SHANKERLAL Vs. JETHMAL

JUDGEMENT

(1.) THIS appeal by the defendants Shankerlal and another is directed against the judgment and decree of the District Judge, Bhilwara, upholding the judgment and decree of the Civil Judge;, Bhilwara, in a suit for refund of earnest money. 2. The material facts are these. On the 27th March, 1953, defendants Shankerlal and Arjunlal agreed to sell, and the plaintiffs to purchase the suit house for a sum of Rs. 12,000/- vide Ex. 1. The plaintiffs paid a sum of Rs. 700/- as earnest money then and there and the rest of the sale consideration was agreed to be paid at the time of the registration of the sale-deed, and it was further agreed between the parties that the sale would be completed within one month of the date of the agreement. The case of the plaintiffs as disclosed in the plaint was that the suit land originally belonged to one Bherunlal Gelda of Udaipur and the defendants had stated that they would settle the dispute with Bherunlal with respect to it and it was on this account that a month's time was agreed to for the completion of the sale. But the defendants had failed to resolve their dispute with Bherunlal and had further failed to complete the sale. Consequently on the 27th April, 1953, exactly one month after the date of the aforesaid agreement, the plaintiffs, through their counsel Sri Yashwant Singh Nahar, served a notice (Ex. A-l) on the defendants to the effete that they were ready and willing to perform their part of the agreement but that the defendants had failed to execute the sale-deed, and, therefore, the plaintiffs called upon the defendants to return the earnest money of Rs. 700/- along with interest and damages in default whereof they further stated that they would have to take legal action against the defendants. The defendants sent a reply (Ex. A-3) on the 29th April, 1953, in which they completely repudiated the allegations made by the plaintiff in their notice and pointed out that the failure of the defendants to execute and complete the sale-deed was caused by the plaintiffs' own default in as much as the latter had not paid their share of the stamp and registration charges as agreed and that the plaintiffs had also failed to give the draft sale-deed, and they further called upon the plaintiffs, (stating that on their side they had always been ready and willing to complete the sale), to give their share of the expenses within two days of the receipt of their letter and also complete the sale and it was further stated that in default thereof the plaintiffs would forfeit their earnest money as well as their right to have the sale completed because the defendants were not at all at fault so far as the completion of the sale was concerned. The plaintiffs sent a rejoinder (Ex A-2) to the aforesaid letter on the 1st May, 1953, again through their counsel Shri Yashwant Singh Nahar, wherein it was stated that the property which was the subject-matter of the contract for sale between the parties had originally belonged to Bherunlal Gelda of Udaipur, and that the defendants had, therefore, taken the month's time in order to obtain a clear title from the said Bherunlal or to settle their dispute with him and thereafter the sale in favour of the plaintiffs, according to the agreement, was to be completed. It was further pointed out that the defendants had failed to obtain a proper conveyance from Bherunlal, and it was on this account that the defendants had failed to execute a proper sale-deed in favour of the plaintiffs in spite of the latter being ready and willing to pay the balance of the sale consideration and not on account of any default on the part of the plaintiffs. Reference was also made in this notice to the fact that the plaintiffs had received a notice from the said Bherunlal Gelda of Udaipur that the house was his and that the defendants had no right to sell the same to any body whatsoever. Consequently, the plaintiffs stated that the agreement dated the 27th March, 1953, had fallen through and was of no effect, and, therefore, it was claimed that they were entitled to receive back the sum of Rs. 7000/-, to pay the same within two days failing which they said they would institute an action against the defendants at their risk as to costs and consequences. Thereafter it appears that a further reply (Ex. A-4) was sent by the defendants through their advocate Sri Chainsukh Ajmera in which a history of the defendants' title with respect to the property under sale was given and it was stated that the defendants had purchased the said property from Bherunlal Gelda on Bhadwa Sudi 4 Svt. 1994 (corresponding to the 8th September, 1937) and that they had entered into possession thereof and had been in such possession for all the intervening period up to the date of the agreement, and further that the defendants had incurred considerable outlay in building a compound wall and a number of apartments thereon and in this way they had been in possession of the said property for the last 16 years, and that they had mentioned all these facts and shown the relevant documents including the patta to the plaintiffs, and, therefore, they had every right to transfer the same and the agreement between the parties had been arrived at with full knowledge of all these facts, and it was futile for the plaintiffs to raise any objections to the sale. It was further stated that the defendants were still ready and willing to complete the sale and that if the plaintiffs should fail to fulfil their part of the contract within a week of the date of their letter, it would be understood that the plaintiffs had broken the agreement and the latter would, therefore, be liable for any loss caused to the defendants. It is in these circumstances that the plaintiffs instituted the present suit for refund of the earnest money on the 20th May, 1953. 3. The defendants resisted the suit. Their case was that they had disclosed the entire facts relating to their title to the plaintiffs and that the agreement to sell had been entered into between the parties with full knowledge thereof on the part of the plaintiffs and that they had reasonably good title to sell the property. The defendants further contended that the responsibility for the breach of the contract lay on the shoulders of the plain tiffs and that they had committed a breach of the same without any rhyme or reason, and consequently, their suit deserved to be dismissed. It may also be pointed out here that the defendants stupidly denied the receipt of Rs. 700/- as earnest money in their written statement, but it was admitted at the trial and is not questioned at this date that this money had been received by the defendants. In fact the agreement Ex. 1 contains a clear mention that the defendants had received the sum of Rs. 700/- as earnest money from the plaintiffs and, therefore, the defendants' denial on this part of the case in the written statement was entirely false. 4. The trial court found that the plaintiffs were not prepared to purchase the property as they considered the defendants' title thereto to be defective although the court earlier came to the conclusion that the title of the defendants appeared to be complete. In this connection the court took into consideration the document Ex. A-3 which was an agreement to sell with respect to the property in suit by Ranglal, Munim of Bherunlal Gelda in favour of the defendants and it was mentioned therein that the sale had been settled for Rs. 1600/- out of which Rs. 1500/- had already been received and the remaining Rs. 100/- would be taken after the sale deed had been registered. It was further observed that although no sale-deed was ever executed or registered up to date, it was satisfactorily proved by the statement of defendant Shankerlal D. W. 6 and his witnesses that the property was in possession of the defendants since Svt. 1994 or 1937 A D. The learned trial Judge then referred to Ex. 2, a notice given by Shri Rajmal, pleader for Bherunlal Gelda dated the 11th April, 1953, addressed to the defendants in which it was stated that Bherunlal was the owner of the property in question and that Shankerlal had entered into unlawful possession of the same and that Bherunlal had heard that the plaintiffs were purchasing the said property from Shankerlal. It was further stated there-in that Shankerlal had no right or title to the property in question and that he had taken unlawful possession of it and that proceedings had already been started to evict him therefrom and consequently the plaintiffs should beware of purchasing the said property from Shankerlal. It was also stated in this letter that this information was being given to the plaintiffs in their own interest and that if they paid any money to Shankerlal they might stand to lose it, and, therefore, they should act with proper care and caution. Impressed by this letter, the learned trial Judge held that the plaintiffs were justified in not completing the sale as they thought that the defendants' title to the property was defective. In this view of the matter, the plaintiffs' suit for refund of the earnest money was decreed. 5. The defendants then went in appeal to the learned District Judge, Bhilwara. The learned District Judge refused to go into the question whether the defendants had a marketable title based on adverse possession or otherwise with respect to the suit property as he thought that the question was a difficult one and could not be properly decided in the absence of the original owner Bherunlal as a party to this suit. He also declined to go into the question whether the plaintiffs had been fully posted with all relevant facts and circumstances relating to the defendants' title over the property in question as he thought that it was enough to say for the purpose of deciding the appeal before him that the defendants' title over the property was not free from doubt. According to the learned Judge, it was the bounden duty of the defendants to convince the plaintiffs that they had acquired a marketable title over the property free from all doubt ; but as the defendants' title was under a cloud, the plaintiffs were justified in refusing to purchase the property and in demanding their earnest money back. In this view of the matter, the learned Judge maintained the decision of the trial court and dismissed the appeal. The defendants have now come up to this Court in this second appeal. 6. It is strenuously contended by learned counsel for the defendants that his clients had not committed any breach of the agreement to sell and that the breach really came from the side of the plaintiffs, and, therefore, the courts below should have held that the earnest money stood forfeited to the defendants. In this connection strong reliance was placed on the dictum of their Lordships of the Privy Council in Chiranjit Singh vs. Har Swarup (1) that earnest money is part of the purchase price when the transaction goes forward and it is forfeited when the transaction falls through, by reason of the fault of failure of the vendee. It was also strenuously contended in this connection that the stand taken by the plaintiffs that it had been agreed to between the parties before the contract was entered into that the defendants would obtain a cleat title or release deed from the original owner Bherunlal Gelda and that in order to enable them to do that the sale was to be completed at the end of the period of a month from the date of the agreement was entirely false and so also the story that there was any real cloud on the defendants' title with respect to the property in question was a complete afterthought without any foundation in fact, and, therefore, it was urged that the plaintiffs' suit should have been dismissed by the courts below. 7. Now so far as the question of fact is concerned, namely, whether the plaintiffs had been apprised of the real nature of the defendants' title over the property in question before the agreement Ex; 1 was entered into, I am satisfied that they had been. In this connection, it is important to bear the following facts in mind. The plaintiffs were purchasing property for which they were prepared to pay a fairly considerable sum, namely, Rs. 12000/ -. The plaintiffs are residents of Bhilwara. The property itself was situate in Bhilwara town. The defendants did not live there but instead appear to have been living at all material times in New Delhi, although they did come to and stayed at Bhilwara to negotiate sale. In these circumstances, I find it difficult to understand that the property was not known to the plaintiffs or that they had or could have failed or ommit-ted to find out the necessary particulars of such title as the defendants possessed with respect to the property in question. The defendants must, therefore, have disclosed all their cards to the plaintiffs. And I am not prepared to believe that the defendants had suppressed any facts as regards their title in the sense that the plaintiffs were not aware of its real nature. 8. Again the story of the plaintiffs that one month's period for the completion of the sale was decided between the parties so that the defendants might be able to obtain a document of title from Bherunlal Gelda or a release deed from him, does not seem to be probable. For one thing, the agreement for sale Ex. 1 does not contain any mention of this requirement. Then it is very important to bear in mind what the plaintiffs said in first instance in their notice dated the 27th April, 1953. THIS notice makes no mention whatsoever of the alleged arrangement between the parries that the defendants were required and had undertaken to obtain a clear title from Bherunlal. All that the plaintiffs said in this notice which was the very first from their side was that an agreement had been entered into between the parties for the purchase and sale of the property in suit for a sum of Rs. 12000/- and a sum of Rs. 700/- had been given by the plaintiffs as earnest money and that a month's time had been fixed for the completion of sale by registration. It was further stated that although the plaintiffs were throughout ready and willing to pay the balance of the sale consideration to the defendants, the latter had still failed to execute the sale-deed and get it registered. The notice thereafter went on to say that the defendants should return the sum of Rs. 700/- along with interest etc. to the plaintiffs within the period of one day. There is not the slightest mention in this document that the arrangement between the parties was that the defendants would obtain the necessary document from Bherunlal Gelda or otherwise settle the dispute with the said Gelda as a condition precedent to the completion of the sale. For the first time, special point was made of this in the plaintiff's second notice Ex. A-2 given in reply to the defendants' letter Ex. A-3 dated the 29th April, 1953. It was in this letter that the plaintiffs stated that the property in question was not of the defendants but was of Bherunlal Gelda and that the defendants had taken one month's time for completion of the sale so that they might purchase the said property from Bherunlal Gelda or otherwise settle the dispute with him, and thereafter complete the sale in favour of the plaintiffs and that as the defendants had completely failed to get anything done to that effect, they were not bound by the agreement of sale. It was further stated in this letter that the plaintiffs had received a letter from Bherunlal Gelda that the house was his and that the defendants had no right to sell it. THIS letter, as already stated above, was sent by Sri Rajmal, P. W. 1, a pleader on behalf of Bherunlal Gelda, and is dated the 11th April, 1953. It is interesting to note that this letter is on a plain paper and it does not appear, whether it was sent by post or by hand, and, further, that although this letter must have been received by the plaintiffs soonafter the 11th April, 1953, no mention whatsoever of it is to be found in the plaintiffs' first notice dated the 27th April, 1953, Ex. A-l. Shri Rajmal appeared in the witness-box and deposed that he had sent this notice (Ex. 11-2) under the instructions of his client Bherunlal Gelda. He, however, admitted in his cross-examination that the said Bherunlal Gelda was not in Bhilwara town on the date he gave the notice and that Bherunlal had sent for the witness some 10 or 15 days before the date of the notice and had given him the necessary instructions. He further deposed that thereafter he had received two letters from Bherunlal Gelda one of which was received by him six or seven days before the date of the notice, and the other some four days before it but had torn off those letters. He also deposed that Bherunlal Gelda had given the Vakalatnama to him but was not sure whether he had it with him or not at the date of his deposition. Further cross-examined, the witness stated that Bherunlal Gelda had not told the former that he had sold the property in question to the defendants on Bhadwa Sudi 4, Svt. 1994 for Rs. 1600/- and that all that the witness remembered was that Bherunlal Gelda had probably told him that the defendants had taken unlawful possession over the suit property some seven or eight years ago. The witness also admitted that Bherunlal Gelda had not shown to him any Patta or title deed for the land. To a question that Bherunlal Gelda had never gone to him or had asked him to give a notice he replied in the negative. To a still further question whether the witness had been asked to give a notice to the defendants in this connection or that he had in fact given such a notice to the defendants, he did not give any but an evasive answer. It is further important to mention in this connection that although it was stated in this notice that proceedings had already been started at the instance of Bherunlal for the defendants' act of trespass on this land there is nothing to show on this record that any such step was at all taken. In fact, learned counsel for the plaintiffs has frankly conceded that he is not aware of any such action having been taken against the defendants until the present moment. It is also a matter to be noticed that neither of the parties produced Bherun Lal Gelda in the witness-box. 9. It would be convenient to discuss the testimony of the plaintiff Jethmal himself in this connection which he gave at the trial. His version is that the defendants had wanted one month's time for the completion of the sale and this was incorporated in the agreement. After the said document had been written up the witness inquired from the defendant Shankerlal as to why he wanted a month's time and that it should be as well if he would accept the money and execute the sale-deed and complete the sale forthwith. Thereupon Shankerlal told him that some of his papers were lying in Delhi and that he had still to obtain a proper document from Bherunlal Gelda and get it registered and after he had got that document registered he would complete the sale in his favour. Jethmal's further testimony is that at that time he had said that if there was any dispute relating to the land, Shankerlal should return the money which had been given to him. The latter, however, replied that if Bherunlal would execute a proper sale-deed in his favour and got it registered, then the arrangement between the parties would stand and the sale in favour of the plaintiffs would also be proceeded with but otherwise the defendants would return the sum of Rs. 700/- I have no hesitation in saying that this version of the plaintiff inspires very little confidence, and I am not prepared to accept it at its face value. It is too much for Jethmal to ask the court to believe that the document had been written up first and that all this talk took place afterwards, as this would be entirely contrary to normal human experience in matters of this kind. Besides, this case of the plaintiffs was not at all disclosed in the plaint, and to my mind it is clearly falsified by the notice Ex. A-1 to which I have made detailed reference in the foregoing part of this judgment. Having regard to all these circumstances, I have no hesitation in coming to the conclusion that the plaintiffs knew the kind of title full well which the defendants had with respect to the property under sale before or at the time the agreement Ex. 1 came to be executed between the parties, and that their grievance that the defendants had refused to execute the sale-deed although the plaintiffs were throughout the stipulated period of one month prepared to pay the money and have the sale completed and therefore the defendants were guilty of having committed a breach of the agreement to sell has no foundation in fact. 10. It is still contended on the side of the plaintiffs that even if this Court came to the above-mentioned conclusion, the plaintiffs were justified in repudiating the contract and asking for the refund of the earnest money inasmuch as the defendants had not made out a marketable title and that the same was not free from cloud or suspicion. THIS brings me to a consideration of sec. 55 of the Transfer of Property Act. Sec. 55 deals with the rights and liabilities of a buyer and a seller in the absence of a contract to the contrary. Clause (l) (a) of this section lays down that the seller is bound to disclose to the buyer any material defect in the property or in the seller's title thereto of which the buyer is not aware and which the buyer could not with ordinary care discover. Under clauses (b) and (c), the seller is required to produce to the buyer on the latter's request all documents of title relating to the property which are in the seller's possession or power and to answer to the best of his information ail relevant questions put to him by the buyer in respect to the title of the property. I have no doubt that there was no breach of any duty on the part of the defendants so far as these clauses are concerned. The matter however, does not seem to end there because sub-clause (2) of sec. 55 further lays down, in so far as it is material for our present purposes, that the seller shall be deemed to contract 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. In other words, the law places the seller in the absence of a contract to the contrary under a statutory obligation to give a warranty of title to the purchaser to the effect that he possesses the interest which he professes to transfer and that the has power to transfer the same. The contention on the side of the plaintiffs is that the defendants cannot be held to have fulfilled the requirements of this clause in the circumstances of the present case. In other words, what is contended is that the seller did not possess the proprietary interest which he was professing to transfer and he had no power in law to transfer the same. 11. To this contention the reply of learned counsel for the appellants is that the plaintiffs knew and were fully informed of such title in relation to the property under sale which the defendants possessed, and that the latter had suppressed nothing. The plaintiffs lived in the place where the property was situate and so also they were aware of everything which needed to be known, and, consequently, it is urged that the plaintiffs cannot be allowed to complain of the lack of title once the agreement to sell had taken place with full notice of the particulars of title, which the defendants had with respect to the property under contract. I have given this aspect of the case my careful consideration and have come to the conclusion that the submission of learned counsel fulfils the requirements of clause (l) (a) or clauses (l) (b) and (c) but would not be a complete answer to the requirement of clause (2) of sec. 55 where the seller, in the absence of a contract to the contrary, has been placed under a specific obligation as to warranty of title. If, therefore, in a given case it is established that there is a breach of this warranty, the seller must be held to be liable to the vendee even though the latter has notice of the defective title provided there is no contract to the contrary. It would also seem to be obvious that in such a case the seller would not be entitled to ask for specific performance of the agreement to sell. There is authority for holding that clause (2) of sec. 55 applies not only to a completed sale but also to an agreement to sell, and that, in any case, if sec. 55 (2) only refers to a complete sale and does not in express language refer to an agreement to sell, the warranty of title essential in the former case must be held to be necessarily implied in a contract for sale also. See Deep Chandra vs. Sajjad Ali Khan

(2.) I am therefore disposed to hold the opinion that clause 55(2) applies not only to conveyances but also to agreements to sell. 12. The true question for determination, therefore, boils down to this whether the defendants vendors did possess the title or interest which they professed to transfer to the plaintiffs vendees and whether they had power to transfer the same. 13. The learned District Judge felt persuaded to avoid answering this question because Bherunlal Gelda to whom the property originally belonged and admittedly so belonged was not a party to this case. The view of the learned Judge is plausible but, in my opinion, it cannot be accepted as sound. Where the rights of the parties depend upon the determination of the question whether the vendor had a marketable title or what is called a title free from reasonable doubt, the determination of that question cannot be brushed aside merely because one of the interested parries is not a party to the suit. In any case, it is not the fault of the defendant that he is not a party to the suit. The plaintiffs had instituted the suit, and it was a matter of their choice whom to implead or nor to implead as defendants to the suit. But precisely for that reason, I think that it would be hardly right that the defendants should stand to be penalised, and it seems to me that they are entitled to ask the courts to hold, in the circumstances of a case like the present, whether they had a marketable title or not; because upon the decision, the answer to the suit would properly depend. If the defendant vendor are unable to show a title free from reasonable doubt with respect to the property under sale, the suit of the plaintiffs vendees for recovery back of the earnest money paid by them will have to be decreed. If, on the other hand, the defendants vendors do succeed in showing that they had a marketable title which they professed to sell and that they had the power to transfer the same, equally clearly they would be entitled to non-suit the plaintiffs. It is true that the court may experience a certain amount of difficulty in determining this question in the absence of a party who is the alleged rival claimant; but what may be said, with equal or even better justice, is that the matter has nevertheless got to be decided between the parties to the suit in order properly to adjudicate on their respective rights. It may be that such a decision would not bind the person or persons who are not parties to the suit; but what I feel is that, after all is said and done, what is required to be proved is not a title which is fool-proof or about which no dispute whatsoever can possibly be raised, but a title which is free from a reasonable doubt as between the parties to the suit. The learned District Judge, therefore, fell into a grave error of law in refusing to go into the question whether the defendants held a reasonable title and whether they had the power to transfer it as this was a crucial issue in the case upon which a proper decision of this case rested. In fact the approach of the learned Judge was entirely wrong and this completely vitiates his judgment. As to authority for the view which I have felt persuaded to propound above, learned counsel for the parties were unable to cite any one way or the other. However, I have been able to find out the following English cases which throw a flood of light on the point under consideration and which greatly fortify me in coming to the conclusion to which I have. 14. In Glass vs. Richardson