Parvathathammal vs Sivasankara Bhattar and Others

Balakrishna Ayyar, J.—The third defendant, a woman is the appellant. The property in suit at one time belonged to the first defendant. On

October 1926 he executed a usufructuary mortgage over it in favour of the plaintiff for a sum of Rs. 1,250. Some sixteen years later, that a to say

on 29th September 1942, the first defendant purported to sell me property to his daughter, the second defendant, for a sum of Rs. 1,500. On 29th

September 1943, defendants 1 and 2 entered into an oral agreement to sell the properly to the plaintiff for a sum of Rs. 2,050, out of which Rs.

1,250 was to be adjusted towards the usufructuary mortgage which the plaintiff held. There were certain execution proceedings in connection with

this property which are not of present interest. On am May 1945, the first defendant sold the property to the third defendant for a sum of Rs.

2,000. The very next day the plaintiffs advocate sent a telegram to the third defendant informing her that she had made her purchase with notice of

the contract of sale in favour of the plaintiff and intimating that a suit would be filed. Four days later, the plaintiff brought the suit out of which the

present second appeal arises for specific performance of the agreement of sale.

Both the Courts below have found that the oral agreement set up by the plaintiff is true. On the question whether the appellant had notice of the

agreement in favour of the plaintiff the trial Court recorded a finding in the affirmative. The lower appellate Court did not record a clear finding on

that point but concluded that the appellant must be deemed to have had notice and in this view dismissed the third defendant''s appeal. She has

now come to this Court.

Mr. Bamachanara Aiyar, the learned Advocate for the appellant based his principle argument on Section 3 of the Transfer of Property Act: ""a

person is saia to have notice or a fact when he actually knows that fact, or when, but for wilful abstention from an inquiry or search which he ought

to have made, or gross negligence, he would have known it."" Three explanations follow, the second of which reads thus:

Any person acquiring any Immovable property or any share or interest in any such property shall be deemed to have notice of the title if any, of

any person who is for the time being in actual possession thereof.

Now, argued Mr. Bamachandra Aiyar the circumstance that the plaintiff was a usufructuary mortgagee of the property and as such in possession of

it would put the appellant on notice only of his rights as a mortgagee and of no more and in consequence it will not be right to impute to her notice

of any other rights which the plaintiff may have in the property, rights arising from a source other than as a usufructuary mortgage. He sought

support for this argument in certain observations appearing In ''Babasah v. Hajee Mahomed Akbar Samo'', to Mad. L. J. 157 regarding cases

where the property is in the possession of tenants or lessees.

He is by their occupation not affected with notice of more than the terms on which they hold including any agreement collateral to their leases, but

he is not bound to enquire, nor are they bound to answer, to whom they pay rent, so that the purchaser is not in such a case affected with notice of

the tenant''s lessor''s title or rights ..... The principle has been embodied in India in 21 of the Specific Relief Act and Section 3 of the Transfer of

Property Act.

The appellant admitted that she did not make any enquiry of the usufructuary mortgagee in order to ascertain from him whether he had any rights

in the property other than as a usufructuary mortgage. The real question in this case, therefore. Is whether her omission to do so can be said to

amount to wilful abstention from an enquiry which she ought to have made or whether it amounts to gross negligence. The argument of Mr.

Ramachandra Aiyar on this matter was that once it was known that the property was in the possession of a usufructuary mortgagee, there was

nothing further that a prospective purchaser of the property need have enquired about. The property was in the possession of the plaintiff. The

appellant was bound to ascertain why he was in possession. To that enquiry the answer would turn out to be that he was a usufructuary mortgagee.

That would dispose of the question of possession. It would hardly occur to anybody to pursue the matter any further and the omission cannot

therefore be said to amount to wilful abstention or gross negligence; it would hardly occur to anyone to suppose that the mortgagee had any other

rights or interests in this property.

I do not consider that a prospective purchaser can be held to have made the sort of enquiry he should if he does not pursue the matter further.

When a person other than the vendor is in actual possession of the property it behoves a prospective purchaser to ascertain what all rights the

person in actual possession really has in respect of the property. And if he omits to do so and if equities exist in favour of the person in possession

the prospective purchaser would be bound by them. In Parthasarathi Aiyar v. Subbaraya Gramany'', 45 Mad. L. J. 175 after extracting the

relevant passage in Section 3 of the Transfer of Property Act, which I have quoted, the learned Chief Justice observed:

In England as here it has been held that constructive notice of all the rights of a person in possession of property sold or mortgaged is to be

imputed to purchasers or mortgagees who made no enquiry of the person in occupation.

The English law on the subject Is stated in ''Hunt v. Luck'', (1901) 1 Ch. 45 where Farwell, J., quotes from tile earlier decision in ''Barnhart v.

Green-shields'', (1854) 9 Moo P C 18 :

With respect to the effect of possession merely, we take the law to be, that if there be a tenant in possession of land, a purchaser is bound by all

the equities which the tenant could enforce against the vendor, and that the equity of the tenant extends not only to interests connected with his

tenancy, as in ''Taylor v. Stibbert'', (1794) 2 Ves Jr 437 : 2 RR 278, but also to interest under collateral agreements, as In ''Daniels v. Davison'',

(1809-11) 16 Ves 249 : 17 Ves 433: 10 R R 171, ''Alien v. Anthonh'', (1816) 1 Mer 282: 15 BB 113, the principle being the same in both

classes of cases; namely, that the possession of the tenant is notice that he has some interest in the land, and that a purchaser having notice of that

fact, is bound, according to the ordinary rule, either to inquire what that interest is, or to give effect to it, whatever it may be.

The decision in ''Paki Ibrahim v. Faki Gulam'', 45 Bom 910 was given on facts scarcely distinguishable from those in the present case. The plaintiff

there was In possession of the property as mortgagee from the first defendant. On 4th March 1917, the first defendant agreed to sell the property

to the plaintiff. Subsequently he refused to do so and sold the property to the 2nd defendant on 19th January 1918. The plaintiff then sued for

specific performance of the agreement. The 2nd defendant relied upon the sale-deed in his favour though he admitted he knew that the plaintiff was

in possession and that he made no enquiries as to the nature of the plaintiff''s possession. The trial Court and the lower appellate Court dismissed

the suit on the ground that the second defendant had no notice actual or constructive of the contract of sale between the first defendant and the

plaintiff although the second defendant might be fixed with notice of the plaintiff''s possession as mortgagee. On second appeal a Bench of the

Bombay High court set aside the decision of the Courts below and ordered specific performance. The learned Judges followed the earlier decision

In ''Sharfuddin v. Govind'', 27 Bom 452 and the English decision in ''Daniels v. Davison''. (1809) 16 Ves (Jun) 249 ; 17 Ves (Jun) 433 in which

the Lord Chancellor held that:

Where there is a tenant in possession under a lease, or an agreement, a person, purchasing part of the estate, must be bound to inquire on, what

terms, that person is In possession, that this tenant being in possession under a lease, with an agreement in his pocket to become the purchaser,

those circumstances altogether give him an equity, repelling the claim of a subsequent purchaser, who made no inquiry as to the nature of his

possession.

Mr. Bamchandra Aiyar argued that the decision in ''Faki Ibrahim v. Faki Gulam'', 45 Bom 910 cannot be now regarded as current law in view of

the amendment made in the Transfer of Property Act after that judgment was rendered. I do not how ever consider that the amendment made in

the Transfer of Property Act affects the correctness of that decision in any manner. The omission of the appellant in the present case to make

enquiries of the plaintiff or about his right must be treated as wilful abstinence or gross negligence, which means, that the appellant is bound by the

existing equity in favour of the plaintiff and cannot obtain the benefit of the proviso to Section 27 A of the Specific Relief Act. The appeal is

dismissed with costs. No leave.