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Preo Nath Chattopadhya v. Ashutosh Ghose, Arunodoy Ghose
Factual and Procedural Background
The Plaintiff-Appellant brought a suit for specific performance of a contract for sale of immoveable property against Defendant No. 2 (the vendor) and Defendant No. 1 (a subsequent purchaser from Defendant No. 2). The plaintiff alleged that: (a) the predecessor-in-interest of Defendant No. 2 had entered into an ekrarnama (an agreement) with the plaintiff and another person giving them priority to buy the property if it were sold; (b) subsequently there was a verbal contract between Defendant No. 2 and the plaintiff for the sale of the property to the plaintiff for Rs. 100; and (c) Defendant No. 1, with notice of the ekrarnama and the verbal contract, nevertheless purchased the property from Defendant No. 2.
Defences included Defendant No. 1's denial of the verbal contract, denial of notice of either the verbal contract or the ekrarnama, and a denial of the plaintiff's right; Defendant No. 2 denied the plaintiff's right generally.
The trial court entered a decree for the plaintiff. On appeal the lower Appellate Court reversed and dismissed the suit, holding (inter alia) that the verbal contract was not proved, the ekrarnama could not be enforced because the suit was not founded upon it and it was not between the plaintiff and Defendant No. 2 nor for exactly the same subject matter, that Defendant No. 1 had no notice of the ekrarnama or any verbal contract, and that registration of the ekrarnama did not constitute sufficient notice within the meaning of section 27 of the Specific Relief Act. This second appeal challenges principally the lower Appellate Court's treatment of the effect of registration as notice.
Legal Issues Presented
- Whether the registration of the ekrarnama constituted sufficient notice to Defendant No. 1 within the meaning of section 27 of the Specific Relief Act.
- Whether the suit was properly founded upon the ekrarnama (as contended by the plaintiff) or not.
- Whether the fact that the ekrarnama was not executed between exactly the same parties as those in the present suit affects the plaintiff's right when one of the ekrarnama's beneficiaries sues on the footing that the co-beneficiary has waived its benefit.
Arguments of the Parties
Plaintiff-Appellant's Arguments
- The registration of the ekrarnama was sufficient in law to give constructive notice to Defendant No. 1 under section 27 of the Specific Relief Act.
- The suit was, in substance, based upon the ekrarnama (despite the lower court's finding to the contrary).
- Any difference in the nominal parties to the ekrarnama and to the present suit is immaterial where the plaintiff is one of the ekrarnama's beneficiaries and alleges that the other jointly interested party has waived the benefit of the ekrarnama.
Defendants' Arguments
- Defendant No. 1 denied that any verbal contract with the plaintiff existed and denied having notice of any ekrarnama or verbal contract; Defendant No. 1 also denied the plaintiff's right.
- Defendant No. 2 denied the plaintiff's right generally.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Inderdawan Pershad v. Gobind Lall Chowdhry | Held that registration does not amount to notice within the meaning of section 81 of the Transfer of Property Act. | The Court followed this decision and applied its reasoning by analogy to hold that registration of the ekrarnama is not constructive notice within the meaning of section 27 of the Specific Relief Act. |
| Le Neve v. Le Neve (note) | Authority indicating that registration is not constructive notice under English law. | Used to support the proposition that registration is not constructive notice; the Court observed English law's treatment as persuasive context. |
| Doorga Narain Sen v. Baney Madhub Mozumdar | Observation (by Mr. Justice Pontifex) that the doctrine of constructive notice has been pushed to its extreme limit in England and that in India it requires still more careful application against a purchaser for value. | Invoked to caution against expansive application of constructive notice by registration in India and to reinforce reluctance to treat registration as sufficient notice to a purchaser for value. |
| Lakshmandas Sarup Chand v. Dasrat | Authority relied upon by the appellant for the proposition that registration could constitute notice. | The Court noted that this decision had been dissented from in Inderdawan Pershad and by the Madras High Court, and therefore declined to follow it. |
| Shan Maun Mull v. Madras Building Co. | Madras High Court decision dissenting from Lakshmandas Sarup Chand v. Dasrat. | Referenced to show that Lakshmandas had been dissented from in other authoritative decisions; supported the Court's choice to follow Inderdawan rather than Lakshmandas. |
Court's Reasoning and Analysis
The Court identified the primary question as whether registration of the ekrarnama suffices as notice to a purchaser under section 27 of the Specific Relief Act. It observed that "notice" is not defined in the Specific Relief Act, and noted the lower Appellate Court's factual finding that there was no actual (or direct) notice to Defendant No. 1 of the ekrarnama or any verbal contract; the only notice relied upon by the plaintiff was constructive notice arising from registration.
The Court referred to the definition of "notice" in section 3 of the Transfer of Property Act as a broad formulation, but relied primarily on precedent. It recalled this Court's decision in Inderdawan Pershad v. Gobind Lall Chowdhry, which held that registration does not amount to notice under section 81 of the Transfer of Property Act. Finding no principled reason to differentiate the effect of registration under section 27 of the Specific Relief Act from its effect under section 81 of the Transfer of Property Act, the Court considered English authority (via Le Neve v. Le Neve) and the remarks in Doorga Narain Sen to underline caution in extending the doctrine of constructive notice, especially in India and particularly against purchasers for value.
The Court also addressed the appellant's reliance on Lakshmandas Sarup Chand v. Dasrat, noting that that decision had been dissented from in Inderdawan Pershad and by the Madras High Court in Shan Maun Mull v. Madras Building Co., and therefore declined to follow Lakshmandas. Applying Inderdawan and allied authority, the Court concluded that registration of the ekrarnama did not constitute constructive notice to Defendant No. 1 within the meaning of section 27 of the Specific Relief Act.
Because the Court resolved the appeal against the appellant on this primary question, it stated that it was unnecessary to decide the other issues raised by the parties.
Holding and Implications
Appeal dismissed with costs.
Direct effect: The Court held that the registration of the ekrarnama was not constructive notice to Defendant No. 1 under section 27 of the Specific Relief Act, and on that basis dismissed the plaintiff's appeal and awarded costs against the appellant. Because the Court resolved the case on this point, it did not decide the remaining contentions concerning whether the suit was properly based on the ekrarnama or the effect of the ekrarnama's parties differing from the present parties.
Broader implication: The Court followed existing authority (notably Inderdawan Pershad v. Gobind Lall Chowdhry) in declining to treat registration as constructive notice for the purposes of a purchaser for value; the opinion therefore applies and reaffirms the existing line of authority rather than announcing a contrary rule.
This appeal arises out of a suit brought by the Plaintiff-Appellant to enforce specific performance of a contract for sale of certain immoveable property against the Defendant No. 2, the vendor, and the Defendant No. 1, who is a purchaser from the Defendant No. 2 of the property in dispute, on the allegation that the predecessor in interest of the Defendant No. 2 had entered into an ekrarnama or agreement with the Plaintiff and another person to sell the property to them if it was sold at all; that subsequently there was a verbal contract between the Defendant No. 2 and the Plaintiff for the sale of the same to the latter for Rs. 100; and that the Defendant No. 1, who had notice of the ekrarnama and of the verbal contract, had, in spite of such notice, purchased the property from the Defendant No. 2.
The defence of the Defendant No. 1 was a denial of the alleged verbal contract, a denial of notice of the verbal contract or of the ekrarnama, and a denial of the Plaintiff's right. The Defendant No. 2 also denied the Plaintiff's right generally.
The first Court found for the Plaintiff and gave him a decree. On appeal by the Defendants the lower Appellate Court has reversed that decree and dismissed the Plaintiff's suit, holding that the alleged verbal contract was not proved; that the ekrarnama could not be enforced as the suit was not based upon it, and as moreover the ekrarnama was not between the Plaintiff and the Defendant No. 2, nor for exactly the same subject-matter as that now in dispute; that the Defendant No. 1 had no notice of the ekrarnama or of any verbal contract for sale; and that the registration of the ekrarnama was not sufficient notice within the meaning of sec. 27 of the Specific Relief Act.
In second appeal it is contended on behalf of the Plaintiff-Appellant that the lower Appellate Court is wrong in holding that the registration of the ekrarnama was not sufficient notice in law to the Defendant No. 1, and that the suit was not based upon the ekrarnama. It is further contended that the fact of the suit not being exactly between the same parties as those who entered into the ekrarnama makes no difference when the suit is brought by one of the parties in whose favour the ekrarnama was executed on the allegation that the other party who was jointly interested had waived the benefit of the ekrarnama.
The first question for consideration in this appeal is whether the registration of the ekrarnama was sufficient notice to the Defendant No. 1 within the meaning of sec. 27 of the Specific Relief Act. If this question is answered in the affirmative it will then be necessary to consider the other questions raised. But if it be answered in the negative, then, as admitted by the learned pleader for the Appellant, it will be unnecessary to go into those questions. “Notice” is not defined in the Specific Relief Act. It has been found by the lower Appellate Court as a fact that there was no actual notice to the Defendant No. 1, either of the agreement or of the alleged verbal contract. The only notice relied upon is constructive notice by reason of the registration of the ekrarnama. In sec. 3 of the Transfer of Property Act “notice” is defined in these words:—“A person is said to have notice of a fact when he actually knows that fact, or when, but for wilful abstention from an enquiry or search which he ought to have made, or gross negligence, he would have known it, or when information of the fact is given to or obtained by his agent under the circumstances mentioned in the Indian Contract Act, 1872, sec. 229.” This is as comprehensive a definition of “notice” as any that has ever been given. Notwithstanding the comprehensive definition of the term it has been held by this Court in the case of Inderdawan Pershad v. Gobind Lall Chowdhry that registration does not amount to notice within the meaning of sec. 81 of the Transfer of Property Act. If that is so, we see no reason why a different view should be taken as to the effect of registration on the question of notice in a case coming under sec. 27 of the Specific Relief Act. Registration is not constructive notice under the English. Law, see the notes to Le Neve v. Le Neve. We may add, as was remarked by Mr. Justice Pontifex in the case of Doorga Narain Sen v. Baney Madhub Mozumdar, that the doctrine of constructive notice has been pushed to its extreme limit in England, and that in this country it requires even more careful application against a purchaser for value.
The learned vakil for the Appellant relies upon the case of Lakshmandas Sarup Chand v. Dasrat. That case was considered by this Court in the case of Inderdawan Pershad v. Gobind Lall Chowdhry, and was dissented from, and it has also been dissented from by the Madras High Court in the case of Shan Maun Mull v. Madras Building Co.. In this state of the authorities we think it right to follow the view taken of the effect of registration on the question of notice in this Court in the case of Inderdawan Pershad v. Gobind Lall Chowdhry, and we must hold that the registration of the ekrarnama was not constructive notice to the Defendant No. 1 within the meaning of sec. 27 of the Specific Relief Act. That being so, it becomes unnecessary to consider the other questions raised in the appeal, and the appeal must be dismissed with costs.
J.N.D
S.C.S
Appeal dismissed with costs.
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