1. The suit out of which this appeal arises was a suit for the refund of money paid as an advance on a lease there after to be executed which, in fact, was not executed. The circumstances, stated briefly, are as follows. The plaintiffs were desirous to enter into coal mining operations and for that purpose to obtain the underground rights in 601 bighas of land in village Kaniapur. In this village defendants owned a three annas share. The plaintiffs had separately negotiated but without success with the co-sharers of the defendants for a transfer of their interest in this property. Upon the failure of this negotiation, the plaintiffs entered into an arrangement with the defendants that the latter should lease to them their own share and twelve and a half annas more belonging to their co- sharers and also should guarantee them for coal mining purposes the peaceful possession of the remaining half anna share.
2. A draft lease, dated the 30th October 1908, was drawn up embodying the terms, and a sum of Rs. 13,052 was paid on account by the plaintiffs to the defendants. Subsequently, certain other sums were also paid in furtherance of the transaction, making the amount paid by the plaintiffs a total sum of Rs. 14,032. The lease was never executed, and the plaintiffs sued to recover' this sum with interest. The defendants contested the suit principally on the grounds that they had given the plaintiffs no covenant of title, that they were willing themselves to carry out the contract, and that it was not they but the plaintiffs who had made default in its performance, that the plaintiffs were not entitled to rescind the contract, and that for these reasons the defendants had incurred no liability. The learned Subordinate Judge has found against them on all these points, and he has held that the contract was void, that the defendants had expressly bound themselves to indemnify the plaintiffs for the sum of Rs. 13,052 received by them and that the defendants are also liable for the incidental expenses incurred by the plaintiffs in addition to this sum. He has, accordingly, decreed the plaintiffs' suit in full. Against this decision the defendants appeal.
3. On appeal, it is argued that the finding of the learned Subordinate Judge that there was a covenant of title is mistaken, and that he should have held that nothing but possession was guaranteed, that the defendants have and always had the title to the land which they claimed to have when the contract was entered into, that the plaintiffs had as much knowledge of this title as the defendants, that the defendants are now and have always been ready to make over the land to them with this title, and thereby fulfil the contract as understood at the time it was made both by the plaintiffs and the defendants, that there has been no misrepresentation, that the contract was accepted by the plaintiffs according to the law as then understood and that the plaintiffs cannot rescind it on account of any change which has since been made in the law. On these main grounds the appellants urge that the whole of the plaintiffs' claim should have been rejected. Apart from their main argument, they urge that if the plaintiffs are entitled to recover anything at all from the defendants, they cannot claim to recover either a sum of Rs. 9,465 out of the total sum of Rs. 13,052 which was paid to the defendants not for any benefit of their own but merely as agents, or the incidental sum paid in addition to the sum of Rs. 13,052.
4. The main point to be considered is, what rights were understood by the contracting parties to be contracted for at the time when the contract was made. The defendants and their co-sharers are mogoli brahmattardars of the land in question. It is common ground that at the time when this contract was made, that is to say, in October 1908, it was generally believed that the rights of tenure-holders included all mineral rights. In July 1909 and in May 1910, the decisions of the Privy Council in Abhiram Goswami v. Shyama Charan Nandi 4 Ind. Cas. 449 ; 36 C. 1003 ; 14 C.W.N. 1 ; 10 C.L.J. 284 ; 11 Bom. L.R. 234, 19 M.L.J. 530, 6 A.L.J. 857 and in Hari Narayan Singh v. Sriram Chakravarti 6 Ind. Cas. 785, 14 C.W.N. 746 ; 11 C.L.J 653, 37 C. 723, 7 A.L.J. 633, 20 M.L.J. 569, 12 Bom. L.R. 495. 8 M.L.T. 51, (1910) M.W.N. 309 ; 37 I.A 136 threw doubts on this understanding of the law. After these decisions a certain amount of correspondence passed between the parties, which was brought to a head by a letter (Exhibit 3) from the plaintiffs' solicitors to the defendants demanding that defendants should produce for inspection of the plaintiffs all their documents of title relating to the property and should satisfy them as to their title within two months, and stating that if this were not done, the plaintiffs would rescind the contract and claim a refund of the sums paid by them. To this letter the defendants replied that they bad long ago satisfied the plaintiffs as to their title to the property, and that they held the plaintiffs to their contract. The solicitors replied, denying that the plaintiffs had ever been satisfied about the title of the defendants, and offering on behalf of the plaintiffs to complete the contract on the defendants satisfying the solicitors that they had a good and marketable title to the property. Nothing to this end was done by the defendants, and the result was the institution of the present suit.
5. The principal point relied on in appeal is that the contract to be executed was one regarding the mngoli brahmattar rights. The appellants say that they are willing to transfer these rights, that there is no defect in their title, that they were and are able and willing to transfer these rights with everything which they include, and that all that the plaintiffs have to complain of is that under the law, as now understood, this title may not be held to pass the rights to minerals. They argue in effect that the rights to minerals are something incidental to the main contract, and that if they transfer their title to the mogoli brahmattar rights, it is immaterial whether or not these rights are found to include the rights to minerals. This contention is disposed of at once by a glance at the draft lease dated 30th of October 1908 (Exhibit 1), which is one of the two principal documents from which the actual agreement between the parties is to be gathered. The whole of this document is directed towards a transfer of the underground rights in the land in question. These rights are specifically referred to in practically every paragraph and the document makes it perfectly clear that the entire purpose of the agreement was to enable the plaintiffs to work coal underground. That everything except the right to work coal was considered immaterial is clear from the fact that under the draft agreement surface lands were only to be settled with the plaintiffs to such an extent as would be required for the actual working of the coal underneath them. This being so, it is impossible to maintain the contention that the contract as understood between the parties was merely to transfer the mogoli brahmattar rights, and that the question whether those rights did or did pot include the rights to minerals was considered a mere incident. It is, on the contrary, perfectly evident that the purpose of the contract was to transfer the mineral rights, and that if those rights cannot now be transferred, the agreement cannot be carried out.
6. No person of common prudence, when about to enter into such an undertaking as the opening of a coal mining enterprise, would do so without making certain that he was buying, not an expensive and doubtful litigation, but an undisputed right to minerals. The circumstances, therefore, in which the contract was made lead us to the same conclusion as the wording of the contract itself.
7. Next, there is the argument of the appellants that what the defendants contracted to give was not a covenant for title but merely a covenant for undisturbed possession. The point which they desire to establish is that it lay on the plaintiffs, not to seek to declare the contract void, but to carry it out and accept whatever title the defendants were able to give them, relying thereafter on the remedy which the contract would give in case their possession should be disturbed. In the first place it is, for the reasons stated in connection with the argument last dealt with, impossible to suppose that any prudent man would make a contract of this kind. In the second place, the agreement as set forth in the draft lease of the 30th of October 1908 directly negatives this contention. The opening portion of the lease recites that defendants are in possession of the property referred to in respect of the underground rights together with the necessary surface lands. Paragraph 5 of the draft lease provides that if the title of the plaintiffs is jeopardised owing to any weakness of title in the property mentioned in the patta or by virtue of dispossession by others, or by discovery of any fraud in the title, the defendants and their representatives in interest shall be bound to make good any loss and costs incurred by the plaintiffs thereby. Further paragraph 8 of the draft lease recites that the defendants lease out the property to the plaintiffs in an unencumbered and flawless state. This is a very clear covenant of title, and it is impossible to accept the appellants' argument on this point.
8. The next argument on behalf of the appellants is that they are prepared to carry out the contract as understood by both parties at the time it was made, and that if there has been any change in the law in consequence of which that property represents a lesser right than it did at the time when the contract was made, the contract is not affected there by. As to this, it is sufficient to observe that there has been no change in the law. The change which there has been is in the knowledge of the law possessed by both parties. The appellants refer to the following cases: Soper v. Arnold (1888) 37 Ch. D. 96 ; 57 L.J. Ch. 145, Ellis v. Rogers (1884) 29 Ch. D. 661 at p. 666 ; 53 L.T. 377, Best v. Hamand (1879) 12 Ch. D. 1 ; 48 L.J. Ch. 503, 27 W.R. 742 and In re Haedicke and Lipski's Contract (1901) 2 Ch. D. 636 ; 70 L.J. Ch. 811 ; 85 L.T. 402 ; 50 W.R. 20 ; 17 T.L.R. 772. None of these cases lends any support to appellants' contention. The first of them is directly against it, for its application to the present case lies in the hypothetical case stated at page 100, according to which a person who contracts to purchase property and subsequently finds that his vendor has no title, is entitled to refuse to complete and to have his deposit returned. The passage referred to in Ellis v. Rogers (1884) 29 Ch. D. 661 at p. 666 ; 53 L.T. 377 lays down that where the contract does not expressly provide that there should be a good title, the knowledge of the purchaser before the contract that there was a defect which the vendor was unable to remove, prevents his raising an objection on that ground.
9. In the present case the contract does expressly provide that there should be a good title, and the purchaser had no knowledge before the contract of any defect in his vendor's title.
10.In Best v. Hamand (1879) 12 Ch. D. 1 ; 48 L.J. Ch. 503, 27 W.R. 742 there was an express agreement that the purchaser was to be content with a mere conveyance of such title as the vendor had. There is no such agreement in the present case.
11. In In re Haedicke and Lipski's Contract (1901) 2 Ch. D. 666 ; 70 L.J. Ch. 811 ; 85 L.T. 402 ; 50 W.R. 20 ; 17 T.L.R. 772 the question was whether the purchaser was precluded from challenging his vendor's title by words in the contract purporting to accept it, and the answer given to this question was in the negative.
12. The law in a case such as in the present one has been perfectly clear since the case of Cooper v. Phibbs (1867) 2 H.L. 149 ; 16 L.T. 678 ; 15 W.R. 1049. It is there stated that 'private right of ownership is a matter of fact, it may be the result also of matter of law, but if parties contract under a mutual mistake and misapprehension as to their relative and respective rights, the result is that that agreement is liable to be set aside as having proceeded upon a common mistake.'
13. This is what has happened in the present case. Both parties at the time when the agreement was made believed that mogoli brahmattar rights carried with that mineral rights. But the decision of their Lordships of the Privy Council in Hari Narayan Singh v. Sriram Chakravarti 6 Ind. Cas. 785, 14 C.W.N. 746 ; 11 C.L.J 653, 37 C. 723, 7 A.L.J. 633, 20 M.L.J.569, 12Bom. L.R. 495. 8 M.L.T. 51, (1910) M.W.N. 309 ; 37 I.A. 136 and the decision of this Court in Jyoti Prasad Singh v. Lachipur Coal Co. 12 Ind. Cas. 482, 16 C.W.N. 241, 14 C.L.J. 361 ; 38 C. 845, which we understand is now before their Lordships, at least throw very grave doubts on the title of the brahmattardar to the mineral right and the mistake having thus been discovered the agreement cannot stand.
14. The next argument of the appellants is that this contract cannot be rescinded, because owing to the engagements which the defendants had entered into with other parties, the parties cannot be restored to the position which they occupied at the time when the contract was made. They refer on this point to Section 36 of the Specific Relief Act. The Subordinate Judge has dealt rightly with this point. As he observed, the present suit is not for rescission of a contract but for recovery of money advanced and the plaintiff's claim is not affected by the section which is referred to. On all the main issues of the case the findings and reasoning of the learned Subordinate Judge are clearly right. The contract entered into by the parties is void under Section 20 of the Indian Contract Act as having been entered into under a mutual mistake. It has also been broken by defendants by their failure to show a good title and to cure the defect therein. The plaintiffs therefore, have rightly been held entitled to succeed.
15. The next point to be considered is the extent to which the plaintiffs are entitled to recover from the defendants. The main point, which the appellants argue relates to the sum of Rs. 9,465, which is stated to have been paid by the defendants to their co-sharers on account of the acquisition by defendants of the co-sharers' shares in the property. It is argued that this sum was not paid by the plaintiffs by way of any benefit to the defendants but that the defendants received it merely as benamdars or agents for the plaintiffs, that defendants having derived no benefit from it cannot be called upon to refund it, and that to compel them to do so would be a great hardship and injustice. When the correspondence connected with this part of the argument is examined, it will be seen that this argument cannot be accepted. It is clear that the defendants in dealing with this sum acted as principals with the prospect of obtaining very substantial benefits for themselves and that is not a case of agency, still less one of benami. Under the agreement if the contract went through successfully, the defendants stood to gain a sum in cash down of Rs. 5,400 and an annual benefit by way of royalties of Rs. 300. This in itself makes it clear that they undertook an adventure of their own, having an expectation of making a substantial profit, and taking, of course, corresponding risks. Even if this had not been so, they are, as the learned Subordinate Judge observes, concluded on this point by the specific agreement contained in the receipt dated the 13th October 1908. There can, therefore, be no question that defendants are liable to the, plaintiffs for the principal amount of Rs. 13,052.
16. In addition to this sum the learned Subordinate Judge has held them liable for an amount of Rs. 980. This sum is made up of Rs. 500 paid by the plaintiffs, with the knowledge and consent of the defendants, to the employees of defendants and their co-sharers as a douceur for not obstructing the carrying through of the contract, Rs. 280 for the purchase of stamps and Rs. 200 as costs for taking out certificates for the minor co-sharers. The reasons given by the learned Subordinate Judge for decreeing this portion of the claim are not conclusive. These sums were expended by the plaintiff through his agent Abinash Chandra Chatterjee, they were not paid to or at the instance of the defendants, and we cannot agree with the Subordinate judge in holding that there was any agreement that they should be treated as part of the salami, or that on failure of the negotiations the defendants should repay.
17. The result is that the principal sum decreed by the learned Subordinate judge will be reduced by Rs. 980. As regards the remainder of the claim, the appeal is dismissed. Costs in proportion to the result.
18. Respondents in cross-appeal urge that interest should have been allowed up to the date of the decree. This argument is a reasonable one, and interest will be decreed accordingly, with interest at 6 per cent. on the aggregate sum so adjudged and on costs to the date of payment. The cross-appeal is thus decreed with costs.