Macleod, C.J:— The plaintiff sued to get a sale-deed of the plaint property executed, alleging that the defendant No. 1 had agreed to pass a sale-deed in his name on the 4th March, 1917 but afterwards refused to convey the plaint property to the plaintiff. The 2nd defendant relied upon a sale-deed executed by the 1st defendant in his favour on the 19th January, 1918. It is admitted that the plaintiff was in possession, and that the 2nd defendant knew that the plaintiff was in possession, and made no inquiry as to the circumstances in which the plaintiff was in possession.
2. The trial Judge dismissed the suit on the ground that the 2nd defendant had no notice, actual or constructive, of the contract between the 1st defendant and the plaintiff. The plaintiff had been in possession since 1914, and admittedly was a mortgagee. The learned trial Judge seemed to think that although defendant No. 2 might be fixed with notice of the plaintiff's possession as mortgagee, he could not be fixed with the notice of the agreement to sell. In appeal, this decision was confirmed. The same distinction was made by the learned appellate Judge, namely, that the constructive notice would only be of the plaintiff's holding as mortgagee and not as a person having an agreement to sell from the 1st defendant.
3. Now in Mancharji Sorabji Chulla v. Kongseoo (1) it was held by Chief Justice Couch that the English authorities, on the question were applicable where a person bought an estate of which some one, not the vendor, had possession. The leading case cited was Daniels v. Davison (2), in which the Lord Chancellor held that—
“Where there was a tenant in possession under a lease, or an agreement, a person, purchasing part of the estate, must be bound to inquire, on what terms that person was in possession…that this tenant being in possession under a lease, with an agreement in his pocket to become the purchaser, those circumstances altogether gave him an equity repelling the claim of a subsequent purchaser, who made no inquiry as to the nature of his possession.”
4. That principle has been followed by a Bench of this Court in Sharfudin v. Govind (3). Mr. Batty, J. said at p. 473:
“It appears to be the result of the Bombay decisions that no purchaser can protect himself merely by registering his document of title, against the title of a person in possession of the subject-matter, and if he ignores that possession and fails to make inquiry into its nature and origin, he will be affected by all the equities which the person in possession is proved to have. This being the case, I think that when the plaintiff found that the property of which he bought the equity (of redemption) was in the possession of the defendants, it was for him to inquire into the nature of his vendor's title and the extent of the liabilities to which he was subject.”
5. The result, therefore, must be that the 2nd defendant having knowledge of the plaintiff being in possession, and having made no inquiry why the plaintiff was in possession, must be taken to have had constructive notice of all the equities in favour of the plaintiff. It would have been a different matter if he had made inquiries and had been told that the plaintiff was only in possession as mortgagee, but if he chooses to make no inquiries at all, then he is liable to all the risks that might result from the discovery that the person in possession was entitled to equities against the vendor.
6. The result, therefore, must be that the appeal must be allowed. The plaintiff will be entitled to a conveyance of the suit property from the 2nd defendant who has a registered sale-deed from the 1st defendant. The plaintiff will be entitled to his costs throughout.
Fawcett, J.:— I concur. I would also refer to the 3rd illustration to clause (b) of section 27 of the Specific Relief Act which authoritatively declares the law in accordance with the case of Daniels v. Davison .
“A contracts to sell land to B for Rs. 5,000. B takes possession of the land. Afterwards A sells it to C for Rs. 6,000. C makes no enquiry of B relating to his interest in the land. B's possession is sufficient to affect C with notice of his interest, and he may enforce specific performance of the contract against C.”
7. Therefore the lower Courts were not justified in making the distinction upon which they dismissed the plaintiff's suit.
8. Order accordingly.