Jeswanthraj Mody v. Selvanayaki Ammal and others — 1996 DIGILAW 255 (MAD)

Judgment : 1. Second defendant in O.S.No.8117 of 1981 on the file of the City Civil Court, Madras, is the appellant. 2. Reference to the parties in this appeal is according to their array in the suit. 3. Plaintiff instituted the suit declaration and injunction, on the following facts:- Plaint schedule property originally belonged to the first defendant who executed a sale deed in favour of the plaintiff, as per the original of Ex.A-7. It is averred that on the date when Ex.A-7 was executed, there were only two mortgages made known to the plaintiff and the first defendant has represented that there was no other encumbrance over any portion of the property. The plaintiff believed the representation of the first defendant and also that of the fourth defendant, who is her husband. It is said that by the month of February, 1979, the plaintiff came to know that prior to the execution of the sale deed in favour of plaintiff, first defendant had fraudulently executed mortgages in favour of defendants 2 and 3 for Rs.20, 000 and Rs.27, 000 respectively. First defendant has suppressed these two mortgages to the plaintiff, and in the encumbrance certificate handed over to the plaintiff, the same was not disclosed. It is stated that the first defendant fraudulently suppressed the existence of the two mortgages in favour of the defendants 2 and 3 and, therefore, the plaintiff is not liable to discharge those debts. It is said that the plaintiff came to know about the existence of these documents when she received a notice from the second defendant in February 1979. Plaintiff, on enquiry, came to know that the mortgage deeds in favour of the defendants 2 and 3 were not registered in the Triplicane Sub Registrar’s Office where actually they should have been registered, but they wer e registered in the Office of the District Registrar, North Madras, Madras, purposely, so that they may not come to the knowledge of the plaintiff. On coming to know about the fraud committed by the first defendant, plaintiff filed objections to the Inspector General of Registration and Commissioner of Police, Madras, and a complaint was made against defendants 1 and 4. It is said that since the mortgages in favour of defendants 2 and 3 were obtained fraudulently, they are void, sham and nominal and are not binding on the suit property or on the plaintiff. It is said that since the mortgages in favour of defendants 2 and 3 were obtained fraudulently, they are void, sham and nominal and are not binding on the suit property or on the plaintiff. It is further averred that attempts are being made by the second defendant to realise the amount on the basis of the mortgages. Hence the suit. 3. In the suit, the first respondent and her husband (fourth defendant) who is a member of legal profession, remained ex parte. .4. In the written statement filed by the second defendant, appellant herein, he stated that on 8. 1978, the first defendant borrowed a sum of Rs.20, 000 and executed a registered mortgage in his favour. He paid that amount after being fully satisfied that the first defendant had ownership over the property. According to him, he was not aware of the arrangement between the first defendant and the plaintiff. He also said that it was his possession to lend money on security of properties and this is also one such transaction. He further said that according to his knowledge, plaintiff was also aware of the same, and he underlook discharge the mortgage in favour of the second defendant. Long before the institution of the suit, even in 1980 the second defendant, by virtue of the mortgage obtained by him, filed a petition before the 6th City Civil Court under Section 69 of the Transfer of Property Act for appointment of a Receiver in respect of the suit property to receive the rents due from the tenants in occupation of the suit building, for being paid towards discharge of his debts. It is further said that even before that proceeding, even in the year 1979, amounts were due to him from the first respondent, and that she has executed a mortgage. According to the second defendant, registration of the mortgage before the District Registrar of North Madras cannot be question, and the same is valid. 5. The third defendant has also filed a written statement on similar lines. Thereafter, he did not proceed with the matter, and he was declared ex parte. 6. Trial Court, after framing issues, and after taking into consideration the evidence that was let in by both parties, held that the plaintiff had miserably failed to prove the fraud, and that, therefore, she was not entitled to the decree prayed for. 7. Thereafter, he did not proceed with the matter, and he was declared ex parte. 6. Trial Court, after framing issues, and after taking into consideration the evidence that was let in by both parties, held that the plaintiff had miserably failed to prove the fraud, and that, therefore, she was not entitled to the decree prayed for. 7. The Trial Court found that there was no allegation anywhere in the plaint that defendants 2 and 3 are parties to the fraud or that they were aware of any concealment by the first defendant. It also came to the conclusion that the mortgage executed by the first defendant in favour of the second defendant is supported by consideration. The suit was ultimately dismissed. .8. Plaintiff took the matter in Appeal as A.S.No.54 of 198 4. Lower Appellate Court came to the conclusion that the registration of the document before the District Registrar. North Madras, was not proper, and that only with an intention to defraud others, the registration was done before the District Registrar of North Madras. It also came to the conclusion that the first defendant did not inform anything about the mortgage to the plaintiff. It found that the plaintiff was a bona fide purchaser. In that view of the matter, it declared that the plaintiff is not bound to discharge the debt, nor can the plaint property be treated as a charge from the amount due under the mortgage. .The second defendant was also restrained from realising the amount due either from the plaintiff personally or from out of the plaint property. 9. Aggrieved by the said judgment, second defendant has preferred this second appeal. 10. At the time of admission of the second appeal, the following substantial questions of law were framed for consideration: 1. Is not the mortgage prior to sale deed binding on the mortgaged property? 2. Whether purchaser of property without notice of prior mortgage be exonerated from the liabilities of prior mortgage? 3. Whether purchase of property without notice of prior mortgage be pleaded against the prior mortgagee? 4. Whether the non-disclosure of prior mortgage by the seller to the buyer would affect the bona fide mortgagee for valuable consideration? 5. 2. Whether purchaser of property without notice of prior mortgage be exonerated from the liabilities of prior mortgage? 3. Whether purchase of property without notice of prior mortgage be pleaded against the prior mortgagee? 4. Whether the non-disclosure of prior mortgage by the seller to the buyer would affect the bona fide mortgagee for valuable consideration? 5. Whether a prayer for declaration that mortgage deed is ab initio void will amount to cancellation of document liable to be valued under Section 40 of the Tamil Nadu Court Fees and Suits Valu- ation Act? 11. According to me, all these questions of law can be considered together. 12. From the averments in the plaint, it is clear that a mortgage has been executed by the first defendant in favour of the second defendant in this case. It is dated 7. 8.1978 and registered on 8. 1978. Likewise, in so far as the mortgage in favour of the third defendant is concerned, it was executed on 7. 1978 and registered on the same date. Admittedly, both these documents are prior to Ex.A-7 dated 8. 1978, which was registered on 8. 1978. 13. The trumpcard of the argument of the plaintiff is that the first defendant handed over the encumbrance certificate and in that document these encumbrances are not shown. The encumbrance certificate alleged to have been handed over by the first defendant is marked as Ex.A-1 in this case. From a perusal of Ex.A-1, it is clear that it is dated 8. 1978, i.e., a few days before the execution of Ex.A-7 and then Ex.A.2 was executed only two days after Ex.A- 1. Naturally, those transactions could not have been entered in Ex.A-1 encumbrance certificate on that date. The case of the plaintiff is that when the first defendant executed Ex.A-7 sale deed in her favour, she suppressed Ex.A-2 mortgage and, therefore, she is not bound by it. Plaintiff has no case that the second defendant misrepresented to her (the plaintiff) or that he also committed fraud in executing the sale deed without disclosing the mortgages. In fact a reading of the entire plaint makes it clear that she had no complaint against the second defendant, but the charge is completely on the first defendant and her husband, the fourth defendant. 14. In fact a reading of the entire plaint makes it clear that she had no complaint against the second defendant, but the charge is completely on the first defendant and her husband, the fourth defendant. 14. Under Section 8 of the Transfer of Property Act, a Transfer of Property Act, a transfer of property passes forthwith to the transferee all the interest which the transferor is then capable of passing in the property, and in the legal incidents thereof. A reading of the said Section makes it clear that the first defendant was capable of transferring only that right of ownership subject to the encumbrances already created. If any fraud had been committed by the first defendant and the appellant (second defendant) had nothing to do with the same, it cannot be said that the mortgage created or taken by him is invalid for any purpose. The remedy of the plaintiff can only be against the first defendant and her husband, if they had misrepresented to her. 15. Evidence also discloses that the second defendant himself before executing the deed, verified about the title of the first defendant, and only after being satisfied about the absolute title, he parted with the money Evidence also discloses that Ex.A-2 was executed for consideration and the entire amount was received by the first defendant. 16. The main argument of the learned counsel for the appellant was that even though Ex.A-2 and A-3 were executed by the first defendant, it was with a fraudulent intention the same were registered before the District Registrar, North Madras, Madras though the property is situated within the jurisdiction of Sub-Registrar, Triplicane, Madras. I do not think that there is any substance in this contention.D.W.1 has stated the circumstances under which the document was registered before the District Registrar, N orth Madras. He said that the first defendant’s husband, who is a legal practitioner, has his office close to the Sub-Registrar’s Office, North Madras, and it is for their convenience, the document happened to be registered in that place. The fourth defendant being a legal practitioner, the second defendant fully believed the words of the first defendant (wife of fourth defendant) and got it registered in the District Registrar’s Office, North Madras. His intention was only to get proper security for the amount lent by him. The fourth defendant being a legal practitioner, the second defendant fully believed the words of the first defendant (wife of fourth defendant) and got it registered in the District Registrar’s Office, North Madras. His intention was only to get proper security for the amount lent by him. It is not the case of the plaintiff that the District Registrar, North Madras, Madras has no jurisdiction to register the document. But her case was that the registration was done in that Office, to clear her. When the plaintiff has no case against the second defendant that he also cheated her, the mere registration of the document in some others Registrar’s Office who has also jurisdiction to register the same, will not lead to an inference that the registration was made in the North Madras Registrar’s Office, in order to cheat her. 18. In Rustomji on Registration - Fourth End.(1989), at page 287, commenting on subsection (2) of Section 30 of the Registration Act, the learned author says thus: Sub-Section (2) confers the discretion on the Registrar of a district in which a Presidency Town is included and the Registrar of the Delhi District. Such a Registrar may receive and register any document referred to in Section 28 without regard to the situation in any part of India of the property to which the document relates. In Chandi Prasad v. Hrishikesh Shaha, AIR 1946 Cal. 465 a Division Bench of the Calcutta High Court held that a Registrar of a District, empowered under Section 30(2) may receive and register a document through no part of the property comprised in the deed is situated within his district. Such registration is not invalid on the ground that the property covered by the document relates to Section 28. In Saraswatibai v. Md.Idrakuddin, AIR 1963 M.P. 234 it was held that the Sub- Registrar of Betul, who is also the District Registrar, has the jurisdiction to register a document executed within his jurisdiction. 19. In Sanjiva Row’s Registration Act - 8th Edn.(1995), at page 357, commenting on Section 30 of the said Act, it is stated thus: The authority conferred by Section 30(2) is absolute and is in no way affected by the Registrar charging the lower fee, chargeable in case where some part of the property is situate within his jurisdiction; the levying of a lower fee may be an irregularity. it may be curable under Section 87 of the Act, but it has no bearing whatever on the jurisdiction of the Registrar to make the registration in such circumstances. Where one of the items of property in the document which was said to be within the jurisdiction of the Registrar was found to be non-existent and the other items were not within his jurisdiction and the document was registered by the Registrar without his saying that he was exercising the discretion under Sec.30 it was held that registration is not invalid in view of section 87 of the Act. The registration of a document by a Registrar, who has no jurisdiction to register under Section 28 of the Registration Act, would be valid, if he is empowered to Act under Section 30 of the Act, although he does not purport to act under the fee charged for registration as the fee chargeable under Section 28 and not the fee chargeable for registration under Section 30. .20. In Chandi Prasad v. Hrishikesh Shaha and others, AIR 1946 Cal. 465 a Division Bench of the Calcutta High Court held that the authority of the District Registrar under sub-section (2) of the Section 30 of the Registration Act is absolute. In the said decision, their Lordships held thus: .Sections 28 and 30 do not provide for two different modes of registration and do not warrant the view that if an officer, special empowered under Section 30(2), registered a deed comprising property no part of which is situated within his own registration district, such registration shall be valid only if the registration is impliedly or in substance under Section 30(2), and shall be invalid if the registration is under Section 28. There is no such thing as registration under one section rather than under another. It is true that the Registration Manual provides for additional fees to be levied in cases where a District Registrar or a Registrar of a Presidency Town registers a document comprising property, no part of which is situated within his registration district. But that requirement has nothing whatever to do with his jurisdiction to register a deed and it cannot be supposed that when such an officer registers a deed on receipt of the lower fee, he somehow contracts into a Sub-Registrar, and exceeds his authority if he exercises the larger powers. But that requirement has nothing whatever to do with his jurisdiction to register a deed and it cannot be supposed that when such an officer registers a deed on receipt of the lower fee, he somehow contracts into a Sub-Registrar, and exceeds his authority if he exercises the larger powers. The authority conferred by Section 30(2) is absolute and it is in no way affected by the Registrar charging the lower fee chargeable in cases where some part of the property is situate within his jurisdiction. The levying of a lower fee may be an irregularity and if it is an irregularity, it may be curable under Section 87 of the Act. But it is a complete mistake to suppose that the matter has any bearing whatever on the jurisdiction of the Registrar to make the registration in such circumstances. .21. Likewise, in the decision reported in Saraswathibai v. Md.Idrakuddin, AIR 1963 M.P. 234 it was held thus:- .The Sub-Registrar, Betul who is not merely a Sub-Registrar, but also the District Registrar, in that capacity, has the jurisdiction to register a document executed within the jurisdiction of the Sub-Registrar, Multai. 22. Once it is held that the District Registrar, North Madras had the power to register the document, the document executed by the first defendant is valid and the same is binding on the property. It is was only subject to the mortgage executed by the first defendant, plaintiff can claim any right over it. Under Section 55 of the Transfer of Property Act, it was the duty on the part of the seller to disclose to the buyer any material defect in the property or the vendor’s title, and he is also bound to answ er all relevant questions, which the buyer puts to him. Under Section 55 of the said Act, it is the duty of the seller (first defendant) to disclose the encumbrance created by her before the sale. If any fraud had been committed by the first defendant by stating that except for the two mortgages, there is no encumbrance, the remedy of the plaintiff can only be against the first defendant and none else. I may say that the plaintiff as well as the second defendant had been cheated by the first defendant and both are equally placed. I may say that the plaintiff as well as the second defendant had been cheated by the first defendant and both are equally placed. Merely because the plaintiff purchased the property without knowing the mortgage in favour of the second defendant, it does not follow that the charge is effaced from the property. When there is a valid document, and a valid debt is created, any sale can be only subject to the security created in favour of the second defendant. 23. Merely because the plaintiff said that she is a bona fide purchaser, that cannot confer on her a better title that the one which the first defendant (her vendor) had. Even the first defendant can convey only that title which is subject to the mortgage. The judgment of the lower appellate Court, according to me, is based on a misunderstanding of law. When the plaintiff herself has no case against the second defendant, a decree should not have been passed as prayed against the appellant (second defendant). The substantial questions of law are answered in favour of the appellant. .24. On question No.5 which relates to court fee payable on the plaint, I do not think this point was urged before the Courts below. The payment of court-fee is a matter between plaintiff and the State. The deficiency of court-fee or sufficiency of the same will have to be decided at or before the settlement of issues. We are now at the second appeal stage. I do not think it will be proper on the part of this Court to enter a finding on the sufficiency or otherwise of the court-fee. Because of belatedness, substantial question of law No.5 is not answered. 25. In the result, the second appeal is allowed. The judgment and decree of the lower appellate court are set aside. The appellant is entitled to costs in this Court and also in both in Courts below.