Judgement

Consolidated Cross-Appeals (No. 30 of 1932, and No. 98 of 1933) from a decree of the High Court (May 1, 1930) varying a decree of the Court of the Government Agent, East Godaveri (July 6, 1925).

The plaintiff, who had obtained a decree against the defendant for more than four lakhs of rupees in respect of money lent on the security of certain property, brought the mortgaged property to sale by auction and himself purchased it. The balance of the purchase price, after deducting the sum due to the plaintiff, was claimed by the puisne mortgagees. By arrangement with the defendant, who was then a minor, and his guardian, it was arranged that the plaintiff should re-convey to the minor for Rs. 139,986 (a sum equal to the above mentioned balance of the purchase price) a certain village, part of the property which he (the plaintiff) had bought by auction, in consideration of the sons not taking any proceedings to set aside the auction sale. It was agreed that the minors guardian should pay the Rs. 139,986, and the compromise transaction was duly sanctioned by the Court as beneficial to the minor. Nothing having been paid under that arrangement, the plaintiff sued the minor, who had attained majority, to recover the money, alleging that he had a vendors lien on the village in question for the unpaid purchase price.

The question in this appeal was whether the transaction whereby the village became the property of the defendant did or did not amount to a sale.

The facts appear from the judgment of the Judicial Committee.

The trial judge granted the plaintiff a decree for sale of the village.

On appeal the High Court (Beasley C.J. and Curgenven J.) held that the transfer of the village was not a sale which would create a lien in favour of the plaintiff; but treating the debt as unsecured they directed that it should be realized from the " general assets of the defendant. The appeal is reported at ( 1931) I. L. R. 54 M. 163.

1936. Jan. 30, 31. Sidney Smith for the appellant.

De Gruyther K.C., Subba Row and Sastri for the respondents.

[Reference was made to Waghela Rajsanji v. Shekh Masludin (( 1887) L. R. 14 I.A. 89.), Ramajogayya v. Jagannadhan (( 1918) I. L. R. 42 M. 185, 187.), Hunooman-persaud Panday v.

2 Law. Rep. 63 Ind. App. 304 ( 1935- 1936) Rajah Kocharlakota v. Maharajah Ravu Venkata

84

Musummat Babooee Munraj Koonweree (( 1856) 6 Moo. I. A. 393.), Turner v. Edgell (( 1837) 6 L.

J. Eq. (n. s.) 201.), Kedar Nath Shaha v. Emperor (( 1903) I. L. R. 30 C. 921.), Madam Pillai v. Badrakali Ammal (( 1922) I. L. R. 45 M. 612.), Bhawani Kumar v. Mathura Prasad Singh (( 1912) L.

R. 39 I. A. 228.), and Ariyaputhira v. Muthukomaraswami (( 1912) I. L. R. 37 M. 423.).]

April 28. The judgment of their Lordships was delivered by

SIR SHADI LAL. The circumstances which led to the action giving rise to these consolidated appeals, brought by both the parties, may be shortly stated. One Krishna Rao, the late Zamindar of Polavaram in the Madras Presidency, borrowed, on different dates, from the Maharajah of Pittapur (to be described hereinafter as the plaintiff) large sums of money; and secured the payment thereof by executing three successive mortgages of his estate in favour of the creditor. The last of these mortgages was granted on October 22, 1913, as a security for a loan of more than three lakhs of rupees; and it was on the strength of this mortgage that the plaintiff instituted, after the death of the mortgagor, a suit for the recovery of the debt, impleading as defendant the mortgagors widow. She subsequently adopted a minor boy, Jagannatha Rao, as a son to her deceased husband, and the adopted son was then added as a defendant (to be referred to hereinafter as the defendant). The suit resulted in a decree for more than four lakhs of rupees, to be realized by the sale of the mortgaged property. The decree-holder brought the property to sale, and on October 28, 1920, he himself purchased it, with the leave of the Court, for six lakhs of rupees. After deducting from that price the sum due to him under the decree, he deposited the balance, Rs. 139,986-1-0, in Court.

It appears that the widow and her son were anxious to retain the village of Polavaram (with its hamlets), which was the ancestral property of the Zamindar; and it was, therefore, arranged between the auction purchaser and the minors mother that the former should re-convey, for the sum deposited by him in Court, the village to the minor. But that sum was claimed by the puisne mortgagees, and it was then agreed that the minors mother, who was his guardian, should pay Rs. 139,986-1-0 for purchasing the village in question. Pursuant to this arrangement, the auction purchaser and the guardian submitted, on November 29, 1920, an application to the Court stating the terms of the compromise, and asking it to sanction the compromise as a transaction beneficial to the minor. Thereupon the Court made the following order " The sale of the property sold in auction on October 28, 1920, is confirmed, with the exception of the property set out in the compromise petition of November 29, 1920, which the decree-holder has agreed to leave to the minor Zamindar of Polavaram on the terms of the compromise petition.

…………………………………………….. " A sale certificate for the extent of property, the sale of which is confirmed, will be issued to the plaintiff."

The guardian was, however, unable to find the money for payment to the plaintiff, but, as she was anxious to acquire the property for her minor son, she, on his behalf, granted on December 14, 1920, a simple mortgage of the village to the plaintiff as a security for the price, with her personal covenant for the payment thereof. But no payment was made to the mortgagee in satisfaction of the debt, and in May, 1924, he brought the present action against the defendant, who had attained majority ; and sought to recover the money by sale of the mortgaged property.

To this action various defences were raised, but they were overruled by the trial judge, who granted a decree for sale. On appeal, the High Court held that the transaction could not operate as a mortgage, as the deed had not been attested as contemplated by the definition of the expression " attested " contained in the Transfer of Property (Amendment) Act (No. XXVII. of 1926). This finding has not

2 Law. Rep. 63 Ind. App. 304 ( 1935- 1936) Rajah Kocharlakota v. Maharajah Ravu Venkata

85

been challenged on behalf of the plaintiff, and must be treated as final. The plaintiff, however, sought the same relief on the strength of his alternative claim to have a vendors lien for the unpaid purchase price, which constituted a charge on the property sold by him. This claim has been disallowed by the High Court on the ground that the transfer in question was not a sale which would create a lien in favour of the plaintiff. The learned judges did not, therefore, declare the debt to be a charge on the village, but, treating it as an unsecured debt, they directed that it should be realized from the " general assets " of the defendant.

The question which their Lordships have to determine is whether the transaction of November 29, 1920, whereby the village in question became the property of the defendant, did or did not amount to a sale. That village, along with other mortgaged property, was, as stated, sold to the plaintiff on October 28, 1920 ; and the period within which the judgment-debtor could apply to the Court for setting aside the sale was thirty days from the date of the sale. During that period no such application was made by him, and the title of the auction purchaser became unimpeachable. On November 29, 1920, the Court executing the decree made an order confirming the sale in favour of the plaintiff in respect of all the property purchased by him except the Polavaram village. The reason for this exclusion was clear. In accordance with the compromise, which had received the sanction of the Court, this village was to become the property of the defendant, and it was, therefore, considered to be an act of supererogation, first to record a formal order confirming the judicial sale thereof in favour of the auction purchaser, and then to sanction its sale by him to the defendant. It is obvious that, after the expiry of the statutory period for setting aside the sale, there was no person who could question the title of the auction purchaser, and a certificate of sale granted by the Court would in such a case be a formal document of title. In the absence of an order setting aside the sale the Court is bound to confirm it, and the law does not prescribe any special period for an application for an order of confirmation. Moreover, the transferee agreed to accept such right, title, and interest, as the transferor had acquired by the Court sale ; and he cannot be allowed to impugn the character of the transaction which alone enabled him to keep the property.

It is argued, however, that the consideration for the transaction consisted of two parts—namely, a sum of money, and a promise by the transferee to abstain from raising objections to the auction sale of the mortgaged property ; while sale, as defined by s. 54 of the Transfer of Property Act (IV. of 1882), is a transfer of ownership in exchange for a price. Now, the transfer was made apparently for a definite sum of money, and was described as a sale. It is true that the deed of compromise mentions also the promise in question, but, apart from the fact that this promise was valueless, there is hardly any instrument of sale which does not contain some stipulations by the parties ; and if the addition of a covenant by the transferee would change its real character, it would be difficult to find a transaction which could be held to be a sale. For example, a covenant by the purchaser giving the vendor a right of pre-emption does not convert the sale into some other transfer, even though the transferee would, in the absence of such a covenant, have paid a larger price for the property. There can be little doubt that both the parties intended the transfer in question to be a sale, and in substance it was nothing but a sale.

Their Lordships are, therefore, of the opinion that the transfer of the property by the plaintiff to the defendant constituted a sale; and under s. 55, sub-s. 4 (b)t of the Transfer of Property Act the seller was entitled to a charge upon the property in the hands of the purchaser for the amount of the purchase money and for interest thereon. This charge can be enforced by a sale of the property under

s. 100 of that statute and under Order xxxiv., r. 15, of the Civil Procedure Code, as in the case of a simple mortgage.

The learned judges of the High Court concurred with the trial Court that the plaintiffs claim amounted,

2 Law. Rep. 63 Ind. App. 304 ( 1935- 1936) Rajah Kocharlakota v. Maharajah Ravu Venkata

86

on July 6, 1925, to Rs.202,591-9-0, and they awarded interest thereon at 6 per cent, per annum from that date until the date of payment. They also found that, as the defendant was a minor at the time of the transaction in question, he could not be held personally responsible for the payment of the debt. This finding has not been contested, and as the claim for the personal liability of the defendant is negatived, the plaintiff is not entitled to recover the money from the " general assets " of the defendant.

The decree granted by the High Court, which makes the entire property of the defendant liable for the debt, can not be upheld, and ought to be set aside. In lieu of that decree, the plaintiff must get a decree in the following terms That, in default of the defendant paying on, or before, September 30, 1936, the sum of Rs.202,591-9-0, with interest thereon at 6 per cent, per annum from July 6, 1925, until the date of payment, the village of Polavaram (with its hamlets as described in the mortgage deed of December 14, 1920), shall be sold, and the proceeds of the sale (after deduction therefrom of the expenses of the sale) shall be paid into Court and applied in payment of the amount due to the plaintiff.

The appeals preferred by the parties are allowed pro tanto, but the defendant, having failed on the main issue, must pay, not only the costs of the Courts below as directed by the High Court, but also the costs incurred by the plaintiff here. Their Lordships will humbly advise His Majesty accordingly.