Judgment:
Raju, J.
1. The 7th defendant in O.S. No. 82 of 1977, on the file of the Court of Subordinate Judge, Tiruchirapalli, is the appellant in the above second appeal. The 1st respondent/plaintiff filed the suit for recovery of Rs. 7,332 being the principal and interest due as damages for the amount paid by the plaintiff to safeguard her title in respect of the B schedule property and in default of such payment, for a direction for the sale of the A schedule property for the payment of the said amount.
2. The case of the plaintiff before the courts below was that one Muthukaruppan Chettiar and his brother Saminathan Chettiar sold a building to the plaintiff described in the B schedule, on 25.6.1960, the original of which is marked as Ex. B-4 and a registration copy of the same is marked as Ex. A-1, for -valuable consideration of Rs. 6,000 claiming themselves to be the full and exclusive owners of the building. The 1st defendant is said to be the son of Muthukaruppan Chettiar, one of the vendors, and defendants 2 to 5 are said to be the heirs of Saminathan Chettiar, the other vendor, of the plaintiff. Though the vendors assured the plaintiff about their full and exclusive title to the property sold, subsequently, the mother of the vendors, filed O.S. No. 70 of 1963 on the file of Sub Court, Tiruchirapalli, claiming partition of the properties by impleading the present plaintiff, as the 9th defendant. The said suit ended in an appeal before this Court in A.S. No. 976 of 1996, wherein, it was confirmed that the plaintiff's vendors had title only to 98/120 shares in all the properties. The said judgment was considered to operate as res judicata and when steps were taken to pass a final decree, the plaintiff was compelled to negotiate with the successful plaintiffs in the other suit and ultimately, she had to pay Rs. 7,000 for the said share of 22/120 to have the property purchased by her exonerated from the defect to its title. Defendants 6 and 7 are said to be the subsequent purchasers of portions of A schedule property, shown as security to safeguard the full and effective title of the vendor. It was in such circumstances the suit came to be filed for the relief, as noticed supra.
3. The 1st defendant filed a written statement denying all the allegations made in the plaint and claiming that there cannot be any res judicata in the matter, on account of the earlier proceedings, that the claim of the plaintiff that she was compelled to compromise the earlier proceedings for securing title in respect of 22/120 shares by paying Rs. 7,000 on 24.4.1976, was incorrect and that therefore, the plaintill was not entitled to the same, towards damages for breach of the covenant of title on the security of the A schedule property.
4. The second defendant also filed a written statement, adopted by defendants 3 to 5, denying all the allegations and claims made by the plaintiff and also contending that the sale deed dated 25.6.1960 was not binding on defendants 3 to 5; who were minors at that time and in any event, the indemnity said to have been given by the vendors, is not binding on them or their share in the A schedule property. While contending that the plaintiff has not cared to properly defend or contest the earlier suit and the appeal and accusing her of negligence, it was also contended that even if she he had paid any amount to the plaintiff in the prior suit, it is not binding on these defendants. A plea that the property was worth really more and as sold for a grossly inadequate price without any necessity therefor, has also been raised.
5. The 6th defendant contended that the sale deed executed in his favour with regard to the A schedule property was a shall and nominal document and when he came to know of that, he also transferred his interest by executing a sale deed in favour of the 1st defendant and that, therefore, he had no subsisting interest in the said schedule property and he is not liable to the suit claim.
6. As far as the 7th defendant/appellant before this Court is concerned, he filed a written statement contending that the suit claim cannot be maintained, as also denying that the plaintiff has really paid a sum of Rs. 7,000 to the plaintiff in the earlier suit and there is absolutely no cause of action for filing the suit as against the 7th defendant. He also claimed that he was a bona fide purchaser for value without notice and therefore, the A schedule property is not liable to be proceeded against for the suit claim.
7. On the above claims and counter claims, oral and documentary evidence came to be adduced on both sides and the learned trial Judge by judgment and decree dated 2.2.1980, decreed the suites prayed for by passing a preliminary decree on the view that the plaintiff has proved her claim that she had paid Rs. 7,000 as per the receipt, marked as Ex. A-12, in order to protect the title by compromise effected with the plaintiff in the earlier suit and that the defendants are liable to reimburse the plaintiff of the same and in default of which, it is open to the plaintiff to proceed against the A schedule property. The learned trial Judge also held that the 7th defendant is a subsequent purchaser of the A schedule property, and he should have verified the encumbrance in respect of the property before purchase and had he taken such minimum and reasonable care, he would not have courted such a trouble and therefore, he cannot be claimed to be a bona fide purchaser for value without notice.
8. Aggrieved, the 7th defendant filed A.S. No. 258 of 1980 before the District Court, Thiruchirappalli. The learned first appellate Judge also concurred with the finds of the learned trial Judge and upheld the claim of the plaintiff on the view that the plaintiff is only trying to enforce the indemnity given to her by her vendor under the sale deed, Ex. B-4, and the plaintiff was entitled to proceed against the A schedule property. Both the courts below have repelled the plea of the 7th defendant based upon the decisions relied upon before them, as of no applicability to the facts and circumstances of the case in the present proceedings. Not satisfied, the 7th defendant pursued the matter on appeal to this Court.
9. At the time of admission of the appeal, a learned Judge of this Court, who dealt with the same, considered the question as to whether the clause in the sale deed Ex. B-4, providing for a Schedule shop to be secured for any loss, which is sought to be enforced by the plaintiff in this suit, is hit by rule of perpetuities envisaged under Section 14 of the Transfer of Property Act, 1882 (hereinafter referred to as the Act).
10. Learned Counsel for the appellant Mr. Ikram Mohammed, while elaborating the above substantial question of law, placed strong reliance on the decisions in Natesa Vanniyan v. Gopalasami Mudaliar A.I.R. 1928 Mad. 894, Tellicherry Pichi Naidu v. C.Jefferson, 41 M.L.J. 94 : A.I.R. 1921 Mad 541 and Raghunathan v. Chellammal 94 L.W. 755.
11. Per contra, Mr. S. Narayanan, learned Counsel appearing for the 1st respondent/plaintiff while distinguishing the decisions relied upon by the learned Counsel for the appellant, as has been done by the courts below, strongly, placed reliance on the decisions in Ram Baran v. Ram Mohit : [1967]1SCR293 , K. Appu v. Rami : AIR1965Ker27 and Ali Hussain v. Rajkumar Haldar A.I.R. 1943 Cat. 417.
12. Before adverting to a consideration of the point raised, it would be appropriate to advert to the decisions relied upon by counsel on either side and deal with their relevance and applicability or otherwise of the same to the case on hand.
13. The decision in Natesa Vanniyan v. Gopalasami Mudaliar A.I.R. 1928 Mad. 894 is one, wherein when a lady sold certain property to a person, her husband executed a security bond separately undertaking that if the purchaser from his wife should be deprived of any of the properties sold for any reason, he would compensate him with equivalent property. The property sold by the wife to the purchaser therein was said to have been sold in Court auction in execution of a decree against the purchaser and ultimately purchased by another person. In the mean time, the son of the lady, who originally sold the property, appears to have successfully set aside the sale by the lady and in such circumstances the court auction purchaser sought to enforce the security bond executed by the husband. It was in such circumstances, a Division Bench of this Court held that the security bond executed by the husband was not a covenant running with the land and consequently, the Court auction purchaser could not enforce the sale. One of the learned Judges expressed the view by a separate opinion that indemnity bond making a property permanently liable for securing possession of the property sold, is unenforceable as violating the rule against perpetuity. It is appropriate to notice even at this stage that the claim of the Court auction purchaser for indemnity came to be rejected on the ground that the agreement of indemnity was itself, in that case, by means of a collateral agreement and not one which operated as a covenant running with the land apart from there being no privity of contract between the court auction purchaser and the husband, who executed the agreement of indemnity. That is not the case arising in the present proceedings; nor the fact situation in the present case would warrant the applicability of the ratio laid down therein to the case on hand.
14. In Raghunathan v. Chellammal 94 L.W. 755, a learned single Judge of this Court had occasion to consider the claim instituted in enforcement of a claim for damages for breach of a clause of warranty. That was a case wherein the plaintiff instituted the suit for recovery of damages and for a charge over certain properties, which were offered as security to indemnify the vendee in respect of any loss the vendee may sustain in case there is any breach in the title to the property conveyed. The plaintiff, as also the defendant in the said proceedings, were the subsequent transferees. It is in that context, the issue that was considered was, with reference to the scope of Section 55(2) of the Transfer of Property Act and the learned Judge ultimately held that Section 55(2) of the Act makes it clear that the benefit of covenant for the title runs with the land and is enforceable by the subsequent purchasers of the land and if the buyer resells to several purchasers, each of the purchasers is entitled to sue on the covenant in respect of his part. The learned Judge only observed that the plaintiff may not be entitled to a charge over the property, as claimed. In my view, the ratio of the said decision cannot in any way be considered to help or come to the rescue, of the appellant in this case.
15. In Tellicherry Pichi Naidu v. C. Jefferson 41 M.L.J. 94 : A.I.R. 1921 Mad. 541, a Division Bench of this Court had occasion to highlight the position as to what constituted a rule against perpetuity, engrafted in Section 14 of the Act. It was held by the learned Judges of the Division Bench that Section 14 of the Act enacted the well known rule that no interest in property can be created to take effect after the lifetime of one of more persons living at the time of such trans for and the minority of some persons, who shall be in existence at the expiration of that period and a mere covenant in a lease deed to renew the lease at the option of the lessess did not stand violated for contravening the rule against perpetuity.
16. In Ali Hossain v. Rajkumar Haldar : AIR1943Cal417 , a Full Bench of the Calcutta High Court had occasion to deal with scope of operation and applicability of the rule against perpetuity and, it was pointed out that perpetuity is a future limitation whether executory or by way of remainder, and of either real or personal property, which is not to vest until after the expiration of, or will not necessarily vest within the period fixed and prescribed by law for the creation of future estates and interests. It was thus considered to be a branch of the Law of Property and its true object being to restrain the creation of future conditional interest in property and therefore, the rule against perpetuity is not really the one concerned with contracts as such or with the contractual rights and obligations, as such, and therefore, a contract to pay money to a person, his heirs of legal representatives upon a future contingency, which may happen beyond a life time or lives in being, would, therefore, be perfectly valid. The rule of perpetuity was held to concern with rights of property only and not affecting the making of contracts, which do not create rights of property. Similarly, the rule against perpetuity was held not to apply to personal contracts, even though such contracts may have reference to lands. On that view, a covenant for pre-emption in respect of land unrestricted in point of time and expressed to be binding on the parties, their heirs and successors did not create interest in land and did not, therefore, offend the rule against perpetuities.
17. In K. Appu v. Mari : AIR1965Ker27 , a learned single Judge of the Kerala High Court, while dealing with the scope and applicability of the principle envisaged under Section 14 of the Act, held as follows:
The second point is whether the doctrine of perpetuity will render the reservation invalid. Section 14 of the Transfer of Property Act can only come into play when there is a transfer of a interest in property. The creation of a charge is not a transfer of an interest in property. The creation of a charge is not a transfer of an interest in property. In Raja Rajeswari Dorai v. Sundara Pandiyasami Thevar 49 I.C. 704 : A.I.R. 1918 P.C. 156, it was held that the creation of an annuity in perpetuity with a charge on property would not offend Section 14 of the Transfer of Property Act as there is no transfer of any interest in immovable; property. There, the suit was to enforce a covenant to pay an annuity in perpetuity as a Charge on property. Their Lordships held that since there was no transfer of any interest in immovable property, Section 14 of the Transfer of Property Act has no application. In Bhupathi Bhusan Tribedi v. Birendra Mohan Singha I.L.R. (1948) Cal. 492, it was held:
But as the parties intended to create a liability in perpetuity not capable of being redeemed at any time, the agreement amounted to a perpetual charge and not a mortgage, as no transfer of an interest in property was involved, and would bind a subsequent transferee for value with notice or a volunteer with or without notice.... The test to determine whether the rule against perpetuity as embodied in Section 14 of the Transfer of Property Act applies of not, is whether the covenant creates or seeks to transfer an interest in land. What the rule applies to is right to property or any future limitation of such right and where, as in the present case, the covenant does not seek to create or limit any such right, the rule has no application.
To the same effect is the decision in Matlub Hasan v. Mt. Kalawati : AIR1933All934 . That is a decision by a Bench of which Sulaiman, C.J. was a party. He said:
When the intention of the parties is to create a liability in perpetuity not capable of being redeemed absolutely at any time, the transaction cannot possibly be a mortgage. An agreement to pay maintenance allowance to a person and to continue to pay to his descendants from generation to generation, making it a charge over property, creates a charge and not a mortgage. The rule against perpetuity would not apply to a charge of this kind which does not amount to a transfer of interest within the meaning of Sees. 13 and 14.
In substance, Mathew, J., as the learned Judge then was, held that a charge on the property created does not operate as a transfer of an interest or light in immovable property and therefore, will not be hit by the rule against perpetuity incorporated in Section 14 of the Act.
18. In Ram Baran v. Ram Mohit : [1967]1SCR293 , while dealing with the scope of Section 14 of the Act, it was held as hereunder:
Reading Section 14 along with Section 54 of the Transfer of Property Act, it is manifest that a mere contract for sale of immovable property does not create any interest in the immovable property, and it, therefore, follows that the rule of perpetuity cannot be applied to a covenant of pre-emption even though there is no time limit within which the option has to be exercised. It is true that the second paragraph of Section 40 of the Transfer of Property Act makes a substantial departure from the English law, for an obligation under a contract which creates no interest in land but which concerns land is made enforceable against as assignee of the land, who takes from the promisor either gratuitously or takes for value but with notice. A contract of the nature does not stand on the same footing as a mere personal contract, for, it can be enforced against an assignee with notice. There is a superficial kind of resemblance between the personal obligation created by the contract of sale described under Section 40 of the Act which arises out of the contract and annexed to the ownership of immovable property, but not amounting to an interest therein or easement thereon and the equitable interest of the person purchasing under the English Law, in that both these rights are liable to be defeated by a purchaser for value without notice. But the analogy cannot be carried further and the rule against perpetuity which applies to equitable estates in English Law cannot be applied to a covenant of pre-emption because Section 40 of the statute does not make the covenant enforceable against the assignee on the fooling that it creates an interest in the land.
We are accordingly of the opinion that the covenant for pre-emption in this case docs not offend the rule against perpetuities and cannot be considered to be void in law.
As a matter of fact, in the aforesaid decision, their Lordships of the Supreme Court have specifically approved the decision of the Calcutta High Court in All Hossain's case : AIR1943Cal417 and also another decision of this Court in Chinna Munuswamy Nayudu v. Sagalaguna Nayudu I.L.R. 49 Mad. 387 : A.I.R. 1926 Mad. 699.
19. It now becomes relevant and necessary to consider the claim of the appellant in the present appeal based on the substantial question of law formulated, as to whether the clause providing for indemnity as against the A schedule property can be said to be hit by the rule of perpetuity. As pointed out in more than one direction, referred to above, the creation of a charge to secure a claim in or over an immovable property, cannot be said to constitute or involve any a transfer of right or interest in immovable property or creation of such interest, as was contemplated under Section 14 of the Act and that too in the prohibited manner or form so as to constitute a violation of the rule against perpetuity on account of the charge operating beyond the life time of one or more persons living at the time of execution of the document. As noticed earlier, as far as the facts and circumstances of the case now under consideration in this appeal are concerned, the person, in whose favour such undertaking or indemnity was created, is the very plaintiff and the same was under the very sale deed in order to create a change and more effectively protect the absolute title conveyed thereunder and the Court below therefore were right in decreeing the suit as prayed for over-ruling the objections of the appellant.
20. Consequently, no exception rfould be taken to the judgments and decrees of both the courts below, as in, my view, they do not suffer from any patent error of law warranting interference by this Court in second appeal. The second appeal, therefore, fails the same is, accordingly dismissed. No costs.