P. Chandra Reddy, C.J.
1. The question that calls for decision in this Second Appeal is as to the starting point of limitation under Article 132 of the Limitation Act.
2. The facts culminating in this litigation may be briefly stated. The plaintiff's husband one Somaraju mortgaged five items of property tinder Ex. A-1 on 13th December 1924 to one Venkatalingam. Shortly thereafter, Somaraju died, leaving behind him plaintiff and his two minor sons. In order to discharge that mortgage. the plaintiff executed a sale deed of item 1 described in the schedule annexed to the plaint (Ex B-1 dated 28-9-1926) in favour of the 1st defendant. Out of this price, she received only Rs. 400/- leaving the balance with the vendee to be paid to the mortgagee.
Some time later, items 2 and 3 were conveyed by her to one Venkatareddy, the father of defendants 2 and 3 under Ex. A-2 dated 7-5-27 for a total consideration of Rs. 2170/-. Out of this, she left Rs. 1500/- with the vendee with a direction that the later should discharge the mortgage evidenced by Ex. A-1. This Venkatareddy, in his turn, sold these properties on 8th November, 1939 to the 1st defendant. Under the terms of that sale, the 1st defendant was required to pay Rs. 500/-to the mortgagee Venkatalingam.
Neither of the vendees carried out his obligations in regard to the payment to the mortgagee. The result was that a suit was filed on the foot of the mortgage in O. S. No. 10 of 1940 and a decree obtained. When the properties were brought to sale in Execution of the decree, the 1st defendant deposited Rs. 500/- in part satisfaction of the decree and in discharge of the liability undertaken by him under Ex. B-1. For the balance, the mortgagee-decree-holder proceeded against other mortgaged properties. In order to avert the sale, she deposited Rs. 1600/- and Rs. 700/- in two instalments, which she got by the sale of her other properties.
3. Having discharged that debt, she instituted the present suit to recover the unpaid purchase money, including the interest that accrued thereon from the vendee under Ex. A-2 and his transferee, the 1st defendant. This suit was instituted in the year 1948. The plaintiff acquired a light to these properties by reason of the death of her two sons unmarried.
4. The main defence to the suit was that it was barred by limitation as it was brought more than 12 years after the execution of Ex. A-2. The trial Court decreed the suit as against the 1st defendant overruling this objection. The Appeal filed by the 1st defendant against the decree and judgment was accepted by the District Judge. In the opinion of the appellate Court, limitation began to run from the date of the original sale and, as such the claim was barred. Dissatisfied with that decision, the plaintiff has filed this Second Appeal.
5. The sole point for determination is whether limitation commenced from the date of the sale under Ex. A-2 or from the time when the plaintiff was obliged to discharge the mortgage debt. It is not disputed that the claim to enforce vendor's lien for unpaid purchase money is governed by Article 132 and not by Article 111 of the Limitation Act. This matter has been finally decided by the Privy Council in Webb v. Macpherson, ILR 31 Cal 57.
6. To appreciate the controversy arising in this appeal, it is necessary to refer to the terms of Article 132. Article 132, omitting the unnecessary portion, reads as follows:
'132.To enforce payment of money charged upon immovable property.
Twelve Years.When the money sued for becomes due.'
The decision of this appeal depends upon when the money sued for becomes due.
7. At the outset, it should be mentioned that this is not a simple case of a vendor enforcing his statutory charge against his vendee. In such a case, the money becomes payable to the vendor on the date of the sale in the absence of any stipulation for payment of it on a particular date. This is a case in which there is any agreement between the vendor and the vendee that the latter should utilise a part of the consideration towards the discharge of the mortgage. That being the case, could it be posited that that part of the money, which was left with the purchaser for a particular purpose, became due from the very day that was done?
8. In judging whether the vendor became entitled to those sums from the inception or not, the provisions of Section 55 of the Transfer of Properly Act have to be taken into account. Section 55 creates a lien in favour of the vendor. Clause 5 (b) of the same Section affords protection to the vendee by enabling him to retain out of the purchase money that amount of any encumbrance on the property existing at the date of the sale to be paid to the person entitled to it.
Thus, the vendee is given a right to keep with himself a portion of the purchase money to discharge any encumbrance existing on the property. In retaining a part of the consideration for the purpose indicated therein, the vendee acts as the agent of the vendor. But the agency could not be revoked so long as the encumbrance remains undischarged since the vendee has an interest in the discharge of the encumbrance. Thus the agency is one coupled with interest in the money being applied in the manner provided.
Therefore, so long as liability on the property subsists, the money left with the vendee could not be recalled by the vendor. It is only when the encumbrance is extinguished either by the satisfaction of the debt or by novatio or by limitation that the vendee could be called upon to return the purchase money with him. Till then he cannot call back the money because the contract between them could be performed at any time before it becomes impossible of being satisfied since no time was specified for making payment to a third party,
9. This principle is enunciated by Leach C.J. and Lakshmana Rao J. in Srinivasavaradachariar v. Dasu Reddiar, 1944-1 Mad LJ 269: (AIR 1944 Mad 330). The learned Judges agreed with the rule stated in Suhba Row v. Varadiah, 1943-1 Mad LJ 279: (AIR 1943 Mad 482) to the effect that where immoveable property was sold free of any encumbrance the vendor was entitled to call upon the vendee to account to him for any portion of file purchase money, which, events had shown, was not required for the fulfilment of the stipulation. 1944-1 Mad LJ 269: (AIR 1944 Mad 330) was followed by Krishnaswamy Naidu J., in Sitharama Holla v. Srinivasa Somayaji, : AIR1954Mad729 .
10. A divergent note was struck by the Patna High Court in Ganga Ram v. Raghubans, ILR 27 Pat 898. The learned Judges expressed the opinion that even in a case where a portion of the consideration was left with the vendee to pay it to the mortgagee in satisfaction of the unpaid purchase money and the vendee had not fulfilled the contract in that regard, the statutory charge in respect of the unpaid purchase money should be enforced within 12 years from the date of the transaction.
In the view of the learned Judges, unless there was an agreement between the parties either expressly or impliedly to postpone the payment of the purchase money either to him or to a third party to a future date the amount would become payable either to the Vendor or to the third party and consequently it became payable on the date of the sale. After setting out the effect of the authorities bearing on the point, namely, that the money becomes due within the meaning of Article 132, of the Limitation Act since it became legally due, they said that there was nothing to prevent the plaintiff demanding that the creditor he paid the amount lying in deposit with the vendee on the date of the sale.
In our opinion, the latter proposition is not home out by the terms of Section 55. We have already pointed out that this provision clothes the vendee with a right to retain the money with him so long as the liability on the property subsists. Therefore, we are unable to subscribe to the theory propounded in, ILR 27 Pat 898 and express our respectful disagreement with it.
11. The doctrine of ILR 27 Pat 898 found acceptance with a Bench of the Madras High Court in Vinaitheertha Thevar v. Viswanatha Ayyar, : AIR1954Mad508 . That was a case of a suit by the purchaser of the equity of redemption for redeeming a usufructuary mortgage, which was first sold to a third party with a condition that out of the sale price the mortgage amount was reserved for discharging the mortgage and for other simple debts.
The further stipulation was that the vendee should redeem the usufructuary mortgage and take possession of the mortgage property. The vendee did not pay off the amount with the result that the mortgage remained undischarged. Subsequently the vendor was adjudged insolvent and the sale mentioned above was declared to be ineffectual. The plaintiff obtained a decree on a promissory note, brought the equity of redemption to sale in execution of his decree and himself purchased it.
Govinda Menon and Basheer Ahmed Sayeed JJ., who heard the matter, decided that the plaintiff acquired nothing in the sale, since there was no right in the property which was the subject of purchase and since the statutory charge could not be said to exist as the sale referred to above was only subject to the mortgage. That was sufficient for disposing of the appeal. The learned Judges however proceeded to consider, even when there was a lien in favour of the original vendor, what the period of limitation was for enforcing the lien.
In repelling the contention of the plaintiff-appellant that the claim was not barred by reason of the existence of the vendor's lien, the learned Judges relied on ILR 27 Pat 898. There is no discussion on the subject nor were the Madras decisions referred to above noticed. We have already pointed out that ILR 27 Pat 898 does not embody the correct law on the topic. It follows that the statement of law contained in the case under examination cannot be accepted as correct.
12. Sri Ramachandra Rao counsel for the respondents cited before us two judgments of the Allahabad High Court as supporting the view taken in ILR 27 Pat 898 which lends countenance to his contention. One is Mt. Naima Khatun v. Basant Singh, AIR 1934 All 406 (FB). and the other Ramachander v. Earn Chander, AIR 1936 All 870. Neither of the two cases has dealt with this matter or throws any light on the present enquiry. In the first of the two cases, the question referred to the Full Bench was not one of limitation, but whether the plaintiff was entitled to any decree for refund of the whole or part of the amount left in the hands of the Vendee, whether he was entitled to any decree for damages and whether a decree for specific performance could be granted in the case.
The first question was answered in the affirmative for the reason that the vendee agreed to discharge the mortgage with the money left in his hands by the vendor within a particular time and that a breach of this covenant gave sufficient cause of action to the vendor to ask for refund of that money. That judgment does not contain any principle supporting the opinion of the learned Judges in ILR 27 Pat 898. On the other hand, the observations contained therein seem more to militate against the contention of the respondent and they did not purport to give a decision on the question as to the starting point of limitation in a situation similar to ours.
13. The same thing may be said of the second case also. The main point there was whether the plaintiffs claim for personal remedy against the vendee was barred under Section 110 of the Limitation Act in the circumstances of that case. There, the suit was brought within 12 years of the transaction of sale and, therefore, there was no occasion for the learned Judges to consider this aspect of the case. The following passage occurring at page 873:
'When a suit is brought for recovery of the amount, then the charge can be enforced for the payment of the amount due if the suit is within 12 years of the original sale deed, for the charge is a statutory charge created by the document and time would begin to run for enforcement of such a charge from the date of that document'
cannot justify the conclusion that if the suit is not brought within 12 years of the transaction even in cases analogous to the present one, the claim is barred. On the other hand, it was remarked in another part of the judgment that when the property was subject to a charge and the money was left at the hands of the vendee to pay off that charge the vendee was entitled to pay the amount in discharge of the encumbrance and not pay it to the mortgagor direct, which in a way militates against the theory propounded for the respondent.
It may also be mentioned here that Mahabir Prasad J., who delivered the leading judgment, noticed these two cases and said that they were not in point and could not be regarded as authorities for the contention similar to the one now raised by the respondent. We, therefore, hold that the two Allahabad cases do not afford us any assistance in this connection.
14. Another point presented by Sri Ramachandra Rao for the respondent was that the view which we take may lead to any anomaly. If it is ruled that the right of the vendor to recover unpaid purchase money is postponed till the discharge of the encumbrance, he may be deprived of the benefits of the vendor's lien, since no protection is afforded to him against a bona fide purchaser for value. The learned counsel draws our attention to section 55, which, as amended, excludes a bona fide purchaser from its operation and argues on the basis of it, that if it be held that the vendor could not sue for the balance of the sale price, so long as an encumbrance is existing, he may be deprived of his right of statutory charge.
This consideration is not a very relevant one. Even in a case where the vendor could recover from the vendee the whole of the purchase money, the right conferred by Section 55 could sometimes be defeated by a vendee with fraudulent intentions as when he transfers the property to a third party within two or three days of the transaction. The vendor is not expected to lay an action on the basis of his lien immediately after the sale.
Therefore, the difficulty pointed out by the learned counsel for the respondent cannot really enter judicial verdict in examining the scope of the clause 'when the money sued for becomes due.' Our answer is that in a case where part of the consideration is left in the hands of the vendee to be applied to the discharge of an encumbrance, limitation commences only from the time when the vendor himself or herself satisfied the debt or the mortgage becomes extinguished for other reasons and not from the date of the sale. Therefore, the vendor's lien could be enforced within 12 years from that period.
15. It follows that the plaintiff's suit was within time. The judgment and decree of the lower appellate Court are set aside and that of the trial Court restored except with regard to item 1 in the memorandum of appeal bearing on the sale of item 1 in favour of the 1st defendant. That relates to interest accruing on the amount of the sale consideration. The lower appellate Court believed the case of the respondents that the plaintiff had agreed to give up interest as evidenced by Ex. B-7. That finding could not be and in fact was not canvassed in this second appeal.
16. In the result the appeal is allowed to theextent indicated above with costs of the appellant.Court fee will be paid by the respondents to theGovernment to the extent they have failed in thesecond appeal and also in the suit and the balancewill be paid by the appellant-plaintiff both in thesecond appeal and in the Suit.