Case Note & Summary
The dispute concerned a mortgagor's liability to a puisne mortgagee after the prior mortgage was satisfied without sale. The mortgagor had executed three mortgages on his one-third share in premises No. 50, Chittaranjan Avenue, Calcutta. The first mortgage dated November 21, 1938, was in favor of Shew Balak Pandey for Rs. 7,500; the second on December 3, 1945, to Sudhinder Nath Mitter for Rs. 8,350; and the third on May 6, 1947, to Gangadhar Khemka (respondent) for Rs. 12,000 at 12% compound interest with monthly rests. After default, Pandey filed Suit No. 135 of 1948 on January 11, 1948, impleading the puisne mortgagees. A preliminary decree in Form 9, Appendix D, CPC was passed on December 12, 1949, and a final decree for sale on December 4, 1952. On July 4, 1954, the mortgagor paid off Pandey's decretal dues, so no sale occurred. Consequently, the respondent's claim remained unsatisfied. On August 5, 1955, the respondent filed Suit No. 2218 of 1955 for a mortgage decree in Form 5-A against the mortgagor's legal representatives (the appellant). The trial court decreed the suit for Rs. 41,172/6/. The Division Bench of the Calcutta High Court reduced the amount to Rs. 38,207 but upheld maintainability and interest. The appellant appealed to the Supreme Court. Two legal issues arose: first, whether the puisne mortgagee could maintain a separate suit; second, whether interest pendente lite should be at the contractual 12% compound or a lesser rate. The appellant argued that the prior decree had already adjudicated the puisne mortgagee's rights, leaving only the remedy of applying for sale and sharing surplus. The respondent contended that the prior decree gave no right to sale without redemption, and since no sale took place, a separate suit was permissible. The Supreme Court, per Justice Ramaswami, examined the rights of puisne mortgagees under the Transfer of Property Act and Order 34 CPC. It held that a puisne mortgagee is made a party solely to redeem and to share in surplus sale proceeds; the decree in Form 9 is not in his favor, and he cannot compel sale without redeeming the prior mortgage. If the prior mortgage is satisfied without sale, the puisne mortgagee's right to surplus never arises, and he may file an independent suit. The court relied on Vedavyasa Ayyar v. The Madura Hindu Labha Nidhi Co. Ltd., Shiv Kumar Prosad v. The Trustees for the Improvement of Calcutta, and others, distinguishing old English practice. On interest, the court noted that Order 34 Rule 11 CPC, amended in 1929, gives discretion to award interest at a lower rate even if the contractual rate is not usurious. Citing Jaigobind Singh v. Lachmi Narain Ram, it held that 6% simple interest per annum from the date of suit till redemption was just. The appeal was partly allowed only to reduce the interest rate; the decree for payment of the principal with 6% simple interest was confirmed.
Headnote
A) Civil Procedure - Mortgage Suits - Puisne Mortgagee's Right to Sue Separately - Code of Civil Procedure, 1908, Order 34, Rule 4(5), Appendix D, Form 9; Transfer of Property Act, 1882 - In a prior mortgagee's suit, the puisne mortgagee as defendant obtains only the right to redeem and to participate in surplus sale proceeds, not a personal decree or right to compel sale without redeeming. If the mortgagor pays off the first mortgagee before sale, no sale occurs, and the puisne mortgagee is not barred from filing a separate suit on his own mortgage. Held that the suit is maintainable and not barred by res judicata or Section 47 CPC. B) Civil Procedure - Mortgage Suits - Interest Pendente Lite - Code of Civil Procedure, 1908, Order 34, Rule 11 - The court has discretion under Order 34 Rule 11 CPC to award interest from date of suit at a rate lower than the contractual rate, even if the rate is not penal or usurious. In the present case, where the contractual rate was 12% per annum with monthly rests, the court deemed simple interest at 6% reasonable. Held that a reasonable rate of 6% simple interest from date of suit until redemption is appropriate.
Issue of Consideration
Whether a puisne mortgagee, who was a party to a prior mortgagee's suit, can institute a separate suit on his mortgage after the prior mortgagee's claim is satisfied by the mortgagor without sale, and whether interest pendente lite should be at the contractual rate or at a reasonable rate within the court's discretion.
Final Decision
Appeal dismissed. The Supreme Court held that the puisne mortgagee could maintain a separate suit. On interest, the court reduced the rate from 12% compound to 6% simple per annum from date of suit till redemption. The preliminary decree was modified accordingly.
Law Points
- Legal points not extracted
- puisne mortgagee's rights in prior mortgagee's suit limited to redemption and surplus sale proceeds
- if prior mortgage satisfied without sale
- puisne mortgagee may file separate suit
- under Order 34 Rule 11 CPC
- court has discretion to award interest pendente lite at less than contractual rate
- 6% simple interest held reasonable
