REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICITION
CIVIL APPEAL NO.7471 OF 2003
Raj Kishore (Dead) By Lrs. ...Appellants
Versus
Prem Singh & Ors. ...Respondents
JUDGMENT
T.S. THAKUR, J.
1. This appeal by special appeal arises out of a judgment
and order dated 25th February, 2003, passed by the High
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Court of Madhya Pradesh at Jabalpur, Gwalior Bench,
whereby Second Appeal No.230 of 1995 filed by the
appellants-plaintiffs was allowed but only in part and to the
extent of granting a decree for injunction restraining the
defendants-respondents from interfering with the possession
of the appellants over the suit property till such time the
said property is partitioned between them through the
competent Revenue Court concerned. The facts necessary
for disposal of this appeal may be briefly stated as under:
2. Late Shri Raj Kishore the predecessor-in-interest of the
plaintiffs-appellants herein owned jointly with his brother
defendant-respondent no.2 Shri Jugal Kishore agricultural
land situate in different survey numbers of village Morasa,
Tehsil Kurwai in the State of Madhya Pradesh. In terms of a
sale-deed executed and registered on 6th July, 1974 by Shri
Raj Kishore an extent of 14 bighas and 15 biswas of the land
aforementioned from out of survey nos. 436, 439/1 and 441
was transferred to the defendant-respondent no.1 for a sum
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of Rs.6,000/- only. The plaintiff's case is that the transfer
was only by way of security for the repayment of Rs.6,000/-
which according to the plaintiff was taken only as a loan.
The plaintiff's further case is that return of the loan amount
by the 6th July, 1981 would result in the land in question
being transferred back to the plaintiff to which effect an
agreement was also executed between the parties to the
transaction on the 6th July, 1974 itself. The plaintiff alleged
that the possession of the land in question continued with
him and defendant no.2 as agreed. It was also agreed
between the parties that defendant no.1 shall not get the
disputed land mutated in their name till 6th July, 1981, the
date by which the plaintiff could repay the amount of loan
and secure the return of their land.
3. The plaintiff further alleged that contrary to the
agreement between the parties defendant no.1 got a
mutation regarding the land in question attested in his
favour although he had no right to do so in view of the
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specific stipulation contained in the agreement between the
parties forbidding any such mutation. The plaintiff asserted
that they had approached defendant no.1 several times to
receive back the sum of Rs.6,000/- borrowed from him and
to get the land in question transferred back to them, but the
said defendant had refused to do the needful. The plaintiff
in that backdrop prayed for a decree for declaration to the
effect that the sale-deed executed by him in favour of
defendant no.1 was void and ineffective and that he
continued to be in cultivating possession of the land as
owner thereof.
4. Defendant-respondent no.1 contested the suit by filing
a written statement in which he denied the assertion that
the sale-deed in question was executed by way of security
for repayment of any loan. It was also alleged that the
defendant was in possession of the land in question ever
since the execution of the sale-deed and that a mutation
based on the sale-deed had been attested in his favour.
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Defendant no.1 further alleged that he had made
improvements over the land and that a suit for declaration
simplicitor was not maintainable as the plaintiff was out of
the possession of the land in question.
5. On the pleadings of the parties the Trial Court of Civil
Judge First Class, Kurwai, District Vidisha, framed as many
as eight issues for determination and recorded evidence
adduced by the parties before it. The Trial Court eventually
held that the sale-deed in question was not executed as
security for any loan as alleged by the plaintiff nor was the
execution of agreement dated 6th July, 1974 proved. The
Trial Court further held that defendant no.1 had not forcibly
occupied the land in question during the pendency of the
suit as alleged by the plaintiff.
6. Aggrieved by the dismissal of the suit the plaintiff
appealed to the District Judge, Vidisha, M.P. During the
pendency of the said appeal the plaintiff filed an application
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for permission to amend the plaint to add an alternative
prayer to the effect that in case the sale-deed in favour of
defendant no.1 was held to be validly executed, the plaintiff
be given a decree for specific performance by execution of a
sale-deed for the transfer of the suit property in his favour.
This application was allowed by the Trial Court but in
revision the same was set aside and the amendment
application directed to be considered along with the main
appeal.
7. The First Appellate Court accordingly heard the appeal
and the application for amendment together and by its
judgment and order dated 19th July, 1995 dismissed both.
The First Appellate Court held that the prayer for
amendment of the plaint to seek a decree for the transfer of
the land in question in favour of the plaintiffs-appellant was
time barred and that the amendment would in any case alter
the nature of the suit.
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8. On the merits of the case the First Appellate Court held
that there was no stipulation in the sale-deed that the land
transferred thereby shall be retransferred to the Vendor by
executing a sale-deed in his favour. In so far as agreement
(marked Ex.D1) for retransfer of the land in question to the
plaintiff was concerned, the First Appellate Court held that
while the execution of the agreement was proved there was
no mention in the same about the sale-deed in question
being by way of security for repayment of the loan. The First
Appellate Court observed:
"It is clear from the above analysis that the alleged
sale deed of Ex.D-1 and agreement Ex.P-1 for which
dispute has been raised and evidence adduced is
actually a Sale deed. This Sale deed was not written
for the security of loan. Similarly it is also clear that
agreement of Ex.P-1 was written by the
Defendant No.1 but writing of Sale deed Ex.D-1 for
Security on the basis of this agreement is not proved
and the Appellants/Plaintiffs do not have eligibility of
any relief from Defendant No.1 on the basis of this
agreement. Hence, the judgment and decree passed
by the lower court is not erroneous."
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9. Aggrieved by the judgment aforementioned the
plaintiffs-appellants filed second appeal No.230 of 1995
before the High Court of Madhya Pradesh, Gwalior Bench.
The High Court held that the dismissal of the application for
amendment by the First Appellate Court on the ground that
the prayer sought to be incorporated by the amendment was
barred by limitation was not correct. All the same the
proposed amendment would make no material difference
unless the plaintiff also pleaded that he was ready to
perform his part of the contract so as to entitle him to any
relief based on the agreement executed between the parties.
The dismissal of the application was on that ground upheld.
10. On the merits of the case the High Court took the view
that whenever a sale-deed was accompanied by a document
for re-conveyance of the property sold the transaction
between the parties would amount to a mortgage, subject to
the condition that the mortgagee must get the property re-
conveyed within the period stipulated for that purpose. The
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High Court further held that there was no cogent evidence
on record to prove that defendant no.1 was in possession of
the suit land on the date of the filing of the suit. Even in
Ex.D-2 relied upon by the defendant, the property was
recorded jointly in the names of the plaintiff and defendant
no.2 in the revenue records for the year 1980-81. The High
Court on that basis held that the finding of the Courts below
that the property was not held jointly by the plaintiff and
defendant no.2 was perverse. The appeal was accordingly
allowed in part and defendant no.1 restrained from
interfering with the possession of the plaintiff till such time
he obtained a decree for partition from the revenue court
concerned. The present appeal assails the above judgment
and order of the High Court as noticed earlier. Raj Kishore
the plaintiff in the suit having passed away during the
pendency of this appeal, his legal representatives were
brought on record on 5th November 2008.
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11. We have heard learned counsel for the parties at
length. As seen above, the High Court has, while dealing
with the substantial question of law framed by it for
determination, held that whenever conveyance of any
property is accompanied by a document for re-conveyance
of the same to the seller the transaction would amount to a
mortgage. That proposition of law is not in our opinion
correctly stated. Although the High Court has not elaborated
as to what kind of mortgage an agreement for re-
conveyance would bring about, it is obvious that the High
Court meant to say that the transaction would constitute a
mortgage by conditional sale. Mortgage by conditional sale
is described by Section 58 as under:
"58 (c) Mortgage by conditional sale.-Where, the
mortgagor ostensibly sells the mortgaged property--
on condition that on default of payment of the
mortgage-money on a certain date the sale shall
become absolute, or
on condition that on such payment being made
the sale shall become void, or
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on condition that on such payment being made
the buyer shall transfer the property to the seller,
the transaction is called a mortgage by
conditional sale and the mortgagee a mortgagee by
conditional sale:
Provided that no such transaction shall be
deemed to be a mortgage, unless the condition is
embodied in the document which effects or purports
to effect the sale."
12. A bare reading of the above would show that for a
transaction to constitute mortgage by conditional sale it is
necessary that the condition is embodied in the document
that purports to effect the sale. That requirement is
stipulated by the proviso which admits of no exceptions.
13. The High Court it is manifest from the judgment under
appeal overlooked the proviso according to which the
condition regarding payment of the mortgage money as a
condition for transfer of the property to the seller must be
embodied in the sale-deed itself. That is not so in the instant
case. The sale-deed executed by the plaintiff in the instant
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case does not embody any condition like the one referred to
in clause (c) of Section 58 extracted above. The broad
statement of law made by the High Court to the effect that
every sale accompanied by an agreement for re-conveyance
of the property will constitute a mortgage by conditional sale
is not, therefore, correct. That is also the view taken by this
Court in K. Simrathmull v. Nanjalingiah Gowder AIR
1963 SC 1182 where the plaintiff had borrowed a certain
amount from the defendant and in lieu thereof executed a
deed of conveyance of certain land together with the house
standing thereon in favour of the defendant. Another deed
of re-conveyance was executed by the defendant on the
same date by which the defendant-purchaser of the property
agreed to re-convey the house provided the exercise of the
right of demanding re-conveyance took place within two
years and rent payable by the plaintiff is not in arrears for
more than six months at any time. On the breach of the
second condition stipulated by the agreement for re-
conveyance the defendant-purchaser refused to re-convey.
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In a suit for specific performance the plaintiff sought to
invoke the equitable jurisdiction of the Court to give him
relief against the forfeiture clause. This Court held that the
sale-deed and the deed of conveyance and rent were no
doubt parts of the same transaction yet the transaction did
not constitute a mortgage by conditional sale. This Court
observed:
"The sale deed the deed of reconveyance Ext. A-1
and the rent note Ext. B-1 were undoubtedly parts of
the same transaction. The plea of the plaintiff that
the sale deed Ext. A-1 constituted a transaction of
mortgage by conditional sale is inadmissible,
because the sale deed and the covenant for
reconveyance are contained in separate documents".
14. The finding of the High Court as to the legal effect of
the transaction of sale followed by an agreement for re-
transfer of the property is not, therefore, legally sound.
15. Mr. Jain learned counsel for the appellants all the same
argued that the transaction in question was in the nature of
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an English Mortgage as defined under Section 58(e) of the
Transfer of Property Act, 1882 which reads as under:
"58 (e) English mortgage.- Where the mortgagor
binds himself to repay the mortgage-money on a
certain date, and transfers the mortgaged property
absolutely to the mortgagee, but subject to a proviso
that he will re-transfer it to the mortgagor upon
payment of the mortgage-money as agreed, the
transaction is called an English mortgage."
16. A plain reading of the above would show that for a
transaction to constitute an English mortgage the following
essential conditions must be satisfied:
(1) The Mortgagor must bind himself to re-pay the
mortgage money on a certain date.
(2) The property mortgaged should be transferred
absolutely to the Mortgagee.
(3) Such absolute transfer should be made subject to
proviso that the Mortgagee shall re-convey the
property to the Mortgagor upon payment by him of the
mortgage money on the date the Mortgagor binds
himself to pay the same.
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17. It is only in cases where all the three requirements
indicated above are satisfied that the transaction constitutes
an English mortgage and not otherwise. The case at hand
does not satisfy all the three requirements mentioned
above. In particular the first requirement where under the
Mortgagor binds himself to re-pay the mortgage money on a
certain date is not satisfied in the instant case. We say so
because the sale-deed executed by the plaintiffs-appellants
does not contain any such stipulation binding the seller to
pay the amount of Rs.6,000/- on a certain date. As a matter
of fact, the sale-deed does not even remotely suggest that
the transaction is in the nature of a mortgage or that there
is any understanding or agreement between the parties
whereunder the property sold has to be re-transferred to the
seller. The only other document which could possibly contain
such a stipulation binding the Mortgagor to return the
mortgage money is the agreement for re-conveyance.
Significantly, this document is signed only by Prem Singh
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the purchaser and not by the seller. The document signed by
Prem Singh is described as an agreement for re-conveyance.
There is no doubt a stipulation that Prem Singh has agreed
to re-transfer the property to the seller in case the plaintiff
Raj Kishore returns the sum of Rs.6,000/- by 6th July, 1981
yet there is nothing in the document to suggest that the
seller had bound himself to abide by that stipulation. What is
important in terms of the requirement of Section 58 (e) is
not that the purchaser has agreed or bound himself to
transfer the property by a particular date but that seller has
bound himself to pay the amount by a certain date. Since
the seller is not a signatory to the agreement of re-
conveyance it is difficult to see how he can be said to have
bound himself to re-pay the mortgage money by the 6th July,
1981. We have, therefore, no difficulty in rejecting the
contention urged on behalf of the appellants that the
transaction was in the nature of an English Mortgage and the
suit was in essence a suit for redemption of such a
mortgage. We have also in that view no difficulty in repelling
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the contention urged by Mr. Jain that the stipulation of a
date for payment of money as a condition for re-conveyance
of the property is a clog on equity of redemption. We
cannot overlook the fact that the suit filed by the appellants
did not proceed on the basis that the transaction between
the parties tantamounted to a mortgage nor did the plaintiff
pray for a decree for redemption from the Court. The suit
was, as noticed earlier, one for declaration to the effect that
the sale-deed executed by him was void and the plaintiffs
continued to be owner and in occupation. The contention
that the transaction between the parties was in reality one in
the nature of a mortgage or that the suit was in substance
one for redemption has not, therefore, impressed us and is
accordingly rejected.
18. The only other question that arises for consideration is
whether the plaintiff could rely upon the agreement for re-
conveyance and pray for a decree for specific performance
thereof. The plaintiff had, in that regard, sought an
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amendment which was declined by the Courts below. The
first appellate Court was of the view that even if the relief
sought to be incorporated by amendment was allowed to be
incorporated the same would be time-barred. The High
Court was on the contrary of the view that even if the prayer
was allowed to be incorporated by amendment since there
was no averment in the plaint to the effect that the plaintiff
was ready and willing to perform his part of the contract any
such amendment would be of little value. The High Court
was, in our opinion, correct in the view taken by it. In a suit
for specific performance it is absolutely necessary for the
plaintiff to assert that he/she was always ready and willing
to perform the essential terms of the contract sought to be
enforced against the defendant. Section 16(c) of the Specific
Relief Act 1963 makes that requirement mandatory. There
is, in the present case, no averment as to the readiness and
willingness of the plaintiff to perform his part of the contract.
In the absence of such an averment, amendment of the
plaint to incorporate a prayer for specific performance of the
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agreement for re-conveyance would not have advanced the
case of the plaintiff or the appellants who have succeeded
him.
19. More importantly, in a case where the parties have
entered into a transaction of sale and also executed an
agreement for re-conveyance of the property sold, time
stipulated for re-conveyance is the essence of the contract.
The law on the subject is fairly well-settled by the decisions
of this Court in Chunchun Jha v. Ebadat Ali (AIR 1954 SC
345), Bismillah Begum (Smt) Dead by Lrs. v.
Rahmtullah Khan (Dead) by Lrs. (1998) 2 SCC 226 and
Gauri Shankar Prasad and Ors. v. Brahma Nand Singh
(2008) 8 SCC 287. Relying upon the decision of Federal
Court in Shanmugam Pillai v. Annalakshmi Ammal AIR
1950 FC 38, this Court in Caltex (India) Ltd. v. Bhagwan
Devi Marodia AIR 1969 SC 405, held that in contracts
relating to re-conveyance of property time is always the
essence of the contract. This Court observed:
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"At common law stipulation as to time in a contract
giving an option for renewal of a lease of land were
considered to be of the essence of the contract even
if they were not expressed to be so and were
construed as conditions precedent. Equity followed
the common law rule in respect of such contracts
and did not regard the stipulation as to time as not
of the essence of the bargain"
20. This Court also held that the principle stated by the
Federal Court in Ardeshir H. Mama v. Flora Sassoon AIR
1928 PC 208 to the effect that time is not normally the
essence of the contract in contracts relating to immovable
property did not apply to contracts for re-conveyance of the
immovable property. This Court observed:
"The above passage refers both to options for
renewal and options to repurchase where, in regard
to immovable property, as a matter of law time
becomes the essence of the contract. Therefore in
regard to contracts of reconveyance relating to
immovable property the principle laid down in A.H.
Mama v. Flora Sassoon - that time is not normally
the essence of the contract in contracts relating to
immovable property - does not apply. It is in fact,
so observed in Caltex (India) Ltd. case. In view of
the abovesaid decision of this Court relating to
contract of reconveyance, and inasmuch as the
amount was not paid within the stipulated time, the
said option in favour of the plaintiff must be deemed
to have "lapsed". For the aforesaid reasons, the
appeal fails and is dismissed. No costs."
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(emphasis added)
21. The Courts below have concurrently held that the
plaintiff had failed to prove that he had tendered the amount
of Rs.6,000/- to the purchaser within the date stipulated in
the agreement for re-conveyance. That being a finding of
fact any claim for re-conveyance made in default of the said
stipulation must fail for the right of re-conveyance cannot in
the case of default be saved from forfeiture. The general
principle of law that equity grants relief against penalty in a
money bond and also against the penal sums made payable
on breach of bonds has an exception to it. The exception
was recognized by the Federal Court in Shanmugam Pillai
case (supra) where by a majority the Court held that if
under an agreement an option to a vendor is reserved for
repurchasing the property sold by him, the option is in the
nature of a concession or a privilege and may be exercised
in fulfillment of the conditions on the fulfillment of which it is
made exercisable. If the original vendor fails to act
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punctually according to the terms of the contract, the right
to repurchase will be lost and cannot be specifically
enforced. Refusal to enforce the terms for failure to abide by
the conditions does not amount to enforcement of a penalty
and the Court has no power to afford relief against the
forfeiture arising as a result of breach of such a condition.
The Court followed the principle set out in Davis v. Thomas
(1830) 39 ER 195. The above principle was recognized to
be correct in K. Simrathmull case (supra). This Court also
quoted with approval the following passage from Halsbury's
Laws of England Vol.14, III Edn., page 622, paragraph
1151:
"Where under a contract, conveyance, or will a
beneficial right is to arise upon the performance by
the beneficiary of some act in a stated manner, or at
a stated time, the act must be performed accordingly
in order to obtain the enjoyment of the right, and in
the absence of fraud, accident or surprise, equity will
not relieve against a breach of the terms".
22. In the present case there is no allegation of fraud,
accident or surprise to call for intervention of equity so as to
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save the plaintiffs right of re-conveyance of the property
against forfeiture.
23. In the result this appeal fails and is hereby dismissed
but in the circumstances without any order as to costs.
.................................J.
(MARKANDEY KATJU)
.................................J.
(T.S. THAKUR)
New Delhi
December 10, 2010
