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476 sui>.RE'ME oodk'f .R.E.PdRTsp9a2jsdi>P.

K., SIMRATHMULL

V.

S. NANJALI.1\GfAH GOW DER I

(::i. K. DAS, M . .l:ImAYA'T(JLLA.Ha.nd J'. l). SILl'.H,:Jlf.)

\ .. ... , Contr!'l't-Coenan!Jor re?onve11~>1c~. ~.prqp~~IK.~.U.?jeYf. to fulfilment of oonditoons-lfailure of cond•t•JJ:J>, whe!her specific 'performarlce could be deln"nded=Where ri!Jht extinguished-

O'ou>ts equitable.iurisdiction could be invoked-'I'mnsfer of Property Act; (4 of 1882)-Specific 'Reli~' Act (1 of•J877).

' ' • I • , By a, deed dated FebruFy, 19, 1948 the -respondeµ, t .1old his house to the appellant in cohsideration of

0 disharging liability torepay a.loan of Rs, 1500/- borrowed by 1ihe lres- .pondent.

T\VO other documents Telflting.; to the house were executed on the same day (J) a -deed by• the appellantragreeing, to reconvey the house if the ryspo'!dent paiq, s., l/iOQ/,• in these two years; (2) p. rent note by the, p; spon?ent ., a\'d. his father agreeing tc1 pay Rs. 26-4-0 per menscm as rent for occupation of the house.

Under 1the agreement of 'iec6nveyance the exercise of the right td demarfd reconV'eyanc"'e 'was subject to~ t, vo, conditions, firstlY, that the right nius.t. be exer cised within 2 years and 1 secondly, that,, he rent -payal;>lct_, under .the rent note should not remain in arrears for more than six

months at any time.

When thai iespoildent Cle'manped sPci fie perfdtmance of -the agreemnt of reconve1ance, !the first condition was fulfilled but the second was, not. The suit for,, specific performance o'f the igreemcnf Of recovey~ anc; e was dismissed, for in the view of the trial.ct:>urt the conditions of the agrcement.t hasi: inot been , stiA•l~.comJSlied with, and the agreement stood cancelled.

Tc1e High Court in second appeal reversed the decree and ordered specific J p;:rformabce. ..,

Held, that the covenant for reconveyance was in the n_ature of a concession granted by the purchaser . . , Held, further that the conces-sion being subject to certain conditions were not fulfilled the right to demand reconveyancc could not be enforced.

The court had no equitable jurisdictio11 to relieve against the extinction of the right to demand reconveyence.

Shanmugam Pillai v. Annnlakshmi Ammal, A. I. R. ( 1950) F. C. 38, folbwed.

John H. Kilm<r v. British Col1'mbi'1. Orchard Lands Ltd.

J L R. (1913) A. C. 319, DeQendrtl. Pr<!Bad Sitk.fl v. Sttrll!ldr\l '"i

3 s.ci.R.

SUPRtllME COUR'r REPOR'rS 477

Prasad Sukul, (1935) L. R. 63 I.A. 26 and Davis v. 1'homas, ( 1930) 39 E. R. 195, referred to.

CIVIL APPELLA~'E JURISDIW'ION : Civil Appeal No. 8 of 1960.

Ajlpeal by special leave from the judgment and decree dated January 30, 1956, of the Madras High Court in Special L. Appeal No. 2174 of 1952.

Bhawani Lal and P. G. Agarwala, for the appellant.

R. Ganapathy Iyer, R. Thiagarajan and G. Gopalakrishnan, for the respondent .

. 1962. February 28. The Judgment of the Court was delivered by

SHAH, J.-This is an appeal with special leave against the judgment of the High Court of Madras.

On February 18, 1948, S. Nanjalingiah Gowderhereinafter referred to as the plaintiff-borrowed Rs. 1,500/- from K. Simrathmull-hereinaHer called the defendant.

On February 19, 1948 the plaintiff executed a sale deed conveying to the defendant certain land at Ootacamund together with a house standing thereon and belonging to him for Rs. 700/-. Two other documents were executed on the same day : ( l) a deed of reconveyance (Ext. A-1) (counterpart of the sale deed) in favour of the plaintiff which contained the following covenant:

"If you pay the sum of Rs. 1500/- within a period of two years I shall at your cost and your responsibility execute a sale in respect of the under-mentioned 'land and house.

You. shall pay the assessment for the house and the municipal tax, you shall if there is any arrears of rent pay the same, prior to the sale, a.i per the rental deed executed by you and your father~ If there is arrears of rent for six

K. Simr'athmull

v, S. Non; O'lingiah

GowJ, r

Shah J,

}, . SimralAmull

S. Nonjalihtioh

Ot11tdt1

Shah J,

478 SUPREME COURT REPORTS [1962) SUPP.

months, the aforesaid counterpart deed shall become cancelle<l.",

and (2) a lien\ Note by t.he plaintiff and his fath•r Rora Gowder in favour of the defendant agreeing to pay rent@ 1 's. 26/4/- per mensem for occupation of the house and the land.

Rent accruing dull was not paid regularly by the plaintiff and his father, and by April 1949 it was in arrears for sev<'n monthR.

The plaintiff sent Rs. 52/8/- by postal money ord<r being rent for two months, on April 20, 19'19, but it waR not accepted by the defendant.

The plaintiff then filed on November 7, 1949 a suit in the Court of the Subonlinate Judge, Ootacamun<l for specific performance of the agreement of recunveyance contained in the deed Ext. A-1.

The suit was dismissed, for, in tho view of tho trial Court, the conditions incorporated in Ext. A-1, had not been strictly complied with, and the agreement stood cancelled. The decree of the trial Court was affirmed in appn~ I. But in second app•al the High Comt of \Tadras reversed the decree and ordered specific performance.

The sale deer!, the deed of reconveyance Ext.

A-I and the Rent Xoto Ext. B-1 were undoubtedly

parts of th!l same transaction.

The plea of the plaintiff that the sale deed Ext. A- I conatituted a transaction of mortgage by conditional sale is inadmissible, because the sale dcd and the covenant for reconveyance aro contained in separate documents.

Indisputably, ou tho findings of the trial Court and confirmed by tho Appellate Courts, the plaintiff has not c; implied with the terms of the agreement for reconvcyance. The plaintiff, however submitted that the court could relieve him against the forfeiture of his rigtits in exerciso of the courts equitable jurisdiction. Tho defendant submitted that the covenant for roconvcyance was in the nature of a eoncossion grunted by the ddendant subject to certain conditions and if the conditions were not

fulfilled the right could not be enforced. On this question the trial Judge with whom the First Appellate Court agreed held that the court had no jurisdiction to relieve against the extinction of the right to demand reconveyance, because the plaintiff had failed to comply strictly with the conditions of the deed. The High Court held that the equitable jurisdiction of the Court could properly he exerciseed in favour of the plaintiff so as to relieve him against the extinction of his right.

The plaintiff had sold his property to the defendant.. There is now no dispute that though the sale deed was for Rs.700/-. it was in satisfaction of the loan bmrowed on February 18, 1948 for Rs. 1500/- that the sale deed was executed. By the deed Ext. A-1 the defendant gave plaintiff a concession: he agreed to reconvey the house, but the exercise of the right of demanding reconveyance hy the plaintiff was subject to two conditions (1) that the right must be exercised within two years, and (2) that the rent payable under Ext. B-1 should not be in arrears' for more than six months at any time.

When the plaintiff dtanded specific performance of the agreement of reconveyance, the first condition was fulfilled but the second was not. It is true that equity relieves against penalties when the intention of the the penalty is to secure payment of a sum of money or attainment of some other object, and when the event upon which the penalty is made payable can be adequately compensated by payment of interest or otherwise. Thus relief is granted in equity against the penalty in a money bond, and also against penal sums made payable on breach of bonds, covenants and agreements for payment of money by instalments, or for doing or omitting to do a particular act (see Halsbury's Laws of England III Edition vol. 14 page 620 Art. 114 7). The cases in John H. Kilmer v. BritiNh Columbia Orchard Land, s Ltd. (') and Devendra Prasad Sukul and others v.

Surendra Prasad Sukul and Another(') are illustrations

(I) L.R, (1918) A,.C. 319.

(2) ( 193S) L.R. 63 I.A. 26.

K. imrathmull

S. Nanjalingiah

Gowder

Shah J.

198t

K. Simrallamull

v ,\'. NOnjaJingi41a

Gowitr

Sh oh J,

480 SUPRE:.'.!E COURT REPOP.TS [1002) SUPP.

of that principle. Bnt there is a well recognised exception to thiH rulo which i~ enunciated in Halshury's Laws of England Vol. 14 TTI Eclition page 622 p1tragraph 1151, as follows: "Where under a contract., conveyance, or will it beneficial ri11ht is to arifie up, m tho performance by the beneficiary of some act in a

statc<l manner, or at a stated timl', the act must bo performed accordingly in order to obtain the enjoyment of the right, and in the .absence of fraud, accident or surprisP, equity will not rnlicve against a breach of the terms".

The Federal Court in 8hanmuyam Pillai and others v. Annalakskmi Ammal and others(') held by a majority of three to two that where 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 privilego and may be exercised on strict fulfilment of the conditions on the fulfilment of which it is made exercisable. If the original vendor fails to act punctually according to the terms of the contract, the right to repurchase will be Jost and cannot be spocifically enforced.

Hefusal to enforce the tHms sprcifica!Jy 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 forfiture arising as a result of breach of such a eondition.

A majority of the Judges of the Court in that case followed the principle set out in Davis v. '!'lwma.~ (').

We accept the view of tho majority enunciated in Slummur; am Pillai's case. The decree passed by tbc High Court must therefore be sot aside and the decree pnssed by the trial Court

restored.

But the property in dispute is valuable.

Evon on the defond1int's case it was on thl' date of tho institution of the suit worth Rs. 15000/-. The defendant purchased it only about a year and seven months prior h> the <late of the institution of the suit for Rs. 1500/-.

He appears to have overreached the plaintiff and taken a document of salo

(IJ Al R. (19SOJ P.C. 38.

(2) ( 1930) 39 E.R. ! 95.

conveying the property when a mere loan was intended on the security of the property. It is unfortunate, having regard to the provision of s. 58(c) of the Transfer of Property Act, that the plaintiff is debarred from proving that the transaction was in the nature of a mortgage. In the circumstances we direct that there will be no order as to costs throughout.

Appe, al allowed.

ORIENT WEAVING MILLd (P) LTD.

THE UNION OF INDIA

(B. P. SINHA, c. J., J. L. KAPUR, M. HIDAYATULLAH, J. c. SHAH and J. R. MUDHOLKAR, JJ.)

Central Excise-Power of Central Government to grant exemption-Rule-Notification granting exemption to co-operah'.ve society-Constitutional mlidity-Central Excises and Salt Act, 1944 (1of1944), ss. 37(2), cl. (xvii)-Central Excise Rules, 1944, r. 8(1)-Constitution of India, Arts, 14, 19(1)(/) and (g), 43.

By r. 8 (1) of the Central Excise Rules, 1944, framed by the Central Government in exercise of its Power under s. 37(2)

cl. xvii of the Central Excises and Salt Act, 1944, "the Central Government may from time to time, by notification in the Official Gazette, exempt subject to such conditions as may be specified in the notification any excisable goods for the whole or any part of the duty leviable on such go'.>ds." By two notifications issued under the said rule the Central Government exempted cotton fabrics produced on po, ver looms owned Dy co-operative societies ti'om the duty leviable thereon subject to certain conditions.

Under s 38 of the Act the said rule and notifications on publication in the Official Gazette had effect as if enacted in the Act. The petitioners, apprehending loss of business in competition with the fifth respondent, a co-operative society, chal1enged the rule and the notifications on the grounds( I) that the power of exemption conferred on the Union Government violated Arts. 14, 19(l)(fl and (g} of the Constitution and (2) that assuming that it did

196!

K. Simrathmull '.

S. Nanjalingioh

Gowder

Shah J.

Ftbuary 38.