K.R. Radhakrishna Ayyar and Another vs T.S. Subramania Iyer

Rajamannar, C.J.—The plaintiffs in O. S. No. 220 of 1946 in the District Munsif Court, Valangiman at Kumbakonam are the appellants in

this second appeal. They sold some of their properties to defendant 1 for Rs. 12000 under a sale deed dated 14th October 1921. The properties

were at the time subject to a mortgage which the plaintiffs had executed in favour of one Ramadoss Iyer on 4th August 1918 for Rs. 2750. Out of

the sale consideration of Rs. 12000 a sum of Rs. 3250 was left with the purchaser, defendant 1 to discharge the amount due under the said

mortgage. Defendant 1, however, did not pay any money to the mortgagee forthwith. In or about 1922 the plaintiffs were obliged to pay an

amount of Rs. 800 to the mortgagee towards the interest which had accrued due. Subsequently, defendant 1 sold certain of the items which he had

purchased from the plaintiff to one Nagammal in 1931 for Rs. 4000 and directed her to pay out of the said amount, Rs. 2500 in part payment of

the amount due under the mortgage. Nagammal accordingly paid Rs. 2500 to the mortgagee in 1934. This amount appears to have been

appropriated by the mortgagee towards the interest due as per the terms of the mortgage. In 1940 plaintiff 2 executed in favour of the mortgagee

an assignment of his share of the vendor''s lien for the unpaid purchase money as additional security. Thereafter the mortgagee assigned his

mortgage right as well as the right to the additional security to Nagammal herself. She instituted O. S. No. 67 of 1943 on the file of the District

Munsif''s Court, Valangiman at Kumbakonam to recover the amount due under the mortgage. Both the plaintiffs and defendant 1 were parties to

that suit. It was ultimately held in that suit that the amount due and payable under the mortgage was Rs. 1847-8-0 after applying the provisions of

Section 8, Clause (2) of Madras Act 4 of 1938. Defendant 1 paid that amount.

The suit out of which this appeal arises was filed to recover from defendant 1 any balance of unpaid purchase money. The basis of the suit was

as follows. The amount of Rs. 2500 paid in 1934 must be deemed to have been paid by or on behalf of defendant 1 in discharge of his liability for

the interest which had accrued due subsequent to the sale to him and so that amount could not be said to have been paid from and out of the

amount of Rs. 3250 left with defendant 1 at the time of the sale. It must, therefore, be held that de-fondant 1 paid Rs. 1847-8-0 out of the amount

of Rs. 3250 left with him and the plaintiffs were entitled to the balance as part of the unpaid purchase money. The learned District Munsif dismissed

the suit. He held that defendant 1 should get credit for Rs. 2500 paid in 1934 and as the unexpended balance out of Rs. 3250 left with him was

only Rs. 750 the plaintiffs could not obviously have a refund of any amount because the amount declared still due under the mortgage was Rs.

1847-8-0 for principal as on 1-10-1937. There was an appeal to the learned Subordinate Judge of Kumbakonam but that appeal was also

dismissed.

It was contended by Mr. M. S. Venkatarama Aiyar on behalf of the plaintiffs appellants that the amount of Rs. 2500 paid in 1934 to the

mortgagee must not be taken as having been paid from and out of the amount of Rs. 3250 left with defendant 1 because that a mount was paid and

appropriated towards the interest which had accrued subsequent to the date of the sale. The purchaser was in law the agent of the plaintiffs in

respect of this sum of Rs. 3250 and as agent, defendant 1 should have strictly followed the instructions of the plaintiffs, viz., to pay the amount of

Rs. 3250 towards the principal of Rs. 2750 and the interest which was payable on the date of the sale, -- so, ran his argument. He relied on

analogous legal positions such as for example arise when money is left with a purchaser to discharge an encumbrance and it subsequently turns out

that the encumbrance had become unenforceable for some reason or another. He also relied on the well-established proposition of law that if the

consideration of a sale was the promise by the purchaser to pay the amount to a third party, and if within a reasonable time the purchaser did not

pay the amount to the third party the vendor could sue to recover the amount from the purchaser. In our opinion, the facts of the present case do

not attract any of the principles laid down in dealing with the instances aforesaid. Here we have a case of a sum of money left with the purchaser to

discharge a mortgage liability. Admittedly, the mortgage liability has been discharged by the purchaser paying a sum not less than the amount left

with him. Whatever may be said in a case where the mortgage had been discharged by the purchaser paying to the mortgagee a sum not less than

the amount left with him, no question of refund could possibly arise in a case like the present in which the purchaser has parted with money not less

than the amount left with him and utilised that amount for the discharge of the mortgage. It is obvious that in this case but for the payment of Rs.

2500 in 1934, the debt could not have been scaled down applying the damdupat rule to Rs. 1847-8-0. It is because of this very reduction that the

plaintiff now claims a refund of purchase money. But he could not have been entitled to rely on this fact but for the payment made by and on behalf

of the defendant.

In our opinion, this case is directly governed by the decision in -- ''Subbarao v. Varadaiah'', ILR (1943) Mad 885. In that case, the vendor of

certain items of Immovable property left with the purchaser an amount of Rs. 5682-7-0 for the discharge of a mortgage to which the properties

were subject at the time of the sale. Subsequent to the sale, a sum of Rs. 1000 was paid by the purchasers to the mortgagee. It was held that the

purchasers were entitled to the benefit of the statutory reduction of the mortgage debt under Madras Act 4 of 1938. It was urged on behalf of the

vendors that the purchaser should not be given credit for Rs. 1000 which they had paid after the sale because that amount must be taken to have

been paid towards the interest accruing due on the mortgage debt subsequent to the sale for which the purchasers were solely responsible by

reason of their delay in payment. The learned Judges held that the purchasers were entitled to credit for the sum of Rs. 1,000 paid by them to the

mortgagee. They observed :

We are, however, inclined to hold that the appellants are entitled to credit for the entire sum of Rs. 1000 paid by them to the mortgagee, for, the

appellants are liable to refund only the unexpended balance, if any, of the purchase money in their hands. It is no doubt true that, if the appellants

had not paid the sum, it would not have to be paid, as all interest outstanding on the mortgage on 1st October 1937 was wiped out under Act 4 of

1938, but it cannot be said on that account that any payment made by the appellants towards the mortgage debt before that date was not made

out of the money left in their hands.

We see no reason to doubt the correctness of this decision on this point. In our opinion, it is fallacious to treat the amount of Rs. 3250 left with the

purchaser as a separate fund subject to some kind of trust to be utilised in a particular manner.

The correct legal position in our opinion is this. The sale was free from encumbrances. There was, however, an encumbrance outstanding at the

time of the sale. To prevent the purchaser from being damnified the amount then due under the mortgage was allowed to be retained by the

purchaser. Thereafter, it is true that as between the vendor and purchaser, it was the purchaser''s concern to discharge the mortgage. It may be

that if the purchaser failed to discharge the debt and the vendor was damnified by the purchaser''s default, the vendor may be entitled to damages.

But if the money retained with the purchaser was utilised by him to discharge the mortgage and there is no sum left out of that amount the vendor

can have no manner of right to a refund of any money as the balance of unpaid purchase money, simply because there has been a delay in

discharging the mortgage and interest had accrued due subsequent to the sale. To give a hypothetical case, if in this case the mortgage was not

discharged, say till 1935 by which date further interests had accrued due and a sum much larger than Rs. 3250 was due and payable for principal

and interest but nevertheless the mortgagee was prepared to take Rs. 3250 in full quit of his claim, can it be said that the vendor is still entitled to a

refund of a portion of that amount because further interest bad accrued due subsequent to the date of sale and the sum of Rs. 3250 paid by the

purchaser to the mortgagee must have also included the further interest; in our opinion, he is not. In the present case, instead of a voluntary

remission by the mortgagee, there has been a statutory reduction of the debt. Even after that reduction, the total amount paid by and on behalf of

defendant 1 was far in excess of the amount of Rs. 3250 which had been left with him. The plaintiffs would not, therefore, be entitled to claim a

refund of any money as balance of unpaid purchase money.

The second appeal fails and is dismissed with the costs of defendant-respondent.