Translate
Text Highlighter

Bookmark

PDF

Share

Report a problem
AMICUS AI
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Seshagiri Aiyar
  • Napier, JJ.
Acts
Are you a practicing lawyer?
Enhance your digital presence and reach by creating a Casemine profile.
Upload pleading to use the new AI search
Click here to upload
Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Seshagiri Aiyar
  • Napier, JJ.
Acts
See more information ...
Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

The properties originally belonged to Murugappa Pillai, who mortgaged them to Krishnachariar in 1895. In September 1897 Murugappa sold some mortgaged properties to Kunjithapatham with a direction that Kunjithapatham pay the mortgagee Rs. 1,200; only part of that was paid. In October other mortgaged properties were sold to Duraisami with a direction to pay Rs. 460 (and odd) to the mortgagee; that was not paid. The remaining mortgaged properties were sold to Rajagopal and others, with a direction that they pay about Rs. 2,000 to the mortgagee. That sale deed is not before the Court on appeal, and it is admitted there is no assignment or specific covenant in favour of Rajagopal on which he can rely in this suit.

The mortgagee sued Murugappa and the purchasers among others. Kunjithapatham and Duraisami entered into a compromise with the plaintiff concerning their liabilities; Rajagopal was not a party to that compromise. The decree in the mortgage suit was for about Rs. 3,000 and directed payments apportioned to Duraisami (Rs. 500) and Kunjithapatham (Rs. 1,000) and provided for sale of properties in default; the balance was to be raised by sale of other properties in Rajagopal's possession. Rajagopal (the largest purchaser) thus had to pay a substantial sum.

Rajagopal's heirs (referred to in the opinion as "the plaintiff" in the present suit) sued the purchasers for contribution. The District Munsif found, and this was not disputed on appeal, that both Duraisami and Kunjithapatham paid under the decree the portion of the debt which would have been chargeable on the properties purchased by them if there had been no directions by the mortgagor. The District Munsif dismissed the suit for contribution. On appeal the District Judge, relying on Sections 69 and 70 of the Indian Contract Act, decreed the claim for contribution. Duraisami and Kunjithapatham appealed to the present Court.

Legal Issues Presented

  1. Whether purchasers who bought portions of mortgaged property with directions from the vendor to pay specified portions of the mortgage debt are liable for contribution to co-purchasers based on the quantum they contracted to pay (i.e., the specific amounts directed), or whether their liability must be determined under Section 82 of the Transfer of Property Act by reference to the value of the properties in their possession in the absence of a contract to the contrary.
  2. Whether Sections 69 and 70 of the Indian Contract Act (concerning payment by a person "bound by law to pay" and consequent rights of contribution) apply so as to displace or determine the contribution liability otherwise governed by Section 82 of the Transfer of Property Act.

Arguments of the Parties

Plaintiff's Arguments

  • The plaintiffs (Rajagopal's heirs) argued that because Duraisami and Kunjithapatham undertook to discharge specific portions of the mortgage debt at the direction of the mortgagor, their liability for contribution should be calculated on the quantum of the liability undertaken by them (the directed sums), not on the value of the properties they purchased.

Arguments Advanced by Counsel for the Purchasers (Appellants)

  • Mr. Venkatarama Sastriar contended that a "contract to the contrary" within Section 82 of the Transfer of Property Act could include the contract between the mortgagor (vendor) and a purchaser — i.e., that a direction by the vendor to a purchaser to pay a specific sum operates as a contract that displaces the statutory rateable liability among purchasers.
  • He further argued that when the owner directed a purchaser to pay a certain amount to the mortgagee, the vendor thereby impliedly transferred his lien or right to enforce payment to that purchaser, so that the purchaser effectively assumed or acquired the vendor's lien-type right as against the mortgage debt.
  • Mr. Ramachandra Aiyar argued (relying on Satya Kripal Bandopadhya v. Gopi Kishore Mandul) that the decree in the mortgage suit worked a merger of prior purchase rights, so that parties claiming under that decree were not bound by previous obligations and therefore could not be compelled to contribute on the basis alleged by the plaintiff.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Ramabhadrachar v. Srinivasa Aiyangar (1901) I.L.R. 24 M. 85 Support for the plain meaning that "contract to the contrary" in Section 82 must be a contract between the parties liable to contribute (i.e., among co-contributors). Cited to reinforce the interpretation that a contract between the vendor and a purchaser does not constitute a "contract to the contrary" affecting the statutory contribution among purchasers unless the contract is between those who are liable to contribute.
Subramania Iyer v. Sivasubramania Iyer (1916) I.L.R. 39 M. 997 : 31 M.L.J. 530 Held that the vendor's lien under Section 55(4)(b) for unpaid mortgage money is not lost by the vendor's direction to pay the mortgagee or a third party; the lien remains with the vendor unless properly conveyed. Relied upon to show that a purchaser does not acquire the vendor's lien merely by purchasing subject to a direction to pay; transfer of such a right requires the statutory mode of conveyance and cannot be presumed by equitable considerations.
Bute (Marquis of) v. Cunynghame (1826) 2 Russ. 275 Passage suggesting settlor's directions might bind persons claiming under a voluntary settlement, but the judgment explicitly refrained from laying down a general principle. Examined and distinguished; the Court held this English authority did not support the broad proposition that a purchaser gains an implied transfer of an undertaking given to the vendor by a prior purchaser.
Leonino v. Leonino (1879) 10 Ch. D. 460 Commentary (by Jessel, M.R.) that Bute did not establish a general principle. Used to emphasize the limited reach of Bute and to show that those English decisions do not warrant the respondent's reliance on an implied transfer principle.
In re Dunlop; Dunlop v. Dunlop (1882) 21 Ch. D. 583 Statement that special agreement in the instrument creating the mortgage or a declaration may direct the order in which securities are applied inter se. Cited to show that only a special agreement binding the mortgagee (i.e., embodied in the mortgage instrument) can alter the order of application — not a mere subsequent purchase with directions by the vendor.
Mothuranath Chuttopadhya v. Kristokumar Ghose (1878) I.L.R. 4 C. 369 Decision adverse to the position that vendor-to-purchaser directions operate to displace the statutory contribution regime. Relied on as an Indian authority that does not support the respondent's contention.
Muhammad Abbas v. Muhammad Hamid (1911) 9 A.L.J. 499 Held that a contract between vendor and one purchaser would not amount to a "contract to the contrary" under Section 82, though the Court observed equitable grounds or assignment of the benefit might be a defence. Cited; the present Court agreed that a valid assignment in the proper form could be a defence, but rejected reliance on equitable grounds to override statutory provisions.
Sree Rajah Simhadri Jagapatiraju v. Sree Rajah Dakshina Kavata Dugaraju (1915) 29 M.L.J. 639 Decision holding that Sections 69 and 70 of the Indian Contract Act do not affect the claim for contribution under Section 82 of the Transfer of Property Act. The Court agreed with this conclusion and relied on it to reject the applicability of Sections 69 and 70 to displace Section 82.
Muthurakku Maniagaran v. Rakkappa (1914) 26 M.L.J. 66 One judgment rested contribution claims on Sections 69 and 70 of the Contract Act (Sadasiva Aiyar, J.), though other judges based conclusions on different grounds. Distinguished: the present Court observed that in Muthurakku Maniagaran there was no argument on Section 82 and, significantly, that there the party had personal liability under a decree — facts different from the present case.
Mahomed Syedol Ariffin Bin v. Yeoh Ooi Gark (1916) L.R. 43 I.A. 256 Privy Council authority indicating that illustrations to a statute are a guide to legislative intent (in the context of Section 32, Clause 5 of the Evidence Act). Referenced to support the point that illustrations may show the legislative intent behind a provision and to limit the reach of Contract Act sections where illustrations indicate a different class of liability.
Boja Sellappa Reddy v. Vridhachala Reddy (1906) I.L.R. 30 M. 35 : 16 M.L.J. 569 Authority refusing relief to a person who paid revenue in whose name a pattah stands when the person in enjoyment ought to have paid; used as analogous reasoning about what payments give rise to statutory rights. Cited to support the view that not every payment by one person for another creates a right of contribution under the Contract Act illustrations; the present plaintiff had not "paid what the other was bound by law to pay" in the sense required by Sections 69 and 70.
Satya Kripal Bandopadhya v. Gopi Kishore Mandul (1902) 6 C.W.N. 583 Held that an auction purchaser was disentitled to fall back on rights which existed before the decree (doctrine of merger in that context). Cited by counsel (Mr. Ramachandra Aiyar) to argue merger by decree; the Court rejected the analogy, holding the plaintiffs' position was not analogous to an auction purchaser's position in that case.

Court's Reasoning and Analysis

The Court set out its solution in terms of the Transfer of Property Act rather than by relying on English equitable authorities. It reasoned as follows:

  1. Section 82 of the Transfer of Property Act imposes the liability of rateable contribution where properties originally mortgaged are sold in lots to different persons. The statute defines the liability "in the absence of a contract to the contrary," and the Court interpreted "this contract to the contrary" as meaning a contract between the parties who are liable to contribute (i.e., between co-contributors). The Court relied on the plain meaning of the section and cited Ramabhadrachar v. Srinivasa Aiyangar in support.
  2. The Court examined the vendor's lien under Section 55, Clause 4(b). Relying on the Full Bench decision in Subramania Iyer v. Sivasubramania Iyer, it held that a vendor's lien for unpaid mortgage money is not extinguished by a direction from the vendor to the purchaser to pay the mortgagee. That lien remains with the vendor and can be transferred only by a proper conveyance in the mode prescribed by the Transfer of Property Act. Therefore, a subsequent purchaser does not acquire the vendor's lien simply by purchasing property with a direction to pay the mortgagee.
  3. The Court rejected the argument (derived from certain English decisions) that the contractual direction by the vendor to a purchaser operates to extinguish the mortgage debt to that extent or to effect an implied transfer of the vendor's lien to the purchaser. It examined Bute v. Cunynghame and related English authorities, noting that Bute was a case of voluntary settlement and that the judgments did not lay down a general principle supporting the respondent's contention. Other English authorities were also considered but found not to support the notion that a purchaser, by mere purchase, receives an implied transfer of an undertaking given to the vendor by a prior purchaser.
  4. Turning to Indian authorities, the Court noted that Muhammad Abbas v. Muhammad Hamid had held that a contract between vendor and purchaser would not amount to a "contract to the contrary" under Section 82, though the Court there allowed that equitable grounds or a valid assignment of benefit might furnish a defence. The present Court agreed that a valid express assignment made in the form required by law could be a defence, but it refused to permit equitable considerations to displace the statutory rules laid down by the Transfer of Property Act.
  5. Regarding the contention that Sections 69 and 70 of the Indian Contract Act should govern (as the District Judge had held), the Court analyzed the nature of the liability contemplated by those Contract Act sections. It concluded that those sections are aimed at cases where one person pays an amount which another is "bound by law to pay" — a class of contractual/ legal liabilities that the illustrations to those sections make clear. The Court considered prior decisions of this Court (including Sree Rajah Simhadri Jagapatiraju) and the Privy Council's comments on statutory illustrations, and determined that Sections 69 and 70 should not be used to displace the specific statutory scheme of Section 82 of the Transfer of Property Act. The Court further observed that the plaintiff in the present suit could not be said to have paid anything which the other purchasers were "bound by law to pay" in the sense required by the Contract Act provisions.
  6. The Court also distinguished the decision in Muthurakku Maniagaran v. Rakkappa because in that case there was personal liability under a decree — a factual difference that made the Contract Act reasoning more applicable there than in the present case.
  7. Finally, on the unchallenged finding of the District Munsif that Duraisami and Kunjithapatham paid, under the decree, amounts proportionate to the value of the properties in their possession, the Court concluded that the claims against them for contribution (as advanced by the plaintiffs) could not be sustained.

Holding and Implications

Holding: The appeals by Duraisami and Kunjithapatham were allowed. The suits for contribution as against them were dismissed with costs in all the Courts.

Implications:

  • The Court applied the statutory scheme of the Transfer of Property Act (notably Section 82 and the lien provisions such as Section 55(4)(b)) to govern rateable contribution among purchasers of portions of mortgaged property. The decision emphasizes that a direction by a vendor to a purchaser to pay a specified sum does not, by itself, constitute a "contract to the contrary" for the purposes of Section 82, nor does it transfer the vendor's lien unless effected by conveyance in the statutory mode.
  • The Court rejected the proposition that Sections 69 and 70 of the Indian Contract Act should displace the contribution regime under Section 82; it concluded those Contract Act provisions were inapplicable to alter the statutory rules in this factual context.
  • Where a valid assignment of benefit has been made in the form required by law, that could constitute a defence, but equitable considerations alone cannot be used to override the statutory rules laid down by the Transfer of Property Act.
  • The decision has the direct effect of dismissing the contribution claims against Duraisami and Kunjithapatham on the facts found; the opinion does not purport to lay down a new broad equitable principle beyond enforcing the statutory scheme, and it stresses adherence to the statutory modes of transfer and assignment.

This summary is limited to and based exclusively on the information contained in the provided opinion.

Show full summary ...

    Kunchithapatham Pillai v. Palamalai Pillai

    1. The owner of the properties was one Murugappa Pillai. He mortgaged them to one Krishnachariar in 1895. In September 1897, he sold some of the properties com. prised in the mortgage to one Kunjithapatham with a direction to pay Krishnachariar, the mortgagee, Rs. 1,200. A portion of this amount was paid, but a good portion remained unpaid. In October, some other properties also included in the mortgage, were sold to one Duraisami, with a direction to pay Rs. 460 and odd to the mortgagee, the deed also containing a covenant to clear off prior mortgages. This was not paid, The remaining properties comprised in the mortgage were sold to Rajagopal and others and they were asked to pay the mortgagee Rs. 2,000 and odd. This sale deed is not before us on appeal, but it is admitted that there is no assignment or specific covenant in favour of the purchaser on which he" can rely for the purpose of this suit. The mortgagee sued Murugappa Pillai and the three aliences among others on the mortgage. Kunjithapathim and Duraisami entered into a compromise with the plaintiff regarding the amounts payable by them. Rajagopal (we shall call the third party by this name, although there are others who have equal interest with him) was no party to this compromise. The decree in the suit was for Rs. 3,000 and odd, and it directed that out of the said amount Duraisami should pay Rs. 500, Kunjithapatham Rs. 1,000, that in default their properties should be sold for the amounts specified, and that for the balance the other properties which were in the possession of Rajagopal and others should be sold. Rajagopal had to pay a considerable sum, as he was the largest purchaser. This suit is by his heirs for contribution. It was found by the District Munsif and not disputed before us, that both Duraisami and Kunjithapatham paid under the decree the portion of the debt which would have been chargeable on the properties purchased by them, if there were no directions to them to pay particular sums. The plaintiff's base their suit on the allegation that as both Duraisami and Kunjithapatham undertook to discharge a specific portion of the mortgage debt, and as their failure to pay the amount within the time mentioned by the mortgagor increased the amount due to the mortgagee, their liability should not be calculated upon the value of the properties purchased by them, but upon the quantum of the liability undertaken by them at the direction of the mortgagor. The District Munsif dismissed the suit. On appeal, the District Judge relying on Sections 69 and 70 of the Indian Contract Act decreed the claim. Duraisami and Kunjithapatham preferred separate appeals to this Court.

    2. The question has been agreed with great ability before us, and the arguments covered a very wide ground of the law of mortgages. We think the solution has to be found in the Transfer of Property Act and not in the English cases quoted at the bar.

    3. The liability to rateable contribution of properties mortgaged in the first instance and sold subsequently in lots to different persons is imposed by the Transfer of Property Act. The legislation may have been based on equitable grounds; but its limits are prescribed by the statute. In the second clause of Section 82, the liability is denned in a particular way, "in the absence of a contract to the contrary." Now, "this contract to the contrary" can only be between the parties who are liable to contribute. That is the plain meaning of the section. See also the observations in Ramabhadrachar v. Srinivasa Aiyangar (1901) I.L.R. 24 M. 85. Mr. Venkatarama Sastriar in his very able argument referred us to certain English decisions to the effect that a contract as between the mortgagor and the purchaser of a portion of the property is within the meaning of the expression "contract to the contrary." We are unable to accept this contention. We shall have a word to say about the English authorities later on; but before doing so, we shall deal with the sections of the Act.

    4. Under Section 55, Clause 4(b), the vendor has a lien for the unpaid mortgage money over the properties sold. This lien, it was held in a recent Full Bench ruling of this Court Subramania Iyer v. Sivasubramania Iyer (1916) I.L.R. 39 M. 997 : 31 M.L.J. 530 is not lost by the direction given by the vendor to pay the mortgagee or any other third party. This right can be transferred, if the vendor executes a proper conveyance in this behalf. But until such a transfer is made, the right inheres in the vendor and in him alone. A subsequent purchaser from him cannot acquire this right by the mere fact of his purchase. The Transfer of Property Act has prescribed the mode by which such transfers can be effected and in our opinion, there is no room for the applicability of equitable considerations when the legislature has enacted specific rules.

    5. Mr. Venkatarama Sastriar's contention, if accepted, must lead us to hold that when the vendor sells a portion of the property with direction to pay a portion of the mortgage debt, the mortgage debt to that extent is extinguished. This would violate the principle that it is open to the mortgagee to sell any portion of the mortgaged property to recover the amount due to him. The learned Vakil argued that when the owner directed the purchaser to pay a certain amount, he impliedly transferred his right of lien to the second purchaser. There are some decisions which lend support to this contention. In Bute (Marquis of) v. Cunynghame (1826) 2 Russ. 275 at 299 : 38 E.R. 339, 348, Lord Eldon said : "But may not a man make a mortgage of two estates in such a way, that though the incumbrancer may go against both or either, yet if the owner of the equity of redemption shall have created in the meantime, two different titles to those estates, so that they shall go to different persons, the estate, which was the primary security, shall remain the primary security, as between the persons claiming under that mortgagor" This is the passage very strongly relied on; but towards the close of the judgment, the Lord Chancellor said : "Taking the whole of this transaction together, and without venturing to lay down any general principle, it is my opinion, that, in this case, there is no right to that contribution towards satisfaction of the mortgage, which is prayed by the bill." This was a case of voluntary settlement, and the question was whether persons claiming under the settlement were not bound by the directions of the settlor. No question of legal rights to contribution arose in the case. That this case enunciated no general principle is pointed out by Jessel, M.R. in Leonino v. Leonino (1879) 10 Ch. D. 460. Chitty, J. in In re Dunbp; Dunlop v. Dunlop (1882) 21 Ch. D. 583 at 588 stated : "The proposition has been stated (and I think not incorrectly) that the right of contribution arises where there are two properties available in equity for the debt, of course in equal degree. It is quite clear that either by special agreement to be found in the instrument creating the mortgage itself, or by declaration on the part of the testator, he can, where two or more properties are comprised in the same security, direct the order in which the securities are to be applied inter se so as to make one the first and another the second, and so forth, available for the purposes of the charge." There can be no doubt that the special agreement referred to by the learned Judge is one which binds the mortgagee and is embodied in the deed of mortgage. The reference to the declaration of the testator, indicates that a volunteer must accept the gift with obligations annexed to it. We do not think these cases support the proposition that by the mere fact of the subsequent purchase, the purchaser gets an implied transfer of the undertaking given to the vendor by the 1st purchaser. On the other hand, in Fisher on Mortgages, paragraph 1347, the law is stated as we find it in the Transfer of Property Act.

    6. Turning to the Indian Cases relied on in the argument, Mothuranath Chuttopadhya v. Kristokumar Ghose (1878) I.L.R. 4 C. 369 is against the position contended for by the respondent. That case was before the Transfer of Property Act. Dr. Rash Behary Ghose doubts the correctness of the decision, presumably on the dictum of Lord Eldon in Bute (Marquis of) v. Cunynghame (1826) 2 Russel. 275 at 299. The decision in Muhammad Abbas v. Muhammad Hamid (1911) 9 A.L.J. 499 is under the Transfer of Property Act. The learned Judges, correctly (if we may say so, with respect) lay down that the contract between the vendor and one of the purchasers would not amount to a contract to the contrary under Section 82; but they proceed to say,

    "If the defendants are entitled to resist the claim for rateable contribution it must be on equitable grounds or because the benefit of the agreement has been assigned to them."
    We agree that if the benefit of the agreement was expressly assigned in a form which the law requires, a valid defence may be raised. But we are unable to accede to the introduction of equitable grounds on a question settled by the legislature. If there is no contract to the contrary, the provisions of the law must be given effect to.

    7. So far we have been dealing with a question on which there is no authority in the decisions of this Court, Mr. Venkatarama Sastriar's second contention involves an examination of two decisions of this Court. The contention is that notwithstanding Section 82 of the Transfer of Property Act, the liability has to be ascertained with reference to Sections 69 and 70 of the Indian Contract Act. Very recently, the Chief Justice and Srinivasa Aiyangar, J., held that these sections of the contract act do not affect the claim for contribution under S, 82 of the Transfer of Property Act, Sree Rajah Simhadri Jagapatiraju v. Sree Rajah Dakshina Kavata Dugaraju (1915) 29 M.L.J. 639. We agree with that conclusion. In Muthurakku Maniagaran v. Rakkappa (1914) 26 M.L.J. 66 Mr. Justice Sadasiva Aiyar rested the claim for contribution on Sections 69 and 70 of the Contract Act. Mr. Justice Miller who took part in the decision based his conclusions on other grounds. It may be pointed out that no argument seems to have been addressed to Mr. Justice Sadasiva Aiyar on Section 82 of the Transfer of Property Act. Further, in the case before the learned Judge, apart from the Transfer of Property Act, there was some ground for saying that one man paid what the other was bound to pay. To our mind, the obvious inapplicability of the Contract Act sections arises from the consideration that the plaintiff in this case cannot be said to have paid anything which the other was "bound by law to pay". What is intended is a contractual obligation and not a legal one. It is argued that a person is bound by law to pay his contracted debts; and in one sense this is true; but we are inclined to think that that it is not what was intended by the section. The illustration seems to indicate the class of liability covered by the section; and it has been very recently held by the Privy Council in Mahomed Syedol Ariffin Bin v. Yeoh Ooi Gark (1916) L.R. 43 I.A. 256 : 20 C.W.N. 786 in an appeal from the decision of the Supreme Court of the Straits. Settlements in construing Section 32, Clause 5 of the Evidence 4ct that the illustrations to a section are a guide to the intent of the legislature. It is on this ground that the decisions of this Court which refused relief to a man in whose name pattah btands and who has been compelled to pay the revenue which the person in enjoyment ought to have paid, rest. See Boja Sellappa Reddy v. Vridhachala Reddy (1906) I.L.R. 30 M. 35 : 16 M.L.J. 569. One other distinction between the present case and that decided by Sadasiva Aiyar, J., may be pointed out. In the latter there was a personal liability under the decree. We therefore see no reason for resorting to Sections 69 and 70 of the Contract Act. Even if the application of Section 69 is not limited as we suggest, it could not, in our view, assist the respondent, because all the assignors of the mortgaged property are equally bound to pay the mortgage debt and we cannot agree with the contention that any equities between co-obligors would make any one of them the less "bound by law to pay" the mortgagee.

    8. Mr. Ramachandra Aiyar rested his case, also on the decision in Satya Kripal Bandopadhya v. Gopi Kishore Mandul (1902) 6 C.W.N. 583, and contended that whatever may have been the rights under the purchase the decree worked a merger of those rights : and that parties claiming rights under that decree are not bound by previous obligations. In the case relied on, the auction purchaser was held disentitled to fall back on rights which existed before the decree. We do not think the position of the plaintiffs is analogous to that of an auction purchaser.

    9. In the view we take, and on the finding of the District Munsif not impeached in this Court that the appellants paid the amount proportionate to the value of the properties in their possession, the appeals must be allowed and the suits as against them must be dismissed with costs in all the Courts.

    Use AI to get other relevant cases.
    Try AI Pro free for 7 days Upgrade to AI Pro

    Comments

    Kunchithapatham Pillai v. Palamalai Pillai
    (Aug 29, 1916)