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Judgment
Natesan, J.—This second appeal is preferred by the Plaintiff against the rejection by the Courts below of her claim for recovery of a sum of
Rs. 1,100 paid by her as advance under a contract with the Defendant for purchase by her of a house property for a sum of Rs. 4,500. The
Plaintiff is the brother''s daughter of the Defendant and there was a partition in the family in 1946 evidenced by exhibit B-1, a registered deed of
partition between the Defendant and his nephew Varadaraja Pillai, the Plaintiff''s brother. The original contract for sale under which the payment
was made is evidenced by a receipt exhibit A-2, dated 19th August 1957 which acknowledges the receipt of the sum of Rs. 1,100 as advance and
provides for the registration of the sale deed on payment of the balance of Rs. 3,400 in the presence of the registrar. As the sons of the Defendant
were not available for completion of the sale deed within the time originally agreed upon, a formal agreement was entered into on 27th September
1957 wherein time for completion of the sale was extended till 30th November 1957. Exhibit A-4 is the said agreement and it provides for the
forfeiture of the sum of Rs. 1,100 paid as advance in the event of the Plaintiff not completing the sale. A sum of Rs. 2,200 is stipulated as the
compensation payable by the Defendant if he should default. With reference to the contemplated sale, copies of two notices addressed to the
Defendant were received by the Plaintiff. In exhibit A-8, dated 10th November 1957, one Neela-kantan Pillai claiming to be the Honorary
President of Sakala Dharma Kainkarya Saswatha Nidhi of Tiruppachur stated that a sum of Rs. 1,062 remainded as capital of the said Nidhi on
14th October 1957 in the hands of the Defendant and had been accepted by him and pointing out that the Defendant had sold away his properties
and was proposing to sell the only remaining property, objection was taken to the intended sale without clearing off the liability of the Nidhi. The
other notice exhibit B-9, was issued by one Kumarasami Pillai as father and guardian of his minor son Sivashanmugham. It related to a sum of Rs.
450 a liability to contribute which amount for the purchase of a property for the benefit of the minor had been assumed by the Defendant at the
family partition evidenced by exhibit B-1 in 1946. Attention was drawn in this notice also of the Defendant having sold all the property that had
come to him in the partition and pointing out that he was proposing to sell the only remaining property he had. The notice given claimed security for
the amount retained. After receipt of the copies of the notices from the creditors of the vendor-Defendant, the Plaintiff by her lawyer wrote to the
Defendant on 27th November 1957 the letter exhibit B-2. Reference was made therein to the notices from the creditors and while expressing
readiness and willingness to complete the purchage, the Defendant was required to get the consent of the creditors or make some provisions for
the discharge of their dues. In his reply thereto by exhibit A-6, the Defendant stated that there was no difficulty in his conveying a legal and valid
title so far as the property under reference was concerned, that there was no encumbrance on the property and the he had secured an
encumbrance certificate and given the same to the Plaintiff�s husband as required. As regard the notices purporting to be from creditors, the
Defendant did not deny liability. He stated:
The amount of Rs. 900 (now referred as Rs. 1,062) is mentioned in item 23 of the partition deed referred above as ""Sri Vasiswara Devastana
Amavasi Kattanam"" and has to be disbursed only with the knowledge and consent of the trustees of the Vaisiswara Temple and on no account can
the amount be paid to the President of the Sakala Dharma Kainkary Saswatha Nidhi Tirpuppachur, who is referred to in your letter. Similarly, with
regard to the amount of Rs. 450 (referred in item 25 of the above partition deed) myself and my brother�s son have to co-jointly buy an
immovable property (total value of Rs. 900) in the name of the minor Sivashanmugham on his becoming a major (paragraph 21 of the above
partition deed). When I have such an obligation to carry out, how is it possible for me to clear the loans now. It is not also possible to transfer such
obligations to any one else. I am answerable for these things and these have absolutely no bearing on the sale of the property under feference.
On 30th November 1957 the Plaintiff again wrote to the Defendant through her Advocate pointing out that admittedly the debts were there and
had been acknowledged in the partition deed itself proceeded:
Please note that once again my client reiterates that she is ready and willing to purchase the property, provided you get the consent of the four
creditors, or in the alternative you give an indemnity changed upon a suitable immovable property available to my client in case the sale should be
impeached and set aside. In default of your so arranging for a safeguard for my client, my client will have no other course but to file a suit against
you for the recovery of the sum of Rs. 1,115 repayable to hger.
In the letter exhibit B-2 she had referred to the fact that there were four out standing liabilities which had to be discharged by the Defendant only
in respect of two notices had been received from the creditors. The Defendant in his reply, exhibit A-6 had not denied the existence of two other
creditors though details are lacking about the same in the records. The Defendant had merely stated that the Plaintiff was aware of the details of the
partition in the family and how he had been able to discharge the debts to the tune of Rs. 15,000 with only the property obtained in the partition in
his possession. Though the advance paid is Rs. 1,100 the claim for refund include a sum of Rs. 15 which the Plaintiff paid for getting an
encumbrance certificate for the property in question.
In the suit for refund of Rs. 1,115 which was instituted by the Plaintiff on 22nd December 1957, after referring to the agreement and notices
from the creditors and o ther relevant matters in paragraph 7 of the plaint it is stated:
The Plaintiff thereupon caused legal adivise to be taken in the matter and she was advised that it would be unsafe to purchage the property
overlooking the objections, especially as the Plaintiff was a close relation of the Defendant, and as this prokperty happened to be the only
remaining asset of the Defendant, that the sale was likely to be impeached as being in fraud of creditors, and that the said debts which were
undertaken to be paid by the Defendant in the registered deed of partition also constituted a charge upon the share of the Defendant in the family
properties that were allotted to him.
The Defendant in his written statement, even as he did not in his reply exhibit A-6, refute the allegation that the property proposed to be
conveyed was the only remaining asset of the Defendant. It is alleged in the written statement that the Plaintiff found that it was no more necessary
for her to purchase the house in question, that the Plaintiff and her husband were fully aware of the details of the family partition and the debts
referred to therein even when they entered into the agreement and the claim by creditors is a lame excuse to wriggle out of the contract.
In the Courts below, the case proceeded on the assumption that the sum of Rs. 1,100 was earnest which could straightaway be forfeited on
default by the Plaintiff. Elaborate arguments were advanced that as the two debts above referred to had been allotted to the share of the
Defendant, a charge was created in respect of these debts over the family properties, that the charge in respect of these debts fastened itself on the
suit property also and that as the Plaintiff could be deemed to have notice of the charge by reason of her close relationship, any sale in her favour
could be impeached by the creditors claiming a charge over the property, that these debts are, therefore, encumbrances on the property and that
on the failure of the Defendant to clear them off, she could refuse to accept the sale. A large number of cases were cited to sustain the proposition
that the debts were charged on the properties allotted to the share of the Defendant. Though the sum of Rs. 1,100 is practically one-fourth of the
price fixed and at the time it was paid it appears to have been paid only in part-payment of the price, no arguments were advanced in the Courts
below that the sum of Rs. 1,100 was only part of the price and was not liable to forfeiture. The issue proceeded on the basis that it was earnest.
Learned Counsel appearing for the Appellant raised before me the contention that the sum of Rs. 1,100 cannot be held to be earnest and,
therefore, not liable to forfeiture. Whether the payment is earnest to ensure due performance of the contract or not is a mixed question of law and
fact and has to be ascertained by reference to the proportion the amount bears to the total sale price, the need to take a deposit intended to act as
in terrorem, the nature of the contract and other circumstances not capable of being exhaustively listed. I have, therefore, not permitted the
Appellant to base his claim on the ground that the amount was not earnest liable to automatic forfeiture on default by the vendee. The Courts
below have negatived rightly the contention of the Appellant that the debts were a charge on the property and, therefore, were encumbered and
constituted a defect in the title. But there has been practically no consideration of the contention on behalf of the Plaintiff that without safeguard or
provisions for the discharge of the liabilities admittedly existing the sale could be impeached as one in fraud of creditors. The lower appellate Court
got over the argument in a brief reference as follows:
It was argued in appeal that the Plaintiff being the Defendant''s brother''s daughter any sale to her by the Defendant was liable to be attacked by
the Defendant''s creditors as a fraudulent transaction and also that the two creditors are likely to enforce their charge against the property. Now,
atleast as regards the point that the Defendant''s creditors are likely to attack the sale in favour of the Plaintiff as a fraudulent one, it should have
struck the Plaintiff even before she entered into an agreement. She could not have been unaware of these debts, because as I have already held it is
probable that she and her husband were aware of them.
The Courts below were inclined to take the view that the Plaintiff herself was responsible for the issue of the two notices by the creditors as she
and her husband were aware of the family partition and the assets and liabilities of the Defendant, the other sharer in the partition being the
Plaintiff''s own brother. But the duty is prima facie on the vendor, that is the Defendant herein, to convey a title to the Plaintiff free from defects and
assuming that the Plaintiff was in fact aware of the debts even before, if she guards herself from future claims, by enquiring of the creditors and
thereby alerting them, such conduct is neither here nor there, in relation to the question in issue. It cannot be said and it is not the law that anterior
knowledge of the defects by itself estops or disentitles the purchaser from requiring the vendor to clear the defect in title or otherwise safeguard the
purchaser from claims which he has not bargained for to undertake or be bound by.
In this Court again, learned Counsel for the Appellant argued that the debts were a charge on the property and constituted a defect in title. I see
no substance in the argument. The debts are simple unsecured debts. They have not been charged on any particular item of property in the partition
though there has been allotment of debts and properties. The Defendant refers to his liability to the Nidhi as personal. As regards the liability to
minor Shanmugam the parties to the partition have shared it between themselves. The preamble to the partition deed shows that it was a partition
of all properties and debts, ancestral as well as self-acquired. It may be that the liability of the Nidhi was purely personal to the Defendant and
shown in the partition deed by way of abundant caution to absolve the other sharer from that liability. Even if the liability has been assumed to be of
the joint family in the partition the liability being unsecured, a creditor who was no party to the deed gets no charge. Reference was made by the
learned Counsel among other cases to the decision in Poovanalingam Servai Vs. Veerayi and Others, . There the Court was dealing with the claim
of the first Defendant to be paid the half share of the price which he had paid on behalf of the second Defendant from whom the Plaintiff claimed as
the assignee, before possession was decreed for the half share of the second Defendant. After referring to the passage at page 703 in Rajah of
Vizianagaram v. Rajah Setrucherla Somasehhararaz ILR (1903) Mad. 686 (F.B.).
But when once the right of contribution is established, as in the present case, it twrtainly cannot be an inequitable or violent stretch of such right to
make it a charge against the co-owner''s share.
Philips J. observed.
Even if there is no legal charge in the present case, yet on equitable principles such a charge can be enforced and when it comes to partitioning the
property between co-tenants, this equity should in my opinion be enforced.
But the present is not such a case and if an authority is needed that no charge is created in a case of this kind Suryanarayana Rao v. Basivi Beddi
ILR (1931) mad. 436 is there.
The sole question for consideration is whether there is a possibility of the transaction in question being assailed as one in fraud of creditors and
the title of the vendee being impeached. The Defendant has not disputed the existence of the liability nor has there been any contradiction that the
property intended to be conveyed was the only remaining asset to the Defendant. The liability that subsisted was fairly substantial. It may be that
the liability was purely personal. There is no evidence on record that the Defendant could, if and when occasion arose, discharge his liabilities
otherwise than from the proceeds of the property in question. He admits in his notice, exhibit A-6 that he was answerable for the debts but would
state that these had no bearing on the sale of the property. Ex facie, in the circumstances, the transfer would be hit at by Section 53 of the Transfer
of Property Act. The entire consideration is being paid in cash to the transferee. The vendee is aware of the claims against the vendor. It may be
that the person who gave the notice on behalf of the Nidhi might not himself be able to file a suit for the amount. But the claim of the institution is
there, real and substantial. Even so, the liability to buy the property for the minor Shanmugam is there. The Plaintiff in this case cannot plead to be a
transferee in good faith even.though full and adequate consideration might pass under the sale. Assuming that the Defendant was not bound to
discharge the debts forthwith, the Plaintiff had required only safeguards to protect the alienation in her favour being impeached. In my view, there
are substantial grounds for apprehending that the alienation in her favour could be assailed as one in fraud of creditors u/s 53 of the Transfer of
Property Act. It is not a requirement of Section 53 that there must be judgment-debtors to impugn the same. If the liability is there, the fact that the
amount was not payable immediately cannot affect the nature of the transaction as one in fraud of creditors. It has been held in a number of cases
that Section 53 of the Transfer of Property Act would apply even to persons who subsequently become creditors.
The only question, therefore, now for consideration is whether the failure of the Defendant to provide for safeguards against the intended
transfer being impugned by his creditors would be a ground for the Plaintiff refusing to proceed with the transaction and claiming refund of the
deposit. The Plaintiff has to show that in this state of the Defendant''s circumstances, she could not be compelled to purchase, to preclude the
forfeiture of the deposit. The test of the vendee''s right to recover back the deposit is whether the action for specific performance at the instance of
the vendor could be successfully resisted by the vendee Defendant on the ground that the vendor''s title was defective vide Low and Co. Ltd. v.
Jyothi Prosad Singh Deo (1931) 61 M.L.J. 699 (P.C.). The vendor cannot successfully maintain a suit for specific performance if the Court
considers that the title of the vendor though not bad, was yet so doubtful as to make considerable the probability of litigation ensuing. In Handmand
and Wilcox, In re (1902) 71 Ch. D. 236 a tenant for life under the powers of the Settled Land Act, 1882, granted to a lessee, a building land on
lease for ninety-nine years at a rent less than the best rent that could reasonably be obtained. On the lessee becoming a bankrupt, the trustee in
bankruptcy sold the lease and the purchaser entered into acontract for the sale of the leasehold interest to another who declined to accept the title
as doubtful because the facts were such that it was extremely probable that the validity of the lease may thereafter be questioned by those entitled
in remainder. If the lease should be challenged the purchase should be supported only on the ground that the vendor (the purchaser from the
trustee in bankruptcy) was a purchaser for value without notice. In such circumstances, it was held on appeal arising upon a summons under the
Vendor and Purchaser Act, 1874 that the Court will not force upon a purchaser a title where there is a probability that it will be questioned and its
validity, if questioned, may depend upon the proof of the fact that the vendor was a puchaser for value without notice of the defect.
In the present case, no doubt, the title would be good as between the vendor and the purchaser and would be voidable at the instance of the
creditors who are defeated or delayed, but the Defendant has refused to give the necessary safeguards if the title should be impeached. The
Plaintiff with knowledge of the debts of the Defendant cannot plead even bonafides unless she has seen to it that provision was made for the
discharge of the debts. In the light of the above decision, the Plaintiff would have a sufficient answer to the claim, if any, for specific performance
by the Defendant and the same answer could provide a ground for refund of the payment she made under the contract for sale. It must, in the
circumstances of this case, be held that there has been no such default on the part of the Plaintiff as to disentitle her to get refund of the deposit she
has made.
In the result, the second appeal has to succeed. The decree and judgments of the Courts below are, therefore, set aside and there will be a
decree in favour of the Plaintiff for a sum of Rs. 1,100. There is no clear proof that a sum of rupees fifteen was given to the Defendant as loan for
obtaining encumbrance certificate. The said claim is therefore disallowed. As in the Courts below, the claim has principally been sought to be
sustained the basis of a charge on the properties, this is a fit and proper case where the parties must bear their respective costs throughout. Interest
on the amount decreed will run from the date of the decree only. No leave.