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Krishnaswami Mudaliar Vs. Vijiaraghava Pillai and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Reported inAIR1939Mad590; (1939)1MLJ344
AppellantKrishnaswami Mudaliar
RespondentVijiaraghava Pillai and ors.
Cases ReferredKrishnaswami v. Subramania Ganapatigal
Excerpt:
.....to canvass the correctness of that decision because the learned judges did not lay down any principle of law which is in conflict with the well-accepted principles governing this branch of law because they themselves recognised that where a vendor takes a promissory note from a vendee, it does not necessarily follow that he has given up the statutory lien and even when a promissory note is given by a third person that fact raises no presumption that the lien has been abandoned......following observations:there is no doubt, both on principle and authority, that a conveyance or sale in consideration of a covenant to pay a sum of money in the future is different from a sale in consideration of money which the purchaser covenants to pay.7. therefore the taking of the bond in this case cannot be construed as a covenant to pay a sum of money in the future within the meaning of the observations of the privy council. on exactly similar facts a division bench of this court in a case reported in vellappa chettiar v. narayanan chettiar (1913) m.w.n. 826 held that the statutory charge would subsist. the facts in that case were as follows: the plaintiff agreed to sell a certain property to the first defendant for rs. 17,000 on the 10th october, 1900. the consideration was to.....
Judgment:

Venkataramana Rao, J.

1. This is an appeal from the judgment of the learned District Judge of North Arcot dismissing the suit against defendants 2 and 3 in reversal of the decree of the District Munsif of Arni. On 22nd September, 1928, the plaintiff sold certain properties of his to the first defendant for a sum of Rs. 1,000. Rs. 500 was paid in cash and for the balance of Rs. 500 a promissory note was executed by the first defendant in favour of the plaintiff which carried interest at 1 per cent, per mensem. The first defendant committed default in the payment of the said money and this action has been brought for the recovery of Rs. 620 being the principal and interest due in respect of the said promissory note up to the date of the suit. The plaintiff also prayed for a sale of the said properties on the ground that he had a statutory charge for the payment of the said sum of money under Section 55(4)(b) of the Transfer of Property Act. Defendants 2 and 3 have been impleaded as parties to the suit as they purchased the properties from the first defendant by sale deeds dated 17th November, 1930 and 11th August, 1930, respectively. The first defendant did not resist the plaintiff's claim but defendants 2 and 3 pleaded that they are bona fide purchasers without notice of the existence of any such charge and further that the plaintiff had also waived the charge by taking the promissory note above referred to. The learned District Munsif found that defendants 2 and 3 who are the sons-in-law of the first defendant were fully aware of the nonpayment of the balance of the purchase money of Rs. 500, that the plaintiff by taking the promissory note for the said amount did not lose the charge given to him by statute and the fact that the plaintiff received a payment of Rs. 60 towards the interest on the amount of the promissory note could not be taken as a circumstance from which waiver of any such charge could be inferred. The learned District Judge was of the opinion that the recital in the sale deed showed that the entire consideration had been paid partly in cash and partly by the execution of the suit promissory note. He was also of the opinion that as the whole of the purchase money was paid there was no statutory charge in the case. He summed up his conclusion thus:

I am of opinion, after careful consideration, from the language used in the sale deed itself, from the evidence of the plaintiff himself on the point and from the other circumstances, that the intention of the parties in this case was that the execution of the promissory note was to be treated as equivalent to payment of the purchase money pro tanto and that the promissory note was not taken merely as a collateral security.

2. The question is, is the conclusion of the learned District Judge correct? The sale was for a sum of Rs. 1,000 and the receipt of the consideration is expressed thus:

For my business I have received Rs. 8C0 by way of cash and by way of bond and the amount which I have agreed to receive before the Sub-Registrar is Rs. 200.

3. It is plain therefore from these recitals that the consideration for the deed is a sum of money. The evidence of the plaintiff does not carry the matter further except establishing the fact that what was received in cash out of the sum of Rs. 800 was only Rs. 300 and for the balance of Rs. 500 a promissory note was taken and the bond referred to in the promissory note for Rs. 500 which carried interest at one per cent, per mensem. With reference to the other circumstances referred to by the learned Judge, Mr. Krishna Rao for the defendants 2 and 3 stated that the only circumstance in the case was the receipt of the payment of interest of Rs. 60 under the promissory note and there were no other circumstances in the case. Therefore on these admitted facts the question arises whether the plaintiff has no statutory charge for the sum of Rs. 500 covered by the said suit promissory note, and if he had a charge, whether he could be said to have waived it. As pointed out by their Lordships of the Privy Council in Webb v. Macpherson the statutory charge conferred by Section 55(4)(b) of the Transfer of Property Act differs from the vendor's lien under the English Law and that in order to exclude the charge given by the statute, the Court has to find something either express contract or at least something from which it is a necessary implication that there is such a contract. Their Lordships further pointed out that the charge would not be excluded by any contract, covenants, or agreement with respect to the purchase money. It will be seen that under Section 55(4)(b) of the Transfer of Property Act the charge subsists in every case where the amount of the purchase money remains unpaid either for the whole or for the part remaining unpaid. What is necessary therefore is payment in fact or what in law would constitute such a payment. With reference to a vendor's lien under the English Law it was held that the mere fact that the consideration was stated in the deed as having been received and the receipt of the vendor endorsed on it would not, as between a vendor and vendee and anybody claiming under the latter with notice of non-payment, amount to an abandonment of the vendor's lien vide the observations of Lord Eldon in Mackreth v. Symmons (1808) 15 Ves. Jun. 329 : 33 E.R. 778 and the taking of a bill or a promissory note was held not to discharge such a lien. Vide Grant v. Mills (1813) 13 R.R. 101. The same rule will apply to the case of a statutory charge. A bill or note is always taken as a conditional payment; the law recognises it as a payment, but if a bill or note is dishonoured, the obligation to pay the amount covered by it would remain and is never put an end to. Lord Redesdale in Hughes v. Kearney 1 Sch. And Lef. 132 : 9 R.R. 30 puts the position thus:

Suppose bills given as part of the purchase money, and suppose them drawn on an insolvent house, shall the acceptance of such bills discharge the vendor's lien? They are taken, not as a security, but as a mode of payment.

4. In Winter v. Lord Anson (1827) 38 E.R. 658 the facts were as follows: William Winter entered into an agreement to sell his property, to William Mousley. The agreement provided that the amount of the consideration should be secured by a bond of Mousley to Winter with interest at 4 per cent, and should remain so secured during the life of William Winter on the regular payment of such interest. The sale deed was subsequently executed wherein it was recited that the amount of consideration, namely, 1,485 was stated to have been paid but in fact only 485 was paid and for the balance Mousley executed a bond to Winter in the penal sum of 2,000 conditioned to be void on payment of 1,000. The question was whether the acknowledgment in the document of the consideration having been received and the taking of a separate bond discharged the lien so that the assignees of the vendee, who took with notice of such nonpayment of the consideration, were held entitled to keep the estate without payment of the same. Lord Chancellor Lyndhurst held that the vendor's lien was not discharged and the assignees were bound to pay the money. Apart from the fact that the bill is a conditional payment, the Vice-Chancellor Shadwell explained the reason of the rule in Buckland v. Pocknell (1843) 13 Sim. 406 : 60 E.R. 157 thus:

Where the consideration is to be money paid down, and the money, in fact, is not paid, but a conveyance is made as if it had been paid, and that is all; or, if there be, in addition to it, the giving merely of a note or bond, still, in substance, the vendor has not that which, in point of justice he ought to have....

5. The question in this particular case also is whether it appears from the sale deed the plaintiff has got what he contracted to have. There is no doubt that he contracted to have a sum of Rs. 800 and he has not got it; he got only Rs. 300 and the balance had to be paid. It will be seen that the consideration was not the execution of a bond but payment of a sum of Rs. 200. Therefore the promissory note itself is not the actual consideration but was taken merely as a security for the purchase money. As observed by Sugden in his book on Vendors and Purchasers,

There is a marked distinction between a conveyance as for money paid with a separate security for the price whether by covenant, bond or note and a conveyance expressed to be in consideration of covenants which the purchaser enters into by the deed itself.

6. This principle was applied by their Lordships of the Privy Council in Webb v. Macpherson and they made the following observations:

There is no doubt, both on principle and authority, that a conveyance or sale in consideration of a covenant to pay a sum of money in the future is different from a sale in consideration of money which the purchaser covenants to pay.

7. Therefore the taking of the bond in this case cannot be construed as a covenant to pay a sum of money in the future within the meaning of the observations of the Privy Council. On exactly similar facts a Division Bench of this Court in a case reported in Vellappa Chettiar v. Narayanan Chettiar (1913) M.W.N. 826 held that the statutory charge would subsist. The facts in that case were as follows: The plaintiff agreed to sell a certain property to the first defendant for Rs. 17,000 on the 10th October, 1900. The consideration was to be secured by two documents (1) a hundi for Rs. 3,000 and (2) a promissory note for Rs. 14,000. The sale deed was executed on 19th September, 1901 and the recital as to the consideration ran thus:

The amount that I have received in accordance with the varthamanam executed by me on 10th October, 1900, by means of hundi drawn by you directing Seenu Pillai, agent of your Mannargudi shop to pay is Rs. 3,000. The amount that I have received in the matter of your having executed a promissory note in my favour on the said date is Rs. 14,000. Total for the two items, is Rs. 17,000. As I received this sum of rupees seventeen thousand as per above particulars and I have executed in your favour the deed of absolute sale, you shall enjoy the undermentioned lands, house, etc....

8. For the sum of Rs. 14,000 a renewed promissory note was executed on 24th September, 1903 and on that renewed pronote a suit was filed for the recovery of the amount due thereunder and sale of the property was also asked for in enforcement of the statutory charge under Section 55(4)(b) of the Transfer of Property Act. The learned Judges (Miller and Abdur Rahim, JJ.) held that the plaintiff took the pronote as security for the unpaid purchase money and that the charge was not extinguished by the taking of the promissory note. It would thus be seen that the facts were almost similar to those in the present case and that the said decision is a conclusive authority against the contention of respondents 2 and 3. The learned District Judge relied on the subsequent payment of Rs. 60 under the promissory note as a circumstance negativing the existence of the charge or as a circumstance indicating a waiver. It is not possible to understand how the payment of interest for detention of the money can be taken as evidence of a waiver of the lien. Even the statute provides for payment of interest on unpaid purchase money. In almost every case where a bond or promissory note is taken, interest will be provided for. The learned District Judge was influenced in his decision by the case reported in Krishnaswami v. Subramania Ganapatigal (1917) 35 M.L.J. 304 where on a similar recital as in the sale deed and on the consideration also of a payment of interest on a promissory note the learned Judges took the view that there was a waiver of the statutory charge. But that case is distinguishable. In that case, apart from these two circumstances, there was the additional fact that though the sale was by two vendors, the promissory notes were executed by one vendee in favour of the two vendors separately, and the suit was brought by one vendor without making his co-vendor a party. Therefore on the facts of that particular case their Lordships came to the conclusion which they did. It is unnecessary to canvass the correctness of that decision because the learned Judges did not lay down any principle of law which is in conflict with the well-accepted principles governing this branch of law because they themselves recognised that where a vendor takes a promissory note from a vendee, it does not necessarily follow that he has given up the statutory lien and even when a promissory note is given by a third person that fact raises no presumption that the lien has been abandoned. I may state that Mulla in his Transfer of Property Act, 2nd edition, seems to think that the case in Krishnaswami v. Subramania Ganapatigal (1917) 35 M.L.J. 304 was not correctly decided. I have come to the conclusion that there is nothing in the language of the document or in the evidence of the plaintiff or in any of the surrounding circumstances which would enable the Court to say that there was no statutory charge or that the statutory charge had been abandoned. I may point out that the learned District Judge was of the opinion that if it were held there is a charge then the plaintiff could not be said to have waived the charge and defendants 2 and 3 must be deemed to have notice of the existence of it.

9. I therefore reverse the decision of the learned District Judge and restore the decree of the learned District Munsif with costs throughout. This judgment will not prevent defendants 2 and 3 from availing themselves of such right as they may have under Madras Agricultural Relief Act IV of 1938 and the amount decreed now will be subject to the result of any application they make with the said Act.

10. Leave to appeal refused.


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