Sambhunath Mukherjee vs Bimala Debi Saharia

Arun K. Mukherjea, J

This is an appeal from a judgment dated August 29,1959," of the Judge, Fourth Bench of the City Civil Court, Calcutta.. The short facts of the case are as follows: The Plaintiffs entered into an agreement with the Defendant on May 27, 1957, by which the Plaintiffs agreed to buy and the Defendant agreed to sell 16 cottahs, 4 chatacks and 26 sq.fit. of vacant land in premises No. 3A Short Street, Calcutta, on certain terms and conditions. One of the conditions was that the Defendant-vendor must make out a good and, marketable title to the suit property to the satisfaction of the Plaintiffs'' Solicitor Mr. P. K. Bose. The Plaintiffs paid the sum of Rs. 5,001 by cheque byway of earnest money at the time of executing the agreement of sale. The Plaintiffs complain that the defendant-vender failed to make out a good and marketable title to the property to the satisfaction of the said Mr. P. K. Bose in terms of the agreement between them. The Plaintiffs further complain that the Defendant wrongfully repudiated the contract and is liable to refund the earnest money of Rs. 5,001 to the Plaintiffs; and also to pay Rs. 51 by way of costs of the investigation to the Plaintiffs. The Plaintiffs also claim Rs. 303 at 6 % per annum by way of damages. The total claim of the Plaintiffs was, therefore, for Rs. 5,355. The Defendant in his. written statement contends that the stipulation that the vendor was to make out a good and marketable title to the satisfaction of the purchasers'' Solicitor only meant such satisfaction of the Solicitor as would be reasonable and normal in the usual course of such transactions. The Defendant claims to have made out a good and marketable title to the property and says that, since time was of the essence of the contract, the Defendant was entitled to forfeit the earnest money after the expiry of the period which was stipulated for the completion of the transaction. The Defendant charges the Plaintiffs with having committed breach of the contract by refusing to complete the transaction.

On these pleadings the following issues were framed by the learned trial Judge:

(1) Is the suit maintainable ?

(2) Did the Defendant perform his part of the contract ?

(3) Did the Defendant make out a good and marketable title to the suit property to the satisfaction of the Plaintiffs'' Solicitor ?

(4) Are the Plaintiffs entitled to get refund of the earnest money, costs for investigation of title and the interest claimed in this suit or any portion or portions of their claims in the suit ?

(5) Was the repudiation of the contract by the Defendant wrongful and illegal ?

(6) What reliefs, if any, are the Plaintiffs entitled to ?

The Plaintiffs examined their Solicitor P. K. Bose as a witness. P. K. Bose says in his evidence that upon investigating the'' title he was not satisfied with the title of the vendor to the suit property. He says that he wanted satisfactory proof about the heirs of another brother of the vendor, and such proof not having been given to him he informed the Defendant''s Solicitor that he had disapproved the title of the vendor. To a question put by the learned trial Judge this witness said that the grounds of his disapproval of the vendor''s title to the suit property will appear from the correspondence that took place between him and the vendor''s Solicitor and from the requisition of title. The Defendant himself gave evidence. He said that he was the present owner of 3A Short Street, Calcutta. His elder brother Haripada Mukherjee, who was one of the joint owners of the premises, had died in 1915 without marrying so that Bhutnath is the sole heir of the deceased brother. In course of cross-examination it was suggested to the Defendant on behalf of the Plaintiffs that he had not agreed to execute an "indemnity bond against any charge created by the brother and any will having been executed by him". Upon this evidence the learned trial Judge decreed the suit in favour of the Plaintiffs. He held that the satisfaction of the Plaintiffs'' Solicitor undoubtedly meant reasonable satisfaction on his part and that P.K. Bose was, therefore, under an obligation to show some reasonable ground for his satisfaction about the absence of a good and marketable title. The learned trial Judge, however, held that the Solicitor was quite reasonable in asking for a proof that the Defendant''s brother had died intestate and that the Defendant was his sole heir. The proof that the Defendant''s Solicitor wanted was an affidavit sworn by the Defendant on this account. The learned trial Judge held that the Plaintiffs'' Solicitor was not bound to accept the verbal assurance of the Defendant''s Solicitor. The learned trial Judge further held that the Defendant was not justified in refusing to swear an affidavit when such a valuable property was going to be purchased by the Plaintiffs at considerable costs. On these considerations, the learned trial Judge decreed the suit. The Defendant has now appealed against that judgment and decree.

There is only one substantial issue for determination in this appeal. Was the Plaintiffs'' Solicitor justified in insisting upon a sworn affidavit from the Defendant to the effect that the Defendant''s brother had died intestate ? It will be remembered that the Defendant''s Solicitor had said in course of his evidence that the grounds for his rejection of the Defendant''s title are to be found in the correspondence. He was obviously referring to his letter dated August 3, 1957 addressed to the Defendant''s Solicitor R. G. Basu 8c Company As the entire case turns round the effect of this letter I set out the letter verbatim:

Messrs. R. C. Bose & Company

Dated 3rd August, 1957.

Dear Sir,

Re: 3A Short Street, Calcutta.

I have received your letter No. 393 dated 26th July, 1957 and 406 dated 1st August, 1957.

A good and marketable title to the said property is not made out to my satisfaction. However, if your client vendor makes a solemn declaration before a Magistrate declaring that his step-brother Haripada Mukherjee died intestate without leaving any widow or son or son''s son or daughter''s son or any other heir save and except your client the vendor and that on the death of said Haripada Mukherjee your client is the sole and full heir, and he also agrees to charge his property as security for any claim that may be made by any heir of Haripada Mukherjee hereinafter my client may complete the purchase.

Please let me know whether your client will agree to the above.

Yours faithfully, P.K. Bose.

In the letter the Solicitor states ''that he is not satisfied about the marketable title but his client would complete the purchase if the Defendant would make a solemn declaration before a Magistrate to the effect that his step-brother Haripada Mukherjee had died intestate without any heirs save and except the Defendant himself and also if the Defendant agrees to charge his property as security for any claim that may be made by any possible heir of Haripada Mukherjee. It is clear from this that what the Solicitor wanted was a sworn declaration before a Magistrate as well as a charge on the Defendant''s property as security against any contingent claim that could be made by an heir of Haripada Mukherjee, if any such heir existed. We are satisfied that neither of these two demands made by the Plaintiffs'' Solicitor on behalf of the Plaintiffs was reasonable. There is nothing in law which entitles a prospective buyer to demand an affidavit from the vendor. In fact, we do not understand how a mere declaration before a Magistrate would have cured any defect in the title of the vendor if there was really such a defect. If the Plaintiffs'' Solicitor thought that a solemn declaration before a Magistrate would give him at least the right to institute a suit against the vendor for deliberately making false statement and passing off a land with defective title, he should have realised that it was not necessary for the purpose of such a suit to have a declaration before a Magistrate. A false and fraudulent answer given in reply to a requisition on title on the part of the vendor would have been sufficient foundation for such a suit. On the other hand, if the vendor had no title to the suit property a mere affidavit by the vendor of any form whatsoever could not possibly have cured that defect.

As for the Plaintiffs'' Solicitor''s demand for a charge on the Defendant''s property this demand was also equally illegal and unjustified. The Plaintiffs'' Solicitor was obviously asking for an indemnity. The law docs not provide for any such indemnity. In fact, it is Clear and settled law that unless there is an express agreement to the contrary a vendee can never ask for an indemnity from the vendor before purchasing a property. Reference may be made to Balmanno v. Lumley (1813) 1 Ves. and B. 224, Ridgway v. Gray (1849) 1 M. and G. 109 (111) and Bainbridge v. Kinnaird (1863) 32 Beav. 346. Dart on Vendors and Purchasers (8th ed., p. 931) formulates the law in the following manner:

When the vendor''s title is only contingently defective, the purchaser may take the estate with an indemnity; but it has been settled that an indemnity will be enforced against either party unless it be provided for by special agreement.

Indeed, the obligations of a seller in a transaction of the nature we are discussing are clearly enumerated in the Transfer of Property Act. Section 55 of the Transfer of Property Act sets out the rights and liabilities of both the buyer and seller. Sub-sections (1), (2) and (3.) deal with the liabilities of the buyer in the absence of a contract to the contrary. These liabilities do not include any obligation on the part of the seller either to swear an affidavit or to create a charge by way of security against any contingent loss that may accrue to the buyer for any defect of title. In this view of the matter, "we have no doubt whatsoever that the Plaintiffs'' Solicitor was wrong in rejecting the title of the Defendant.

It only remains for us to note that the Defendant has tendered, in evidence, a death certificate of his brother who died on October 9, 1915, (Ex. C) and also a copy of the decree for registration under Act VII of 1876 of the suit property in favour of Bhutnath Mukherjee which indicates that the Plaintiffs had made an application for registration of the estate of his deceased brother Hari pada Mukherjee in his name and succeeded. The decree was granted on January 8,1916.

In the aforesaid circumstances, the Defendant was, in our opinion, entitled to forfeit the earnest money deposited by the Plaintiffs.

Mr. Choudhury appearing for the Respondents sought to invoke Section 74 of the Contract Act and pleaded that the Defendant should not be allowed to forfeit the earnest money by reason of the provisions of Section 74 of the Contract Act. Mr. Choudhury relied for this purpose on the Supreme Court decision in Fateh Chand Vs. Balkishan Das, . There is no substance in this contention of Mr. Choudhury. The Supreme Court decision instead of supporting his contention goes against it. It will appear from that decision that in that case the vendor was allowed to retain the earnest money by way of forfeiture. The vendor, however, was compelled to return the money which had been paid to him in addition to the earnest money as a part of the stipulated consideration. It was held that for the vendor to retain that money would be to impose a penalty on the vendee and that any stipulation in the nature of penalty for forfeiture of an amount deposited in pursuance of a term of the contract was hit by Section 74 of the Contract Act. It is clear and settled law that Section 74 of the Contract Act does not apply in the case of earnest money. Reference in this connection may be made to the decision of this Court in Naresh Chandra Guha Vs. Ram Chandra Samanta and Others,

No other point was argued before us and in the circumstances of the case the appeal must succeed. We order as follows:

The appeal, is allowed and the judgment and decree dated August 29,1959, of the learned trial Judge are set aside. The Plaintiffs'' suit is dismissed. In the peculiar facts and circumstances of the case, we order that each party will pay and bear its respective costs in the appeal as well as in the Court below.

M.M. Dutt, J.

I agree.