046-NLR-NLR-V-41-DE-SILVA-v.-KANAKERATNE.pdf
de Silva v. Kandkeratne.
201
1939
Present: Wijeyewardene J. and Jayetileke A.J.DE SILVA v. KANAKERATNE.
86—D. C. Galle, 35,558.
Sale in execution—Crown lease—Sale of leasehold in execution against lessee—No saleable interest—Right of purchaser to set aside sale—Caveatemptor—Civil Procedure Code, s. 284. ■
Where a person took on lease from the Crown property subject to thecondition that in the event of the sale in execution of the leaseholdinterest against the lessee, the demise shall cease and the property shallreturn to the Crown,—
Held, that the lessee had no saleable interest in the property within themeaning of section 284 of the Civil Procedure Code and that a purchaserof the leasehold interest in execution was entitled to have the sale setaside under the section.
Section 284 of the Civil Procedure Code furnishes a statutory exceptionto the principle of caveat emptor.
N a decree against the defendant, the purchaser-appellant bought at
KJ a sale in execution a Crown lease held by the defendant. The rele-vant clauses of the lease are set out in the judgment. Later the purchaserdiscovered that he bought nothing as there was no saleable interest ofhis judgment-debtor in the land and moved the Court to set aside thesale. The learned District Judge following the judgment in Jayawardenev. Jayawardene held that there was a saleable interest and dismissed theapplication. From this order of dismissal the purchaser appeals.
H. V. Perera, K.C. (with him V. F. Gunaratne), for the purchaser,appellant.—The Privy Council in appeal has reversed the judgment citedby the learned District Judge. The judgment is Jayawardene v. Jaya-wardene This is an application under section 284 of the Civil ProcedureCode. Section 218 mentions the property which could be sold. Clause
of the lease creates a difficulty. A saleable interest is one which thejudgment-creditor can sell, even though it may be claimed by someone elseor may be avoided at the instance of someone; but if the sale is void,there is no saleable interest.
[Jayetilleke A.J.—What about the decision in Wijemanne v.Schokman ? *]
There the question arose between the purchaser and someone else. Itwas not to set aside the sale. The sale does pass rights if it is not setaside and if the alienation is not void. If the grant is made with acondition subsequent, then at the time of sale, there is a “ saleableinterest ”. If the judgment-debtor has any interest it could be sold. Aclause with respect to forfeiture for failure to pay rent on a lease is on adifferent footing. There the forfeiture is due to the non-performance ofthe covenants but here there is a reversion on the happening of a certain
0
* (1936) 39 N. L. R. 135.
3 (1910) 13 N. L. R. 301.
(1939) 14 C. L. W. 13.
202
JAYETILEKE AJT.—de Silva v. Kanakeratne.
event. If the purchaser can show that the judgment-debtor cannot sellhis interests voluntarily, he is entitled to ask the Court to set aside thesale under section 284 of the Civil Procedure Code.
J. E. M. Obeyesekere, for plaintiff, respondent.—Unless the Crown setsthe sale aside, the sale is good. The Crown is in the same position as aprivate party. The purchaser gets the possession of the land after theFiscal’s sale. If the Crown wants to exercise its rights, it should sue thepurchaser and the judgment-debtor to set aside the sale, and declare thelease to be forfeited, otherwise the Crown acts as the judge in its owncase. The correspondence indicate that the purchaser had a preferentialright to the lease. In that case he buys some interest even though itmay be speculative. Though the judgment in Jayawardene v. Jay a-wardene (supra) was reversed by the Privy Council, the reasons given inthe judgment are not questioned.
In Perera v. Perera it was held that in a lease a clause of forfeiturewould not operate automatically to terminate the lease. There must bean order of Court. See Silva v. Dassanayake ’.
The clause in the lease is not a total prohibition. The lessee has aqualified right of sale, which is a saleable interest under section 284.See Sarkar (1928 ed.), vol. II., p. 1508; Durga Sundari Devi v. GovindaChandra Addy‘. “No saleable interest” means no interest. The leaseis only determined as a result of the sale. Saleable means the price whichcould be realized at the sale and does not mean the legal title to sell.Further the rule of caveat emptor would apply.
N. E. Weerasooria, K.C. (with him L. A. Rajapakse and C. R. de Silva)for the substituted defendants, respondents.—These defendants have noobjection to the sale being set aside.
H. V. Perera, K.C., in reply.—Section 284 is applicable to a case likethis. Section 218 permits the decree holder to sell the judgment-debtors’rights. The Court has a general supervision of the sale. If the purchaserfinds that he did not obtain anything, he can move the Court to set asidethe sale. An interest with a proviso against alienation cannot be sold inexecution as held in Diwali v. Apaji Ganesh '. The case Perera v. Perera cited by the Counsel for the plaintiff-respondent, holds that a forfeitureclause for non-payment of rent is intended as security for the due paymentof rent. Where there is no title, caveat emptor will not apply.
Cur. adv. vult.
July 14, 1939. Jayetileke A.J.—
By an indenture of lease bearing No. 155 dated February 23, 1920, theCrown leased to the defendant an allotment of land called Uskekuna-goaakele, containing in extent 11 acres 3 roods and 30 perches inperpetuity subject to the following conditions:— ;
The lessee and his heirs, executors, administrators and permittedassigns shall not sublet, sell, donate, mortgage or otherwisedispose of or deal with his interest in this lease, or any portion
■ (1907) 10 X. L. It. 230 at p. 231.1 (1S»3 10 Cal. 363.
• (JS9V) 3 .V. L. R. 243.‘ (13ii)J3 Btt». 342.
« (1907) 10 X. L. R. 230.
JAYETILEKE A.J.—de Silva v. Kanakeratne.
203
thereof, without the written consent of the"lessor, and everysuch sublease, sale, donation or mortgage without such consentshall be absolutely void.
That if the interest of the lessee or his heirs, executors, administra-tors and permitted assigns be sold in execution of a decree against« him or his aforewritten, then this demise and the privilegeshereby reserved, together with these presents, shall forthwithcease and determine, and the lessor, his agent or agents, maythereupon enter into and upon the said land and premises, or anypart thereof in the name of the whole* and the same have,re-possess, and enjoy as in his former estate, and the said landand premises shall forthwith revert to the. Crown, without anyclaim on the part of the lessee or his aforewritten against thelessor for compensation on account of any improvements orotherwise howsoever.
The plaintiff sued the defendant in this action for the recovery of a sumof Rs. 2,000 and interest due upon a promissory note, and obtainedjudgment. A writ was issued to the Fiscal in pursuance of the decree andthe right, title and interest of the defendant in the lease was seized. Onor about November 4, 1937, the sale took place, and the appellant becamethe purchaser for the sum of Rs. 1,930. The appellant as purchaser paidone-fourth of the purchase price on the day of the sale and the balancethree-fourths on November 27, 1937. On February 26, 1938, he made anapplication to Court that the sale be set aside on the ground that hediscovered that the defendant had no saleable interest in the property.At the inquiry, he produced three letters, X 2, X 3, and X 6 which indi-cated that the Crown took up the position that no title passed to him. TheDistrict Judge dismissed the appellant’s application on the ground thatthe defendant had a saleable interest in the property; and the appeal isfrom that order. The appellant bases his application on section 284 ofthe Civil Procedure Code. The section enables a purchaser to proceedby an application to set aside a sale on the ground that the person whoseproperty purported to be sold had no saleable interest therein. Thefirst point taken on behalf of the appellant was that the expression“saleable interest ” means an interest which is capable of being sold bythe judgment-debtor and not against him. I think this is too narrow aview to take of the meaning of this expression. I agree with the dictumof Straight J. in Munna Singh v. Gajadhar Singh ' that the expressionmust be interpreted in the widest and most general sense, and as meaningin plain terms “ nothing to sell ”. In the course of his judgment,Straight J. said : “ I cannot suppose it was ever intended that a purchaserat an auction sale held under the authority of a Court, who buys a propertyas free from incumbrance, which subsequently turns out to be mortgagedup to its full value, can be said to have purchased what purported to besold him, because it may be argued that he technically acquired thejudgment-debtor’s equity of redemption”.
The alienation prohibited by condition (a) is -restricted to voluntaryalienations and not to necessary alienations. In Wijemanne v. Schokman'
1 J. L. /?. .in. 577.-* 13 N. L. R. 301.
204
JAYETILEKE AJ.—de Silva v. Kanakeratne.
a condition somewhat similar to condition (a) was considered and it washeld that the purchaser of the land at a sale in execution bought it subjectto the condition as to inalienability. It follows from this judgment thatif condition (a) stood alone, it could not be said that there was “ nothingto sell The next point taken on behalf of the appellant was that undercondition (b) the property had to revert to the Crown the moment it wassold in execution, and that therefore it could not be said that the defendanthad a saleable interest within the meaning of section 284. A stipulationis attached to the lease providing for the restitution of the property to theCrown if the interest of the defendant is sold in execution. Is thatstipulation valid in law ? The intention of the Crown in imposing thatstipulation can be gathered from the terms of the indenture. An examina-tion of the terms makes it clear that the Crown granted leases of this natureto persons who were able to clear and plant the land within a certainperiod and to pay the rent reserved in the indenture on the due dates.The object of the stipulation seems to be to prevent the property frompassing into the hands of people who were not approved by the Crown.A stipulation of this nature must be regarded as one which adheres to theland and gives rise, not to a personal action, but to an actio in rem.Sande1 says, “ that there has been considerable controversy on the pointwhether, if the owner on the sale of his property makes a pact that thepurchaser shall not alienate it, such a pact is so far effective as to preventthe dominium from passing if the new owner does alienate the property?The most common view among the Doctors is that it will not have thateffect …. They are chiefly influenced by the rule that it is thenature of such agreements that they do not bind the property but thepersons ”.
“ From the different arguments that have been given on both sides, itappears that the more correct view is held by those who say that thepassing of the dominium can be prevented by a pact, if only the ownerimposes the pact at the time of the transfer of his property or makes acondition at the time of the alienation of the property, and not subse-quently, as by the tradition the right can be acquired by another person
I)
It must be noted that Sande was dealing with a case where there wasmerely an agreement not to alienate. In the present case there is inaddition a provision for the transfer of the dominium if in breach of theagreement there is an alienation. The lease under consideration is onewhich may be termed in longum tempus. It is virtually an alienation.(See Carron v. Fernando3.) The stipulation is, in my opinion, a valid one.The result is, that upon the safe in execution of the defendant’s interestsin the lease, the land reverted to the Crown.
' Mr. Obeyesekere contended that the property cannot revert to theCrown until there is a declaration by Court to that effect. He relied onPerera v. Perera *, in which it was held that a clause of forfeiture in a leasefor non-payment of rent cannot be enforced, except by appropriatejudicial proceedings, in the course of which it would be competent for the
1 Restraints on Alienations, pp. 306, 307, 314.* 35 N. L. R. at p. 358.
3 {1907) 10 X. L. R. 230.
JAYETILEKE A.J.—de Silva v. Kanakeratne.
205
lessee to set up against the lessor all equitable rights to compensation.Wood-Renton J. in the course of his judgment said: —
“ The Court of Equity in England was from an early period accustomedto grant relief against the payment of the whole penalty on money bonds;and the Statutes 4 & 5 Ann. c. 16, ss. 12 and 13; and 8 &9 Will. Ill c. 11conferred a similar jurisdiction on the Courts of law. In the course oftime this equitable jurisdiction was extended to forfeiture clauses fornon-payment of rent. This extension proceeded on the theory that theforfeiture clause—like the penalty in the bond—was only a security forthe recovery of money. The Statute 4 Geo. 2 c. 28 recognized this juris-diction, but limited (section 3) the time within which the lessee in defaultmight claim relief. An attempt was at one time made to extend thejurisdiction in equity to relieve against forfeiture for non-payment of rentto breaches of other conditions in leases, e.g., covenants to insure. Butthis was effectually checked by the decision of Lord Eldon in Hill v.Barclay 1 and cf. Bowser v. Colby r and Barrow v. Isaacs Later on thelegislature interposed, and first the Court of Equity (22 & 23 Viet. c. 35,ss. 4—9) and afterwards Courts of Law (23 & 24 Viet. c. 126) were enabledto grant relief against breaches of covenants to insure if (a) no damage hadresulted from the default, (b) the default was due to accident or mistake,or in any event not to gross negligence on the part of the lessee, and (c)there was an adequate insurance on foot at the time of the application tothe Court ”.
The ratio decidendi of that case is that the forfeiture clause is only asecurity for the recovery of money. That case does not help the .respondent. It shows that a lessee is not entitled to claim relief againstevery forfeiture clause in the lease. To my mind there is no analogybetween that case and the present case. Condition (b) has nothing to dowith the performance by the defendant of his duties as a lessee. Itprovides that on the happening of a certain event, the land shall revert tothe Crown. As soon as the interest of the defendant in the lease-is soldin execution the property reverts to the Crown as a consequence imposed.by condition (b). I am, therefore, of opinion that the penalty takes effectat once and there is no necessity for the Crown to obtain a judgmentdeclaring its rights.
Mr. Obeyesekere also contended that the doctrine of caveat emptorapplies to this case. I cannot see how that doctrine can be applied to anapplication under section 284 of the Civil Procedure Code. That sectionfurnishes a statutory exception to the doctrine of caveat emptor. (SeeRam Kumar v. Ram Gour'.) In my opinion, in view of condition (b) thedefendant had no saleable interest in the property sold. I would thereforeallow the appeal with costs in both Courts against the plaintiff.
Wijeyewardene J.—I agree.
Appeal Allowed.
18-
1 (1811) 18 Ves. 56* (1841) 1 Hare 109.
8 (1891) 1 Q. B. 417.
* I. L. if. 37. Calcutta 67.