Report No. 70
51.51. Origin in Roman law.-
The true origin of the doctrine may, with high probability, be ascribed to the Roman law, from which it was imported into the equity jurisprudence of England.1 By the Roman law, the vendor of property sold had a privilege, or right of priority of payment, in the nature of a lien on the property, for the price for which it was sold, not only against the vendee and his representatives, but against his creditors, and also against subsequent purchasers from him.
It was a rule of that law that although the sale passed the title and dominion in the thing sold; yet it also implied a condition, that the vendee should not be owner of the thing so sold, unless he had paid the price, or had otherwise satisfied the vendor in respect thereof, or a personal credit had been given to him without satisfaction.
1. Mackreth v. Symmons, 15 Ves 329 (344); Story Equity.
51.52. English law.-
The lien ordinarily attaches and in cases of doubt it is presumed to exist, the burden of proof being on the vendee to show that it is waived or lost. The principles so stated are simple. At some time, there was felt a difficulty in ascertaining what circumstances are sufficient "to repel or displace" the lien. Lord Eldon in Mackreth's case1 did not hesitate to say "that it would have been better at once to have held that the lien should exist in no case and that the vendor should suffer the consequences of his want of caution; or to have laid down the rule the other way so distinctly that a purchaser might be able to know without the judgment of a Court in what cases it would or in what cases it would not exist." But the various matters of detail are now fairly well settled.
1. Mackreth v. Symmons, (1808-09) 15 Ves 340.
51.53. Lien in England.-
In England,1 as soon as a binding contract of sale is made,2 the vendor has a lien on the property for the purchase money and a right to retain the property until the money is paid. Even if the vendor executes an absolute conveyance and parts with possession both of the property and of the title deeds to the purchaser, he still has a lien on the property in equity in respect of any part of the purchase-money which may not have been paid; and the lien is not excluded by the fact that the purchase-deed contains a receipt for the purchase-money.
1. Snell Equity, (1966), p. 490.
2. Birmingham (in re:), 1959 Ch 523.
51.54. No right conferred to interest.-
Section 55(4)(b) does not itself give a right to interest. It assumes that the interest is payable,1 and defines the date of commencement of a right to interest. This interest is, in the context of section 55(4)(b), generally attributed to implied agreement. But the right does not exist in every case. Equitable considerations may point to the contrary.
1. ILR 35 Mad 625 (627).
51.55. Notice of non-payment.-
In section 55(4)(b), importance has been given to notice of non-payment. Thus, the mere fact that the transferee has notice of the previous sale will not be enough to fix him with the lien or make him liable on the lien. It will be necessary to prove that he had notice of the factum of non-payment. This is a sensible provision because the non-payment of consideration is the fact that gives rise to the lien. It may be noted, incidentally, that this change was made in view of the comments received on the Bill.1
1. See notes on the Amending Bill, (1928) 54 MLJ 93 (99).
51.56. Delayed delivery.-
Where no delivery is given on the passing of ownership and no purchase-money is paid, the position is that the buyer will be entitled to the rents and profits from the date of conveyance, but the seller will not be entitled to a charge or interest on the unpaid purchase-money,1 because, under section 55(4)(b), the charge for the interest is only from the date of delivery and not before.
1. AIR 1956 Andh 113 (114).
51.57. Equitable consideration.-
It will also appear that the right of the seller to interest on the purchase-money being derived from equity, is not absolute and will depend on the circumstances of the case.1 It would, however, appear that the Oudh Court has taken a different view.2 So far as the presence of a contract to the contrary is concemed,3 the position is obviously different, in view of the opening words of section 55; but, we feel that on the language of section 55(4)(b), as it now stands, one cannot take a positive view on either side. The case is outside the section. It is to be noted that while section 55(4)(b) provides for interest on the amount of the unpaid purchase-money, it does not directly deal with the question-"In what circumstances interest is allowable and what is the rate?"
1. AIR 1952 Mad 678 (679); AIR 1933 Rang 401 (402).
2. AIR 1933 Oudh 33 (34).
3. AIR 1966 Mys 86 (91).
51.58. Some confusion has arisen with reference to section 55(4)(b) by reason of the fact that this clause mentions two events-passing of ownership and delivery of possession. Both are material for clause (b), because it begins with the words "where the ownership of the property" and further it ends with the words "from the date on which possession has been delivered". These words were inserted in 1929. The language of the clause is quite clear and the award of interest, before delivery, is not justified by the clause, whatever be any other source for the recognition of such right.
It is needless to state that the right of the vendor in a purchase deed does not, in any way, affect his personal right against the vendee.1 Of course, such a right, that is to say, personal liability, cannot be enforced against a transferee of the property from the purchaser.2 But the fact that there is a personal liability in the purchase, might become material, since unpaid purchase-money left with the purchaser is a "debt" due to the vendor, and can be attached in execution of a decree against the vendor.3 Besides this, it is to be noted that if the buyer does not pay the purchase money at the time of the completion of sale, the seller can put an end to the contract.4
Advantage of the statutory charge created by clause (b) lies in this, that it can be enforced against the property in the hands of the specified persons.
1. AIR 1942 Lah 275 (278).
2. AIR 1945 All 156 (158).
3. AIR 1942 Lah 275 (278, 279).
4. AIR 1932 All 454 (456).
We must now address ourselves to an important question in respect of which section 55 requires to be revised. There is need for considering, in some detail, the date that should be properly mentioned in clause (a) and clause (b). These clauses mention two dates-date of passing of ownership and date of delivery. What should be the crucial date?
Theoretically, there are several alternatives-the date of contract, the date of passing of property (usually the conveyance) and the date of delivery of possession. Of course, it is only if there is an interval of time between these dates that the question arises for the purpose of section 55(4). As to the date of contract, it has no relevance in India. Since no interest passes thereunder, the question of adjustment of the income does not arise.
Of course, if possession has also been delivered on execution of the contract and before conveyance without payment of price-an unlikely event though sometimes met with-the question of charge of the vendor for the unpaid vendor could arise. Such a question is outside section 55(4), but relief can be awarded on the ground of justice, equity and good conscience. The real competition is between the date of transfer of ownership and date of delivery of possession. Which should be the crucial starting point for commencement of the lien?