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2008 DIGILAW 233 (KER)

Joy Varghese v. Ulahanan alias John

2008-04-03

M.SASIDHARAN NAMBIAR

body2008
Judgment : 1. Defendants in O.S.75 of 1992 on the file of Sub Court, Muvattupuzha are the appellants. Plaintiffs are the respondents. Suit was filed for realisation of Rs.14,787/-with interest charged on the plaint schedule property. The plaint schedule property originally belonged to respondent. Under Ext. A1 sale deed dated 10.8.1989 first respondent transferred the property for a total consideration of Rs.40,000/-, to first appellant for the second appellant who was a minor then. Out of the sale consideration, Rs.14,787/- was retained with appellants to discharge the mortgage debt existing in the property on that date in favour of Mulakulam Service Co-operative Bank. Only the balance consideration of Rs.25,213/- was paid to the respondents. Subsequently, the Agricultural and Rural Relief Scheme, 1990 came into force by which the debt payable by Agriculturists was reduced. Second respondent paid the amount due to bank so that the amount retained with appellants need not be paid. Respondents then instituted the suit for realisation of the amount of Rs.14,787/-retained with appellants under Ext. A1. Appellants resisted the suit contending that Ext. A1 does not provide for return of the amount paid thereunder and as respondents have surrendered all their rights and liabilities in favour of appellants, they are not entitled to claim back any amount from appellants. It was also contended that appellants when approached the Bank to pay the amount as provided in Ext. A1 , they were informed that first respondent has paid Rs.3513/-and therefore appellants entrusted a cheque for Rs.3,513/-, the amount paid by respondents to the Bank, to be paid to the respondents and respondents are not entitled to claim any other amount. 2. Learned Munsiff, on the evidence of PW1, DW1 and Exts. A1 to A4, dismissed the suit following the decision of a learned Single Judge of this Court in Kunjikavu Amma v. Janaki Amma (1957 KLT 392). Respondents challenged the judgment before District Court, Ernakulam in AS 198 of 1994. Learned District Judge, on reappreciation of evidence, following the Division Bench decision in Joseph v. Joseph (1972 KLT 829), found that the amount retained with appellants was only to discharge the liability in favour of the Bank and appellants are only the agents of respondents to discharge the liability and as that amount was not to be paid to the bank because of the subsequent legislation, respondents are entitled to the decree sought for. Appellants were directed to pay the amount retained with them with interest at 6% from the date of the suit. It is challenged in the second appeal. 3. Second appeal was admitted formulating the following substantial questions of law. 1) Whether Ext. A1 discloses a sale free of encumbrance or sale subject to encumbrance. 2) Whether in the absence of a clear and definite statement in the document, that the sale is free of encumbrance, is it to be presumed to be a sale subject to encumbrance as held in Kunjikavu Amma v. Janaki Amma (1957 KLT 392). 3) If Ext. A1 sale deed is subject to encumbrance, whether vendor is entitled to get any benefit accruing subsequent to the sale by scaling down of liability. 4) Is there a conflict between Kunjikavu Amma v. Janaki Amma (1957 KLT 392) and Joseph v. Joseph (1972 KLT 829) and if so how is to be resolved and is the decision of Privy Council in Musammat Izzat-Un-Nissa Begam v. Kunwar Pertab Singh (36 IA 203) liable to be followed as binding precedent. 4. Ext. A1 shows that the plaint schedule property belonging to respondents was purchased by appellants for a total consideration of Rs.40,000/-. It shows that appellants have paid Rs.25,213/-out of the sale consideration and retained Rs.14,787/-with them. The said amount was retained to be paid to the Bank to discharge the mortgage debt created by respondents. Ext. Al shows that Rs. 14,787/- was part of the sale consideration and it was retained with appellants only for the purpose of discharging the existing debt as absolute right in the property was purchased by appellants. The question is whether the sale is a sale with encumbrance or free of encumbrance. 5. Ext. A1 does not provide that the liability to discharge the mortgage debt is on the appellants vendees. On the other hand fixing the entire liability on the date of execution of the sale deed, Rs. 14,787/- the amount due to discharge the liability, was retained with the appellants and only the balance of sale consideration was paid to the respondents. If the amount which was necessary to discharge the mortgage debt was more than Rs. 14,787/-, appellants could have claimed that amount from the respondents as it was not for the appellants to discharge that debt. Plaint schedule property was not transferred with the existing mortgage debt. If the amount which was necessary to discharge the mortgage debt was more than Rs. 14,787/-, appellants could have claimed that amount from the respondents as it was not for the appellants to discharge that debt. Plaint schedule property was not transferred with the existing mortgage debt. On the other hand, respondents have undertaken to discharge the liability. That is the reason why the amount necessary to discharge the debt was retained with the appellants out of the sale consideration. Otherwise the entire consideration of Rs.40,000/- as such would have been paid to the respondents. If so sale cannot be with encumbrance but full of encumbrance. 6. The position has been explained with clarity by Patanjali Sastri, J. in Avvari Subba Row & Ors. v. Kondamudi Varadaiah & Ors. (AIR 1943 Mad. 482), as follows: "These provisions (S.55 of the T.P. Act) make it plain that on the sale of property subject to encumbrances, the bargain relates to the vendors interest in the property such as it is, that is to say, his equality of redemption and the discharge of the encumbrances is the sole concern of the purchaser as between himself and the vendor who is only entitled to be indemnified against the encumbrances; while in the case of a sale free from encumbrances, the price is fixed with reference to the full value of the property, the liability to discharge all the encumbrances being thrown on the vendor, the vendee, however, being given the right to retain out of the price an amount sufficient to clear the encumbrances. But as the liability to pay them off is that of the vendor who has to implement his sale by providing a clear title, the vendee must be regarded as paying the amount retained to the encumbrance on behalf of the vendor out of the purchase-money payable to the latter under the contract of sale. But as the liability to pay them off is that of the vendor who has to implement his sale by providing a clear title, the vendee must be regarded as paying the amount retained to the encumbrance on behalf of the vendor out of the purchase-money payable to the latter under the contract of sale. In other words, the vendee acts as the agent of the vendor as regards the disposal of the sum retained, although the agency is one which cannot be revoked as the vendee has himself an interest in the money being applied in the manner indicated." The decision further states that: "Where immovable property is sold free from encumbrances, it follows that the vendor entitled to call upon the buyer to account to him for any portion of the purchase money which it has become no longer necessary to apply in accordance with the stipulation in that behalf." 7. The legal position was reiterated in Panchigolla Satya Narayana Murthi v. Karatam Sathiraju & Ors. (AIR 1942 Mad.525) as follows: "Where part of the purchase money is retained by the purchaser for the payment of a mortgage and if the purchaser does not have to pay the full amount thus reserved with him, owing to mortgage debt being scaled down, at the instance of the mortgagors, he would be liable to return to the latter, the portion of the purchase money remaining unpaid." 8. Ext. A1 gives no room for any doubt that the amount retained with appellants out of the sale consideration is the amount due to respondents, which was to be paid by respondents to the Bank to discharge the mortgage debt. Appellants retained the amount for payment to the Bank only as agent of respondents. 9. The facts of the case considered by the Division Bench in Josephs case (supra) are exactly similar. As in this case, sale deeds were executed, reserving Rs.3328/-being part of the sale consideration with the vendee to enable them to discharge the mortgage debt outstanding on two subsisting mortgages and payable by vendors. Subsequent to the enactment of Kerala Act 31 of 1958, Debt Relief Act, there was a scale down of the liability of the vendors. Instead of Rs.3,328/-, only Rs. 1884.65 had to be paid. Vendors in turn instituted the suit for realisation of Rs.1,443.35/-, the balance amount retained with the vendee. Subsequent to the enactment of Kerala Act 31 of 1958, Debt Relief Act, there was a scale down of the liability of the vendors. Instead of Rs.3,328/-, only Rs. 1884.65 had to be paid. Vendors in turn instituted the suit for realisation of Rs.1,443.35/-, the balance amount retained with the vendee. The Division Bench analysing the decision of various High Courts, held that the amount retained with the vendee is the amount due to the vendors and the amount is retained in their capacity as agents and when that liability was scaled down that benefit should go to the vendors and not the vendee. 10. Though it was argued that the decision of the Privy Council in Musammat Izzat-Un-Nissa Begams case (supra) is in favour of the vendee and this Court is bound to accept the view of the Privy Council, the Division Bench, repelled the argument as follows: "9. The other decision relied on by the learned counsel for the appellant is that reported in AIR 1953 Pun.110. In that decision, it is stated that in Izzat-Un-Nissa Begam v. Pertab Singh (31 All. 583 PC) a contrary view has been taken and that the Court was therefore bound to accept the view of the Privy Council. We may point out that the decision of the Privy Council dealt with a case of a sale subject to encumbrance and, therefore, the ratio decidendi of that decision cannot apply to the facts of this case. We have no doubt that where the sale is free from encumbrances, the liability to discharge the encumbrances is on the vendor and even if there is a direction to the vendee to pay the amount, it amounts only to the vendee being made an agent of the vendor for payment of the amount." In the light of the Division Bench decision in Josephs case (supra), appellants cannot canvass the position that Privy Council decision in lzzat-Un-Nissa Begams case is binding. 11. Though it was canvassed that the decision of a learned Single Judge in Kunjikavu Ammas case (supra) is conflicting with the Division Bench decision in Josephs case and as the view of the Single Judge is in agreement with the decision of the Privy Council decision Izzat-Un-Nissa Begams case, the facts are different. 11. Though it was canvassed that the decision of a learned Single Judge in Kunjikavu Ammas case (supra) is conflicting with the Division Bench decision in Josephs case and as the view of the Single Judge is in agreement with the decision of the Privy Council decision Izzat-Un-Nissa Begams case, the facts are different. In Kunjikavu Ammas case a fidelity bond for Rs.500/- was executed on 26.3.1100 as guarantee in faithful discharge of the duties of her brother as Muthalpadi, in favour of Cochin Kovilakam. Later, a simple mortgage and thereafter a Purakadom for an aggregate amount of Rs.350/- was created in favour of the defendants in that case. Defendants instituted a suit for the mortgage debt. In execution of the decree, property was sold and purchased by defendants/decree-holders in 1112, subject to the prior charge in favour of the Kovilakam Property was taken delivery. Brother of plaintiff mortgagor retired from service and the bond was returned to plaintiff. Rs.500/-, the amount under the fidelity bond was not liable to be paid. It is for realisation of that amount, suit was filed against the auction purchaser-decree-holder. It was relying on the decision, of the Madras High Court in Vinaitheertha Thevar v. Viswanatha (AIR 1954 Mad. 508) it was held that plaintiff is not entitled to the amount. It was found that the sale was not free of encumbrance, but subject to encumbrance. It was held that encumbrances subject to which the property was sold, turned out to be invalid or in some way unenforceable, the benefit goes exclusively to the vendee. Facts show that it is not a sale free of encumbrance. The decision of the Madras High Court in (AIR 1954 Mad. 508) was not followed by the Division Bench in Josephs case holding as follows: "With great respect, we are unable to agree with this ruling if it means that in all cases where the vendee has been directed to pay up the encumbrance existing on the property, the sale must be deemed to be subject to encumbrance. As has been explained in the decision reported in (AIR 1943 Mad. 482), a direction in the sale deed to the vendee to discharge the encumbrance, that being part of the purchase money, cannot convert the transaction from a sale free of encumbrance to one subject to an encumbrance. As has been explained in the decision reported in (AIR 1943 Mad. 482), a direction in the sale deed to the vendee to discharge the encumbrance, that being part of the purchase money, cannot convert the transaction from a sale free of encumbrance to one subject to an encumbrance. The liability imposed upon the vendee in such cases is only as an agent of the vendor; and if the vendee has to pay a higher amount then that has been stipulated, he would be entitled to recover the excess amount from the vendor. What has to be ascertained is whether it is the whole property which has been sold fixing a price for the entire property or whether what is sold is only the equity of redemption and the price stipulated is only for that right." 12. When Exhibit A1 establish that the whole property was sold free of encumbrance and a part of the sale consideration was retained with the vendee for discharging the liability under the mortgage debt and the amount was retained with appellants as agent of the vendors and the liability was later scaled down, respondents are entitled to get back the amount. First Appellate Court rightly followed the Division Bench decision in Josephs case and granted a decree in favour of respondents. There is no merit in the appeal. It is dismissed.