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Case Number

First Appeal No. 163 of 1952

Advocates

Bhagirath Dass and M.R. Chhibar
D.R. Manchanda
for Respondent 1; B.R. Tuli
N.N. Goswamy and K.C. Grover
for Respondent 3

Judges

S.S Dulat
D.K Mahajan, JJ.

Acts

SECTION 42 SPECIFIC RELIEF ACT
Section 2(d) of the Transfer of Property Act
SECTION 55 TRANSFER OF PROPERTY ACT
SECTION 5 TRANSFER OF PROPERTY ACT
SECTION 3 TRANSFER OF PROPERTY ACT
Order 21, rule 63 of the CPC.2.
S. 57 and Chap. 4 of this Act
Order 21 Rule 58 of the CPC
TRANSFER OF PROPERTY ACT
jurisdiction;8. Section 5:
Order 21 rule 63

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Smart Summary

Legal Opinion Summary — D.K. Mahajan, J. (First Appeal from Sub-Judge 1st Class, Amritsar)

Factual and Procedural Background

The appeal arises from a suit founded under Order 21, rule 63 of the Civil Procedure Code (CPC) challenging an auction sale in execution of a decree. Six shops on G.T. Road, Amritsar, had been sold by Manna Singh to Jodh Singh under a registered sale deed for Rs. 24,800. Rs. 15,800 was paid at registration and Rs. 9,000 remained in trust with the purchaser (Jodh Singh), payable to the vendor within two months. In execution of a money decree obtained by Wasti Ram against Jodh Singh, the shops were attached. Manna Singh (the vendor / plaintiff in the original suit) raised objections under Order 21, Rule 58 CPC alleging a charge of Rs. 9,000; those objections were dismissed by the executing Court on 26 March 1951 as "designedly and unnecessarily delayed." An auction took place on 27 March 1951, when Shiv Parkash (Defendant No. 3) purchased the shops.

The plaintiff filed a suit on 12 April 1951 under Order 21, rule 63 CPC seeking a declaration that he was in possession of the shops as a mortgagee (mortgage/charge claimant), that the auction sale was invalid because it had been held without reservation of mortgagee's rights, and that the auction-purchaser could not take possession without liquidating the charge. The judgment debtor (Jodh Singh, Defendant No. 2) did not appear and the suit proceeded ex parte against him. Defendants Nos. 1 (decree-holder, Wasti Ram) and 3 (auction-purchaser, Shiv Parkash) contested the suit.

The trial Court dismissed the suit on 5 May 1952, holding the suit not maintainable in the form filed, that the value for jurisdictional purposes was about Rs. 9,000 (while noting proper court-fee had been paid), and that Defendant No. 3 was protected as a bona fide transferee for consideration without notice. The plaintiff appealed to this Court.

Legal Issues Presented

Whether a suit for a declaration under Order 21, Rule 63 CPC (challenging an auction sale held in execution of a decree) is maintainable, or whether the remedy must be different (i.e., to enforce the charge).
Whether an auction-purchaser in execution of a decree who buys "for consideration" is bound by a pre-existing charge on the property that arose from unpaid part of the purchase price of an earlier sale (i.e., whether such a purchaser takes subject to the charge or is protected).
Whether the auction-purchaser had actual or constructive notice of the alleged charge (specifically whether constructive notice arose from plaintiff's asserted possession or from recital in the sale deed that Rs. 9,000 remained unpaid).

Arguments of the Parties

Appellant (Plaintiff / Manna Singh) — Arguments

The trial Court erred in holding that a declaratory suit (as filed) was not competent; the plaintiff was entitled to a declaration of his rights as mortgagee/charge-holder under Order 21, Rule 63 CPC.
The auction-purchaser (Defendant No. 3) purchased only the right, title and interest of the judgment-debtor and, because the shops were subject to a charge (the unpaid Rs. 9,000), that charge binds the purchaser; the purchaser cannot escape liability by pleading bona fide purchase for consideration without notice.
In any event, the auction-purchaser had both actual and constructive notice of the charge: (a) because the plaintiff was in possession of the shops (claimed), and (b) because the sale deed recited the unpaid Rs. 9,000 and registration of that deed constituted notice to the world.

Defendants

Defendant No. 1 (decree-holder, Wasti Ram) maintained that the property belonged to the judgment-debtor (Jodh Singh) and was not subject to any charge; also contended the suit should not have been in the form filed.
Defendant No. 3 (auction-purchaser, Shiv Parkash) raised that the suit was improperly stamped for court-fee and jurisdictional purposes, denied the existence of the charge, alternatively pleaded that any alleged charge had been paid, and contended that if a subsisting charge existed, he was a transferee for consideration without notice and therefore protected.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Kristnam Sooraya v. Pathma Bee, ILR 29 Mad 151 (Full Bench, 1906)	That the proviso to Section 42 of the Specific Relief Act does not take away the right conferred by Section 283 (to sue for a declaration of title) where an order has been made under Sections 280–282 CPC; i.e., a declaratory remedy remains available in such contexts.	The Court relied on this Full Bench decision to hold that the corresponding provisions under the 1908 Code do not prevent a suit for declaration under Order 21, Rule 63 CPC; therefore Section 42 of the Specific Relief Act did not preclude the plaintiff's declaratory suit.
Tulsi Das v. Shiv Dat, ILR 9 Lah 167; (AIR 1927 Lah 631)	Supportive authority following the rule in ILR 29 Mad 151 regarding the availability of declaratory relief notwithstanding the relevant proviso in Section 42 of the Specific Relief Act.	Applied as corroborative precedent for the proposition that Section 42 does not bar a suit under Order 21, Rule 63 CPC.
Mt. Anrajo Kuer v. Ramadaval Singh, ILR 21 Pat 300; (AIR 1942 Pat 406)	Similar support for the principle that Section 42 of the Specific Relief Act does not remove the right to seek a declaration under the corresponding CPC provisions.	Used as further authority to confirm that Section 42 of the Specific Relief Act has no application to suits under Order 21, Rule 63 CPC.
Nawal Kishore v. Municipal Board Agra, AIR 1943 All 115	Interpreted Section 100 of the Transfer of Property Act: the words "transferred for consideration" include an auction sale in execution of a decree; Chapter IV (which includes S.100) and Section 2(d) show transfers by execution of a decree are covered for purposes of charges and mortgages.	The Court accepted and expressly agreed with these observations, using them to hold that an auction sale in execution of a decree can constitute a transfer for consideration and thus the protection in S.100 (that a charge is not enforceable against a transferee for consideration without notice) applies.
Raj kishore Lall v. Begum Sultan Jehan, AIR 1953 Pat 58	Supportive authority to the interpretation of Section 100 and the position that transfers in execution of a decree may be treated as transfers for consideration within the meaning of the section.	Relied upon as confirming authorities; the Court cited it as supporting the conclusion that the auction purchaser may be protected under Section 100 if he is a transferee for consideration without notice.
G. Sitayya v. G. Kotayya, AIR 1932 Mad 71	Authority on constructive notice and on the inquiry expected of an intending purchaser where property is in the actual possession of a tenant (i.e., purchaser is not required to investigate the tenant's lessor or the lessor's title).	Applied to reject the plaintiff's contention that possession implied constructive notice to the auction-purchaser; the Court held that because the property was in the tenant's possession, the purchaser was not required to investigate the lessor's title and was not put on inquiry by mere tenant-occupation.

Court's Reasoning and Analysis

The Court addressed the appeal in a stepwise manner, applying statutory provisions and binding authorities expressly cited in the record.

Maintainability of the declaratory suit:
The Court found "considerable force" in the appellant's first contention that a suit for declaration under Order 21, Rule 63 CPC is competent. It relied upon the Full Bench decision in Kristnam Sooraya v. Pathma Bee (ILR 29 Mad 151) and subsequent cases (including Tulsi Das and Mt. Anrajo Kuer) to hold that the proviso to Section 42 of the Specific Relief Act does not operate to oust a party's right to sue for a declaration under the relevant CPC provisions. Consequently, Section 42 of the Specific Relief Act was held not to apply to a suit under Order 21, Rule 63 CPC.
Effect of the Transfer of Property Act amendments (1929) and protection of auction-purchaser:
The Court considered the amendments to the Transfer of Property Act and quoted relevant provisions (Section 2(d), Section 5, and Section 100). It accepted the reasoning of the Allahabad Full Bench in Nawal Kishore v. Municipal Board Agra (AIR 1943 All 115) that the words "transferred for consideration" in Section 100 are wide enough to include an auction sale in execution of a decree, and that Section 2(d) permits Chapter IV (including S.100) to apply to transfers by operation of law or in execution of a decree. The Court agreed with this interpretation and with corroborative Patna authority (Raj kishore Lall). On that basis the Court held that the auction-purchaser could be protected by S.100 if he was a transferee for consideration without notice.
Nature of a charge and notice:
The Court reiterated statutory points: unpaid part of purchase price is a charge on property (citing Section 55 of the Transfer of Property Act), and unlike a mortgage, a charge does not automatically attach to the property so as to bind transferees unless the transferee has notice.
Actual vs. constructive notice — application to facts:
The Court observed that the plaintiff had not established actual notice to the auction-purchaser. The appellant's argument on constructive notice relied on two factual points: (a) alleged possession by the plaintiff, and (b) a recital in the sale deed that Rs. 9,000 remained unpaid and that registration gives notice to the world. The Court found that the shops were in actual possession of a tenant (Chaman Lal), so plaintiff could not be said to be in possession; consequently, the purchaser was not obliged to investigate the tenant's lessor or title (relying on G. Sitayya v. G. Kotayya).

With respect to the recital of the unpaid Rs. 9,000, the Court observed that the auction occurred more than four years after the sale deed and that a reasonable person would not assume a substantial sum payable within two months remained unpaid for four years. The Court further noted the plaintiff delayed in asserting his charge — objections under Order 21, Rule 58 CPC were filed only on 21 March 1951, five days before the auction, and were dismissed on 26 March 1951 as delayed. The plaintiff took no steps to inform the official receiver or to publicize the charge at the time of sale, nor did he prove in his suit that Rs. 9,000 remained unpaid or produce the judgment-debtor to support the claim.

Applying Section 3 of the Transfer of Property Act (definition of "notice"), the Court asked whether there had been wilful abstention from inquiry or gross negligence on the part of the auction-purchaser that would amount to constructive notice. The Court concluded there was no such wilful abstention or gross negligence, and that no reasonable person would have inferred that such a payment remained unpaid for over four years. The Court therefore held that the auction-purchaser had no notice of the alleged charge.
Consequence for the appellant's remaining contentions:
Having rejected both the argument that the auction-purchaser takes subject to the charge despite being a purchaser for consideration and the contention that the purchaser had actual or constructive notice, the Court found no substance in the appellant's second and third contentions.

Holding and Implications

Final Holding: The appeal is dismissed. The trial Court's dismissal of the plaintiff's suit was upheld.

Direct consequences and implications for the parties:

The plaintiff's suit challenging the auction sale and seeking to enforce or declare a charge on the six shops failed in appeal.
The auction-purchaser (Defendant No. 3, Shiv Parkash) is treated as a transferee for consideration without notice and is protected from enforcement of the alleged charge, on the facts of this case.
The judgment below is affirmed in effect; the appeal was dismissed "but without any order as to costs" (i.e., no costs were awarded against the appellant).

The Court applied existing statutory provisions and authorities to the facts; it did not purport to establish a new principle beyond applying the cited precedents and statutory interpretations to the circumstances before it.

Source: Opinion of D.K. Mahajan, J. (with concurring opinion of S.S. Dulat, J.) — First appeal from Sub-Judge 1st Class, Amritsar — decision dismissing appeal dated as recorded in the provided text.

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Manna Singh v. Wasti Ram Saraf

D.K Mahajan, J.:— This is a first appeal directed against the judgment and decree of Sub-Judge 1st Class, Amritsar, dated the 5th of May, 1952, in a suit filed under Order 21, rule 63 of the CPC.

2. The facts giving rise to this appeal are that the property in dispute, six shops on G.T Road, Amritsar, were sold by Manna Singh to Jodh Singh for a sum of Rs. 24,800/- under a registered deed of sale. A sum of Rs. 15,800/- was paid before the Sub-Registrar and the balance remained in trust with Jodh Singn, and had to be paid to the vendor within two months of the registration of the deed. In execution of a money decree obtained by Wasti Ram against Jodh Singh, the six shops were attached. Objections were raised to the attachment by Manna Singh under Order 21 Rule 58 of the CPC on the 21st of March, 1951, to the effect that the property was subject to a charge of Rs. 9000/-. Thus application was dismissed by the executing Court on the 26th of March, 1951, on the ground that the objections had been designedly and unnecessarily delayed. The next day the auction took place and the shops were purchased by Shiv Parkash, Defendant No. 3. The present suit was filed on the 12th of April, 1951 under Order 21 rule 63 for a declaration that the plaintiff is in possession of the shops as a mortgagee and that the auction sale held on the 27th of March, 1951, in execution of Wasti Ram Defendant No. 1's decree against Jodn Singh defendant No. 2 being without reservation of mortgagee's rights is not valid and that Shiv Parkash defendant No. 3, the auction-purchaser, was not entitled to take possession of the aforesaid shops without liquidating the charge on them. Defendant No. 2 the judgment debtor, did not appear and was proceeded against ex parte. Defendants Nos. 1 and 3, the decree-holder and the auction-purchaser respectively, contested the suit. The decree-holder's defence was that the property belonged to the judgment-debtor and was not subject to any charge. It was also pleaded that the suit did not be in the present form. Defendant No. 3 in his defence raised the plea that the suit had not been properly stamped for the purposes of court-fee and jurisdiction. He also denied the charge on the property and in the alternative pleaded that if there was any charge, it had been paid off. And further that if there was a subsisting charge, defendant No. 3 is not liable for the same as he is a transferee for consideration without notice of the charge and is protected. On the pleadings of the parties, the following issues were framed:—

1. Whether the suit in the present form cannot proceed?

2. What is the proper value of the suit for purposes of court-fee and jurisdiction?

3. Whether the plaintiff is in possession of the property in dispute as a mortgagee?

4. Whether defendant No. 3 is a transferee for consideration without notice and how does it affect the present suit?

5. Relief.

3. The trial Court dismissed the suit on the 5th of May, 1952. It haveeld that the suit was not maintainable, that the value for purposes of jurisdiction was about Rs. 9000/-, but all the same proper court-fee had been paid and the only effect was regarding the forum of appeal; and that defendant No. 3 was protected because he was a bona fide transferee for consideration. Dissatisfied with this decision, the plaintiff has come up in appeal to this Court.

4. The contentions raised by Mr. Bhagirath Das, learned counsel for the appellant, are:—

1. That the trial Court has gone wrong in holding, that, the suit, that the plaintiff should have filed was to enforce his charge, and that the present suit for a mere declaration does not lie;

2. that defendant No. 3 being an auction-purchaser has purchased merely the right, title and interest of the judgment-debtor in the shops in dispute, and as the shops were subject to a charge and that charge was binding on the judgment-debtor, it is also binding on the auction-purchaser, and he cannot escape liability on the plea that he is a bona fide transferee for consideration without notice of the charge; and

3. that in any case it is established on the record that defendant No. 3 had actual as well as constructive notice of the charges and is therefore bound by the same.

5. It seems to me that there is considerable force in the first contention. The finding of the Court below that the present suit being merely for a declaration is not competent is clearly wrong and cannot be upheld. As far back as the year 1906, this question came up for decision before a Full Bench of the Madras High Court in Kristnam Sooraya v. Pathma Bee, ILR 29 Mad 151 and it was held that:—

“………the proviso to Section 42 of the Specific Relief Act does not operate so as to take away from a party against whom an order has been made under Sections 280, 281 or 282 of the CPC, the special right conferred by S. 283 to sue for a declaration of his title in so far as it is affected by the order which he seeks to impeach.”

6. No doubt this decision was under the 1882 Code, but it makes no difference. The corresponding provisions under the 1908 Code, are in similar terms and while dealing with them the rule in ILR 29 Mad 151 has been followed. In this connection reference may be made to the decisions in Tulsi Das v. Shiv Dat, ILR 9 Lah 167 : (AIR 1927 Lah 631) Mt. Anrajo Kuer v. Ramadaval Singh, ILR 21 Pat 300 : (AIR 1942 Pat 406). Thus the provisions of Section 42 of the Specific Relief Act have no application to a suit filed under O. 21 R. 63 of the CPC.

7. So far as the second contention is concerned, there is no force in it in view of the amendments to the Transfer of Property Act in the year 1929. It is, therefore, necessary to set out the relevant provisions of the statute (Transfer of Property Act) as they now stand after the amendment:

“Section 2. In the territories to which this Act extends for the time being the enactments specified in the scheduled hereto annexed shall be repealed to the extent therein mentioned. But nothing contained shall be deemed to affect—

a. xxx

b. xxx

c. xxx

d. save as provided by S. 57 and Chapter IV of this Act, any transfer by operation of law, or by, or in execution of a decree or order of a Court of competent jurisdiction;

8. Section 5: In the following sections ‘transfer of property’ means an act by which a living person conveys property, in present or in future to one or more other living persons, or to himself, or to himself and one or more other living persons and ‘to transfer proprety’ is to perform such act.

9. Sec. 100. Where immovable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property; and all the provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge.

10. Nothing in this section applies to the charge of a trustee on the trust-property for expenses properly incurred in the execution of his trust, and save as otherwise expressly provided by any law for the time being in force no charge shall be enforced against any property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge.”

11. A similar question came up for consideration before a Full Bench of the Allahabad High Court in Nawal Kishore v. Municipal Board Agra, AIR 1943 All 115, and it was held:

“………The words used in S. 100 are ‘no charge shall be enforced against any property in the hands of a person to whom such property has been transferred for consideration’ and the words ‘transferred for consideration’ are wide enough to include an auction sale in execution of a decree. No doubt, the Preamble of the Transfer of Property Act states that the Act is meant to define and amend laws relating to the transfer of property by act of parties and Section 5 of the Transfer of Property Act, which defines the expression ‘transfer of property’ contemplates also a transfer by act of parties and the language used in S. 100 as ‘property transferred for consideration’ also suggests that the basis of the transaction is a contract of which consideration is the essential element, but Section 2(d) of the Transfer of Property Act lays down:

“But nothing herein contained shall be deemed to affect………(d) save as provided by S. 57 and Chap. 4 of this Act any transfer by operation of law or by, or in execution of, a decree or order of a Court of competent jurisdiction.”

And Chapter 4 deals with mortgages and charges and S. 100 which specifically provides for charges is included in it. Section 2, therefore, provides that the Transfer of Property Act may affect a transfer by operation of law or by, or in execution, of a decree or order of a Court in matters relating to S. 57 and Chapter 4 of the Act, and it is a legitimate argument that in Chapter 4 and also in S. 100 which is included in Chapter 4 the expression ‘transferred’ is used in a wider sense and, includes both a transfer by act of parties and a transfer by operation of law or by or in execution of a decree.”

12. We are in respectful agreement with these observations. To the similar effect is the decision of the Patna High Court reported as Raj kishore Lall v. Begum Sultan Jehan, AIR 1953 Pat 58. No authority to the contrary has been cited at the bar nor we have been able to discover one. Thus the second contention raised fails.

13. It cannot be disputed that if part of the purchase price remains unpaid, it is a charge on the property sold (Section 55 of the Transfer of Property Act). It also cannot be disputed that unlike a mortgage a charge is not attached to the property and its transfer is not subject to it unless the transferee has notice of the charge.

14. Now the last contention remains for consideration. It is conceded that the plaintiff has not been able to establish actual notice of the charge to the transferee. The learned counsel restricted his argument to constructive notice. According to him, the transferee would be deemed to have notice of the charge from the fact that (a) plaintiff was in possession of the shops and not the judgment-debtor; and (b) that in the sale deed in favour of the judgment-debtor it is stated that part of the sale price (Rs. 9,000/-) was unpaid, for under the law registration of a document is notice to the entire world of the contents of the same. It is not disputed that the property was in actual possession of a tenant, Chaman Lal, and as such it cannot fee said to be in possession of the plaintiff. In such circumstances, the intending purchaser is not required to ascertain what the tenant's rights are and also who is his lessor and what is that lessor's title. In this connection reference may be made to G. Sitayya v. G. Kotayya, AIR 1932 Mad 71. As regards the recital in the sale deed about Rs. 9,000/- which had been left in trust with Jodh Singh for payment to the plaintiff within a period of two mouths, the position might have been different if the auction sale had taken place within those two months. As a matter of fact the auction sale took place more than four years after the execution of the sale deed by the plaintiff. It cannot, therefore, be assumed that any reasonable person even if he had read the term in the sale deed could have been put on an enquiry that the sum of Rs. 9,000/- which by no means is a small sum was still unpaid.

15. The definition of ‘notice’ contained in Section 3 of the Transfer of Property Act is—

“…….a person is said to have ‘notice’ of a fact when he actually knows that fact, or when, but for wilful abstention from an inquiry or search which he ought to have made, or gross negligence he would have known it.”

16. What therefore has to be seen is whether in the circumstances of this case, can it be said that there was any wilful abstention from an inquiry or search, which ought to have been made or that there was gross negligence on the part of the auction purchaser, which prevented him from the knowledge that a sum of Rs. 9,000/- was still due and was a charge on the property, which lie was purchasing at the auction? In my view this cannot be said. No reasonable man could ever have imagined that a huge sum of money, which was payable within a period of two months had remained unpaid for a period of more than four years. On the facts and circumstances disclosed on the record it seems that the plaintiff has been set up by the judgment-debtor in an attempt to defeat the decree-holder. The sale proclamation was drawn up after notice to the judgment-debtor. If there was a charge on the property, the judgment-debtor would have pointed out the same. This was not done with the result that the property was stated to be free from all encumbrances in the proclamation of sale and the notice of auction. The property remained under attachment for a considerable period and during; all this period, no steps were taken by the plaintiff to intimate his charge. It was five days before the auction that he came to Court and filed his objections to the attachment under O. 21 R. 58 of the CPC on 21-3-1951, stating that the property was subject to a charge in his favour. These objections were rejected on 26-3-1951. The order of the Court rejecting the objections is in the following terms:

“The objections have been designedly and unnecessarily delayed. The sale will lake place tomorrow. The objections are summarily dismissed.” Therefore he knew on the 26th at the time when his application was dismissed that the sale was to take place the next day. He not only disappeared from the scene altogether but did not at all approach the Official Receiver or at the time of the sale proclaim by handbills or otherwise that the property that was being sold was subject to his charge. All he did was to file the present suit on 12-4-1951. Even in this suit no attempt has been made to prove that in fact the sum of Rs. 9,000/- is still due to him. He has not even cared to produce the judgment-debtor in evidence to support his claim that Rs. 9,000/- was still due from him.

17. After considering jill the facts and circumstances of the case, I have come to the conclusion that the auction purchaser had no notice of the alleged charge.

18. Therefore, the third contention of Mr. Bhagirath Dass has also no subsance.

19. For the reasons given above, this appeal fails and is dismissed but without any order as to costs.

20. S.S Dulat, J.: I agree.

BD/K.S.B

21. Appeal dismissed.

Manna Singh v. Wasti Ram Saraf

Legal Opinion Summary — D.K. Mahajan, J. (First Appeal from Sub-Judge 1st Class, Amritsar)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant (Plaintiff / Manna Singh) — Arguments

Defendants

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Manna Singh v. Wasti Ram Saraf

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