Alluri China Bapanna And Ors. vs Sri Mattangi Jaggiah Alias ...
on 24 January, 1939
Madras High Court
Alluri China Bapanna And Ors. vs Sri Mattangi Jaggiah Alias ... on 24 January, 1939
Equivalent citations: (1939) 2 MLJ 214
Author: A Rahman
JUDGMENT Abdur Rahman, J.
1. This appeal arises out of a suit instituted originally by one Muttangi Jaggiah alias Jaggarao as one for
dissolution of partnership and for accounts but really for the recovery of a proportionate share claimed
by him and one Sitaramayya (sixth defendant) from defendants 1 to 5 out of the money collected by
them from the late P. Ramarayanim Garu, Rajah of Panagal, who had executed a mortgage deed for
Rs. l,16,650on the 9th September, 1913, in favour of the Rajah of Badrachalam (Ex. I). This mortgage
was assigned to the plaintiff, Sitaramayya (sixth defendant) and the defendants (1 to 5) by the Rajah of
Badrachalam on the 6th July, 1925, under Ex. II as the latter owed a sum of Rs. 80,000 to the plaintiff
and Sitaramayya on a promissory note dated the 22nd March, 1924, and a sum of Rs. 41,071-9-4 to the
defendants (1 to 5) on a promissory note dated the 13th July, 1923. The consideration for the
assignment as given in the deed consisted of the entire debt of Rs. 41,071-9-4 payable to the defendants
and a sum of Rs. 61,525-11-11 out of th.6 debt payable to the plaintiff and Sitaramayya. The Rajah of
Panagal paid a sum of Rs. 46,000 to the defendants on various dates between April, 1926 and
November, 1930, expressly towards the share of the mortgage amount due to them and it is out of this
sum that a proportionate share was claimed in this suit. Sitaramayya was impleaded as a defendant but
was subsequently transposed as a plaintiff.
2. The plaintiff had come to Court with an averment that a partnership had been entered into between
him and Sitaramayya on the one hand and the defendants (1 to 5) on the other on certain terms stated
in paragraph 7 of the plaint. It was pleaded by him in the alternative that even if the agreement relating
to the alleged partnership be found not to have been established, the defendants (1 to 5) would be liable
as they were acting or must be deemed to have been acting on his behalf as well as on that of the sixth
defendant and having given a partial discharge, which as co-mortgagees they were competent to do,
they must be held to have acted and realised the money not only for themselves but also for the plaintiff
and the sixth defendant. It was further urged that inasmuch as the money realised by the defendants (1
to 5) from the mortgagor was ordered to be appropriated first towards interest and the balance towards
the principal in a suit instituted by the plaintiff and the sixth defendant on the basis of the mortgage
deed, to which the defendants (1 to 5) were also parties, it was no longer open to them to contend that
the money was realised by them for their own share and the money must in accordance with the decree
passed in the suit, be held to have been paid towards the mortgage as a whole.
3. The various positions taken up by the plaintiff were denied by the defendants who set up an
agreement, on the other hand, in paragraph 2 of the written statement to the effect that they had a
prior right under it to collect the money due to them. It was also contended on their behalf that they
were not co-mortgagees with the plaintiff and the sixth defendant, but the assignees of the mortgagee's
rights, and could not be held to have been acting on behalf of the plaintiff and the sixth defendant or to
be competent to give a discharge on the latter's behalf particularly when they had
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Alluri China Bapanna And Ors. vs Sri Mattangi Jaggiah Alias ... on 24 January, 1939
not realised any money from the mortgagor in excess of what was due to them. In the end it was
pleaded on behalf of these defendants that the suit was barred by limitation.
4. The learned Subordinate Judge on a consideration of the evidence in the case found against the
agreements pleaded by the parties but on an examination of the legal position he came to give a valid
discharge on behalf of the plaintiffs and must therefore be taken to have collected the money not merely
for their share but for that of the plaintiffs as well. Having regard to the provisions contained in Section
90 of the Indian Trusts Act, he held them to be constructive trustees and thus found them to have
realised the money not only for their own benefit but also for that of the plaintiffs. The defendants were
consequently ordered to render an account to the plaintiffs and to pay them their share of the money in
proportion to what was due to them at the time when Ex. II was executed. The plea of res judicata was
found against the plaintiffs and that of limitation against the defendants. Aggrieved by this decree the
defendants have appealed.
5. It might be stated here that the plaintiff had instituted a suit (O.S. No. 21 of 1931) in the Court of the
Subordinate Judge of Chittoor for the sale of the mortgaged properties, against the original mortgagor,
the Rajah of Panagal. These defendants (1 to 5) were impleaded in that suit as defendants. This was
decreed and although no contention was raised on behalf of the parties to the suit that the amount paid
to the defendants (1 to 5) should be appropriated towards the interest due on the entire mortgage debt,
the Court in decreeing the claim gave credit to the amount received by the defendants (1 to 5), towards
the interest which was due on the mortgage bond. The decree was not appealed against and became
final. This has given rise to the contention on behalf of the respondents that the money having been
ordered to be credited by the Court decreeing that claim towards the interest due on the mortgage
bond, it must be held to have been decided between the parties that the money realised by the
appellants was on behalf of the respondents as well and the appellants were therefore precluded by the
rule of res judicata from raising any contention to the contrary in this suit under the provisions of
Section 11 of the Code of Civil Procedure.
6. In regard to the agreements pleaded on behalf of the parties, no attempt was made before us by the
learned Counsel for the respondents to canvass the finding arrived at by the lower Court against his
clients. Nor do we think it likely that if an agreement was arrived at between the parties, it could have
been on the terms stated in the plaint. The learned Advocate-General however urged on behalf of the
appellants that although the statement made by the fifth defendant as a witness could not in view of its
inconsistency with what was pleaded on behalf of the defendants, be relied upon and was rightly
rejected by the trial Court, yet the agreement mentioned in the written statement was to a large extent
supported by some of the letters which were written on behalf of the plaintiffs themselves. The first
letter to which our attention was drawn was a registered notice (Ex. IX) sent by the first plaintiff to the
defendants asking how much was collected by them jointly or separately towards that deed. This was
followed by another notice sent by the plaintiffs on the 27th February, 1931, informing the fifth
defendant that the plaint had been prepared and calling upon him to deposit Rs. 500 towards the costs
of the suit which was to be filed by them against the mortgagor for the sale of the mortgaged property.
The requisite court-fee for that suit was of the value of Rs. 3,392 and yet they had asked the fifth
defendant for a sum of Rs. 500 only, which would be approximately required to recover the balance of
the money due to the defendants after giving credit to what had
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Alluri China Bapanna And Ors. vs Sri Mattangi Jaggiah Alias ... on 24 January, 1939
been realised by them from the mortgagor. This notice was expressly referred to by the Subordinate
Judge in his judgment in O.S. No. 21 of 1931. From the fact that an agreement was being pleaded even
by the plaintiffs, although the terms alleged on their behalf were undoubtedly different and bearing the
two notices referred to above in mind it would appear to be more likely than not that there was some
understanding either explicit or implied to the effect that the parties would be entitled to recover their
shares from the mortgagor and as long as they did not realise anything in excess of their shares, they
would not be accountable to each other. The reasons given by the learned Subordinate Judge for the
finding that no agreement was arrived at between the parties are not convincing. He was mainly
persuaded to come to that decision as he found that the statement of the fifth defendant was contrary to
what had been pleaded on his behalf. This criticism was perfectly justified but the other reasons which
he has given are not very convincing. Having regard to all the circumstances we are rather inclined to
the view that an agreement was on some such terms as have been stated above, arrived at between the
parties.
7. If this were all, we would have had to seriously consider if the material on the record was sufficient
to reverse the finding arrived at by the lower Court in this respect but in view of the conclusion at
which we have arrived in regard to the other points discussed by the learned Counsel for the parties, it
seems to us to be unnecessary to rest our judgment on this inference of fact. We propose to devote our
attention to the main question involved in the second issue framed by the lower Court which concerns
the plaintiff's rights to demand an account from the defendants for the collections made by them. Since
the question o f res judicata was argued with great persistence by the learned Counsel for the
respondents, we would have to examine this contention in the course of this judgment. The question of
limitation raised by the appellants stands however on a different footing. Its decision depends on the
finding whether the defendants are liable to account to the plaintiff. If they are found to be liable, it is
apparent that the suit would not be barred by time. If on the other hand, they are found to be entitled
to retain the amount realised by them from the mortgagor, the suit against them would be as they had
realised the amount more than three years before the institution of the suit, be barred by limitation. It
would therefore be unnecessary to give any finding on this question.
8. Turning our attention to the crucial question regarding the liability of the defendants to account we
must point out that they were not co-mortgagees with the plaintiffs but only assignees of a mortgage
executed by the Rajah of Panagal in favour of the Rajah of Bhadhrachalam. It is all the more necessary
to keep this in view as the learned Subordinate Judge seems to have lost sight of this distinction and
held that the parties to the suit were joint promisees under the mortgage deed (Ex. I) and must
therefore be regarded as co-mortgagees. This is obviously not so. The definition of 'promisee' give in
Section 2 of the Indian Contract Act must not be ignored. So far as the mortgage is concerned, the
Rajah of Panagal was the promisor and the Rajah of Bhadhrachalam the promisee. It was the Rajah of
Bhadhrachalam who could be said to have accepted the proposal made by the Rajah of Panagal. It may
be that so far as the assignment of the mortgage is concerned, the Rajah of Bhadhrachalam may be the
promisor and the parties to this suit the promisees. We are not concerned here with the jural
relationship which was brought into existence by the deed of assignment but by the original mortgage
executed by the Rajah of Panagal. There can be no doubt that as between the Rajah of Panagal and the
parties to this suit even if privity of estate is held to
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Alluri China Bapanna And Ors. vs Sri Mattangi Jaggiah Alias ... on 24 January, 1939
exist the former cannot be described to be the promisor and the latter not the promisees. The heirs of a
promisee may be entitled to claim what their ancestor (the promisee) could have claimed, but by
standing in his shoes they do not become, in the eye of the law, the promisees themselves. Similarly an
assignee of a promise may be able to claim what his transferor could have claimed but he would not
become a promisee by reason of the assignment so far as the original promisee is concerned.
6. We have thus not to decide what the position would have been if a co-mortgagee would have
accepted payment from his mortgagor either in full or in partial satisfaction of the mortgage but what it
is if a co-assignee realises a portion of the money due from the mortgagor when that portion does not
exceed the recipient's share of the consideration for which the assignment was made in his favour.
There is divergence of opinion between this and several other High Courts on the point whether a
mortgage debt would be discharged by paying it to one of two or more mortgagees. It has been held by
this Court that a payment to one would discharge the mortgage-debt. Barber Maran v. Ramanna
Goundan (1897) 7 M.L.J. 269 : I.L.R. 20 Mad. 461 and Annapurnamma v. Akkayya (1912)
24 M.L.J. 333 : I.L.R. 36 Mad. 544 (F.B.). The other High Courts have, on the other hand, taken the
opposite view in Jagat Tarini Dasi v. Naba Gopal Chaki (1907) I.L.R. 34 Cal. 305, Sitaram v. Shridhar
(1903) I.L.R. 27 Bom. 292, Jauhari Singh v. Ganga Sahai (1919) I.L.R. 41 All. 631, Ray Satindra Nath
Choudhury v. Ray Jatindra Nath Choudhury (1925) 31 C.W.N. 374. Sukh Lal v. Kanjman (1929) 28
A.L.J. 290, Syed Abbas Ali v. Misri Lai (1920) 5 Pat. L.J. 376 and Mathra Das v. Nizam Din (1916) 68
P.R. 1917 (F.B.). But no case has been brought to our notice, even of this Court, where a co-assignee or
a co-heir may have been held entitled on behalf of the other co-mortgagees or co-heirs to give a
complete discharge of a mortgage debt which has been assigned to or which devolved on the other co-
assignees or co-heirs. The principle on which this Court has recognised the power of a co-mortgagee for
giving a valid discharge of the whole mortgage debt was largely based on a consideration of Section 38
of the Indian Contract Act, but a reference to this section would show that it is confined to the
promisees as defined in the Act and not to his heirs or assignees. Indeed while expressing their opinion
in the Full Bench case, both the learned Judges whose view prevailed in that case observed that the rule
which they were applying to a co-mortgagee could not be extended to co-heirs. The same distinction was
made in Ahinsa Bibi v. Abdul Kader Saheb (1901) I.L.R. 25 Mad. 26 at 39 by no less than an eminent
Judge of this Court than Sir V. Bhashyam Aiyangar.
7. In view of these authorities an attempt was made by Mr. Raj ah Aiyar to distinguish these cases on
the ground that they have gone only to the length of holding that the position of a co-heir or a legal
representative is not the same as that of a co-mortgagee where the latter could, and the former could
not, give a valid discharge to a mortgagor. But he says that the same principle which has been held to
apply to co-heirs or legal representatives cannot be made to apply to co-assignees on the ground that
while the interest of a propositus devolves on his heirs by operation of law and independently of the
deceased's desire, an assignor's interest is conveyed to an assignee by a volition of the former and can
be favourably compared with the case of a co-mortgagee where both decide to take a mortgage jointly.
The distinction made between a co-heir and a co-assignee is in our opinion of no avail as from what we
have already said in regard to the definition of a promisee used in the Indian Contract Act, it would be
clear that under that definition, both of them would stand in the same position. If the term 'promisee'
cannot be applied to a co-heir or a legal representative it can neither
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Alluri China Bapanna And Ors. vs Sri Mattangi Jaggiah Alias ... on 24 January, 1939
be held to apply to a co-assignee. The situation then seems to be that on a devolution of a mortgagee's
interest either on his legal representatives or on his assignees, the legal representatives or co-assignees
would be, at least amongst themselves, entitled to recover their own shares and be able to give an
acquittance to that extent only and not for the shares of other legal representatives or co-assignees. It
would thus follow that if a co-assignee is found to have realised his own share of the mortgage debt, he
cannot be said to have been acting in the capacity of an agent or much less of a constructive trustee and
any receipt by him cannot be considered to be a receipt on behalf of the others. Ankalamma v.
Chenchayya (1917) 34 M.L.J. 315 : I.L.R. 41 Mad. 637. It maybe that a devolution of interest upon a co-
heir or a co-mortgagee, may effect a severance of the mortgagee's interest between them Mahamed
Ishaq v. Sheikh Akramul Huq (1907) 12 C.W.N. 84 but if the theory of representation is correct, so far
as the heirs are concerned, it would neither be illogical nor unsatisfactory to extend the same although
to a limited extent, to the assignees of a mortgage debt as well. The case is Sunitibala Debi v. Dhara
Sundari Debi Choudhurani (1919) 37 M.L.J. 483 : L.R. 46 I.A. 272 : I.L.R. 47 Cal. 175 (P.C.), cited by
the learned Counsel for the respondent does not at all help him. We are not concerned here with the
form in which the suit has to be filed. Nor are we concerned in this case with the rights of co-
mortgagees inter se or with the release or redemption of any part of the security by one of the
mortgagees. It was on these points that this case is an authority and not on those which are before us for
decision in this appeal. The next case relied upon by him was that of Lakshmi Narasimha v.
Lakshmamma (1913) 25 M.L.J. 531. This is also not of much assistance as the co-mortgagee had in that
case admittedly received more than his share of the debt and had exceeding his rights given a release in
respect of the unrealised portion. He was therefore held and rightly, if we may say so with respect, to be
incompetent to give a release to the mortgagor on behalf of his co-mortgagee or to receive any money in
excess of his share, which he was ordered to refund. The third case cited by Mr. Rajah Aiyar was that
of Ramachandra Aiyar v. Sivarama Aiyar (1936) 4 L.W. 502, where it was held by Pandrang Row, J.,
that in the absence of a covenant to pay the amount due to any particular co-mortgagee a suit by one
co-mortgagee for his share of the mortgage money was not maintainable and that the recital in the
mortgage deed of the debts due to each co-mortgagee did not amount to an agreement by the
mortgagors to pay the mortgagees separately. In view of the distinction that we have already tried to
emphasise between the mortgagees and the assignees of a mortgagee this case is of no value to us here.
8. Reference was made in the end to English cases such as Tyson v. Fairclough (1824) 47 E.R. 955,
where it had been held that a Court would regard a tenant-in-common who had received the rent as in
the nature of a bailiff or an agent for his co-tenants-in-common respecting their shares of the rent. This
proposition is in accordance with the cases decided by this Court where a co-mortgagee would be able
to give, by receiving the debt due under a mortgage, an acquittance to the mortgagor. This is only
because he is held to be a person to whom an offer of performance can be validly made by a promisor
under Section 38 of the Indian Contract Act, and by accepting the offer not only on his own behalf but
on that of his co-promisees, he would be deemed to have been acting as their agent to the extent of their
shares in the mortgage and would therefore be liable to account to them. But the same principle cannot
be applied to the assignees of a mortgagee's rights, who cannot beheld to be joint promisees in the sense
in which that expression has been used in the Indian Contract Act.
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Alluri China Bapanna And Ors. vs Sri Mattangi Jaggiah Alias ... on 24 January, 1939
9. In view of what has been said it is unnecessary to consider the liability of a tenant-in-common when
he has received income or rent in respect of the property of which he was a co-tenant with others but
there is an authority of this Court where it had been held that a tenant-in-common would not be bound
to share his receipts with another co-tenant if they did not exceed the recipient's proper share.
Nellayappa Pillaiyan v. Ambalavana Pandara Sannadhi (1903) 14 M.L.J. 81 : I.L.R. 27 Mad. 405 at 477
(F.B.).
10. In the present case, the realisation of the sum of Rs. 46,000 by the defendants was not in excess of
what was due to them on account of principal and interest and was paid to them expressly by the
mortgagor towards the debt due to them and for which they could give a complete discharge not as
agents or trustees on behalf of the plaintiffs but in the capacity of co-assignees of the mortgagee's rights.
They must consequently be held not to be liable to account for the sum realised by them.
11. The next question to decide is whether the defendants are barred by the principle of res judicata
from contending that the sum of Rs. 46,000 was realised by them towards their share alone. It has been
already observed that this contention was raised on behalf of the respondents on account of the decision
in O.S. No. 21 of 1931 where the Subordinate Judge in decreeing the claim gave credit to the amount
realised by the defendants towards the interest due on the mortgage bond although no such plea was
raised by any party to that suit. (Vide plaint Ex. VIII and the written statement of the defendants Ex.
III.) The suit was filed by the plaintiffs for the whole of the amount due under the mortgage deed Ex. I,
and the mortgagor had pleaded that a sum of Rs. 46,000 had been paid to the eleventh defendant, that is
(the fifth defendant in the present case) for which he had naturally asked for a credit. It was also
pleaded on his behalf that the rate of interest stipulated in the deed was of a penal character. The copy
of judgment has been exhibited and is marked as Ex. IV. A perusal of this judgment would show that
not only was no issue framed in that suit on the question whether the payment received by the
defendants should be credited towards the interest on the mortgage debt, but what is more, the only
issue (Issue 9) which was framed with the object of arriving at a finding in regard to the disputes
between plaintiffs and the present defendants was left undecided. In fact the Subordinate Judge has
after stating the issue framed in the case started with the words:
The only two questions that were agitated at the trial were (1) as regards interest claimed and (2) costs
to be decreed and against which set of defendants.
12. Holding that the interest claimed was not in the nature of a penalty and being of the opinion that the
costs should be paid by the mortgagor and the present defendants in equal shares, he gave a finding in
regard to Issues 3 and 4, which related to the fact and the validity of payment pleaded by the mortgagor
in the following words:
As regards Issues 3 and 4 it has to be found that payments pleaded are true and binding on plaintiffs in
the sense they have to be given credit to.
13. The ninth issue reads as follows:
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Alluri China Bapanna And Ors. vs Sri Mattangi Jaggiah Alias ... on 24 January, 1939
Whether the agreement set out in paragraph 4 of the written statement of the defendants 7 to 11 is true
and plaintiffs are bound to pay any amount as per schedule of expenses attached to the written
statement of defendants 7 to 11 to them?
14. This was not decided by the Subordinate Judge who observed:
As regards Issue 9, I have ruled that a consideration of this matter of dispute as between plaintiffs on
the one hand and defendants 7 to 11 on the other, is not germane to this suit which is one for sale and
the question may be left open. I therefore refrain from giving any finding on Issue 9.
15. This was the only issue which might have settled the disputes raised by the present defendants and
this the Court refused to adjudicate upon. How could it be seriously urged then that the matter was
decided between the parties? The learned Counsel for the respondent however urged that it was
incumbent on the defendants to plead in that suit that the payment was realised by them for their own
share. In other words he tried to bring his contention within Explanation IV of Section 11, Civil
Procedure Code. But a reference to paragraphs 4 and 5 of the written statement filed by the defendants
would show that the point that they were entitled to recover the money due to them before the plaintiffs
could do so, was raised by them specifically. They had also pleaded in that suit that the mortgagor had
paid a sum of Rs. 46,000 expressly towards their share and prayed for a direction in the decree that out
of the balance of the money found due from the mortgagor they should be paid in the first instance. We
fail to see what other plea could have been raised by the defendants. It was this plea which formed the
subject-matter of the ninth issue and was left undecided. The Explanation IV imports a fiction into
Section 11 of the Code of Civil Procedure. Having provided that a matter which might and ought to
have been made a ground of defence or attack in a former suit it introduced a fiction that it shall not
only be deemed to have been raised, but also to have been directly and substantially in issue in that suit.
This would not have been however enough for the purposes of Section 11, Civil Procedure Code, until
the matter was presumed to have been decided. It therefore imported a further fiction that it should
also be deemed to have been heard and finally decided. In view of an express order by the Court that
the matter would be left open, it is impossible to permit any such fiction to be introduced in this case.
The contention is devoid of any force and must be repelled.
16. For the above reasons we allow this appeal and order the suit to be dismissed. The appellants will be
entitled to their costs both in this and in the lower Court.
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