1. This is a suit on behalf of the present Rajah of Karvetnagar who, on his own application, made under Madras Act 4 of 1899, was constituted a ward of the Court of Wards and the suit is in effect to recover possession from the defendants of the four villages described in the plaint, on payment, if necessary of such sum, if any, as may be found due and for the execution of a conveyance in his favour by defendant 1. Various defences were raised to the suit and the Subordinate Judge, after framing 19 issues confined the trial to the 8th, 9th, and 17th issues, and with reference to his findings thereon dismissed the suit with costs. This appeal has been preferred on the ground that his findings on those issues are contrary to law and have been, based on a misconstruction of Ex. B. We agree with the Subordinate Judge that the legal relation between the plaintiff and defendant 1 in regard to the plaint villages is settled and determined by Ex. B, dated 25th August 1888, and that it is unnecessary to go further back and consider the dealings between the parties, prior to that date, in respect of these villages—which were brought; to sale in March and April 1883 in execution of the decree in Original Suit No. 5 of 1879, which was passed against the plaintiff and his deceased father, the then Rajah of Karvetnagar, and were purchased by, or in the name of defendant 1 herein. It is clear from paras. Nos. 11, 12, 13, 19 and 20 of the plaint that the plaintiff does not—and rightly so—repudiate the agreement of Ex. B as not binding upon him; and defendant 2 in this suit, who alone originally impeached its validity on the score of absence of consideration, subsequently withdrew this contention at the trial of the suit.

2. In our opinion, both the plaintiff and defendant 1 are bound by that agreement. The Subordinate Judge held that, according to the terms of Ex. B, it was settled that defendant 1 was the owner of the villages—meaning apparently both beneficial and legal owner—and that he was to sell the same to the plaintiff for a consideration of Rs. 99,568-15-6 after getting a reconveyance thereof from T.S Krishnama Chari, the defendant in Original Suit No. 71 of 1887 on the file of the High Court, to whom the villages had been either mortgaged by way of conditional sale or sold with a condition for re-purchase. We are of opinion that this view of the Subordinate Judge proceeds on a misconstruction of the document. The agreement clearly proceeds on the footing that the plaintiff was the beneficial owner of the villages, defendant 1 being only the legal owner, and that, in the matter of pecuniary obligations incurred by defendant 1 in connection with the purchase of the villages and in the matter of other money dealings between him and the plaintiff, there was found due from the plaintiff to the defendant a sum of Rs. 99,568-15-6 on settlement of accounts. This agreement was executed during the pendency of the aforesaid Original Suit No. 71 of 1887, after a written statement had been filed by defendant 2 therein, one Narayana Ayyangar, who jointly with the present defendant 1—the plaintiff therein—had executed the mortgage by way of conditional sale in favour of T.S Krishnamachari, defendant 1 therein, the principal contention raised in that written statement being that the purchase of the village by the present defendant 1 was out of funds belonging to the Rajah of Karvetnagar and that the reconveyance by Krishnamachari ought to be in favour of the Rajah and not to defendant 1. The agreement provides that the Rajah should cause Narayana Ayyangar to withdraw his objections, that immediately after a decree for reconveyance is passed in favour of defendant 1 he should sell to the Rajah the plaint villages for the sum of Rs. 99,568-15-6 and give possession thereof, that when the Rajah finds it convenient to pay the said amount in one lump, he should do so with interest at 1 per cent, per mensem on Rs. 40,000 out off the said amount and half a rupee per cent, per mensem on the remainder of Rs. 99,568-15-6 and that till such payment the Rajah should give as security for the said principal and interest a mortgage with possession of the plaint villages or of the other villages which defendant 2 may accept—both the sale-deed by defendant 1 and the deed of mortgage by the Rajah in favour of defendant 1 to be executed and registered on the same day. The learned Pleader for the respondents lays particular stress upon the expression that defendant 1 is to sell to the Rajah the plaint villages for the sum of Rs. 99,568-15-6 and urges that this shows that defendant 1 was both the legal and benefical owner of the villages and that the sum of Rs. 99,568-15-6 was the price which as vendor he was to get for sailing the villages to the plaintiff. This argument would no doubt carry weight if the said amount was really the price. Admittedly, a considerable portion of it was debt due by the Rajah to the defendant on money dealings between them unconnected with the villages and this, therefore, cannot certainly form a portion of the price, inasmuch as the Rajah only undertakes to pay what he already owed to the defendant. Even the remainder (of the Rs. 99,568-15-6) cannot be really viewed as price for the sale of the villages, for that amount too was found due by the Rajah to defendant 1 in respect of the pecuniary obligations which he had incurred for the benefit of the Rajah in connection with the purchase of the villages.

3. That the amount Rs. 99,568-15-6 is made up of these two items appears not only from the recitals in Ex. B but also from Ex. D, the settlement of accounts giving the particulars of the said amount. Taking Ex. D along with the evidence of P.W 1—the only witness examined in the case—it is clear that the receipts derived from the villages for the 4 years commencing from 1883—when the villages were purchased in Court auction-sale—were credited in the accounts to the Rajah and deducted as payments made towards the amount due by him to defendant 1. This conclusively shows that the agreement (Ex. B) proceeded on the footing that the Rajah was the beneficial owner of the villages and defendant 1 held the same for his benefit.

4. The respondents' pleader also relies upon the recitals made in Ex. B that the villages were purchased in Court auction-sale by defendant 1, that he, in conjunction with Narayana Ayyangar, executed a deed of conditional sale in favour of Krishnamaohri, and that, according to the terms of the said conditional sale, he repaid the amount of the conditional sale to Krishnamachari; but such recitals are not inconsistent with the purchase having been made for the benefit of the Rajah or with the other transaction also having been entered into on his behalf, in connexion with such purchase. The reason why it was not expressly stated in Ex. B that the purchase was made for the benefit of the Rajah and the dead of conditional sale also executed on his behalf, may be that such recital might prejudice the suit, Original Suit No. 71 of 1887 (in the High Court), instituted by defendant 1 in his own name, for the purpose of obtaining a reconveyance from Krishna, machari. The object of agreement B was that the objection raised (in Original Suit No. 71 of 1887) by Narayana Ayyangir should be withdrawn and that, instead of the suit being dismissed, a decree might be obtained by defendant 1 for a reconveyance to him by Krishnamachari, so that the former might be in a position to transfer the villages to the Rajah and execute the necessary conveyance.

5. Though defendant 1 in his written statement pleads that he purchased the villages on his own account and with his own money and borrowed Rs. 52,750 on his own account (from Krishnamachari) for purchasing the villages yet he admits that the deed of conditional sale which he in conjunction with Narayana Ayyangar executed in favour of Krishnamaohari, included not only the said Rs. 52,750, but also a further sum of Rs. 21,495 which was due by the Rajah to Krishnamachari and that Krishnamachari was to re-convey the villages on payment not only of the above two sums, but also of a further sum of Rs. 5,000 due by the Rajah to him. He further admits that a deed of indemnity was also executed in favour of Krishnamaohari by himself, Narayana Ayyangar, the plaintiff and his father the late Rajah. As regards the repayment (by defendant 1) of the amount due to Krishnamachari under the deed of conditional sale, the defendant in order to enable him to do so borrowed a lakh of rupees, on 18th April 1884, from the Mahant of Tirupati on a mortgage of the plaint villages and other properties belonging to him. The defendant, however, admits in para. 10 of his written statement that in December 1884, the said debt of one lakh of rupees due by him to the Mahant was discharged, so far as he was concerned, by the Rajah, including the same in a mortgage-bond for 14 lakhs of rupees executed by him in favour of the Mahant. These and other dealings between the Rajah and defendant 1 ware adjusted and the agreement (Ex. B) was entered into on 25th August 1888. This document also provides that defendant 1 should not be under liability to satisfy the decree in Suit No. 320 of 1880 (on the file of the High Court) obtained by Krishnamaohari, not only against the Rajah but also against him and that the Rajah should arrange to satisfy that decree himself. From the nature of these transactions and the context in Ex. B it is clear that the word ‘sale’ therein is used simply in the sense of a conveyance from the legal owner to the beneficiary or to any other person nominated by him.

6. The respondents' pleader further urges that as the agreement is silent as to the income of the villages prior to the contemplated conveyance (by defendant 1) to the Rajah, the agreement should be cons, trued merely as an agreement for sale. This is quit a inconsistent with the income of the villages prior to the agreement having been dealt with as belonging to the Rajah and credited to him in the account Ex. D. It was evidently expected that there would be no delay in obtaining a decree for reconveyance from Krishnamaohari (in the High Court suit) and in the villages being conveyed and transferred by defendant 1 to the Rajah and no express provision was, therefore, made as to the future income of the villages; but the death of Narayana Ayyangar subsequent to the agreement and the necessity of bringing his legal representative on the record caused a delay of about a year in obtaining the decree. The sum of Rupees 99,568-15-6 was on a settlement of accounts found due to defendant 1 on 25th August 1888, and the interest provided in the document evidently runs from that date; there is nothing in the document to support the contention of the respondent's Pleader that interest should be reckoned only from the date of the conveyance (to be executed by defendant 1 in favour of the Rajah), on which date the Rajah was also to execute a mortgage-deed for the said amount in favour of defendant 1. If, as held by the Subordinate Judge, Ex. B were a contract for sale, the suit would essentially be one for the specific performance of a contract and in that case it would be dearly barred under Article 113, Lim. Act.

7. But in the view which we take of Ex. B the suit is really one for the possession of immovable property by a beneficial owner thereof against the legal owner, on payment, if necessary, of such sum, if any, as may be found due; and the execution of a conveyance by defendant 1 to the plaintiff is not essential and is unnecessary. If he gets a decree for recovery of the villages as beneficial owner. The plaintiff should be charged with interest at the rate provided in that document or such other rate as may have been agreed upon between the parties on the same day as Ex. B was executed (as alleged before us by the Advocate-General), provided such agreement is valid and subsisting from the date thereof, in addition to the principal sum of Rs. 99,568-15-6, and the defendant should be charged with the income derived from the villages from the same date. Having regard, however, to the provisions of the Transfer of Property Act, effect cannot be given to Ex. B itself as creating a mortgage of the villages in favour of the defendants from the date when a re-conveyance was executed by the High Court (i.e, 7th February 1890) and defendants 2 to 6 cannot, therefore, be regarded technically as sub-mortgagees. If they became mortgagees under defendant 1 without notice, express or constructive, of Ex. B and in the bona fide belief that defendant 1 was the owner, they would be entitled to be paid the full amount due to them under their respective mortgages before the villages could be recovered by the plaintiff from them. If, however, it is not proved that they are such bona fida mortgagees for value they should, for the purposes of this suit, be treated merely as sub-mortgagees under defendant 1 on the footing that defendant 1 was a usufruetuary mortgagee for the sum of Rs. 99,568-15-6, with interest as provided in Ex. B. In taking an account of the income of the villages on either footing the mortgagees defendants should be respectively charged with the income derived from them during the time they have respectively been in possession.

8. As regards the covenant (in Ex. B) that the plaintiff himself should arrange for the satisfaction of the decree in Civil Suit No. 320 of 1880 (on the file of the High Court), it is admitted that it is still outstanding against both the plaintiff and defendant 1. Under the provisions of (Mad.) Act 4 of 1899, its execution, solar as the plaintiff is concerned, must have been transferred to the Collector, the decree-holder, however, being apparently at liberty to execute the decree against defendant 1 only by process of civil Court. If the decree-holder does thus execute it and the defendant obtains a decree for damages against the plaintiff for breach of the covenant, such decree will, under the provisions of the Act (4 of 1899), have to be transferred to the Collector for execution; and under the rules-framed under the Act the execution of that decree may be postponed for an indefinite time. Under such circumstances the plaintiff should, before recovering possession of the villages, satisfy the decree in Civil Suit No. 320 of 1880, or arrange with the decree-holder therein to enter up satisfaction, of the decree, so far at any rate as defendant 1 is concerned, within a time to be fixed by the appellate decree herein. Before disposing of this appeal finally we must call upon the District Judge to try the following issues with reference to the foregoing observations and submit his findings thereon within three months from this date. Both parties will be at liberty to adduce evidence on these issues; ten days will be allowed for filing objections to the findings, (i) What are the amounts, if any, still due to defendants 2 to 6 on their respective simple or usufructuary mortgages? (ii) Whether all or any of defendants 2 to 6 are bona fide mortgagees for value without notice (vide definition in Section 3 of the Transfer of Property Act) of the plaintiff's title? (iii) What sums, if any are payable by the plaintiff to defendants 1 to 6 respectively before recovering possession of the plaint villages? [In compliance with the order for findings contained in the above judgment, the District Judge of North Arcot specified, on the first revised issue the amounts due to each of the defendants on the report of a Commissioner, who was appointed for the purpose. On issue 2, defendants 2 and 3 were found not to be bona fide mortgagees without notice and defendants 4 to 6 found to be bona fide mortgagees without notice. On the third issue the Judge found that plaintiff was liable to pay defendant alone Rs. 104-975-6-11]. This appeal coming on for final bearing, after the return of the finding of the lower Court on the issues referred to it for trial on 7th February 1916 the Court delivered the following.

JUDGMENT

9. In this suit (No. 25 of 1900), which was instituted by the Rajah of Karvetnagar for the recovery of 4 villages, Kolabhur, Malapudi, Kelapudi and Pemmanallur, Sir Subramania Aiyar, Benson and Bashyam Ayyangar, JJ., for the purpose of disposing of the appeal preferred to the High Court from the decree of the Subordinate Judge of North Arcot, directed the lower Court on 15th December 1903 to determine the following issues: 1 What are the amounts, if any still, due to defendants 2 to 6 on their respective simple or usufructuary mortgages? 2 Whether all or any of defendants 2 to 6 are bona fide mortgagees for value without notice (vide definition in Section 3 of the Transfer of Property Act), of the plaintiff's title? and 3. What sums, if any are payable by the plaintiff to defendants 1 to 6 respectively before recovering possession of the plaint villages? The results of the inquiry were submitted in due course, but as the findings calculated the sums due by the plaintiff to the defendants and by defendant 1 to defendants 2 to 6 only up to 6th July 1903, the High Court before dealing with the objections to the finding directed the lower Court on 21st November 1911 to ascertain what would be due till 8th July 1912 and also ordered that a Receiver may be appointed for the property from that date. We have now before us the revised findings and shall proceed to deal with the objections to them. There are six-defendants in this suit; defendant 8 did not appear before us. He has a mortgage subsequent to that of defendant 4. Defendant 1 was an officer of the Karvetnagar Raj and all the four villages stand in his name, but it has been held by this Court that he is only the legal owner of the property, the plaintiff being the beneficial owner. It has also been held that before the plaintiff could recover the villages he was bound to pay defendant 1 the principal sum of rupees 99,568-15-6 with such interest thereon as might be found due to him, while on the other hand defendant 1 was liable for the income derived from the villages from the date of Ex. B, that is 25th August 1888. Defendants 2 to 6 hold mortgages on these villages executed in their favour by defendant 1 and it has been ruled that if they became mortgagees under defendant 1 without notice of Ex-B, express or constructive, and in the bona fida belief that defendant 1 was the owner, they would be entitled to be paid the full amount due to them under their respective mortgages before the plaintiff could recover the villages. If they were not such bona fida mortgagees for value, they should be treated merely as sub-mortgagees under defendant 1 on the footing that he was a usufructuary mortgagee for the amount due to him. The first contention raised before us on behalf of the appellant is that the onus lay on defendants 2 to 6 to show that when they obtained their respective mortgages they had no notice of Ex. B and that they were bona fide mortgagees for value. The District Judge failed to determine for himself this question as he should have done. He has submitted his finding in an alternative form; if the burden of proof lay on the defendants, they had failed to discharge that burden; if the onus was on the plaintiff, he found it proved by the evidence that the defendants 2 and 3 were not bona fide mortgagees without notice but that defendants 4, 5 and 6 were bona fide mortgagees without notice. A number of decisions have been cited to us, but we think that the proper principle governing the present case is that which has been applied to purchasers from benamidars. That principle has been most clearly laid down in Ramcoomar Koondoo v. McQueen(1) by their Lordships of the Privy Council. They say:

“It is a principle of natural equiry, which must be universally applicable, that where one man allows another to hold himself out as the owner of an estate, and a third person purchases it, for value from the apparent owner in the belief that he is the real owner, the than who so allows the other to hold himself out shall not be permitted to recover upon his secret title, unless he can overthrow that of the purchaser by showing either Shat he had direct notice, or something which amounts to constructive notice, of the real title or that there existed circumstances which ought to have put him upon an inquiry that if prosecuted, would have led to a discovery of it.”

10. The rule was re-affirmed in Mahomed Mozuffer Hossein v. Kiskori Mohun Roy(2): See also Bhugwan Doss v. Upooch Singh(3). In the present case defendant 1 no doubt was more than a mere benamidar, he had a lien on the property for large payments made by him. But all the same the plaintiff or his predecessors-in-title allowed him to appear before the world in the character of owner, and that is the essential fact which brings into play the principles of natural equity expounded by the Judicial Committee. The fact that he has an interest of his own in the property is no intimation to a purchaser of the right of the real owner. The other decisions brought to our notice referred to cases of a different nature. In Varden Seth Sam v. Luahpathy Royjee Lallah(4) what was set up against the purchaser was a prior equitable charge by deposit of title-deeds; in Akshoy Kumar Banerjee v. Corporation of Calcutta(5) it was a statutory charge and in Mulji Jetha & Co. v. Macleod(6) the contest was between the cestui que trust of certain joint stock shares and the pat chasers and pledgees deriving their title from the holder in whose hand the shares were impressed with the trust. In another class of cases to which reference has been male, viz., Thiruvenkatachariar v. Venkatachariar(7), Himatlal Motilal v. Vasudeo Ganesh Mhashar(8) and Lalubhai Surchand v. Bai Amrit(9), the competition lay between a person to whom the owner had agreed to sell certain properties and a person to whom he actually sold the properties subsequently. It is not necessary for us to discuss these cases in detail. But we must point out that the proposition enunciated in Attorney General v. Biphosphated Guano Co.(10) and Wilkes v. Spooner(11) and relied on in Akshoy Kumar Banerjee v. Corporation of Calcutta that the defence of a bona fide purchaser for value without notice is a single defence and cannot be split up has in its general aspect, reference more to the form of pleadings, as clearly stated by West, J., in Lalubhai Surchand v. Bai Amrit, and cannot be treated as decisive of the question of onus in all cases in which such a defence is pleaded. If the latter were the case as we are asked to infer from the judgment in Akshoy Kumar Banerjee v. Corporation of Calcutta then the ruling in the banami cases, Ramcoomar Koondoo v. Mc Queen, Mahomed Mozuffer Hossein v. Krishori Roy, Bhugwan Doss v. Upooch Singh, would not be good law, as it undoubtedly is. We hold that in this case it is for the plaintiff to show that defendants 2 to 6, when they obtained their mortgages from defendant 1 had notice of the plaintiff's title.

11. Their Lordships then discussed the evidence and allowed the appeal in part.

S.N/R.K

12. Appeal partly allowed.