MADHAVI v. YAGNESWARA IYER — 1966 DIGILAW 181 (KER)

Judgment :- 1. This Second Appeal is in a suit by the respondents and by their deceased father, the first plaintiff, for damages suffered by them by way of costs decreed, in defending the litigation O. S.13 of 1956. They had executed a mortgage for five properties for Rs. 9000 in the year 1948. On the 10th September, 1955, they sold two of the properties to the defendant-appellant by Ex. B-1 for Rs. 4300/-, reserving Rs. 4000/- with her, to be paid to the mortgagee out of Rs. 6235 due under the mortgage. It is the case of the appellant, that the mortgagee did not accept such partial payment of Rs. 4000. The appellant then caused two notices, Exs. B-3 and B-5, both dated the 2nd December, 1955, to be issued to the vendor and to the mortgagee respectively. By Ex. B-3, the appellant called upon the venders, either to discharge the mortgage themselves or to pay the balance of the amount to the appellant and by Ex. B-5, the appellant intimated the mortgagee, that the amount of Rs. 4000 was available for immediate payment and that therefore she is no more liable for interest. The mortgagee did not reply to Ex. B-5, which, as seen from the endorsement of the postman made on it, was refused, but Ex. B-4 the reply dated the 13th December, 1955, to Ex. B-3 stated, that the vendors were not liable to pay the amount in lump because of the provisions of Madras Act 1 of 1955, and that the appellant may therefore proceed to deposit in court the amount left with her. Act 1 of 1955 had come into force on the Ist March 1955, that is before Ex. B-1. O.S. 13 of 1955 was commenced by the mortgagee on the 20th February, 1956, for the realisation of the mortgage amount in full, impleading the vendors as defendants 1 to 3 and the appellant as the 6th defendant. The appellant is seen to have deposited about Rs. 4000 in that court on the 9th July, 1956. In that suit, the vendors claimed the benefits of Act 1 of 1955 and a decree was passed, conferring on them such benefits with respect to the balance that remained payable; costs of the suit were also decreed against the vendors and the appellant, but their liability inter se was left open. In that suit, the vendors claimed the benefits of Act 1 of 1955 and a decree was passed, conferring on them such benefits with respect to the balance that remained payable; costs of the suit were also decreed against the vendors and the appellant, but their liability inter se was left open. It is this decree for costs that has occasioned the present suit. 2. The appellant contended that she had properly tendered the amount reserved to the mortgagee, but that the latter did not accept payment, that contemporaneously with Ex. B-1, the vendors had orally undertaken to obtain a release of the mortgage, by themselves making good the balance of the amount payable, but had failed to perform the undertaking, and that in any event the appellant is not liable. The first court dismissed the suit, but in appeal the District Judge held that the appellant had occasioned the suit by the mortgagee, by her failure to avail herself of the provisions of Madras Act 1 of 1955 and is therefore liable. This decree is assailed by the appellant before us. 3. There was a contention before us on behalf of the appellant, that the costs of the litigation by the mortgagee, was not within the contemplation of the parties at the time of the sale to her. Ex. B-1 recited, that while the sum of Rs. 6235/- was payable under the mortgage, the appellant was to make payment only of Rs. 4000; this necessarily implied that the balance was to be made good by the vendors. In this view, the sale may be deemed to be free of the mortgage, the vendors themselves raising Rs. 4000 by Ex. B-1 and leaving that sum with the appellant, the balance having to be found by them. So long as the mortgagee was not paid in full, the costs of the suit by the mortgagee to enforce the mortgage are, in our opinion, "such as may reasonably be supposed to have been in the contemplation of both the parties at the time they made the contract as the probable result of the breach of it", to quote the rule in Bailey v. Bermadale (See Pollock and Mulla's Contract Act, 8th edition, page 480). We overrule this contention. 4. We overrule this contention. 4. It was then argued, that under S.55(5) (b) of the Transfer of Property Act, the sale being free of encumbrances, even in an action by the vendors against the appellant to recover Rs. 4000 as unpaid purchase-money, the latter would be within her rights in refusing to pay, on the ground, that by her payment alone, the mortgage would not be wiped out and title to the properties sold to her would not be clear. The argument seems to us to be untenable, for it was part of the bargain which the appellant entered into with eyes open, that she do pay only Rs. 4000 out of Rs. 6235 payable under the mortgage without stipulating for anything; the appellant was not saddled with any other duty, say of redeeming the mortgage or of freeing the properties from the mortgage. She might well have insisted upon this a a condition of the sale but did not do so. All that the appellant had to do, was to pay the sum reserved, in the performance of her undertaking and in the event of the mortgagee's refusal to accept payment, to apply to the vendors for directions or seek recourse to proceedings in a court of law. The vendors gave fresh directions by Ex. B-4 and though Madras Act 1 of 1955 made provision for compliance with such directions, the appellant did not choose to set up to those directions. Learned counsel for the appellant relied in support of his argument on the decision of the Privy Council in Muhammed Siddiq Khan v. Muhammed Nasir Ullah Khan ILR. 21 Allahabad 223. In that case, the sale deed directed the vendee to discharge two debts, a mortgage debt due to Srikishan Das and a debt due to Indaman and the vendee was left with Rs. 17,000 for payment to the former and with Rs. 5,000 for payment to the latter. The vendees paid the latter, but not the former on the ground that more was due to him. Srikishan Das put the mortgage in suit and obtained a decree for what was due to him with interest and costs against the vendor. After the latter's death, his widow commenced the suit against the vendees for the recovery of Rs. 17000 reserved with them and interest thereon and also the costs of the suit by Srikishan Das. Srikishan Das put the mortgage in suit and obtained a decree for what was due to him with interest and costs against the vendor. After the latter's death, his widow commenced the suit against the vendees for the recovery of Rs. 17000 reserved with them and interest thereon and also the costs of the suit by Srikishan Das. During the course of that suit, Rs. 14000 was apparently paid and a decree was passed for the balance and interest, but not for the costs. In appeals preferred by both parties, the High Court disallowed interest and passed a decree for the balance still outstanding. On further appeal by the legal representatives of the vendor, the Privy Council held, that the sum of Rs. 17000 "were not left with the vendees simply as a deposit of the money of the vendor. They were to retain it as a security that the property sold should be freed from the encumbrances upon it and that they should have a good title. They were entitled to retain it until the vendor provided the rest of the money necessary for this purpose. Unless this was done, a payment of the Rs. 17000 would leave the property still encumbered, as Srikishan would only receive it, if he did so, in part payment of what was due. From the nature of the transaction, it was not a deposit upon which the vendees would be liable to pay interest unless they refused or omitted to pay the money when they were informed by the vendor that he was prepared to pay the balance necessary to satisfy what was due to Srikishan". These observations might suggest, that there was an arrangement by which the money was not deposited with the vendees as that of the vendor, but was made a security that the property sold should be freed from the encumbrances and that they should have a good title and on that very ground was distinguished in Kasi Vesi Chokkalinga Tambiran v. Ramanadan AIR. 1926 Madras 1031. The facts of the case before the Privy Council do not appear fully from the report and have to be gleaned from the judgment of the Allahabad High Court in the later case of Badri Das v. Jivan Lal 15 I.C. 854 at p. 855. 1926 Madras 1031. The facts of the case before the Privy Council do not appear fully from the report and have to be gleaned from the judgment of the Allahabad High Court in the later case of Badri Das v. Jivan Lal 15 I.C. 854 at p. 855. It may be mentioned, that the appeal before the Privy Council was from the judgment of the Allahabad High Court. In the later case just cited, the Allahabad High Court examined the records of the earlier case and observed thus: "On referring to the record we find that this Court held that vendors had agreed to discharge the mortgages, not on the strength of the oral evidence, the admissibility of which seemed doubtful, but on the terms of the sale deed itself. The Privy Council in their judgment confirmed the finding of this Court. Whether the Privy Council proceeded upon that oral evidence or not, we think that this case is not distinguishable from that case. There, as here, a sum of money was left in the hands of the purchaser for the purpose of redeeming the prior mortgage. It turned out that the amount due was far in excess of the amount left in the hands of the purchasers." It is thus seen, that in the case before the Privy Council the vendees were charged on behalf of the vendor with the duty of redeeming the mortgage, but had not been left with sufficient amount to redeem; in these circumstances it was held, that the vendees could successfully contend, that they could retain the amount in their hands until the vendor gave them a clear title to the property free of the mortgage. In Badri Das v. Jivan Lal 15 I.C. 854 just cited also, the provision was similar and the vendee did not know that more had to be made for the redemption of the mortgage than had been reserved with him. Muhammed Siddiq Khan v. Muhammed Nasir Ullah Khan ILR. 21 Allahabad 223 and Badri Das v. Jivan Lal 15 I.C. 854 are distinguished on this ground. 5. The case before us is similar to Kesi Vesi Chokkalinga Tambiran v. Ramanadan AIR. 1926 Madras 1031 cited earlier, where the dictum of the Privy Council was distinguished on other grounds. Muhammed Siddiq Khan v. Muhammed Nasir Ullah Khan ILR. 21 Allahabad 223 and Badri Das v. Jivan Lal 15 I.C. 854 are distinguished on this ground. 5. The case before us is similar to Kesi Vesi Chokkalinga Tambiran v. Ramanadan AIR. 1926 Madras 1031 cited earlier, where the dictum of the Privy Council was distinguished on other grounds. In that case too, both the vendor and vendee were aware, that more had to be paid than had been reserved with the vendee for discharging the encumbrances, but the court held, that so long as the vendee had been charged with making payment of a specified amount only, he had no defence to an action by the vendor to recover the sum received, on the ground that the encumbrance could not be cleared fully with that sum. A converse case was decided by the Calcutta High Court in Tripura Charan Choudhury v. Nikunja Behari Choudhury AIR. 1940 Calcutta 580. This related to a sale free of encumbrances, but there was an undisclosed mortgage. The vendee was held entitled under S.55 (5) (b) of the Transfer of Property Act, to resist an action by the vendor for the amount reserved with him out of the purchase-money. This case too is distinguishable. The present case falls squarely within the rule in the Madras case cited, Kasi Vesi Chokkalinga Tambiran v. Ramanadan AIR. 1926 Madras 1031, that the appellant having entered into the bargain, subject only to an undertaking to pay Rs. 4000, realising well that the entire mortgage would not by such payment be discharged, must be held to be bound to his bargain and responsible for the failure to make payment according to the directions of the vendor. That sum could not be deemed to be a security in the hands of the appellants, as in the case before the Privy Council. 6. The third contention in the appeal related to an alleged contemporaneous agreement by the vendors to obtain a release of the mortgage. This contention was not entertained on the merits by the lower court and was dismissed as not open by reason of S.32 of the Evidence Act. Assuming the contention to be open, we are satisfied, that there is no substance in the contention. For one thing, Ex. This contention was not entertained on the merits by the lower court and was dismissed as not open by reason of S.32 of the Evidence Act. Assuming the contention to be open, we are satisfied, that there is no substance in the contention. For one thing, Ex. B-1 is silent about any such agreement which would have been recited if it were true, and for another, the registered notice Exx. B-3 and B-5 too make no mention of it; clearly this is an afterthought. All that the appellant could point to is, that a release deed of the mortgage was written on stamp paper on the same date by the same scribe, as Ex. B-1 was written. This does not necessarily prove the agreement as alleged and we overrule the contention. 7. It is true, that the vendors too did not pay the amount of the balance under the mortgage. Their right to make payment under Madras Act 1 of 1955 has been adjudged in their favour, in the judgment in O.S. 13 of 1956. When the appellant found that the mortgagee was not prepared to accept payment of Rs. 4000, she applied to the respondents by Ex. B-3 for directions, to which, as we have seen, by Ex. B-4 she was called upon to deposit the amount in court. Ex. B-1 was itself executed after Madras Act 1 of 1955 came into force. As between the appellant and the respondents, the latter had every right to insist on the former's depositing Rs. 4000. Had this deposit been made under the Act, the liability of the respondents was to pay the balance in instalments under the Act and this was the right which they established in the former litigation. It cannot, therefore, be supposed, that therespondents had in any way contributed towards the institution of O. S.13 of 1956 by the mortgagee. The responsibility for having occasioned that litigation must be borne by the appellant herself. 8. In the result, the decree under appeal is affirmed and this appeal dismissed with costs. Dismissed.