PETITIONER: <NAME> AND <NAME> Vs. RESPONDENT: THE STATE OF DELHI(And connected Appeals) DATE OF JUDGMENT: 14/12/1954 BENCH: JAGANNADHADAS, B. BENCH: JAGANNADHADAS, B. MUKHERJEA, B.K. BOSE, VIVIAN CITATION: 1955 AIR 196 1955 SCR (1)1150 ACT: Prevention of Corruption Act , 1947 (II of 1947), s. 5(4) and proviso to s. 3-Prevention of Corruption (Second Amendment) Act, 1952 (LIX of 1952), s. 5-A -Whether mandatory or directory-Cognizance taken on a police report vitiated by a breach of mandatory provisions -Legal effect thereof. HEADNOTE: Held, that s. 5(4) and proviso to s. 3 of the Prevention of Corruption Act, 1947 (II of 1947) and the corresponding s. 5-A of the Prevention of Corruption (Second Amendment) Act, 1952 (LIX of 1952) are mandatory and not directory and that an investigation conducted in violation thereof is illegal. If cognizance is in fact taken on a police report in breach of a mandatory provision relating to investigation, the results which follow cannot be set aside unless the illegality in the investigation can be shown to have brought about a miscarriage of justice. It is well-settled that an illegality committed in the course of an investigation does not affect the competence and the jurisdiction of the court for trial and where cognizance of the case has in fact been taken and the case has proceeded to termination the invalidity of the preceding investigation does not vitiate the result unless miscarriage of justice has been caused thereby When any breach of the mandatory provisions relating to investigation is brought to the notice of the <ORG> at an early stage of the trial the <ORG> will have to consider the nature and extent of the violation and pass appropriate orders for such reinvestigation as may be called for, wholly or partly, and by such officer as it considers appropriate with reference to the requirements of s. 5-A of the Prevention of Corruption (Second Amendment) Act, 1952. <ORG> v. <NAME> ( 30 L. J. Ch. 379), <CITATION> (A.I.R. 1944 P.C. 73) and <CITATION> (A.I.R. 1950 P.C. 26), referred to. JUDGMENT:

CRIMINAL APPELLATE JURISDICTION: Criminal Appeals Nos. 95 to 97 and 106 of 1954.

Appeal by Special Leave from the Judgment and Order dated the 24th August 1953 of <ORG> (Circuit Bench, Delhi) in Criminal Revision Nos. 109-D, 122-D and 123-D of 1953 arising out of the Judgment and Order dated the 25th May 1953 of <ORG>,Delhi, in Corruption Case No. 14 of 1954; from the Judgment and Order dated the 27th August 1954 of <ORG> (Circuit Bench, Delhi) in Criminal Miscellaneous No. 131-D of 1954. <NAME> and <NAME>, for appellant No. 1. <NAME>, Solicitor-General of India (<NAME>, <NAME> and <NAME>, with him), for the respondent.

1954. December 14. The Judgment of the Court was delivered by <NAME> are appeals by special leave against the orders of <ORG> made in exercise of revisional jurisdiction, reversing the orders of the Special Judge, Delhi, quashing certain criminal proceedings pending before himself against these appellants for alleged offences under the Penal Code and the Prevention of Corruption Act , 1947. The Special Judge quashed the proceedings on the ground that the investigations on the basis of which the appellants were being prosecuted were in contravention of the provisions of sub-section (4) of section 5 of the Prevention of Corruption Act, 1947, and hence illegal. In Appeal No. 95 of 1954 the appellants are two persons by name <NAME> and <NAME>. In Appeals No. 96 and 97 of 1954 <NAME> above mentioned is the sole appellant. These appeals raise a common question of law and are dealt with together. The appellant <NAME> was the Assistant Development Officer (Steel) in the office of <ORG>, <ORG>, <ORG> and the appellant <NAME> was the Assistant Project Section Officer (Steel) in the office of <ORG>

torate-General, <ORG>, <ORG>. There appear to be a number of prosecutions pending against them before the Special Judge, Delhi, appointed under the Criminal Law Amendment Act ., 1952 (Act XLVI of 1952). We are concerned in these appeals with Cases Nos. 12,13 and 14 of 1953. Appeals Nos. 95, 96 and 97 arise respectively out of them. The cases against these appellants are that they along with some others entered into criminal conspiracies to obtain for themselves or for others iron and steel materials in the name of certain bogus firms and that they actually obtained quota certificates, on the strength of which some of the members of the conspiracy took delivery of quantities of iron and steel from the stock- holders of these articles. The charges, therefore, under which the various accused, including the appellants, are being prosecuted are under section 120-B of the Indian Penal Code, section 420 of the Indian Penal Code and section 7 of the Essential Supplies (Temporary Powers) Act, 1946. In respect of such of these accused as are public servants, there are also charges under section 5(2) of the Prevention of Corruption Act, 1947.

Under section 5(4) of the Prevention of Corruption Act, 1947, a police officer below the rank of a Deputy Superintendent of Police shall not investigate any offence punishable under sub-section (2) of section 5 without the order of a Magistrate of the First Class. The first information reports in these cases were laid in April and June, 1949, but permission of the Magistrate, for investigation as against the public servants concerned, by a police officer of a rank lower than a Deputy Superintendent of Police, was given in March and April, 1951. The charge- sheets in all these cases were filed by such officers in August and November, 1951, i.e. subsequent to. the date on which permission as above was given. But admittedly the investigation was entirely or mostly completed in between the dates when the first information was laid and the permission to investigate by an officer of a lower rank was accorded. It appears from the evidence taken in this behalf that such investigation was con-

ducted not by any Deputy Superintendent of Police but by officers of lower rank and that after the permission was accorded little or no further investigation was made. The question, therefore, that has been raised is, that the proceedings by way of trial initiated on such charge-sheets are illegal and require to be quashed.

To appreciate the argument it is necessary to notice the relevant sections of the Prevention of Corruption Act , 1947 (Act II of 1947) (hereinafter referred to as the Act. Section 3 of the Act provides that offences punishable under section 161 or 165 of the Indian Penal Code shall be deemed to be cognizable offences. Section 4 enacts a special rule of evidence against persons accused of offences under section 161 or 165 of the Indian Penal Code , throwing the burden of proof on the accused. Broadly stated, this section provides that if it is proved against an accused that lie has accepted or obtained gratification other than legal remuneration, it shall be presumed against him that this was so accepted or obtained as a motive or reward., such as is mentioned in section 161 of the Indian Penal Code. Sub-sections (1) and (2) of section 5 create a new offence of "criminal misconduct in discharge of official duty" by a public servant punishable with imprisonment for a term of seven years or fine or both. Sub-section (3) thereof enacts a new rule of evidence as against a person accused of the commission of offences under section 5(1) and (2). That rule, broadly stated,. is that when a person so accused, or any other person on his behalf, is in possession of pecuniary resources or property disproportionate to the known sources of his income and for which he cannot satisfactorily account, the Court shall presume him to be guilty of criminal misconduct unless he can displace that presumption by evidence. The offence of criminal misconduct which has been created by the Act, it will be seen, is in itself a cognizable offence, having regard to item 2 of the last portion of Schedule 11 of the Code of Criminal Procedure under the bead "offences against the other laws". In the normal course, therefore, an investi-

<NAME>

gation into the offence of criminal misconduct under section 5(2) of the Act and an investigation into the offence under sections 161 and 165 of the Indian Penal Code which have been made cognizable by section 3 of the Act would have to be made by an officer incharge of a police station and no order of any Magistrate in this behalf would be required. But the proviso to section 3 as well as sub-section (4) of section 5 of the Act specifically provide that "a police officer below the rank of a Deputy Superintendent of Police shall not investigate any such offence without the order of a Magistrate of the First Class or make any arrest there for without a warrant". It may be mentioned that this Act was amended by Act LIX of 1952. The above mentioned proviso to section 3 as well as sub-section (4) of section 5 have been thereby omitted and substituted by section 5-A , the relevant portion of which may be taken to be as follows: "Notwithstanding anything contained in the Code of Criminal Procedure, no police officer below the rank of a Deputy Superintendent of Police (elsewhere than in the presidency towns of Calcutta, Madras and Bombay) shall investigate any offence punishable under sections 161 , 165 or 165-A of the Indian Penal Code or under section 5(2) of this Act without the order of a Magistrate of the First Class". This amendment makes no difference. In any case the investigation in these cases having taken place prior to the amendment, what is relevant is section 5(4) as it stood before the amendment. It may also be mentioned that in 1952 there was enacted the Criminal Law Amendment Act , 1952 (Act XLVI of 1952) which provided for the appointment of Special Judges to try offences under sections 161 , 165 and 165-A of the Indian Penal Code and under sub-section (2) of section 5 of the Act such offences were made triable only by such Special Judges. Provision was also made that all pending cases relating to such offences shall be forwarded for trial to the Special Judge. That is how the present cases are all now before the Special Judge of Delhi appointed under this Act.

On the arguments urged before us two points arise for consideration. (1) Is the provision of the Prevention of Corruption Act , 1947, enacting that the investigation into the offences specified therein shall not be' conducted by any police officer of a rank lower than a Deputy Superintendent of Police without the specific order of a Magistrate, directory or mandatory. (2) Is the trial following upon an investigation in contravention of this provision illegal.

To determine the first question it is necessary to consider carefully both the language and scope of the section and the policy underlying it. As has been pointed out by Lord <NAME> in <ORG> v. Turner(1), "there is no universal rule to aid in determining whether mandatory enactments shall be considered directory only or obligatory with an implied nullification for disobedience. It is the duty of the <ORG> to try to get at the real intention of the <ORG> by carefully attending to the whole scope of the statute to be construed". (See Craies on Statute Law, page 242, Fifth Edition). The Code of Criminal Procedure provides not merely for judicial enquiry into or trial of alleged offences but also for prior investigation thereof. Section 5 of the Code shows that all offences "shall be investigated, inquired into, tried and otherwise dealt with in accordance with the Code " (except in so far as any special enactment may provide otherwise). For the purposes of investigation offences are divided into two categories 'cognizable' and 'non-cognizable'. When information of the commission of a cognizable offence is received or such commission is suspected, the appropriate police officer has the authority to enter on the investigation of the same (unless it appears to him that there is no sufficient ground). But where the information relates to a non- cognizable offence, he shall not investigate it without the order of a competent Magistrate. Thus it may be seen that according to the scheme of the Code , investigation is a normal preliminary to an accused being put up for trial for a cognizable offence (except when the Magistrate takes cognizance other-

(1) [1861] 30 L.J. Ch 879. 148 wise than on a police report in which case he has the power under section 202 of the Code to order investigation if he thinks fit). Therefore, it is clear that when the <ORG> made the offences in the Act cognizable, prior investigation by the appropriate police officer was contemplated as the normal preliminary to the trial in respect of such offences under the Act. In order to ascertain the scope of and the reason for requiring such investigation to be conducted by an officer of high rank (except when otherwise permitted by a Magistrate), it is useful to consider what "investigation" under the Code comprises. Investigation usually starts on information relating to the commission of an offence given to an officer in charge of a police station and recorded under section 154 of the Code. If from information so received or otherwise, the officer in charge of the police station has reason to suspect the commission of an offence, he or some other subordinate officer deputed by him, has to proceed to the spot to investigate the facts and circumstances of the case and if necessary to take measures for the discovery and arrest of the offender. Thus investigation primarily consists in the ascertainment of the facts and circumstances of the case. By definition, it includes "all the proceedings under the Code for the collection of evidence conducted by a police officer". For the above purposes, the investigating officer is given the power to require before himself the attendance of any person appearing to be acquainted with the circumstances of the case. He has also the authority to examine such person orally either by himself or by a duly authorised deputy. The officer examining any person in the course of investigation may reduce his statement into writing and such writing is available, in the trial that may follow, for use in the manner provided in this behalf in section 162 . Under section 155 the officer in charge of a police station has the power of making a search in any place for the seizure of anything believed to be -necessary for the purpose of the investigation. The search has to be conducted by such officer in person. A subordinate officer may be deputed by him for the purpose only for reasons to be recorded in writing if he is unable to conduct the search in person and there is no other competent officer available. The investigating officer has also the power to arrest the person or persons suspected of the commission of the offence under section 54 of the Code. A police officer making an investigation is enjoined to enter his proceedings in a diary from day-to-day. Where such investigation cannot be completed within the period of 24 hours and the accused is in custody he is enjoined also to send a copy of the entries in the diary to the Magistrate concerned. It is important to notice that where the investigation is conducted not by the officer in charge of the police station but by a subordinate officer (by virtue of one or other of the provisions enabling him to depute such subordinate officer for any of the steps in the investigation) such subordinate officer is to report the result of the investigation to the officer in charge of the police station. If, upon the completion of the investigation it appears to the officer in charge of the police station that there is no sufficient evidence or reasonable ground, he may decide to release the suspected accused, if in custody, on his executing a bond. If, however, it appears to him that there is sufficient evidence or reasonable ground, to place the accused on trial, he is to take the necessary steps therefore under section 170 of the Code. In either case, on the completion of the in- vestigation he has to submit a report to the Magistrate under section 173 of the Code in the prescribed form furnishing various details. Thus, under the Code investigation consists generally of the following steps:(1) Proceeding to the spot, (2) Ascertainment of the facts and circumstances of the case, (3) Discovery and arrest of the suspected offender, (4) Collection of evidence relating to the commission of the offence which may consist of (a) the examination of various persons (including the accused) and the reduction of their statements into writing, if the officer thinks fit, (b) the search of places of seizure of things considered necessary for the investigation and to be produced at the trial, and (5) Formation of the opi-

nion as to whether on the material collected there is a case to place the accused before a Magistrate for trial and if so taking the necessary steps for the same by the filing of a charge-sheet under section 173 . The scheme of the Code also shows that while it is permissible for an officer in charge of a police station to depute some subordinate officer to conduct some of these steps in the investigation, the responsibility for every one of these steps is that of the person in the situation of the officer in charge of the police station, it having been clearly provided in section 168 that when a subordinate officer makes an investigation he should report the result to the officer in charge of the police station. It is also clear that the final step in the investigation, viz. the formation of the opinion as to whether or not there is a case to place the accused on trial is to be that of the officer in charge of the police station. There is no provision permitting delegation thereof but only a provision entitling superior officers to supervise or participate under section 551 . It is in the light of this scheme of the Code that the scope of a provision like section 5(4) of the Act has to be judged. When such a statutory provision enjoins that the investigation shall be made by a police officer of not less than a certain rank, unless specifically empowered by a Magistrate in that behalf, notwithstanding anything to the contrary in the Code of Criminal Procedure, it is clearly implicit therein that the investigation (in the absence of such permission) should be conducted by the officer of the appropriate rank. This is not to say that every one of the steps in the investigation has to be done by him in person or that he cannot take the assistance of deputies to the extent permitted by the Code to an officer in charge of a police station conducting an investigation or that he is bound to go through each of these steps in every case. When the <ORG> has enacted in emphatic terms such a provision it is clear that it had a definite policy behind it. To appreciate that policy it is relevant to observe that under the Code of Criminal Procedure most of the offences relating to public servants as such, are non-cognizable. A cursory perusal of Schedule II of the Code of Criminal Procedure discloses that almost all the offences which may be alleged to have been committed by a public servant, fall within two chapters, Chapter IX "Offences by, or relating to, public servants", and Chapter XI "Offences against public justice" and that each one of them is non-cognizable. (Vide entries in Schedule II under sections 161 to 169 , 217 to 233 , 225-A as also 128 and 129). The underlying policy in making these offences by public servants non-cognizable appears to be that public servants who have to discharge their functions- often enough in difficult circumstancesshould not be exposed to the harassment of investigation against them on information levelled, possibly, by persons affected by their official acts, unless a Magistrate is satisfied that an investigation is called for, and on such satisfaction authorises the same. This is meant to ensure the diligent discharge of their official functions by public servants, without fear or favour. When, therefore, the <ORG> thought fit to remove the protection from the public servants, in so far as it relates to the investigation of the offences of corruption comprised in the Act, by making them cognizance, it may be presumed that it was considered necessary to provide a substituted safeguard from undue harassment by requiring that the investigation is to be conducted normally by a police officer of a designated high rank. Having regard therefore to the peremptory language of sub-section (4) of section 5 of the Act as well as to the policy apparently underlying it is reasonably clear that the said provision must be taken to be mandatory. It has been suggested by the learned SolicitorGeneral in his arguments that the consideration as to the policy would indicate, if at all, only the necessity for the charge- sheets in such a case having to be filed by the authorised officer, after coming to his own conclusion as to whether or not there is a case to place the accused on trial before the <ORG>, on a. perusal of the material previously collected, and that at best this might extend also to the requirement of arrest of the concerned public servant by an officer of the appropriate rank. There is, however, no reason to think that the policy comprehends within its scope only some and not all the steps involved in the process of investigation which, according to the scheme of the Act, have to be conducted by the appropriate investigating officer either directly or when permissible through deputies, but on his responsibility. It is to be borne in mind that the Act creates two new rules of evidence one under section 4 and the other under section 5(3) , of an exceptional nature and contrary to the accepted canons of criminal jurisprudence. It may be of considerable importance to the accused that the evidence in this behalf is collected under the responsibility of the authorised and competent investigating officer or is at least such for which such officer is prepared to take responsibility. It is true that the result of a trial in <ORG> depends on the actual evidence in the case but it cannot be posited that the higher rank and the consequent greater responsibility and experience of a police officer has absolutely no relation to the nature and quality of evidence collected during investigation and to be subsequently given in <ORG>. A number of decisions of the various High <ORG>s have been cited before us bearing on the questions under consideration. We have also perused the recent unreported <ORG> judgment of the Punjab High <ORG>(1). These disclose a conflict of opinion. It is sufficient to notice one argument based on section 156(2) of the Code on which reliance has been placed in some of these decisions in support of the view that section 5(4) of the Act is directory and not mandatory. Section 156 of the Code of Criminal Procedure is in the following terms: "156(1). Any officer in charge of a police-station may, without the order of a Magistrate, investigate any cognizable case which a <ORG> having jurisdiction over the local area within the limits of such station would have power to inquire into or try under the provisions of Chapter XV relating to the place of inquiry or trial. (1) Criminal Appeals Nos. 25-D and 434 of 1953 disposed of on 3rd May,1954.

(2). No proceeding of a police-officer in any such case shall at any stage be called in question on the ground that the case was one which such officer was not empowered under this section to investigate.

(3). Any Magistrate empowered under section 190 may order such an investigation as above-mentioned". The argument advanced is that section 5(4) and proviso to section 3 of the Act are in substance and in effect in the nature of an amendment of or proviso to section 156(1) of the Code of Criminal Procedure. In this view, it was suggested that section 156(2) which cures the irregularity of an investigation by a person not empowered is attracted to section 5(4) and proviso to section 3 of the 1947 Act and section 5-A of the 1952 Act. With respect, the learned Judges appear to have overlooked the phrase "under this sec- tion" which is to be found in sub-section (2) of section 156 of the Code of Criminal Procedure. What that sub-section cures is investigation by an officer not empowered under that section, i.e. with reference to sub-sections (1) and (3) thereof. Sub-section (1) of section 156 is a provision empowering an officer in charge of a police station to investigate a cognizable case without the order of a Magistrate and delimiting his power to the investigation of such cases within a certain local jurisdiction. It is the violation of this provision that is cured under sub-section (2). Obviously sub-section (2) of section 156 cannot cure the violation of any other specific statutory provision prohibiting investigation by an officer of a lower rank than a Deputy Superintendent of Police unless specifically authorised. But apart from the implication of the language of section 156(2) , it is not permissible to read the emphatic negative language of sub-section (4) of section 5 of the Act or of the proviso to section 3 of the Act, as being merely in the nature of an amendment of or a proviso to sub-section (1) of section 156 of the Code of Criminal Procedure. Some of the learned Judges of <ORG> have called in aid sub-section (2) of section 561 of the Code of Criminal Procedure by way of analogy. It is difficult to see how this analogy helps unless the said sub-section is also to be assumed as directory and not mandatory which certainly is not obvious on the wording thereof We are, therefore, clear in our opinion that section 5(4) and proviso to section 3 of the Act and the corresponding section 5-A of Act LIX of 1952 are mandatory and not directory and that the investigation conducted in violation thereof bears the stamp of illegality. The question then requires to be considered whether and to what extent the trial which follows such investigation is. vitiated. Now, trial follows cognizance and cognizance is preceded by investigation. This is undoubtedly the basic scheme of the Code in respect of cognizable cases. But it does not necessarily follow that an invalid investigation nullifies the cognizance or trial based thereon. Here we are not concerned with the effect of the breach of a mandatory provision regulating the competence or procedure of the <ORG> as regards cognizance or trial. It is only with reference to such a breach that the question as to whether it constitutes an illegality vitiating the proceedings or a mere irregularity arises. A defect or illegality in investigation, however serious, has no direct bearing on the competence or the procedure relating to cognizance or trial. No doubt a police report which results from an investigation is provided in section 190 of the Code of Criminal Procedure as the material on which cognizance is taken. But it cannot be maintained that a valid and legal police report is the foundation of the jurisdiction of the <ORG> to take cognizance. Section 190 of the Code of Criminal Procedure is one out of a group of sections under the beading "Conditions requisite for initiation of proceedings. The language of this section is in marked contrast with that of the other sections of the group under the same heading, i.e. sections 193 and 195 to 199 . These latter sections regulate the competence of the <ORG> and bar its jurisdiction in certain cases excepting in compliance therewith. But section 190 does not. While no doubt, in one sense, clauses (a), (b) and (c) of section 190(1) are conditions requisite for taking of cogni-

zance, it is not possible to say that cognizance on an invalid police report is prohibited and is therefore a nullity. Such an invalid report may still fall either under clause (a) or (b) of section 190(1) , (whether it is the one or the other we need not pause to consider) and in any case cognizance so taken is only in the nature of error in a proceeding antecedent to the trial. To such a situation section 537 of the Code of Criminal Procedure which is in the following terms is attracted:

"Subject to the provisions herein before contained, no finding, sentence or order passed by a Court of competent jurisdiction shall be reversed or altered on appeal or revision on account of any error, omission or irregularity in the complaint, summons, warrant, charge, proclamation, order, judgment or other proceedings before or during trial or in any enquiry or other proceedings under this Code, unless such error, omission or irregularity, has in fact occasioned a failure of justice".

If, therefore, cognizance is in fact taken, on a police report vitiated by the breach of a mandatory provision relating to investigation, there can be no doubt that the result of the trial which follows it cannot be set aside unless the illegality in the investigation can be shown to have brought about a miscarriage of justice. That an illegality committed in the course of investigation does not affect the competence and the jurisdiction of the <ORG> for trial is well settled as appears from the cases in <CITATION> (1) and <CITATION> (2). These no doubt relate to the illegality of arrest in the course of investigation while we are concerned in the present cases with the illegality with reference to the machinery for the collection of the evidence. This distinction may have a bearing on the question of prejudice or miscarriage of justice, but both the cases clearly show that invalidity of the investigation has no relation to the competence of the <ORG>. We are, therefore, clearly, also, of the opinion that where the cognizance of the case has in fact been taken and the case has proceeded to termi-

(1) A.I.R. 1944 P.C. 73. 149 (2) A.I.R. 1950 P C. 26, nation., the invalidity of the precedent investigation does not vitiate the result, unless miscarriage of justice has been caused thereby.

It does not follow, however, that the invalidity of the investigation is to be completely ignored by the <ORG> during trial. When the breach of such a mandatory provision is brought to the knowledge of the <ORG> at a sufficiently early stage, the <ORG>, while not declining cognizance, will have to take the necessary steps to get the illegality cured and the defect rectified, by ordering such reinvestigation as the circumstances of an individual case may call for. Such a course is not altogether outside the contemplation of the scheme of the Code as appears from section 202 under which a Magistrate taking cognizance on a complaint can order investigation by the police. Nor can it be said that the adoption of such a course is outside the scope of the inherent powers of the Special Judge, who for purposes of procedure at the trial is virtually in the position of a Magistrate trying a warrant case. When the attention of the <ORG> is called to such an illegality at a very early stage it would not be fair to the accused not to obviate the prejudice that may have been caused thereby, by appropriate orders, at that stage but to leave him to the ultimate remedy of waiting till the conclusion of the trial and of discharging the somewhat difficult burden under section 537 of the Code of Criminal Procedure of making out that such an error has in fact occasioned a failure of justice. It is relevant in this context to observe that even if the trial had proceeded to conclusion and the accused had to make out that there was in fact a failure of justice as the result of such an error, explanation to section 537 of the Code of Criminal Procedure indicates that the fact of the objection having been raised at an early stage of the proceeding is a pertinent factor. To ignore the breach in such a situation when brought to the notice of the <ORG> would be virtually to make a dead letter of the peremptory provision which has been enacted on grounds of public policy for the benefit of such an accused. It is true that the peremptory pro-

vision itself allows an officer of a lower rank to make the investigation if permitted by the Magistrate. But this is not any indication by the <ORG> that an investigation by an officer of a lower rank without such permission cannot be said to cause prejudice. When a Magistrate is approached for granting such permission he is expected to satisfy himself that there are good and sufficient reasons for authorising an officer of a lower rank to conduct the investigation. The granting of such permission is not to be treated by a Magistrate as a mere matter of routine but it is an exercise of his judicial discretion having regard to the policy underlying it. In our opinion, therefore, when such a breach is brought to the notice of the <ORG> at an early stage of the trial the <ORG> have to consider the nature and extent of the violation and pass appropriate orders for such reinvestigation as may be called for, wholly or partly, and by such officer as it considers appropriate with reference to the requirements of section 5-A of the Act. It is in the light of the above considerations that the validity or otherwise of the objection as to the viola- tion of section 5(4) of the Act has to be decided and the course to be adopted in these proceedings, determined. The learned Special Judge before whom the objection as to the violation of section 5(4) of the Act was taken took evidence as to the actual course of the investigation in these cases. In the cases out of which Criminal Appeals Nos. 96 and 97 of 1954 arise, the first information report which in each case was filed on 29-6-1949 was in terms on the basis of a complaint filed by the Director of Administration and Co-ordination,, <ORG>. This disclosed information constituting offences including that under section 5(2) of the Act. The cases were hence registered under various sections including section 5(2) , of the Act. The investigation that was called for on the basis of such a first information report was to be by an officer contemplated -under section 5(4) of the Act. The charge-sheets in these two cases were filed on 11- 8-1951 by a Sub-Inspector of Police, <NAME> and it appears that he applied to the Magistrate for permission to investigate into these cases on 26-3-1951. His evidence shows that so far as the case relating to Criminal Appeal No. 97 of 1954 is concerned, he did not make any investigation at all excepting to put up the chargesheet. All the prior stages of the investigation were conducted by a number of other officers of the rank of Inspector of Police or Sub-Inspector of Police and none of them had taken the requisite permission of the Magistrate. In the case out of which Criminal Appeal No. 96 of 1954 arises the evidence of <NAME> shows that he took up the investigation after he obtained permission and partly investigated it thereafter but that the major part of the investigation was done by a number of other officers who were all below the rank of Deputy Superintendent of Police without having obtained from the Magistrate the requisite sanction therefor. Both these are cases of clear violation of the mandatory provisions of section 5(4) of the Act. In the view we have taken of the effect of such violation it becomes necessary for the Special Judge to reconsider the course to be adopted in these two cases.

As regards the case out of which Criminal Appeal No. 95 of 1954 arises it is to be noticed that the first information report which was filed on 30-4-1949 disclosed offences only against Messrs <ORG>, <NAME>, Delhi, and others, and not as against any public servant. The case that was registered was accordingly in respect of offences punishable under section 420 of the Indian Penal Code and section 6 of the Essential Supplies (Temporary) Powers Act, 1946, and not under any offence comprised within the Pre- Vention of Corruption Act. The investigation proceeded, therefore, in the normal course. The evidence shows that the investigation in this case was started on 2-5-1949 by Inspector <NAME> and that on 11-7-1949 he handed over the investigation to Inspector <NAME>. Since then it was only <NAME> that made all the investigation and it appears from his evidence that he examined as many as 25 witnesses in the case. It appears further that in the course of this investigation it was found that, the two appellants and another public servant were liable to be prosecuted under section 5(2) of the Act. Application was then made to the Magistrate by <NAME> for sanction being accorded to him under section 5(4) of the Act and the same was given on 20-3-1951. The charge-sheet was filed by <NAME> on 15-11-1951. He admits that all the investi- gation by him excepting the filing of charge-sheet was prior to the obtaining the sanction of the Magistrate for investigation. But since the investigation prior to the sanction was with reference to a case registered under section 420 of the Indian Penal Code and section 6 of the Essential Supplies (Temporary) Powers Act, 1946, that was perfectly valid. It is only when the material so collected disclosed the commission of an offence under section 5(2) of the Act by public servants, that any question of taking the sanction of the Magistrate for the investigation arose. In such a situation the continuance of such portion of the investigation as remained, as against the public servants concerned by the same officer after obtaining the permission of the Magistrate was reasonable and legitimate. We are, therefore, of the opinion that there has been no such defect in the investigation in this case as to call for interference.

In the result, therefore, Criminal Appeal No. 95 of 1954 is dismissed. Criminal Appeals Nos.96 and 97 of 1954 are allowed with the direction that the Special Judge will take back the two cases out of which these appeals arose on to his file and pass appropriate orders after reconsideration in the light of this judgment.

Criminal Appeal No. 106 of 1954.

This is an appeal by special leave against a common order of <ORG> relating to Cases Nos. 19 to 25 of 1953 before the Special Judge, Delhi. It raises the same questions which have been disposed of by our judgment in Criminal Appeals Nos. 95 to 97 of 1954. Since the appeal is, in form, one against the order of <ORG> refusing to grant stay of the proceedings then pending, it is sufficient to dismiss this appeal with the observation that it will be open to the appellants to raise , the objections before the Special Judge.


<NAME>, J.

1. The question raised in this appeal relates to the construction of Section 127A of the Madhya Pradesh Municipalities Act, 1961, ('The Act'). The relevant portion of Section 127A reads:

127A. Imposition of Property Tax-(1) Notwithstanding anything contained in this Chapter, as and from the financial year 1976-77, there shall be charged, levied and paid for each financial year a tax on the lands or buildings or both situate in a Municipality other than class IV Municipality at the rate specified in the table below :

TABLE (i) Where the annual letting 6 per centum of the value exceeds Rs. 1800 but annual letting value does not exceed Rs. 6000 (ii) Where the annual letting 8 1/3 per centum value exceeds Rs. 6000 of the annual but does not exceed letting value Rs. 12000 (iii)Where the annual letting 10 per centum of the value exceeds Rs. 12000 but annual letting does not exceed Rs. 18,000 value (iv) Where the annual letting 15 per centum of the value exceeds Rs. 1800 but annual letting does not exceed Rs. 24,000 value (v) Where the annual letting 20 per centum of the value exceeds Rs. 24,000 annual letting value

2. The property tax levied under Sub-section (1) shall not be leviable in respect of the following properties, namely :

(a) buildings and lands owned by or vesting in-

(i) <ORG>;

(ii) the State Government;

(iii) the Council;

(b) buildings and lands the annual letting value of which does not exceed eighteen hundred rupees :

Provided that if any such building or land in the ownership of a person who owns any other building or land in the same Municipality, the annual letting value of such building or land shall for the purpose of this clause, be deemed to be the aggregate annual letting value of all buildings or lands owned by him in the Municipality.

2. Sub-section (1) of Section 127A is the charging section. Sub-section (2) provides for exemption. Clause (b) thereof provides that buildings and lands the annual letting value of which does not exceed eighteen hundred rupees are exempt from taxation. The proviso thereunder states that if any such building or land in the ownership of a person who owns any other building or land in the same municipality, the annual letting value of such building or land for the purpose of Clause (b) shall be deemed to be the aggregate annual letting value of all buildings or lands owned by him in the Municipality.

3. <ORG> has pointed out that under the scheme of the Act for the purpose of imposition of property tax under Sub-section (1) of Section 127A, each tenement has to be separately assessed and no tax can be levied for a building with annual letting value up to rupees eighteen hundred. The aggregation of annual letting value of all buildings owned by a single individual could be applied only for exemption and not for taxation. The unit of tax is a building (property) and not a person. If a person owns more than one building within the urban area to which the Act is applicable, the aggregate annual letting value of all the buildings cannot be taken into consideration for assessment of tax. If the quarters are let out to different persons, each quarter has to be valued as a separate unit. If the annual letting value of each quarter does not exceed the limit prescribed by the Act, it will be exempt from assessment <ORG> relied upon the previous decisions construing the corresponding provisions in the M.P. Sampatti Kar Adhiniyam, 1964. (See: <NAME>, <NAME> v. Deputy Property Tax Commissioner, <NAME> and <NAME>. 1973 M.P.L.J. 918; <CITATION> 1975 M.P.L.J. (NOC) 88; and <NAME> v. State of M.P. 1977 J.L.J. 712).

4. It seems to us that <ORG> had a mechanical approach to construction. The mechanical approach to construction is altogether out of step with the modern positive approach. The modern positive approach is to have a purposeful construction that is to effectuate the object and purpose of the Act. Section 127A must, therefore, receive a purposeful construction. Sub-section (1) contains a table for taxation. There is no provision for taxation in respect of a building having annual letting value less than rupees eighteen hundred. Clause (b) of Sub-section (2) expressly exempts buildings and lands, the annual letting value of which does not exceed eighteen hundred rupees. The proviso permits adding up of annual letting value of all such buildings or lands owned by a single individual in the Municipality. The proviso no doubt states that the annual letting value aggregated shall be deemed to be "for the purpose of this clause" meaning thereby for the purpose of Clause (b), that is for exemption. But the purpose of the proviso is to deny exemption to buildings or lands owned by the same person and of which the total annual letting value exceeds rupees eighteen hundred.

5. It is quite true that each building is a unit for the purpose of taxation and there is no provision for taxation of building and land of which the annual letting value is up to rupees eighteen hundred. But when aggregation of annual letting value of all buildings or lands is permitted, then, all such buildings or lands have to be taken as one unit for the purpose of taxation. Any other construction would render the proviso nugatory and defeat the object of the Act. The <ORG> could not have intended that all buildings or lands owned by a single individual should get exemption from taxation even if their total letting value exceeds rupees eighteen hundred.

6. The decisions of <ORG> taking contrary view cannot be said to have laid down the law correctly.

7. In the result we allow the appeal and set aside the impugned judgment of <ORG>. We, however, direct that this decision should be given affect prospectively and there shall not be recovery from or refund to any person with regard to the period antecedent hereto.

8. No costs.


JUDGMENT <NAME>, J.

1. This appeal raises a question of subrogation. The facts necessary for the disposal of the same lie in a narrow compass. The plaintiff sued to recover a sum of Rs. 8,000 on a mortgage dated 3rd October, 1925, executed by defendants 1 to 4 and their father late <NAME> in her favour. There was a prior mortgage on the said property dated 1st August, 1914. In execution of a decree obtained thereon the property mortgaged was about to be sold. To discharge the said decree debt the mortgagors - late <NAME> and his sons - agreed to sell a part of the said property, namely, plaint items 3 to 7, 9 and 15 to defendants 6 and 7. In pursuance of the said contract, the defendants 6 and 7 obtained a sale-deed dated 2nd November, 1933, and advanced the money with which the said decree debt was satisfied. They therefore claim a right of subrogation in respect of the said sum on the ground that by their having discharged the said decree debt they are subrogated to the rights of the mortgagee under the deed dated 1st August, 1914. The learned Subordinate Judge refused to give them the said relief on the ground that there is no registered instrument reserving the right as required by Section 92(iii) of the Transfer of Property Act. It is this view that is now canvassed in this appeal by Mr. <NAME> on their behalf.

2. It is conceded that the matter is governed by Section 92 of the Transfer of Property Act, but it is contended that defendants 6 and 7 have a right of subrogation under Clause (i) of the said section. This contention is directly opposed to the interpretation placed on the said section by the <ORG> decision in <CITATION> (1935) 70 M.L.J. 1 : I.L.R. 59 Mad. 359 at 375 (F.B.). But it is contended that the observations regarding the interpretation of that section are obiter and that a different note was struck in a recent judgment by their Lordships <NAME> and <NAME>, JJ., in <NAME> v. Damodarasami A.I.R. 1938 Mad. 779. <CITATION> (1935) 70 M.L.J. 1 : I.L.R. 59 Mad. 359 at 375 (F.B.), I observed as follows:

The first clause enunciates no new principle (vide Section 74 of the Transfer of Property Act since repealed). It applies to all persons who have an interest in the equity of redemption and are under no personal obligation to discharge prior encumbrances. The third clause has been enacted to confer a benefit on persons who advance money to discharge an incumbrance only 'if the mortgagee has by a registered instrument agreed that such persons shall be subrogated.' The clause is intended to apply to all persons who acquire an interest in the mortgaged property by advancing moneys to discharge prior incumbrances and there is no warrant for restricting the scope of that clause to persons other than purchasers or mortgagees as contended by Mr. <NAME>. The distinction between the two classes of cases aforesaid, namely, those who have an existing interest in the property and those who acquire an interest therein by advancing money, is well recognised in the law relating to subrogation.

3. This is also the view taken by <ORG> pages 367 and 368 and by <ORG> (page 362). Since the date of this decision the matter was considered by a Full Bench of <ORG> and a Full Bench of <ORG>. The Full Bench decision of <ORG> is reported in <NAME> v. Jai Singh sI.L.R. (1937) All. 880 (F.B.). <NAME>, C.J., after considering the decision in <CITATION> (1935) 70 M.L.J. 1 : I.L.R. 59 Mad. 359 (F.B.) and the previous Full Bench decision in <CITATION> (1932) I.L.R. 54 All. 897 (F.B.), which was dissented from in <CITATION> (1935) 70 M.L.J. 1 : I.L.R. 59 Mad. 359 (F.B.) affirmed the view taken by us. In that case certain properties were sold for discharging the prior encumbrances and as there was no registered instrument in the case, the right of subrogation was refused. The learned Chief Justice concluded his judgment thus:

Having paid the amounts which under their contracts of sale they were bound to pay as part of their sale consideration, and not having obtained any agreement in writing registered that they would be subrogated to the rights of the prior mortgagee, they are not entitled to any such benefit.

4. The Full Bench decision of <ORG> is reported in <NAME> v. <NAME> I.L.R. (1938) Nag. 206 (F.B.). The actual decision in that case is that:

A purchaser of a property with whom is left part of the consideration of the sale in his favour for paying off a mortgage but in whose favour there is no express agreement of subrogation in writing registered is not entitled to claim subrogation against a later mortgagee under Section 92 of the Transfer of Property Act as amended by Act XX of 1929.

5. It also affirms the view taken by us in our <ORG> decision. Mr. <NAME> canvasses the reasoning in both the above judgments. What he contends for is that the interpretation placed on Section 92 (iii) of the Transfer of Property Act was based upon a principle which according to him was not well founded. In the course of the <ORG> judgment in <CITATION> (1935) 70 M.L.J. 1 : I.L.R. 59 Mad. 359 (F.B.), Varadachariar,. J., observed thus:

There is a well-established distinction between cases in which a person who has a pre-existing interest in property pays off a prior charge on that property for the protection of his own interest and cases in which a person acquires an interest in property only by reason of his advancing money to pay off an existing mortgage debt. It seems to me that the first clause of Section 92 must be held to relate to the first type of cases above referred to and the third clause to the second type.

6. This is also the view which I took. It is this view which Mr. <NAME> questions and in support thereof relies upon the observations of <NAME>, J., in <NAME> v. Damodarasami I.A.R. 1938 Mad. 779. The learned Judge remarks thus at page 783:

We must say we find it difficult to follow the distinction adverted to. between a person with a pre-existing right and a person acquiring a right by reason of the advance he makes. Not the slightest support is to be found for this supposed distinction in any of the rulings of <ORG>; on the contrary, as already shown, it finds no countenance in them.

7. But the learned Judge did not however express any opinion on the interpretation placed by us. The learned Judge again remarks:

To construe Clause (i) and (iii) of the new Section 92 is not within our purview. It is not therefore for us to say whether the construction adopted in <CITATION> (1935) 70 M.L.J. 1 : I.L.R. 59 Mad. 359 (F.B.) is right or not, whatever may be our own view on the matter.

8. Mr. <NAME> contends that the observations of <NAME>, are well founded in principle and the distinction sought to be made in <CITATION> (1935) 70 M.L.J. 1 : I.L.R. 59 Mad. 359 (F.B.) does not exist and that on a proper construction of Section 92 , a person who advances money to a mortgagor and takes a mortgage or sale would come within Clause (i) of Section 92 . Considerable reliance was placed upon certain decisions of <ORG> and the interpretation placed upon them by our <ORG> and other <ORG>s. Those decisions are <NAME> v. <NAME> (1883) L.R. 10 I.A. 62 : I.L.R. 9 Cal. 961 (P.C.), <NAME> v. <NAME> (1884) L.R. 11 I.A. 126 : I.L.R. 10 Cal. 1035 (P.C.), <NAME> v. <NAME> (1901) 12 M.L.J. 73 : L.R. 29 I.A. 9 : I.L.R. 29 Cal. 154 (P.C.) <CITATION> (1912) 22 M.L.J. 468 : L.R. 39 I.A. 68 : I.L.R. 39 Cal. 527 (P.C.) and <NAME> v. Jugal Kishore A.I.R. 1932 P.C. 99 (P.C.). I shall now proceed to examine the soundness of the contention and the scope of the said <ORG> decisions. The cases in <NAME> v. <NAME> (1883) L.R. 10 I.A. 62 : I.L.R. 9 Cal. 961 (P.C.) and <NAME> v. <NAME> (1884) L.R. 11 I.A. 126 : I.L.R. 10 Cal. 1035 (P.C.) were decided before the Transfer of Property Act (1882) was enacted and the other cases were decided after the enactment of the Act but before the recent amendment in 1929 and 1930. Both in 9 and 10 Calcutta cases, their Lordships applied certain rules of English Law as rules of justice, equity and good conscience. They approved "of the rule in <NAME> v. <NAME> (1877) 5 Ch.

D. 634 and disapproved of the rule in <NAME> v. <NAME> (1817) 3 Mer. 210 : 36 E.R. 81, the one on the ground that it was in consonance with the rules of justice equity and good conscience and the other, on the ground that it was not. I shall first explain the scope of the rule in <NAME> v. <NAME> (1817) 3 Mer. 210 : 36 E.R. 81. It is well settled that a mortgagor who has created more than one encumbrance cannot set up a prior encumbrance which he has discharged against a later encumbrance. This is on the principle that a person who borrows money cannot be his own creditor and he would be derogating from his own grant. But <NAME> v. <NAME> (1817) 3 Mer. 210 : 36 E.R. 81 carried the principle a step further and applied the same principle to a person who acquired an equity of redemption. The soundness of the decision was always questioned in English Courts though it was not overruled. Its application was limited as far as possible. The limit of the rule as enunciated therein is thus explained by Lord <NAME> in <NAME> v. <NAME> (1895) A.C. 18:

A purchaser who took a conveyance purporting to be free from encumbrances could not set up a mortgage which had been paid off out of the purchase money against an encumbrance subsequent in date of which he had constructive notice. The authority of that case cannot nowadays be treated as going beyond the actual decision.

9. This rule was considered by their Lordships of <ORG> as not being in accordance with justice, equity and good conscience. They further stated that they were not prepared to extend that doctrine to India.

10. I shall now deal with the rule in <NAME> v. <NAME> (1817) 3 Mer. 210 : 36 E.R. 81. In that case, <NAME>, M.R., after laying down the general proposition that the mere fact of a charge having been paid off does not decide the question whether it is extinguished, proceeded to explain in what cases it could be said to have extinguished and in what cases, not. He instanced the case of a charge paid off by a tenant for life without any expression of his intention and in such a case he observed that it was presumed that his intention was to keep it alive. He then proceeded to instance the case of an owner of an estate in fee or tail. In dealing with, this, he observed the presumption was the other way remarking that if there was no reason for keeping it alive, equity, would, in the absence of any declaration of his intention, destroy it, but if there was a reason for keeping it alive, equity would not destroy it. He then took the case of a purchaser and observed that if he paid off a charge, he might have it assigned to a trustee for himself or might have a declaration inserted in the deed that the charge should be treated as remaining on foot for the purpose of protecting him against any encumbrances. The learned Master of the Rolls then wound up thus:

The intention, therefore, if expressed, governs the case, but if no intention is expressed, then <NAME> v. <NAME> (1817) 3 Mer. 210 : 36 E.R. 81 says that in the incumbrance which is paid off is merged, and the subsequent incumbrancers let in.

11. On the actual facts of that case, he found that the intention was clearly shown not to let in the subsequent incumbrancer. According to <NAME> v. <NAME> (1877) 5 Ch. D. 634, a purchaser who pays off a charge must show an intention to keep it alive if he wishes to prevent its merger and such an intention was shown in that case. (This is also how Lord Justice <NAME> understood the case.) See <ORG> v. <NAME> (1896) 1 Ch. 726 at 734. Let us see how <ORG> applied the rule. In 9 <NAME> case the right of subrogation was negatived. In that case one <NAME> as the agent of an <NAME> executed a mortgage in favour of one <NAME>. During that time one <NAME> was the <NAME>. After the death of <NAME> disputes arose between <NAME> and another as to succession. In 1872 <NAME> purporting to act as the proprietor executed a mortgage in favour of one <NAME> and a part of the consideration for the mortgage was utilised in discharging the prior mortgage in favour of <NAME>. Their Lordships of <ORG> after citing the rule in <NAME> v. <NAME> (1877) 5 Ch. D. 634 as enunciated by <NAME>, <NAME>, proceeded to apply the said rule in the following words:

Applying that rule to the present case, it must be presumed, in the absence of any expression of intention to the contrary, that <NAME>, who when he borrowed the money to pay off <NAME>'s mortgage, claimed to be the owner of the estate, and was stated on the face of the bond to be so, intended that the money should be applied in paying off that mortgage, and in extinguishing the charge, there being no intermediate encumbrance. Although the money was paid by the plaintiff's gumastha to <NAME>'s estate, it was paid with money borrowed from the plaintiff by <NAME>, and for wfeich <NAME> was liable to him. The mortgage was therefore paid off by <NAME> and not by the plaintiff.

12. It will be seen that <NAME> was treated as the owner in fee and the amount borrowed by him and paid in discharge of the prior mortgage was treated as money paid by the owner in fee. Though the money was expressly borrowed for the purpose of paying off the prior mortgage, their Lordships negatived the right of subrogation. The principle is this, that money received in consideration of a mortgage or sale of a property will be the property of the mortgagor or a vendor. Prima facie therefore the money that goes in discharge of the prior mortgage will be the money of the mortgagor or the vendor and therefore it will be payment by the owner in fee. Though in that case it was paid by <NAME> the mortgagee's gumastha, still their Lordships observed that the mortgage was paid by <NAME> and not by <NAME>. Their Lordships remarked that as there was no intermediate encumbrance, the charge must be deemed to be extinguished and they declined to raise an equity in favour of <NAME>. In order to have this equity there must be a declaration of his intention and in the absence of such a declaration for keeping it alive, their Lordships observed that it was extinguished.

13. I shall now take the 10 Calcutta case and see how the rule was applied. In that case, a person in execution of a money decree purchased in <ORG> auction a certain property which was admittedly subject to more than one mortgage. As purchaser of the equity of redemption, after the purchase he discharged the first mortgage and was held entitled to the right of subrogation in respect thereof against the later mortgage. After referring to <NAME> v. <NAME> (1877) 5 Ch. D. 634 and <NAME> v. <NAME> (1817) 3 Mer. 210 : 36 E.R. 81, Sir <NAME> formulates the question thus and answers it:

The obvious question to ask in the interests of justice, equity and good conscience is, what was the intention of the party paying off the charge? He had a right to extinguish it and a right to keep it alive. What was his intention? If there is no express evidence of it, what intention should be ascribed to him? In the familiar instance of a tenant for life paying off a charge upon the inheritance, he is assumed, in the absence of evidence to the contrary, to have intended to keep the charge alive. It cannot signify whether the division of interests in the property is by way of life estate and remainder or by way of successive charges. In each case it may be for the advantage of the owner of a partial interest to keep on foot a charge upon the corpus which he has paid.

14. Their Lordships therefore treated the case of a purchaser of an equity of redemption in exactly the same position as a life tenant, that is, a person having an existing interest in the property and discharging a prior mortgage by reason of such an existing interest and not being under a personal liability to pay the charge or being under a contractual liability to pay the encumbrance. The expression "the owner of a partial interest" would take in the case of a second and every subsequent mortgagee. The money that is paid by the second mortgagee or the purchaser in such a case would be his own money and cannot in any sense be considered to be the money of the mortgagor because the money is paid as owner of an existing interest, that is, the purchaser as owner of equity of redemption. Where a mortgagor mortgages or sells a property for discharging a subsisting mortgage, whether the mortgagor discharges by receiving the money or the mortgagee or vendee discharges by covenanting to do so retaining the consideration money for the mortgage or sale, it will in either case be a discharge by the mortgagor. Where the mortgagee or vendee covenants with the mortgagor to discharge a particular incumbrance, he assumes the duty of the mortgagor. Prima facie therefore as stated by <NAME> in his book on 'Mortgages', Section 258 :

If the money be paid by one who has assumed the duty of paying the debt, either by contract with the mortgagor or with those who may have succeeded to his rights, this must be taken, as regards other subsequent interests, as a payment and as the payment was in pursuance of his agreement, it may be regarded as made with the mortgagor's money. ( Section 864 .)

15. In dealing with the case of a mortgagee who purchases an equity of redemption, Vice-Chancellor <NAME> in <NAME> v. <NAME> (1877) 5 Ch. D. 634 states the principle thus at page 642:

A mortgagee who purchases an equity of redemption from a vendor liable to pay the mortgage debt, ought, it would seem, in the absence of contract to the contrary, ordinarily to be considered as giving up his claim as creditor against the estate, and not merely his personal remedy against the mortgagor. The parties can well arrange to the contrary, but not doing so, it seems reasonable that the debt satisfied for one purpose should be deemed satisfied for all purposes. That this involves a second mortgagee being placed in a better position than he previously was, does not seem to me to affect the question. Indeed the improved position of the second mortgagee would seem, after all, to be only consistent with his contract, if such contract be considered (as it reasonably maybe) to have been a contract that he should have a security on the property, but subject to a prior charge so long as the creditor having that charge remained unpaid.

16. It will be seen from this passage that it is open to the parties to arrange to the contrary. Of course, where no such arrangement is made, the English law modified the rule in <NAME> v. <NAME> (1817) 3 Mer. 210 : 36 E.R. 81, where a person advancing the money had no notice of an intermediate encumbrance or other circumstances which would raise equity in his favour. Even in such cases where from the terms of the mortgage deed or purchase deed it is clear that the intention to keep alive a charge is inconsistent with the real intention of the parties it would not be kept alive because the mortgagee or purchaser finds it would have been better for him to have kept the charge alive. Vide the observations of Lord Justice <NAME> in <ORG> v. <NAME> (1896) 1 Ch. 726 at 734. <NAME> v. <NAME> (1883) L.R. 10 I.A. 62 : I.L.R. 9 Cal. 961 (P.C.) illustrates this rule very clearly. That case was one in which the mortgagee had not an existing interest but acquired an interest in consideration of certain money paid to the mortgagor and prima facie the money so paid to the mortgagor would be the money of the mortgagor with which the prior mortgage would have been redeemed. Both these cases illustrate the distinction between the case of a person having an existing interest and the case of a person acquiring an interest. As I said, these cases arose before the Transfer of Property Act was enacted.

17. Now let us see how the matter stood under the Act. Sections 74 and 75 of the Act enacted that every second or subsequent mortgagee on discharging a prior mortgage will be entitled to all his rights. The sections gave effect to the recognition of the principle that a person having an existing interest and not being under personal or contractual liability to pay an encumbrance is entitled to be subrogated to the rights of a prior encumbrance which is discharged. Section 95 provides for the case of a co-mortgagor. Section 101 provides for the case of a union of interests, that is, the case of an incumbrancer becoming owner of the property. It was applied also to the case of a purchaser of equity of redemption discharging a prior encumbrance. It will be seen from the language of Section 74 that it is a statutory right and the <ORG> do not go into the question whether it was for the benefit of the subsequent mortgagee to keep the prior mortgage alive or not; the presumption which was automatically raised in such cases in England was recognised as a statutory right.

18. In the case of a person who advances money for the purpose of paying off a mortgage and takes a mortgage or sale, the principle would be that prima facie the prior mortgage is discharged unless there is an agreement that it should be kept alive or the mortgagee or the vendee shows that there is some reason for presuming or implying such an agreement in his favour as the subsistence of an intermediate incumbrance, that is, the onus is on him to prove it. The presumption and onus are not the same as in the two classes of cases, that is, in the case where a person having an existing interest discharges a prior mortgage and a person acquiring an interest discharges a mortgage. The result of the case-law in regard to presumption and onus in cases where a charge is not discharged by a mortgagor and in the absence of an expression of intention or an express agreement to have the charge kept alive may be summarised thus:

(1) If a charge is paid off by a tenant for life, he retains the benefit of it against the inheritance. The presumption is that he intends to keep it alive. <NAME> v. <NAME> (1877) 5 Ch. D. 634 and <ORG> In re: <NAME> v. <ORG> (1905) 2 Ch. 587 at 602. The burden of proof is upon those who allege that in paying off the charge he intended to exonerate the estate. <NAME> v. Earl of Egremont (1844) 7 Beav. 205 : 49 E.R. 1043. This is irrespective of any existence of an intermediate encumbrance. <NAME> v. <NAME> (1783) 2 Ch. 587 at 602 and <NAME> v. <NAME> (1818) 36 E.R. 751 at 784.

(2) Where a second or a subsequent mortgagee discharges a first or prior mortgage, the same presumption and onus are raised as in the case of a tenant for life. As <ORG> remarks in <NAME> v. <NAME> (1884) L.R. 11 I.A. 126 : I.L.R. 10 Cal. 1035 at 1046 (P.C.):

It cannot signify whether the division of interests in the property is by way of life estate and remainder, or by way of successive charges.

Section 74 of the Transfer of Property Act.

It would seem that <ORG> applied the principle applicable to cases coming under this class to the case of a purchaser of an equity of redemption discharging a mortgage apparently on the ground that the charge was by an owner of an existing interest. <NAME> v. <NAME> (1884) L.R. 11 I.A. 126 : I.L.R. 10 Cal. 1035 at 1046 (P.C.). It appears to me that it would more appropriately come under the next class of cases.

(3) Where the owner of an estate in fee pays off a charge, the presumption is the other way. Equity would in the absence of any declaration of his intention destroy it, but if there was a reason for keeping it alive such as the existence of another encumbrance, equity would not destroy it. <NAME> v. <NAME> (1877) 5 Ch. D. 634 at 645; also <ORG>, In re: <NAME> v. <ORG> (1905) 2 Ch. 587 at 602.

As the learned Editor of the Article on 'Mortgages' in Hailsham's Edition of Halsbury's Laws of England, Vol. 23, points out in the footnote at page 516:

When a tenant in fee simply pays off a charge, the original presumption is in favour of merger. Where under the circumstances it is for his advantage to keep the charge alive, there may be a rebutting presumption which prevents merger.

Take the case of a person who becomes entitled to an equity of redemption by descent or devise. If he pays the charge created by his predecessor, the presumption is merger but he can keep it alive or if there is an intermediate incumbrance or other circumstances which will have to be proved, a rebutting presumption will be made in his favour. Vide the observations of Sir <NAME> in <NAME> v. <NAME> (1851) 14 Beav. 542 : 51 E.R. 394 at 397, the case of an heir discharging an encumbrance created by his predecessor. The onus of proving such circumstances is on him, though admission of them might dispense with proof in some cases.

Under this category, in my opinion, would come the case also of a purchaser of an equity of redemption discharging a mortgage. The presumption would be merger but where there is an expression of an intention or an intermediate encumbrance or such a continuance would be for his benefit, a rebutting presumption will be made in his favour. This is the rule embodied in Section 101 of the Transfer of Property Act before the Amendment.

(4) Where a person advances money to discharge a mortgage and takes a mortgage or sale, the presumption is that the mortgage is extinguished. But if it is shown that there is an intermediate encumbrance or other circumstances which raise equity in his favour, the presumption shifts or is rebutted and an agreement with the borrower that the mortgage was to be kept alive is presumed or implied. The agreement is often implied from such circumstances as an arrangement with the mortgagor that after the discharge of the mortgage the mortgage deed should be surrendered to him and a new document would be executed in his favour or a sale free from encumbrance. Vide Dinabandhu Shaw Chowdhry v. <NAME> (1901) 12 M.L.J. 73 : L.R. 29 I.A. 9 : I.L.R. 29 Cal. 154 (P.C.) and <CITATION> (1912) 22 M.L.J. 468 : L.R. 39 I.A. 68 : I.L.R. 39 Cal. 527 (P.C.). The onus is on him to prove them. <CITATION> (1897) 7 M.L.J. 198 : I.L.R. 20 Mad. 486 at 487.

Where there is no intermediate incumbrance or any other circumstances which would raise an equity in his favour, the original presumption that the mortgage is extinguished will not give place to a rebutting presumption in his favour and the onus is on him to prove that there was an express agreement to keep the mortgage alive. This principle is exemplified by the cases in <NAME> v. <NAME> (1883) L.R. 10 I.A. 62 : I.L.R. 9 Cal. 961 (P.C.) and <CITATION> (1910) 21 M.L.J. 180.

(5) Where one advances money to another for paying off a mortgage without stipulating for any security, the presumption is that the mortgage is discharged unless by an agreement with the borrower he is subrogated to the mortgage security. <NAME> v. <NAME> (1875) L.R. 2 I.A. 131 (P.C.). The rule in English law appears to be different. <NAME> v. <NAME> (1879) 11 Ch. D. 1 at 18, which appears to treat him as an equitable transferee of the debt.

19. Whether it is a case of an original presumption as in (1) and (2) or a case of rebutting presumption as in (3) and (4), the theory on which the presumption and onus are rested is that an intention in favour of a gift will not be presumed. Vide the observations of Lord Justice <NAME> in <NAME> v. <NAME> (1912) 1 Ch. 735 at 764. This judgment was upheld in <NAME> v. <NAME> (1914) A.C. 132.

20. Both <NAME> v. <NAME> (1901) 12 M.L.J. 73 : L.R. 29 I.L.R. 9 : I.L.R. 29 Cal. 154 (P.C.) and <CITATION> (1912) 22 M.L.J. 468 : L.R. 39 I.A. 68 : I.L.R. 39 Cal. 527 (P.C.) are cases of mortgages and not purchases. In the 29 Calcutta case, one <NAME> advanced a sum of Rs. 40,000 for the purpose of discharging two prior mortgages. The mortgages were discharged with the amount. A question arose whether the mortgage in favour of <NAME> had priority over an attachment of property which came into effect before the date of the mortgage. Their Lordships from the nature of the transaction inferred an agreement that the mortgages intended to be discharged should be kept alive. After referring to <NAME> v. <NAME> (1884) L.R. 11 I.A. 126 : I.L.R. 10 Cal. 1035 (P.C.), they remarked thus:

Here the mortgagor was paying off his own debts, but he was doing so for the benefit of <NAME> and in performance of the agreement with him.

21. Therefore their Lordships recognised that though the money would prima facie become the money of the mortgagor as in the 9 Calcutta case, as the money was paid in performance of an agreement with the mortgagee, it should be kept alive. This their Lordships inferred from the fact that it was intended that the mortgagee should have an unencumbered property and the charge in his favour should have priority over all other charges. It would have been very easy for their Lordships to apply the rule under Section 74 of the Transfer of Property Act by treating <NAME> as a second mortgagee; but they would not apply that section because that section was intended to relate only to a person having an existing interest in the property and discharging a prior mortgage out of his own money without being under a stipulation with the mortgagor to discharge it from and out of the consideration money for his mortgage. Therefore the distinction between a person having an existing right and the person acquiring an interest was kept in view by their Lordships of <ORG>. Again, in <CITATION> (1912) 22 M.L.J. 468 : L.R. 39 I.A. 68 : I.L.R. 39 Cal. 527 (P.C.), there was a mortgage in favour of one <NAME> on 17th February, 1888, which was effected for the purpose of discharging a zerpeshgi debt dated 20th November, 1874. Their Lordships gave the benefit of subrogation to <NAME> in respect of the zerpeshgi deed dated 20th November, 1884, by inferring an agreement that that mortgage should be kept alive. At page 554 this is what their Lordships observe:

The Rs. 12,000 lent by <NAME> were in accordance with the agreement between <NAME> and <NAME> applied in paying off the zerpeshgi debt, that on payment of that debt the zerpeshgi deed of the 20th November, 1874, was handed over to <NAME>, and that <NAME> when she lent her Rs. 12,000 intended to keep alive for her benefit and protection the charge which had been created by the zerpeshgi deed of the 20th November, 1884.

22. After referring to <NAME> v. <NAME> (1883) L.R. 10 I.A. 62 : I.L.R. 9 Cal. 961 and <NAME> v. <NAME> (1884) L.R. 11 I.A. 126 : I.L.R. 10 Cal. 1035 (P.C.), they observe that applying the rule of justice, equity and good conscience, the charge was kept alive. It is also significant that their Lordships did not apply Section 74 of the Transfer of Property Act but invoked the principle of equity, thus again illustrating the distinction between a person having an existing interest and a person acquiring an interest. This principle was again illustrated in <NAME> v. Jugal Kishore A.I.R. 1932 P.C. 99 (P.C.), where in respect of half of the purchase money their Lordships did not give the benefit of subrogation by implying an agreement because there was no intermediate encumbrance. <NAME> does recognise that 29 and 39 Calcutta cases were based on conventional subrogation and that Section 74 of the Transfer of Property Act would not apply to cases where a person is under a contractual liability to discharge a mortgage.

23. In order therefore to avoid questions of intention and onus being gone into by <ORG> and with a view to place the right of subrogation on a statutory basis the <ORG> enacted Section 92 of the Transfer of Property Act. As remarked by <NAME>, Section 92(i) deals with the case of a person having an existing interest and Section 92(iii) deals with the case where under the previous state of the law the right of subrogation was invoked on the doctrine of conventional subrogation. This follows from the plain language of the section and there is very good reason why the <ORG> adopted this view. In the case of a person having an existing interest, there is no need to resort to any agreement express or implied and Section 74 of the Transfer of Property Act before the amendment gave partial recognition in favour of second and subsequent mortgagees and Section 92(i) only extended the said principle. In other cases the <ORG> had to go into questions of intention, in certain cases coming to the conclusion that there was an intention to keep the mortgage alive and in certain other cases, that there was no such intention. The <ORG> therefore enacted the rule in Section 92(iii) as it is always open to a person who advances money to enter into an agreement. I do not see any injustice in enacting such a rule. The legislature does give the benefit of the principle of subrogation even in such cases but the legislature requires that the person intended to take advantage of the benefit must comply with certain requirements, the requirements being a registered instrument for keeping alive the prior mortgage which can always be done even by the very transaction--sale or mortgage - under which the money was advanced by making a declaration that it was agreed between the parties that the prior mortgage was intended to be kept alive.

24. It is contended by Mr. <NAME> that the words in Clause (iii), "a person who has advanced money to a mortgagor money with which the mortgage has been redeemed", are only intended to cover the case of a person who merely lends money without stipulating for any security as such a person cannot in law acquire any right of subrogation but for the statutory provision. There is no warrant for placing such a narrow construction. The words are wide enough to cover the case of a mortgagee or a vendee who advances money in consideration of a mortgage or sale. All that the section requires is that money must have been received by the mortgagor from the person who advances it and with which the mortgage must have been redeemed. What is contemplated by the section is the receipt of money by a mortgagor for the discharge of a mortgage and the redemption of such a mortgage with that money. The money may have been received by the mortgagor either by raising a loan by a mere personal security or by a transfer of the mortgaged, property by way of a mortgage or sale. In such cashes the money with which the mortgage is redeemed will be the money of the mortgagor obtained by him in any of the modes indicated above. Prima facie therefore the redemption of the mortgage being with the mortgagor's money, the mortgage is discharged. But as and by way of equity an agreement was inferred in cases where there is no express agreement for keeping the mortgage alive. As the inference of such an intention is dependent upon a number of circumstances and to avoid <ORG> going into them, Clause (111) was enacted to confer a statutory right in such cases, provided the person seeking the benefit of it fulfils the conditions mentioned in the section.

25. I am therefore of the opinion that the vendees in this case not having obtained a registered agreement stipulating that they should be subrogated to the rights of the mortgage which they have discharged, they are not entitled to set up any claim of priority over the plaintiff's mortgage. In the result, the appeal fails and is dismissed with costs.

<NAME>, J.

26. This was a suit on a mortgage dated 3rd October, 1925, executed by a Hindu father and his four major sons. Defendants 6 and 7 purchased seven items of the hypotheca on 2nd November, 1933. The sale of these items to defendants 6 and 7 was expressly stated to be in order to avoid at sale in execution of a decree based on a prior mortgage of the same property dated August, 1914. The question is whether defendants 6 and 7 are by virtue of their purchase subrogated to the rights of the mortgagee whose mortgage was redeemed with their money. The Court below has answered this question in the negative.

27. The law to be applied is admitted to be found in Sections 91 and 92 of the Transfer of Property Act.

28. In order to be subrogated to the rights of a mortgagee whose mortgage you redeem you must be either

(a) a person entitled to sue for redemption [Clause (i) of Section 92 ]; or

(b) a person who has advanced money to a mortgagor for redeeming a mortgage and a person who has contracted for subrogation with the mortgagor by a registered instrument [Clause (iii) of Section 92 ].

29. Section 91 tells us who are persons entitled to sue for redemption. The mortgagor, of course, but the equitable doctrine of subrogation obviously does not apply to mortgagors. Persons entitled to institute a suit for redemption fall into three classes only:

(1) any person who has an interest in or charge upon the property mortgaged or an interest in or charge upon the right to redeem;

(2) any surety for payment of the mortgage debt or a part thereof;

(3) any creditor of the mortgagor who in a suit for administration of his estate has, obtained a decree for sale of the mortgaged property.

30. Excluding the mortgagor, this is an exhaustive list of the persons entitled to sue for redemption. The question is whether defendants 6 and 7 fall into one or other of these categories. The answer is that they obviously do not. They were not persons entitled to sue for redemption when they purchased property burdened with a mortgage-debt. They did not therefore by their purchase 'redeem' a mortgage. Since they were not persons entitled to sue for redemption their purchase cannot be deemed in equity to be a redemption. That is the principle laid down in the first clause of Section 92 . A rule of equity has been given statutory recognition, and it has been strictly confined and limited to persons entitled to sue for redemption. A person not entitled to sue for redemption who purchases property subject to mortgage becomes ipso facto a person entitled to sue for redemption which is the very reverse of saying that he is subrogated to the rights of the mortgagee. A person not entitled to sue for redemption who buys mortgaged property (that is, advances money to the mortgagor with which the mortgage is redeemed) may however contract with the mortgagor for the right to be subrogated to the mortgagee whose mortgage has been redeemed. But the contract must be in writing and registered. That is the gist of Clause (iii) of Section 92 . It is an extension of the principle "caveat emptor". A would-be purchaser of property subject to more than one mortgage must protect himself by a registered instrument. He must contract with the mortgagor for discharge of the prior mortgagee or mortgagees and for the rights of the prior mortgagee or mortgagees, and he can only do so by a registered instrument. Where a statute is as clear as Sections 91 and 92 are, authority is strictly speaking superfluous. The state of the law on the subject of subrogation before the Amending Act (XX of 1929) is a matter of academic interest, but as a matter of fact the Amending Act merely gave effect to a simple rule of equity, the application of which to the various classes of persons who claimed its benefits was difficult. The application of this rule of equity has now been placed on a statutory and easily intelligible basis. The rule has been defined and the persons to whom the rule is applicable have been classified. Conflict of opinion has been clarified and stilled.

40. I agree with my learned brother that this appeal fails and must be dismissed with costs.

41. The decree that we pass herein will be without prejudice to the right of the mortgagors and the purchasers of the equity of redemption to claim any relief under the Madras Agriculturists' Relief Act. The application that has been filed here for this purpose will be remitted to the lower <ORG> for being dealt with on its merits.

42. The Memorandum of Cross-objections is dismissed. No costs.