Harilal Dalsukhram Sahiba v. Mulchand

Fawcett, A.C.J:—

The plaintiff-appellant brought this suit against the defendant for a refund of Rs. 19,000, the amount of consideration that he paid for the purchase of a field bearing Survey Nos. 108/1 and 108/2 near Ahmedabad, with interest thereon. This purchase was made on September 5, 1919, under a registered conveyance, and he had been duly placed in possession. But in a suit of 1920 brought by one Somnath Motilal for redemption of a mortgage on No. 108/2, Somnath obtained a decree on the ground that the defendant's vendors had no right of ownership such as the defendant purported to pass on to the plaintiff, but were only in the position of sub-mortgagees. This No. 108/2 had become vested in three daughters of one Narsi, who mortgaged it in 1889 for Rs. 900. The plaintiff's title to No. 108/2 thus became defective. He alleged that he had bought the land in order to build on it and that he was entitled to a rescission of the transfer and for a refund of the amount he had paid. The defendant disputed the right of the plaintiff to get back the whole consideration on various grounds; but his main defence may be said to be based on a subsequent transaction, whereby on July 23, 1924, he bought Somnath's rights in 108/2 (Exhibit 65). The decree that Somnath had obtained in the suit of 1920 had in the meanwhile been confirmed on appeal. The plaintiff did not appeal, and applications for execution had been made in respect of Somnath's decree; this was why he brought the suit of 1922. In September 1924, the defendant's pleader drew the Court's attention to the sale deed that he had obtained from Somnath and urged that the plaintiff's suit should not, in consequence, proceed. The plaintiff contended that it made no substantial difference. The Subordinate Judge held that there was a defect of title in regard to No. 108/2, which the defendant either knew or should have known and which he concealed from the plaintiff at the time of the transaction of 1919. On the other hand he held that the plaintiff himself could have discovered this defect had he made a sufficient investigation of title. But he did not find it necessary to decide expressly whether on the original cause of action the plaintiff would have been entitled to the relief he sought; and he held that in view of the defendant's subsequent acquisition of title under his purchase from Somnath the plaintiff ceased to have any case for rescinding his conveyance and for the return of the sale-price, unless the defendant refused to convey to him the requisite title. On the other hand, he found that there was still some defect in the quality of the title acquired by defendants from Somnath, because the latter had succeeded in his litigation as being the heir of Diwali, one of the three sisters I have mentioned, and there was the possibility that heirs of the other two sisters on their husbands' side might come forward and establish rights in regard to this piece of land. He held that the plaintiff was entitled to damages for this flaw in the title, and he awarded a sum of Rs. 1,000 on that account. He further held that the plaintiff was also entitled to have the benefit of the indemnity clause which the defendant had secured from Somnath in his deed of purchase, and directed that this should be assigned by the defendant to the plaintiff, and also that the defendant should personally indemnify plaintiff against future disturbance by heirs of the other two sisters. His decree allowed defendant two months to comply with these conditions about conveyance to the plaintiff, as well as the payment of Rs. 1,000 and full costs of the plaintiff's suit. If that was done then the plaintiff's conveyance, Exhibit 42, was to stand affirmed and continue to operate. If the defendant failed to act as aforesaid, it was to stand rescinded and the defendant was to pay Rs. 19,000 to the plaintiff and the plaintiff's costs of the suit. The defendant was in that case to obtain a re-conveyance at his own expense of the two pieces of land and to recover their possession from the plaintiff. The plaintiff has come in appeal, and his main contention is that the lower Court erred in compelling him to accept the subsequently acquired title of Somnath. He says he is entitled to have his conveyance rescinded, as prayed for in the plaint, and to be repaid the full amount of Rs. 19,000. Secondly, he contends that, if he is not entitled to that, the damages awarded are insufficient. The defendant has also raised cross-objections with a view to getting the direction as to the payment of Rs. 1,000 set aside.

The main ground on which the case for rescission of the conveyance is put is the duty of a seller [as laid down in section 55(1)(a) of the Transfer of Property Act] to disclose to the buyer any material defect in the property of which the seller is, and the buyer is not, aware, and which the buyer could not with ordinary care discover. This has to be read with the last paragraph of section 55, which treats an omission to make such disclosure as fraudulent. Mr. Thakor also contends that, apart from this, particular provision about fraud, there was misrepresentation on the part of the defendant which would entitle him to avoid the contract under sections 18 and 19 of the Indian Contract Act; and thirdly, he relies upon the contention that there was a mutual mistake of facts which would make the agreement void under section 20. The last contention can, I think, be shortly disposed of. There may, of course, be some defect that is unknown both to the purchaser and to the seller, whereby the contract is so fundamentally affected that there is good ground for holding the contract void because of a mutual mistake of fact. A case of that kind will be found in Nursing Dass Kothari v. Chuttoo Lall Misser. But in the present case there is clearly no ground for saying that the defect in title was not within the knowledge of both the plaintiff and the defendant. The Record of Rights entry (Exhibit 45), which was framed prior to the defendant's purchase on August 1, 1918, clearly shows this plot 108/2 as held by defendant's predecessors-in-title only under a mortgagee right; and having regard to the defendant's admission that he had actually taken the Record of Rights in his own hands and seen it, I think there can be no reasonable doubt that he was aware of this particular entry. It is most improbable that he could have effected his purchase without seeing exactly what this entry was, and his equivocation upon this point leaves little doubt that he saw it. That being so, whether or not the plaintiff was aware of this entry and this defect in title, it is clear that there was no mutual mistake which would bring the case under section 20 of the Indian Contract Act. Therefore, we come to the two other contentions as to fraud and misrepresentation.

It is quite clear that, if the plaintiff could with ordinary care have discovered that there was this defect of title, then he cannot plead that there was a failure on the part of the defendant to comply with the obligation laid down in section 55(1)(a). There has been considerable argument as to whether the plaintiff knew, or could have discovered, that there was such a defect. The Subordinate Judge has held that he could have discovered the defect, if he had sufficiently investigated the title. Now that in regard to agricultural lands the Record of Rights affords such an easy means of investigating questions of title about particular pieces of land, there is clearly not the same difficulty that there used to be about discovering defects of title with reasonable care. Admittedly, the plaintiff did see the mutation entry, Exhibit 44, which as regards plot No. 108/1 showed the defendant as the occupant under his sale deed of August 1918; but the duty of a prudent purchaser does not rest with merely seeing a mutation entry, if it does not cover the whole of the land he is purchasing. Moreover the plaintiff is a person of intelligence, who has been a member of the Bombay Legislative Council. I think it would be absurd for this Court to say that in the circumstances he ought not to have ascertained what were the entries in the Record of Rights about the two pieces of land; and had he done so he would have seen the entry about No. 108/2 and the mortgagees in possession. That would have put him on enquiry as to what these mortgagee rights were. It may be that the defendant had not given him his title-deeds. But that does not affect this particular point. With ordinary care he should have pursued his investigation beyond the point he says he did. Both under section 55(1)(a) and the definition of “notice” in section 2 of the Act there was a want of care or a wilful abstention from an enquiry or search which the plaintiff ought to have made, so that, in my opinion, the plaintiff is not entitled to say that there has been fraud on the part of the defendant in regard to this matter.

The same result, I think, follows if, leaving aside the special provisions of section 55 of the Transfer of Property Act, we consider the sections relating to fraud and misrepresentation in the Indian Contract Act. Section 19 contains an exception that, if consent was caused by misrepresentation or by silence, which is fraudulent within the meaning of section 17, the contract, nevertheless, is not voidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence; and that again brings the case back to the same question of what was reasonable care or diligence on the part of the plaintiff. Therefore, although there is some authority in English law for saying that the purchaser is not under an obligation to enquire into the vendor's title and that it is the duty of the vendor to disclose any defects, we are bound by what is the law as laid down in the pertinent Indian Statutes; and I can find nothing sufficient in the arguments that Mr. Thakor has placed before us for differing from the lower Court's view on this point.

The next question is whether the defendant's acquisition after the suit was instituted and after the conveyance to the plaintiff can properly be taken into account in disposing of this suit. Mr. Thakor has strenuously urged that neither the Specific Relief Act nor the Transfer of Property Act contemplates a purchaser's rights being affected by anything that is done by the vendor after the conveyance, and he has also pointed out that under section 18(a) of the Specific Relief Act and section 43 of the Transfer of Property Act, the option there mentioned is conferred on the transferee and not on the transferor. This option is one relevant to this case, viz., where a vendor has subsequent to the sale acquired an interest in the property, so that he becomes able to cure a defect of title. That is true; but, in my opinion, that does not suffice to show that the view taken by the lower Court is incorrect in law. It has been laid down that Courts can take cognisance of events which happen during the pendency of the litigation, and a fairly recent instance of that will be found in Nadir Husain v. Sadiq Husain. Inasmuch as the plaintiff has failed to establish that he is entitled to a complete rescission of the contract, it seems to me that the Subordinate Judge was perfectly correct in allowing this subsequent acquisition to be taken into account in deciding what relief he should grant to the plaintiff. The question before him became one simply of damages to be awarded under section 73 of the Indian Contract Act, and in awarding damages it is an ordinary rule that a change of circumstances may be taken into consideration. Thus it is said in Mayne on Damages, 10th Edition, page 132, that where, in consequence of a change of circumstances, the defendant's breach of contract has not produced the full damage which the contract originally provided against, only the loss which has actually been incurred can be recovered. As authority the learned author refers to the case of Wigsell v. School for Indigent Blind. I do not say that is a case exactly on all fours with the present case, but it is one which supports the general proposition. Mr. Thakor has also referred us to the decision of the Privy Council in Graham v. Krishna Chunder Dey. That case would be applicable if it was a question of determining whether the plaintiff could be compelled to be content with plot No. 108/1. But that is not the case before us. The defendant has now managed to get rid of the main threat of Somnath's title as a holder of the equity of redemption. Therefore we are not concerned with the question whether it would be proper to allow the plaintiff to rescind the whole contract, because of the loss that might be involved in depriving him of No. 108/2; otherwise, I do not think that the judgment of their Lordships in that case contains any thing which affects the present case.

The only remaining question is whether the plaintiff should be awarded damages in respect of the flaw in Somnath's title that I have mentioned, and if so, on what basis the damages should be assessed. It was contended by Mr. Thakor that there was really no reasonable prospect of any heirs of these two sisters coming forward, and that the plaintiff had really acquired a marketable title free from reasonable doubt. I do not accept that contention and prefer the view taken by the Subordinate Judge. It may be that nobody at present knows of any such heirs; but in my judicial experience I have had many cases of heirs of mortgagors being dug out and brought forward to attack the title of persons who have been in possession of lands for many years, and it certainly seems to me that the possibility of future litigation by somebody asserting—whether by purchase or inheritance—the rights of one or other of these two sisters is not a matter to be entirely put out of consideration. The plaintiff certainly holds the land with less security than if there was not this prospect. Therefore I do not accept the cross-objection that the lower Court erred in awarding some compensation to the plaintiff on this account. The question of the amount of compensation to be awarded is undoubtedly one of some difficulty. I think the best authority that has been cited to us on a question of this kind is the part of Mayne on Damages, 10th Edition, which deals with actions for breach of the covenant of title before any eviction or disturbance of the plaintiff has taken place. Mr. Mayne's remarks on this subject are from page 203 up to the top of page 205 of his work. The portion of the remarks which are against the marginal note “when the plaintiff is in possession” are the most applicable. He there comes to the conclusion that the fair rule in a case where there is a defect in title, but the land is still in the possession of the plaintiff, will be to give the plaintiff such compensation as will compensate him for the defective quality of his title. This, of course, will vary considerably according to the circumstances of the particular case, as, for instance, in the case he mentions at the bottom of page 204, where the plaintiff has always been in possession, and his title has since been perfected, without any expense on his part, then nominal damages will be sufficient. But the case would be different where the land had been taken for some use which could produce no return until a distant period, which had not arrived; as, for instance, where the purchase was of building plots or unreclaimed land. In the present case, I think, that the available utility of this land for building purposes is considerably affected by this possibility of further litigation; and it is a case where, at any rate, something more than nominal damages, i.e, a substantial sum, should be awarded to the plaintiff. It might be that the exact measure of damages would be the difference between the value of the property as purported to be conveyed, i.e, with a clear title, and its value as the vendor (defendant) actually conveyed it, with the additional title that he acquired from Somnath in 1924, and that this difference should be valued according to prices of land in 1919, when the plaintiff made his purchase, as was, for instance, adopted as a measure of damages in Turner v. Moon. But, it seems to me that to attempt an enquiry of that kind will merely be a waste of time, and that no useful or reliable evidence could possibly be obtained to show what was this actual difference of value, so that the Court must fall back upon a rough estimate as to what should be the proper amount of compensation for this flaw in the plaintiff's title. Taking this view, it seems to me that the amount of Rs. 1,000 awarded does satisfy the requirements of substantial justice in the present case. I can find no sufficient reasons for saying more should be awarded or less should be awarded; and it is a fair sum, which I think will properly compensate the plaintiff for this particular flaw, because, in addition to that, he will have the benefit of the indemnity clause which has to be assigned to him and the personal covenant of indemnity by defendant that has to be made, under the decree of the lower Court.

The result is that I find no sufficient reason to interfere with the decree of the lower Court, except on two minor points.

The first is that, as pointed out by Mr. Thakor, the defendant's purchase-deed from Somnath refers to a charge of Rs. 500 which Somnath was to pay. Mr. Thakor says that there is nothing to show that amount was really paid, and that some provision should be made for that. This, I think, should be done by making the covenant for transfer of the indemnity specified in clause (ii)(a) of paragraph 15(A) of the Subordinate Judge's judgment, cover an indemnity against the plaintiff having to pay that amount, with any interest thereon.

The second point is that the time fixed in the lower Court's decree was two months from the date of that decree. This should now be altered to “two months from the date of our judgment.” Subject to these two changes, I would dismiss both the appeal and the cross-objections with costs.

Murphy, J.:— I agree with the learned Chief Justice that the plaintiff should not be granted the setting aside and the cancellation of the sale deed of 1919 and the reimbursement of his purchase money. It seems probable on the evidence that the vendor was aware of the defect in his title, for the fact of the mortgage, to redeem which Somnath ultimately got a decree, is mentioned in the Record of Rights. Plaintiff was in a similar position, though it has been argued that he was misled by looking only into the mutation register; but it seems to me that while looking at the register with due care he was bound to notice that it referred to only one of the two pot numbers he was buying, and that a careful person would in such a case look at the permanent Record of Rights which disclosed the facts of the mortgage.

I also agree that sections 14, 15, 18 and 25 of the Specific Relief Act to which Mr. Thakor has referred us are not really relevant to the questions before us.

The appeal seems to me to be governed by section 55(1)(a) of the Transfer of Property Act and the relevant provisions of the Indian Contract Act. Section 55(1)(a) though providing that a seller is bound to disclose certain defects, also qualifies the statement by the words “and which the buyer could not with ordinary care discover.” It is only when both these clauses are complied with that the failure to disclose amounts to fraud by sub-section (6) of the same section.

It seems very doubtful to me in the circumstances whether it can be held that the defendant's action in not disclosing the defect of title amounted to fraud. It appears to be more in the nature of a breach of the agreement to give a clear title, and the question really is whether there has been such a breach as would entitle the plaintiff to have the contract set aside.

I agree with the learned Chief Justice that the facts would not fall within section 20 of the Indian Contract Act. Neither do they seem to be governed by section 19, for, as I have said, the plaintiff clearly had the means of discovering the title with ordinary diligence and did not, or professes not to have done so.

In the circumstances, the contract is not voidable at the instance of the plaintiff, and what he is at best entitled to is damages under section 73 of the Indian Contract Act.

The learned Subordinate Judge has accordingly awarded Rs. 1,000 as damages. It has been argued, on the one side that this is inadequate, and on the other that damages should not have been awarded. Since the defendant has bought up Somchand, who successfully established his right to redeem pôt No. 2, the actual danger is that some heir or representative in interest of Bai Pasi or Bai Santoke, the two sisters of Bai Diwali through whom Somchand claimed, may come forward and enforce claims similar to Somchand. On the evidence it is not possible to say whether this is a remote probability or not, but it must, for a long time, be a possibility and may occur at any time.

On the basis of plaintiff's purchase, the proportion of the property affected by the defect would at the time have represented about Rs. 5,000 of his purchase money. It would probably be worth much less now, and taking into consideration the possibility that no claimant may ever appear, and the facts that Somchand has executed an indemnity clause, and the further order to be made on the point, I agree that the decree should be confirmed and the appeal dismissed with costs, as well as the cross-objections.

Appeal dismissed.

B.G.R