1. This is an appeal against the order of remand made by the Subordinate Judge of Vizagapatam in A.S. No. 62 of 1927. The learned Subordinate Judge had passed this order of remand previously on 10th November 1927, but he was directed by the High Court to dispose of a petition, I. A. No. 1925 of 1927, which was for security for costs in the appeal, before disposing of the appeal. A preliminary point is taken by the appellant that he has not done so and that this order of remand must be set aside on that ground alone. We find, however that in para. 4 of his order the learned Subordinate Judge says:
If it is to be deemed that no definite order was passed one way or the other on I. A. 1295, it must be presumed that the order recording the petition was an order declining to call on the appellant to furnish security. In this view of the matter the petition. I. A. 1295, must be deemed to have been dismissed. The petition is therefore dismissed.
2. As the learned Subordinate Judge has passed a specific order in accordance with the directions of the High Court dismissing the petition, there is no substance in this preliminary point.
3. Turning now to the main subject-matter of the appeal which relates to the reversal of the finding of the Court of first instance on issue 2, which issue had been disposed of by the said Court as a preliminary point, it is necessary shortly to describe the events which led to the institution of the suit, O.S. 316 of 1925. The properties in suit were usufructuarily mortgaged for Rs. 600 on 14th May 1913, in favour of one M. Sankariah by the original owners. The mortgagee filed a suit to recover the money and got a decree for sale of the property which was put up for sale and purchased by the plaintiffs' father on 17th December 1914, subject to the usufructuary mortgage. On 12th February 1917, the plaintiffs' father entered into an agreement with the defendant, (the present appellant) to sell him this property, and under this agreement an advance of Rs. 50 was paid on the data of the agreement. The plaintiffs' father as auction-purchaser filed a suit against the mortgagee for redemption of the suit lands. He died during the pendency of the suit and the present plaintiffs who are his daughters were brought on record as his legal representatives. There was a preliminary decree passed on 31st July 1918 and three months were allowed for redemption, After the passing of this preliminary decree on 19th August 1918, defendant 1 paid the mortgage amount, Rs. 765, to the mortgagee and got a transfer of the mortgage under Ex. 1. In 1920 defendant 1 filed a suit, O.S. 117, for specific performance and a decree was given in his favour subject to the condition that he should pay Rs. 330 to the present plaintiffs and take a sale deed. This was confirmed in A.S. 236 of 1921. The defendant did not pay and neither party took further action in this matter. In 1922 the defendant filed two petitions in the redemption suit, one that he should be brought on record as transferee of the mortgagee's interest; and the other that the final decree should be passed. These are C. M. Ps. 1340 and 1350 of 1921. These two petitions were dismissed by the District Munsif. The present plaintiffs as legal representatives of the original auction-purchaser, filed this suit to eject the defendant from 2/3rds of the property which their father purchased and to recover past mesne profits from him.
4. The following issues were framed:
1. Whether the plaintiffs have a subsisting title to the suit land.
2. Whether the defendant is in the position of trespasser in the suit land.
3. Whether the plaintiffs have a right to take possession of the suit land; if so whether they cannot get possession without paying the amount mentioned in para. 9 of the written statement of the defendant.
4. Whether the plaintiffs are entitled to any and what amount of profits.
5. To what relief are plaintiffs entitled.
5. On issue 2 the learned District Munsif found that the defendant was not a trespasser. He therefore held that the suit as brought was not maintainable and dismissed it with costs. On appeal the learned Subordinate Judge held that the defendant was a traspasser. He reversed the finding of the trial Court on this issue and remanded the suit for further disposal on the other issues. Against this order the present appeal has been preferred.
6. We shall, as far as possible, not refer in any way to the other issues in the suit, which have not been triad, though, owing to the peculiar nature of issue 2, it is somewhat difficult to avoid conclusions which might affect those issues. The question is whether the defendant has any interest in the property. He claims this under two heads: (1) that by payment of the earnest money, Rs. 50, at the time of the agreement to sell by the plaintiffs' father he acquired a charge on the property; and (2) that he having paid the mortgagee should be subrogated to the rights of the latter.
7. Taking first, the charge which he alleges he has acquired by payment of Rs. 50 as earnest money to the plaintiffs' father, it is argued for the defendant that, as soon as the money was paid he acquired a charge on the property. Balvanta v. Bira [1899] 23 Bom. 56 at p. 61 is quoted in this connexion. The learned Subordinate Judge relied on Ponnammal v. Pichai A.I.R. 1927 Mad. 204. But it was contended for the appellant that this was opposed to the ruling of the Privy Council in Dayal Singh v. Indar Singh A.I.R. 1926 P.C. 94. The question whether a purchaser by part-payment can obtain a charge on the property depends on whether the default in completing the contract rests with him or with the vendor. This is a matter of fact to be found in each case. In Ponnammal v. Pichai A.I.R. 1927 Mad. 204 the purchaser redeemed a mortgage which, was a part consideration for the sale, but he failed to go on with the contract and pay the remainder of the purchase money. Ramesam, J., held that ha had no charge on the property even though ha had discharged the mortgage. We find nothing in the judgment of the Privy Council which conflicts with this decision. Their Lordships mention Section 55 (6) (b), T. P. Act, and say:
Their Lordships are of opinion that the section applied to the agreement in this case, where the buyer had paid earnest money, and so far from refusing to accept delivery, was pressing for specific performance, and that the agreement did in itself create an interest.
8. No authority has-been shown to us for the proposition that a purchaser paying earnest money and then refusing to complete the purchase has a charge on the property for the earnest money, and any such proposition is on its face quite untenable. It is therefore a question of fact in each particular case as to who is in default. The facts of the present case are somewhat peculiar because no argument can be advanced that the defendant was willing to carry out the contract from the fact that ha sued for specific performance. The purchase price under the contract was Rs. 1,000 and when he brought his suit for specific performance his case was that in this the charge for redeeming the mortgage was included. Not only did he claim that the Rs. 765, which he paid to the mortgagee, was in part-payment of the Rs. 1,000, but he claimed to have paid the vendor direct a sum of Rs. 315, which both the trial Court and the lower appellate Court found that he had not paid him. It was also held by both the Courts that the purchase price of Rs. 1,000 was only for the equity of redemption and did not include the mortgage. To finding of the trial Court was confirmed on appeal so that the present defendant had only paid Rs. 470 towards the consideration under the contract of sale, Ex. A. It was also found on issue 3 (To what relief is the plaintiff entitled)? as follows:
In view of the false allegations of plaintiff that he paid Rs. 315 in excess of what he actually paid it is not possible for defendants to execute a sale deed in plaintiff's favour in accordance with Ex. A.
9. It is clear that on this finding the suit for specific performance was liable to be dismissed. The present appellant had brought that suit to enforce the contract of sale of the property to himself for Rs. 1,000 which was to include his payment of the mortgage. The finding was that Rs. 1,000 was only for the equity of redemption and that the mortgage had separately to be redeemed. No argument therefore can be founded that the present appellant was willing to carry out the contract as found by the Court merely because he sought to sue on the contract as he considered it. Although this decree was confirmed on appeal in 1922, the present appellant took no steps to pay up the remainder of the purchase money and he has not up to this date offered to do so. In fact he has got possession of the land from the mortgagee and is resisting the plaintiffs' claim to the property. It is true that the decree in the suit for specific performance fixed no time in which the money had to be paid. In this connexion our attention has been drawn to certain remarks made in Abdul Sahaker Sahib v. Abdul Rahiman Sahib A.I.R. 1923 Mad. 284. It was there decided that even if time was fixed in the decree the Court may extend it. It was remarked that there is no form for a decree for specific performance provided by statute or rule and that in Courts of Chancery in England the appropriate forms of judgment, which have been approved, do not contain in the first instance a limit of time for payment of the purchase money. In that case there was evidence that the vendor was asked1 by the vendee to take the amount of purchase money and he refused. We are clear on the facts of this case that the present appellant is the party obviously in default, and even now he is clearly not ready to complete the purchase by paying Rs. 530 which the decree directed him. to pay. The principle on which Ponnammal v. Pichai has been decided is exactly the same so far as this is concerned and in our opinion it makes no difference that the redemption of the mortgage in that case was part of the purchase money, and in this case it is not part of the purchase money. We hold therefore that the appellant has not acquired a charge on the property for the Rs. 50 as earnest money for the contract of sale.
10. We now come to his claim to be subrogated to the rights of the mortgagee. The first point to be noted is that he got the transfer of the mortgage after the latter had become merged in the preliminary decree in the redemption suit. The decision in Parvati Animal v. Venkatarama Ayyar A.I.R. 1925 Mad. 80 by Wallace, J., sitting as a single Judge, is quoted by the appellant in this connexion. If, by that decision, it is meant that after the passing of the preliminary decree in a mortgage suit, payment of the mortgage money not into Court can be recognized in passing the final decree, it must be held to have been overruled by the later decision in Hasan Chettiar v. Rangayan Chettiar A.I.R. 1930 Mad. 105, in which Wallace, J., and one of us laid down that such adjustment made out of Court cannot be pleaded against the passing of the final decree since the Code distinctly lays down that the payment must be made into Court. There is no difference in this respect between the decree in a foreclosure suit and the decree in a redemption suit : vide Order 34, Rule 8, which governs redemption suits. The application of the appellant to be made a party to the redemption suit was rightly dismissed by the Court and, whether right or wrong, it has not been appealed against and has become final. The second counter-petitioner in that matter opposed the petition on the ground that the mortgage had been superseded by the preliminary decree. This is mentioned in full in the order of the District Munsif who concludes by saying: "Final decree cannot be made as mortgage debt was discharged." If he means by that that the mortgage deed was superseded by the preliminary decree, we quite agree. But if be means that the mortgage debt could be discharged by payment out of Court, then it is opposed to the ruling quoted above in Rasan Chettiar v. Rangayan Chettiar. It is inmaterial whether the reason given by the learned District Munsif was right or wrong; the order passed against the appellant has become final.
11. The appellant had two courses open to him. He might have paid up the remainder of the purchase money and then, having got the land assigned to him by the plaintiff's, might have had himself brought on record as plaintiff and asked for the final decree paying the mortgage amount into Court, or he might have purchased the mortgagee's interest in the preliminary decree, got the decree transferred, and applied in the capacity of mortgagee for a final decree to sell the property. It is obvious that in a redemption suit the mortgagee is a decree-holder under the definition of decree-holder" in Section 2 (3), Civil P.C. He can therefore transfer his decree and, on the transfer being recognized the transferee has the same right to apply for the passing of la final decree. The appellant pursued neither of these courses. Instead, be chose to pay the mortgage debt out of Court, to get possession from the mortgagee, and then to resist the plaintiffs' claim to the property without even offering to pay the plaintiff's the balance of the purchase money.
12. It has been argued that this taking of possession from the mortgage instead of from the plaintiffs is really a breach of the original contract to sell which would by itself be sufficient to destroy any charge which the appellant had got by payment of the earnest money on the property. We are not sure that this contention also is not well founded. No doubt the property was in the possession of the usufructuary mortgagee at the time it was purchased by the plaintiff's father and the latter was given only symbolical possession; still it was that symbolical possession that was to be transferred to the appellant under the contract Ex A which he failed to complete, and till he had completed the contract he could not get it. However that may be, as stated above, we are satisfied that the default in completing the contract is on the part of the appellant. But it is argued for the appellant that as he paid the mortgage money under the agreement to purchase the property, he should be subrogated to the rights of the mortgagee. In this connexion the cases quoted to us before, Parvati Ammal v. Venkatarama Ayyar, Butler v. Rice [1910] 2 Ch. 277 which was followed in Tangya Fala v. Trimbak Daga [1916] 40 Bom. 646, Govinda Chandra v. Parsa Nath A.I.R. 1926 Cal. 231, and Narayana Kutti Goundan v. Pechiammal [1913] 36 Mad. 426 at p. 435, have been relied on. The learned advocate for the appellant however concedes that the Madras decisions except that first quoted are against him : vide Gobinda Padayachi v Lokanatha Ayyar (10) a decision by Oldfield and Hughes, JJ., and Velayudhan v. Nallathambi A.I.R. 1928 Mad. 541. There is a very full discussion of the question in Gobinda Padayachi v. Lokanatha Ayyar A.I.R. 1921 Mad. 51. The English cases as well as the case in Narayana Kutti Goundan v. Pechiammal [1913] 36 Mad. 426, have been distinguished. We may notice that in Narayana Kutti Goundan v. Pechiammal [1913] 36 Mad. 426 Sundara Ayyar, J., at p. 432 observes as follows:
The principle governing the right of subrogition in cases where it is claimed by a person, who, without any previous interest, in the property discharges a mortgage on it, is expressed in Jones on Mortgages (S. 874) thus : Under the equitable principle of subrogation, one who pays a mortgage debt under an agreement for an assignment or for a new mortgage, for, his own protection or for the benefit of another, acquires a right to the security held by the other.
13. He then proceeds to state that in India the scope of the rule appears to be narrower still. The learned Judges in Gobinda Padayachi v. Lokanatha Ayyar distinguish the English eases Neesom v. Clarkson [1845] 4 Hare 97, Kinnard v. Tollope [1888] 42 Ch. D. 610 Palmer v. Hendrie [1859] 26 Beav 349 and Butler v. Rice, as well as Tangya Fala v. Trimbak Daga which followed Butler v. Rice. In all these cases payment had been made by a transferee of property under a mistake as to the ownership of his transferor. The case in A.I.R. 1926 Cal. 231 appears to go far beyond anything laid down even in the English cases. With due respect, we are unable to agree with what appears to have been laid down there that a stranger notwithstanding, the provisions of Section 74, Contract Act, is entitled to subrogation to the rights of the mortgagee to the extent of the money paid by him if he pays off the mortgage debt, even if not asked to do so by the mortgagor. This case came up for consideration before the Madras High Court in A.I.R. 1928 Mad. 541 and Devadoss, J., refused to follow it. In the Madras case the plaintiff,was a vendee under a sham transaction and it was argued that his position could not be worse than that of a pure volunteer and that a pure volunteer was entitled to be subrogated to the rights of the mortgagee. Devadoss, J., says:
This is a startling proposition of law. No volunteer is entitled to pay the debt of another person and claim to charge the amount against him.
14. Refering to the Calcutta case he says:
The learned Judge, after observing that there is no direct authority for the position, seems to draw support for his position from two English decisions. With very great respect I am unable to agree with the learned Judge in holding that a mere volunteer is entitled to the benefit of any payment that he might make on behalf of a debt whether it be to redeem a mortgage or whether it be to pay off a simple money debt; and the cases upon which the learned Judge relies do not warrant such a wide proposition as he has laid down.
15. He then proceeds to distinguish these cases on very much the same lines as they had been already distinguished in Gobinda Padayachi v. Lokanatha Ayyar quoted above. We entirely agree with him that it is a startling proposition that an entire stranger can go round paying mortgage debts without the consent and even against the wishes of the mortgagor and claim to be subrogated to the rights of the mortgagee. In the present case even by the terms of the contract the appellant did not enter into any obligation to pay off the mortgagee, and was not bound to do so even had he completed the purchase of the equity of redemption. In Gobinda Padayachi v. Lokanatha Ayyar, a case almost exactly similar to the present case, the facts were as follows:
16. Properties which were subject to a hypothecation and to a mortgage with possession were sold in execution of a money decree against the mortgagors and purchased by a third person. Subsequent to the execution sale those properties were purported to be sold by the mortgagors to the predecessors-in-title of the appellants, the consideration for the sale being the discharge of the hypothecation and the mortgage with possession and of a payment of a sum to the mortgagors for payment to the third person as consideration for the purchase from him of the properties. Appellants discharged only the hypothecation and the usufructuary mortgage amounts and obtained possession from the usufructuary mortgagee; but they did not pay the third person and did not therefore complete their title as owners of the properties. In a suit brought against the appellants by the successor-in-interest of the third person for possession of the properties it was held that the plaintiff was entitled to obtain possession and that the appellants were not entitled to insist on (1) their being paid the amounts of the hypothecation and the usufructuary mortgage before being ejected, or (2) the plaintiff paying to the usufructuary mortgagee the amount of his mortgage to complete the plaintiff's right to immediate possession. There was no doubt this difference *in that case that at the time of the sale purported to be made by the mortgagors the latter had no title to the property. But it was held that the appellants could not also rely upon the equitable principle of subrogation because there was no authority for extending the principle to a case such as that of a payment made under a mistaken belief in the future acquisition of an interest in property.
17. In the present case it is clear that the defendant got the mortgage transferred to him before he had purchased the equity of redemption. Taking his con-duct at its best, it may be said that he thought that the sum he had paid was part of the Rs. 1,000 the purchase money of the land. But when the Court held that this was not so, he evidently declined to go on with the contract of purchase. Besides as noted above, there is an important fact in the present case. If he meant to purchase the mortgagee's rights, he should have got the transfer not of the mortgage but of the preliminary decree which had superseded it. If on the other hand, he wanted to put himself in the shoes of the plaintiff and redeem the mortgage, he had to go on with the contract, purchase the property from the plaintiffs and get himself substituted for the plaintiffs in the suit. He adopted neither of these courses.
18. In the result we hold that the appellant acquired no charge on the property either by his payment of the earnest money of Rs. 50 at the time of the contract for sale which he failed to carry out or by subrogation to the rights of the mortgagee. That being so we consider that the Court of first appeal was right in holding that he was a trespasser, and the suit as framed was maintainable. We are not here concerned with the other issues which have been remanded by the learned Subordinate Judge for trial.
19. The appeal therefore fails and is dismissed with costs.