Case: Soni Lalji Jetha &amp; Ors Vs. Soni Kalidas Devchand &amp; Ors,

agreeing to purchase the property thereunder does not acquire any interest in the property. Section 54 of the Transfer of Property Act in terms provides that such a contract of sale does not create as in English law any equitable estate in the immovable property which is the subject-matter of the contract. But as aforesaid, the contract creates an obligation which is recognised by Section 3 of the Specific Relief Act, 1877 and Section-91 of the Indian Trusts Act, 1882, Section 3 of the Specific Relief Act defines an "obligation" as including every duty enforceable by law and a "trustee" as including every person holding expressly, by implication or constructively a fiduciary character. Illustration (g) to that section reads as follows:"A buys certain land from B, with notice that B has already contracted to buy it. A is a trustee, within the meaning of this Act for B, of the land so bought."This Principle is embodied in Section 91 of the Indian Trusts Act which lays down that where a person acquires property with notice that another person has entered into an existing contract affecting that property, of which specific performance could be enforced, the former must hold the property for the benefit of the latter to the extent necessary to give effect to the contract.10. In Durga Prasad v. Deep Chand, 1954 SCR 360 : (AIR 1954 SC 75 ) this Court after considering these provisions observer that in spite of the existence of a previous contract of sale, a sale to a subsequent purchaser even with notice is not void but void able at the instance of the party agreeing to purchase under a previous contract and except for the obligation arising from Section 91 of the Trusts Act and paragraph 9 of Section 40 of the Transfer of Property Act the title to the property would pass from the vendor to the subsequent transferee. In Gafur v. Bhikaji Govind, (1902) ILR 26 Bom 159 the fasts were a1most similar to the facts in the present case. The first defendant there had entered into an agreement dated June 25, 1895 to sell certain land to the plaintiff. On December 19, 1895 he sold the land to the second defendant by a registered deed. The plaintiff then sued the first defendant for specific performance and got a decree dated March S. 1897 in execution of which conveyance of the land was executed to him by the court. On his failing to obtain possession from the second defendant he filed a suit. It was found as a fact that the second defendant had purchased the said land in December 1895 with notice of the earlier agreement of June 1895 with the plaintiff. The High Court held that the plaintiff was entitled to possession and as the second defendant had purchased with notice of the plaintiffs contract he held the property for the benefit of the plaintiff to the extent necessary to give effect to that contract. In Sathiraju v. Venkanna, AIR 1935 Mad 333 the High Court of Madras similarly observed that as a result of S. 91 of the Trusts Act the natural result of a person purchasing a property with notice of a prior contract in another persons favour is that the purchaser holds the property for the benefit of the latter to the extent necessary to give effect to the contract. But for all other purposes and as between the purchaser and the vendor, the purchaser is the owner and that is the reason why in such circumstances the decree in a suit for specific performance must direct the purchaser to join in execution of the conveyance. See also Appa Rao v. Veeranna. AIR 1953 Mad 409 .11. It is thus clear that though the sale dated September 10, 1930 in favour of Kanjil and Lalji was not void but voidable at the instance of respondents 1 and a by reason of their earlier contract and though as between the mortgagors and Kanji and Lalji the sale was valid and binding, it was subject to the right of specific performance which respondents 1 and 2 had acquired and Kanji and Lalji being in a fiduciary position, their possession was not adverse as against respondents 1 and 2. Therefore their suit for redemption cannot be said to be barred even though the statutory period had expired. We thus arrive at the same result which the High Court reached though on different reasons.12. The contention of Mr. Sarjooprasad, however, was that the said decree for specific performance cannot affect the adverse nature of possession of Kanji and Lalji as even when respondents 1 and 2 obtain the deed of sale from the court in April 1947 Kanji was not made one of the conveying parties but was made an attesting witness. As pointed out in Lala Durga Prasads Case (supra) the logical course is to provide in such a decree that both the vendors and the subsequent purchaser should join in the deed of conveyance. The decree for specific performance did in feet provide that all the defendants in that suit that is, including Kanji should sign the deed of conveyance. But it appears that through some misconception Kanji was not made to join in that conveyance and was only made to attest that document. But that would not, in our view, make any difference in the conclusion that as between Kanji and Lalji on the one hand and respondents 1 and 2 on the other the possession of the former could not be adverse and therefore there was no question of the suit of respondents 1 and for redemption being barred by limitation. Further, being an attesting witness. Kanji both for himself and on behalf of Lalji was made fully aware that the sale deed conveying the title of the property was being passed in favour of respondents 1 and 2 and that the only right henceforth in them was to receive the mortgage amount and no more.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]For, while observing that possession of Kanji and Lalji could at no point of time be adverse the Division Bench slipped into an error in failing to take into account the loyal effect of the sale, dated September 10, 1930.It is true that as mortgagees-in-possession Kanji and Lalji derived their title to possession through the mortgagors and by virtue of their rights under the said mortgage. They were entitled, therefore, to continue to be in possession under the said mortgage and so long as it subsisted. By merely asserting rights of ownership in the said shops they could not convert their possession as mortgages and unilaterally alter their lawful possession as mortgagees into possession hostile to the mortgagors. But it is a well proposition that a mortgagor can sell the mortgaged property to his mortgagee and thus put the mortgagees estate to an end and thereafter all the right, title and interest in the property would vest in the mortgagee. Such a sale would be valid and binding as between them and henceforth the character of possession as a mortgagee would be converted into possession as an absolute owner. Even if such a sale is held to be voidable and not binding on a subsequent purchaser the character of possession based on assertion of absolute ownership by the mortgagee does not alter, and if that possession continues throughout the statutory period it ripens into a title to thedecision was followed in Dagadabai v. Sakharam, AIR 1948 Bom. 149   where the High Court of Bombay held that if a decree for possession in plaintiffs favour does not in fact result in the defendant giving up possession of the property or having possession of the property taken from him, it cannot be said that it had interrupted possession; nor can it in law affect the nature of the possession unless it does so in fact. On this basis the High Court held that the possession of the defendant must be deemed to have been adverse throughout and could not be said to nave been interrupted by the mortgage decree. (See also Bhogilal v. Ratilal, AIR 1939 Bom 261  ). The observation made by the High Court that possession of Kanji and Lalji was at no point of time adverse is clearly contrary to the decision of the Privy Council and the two decisions of the High Court of Bombay which were binding on them. The fact that a decree for specific performance was passed in suit No. 263 of S. Y. 1987 would not affect the character of possession of Kanji and Lalji nor would the declaration therein made that the sale deed in their favour was not valid and binding on respondents 1 and 2 would have the effect of altering the character of their possession. Therefore, except for the rights and equities in favour of respondents 1 and 2 by virtue of the agreement of sale of August 1930, the sale in favour of Kanji and Lalji by the mortgagors was a valid sale and conveyed title in the shops in theirBut paragraph 2 of- S. 40 of the Transfer of Property Act, 1882 in clear terms lays down that where a third person is entitled to the benefit of all obligation arising out of contract and annexed to the ownership of immovable property, but not amounting to an interest therein, such right or obligation may be enforced against a transferee of the property affected thereby, but not against a transferee for consideration and without notice of the right or obligation nor against such property in his hands. It is a right no doubt arising from contract and the person agreeing to purchase the property thereunder does not acquire any interest in the property. Section 54 of the Transfer of Property Act in terms provides that such a contract of sale does not create as in English law any equitable estate in the immovable property which is the subject-matter of the contract. But as aforesaid, the contract creates an obligation which is recognised by Section 3 of the Specific Relief Act, 1877 and Section-91 of the Indian Trusts Act, 1882, Section 3 of the Specific Relief Act defines an "obligation" as including every duty enforceable by law and a "trustee" as including every person holding expressly, by implication or constructively a fiduciaryPrinciple is embodied in Section 91 of the Indian Trusts Act which lays down that where a person acquires property with notice that another person has entered into an existing contract affecting that property, of which specific performance could be enforced, the former must hold the property for the benefit of the latter to the extent necessary to give effect to the contract.It is thus clear that though the sale dated September 10, 1930 in favour of Kanjil and Lalji was not void but voidable at the instance of respondents 1 and a by reason of their earlier contract and though as between the mortgagors and Kanji and Lalji the sale was valid and binding, it was subject to the right of specific performance which respondents 1 and 2 had acquired and Kanji and Lalji being in a fiduciary position, their possession was not adverse as against1 and 2. Therefore their suit for redemption cannot be said to be barred even though the statutory period had expired. We thus arrive at the same result which the High Court reached though on differentpointed out in Lala Durga Prasads Case (supra) the logical course is to provide in such a decree that both the vendors and the subsequent purchaser should join in the deed of conveyance. The decree for specific performance did in feet provide that all the defendants in that suit that is, including Kanji should sign the deed of conveyance. But it appears that through some misconception Kanji was not made to join in that conveyance and was only made to attest that document. But that would not, in our view, make any difference in the conclusion that as between Kanji and Lalji on the one hand and respondents 1 and 2 on the other the possession of the former could not be adverse and therefore there was no question of the suit of respondents 1 and for redemption being barred by limitation. Further, being an attesting witness. Kanji both for himself and on behalf of Lalji was made fully aware that the sale deed conveying the title of the property was being passed in favour of respondents 1 and 2 and that the only right henceforth in them was to receive the mortgage amount and no more.