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1948 Supreme(SC) 32
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD NORM AND, LORD MACDERMOTT AND-SIR JOHN BEAUMONT.
GOURI DUTT MAHARAJ - Appellant
Versus
SHEIKH SUKUR MOHAMMED - Respondents
On appeal from the High Court at Calcutta.
Decided On : Apr. 6. 1948.
Solicitors for appellant : Hy. S. L. Polak & Co.
Section 52 of the Transfer of Property Act maintains the status quo during litigation regardless of the case's merits. A compromise decree is a "decree or order" under this section, and an express first charge created by such a decree prevails over subsequent mortgages.
Headnote:(A) Transfer of Property Act, 1882 - Section 52 - Doctrine of lis pendens - Transfer or encumbrance of property during pendency of suit - Right to immovable property directly and specifically in question - The broad purpose of the section is to maintain the status quo unaffected by the act of any party to the litigation pending its determination - Applicability does not depend on matters of proof or the strength or weakness of the case in bona fide proceedings.
(B) Compromise Decree - Scope of Section 52 - A decree or order made pursuant to agreed terms of compromise is included within the meaning of the section - Such a decree need not invariably reflect the precise relief claimed in the plaint, provided it is not entirely alien to the issues raised.
(C) Priority of Charges - An express provision in a compromise decree stating that decretal dues are a first charge on the property is not qualified by a separate clause merely acknowledging the existence of a subsequent mortgage, unless the language explicitly indicates that the subsequent mortgage is entitled to priority.
Facts of the case:
A mortgagor held a lease for a cinema and entered into an unregistered agreement to sell a share of the business and assets to partners. The partners initiated a suit for specific performance or, alternatively, a declaration of a charge on the property. One day after the suit was filed, the mortgagor executed a registered simple mortgage in favor of a third party. The suit ended in a compromise decree where the partners relinquished their rights in exchange for a monetary sum, which was declared a first charge on the property. The mortgagee subsequently sought to enforce the mortgage.
Findings of Court:
The mortgage was executed during the pendency of a suit where the right to immovable property was directly and specifically in question. The compromise decree, which provided for a charge on the property, is a decree within the meaning of Section 52 of the Transfer of Property Act. The acknowledgement of the mortgage's existence in the compromise did not override the express provision granting the decretal dues first charge status.
Issues: Whether a mortgage executed during the pendency of a suit for specific performance or a charge is affected by the doctrine of lis pendens under Section 52 of the Transfer of Property Act, and whether a subsequent compromise decree falls within the scope of that section.
Ratio Decidendi: The doctrine of lis pendens under Section 52 is intended to preserve the status quo; therefore, its application is not contingent upon the registration of the underlying agreement or the ultimate strength of the claim. A compromise decree is a valid "decree or order" under the section if it addresses the substance of the relief sought. An explicit grant of a first charge in a compromise decree takes precedence over a general acknowledgement of a subsequent mortgage.
Result: Appeal dismissed.
Legal Category Hierarchy
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property law
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transfer of property
- lis pendens
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transfer of property
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practice and procedure
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civil procedure
- compromise decrees
- mortgage suits
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civil procedure
Judgement
Appeal (No. 71 of 1946) from a judgment and decree of the High Court (August 27, 1942) which substantially varied a judgment and decree of the Court of the Subordinate Judge at Asansol (November 24, 1939) in a mortgage suit brought by the present appellant as mortgagee.
The following facts, material to the issues now calling for determination, are taken from the judgment of the Judicial Committee. On November 15, 1931, Sheikh Sukur Mohammed, the first named respondent (hereinafter called the mortgagor), obtained a lease of some three-fifths of an acre in the town of Asansol for three years at a rent of Rs. 12 per month and with a right of renewal. The mortgagor proceeded to construct a cinema on that plot and, falling short of funds, took into partnership Oscar Gerald Birt and Pramatha Nath Mukherjee (hereinafter called the new partners) who were, it appeared, the predecessors in title of the respondents other than the mortgagor. That transaction was effected by an unregistered agreement in writing of June 8, 1932, which provided (a) for the carrying on of the cinema business in partnership by the mortgagor and the new partners, with the former having an eight annas interest and each of the new partners a four annas interest, and (b) for the sale by the mortgagor to the new partners of the mortgagors eight annas interest, or half share, in the cinema business and its assets, which included the leasehold already mentioned, for the sum of Rs. 15,000 " free from "all encumbrances." The parties to that agreement fell out, and on September 20, 1932, the new partners commenced a suit —No. 229 of 1932—against the mortgagor. In that suit the new partners pleaded the agreement of June 8, 1932, alleged that they had advanced thereunder a sum of Rs. 17,375, and claimed, inter alia, specific performance of the said agreement for sale and, alternatively, a decree for the said advance of Rs. 17,375 with a declaration that it and costs were a first charge on the premises described, which included the said leasehold. On the next day, September 21, 1932, the mortgagor executed a mortgage deed of the said leasehold, with fittings and equipment, in favour of the appellant to secure an advance of Rs. 6,000 with interest. That was a simple mortgage, duly registered, and the present suit was founded on it.
Suit No, 229 (to which the appellant was throughout a stranger) ended in a compromise between the mortgagor and the new partners which was reduced to writing and was framed on the basis that the new partners should drop out of the cinema business and relinquish their rights under the agreement of June 8 in consideration of the mortgagor paying them a sum of Rs. 18,500 in respect of moneys advanced and costs of suit. The following stipulations therein were material Clause 2. "That a final decree for the aforesaid sum of "Rs. 18,500 will be passed in favour of the plaintiffs and that "the defendant will make payment of the said decretal sum "by monthly payment as described below." Clause 6. " That "the decretal dues of the plaintiffs as stated above are a first " charge on the cinema house, lands, machineries, plants, tools, "furniture, equipment, etc., mentioned in the schedule below
8 Law. Rep. 75 Ind. App. 165 ( 1947- 1948) Gouri Dutt Maharaj V. Sheikh Sukur Mohammed
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"and shall continue a first charge till full satisfaction of this "decree." Clause 12. "That the defendant assures the " plaintiffs that there is no charge or mortgage on the properties " mentioned in the schedule below save and except one mortgage " in favour of Gouri Dutt Maharaj of Asansol for Rs. 6,000 " (six thousand) subsequent to the aforesaid agreement dated "8th June, 1932." The schedule referred to specified the leasehold in question. The compromise was accepted by the Subordinate Judge at Asansol on November 17, 1932, as appeared from the final decree in suit No. 229 which ordered that " the suit be decreed in terms of petition of compromise " and directed t
