Jamna Das v Ram Autar Pande (1911)

This is the short, decisive authority on the other side of the privity line. Where Nawab Khwaja Muhammad Khan v Nawab Husaini Begam allowed a beneficiary to sue in equity because specified immoveable property had been charged in her favour, Jamna Das refuses a mortgagee any right to enforce a purchaser's promise to his own vendor to pay off the mortgage debt. The purchaser's undertaking is a contract between purchaser and mortgagor; the mortgagee is a stranger to it.

For an examiner it is the standard illustration of the proposition that a third party cannot sue on a contract made for his benefit, and it is the case that fixes the limit of the beneficiary exception. The report itself is very short, and the whole of its reasoning fits into a single paragraph of the judgment.

The appellant was the holder of a mortgage decree against the respondents under s. 88 of the Transfer of Property Act, that decree being dated 29 November 1904. The net proceeds of the sale being insufficient, he applied for a further decree under s. 90 of the Act, which enacts that "when the net proceeds of any such sale are insufficient to pay the amount due for the time being on the mortgage, if the balance is legally recoverable from the defendant otherwise than out of the property sold, the court may pass a decree for such sum".

The first respondent, Ram Autar Pande, was the purchaser of the mortgaged property; the other respondents were the representatives of the mortgagor. Part of the purchase money had been left in the purchaser's hands so that he might pay off the mortgage debt.

The Subordinate Judge of Mirzapur, by his decree of 16 April 1907, allowed the application against the judgment-debtors other than Ram Autar Pande, but dismissed it as against him. The High Court at Allahabad affirmed that decree on 20 April 1909. The mortgagee appealed to His Majesty in Council.

Counsel for the appellant contended that the first respondent was not merely the purchaser of the equity of redemption but of the whole mortgage debt; that part of the purchase money had been left in his hands in order to pay off the debt; and that a personal decree could therefore be made against him. It was further urged that the word "defendant" in s. 90 was not limited to the mortgagor, and that in making the earlier decree under s. 88 the High Court had said that if the sale did not satisfy the decree the mortgagee rights, which had not been sold, could be proceeded against in execution.

Counsel for the first respondent were not called upon.

Their Lordships' answer is contained in a few sentences and turns entirely on privity. The suit was in substance an action by a mortgagee to enforce, against a purchaser of the mortgaged property, an undertaking which that purchaser had given to his own vendor. The mortgagee, their Lordships held, had no right to avail himself of that undertaking. Two reasons are given, and both are matters of privity rather than of the construction of s. 90: "He was no party to the sale." And: "The purchaser entered into no contract with him, and the purchaser is not personally bound to pay this mortgage debt."

It follows that the balance of the mortgage debt was not "legally recoverable" from the purchaser within the meaning of s. 90, and no personal decree could be passed against him. The opening words of the judgment show how little argument their Lordships thought the point required: "This is a perfectly plain case."

The decisions of the courts in India were affirmed. The purchaser of the mortgaged property was not a person from whom the balance of the mortgage debt was "legally recoverable" within the meaning of s. 90 of the Transfer of Property Act, because he had entered into no contract with the mortgagee and was not personally bound to pay the debt. Their Lordships humbly advised His Majesty "that this appeal must be dismissed with costs."