Madras High Court
Natesan (Died) And Another vs J. Vasanth And 5 Others on 15 June, 2001
Author: C. Nagappan
Bench: C. Nagappan
ORDER
1. This appeal is preferred against the judgment and decree of the Subordinate Judge, Namakkal in O.S.No.39 of 1987.
2. The third defendant is the appellant herein.
3. The plaint averments are summarised as follows: The first defendant obtained a loan of Rs. 15,000 from the plaintiff on 1.2.1975 and executed a Mortgage Deed mortgaging the suit properties for the above loan. The first defendant obtained the above mortgage loan from the plaintiff for his money lending business and he is not entitled to claim benefits under the Debt Relief Act. The plaintiff demanded the repayment of the loan and inspite of it, the first defendant did not pay any amount. The first defendant had obtained another loan of Rs. 30,000 from the second defendant on 19.10.1973 by mortgaging the very same properties for the above loan. The second defendant filed a suit in O.S.No. 646 of 1979 against the first defendant and obtained a preliminary decree for a sum of Rs. 50,000 on 31.3.81 and he also obtained final decree on 31.8.1983. Pursuant to that, the second defendant executed the above decree in E.P. No.63 of 1983 and brought the suit properties for sale. The third defendant purchased the first item for a sum of Rs. 42,000 and the second item for a sum of Rs. 13,000 in court auction and the sale was confirmed. The second defendant in his suit in O.S.No.646 of 1979 did not implead the other mortgagees, namely, the plaintiff and the defendants 4 to 6 fraudulently and obtained the decree in their absence and the third defendant had purchased the properties for a lesser amount. Items 1 and 2 of the suit properties are individually worth a lakh of rupees. The court auction was not conducted as per law. Defendants 4 to 6 are impleaded in the suit since they are subsequent mortgagees of the suit properties. The plaintiff prayed for a mortgage decree for a sum of Rs. 36,600 in the suit.
4. The third defendant in his written statement has contended that he is a bona fide purchaser in court auction sale in pursuant to the decree obtained by the second defendant against the first defendant. The sale has been confirmed and the delivery has already been taken through court. One Thiagarajan, son of Periasami Pillai and also the plaintiff filed applications to set aside the sale and they were dismissed. No further action was taken against that order and hence the plaintiff is barred by the principle of res Judicata from agitating the same question once again in this proceeding. The suit is not maintainable for the reason that the sale in favour of the third defendant has been confirmed and the possession has been taken. There is no liability for the third defendant to pay the suit claim. The third defendant is not a necessary party to the suit. There is no cause of action against the third defendant and the alleged one is false. The prayer in the plaint for a decree against all the defendants is not sustainable in law.
5. The trial Court framed five issues and on a consideration of the matter, held that the plaintiff is entitled for a mortgage preliminary decree against the defendants and decreed the suit as prayed for with costs. Aggrieved by the same, the third defendant has preferred the present appeal.
6. During the pendency of the appeal, the appellant died and his legal representative has been brought on record as appellant. In this Judgment, the parties are described as arrayed in the suit for the sake of convenience.
7. The point for determination in this appeal is whether the plaintiff is entitled for a mortgage preliminary decree as prayed for?
8. POINT:- The case of the plaintiff is that the first defendant obtained a loan of Rs. 15,000 from her on 1.2.1975 and executed a Mortgage Deed mortgaging the suit properties for the above loan and he did not pay any amount. She has further averred that the first defendant had earlier obtained another loan of Rs. 30,000 from the second defendant on 19.10.73 by mortgaging the suit properties and the second defendant filed a suit in O.S.No.646 of 1979 against the first defendant and obtained a preliminary decree for a sum of Rs. 50,000 and pursuant to the-final decree, he executed the same and-brought the suit properties for sale and the third defendant purchased the first item for a sum of Rs. 42,000 and second item for a sum of Rs. 13,000 in court auction and the sale was confirmed. The plaintiff has stated that the second defendant in his suit did not implead the other mortgagees, namely, the plaintiff and the defendants 4 to 6 and had obtained the decree in their absence and the third defendant had purchased the suit properties in the court auction for lesser amount.
9. The first defendant even though entered appearance through his counsel in the suit, did not choose to file written statement. The fourth defendant also did not file any written statement. Defendants 2, 5 and 6 remained exparte. The third defendant alone filed his written statement and contested the suit.
10. The contention of the third defendant is that he is a bona fide purchaser in court auction sale, conducted in pursuance to the decree obtained by the second defendant against the first defendant and he had taken delivery of the property and the sale was confirmed. Yet another contention was raised by him in the written statement that the plaintiff and the son of the first defendant filed applications to set aside the sale in the execution proceedings in O.S.No.646 of 1979 and both the applications were dismissed and hence the plaintiff is estopped by the principle of res Judicata from agitating the same question in the suit. The trial Court while considering this contention held that the plaintiff in the present suit withdrew the application to set aside the sale in O.S.No.646 of 1979 and hence there was no decision on merits. It is not disputed that the plaintiff withdrew the application filed by her to set aside the sale in the above execution proceedings and hence, the question of res judicata does not arise.
11. The learned counsel appearing for the appellant, Mr. T.R.Rajaraman contended that the appellant/third defendant, being the purchaser in execution of a decree obtained by the first mortgagee, namely, the second defendant in the suit to which the puisne mortgagee namely the present plaintiff was not a party, stands only in the position of the first mortgagee since the interest of the first mortgagee and the mortgagor had passed on to him as auction purchaser and the subsequent mortgagee, namely, the plaintiff has to pay the amount due under the first mortgage for enforcing her claim against the mortgaged properties and he relied on a commentary in Sanjiva Row's Transfer of Property Act (Sixth Edition)-and some decisions in mis regard.
12. The commentary for Section 91 in Sanjiva Row's Transfer of Property Act (sixth edition) at Page 1576 is extracted as follows:
"A purchaser, at a sale in execution of a decree obtained by the first mortgagee in a suit to which the puisne encumbrancer was not a party, does not displace the latter but stands only in the position of the first mortgagee, and, under such a sale, the interest both of the first mortgagee and of the mortgagor passes to the auction-purchaser subject to the rights of the puisne mortgagee. The right of the purchaser in execution of a decree, obtained by the first mortgagee in such a case, is the same as that of the mortgagor, and he can redeem the second mortgage. In such cases, the subsequent mortgagee also has the right to pay up the amount due under the first mortgage."
13. The first decision relied on by the appellant is Musammat Sukhi v. Ghalam Safdar Khan and others, A.I.R. 1922 PC 11. Privy Council in the above decision held as follows:
"When a prior mortgagee brings the property to sale in execution of a decree on his mortgage without impleading the puisne mortgagee to the suit, the rights of the puisne mortgagee are not affected by the sale. But if the puisne mortgagee brings a suit on his mortgage, the auction purchaser in execution of the prior mortgage decree, can use the prior mortgage right as a shield, and claim payment of the amount due under the prior mortgage decree, where the puisne mortgagee seeks a decree for sale in his favour."
14. The facts of the case in the above decision are similar to the facts of the present case. The Privy Council has laid down that if the puisne mortgagee brings the suit on his mortgage, the auction purchaser in execution of the prior mortgage decree, can use the prior mortgage right as a shield and claim payment of the amount due under the prior mortgage decree. In the present case, the prior mortgagee, namely, the second defendant brought the properties to sale in execution of decree on his mortgage without impleading the puisne mortgagee, namely, the present plaintiff in his suit and now, the puisne mortgagee, namely, the plaintiff has brought the present suit on her mortgage seeking for a decree for sale in her favour and in such circumstances, the auction purchaser, namely, the third defendant can claim payment of the amount due under the prior mortgage decree from the plaintiff herein.
15. The next decision relied on by the appellant is A.M.A. Firm by Managing Partner Murugappa Chettiar in the place of A.M.A. Palaniappa Chettiar v. Marudachalam Chettiar and others, A.I.R. 1948 Mad. 412. A learned Judge of this Court has held as follows:
"The rights of second mortgagee who was not impleaded as a party to the suit by the first mortgagee, remain unaffected by such a suit and by sale in pursuance of that decree. His right under S. 91 to redeem the prior mortgage, is not taken away by such decree and sale."
16. The counsel for the appellant cited yet another decision of this Court in Shanmugha Nadar v. Sivam Pillai and others, . 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 S. 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 mortgage 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.
19. In the result, there shall be a mortgage preliminary decree against the first and third defendants provided the plaintiff pays the amount due under the prior mortgage decree in O.S. No. 646 of 1979 on the file of Sub-Court, Namakkal to the third defendant herein, namely, the Court Auction Purchaser and the suit with regard to other defendants shall stand dismissed. The appeal is allowed to the extent indicated above and the judgment and decree of the trial Court are modified accordingly. There shall be no order as to costs.