Janki Prasad v. Kishen Dat

Sir John Edge, C.J, Knox, Blair, Banerji and Burkitt, JJ.:— The question which has been referred to this Full Bench arises out of the following circumstances:—The same property was mortgaged to Kishen Dat, the defendant in this suit, and subsequently mortgaged to one Tika Ram, the mortgagor in each case being the same party. Tika Ram brought a suit on his mortgage, ob-tained[479] a decree for sale, put the property up to sale, and it was purchased by Janki Prasad, the plaintiff here. Kishen Dat was not made a party to that suit or to the sale. Tika Ram's suit was commenced after the coming into force of Act No. IV of 1882. Kishen Dat, subsequently to the coming into force of Act No. IV of 1882, brought a suit on his mortgage. He did not make Tika Ram a party to that suit, nor was Janki Prasad, the plaintiff here, made a party to that suit. Kishen Dat got his decree on the 10th of September 1889. Tika Ram had got his decree on the 12th of June 1886, and the sale to the plaintiff took place on the 22nd of June 1891. Kishen Dat proceeded to put his decree for sale into execution. On that Janki Prasad, the plaintiff here, objected that the property could not be sold under that decree. That objection was disallowed and Jaoki Prasad brought his suit. It has been found in this suit that Kishen Dat had not notice in fact, when be brought his suit, of the subsequent mortgage to Tika Ram or of Tika Ram's suit. Both the first and the second mortgages were duly registered documents.

The question which has been referred to the Full Bench is—did the fact that Tika Ram's mortgage was registered affect Kishen Dat with notice of that mortgage?

It has been decided by this Court that the registration of a prior mortgage affects a subsequent mortgagee with notice of the prior mortgage. The answer to this reference to the Full Bench appears to us to be found in s. 3 and s. 85 of Act No. IV of 1882. By s. 85 it is enacted that, “subject to the provisions of the Code of Civil Procedure, s. 437, all persons having an interest in the property, comprised in a mortgage must be joined as parties to any suit under this chapter relating to such mortgage. Provided that the plaintiff had notice of such interest.” There were good grounds for the enacting of the provisions of the section. Prior to the passing of Act No. IV of 1882, the multiplicity of suits relating to one and the same mortgaged property, but arising under different mortgages and in respect of separate interests in the property mortgaged, created a scandal. No purchaser at an auction sale held [480] under a decree upon a mortgage, was ever reasonably certain that he would not have to defend a suit or suits by one or more mortgagees, who were not made parties to the suit in which the decree was made under which he purchased. Again, much hardship resulted from the system then in vogue, not only to prior but to subsequent mortgagees. Under that system a mortgagee, whether prior or subsequent, brought his suit for sale on his mortgage without making the other mortgagees or any other party interested in the property (the mortgagor excepted) a party to the suit. The object of s. 85 of Act No. IV of 1882 was to compel any person suing on a mortgage to bring into one suit, so far as he had notice of their interests, all persons interested in the property, so that in one suit, instead of in several, the rights and interests of the different persons interested in the mortgaged property might be ascertained, protected and dealt with. The result of the system which obtained previously to Act No. IV of 1882 was that mortgaged property when sold in execution of a decree seldom fetched anything like its value, and that was a result only to be expected from the uncertainty of the title obtained under a decree for sale under the system then in operation.

Section 85 only makes it compulsory that all the persons interested should be joined in the suit of whose interests the plaintiff had notice. Now the notice referred to in s. 85 must necessarily be the notice referred to and defined by s. 3 of the same Act. By s. 3 it is enacted that—“a person is said to have ‘notice’ of a fact when he actually knows that fact, or when, but for wilful abstention from an inquiry or search which he ought to have made, or gross negligence, he would have known it * *.” Under the Indian Registration Act, certain documents are rendered ineffectual as against interests in land unless they are registered under that Act. Each of the mortgages in this case was registered under that Act, and each was a document which under that Act was compulsorily registrable. The registry is open to search by any one disposed to make a search. In this particular case Kishen Dat made no search, and we have to decide whether he must be taken to have notice by [481] reason of the fact that Tika Sam's mortgage was in fact registered in the office where that document was bound under the Act to be registered.

It appears to us that it must be held that every person dealing with immoveable property knows that certain documents, such as mortgages of the value of over Rs. 100, must be registered, and that the fact whether such a mortgage has been registered will be disclosed by a search in the registry. It also appears to us that it is the duty of every person bringing any suit on a mortgage under Chapter IV of Act No. IV of 1882, to ascertain, so far as he reasonably can, that he has as parties to the suit which he is about to bring all parsons having an interest in the property comprised in his mortgage. It also appears to us that any reasonably prudent person who was bringing such a suit ought to search in the registry in order to ascertain what were the dealings with the property the subject of his mortgage, whether those dealings were anterior or subsequent to his mortgage, if he intends to bring a suit on that mortgage. It is obvious here that if Kishen Dat had made a search in the registry he would have ascertained the existence of the subsequent mortgage made to Tika Ram, and as that mortgage was made before Kishen Dat's suit was instituted it would have been only reasonably prudent on the part of Kishen Dat to have ascertained by inquiry from Tika Ram and the mortgagor whether that mortgage was still subsisting and unsatisfied. Indeed, unlass he had positive proof before him that the mortgage had been satisfied, his only safe course would have been to have made Tika Ram a party to his suit. In our opinion Kishen Dat must be taken to have either wilfully abstained from searching the registry, or, in not making a search in the registry, to have omitted to do an act which a reasonably prudent mortgagee about to bring a suit on his mortgage under Chapter IV of Act No. IV of 1882 ought to have done and would have done. In either case, in our opinion, Kishen Dat must, by reason of Tika Ram's mortgage having been registered, be taken to have had notice of the interest created by that mortgage, and, if he had ascertained that mortgage had been [482] made, it would have put him on further inquiry, which he was bound to have made, as to who was the person who was at the time of the suit interested in the property.

We do not decide that registration is of itself notice to all the world. All we do decide is that where it is the duty of a person to search or where a reasonably prudent man would in his own interests make a search, then the fact that the search, if made, would have disclosed a document affecting the property, affects that man with notice of such document and puts on him the necessity of further inquiry. With this answer we return the case to the Bench which made the reference.

The appeal being again laid before the Bench which made the reference the following order was passed:—

ORDER OF DIVISION BENCH

Knox and Burkitt, JJ.:— The facts connected with this second appeal have been fully set out in the judgment of the Full Bench, on a reference made by us on the 20th of July 1894, and need not therefore be recapitulated here. It was held that Kishen Dat, although a prior mortgagee, had constructive notice of a subsequent mortgage in favor of Tika Ram by reason of that mortgage-deed having been duly registered. The case therefore falls under s. 85 of the Transfer of Property Act. The sole question which now remains to be decided is whether Kishen Dat, the respondent, is entitled under the decree which he obtained on the 10th of September 1889, to bring to sale the property affected by his decree, which property had, as the facts set out in the Full Bench judgment show, been purchased by the plaintiff-appellant in pursuance of a decree obtained by Tika Ram, the subsequent mortgagee, upon the basis of his subsequent mortgage, and which is the decree dated the 12th June, 1886. Now no mortgagee can sell the mortgaged property except under a decree for sale obtained under Act IV of 1882. A first mortgagee cannot sell except under a decree which has given a second mortgagee a right to redeem within a time to be fixed by the Court, which, in the event of the second mortgagee not redeeming the first mortgagee, forecloses the second mortgagee's right to [483] redeem. The first mortgagee's right to sell under the decree arises only on the second mortgagee having failed to redeem and being foreclosed by the decree. There is no such decree in the case before us, that is to say, there is no decree giving the second mortgagee the right to redeem. It is not for us to say what will be the result if Kishen Dat institutes another suit for sale with a proper array of defendants. All we need say is that under the decree of the 10th of September 1889, Kishen Dat is not entitled to bring the mortgaged property the subject of this appeal to sale. It is on this ground that we now allow the appeal and set aside the decrees of the Courts below, but without costs, as the ground now raised before us in second appeal was not taken in the Court of first instance.

Appeal decreed.