Chinnappa Reddi v. Manickavasagam Chetti

The law gives the holder of a registered mortgage priority over an unregistered mortgage though the latter may be of earlier date. This Court, following the English decisions, has held that, in order to check fraud under cover of this provision of law, such priority cannot be claimed if the subsequent mortgagee, at the time of obtaining his mortgage, had notice of the earlier mortgage. The onus is upon the party alleging such knowledge or notice to aver the same in his pleadings and to prove it. This the plaintiff did not do. He made no allegation in his plaint, nor at the settlement of issues, that the fourth defendant had notice, of the plaintiff's mortgage and it cannot he properly presumed that fourth defendant had such notice from the fact of his not having denied in his written statement what was not alleged by the plaintiff.

We must set aside the decrees, of both the Courts below with costs throughout. With the consent of the parties before us the property will be sold free from both plaintiff's and fourth defendant's mortgages and the net proceeds will be applied first towards discharge of fourth defendant's mortgage debt and the costs of the present litigation and the balance, if any, will be applied to the discharge of the plaintiff's mortgage, debt and the surplus, if any, will be paid to the defendants Nos. 1 to 3.