Lawyers Directory Listing
Chat with us free on WhatsApp — tell us your city and legal matter and our team connects you with the right lawyer. No form, no fee.
Second Appeal No. 298 of 1951, decided on 10th April 1953, from the decree of Ghulam Rabbani, Additional District Judge, Jhang, dated the 23rd July 1951, reversing that of D. Fazal‑ud‑Din, Senior, Civil Judge, Jhang, dated the 13th December 1950.
S. 55‑---Sale--- Deed not effective to transfer title‑Held, breach of contract of sale arose the moment deed was executed.
An agreement for sale is in fact a promise to transfer owner ship of the land and if by the sale deed the land in fact has not been transferred a breach of contract would appear to occur the moment a sale deed is executed which has not the effect of transferring the promised title.
Covenant of title‑Suit by vendee on breach of Limitation‑--Starting point from discovery of defect‑(Obiter).
Contract of‑Defect in title‑Discovery of, does not per se make contract void.
The discovery of a defect in title doffs not per se make a contract of sale void.
Contract of---Cannot be rescinded after execution of sale deed on ground of defect in title unless such warranty incorporated in deed.
If the vendor is unable to show a good title before the execu tion of a sale deed the vendee may refuse to accept a sale deed, may rescind the contract and may sue for damages for breach of contract. The basis of the rescission will be the failure of the vendor to perform the contract.
But after the performance of a contract has been accepted it cannot, in the absence of a special agreement, be rescinded by a party to it except on the ground of a defect in the party's consent either to the original agreement or to the performance of it. What were conditions of the contract before its performance become only warranties or at least are enforceable only as warranties after the performance.
S. 65‑Consideration‑ Failure of‑Suit by vendee to recover balance of consideration from vendors after the earlier sale in latter's favour had been declared null and void under agricultural custom‑Competent.
Mathela plaintiff respondent purchased the land in dispute from Umar Hayat and Umar Draz defendant‑appellants for a sum of Rs. 5,000 by a registered deed dated the 24th of September 1946. Allah Ditta the deceased father and predecessor‑in‑interest of the defendant‑appellants had in turn purchased the land from one Muhammad Bakhsh by a deed dated the 20th of November 1940 for Rs. 1,100. This Muhammad Bakhsh happened to be governed by agricultural custom and after his death his sons filed a suit on the 18th of November 1946, for possession of the land (impleading as defendants Mathela as well as the appellants) on the ground that the property was ancestral and the sale without consideration and necessity. That suit was compromised and by the compromise decree the sale by Muhammad Bakhsh was set aside and converted into a mortgage. The following was the joint statement made by Mathela, Umar Hayat and Umar Draz:‑
A decree be passed in favour of the plaintiffs on payment of Rs. 1,100. The sale be set aside and the land be mortgaged in favour of the defendants for Rs. 1,100. The plaintiffs can redeem the land on payment of Rs. 1,100 at all times.
On the 24th of March 19 0, the present suit was filed by Mathela for recovery of Rs. 3,900 from Umar Hayat and Umar Draz defendants.
On an objection that the suit was premature as possession was still with the vendee Mathela
Held, as a result of the previous suit the transaction of sale ceased to have effect and all that remained with the vendee was a security for payment of Rs. 1,100. Title as owner failed at least on that date, though the failure of consideration is only partial. Though possession still remains with the vendee and the land cannot be redeemed except on payment of Rs. 1,100, it cannot be said that as yet there is no failure of consideration at all and the vendee has no cause of action.
The implied covenant for title can be taken away only by clear words find not by doubtful implications. If it was the agreement between the parties, that the vendors had no liability if the title of their own vendors was found to be defective the vendors ought to have got it inserted in the deed in so many words.
Their Lordships repelled the contention that cause of action does not arise till dispossession or that till then no damage is caused.
[Case‑law discussed]. Aftab Hussain for Appellants.
Mazhar Ali Azhar for Respondent (1).
This regular second appeal has arisen out of a suit filed by a vendee of land against his vendors for damages due to defect in the vendors' title. The trial Court dismissed the suit but on appeal the learned District Judge decreed it and the defendants have filed this second appeal.
The main facts are not in dispute. Mathela plaintiff‑respondent purchased the land in dispute from Umar Hayat and Umar Draz defendant‑appellants for a sum of Rs. 5,000 by a registered deed, dated the 24th of September 1946. Allah Ditta the deceased father and predecessor‑in‑interest of the defendant‑appellants had in turn purchased the land from one Muhammad Bakhsh by a deed, dated the 20th of November 1940, for Rs. 1,100. This Muhammad Bakhsh happened to be governed by agricultural custom and after his death his son filed a suit on the 18th of November 1946, for possession of the land (impleading as defendants Mathela as well as the appellants) on the ground that the property was ancestral and E the sale without consideration and necessity. That suit was compromised and by the compromise decree the sale by Muhammad Bakhsh was set aside and converted into a mortgage. The following is the joint statement made by Mathela, Umar Hayat and Umar Draz:‑
"A decree be passed in favour of the plaintiffs on payment of Rs. 1,100. The sale be set aside and the land be mort gaged in favour of the defendants for Rs. 1,100. The plaintiffs can redeem the land on payment of Rs. 1,100 at all times,
The parties have given up the costs of the case."
After the joint statement, counsel for Mathela had stated:‑
"The above‑mentioned compromise is correct and is admitted but notwithstanding the same if defendant No. 3 (Matbela) has any right against defendants Nos. 1 and 2 (Umar Hayat and Umar Draz) be will bring a separate suit for the same."
On the 24th of March 1950, the present suit was filed by Mathela for recovery of Rs. 3,900 from Umar Hayat and, Umar Draz defendants. He impleaded the sons of Muhammad Bakhsh as pro forma parties. The suit was originally based on the compromise decree in the previous suit as if the decree itself granted a cause of action but this position was soon given up and the suit was alleged to be based on section 65 of tbe. Contract Act and section 55 (2) of the Transfer of Property Act.
The suit was defended Inter alia on the grounds; (1) that according to the sale deed the defendants were not liable, (2) that the sale deed had not become void, and (3) that the suit was premature as the plaintiff had not as yet been dis possessed. The learned Senior Subordinate Judge, who tried the suit, came to the conclusion that the sale never became void as there was no finding by the Court but only a compromise. He found too that as the plaintiff was still in possession he had no cause of action for the suit. On appeal the learned District Judge held that the sale had been set aside because the appellants too were parties to the compromise. He rejected the plea that that was no cause of action at all till dis possession. The possession as owner, he said, had been changed into possession as mortgagee.
Before us learned counsel for the appellants has argued (1) that by a clause in the sale deed the vendors are absolved from all liability, and (2) that the suit is premature as the plaintiff is still in possession.
It will be convenient to begin with the second point. The claim of the plaintiff'‑respondent, as argued before us, is based on four grounds:‑
(i) Breach of implied covenant of title,
(ii) Section 65 of the Contract Act,
(iii) Failure of existing consideration, and
(iv) Express covenant in the sale deed.
It has to be considered with respect to each of the grounds when a right of suit will arise. A number of cases have been quoted by a learned counsel for the appellants which lay down that till dispossession there is no cause of action. We will take up the grounds in their order. We will first state our views with respect to all these grounds and then advert to the authorities quoted by the appellants.
I.‑Breach of implied covenant of title.
Under section 55 of the Transfer of Property Act, which has been applied to the Punjab in a number of cases, there is a covenant of title in every sale. In fact it is not the case for the appellants that the covenant does not exist, the only dispute being as to the time of its breach. Covenant of title is an undertaking that the vendor has title as well as power to convey the title.
An agreement for sale is in fact a promise to transfer owner ship of the land and if by the sale deed the land in fact has not been transferred a breach of contract would appear to occur the moment a sale deed is executed which has not the effect of transferring the promised title. That is the view taken in England‑Halsbury, Volume 29, pages 457/458, Dart on Vendors and Purchaser, page 663. The same is the view taken in the following Indian cases Tulsiram and others v. Murlidhar Chatur bhuj Marwadi (I L R 26 Bom. 750), Multanmal Jayaram and another v. Budhumal Kevalchand and others (I L R 45 Bom. 955), Kashirao v. Zabu (A I R 1932 Nag. 5 (F B)) and K. A. Ramanatha Aiyar v. Ozhaloor Pathiri Serri Raman Mambudripad (A I R 1915 Mad. 766). If this proposition be accepted the objection of the appellant as to suit being premature would disappear and although the appellant is able to cite cases saying that there is no cause of action till dispossession (with which cases we will deal later) he is unable to cite a case where it was held that a covenant for title is not broken till dispossession.
We would, however, guard against being understood to lay down that for suing on a covenant of a title time would start from the date of sale. The defect in the vendor's title may be a secret one which even by exercise of diligence may not have be come known. The vendor himself may not know the defect. The question whether the title is good may involve decision of difficult questions of law and fact which may require decision by a Court before they are settled. Litigation between the vendee and a stranger claimant may take more than six years in the case of a registered or more than three years in the case of unregistered sale deeds. Would the vendee be deprived of the benefit of the covenant in such cases because the defect in title is not discovered within six years or three years from the sale deed The promisor has given an apparent performance of contract. There is no means of knowing whether the performance is good but he guarantees by the covenant for title that it is good. The guarantee cannot be effective unless the covenant be interpreted to mean that in case of discovery of defect in title the vendor shall be responsible for compensating the vendee. Unless limitation be held to start from such discovery a vendee may lose the benefit of this covenant without any fault of his. As we will show later in this judgment the vendee cannot after the execution of the sale deed rescind the contract on account of its breach. He must at least have an effective guarantee.
We are not concerned in the present suit with the question of limitation and for us it is sufficient that the breach has been committed but we are of opinion that it should be regarded as having taken place on discovery of defect, a proposition for which we find support in Bapu Shivaji Naik and others v. Kashiram Xammantrao Ghag (A I R 1929 Bom. 361) and Thillaikannu Achi v. Sheikh Abdul Kadir Rowther (A I R 1933 Mad. 126).
II.‑--Section 65 of the Contract Act
It is not the plaintiff's case that the sale was void from the beginning. What is contended is that the sale was voidable and came to an end with the compromise in the last suit. But has the contract between the parties become void That the sale or rather the transfer of property has become void in the sense that it ceases have to effect on account of the action taken by the sons of Muhammad Bakhsh is true but that will not render the contract between the vendor and the vendee void. A contract once validly entered into could only become void by virtue of some provision in the Contract Act or some other law applicable. There is no provision in the Contract Act or elsewhere making the original contract between the vendor and the vendee void in the circumstances of the present case. The sale is, in cases like the present, said to be voidable at the option of the third person who can render it ineffective but the word 'voidable' is in such cases not used in the sense in which it is used in the Contract Act. Of course, it is open to the parties to a contract of sale to make the existence of good title a condition precedent to the formation of the contract at all or to provide for its termination on discovery of defect in title but no such condition can be imported into an ordinary contract for sale. T he discovery of a defect in title does not per se make a contract of sale void. If the vendor whose title has been found defective were to acquire a new and better title in the property it would pass automatically to a vendee under section 43 of the Transfer of Property Act, which could only happen if a valid contract for sale existed. Also a suit for damages for breach of covenant for title would lie which too presupposes an enforceable contract.
The next question is whether after the execution of a sale deed the vendee could rescind a contract of sale on the ground that there being a defect in the vendor's title the vendor has not performed his part of the contract. The existence of a title with power to convey is a condition of every contract of sale. The vendor contracts with the purchaser that he will make an effective transfer of title to the vendee. If the vendor is unable to show a' good title before the execution of a sale deed the vendee may refuse to accept a sale deed, may rescind the contract and may sue for damages for breach of contract. The basis of the rescission will be the failure of the vendor to perform the contract.
But after the performance of a contract has been accepted it cannot, in the absence of a special agreement, be rescinded by a party to it except on the "ground of a defect in the party's consent either to the original agreement or to the performance of it, What were conditions of the contract before its performance become only warranties or at least are enforceable only as warranties after the performance. This is implied in the acceptance of a performance for the acceptance involves an element of consent, similar to that involved in a contract. It is open to the party to reject a perfor mance but if he accepts it then in the absence of a contract to the contrary, the transaction is (apart from defects in consent) closed except for covenants and warranties to which the performance gives rise. That conditions of a contract are, in the absence of express or implied contract, to the contrary, enforceable only as warranties after acceptance of performance is expressly incor porated in section 13 of the Sale of Goods Act but the principle is one of general application. One may also, in this connection, refer to what is stated in Dart on Vendors and Purchasers at page 683 of English Edition:
"In general, where parties enter into a preliminary contract, which is afterwards to be carried out by a deed, the contract be comes extinguished in the deed when it is executed, and can no longer be looked at for any purpose. But the ordinary provision for compensation is construed not as one which is intended to be carried out by the deed of conveyance but as continuing to exist outside it, and may therefore by enforced after conveyance. "
We hold that on account merely of a defect in title the contract cannot be rescinded at this stage, there being no special agreement to that effect between the parties. We may also point out that the plaint in the case does not properly make out a case of rescission.
III.--‑Failure of consideration
A consideration which was to be received or was received fails when it ceases to exist or to be available to the party concerned for a cause the effect of which it should be the duty of the other party to bear. The basis of the suit for recovery of money paid for such a consideration is an implied or rather a constructive contract that the money would in the circumstances that have arisen be returned Some cases of failure of consideration are covered by section 65 of the Contract Act but the doctrine is of wider application and enables a party to a contract to recover money which it would be inequitable for the other party to retain. Whether the party receiving the money was bound to return it would depend upon whether a constructive contract to return the money in the circum stances that have occurred could be imputed.
In a contract of sale there is an implied contract that title and power to convey exist and that if vendee loses what he has received the purchase money will be refunded. If the suit be regarded as far failure of consideration it would be one for money paid whereas if it be based on the covenant for title it would be a suit for compensation for breach of contract. In the present case the difference ii not material.
A consideration is any benefit, anything of value. In cases of sale of land it would consist of title as well as possession. The time from which cause of action would arise for failure of consider ation would differ according as title or possession or both passed or not. For deciding the point of time when cause of action for a suit based on failure of consideration will arise transactions of sale may be classified under the following heads:‑
(i) Void sale without delivery of possession.
(ii) Void sale accompanied by delivery of possession.
(iii) Voidable sale without delivery of possession.
(iv) Voidable sale with delivery of possession.
In cases falling under clause (i), consideration would fail from the very beginning. In cases falling under clause (ii), consideration would fail partially, i.e., as regards title, on the date of sale, and totally on the date of eviction. A cause of action would in such cases arise even on the date of sale although for the purpose of limitation a suit brought within time from eviction may not be barred. In cases falling under clause (iii) con sideration would fail when the option to terminate the sale is validly exercised. In cases falling under clause (iv) consideration would fail as regards title when the option to terminate the con tract is validly exercised and as regards possession on the date of eviction. As was the case with respect to clause (ii) a cause of action would in such a case arise even on the exercise of option though so far as limitation is concerned time may start from dispossession. In the present case, we are not concerned with the question of limitation and we are making question of limitation only because authorities which upon by the appellants in this connection are cases of to which we will have to refer.
The present case is one of a voidable sale falling under clause (iv). The word 'voidable' we are using not in the sense in which it is used in the Contract Act but in the broad and comprehensive sense which includes a transfer effected by one party in favour of another which a stranger has the power to render of no further effect. The sale in favour of Mathela was valid when made but (as was the sale by Muhammad Bakhsh to Allah Ditta) it was subject to the right of succession vesting in the sons of Muhammad Bakhsh. As a result of the previous suit the transac tion of sale ceased to have effect and all that remained with the vendee was a security for payment of Rs. 1,100. Title as owner did fail at least on that date, though the failure of consideration is only partial. Though possession still does remain with the vendee and the land cannot be redeemed except on payment of Rs. 1,100, it cannot be said that as yet there is no failure of consideration at all and the vendee has no cause of action. The vendee has lost its title. The value of what he holds has been reduced to Rs. 1,100. Learned counsel for the appellants says that the sons of Muhammad Bakhsh may never redeem the land and, therefore, no loss may ever occur. If they do not, then Mathela will get something by virtue of the statute of limitation which he does not possess now. If he wanted to sell his rights today they would not fetch any more than Rs. 1,100. The fact that the value of his right has diminished is by itself a loss capable of grounding a suit for damages. In cases of sale of land it cannot be said that possession is the only consideration or that till possession is lost no part of the consideration has failed. There may be cases where possession has not passed at all and a title is by some means lost. Could it be said that there was no failure of consideration at all in such cases We will have to revert to this subject when we consider the question as to the damage caused. We hold that failure of consideration did take place at least when decree was passed in the last suit.
IV.‑--Express contract
The following are the words used in the sale deed relating to the vendor's liability in case of defect in title:
"Mazhiran ne woh haquq jo walid mazhiran ne barue bai. nama ragistry shuda moarkha 20th November 1940 bar No. 1306 mahkama Janab Sub‑Registrar, Jhang, minjanib Muhammad Bakhsh bahaq Allah Ditta hasil kiey hain bai kar diay hain. Aur muqirran ki koi zimmawari nahin hal. Agar koi bar kisi qisam ka sabit howay ya naqs nisbat malkiat sabit howay to zat mazhiran wa deegar jaidad mazhiran zimmawar hogi."
It will be convenient here to deal also with the contention of the learned counsel for the appellants that by a provision in the sale deed they are absolved from all liability. He relies upon the words:
"Aur mazhiran ki koi zimmawari nahin hai." Had these words stood by themselves and were not followed by the succeeding sentence quoted above, they may have been capable of the interpretation suggested by the learned counsel for the appellants. The words do show that some responsibility is being excluded but really it is not possible to find out of what respon sibility the appellants were being absolved for the sentence which follows makes the appellants liable for any defect in title. While no such interpretation of the earlier portion is suggested by the learned counsel for the respondent as well reconcile it with the latter portion, the words used in the latter portion are plain and not reasonably capable of any interpretation consistent with the appellants' contention. The implied covenant for title can be taken away only by clear words and not by doubtful implications. If it was the agreement between the parties, that the vendors had no liability if the title of their own vendors was found to be K defective the vendors ought to get it inserted in the deed in so many words and should not have agreed to the widely worded clause that follows.
We now turn to the effect of this express covenant. Apparently the words would give a right of suit if a defect in title is discovered. The covenant does not say that the vendee will have a right to sue only when he is dispossessed. It may be argued, however, that the covenant is only the ordinary implied covenant of title which is being put expressly in the deed and that it is not intended to give a greater right of action. Construing the words. in their plain sense they do give a right of action on discovery of the defect though it should be obvious that discovery must be such as does adversely affect the vendee's rights. The clause does really embody the covenant for title, only it expressly gives a right on discovery and may be one of the answers to a plea of limitation. It may also be said that the clause is in the nature of a provision for indemnity but only to the extent of loss caused by a defect in title.
The question whether the loss has been caused to the vendee already is one of the matters for consideration not only in connection with the express covenant but generally with respect to all the pleas of the plaintiffs for the damages awarded are to be regulated by the damage actually suffered. Learned counsel for the appellants says no damage has yet been caused‑ to the respondents. We have already stated in connection with the failure of consideration that in so far as title is concerned loss has already occurred. The plaintiff was owner of the property till the sons of Muhammad Bakhsh exercised their right and got a declaration and now he is only a mortgagee of land to the extent of Rs. 1,100. That a loss has been caused to him can be judged from the fact that if today he wanted to sell his right the property would not fetch him anything more than Rs. 1,100 whereas the land itself would be worth about Rs. 5,000. We put it to the learned counsel for the appellants whether if the plaintiff actually 'sold the land the loss would not occur to him. He agreed that in case the plaintiffs did sell the land damage would be caused. He argued, however, that the respondent has not yet sold the land. We do not think it necessary for the plaintiff to take that step. The value of his right has gone down and that is sufficient and really it is the difference between the market value of the land before the setting aside of sale gad the market value of his present rights that is the measure of damages in this case. A breach of the express covenant it is obvious has occurred.
We will now take up the cases cited by the appellants for the proposition that till dispossession there is no cause of action. They are all, except Bhagwati Prasad and others v. Badri Prasad and others (A I R 1936 Oudh 141) concerned with the question of limitation. In A I R 1936 Oudh 141, a suit for possession had been filed against the vendee by the sons of the vendor and a decree for 1/2 of the property sold bad been passed in their favour but had not yet been executed. As we find from the last portion of the judgment there was a covenant in the sale deed which the learned Judges interpreted as limiting the liability of the vendor to a case of dispossession. However, the learned Judges did discuss the question of the date of the accrual of cause of action apart from the covenant in the sale‑deed. The learned Judges did not repel the contention that a breach of covenant for title had been committed already but proceeded to dismiss the suit on the ground inter alia that no loss or damage had occurred till dispossession. But suppose possession has not passed at all and there is a breach of covenant for title alone, could it be said that no damage has occurred The learned Judges agreed that damage can be caused even by mere breach of covenant of title for they do not dissent from Lakhpat Kaur v. Durga Prasad (I L R 8 Pat. 432) which was quoted before them and in which possession had not passed. They distinguished the case on that very ground. So that what the learned Judges mean is that though damage may have been caused by breach of covenant for title there is a chance for the damage being made up by the failure of the stranger claimant to execute his decree for possession. The learned Judges are not themselves quite sure of the effect of the decree for they say:‑
"It is doubtful whether it could be said that the mere passing of the decree actually caused any loss or damage before the decree has been executed."
Profits are not the only benefit which the vendee may want to have from the property sold. He may want to sell the land and when he sells it he will get little if a decree for possession has already been passed. If be did go and sell the property at a loss it could not be argued that loss had not occurred and we do not think it is necessary for a person to actually sell before he files a suit, nor could he be forbidden to sell only in order to keep alive the chance of acquiring a title by the failure of the stranger to execute his decree. That he need not go and sell would also be supported by the illustrations to section 73 of the Contract Act. Illustration (a) shows that a person who has agreed to purchase saltpetre can recover the difference in the market value of the saltpetre and the price at which he agreed to purchase if there is a default in the delivery of the saltpetre. It is not necessary that the person concerned should have first actually purchased the saltpetre. Illustration (d) is a converse case and does not make it a condition precedent to a suit for damages that the ship should be actually sold. Other illustrations are of a similar charac ter. The present is a stronger case than those in the illustrations. Here the rights of the vendee have been greatly diminished in value. The extent of the diminution is the measure of the damage caused in A 1 R 1936 Oudh 141, the learned Judges relied mainly on Muhammad Siddiq v. Muhammad Nur (A I R 1930 All. 771), for their conclu sions. In that case the sale in dispute was voidable at the option of certain reversionery heirs who flied a suit for possession and got a decree on the 29th of September 1921, which was affirmed by the High Court on the 16th of April 1924 and dispossession took place on the 23rd of August 1924. The suit had been filed within six years even from the first decree and the learned Judges held Article 116 to be applicable so that the suit was clearly within time. The learned Judges, however, went on to say that even if Article 97 applied the suit would be within limitation. The basis of the decision of the learned Judges would appear from the following passage:‑
"So long as the vendee actually remains in possession and is in receipt of the profits he is getting some consideration for his money, and it is difficult to say that the consideration has already totally failed merely because a suit has been decreed against him." (P.776).
There can be no quarrel with the proposition that total failure had not been occasioned merely by the decree for possession but for the purposes of limitation a total failure may give a starting point. It cannot be said that a partial failure can give rise to no cause of action. The learned Judges themselves recognised that failure of consideration did take place on discovery of defect in title for they say, "Failure of consideration was only discovered when the claim was put forward on behalf of the reversioners." The next case relied upon‑it is a case which has been followed in a number of cases is Subbarova Reddiar v. Rajagopala Reddiar (I L R 38 Mad. 887). Seshagiri Ayyar, J., who has written this judgment, divided cases into three classes for determining the time from which consideration would fail. The present case would fall under class (b). With respect to this class, the learned Judge said:‑‑
"In the second class of cases the cause of action can arise only when it is found that there is no good title. The party is in possession and that is what at the outset under a contract of sale a purchaser is entitled to, and so long as his possession is not disturbed, he is not demnified. The cause of action will, therefore, arise when his right to continue in possession is disturbed" (P. 889).
The first sentence quoted above would go against the contention of the learned counsel for the appellants, for on the discovery of a defect in title a cause of action would arise according to the learned Judge. However, although a cause of action has arisen a suit for damages would in the opinion of the learned Judge lie only when the party is actually dispossessed for till then there would be no damage caused. We have already explained above that damage will occur even though possession bas not yet been disturbed, for the title has been lost. In fact the different parts of the above quotation are not, with the utmost respect for the learned Judge, quite consistent, It may also be pointed out that regarding the case as one of breach of covenant for title, it will not be possible to place the breach of contract and the consequential damage at different points of time.
Under Articles 115 and 116, time for filing a suit for damages for breach of contract begins to run from the breach of contract and not from the accrual of damage. If the breach of contract occurred at one time and the damage occurred six years later, the suit of the party would be time‑barred before damage actually occurred. I L R 38 Mad. 887 has been relied upon in Mst. Lakhpat Kuer v. Durga Prasad (A I R 1929 Pat. 388), Multanmal Jayaram and another v. Budhumal Kevalchand and others (A I R 1929 Bom. 361) and Bapu Shivaji Naik and others v. Kashiram Hammantrao Ghag (A I R 1929 Bom. 361), for the proposition which we support, viz., that cause of action accrued when invalidity of the purchaser's title was declared. In Thillaik annu Achi v. Sheikh Abdul Kadir Roivther (A I R 1933 Mad. 126) also the learned Judge held, even after reference to I L R 38 Mad. 887, that breach of covenant for title occurs "at the earliest date when a Court decides that the vendor has no title."
Next case relied upon for the appellants is Kashirao v. Zabu (supra). The headnote of the case does show that it refers to a covenant for title. However, on reading the judgment one comes to the conclusion that the learned Judicial Commissioners are really dealing with the breach of covenant for quiet enjoyment which they regard as one of the covenants for title. That the covenant for the right to convey would be broken at the time when a sale deed is executed and that a suit will lie from such breach is conceded in the judgment itself as would appear from the following observations at page 10 of the report:‑
"In Pirbhu v. Mst. Wazirbi (31 I C 877), the covenant for title considered to have been broken was the covenant for right to convey; and in my opinion it was rightly decided that limitation for a suit on that cause of action began to run from the date of the sale. In the present case, two covenants for title have been broken, the covenant for right to convey and the covenant for quiet enjoyment; obviously, limitation for a suit based on breach of the second of these covenants can only begin to run from the date on which the vendee's possession was disturbed." The case instead of being an authority for the appellants is a. complete answer to their argument. Again at page 9 occurs the following passage:‑
"Since the vendor's covenant is twofold, viz., for right to convey and for quiet enjoyment, the vendee will have two distinct causes of action in the event of the breach. If the vendor has no title on the date of the conveyance, the breach of the covenant certainly occurs at the time of the sale, and if the remedy is not sought within the statutory period, the cause of action accruing from that breach will alone lapse. It cannot destroy any remedy to which the vendee may be entitled by reason of interference with his possession."
The present case is one where the vendor did have title which was determined by a suit brought by a third party whereas in the case before the learned Judicial Commissioners the breach of the first covenant according occurred to them on the date of the sale.
It would, applying their criterion, be broken in the present case on the date when the third party validly exercised its option, that the vendee was left without title.
Raghunath Prasad and others v. Ram Bharose and another (A I R 1927 All. 421), cited for the appellants, is in fact an authority against. In this case a decree had been passed in favour of the sons of the vendor but it was conditional on payment of some money and it was held that the decree became operative only when the money was paid, and, therefore, limitation began to run from that dale.
Punjab Government through Collector, Ambala v. L. Baij Nath and others (A I R 1945 Lah. 164) approves of A I R 1932 Nag. S (F. B), and though it mentions the date of dispossession as the starting point of limitation, it does not discuss the point involved in the present case and we have already said that limitation in cases of failure of consideration may start when it has totally failed.
Ma Hnit v. Fatima Bibi and another (A I R 1927 P C 99) would also, on u careful study, be found to be rather against the appellants' con tention. The mortgage had in that case filed a suit on the basis of a mortgage, and getting the property put to auction, had pur chased it himself. A claimant tiled a suit for setting aside the mortgage decree and for possession. Their Lordships said:‑
"But should the true date of the failure of the consideration for the loan of the money be the day on which the appellate Court made a decree in favour of Ali Hashim Methar (the minor) setting aside the mortgage, and giving him possession of the mortgaged property, i.e., 11th March 1918, then this suit would be well within the three years allowed for taking proceedings to recover the Rs. 10,000 with interest, for the loan of them. In the opinion of their Lordships this contention of the appellant is well founded."
It will be observed that the time, which according to their Lord ships was the terminus quo, is the date of the decree and not the taking of possession. The words and giving possession' ere simply descriptive of the decree and the date 11th March 1918 is the date of the decree, not of dispossession.
In Sri Raja Velugoti Sarvagna Kumara Krishna Yachandru Bahadur Garu, Raja of Venkatagiri and others v. Sri Raja, Sobhanadri Appa Rao Bahadur Zamindar Garu and another (A I R 1944 Mad. 211), another case cited for the appellants, a decree had similarly beat passed in favour of an adverse claimant first by the trial Court and ultimately by the Privy Council. The High Court had on appeal dismissed his suit but the Privy Council had restored the trial Court's decree. The following passage would show what the learned Judges regarded the starting point of time:‑
"If the dispute had not been taken to the Privy Council and the judgment of the High Court had been final, could it have been said that there was a void contract, that the plaintiff had discovered it to be void on 4th December 1921, when defendant No. 4's son filed his suit In view of the difference of opinion possible on the point raised in the suit, it cannot be said that the invalidity of the sale had been discovered until the highest tribunal had adjudicated on the matter and given a finding that was final and conclusive between the parties."
It would appear from this observation that it was the decision which the learned Judges regarded as a material point. Further on, learned Judges said:‑
"The decree of the Privy Council was on the 31st January. 1936, and the plaintiff was dispossessed in Decembers 1937. As the suit was filed on the 30th January 1939, it was within time."
No doubt there are observations in the judgment that limitation would begin from dispossession but whether it began from dis. possession or the decree was immaterial for the suit was within time .from both the dates. The real question was whether the time should begin from the trial Court's decree or the last Court's decree and it was held that as the High Court had set aside the trial Court's decree limitation could not begin before the Privy Council judgment.
Ratanbai v. Ghashiram Gangabishan Wani (A I R 1932 Bom. 36) is based on an express covenant in the sale deed and is not of any help in deciding the point before us. A. M. A. Murugappa Chettiar and others v. Arunachale Goundan and others (A I R 1949 Mad. 638) simply follows A I R 1944 Mad. 211, which we have already discussed. Bahagirathibai ivlo Baboo Kedarnath v. Seth Rambaran Jankiram Sunar (A I R 1941 Nag. 169) follows A I R 1932 Nag. 5 (F B) and recognizes that a covenant for title may have already been broken when a sale deed is executed. Muthu Goundan and others v. Mottayyan alias Kolanda Goundan (A I R 1943 Mad. 150) is concerned only with the interpretation of an express covenant. In Mst. Gopal Dei v. Dhanna Mal and another (A I R 1927 Lah. 570) there was at first a declaratory decree against the purchaser and then a suit for possession. It is clear that the learned Judges regard consideration to have partly failed by decree and partly by dispossession for they say, "Possession is an impor tant element in the consideration and this part of the consider ation did not fail till the year 1921". The learned Judges had already stated, "It cannot be said that the consideration failed entirely on the date of the Privy Council decree."
Dhani Sahu and others v. Bishun Prasad Singh and others (A I R 1942 Pat. 247) and H. K. V. Sankara Variyar v. Kaiparambil Kalathil Ummar and others (A I R 1923 Mad. 40) are both cases dealing with Article 97, Limitation Act and are open to the obvious comment which is applicable to all cases dealing with Article 97 cited by the appellants, that time under Article 97 may start when entire con sideration has failed and, therefore, the cases are no authority for the proposition that till eviction no part of consideration fails.
On the other hand, there are a number of cases wherein it has been held that in such cases time will begin to run when the sale is found or declared to be invalid. Bapu Shivaji Naik and others v. Kashiram Hanmantrao Ghag (supra), Mst. Lakhpat Kuer v. Durga Prasad (A I R 1929 Pat. 388), Ragunath Prasad and others v. Ram Bharose and another (supra), Multanmal Jayaram and another v. Budhumal, Kevalchand and others (supra) and Thillaikannu Achi v. Sheikh Abdul Kadir Rowther (supra) we have already mentioned. We may add to them Sadasiva Suryanarayana Rao v. Palakurthi Rajalingam and others (A I R 1933 Mad. 382) which is also an authority for the proposition that partial failure of consideration can form the basis of suit.
We repel the contention that cause of action does not arise till dispossession or that till then no damage is caused.
We have dealt with the case on the footing that the possession has not yet been disturbed. We do not think, however, that that is a correct statement of facts. The previous possession of Mathela was as owner. After the compromise decree he accepted the position of a mortgagee and the character of his possession changed. In law po, session of a mortgagee is the possession of his mortgagor. This can be properly illustrated if we refer to the case where a mortgagee remains in possession as such of land which in fact does not belong to his mortgagor for more than years. The result of the mortgagee's possession will be that the mortgagor will acquire title in the land by adverse possession, So from this point of view too, a cause of action did arise to the plaintiff.
The appeal fails and is dismissed with costs.
A. H. Appeal dismissed.
Dealing with a matter like this? Connect with a verified advocate in your city — free on SJP Lawyers Directory.
🔍 Find a Lawyer