Rebala Venkata Reddi v. Mangadu Yellapa Chetty

JUDGMENT

The appeal in this case depends on the question whether the appellants' father having obtained a contract for the sale of the property in dispute before it was attached by the 1st and 2nd respondents in execution of a decree against defendants 4 and 5, and having also obtained a conveyance of the property since the date of attachment, the appellants are not entitled to the property as against the execution creditors. There are at least two decisions of this Court which cover the present question. Savithri Ammal v. Ramasami and Bapineedu v. Venkayya. To a similar effect is the decision of the Calcutta High Court in Madan v. Rebati. It has, however, been strenuously contended by Mr. Vardachari on behalf of the respondents that these decisions are wrong and that it should be held that the appellants acquired no right to the property by their father's purchase. It is perfectly true as pointed out by the learned Vakil that having regard to Sect. 54 of the Transfer of Property Act, a mere contract of sale does not give an interest in the property, the subject-matter of the contract. But nevertheless it does create an obligation on the part of the vendor to convey the property, that obligation being described by the Indian Legislature as an obligation annexed to the ownership of the property (Section 40 of the Transfer of Property Act). If therefore a creditor attaches property which is subject to such obligation, he is prima facie entitled to sell the property but subject to that obligation. As pointed out by Justice Woodroffe in the case in 23 C.L.J, 115 the attaching creditor is entitled to sell the right, title and interest of the judgment-debtor of his proprietary right subject to an obligation arising out of a contract of sale, the attaching creditor ought not to be allowed to sell anything more. It is contended that in the 3rd paragraph of Sect. 40 which says that “such right or obligation may be enforced against a transferee with notice thereof or a gratuitous transferee of the property affected thereby, but not against a transferee for consideration and without notice of the right or obligation, nor against such property in his hands.” The transferee referred to is a transferee under a private alienation, deriving his title from the owner of the property and does not include any person who has purchased the property in execution of a decree against a judgment-debtor. While we are not prepared to hold that this construction suggested by Mr. Varadachari is wrong, we are not quite satisfied that the term ‘transferee’ may not include a purchaser at Court auction. However that may be, as the property has not been sold in this case, it is not necessary for us to express any final opinion on this point. At the same time the principle of the section in any case is applicable to the question before us. The same principle seems to underlie the enactment in Sect. 91 of the Trust Act, which says:—“Where a person acquires property with notice that another person has entered into an existing contract affecting that property, of which specific performance could be enforced, the former must hold the property for the benefit of the latter to the extent necessary to give effect to the contract.” This section does not in terms apply, but as we said the principle of it would be applicable to this case. Mr. Varadachari also bases an argument on the provisions of Rules 60 and 61, Order 21 of the Civil Procedure Code, to the effect that if the ownership of the property is still in the judgment-debtor, the rights of the judgment-creditor cannot be effected. But these rules relate to procedure while the question before us is one of substantive rights of the parties and this cannot be decided by any inference derived from a literal construction of these rules.

As regards the English Law, there can be no doubt as is pointed out in the case in 21 M.L.J, 82 that the judgment-creditor would have no rights as against a transferee of the property in pursuance, of a contract entered into before attachment. In that law, the person in whose favour a contract of sale has been executed, is regarded as the equitable owner of the property. Mr. Varadachari has argued that this is not in accordance with the law in India. But we are not prepared to say that Sect. 54 of the Transfer of Property Act was intended to affect any equitable rights which may arise under a contract for sale. The Indian Legislature provides that a contract for sale not only gives rise to an obligation but that the obligation so arising should be regarded as annexed to the ownership of the land itself. It may be as was pointed on behalf of the respondents that the legal incidents arising out of a contract of sale are not exactly the same as those under the English Law. Still it does not seem to be sound sense that when a creditor attaches property which is subject to a particular obligation, he should be able to override it. In the result, the appeal will be allowed and the suit dismissed with costs in both Courts.

S.SAppeal allowed.