Paparaju Veeraraghavayya Petitioner. v. Kilaru Kamala Devi And Others

JUDGMENT

The question that is raised may be stated thus: The purchase was subsequent to the attachment but the agreement in pursuance of which the purchase was made was prior to the attachment. Does the purchase prevail or not against the attachment?

The suit in question was filed on the 22nd April, 1933, the application for attachment before judgment was made on the 22nd June, the attachment was ordered on 24th June and effected on the 13th July. On the 20th June, that is, two days prior to the application for attachment, the defendants executed an agreement in favour of the petitioner agreeing to sell him the property. Relying on this agreement, the petitioner put in a claim petition on the 22nd August and the District Munsif, finding the agreement proved, made the following order on 17th October, 1933:

“Attachment will continue subject to the rights of the petitioner under the agreement, dated 20th June 1933.”

The claimant can take no exception to this order, as it upholds such right as he possessed at the time and it follows that C.R.P No. 788 of 1934 filed impugning that order fails and it is accordingly dismissed but without costs. It is the second order to which I shall presently refer, that has seriously prejudiced the claimant.

To resume the narrative, the price settled for the property was Rs. 1,566 out of which the petitioner paid to the vendors on the date of the agreement Rs. 700. On the 9th November, 1933, the sale was completed, the defendants executing the sale deed on that date. The petitioner then put in a second claim petition on the 19th December depositing into Court Rs. 800, the balance of the price payable, the registration and the stamp charges having amounted to Rs. 66. The lower Court made an order disallowing the claim, the correctness of which is questioned in C. R. P. No. 841 of 1934. This second order, is in my opinion, clearly wrong and must be set aside.

Under S. 40 of the Transfer of Property Act (as amended by Act of 1929) a purchaser under a contract of sale of land is entitled to the benefit of an obligation arising out of that contract and it provides that that obligation may be enforced inter alia against a transferee with notice. S. 91 of the Trusts Act recognises this principle and declares that a transferee with notice of an existing contract, of which specific performance can be enforced, must hold the property for the benefit of the party to the contract, to the extent necessary to give effect to it. Thus it will be seen that a purchaser under a contract of sale of land possesses a well defined right, which, though not amounting to an interest in immoveable property, is annexed, in the words of S. 40, to the ownership of such property. S. 54 of the Transfer of Property Act says no doubt that a contract of sale does not create an interest in land, but in virtue of the provisions I have referred to, it creates an obligation of a fiduciary character and is in the nature of a trust. The question then is, whether by reason of the Civil Procedure Code any rights accruing under an attachment can override the right above referred to of a purchaser under a contract of sale. In Venkata Reddi v. Yellappa Chetty (1) A and B entered into a contract that B's property should be sold to A. Subsequently C, B's creditor, attached it in execution of a decree he had obtained against B. Soon after the attachment A had the property duly conveyed to him by B. It was held that A was entitled to the property as against C. The learned Judges, referring to the provisions of the Civil Procedure Code, observe that the question of substantive right cannot be decided by a literal construction of the rules relating to procedure. I am prepared to go further, for it seems to me that there is nothing in the Code which militates against, or is inconsistent with, the right which a purchaser possesses under the substantive law. O. 38, B. 10 saves expressly in the Case of an attachment before judgment, rights existing prior to the attachment of persons not parties to the suit. Though there is no similar provision dealing in terms with attachments in due course of execution, it can hardly be suggested that a different principle applies. Indeed, O. 38, R. 8 specifically provides that claims preferred to property attached before judgment shall be investigated in the same manner as claims to property attached in execution of decrees. But then it is argued that under O. 21, R. 59 the claimant is bound to show that at the date of the attachment he had some interest in the property attached, which interest, it is contended, means an estate in land. I cannot agree that the interest referred to in this rule is necessarily an interest in land in the sense that expression is used in S. 54 of the Transfer of Property Act. The Civil Procedure Code and the Transfer of Property Act are not in pari materia and there is no reason to suppose that it was within the contemplation of the legislature that the interest referred to in O. 21, R. 59 should exclude all rights which are not interests in land. On the contrary, the very next rule shows beyond a possibility of doubt, that the word ‘interest’ is used in a wider sense for, that rule provides inter alia that the property shall be released from attachment if the Court is satisfied that though it was in possession of the judgment-debtor, he held it not on his own account but in trust for some other person (O. 21, R. 60). A party in whose favour there is a contract of sale, can enforce specific performance of that contract as stated above against a transferee with notice. The illustration to S. 40 of the Transfer of Property Act runs thus:

“A contracts to sell Sultanpore to B. While the contract is still in force, he sells Sultanpore to C, who has notice of the contract. B may enforce the contract against C to the same extent as against A.”

In the face of this, it seems unreasonable to hold, that the rights of the purchaser will not prevail against the claims enforceable under the attachment. In support of the opposite view Taraknath Mukherji v. Sanatkumar Mukherji* is relied upon. Even that case shows how very illusory the so-called right accruing under the attachment is; for Cuming, J. is constrained to observe:

“It might he that as a result of the obligation or agreement Mukherji (the party in whose favour the agreement to sell had been made) might be able to go to the person who had purchased the property at an execution sale and ask that he should perform the contract for sale.”

In other words, to take a concrete case, if the purchaser under the contract of sale had before the attachment paid half the purchase-money, he could compel the person who purchased the property at the execution sale, to convey the property back to him on receiving the remaining moiety only of the purchase-money. In effect, this amounts to saying that the so-called superior right of the purchaser at the execution sale is unreal and illusory. Nor does S. 64 of the Civil Procedure Code, which says that where an attachment has been made, a private transfer of property shall be void as against the claims enforceable under the attachment, present, in my opinion, any real difficulty. As pointed out in Madan Mohan Dey v. Rebati Mohan Poddar (2), S. 64 could not have been intended to invalidate transactions coming into existence in pursuance of the obligation arising previous to the attachment. In that case it was held that a conveyance of a property executed after its attachment in pursuance of a contract dated before the attachment, should prevail. There, no doubt, the conveyance was not a private transfer but was obtained under a decree for specific performance, but the decision does not turn upon any such point. This case in Modan Mohan Dey v. Rebati Mohan Poddar has been followed by a Bench of the Madras High Court in Venkata Reddi v. Yellappa Chetty and, in my opinion, gives effect to the correct principle. Cuming, J., one of the two learned Judges who decided Taraknath Mukherji v. Sanatkumar Mukherji* (3), differs from it and Mulla in his commentary on S. 40 of the Transfer of Property Act seems to agree with that learned Judge. I must, with great respect, express my dissent from the view of Cuming, J., and hold that the purchase prevails over the attachment. As the learned Judges observe in Venkata Reddi v. Yellappa Chetty ,

“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.”

What was and could be attached by the creditor was the right, title and interest of his debtor at the date of the attachment and that right is to the unpaid balance of the purchase-money, and the attachment therefore holds good to the extent of that balance. In the present case the purchaser by paying into Court Rs. 800, the unpaid balance, has freed himself from all further liability and the attachment subsists as against that amount. I understand that the petitioner has drawn this amount from the Court undertaking to bring it back, and his Counsel repeats the undertaking in this Court.

In the result, the lower Court's order is set aside and the Civil Revision Petition is allowed with costs.

N. R. R. Petition allowed.