Report No. 70
51.31. Common law.-
Sub-section (2) corresponds to what is known as the covenant for title in England. At common law, no such covenant was implied in England.1
The maxim adopted by the common law was "let the purchaser beware-"Caveat emptor", which means that the buyer is bound by the law to look after his own interests. If people will not assist themselves, the law will not assist them; if a person chooses to buy a property without looking into the title, he does so at his own risk and the law will not help him to get rid of his bargain.
This was the law as unmodified by statutes in England, which led to the practice of inserting express covenants so as to avoid the effect of the rule of caveat emptor. In the absence of an express covenant, however, the common law rule would apply and the buyer could not hold the seller liable for any defect of title after the conveyance was executed.
1. Gour Kishore v. Chancier Kishore, 25 South WR 45 (46).
51.32. Statute.-
Statutory modification of this common law rule took place in England, first in 1881 by the Conveyancing and Law of Property Act, section 7(1)(a), and then by the Law of Property Act, 1925, section 76. In India, sub-section (2) now implies a warranty of title in all sales, whether or not such a warranty is expressed in the conveyance. In the absence of a contract to the contrary, the warranty is absolute and irrebuttable.1 It also appears that the fact that the buyer knew of the defect is not material for the purpose of sub-section (2). In this sense, section 55(1)(a) is subordinated to section 55(2).2-4
1. Deep Chandra v. Sajjad All Khan, AIR 1951 All 114 (118) (Agarwala and Wanchoo, JJ.).
2. AIR 1918 Mad 1315 (1320).
3. Avadesh Kumar v. Zakaul Hussain, AIR 1944 All 243 (244).
4. AIR 1957 AP 307 (325).
51.33. Quiet enjoyment.-
In England, besides the covenant for title, there is implied a covenant for quiet enjoyment which means that the buyer shall not be disturbed in his possession and enjoyment of property. While the covenant for title relates to right to convey, covenant for quiet enjoyment relates to possession. Decisions of some High Courts take the view1-3 that section 55(2) imports not only a covenant for title but also a covenant for quiet enjoyment. In some cases4-5 the existence of the covenant seems to have been assumed.6
1. AIR Nag 382 (385).
2. AIR 1953 Mad 529 (530).
3. AIR 1916 Mad 14 (15).
4. AIR 1935 Mad 636 (637).
5. AIR 1950 Born 401 (404, 406).
6. Contra 1957 Ker LT 588 (591).
51.34. The distinction between covenant for title and covenant for quiet enjoyment is that the former, if broken, is necessarily broken immediately upon execution of the conveyance which contains it and the purchaser need not wait for his eviction. The latter covenant (quiet enjoyment) offers no immediate right.
51.35. Section 55(2)-Good and Marketable Title.-
A party in whose favour an agreement of sale of immovable property has been executed is entitled to have title made out for him. This broad proposition is the underlying principle in section 55(1)(b) and section 55(2). Questions would arise as to whether the title should be good title or absolute title or title free from encumbrances. Fortunately, the Act avoids these complications by using only the words "the interest which the seller professes to transfer". We find subtle distinctions made between good title and marketable title in a Calcutta case.1
This inclination was towards holding that the Act does not impose the obligation to pass the good title-an expression which seems to be nearer to absolute title. He seems to have assumed the existence of this distinction in England.
With great respect, we are not convinced that any such subtle distinction is recognised even in England. In England, "good title" in a contract for the sale of realty means such a title as will be forced on a purchaser in an action for specific performance and as would be an answer to an action of ejectment by any claimant.2
In Curtis v. Maloney, (1951) 1 KB 736: (1950) 2 All ER, the provision in the Bankruptcy and Deeds of Arrangement Act, 1914, section 15, to the effect that the purchaser shall acquire a "good title" was construed as a good title against all the world. That statutory provision relates to sale by the official Assignee of goods of a third person which are in the "order and disposition" the bankrupt and which are in his "reputed ownership".
The auction purchaser, it was held, acquires a good title against the true owner also. This decision does not make any distinction, for the purpose of conveyancing, between good title and title free from reasonable doubt or marketable title. In section 55(2), in any case, the words used are "the interest which the seller professes to transfer subsists". They do not define the quality of title.
1. AIR 1966 Cal 605 (610), paras. 22 to 255.
2. Jeakes v. Write, 6 Ex 873; Stroud, (1972), Vol. 2, p. 1174.
51.36. Title free from doubt.-
The Specific Relief Act, in section 17(b), provides1 that the vendor can sue for specific preformation if he can show a title free from reasonable doubt. Where the vendor is not in such a position, the vendee is entitled to repudiate the agreement.2-4 It is thus clear that marketable title is one which can be enforced on an unwilling purchaser under a contract for sale.5 This is very much like the English position.
This right is not one that grows out of the agreement between the parties, but is given by the law. In the leading English case,6 Sir William Grant, M.R., observed that the defendant insists on having a good title, "not because it is stipulated for by the agreement, but on the general right of the purchaser to require it.".
1. Section 17(b), Specific Relief Act, 1963.
2. AIR 1964 Ori 269 (273).
3. AIR 1956 Born 175 (179).
4. AIR 1923 Born 148 (150, 152, 154).
5. AIR 1938 Born 175 (179).
6. Agilvie v. Foliambe, (1917) 36 Eng Rep 21 (25, 26).
51.37. Section 55(2)-Proviso.-
The proviso to sub-section (2) enacts that where a sale is made by a person in a fiduciary character, he shall be deemed to contract that the seller has done no act whereby the property is incumbered or whereby he is hindered from transferring it. The liability under the proviso is not, according to an Allahabad judgment, enforceable against the person who has acted in a fiduciary character,1 but only against the person on whose behalf the sale is executed, and that even this cannot be done if the sale is not binding upon the latter person.
In that case a guardian executed a sale on behalf of a minor after obtaining permission from the District Judge, but the permission was found to be ineffective and consequently the sale was not valid as against the ward. It was held that the buyer was not entitled to recover any compensation from the guardian, as the sale had been made by him only in his capacity as guardian. The buyer would have been entitled to recover compensation from the property of the minor ward, if the sale had been binding upon him, but inasmuch as the sale was not valid against the ward, it could not be enforced against him also.
In an Oudh case2 it was, however, held that a breach of a warranty implied by law in respect of a sale effected by a guardian could not result in a personal liability on the ward for damages, on the well-settled principles of law, that a guardian cannot so contract in the name of his ward as to entail the imposition of a personal liability on the ward. In a later case,3 it has been held by the High Court of Allahabad that where the Official Receiver purports to sell property to which the insolvent has ceased to have title, the sale cannot be said to have been made in a fiduciary character within the proviso to paragraph 2 of section 55.
Although the state of the case law leads to some want of clarity, it appears to us that the position is this
(i) Where the person selling is a guardian, and he is not competent to do so, the minor's interests are not affected either by the sale or by the preceding contract. The remedy, if any, is against the guardian.
(ii) Where the person selling is a guardian and he is competent to do so, the minor's interests are affected by the sale. So far as the guardian is concerned, if he has done any act incumbering the property (say, by borrowing a loan), or any act whereby he is hindered from transferring the property, he must accept responsibility for that act.
Assuming that section 55(2), proviso, is included for guardians also, we do not think that the proviso makes a difference to the position that we have stated above.
1. Maida (Mst.) v. Kishan Bahadur, AIR 1934 All 645
2. AIR 1924 Oudh 99 (100).
3. AIR 1942 All 39 (41). (650, 651).
51.38. No change.- The above discussion does not disclose any need for amending section 55(2).
51.39. Section 55(3).-
In addition to receiving the conveyance, the purchaser is entitled to receive the title deeds. This is more than a contractual right, for, the owner of land has a right to the title deeds under a general rule.1 "The purchaser shall have all the charters, deeds and evidences, as incident to the lands for the evidences are, as it were, the sinews of the land."2
Section 55(3) reads-
"55. (3) Where the whole of the purchase-money has been paid to the seller, he is also bound to deliver to the buyer all documents of title relating to the property which are in the seller's possession or power:
Provided that, (a) where the seller retains any part of the property comprised in such documents, he is entitled to retain them all, and (b) where the whole of such property is sold to different buyers, the buyer of the lot of greatest value is entitled to such documents.
But in case (a) the seller, and in case (b) the buyer of the lot of greatest value, is bound, upon every reasonable request by the buyer, or by any of the other buyers, as the case may be, and at the cost of the person making the request, to produce the said documents and furnish such true copies thereof or extracts therefrom as he may require; and in the meantime, the seller, or the buyer of the lot of greatest value, as the case may be, shall keep the said documents safe, uncancelled and undefaced, unless prevented from so doing by fire or other inevitable accident."
1. Harrington v. Price, (1832) 3 B&Ad 170; Loosemore v. Radford, (1842) 9 M&W 657; Cf. Knight's Question (in re:), 1958 Ch 381.
2. Coke on Littleton, 6a.
51.40. Title deeds-Nature of.-
The title deeds for the property sold belong to the buyer as an incident of the property sold, though not granted by express words. The buyer is entitled to every deed forming a step in his title in such a shape that he can, if necessary, give it in evidence. He is not bound to complete the contract until the title deeds are handed over.
