ORDER V. Bhargava, J.
1. This is a first appeal arising out of a suit brought by the plaintiff-respondents against the defendant-appellants and certain other defendants who are pro forma respondents, for compensation for breach of a contract. The brief facts of the case are that some of the plaintiff-respondents and predecessor-in-interest of other plaintiff-respondents owned 14 biswas and 11 biswansis share in Mahal Narain Singh village Khetalpur Sahruiya.
They executed a simple mortgage of this property on 9th May 1914 in favour of two persons Bansidhar and Khub Chand, for a sum of Rs. 12,000/-. Subsequently a sale-deed of half or this property which had been mortgaged was executed by the owners (now represented by the plaintiff-respondents) on 9-2-1920, in favour of Shanti Saran, appellant, and three others who are now represented by the remaining appellants.
The consideration for the sale-deed was a sum of Rs. 16,000/-. In the body of the sale-deed it was recited that the consideration had been received by the vendors and the entire amount had been set off in the manner specified below in that sale-deed and that nothing at all out of the consideration remained due from the vendees to the vendors. The specification at the end giving the details of the method of receipt of the consideratiion included one clause with regard to the mortgage of the year 1914, mentioned above.
It was stated that sum of Rs. 13,500/-was left in the hands of the vendees for payment to Bansidhar and others, creditors in respect of the amount including the interest which was due on the mortgage which had been executed on 9-5-1914 and which had been registered on 20-5-1914. Alter the execution of the sale-deed the vendees entered into possession of the property but they did not pay the amount due to the mortgagees in accordance with the terms of the contract.
Since the mortgagees were not paid the amount due to them, they brought a suit for the recovery of the money on the basis of the mortgage which stood in their favour and on 4-2-1937, they obtained a decree for a sum which was a little over Rs. 26,000/-. It was laid down toy the decree that, in execution, the property which had passed to the vendees under the sale-deed of 1920, would be sold first and if any amount still remained due thereafter, then the other half of the property which had continued to remain in the ownership of the vendors would be sold to realise the decretal amount.
Thereafter, the plaintiff-respondents moved an application under the Encumbered Estates Act and, in those proceedings on 22-5-1939, the Special Judge apportioned the liability under the mortgage debt between the vendors or their successors in interest who were landlord applicants and the vendees who were also liable for the mortgage debt as purchasers of half of the mortgaged property.
As a result of this apportionment, the plaintiff-respondents were held to be liable to a sum which was equal to half of Rs. 28.615/3/-. For the remaining half of this sum the present defendant-appellants were held to be liable. In addition, it was laid down that the pl-intiff-respon-dents would be liable to pay interest at 6 per cent per annum from 1-8-1933 to 28-9-1936, and thereafter at 4 1/2 per cent, per annum.
In pursuance of the decree passed on apportionment by the Special Judge against the plaintiff-respondents, proceedings for liquidation of debt were taken by the collector and in those proceedings the plaintiff-respondents were compelled to execute a self-liquidating mortgage of 3/4th of the half share of the property which was owned by them, This self-liquidating mortgage was for a period of 20 years and for a sum of Rs. 20,803/4/3.
The mortgage was executed on 25-2-1943. As a result the plaintiff-respondents had to deliver possession of this share of the property to the mortgagee-decree-holders. Thereupon, this suit was filed by the plaintiil-respondents claiming damages from the defendant-appellants on the ground that they had been deprived of the possession o the property and were being compelled to pay a sum of Rs. 20,803/4/3 as a consequence of the breach of the contract committed by the defendant-respondents in not paying the money to the mortgagees as they had undertaken to do under the sale-deed.
This suit was instituted on 30th July 1943. Among other questions that arose during the trial of the suit, one important question related to limitation. On benalf of the plaintiif-respondents, it was claimed that they had actually suffered loss and injury as a result of the breach of the contract by the defendant-appellants on 25th February 1943 when they were compelled to execute the self-liquidating mortgage and to deliver possession ot the property in the proceedings for liquidation of their debts which had been decreed by the Special Judge in the Encumbered Estates Act proceedings.
On behalf of the defendant-appellants, it was pleaded that the suit was time-barred as the claim of the plaintiff-respondents was a claim for compensation for breach of the contract which was entered into by a registered document so that the period of limitation for the suit was six years form the date on which the breach of the contract had been committed. It was contended that the breach of the contract should be deemed to have been committed in the year 1920 when the defendant-appellants undertook to pay the money to the mortgagees and failed to do so within a reasonable time.
In the alternative it was urged by learned counsel for the appellants before us that in any case the breach of the contract must be deemed to have been committed when the appellants failed to pay in spite of a suit having been instituted for recovery of money under the mortgage by the mortgagees and the mortgagees obtained their decree on 4-2-1937 under which the property of the plaintiff-respondents was declared to be liable to the mortgage-debt.
Lastly, a third alternative was also urged to the effect that the breach of contract was committed in the year 1936, when the plaintiff-respondents instituted the proceedings under the Encumbered Estates Act. It was pleaded that a period of six years for institution of the suit computed for the purpose of Article 116 of the Limitation Act, which would apply to such a suit, from any of the three dates mentioned above would show that the suit was filed beyond time and consequently it ought to have been dismissed, as being barred by limitation.
On behalf of the plaintiff-respondents the suit was sought to be saved from the bar of limitation on two alternative pleas. One plea was that the limitation in a suit of this type was covered by Article 83 read with Article 116 of the Limitation Act, because the contract contained in the sale-deed of which the breach had been committed was a contract of indemnity. In the case of a contract of indemnity under Article 83 of the Limitation Act, the suit could be brought within six years of the date on which the plaintiff-respondents were actually indemnified.
It was contended that, the contract which had been broken by the defendant-appellants was contained in a registered instrument and it being a contract of indemnity, on application of Arts. 83 and 116 of the Limitation Act, the period of limitation should be computed as six years from the date on which the plaintiff-respondents suffered the injury as a result of the breach of the contract and this injury was suffered on 25th February 1943, when the plaintiff-respondents were compelled to execute the self-liquidating mortgage and to deliver "possession of their property.
2. The second ground that was urged was that, even if Article 83 of the Limitation Act did not apply, the period of limitation had to be computed under Article 116 of the Limitation Act, but subject to Section 24 of the Limitation Act, on the ground that there was no cause of action as a result of the breach of the contract until the plaintiff-respondents had actually suffered the damage or loss on 25th February 1943.
On behalf of the plaintiff-respondents, reliance was placed on several cases in support of the proposition that, in a suit of this nature and on the facts mentioned above, the proper Article of the Limitation Act applicable was Article 83. The principal decision relied upon is that reported in Tilak Ram v. Surat Singh, 1938 All LJ 455 : (AIR 1938 All 297) (A), which is a decision of a Full Bench of three Judges of this Court.
Decisions of some other High Courts were also referred to. but it appears to us to be unnecessary to make a reference to them. In our opinion, which we have formed after hear-ing learned counsel for the parties, this decision of the Full Bench needs reconsideration and in the circumstances we think that this point should be referred for opinion to a Bench of five Judges.
3. The alternative plea taken, for bringing the suit within limitation, on behalf of the plaintiffs that, the limitation should be computed under Article 116 of the Limitation Act after applying the provisions of Section 24 of the Limitation Act, is sought to be supported by a decision of a Division Bench of this Court in Kedar Nath v. Hargovind. 1926-24 All LJ 550: (AIR 1926 All 605) (B). We have examined various other cases on this point but have found that the decision of the Division Bench in the case cited above has not been overruled by any subsequent decision.
We are, however, of the opinion that this decision also requires reconsideration. In the circumstances, we consider it appropriate that a question should be framed on tnis point also-and be referred to the same Full Bench to which the first question indicated above is referred for opinion. We may make it clear that, having gone tnrough the decision of the Full Bench in 1938 All LJ 455: (AIR 1938 All 297) (A), and having perused the sale-deed which embodies the contract in question in the present case, we have not been able to find any feature which would distinguish the facts of the two cases, so that the decision of the Full Bench appears to be fully applicable to the facts of the present case and the reference is to be made for the purpose of reconsideration of that decision.
Similarly we have felt that the decision of the Division Bench in 1926-24 All LJ 550: (AIR 1926 All 605) (B), also appears to be fully applicable to the facts of the present case and what is really needed is reconsideration of the case. Consequently we frame the following two questions for a reference to the Full Bench :
1. Whether, on the facts and circumstances. of the case as mentioned in this order earlier, the suit is governed by Article 83 of the Limitation Act, and it so, whether the period for limitation is three years as shown in Article 83 of the Limitation Act, or is six years by virtue of applicability of Article 116 of the Limitation Act and which is the date from which the period of limitation would start running?
2. Whether, on the facts and circumstances of the case as mentioned in this order earlier, the period of limitation is six years under Article 116 of the Limitation Act but this period of limitation of six years is to be computed after applying the provisions of Section 24 of the Limitation Act, and, if. so, from what date this period of limitation would start running?
4. We direct that this case be laid before Hon'ble the Chief Justice for constituting a Full Bench of five Judges for giving their opin-ion on these two questions of law.
ORDER Mootham,C.J.
5. The circumstances in which the reference to this Full Bench has been made can be stated shortly.
6. The first and second respondents and three other persons were the owners of certain land. On 9th May, 1914, they executed a simple mortgage of this property to two persons as security for a loan of Rs. 12,000 and the interest thereon. On 9th February, 1920, the respondents, who had then become the sole owners of the property, sold half of it to Shanti Saran, the first appellant, and three others who are now represented by the remaining appellants.
The consideration for the conveyance was-Rs. 16,000 out of which the sum of Rs. 13,500 was left with the purchasers for payment of the amount due to the mortgagees on account of principal and interest unoer the mortgage 4ated 9th May, 1914. The purchasers entered into possession of the property conveyed to them out neither they nor the appellants made any payment to the mortgagees who in due course Drought a suit against the respondents for the recovery of the amount due to them under the mortgage.
On 4th February, 1937, a final mortgage decree was passed in their favour for a little over Rs. 26,000. Thereafter the respondents made an application under the U. P. Encumbered Estates Act, and by an order dated 22nd May, 1939, the Special Judge apportioned the liability for the mortgage debt between the respondents and the purchasers as owners of half the mortgaged property.
As a result of this apportionment the respondents and the appellants were each held to be liable for the sum of Rs. 14,307-9-6. It was further provided in this order that the respondents would be libale to pay interest at 6 per cent, per annum on the amount due by them from 1st August 1933 to 28th September, 1936, and thereafter at 4 1/2 per cent, per annum.
Proceedings for the liquidation of the debt were then taken by the Collector, and on 30th January, 1943, the Collector directed the execution by the respondents of a self-liquidating mortgage of three-fourths of the half share of the property of which they were the owners. That mortgage which was for the sum of Rs. 20,803-4-3 was executed on 25th February, 1943, and as a result the respondents had to deliver possession of this share of the property to the mortgagees.
The respondents then filed the suit out of which this appeal arises for the recovery of the sum of Rs. 18,500/- and interest as the loss they had sustained owing to the failure of the appellants or of their predecessors-in-interest to discharge the original mortgage of 9th May, 1914. This suit was instituted on 30th July, 1943. The trial Court decreed the suit and the defendants appealed to this Court.
The Bench hearing the appeal was of opinion that the case before it was indistinguishable from that which was considered by a Full Bench of this Court in AIR 1938 All 297 (A) and further that the decision in 1926-24 All LJ 550:(AIR 1926 All 605) (B), was also applicable to the facts of the case. The Bench was however of opinion that both these decisions required further consideration, and it has accordingly referred to this larger Bench the following questions :
''1. Whether, on the facts and circumstances of the case as mentioned in this order earlier, the suit is governed by Article 83 of the Limitation Act, and if so, whether the period for limitation is three years as shown in Article 83 of the Limitation Act, or is six years by virtue of applicability of Article 116 of the Limitation Act and which is the date from which the period of limitation would start running?
2. Whether, on the facts and circumstances of the case as mentioned in this order earlier, the period of limitation is six years under Article 116 of the Limitation Act but this period of limitation of six years is to be computed after applying the provisions of Section 24 of the Limitation Act, and, if so, from what date this period of limitation would start running?
7. We are of opinion that the case of Tilak Ram v. Surat Singh (A), was rightly decided. In that case the plaintiffs owned certain properties which were the subject of a mortgage. Subsequently the property in suit was sold to the defendants, the entire consideration being left with the latter for the specific purpose of paying off a part of the encumbrance that existed on the property sold and certain other property.
The purchasers failed to make the payment and that failure resulted in the whole of the property of the plaintiffs the subject of the mortgage being sold in execution of a decree obtained by one of the mortgagees. The plaintiffs thereupon filed a suit against the defendants for damages on the ground that the loss they had sustained was due to the failure of the defendants to make payment to the mortgagees of the consideration left with them for that purpose.
The conveyance in favour of the defendants specifically stated that the entire consideration for the sale was left with the purchasers for payment by the latter to the mortgagees. The Court held that the conveyance gave rise to an implied contract of indemnity, that the suit was governed by Article 83 read with Article 116 of the Limitation Act and the period of limitation was six years from the time when the plaintiffs were damnified.
8. Learned counsel for the appellants has argued that a provision in a conveyance where-under the purchaser agrees to pay off an in-cumbrancer does not give rise to any contract of indemnity and that the appropriate article of the Limitation Act is accordingly Article 116, time beginning to run from the date when the covenant to pay off the encumbrancer is broken. We think that there is no force in this argument, the question being concluded by the decision of the Privy Council in Mt. Izzat-un-nissa Begam v. Kunwar Pertab Singh, 36 Ind App 203 (PC) (C), which was relied upon by the Full Bench in Tilak Ram's case (A). In the former case their Lordships said :
"On the sale of. property subject to in-cumbrances the vendor gets the price of his interest, whatever it may be, whether the price be settled by private bargain or determined by public competition, together with an indemnity against the incumbrances (encunr (sic) affecting the land. The contract of! indemnity may be express or implied. If the purchaser covenants with the vendor to pay the incumbrances. it is still nothing more than a contract of indemnity."
9. It must be borne in mind that where a conveyance contains a covenant by the purchaser to pay off an encumbrance on the pro-perity sold the lailure of the purchaser to do so may give rise to two distinct causes of action. The iailure of the purcnaser to discnarge the encumorance witnin such time as is provided, expiessly or by implication, in the conveyance entities the vendor to bring an action to nave himseli put in a position to meet the liability which the purchaser has failed to discharge: see Raghubar Rai v. Jai Rai, ILR 34 All 429 (D); Abdul Majeed v. Abdul Rashid. AIR 1936 All 598 (E); Ram Rachhya Singh Thakur v. Raghunath Prasad Misser, ILR 8 Pat 860 : (AIR 1930 Pat 46) (F) ; and, secondly, if as a result of that failure the vendor incurs loss as a consequence of the incumbrancer recovering from the vendor the amount due under the mortgage, then the vendor is entitled to file a suit on the contract of indemnity: see Kumar Nath Bhuttacharjee v. Nobo Kumar Bhuttacharjee, ILR 26 Cal 241 (G); Ratan Bai v. Ghasiram Gangabisan Wani, ILR 55 Bom 565: (AIR 1932 Bom 36) (H); Abdul Qadir v. Mt. Bilas Kuar, AIR 1933 Lah 793 (I); Gulabrao Vithoba v. Shamrao Jagoba, AIR 1948 Nag 401 (J).
In the first of these cases limitation will run under Article 116 of the Limitation Act (or under Article 115 if the sale deed is unregistered) from the date upon which the purchaser ought to have paid off the mortgagee; in the second it will, under Article 83 run from the date upon which the vendor is damnified.
It is in our opinion immaterial in the latter case whether the conveyance contains an express covenant to indemnify for, as their Lordships of the Privy Council pointed out in Izzat-un-nissa Begam's case (C), the purchaser's covenant with the vendor to pay off the incum-brance is a contract of indemnity. If the conveyance is registered the period of limitation is, under Article 83 read with Article 116, six years from the date upon which the vendor is damnified.
10. We are of opinion that in the present case the suit filed by the respondents on 30th July, 1943, is governed by those Articles and that time runs from 25th February, 1943, the date upon which the respondents were compelled to execute a self-liquidating mortgage for the purpose of satisfying the claim of the mort gagees. In the circumstances the second ques tion does not arise and it is unnecessary for us to express any opinion upon it; nor do we feel called upon to consider the correctness of the decision in 1926-24 All LJ 550: (AIR 1926 All 605) (B), which was decided before Tilak Ram's case (A). The reference is answered accordingly.