Adikesavan Naidu and Others vs M.V. Gurunatha Chetti and Others

Abdur Rahim, J.—The question referred to us is whether a manager of a joint Hindu family who has agreed to sell Immovable property

belonging to himself and the minor members of the family is personally liable for damages for failure to perform the contract when it is found that, it

is net binding on the minors. The facts briefly speaking upon which the question arises seem to be that the vendor the managing member of the

family represented that circumstances existed which entitled him to sell the property and the intending purchaser, relying upon that representation,

agreed to purchase the property. It is, however, found that the sale did not bind the minors'' shares as there was no necessity for the sale though

both the contracting parties believed that there was and acted in good faith. That, as I understand it, is the result of the findings of the learned

Judges who have referred the question to the Full Bench.

There is no question but that Section 73 of the Contract Act applies. Under this enactment it makes no difference as to the liability for damages

caused by breach of contract whether the contract was for sale of moveable or Immovable property. It lays down that the aggrieved party is

entitled to compensation for any loss or damage caused to him by the breach of contract which naturally arose in the usual course of things from

such breach or which the party knew when they made the contract to be likely to result from the breach of it.

The learned Chief Justice is of opinion that the buyer in such a case as this is not entitled to damages, relying mainly on the decision in Gas Light

and Coke Co v. Towse (1887) 35 Ch. D. 519. That decision was based by Mr. Justice Kay on the ruling in Bain v. Fothergill (1874) L.R. 7 H.L.

158 : 96 E.R. 635, in which it was held on the authority of Flureau v. Thornhill (1776) 2 W. Bl. 1078, "" If a person enters into a contract for the

sale of a real estate knowing that he has no title to it, nor any means of acquiring it, the purchaser cannot recover damages beyond the expenses he

has incurred by an action for the breach of the contract; he can only obtain other damages by an action for deceit,"" In the same case Lord Hatherly

stated ""a contract for sale of a real estate is very different indeed from a contract for a sale of a chattel, where the vendor must know what his right

to the chattel is."" Especial reliance is placed on a passage in the judgment of Kay, J. ""If he (meaning the person in whose favour a trustee leased the

trust property for a certain term with a covenant for renewal for another like term) enters into it knowing exactly what the title of his vendor is, and

that the carrying out of the contract eventually is subject to a possible difficulty, how can he turn round and say although I entered into that contract

with you knowing of that difficulty, still I hold you liable for damages?'' "" That observation again is founded on the doctrine that contracts for sale of

Immovable property stand on a peculiar footing different from that of other contracts. That the rule in Flureau v. Thornhill (1776) 2 W. Bl. 1078, is

of an anomalous nature and has been upheld mainly as it had been recognised in a series of cases in England extending over a long period of time

and arising out of the peculiar difficulties of conveyancing with respect to Immovable property in that country, is made clear by the fact that English

Judges themselves have refused to extend the doctrine any further. For instance it has been decided that the rule would not be applied to cases

where the inability of the vendor to perform the contract was due to his not having first secured to himself the property which be assumes to sell or

to his failure to make out the title due to his unwillingness to remedy the defect. See Engel v. Fitch (1868) L.R. 3 Q.B. 314 and Day v. Singleton

(1899) II. Ch. 320. Justice Fry in his book on Specific Performance describes the rule established by Flureau v. Thornhill (1776) 2 W. Bl. 1078

and Bain v. Fothergill (1874) L.R. 7 H.L. 158 as an exceptional and anomalous rule.

In India, Macleod, J. in Ranchhod v. Manmohandas ILR (1907) B. 165 and Stephen, J. in Nabin Chandra Saha Paramanick v. Krishna Barana

Dasi ILR (1911) C. 458, refused to follow that rule. There is only one case brought to our notice in which it was adopted, namely, Pitamber

Sundarji v. Cassibai ILR (1886) B. 272, but I do not find that the effect of Section 73 of the Contract Act was taken into consideration there. In

Madras, in the case in Krishna Aiyar and Others Vs. Shamanna legal representative of the plaintiff by his guardian Vengalaxmi Ammal and Others,

a vendor who failed to make out a good title was held liable in damages though it may be noted that the question of applicability of the rule laid

down by Flureau v. Thornhill (1776) 2 W. Bl. 1078 and Bain v. Fothergill (1874) L.R. 7 H.L. 158 was not raised or discussed. The matter

however was fully considered in Nabin Chandra Saha Paramanick v. Krishna Barana Dasi ILR (1911) C. 458 and Ranchhod v. Manmohandas

ILR (1907) B. 165.

It is then argued that since by the Hindu Law as well established by Hunooman Persaud''s case the duty is laid on the purchaser in a case such

as this to satisfy himself as to necessity for the sale, therefore the manager of a Hindu family who contracted to sell the property of the minor co-

parceners is not answerable in damages. But the rule laid down in Hunooman Persaud''s case is concerned with the question of liability of persons

other than the vendor, that is, whether the acts of the manager would bind the minors, where no necessity is shown for the sale. It does not, in my

opinion, affect the question of liability of the contracting party himself for damages for breach of the contract in case it turns out that he was not

entitled to sell the property.

In this case it appears from Exhibit A that the vendor represented that there was necessity for selling the property in dispute. The purchaser, so

far as the question lay between him and the vendor, was entitled to rely on that representation. If the representation proved to be incorrect as it

eventually did, I fail to see any reason why the vendor should not be held responsible for any loss that resulted, therefrom to the buyer.

It is however to be noticed that in the proposition referred to the Pull Bench no mention is made of any express representation on the part of the

manager of the family.

The question is then raised whether Section 55, Sub-section 2 of the Transfer of Property Act applies and if it does, whether from the fact that

the buyer knew that the property belonged to the family of which the vendor was only the managing member, it can b3 deduced tint there was a

contract to the contrary,"" within the meaning of Section 55. Section 55 deals with rights and liabilities of buyer and seller. Sub-section 2 enacts

that in the absence of a contract to the contrary, the seller shall be deemed to contract with the buyer that the interest the seller professes to

transfer to the buyer subsists and that he has power to transfer the same. It is argued that this applies only to cases where the transaction is still in

the executory stage. But I find nothing in the language of the section nor can I perceive any reason which would justify such a distinction. What the

legislature intended apparently was that subject to any special stipulations to the contrary, certain stipulations would be presumed in every

transaction of sale of Immovable property and a warranty of title on the part of the seller is one of those stipulations. It is not easy to understand

how the legislature could import a stipulation of this nature in a transaction of sale without implying at the same time that it should be taken as

having formed part of the contract which became perfected in the sale.

Then the mere fact that the intending purchaser knew that the property belonged to the family cannot in my opinion be said by itself to imply a

contract on the part of the buyer that the seller purporting to have power to sell the property would be absolved from liability if it turned out that he

had no such power. See Arunachella Aiyar and Others Vs. T. Ramaswami Iyer and Others, and Subbaraya Reddiar v. Rajagopala Reddiar

(1914) M.W.N. 376.

For these reasons I agree with the view expressed by Seshagiri Aiyar, J., in the order of reference and would answer the question referred to

us in the affirmative.

Sadasiva Aiyar, J.

In Krishna Aiyar and Others Vs. Shamanna legal representative of the plaintiff by his guardian Vengalaxmi Ammal and Others, , (decided by

Ayling and Napier, JJ.) it was held (at page 617) that where the 1st defendant, an adult member of a Hindu family professing to be the managing

member (when he was not the managing member) agreed to sell the family lands including the interests of the other members, he became liable in

damages to the intending purchaser if he was unable to establish his power to sell the interests of the other members. That case, which in my

opinion, was a weaker case for the purchaser, was argued by able members of the Bar on both sides (Mr. K. Srinivasa Aiyangar, Mr. B. Sitarama

Rao and Mr. T. Rangachariar). The 1st defendant in that case died pending the litigation, no claim for images had been made in the plaint against

him, and yet the Horned Judges, when damages were claimed by the respondents'' learned vakil for the first time on appeal, held that damages

could and should be awarded against the 1st defendant''s legal representative. (Section 16 of the Specific Relief Act mentioned at page 617 of the

report is probably a clerical error for Section 19 read in the light of Section 29). The purchaser in that case made the contract with the eldest son

(1st defendant) though the father (5th defendant who was the managing member de jure) was alive and yet the purchaser was awarded damages.

Here, the manager de jure himself agreed to make the sale.

u/s 55(2) of the Transfer of Property Act"" in the absence of a contract to the contrary the seller shall be deemed to contract with the buyer

that""...(the seller) ""has power to transfer the interests which"" he ""professes to transfer to the buyer."" I am unable to hold that the fact that the buyer

had notice of facts which indicated that the seller had not the power which he professed to be able to transfer implies "" a contract to the contrary.

Napier, J. and myself in Arunachella Aiyar and Others Vs. T. Ramaswami Iyer and Others, held that the covenant in Section 55, Clause (2) is not

excluded by the mere fact that the vendee was aware of the defect in the title. The same view was taken by Hannay, J. sitting with myself in

Thekkamannengath Raman alias Kochu Poduval v. Kakkasseri Pazhiyot Manakkal Karnavan (1915) 29 I.C. 747, and by Ayling and Tyabji, JJ.

in Vellayappa Rowthen v. Bava Rowthen (1915) 29 I.C. 747. Seshagiri Aiyar, J. has taken the same view in this case and in a prior case. I am not

prepared therefore to follow the English decision in Gas Light and Coke Co. v. Towse (1889) L.R. 35 Ch. D. 519 (itself differing from a prior

English decision, Mortlock v. Buller (1804) 10 Ves. 292 : 32 E.R. 857, especially as English courts are rather more inclined to shield from claims

for damages the vendors of lands situated in England where no system of public registry of title-deeds seems to have existed originally as in India,

where the codification of the laws relating to transfers of lands seems not to be so complete and systematic as here, and where the extreme form of

the doctrine of caveat emptor prevailed originally.

But is Section 55(2) of the Transfer of Property Act j applicable to the facts of this case? The word ""seller"", in Section 55 Clause 1 as applied

to the provisions of Sub-clauses (a) to (d) of that section can, it appears to me, mean only a person who has contracted to sell but has not yet sold.

In Sub-clauses (e) and (g) it seems, however, to mean the person who has not only contracted to sell but has also actually sold. In Sub-clause (f) it

seems to mean the same thing where possession ought naturally to follow only on the completion of the sale, that is, in cases where a registered

conveyance is necessary to convey title but it might include also a person who has only contracted to sell when the delivery of possession itself has

to be made to complete the sale (as in the case of a sale of property worth less than Rs. 100 and not effected by a registered conveyance). In

Clause 2, (with which we are concerned,), the word ""seller"" seems to mean the same thing as in Sub-clauses (e) and (g) of Clause 1, that is, a

person who has actually parted with his title. [See the use in Clause (2) of the words "" professes to transfer"" and not "" contracted to transfer""]. The

defendants Nos. 1 and 2 in this case not having executed any conveyance are not therefore ""sellers"" under Clause (2) of Section 55 and I think that

the contention that Section 55 Clause (2) of the Transfer of Property Act does not apply is well founded. However, the plaintiff is entitled, in my

opinion, to rely on Section 73 of the Contract Act which is very wide in its terms as regards the right to compensation for breach of any kind of

contract. If A chooses to contract to sell to B full ownership right in a property and breaks that contract through inability (not attributable to act of

God, etc.) to convey the full title, he is legally bound to make compensation to B u/s 73. I do not think that the knowledge on the part of B that A

had ''not the complete title which he contracted to transfer can vary the term of the contract by which A did agree to transfer a complete title; nor

can such knowledge on the part of B itself constitute an implied contract to the contrary, subtracting from or rather contradicting the express term

of the contract to convey full ownership. The contract in this case is moreover a written one (Exhibit A) and cannot u/s 92 of the Evidence Act be

contradicted by a contemporaneous implied (or even express) oral agreement sought to be inferred from mere knowledge of certain facts on the

part of the plaintiffs.

I therefore concur in answering the question referred to us in the affirmative.

Napier, J.

I agree in answering the question referred to us in the affirmative. The learned Chief Justice bases his doubt on the point on the language of

Section 55, Sub-section 2 of the Transfer of Property Act and is inclined to think that the well known duty of a purchaser from the manager of a

joint Hindu family is sufficient to indicate a ""contract to the contrary,"" and to bring the case within the doctrine laid down by Mr. Justice Kay in the

Gas Light and Coke Co. v. Towse (1889) 35 Ch. D. 519. I have myself some doubt whether Sub-section 2 of Section 55 applies where the

transaction has not gone beyond the stage of contract, the words ""professes to transfer"" seeming to indicate that the stage of actual transfer has

been reached and the provision for this implied contract being annexed to the interest also seeming to suggest that the interest had been created. It

is not however necessary to decide the point, for I am of opinion that the doctrine in Gas Light and Coke Co. v. Towse (1889) 35 Ch. D. 519

cannot be applied on the construction of the words "" a contract to the contrary."" It does not appear from the language used by Kay, J. that he

regarded it in this light, for he appears to have treated it as a case of contract that became impossible of performance owing to circumstances in

contemplation by both parties. The question then resolves itself into one under the Contract Act and unless there is any limitation of the right to

recover compensation for loss or damage caused to the party who has suffered by the breach, the consequences of the section must apply. There

is no doubt that according to the English law, broadly speaking, purchasers are not entitled to recover such damages for breach of an agreement to

sell real property, but are limited to such expenses as they may have incurred in investigating the title, the right to recover which is stated in

Compton v. Bagley (1891) 1 Ch. 313 as not being in the nature of damages-vide cases quoted by Seshagiri Aiyar, J., in his judgment of reference;

but this is admittedly an exception to the ordinary law, due as stated in Day v. Singleton (1899) 2 Ch. 320, to the uncertainty of making out a good

title owing to the complexity of the English law of real property. This exception however has not been recognised in India-vide Ranchhod v.

Manmohandas ILR (1907) Bom. 165, Nabin Chandra Saha Paramanick v. Krishna Barana Dasi ILR (1911) Cal. 458, and Krishna Aiyar and

Others Vs. Shamanna legal representative of the plaintiff by his guardian Vengalaxmi Ammal and Others, . There still remains to consider the

doctrine applied by Kay, J. It is not the doctrine of subsequent absolute impossibility which is provided for in Section 56 of the Contract Act and I

know of no principle governing contracts generally which disentitles a party to recover damages for breach of a contract where it might only be

impossible to enforce it. The doctrine, if sound, must be confined to real property in England, contracts with reference to which are treated with

leniency under English law and I see no reason why we should apply this doctrine either in Ind

It has been negatived by a Bench of this Court in Arunachella Aiyar and Others Vs. T. Ramaswami Iyer and Others, ,in which case the Judges

follow the decision of a single Judge in Subbaraya Reddiar v. Rajagopala Reddiar ILR (1914) Mad. 887, holding that the question of the

knowledge of the purchaser does not affect the right to be indemnified under the Indian Statute Law, and in Thekkamannengath Raman alias

Kochu Poduval Vs. Kakkasseri Pazhiyot Manakkal Karnavan and manager Raman Bhattathripad and Others, , another Bench of this Court held

that the question of the knowledge of a mortgagee as to the defect of title in the mortgagor is irrelevant on the same principle. I am in entire accord

with this view and would hold that the law as laid down in Gas Light and Coke Co. v. Towse (1889) 35 Ch. D. 519, is not applicable to this

country.