Judgement Appeal from a decree of the High Court (June 3, 1898) affirming a decree of the Subordinate Judge of the 24 Pergunnahs (April 16, 1896). Nistarini, the widow of Mustaphi and predecessor of the respondents, sued, under the circumstances stated in their Lordships judgment, Prashid, her mortgagor, and the appellant, the purchaser at a sheriffs sale of part of the property comprised in her mortgage deed, for a declaration of (1.) her priority of claim to the mortgage property; (2.) that the appellant had purchased only the equity of redemption, subject to her claim, and with notice thereof; (3.) for an account and payment or sale. The appellant pleaded that the said property had been attached on October 5, 1891, at which time he believed that the same was free from all charges, except such attachment; that it was purchased by him on July 28, 1892, at a sale under the attachment; that the sale was confirmed by the High Court on September 5, 1892, and that he had obtained a sale certificate and possession of the said property; and he denied that the mortgage to Nistarinis husband had any force, or that Nistarini had any rights in or over the said property. The Subordinate Judge held that at the time of the attachment all the interest remaining in the mortgagor was the equity of redemption; that the attachment did not, and could not, affect the interest then vested in the prior mortgagees; and that upon the reconveyance by the previous mortgagees to the mortgagor, upon the satisfaction of their mortgages out of the money advanced by Mustaphi, the rights of Mustaphi as mortgagee of the property were perfected; and further, that there was, no sign of any intention on the part of Mustaphi to forego the benefit of the prior securities, but that, it being for his benefit to keep the prior charges alive, it was open to the Court to presume, and the Court did presume, that he intended to do so. He was therefore of opinion that Nistarinis right prevailed over the appellants title by purchase at the execution sale. He accordingly gave judgment for Nistarini, directing that there should be the usual mortgage decree in her favour, under s. 88 of the Transfer of Property Act (Act IV. of 1882).
He was therefore of opinion that Nistarinis right prevailed over the appellants title by purchase at the execution sale. He accordingly gave judgment for Nistarini, directing that there should be the usual mortgage decree in her favour, under s. 88 of the Transfer of Property Act (Act IV. of 1882). The High Court held that, according to the authorities, the principle governing such cases is that the question of whether it was intended to keep the prior security alive or not was a question of the intention of the parties to the transaction, and that in this case it was abundantly clear that it was the intention of the parties to keep alive the former securities for the benefit of the new mortgagee, who was providing the money required for satisfying the claims of the former mortgagees. They held further that, as the mortgage to Mustaphi was executed on October 7, 1891, and provided the money with which the prior mortgages were paid off on October 8, 1891, the Subordinate Judge had rightly held that Mustaphi had such an interest in the mortgaged property as entitled him to pay off the former mortgagees, and obtain for himself the benefit of such payments. They held further that all that could have been attached, and all that was attached, on October 5, 1891, was the equity of redemption, which was all the mortgagor then had; and that consequently this was all that was sold to, and purchased by, the appellant. They held, however, that all that came before the claim of the present appellant was the amount actually paid to the earlier mortgagees; and upon this basis they amended the decree of the First Court. Sir W. Rattigan, K.C., and C. W. Arathoon, for the appellant, contended that there was no evidence of any intention on the part of Mustaphi or his mortgagor to keep alive the prior securities which had been paid off by the mortgagor, to whom reconveyances had been executed. Those mortgages had, therefore, been completely extinguished. There had been a release of the debts due see Adams v. Angel (( 1877)-5 Ch. D. 634, 615.), according to which authority, in the absence of a contemporaneous expression of intention to that effect, the incumbrances paid off by the owner are not to be held as still subsisting.
Those mortgages had, therefore, been completely extinguished. There had been a release of the debts due see Adams v. Angel (( 1877)-5 Ch. D. 634, 615.), according to which authority, in the absence of a contemporaneous expression of intention to that effect, the incumbrances paid off by the owner are not to be held as still subsisting. These prior charges having been discharged pending attachment, that attachment became effective against the absolute right, and not merely against the equity of redemption. Any subsequent mortgage by the judgment debtor was necessarily subject to the rights of the attaching creditor, and s. 276 of the Civil Procedure Code rendered the mortgage void as against him. Reference was made to Mohesh Lal v. Mohunt Bawan Das (( 1883) L. R. 10 Ind. Ap. 62.) and Gokuldoss Gopaldoss v. Bam Bux Seochand (L. R. 11 Ind. Ap. 126, 132.), where it was held that the question was one of intention; and here the intention shewn was to extinguish the debts due on the earlier mortgages, and to revest the estate in the mortgagor as com pletely as if it had never been mortgaged. The subsequent mortgagee was no party to the transaction, and was satisfied with the title of the mortgagor as it stood after reconveyance by the earlier mortgagees. In Liquidation Estates Purchase Co. v. Willoughby ([1805] 1 Ch. 726.) it was held in effect that, if an intention to keep alive a charge on property is inconsistent with the real intention of the parties to the deed by which the purchaser takes the property, it cannot be afterwards treated as subsisting to increase the interest taken by the purchaser. The limits within which a presumption in favour of the purchaser as to the original intention of the transaction may be made is there discussed. See also Thorne v. Cann ([1815] A. C 19.), where the points relied on for keeping the security alive were that there had been no release of the debt and no reconveyance, but a transfer both of debt and mortgages. It was also contended that on the evidence the appellant had had no notice at the time of the purchase of the incumbrance in question, Reference was also made to Times Chunder Sircar v. Zahoor Fatima (( 1889) L. R. 17 Ind. Ap. 201, 210.) and Muhammad Abdul Kadir v. Kutub Husain. (( 1880) Ind.
It was also contended that on the evidence the appellant had had no notice at the time of the purchase of the incumbrance in question, Reference was also made to Times Chunder Sircar v. Zahoor Fatima (( 1889) L. R. 17 Ind. Ap. 201, 210.) and Muhammad Abdul Kadir v. Kutub Husain. (( 1880) Ind. L. R. 9 Allah. 136,139.), which relate to the enlargement of a debtors interest subsequent to its having been attached. Branson, for the respondents, relied upon Gokuldoss Gopaldoss v. Ram Bux Seochand (1), and submitted that the Courts below were right in holding that it was a question of intention whether the earlier mortgages were to be kept alive for the security of the new mortgagee, and that such intention appeared on the face of the new mortgage deed as well as on the evidence. The new mortgagee had an interest in the pro perty vested in him by the mortgage deed which entitled him to pay off the former securities, and claim the benefit of having done so. There was obviously no intention to benefit either the execution creditor or the intending purchaser. The presumption as well as the evidence was that he intended to claim the benefit for himself. Sir W. Rattigan, K.C., replied. The judgment of their Lordships was delivered by LORD LINDLEY. The question in this appeal is whether a purchase of property by the appellant at a sheriffs sale is subject to or freed from a prior lien claimed by the respondents. On October 5, 1891, the property in question was attached by the sheriff of Calcutta at the suit of a judgment creditor. At that time the property was subject to two mortgages created by the execution debtor, namely—(L. R. 11 Ind. Ap. 120, 133..) a mortgage dated June 22, 1888, for Rs.25,000 bearing interest at 15 per cent.; and (2.) a mortgage dated August 9, 1890, for Rs.3000 bearing interest at 24 per cent. The attachment in no way affected these mortgages. It affected the execution debtors beneficial interest in the property attached ; in other words, the equity of redemption and nothing else.
The attachment in no way affected these mortgages. It affected the execution debtors beneficial interest in the property attached ; in other words, the equity of redemption and nothing else. At the time of the attachment the mortgagor was making arrangements with one Mustaphi (the predecessor of the respondents in the present proceedings) for an advance of Rs.40,000 at 12 per cent, to enable him, i.e., the mortgagor, to pay off the two above-mentioned mortgages and for other purposes. The mortgagor was to obtain the deeds from the mortgagee and to hand them over to Mustaphi, and give him a mortgage for his advance of Rs.40,000 and interest at 12 per cent. It is obvious that if this arrangement had been carried out in English fashion by a skilful conveyancer the old mortgages would have been kept alive and transferred to Mustaphi, and provision would have been made for reducing the interest and for securing the excess of the Rs.40,000 advanced over the amount due on the mortgages paid off. If this had been done, the position of the execution creditor would have been unaffected in any way. He would have gained nothing by the payment off of the old mortgages, and he would have lost nothing either by that payment or by the further advance, which would not have affected him see s. 276 of the Code of Civil Procedure. Transfers of mortgages are apparently not so common in India as in this country; and what was done was that the mortgagor paid off the two old mortgages, took a reconveyance to himself, and then executed a fresh mortgage bond for Rs.40,000 to Mustaphi. This mortgage bond is dated October 7, 1891, and is set out in the record. The bond recited the two old mortgages, and the loan of Rs.40,000 to pay them off, and charged the property with that amount and interest at 12 per cent. The bond stated that the property was not subject to any attachment by the Court, and if it should appear that there was any charge on the property then the Rs.40,000 and all interest should become immediately payable.
The bond stated that the property was not subject to any attachment by the Court, and if it should appear that there was any charge on the property then the Rs.40,000 and all interest should become immediately payable. The bond also contained a clause as follows "I promise that after repaying the money due on the aforesaid two mortgages I shall cause a reconveyance of those properties to be executed and registered, and shall make over to you the mortgage deeds which I shall get back." This arrangement was carried out the Rs.40,000 were advanced ; the two old mortgages were paid off; the property comprised in them was reconveyed to the mortgagor; he got the deeds and handed them to Mustaphi. This was done on October 8, 1891, the day after the mortgage bond was executed. Probably at this time the mortgagor was not aware of the attachment. Pausing here for a moment, nothing can be clearer than that the intention of the parties to this transaction was to give to Mustaphi a charge for Rs.40,000 on the property in question in priority to all other charges, if any. The property being represented as unincumbered, the statement in the judgment of the High Court that it was intended to keep the two old mortgages alive is open to criticism. But it does not affect the substance of the case. The respondents were intended to have the first and only charge, and it is idle to contend that there was any intention to extinguish the old mortgages for the benefit of the execution creditor or any purchaser at the sheriffs sale. Subsequently to this transaction, namely, in July, 1892, part of the property mortgaged was sold under the execution to the appellant. As will be shewn presently, he was not a purchaser for value without notice of the respondents security. He claimed, however, to be entitled to the property bought free from all incumbrances. Thereupon, Mustaphi having died, this suit was instituted by his widow claiming a lien for the full amount of their mortgage bond. She died pending the suit, which was continued by the respondents, and they obtained a decree in their favour. On an appeal this decree was affirmed, but was modified without objection on the part of the respondents by limiting their lien to the amount actually applied in paying off the two old mortgages.
She died pending the suit, which was continued by the respondents, and they obtained a decree in their favour. On an appeal this decree was affirmed, but was modified without objection on the part of the respondents by limiting their lien to the amount actually applied in paying off the two old mortgages. From this decree the appellant has again appealed. Counsel for the appellant contended that the appellant had no notice of the real facts when he bought; and that the only notice he had was that conveyed by the proclamation referred to in the official sale certificate of the registrar set out in the record. According to this certificate, notice was given of the old mortgage of June 22, 1888, and of its payment off, and of the mortgage for Rs.40,000 on October 7, 1891, two days after the attachment. Nothing is said about anything more. The certificate was apparently given pursuant to s. 316 of the Civil Procedure Code. It appears from the evidence that the appellant was distinctly informed of both mortgages, and of their payment off out of the Rs.40,000 advanced by Mustaphi, and of his widows claim to a lien on the property. Both the Subordinate Judge and the High Court held that the appellant had full knowledge of the real facts of the case when he bought the property, and their Lordships are of the same opinion. The next and main contention raised by counsel for the appellant was that the two old mortgages were extinguished by the mode in which they were dealt with. The answer given in both Courts to this contention was that so to hold would be to defeat the obvious intention of the parties to the transaction. Their Lordships have already stated that this is the conclusion at which they have themselves arrived. The law upon this subject and its application to transactions in India will be found in Mohesh Lal v. Mohunt Bawan Das (L. R. 10 Ind. Ap. 62) and Gokuldoss Gopaldoss v. Ram Bux Seochand. (L. R. 11 Ind. Ap. 120.) The Subordinate Judge has summed it up accurately thus "When the owner of an estate pays charges on the estate which he is not personally liable to pay, the question whether those charges are to be considered as extinguished or as kept alive for his benefit is simply a question of intention.
(L. R. 11 Ind. Ap. 120.) The Subordinate Judge has summed it up accurately thus "When the owner of an estate pays charges on the estate which he is not personally liable to pay, the question whether those charges are to be considered as extinguished or as kept alive for his benefit is simply a question of intention. The intention may be found in the circumstances attending the transaction, or may be presumed from a consideration of the fact whether it is or is not for his benefit that the charge should be kept on foot." Here the mortgagor was paying off his own debts, but he was doing so for the benefit of Mustaphi and in performance of the agreement with him. As already stated, the intention of the parties in this case was to give Mustaphi a first charge on property represented to be unincumbered, and the appellant knew it. The last point urged by the appellants counsel was that, whatever the intentions of the parties may have been, s. 276 of the Civil Procedure Code rendered the mortgage for Rs.40,000 wholly void as against the appellant. So to construe this section would be quite wrong. So far as the mortgage for Rs.40,000 prejudiced the execution creditor, it is void as against him; but the section does not render void transactions which in no way prejudice him ; and to hold the mortgage void so as to confer upon him a benefit which no one ever intended he should have is entirely to ignore the object of the section and to pervert its obvious meaning. It is impossible to hold that the effect of that section is to give an execution creditor an unincumbered fee simple instead of an equity of redemption against the intention of the parties. Their Lordships will, therefore, humbly advise His Majesty to dismiss this appeal, and the appellant must pay the costs of it.