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Babu Parasuram Singh v. Pandhohi
Judgment Summary — Ryves, J. (with Gokul Prasad, J., concurring)
Factual and Procedural Background
The mortgagor (who later ceased to be interested) executed a conditional-sale mortgage dated 20 September 1900 by which his zemindari share in four villages was mortgaged to the defendants. Subsequently the mortgagor executed three usufructuary mortgages in favour of the plaintiffs: one on 15 July 1903 for Rs. 99-15-6 covering three small plots of sir land, and two on 8 July 1904 for Rs. 71 and Rs. 75 covering other small plots of sir and khud kasht land. The aggregate area of these plots was a little over three bighas (slightly more than an acre); all were within the village of Ukraewan, one of the four villages included in the 1900 mortgage. All three usufructuary mortgages were unregistered. The mortgages provided that the mortgagees would pay the Government revenue and that profits would be set off against interest; redemption was agreed to be possible at the end of the month of Jeth in any year on payment of the principal money.
In 1907 the defendants brought a suit for foreclosure of the 1900 mortgage, obtained a decree made absolute in 1908, and eventually obtained possession of the mortgaged property. The plaintiffs (puisne mortgagees) were not made parties to that foreclosure suit.
After the foreclosure and the defendants' acquisition of possession, the defendants sought to eject the plaintiffs (initially in the revenue court, later in the civil court), where they obtained a decree on 21 May 1917 declaring them to be usufructuary mortgagees. On 6 August 1918 the plaintiffs served notice of intention to sue for redemption of the prior (1900) mortgage. On 30 August 1918 the defendants deposited in court, under section 83 of the Transfer of Property Act, the entire amount they asserted was due to the plaintiffs on the three usufructuary mortgages and offered to redeem them; the plaintiffs refused the money and on 10 September 1918 filed suit seeking to redeem the prior mortgage on payment of the amount the court considered valid and to be put in possession of the property.
The defendants contested the plaintiffs' suit on several grounds. The trial court framed, inter alia, an issue (No. 6): whether the defendants had a right to redeem the plaintiffs' mortgages and whether the defendants had been ready to pay the mortgage money due to the plaintiffs and, if so, how that affected the plaintiffs' claim. The trial court decided the issue in favour of the plaintiffs, treating the plaintiffs as having a preferential right to redeem because they had not been made parties to the earlier foreclosure; the trial court entered a decree for redemption in favour of the plaintiffs for an amount higher than that claimed by the plaintiffs. The defendants appealed; the matter proceeded to a further appeal considered by Ryves, J., with a concurring opinion by Gokul Prasad, J.
Legal Issues Presented
- Have the defendants (who acquired the mortgaged property's possession and a decree of foreclosure against the mortgagor) a right to redeem the mortgages in favour of the plaintiffs (the subsequent puisne mortgagees)?
- Have the defendants been ready to pay the mortgage money due to the plaintiffs (specifically, had they complied with section 83 of the Transfer of Property Act by depositing the amount in court), and if so, how does that affect the plaintiffs' claim to redeem the prior mortgage?
- Related question implicit in the contest of the parties: what is the legal effect of a subsequent mortgagee not having been made a party to a prior foreclosure suit — in particular, whether the subsequent mortgagee can on redemption obtain ownership of the whole mortgaged property and thereby displace a prior mortgagee who has acquired the equity of redemption.
Arguments of the Parties
Defendants / Appellants
- The defendants asserted that they had deposited the whole amount due to the puisne mortgagees in court under section 83 of the Transfer of Property Act and thereby offered to redeem the plaintiffs' mortgages as a precautionary measure to avoid future disputes.
- They contended that having acquired the mortgagor's equity of redemption (through foreclosure and sale), they stood in the shoes of the mortgagor and therefore had a right to redeem the plaintiffs' subsequent mortgages.
- They argued that a decree should have been prepared in their favour allowing them to redeem the plaintiffs' mortgages, and that the trial court's decree for the plaintiffs was materially injurious to the defendants' rights.
Plaintiffs / Respondents
- The plaintiffs refused the defendants' offer to accept the deposited sums and brought a suit on 10 September 1918 seeking leave to redeem the prior (1900) mortgage on payment of the amount the court considered proper and to be put in possession of the property and the sir land appertaining thereto.
- At trial the plaintiffs successfully relied on the fact that they had not been made parties to the earlier foreclosure suit, and the trial court treated that omission as giving the plaintiffs a preferential right to redeem the prior mortgage.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Havsanhhai Valad Radhanbhui v. Umaji Bin Hiraji (XXVIII Bombay, 153) | Affirmation (in that case) that a prior mortgagee who has acquired the mortgagor's equity of redemption (by foreclosure or sale) may have a right to redeem a subsequent mortgagee who was not made a party to the foreclosure suit. | Ryves, J. treated the Bombay decision as an authority supportive of the defendants' position that a prior mortgagee who acquired equity of redemption can redeem subsequent mortgagees; he analysed the Bombay decision's actual reasoning and held it was not inconsistent with allowing the defendants to redeem in the present case. |
| Decisions collected/quoted in Dr. Gaur's Transfer of Property Act (cited at p. 1130, 4th Edn., 1915) | Commentary expressing the view that the Bombay view (allowing prior mortgagee to redeem subsequent mortgagee where the prior mortgagee acquired the equity of redemption without making the subsequent mortgagee a party) is opposed by other High Courts; notes the potential unfairness if the prior mortgagee keeps the subsequent mortgagee ignorant of the foreclosure suit. | The trial court relied on the commentary to deny the defendants' claimed preferential right; Ryves, J. engaged with the commentary's position and the reported authorities, and concluded the Bombay decision was not as broadly hostile to defendants' claim as the commentary suggested. |
| Kedar Nath v. Saiyad Hafiz Ali | Cited as a decision that unreservedly approved and followed the Bombay decision above. | Ryves, J. cited this case as supporting the Bombay decision (and thus supporting the view that the prior mortgagee may be allowed to redeem the subsequent mortgagee in appropriate circumstances). |
| Charni v. Raj Bahadur | Cited as a case following the Bombay decision. | Ryves, J. noted that this decision followed the Bombay case and thus provided judicial support for allowing a prior mortgagee who acquired the equity of redemption to redeem subsequent mortgagees. |
| Munammat Ram Piari v. Raghunath Singh | Referenced in relation to the Bombay decision; reported to have been referred to by Mr. Justice Piggot in a similar matter. | Ryves, J. observed that Mr. Justice Piggot did not dissent from the Bombay decision in that similar case, but left the parties to obtain remedies in a further suit because of lack of material. |
| Kedar Prosunna Lahiri v. Girindra Prosad Sukul | Held that when both first and second mortgagees brought suits and later purchased the mortgaged property, each party was entitled to redeem the other; in that case the plaintiff (a subsequent mortgagee) had the right to redeem. | Ryves, J. cited this decision as an illustration of legal outcomes in cross-suit situations, but noted that the particular point before the court in that case was not directly argued or decided for present purposes. |
Court's Reasoning and Analysis
Ryves, J. began by characterising the dispute as essentially comprising two cross-suits that the courts below should have treated together: (1) a suit by puisne mortgagees (the plaintiffs) to redeem a prior mortgage where they had not been made parties to the prior foreclosure; and (2) a suit by a person (the prior mortgagee defendants) who, having become the owner of the mortgaged property by foreclosure, stood in the shoes of the mortgagor and sought to redeem encumbrances (the plaintiffs' subsequent mortgages).
He rejected the framing used by the courts below that asked which party had a "preferential right to redeem." Instead, he emphasised that, prima facie, both classes of parties had a right of redemption and that the proper course when all parties and evidence were before the court was to decide the matter once and for all, on the equities, to prevent further litigation. He observed the practical consequences of affirming the plaintiffs' decree (the plaintiffs would be entitled only to recover their mortgage money and, upon doing so, the defendants would simply sue to redeem the plaintiffs' mortgages and thereby recover the property), and concluded that equity and practicality required allowing the defendants (who had acquired the equity of redemption) to redeem the plaintiffs' mortgages.
Ryves, J. engaged with the reported authorities. He analysed the Bombay decision (Havsanhhai v. Umaji) that favoured the prior mortgagee's right to redeem and concluded that the supposed divergence among High Courts was, in part, a misreading of that decision and of the head-note in Dr. Gaur's commentary. He noted that several decisions had followed or approved the Bombay decision (including Kedar Nath v. Saiyad Hafiz Ali and Charni v. Raj Bahadur) and that cases said to be adverse did not, in fact, determine the present point in a manner hostile to the defendants' position.
On legal principle, Ryves, J. accepted that a subsequent mortgagee who had not been made a party to a foreclosure decree is not affected by that decree in the sense of being put in a worse position than if he had been made a party; however, Ryves, J. also emphasised that such a subsequent mortgagee cannot be put into a better position than he would have had if he had been a party. In particular, allowing the subsequent mortgagee to redeem the prior mortgage and thereby obtain ownership of the whole property (to the prejudice of a prior mortgagee who had already acquired the equity of redemption) would be placing the subsequent mortgagee in a better position than if he had been a party to the foreclosure. That result was not tenable in Ryves, J.'s view.
Having weighed the equities and considered the reported authorities, Ryves, J. concluded that, in the circumstances of this litigation (with all parties before the court and the relevant facts on the record), justice required allowing the defendants (the prior mortgagees who had acquired the equity of redemption) to redeem the plaintiffs' mortgages upon payment of the sums due by a specified date (the next month of Joth; as later ordered, by 9 June 1922), failing which the appeal would be dismissed.
Gokul Prasad, J. concurred, adding practical observations: allowing the plaintiffs to redeem in the manner they sought would prolong litigation, would not materially benefit the plaintiffs (who would only recover their three bighas free from mortgage and be left with a claim for contribution), and would ultimately lead to another suit by the defendants to redeem the plaintiffs' mortgages. He agreed that the decree proposed by Ryves, J. met the equities and prevented multiplicity of proceedings.
Holding and Implications
Core Ruling: APPEAL ALLOWED.
Direct effect on the parties:
- The defendants were given time up to 9 June 1922 (the court directed that they be allowed time to the 9th of June 1922) to redeem the plaintiffs' mortgages by paying the sum due on those mortgages on that date.
- In the event of the defendants' failure to redeem by that date, the appeal would stand dismissed.
- Under the particular circumstances of this case the court directed that the parties should bear their own costs.
Broader implications and judicial posture:
- The court emphasised deciding disputes of competing rights to redemption by reference to equities where all parties and evidence are before the court, to prevent multiplicity of litigation.
- Ryves, J. treated the Bombay decision (Havsanhhai v. Umaji) and several later decisions as supporting the proposition that a prior mortgagee who has acquired the equity of redemption may, in appropriate circumstances, redeem subsequent mortgages — and he preferred to give effect to that equitable outcome in this case.
Final Order (as recorded): The appeal was allowed; the defendant was given time to 9 June 1922 to redeem the plaintiffs' mortgages on payment of the sum due on that date; if they failed to do so the appeal would be dismissed; costs were borne by the parties themselves.
Ryves, J.:— The essential facts so far as they are necessary for the purposes of this appeal can be stated very shortly. The mortgagor, who is no longer interested, by a mortgage by conditional sale dated the 20th of September 1900, mortgaged his zemindari share in four villages to the defendants. Subsequently on the 15th of July 1903, he executed a usufructuary mortgage in favour of the plaintiffs of three small plots of sir land for Rs. 99-15-6 and on the 8th of July 1904 he executed two other usufructuary mortgages in favour of the plaintiffs of some other small plots of sir and khud kasht land for Rs. 71 and Rs. 75 respectively. The aggregate area of these plots was a little over 3 bighas, the is, something more than an acre. All these plots of land were situated within the boundary of the village of Ukraewan, one of the four villages mortgaged to the defendants. These three usufructuary mortgages were all unregistered. The terms of all of them were similar. The mortgagees undertook to pay the Government revenue, and the profits were set off against the interest. It was agreed that the mortgages could be redeemed at the end of the month of Jeth is any year on payment of the principal money.
2. In 1907 the defendants brought a suit for foreclosure of the mortgage of 1900 against the mortgagor and obtained a decree which was made obsolute in 1908, and thus they obtained eventually possession of the mortgaged property.
3. The plaintiffs, the puisne mortgagees, were not made parties to that suit. Thereafter the defendants sought to eject the plaintiffs, in the revenue court, describing them as their tenants. They pleaded that they were usufructuary mortgagee and, on being referred to the civil court obtained a decree from the civil court declaring them to be usufructuary mortgagees. This was on the 21st of May 1917. On the 6th of August 1918 the plaintiff served a notice on the defendants of their intention to sue for redemption of the prior mortgage of 1900. On the 30th of August 1918 the defendants deposited in court under the provisions of section 83 of the Transfer of Property Act the entire amount due to the plaintiffs on the three subsequent usufructuary mortgages, offering to redeem them. The plaintiffs refused to accept the money and on the 10th of September 1918 filed this suit praying to be allowed to redeem the prior mortgage of 1900 on payment of “the amount which the court considers genuine and valid and that they may be put in possession of the property comprised in the prior mortgage together with the sir land appertaining thereto.” The defendants contested the suit on three grounds. The first two need not be considered. The third ground taken was “to avoid future dispute and to put a stop to the litigation, they (the defendants) had deposited the whole amount due to the puisne mortgagees on their mortgages and asked them to give up possession and that although they had refused this offer, they were still willing to pay them every thing due under their mortgages.” On these pleadings the trial court framed among other issues, issue No. 6: “Have defendants got a right to redeem the mortagages in favour of the plaintiffs? Have defendants been ready to pay the mortgage money due to plaintiffs? If so, how does it affect the claim? On this issue, the only one with which we are concerned, it held: “defendants appear to have deposited the mortgage money due to the plaintiffs in court under section 83 of Act IV of 1882, and they claim that they have got a preferential right of redemption. This view though countenanced by the Bombay High Court is opposed to the views of the other High Courts (vide Gaur's Transfer of Property Act, page 1130-1V Edition of 1915 and the rulings cited on that page). The learned author observes: If the Bombay view be correct, the prior mortgagee would steal a march over the subsequent mortgagee by keeping him ignorant of the suit in which he acquires the mortgagor's interest. It west on to find that inasmuch as the plaintiffs had not been made parties in the foreclosure suit, the plaintiffs had a preferential right to redeem; and it gave them a decree for redemption on payment not of the amount claimed by the plaintiffs, namely Rs. 382-12-2, but of Rs. 4,929-6-0 which included a sum of Rs. 1,400 which the defendants had to pay in their suit to redeem a still earlier mortgage. The defendants appealed and in paragraph 4 of their memorandum of appeal put their case in the following words:—“Legally the appellants as representatives of the mortgagor and also as prior mortgagees have a right to redeem the mortgage? in favour of the plaintiffs. The appellants with a view to do away with future disputes have already deposited, under section 83 of Act IV of 1883, the mortgage consideration due to the plaintiffs in a competent court, on, they, as precautionary measure instituted this suit. Having regard to the entire circumstances the defendant's prayer as to the redemption of the plaintiffs mortgages was fit to be allowed and in this case a decree for redemption in favour of the defendants should have been prepared. Such a decree is not prejudicial to the plaintiffs, and the one for redemption, passed by the court is materially injurious to the defendants' right. The learned Judge of the court below sets out as one of the two points for his decision, as follows, “that the defendants appellants who were once prior mortgagees were now the owners of the equity of redemption and were therefore entitled to redeem the plaintiffs mortgages”. Unfortunately, as it seems to me, when he comes to discuss this proposition in his judgment he changes the phraseology of the issue as he had originally ??? it and asked himself the ??? point for decision is whether the subsequent mortgagees have a preferential right of redemption over a prior mortgagee who has obtained a decree for foreclosure” and he then goes on to hold that the plaintiffs, not having been made parties in the former foreclosure suit, cannot in any way be affected by what happened in that suit, and finally, after discussing some rulings to which I shall refer later, accepted the dictum of Dr. Gour already quoted and dismissed the appeal. The defendants come here in, second appeal and their first ground is that the learned District Judge to overlooked the fact that, although the subsequent mortgagees are entitled to redeem the prior mortgage, the prior; mortgagees who have already acquired the mortgagor's right by foreclosure can after such redemption claim redemption of the subsequent mortgage.
4. It seems to me most unfortunate that the courts below should have asked themselves which of the parties had “the preferential right to redeem” It seems to me clear beyond any controversy that both had a right of redemption. I prefer to regard this litigation as being substantially two cross suits which might well have been consolidated, as indeed they were far all practical purposes, having regard to the pleadings and issue No. 6 framed by the trial court and reiterated in the Appellate Court and tried out in both courts. I think paragraph 21 of the written statement already quoted may be regarded as substantially a plaint in such a cross suit. I think this litigation really involves two suits: (1) by a puisne mortgagee to redeem a prior mortgagee who had not made him a party in his suit on his own mortagage, and (2) by a person who had become the owner of the mortgaged property, and who had acquired the equity of redemption and therefore stands in the shoes of the mortgagor to redeem an encumbrance. It seems to me that both are, prima facie, entitled to what they claim and the question for the court, under such circumstances, when all the parties were before it and all the necessary evidence was on the record, was to decide once and for all, having regard to the equities of the parties and to prevent further litigation what the justice of the case demanded. In this view what I think we have to look at in this appeal, is not whether the decisions of the courts below were legally correct but whether we should now do what I think the courts below should have done,—looking at the consequences. If we uphold this decree, the plaintiffs pay the decretal amount to the defendants, and the next day the defendants will inevitably file their suit to redeem the plaintiffs and so recover the property. All that the plaintiffs are entitled to is to get back their mortgage money. After all, they are merely mortgagees and a such are Table be redeemed by the owner of the property, that is the mortgagor or whoever represents him. In this case the prior mortgagees, the defendants having acquired the equity of redemption, stand in the shoes of the mortgagor and are the owners of the property. I should be content to stop here and base my decision on what seems to me to be required by the equities of the case. But as it has been very ably argued that the decisions of the various courts except the Bombay decision, is opposed to my view, I think I should consider those authorities. The Bombay case, namely, Havsanhhai Valad Radhanbhui v. Umaji Bin Hiraji, (XXVIII Bombay, 153,) it is conceded, is an authority in favour of the appellants, but it is argued that the facts there were different; that the decision itself is unreasonable and that it has not been followed by other Courts. In the Bombay case the mortgagor brought a suit to redeem in the prior mortgage and got a decree but failed to pay the decretal amount within the time ordered and consequently the mortgage was foreclosed. Then the subsequent mortgagee brought a suit for sale on his mortgage, thereby it is said offering the prior mortgagee the option of redeeming him. Although the facts are different, I do not think the principle of law involved is substantially different. Next it is said that the decision of the Bombay court is unreasonable, because if the puisne mortgagees had been made parties in the former suit as the should have been made, they would have had an undoubted right to redeem the prior mortgage, and it is said the prior mortgagee must not be allowed to take advantage of his own fault by depriving the subsequent mortgagees of their right to redeem the prior mortgage. This I think puts Dr. Gaur's dictum, already quoted in other words. Although it has been held that a subsequent mortgage who should have been made a party, to a suit on a prior mortgage but had not been made a party, cannot in any way be affected by the decree in that suit, and cannot be put in a worse position than he would have been in it he had been made a party; on the other hand it seems to me he cannot be put in a better position than he would have been if represented then. If he had been made a party to the former suit, no doubt he could have redeemed the prior mortgage, but he would not thereby obtain possession of the property. What he now claim is, that, not having been made a party to the former suit, that decree must be considered a nullity, and that he is now entitled on redeeming the prior mortgage to become the owner of the whole property originally mortgaged. This manifestly they cannot do. The result of the former suit undoubtedly was to vest the ownership of the property in the defendants and as such they must have a right to redeem the plaintiffs. The last argument is that the other High Courts have not followed the Bombay decision. It seems to me that this argument is based on the head note to the Bombay case which is very misleading. According to that it was “Held, reversing the decree, that H. the prior mortgagee, had a right to redeem superior to that of U, the subsequent mortgagee.” Put baldly like that it is most misleading. The High Court never held anything of the kind. What they did hold was as reported on page 160: “Looking to the substance and not to the form of the suit, the plaintiff was clearly seeking relief on the basis of the right of a mortgagee. When the pleadings were complete it appeared that his mortgage was subsequent in date to that which Hasan had taken of the same lands and had foreclosed. The contest thus became one between, on the one hand, a prior mortgagee in possession who had obtained a decree absolute for foreclosure and, on the other hand, a subsequent mortgagee who had not been made a party to the redemption suit in which that final decree for foreclosure was made”. Later on it is said: The next and main point for decision is whether, looking to the equities on both ??? Hasan, the prior mortgage, who had already obtained a final decree for foreclosure against the mortgagors and was in possession, ought to have been given an opportunity to redeem Umaji, the ??? mortgagee” and they held that under the circumstances of the case he should be allowed to redeem the subsequent mortgagee. It seems to me therefore, that the note in Dr. Gaur's commentary on page 1130 in my opinion is not quite accurate, where he says “the right of the prior mortgagee to redeem the subsequent mortgagee on his acquiring the mortgagor's equity of redemption whether by foreclosure or gale in a suit to which the subsequent mortgagee was not a party has been categorically affirmed in Bombay, while it has been as “categorically denied by the Calcutta and other courts”. The learned Vakil for the respondents has not been able to refer us to a single case in which the Bombay case was dissented from. That case was published as long ago as 1904, and the cases that had been referred to really have held nothing more than what is quite clear, namely that a subsequent mortgagee who has not been made a party to a foreclosure decree is not affected by it. The Bombay case however has been unreservedly approved of and followed in the case of Kedar Nath v. Saiyad Hafiz Ali (1) decided by a Bench consisting of Messrs Chamier and Griffin, both of whom were subsequently Judges of this Court. It was followed in the case of Charni v. Raj Bahadur (2) by Mr. Justice Karamat Hussain, and it was referred to by Mr. Justice Piggot in the case of Munammat Ram Piari v. Raghunath Sinqh, (3) That was a simnar case to this one and Mr. Justice Piggot far from dissenting from the Bombay case decided not to follow it, not apparently because he did not approve of it but because there were no materials on the record on which he could give the prior mortgagee a decree, and he therefore left the parties to obtain such remedies as they might have in a further suit. I do not think it necessary to refer more specifically to any other of the many decisions which have been brought to our notice, except perhaps the case of Kedar Prosunna Lahiri v. Girindra Prosad Sukul (4) There the contest was between the first mortgagee and the second mortgagee who had both brought suits on their mortgages without making the other a party, and on getting a decree, had purchased the mortgaged property, and it was ??? held that each party was entitled to redeem the other but the ??? right to redeem was with the plaintiff who in that case was the subsequent mortgagee. The point now before us was not argued or decided and no cases were referred to. As I have already said the decision of the courts below in this case was legally right, but I do not think it was the proper decision to give having regard to all the circumstances of the case and the pleadings of the parties. I would therefore allow the appeal, and allow the defendants to redeem the plaintiffs' mortgages on payment, to them the sum due on their mortgagors in the next month of Joth. If they fail to do so I would dismiss the appeal.
5. Gokul Prasad, J.:— I agree in the order proposed and in the judgment of my learned brother. I have only to state that the result of our decreeing this appeal and suit would result in prolonging this litigation. If the plaintiffs are allowed to redeem the prior mortgage in favour of the defendant who has now acquired the equity of redemption the result would be that the defendant prior mortgagee purchaser will bring a suit to redeem the puisne mortgage in favour of the plaintiffs and would get back the property on payment of the amount due under the plaintiffs mortgage as also the amount which he has received from the plaintiffs in satisfaction of his prior mortgage or in other words the defendant would be placed back in the same position in which he would have been if he had been allowed to redeem the plaintiffs. Besides this the plaintiffs would be in no better position by redeeming the mortgage in favour of the defendant. They would have after redemption their three bighas odd free from the mortgage and would only have a charge on the balance of the mortgaged property for the proportionate amount which they would have had to pay over and above the proportionate share duo from their three bighas. From this aspect too the result of conceding to the plaintiff's argument would be a suit for contribution by the plaintiffs against the owners of the remaining portion of the mortgaged property. So that in any casa the plaintiffs would not benefit from the suit. The decree passed by my learned brother fully meets the justice of the case and gives effect to the equities between the parties and at the same time prevents useless multiplicity of proceedings. I agree in the order proposed.
6. By the Court:— The order of the Court is that this appeal is allowed, the defendant being given time to the 9th of June 1922 to redeem the plaintiffs' mortgages on payment of the sum due on their mortgages on that date. In case of their failure to do so this appeal will stand dismissed. Under the circumstances of this particular case we direct that the parties do bear their owe cost of this litigation.
7. Appeal allowed.
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