Sardar Govindrao Mahadik & ANR Vs.
Devi Sahai & Ors [1981] INSC 206 (15 December 1981)
DESAI, D.A.
DESAI, D.A.
MISRA, R.B. (J)
CITATION: 1982 AIR 989 1982 SCR (2) 186 1982
SCC (1) 237 1982 SCALE (1)191
CITATOR INFO :
E&R 1990 SC1828 (9) RF 1992 SC 385 (7)
ACT:
Transfer of Property Act, Section 53A-Scope
of
HEADNOTE:
The appellant mortgagor took a loan by
mortgaging his house property to the respondent mortgagee. The mortgage was a
mortgage with possession. According to the mortgagee sometime thereafter the
mortgagor agreed to sell the property to him and that pursuant to this
agreement requisite stamps were purchased and a draft sale deed was drawn up.
The sale deed was however not registered.
A few days later the mortgagor sold the
property to another person and the mortgagor and the subsequent purchaser filed
a suit against the mortgagee for a decree for redemption.
In the written statement the mortgagee
claimed that even though the sale deed was not registered, since he was in
possession of the property in part performance of the contract of sale and
continued to be in possession and did several acts attributable to the
contract, the mortgagor was debarred from enforcing any right against him in
respect of the property. It was also claimed that since the mortgagor himself
had no subsisting title to the property on the date of sale, he could not have
transferred the property to the subsequent purchaser.
The trial court held that though the sale
deed was executed but since it was not registered the transaction of sale was
not complete. The Court further held that benefit of section 53 A is not
available to the mortgagor defendant because the mortgage being a mortgage with
possession, continued possession of the mortgagee after the date of contract would
not be in part performance of the contract, and also the payment made for the
purchase of stamps and for expenses of registration could not be said to be in
furtherance of the contract because that amount was paid before the execution
of the contract.
In the mortgagee's appeal the High Court held
that he was entitled to the benefit of section 53A against the mortgagor and
the subsequent purchaser for the reason that he was in possession of the
property and paid Rs. 1000 in furtherance of the contract.
The appellant in Civil Appeal No. 1145 of
1969 filed a suit against the mortgagor for recovery of a debt owed to him and
obtained attachment of the 187 suit property before judgment. The suit
eventually ended in a decree in his favour, In the auction of the suit property
since there were no bidders the decree holder's bid was accepted with the
permission of the Court.
The High Court allowed the decree holder to
be impleaded as a respondent in the mortgagee's appeal which was then pending
in the High Court.
It was contended on behalf the mortgagor that
the decree holder could not maintain an application under order XXII, Rule 10
of the Code of Civil Procedure because he could not be said to be claiming
under the mortgagor. (Rule 10 of order XXII CPC provides for continuance of any
action by or against a person who acquires any interest either by assignment,
creation or devolution during the pendency of the suit with the leave of the
Court.) ^
HELD: To qualify for the protection of the
doctrine of part performance it must be shown that there is a contract to
transfer immovable property for consideration and the contract is evidenced by
a writing signed by the person sought to be bound by it and from which the
terms necessary to constitute the transfer can be ascertained with reasonable
certainty. After establishing these circumstances, it must be further shown
that a transferee had in part performance of the contract either taken
possession of the property or any part thereof or the transferee being already in
possession, continued in possession in part performance of the contract and had
done some act in furtherance of the contract. The acts claimed to be in part
performance must be unequivocally referable to the pre-existing contract and
the acts of part performance must unequivocally point in the direction of the
existence of contract and evidencing implementation or performance of contract.
There must be a real nexus between the contract and the acts done in pursuance
of the contract or in furtherance of the contract and must be unequivocally
referable to the contract. When series of acts are done in part performance one
such may be payment of consideration.
Any one act by itself may or may not be of
such a conclusive nature as to conclude the point one way or the other but when
taken with many others, payment or part of the consideration or the whole of
the consideration may as well be shown to be in furtherance of the contract.
[209 D-H] The view of the House of Lords that one must not first look at the oral
contract and then see whether the alleged acts of part performance are
consistent with it but that one must look at the alleged acts of part
performance and see whether they prove that there must have been a contract and
that it is only if they do so prove that one can bring in the oral contract may
not be wholly applicable to the situation in India because an oral contract is
not envisaged by section 53A. Even for invoking the equitable doctrine of part
performance there has to be a contract in writing from which the terms
necessary to constitute the transfer can be ascertained with reasonable
certainty. The correct view would be to look at that writing that is offered as
a contract for transfer for consideration of any immovable property, examine
the acts said to have been done in furtherance of the contract and find out
wether there is a real nexus between the contract and the acts pleaded as in
part performance so that to refuse relief would be perpetuating the fraud of
the party who, after having taken advantage or benefit of the contract, backs
out and pleads non-registration as defence. [210A-D] Foxcroft v. Lester, 2
Vern. P. 456; Elizabeth Meddison v. John Alderson, Lord Selborne (1882-1183) 8
A.C. 467;
Clinan & Anr. v. Cooke & Ors.
1775-1802 188 All. E.R. (Reprint) 16; Chapronierse v. Lambert 1916-17 All.
E.R. (Reprint) 1889; Steadman v. Steadman
[1974] 2 All. E.R.
977, referred to.
In short, acts preliminary to the contract
would be hardly of any assistance in ascertaining whether they were in
furtherance of the contract. Anything done in furtherance of the contract
postulates the pre-existing contract and the acts done in furtherance thereof.
Therefore, the acts anterior to the contract or merely identical to the
contract would hardly provide any evidence of part performance [210 E] Although
the mortgagee's claim regarding payment of Rs.
1000 to the mortgagor for the purchase of
stamps and for expenses incidential to registration was not in dispute, there
is no evidence on record to show that there was an oral contract anterior to
the unregistered sale deed, nor was there a draft agreement prior to the
drawing up of the sale deed. Out of the sum of Rs. 1000 a sum of Rs. 700 was
paid prior to the agreement. It was not subsequently claimed that the balance
of Rs. 300 was paid in furtherance of the contract.
The High Court was in error in holding that
the act envisaged by the phrase "in furtherance of the contract"
should be in pursuance of the contract and not that it should either precede or
follow the agreement or the contract. If a written contract is a sine qua non
for the application of the equitable doctrine of part performance any act
preceding the contract could never be in furtherance of that contract which was
yet to materialise. Negotiations for a contract and a concluded contract stand
apart from each other. Anything at the negotiating stage cannot be claimed as a
contract unless the contract is concluded between the parties, that is the
parties are ad idem. The contract should be a written contract from which the
necessary ingredients constituting the transfer could be ascertained with
reasonable certainty.
[203 A-B] There is no material on record to
substantiate the mortgagee's claim that out of the total consideration payable
to the mortgagor he had retained in deposit with him a sum of Rs. 17000 odd for
being paid to other creditors of the mortgagee and that out of this amount a
sum of Rs. 541 due to him had been adjusted. Assuming that he could reimburse
himself there is no evidence to show that he gave discharge or gave credit in
his books of account to this sum. Also there is nothing to show that the
mortgagor had in his possession a list of the mortgagees creditors or that he
had made any attempt to procure the list or that he issued a public notice
inviting the creditors of the mortgagor to claim payment from him to the extent
of the consideration retained by him. Neither did he pay any creditor nor did
he make any attempt to pay any creditor including those whose names were known
to him. [211 G] Induction into possession of an immovable property for the
first time subsequent to the contract touching the property, may be decisive of
the plea of part performance.
But mere possession ceases to be of
assistance when the person claiming benefit of part performance is already in
possession prior to the contract and continues to retain possession. There is
an understandable and noteworthy difference in the probative value of entering
into possession for the first time and continuing in possession coupled with a
claim of change in character. Where a person claiming benefit of part
performance of a contract was already in posses- 189 sion prior to the
contract, the Court would expect something independent of the mere retention of
possession to evidence part performance. Mere retention of possession, quite
legal and valid, if mortgage with possession is not discharged, could hardly be
said to be an act in part performance unequivocally referable to the contract
of sale. [213 D-E, 215 E-F] In the instant case retention of possession is of
no consequence because the mortgage was not discharged and was subsisting and
the mortgage being a mortgage with possession, the mortgagee was entitled to
retain possession.
The fact that immediately a sale deed was
executed in favour of the subsequent purchaser by the mortgagor would show that
he was not willing to accept the contract as offered by the mortgagor. The
subsequent purchaser had taken a conditional sale and this reinforces the stand
of the mortgagor. The existence of the dispute, about the nature of the
transaction, is not in dispute. Therefore the conduct of the mortgagor is
consistent with his case. [217 D-F] The mortgagee had failed to prove that he
did any act in furtherance of the contract, continued retention of possession
being a circumstance of neutral character in the facts and circumstances of the
case and it being further established that the mortgagee was not willing to
perform his part of the contract, he is not entitled to the benefit of the
equitable doctrine of part performance. [217 H] (2) A perusal at the
chronological events of the case would clearly show that the decree holder had
more than a mere semblance of title. Even if the application would not fall
under order 22 Rule 10 CPC. section 146 of the Code enables him to maintain the
application. Smt. Saila Bala Desai v. Smt. Numala Sundari Dassi and another,
[1958] S.C.R. 1287 at 1291, referred to. [221-D-E] The decree holder did not
acquire under the sale certificate the equity of redemption of the mortgage.
The suit property was sold subject to subsisting mortgage in favour of the
mortgagee. At a Court auction what is sold is right, title and interest of the
judgment debtor who in this case was the mortgagor. Subject to other conditions,
his right is the right to redeem the mortgage. Much before the proclamation of
sale was issued the equity of redemption held by the mortgagor was sold by him
to the subsequent purchaser. Therefore, even on the date of decree as also on
the date of filing of the execution application the mortgagor had no subsisting
interest in the property which could be sold at the Court auction. [222 A-B]
The object behind the order levying an attachment before judgment is to give an
assurance to the plaintiff that his decree, if made, would be satisfied. Where
an attachment has been made, any private transfer or delivery of the property
attached would be void as against all claims enforceable under the attachment.
What is claimed enforceable is claim for which the decree is made. A dismissal
of the suit may terminate the attachment and would not be revived even if the
suit is restored As a corollary, if attachment before judgment is obtained in a
suit which ends in a decree but if in appeal the decree is set aside, the
attachment of necessity must fall. It at an intermediate stage pursuant to the
decree of the trial Court the attached property is sold at a Court auction and
where an appeal is preferred, an attempt should be made to obtain stay of the
execution of the decree of the trial court. If the execution proceeds and the
property is 190 sold at a court auction before the appeal is disposed of, the
equity in favour of a person as a auction purchaser may come into existence. In
such a case if the auction purchaser is an outsider and if the execution of the
decree was not stayed, the auction purchaser would be protected even if the
decree in execution of which the auction sale had been held is set aside
because the equity in favour of the stranger should be protected. [223 C-E] If
on the other hand the auction purchaser is the decree holder himself, he should
not be entitled to any protection because when he proceeds with the execution
he was aware that an appeal against the original decree was pending and that if
the appeal was allowed the decree which he sought to execute might be set
aside. He could force the place by executing the decree, taking advantage of
the economic disability of the judgment debtor in a money decree by making the
situation irreversible. Therefore, where the auction purchaser was none other
than the decree holder who purchased the property for a meagre sum, this
results in an atrocious situation, but yet by a technicality he wants to
protect himself. To such an auction purchaser, who is not a stranger and who is
none other than the decree holder, the Court should not lend its assistance.
[224 G-H] Janak Raj v. Gurdial Singh & Anr. [1967] 2 S.C.R. 77 at 86,
followed.
In the instant case the High Court was right
in holding that the auction purchaser decree holder was entitled to recover
only the decretal amount and proportionate costs.
[225 D] But yet the conduct of the mortgagor,
the subsequent purchaser and the mortgagee in not paying a small debt and
allowing the property to be auctioned and forcing the decree holder to fight a
never ending litigation was iniquitous in the facts and circumstances of this
case. Taking into consideration the conduct of the parties the decree holder
should be paid a sum of Rs. 7,000 inclusive of decretal amount, interest,
proportionate costs and costs of litigation so far. [225 E-F]
CIVIL APPELLATE JURISDICTION: Civil Appeal
Nos. 1144- 1145 of 1969.
From the judgment and decree dated the 5th
March, 1964 of the Madhya Pradesh High Court in First Appeal No. 14 of S.S.
Ray, G.S. Solanki, S. Kachwah and K.J. John for the Appellant in C.A. 1144/69
and for Respondent Nos. 2 and 3 in C.A. 1145/69.
G. L. Sanghi. A.G. Ratnaparkhi and K.K.
Gupta, for the Appellant in C.A. 1145/69 and for Respondent No. 2 in C.A. 1144
of 1969.
191 V.S. Desai and Dr. Y.S. Chitale.
Rameshwar Nath, K.A. Chitale and Mrs. S. Ramachandran for Respondent No. 1 in
both the Appeals.
The Judgment of the Court was delivered by
DESAI, J. . What constitutes part performance within the meaning of the
expression in Section 53-A of the Transfer of Property Act ('Act' for short) so
as to clothe a mortgagee in possession with the title of ownership which would
defeat the suit of the erstwhile mortgagor for redemption, is the question
canvassed in these two appeals by common certificate.
Facts first Sardar Govindrao Mahadik original
plaintiff 1 (now deceased prosecuting these appeals through his legal
representatives) and Gyarsilal original plaintiff 2 (appellant 2) filed Civil
Suit No. 14151 in the Court of the District Judge, Indore, for redemption of a
mortgage in respect of house No. 41 more particularly described in plaint
paragraph 1, dated February 22, 1951. A loan of Rs. 10,000 was secured by the
mortgage. The mortgage was mortgage with possession. Plaintiff I was the
mortgagor and the sole defendant Devi Sahai was the mortgagee. Plaintiff 2 is a
purchaser of the mortgaged property from plaintiff I under a registered sale
deed Ex. P-I, dated October 14, 1950. Plaintiff I will be referred to as mortgagor
Defendant Devi Sahai as a mortgagee and plaintiff 2 Gyarsilal as subsequent
purchaser in this judgment. Even though the mortgage was mortgage with
possession, it was not a usufructuory mortgage but an anomalous mortgage in
that the mortgagor had agreed to pay interest at the rate of 12% and the
mortgagee was liable to account for the income of the property earned as rent
and if the mortgagee himself occupied the same he was bound to account for the
rent at the rate of Rs. 515 per annum. Mortgagor served notice dated October 5,
1945, calling upon the mortgagee to render true and full account of the
mortgage transaction. The mortgagee failed to comply with the notice.
Subsequently it appears that there were some negotiations between the mortgagor
and the mortgagee which according to the mortgagee, culminated in a sale of the
mortgaged property in favour of mortgagee for Rs. 50,000. Account of the
mortgage transaction was made and the consideration of 192 Rs. 50,000 for the
sale of the house which would mean sale of equity of redemption was worked out
as under:
Rs. 25,000 Principal mortgage money plus the
amount found due as interest on taking accounts of mortgage.
Rs. 17,735 Given credit for the amounts taken
from time to time by the mortgagor from the mortgagee s for domestic expenses.
This is disputed as incorrect and it was suggested that the entry be read as
amount retained to pay off other creditors of the mortgagor.
Rs. 1,000 Taken in advance for purchasing
stamps and incurring registration expenses.
Rs. 6,265 To be paid in cash at the time of
registration before the Sub-Registrar.
---------- Rs. 50,000 ---------- Requisite
stamps were purchased and the draft sale deed was drawn up on October 10, 1950,
but it was never registered.
On October 14, 1950, Ist plaintiff mortgagor
sold the suit house by a . registered sale deed to plaintiff 2 Gyarsilal for
Rs. 50,000 with an agreement for resale. Thereafter the mortgagor and the
subsequent purchaser as plaintiffs 1 and 2 respectively filed a suit on February
22, 1951 against mortgagee defendant Devi Sahai for taking accounts of the
mortgage transaction and for a decree for redemption.
The mortgagee Devi Sahai defended the suit on
diverse grounds but the principal and the only defence canvassed was one under
section 53A of the Act, namely, that even though the sale deed purporting to
sell equity of redemption having not been registered would not clothe the
mortgagee with title of owner to the mortgaged property, yet he could defend
his possession as transferee owner under the doctrine of part performance in as
much as not only is the mortgagee in possession in part performance of the
contract of sale but has continued in possession in part perfor- 193 mance of
the contract and has done several acts unequivocally referable or attributable
to the contract and that the mortgage as transferee has not only performed but
is willing to perform his part of the contract and, therefore, the mortgagor is
debarred from enforcing against the mortgagee any right in respect of the
mortgaged property. As a necessary corollary, it was also contended that
plaintiff 2 has acquired no right, title or interest in the mortgaged property
under the alleged sale deed dated October 14, 1950, in view of the fact that
the transferor, viz., original mortgagor had no subsisting title to the
property on the date of the sale which he could have transferred to the 2nd
plaintiff.
Arising from the pleadings of the parties,
trial court framed five issues. The trial court held that plaintiff I executed
a sale deed of the mortgaged property in favour of the defendant mortgagee but
as the sale deed was not registered the transaction of sale is riot complete on
the issue of protection of section 53A claimed by the defendant mortgagee the
trial court held against him. It was held that the mortgage being mortgage with
possession, continued possession of the mortgagee after the date of the
contract dated October 10, 1950, would not be in part performance of the contract.
The trial court further held that no payment was made could remotely be said to
be in part performance of the contract. With regard to the payment of Rs. 1,000
for purchase of stamps and expenses of registration, it was held that the same
was paid before the execution of the contract, and therefore, could not be said
to be in furtherance of the contract. On these findings the trial court held
that section 53A of the Act was not attracted and the mortgage was accordingly
held to be subsisting and a preliminary decree for taking accounts was passed.
A Commissioner was appointed for taking accounts.
Defendant mortgagee Devi Sahai preferred
Civil First Appeal No. 14/66 to the Indore Bench of the Madhya Pradesh High
Court. When this appeal was pending, appellant Motilal in cognate Civil No 1145/69
applied under order 22, rule 10, Code of Civil Procedure, for being joined as a
party to the appeal claiming that under s the sale certificate dated March 25,
1953, issued by the Additional City Civil Judge First Class, Indore, he had
purchased the equity of redemption in respect of the mortgaged property and
that he has a subsisting interest in the property involved in the dispute and,
therefore, he would contest the rights of the plaintiffs as well as of the
mortgagee defendant to claim any right, title or interest in the 194 property.
In his application Motilal alleged that he had filed Civil Suit No. 243/47
dated November 3,1947 for recovering a certain amount against the 1st plaintiff
mortgagor and had secured attachment before judgment of the mortgaged property
on November 6, 1947. His suit was decreed to the extent of Rs. 2500 by the
trial court. He filed execution application No. 216/51 and in this proceeding
the mortgaged property was sold subject to mortgage and he purchased the same
for Rs. 300. The auction sale was confirmed on September 25, 1953. It may also
be mentioned that the mortgagor 1st plaintiff had preferred appeal against the
decree of the trial court and the appellate court by its judgment dated March
27, 1953, allowed the appeal and dismissed the suit of Motilal in entirety.
Against the appellate decree Motilal filed
Second Appeal No. 78/53 in the High Court and by its judgment dated September
4, 1958, Motilal's claim to the tune of Rs. 500 against the Ist plaintiff
mortgagor along with proportionate interest and costs was decreed. The
application of Motilal for being impleaded as a party was contested by the 1st
and the 2nd plaintiffs as well as by the defendant mortgagee. The High Court
allowed the application of Motilal for being joined as party to the appeal and
examined the contentions advanced on his behalf on merits.
The only contention canvassed by the
mortgagee in his appeal in the High Court was that he is entitled to the
protection conferred by Section 53A of the Act. In order to attract section 53A
it was urged that Rs. 1,000 advanced to mortgagor for purchase of stamps etc.
was in furtherance of the contract. The only such act pleaded was payment of
Rs. 1,000 and no other act or circumstance was relied upon. The High Court was
of the opinion that original mortgagee Devi Sahai was entitled to the benefit
of the doctrine of part performance as against the 1st plaintiff mortgagor
Govindrao Mahadik and his subsequent transferee Gyarsilal because he was in
possession and continued to be in possession and paid Rs. 1,000 in furtherance
of the contract. While so holding the High Court imposed a condition that the
mortgagee must pay or deposit in the court an amount of Rs. 24,000 with
interest at the rate of 4% per annum from the date of delivery of possession to
him as vendee till the date of payment or deposit on the footing that was the
balance consideration promised but not paid by the mortgagee. The deposit was
directed to be made in the trial court within three months from the date of the
judgment of the High Court for payment to the 2nd respondent which would enable
195 the mortgagee to retain possession of the mortgaged property. The High
Court gave a further direction that if the payment or deposit as directed in
the judgment was not made, the appeal of the mortgagee would stand dismissed
and if the amount directed in the judgment of the High Court was paid or
deposited in the trial court within the stipulated time the appeal of the
mortgagee would stand allowed and in that event the suit of the mortgagor would
stand dismissed.
In respect of Motilal's claim the High Court
directed that in either event he shall be entitled to recover the balance of
his decretal amount and interest at the rate of 4% per annum from the date of
the auction sale till the date of realisation and to the extent of that amount
there shall be a charge on the mortgaged property enforceable at the instance
of Motilal. In the circumstances of the case the High Court did not award costs
to either side.
Both the original plaintiffs and Motilal made
separate applications for certificate under Article 133 (l) (a) and (b) of the
Constitution which were granted. Hence these two appeals.
The Appeal (CA 1144/69) preferred by the
original plaintiffs-plaintiff 1 being the mortgagor, may be dealt with first.
In this appeal 1st defendant (mortgagee) seeks to non-suit the plaintiff on the
only ground that he is entitled to the benefit of equitable doctrine of part
performance as enacted in section 53A of the Act. According to the
defendant-mortgagee the mortgagor agreed to sell the mortgaged property to the
mortgagee for consideration of Rs. 50,000 made up in the manner set out in the
sale deed Ex. 1 dated October 10, 1950 and pursuant to the agreement he has given
Rs. 1,000 being part of the consideration for purchasing stamps and for
expenses of registration and after stamps were purchased, sale deed Ex. 1 was
drawn up and executed and since then he being in possession retained the same
as a vendee and accordingly he is entitled to the protection of section 53A of
the Act.
This necessitates focussing of the attention
on the requirements what constitutes part performance as enacted in section
53A. Even though at the hearing of the appeals what was the state of law prior
to the introduction of section 53A in the Act by the Transfer of Property
(Amendment) Act, 1929, was canvassed at length, we would like to steer clear of
this confusing mass of legal squabble and, proceed to analyse the contents of
section 53A, subsequently referring to legislative cum legal history so far as
it is 196 relevant for interpretation of the section. Section 53A reads as
under:
"53A. Where any person contracts to
transfer for consideration any immovable property by writing signed by him or
on his behalf from which the terms necessary to constitute the transfer can be
ascertained with reasonable certainty, and the transferee has, in part
performance of the contract, taken possession of the property or any part thereof,
or the transferee being already in possession continues in possession in part
performance of the contract and has done some act in furtherance of the
contract and the transferee has performed or is willing to perform his part of
the contract.
then, not withstanding that the contract,
though required to be registered, has not been registered, or, where there is
an instrument of transfer, that the transfer has not been completed in the
manner prescribed therefor by the law for the time being in force the
transferor or any per son claiming under him shall be debarred from enforcing
against the transferred and persons claiming under him any right in respect of
the property of which the transferee has taken or continues in possession,
other than a right expressly provided by the terms of the contract;
Provided that nothing in this section shall
affect the rights of a transferee for consideration who has no notice of the
contract or of the part performance thereof." In order to qualify for the
protection conferred by the equitable doctrine of part performance as enacted
in section 53A, the following facts will have to be established:
(1) That the transferor has contracted to
transfer for consideration any immovable property by writing signed by him or
on his behalf from which the terms necessary to constitute the transfer can be
ascertained with reasonable certainty;
(2) That the transferee has in
part-performance of the contract taken possession of the property or any part
thereof. Or the transferee. being already in possession, 197 continues in
possession in part performance of the contract:
(3) That the transferee has done some act in
furtherance of the contract: and (4) That the transferee has already or is
willing to perform his part of the contract." (see Nathulal v. Phool Chand.
There was no dispute that the aforementioned
conditions have to be satisfied to make good the defence of part performance.
The controversy is on their application to the facts of the case.
The High Court which accepted the defence of
part performance as canvassed on behalf of the mortgagee who claimed to have
purchased the property under a sale deed Ext. D 1 dated October 10, 1950, found
that payment of Rs.
1,000 for purchase of stamps was an
unequivocal act in furtherance of the contract. The defendant mortgagee did not
invite the High Court to consider any other act as having been done by him
under the contract or furtherance of the contract, or unequivocally referable
to the contract.
However, when the matter was heard in this
Court, Mr. V S. Desai, learned counsel appearing for the respondent mortgagee
urged the following acts as having been done by the mortgagee in furtherance of
the contract which would constitute part performance;
(a) payment of Rs. 1,000 as agreed to under
the contract for purchase of stamps for drawing up and registering the sale
deed;
(b) discharge of a debt of Rs. 541 which was
included in the amount of Rs. 17,735 retained by the mortgagee from the total
consideration payable for discharging other debts;
(c) mortgagee agreed to discharge the
mortgage subsisting on the property in his favour on settlement of accounts;
198 (d) all dues owed by the mortgagor to the
mortgagee may have to be taken as cleared on completion of the (e) nature and
character of possession changed as recited in the contract;
A few more circumstances were relied upon to
show that the mortgagee was willing to perform his part of the contract and the
omissions pointed out are not fatal to his case.
They are:
(f) failure to offer the amount agreed to be
paid before the Registrar and/or not discharging debts agreed to be discharged
as having been given credit in the consideration for the sale would not detract
from part performance because they have to be evaluated in the facts and
circumstances of the case;
(g) conduct of the 1st plaintiff mortgagor in
executing and registering a sale deed in respect of the mortgaged property in
favour of the 2nd plaintiff Gyarsilal and thereby frustrating the contract of
sale in favour of the defendant mortgagee evidence that the 1st plaintiff
mortgagor was aware of the contract in favour of the defendant mortgagee and he
was retaining possession in furtherance of the contract:
(h) defendant mortgagee made all attempts to
get the deed registered by approaching the Sub-Registrar;
(i) the defendant mortgagee initiated
criminal proceedings against the 1st plaintiff mortgagor for misusing the stamp
papers.
Ordinarily this Court would be loath to
examine contentions of facts based on evaluation of evidence advanced for the
first time before this Court without any attempt at inviting the adjudication
of the same by the High Court. However, as all the contentions arise from the
record and proceedings, we propose to examine them on merits more so because we
do not propose to rest this judgment on a technical around and also because we
are inclined to reverse the decision of The High Court which is in favour of
1st defendant mortgagee.
199 Section 4 of the Statute of Frauds, 1677
of United Kingdom provided that no person shall be charged upon any contract
for sale of lands or any interest in land etc.
unless the agreement or some memorandum or
some note thereof shall be in writing and signed by the party to be charged
there under or some other person there unto by him lawfully authorised. This
provision has been substantially re-enacted in section 40 (i) of the Law of
Property Act, 1925 with this departure that sub-section 2 specifically provides
that the substantive provision in sub-section I does not effect the law relating
to part-performance or sales by the court. As no action could be brought on
oral agreement the doctrine of part performance was devised by the Chancery
Court with a view to mitigating the hardship arising out of an advantage taken
by a person under an oral contract and failure to enforce it would permit such
person to retain the undeserved advantage by the Equity Court enforcing the
contract. The situation must be such that not to enforce the contract in face
of the defence of Statute of Frauds after taking advantage of oral contract
would perpetuate the fraud which the statute sought to prevent The party who
altered its position under the contract must have done some act under the
contract and it would amount to fraud in the opposite party to take advantage
of the contract not being in writing. Such a situation arose where one of the
parties to the oral agreement altered its position and when specific
performance was sought after taking advantage under oral contract, set up the
defence available under the Statute of Frauds. The Chancery Court while
granting relief of specific performance wanted to be wholly satisfied that the
pleaded oral contract exists and is established to its utmost satisfaction and
in order to ascertain the existence of the oral contract before granting a
relief of specific performance the court wanted to be satisfied that some such
act has been done which would be unequivocally referable to the oral contract
as would prove the existence beyond suspicion, meaning part performance of the contract.
The departure under our law is that when giving its statutory form in section
53A of the Act the existence of a written contract has been made sine qua non
and simultaneously the statute also insists upon proof of some act having been
done in furtherance of the contract. The act relied upon as evidencing part
performance must be of such nature and character that its existence would
establish the contract and its implantation. Each and every act subsequent to
contract by itself may not be sufficient to establish part performance. The act
must be of such a character as being 200 One unequivocally referable to the
contract and having been per. formed in performance of the contract. In Lady
Thynne v. Earl of Glengall it was observed that: "part performance to take
the case out of the Statute of Frauds, always supposes a completed agreement.
There can be no part performance where there is no completed agreement in
existence. It must be obligatory, and what is done must be under the terms of
the agreement and by force of the agreement." This approach would
necessitate that the act relied upon as being in the part-performance of the
contract was such as by its own force would show the very same contract as is
alleged by the person seeking the protection of part-performance.
In the fact situation as it unfolds itself in
this case, continued possession of the mortgagee hardly offers any clue to the
question of part performance. Defendant mortgagee was in possession of the
mortgaged property.
Therefore, physical possession having not
changed hands, it would be for the mortgagee to show that he continued to
retain possession in part performance of the contract and has done some act in
furtherance of the contract. Where physical and actual possession was already
with the person claiming the benefit of the doctrine of part performance its
continued retention by itself without anything more would hardly be indicative
of an act unequivocally referable to part performance of the contract. He must
further establish that he has done some act in furtherance of the contract.
This was not disputed and, therefore, the
mortgagee defendant urged before the High Court and reiterated before us that,
payment of Rs. 1,000 inter alia to the 1st plaintiff mortgagor for purchase of
stamps and for expenses incidental to registration was an act unequivocally
done in furtherance of the contract.
Before evaluating the submission a few
relevant facts may be noticed. By letter Ext. P-3 dated October 9, 1950, 1st
plaintiff wrote to defendant mortgagee portion of which may be extracted as it
has some bearing on the question under consideration:
".. It is requested that we have entered
into a contract with you for the sale-condition of our house No. 12 situated in
Kalai Mohalla. Therefore to buy stamps etc. for the sale you should pay Rs.
1,000 (Rupees one thousand 201 only) to our Mukhtiar Shri Madhavraoji Vishnu
Joshi, 82, Ada Bazar, Indorewale, I agree for the same and shall deduct the
amount at the time of registration." Pursuant to this letter defendant
mortgagee paid Rs. 700 to the Muktiar and an endorsement to that effect is
found as Ext. P-4. On the next day that is October 10, 1950, a further amount
of Rs. 300 was given and stamps were purchased and on the same day sale deed
Ext. 1 was drawn up.
While reciting the consideration for the sale
deed a credit was given for Rs. 1,000 paid by the mortgagee for purchase of
stamp. So far there is no dispute. The grievance is that according to the 1st
plaintiff mortgagor he had agreed to sell the house to the mortgagee but the
sale was to be a conditional sale with a right to repurchase and that was
agreed to between the parties. Subsequently when the sale deed Ext. D-1 was
drawn up he found that it was an absolute sale in breach of the agreement and
therefore he did not complete the transaction and sold the house subsequently
on October 14, 1950 to the 2nd plaintiff, under Ext. P-1 which is a conditional
sale with a right to repurchase.
It would thus transpire that payment of Rs.
1,000 consisting of two separate payments-one of Rs. 700 on October 9, 1950,
and an amount of Rs. 300 on October 10, 1950, by the defendant mortgagee to 1st
plaintiff mortgagor for purchasing stamps for execution of a sale deed is not
in dispute. What is in dispute is whether the payment was made towards some
contract anterior to the letter Ext. P-3 dated October 9,195, or it was in
pursuance to the contract dated October 10, 1950, as reflected in the
unregistered sale deed. In this connection the stand taken by the mortgagee
defendant is both equivocal and fluctuating. In the written statement filed on
his behalf on April 10, 1951, there is no specific, clear and unambiguous plea
of part performance.
Under the heading 'additional plea' in para 9
it is contended that the sale deed having been executed in favour of the
mortgagee in settlement of mortgage transaction mutually between the parties
and that the mortgaged property has been given to the mortgagee as an owner,
the mortgage transaction does not subsist in law. This has been understood to
mean a plea for the protection of the doctrine of part performance. Be that as
it may, it is not suggested that there was any oral contract anterior to the
one as found in the unregistered sale deed Ext. D-l. Nor is there any suggestion
of any draft agreement prior to the drawing up of the sale deed Ext. D-l. What
transpires from 202 the diverse recital is that there was some oral discussion
between the parties prior to the letter Ext. P-3 dated October 9, 1950, at
which the understanding was that there was to be a conditional sale with a
right of repurchase by the mortgagor and that becomes evident from the recital
in Ext. P-3, "sale condition" which is contemporaneous evidence
having its intrinsic worth and a stamp of truthfulness because at that time no
dispute had arisen and the mortgagor was seeking to work out and implement the
agreement by seeking a loan of Rs. 1,000 for purchase of stamps and for
expenses incidental to registration so as to complete the transaction. But there
was no written contract. It must be stated that there was dispute about the
nature of transaction is also borne out by the parol evidence.
Mortgagee Devi Sahai DW 1 has deposed in para
6 that mortgagor in Chit Ex. P. 3 proposed a conditional sale to which he did
not agree whereupon mortgagor agreed to give absolute sale. This establishes
that there was a dispute as to the nature of the transaction. Section 53A
postulates a written contract from which the terms necessary to constitute the
transfer can be ascertained with reasonable certainty. There was no concluded
contract prior to Ext. D- l. The only written contract which is relied on is
the unregistered sale deed Ex. D-l of October 10, 1950. On the admission of the
mortgagee himself it is crystal clear that out of Rs. 1,000 an amount of Rs.
700 was paid on October 9, 1950, and that was prior to the agreement. As for
the payment of Rs. 300 it is not specifically claimed that was payment in
furtherance of the contract. In any event, stamps were purchased prior to the
drawing up of Ext. D-l which is the contract relied upon for the purposes of
section 53A.
And it must be shown that the act has been
done in furtherance of the contract, i.e. subsequent to the contract or at best
simultaneously with the contract but un- equivocally attributable or referable
to the contract. It must follow that acts anterior to and done previous to the
agreement cannot be presumed to be done in pursuance of it and cannot,
therefore, be considered as acts of part performance (See Whiteread v.
Brockhunt quoted by White and Tudor, leading cases on Equity at p. 416).
The High Court while evaluating the probative
value of the circumstances of payment of Rs. 1,000 started on a wrong premise
when it observed that the act envisaged by the phrase in furtherance of the
contract" in section 53A should be in pursuance of the contract and not
that it should either precede or follow the 203 agreement or the contract. If a
written contract is a sine qua non for seeking coverage of the umbrella of the
equitable doctrine of part performance any act preceding the contract could
conceivably never be in furtherance of that contract which was yet to
materialise. Negotiations for a contract and a concluded contract stand apart
from each other. Anything at the negotiating stage cannot be claimed as
contract unless the contract is concluded between the parties, i.e. the parties
are ad idem. Coupled with this is the further requirement that it should be a
written contract in that the contract which would purport to transfer for
consideration the immovable property must be by writing and the writing must be
such that the necessary ingredients constitute the transfer can be ascertained
with reasonable certainty. The High Court overlooking the very important fact
situation that the only contract relied upon by the mortgagee defendant was one
contained in the unregistered sale deed Ext. D-1 dated October 10, 1950,
committed an error in holding that the payment of Rs. 1,000 prior to October
10, 1950 would undoubtedly be an act in pursuance of the contract which is
evidenced by the writing Ext. D-1 duly signed by the Ist respondent. This
approach overlooks a vital dispute between the parties and the High Court could
not have utilised this circumstance without resolving the dispute in as much as
unquestionably there were some negotiations between the parties either on
October 9, 1950, or sometime prior thereto but there was no concluded contract
because the very letter Ext. P-3 which the 1st plaintiff mortgagor sought a
loan of Rs. 1,000 for purchasing the stamps etc. was pursuant to a conditional
sale and that is totally denied and repudiated by the mortgagee as shown
hereinabove. Accordingly when the amount of Rs. 1,000 was paid it was the stage
of negotiations and not a concluded contract. And when the contract was drawn
up as evidenced by Ext. D-1 being the unregistered sale deed dated October 10,
1950, the parties were not ad idem.
because the mortgagor declined to agree to
registration of the sale deed as it was contrary to the understanding arrived
at between the parties though no doubt he had executed the sale deed. The
contention therefore that the amount of Rs. 1,000 was paid in furtherance of
the contract does not bear scrutiny.
However, assuming that the finding of fact
recorded by the High Court that the amount of Rs. 1,000 was paid in furtherance
of the contract, is a finding of fact recorded on appreciation and evaluation
of evidence and ordinarily not interfered with by this Court unless shown to be
perverse, the alternative contention that 204 payment of part or even whole of
the consideration could not be said to be in furtherance of the contract and,
therefore, not sufficient to constitute part performance, may now be examined.
How far payment of part or even whole of the
consideration would constitute part performance so as to take the case out of
section 4 of the Statute of Frauds may now be examined with reference first to
the English decisions because section 53A enacts with some modification the
English equitable doctrine of part performance.
In order to mitigate the hardship arising out
of the rigorous provisions of the Statute of Frauds equitable doctrine of part
performance was divised by the Court of Chancery. Commenting upon section 4 of
the Statute of Frauds 1677, Lord Redesdale observed in Foxcroft v. Lester,(l)
(quoted in White & Tudor's Leading cases on Equity, 8th Edn., p. 413) as
under:
"The Statute of Frauds says that no
action or suit shall be maintained on an agreement relating to lands, which is
not in writing, signed by the party to be charged with it; and yet the Court is
in the daily habit of relieving, where the party seeking relief has been put
into a situation which makes it against conscience in the other party to insist
on the want of writing so signed, as a bar to his relief. The first case
(apparently) of this kind was Foxcroft v. Lyster (1), which was decided on a
principle acted upon in Courts of law, but not applicable to the particular
case. It was against conscience to suffer the party who had entered and
expended his money on the faith of a parol agreement to be treated as a
trespasser, and the other party to enjoy the advantage of the money he had laid
out." The question often arises whether payment of part or even whole of
the consideration can be unequivocally attributed to the contract. At 416 the
authors observe :
"Payment of part or even of all the
purchase-money will not be considered an act of part performance to take 205 a
parol contract out of the Statute of Frauds. Nor will payment of the auction
duty." The payment of a part or even a whole of the consideration was not
treated unequivocal act of part performance because it was believed that money
can be repaid or can be reclaimed and, therefore, it is not an unequivocal act
evidencing an act in furtherance of the contract (See Hanbury & Maudsley,
Modern Quity, 10th Edn., p. 37).
Similarly, Story's Equity Jurisprudence 14th
Edn., para 1045, p. 424, neatly sets out the history of the approach to payment
of money as evidence of part performance. It may be extracted:
".. It seems formerly to have been
thought that a deposit, or security, or payment of the purchase money, or of a
part of it, or at least of a considerable part of it, was such a part
performance as took the case out of the statute. But that doctrine was open to
much controversy, and is now finally overthrown Indeed the distinction taken in
some of the cases between the payment of a small part and the payment of a
considerable part of the purchase-money seems quite too refined and subtle, for
independently of the difficulty of saying what shall be deemed a small and what
a considerable part of the purchase money, each must, upon principle, stand
upon the same reason, namely, that it is a part performance in both cases, or
not in either. One ground why part payment is not now deemed a part
performance, sufficient to take a case out of the statute, is that the money
can be recovered back again at law, and therefore the case admits of full and
direct compensation." Equity by G.M. Keeton and L.A. Sheridan, 2nd Edn.,
p. 366 sets out chronologically the approach of the Court to payment of money
as evidencing part performance. Attitude to the payment of money as an act of
part performance had varied from time to time. In Elizabeth Meddison v. John
Alderson,(1) Lord Selborne, L.C. pointed out:
".. the payment of money is an equivocal
act not (in 206 itself) unless connection is established by parol testimony
indicative of a contract consisting of land." In Snell's principles of
Equity, 20th Edn., p. 587, under the heading 'Insufficient Acts to bring the
case out of the doctrine of part performance', it is noted that payment of a
part of the purchase-money, or even apparently the whole, is not sufficient for
part performance of a contract for the sale of land for the payment of money is
an equivocal act (not in itself), until the connection is established by parol
testimony, indicative of a contract concerning land. Maddison v. Alderson is
relied upon in support of this statement.
A few cases to which our attention was drawn
may now be referred to. In Clinan and Anr. v. Cooke and Ors.,(1) Cooke inserted
an advertisement in the public papers inviting offers to let a piece and parcel
of land for the period set out in the advertisement. In response to this
advertisement the plaintiffs applied to Edmund Meagher to whom the application
was to be addressed and entered into a treaty with him for lease of land. A
memorandum of agreement was entered into between the parties and the intending
tenant deposited 50 guineas which the advertiser received in consideration of
the lease on the recommendation of Meagher who also appeared to have received a
sum of 20 guineas from the plaintiffs for which no receipt was given Subsequently
Mr. Cooke refused to perform the agreement and he granted a new term of lease
to the defendants who entered into the same with the knowledge of the agreement
with the plaintiffs. An action was brought by the plain tiffs for specific
performance. Declining to grant that relief Lord Redesdale held as under:
"But I think this is not a case in which
part performance appears. The only circumstance that can be considered as
amounting to part performance is the payment of the sum of fifty guineas to Mr.
Cooke. It has always been considered that the payment of money is not to be
deemed part performance to take a case out of the statute." In Maddison's
case Earl of Selborne, L.C. in unequivocal terms observed that it may be taken
as new settled that part payment of purchase money is not enough, and judges of
high authority 207 have said the same even of payment in full. Clinan v. Cooke,
(supra) Hughes v. Morris(1) and Britain v. Rossiter(2) were relied upon in
support of this. Again at p. 484 Lord O'Hagan taking note of the conflict of
decisions pertinently observed as under:
"I confess I have found it hard to
follow the reasoning of the judges in some of the cases to which the Lord
Chancellor has referred to reconcile the rulings, in others of them-and to
regard as entirely satisfactory the state of the law in which the taking of
possession or receipts of rent is dealt with as an act of part performance, and
the giving and acceptance of any amount of purchase money, confessedly in
pursuance and affirmance of a contract of sale, is not.
As to some of the judgments prompted no doubt
by a desire to defeat fraud and accomplish justice, I am inclined to concur
with the present Master of the Rolls in Britain v. Rossiter (1), when he called
them" bold decisions." It may be noted that in that case an intestate
induced a woman to serve him as his house-keeper without wages for many years
and to give up other prospects of establishment in life by a verbal promise to
make a will leaving her a life estate in land and afterwards signed a will, not
duly attested, by which he left her the life estate. lt was contended on behalf
of the woman who worked as house-keeper that she had wholly performed her part
by serving the intestate as house-keeper till the intestate's death without
wages yet the Court in its equity jurisdiction declined to hold such an act as
referable to any contract and was not such a part performance as to take the
case out of the operation of section 4 of the Statute of Frauds. This case is
being referred to show how firstly established and entrenched the view was that
payment is not enough. Offer to work without wages was treated as evidencing
some payment not enough to sustain the plea of part performance. The equity
should take such a view of human service and sacrifice is difficult to
appreciate. Modern notions of equity, fairplay and just approach would stand
rudely shaken by the view taken in that case & and quoting the case is not
to be interpreted to mean sharing the view.
208 In Chaproniere v. Lambert,(1) the Court
of Appeal reinforced the view which held the field till then that the mere
payment of rent is not such part performance to take the case out of the
statute and even payment of whole of the purchase money has been held not to be
sufficient to take the case out of the statute. In so doing it reiterated the
view taken in Muddison v. Anderson, (supra).
In Enland the law took a sharp U-turn in
Steadman v. Steadman,(2) Lord Simon of Claisdale under the heading 'Payment of
money' observed as under:
"It has sometimes been said that payment
of money can never be a sufficient act of part performance to raise the
required equity in favour of the plaintiff or, more narrowly, that payment of
part or even the whole of the purchase price for an interest in land is not a
sufficient act of part performance. But neither of the reasons put forward for
the rule justifies it as framed so absolutely. The first was that a plaintiff
seeking to enforce an oral agreement to which the statute relates needs the aid
of equity; and equity would not lend its aid if there was an adequate remedy at
law. It was argued that a payment could be recovered at law, so there was no
call for the intervention of equity. But the payee might not be able to re pay
the money (he might have gone bankrupt), or the land might have a particular
significance for the plaintiff (of the equitable order for specific delivery of
a chattel of particular value to the owner: (Duke of Somerset v. Cookson) or it
might have greatly risen in value since the payment, or money may have lost
some of its value.
So, it was sought to justify the rule,
alternatively, on the ground that payment of money is always an equivocal act,
it need not imply a pre-existing contract, but is equally consistent with many
other hypotheses. This may be so in many cases, but it is not so in all cases.
Oral testimony may not be given to connect the payment with a contract; but
circumstances established by admissible evidence (other acts of part
performance, for case, for example, what was said (i.e. done) in the
magistrates' court in part 209 performance of the agreement makes it plain that
the payment of the 108 was also in part performance of the agreement and not a
spontaneous act of generosity or discharge of a legal obligation or
attributable to any other hypothesis." To some extent, therefore the
statement of law in Maddison's case that it may be taken as well settled that
payment of part of purchase money or even the whole of the consideration is not
sufficient act of part performance can be taken to have been shaken
considerably from its foundation.
While text book writers and English decisions
may shed some light to illuminate the blurred areas as to whether part payment
of purchase money or even the whole of the consideration would not be
sufficient act of part performance, it is necessary that this aspect may be
examined in the background of statutory requirement as enacted in section 53A.
To qualify for the protection of the doctrine of part performance it must be
shown that there is a contract to transfer for consideration immovable property
and the contract is evidenced by a writing signed by the person sought to be
bound by r it and from which the terms necessary to constitute the transfer can
be ascertained with reasonable certainty. These are pre-requisites to invoke
the equitable doctrine of part performance. After establishing the
aforementioned circumstances it must be further shown that a transferee had in
part performance of the contract either taken possession of the property or any
part thereof or the transferee being already in possession continues in
possession in part performance of the contract and has done some act in
furtherance of the contract. The acts claimed to be in part performance must be
unequivocally referable to the pre-existing contract and the acts of part
performance must unequivocally point in the direction of the existence of
contract and evidencing implementation or performance of contract. There must
be a real nexus between the contract and the acts done in pursuance of the
contract or in furtherance of tho contract and must be unequivocally referable
to the contract. When series of acts are done in part performance, one such may
be payment of consideration.
Any one act by itself may or may not be of
such a conclusive nature as to conclude the point one way or the other but when
taken with many others payment of part of the consideration or the whole of the
consideration may as well be shown to be in furtherance of contract. The
correct approach would be what Lord Reid said in Steadman's case 210 that one
must not first took at the oral contract and then see whether the alleged acts
of part performance are consistent with it. One must first look at the alleged
acts of part performance and see whether they prove that there must have been a
contract and it is only if they do so prove that one can bring in the oral
contract. This view may not be wholly applicable to the situation in India
because an oral contract is not envisaged by section 53A. Even for invoking the
equitable doctrine of part performance there has to be a contract in writing
from which the terms necessary to constitute the transfer can be ascertained
with reasonable certainty. Therefore, the correct view in India would be, look
at that writing that is offered as a contract for transfer for consideration of
any immovable property and then examine the acts said to have been done in
furtherance of the contract and find out whether there is a real nexus between
the contract and the acts pleaded as in part performance so that to refuse
relief would be perpetuating the fraud of the party who after having taken
advantage or benefit of the contract backs out and pleads non registration as
defence, a defence analogous to section 4 of the Statute of Frauds.
We may recall here that the acts preliminary
to the contract would be hardly of any assistance in ascertaining whether they
were in furtherance of the contract. Anything done in furtherance of the
contract postulates the pre- existing contract and the acts done in furtherance
thereof.
Therefore, the acts interior to the contract
or merely incidental to the contract would hardly provide any evidence of part
performance.
The contention of Mr. Desai that payment of
Rs. 1,000 for purchase of stamps in an act of part performance unequivocally
attributable to the contract dated October 10, 1950, cannot be accepted for two
reasons, one being that Rs.
700 out of the amount of Rs. 1,000 was paid
on October 9, 1950, that is prior to the date of contract. Then there is a
serious dispute as to the nature of contract which was negotiated on October 9,
1950, the day on which payment of Rs. 700 was made. Mortgagor was insisting
upon a conditional sale and defendant mortgagee declined to accept the conditional
sale and that is borne out by his evidence also.
There was thus no concluded contract on
October 9, 1950, and, therefore, the payment of Rs. 700 out of Rs. 1,000 in any
case could not be said to be part performance and the same reasons would
mutatis mutandis apply to the payment of Rs. 300 also. In the facts of this
case this payment would not be an act of part performance. In 211 our opinion,
therefore, the High Court recorded an utterly unsustainable finding without
minutely examining the relevant evidence coupled with the requirements of law
and erred in holding that the payment of Rs. 1,000 was in furtherance of the
contract. We would also add that in the facts and circumstances of the case
payment of Rs. 1,000 was not such an act of part performance which would help
defendant mortgagee in any manner.
Mr. Desai next contended that the mortgagee
discharged a debt of Rs. 541 which was included in the amount of Rs. 17,735
retained by the mortgagee from the total consideration payable for discharging other
debts and that this payment was in furtherance of the contract. This contention
is being put forward for the first time in this Court and should be negatived
on that account alone. Even apart from this there is no sufficient evidence to
uphold this contention. In fact, the defendant mortgagee himself has to some
extent prevaricated on the question of retention of Rs. 17,735 out of the total
consideration for the sale transaction agreed at Rs. 50,000. Consideration of
Rs. 50,000 was made up, inter alia, by retaining Rs. 17,735 in discharge of
debts owed by mortgagor to mortgagee by borrowing loans on different occasions
for domestic expenses. It is so stated in Ext. D-l which had been extracted
earlier.
Mortgagee in his evidence gave a go bye to
this recital and deposed that the amount of Rs, 17,735 from the total
consideration payable by him was retained by the mortgagee for payment of other
creditors of the mortgagor. Even apart from this he has not stated a word that
out of the amount of Rs. 17,735 he paid Rs. 541 to any particular creditor. In
his written statement he has stated that the amount of Rs. 17,735 was kept in
deposit for payment to other creditor of the mortgagor. One such creditor was
to be paid a sum of Rs. 541. This creditor is none other than the mortgagee
himself.
This would mean that he himself was creditor
to whom he paid Rs. 541. Assuming that he could have reimbursed himself, there
is nothing to show that he gave a discharge or that he gave credit in his books
of accounts. Further, there is no statement in his evidence to that effect.
That aspect was never canvassed before the trial court as well as the High
Court and we find no material evidence to substantiate this contention. The
contention, has, therefore, to be negatived.
The third act of part performance pleaded on
behalf of the mortgagee is that the mortgagee agreed to discharge the mortgage
212 subsisting on the property in his favour on settlement of accounts. The
mortgage deed admittedly was not returned to the mortgagor even after the
mortgagor executed Ext. D-1 the sale deed which was not ultimately registered.
But that is not enough. The mortgage admitted in his evidence that even after
Ext. D-1 was executed he maintained the accounts of mortgage and in that account
he debited Rs. 1,000 paid to the mortgagor for purchase of stamps. Could it be
said that he had discharged or agreed to discharge the mortgage subsisting on
the property? There is however a piece of evidence which completely belies the
claim and demonstrably establishes that mortgagee never claimed to regard
himself as owner from October 10, 1950 the date of contract but till a later
date continued to regard himself as a mortgagee with subsisting mortgage.
Mortgagee made an application on June 23, 1952 nearly two years after the
contract of sale in the execution proceedings filed by Motilal seeking to bring
mortgage property to court auction for realising his decretal amount, which
decree he had obtained against the mortgagor. In this application dated June 23,
1952 mortgagee has stated that till that date Rs. 27792/2/3 were due under the
mortgage from the mortgagor and that fact must be noted in the sale
proclamation and thereafter property should be sold. Now if on October 10, 1950
accounts were made, mortgage was satisfied and mortgage debt was discharged,
how is it that on June 23, 1952 he retained the mortgage account, worked out
the amount due and sought its mention in the sale proclamation. This conduct of
mortgagee is sufficient to negative this contention. In any event mere oral
agreement to discharge a mortgage could hardly be said to be an act of part
performance unless in fact such an act was done and that could have been only
done by a discharged mortgage deed being returned to the mortgagor.
The next act of part performance pleaded by
the mortgagee is that all dues owed by the mortgagor to the mortgagee have be
taken as cleared on completion of the contract Now, even here his stand is
equivocal. In the written statement it was stated that at the time of filing
the written statement a sum of Rs. 29,000 was found to be due from the
mortgagor. If on October 10, 1950, all accounts were made up, how could he
continue a mortgage account which mortgage according to him came to be
satisfied when he took the sale deed and continued in possession in part
performance of the contract ? Therefore, the submission is without merits.
213 The next act of part performance pleaded
by the mortgagee is that the nature and character of possession changed as
recited in the contract. Mortgagee was in possession as mortgagee. Now
according to him since the date of execution of the sale deed the nature of
possession changed. For this he relies upon a statement in the sale deed Ext.
D-1 wherein it is stated that he is being put in possession as owner. This mere
recital is hardly indicative of the change in the nature of possession. There
is no evidence to show that he moved the authorities that he would be liable to
pay taxes as owner. There is no overt act on his part to so assert possession
as owner. A mere recital in the disputed sale deed is of dubious evidentary
value and when it would be pointed out that he was never willing to perform his
part of the contract which is a pre-requisite for claiming protection of the
doctrine of part performance it will be shown that he believed himself to be a
mortgagee and acted as such even at a date much later than October 10, 1950,
from which date he claims to be the owner.
Induction into possession of an immovable
property for the first time subsequent to the contract touching the property,
may be decisive of the plea of part performance.
Mere possession ceases to be of assistance
when as in this case the person claiming benefit of part performance is already
in possession, prior to the contract and continues to retain possession.
However a reference to a statement of law in Halsbury's Laws of England, 3rd
Edition, Vol. 36, para 418 would be instructive. It reads as under:
"Where possession is given to a
"tenant" before a tenancy agreement has been concluded and the
possession is retained after the conclusion of the agreement, the possession,
if unequivocally referable to the agreement, is a sufficient part performance
but subject to this, acts done prior to, or preparatory to, the contract will
not suffice." If a person claiming benefit of part performance is inducted
into possession for the first time pursuant to the contract it would be strong
evidence of the contract and possession changing hands pursuant to the
contract. in Hedson v.
Heuland (1) it was held that although the
entry into possession was antecedent to the contract, yet the subsequent
continuance in possession being, under the circumstances, unequivocally
referable to the contract, constituted a 214 part performance sufficient to
take the case out of the Statute of Frauds.
In Nathulal's case, the fact that Nathulal
parted with possession after receiving part payment of the sale consideration
was held sufficient to constitute part performance. This Court observed that j,,
part performance of contract Phoolchand has taken possession of the property
and he had in pursuance thereof paid a part of the consideration and thereby
the first three conditions tor making good the defence of part performance had
been satisfactorily shown to exist. But greater emphasis was laid on the
decision of Somnath Iyer, Acting C.J. in Babu Murlidhar v. Soudagar Mohammad
Abdul Bashir and Anr. (1) In that case an unregistered agreement of sale
executed by the mortgagor in favour of the mortgagee in possession recited that
after the date of the agreement the mortgagee who had been in possession as
such would become the owner of the property and that he could get his name
mutated into mutation register of the municipality and in implementation of this
agreement of sale, the mortgagor himself made an application for mutation to
the municipal authorities and the name of the mortgagee was mutated as owner of
the property, it was held sufficient to clothe the mortgagee with the
protection of section 53A in a suit for redemption of the mortgage and the
mortgagor's suit was dismissed. The Court attached considerable importance to
the provision in the unregistered agreement for mutation in favour of the
mortgagee as owner and the subsequent conduct of the mortgagor in making an
application for mutation was held to be the clearest indication which is
essential for invoking the doctrine of part performance. The decision can be
said to depend more or less on the facts of the case. However in this
connection a reference was also made to Thota China Subba Rao and Ors. v.
Matapelli Raju and Ors(2) That decision is hardly of any importance because an
extreme contention was advanced on behalf of the mortgagee resisting a suit for
redemption that he continued to be in possession in part performance of the
agreement which argument was repelled by the Court on the observation that the
mortgagee had never been in possession and the contention that he was always in
constructive possession could hardly assist him.
215 In Jahangir Begum v. Gulam Ali Ahmed,(1)
the Court after holding that the defendant was in possession and had put up a
structure on it, came to the conclusion that he was not entitled to the benefit
of doctrine of part performance because he was already in possession before the
contract to transfer the property, relied upon by him, was entered into, and,
therefore, it was obligatory upon him to show that he had done some act in
furtherance of the contract in order to constitute a part performance of the
contract. In Kukali v. Basantilal(2) the facts found were that A mortgaged with
possession his house with B. Subsequently A sold the house to in consideration
of the mortgage debt and the amount spent by A on improvements and repairs of
the house. The deed was not registered. Subsequently A sold the same property
to under a registered sale deed. sued for redemption. relied on the equitable
doctrine of part performance in defence. Negativing the defence of part
performance the Court held that as was already in possession as a mortgagee,
unless he shows that he did some act in furtherance of the contract, over and
above being in possession, mere continuance in possession would not constitute
part performance. The case is very near to the facts disclosed in the case under
discussion. There is an understandable and noteworthy difference in the
probative value of entering into possession for the first time and continuing
in possession with a claim of change in character. Where person claiming
benefit of part performance of a contract was already in possession prior to
the contract, the court would expect something independent of the mere
retention of possession to evidence part performance. Therefore mere retention
of possession is not discharged, could hardly be said to be an act in part
performance unequivocally referable to the contract of sale.
Section 53A requires that the person claiming
the benefit of part performance must always be shown to be ready and willing to
perform his part of the contract. And if it is shown that he was not ready and
willing to perform his part of the contract he will not qualify for the
protection of the doctrine of part performance. Reverting to the consideration
recited in Ext. D-l the sale deed, even according to the mortgagee it was agreed
that he had retained an amount of Rs. 17,735 out of the total consideration of
Rs. 50,000 for payment to the other creditors of the mortgagor. Barring a 216
claim made in the written statement that he paid himself Rs. 541 which was
included in the amount of Rs. 17,735 which allegation itself is unconvincing,
there has not been the slightest attempt on his part to pay up any of the
creditors of the mortgagor. There is nothing to show that he had the list of
all the creditors of the mortgagor or that he made any attempt to procure the
list or that he issued a public notice inviting the creditors of the mortgagor
to claim payment from him to the extent of the consideration retained by him.
Not a single creditor has been paid is an admitted position. But the more
inequitous conduct of the mortgagee is that he had not made the slightest
attempt to contact any of the creditors of the mortgagor or to pay even the
smallest sum. There is no such statement in the written statement but even in
his evidence at the trial he has not been able to show that he has paid any
creditor or made any attempt to pay any of the creditors including those whose
names were admittedly known to him such as Ramkaran Ghasilal, Kajodimal,
Motilal Bhagirath and Kanhaiyalal Chagganlal. Further shifting stand of
mortgagee to suit his convenience is discernible here. In Ext. D-1, the entry
of Rs. 17,735 is described as 'have been taken from you from time to time for
domestic expenses'. In his evidence mortgagee states that this recital is incorrect
and the correct position according to him is that the amount of Rs. 17,735 from
total consideration payable by him was retained to pay to other creditors of
mortgagor. According to him the only amount due to him from mortgagor outside
the mortgage transaction was a debt of Rs. 541 only. Mortgagee neither paid
himself nor other creditors and thereby did not perform his part of the
contract. He even did not pay a small decretal amount of Rs. 500 plus interest
and costs to Motilal in 1952 but allowed the property to be sold. Coupled with
this is the fact according to the recital in Ext. D-1 he had agreed to pay the
balance of the consideration of Rs 6265 to the mortgagor at the time of
registration of the sale deed. Now, undoubtedly the mortgagor did not agree to
get the sale deed registered because there was a dispute between the parties as
to the nature of the transaction. But the defendant mortgagee made unilateral
attempt to get the sale deed registered by offering it for registration. Thus
while attempting to complete his title both legally and even in equity he was
under an obligation to pay Rs 6265 to the mortgagor. This liability is not
disputed yet in this behalf he has not stated anything in his
examination-in-chief that he made any attempt to pay that amount to the
mortgagor. Add to this his failure to return the discharged mortgage deed and
his further averment that he used to maintain the mortgage account 217 even
after October 10, 1950. All this would conclusively show A that the mortgagor himself
was not willing to perform his part of the contract. In this view of the matter
Mr. Desai's contention that failure to pay the amount agreed to be paid before
the Registrar and/or not discharging debts agreed to be discharged as having
been given credit in the consideration for the sale would not detract from part
performance because they have to be evaluated in the facts and circumstances of
the case cannot be upheld.
It was next contended on behalf of the
mortgagee that the conduct of the 1st plaintiff mortgagor in executing and
registering a sale deed in respect of the mortgaged property in favour of 2nd
plaintiff Gyarsilal and thereby frustrating the contract of sale in favour of
the defendant mortgagee evidence that the Ist plaintiff was aware of the
contract in favour of the defendant mortgagee and he was retaining possession
in furtherance of the contract. The submission does not constitute any
independent act on the part of mortgagee but it is merely another facet of the
fact of permission being retained by the defendant mortgagee.
Retention of possession is of no consequence
in this case because the mortgage was not discharged and was subsisting and the
mortgage being a mortgage with possession the mortgagee was entitled to retain
possession. The fact that immediately a sale deed was executed in favour of 2nd
plaintiff by 1st plaintiff would show that he was unwilling to accept the
contract as offered by the mortgagee. The subsequent purchaser Gyarsilal has
taken a conditional sale and this reinforce the stand of the mortgagor. The
existence of the dispute about the nature of the transaction, namely, according
to the mortgagor he wanted an absolute sale and this dispute between the
parties as on October 10, 1950, is not in dispute. Therefore the conduct of the
mortgagor is consistent with this case.
It was next contended that defendant
mortgagee made all attempts to get the deed registered by approaching the Sub-
Registrar, and that the defendant mortgagee initiated criminal proceedings
against the 1st plaintiff mortgagor for misusing the stamp papers need not
detain us, as they have no probative value.
Having, therefore, examined all the
contentions canvassed on behalf of the mortgagee we unhesitatingly reach the
conclusion that the mortgagee has failed to prove that he did any act in
furtherance of the contract, continued retention of possession being a
circumstance of neutral character in the facts and circumstances of 218 the
case and it being further established to our satisfaction that the mortgagee
was not willing to perform his part of the contract, it is clear that the
mortgagee is not entitled to the benefit of the equitable doctrine of Part
Performance.
On the conclusions hereby indicated the
appeal preferred by the plaintiffs (CA 1144/69) must be allowed and the
judgment of the High Court has to be set aside and the one rendered by the
trial court is restored with costs throughout.
That takes us to the second appeal preferred
by Motilal being CA 1145/69. First a synopsis of the facts relevant to the
dispute raised by appellant Motilal. Motilal filed Civil Suit No. 243/47 on
November 3, 1947, for recovering his debt from mortgagor Govindrao Mahadik. In
this suit he obtained attachment before judgment of the suit property on
November 6, 1947. The suit of Motilal ended in a decree in the amount of Rs.
2,500 on March 15, 1951. On March 27, 1951, execution application No 216 of
1951 was made by Motilal. On April 3, 1951, the executing court made an order
that as the suit property of the judgment debtor has already been attached by
an order of attachment before judgment, steps should be taken for drawing up a
proclamation of sale under order XXI, rule 66, Code of Civil Procedure. The
Court directed auction sale of the suit property to be held on December 9,
1951. It appears that the auction sale was stayed. There was some default on
the part of the judgment debtor to comply with the conditional stay order and
on his failure auction sale was directed to be held on March 23, 1952. After
correcting the amount due on the mortgage of mortgagee in the proclamation of
sale, a fresh auction was held on August 23, 1952. In the meantime, in the
absence of any bidder at the auction Motilal the decree holder himself obtained
permission of the court to bid at the auction and his bid in the amount of Rs.
300 was accepted and the sale in favour of Motilal was confirmed on September
23, 1952.
In the mean time mortgagor Govindrao Mahadik
the judg- ment debtor in Motilal's suit filed Regular Appeal No. 125/51 which
was allowed by the Additional District Judge as per his judgment dated March
27, 1953 and thereby the suit of Motilal was dismissed in entirety. Motilal
preferred Second Appeal No. 78/53 in the High Court of Madhya Bharat and by its
judgment dated September 1, 1958, Motilal's appeal was allowed and a decree in
219 his favour in the amount of Rs. 500 with interest and proportionate costs
was passed.
Motilal made an application on April 2, 1962
purporting to be under order XXII, rule 10 of the Code of Civil Procedure
alleging that he came to know about the suit filed by the mortgagor for
redemption of the mortgage in December, 1961 and as the decision in the suit is
likely to have an impact on his rights and that as he is the purchaser of the
equity of redemption, the mortgagor and the subsequent purchaser from the
mortgagor cannot now maintain the action for redemption of the suit property
and he should be substituted in place of the plaintiffs and be permitted to
prosecute; the suit for redemption against mortgagee. This application was
contested on behalf of the parties to the suit.
The High Court was not fully satisfied about
the explanation of delay in making the application by Motilal and was not even
inclined to accept the suggestion that he became aware of the suit in 1961 and
that on the ground of gross delay the application was liable to be dismissed.
The High Court ultimately made on order as under:
"Therefore, although ordinarily we might
not be inclined to allow Motilal's request to be impleaded in this Court at the
appellate stage, we are of opinion that it would be desirable to have final
decision about the various points of dispute between all the parties in order
to avoid further unnecessary litigation. From this point of view only, we would
allow Motilal to be impleaded in the present litigation by addition of his
name, and not by allowing him to replace both the plaintiffs." Having thus
directed Motilal to be impleaded as a party respondent, the High Court
proceeded to ascertain, evaluate and adjudicate the right claimed by Motilal
and ultimately held that in any event the auction purchaser Motilal shall be
entitled to recover the balance of his decretal amount and interest at the rate
of 4% per annum from the date of his auction sale till the date of realisation
or deposit as the case may be either from the appellant or from the mortgagor
or subsequent purchaser, as the case may be, and that there shall be a charge
on the suit property for the aforementioned amount which shall be enforceable
at the 220 instance of Motilal by a sale of the property, Motilal was held
disentitled to costs on account of the delay in filing the application.
Mr. Ray, learned counsel for the 1st
plaintiff mortgagor contended that the High Court was in error in allowing the
application of Motilal to be impleaded as a party because according to Mr. Ray
Motilal could not be said to be claiming under the mortgagor and that,
therefore, he could not maintain the application under order XXII, rule 10,
Code of Civil Procedure.
Rule 10 of order XXII, provides for
continuance by or against a person of any action who acquires any interest
either by assignment, creation or devolution during the pendency of suit, with
the leave of the court. In ascertaining whether Motilal can maintain the
application his averments in the application will have to be taken as the basis
for invoking the Court's jurisdiction under order XXII, rule 10. The question
that will have to be posed would be whether Motilal acquired any interest by
assignment, creation or devolution during the pendency of the suit and would,
therefore, be entitled to continue the suit. The suit is primarily a suit for
redemption of mortgage. A suit for redemption of mortgage can be brought by a
person holding the equity of redemption. Motilal contends that the suit
property was sold at a court auction with subsisting mortgage thereon and the
right, title and interest of the mortgagor was sold at the court auction and on
the sale being confirmed and the sale certificate being issued he acquired the
interest either by assignment or devolution of the original mortgagor. Now this
assertion is controverted on behalf of the original mortgagor and the
subsequent purchaser contending that much before the confirmation of the sale
on September 23, 1952, the subsequent purchaser had purchased the equity of
redemption by the sale deed Ext. P-1 dated October 17, 1950, and that the
original mortgagor had no subsisting right, title and interest in the suit
property on August 23, 1952, being the date of the sale in favour of Motilal.
This was countered on behalf of Motilal by his learned counsel Mr. G.L. Sanghi
asserting that Motilal had obtained an attachment before judgment of the suit
property by order dated November 6, 1947, and that this was subsisting till
March 5, 1951, when the trial court decreed the suit of Motilal against the
mortgagor in the amount of Rs. 2500 and till the application for execution was
filed on March 27, 1951, and no reattachment was necessary. These facts are incontrovertible
but one aspect of law has to be examined as to what is 221 the effect of the
judgment of The appellate court in the appeal filed by original mortgagor
Govindrao Mahadik, the decree obtained by Motilal, to wit, the appeal was
allowed and Motilal's suit was dismissed on March 27, 1953. Between March 27,
1953, till the High Court allowed the appeal of Motilal on September 4, 1958,
there was no subsisting attachment but it must be recalled that by September
23, 1952, the sale was confirmed and the sale certificate was issued on March
25, 1953, that the two days before the appeal of mortgagor preferred against
the decree obtained by Motilal was allowed on March 27, 1953.
The averments of Motilal in his own
application would prima facie be sufficient to sustain an application under
order XXII, rule 10. The question whether he has acquired an interest or not in
the property either by assignment or devolution which is the subject matter of
dispute in this appeal would have to be answered on merits but the narration of
chronological events as delineated hereinabove would clearly show that Motilal
has more than a mere semblance of title which this Court will have to
investigate. And even if stricto sensu the application would not fall under
order XXII, rule 10, CPC, yet section 146 of the Code of Civil Procedure would
certainly enable Motilal to maintain the application (See Smt. Saila Bala Desai
v. Smt. Nirmala Sundai Dassai and another, at 1291, referred to with approval
in Shew Bux Mohata & Ors. v. Bengal Breweries Ltd & Ors. Undoubtedly
the High Court was reluctant to overlook the gross delay in preferring the
application but even after this reluctance the High Court having granted the
application, we would consider it imprudent to reject the application on the
ground of delay.
Once Motilal becomes a party, two contentions
advanced on his behalf will have to examined: (a) has he become, under the sale
certificate obtained by him, a purchaser of equity of redemption so as to
dissentitle the original mortgagor from bringing the present action; (b) What
is the effect of the attachment before judgment secured by him on November 6,
1947, on the sale of equity of redeption in favour of the subsequent purcharser
under the sale deed Ext.
P-1 dated October 14, 1950.
Looking to the proclamation of sale it is
crystal clear that the property was sold subject to subsisting mortgage in
favour of Devi 222 Sahai, mortgagee. At a court auction what is sold is the
right, title and interest of the judgment debtor. The judgment debtor in the
decree obtained by Motilal was original mortgagor Sardar Govindrao Mahadik.
Subject to other conditions, his right, title and interest would be one of a
mortgagor, that is the right to redeem the mortgage style as equity of
redemption. According to Motilal this equity of redemption was sold at the
court auction and it was purchased by him. Subject to the decision on the
second contention so as to the effect of attachment before judgment, there is
no substance in this contention because much before even the proclamation of
sale was issued the equity of redemption held by the mortgagor was sold by him
under sale deed Ext. P-l dated October 14. 1950, in favour of 2nd plaintiff
Gyarsilal. Therefore, even on the date of the decree as also on the date of
filing of the execution application mortgagor had no subsisting interest in the
property which could be sold at the court auction. On this short ground it can
be held that Motilal did not acquire under the sale certificate equity of
redemption of the mortgagee.
But Mr. Sanghi, learned counsel for Motilal
contended that the transfer in favour of subsequent purchaser under the sale
deed Ext. P.1, dated October 14, 1950, by the mortgagor is void against Motilal
because in the suit filed by Motilal he had obtained an order of attachment
before judgment of the suit property and this attachment before judgment would
cover the right, title and interest of the mortgagor defendants in that suit
and that any private sale inter vivos of the attached property would under
section 64 of the Code of Civil Procedure be void against the attaching
creditor. Proceeding further along this line it was contended that as a
corollary if the sale in favour of subsequent purchaser is void against Motilal
then the equity of redemption continued to remain vested in the original
mortgagor and at the court auction the same was sold and purchaged by Motilal.
This necessitates examination of the effect of an order of attachment before
judgment in a suit.
Order XXXVIII, rule 5, enables the Court to
levy attachment before judgment at the instance of a plaintiff if the
conditions therein prescribed are satisfied. What is the nature of attachment
levied in this case is not made known save and except saying that the suit
property was attached and the sale proclamation mentioned therein the
subsisting mortgage. Taking the best view in favour of Motilal, 223 one can say
that what was attached was the equity of redemption. The attachment was levied
and continued to subsist till the date of the decree. It would, therefore, not
be necessary to reattach the property.
What is the effect of attachment before
judgment ? Attachment before judgment is levied where the court on an
application of the plaintiff is satisfied that the defendant, with intent to
obstruct or delay the execution of any decree that may be passed against him
(a) is about to dispose of the whole or any part of his property. Or (b) is
about to remove the whole or any part of his property from the local limits of
the jurisdiction of the Court. The sole object behind the order levying
attachment before judgment is to give an assurance to the plaintiff that his
decree if made would be satisfied. It is a sort of a guarantee against decree
becoming infructuous for want of property available from which the plaintiff
can satisfy the decree. The provision in section 64 of the Code of Civil
Procedure provides that where an attachment has been made, any private transfer
or delivery of the property attached or of any interest therein and any payment
to the judgment debtor of any debt, dividend or other monies contrary to. such
attachment, shall be void as against all claims enforceable under the
attachment. What is claimed enforceable is the claim for which the decree is
made. Motilal's suit was for a money claim. It finally ended in a decree for
Rs. 500 by High Court and in between the 1st appellate court had dismissed
Motilal's suit in entirety. There is nothing to show that the attachment which
would come to an end on the suit being dismissed would get revived if a second
appeal is filed which ultimately succeeds. In fact, a dismissal of the suit may
terminate the attachment and the same would not be revived even if the suit is
restored and this becomes manifestly clear from the newly added provision in
sub rule (2) of rule 11 A of order XXXIII, C.P.C. which provides that
attachment before judgment in a suit which is dismissed for default shall not
be revived merely because by reason of the fact that the order for the
dismissal of the suit for default has been set aside and the suit has been
restored.
As a corollary it would appear that if
attachment before judgment is obtained in a suit which ends in a decree but if
in appeal the decree is set aside the attachment of necessity must fail. There
should be no difficulty in reaching this conclusion.
The question, however, is what happens if at
an intermediate state pursuant to the decree of the trial court the attached
property is sold at a court auction ? How would the rights and obligations of
the auction purchaser be adversely affected if the appeal is allowed and the
suit is dismissed ? ordinarily where the appeal is preferred an attempt should
be made to obtain stay of the execution of the decree of the trial court.
However, it is notorious that the appellate court is loath or reluctant to
grant stay of a money decree and the judgment debtor may not be in a position
to deposit the decretal amount and in this situation more often the execution
proceeds and before the appeal is disposed of an equity in favour of a third
person as auction purchaser who purchases the property at a court auction may
come into existence. If afterwards the appeal is allowed and the suit is
dismissed, would the auction purchaser be adversely affected ? The emerging
situation in this case clearly demonstrates the dilemma.
Ordinarily, if the auction purchaser is an
outsider or a stranger and if the execution of the decree was not stayed of
which he may have assured himself by appropriate enquiry, the court auction held
and sale confirmed and resultant sale certificate having been issued would
protect him even if the decree in execution of which the auction sale has been
held is set aside. This proceeds on the footing that the equity in favour of
the stranger should be protected and the situation is occasionally reached on
account of default on the part of the judgment debtor not obtaining stay of the
execution of the decree during the pendency of the appeal.
But what happens if the auction-purchaser is
the decree holder himself ? In our opinion, the situation would materially
alter and this decree holder-auction purchaser should not be entitled to any
protection. At any rate when he proceeds with the execution he is aware of the
fact that an appeal against the original decree is pending. He is aware of the
fact that the resultant situa-may emerge where the appeal may be allowed and
the decree which he seeks to execute may be set aside. He cannot force the pace
by executing the decree taking advantage of the economic disability of a
judgment debtor in a money decree and make the situation irreversible to the
utter disadvantage of the judgment debtor who wins the battle and loses the
war.
Therefore, where the auction-purchaser is
none other than the decree holder who by pointing out that there is no bidder
at the auction, for a nominal sum purchases the property, to wit, in this case
for a final decree for Rs. 500, Motilal purchased the property for Rs. 300, an
atrocious situation, and yet by a technicality he wants to protect himself. To
such an 225 auction purchaser who is not a stranger and who is none other than
the decree holder, the court should not lend its assistance. The view which we
are taking is not unknown and to some extent it will be borne out by the observations
of this Court in Janak Raj v. Gurdial Singh and Anr. This Court made a
pertinent observation which may be extracted:
"The policy of the legislature seems to
be that unless a stranger auction purchaser is protected against the
vicissitudes of the fortunes of the suit, sales in execution would not attract
customers and it would be to the detriment of the interest of the borrower and
the creditor alike if sales were allowed to be impugned merely because the
decree was ultimately set aside or modified." Viewed from this angle, the
order of the High Court that the auction-purchaser decree holder Motilal would
be entitled to recover the decretal amount of Rs. 500 with interest at the rate
of 4% per annum and proportionate costs could be styled as manifestly
equitable. However the Court cannot overlook the conduct of the mortgagor
Govindrao Mahadik, his subsequent purchaser Gyarsilal and even the original
mortgagee Devi Sahai in not paying a small debt and allowing the property to be
auctioned and forcing Motilal to the logical end of litigation and yet without
the slightest recompense to go on investing into this bottomless pit of
unending litigation. And at best his attachment before judgment is a security
that his decree would be satisfied from the property attached and sale to the
extent of recovery of decretal amount from attached property would be, against
attaching creditor void. If we assure him payment of decretal amount and costs
the sale in his favour is of no significance. The logical course for us would
have been to leave Motilal to his own remedy which we consider inequitous in
the facts and circumstances of this case. The order made by the High Court
would hardly provide him Rs. 1,500 to recover which he must have spent at the
inflated rate of litigation costs. In our opinion, while not granting the
substantial relief claimed by Motilal and looking to the conduct of all the
parties, we direct that Motilal should be paid Rs. 7,500 inclusive of decretal
amount, interest, proportionate costs and costs of the litigation till today,
and for this amount there will be a charge on this property to be cleared by
226 Govindro Mahadik at the time of redemption of the property which amount
will have to be paid by Gyarasilal's heirs in view of the sale-deed in favour
of Gyarsilal.
Accordingly, Civil Appeal No. 1144/69 filed
by Govindrao Mahadik is allowed and the judgment and decree of the High Court
are set aside and those of the trial court are restored with costs throughout.
Civil Appeal No. 1145/69 preferred by Motilal
is disposed of in accordance with direction herein-above indicated with no
order as to costs. CMP 9004/80 and CMP 10593/80 for substitution are allowed.
P.B.R. Appeals allowed.
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