Rahmath Unnissa Begum Pltf.-Applt. v. Shimoga Co-Operative Bank, Ltd. & Another Defts.-Resps.

Yasudevamurthy, J.:— The pltf. is the applt. before us. She filed a suit in O.S no. 12/46-47 on the file of the Dist. J., Shimoga, against the Shimoga Co-operative Bank Ltd., as deft. 1 & one A.K Nannesab as deft. 2 Her case was that the plaint schedule house which is situated in Shimoga Town belonged to her, that deft. 2 claiming that they had purchased the same in Ct. auction had sought to take possession from her when as she did not want to involve her-self in further litigation, she entered into an agreement with deft. 1 on or about 7-4-1941 to purchase the property for Rs. 1,400; of this a sum of Rs. 200 was to be paid as part of the purchase money & the balance in monthly installments of Rs. 15, the entire amount being payable by the end of December 1947; that accordingly she had paid a sum of Rs. 200 & had also paid soma installments & that nevertheless deft. 1 had purported to sell the property to deft. 2 for a sum of Rs. 3,300 on 17-7-1945. She, therefore, sought for specific performance of the agreement, or in the alternative for possession of the house or damages. Deft. 1 admitted the agreement but contended that the pltf. had been extremely irregular in the matter of payment of the installments in spite of numerous chances given to her, that the contract had, therefore, come to an end & that they were justified in conveying the property to deft. 2.

2. The learned Dist., J. who tried the case, dismissed the pltf's suit. He held that the agreement & the conduct on the part of deft. 1 Bank showed that time was not meant to be of the essence of the contract, that the pltf. was responsible for the breach of the contract & not deft. 1, that deft. 2 was not a bona fide purchaser for value of the suit property without notice & that the pltf. was not the owner of the property & was not entitled to any relief except to receive back from deft. 1 Rs. 441 which she had paid to deft. 1 in pursuance of the agreement. Hence this appeal. The point whether deft. 2 was a bona fide purchaser for value without notice does not really arise in this case as in the sale deed executed in his favour by deft. 1 the prior agreement in favour of the pltf. is mentioned & deft. 2 has undertaken to take possession of the property himself. The claim that the pltf. is the owner of the property is not also seriously pressed before us, nor is there any evidence therefor.

3. In this case many of the facts are admitted or are conclusively established by the documentary evidence. Deft. 1 purchased the property in Ct. auction & took delivery of the same through Ct. under Ex. II dated 15-5-40. On the same day the pltf. executed in favour of deft 1 a lease deed under which she acknowledged the title of the Bank & agreed to pay monthly rent of Rs. 8 for the property. Later she made an appln. on 22-5-40 to deft. 1 Bank saying that she & her children had no other residence & that the Bank should allow her to retain the house for herself for the amount for which they had purchased the same in the auction. She offered to pay immediately Rs. 200 towards the purchase money & the balance in installments of Rs. 15 p.m After some correspondence this request of hers was accepted by the Bank & on 28-1-41 the Honorary Secretary of the Bank wrote the letter Ex. XV informing her that the Bank had agreed to her proposal subject to the condition that if any one instalment was not paid the house could be otherwise disposed of by the Bank. The pltf. paid Rs. 200 on 7-4-41 & went on paying several installments as is evidenced by Exs. E, to E-21. As the pltf. failed to pay further installments the Bank issued through their lawyer a notice, Ex. XXIX dated 4-5-1944 in which she was called upon to pay the rents that bad accrued & to vacate the house & informing her that if she failed to do so a suit would be filed. The pltf. sent the reply as per Ex. XXX, in which she pointed out that she had not taken the house for rent, that she had been paying the installments of Rs. 15 every month regularly & that she found it difficult to pay the same as she found it heavy. Ex. XXX, does not seem to have been replied to by deft. 1 & on 17-7-45 the Bank executed the sale deed, Ex. XXXV, in favour of deft. 2 for Rs. 3,351-1-6, which has led to the present suit.

4. For the applt. it is contended that the stipulation that if any instalment was not paid, the agreement would stand cancelled was not meant to be acted upon & was really a clause in terrorem; that time viz. the regular payment of the monthly installments was not meant to be the essence of the contract & that both the parties understood that if payment of the entire purchase money was made by 31-12-1947 deft. 1 would convey the property to the pltf. though she might be irregular in the payment of the intermediate installments; that the pltf. has substantially performed the conditions which were binding on her under the agreement, that the Bank was wrong in selling away the property to deft. 2 & in particular without terminating the contract with the pltf. & that the contract is, therefore, still open & subsisting & the pltf. is entitled to obtain specific performance of it.

5. There is no doubt that deft. 1 appears to have been content to receive the instalmpnts as & when they were paid, irregularly by the pltf. & waived the observance of the stipulation regarding their prompt pay cent every month. It is seen from Ex E-19 that only for three months, viz. June, July & August 1941, a sum of Rs. 15 was paid & thereafter the Bank has received at Rs. 10 a month for six months, then sums of Rs. 13, Rs. 3, Rs. 30 during next three months, & at Rs. 13 for six subsequent months, then Rs. 19 & Rs. 7 in May 1943 & January 1914. Even on 4-2-44 & 27-3-44 the Bank has received at Rs. 13 p.m as is evidenced by Bxs. E-20 & E-21 which are the latest receipts. These payments have been received apparently without any protest by the Bank. By this conduct of theirs, it is argued, & we think rightly, for the applt. that the Bank has waived their right to insist upon regular payments & the pltf. was lulled into the belief that she need not pay the installments at Rs. 15 p.m regularly but that if she paid the full sum by the end of December 1947, the Bank would be content & convey the property to her & that they cannot now say that the pltf. has committed a breach of the agreement & that it is no longer enforceable by her.

6. In support of his arguments a case in Kilmer v. British Columbia Orchard Lands, Ltd., 1913 A.C 319 : (82 L.J P.C 77), is relied on strongly by Mr. V. Krishnamurthi, the learned counsel for the applt. In that case the resp. company agreed to sell some lands in British Columbia to the applt. under an agreement which provided that the purchase money was to be paid by specified installments at certain specified dates. Time was declared to be of the essence of the agreement in default of punctual payment at an appointed date, the agreement was to be null & void, all payments already made were to be absolutely forfeited to the vendor, & the vendor was to be at liberty to resell the property immediately. The first instalment was duly paid but the second was not paid on the day fixed for payment & the date was extended by three weeks to 7-7-1910. On 8th July the applt. wrote to the company explaining the circumstances which prevented his paying on the 7th but promising to pay positively on the 12th. On the 9th the company sent him a telegram saying the deal was off & brought the action to enforce their rights according to the strict letter of the agreement. The applt. counter-claimed & asked for specific performance after paying the balance of purchase money into Ct. It was held by the P.C that by the law of British Columbia as well as by English law the condition of forfeiture was in the nature of a penalty from which the applt. was entitled to be relieved on payment of the purchase money & they accordingly decreed specific performance on the counter-claim. In his judgment Lord Macnaghten pointed out

“that in such a case the penalty stipulated in the agreement if enforced according to its letter becomes more & more severe as the agreement approaches completion, & the money liable to confiscation becomes larger.”

7. In that case it will be noticed that even the second instalment was not paid in time but that was not considered sufficient by itself to put an end to the agreement & to disentitle the purchaser to specific performance. In arriving at their conclusion their Lordships were apparently of the opinion “that the stipulation as to time had ceased to be applicable.” This has been pointed out & explained in a later case of the P.C in Steedman v. Drinkle, (1916) 1 A.C 275 A.I.R (2) 1916 P.C 94, at p. 280.

8. In the latter case by an agreement in writing dated 9-12-1909, land in the province of Saskatchewan was to be sold for 16,000, of which 1000 dollar, were paid on signing the agreement & the balance was payable by six annual installments on December 1 of each year. The agreement provided that, if the purchaser should make default in any of the payments the vendor should be at liberty to cancel the agreement & to retain, as liquidated damages, the payments already made, & time was to be considered as of the essence of the agreement. Default having been made in the payment of the first instalment, the vendor cancelled the agreement: and the assignees of the purchaser sued for specific performance. The S.C of Saskatchewan decreed specific performance in addition to relief from forfeiture. On appeal the P.C reversing that judgment held that the parties having made time the essence of the agreement, specific performance could not be decreed as they found that there had been no agreement to extend time nor anything that amounted to waiver of the right to treat time as of the essence in the case before them. Their Lordships pointed out

“that Cts. of Equity which look at the substance as distinguished from the letter of agreements, no doubt exercise an extensive jurisdiction which enables them to decree specific performance in cases where justice requires it, even though literal terms of stipulations as to time have not been observed. But they never exercise this jurisdiction where the parties have expressly intimated in their agreement that it is not to apply by providing that time is to be of the essence of their bargain. If, indeed, the parties having originally so provided, have expressly or by implication waived the provision made, the jurisdiction will again attach.”

9. With these may be compared the case in Stickney v. Keeble No. 1, 1915 A.C 386 : (84 L.J Ch. 259) where by an agreement in writing the applts. agreed to purchase from the resps. certain agricultural lands & received a sum of money by way of deposit; a date was also fixed for the completion of the contract but it was not stated that time was to be of its essence; at the date of the contract the deft. had no legal title to the land & delayed completion of the pltf's. contract in order to perfect their title by obtaining conveyances in their own favour; about 3 months after the expiry of the period fixed for the completion of the contract the pltf. who had repeatedly pressed for completion gave notice to the defts. requiring them to complete it in a fortnight & on their failure to do so brought an action for the return of the deposit. It was held by the House of Lords that there had been unnecessary delay in the completion of the contract for which the defts. were responsible, & that in the circumstances the time limited by the notice was sufficient to cancel the contract.

10. In India the rights & liabilities of parties & the powers of the Ct. in granting specific relief is governed by the Specific Belief Act. But it has always been recognised that as that Act has been founded on English law it is permissible to refer to English law wherever the Act does not deal specifically with any matter; vide Aredeshir Mama v. Flora Sassoon. 52 Bom. 597: (A.I.R (15) 1928 P.C 208). It is a well recognised rule that time is not normally to be considered of the essence in a contract to sell or purchase immoveable property though either party has a general right to have the contract performed within a reasonable time according to the circumstances by giving a notice to the other side; see Jamshed Khodaram v. Burjorji Dhunjibhai, 40 Bom. 289 : (A.I.R (2) 19 5 P.C 83), Dau Alakhram v. Mt. Kulwantni, I.L.R 1950 Nag. 386 : (A.I.R (37) 1950 Nag. 238) and Mahadeo Prasad v. Narain Chandra, 24 C.W.N 330 : (A.I.R (7) 1920 Cal. 651).

11. In the present case there are also certain other important circumstances in favour of the applt. Deft. 1 has by his conduct clearly waived the defaults in the regular payment of installments. In addition to the stipulation regarding installments, there is a further express provision in the agreement that the full purchase money may be paid before the end of December 1947. Deft. 1 did not issue any notice or otherwise intimate the pltf. of their intention to cancel the contract before disposing of the property to deft. 2.

12. Mr. Somasekhara Rao, the learned counsel for resp. 1 relies on a case reported in Shanmugam Pillai v. Annalakshmi Ammal, 1950 S.C.J 1 : (A.I.R (37) 1350 F.O 38). The facts of that case however, are clearly distinguishable from those of the present one. In that case the properties in suit along with others had been mortgaged to the resps. family by the applts who were their owners. For the sum found due on the taking of an account between them the mtgors. sold the properties in suit to one of the family of the mtgeea. Two days later two further documents came to be executed by & between the parties. The first was a lease deed execrated by the purchaser as lessor & applt 1 as a lessee, & the second was a registered agreement whereby the purchaser agreed to reconvey the properties to the applt. on payment by a specified date of the same sum as was the consideration for the earlier sale deed but subject to the condition that if the lessee was in arrears as to the lease amount, the agreement should stand. It was also stated in the agreement that time was the essence of the agreement. The lessee defaulted in the payment of the lease amounts but paid them subsequently & they were accepted by the lessor. But when default was committed in respondent of the fifth installment, the member of the lessor's branch to whom the suit property had in the meanwhile been allotted at a partition, gave notice to the lessee terminating the lease & also declared that the agreement to repurchase had also become cancelled. There was a default in regard to the sixth instalment also & the lessor sent notices demanding payment of the amounts due as damages. The previous notice terminating the lease was also referred to. Sometime later the lessee paid certain sums & made an endorsement on the lease deed of such payment & also stated that a certain amount still remained due. A suit was filed by the lessee prior to the sp cified date for specific performance of the registered agreement. It was held, Mahajan & Mukherjea, JJ. dissenting, that

“the lessee secured the privilege of repurchase only subject to the conditions set forth in the agreement. Such conditions though relating only to payment of money, cannot be regarded as penalty & Cts. will not afford relief against a forfeiture for their breach. As the privilege was conferred upon payment of money at a stated period, it was lost as the money was not paid accordingly. The acceptance of payments alter the notice terminating the lease & intimating the cancellation of the agreement to repurchase could not, in the circumstances of the case, operate in any event as a revival of the agreement.”

13. Their Lordships have pointed out in their judgment that

“it is well-settled that, when a person stipulates for a right in the nature of a concession or privilege on fulfillment of certain conditions, with a proviso that in case of default the stipulation should be void, the right cannot be enforced if the conditions are not fulfilled according to the terms of the contract.”

14. They also refer to the decision in Kilmer v. British Columbia Orchard Lands, 1913 A.C 319 : (82 L.J.P.C 77) & find that decision has no application to the case before them on the ground that it was not a case of a right in the nature of a privilege or concession on fulfillment of specified conditions. They also found that in the case before them the agreement was not kept alive but had been determined expressly by notices.

15. A case on similar facts reported in 51 Mys. H.C.R 388 supports the pltf. In that case also there was an agreement by the deft. to reconvey the property to the pltf. on payment of an agreed sum, & simultaneously a lease deed by which the property was leased to the pltf. The lease deed contained a covenant for forfeiture for non-payment of rent & it was expressly provided in the agreement that on breach of any of the conditions in the lease deed the agreement to reconvey should stand cancelled. Sometime after the arrangement was given effect to, the pltf. defaulted in the payment of rent whereupon the deft. sued the family of the pltf. for ejectment. In that suit the Ct. made an order under S. 114, T.P Act, granting time to pay the arrears of rent & directing that on such payment the suit shall stand dismissed. The pltf. complied with the order & continued in possession paying the rent regularly thereafter. After the expiry of the term of the lease & within the time allowed by the agreement the pltf. tendered the purchase money to the deft. & applied for a deed of reconveyance. On the deft's refusal he filed the suit for specific performance of the agreement to reconvey. The deft. pleaded that the agreement to reconvey stood cancelled as the pltf. had committed a breach of the covenant for payment of rent. It was held that the condition in a lease relating to non-payment of rent was one which can always be relieved by statute & that the parties must be deemed to have entered into the contract with this incident in mind & that the effect of relief against forfeiture for non-payment of rent under S. 114 was as if there was no breach at all & the same had disappeared. It was further held that the quest of in such cases is not whether the lessee has observed & performed the covenants all through the terms of the lease but whether at the time when the specific performance was asked there was an existing right of action & no existing breach of the covenant. This decision appears at first sight to be contrary to the decision in Shanmugam Pillai v. Annalakshmi Ammal, 1950 S.C.J 1 : (A.I.R (37) 1950 P.C 38). But the circumstance that there had been only one breach & its consequence had been wiped out by a decree of Ct. a result which would bind both the parties & there was existing no further breach of the agreement which could disentitle the pltf. from claiming under the agreement distinguish it from the case in Shanmugam Pillai v. Annalakshmi Ammal, 1950 S.C.J 1 : (A.I.R (37) 1950 S.C 38). Moreover, in the present case there was no subsisting lease arrangement between the pltf. & deft. 1 the same having been superseded & given place to the agreement to sell.

16. Mr. Somasekhara Rao also relied on a case reported in Aredeshir Mama v. Flora Sassoon, 52 Bom. 597 : (A.I.R (15) 1928 P.C 208) & contends that the aggrieved party suing for specific performance is required to allege & prove a continuous readiness & willingness from the date of the contract to the time of the hearing to perform the contract on his part. He argues that the pltf. has been most irregular in the payment of installments & has not shown that readiness & willingness which is necessary before she can claim specific performance. There is no doubt that it is an absolutely necessary element in a suit for specific performance that the pltff. must establish that he was “ready & willing” to perform his part of the contract. As we have pointed out above the pltf. has certainly been irregular in payment of the installments but deft. 1 appears to have been content to receive without any protest these later installments & in varying amounts & altogether given the go-by to that portion of the agreement. In fact it appears as if deft. 1 was quite willing to reconvey the property if the full amount of purchase money was paid before 31-12-1947 & attached little or no value to the regular payment of the installments. After the pltf. had committed several defaults in the payment of installments deft. 1 issued through their lawyer a notice Ex. XXIX dated 4-5-44 in which it is significant to note that the agreement was not sought to be put an end to. There is no reliable evidence that the resolutions of the Committee of the Bank passed on 23-1-44 & 23-12-44 putting an end to the contract was ever communicated to the pltf. Even subsequent to 23-1-44 the Bank has admittedly received two payments. The Honorary Secretary of deft. 1 Bank has stated that the resolutions were so communicated, but he does not say that he himself communicated the same, nor has any witness been called or document produced to prove such a communication. Defendant 1 issues notices as per Ex. XXI dated 27-1-42 & Ex. XXIV dated 3-11-42 threatening to put an end to the arrangement & to adjust payments already made by the pltf. towards rents. The pltf. replied to them denying that she had agreed to pay rents & asking for time to pay the overdue installments; and even subsequently installments appear to have been more or leas irregularly paid & received without demur. Even as late as on 17-4-43 the Bank wrote as per Ex. XXVIII clearly admitting that the amounts paid by the pltf. after adjusting towards rents had been “kept in suspense towards the sale consideration of the house.” The result therefore is that the contract was never put an end to by deft. 1 & the pltf. can treat it as still subsisting & seek specific performance of it.

17. The next question that arises is as to what relief is the pltf. entitled. We do not think that this is a case in which the pltf. ought to be granted a decree for specific performance. Under S. 19, Specific Relief Act, it is provided that in any suit for specific performance of a contract, if the Ct. decides that specific performance ought not to be granted but that there was a contract of which the deft. has committed a breach & that some compensation for such breach should be made to the pltf. it shall award him such compensation accordingly. Mr. Somasekhara Rao refers to the case in Aredeshir Mama v. Flora Sassoon, 62 Bom. 597 : A.I.R (15) 1928 P.C 208, & contends that in cases where specific performance cannot be granted damages cannot be recovered for the breach of the contract. In that case the pltf. by his plaint claimed, in accordance with S. 19, Specific Relief Act, specific performance of a contract & compensation in addition to or in substitution of that relief. He subsequently gave notice abandoning his claim for specific performance. It was held that he could not recover damages since relief under S. 19 could be decreed only when the pltf. is ready & willing to perform the contract & it is therefore still subsisting. The P.C pointed out that the pltf. bad by his notice in effect intimated that he was no longer either willing or ready to perform the contract on his part & had not only thereby renounced but as from that moment disentitled himself to a decree for specific performance & had thus brought upon himself the untoward consequence that there was under the statute in the circumstances of the case no power left in the trial Judge to award him in the suit any damages at all. In the present case the pltf. has clearly asked for specific performance as well as damages in the alternative.

18. In 46 Mys. H.C.R 125, which is another case relied on for resps. in this connection & which was a suit for specific performance of a contract of service, damages by way of compensation was not granted. It was held in that case that S. 19, Specific Relief Act, did not apply to cases in which specific performance could not be claimed at all or where specific performance was barred under S. 21 of the Act, & that S. 19 applies only to cases in which specific performance might have been granted though for some reason the Ct. does not think fit to grant such relief in that case. That case, therefore, does not help the resps.

19. Under S. 22, Specific Relief Act, jurisdiction to decree specific performance is discretionary & the Ct. is not bound to grant such relief merely because it is lawful to do so. No doubt such discretion must be exercised judicially & having regard to all the circumstances of the case. In the present case the pltf. has been rather negligent & dilatory. Deft. 1 Bank appears to have been very lenient towards her & given her numerous opportunities for payment which she did not avail herself of. Deft 1 has also sold the property to deft. 2 & we think it would act very oppressively on the defts. if they are now forced to part with the property. We, therefore, hold that this is a case in which we should in our discretion properly refuse specific performance but grant some compensation for the breach of the agreement. As regards the quantum of such damages we have given the matter our careful consideration. The pltf. has been declared by the lower Ct. to be entitled to recover from deft. 1 the sum of Rs. 441 which she has paid towards the purchase money. Deft. 1 has also paid assessments on the property. They have lost the rents & profits of the house & been deprived of the use of the amounts which the pltf. should regularly have paid to them. Taking into account all the circumstances, including the conduct of the parties, we think that in the peculiar circumstances of this case a sum of Rs. 800 may be awarded as compensation to the pltf. This will be in addition to the sum of Rs. 441 which the lower Ct. has allowed her to recover. We direct that deft. 1 do deposit into Ct. the said sums & that the pltf. should vacate & deliver possession of the property to deft. 2 before she is permitted to draw the sum.

20. As regards costs, we think the pltf. is entitled to costs proportionate to her success in both the Cts. & we order accordingly. Ab the suit & appeal have been brought in forma pauperis the court-fee payable to Govt. will be paid by the pltf. & will be a first charge on the amount payable to her under the decree. Resps. 1 & 2 will bear their own costs throughout.

D.H

Order accordingly.