Supreme Court: In the present case, as maintenance amount, payable to charge-holder, as a charge on the mortgaged property was not known to the mortgage, the 4-Judges Bench of M.C. Mahajan, C.J., and N.H. Bhagwati, B. Jagannadhadas and T.L. Venkatarama Ayyar*, JJ., held that the mortgagees had no actual or constructive notice of the charge in favour of charge-holder, and were bona fide transferees for consideration. Therefore, the rights of the charge-holder could not prevail. The Supreme Court affirmed the decision of the Nagpur High Court (‘the High Court’) and opined that the rights of the charge-holder could not prevail as against those of the mortgagees, under Section 100 of the Transfer of Property Act, 1882 (‘the 1882 Act’).
Background
In the present case, the suit properties belonged to Anandrao, who died leaving him surviving his mother, his wife, and an adopted son. Anandrao’s mother was in possession of the properties, and his son and wife had to file a suit in the Additional District Court, Amraoti, to recover them from his mother. On 8-10-1917, the suit was settled on the terms that the properties were to be taken by his son and wife, and that his mother was to get Rs 2000 per annum for her maintenance, and that the payment of the amount should be charged on the estate. A memorandum was drawn up and was signed by the parties. On 28-2-1918, a compromise decree was passed in the suit, but it did not incorporate the term as to the maintenance claim being charged on the suit properties.
On 24-6-1922, Anandrao’s son and wife mortgaged the properties mentioned in Schedule A to Shriballabh Badrinath for Rs 6000, and on 25-9-1923, they executed a mortgage over these properties and also the properties mentioned in Schedule B in favour of Manoramabai for Rs 20,000, who in turn mortgaged them to the respondent, Laxman, under two deeds dated 28-9-1923 and 22-2-1924 for Rs 15,000 and Rs 1700, respectively. Subsequent to these mortgages, Anandrao’s mother applied for amendment of the decree by addition of a clause that the payment of the maintenance amount be a charge on the properties, and that was ordered on 9-7-1925 without notice to the mortgagees.
Shriballabh then filed a suit in the Court of the Additional District Judge, Amraoti (‘ADJ’), to enforce the mortgage dated 24-6-1922. There was a preliminary decree providing for redemption by the mortgagors and the subsequent mortgagees and in pursuance of that clause, the respondent deposited into court on 2-9-1931, Rs 17,892, and stepped into the shoes of the decree-holder, and on his application, a final decree for foreclosure was passed on 22-4-1933. Sriballabh took possession of properties mentioned in Schedule A in June 1933. Manoramabai, the mortgagee under the deed dated 25-9-1923, along with the respondent-sub mortgagee, also filed a suit before the ADJ for recovery of the amount due under that mortgage, and obtained a preliminary decree on 28-6-1932, which became a final decree on 17-4-1934.
Meanwhile, Anandrao’s mother transferred the arrears of maintenance due to her for the years 1931 and 1932 to Shriram, who brought himself on record as the assignee-decree-holder without notice to the judgment-debtors, Anandrao’s son and wife; and started execution proceedings against the properties in Schedules A and B. Anandrao’s mother also applied to execute the decree for the maintenance amount due for the subsequent years against those properties. Thereafter, the respondent became aware of these proceedings in December 1933 and thus, instituted the present suit.
By the time the suit was filed, several properties in Schedule A and some in Schedule B were sold, some of which were purchased by Shriram on 28-5-1934 and others by Appellant 5. The respondent applied in the suit to stay further execution of the decree in a suit and the confirmation of the sale which had been already held, and that was granted. The respondent alleged that the amendment of the decree in a suit on 9-7-1925 could not affect the rights of the mortgagees under the deeds of 1922 and 1923, that their right had been perfected as regards the properties mentioned in Schedule A by the final decree for foreclosure dated 22-4-1933, and as regards the properties mentioned in Schedule B, by the decrees dated 28-6-1932 and 17-4-1934, and that therefore the charge decree could not be enforced against the properties comprised in those decrees.
Shriram died before the suit, and was represented by his widow, Janibai-Appellant. Anandrao’s mother died in 1936, and Appellant 3 was brought on record as her stridhanam heir. Appellants 3 to 5 contested the suit on the ground that the mortgagees of 1922 and 1923 had notice of the charge in favour of Anandrao’s mother, and were therefore bound by that charge, and the proceedings taken for enforcement of the same.
The District Judge dismissed the suit and held that the effect of the amendment of the decree on 9-7-1925 was that it related back to the date of the decree i.e., 28-2-1918, that the mortgagees of 1922 and 1923 must be held to have had constructive notice of the charge, and that they were therefore bound by it. The respondent filed an appeal before the High Court, wherein it was held that the mortgagees had no notice, actual or constructive, of the charge in favour of Anandrao’s mother, and that as bonafide transferees for consideration, they were not affected by the charge created subsequently by the order dated 9-7-1925. The High Court allowed the appeal, and granted the declaration prayed for. Thereafter, Appellants 3 to 5 preferred the present appeal.
Analysis, Law, and Decision
The Supreme Court stated that the appellants did not seriously dispute the finding of the court below that the mortgagees of the years 1922 and 1923 were bonafide transferees for consideration without notice of the charge and even the ADJ’s decision in favour of the appellants was based on the doctrine of constructive notice. The Supreme Court opined that the High Court rightly pointed out that there was no scope for the application of the said principle on the facts of the present case, as the charge itself was created by the order dated 9-7-1925, and there was nothing to put the mortgagees on enquiry about the rights of Anandrao’s mother under the compromise memorandum dated 8-10-1917. The Supreme Court affirmed the High Court’s decision and opined that the rights of the charge-holder could not, under Section 100 of the 1882 Act, prevail as against those of the mortgagees.
The Supreme Court noted that the appellants raised a new point in the present appeal and contended that even if the right of the charge-holder might be postponed to that of a bonafide transferee for consideration under Section 100 of the 1882 Act, her right to redeem the mortgages was not affected thereby. The Supreme Court stated that the appellants did not put forward this right in the courts below and did not even allege that they were ready and willing to redeem the mortgages.
The Supreme Court opined that the appellants now could not be permitted to set up that right, as that involved an investigation of other defences which might be available if the point was to be entertained. The Supreme Court declined to permit the said point to be raised for the first time in the present appeal and thus dismissed the present appeal with costs.
[Baburao v. Laxman Bhave, (1954) 2 SCC 865, decided on 7-12-1954]
*Judgment authored by: Justice T.L. Venkatarama Ayyar
Advocates who appeared in this case :
For the Appellants: C.K. Daphtary, Solicitor General of India (Radhey Lal Aggarwal and Bishan Prasad Maheshwari, Advocates, with him),
For the Respondent: M.C. Setalvad, Attorney General for India and Ved Vyas, Senior Advocate (Ganpat Rai, Advocate, with them).
**Note: Section 100 of the Transfer of Property Act, 1882
Section 100 of the Transfer of Property Act, 1882 defines ‘charge’ as where a person’s immovable property is, by an act of parties or operation of law, made a security for the payment of money to another, and this transaction does not amount to a mortgage, the latter person is said to have a charge on the property; and all the provisions therein contained which apply to a simple mortgage shall, so far will also apply to charge. Section 100 does not apply to the following:
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A trustee’s charge on trust-property for the expenses in the execution of his trust.
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A charge against any property in the hands of the person to whom such property has been transferred for consideration and without notice of charge.
