# OATTATRAYA SHANKER MOTE & ORS. ' v. ANAND CHINTAMAN DATAR & ORS

- **Citation:** [1975] 2 S.C.R. 224
- **Court:** Supreme Court of India
- **Decided:** 1974-10-03
- **Case number:** Civil Appeal Nos. 1882-1883 of 1967
- **Bench:** P. Jaganmohan Reddy, M. H. Beg, A. Alagiriswami
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/oattatraya-shanker-mote-ors-v-anand-chintaman-datar-ors-6292
- **Pages:** 35

## Headnote

Transfer of Property A.ct (4 of 1882) s. 100, proviso-If protecthm Is afforded
to a simple mortgagee.-Compromlse decree
creating charge, If covered b)• s.
100-l'ransferee for cmtsfderaricm if includes mortgagec-'ln the hands of
mea11ink of-Lis pendens applicability.
The appellants filed a suit for the recovery of a money debt against the res·
pondents. The suit was compromised and by the compromise decree three items
of the respondent's property were1 sought to be charged. The compromise decre~
was presented in the Registrar's office and was noted in Book No. 1, but, due to
the negligence of that office only ,the charge on one item of property was ·specifi·
cally rec~rded in the registers mentioned in s. 51 and the Indices mentioned in s.
55 of the Registration Act. The appellants, after realising some money by the
sale of the itec1 of property with respect to which the charge was specifically re·
corded in the Regist.rar's office, filed on execution application for the recovery
bf balance of monel by the sale of one of the items of property with respect to
which the Registrars office had not recorded the charge. That property, in the
meanwhile, war. mortgaged under two simple mortgages. The mortgagee, claiming to be ignorant of the prior charge, objected to its sale in the execution proceedings initiated by the appellants; but his objection was overruled and the pro·
perty was sold in execution.
The mortgagee under the two simple mortgages field a suit for recovery of
the amount due to him. The suit was dismissed by the trial court on the ground
that though he had no actual or constructive notice of the charge in· favour of
the appellants, yet, the charge had priority over the subsequent mortgages and
could be enforc.ed against the mortgagee in as much as a simple mortgage without possession, did not give the mortgagee the protection given by the amended
proviso to s. 100 of the Transfer of Property Act, 1882, which provides that a
charge shall not 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,
On appeals against the order arising out of the execution application of the
appellants and against the judgment dismissing
the mortgagee's suit, the High
Court held against the appellant• on the ground that the .mortgage in favour of
the respondent was protected under the proviso to s. 100 and was free from the
charge in favour of the appellants.
In appeals to this Court, on !he question of competing priorities between a
charge created by the decree and the subsequent simple mortgage,
HELD :
(Per Curiam) : The appeals should be dismissed. [243 D-E;
258 CJ
(Per Jaganmohan Reddy and Alu.giriswumi, JJ : )
(I) The charge created by the terms of the decree is covered by s. 100 of the
Act. A compromise decree, not being the result of a decision by the court, but an
acceptance by the court of something to which the parties had agreed, if it creates
a charge on imn1ovable property and is duly registered, it amounts to the creation
of security by act of parties within the meaning of ~. I CO of the Act. [232 B-CJ
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(2) The finding of the courts below that the mortgagee had no notice actual
or constructive of the prior charge created by the decree is correct. [231 E-C]
(a) Jt was an admitted positi.on that even on a careful inquiry the mortgagee
H
would not have known that the property was charged in favour of the appellants,
in as much as, neither the property cards nor the municipal records nor the indii:es contained a reference to the charge on the suit property. If the property
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D. S. MOTE V, A. C. DATAR
225
w.hlch a person wants to purchase or which Is being offered to him as mortgage or
security for payment of any money is shown in Index II then he would have notice
of such charse o. r mort;age and may wish to further l,lrobe by Inspecting Index 1
and Book I. · Merely inspecting Book I or Index I will

## Text

_Characters 0–39,968 of 113,321. This is a partial read: ask again with offset=39968 for what follows._

224
:OATTATRAYA SHANKER MOTE & ORS. '
v.
ANAND CHINTAMAN DATAR & ORS.
October 3, 1974
[P. JAGANMOHAN REDDY, M. H. BEG AND A. ALAGIRISWAMI, JJ.]
Transfer of Property A.ct (4 of 1882) s. 100, proviso-If protecthm Is afforded
to a simple mortgagee.-Compromlse decree
creating charge, If covered b)• s.
100-l'ransferee for cmtsfderaricm if includes mortgagec-'ln the hands of
mea11ink of-Lis pendens applicability.
The appellants filed a suit for the recovery of a money debt against the res·
pondents. The suit was compromised and by the compromise decree three items
of the respondent's property were1 sought to be charged. The compromise decre~
was presented in the Registrar's office and was noted in Book No. 1, but, due to
the negligence of that office only ,the charge on one item of property was ·specifi·
cally rec~rded in the registers mentioned in s. 51 and the Indices mentioned in s.
55 of the Registration Act. The appellants, after realising some money by the
sale of the itec1 of property with respect to which the charge was specifically re·
corded in the Regist.rar's office, filed on execution application for the recovery
bf balance of monel by the sale of one of the items of property with respect to
which the Registrars office had not recorded the charge. That property, in the
meanwhile, war. mortgaged under two simple mortgages. The mortgagee, claiming to be ignorant of the prior charge, objected to its sale in the execution proceedings initiated by the appellants; but his objection was overruled and the pro·
perty was sold in execution.
The mortgagee under the two simple mortgages field a suit for recovery of
the amount due to him. The suit was dismissed by the trial court on the ground
that though he had no actual or constructive notice of the charge in· favour of
the appellants, yet, the charge had priority over the subsequent mortgages and
could be enforc.ed against the mortgagee in as much as a simple mortgage without possession, did not give the mortgagee the protection given by the amended
proviso to s. 100 of the Transfer of Property Act, 1882, which provides that a
charge shall not 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,
On appeals against the order arising out of the execution application of the
appellants and against the judgment dismissing
the mortgagee's suit, the High
Court held against the appellant• on the ground that the .mortgage in favour of
the respondent was protected under the proviso to s. 100 and was free from the
charge in favour of the appellants.
In appeals to this Court, on !he question of competing priorities between a
charge created by the decree and the subsequent simple mortgage,
HELD :
(Per Curiam) : The appeals should be dismissed. [243 D-E;
258 CJ
(Per Jaganmohan Reddy and Alu.giriswumi, JJ : )
(I) The charge created by the terms of the decree is covered by s. 100 of the
Act. A compromise decree, not being the result of a decision by the court, but an
acceptance by the court of something to which the parties had agreed, if it creates
a charge on imn1ovable property and is duly registered, it amounts to the creation
of security by act of parties within the meaning of ~. I CO of the Act. [232 B-CJ
A
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(2) The finding of the courts below that the mortgagee had no notice actual
or constructive of the prior charge created by the decree is correct. [231 E-C]
(a) Jt was an admitted positi.on that even on a careful inquiry the mortgagee
H
would not have known that the property was charged in favour of the appellants,
in as much as, neither the property cards nor the municipal records nor the indii:es contained a reference to the charge on the suit property. If the property
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D. S. MOTE V, A. C. DATAR
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w.hlch a person wants to purchase or which Is being offered to him as mortgage or
security for payment of any money is shown in Index II then he would have notice
of such charse o. r mort;age and may wish to further l,lrobe by Inspecting Index 1
and Book I. · Merely inspecting Book I or Index I will not benefit him because
·all he can know ls that there ls a decree that has been registered which would not
be helpful to him. [.230 H-23 lB; C·DJ
(b) The l?roviso to Explanation 1 to s. 3 of the Transfer of Property Act,
provides that m order to.amount to ~onst~ctive.notice it is nec~ssary (i) that the
lllStrument has been registered and its· registration completed m the manner re·
quired by the Registration Act; (ii) the instrument has been duly entered or liled
in books kept under s. 51 of the Registration Act; and (iii) the particulars regard·
Ing the transaction to which the instrument relates have been correctly entered
in the Indices ~t under s. H of Registration Act. In the instant case construe·
live notice cannot be imputed to the mortgagee since the third condition required
for the \'Utl'OSe was not satisfied. [231 J>F]
(3) The protection in the proVlso to s. 100 does not apply to mortgages. In
order to make It applicable It has to be shown that, (a) the property against which
tllo charge is to, be enforced has been transferred for consideration; (b) the. trans·
feree had no notice of the char;e, and (c) the property which is the subject-matter
of the charp. Is In the hands of the person to whom such property has been
tr811Sfeired. [236H-237B]
.
·
(i) The words "transferred for consideration and without notice of the charge"
have "1ever been used for describi!IJ a mortgage whether it be a simple -111ortgage
or mortgage with possession.
This expression has always been understood to
describe a sale and in antithesis to a transfer by way of gift. Throughout the
Tramfer of Property Act whenever a transfer of property is referred to without
any qualification it is to the transfer of all the interests in the property. Thus the
'tramfer of property' referred to in s. 100 is the transfer of the whole. property
and 110t a mere interest in or over the property like mortgage,. lease etc.
[234 F·H; 236 B-El
(ii) Under English Law, the expression 'purchaser for value' includes a mortgagee. Before the Transfer of Property Act came into force whenever any expres·
sioll came up for consideration, in the absence of any specific ·aefinition under the
Indian statutes, the meaning assigned in English law seems to have sometimes been
applied in a general way. The usage of any term conveying a particular meaning
in English Law and which ·subsequently has been incorporated in the definition
· of statutes in England cannot, on that hypothesis, be imported as if that word has
the same meaning under the Indian Law when our statutes adopts different connotations. After the Act has come into force, if the Act intended to convey that
a person has an absolute tit1e it has used the word 'buyer'. Through.in the marginal
note in s. 56 the word 'purchaser' has been used, an analysis of the section shows
that the legislature has used different terminology for connoting different con~
cepts and that it has used the word 'purchaser' as syponymous with 'buMer' and
as not including the mortgagee or mortgagor or a lessee or a lessor as in
En8fish Law.
[237~, E-G; 238A-B-G]
(iii) The expression 'in the hands of' in the proviso is a figurative expression
and is intended to convey that a person has sufficient control over the subject matter, to enable him to do anything with it which the nature of that subject matter
would permit. It is a multifaceted phrase connoting many meanings depending
on the context. In the context of the saving clause in s. 100, the phrase was
intended to convey and does convey that the buyer, as a transferee for consideration without notice of a charge, was in possession, including constructive
possession through a tenant who has attorned to him; and that the vendor had
conveyed to him all his right. title and interest in the property including possession. If the intention of the Legislature was to make the proviso applicable
even to a mortgage, there was no need for· it to have used the words 'in the
hands of a person to whom sucb property has been because, even if the proviso
is read without these words, the effect ·sought for would ensue. [234 D-E:
239 C-D, E·Gl
Arumilll !f11rayya v. Plnluttl Venkataramanamma and ors. A.LR. 1940 Mad.
701, referred to..
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16-L2S1Sup.Cl/75
.
226
SUPREME COURT REPORTS
[1975] 2 s.c.R.
( 4) The question of prior4ty between a charge and a mortgage cannot be decided with reftrence to s. 48 of the Transfer of Property Act, because, that section
deals with a case of transfers of interest in respect of the same immovable .pro·
perty created at different times while a charge . ts not a transfer of an interest in
or over immovable property. In fact, the proviso to s. 100 was amended lo get
ove~ the effect of. certain decisions. which' ha.ve held that II' char,ge Was valid even
against a sub3equent p11rchaser without notice on the assumptlon that a charge
creates an interest in property, because all provisions r~latitlg to a simple mortgage ·shall as for as
rri~!' be. a.pply to a charge'. [232 F·H, 23!M; 234 A~B;
.
·
240 D-EJ
(5) But th.e doctrine of notice ap'att from the statutory provisions ·such as· s.
53A ·of the. Transfer of Ptoperty Act, s. 48 of the Registratibn Act and s. 27 (b) ·of
the Specific Relief Act, 1877 cottespondihg to s. -19 of the Specific Relief A-ct,
1963, is firmly embedded in the jurisphidence of this country· as part of the equitable principles which courts administer in conformity with "justice, equity and
good conscience". On this appra~ch, the conclusion .would. be the same. as.if the
proviso to ·s. 100 of .the Act was applicable to mortgages also. [243 B·CJ .
. (6) However, it is no answer to say that merely been.use ihe ultjinate result. is
the same we should read the language of s. 100 ignorin$ the purpose for 'w,hich
the amendment was made or give it an interpretation which is· totally at variance
with the tenor of the entire Act iii order that it ·may conform with the ultimate
result. {243 C·DJ
.
(7) Since the finding in the instant. case is that the- respondent did not have
notice· of the appellants' charge the mortgage will have a pnority over the charge
of the appellants. [243 D·EJ .
(8) There is no quesiion of the appellants being protected by the doctrine~ of
Lis Penie11s. [230 B·CJ
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(Per Beg J : ) : ( 1) The agreement between the parties which was e01bodied
in the compromise decree satisfies the requirements of s. 100 of the Transfer of
Property Act inasmuch as it is a charge created )ly the act of parties. If the rights
of a. simple mortgagee, v:ho is not in possession of the mortgage~ pro~erty, are
E
not protected by the proviso to the section, the first part of the section will confer
upon the charge-holder, the same rights as a prior simple mortgagee has ngainst
a subsequent simple mortgagee even though the charge does not amount to a
mortgage. [246 D·E, GJ
(2) There is no reason to differ from the views taken by the trial court and
the' High Court which preclude the existence of 'grose negligence' on the part of
· the respondent who had made such attempts as could be expected of a reasonable
F
and p~dent individual to-find out whether the property to be mortgaged was sub·
ject to a previous· charge. The !failure of the ,respondent to learn , of the prior
<:barge on the mortgaged property could be ascribed dnly to the negltgence of the
Registrar's office for which the respondent could not be made to suffer.
.
'
[248 F·G]
(3) The High Court was correct in adopting the view that the respondent, as
a simple mortg$gee, was not outside the protection conferred by the 11roviso to
'· 100, because he was both a bona fide transferee for consideration with simple
G
mortgagee rights 'in hand', as well as a person who had no notice, nctuat or
<:onstructive, of the prior charge of the appellpnto. [250 O·HJ
·
, (i) ·Section 58 of the Transfer of Property Act defines a mortaaae as the
'transfer of an interest In specific: i.mmovable property' and 'property' is indicative
of every possible interest a person can have. Therefore; a simpt& mortgage is a
transfer of pr()pertY. within the meaning of s. 5 of the Act. and the mortga~ee's
rights are. 'properJy in the hands of a person to whom such property had been
transferred for consideration'. If a simple mortgage amounts to a transfer of property for.the purposes ots. ioo it Is immaterial that a transfer of property lmplie11 a
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transfer of the' whole bundle of rights in the propertv which the transferor has
for the purpose of situations dealt with by other section~. For example, s. 8 of
the Act laying down the effects, incidents and implications of a transfer, em·
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D. S. MOTE V. A, C. DATAR
227
bodies only a rule of interpretation and was meant to
govern
matters
not
expressly provided f9r in deeds of transfer; It was not at all intended to govern
or lay down the meaning of 'transfer' whenever used in the Act. That has been
done expressly by ss. 5 and 6. In view of the other provisions of the Mt the
transferee under the proviso to s. 100 may be of, even an interest in property.
The words 'such prope_rty' do ~ot stand only for 'fu)l ownership of property'.
If the transfe~ of an mt~rest ID property to. a mortgagee, whether simple or
usufructuary, 1s a transfer of property, •such property' could only mean, in the
case of a mortgageeh th~ inter~st in property which has been transferred to the
mortgagee because t at 1s also property. [249F; 253 D-E; 254 A-C. F-G]
·
(ii) Under English Law, for the purpose of determining the priority between
the owner of a legal estate and an equitable owner, a 'purchaser for value' inc
.eludes a mortgagee. English equitable principle u.nder the provision
of the
Transfer of Property Act, so that although the term 'purchaser is not used
in. s. JOO of the Act, the proviso· seems to have been ·meant to incorporate the
doctrine of a bona fide pμrchaser for value. It secaks of 'a person to whom
such property has been transferred for consideration without notice
of
tlie ·
charge', and the language used was designedly wide so as to confer the bCnefit of the proviso also l!pon persons other than purchasers of ownership· rights.
[2510; 252G-2531l]
((Hi) !he ~xpression ·~n the hand~ of' could f!Ot be confined to tengible p~o
;perty which
1s actually ID the physical possession of the trans~ree, · because,
·property· as defined in s. 6, includes both tangible and intangible property and ex·
tends to rights and interests in property. 'Possession' is only one of the meanings
of the expression 'in ha.nd' and whenever the concept of possession was intended
to be conveyed, the word 'possession' had been used as for example in Explanation II to s. 3.
In the proviso to s. 100, the Legislature deliberately employed
the concept of ~property in hand' in contradistinction to 'property in the possession
of'· a transferee, so as to include cases where a person has· a right, which is intan.
gible property, vested in him. The right of a simple mortga¥~e may be capable
of being spoken of as 'possessed' by the mortgagee, but the right could more ap·
propriately be spoken of as either 'vested in the transferee'; or, as property 'm
the hands of the transferee'. The object of employing this terminology in the
proviso seems to be to include such rights as those of a simple mortgagee,
{249· G-H; 250 C·G]
.
Observation contra in Arumilli Surayya '" Pinisettl
Venkataraman11111111a &
. Ors. A.LR. 1940 Mad. 701 overruled.
·
( 4) The appellants cannot contend that their prior rights would be protrcted
by the principle underlying s. 48 of the Act because; (a) Apart from the..quafifying words, 'so far as may be' in s. 100, one of the conditions for the applicability
of s. 48 is that there must be an actual transfer of property, (b) Another condition is that the previous and the su.bsequently created rights cannot all .exist or
be exercised to their full extent together, \Vhich condition .is not satisfied in the
present case. (c) The prior right of the charge holder could only obtain priority
provided other things are not unequal. (d) The conditions of priority as. bet·
ween the hofder of a previous charge and a subsequent simple mortgage are
completely covere.d by s. 100. [251 B-E]
( 5) If the same result on the question of a priority of a simple mortgage as
against a charge, of which the mortgagee has no notice, can be rea.ched by re;
sorting to the principle of 'equity, jus.tiee and good conscience' s. 100 itself can be
rend ns a direct statutory recognition of, the very principles, beca:use, it contums
comprehensively the requirements of equity, justice and good conscie11cc.
[2~4H-255B]
(6) A wide and liberal interpretation must. be given to the proviso to extend
the benefit of the amended section to mortgagees also, as bona fide traiuferees
for value-the word 'purchaser' having been deliberately eschewed. The amendment, made to negativ~ the view in sQ.me cases that a charge could be enforce!l
even against a bona fide purchaser. for value without notice, should be .inter11reted to amplify the .remecj.y an.d suppress the mischief aimed at. Decisions had
also been given· until' now, sinCe the amendment of s. 100 in 1928, or the
assumption that a simple mortgagee is also covered by the protection conferred
bv the amended powers.
There is no reason why a new path or its meaning
.shouid now be taken. [225 D-F; 256 FoHJ
.
·
228
SUPREME COURT REPORTS
[1975] 2 s.p.R.
CJ Tber.e is no question t\f the mortgage beina struck by the doctrine of
Lis PC"11de11s, (258 A-CJ
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1882-1883
of 1967.
Ap1,eals from the judgment and order dated the 12th November
1962 of the Bombay :A:igh Court in First Appeals Nos. 668 of 1957
and 40 of 1960.
V. S, Desai', and K. Ra.f Choudhry, for the appellants.
Navnit A. Shah and A. G. Ratnaparkhi, for the respondents.
The Judgment of the Court was delivered by .Taganmohan Reddy
J., M. H. Beg, J. gave a separate Opinion.
JAGANMOHAN REDDY, J.-In both these appeals by certificate the
question of competing priorities between a charge created by n decree
and a subsequent simple mortgage has to be determined. The appellants had filed Qvil Suit No. 741 of 1938 for recovery of a sum of
Rs. 1,34,000/· with interest from respondents 1 to 7. On March 31,
1941 a com.promise decree was passed under which a charge was creat•
cd for the decretal amount on three pieces of property belonging to the
said respondents 1 to 7. These properties comprise a house in Shukrawar Peth and Kekakuva Mansion in Budhwar Peth both at Poona and
a chawl in Kalyan. This decree was registered on April 7, 1941 but
due to inadvertence the charge on the Kakakuva Mansion in Budhwar
Peth at Poona was not shown in ~he Index of registration. The significance of this omission wil.L become evident. when the full facts are
narrated. Th,_ereafter on June 27, 1949 the respondents 1 to 1 mortgaged the K.akakuva Mansion to the plaintiff respondent 14 for a sum
of Rs. 1 lakh. The respondents created a further charge on September 13, 1949 in favour of the said plaintiff respond·ent
14 for
Rs. 50,000/-
On July 7, 1951 a charge was created by a decree in
favour of respondent 15 for a sum of Rs. 59,521/11/- under an award
decree.
In the meantime the appellants had recovered some amounts
by execution of their decree in Civil Suit No. 741 of 1938 biy sale of
the property at Shukrawar Peth at Poona and the chaw! at Kalyan.
In spite of th-ese sales a large balance was still due, and in order to
recuver the balance of Rs. 1,57.164/- appellants filed Darkhast No.
32 of 195::! in the Court of the 3rd Joint Civil Judge, Senior Division
at Poona for the sale of Kakakuva Mansion over which, as we have
said earliet. there was a chJrge created in favour of the appellants by
the decree of March 31, 1941. Notices were issued under 0.21 r.66
of the Code of Civil Procedure to respondent 14 and other respondents.
The Executing Court, however, held that the presence of plaintiffrespondent 14 was not necessary for the purposes of effecting the sale
on the Darkhast of the appellants and accordingly, it vacated the
notices. Against the said order of the Executing Court respondent ·14
filed First Appeal No. 668 of 1957 in the High Court of Bombay,
and he also filed on June 5, 1958 Civil Suit No. 57 of 1968 in the
Court of the Joint Judge, Senior Division at Poona for a recovery of
a sum of Rs. 2,18.564/- alleged, to be due to him umf.er the two mort·
gages dated June 27. 1949 and September 13, 1949.~.
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D. s. MOTE v. A. c. DATAR (Jaga11molza11 Reddy,/.)
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H may be mentioned that while Suit No. 57 of 1958 was pending
the property-the subject-matter of that suit-was put up for sale on
the appellants' Darkhast and it was purchased by the appellants with
t:he leave of the Court.
In view of this development respondent 14
impleaded the appellants in the said Suit No. 57 of 1958 as' the purchasers of the equity of redemption.
The appellants resisted the
snit ·on the ground that they had a prior charge in their favour aud the
mortgage of respondent 14 was subject to that charge. It was al~o
contended that s. 100 of the Transfer of Property Act, 1882 (hereinafter referred to as 'the Act') regarding notice was not obligatqry in
respect of the interest created in favour of respondent 14. The Trial
Judge by his judgment dated Ju]Jy 21, 1959, while decreeing the suit
of the plaintiff respondent 14 for recovery of Rs. 2,18,564/- held that
the appellants hacl a prior charge over the property and were bound
by the mortgage in favour of the plaintiff-respondent 14 and 15 (delfendant 8 in the suit). It further held that the rights of a simple
mortgagee are not "property in the hands of" the mortgagee who could
not be protected by the proviso to s. 100 of the Act.
·
Against the decree of the Trial Judge, respondent 14 filed First
Appeal No. 40 of 1960 in the High Court of Bombay. The·two First
Appeals, one arising out of the Darkhast filed by the appellants and
the other arising out of the suit filed by respondent 14 were heard
together on November 12, 1962 .. The High 'Court of Bombay by its
Judgment modified the decree of the Trial Judge holding that as the
mortgage in favour of respondent was protected unde_r the proviso to
s. 100 of the: Act it is free from the charge it1 favour of the appellan!s.
It also gave priority to respondent 15 for its dues, though it had not
filed any appeal.
Against this judgment artd decree two appeals were
filed, one in respect of First Atioeal No. 40 of 1960 and the oth~r
in respect of First Appeal No. 668 of 1957.
It was contended before the High Court that whatever may be the
position under s. 100 of the Act, respondents Motes would still be
protected by s. 52 by the doctrilie of /is pr11de11s.
Over1111ing" a ph~li
minmiy objection that this point was not taken in the Trial Cot.!rt, the
High Court, after considering the admitted position, noticed that originally there. was·only a money debt due to defendants 9-13 from Datars.
The appellants had filed Suit No. 741 of 1938 and practically three.
years thereafter at the time of passing of the decree, a charge by agreemcllt was created on the properties of Darars.
Admittedlv. the properties on which the charge was created were not the subject-matter
<Jf the suit ,and no issue. was raised in that suit in respect of these pro-.
ocrti~s. 1t was pointed out that for s. 52 to apply. two conditions
have to be fulfilled. namely, ( l) the suit or the proceedings must not
be collusive and must be pending; and (2) the right to immoveable prop~rty was directly and specifically in question in the suit. Unless both
these conditions are satisfied. no protection can be claimed. The
m~rc fact that n specific immoveable property becomes the subject-matter of a decree subsequentlv by agreement of the parties will not justify
a cbim for protection 'Under s. 52. If the chatgc has been created by
230
SUPREME COURT REPORTS
fl975i]: Z s.r,.~
consent of the parties it is something extraneous to the suit and a~ordlA
ingly no !is in fact exists in respect of that property nor can it be said
that a Us had commenced at least from the date of the decree. There:
is no commencement at 1111 so far as the /is is concerned which in that
suit was a simple claim for money and nothing more. Apart from
this, there was no Darkhast or execution application pending at the
time when the simple mortgages in favour of the plaintiff were ereated
in 1949. The High Court discussed several decisions in respect of
B
the above conclusion and we are in agreement with the reasoning of
the High Court.
Since before us this point was not seriously argued,
we do not think that there is any need to deal with this aspect fn any
detail.
.
·
It may also be mentioned that the High Court, on the evidence,
came to the conclusion that respondent 14 had no notice of the prior
charge inasmuch as the search of the indices .did not disclose that tlfore
was charge on the suit property.
An attempt was made to show that
the respondent 14 had feigned ignorance of the decree in favour of
tke appellants though his witness admitted. that he had taken search
of the records of the Sub-Registrar's oflice before he took the two
mortgages. It was also contended that the p11aintiff-respondent 14
had admitted that the mortgage Ext. 87 was registered fn the SubRegistrar's Office on May 17, 1941, and is noted as No. 104-g_g in
Book No. 1. Though this decree was entered in Index I, it was not
entered in Index II. From the very fact that the decree was shown
in Index I and having been so registered, fr is sought to be corrterrded·
that the High Court had, by ignoring the above.ievidence, held that
respondent 14 did not have notice. It may be mentW!rellli tl'mt the properties which . are the subject-matter of the charge under the d~cree
could only be shown under s. 21 of the Registration Act in Index IL
Unfortunately, as we have said earlier, by inadvertence the property-·
the subject-matter of the suit-was not shown in that Index (Index II)' ..
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A person who wishes to search the registers for. aniy prior sale, mortgage or charge would necessarily inspect Index II, which under s. ·55(3)1
Of the Registration Act is required to contain such particulars men·
F
tioned in s. 21 relating to ·every such document and memorandum ·
as ~he Inspector General from time to time directs iii that behalf.
Under s. 21 description of property and. maps or plans have to be
mentioned in all non-testamentary documents relating to immoveable
property before they are accepted for registration, with further particulars as spedfied in sub-ss: (2) to ( 4) thereof. Under s. 55 (1)
there are to be four Indices I to IV. Sub-section (2) provides that
Index I shall contain the names and addresses of all persons execμting
and of all persons claiming under every document entered or memorandum filed in Book No. 1 and Index II shall contain such parti-·
culars mentioned in s. 21 relating to every such document and memorandum as the Inspector General may from time to time direct
fn
that behalf, Under s. 51 (2) in Book 1 shall be entered. or filed alt
documents or memoranda registered under ss. 17, 18 and 89 which
relate to immoveable property, and are not wills. If the property which
a person wants to purchase or which is being ·offered· to him as a
mortgage or security for payment of any IJlOney is shown in Index II,
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D. s. MOTE. v. A, c. DATAR (Jaganmohan Reddy,/.)
23 l
A
then he would have notice of such charge or mortgage and may wish
~o further probe by inspecting Index I and Book 1. Merely inspectmg Book 1 or Index I will not benefit him because all he can know
is that there is a decree that has been registered which may not be
~elpful. The High Court was. right in not accepting the contention of
the appellants that respondent 14 had notice of the decree because if
in fact he had taken the trouble of going to the Sub-Registrar's Office
for inspection and search and to ascertain whether there was
any
charge, mortgage or other encumberance on the property in respect
of which he wanted to advance such a. large sum of Rs. 1;50,000f,
he would not, as a man of prudence, have advanced the said amounts
if he had in fact known.that there was a prior charge on that property.
B
c
In fact th.e High Court o~rved that it was an admitted position that
even on a careful inquiry the plaintiff (respondent 14) would not have
known that the property (Kakakuva Mansion) was charged in favour
D
of defendants 9 to 13 (the appellants herein) inasmuch as __ neither
the property cards, nor the Municipal kecords, nor the indices contained a reference to the charge on the suit property. The Exphination in
s. 3 of the Act which provides for fixing a party with constructive
notice in respect of registered transactions, contains a proviso
to
Explanation I that in order to amount to constructive notice, it is
necessary that ( 1 ) the instrument has been registered and its registration completed in the manner required by the Registration Act and
the Rules made thereunder, (2) the instrument has been duly· entered
or filed in books kept under s. 51 of the Registration Act, and ( 3)
the particulars regarding· the· transact.ion to which the instrument refates have been correctly entered in the indices kept under s. 55, of
E
that Act. It further observed that though in some cases by legal
fiction, constructive notice may be imputed to a party, in the case
before it, it cannot be imputed to the plaintiff (respondent 14), since
the third condition required for the purpose was not satisfied. We
would, therefore. accept the finding of both the Courts that respondent
14 had no notice of the prior charge created by the decree. ·
F
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The question which will arise for our consideration is whether the
appellants by reason of the decree creating a charge on the sujt properties have a priority over the subsequent simple mortgage created
in favour of respondent 14. We need not go into other niceties, as
to what would be the position where a sale deed is invalid for want
of registration or whether a transaction intended to be a mortgage
but not reduced to writing and registered will operate as a charge,
because in this case the competition is between a charge created by a
decree which was registered and a subsequent mortgage ~ithout notice
of a prior charge. It is contended that the provisions contained in
s. 100 of the Act that "save as otherwise provided by any law for the
time being in force, no charge shall 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" means and implies
that where there is a charge and where the property is sold and is in
possession of the purchaser for consideration, no charge so created
prior to the sale can be enforced against a propertv in the hands of
a person to whom such property has been transferred for consideration
232
SUPREME COURT REPORTS
[1975] 2 s.c.R.
and without n0tice of the charge. The words "save as
otherwise
provided" would imply that a charge can be enforced even against a
purchaser without notice where a law expressly so provides.
It is further contended that a charge created by the terms of a
decree is not covered by s. 100 of the Act inasmuch as it is neither a
security on immoveable properliy created by act of parties or by operation of law.
Several decisions have been referred to before us which,
in our view, have no application, because a compromise decree not
being the result of a decision by the Court but an acceptance by the
Court of something to which the parties have agreed if it created a
charge on an immoveable property, and was dully registered, as indeed
it was in this case, amounts to the creation of a security by act of
parties within the meaning of s. 100 of the· Act. In order to resolve
the question before us it is necessary to analyse the provisions of s. 100
of the Act, the text ()f which is given below :-
"Where immoveable property of one person is by act of
parties or operation of law made security for the payment
of money to another, and the transaction does not amount to
a mortgage, the latter person is said to have a charge on
the property; and all the provisions hereinbefore contained
which apply to a simple mortgage shall, so far as ma1y be,
apply to such charge.
Nothing in this section applies to the charge of a trustee
on the trust-proper(y for expenses properly incurred in the
execution of his trust, and, save as otherwise expressly pro·
vided by any law for the time being in force, no charge shall.
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."
Jt is apparent from the provisions of the above section that a charg~
does not amount to a mortgage though all the provisions which apply
to a si '1ple mortgage contained in the precedine: provisions shall, so
fo~· as .nay 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 in·
cludes also a mortgage, in that ev1tt1y mortgage is a charge, but every
charge is not a mortgage. The Legislature while defining a charge
in s. 100 indicated specifically that it does not amount to a mortgage.
It may be incongruous and in terms even appear to be an anti-thesis
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 hy 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
A
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D. s. MOTB v. A. ~. DATAR (Jaganmohan R~ddy J.)
.233
. may be, apply to such charge" does not have the effect of changing
the nature of a charge to one of interest in property.
'.'"
Order 34 r. 1.5 of the Code of Civil Procedure also· provides for
the remedy of enforcing a charge under which all the provisions of
0.34 in so far as they are applicable to a simple mortgage would be
applicable to a charge under s. 100 of the Act.
This rule was sub·
stituted for the old r. 15 by the Transfer of Property (Amendment)
Supplementary Act, 1929, which came into operation on the l st April,
1930. The old r. 15 of 0.34 was as follows :
"All the provisions contained in this Order a~ to the
sale or redemption of mortgaged property shall, so far a;
may be, apply to pl'Op~rty subject to a charge within the
meaning of section 100 of the Trnnsfer of Prop:rty Act.
1882."
The words "as to the sale or redemption of the mortgaged properly"
which were in, the old rule· have bce11 omitted, und instcnd it is now
provided in general terms that the provisions applying lo simpk mortgages shall apply to charges.
A charge-holder like -a simple mort·
·gag::e has a rjght to bring the property charged to sulc or cari .;>nfdrce
D . his charge against any portion of the propert~ charged. Wher;
a
charge-holder is given possession of the property as
~1 charge-holder,
·he can remain in possession of it until the amount due to hin1 is satistied; but if the possession is not atiributable to the charge, he cannot
insist on retaining possession until his dues are paid.
·
E
r
The reason for the above provision in s. I 00 of the Act, r~aJ wit\!
0.34 r.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 he applicable. The words
"~o far as miey be" indicate that provisions which :ipply to simple
mortgage may not be applicable to the charge. It has been held that
ss. 56, 67(2). 68{3), 73(4). 83(5) and 92(6) nr.: applicahk to
charges.
On the other hand, s. 67 A has been held to be applicable
to charges created by act of parties μnd not to charges creat.:d by
operation o' law on the ground that the clause "in the absence of a
contract t~ 1he contrary"' occurring in that section is an essential part
of it and car.mot be given effect to in a sta.tutory charge.. If a charge
carries with it a personal liability as iii the case of a seller's ·charge for
price not paid. the charge-holder is entitled under 0.34 i·.6 ,)f the
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Code of Civil Procedure to a personal decre·~.
·
The Privy Council had observed th•1t in a suit for enforcem~nt of
a charge under s. 100 of the Act read with 0.34 r.15 Code of Civil
Procedure, a decree for sale, as in a suit for a momaμe. should have
been passed : See Ram Raglrubir Si11gh La! v. U11it1•cl Refi11erie.1 ( 1).
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 mcrdy to illustrnt.::
the reason for a reference in s. I 00 to a simple mortgage.
(I) [!933160 I. A. 183.
234
SUPREME COURT REPORTS
[1975] 2 s.c.n.
A
The ques,tion would then be : what is the purpose and intendment of 1929 Amendment adding the proviso to s. 100 of the Act?
There may be several views as to why this amendment was effected,
but certainly one of them is to get over the eiiect of certain decision~
of the Courtg which have herd 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 simpk mortgage ii: being first in point of time has a priority
over a. subsequent sale to a purchaser of proper~y 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 s. 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.
B
c
On the other hand, the submissiC?n of the appellants is that the
proviso to s. 100 applies only to cases of sale for consideration where
the property is in possession of the purchaser. It is only in such a
case where the purchaser has bought the property without notice of
the charge that the charge cannot be enforced against him. It appears
to us that if the intention of the Legislature was to make the proviso
applicable even to a mortgage including a simple mortgage, there was
no need for it to have used the words "in the hands ·of a person to
whom such property has been" because if the proviso is read without
those words the effect sought for would nonetheless ensue. The proviso read after the deletion of the words indicated by us
would
read:
"Save as otherwise expressly provided by any law for the
time being in force, no charge shall be enforced against anv
property transferred for consideration and without notice of
the charge."
If mortgages were sought to be included, it would look somewhat
incongruous because the words "transferred for consideration
and
without notice of the charge" in so far as we are ·able to ascertain have
never been used in describing a mortgage whether it be a simple mortgage or a mortgage with possession.