Brahm Parkash Vs. Manbir Singh and ors. - Court Judgment

Ayyangar, J.

1. These three appeals, which are before us on certificates of fitnessgranted by the High Court of Punjab, arise out of two suits for the recovery ofamounts due on mortgages executed by one Mohinder Singh who was a contractor inDelhi. Mohinder Singh is now deceased and is now represented in theseproceedings by his widow and son. Mohinder Singh owned as many as eightproperties in Delhi and over one or other of these he created successively 24mortgages between September 1943 and July 1944 and also executed a sale inrespect of one item of these properties. The contentions urged in these appealsarise out of conflicts between the rights of some these mortgagees inter se,between some of them and the purchaser of one of the properties. It is howeverunnecessary for the purpose of deciding these points to set out the details ofevery one of these several mortgages or their history.

2. Appeals 77 and 78 may first be considered. The facts necessary toappreciate the sole point raised by Mr. Achhru Ram, learned Counsel for theappellant - Jagdish Chand are these : The property concerned in the two appealsis plot No. 1, Pusa Road in Block 34 with a bungalow thereon. A mortgage forRs. 10,000/- was created over this and certain other properties (we are,however not concerned with these other properties) in favour of one Lajwanti byMohinder Singh by a deed dated October 19, 1943. A few days later - on November7, 1943 - another mortgage was executed in her favour for Rs. 16,000/- underwhich the property No. 1, Pusa Road was given as security. Passing over certainintermediate transactions not material for the purposes of the present appeals,a mortgage was created in favour of one Daulatram Narula inter alia on thisproperty on January 21, 1944 to secure a sum of Rs. 60,000/-. Two days later -on January 23, 1944 - the appellant, Jagdish Chand, lent a sum of Rs. 10,000/-to Mohinder Singh and had a mortgage executed on No. 1, Pusa Road. DaulatramNarula, the mortgagee under the deed dated January 21, 1944 obtained twofurther mortgages over the same property and others on February 25, 1944 andMarch 14, 1944, the first for Rs. 9,500/- and the second for Rs. 10,000/-. Itought to be mentioned that the consideration for several of the mortgagesreferred to earlier was in part a payment in cash to the mortgagor and in partrepayment in part satisfaction of previous mortgages, but this circumstance notbeing of any relevance we are not setting out the details of the considerationfor the several mortgages. Lastly, and this is the mortgage which is ofimportance for the point raised in this appeal, on July 13, 1944, MohinderSingh created in favour of Pandit Sham Sunder an usufructuary mortgage for Rs.1,25,000/- out of which Rs. 84,000/- was reserved with the mortgagee forpayment to Daulatram Narula the sum representing the principal and interest dueon his three mortgages. It is common ground that on the date when the mortgagewas registered Sham Sunder carried out his obligation and discharged themortgages of Daulatram by paying him Rs. 84,000/-.

3. The amount due to Lajwanti was not paid and she accordingly brought asuit on June 14, 1945, in the Court of the Senior-Sub-Judge, Delhi for therecovery of her mortgage money which, after giving credit for the sums paid toher already by several subsequent mortgagees, came to Rs. 11,657/5/4. Sheimpleaded as party defendants to the suit the several subsequent mortgageesincluding the appellant - Jagdish Chand as well as Daulatram and Sham Sunder'slegal representatives as he himself was dead by that date. Just like Lajwantianother mortgagee - one Mukhamal - in whose favour two mortgages, one datedFebruary 1, 1944 and another dated May 12, 1944 for Rs. 10,000/- and Rs.9,000/- respectively, also filed a suit for the recovery of Rs. 15,302/- andodd. As in Lajwanti's suit, the several subsequent mortgagees including JagdishChand, Daulatram and the legal representatives of Pt. Sham Sunder were alsoimpleaded as defendants in this suit also.

4. In these two suits the genuineness of the several mortgages was notseriously disputed and the only point on which contest was centerd was asregards the respective rights of the several mortgagees inter se. We areconcerned in these two appeals with the claim made by the legal representativesof Sham Sunder that they were entitled by reason of their discharging themortgages-debt of Daulatram to whom they had paid Rs. 84,000/- out of themortgage amount of Rs. 1,25,000/- to be subrogated to the rights and prioritiesof Daulatram under the mortgage dated January 21, 1944 for Rs. 60,000/- asagainst the later mortgage of January 23, of Jagdish Chand even though therewas no agreement in writing under which he stipulated for such a right. Thiscontention was raised both in the suit by Lajwanti as well as in Mukhamal'ssuit. It was contended on their behalf that though the Transfer of Property Actdid not in terms apply, yet the equitable principle underlying its s. 92 viz.,the right of a secured creditor who had discharged a prior encumbrancer to besubrogated to the rights and priorities of the mortgagee who he had redeemd,could nevertheless be invoked under s. 6 of the Punjab Laws Act. The learnedtrial Judge, however, while acceding to this in principle, held on the basis ofcertain authorities to which he referred that in the absence of a specificagreement stipulating for subrogation the subsequent mortgagee was not entitledto such an equity. On this ground the right of the subrogation claimed by thelegal representatives of Sham Sunder was rejected. From the rejection of thisclaim in the two suits Sham Sunder's representatives preferred two appeals tothe High Court and the learned Judges allowed the appeal holding that it wasnot an essential condition for claiming the right of subrogation that thecreditor redeeming the mortgage should have entered into an express agreement tothat effect. It is from this decision of the High Court that these two appealshave been preferred.

5. Mr. Achhru Ram, learned Counsel for the appellant did not dispute beforeus the correctness of the view expressed by the learned Judges of the High Courtthat in order to entitle a creditor to claim a right of subrogation it was notnecessary that he should have entered into a written agreement stipulating forsuch a right. His submission, however, was on the following lines : Acceptingthe Law, as expounded by Sir Richard Couch in Gokuldass Gopaldass v. Ram BuxSeochand (1884) L.R. III. A. 126, in the following terms :

'In India the art of conveyancing has been and isof a very simple character. Their Lordships cannot find that a formal transferof a mortgage is ever made, or an intention to keep it alive ever formallyexpressed....... The obvious question to ask in the interests of justice,equity, and good conscience, is, what was the intention of the party paying offthe charge He had a right extinguish it and a right to keep it alive. Whatwas his intention If there is no express evidence of it, what intentionshould be ascribed to him The ordinary rule is that a man having a right toact in either of two ways; shall be assumed to have acted according to hisinterest. In the familiar instance of a tenant for life paying off a chargeupon the inheritance, he is assumed, in the absence of evidence to thecontrary, to have intended to keep the charge alive. It can not signify whetherthe division of interests in the property is by way of life estate andremainder, or by way of successive charges. In each case it may be for theadvantage of the owner of a partial interest to keep on foot a charge upon thecorpus which he has paid.'

6. as laying down the correct test for determining whether the right ofsubrogation could be claimed or not, Mr. Achhru Ram submitted that the law wasthat even where there was no express agreement stipulating for subrogation, thelaw would presume such a right on the ground that the payer intended to act ina manner most advantageous to him, but that this was only a rebuttablepresumption which would be negatived on positive proof from the conduct orstatements of such a creditor pointing to a contrary intention. In other words,that there was nothing to prevent its being shown that the creditor paying offthe charge did not intend to preserve the mortgage which he discharged so as toobtain the priority which the discharged encumbrance enjoyed. He urged that inthe present case, on the terms of the documents to which Sham Sunder was aparty, such an intention not to keep alive the discharged encumbrance ofDaulatram was clearly made out. In this connection he drew to our attentionfirst the terms of the mortgage executed in favour of Sham Sunder on July 13,1944, in which this Rs. 84,000/- left with the mortgagee is referred to asbeing held by the latter in trust for the payment of the previous encumbrancer- Daulatram. Next, he referred us to the endorsements of discharge on themortgages of Daulatram which read as if the amount due had been paid by ShamSunder on behalf of the mortgagor - Mohinder. On this basis the contention wasurged that any intention to obtain the benefit of subrogation was clearly negatived.

7. We do not propose to discuss the merits of this contention, and it is notas if it is not capable of cogent refutation, because we are satisfied that theappellant should not be permitted to raise such an argument at this stage. Inboth the suits the legal representatives of Sham Sunder filed writtenstatements in which they specifically stated that the discharge of theencumbrances of Daulatram was under circumstances in which they were entitledto claim the relief of subrogation. The question regarding the intention withwhich a prior encumbrance is discharged, whether it is with a view to obtainthe priority of the mortgage paid off or not, in circumstances like the presentwould be a question of fact and would have to be answered on a conspectus ofthe entire circumstances of the case. If the appellant was disputing the pleaof Sham Sunder's representatives that the intention of Sham Sunder indischarging Daulatram's mortgages was to retain the benefit of subrogation, itwas for him to have raised it by proper pleading when an issue would have beenstruck and evidence led for and against such a contention. At the stage of thetrial the only objection raised to the claim for subrogation was based on theabsence of a written agreement which the appellant contended was a requirementof the law which had not been complied with. In one sense such plea wouldappear to assume that the intention of the party paying off the mortgage was toobtain the benefit of subrogation but that he had failed to comply with arequirement of the law in having that intention embodied in a document. Thisplea was accepted by the learned trial Judge and the claim for subrogation wasdisallowed but Sham Sunder's representatives filed an appeal to the High Court.Again, at the stage of the appeal the only contention urged before the learnedJudge was as regards this supposed requirement of the law that there should bea written agreement. When this plea was rejected it is obvious that on thepleadings the right to subrogation should be held to be established. Thematter, however, does not stop here, because even at the stage of appeal tothis Court no point was made that in the instant case the presumption in favourof a person having acted to his interest and so entitled to claim subrogationwas displaced by clear evidence of the party's statements or conduct. Nor caneven a trace of such plea be found in the statement of case filed in theseappeals. We do not therefore consider it proper to permit learned Counsel tourge any such ground before us.

8. This was the only point urged in these appeals which fail and aredismissed with costs - one set payable to the executors of the will of Pt. ShamSunder.

Civil Appeal 76 of 1961.

9. This appeal arises out of the suit by Lajwanti already referred to. Theappellant is one Brahm Parkash in whose favour Mohinder Singh executed amortgage for Rs. 15,000/- on May 2, 1944. The property mortgaged was plot No.44 in Block 17A with the superstructure on it and plot No. 19 in Block No. 5.Brahm Parkash was the twentieth defendant in Lajwanti's suit. Plot No. 14 ofBlock No. 13 was sold by Mohinder to one Mukhamal Gokul Chand by deed datedApril 28, 1944. It is the claim of this Mukhamal to marshalling that is themain subject of controversy in this appeal. As we have stated earlier,Lajwanti's mortgage dated October 19, 1943, for Rs. 10,000/- comprised ofseveral properties including plot No. 14 which on April 28, 1944, had been soldto Mukhamal. Now Mukhamal who had been impleaded as a subsequent transferee inLajwanti's suit claimed that he was entitled to marshalling on the principle tobe found in s. 56 of the Transfer of Property Act which runs as follows :

'56. If the owner of two or more propertiesmortgages them to one person and then sells one of more of the properties toanother 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 propertiesnot sold to him, so far as the same will extend, but not so as to prejudice therights of the mortgagee or persons claiming under him or of any other personwho has for consideration acquired an interest in any of the properties.'

10. This claim was however disallowed by the trial Judge for reasons towhich it is not necessary to advert. Mukhamal Gokul Chand filed an appeal tothe High Court in which he made the same prayer. The learned Judges of the HighCourt upheld Mukhamal's contention that he was entitled to marshalling anddirected that Lajwanti should proceed first against plot 44 and only for thedeficiency, if any against plot 14 which Mukhamal had purchased. It is thecorrectness of this decision that is challenged by Brahm Parkash in thisappeal. Mukhamal Gokul Chand has not entered appearance and the appeal has beenheard ex parte.

11. Before dealing with the correctness of this direction as regardsmarshalling it is necessary to mention one further fact. Mukhamal's appeal tothe High Court - Appeal 28 of 1948 was filed out of time with a petition forcondonation of delay under s. 5 of the Indian Limitation Act and the learnedJudges condoned the delay and entertained the appeal. The legality andpropriety of this order condoning the delay is canvassed before us by learnedCounsel for the appellant. The facts relevant for the consideration of thispoint are briefly as follows : The preliminary decree of the trial Judge fromwhich the appeal No. 28 of 1948 was filed was dated April 28, 1947. Anapplication for the grant of certified copies was made on October 16, 1947 andthe copies were ready for delivery on October 28, 1947. The appeal, however,was actually filed only on March, 10, 1948 - admittedly after the period oflimitation had expired. The application to the High Court for condoning thisdelay was supported by an affidavit by one Amar Nath. Before setting out thecontents of this affidavit it must be mentioned that the disturbed state of thePunjab at the time of the partition was taken into account by the legislatureand by East Punjab Act 16 of 1947 the period from September 19, 1947, toNovember 15, 1947, was directed to be excluded in computing limitation for anypurpose of the Limitation Act including s. 5. In the affidavit in support ofthe application for the condonation of the delay it was stated that the firm ofGokul Chand had handed over the papers to their Munim on or about November 1,1947, for filing an appeal but the Munim who was a Muslim went away to Pakistanwithout handing over the certified copies of the judgment to the parties and thatthe copies were received from Pakistan on March 4, 1948, - a few days beforethe affidavit was sworn and that immediately after the receipt of the papersthe appeal was filed at Simla on March 10, 1948. The learned Judges in dealingwith this application observed :

'In 1947-48 unprecedented events occurred in Delhiwith the result that in some cases the whereabouts of close relations were notknown for months. In the present case not a syllable is to be found on therecord to show that the affidavit of Amar Nath was untrue in any particular.That being so, I have no doubt that there was sufficient cause for not filingthe appeal in time. In these circumstances I condone the delay in filing theappeal - Regular 1st Appeal No. 28 of 1948.'

12. Learned Counsel for the appellant submitted that the learned Judges hadnot required the petitioner for condonation to explain each day's delay, thusdeparting from the accepted tests for condonation under s. 5 of the LimitationAct. We are not, however, persuaded that the learned Judges were eitherunmindful of the principles on which delay should be excused or went wrong inthe exercise of the discretion which they undoubtedly possessed and that, inany event, we do not consider that this is a fit case in which we shouldinterfere in appeal.

13. Coming now to the merits of the appeal, learned Counsel strenuouslyurged that the learned Judges of the High Court had misapplied the principlesunderlying s. 56 of the Transfer of Property Act in directing Lajwanti toproceed first against the property not sold to Gokul Chand. In this connectionlearned Counsel urged two points : (1) that on a proper construction of s. 56and the principle underlying it the benefit of marshalling could not be claimedby a purchaser who happened to be a mortgagee in respect of any propertybelonging to the mortgagor. Learned Counsel pointed out that Mukhamal GokulChand had a mortgage under a deed dated February 9, 1944, over certainproperties with which the appellant is not concerned. We consider thissubmission wholly without substance. When s. 56 refers to a subsequentpurchaser it does not obviously exclude a purchaser who has some mortgage overproperty with which these proceedings are not concerned. His mortgage rightsover some other property of the mortgagor is wholly irrelevant for consideringhis rights gua purchaser of one of the properties to which opening words of s.56 apply. The construction contended for, in our opinion, has only to be statedto be rejected.

(2) The other submission of learned Counsel was that the learned Judgesfailed to give effect to the last portion of s. 56 under which marshalling isnot to be permitted so as to prejudice the rights inter alia of the mortgageesor other persons claiming under him, i.e., under the original mortgagor. LearnedCounsel pointed out that the appellant having proved his mortgage and the factthat it was subsisting, the learned Judges of the High court ought to have heldthat any direction as to marshalling must necessarily prejudice him. We areunable to agree that this follows as any matter of law. The question ofprejudice is purely one of facts which has to be pleaded and the necessaryfacts and circumstances established. It is obvious that the question ofprejudice would be intimately connected with the value of the property againstwhich the mortgagee is directed to proceed in the first instance. If even afterpaying off such a mortgage there is enough left for payment over to thesubsequent encumbrancer referred to in the last portion of s. 56 it would bemanifest that there would be no question of prejudice. If therefore theappellant desired to invoke the benefit of the last portion of s. 56 he shouldhave made some plea as to the value of the property and shown how it wouldprejudice his rights as a subsequent encumbrancer. He however made no such pleaand no evidence was led as to the value of the property. Even at the stage ofthe appeal in the High Court the contention that to allow marshalling in favourof the subsequent purchaser - Mukhamal - would result in prejudice to him wasadmittedly never put forward before the learned Judges. As the point is one notof pure law but springs from the factual inadequacy of the property mortgagedto him to discharge his debt it is too late for the appellant to raise such aplea in this Court.

14. The appeal fails and is dismissed

15. Appeals dismissed.