Madras High Court
S. Ahmed Hussain Sahib vs K.K. Gani Veeri Chettiar And Ors. on 8 February, 1952
Equivalent citations: AIR 1953 MADRAS 628
JUDGMENT Krishnaswami Nayudu, J.
1. The plaintiff who is the appellant in both these appeals purchased two plots of land situated within the Salem Municipality from the defendants under two different sale deeds of the same date, namely, 26-1-1946. Two suits, O. S. Nos. 81 and 82 of 1946 against which these appeals are filed, were instituted by the plaintiff for setting aside the sale deeds and for recovery of the amounts paid as the sale price. The plaintiff claims to have learnt some time after the completion of the sale deeds that the lands purchased were comprised in a town planning scheme notified by the Salem Municipality in May 1941 which the defendants knew but did not disclose to the plaintiff and that there was therefore such a material defect in the title to the property that the omission on the part of the defendants to disclose the above defect was fraudulent entitling the plaintiff to set aside the sale and claim refund of the sale price. The defendants' contention is that the plaintiff knew about the Town Planning scheme and that no portion of the property purchased was reserved under the scheme and it was not subject to any acquisition by the municipality or the Government. He also contended that the existence of a scheme relating to the property was not in any event a material defect in title entitling the plaintiff to avoid the sale. The lower Court dismissed the suits. Hence these appeals.
2. The sales are sought to be avoided on two grounds, namely, (1) that the sale of a property which is the subject-matter of a town planning scheme is prohibited under the provisions of the Madras Town Planning Act (7 of 1920) and therefore void, and (2) that the fact that a scheme under the Madras Town Planning Act is in force relating to the property is a material defect in the seller's title which the defendants were aware of, and which they were bound to disclose to the buyer and the omission to make such disclosure is fraudulent under Section 55(1)(a), T. P. Act. It was also sought to be contended on behalf of the appellant that he is also entitled to avoid the sale as both parties to the contract were under a mistake as to a matter of fact essential to the agreement and therefore the agreement is void under Section 20, Contract Act. In view of the evidence in this case, it cannot be said, at any rate that the defendants at least were not aware of the fact that these properties were included in the Town Planning scheme and it is therefore futile to contend that the sale is void on the ground of mutual mistake.
3. It is however necessary to examine the provisions of the Madras Town Planning Act with reference to the facts of this case in order to consider the other contentions of the appellant. On 24-4-1941 the Salem Municipal Council acting under Section 9(1), Madras Town Planning Act, passed a resolution and had the same published in the prescribed manner on 9-5-1941 under Section 10 of the Act deciding to prepare a scheme in respect if a certain area within which the properties in question were included. The Council also prepared and published a draft scheme under Section 11 on 6-5-1943. There were no objections to the scheme and the scheme was submitted to the Government for its sanction under Section 14. But the Government does not appear to have sanctioned it, and nothing appears to have happened after the submission of the scheme to the Government. Under Section 9, a Municipal Council may, by resolution, decide to prepare a scheme in respect of any land within the municipal area and the Chairman shall then have a plan prepared showing the land proposed to be included in the scheme, the surrounding lands and any existing streets. Such a resolution shall, under Section 10, be published by notification in the prescribed manner by the chairman and the notification shall state that a copy of the plan is kept for the inspection of the public.
If the resolution is to make a scheme, as in this case, the municipal council shall, under Section 11, within 12 months from the date of the notification under Section 10, or within such further period not exceeding 12 months as the Provincial Government may allow, and after consulting, in the prescribed manner, the owners of the lands and buildings in the area affected, prepare and publish a draft scheme. Such a draft scheme shall contain the particulars enumerated in Section 13, and under Section 14, if within sixty days from the date of the publication of a draft scheme any person affected by such a scheme communicates in writing any objection or suggestion relating thereto, the council shall consider such objection or suggestion and may modify the scheme as it thinks fit, and the scheme together with such objections and suggestions, if any, shall be submitted to the Provincial Government for sanction and the Provincial Government may after considering the objections and suggestions, if any, sanction the scheme with or without modification or may refuse to sanction the scheme. Section 17 provides that after the publication of the notification under Section 10 or Section 12 no person shall erect or proceed with any building or work or enter into or carry out a contract in respect of the land within the area included in the scheme unless he has applied for and obtained permission in cases where a scheme has not been sanctioned from the municipal council and in other cases from a responsible authority. Section 21 lays down that a person shall not be entitled to obtain compensation under Section 20 on account of any building erected on, or contract made, or other thing done, with respect to land included in a scheme, after the date of the publication of the notification under Section 10 or Section 12 except as to buildings erected, contract made or other thing done in accordance with a permission granted under Section 17.
4. Section 17 is relied upon by the appellant in support of his contention that there is express prohibition against any sale of land comprised within the area included in the scheme, reliance being placed on the words "no person shall enter into or carry out a contract in respect of land within the area included in the scheme". It is therefore for consideration whether the Act prohibits transfers of properties comprised in the area included in the scheme or whether the prohibition as to entering into or carrying out a contract does not relate to transfers of land but only refers to contracts with reference to enjoyment or to the use to which the land is to be put by virtue of any arrangement that may be entered into by the owner with third parties. Apart from the fact that if it was intended to prohibit alienations or transfers of properties included in the scheme more express terms could have been employed in the Act, it is clear that when reference to entering into or carrying out the contract is made, it is in relation to something that has to be done in the land and which should not be done contrary to the purpose for which the scheme was intended.
This is evident from Section 21 which relates to compensation, the penalty for the construction of any building or work done or any contract entered into or carried out in respect of the land without the sanction of the municipal council or responsible authority would be to deprive the person from compensation. It does not make such a contract void even assuming a contract of sale or the sale itself is intended, which however we have no doubt has not been intended to be included in the contract referred to in Section 17. The purpose of the Town Planning Act is to vest municipalities with power to control the erection of buildings or such works and the use to which the lands situated within the Municipality may be put to in order to secure the object of laying out a well planned town or city. Par from any transfers being prohibited, it is clear from the Act and the rules that such transfers are contemplated and provisions made to define the rights and liabilities of the transferor and the transferee of land covered within the area under the scheme. A reference may be made to Rule 66 framed under the Town Planning Act where with reference to payment of betterment contribution payable in respect of any premises it is laid down that where the title of any person primarily liable to the payment is transferred, the person whose title is transferred and the person to whom the same shall be transferred shall, within three months after the execution of the instrument of transfer or after its registration if it be registered or after the transfer is effected, if no instrument be executed, give notice of such transfer to the municipality of such transfer and if a person makes a transfer without giving such notice, the transferor continues liable for payment of the betterment contribution. The prohibition therefore in Section 17 is not a prohibition against the transfer of the property but a prohibition against the use to which the property is put to, the use being subject to such restrictions that may be prescribed under the scheme. The need for such a provision as Section 17 was apparently felt necessary to prevent the owners of lands who are likely to enter into contracts with respect to the lands with a view to bolster up their claims for compensation by virtue of anything done on the land in pursuance of a contract entered into. We have therefore no hesitation in holding that Sections 17 and 20 do not extend so as to prohibit owners of lands from selling their properties and the sales therefore cannot be void.
5. The question whether the existence of a scheme is a material defect in the seller's title requires consideration. This question was considered in 'Forsey and Hollebon's Contract, In re', (1927) 2 Ch 379 (A), with reference to the Town Planning Act of 1925 (15 Geo. V, c. 16). In that case the purchaser agreed to purchase certain premises "for an estate in fee simple absolute, free from incumbrance". Before the date fixed for completion he discovered that the property was included in the area proposed to be dealt with by local authority by its resolution under Section 2, Town Planning Act, 1925. On an application by the purchaser that the vendor had not shown good title to the property sold in accordance with the contract and for payment of the deposit, it was held by Ere J. that the mere passing and registration of the resolution by the local authority did not operate to impose on the land any subsisting incumbrance within the meaning of Clause 1 of the contract, that the sections of the Act of 1925 showed that the purpose of the registered resolution was not so much to impose restrictions on the land as to prevent unreasonable claims being made by persons who bought up land subject to the scheme; and that there was nothing like an interference with the property which made it different from that which was contracted to be sold.
Lord Hanworth M.B. observes at p. 391 as follows:
"A draft statement in relation to the scheme has been prepared. But even then the scheme has to be passed by the Minister. There may be restrictions imposed by the scheme on the purchaser, but I reject the view that the scheme operates as an existing incumbrance on the land. The resolution has only a certain effect as to compensation. I have gone through the various sections of the Town Planning Act, 1925, in order to show that the resolution is passed not so much for the purpose of imposing restrictions as of preventing unreasonable claims for compensation being made by persons buying up land subject to the proposed scheme. I think that Eve J. was right in saying that there was nothing like an interference with the property which made it different from that which was contracted to be sold.
I do not think that the purchaser can say that the vendor has failed to make a good title."
6. The provisions of the English Act are not far different from the provisions of the Madras Act. There are provisions in the English Act corresponding to Sections 9, 10, 11 and 14. There is no provision corresponding to Section 17. The disability under Section 21 to obtain compensation in respect of buildings erected, contract made or thing done without the permission of the authority is provided under Section 10 of the English Act. The facts in this case appear almost identical with the facts of the case which the Court of Appeal was considering. Here as well, excepting the publication of the draft scheme and its submission to the Government nothing further has been done and it cannot therefore be stated that there is any interference with the property which would justify the plaintiff contending that the defendants had no title to convey. Reliance was placed on -- 'Nursing Dass Kothari v. Chuttoo Lal Misser', AIR 1923 Cal 641 (B) and --'Lallubhai Rupchand v. Mohanlal Sakarchand', AIR 1935 Bom 16 (C). In the former case, it was a case of sale by public auction where the purchaser was declared the highest bidder and he made a deposit as per the conditions of the sale. Subsequently he discovered that at the time when the auction was held there had been already published in the Calcutta Gazette a notice under Section 63(2), Calcutta Improvement Acts 1911-1915 which showed that the Trust had prepared a plan of the proposed public street and that among other buildings through which the street would pass were the premises which were the subject-matter of the auction. It was held in that case that neither the receiver who sold the property, nor the purchaser was aware of the notice issued under Section 63(2), Calcutta Improvement Acts and that the case fell within the provisions of Section 20, Contract Act and that the purchaser was therefore entitled to avoid it as the parties were not aware as to a matter of fact essential to the agreement before the auction. That decision therefore is not very helpful to the appellant in that it did not proceed to consider it with reference to Section 55(1)(a), T. P. Act.
In 'AIR 1935 Bom 16 (C)' after the agreement was entered into between the parties for sale of the property and before its completion, it was brought to the notice of the purchaser that the Government at the instance of the municipality decided to acquire the property agreed to be sold under the Land Acquisition Act and a notification to that effect had been published in the Gazette. The purchaser wanted to avoid the sale and recover the advance paid by him as earnest money and it was held that he was entitled to it since he was not bound to complete the same when there were defects in the property or in the title to the property which are material and also latent and not discoverable by due care. It was held that the liability of the property to be compulsorily acquired may fairly be said to amount to a material defect which was not discoverable by due care and that the vendor was not in a position to show title free from reasonable doubt and therefore the purchaser was held entitled to avoid the contract. But it must be mentioned that in both these cases there was a direction to acquire the lands, one under the provisions of the Calcutta Improvement Acts and the other under the Land Acquisition Act. In the present case, there is nothing to show that the suit lands were directed to be acquired under the scheme. There is no direction since the Government have not yet sanctioned the scheme or issued instructions to the municipality to acquire any portion of the lands comprised in this scheme. It is not even shown whether the lands which are the subject-matter of these suits were set apart in the draft scheme for any public purpose to be used for providing for a street, park, school, or otherwise when it may be contended with some force that if the Government makes up its mind even at this late stage to sanction the scheme there is the likelihood of the plaintiff losing the property and getting only compensation for the property and that if he had known before he entered into the transaction it can be reasonably supposed that he would not have entered into the contract at all That stage had not come up in this case. It is only in the stage of proposal pending acceptance by the Government ever since 1944 when the notice of the submission of the draft scheme was published. It will, therefore, in the words of Eve J. in (1927) 2Ch 379 (A) when he considered the resolution of the municipal council as to whether it was a restriction which affected the property so that the property which was to be conveyed was different from the property contracted to be sold "a potential interference with its enjoyment", and he goes on to observe "but until that potentiality has ripened into an actual interference I cannot bring myself to hold that the property is affected in the sense that there is an incumbrance imposed on it by the mere passing of the resolution, and on those grounds I am prepared to hold and do hold, that the mere passing and registration of the resolution of this nature does not operate to impose on the land included in the area any subsisting incumbrance."
7. The learned counsel for the appellant referred to the principle laid down by Tindal C. J. in -- 'Flight v. Booth', (1834) 131 E R 1160 (D). In that case, the contract of sale was sought to be avoided by reason of misdescription in the printed particulars of the sale of the premises to be sold by reason of which the purchaser wanted to rescind the contract altogether. The learned Chief Justice after discussing the decided cases observed:
"We think it is, at all events, a safe rule to adopt that where the misdescription, although not proceeding from fraud, is in a material and substantial point, so far affecting the subject-matter of the contract that it may reasonably be supposed, that, but for such mis-description the purchaser might never have entered into the contract at all, in such case the contract is avoided altogether, and the purchaser is not bound to resort to the clause of compensation. Under such state of facts, the purchaser may be considered as not having purchased the thing which was really the subject of the sale."
8. The purchaser in that case was held entitled to avoid the contract since by reason of his being compelled to purchase it he would be getting something different from what he contracted to buy. It was urged that this principle should be applied to this case as by reason of the scheme the plaintiff would be getting something different from what he contracted to buy, namely compensation instead of land. There is no doubt force in this contention. But it has not been shown that these lands were directly sought to be acquired under the scheme and that the plaintiff would therefore be entitled only to compensation and not the land, even assuming that the Government would approve the scheme and put it into effect. In any event, we are satisfied that there is no material defect in the seller's title soiely on the ground that the property sold is comprised in an area in respect of which a draft scheme under the Madras Town Planning Act has been prepared and submitted to the Government does not amount to any interference in the rights of the owners of the properties and does not impose restrictions in the right to transfer the same, nor affect their title to deal with them. It must be borne in mind that these lands are situated within the Municipality and should always be held subject to such restrictions as to their use and enjoyment that may be imposed by the Municipality by virtue of the powers vested in it under not only the Municipal Acts but also other enactments empowering the municipalities to have control over the properties within their limits in the interests of the public to enable them to discharge their duties of providing proper housing accommodation and other civic amonities. Therefore, a person holding property situated in a municipality must hold it subject to these limitations and restrictions imposed on such owners. It cannot therefore be said that the mere fact that a particular area is included in the Town Planning Scheme would justify holding that the owner of such property is incompetent to sell the same or that his title to deal with it is in any way affected.
9. Section 55(1)(a), T. P. Act, provided that the seller is bound to disclose to the buyer any material defect in the property or in the seller's title thereto of which the seller is, and the buyer is not aware, and which the buyer could not with ordinary care discover; and omission to make such disclosure is fraudulent under the section and the purchaser is therefore entitled to avoid the sale on the ground of fraud. In this case, the lower Court found that the plaintiff must have been vaguely aware of the existence of the Town Planning Scheme. The learned Judge however declined to accept the evidence of D.Ws. 1 and 2 who stated that they told the plaintiff's broker and clerk, F. Ws. 2 and 3, about the Town Planning Scheme and that they stated that they made enquiries and with the knowledge they purchased the property. After examining the evidence of these witnesses and taking into consideration that P. Ws. 2 and 3 were not cross-examined as to whether they were not informed of the existence of the scheme, we agreed with the learned Judge that much reliance could not be placed on the evidence of these witnesses. We however agree with the finding of the lower Court that the plaintiff must have learnt about the scheme earlier than the sales and not after.
The plaintiff states that he agreed to purchase these lands for the purpose of putting up buildings and being within the municipal limits it is difficult to believe, as observed by the lower Court, that the lands would have been purchased without examining the title to the property and finding out whether the area was not the subject of any town planning scheme. The suit plots were potential building sites and it could not have been assumed by the plaintiff that the municipality would not take steps to lay the necessary roads and put up damage and other facilities calling upon the owners to pay betterment contribution. The object admittedly of the plaintiff was to put up houses and he must have made enquiries about the existence of the scheme and should have gone through the transaction with such knowledge. In any event, it cannot be said that the plaintiff could not have discovered this with ordinary care.
The person purchasing lands for building sites within a municipality should examine the situation with reference to public road, the existence or otherwise of such access, the provision of drainage and the title of the vendor with reference to the municipal registers which enquiries would have led him to the knowledge of the Town Planning Scheme for the area. Apart from agreeing with the lower Court that the plaintiff must have been aware of the scheme, we are of opinion that assuming that it is a material defect in the seller's title, he could have discovered it with ordinary care. Section 55(1)(a), T. P, Act, could not therefore be invoked by the plaintiff. In the result, these appeals are dismissed with costs in A. S. No. 359 of 1948.