S PARTHASARATHY AIYAR Vs. MSUBBAROYA GRAMANY

JUDGEMENT

(1.) One Jambulinga owned two adjoining houses in Mylapore. He purported to mortgage them to one Subbusami who was a brother of the husband of Meenakshi, Jainbulinga's daughter. He then died and left a Will appointing his widow Mylathammal executrix and giving her power to sell his property for the purpose of paying debts and to enjoy what was left during her life, and bequeathing after her death what was left to Meenakshi. Probate has never been taken out of the Will. Some-years later, the widow purported to sell the property to Rajagopal her brother for Rs. 1,000. The documents of title were handed over to him, the sale deed was registered and in the presence of the Registrar a thousand rupees were handed over by Rajagopal to the widow. Subbusami joined in that sale by acknowledging the discharge of his mortgage which was for a larger amount, the sale deed providing that the sale was for the purpose of discharging that mortgage. Many years afterwards, Rajagopal purported to sell the property to Subbaroya Gramany for Rs. 4,000 and he, with the assistance of Rajagopal, mortgaged the premises to the plaintiff for Rs. 2,000, it being stated that Rs. 2,000 was required for the purpose of providing part of the purchase money. This suit has been brought by this mortgagee to obtain possession of the premises. Meenakshi who has been forborne time in occupation of part of one of the two houses resists the claim for ejectment alleging that the property is hers.

(2.) The learned Judge, who tried the case, has held that defendant Meenakshi has made out her case. He holds that all the transactions relating to this property from the time of the mortgage to Subbusami down to the sale to Subbaraya Gramany and including that sale, were benami transactions and mere shams. He holds too that the plaintiff is in no better position than Rajagopal or Subbaraya Gramany, because he is not a bona fide mortgagee for value without notice.

(3.) I agree with the findings of fact of the learned Judge except on two material points. I agree that the original mortgage to Subbusami by Jambulinga himself was not a real transaction. I agree that the sale by Rajagopal to Subbaraya Gramany was not a real transaction. I am prepared also to accept his view of the character and credibility of Rajagopal that he was an impecunious and unscrupulous person. But I do not agree with the inference that he has drawn from the facts put before him in relation to the sale by Mylathammal, the widow. Nor do I agree that on the facts as found by him, the plaintiff is not a bona fide mortgagee for value. No rational explanation has been offered to the Court as to why Mylathammal should have gone through the form of selling the property to her brother Rajagopal. It is suggested that she did so either, so that, Rajagopal might be trustee for Meenakshi, her daughter, and after her own death, protect the property for the benefit of the daughter against her husband; or as an alternative, that she went through a form of a real sale in order to frighten her son-in-law and make him more careful in the future in his conduct towards her and her daughter. The first of these alternatives seems to me to be incredible, for one cannot believe that the mother would hand over her property to her brother in trust after her death for her daughter in the form of an absolute conveyance without informing her daughter of the fact, and it is admitted that the daughter was never told anything about it. In doing so, she would leave her daughter at the mercy of her uncle and if the uncle died, she would leave her without evidence to attempt to recover her inheritance from the uncle's heirs. The other alternative seems to me to be equally incredible. Because, in order to have the desired salutary effect upon the conduct of the son-in-law, he would have to be told of the sale, that there was a real sale, and one would have thought that he would ascertain at once that it was not a real sale because his brother Subbusami who was a party to the transaction would tell him not to be alarmed, as the whole thing was benami and could be disregarded. And again, if he knew about it, how is it possible that his wife Meenakshi did not know about it? I cannot accept either alternative as a possible motive for this curious. transaction. It is not the case of a person buying the property and putting it in the name of somebody else as benami. It is suggested to be the case of a person who has a life interest and whose daughter has a reversionary right to her property, voluntarily parting with the property in the sense of transferring it to somebody else. It is a much more likely view in my Judgment that Rajagopal being of the character attributed to him, in some way defrauded or tricked his sister into selling the property to him at an under value and probably also knowing full well that under the terms of the Will she was exceeding her authority in effecting the sale, because at that time there were no debts of the testator which required to be paid. I find on the facts that the sale to Rajagopal was a real sale though induced by fraud and voidable therefore on discovery of fraud by Mylathammal and consequently also by Meenakshi. But a person who has acquired property under a voidable title can himself give a good title to that property to a bona fide purchaser or mortgagee from him, who deals for value and has no notice of the defects in the title. In this case the plaintiff admittedly dealt for value. He had in fact no notice at all of anything being wrong from the beginning to the end of these transactions. He had before him the original mortgage, the Will, title deeds to the property the conveyance to Rajagopal and the endorsement by the original mortgagee. He knew nothing of Meenakshi or that, she had ever resided on the premises. But it is argued that he had constructive notice of all Meenakshi's claims by reason of the fact that, unknown to him, she was at the date of the sale in possession of a part of the premises. Now the doctrine of constructive notice is one that applies here as well as in England and here the requisites for it are stated in Section 3 of the Transfer of Property Act which runs thus : "A. person is said to have notice of a fact when he actually knows that fact, or when, but for wilful abstention from an enquiry or search which He ought to have made, or gross negligence, he would have known it,. . . . In England as here it has been held that constructive notice of all the rights of a person in possession of property sold or mortgaged is to be imputed to purchasers or mortgagees who made no enquiry of the persons in occupation. But that rule depends on the principle that where another is in exclusive possession of the property and such possession would prima facie be inconsistent with the full rights of ownership of the vendor or mortgagor, and the purchaser does not choose to ask what that possession is, he must be taken to have got the information that he would have obtained if he had asked. It has, however, frequently been laid down that that doctrine has gone to its full length and must not be extended, and it has never been held that it is the duty of a proposed purchaser or mortgagee to enquire of every person who may be on the premises or any part of those premises. Nor has it been suggested that the unknown occupation of a part of the premises would put him on enquiry as to the possible rights of the occupier of that portion over the remainder of the premises. There is indeed strong authority to the contrary. That master of equity Farwell, J. as he then was, in Hunt V/s. Luck (1901) 1 Ch. 45 affirmed on appeal in (1902) 1 Ch. 428, with whose judgment the Court of Appeal agreed, said thus : "If a vendor or mortgagor offers property stated to be subject to tenancies, there is nothing in the fact that tenants are all in occupation to give rise to any suspicion. . . ." In Hunter V/s. Walters (1871) L.R. 7 Ch. 75 at p. 83, it was held that if further enquiry as to title of a small part of the estate would have revealed a defect in title as to the whole estate, the purchaser was not to be held to have constructive notice of that defect, in Manji Karimbhai v. Hoorbai I.L.R. 35 B. 342 it was held that the fact that a person was in occupation of a small part of a house did not put a purchaser on constructive notice of that person's rights as to the whole house. But apart from authority, one has to see here whether there has been wilful abstention from enquiry or gross negligence, and I fail to see how there can be wilful abstention or gross negligence in a failure to enquire from everybody on the premises what their title might be. In the case of tenement houses, there may be on the premises the actual sub-tenants, their wives, families, friends, guests and so forth. To suggest that it is the duty of the proposed mortgagee or purchaser to attend on these premises and examine narrowly every one of those persons would be casting upon him an intolerable burden, and to hold that he was affected by constructive notice of all these person's possible equitable rights over any part of the premises would be an extension of the doctrine of constructive notice, which, as I have pointed out, has long been held, must be kept within the limits which have been fixed. I find nothing in this case to put the plaintiff upon any enquiry as to Meenakshi's rights and I hold that he is a mortgagee for value without notice.