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Online LibraryChas. A. Stevens & BrosThe Indian decisions (New series) : being a re-print of all the decisions of the Privy Council on appeals from India and of the various high courts and other superior courts in India reported both in the official and non-official reports from 1875 (Volume 7) → online text (page 47 of 155)
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security to a right in personam.

******

"The objects aimed by a pledge ere obviously, on the one hand to
give the creditor a security on the value of which he can rely, which
he can readily turn irfio money, and which he can follow even in the
hands of third parties ; on the other band to leave the enjoyment of the
thing in the meantime to its owner, and to give him every facility for
disincumbering it when the debt for which it is security shall have been
paid." (Holland, p. 152.)

" Such being the very nature and essence of the rights created by
hypothecation, it follows that if hypothecation is valid and legal, the
incidents which flow from it must necessarily be held to be valid and
legal too, on the principle that when the law permits a thing, it also-
permits that which is essential to its accomplishment. The most essential
incident of hypothecation is the eventual sale by order of Court a sale
which in the ordinary course of law must be held by public auction, -at
which ex necessitate rei any person may bid and which must be concluded
in favour of the highest bidder. If hypothecation does not carry with it
this right of sale at the instance of the mortgagee, and without any
restrictions as to the class of bidders or purchasers it cannot be called
hypothecation at all. For if any such restrictions are attached to the
rigt of sale, they are essentially repugnant to the very nature of the right
[479] conveyed, and must end in defeating the entire object of the
pledge."

These views were expressed by me so long ago as the 13feh June,
1882. in the Full Bench case of Gopal Pandey v. Parsotam Das (1) and
to those views I still adhere so far as they explain the legal incidents of
a simply mortgage or hypothecation as understood in the Indian Law.
But because these observations were made in a dissentient judgment, it
was argued before me in a later ca'se Kishan Lai v. Ganga Ram (2)



(1) 5 A. 121,



(2) 13 A. 28 (pp. 49 and 50).



304



YII]



MATA DIN KASODHAN V. KAZIM HUSAIN



13 All. 481



that this view of the nature of a simple mortgage was disapproved by the
majority of the Court in the Full Bench case. In delivering my judg-
ment I took occasion to explain why such was not the case, and that
explanation justified me in the later case to abide by what I have all along
understood to be the legal incidents of hypothecation or simple mortgage
as understood in the Indian Law.

I think I have said enough to indicate what I understand by the
term "property " as used in the Transfer of Property Act; also what I
understand by " simple mortgage " as described in the same enactment.
And if it is necessary to explain my meaning more concretely, I will do so
by taking the following illustration, which will also help me in dealing
with some of the other points in this case.

Lat me suppose that A is the owner of certain property X which is
free of all kinds of mortgage incumbrances. A borrows Us. 90,000 from
B and executes a simple mortgage in his favour hypothecating the property
X to him as security for repayment of the loan after the lapse of 70 years,
the date of the mortgage being 1883.

Upon this state of things the first question is, whether after the
execution of the mortgage in favour of B, A continues to be the owner of
the property X or not, and whether his rights and interests, subject of
course to the mortgage in favour of B, can be called " property " within
the meaning of the Transfer of Property Act. Secondly, the question is
whether such rights as B derived under [480] his mortgage of 1883 can
be called " property " within the meaning of the Transfer of Property Act.

I am of opinion that the answer to both these questions must be in the
affirmative, because the negative answer would necessitate the following
results :

First. That A, having no longer any property in X, could not execute
a second mortgage, for, his power of transfer must be governed by the
provisions of ss. 5 and 6 of the Transfer of Property Act, and in those
sections the right of transfer refers only to the expression " properly " as
meaning what I have explained. If that explanation is erroneous, then
there is no power in the Transfer of Property Act to enable a mortgagor
after having executed a first mortgage to execute a second mortgage or to
sell his rights, because ex hypothesi his rights in X after the first mortgage
to B, cannot be called " property."

Secondly, for similar reasons it would follow a fortiori that the rights
of B under his mortgage of 1883 not being " property " with the meaning
of ss. 5 and 6 of the Transfer of Property Act, he could not transfer them
either by assignment or sale or by executing a sub-mortgage.

A more restricted meaning of the word " property " then I have
adopted would, ia my humble opinion, necessitate both these results ; and
I venture to say that I am wholly unaware of any authority in the Indian
Law of Mortgages as it stood before the Transfer of Property Act (IV of
1882), or as it now stands since the enforcement of that enactment, to
justify the view that either second or other subsequent mortgages of
sub-mortgages are prohibited by the law. And if I am right so far, it
follows that a second mortgage or a sub-mortgage is either legal or illegal.
If such transactions are illegal, then a clear answer is obtained. But if it
be accepted that they are legal and valid, as I hold them to be, then it
follows that these transactions, falling under the category of the law of
contracts, must be governed by the general principles of the Indian Con-
tract Act (IX of 1872), as.indeed expressly stated in s. 4 of the Transfer of
Property Act itself, which lays down inter alia [481] that '' the chapters-



1891

JULY 25.

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BENCH.

13 A. 432

(F.B.).



A VII-39



305



13 All. 482



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[Yol.



1891

JULY 25,

FULL
BENCH.

13 A. 432



and sections of this Act which relate to contracts shall be taken as part of
the Indian Contract Act, 1872."

There is nothing in either of these enactments to prohibit a mortgagor
after his first mortgage to deal with his rights by transfer in any form in
which he chooses to alienate them. Nor is there anything in those enact-
ments to render such subsequent transfers unenforceable at the instance
of the transferee, that is to say, in the case of a second mortgage, for
example, the second mortgagee would have the right to enforce the obliga-
tions contained in the covenants of his mortgage-deed.

There is, however, one point which, with reference to the covenants
against alienation as contained in Hari Prasad, (defendant's) three mort-
gaages, dated the 10th Seotember 1882, the 23rd February 1884, the 12bh
August 1885, and Mata Din Kasondhan's mortgage of the 6th August 1885
as also in Mata Prasad's mortgage of the 21st August, 1885, assumes
importance, viz., whether such covenants against alienation absolutely debar
the mortgagor from dealing with his rights by way of transfer of the mort-
gaged property. The plea was actually taken by Hari Prasad in his defence
to the action in the second paragraph of his written statement. This ques-
tion was one of the subjects of consideration by me in Alt Hasan v.
Dhiraj (1) and I expressed my views upon it at pp. 523 and 524 of the
report. I ended my observations by saying \

" I am therefore of opinion that transfers made in breach of cove-
nants against alienation covenants so often introduced in mortgage-deed
and so often infringed by mortgagors in this country, are valid except in
so far as they encroach upon the rights of the prior mortgagee, and that,
with this reservation, such covenants do not bind the property so as to
prevent the acquisition of a valid title by the alienee."

This view of the law is stated by Dr. Bash Behari Ghose in the
second edition of his well-known work on the Law of Mortgage in India
(page 157), and he sums up the case-law in the following words :

[482] " It ia necessary to observe that at one time [the Courts used
to give full effect to a condition against alienation (see the cases cited by
the reporter in the note to Chunni v. Thakoor Dass (2)) ; but it is now
settled that a transfer by the mortgagor in breach of a condition against
alienation is valid, except in so far as it encroaches upon the right of the
mortgagee to realize his security. But, with this reservation, such a
condition does not affect the property so as to prevent the acquisition of a
valid title by the transferee of the equity of redemption. Covenants against
alienation are often introduced in mortgage-deeds in this country, and, I
may add are so often infringed by mortgagors. But such a covenant,
although it may create a personal liability between the mortgagor and
the mortgagee, does not render an alienation absolutely void, but voidable
only in so far as it is in derogation of the rights of the mortgagee. In reality,
therefore, a mortgagee does not, by virtue of such a covenant, acquire
any higher rights than he would acquire even if the condition was
absent, except, perhaps, as regards the necessity of making puisne
claimants parties [Radha Prasad Misser v. Monohur Dass (3) ; Chunni
v. Thakoor Dass (2), Ali Hasan v. Dhiraj (1)] . To these cases I may
add the ruling of the Madras High Court in Venkata Somayazulu v.
Kannam Dhora (4) and cite the authority of the various cases mentioned
at p. 293 in Macpherson's Mortgages (7th ed,), where the rule laid down



(1) 4 A. 618.



(2) 6 0. 317.



(3) 1 A. 126.



(4) 5 M. 184.



306



VII]



MATA DIN KASODHAN V. KAZIM HUSAIN



13 All. 484



is that alienations made by a mortgagor in breach of a covenant against
alienation are bad only in so far as they interfere with the rights of those
witih whom the agreement not to alienate was made. And this rule
is stated to be as old as the Full Bench ruling of the Calcutta Sudder Court
inUbhy Gharn Sheikhdar v. Jugat Kishore Ra.ee (1), which was followed
in later cases.

Applying these principles to the facts of the present case, it follows
that notwithstanding the mortgages of the 10th September 1882, and the
23rd February 1887, in favour of the defendant Hari Prasad, both of
which contained covenants against alienation, the [483] mortgagor Kazim
Husain was legally entitled to execute subsequent mortgages, as he did by
the deed of the 6th August 1885, in- favour of the plaintiff Mata Din
Kasodhan, and by the deed of the 21st August 1885, in favour of the plaintiff
Mata Prasad. Now, if these two latter deeds were valid contracts, as I
hold them to be, they must; be enforceable by suit in the Courts of justice.
And if they are so enforceable, the right of the mortgagees to bring what
was mortgaged to them to sale cannot be denied according to the terms of
the contract, ifa being of course borne in mind that what was mortgaged to
them was subject; to prior incumbrances as I have already described. Such
is the effect of the rule as stated at p. 290 of Macpherson on Mortgages
(7th ed.,) where the learned author on the authority of numerous rulings
says

" And the mortgagor may either tranfer absolutely or mortgage
his remaining interest in lands which he has already mortgaged without
first redeeming them. The purchaser or mortgagee acquires the rights
or interests of the mortgagor and stands in his place ; he takes the property
subject to the lien of the prior mortgagee, the liabilities of the property
not being affected by any subsequent transfer which the mortgagor can
make. And no act of the mortgagor, nothing, in fact, but a revenue
sale, injure the mortgagee's lien on the land ; or on that which represents
the land."

It has, however, been contended that the mere existence of prior
incumbrances debars these plaintiffs who are puisne mortgagees "from
enforcing their remedy according to the terms of their mortgage-deeds,
without the consent of the prior mortgagee as such, or without redeeming
the prior incumbranoes. It has been argued that this restriction upon
the plaintiffs' right to bring the property mortgaged to them to sale arises
out cf the doctrine of priority of liens as understood in the Indian Law
of Mortgages. That such restrictions do not arise out of any terms or
covenants contained in the plaintiff's mortgage-deeds seems to me to be
clear, and I will now consider whether the doctrine of priority as under-
stood in our law subjects puisne mortgages to any such restrictions as
are sought to be imposed upon them by the argument which I have
mentioned.

[484] Now, mortgage being only a form of the transfer of immoveable
property, the rule formulated in s. 48 of the Transfer of Property Act com-
prehensively describes the scope of the doctrine of priority, and it applies
to mortgages as much as. to other kinds of transfers. The section runs as
follows :

" Where a person purports to create by transfer at different times rights
in or over the same immoveable property, and such rights cannot all exist
or be exercised to their full extent together, each later created right shall,

(l)Oal, BD. A. 1848,305,
307



1891

JULY as.

FULL
BENCH.

13 A. 432

(F.B.).



13 All. 485



INDIAN DECISIONS, NEW SERIES



[Yol.



1891

JULY 25.

FULL
BENCH.

13 A. 432

(F.B.).



in the absence of a special contract or reservation binding the earlier
transferees, be subject to the rights previously created."

In considering this section the words which I have emphasized
are by no means unimportant, for they show that the rule of priority
applies only where the rights of the prior transferee clash with the
rights of the puisne transferee, and that such right of priority does
not give to the prior transferee a free hand to deal with the puisne
transferee's rights in any manner going beyond what is requisite to
fulfil and protect the rights of the prior transferee. In other words, where
the terms or covenants of a puisne.transfer can be enforced without injany
manner affecting the rights of the prior transferee, the terms of the puisne
transfer must take effect, irrespective of the wishes of the prior trans-
feree, because in such a case, the doctrine of priority does not come into
p)ay and the maxim "Qui prior est tempore potior est jure " upon which it
is based has no reference. -This view of the law is applicable as much to
transfers by mortgage as to other forms of transfer of immoveable property
and therefore my answer to the second question, as enunciated by me, is
that so long as the enforcement of the puisne mortgage cannot in any
manner affect injuriously the rights of the -prior mortgagee, such prior
mortgagee, is not entitled to prevent the enforcement of the terms of a
valid puisne mortgage to which he was no party and which cannot defeat
or in any manner operate in derogation of his prior mortgage security.

I may explain my meaning by taking an illustraion. A, the owner
of certain immoveable poperty, hypothecates the same by [485] simple
mortgage to B in 1883 as security for payment of Ks. 5,000 payable at
the end of 25 years. In 1884 he executes a second simple mortgage of the
same property in favour of G in lieu of Ks. 4,000 payable at the end of 15
years ; and in 1885 he executes a similar mortgage of the same property
in favour of D for Us. 3,000 payable at the end of 3 years. In this illus-
tration it will be observed that B's mortgage would fall due in 1908, O's
mortgage in 1899 and D's mortgage in 1888. All the mortgages remain-
ing unpaid, D comes into the Court seeking to recover his mortgage
money by enforcement of his security without waiting for the lapse of the
terms of the two prior mortgages and without seeking to redeem them.
The question then arises whether he can maintain such a suit ?

Now, s. 67 of the Transfer of Property Act distinctly declares that "in
the absense of a contract to the contrary the mortgagee has, at any time
after the mortgage money has become payable to him, and before a decree
has been made for the redemption of the mortgaged propertv, or the
mortgage money has been paid or deposited as hereinafter provided,
has a right to obtain from the Court an order that the mortgagor shall
be absolutely debarred of his right to redeem the property, or an
order that the property be sold." Clause (a) of that section leaves no
doubt that in the case of a simple mortgage the only remedy available
to the mortgagee for recovery of his mortgage money is to bring the
mortgaged property to sale under a decree of the Court, for he could nofc
sell it himself without the intervention of the Court as explained by me in
Kishen Lai v. Ganga Bam (1)

It will be observed that the section, whilst conferring, upon a simple
mortgagee the right of bringing the property to sale, does not either limit
it to first mortgagees or otherwise qualify such right by saying that a
puisne simple mortgagee must either delay the enforcement of his security

(1) 13 A. 28 (at p. 48).
308



YII]



MATA DIN KASODHA-N V. KAZIM HUSAIN



13 All. 487



till the lapse of the terms of prior mortgages or that the redemption of
such prior mortgages is a condition precedent to the enforcement of the
puisne mortgage. Nor do I think that any such qualifications or restric-
tions can be imported into the section. [486] For I take it as an estab-
lished rule of interpretation that when a statute has expressly conferred
. a right, such right cannot be qualified, restricted or defeated unless such
qualification, restriction or defeasance is to be gathered from the provisions
of the same statute or of other statutes in pari materia.

And if this is so, it becomes important to examine closely the various
sections of the Transfer of Propety Act which have been cited in support
of the proposition that, in the case of a simple mortgagee whose mortgage
is puisne to prior mortgages, the right of sale conferred by section 67 of
the Act restricts that right by rendering the redemption of prior mortgages
a condition precedent to the exercise of the right.

Now, the first section to which reference may be made is section 74
of the Transfer of Property Act which runs as follows ;

"Any second or other subsequent mortgagee may, at any time
after the amount due on the prior mortgage has become payable,
tender such amount to the next prior mortgagee, and such mortgagee
is bound to accept such tender and to give a receipt for such amount ; and
(subject to the provisions of the law for the time being in force regulating
the registration of documents) the subsequent mortgagee shall, on obtain-
ing such receipt, acquire in respect of the property, all the rights and
powers of the mortgagee as such, to whom he has made such tender."

That this section confers a right upon puisne mortgagees to pay off
prior mortgages cannot be doubted, nor do I think there can be any doubt
that such right is limited to the immediately prior mortgage as indicated
by the phrase "the next prior mortgage " used in the section. Further, I
may say that the rights thus conferred upon the puisne mortgagees cannot
be exercised under the section till after "the amount due on the next
prior mortgage has become payable," that is to say, such right cannot be
exercised either in respect of a first mortgage where there are intervening
mortgages, nor before the lapse of the term of the mortgage immediately
prior to the puisne mortgage. But more important than either of these
points is the effect of the word "may" as it occurs in the earlier part of the
[487] section, where the right to pay off prior mortgages is mentioned.
I understand that word to mean an option as distinguished from what
might have been the effect of the word ''shall," if that word had been
there employed, as it usually is where the Legislature intends to make an
imperative mandate. The result of this view is that the right of paying
off prior mortgages conferred upon puisne mortgagees in s. 74 is an
optional right which they may or may not exercise at their choice ; and it
follows that the provisions of the section cannot operate as a qualification
or restriction of the right to bring the mortgaged property to sale con-
ferred upon all simple mortgagees by s. 67 of the Transfer of Property
Act.

The next section to be considered is section 75 of the Act which
runs as .follows :

" Every second or other subsequent mortgagee has, so far as regards
.redemption, foreclosure and sale of the mortgaged property, the same
rights against the prior mortgagee or mortgagees as his mortgagor has
against such prior mortgagee or mortgagees, and the same rights against
4>he subsequent mortgagees (if any) as he has against his mortgagor."

309



1891

JULY 25.

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BENCH.

13 A. 432

.. (P.B.).



13 All. 488



INDIAN DECISIONS, NEW SERIES



[YoL



1891

JULY 25.

FULL
BENCH.

13 A. 432

(P.B.),



Now, in this section I fail to see any qualification or restriction of
the right to bring the property to sale which section 67 of the Act confers
upon simple mortgagees without limiting that right to first mortgagees.
That right of sale belongs as much to puisne and mesne simple mortgagees
as to the first simple mortgagee, subject of course to the rule of priority
enunciated in section 48 of the Act, the exact scope of which rule I have
already discussed. All that section 75 of the Act lays down is well
illustrated in Mr. Justice Shephard's commentary on that section 1.2nd
ed., p. 288), where he says

" Thus when A has mortgaged the property successively to B, C and
D ; C and D have against B, and D has against C, the same rights as
A has under the several mortgages against B, C and D ; while C has
against D the same rights as he has against A. That is to say, the
later can redeem the prior mortgagee, and exercise the right of fore-
closure or sale against any mortgagee posterior to him. In the case of
a prior versus later mortgagee the former has the [488] right which the
mortgagee possesses against the mortgagor, and may consequently sue
for foreclosure or sale ; since the later mortgagee, having taken as his
security the right of redemption, occupies the position of the mortgagor."

In my opinion this illustration correctly explains the entire scope
and effect of the section : but that effect falls far short of sustaining the
proposition that the payment of a prior incumbrance is a condition pre-
cedent to the enforcement of a puisne or mesne simple mortgage or that
such puisne or mesne mortgagee is bound to wait for enforcement of
his security till the lapse of the term when the prior mortgages become
redeemable. It equally falls short of sustaining the proposition that
where there are several successive mortgages of the same property any
mortgagee whether prior, puisne or mesne is bound before he can enforce
his security to seek the liquidation of all the mortgages then subsisting
upon the property, regardless of the amounts, nature and the period when
such mortgages fall due. In short, I understand the effect of s. 75 to be
that each successive mortgagee has the right to enforce his security accord-
ing to its terms, subject to the rules of priority, and that, in addition
he may redeem prior mortgages if he likes, and if he does not prefer to
adopt that course he may proceed with his rights against the puisne incum-
brancers, and the mortgagor.

And I may here say in passing in that I put a similar interpretation
upon the provieions of s. 91 of the Act, so far as they relate to the rights
of the puisne mortgagees, to maintain suits for redemption of prior mort-
gages, with this distinction that whilst the right to pay off a prior mort-
gage under's. 74 of the Act is limited to the immediately prior mortgagee,
the right to SMC for redemption under s. 91 is not restricted and applies to
the redemption of all prior mortgages, subject, of course, to the covenants
in such mortgages as to the time when they would be redeemable. This
is apparent from the provisions of s. 60 of the Act. But notwithstanding
this distinction two points remain, viz., that the puisne mortgagee
cannot, any more than the mortgagor himself, enforce redemption before
the time when the mortgage is redeemable and [489] that neither
is under the imperative necessity of seeking redemption. Their omission
to redeem would, of course, bring with it its natural legal conse-
quences : in the case of the mortgagor the extinguishment of such
rights as may have been left to him in the mortgaged property after
the execution of the mortgage security which may be enforced, and in the
case of a puisne of the mortgagee the loss of his security by reason of the



Online LibraryChas. A. Stevens & BrosThe Indian decisions (New series) : being a re-print of all the decisions of the Privy Council on appeals from India and of the various high courts and other superior courts in India reported both in the official and non-official reports from 1875 (Volume 7) → online text (page 47 of 155)