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Jyoti Prosad Singh Deo Vs. H.V. Low and Co. Ltd. - Court Judgment

LegalCrystal Citation
Subject Commercial
CourtKolkata
Decided On
Reported inAIR1930Cal561
AppellantJyoti Prosad Singh Deo
RespondentH.V. Low and Co. Ltd.
Cases ReferredGiridhari v. Megh Lal A.I.R.
Excerpt:
- rankin, c.j.1. the plaintiffs are a limited company called h.v. low & co., ltd., and they sue the defendant for the return of the deposit paid by them upon an agreement between the parties that the defendant would grant to the plaintiffs a mining lease for a term of 999 years of the underground coal rights in two mouzahs belonging to the defendant and called raidi and methadi. it appears from certain correspondence between the parties that an agreement for a mining lease of these two mouzahs had been made in 1923 and the deposit of rs. 34,440 was paid at that time. on 2nd january 1924, the plaintiffs asked for one month's further time in which to complete the lease but in march, april and may of 1924 they were pressing for completion and intimating a claim for damages on account of the.....
Judgment:

Rankin, C.J.

1. The plaintiffs are a limited company called H.V. Low & Co., Ltd., and they sue the defendant for the return of the deposit paid by them upon an agreement between the parties that the defendant would grant to the plaintiffs a mining lease for a term of 999 years of the underground coal rights in two mouzahs belonging to the defendant and called Raidi and Methadi. It appears from certain correspondence between the parties that an agreement for a mining lease of these two mouzahs had been made in 1923 and the deposit of Rs. 34,440 was paid at that time. On 2nd January 1924, the plaintiffs asked for one month's further time in which to complete the lease but in March, April and May of 1924 they were pressing for completion and intimating a claim for damages on account of the defendant's failure to execute the lease. Ultimately, on 22nd January 1925 the parties with the advice of their solicitors, entered into a formal agreement which provided that the plaintiffs would within two months from the date of the submission of a draft lease by the defendant take a mining lease from him or his lessees upon certain terms therein mentioned which are, in substance, the terms previously arranged. The agreement provided that the plaintiffs would not claim any damages from the respondent for the delay already incurred in obtaining the lease. It further provided, and this is for our present purpose, the important clause:

If they neglect or fail to take such lease within the aforesaid time except for the reason of the want of the lessor's title to the said mouzahs, the sum of Rs. 34,410 deposited as aforesaid will be forfeited unto the Raja, Bahadur.

2. Now the plaintiffs have refused to accept the lease and they are suing for the return of the deposit upon the ground that they were justified in so doing by reason of the want of the defendant's title to the said mouzahs within the meaning of this exception.

3. The facts are that the draft lease was sent to the plaintiff's on 29fch May 1925. Nothing in this case turns upon the terms of the draft which has not been laid before us. The plaintiff's attorneys, finding that in the draft the defendant's two sons were the proposed lessors, asked for and obtained copies of the patta granted by the defendant to them. They also made enquiry as to their ages and were informed upon this point. On 30th June 1925, they returned the'draft approved with certain alterations but stated:

our approval is subject to the title of the Maharaja 'being satisfactory.' Before the lease is finally completed we must be satisfied that the Maharaja has the right to deal 'with the underground.

4. On 11th July 1925 the defendant's manager returned the draft, with a copy of the settlement records, and explained that under the defendant Raidi was held as a rent-free debuttar tenure and Methadi as a rent-paying brahmottar tenure; that in the circumstances it was quite clear that the defendant was the landlord 'and as such the right in the underground minerals is vested in him.' On 17th July the plaintiffs' solicitors say that it is not clear whether the mineral rights have not been parted with by the ancestors of the defendant to the debuttardars and brahmottardars and ask for copies of debuttar and brahmottar grants, failing which they say an indemnity by the defendant will be necessary. On 23rd July 1925, they pressed for a reply saying that they cannot possibly complete unless satisfied that the Raja has a good title to the underground rights. On 24th the defendant's manager writes to say that he is looking up the whole records to find out copies of the debuttar and brahmottar grants. On 5th August he writes that the brahmottar and debuttar grants were made by the ancestors of the defendant in days long gone by and no trace of the origin of the grants can be found out:

Prima facie the mining rights in the villages belong to the Raja Bahadur who is admittedly the proprietor thereof and, if anybody questions his rights, it will evidently be for him to show the same. Under the circumstances the Raja Bahadur is not in a position to execute any indemnity bond.

5. Thereupon, the plaintiffs, by their solicitors, write on 18th August 1925 refusing to complete on the ground that the defendant 'has failed to produce any title to the underground rights.'

6. The defendant has not sued for specific performance. Had he done so, it is clear that under Section 25, Sp. Rel. Act, he could only have succeeded upon showing that the title offered to the lessees was a title free from reasonable doubt. And it is also clear under Section 18 (d) that if he had failed in such a suit, the plaintiffs would have been entitled to a return of the deposit with interest thereon. No such suit having been brought, however, it would seem that under our Indian Statute Law, the respective rights of the parties to a contract for the grant of a lease have to be determined with reference to Section 108, T.P. Act, the terms of which are in some respects in contrast with the definition given in Section 55 of the Act of the rights and liabilities of the parties to a contract for the sale of immovable property.

7. In the case of a contract for sale it is provided by Section 55 that the seller is bound, in the absence of a contract to the contrary:

(b) to produce to the buyer on his request for examination all documents of title relating to the property which are in the seller's possession or power and (c) to answer to the best of his information all relevant questions put to him by the buyer in respect to the property or the title thereto.

8. There is a further provision in Sub-section (2) that the seller shall be deemed to eon-tract with the buyer that the interest which the seller professes to transfer to the buyer subsists and that he has power to transfer the same. Prom other provisions of this subsection it seems to mo though this has been disputed : cf. Adkesadam v. M.V. Guruatha [1914] 40 Mad. 338 that this clause contemplates a completed sale and corresponds to the covenant for title in an English conveyance. There can, however, be no doubt that in India a contract for sale of immovable property implies some warranty as to title by the seller. It has been held in India that defects of title are within the scope of the clause which requires the seller to disclose to the buyer any material defect in the property of which the seller is and the buyer is not aware, and which the buyer could not with ordinary care discover : Haji Essa v. Dayabhai [1895] 20 Bom. 522. Sub-section (6), Section 55, refers to the buyer having 'improperly' or 'properly' declined to accept delivery of the property. Upon this section I will make two observations only. It is noticeable that the section says nothing about the seller delivering an abstract of title and in India as a whole this practice does not obtain; the obligation of the seller is to produce his documents of title for examination by the buyer if the buyer so requests. Secondly, [at least if my view of Sub-section (2) is correct] there is a remarkable absence, in a section which appears to be designed as a statement of the rights of the parties upon a contract for sale, of any statement of the cardinal obligation of the seller - certainly of any statement to the effect that the seller undertakes to show a good title (by 'his documents' and his verification of facts) which is a very different thing from a mere warranty that the seller has in fact and in law the estate which he professes to have - a warranty which would take effect upon proof of breach.

9. The present case, however, though the contract is for a mining lease for 999 years, is governed by the provisions of Section 108, T.P. Act, which deals with the rights and liabilities of lessor and lessee, No special provisions affecting the question before us exist to discriminate long leases from short leases at a rack-rent from other leases, or mining leases from leases of the surface. Such considerations:

are more proper for the discretion of the purchaser and his advisers before he makes his bargain and incurs expanse : Per Kelly, C.B., in Frend v. Buckley [1870] 5 Q.B. 213.

10. Under Section 103 the lessor's obligation to (disclose defects is limited to:

any material defect in the property with reference to its intended use.

11. It seems reasonably clear Syed Mukhtar v. Rani Sundar [1918] 19 I.C. 815 that these |words have reference to the nature and condition of the property to be demised. No obligation as to production of documents or giving answers to questions (that is, requisitions) is mentioned in this section. Clause (c) is a provision importing a covenant for quiet enjoyment, but there is no reference in the section to an implied warranty of title.

12. Upon these provisions of the statute law, learned Counsel for the defendant contends that as the defendant is admittedly the zamindar and as the two mouzahs Baidi and Methadi are admittedly within his zamindari, the defendant is prima facie entitled to the mineral rights and there is no indication, proof or presumption to the contrary. He relies upon a series of decisions which establish that when a grant is made by a zamindar of a tenure even if such tenure be at a fixed rent, permanent, heritable and transferable, minerals will not be held to form part of the grant in the absence of express evidence to that effect : Sashi Bhusan v. Jyotiprosad A.I.R. 1916 P.C. 191 Giridhari Singh v. Megh Lal A.I.R. 1917 P.C. 163. Tituram v. Cohen [1906] 33 Cal. 203, Kumar Harinarain v. Sriram [1910] 37 Cal. 723, Raja Durga Prosad v. Brajanath [1912] 39 Cal. 696, Raghunath v. Raja of Jharia A.I.R. 1919 P.C. 17 and Raja Bejoy v. Surendra A.I.R. 1928 P.C. 234. These decisions clearly apply to brahmottar and debuttar tenures and we need not consider cases of putnis. It is only within recent times that grants of such tenures were required to be made in writing. It is difficult in India to preserve ancient documents at any time and there must exist numberless brahmottar and debuttar tenures the origin of which is now unknown and for which no written instrument can be produced. What then, he asks, in a contract for that grant of a lease has this defendant promised, and what is the breach of that promise which entitled the plaintiffs to repudiate or rescind the agreement? If the plaintiffs do not show that they were entitled to rescind the agreement, on what principle can they recover their deposit?

13. For the plaintiffs it is contended that whatever be the obligation of an intending lessor under the general law, the defendant by the agreement of 22nd January 1925 undertook not merely that he was entitled to dispose of the mineral rights but in the English sense to show a good title thereto, and that a breach of that obligation can be made out, unless he removes a reasonable doubt whether there is outstanding in the debuttardars or brahmottardars some claim to the underground. It is further contended that the correspondence contains an admission that the grant of the3e tenures was made by written instruments; and that in not producing these written instruments, the defendant failed to comply with his obligation under the contract. It is said that the evidence produced at the trial by the defendant to the effect that these grants have been searched for and no trace of them discovered, is insufficient and inconclusive, as it shows that the defendant might have made greater efforts to obtain them. It is complained that the witness Rajendra Lal Mitter called by the defendant was not himself the defendant's record-keeper and that subpoenas to produce the grants or copies thereof were not issued upon all persons interested in the tenures. If, they say, the plaintiff had accepted the lease and gone to expense in setting up this colliery, it is quite possible that one or other of such persons would thereafter have produced his grant and shown some title to the mineral rights.

14. Now the first question in this case is as to the meaning of the agreement of 22nd January 1925. The agreement can be read as an independent agreement complete in itself. The object of the last clause is to exclude all lights in the plaintiffs to a return of their deposit should they fail to complete within the stipulated time save for the exception therein mentioned:

except; for the reason of the want of lessor's title to the said mouzahs.

15. Unless it can be said that under the general law upon a contract for the grant of a lease, the proposed lessee has no right to repudiate the agreement on the iground of want of title in the lessor, I see no reason for holding that this clause increases the obligation of the [defendant in the matter of title. The exception is not introduced in such a way as to suggest an intention to make any special stipulation either as to title or evidence of title. It was contended for the defendant that the phrase 'title to the said mouzah' contrasts with the earlier phrase 'a mining lease of the underground coal' and that the want of title referred to is limited to the question whether the defendant is the zemindar of those mouzahs. This, it is said, may well have been intended, since his position as zemindar carries with it a good prima facie title to the mineral rights. On the other hand, the view taken by the learned Judge is that

under this agreement we are not concerned with what the position might be if the agreement contained no provision relating to the title of the lessor, for the all-important provision of the agreement in this case is that if there is a want of title in the lessor, the lessee is not bound to take the lease.

16. In my judgment, the phrase 'want of the lessor's title to the said mouzahs' cannot in this agreement be held to have no reference to the mineral rights, but must, on the contrary, be read with particular reference thereto. On the other hand the plaintiffs' right to repudiate the agreement for want of title in the lessor is not a new right specially stipulated for, and for the first time, by this agreement, but is a reference to what the parties assumed, and I think rightly, to be an obligation arising out of the general law. If the decision of this case depends upon the defendant saying that under this clause he has specially stipulated that he would produce to the lessee documents and other evidence deducing a good title to the mouzahs, then it seems to me that the defendant could not succeed. The object of the clause is not to give the defendant two months in which to show a clear title but to entitle him to forfeit the deposit unless the plaintiffs complete within two months. The exception' covers the case of the plaintiffs rightly refusing to complete for want of title in the defendant.

A person who agrees to let land agrees to grant a valid lease : 'per Wallis, J., in Stranks v. St. John [1867] 2 C.P. 379.

17. If it had turned out, for example, that the defendant as an adopted son had succeeded to this zemindari from his father, but that the adoption for one reason or another was invalid, the plaintiffs' right to repudiate the contract would in my judgment have been clear. But it is not so clear that under the Transfer of Property Act, it would be true to say, as Lord Russell, C.J., said in Baynes & Co. v. Lloyd & Sons [1895] 1 Q.B.D. 820,

the intending lessee was entitled before he accepted a lease tendered under the agreement to be satisfied that the intending lessor had a good title to grant it, and for the purpose had a right, if he chose to insist upon it, to require full disclosure.

18. In spite of the doubt expressed in old cases [e.g., Guillim v. Stone [1811] 3 Taun. 432, where an implied agreement to deliver an abstract, etc., was described by Lawrence, J., as 'all poetry, the mere fancy of the special pleader,' it was established in England by Souter v. Drake [1834] 5 B. & Ad. 992 and subsequent cases, that a lessor has to show a good title in the same way as a vendor, notwithstanding that the intended lease might be for a short term and on a rack-rent. In 1874, by Section 2, Vendor and Purchaser Act, it was provided that the intended lessee should not be entitled 'to call for the title to the freehold'; and further provision in relief of persons who have contracted to grant or assign leases or under-leases was made by the Conveyancing Act of 1881. In Jones v. Watts [1890] 43 Ch. D. 574, the effect of the Act of 1874 was considered and Cotton, L.J., said:

In my opinion, a lessor under the Act makes out a good title without showing a title to the freehold. The question to be decided is whether assuming a free-hold title to be good, a good title is shown to the lease-hold interest and the lessee cannot by a simple denial of the lessor's title acquire a right to the discovery of documents which relate only to the title of the free-hold. But does that prevent a purchaser raising later an objection that the title to the free-hold is bad? I think not; and if he raises by way of objection to the title any distinct and tangible issue as to the goodness of the title, I think that he can call on the vendor for production of such documents in the vendor's possession as are relevant to that issue.

19. The case shows that if the defendant had alleged a specific ease to the effect that there were restrictive covenants interfering with the enjoyment of the property he would have been entitled not only to his chance of proving this, but to discovery of documents upon [that point.

20. In 1882, when the Transfer of Property Act was enacted in India, English experience had shown that the right to call for the lessor's title had been a source of unnecessary inconvenience and expense: and, without trenching upon the lessor's right to obtain a valid lease, the lessor had been relieved of the obligation to show his title to the free-hold by producing the documents upon which he depended and verifying the documents and the facts. Accordingly, when I find that in Section 108 the provision which corresponds to Clause (a), Section 55, Sub-section (1) is carefully adapted to the case of a lease and Clauses (b) and (c) are omitted altogether, I cannot but conclude that the plaintiffs here cannot succeed by resting their case upon an obligation on the defendant to produce to them before completion satisfactory evidence of his title to the minerals, or upon a right in themselves, if I may use the words of the Act of 1874, to 'call for' the title to the minerals. I think the plaintiffs here are much in the same position as a lessee in England under the Act of 1874., They may show that the title is bad but it is for them to show it. What, then for this purpose, is it necessary that the plaintiffs should establish? I do not think that it is necessary for them to establish that the defendant has no good right to convey, i.e. to prove breach of a warranty that he has right to the minerals and power to grant a lease thereof. The case is not like that of a purchaser who has definitely agreed that he will not take any objection to the title : cf. Scott v. Alvarez [1895] 1 Ch. 596. A person may have a right in land which is precarious in the sense that an event may or may not happen to defeat it. He may have a title though the circumstances under which the land has been acquired make it difficult or perhaps impossible for him to establish his right. Restrictive covenants or negative easements are of course another matter as they trench upon the owner's right itself. Upon proof that the interest which, upon completion, would be conveyed to the lessee would be either nugatory, precarious or incomplete, it is clear in the absence of special contract that he could, under Section 25, Specific Relief Act, resist a claim for specific performance. That section treats a contract for the letting of property in the same way as a contract for sale. While it is true that on grounds of hardship, delay and on other grounds, specific performance may be resisted by a promiser, I think that the statute law of India shows no sign of departure from the principle which was stated (in terms of the old English law, be it observed) in Souter v. Drake [1834] 5 B. & Ad. 992.

All these were oases in equity arising on bills for specific performance : and Lord Eldon, and more particularly Sir W. Grant both advert to the possibility of a distinction between them and actions for damages to be recovered at law for breach of contract. We cannot, however, help thinking, that the opinions of these eminent Judges and the decisions, especially that of Purvis v. Rayer 9 Price 488, are authorities upon the general question, whether it arises in a Court of law or equity, and that the true ground of refusing relief by a specific performance in these cases is, that the vendor by his contract was bound to make out a good title in all respects to the subject agreed to be sold, including the right of the lessor to demise, and that he bad not done so. If that is his contract, he must equally fail in a Court of law, unless he can prove a performance of it on his part : per Denman, C.J., See also Hall v. Betty [1842] 4 M. & Gr. 410.

21. I do not think that the statute of law of India intends a new cleavage between law and equity. This would be contrary to its general policy at any time and Section 18, Clause (f), Specific Relief Act, shows, if it be compared with such decisions as Scott v. Alvarez [1895] 1 Ch. 596, an intention to close up any gaps. I do not think that Indian law makes a distinction in principle between the obligation of a lessor and of a vendor so far as regards the duty to give a good title, though the incidents of these different types of contract may be different as regards the obligation to give disclosure or to furnish proof thereof.

22. In the end, therefore, it seems to me that the Court has on trio evidence before it, to decide whether the plaintiffs have now shown that the lease offered to them is not a secure and valid lease. The position is not that the defendant has or had to prove something and that a miss is as good as a mile. It is that the plaintiffs repudiate their agreement because they alleged that the defendant was not ready and willing to give them such a lease. This allegation has to be established by the plaintiffs. It is for them to shake the title - to show that it is infected with doubt in a reasonable sense.

23. The defendants' manager in his letter of 11th July forwarded the settlement records as proof that the tenure-holders were holding under the defendant as zamindar and claimed that this showed that the right in the underground minerals was vested in the defendant. On the 17th the plaintiffs' solicitors wanted to know whether the mineral rights of the mouzahs had not been parted with by the ancestors of of the defendant and say:

We think you will admit that copies of the debuttar and brahmottar grants are necessary to arrive at a decision. We shall therefore thank you to send copies of the documents, f ailing which we are afraid that an indemnity of the Raja Bahadur will be necessary to 'safeguard the interests of our clients.

24. The answer of the defendants' manager dated 24th is:

I am looking up the whole records to find out copies of the debuttar and brahmottar grants in respect of the above monzaba and will send you copies as soon -as they are traced.

25. On 5th August, however, he writes that these grants were made by the ancestors of the defendant in days long gone by and that no trace of the origin of the grant can be found out. It is upon this that the plaintiffs rescind the contract.

26. Now, I am not sure whether the learned Judge considered that 'this correspondence shows that the grant of these tenures was originally by written instruments, but I can see nothing in their correspondence or in the evidence which amounts in any reasonable sense to proof of this. Until the approximate date of each grant can be fixed it is difficult to say whether the probability that these grants were originally effected by documents has any real strength. At present no trace has been discovered of the origin of the grants. The defendants' witness gives evidence which shows it to be improbable that there were written grants of these tenures during the time of Raja Nilmoni Singh, the defendants' predecessor. This, however, does not carry us far. The position is that in law it was not impossible to make such grants without written instruments until 1882, but that since the Registration Act of 1865 such grants, if made by written instruments, would be invalid unless registered. The plaintiffs have adduced no proof of any registered instrument trenching upon the defendants' title and the possibility upon which they enlarge must be the possibility of the instance of documents in writing dated prior to 1866 or proof being forthcoming of grants made without writing of the minerals prior to 1883. When one considers the change of attitude on the part of the plaintiffs since 1923-24, when they were pressing for execution of the lease, one cannot help doubting whether the superior caution of 1925 is entirely due to a revelation from their lawyers of the necessity of being particular about title. It may certainly be taken that from the beginning the plaintiffs were well aware that these mouzahs were -not khas in the hands of the zamindar - that they were settled with tenants of some kind, either tenure-holders or raiyats, though there is no reason to suppose that they had made more particular enquiries.

27. I hesitate much to lay down that a zamindar does not show a good title to the underground unless be can disprove the suggestion that tenure-holders of long standing have not been given underground rights - that is, be it understood, in the absence of anything in the history of the land or the conduct of the parties to give grounds for suspicion to this effect, and in the absence of any stipulation imposing such a burden upon him. The reasons which underlie the rule of law that tenure-holders claiming to 'have rights in the underground must show an express grant thereof and that such phrases as 'with all rights,' Giridhari v. Megh Lal A.I.R. 1917 P.C. 163, convey no title to the minerals, that no argument whatever lies from the existence of a tenure to any probability of a right to the minerals.

It must be borne in mind also that the essential characteristic of a lease is that the subject is one that is occupied and enjoyed and the corpus of which does not in the nature of things and by reason of the user disappear. In order to cause the latter speciality to arise minerals must be expressly denominated so as thus to permit the idea of partial consumption of the subject leased : Giridhari v. Megh Lal A.I.R. 1917 P.C. 163.

28. In In re, Ford & Hill [1879] 10 Ch. D. 365, James, L.J., speaking of the English law, said:

A vendor is bound to funish an abstract of title upon the requisition of the purchaser, to verify it or complete it on any point on which it appears defective. That is evidence verifying the title shown by the abstract. But if in addition to this, questions are to be asked for the purpose of negativing the existence of in-cumbrances where is the matter to end?

29. The requisition in that case was of a character entirely directed to possibilities of documents, judgments or charges existing and not noticed in the abstract. Bramwell, L.J, said:

Suppose that the vendor refuses to answer these requisitions and the purchaser thereupon refuses to complete and brings an action for his deposit. He would have to make out a breach of contract, and for that purpose must establish that the vendor had refused to answer a question which it was his duty to answer, or that a good title had not been shown. He could not make out either of these points.

30. In Dart on Vendors and Purchasers, Edn. 7, pp. 366-7, it is pointed out that where a title commences with a conveyance by a person who conveys as an heir-at-law, the purchaser cannot require any other evidence in the ancestor's intestacy than such (if any) as in the vendor's possession. The general rule is stated thus:

that where a prima facie title is shown the purchaser cannot require evidence not in the vender's possession or power tending to negative any matter the existence of which may not be presumed from the contents or nature of the abstracted document or according to the ordinary rules regarding presumptions.

31. In the present case it appears to me that while the plaintiffs have shown that there are tenure-holders upon this land and that they, have permanent rights as many tenure-holders have, the plaintiffs have done nothing more; and upon the evidence as it stands the title of the zamindar to the minerals has not been shown to be such as prevented him from giving to the plaintiffs a secure and valid lease.

32. In my opinion the appeal should be allowed and the suit dismissed with costs in both Courts.

Buckland, J.

33. I agree.


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