Navamani Nadar and Another vs Vedamanicka Nadar (deceased) and Others

Krishnan Pandalai, J.—The question in this petition is one of limitation. The suit was dismissed by the learned Subordinate Judge, of

Tuticorin on the ground that it was barred under Article 111 of the Limitation Act as one for unpaid purchase money personally from the purchaser

brought more than 3 years after the date of the sale. The facts are as follows. The plaintiff''s father sold to the defendant on 28th April, 1919, for

Rs. 500 a portion of the property which had been mortgaged by the vendor to a third party prior to the sale. The consideration of Rs. 500 was

made up as follows: ""Rs. 312-0-0 being the amount reserved with you (purchaser) in order that you (purchaser) may redeem the hypothecation

executed by me; Rs. 88-0-0 received in cash and Rs. 100-0-0 to be paid before the Registrar, total Rs. 500."" The purchaser paid Rs. 188 and

took possession of the property. He did not pay the amount of the hypothecation to the third party who therefore brought a suit in 1924 impleading

the mortgagor-vendor and purchaser-defendant and having obtained a decree sold the whole of the mortgaged property in execution on 29th

October, 1926, including the property which was in the possession of the mortgagor as well as that which was sold to the defendant. This suit was

brought on the 4th December, 1926, for Rs. 738-0-7 made up of Rs. 312 with interest thereon.

The Lower Court relied upon Chunilal v. Bai Jethti ILR (1897) 22 Bom. 846 in support of its view that Article 111 governs the case and

distinguished the decision in Seshachala Naicker v. Varadachariar ILR (1901) 25 Mad. 55 : 11 M.L.J. 318 which pointed out that where a

contract to sell is embodied in the deed of sale the Article applicable would be Article 116. I think Article 111 has no application to the present

case. That Article governs suits- for unpaid purchase money payable to or to the order of the vendor under an agreement to sell and, as the third

column shows, is independent of rights arising by the deed of sale because the terminus a quo is the date fixed for completing the sale or the date of

acceptance of the title whichever is later. The present suit is not brought on any agreement to sell; nor, on the terms of the sale deed, which we may

suppose contains the terms of the agreement to sell, is the amount sued for payable to or to the order of the vendor. Chunilal v. Bai Jethi ILR

(1897) 22 Bom. 846 related to a parol sale of the year 1890 when the Transfer of Property Act had not been extended to the Bombay

Presidency. The sale was for cash to be paid to the vendor, but instead of paying cash the purchaser signed an acknowledgment in the vendor''s

account book. It was held that the sale was completed and the title accepted more than three years before the suit. In the first place there was no

registered sale deed in that case and in the second the whole of the consideration was payable in cash to the vendor. As pointed out in Seshachala

Naicker v. Varadachariar ILR (1901) 25 Mad. 55 : 11 M.L.J. 318 where the contract to sell is embodied in a registered deed of sale, the unpaid

vendor can rely upon Article 116 which allows six years from the date of breach. But the difficulty in the present case is that even six years from

the date of the sale deed will not save the suit. It is therefore argued that the date of breach in a case where the purchaser undertakes in the sale

deed to pay part of the purchase money to the vendor''s creditors, secured or unsecured, is not the date of the sale deed but some later date,

which, is put in some cases as a reasonable time after the sale deed, in others as the date of demand and refusal, and in still others, as-the time

when the vendor is himself compelled to pay the creditors whom the purchaser has defaulted to satisfy. Another line of reasoning which favours the

postponement of the date for bringing a, suit by the vendor is that where the purchaser agrees in a registered deed of sale to satisfy a mortgage

debt or other debt of the vendor with part of the purchase money, there is implied in that agreement an agreement to indemnify the vendor against

losses which may be caused by action taken by the creditors on the default of payment by the purchaser and such an agreement to indemnify is

broken only when the vendor is compelled to pay the creditors himself or his property is sold.

It is curious that no decision of our own Court directly dealing, with this topic was cited. In Raghunatha Chariar v. Sadagopa Chariar ILR

(1911) 36 Mad. 348 : 21 M.L.J. 983 it was held that in a transfer (of two decrees), the consideration for which was that the transferee should pay

the transferor''s creditors, the transferor could sue the transferee for the money, even though the transferor himself had not paid off the creditors, on

the transferee''s default to do so within a reasonable time, but that the suit can only be for the consideration for the sale which the vendee failed to

pay but not for any further damages which the vendor had not actually, sustained. This implies that where the vendor has actually sustained further

damages, by having to pay the creditors himself or by having his property sold, he is entitled to recover the damage actually sustained. I do not

consider this decision as prohibiting a suit for the damages actually sustained after it has been sustained, if it is reasonable to infer that a contract of

indemnity is to be implied in the circumstances.

There are however decisions of other Courts more to the point. In Raghubar Rai v. Jaij Raj ILR (1912) 34 All. 429, a case like the present

except that the vendor had not in fact himself paid the secured creditor whom the purchaser had undertaken to pay, it was held that it was not

necessary for the vendor to have paid the creditor before bringing the suit and that as no time was fixed in the sale deed for the payment of the

mortgage money limitation began to run from the date of the execution of the deed. This view however was dissented from in Ram Ratan Lal v.

Abdul Wahid Khan ILR (1927) 49 All. 603, where the vendor had been compelled to pay a mortgage debt himself and it was held that limitation

in respect of the vendor''s suit against the purchaser will not begin to run until he has been compelled to pay. Babu Makund Lal Vs. Bhola Rai and

Others, was a case where the vendor''s unsecured creditors had to be paid off by the purchaser and it was held that the vendor could recover the

unpaid money within six years from the date of the sale deed. Ammani Bai v. Anant (1930) 33 Bom. L.R. 136 was a case in which the vendor''s

creditor had recovered the money from the vendor on the purchaser''s default to pay. The sale was in 1912; the vendor was compelled to pay the

same debt in 1921. The vendor''s suit against the purchaser was brought in 1924, i.e., within three years of the actual payment but 12 years after

the sale deed. It was held that the Article applicable was 116 and that time began to run when the plaintiff actually suffered the loss, which was the

date when the purchaser''s agreement became impossible of performance by reason of the payment by the vendor himself. Ram Rachhya Singh

Thakur v. Raghunath Prasad Misser ILR (1929) 8 Pat. 860 is a case which adopts the same reasoning. It was held that the terminus a quo was not

the date of the execution of the sale deed but the date on which the contract was deemed to have been broken, namely, the date when either there

was a repudiation of the liability under it or when the contract had become impossible of performance on account of the vendor''s debt having been

satisfied and also that the measure of compensation to be awarded is the amount of the debt with interest.

It occurs to me that it is necessary to distinguish claims of two kinds which may arise in this connection. A vendor may reserve part of the

purchase money with the purchaser entirely for payment of the vendor''s debts in the payment of which the purchaser has himself no primary

interest. These may be unsecured creditors of the vendor for which the vendor alone is liable or secured creditors of the vendor where the security

is other than the property sold. On the other hand such a reservation may be for payment of debts in which the purchaser as owner of the property

purchased becomes solely primarily interested. It may be to pay off a previous mortgage covering only the property sold. In this case except by

way of the vendor''s personal liability for any deficiency that may arise on the mortgage, the purchaser subject to the mortgage becomes the only

person interested in the payment. If he does not pay, the previous mortgage debt will be realised from his own property and no one else''s. It is

difficult to see how in such a case, except where the vendor is proceeded against on his personal liability, he can bring a suit if the purchaser fails to

pay off the mortgage on the property which he has bought. But the reserved portion of the price may be, as it is in this case, to pay off a mortgage

which covers not only the property bought but also some other property which the vendor is entitled to be freed from the mortgage by the payment

undertaken by the purchaser. In such a case the vendor is entitled to see that by the purchaser''s default the mortgaged property left with him is not

endangered. In brief, the suits which a vendor is entitled to bring for the reserved amount against the purchaser before himself paying the amount or

suffering some other damage are cases in which he alone is entitled to benefit fey the payment. But where, as in this case, the benefit of the

payment of the reserved amount accrues partly to the purchaser himself and only partly to the vendor, it is not possible for the vendor to sue the

purchaser for the whole amount reserved. In such cases he can only sue for the portion of the amount the non-payment of which is likely to affect

him, and this can only be properly, determined when he has either made the payment himself or has suffered some other damage by the

purchaser''s default. The basis of the suit in such a case is the contract of indemnity which the agreement in the sale deed implies and can be held to

be broken only when the plaintiff has actually suffered loss. I am therefore of opinion that the limitation in this case began to run when the plaintiff''s

property was sold on the 29th October, 1926, and therefore the suit was not barred.

Another point depending upon this and following from it is the amount which the plaintiff is entitled to recover. As the plaintiff is not entitled to

recover the whole of the Rs. 312 because a portion of it was also to release the property sold to the defendant from the mortgage he can recover

only the loss actually sustained by him. What it is, has yet to be ascertained. The decree of the Lower Court is therefore set aside and the suit

remanded for re-trial and disposal according to law. The petitioners must have their costs in this Court from the counter-petitioner.