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1928 Supreme(SC) 4
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD SHAW, LORD CARSON, AND SIR LANCELOT SANDERSON.
BHAGWATI - Appellant
Versus
BANARSI DAS (DEFENDANTS) - Respondents
On Appeal from the High Court at Allahabad.
Decided On : January 23, 1928.
Solicitor for appellants : H. S. L. Polak.
Solicitors for respondents 1 to 5: Barrow, Rogers & Nevill.
A clause in a sale deed providing for the refund of consideration upon loss of possession does not constitute a "contract to the contrary" that exempts a seller from the statutory obligation to discharge existing incumbrances under Section 55(1)(g) of the Transfer of Property Act, 1882.
Headnote:(A) Transfer of Property Act, 1882 - Section 55(1)(g) - Seller's liability to discharge incumbrances - Contract to the contrary - In the absence of a contract to the contrary, the seller is bound to discharge all incumbrances existing on the property at the time of sale - A declaration in the sale deed that the property is free from all mortgages except one specifically named constitutes a commitment to the statutory obligation - A clause providing that the vendor shall pay the consideration if the vendee is put out of possession due to an encumbrance does not restrict or wipe out the statutory obligation to discharge incumbrances, particularly where the vendee retains possession but is compelled to pay the mortgage debt.
(B) Contract Act - Section 69 - Reimbursement - Person who pays money which another was bound by law to pay is entitled to be reimbursed by the other party.
Facts of the case:
The predecessors of the appellants purchased immovable property via a sale deed which disclosed only one mortgage. It was subsequently discovered that the property was subject to another prior mortgage. A decree was executed against the property, and the appellants were compelled to pay a sum to satisfy the mortgage. The appellants sued the vendors to recover this amount. The High Court had reversed a lower court's decree in favor of the appellants, holding that a specific clause in the sale deed excluded the vendors' statutory obligation.
Findings of Court:
The court found that the sale deed contained an absolute declaration that the property was free from all mortgages except the one named. The provision regarding the return of consideration upon loss of possession was an additional safeguard and did not contradict the wider language of the contract or the statutory obligations.
Issues: Whether a clause in a sale deed providing for the refund of the purchase price if the vendee is put out of possession constitutes a "contract to the contrary" that exempts the vendor from the obligation to discharge existing incumbrances under Section 55(1)(g) of the Transfer of Property Act, 1882.
Ratio Decidendi: The court ruled that the statutory obligation of a seller to discharge incumbrances remains unless explicitly negated. A clause dealing with the loss of possession does not override this obligation, especially when the vendee retains possession but is forced to pay the debt. Such payment is recoverable under Section 69 of the Contract Act as it was a payment the vendor was legally bound to make.
Result: Appeal allowed; decree of the Subordinate Judge restored.
Legal Category Hierarchy
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property law
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sale of immovable property
- vendor's liabilities
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sale of immovable property
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contract law
- reimbursement
Judgement
Appeal (No. 91 of 1926) from a decree of the High Court (April 8, 1924), reversing a decree of the Subordinate Judge of Aligarh.
In 1907 the predecessors in interest of the respondents sold certain immovable property to the predecessors in interest of the appellants by a deed of sale, the material provisions of which appear from the judgment of the Judicial Committee. The vendees paid the price and obtained possession. Subsequently it was discovered that the property was subject to a mortgage executed in 1882 in addition to a mortgage mentioned in the deed of sale. Under this mortgage of 1882 a mortgage decree was made in 1914 against both the vendors and vendees. In 1920 the decree was put in execution against the property, and the present appellants were compelled to pay thereunder Rs. 13,234.
The appellants brought the present suit to recover that sum.
Law Rep. 55 Ind. App. 135 ( 1927- 1928)
Bhagwati V. Banarsi Das 2
The Subordinate Judge made a decree, allowing the claim, but it was set aside by the High Court. The learned judges (Mukerji and Dalai JJ.) were of opinion that the clause in the sale deed set out in the present judgment excluded the obligation of the vendors under s. 55, sub-s. 1 (g), of the Transfer of Property Act, 1882.
1928. Jan. 23. Dube for the appellants. Hyam for the respondents 1 to 5.
The judgment of their Lordships was delivered by
LORD SHAW. This is an appeal from a decree of the High Court of Judicature at Allahabad, which reversed a judgment and decree of the Subordinate Judge of Aligarh.
The question is a short and simple one. It arises under s. 55, sub-s. 1 (g), of the Transfer of Property Act, 1882, and the bearing thereon of the terms of a particular contract of sale.
The parties were vendor and vendee of a certain piece of immovable property. Sect. 55 is expressed in terms of a very absolute and clear character. It provides, the irrelevant parts of the section being omitted, that in the absence of " a contract to the contrary," the buyer and the seller of immovable property are subject to liabilities and have rights ; the enumeration includes the elementary proposition that the seller is bound to discharge all incumbrances then existing on the property. It is said, however, that this statutory obligation was negatived in the particular circumstances of this case by reason of the terms of the contract of sale.
The fact is that there had been more than one mortgage existing on the property prior to the transaction of sale. But the language of the deed of sale recognizes only one of those mortgages and makes no mention of the others. " The said property " (says the sale deed) " is mortgaged to Parshadi Lal, son of Tika Ram .... under a mortgage deed for Rs.4000." Quoad ultra this deed is an absolute and unreserved disposal by sale of the property, unencumbered and free from all mortgage. The language of the deed of sale is that, apart from the Parshadi Lal mortgage, " the property is up to this date free from all rights of transfer by sale, mortgage," etc. There is an absolute declaration by the vendor to the vendee that he is buying the property free from all mortgages and covenants, except the one that has just been named. It may reasonably be asked up to that point is there any “contract to the contrary " of the terms of the statute ? There is none.
But the contract further provides " If, God forbid, any person comes forward as partner or co-sharer and brings a claim, or if an encumbrance, etc., is found in respect of the whole, or part of the property sold, and as a result of his claim the property pass out of the possession of the vendees, we, the vendors, shall pay to the vendees the consideration of this sale deed to the extent the property sold passes out of their possession." It is said that that provision is exclusive of all other rights on the part of the vendee.
It is sufficient in their Lordships opinion to point out that no such event ever happened. The property did not pa
