9911796707
TMI Blog1949 (5) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... be due to the mortgagee, the properties in suit were sold on 7th January 1937 to the then manager of the family, Balasubramania Ayyar, in full discharge of the debts. Two days later, on 9th January 1937, two further documents were brought into existence between the parties. One of them was a lease-deed executed by Balasubramania as lessor and appellant 1 (hereinafter referred to as the appellant ) as lessee on behalf of their respective families. The document recited that the property had been sold to the lessor and taken on lease by the lessee from this day up to 30th April 1943 and provided, inter alia, that the lessee shall pay therefore the net lease amount, after deducting all expenses which he has promised to pay to the said lessor, in cash in seven installments, viz. ₹ 700 by 30th September 1937, ₹ 1,450 by 30th April 1938, ₹ 1,450 by 30th April 1939, ₹ 1,450 by 30th April 1940, ₹ 1,450 by 30th April 1941, ₹ 1,450 by 30th April 1942, and ₹ 1,450 by 30th April 1943-shall pay the lease amounts stated above by the respective due dates....should the said lessee be in arrears of cash lease amount in respect of any instalment witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Cl. 3 infra, this agreement shall be in force only up to 30th April 1943, Time is the essence of this agreement. 3. Should the said party No, 2 without making payment of the amount in full, be in arrears In respect of any instalment, out of the seven installments of the lease amounts payable in each year on 30th April of the respective year and of the lease amount alone payable by 30th September 1937 on the succeeding due date, i.e., by 30th April 1938, or, should, he be in arrears without wholly paying the Sircar kist, etc. pertaining to the lands covered by the lease, which he himself has promised to pay for the lease period, i.e. from fasli 1345 (1935-36) to fasli 1352 (1942-43) as mentioned in the lease deed, this sale agreement shall stand cancelled forthwith without reference to the subsequent due dates and furthermore, the aforesaid party No. 2 shall forfeit all the rights and reliefs belonging to the said party No. 2 tinder this agreement. Subject to the aforesaid condition alone we have entered into this agreement of sale, with mutual consent. 5. There was a partition in 1938 between Balasubramania and his brother Rangaswami at which the properties in suit wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the suit) was paid on the due date, the belated payment in each case was accepted by the lessor as a proper payment by waiving the delay and that, therefore, the conditions of the agreement providing for its cancellation in case of default in the punctual payment of any one of the installments did not come into operation. He accordingly held that there was no forfeiture either of the lease or of the agreement and that, as the appellants were prepared to pay the last instalment and tendered the sum of ₹ 31,500 by depositing the same in Court before the date fixed for the payment thereof, they were entitled to a decree for specific performance. On appeal the learned Judges (Leach C.J. and Lakshmana Rao J.) do not appear to have devoted any consideration to the question whether the forfeiture of the lease was waived by the lessor accepting payment of rents for the subsequent years. Proceeding apparently on the finding of the Subordinate Judge that there was such waiver, they held that it did not affect the terms of the agreement to re-convey as the terms of the lease and the terms of the agreement stood apart and that in accepting the rent after the due date the lesso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition as to the punctual payment of the installments of rents, and once the irregular payments were unconditionally accepted as payments there was no longer any default such as could be availed of as a ground for refusing performance of the agreement. I am unable to accept these contentions. 10. On the first point, it is clear, from the (Surrounding circumstances and on the language of the instrument, that the appellant obtained a concession or privilege under the agreement. He was unable to pay off the long outstanding mortgage debts and therefore agreed to sell a portion of the by potheca in discharge of them under the sale-deed of 7th January 1937 which passed the absolute title in the property to the vendee. Two days later, at his request-so the agreement recites-the vendee agreed that he (the appellant) should have a right to repurchase the property on payment of practically the same price at any time before 30th April 1943; that is to say, that the absolute right in the property passed to the vendee should be defeasible at any time during the period of six and odd years by the appellant exercising an option to repurchase. It was, at the same time, made plain that the vend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the following clauses. 12. 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. Such conditions though relating only to payment of money, are not regarded as a penalty and Courts of equity will not afford relief against a forfeiture for their breach. Thus, in Davis v. Thomas, (1830) 1 Russ M. 506: 39 E.R. 195, which was decided on very similar facts, there was a sale of the equity of redemption in a certain estate which was followed by a demise of the estate to the vendor for a term at a certain rent payable half-yearly. That was a collateral agreement whereby the vendor stipulated that he should have the right to repurchase the premises any time within five years at a price slightly in excess of the original price in case he regularly paid the rent by 4th June and 26th October , with a proviso that if default were made in the payment of rent within the stated periods the agreement was to be void. The vendor f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and the conduct of the lessor in relation thereto (as to which the matter may not be free from doubt), I think there can be no doubt as to what happened when the fifth instalment, which was payable before 30th April 1941, was not paid. Rangaswami, to whom the leasehold interest had passed and the appellant had already attorned sent a notice dated 13th September 1941 to the appellant calling attention to his default and definitely stating that the lease had become forfeited and that he was determining the lease through this notice . He added that for the same reason the aforesaid sale agreement has become cancelled . He also demanded payment of the overdue sum of ₹ 1450 with interest and delivery of possession and threatened suit if the demand was not complied with. It will be seen that by this notice Rangaswami unequivocally made his election not only to determine the lease but what is more important for the present case, to cancel and put an end to the agreement. After this, the sixth instalment became due on 30th April 1942 and it was also not paid. So Rangaswami sent another notice to the appellant on 8th May 1942 by which, while making no reference to the agreement w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n whether the lease should be deemed to have been continued by Rangaswami subsequently accepting the payments made in June and July 1942. Though we are not directly concerned with the lease in this appeal, it has been urged before us, as it was urged in the Courts below, that inasmuch as the lease and the agreement are inter-linked by reason of the punctual payment of the installments of rent being made a condition of the appellant's rights under both, a continuance of the lease would result in a revival of the agreement. I have already expressed my view that the lease and the agreement could stand apart without the continuance of the one affecting the termination of the other. But, assuming that they must both stand or fall together, I sea no justification for the view that acceptance by Rangaswami of the payments evidenced by the endorsement of 20th July 1942 had the effect of continuing the lease notwithstanding its previous determination. The Subordinate Judge, without considering the effect of each endorsement of payment, held, generally in regard to all, that the forfeiture incurred had been waived, and the High Court, as already stated, proceeded on that assumption. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such reservation amounted to a waiver of his right to enforce Cl. (3) of the agreement. There is no force in this argument which proceeds on 'a misconception as to what can amount to a waiver. As pointed out by Fry J., as he then was, in Keene v. Biscoe, ( (1878) 8 Ch. D. 201 : (147 L.J. Ch. 644), there must be some conduct inconsistent with the right claimed or asserted before its waiver could be inferred or implied. In that case a creditor agreed not to call in the principal for two years if the interest was punctually paid. On default made on the due date, he demanded payment of the principal sum but subsequently accepted the overdue interest. Holding that the creditor had not thereby waived his right to demand such payment, the learned Judge observed: Where a right has accrued It can be waived, but to amount to waiver there must be something done which IS inconsistent with the continuance of that right. Now, the right here was to immediate payment of 400 and interest, and the receipt of a portion of that sum is in no way inconsistent with that demand. I cannot conclave any case more different from that of receipt of rent after a forfeiture ........The receipt of mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of that covenant. 21. There remains the contention of the respondents that, in any case, inasmuch as ₹ 447 out of the installments of rent due under the lease remained unpaid on 30th April 1943, the last date fixed for payment of the price and calling for a reconveyance, the appellant's claim for specific performance must fail. The appellant's case is that ₹ 2,900, the payment of which is evidenced by the endorsement dated 20th July 1942, represented the fifth and sixth installments of rent due, and ₹ 447 represented the interest payable on overdue installments, and that, as no time-limit was fixed for the payment of such interest either in the lease or in the agreement, the failure to pay it before 30th April 1943 could not affect the appellant's right to claim specific performance. As already noticed, there is nothing in the said endorsement to indicate that the sum of ₹ 447 was due as interest. All that we have in support of the mode of appropriation suggested above is the appellant's statement in the course of his deposition that he had not yet paid or deposited the sum of ₹ 447 due as interest . Apparently on the strength o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same security on 12th March 1929. On 7th January 1937 the sum due under these mortgages was ₹ 31.300, in spite of payments made meanwhile in the sum of ₹ 25,000. A settlement was arrived at between the parties on that date under which the mortgagors sold to the mortgagees 32,17 acres out of the mortgaged property for the above amount. Two days later, an agreement of re-sale in respect of the land was executed between them, and the respondents agreed to sell the lands purchased by them, to the appellants for a price of ₹ 31,500. (After stating the relevant terms of the agreement and of the lease as given in the judgment of Patanjali Sastri J. the judgment proceeds thus): The first instalment of rent was paid in time. Default was committed in respect of the payment of the subsequent installments on the due dates. They were however paid in the following manner: (i) The second instalment due on 30th April 1938 was paid on 13th May 1938 and 1st October 1938 and the payment was endorsed on the lease deed on 25th December 1938 without prejudice to the rights of the lessor on the basis of the sale agreement; (ii) the third instalment due on 30th April 1939 was paid on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a consequence thereof the sale agreement has become cancelled. Demand was made for the payment of ₹ 1,460 together with interest at one per cent, and possession was asked to be delivered of the leased lands. A suit was threatened if the requirements of the notice were not fulfilled. In spite of this notice, the lessee committed default in the payment of the sixth instalment as well. Within a month of this default, another notice was issued by the lessor to the lessee. Alter referring to the previous notice, it proceeds to say that possession has not been re-delivered, arrears of rent have not been paid, and that the lessee is wrongfully occupying the properties even though the lease has been determined. The amount due was demanded within one week from the receipt of the notice and delivery of possession was also asked for. A suit was threatened in case the lessee failed to comply with the requirements of the notice. It was after service of this notice that the amount due on the two installments was paid, partly in June 1942 and partly in July 1942. It appears that on 20th July 1942 accounts were made between the parties and the following endorsement was made on the lease ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the agreement and their right was unaffected by any of the matters referred to in the respondents notice. On 5th March 1943 the appellants filed the suit giving rise to this appeal for the reliefs already stated and with the results above mentioned. 27. The trial Judge decreed specific performance on the finding that the penal provisions of para. 3 of the agreement did not come into effect so as to take away the plaintiffs' right to obtain a reconveyance and that though the payments of installments of rent were not made on the due dates, yet they had been accepted by the lessor without any reservation and this conduct on his part showed that he had agreed to extend the time for making them by waiving the delay. The plaintiffs were directed to deposit a sum of ₹ 2,184 due on the terms of the lease, in Court along with ₹ 31,500, the sale price, and the respondents were ordered to take these amounts on executing the necessary conveyance. The learned Judges of the High Court held that the lessor did not, as he had a right to do, forfeit the lease, but that he made it quite clear that in accepting the payments of rent after the due date be was still insisting on hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions on the basis of which it was conferred were strictly complied with. 30. In Davis v. Thomas, (1830) 39 E.R. 195: (1 Russ. M. 506) the plaintiff, being entitled to the equity of redemption of a certain estate, conveyed the same to Mrs. Twyning, the mortgagee, in consideration of 1,800, made up of the mortgage debt and of an additional sum of money paid to him. The mortgagee demised the estate to the plaintiff for a term of 99 years, determinable on the death of the survivor of him, his wife, and son, at a rent of 105, payable half yearly at Lady day and Michaelmas; and on the lease there was endorsed an agreement signed by the mortgagee, by which it was stipulated that, in case the plaintiff regularly paid the rent due at Lady-day by 4th June, and the rent due at Mischaelmas by 26th October, he should be at liberty to repurchase the premises at the price of 1,850 at any time within five years; but if default were made in the payment of the rent within the stated periods, the agreement was to be void. The plaintiff failed in the payment of his rent at the periods stated but within five years applied to repurchase and at the same time tendered the arrears of rent the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he six months' notice was given or when it-expired, the lessee was not entitled to a renewal of his lease. The learned Judge at p. 250 observed as follows: First of all looking to the scheme of the whole thing, it is apparent that what is granted to the tenant by this covenant is a privilege. He is to be entitled to renew, that is in every sense a privilege. I do not think the cases of Boons v. Eyre, (1777) 1 H. Bl. 273 : (2 R.R. 768) and Stavers v. Curling, (1836) 3 Bing, N.C. 355 : (43 R.R. 682) affect the matter at all. To use the technical language in Boone v. Eyre, (1777) 1 H. Bl. 273 : (2 R.B. 768), this is a matter which goes to the whole consideration. It is obvious the meaning was this: the landlord must have intended by a covenant worded like this to say: 'I shall have the term in which, to see whether you are such a tenant as I shall think it right and expedient to grant a new lease to, and the test I propose in words is this, whether when you come for your new lease, or whether at some time or other you have paid, your rent and performed your covenants. I am not able to see, looking at the scheme of the whole lease, how these can be anything but words of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over his debt. He however stipulated that he would have a right to forfeit the lease as well as the agreement of sale and would have the power to cancel it if the installments were not punctually paid, A double penalty was provided in case the payments were not punctually made. The forfeiture and cancellation clauses secured to the mortgagees the punctual performance of the terms of the lease. After the expiry of the period given to the buyer, the seller had a right to claim specific performance of the agreement of sale if he desired the sale price in preference to the property. The agreement of re-sale is a concluded contract between the parties, which both of them could mutually enforce, subject, of course, to the condition that the seller could not enforce it within the time stipulated. This point was not disputed by the learned counsel for the respondents. He argued that the contract was unilateral up to a stage and bilateral later on. The buyer could enforce the contract at any moment. The seller was given the power to forfeit the lease and to cancel the agreement of sale in case the buyer defaulted in punctual payments of the lease installments. It has further to be observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company sued to enforce the forfeiture. The appellant paid into Court the instalment due and counterclaimed for specific performance. It was held that the condition of forfeiture was in the nature of a penalty from which the appellant was entitled to be relieved on payment of the purchase money due. It was held that the case was entirely within the ruling of the Dagenham Dock case, (1874) 8 Ch. 1022; 43 L.J. Ch. 261). 32. In In re Dagenham (Thames) Dock Co.; Ex parte Hulse, (1874) 8 Ch, 1022 : (43 L.J. Ch. 261), a company incorporated by Act of Parliament for making a dock agreed with a landowner to purchase a piece of land for . 4000, of which . 2000 was to be paid at once, and the remaining . 2000 on a future day named in the agreement, with a provision that if the whole of the 2000 and interest was not paid off by that day, in which respect time was to be of the essence of the contract, the vendors might re-possess the land as of their former estate, without any obligation to repay any part of the purchase-money and it was held that this stipulation was in the nature of a penalty, from which the company was entitled to be relieved on payment of the balance of the purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to contradict the clear fact that the balance of the price had not been paid to the vendor himself, but was to be paid thereafter to his creditors by the date prescribed. In the opinion of their Lordships there Is nothing in S. 31, which merely declares that a limitation upon a condition subsequent is a lawful method of grant, to exclude the right of the Court to give relief to the purchaser who fails to make payment of the price, or part thereof, by the date agreed upon in the contract of sale. Their Lordships are therefore unable to accept the first contention of the appellants. These two cases clearly show that even in cases where the sale price is to be paid in installments and punctual payment of instalment is insisted upon and is made the essence of the contract and in cases of default it is provided that the contract of sale shall stand cancelled, it has been held that the Court can relieve against such a clause. The case of punctual payments of lease instalment cannot be placed on a higher footing than the case of punctual payments of the instalment of the sale price itself. A default in payment of one instalment of lease money involved the buyer, in two serious cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expiration of the said period, yon will claim no right or privilege whatever to this agreement. The plaintiffs did not pay the price on the stipulated date and tendered it after a year and few months after the stipulated time. Sadasiva Ayyar J. held that if the transaction evidenced by the document was not a mortgage, the right to repurchase being an option must be exercised according to the strict terms of the power. The case is clearly distinguishable from the facts of the present case. It was not a case where the seller could enforce specific performance against the buyer. 35. Munshi Lal v. Ahmad Mirza Beg, 8 Luck. 707 : (A.I.R 1933 Oudh 291) was however a case near the present case and the rule laid down in it has greater application to the facts of this case than laid down in Samarapuri Chettiar v. Sudarsanachariar, 42 Mad. 802 : (A.I.R 1919 Mad. 644). It was observed therein that the remedy of forfeiture given to the seller was in the nature of a liability imposed on the defendants as a punishment for their committing a breach of the agreement. In order to constitute a penalty, all that is necessary to establish is that there is an element of punishment in it, however ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of rent were treated as good payments under the lease, and condoned the default, Cl. 3 of that agreement in the event could not furnish a defence to the respondent to resist a claim of specific performance. The High Court affirmed the decision of the trial Judge on the question of waiver. This finding was not challenged in the first instance before us by the learned counsel for the appellants but towards the tail end of his arguments he urged that as regards the payments of the fifth and the sixth installments) there was no waiver by acceptance of the overdue instalment. It was conceded that the first four installments having been received the lease subsisted till then because the act of the lessor in receiving those installments put an end to the right of forfeiture. Receipt of rent after the forfeiture has been incurred is an act inconsistent with the continuance of forfeiture; in other words, such a receipt is inconsistent with the termination of the lease. As regards the fifth and the sixth installments, however, all that happened was that the amount already due was received. In the terms of S. 112, therefore, there has been no waiver of this forfeiture. The finding as to waive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to hold that the other penalty for the same act can be enforced by the holder of it. The sting of the default clause primarily bad a fatal effect on the lease, but once it is held that the sting is of no effect, then it is difficult to say that it can fatally affect the agreement, The agreement of re-sale and the lease were substantially parts of one arrangement. The lease was to subsist for six years because that was the outside limit fixed for the enforcement of the agreement. It could never have been intended that the lease would subsist but the sale agreement would stand cancelled. Either both stand cancelled or both have to be considered alive. It cannot be that one is afloat and the other is drowned. Belief against forfeiture is given on payment of the amount due along with full compensation and once that is done, the punctuality of payment of installments no longer remains as the essence of the contract. Any other rule than the one that I propose to apply to this case will work great hardship and injustice. The value of property has gone up considerably. The respondents wish to retain it under cover of the default clause, which clause causes a very small injury to them and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich effected or purported to effect the sale, the transaction could not be regarded as mortgage in view of the proviso to Cl. (c) of S. 58, T.P. Act, introduced by the amending Act of 1929, and the plaintiffs, there, fore, were not competent to lead evidence to show that the three documents taken together amounted to a transaction by way of mortgage. This position, it seems, was not controverted by the plaintiffs when the cage came up in appeal before the High Court, and the point has not been canvassed before us. We are not, therefore, concerned with the question of redemption of any mortgage in the present case; the only question for consideration is whether the plaintiffs are entitled to a decree for specific performance of the agreement for re-sale of the suit property; and, on this point, the Courts below have taken divergent views, the trial Judge being of opinion that the plaintiffs were entitled to a decree, whereas the High Court in appeal has held otherwise. 42. To appreciate the contentions that have been raised before us, it would be necessary to narrate a few material facts. The plaintiffs appellants, who are 7 in number, are members of a joint Hindu family and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and between the lessor and the lessee, by which it was agreed that the lessee would purchase the property in suit from the lessor on payment of a sum of ₹ 31,500 which could be paid any time between then and 30th April 1943, and the stipulation as to time would be of the essence of the agreement. Clause 3 of this agreement which is material for our present purpose, runs as follows: Should the said party No. 2 (the lessee) without making payment of the amount in full, be in arrears in respect of any instalment, out of the seven installments of the lease amounts payable in each year on 30th April of the respective year and of the lease amount atone payable by 30th September 1937 on the succeeding due date, that 13 by 30th April 1938.....this sale agreement shall stand cancelled forthwith without reference to the subsequent due dates and further more, the aforesaid party No. 2 shall forfeit all the rights and reliefs belonging to the said party No. 2 under this agreement. It is to enforce specifically this contract of sale that the present suit was brought. Though Balsubramania alone figured as the ostensible purchaser in the sale deed, it is not disputed that he acquire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, The two payments mentioned above, though made out of date, were, however, accepted by the lessor, and on 26th December 1938 the endorsement (D-4e) on the back of the lease, in token of this payment expressly stated that the lessee paid these amounts without prejudice to the rights of the lessor to cancel the agreement in case of default of any future instalment. The Subordinate Judge held, therefore, that the delay in payment of the second instalment was expressly waived by the lessor. 45. The third instalment which was due on 30th April 1939 was actually paid on 12th of December 1939 and accepted by the lessor. This is evidenced by the endorsement (Ex. D.4d) and it is to be noted that Rangaswami, to whom this property was allotted on partition, did not, after this default, serve any notice upon the plaintiff's complaining of nonpayment of this instalment. The fourth instalment, which had to be paid before 30th of April 1940, was not paid till 2nd December in that year. On 19th August 1940 Rangaswami Ayyar gave a notice (Ex. P-3) to the plaintiffs stating inter alia that by reason of non-payment of the instalment both the lease and the agreement for sale stood cancelled. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for non-payment was waived, it would amount to acceptance of payments under the terms of the agreement also, unless an intention to the contrary was expressed by the lessor when he accepted these payments. According to the learned Subordinate Judge the endorsement did not show that these payments were accepted subject to any reservation of the rights of the lessor under the agreement of sale. Even taking these payments in relation to the agreement for sale merely, the Subordinate Judge held that under S. 63, Indian Contract Act, it was open to the promisee to dispense with or remit the performance of a contract either in whole or in part or to extend time for its performance. The circumstances of this case indicated that the time for making these payments was extended by the lessor. The result was that the plaintiffs' claim for specific performance of the contract was allowed and they were directed to pay the sum of ₹ 1450/- due under the seventh instalment and also certain other sums of money as interest and revenue kists. 46. Against this decision, the defendants took an appeal to the Madras High Court and the appeal was beard by a Division Bench consisting of Lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il the vendors fail to purchase the property in terms of the agreement. It was a bilateral agreement creating rights and liabilities on both sides and was not a mere offer which the defendants' predecessor agreed to keep open for a certain length of time. The fact that a period of 6 years and odd was given to complete the purchase is really immaterial. The stipulation as to time might be and was, in fact, the essence of the agreement but such covenants occur in ordinary contracts of sale and do not by any means affect the nature of the transaction. I am unable to hold on the facts of this case that the plaintiffs got anything in the nature of an indulgence by reason of this contract. Apparently the defendants' side wanted money and not property. They had already got more than ₹ 25,000 upon a loan of ₹ 25,000 only and for the further sum of ₹ 31,300 which was the exact amount due in January 1937, the conveyance was executed. The conveyance was taken obviously because the mortgagors were not in a position at that time to pay the entire mortgage money in cash. It was not, however, against the interest of the mortgagee purchaser to let the debtors have their p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they were quite extraneous and collateral to the transaction of purchase and sale and the only object was that the threat of losing all benefits under the agreement might keep the lessee perpetually alert and alive to his duty of paying the installments of rent with punctilious regularity. The rest of the document is not material for our present purpose. 51. Now, it has been found by both the Courts below that there was, in fact, a failure on the part of the plaintiffs to pay five out of the seven installments in proper time. It has also been found by both the Courts that all these payments though made subsequent to due dates, were accepted by the lessor. The question is what is the legal effect of the acceptance of these overdue payments? Can the lessee be said to be in arrears in regard to these installments within the meaning of Cl. 3 of the agreement and as a result thereof to have lost all his rights under the same? 52. The Division Bench of the High Court answered this question against the plaintiffs, relying on a decision of Kay J. in Bastin v. Bidwell, (1881) 18 Ch. D. 238 : (44 L.T. 742), where the learned Judge relied, amongst others, on an earlier pronouncement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53. The observation of Mellish L.J. in Finch v. Underwood, (1876) 2 Ch. D. 310 : (45 L.J. Ch. 622), does not carry the matter any further. In this case also there was a contract for renewal by the landlord conditional on the performance of certain covenants by the lessee, one of which was that the interior of the premises should be kept in repairs. One of the tenants had become a bankrupt and the other tenant applied for renewal of the lease. Admittedly there was want of repairs in terms of the covenant at the date when the new lease applied for. It was held that the tenant was not entitled to renewal; flatly because, the condition precedent to the renewal of the lease was not fulfilled and secondly because, the agreement being to grant a lease to two persons jointly, the landlord could not be called upon to grant lease to one of them. It appears that in this case there was a clause in the lease entitling the lessor to exercise his right of re-entry if there was a failure on the part of the tenants to pay rent or if either or both of them became bankrupts. One of the tenants, as said above did become a bankrupt and in spite of this the landlord went on accepting rents from the ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion: (1) Whether on the facts of this case the acceptance of the overdue installments of rent by the lessor amounted to waiver of the forfeiture of the rights of the plaintiffs under the provision of clause 3 of the agreement of sale ? And (2) Even if there was no waiver of forfeiture by the predecessor of the defendants, could the plaintiffs claim relief against such forfeiture under any principle of law or equity ? 54. So far as the first point is concerned, it cannot be disputed that the conditions laid down in Cl. 3 of the agreement were exclusively for the benefit of the first party and it was for that party to choose whether the agreement should be avoided or not when there was default by the other side in the performance of the covenants contained in that clause. It cannot be and has not been argued that the agreement automatically stood cancelled as soon as there was default in the payment of any of the installments of rent by the plaintiffs. It was certainly open to Balsubramania or Rangaswami Ayyar to remit the payment of all or any of these installments or to extend the time for payment of the same, and there was nothing in law which prevented the first party from wai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instalment had already expired, it was stated in this notice that the addressee had forfeited all his rights both in the lease as well as in the sale agreement. After this, a part of the second instalment was paid on 13th May 1938 and the balance on 18th October following. Acceptance of these amounts, which were due prior to the date of forfeiture, may not amount to waiver. But the endorsement of payment (EX. D-4e) made on 25th December 1938 expressly stated that the amounts were paid subject to and without prejudice to the rights of the lessor to cancel the agreement on account of default in the payment of any instalment in future. Forfeiture for default in the payment of the first and the second installments was thus expressly waived by the defendants' predecessor. The third instalment fell due on 30th April 1939 and it was paid on 12th December 1939. This payment was accepted and Rangaswami Ayyar, to whom the property was allotted, did neither serve any notice nor perform any other overt act expressing his intention to avoid the agreement by reason of non-payment of the third instalment within the due date. The delay in payment of the third instalment was thus condoned by R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tices (Ex. P-3 and Ex. P-4) were issued, the acceptance of that amount after the defendants' predecessor elected to forfeit the agreement for sale, would certainly amount to waiver in law, The subsequent notice (Ex. P-6) given by Balsubramania after the death of Rangaswami Ayyar cannot revive the forfeiture which was already waived. I think, therefore, that on the facts of this case, as have been found by the Courts below, it must be held that there was waiver of the defaults in the payments of the lease installments as contemplated by Cl. 3 of the agreement by acceptance of these installments after the due dates. 57. For similar reasons, I think that there was no forfeiture of the lease in the present case, and the concurrent findings on this point by both the Courts below are perfectly right, As the trial Judge has correctly pointed out, there was no forfeiture exercised by the lessor in connection with the sixth instalment and the last notice (EX. P-5) does not refer to this instalment at all. After the right of forfeiture was exercised on the basis of non-payment of the fifth instalment, the sixth instalment was accepted and this would constitute waiver of forfeiture acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and is designed merely as a thing in terrorem in order to insure due payment of money, there is clear equity in relieving the party against the breach of such stipulation provided the other party is adequately compensated for the lose he has sustained. As Story observes in his well-known work on Equity Jurisprudence: In reason, in conscience, in natural equtiy, there is no ground to say because a man has stipulated for a penalty in case of his omission to do a particular act (the real object of the parties being the performance of the act), that if he omits to do the act, he shall suffer an enormous loss wholly disproportionate to the enjury to the other party. If it be said that it is his own folly to have made such a stipulation, it may equally well be said that the folly of one man cannot authorise gross oppression on the other side......There is no more intrinsic sanctity in stipulations by contract than in other solemn acts of parties which are constantly interfered with by Courts of equity upon the broad ground of public policy or the pure principles of natural justice. Where a penalty or forfeiture is designed merely as a security to enforce the principal obligation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was any forfeiture in present case the plaintiffs are entitled to be relieved against it. As I have already stated, the agreement in the present case did not confer a mere privilege upon the plaintiffs which they could avail of only upon payment of money at stated periods but it was a bilateral agreement creating rights and obligations on both sides. The decision in Davis v. Thomas, (1830) 39 E.R. 193 : (1 Russ M. 506), where the facts are very much similar to those of the present case is clearly distinguishable in principle. It was held there that no relief against penalty could be given in cases where only a privilege is created for the benefit of one party. It was conceded that such relief could be given when the agreement aid not create a mere privilege. In the present case, my opinion is that as no privilege or indulgence merely was created in favour of the plaintiffs, there is no reason why the principles of equity Courts which grant relief against penalty should not be applied in the case before us. The terms upon which the decree was given by the trial Judge seem to me to be very fair and proper. The defendants were not only given full interest at the rate of 12 per cent, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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