Andhra Pradesh High Court
Judges : P.RAMACHANDRA RAJU
Kosuri Koteswara Rao - Appellant
Versus
Kothu Venkataramana Rao - Respondent
Decided On : 08-03-71
TRANSFER OF PROPERTY ACT, 1882 - SECTION 56 - MORTGAGE - MARSHALLING - RIGHT OF SUBSEQUENT PURCHASER - APPLICABILITY TO CASE OF MULTIPLE DEBTORS MORTGAGING SEPARATE PROPERTIES - NO RIGHT TO REQUIRE SALE OF PROPERTIES OF OTHER DEBTOR FIRST.
Fact of the Case:
A petitioner purchased mortgaged properties from one of two mortgagors who owned the properties separately. The first respondent, the mortgagee, filed a suit for recovery of the mortgage debt and sought to sell all the mortgaged properties. The petitioner filed a counter requesting the court to sell the mortgaged properties not sold to him in the first instance.
Finding of the Court:
The court held that Section 56 of the Transfer of Property Act, which provides for marshalling in cases of subsequent purchasers, does not apply to cases where there is more than one debtor mortgaging their separate properties jointly. The court found that the petitioner had no right to require the properties of the other mortgagor to be sold first.
Issues: Whether a subsequent purchaser of mortgaged properties from one of multiple mortgagors who own the properties separately can claim to have the mortgage debt satisfied in the first instance by the sale of the properties not sold to him.
Ratio Decidendi: The court interpreted Section 56 of the Transfer of Property Act to apply only to cases where there is a common debtor. The court reasoned that the purpose of marshalling is to protect the rights of subsequent purchasers, and that this purpose is not served in cases where there is more than one debtor because the sale of the properties of one debtor would prejudice the rights of the other debtor.
Final Decision: The court dismissed the petitioner's revision petition, holding that he had no right to require the properties of the other mortgagor to be sold first.
( 1 ) THE short question that arises for consideration of this Civil Revision Petition is whether in the case of a mortgage debt which was contracted by more than one mortgagor, who own the mortgaged properties separately and not jointly, can a purchaser of the mortgaged properties from one of the mortgagors claim to be entitled to have the mortgage debt satisfied in the first instance by the sale of the property or properties not sold to him and belonging to other mortgagor.
( 2 ) THE facts of the case may be stated thus:
( 3 ) RESPONDENTS 2 and 3 herein mortgaged six items of properties to the first respondent The second respondent was the owner of items 1, 2 and 3 and Ac. 0-20 cents in item No. 6. The second respondent was declared an insolvent and in the sale by the Officer Receiver the petitioner herein purchased the items of the second respondent mentioned above. Subsequently , the first respondent file a suit for recovery of the mortgage debt. After final decree was passed, he filed an execution petition to sell all the items of the property. In that execution petition, the petitioner herein filed a counter requesting the executing court to sell the mortgaged properties, not sold to him, in the first instance and to sell the properties purchased by him thereafter when the decree amount still remains unsatisfied in full. The lower court by following the decision in S. L. N. Somayajulu v. N. P. Sidhanthi, (1957) 2 Andh WR 385, came to the conclusion that the first respondent can proceed against any of the mortgaged properties in the satisfaction of his decree and he cannot be directed to proceed against the mortgaged properties in any particular order and accordingly refused to give direction as prayed for by the petitioner. It is against this view taken by the lower court that this revision petition has been filed.
( 4 ) SRI Challa Sitharamaiah, learned counsel for the petitioner has assailed the order of the lower court contending that the order of the lower court contending that on the basis of the provisions made in Section 56 of the Transfer of Properties Act, the petitioner is entitled to have the mortgage debt satisfied out of the mortgaged properties not sold to him in the first instance. It is convenient to read here section 56 of the Transfer of Property Act, which is in the following terms :" If the owner of two or more properties mortgages them to one person and then sells one or more of the properties to another person, the buyer is, in the absence of a contract to the contrary, entitled to have the mortgage debt satisfied out of the property or properties not sold to him, so far as the same will extend, but not so as to prejudice the rights of the mortgagee or persons claiming under him or of any other person who has for consideration acquired an interest in any of the properties. "
( 5 ) THIS section has been substituted by the Amending act of 1929 for the original section, the scope of which was limited to " charges" only. In the original section, the right to the buyer was given specifically only " as against the seller. " The words " as against seller" have been dropped in the present new section to show that the right can be enforced against the mortgagee also. Section 56 deals with the right of a subsequent purchaser to claim marshalling. It is similar to section 81 which refers to marshaling by a subsequent mortgagee. Section 81 applies as between mortgagees of the same debtor, the first of whom has got several securities and the second of whom has but some of those securities and advanced loan without notice of the earlier encumbrance. In such a case, the mortgagee is entitled to marshall the securities and to require that the earlier mortgagee shall first proceed against those securities which have not been encumbered in favour of the latter. The marshalling as provided under section 56 requires that a mortgagee who has the means of satisfying his debt out of several properties
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