T.K. Abdul Razak Rowther v. Abdul Rahiman Sahib

1. This appeal arises out of a suit filed by the plaintiff (1st respondent) for the recovery of a sum of Rs. 8,710-6-9 which is made up of three different sums payable by defendants 1 to 3 respectively, which the plaintiff seeks to recover from them personally and also by the sale of the properties mentioned in Schedules I to III, as they are subject to a charge in plaintiff's favour for the recovery of the aforesaid sums. The facts of the case are briefly as follows: - The plaintiff and defendants 1 to 3 are the sons of the late Seeni Rowther who died on 4th January, 1922. Subsequent to his death, a partition was effected among the four brothers with the intervention of mediators and a registered partition deed, Ex. B, was also executed on 1st August, 1923. Even during the lifetime of Seeni Rowther, there was a mortgage decree in O.S. No. 105 of 1914 on the file of the Madura Sub-Court in favour of Appavu Rowther, under which a sum of Rs. 36,000 was due on the date of the aforesaid partition deed. The family properties were all liable for the satisfaction of that decree. In that partition, there was a division of the properties and also the debts due by the family. The mortgage decree debt which amounted to Rs. 36,000 was partitioned among the four brothers, the plaintiff's share of that burden being Rs. 1,620, the 1st defendant's being Rs. 10,090, the 2nd defendant's being Rs. 13,495, and the 3rd defendant's being Rs. 10,795. The partition deed provides that each of the brothers shall pay his share of the debt out of the specific properties allotted to him and that in case the properties allotted to the share of one brother should be made liable for the debts due by the other brothers, they and the properties falling to their shares shall be liable for any loss caused thereby. The plaintiff's case is that in spite of the covenants contained in the partition deed, default was made by defendants 1 to 3 in the payment of their shares of the aforesaid mortgage decree debt. The result was that the properties allotted to the plaintiff's share were brought to sale by the decree-holder. In order to avert the sale of the properties in Court-auction, the plaintiff and the 3rd defendant respectively mortgaged with possession some of their properties and deposited into Court Rs. 5,000 on 11th July, 1925 and Rs. 13,080 on 10th August, 1925. One-half of these amounts, namely, Rs. 9,040, was the plaintiff's contribution. Calculating interest thereon at 71/2 per cent, per annum and deducting therefrom the sum of Rs. 1,620 payable by the plaintiff towards the said decree debt together with interest at the same rate, the amount due to the plaintiff on the date of plaint was Rs. 8,710-6-9 which was the amount paid by him in excess of what he undertook to pay. On a consideration of the evidence and after making the necessary calculations, the Lower Court has found that out of the said amount, the 1st defendant is liable to pay a sum of Rs. 3,647-11-11 and the 2nd defendant is liable to pay Rs. 5.062-10-10. The 3rd defendant has not been found liable to pay anything to the plaintiff. The sum payable by the 1st defendant is made a charge on the properties mentioned in plaint Schedule I, and similarly the sum payable by the 2nd defendant is declared to be a charge on the properties mentioned in Schedule II. The properties in these two schedules are those allotted to the shares of defendants 1 and 2 respectively in the partition deed. Some of the other defendants who are impleaded in this suit as subsequent purchasers or alienees set up the plea that they were bona fide purchasers for value without notice of the charge claimed in the plaint and that therefore those items should not be held liable for the plaintiff's claim. Some other contentions were also raised, but they were all overruled by the Lower Court. The 5th defendant is one of the purchasers. He purchased item 1 of Schedule I from the 1st defendant on 24th August 1926 for Rs. 10,000, and on the same date he purchased item 1 of Schedule II from the 2nd defendant for a like price. Items 2, 4 to 6, 8 and 9 of Schedule I were also bought by him from the 1st defendant for Rs. 6,000 on 22nd April, 1926. Against the decree of the Lower Court, this present appeal has been filed by the 5th defendant alone. He has confined the subject-matter of this appeal to the declaration of charge given to the plaintiff by the decree of the Lower Court on his (5th defendant's) properties without consequential relief.

2. There is no dispute in this appeal as regards the correctness of the amounts found due to the plaintiff. The first point for consideration is, whether the plaintiff is entitled to a charge as claimed in the plaint. This question depends upon the nature of the stipulations contained in the partition deed, Ex. B. That deed sets forth the circumstances in which the division among the brothers came to be effected. The indebtedness of the family to a very large extent is mentioned. After the discharge of those debts, very little property would be available for partition. On representation to the plaintiff by the other brothers about such a plight and at their request, the plaintiff is said to have agreed to bring into hotchpot his own self-acquired properties and make them available for division as family properties among all the brothers. On the basis of this concession by the plaintiff, the division was effected among the brothers, allotting certain specific properties to the share of each of them and also a specific portion of the debts due by the family. The mortgage decree debt due to Appavu Rowther was also apportioned among the four brothers in different sums. After setting forth these facts, the covenants run as follows:

"Each of us shall discharge the debt falling to his share from the properties which have fallen to his share". If otherwise the properties falling to the share of one person are made liable for the debts due by other sharers, the other sharers and the properties allotted to their shares shall be liable for any loss caused thereby.

3. The indemnity clause in the aforesaid covenants undoubtedly creates a charge in favour of the person for any excess sum paid by him over and above his share of the debt, on the properties of the other sharers in proportion to the sums which they should have paid, but defaulted to pay. The express undertaking to reimburse the person who sustains such loss by paying the amount found due to such person from out of the specific properties allotted in the partition deed to their respective shares is sufficient to create a charge on those properties. In paragraph 15 of his judgment, the learned Subordinate Judge has referred to a number of cases in which it has been held that similar clauses gave rise to an express charge within the meaning of Section 100 of the Transfer of Property Act. It is unnecessary to refer to those decisions in detail and the learned advocate for the appellant has not been able to show any authority to support the contention that the indemnity clause contained in Ex. B does not suffice to create a charge on the properties of the defaulter in favour of the person who sustains loss on account of such default.

4. It is next contended that the appellant (5th defendant) must be taken to be a bona fide purchaser for value without notice of the charge. On this question, we have no hesitation in holding that the whole trend of the evidence is against the truth of the alleged ignorance of the 5th defendant of the covenants contained in Ex. B. In the first place, he is a close relation of the plaintiff's family. Appavu Rowther, the decree-holder in O.S. No. 105 of 1914, is the junior paternal uncle of the 5th defendant and also the maternal uncle and father-in-law of the plaintiff. 5th defendant's mother and the 1st defendant's wife are sisters. As would appear from his own evidence, the 5th defendant was closely connected with the negotiations and discussions preliminary to the execution of the partition deed (Ex. B) and was actually staying at Madura for about a week or so in that connection. He is the first attestor to this partition deed. In pursuance of this partition deed, the 5th defendant's wife filed a suit in 1922 for partition against the plaintiff's family in respect of her mother's property. The 5th defendant refers to the preparation of the lists of the assets and liabilities allotted to each of the brothers at the time of the execution of Ex. B. In the subsequent sale deeds obtained by him from defendants 1 and 2, namely, Exs. V, VI and VII, specific mention is made of this partition deed to account for the title possessed by the vendor in each of these sale deeds to the properties sold under it. In the face of these telling facts, it is idle for the 5th defendant to contend that he was not aware of the covenants in the partition deed, whereby a charge was created. There are adequate grounds for holding that the 5th defendant was aware of the covenants contained in the partition deed. It is argued, that if he had such express knowledge, he would not have purchased the aforesaid items. It is further contended that the plaintiff who was also present when Exs. VI and VII were executed, did not apprise the 5th defendant of his claim for reimbursement on account of the excess amount paid by him towards the decree debt of Appavu Rowther. There is nothing to show that the 5th defendant was misled by any misrepresentation made to him by the plaintiff, that he would not enforce the charge created under the partition deed. On the other hand, the evidence shows that the plaintiff was urging his claim and was even stating that unless his claim was also satisfied he would not attest these sale deeds. The fact remains that he did not attest them. Any man of ordinary prudence would have secured his attestation to the sale deeds as a safeguard against the enforcement of any such charge by him later on. There was no duty on the part of the plaintiff to give any warning to the 5th defendant. No tangible foundation has been laid in this case for setting up an estoppel against the plaintiff. On the other hand, the 5th defendant must be deemed to have made this purchase with full knowledge of the arrangement come to among the brothers as set forth in the partition deed, and, at any rate, he must be deemed to have had constructive notice of the covenants contained therein. He being an attestor to the partition deed and mention of that deed having been made in every one of the sale deeds obtained by the 5th defendant, his omission to ascertain the contents of the partition deed should be construed as wilful abstention from an enquiry which he ought to have made. Vide Rajaram v. Krishnasami (1892) I.L.R. 16 Mad. 301 at 303. The learned Subordinate Judge has come to a correct finding on this point, and it must be taken that the plaintiff is not estopped from enforcing his charge and the 5th defendant is a purchaser of the items in question with actual or constructive notice of the covenants contained in the partition deed, Ex. B, and the charge created thereby.

5. There is yet another contention raised by the learned advocate for the appellant which has been the subject of considerable discussion in the course of the arguments. It is admitted that out of the purchase money due under each of the sale deeds, Exhibits VI and VII, a sum of Rs. 7,650 was applied for the payment of Appavu Rowther's decree debt. The purpose for which the sale was effected under Exhibits VI and VII was specified in them. In the course of the execution of the aforesaid mortgage decree, Appavu Rowther brought item 1 of Schedule I and item 1 of Schedule II to sale in Court-auction and purchased them himself on 23rd February, 1924, for a sum of Rs. 18,760-0-0. There was still a small balance due under the decree and subsequent to its realisation, the decree was recorded on 30th September, 1925, as fully satisfied. (Vide Ex. C.) But defendants 1 and 2 had already applied for the setting aside of the sale of those items, and their petition was dismissed in the first Court. During the pendency of the appeal filed by them in the High Court, some time was given to them to deposit in Court a sum of Rs. 22,300 in order to have the sale set aside. That sum was raised by means of the transactions evidenced by Exhibits I, VI, VII and F on 24th August, 1926 and on depositing this sum into Court on that date, the sale of those two items was set aside and subsequently possession thereof was delivered over to the purchaser (5th defendant). It is clear that out of the purchase money paid by the 5th defendant under the sale deeds, Exs. VI and VII, a sum of Rs. 15,300 was paid into Court to make up the amount of Rs. 22,300. The remaining sum of Rs. 7,000 was raised under Exs. I and F. There is no doubt that the amount deposited in Court was the total of the sums paid by the alienees under the aforesaid deeds, though the physical act of depositing the same into Court was done by defendants 1 and 2. As held in Ram Narayan Sah v. Sahdeo Singh (1922) I.L.R. 1 Pat. 332, the alienees who contributed the sums for the deposit can claim to have discharged the mortgage debt by such payment, in order to claim any right of priority or subrogation. The moment the sale of the aforesaid two items was set aside, it results in some portion of the decree amount remaining as the balance still due. By the deposit of the said sum of Rs. 22,300 to the credit of the decree-holder, the balance due was wiped out and the alienees who contributed this sum must be taken to have discharged the mortgage debt fully. Though what they paid was only a portion of the whole of the mortgage debt, still it was by that payment, what remained as the balance of the decree debt was discharged and the whole of the debt was thus wiped out. In exactly similar circumstances, priority was given in respect of such payment on the equitable principle of subrogation, though technically the amount paid would only be a portion of the debt. Vide Rupabai v. Audimulam (1888) I.L.R. 11 Mad. 345 at 353 and 354, Saminatha Pillai v. Krishna Iyer (1913) I.L.R. 38 Mad. 548 : 28 M.L.J. 484 and Andi Thevan v. Nagayasami Chettiar (1927) 55 M.L.J. 369 at 377. In view of these circumstances, the appellant claims a right of priority and wants the Court to give a declaration that item 1 of Schedule I and item 1 of Schedule II can be proceeded against by the plaintiff in enforcement of his charge, subject to a lien for Rs. 7,650 in 5th defendant's favour on each of those items, together with interest thereon. Virtually, this is a claim of subrogation, treating the charge claimed by the plaintiff under the partition deed to be one which arose later than the mortgage lien of Appavu Rowther under the aforesaid decree, and setting up the payment of Rs. 15,300 out of the purchase money under the sale deeds Exs. VI and VII as having gone towards the discharge of the first mortgage. Ordinarily, the claim for subrogation in this simple form would be good. But in the present case, there are some other complications which go to the root of the claim set up by the 5th defendant. Strenuous arguments have been addressed by either side in this connection.

6. A clear statement of facts disclosed in this case would pave the way for an easy solution of this problem. The covenants contained in Ex. B have been already referred to. As per one of those covenants, the 1st defendant has undertaken to pay out of the specific properties allotted to his share a sum of Rs. 10,090 towards the mortgage decree debt of Appavu Rowther, and the 2nd defendant has similarly undertaken to pay a sum of Rs. 13,495 towards that debt. After taking into account the sum of Rs. 7,650 paid by each of them out of the purchase money realised from the 5th defendant, and giving credit to the same in their favour, the two sums decreed against them respectively by the Lower Court are found due to the plaintiff. These sums represent the loss sustained by the plaintiff on account of the default committed by them in the fulfilment of their undertaking, and therefore, the plaintiff is enforcing the charge created in his favour for those sums against the properties in Schedules I and II respectively. The covenant in Ex. B, namely,

"Each of us shall discharge the debt falling to his share from the properties which have fallen to his share"

is not a mere personal covenant, and cannot be treated as a contract among the brothers having no reference to the properties allotted to their respective shares. The exclusive ownership of the properties allotted to the share of each of the brothers in a particular schedule attached to the partition deed, is derived from the adjustment of their mutual rights and obligations, and in consideration of the benefits derived from some of them and enjoyed by others, the apportionment of the debts due by the family was effected in a certain way and the payment of each one's share of the debts was expressly made an obligation with which his share of the properties was burdened. That being so, it seems to be a restrictive covenant in the nature of an obligation annexed to the ownership of immovable property, within the meaning of Section 40 of the Transfer of Property Act. If the plaintiff is entitled to the benefit of such an obligation, he can enforce specific performance thereof not only against defendants 1 and 2, but also against any transferee from them with notice of such covenants. The 5th defendant has been found to be a subsequent purchaser with notice. The effect is to place the 5th defendant in no better position than defendants 1 and 2 and he must be deemed to be one bound by the restrictive covenant or obligation as if he were a party to such covenant. Can the 1st defendant or 2nd defendant claim priority or any right of subrogation in respect of the payment of Rs. 7,650 by each of them towards the mortgage decree debt of Appavu Rowther? Neither of them can claim such a right, because that sum is part of the debt which he undertook to pay out of the share of the properties allotted to him under the partition deed Ex. B. What is now claimed by the plaintiff in this suit as due from the 1st defendant or 2nd defendant represented only another portion of the mortgage debt undertaken to be paid by defendants 1 and 2 in the aforesaid manner. The general principle is that a later purchaser or mortgagee who undertakes to pay two prior encumbrances but pays only one and not the other, cannot resist the claim of the encumbrancer not so paid by setting up the discharge of the other encumbrance as a shield and claiming priority for the amount paid in discharge of it. ( Vide Bisseswar Prosad v. Lala Sarnam Singh ( 1907) 6 Cal. L.J. 134. A purchaser from such a purchaser with notice of the covenant cannot also claim any right of subrogation. Vide Lakshmi Achi v. Narayanasami Naiker ( 1929) I.L.R. 53 Mad. 188 : 57 M.L.J. 746. In the present case, it was by virtue of the mutual adjustment of rights among the brothers that each of them became the exclusive owner of certain specific items of properties at the time of the partition, and to such exclusive ownership of those properties the burden of paying a specific sum towards the mortgage debt of Appavu Rowther was annexed. The 5th defendant who has purchased the items from defendants 1 and 2 with notice of the aforesaid covenant is equally bound by it. Vide Power v. Standish 8 Ir. Eq. 526 and also Parbhu Narain Singh v. Ramzan ( 1919) I.L.R. 41 All. 414. The plaintiff being entitled to the benefit of that restrictive covenant, the 5th defendant who is a purchaser with notice of that covenant cannot claim any right of subrogation to the prejudice of the plaintiff.

7. The next question is whether the plaintiff can be allowed any interest. He claims it as part of the compensation for the loss sustained. The indemnity clause in Ex. B entitles him to adequate compensation for the loss. It is proved that he raised the money for making the deposit by mortgaging his properties with possession under Ex. D. That being so, a reasonable rate of interest can be allowed to him as compensation due to him under the indemnity clause. Ex parte Bishop, In re Fox, Walker, & Co. (1880) 15 Ch. D. 400 at 421. Interest has been allowed to the plaintiff at the rate of 71/2 per cent, per annum. It seems to be a perfectly reasonable rate.

8. We must point out that though the 5th defendant is not entitled to any priority over the plaintiff's claim, his right to claim contribution under Sections 82 and 95 of the Transfer of Property Act is available to him, when the need to enforce such a right arises.

9. It is next contended for the appellant that the Lower Court was wrong in having exonerated item 3 of Schedule I from liability to the plaintiff's charge. The plaintiff has not chosen to file an appeal or memo of objections as regards this item, but we think that the 5th defendant is entitled to question the correctness of the exoneration of this item, as a greater burden would be thrown on the items purchased by him. This item was bought by the 8th defendant in Court auction in execution of a simple money decree which was obtained against Seeni Rowther. After his death, his sons (the plaintiff and defendants 1 to 3) were added as his legal representatives in the course of execution. The sale certificate (Ex. X) does not state that the property was sold subject to any charge in favour of the present plaintiff under the partition deed, Ex. B, though mention of this deed is made in it, as noted in the sale proclamation. The Lower Court has held, that the 9th defendant who is a later purchaser from the 8th defendant under Ex. XII is a bona fide purchaser for value, without notice of the charge in plaintiff's favour. When reference to Ex. B was made in the sale certificate, this circumstance must have put the 9th defendant on inquiry, and his abstention from making an inquiry is without any lawful excuse. He must be taken to have had constructive notice. But the exoneration of this item may be justified on another ground. In the absence of any evidence to the contrary, we may presume that the right, title and interest of all the legal representatives of Seeni Rowther in that item was attached and sold. That being so, any charge which the present plaintiff had over that item should be deemed to have passed to the auction purchaser. We therefore think the exoneration of this item from the plaintiff's claim should stand.

10. There are still two more points to be considered. The decree of the Lower Court is defective, as it stops with a mere declaration of a charge on the properties in Schedules I and II. It seems to have failed to grasp the real scope of this suit, and has ignored the prayer for sale contained in paragraph 12 of the plaint. The plaintiff is surely entitled to that relief in this very suit. As a last resort, a request is made on behalf of the appellants for a direction about the order in which the items in Schedules I and II should be put up for sale. In view of the fact that the major portion of the purchase money paid by him for some of the items went towards the discharge of Appavu Rowther's mortgage decree debt, it would not be unreasonable, if they are directed to be sold last, and there can be no prejudice to the realisation of the decree amount by the plaintiff. The 6th defendant also has similarly contributed out of the purchase money for item 5 of Schedule II. Having regard to these facts and other circumstances in this case, we are inclined to give the necessary directions. Exception is taken to the Lower Court's order, that the 5th defendant is also personally liable for the full costs of the plaintiff. It is true that he has failed to substantiate many of his pleas. We are however of opinion that this order of the Lower Court is rather drastic, and should not be upheld.

11. In the result, the decree of the Lower Court is confirmed, subject to the following modifications. Three months' time is given for the payment of the sums decreed to the plaintiff. In case of default, the items of 1st schedule (except the 3rd item) and the items of 2nd schedule will be sold. The first schedule items will be put up for sale in this order, viz., 7, 10, 11, 2, 4, 5, 6, 8, 9 and 1. The 2nd schedule items will be put up for sale in this order, viz., 9, 10, 2, 3, 4, 6, 7, 8, 5 and 1.

12. The order making 5th defendant personally liable for the plaintiff's costs of suit is set aside. The appeal having substantially failed, the appellant should pay the 1st respondent's costs and bear his own. The other respondents will bear their own costs.