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SUPREME COURT OF INDIA
A.Alagiriswami : M.H.Beg : P.Jaganmohan Reddy
Dattatreya Shanker Mote
Versus
Anand Chintaman Datar
Case No. : 1882 , 1883 of 1967
Date of Decision : 10/3/74
Transfer of Property Act, 1882 - Section 100, 6 and 48 - Registration Act, 1908 – Section 21, 55(3), 55(1), 51, 55 and 60(2) - Transfer of Property Supplementary Act, 1929 - Rule 15 - Law of Property Act, 1925 - Section 205(1)(xxi) - Mullas Indian Registration Act - Amendment Act of 1929 – Section 50 - Specific Relief Act, 1963 - Section 27(b) - Constitution of India, 1950 - Article 133 (1) (a) - Property Act XX of 1929 - Property - Mortgaged - Recovery of a Sum - Appellants had filed Civil Suit for recovery of a sum with interest from respondents Nos. 1 to 7 - A compromise decree was passed under which a charge was created for decretal amount on three pieces of property belonging to said respondents Nos. 1 to 7 - These properties comprise a house in Shukrawar Peth and Kakakuva Mansion in Budhwar Peth both at Poona and a chawl in Kalyan - This decree was registered, but due to inadvertence charge on Kakakuva Mansion in Budhwar Peth at Poona was not shown in Index of registration - Significance of this omission will become evident when full facts are narrated - Thereafter respondents Nos. 1 to 7 mortgaged Kakakuva Mansion to plaintiff-respondent No. 14 for a sum of Rs. 1 lakh – Held, Rights of appellants charge-holders could only be exercised, on facts found, subject to priority obtained by respondent mortgagees rights - This clear result of law, as contained in S. 100 of Act, cannot be defeated by invoking either terms of or principles underlying S. 48 of Act read with first part only of S. 100 of Act - If respondent simple mortgagee Oswal could not have claimed benefit of proviso to S. 100, first part of S. 100, read with S. 48 of Act, could have come to aid of appellants - But, on view adopted by Court, this line of reasoning does not help unfortunate charge-holders at all - Learned Counsel for appellants suggested that mortgages made subsequent to charge by a decree in favour of Motes were struck by doctrine of Lis Pendens - Bombay High court had repelled this contention on two grounds firstly, properties which were subsequently charged with payment of debts to Motes were not subject-matter of Suit and secondly, there was no Darkhast or execution application pending at time when simple mortgages in favour of plaintiff-respondent Oswal were created – Court agree with these reasons for holding that doctrine of Lis Pendens had no application on facts of case before Court - Appeals dismissed.
Ratio Decidendi:
A charge created by act of parties, including one embodied in a compromise decree that is duly registered, is governed by Section 100 of the Transfer of Property Act, 1882 ("TPA"), as it constitutes security on immovable property without amounting to a mortgage, attracting provisions applicable to a simple mortgage so far as may be. (!) [1000285470006][1000285470007][1000285470039][1000285470040]
The proviso to Section 100 TPA protects a subsequent transferee for consideration without notice of the prior charge, preventing enforcement of the charge against "any property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge"; "transfer of property" under Sections 5 and 6 TPA includes transfer of an interest in immovable property, such as by simple mortgage under Section 58 TPA, and "property in the hands of" encompasses the mortgagee's interest therein (including intangible rights), without requiring physical possession. (!) (!) (!) [1000285470011][1000285470012][1000285470013][1000285470015][1000285470016][1000285470017][1000285470020][1000285470021][1000285470047][1000285470048][1000285470049][1000285470050][1000285470051][1000285470058][1000285470059] (!) (!) (!)
Constructive notice under Explanation I to Section 3 TPA requires proper registration under the Registration Act, 1908 (including correct entry in indices under Sections 51 and 55), such that omission due to Sub-Registrar's inadvertence precludes notice despite Book 1 entry.[1000285470004][1000285470005][1000285470041][1000285470042][1000285470043] (!) (!) (!) (!) (!)
Where a subsequent simple mortgagee advances consideration without actual or constructive notice of a prior charge (verified via diligent search of relevant indices and records), the mortgage takes priority over the charge; Section 48 TPA does not aid the prior charge-holder, as a charge is not a "transfer" creating competing rights therein.[1000285470001][1000285470002][1000285470023][1000285470024][1000285470025][1000285470030][1000285470044][1000285470066][1000285470067] (!)
Doctrine of lis pendens under Section 52 TPA does not apply to properties charged by compromise post-suit institution and not directly in issue therein, absent pending execution proceedings at subsequent mortgage creation.[1000285470003][1000285470068]
JAGANMOHAN REDDY, J
(1) IN Both these appeals by certificate the question of competing priorities between a charge created by a decree and a subsequent simple mortgage has to be determined. The appellants had filed Civil Suit No. 741 of 1938 for recovery of a sum of Rs. 1,34,000.00 with interest from respondents Nos. 1 to 7. On 31/03/1941 a compromise decree was passed under which a charge was created for the decretal amount on three pieces of property belonging to the said respondents Nos. 1 to 7. These properties comprise a house in Shukrawar Peth and Kakakuva Mansion in Budhwar Peth both at Poona and a chawl in Kalyan. This decree was registered on 7/04/1941, but due to inadvertence the charge on the Kakakuva Mansion in Budhwar Peth at Poona was not shown in the Index of registration. The significance of this omission will become evident when the full facts are narrated. Thereafter on 27/06/1949 the respondents Nos. 1 to 7 mortgaged the Kakakuva Mansion to the plaintiff-respondent No. 14 for a sum of Rs. 1 lakh. The respondents created a further charge on 13/09/1949 in favour of the said plaintiff-respondent No. 14 for Rs. 50,000.00. On 7/07/1951 a charge was created by a decree in favour of respondent No. 15 for a sum of Rs.59,521/11/- under an award decree. In the meantime the appellants had recovered some amounts by execution of their decree in Civil Suit No. 741 of 1938 by sale of the property at Shukrawar Peth at Poona and the chawl at Kalyan. In spite of these sales a large balance was still due, and in order to recover the balance of Rs. 1,57,164.00 appellants filed Darkhast No. 32 of 1952 in the court of the Third Joint Civil Judge, Senior Division at Poona for the sale of Kakakuva Mansion over which, as we have said earlier, there was a charge created in favour of the appellants by the decree of 31/03/1941. Notices were issued under Order 21, Rule 66 of the Code of Civil Procedure to respondent No. 14 and other respondents. The Executing court, however, held that the presence of plaintiff-respondent No. 14 was not necessary for the purposes of effecting the sale on the Darkhast of the appellants and accordingly, it vacated the notices. Against the said order of the Executing court respondent No. 14 filed First Appeal No. 668 of 1957 in the High court of Bombay, and he also filed on 5/06/1958 Civil Suit No. 57 of 1968 in the court of the Joint Civil Judge, Senior Division at Poona for a recovery of a sum of Rs. 2,18,564.00 alleged to be due to him under the two mortgages dated 27/06/1949 and 13/09/1949.
(2) IT may be mentioned that while Suit No. 57 of 1958 was pending the property the subject-matter of that suit was put up for sale on the appellants Darkhast and it was purchased by the appellants with the leave of the court. In view of this development respondent No. 14 impleaded the appellants in the said Suit No. 57 of 1958 as the purchasers of the equity of redemption. The appellants resisted the suit on the ground that they had a prior charge in their favour and the mortgage of respondent No. 14 was subject to that charge. It was also contended that S. 100 of the Transfer of Property Act, 1882 (hereinafter referred to as the Act) regarding notice was not obligatory in respect of the interest created in favour of respondent No. 14. The trial Judge by his judgment dated 21/07/1959, while decreeing the suit of the plaintiff-respondent No. 14 for recovery of Rs. 2,18,564.00 held that the appellants had a prior charge over the property and were bound by the mortgage in favour of the plaintiff-respondents Nos. 14 and 15 (defendant No. 8 in the suit). It further held that the rights of a simple mortgagee are not "property in the hands of" the mortgagee who could not be protected by the proviso to S. 100 of the Act.
(3) AGAINST the decree of the trial Judge, respondent No. 14 filed First Appeal No. 40 of 1960 in the High court of Bombay. The two First Appeals, one arising out of the
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