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SUPREME COURT OF INDIA
K. MUTHUSWAMI GOUNDER
versus
N. PALANIAPPA GOUNDER
Decide on August 31, 1998
AUCTION SALE - MORTGAGE - CHARGE - SECURITY BOND - INTERPRETATION - REDEMPTION - ORDER XLI RULE 33 CPC - RES JUDICATA - FINALITY OF DECREE - APPELLATE COURT'S POWER TO SET ASIDE DECREE - COURT'S DISCRETION - LEGAL PRINCIPLES.
Fact of the Case:
Two competing Court auction purchasers disputed the superiority of their rights derived from alleged hypothecation of the same property. The respondent purchased the property in a Court auction sale in 1957, while the appellant purchased it in a subsequent auction sale in 1966. The dispute centered around the nature of a document (Exhibit A-6) executed in 1950, which the appellant claimed created a charge over the property, making him a puisne mortgagee.
Finding of the Court:
1. The document Exhibit A-6 did not create a charge over the property. It was merely an undertaking not to alienate the property till the decree in O.S. No. 108 of 1950 was discharged. 2. The decree obtained in O.S. No. 108 of 1950 was a simple money decree and not a decree on a charge or mortgage. Therefore, the appellant, who purchased the property in execution of that decree, did not acquire any rights under Exhibit A-6. 3. The High Court was justified in exercising its discretion under Order XLI Rule 33 CPC to set aside the decree in favor of the appellant, as it was necessary to ensure that the appellant did not get a decree contrary to the finding that he did not hold the status of a puisne mortgagee.
Issues: 1. Whether the document Exhibit A-6 created a charge over the property, making the appellant a puisne mortgagee? 2. Whether the decree obtained in O.S. No. 108 of 1950 was a simple money decree or a decree on a charge or mortgage? 3. Whether the High Court was justified in exercising its discretion under Order XLI Rule 33 CPC to set aside the decree in favor of the appellant?
Ratio Decidendi: 1. A charge is an obligation to make payment out of the property specified. In the present case, the document Exhibit A-6 did not contain a clear recital of having created an obligation to make payment of the decretal amount out of the property in question. It merely stated that in the event of a decree being passed, the property would not be alienated till the decree is discharged, which is a mere undertaking without creating a charge. 2. The decree obtained in O.S. No. 108 of 1950 was a simple money decree and not a decree on a charge or mortgage. Therefore, the appellant, who purchased the property in execution of that decree, did not acquire any rights under Exhibit A-6. 3. The High Court was justified in exercising its discretion under Order XLI Rule 33 CPC to set aside the decree in favor of the appellant, as it was necessary to ensure that the appellant did not get a decree contrary to the finding that he did not hold the status of a puisne mortgagee.
Final Decision: The appeals were dismissed, and the High Court's decision was upheld.
Judgment
S. RAJENDRA BABU
( 1 ) THESE appeals arise out of dispute between two competing Court auction purchasers on the basis that the rights derived by each of them is superior to the other emerging out of alleged hypothecation of such property. Respondent filed a suit in O. S. 12 of 1967 on the files of II Subordinate Judge, Tiruchirappalli to restrain the appellant herein from interfering with respondents possession of the suit property. The appellant filed in the same Court a suit in O. S. 211 of 1967 for redemption of the suit land, and recovery of possession thereof. The undisputed facts leading to the two suits are as under. The suit land belonged to one Ganesan who executed a registered security bond on 18-12-1950 (18-2-1950) for a sum of Rs. 3,000. 00 hypothecating the suit property and also executed a promissory note in favour of one Vairavan Chettiar and borrowed moneys. Vairavan Chettiar obtained a decree on the foot of the Security Bond and in execution thereof brought the suit property to sale. Respondent purchased the suit property in the said Court auction sale on 6-2-1957 and the same was confirmed on 15-3-1957. Respondent took delivery of the property through Court. Sandanam Mudaliar and Company filed O. S. No. 108 of 1950 for recovery of a sum of Rs. 6,494. 10 against Ganesan. In that suit the plaintiffs got certain amounts due to Ganesan from the South India Railway attached before judgment. Ganesan filed I. A. No. 811 of 1950 in the said suit seeking for raising the attachment before judgment of the amount and it was ordered subjet to his furnishing of security. Ganesan executed on 12-4-1950 a registered deed in respect of the said property for Rs. 7,000. 00, costs of the suit and subsequent interest. In this said deed recitals were made referring to the security bond dated 18-2-1950, executed in favour of Vairavan Chettiar as a prior encumbrance. O. S. No. 108 of 1950 filed by Sandanam Mudaliar and Co. was decreed on 25-1-1956. Sandanam Mudaliar and Company in execution of the decree obtained by them brought the property to sale on 15-9-1962 and the original appellant Muthuswami Gounder purchased the property on 14-12-1966 for Rs. 12,250. 00 which sale was confirmed on 19-1-1967.
( 2 ) THE suit filed by appellant and the suit filed by respondent were ordered to be tried jointly. One of the questions raised in the suit is whether the deed dated 12-4-1950 executed by Ganesan in O. S. 108/50 on the file of the Court of Subordinate Judge, Coimbatore original of Exhibit A-6 creates any charge or was it only an undertaking not to alienate the suit property. On this question the trial Court held at paras 13 and 14 as follows :-
"13. As said already, the document is named as a security deed. Exhibit A6 shows that non-judicial stamps for the value of Rs. 105 had been affixed. If it was merely a document for giving an undertaking not to alienate there was no necessity to affix stamps for Rs. 105, which is the correct value of stamps for the sum of Rs. 7000. 00. In the document a specific immovable property (i. e. ,) suit property, is noted. It is specifically stated that for Rs. 7000. 00 and subsequent interest and costs this security bond is written. Even the prior encumbrance in favour of Vairavan Chettiar in respect of this property is noted. It is signed by Ganesan and attested by two witnesses. Taking all these factors found in Exhibit A6, taken along with the fact that the security was given as per order of Court in a petition to raise the attachment of the amount of Ganesan in the South Indian Railway, it is evident that the suit property was intended to be, and was as a matter of fact, given as a security for the payment of the sum of Rs. 7000. 00, costs and interest in the case.
14. It is thus evident that under Exhibit A6 a charge of a peculiar nature is created and "that here is an unquestioned liability and there must be some modes of enforcing it (in the words of their Lordships of the Privy Council in t
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