1. On behalf of the plaintiff appellant in this second appeal Mr. Raghava Rao has addressed to me a long, and learned argument, and after considering all that he has submitted I have come to the conclusion that the second appeal must be dismissed.
2. The plaintiff as landlord sued to eject the defendant, his tenant, on the ground that the rent in respect of the land was not paid by the tenant on or before the 1st April for the fasli, and that, according to the clause in the lease, forfeiture followed. The covenant or condition in the lease is to this effect: the tenant, it is stated, should pay the rent due on or before the 1st March, and if he should make default, pay the same with interest at 12 per cent. per annum on or before the 1st April following; and that if, even then he should make default in the payment of the rent due he was liable to be ejected from the holding even without notice. The argument of Mr. Raghava Rao, the learned vakil for the appellant, was that this period between the 1st March and the 1st April was, what he-terms "days of grace" and his contention was that, if in any lease the landlord gave the tenant any days of grace, then the equitable right the Court has of relieving the tenant against forfeiture is taken away and that in such a case the Court has no power at all to grant any relief against forfeiture. I think it is inaccurate to call the period between the 1st March and the 1st April as days of grace. It is clearly not days of grace for purpose of the payment of the rent because, according to the deed the rent is payable on the 1st March and, though it carries interest at 12 per cent. per annum from that date, it cannot possibly be contended on the true meaning and construction of the deed that the landlord would have no right to maintain a suit for the payment of the rent, although it has fallen due and become payable. The days of grace, strictly so-called, are clearly days before the expiry of which there is no right of action for the party giving the days of grace. I am rather inclined to think that this expression " days of grace" has come to be somewhat loosely used in connexion with this discussion on this matter in the course of some judgments. I may also further point out in this connexion that the expression 'days of grace" seems to be further inappropriate because it would be apt and proper only when the liability which ultimately arises or attaches on the expiry of the days of grace is itself said to arise in some way before the commencement of the days of grace. Obviously in the present case no question of the determination of the tenancy or the liability to eject arises on mere default in the payment of rent on the 1st March. I shall later on refer to the cases that have been cited before me with regard to this matter and I am conscious that in some of these cases, the expression days of grace" has been used; but I believe it was used, as I have already observed, somewhat loosely and merely to indicate that the clause of forfeiture was really not in the way of a penal clause introduced in the contract to operate in terrorem over the contracting party but by consent between the parties as part of the contract itself and with the deliberate object of liability to performance.
3. Now with regard to the argument of the learned vakil for the appellant that, whenever even where the provision in the lease is to the effect that the forfeiture of the lease should result not on the mere nonpayment of any rent on due date but on some subsequent date or on the happening of further conditions, the forfeiture is not capable of being relieved against, I do not see my way to agree to any such contention. As a matter of fact I am aware of and I have come cross very few leases of any kind in which on the mere non-payment of rent on the due date forfeiture follows. In most cases forfeiture is provided to follow only on further default being made, that is, as in some cases where the rent for, say, three or more subsequent months falls into arrears on the rent having fallen due is allowed to remain in arrears for a particular period and so on. I for my part see no peculiarity in the provisions in the deed of lease before me which provides that it is only on default being made for a period of one month after the rent has fallen due and payable that forfeiture should result.
4. The first case that was referred to by Mr. Raghava Rao was that of Narayana Kamti v. Handu Shetty [1902] 12 M.L.J 210. In that case there was no payment by the tenant into Court of the whole of the amount of rent due and the costs of the suit and a claim thereon for being relieved against forfeiture. Apparently the argument in that case was that a forfeiture clause to the effect that the tenancy itself should become determined on the nonpayment of rent, was penal in its nature and intended by the party only to operate in terrorem over the other contracting party and that, therefore, it should not be treated as an ordinary covenant enforceable between the parties. It is to that argument that the learned Judges in that case were adverting when they referred to the provision in the deed that though the rent became payable on the 15th April, it was only when default should continue to be made till December the lease was to be forfeited. They also specifically referred in their judgment to the fact that the tenant in that case had not paid into Court the rent on the nonpayment of which the forfeiture was incurred. That case was undoubtedly the authority for the position that, if in a deed of lease the lease is made determinable not merely on the nonpayment of rent, but on further default being made for a period fixed or indicated therein, the provision is not liable to be regarded as penal and therefore not enforceable. That case is clearly no authority for the position that if the tenant should pay into Court the amount of rent due and also the costs of the suit the Court has no power to relieve defendant against forfeiture.
5. The next case the learned vakil for the appellant cited was that of Narain-Naikan v. Vasudevan Bhatta [1905] 28 Mad. 389; in that case also the claim by the defaulting tenant for being relieved against forfeiture was not advanced on the payment by him into Court of the rent failed to be paid and the costs of the suit. The learned Judges in that case also were only dealing with the argument that a clause of forfeiture was in itself a penal clause and therefore not enforceable, and, as in the previous-case, the Court merely held that though a Court of law might hold that a clause was penal and must be regarded as included in the deed by way of terrorem if the forfeiture was provided to follow merely on the nonpayment of rent on the date fixed, still such consequences would not follow if it is provided that forfeiture should be incurred only if there should be further default for a period fixed after the date on which the rent became due and payable. The learned Judges in that case made the following observation:
We may add that even under Section 114, T. P. Act, the exercise of the discretion to relieve against forteiture may depend upon the circumstance whether the lease allows a period of grace or not and in the former case whether the period of grace is a reasonable period having regard to the nature and terms of the lease.
6. The learned Judges were therein referring obviously to the manner in which and the conditions under which the discretion undoubtedly vested in Court, as a Court of equity, should be exercised.
7. Mr. Raghava Rao also referred to the case of Mahalahshmi Animal v. Lakshmi [1911] 21 M.L.J. 960. In that case no doubt, as pointed out by Mr. Raghava Rao, the two cases already cited are referred to as laying down that, when a period of grace is provided for and payment is not made within that period, forfeiture should not be relieved against. With all respect I am constrained to state that that view of the two cases already discussed by me is incorrect because in my judgment those two cases lay down nothing of the kind. I myself also further observe that in this case also there does not appear to have been any payment by the tenant into Court of the amount of rent due or of any prayer for relief against forfeiture on that ground.
8. The case of Ramakrishna v. Baburayya [1914] 24 I.C. 139 was also referred to by the learned vakil for the appellant. In that ease which was not under the Transfer of Property Act directly it was held by the learned Judges, Sir Arnold White, C.J., and Justice Sankaran Nair that the fact that the tenant sets up a plea of payment which he fails to prove, necessarily, in itself, disentitles him to equitable relief.
9. And further say the question whether a tenant is entitled to relief against forfeiture for non-payment of rent must depend upon the facts of the particular case.
10. I respectfully agree with that proposition and there can be no doubt whatever that whether the Court regards Section 114 as merely codifying the principle of equity applicable to such cases or not, the true principle is to regard a provision for forfeiture of the lease as really penal and to hold that it will be for the Court in each ease to determine, whether, having regard to the circumstances of the case the penal clause such as it may be should be given effect to or not. The determination of the tenancy cannot, ordinarily speaking, be regarded as the usual manner in which the landlord should be compensated for breach of contract by the defendant for payment of rent at the time fixed; for instance, if there should be provision that on the nonpayment of rent, the rent should carry interest at a particular rate, assuming such rate to be reasonable, that would properly be one way of compensating him for the damage caused or the breach committed by the tenant in failing to pay the rent on the fixed date. But the result that the forfeiture of the tenancy itself should follow is generally to be regarded as penal in its nature It seems to me that the equitable provision recognized and embodied in Section 114, T. P. Act, is the one that should be given effect to by Courts of law, in such cases whether or not the cases directly fall under the Transfer of Property Act. And so far as this is concerned there is no difference of opinion between the learned Judge's Seshagiri Ayyar, J., and Napier, J., in Appayya Chetty v. Mahomed Behari [1915] 29 M.L.J. 381. and both the learned Judges agree to the principle itself and have laid down that whether relief against forfeiture should in any particular case be given depends upon the facts of the case.
11. It was also clearly and distinctly held in that case by the learned Judges that Courts in India have power to relieve against forfeiture for non-payment of rent even in cases where a period of grace is allowed for payment by the lease-deed. I see no warrant whatever for the argument strenuously put forward by Mr. Raghava Rao that if the lease-deed should provide for what has been called period or days or grace, the Court has no power whatever to relieve the tenant- against the forfeiture.
12. Undoubtedly it must be conceded that even in such a case and even assuming that such a contention to be correct, it must be that if the Court is not satisfied with the period or days of grace or any other circumstances bearing upon it, the Court might regard it merely as a cover or cloak for concealing what is really in the nature of a penal provision. On the facts of this case also Mr. Raghava Rao advanced long arguments to show that, having regard to the persistent way in which the defendant went on making default fasli after fasli as referred to in the judgment of both the lower Courts, the tenants should be held to have become disentitled to relief. It was said that in this case it was shown satisfactorily that every year the tenant had been making default in the payment of rent and failing to carry out the covenant in the deed and thus the Court should take that into consideration in determining the question whether it should exercise its discretion in favour of the tenant or not. So far as this case is concerned I have no doubt whatever that the materials are insufficient to enable me to decide that the conduct of the defendant has been such as to deprive him of this equitable relief. I have a very shrewd suspicion in this case, and I do not put it at any more than that, that the landlord who had granted a permanent lease to the tenant began to regret it afterwards and has been making endeavours directly and indirectly somehow to see that forfeiture was incurred by the tenant. Otherwise I am unable to appreciate why it should have become necessary during the some years past for the tenants to send the rent which became payable by money orders. The mere fact that they were put to the necessity of going to the post office to send the rent by money order seems to my mind to a very large extent as going to show that payment of rent by the tenant was not made quite easy by the landlord and that the position and the circumstances were such that the landlord would not have been sorry to see the tenants make default in the payment of rent. According to the clause in the lease it is on failure to pay the rent by 1st April, that that forfeiture should ensue.
13. So far as the rent for fasli 1327 is concerned because the suit was instituted in March itself there could have been no forfeiture incurred by the tenant for the nonpayment of the rent for the fasli because the 1st April had not yet arrived and as regards the rent for the previous fasli it is clear, as would be seen from the judgment of the lower appellate Court that there were disputes and differences and legal proceedings between the parties and appeals therefrom in consequence of which there was a delay not only in the payment of rent by the defendant, but, also in the acceptance of the rent by the landlord. After all, if it should be found that the Court has got the power to relieve the tenant against forfeiture, that discretion should be exercised really by the Court of first instance. No doubt the discretion has to be exercised on proper judicial grounds and if the Court of appeal finds that the Court of first instance has exercised that discretion and there is nothing to show that there was anything wrong in principle it should not interfere. No doubt if the appellate Court finds that the discretion was exercised in a capricious and whimsical manner and not on any judicial principle, then it might and should interfere. In this case, as I said both the lower Courts have exercised their discretion in favour of the tenant and even though I should be disposed to agree with Mr. Raghava Rao's contention with regard to the conduct of the defendant, I should still hesitate to interfere with the exercise of discretion by both the lower Courts. In the circumstances I am satisfied that the judgment of the lower appellate Court was right and the appeal fails and is dismissed with costs.
S.A. 1050 of 24.
14. This appeal is also dismissed and the appellant will pay the respondent the out-of-pocket expenses in connexion with this appeal.