Koshi, C.J.@mdashThis Second Appeal was referred to a Full Bench by one of us with a view to have an authoritative pronouncement of this Court on the question whether a contract to forego the vendor''s charge for unpaid purchase-money is to be necessarily inferred when the whole or part of the consideration for the purchase of immovable property is agreed to be paid by the purchaser to a third party on behalf of the vendor. It is a matter of common knowledge for lawyers and Judges that the decisions bearing on the question are by no means uniform. The present case arises from the Travancore area. The balance of judicial opinion in the erstwhile Travancore High Court was definitely in favour of the view that in the circumstances mentioned the unpaid vendor would not lose his charge on the property. Almost consistently the Cochin High Court was taking the opposite view that the charge will not survive on arrangement of the kind referred to. It is on account of this conflict that the case was referred to a Full Bench.
2. However, at the hearing before the Full Bench, it became obvious that even if we were to hold that the direction to the purchaser to pay the price or a part thereof to a creditor of the vendor is not a contract inconsistent with the existence or the continuance of the unpaid vendor''s charge, no relief against the property could be granted in favour of the Plaintiff as the suit was brought more than twelve years after the money sued for became due. We did not, therefore, hear arguments on the vexed question referred to the Full Bench. On the assumption that the charge was not lost by an arrangement of the kind we have before us, counsel were directed to confine their submissions as to when the cause of action arose in the case to enforce the charge.
When that was done Mr. N. Varadaraja Iyengar, learned Counsel for the Plaintiff-Respondent practically gave up the fight and told us that regard being had to the terms of the sale deed (Ex. B) he could not find much support in decided cases or elsewhere for the view that the cause of action arose on a date subsequent to the date of the sale. On principle and authority, we are definitely of the view that, assuming the unpaid vendor''s charge was not displaced by the vendee''s covenant to pay the vendor''s creditors, the cause of action to enforce it arose on the date of the sale itself and that the suit brought more than twelve years after the accrual of the cause of action, was barred by time as to the relief against the property and that the relief granted against the property by the Courts below cannot be sustained.
3. The facts of the case are simple. On 18-10-1103 the Plaintiff sold the plaint-schedule property to the husband of Defendant 1 for a consideration of Rs. 615/-. No part of the consideration did he receive in cash. The property was outstanding in the possession of usufructuary mortgagees and after leaving sufficient money with the vendee to redeem them, the balance of the consideration was directed to be paid to as many as four simple creditors of the vendor. The present suit was in respect of an amount of Rs. 170/- left in the hands of the vendee to discharge the principal amount of a promissory note executed by the vendor on 23-3-1103. The vendor had paid off the interest accrued due till the date of the sale The vendee did not pay amount towards the promissory note, but the vendor kept the debt alive by an acknowledgement dated 28-3-1109, and finally paid off the same himself on 28-3-1115. Under the limitation law in Travancore the period of limitation for suit on a promissory note was six years.
The present suit by the vendor to recover the amount he paid to the creditor was institution on 28-3-1118, the day on which three years aspired from the date of the payment. The suit was so framed as to be treated either as one to enforce the vendor''s lien for unpaid purchase-money (SIC) as one to enforce the contract to indemnify. The sale-deed contained an express covenant to (SIC) demnify the vendor for losses, if any, sustaineed by him in the event of the vendee''s failure discharge the amounts reserved with him for payment to the vendor''s creditors. The cause of action for the suit is said to hare arisen on 28-3-111 when the debt was discharged by the vendor and in the prayer portion of the plaint the Plaintiff prayed for the recovery of the amount by sale of the property sold by him and out of the assets of the deceased vendee in the hands of Defendant 1, the wife of the vendee. After the death of the vendee his heirs partitioned his properties among them and under that arrangement the plaint-schedule property went to a son of the vendee, one Raghava Panicker and he sold the same to Defendant 2,. In the partition arrangement Defendant 1 had obtained other properties.
4. Both Defendants 1 and 2 contested the suit. Though various defences were raised the trial Court repelled all of them and gave the Plaintiff a decree substantially in terms of his plaint. That was confirmed in appeal by the lower appellate Court and Defendant 2 has brought this second appeal against the lower appellate Court''s decision. Pleas such as that the debt was discharged by the vendee himself, that the acknowledgment was spurious and collusive, etc., have concurrently been negatived by the two Courts below and we are, therefore, now concerned only with the pleas as to limitation with respect to the relief claimed against the property. Defendant 2, the Appellant is not interested in the decree on the contract of indemnity against the assets of the deceased vendee in the hands of his wife.
5. It is now settled law that the applicatory provision of the limitation Act to enforce the vendor''s charge for unpaid purchase-money is Article 132 (Article 119 of the Travancore Limitation Act, 6 of 1100 which gives a period of twelve years from the date "the money sued for became due". The question, therefore, is when this amount of Rs. 170/- left in the hands of the vendee became due.
6. In the absence of a contract to the contrary a purchaser of immovable property is bound to pay or tender, at the time and place of completing the sale, the purchase-money to the seller or such person as he directs. This is the rule enacted in Section 55(5)(b) of the Transfer of Property Act, 1882. Though this case arises from a transaction of sale that took place when the Transfer of property Act was not law in Travancore, we cannot find our way to hold that a different rule than the just and equitable principle embodied in the above provision of the Transfer of Property Act should be applied to the case. The sale deed fixed no time for payment. The amount of Rs. 170/- reserved for payment to the payee under the promissory note of 28-3-1103 was, therefore, ''due'' on the date of the sale and the purchaser having failed to pay the amount to the said payee the cause of action to enforce the charge arose on the date of the sale itself. The Madras High Court gave recognition to this principle so early as 1906 in - ''Ramakrishna Ayyar v. Subrahmania Ayyen'' 29 Mad 305 (A), and held that a suit brought to enforce the unpaid vendor''s charge within 12 years from the date oi the sale was within time.
7. In - ''Raghubar Rai v. Jaij Raj'' 34 All 429 (B)- the vendees had covenanted with the vendors to pay a certain sum of money on account of a mortgage-debt due by the vendors on some property of theirs other than that vended. The vendees did not pay in accordance with the covenant and the mortgagee, therefore, brought a suit upon his mortgage and obtained a decree. In the vendors'' suit for compensation for breach of the covenant the Court while holding that it was not necessary that the vendees should have suffered any loss before they could bring their suit also held that as no time was specified in the sale-deed for the payment of the mortgage-money, limitation began to run from the date of the execution of the deed. As no date was fixed for performance, the dates of the breach and the promise were held to coincide. The sale-deed in that case was dated 20-4-1898, the mortgagee obtained his decree on the mortgage on 14-1-1910 and the vendor''s suit for compensation was brought on 6-6-1910. The suit was found to be barred under Article 116 of the Limitation Act (1877). As the Plaintiffs had not paid any amount to the mortgagee decree holder no case of a second cause of action founded on the actual damage sustained arose there.
8. A case which is parallel to the case in hand in the aspect of limitation which concerns us here is a decision of the Patna High Court reported in - ''Ganga Ram v. Raghubans'' 27 Pat 898 (C). There a sale-deed was executed on 17-5-1927 with respect to an item of immovable property and out of the consideration a portion was paid in cash and the balance was left with the vendee to be paid to a third party in satisfaction of his dues under two simple mortgage bonds in respect of property other than the one vended and also for payment of two usufructuary mortgage bonds in respect of the vended property which were to be redeemed in May, 1935. There was no stipulation in the sale-deed as to when the amounts due to the simple mortgagee were to be paid.
The debt due under the two simple mortgage bonds not having been paid the mortgagee thereunder instituted a suit for the recovery of his mortgage dues and obtained a mortgage decree against the vendor who satisfied the decree in 1943. Meanwhile the vendee died and his sons sold the property to Anr. . The vendor thereafter brought it suit against the original vendee''s sons and the subsequent transferee for recovery of the amount which was left with the vendee to be paid to the simple mortgagee-creditor by enforcing the vendor''s charge which he had over the property vended. A plea that the vendor''s charge for unpaid purchase-money was lost on account of the direction to pay the creditors was negatived but we are here not concerned with that aspect since we have proceeded on the assumption that the charge is not lost by reason of such a direction.
The question of limitation came up prominently for decision and the learned Judges held that u/s 55(5)(b) of the Transfer of Property Act, 1882, unless there was a contract to the contrary, the buyer was bound to pay or tender at the time and place of completing the sale the purchase-money to the seller or such person as he directs and that it was, therefore, clear that unless the seller had expressly or impliedly agreed to postpone the payment of the purchase-money or part of it either to him or to a third party on a future date. the amount was payable to him or to the third party on the date of the sale, and became payable on that date, and that the vendor''s charge in respect of the unpaid purchase-money must be enforced within 12 years from the date of the transaction and that, therefore, the purchase-money for which the suit had been instituted became ''due'' on the date of the sale, 17-5-1927, and the suit not having been instituted within 12 years from the date was barred by limitation under Article 132 of the Limitation Act, 1908.
This is exactly the position in this case. When the sale in this case took place the Travancore Limitation Act 6 of 1100 was in force and that Act had removed the occasion for conflict of opinion whether 3 years'' rule of limitation or 12 years'' rule applied to suits to enforce the vendor''s charge for unpaid purchaser-money. Article 97 of Act 6 of 1100 in terms corresponded to Article 111 of the Indian Limitation Act, 1908. The said Article being confined to personal actions for unpaid purchase-money it became clear that at any rate, thereafter the 12 years'' rule under Article 119 (corresponding to Article 132 of the Indian Limitation Act 5 of 1908) alone applied to enforce the vendor''s charge for unpaid purchase-money against the property vended. In the absence of a contract to the contrary the money "becomes due" on the date of the sale itself. The suit brought beyond 12 years from that date was clearly barred with respect to the relief against the property.
9. A plausible argument against this view is that the covenant between the parties being that the purchaser would satisfy the debt of the creditors of the vendor, and there being no time fixed within which the payment was to be made, it must be presumed that the contract between the parties was that the payment would be made to the creditors at any time at the option of the vendee or in other words the contract of paying the amounts due to the creditors would be performed at any time before its performance became impossible on account of the money having been paid by the vendor himself. If that was the true position time began to run in this case only from the date the Plaintiff paid the amount in question and it became impossible for the vendee to make the payment and to perform the contract.
This argument was raised in the Patna case referred to above but it was repelled. The substance of the reasoning of the judgment in that case has been given above after setting out the relevant facts. The money left with the vendee in this case for payment of the debt due under the promissory note was a debt due on the date of the sale. The money was due under a promissory note which had become overdue by part payment.
10. In the Patna case (C), at page 912 of the report Mahabir Prasad, J. who delivered the leading judgment said:
The, gist of the authorities on the point seems to be that the money becomes ''due'' within the meaning of Article 132 of the Limitation Act as soon as it can be legally demanded. It is clear that in the present case there was nothing to prevent the Plaintiff from demanding that the creditor be paid the amount left in deposit with the vendee on the date of sale. It, therefore, became ''due'' on that date.
Again at Paragraph 916, the learned Judge observed:
It must be held that there being no postponement of the date of the payment of the part of the purchase-money directed to be paid to the third party-creditor, the time for the enforcement of the statutory charge began to run from the date of the sale and the present suit for a charge decree is barred by limitation.
11. The judgment contains, if we may say so, a very learned discussion of the principle involved and the case-law bearing on the point. As we are in respectful agreement with the view enunciated in that judgment we consider it unnecessary to traverse the same grounds here or to make further quotations from it or from the judgment of Manohar Lall J., who in a concurring judgment agreed with the reasoning and conclusion of the leading judgment.
12. In a very recent case the Madras High Court followed the decision in - ''27 Pat 898 (C)'' and held that in the absence of a postponement of the date of payment by agreement the cause of action to enforce the unpaid vendor''s charge arose on the date of the sale itself - See -
The Plaintiff in his turn conceded that that charge not having been enforced during the period of 12 years from the date of sale it became unenforceable (p. 511 of the report). There was, however, serious controversy before the High Court as to whether any unpaid vendor''s charge arose in respect of the mortgage-money charged on the property vended i.e., item (1) among the three debts the vendee had undertaken to discharge. This aspect had also came up for discussion in - ''27 Pat 898 (C)'' though incidentally, and what was held there was that that part of the purchase-money which remained in the hands of the vendees for payment to the usufructuary mortgagees of the property vended was not payable to the vendor u/s 55(5)(b) of the Transfer of Property Act and could hardly be said as remaining unpaid within the meaning of Section 55(4)(b) of the Act and was, therefore, not subject to the statutory charge contemplated by the section.
The learned Judges in the Madras case accepted this position. They, however, went on to discuss the question of limitation, assuming for the sake of the argument, that the vendor''s charge existed even in respect of the money left with the vendee for discharge of the encumbrance on the property vended. What they said in that connection may usefully be quoted here:
Even on this point the decision in - ''27 Pat 893 (C)'' is against the Appellant''s contention. In our opinion that decision is right....The same view is deducible from the observations of the learned Judges in - ''29 Mad 305 (A)'' where the learned Judges held that the article of Limitation Act applicable to a suit for enforcing the statutory charge is Article 132 of the Limitation Act. There are observations in -
13. The only instance where a different note is struck from the view taken in the cases so far referred to as to the commencement of limitation is in a judgment of Sadasiva Iyer C.J., in - ''Vamana Vadhyar v. Sulapani Varrier'' (sic) KER LJ 100 (FB) (F). In a case like the (SIC) before us now where the yendee undertook to pay part of the purchase-money to the vendor''s creditor the learned Chief Justice held that the amount agreed to be paid cannot be called unpaid purchase-money", that the vendor had a claim for damages against the vendee for breach of the covenant to pay the creditor, that, there was an equitable charge for such damages in favour of the vendor against the property sold in the hands of the vendee and that the cause of action for such breach arose only when damages were actually incurred. When the vendor suffer damages on account of the breach he has not doubt a fresh cause of action, but how the damages could become a charge on the property sold is something we find it difficult to under stand. The two other learned Judges constitution the Full Bench did not agree with the learned Chief Justice''s views. We regret we cannot accept the minority opinion as expounding correct law.
14. The order of reference in this case refer to the decisions of this Court which have some bearing on this question of limitation. These cases are - ''Sreenivasa Ayyar v.- Madhavan Nayar'' 1950 KER LR 140 (G) and - ''Hariharan Iyer v. Augusthy Devasia'' AIR 1952 KER 465 (H). The first of these cases recognises the principle that ordinarily when property is sold leaving the whole or part of the purchase-money with the vendee the cause of action to enforce the vendor''s charge arose on the date of the sale itself. But that case further held that it was open to the parties to postpone the date of payment, in which case time would run against the vendor only from the date fixed for payment.
15. In the other case, the sale was on 30-10-109(sic) and part of the purchase-money was left with the vendee for payment of a decree debt (O. S. 878 of 1093) due by the vendor to a third party. The vendee did not pay the debt and the credited brought the vendor''s properties to sale in execution of his decree. The execution sale was on 4-7-1101 and the vendor brought the action to enforce the unpaid vendor''s charge on 3-7-1104. (The date of the institution of the suit does not appear in the judgment but we got it from the original records in Court). There was controversy as to which Limitation Act of Travancore applied to the case i.e., whether Act 2 of 1062, which was in force on the date of the sale in 1096, or Act (sic) of 1100 which was in force when the vendor''s properties were sold in Court (4-7-1101) and when the action was commenced (3-7-1104).
The decision rendered was that there was no bar of limitation, either in respect of the relief against the property vended or against the person of the vendee. There is no need to quarrel with the decision as the suit was brought within 12 years of the sale to the vendee and within 3 years of the damage suffered by the vendor by the execution sale. However, in seeking to apply some Travancore decisions which held that the three years'' rule applied to enforce the unpaid vendor''s charge against the property sold the learned Judges said:
There was no time stipulated in the sale deed for payment of the decree debt. In so far as the document did not fix any time for payment it is not unreasonable to infer that the vendee had time for payment till execution was taken out in O.S. 878 of 1093 and the properties were sold in Court auction. Therefore consistently with the view taken in - ''18 Trav LJ 760 (I)'' even under Article 91 of the Limitation Act 2 of 1062 the cause of action for the Plaintiff for enforcing the lien on the properties arose only on 4-7-1101. As against the person undoubtedly the sale deed being a registered one the cause of action for damages on account of the breach of contract arose on the date of the court sale that is, on 4-7-1101. Therefore the cause of action both for enforcing the lien on the properties and enforcing the personal remedy against the vendee arose in this case on 4-7-1101.
16. We venture to observe we cannot agree with the reasoning. It runs counter to settled principles as to the time for payment of purchased money in a case where the parties have not chosen to postpone the date of payment. The argument repelled in - ''27 Pat 898 (C)'' is repeated in the above reasoning in Anr. form. The cause of action for enforcement of the charge find for compensation for breach of covenant arose on the date of the sale. The question of indemnification arose only when the vendor''s properties were sold in court auction. The suit brought within three years of that was within time to obtain personal relief on the basis of the contract of indemnity, express or implied, but not on the basis of a breach of covenant.
17. Some days after the argument in this case concluded the Respondent''s learned Counsel invited our attention to a decision of Balakrishna Iyer, J. in - ''Thirumu Ninar v. Chakravarthy Ninar'', a short summary of which is reported in - (1953) 2 Mad LJ (NRC) 70 (J)''. This case apparently favours the contention that in a case where the vendee does not discharge the amount deposited with him for payment to the creditor and the vendor discharges that debt the cause of action to enforce the unpaid vendor''s charge would arise only on the date the vendor paid the debt. Without the full text of the judgment it is difficult to comment upon the decision. However. the view of the learned Judge that the question of the unpaid vendor''s charge arose there is opposed to the decisions in - ''27 Pat 898 (C)'' and - ''AIR, 1954 Mad 508 (D)''.
In the case in - ''(1953) 2 Mad LJ (NRC) 70 (J)'', the in-paid vendor''s charge was claimed in respect of an amount left with the vendee to discharge a mortgage-debt on the property vendeed. Under the proviso to Section 55(5)(b) of the Transfer of Property Act, where the property is hold free from encumbrances, the buyer may rertain out of the purchase-money, the amount of any encumbrances on the property existing at the date of the sale, and he was to pay the amount so retained to the persons the entitled thereto. It is in view of this provision the two cases abovenamed held that no question impaid of unpaid purchase-money, and much less any charge for it, would arise in respect of an amount left with the vendee to discharge a debt charged on the property vended. The point is very elaborately discussed by Mahabir Prasad J, in - ''27 at 898 (C)'' and by Govinda Menon J. in -
18. As that question does not arise here it is (SIC)necessary to comment upon it further, but in missing it may be noticed that in -
It was suggested that interest could be awarded u/s 55(4)(b), T.P. Act, which provides for a charge on the property sold for the purchase-money or any part thereof remaining unpaid and for interest on such amount or part from the date on which possession has been delivered. But this general provision clearly pre-supposes that the purchase-money or part thereof remaining unpaid is payable to the seller and can have no application to a case where the buyer is entitled and allowed to retain out of the purchase-money the amount of an encumbrance on the property for payment to the person entitled thereto.
It is needless to add more words to show that we cannot accept as correct the view that a claim for unpaid vendor''s charge arose in the case in - ''(1953) 2 Mad LJ (NRC) 70 (J)". From the reported summary of the case it is difficult to understand how the vendor could have been compelled to pay the amount charged on the property vended. Personal liability could have arisen only after the security was exhausted. Perhaps the mortgage embraced also properties not sold to the vendee. Be that as it may, in our view, even if the charge existed originally, the only remedy available to the vendor when he was seeking relief more than 12 years after the sale was to enforce the contract of indemnity. To such a claim Article 83 of the Limitation Act applied and the cause of action arose on the date the damage was suffered.
19. It may not here be out of place to refer to the decision in -
In Second Appeal by the Plaintiffs a learned Single Judge allowed personal relief as well, but he made some obvious mistakes as to the rate of interest. These matters alone were before the Divisional Bench which disposed of the Letters Patent Appeal. The mortgage-debt reserved with the vendees was a charge on the properties vended as also on other properties of the vendors and the latter had to pay off the debt to prevent the mortgagee proceeding against their properties in execution of the decree obtained by him. We quote the following from the judgment in that case:
The question of limitation has to be answered in accordance with the special circumstances of each case:
(1) Where property has been sold and part of the purchase money remains unpaid, a suit would lie to recover it, even though no other special damage has been proved, because the balance is payable. This would be so, even though the vendor had left the money in the hands of the vendee for payment to a creditor of his. But where the property transferred is subject to a charge and money is left in the hands of the vendee to pay off that charge, the vendee would of course be entitled to pay the amount in discharge of the encumbrance and not pay it to the mortgagor direct;
(2) where, there has been an undertaking to release the mortgagor from personal liability or to free his property from encumbrances and there is default made by the vendee, the vendor will be entitled to enforce the covenant and bring a suit for specific performance of the contract by the vendee;
(3) where there is an express contract to pay the amount and there is an express or implied contract of indemnity thus u/s 125, Contract Act, the promisee is entitled to recover all damages, costs etc. which he may have been compelled to pay in respect of any matter to which the promise to indemnify applied.
When a suit is brought for recovery of the amount, then the charge can be enforced for the payment of the amount due if the suit is within 12 years of the original sale deed, for the charge is a statutory charge created by the document and time would begin to run for enforcement of such a charge from the date of that document. If the suit is for specific performance of the contract, then it would be governed by Article 113, Limitation Act, and time would begin to run from the date when there was failure to perform it. Similarly, in the case of compensation for breach of contract under Article 116, Limitation Act, time would begin to run from the time when the contract was broken or in case of successive breaches from the date when the last breach occurred or in the case of a continuing breach, when it ceased.
But where the claim is upon a contract to indemnify, then time would begin to run from the date when the Plaintiff is actually damnified. It is therefore impossible to say that time would begin to run against the Plaintiff even before any damage was suffered by him. Of course, if the suit is brought within three years of the date when the damages was suffered but more than 12 years after the date of the original transfer, then no charge can be enforced and only a money decree can be obtained.
But if the suit is brought both within three years from the date when the damage was suffered and 12 years from the date of the sale deed the Plaintiff would be entitled both to a charge and a personal decree, in case the amount is not satisfied out of the property on which the charge exists. On the other hand, if the suit is brought merely for compensation for breach of contract then, as already remarked time would begin to run from the date of the breach.
In the present case, the contract was made on 12-11-1919 and the suit was brought within 12 years of that date, so the Plaintiffs'' right to enforce the charge subsists. Again, even though there was a breach of contract in not paying the amount soon after 12-11-1919 and a suit might have been maintained to enforce the contract in order to prevent the interest on the earlier mortgage from running, the preset (sic) which has been brought within three years from the date when the Plaintiffs were compelled to make the payment in order to save the property from sale must be regarded as a suit to be indemnified by the Defendants on account of the damage suffered by the Plaintiffs owing to the failure of the Defendants to pay the amount as undertaken by them. The claim, in our opinion, is well within time as it is governed by Article 83, Limitation Act. The view taken by the learned Judge of this Court that the personal decree can be obtained is therefore correct.
20. The case follows the opinion Sulaiman C.J. gave in the Full Bench decision in -
21. To conclude as we began, on principle and authority it has to be held that assuming the direction to pay part of the purchase-money to a third party had not the effect of displacing the unpaid vendor''s charge, it had become unenforceable in this case as the suit was brought long after 12 years of the money becoming ''due''. The appeal has to be allowed to the extent of exonerating the plaint schedule property from liability. The decree against the assets of the vendee in the hands of Defendant 1 has to be sustained as it is good as the suit was brought within time to enforce the contract of indemnity.
22. The Second Appeal is allowed to the extended indicated above i.e., the plaint schedule property is exempted from liability. The Plaintiff will pay Defendant 2 his costs throughout.
