Nursing Dass Kothari v. Chuttoo Lall Misser .

The Judgment of The Court was as follows:—

Sanderson, C.J:— This is an appeal from the judgment of my learned brother Mr. Justice Buckland who dismissed the suit of the Plaintiff with costs.

The suit was brought for the purpose of obtaining a declaration that a certain agreement for the purchase of the land and premises No. 43, Burtolla Street, Calcutta, is void and inoperative, and to recover a sum of Rs. 36,000 with interest which the Plaintiff had deposited as part payment of the purchase-price.

The date of the agreement in question was the 29th of November 1919. The Defendant was a receiver appointed in a certain suit by this Court, and he sold by auction the property in pursuance of an order of the Court. The Plaintiff was the highest bidder, and purchased the property for Rs. 1,41,000 and made a deposit, as I have already said, of Rs. 36,000. Subsequently, the Plaintiff discovered that a notice had been published under sec. 63, sub-sec. (2) of the Calcutta Improvement Act, which affected these premises. That notice had been published on the 18th of December 1918: and, objections to matters contained in the notice had to be put in by the 31st of March 1919, so that, if it is material for the consideration of this case, it is to be noted that the lime for making objections had expired before the date of the sale to the Plaintiff. No mention of this notice was made in the sale notification. The facts relating to this matter are to be deduced from the memorandum which was agreed to by the parties in the trial Court. It is as follows:—

“With reference to the question of knowledge it is stated by Mr. Mitter on behalf of the Plaintiff that he does not impute personal knowledge to the Defendant and accepts the Defendant's denial in regard thereto until after the contract was entered into. He, however, imputes to him prior constructive notice of the intended acquisition reason of the public notification and by reason of the fact that particular notice had been served on the Official Receiver who preceded him as a Receiver. Mr. Das on behalf of the Defendant similarly says that he does not impute personal knowledge to the Plaintiff and accepts the denial with regard thereto, but he relies upon the constructive notice of the intended acquisition afforded by the public notification. Mr. Das also admits that the property which formed the subject-matter of the notice was about half the property in suit and was not an insignificant amount.”

The Defendant was not the first Receiver in this matter. It appears that the Official Receiver had been appointed Receiver, and the Defendant was appointed as a Receiver to succeed the Official Receiver: and, the learned Judge in his judgment stated — “It has, however, been, admitted by the Defendant's Counsel that the Defendant found a copy of this notice among other papers which he received after the sale from the Official Receiver whom he succeeded in the Receivership of this estate.” So, it is clear that the Defendant himself did not know of this notice until after the sale of November 1919. The Plaintiff refused to complete the purchase. The result was that the Receiver put up the property for sale again, and on that occasion it fetched one lac and six thousand rupees. We were informed that at this sale the notice, which had been published by the Improvement Trust Board, was referred to.

The learned Judge came to the conclusion that under the provisions of sec. 63 of the Calcutta Improvement Act, nothing more had been done than to prepare a plan of a proposed public street and to publish the requisite notices, and possibly, to apply to the Local Government for sanction, but as to that no information had been forthcoming nor would it affect the matter, and that the result was that at the time of the sale by auction the land sold was subject to no disabilities or burden or restrictions on the owner's use, whatever might be the most appropriate expression. The learned Judge further said that he did not think that in such circumstances it was the duty of the Defendant to disclose the existence of a notice which in fact might not and did not in law as a necessary consequence result in detriment to the purchaser of property by curtailing his right as owner.

The learned Counsel on behalf of the Plaintiff urged in the first place that a possible result of the notice, which had been published by the Improvement Trust, was that half the premises might be taken by the Improvement Trust for the purposes of the Act. It is not necessary for me to go through the provisions of sec. 63 in detail. It is sufficient for me to say that it seems to me on the facts of this case that the position may be stated as follows:— Proceedings had been put in train by the Improvement Trust which, if brought to completion, might result in a restriction being placed upon the use of the property by the purchaser and that restriction might apply to no less than half the property which was admitted in the above-mentioned note to be “not an insignificant amount.”

The learned Counsel for the Appellant argued in the first place that such a liability constituted a material defect in the property within sec. 55(1)(a) of the Transfer of Property Act. The section runs us follows:— The seller is bound to disclose to the buyer any material defect in the property of which the seller is and the buyer is not, aware, and which the buyer could not with ordinary care discover.” The learned Counsel argued further that the seller, i.e, the Defendant, must be taken to have been aware of the material defect in the property, and consequently it was his duty to disclose it to the Plaintiff, the buyer.

In my judgment, the learned Counsel cannot bring the Plaintiff's case within that section. It is admitted that at the time of this sale the Defendant was not in fact aware of the notice, constituting the alleged defect — if it may be so called — in the property. The learned Counsel, however, said that inasmuch as the Defendant's predecessor, the Official Receiver, had express notice of the proceedings instituted by the Improvement Trust, the Defendant also must be taken to have had notice of such proceedings: and, he referred to the definition of “notice” in sec. 3 of the Transfer of Property Act. I am not prepared to accept that argument.

In the first place, I do not understand how the seller can be called upon to disclose that of which he is not aware; and, in the second place, when I look at the last sentence of sec. 55, I find this provision: “An omission to make such disclosures as are mentioned in this section, para, (1), cl. (a), para. (5), cl. (a), is fraudulent.” Consequently, if the seller does not disclose to his buyer any material defect in the property of which he is aware and of which the buyer is not aware and which he could not discover with ordinary care the omission is declared by the provisions of the section to be fraudulent. Consequently, in my judgment, having regard to the facts of this case and to the fact that the Defendant had no knowledge of the notice at the time of the sale, the Plaintiff's case does not come within that section. It is not therefore necessary for me on this appeal to consider or decide whether the facts, to which I have referred, constitute a material defect in the property. The first point, therefore, upon which the learned Counsel for the Appellant relied, fails.

The second ground upon which the learned Counsel for the Appellant relied, was that the case comes within sec. 20 of the Indian Contract Act. That was considered by the learned Judge, and he came to the conclusion that the alleged defect in the property was not essential to the agreement for the reasons which I have already mentioned and which were the basis of his judgment. It is necessary, therefore, for me to consider this question.

It appears to me that the notice issued by the Improvement Trust and the liability to restriction upon the use of the premises, to which I have already referred, consequent upon the proceedings initiated by the Improvement Trust may be said to be “a matter of fact essential to the agreement.” The learned Advocate-General argued that it did not follow that, because proceedings under sec. 63 had been initiated by the Improvement Trust, any further steps to carry out street improvements would be taken. That is true. On the other hand, the converse is equally true, and the proceedings under sec. 63 having been initiated, the Improvement Trust might eventually carry out street improvements which would affect the premises. That essential matter of fact was unknown both to the Plaintiff and the Defendant at the time of the Plaintiff's purchase; consequently by reason of the provisions of sec. 20 of the Contract Act, the agreement is void. The words of the section are: “Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void.” For these reasons, and on the above-mentioned ground, I am of opinion that the Plaintiff is entitled to the declaration for which he asked, namely, that the agreement is void, and he is further entitled to a decree for the return of the deposit of Rs. 36,000.

The result is that the appeal is allowed, the learned Judge's judgment and decree are set aside. A declaration will be made that the agreement is void and there will be a decree in favour of the Plaintiff for rupees thirty-six thousand.

The Defendant must pay the costs of the Plaintiff in this Court and in the trial Court.

Richardson, J.:— I agree. It is common ground that neither party knew of the defect consisting in the liability created by the notice in the Gazette. An attempt was made by the learned Advocate-General by a close examination of the provisions of sec. 63 of the Calcutta Improvement Act as amended by Act, III of 1915, to minimise the liability to which the property is subject. He said that every house in Calcutta is subject to a possibility that it may be acquired under the Improvement Act for the purposes of the Act and that the notice issued by the Board of Trustees under sec. 63 stating that a plan had been made of a proposed public street which would pass through this particular house carried the liability of the house to be acquired under the Act very little further. There were other stages to be gone through and the premises could not be acquired until the proposed public street had first become a projected public street and had then found its way into an improvement scheme sanctioned by the Local Government under sec. 48 of the Act. But, in my opinion, the notice in the Gazette did crystallize the general liability to which this property, in common with other properties in Calcutta, is subject in such a way as to entitle the buyer to say that he would not be getting a property of the description which at the tune of the sale he thought he was getting. He would be getting a property which he might not be able to keep and instead of which he might in the result be entitled merely to a sum of money by way of compensation. Where sec. 20 of the Contract Act is in question it may not always be easy to say whether a mistake has been made as to a matter of fact “essential to the agreement.” In my opinion, however, the present case falls within the section, and with great respect to the learned Judge, I am of opinion that this appeal should be allowed.

Mr. N.C Bose, Solicitor for the Plaintiff-Appellant.

Mr. S.C Mitter, Solicitor for the Defendant-Respondent.

P.K.C