JUDGMENT
V.D. Gyani, J.
1. This is a plaintiffs first appeal Under Section 96, CPC, directed against the trial Court’s judgment and decree dated 9-3-1971, passed by the 2nd Addl. District Judge, Indore (decree subsequently modified on 11-3-1971), in Civil Suit No. 18A of 1967, dismissing the suit, but later on decreeing it to the extent of Rs. 5000/- only.
2. Plaintiff filed a suit for recovery of Rs. 10,000/- paid as earnest money, claiming interest at 6% per annum, against the defendant-respondents alleging breach of contract against them.
3. Plaintiffs case was that the defendant-
respondent M/s. Jasrup Baijnath entered into
a contract with the appellant on 31st May
1962, agreeing to sell lease hold rights in the
property, as detailed in para. 3 of the plaint,
with structures and construction standing
thereon, for Rs. 1,15,000/-. The agreement
was signed by defendant No. 1, Kalyandas
Baheti, as the manager and Karta of the joint
Hindu family, carrying on business in the
name of M/s. Jasrup Baijnath. Plaintiff had
paid Rs. 10,000/- as earnest money at the
time of agreement to defendant No. 1, who
had represented and assured the plaintiff that
the property to be sold was free from all
encumbrances and that he as “Karta” had
power to sell the same. It was also held out
that the firm consisted of himself and his
brother, Daulal and their sons, as coparceners
and that he was the Manager and Karta of
the family firm.
4. The plaintiff in the usual course of
business, caused a public notice to be
published in a local daily, Nai-Dunia, dated
10-6-1962, notifying their intention of
purchasing the property. Defendant No. 1
was requested many times to give theoriginal
lease deed and also to furnish draft of the sale
deed, but the defendant failed to supply the
same. A notice dated 23-6-1962 was sent
through an Advocate, calling upon him to
supply the necessary papers.
5. After despatch of the notice, plaintiff for the first time came to know that in proceedings pending before the Third Addl.
District Judge, Indore a compromise was arrived at between the defendants and the State Bank of Indore, authorising the Bank to enter into contract for sale of the properties, including the suit property and the Bank had already entered into a contract with M/s. Thakur Savdekar Company, Khategaon, for sale of the suit property for Rs. 64,000/-and thjs contract was anterior to that of the plaintiff. It also transpired that in the execution proceedings, the Court had issued notice to M/s. Thakur Savdekar Company, to explain their position.
6. Another notice was, therefore, sent to the defendants on 29-9-1962, calling upon them to clear the cloud on their title, but it was not replied to. But the plaintiffs were assured by the defendants that they would convey a marketable title to the plaintiff after removing all clouds, on their title.
7. With a view to avoiding further delay, the plaintiff paid Rs. 4600/- to the defendant for purchase of stamps for drawing up the sale deed. Accordingly, defendants purchased stamps worth Rs. 4600/. The defendant, however, could not clear the cloud on their title. Therefore, the said deed could not be executed.
8. In the meanwhile on further inquiries it was learnt that there were other members of the joint family, other than those represented by defendant No. 1 at the initial-most stage. The plaintiff, therefore called upon the defendants to produce partition-deed or any other deed to show that they had acquired exclusive title to the lease-hold land The defendants however, failed to show any such document. As an alternative, all these other members of the family were joined as vendors, in order to assure the plaintiffs of full title. Fresh stamps worth Rs. 4600/- were purchased by the plaintiff, as the stamps purchased were not useful, many alterations and changes were to be made in the draft, in view of the changed context. After purchase of stamps the defendants were called upon to procure concurrence of all members of the family to the proposed deed of sale, but the defendants went back on their word and said that other members were not willing to join in the sale of land. Plaintiff also came to know that there were other creditors of the
defendants, who had outstanding claims and had started execution proceedings against the defendants. The defendants were restrained from alienating their properties, including the suit land, by an order passed by Civil Judge Indore, The structure put up by the defendants itself was in violation of the terms of the lease, thus incurring the risk of the lease itself being forfeited.
9. Defendants committed breach of contract. They neglected and failed to clear the cloud on their title and also failed to carry out the promises and assurances made by them. The plaintiff at all times was ready and willing to perform his part of the contract. The defendants committed breach of contract and therefore liable to refund the amount of Rs. 10,000/- received by them from the plaintiff as earnest money. Plaintiff also claimed interest. By notice dated 17-7-1962 the defendants were called upon to pay the aforesaid amounts and also pay damages for breach of contract This notice was not replied to. As the defendants were not willing to carry out the contract, the stamps worth Rs. 4600/- were returned, but a sum of Rs. 460/- was deducted as per rules. The stamps were purchased twice. Thus in all Rs. 920/- was deducted. Plaintiff, therefore, filed the suit for recovery of Rs. 10,000/- the earnest money, Rs. 920/- the loss suffered in returning the stamps Rs. 1100/- as interest, at the rate of Rs. 6% per annum from 1-6-1962 to the date of suit and Rs. 250/- as expenses in getting the draft prepared and for legal advice – thus in all Rs. 12,770/-.
10. The defendant resisted the plaintiff’s claim and denied the allegations of breach of contract made against them. According to them, the plaintiff had been appraised of the execution proceedings. Enquiries were also made by the plaintiff from the State Bank of Indore before entering into the agreement. The plaintiff had full knowledge of all the facts. It was the plaintiff, who evaded implementation of the agreement and tried to wriggle out of the contract by cooking up false designs and pretexts. Thus, according to the defendants, it was the plaintiff, who committed breach of contract, and they were entitled to forfeit the amount of earnest money.
11. The trial Court on the basis of pleadings of the parties framed as many as six
issues and answered all the material issues against the plaintiff and dismissed the suit.
12. On the question of representation the trial Court found that the defendant No. 1 had represented that the property agreed to be sold was free from all encumbrances, except the one disclosed in the agreement. On the constitution of the joint Hindu family firm, the trial Court found that the plaintiff was fully aware of its constitution and defendant No. 1 had represented that the firm M/s. Jasrup Baijnath was his (defendant No. 1) and that of his joint family. Trial Court also held that the defendants had a marketable title. The trial Court also held that the plaintiff-Company was not ready and willing to perform its part of the contract and it was the plaintiff, who committed breach of contract.
13. Shri Chaphekar, learned counsel appearing for the appellant has assailed the findings as erroneous, unreasonable and unsupportable by evidence on record. According to the learned counsel, the findings recorded by the trial Judge are vitiated, as he misread the evidence and indulged in conjectures and surmises and failed to draw adverse inference against the defendants for non-examination of Sumatikumar and other material witnesses. Shri Kokje, learned counsel for the respondents has supported the findings, contending that they are proper and do not call for interference.
14. It may be noted that defendant Kalyandas died during the pendency of this appeal and is being represented by his legal representatives.
15. The question, which arises for consideration is whether the defendant-respondent had a clear marketable title to the land in question. As has been noted above, the defendant failed to produce evidence or legal proof of valid partition or concurrence of the members of other branch of their family, for which they had agreed and were also found under the law to satisfy the purchaser
about their marketable title to the land in
question.
16. Admittedly, the land in question was
leased out by the Indore Municipality for a period of 99 years to M/s. Jasroop Baijnath, a joint Hindu family firm, carrying out its business as Sanawad. It is also clear from the agreement, Ex. p/3, that Kalyandas, defendant-respondent No. 1, acted as Manager and Karta of M/s. Jasroop Baijnath. By a notice dated 25th Oct., 1962 Ex. p/23, he was called upon by the piaintiff to satisfy him regarding his right, title and interest in the said property, a paper, alleged to be a partition-deed or a family arrangement was shown to the (sic) defendant-respondent, but this could certainly not be treated as a valid document, which could be acted upon by the plaintiff. It was also made clear to the respondent No. 1 vide notice, Ex. P/22, that firm Jasroop Baijnath was constituted-by him (Kalyandas and his brother Daulal). Paragraph 9 of this notice shows that it was repeated demand of the defendant-respondent that they should furnish the deed of partition or the family arrangement under which the property in question had fallen to the share of Kalyandas and his brother Daulal, but this document, evidencing such a partition was never furnished to the plaintiff-appellant.
17. The trial Court has taken a curious view of the matter that after publication of the notice, Ex. p/ in local Press on 19-6-1962, since no objections were taken from any one, it was presumed that the defendant respondent had right to sell the property. This is what the learned Judge says in paragraph 13 of the impugned judgment:
“Thus, it is clear that the plaintiff company was fully made aware of the constitution of the joint Hindu family firm M/s. Jasroop Baijnath’. Even if there was partition, it matters little, because after the notification in Nai Dunia, dated 10-6-62, none came forward to object the transaction and therefore, it is clear that the defendant No. 1 had a right to dispose off the suit property.”
The line of reasoning taken by the learned Judge is apparently erroneous. Simply because none came forward to object to the transaction in spite of public notice published in the local press, it would not absolve the respondents of their liability to show and satisfy the appellant a partition-deed or family arrangement, as the case may be which
Undoubtedly they failed to supply. A mere public notice published in the local press, would not go to cure any defect in marketable title claimed to be possessed by the vendor.
18. The only incumbrance as disclosed by the defendant-respondent in the agreement, Ex. p/3, was about the claim of the State Bank of Indore, not exceeding Rs. 30,000/- and the transferor, i.e. the defendant respondent had undertaken to obtain full discharge certificate of the liabilities from the State Bank of Indore in respect of the land in question and handed over to the transferee, i.e. the appellant before registration. The defendant-respondents were repeatedly called upon to settle their dispute with the State Bank of Indore and obtain discharge certificate, vide notices Exs. p/20, p/21 &, p/23, which they failed to comply with. In fact, execution proceedings were pending in the Court of Third Addl. Distt. Judge, Indore. It is clear from the certified copy of proceedings in Execution Case No. 104/64, that the property in question was attached by the Court and there was a prior contract of sale of this very property entered into on their behalf by the State Bank of Indore with Sawadekar & Co. Exhibit p/9, is the order-sheet dated 7-7-1962, which goes to show that attachment warrant was issued under Order 21, Rule 54, CPC in respect of the property in question. By order dated 27-8-62, Ex, p/12, read with Ex. p/12A and Ex. p/13, it is abundantly clear that the property in question was restrained from being alienated or transferred by the Executing Court.
19. The trial Court has taken the view
that the property in question was attached in
July 1962, while the agreement, Ex. p/3 was
entered into on 31-5-1962. But the real
question is not as to when the property was
attached. The question which the learned
Judge should have posed was whether
representation as made by the defendant at
the time of entering into the agreement that
the State Bank of Indore had some claim not
exceeding Rs. 30,000/- against the transferor
and the defendant has undertaken to obtain
a full discharge certificate of the liabilities of
the State Bank of Indore, whether in spite of
repeated demands by the plaintiff-appellant,
vide notices, Exs. p/20, p/21 and p/23, did he obtain such a discharge certificate. It is nowhere disclosed under, the agreement, Ex. p/3, that execution proceedings were pending before the court in respect of the loan in question. All that is stated is about Bank’s claim not exceeding Rs. 30,000/-Exhibit p/7 is the execution application filed on 7-7-1962. Defendant-respondents were parties to the suit in which the decree was passed on 3-7-1962 and they were judgment debtors in the execution proceedings. Undoubtedly, they were fully aware of the nature of the suit, which they did not disclose at the time of the agreement. State Bank of Indore had already enteredinto a contract of sale of the property in question with M/s. Thakur Sawadekar & Co. — again a fact though within the knowledge of the defendant, yet not disclosing at the time of entering into the agreement, Ex. p/3. A certified copy of the order-sheet dated 21-4-1962 of the Execution Case No. 17 of 1958 (State Bank of Indore v. M/s. Jasroop Baijnath) has been filed. This order-sheet itself spells out the way defendant-respondents were conducting themselves. Relevant portions from the said order-sheet are extracted hereinunder :
“It was also contended that the decree-holder has secured a prospective purchaser with whom an agreement of sale has been made. This fact was intimated to the judgment-debtors and under the terms of the compromise the judgment-debtors were liable to execute the sale deed in favour of this prospective purchaser. Since the judgment-debtors have not complied with it and have not executed the sale deed, the decree-holder has prayed that the sale deed may be executed through Court, as provided in the compromise itself.”
“Various objections have been raised on behalf of the judgment-debtors and all the objections have now been decided by the decision of the High Court. Except one contention all the other contentions of the judgment-debtors have been turned down. Under the decision of the High Court it has been held that the decree-holder is not entitled to any interest on the amount which has been agreed to be the decretal amount in the
compromise. The amount which the decree-holder had agreed to accept under the decree was a sum of Rs. 30,000/-.”
“The decree-holder has also produced a draft of the sale deed. A notice shall now be issued to the purchaser referred to in the draft-sale deed to show cause and to appear in court to state whether he is prepared to purchase the property as per draft-sale deed. Process fee shall be paid by the decree-holder.”
This order sheet dated 21-4-62, drawn in Ex. Case No. 17/58 (State Bank of Indore v. M/s. JasrupBaijnath) is undoubtedly prior in point of time to the agreement Ex. p/3. The defendants were fully aware as to what was going on in the execution proceedings instituted by D. H. Bank, yet they concealed the reality and merely came out with a disclosure that the Bank had some money Claim not exceeding Rs. 30,000/-. This was not a full and faithful disclosure of the real state of affairs prevailing at the time of agreement.
20. A compromise was arrived at between the defendants and the Bank authorising the Bank to enter into contract for sale of properties including the suit property and the Bank had in fact, entered into contract with M/s. Thankur-Saodekar & Co. Khategaon for sale of the suit-property for Rs. 64,000/- and this contract was anterior to that of the plaintiff.
21. By notice dated 29-9-62, the defendant was called upon to clear the clouds on their title, which they failed to do. Trial Court has taken the view that the attachment of property being subsequent to the agreement, Ex. p/3, and the Bank’s encumbrance having been disclosed by the defendants, they were not liable for frustration of contract.
22. The trial Court has overlooked the nature of Bank’s encumbrance as disclosed by the defendants. Suppression of material fact on part of the defendants that they had by entering into a compromise authorised the Bank to sell the property in question and the Bank had already entered into a contract with M/s. Thakur Saodekar & Co. Khategaon for sale of the suit-plot — this contract was
prior in point of time to Ex. p/3. The defendants though fully knowing about it, do not disclose this fact, the trial Court without -considering these suppressions of material facts and misleading mis-representations made by the defendants as regards the nature of Bank’s claim, dismissed plaintiff’s claim. The trial Court failed to notice the guarantee given by the defendants contained in para 5 of the agreement it reads as follows :–
“The transferor guarantees to the transferee
that there is no other encumbrance in the
land except the one mentioned at item
No. 3(b) which relates to “some claim not
exceeding Rs. 30,000/-” of the State Bank of
Indore.”
23. Facts as discussed above, reveal the
futility of such a guarantee as contained in
the agreement, Ex. p/3.
24. Admittedly, the property agreed to be sold, was held by the defendants in leasehold rights. Their lease was also cancelled as can be gathered from Ex, p/6, Certified copy of an application made by the Municipal Corporation before the Executing Court. This application is no doubt subsequent to the agreement but it contains the fact that defendants’ lease was terminated by the Municipal Corporation. The trial Court merely because the application, Ex. p/6, was subsequent in point of time rejected this objection and held that the appellants were evading the contract.
25. The question which ought to have been considered was whether on the date of agreement the defendants had any valid sanction from the Municipal Corporation to sell the land and if they had any, did they produce the same when demanded by the appellants. There is overwhelming documentary evidence on record to show that such a demand was made by the appellants.
26. The facts as noted above, not merely go to show the suppressions of material facts, misrepresentations made by the defendants but also the clouded nature of their title.
27. A basic requirement before the defendants could enter into an agreement to
sell the property, was that they were possessed of a clear marketable title to sell the property under agreement.
28. Shri Chaphekar, learned counsel appearing for the appellant rightly contended that the trial Court failed to grasp and give effect to, the true meaning of ‘marketable title’. ‘Marketable title’ means — particularly in the case of a contract for sale immovable property means title free from resonable doubt A marketable title is one which so far as the defendants are concerned, may at all times and under all circumstances be forced upon an unwilling purchaser. A conveyance for title is an assurance to the transferee that the transferor has the very estate in quality and quantity which he purports to transfer.
In contrast to a clear marketable title, a doubtful title means such title as involves a considerable chance of litigation.
29. It is this test of marketable title which
the trial Court should have applied to facts of
the present case, but a reading of the
impugned judgment goes to show that it has
failed to apply.
30. In view of the foregbing discussions, the finding recorded by the trial court on Issue No. 3 is palpably erroneous and cannot be allowed to stand, it is accordingly set aside. Ex. p/24, iscertified copy of resolution dated 27-5-59 passed by the General Council. By this resolution, Corporation had decided to resume the land given on lease to the defendants. Although, Ex. p/6 is subsequent to the agreement, but the fact of resolution by the council of release, relates back to May, 1959. The trial court should have seen that if defendant-respondents had anything contrary to the Exs. p/6 and p/24 they should have shown it to the plaintiffs in order to clear the cloud over their title, which they did not. In the circumstances, the finding recorded by the trial Court on issue No. 3 is set aside.
31. Similarly, the finding recorded by the trial Court on issue No. 2(b) and (c) is also erroneous. The trial Court failed to see that
the defendant/respondents had not disclosed an earlier contract of sale of the suit-property entered into on their behalf by the State Bank of Indore with M/s. Thakur Saodekar & Co., Khategaon. They had also failed to disclose the proceedings taken by the Corporation for cancellation of the lease itself. The finding recorded by the trial Court on issue No. 2(b) and (c) stand vitiated for non-consideration of the aforesaid facts, having bearing on the issues. The findings are, therefore, liable to be set aside and are accordingly set aside.
32. In view of the foregoing discussion, this appeal deserves to be allowed and is accordingly allowed. The judgment and decree, as passed by the trial court is set aside. The plaintiff-appellants are held to be entitled to refund of the whole amount of earnest money of Rs. 10,000/- paid by them to the defendant/respondents, as against the finding recorded by the trial Court holding them entitled to half of the earnest money.
33. Trial Court has disallowed the amount deducted on account of return of stamps, purchased by the plaintiff. The reason assigned is that no documentary evidence has been produced by either party. The evidence of Rajmal, (PW 5) is very clear on this point and there is no reason to disbelieve it. The plaintiffs are held to be entitled to Rs. 920/- being the loss sustained by the plaintiff on return of stamps. They are also held to be entitled to Rs. 250/- as expenses claimed by them on account of drafts prepared and legal advice. Both these claims are decreed. Plaintiffs are also held entitled to interests as claimed by them, being Rs. 11,00/- The damages as claimed of Rs. 500/- is also awarded in view of the fact that the defendant/respondents were guilty of breach of contract. Thus, the suit is decreed in toto, which costs, throughout. Counsel’s fee as per schedule, if certified.