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1949 Supreme(SC) 38
Privy Council At North-West
Sir Malcolm Macnaghten, Lord Radcliffe, Justice Lord Simonds, JJ.
Ghulam Sarwar Khan and others -Appellant
Versus
Abdul Wahab Khan and others -Resopndent
Privy Council Appeal No. 20 of 1947
Decided On : 28-07-1949
Hy. S.L. Polak and Co., Douglas Grant and Co., M.A. Rahman, P.V.Subba Row, J.M. Pringle, A.G.P. Pullan, J.D. Casswell
A mortgage security is indivisible unless otherwise agreed. If the mortgagee rights for the full mortgage debt are sold by a paramount authority, the original mortgagee retains no rights in any part of the mortgaged land to transfer to others.
Headnote:(A) Land Revenue Act, 1887 - Sections 92 and 95 - Mortgage rights - Sale by auction for recovery of arrears - Indivisibility of mortgage security - Where the mortgagee rights in respect of the full mortgage debt are sold by public auction to a purchaser, the original mortgagee is left with no rights to transfer to any third party - A mortgage security is indivisible except by agreement between the mortgagee and mortgagor (Para 11).
(B) Transfer of Property - Mortgage - Rights of mortgagee - Once the entire mortgage debt is transferred or sold by paramount authority, the original mortgagee cannot retain rights in respect of any part of the mortgaged land (Para 10).
Facts of the case:
Certain lands were mortgaged for a specific sum. Due to land revenue arrears, the mortgagee rights were sold by public auction under the Land Revenue Act. A certificate of sale was issued confirming the transfer of the mortgagee rights for the full value of the mortgage debt to the auction purchaser. Subsequently, the original mortgagee purported to transfer the same mortgage rights to another party via a deed. The transferee of the latter deed brought a suit to enforce rights as a mortgagee.
Findings of Court:
The court found that the sale of the mortgagee rights for the full sum of the mortgage debt vested all such rights in the auction purchaser. Consequently, the original mortgagee had no remaining rights to transfer to the subsequent purchaser.
Issues: Whether the original mortgagee could transfer mortgage rights to a third party after those rights had been sold by the revenue authorities in a public auction, and whether a mortgage security is indivisible.
Ratio Decidendi: The court held that a mortgage security is indivisible unless agreed otherwise. Since the rights to the full mortgage debt were transferred to the auction purchaser, the original mortgagee could not have retained any rights in any part of the mortgaged land. The transfer of the full debt amount effectively extinguished all rights of the original mortgagee, making any subsequent transfer of those rights void.
Result: Appeal allowed.
In this appeal which is brought from a judgment and decree of the Judicial Commissioner, North West Frontier Province, dated 28th July 1943, a large number of questions have been debated upon which their Lordships think it unnecessary to express any opinion. The question which is decisive of the matters in dispute is a simple one and the relevant facts can be shortly stated.
[2] The first respondent to this appeal, Abdul Wahab Khan, claiming that under and by virtue of a deed of 23rd August 1939, he had acquired from one K. B. Muqarrab Khan, since deceased, all the rights which the latter enjoyed under a certain mortgage dated 25th May 1921, brought the suit out of which this appeal arises to enforce his rights as mortgagee under that mortgage. His suit was dismissed on various grounds by the Additional Subordinate Judge, Peshawar, on 24th November 1942, but his appeal from that decision was substantially allowed by the Court of the Judicial Commissioner.
[3] It appears to their Lordships that, apart from all other defences available to the appellant in the suit, it is a fatal objection to the claim of respondent 1 that under the deed of 23rd August 1939, upon which he founds his claim, he acquired and could acquire no rights of any kind, inasmuch as K. B. Muqarrab Khan had already parted with the rights which he then purported to dispose of.
[4] The history of the matter, so far as it is necessary to state it, starts with a mortgage deed of 25th May 1921, by which one Abdul Akbar Khan (through whom the appellants claim) mortgaged with possession to K. B. Muqarrab Khan for Rs. 23,000 certain lands in Shah Dhand and Shakara including an area of 307 Kanals 4 marlas in Shah Dhand. The same land had previously been mortgaged to one Tara Chand for Rs. 12,000. He was paid off out of the Rs. 23,000 and transferred his mortgage rights to K. B. Muqarrab Khan, who will now be referred to as "the original mortgagee". Of the steps taken by the original mortgagee to obtain possession of the mortgaged land and the disputes that have arisen in regard thereto it is not necessary to say anything. In 1935 there happened the crucial event which in their Lordships' opinion is decisive. On 18th May in that year the land revenue in respect of all or some part of the mortgaged land being long in arrear, and proceedings having been taken for its recovery, the Naib Tahsildar (whose duty it was to report to his superior officer in the Revenue Department) reported as follows :
"Sanction for the sale by auction of the mortgagee rights has been accorded by the Revenue Commissioner by letter No. 123000/RA dated the 15th November 1934.
The 16th May 1935, was fixed for holding the Sale. The sale having been held the final bid was knocked down in the name of Faqir Mohammad Khan, Executive Engineer Mardan, through his brother Mohammad Safdar Khan in lieu of Rs. 5,500. The one-fourth Rs. 1,375 has been deposited into the Treasury. Hence this report is submitted for the confirmation of the final bid under S. 92 (Land Revenue Act) in the name of the auction purchaser named above."
[5] Objection was taken to this report by respondent 1 but his objection was overruled by the Deputy Commissioner at Peshawar.
[6] On 3rd June 1935, the Collector approved of the sale of the mortgagee rights of Rs. 23,000 and the recommendation of the Assistant Collector that
"Mr. Faqir Mohd. Khan may be declared the purchaser of the mortgage rights of 307 kanals 4 marlas. .... after which the sanction of the Revenue Commissioner for confirmation of the sale under S. 92, Land Revenue Act, will be obtained".
[7] On 25th November 1935, a certificate was issued by the Collector to Faqir Mohd. Khan in the following terms : -
"Certificate of Sale under S. 95, Land Revenue Act, 1887.
I, the Collector of Peshawar, do hereby certify that Faqir Mohd. Khan, resident of Charsadda, Executive Engineer, Malakand Division, Tahsil Charsadda, District Peshawar has been declared the purchaser at sale
