V. Ramaswami Ayyangar And Others vs T.N.V. Kailasa Thevar

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 32 of 1950

Decision Date: 5 March 1951

Coram: Mukherjea J.

In this case the Supreme Court recorded that the petition was filed by V. Ramaswami Ayyangar and others against the respondent T.N.V. Kailasa Thevar. The judgment was delivered on 5 March 1951 by the bench comprising Justices SASTRI and M. PATANJALI. The case is reported in the 1951 AIR 189 and also cited as D 1969 SC 69 (6). The dispute concerned the operation of the Madras Agriculturists’ Relief Act of 1938, specifically sections 7 and 19, and involved the question of whether a decree that had been sealed down in favour of some joint debtors could be treated as satisfied for all the debtors, including those against whom the original decree for the full amount remained.

The Court explained that under the 1938 Act a mortgage decree may be reduced, or “sealed down,” for certain judgment debtors while it continues to stand in its original form for the remaining debtors. In the matter before the trial court, a mortgage suit was brought by the plaintiff against defendant No. 1 in his personal capacity and on behalf of defendants Nos. 2 to 7. Defendant No. 1 did not appear, whereas the other defendants contested the suit. The trial court entered a decree for the sum of Rs 1,08,098. While an appeal and a cross-appeal were pending, the Madras Agriculturists’ Relief Act, 1938, came into force. Defendants Nos. 2 to 7 then applied under the Act and the decree was reduced to Rs 49,255 as far as those defendants were concerned; the decree for the full amount continued to apply to defendant No. 1. Defendant No. 1 subsequently sought a further reduction, but his application was refused. Defendants Nos. 2 to 7 paid the reduced sums and obtained release of their properties. Defendant No. 1 later paid the balance that remained due under the reduced decree and requested that full satisfaction of the decree be recorded. The Subordinate Judge rejected this request. On appeal, the Madras High Court held that defendant No. 1 was also entitled to the benefit of the reduction because the mortgage debt was a single, indivisible obligation. The Supreme Court, on further appeal, rejected that view, holding that the ratio decidendi of earlier cases involving purchasers of mortgaged property did not apply. It observed that the plain language of the Act allowed a reduced decree to be granted to an agriculturist debtor without extending the same benefit to his co-debtors. Accordingly, defendant No. 1 could not claim the advantage of the scaling-down granted to defendants Nos. 2 to 7, and the judgment of the Madras High Court was reversed.

In this appeal, the Court referred to earlier decisions reported in the Madras Law Journal, namely the cases of 1940 volume 2 page 872, Arunachalam Pillai v. Seetharam reported in volume 1 page 561, Pachigola v. Karatam reported in 1942 volume 1 page 506, and Subramaniam v. Ramachandra reported in 1946 volume 2 page 429, distinguishing the latter from the present matter. The judgment was delivered in the civil appellate jurisdiction concerning Civil Appeal Number 32 of 1950. The appeal arose from a judgment and order of the Madras High Court dated 5 January 1948, which had reversed an order of the District Judge of East Tanjore in an application made under section 47 of the Civil Procedure Code together with Order XXI, rule 2. Counsel for the appellants was R. K. Kesava Aiyangar, assisted by T. K. Sundararaman, while the respondent was represented by S. Ramachandra Aiyar. The judgment was pronounced on 5 March 1951 by Justice Mukherjea.

The appeal was filed on behalf of the decree-holders in a mortgage suit and challenged the order of a Division Bench of the Madras High Court dated 5 January 1948, wherein the learned judges had set aside, on appeal, the order of the District Judge of East Tanjore issued in a proceeding under section 47 and Order XXI, rule 2 of the Civil Procedure Code. The material facts, which were not contested, may be briefly summarized. The present appellants were the representatives of three original plaintiffs who, as mortgagees, instituted suit number O.S. 30 of 1934 in the Court of the District Judge, East Tanjore, seeking enforcement of a mortgage against the respondent, who was Defendant 1 in the suit, and six additional persons. The mortgage bond that formed the basis of the suit had been executed by Defendant 1 for himself and his minor undivided brother, Defendant 2, and also in the capacity of authorised agent on behalf of Defendants 3 to 7, who were interested in a joint family business. All defendants except Defendant 1 contested the suit; against Defendant 1 the suit proceeded ex parte. A preliminary decree was passed on 15 May 1937, directing Defendant 1 and Defendants 3 to 7 to pay the sum of Rs 108,098, and providing that, in default, the plaintiffs could apply for a final decree for sale of the mortgaged properties. The suit was dismissed against Defendant 2. Against this preliminary decree two appeals were filed in the Madras High Court: one by Defendants 3 to 7, identified as Appeal No. 48 of 1938, asserting that the mortgage was not binding on them or on their shares in the joint family property; and the other by the plaintiffs, identified as Appeal No. 248 of 1938, challenging the trial judge’s dismissal of their claim against Defendant 2. During the pendency of these appeals, the Madras Agriculturists’ Relief Act (Act IV of 1938) came into force, and Defendants 2 to 7 made applications to the High Court requesting that, should a decree be passed against them, the decretal debt be reduced in accordance with the provisions of the Act. Defendant 1, who did not appear at any stage of the proceedings, made no such application.

The defendants numbered two through seven applied to the High Court asking that, if a decree were ultimately entered against them, the debt imposed by the earlier decree should be reduced in accordance with the provisions of the Madras Agriculturists’ Relief Act, Act IV of 1938. Defendant No 1 never appeared at any stage of the proceedings and therefore made no such application. The High Court directed that these applications be sent to the District Court for investigation and for a report setting out whether the applicants qualified as agriculturists and, if so, the extent to which the decretal liabilities should be lessened. After conducting the necessary inquiries, the District Judge reported that all of the applicants were indeed agriculturists and that, after the statutory reduction, the total debt owed by them would be Rs 49,255 together with interest calculated at six per cent per annum from 1 October 1937, exclusive of costs. Upon receipt of this report, the appeals were scheduled for a final hearing. In the judgment delivered on 23 March 1942, the High Court judges accepted the findings of the District Court, held that defendants 2 to 7 were therefore entitled to have their debts reduced to the amount specified, but observed that no application for relief under the Act had been filed on behalf of defendant No 1 and consequently he could claim no benefit from the Act. A decree was drawn up in conformity with that judgment. The decree recorded that the amount due from defendants 2 to 7 was Rs 49,255 with interest at six per cent per annum, while the decree of the trial judge as to defendant No 1 was affirmed, subject only to a minor alteration in the rate of interest applicable to him.

Subsequently, defendant No 1 lodged an application before the District Judge of East Tanjore, asserting that he was also an agriculturist and therefore entitled to the relief provided by the Agriculturists’ Relief Act. The District Court dismissed his application on 25 February 1943, holding that the High Court had already issued a final decree expressly denying any right to relief under the Act and that, consequently, the lower court had no jurisdiction to entertain his claim. Undeterred, defendant No 1 then filed a separate application before the High Court seeking to set aside the ex parte decree that had excluded him from the benefits of Act IV of 1938. The High Court rejected this application on 13 December 1943. Because no payment was made in accordance with the preliminary decree earlier pronounced by the High Court, the District Judge issued a final decree on 25 September 1943 in the same terms. Execution of this final decree was initiated on 16 August 1944 in case E.P. 2 of 1945 before the District Judge of East Tanjore. Two parcels of the mortgaged property were subsequently sold to the decree-holders for a total consideration of Rs 12,005 on 15 July 1946. The sale was confirmed on 17 August 1946, and the court entered a part-satisfaction of the decree reflecting the amount received.

After the judgment-debtors presented offers of settlement, the estate belonging to the decree-holders remained under the control of the Receivers. In the Receivers’ report dated 10 January 1947, it was shown that the Receivers had accepted the court’s sanction to receive only Rs 24,000 from or on behalf of defendant No 2 and, in return, to release both him and his share of the mortgaged property from the decretal charge. In the same manner, the Receivers consented to receive Rs 48,000 from defendants 3 through 7 and to discharge them and their respective properties from the decretal debt. Regarding defendant No 1, the proposal—apparently approved by the Receivers—provided that his liability under the decree would be settled for Rs 37,500, with Yacob Nadar agreeing to pay that amount on his behalf. This arrangement was to be effected by assigning the decree against defendant No 1 to Yacob Nadar, while expressly excluding the Receivers’ right to execute the decree against defendants 2 to 7 as reduced by the High Court. The execution records indicate that on 20 January 1947 a sum of Rs 24,000 was paid on behalf of defendant No 2, resulting in the release of his properties, namely lots 2 and 6, from the decree. Subsequently, on 27 January 1947 defendants 3 to 7 paid Rs 30,000, and on 17 February 1947 they paid an additional Rs 18,610-12-0, bringing the total paid by this group to Rs 72,610-12-0. No payment was made toward the Rs 37,500 that was to be furnished by defendant No 1 or by Yacob Nadar. Nevertheless, on 6 March 1947 defendant No 1 deposited Rs 3,215 in the court and filed a petition under section 47 of Order 21, rule 2 of the Civil Procedure Code. In that petition he prayed that the deposited amount, together with the sums already paid by defendants 2 to 7, fully satisfied the decree as reduced by the High Court, thereby allowing the court to record complete satisfaction of the decree, to release the mortgaged properties, and to discharge him personally from any further liability for the decretal debt. The substance of defendant No 1’s position was that the mortgage debt constituted a single, indivisible obligation; consequently, although the decree specified different amounts payable by two groups of defendants, the decree-holders were bound by the decree to release the entire mortgaged property upon payment of the amount assigned to defendants 2 to 7. In effect, even though his own application for relief under the Madras Agriculturists’ Relief Act had been expressly rejected and he had been held liable for the full mortgage debt, defendant No 1 argued that he should nevertheless benefit from the scaling down of the decree that had been granted in favor of defendants 2 to 7.

The contention raised by the plaintiff was rejected by the District Judge, but the High Court, on appeal, accepted it. The appellate court permitted the relief sought by defendant No. 1 and instructed the lower court to record complete satisfaction of the mortgage decree. Consequently, the decree-holders have appealed this High Court judgment to this Court. At the beginning of its judgment, the High Court observed that the interaction of the Madras Agriculturists’ Relief Act with the provisions of the Transfer of Property Act had produced several unusual and novel factual situations, for which logical solutions were not always apparent. The Court then examined a series of earlier decisions of the Madras High Court that concerned the same point of law. In summarising its conclusion, the Court quoted: “It is no doubt somewhat odd that when a person is declared liable to pay a larger amount he should on payment or tender of a smaller amount get his property exonerated from liability but this is inherent in and arises out of the proposition established by the decisions already dealt with, namely, that by the application of the principle of unity and indivisibility of a mortgage decree a non-agriculturist can indirectly get relief which he cannot directly get.” The present Court found this approach to be improper and held that the High Court’s conclusion could not be supported by law. The Court noted that the judges of the High Court were acting merely as an executing court, whose duty was limited to giving effect to the terms of the decree that had already been passed, and that they could not exceed that mandate. While interpreting the decree was within their jurisdiction, the Court emphasized that such interpretation could not amount to creating a new decree for the parties.

The Court observed that the mortgage decree had been reduced only in respect of defendants 2 to 7. The amended decree required those defendants to pay into court the sum of Rs 49,255 together with the applicable interest and costs; upon receipt of this payment, the plaintiff was required to produce all documents in his possession relating to the mortgage and, if necessary, to reconvey or re-transfer the property. Regarding defendant No. 1, the decree expressly stipulated that he alone was liable to pay the sum of Rs 1,05,000 (odd) and that redemption of the mortgaged property would be permitted only upon payment of that amount. The Court held that, if the High Court’s decision were to be upheld, this specific provision of the decree would become meaningless and without effect. Nevertheless, the respondent contended that he was not seeking any benefit that would contravene this clause. By the satisfaction of the decree against defendants 2 to 7, the entire mortgaged property would, by force of the decree itself, be released from the debt, and any benefit accruing to the respondent would be merely incidental or consequential in nature.

In the view expressed, the property would, by operation of the decree, become released from the mortgage debt, and any advantage that the respondent might obtain as a result would be merely incidental or consequential. The High Court accepted this contention in substance and grounded its decision on the principle that, although a mortgage decree is ordinarily indivisible, a non-agriculturist debtor whose liability had not been reduced under the Agriculturists’ Relief Act could nevertheless receive, by implication, the benefit of the relief that had been granted to his agriculturist co-debtor under the same statute. The prevailing rule of general law held that a mortgage decree was a single, indivisible instrument, and departures from that rule were permitted only in special situations where the mortgagee himself had disturbed the integrity of the mortgage, for example by severing the mortgagors’ interests with the mortgagee’s consent or by vesting a portion of the equity of redemption in the mortgagee. It was noted, however, that the Madras Agriculturists’ Relief Act constituted a special piece of legislation aimed specifically at a particular class of debtors—namely, those classified as agriculturists within the meaning of the Act. In this respect the Act superseded the general law, and section 7 expressly declared that “notwithstanding any law, custom, contract or decree of court to the contrary, all debts payable by an agriculturist at the commencement of this Act shall be scaled down in accordance with the provisions of this chapter.” Consequently, when a mortgage loan was extended to more than one person and one of those persons was an agriculturist while the others were not, the agriculturist debtor was entitled to have his share of the debt reduced under the Act, even though the general law ordinarily prevented a mortgagor from denying the liability of his interest in the mortgaged property for the purpose of satisfying the entire mortgage obligation. Thus there was no legal defect in reducing the decree with respect to one judgment debtor while leaving the decree unchanged for the remaining debtors. The Madras High Court had expressly endorsed this principle in the case of Rainier v. Srinivasiah, a decision cited in the appeal, and observed that the fact that the relief was granted in that case to a puisne mortgagee rather than to a mortgagor made no difference to the underlying principle. The puisne mortgagee had been joined as a defendant in the suit brought by the first mortgagee to recover the debt, and, being liable to pay the amount due to the first mortgagee, he was deemed a debtor and therefore entitled to

The Court observed that the right to invoke section 19 of the Agriculturists’ Relief Act could be claimed by a mortgagor who satisfied the conditions of the statute. It further noted that section 14 of the Madras Agriculturists’ Relief Act, which permits the separation of a debt incurred by a Hindu family when some members are agriculturists and others are not, clearly demonstrates that the division of a debt in such circumstances is entirely consistent with the legislative scheme of the Act. The decisions upon which the learned judges of the High Court relied were founded on a different principle, and the Court held that, irrespective of whether that principle is right or wrong, it does not apply to the present matter. In the category of cases under consideration, the mortgagors were agriculturists and therefore entitled to have their debts reduced under the Agriculturists’ Relief Act, while the purchasers of the mortgaged property were not agriculturists. The question that arose was whether such a purchaser could also enjoy the benefit of the debt being reduced in favour of the original debtors. The Court answered affirmatively. The reasoning for this view was illustrated in the case of Arunachalam Pillai v. Seetharam, where the purchase of the equity of redemption occurred at an execution sale. The Court explained that when the twelfth respondent bought the property at a court auction, he acquired it subject to the appellant’s mortgage, and if the mortgage burden was reduced pursuant to section 8 without payment, the purchase proved advantageous; there was nothing in the Act that could deprive him of the fruits of his fortunate purchase, even though he was not an agriculturist. He obtained the benefit of the scaling down not because the statutory provisions applied to him—clearly they did not—but because such benefit is an inevitable incident of his purchase under general law, and the Act does not take it away. A somewhat different justification was offered in Pachigola v. Karatam, a case involving a private sale of a portion of the equity of redemption. There the Court held that by allowing the mortgagor to redeem, it was not conferring upon the non-agriculturist purchaser the benefit of the Act, since the purchaser would have to return to his vendor the purchase money that had been reserved with him, an amount he would not have been required to pay to the mortgagee after the scaling down. In both of these authorities, the issue of scaling down the decree was raised in a proceeding specifically under the Agriculturists’ Relief Act and not at the stage of execution. The Court also referred to Subramanian v. Ramachandra, where the question emerged during execution proceedings, and a purchaser of a portion of the equity of redemption was held entitled to the benefit of the reduced decree in favour of the agriculturist mortgagors, even though his own application for relief under the Act had been denied. The Court stated that it was unnecessary to express an opinion on the correctness of these decisions, only that the ratio decidendi in all of them was not applicable to the case at hand. In the present case there was no purchaser of the mortgaged property, and consequently no issue of a non-agriculturist purchaser claiming the benefit of a decree that had been scaled down in favour of an agriculturist mortgagor. The judgment-debtors were the mortgagers themselves, and, according to the plain provisions of the Agriculturists’ Relief Act, there could be no objection to a decree for a reduced amount being passed against an agriculturist debtor, while the same relief was not extended to his co-debtors.

The Court observed that, in Subramanian v. Ramachandra, a purchaser of a portion of the equity of redemption had been held entitled to the benefit of a decree that had been scaled down in favour of the mortgagors, even though the purchaser’s own application for relief under the Agriculturists’ Relief Act had been refused. The Court stated that it was unnecessary to pass judgment on the correctness of those earlier decisions; it was sufficient to note that the legal principle derived from those cases did not apply to the matter before it. In the present case, there was no purchaser of the mortgaged property, and consequently no question arose as to whether a non-agriculturist purchaser could claim the benefit of a decree that had been reduced for the benefit of an agriculturist mortgagor. The Court explained that the judgment-debtors were the mortgagors themselves and that, according to the plain terms of the Agriculturists’ Relief Act, a decree for a reduced amount could be issued against an agriculturist debtor while the same relief could not be extended to co-debtors who did not satisfy the definition of agriculturist. The Court acknowledged that the form and wording of the decree passed in the present case could be questioned. It held that, ideally, the decree should have specified separately the amount payable by Defendant No. 1 and the amounts payable by Defendants 2 to 7, and should have expressly directed that, upon payment of the sums directed to be paid by Defendants 2 to 7, their respective interests in the mortgaged property would not be liable to sale. Furthermore, the decree should have provided that, if those defendants failed to make the required payments, the entire mortgaged property, including their interests, would be sold to satisfy the whole mortgage debt for which Defendant No. 1 was made liable. Although the decree did not contain such explicit directions, the Court read the decree as a whole, considered the actual decision rendered, and concluded that its plain implications were consistent with the foregoing description. The Court then turned to the subsequent agreement reached between the parties during the execution proceedings, whereby the decree-holders consented to release the interest of Defendant No. 2 and of Defendants 3 to 7 separately upon receipt of specified sums from them. The Court noted that the proceeds of that agreement clearly rested on the assumption that the mortgage debt and the security had been divided, and it was therefore impossible for Defendant No. 1 to maintain that the mortgage debt remained indivisible. On that basis, the Court concluded that the view taken by the District Judge was correct and should not have been disturbed. Accordingly, the Court allowed the appeal, set aside the order of the High Court, and restored the order of the District Judge. No order as to costs of the appeal was made. The appeal was allowed.