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PETITIONER: V.   M. RV.  MR.  RAMASWAMI CHETTIAR AND ANR.

       Vs.

RESPONDENT: R.   MUTHUKRISHNA IYER AND OTHERS

DATE OF JUDGMENT: 16/02/1966

BENCH: RAMASWAMI, V. BENCH: RAMASWAMI, V. SUBBARAO, K.

CITATION:  1967 AIR  359            1966 SCR  (3) 603

ACT: Indemnity  and  guarantee-Sale  of  land  by  one  having  a voidable title and putting purchaser in possession-Agreement to  indemnity  purchaser Sale set aside at the  instance  of person  entitled  to avoid-No  dispossession  of  purchaser- Enforceability of indemnity bond.

HEADNOTE: The second defendant sold property belonging to himself  and his  minor  son the third defendant. and  also  executed  an indemnity bond in favour of the vendee agreeing to indemnify him  for  any loss that might be caused to him in  case  the sale of the third defendant’s half share should later on  be set aside.  The. vendee sold the property to the  plaintiffs and  assigned  the indemnity bond in their  favour  and  the plaintiffs  took  possession  of the  property.   The  third defendant, after attaining majority, sued for ,setting aside the  sale  in respect of his half share and  for  partition. The plaintiffs contested the suit but the third  defendant’s suit  was  decreed.   He, however, did  not  dispossess  the plaintiffs.   Meanwhile, a creditor of .the third  defendant obtained  a  money  decree  against  him  and  in  execution ,thereof attached and brought to sale the third  defendant’s half  share,  and,  ,the brother-in-Law  of  the  plaintiffs purchased  the  property, but ,the plaintiffs  continued  in possession  of  the property.  The  plaintiffs,  thereafter, filed  the suit for recovery of half the consideration  paid by them, on the allegation that they sustained damage by the loss  of one half of the property bought by them,  and  that they  were  entitled  to recover  damages  from  the  second defendant.   The suit was contested on the ground  that  the court   sale  in  favour  of  the  brothers-in-law  of   the plaintiffs  was benami for the plaintiffs, and that  as  the plaintiffs  never  lost  ownership  or  possession  of   the halfshare,  they did not sustain any loss. .The trial  court decreed  the suit.  The High Court, on appeal, confined  the decree to the actual loss sustained, namely, the amount  for the  court sale and the amount spent for the defence of  the third defendant’s suit. In  appeal to the Court, on the question of the  quantum  of damages to which the plaintiffs were entitled, HELD  :  High Court was right in granting a decree  to,  the

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plaintiffs  only  for  the sum which  was  the  actual  loss sustained by them. The  sale of the half share of the third defendant  was  not void  ab initio but was only voidable.  In such a  case  the indemnity  bond  becomes enforceable only if the  vendee  is dispossesed  from the properties, because, a breach  of  the covenant  can only occur on the disturbance of  the  vendees possession. SD 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 convenant of the warranty of title. [610 H-611 B] Subbaroya Reddiar v. Rajagopala Reddiar, (1915) ILR. 38 Mad. 887 Muhammad Siddiq v. Muhammad Nuh, I.L.R. 52 All. 604  and Gulabchand  Daulatram v. Suryaji Rao Ganpatrao, A.I.R.  1950 Bom. 401, approved.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7 of 1964. Appeal  from the judgment and decree dated January  7,  1955 -of the Madras High Court in Appeal Suit No. 371 of 1959. 609 R.   Ganapathy Iyer and R. Thiagarajan, for appellants. M.   S. K. Sastri and M. S. Narasimhan, for respondent No. 2 The Judgment of the Court was delivered by Ramaswami.   J. 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, 1912 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 son’s 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  partition 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. Meanwhile,  a  creditor of the third  defendant  obtained  a money decree and in execution thereof, attached and  brought to sale the third defendant’s half-share in the ’A’ Schedule village.    In  the  auction-sale  Subbaiah  Chettiar,   the plaintiff ’s 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 recover  the same from the second defendant  personally  and out  of  the ’B’ Schedule properties.  The  plaintiffs  have

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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. I was benamidar of 610 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 defendant’s halfshare 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. 1236/- and interest at 6 per cent p.a. from the date of  the suit. 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. 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 allenate 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 611

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convenant can only occur on the disturbance of the  vendee’s 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 convenant of the warranty of title.  The view that  we have  expressed is borne out by the decision of  the  Madras High Court in Subbaroya Reddiar v. Rajagopala Reddiar (1) 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  B’s  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 article 97  of the  Limitation  Act.  At page 889 of the  Report  Seshagiri Ayyar,  J.  states: "The  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 voidable sale; and (c) where though the title is known to be imperfect,  the contract is in part carrried 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 Bakewell’s view  in  [Ramanatha Iyer  v. Ozhapoor Pathiriseri Raman Namburdripad  (1913)  14 M.L.T. 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  (I 892) I.L.R. 19 Cal. 123  (P.C.)  and  in Bassu  Kuar v. Dhum Singh (I 889) I.L.R. II All.  47  (P.C.) are authorities for this position." A  similar  view has been expressed by  the  Allahabad  High Court in Muhammad Siddiq v. Muhammad Nuh (2) and the  Bombay High   Court   in   Gulabchand   Daulatram   v.   Survajirao Ganpatrao.(3)  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 (1)  I.L.R. 38 Mad. 887. (2) I.L.R. 52 All. 604. (3) A.I.R. 1950 Bom. 401. 612 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. I 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 sum of Rs. 736/- paid at the Court sale and a sum of Rs. 5001- 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. 1236/-  which was  the  actual  loss sustained by them and  they  are  not

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entitled to any further amount. For  these  reasons we hold that there is no merit  in  this appeal which is dismissed with costs. Appeal dismissed. 613