Sampatraj and others vs Pokar and others

Modi, J.—This is a first appeal by the plaintiffs Sampatraj and others against the judgment and decree of the Civil Judge, Pali, dated 30-7-1951, in a suit for damages for breach of contract relating to sale of land.

The dispute between the parties arises out of an agreement to sell ''Bapi'' rights in respect of a well called Kosita in Sojat, which was held by the plaintiffs as ''Bapidars''. The plaintiffs'' case was that some time in 1949, when they wanted to sell their rights in respect of the well in question, defendant-respondents Pokar and three others, who were tenants at the well and cultivated the land appertaining thereto suggested that the former might consult them before transferring their rights to anybody else as they had spent considerable labour and money on it. Accordingly the plaintiff informed the defendants that defendant-respondent Bhanka was willing to purchase the plaintiffs'' rights. Thereupon it was settled that the plaintiffs might hold a sort of an auction between Bhanka and the existing tenants and this was agreed to. The result was that on 20-1-1949, an auction was held and defendant Jagga gave the highest bid of Rs. 21,000/-.

Thereafter Bhanka and the defendant-tenants bad consultation between themselves and suggested that the plaintiffs might accept an amount of Rs. 20,000/- from the defendants jointly. This was accepted. It was further agreed that the purchasers would pay the sale consideration within one month from 20-1-1949. It was also agreed before the auction was held that if the sale would be knocked down in favour of a third party, that is, a person other than the existing tenants, the latter would hand over possession on or before Baisakh Sud 3 corresponding to 1-5-1949. The proceeding or document embodying all these conditions is marked as Ex. P-1 and was signed by Bhanka who was literate and thumb-marked by the other defendant-purchasers who were illiterate. On 24-1-1949, the defendants paid a sum of Rs. 500/- towards the sale consideration. As the defendants failed to pay the balance thereof, the plaintiffs sent a written notice to the defendants. The latter replied that the bargain had been settled between the parties not for a sum of Rs. 20,000/- as alleged by the plaintiffs but for a sum of Rs. 2000/- only. This, according to the plaintiffs, was quite false. They, therefore, gave another notice in which it was stated that they were selling their rights to a purchaser for Rupees 10,000/- and that they would hold the defendants responsible for the loss, but the latter paid no heed to it.

Eventually on 26-4-1949, the plaintiffs sold their rights to defendant-respondents Nos. 3, 4 and 6 who were three out of the five persons who had originally agreed to purchase the plaintiffs'' rights for the sum of Rs. 20,000/- as stated above. This second sale was settled for Rs. 12,000/-. The plaintiffs then instituted the present suit against the defendants for damages amounting to Rs. 8,000/- being the difference between the contract price and the sale price, and gave the defendants credit for the sum of Rs. 500/- which was already received by them and further added a sum of Rs. 500/- by way of interest up to the date of the suit. The plaintiffs thus claimed a sum of Rs. 8,000/- in all plaintiffs'' claim. It may be pointed out here that.

Defendants Nos. 3, 4 and 6 admitted the defendant No. 5, Goria is the son of defendant Ho. 4 Pokar and was impleaded by the plaintiffs as he had put his thumb mark on Ex. P-1, which is the original agreement for sale, as agent for his father. Defendants Nos. 1 and 2 contested the suit. They admitted that they were tenants at the plaintitts'' well but otherwise denied the plaintiffs'' claim. They pleaded that the deal between them and the plaintiffs had been settled for a sum of Rs. 2000/- only and that they had signed Ex. P-1 under that belief. They also contended that the auction referred to by the plaintiffs was not held properly and, therefore, the plaintiffs were not entitled to claim any damages on its basis. They further contended that even if it was held that the auction was properly held, the plaintiffs were not entitled thereafter to sell their land in favour of the other defendants and that the plaintiffs'' suit in the form in which it was brought was not maintainable. These defendants finally contended that the plaintiffs had not suffered any loss and they were, therefore, not entitled to claim any damages whatsoever.

The learned Civil Judge Pali to whom the case was eventually transferred found that it was proved that the defendants had agreed to purchase and the plaintiffs to sell the suit property for a sum of Rs. 20,000/- as embodied in Ex. P-1. He also held that the plaintiffs had thereafter sold their rights in the suit property in favour of defendants Nos. 3, 4 and 6 for a sum of Rs. 12,000/-. He held against the defendants that it was not proved that the sale agreement in the first instance had been made for the sum of Rs. 2000/- and not 20,000/- as claimed by the plaintiffs. The learned Judge further found however that the plaintiffs should have sold the property on the second occasion by means, of a public auction and as they had not done so, they were not entitled to claim any damages, and on that footing dismissed the plaintiffs'' suit against the contesting defendants. As the other defendants had admitted the plaintiffs'' claim, the suit was decreed against them. The plaintiffs have preferred the present appeal from the above judgment and decree.

A number of questions arising out of the appeal were debated before us and we propose in the first place to deal with the question as to what was the precise nature and effect of the contract evidenced by Ex. P-1. It was strenuously contended before us on the side of the contesting respondents that Ex. P-1 was not merely an agreement for sale but a contract of sale and as it was not registered, it was not admissible in evidence, and no other evidence could be led under the Evidence Act to prove such a contract. Alternatively it was also argued that even if Ex. P-1 was held by us to be a mere agreement to sell, it affected immovable property and would be compulsorily registerable and in that view It would still be inadmissible in evidence and, therefore, no suit could be founded on its basis.

We may point out at once that this question was not raised in the court below but as it is a question of pure law, we allowed it to be raised before us. We further wish to draw attention to the fact at the very outset that the T.P. Act was not in force on the relevant date in the former State of Jodhpur and this factor makes for a good deal of complication into the decision of the point before us. If the provisions of S. 54, T.P. Act were applicable to the present case, there Would be no scope for an oral sale but as that Act was admittedly not in force in Marwar at the time this contract was entered into between the parties, if is a question for consideration whether the document Ex. P-1 amounted to a sale.

The argument of learned counsel for the respondents was that the agreement between the parties in this case was a perfected sale and not a mere agreement to sell. He further contended that the fact that the price had not been paid did not make any difference to his argument and for this conclusion he relied on the definition of sale given in S. 54, T.P. Act, We are fully aware of various decisions of the courts in the former State of Jodhpur & of some other parts of what was then British India where the T.P. Act was not in force wherein the view was taken that although the T.P. Act was not in force as such, its principles were nevertheless applicable.

It is against this background that we are called upon to decide what, according to us, are the essential ingredients of a sale which need not be reduced to writing and was, therefore, not Required to be registered. Having given our most careful consideration to this matter, we are of opinion that before an oral sale can be held to have taken place in a given case, one of two essential conditions must be fulfilled. First, that the entire sale-price must have been paid, or secondly the possession of the property sought to be sold must have been delivered by the seller to the purchaser. In the absence of any of these two conditions having been fulfilled, we feel that it would be highly dangerous to hold that a sale of immovable property had taken place orally and in that view the definition given of a sale in S. 54, T.P. Act seems to us to be a technical provision which should not be held to be applicable to such sales.

Suppose that we adopt the view that none of these conditions is necessary and that if a contract is made and price settled part paid and part promised or not paid at all, then we would help to create such a condition of things in which it would be perfectly possible for a person to come forward and say that an oral sale of property had taken place in his favour, that ownership had been transferred to him and that a particular price had been settled which he had agreed to pay to the seller but that the seller had broken his contract and, therefore, the purchaser was entitled to damages or any other relief which he might possibly claim in law. Nor would it be difficult in such a case for a dishonest purchaser to get help of some witnesses who would give oral evidence to support his case. We cannot be oblivious of the fact that such a case though easy to set up may be very difficult to refute. We emphatically consider that we cannot possibly allow such a state of things to come about although we know that the T.P. Act has since been brought into force in the whole of Rajasthan.

In this view of the matter, therefore, we are decidedly of the opinion that before we can allow an oral sale to be established in a court of law, we must be convinced of one of two things viz., that the entire consideration had been paid by the purchaser to the vendor or the possession of the property in question is made over from the one to the other. It is then and then only that we can reasonably come to the conclusion that there has been a transfer of ownership of the property intended to be sold. That seems to us to he the gravamen of and the principle behind the provisions of S. 54 and other rules enacted thereunder are in the nature of technical provisions of law which are perfectly good where oral sales cannot be made but which should be extremely dangerous to apply where the T.P. Act is not in. force and, therefore, oral sales are possible.

Applying the above principle to the case before us, what we find is that the defendants vendees in the present case had not paid the price at the time of the sale. In fact, they had paid a sum of Rs. 500/- on 24-1-1949 and never paid the balance at all. As regards possession, it is true that four of the defendant-respondents were already in possession as tenants of the plaintiffs and, therefore, nothing turns on their possession in the circumstances of this case. The test in the present case would be whether the fifth person defendant Bhanka had ever been put into possession as a result of the alleged sale. It is common ground between the parties that he was not. In these circumstances, we must hold that this was not a perfected contract of sale and as such did not require registration but was merely an agreement to sell.

It was further contended before us, however, that even if Ex. P-1 was an agreement to sell, it was still compulsorily registrable and in the absence of registration was not admissible in evidence and, therefore, could not serve as a foundation for the plaintiffs'' suit. The argument of learned counsel for the respondents was that even so, such a contract would affect immovable property within the meaning of S. 17, Registration Act and would attract the provisions thereof. Reliance was placed in support of this argument on - AIR 1929 269 (Privy Council) It was held by their Lordships of the Privy Council in that case that "An agreement for the sale of immovable property is a transaction ''affecting'', the property within the meaning of S. 49, inasmuch as, if carried out, it will bring about a change of ownership; and to allow a document which does itself create such an interest to be used as the foundation of a, suit for specific performance is an evasion of the Registration Act." Further support was found for the above argument in illustration (a) of S. 13, Specific Relief Act. This illustration runs as follows:

A contracts to sell a house to B for a Lakh of rupees. The day after the contract is made, the house is destroyed by a cyclone. B may be compelled to perform his part of the contract by paying the purchase-money.

It was argued that from the above illustration it necessarily follows that a vendee becomes an equitable owner of the estate from the date of the contract for sale and must pay the stipulated consideration for it even though the estate itself is destroyed between the date of the contract and the actual transfer. The argument appeared at one time to be almost unanswerable to us with respect to the conditions where the T.P. Act was not in force at all and where therefore the last clause of S. 54 was not available. That is in the following terms:

A contract for the sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties. It does not, of itself, create any interest in or charge on such property.

On closer examination, however, we have come to the conclusion that this argument has no force. We should like to point out that so far as Skinner''s case (A), referred to above is concerned, their Lordships held the view that the document in that case was a sale-deed and on that question, preferred the opinion of the Subordinate Judge who had held that it was a sale-deed to that of the High Court which on appeal had differed from the conclusion of the Subordinate Judge and had held that it was an agreement for sale rather than a sale-deed. In that view it was held that the document fell within the provisions of S. 17, Registration Act and, therefore, was compulsorily registrable. Though that was the main finding upon which their Lordships based their decision, they further pointed out that even an agreement for sale of immovable property would be a transaction affecting the property within the meaning of S. 49, Registration Act and would, if carried out, bring about a change in ownership.

Reference was then made to S. 17(2)(v) which exempts from registration a document which does not itself create an interest in an immovable property but merely creates a right to obtain another document which will do so. As the view of their Lordships, however, was that the document in that case itself created an interest in an immovable property, it was held that to allow such a document to be used as the foundation of the suit for specific performance was little more than an evasion of the Act. With utmost respect, we may point out that the last clause of S. 54, T.P. Act, which we have already quoted above, was not brought to their Lordships notice and there is no discussion in Skinner''s case (A), as to the implications thereof. It appears to us that it abolishes the English doctrine that a contract for sale transfers an equitable estate to the purchaser. A contract for sale, where the T.P. Act is in force, would, therefore, merely amount to being a document creating a right to obtain another document and would not require registration according to S. 17(2)(v). It appears to us that even before the enactment of the T.P. Act, the legislature when enacting the Registration Act of 1877, did not regard an instrument for sale as itself creating an interest in land. See Cl. (v) of S. 17(2) of the Act of 1908 which corresponds to Cl. (h) of S. 17 of the Act of 1877.

Reference may be made in support of this view to - ''Chunilal Panalal v. Bomanji Mancherji Modi'', 7 Bom 310 (B); - ''Sreegopal Mullick v. Ram Churn Nuskur'', 8 Cal 856 (C); - ''Pertap Chunder Ghose v. Mohendra Nath Purkait'', 16 Ind App 233 (PC) (D) and - ''Hurnandan Singh v. Jawad Ali'', 27 Cal 468 (E). This state of law, however, did not find favour with their Lordships of the Privy Council in - AIR 1926 94 (Privy Council) . That was a suit for specific performance of a contract to sell and it was held by their Lordships that where the buyer had paid earnest money and so far from refusing to accept delivery was pressing for specific performance, the agreement in itself created an interest and did not allow of the application of S. 17(2)(v), and was, therefore, compulsorily registrable and not having been registered was inadmissible in evidence under S. 49. This view is also supported by the dictum of their Lordships in Skinner''s case (A), already cited above. We would most respectfully point out, however, that in neither of these cases there is a reference to the last clause of S. 54, T.P. Act which provides that a contract for the sale of immovable property does not of itself create any interest in or charge on such property. Skinner''s case (A), was cited in the various High Courts in India, e.g., before the Allahabad High Court in - Sohan Lal and Others Vs. Atal Nath before the Madras High Court in - Madirazu Jagannadha Rao Vs. Somu Lakshminarayana and Another, and in the Patna High Court in - Abdul Latif Mian Vs. Debi Mahton, and it was explained that a mere contract for the sale of immovable property, which did not create any interest in such immovable property, did not require registration. Thus in ''Sohanlal v. Atal Nath (G)'', Sulaiman C.J. observed that

If a document on the face of it purports to create an interest in immovable property then it cannot be used in evidence for the purpose of showing that it affected such interest, nor even for the purpose of showing any transaction affecting such interest. We do not think that their Lordships meant to lay down that even where a document does not purport to create an interest in immovable property it falls under S. 17 and is therefore altogether inadmissible under S. 49 for either purpose. Nor do we think that their Lordships have laid down in. their judgment that a mere contract for sale of immovable property purports to-create interest in such property and falls within S. 17, Registration Act, so as to be compulsorily registrable. We think that the view of this Court that a mere contract for the Sale of an immovable property and does not require registration has not been overruled by this pronouncement of their Lordships.

The question, however, still remains, what is the correct position where the T.P. Act was not in force as in the former State of Jodhpur? It was strenuously argued before us that if S. 54 of the T.P. Act is left out of consideration, the position must be that an agreement to sell land inasmuch as it- affects immovable property (over the value of Rs. 100/-) and gives rise to certain rights, where such an agreement is reduced to writing, would be compulsorily registrable. We were referred to - Dinkarrao Ganpatrao Kothare Vs. Narayan V. Mandlik, ; - Kala Chand Mukherjee and Another Vs. Jatindra Mohan Banerjee and Others, ; - Allibhai Mahomed Akuji Vs. Dada Alli Isap, ; - AIR 1941 240 (Lahore) , in Support of this contention.

It was further argued before us that while the T.P. Act was not in force in the former State of Jodhpur, the Specific Relief Act was in force there and the illustration (a) to S. 13 to which we have already made reference above existed in the Marwar Specific Relief Act. The conclusion which was placed for our acceptance on the above reasoning was that the agreement Ex. P-1 in this case gave rise to equitable rights between the parties and, therefore, was compulsorily registrable within the meaning of S. 17, Registration Act and in the absence of registration was altogether inadmissible under S. 49, Marwar Registration Act. An answer to this contention is in our judgment, furnished by the explanation to S. 17, Registration Act which was added to the Indian Law of Registration by the Indian Registration (Amendment) Act (No. II) of 1927. This explanation is in the following terms: "A document purporting or operating to effect a contract for the sale of immovable property shall not be deemed to require or ever to have required registration by reason only of the fact that such document contains a recital of the payment of any earnest money or of the whole or any part of the purchase money." It appears to its that when their Lordships of the Privy Council adopted the view in ''Dayal Singh''s case (F)'', that where the buyer had paid earnest money under a written agreement and was pressing for specific performance, such agreement in itself created an interest under S. 55 (b), T.P. Act and, therefore, did not permit the application of S. 17(2)(v), and the agreement was consequently compulsorily registrable, the legislature restored the view which was previously held in India viz., that a mere agreement for sale of immovable property was exempt from registration even though it contained an acknowledgment of receipt of earnest or part payment of the price.

The Marwar Registration Act, 1934, contains the same explanation verbatim. We are, therefore, inclined to the view that no matter that the T.P. Act was not in force in the former State of Jodhpur, a mere agreement to sell immovable property of the value of Rs. 100/- and over was not required to be compulsorily registered by virtue of the explanation to S. 17, even though such an agreement might or might not fall within the four corners of Cl. (v) of sub-s. (2) of S. 17, as oral sales were permitted in that State. We are of the view that if a contract for the sale of immovable property even when it contains the recital of the payment of any earnest money or of the whole or part of the purchase price does not require registration, a document purporting to be an agreement to sell immovable property when it does not contain any such characteristics cannot be held to require registration. It is also remarkable that the explanation which we are considering is clearly retrospective and that again shows that the intention of the legislature was emphatically to uphold the view which was held before the decision of their Lordships of the Privy Council in Dayal Singh''s case (F) that a mere contract for the sale of immovable property did not of itself, create any interest in or charge on any such property. This view is abundantly supported by the decisions of the various High Courts in India in the cases of - Bansi Dhar and Others Vs. Sampat Kumar Singh and Others, ; - V.R. Ramasubba Raju Vs. Seshamma and Others, ; - Nagarbashi Banik Vs. Meghnath Maishan and Others, and - AIR 1932 95 (Lahore)

For the reasons mentioned above, we have come to the conclusion that the document Ex. P-1 in this case, which was a contract for the sale of immovable property as already held by us above, did not require to be compulsorily registered and is, therefore, admissible in evidence. We accordingly overrule this contention.

The finding of the court below that the contract settled between the parties was for a sum of Rs. 20,000/- and not for Rs. 2000/- only, as alleged by the defendants, was not seriously questioned before us and, therefore, we do not propose to deal with this question at any length. We consider it sufficient to state, however, that there is ample evidence on the record to justify the conclusion of the trial court and we concur in it.

The next question that falls for determination is whether the defendants were guilty of having broken the contract and if so to what damages the plaintiffs are entitled. On the first question, we are clearly of the opinion that they were. The reasoning of the learned trial Judge that the plaintiffs should have re-sold the land by a public auction does not appear to be founded on any legal justification and no law has been pointed out to us which would render such a course necessary. We may point out in this connection that even the first sale that was held was not a public auction.

As already pointed out by us above, the plaintiffs were anxious to sell their ''Bapidari'' rights to any prospective purchaser who offered them a suitable price, and had intimated their intention to the defendants who were the tenants of the former. In acting in that manner, the plaintiffs were obviously actuated by the best of motive and the defendants when they were informed of the intentions of the plaintiffs wanted in effect that they should have the option of first refusal and in pursuance of that intention private bids were taken where the defendants gave bids mostly and there was also an out-sider, namely, Bhanka. The highest bid given was by defendant-respondent Jagga for Rs. 21,000/- but to all intents and purposes the auction had fallen through because the defendants thereafter were able successfully to persuade the plaintiffs to accept a lower price viz., Rs. 20,000/- for the proposed sale, and the bargain was accordingly settled.

It is clear, therefore, that there can be no justification either in law or in fact for holding the view that the property was sold at a public auction in the first instance or that it required to be sold again by a public auction on the second occasion, it is also clear beyond a shadow of doubt that the defendants refused to carry out the contract and in fact went to the length of supporting their refusal on an entirely false foundation, viz., that the contract had been settled for a sum of Rs. 2000/- only. We have no doubt, thererore, that they were responsible for violating the contract embodied in Ex. P-1.

The next question that remains to be decided is what would be the amount of damages, to which the plaintiffs are entitled. The law appears to us to be well settled that in such cases the amount of damages to which the plaintiffs are entitled must be the difference between the contracted price and the actual price. (See - ''Radha Kishan Kaul v. Shankar Das'', AIR 1927 Lah 252 (R)). The same conclusion appears to us to be supported by a decision of their Lordships of the Privy Council in - AIR 1929 179 (Privy Council) although the actual decision in that case turned on different considerations.

Learned counsel for the appellants, therefore, contended that the plaintiffs were entitled to the difference between the contracted price of Rupees 20,000/- and the price actually fetched at the second sale which was Rs. 12,000/-, in other words, to a sum of Rs. 8,000/-. It was contended, however, on behalf of the respondents that according to S. 73, Contract Act, all that the plaintiffs were entitled to was compensation for the loss or damage caused to them at the date of the breach. It was argued that the breach in this case had occurred on 20-2-1949, one month after the date of the contract and that the plaintiffs had not proved the damages suffered by them on that date or the value of the property which is the subject-matter of dispute thereon. Learned counsel relied in support of his contention on - ''A.K.A.S. Jamal v. Moola Dawood Sons & Co.'', AIR 1915 PC 48 (T). It was held in that case that

A plaintiff who sues for damages for breach of contract of sale owes the duty of taking all reasonable steps to mitigate the loss consequent upon the breach and cannot claim as damages any sum which is due to his own neglect.

It was further held that

The loss to be ascertained is the loss at the breach. If at the date the plaintiff could do something or did something which mitigated the damage, the defendant is entitled to the benefit of it. But the fact that by reason of the loss of the contract which the defendant has failed to perform the plaintiff obtains the benefit of another contract which is of value to him, does not entitle the defendant to the benefit of the latter contract.

We may point out at once that the case before their Lordships arose in connection with the sale of negotiable securities such as shares for which there is a ready market and in connection with which it is always possible to ascertain the market value on the date of breach and in such a case it is perfectly understandable that the "loss claimed" must be the "loss ascertained" at the date of the breach. The ascertainment of damages in connection with the breach of a contract for the sale of immovable property obviously stands on a different footing. It cannot be said that there is a ready market for such property nor is it possible to ascertain the value of such property from day to day. We are of opinion that in such cases, the dictates of law are reasonably met by proving the loss with reasonable approximation to the date of breach. The contract for the sale of the suit property in the present case had taken place on 20-1-1949, and the breach had occurred on 20-2-1949, and the property had been re-sold in the same year on 26th April. If the property fetched a lesser price at the re-sale, it was not due to any fault of the plaintiffs and the defendants must be held accountable for the difference in the circumstances of this case. We, therefore, hold that the plaintiffs are entitled to the difference between the contracted price and the price actually fetched by the property at the re-sale viz., a sum of Rs. 8,000/-. Out of this sum, the plaintiffs admitted to have received Rs. 500/- soon after the contract had been settled. They are, therefore, entitled to As. 7500/-.

The only question that remains to be decided is the contention raised on behalf of the appellants that they are entitled to interest from the date of suit to the date of decree. This matter, however, rests in the discretion of the court. Having regard to all the circumstances of the case, we have not been able to persuade ourselves that we should allow such interest. We would, however, allow future interest on the decretal amount at 6 per cent from the date of our judgment.

The result is that we hereby allow this appeal, set aside the judgment of the learned Civil Judge, and grant a decree in favour of the plaintiffs appellants for a sum of Rs. 7500/- with future interest from the date of the decree at 6 per cent. per annum. The appellants will be entitled to their costs from the contesting respondents here and in the court below.