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Shanmugam Pillai and others Versus Annalakshmi Ammal and others

1949 (5) TMI 16 - FEDERAL COURT

Civil Appeal No. 43 of 1948 - Dated:- 20-5-1949 - Sir Harilal Kania, C.J., Sir Fazl Ali, Patanjali Sastri, Mehr Chand Mahajan and Mukherjea, JJ. For the Appellant: N. Rajagopala Ayyangar and K.S. Venkataramani with him For the Respondent : R. Raja Aiyar, K.S. Ramamoorthy and K. Vydeeswaran JUDGMENT Sir Harilal Kania, C.J. 1. I have read the judgment prepared by Patanjali Sastri J. and agree with its line of reasoning and conclusion. Fazl Ali J. 2. I concur in the judgment prepared by Patanjali S .....

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of ₹ 31,300 having been found to 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 .....

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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 without making payment of the entire lease amount by the aforesaid due dates, which the said lessee has promised to pay in accordance with the aforesaid due dates, the said lessee shall make good the entire loss caused thereby to the said lessor, out .....

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t of any instalment without making payment of the entire cash rent which he has promised to pay on the due dates referred to above, the said lessor hereby has the right to realise the said arrears of cash rent together with interest at the rate of one per cent, per mensem from the date of default as stated above, by proceeding against the said lessee's own funds, and against him personally. On the same date the parties also executed a registered agreement whereby Balasubramania agreed to con .....

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n a sale" subject to those conditions. Then follow "conditions of agreement of sale" in these terms: 1. Party No. 2 aforesaid agrees to obtain a sale of the undermentioned properties in his name or in the name of others to be specified by him, paying a net amount of ₹ 31,500 as the sale price of the said properties within the period commencing from this day and up to 30th April 1943, the said party No. 2 himself undertaking to bear all the expenses that may have to be incurr .....

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ar 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 sub .....

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ale. Rangaswami having died in October 1942, the suit was filed on 5th March 1943 against his widow and minor daughter, and they are the respondents to this appeal. 6. In the plaint the appellant alleged, inter alia, that the aforesaid three documents, all of which were duly registered, were intended to form part of a single transaction constituting together a mortgage by conditional sale and that it was on that understanding that the three documents were executed by the parties. The appellant a .....

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oned, waived and treated as non-existent." The respondents traversed these allegations in their written statement and pleaded, inter alia, that, in view of S. 58 (c), T.P. Act and S. 92, Evidence Act, the claim to redeem on the footing of a mortgage by conditional Bale was unsustainable, that the sale of 7th January 1937 was an outright and absolute sale of the properties which formed a portion of the by potheca equivalent, in value to the amount due under the previous mortgages and that, a .....

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d evidence to that; effect. This view was not questioned and the claim for redemption was not pressed either in the High Court or before us. 8. The Subordinate Judge, however, found that though none of the installments of rent due under the lease (except the seventh and last which fell due only after the institution 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 .....

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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 .....

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servations of Mellish L.J. in Finch v. Under. wood, (1876) 2 Ch. D. 310 : (45 L.J. Ch. 622). They accordingly allowed the appeal and dismissed the suit. 9. On behalf of the appellant Mr. Rajagopala Ayyangar raised two contentions. Firstly, that the agreement of 9th January was, on a proper construction, an ordinary agreement for sale with mutual rights and obligations and not one reserving an option of repurchase to the appellant, that, therefore, Cl. (3) relating to punctual payment of the inst .....

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ce to the same identical sums, namely, the rents payable under the lease, the acceptance by the lessor, without any reservation, of the overdue installments as duly and properly paid was a complete condonation of the delay in the payments and operated as a waiver of the forfeiture of the lease and the agreement alike. He sought to distinguish Bastin v. Bid-well, (1881) 18 Ch. D. 238 : (44 L.T. 742) and Finch v. Underwood, (1876) 2 Ch. D. 310 : (45 L.J. Ch. 522) by pointing out that the right of .....

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onditionally 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 di .....

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ellant exercising an option to repurchase. It was, at the same time, made plain that the vendee "consented" to this arrangement only "subject to the conditions" mentioned in the instrument; the appellant, too, for his part consenting "to obtain a sale" subject to those conditions. 11. Counsel for the appellant laid stress on the words "party No. 2 agrees to obtain a sale." in Cl. (1) as indicating that the appellant was under an obligation to buy which cou .....

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tation in rejecting it. Clause (2) provides that the agreement was to be in force "only up to 30th April 1943" unless it was cancelled earlier under Cl. (a). There could be no question, therefore, of its being enforced against the appellant specifically or otherwise after that date. It seems equally clear that it could not be enforced against him before that date, for otherwise, the time fixed in Cl. (2) for his benefit would have no meaning. That stipulation was designed to give the a .....

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d exercise at any time before 30th April 1943. The expression used in Cl. (1) "Party No. 2 agrees to obtain a sale"-not, be it noted, "agrees to buy"-is not inconsistent with this view. Those words seem to convey, in the context, no more than the opening paragraph wherein the appellant 'consents to obtain a sale subject to the conditions" mentioned in the instrument. That is to say, Cl. (1) was intended to emphasise the idea that the appellant had secured the privile .....

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lty 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 wit .....

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ving refused to re-convey, a bill was filed claiming specific performance or redemption on the footing that the transaction was a mortgage. The bill was dismissed by the Master of the Rolls (Sir John Leach) and the decision was affirmed on appeal by the Lord Chancellor (Lord Brougham). It was held (to quote the head-note) that though in cases of non-payment of money the Court will relieve against penalty or forfeiture, yet when it is not a question of penalty or forfeiture but a privilege is con .....

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s urged that a strict enforcement of the provisions of Cl. (3) of the agreement would result in great hardship to the appellant as the value of the property in question has since greatly increased. Such considerations, however, can have no place in adjudging the legal rights of parties. As Viscount Finlay truly observed in Maclaine v. Gatty, 1921 1 A.C. 376 at p. 390 : (90 L.J.V.C. 73)- It is much better that these rights should be enforced, even although there is hardship in the individual case .....

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provision means only that the agreement is voidable at the election of the party agreeing to resell. Leaving aside the defaults in the payment of the first four installments 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 attor .....

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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 which had already been "cancelled" and put an end to, he demanded the sum of ₹ 1,450 payable .....

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of ₹ 450 on 20th July following. Both these payments were endorsed on the lease-deed in his own hand on the latter date in the following terms: For my having cultivated your lands at Vilampatti from 30th April 1940 onwards, amount paid by me to yon on 3rd June 1942 is ₹ 2,450 and amount paid this day, i.e. 20th July 1942, is ₹ 450. Excluding this amount settled as due by me to you upto 30th April 1942 is Kg. 447. The question is: Did the acceptance of these payments in terms o .....

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ne the lease and the lease had accordingly determined. By the same notice he had also terminated the agreement as he was entitled to do under the terms thereof. Acceptance of payments as rents for the subsequent period from the appellant who was continuing in possession might result in a renewal of the tenancy. But such renewal, even if one was to be presumed in the circumstances, could not, ipso facto or of necessity, revive the appellant's right of repurchase under the agreement which was .....

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e 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 th .....

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t assumption. But I am unable to agree with that conclusion so far as the fifth and sixth installments are concerned. The Subordinate Judge has in my opinion, misconstrued the endorsement of 20th July 1942 and misunderstood its effect. When Rangaswami determined the lease by his notice dated 13th September 1941, a sum of ₹ 1,450 payable for the year ended 80th April 1941 had become due. In the next notice dated 8th May 1942 be claimed that sum as an "arrear of rent" due under the .....

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nd ₹ 447 remained due. It was said that ₹ 2,900 represented the fifth and sixth installments and ₹ 447 the interest on overdue installments. There is nothing, however, to show, that the ₹ 2,900 was paid to the lessor as installments of rent. Rangaswami had claimed the identical sum partly as an arrear of rent and partly as damages, and his acceptance of that sum was perfectly consistent with his claim. The language used in the endorsement appears to have been deliberately .....

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t expression or make any reference to the lease but refers to the "amount paid" for "my having cultivated your lands". It cannot, therefore, be said that the acceptance of ₹ 2,900 in terms of the endorsement amounted to a renewal of the lease. 18. It was argued that Rangaswami was bound, while accepting the payment, to make it clear that he was doing so only for the purpose of the lease and without prejudice to his rights under the agreement and his failure to make such .....

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he 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 t .....

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n any case was due to him by reason of the appellant having cultivated his lands for the two preceding years and which in fact had been demanded by his notice of 8th May 1942. It appears to me to be impossible to construe the transaction of 20th July 1942 as an abandonment of the position which Rangaswami took up in his notice of 13th September 1941, wherein he clearly asserted his legal rights. 19. There was some discussion at the bar as to whether the conditions mentioned in Cl. (3) of the agr .....

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ege or concession. Both in Davis v. Thomas, (1830) 1 Hubs & M. 506 : 39 E.R. 195 and Keene v. Biscoe, (1878) S. Ch. D. 201 : (147 L.J. Ch. G44) referred to supra the conditions related to the payment of money at specified periods and were in their nature similar to the conditions we have here. In the former case, the landlord who had agreed to resell had levied distress for the overdue rents treating the lease as subsisting. In the latter, there was a delay of only three days in the payment .....

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o a demand of the privilege or concession which he had agreed to grant only on due performance 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 wh .....

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e 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 of this statement the Subordinate Judge treated the sum as interest and held that its non-payment was not a breach of the terms of the agreement. The High Court, however, would seem to regard the sum as .....

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of each payment-See Venkatadri Appa, Rao v. Parthasarathi Appa Rao, MANU/PR/0102/1921MANU/PR/0102/1921 : 44 Mad. 570 : 48 I.A. 150 : (A.I.R. 1922 P.C. 233). If SO applied, the sum of ₹ 447 would have to be regarded as representing a portion of the principal sums due for the period ended 30th April 1942. In that view, the appellant, not having paid all the installments of rent due in full, in addition to the ₹ 31,500 before 30th April 1943 as stipulated in the agreement, will not be .....

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an agreement of re-sale. They were held disentitled to redemption by reason of the proviso inserted in S. 58 (c), T.P. Act by the amending act of 1929 but were granted a decree for specific performance by the trial Judge. In appeal this was also refused to them. Hence this appeal to us under our extended jurisdiction. 25. On 18th October 1921, a mortgage transaction in respect of 58-69 acres of agricultural lands was entered into between the parties (or those whom they represent), to secure a lo .....

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e 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 subsequ .....

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pril 1940 was paid on 22nd December 1940; (iv) the fifth and sixth installments due on 30th April 1941 and 30th April 1942 respectively were paid together on 3rd June 1942 and 20th July 1942 to the fullest extent. The seventh instalment was not paid as the suit out of which this appeal arises was instituted before its due date. 26. When the defaults occurred, correspondence started between the parties and the first of these letters is dated 2nd May 1938. This was issued after the appellants bad .....

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are not material were also stated in this letter. It seems that in pursuance of this notice, the second instalment was paid, partly within a few days of its issue and partly in October 1938. No steps were taken by the lessor to forfeit the lease and to enter into possession of the property. The rent due for the subsequent instalment, as already mentioned, was received on 12th December 1939. When the fourth instalment was defaulted, a notice was issued on 19th August 1940 on behalf of the lessor .....

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en made in the payment of the fifth instalment. After repeating the whole history of the previous defaults committed by the lessee the notice proceeds to say that even now the amount due on 30th April 1941 has not been paid, that the lease has become forfeited and has been determined and 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 l .....

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etermined. 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 deed: For my .....

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ands. On 24th December 1942, before the seventh instalment fell due, a notice was again issued by the lessor to the lessee. After recounting the previous history of the dealings between the parties, the notice stated as follows: thereupon, you paid ₹ 2450, on 3rd June 1942 and ₹ 450 on 20th July 1942, that you represented to him that you would forthwith pay ₹ 447 towards the balance 'and subsequent interest and damages, hand over the kist receipts for fasli 1351 and deliver .....

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id, be paying either paddy at the rata of 800 kalams of 54 Madras measures each or cash of ₹ 7,500 being the price thereof at the present market rate by way of damages and that you should also pay the balance amount of ₹ 447 together with the subsequent interest thereon. A note was appended to the notice in the following terms: As according to the registered notices sent to you on 19th August 1940 and 13th September 1941 by the late T.Y. Rangaswami Ayyar Avargal, the sale agreement, .....

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lants 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 .....

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ments of rent after the due date be was still insisting on his right of ignoring the agreement for re-sale, because of the non-fulfillment of the conditions of that agreement. Following the decision in Bastin v. Bidwell, (1881) 18 Ch. D. 238 : (44 L.T. 742), their Lordships allowed the appeal and dismissed the plaintiffs' suit for specific performance. 28. The question for consideration is whether the High Court rightly held that the case stood decided on the rule laid down in Bastin v. Bidw .....

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mp; M 506) and it appositely brings out the distinction between the two sets of cases. In cases of non-payment of money on due dates the Court relieves against penalty or forfeiture; but when it is not a question of a penalty or a forfeiture, but a privilege is conferred upon payment of money at a stated period, the privilege is lost if the money not paid accordingly. If it is held that on 9th January 1937 a privilege was conferred upon payment of money at a stated period on the appellants by th .....

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D. 238 : (44 L.T. 742) will not govern the case. The cases cited on behalf of the appellants all relate to option contracts. In some of them renewal of a lease could be claimed if certain payments were made punctually or if certain acts were done by the lessee. In others an indulgence was promised or a privilege conferred by one party on the other on fulfillment of certain conditions. In these it was held that the privileges could only be availed of if the conditions on the basis of which it wa .....

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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 w .....

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an estate, and two years afterwards baa made ft conveyance of that estate, and then, again, three months subsequently, upon obtaining a lease of the same estate from the purchaser, procures to be endorsed upon that lease, by way of indulgence, a power to repurchase the property on certain terms,- can I reasonably hold, that, because he obtains this power of repurchase, all the different instruments form parts of one conveyance ? And yet, unless I am to hold that, and unless I am to lay it down, .....

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y that the plaintiff comes in due time, or that he has entitled himself by his conduct to the benefit which he now claims. In Bastin v. Bidwell, (1881) 18 Ch. D. 238 : (44 L.T. 742), on which reliance has been placed by the High Court, the lease of a house contained a covenant by the lessee to pay the rent and keep the premises in repair, and to paint the outside and inside at certain fixed periods, the lessor covenanting that the lessee should be entitled, on giving sis months notice before the .....

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he requisite painting and repairs not having been completed either where the 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. 27 .....

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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 condition. Then I look at it grammatically, and I find the words to be these, 'And further, the lessees shall be entitled, on giving six months' notice before the expiration of the term, to have a further lease of twenty-one .....

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six months' notice' are words in which a condition is expressed, why should not upon performing covenants' similarly express a condition ? Grammatically, I think that conduction is one which is a fair construction of this clause. Therefore, upon the whole, looking to the intention of the parties, and looking to the grammatical construction of the clause, I think, construing this, as I quite agree every Court is bound to construe such a provision, with regard to the whole lease and to .....

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n agreement of re-sale under which the mortgagors could demand specific performance of it within a period of six years on payment of a price of ₹ 31,500. ₹ 10 was paid by way of earnest money. For the period during which the re-sale agreement was to be operative the mortgagors were left in possession of the whole property on foot of a lease the period of which was the same as of the agreement itself. The rent due was payable in seven installments. It is not unlikely that the mortgage .....

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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 th .....

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sted in the seller alone. He could waive the cancellation if he so desired. No option of any kind has been conferred by this agreement on the buyer. He is not in a position to say "I will not buy the property and I do not like to enforce it. I thank you for your indulgence but it does not now suit me to avail of it." He cannot commit default and say "the agreement is at an end." It is not a case where any indulgence has been shown to the buyer or a case where a privilege has .....

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arket went down, the seller in spite of default, if he chose, could specifically enforce the agreement. He could do the same even if the buyer informed him that he did not want the privilege. This agreement is one which binds both parties hand and foot with mutual rights. To a contract of this nature the rule of option contracts, like Bastin v. Bidwell, (1881) 18 Ch. D. 238 : (44 L.T. 742) or of privilege cases like Davis v. Thomas, (1890) 39 E.R. 195 : (1 Russ & M. 506) is not applicable at .....

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s at specified dates contained a clause of forfeiture both of the agreement and of all payments of past installments of purchase money in case of default of punctual payment of any one instalment; and time was declared to be of the essence of the agreement. Default having been made, the 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 fr .....

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ing £. 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 th .....

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appellants. It stated that at that date ₹ 29,072 principal with interest and compound interest was due under the mortgage and payable to the mortgagees and that of the purchase price ₹ 29,072 was left in deposit with the purchasers for them to discharge the sum due to the mortgagees. The balance of ₹ 1,928 was paid in cash. The sale deed further stipulated that if the sum due to the mortgagees had not been met by the purchasers by 30th December 1925, and the consideration money .....

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ondents paid the final balance of ₹ 22,131 due to the mortgagees. The Subordinate Judge was at the opinion that time was of the essence of the contract and declared the sale deed null and void. The High Court of Patna allowed the appeal and held that the sale was not a conditional one and that time was not of the essence of the contract. Lord Thankerton, while delivering the judgment of their Lordships of the Privy Council, observed as follows: In the present case the contract of sale and .....

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lf, 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 tw .....

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lf. A default in payment of one instalment of lease money involved the buyer, in two serious consequences, forfeiture of the lease and deprivation of a very valuable right under the sale agreement. The seller is fully safeguarded by the right conferred upon him to recover the full amount due along with interest at one per cent and by his right to enforce specific performance of the agreement if the property fell in value. The penalty provided against the buyer is wholly disproportionate to the i .....

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ext day after the execution of the agreement before any installments fell due the buyer could claim specific performance of the contract of sale, though the right of the seller to claim specific performance was postponed. That fact however does not detract from the binding nature of the contract and of its immediate enforceability. Once it is conceded that the contract of sale was enforceable the moment it was signed, no question can arise that its coming into existence depended on the fulfillme .....

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d. 802 : (A.I.R. 1919 Mad. 644) in which it was held that the right to repurchase was in the nature of an option and must be exercised according to the strict terms of the power. The material terms of the agreement were as follows: If you or any one authorized by you pay up the sale amount to me or my heirs at any time within five years from this day, within 21st October 1913, myself or my heirs shall sell to yon. This agreement will not he valid after the stipulated period. After the expiration .....

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e 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 pu .....

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le agreement of sale regarding property worth ₹ 31.500. It has to be pointed out that the seller is at the same time entitled to recover the full amount of the installments along with quite a good rate of interest. Reference was also made to the decision in Burjorji Shahpurji v. Madhavlal Jesinghbhai 58 Bom. 610 : (A.I.R 1934 Bom. 370). In that case there was a contract for the payment of a larger sum with a concession enabling a smaller Bum to be paid in a particular way in full satisfact .....

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st stipulated for in the bond should be modified to four per cent, so long as interest at the said lower rate was punctually paid. Default having been made in the punctual payment of interest, it was observed that the rights under the bond should be strictly performed. This case is again one governed by the rule relating to option or concession contracts. 36. For the reasons given above I am of the opinion that the High Court was in error when it applied the rule in Bastin v. Bidwell, (1881) 18 .....

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f the sale agreement automatically became unenforceable. If belated payments 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 .....

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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 waiver can, however, be supported on the ground that when accounts were made between the parties in July 1942, and a sum of ₹ 447 was determined to be due, and the payments made in June and July were treated as payments to .....

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ent fell due. If the accounts had been made up to July 1942, the matter might have been different. In my opinion, this account was on the basis that the relationship of lessor and lessee still subsisted and the respondent bad given up the demand for re-entry on the leased premises. The notice issued after July 1942 calling upon the lessee to give up possession also indicates that the previous demand for possession was not regarded seriously. It was only when ₹ 477 were not paid that the de .....

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and the Court was bound to dismiss the suit if the amount due was paid in Court. That being so, it cannot be held that the lease stood automatically forfeited. Once it is held that the lease does not stand automatically forfeited, and the penal clause of forfeiture in the lease is unenforceable in view of the provisions of S. 114, T.P. Act, it is difficult to hold that by virtue of Cl. 8 of the agreement the contract of sale stands cancelled. One act of default in respect of the same amount of m .....

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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 tha .....

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ants. Such a harsh consequence, if possible, has to be avoided if it does not in any way transgress any well-established principles. Such a course is consistent with the rules of equity, justice and good conscience. It must also be observed that the acceptance of overdue payments of monies payable by installments by a creditor amounts to a waiver of a default clause which provides that on non-payment of any instalment the whole amount will become due. When a creditor is entitled to claim the who .....

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de and that of the trial Judge restored. B.K. Mukherjea J. 39. I regret, that it has not been possible for me to accept the view taken by the majority of my learned colleagues. In my opinion, the decision of the High Court is wrong and this appeal should be allowed. 40. The suit out of which this appeal arises was commenced by the present appellants as plaintiffs, for redemption of an alleged mortgage by conditional sale, of the property in suit, the mortgage said to be constituted by three docu .....

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mortgage in law. 41. After the case was opened in the trial Court, it was ruled by the learned Subordinate Judge that as admittedly there were more than one document in the present case and the condition of re transfer was not embodied in the same instrument which 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 compete .....

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e 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 property in suit, comprising an area of 32 .....

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m and in case of default 12 per cent, per annum with yearly rests. On 12th March 1929, appellant 1, as karta of the family, borrowed a further sum of ₹ 5,000 on the security of the said property and executed a second mortgage bond in favour of Balsubramania Ayyar, who was one of the undivided brothers of the mortgagee under the first instrument. Several sums of money were paid from time to time by the mortgagors towards these debts and in the beginning of January 1937 the total amount due .....

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mortgage bonds mentioned above. Two days later, on 9th January 1937, Balsubramania executed a deed of lease (EX. D.4) in respect of the same property in favour of appellant 1 for a term of 6 years and odd months, the lease to expire on 30th April 1943. The total rent payable for this period was stipulated to be paid in seven installments; the first instalment of ₹ 700 being payable before 30th September 1937 and the remaining six yearly installments of ₹ 1,480 each to be paid within .....

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ment 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 o .....

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ser in the sale deed, it is not disputed that he acquired the property on behalf of the family. There was a partition between him and his other brothers and the property in suit together with all rights and liabilities attached to it was allotted to Rangaswami Ayyar, one of the brothers of Balsubramania. Rangaswami died in 1942 and his two daughters, who are his heiresses in law, are the defendants in the present suit. 43. The suit was filed on 5th March 1943, and simultaneously with the filing .....

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nder the lease in terms of Cl. 3 of the agreement of sale, the agreement stood cancelled under the provision of that clause and the plaintiffs lost all their rights under it. This is the point round which the whole controversy between the parties practically centered. 44. The learned trial Judge on a consideration of the facts appearing on the record, held that out of the seven installments of rent payable by the lessee, the first instalment was paid within time as contemplated by Cl. 3 of the a .....

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ober following. Soon after the due date for this instalment expired, Balsubramania gave a notice (EX. P-2) to the first plaintiff on 2nd May 1938 intimating to him that as there was default in the payment of the lease amount within the due date, the agreement of sale stood cancelled, and if the amount was not paid together with interest within one week from the date of the notice, the lease would be cancelled also and the property let oat to others, The two payments mentioned above, though made .....

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39 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 .....

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April 1942, although a notice (Ex. F-4) in terms of the previous notices was sent by Rangaswami to the first plaintiff on 13th September 1941. After 30th April 1942 Rangaswami Ayyar gave another notice (EX. P-6) in which it was stated that as the lessee did not pay the fifth instalment, the lease was determined by the previous notice (EX. F-4) and the lessee was, therefore, in unlawful possession of the property which he should surrender at once and pay the lease amount by way of damages. After .....

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y me to you up to 30th April 1942 is ₹ 447/- (four hundred and forty-seven). The learned Subordinate Judge was of opinion that the two payments aggregating to ₹ 2,900/- fully covered the amounts due under the fifth and the sixth installments and the sum of ₹ 447/- mentioned in the endorsement represented only the interest due on account of the belated payments. It was held by the Subordinate Judge that although all the five installments were paid after the expiry of due dates, .....

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der the lease and the forfeiture incurred 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 sa .....

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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 Leach C.J. and Lakshmana Rao J. The learned Judges while accepting, or rather assuming as correct, the findings of fact arrived at by the trial Judge held differing from the latter that irrespective of the fact that the lessor did not insist on a forfeiture of the le .....

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e Privy Council. Before the records could be transmitted to England, the jurisdiction of this Court was enlarged by Act I [1] of 1948 and the appeal has now come up for hearing before this Court. 48. The only point for our consideration in this appeal is whether the High Court was right in holding that in view of the plaintiffs' failure to fulfil strictly the conditions laid down in Cl. 3 of the agreement mentioned above, the contract stood cancelled and was incapable of being enforced in la .....

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₹ 31.500 exclusive of all expenses which are to be borne by the purchaser, the purchase money to be paid any time between the date of agreement 30th April 1943. In my opinion, this was not a mere privilege or concession given to the plaintiffs which they could avail of on fulfillment of certain terms. The three documents, though in law would not constitute a mortgage, were really parts of one and the same transaction and the agreement seems to be that the vendors would remain in occupation .....

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n 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 & .....

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rest during the period which was allowed to the plaintiffs to complete the purchase. This was the bargain between the parties which apparently was for the benefit of both the sides and in my opinion, it is to be treated as an ordinary contract of sale and not a mere indulgence or privilege given to one side only. 50. The second clause lays down that if the agreement does not stand cancelled under the subsequent Cl. 3, it shall remain in force up till 30th April 1943. The stipulation as to time w .....

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e lease were made payable in certain installments, the dates of which were fixed and it was one of the conditions of the lease that the lessee would forfeit his interest if there was default in the payment of any of these installments within the specified time. The intention of the patties clearly was that the party to whom the property originally belonged would remain in occupation of the same as lessee under the other party on payment of rents within certain fixed dates so long as he was not e .....

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nt for sale 'would also stand cancelled and the plaintiffs will lose all their rights under it. Strictly speaking, the payments required under Cl. 3 of the agreement were not payments in connection with the sale at all; 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 punctilio .....

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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 Mellish L.J. in Finch v. Underwood, (1876) 2 Ch. D. 310 : (45 L.J. Ch. 522). It se .....

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de and inside of the house at stated periods. The lessee applied for renewal by giving 6 months' notice before the end of the term but the lessor refused to grant such a renewal on the ground that the covenants were not fulfilled. The lessee brought a suit for specific performance of the contract and it was dismissed on the ground that the performance of the covenants was a condition precedent to the lessee's privilege of having a renewed lease and the requisite repairs and paintings not .....

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l was given in this case to the lessee which was dependent upon the performance of a condition precedent, and this condition was not performed at all. In the case before us, as said above, the plaintiffs were not given a mere privilege or option of repurchase and the payment of the lease installments was not ft condition precedent to the accrual of the contractual right. The rights under the contract were already in existence and the non-payment of rent was to work forfeiture of existing rights. .....

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ract 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 l .....

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cepting rents from the other tenant without exercising his right of re-entry. Mellish L.J. observed in course of his judgment that from the fact that the landlord waived his right of re-entry which he could exercise by reason of one of the tenants having been adjudged a bankrupt, it did not follow that the condition precedent to the granting of the new lease was also waived. The learned Judges of the Madras High Court seemed to think that these observations of Hellish L.J. fortified the view the .....

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tenant which was a condition precedent to his being entitled to a new lease under the terms of the tenancy and which condition was not fulfilled at all. The learned Judges also overlooked that the landlord in that case by accepting rent from the lessee only waived the forfeiture occasioned by the bankruptcy of one of the tenants and this had nothing to do with the covenant relating to the repairs of the premises which remained unfulfilled at the date when the renewed lease was prayed for. In th .....

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question of the lessee's losing any existing rights an in the present case. The right to have a renewal could accrue when the covenants were fulfilled and admittedly one of the covenants was not fulfilled. It seems to me that the decisions relied upon by the learned Judges of the High Court are of really no assistance to us, and to arrive at a decision in the present case there are two matters which require consideration: (1) Whether on the facts of this case the acceptance of the overdue in .....

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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 install .....

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conclusive on the point. Waiver may be proved by a variety of facts and it 13 not possible to define them exhaustively. On behalf of the respondents it has been argued that there was no waiver of forfeiture of the rights under the agreement in the present case; firstly because the defendants' predecessor even if he accepted payments of these installments as payments under the lease, did not treat them as payments under the agreement at all. In the second place, it is said that the defendants .....

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payments in relation to the contract of sale at all; they had to be made by the second party only in discharge of his obligation as lessee under the first party. If the first party accepted the installments as proper payments under the lease, there in fact would be no arrears of any instalment upon which the forfeiture clause could work. Even conceding, as has been said by the learned Subordinate Judge that it was open to the lessor to say that even if be accepted the payments under the lease, .....

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e for the second 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 wer .....

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or 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 Rangaswami Ayyar. The fourth instalment, which was due on 30th April 1940, was not paid on that date and certainly this non-payment could have been made ground for forfeiture. Rangaswami did serve a notice (Ex. P-3) on 19th August 1940 expressing his intention to cancel both the lease .....

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elled as the third and the fourth installments had not been paid in proper time and the fifth instalment had not been paid at all. No reply was given to this notice by plaintiff 1. On 8th May 1942 another notice was given by Rangaswami Ayyar to plaintiff 1, (EX. P-5), in which it was said that the lease was cancelled already by the notice (EX. P-4) and the lessee was in unlawful possession of the property which he must surrender at once and that he should pay the installments of rent with intere .....

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unt due under the sixth instalment must be taken to have been paid by the plaintiffs partly in June and partly in July 1942 and accepted by the defendants' predecessor. For purposes of keeping alive the agreement for sale, it was immaterial that a sum of ₹ 447 still remained: outstanding as interest, for Cl. 3 of the agreement speaks of installments merely and not of any interest due upon the same. It was also immaterial that in Ex. D-4f the amounts were not specifically described as l .....

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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 exer .....

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idence of plaintiff 1. Too much reliance cannot, in my opinion, be placed upon the wording of the acknowledgment (Ex. D-4f). It is true that it describes the payment as made by plaintiff 1 on account of his having cultivated the lands and does not specifically refer to the lease, It is to be noted that the lease itself nowhere used the word 'rent.' It speaks only of 'installments' which connote payment of certain specified sums of money at specified periods. According to the find .....

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er standpoint. As has been already said, the question whether the lease has been forfeited or not does not concern us materially for our present purpose. If the payments were those which the defendants' predecessor were entitled to receive under the terms of the agreement and they were received by him alter waiving the delay, the agreement cannot possibly stand cancelled. 58. Assuming, however, for the sake of argument that there was no waiver of forfeiture of the agreement for sale, cannot .....

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Scheoning, 49 N.Y. 326. The Courts of equity have always made a distinction between that which is a matter of substance and that which is a matter of form. If the forfeiture clause is in the nature of a penalty 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 .....

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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, it is as much against conscience to allow any party to parvert it to a different and oppressive .....

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ment was the penalty designed to secure the due payment of the installments payable under the lease. In such circumstances, equity will certainly relieve against any literal default and enforce specific performance of the substantive agreement between the parties notwithstanding the failure to keep the dates assigned for a mere collateral purpose, provided no injustice is done to the other side and he suffers no wrong which cannot be compensated properly. The decision of the Judicial Committee i .....

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e of the agreement. Default having been made, the company sued to enforce the forfeiture; the appellant paid into Court the instalment due and counter-claimed for specific performance. It was held by the Judicial Committee that by the law of British Colombia as well as by English law, 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. The case before us is even stronger. Here time was not made the .....

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