Kaliyammal v. Kolandavela Goundar

1. The question arising in this appeal is whether Article 83, Lim. Act, which provides the period of limitation for a suit upon a contract to indemnify other than contracts specified in Articles 81 and 82, applies. The appellant's (plaintiff's) husband executed a document marked as Ex. A in the case in favour of defendant 1 who had married his sister. The document states:

“I have on this date conveyed to yon by absolute sale the zamin of Konur mentioned hereunder for Rs. 27,000, the following being the particulars for the payment of the said amount of Rs. 27,000.”

2. Then it states that the zamin was under hypothecation for Rs. 24,000 odd.

3. It proceeds to state:

“By your having undertaken to pay him off the said debt which now amounts to Rs. 27,000 inclusive of interest, the said amount has been paid to me. Therefore, the said property sold has been on this date sold and delivered over to your possession.”

4. The question is whether the covenant or undertaking to pay the debt charged upon the property to the extent of Rs. 27,000 as calculated by the parties at the time is a contract to indemnify within the meaning of Article 83. If it is, the suit is within time. What is contended on behalf of the respondents in support of the judgment of the learned Subordinate Judge is that the matter is governed by Article 116, Lim. Act, which deals with suits for compensation for the breach of a contract in writing registered. The time under that article runs from the date when the contract is broken. The deed does not lay down any particular date when the debt is to be paid off. But the Subordinate Judge held that the breach must be said to have occurred after the lapse of a reasonable time allowed to the defendant for the payment of the debt. Allowing for such time, he found that more than six years had elapsed at the date of suit. If Article 116 applies, there can be no question but that the Subordinate Judge is right. Article 116, however, would not apply if the specific Article 83 applies to the case. The question is purely one of construction of Ex. A and it seems to us what the parties contemplated was, that the transferor should transfer the property to defendant 1 and that it should be the concern solely and entirely of defendant 1 to pay the debt charged upon the property. It does not appear to have been contemplated by the parties that the plaintiff's husband, as between himself and defendant 1, should have anything further to do with payment of the encumbrance.

5. After the transaction, it appears, the parties fell out among themselves; the transferor wanted to regain possession of the property and defendant 1 resisted all such attempts on the ground that the transferor had no longer any title to the property. Defendant 1 is proved to have remained in the possession and enjoyment of the property all the time from the date of Ex. A, that is, 1896, till the date when the property was sold, that is, for a considerable number of years. He did not discharge the debt except to a very small extent, with the result that the debt accumulated and amounted to more than Rs. 60,000 in realization of which the mortgaged property was ultimately sold. The mortgagee then had recourse to the plaintiff for the balance that was not realized by the sale of the property, namely, for about Rs. 35,000 and the plaintiff had to pay the amount.

6. The plaintiff's husband never thought that as between himself and defendant 1, he would be called upon to discharge the encumbrance. As we have said, however, the question is one of construction. After the best consideration we have been able to give to Ex. A, our view is that the covenant therein is one of indemnity. A number of cases have been cited before us; but apart from any general principles of construction, it is the wording of a particular document that must determine the decision in each case. We have, in construing this document, to try to place ourselves in the position of the parties and ascertain in the best way we can what was the intention of the parties when they entered into the transaction. As regards the decided cases the most important is a decision of the Privy Council in Izzatunnisa Begam v. Pertab Singh(1). That was a case in which the equity of redemption in a certain property was sold and their Lordships held that the contract on the part of the vendee to pay off the incumbrances was nothing more than a contract by way of indemnity. The covenant in this case is also of a similar nature.

7. Mr. Rangachariar has, however, argued that what was sold here was not merely the equity of redemption, but the property itself and the observation of the Judicial Committee does not, therefore, apply. No doubt the property conveyed by Ex. A is valued at Rs. 27,000, which is also stated to be the consideration for the sale. But it is perfectly clear upon the facts, and this is not disputed, that the real value of the property was more than Rs. 27,000, and that, as a matter of fact, the transfer was made more by way of gift than as an ordinary transaction of sale.

8. It would be unreasonable to hold that, in a transaction of this nature, the transferor expected or contemplated any further liability with respect to the encumbrance. A ruling, Kumar Nath Bhuttaaharjee v. Nobo Kumar Buttaaharjee(2), has been brought to our notice which also bears out that, in cases of this nature, a contract to pay a debt really implies a contract to indemnify. No doubt there are cases in which the gist of the transaction is that the vendor leaves part of the sale-proceeds in the hands of the vendee with a direction that he shall pay the debts for which the vendor was liable. In such cases of absolute covenant it is open to the vendor to sue the vendee as soon as he fails to pay the debts as they become due and the words of such a covenant may be inconsistent with a covenant to indemnify, properly so called. The case of Bahgunatha Ghariar v. Sadagopa-Chariar(3) appears to have been one of that nature. We may also refer to an Irish case, Ardair v. Garden(4), where the whole question is fully discussed with reference to the English law of conveyancing, but the principle of interpretation laid down there seams to be applicable to the document which we have got to construe in this case. It was argued by Mr. Bangachariar that this is not a case of sale properly speaking but a gift. Treating the matter in that light—that such is really the substantial nature of the transaction—we do not think that it improves his client's position. We should think that there would then be as strong a ground for presuming that the covenant was by way of indemnity as in a case of sale. In the Irish case we have referred to it is observed at p. 482;

“Suppose too, instead of a sale, a gift. If a man, by voluntary deed, conveyed to another a property incumbered with a mortgage-debt, presented to him the estate just as it stood, it could hardly be supposed that the grantor should remain liable to pay the incumbrances in exoneration of the land.”

9. We have no doubt that what was meant here was that defendant 2 should hold the plaintiff harmless against all loss on account of the debts. Next it is argued that, as a matter of fact, the transaction evidenced by Ex. A was benami and, therefore, the covenant in that document was also benami in nature. The word “benami” is hardly applicable to contracts. It applies to tenure of property—where one person holds property in his name, while, as a matter of fact, the title belongs to somebody else. As regards contracts, the question would be whether a man entered into a contract on his own behalf or on behalf of somebody else as his agent. In this case, it may be that the benefit of the conveyance was intended for defendant 1's wife, but it does not follow therefrom that the conveyance was benami in the name of defendant 1. What was intended evidently was—at any rate, that supposition is not inconsistent with the evidence in the case or the terms of Ex. A—that the property being transferred to defendant 1, his wife, the transferor's sister would naturally be expected to derive benefit from it. Then no express issue was raised as to the question of benami. Issue 1 in the case was whether Ex. A was merely a nominal or a real transaction. We have been referred to some statements in the evidence of defendant 1 who was examined as a witness for the plaintiff and of the D.W 4, elicited in cross-examination that the transfer was intended to be benami. But those are mere casual statements; if, as a matter of fact, it was intended to put forward such a case, one would expect that a clear issue should have been raised to that effect.

10. The learned Subordinate Judge, on this question, has entirely proceeded upon a statement in a passage in the reply statement filed on behalf of the plaintiff, referred to in p. 20 of the judgment. But as we read it, it only means that the conveyance was meant to benefit the wife of defendant 1. It does not say that it was a benami transaction. Even if it were proved that the transaction was benami ??? would not have necessarily followed that the covenant was not binding upon defendant 1 in whose name the deed was executed. It might very well be that while the wife of defendant 1 was intended to be the real transferee, her husband, having regard to the benefit he would have derived along with his wife by the transfer, might well have entered into the covenant to indemnify the transferor against the encumbrance. The entire evidence, however, shows that defendant 1 was actually in possession and enjoyment of the property. All the public acts were done in his name while there is no evidence to prove either possession or enjoyment by his wife. Nor is there any proof whatever, that she was at all conscious that she was the owner of the property and not her husband. The judgment of the Court of the Temporary Subordinate-Judge is reversed and the case must be remanded to the Court of the Subordinate Judge for disposal on the other issues involved in the suit. We must observe that all the evidence was recorded in this case and yet the Subordinate Judge has confined himself practically to the trial of only one issue. We do not think that this was a proper way of dealing with the case. He ought to have considered the other issues and recorded his findings thereon. Costs will abide the result.

S.N/R.K

11. Appeal allowed.