Case: Dattatreya Shanker Mote and Others Vs. Anand Chintaman Datar and Others

1944 Nag 1) the plea of a defendant charge-holder under a decree was repelled as against the plaintiff-respondent who had brought a suit to enforce a subsequent mortgage because the mortgagee had no notice of the charge. Grille, C.J. observed, with regard to the distinction between the unamended and amended sections (at page 5) :The main difference to be noticed in the two section is that the section as amended explicitly states that no charge would be enforced against a person taking the property for consideration and without notice of the charge. The amendment was made in order to set at rest the conflict of decisions that existed before. The view taken by the Judicial Commissioners Court, Nagpur, before the amendment was that no charge could be enforced against property in the hands of a person to whom such property had been transferred for consideration and without notice of the charge : 15 NLJ 141. This view was approved in 30 NLR 303, at p. 305. The view taken in several other cases was that inasmuch as there is no transfer of interest in property in a charge while there is such a transfer of interest in a mortgage a charge would be good against subsequent transferees such as mortgagees or purchasers only if the subsequent transferees had notice of the prior charge. (33 Cal 985, 993 : 38 All 254, 258 : 42 Cal 625) 65. Of course, the precise question raised before us was not actually raised in the cases mentioned above, and, therefore, it was not decided there. But, each of these decisions rests on the assumption that a simple mortgagee is also covered by the protection conferred by the amended proviso. If this has been the basis on which decisions have been given until now since the amendment of Section 100 by Act XX of 1929, we should, I think, be most reluctant to tread a new path on the meaning of such a statutory provision unless we could not avoid doing so because some clear misconception of the law is revealed.66. Another contention advanced on behalf of the appellant was that their prior rights would be protected by either the terms of or the principles underlying Section 48 of the Act which reads as follows :Section 48. 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, in the absence of a special contract or reservation binding the earlier transferees, be subject to the rights previously created.67. The contention was that, although a charge may not be described as "a transfer", yet, the result of Section 100 of the Act was to equate it with a simple mortgage which is a transfer because Section 100 says : "all the provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge". I think that, apart from the qualifying words, "so far as may be", used by Section 100 of the Act, a condition essential to the applicability of Section 48 of the Act is that there must be an actual transfer of property. Further more, another condition for invoking Section 48 of the Act is that the previous and the subsequently created rights "cannot all exist or be exercised to their full extent together". In the case before us, this does not appear from facts found. In any case, the prior right of the charge-holders could only obtain priority provided other things are not unequal. This follows from words used indicating that each of the two or more transactions must at least be a "transfer". Furthermore, the conditions of priority as between the holder of a previous charge and a subsequent simple mortgage are completely covered by Section 100 of the Act. The principle underlying Section 48 is one expressed in the maxim of Equity : "Qui prior est tempore potior est jure" (first in time is stronger in right). This principle, applied to ranking between rival equitable claims, is applied by Section 48 to contending claims of otherwise equal legal validity. The effect of Section 100 is that wile a charge, which is not a "transfer" of property, gets recognition as a legally enforceable claim, that enforceability is subjected by the proviso to the requirements of a prior notice in order to give it precedence over a legally valid transfer of property. The rights of the appellants charge-holders could only be exercised, on facts found, subject to the priority obtained by the respondent mortgagees rights. This clear result of the law, as contained in Section 100 of the Act, cannot be defeated by invoking either the terms of or the principles underlying Section 48 of the Act read with the first part only of Section 100 of the Act. If the respondent simple mortgagee Oswal could not have claimed the benefit of the proviso to Section 100, the first part of Section 100, read with Section 48 of the Act, could have come to the aid of the appellants. But, on the view adopted by me, this line of reasoning does not help the unfortunate charge-holders at all.68. Lastly, learned Counsel for the appellants suggested that the mortgages made subsequent to the charge by a decree in favour of the Motes were struck by the doctrine of Lis Pendens. The Bombay High Court had repelled this contention on two grounds : firstly, the properties which were subsequently charged with the payment of the debts to the Motes were not the subject-matter of Suit No. 741 of 1938 : and, secondly, there was no Darkhast or execution application pending at the time when the simple mortgages in favour of the plaintiff-respondent Oswal were created in 1949. I agree with these reasons for holding that the doctrine of Lis Pendens has no application on the facts of the case before us.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]It is apparent from the provisions of the above section that a charge does not amount to a mortgage though all the provisions which apply to a simple mortgage contained in the preceding provisions shall, so far as may be, apply to such charge. While a charge can be created either by act of parties or operation of law, a mortgage can only be created by act of parties. A charge is thus a wider term as it includes also a mortgage, in that every mortgage is a charge, but every charge is not a mortgage. The Legislature while defining a charge in Section 100 indicated specifically that it does not amount to a mortgage. It may be incongruous and in terms even appear to be an antithesis to say on the one hand that a charge does not amount to a mortgage and yet apply the provisions applicable to a simple mortgage to it as if it has been equated to a simple mortgage both in respect of the nature and efficacy of the security. This misconception had given rise to certain decisions where it was held that a charge created by a decree was enforceable against a transferee for consideration without notice, because of the fact that a charge has been erroneously assumed to have created an interest in property reducing the full ownership to a limited ownership. The declaration that "all the provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge" does not have the effect of changing the nature of a charge to one of interest in property.The reason for the above provision in Section 100 of the Act, read with Order 34, Rule 15, is merely to declare that the rights and liabilities of a charge-holder are to be that which a simple mortgagee has under the provisions of the Act in so far as they may be applicable. The words "So far as may be" indicate that provisions which apply to simple mortgage may not be applicable to the charge. It has been held that Section 56, 67(2), 68(3), 73(4), 83(5) and 92(6) are applicable to charges. On the other hand, Section 67A has been held to be applicable to charges created by act of parties and not to charges created by operation of law on the ground that the clause "in the absence of a contract to the contrary" occurring in that section is an essential part of it and cannot be given effect to in a statutory charge. If a charge carries with it a personal liability as in the case of a sellers charge for price not paid, the charge-holder is entitled under Order 34, Rule 6 of theCode of Civil Procedure to a personal decree.10. The Privy Council had observed that in a suit for enforcement of a charge under Section 100 of the Act read with Order 34, Rule 15Code of Civil Procedure, a decree for sale, as in a suit for a mortgage, should have been passed. See Ram Raghubir Singh Lal v. United Refineries ((1933) 60 IA 183) The several aspects of the application of the provisions of a simple mortgage have not been and need not be considered by us as they are not relevant for our purpose. Our object is merely to illustrate the reason for a reference in Section 100 to a simplemay be several views as to why this amendment was effected, but certainly one of them is to get over the effect of certain decisions of the courts which have held that a charge was valid as against a subsequent purchaser of property without notice on the assumption that a charge created an interest in property and since its effect is similar to a simple mortgage it being first in point of time has a priority over a subsequent sale to a purchaser of property who has taken it with consideration and without notice. It is contended that even after the Amendment of 1929 since no charge can be enforced against any property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge, the saving clause applies to a simple mortgage as well as to mortgages with possession inasmuch as in both cases property which could be transferred under Section 6 of the Act can be said to be transferred. In other words, the saving clause is not confined only to an out and out sale.In order to ascertain the true import of the terminology used in Section 100 of the Act, it is necessary to state clearly some of the basic concepts embodied in the Act which are beyond controversy. Section 5 defined "transfer of property" as meaning "an Act by which a living person conveys property, in present or in future to one or more other living persons, or to himself, or to himself and one or more other living persons", and "to transfer property" is to perform such act. Section 6 says that property of any kind may be transferred, except as otherwise provided by the Act or by any other law for the time being in force other than those mentioned specifically in clauses (a) to (i) which cannot be transferred. Section 8 deals with the operation of transfer and says that unless a different intention is expressed or necessarily implied, 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. It then narrates all such incidents having regard to the land, debt, etc., etc. Chapter III of the Act deals specifically with sales of immoveable property, the sale in Section 54 being defined as transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. Mortgages are dealt with in Chapter IV where mortgage is defined in Section 58(a) as the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan. Different kinds of mortgages are also specified in that section of which clause (b) states what a simple mortgage is, namely,where, without delivering possession of the mortgaged property, the mortgagor binds himself personally to pay the mortgage-money, and agrees, expressly or impliedly, that, in the event of his failing to pay according to his contract, the mortgagee shall have a right to cause the mortgaged property to be sold and the proceeds of sale to be applied so far as may be necessary, in payment of the mortgage-money, the transaction is called a simple mortgage and the mortgagee a simple mortgagee.In so far as competing mortgagees are concerned, Section 48 of the Act gives priority to the first in point of time in whose favour transfer of an interest in respect of the same immoveable property is created, if the interest which he has taken and the interest acquired sub-sequently by other persons cannot all exist or be exercised to their full extent together. This section speaks of a person who purports to create by transfer at different times rights in or over the same immoveable property, and since charge is not a transfer of an interest in or over the immoveable property he gets no security as against mortgagees of the same property unless he can show that the subsequent mortgagee or mortgagees had notice of the existence of his prior charge.The doctrine of notice, even apart from the statutory provisions, is firmly embedded in the jurisprudence of this country as part of the equitable principles which courts administer in conformity with the maxim "justice, equity and good conscience". On this approach the conclusion would be the same as if the proviso to Section 100 of the Act was applicable to mortgages also, but it is no answer to say that merely because the ultimate result is the same, we should read the language of Section 100 of the Act ignoring the purpose for which the amendment was made, or give it an interpretation which is totally at variance with the tenor of the entire Act in order that it may conform with the ultimate result, which in any case has been reached, even if it was by a different road.The result of a close examination of the several aspects of the question posed before us leads us to the conclusion that a subsequent mortgagee with notice of a prior charge takes the mortgage subject to the charge. But as in this case the finding is that the respondent did not have notice of the appellants charge, the appeals will have to be dismissed, and are accordingly, dismissed, but in the circumstances without costs.In several of the cases mentioned above the question arose whether the terms of the decree were sufficient to confer the rights upon the parties or their representatives in interest to execute the decree to satisfy the claim or a separate unit was needed. That question has not been raised before us. We are concerned here with a charge created by the terms of an agreement between the parties which was embodied in the compromise decree. This agreement satisfies the requirements of Section 100 of the Act inasmuch as it is a charge created by the Act of parties. It is immaterial that the charge was subsequently incorporated in a decree. We also find that no contention was advanced either in the trial Court or in the High Court, that a charge under the terms embodied in a compromise decree operates or binds outside the conditions laid down by Section 100 of the Act for enforcing charges in general. I am not impressed by the argument.41. I hold that a charge was created by the terms of the agreement embodied in the consent decree, which was actually registered even though, unfortunately for the charge-holders, the provisions of Section 51 of the Registration Act were not fully complied with in keeping a record of the charge. That charge against Budhwar Peth property would be enforceable if the plaintiff-respondent is not protected by the terms of the proviso after its amendment by the Transfer of Property (Amendment) Act XX of 1929. If the rights of a simple mortgagee, who is not in possession of the mortgaged property are not protected by the proviso at all, there is no doubt that the first part of Section 100 will confer uponOn the evidence on record, the trial Court came to the conclusionthat only the property at Shukrawar Peth, Poona city, was mentioned in the various official records maintained by the Sub-Registrar and City Survey Officer as affected by the charge, though property in Budhwar Peth, which was also included therein, was not at all referred to therein.The High Court affirmed this finding and held :that from inspection of the records it could not have been possible for any one to find out if the suit property was charged and the plaintiff, therefore, could not be fixed with notice, either actual or constructive, of the above decretal charge in favour of defendants Nos. 9 to 13.After having been taken through the evidence mentioned above, I see no reason to differ from the views taken by the trial Court and the High Court which preclude the existence of "gross negligence" on the part of the plaintiff who had made such attempts as could be expected of a reasonable and prudent individual to find out whether the property to be mortgaged was subject to a previous charge. The failure of the plaintiff to learn of the prior charge on the Budhwar Peth property could be ascribed to the negligence of the Sub-Registrar concerned for which the plaintiff Oswal could not be made to suffer.45. Coming back to the principal question indicated above, which was most strenuously argued on behalf of the appellants, relating to the interpretation of the proviso to Section 100 of the Act, I think that the correct meaning of this provision will emerge by determining what its object is by firstly, considering the language employed in the context of other sections of the Act defining the concepts involved; and, secondly, if there is any uncertainty left, by glancing at some legal history so as to appreciate what the provisions could be aimed at achieving.46. I have set out above the requirements of notice, both actual and constructive, found in Section 3 of the Act. So far as constructive notice is concerned, it is evident that the three explanations lay down what is deemed to be notice under each of the three sets of circumstances dealt with separately by each Explanation. There is a presumption against redundance or meaningless overlapping of statutory provisions. Explanation I, within which the case of the plaintiff Oswal was sought to be brought by Motes, deals with a very different set of circumstances, and, apparently, dispenses with circumstances bringing in Explanation II which makes it clear that a person acquiring any share or interest in immoveable property will be "deemed to have notice of the title, if any of any person who is in actual possession thereon". In other words, Explanation II constitutes an independent category of a deemed or constructive notice of entitlement of the person shown to be in possession. The significance of this provision is that it shows that, where actual possession was to constitute notice of entitlement, it is clearly and specifically dealt with in Section 3 of the Act. It indicates that reference to the factum of possession is made in the Act itself where this constitutes a part of a set of facts which has to be proved for establishing a right or liability.Thus, we see that to have possession of an object is only one of the several dictionary meanings but not the only meaning of the expression "in hand". Moreover, the concept of possession in legal terminology is so well known that, whenever it is intended to convey what is signifies, lawyers and draftsmen do not hesitate to use the word possession just as we find it used in Section 3, Explanation II, relating to deemed "notice". It seems that, in the proviso to Section 100 of the Act, the Legislature deliberately employed the concept of "property in hand", in contra-distinction with "property in the possession of" a transferee, so as to include cases where a person has a right, which is intangible property, vested in him.51. The right of a simple mortgagee may be capable of being spoken of as "possessed" by the mortgagee. But, since it is an intangible right, even the word possession, when used in conjunction with mortgagees rights, would not denote an actual physical handling of the right which is intangible. The right may be evidenced by a document kept in the vaults of a bank or in an almirah in a private home, but, the right itself is incorporeal. It is something distinct from the document which evidences it. It is incapable of being "handled" physically. The right could more appropriately be spoken of as either "vested in the transferee", or, as property "in the hands of the transferee". The object of employing this terminology in proviso to Section 100 of the Act seems to be to include such rights as those of a simple mortgagee. I, therefore, think that the Bombay High Court was correct in adopting the view that the plaintiff-respondent Oswal, as a simple mortgagee, was not outside the protection conferred by the proviso to Section 100 because he was both a bona fide transferee for consideration with simple mortgagee rights "in hand", as well as a person who had no notice, actual or constructive, of the prior charge of the Motes for reasons already mentioned above.It will be seen that in the passage set out above, the term "holder of the legal estate" is obviously used for one who holds the property "either as absolute owner or until his mortgage is discharged as the case may be". In other words, for applying the equitable principle explained there, a mortgagee is equated with the absolute owner under an outright sale of rights of ownership. A reference to Berwick & Co. v. Price (supra) also shows that the meaning of the term "purchaser for value" as including a mortgagee was so well settled in English law that it received statutory recognition in Section 2(viii) of the Conveyancing Act, 1882, there. Again Section 285(1)(xxi) of the Law of Property Act, 1925, in defining "purchaser", made it abundantly clear, that both an outright purchaser and a mortgagee could fall under the protective cover of the doctrine of a "bona fide purchaser for value". This only meant that English law too gave statutory form and expression to doctrines evolved by Courts of Equity. A bare perusal of passages in Pomeroys Equity Jurisprudence is enough to show that the concept of a "bona fide purchaser for value" includes the mortgagee and that a "legal mortgagee" has, for the purposes of applying the doctrine, a "legal estate". In a discussion of "what constitutes a bona fide purchase", the need to show a purchase of the whole interest which a transferor could pass finds no place (see Pomeroys Equity Jurisprudence, 5th Edn. Vol. 3, Para 745, pp. 19-20). A distinction is made between the claims of a "legal mortgagee", who is described as "holding of course, the legal estate", and those of a merely "equitableThe effect of provisions of our Act is that a legally valid charge, even though Sanction 100 makes it a legally enforcible claim, is not a transfer of property which, as Section 58 of the Act shows, a mortgage is. Nevertheless, a charge for purposes to enforceability would rank equally with a transfer of interest in property provided the transferee had notice of that charge within the meaning of "notice" as defined by Section 3 of the Act. If a simple mortgage amounts to a transfer of property for the purposes of Section 100, as it does, it is immaterial that a transfer of property implies a transfer of the whole bundle of rights in property which the transferor has for the purposes of situations dealt with by other Sections.A number of other provisions of the Act to which references have been made in the course of arguments do not, in my opinion, really help us in arriving at the correct meaning of the transfer of property contemplated by the proviso to Section 100 of the Act. It is enough, for the purposes of interpreting Section 100, to reach the conclusion, as I think we have to in view of other provisions of the Act, that the transfer may be of even an interest in property.59. I regret that I am unable to share the view that the Bombay High Court, in the judgment under appeal, stretched the meaning of the words "in the hands of" too far to read something into Section 100 of the Act which is not there. On the other hand, I think that we will have to add some words if we import a limitation, which is not there, into the words : "any property in the hands of a person to whom such property has been transferred for consideration". We will have to so read them as to confine the meaning to a transfer of "full rights of ownership in property". To do that, we will have to at least after the words "such property" into "rights of ownership in such property". The words "such property" do not, it seems to me, stand only for "full ownership of property". They obviously denote that property which has been transferred. If the transfer of an interest in property to a mortgagee, whether simple or usufructuary, is a transfer of property, "such property" could only mean, in the case of a mortgagee, the interest in property which has been transferred to the mortgagee because that is also "property". The words used could not, in the context, stand only for the whole bundle of rights which ownership of such property may be made up of. In any case, what the mortgagee has "in hand" is only an interest in property, so that this, and nothing more, is "property in the hands of" a mortgagee. When his case is under consideration that is all we are concerned with. We need indulge in no semantic refinements at all to reach this result which flows directly from the words used in the section. And, we need not unnecessarily cut down the apparent amplitude of their scope.60. If we can reach the same result on the question of priority of a simple mortgage as against a charge, of which the mortgagee has no notice, by resorting to the principles of "equity justice and good conscience", the question arises : why can we not read Section 100 of the Act itself as a direct statutory recognition of those very principles when this provision contains, comprehensively, as it appears to me to be meant to do, the requirements of equity, justice, and good conscience, on the question of priority between a charge-holder and other possible transferees including a simple mortgagee against whom the question of enforceability of a prior charge could arise ? To answer this question satisfactorily I think we are, necessity, driven to seek light from the principles developed by the Chancellors Court of Equity in England which a number of our statutory provisions are intended to incorporate into our statutory law just as a number of them have been embodied in English statutory law now. If the maxim of equity is that "equity follows the law", it is no less true that statutory law generally purports to follow the behests of equity, justice, and good conscience.61. A wide and liberal enough interpretation of the proviso to Section 100 of the Act to extend the benefit of it, as amended and clarified by Section 50 of the Transfer of Property (Amendment) Act XX of 1929, to mortgagees also as bona fide transferees for value (the word "purchaser" seems to have been deliberately eschewed), is supported by an examination of all such relevant cases decided by different High Court on the amended provision as have come to my notice, with the solitary exception of Arumilli Surayyas case (supra) of the Madras High Court containing an observation, quoted already, by Horwill, J. The amendment was apparently made to negative the view expressed in some cases that a charge could be enforced even against a bona fide purchaser for value without notice. The proviso should I think, be so interpreted as to amplify the remedy and to suppress the mischief aimed at by the amendment. I may mention some cases decided on the assumption that the mortgagees were also protected by the proviso.The contention was that, although a charge may not be described as "a transfer", yet, the result of Section 100 of the Act was to equate it with a simple mortgage which is a transfer because Section 100 says : "all the provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge". I think that, apart from the qualifying words, "so far as may be", used by Section 100 of the Act, a condition essential to the applicability of Section 48 of the Act is that there must be an actual transfer of property. Further more, another condition for invoking Section 48 of the Act is that the previous and the subsequently created rights "cannot all exist or be exercised to their full extent together". In the case before us, this does not appear from facts found. In any case, the prior right of the charge-holders could only obtain priority provided other things are not unequal. This follows from words used indicating that each of the two or more transactions must at least be a "transfer". Furthermore, the conditions of priority as between the holder of a previous charge and a subsequent simple mortgage are completely covered by Section 100 of the Act. The principle underlying Section 48 is one expressed in the maxim of Equity : "Qui prior est tempore potior est jure" (first in time is stronger in right). This principle, applied to ranking between rival equitable claims, is applied by Section 48 to contending claims of otherwise equal legal validity. The effect of Section 100 is that wile a charge, which is not a "transfer" of property, gets recognition as a legally enforceable claim, that enforceability is subjected by the proviso to the requirements of a prior notice in order to give it precedence over a legally valid transfer of property. The rights of the appellants charge-holders could only be exercised, on facts found, subject to the priority obtained by the respondent mortgagees rights. This clear result of the law, as contained in Section 100 of the Act, cannot be defeated by invoking either the terms of or the principles underlying Section 48 of the Act read with the first part only of Section 100 of the Act. If the respondent simple mortgagee Oswal could not have claimed the benefit of the proviso to Section 100, the first part of Section 100, read with Section 48 of the Act, could have come to the aid of the appellants. But, on the view adopted by me, this line of reasoning does not help the unfortunate charge-holders at all.68. Lastly, learned Counsel for the appellants suggested that the mortgages made subsequent to the charge by a decree in favour of the Motes were struck by the doctrine of Lis Pendens. The Bombay High Court had repelled this contention on two grounds : firstly, the properties which were subsequently charged with the payment of the debts to the Motes were not the subject-matter of Suit No. 741 of 1938 : and, secondly, there was no Darkhast or execution application pending at the time when the simple mortgages in favour of the plaintiff-respondent Oswal were created in 1949. I agree with these reasons for holding that the doctrine of Lis Pendens has no application on the facts of the case before us.