Rameshwardas Khemraj and another. vs Jagannath Sitaram and others

C.P. Sen, J.—This is plaintiffs'' appeal against the dismissal of their claim for Rs. 21,642-10 p. by the trial Court.

The plaintiffs are brother and sister, their father Khemraj died some years back. The defendants 1 to 3 are sons of Sitaram and the defendant No. 4 is their cousin. The plaintiff No. 1 and his father from time to time gave loans amounting to Rs. 11,853 and 6 annas to Sitaram who was then the Karta of the joint family of the defendants for purchase of certain properties and it was agreed that a deed of mortgage would be executed mortgaging the properties purchased. However, on 13-10-1944 Sitaram died and after his death a registered agreement, Ex. P. 7, was executed by the defendants on 20-11-1944 agreeing to execute a mortgage deed in favour of the plaintiff No. 1 and his father for the loans advanced by them mortgaging certain proprietary rights in chhota ghas lands and also mortgaging sir and khudkasht lands as detailed in the said agreement. As per the agreement, the plaintiff and his father were entitled to foreclose the mortgage if the loans were not repaid by 2-5-1950. Since the defendants failed to execute a mortgage deed, the plaintiff No. 1 and his father brought Civil Suit No. 4-B of 1947 for specific performance of the said agreement or in the alternative claimed refund of the consideration. The claim for specific performance alone was decreed by judgment dated 24-4-1948, Ex. P. 4. In that judgment it was held that the defendants were ever ready and willing to perform their part of the agreement but no registered document could be executed as the plaintiffs were insisting for specific performance outside the terms of the agreement. The plaintiff No. 1 and his father preferred First Appeal No. 77/1948 in the High Court of Judicature at Nagpur and the appeal was dismissed on 29-7-1955 vide judgment Ex. D. 3. In the meantime, M.P. Abolition of Proprietary Rights Act, 1950 (No. 1 of 1951) came into force on 31-3-1951 but the effect of the said Act was not considered by the High Court. The plaintiff and his father then filed an execution proceeding for specific performance as decreed and during pendency of the execution application, the plaintiff''s father Khemraj died and in his place the plaintiff No. 2 was impleaded. However, the execution was dismissed as infructuous on 17-1-1960 by the executing Court. Thereafter, the plaintiffs filed another execution application and therein an objection was raised by the defendants that the decree has become void and unexecutable by virtue of the Abolition Act and the decree cannot be executed. The objection was upheld by the executing Court as per its order dated 27-11-1964 Ex. P. 1, holding that all proprietary rights are vested in the State and that the decree under execution for specific performance of the agreement to mortgage has become void and unenforceable after coming into force of the M.P. Abolition of Proprietary Rights Act, 1950, by relying on a decision of the Supreme Court in Haji S.K. Subhan v. Madhorao A I R 1962 S C 1231.The executing Court also rejected the prayer of the plaintiffs for refund of the consideration by saying that no such relief can be granted by the executing Court which has to execute the decree as it is. However, the executing Court found that a part of the decree was executable by observing as under:--

Thus, only the Khasra No. 124, area, 0.07 acre and the sites of the payagas are now available for being mortgaged. But, the contract is one and indivisable and the part which must be left unperformed forms a considerable portion of the whole and does not admit of compensation in money. Therefore, u/s 15 of the Specific Relief Act, the contract cannot now be specifically enforced unless the decree-holders relinquish all claim to further performance and all right to compensation. They are not willing to do so. Therefore, the entire contract has become void and the decree for specific performance has become unexecutable.

The order was not challenged by the plaintiffs and has become final.

After dismissal of their execution application, the plaintiffs have filed this suit for recovery of Rs. 11853.37 p. with interest at the rate of 8 annas per cent per month, the total amounting to Rs. 21,642.10 p. The plaintiffs based their suit u/s 65 of the Contract Act because of the failure of the consideration and the cause of action was shown to have arisen on 27-11-1964 when the executing. Court held that the decree was unexecutable. The defendants 1 to 3 resisted the suit and the defendant No. 4 remained ex-parte. According to the defendants 1 to 3, the plaintiff and his father were all along not willing to abide by the terms of the agreement and, in fact, after hearing rumors about intending abolition of Malguzari insisted on the defendants to execute a mortgage deed by including Khasra No. 185 area 20.65 acres belonging to the defendants and also incorporating a condition that all the defendants are personally liable for the loans taken. It was agreed between the parties that the mortgagees could, foreclose all the rights of the mortgagors if the loan amounts were not repaid by 2-5-1950. According to the defendants, because of the latches on the part of the, plaintiffs they did not take steps for foreclosure of the mortgage and in the meantime the Abolition Act came into force and all proprietary rights vested in the State. The defendants were all along ready and willing to perform their part of the agreement and after the coming into force of the Abolition Act the plaintiffs at the most could get the amount of compensation that has been awarded to the defendants due to vesting of their proprietary rights. The defendants also submitted that the suit was barred by time because the cause of action arose on 31-3-1951 when the Abolition Act came into force and the consideration failed. The learned trial Judge held that only Rs. 800 was paid at the time of the execution of the agreement Ex. P. 7 and the balance amount of the mortgage amount was towards acknowledgement of the past debts and, therefore, u/s 65 of the Contract Act the plaintiff are entitled to receive back only the advantage of Rs, 800 and not Rs. 11,853 and 6 annas. Regarding limitation, the learned trial Judge held that the suit is hopelessly barred by limitation inasmuch as the cause of action arose on 31-3-1951 when the Abolition Act came into force and on 27-11-1964 when the order was passed by the executing Court, Accordingly, the suit has been dismissed.

The only questions For consideration in this appeal are (i) whether it can be said that the only advantage obtained by the defendants under Ex. P. 7 was the amount of Rs. 800 advanced at the time of execution of the agreement and (ii) whether the suit is barred by limitation.

The suit is based on section 65 of the Indian Contract Act which is as follows:--

When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it.

Under this section, any person who has received any advantage under the agreement which has become void is bound to restore the advantage so obtained or to make compensation for it to the person from whom he has received it. As per the agreement Ex. P. 7, the defendants were paid Rs. 800 in cash at the time of execution of the agreement and Rs. 11,853 and 6 annas were acknowledged by the defendants towards past debts. The learned trial Judge was clearly in error in holding that the acknowledgement of the past debts was not the-advantage obtained by the defendants from the plaintiffs. The learned trial Judge failed to consider that because of the acknowledgement of the past debts and the promise of the defendants to execute a mortgage deed for the entire amount including the amount of Rs. 11,553 and 6 annas towards past debts, the plaintiffs were forbeared from recovering the amounts of the past debts. u/s 58 of the Transfer of Property Act there can be mortgage of the past debts also. Forbearing to sue on the part of the plaintiffs in view of the agreement of the defendants to execute a mortgage deed for the entire amount is a valid consideration. The defendants having taken advantage under the agreement, cannot now turn round and say that the plaintiffs should have filed a separate suit for recovery of the amount of Rs. 11,853 and 6 annas. Even such a course was not open to the plaintiffs. Therefore, disagreeing with the view of the trial Court, we hold that under the agreement Ex. P. 7 the defendants obtained an advantage for a sum of Rs. 11,853 and 6 annas. Since the defendants agreed to pay interest at 8 annas per cent per month, the plaintiffs are entitled to recover the amount with interest in view of the failure of the consideration due to enactment of the Abolition Act.

Now the question remains whether the plaintiffs'' suit is barred,by limitation. It has not been disputed by the parties that Article 97 of the new Limitation Act of 1908 (Article 47 of the new Limitation Act of 1963) applied in the present case which is as under:--

For money paid upon an existing consideration which afterwards fails.

Three years

The date of the failure

For money paid upon an existing consideration which afterwards fails.

Three years

The date of the failure

The dispute is regarding the date of failure of the consideration. According to the plaintiffs, the failure of consideration was on 27-11-1964, the date on which the executing Court held that the decree for specific performance of the agreement was unexecutable, whereas the defendants assert that the failure of the consideration was on 31-3-1951 when the Abolition Act came into force. u/s 3 of the M.P. Abolition of Proprietary Rights Act, 1950, on and from the date of notification all proprietary rights in an estate, mahal, alienated village or alienated land, as the case may be, in the area specified in the notification, vesting in a proprietor of such estate, mahal, alienated village, alienated land or in a person having interest in such proprietary right through the proprietor, shall pass from such proprietor or such other person to and vest in the State for the purposes of the State free of all encumbrances. u/s 4 of the Act when the notification u/s 3 has been published, then notwithstanding anything contained in any contract, grant or document or in any other law for the time being in force and save as otherwise provided in this Act all rights, title and interest vesting in the proprietor or any person having interest in such proprietary right through the proprietor, in such area including land (cultivable or barren), grass land, scrub jungle, forest, trees, fisheries, wells, tanks ponds, water channels, ferries, path-ways, village sites, haats, bazars and melas; and in all sub-soil, including rights, if any, in mines and minerals, whether being worked or not, shall cease and be vested in the State for purposes of the State free of all encumbrances; and the mortgage debt or charge on any proprietary right shall be a charge on the amount of compensation payable for such proprietary right to the proprietor under the provisions of this Act. The provisions are very clear and on the coming into force of the Act all proprietary rights vested in the State.

The learned trial Judge has relied on a Division Bench decision of this Court in Singhai Shrinandanlal Vs. Laxman Singh and Another, . wherein it has been held that where a proprietor lambardar of a mouza transfers occupancy rights in the property after 16-3-1950, the contract becomes void after the Abolition Act came into force and u/s 65 of the Contract Act the original contract became void on 31-3-1951. This ruling is sought to be distinguished on the ground that the question of limitation was not in issue in that case and the observations are obiter. May be the question of limitation was not in issue but the question as to when the contract became void was very much in issue in that case. We are bound by the Division Bench decision and we do not find any reason to take a contrary view. This view also finds support from the Division Bench decision of the Bombay High Court in Rayagonda Anna Patil Vs. Jankibai and Another, . wherein it has been held that the starting point of limitation under Article 97 was when the Bombay Tenancy and Agricultural Lands Act, 1948, came into force. This is direct authority because the question of limitation was very much in issue and the question was whether the plaintiff was entitled to specific performance of the contract or refund of the consideration due to enactment of the said Act which made the agreement unenforceable. View of this Court also finds support from a Division Bench decision of the Rajasthan High Court in State of Rajasthan Vs. Bundi Electric Supply Co. Ltd., Bundi, . wherein it has been held that the contract becomes impossible of performance due to supervening event and after passing of the Motor Vehicles Act the contract became impossible of performance. All these cases are sought to be distinguished on the ground that in all those cases the entire agreement became void due to supervening event of some enactment. But here the entire agreement did not become void and the part of the decree still remained executable even after 31-3-1951. It was contended that unless and until the matter was finally adjudicated by the executing Court section 47 of CPC was a bar in filing a separate suit for refund of the consideration u/s 65 of the Contract Act. This contention has been rightly negatived by the learned trial Judge. As has been ordered by the executing Court in its order Ex. P. 1, the substantial portion of the decree under execution became unenforceable and the plaintiffs could have only got execution of the specific performance of the agreement in respect of Khasra No. 124, area 0.07 acre, but it was for the plaintiffs to choose as to whether they should get specific performance of the remaining portion. section 15 of the Specific Relief Act, 1877, provided that when the contract was one and indivisible and the part which must be left unperformed forms a considerable portion of the whole and did not admit of compensation in money, the contract cannot be specifically performed unless the decree-holders relinquish all claim to further performance and all right to compensation. Therefore, no adjudication of the Court was necessary, for the option was of the plaintiffs as to whether they should get specific performance of the portion which was still available for specific performance. It is also evident that the plaintiffs were not willing to get specific performance of the portion which could be performed by relinquishing all claims to further performance and all right to compensation. The plaintiffs, therefore, were aware on 31-3-1951 when the Abolition Act came into force that the execution of the decree for specific performance has become unenforceable. This being the position, the plaintiffs should have filed the present suit within 3 years under Article 97 of the old Limitation Act. The plaintiffs could have also pressed for their alternative relief of refund of consideration in their appeal before this Court (Ex. D. 3) but they failed to avail of that opportunity.

The appellants have also relied on certain decisions of the Privy Council in support of their contention that the date of failure of consideration was on 27-11-1964 after adjudication by the executing Court. The first case is of Basu Kumar v. Dhum Singh 11 ALL 47 (P C). In that case money due was part of the consideration for sale of land by debtor to creditor but the suit for specific performance having been dismissed, the decree brought about a new state of things and the failure of consideration was only after the decision in the suit. In the second case of Amma Bibi v. Udit Narain Misra 31 All 68 (P C). the suit for specific performance having failed, it was held that the cause of action to recover money arose after the decision in the suit when there was failure of consideration. In the third case of Hanumand Kamat v. Hanuman Mandir I L R 19 Cal. 123 (P C). a sale by a member of a joint family was challenged by other co-sharers it was held that the sale was not void from the begining but it was voidable and the consideration failed only when the purchaser failed to obtain possession of the suit land. The last case is of AIR 1927 99 (Privy Council) . wherein by subsequent adjudication it was held that the mortgage was not binding on the person bringing subsequent suit and, as such, it was held that the cause of action arose when the suit challenging the mortgage was decreed and the mortgagee was dispossessed. In all these cases, the contract did not become void by operation of law but became void or unenforceable by adjudication through Courts. Therefore, these cases are clearly distinguishable from the facts of the present ease wherein these consideration failed because of the vesting of all proprietaiy rights under the Abolition Act and on the unwillingness of the plaintiffs to get specific performance of a small portion of the contract which could still be performed. Clearly, the present suit is barred under Article 97 of the old Limitation Act since the plaintiffs did not bring the suit within 3 years of 31-3-1951 when the Abolition Act come into force, and there was failure of consideration.

The appeal fails and it is dismissed with costs. counsel''s fee as per schedule, if certified.