Eravi Parameswaran Kartha and Others vs R. Ramankutty and Another

The first Defendant is the Appellant. He died after the filing of the appeal, and his legal representatives were impleaded as additional Appellants 2 to 4. The suit is for damages for breach of a covenant of indemnity. The first Defendant sold a property, 1 acre and 12 cents in extent, comprised in Survey No. 6/23 in Sher-tallay Thejku Pakuthy in favour of the Plaintiff on 27-7-1119. Ext. A is the copy of the sale deed.

The consideration for the sale was Rs. 600/-. Besides the usual guarantees of title, it was stated In Ex. A that there were no encumbrances on the property and no court attachment relating to it. The vender also undertook to make himself liable for any damages that the vendee might be put to by reason of the existence of any encumbrances the property or of any attachment relating to He further agreed to pay 12 per cent interest on the amount of such damages and gave as indemnify the plaint schedule properties. The relevant position of the indemnity clause is as follows:

The first Defendant had purchased this property from Valappilchira tarwad under Ext. VIII dated 6-2-1117. The consideration for that sale also was Rs. 600/-. It was stated in Ext. VIII that there were no encumbrances on the property and the vendors undertook to make them selves liable for any damages that the vendee might be put to by reason of the existence of any encumbrance.

But in fact, the karnavan of Valappilchira tarwad had executed a hypothecation bond in favour of a third party on 28-3-1102 charging this property and three other items of properties for Rs. 833,3/4. Ext. I is the copy of the hypothecation bond.

The hypothecates instituted a suit as O.S. No. 98 of 1114 of the Shertallai Munsiff''s Court for the amount due under the hypothecation bond. The suit was compromised between the parties. Ext. II is the copy of the compromise decree. It is dated 11-4-1114. under the compromise decree Defendants 1 to 7 in that suit who were members of the Valappilchira tarwad and the four items of properties scheduled to the plaint were made liable for the plaint amount.

When Ex. VIII sale deed was executed in favour of the first Defendant nothing was said about this decree. The decree-holder brought the decree-schedule properties to sale and on 31-9-1123 two of the items including the property covered by Exts. VIII and A were sold in auction and purchased, by the decree-holder for 14 26 Fanams 4 cash.

Before the sale was confirmed the Plaintiff came to know of it and, for saving the property purchased by him under Ext. A he deposited T. Rs. 2194-12 Cs. 4 Cash on 29-10-1123 and applied for setting aside the sale under O. XXI R. 86 of the Travancore Code of Civil Procedure. The Court set aside the sale by its order dated 11-12-1123. The Plaintiff brought this suit for the recovery of the sum of Rs. 2194-12-4 and interest thereon at the rate of 12 per cent per annum from the first Defendant and from the plaint schedule properties.

Defendants 2 and 3 were impleaded as subsequent encumbrances.

Defendants 1 and 2 filed a joint written statement in the case while the third Defendant filed a separate written statement. The third Defendant subsequently withdrew his contentions and a compromise petition was filed in court by the Plaintiff and the third Defendant on 13-11-1124 by which the Plaintiff agreed that item No. 2 in the plaint schedule might be proceeded against only if the amount due to him is not realised from the other items and from the properties attached before judgment. Defendants 1 and 2 contended as follows:

The first Defendant was not aware of the hypothecation bond, Ext. I, and the suit and decree in O.S. No. 98 of 1114 when he executed the sale deed (Ext. A) in favour of the Plaintiff, He purchased the property under Ext. VIII honestly believing that there were no encumbrances on the property. Valappilchira tarwad had started a chitty.

One of the chitty creditors instituted an administrative. suit in the Alleppey District Court as O.S. No. 100 of 1110 and a receiver was appointed for the properties belonging to the tarwad. The decree and execution proceedings in O.S. No. 98 of 1114 are invalid since the receiver in O.S. No. 100 of 1110 was not made a party to that suit. It was, therefore, unnecessary on the part of the Plaintiff to have deposited the auction amount in O.S. No. 98 of 1114.

The payment made by the Plaintiff was voluntary and he is, therefore, not entitled to get any amount as damages from the first Defendant. In any case the first Defendant can be made liable only for the proportionate amount chargeable on the property sold to the Plaintiff which was only one out of the four items included in the hypothecation bond Ext. I.

The Plaintiff has to proceed against the other items for the balance amount. Plaint items 1 and 3 are in the possession of the second Defendant under a deed of settlement executed by the first Defendant. Plaintiff filed a replication traversing contentions of Defendants 1 and 2 affirming the allegations in the plaint.

The court below repelled the contentions of Defendants 1 and 2 and held that the first Defendant and the plaint schedule properties were liable for the amount claimed in the plaint. The suit was accordingly decreed subject to the terms of the compromise entered into between the Plaintiff and the third Defendant.

4a. The only point that was argued in the appeal was that the first Defendant and the plaint schedule properties should have been made liable only for the proportionate amount chargeable on the property sold to the Plaintiff by the first Defendant.

There can be no doubt that, under the terms of Ext. A, the first Defendant is liable to Indemnify the Plaintiff against any loss the latter ii put to on account of the existence of any encumbrance on the property sold to him. The fact that the first Defendant was not aware of the existence of any such encumbrance when he executed the sale deeds is of no consequence in view of the express undertaking by him to make himself answerable for any loss that the Plaintiff might be put to by reason of the existence of any encumbrance on the property.

Therefore, the only question for consideration. is what exactly is the amount of loss or damage that was caused to the Plaintiff by reason of the breach of the covenant of indemnity. It is true that the Plaintiff had to deposit T. Rs. 2194-12-4 for saving the property sold to him by the first Defendant.

But that amount was not charged on that property alone.

There were three other items of properties included in the hypothecation bond, Ext. I and the decree, Ext. II. u/s 82 of the Transfer of Property Act each of the four items is liable to contribute rateably towards the debt secured by the hypothecation bond. Section 82 reads:

Where property subject to a mortgage belongs to two or more persons having distinct and separate rights of ownerships therein, the different shares in or parts of such property owned by such persons are, in the absence of a contract to the contrary, liable to contribute rateably to the debt secured by the mortgage, and, for the purpose of determining the rate at which each such share or part shall contribute, the value thereof shall be deemed to be its value at the date of the mortgage after deduction of the amount of any other mortgage or charge to which it may have been subject on that date.

Where, of two properties belonging to the same owner, one is mortgaged to secure one debt and then both are mortgaged to secure another debt and the former debt is paid out of the former property each property is, in the absence of a contract to the contrary, liable to contribute to the latter debt after deducting the amount of the former debt from the value of the property out of which it has been paid.

Nothing in this section applies to a property liable u/s 81 to the claim of the subsequent mortgagee.

It is clear that the four items of properties included in Ext. I are liable to contribute rateably to the debt secured by the hypothecation. The property purchased by the first Defendant and sold to the Plaintiff will be liable only for the proportionate amount chargeable on that property. Therefore, although the Plaintiff had to deposit the whole decree amount and five per cent commission for saving his property, the actual loss caused to him is only the proportionate amount chargeable on the property purchased by him. The balance amount he can recover from the other properties included in Ext. I.

It was, however, contended for the Plaintiff that the first Defendant is liable to pay the whole amount which the Plaintiff was compelled to deposit in Court for saving the property and that he may recover the proportionate amount chargeable on the other items by a suit instituted by him for that purpose. We do not think that, in the circumstances of this case, it is necessary that the first Defendant should be compelled to pay the whole amount deposited by the Plaintiff and to institute a fresh suit for contribution.

As stated already, the first Defendant himself was not aware of the fact that there was a prior encumbrance on the property. The price received by him for the property was only Rs. 600/-. It is therefore, unreasonable to ask him to pay the Plaintiff Rs. 2,194-12 Ch. 4 Cash and interest and to seek his remedy again at the other items of properties included in the hypothecation bond. It seems to us that the proper course to adopt is to direct the Plaintiff to enforce his claim against the other items of properties also in this suit itself.

The Plaintiff will amend the plaint and claim the proportionate amount chargeable on the property sold to him by the first Defendant from the first Defendant and the properties given by him as indemnity, viz., the present plaint schedule properties, and the remaining amount rateably from the other properties included in the hypothecation I bond Ext. I. The owners of those properties also ''will be impleaded as Defendants in the suit.

We, therefore, set aside the judgment and decree of the Court below and send back the case to that Court for fresh disposal according to law after allowing the Plaintiff to amend the plaint in the manner stated above. The parties will bear their respective costs in this Court. Costs in the Court below will abide the final result of the suit. "The Appellant will get refund of the court-fee paid on the memorandum of appeal.