1. The plaintiff's suit is for specific performance of a contract of sale entered into with him by the first defendant. The District Munsif gave a decree for specific performance and the Subordinate Judge dismissed the appeal of the first defendant. He has preferred this second appeal.
2. The contention of the appellant is that the direction in the decree, 'that first defendant do draw the above amount on discharging the decree in Original Suit No. 185 of 1910 of the principal District Munsif's Court of Madura and filing a copy of record of satisfaction,' is bad in law. The argument of Mr. Rajah Ayyar is that when a decree for specific performance is given against the vendor, he should not be directed to redeem any encumbrance on the property which was not disclosed to the vendor. The agreement dated the 18th day of October, 1909, does not mention the existence of any encumbrance on the property contracted to be sold, nor is there any recital in it that there are no encumbrances on the properly. The finding of the learned Subordinate Judge is that the first defendant did undertake to free the property from two encumbrances which were mentioned in the certificate of sale, Ex. 0. The first defendant purchased the property in Court-auction in execution of his decree in Original Suit No. 141 of 1902. In the sale proclamation, he stated that the encumbrances had been discharged. In Ex. C which was drawn up by the Court there is a recital that the encumbrances have been discharged. The finding is that the first defendant knew that these encumbrances had not been discharged and that he undertook to discharge them when the agreement, Ex. A, was entered into. The question is when a vendor undertakes; to discharge the encumbrances on the property, whether the Court decreeing specific performance can direct him to discharge the encumbrances before he is paid the consideration for the sale? The contention of Mr. Rajah Ayyar is that the Court should decree specific performance and if the vendee finds that there are encumbrances on the property he should bring a suit for damages against the seller. Under Section 55, Clause 1(g) of the Transfer of Property Act, a seller is bound to discharge all the encumbrances on the property then existing. If the vendee is not aware of the existence of any encumbrance on the property when the contract of sale is entered into, and he comes to know of the existence of any encumbrances he can ask a seller to discharge those encumbrances before a sale is effected. When he sues for specific performance of the contract of sale could it be said that he is not entitled to have a direction in the decree that the seller should discharge the encumbrances on the property before he is paid the consideration for the sale? The provisions contained in Section 18 (c) of the Specific Relief Act. apply to this case. Where the vendor professes to sell unencumbered property and if it is afterwards found that the property is mortgaged for an amount not exceeding the purchase-money, the purchaser may then compel the seller to obtain a conveyance from the mortgagee or himself pay off the encumbrances out of the unpaid purchase-money. Here, on the finding of fact that the vendor undertook to discharge the encumbrances the purchaser was entitled to insist upon his discharging them, before a conveyance is effected through Court. He is entitled to ask the Court to give a direction in the decree that the encumbrances should be discharged before the consideration for the sale is paid to him.
3. Considerable argument was advanced by Mr. Rajah Ayyar that the provisions of Section 55 do not apply to executory contracts, in other words, the covenants contained in Section 55 of the Transfer of Property Act apply only to completed sales and not to agreements of sales. Under Section 55 the seller is bound to do certain things. One of them is to answer to the best of his information all relevant questions which may be put to him by the buyer in respect of the property and the title thereto and the other is to produce before the buyer on his request for examination all documents of title relating to the property which are in the seller's possession. It cannot be said that these two things should be done after the sale is effected. The covenants contained in Section 55 apply to contracts of sale as well as to completed contracts. In this connection with great respect I am unable to agree with the reasoning of Sadasiva Ayyar, J., in Adikesavan Naidu v. Gurunatha Chetti : (1917)32MLJ180 Abdur Rahim, J., was of opinion that the covenants contained in Section 55 apply to contracts of sale as well.
4. It is argued for the appellant that it was open to the plaintiff to repudiate the contract and to claim damages when the vendor was not able to give him a clear title. No doubt the vendee can repudiate the contract of sale if he finds that the vendor has no title to convey or that the property is encumbered. Vide Reeve v. Beeridge (1888) 20 Q.B.D. 523 : 57 L.J.Q.B. 265 : 58 L.J. 836 : 36 W.R. 517 : 52 J.P. 549. The case in Eastern Mortgage and Agency Co. Ltd. v. Mohammad Fazl-ul-Karim 90 Ind. Cas. 851 : 41 CRI.L.J. 571 : 52 C. 914, does not apply to the facts of this case. There it was held that it was open to the vendee to resist a suit for specific performance on the ground that the defects in the property were not disclosed by the vendor. But here the first defendant did undertake to discharge the encumbrances on the property and the plaintiff is entitled to enforce the terms of that agreement. The argument that Section 18 (c) applies only to undisclosed encumbrances and does not apply to cases where the vendor undertakes to discharge the encumbrances on the property before the sale cannot be accepted. When the vendor undertakes to discharge the encumbrances on the property, he contracts to sell the property unencumbered and, therefore, Clause (c) applies to a case like this. The Court granting specific relief is entitled to direct the vendor to discharge the encumbrances which he undertook to do before he is paid the consideration for the sale. The clause in the decree objected to is perfectly legal. In this connection I may refer to recent decision of Spencer and Viswanatha Sastri, JJ., in Venkataranga Iyer v. Ramaswami Iyer : AIR1926Mad173 in which a similar direction was given by them.
5. It is stated that the amount secured by the two mortgages on the property which the vendor undertook to discharge is about Rs. 300 or Rs. 400. As the consideration for the sale is Rs. 1,950, the direction in the decree may be varied by directing that the amount which would be necessary to discharge the encumbrances be kept in deposit and the balance be drawn by the first defendant. This would be an equitable arrangement as the plaintiff cannot be damnified to a larger extent than the amount of the two mortgagees. If the mortgagees try to enforce their mortgages the amount in Court would be sufficient to meet their demands and the first defendant need not be kept out of a large sum of money by reason of a portion thereof being necessary to meet the demands of the mortgagees.
6. With this modification I dismiss the second appeal with costs.