VENKATASWAMI NAIDU Vs. MUNIAPPA MUDALIAR

JUDGEMENT

(1.) The learned Additional District Judge of Salem, disagreeing with the decision of the District Munsiff of Sankaridrug at Salem, held in A.S. No. 395 of 1943 out of which this second appeal arises, that. Ex. P-I, dated 26 December, 1931, related to the purchase of the suit property in the name of the plaintiffs vendor not as benami for the first defendant but in order to enure for the benefit of the plaintiffs vendor himself. Ex. P-I was a sale deed for a consideration of Rs. 800 executed by one Muthuswami Konar in favour of one Duraiswami Naidu, by which the property mentioned therein was. sold with absolute rights to the latter. On 7 June, 1941, Duraiswami Naidu sold the property purchased under Ex. P-I to the plaintiffs for a sum of Rs. 1,500. On the strength of this purchase under Ex. P-12, the plaintiffs brought the suit for a declaration of their title to the suit house and possession of the same with damages for past use and occupation from the defendants. The first defendant who was the brother of defendants 2 and 3 contested the plaintiffs claim on the ground that the purchase under Ex. P- I was for his own benefit and that he paid the consideration for it though the document was taken in the name of Duraiswami Naidu as a benamidar. It was further contended that the thatched house which was standing on the property at the time of the purchase was destroyed by fire and the first defendant built a new house with his own funds.

(2.) The trial Court found that the sale deed Ex. P-I was taken by the first defendant for his own benefit in Duraiswami Naidu's name as benamidar. It was also held that the first defendant was not a lessee of Duraiswami Naidu. There was a further decision that the tiled house built on the property was constructed by the first defendant with his own funds and that the plaintiffs were not bona fide purchasers for value of the house without notice of the first defendant's title. The learned District Munsiff discussed the entire oral and documentary evidence at great length before he arrived at the findings adverted to by me above. The result of these findings was that the suit was dismissed. On appeal, the learned Additional District Judge came to a somewhat different conclusion on some of the points in controversy. The result of the learned Judge's conclusion was that the house was built by the first defendant with his own funds but that Ex. P-I was a sale deed in favour of Duraiswami Naidu effected with Duraiswami Naidu's own funds and with the intention that the title should vest in Duraiswami Naidu alone. The learned Judge found that the first defendant's case that he paid R.s. 500 of the purchase price and that Duraiswami Naidu (P.W. 1) advanced only the balance of Rs. 300 was false. At the end of paragraph 4 of his judgment the learned District Judge observes that Duraiswami Naidu P.W. 1, purchased the property at the instance of the first defendant and for the purpose of providing him with a residence. It was the first defendant who negotiated the transaction and it was he who actually paid the money into the hands of D.W. I, the vendor under Ex. P-I. The effect of his finding is that Duraiswami Naidu wanted to pro-vide a residence for the first defendant and with that object, and at the instance and request of the first defendant, he purchased the property in question with monies belonging to himself. The learned Judge thereafter discussed the evidence in relation to the construction of the existing house on the property and agreed with the District Munsiff that it was the first defendant who put up a building spending his own monies and all the while Duraiswami Naidu, P.W. 1, kept quite like disinterested spectator and did not step in to claim his rights. At the end of paragraph 6 the learned Judge observes as follows: The lower Court has discussed the matter at considerable length and I am in complete agreement with it when it says that the first defendant effected the improvement at his own cost. The improvements were considerable, although as to their precise value, there is no reliable evidence. Thereafter in paragraph 7 the learned District Judge discussed the question as to what the attitude of the parties, viz., the first defendant and Duraiswami Naidu,. was at the time of the construction of the house. In discussing that, he was of the view that no precise terms and conditions governing the transaction between them were either discussed or formulated but the whole matter was to a large extent based on mutual trust and confidence. I think it is well and useful to set out in. the learned Judge's own words what he considered to be the state of things at that time: The first defendant was badly in need of a house. But he had no money with which to buy one. P.W. I who was rich was prepared to advance the money on condition that he was to be the owner until the advance was repaid. Or, in other words, P.W. I was prepared to buy the house himself, so as to enable the first defendant in course of time to save enough money to buy it off him. Meanwhile the first defendant was to occupy the house, legally in the position of a tenant, but actually in his capacity as the ultimate owner, although of course, his ownership was contingent on his repaying the purchase price. No rent was to be actually collected from the first defendant since he was going to repay P.W. is money with interest. The first defendant could do what he liked with the property, and effect whatever improvements he considered necessary without any specific provision being made in respect of it, since the improvements were ultimately to enure to his own benefit. It was taken for granted that the first defendant would pay up the purchase price and secure the property for himself; the possibility of his failing to do this-was perhaps not contemplated. It is also found by the lower appellate Court that the plaintiffs knew the fact that the property was purchased for the benefit of the first defendant and they can not claim the rights of a bona fide transferee under issue 4. What then is the legal effect of the transaction? I do not agree with the learned District Judge with his discussion or the conclusion arrived at in paragraph 7 of his judgment. Though the title at the time of Ex. P-I was to vest in P.W. I, still the parties agreed that the first defendant could do what he liked with the property and effect whatever improvements he considered necessary on the property. The only burden on the first defendant was to pay back the purchase price to P.W. I with interest as contemplated at the time of the purchase. In deciding the relative legal rights of the parties, we have to bear in mind the intention with which the first defendant built the house and also how P.W. I, Duraiswami Naidu, behaved when the house was being built. It is common ground that the old thatched house was destroyed by fire and the finding now is that the present structure was put up by the first defendant with his own funds. The conclusion of the lower appellate Court is also to the effect that all the time the first defendant was building the house, P.W. I was looking on and tacitly acquiesced in the first defendant putting up the building. Not only was there no overt act of P.W. I signifying his opposition to the building scheme of the first defendant, but there was passive acquiescence by P.W. I in the first defendant's action. The first defendant was building the house on the bona fide belief that the land was his and the only act of his to complete the title was to pay the purchase money to P.W. I with interest thereon. It is in circum-stances like this that we have to apply the principle of equitable estoppel laid down in the well- known English Case of Ramsden V/s. Dyson(1866) L.R. I H. L. 129. The rule of equitable estoppel enunciated in the above case will be made to apply to the case where the owner of land sees another person erecting buildings upon it, and Knowing that such per-son is under the mistaken belief that the land is his own property, purposely abstains from interference with a view of claiming the building later on when it is erected. P.W. I knew that the first defendant was building upon the land in the belief that the property was his but that he should only pay the purchase price to him. In spite of that P.W. I did not raise his little finger to prevent the building from being constructed. In order to bring in the principle of equitable estoppel, it is sufficient to show that the conduct of the owner, whether consisting in passive abstinence from interfering, or in active intervention, was sufficient to justify the legal inference that he had, by implication, contracted that the ownership of the land should be transferred to the first defendant here. In Narasayya V/s. Raja of Venkatagiri (1910) I.L.R. 37 Mad. 1, at page 15, Abdur Rahim, J, discusses the question how far equitable estoppel enunciated in Ramsden V/s. Dyson (1866) L.R. 1 H.L. 129 can be applied to cases where a tenant built upon the land with the passive connivance of the landlord in the following words: If they had acted under such belief they would have been entitled to insist that they should not be ejected at all or that if ejected compensation should be paid to them for the improvements which they had effected under such belief provided they proved that they made the improvements in circumstances which would induce a Court of Equity to imply a contract between them and the landlord that the landlord would not eject them or in case he ejected them that he would pay them the value of the improvements. The Court would Infer such a contract if the landlord, by his conduct, encouraged or raised an expectation in the tenant spending money in making improvements that the latter would not be evicted at all or at least not without being compensated for the value of such improvements and the improvements were in fact made under such expectations. Such a contract is inferred in order to relieve the tenant from the fraud of the landlord. In the well-known case of Willmott V/s. Barber (1880) 15 Ch. D. 96, Fry, L.J., enunciates the rule of estoppel applicable to cases of this nature and lays down that to constitute acquiescence in such cases the following essentials must co- exist: (1) The first defendant must have made a mistake as to his legal rights; (2) He must have expended some money or must have done some act on the faith of his mistaken defendant; (3) The plaintiffs, the possessors of the legal right, must know of the existence of their legal right which is inconsistent with the right claimed by the first defendant; (4) The plaintiffs the possessors of the legal right, must know of the. first defendant's mistaken belief of his rights and (5) The plaintiffs must have encouraged the first defendant in his expenditure of money or in other acts which he has done either directly or by abstaining from asserting his legal right. These principles are of such well-known application and have been followed in numerous cases in this country that it is unnecessary for me to enumerate the Indian cases in which they have been followed. In De Bussche V/s. Ali (1878) 8 Ch. D. 286, Thesiger, L.J. observed that if a person having a right and seeing another about to commit, or in the course of committing, an act infringing upon that right, stands by in such a manner as really to induce the person committing the act, and who might otherwise have abstained from it, to believe that he assents to its being committed, he cannot afterwards be heard to complain of the act. To the same effect are the observations of Lord Cottenham in Duke of Leeds V/s. Earl of Amherst (1846) 2 Ph. 117 : 41 E.R. 886. In Cairncross V/s. Lorimer (1860) 3 L.T. 130, Lord Campbell enunciated the principle of acquiescence in these words: ...Generally speaking, if a party having an interest to prevent an action being done, has full notice of its having been done, and acquiesces in it, so as to induce a reasonable belief that he consents to it, and the position of others is altered by their giving credit to his sincerety, he has no more right to challenge the act to their prejudice, than he would have had if it had been done by his, previous licence. In Hari Bhusan V/s. Sheikh Abdul , the rule of estoppel is stated as follows: Where a person in bond fide belief that a certain property belongs to him spends money upon it and the true owner stands by and allows him to spend money and make improvements upon his land, the true owner is estopped from asserting his title to the land as against the person making improvements in such bona fide belief. It seems to me that the statement of law outlined above applies directly to the present case. According to the finding of the learned District Judge, the first defendant was under the bona fide belief they the property belonged to him and that the only obligation he had to meet was to pay the price paid by Duraiswami Naidu with interest thereon to the latter. If that is done, the property could be enjoyed by the first defendant as his own property without any let or hindrance by Duraiswami Naidu or others claiming under him. That Duraiswami Naidu encouraged the first defendant to be under that belief, is also what the learned Judge opines. could it be said that in a situation like this, having allowed the first defendant to expend the money and build a substantial structure on the property in the bona fide belief that the land would become his on the fulfillment of certain conditions, Duraiswami Naidu can turn round and say that the first defendant has no legal title and that the property should be surrendered to him or to his alienee ? Following the well-known dicta contained in the various cases mentioned by me above, the only answer that could be given to it is that Duraiswami Naidu could not; and if he could not, the plaintiffs, who are not even bona fids purchasers, are prevented from claiming any higher rights.

(3.) The learned District Judge was not alive to the position thus created to the fullest extent, and in his opinion it was a case of implied contract to pay the value of the structure by Duraiswami Naidu to the first defendant. I do not think that his findings justify that legal conception. There was no contract" to pay the value of the structure but what was impliedly understood was that if the first defendant paid the cost price of the land with interest thereon to Duraiswami Naidu the land would become the first defendant's own property. Therefore, the learned Judge's view that the plaintiffs, as successors to the rights of Duraiswami Naidu, should pay the first defendant the value of the structure on the latter surrendering the property with the house thereon cannot be justified. It seems to me that in a state of things like this the plaintiffs are not entitled to possession at all. The utmost they are entitled to is that the first defendant should pay the cost of the site which Duraiswami Naidu had to pay to the vendor under Ex. P-1, with interest thereon.