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1918 Supreme(SC) 21
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
VISCOUNT HALDANE, SIR JOHN EDGE, MR. AMEER ALI, AND SIR WALTER PHILLIMORE, BART.
HET RAM - Appellant
Versus
SHADI LAL - Respondents
On Appeal from the High Court at Allahabad.
Decided On : March 15, 1918.
Solicitors for appellant: T. L. Wilson & Co.
Solicitors for first respondent: Pyke, Franklin & Gould.
A decree absolute for sale under Section 89 of the Transfer of Property Act extinguishes the mortgage security. If the second mortgagee is not joined in the suit, they are not bound by the decree, but the first mortgage security remains extinguished regardless of the decree's subsequent expiration.
Headnote:(A) Transfer of Property Act, 1882 - Sections 58, 67, 85 and 89 - Simple mortgage - Suit for sale - Necessity of joining subsequent mortgagees - Effect of decree absolute - Extinguishment of security - Under Section 85, a first mortgagee is bound to make the second mortgagee a party to a suit for sale; failure to do so means the second mortgagee is not bound by the order for sale. Under Section 89, once a decree absolute for sale is made, the defendant's right to redeem and the security are both extinguished, and the mortgagee's right under the security is substituted by the right to a sale conferred by the decree.
(B) Indian Limitation Act, 1877 - Article 179 - Execution of decree - Period of limitation - A decree for sale that is not executed within the prescribed period of three years becomes inoperative. However, the expiration of the decree under the Limitation Act does not revive a security that was already extinguished by the making of the decree absolute.
Facts of the case:
An owner purchased immovable property subject to two simple mortgages. The first mortgagee obtained a decree absolute for sale but did not make the second mortgagee a party to the suit. The first mortgagee subsequently died, and the owner of the property succeeded to the first mortgagee's rights. The decree for sale was never executed and became inoperative due to the expiration of the limitation period. The second mortgagee later instituted a suit for a sale decree.
Findings of Court:
The court found that the second mortgagee was not affected by the prior decree as they were not made a party to the suit. It further held that the security of the first mortgage was extinguished upon the making of the decree absolute, and the subsequent failure to execute the decree did not restore that security.
Issues: Whether property sold under a second mortgage should be treated as subject to a prior mortgage right in circumstances where a decree absolute for sale had been obtained on the prior mortgage, but the second mortgagee was not a party to that suit and the decree subsequently became inoperative due to limitation.
Ratio Decidendi: The court reasoned that under Section 89 of the Transfer of Property Act, a decree absolute extinguishes the mortgage security. While the second mortgagee was not bound by the prior decree because they were not joined as a defendant under Section 85, the first mortgage security itself ceased to exist upon the decree becoming absolute. The fact that the decree later became inoperative under the Limitation Act does not revive the extinguished security.
Result: Appeal dismissed with costs.
Legal Category Hierarchy
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property law
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transfer of property act
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mortgages
- simple mortgage
- foreclosure and sale
- priority of mortgages
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mortgages
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transfer of property act
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practice and procedure
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limitation
- execution of decrees
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limitation
Judgement
Appeal from a judgment and decree of the High Court (May 13, 1913) varying a decree of the Court of the Subordinate Judge of Moradabad.
The appellant, in 1883, purchased immovable property which was subject to a simple mortgage made in 1880 in favour of one Lachman Das, and to further mortgage made in 1881 in favour of the first respondent, and took possession.
In 1895 Lachman Das obtained against the mortgagor and the appellant a decree absolute for sale under s. 83 of the Transfer of Property Act, 1884, upon his mortgage of 1880. The first respondent was not made a defendant to the suit although his mortgage of 1881 was duly registered. Later in 1892 Lachman Das died, without having executed the decree, and was succeeded by the appellant as heir. The appellant took no steps under the decree.
Law Rep. 45 Ind. App. 130 ( 1917- 1918)
Het Ram V. Shadi Lal 44
In 1910 the first respondent instituted the present suit against the mortgagors, the appellant, and other transferees of the property mortgaged (now joined as respondents), for a sale decree under his mortgage of 1880.
The trial judge made a decree for sale, but ordered that the sale should be subject to the prior mortgage right of the appellant under the mortgage of 1880.
Upon appeal to the High Court the decree was varied by omitting the direction in favour of the appellant. The learned judges (Richards C.J. and Lyle J.) said " We think that if Het Ram had acquired the mortgage of 1880 while he was still owner of the property subject only to the mortgage now sued upon, he could probably set up the equity of his prior mortgage of 1880. But it seems to us that Het Ram cannot be regarded as the owner of the mortgage of 1880. The (previous) suit was brought upon the foot of that mortgage and a decree obtained which has never been executed. We think that the mortgage merged in the decree, and that the acquiring of the decree by Het Ram cannot be said to have vested in him the mortgage upon which the decree was based. Neither is he in the position of a person who has purchased upon the foot of a sale in execution of the decree of 1880."
1918. Feb. 21, 22. Dunne, K.C., and T. B. W. Ramsay, for the appellant. The decree of the trial judge was right. The appellant succeeded to the rights of Lachman Das under the prior-mortgage. There was thereupon no merger of those rights, and the appellant was entitled in justice, equity, and good conscience to the benefit of that mortgage Gokuldoss v. Rambux Seochand (( 1884) L. R. 11 I. A. 126.); Dinobundhu v. Jogmaya (( 1901) L. R. 29 I. A. 9.); Mahomed Ibrahim v. Ambika . (( 1912) L.
R. 39 I. A. 68.) The decree of 1892 did not extinguish the prior mortgage right as against the first respondent, since the latter was not a party to the decree. Further, the appellant could not enforce the decree, since he was owner of the mortgaged property.
Dube, for the first respondent. Under s. 89 of the Transfer of Property Act the security contained in the prior mortgage ceased to exist upon the decree absolute being obtained Ram Singhji v. Chunni Lal . (( 1897) I. J. R. 19 A. 205.) The appellant has no rights against the first respondent upon the decree. First, because the first respondent was not made a defendant, as (under
s. 85) he should have been. The mortgage of 1880 being registered, Lachman Das had notice of it Mahomed Ibrahim v. Ambika . (L. R. 39 I. A. 68, 82.) Secondly, because under Sched. II., art. 179, of the Limitation Act, 1877, a period of three years was provided for enforcing the decree. Time began to run from the date of the decree absolute Mahabir Prasad v. Sital Singh (( 1897) I. L. R. 19 A. 520.); once it began to run there was no suspension owing to the fusion of the mortgagor and mortgagee interests Lala Soni Ram v. Kanhaiya Lal . (( 1913) L. R. 40 I. A. 74, 85.) The appellant could have taken steps upon the decree under s. 232 of the Code of Civil Procedure, 1882.
Dunne, K.C., in reply. The provisions as to limitation
