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Himatlal Motilal Vs. Vasudeo Ganesh Mhashar - Court Judgment

LegalCrystal Citation
SubjectContract
CourtMumbai
Decided On
Case Number First Appeal No. 14 of 1910
Judge
Reported in(1912)14BOMLR634
AppellantHimatlal Motilal
RespondentVasudeo Ganesh Mhashar
Excerpt:
.....male for the sale of property, and a third party afterwards buys the property with notice of the prior contract, the title of the party claiming under the prior contract prevails against the subsequent purchaser, although the latter's purchase may have been registered and although he has obtained possession under his purchase.;notice before actual payment of the whole of the purchase money, even although it may have been secured, or before the conveyance is actually executed, is binding in the same manner as notice had before the contract; for although the purchaser had no remedy at law against the payment of the residue, for which he gave his security, yet he would be entitled to relief in equity, on bringing his bill and showing that though he has given a security for payment of the..........made for the sale of property, and a third party afterwards buys the property with notice of the prior contract, the title of the party claiming under the prior contract prevails against the subsequent purchaser, although the latter's purchase may have been registered, and although he has obtained possession under his purchase.' after referring to a case, nemai charan dhabetl v. kokil bag ilr (1880) cal. 534, to which, however, section 27 of the specific relief act did not apply, their lordships set out section 27 of that act, and say, ' this shows, that where a party has notice of a prior contract for sale, he cannot, by any purchase that he may subsequently make, over-ride it.'4. now in england it has been held that notice before actual payment of the whole of the purchase-money,.....
Judgment:

Russell, J.

1. With regard to the first question we have to decide, namely, the question upon whom lies the onus of proof in this case, it appears that the plaintiff's agreement to purchase the property in question from defendants 1 and 2 is dated 9th February 1906. The agreement of defendants 1 and 2 with defendants 3 and 4, who are the purchasers of the same property (Exhibit 65), is dated the 21st May 1906. The defendants 3 and 4, therefore, having contracted to purchase the property from the same defendants who had contracted to sell it previously to the plaintiff must show three things : that they are purchasers for value, and bona fide, and without notice: see Mulji Jetha & Co v. Macleod (1903) 5 Bom. L.R. 991. The plaintiff under his contract has a prior equity. In Varden Seth Sam v. Luckpathy Royjee Lallah (1862) 9 M. I. A. 307, it was said :-

The question to be considered is, whether the third and sixth defendants respectively possessed the land free from that lien, whatever its nature. As one who owns property subject to a charge can, in general, convey no title higher or more free than his own, it lies always on a succeeding owner to make out a case to defeat such prior charge. Let it be conceded that a purchaser for value, bona fide, and without notice of this charge, whether legal or equitable, would have had in these Courts an equity superior to that of the plaintiff, still such innocent purchase must be, not merely asserted, but proved in the cause, and this case furnishes no such proof.' This passage in the Privy Council judgment certainly seems to conflict with the statement of the law set out by West J. in Lalubhai Surchand v. Bai Amrit ILR (1877) 2 Bom. 299 where he refers to several authorities in support of the proposition that in cases such as the present it is for the plaintiff to prove the notice. But it must be remembered that the burden of proof is not always a standing quantity. And West J., at the bottom of page 303, says:-'The purchaser pleading absence of notice is 'held strictly to proof of the payment,' that being an affirmative matter ; but when he has thus far established his good faith, it devolves on the opposite party to prove notice or the circumstances from which the Court may infer a knowledge or means of knowledge of the previous transaction.

2. In this case, therefore, it devolved upon the defendants 3 and 4 to prove payment of the consideration before they got notice of the plaintiff's contract. And the question has arisen whether that means payment of the whole consideration money or whether the position of defendants 3 and 4 is not made secure by reason of their conveyance having been registered, when it was, and part payment made by them before they got notice of the plaintiff's contract. The defendants' contract was registered on the 22nd May 1906. Possession was delivered to them on the 26th May 1906. Before this suit was filed it appears that Rs. 2,500 exactly was paid by them to defendants 1 and 2. The summons in the suit was served upon them on the 9th August 1906. As security for the payment of the residue of the purchase-money they had given Chithis for Rs. 6001 and Rs. 4224 and they appear to have paid off those Chithis subsequently. It must be taken, therefore, that they had notice, in any event on the 9th August 1906, when the summons was served upon them, as I have said.

3. Mr. Rao, in arguing for defendants 3 and 4, laid great stress upon the fact of registration, but, in our opinion, that point does not avail him : see Chunder Kant Roy v. Krishna Sunder Roy ILR (1884) Cal. 710. The head-note of that case is as follows:-' Where a bona fide contract, whether oral or written, is made for the sale of property, and a third party afterwards buys the property with notice of the prior contract, the title of the party claiming under the prior contract prevails against the subsequent purchaser, although the latter's purchase may have been registered, and although he has obtained possession under his purchase.' After referring to a case, Nemai Charan Dhabetl v. Kokil Bag ILR (1880) Cal. 534, to which, however, Section 27 of the Specific Relief Act did not apply, their Lordships set out Section 27 of that Act, and say, ' this shows, that where a party has notice of a prior contract for sale, he cannot, by any purchase that he may subsequently make, over-ride it.'

4. Now in England it has been held that notice before actual payment of the whole of the purchase-money, even although it may have been secured, or before the conveyance is actually executed, is binding in the same manner as notice had before the contract; for although the purchaser had no remedy at law against the payment of the residue, for which he gave his security, yet he would be entitled to relief in equity, on bringing his bill and showing that though he has given a security for payment of the residue of his purchase-money yet he had since had notice of an incumbrance, under which circumstances the Court would stop payment of the money due on the security: see Tourville v. Naish (1734) 3 P. W. 307; Story v. Lord Windsor (1743) 2 Atk. 630; More v. Mayhow (1839) 1 Ch. Cas. 34; and Jones v. Stanley (1731) 2 Eq. Abr. 685. And it appears to us that under the law in India the same principle must hold good. It is to be observed that in Clause (b) of Section 27 of the Specific Relief Act the words are:-'except a transferee for value who has paid his money in good faith and without notice of the original contract.' There is nothing inconsistent in these words with _ the English rule above referred to.

5. Mr. Rao referred us to Section 91 of the Indian Trusts Act which is as follows :-

Where a person acquires property with notice that another person has entered into an existing contract affecting that property, of which specific performance could be enforced, the former must hold the property for the benefit of the latter to the extent necessary to give effect to the contract.

6. The word ' acquire' is quite consistent with the English rule that the purchase should be complete both by payment and conveyance before notice in order to defeat a person having a prior equity. Upon this ground alone the case may be decided in favour of the defendants.

7. But this Court is also of opinion that there is no good reason for dissenting from the conclusion arrived at by the learned Subordinate Judge that under the circumstances of the case the appellant should be held to have had knowledge of the defendants' contract prior to the date of the conveyance. We do not propose to go in detail through this evidence but merely to set out the circumstances which have led us to infer that defendants 3 and 4 must be held to have had such knowledge. The first is that the sale of a village for a large amount of money, such as in the present case, must inevitably have been a matter of notoriety throughout the adjoining districts. Goraj, where the plaintiff's agreement was executed, is only twenty-one miles from Kalol where the defendants' agreement was executed. A considerable number of persons were present at the execution of both the contracts. The plaintiff's contract Exhibit 53 was attested by Jethalal, Girdhar, Swarupgir, and written by Bhagwanji. There were six arbitrators who fixed the price which defendants 3 and 4 were to pay, three for defendants 1 and 2, and three for defendants 3 and 4. For defendants 1 and 2 the arbitrators were Bhagwanji, who lived at Halol, seven miles from Kalol; Swarupgir of Kadochhala, where defendants 1 and 2 lived, which is seventeen miles from Kalol, and Girdhar of the same place. The arbitrators for defendants 3 and 4 were Damodar of Godhra, fifteen miles from Kalol; Jagjivan also of Kalol and Mathur also of Kalol. Girdhar and Bhagwanji were the clerks, it appears, of defendants 1 and 2. We find it very difficult to believe that the existence of the plaintiff's contract was not referred to during the negotiations for the defendants' contract, and that defendants 3 and 4 were not aware of it.

8. The next circumstance is the unusual rapidity with which defendants' agreement was carried out. It was executed on the 21st May 1906 ; it was registered on 22nd May 1906; and possession was delivered on 29th May 1906. In our opinion this is a very important circumstance as it shows an extraordinary and unusual carrying through of a contract in this country where proceedings as a rule are much more leisurely.

9. The next circumstance to be borne in mind is that defendants 1 and 2 had previously entered into a contract with Haribhaktiwala to sell the same property to him for considerably less sum than they had contracted to sell to the plaintiff, The Sanad relating to the property was redeemed by defendants 3 and 4 from Haribhaktiwala on 28th November 1906. This circumstance shows that defendants 1 and 2 were j anxious to sell the property to the highest bidder totally regardless of any prior contracts that they may have entered into with other persons.

10. The next circumstance is the very considerable increase (about 4,000 rupees) in the purchase-money to be paid by defendants 3 and 4, as compared with the sum contracted to be paid by the plaintiff, with regard to which no satisfactory evidence, it appears to us, has been given in explanation. Again the wording of the contract between defendants 1 and 2 and 3 and 4 is very peculiar. (See p. 68.) Why should any provision have been made for ' Safildars ' ' neighbours making a claim or causing obstruction ' if such a claim was not anticipated Lastly, the defendants 3 and 4 were mortgagees with a long standing mortgage in the village and this would account for their eagerness to acquire the equity of redemption at a higher rate than the intending purchaser, the plaintiff. In our opinion, therefore, defendants 3 and 4 must be taken to have had notice of the previous contract of defendants 1 and 2 with the plaintiff.

11. The only other point that was argued was that the plaintiff was not ready and willing to carry out his contract, and that he thereby committed a breach thereof. And great stress was laid upon the fact that in para. 2 of his plaint, (which we take as read), the terms of the plaintiff's contract are not correctly set out. But we do not think that this para, of the plaint should be read so strictly as against the plaintiff, for the additional term to the contract set out therein may be taken to give the plaintiff's view of the agreement after he became aware of the contract between defendants 1 and 2 and defendants 3 and 4 with reference to the purchase of the village or a legal point suggested by the draftsman of the plaint. There is no evidence whatever to show that assuming the plaintiff did commit a breach of his contract defendants 1 and 2 accepted such breach. But there is one circumstance on this point which seems to us to dispose of this part of the case of defendants 3 and 4, and that is this, that if the plaintiff broke his contract and defendants and 2 knew or acquiesced therein, they must have mentioned the fact of such breach and acquiescence or knowledge to defendants 3 and 4 before the latter entered into their contract, but it is not suggested anywhere in the evidence that any such mention was made.

12. The other point that was made was that Jethalal the Banker was not in a position to pay the money which the plaintiff had agreed should be paid to defendants 1 and 2, but we do not think, upon the evidence, that it would be possible to hold that Jethalal was not in a position to call up or to pay the money required.

13. Under these circumstances, it is not necessary to award damages to the plaintiff as against defendants 1 and 2.

14. Accordingly, we are of opinion, that the decree of the lower Court which has been carefully and correctly drawn should be confirmed, and the defendants pay the costs throughout.


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