Padmanabha Pillai v. Pich Rowther — 1955 DIGILAW 113 (KER)

Judgment :- 1. The plaintiff is the special appellant. He had a mortgage Ext. B for 1400 fanams over certain property belonging to a Devaswom and executed a sub-mortgage Ext. C dated 29.5.1106 in favour of the defendant from 500 fanams of which 105 and odd fanams was left with the defendant to pay as per recital. The defendant covenanted under the sub-mortgage to pay to the Devaswom the annual tax of 10 paras of paddy from 1105 onwards but he did not pay either the recital amount or the tax due to the Devaswom with the result that the properties were sold in revenue auction on 14.5.1109 for arrears of tax due to Devaswom for the three years 1106 to 1108. The plaintiff subsequently filed petition before the Devaswom authorities to set aside the revenue sale. Being unsuccessful therein he later filed suit O.S. No. 104 of 1110 in the Quilon District Court to set aside the revenue sale impleading the present defendant sub-mortgagee as the 2nd defendant but the suit was dismissed on 18.1.1116. This suit was laid therefore for recovery of damages from the defendant for the amount of 1400 fanams representing Ext. B mortgage amount after deducting therefrom the actual consideration of 394 and odd fanams due to the defendant under the sub-mortgage Ext. C and also for the costs incurred by the plaintiff in the conduct of the suit O.S. No. 104 of 1110. 2. Defendant contested the suit. He disclaimed liability for payment of tax on the ground that he did not obtain possession of the plaint property under Ext.C sub-mortgage and further contended that the damages claimed was in any event too remote and besides the suit was barred by limitation. The courts below concurrently found that the suit was not barred by limitation and that the defendant got possession. The trial court found further that the defendant was to blame for having allowed the property to be sold in revenue auction and was liable in consequence for damages on all the heads claimed by the plaintiff. The courts below concurrently found that the suit was not barred by limitation and that the defendant got possession. The trial court found further that the defendant was to blame for having allowed the property to be sold in revenue auction and was liable in consequence for damages on all the heads claimed by the plaintiff. The learned Additional District Judge in appeal by the defendant modified decree of the trial court and granted recovery of 45 paras of paddy made up of 30 paras being the defaulted arrears and interest thereon up to one-half the principal subject however to a deduction of the admitted consideration of 394 and odd fanams under the sub-mortgage. The price of paddy was to be calculated at the nirak rate on the date of suit. The plaintiff has come up in appeal claiming that he is entitled to the entire damages as prayed for in the plaint and as granted by the Munsiff. By cross-objection the defendant has raised once again all the questions he raised in the trial court as to possession, limitation and also measure of damages. 3. The question of possession of the defendant under the sub-mortgage need not detain us for a moment. It is concluded by the concurrent findings of the courts below and no reason has been made out for interfering with those findings. 4. On the question of limitation, learned counsel for the defendant relied upon an admission of the plaintiff examined as Pw. 3 that he knew of the revenue sale in Dhanu 1109, that is the very month during which it was held, and argued therefrom that the suit filed in 1119 must be held to be barred whether under the three of six years' rule. The court below had got over it by saying that the plaintiff's cause of action arose only after the dismissal of the suit in O.S. No. 104 of 1110 and the dismissal being on 18.1.1116 this suit filed on 17.1.1119 was well within time. According to that court the plaintiff had six years for filing a suit for the breach of contract in Ext. C sub-mortgage in writing registered. The reasoning is not without force. According to that court the plaintiff had six years for filing a suit for the breach of contract in Ext. C sub-mortgage in writing registered. The reasoning is not without force. But I would place it on a broader footing, depending on the obligation of a mortgagee even in the absence of a contract to the contrary "to pay the Government revenue, all other charges of a public nature (and all rent) accruing due in respect thereof during such possession, and any arrears of rent in default of payment of which the property may be summarily sold" as provided for under S. 76(c) of the Transfer of Property Act and the liability consequent on the breach thereof as mentioned towards the end of the same section "when accounts are taken in pursuance of a decree made under this chapter, to be debited with the loss, if any, occasioned by such failure". The plaintiff who was in the position of mortgagor as regards the defendant had 50 years within which to sue for redemption under Art. 136 of the Travancore Limitation Act VI of 1100, which was in force at the time of institution of the suit. Damages consequent on the failure of the mortgagee to fulfil his covenant to pay revenue dues in proper time is one of the items of accounting available to the mortgagor as against the mortgagee at the time of redemption and it does not matter for this purpose that recovery on redemption has become impossible by virtue of the loss of the mortgage holding, during the interval, on account of the default of the mortgagee. No doubt the mortgagor could come in with his claim for damages as soon as he is aware that the holding is lost but it cannot mean that his right to accounting as at date of redemption is in any way prejudiced. As observed in Madhavan Pillai v. Sankararu,1950 KLT 356, "The law allows accounting between persons standing in certain jural relationship in which accounts are taken for all the period prior to commencement of action and mutual rights and liabilities are settled without limitation of time. As an example we may refer to the case of partners and principal and agent. The relationship between mortgagor and mortgagee in respect of accounts is not different and we hold that no question of limitation can arise until re-entry by the mortgagor". As an example we may refer to the case of partners and principal and agent. The relationship between mortgagor and mortgagee in respect of accounts is not different and we hold that no question of limitation can arise until re-entry by the mortgagor". This decision was quoted with approval and followed in Kurien Chacko v. Ramakrishna Pillai, A.I.R. 1952 (T.C.) 552. It follows therefore that no question of limitation arises in the case. 5. The only question remaining to be considered is the rule as to measure of damages applicable to the case. The learned judge has referred on this subject to Narayanan v. Govindan, 24 TLJ 777, and Atchuthan v. Lekshmi, 27 TLJ 1219 for the proposition that in the case of non-payment of money undertaken by the defendant, on behalf of the plaintiff, no matter what amount of inconvenience was sustained by the plaintiff, the measure of damages is the interest on the money only and all other damage sustained by the plaintiff as the result of the breach is remote. On this basis the learned judge arrived at the liability of the defendant to the extent of 45 paras of paddy and disallowed the excess of the mortgage amount under Ext. B and also the costs incurred over the sub-mortgage amount under Ext. C by the plaintiff in the prior litigation. But he went further and allowed deduction of the sub-mortgage amount and for this he gave no reason. Learned Counsel for the plaintiff submits that this is a case where the parties must be held to have contemplated the possible consequence of a non-payment of the tax due to the Devaswom by way of loss of the entire holding and that therefore the value of the property lost to him must be taken to be the proper measure of damages. He urged that in any event there was no warrant for the deduction of the sub-mortgage amount from the defaulted tax arrears and interest thereon. 6. It is no doubt the rule in contract that a party who has sustained loss by reason of a breach of contract is, with respect to damages, to be placed in the same situation as he would have been in, if the contract had been performed. 6. It is no doubt the rule in contract that a party who has sustained loss by reason of a breach of contract is, with respect to damages, to be placed in the same situation as he would have been in, if the contract had been performed. But this principle is only theoretically true for in practice it is almost certain that it is impossible to restore the party who has suffered by the breach of contract to status quo ante. According to illustration (n) to S. 73 of the Contract Act, the law in India, in consonance with the rule of English Law, does not regard collateral or consequential damage arising from delay in the receipt of money. And as observed by Pollock and Mulla in their commentary on the Indian Contract Act, this principle has become settled though it is anomalous. It is difficult to understand also how the parties could have contemplated the actual loss of the mortgage holding by reason of the default on the part of the mortgagee to pay the tax in due course, for, ordinarily, parties do not think of the consequences of a breach when the contract is entered into and there is neither plea nor proof to this effect. Therefore the contention that plaintiff is entitled to more than the normal damages of the principal and interest by virtue of special terms or conditions cannot be sustained. 7. The question directly arose in Chandra Das v. Kunja Behari Malo, I.L.R. 35 Cal. 683. In that case a lessee had agreed under his lease to pay the superior land-lord the amount of rent which the lessors were bound to pay and owing to the lessee not having paid the rent due to superior land-lord the holding itself was lost to the lessors and it was held that the lessors were not entitled to sue the lessee for damages for loss of the holding. The learned judges blamed the lessor for his own default in not protecting the property and observed "It is reasonably clear if we look at S.73 of the Indian Contract Act that the plaintiffs were only entitled to compensation for any loss or damage, which naturally arose in the usual course of things from the breach of the contract and illustration (n) to that section supports this view". That is to say, loss of property was not the natural consequence of the default of the lessee in performing his covenant within the meaning of S. 73 supported by illustration (n). The same principle was applied in a case where the defendant had undertaken to collect some monies due to the plaintiff, and out of such collections, to pay a debt due by the plaintiff to a third person who, however, because of the defendant's default recovered it with costs from the plaintiff. In an action by the plaintiff to recover from the defendant the amount of the debt and the costs he had to pay to his creditor, it was held that the amount of costs recovered against him was a consequential damage for which the law does not award compensation under S. 73, Indian Contract Act. See Rangaswami Aiyer v. Venkatarama Iyer, 28 I.C. 635. It follows, that the proper measure of damage in this case should be the amount of tax which was defaulted to be paid and the interest thereon. But we cannot deduct therefrom as the court below did, the amount of the sub-mortgage because it was due to the default of the sub-mortgagee himself that he lost his own security. 8. S.73 of the Transfer of Property Act says: "Where the mortgaged property or any part thereof or any interest therein is sold owing to failure to pay arrears of revenue or other charges of a public nature or rent due in respect of such property, and such failure did not arise from any default of the mortgagee, the mortgagee shall be entitled to claim payment of the mortgage-money, in whole or in part, out of any surplus of the sale-proceeds remaining after payment of the arrears and of all charges and deductions directed by law". The implication is that if the failure arose from the default of the mortgagee, the mortgagee would not have any remedy in respect of his mortgage amount. There is no warrant therefore for the learned judge to have deducted the sub-mortgage amount from the amount of tax and interest thereon. 9. The court below directed that the valuation of the paddy should be at the nirak rate prevailing at the date of suit. There is no warrant therefore for the learned judge to have deducted the sub-mortgage amount from the amount of tax and interest thereon. 9. The court below directed that the valuation of the paddy should be at the nirak rate prevailing at the date of suit. Learned Counsel for the special respondent urges that the material date for commutation is the date of the accrual of the cause of action according to the Full Bench decision in Ouseph v. Thomman, 1954 KLT 463, and this according to him, should be taken to be the date of the revenue sale in 1109. In the light of the discussion in this judgment however as to the availability of cause of action in favour of plaintiff at date of suit, for purpose of limitation, I uphold the direction of the judge in this regard. 10. I therefore modify the decree of the court below to this extent that the deduction of 395 5/8 fanams provided for therein will stand deleted and the decree will otherwise stand confirmed. The plaintiff will get proportionate costs from the defendant in this Court also. The second appeal is allowed to this extent. The objection memorandum filed by the defendant is dismissed with costs. Decree modified.