The vendor is entitled to interest on the purchase price from the date of taking possession by the purchaser, even if the sale deed is not executed, on the basis of an implied agreement arising out of the fact of taking over possession without paying the consideration amount.

SUBBA RAO, C.J. :- These are appeals against the decree and judgment of Panchapakesa Ayyar, J., in C. S. No. 197 of 1951 on the file of the Original Side of the High Court of Judicature at Madras.

2. The plaintiffs, the Andhra Paper Mills Co. Ltd., situate at Rajahmundry, were a limited company incorporated under the Indian Companies Act 7 of 1913. By an order dated 23-9-1947 in O. P. No. 235 of 1947 on the file of the High Court, Madras, the said company was directed to be wound up and an Official Liquidator was appointed. The Official Liquidator called for offers in December 1947 and January 1948 to purchase the Andhra Paper Mills as a going concern.

As there was paper shortage and labour unrest, the Government of Madras, after due inspection, made an offer to purchase it for an amount not exceeding Rs. 25,00,000/-. With the permission of the Court, that offer was accepted by the Official Liquidator. As there was delay in executing the sale deed, at the request of the plaintiffs, the defendants commenced taking possession of the mills at Rajahmundry on or about 3-5-1948 and had completely taken possession of the whole of the property by 17-5-1948.

After the defendants took possession of the mills, the Plaintiffs called upon the defendants to pay the consideration amount of Rs. 25,00,000/- with interest. On 8-11-1948, the defendants paid to the plaintiffs-the said sum of Rs. 25,00,000/-. The sale deed was executed only in 1953 after the filing of the suit.

The plaintiffs filed the aforesaid suit for recovery of interest on Rs. 25,00,000/- at 6 per cent per annum from the date of the taking over of the suit mills i.e., 17-5-1948 up to 8-11-1948 when the consideration amount was paid. The plaintiffs claimed in the plaint that defendants were liable to pay interest at the aforesaid rate both under law and equity.

3. The defendants in their written statement alleged that they were not liable to pay interest as under the agreement, they had to pay the consideration money only after the execution of the sale deed; that the plant was not in a working condition on the date they took possession but was put to partial use only on 16-8-1948 after expending a sum of Rs. 37,350/- and could be worked completely only front 1-10-1949 after spending a large sum of over a lakh of rupees and that, therefore, the claim for interest was neither equitable nor just.

4. The learned Judge found that the plaintiffs would be entitled to interest in lieu of rents and profits under S. 55 (4) (a), Transfer of Property Act and also in equity from the date the defendants to work the mills i.e., 16-8-1948 up to 8-11-1948 when the consideration amount was paid. The learned Judge held that, during that period, the defendants must have made some profit and, at any rate, would be liable to pay some rent, even if there was no profit. He awarded 3 per cent interest in lieu of rents and profits on the ground that they were making every day during that period one ton of paper worth Rs. 1,220/- by using the machinery and the premises and, therefore, 20 or 25 per cent of that price would be the reasonable rent and also on the ground that the capital of Rs. 25,00,000/- would require the payment of at least 3 per cent interest when the machinery and the premises were being actually used. In the result, the suit was decreed for recovery of interest at 3 per cent p. a. on Rs. 25,00,000/- from 16-8-1948 to 8-11-1948.

5. The defendants filed O.S.A. No. 5 of 1954 in so far as the suit went against them and the plaintiffs filed O.S.A. No. 11 of 1954 in so far as they failed. After the constitution of the Andhra High Court, the aforesaid two appeals were transferred to this High Court.

6. The learned Government Pleader contended that the plaintiffs would not be entitled to interest under S. 55 (4) (a) Transfer of Property Act as they did not derive any profit during the crucial period and as under that clause the vendor would not be entitled to occupation rent. He added that