1. Appeal against the order of the Subordinate Judge, Tiruvalur, in Appeal No. 57 of 1925 from the decree in O.S. No. 528 of 1923, District Munsif, Nannilam.
2. One Narayani Ammal sold certain property, described now as the A schedule property, in 1890 to one Subramania Sastri. Her husband Swaminatha Aiyar executed a security bond, Ex. F, undertaking that if Subramania Sastri, the vendee, should be deprived of any of the property for various reasons he would compensate him with equivalent property, now described as the B schedule property. Subsequently Subramania Sastri mortgaged the A schedule property, the mortgagee sued and brought the property to sale, and it was bought in court auction by one Namasivaya Pillai who sold the property to the present plaintiff. Meanwhile Muthusavvmi Aiyar, the second son of Narayani Ammal, sued to cancel the original sale, succeeded, and then dispossessed Namasivaya Pillai, and his vendee the plaintiff. The plaintiff now sues to enforce the security bond Ex. F on the ground that it is a covenant running with the A schedule kind which enures to the successors to the title of Subramania Sastri. The 3rd defendant, the present appellant, is a purchaser of certain items of the B schedule property and contends that the plaintiff has no right to enforce the bond against the property in his possession. The District Munsif dismissed the suit and the Subordinate Judge finding that the bond was enforceable remanded it for disposal upon the remaining issues.
3. The learned District Munsif dismissed the suit on the short ground that no warranty of title could pass in a court sale, and therefore whatever rights the successors to the title of Subramania Sastri might have claimed before the mortgagee brought the property to sale, had gone when Namasivaya Pillai bought the property at that sale. This argues a certain confusion of thought.
4. No doubt the Transfer of Property Act does not apply to any transfer by operation of law [Section 2(d)] and therefore the implied covenant for title in Section 55(2) is not annexed to the interest of transferee by Court sale. But supposing the right and interest of judgment debtor, which is sold by action, of the Court should happen to include an interest which the transfer was capable of passing, then that interest could be purchased at the Court sale along with the property to which it was attached and if such interest were a covenant running with the land, as, for instance, the covenant for title provided in Section 55(2) that interest could be transferred at a Court sale. This appears to be the view taken by the learned Subordinate Judge in his sixth para, and in my opinion that view is correct.
5. But Mr. Venkatachariar rests his appeal upon two other grounds. He contends that the indemnity bond, in that it creates a perpetual interest in the B schedule property, is opposed to Section 14 of the Transfer of Property Act and he also contends that this indemnity bond is not a covenant running with the land, and therefore it could not have passed at the Court sale to plaintiff’s predecessors-in-title. There appears to be much force in both of these contentions, but the first was not raised in either of the lower courts and it is unnecessary to discuss it unless the second ground proves to be invalid.
6. A covenant running with the land must be one that touches or concerns the thing demised. The distinction is no doubt subtle, but if this definition is kept in mind, it seems clear that a covenant for title, does, in this sense, touch the property demised, while a covenant for indemnity is just so remote as not to touch it. Shephard’s Touchstone of Common Assurances puts the point as follows:
Page 161 : And these are some of them said to be inherent, i.e., such us are conversant about the land (and knit to the estate in the land) as that the thing demised shall be quietly enjoyed…And some of them are said to be collateral…or not so immediately concern the thing granted; as…to give other security to perform the covenant.
7. This is quoted in Cuthbert Brown’s Covenants running ‘with-the land where (page 25) covenants to give security for the performance of covenants are classed as personal or collateral, i.e., not such as run with the land (page 7).
8. To the same effect are the observations of Parke, B., in Doughty v. Bowman (1848) 11 Q.B. 444 : 116 E.R. 543.
Again if the covenant declared upon presents an alternative, it is ‘merely a covenant to indemnify. Is that then ad idem with a covenant for quiet enjoyment, assuming that the covenant would pass?
It is not… It must be considered as an undertaking to perform or, in default of performance, to indemnify; and therefore “it cannot pass with the reversion. I think the judgment given by my brother Paterson is quite right.
9. Paterson, J., had said (page 545):
If it be considered as a covenant of indemnity, then it is conceded that the-assignee is not bound.
10. It may be observed that though the Transfer of Property Act mentions certain contracts the benefit of which shall be annexed to and go with the interest of the transferee, there is no such mention of a covenant of indemnity. The learned Subordinate Judge has rather assumed that a covenant of indemnity is identical with a covenant for title, but that is not so.
11. I find therefore that Ex. F is not a covenant running with the Land and plaintiff has no rights by virtue of its provisions to dispossess the appellant.
12. The appeal is accordingly allowed with costs throughout to 3rd defendant. The plaintiff’s suit is dismissed.
13. When Narayani Animal sold the A schedule land in which she had only a daughter’s estate, to Subramania Sastri, in 1890, her husband and one of her sons executed Ex. F in favour of Subramania Sastri, by which they undertook that, if Subramania Sastri was deprived of any part of the A schedule land by reason of any incumbrance, sale, security, exchange, claim for maintenance or right of a minor or by a decree of any Court or in consequence of any interest created by the executants themselves or by Narayani Ammal, or of any claim put forward by others, they would give him an equal extent of the B schedule land. That is, they agreed that if Subramania Sastri in the specified circumstances lost any part of the A schedule property, which he was buying from Narayani Ammal, they would indemnify him in a particular way. It appears to me impossible to regard that as a covenant for title in respect of the land which Narayani Ammal was selling. It has been argued before us for the plaintiff that, because a covenant for title in respect of that land would have had the result among other things that Subramania Sastri and his assignees could have sued the covenantor for damages to indemnify themselves for the loss of any part of the property through defect in Narayani Animal’s title, therefore the contract by which her husband and son promised indemnification in a particular form was a covenant for title. That argument appears to me to call for no discussion. The fact that that common feature of contracts is to be found in a covenant for title is obviously not enough to make this contract a covenant for title. A covenant to indemnify a transferee for the loss of the land transferred, even when made by the transferor, is not a covenant which runs with the land, see Doughty v. Bowman (1848) 11 Q.B. 444 : 116 E.R. 543. Mr. Venkatachariar for defendant 3 has argued that, even if Ex. F embodied a covenant for title, the benefit of it would not pass to the plaintiff because he is the assignee not of a purchaser from Subramania Sastri, but only of a purchaser at a court sale in execution of Subramania Sastri’s right, title and interest in the A schedule property. On principle I see no reason why the benefit of an express covenant for title of which the judgment-debtor can take advantage should not pass by a court sale in execution, though with respect I doubt whether in this country the benefit of an implied covenant for title arising only out of the provisions of Section 55(2) of the Transfer of Property Act could ever pass by such a sale. However it appears to me unnecessary to discuss that question as in my opinion Subramania Sastri got no covenant for title by Ex. F. I agree that the benefit of the contract under Ex. F does not run with the land and that, as it has not been assigned, the plaintiff’s suit must fail.
14. I agree also with Mr. Venkatachariar’s further contention, that, if it was intended by Ex. F to make the B schedule property permanently liable to Subramania Sastri’s assignees and representatives-in-interest, it would be unenforceable as violating the rule against perpetuities. Compare The London and South Western Railway Co. v. Gomm (1882) 20 Ch. D. 562. On that ground also the plaintiff cannot enforce Ex. F.
15. I agree that this appeal must be allowed and the plaintiff’s suit dismissed with 3rd defendant’s costs throughout.