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Structured Summary of the Legal Opinion

Factual and Procedural Background

This appeal arises from a suit for recovery of a mortgage debt by sale of mortgaged property. On 4 August 1919 Mt. Nazir-un-Nisa (defendant 1) executed a mortgage for Rs. 500 on shares in two villages, Nagla Rumi and Asafpur, on her own behalf and on behalf of her minor son Sayed Ahmad Khan (defendant 2). Although certificated guardian of the minor, Mt. Nazir-un-Nisa executed the mortgage without the permission of the District Judge.

On 10 September 1919 Mt. Nazir-un-Nisa, with the District Judge's sanction, sold the (joint) share in Nagla Rumi to defendants 3 and 4 (the appellants). Out of the sale consideration, amounts were left with the vendees for payment of a prior mortgage and for payment to the plaintiff in respect of the mortgage then in suit. The appellants discharged the prior mortgage but did not pay the amount left to be paid to the plaintiff, prompting the plaintiff to sue for recovery of the mortgage debt by sale of the mortgaged shares.

At trial, Sayed Ahmad Khan did not contest the suit. Mt. Nazir-un-Nisa alleged that the plaintiff had taken back Rs. 250 from her out of the Rs. 500 paid before the Sub-Registrar and that she had only received Rs. 250 as consideration. The trial Court found that the mortgage was supported by consideration and that the full Rs. 500 was paid to Mt. Nazir-un-Nisa (a finding not challenged on appeal). The trial Court and the lower appellate Court reached several conclusions: (a) the mortgage was ineffective as to the minor's interest because it was executed without the District Judge's permission; (b) the appellants, having undertaken to discharge the prior mortgage, were estopped from disputing the validity of the mortgage in suit and could not set up the discharged prior mortgage as a shield; and (c) because Mt. Nazir-un-Nisa's share in Asafpur was not ascertainable, no decree could be granted in respect of that share. The lower appellate Court decreed sale of the share in Nagla Rumi for the full amount claimed. The present appeal challenges the decrees of the Courts below on the two principal grounds raised by the defendants at trial.

Legal Issues Presented

  1. Whether the mortgage executed by Mt. Nazir-un-Nisa without the permission of the District Judge is invalid or ineffective so far as it affects the minor's interest, and if so whether transferees of the minor's property (the appellants) may attack that validity.
  2. Whether purchasers (the appellants) who discharged a prior mortgage out of the sale consideration can, as against a puisne (subsequent) mortgagee (the plaintiff), claim priority by setting up the prior mortgage which they discharged (i.e., whether they are entitled to step into the prior mortgagee's shoes).
  3. Whether the appellants are estopped from contesting the validity of the plaintiff's mortgage by reason of their undertaking to discharge that mortgage out of the sale consideration.
  4. Whether this Court has jurisdiction under Order 41, Rule 33 Civil P.C. to modify the lower appellate Court's decree and grant the plaintiff relief (sale of the mother's share) that the lower appellate Court declined to grant.

Arguments of the Parties

Defendants-Appellants' Arguments

  • The mortgage was invalid insofar as it affected the minor's interest because it was executed without the permission of the District Judge.
  • Having discharged a prior mortgage out of the sale consideration, the appellants were entitled to set up that prior mortgage as a shield and to claim priority over the plaintiff's later mortgage.

Mt. Nazir-un-Nisa's Contentions

  • She alleged that out of the entire promised consideration of Rs. 500 paid before the Sub-Registrar, the plaintiff took back Rs. 250 from her, and that she only received Rs. 250 as consideration for the mortgage in suit.

Plaintiff-Respondent's Position (as reflected in the record)

  • The plaintiff sought recovery of the mortgage debt by sale of the mortgaged shares. The trial Court found that the mortgage was supported by consideration and that the full Rs. 500 was paid to Mt. Nazir-un-Nisa; that finding was not challenged on appeal.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Gokal Das Gopal Das v. Puranmal Prem Sukhdas [1884] 10 Cal. 1035 Presumption that, absent evidence to the contrary, a person acts according to his interest when discharging a prior mortgage (i.e., whether the purchaser intended to extinguish or keep alive the prior incumbrance). The Court relied on this authority to explain the general presumption and to distinguish circumstances where a purchaser intends to extinguish all incumbrances by paying them off from those where he does not.
Mahomed Sadiq v. Gaus Mahomed [1911] 33 All. 101 (Full Bench) Supported the view that when a purchaser undertakes to discharge all incumbrances out of sale consideration, the presumption is that he intended to extinguish them (and not to keep prior mortgages alive). The Court cited this Full Bench decision as authority for holding that the appellants, having undertaken to discharge both incumbrances, cannot claim priority as against the plaintiff.
Mahhan Lal v. Nathi A.I.R. 1923 All. 503 Same general principle as Mahomed Sadiq regarding a purchaser's intention when discharging incumbrances arising from sale consideration. Used alongside Mahomed Sadiq to support the conclusion that the appellants cannot claim priority over the plaintiff.
Nur Bakhsh v. Rukam Singh [1911] 8 A.L.J. 754 Rule that a minor who seeks to avoid a transaction (here, a mortgage) executed without proper sanction must make restitution to the extent to which he benefited from the transaction. The Court applied this principle to hold that the appellants (as representatives-in-interest of the minor) can only be permitted to avoid the mortgage on condition of making restitution to the extent the minor benefited; noted that no finding had been made below on that point.
Rangam Lal v. Jhandu [1911] 34 All. 32 (Full Bench) Interpreted Order 41, Rule 33, Civil P.C., as empowering an appellate Court to grant relief to a respondent (who did not appeal) when necessary to do complete justice between the parties to the appeal. The Court relied on this Full Bench decision to hold that it had jurisdiction under Order 41, Rule 33, Civil P.C., to grant the plaintiff a decree for sale of Mt. Nazir-un-Nisa's share even though the lower appellate Court had declined to grant such relief.
Mohammad Khaleef Shirazi v. Les Tanneries Lyounaises A.I.R. 1926 P.C. 34 Discussed limits of Order 41, Rule 33 — specifically where a party did not appeal in the Court of first appeal, the Privy Council held that that party could not, by appealing to a higher court, in effect obtain relief that would amount to a direct appeal from the trial court's decree. The Court considered and distinguished this Privy Council decision on the facts, concluding that it did not prevent granting the plaintiff relief in the present case because the plaintiff had filed cross-objections in the lower appellate Court.

Court's Reasoning and Analysis

The Court conducted a sequential analysis addressing the principal contentions of the parties and the legal consequences:

  1. Priority by discharge of prior mortgage: The Court agreed with the Courts below that the appellants, having discharged the prior mortgage out of the sale consideration, are not entitled to claim priority over the plaintiff's mortgage. The Court explained the presumption that a purchaser who undertakes to discharge all incumbrances intends to extinguish them rather than keep a prior incumbrance alive as a defensive shield. The Court relied on established authority (including Gokal Das, Mahomed Sadiq and Mahhan Lal) to support this principle and applied it to the facts (both incumbrances on Nagla Rumi existed; appellants retained funds sufficient to discharge both).
  2. Right to attack mortgage validity: The Court disagreed with the Courts below insofar as they held that the appellants were estopped from attacking the validity of the mortgage in suit. The Court observed that because the mortgage-deed had been executed without the sanction required under Section 30 of the Guardians and Wards Act, the mortgage could be avoided by any person affected thereby — in particular, Sayed Ahmad Khan (the minor) could avoid it. As purchasers of the minor's property, the appellants were representatives-in-interest of the minor and thus entitled to question the validity of the plaintiff's mortgage unless estopped.
  3. Estoppel analysis: The Court examined whether the appellants were estopped. It found no privity of contract between the plaintiff and appellants (the plaintiff had already advanced the money before the appellants' purchase), and there was no conduct by the appellants that caused the plaintiff to believe something untrue and change his position to his detriment. Hence, the factual and legal basis for estoppel did not exist, and the appellants were not estopped from contesting validity.
  4. Restitution condition if mortgage avoided: The Court, relying on Nur Bakhsh v. Rukam Singh, held that even if the minor sought to avoid the mortgage, he must make restitution to the extent he benefited. Consequently, appellants (as representatives-in-interest) could only be relieved of the liability created by the mortgage on condition of restitution to the extent of the minor's benefit. The Court noted that neither of the lower Courts had made any finding as to the extent of the minor's benefit.
  5. Rights as against the mother's share: The Court emphasized that the mortgaged property included shares of the mother (Mt. Nazir-un-Nisa) as well as the minor, and the plaintiff was entitled to enforce his mortgage against the mother's share. The lower appellate Court had refused to decree sale of the mother's share in Asafpur because the extent of that share was not ascertainable; the plaintiff did not appeal that part. However, this Court found, on the basis of its authority under Order 41, Rule 33 Civil P.C. (as explained in Rangam Lal v. Jhandu), that the plaintiff should be granted a decree for sale of Mt. Nazir-un-Nisa's share in both villages despite the lower appellate Court's refusal.
  6. Jurisdiction and distinction of Privy Council authority: The Court addressed and distinguished Mohammad Khaleef Shirazi v. Les Tanneries Lyounaises (P.C.) on the limited ground that the present plaintiff had filed cross-objections in the lower appellate Court, unlike the position in the Privy Council decision. Accordingly, the limitation identified by the Privy Council did not prevent this Court from granting relief to the plaintiff under Order 41, Rule 33.
  7. Remand for specific findings and directions: Because important factual issues remained unresolved, the Court remanded two determinations to the lower appellate Court: (1) the extent to which the minor benefited from the mortgage money, and (2) the extent of Mt. Nazir-un-Nisa's share in Asafpur. The parties were permitted to adduce additional evidence; the lower appellate Court's findings were to be returned within two months, after which ten days would be allowed for filing objections.

Holding and Implications

Holding:

The Court held that the defendants-appellants cannot claim priority over the plaintiff by reason of having discharged the prior mortgage.

Additional core rulings and immediate consequences:

  • The appellants are not estopped from contesting the validity of the mortgage in suit; because the mortgage was executed without the District Judge's sanction, it could be avoided by the minor, and the appellants, as transferees and representatives-in-interest of the minor, may challenge that validity.
  • Even where avoidance is sought, the minor (and therefore the appellants as his representatives) can only avoid the mortgage on the condition of making restitution to the extent that the minor benefited from the mortgage money; the Courts below made no finding on the extent of such benefit, and that factual issue must be determined.
  • The plaintiff is entitled to enforce the mortgage as against Mt. Nazir-un-Nisa's share in both villages; this Court exercised its jurisdiction under Order 41, Rule 33 Civil P.C. to grant the plaintiff relief (decree for sale of the mother's share) notwithstanding the lower appellate Court's earlier refusal to decree sale of the mother's share in Asafpur for want of ascertainment.
  • The matter is remanded to the lower appellate Court to determine (1) the extent to which the minor benefited by the mortgage advance and (2) the extent of Mt. Nazir-un-Nisa's share in village Asafpur. Parties may adduce additional evidence; findings must be returned to this Court within two months, with ten days thereafter for filing objections.

Implications:

  • Direct effect on the parties: The appellants lose any claim to priority over the plaintiff based on their discharge of the prior mortgage. They retain the right to challenge the mortgage's validity but only subject to restitution obligations if the mortgage is avoided. The plaintiff gains the enforceable right to recover against the mother's shares in the mortgaged villages, and the case is remitted for factual determination necessary to finalize how much of the minor's share (if any) may be subject to relief after restitution is assessed.
  • Precedential effect: The Court applied existing principles from cited authorities and statutory provisions. The decision refines the application of those principles on the facts, but the opinion does not purport to lay down a new general rule beyond the established authorities cited. No broader disruptive precedent beyond these applications is stated in the opinion.

Directions and Case Management

The lower appellate Court is directed to determine two factual questions:

  1. To what extent did the minor Sayed Ahmad Khan benefit by the money advanced under the mortgage in suit?
  2. What is the extent of Mt. Nazir-un-Nisa's share in village Asafpur?

Parties may produce additional evidence. The findings must be returned to this Court within two months from the date of the opinion, and on receipt of the findings, ten days will be allowed for filing objections.

    Maqsud Ali Khan v. Abdullah Khan

    1. This is a defendants' appeal and arises out of a suit for sale on a mortgage, dated the 4th August 1919. The mortgage was executed by Mt. Nazir un-Nisa, defendant 1, on her own behalf and on behalf of her minor son Sayed Ahmad Khan, defendant 2. The mortgage was for a sum of Rs. 500, and the mortgaged property consisted of shares in two villages, Nagla Rumi and Asafpur, which belonged both to Mt. Nazir-un-Nisa and to Sayed Ahmad Khan. Though Mt. Nazir-un-Nisa was a certificated guardian of her minor son, she executed the mortgage-deed without taking the permission of the District Judge.

    2. About a month after the execution of the mortgage-deed, viz., on the 10th September 1919, Mt Nazir-un-Nisa, with the sanction of the District Judge, sold the share belonging to her and to her minor son in Nagla Rumi to defendants 3 and 4, who are the appellants before us, and, out of the sale consideration, left with the vendees the amounts due on the basis of a prior mortgage and of the mortgage now in suit for payment to the respective mortgagees. The appellants discharged the prior mortgage, but did not pay the amount left with them for payment to the plaintiff-respondent, and hence the suit giving rise to the present appeal was brought by the plaintiff for recovery of the mortgage debt by sale of the shares in the two villages mortgaged.

    3. Sayed Ahmad Khan did not contest the suit. Mt. Nazir-un-Nisa alleged that out of the entire sum of Rs. 500 paid before the Sub-Registrar, the plaintiff-respondent took back a sum of Rs. 250 from her and she only received Rs. 250 as consideration for the mortgage in suit.

    4. The defendants-appellants contested the suit mainly on two grounds: (1) that the mortgage having been executed without the permission of the District Judge was invalid and (2) that they having discharged the prior mortgage were entitled to set up that mortgage as a shield against the plaintiff's claim.

    5. The trial Court held that the mortgage in suit was supported by consideration and that the entire mortgage-money, viz., Rs. 500, was paid to Mt. Nazir-un-Nisa. This finding of the trial Court was not challenged in the lower appellate Court, and has not been challenged before us.

    6. The trial Court further held that the mortgage in suit having been executed without the permission of the District Judge, was ineffective so far as it affected the interest of the minor in the hypothecated property and, therefore, the plaintiff-respondent was not entitled to a decree for sale of the minor's share in the two villages and, though the plaintiff was entitled to a decree for sale of Mt. Nazir-un-Nisa's share, such a decree could not be granted to the plaintiff inasmuch as there was nothing on the record to show the extent of Mt. Nazir-un-Nisa's share in village Asafpur. But it held that the defendants-appellants, having undertaken to discharge the mortgage in suit out of the sale consideration left in their hands, were estopped from disputing the validity of the mortgage, and that the defendants-appellants were not entitled to set up the prior mortgage discharged by them as a shield against the plaintiffs' claim and, accordingly, it granted a simple money decree to the plaintiff against the defendants-appellants. The defendants-appellants filed an appeal in the lower Court and the plaintiff filed cross-objection.

    7. The lower appellate Court agreed with the trial Court in holding that by paying the prior mortgage the defendants-appellants did not obtain a priority over the plaintiff's mortgage and that they were estopped from pleading that the mortgage in suit was invalid. It also agreed with the trial Court in holding that the mortgage, having bean executed without the permission of the District Judge, was ineffectual to adversely affect the minor's share in village Asafpur and, as the extent of Mt. Nazir-un-Nisa's share in that village was not ascertainable, the plaintiff was not entitled to a decree for sale of the share in Asafpur. As a result of these findings, the lower appellate Court passed a decree for the full amount claimed by the plaintiff by sale of the share in village Nagla Rumi. In appeal before us the decrees of the Courts below are assailed on the two grounds that were raised by the defendants-appellants in the trial Court and that have been noted above.

    8. We agree with the Courts below in holding that by discharging the prior mortgage the defendants-appellants are not entitled to set up the prior mortgage discharged by them as a shield against the plaintiff's claim. As already stated, there were two incumbrances on Nagla Rumi on the date of the purchase made by the appellants. Out of the sale consideration sufficient amount was left with the appellants for the discharge of both the mortgages. The appellants having undertaken to pay off both the incumbrances cannot by paying off the prior mortgage, step into the shoes of the prior mortgagee and be allowed to claim priority as against the plaintiff-respondent. In all cases whore a subsequent purchaser claims priority over a puisne mortgagee by reason of his having discharged a prior mortgage, the question is whether or not it was his intention, while discharging the prior mortgage, to keep that mortgage alive as against the puisne mortgage and, in absence of evidence to the contrary, it is presumed that a man acts according to his interest: vide Gokal Das Gopal Das v. Puranmal Prem Sukhdas [1884] 10 Cal. 1035. But when a purchaser of a property, subject to various incumbrances, undertakes to discharge all those incumbrances out of the sale consideration, the presumption is that he intended to discharge and extinguish all the incumbrances over the property purchased by him and not to keep the prior mortgages alive to be set up as a shield against the claims of the puisne incumbrancer. The reason for this is not far to seek. When the purchaser retains out of the sale consideration amount enough to discharge all the incumbrances over the property purchased by him, he intends to clear the property of all the incumbrances. The case is otherwise when a purchaser does not undertake to discharge all the incumbrances on the property purchased by him. In such cases, it is clearly to the benefit of the purchaser to keep the prior incumbrance alive and to put the same as a shield against the claim of the puisne incumbrancer, and therefore in such cases, in the absence of evidence to the contrary, the presumption is that he did not intend, by discharging the prior mortgage, to extinguish the same but intended to keep it alive. This was the view taken by this Court in the Full Bench decision in Mahomed Sadiq v. Gaus Mahomed [1911] 33 All. 101 and Mahhan Lal v. Nathi A.I.R. 1923 All. 503. We therefore hold that the defendants-appellants cannot claim priority as against the plaintiff-respondent.

    9. But we are unable to agree with the Courts below in holding that it was not open to the defendants-appellants to attack the validity of the mortgage in suit. The Courts below were of opinion that the appellants, having undertaken to pay off the mortgage in suit out of the sale consideration left with them, were estopped from contesting the validity of the plaintiff's mortgage. In our judgment the Courts below were wrong in arriving at this conclusion. The mortgage-deed having boon executed without the sanction of the District Judge, could, in view of the provisions of Section 30, Guardians and Wards Act. be avoided by any person affected thereby. It is clear therefore that Sayed Ahmad Khan could avoid the mortgage in suit. The question then remains whether the defendants-appellants, who are transferees of Sayed Ahmad Khan's property, have a right to contest the validity of the mortgage in suit. As purchasers of the minor's property the appellants are representatives-in-interest of the minor. The relief sought in the present suit is that the plaintiff be allowed to recover the mortgage-money by sale of the property purchased by the appellants and, therefore, the mortgage in suit affects the appellants and they as representatives-in-interest of the minor, are entitled, unless estopped from doing so, to question the validity of the plaintiff's mortgage.

    10. We are unable to hold that the appellants were estopped from contesting the validity of the plaintiff's mortgage. It is true that the appellants undertook to discharge the plaintiff's mortgage out of the sale consideration retained by them but the plaintiff was not a party to the sale-deed and there was no privity of contract between him and the appellants. The plaintiff had, before the purchase made by the appellants, already advanced the money secured by the mortgage. The appellants did not, by their declaration, act or omission, cause or permit the plaintiff to believe something which the plaintiff did not believe and to act upon such belief, and to change his position in any way We, therefore, fail to appreciate the grounds on which the Courts below held that the appellants were estopped from calling in question the validity of the mortgage in suit.

    11. But even if the minor himself had sought to avoid the mortgage in suit, he could only be allowed to do so on condition of making restitution to the extent to which he had benefited by the mortgage, vide Nur Bakhsh v. Rukam Singh [1911] 8 A.L.J. 754 and, therefore, the appellants, as representatives-in-interest of the minor, can only be permitted to get rid of the liability created by the mortgage on condition of making restitution to the extent to which the minor benefited by the mortgage money. There is no finding by either of the Courts below on the question as to what extent the minor benefited by the mortgage in suit.

    12. Moreover, as already stated, the property mortgaged to the plaintiff comprised shares not only of the minor in the two villages, but of his mother Mt. Nazir-un-Nisa as well. The plaintiff-respondent is undoubtedly entitled to enforce his mortgage as against the share of Mt. Nazir-un-Nisa in both the villages. The lower appellate Court granted a decree only for sale of the share in Nagla Rumi and declined to pass a decree for sale of the share of Mt. Nazir-un-Nisa in village, Asafpur on the ground that there were no materials on the record to determine the extent of her share in that village. The plaintiff has not challenged the decree of the lower appellate Court by way of appeal so far as it directs the dismissal of the claim for sale of the share in Asafpur. But there was obvious reason for the plaintiff not to have appealed in this Court as the probabilities were that the entire decretal amount could be realized by sale of the share in Nagla Rumi. But it is clear that as a result of our findings the plaintiff cannot be hold entitled to a decree for the sale of the minor's share in either of the two villages provided the appellants make restitution to the extent to which the minor benefited by the mortgage in suit. The question then arises: Have we jurisdiction, while modifying the decree of the lower appellate Court in favour of the appellants, to grant a relief to the plaintiff which was denied to him by the lower appellate Court. We think that Order 41, Rule 33, Civil P.C., vests us with ample jurisdiction to do so. As was pointed out by this Court in the Full Bench decision in Rangam Lal v. Jhandu [1911] 34 All. 32.

    the object of Rule 33 is manifestly to enable the Court to do complete justice between the parties to the appeal, where, for example, it is essential in order to grant relief to an appellant that some relief should at the same time be granted to the respondent also, the Court may grant relief to the respondent although he has not filed an appeal or preferred an objection.

    All the parties to the suit are before us and we can see no justification for not granting to the plaintiff a decree for sale of Mt. Nazir-un-Nisa's share in both the villages. By holding that it is open to the appellants to challenge the validity of the mortgage we are denying to the plaintiff-respondent the relief granted to him by the lower appellate Court, While refusing to enforce the mortgage against the minor's share we think it consonant with justice to grant the plaintiff a decree for sale of Mt. Nazir-un-Nisa's share in the villages mortgaged. Reliance has been placed by the learned Counsel for the appellants; on the case of Mohammad Khaleef Shirazi v. Les Tanneries Lyounaises A.I.R. 1926 P.C. 34. In our opinion that case is distinguishable. In that case the plaintiff sued two defendants and the suit against one of the defendants was dismissed by the trial Court but that defendant was made liable for the plaintiff's costs. The plaintiff did not appeal against the decree of the trial Court and the Court of first appeal, on appeal by the defendants, dismissed the claim against both the defendants. The plaintiff thereupon appealed to His Majesty in Council and arrayed both the defendants as respondents to the appeal. It was held by their Lordships of the Privy Council that the plaintiff, not having appealed in the Court of first appeal against the decree of the trial Court dismissing: his claim as against one of the defendants, was not entitled in appeal before their Lordships to contest the validity of the decree of the trial Court, as against that defendant. In that case the validity of the decree of the trial Court not having been assailed in the Court of first appeal, their Lordships held that to grant relief to the plaintiff against the defendant who was successful in the trial Court, would be in effect to allow "an appeal direct to his Majesty in Council from the decree of the trial Judge" and that "O. 41, Rule 33, Civil P.C., was not intended to apply to such an appeal." This is not so in the present case. The plaintiff in the lower appellate Court filed cross objections against the decree of the trial Court claiming a decree for sale of the shares of Mt. Nazir-un-Nisa and of the minor. For these reasons we hold that Mt. Nazir-un-Nisa's share in both the villages is liable to answer the plain tiff's claim.

    13. We cannot dispose of this appeal without having a finding from the lower appellate Court on the following points:

    (1) To what extent did the minor Sayed Ahmad Khan benefit by the money advanced under the mortgage in suit?

    (2) What is the extent of Mt. Nazir-un-Nisa's share in village Asafpur?

    14. Parties will be allowed to adduce additional evidence. The findings must be returned to this Court within two months from to day's date. On receipt of the findings, ten days will be allowed for filing objections.

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    Comments

    Maqsud Ali Khan v. Abdullah Khan
    (Jun 8, 1927)