Madras High Court
The Indian Corporation Ltd vs Maragatham Ammal ... 1St on 19 December, 2011
Author: M.Venugopal
Bench: M.Venugopal
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 19/12/2011 CORAM THE HONOURABLE MR.JUSTICE M.VENUGOPAL S.A.(MD)No.459 of 2006 The Indian Corporation Ltd., through its Managing Director, M.Sankaran. ...Appellant/1st Respondent/ Plaintiff Vs. 1. Maragatham Ammal ... 1st Respondent/Appellant/ 3rd Defendant 2. M.Sivaraman 3. S.Veni ... Respondents 2 & 3/ Respondents 2 & 3/Defendants 1&2 (Respondents 2 & 3 set exparte in trial Court and called absent in First Appellate Court. Hence given up) Prayer Second Appeal is filed under Section 100 of Civil Procedure Code, against the Judgment and Decree passed in A.S.No.74 of 2002, dated 07.10.2005, on the file of the Learned Principal District Judge, Madurai, in reversing and setting aside the Judgment and Decree passed in O.S.No.299 of 1992 dated 19.11.2001, on the file of the II Additional Subordinate Court, Madurai. !For Appellant ... Mr.V.Meenakshisundaram for Mr.A.Sankara Subramaniam ^For Respondent ... Mr.A.Arumugam for Mr.M.Ajmalkhan for R.1 ... R.2 and R.3 given up *** :JUDGMENT
The Appellant/First Respondent/Plaintiff has filed the instant Second Appeal against the Judgment and Decree dated 07.10.2005 in A.S.No.74 of 2002 passed by the Learned Principal District Judge, Madurai in reversing and setting aside the Judgment and Decree dated 19.11.2001 in O.S.No.299 of 1992 passed by the Learned II Additional Subordinate Judge, Madurai.
2. The First Appellate Court viz., the Learned Principal District Judge, Madurai, while allowing the Appeal in A.S.No.74 of 2002, on 07.10.2005 in the Judgment has inter alia held that "(i) even though the original sale deed was not deposited by the First Defendant on 11.11.1974 with Sri Ram Chits and Investments (P) Ltd., it could not be contended that no valid equitable mortgage was created and answered this point in the affirmative, (ii) that the effect of equitable mortgage created on 05.03.1990 would no way affect the title of the third Defendant to the suit property and (iii) upheld the Court auction purchase in favour of the third Defendant and allowed the Appeal without costs, thereby setting aside the Judgment and Preliminary Decree passed by the trial Court in O.S.No.299 of 1992 dated 19.11.2001. Also, the First Appellate Court has dismissed the suit O.S.No.299 of 1992, on the file of the trial Court without costs.
3. Before the trail Court, in the main suit, 1 to 5 issues have been framed for determination. On behalf of the Appellant/Plaintiff, witness P.W.1 has been examined and Ex.A.1 to A.13 have been marked. On the side of the third Defendant, witness D.W.1 has been examined and Ex.B.1 to B.6 have been marked.
4. The trial Court, on an appreciation of oral and documentary evidence available on record, has come to a resultant conclusion that the Appellant/Plaintiff towards the first mortgage is to pay a sum of Rs.65,124/- to the third Respondent/third Defendant within a period of two months and passed a conditional Preliminary Decree with costs against the Defendants 1 to 3.
5. Earlier, being dissatisfied with the Judgment and Decree of the trial Court in O.S.No.299 of 1992 dated 19.11.2001, the third Defendant has preferred A.S.No.74 of 2002, before the First Appellate Court viz., the Learned Principal District Judge, Madurai, as an aggrieved person.
6. The Appellate Court viz., the Learned Principal District Judge has allowed A.S.No.74 of 2002 on 07.10.2005 without costs by setting aside the Judgment and Preliminary Decree passed by the trial Court in O.s.No.299 of 2001 dated 19.11.2001 and consequently dismissed the suit without costs by assigning reasons.
7. Feeling aggrieved against the Judgment and Decree of the First Appellate viz., the Learned Principal District Judge, Madurai, the Appellant/Plaintiff has projected this Second Appeal No.459 of 2006 before this Court.
8. At the time of admission of the Second Appeal, this Court has framed the following Substantial Questions of Law for determination.
"1. Whether the mortgage said to have been executed by deposit of Registration Copy of the Title Deeds and the Decree obtained thereon and subsequent execution proceedings are binding on the persons taking Equitable Mortgage with original title deeds.
2. Whether a Registration copy of the sale deed said to have been executed by the Mortgagor long after losing all his interests in the property and contents therein can be relied upon without proving them by examining any witness for arriving at any decision? and
3. Whether the Court Auction sale dates back to the day auction was held and if so whether it can be applied to 3rd parties?".
9. The Contentions, Discussions and Findings on Substantial Questions of Law (1) to (3):
The Learned Counsel for the Appellant/Plaintiff submits that the equitable mortgage said to have been created on 11.11.1974 by deposit of registration copy of the title deed by the first Defendant in favour of Sri Ram Chits Funds is neither legal nor enforceable.
(ii) The Learned Counsel for the Appellant/Plaintiff contends that an equitable mortgage created by depositing registration copy of the title deed will neither affect nor be binding on nor prevail over the equitable mortgage created by depositing original title deeds.
(iii) According to the Learned Counsel for the Appellant/Plaintiff, the Court Auction sale does not guarantee title to the purchasers and the Court Auction purchaser can be at peril and thereby not derive title to the property, if the decree obtained to bring the property to sale is based upon a mortgage which is neither legal nor enforceable.
(iv) The Learned Counsel for the Appellant/Plaintiff projects his plea that the First Appellate Court has committed an error in not taking note of the fact that the Registration copy of the sale deed Ex.B.1 dated 10.06.1990 is not admissible in evidence namely that it is a fraudulent document executed by the second Respondent/first Defendant, long after extinction of all his interests in the suit property in favour of the third party and the statement made as regards the missing of original title deeds thereon cannot at all be true besides being legally proved.
(v) Advancing his arguments, it is the contention of the Learned Counsel for the Appellant/Plaintiff that the lower Court has failed to see that the notice Ex.A.9 does not contain any explanation for not obtaining the original title deeds relating to the suit properties to create equitable mortgage and further there is no oral evidence tendered by anyone connected with the mortgage deed dated 11.11.1974.
(vi) Lastly, it is the contention of the Learned Counsel for the Appellant/Plaintiff that in a mortgage suit claim, a Decree can be passed without any condition and the mortgage decree imposing condition of monetary burden is without jurisdiction.
(vii) The Learned Counsel for the Appellant/Plaintiff cites the decision M.L.Suryanarayana Rao V. Special Tahsildar and Magistrate, Mysore and Others reported in AIR 1985 KARNATAKA, AT PAGE 260, wherein it is held as follows:
"When property sold in execution of mortgage decree is purchased by the auction purchaser and the sale is confirmed subsequently, the property sold is by a fiction under Section 65 deemed to have vested in the purchaser from the date of sale and not from the date when the sale was confirmed and became absolute. The position of the judgment-debtor between the date of sale and the date of confirmation remains the same and the fiction of dating back does not have the effect of extinguishing the mortgage debt. The debt subsists till the date of confirmation of sale. Therefore, where the mortgaged property was sold in execution of the mortgage decree and purchased by the mortgage on 11.04.75 before Section 4 came into force on 21.10.75 and the sale was confirmed after 21.10.75 on 03.03.80, the mortgage debt would be subsisting on 21.10.75 and would not be extinguished till the date of confirmation on 03.03.80 and, therefore, an application filed by the judgment-debtor mortgagor prior to the date of confirmation before the authority under Section 4(c) for discharge of the mortgage debt and release of the mortgaged property would be maintainable and the concept of "dating back" on confirmation under Section 65 would not affect the right of the judgment-debtor mortgagor to apply under Section 4 AIR 1953 SC 425 and AIR 1933 PC 101 and AIR 1966 ALL 360 (FB) and AIR 1974 Guj 218 and (1963)2 Mys LJ 413, Rel.On; (1980)2 Kant LJ 71, Distinguished; AIR 1967 SC 608 and (1968)1 Mys LJ 200 Explained; 1972 Mys LJ(S.N.)27, Ref."
(viii) He also relies on the decision of this Court Natesan (died) and another V. J.Vasantha and 5 Others reported in 2001(3) CTC 47, at page 47 at special page 51, whereby and where under in paragraphs 16 to 18, it is laid down thus;
"16. The Counsel for the appellant cited yet another decision of this Court in Shanmugha Nadar V. Sivam Pillai and others, A.I.R. 1967 Mad 418. It is held as follows:
"Section 94 of the Transfer of Property Act provides that where a property is mortgaged for successive debts to successive mortgagees, a mesne mortgagee has the same rights against mortgagees posterior to himself as he has against the mortgagor. That is, a prior mortgagee has the same rights against the subsequent mortgagees, as he has against a mortgagor. A prior mortgagee can foreclose a puisne mortgagee. The effect of these two sections is expressed by the familiar rule "redeem up, foreclose down". When a prior mortgagee suing to enforce his mortgage does not make the puisne mortgagee a party to the suit and brings the property to sale, the auction purchaser acquires the rights both of the mortgagee and mortgagor, and as assignee of the mortgagor he may sue to redeem the puisne mortgagee. Under Section 91 the puisne mortgagee as an assignee of the equity of redemption has a statutory right to redeem an earlier mortgage."
17. In both the decisions referred to above, this Court has held, that puisne mortgagee (second mortgagee) who was not impleaded as a party to the suit by a prior mortgagee (first mortgagee) can redeem the prior mortgage (first mortgage). Hence, it is clear that the present plaintiff, being the puisne mortgagee seeking a decree for a sale in his favour, has to pay the amount due under the prior mortgagee decree.
18. The Learned Counsel appearing for the respondents contended that the principle that the puisne mortgagee must redeem the earlier mortgage is not based on statutory provision and in any event, the earlier mortgage having been discharged, there is nothing to redeem. This contention is devoid of merit. As already seen, the purchaser at a sale in execution of decree obtained by the first mortgagee in a suit, to which the second mortgagee was not a party, does not displace the latter but stands only in the position of the first mortgagee and in the sale, the interest of both of the first mortgagee and of the mortgagor passes to the auction purchaser subject to the rights of the puisne mortgagee to pay up the amount due under the first mortgage. Hence it is clear that the plaintiff can get decree for sale provided, she pays the amount due under the prior mortgage decree in O.S.No.1646 of 1979 on the file of Sub-Court, Namakkal. Further, the suit can be decreed with regard to the first defendant alone to pay the suit claim and the other defendants are not liable."
(ix) Yet another decision of this Court Adaikappa Chettiar V. Official Assignee reported in 1972 TLNJ, at page 589 and 590 is relied on the side of the Appellant/Plaintiff wherein it is held hereunder:
"In the instant case, even before creating the mortgage by deposit of title deeds there is an encumbrance on the property and also the originals have already been deposited with the prior mortgagee. No doubt, there is an intention to create a mortgage. But there is definitely no intention to deposit the title deeds in as much as the mortgagor knows at the time he deposited the copies of the title deeds that he cannot deposit the originals in spite of the fact that they are available. As far as creation of mortgage by deposit of title deeds is concerned it is a special type of mortgage available only in such of those towns notified. To create such type of mortgage the provisions and the ingredients necessary to constitute such mortgage must be strictly complied with. One of such necessary ingredients is that the original must be deposited with the mortgagee. If the originals are not available in certain stated circumstances, such as, when it is lost or when it is not readily available to produce, the copies can be accepted for the time being. But when such document has already been deposited with some other person for the purpose of creating a mortgage, the mortgagor cannot create a subsequent equitable mortgage in the absence of the original title deeds."
(x) The Learned Counsel for the Appellant/Plaintiff invites the attention of this Court to the decision Shanmugha Nadar V. Sivan Pillai and Others reported in AIR 1967 MADRAS, at page 418, wherein it is observed and held as follows:
"The right of the puisne mortgagee to redeem a prior mortgagee cannot be prejudiced by a court sale at the instance of the prior mortgagee without impleading the puisne mortgagee. Though in law the purchaser in the prior mortgagee's sale as an assignee of the mortgagor is entitled to redeem his right of redemption in law or is equity cannot be prevail over the puisne mortgagee's right to redeem.
As between the prior mortgagee and the puisne mortgagees, while the puisne mortgagee can bring a suit without impleading the prior mortgagee, the prior mortgagee is required to implead the puisne mortgagee as a party to his suit. Thus, while the suit brought by the prior mortgagee is defective, the suit by the puisne mortgagee does not suffer from any such defect. While the puisne mortgagee has a statutory right to redeem the prior mortgagee, the right of the purchaser in a suit by the prior mortgagee is as an assignee of the mortgagor. The auction-purchaser's claim as an assignee of the mortgagor is by virtue of a sale without notice to the puisne mortgagee as required under law. If the puisne mortgagee has been made a party, he would have had the option of redeeming the mortgage. By not making the puisne mortgagee a party the right to which he was entitled cannot be taken away or the rights of the purchaser be enhanced without such notice to the puisne mortgagee: AIR 1933 Mad 583 (FB) Ref.to."
(xi) Per contra, it is the submission of the Learned Counsel for the first Respondent/third Defendant that the First Appellate Court has considered the entire available materials on record in the suit and has come to a right conclusion that there is no legal impediment to approve the interest of the third Defendant and further the First Appellate Court has opined that an equitable mortgage in favour of the Appellant/Plaintiff on 05.03.1990 will not override the rights of the first Respondent/third Defendant and rightly dismissed the suit without costs.
(xii) However, the Learned Counsel for the first Respondent/third Defendant cites the decision C.Assiamma V. State Bank of Mysore and Others reported in AIR 1990 KERALA, at page 157, wherein it is held as follows:
" In the instant case the mortgagor deposited a registration copy of the title deed and other relevant documents like tax receipt etc. with the Bank. The mortgagor claimed title as one of the donee. In the original title deed the donor had gifted properties to some persons, one of the properties was gifted to the mortgagor, since properties were gifted to many persons, all of them could not have original gift-deed. Therefore, the mortgagor deposited the registration copy. The various documents including the registration copy of the title deed deposited with the Bank clearly established the title of the mortgagor. The evidence on record also showed the intention of the mortgagor to create an equitable mortgage in clear and unambiguous terms. Thus it could not be said that merely because the original title deed was not filed, no equitable mortgage was created. It could not be said that only in cases where the original title deed is lost that deposit of a registration copy can validly create an equitable mortgage."
(xiii) He also places reliance on the decision of Privy Council in Rai Bahadur Madhoram Sand and Others V. Raja Bahadur Kirtya Nand Sinha and Others reported in 1944 II MLJ at page 343, wherein it is held hereunder:
"A mortgage executed after a mortgage decree and during the course of execution proceedings is subject to his pendens. Where such mortgage came into existence before the amendment of the Transfer of Property Act by Act XX of 1929 came into force the doctrine of lis pendens applicable to the case is that enacted in Section 52 before it was amended.
Partial subrogation is now disallowed by paragraph 4 of Section 92 of the Transfer of Property Act. A person who claims to be subrogated to the rights of a mortgagee must pay the entire amount of the incumbrance in question and the same principle applied under the pre-existing law."
(xiv) In order to appreciate the merits of the controversies between the parties, this Court makes a useful reference to the evidence of P.W.1 and D.W.1.
(xv) It is the evidence of P.W.1(the Appellant/Plaintiff) that the Appellant/Plaintiff/ Company is a registered Company as per Ex.A.1, Xerox copy of the Certificate of Incorporation and the Appellant/Plaintiff is doing the business of lending money on the basis of documents being handed over to them and that the Respondents 2 and 3/ Defendants 1 and 2 have received a sum of Rs.25,000/- on 05.03.1990 and executed Ex.A.2 pronote, agreeing to pay interest at 12% per annum and further, the second Respondent/ first Defendant in support of the loan has deposited the sale deed standing in his favour with the Appellant/Plaintiff and the original sale deed is Ex.A.3 and the house tax receipt in the name of the second Respondent/first Defendant handed over to the Appellant/Plaintiff is Ex.A.4 and Ex.A.5 is the memorandum containing the aforesaid details.
(xvi) It is the further evidence of P.W.1 that the Defendants 1 and 2 have agreed to pay interest at 18% p.a., if they failed to pay the amount and at the rate of Rs.1,500/-p.m. for twenty months, they have to pay the amount and Ex.A.6 is the agreement letter in this regard and as agreed, the Defendants 1 and 2 had not paid the amount.
(xvii) The evidence of P.W.1 is also to the effect that in respect of the mortgage property, Sri Ram Chit Funds has taken action against the second Respondent/first Defendant and O.S.No.394 of 1978 has been filed against the first Defendant by the said Chit Fund and Ex.A.7 is the plaint copy and Ex.A.8 is the preliminary decree passed in O.S.o.394 of 1978 and the suit mortgage property has been taken in auction by the first Respondent/third Defendant on 23.09.1985 and that the sale has been confirmed on 09.10.1990 and on 05.03.1990, the original sale deed has been handed over to him and a copy of the original sale deed has been given to the Sri Ram Chit Fund and Ex.A.9 is the Lawyer notice issued to the Defendants and after handing over the original sale deed in respect of the suit property, since the first Respondent/third Defendant has taken the suit property in auction, he has been added as a party and all the three Defendants are liable to pay the suit amount.
(xviii) D.W.1(husband of the first Respondent/ third Defendant) in his evidence has deposed that his wife (third Defendant) has not borrowed any loan from the Appellant/Plaintiff and initially the suit property belongs to the second Respondent/first Defendant as per Ex.A.3 sale deed and as per Ex.A.12 sale deed, the second Respondent/first Defendant has sold the suit property to the State Bank of India Housing Society and the aforesaid Housing Society as per Ex.A.13 on 12.01.1990 has sold the property once again to the second Respondent/first Defendant and again the second Respondent/first Defendant has sold the suit property to one Devar in June 1990 and the second Respondent/first Defendant in the sale deed executed in favour of Devar has mentioned that Ex.A.3 original sale deed has been lost.
(xix) The evidence of D.W.1 also goes to the effect that the Sri Ram Chit Fund Company has filed a suit in O.S.No.394 of 1978 against the second Respondent/first Defendant and based on the decree obtained E.P.No.318 of 1984 has been filed before the Learned Subordinate Judge, Madurai and as per Court Auction proceedings, the first Respondent/third Defendant has purchased the suit property on 23.09.1985 for a sum of Rs.60,300/- and the confirmation of Court sale has taken place during October 1990 and since the second Respondent/first Defendant filed an application to cancel the auction, the confirmation of sale has taken place with a delay and that the first Respondent/third Defendant has obtained the possession of the suit property through Court during December 1990 and till this date, the suit property is in enjoyment of the first Respondent/third Defendant and further either himself or the first Respondent/third Defendant does not know about the suit mortgage.
(xx) Continuing further, it is the evidence of D.W.1 that in the Auction amount, the decree amount due to the Sri Ram Chit Fund is Rs.22,000/- and the balance amount is in Court deposit and the first Respondent/third Defendant has no objection for the Appellant/Plaintiff taking the balance amount and the suit mortgage is subsequent to the first Respondent/third Defendant taking the property through Court Auction and as such, the suit mortgage will not bind the first Respondent/third Defendant.
(xxi) D.W.1 (in his cross examination) has deposed that it is not correct to state that because of the negligence of Sri Ram Chit Fund, the suit mortgage has become the mortgage of the Appellant/Plaintiff and in the Court Auction Certificate, there are no endorsement of encumbrance in respect of the suit property and further that he has not filed the encumbrance certificate in respect of the suit property and moreover in Ex.B.2 certified copy of petition and order in E.P.No.318 of 1984 in O.S.No.394 of 1978 on the file of the Learned III Additional Subordinate Judge, Madurai, it is mentioned that the final decree has been passed on 06.08.1980.
(xxii) The Appellant/Plaintiff in the plaint in O.S.No.299 of 1992, on the file of the Learned II Additional Subordinate Judge, Madurai has averred that it is a Private Limited Company incorporated under the Indian Companies Act and that the Company used to advance loans on the security of immovable properties by deposit of title deeds at Madurai and further it is also authorised to conduct chits as are permitted by law.
(xxiii) The case of the Appellant/Plaintiff is that the Defendants 1 and 2 (the Respondents 2 and 3) on 05.03.1990 have deposited with the Appellant/Plaintiff/Company at Madurai the title deeds of the plaint schedule properties as collateral security with intent to create equitable mortgage for all amounts due from them to the company under any account, present and future.
(xxiv) According to the Appellant/Plaintiff, the Defendants 1 and 2(the Respondents 2 and 3 in the Second Appeal) on 05.03.1990, have borrowed from the Appellant/Plaintiff/Company, a sum of Rs.25,000/- and executed the pronote with an undertaking to repay the said amount with interest at 12% per annum on demand by the Appellant/Plaintiff or order.
(xxv) The Appellant/Plaintiff has added the first Respondent/third Defendant as party to the suit, inasmuch as, she has acquired some interest over the mortgage property subsequent to the equitable mortgage by deposit of original title deeds created in favour of the Appellant/Plaintiff by the Respondents 2 and 3/Defendants 1 and 2.
(xxvi) The Appellant/Plaintiff has prayed for a decree being passed against the Defendants to pay Rs.34,375/- with costs and subsequent interest to the Appellant/Plaintiff within such time to be determined by this Court and also a direction that in case the Defendants so fail to pay, then the under mentioned mortgaged properties be sold through Court and the decree amount be ordered to be paid to the Appellant/Plaintiff from the sale proceeds and in the event of the sale proceeds not be sufficient to pay the Appellant/Plaintiff's claim in full, then the personal decree may be passed against the Defendants for the remaining amount.
(xxvii) Before the trial Court, the First Appellate Court and also in the Second Appeal, the Defendants 1 and 2/the Respondents 2 and 3 have remained exparte/called absent.
(xxviii) The first Respondent/third Defendant in the written statement (before the trial Court) has inter alia stated that she neither borrowed any amount from the Appellant/Plaintiff nor executed any pronote and also that the Appellant/Plaintiff has not specifically mentioned in the plaint as to who actually borrowed the said amount and executed the pronote.
(xxix) The further case of the first Respondent/third Defendant is that the Appellant/Plaintiff in the plaint has not specifically mentioned about the individuals who actually deposited the tile deeds with it and that the second Respondent/first Defendant has borrowed the loan from Sri. Ram Chits and Investment (P) Limited and has not repaid the loan and the Company instituted a suit against the second Respondent/first Defendant in O.S.No.394/78 on the file of the Subordinate Court, Madurai. A decree has been obtained by the said Chit Company which brought the plaint schedule property (which originally belonged to the first Defendant) for sale in E.P.No.318/84 for releasing the decree amount.
(xxx) In the Court Auction that has been taken place on 23.09.1985, the first Respondent/third Defendant is the highest successful bidder and the second Respondent/first Defendant seems to be the owner of the plaint schedule property and lost all his rights, title and interest over the said property soon after the sale that held on 23.09.1985. Therefore, on 05.03.1990, when the second Respondent/first Defendant is alleged to have created equitable mortgage, he has no title or any right over the plaint schedule property and as such, the said equitable mortgage in favour of the Appellant/Plaintiff is invalid in law. The Appellant/Plaintiff, if necessary, may obtain a simple money decree against the Respondents 2 and 3 / the Defendants 1 and 2. As such, the Appellant/Plaintiff is not entitled to get any mortgage decree in respect of the plaint schedule property.
(xxxi) Apart from the above, it is the stand of the first Respondent/third Defendant that the Appellant/Plaintiff has no cause of action against her. Also, the first Respondent/third Defendant is a bonafide purchaser without notice for valuable consideration and that too in the Court Auction sale. Therefore, the sale in favour of the first Respondent/third Defendant will prevail over the transactions purported to have been entered into by the second Respondent/first Defendant and the person like the Appellant/Plaintiff.
(xxxii) A perusal of Ex.A.2 pronote dated 05.03.1990 shows that it has been executed by the Respondents 2 and 3/the Defendant 1 and 2 to and in favour of the Appellant/Plaintiff/Company for a sum of Rs.25,000/-, agreeing to repay the loan amount of Rs.25,000/- with interest at 12% p.a. Further, Ex.A.5 is the letter dated 05.03.1990 executed by the Respondents 2 and 3/the Defendants 1 and 2 to and in favour of the Appellant/Plaintiff/Company mentioning the deposit of title deed dated 04.12.1970 for Rs.5,200/-, house tax receipt, encumbrance certificate and other discharged mortgage documents.
(xxxiii) Ex.A.7 is the certified copy of the plaint in O.S.No.394/98 on the file of the Subordinate Court, Madurai filed by the Sri Ram Chit and Investment (P) Limited as Plaintiff against the second Respondent/first Defendant. A cursory glance of Ex.A.7 plaint in O.S.No.394/78 (filed by the Sri Ram Chit and Investment (P) Limited) shows that the same company has prayed for passing of preliminary mortgage decree directing the second Respondent/first Defendant to pay the Plaintiff therein a sum of Rs.19,303.95/- with further interest of Rs.15,660/- with interest at 6% within a time stipulated by this Court and in default of the payment of the said sum, to pass a final decree for sale, directing the sale of the hypotheca - B schedule property and to appropriate the sale proceeds towards the decree amount and further to pass a personal decree against the second Respondent/first Defendant for payment of the balance due if any.
(xxxiv) Ex.A.8 is the certified copy of the decree in O.S.No.394/78 passed by the Learned Subordinate Judge, Madurai, dated 13.12.1978 in and by which the second Respondent (first Respondent in O.S.No.299/92, figuring as Defendant in O.S.No.394/98) has been directed to pay into Court on or before 13.06.1979 or any later date to which time for payment may be extended by the Court for the sum of Rs.22,003.20/- of which the sum of Rs.15,660/- shall carry future interest at 12% per annum from this date till 13.06.1979, the date fixed for payment and thereafter at 6% per annum till date of realisation, etc. In short, as per Ex.A.8, the preliminary decree in O.S.No.394/78 has been passed by the Learned Subordinate Judge, Madurai on 13.12.1978.
(xxxv) Ex.B.2 is the petition and order passed by the Learned III Additional Subordinate Judge, Madurai in E.P.No.318/84, wherein it is mentioned that a preliminary decree has been passed on 13.12.1978 and a final decree has been passed on 06.08.1980. To put it shortly, Ex.B.2 petition and orders shows from 05.12.1984 till 09.10.1990, various orders have been passed by the Court and finally, on 09.10.1990 E.As 1342/85, 1343/85 and 50/90 have been dismissed and the sale has been confirmed and the sale certificate has been ordered to issue. In Ex.B.2, E.P. claim has been made for Rs.22,169.54/- as on 30.11.84. Ex.B.3 is the xerox copy of Auction Notice on the file of the Learned III Additional Subordinate Judge, Madurai in E.P.No.318/84 in O.S.No.394/78. Ex.B.5 is the sale certificate dated 09.10.1990 issued by the Learned III Additional Subordinate Judge, Madurai in E.P.No.318/84 in O.S.No.394/78. As seen from Ex.B.5 certified copy of sale certificate, the first Respondent (third Defendant in S.A.No.459/2006 in O.S.No.299/2002) has been declared as the successful bidder in auction for having purchased the property for Rs.60,300/-, only in the public auction held on 23.09.1985, in the execution of the decree in the said suit and the sale has been duly confirmed on 09.10.1990.
(xxxvi) A puisne mortgagee is that a person who holds a mortgage which is subsequent in date to another mortgage as per Order 34 Rule 1 of Civil Procedure Code.
(xxxvii) It is not out of place for this Court to recall the decision of this Court Narayanaswamy V. Rudrappa reported in 1944(1) MLJ at page 10, wherein it is held that "when once an execution of sale has been carried out, the interest of the auction purchaser comes into being and such interest can be displaced only in one of the modes sanctioned by law, the Court being otherwise under an obligation to confirm the sale."
(xxxviii) This Court aptly points out that the purchaser at a Court sale acquires title by operation of law and at such sale, tile is transferred without a registered sale deed. A Court of Law merely issues a sale certificate.
(xxxix) It is to be borne in mind that once the sale has been confirmed by a Court, it confers an absolute tile on the auction purchaser, whether he be a decree holder or a stranger provided there was title in the judgment debtor as per decision Abdul Subhan V. Kante Ramanna reported in AIR 1945 MADRAS at page
161. (XL) A Judicial sale becomes absolute only when the requirements of the rule are followed as per the decision Ramachandra Bhagat and Another V. Mrs.Eva Mitra reported in AIR 1960 PATNA at page 378.
(XLi) An order confirming a sale is a judicial determination of fact, that there exists no objection upon the validity of sale can be questioned as per the decision Jogneswar Kailas reported in 28 CWN 821.
(XLii) At this stage, this Court cites the following decisions to prevent an aberration of justice.
(a) In a decision of the Honourable Supreme Court Sardar Govindrao Mahadik and another V. Devi Sahai and others reported in AIR 1982 SUPREME COURT at page 989 at page 990, it is laid down as follows:
"Ordinarily, if the auction-purchaser is an outsider or a stranger and if the execution of the decree was not stayed of which he may have assured himself by appropriate enquiry, the Court auction held and sale confirmed and resultant sale certificate having been issued would protect him even if the decree in execution of which the auction sale has been held is set aside. This proceeds on the footing that the equity in favour of the stranger should be protected and the situation is occasionally reached on account of default on the part of the judgment-debtor not obtaining stay of the execution of the decree during the pendency of the appeal. But if the auction-purchaser is the decree-holder himself the situation would materially alter and this decree-holder auction- purchaser should not be entitled to any protection."
(b) In the decision of the Honourable Supreme Court Navalkha and Sons V. Sri Ramanya Das and others reported in AIR 1970 SUPREME COURT at page 2037, it is held as follows:
"Where the acceptance of the offer by the Commissioners is subject to confirmation of the Court the offerer does not by mere acceptance get any vested right in the property so that he may demand automatic confirmation of his offer. The condition of confirmation by the court operates as a safeguard against the property being sold at inadequate price whether or not it is a consequence of any irregularity or fraud in the conduct of the sale. In every case it is the duty of the Court to satisfy itself that, having regard to the market value of the property, the price offered is reasonable. Unless the Court is satisfied about the adequacy of the price the act of confirmation of the sale would not be a proper exercise of judicial discretion. AIR 1921 Mad 286 and AIR 1925 Mad 318 and AIR 1940 Mad 42 and AIR 1951 Mad 986, Ref.
(c) In C.Jadunath V. Parameswar reported in 1940 Privy Council at page 11, it is held that "Buying the mortgage property free from encumbrances, a person gets the title both of the mortgage and of those interested in equity of redemption is not a mere successor-in-interest of the owner of equity of redemption at the date of sale.
(d) In Pethaperumal Ambalam V. Chidambaram Chettiar, minor through property guardian, P.E.Eapen reported in AIR 1954 MADRAS at page 760, it is held that " the issue of sale certificate is to complete the title of the purchaser so that his right to possession becomes unimpeachable as against the persons to the suit as well as those claiming under them."
(e) In Birdichand and others V. Ganpatsao Narayansao Kalar reported in AIR 1938 Nagpur at page 525, it is held thus:
"A sale in execution of a decree cannot be set aside, even if the decree under which the sale took place is not merely varied but reversed. The mere fact that the sale has not been confirmed makes no difference, when it is bound to be confirmed, an application under O. 21, R. 90 having been made and disallowed. No doubt, where there is an appeal from preliminary decree and the preliminary decree is varied by the Appellate Court so that the final decree is different from that passed by the trial Court, it is the final decree which carries into effect the preliminary decree as varied by the Appellate Court, that is the effective final decree; but although this would cause the decree under which the sale took place to merge in the final decree of the Appellate Court, that fact, in the absence of any stay, rendering it improper to proceed with the execution of trial Court's final decree, would not invalidate the sale as against the third party purchaser, though different considerations might apply where the decree-holder is the purchaser : 10 All 166; AIR 1917 All 163 and AIR 1931 All 655, Rel. on."
(f) In the decision of the Honourable Supreme Court Jog Ram V. State of Haryana and Others reported in (1996)5 Supreme Court Cases at page 398 at page 399, in paragraph 2, it is held thus:
"The learned Counsel for the appellant contended that though the respondent was the highest bidder, he had not deposited the full consideration of the bid amount; there was no sale certificate issued to him and thereby the fifth respondent could not become the owner of the property to the extent of 13 bighas 13 biswas which was sold in the auction to him. The Division Bench was not right in holding that the appellant was not entitled to the sale on the ground that it was already put to auction in favour of the fifth respondent. When we pointedly asked the learned Counsel for the appellant for the order of confirmation of sale of land dated 27.02.1967, in fairness, the learned Counsel has stated that the said order was not made part of the record. The confirmation of the sale conferred certain rights on the fifth respondent. Unless the sale was duly set aside, the sale property held and concluded could not be put to resale and sold to the appellant on 26.06.1968. as a consequence, the cancellation of the sale by order dated 05.02.1974 cannot be said to be vitiated by any error of law warranting interference.
(XLiii) Apart from the aforesaid decisions, this Court cites the decision Ram Sanehi V. Janki Prasad reported in AIR 1931 Allahabad at page 466, wherein it is held that "the purchaser at the first auction sale, whether it be held under the prior mortgage or under the subsequent mortgages, acquires the interest of mortgagor."
(XLiv) Also this Court cites the decision Chandulal Keshwani and Others V. Balwant Singh and Others reported in AIR 2006 ALLAHABAD at page 47, wherein it is held as follows:
A puisne mortgagee is a person who has an interest in the right to redeem the mortgaged property under the prior mortgage. He may institute a suit for redemption of the prior mortgage. Where a prior mortgagee obtains a decree without impleading the puisne mortgagee he becomes entitled to sue for redemption of earlier mortgage. If the property is sold in execution of the decree, the rights of puisne mortgagee are not affected so long as there is no other prohibition in law. A puisne mortgagee is the assignee of the equity of redemption but he has to bring a suit to enforce his rights. S.91 of the Act gives such a right to the subsequent mortgagee. He will fall within the entitlement of the person in sub-cl (a) of S.91, as a person who has an interest in or charge upon the mortgaged property, or in or upon the right to redeem the same.
It was thus held that the auction purchaser of the mortgaged property stepped into the shoes of the mortgagor and where the subsequent mortgagee is not a party to his suit for foreclosure, such a puisne morgagee-inferior in rank, acquires a right of redemption, and can sue for his interest in the mortgaged property. In a decree of redemption of mortgaged property the right of the auction purchaser is subject to the rights of the puisne mortgagee. There was no pleading nor any issue was framed or evidence led between the parties of the plaintiff having knowledge of auction sale and thus the question of the plaintiff nor objecting to the encumbrances at the time of auction sale cannot detain or be raised as a plea in equity to resist the decree of the interest in the mortgaged property.
(XLv) Further, in the decision Dinendronath Sanyal V. Ramcoomar Ghose reported in (1881)8 Ind.App 65 at page 75(PC) the Judicial Committee of the Privy Council observed as follows:
"There is a great distinction between a private sale in satisfaction of a decree and a sale in execution of a decree. In the former the price is fixed by the vendor and purchaser alone; in the latter the sale must be made by public auction conducted by a public office, at which the public are entitled to bid. Under the former the purchaser derives title through the vendor, and cannot acquire a better title than that of the vendor. Under the latter the purchaser, notwithstanding he acquires merely the right, title and interest of the judgment-debtor, acquires that title by operation of law adversely to the judgment-debtor, and freed from all alienations of the incumbrances effected by him subsequently to the attachment of the property sold in execution."
(XLvi) In Sm.Priti Rekha Mitra V. Narayan Chandra Dutta reported in 1956 CALCUTTA AT PAGE 510, it is held that "A mortgagee can press his equity of redemption before confirmation of sale."
(XLvii) In the decision of the Honourable Supreme Court Desh Bandhu Gupta V. N.L.Anand and Rajinder Singh reported in (1994)1 SUPREME COURT at page 131, at special page 141, it is inter alia held that "the auction purchaser gets a right only on confirmation of sale and till then his right is nebulous and has only right to consideration for confirmation of sale etc.,"
(XLviii) Furthermore, this Court, to promote the substantial cause of justice, quotes the decisions hereunder:
(1) In Shaw V. Bunny reported in 34 LJ CH at page 257, it is held that 'A puisne mortgagee or encumbrancer is a mortgagee other than and subordinate to the first mortgage, from whom accordingly he may purchase the mortgage property, when the first mortgagee is selling under a power of sale.' (2) In Ramaswami Iyer V. Komala Valli Ammal reported in AIR 1941 Madras at page 277, it is held that 'After the expiry of period for an application to set aside an Auction Sale, the Auction purchaser can effectively sell the property purchased, even in the absence of confirmation of an Auction sale by Court.' (3) In Sham Singh V. Vir Bhan reported in ILR 1942 Calcutta at page 349, it is held that 'A right of an Auction purchaser cannot be defeated by a transfer made by the Judgment debtor during that period.' (4) In Venkatappadu V. Appalaswami reported in (1940)2 MLJ at page 48, it is held that 'The confirmation of sale amounts to an adjudication that the property is alienable.' (5) In Velayadhan Pillai's case, reported in 1953 Travancore and Cochin at page 574, it is held that 'the fact that purchaser has not taken delivery of possession does not detract from the completeness of his title.' (6) A Court sale is also subjected to lis pendens, when sale is held pending a suit relating to the same property, as per the decision Radhemadhub V. Manohar reported in 15 Calcutta at page 756.
(7) In Sundararajan V. Kaka Mohammed reported in AIR 1940 Madras at page 42, it is held that 'where an Auction purchaser makes an adequate bid and complies with all the requirements of the Code and there is no irregularity or fraud is entitled to have the sale confirmed, even though at a later stage, some other person is willing to pay more.' (XLix) The trial Court, while passing a preliminary decree in O.S.No.299 of 1992 on 19.11.2001 has directed the Appellant/Plaintiff /Company to pay the first mortgage loan amount in respect of the suit property and if the said amount is paid then the Appellant/Plaintiff is entitled to the relief of preliminary. Further it directed the Appellant/Plaintiff to pay the mortgage loan amount of Rs.65,124/- to the first Respondent/third Defendant within a period of two months and with the above condition passed a preliminary decree as prayed for in the plaint with costs against the Defendants 1 to 3.
(L) The First Appellate Court viz., the learned Principal District Judge, Madurai, while passing the Judgment in A.S.74 of 2002 on 07.10.2005 has among other things observed that the Court Auction purchase in favour of the first Respondent/third Defendant has been upheld and there is no legal impediment to approve the interest of the first Respondent/third Defendant and resultantly allowed the Appeal by setting aside the Judgment and Preliminary Decree passed by the trial Court in O.S.No.299 of 1992 dated 19.11.2001 and resultantly dismissed the suit without costs.
(Li) As far as the present case is concerned, it is to be pointed out that the first Respondent/third Defendant is an auction purchaser of the suit property. As per Ex.B.5 Sale Certificate dated 09.10.1990, issued by the learned III Additional Subordinate Judge, Madurai in E.P.No.318/84 in O.S.No.394/78 filed by the Petitioner/Plaintiff/Decree holder viz., Sri Ram Chits and Investments (P) Ltd., Madras, the second Respondent/first Defendant M.Sivaraman in O.S.No.299 of 1992 has figured as Defendant in the said O.S.No.394 of 1978. The said Sri Ram Chits and Investments (P) Ltd., Madras, being the Plaintiff/Decree holder in O.S.NO.394/78 and E.P.NO.318/84, is the first mortgagee in whose favour an equitable mortgage on 11.11.1974 has been created by the second Respondent/first Defendant M.Sivaraman, who admittedly figured as Defendant in O.S.No.394/78 on the file of the Learned III Additional Subordinate Judge, Madurai. The Sri Ram Chits and Investments (P) Ltd., Madras has obtained a preliminary decree in O.S.No.394/78, on the file of the Learned III Additional Subordinate Judge, Madurai on 13.12.1978 against the Defendants therein namely M.Sivaraman, who is the second Respondent/first Defendant in O.S.No.299 of 1992 on the file of the Learned II Additional Subordinate Judge, Madruai. In pursuance of the preliminary decree dated 13.12.1978 in O.S.No.394/78, a final decree has been passed in O.S.No.394/78 on 06.08.1980.
(Lii) It is not in dispute that the sale of the suit property in public auction held on 23.09.1985 in execution of a decree in O.S.No.394/78, in E.P.No.318/84 has been confirmed on 09.10.1990. But in respect of the suit property in favour of the Appellant/Plaintiff, an equitable mortgage has been created on 05.03.1990 by the Respondents 2 and 3/Defendants 1 and 2 by taking a loan of Rs.25,000/- on a pronote. The Court Auction sale held on 23.09.1985 in respect of the suit property in E.P.No.318/84 in O.S.No.394/78 and confirmed on 09.10.1990 shows that the first Respondent/third Defendant (auction purchaser) gets the right, title and interest in the mortgage property, which the mortgagor had at the time of mortgage, even though, the first mortgage created by the second Respondent/first Defendant with the Sri Ram Chits and Investments (P) Ltd., Madras/Plaintiff in O.S.No.394/78, on the file of the Learned III Additional Subordinate Judge, Madurai with that of the xerox copy / certified copy of the sale deed.
(Liii) An equitable mortgage can be created as per Section 58(f) of the Transfer of Property Act, in the absence of depositing the original document and the said mortgage is a valid one in the eye of law. The first Respondent/third Defendant being an auction purchaser of the suit property derives title both of the mortgagee and those interested in the equity of redemption, the first Respondent/third Defendant (auction purchaser of the suit property) is entitled to protection on the ground of Equity, Fair Play and Good Conscience and even as a matter of Prudence, in the considered opinion of this Court. As a matter of fact, the first Respondent/third Defendant in O.S.No.299 of 1992 on the file of the Learned II Additional Subordinate Judge, Madurai is unconnected to the earlier suit proceedings in O.S.No.394/78 on the file of the Learned III Additional Subordinate Judge, Madurai. The first Respondent/third Defendant is a bonafide Court Auction purchaser and her rights are to be protected. Also, it cannot be gain said that a puisne mortgagee is not liable for a personal decree as per decision The Montreal Trust Company V. The British Columbia Land and Investment Agency, Limited reported in AIR 1936 Privy Council at page 65.
(Liv) In the instant case, though the Learned Counsel for the Appellant/Plaintiff strenuously contends that the Appellant/Plaintiff is entitled to get the rights and benefits of a puisne mortgagee, it is to be pointed out that in the suit O.S.No.299 of 1992 filed by the Appellant/Plaintiff the first mortgagee Sri Ram Chits and Investments (P) Ltd., Madras, has not been arrayed as one of the parties to the proceedings. It is not known as to why the Appellant/Plaintiff has not added the first mortgagee viz., Sri Ram Chits and Investments (P) Ltd., Madras in O.S.299 of 1992. The prior mortgagee/first mortgagee (Sri Ram Chits and Investments (P) Ltd., Madras) is not bound by the second mortgage created by the second and third Respondents/the Defendants 1 and 2 to and in favour of the Appellant/Plaintiff on 05.03.1990. In Nansing V. Nathaji reported in AIR 1929 Nagpur at page 135, it is held that 'A prior mortgagee can be joined as party and when joined, he has a right to redeem the puisne mortgagee.' A prior mortgagee cannot redeem a second mortgagee. It is only on the principle redeem up and foreclose down. A prior mortgagee is not bound by the second mortgagee, as per the decision reported in AIR 1917 Madras, at page 751. Moreover, a transferee pendente lite is bound by the Decree or Order of a Court, as per the decision reported in AIR 1915 Nagpur at page 28.
(Lv) In the absence of the prior mortgagee/first mortgagee (Sri Ram Chits and Investments (P) Ltd., Madras) not being added as a party to the suit in O.S.No.299 of 1992 on the file of the trial Court and inasmuch as, the prior mortgagee (Sri Ram Chits and Investments (P) Ltd.,) is not bound by the second mortgage created by the second and third Respondents/Defendants 1 and 2 to and in favour of the Appellant/Plaintiff on 05.03.1990, this Court, on the basis of Equity, Fair Play, Good Conscience and even as a matter of Prudence, opines that the Appellant/Plaintiff is entitled to recover the principal mortgage sum of Rs.25,000/- from 05.03.1990 together with interest 12% per annum till date of realisation together with proportionate costs from the second and third Respondents/the Defendants 1 and 2. Accordingly, it is held by this Court that the mortgage executed by deposit of Registration of Copy of Title Deeds and the Decree obtained in O.S.No.394 of 1978 and the subsequent E.P. Proceedings in E.P.No.318 of 1984 are binding on the Appellant/Plaintiff and further, the Registration copy of the sale deed executed by the Mortgagor long after losing all his interests in the property and contents therein can be looked into and relied upon to know about the contents and the nature of transaction in the said document, even without examining any witness in this regard for resolving the dispute/controversy and moreover, the confirmation of Auction sale on 09.10.1990, in the present case, the reverts back to the public Auction sale held on 23.09.1985 and it binds everyone including the third parties and accordingly, the Substantial Questions of Law 1 to 3 are so answered.
10. In the result, the suit in O.S.No.299 of 1992, on the file of the trail Court is partly decreed by directing the Respondents 2 and 3/the Defendants 1 and 2 to pay the principal mortgage sum of Rs.25,000/- from 05.03.1990 till the date of realisation together with interest at 12% per annum coupled with proportionate costs to the Appellant/Plaintiff. Three months time is granted to the Respondents 2 and 3/the Defendants 1 and 2 to make the payment. Accordingly, the Second Appeal is disposed of, leaving the parties to bear their own costs.
ssl To
1. The Principal District Judge, Madurai.
2. The II Additional Subordinate Judge, Madurai.