recognised in that section. The section declares that the charge or encumbrance existing before the purchase of the property by the owner of the charge or encumbrance shall be extinguished unless its continuance would be for his benefit. The encumbrance is kept alive as against a puisne encumbrancer in the circumstances referred to in the section. It does not of course continue against the owner whose equity of redemption the encumbrancer has purchased. Beyond declaring that the encumbrance will subsist where It is for the benefit of the encumbrancer the section does not state what the exact rights on the encumbrance would be after the date of the purchase. Suppose a first mortgagee takes a further mortgage on the property for the amount duo on his first mortgage after the execution of a second mortgage in favour of a third party by the mortgagor, and suppose farther that according to the terms of the substituted mortgage the rate of interest agreed upon is less than that fixed in the previous mortgage instrument. It is quite clear that although the first mortgagee may claim priority for his mortgage as against the second mortgagee notwithstanding its merger in the substituted mortgage instrument, he cannot be entitled to the higher rate of interest fixed in his first mortgage-deed as he agreed under the substituted mortgage to receive a less rate from that date. The rule embodied in Section 101 is one which in equity and justice should be enforced to; protect the rights created under the first mortgage and the question in each case is what is the measure of protection which equity and justice require to be given. Now on the date of Exhibit E, the plaintiff agreed with her mortgagor to take the property for the price agreed upon according to that exhibit. She thenceforward enjoyed the property in lieu of the price she gave for it, although she was previously in possession of it as usufructuary mortgagee under Exhibit C. What was enjoyed by her till then as compensation for the amount advanced on the usufructuary mortgage, she agreed subsequently to enjoy in consideration of the whole price fixed on Exhibit E. She cannot therefore claim any further compensation from that date for any portion of the price. See Umes Chunder Sircar v. Zahur Fatima (1891) I.L.R., 18 Calc., 164 at p. 181 (P.C.).. If for instance, she took a fresh mortgage instead of a sale-deed and gave up all claim to future interest, her covenant to that effect would be binding on her in a suit against the second mortgagee quite as much as it would bind her against her mortgagor himself. No case expressly deciding this point was cited on either side, but we observe that in several cases where priority was allowed for a previous mortgage on the ground that it was not extinguished no interest after the date of merger aw against the previous owner of the equity of redemption was allowed. See Gangadhara v. Sivarama (1885) I.L.R., 8 Mad., 246, Seetharama v. Venkatakrishna (1893) I.L.R., 16 Mad., 94, and Vanmikalinga Mudali v. Chidambara Chetty (1906) I.L.R., 29 Mad., 37. Where a previous mortgage was merged in a subsequent one, interest was allowed as against a puisne encumbrancer only at the rate stipulated in the substituted mortgage. Sea Chetwyud v. Allen (1899) 1 Ch., 353, and Mohesh Lal v. Bawan Das (1883) I.L.R., 9 Calc., 961 (P.C.). Syamalarayudu v. Subbarayudu (1898) I.L.R., 21 Mad., 143, cited for the respondent is not in point as it does not appear that the plaintiff in that case was in possession of the property enjoying it in consideration of the amount paid by him to discharge the prior encumbrance. We must therefore disallow the amount of Rs. 300 awarded to the plaintiff for interest subsequent to the date of Exhibit B when the second defendant became the purchaser of the property, i.e., 24th March 1908 [4th September 1896?].

    8. The next question argued in Second Appeal relates to the plaintiff's claim for the amount paid by her for municipal tax. According to the provisions of Exhibit C the usufructuary mortgage deed, the mortgagor the first defendant in this suit agreed to pay all municipal taxes himself. The plaintiff's right with respect to the taxes was under the personal covenant entered into by the mortgagor. It is unnecessary to consider whether taxes due to a municipality would come within the expression "charges of a public nature" which the mortgagee in possession is bound to pay under Clause (c) of Section 76 of the Transfer of Property Act and the mortgagor is bound to pay when the mortgagee is not in possession under Clause (c) of Section 65. In this case the mortgagee notwithstanding her being in possession was not bound to pay the municipal tax as the mortgagor expressly covenanted to pay it. The obligation of the mortgagor was not under Clause (c) of Section 65 of the Act, but under his covenant. The tax does not come under the expenses which the mortgagee is entitled to incur under Section 72 and add to the principal money due under the mortgage instrument, as the payment was not required either for the preservation of the property or for the protection of the mortgagor's title to it. It may be observed that the District Judge is wrong in supposing that the doors and windows of a house could be sold as moveable property of the mortgagor. Section 103 of the District Municipalities Act before its amendment in 1899 allowed the seizure only of moveable property in the possession of the occupier where he was the defaulter. The plaintiff was not the defaulter in this case. Covenants entered into by the mortgagor cannot be enforced against a puisne encumbrancer nor can the doors and windows of the house regarded as moveable property. See Peru Bepari v. Renuo Maifarash (1885) I.L.R., 11 Calc., 164, Queen-Empress v. Shaik Ibrahim (1890) I.L.R., 13 Mad., 518, and Purushottama v. Municipal Council of Bellary (1891) I.L.R., 14 Mad., 467

    9. We must therefore disallow the amount awarded for municipal tax.

    10. With respect to the award of Rs. 128 for the costs incurred by the plaintiff in making repairs, it is not contended before us that the repairs were not of such a character as would entitle a mortgagee to reimbursement but it is argued that the plaintiff did not spend the amount as mortgagee but as purchaser of the property as the repairs were made after the date of Exhibit E. No doubt the plaintiff had become the purchaser in 1896, but the contention, though it looks plausible, is not entitled to succeed. As the mortgage subsisted after the purchase, the plaintiff must be held entitled to add all monies to the principal amount which she would be entitled to do under Section 72, if the sale did not take place. All rights incidental to the mortgage must subsist with the mortgage right itself. If the prior mortgagee spends money for preservation of the property from destruction, forfeiture or sale, it would be inequitable to hold' that the puisne encumbrancer should have the benefit of the expenditure incurred for that purpose without paying for it. The value of the property over which the puisne encumbrancer is entitled to a charge is enhanced by the expenditure and he cannot claim the benefit of the expenditure without making payment for it. The objection to the award for the repairs must be disallowed.

    11. The result is that this Second Appeal must be allowed except with regard to the award for repairs. The decree of the District Judge will be modified as indicated above.

    12. Both parties will pay and receive proportionate costs in all the Courts.

    13. The time for redemption will be extended to three months from this date.

    Use AI to get other relevant cases.
    Try AI Pro free for 7 days Upgrade to AI Pro

    Comments

    Ibrahim Sahib v. Arumugathayee And Another
    (Sep 4, 1912)