Whether vendee can claim compensation from vendor on ground that decree was passed in respect of purchased property?

Moreover the learned Judge relied upon English law for holding that the passing of the decree would constitute a cause of action for compensation for breach of the covenant of title. Under the law of contract in India compensation can only be claimed under S. 73, Contract Act, when loss or damage has been caused, and it is doubtful whether it could be held that the mere passing of the decree actually causes any loss or damage before the decree has been executed. For the respondents reliance has been placed not only upon 52 All 604 Muhammad Siddiq v. Muhammad Nuh, 1930 All 771=124 I C 185=52 All 601=1930 A L J 653, but also on a Full Bench decision in 1932 Nag 5 Kasi Rao v. Zabu, 1932 Nag 5=136 I C 225= 28 N L R 31 (F B). It appears to us that, apart from the terms of the sale-deed itself, the plaintiffs had not got any cause of action for the suit as they had not been dispossessed. If we turn to the terms of the sale-deed, it is clear that the plaintiffs are not yet entitled to claim compensation. It was definitely provided in the sale-deed that in case of any disturbance or dispute the buyer could claim his money with interest from the seller from the date of dispossession. Evidently it was not the intention of the parties that the buyer could claim compensation unless and until he is dispossessed, and that contingency has not yet arisen. We agree with the Courts below and dismiss the appeal with costs.

IN THE HIGH COURT OF OUDH

Second Appeal No. 101 of 1934

Decided On: 06.12.1935

Appellants: Bhagwati Prasad and others
Vs.
Respondent: Badri Prasad and others

Hon'ble Judges/Coram:
King, C.J. and Nanavutty, J.

Citation: AIR1936Oudh141

1. This is a plaintiffs' appeal arising out of a suit for refund of purchase money, or in the alternative for damages for breach of contract of sale. One Rajjan Lal sold a four annas share out of a certain mahal to the father of the plaintiffs on 30th January 1931. A partition was effected in the family of Rajjan Lal in November 1931. On 4th April 1932 two of the sons of Rajjan Lal brought a suit against Rajjan Lal and their brother Chhotey Lal and the plaintiffs for possession of two annas out of the four annas which had been sold to the plaintiffs' father. This suit was decreed on 24th October 1932 with the result that defendants 1 and 2 of the present suit were found entitled to two annas of the property sold and were given a decree for possession. It was also held in that suit that the actual sale consideration was only Rs. 1,620 and not Rs. 2,500 as entered in the sale deed. On 5th December 1932 the plaintiffs brought their present suit claiming refund of Rs. 810 as half the sale consideration, together with the costs of defending the suit brought by defendants 1 and 2 and interest.

2. One of the grounds of defence was that the suit was premature because the plaintiffs were still in possession of the property in suit, and therefore they had suffered no loss or damage. Both the Courts below have concurred in finding that the suit is premature as no cause of action had accrued before the institution of the suit. It has been argued for the appellants that a cause of action accrued when the decree was passed in the Munsif's Court on 24th October 1932 decreeing possession of two annas out of the property sold by Rajjan Lal in favour of defendants 1 and 2, who were the plaintiffs of that suit. It is argued that the effect of this decree was to cause a breach of the implied covenant of title contained in the plaintiffs' sale deed, and that the passing of this decree constituted a sufficient cause of action for instituting the suit. For the respondents it is argued that compensation can be only claimed for breach of contract under S. 73, Contract Act, when any loss or damage has been occasioned by the breach. As the plaintiffs have not been dispossessed, no loss or damage can be said to have been sustained, and therefore no cause of action has accrued for a suit for damages. Both parties have relied upon certain authorities, but in our opinion the authorities relied upon by the respondents and by the Courts below are more clear and decisive than those which have been cited for the appellants. For the appellants reliance has been placed mainly upon the ruling in 45 Bom 955 Multanmal Jayram v. Budhumal Keval Chand, 1921 Bom 252=61 I C 70=45 Bom 955=23 Bom L R 325. In that case the plaintiffs in 1911 bought two lands under a registered sale deed and went into possession. One of the lands was let to a tenant. The tenant claimed the land as his own and established his title to the land in 1913, and the decree was confirmed by the High Court in 1916.

3. In 1917 the plaintiffs sued their vendors for cancellation of the sale of 1911 and to recover the consideration money together with certain amounts spent on improvements. It was held that a cause of action arose in 1913 when the tenant established his title in the trial Court. In that case the question did not arise whether the cause of action accrued on the passing of the decree or whether it did not accrue before the purchaser was dispossessed. Apparently in the circumstances of that case, the decree of 1913 was taken as equivalent to dispossessing the purchaser because the plaintiff in that suit was already in actual possession as a tenant. The reasoning of the case does not seem to support the view that if the purchaser retains possession then he can sue for recovery of his purchase money even before he has been dispossessed. Two rulings of their Lordships of the Judicial Committee, namely 46 I A 52 Juscurn Boid v. Pirthi Chand Lal, 1918 P C 151=50 I C 444=46 I A 52=46 Cal 670 (P C) and 18 I A 158 Hanuman Kannut v. Hanuman Mandar,(1891) 19 Cal 123=18 I A 158=6 Sar 91 (P C), have also been relied upon for the appellants for holding that the cause of action should be held to have accrued upon the passing of the Munsif's decree on 24th October 1932. These rulings were considered by a Bench of the Allahabad High Court in 52 All 604 Muhammad Siddiq v. Muhammad Nuh, 1930 All 771=124 I C 185=52 All 601=1930 A L J 653. At p. 610 the learned Judges referred to the Privy Council decisions and distinguished them. It is unnecessary for us to discuss the question at length as we respectfully agree with the views expressed by their Lordships in this ruling. Their Lordships held in a suit brought by a vendee who had purchased under a registered sale-deed from a vendor with a defective title and was subsequently dispossessed by the person with superior title, that Art. 116, Lim. Act, applied to a suit to recover damages for breach of the implied covenant for title under S. 55, Sub-S. (2), T. P. Act.

4. At p. 615 their Lordships gave reasons for holding that the date of dispossession should form the starting of limitation for the suit where the suit is regarded as a suit for compensation for breach of contract, or whether it is regarded as a suit to which Art. 97 would apply, to recover money paid upon an existing consideration which has afterwards failed. If the suit is regarded as governed by Art. 116, then it was pointed out by their Lordships that no loss or damage can be said to have been caused by the mere passing of a decree for proprietary possession in favour of a third party. It appears to us that this view must be correct. It is possible that the decree for possession may never be executed. By, reason of negligence or some other reason the decree-holder may fail to execute it until it has become barred by limitation. In such a case the purchaser may retain possession of the property sold to him and may not suffer any loss although his title has been found defective. Hence we do not think that the mere passing of the decree can be held to constitute a cause of action, and the cause of action does not accrue until the purchaser has been dispossessed in execution of the decree. If on the other hand, the suit is regarded as governed by Art. 97, it cannot be held that consideration has totally failed so long as the buyer remains in possession and is in a position to enjoy the profits. It has been found in the present case that the plaintiffs have not actually been recovering the rents since the decree was passed against them, and it is argued that it would be wrong for them to do so as their possession must be now regarded as the possession of a mere trespasser. We do not think that this view is correct. Unless and until the plaintiffs are ejected in execution of the decree against them, we think that they are legally entitled to remain in possession and to recover rents from the tenants. Their names still remain recorded in the khewat, and they have not been lawfully dispossessed.

5. The ruling in 8 Pat 432 Lakhpat Kuar v. Durga Prasad, 1929 Pat 388=117 I C 654=8 Pat 432 is distinguishable as no question of dispossession arose in that case. The case of 57 Mad 1016 V. M. Meerakanni v. A.V. Periya Karuppan 1934 Mad 687=151 I C 920=57 Mad 1016=67 M L J 647 is in favour of the appellants, but the decision is by a single Judge, and the opinion relied upon is an obiter dictum which was not necessary for the decision of the appeal. Moreover the learned Judge relied upon English law for holding that the passing of the decree would constitute a cause of action for compensation for breach of the covenant of title. Under the law of contract in India compensation can only be claimed under S. 73, Contract Act, when loss or damage has been caused, and it is doubtful whether it could be held that the mere passing of the decree actually causes any loss or damage before the decree has been executed. For the respondents reliance has been placed not only upon 52 All 604 Muhammad Siddiq v. Muhammad Nuh, 1930 All 771=124 I C 185=52 All 601=1930 A L J 653, but also on a Full Bench decision in 1932 Nag 5 Kasi Rao v. Zabu, 1932 Nag 5=136 I C 225= 28 N L R 31 (F B). It appears to us that, apart from the terms of the sale-deed itself, the plaintiffs had not got any cause of action for the suit as they had not been dispossessed. If we turn to the terms of the sale-deed, it is clear that the plaintiffs are not yet entitled to claim compensation. It was definitely provided in the sale-deed that in case of any disturbance or dispute the buyer could claim his money with interest from the seller from the date of dispossession. Evidently it was not the intention of the parties that the buyer could claim compensation unless and until he is dispossessed, and that contingency has not yet arisen. We agree with the Courts below and dismiss the appeal with costs.