K. Muthuswami Gounder v. N. Palaniappa Gounder .

S. Rajendra Babu, J.— These appeals arise out of a dispute between two competing court auction-purchasers on the basis that the rights derived by each of them is superior to the other emerging out of the alleged hypothecation of such property. The respondent filed a suit in OS No. 12 of 1967 on the files of the Second Subordinate Judge, Tiruchirappalli to restrain the appellant herein from interfering with the respondent's possession of the suit property. The appellant filed in the same Court a suit in OS No. 211 of 1967 for redemption of the suit land, and recovery of possession thereof. The undisputed facts leading to the two suits are as under:

The suit land belonged to one Ganesan who executed a registered security bond on 18-2-1950 for a sum of Rs 3000 hypothecating the suit property and also executed a promissory note in favour of one Vairavan Chettiar and borrowed moneys. Vairavan Chettiar obtained a decree on the foot of the security bond and in execution thereof brought the suit property to sale. The respondent purchased the suit property in the said court auction-sale on 6-2-1957 and the same was confirmed on 15-3-1957. The respondent took delivery of the property through court. Sandanam Mudaliar and Company filed OS No. 108 of 1950 for recovery of a sum of Rs 6493.10 against Ganesan. In that suit, the plaintiffs got certain amounts due to Ganesan from the South Indian Railway attached before the judgment. Ganesan filed IA No. 811 of 1950 in the said suit seeking for raising the attachment before judgment of the amount and it was ordered subject to his furnishing of security. Ganesan executed on 12-4-1950 a registered deed in respect of the said property for Rs 7000, costs of the suit and subsequent interest. In this said deed, recitals were made referring to the security bond dated 18-2-1950, executed in favour of Vairavan Chettiar as a prior encumbrance. OS No. 108 of 1950 filed by Sandanam Mudaliar & Co. was decreed on 25-1-1956. Sandanam Mudaliar and Company in execution of the decree obtained by them brought the property to sale on 15-9-1962 and the original appellant Muthuswami Gounder purchased the property on 14-12-1966 for Rs 12,250 which sale was confirmed on 19-1-1967.

2. The suit filed by the appellant and the suit filed by the respondent were ordered to be tried jointly. One of the questions raised in the suit is whether the deed dated 12-4-1950 executed by Ganesan in OS No. 108 of 1950 on the file of the Court of Subordinate Judge, Coimbatore original of Exhibit A-6 creates any charge or it was only an undertaking not to alienate the suit property. On this question, the trial court held at paras 13 and 14 as follows:

“13. As said already, the document is named as a security deed. Exhibit A-6 shows that non-judicial stamps for the value of Rs 105 had been affixed. If it was merely a document for giving an undertaking not to alienate, there was no necessity to affix stamps for Rs 105, which is the correct value of stamps for the sum of Rs 7000. In the document, a specific immovable property, i.e, suit property, is noted. It is specifically stated that for Rs 7000 and subsequent interest and costs, this security bond is written. Even the prior encumbrance in favour of Vairavan Chettiar in respect of this property is noted. It is signed by Ganesan and attested by two witnesses. Taking all these factors found in Exhibit A-6, taken along with the fact that the security was given as per order of the Court in a petition to raise the attachment of the amount of Ganesan in the South Indian Railway, it is evident that the suit property was intended to be and was as a matter of fact, given as a security for the payment of the sum of Rs 7000, costs and interest in the case.

14. It is thus evident that under Exhibit A-6 a charge of a peculiar nature is created and ‘that here is an unquestioned liability and there must be some mode of enforcing it’ (in the words of their Lordships of the Privy Council in the ruling quoted supra). Exhibit A-6 is therefore not a mere undertaking not to alienate but it creates a charge and a liability which could be forced as per law.”

The trial court by its judgment dated 27-11-1967 held that the respondent is the ultimate owner of the final equity of redemption subject to the right of the appellant to redeem the first mortgage. The trial court also held that the appellant was not entitled to redeem the entire property including the final equity of redemption and, therefore, passed a decree for redemption of the first mortgage in favour of the appellant, but held that he was not entitled to claim possession of the property and granted the respondent the relief of injunction in suit OS No. 12 of 1967 filed by him.

3. The appeals filed by the appellant against the said decrees were dismissed by the first appellate court holding that the relief of injunction was correctly granted to the respondent. The appellate court also confirmed the decree for redemption but enhanced the amount payable from Rs 1501 to Rs 5000. The appeal of the respondent against non-awarding of costs in the injunction suit by the trial court was dismissed. The appellate court on the nature of the document at Exhibit A-6 observed as follows:

“The lower court in paras 12 to 15 has clearly explained that Exhibit A-6 contains all the characteristics of a mortgage. I agree with the conclusion. Further, as pointed out by the lower court, merely because the petitioner decree-holder in EP No. 305 of 1962 (Exhibit A-9) altered the prayer into one of attachment and sale from one of pure sale at the instance of the Court, it cannot be said that the decree-holder had given up his charge. Therefore, the attachment of charged property does not invalidate claim in pursuance of the charge. Therefore, the purchaser in such a sale gets the rights of the mortgage.”

4. On second appeal preferred to the High Court by the appellant, the matter was referred to a Division Bench of the High Court in view of the important questions of law arising for determination. The High Court considered several questions but ultimately held that the facts available in the case would run counter to the conclusion that the appellant is a puisne mortgagee. It was observed that

“the claim of the appellant that he holds the status of a second mortgagee is based on security bond Ex. A-6 coupled with the auction-sale held on 14th December, 1966. That sale is no doubt there, but then the security bond does not amount to a mortgage. By it no property was conveyed to the Court in whose favour it was executed nor was any charge created on the land in suit. All that Ganesan undertook by it was not to alienate the land till the discharge of the decree passed in Suit No. 108 of 1950. As soon as that decree was passed, the security bond became void and of no effect”.

5. It was also held by the High Court that Muthuswami Gounder could possibly claim the status of a puisne mortgagee only if he had purchased the property in a sale arising out of execution of a decree based on a mortgage. No such decree was passed in Suit No. 108 of 1950. On the other hand, the decree was a simple money decree in execution of which the land in the suit was first attached and then sold. In this view of the matter also, the High Court concluded against the claim of Muthuswami Gounder that he held the status of a puisne mortgagee.

6. Having negatived the claim that the appellant ever became a mortgagee, the sheet-anchor of his case was lost. The High Court having noticed that there was no appeal by the respondent against the decree passed in favour of the appellant, considered that it was an appropriate case where powers under Order 41 Rule 33 of the Code of Civil Procedure should be exercised and thus dismissed the suit filed by him in the trial court.

7. Aggrieved by the order made by the High Court, these appeals have been preferred before this Court by special leave.

8. Shri K. Parasaran, learned Senior Advocate appearing for the appellant, contended that the judgment of the trial court granting a decree for redemption became final and operated as res judicata by not having been appealed against and the High Court could not dismiss the suit by setting aside the decree for redemption in the absence of an appeal by the defendant in the redemption suit; that the decree for redemption passed by the trial court having attained finality in the absence of an appeal to the first appellate court by the defendant, the High Court even in exercise of powers under Order 41 Rule 33 could exercise its powers only against the judgment of the first appellate court and not as against the judgment of the trial court and destroy the finality of that part of the trial court judgment which was not appealed against; that Order 41 Rule 33 was not attracted to the facts arising in the present case.

9. Elaborating this contention, Shri Parasaran submitted that before the first appellate court, the respondent not only did not appeal against the decree for redemption but prayed for invocation of power under Order 41 Rule 33 of the Code of Civil Procedure in acceptance of the decree for redemption but only sought for enhancement of the redemption amount on the ground that it was a mistake which called for rectification. Having opted for praying for enhanced amount by accepting the decree for redemption, he was precluded by the principle that a party cannot approbate and reprobate and seek for setting aside the decree for redemption at the second appeal stage.

10. Shri G.L Sanghi, learned Senior Advocate for the respondents submitted that it is certainly open to the respondents to challenge the findings regarding the nature of the document Exhibit A-6 in conferring the status of puisne mortgagee and in order to sustain the decree for injunction granted in his favour, he could support the same by resort to Order 41 Rule 33 CPC and ensure that the appellant does not get any decree contrary to it. In doing so, he contended that the High Court could examine the matter under Order 41 Rule 33 CPC and set aside the decree in favour of the appellant. The High Court took the view that while it is true that no appeal against the decree passed in favour of the appellant was filed by the respondent, but it was a fit case in which interference under Order 41 Rule 33 CPC was called for. In exercise of that power it set aside the decree passed in favour of the appellant.

11. There are three objections raised to this course adopted by the High Court. Firstly, that the respondent had not filed any appeal against that part of the decree in favour of the appellant for redemption of the last mortgage and he cannot be allowed to blow hot and cold. Secondly, the finding that the document Exhibit A-6 was a charge had become final and could not be reopened. Thirdly, that the said finding operates as res judicata as the respondent had not filed any appeal against the same.

12. Order 41 Rule 33 enables the appellate court to pass any decree or order which ought to have been made and to make such further order or decree as the case may be in favour of all or any of the parties even though (i) the appeal is as to part only of the decree; and (ii) such party or parties may not have filed an appeal. The necessary condition for exercising the power under the Rule is that the parties to the proceeding are before the court and the question raised properly arises (sic out of) one of the judgments of the lower court and in that event, the appellate court could consider any objection to any part of the order or decree of the court and set it right. We are fortified in this view by the decision of this Court in Mahant Dhangir v. Madan Mohan 1987 Supp SCC 528, AIR 1988 SC 54. No hard and fast rule can be laid down as to the circumstances under which the power can be exercised under Order 41 Rule 33 CPC and each case must depend upon its own facts. The Rule enables the appellate court to pass any order/decree which ought to have been passed. The general principle is that a decree is binding on the parties to it until it is set aside in appropriate proceedings. Ordinarily the appellate court must not vary or reverse a decree/order in favour of a party who has not preferred any appeal and this Rule holds good notwithstanding Order 41 Rule 33 CPC. However, in exceptional cases, the Rule enables the appellate court to pass such decree or order as ought to have been passed even if such decree would be in favour of parties who have not filed any appeal. The power though discretionary should not be declined to be exercised merely on the ground that the party has not filed any appeals. We are not impressed with the argument that the finding as to the nature of Exhibit A-6, the security deed has become final as the finding operates as res judicata. When the entire matter was still in appeal and any part of the finding could be varied by the appellate court, it is idle to contend that the same had become final. So also when the matter had not attained finality and was still in dispute, the principle of res judicata could not arise. In some cases, finding recorded at an earlier stage will operate as res judicata if such finding had become final. In the present case, that was not the position. The High Court had to find out the rights of the parties arising out of the deed under Exhibit A-6 and necessarily had to give a finding one way or the other to determine the status of the appellant as puisne mortgagee. In doing so, the High Court decided that the document Exhibit A-6 did not amount to a charge and therefore, the appellant did not derive any rights of puisne mortgagee thereunder. The High Court having so held proceeded further to upset the decree as otherwise if the decree for redemption remained in the face of the finding of non-existence of a charge with the consequent right as puisne mortgagee, the position would be anomalous, if not absurd. And so, the High Court in the special circumstances arising in this case exercised the discretion vested in it under Order 41 Rule 33 CPC. It cannot be said that such a question was not germane to the determination of the matter in issue. To defend the finding in his favour, the respondent could contend that the appellant could not claim to be a puisne mortgagee as no charge arises from Ex. A-6. In that event it cannot be said that there is any inconsistency in the stand of the respondent. Therefore, we find that there is no merit in the contention of the appellant and the same is rejected.

13. Shri Parasaran next contended that on a proper interpretation, the document, Exhibit A-6 in OS No. 108 of 1950 dated 12-4-1950 creates a charge over property; that the language of the document made it clear that it was offered by way of security to the Court and a document executed in favour of the court under the orders of the court should be given equal efficacy as a security bond and such a document creates a charge by operation of law.

14. In reply, Shri Sanghi submitted that what was granted by Exhibit A-6 was only an undertaking, which would not amount to a charge.

15. The deed of security executed in the case in OS No. 108 of 1950 between Sandanam Mudaliar and Co. v. Ganesan Pillai reads as follows:

“Deed of security executed this the 12th day of April, 1950 in favour of Coimbatore Sub-Court by M. Ganesan, son of Magudapathi Gounder, businessman and agriculturist, residing at Gowripuram, Karur Taluk Dt. The aforesaid plaintiff, A.M Sundara Mudaliar has filed the suit against me for recovery of Rs 6493.13 annas with subsequent interest and costs. He has also obtained an order for attachment before judgment of the monies payable to me from South Indian Railway. In order to vacate the order of the aforesaid order for attachment before judgment, I have filed an application IA No. 811 of 1950 in the said suit OS No. 108 of 1950.

As per the order of this Hon'ble Court, I have executed this deed of security in the sum of Rs 7000 and subsequent interest and cost over my self-acquired properties in my possession and properties which are nanja lands and are described in the schedule. In the event of a decree being passed in the suit, I will not alienate the properties till the decree is discharged. The properties set out hereunder belong to me under right of purchase dated 14-10-1946. There is already a prior mortgage over the properties for a sum of Rs 3000 in favour of one Vairavan Chettiar. These properties are capable of being plotted into house sites and therefore their present value is about Rs 15,000. I hereby affirm that there is no kind of encumbrance whatsoever over the properties except the one mentioned above.”

16. A perusal of this document will indicate that there was an attachment before judgment for money payable to Ganesan by South Indian Railway and those monies stood attached to satisfy the decree to be passed in the said OS No. 108 of 1950. An application was filed by Ganesan to vacate the order of attachment in IA No. 811 of 1950 in OS No. 108 of 1950. In compliance with the order of the Court, he had executed a deed of security for a sum of Rs 7000 and subsequent interest and costs over his self-acquired properties in his possession described in the schedule. He stated that in the event of a decree being passed in the suit, he will not alienate the properties till the decree is discharged and, therefore, he describes the prior encumbrances in respect of the properties as on the date of the execution of the security bond. A charge is an obligation to make payment out of the property specified. In the present case, there is no clear recital in the document of having created an obligation to make payment of the decretal amount out of the property in question.

17. The document, Exhibit A-6, security bond does not in substance offer suit property by way of security. Even giving the most liberal construction to the document, we cannot say that a charge as such has been created in respect of the suit property for money to be decreed in the suit. All that it states is that in the event of a decree being passed not to alienate the property till the decree is discharged, which is a mere undertaking without creating a charge. Therefore, we agree with the finding of the High Court that the document at Exhibit A-6 is not a charge. If that is so, the suit filed by the appellant has got to be dismissed.

18. There is yet another reason as to why the High Court held that the appellant cannot claim any rights under Exhibit A-6, the alleged security bond executed in OS No. 108 of 1950. The decree obtained in that suit was a simple money decree and not a decree on a charge or mortgage with the result that the appellant who purchased the property in execution of that decree did not acquire the rights under the said document Ex. A-6. This finding appears to be correct. The decree-holder sought to execute the decree in EP No. 305 of 1962 to order sale of the suit property stating that the same is secured in the bond, Ex. A-6. However, the executing court did not proceed on that basis and raised objections thereto. Thereafter, the decree-holder sought for attachment of the suit property independent of the so-called charge under Ex. A-6. If really the decree-holder in the proceedings wanted to proceed on the basis of the security arising out of the charge under Ex. A-6, the requirement of attachment was superfluous. Whether the claim under Ex. A-6 arising out of the charge was given up or not, what was pursued in the execution proceeding was only to attach the suit property without recourse to the charge under Ex. A-6. Therefore, the appellant could not have acquired any rights of the mortgagee under Ex. A-6, the security bond. For this reason also, the appellant's suit is liable to be dismissed and the finding of the High Court, therefore, stands affirmed.

19. The other questions raised and elaborately argued do not assume any importance in the view we have taken. Hence we do not propose to answer them.

20. In the result, the appeals stand dismissed and in the circumstances of the case, there shall be no order as to costs.