Case: V. M. Rv. Mr. Ramaswami Chettiar And Anr Vs. R. Muthukrishna Iyer And Others

Ramaswami, J.1. In the suit which is the subject-matter of this appeal the plaintiffs alleged that Plaint A Schedule properties belonged to the second defendant and his son, the third defendant. The second defendant sold the village for Rs. 28,000 to one Swaminatha Sarma by a sale-deed Ex. A, dated December 12, 19l2 which he executed for himself and as guardian of the third defendant who was then a minor. The second defendant also agreed to indemnify any loss that might be caused to his vendee in case the sale of his minor Sons half share should later on be set aside. Accordingly the second defendant executed the Indemnity Bond-Ex. B in favour of Swaminatha Sarma. The sons of Swaminatha Sarma sold Plaint A Schedule village to the father of the plaintiffs for a sum of Rs. 53,000. On the same date they assigned the Indemnity Bond-Ex. B to the father of the plaintiffs under an Assignment Deed- Ex. D. The third defendant after attaining majority filed O. S. No 640 of 1923 in the Chief Court of Pudukottai for setting aside the sale-deed-Ex. A in respect of his share and for partitions of joint family properties. The plaintiffs were impleaded as defendants 108 and 109 in that suit. The suit was decreed in favour of the third defendant and the sale of his share was set aside on condition of his paying a sum of Rs. 7,000 to defendants 108 and 109, and a preliminary decree for partition was also granted. In further proceedings, the village was divided by metes and bounds and a final decree-Ex. F was passed on October 6, 1936.2. Meanwhile, a creditor of the third defendant obtained a money decree and in execution thereof attached and brought to sale the third defendants half-share in the A Schedule village. In the auction-sale Subbaiah Chettiar, the plaintiffs brother-in law purchased the property for a sum of Rs. 736 subject to the liability for payment of Rs. 7,000 under the decree in O. S. No. 640 of 1923. Thereafter, the plaintiffs have brought the present suit on the allegation that they have sustained damage by the loss of one half of the A Schedule village and are entitled to recovery the same from the second defendant personally and out of the B Schedule properties. The plaintiffs have claimed damages to the extent of half of the consideration for the sale-deed-Ex. C. minus Rs. 7,000 withdrawn by them. The plaintiffs claimed a further sum of Rs. 500 as Court expenses making a total of Rs. 20,000. The suit was contested on the ground that the Court sale in favour of Subbaiah Chettiar was benami for the plaintiffs and the latter never lost ownership or possession of a half-share of the A Schedule village and consequently the plaintiffs did not sustain any loss. The trial Court held that Subbaiah Chettiar-P. W. 1 was benamidar of the plaintiffs who continued to remain in possession of the whole village. The trial Court was, however, of the opinion that though the plaintiffs had, in fact, purchased the third defendants half-share in the Court sale, they were not bound to do so and they could claim damages on the assumption that third parties had purchased the same. The trial Court accordingly gave a decree to the plaintiffs for the entire amount claimed and made the payment of the amount as charge on B Schedule properties. The second defendant took the matter in appeal to the Madras High Court which found that the only loss actually sustained by the plaintiffs was the sum of Rs. 736 paid for the Court sale and the sum of Rs. 500 spent for the defence of O. S. No. 640 of 1923. The High Court accordingly modified the decree of the trial Court and limited the quantum of damages to a sum of Rs. 1,236 and interest at 6 per cent p.a., from the date of the suit.3. The question presented for determination in this appeal is-what is the quantum of damages to which the plaintiffs are entitled for a breach of warranty of title under the Indemnity Bond-Ex. B. dated December 19, 1912.4. It was contended by Mr. Ganapathy Iyer on behalf of the appellants that in O. S. No. 640 of 1923, defendant No. 3 .obtained a partition decree and a declaration that defendant No. 2 was not entitled to alienate his share in the A Schedule properties. It was submitted that on account of this decree the appellants lost title to half-share of A Schedule properties and accordingly the appellants were entitled to get back half the amount of consideration under the Indemnity Bond-Ex. B. The argument was stressed on behalf of the appellants that the circumstance that the plaintiffs had a title of benamidar to the half-share of the third defendant in Court auction, was not a relevant factor so far as the claim for damages was concerned. It was suggested that the purchase in Court auction was an independent transaction and the defendants could not take the benefit of that transaction. We are unable to accept the contention of the appellants as correct. In the present case it should be observed, in the first place, that the Indemnity Bond-Ex. B states that defendant No. 2 shall be liable to pay the amount of loss "in case the sale of the share of the said minor son-Chidambaram-is set aside and you are made to sustain any loss". In the second place, it is important to notice that the sale-deed-Ex. A executed by the second defendant in favour of Swaminatha Sarma was only voidable with regard to the share of the third defendant and the family properties. The sale of the half-share of defendant No. 3 was not void ab initio .but it was only voidable if defendant No. 3 chose to avoid it and proved in Court that the alienation was not for legal necessity. In a case of this description the Indemnity Bond becomes enforceable only if the vendee is dispossessed from the properties in dispute. A breach of the covenant can only occur on the disturbance of the vendees possession and so long as the vendee remains in possession he suffers no loss and no suit can be brought for damages either on the basis of the Indemnity Bond or for the breach of a covenant of the warranty of title. The view, that we have expressed is borne out by the decision of the Madras High Court in Subbaraya Reddiar v. Rajagopala Reddiar, ILR 38 Mad 887 : (AIR 1915 Mad 708), in which A who had a title to certain immovable property, voidable at the option of C, sold it to B and put B in possession thereof. C then brought a suit against A and B. got a decree and obtained possession thereof in execution. In this state of facts it was held by Seshagiri Ayyar, J. that Bs cause of action for the return of the purchase money arose not on the date of the sale but on the date of his dispossession when alone there was a failure of consideration and the article applicable was Art. 97 of the Limitation Act. At p. 889 of the Report (of ILR Mad): (at p. 710 of AIR) Seshagiri Ayyar, J. states :"These cases can roughly speaking be classified under three heads: (a) where from the inception the vendor had no title to convey and the vendee has not been put in possession of the property; (b) where the sale is only voidable on the objection of third parties and possession is taken under the viodable sale; and (c) where though the title is known to be imperfect, the contract is in part carried out by giving possession of the properties. In the first class of cases the starting point of limitation will be the date of the sale. That is Mr. Justice Bakewells view in Ramanatha Iyer v. Ozhaloor Pathiriseri, (1913) 14 MLT 524: and I do not think Mr. Justice Miller dissents from it. However, the present case is quite different. In the second class of cases the cause of action can arise only when it is found that there is no good title. The party is in possession and that is what at the outset under a contract of sale a purchaser is entitled to, and so long as his possession is not disturbed, he is not damnified. The cause of action will, therefore, arise when his right to continue in possession is disturbed. The decisions of the Judicial Committee of the Privy Council in Hanuman Kamat v. Hanuman Mandur [(1892) ILR 19 Cal 123 (PC)] and in Bassu Kuar v. Dhum Singh [(1889) ILR 11 All 47 (PC)] are authorities for this position."A similar view has been expressed by the Allahabad High Court in Muhammad Siddiq v. Muhammad Nuh, ILR 52 All 604: (AIR 1930 All 771), and the Bombay High Court in Gulabchand Daulatram v. Suryajirao Ganpatrao, AIR 1950 Bom 401 . In the present case it has been found by the High Court that P. W. 1, the auction-purchaser was the brother-in-law of the plaintiffs and that he was managing the estate of the plaintiffs and defending O. S. 640 of 1923 on their behalf .It has also been found that P. W. 1 did not take possession at any time and plaintiffs have been cultivating and enjoying the whole village all along and at no time were the plaintiffs dispossessed of the property. The only loss sustained by the plaintiffs was a sun; of Rs. 736 paid at the Court sale and a sum of Rs. 500 spent for the defence of O. S. No. 640 of 1923 which the plaintiffs had to incur for protecting the continuance of their possession over the disputed share of land. Accordingly the High Court was right in granting a decree to the plaintiffs only for a sum of Rs. 1,236 which was the actual loss sustained by them and they are not entitled to any further amount.

Decision reasoning: 0[ds]In the present case it should be observed, in the first place, that the Indemnity Bond-Ex. B states that defendant No. 2 shall be liable to pay the amount of loss "in case the sale of the share of the said minor son-Chidambaram-is set aside and you are made to sustain any loss". In the second place, it is important to notice that the sale-deed-Ex. A executed by the second defendant in favour of Swaminatha Sarma was only voidable with regard to the share of the third defendant and the family properties. The sale of the half-share of defendant No. 3 was not void ab initio .but it was only voidable if defendant No. 3 chose to avoid it and proved in Court that the alienation was not for legal necessity. In a case of this description the Indemnity Bond becomes enforceable only if the vendee is dispossessed from the properties in dispute. A breach of the covenant can only occur on the disturbance of the vendees possession and so long as the vendee remains in possession he suffers no loss and no suit can be brought for damages either on the basis of the Indemnity Bond or for the breach of a covenant of the warranty of title. The view, that we have expressed is borne out by the decision of the Madras High Court in Subbaraya Reddiar v. Rajagopala Reddiar, ILR 38 Mad 887  : (AIR 1915 Mad 708), in which A who had a title to certain immovable property, voidable at the option of C, sold it to B and put B in possession thereof. C then brought a suit against A and B. got a decree and obtained possession thereof insimilar view has been expressed by the Allahabad High Court in Muhammad Siddiq v. Muhammad Nuh, ILR 52 All 604: (AIR 1930 All 771), and the Bombay High Court in Gulabchand Daulatram v. Suryajirao Ganpatrao, AIR 1950 Bom 401  . In the present case it has been found by the High Court that P. W. 1, the auction-purchaser was the brother-in-law of the plaintiffs and that he was managing the estate of the plaintiffs and defending O. S. 640 of 1923 on their behalf .It has also been found that P. W. 1 did not take possession at any time and plaintiffs have been cultivating and enjoying the whole village all along and at no time were the plaintiffs dispossessed of the property. The only loss sustained by the plaintiffs was a sun; of Rs. 736 paid at the Court sale and a sum of Rs. 500 spent for the defence of O. S. No. 640 of 1923 which the plaintiffs had to incur for protecting the continuance of their possession over the disputed share of land. Accordingly the High Court was right in granting a decree to the plaintiffs only for a sum of Rs. 1,236 which was the actual loss sustained by them and they are not entitled to any further amount.