Allahabad High Court
Mahadeo Prasad vs Anandi Lal And Ors. on 8 July, 1924
Equivalent citations: 92IND. CAS.348
JUDGMENT
1. The question of law which is raised in this appeal is whether a charge which does not amount to a mortgage can be enforced against a transferee for value without notice of the charge. The Court below, relying on the decision in Maina v. Bachchi 28 A. 655 : 3 A.L.J. 551 : A.W.N. (1906) 165 has held that it can. The appellant contests this proposition. The plaintiff-respondent supports it, but in addition contends that on the finding of fact of the Court below the question does not really arise. He relies also on the fact that the appellant's title was acquired at execution sale and not by private conveyance.
2. The property in dispute consists of a half share in three houses Nos. 29, 45 and 66, situated in the city of Allahabad. The plaintiff, Anandi Lal, was at the institution of the suit the holder of a decree for Rs. 701-9-0 against the first defendant, Sham Lal, and seeks to enforce his decree by the sale of these houses. The houses originally belonged to the plaintiff and his cousin, Kalyan Chand, in equal shares. One Sheo Nath obtained a decree against Kalyan Chand and attached his half share in the houses before judgment, on 5th February 1918. The suit was finally decreed on 13th June 1916 on the basis of a compromise which provided that the amount decreed in favour of Sheo Nath should constitute a charge on the property already under attachment. As an additional precaution the decree was registered. The rights of the decree-holder were purchased by the plaintiff, Anandi Lal, who proceeded to put the decree in execution. The houses were put up to sale and purchased by one Badri Prasad, but the sale was set aside on the application of Sham Lal, and the plaintiff has in consequence brought the present suit to establish his right to have the half share in the houses attached and, sold under his decree.
3. The claim of the appellant arises out of proceedings taken by Bulaki another creditor of Kalyan Chand, who brought a suit, No. 189 of 1918, against the latter and obtained a decree on 30th April 1918. Before judgment Bulaki got an injunction, on 21st January, 1918, from the Small Cause Court restraining the judgment-debtor from transferring the property. It is said by the learned District Judge that the issue of this injunction was ultra vires, and it has not been relied on in argument, in this Court. In execution of this decree, Kalyan Chand's interest in the houses was attached and brought to sale and was ultimately purchased by Sham Lal on 22nd March 1919. Sham Lal got possession of the property on 27th March 1920. He subsequently sold his rights to the appellant, Mahadeo Prasad. The latter was added as a defendant after the institution of the suit. The question for decision is whether Sham Lal's purchase was or was not subject to the charge created by the decree of 13th June, 1918, in Sheo Nath's case, the benefit of which has now passed to the plaintiff.
4. According to the definition in Section 3 of the Transfer of Property Act, a person is said to have notice of a fact, not only when he actually knows it but when he could have been aware of it but for wilful abstention from such inquiry or search as he ought to have made. Now in this case the purchaser, Sham Lal, knew that a previous suit had been filed against Kalyan Chand, for he had actually been summoned as a witness in that suit. He was summoned for the very day on which the compromise decree was passed. As he professes not to know whether he attended the Court or not (a fact which he could not possibly have forgotten), the probability is that he really was there. In any case he knew enough to make it incumbent on him to ascertain, before buying the property, what had happened in the previous suit and whether the creditor having got his decree had taken any steps against the property, which would affect the title of a subsequent purchaser. This is substantially what the District Judge finds, though he has put his finding in the somewhat indefinite form that the facts "strongly suggest" that Sham Lal knew more about the proceedings in the former case than he is now prepared to admit. The learned Judge further points out that the decree-holder, by registering his decree, had done everything possible to give notice to any one who might contemplate buying the decree. On the findings of the District Judge it must be held that there was sufficient to put the original defendant. Sham Lal, on enquiry, and that, if he had made any enquiry, he could not have failed to learn the true state of the case. He must, therefore, be held to have had notice of the plaintiff's charge within the meaning of the definition in Section 3 of the Act.
5. This really concludes the case. But we may say that we are not disposed to differ from Sir Henry Richards' view, in Maina v. Bachehi 28 A. 655 : 3 A.L.J. 551 : A.W.N. (1906) 165, that the position of a charge-holder, under the Transfer of Property Act, is stronger than that of a person holding a merely equitable charge under English Law, and that though there may be cases in which a mere equitable claim will not be enforced against bona fide transferees for value without notice, yet It is much too broad a proposition to state that in all cases where by act of parties or operation of law, immoveable property of one person is made security for payment of money to another and the transaction does not amount to a mortgage, the security will not be enforced even against such transferees.
6. The general rule is that where the owner of property creates successive rights by different transactions entered into at different times, the rights will, in the absence of special circumstances, take effect in order of priority. On the other hand, Section 40 of the Transfer of Property Act lays down that a right arising out of contract and not amounting to an interest or an easement, cannot be enforced against a transferee for value without notice. In this case the right was not a merely contractual right but an obligation embodied in a decree. It is also to be remembered that Sham Lal was an execution purchaser who bought the interest of the judgment-debtor as it stood on the date of the decree. There are two Calcutta judgments, Royzuddi Sheik v. Kali Nath Mookerjee 33 C. 985 : 4 C.L.J. 219 and Akhoy Kumar Banerjee v. Corporation of Calcutta 27 Ind. Cas. 261 : 42 C. 625 : 19 C.W.N. 37 : 21 C.L.J. 177, both delivered by Mr. Justice Mookerjee, which lay down in general terms that a charge cannot be enforced against a transferee for value without notice. But in neither of these cases did the decision actually turn on this question. In the earlier case the document relied on as creating a charge was held to be invalid and in the later case the later transferee was found to have had notice of the charge. For the reasons given, we dismiss the appeal with costs including in this Court fees on the higher scale.