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Ponnammal v. Pichai Thevan
Structured Summary of the Opinion
Factual and Procedural Background
Two plaintiffs (a brother and a sister) originally filed a suit seeking recovery of Rs. 2,207-14-6 and a charge on two specified items of property. The plaint stated that the decree might be given in favour of the 1st plaintiff, who was the only person interested in the amount claimed. The trial Court dismissed the plaintiffs' suit.
A second appeal was filed only by the 2nd plaintiff; the 1st plaintiff was made the 1st respondent because his vakalat was not ready. The High Court directed that the 1st plaintiff be transposed as an additional appellant. Respondents objected that the appeal was out of time; the Court held the appeal to be maintainable and that the 2nd plaintiff was competent to prosecute the appeal.
Facts relevant to merits: the two items of land belonged to the 1st defendant (the defendants 2 and 3 being his sons and the 4th his grandson). The 2nd plaintiff entered into an agreement to purchase the two items for Rs. 3,000. In pursuance of the agreement she paid off a prior mortgage encumbrance held by Ramayya Bhagavathar (mortgage deed dated 12 August 1909 for Rs. 600) by paying Rs. 775 on 22 September 1912, and she also paid Rs. 225 to the 1st defendant. The plaintiffs did not pay the balance of the purchase price and the sale fell through.
To discharge the Rs.1,000 debt (the part payments), the plaintiffs borrowed from Suppa Pandithan, who subsequently sued (O.S. No. 195 of 1914) and obtained a decree against the plaintiffs only; the plaintiffs paid Suppa and then sued defendants 1 to 4 seeking recovery from them of that amount with interest, alleging they had benefited by the discharge of the mortgage. The trial and appellate Courts below held that the contract had effectively fallen through (said to arise by February 1913) and that the plaintiffs were not entitled to a charge and that the suit was time-barred.
Legal Issues Presented
- Whether the plaintiffs are entitled to a charge on the properties for the amount they paid in discharge of the prior mortgage and the sums borrowed to effect that discharge.
- When did the cause of action for the suit arise (i.e., when did the contract terminate or fall through for limitation purposes)?
Arguments of the Parties
Appellant's Arguments (as advanced by Mr. Sitarama Rao)
- It does not necessarily follow that the contract fell through in February 1913 merely because the 2nd plaintiff told the 1st defendant then that she was unable to find the balance; time is not of the essence in contracts for immovable property.
- If the 1st defendant did not rescind immediately and kept the contract alive (or the plaintiffs indicated they hoped to raise funds and requested time), the cause of action may have arisen later; therefore the date assumed by lower Courts may be incorrect.
- The plaintiffs who paid off the prior mortgage are entitled to a charge by principles of equity such as subrogation or similar equitable relief. Counsel relied on a number of authorities and also invoked Section 64 of the Indian Contract Act to contend that the plaintiffs, who restored a benefit to the defendants by discharging the mortgage debt, should have a charge as security for repayment.
Respondents' / Lower Courts' Position
- Objected that the second appeal was out of time (procedural objection), though the High Court regarded the transposition and competence issues as disposing of that objection.
- The lower Courts treated the contract as having fallen through by February 1913, concluded the plaintiffs were not entitled to a charge, and held the suit to be barred by limitation if no charge were found.
- The Courts below concluded that the 2nd plaintiff had said she did not want to purchase the land in or about February 1913 and therefore the cause of action arose then.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Syamalarayudu v. Subbarayudu | Payment by a purchaser who actually was the purchaser and paid to protect his interest; such a payer held entitled to a charge. | The Court observed that in that case D was actually the purchaser and paid to protect his interest; it held the case was not helpful here because the plaintiffs in the present case had no interest at the time of payment. |
| Rajah of Vizianagaram v. Rajah Setrucherla Somasekhararaz | Case of a co-sharer who paid land revenue to protect his share — governed by established principles applicable to co-sharers. | Court noted it was a co-sharer case governed by well-known principles and found it not helpful to the plaintiffs' position. |
| Chamaswami v. Padala Anandau | Similar to Syamalarayudu: payment by one who believed himself purchaser/protecting his interest gave rise to entitlement to a charge. | Cited as analogous to Syamalarayudu; Court regarded it as unhelpful because the plaintiffs here had no interest when they paid. |
| Ammani Ammal v. Ramaswami Naidu | Purchaser from a guardian whose purchase later proved invalid was held entitled to a charge for money paid in discharge of a mortgage. | Court acknowledged the case but held it distinguishable because there the payer was a purchaser (or believed herself to be) and here the plaintiffs had only a contract and not an existing proprietary interest when payment was made. |
| Narayanakutti Goundan v. Pechiammal | Where the plaintiff actually took a mortgage, mortgagors with a reversioner’s interest could be subrogated and entitled to a charge. | Court noted it was a case where the plaintiff actually had a mortgage and reversionary interest; the authority did not help the plaintiffs who lacked such an interest at time of payment. |
| Bhagwati Prasad v. Radha Kishen Sewak Pande | Instances where plaintiffs had deeds of conveyance found invalid and were nevertheless held entitled to equitable relief (charge) if they bona fide thought they had an interest. | Cited as part of a group of cases showing that a payer who bona fide believed he had an interest might obtain a charge; Court treated these as distinguishable because here the plaintiffs had no such belief or deed-based claim at payment. |
| Har Shyam Chowdhri v. Shyam Lal Sahu | Illustration that money paid under a contract which would have become the vendee's money if sale completed is different from payment by one with a present interest. | Court relied on this case to show similarity: the plaintiffs' payments were part payments of consideration and would have been the vendee's money if the contract had been completed; therefore a charge could not be inferred. |
| Govinda Padayachi v. Lokanatha Aiyar | Decision cited as resembling a case where payments do not give rise to a charge where the payer had no interest at time of payment. | Court treated it as a similar decision supporting the conclusion that mere part payment under a contract does not create a charge. |
| Mohesh Lal v. Mohani Bawan Das (Privy Council) | Observations that shed light on when equitable relief such as a charge may be appropriate. | Referred to as throwing similar light on the distinction between payments by one with an interest and payments that are mere part consideration; used to support the Court's distinction. |
| Surjiram Marwari v. Barhamdeo Persad (observations of Mukerjee, J.) | Judicial observations relevant to the equitable treatment of payments and the circumstances in which charges may be recognized. | Referenced for similar reasoning; Court cited the observations as further authority illustrating the limits of equitable charges where the payer lacked an existing interest. |
Court's Reasoning and Analysis
Procedural and competence issues: the Court first dealt with procedural objections. It concluded that transposition of the 1st plaintiff as an additional appellant removed the limitation objection in practical terms, and that the 2nd plaintiff was competent to prosecute the appeal despite the 1st plaintiff being the only person ultimately interested in the monetary relief.
On the merits, the Court recited the factual matrix: the 2nd plaintiff entered into a contract to purchase two properties for Rs. 3,000, discharged a prior mortgage of Rs. 600 by paying Rs. 775 (on 22 September 1912), and paid an additional Rs. 225 to the vendor; the balance was not paid and the sale failed. The plaintiffs borrowed Rs. 1,000 from Suppa Pandithan to make the payments; Suppa sued and obtained a decree against the plaintiffs only; the plaintiffs paid Suppa and then sued the original vendors to recover that amount as having benefited by the discharge.
Two main legal questions were identified: entitlement to a charge and the date when the cause of action arose for limitation purposes. The lower Courts assumed the cause of action arose in February 1913 when the 2nd plaintiff allegedly told the vendor she could not pay; counsel for the plaintiffs contended that the contract might have been kept alive beyond that date and hence the cause of action might have arisen later.
The High Court required a specific finding from the lower appellate Court on whether the contract was kept subsisting after February 1913 and, if not, when it terminated. The Additional Subordinate Judge of Madura found that the contract was broken by the 2nd plaintiff in or about February 1913, that she regarded it as not subsisting by 30 September 1914 (her written statement Ex. III), and that it was repudiated by the 1st plaintiff when he filed his written statement in the Suppa Pandithan suit on 15 February 1915; the 1st defendant's written statement Ex. VIII on 27 February 1915 unmistakably expressed intention to rescind and to enforce the penalty. The subordinate judge also found no clear evidence fixing the exact date between February 1913 and February 1915 when the contract finally fell through.
Turning to entitlement to a charge, the Court analyzed statutory provisions and precedent. It observed that Sections 74 and 101 of the Transfer of Property Act did not apply to this case. The Court acknowledged that under Section 64 of the Contract Act the plaintiffs were entitled to restitution (a refund) of the amounts they paid in discharging the mortgage since the defendants received the benefit; however, the Court found it difficult to read into Section 64 any creation of an equitable charge as security for such restitution. The Court expressly stated that it was unable to "spell out an equitable charge from the language of Sect. 64" and that no authority had been cited to support that extension.
The Court then examined the authorities relied upon by the plaintiffs. It distinguished cases where the payer was actually the purchaser or bona fide believed himself to have an interest (Syamalarayudu v. Subbarayudu, Chamaswami v. Padala Anandau, Ammani Ammal v. Ramaswami Naidu, Bhagwati Prasad v. Radha Kishen Sewak Pande) or where a mortgagor had a reversioner's interest (Narayanakutti Goundan v. Pechiammal). In those cases, the payer either had a present interest or bona fide believed in an interest and thus equity recognized a charge. By contrast, in the present case the plaintiffs had no proprietary interest at the time of payment; they had only entered into a contract and made part-payment of the purchase consideration. The Court observed that such part payments "were really what would have become the vendee's money if the contract had been carried out."
The Court concluded that while the plaintiffs could obtain a refund under Section 64, they were not entitled to an equitable charge on the properties because the contract failed on account of the plaintiffs' own default (they did not pay the balance). The Court noted that if the contract had failed due to defendants' default, the outcome might be different, but that was not the factual position here.
Holding and Implications
APPEAL DISMISSED.
Consequences and immediate effects:
- The second appeal was dismissed; the plaintiffs are not entitled to an equitable charge on the properties for the amounts they paid in discharge of the prior mortgage.
- The plaintiffs remain entitled to a refund of the amounts paid (the Court recognized entitlement to restitution under Section 64 of the Contract Act), but not to a charge as security for such repayment in the circumstances of this case.
- The Court recorded that it was the plaintiffs' own default in not completing the purchase which led to the failure of the contract; accordingly, equitable relief in the form of a charge was refused.
- Costs: the second appeal was dismissed with costs to be shared half and half by the vendors and their alienees.
Broader precedent or law: the judgment distinguishes earlier cases where a charge was allowed because the payer had a present or bona fide claimed interest at the time of payment; the Court did not purport to lay down any novel principle beyond applying those distinctions to the facts. The opinion does not state that it establishes any new overriding precedent.
C.K. — Appeal dismissed.
The suit was originally filed by two plaintiffs a brother and a sister and in the plaint it was stated that a decree may be given in favour of the 1st plaintiff who is the only person interested in the amount. The Court below dismissed the plaintiff's suit.
The second appeal has been filed only by the 2nd plaintiff, the 1st plaintiff being made the 1st respondent. It is explained that the vakalat of the 1st plaintiff was not ready and so he had to be made a respondent and not that he does not want a decree. I directed that the 1st plaintiff should be transposed as an additional appellant. It is then objected by the respondents that the appeal is out of time. Apart from the consideration that where a party is transposed no question of limitation arises, it seems to me that the 2nd plaintiff only is competent to carry on the second appeal. Though ultimately the 1st plaintiff is the person interested in the transactions as the 2nd plaintiff conducted most of them as his agent sometimes not disclosing the principal, I think she is competent to sue and, if she succeeds, to hand over the benefit to the 1st plaintiff. The appeal is therefore maintainable.
To deal with the merits I would state the facts. The suit is to recover Rs. 2,207-14-6 claiming to make it a charge on two items of property. These items belonged to the 1st defendant, defendants 2 and 3 being his sons and the 4th being his grandson. The 2nd plaintiff entered into an agreement with the 1st defendant to purchase two items for Rs. 3,000. In pursuance of this agreement she paid off a prior encumbrance on 22nd September, 1912 to one Ramayya Bhagavathar who held a mortgage under a deed dated 12th August 1909 for Rs. 600 over both the said items. The amount paid was Rs. 775. It is also found that she paid another amount of Rs. 225 to the 1st defendant. But the plaintiffs never paid the balance of the consideration amount and the sale fell through. To pay off the above-mentioned Rs. 1,000 the plaintiffs borrowed from one Suppa Pandithan. Suppa Pandithan afterwards filed a suit against the plaintiff and defendants 1 to 4 to recover the amount of Rs. 1,000 with interest and he claimed a charge on the suit properties. That suit was O. S. No. 195 of 1914 on the file of the District Munsif's Court of Melur, It ended in a decree against the present plaintiffs only and the present plaintiffs had to pay off that amount to Suppa Pandithan. They now sue to recover that amount with interest from defendants 1 to 4 who had the benefit of the payment. The first item was sold to the 10th defendant in 1916 and the second item to the 5th defendant on 23rd February, 1917. The Courts below finding that the 2nd plaintiff who was unable to find the money after the return of the 1st plaintiff from Rangoon in about February, 1913 told the 1st defendant that she had no money and consequently she did not want to purchase the land, held that the suit is barred by limitation and that the plaintiffs are not entitled to a charge.
Two points arise in Second Appeal (1) whether the plaintiff3 are entitled to a charge for the said amount? and (2) when did the cause of action for the suit arise? The Courts below assumed that the cause of action arose in February, 1913 when the plaintiffs were unable to find the balance of the amount for the sale. But Mr. Sitarama Rao contends that it does not follow from the mere fact that the 2nd plaintiff told the 1st defendant in February, 1913 that she was unable to purchase the land that the contract fell through at once. Time is not of the essence in a contract to purchase immoveable properties. If the 1st defendant did not rescind the contract at once but continued to keep it alive waiting for the plaintiffs to find the necessary funds the contract would be continuing; similarly it would continue, if the plaintiffs told the 1st defendant that they hoped to raise the necessary funds and requested the 1st defendant to wait for sometime. However, it seems to me, by February, 1915 when the written statement of the 1st plaintiff (the 1st defendant) in Suppa Pandithan's suit was filed the contract certainly fell through. It is not clear to me when between February, 1913 and February; 1915 the contract really terminated. I therefore request the lower appellate Court to submit a finding on the question whether the contract was kept subsisting after February, 1913 and when it terminated.
Further evidence may be adduced. The written statement of the present 1st defendant may be exhibited as it may be of some help.
The finding will be submitted within six weeks and seven days for objections.
In compliance with the order contained in the above judgment, the Additional Subordinate Judge of Madura submitted the following
FINDING.
By an order of the High Court dated 15th October, 1925 made in Second Appeal No. 1504 of 1922, a finding has been called for on the following issue:
“Whether the contract referred to in the suit was kept subsisting after February, 1913 and when it terminated.”;
Under these circumstances I would find that the contract was broken by the 2nd plaintiff in or about February, 1913, that she regarded it as not subsisting when she filed her written statement Ex. III on 30th September; 1914, that it was repudiated by the 1st plaintiff when he filed his written statement in plaintiffs' 1st witness's suit on 15th February, 1915, and tha the 1st defendant unmistakably expressed her intention to rescind it and to enforce the penalty when she filed her written statement Ex. VIII on 27th February, 1915. I would also find that there is no clear evidence that the contract fell through at any particular date between February, 1913 and the date of Ex. VIII.
[This Second Appeal came on for final hearing after the return of the finding submitted by the Additional Subordinate Judge of Madura on 20th, 26th and 27th days of July, 1926.J
JUDGMENT
The Subordinate Judge has now sent up a finding that the contract was not subsisting even on 30th September, 1914 and that probably it must be regarded as having been rescinded even in February, 1913. It follows that, if there is no charge, the suit is barred by limitation. This makes it necessary for me to go into the question of charge. Mr. Sitarama Rao contends that, as the plaintiffs paid off the prior mortgage in favour of Rama Bhagavathar they are entitled to a charge. He relies on Syamalarayudu v. Subbarayudu(1), Rajah of Vizianagaram v. Rajah Setrucherla Somasekhararaz(2) Chamaswami v. Padala Anandau(3), Ammani Ammal v. Ramaswami Naidu(5) and other cases. It is admitted that this is not a case falling under Sect. 74 of the Transfer of Property Act. Nor does it fall within the exception to Sect. 101 of the Transfer of Property Act. The plaintiffs will be entitled to a charge, if at all, on considerations of equity either by the principle of subrogation or on such similar principle. It is contended for the appellant that he is entitled to a charge under Sect. 64 of the Contract Act. It may be conceded that the plaintiffs are entitled under Sect. 64 of the Contract Act to a refund of the amount paid by them in discharge of the mortgage over the property (the defendants getting the benefit of such discharge). The contract was rescinded by the defendants on account of the plaintiff's breach and they must restore the benefits received thereunder. But it seems to me difficult to hold that Sect. 64 has anything to do with the question of a charge. The appellant contends the words “restore such benefit” create a charge. He says:
“The defendants' mortgage was paid off. They must restore the benefit received. Therefore the plaintiffs are entitled to a charge.”
I am not able to agree with this reasoning. It cannot be said that the benefit obtained by the defendants is a mortgage and that they must allow the plaintiffs to have the benefit of that mortgage. The only benefit the defendants received was the payment of a mortgage debt, and they must refund that amount. Anyhow I am not able to spell out an equitable charge from the language of Sect. 64 of the Contract Act and no authority has been cited in favour of such a process.
Coming now to the other cases cited, in the case in Syamalarayudu v. Subbarayudu at the time of payment D was actually the purchaser and he made the payment to protect his interest. It is true that the interest afterwards turned out to be illusory, but it was held he was entitled to a charge. The case in Rajah of Vizianagaram v. Rajah Setrucherla Somasekhararaz was a case of a co-sharer who had to pay land revenue for protecting his share. That is a case governed by well-known principles of law. The case in Ghamaswami v. Padala Anandau is like Syamalarayudu v. Subbarayudu. In Narayanakutti Goundan v. Pechiammal the plaintiff actually took a mortgage. The objection there was that the mortgagors had no interest except a spes successionis, but it was held that the mortgagors (the daughters) had a reversioner's interest and would be entitled by subrogation to a charge if they paid the amount, and such charge could be sub-mortgaged to the plaintiffs. I do not think any of these cases can help the plaintiff. The appellant strongly relies on the case in Ammani Ammal v. Ramaswami Naidu. That is also a case of a purchaser from a guardian. When the purchase turned out invalid it was held that be was entitled to a charge for money paid in discharge of a mortgage. It is true these cases show that not only in cases where the person paying off a charge had some interest at the time but also in cases where he had no such interest he may be entitled to a charge if he bona fide thought he had an interest to protect. In Syamalarayudu v. Subbarayudu, Chamaswami v. Padala Anandau, Ammani Ammal v. Ramaswami Naidu and Bhagwati Prasad v. Radha Kishen Sewak Pande, the plaintiffs had deeds of conveyance in their favour which were afterwards found to be invalid. In the present case, the plaintiffs had no interest at the time of payment. They only entered into a contract to purchase the property and the money they paid to discharge the mortgage was only part of the consideration they had to pay for the sale. It was really what would have become the vendee's money if the contract had been carried out. See Har Shyam Chowdhnri v. Shyam Lal Sahu. In this respect the case resembles the decision in Govinda Padayachi v. Lokanatha Aiyar(6) and the case in Har Shyam Chowdhnri v. Shyam Lal Sahu. The observations of the Privy Council in Mohesh Lal v. Mohani Bawan Das(7) throw similar light (see also the observations of Mukerjee, J., in Surjiram Marwari v. Barhamdeo Persad(8). If in this case the contract was not carried out on account of the default of the defendants it may be that the plaintiffs would be entitled to a charge. It is on account of their own default that the contract was not completed. It is simply a case where plaintiffs paid a part of the consideration but not the rest and though they are entitled to a refund of the part payment made they are not entitled to a charge. The second appeal fails and is dismissed with costs to be shared half and half by the vendors and their alienees.
C.KAppeal dismissed.
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