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Komu Kutti Vs. Kumara Menon and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Reported in(1918)35MLJ692
AppellantKomu Kutti
RespondentKumara Menon and ors.
Cases ReferredRaghunatha v. Sadagopa I.L.R.
Excerpt:
- - a is himself entitled to sue b for the recovery of those sums as if they are due to him in case of b's failure to pay the third persons within a reasonable time; is not in such a case bound to show that he was in any way damnified by b's failure. there the agreement provided that if the defendant failed to discharge the debt, he should be liable to pay the plaintiff for any damage the latter might sustain. in those circumstances, it was pointed out that the owner of the property had got what he bargained for and had nothing to complain of. (1909) a 583 establishes that wherever there is a sale of property subject to previous encumbrances it must be regarded that there is a contract of indemnity by the purchaser as well......he did not, then he must indemnify the vendor against all loss. but here the debts were ordinary money debts, and there is an unconditional contract that with the greater part of the consideration money the appellant will pay these debts. it seems to me altogether unreasonable to treat such a contract as a mere contract of indemnity, simply because the document provides for compensation for any loss caused to the respondents by the breach of the contract. i therefore hold that the conclusion of the learned judge on this point is right.3. the memorandum of objections relates to the costs which have been disallowed to the respondents by the district judge. these are the costs which they had to pay to the plaintiffs in certain suits brought to recover the debts which the appellant.....
Judgment:

Abdur Rahim, J.

1. As regards the objection to the registration of the sale-deed Exhibit A on the ground that item No. 17, plot C, which was situated in the jurisdiction of the Sub-Registrar was not in fact sold, I do not think that there is any substance in this objection. The District Judge has found otherwise and that finding is prima facie correct.

2. The next question depends primarily upon the interpretation of the sale-deed Ex. A. It provides that as regards the purchase money, 'the said sum of Rs. 10,237-8-0 as has been received by us by way of the Rs. 9,086-2-10 reserved with you, it being settled that' the Kudicadan (encumbrance) Rs. 1,237-8-0 due to the aforesaid persons on properties items 10 to 16 should be paid by you and the properties should be recovered possession of, and that the previous debts Rs. 7848-10-10 which were incurred for our tarward necessities * * * should be paid off by you * * *, and by way of the balance amount Rs. 1,151-5-2 which was obtained by us in ready cash this day for the purpose of constructing a house etc.' The document states later on : 'And it has hereby been agreed on karar that if, without your paying in time, with future interest thereon from this day forwards, the Rs. 7,348-10-10 which as aforesaid is described in Schedule B and which was agreed to be paid off by you, and obtaining back the documents described in Schedule C any occasion is given for any loss to be sustained by us consequent thereupon or for us to pay any amount, yourself and your properties would be liable for all such losses and amounts etc.' It is contended that these clauses amount merely to a contract of indemnity, and therefore the respondents, the vendors of the property were not entitled to bring this suit, until any loss has been caused to them by the appellant, the vendee failing to pay Es. 7,848-10-10 as covenanted by him. Whether it is an absolute covenant to pay the purchase money in the way agreed upon by the parties or a covenant merely by way of indemnity, must necessarily depend, upon the construction of the document. As I read Ex. A, it provides that the greater part of the purchase money should remain in the hands of the purchaser, he undertaking to pay the different creditors. These were all simple debts due on promissory notes, and none of them were charged upon the property. No doubt there is a contract by the vendee to compensate the vendors for any loss sustained by them by his default in paying the amount which he undertook to pay. But that, in itself, would not make it a mere contract of indemnity, All that it means, reading it with the other clauses, is that if the vendee having the money of the vendors in his hands fails to pay according to the contract certain creditors of theirs, then he must compensate the vendors for any loss that may be caused to them by such breach of contract, This is to my mind a mere case of contract to pay the purchase money, providing for compensation in case of breach. It is just the case which is set out in the decision to which I was a party, viz., Kaliammal v. Kolandavelu Goundan (1916) 5 L.W. 228. It is there stated, 'No doubt there are cases in which the gist of the transaction is that the vendor leaves part of the sale proceeds in the hands of the vendee with a direction that he shall pay the debts for which the vendor was liable. In Such cases of absolute covenant it is open to the vendor to sue the vendee as soon as he fails to pay the debts as they become due and the words of such a covenant may be inconsistent with a covenant to indemnify properly so called.' There is another decision to which I was a patty, Raghunatha v. Sadagopa (191l) L.R. 36 M. 348. The headnote of that decision is in these words. ' A transfers his property to B in consideration of B agreeing to pay certain sums to third persons. A is himself entitled to sue B for the recovery of those sums as if they are due to him in case of B's failure to pay the third persons within a reasonable time; and A. is not in such a case bound to show that he was in any way damnified by B's failure.' There was a previous decision of Subra-mania Aiyar and Moore, JJ., on the same subject in Doraisinga Tevar v. Arunachallam Chetti I.L.R. (1899) M. 441 which perhaps went further. There the agreement provided that if the defendant failed to discharge the debt, he should be liable to pay the plaintiff for any damage the latter might sustain. It was held that the agreement was not a mere contract of indemnity. There the learned Judges point out in support of their view, that this provision could not detract from the absolute promise to pay contained in the beginning of the document. Here also there is an absolute promise to pay, though the document further provides for compensation in default of payment. It has been argued by Mr. C. V. Ananthakrishna Aiyar that the decision of the Privy Council in Izzat-un-Nissa Begam v. Pertab Singh I.L.R. (1909) A. 583supports his contention, and that the view of the law laid down especially in Doraisinga Tevar v. Arunachallam Chetti I.L.R. (1899) M. 441, requires reconsideration. In Izzat-un-Nissa Begam v. Pertab Singh I.L.R. (1909) A. 583 the equity of redemption in certain property was sold in auction and was bought by the decree-holder. The sale was subject to two prior mortgages. As it happened, those mortgages were found to be invalid, and the purchaser had nothing to pay on that account. The owner of the property sued afterwards to recover the amount of those mortgages from the purchaser. The Judicial Committee held that the purchaser of the equity of redemption was entitled to whatever benefit accrued to him by reason of the mortgages which were supposed to exist on the property being found to be inoperative. He had bought the equity of redemption and there was thus a contract implied by law that he would indemnify the owner 'of the property against encumbrances affecting it. As it happened, he had not to pay any of the supposed emcumbrances. In those circumstances, it was pointed out that the owner of the property had got what he bargained for and had nothing to complain of. There is one sentence in the judgment which is especially relied on by Mr. Ananthakrishna Aiyar and it is this : ' If the purchaser covenants with the vendor to pay the encumbrances, it is still nothing more than a contract of indemnity'. But reading that sentence in the light of the rest of the judgment, it means nothing more than this, that in a transaction of the nature under consideration in that case, there was an implied contract of indemnity, and if the purchaser expressly covenanted with the vendor to pay the encumbrances, such a covenant as that without more, having regard to the nature of the transaction, would in no way change the character of the contract which the law implied between the parties. It does not in my opinion countenance a general proposition that wherever there is a contract to pay compensation to the vendor for any loss caused to him by non-payment, that must be treated as a mere contract, of indemnity; that is to say that we must always in such a case disregard the express and unqualified covenant for payment and treat the transaction merely as a contract of indemnity. The gist of the transaction in this case was that the appellant constituted himself the agent of the respondents for the purpose of paying certain debts. In the case in the Privy Council there were debts charged upon the property and as the property was sold subject to those encumbrances, the law required that the purchaser should discharge those encumbrances if called upon to do so, and if he did not, then he must indemnify the vendor against all loss. But here the debts were ordinary money debts, and there is an unconditional contract that with the greater part of the consideration money the appellant will pay these debts. It seems to me altogether unreasonable to treat such a contract as a mere contract of indemnity, simply because the document provides for compensation for any loss caused to the respondents by the breach of the contract. I therefore hold that the conclusion of the learned Judge on this point is right.

3. The memorandum of objections relates to the costs which have been disallowed to the respondents by the District Judge. These are the costs which they had to pay to the plaintiffs in certain suits brought to recover the debts which the appellant undertook to pay. I have no doubt that the appellant is liable for this amount.

4. The result will be that the' appeal is dismissed with costs. The memorandum of objections must be allowed with costs, and the decree will be modified by increasing the amount by Rs. 355-8-0. The time for payment of the decree amount will be extended by four months irom this date.

Seshagiri Aiyar, J.

5. In a given case it may not be easy to determine whether a suit is upon a covenant or upon a contract of indemnity. We may take it that the decision of the Judicial Committee in Izzat-un-Nissa Begam v. Pertab Singh I.L.R. (1909) A 583 establishes that wherever there is a sale of property subject to previous encumbrances it must be regarded that there is a contract of indemnity by the purchaser as well. Although the Transfer of Property Act dces not specifically refer to such an indemnity, from the decision of the Judicial Committee we must take it that whenever there is a sale of property and the purchaser has to discharge encum brances upon the property, there is on the one hand on the part of the vendor a contract to indemnify the purchaser for any loss he may be put to, and on the other hand there is a contract on the part of the purchaser that he would relieve the vendor from any personal liability to pay the mortgage amount subsisting on the property. Subject to this reservation, ordinarily where there are agreements by the purchaser to pay off, outstanding debts which are not charges on the property, they must be regarded as mere covenants or agreements and the suit would be generally upon the agreement which has been broken. In such cases, the purchaser must be regarded as the agent of the seller. It is the seller's money that he has, and the purchaser is bound to apply the money as directed by the seller. If he fails to so apply, the seller can say, 'You have not discharged my debts as directed. Eeturn the money left with you.' In those circumstances there will be a right on the part of the seller to call back the money so that he may himself apply it towards the discharge of the debts. In such cases, the suit will be upon the covenant and not upon an implied or express contract of indemnity. In the ptesent case, I feel no doubt that the suit is brought upon the covenant. The two clauses in Ex. A to which Mr. Ananthakrishna Aiyar drew our attention refer to losses sustained by voluntary payments on the one hand and by involuntary payments on the other. The clauses contemplate that in some cases there may be a decree and the property of the vendor may have to be sold; then in others there may be voluntary payments to avoid litigation. These are the two classes of cases mentioned in the sale-deed. These are cases of covenants and not of indemnity. Following the decisions of this Court to two of which my learned brother was a party, viz., Kaliamma v. Kolandavelu Goundan (1916) 5 L.W. 228. Raghunatha v. Sadagopa I.L.R. (1911) M. 348. I hold that this is a suit brought uprn the covenant and that the decree was rightly given by the court below, I agree that the decrees should be modifed as suggested by my learned brother.


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