- Bookmark
- Share
- CaseIQ
Gur Dayal Singh And Ors. v. Karm Singh And Ors.
Factual and Procedural Background
The plaintiffs sued to recover Rs. 476 principal and Rs. 83 interest (total Rs. 559) from all the defendants and, in default, sought sale of certain property. On 28 August 1903 the plaintiffs sold property to Gur Dayal for Rs. 250. The sale-deed stated the vendor had received Rs. 90 in cash and that Rs. 160 was left with the purchaser for payment to certain creditors of the vendor. The debt to be paid to those creditors was a simple contract debt (not a mortgage). The purchaser (Gur Dayal) did not pay those creditors, asserting a dispute about possession of part of the property. Gur Dayal's title was imperfect.
On 1 April 1909 Gur Dayal sold the property (with other property) to Kundan. On 27 April 1909 Kundan re-sold the property to Jiwan Singh and Kapur Singh (defendants Nos. 5 and 6). Neither Gur Dayal nor Kundan retained an interest in the property at the time of the suit.
The plaintiffs allege that because Gur Dayal failed to pay the Rs. 160, the creditors sued the plaintiffs (the original vendors), obtained a decree, and the plaintiffs had to pay Rs. 390; their current claim aggregated that amount with interest and costs. The plaintiffs sought to enforce a vendor's charge under Section 55(4) of the Transfer of Property Act against the property as held by subsequent transferees (defendants Nos. 5 and 6).
The trial court granted a decree for Rs. 160 with 6% interest. The lower Appellate Court allowed a larger recovery — the full amount the plaintiffs claimed to have paid to satisfy the creditors' decree. The present court heard the appeal and reviewed the legal questions arising from these facts.
Legal Issues Presented
- Whether a vendor's charge under Section 55, Clause (4), of the Transfer of Property Act can be enforced against subsequent transferees for value who did not have notice.
- Whether the sum of Rs. 160, left with the purchaser for payment to the vendor's creditors, constitutes "unpaid purchase-money" so as to create a vendor's charge under Section 55(4).
- Whether the subsequent purchasers (Kundan; then defendants Nos. 5 and 6) had actual or constructive notice of any vendor's charge arising from the 1903 sale-deed.
Arguments of the Parties
Plaintiffs' Arguments
- The plaintiffs asserted a vendor's charge under Section 55(4) of the Transfer of Property Act for the amount left unpaid (Rs. 160) and sought to enforce that charge against the property even in the hands of subsequent transferees (defendants Nos. 5 and 6).
- The plaintiffs contended that the sale-deed's recital that Rs. 160 was left with the purchaser for payment to the vendor's creditors gave notice (actual or constructive) to subsequent purchasers; therefore, Kundan and the defendants Nos. 5 and 6 should be treated as having notice.
- The plaintiffs argued that, because they were compelled to pay the creditors (and obtained a decree), they were entitled to recover the amount they paid (and interest/costs) from the property under the vendor's charge.
Respondents' / Defendants' Arguments
- The respondents relied on authority (Webb v. Macpherson) to argue that any charge under Section 55(4) could not be enforced against a subsequent transferee for value without notice; the charge, if enforceable beyond the immediate buyer, required notice to the subsequent purchaser.
- They disputed that the Rs. 160 constituted unpaid purchase-money: the agreement was to pay a creditor of the vendor (a separate contract), not to leave unpaid purchase-money due to the vendor.
- They denied having actual or constructive notice of any charge; the court should not treat a recital in the earlier sale-deed as sufficient to impute notice to subsequent purchasers in the particular circumstances of the case.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Webb v. Macpherson, 30 I.A. 238; 31 C. 57; 5 Bom. L.R. 838; 8 C.W.N. 41; 13 M.L.J. 389 (P.C.) | Authority that a seller may be able to enforce the vendor's charge against a subsequent purchaser who had notice of unpaid purchase-money; discussion of whether words "in the hands of the buyer" limit the charge. | The court treated Webb as supporting enforcement of the charge only against subsequent purchasers who had notice, but rejected extending Webb to hold that the charge is enforceable against subsequent transferees for value without notice; the court viewed such an extension as inconsistent with the plain words "in the hands of the buyer." |
| Abdulla Beary v. Mammali Beary, 5 Ind. Cas. 87; 33 M. 446; 7 M.L.T. 376 | Authority for the proposition that where the undischarged consideration is an agreement to pay a creditor (not unpaid purchase-money to the vendor), the vendor has no charge on the property. | The court relied on this decision as analogous and supportive of the conclusion that an agreement to pay the vendor's creditor does not create unpaid purchase-money giving rise to a vendor's charge. |
| Megh Raj Vaish v. Abdullah Khan, 25 Ind. Cas. 208; 12 A.L.J. 1034 | Application of Webb v. Macpherson where a finding of fact existed that a subsequent transferee had notice; that finding of notice was binding in second appeal. | The court cited this case for the proposition that Webb's principle can apply where there is a binding factual finding of notice by the subsequent transferee; it distinguished that situation from the present case, where notice was not established. |
| Tehilram Girdharidas v. Kashibai, 1 Ind. Cas. 614; 33 B. 53; 10 Bom. L.R. 403 | Held that vendor could not enforce a charge against a subsequent mortgagee without notice; decision turned on estoppel though judges discussed the limits of Webb. | The court used the observations in this case to show that earlier courts doubted Webb's broader applicability beyond its facts; it noted the decision was decided on estoppel and that judges expressed uncertainty about extending Webb beyond its facts. |
Court's Reasoning and Analysis
The court began by construing Section 55, Clause (4), of the Transfer of Property Act, which expressly grants the seller a charge "in the hands of the buyer" for unpaid purchase-money or part thereof and for interest on such amount. The court held that the phrase "in the hands of the buyer" is not mere surplusage and that a vendor's charge under Section 55(4) is, by its terms, primarily a right against the buyer's interest in the property.
The court rejected the plaintiffs' broad contention that the vendor's charge could be enforced against all subsequent transferees for value irrespective of notice. The court reasoned that permitting enforcement against subsequent purchasers without notice would render the statutory language meaningless, would impose an unreasonable burden on purchasers of immovable property, and would open the door to fraudulent claims against purchasers who acquired property in good faith for value.
The court analyzed Webb v. Macpherson and concluded that Webb supports the narrower proposition that a vendor may enforce a charge against subsequent purchasers who had notice of unpaid purchase-money, consistent with general equitable principles. However, the court refused to extend Webb to hold that subsequent transferees for value without notice are liable under Section 55(4).
Addressing the plaintiffs' contention that subsequent purchasers had notice, the court examined the sale-deed recital that Rs. 160 had been left with the buyer for payment to the vendor's creditors and the argument that this gave rise to a duty of inquiry (constructive notice) on the part of Kundan and of the defendants Nos. 5 and 6. The court concluded that, on the facts of this case, it could not be said that the transferees wilfully abstained from inquiries they ought to have made, and therefore they did not have notice (actual or constructive) of any vendor's charge.
The court further distinguished between an agreement by the purchaser to pay the vendor himself (which may amount to unpaid purchase-money) and an agreement to pay a third-party creditor of the vendor. Relying on authorities (including Abdulla Beary v. Mammali Beary), the court held that where the remaining obligation is an agreement to pay a creditor of the vendor (a separate contract), that sum does not constitute "unpaid purchase-money" giving rise to the vendor's statutory charge under Section 55(4).
Holding and Implications
APPEAL ALLOWED; PLAINTIFFS' SUIT DISMISSED.
Holding: The court allowed the appeal, set aside the decrees of both lower courts, and dismissed the plaintiffs' suit with costs in all courts.
Implications:
- The court held that the vendor's charge under Section 55(4) cannot be enforced against subsequent transferees for value who did not have notice; Webb v. Macpherson was read as permitting enforcement only where the subsequent purchaser had notice.
- The court held that the Rs. 160 in this case was not "unpaid purchase-money" within the meaning of Section 55(4) because the transaction involved an agreement by the purchaser to pay a creditor of the vendor (a separate contractual obligation) rather than unpaid purchase-money owed to the vendor.
- Direct effect on the parties: the plaintiffs cannot recover under a vendor's charge in respect of the Rs. 160 from the property in the hands of defendants Nos. 5 and 6; the plaintiffs' suit was dismissed and the decrees below were set aside.
- The court did not purport to create a novel broad exception to Section 55(4); rather it interpreted the statute and applied existing authorities to the facts, declining to extend precedent (Webb) beyond cases where notice to the subsequent purchaser was established.
1. This appeal arises out of a suit in which the plaintiffs seek to recover a sum of Rs. 476 principal and Rs. 83 interest, in all Rs. 559, against all the defendants and in default that certain property should be sold. The facts of the case were somewhat complicated, but for the purpose of the questions of law which we have to decide it is not necessary to go with great detail into them. On the 28th of August 1903, the plaintiffs sold certain prperty to Grur Dayal. This property was sold in consideration of Rs. 250. In the detail of consideration it is stated that the vendor has received Rs. 90 in cash and that he has left Rs. 160 for payment to certain creditors of the vendor. We may mention that the nature of the debt which was to be paid was a simple contract debt and not a mortgage-debt. As a matter of fact the purchaser did not pay the creditors of the vendor. His alleged reason for not doing so was that he did not get possession of part of the property sold, and there certainly was a dispute about the matter. The vendor's title was by no means perfect. On the 1st of April 1909, Gur Dayal sold the property (together with other property) to one Kundan. Kundan on the 27th April 1909 re-sold the property to Jiwan Singh and Kapur Singh, the defendants Nos. 5 and 6. It will thus appear that neither Grur Dayal nor Kundan have any longer any interest in the property. The plaintiffs allege that in consequence of the failure of Grur Dayal to pay Rs. 160 left in his hand, a suit was brought against them by the creditors and a decree was obtained against them and they had to pay Rs. 390. Their present claim is made up of this sum together with interest and costs. The contention in favour of the plaintiffs is, that under Section 55, Clause (4), of the Transfer of Property Act, they have a charge against the property and that the property in the hands of defendants Nos. 5 and 6 is liable to be sold. The Court of first instance gave the plaintiffs a decree, but only for Rs. 160 together with interest at 6 per cent. The lower Appellate Court thought that the plaintiffs were entitled to the full amount which they had to pay to satisfy the decree and made its decree accordingly. It seems difficult to understand how, under any circumstances, the property in the hands of defendants Nos. 5 and 6 could have been made liable for anything more than the amount of the Rs. 160 together with interest thereon. Section 55, Clause (4), of the Transfer of Property Act, provides that the seller is entitled, where the ownership of the property has passed to the buyer before payment of the whole of the purchase-money, to a charge upon the property in the hands of the buyer for the amount of the purchase-money or any part thereof remaining unpaid and for interest on such amount or part. Apart from authority, it seems difficult to treat the words "in the hands of the buyer" as mere surplusage. A vendor's charge for unpaid purchase-money is obviously one which in all cases ought to (and in most cases would) be promptly enforced. The broad contention of the plaintiffs is that the charge can be enforced against, all subsequent transferees quite irrespective of notice. If this contention be correct every purchaser of immoveable property buys with the possibility of there being a charge on the property in respect of every previous transfer: which would mean that no purchaser is safe and the door would be opened to any amount of fraudulent claims. The respondents rely on the case of Webb v. Macpherson 30 I.A. 238 : 31 C. 57 : 5 Bom. L.R. 838 : 8 C.W.N. 41 : 13 M.L.J. 389 (P.C.). The facts in that case were very peculiar and very different from the facts in the present case. By an indenture, dated July 17th, 1892, one Lloyd conveyed certain property to one Tucker. The consideration was Rs. 81,210, of which Rs. 30,000 was paid in cash and the balance of Rs. 51,210 was to be secured by the formal undertaking of the purchaser. The indenture recited that this "formal undertaking" had been executed by the purchaser. The money was not paid, and Lloyd was allowed tore-take possession. Macpherson subsequently purchased three-fourths of the property and it was from Lloyd that Macpherson got possession, Macpherson thus purchased the property with express notice that Lloyd had not been paid. Their Lordships, no doubt, held that Lloyd's executors had a charge on the whole property including the portion sold to Macpherson. In this connection it must be borne in mind that the meaning of the words in the hands of the buyer" in Section 55, Sab-section 4, of the Transfer of Property Act was not considered. The case may fairly be said to be an authority for the proposition that, notwithstanding the words in the hands of the buyer", the seller can enforce the charge mentioned in Section 55, Sub-section 4, against the property in the hands of a subsequent purchaser who has notice of the fact that the purchase-money in the first transfer, or some part of it, has not been paid. This would be in accordance with the general principles of equity, though it is going outside the provisions of Section 55, Clause 4, where their Lordships say we are to look to see the nature of the right. To hold, however, that the charge can be enforced against subsequent purchasers without notice would mean that the Court should treat the words in the hands of the buyer" as superfluous and meaningless and would, in our opinion, be extending the decision in Webb v. Macpherson 30 I.A. 238 : 31 C. 57 : 5 Bom. L.R. 838 : 8 C.W.N. 41 : 13 M.L.J. 389 (P.C.) in a manner never intended by their Lordships. In our opinion the charge mentioned in Section 55(4) cannot be enforced against subsequent transferees for value without notice.
2. It is next contended that the subsequent purchasers in the present case had notice." This contention is based on the following line of argument. In the sale-deed of 1903 it is mentioned that Rs. 160 had been left in the hands of the purchaser for payment to the creditors of the vender, therefore it was the duty of Kundan who made the purchase on the 1st of April 1909 to enquire if his vendor had fulfilled his contract and paid the creditor. Again, it was equally the duty of defendants Nos. 5 and 6 when the third transfer was made to examine the transfer to his vendor and having done so to ascertain if the Rs. 160 had been paid. It is said that not having made these enquiries the defendants had constructive notice [see Section 3, Clause (c), Transfer of Property Act]. In our opinion it cannot be said, in the circumstances of the present case, that the transferees in 1909 wilfully abstained from an enquiry or search which they ought to have made." In our opinion defendants Nos. 5 and 6 did not have notice of the alleged charge. We have already mentioned that in the present case the plaintiffs' contention is based on' the fact that it appears from the deed of transfer that Rs. 160 was left with the buyer for payment to a creditor of the seller. In Webb v. Macpherson 30 I.A. 238 : 31 C. 57 : 5 Bom. L.R. 838 : 8 C.W.N. 41 : 13 M.L.J. 389 (P.C.) at page 246 Page of I.A.--Ed of the report their Lordships say:--"There is no doubt, both on principle and authority, that a conveyance or sale in consideration of a covenant to pay a sum of money in the future is different from a sale in consideration of money which the purchaser covenants to pay. The destinction may seem fine, but it is a real distinction, and it is one which, if made out, might have had the effect which the High Court have given to it." Their Lordships then go on to deal with the particular terms of the conveyance in the case before them. There is a marked distinction between the terms of that conveyance and the present. It would appear in this case that the agreement was to pay, not the vendor, but the creditor of the vendor. In Webb v. Macpherson 30 I.A. 238 : 31 C. 57 : 5 Bom. L.R. 838 : 8 C.W.N. 41 : 13 M.L.J. 389 (P.C.) the agreement was to pay Lloyd (the vendor) himself. In this case it was only when the buyer neglected to pay the creditor and the creditor got a decree against the seller that the latter brought, or was entitled to bring, the present suit. In Abdulla Beary v. Mammali Beary 5 Ind. Cas. 87 : 33 M. 446 : 7 M.L.T. 376 which was a case very like the present, and in which Webb v. Macpherson 30 I.A. 238 : 31 C. 57 : 5 Bom. L.R. 838 : 8 C.W.N. 41 : 13 M.L.J. 389 (P.C.) was cited, the Madras High Court held that the vendor had no charge on the ground that the consideration undischarged by the buyer was an agreement to pay the creditor and not unpaid purchase-money.
3. In the case of Megh Raj Vaish v. Abdullah Khan 25 Ind. Cas. 208 : 12 A.L.J. 1034 Mr. Justice Sundar Lal considered that the case of Webb v. Macpherson 30 I.A. 238 : 31 C. 57 : 5 Bom. L.R. 838 : 8 C.W.N. 41 : 13 M.L.J. 389 (P.C.) applied and he further considered that there had been a finding of fact by the lower Courts (binding on him in second appeal) that the subsequent transferee had notice.
4. In the case of Tehilram Girdharidasy. Kashibai 1 Ind. Cas. 614 : 33 B. 53 : 10 Bom. L.R. 403 the sale-deed recited that the consideration had been paid, and the Court held that the vendor could not enforce a charge against a subsequent mortgagee without notice. It is true the Court held the vendor estopped and decided the case on that ground. At page 61, Page of 33 B,-- Ed Jenkins, C. J., says: -"I will assume that the defendant, under Section 55(4)...has a charge upon the property transferred not only in the hands of the buyer, but also of one who claims under the buyer, and that the decision in Webb v. Macpherson 30 I.A. 238 : 31 C. 57 : 5 Bom. L.R. 838 : 8 C.W.N. 41 : 13 M.L.J. 389 (P.C.) did not turn on the special circumstances of that case." Batchelor, J., says at page 67: Page of 33 B,-- Ed "The section gives the charge over the property in the hands of the buyer', but for the purposes of this case we may assume, though the point is by no means clear, that in Webb v. Macpherson 30 I.A. 238 : 31 C. 57 : 5 Bom. L.R. 838 : 8 C.W.N. 41 : 13 M.L.J. 389 (P.C.) it was intended to decide that the charge was extended to persons claiming through the buyer." These remarks by the learned Judges seem to indicate that they thought it doubtful whether their Lordships of the Privy Council intended to decide in Webb v. Macpherson 30 I.A. 238 : 31 C. 57 : 5 Bom. L.R. 838 : 8 C.W.N. 41 : 13 M.L.J. 389 (P.C.) any principle outside the facts and circumstances of that particular case.
5. In our opinion the Rs. 160 was not unpaid purchase-money." The consideration was Rs. 90 in cash and the agreement of the vendee to pay the creditor.
6. We allow the appeal, set aside the decrees of both the Courts below and dismiss the plaintiffs' suit with costs in all Courts.
Alert