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Visvanathan Chetty and ors. Vs. S. Ethirajulu Chetty and ors. - Court Judgment

LegalCrystal Citation
SubjectLimitation
CourtChennai
Decided On
Judge
Reported in76Ind.Cas.467; 76Ind.Cas.467; (1923)45MLJ389
AppellantVisvanathan Chetty and ors.
RespondentS. Ethirajulu Chetty and ors.
Cases ReferredKhan v. Hardeo Sahai I.L.R.
Excerpt:
limitation act (ix of 1908), sections 8, 17, schedule i, article 10 - pre-emption suit--minority of pre-emptor--extension of time--suit for pre-emption of equity of redemption--limitation, commencement of--guardian and minor--contract for sale or purchase of immoveable property by guardian--pre-emption contract--minor, liability of--mortgage--clog on redemption--pre-emption right given to mortgagee--failure to exercise right, effect of. - - 3,025 and called upon the 2nd and 3rd defendants to execute a conveyance in favour of the plaintiff but 2nd and 3rd defendants refused to receive the said sum and failed and neglected to execute the conveyance. kindly go through paragraph 16 of the first mortgage deed in which it is clearly stated that you should not do anything with the said..........issues were settled:1. is the plaintiff entitled to a right of pre-emption in respect of the suit property?2. is the recital in clause 16 of the mortgage deed dated the 25th april, 1914 a clog on the equity of redemption and is plaintiff in consequence deprived of his right of pre-emption?3. is the covenant as to the fight of pre-emption void and unenforceable for the reasons set out in paragraphs 9 and 70 of the written statement of defendants 2 and 3?4. is the plaintiff precluded from asserting his right of pre-emption for the reasons set out in paragraph 10 of the written statement of defendants 2 and 3?5. is the plaintiff's claim barred by limitation?6(a) was it a condition precedent for the coming into operation of the sale dated 9-4-1918 to p.s.n. muruganathan chetti that he.....
Judgment:

Kumaraswami Sastriar, J.

1. This (C.S. No. 20 of 1921) is a suit by the plaintiff for the enforcement of pre-emption alleged to be conferred on him by two deeds of mortgage dated 27th November, 1915 for Rs. 2,500 and 25th April, 1914 for Rs. 3,000 executed by the 1st defendant in favour of the plaintiff who was then a minor and represented by his father and natural guardian, Kumaraswami Chetti. The 2nd and 3rd defendants are impleaded as alienees of the mortgaged property with notice. The case for the plaintiff is that the 1st defendant executed the two deeds of mortgage in favour of the plaintiff, then a minor, that the first deed of mortgage contained the following covenant : 'that the mortgagor will, not, during the continuance of the security, in any way or manner deal with the scheduled property or any portion thereof either by way of sale, mortgage, charge, lease or otherwise without obtaining the previous consent in writing of the mortgagee permitting and authorising the morgtagor to do so and that the mortgagee shall have the right of pre-emption in respect of the scheduled property.' The second deed of mortgage stated that all the terms and conditions of the first mortgage should, mutatis mutandis, be treated as applicable to the said deed. The plaintiff states that by reason of these two clauses he is entitled to a right of pre-emption in respect of the property, 'that the plaintiff has recently come to know that on the 9th April, 1918 the 1st defendant sold to P.S.N. Muruganathan Chetti the property mentioned in the schedule hereto for a consideration of Rs. 3,025 in cash and the purchaser covenanted to pay to the plaintiff the amount due on the 'deeds of mortgage and the further charge above referred to and that the said P.S.N. Muruganathan Chetti by a deed of sale dated the 3rd July, 1919 sold the said house and ground together with another property to the 2nd and 3rd defendants herein. The 2nd and 3rd defendants sent a notice dated the 3rd May, 1920 through their Vakils, Messrs Madhavan and Rangaiya, to the plaintiff in which they informed him of the fact of the purchase and offered to redeem the mortgage and the further charge. On the 5th July, 1920 the plaintiff through his vakils sent a reply to the said letter in which he inter alia pointed out to the 2nd and 3rd defendants that he had a right of pre-emption in respect of the said property, that the transfers of the said property by the 1st defendant to P.S.N. Muruganathan Chetti and by the said Muruganathan Chetti in favour of 2nd and 3rd defendants had been effected without the plaintiff's knowledge or consent and that the plaintiff was entitled to enforce his right of pre-emption against 2nd and 3rd defendants. The plaintiff tendered with the said letter a sum of Rs. 3,025 and called upon the 2nd and 3rd defendants to execute a conveyance in favour of the plaintiff but 2nd and 3rd defendants refused to receive the said sum and failed and neglected to execute the conveyance.' The plaintiff therefore prays that the defendants or such of them as the Court may find liable be directed to execute a conveyance in favour of the plaintiff of the property described in the schedule on payment of Rs. 3,025 or such other sum as the Court may find payable by the plaintiff.

2. The first defendant filed a written statement in which he pleads that the sale by him to Muruganathan Chetti was subject to the covenants in the two deeds of mortgage and that the sale to the 2nd and 3rd defendants by Muruganathan Chetti was a sham and colorable transaction. He says that there is no cause of action against him and that he is an unnecessary party to the suit.

3. The 2nd and 3rd defendants raise various pleas. They state that the agreement contained in the two deeds of mortgage is void and unenforceable as being a clog on the equity of redemption, Chat it is also not enforceable because of plaintiff's minority at the date of the mortgages and that opportunity was given by the 1st defendant to the plaintiff's guardian to purchase the property but that the offer was refused, that the claim is barred by limitation, that, in any event, the option to purchase not being exercised before the period for redemption expired, it ceased to have any legal effect and is not enforceable. He says he is willing to redeem the property and that the tender of Rs. 3025 was not a valid tender.

4. Suit No. 88 of 21 is a cross suit to redeem the mortgages:

The following issues were settled:

1. Is the plaintiff entitled to a right of pre-emption in respect of the suit property?

2. Is the recital in Clause 16 of the mortgage deed dated the 25th April, 1914 a clog on the equity of redemption and is plaintiff in consequence deprived of his right of pre-emption?

3. Is the covenant as to the fight of pre-emption void and unenforceable for the reasons set out in paragraphs 9 and 70 of the written statement of defendants 2 and 3?

4. Is the plaintiff precluded from asserting his right of pre-emption for the reasons set out in paragraph 10 of the written statement of defendants 2 and 3?

5. Is the plaintiff's claim barred by limitation?

6(a) Was it a condition precedent for the coming into operation of the sale dated 9-4-1918 to P.S.N. Muruganathan Chetti that he should be bound to sell and convey the equity of redemption to the plaintiff as stated in paragraph 4 of the 1st defendant's written statement?

(b) If so, can the 2nd and 3rd defendants resist the claim of the plaintiff for pre-emption?7. Is the sale deed, dated the 3rd July, 1919 in favour of 2nd and 3rd defendants a sham, nominal, fraudulent and colourable transaction and hence void and unenforceable in law as stated in paragraph 5 of the 1st defendant's written statement?

8. Is the 1st defendant not a necessary party to the suit?

9. Is the tender by the plaintiff a valid tender?

10. To what relief is the plaintiff entitled?

5. The deed of mortgage dated 25th April, 1914 is Ex. A. The material clause is Clause 16 and has been set out in page 2. The plaintiff was then a minor aged 12 years and the deed purports to have been executed in his favour and he was re presented by his father and natural guardian Kumaraswami Chetti. The 2nd deed of mortgage is filed as Ex. B and it incorporates the provisions of the first deed of mortgage as regards the clause in question. On the 4th April, 1918 the 1st defendant wrote a letter to Kumaraswami Chetti, the father of the plaintiff wherein he states that he represented to him some time ago that he wanted to dispose of the equity of redemption of the mortgaged property, as he was getting old end finding it difficult to make any arrangement for payment of interest and taxes and that he was told by the guardian that he might dispose of the same if he got a price more than Rs. 8,000. He proceeds as follows : 'I have been negotiating for the same ever since but I thought it desirable to give you another opportunity before I finish the sale elsewhere. I therefore request you to reconsider and to inform me within one day after the receipt of this letter your last offer for the same, so as to enable me to finish the sale of the same else where.' To this letter a reply was sent on the 5th April, Ex. D, where the plaintiff's guardian denies the allegation in the letter under reply that he asked him to dispose of the property elsewhere if he got more than Rs. 8,000. He then proceeds as follows : 'Do you mean to say that I have forgotten the paragraph No. 16 of the mortgage deed executed by you. Kindly go through paragraph 16 of the first mortgage deed in which it is clearly stated that you should not do anything with the said premises either by sale or by mortgage, lease or other wise without my consent. Under the circumstances you have no voice to do anything in the matter until 1st May 1920 which please note.' On the 9th April 1918, the 1st defendant sold the property to one Muruganathan Chetti under Ex. E. It recites that on the 9th February 1918, the 1st defendant agreed to sell to Muruganathan Chetty the property mortgaged to the plaintiff 'Subject to the conditions and limitations prescribed therein and now subsisting and capable of taking effect.' On the 3rd July 191 8 Muruganathan Chetti sold the property under Ex. F to the 2nd and 3rd defendants. On the 1st April, 1920 the 2nd and 3rd defendants gave notice to the plaintiff's father and guardian (Ex. G.) offering to redeem the property. To this a reply was sent Ex. K, on the 5th July, 1920, wherein they set up their claim under Clause 16 of the mortgage deed for pre-emption.

6. I shall first deal with the question of limitation raised. It is clear from the correspondence which I have referred to that in 1918 the 1st defendant gave the plaintiff's father and guardian notice of his intention to sell the property and asked him what offer he had to make and that in 1918 the position taken up was that the 1st defendant had no power to sell and no offer was made by the plaintiff's father as to what price he was prepared to pay for the house. The case of pre-emption is governed by Article 10 of the 2nd schedule to the Limitation Act which prescribes a period of one year in a suit to enforce a right of pre-emption, the period to run from the time when the purchaser takes, under the sale sought to be impeached, physical possession of the whole of the properties sold or, where the subject of the sale does not admit of physical possession, from the date on which an instrument of sale is registered. Section S of the Limitation Act states that nothing in Sections 6 and 7 of the Limitation Act which gives an extended period in cases of minors or of persons under a disability applies to suits to enforce rights of pre-emption or shall be deemed to extend for more than three years from the cessation of the disability or the death of the person affected thereby the period within which any suit must be instituted or application made. In this case the minority of the plaintiff which would otherwise bring the case under Section 6 does not extend the period and similarly Clause (3) of Section 17 which refers to the fact of death before the right to sue accrues says that nothing in Sub-sections (1) and (2) applies to suits to enforce rights of pre-emption or to suits for the possession of immoveable property or of an hereditary office. The minority of the plaintiff therefore is an element which cannot be taken into consideration in dealing with the question of limitation under Article 10. In this case as the property was under mortgage to the plaintiff with possession and the plaintiff was in possession of the property, all that can be sold was the equity of redemption and, the equity of redemption not being one of which physical possession could be given, the case falls under the latter part of Article 10. Where the subject matter does not admit of physical possession, limitation runs from the date when the instrument of sale is registered. In Shamsunder v. Amanand Begum I.L.R. (1887) All. 234 it was held that in cases where the sale was of the equity of redemption the property cannot be said to be capable of physical possession within the meaning of Article 10 of Schedule II to the Limitation Act and limitation began to run from the date of the registration of the deed of sale. In Intisar Hussain v. Jumma Prasad (1904) 1 A.L.J. 247 it was held that the property in that case which was the sale of an undivided share was not capable of physical possession and that limitation must be computed from the date of registration of the sale-deed. In Umrao Beg v. Mukhtar Beg (1919) 17 A.L.J. 269 which was also a case of a fraction of a share of a Zamindari situated in several Khatas, it was held that limitation began from the date of registration. In Nagina Singh v. Dhuni Chand (1921) 62 I.C. 797 a similar view was taken by the Punjab High Court. The property sold was a property which was in the possession of a mortgagee and it was held that it was Incapable at the time of sale of physical possession being given over and limitation began to run under Article 10 for one year from the date of registration. It was also held that it was immaterial whether registration was made with or without the consent of the vendor as in either registration was equally effective. In Velayudham Pillai v. Tina Velayudham Pillai : AIR1921Mad554 Justice Krishnan observes as follows : 'In cases where there is an outstanding interest in third parties in the property sold which gives them a right to possession as in the case of leases and usufructuary mortgages, even if the sale purports to be of the land itself, the sale would pass only the lessor's or the mortgagor's estate; the subject of the sale in such cases may well be held to be only that estate and not the land; and as physical possession of such an estate cannot be given and the vendor not being entitled to the possession of the land itself could not pass it on to the vendor, it may be that in such cases the second part of column' 3 (of Article 10) will apply if there is a registered instrument. ' A similar view was taken by Justice Napier. The result is that in a case like the present limitation begins from the date of registration.

7. It has been argued that registration is not necessarily notice and that, secondly, it will be a hard case if the plaintiff's suit is barred by the defendant registering the document without his knowledge. It is no doubt true that the Privy Council has decided that registration is not notice but that was with reference not to Article 10 of the Limitation Act but with reference to cases of priority of mortgages under the Transfer of Property Act. Where the Legislature expressly states that limitation begins from registration without any reference to whether the transaction was with or without notice it is difficult to see how the Court can go into any question of notice in dealing with the question. Reference has been made to Section 18 of the Limitation Act but it has no application as it refers to concealment or fraud or misrepresentation and it is not alleged here that there was any such fraud or concealment. On the contrary the 1st defendant gave notice that he wanted to sell the property to strangers and there was no attempt at concealment as regards the sale or registration of this document. I am therefore of opinion that so far as the plaintiff's claim is concerned it is barred by limitation.

8. It was further contended that, even if the plaintiffs', suit is barred by limitation, he could resist a suit for redemption on the ground that his right is not extinguished and reference has been made to a case Kanharankutti v. Aliotti I.L.R.(1890) M. 490, and Krishnan Menon v. Kesaven I.L.R. (1897) M. 305. This contention is with reference to C.S. No. 88 of 1921 brought by the 1st defendant against the plaintiff. It seems to me to be a peculiar position that where the plaintiffs' suit for specific performance is dismissed he can still hold on to the property. And the view taken in 13 and 20 Mad. has not been followed in Ramaswami Pattar v. Chinniah Asari I.L.R. (1901) M. 449 . I entirely agree with the view taken in 24 Mad. where Sheppard and Bashyam Iyengar, JJ. state that, having regard to the provisions of the Transfer of Property Act as regards the right of redemption and of Section 54 as regards the effect of a contract for sale, it can be no defence to a suit for redemption to state that the defendant has got a right to purchase the property under a contract which right he is unable to enforce owing to the bar of limitation. The Full Bench decision in Kurri Verareddi v. Kurri Bapireddi 16 M.L.J. 395 (F.B.) , which has been considered and followed in Ramanathan Chetti v. Rangunathan Chetti 33 M.L.J. 252 is also to the effect that in suits for possession under title it is no defence to say that the defendant has got a right to enforce specific performance of a contract and the case a fortiori is barred by the statute of limitation. It seems to me that a suit under Section 60 of the Transfer of Property Act which the Privy Council in the recent case in Muhammad Sher Khan v. Raja Seth Swami Dayal I.L.R. (1922) All. 185 has construed to be absolute in its terms and applicable to all mortgages and which gives an absolute right to redeem cannot be met by an agreement of pre-emption which, under Section 54 of the Act, confers no right to immoveable property, especially, when a suit to enforce the right of pre-emption is barred under Article 10 of the Limitation Act. I therefore hold that not only is the plaintiff's claim barred by limitation but that it would afford no defence to a suit for redemption.

9. The next question is as regards the minority of the plaintiff and the invalidity of a contract entered into by his guardian, h is admitted that at the date of the mortgage the plaintiff was a minor. It has been held by the Privy Council in Mir Sarwar Jan v. Fakiruddin Muhammad Chowdhury 21 M.L.J. 1154 P.C. in a suit for specific performance by a minor of an agreement for the purchase and sale to him of immoveable property entered into by a manager that the contract was unenforceable as it was not within the competence of the manager of a minor's estate or his guardian to bind the minor or the estate by a contract for the purchase of immoveable property and that the minor was not bound by the contract, there being no mutuality and they were not going to give specific performance of the contract. It seems to me that in the present case this contract could not be enforced. It is argued that in cases of pre-emption there is, by its very essence, no mutuality and that, whereas the minor is not bound to buy, the defendant is bound to sell to nobody else and, the principle of mutuality not being necessary, the case does not fall within the ruling in Mir Sarwar Jan v. Fakiruddin Muhammad Chowdhury 21 M.L.J. 1154 P.C. But, as pointed out in Ramaswami Pattar v. Chinniah Asari I.L.R.(1901) 24 M. 449 cited above, the moment the plaintiff elects to buy the property he affirms the contract and the same legal consequences follow as if there was a contract to buy and it is difficult to distinguish the case from the case of an ordinary contract to purchase. Although there is no mutuality in its inception, when the plaintiff elects to purchase the property and gives notice of his intention to buy, it becomes a contract like any other contract to purchase immoveable property and is governed by the same principles which govern other contracts. Mir Sarwar Jan v. Fakiruddin Muhammad Chowdhury 21 M.L.J. 1154 P.C. applies therefore to such cases.

10. As regards the notices which passed between the parties, i am of opinion that the two notices, Exs. C and D show that there was an offer by the 1st defendant which the plaintiff would not accept. It is not disputed before me that the clause against alienation without the consent of the mortgagee is a clog on the equity of redemption and it is not enforceable as such. The position that the plaintiff therefore took up when he was asked whether he was willing to buy the property was that, the sale itself being invalid under the mortgage document, no question would arise of any option to buy and he said the 1st defendant had no power to sell to anybody else at all. Even assuming that the representation of the 1st defendant that the plaintiff asked him to sell for not less than Rs. 8,000 is untrue, there is still the fact that the 1st defendant asked the plaintiff whether he was willing to buy and the plaintiff not only did not express his willingness but prohibited the alienation. Even assuming that there was a right of pre-emption, it was not exercised and the case falls within the decision in Nanni Lal Singh v. Ram Ratan I.L.R. (1918) All. 127 and Ghulam Mohi-ud-din Khan v. Hardeo Sahai I.L.R. (1920) All. 402. This is a ground on which I am of opinion that the plaintiff's suit fails and it is dismissed with costs.

11. As regards the connected suit C.S. No. 88 of 1921 which is a suit for redemption, it follows from my judgment in the previous suit that the plaintiffs are entitled to redeem. As regards the amount payable by them an account will have to be taken of the amount due to the defendant under the mortgage and the usual preliminary redemption decree will be passed. The suit will be referred to the Official Referee to take an account of the amount due under the mortgage and a filial decree will be passed on the amount being ascertained. Plaintiffs would be entitled to the costs of the suit.


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