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Lallubhai Rupchand Vs. Mohanlal Sakarchand - Court Judgment

LegalCrystal Citation
Decided On
Case NumberFirst Appeal No. 173 of 1929
Reported inAIR1935Bom16; (1934)36BOMLR1041; 155Ind.Cas.564
AppellantLallubhai Rupchand
RespondentMohanlal Sakarchand
DispositionAppeal allowed
.....whether material defect-non-disclosure of easements by vendor, whether material defect-defect in title-title free from reasonable doubt, meaning of.; a buyer of immoveable property is not bound to complete the sale if there are defects in the property which are material and latent, that is to say, not discoverable by the exercise of ordinary care, or if the title to the property is not free from reasonable doubt.; flight v. booth (1834) 1 bing. (n.c.) 370, referred to.; liability of property, which is agreed to be sold, to be compulsorily acquired by government under the land acquisition act, 1894, would be regarded as both material and a latent defect.; nursing dass kothari v. chuttoo lall misser (1923) i.l.r. 50 cal. 615, referred to.; the vendor is bound to disclose any restrictive..........the purchaser in that case had not carried out his duty under section 55(1)(a). as regards defects in title as distinct from defects in the property itself, they are almost always to be regarded as latent because prima facie the seller knows his title and the purchaser does not. on that point various cases are cited in sir dinshah mulla's transfer of property act, p. 264.6. the meaning of a title free from reasonable doubt was explained in pyrke v. waddingham (1852) 10 hare 1 as a marketable title which can at all times be forced upon an unwilling purchaser, and it was held in that case that specific performance should not be allowed even though the court takes a favourable view of the title if it appears that its opinion may fairly and reasonably be questioned by other competent.....

Broomfield, J.

1. The first of these appeals is against the decree of the First Class Subordinate Judge at Surat decreeing the respondent's suit for specific performance of a contract for sale of a house in Gopipoora Surat. The second appeal is a companion appeal from the decree of the same Subordinate Judge dismissing the appellant's suit for return of the earnest money paid by him in respect of the contract. The agreement of sale took place on February 26, 1927, and is exhibit 28. It contains an averment that the house is of the ownership and possession of the plaintiff. It states that Rs. 500 had been paid by the purchaser as deposit or earnest money and provides that the balance was to be paid on delivery of possession of the house and execution of a conveyance. On April 5, 1927, the plaintiff sent the defendant a notice calling upon him to complete the sale. On April 19, 1927, defendant replied demanding inspection of the title-deeds. Inspection was given in the office of defendant's pleader. The defendant then wrote a letter, exhibit 10, taking various objections. He pointed out that, at the instance of the Municipality, Government had decided to acquire the suit property along with others in the same locality under the Land Acquisition Act and that a notification to that effect had been published in the Bombay Government Gazette in August, 1912. Next, it was stated that plaintiff had purchased the house from one Bai Hirakor in 1925 under a deed, exhibit 25, that under the will of her husband this Bai Hirakor had only a widow's estate and that the will was unsigned and unattested. Thirdly, it was pointed out that there had been litigation between the plaintiff and his neighbour Champaklal in 1925 and a consent decree had been passed imposing restrictive conditions as to the user of the plaintiff's property, that is to say, the decree bound the plaintiff not to build on part of the open land at the back of the house and not to close certain windows in Champaklal's house. As to one of these windows the decree provided that it was not to be closed at all; as to the other it was to remain open until such time as the plaintiff desired to build up to that height. In view of these defects, or alleged defects, in the title the defendant refused to complete and demanded return of his deposit. To this letter plaintiff replied by exhibit 36 on June 2, 1927, but he did no more than state that the defendant was aware of all the facts. The defendant then rejoined by exhibit 37 denying his knowledge of the facts, and on June 11, 1927, plaintiff filed his suit for specific performance.

2. On the issues framed by the trial Judge in the main suit the one to which argument has been mainly directed in this appeal is issue No. 3, which is in this form:

Whether it is proved that the plaintiff's title to the property agreed to be conveyed was defective so as to entitle the defendant to refuse to complete the contract and accept the conveyance?

The relevant provisions of the law are Sections 55 of the Transfer of Property Act and 25 of the Specific Relief Act. Section 55 provides:

In the absence of a contract to the contrary...,

(1) The seller is bound-

(a) to disclose to the buyer any material defect in the property or in the seller's title thereto the latter words were added by Act XX of 1929, but the law was the same before the amendment: see Haji Essa Sulleman v. Dayabhai Parmanandas I.L.R. (1895) 20 Bom. 522 of which the seller is, and the buyer is not, aware, and which the buyer could not with ordinary care discover;

(b) to produce to the buyer on his request for examination all documents of title relating to the property which are in the seller's possession or power;

(c) to answer to the best of his information all relevant questions put to him by the buyer in respect to the property or the title thereto....

Clause 2 of the section provides:

The seller shall be deemed to contract with the buyer that the interest which the seller professes to transfer to the buyer subsists and that he has power to transfer the same:

The concluding words of the section are :

An omission to make such disclosures as are mentioned in this section, paragraph (1) Clause (a), fraudulent.

Section 25 of the Specific Relief Act provides:

A contract for the sale or letting of property, whether moveable or immoveable, cannot be specifically enforced in favour of a vendor or lessor:

(a) who, knowing himself not to have any title to the property, has contracted to sell or let the same;

(b) who, though he entered into the contract believing that he had a good title to the property, cannot, at the time fixed by the parties or by the Court for the completion of the sale or letting, give the purchaser or lessee a title free from reasonable doubt;....

The effect of these provisions is that a buyer is not bound to complete the sale if there are defects in the property or in the title to the property which are material and also latent, that is to say, not discoverable by the exercise of ordinary care, or if the title is not free from reasonable doubt. Paragraph 2 of Section 55 need not be discussed and has not been discussed in the argument. The correct view appears to be that the covenant for title in that paragraph contemplates a completed contract and corresponds to the covenant for title in English conveyances. Prior to completion the buyer's right is to a title free from reasonable doubt: see Mulla's Transfer of Property Act, p. 270.

3. The test of materiality was laid down by Tindall C.J. in Flight v. Booth (1834) Bing. 370; it was held there that a defect to be material must be of such a nature that it might be reasonably supposed that if the buyer had been aware of it he might not have entered into the contract at all, for he would be getting something different from what he contracted to buy.

4. The question, whether a defect is patent or latent, presents more difficulty because the expression 'ordinary care' is somewhat indefinite. A defect which can be seen on inspection is obviously not latent, for instance, the ruinous condition of a house, and it may be said generally that a defect should be regarded as capable of discovery with ordinary care if there is anything to put the buyer on inquiry which would disclose the defect, for instance a footpath across a meadow. In Manji Karimbhai v. Hoorbai I.L.R.(1910) 35 Bom. 342 : 12 Bom. S.C. L.R. 1044 Scott C.J. cited the observations of Lord Justice Lindley in Bailey v. Barnes [1894] 1 Ch. 25:.a purchaser of property is under no legal obligation to investigate his vendor's title. But in dealing with real property, as in other matters of business, regard is had to the usual course of business; and a purchaser who wilfully departs from it in order to avoid acquiring a knowledge of his vendor's title is not allowed to derive any advantage from his wilful ignorance of defects which would have come to his knowledge if he had transacted his business in the ordinary way.

5. Those words were cited with reference to the meaning of the expression 'reasonable care' in Section 41 of the Transfer of Property Act, but it would appear that they apply equally well to the expression 'ordinary care' in the section with which we are dealing. We were also referred to Jones v. Smith (1841) 1 Hare 43 56 in the same connection, and I may mention Harilal Dalsukhram v. Mulchand (1928) I.L.R. 52 Bom. 883 : 30 Bom.S.C L.R. 1149. There Mr. Justice Fawcett held that a failure to refer to entries in the record of rights, being the neglect of an easy means of investigating questions of title, amounted to a want of care and wilful abstention from an inquiry or search which the party ought to have made and that therefore the purchaser in that case had not carried out his duty under Section 55(1)(a). As regards defects in title as distinct from defects in the property itself, they are almost always to be regarded as latent because prima facie the seller knows his title and the purchaser does not. On that point various cases are cited in Sir Dinshah Mulla's Transfer of Property Act, p. 264.

6. The meaning of a title free from reasonable doubt was explained in Pyrke v. Waddingham (1852) 10 Hare 1 as a marketable title which can at all times be forced upon an unwilling purchaser, and it was held in that case that specific performance should not be allowed even though the Court takes a favourable view of the title if it appears that its opinion may fairly and reasonably be questioned by other competent persons.

7. Applying these principles to the facts of the present case, I am of opinion that the liability of this property to be compulsorily acquired may fairly be said to amount to a material defect. The buyer is entitled to say that he wants a house and not a right to compensation, and the learned trial Judge in dealing with this part of the case has obviously applied the wrong criterion. It has been suggested by learned Counsel for the plaintiff-respondent that the notification having been made as long ago as-1912 must be regarded as obsolete and that therefore there is no real likelihood of this property being acquired. I do not feel satisfied, however, that that is so. The learned Counsel referred us to various sections of the Land Acquisition Act, but, as far as I can see, it is nowhere provided that the acquisition must follow within any limited time after the notification. Difficulties might no doubt arise in the event of steps being taken to acquire property after the lapse of many years, because under the Act the property is to be valued as at the date of the notification. Possibly the procedure in such cases may be to publish another notification. As to that we have no evidence. But it seems to me that when once there has been a notification by Government at the instance of the Municipality that certain properties are to be acquired for municipal purposes, such as the widening of a street, or a town planning scheme, there must always be a. likelihood of steps being taken in that direction sooner or later. If this liability to be acquired under the Land Acquisition Act is a material defect, as, in my opinion, it is, there can be no doubt, I think, that it is also one which was not capable of being discovered with ordinary care in the sense of those words as used in Section 55(1)(a). As far as we are aware there was, ally nothing at all to put the buyer on inquiry as to that particular matter. A that respect the fact that the notification was in 1912 is obviously in his favour. The view that this should be regarded as both a material and a latent defect is supported by the cases cited by Mr. Dave for the appellant, Nursing Dass Kothari v. Chuttoo Lall Misser I.L.R.(1923) Cal. 615 and Ballard v. Way (1836) 1 M. & W. 520. The Calcutta case was decided under Section 20 of the Indian Contract Act because it was found that both parties to the contract were unaware of the fact that the property had been notified for acquisition. But obviously the position of the purchaser could be no worse if he was ignorant of the fact of the notification while the seller was aware of it.

8. I may at this stage refer to a difficulty which has arisen in this appeal owing to the manner in which the case was tried by the learned Subordinate Judge. As I have mentioned, in the correspondence the plaintiff's case was that the defendant was aware of the alleged defects in the title at the time he entered into the contract of sale. The principal averment in the plaint was the same, and one would have expected that an issue would have been framed therefore to cover the point whether defendant did or did not know of the facts on which his objections are based. He has throughout denied knowledge. But the learned trial Judge apparently understood the pleadings to mean that the plaintiff alleged a specific agreement by the defendant to accept the plaintiff's title such as it was. He framed an issue to cover that point and decided it against the plaintiff, as he was obviously bound to do. It is not suggested in the argument before us that the plaintiff has succeeded in proving any such agreement, but it has been argued with much force by his learned Counsel that the question, whether the defendant was aware of the facts relating to the plaintiff's title, is most material for the purpose of applying the provisions of the Transfer of Property Act. It is unfortunate, therefore, that that question has been left undecided by the trial Judge. He decided the case on the assumption that the defendant was not aware of the facts, although he admitted that it was only an assumption, and that the plaintiff had all along alleged the contrary. In dealing with this appeal, therefore, we are compelled to act upon the same assumption, though, if the case had depended upon the view we take of the alleged defects in the property as distinct from the defect in the title, we should probably have thought it necessary to have a remand to the trial Court in order that evidence might be taken on this question of knowledge. Although, as I have said, the liability of this property to be acquired under the Land Acquisition Act is, in my opinion, a material defect within the meaning of Section 55 (1)(a) and one which the seller was bound to disclose, it obviously would not be so if the purchaser was already aware of the facts.

9. I will next deal with the restrictive conditions imposed by the consent decree. These have been held by the learned trial Judge himself to be material defects in the property, and I think there can be no doubt that they are. The learned Judge took the view that the defendant might have discovered the existence of these easements if he had exercised ordinary care, but on that point I am not prepared to agree with him. The existence of these restrictive conditions was certainly not discoverable mere inspection, at any rate so far as the prohibition against building on the chowk is concerned. The view taken by the learned trial Judge is that the defendant should have inspected the property; in that case he would have seen the windows, and he should then have questioned the plaintiff, from whom he would have discovered all the facts. That may be so, no doubt, but the seller's duty to answer requisitions or inquiries is distinct from the duty to disclose, and the omission of the buyer to inquire would not in a case like this absolve the seller if he has not made a full disclosure. In that connection I may refer to Reeve v. Berridge (1888) 20 Q.B.D. 523. In Bai Dosibai v. Bai Dhanbai I.L.R 1924. 49 Bom. 325 : 26 Bom.S.C L.R. 1071 a similar restrictive covenant not to build on a portion of the property was held to be a material defect and non-disclosure of it was held to give a right to rescind the contract. As in the case of the first objection, of course, defendant could not rely upon the provisions of the consent decree if he was aware of the decree at the time he entered into the agreement, but if he was not aware of it, then I hold the plaintiff was bound to disclose the fact relating to this decree, and his failure to do so would entitle the defendant to refuse to complete.

10. Coming lastly to the question of the plaintiff's title, he purchased the house from one Bai Hirakor by a sale-deed, exhibit 25, dated June 13, 1925. This lady was in possession of the property under a document, exhibit 23, purporting to be the last will of her husband Panachand. This is a short document and runs as follows:

On Thursday the Maha Vadi 9th of the Section Year 1953 written by Shah Panachand Tarachand that my wife Bai Hirakor is the owner of my goods and properties, cash and ornaments and the house at Surat, etc., and of all the household furnitures that may be. She is also the owner of the property in Bombay. When none of us two may exist all the things should be spent in repairs of the old things and for good purposes. This document has been passed in writing with my free will and pleasure. Neither my heirs nor any legal representatives nor any body else have got any claim over my property. My wife has got all powers. Ujam should be maintained therefrom.

11. The defendant's objections are, firstly, that the will is not proved, and, secondly, that Bai Hirakor, on the proper construction of the will, took only a widow's estate. It purports to be a holograph will. The name of Shah Panachand appears at the top. There is no signature nor attestation. That, of course, is not necessary, but, in order that the Court could accept the document as a legal will, there would have to be evidence of the handwriting of Panachand and of the fact that it is his last will and testament. It is important to note that exhibit 23 is dated in 1897 and Panachand did not die till 1918. From the appearance of exhibit 23 it might obviously be a mere draft. The plaintiff has relied in support of it on certain recitals in the sale-deed which Bai Hirakor executed in his favour, exhibit 25. In this sale-deed she referred to the will and said that in his last illness her husband had authorised her to sell the house for her maintenance if necessary. These recitals, however, are not binding upon the defendant : see Shrinivasdas Bavri v. Meherbai : 19 Bom.S.C.L.R. 151. No other evidence has been produced in support of the will. The learned Counsel for the plaintiff says that no evidence was necessary because the defendant had admitted that this was the will of Panachand and had merely objected that the plaintiff's vendor had only a widow's estate and, as to its execution, that the will was not signed nor attested. That is to say, the suggestion is that objection was taken only on the ground of construction and the form of the will, and plaintiff was not put to proof of the fact that this was the last will and testament of Panachand. The reference to the will in the defendant's letter, exhibit 10, dated May 27, 1927, is this-

Bai Hirakor the vendor of Mr. Chimanlal your client has got a right as a Hindu widow only. It appears so from the will executed by Panachand Tarachand on Maha Vad 9th of Section 1953. Moreover, there are no signature and attestations on the said will.

At the conclusion of the letter it was stated that the plaintiff has no title at all. 'Hence my client is not bound to take the property.' Mofussil correspondence, like mofussil pleadings, is apt to be badly worded, but, in my opinion, the defendant's objections really amount to this, that the will was not accepted as a valid deed of title without further evidence in support of it. I may note that the plaintiff said nothing about the will in his reply to this letter. I may also refer to the case of Dahyabhai v. Kanaiyalal : AIR1930Bom441 , which points out the necessity for caution in accepting such a document as this as a valid and final testamentary disposition. I cannot accept the view that the defendant has admitted the execution of the will or the fact that it is the last will of Panachand, and it is clear, in my opinion, that there is no legal evidence of those facts. As to the effect of the will there is some force in Mr. Dave's argument that the provisions as to the disposal of the property after the death of the widow and as to the continuance of the ujam ceremony are inconsistent with the absolute right of the widow. In view of the authorities cited by learned Counsel for the plaintiff, Raghunath Prasad Singh v. Deputy Commissioner, Partabgarh (1929) 32 Bom. L.R. 129. and Saraju Bala Debi v. Jyotirmoyee Debi : (1931)33BOMLR1257 ., it may no doubt appear probable that on the construction of this will the proper view to take would be that it gives an absolute estate and that the provisions fettering and cutting down that estate should be held repugnant and void. But a claim by the agnates of Panachand on the death of the widow is by no means improbable, and though, as I say, it may seem doubtful whether such a claim would be likely to succeed, I think it would be rather difficult to say that there is any certainty about it. So that even if the proof of the will had been beyond question, I should hesitate to say that the title is one which the purchaser should be forced to accept, having regard to the propositions laid down in Pyrke v. Waddingham. It may be mentioned in that connection that the learned trial Judge refused to allow interest to the plaintiff on the ground that this will, exhibit 23, 'is not quite that formal and regular instrument that would on the face of it carry with it signs of its absolute genuineness', and that, therefore, there was some justification for the defendant hesitating before accepting plaintiff's title.

12. In view of the twofold objection, the deficiency of proof and the possibility of a reasonable dispute as to construction, I am of opinion that I. must be held that the plaintiff has not made out his title beyond reasonable doubt. Mr. Carden Noad points out that on the question, whether a title free from reasonable doubt has been made out, the burden of proof is on the defendant, and he refers to Low & Co. v. Jyoti Prosad Singh Deo : (1931)33BOMLR1544 Taking the burden of proof to be so, the defendant has succeeded in show-ing facts from which, I think, the only reasonable conclusion is as I have stated.

13. If any one of the three grounds of objection alleged by the defendant is substantiated, he would be entitled to repudiate this transaction. Had it been necessary to decide the case on the point as to the land acquisition notification or the point as to easements, I should not myself have been prepared to dispose of it without a remand to the lower Court for further evidence. But that is quite unnecessary on the question as to title. The defendant-appellant having succeeded on that point is entitled to succeed in these appeals.

14. The result is that both appeals must be allowed. The plaintiff's suit for specific performance must be dismissed with costs. The appellant's suit for return of the deposit will be allowed with costs and interest at six per cent. until date of payment, and the appellant will be allowed his costs in this Court.

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