VEERNI SOORAYYA Vs. KATEEZA BEEGUM (DIED) AND OTHERS

JUDGEMENT

(1.) Latchayya, the father of defendants 1 to 6, purchased under a sale deed, Exhibit P-1, dated 12th April, 1927, from the plaintiff and the deceased wife of the 7th defendant, eleven godowns in the main bazaar, Rajahmundry, 232 acres of land in Kavalagoyyi village and a charge decree in O. S. No. 13 of 1923 on the file of the District Court, East Godavari, for a sum of Rs. 40,000. A sum of Rs. 3,000 in cash and conveyance of land worth Rs. 2,000 by the vendee to the vendors formed part of the consideration for Exhibit P-1, the remaining Rs. 35,000 being left with the vendee for discharging a mortgage subsisting on the properties sold under Exhibit P-1 and other valuable properties of the vendors. The vendee took leases from the tenants of the godowns and collected rents from some of them and also executed the charge decree in O. S. No. 13 of 1923 and realised considerable amounts. The vendee sued for possession of the godowns and the tends sold under Exhibit P-1 and the final result of that litigation in the High Court was that the plaintiff was held entitled to only 7/64 share and the seventh defendant's wife to 8/64 shares in the properties sold by them to Latchayya. The vendee and his sons defaulted to pay the mortgagee with the result that there was a decree on the mortgage and a Court sale of the hypotheca including the properties of the vendors sold under Exhibit P-1. The plaintiff thereupon sued in forma pauperis for the recovery of Rs. 30,000 from defendants 1 to 6, the sons of deceased Latchayya, as "damages and compensation." The co-vendor of the plaintiff having died, her heir and husband was made the 7th defendant to the suit though the sum of Rs. 20,000 was claimed by the plaintiff for herself alone. Pending the suit the first defendant died and two of his sons were impleaded as defendants 8 and 9 but his wife and another minor son. During the trial the plaintiff did press the claim against defendants 8 and 9. The trial Court held that the vendors would be entitled to recover the amount left by them with the vendee to discharge the mortgage but paid by the vendee, as unpaid purchase money or as damages for breach of the vendee's undertaking to discharge the mortgage. The suit, was, however, dismissed on two grounds (i) that one of the two vendors could maintain the suit and (ii) that the defect in the title of the vendors was a bar to the maintainability of the suit. The plaintiff preferred an appeal confining her claim to Rs. 3800 and the appeal was allowed and the suit decreed to that extent by Subba Rao J. (as he then was). Defendants 2 to 6 have preferred this appeal under Clause 15 of the Letters Patent.

(2.) It was argued by Sri Poornaiah for the appellant that the suit was one for damages for breach of a contract of indemnity and that the plaintiff having herself failed to convey a good title and being guilty of a breach of the covenant for title, could sue for damages. Though the plaint is happily framed, it is possible to regard the plaintiff's claim as one for unpaid purchase money as well as one for damages for breach of indemnity and it has been understood by the learned Judge as one for unpaid purchase money. The question is whether it is open to the defendants to non-suit the plaintiff on the ground of a breach by the vendors of the covenant for title and quiet enjoyment.

(3.) Under Section 55 (1) (a) of the Transfer of Property Act the seller is bound to disclose to the buyer any material defect in the seller's title to the property. Under the last para of Section 55 an omission to make such disclosure is "fraudulent". Therefore, it is open to the buyer to avoid the contract of sale on this ground, if the matter rests in the stage of contract. He could also set aside the sale even if the contract has been completed by the execution of a conveyance, if he makes out a case of fraud by establishing that his seller had no title at all to the property sold and this fact, which was known to the seller but could be known by the buyer, was deliberately suppressed by the seller. A sale is an executed contract and effects transfer of property and the considerations which apply to the enforcement of mere contracts do necessarily apply to a transfer already effected. So long as the buyer does get a rescission of the sale deed, the rights and liabilities of the parties would be governed by Section 55 of the Transfer of Property Act. A breach of covenant for title or quiet enjoyment would entitle the buyer to avoid the sale on that ground but would entitle him to damages. If the purchase money or a portion thereof is paid, the remedy of the seller is to avoid the sale but to sue for its recovery and enforce his charge. Section 55 confers certain rights and imposes certain obligations on the buyer and seller and these rights and obligations are statutory. Under Section 55 (5) (b) the obligation to pay the purchase money to the seller is to be performed by the buyer when the seller performs his obligation under Section 55 (1) (b) to execute a proper conveyance of the property. Under the proviso to Section 55 (5) (b) the amount of any incumbrance existing at the date of the sale may be retained by the buyer and paid to the person entitled thereto. In the present case the sum of Rs. 35,000 was left with the buyer to pay off a mortgagee but no time was fixed for making the payment. Therefore, the engagement had to be performed within a reasonable time under Section 46 of the Contract Act. The payment having been made at all by the buyer, the mortgagee sold other property of the seller which was subject to the mortgage and realised the bulk of the amount due to him. The amount retained by the buyer for payment to an incumbrancer, it must be paid to the seller. The buyer acts as the agent of the seller as regards the disposal of the sum retained. Subba Rao v. Varadiah, AIR 1943 Madras 482 at p. 484 . The buyer having paid any portion of the sum of Rs. 35,000 retained by the sellers with him for payment to the mortgagee, is accountable to the sellers for the amount. The suit however, was only restricted to a portion of this sum. The fact that the covenant for title or quiet enjoyment has been broken by the plaintiff by reason of her having been found to have had title only to a fractional share of the property conveyed, would give the buyer a right to damages against her. This, however, will be a bar to a suit by the seller for recovery of the unpaid purchase money, particularly when she is found to have conveyed a valid title to the buyer to a share of the property and the buyer retains that interest. The seller has a statutory right to recover the purchase money on a charge of the property sold under Section 55 (4) (b) and the buyer is under a statutory obligation to pay it under Section 55 (5) (b) of the Transfer of Property Act. In the absence of a contract to the contrary, the obligation of the buyer to pay the purchase price to the seller arises at the moment the sale transaction is completed. A subsequent claim for damages that might accrue to the buyer on the ground of a breach of the covenant for title and quiet enjoyment is no bar to the seller's right to sue for the unpaid purchase money.