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1911 DIGILAW 102 (ALL)

Rameshar Upadhya v. Subbkaran Upadhya

1911-03-06

BANERJI, RICHARDS, STANLEY

body1911
JUDGMENT : STANLEY, J. 1. The sole question in this appeal depends upon the true construction of a decree based upon a compromise of the 24th of March, 1888; whether in fact by that decree a charge merely was created, or whether or not in addition to the creation of a charge the property charged was directed to be sold. 2. The suit was one for sale of property comprised in a mortgage of the 17th of July, 1890, executed by Jai Karan Singh and the other sons of one Kutwaru Singh in favour of Bechu Ram, a member of the joint family of the plaintiffs. The defendants 1–13 are the representatives in interest of the mortgagors. The other defendants are auction purchasers of the mortgaged property under a sale which took place on the 20th of December, 1893, purporting to be in execution of the decree of 24th of March, 1888. The circumstances which led to the passing of this decree are as follows:— On the 21st of December, 1879, Kutwaru Singh executed a sale deed in respect of his share in the village of Bahura with other property in favour of one Baij Nath Singh, the price being Rs. 500. The purchase money was paid to the vendor but he did not deliver possession of the property to the vendee, who consequently brought a suit for possession of the property. A compromise was entered into in the following terms:— “The plaintiff consents to give up his right as vendee in the property in dispute. The defendants agree to return the purchase money Rs. 500 with Rs. 100, the costs of the suit to the plaintiff vendee, total Rs. 600, within two years, for which payment this share (i.e., the property which was sold) as well as the person of the defendant shall be liable, and until this money is paid, the property in dispute cannot be alienated. Let the case be decided in accordance with this compromise, that is to say, a decree for costs be passed for the plaintiff to the extent of Rs, 600 with interest. 3. Upon this compromise the court passed the following order:— “Plaintiff's claim is decree I for Rs. 600 as per compromise against the defendants and hypothecated property with interest at Re. 3. Upon this compromise the court passed the following order:— “Plaintiff's claim is decree I for Rs. 600 as per compromise against the defendants and hypothecated property with interest at Re. 1 per cent, per mensem, payable in two years.” On this order the following was drawn up, “Let the claim of the plaintiff for the sum of Rs. 600 be decreed against the defendants and the hypothecated property with interest at Re. 1 per cent, per mensem, payable in two years, in accordance with the deed of compromise.” An application for execution of this decree was made on the 16th of March, 1891, and was struck off for default. A second application was made on the 24th of July, of the same year, which was also allowed to go by default; as was also a further application of the 29th of October, 1892. On the 23rd of November, 1892, a fourth application was filed and the case was transferred to the Collector with the result that the auction sale already referred to, took place. The judgment-debtor raised an objection to the sale on the ground that the decree could not be executed unless an order absolute for sale was passed under section 89 of the Transfer of Property Act. This objection was disallowed for reasons not known, this part of the record having been destroyed. The defendants in the present suit pleaded that the mortgage of the 17th of July, 1890, which was executed after the passing of the decree of the 24th of March, 1888, was ineffectual as against the principal defendants (auction purchasers), and that the plaintiffs have no right to sue for the enforcement of this mortgage against the property and have no right of redemption; that the property in dispute was sold by auction on the 20th of December, 1893, in execution of the decree for enforcement of the lien created by the compromise decree of the 24th of March, 1888, and was purchased by these defendants, and that the right to redeem of the judgment-debtors and the plaintiffs thereby became extinct. 4. The court of first instance dismissed the suit on the ground that the decree, in execution of which the defendants purchased, was a mortgage decree and not a simple money decree. 5. 4. The court of first instance dismissed the suit on the ground that the decree, in execution of which the defendants purchased, was a mortgage decree and not a simple money decree. 5. On appeal the learned District Judge held that the decree in question was a money decree and not a mortgage decree, and that it created nothing more than a charge upon the hypothecated property. He accordingly set aside the decree of the court below and decreed the plaintiffs’ claim. 6. In the appeal before us the correctness of the decision of the lower appellate court is impugned. The sole question in it is, as I have said, whether or not by the decree of the 24th of March, 1888, a sale of the property was directed and validly directed. I am of opinion that no such order for sale was passed and that the decision of the learned District Judge in this respect is correct. The suit in which the compromise was entered into was, it is to be observed, a suit for possession of property agreed to be sold. The compromise provided that the purchase money with costs, i.e., Rs. 600, should be paid by the vendor to the vendee, and that as security for this sum the property as well as the person of the defendant should be liable. The meaning of this is that there should be a decree against the defendant vendor for payment of the amount of the decree, and that until payment of it was made, the property which was the subject-matter of the suit, should stand charged with the payment of this amount. That this was the meaning of the compromise is emphasised by the words subsequently appearing in it, namely, that “a decree for cash be passed for the plaintiff to the extent of Rs. 600 with interest.” There is nothing to indicate that the parties agreed that if the money were not paid within two years, the property sould be forthwith sold. It was in fact a simple money decree with a superadded charge of property as collateral security for the payment of the amount of the decree. There was no hypothecation of the property whatever, created by the compromise or prior thereto. By the agreement of compromise a valid charge could not have been created without registration. It was in fact a simple money decree with a superadded charge of property as collateral security for the payment of the amount of the decree. There was no hypothecation of the property whatever, created by the compromise or prior thereto. By the agreement of compromise a valid charge could not have been created without registration. No charge was created other than by force of the decree. The parties simply agreed that the property should be security for the payment of the debt, and that a decree of the court should be passed creating this charge. The decree purports to have been passed in accordance with the compromise, and we are entitled to look at the compromise so as to interpret rightly the decree. It is drawn up in a loose and clumsy fashion, namely, “Let the claim of the plaintiff for the sum of Rs. 600 be decreed against the defendants and the hypothecated property with interest at Re. 1 per cent, per mensem payable in two years in accordance with the deed of compromise.” In the first place the word “hypothecated” is inaptly used. The property was not hypothecated. There was merely an agreement that it should be liable for payment of the sum of Rs. 600. The only decree which the court was empowered by the compromise to pass in my judgment was a decree against the defendant for the sum of Rs. 600 and a declaration that the payment of this sum of Rs. 600 should be charged upon the property in question. If the court had passed a decree for sale of the property in default of payment within two years, the decree would not have been in accordance with the compromise. The compromise did not of itself provide for the sale of the property. In view of the fact that the property was not hypothecated at the date of the decree, the true meaning to be attached to the decree is, I think, that it was a decree for money only with a superadded charge of the sum agreed to be paid upon the property specified or referred to in the compromise. The words of the decree “against the hypothecated property” means, I think, no more than this that the decretal amount should be payable out of the property charged therewith. The words of the decree “against the hypothecated property” means, I think, no more than this that the decretal amount should be payable out of the property charged therewith. The court of first instance relied upon the ruling in Lal Behari Singh v. Habibut Rahman, [1898] I.L.R., 26 Cal. 167 in which it was held that a decree that mortgaged property be made liable for realisation of the amount of the decree was to be regarded as a mortgage decree governed by the Transfer of Property Act though not made in the form prescribed by that Act. It also relied upon the ruling in Fazil Havildar v. Krishna Bandu Roy, [1897] I.L.R., 25 Cal., 580 in which it was held that a decree which directs the realisation of money found to be due from hypothecated property is a mortgage decree and not a decree for money. In both these cases, however, there was at the date of the suit an existing mortgage. Here there was at the date of the suit neither a mortgage nor a charge. The suit was not to realise a mortgage debt or a charge. It was a suit of a very different nature, namely, a suit for possession. It would be in my opinion straining the language of the decree if we were to hold that the court intended by it not merely to create a charge but also to order a sale of the property so charged for the satisfaction of it. Moreover, if we were to hold that the court did pass such a decree, it appears to me that it did so wholly regardless of the term of the compromise which expressly provided that a decree for cash should be passed and that the property should be liable for payment of this cash. 7. For the foregoing reasons I am of opinion that the lower appellate court took a correct view. I may here point out that the plaintiffs’ mortgage was a registered document, that it was executed before the sale under which the defendants-appellants purchased and notice was given in the sale proclamation that the property was subject to an incumbrance. The appellants therefore have themselves to blame if they suffer any loss in the transaction. The plaintiffs, however, in their plaint offered to redeem any mortgage holding priority to their mortgage. The appellants therefore have themselves to blame if they suffer any loss in the transaction. The plaintiffs, however, in their plaint offered to redeem any mortgage holding priority to their mortgage. The charge created by the decree of the 24th of March, 1888, is clearly prior to the plaintiffs’ mortgage, and no provision has been made for satisfaction of it in the decree of the learned District Judge. Before, therefore, this appeal can be satisfactorily disposed of, it appears to me that an issue ought to be referred to the lower appellate court to determine what, if any charges existed upon the property having priority to the plaintiffs’ mortgage and what amounts are due in respect of these prior mortgages. 8. As my learned colleague and I are not in agreement as to the true construction of the decree of the 24th of March, 1888, the question whether or not that decree did anything more than create a charge upon the property referred to therein should be decided by one or more of our colleagues under section 98 of the Code of Civil Procedure. BANERJI, J. This appeal arises out of a suit brought by the plaintiffs for sale of certain immovable property mortgaged to them on the 17th of July, 1890, by the descendants of one Kutwaru. The same property was sold by auction on the 20th of December, 1893, in execution of a decree obtained against Kutwaru on the 24th of March, 1888, and was purchased by the defendants appellants. They contend that the decree in execution of which the property was sold was one for the sale of hypothecated property and that as the mortgage of the plaintiffs is of a later date, they have priority over the plaintiffs, and the property cannot be sold again. The plaintiffs, on the other hand, urge that the decree of the 24th March, 1888, was a simple decree for money, and that the appellants, purchased the property subject to the plaintiffs’ mortgage. The court of first instance found in favour of the appellants and dismissed the suit. The lower appellate court has reversed the decree of the first court, holding that the decree mentioned above was a simple money decree. 9. The court of first instance found in favour of the appellants and dismissed the suit. The lower appellate court has reversed the decree of the first court, holding that the decree mentioned above was a simple money decree. 9. There can be no question that if the decree of the 24th of March, 1888, was a simple decree for money, the defendants-appellants who purchased the property after the date of the plaintiffs’ mortgage did so subject to that mortgage. If, on the other hand, the decree was one enforcing a charge and directing a sale of specific property, the appellants have priority over the plaintiffs whose mortgage is of a later date. The decision of the case therefore turns on the construction of the decree. 10. The circumstances under which it was passed are these :— The property mortgaged to the plaintiffs was sold by Kutwaru to one Baij Nath. The latter brought a suit against the former for possession of the property. The case was compromised by the parties on the 24th of March, 1888, and a decree was passed in accordance with the compromise on the same date. The terms of the compromise were set forth in the decree and have been correctly translated by the court below as follows:— “The plaintiff consents to give up his right as Vendee in the property in dispute. The defendants agree to return the purchase money, Rs. 500, with Rs. 100 the costs of the suit, to the plaintiff vendee, total Rs. 600, within two years, for which payment this share as well as the person of the defendant shall be liable, and until this amount is paid, the property in dispute cannot be alienated. Let the case be decided in accordance with this compromise, that is to say, a decree for cash be passed for the plaintiff to the extent of Rs. 600 and interest the decree was passed in the following terms :—“The claim of the plaintiff is decreed for Rs. 600 against the defendants and the hypothecated property with interest at I per cent, per mensem, payable in two years in accordance with the compromise.” 11. That the compromise created a charge on the property which was claimed in the suit cannot admit of any doubt. Did the decree only declare the charge or did it enforce the charge by ordering a sale? That the compromise created a charge on the property which was claimed in the suit cannot admit of any doubt. Did the decree only declare the charge or did it enforce the charge by ordering a sale? I am of opinion that it was a decree for sale. It was not drawn up, it is true, in strict accordance with the provisions of section 88 of the Transfer of Property Act, but before that Act was passed and for many years after its enactment decrees for sale were passed in terms similar to those of the decree in question. It was a decree for Rs. 600 “against the defendant and the hypothecated property,” that is to say, for the recovery of Rs. 600 from the defendant and from the property. As the amount of the decree could be recovered from the property by the sale of it only, the decree was one for sale. It is clear from the terms of the compromise that what the parties contemplated was that there should be a charge on the property sold for the amount of the sale consideration and costs and that if those amounts were not paid within the time fixed, the property would be sold in execution of the decree, and the said amounts should thus be realised. It was certainly not intended that if payment was not made within the stipulated period, a second suit would have to be brought to enforce the charge. The parties to the suit were settling their disputes once for all and they entered into a compromise for the purpose of putting an end to further litigation. That purpose could not be attained by a compromise which would render it necessary for the holder of the decree to bring another suit to enforce the charge. In my opinion the intention of the parties was that the amount agreed to be paid should be realized by sale of the property in execution of the decree, and that the decree gave effect to this intention. That this was contemplated by the parties is further manifest from the fact that when execution of the decree was sought, the judgment-debtors raised objections on the ground that an order absolute for sale had not been obtained after decree, and that the decree as it stood was a preliminary decree for sale. That this was contemplated by the parties is further manifest from the fact that when execution of the decree was sought, the judgment-debtors raised objections on the ground that an order absolute for sale had not been obtained after decree, and that the decree as it stood was a preliminary decree for sale. This objection was overruled by the court, and throughout the proceedings the property was treated as hypothecated property, was sold as such and was described in the certificate of sale as hypothecated property. The compromise created a lien, and the decree ordered that lien to be enforced. I am of opinion that the decree was not one for money only, nor was it a decree which merely declared a charge, but that it directed sale of the property—the subject of the charge. The words “a decree for cash” in the compromise meant, as it seems to me, a decree for recovery of money as distinguished from a decree for recovery of the property— and did not mean a money decree as distinguished from a decree for sale. In Fazil Havildar v. Krishna Bandhu Rai, [1897] I.L.R., 25 Cal., 580 the decree ran as follows : “It is ordered…… that the sum of Rs. 323 claimed …… plaintiff do get from the hypothecated property.” It was held that the decree was not a money decree but a mortgage decree. Similarly, in Lal Behari Singh v. Habibur Rahman, [1898] I.L.R., 26 Cal., 167 the decree was to the effect that the “property be made liable for realization of the decretal amount.” It was held that the decree was a mortgage decree governed by the Transfer of Property Act, though not made in the form prescribed by the Act. These cases support the view contended for by the appellants. The case of Gobinda Chandra Pal v. Dwarka Nath Pal, [1908] I.L.R., 35 Cal., 837 relied on by the lower appellate court is distinguishable. In that case the decree only declared a charge and did not order realization of the decretal amount from the property, that is, by the sale of it. In Baldeo Bharthi v. Hoshiar Singh, [1895] A.W.N., 45 although the compromise created a lien the decree passed was a money decree only and not a decree against the property, as in the present case. In Baldeo Bharthi v. Hoshiar Singh, [1895] A.W.N., 45 although the compromise created a lien the decree passed was a money decree only and not a decree against the property, as in the present case. Whether the court was right in making a decree against the property or was competent to make a decree for recovery of money by sale of specific property in a suit for recovery of property, is immaterial. The fact remains that a decree was passed and became final and was binding on the parties. It was after the passing of this decree that the mortgage in favour of the plaintiffs was effected. That mortgage was subject to the decree. It was open to the plaintiffs as subsequent mortgagees to discharge the decree and thus make the property available for the recovery of the money borrowed from them on the security of it. They did not do so but allowed the property to be sold in execution of the earlier decree for the realization of a prior charge. The purchasers have, therefore, acquired priority over them and the property cannot be sold again. In my judgment the decision of the court of first instance is correct and this appeal must prevail. I would allow the appeal, set aside the decree of the lower appellate court and restore that of the court of first instance. I, however, agree in referring the question of law which arises in the case to a third Judge under section 98 of the Code of Civil Procedure. 12. The appeal was laid before Mr. Justice Richards for the determination of the question whether or not the decree of the 24th of March, 1888, did anything more than create a charge upon the property referred to therein. RICHARDS, J. The facts connected with this appeal have been so very fully dealt with by both the learned Judges of this Court before whom the appeal came, that it is unnecessary for me to refer to them in any detail. The sole question before me is whether or not under the circumstances the decree of the 24th March, 1888, is to be deemed a decree under the Transfer of Property Act or whether it merely operated to create a charge on the property referred to in the decree. The decree itself was not in the form prescribed by the Transfer of Property Act. The decree itself was not in the form prescribed by the Transfer of Property Act. It is pointed out, no doubt, that at the time that the suit was brought, neither the public nor the courts were as familiar with the provisions of the Transfer of Property Act as they afterwards became. The fact, however, remains that the decree is not in the prescribed form and does not expressly direct the sale of the property. A decree for sale under the Transfer of Property Act, always pre-supposes the existence of a mortgage. Parties entering into an agreement for a mortgage cannot contract themselves out of the provisions of the Act and a decree for safe cannot be obtained without complying with the formalities prescribed by the Transfer of Property Act. It would seem, therefore, that if the court, which passed the decree of the 24th March, 1888, intended to decree that the mortgaged property should be sold without any further, default of payment within two years, the court??? an illegal decree. In the cases relied upon by the defendants in which the decree was held to be a of the same property, there were mortgages and the suits were mortgage suits in which the appropriate relief was a decree for sale. It seems to me that in such a case it is the duty of the court construing the decree to struggle to see whether an interpretation cannot be given, which would make the decree operative. The considerations are very different where to construe the decree as a decree for sale we would be attributing to the court the making of a decree, which was certainly inappropriate if not illegah. In my opinion the decree can only be held to operate as creating a charge on property. 13. The case will accordingly be referred back to the Honourable the Chief Justice, who referred the matter to me. 14. The following order was passed by STANLEY, BANERJI, JJ. The plaintiffs in their suit on the mortgage of the 17th July, 1890, admitted that if any prior incumbrances existed over the property, the subject-matter of that mortgage, they would be prepared to discharge these prior mortgages. The court below has given; a decree to the plaintiffs without regard to any subsisting charges. That court ought to have ascertained whether there were any, and if so, what prior mortgages or charges. The court below has given; a decree to the plaintiffs without regard to any subsisting charges. That court ought to have ascertained whether there were any, and if so, what prior mortgages or charges. Before, therefore, we can satisfactorily dispose of this appeal, we must refer the following issue to the lower appellate court under Order 41, Rule 25, namely:— 15. What, if any, charges or incumbrances existed over the property comprised in the mortgage of the 17th of July, 1890, having priority to the plaintiff's mortgage; and what amounts, if any, are due in respect of any such prior mortgages or charges, and to whom are these amounts payable. We refer this issue under the order aforesaid and direct the lower appellate court to take such relevant evidence as the parties may adduce and return its finding with its reasons to this Court as soon as convenient. The parties will have the usual ten days for filing objections.