1. This appeal involves the question whether an undertaking by a vendee to pay a creditor of the vendor precludes the vendee from retaining that sum when the mortgagor who undertook as part of the same contract of sale to pay off a mortgage on the property did not do so. The twentieth defendant was the owner of the property, and he sold it to the first defendant under a sale deed Ex. I, dated the 20th June, 1935. The consideration for the sale deed was a sum of Rs. 1,935-15-1, out of which a sum of Rs. 302-12-4 was reserved with the vendee for payment to the plaintiff, who is a simple money creditor of the vendor. As part of the same sale transaction the vendor undertook to pay a mortgage existing on this and other properties and to free the property from that encumbrance as well. The wording is:
The properties in the A Schedule are included in the sample mortgage executed in favour of M. A. Subramania Aiyar of Chakkirar Matam being document No. 1397 of 1934. That amount will be discharged without any delay, but if it is not so done and if the properties therein are sold and if there is any balance due for which you are made liable, then you can pay the same and be entitled to recover.
Finding that the twentieth defendant did not pay the mortgage due to Subramania Aiyar, the first defendant declined to pay the amount of Rs. 302-12-4 to the plaintiff. Thereupon the twentieth defendant assigned his right to recover this sum of Rs. 302-12-4 treating it as unpaid purchase money together with his vendor's lien to the plaintiff: The plaintiff as the assignee of the right of the twentieth defendant to' recover this sum as unpaid purchase money filed this suit to enforce recovery thereof by sale of the property covered by the charge. Both the Courts rejected the plaintiff's claim and the plaintiff appeals. His learned advocate urges that in this case there is a contract that the vendee should pay this sum of Rs. 302-12-4 to the plaintiff and that there is also a contract by which the vendor himself was to pay and discharge the mortgage debt due to Subramania Aiyar and that therefore the provisions of Section 55 of the Transfer of Property Act do not apply because that section begins by saying, 'in the absence of a contract to the contrary'. The learned advocate urges that the right given to the vendee to retain the unpaid purchase money in case the mortgages on the property are not discharged by a vendor in the case of a sale free from encumbrances is taken away in this case because there is a contract to the contrary.
2. Section 55, Clause 5 (6) runs thus:
The buyer is bound to pay or tender, at the time and place of completing the sale, the purchase money to the seller or such person as he directs, provided that, where the property is sold free from encumbrances, the buyer may retain, out of the purchase money, the amount of any encumbrances on the property existing at the date of the sale, and shall pay the amount so retained to the persons entitled thereto.
This section expressly gives to the buyer a right to retain out of the purchase money the amount of any encumbrances on the property existing on the date of the sale, where the property is sold free from encumbrances. In this case it is undoubted that the property was sold free from all encumbrances in favour of Subramania Aiyar. There is an express contract that the mortgagor shall pay that mortgage himself and he undertakes to do that without any delay. So the condition that the sale should be free from encumbrances is satisfied. So, the buyer may retain the amount of that encumbrance if the vendor does not discharge that encumbrance. In this case the vendor undertook to discharge it immediately; he did not do so; and the vendee prima, fade is entitled to retain out of the purchase money enough to pay the, encumbrance in favour of Subramania Aiyar. In this case the sum retained is admittedly much less than the sum due to Subramania Aiyar. What is said is that the right given under Section 55, Clause 5 (b), is subject to a contract to the contrary and that the contract to the contrary is found in the direction given in the sale deed that the amount is to be paid to the plaintiff. He, as I said before, was and continues to be a simple money creditor of the vendor. Is this a contract to the contrary is the question. And again, is the mortgagor's undertaking to pay Subramania Aiyar's mortgage and giving liberty to the vendee to pay that sum in case the vendor did not pay and to recover it from him a contract to the contrary?
3. A very similar case arose for decision before a Bench of this Court in Kata Veerabadrayya v. Subba Rao Appeal No. 48 of 1940 which is an unreported case the judgment having been delivered only on the 6th November, 1941. It is enough to refer to one sale deed in that case for a sum of Rs. 2,500 out of which Rs. 1,300 was directed to be paid to a simple money creditor of the vendor. There was also an undertaking by the mortgagor to discharge other named encumbrances which were existing on the property. The prior mortgages which were existing on the property and which the vendor had to discharge were not discharged till June, 1937. The vendee did not pay amongst other things the sum of Rs. 1,300 to the creditor as directed by the sale deed. The vendors conveyed to the plaintiff the right to recover from the vendee the unpaid purchase money and also the right to recover the sum by enforcing the unpaid vendor's charge. The plaintiff to whom this right was assigned paid off the encumbrances which the vendor had to pay and brought the suit out of which the appeal arose for recovering the purchase money from the vendee. By the time of the suit the properties were free from the mortgages which had existed on the date of the sale. The vendee who was the first defendant in the action paid the amount of Rs. 1,300 into Court soon after the plaint was filed- Among other questions, one question was whether the vendee was liable to pay interest from the date of the mortgage or only from the date when the encumbrances existing on the date of the sale were cleared. After setting out the terms of Section 55. 01. 5 (b), the learned Judges discuss the question whether there was a contract to the contrary which would preclude the vendee from taking advantage of the right given in that section, and they say,
With regard to the sum of Rs. 1,300, it is argued for the appellant; that there is a contract to the contrary. Section 55, Clause 5 (6) of course applies only in case there is no contract to the contrary as is mentioned in the very opening clause of Section 55.
That contract to the contrary, he states, is the undertaking of the vendors themselves to discharge the two mortgages Exs. B and C. The fact that they have undertaken to discharge Exs. B and C makes this a sale free from these particular encumbrances and therefore, if there is no contract to the contrary, Section 55, Clause 5 (b) must apply. We are unable to see how the covenant by the vendors that they will themselves discharge. Exs. B and C can be called a contract to the contrary. Exs. B and O were mortgages undoubtedly existing upon the land which was sold and Section 55, Clause 1 (g), lays it down that, in the absence of any contract to the contrary, it is the vendors who must discharge those mortgages. The specific contract, therefore, entered into by the vendors in this sale deed that they would discharge Exs. B and C is a contract which is only in the fullest accordance with the general law as to the rights of buyer and seller enunciated in Section 55, and in no sense whatever can it be called a contract which is contrary to any such provision of law. Section 55, Clause 5 (6), therefore, can be put forward by the first defendant in this case in support of his claim that he had a right to retain purchase money because the sale to him was free from encumbrances and his vendors did not in fact discharge the encumbrances.
It is true that in this case the learned Judges did not expressly deal with the question whether the direction in the sale deed to pay Rs. 1,300 to the simple money creditor was a contract to the contrary; but it is clear that they did not regard it as such. It is difficult to see how this amounts to a contract to the contrary. It is only a case of the mortgagee retaining this amount as the agent of the mortgagor and would be bound to obey the mortgagor's directions as regards the disposal of that amount. Under the sale deed the vendor directs him to pay it a particular creditor of his. There is nothing in, law in such cases to prevent a vendor from varying that direction and to direct the vendee to pay it to himself or to any other person. In this case no doubt the sale deed contained a direction that the vendee should pay this amount of Rs. 302-12-4 to the plaintiff who is a simple money creditor of the vendor. The case of the plaintiff is that soon afterwards seeing that the vendee did not pay the plaintiff, the vendor called upon the vendee to pay that amount to himself and finding that he would not pay it assigned his right to recover that amount together with a charge for the unpaid purchase money to the plaintiff by a separate deed. At any rate therefore as soon as the original direction in the sale deed was varied by a request to the vendee to pay the amount to the vendor himself, the position is that of an ordinary sale where there is some amount left with the vendee which would ordinarily be payable to the vendor himself but which might be retained by the vendee under Section 55, Clause 5 (b) in case the sale is from encumbrances and that to the extent of the money required to pay off the earlier encumbrance. In this view there is no point in the argument based upon this direction to pay the plaintiff. That is evidently why the learned Judges did not think it necessary to deal specifically with this aspect of the case. But it is undoubted that the case before the Bench is on all fours with the present case and that this case is indistinguishable from that case. I am therefore bound by the decision of the Bench. Mr. Y. G. Krishnamoorthi whom I requested to help me as amicus curias as the respondents do not appear drew my attention to the above decision as well as to a few other decisions of the Allahabad and Calcutta High Courts. One decision reported in Abdul Wahid v. Sher Muhammad : AIR1935All463 may be referred to as it appears to me to have some bearing on this question. There the vendor undertook to deliver possession to the vendee and there was a direction that the vendee should pay a part of the purchase money left with him to a third party, a creditor of the vendor. The money was not paid. But the vendor did not deliver possession to the vendee. Finding that the vendee did not pay the amount to the named creditor the vendor filed the suit out of which the appeal arose for recovery of that amount by enforcing the vendor's lien. The defence was that the vendor was under a duty to deliver possession and that until the vendor delivered possession he was not entitled to call upon the vendee to pay the purchase money. Under Section 55, Clause 1 (f), the seller is bound to give, on being so required, the buyer or such person as he directs, such possession of the property as its nature admits. The vendor did not deliver possession on being required to do so by the vendee. But the vendor wanted that the money which was left with the vendee with a direction that it should be paid over to a creditor of his should be paid to him as unpaid purchase money. It was held that the vendee was entitled to put forward non-delivery of possession as a valid defence. It would be noticed that the obligation under Section 55 Clause 1 (f) as well as the right under Clause 5 (b) are all subject to the words 'contract to the contrary' which are contained in the opening portion of the section. The direction to pay the purchase money to a third party and the undertaking by the vendee to do so were not obviously treated as a contract to the contrary.' This decision might not be directly in point, but the principle of it seems to me to apply to this case. But anyway the decision of King and Lakshmana Rao, JJ., in Appeal No. 48 of 1940, is directly in point, and following it I dismiss this appeal. As the respondents do not appear in this case, I requested Messrs. Y. G. Krishnamoorthy and P. Suryanarayana to help me and I am very much indebted to them for the assistance that they have rendered.