1. This is an appeal from the decree of the Second Additional District Judge, Amraoti, in a suit instituted for enforcing a mortgage. The sole point for determination is whether the appellants, who are subsequent mortgagees, have acquired priority over the mortgage in suit by virtue of redemption of the first mortgage.
2. Defendant 1, Jaikrishna, is the purchaser of the mortgaged field from Gopalsa, the original owner. As security for the payment of a part of the purchase money, namely Rs. 1,300, he executed a mortgage in favour of Gopalsa on 12th April, 1924. He then executed a second mortgage on 8th August, 1924 in favour of the plaintiff Mohammad Sujat. Again he executed a third mortgage on 21st April 1925 in favour of Gangaram who transferred his mortgagee rights to Mohanlal and Gopikabai who were defendants 2 and 3 in the trial Court and are appellants here. The consideration of this third mortgage consisted of Rs. 1,459 which the mortgage Gangaram undertook to pay to Gopalsa and redeem his mortgage and Rs. 791 were paid in cash to the debtor. The second mortgagee, namely, Mohammad Sujatr instituted this suit for enforcing his mortgage. The principal contesting parties were the-appellants. Their contention was that the third mortgagee Gangaram, from whom they purchased the mortgagee rights, having redeemed the first mortgage to Gopalsa they were subrogated to the position of the first mortgagee and that the plaintiff could not enforce his mortgage until he redeemed the first mortgage. Both the Courts below concurrently held that the appellants were not entitled to priority on the ground that their predecessor Gangaram simply performed his own obligation under his third mortgage and that in redeeming the first mortgage he only acted as an agent of the mortgagor. It is urged on behalf of the appellants that by undertaking to redeem the first mortgage Gangaram intended to keepi alive the first mortgage for his own benefit and that the extinction of the first mortgage was not for his benefit. Reliance is placed on Dinobundhu Shaw Chowdhry v. Jogmaya Dasi (1902) 29 Cal 154 , 29 IA 9 , 6 CWN 209 (PC), Madho Singh v. Pancham Singh AIR 1927 All 211 , 49 All 233, Durga Missir v. Baijnath Saran AIR 1929 Pat 325 , 118 IC 730 , 8 Pat 360 and Malireddi Ayyareddi v. Gopalakrishnayya AIR 1924 PC 36 , 79 IC 592 , 51 IA 140 , 47 Mad 190. On the other hand it is argued that Gangaram having agreed to discharge the first mortgage debt as a part of the consideration for his mortgage he was only performing his own obligation and could not therefore equitably use the first mortgage as a shield against the second mortgagee. Reference is made to Koopmia Sahib v. Chidambaram Chetti (1896) 19 Mad 105, Har Shyam Choudhury v. Shyam Al Sahu (1916) 43 Cal 69 , 31 IC 22, Sibanand Misra v. Jagmohan Lall AIR 1922 Pat 499 , 1 Pat 780, Shafiq-Ullah Khan v. Sami-Ullah Khan AIR 1929 All 943 , 123 IC 101 , 52 All 139 and Kandasami v. Venkata, A.I.R 1925 Mad. 1219.
3. The question, whether Gangaram intended to keep the first mortgage alive is one of inference from the nature of the agreement and the surrounding circumstances of the transaction. To entitle anybody to invoke the equitable right of subrogation, he must either occupy the position of a surety of the debt or must have made the payment under an agreement with the debtor or creditor that he should receive and hold an assignment of the debt as security, or he must stand in such a relation to the mortgaged premises that his interest cannot otherwise be adequately protected: see Gurdeo Singh v. Chandrikah Singh (1909) 36 Cal 193 , 1 IC 913. If there had been an express agreement between Gangaram and the mortgagor that by redeeming the first mortgage Gangaram was to receive and hold an assignment of 1st mortgage as security then it would appear that there could have been no dispute as to Gangaram's priority. But such an agreement need not be express; whether the payment was to extinguish or keep alive the prior mortgagee for the benefit of the subsequent mortgagee who pays depends upon the intention which may be gathered from the surrounding circumstances and from the consideration of what was to his interest: see Mohesh Lal v. Bawan Das (1883) 9 Cal 961 , 10 IA 62 , 13 CLR 221 (PC). As their Lordships of the Privy Council observed in Gokaldas Gopaldas v. Puranmal Premsukhdas (1884) 10 Cal 1035 , 11 IA 126 , 4 Sar 543 (PC), that when the estate is burdened by a succession of mortgages and the owner of an ulterior mortgage pays of an earlier mortgage, it is a matter of course, according to the English practice, to have it assigned to a trustee for his benefit, as against intermediate mortgagees, to whom he is not personally liable. But in India a formal transfer for the purpose of a mortgage is never made, nor is an intention to keep it alive ever formally expressed. Their Lordships, therefore, laid down the dictum that in the interests of justice, equity and good conscience, the intention of the party paying of the charge must be gathered from the consideration of what was to his interest. To quote their actual words:
“The obvious question to ask in the interests of justice, equity and good conscience, is, what was the intention of the party paying of charge? He had a right to extinguish it an right to keep it alive. What was his intents. If there is no express evidence of it, what ??? should be ascribed to him? The order rule is that a man having a right to act in ??? of two ways, shall be assumed to have acted cording to his interest:” see also Malire Ayyareddi v. Adusamilli Gopalkrishnayya AIR 1924 PC 36 , 79 IC 592 , 51 IA 140 , 47 Mad 190
4. The position would undoubtedly different in respect of cases under Section ??? Transfer of Property Act, as amended by Act 20 of 19 which requires an agreement as to ??? rogation to be expressly stated in to registered instrument. The question however, in the present case has to determined on the view of the law ??? vailing before this amendment.
5. In the present case the consideration 3rd mortgage was Rs. 2,250, out of which Rs. 1,459, were agreed to be applied the redemption of 1st mortgage and to balance of Rs. 791 unconditional paid. The mortgagor did not dis clear the existence of 2nd mortgage. I has to consider the effect of the argument to redeem 1st mortgage and all that of non-disclosure of the existent of 2nd mortgage. It appears to me fail reasonable to assume that when Gangaram undertook to pay of the first char he intended to enlarge his ???. Even without such an agreement he we bound to redeem the prior ???. In the second event if he satisfied to first mortgage, could he not have been entitled to use it as a shield against to second mortgagee? I am unable to so why his position should be the worse of the existence of an express agreement there is no reason why there should ??? a presumption of an intention to ??? alive the prior security when the subsequent encumbrancer discharges his leg liability and not when he does so under an express agreement. In either case ??? satisfies a liability not his own but the of the mortgagor. An express agreement to discharge the prior ??? cannot be treated as conclusive evident of an intention to extinguish the charge. The intention must be gathered fro the circumstances of each case. In the absence of any intermediate ??? it is immaterial whether to security is kept alive or extinguisher. There is no special advantage in keeper it alive when its extinction is equal calculated to enlarge the security of the paying encumbrancer. But the ??? of an intermediate encumbrance ??? the questions:
“Why should the paying encumbrancer ??? the first security sand lose the advance of enlarged security which he would ??? acquire by keeping the first security alive? ??? should he give the benefit of the enlarged ??? to the intermediate mortgagee when his ??? enures for his own benefit?”
6. The answer is to be found in Gokaldas ??? v. Puranmal Premsukhdas (1884) 10 Cal 1035 , 11 IA 126 , 4 Sar 543 (PC) ??? referred to. It is however ??? that in agreeing to discharge the ??? mortgage the party paying of the ??? simply acted as an agent of the mortgagor. He would indeed be an and if the money which went to the charge of the first debt belonged to a mortgagor. If the mortgagor was titled to receive unconditionally Rs. 1,459 as the other sum of Rs. 791 so at he could do whatever he liked with then, of course, the money could be dated as belonging to the mortgagor the paying encumbrancer discharge the prior mortgage with the amount Rs. 1,459 paid by the mortgagor could regarded as his agent. But when the amount of Ss. 1,459 was specifically set art for redemption of the first Mortie that sum cannot be treated as ??? belonging to the mortgagor for an if he had himself taken money he mid have been bound to apply it to a discharge of the first mortgage. That are was such an agreement is itself ??? of the fact that Gangaram in ??? by the payment of Rs. 1,459 to ??? the benefit of the enlarged security himself. It is impossible to assume at Gangaram redeemed the mortgage or the benefit of the intermediate mortgee and not his own. In ??? Missir v. Baijnath Saran AIR 1929 Pat 325 , 118 IC 730 , 8 Pat 360, a section precisely in the form in which has arisen here was resolved on the principle that there was an intention to up alive the prior mortgage.
7. No doubt in Mohesh Lal v. Mohantwan Das (1883) 9 Cal 961 , 10 IA 62 , 13 CLR 221 (PC), their Lordships of the ivy Council took a different view but at was a deduction from the pareu lar facts of that case. Their Lordships pointed out that there was no inrmediate mortgage and therefore their order ships held that there could be no ??? of keeping alive the first mort-gee. As to the contention that there could be no such intention at the time the third mortgage as the existence of the intermediate mortgage was not disclosed the answer is given by their Lordships of the Privy Council in Dinobundhu Shaw Chowdhry v. Jogmaya Dasi (1902) 29 Cal 154 , 29 IA 9 , 6 CWN 209 (PC). In that case the third mortgagee under an express agreement discharged the first two mortgages while he was ignorant of the fact that the property was attached two days prior to his mortgage. In the contest between the mortgagee and the execution purchaser, their Lordships found that it was the intention of the parties to the transaction of the third mortgage to give a charge on the property in question in priority to all other charges, if any, and this was deduced from the recital in the mortgage bond that the property was not subject to prior encumbrances or attachment. The passage runs thus:
“Pausing here for a moment, nothing can be clearer than that the intention of the parties to this transaction was to give to Mastafi a charge for Rs. 40,000 on the property in question in priority to all other charges, if any. The property being represented as unencumbered the statement in the judgment of the High Court that it was intended to keep the two old mortgages alive is open to criticizm. But it does not affect the substance of the case. The respondents were intended to have the first and only charge, and it is idle to contend that there was any intention to extinguish the old mortgages for the benefit of the execution creditor or any purchaser at the Sheriff's sale.”
8. Now applying this principle to the facts of the present case it would be evident that there could be no intention on the part of the third mortgagee to extinguish the first mortgage but to use it as an additional security for the debt advanced by him. He believed that his was the first and the only charge and could by no stretch of imagination be imputed with the intention of benefiting the second mortgagee. The decision of the case reported in Dinobundhu Shaw Chowdhry v. Jogmaya Dasi (1902) 29 Cal 154 , 29 IA 9 , 6 CWN 209 (PC) proceeds on this view and it was also followed in Pandit Durga Missir v. Baijnath Saran AIR 1929 Pat 325 , 118 IC 730 , 8 Pat 360, Madho Singh v. Pancham Singh AIR 1927 All 211 , 49 All 233, Tot Ram v. Ram Lal, A.I.R 1932 All. 489 (F.B), and Mata, Din v. Iftikhar Husain AIR 1930 Oudh 178 , 118 IC 835 , 5 Luck 53. In Koopmia Sahib v. Chidambaram Chetti (1896) 19 Mad 105 and Kandasami v. Venkata, A.I.R 1925 Mad. 1219, there was no intermediate mortgage on account of which it was held that there could be no presumption of any intention to keep alive the first mortgage.
9. In Har Shyam Chowdhri v. Shyam Lal Sahu (1916) 43 Cal 69 , 31 IC 22 no doubt it was held that when the subsequent mortgagee or purchaser discharged an obligation which he had undertaken to fulfil the payment not having been made with his own money but with the money which belonged to the vendors or mortgagors the party paying of the charge was not entitled to its benefit. I have already shown that when the subsequent purchaser or encumbrancer enters into an agreement to redeem the first mortgage the money set apart out of the consideration cannot be regarded as belonging to the vendor or the mortgagor. In the case cited above there is no reference made to the important judgments of the. Privy Council reported in Dinobundhu Shaw v. Jogmaya Dasi (1902) 29 Cal 154 , 29 IA 9 , 6 CWN 209 (PC) and Mahomed Ibrahim v. Ambika Pershad (1912) 39 Cal 527 , 14 IC 496 , 39 IA 68 (PC). Similarly in Shafiz Ullah Khan v. Sami Ullah Khan AIR 1929 All 943 , 123 IC 101 , 52 All 139 these authorities escaped the attention of the learned Judges who decided the case; but even then Sulaiman, J., thought it necessary to examine the surrounding circumstances for deducing the intention of the person paying of the charge. These circumstances were that the mortgage deed itself did not recite the fact that the consideration was to be applied to the discharge of the first mortgage, that there was no other intermediate Smortgage, that the first mortgage had merged into a decree and that the mortgagors had taken the consideration in cash and paid by them directly and not left in the hands of the mortgagee for the discharge of the prior debt. But for these circumstances the learned Judge would have come to a different conclusion. Considering the circumstances of this case in the light of the principle enunciated by their Lordships of the Privy Council in Dinobundhu Shaw v. Jogmaya Dasi (1902) 29 Cal 154 , 29 IA 9 , 6 CWN 209 (PC) and applied in Madho Singh v. Pancham Singh AIR 1927 All 211 , 49 All 233 and Pandit Durga Misir v. Baijnath Saran AIR 1929 Pat 325 , 118 IC 730 , 8 Pat 360, I hold that Gangaram's intention in paying of the first charge was to keep alive the first mortgage for his own benefit and not for the benefit of intermediate encumbrancer or any other party. The appellant is there fore entitled to use the first mortgage a shield against the second mortgage executed in favour of the respondent plaintiff. The result is that the plaintiff-respondent is liable to satisfy the first mortgage debt. As the appellant has been enjoying possession of the mortgaged property since the date of his mortgage as again the full amount of the debt advanced be him, he is not entitled to any integer on the amount of Rs. 1,459 paid by him to satisfy the first mortgage. The plaintiff-respondent is therefore only born to pay Rs. 1,459 to the appellants or after he makes this payment he will ??? entitled to recover the debt due on own mortgage. I pass a decree in the following terms: The plaintiff-respondent Mahomed Sujat will pay Rs. 1,459 Mohanlal and Gopikabai within so months from the date of the decree or on his failure to make such payment he suit shall be dismissed. If he pays to amount the defendants 2 and 3 will within three months after such payment by the plaintiff, pay to the plaintiff the amount due on his second mortgage with interest as directed in the decree of the original Court and costs. The respondent will pay the appellants' cost of this Court and the lower appellant Court.
10. Order accordingly.