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Veeramalai Vanniar (Died) and ors. Vs. Thadikara Vanniar and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty;Contract
CourtChennai High Court
Decided On
Case NumberAppeal Nos. 199, 440, 441 and 442 of 1962
Judge
Reported inAIR1968Mad383; (1968)1MLJ437
ActsSpecific Relief Act - Sections 27
AppellantVeeramalai Vanniar (Died) and ors.
RespondentThadikara Vanniar and ors.
Cases ReferredDurga Prasad v. Deepchand
Excerpt:
.....three minor sons--in suit by plaintiff for specific performance, defendant contending that subsequent purchasers of property were bona fide transferees for value without notice--maintainability of contention --applicability of section 27 of act--plaintiff being in possession of property--held plaintiff's being in possession is to be deemed as notice to subsequent purchasers of his interests-- subsequent purchasers not making further enquiries--they are not purchasers in good faith and plaintiff is entitled to decree for specific performance.; the appellant filed a suit claiming specific performance of an agreement of sale of the suit properties. he was obliged to file the present suit as he subsequently discovered that at the instance of the first defendant, his brother,..........purchaser paid and could be deemed to have paid the purchase paid and could be deemed to have paid the purchaser price. a perusal of the judgment shows that the learned judge was also of the view that the entire purchase money should have been paid before the subsequent purchaser obtained knowledge of the prior agreement of sale. in the instant case, even at the time when the first defendant gave evidence, there was admittedly a balance of rs. 7000 due under the three sale deeds (vide d.w. 1's evidence at page 44 of the typed papers). the learned judge has committed a serious error in thinking that the words 'who has paid his money' in section 27(b) are equivalent to 'who has paid his money' (sic) or 'who has agreed to pay his money'. the judge has overlooked that it is the actual.....
Judgment:
(1) This batch of four appeals arises out of four suits which were tried and disposed of by a common judgment by the learned Subordinate Judge of Tanjore. Appn. No. 199 of 1962 is against the decision in O. S. 29 of 1960, the evidence in which, by consent of parties, was treated as evidence in the other suits. It will be therefore convenient to refer to the rank of the parties and the controversy in that suit, as the decision therein has to simply follow in the other three appeals.

(2) The appellant in A. S. 199 of 1962 (hereafter referred to as the appellant) filed the suit, O. S. 29 of 1960, claiming specific performance of an agreement of sale of the suit properties, of an extent of about 11/2 velies, situate in the village Nala Uthamanallur, Tanjore Taluk. The plaintiff's brother is the first defendant and the latter's wife is the second defendant. Minor defendants 1 and 2. Ammaniammal, the sixth defendant, to whom the suit properties belonged died pending suit and on her death her only daughter and legal representatives was impleaded as the seventh defendant. The plaintiff's case was that in Avani 1956, an agreement was entered into between the plaintiff and the 6th defendant to sell the suit properties, about 11/2 velies in extent for a sum of Rs. 9000, that under that agreement the sale transaction was to be completed by the next 30th of Chitrai, i.e., April 1957, that on 19-9-1956, the plaintiff paid a sum of Rs. 1000 towards part payment of the price and that the same was evidenced by a document signed and passed by one Thiruvengadam, the son-in-law and agent of Ammaniammal and in that document all the details of the agreement of sale have been embodied, viz., the price fixed at Rs. 9000 the payment and receipt of Rs. 1000 the balance of Rs. 8000 to be paid before the next Chitrai i.e., April, 1957, and the sale was to be completed. The plaintiff's further case was that on 30-10-1956, this Thiruvenkadam, the agent of Ammaniammal wrote a letter urging upon the plaintiff to complete the transaction without further delay and not to wait till Chitrai, at the same time warning the plaintiff that the first defendant the plaintiff's brother, was making efforts to purchase the properties. The plaintiff was obliged to file the present suit as he subsequently discovered that at the instance of the first defendant, his brothers Ammaniammal had executed three sale deeds all dated 29-12-1956, comprising various items of properties including the suit properties, the vendees under the sale deeds, being the first defendant's minor children, 3rd, 4th and 5th defendants. In addition to the other evidence in the case, both oral and documentary, the plaintiff mainly relied upon the two letters given by Thiruvengadam on behalf of Ammaniammal, the vendor to the plaintiff. The contesting defendants resisted the suit on the ground inter alia that no such agreement of sale was entered into between the plaintiff and the sixth defendant, that the two letters alleged to have been written by Thiruvengadam purporting to be on behalf of the vendor Ammaniammal, are ante-dated and concocted documents and that in any event the defendants were bona fide transferees in good faith and for value paid without any knowledge of the alleged agreement of sale in favour of the plaintiff.

(3) The plaintiff is admittedly in possession of the suit properties and in this suit, whilei claiming

specific performance he had deposited in the trial Court the balance of the price due by him. The other three suits were filed by the three minor sons of the first defendant for possession of the suit properties to the extent covered by the respective sale deeds in favour of each of the defendants which, naturally was resisted by this Veeramalai, the plaintiff in O. S. 29 of 1960, and the sole defendant in all these suits on the basis of the aforesaid agreement of sale. The learned Subordinate Judge negatived the contentions of the plaintiff and dismissed his suit and following upon that, decreed the other suits. hence this batch appeals by this Veeramalai for enforcement of his rights under the agreement of sale.

(4) Reference may first be made to the main background of the case and the facts which are admitted or beyond controversy and clearly established.............................................................................. .....................

(After discussing the evidence and facts of the case His Lordship proceeded):

(5) The plaintiff cannot surely be nonsuited on the ground that the 6th defendant while admitting the agreement of sale, has pleaded a complete novation as a result of which she was discharged from the contract, the first defendant taking her place. Even in the additional written statement of the first defendant he did not take up this stand. When he totally denied the agreement of sale, it does not lie in his mouth to plead that as a result of the novation pleaded by the 6th defendant, the plaintiff cannot get any relief. The plea of discharge contained in the written statement of the sixth defendant will have to be established by independent evidence, the burden being upon the sixth defendant and the first defendant. For all these reasons, we have no hesitation in upholding the plaintiff's case of the agreement of sale.

(6) The only question that remains is whether the defendants are entitled to invoke the provisions of Sec. 27(b) of the Specific Relief Act, as persons who have paid money in good faith and without notice of the original contract. It is simply amusing how, on the admitted facts, the learned Subordinate Judge felt that defendants 3 to 5 are transferees for value who have paid their money in good faith and without notice of the plaintiff's agreement of sale. He has not borne in mind the rudiments and the basic principles of law. The general rule is that no person can convey a better title than what he has, except where the statute provides exceptions to the rule like Sec. 27(b) of the Specific Relief Act. If a person as the owner of the property, has entered into an agreement to sell the property, he cannot thereafter convey the same property to any other person, as after the prior agreement of sale he cannot be said to be a free owner of the property. If he subsequently alienates the property he can alienate it only subject to the rights created under the prior agreement of sale. S. 27 of the Specific Relief Act is in these terms:--

"27. Except as otherwise provided by this Chapter, specific performance of a contract may be enforced against-

(a) either party thereto: (b) any other person claiming under him by a title arising subsequently to the contract, except a transferee for value who has paid his money in good faith and without notice of the original contract".

The plaint language of the sub-section (b) shows that the subsequent transferee can retain the benefit of his transfer by purchaser which, prima facie, he had no right to get, only after satisfying the two conditions concurrently; (1) he must have paid the full value for which he purchased the property and (2) he must have paid it in good faith and without notice of the prior contract. Further the burden of proof is upon the subsequent purchaser to establish these conditions in order that his rights may prevail over the prior agreement of sale. It will be sufficient to refer to the decision of the Privy Council in Bhup Narain Singh v. Gokul Chand, 66 Mad LJ 255 = (AIR 1934 PC 68), about the stringent nature of the conditions and the burden of proof under Sec. 27(b). In the instant case, admittedly the full price has not been paid at the time when controversy arose and even at the time when the suit was filed. The learned Judge was of the view that because the bargain as embodied in the three sale deeds provided for the payment of the money in convenient instalments and as a substantial portion of the price had been paid, the defendants must be regarded as transferees who paid their money. This view is clearly erroneous. It is sufficient to refer to the leading decision in Himatlal Motilal v. Vasudev Ganesh, (1912) ILR 36 Bom 446, in which it was held that in order to defeat the prior equity to which the plaintiff was entitled, the subsequent purchasers were bound to establish three things that (1) they were purchasers for value (2) bona fide and (3) without notice; and that if the entire price had not been paid and a security had been given for the payment of the balance of the purchase price, the defendants cannot resist the claim for specific performance. (Vide observations at page 451 of the above decision). Section 27(b) of the Specific Relief Act is only the statutory provision of the principles enunciated in the decisions in England to which reference has been made in this Bench decision of the Bombay High Court. The principle in this decision was referred to with approval in Mohammed Haneef Sahib v. Board of Trustees. Jumma Masjid Adoni, 1944-1 Mad LJ 377 = (AIR 1944 Mad 421), in which it was held that the words in Sec. 27(b) 'who has paid his money' mean the transferee who has paid the whole of the consideration and not a transferee who has paid only part of it. Our attention was also drawn to the decision of Justice Varadachariar J., in Arunachala v. Madappa, AIR 1936 Mad 949, in which the learned Judge (Varadachariar J.) called for a finding from the trial Court as to the dates on which the subsequent purchaser paid and could be deemed to have paid the purchase paid and could be deemed to have paid the purchaser price. A perusal of the judgment shows that the learned Judge was also of the view that the entire purchase money should have been paid before the subsequent purchaser obtained knowledge of the prior agreement of sale. In the instant case, even at the time when the first defendant gave evidence, there was admittedly a balance of Rs. 7000 due under the three sale deeds (Vide D.W. 1's evidence at page 44 of the typed papers). The learned Judge has committed a serious error in thinking that the words 'who has paid his money' in Section 27(b) are equivalent to 'who has paid his money' (Sic) or 'who has agreed to pay his money'. The Judge has overlooked that it is the actual payment of the money which alone confers the right so as to prevail over a prior agreement of sale.

(7) The trial Court has committed the same serious error in holding that the defendants are transferees without notice of the original contract under Sec. 27(a) of the Specific Relief Act. We have already held that the defendants had actual knowledge of the plaintiff's prior agreement of sale when they took the sale deeds, Exs. B-13 to B-15. Even if the defendants had no actual notice or knowledge of the agreement of sale, they must be deemed to have had constructive notice or knowledge on the admitted facts of the case. It is surprising how the learned Judge was persuaded of find this point in favour of the defendants despite the fact that his attention was invited to the decision in M.R.P. Yella Reddi v. Subbi Reddi, 1954-2 Mad LJ (Andh) 6 = (AIR 1954 Andhra 20), of the Andhra High Court which contains a reference to all the leading decisions in England and India and in particular to the decisions of this Court, the latest being the decision of Balakrishna Iyer J., inParvathathammal v. Sivasankara Bhattar, . It only shows that the learned Judge has

not carefully booked into the decisions referred to in his judgment. He says that no enquiry is necessary by the subsequent purchaser regarding the rights of the person who is already in possession, once it is found that that person originally got into possession as a lessee under the vendor. In other words, the learned Judge holds that if the subsequent purchaser knew that at some earlier point of time the person who relied upon the prior agreement of sale was already in possession as a lessee, the subsequent purchaser need not make any enquiry as to whether the lessee was continuing in possession only as a lessee or in the assertion of any other right. It is this identical point which has been considered by the leading decisions in England and in India and the view has been uniformly taken in all the cases that it is the duty of the subsequent purchaser to enquire (of ?) the persons in possession as to the precise character in which he was in possession at the time when the subsequent sale transaction was entered into. In a usufructuary mortgagee was in possession of the property and an agreement of sale was entered into by the mortgagor to sell the property to the usufructuary mortgagee in satisfaction of the mortgage and also for payment of some additional consideration. The contesting defendant was the subsequent purchaser and it was admitted that the latter did not make any enquiries of the usufructuary mortgagee in order to ascertain from him whether he had any rights in the property other than as usufructuary mortgagee. This identical argument which was accepted by the trial Court in the instant case was advanced that once it was known that the property was in the possession of a usufructuary mortgagee, there was nothing further that a prospective purchaser of the property need have enquired about. This argument was rejected in unambiguous terms. The learned Judge has referred to all the leading decisions and in particular had extracted the following statement of the law in Barnhart v. Greenshields, (1853) 14 ER 204 at p. 209--

"With respect to the effect of possession merely we take the law to be that if there be a tenant in possession of land, a purchaser is bound by all the equities which the tenant could enforce against the vendor and that the equity of the tenant extends not only to interests connected with his tenancy as in Taylor v. Stibbert, 1794-2 Ves Jr. 437, but also to interest under collateral agreement, as in Denials v. Davison 1809-16 Ves Jun 249, Allen v. Anthony, 1816-1 Mer 282, the principle being the same in both classes of cases, namely, that the possession of the tenant is notice that he has some interest in the lands, and that a purchaser having notice of that fact, is bound, according to the ordinary rule, either to enquire what that interest is, or to give effect to it, whatever it may be".

1954-2 Mad LJ (Andh) 6 = (AIR 1954 Andhra 20), was a case in which the person in whose favour a prior agreement of sale was entered into was already in possession as a lessee but the property was subsequently sold to the contesting defendant. There too the same argument was advanced, that in view of the character of the plaintiff's possession at its inception as a tenant, there was no duty case upon the subsequent purchaser to make any further enquiry. This argument was not accepted. As this decision reviews the relevant cases on the topic, it is unnecessary to burden this judgment by referring to all the cases. Reference may, however, be made to the following observations of the Lord Chancellor in the leading decision which has been followed in all subsequent cases in Deniels v. Davison, (1809) 16 Ves Jun 249 at p. 254:--

"Where there is a tenant in possession under a lease, or an agreement, a person purchasing part of the estate must be bound to inquire on what terms that person is in possession.......that a tenant being in possession under a lease with an agreement in his pocket to become the purchaser, these circumstances altogether give him an equity repelling the claim of a subsequent purchaser who made no enquiry as to the nature of his possession".

(Vide also 34 Halsbury's Laws of England, page 366, Para 644 and 14 Halsbury's Laws of England, page 546, Para 1024). For all these reasons, it has to be held that the defendants have failed to satisfy both the limbs of S. 27(b) of the Specific Relief Act, (1) they have not paid the money and (2) they are not transferees in good faith and without knowledge of the prior agreement of sale. The plaintiff will be entitled to a decree for specific performance as against defendants 2 to 5 and 7. The sale deed to be executed by them shall be on the lines indicated in the decision of the Supreme Court in Durga Prasad v. Deepchand, . As the plaintiff has deposited the

balance of price at the time of the institution of the suit, there is no question of the plaintiff being liable for mesne profits thereafter. From May 1957 till 8th June 1960 for three years they, the defendants, will not be liable to pay interest on the balance of Rs. 8000. So far as the period from May 1957 to 1960 is concerned, on our findings, the plaintiff has been in possession not as a lessee but only in pursuance of the agreement of sale. He will not be liable for any rent or damages for use and occupation nor for any mesne profits. The question is whether he could be held liable for interest on the balance of Rs. 8000 from May 1957 to 8th June 1960. He was always ready and willing but neither defendants 3 to 5 nor the 6th defendant would receive the money and complete the transaction. On the other hand, the plaintiff was harassed by eviction proceedings and put to unnecessary expenses. In those circumstances, having regard to the fraudulent conduct of the first defendant, we are of the view that the plaintiff should not be made liable for interest. The result is that a sale deed will have to be executed in favour of the plaintiff and the sum of Rs. 8000 will have to be taken by defendants 3 to 5. Instead of the properties, their rights will be transferred to the balance i.e., the sum of Rs. 8000. In view of this conclusion of ours, the question of the plaintiff's right to the site on which he has put up the building on payment of paghudi does not arise.

(8) The result is that A. S. 199 of 1962 is allowed and the plaintiff's suit O. S. 29 of 1960 is decreed. The plaintiff will be entitled to his costs here as well as in the trial Court as against defendants 2 to 5 and 7th defendant. A. S. 440, 441 and 442 of 1962 are also allowed and the connected suits O. S. 27, 28 and 29 of 1961 are all dismissed. There shall be no order as to costs in the trial Court in all the three suits. in the three appeals, A. S. 440 to 442 of 1962, the appellant will be entitled only to the court-fee paid by him in this Court. We are not awarding separate counsel's fee in all these three appeals either in the trial Court or here as they were tried along with the other suit O. S. 29 of 1960 and the arguments were the same. The defendants are directed to execute the conveyance within 2 months after the receipt of the judgment in the lower Court. On their default in doing so, plaintiff will be entitled to execute this decree for specific performance. At the time of the execution of the sale deed and before the payment of Rs. 8000 is made to defendants 3 to 5 the plaintiff will be entitled to adjust and to be paid the costs which have been decreed in his favour as per the decree. if the defendants had taken possession of the suit properties taking advantage of the decree of the trial Court they should surrender possession to the plaintiff. There shall be a decree for possession in favour of the plaintiff accordingly. The defendants will also be liable for mesne profits for that period which shall be ascertained by the trial Court.

(9) Order accordingly.


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