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1964 DIGILAW 71 (MAD)

Sambandam Pillai v. Ramaswami Naidu

1964-02-14

T.VENKATADRI

body1964
Judgment.- This appeal arises out of execution proceedings in O.S. No. 31 of 1945 on the file of the Sub-Court, Cuddalore. The sixth defendant in the suit is the first appellant herein. He and his son filed an application E.A. No. 700 of 1960, out of which this appeal arises, for directing the decreeholder in O.S. No. 31 of 1945 to sell items 1 to 15 and 17 to 25 of the decree first in execution and to sell item 16 afterwards. When this application came up before the learned Subordinate Judge, Cuddalore, he allowed the application, subject to the condition, namely that item 16 would be sold in the order in which it was found in the decree seriatim. The assignee-decree holder filed an appeal against the said direction to the District Judge, Cuddalore. He held that the assignee-decree holder had a right to proceed only against item 16 which belonged to Sambandam Pillai, the sixth defendant the original mortgagor, and thus set aside the order of the learned Subordinate Judge. The assignee-decree holder was thus permitted to proceed in execution only against item 16. It is against this order the sixth defendant has preferred this appeal. It is necessary to state briefly the facts which led to the filing of the petition by the appellants herein in the Executing Court. A security bond was executed for Rs. 9,000 by one Venugopala Naidu, the second defendant in the suit in favour of the District Munsif, Vridhachalam, for the benefit of one Seshayya Naidu. The security bond comprised 25 items of property belonging to Venugopal Naidu. While the security bond was in force, Venugopala Naidu and his sons, defendants 3 to 5, sold items 16 of the property to the sixth defendant-appellant for Rs. 3,000. Similarly, defendants 2 to 5 executed another sale-deed in respect of items 20, 24 and 25 in favour of the 9th and 10th defendants, who are the legal representatives of the seventh defendant. Subsequently, in the year 1945, Seshayya Naidu filed the suit, O.S. No. 31 of 1945 on the file of the Sub-Court, Cuddalore, on the security bond executed by Venugopala Naidu in favour of the District Munsif, Vridhachalam and all the purchasers were impleaded as parties. A preliminary decree was passed on 31st January, 1947, for Rs. 9,570-4-0. Subsequently, in the year 1945, Seshayya Naidu filed the suit, O.S. No. 31 of 1945 on the file of the Sub-Court, Cuddalore, on the security bond executed by Venugopala Naidu in favour of the District Munsif, Vridhachalam and all the purchasers were impleaded as parties. A preliminary decree was passed on 31st January, 1947, for Rs. 9,570-4-0. The decree was against defendants 2 to 6 and 8 to 10, and the charge was spread all over the items of property. Subsequently, the decreeholder, Seshayya Naidu, assigned the decree to one Ramasami Naidu, the present first respondent herein. A final decree was passed on 18th July, 1955. The said Ramaswami Naidu, after obtaining the assignment of the decree, released items 20, 24 and 25 in favour of the 9th and 10th defendants on 10th March 1958, by a registered release deed, Exhibit B-1, in consideration of Rs. 100. On 16th July, 1958, the assignee-decreeholder filed E.P. No. 398 of 1958, praying for a sale of all the 25 items without mentioning the release of items 20, 24 and 25 under Exhibit B-1 already referred to. When the Court returned the petition on 13th August, 1958, with a direction that he should file the sale papers, the assignee decreeholder filed the sale papers on 25th August, 1958, only in respect of item 16 with a note that, as the encumbarance certificates in respect of items 1 to 15 and 17 to 25 have not yet been obtained, he would bring those items to sale subsequently. Before the said E.P. came for hearing, the assignee-decreeholder released items 1 to 11, 14, 15, 17 to 19 and 21 to 23 in favour of the second defendant, Venugopala Naidu, the person who executed the security bond, for a sum of Rs. 500, an extent of 23.66 acres of punja land and 4.70 acres Nanja land. The first appellant herein objected to the procedure adopted by the assignee-decree holder. The execution application was, therefore, withdrawn. Again, on 29th February, 1960, the assignee decree holder filed another Execution Petition (E.P. No. 152 of 1960) for the sale of item 16. The appellant herein filed E.A. No. 700 of 1960, alleging that he is the bona fide purchaser of item 16 from defendants 2 to 5 for a valid consideration of Rs. Again, on 29th February, 1960, the assignee decree holder filed another Execution Petition (E.P. No. 152 of 1960) for the sale of item 16. The appellant herein filed E.A. No. 700 of 1960, alleging that he is the bona fide purchaser of item 16 from defendants 2 to 5 for a valid consideration of Rs. 3,000 that the first respondent took an assignment of the decree for a low consideration and is maliciously bringing to sale only item 16 and that the other respondents got the secured property on release from the assignee-decreeholder for a low consideration. He, therefore, prayed the Court that his property item 16 should be ordered to be sold last, after items 1 to 15 and 17 to 25. The assignee-decreeholder resisted the application supported by the second defendant, Venugopala Naidu, who obtained release of the major items of property. The assignee-decreeholder asserted as a mortgagee-assignee-decreeholder he was entitled to release some items and to proceed against any item of the mortgage as he pleased and submitted that this matter could not be gone into in execution proceedings. The learned Subordinate Judge was convinced that the assignee-decreeholder was actuated by mala fides in singling out item 16 and in bringing that property to sale, and allowed the application filed by the sixth defendant and ordered that the properties should be sold in the order in which they were found in the decree. The learned District Judge, on appeal by the assignee-decreeholder, observed that the Court should frustrate any attempt on the part of the decree-holders to throw most of the burden mala fide on only one of the mortgaged properties. However, he came to the conclusion that the mortgagee would have a paramount right to have the entire mortgage amount recovered from all or any of the properties comprised in the mortgage and that this right should be whittled down only by clear and express words in the enactment or by necessary intendment, and that the provisions of section of section 56 of the Transfer of Property Act and Order 34, Rules 4 and 5, Civil Procedure Code, neither expressly nor by necessary intendment curtail the powers of the mortgagee to release the rights in respect of some properties of the mortgage by virtue of the dominant right to realise the entire decree debt only from some of the properties comprised in the mortgage. The sixth defendant has come in appeal. Now, I have to consider how far this observation made by the District Judge is correct and in accordance with law. A Bench of this Court has held as early as 1906 in Krishna Ayyar v. Muthukumaraswamiya Pillai1. “..........it was quite competent to the Court to exercise the control, which it did, so as to bring the different items of property comprised in the decree to sale in a particular order with a view properly to adjust the equities possessed by the parties who were before it and who were all the parties interested in the different items constituting the security.” It is true that a Full Bench of this Court in Appayya v. Rangayya,2has held that a bona fide purchaser, who purchases for value a portion of a mortgaged property without notice of such mortgage, has no right, in a suit by the mortgagee to enforce his mortgage, to insist that the portion not sold to him must be proceeded against first and the portion purchased by him must be sold only for the balance, if any due. But the principle laid down by the Full Bench was subsequently referred to and explained by another Division Bench of this Court in Raghavachariar v. Krishna Reddi.3 “The only question that I have to consider is whether it is right that the order of sale of these properties should be regulated by the order of Court and that, in my judgment, must depend on whether the appellant has got a good, equitable right as between himself and the mortgagor and as between himself and the other persons interested in the other mortgaged property ; and if he has a right to preference then it is the duty of the Court to give him preference, taking care, of course, that the mortgagee is not prejudiced”. Thus, there is no direct authority that the mortgagee is the absolute master of the situation and that he could dictate to the Court the order in which he would sell the mortgaged properties. Thus, there is no direct authority that the mortgagee is the absolute master of the situation and that he could dictate to the Court the order in which he would sell the mortgaged properties. On the other hand, there is plenty of authority in support of the view that there is a discretion vested in Court in fixing the order in, which the property should be put up for sale, and, of course, this discretion is to be exercised in a reasonable and just manner consistent with the equities of the case. The facts of this case disclose mala fides of the assignee-decreeholder and a conspiracy between the assignee-decreeholder and the person who originally executed the security bond, Venugopala Naidu, the second defendant in the suit, to bring item 16 to sale (the property originally belonged to the second defendant and subsequently sold by defendants 2 to 5 to the appellant herein), after giving release of all the other items of property to the second and the seventh defendants. The main object seems to be that after enabling Venugopala Naidu to get back all the items of property which he originally gave as security in favour of the District Munsif, Vridhachalam for a low consideration of Rs. 500 and Rs. 100 the assignee decree-holder wanted to proceed against item 16 only for recovery of the decree amount. It is a deliberate attempt on the part of the assignee-decreeholder and Venugopala. Naidu to throw the entire burden of the decree on item 16 only. 500 and Rs. 100 the assignee decree-holder wanted to proceed against item 16 only for recovery of the decree amount. It is a deliberate attempt on the part of the assignee-decreeholder and Venugopala. Naidu to throw the entire burden of the decree on item 16 only. It has been held by a Division Bench of the Calcutta High Court as early as 1905 in Surjuram Marwari v. Barhamdeo Persad4: “It is not open to a mortgagee to throw the burden of the entire debt upon a portion only of the mortgaged property and release the remainder The same principle has been reiterated in Imam Ali v. Baijnath Ramsahu,5and also in Jugal Kishore Sahu v. Kedar Nath,6This has been followed in Mirza Qaiser Beg v. Sheo Shanker7, where Niamatullah, J., made the following observation at page 88: "If the Court executing the decree which directs sale of numerous properties has a discretion to sell the mortgaged properties in any order it deem equitable, it should be guided by what it thinks to be consonant with justice to all the parties concerned with due regard to the mortgagee’s right to have bis mortgage money satisfied by sale of all the mortgaged properties or a sufficient part thereof. The Court should frustrate any attempt on his part to throw most of the burden on one only of the mortgaged properties. That the Court has such discretion admits, in my opinion, of no doubt. " Though there are about 25 items of property in the decree, the assignee-decree-holder released major items of property and concentrated on only one item, namely, item 16, to recover the decree debt. Mr. Rashbehary Ghose, in his Tagore Law Lectures (Fourth Edition) Vol. I, at page 369, states: "For the law would not suffer the creditor to select his own victim, and from caprice or favouritism to turn a ‘common burden ‘into ‘a gross personal oppression'." In Kuppuswami Gounder v. Muthuswami Gounder1, Mack, J., in a case of similar circumstances observed: "It is true that a mortgage decree holder has ordinarily a right to bring the items of hypotheca in his decree to sale in any order that he pleases, that is most convenient for him to realise his decree as quickly as possible. This right cannot, however, include a right to single out one purchaser of an item of hypotheca and insist on bringing that item to sale out of mala fide motives such as spite or personal enmity. In such a case, if the Executing Court has reason to believe that a decree-holder in making a differentiation which the law allows him, is animated by mala fide motives, it can and should step in and direct an equitable sale without prejudice, of course, to the mortgagee’s right to bring every bit of the hypotheca in satisfaction of his decree". By the conduct of the assignee-decree holder, the appellants lost a valuable right of contribution from the other items of the property. By releasing major items of property for a very small consideration, the assignee-decreeholder must be deemed to have voluntarily released out substantial portions of the security. In such circumstances, what is the law to be applied is summed up in a treatise on the law and Practise of Real Property, Mortgage-Foreclosure, by Charles Histings Wiltsie (Fifth Edition) Volume 2, page 1143, paragraph 707, as follows: ".......... if the mortgagee releases from the mortgage, one or more parcels of the premises primarily liable, he thereby releases pro rata the portion secondarily liable, and he cannot enforce the lien against the residue without deducting the value of the part released from the amount due on the mortgage. if the mortgagee releases from the mortgage, one or more parcels of the premises primarily liable, he thereby releases pro rata the portion secondarily liable, and he cannot enforce the lien against the residue without deducting the value of the part released from the amount due on the mortgage. In case the value of the property released is equal to the full amount of the mortgage debt, the mortgagee will, of course, lose his debt so far as the lien of his mortgage is concerned." In effect, the assignee-decree-holder extinguished the charged lien on major items of the property, and, if it is found that he is responsible for it, then the ruling made in Krishna Ayyar v. Muthukumarasivamiya Pillai2should be applied, namely: "If the action of the mortgagee had the effect of extinguishing a mortgage lien upon any portion of the mortgage property so as to relieve it from the liability to bear its proportion of the debt, he cannot recover more than what the property he proceeds against would be rateably liable for." Therefore on a review of the entire case-law on the subject, I feel that the mortgagee should not be permitted to unequally distribute the mortgage money on two different properties and to release one lightly and burden the other with more than what it normally should be. Therefore in the interests of justice, I allow this appeal and direct that, if the assignee-decreeholder agrees, the rateable liability of item 16 should be ascertained and its owner allowed to redeem it on payment of the proportionate amount of the mortgage money, and, in default, item 16 should be sold for realisation of that proportionate amount, but if the mortgagee does not agree to such partial redemption, the assignee-decreeholder should bring all the items of property for sale before he sells item 16. In the result, the appeal is allowed with costs, and the execution application is remanded to the trial Court for final disposal in the light of the directions given in this judgment. P.R.N. --------- Appeal allowed; E. P. remanded.