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High Court Of Madhya Pradesh
T. C. Shrivastava, J.
GANPAT RANGLAL MAHAJAN - Appellant
Versus
MANGILAL HIRALAL - Respondents
Civil Revn. 423 Of 1959
Decided On : 01/19/1961
SALE OF PROPERTY - REFUND OF SALE PRICE - FRAUDULENT MISREPRESENTATION - SECTION 55 (1) (A) AND (G) OF THE TRANSFER OF PROPERTY ACT, 1882 - SECTION 19 OF THE INDIAN CONTRACT ACT, 1872 - SECTION 69 OF THE INDIAN CONTRACT ACT, 1872 - SECTION 55 (2) OF THE TRANSFER OF PROPERTY ACT, 1882 - VENDOR'S DUTY TO DISCHARGE ENCUMBRANCES - REMEDIES AVAILABLE TO VENDEE.
Fact of the Case:
The plaintiff purchased a house from the defendant by a registered sale deed. The sale deed contained a recital by the defendant that the mortgaged property is not encumbered. However, at the time of the sale deed, a mortgage suit brought by a third party was pending and the defendant was impleaded as a party therein. The plaintiff was dispossessed from the house in execution of the mortgage decree. The plaintiff filed a suit for recovery of the sale price and damages.
Finding of the Court:
The court held that the defendant was liable to refund the sale price to the plaintiff. The court held that the defendant's statement in the sale deed that the property was free from encumbrances was a fraudulent misrepresentation. The court also held that the plaintiff was not aware of the existence of the mortgage and could not have discovered it with ordinary care. The court further held that the defendant was bound to discharge the encumbrance in favor of the third party and his failure to do so entitled the plaintiff to the refund of the sale price as damages.
Issues: 1. Whether the defendant's statement in the sale deed that the property was free from encumbrances was a fraudulent misrepresentation? 2. Whether the plaintiff was aware of the existence of the mortgage and could have discovered it with ordinary care? 3. Whether the defendant was bound to discharge the encumbrance in favor of the third party? 4. Whether the plaintiff was entitled to the refund of the sale price as damages?
Ratio Decidendi: 1. The court held that the defendant's statement in the sale deed that the property was free from encumbrances was a fraudulent misrepresentation because it was a suggestion, as to a fact, of that which is not true, by one who does not believe it to be true'' and "an active concealment of a fact by one having knowledge or belief of the fact". 2. The court held that the plaintiff was not aware of the existence of the mortgage and could not have discovered it with ordinary care because the plaintiff could have known about the encumbrance by making inquiries in the office of the Registrar. 3. The court held that the defendant was bound to discharge the encumbrance in favor of the third party because the property was not sold subject to encumbrances and an assurance was given that no such encumbrances existed. 4. The court held that the plaintiff was entitled to the refund of the sale price as damages because the defendant's failure to discharge the encumbrance entitled the plaintiff to reimbursement under Section 69 of the Indian Contact act.
Final Decision: The court dismissed the defendant's revision petition and upheld the lower appellate court's decree ordering the defendant to pay Rs. 325/- to the plaintiff.
( 1 ) THIS petition for revision has been filed by the defendant against the decree of the lower appellate Court accepting the claim of the respondents for refund of Rs. 325/- as sale consideration.
( 2 ) THE house to which the contract of sale related originally belonged to one 1944 Ahmad sold the house to one Babu and Babu mortgaged it in favour of Misrilal and others. In the year 1947-48 Motilal, the first mortgagee, brought a suit on the basis of his mortgage and obtained a decree for sale, in execution of which the house was sold and was purchased by the applicant Ganpat on 15-3-1948. The defendant Ganpat sold the house to the plaintiff by a registered sale deed on 186-1948. In the meantime, Misrilal and others, the second mortgagees, had brought a suit on 18-3-1948 for the enforcement of their mortgage and Ganpat was also impleaded as one of the defendants in this suit. The claim was decreed and the property was sold with the result that the respondents were dispossessed from the house. Accordingly they brought the present suit for recovery of Rs. 325/- which had been paid by them as the sale price and also claimed Rs. 75/-as damages partly for costs incurred in defending the mortgage suit and partly for repairs made to the house.
( 3 ) THE trial court decreed the full claim, but the lower appellate court dismissed the claim for damages and confined the decree only to Rs. 325/-, that is, for the refund of the sale price. As the amount decreed is less than Rs. 1,000/-, no appeal lies and the defendant has come up in revision.
( 4 ) THE sale deed contains a recital by Ganpat that the mortgaged property is not encumbered. This statement is obviously false to the knowledge of Ganpat, as at the time of the sale deed the mortgage suit brought by Mishrilal and others was pending and Ganpat was impleaded as a party therein. Shri Bharucha, however, contends that as the mortgage deed in favour of Mishrilal was registered, it was possible for the buyer to find out the existence of the mortgage with ordinary care and further that as the registration of the deed amounted to a constructive notice to the plaintiffs, under Section 3 of the Transfer of Property Act, they should be deemed to have known about the mortgage. Reliance is placed upon Harilal v. Mulchand, AIR 1928 Bom 427 in support of this contention. Accordingly, he contends that Section 55 (1) (a) of the Transfer of Property Act did not apply to the ease. He has further argued that the contract was not voidable as the venders could have discovered the existence of the mortgage and the case fell within the exception to Section 19 Of the Indian Contract Act.
( 5 ) SO far as the applicability of Section 55 (1) (a) of the transfer of Property Act is concerned, the contention of the applicant appears to be correct, Although there is an express recital, in the sale deed that the property is free from mortgage etc. , this is not enough. To attract the provisions of Section 55 (1) (a) two conditions are necessary : firstly, that the buyer should not be aware of the existence of the defect in title; and, secondly, that he could not with ordinary care discover the defect. So far as the first condition is concerned, although the applicant vendor in his written statement pleaded that the buyer was aware of the existence of the mortgage, there is no proof of this fact and it must be assumed that the buyer was not aware of the defect. However, the second condition is not satisfied inasmuch as the buyer could have known about the encumbrance by making inquiries in the office of the Registrar. Section 55 (1) (a) of the Transfer of Property Act has, therefore, no application to the present case, ( 6 ) THE alternative argument that the case falls within the Exception to Section 19 of the Indian Contract Act is, however, without any force. The express recital in the sale deed about the non-existence of the mortgage, as I have already said, was to the knowledge of the vend
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