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Bahadur Vs. Motiram and anr. - Court Judgment

LegalCrystal Citation
SubjectProperty;Contract
CourtRajasthan High Court
Decided On
Case NumberSecond Appeal No. 443 of 1965
Judge
Reported inAIR1972Raj250; 1971(4)WLN334
ActsTransfer of Property Act, 1882 - Sections 58; Specific Relief Act, 1877 - Sections 15
AppellantBahadur
RespondentMotiram and anr.
Appellant Advocate B.R. Arora, Adv.
Respondent Advocate H.C. Jain, Adv. (for No. 1) and; U.C. Bapna, Court Guardian (for No. 2)
DispositionAppeal allowed in part
Cases ReferredBalasundara v. Muthuvenkatachala
Excerpt:
.....question for rs. it was further agreed between the parties that the expenses for execution of the sale deed, andits registration would be borne by the plaintiff and in case the plaintiff failed to perform his part of the contract rs. 1. 3. the suit was resisted by the defendant motiram as well as prem narain, who filed separate written statements though the pleas taken by them are identical. 5. i may state at the very outset that the plaintiff has miserably failed to prove that any fraud was practised upon him at the time of execution and registration of the sale deed ex. 2. the plaintiff very well knew that the document he was executing in favour of the defendant was sale out and out. on that point, however, oral evidence adduced by the parties need not be looked into because the..........is that he had purchased the house in dispute on 17-3-1960 from one kanaram for rs. 4800/-. the sale deed in his favour has, however, not been placed on the record. it is alleged that he was badly in need of money on account of the marriages of his two daughters and so he agreed to mortgage the house in question for rs. 1000/- with the defendant no, 1 motiram, who however, played a fraud upon him, and actually got a sale deed executed by him for rs. 1000/- on 5-10-61. the original sale deed has been placed on the record and is marked ex. 2. it is admitted case of the parties that on the same day motiram executed an agreement in favour of the plaintiff to resell the property in dispute to the latter for a sum of rs. 1100/- on or before 31-3-1962. the original agreement has been put on.....
Judgment:

C.M. Lodha, J.

1. This is a plaintiffs second appeal arising out of a suit for specific performance of an agreement to resell the property in dispute to the plaintiff for a consideration of Rs. 1100/-.

2. The plaintiff's case as set out in the plaint is that he had purchased the house in dispute on 17-3-1960 from one Kanaram for Rs. 4800/-. The sale deed in his favour has, however, not been placed on the record. It is alleged that he was badly in need of money on account of the marriages of his two daughters and so he agreed to mortgage the house in question for Rs. 1000/- with the defendant No, 1 Motiram, who however, played a fraud upon him, and actually got a sale deed executed by him for Rs. 1000/- on 5-10-61. The original sale deed has been placed on the record and is marked Ex. 2. It is admitted case of the parties that on the same day Motiram executed an agreement in favour of the plaintiff to resell the property in dispute to the latter for a sum of Rs. 1100/- on or before 31-3-1962. The original agreement has been put on the record and marked Ex. 1. It appears from this agreement that Rs. 100/- were paid by the plaintiff to Motiram as part of the purchase price and the balance Rs. 1000/-was to be received at the time of registration of the sale deed. It was further agreed between the parties that the expenses for execution of the sale deed, andits registration would be borne by the plaintiff and in case the plaintiff failed to perform his part of the contract Rs. 100/- paid by him as earnest money would be forfeited and so also if the defendant Motiram Committed breach of the contract and did not execute the sale deed, he would pay Rs. 100/- to the plaintiff as penalty. The plaintiff's case is that on 31-3-1962 and thereafter he offered the balance of the purchase price Rs. 1000/- to the defendant, who put him off on some pretext or the other and ultimately on 21-4-1963 he refused to execute the sale deed. It was further stated that the defendant No. 1 Motiram transferred the house in question to the- defendant No. 2 Prem Narain minor through his guardian, his father Lalchand in exchange for another house. A copy of the exchange deed duly registered has also been produced and marked Ex. A-l. This necessitated the impleading of Prem Narain as defendant No. 2 in the case. One Khemchand was also impleaded as party to the suit on the ground that the Louse in question had been previously mortgaged with him by Motiram though it was subsequently redeemed. Khemchand is, therefore, now not at all interested in the result of the suit. However, it was alleged that the defendant No. 2 acquired the house in question in exchange in collusion with the defendant No. 1 Motiram with the full knowledge that the plaintiff was in possession of the same and that there had been an agreement between the plaintiff and the defendant Motiram for resale of the house in the plaintiff's favour vide Ex. 1- The plaintiff also averred that he was always ready and willing to perform his part of the contract, but the defendant had wrongfully refused to execute the sale deed in his favour. On these allegations, he prayed for a decree for specific performance of the agreement Ex. 1.

3. The suit was resisted by the defendant Motiram as well as Prem Narain, who filed separate written statements though the pleas taken by them are identical. It was pleaded that the transaction between the plaintiff and the defendant No. 1 Motiram (who will hereinafter be referred to as 'the defendant') was one of sale out and out and not a mortgage by conditional sale and that the plaintiff had executed the sale deed Ex. 2 with full knowledge of its contents. The claim for specific performance was refuted on the ground that the plaintiff had not performed his part of the contract and had never offered the defendant the balance of the sale price, namely Rs. 1000/- nor hadever called upon the defendant to execute the sale deed and get it registered. Thedefendant Prem Narain took a further objection that he was a bona fide purchaser for value without notice of the prior agreement to sell in favour of the plaintiff (Ex. 1) and hence no relief could be granted against him.

4. After recording the evidence produced by the parties the learned Civil Judge, Ganganagar, by his judgment dated 19-10-1964 dismissed the plaintiff's suit. Aggrieved by the judgment and decree of the trial Court the plaintiff filed appeal in the Court of District Judge, Ganganagar, who affirmed the same and dismissed the appeal by his judgment dated 19-4-1965. Hence the plaintiff has come in second appeal to this Court.

5. I may state at the very outset that the plaintiff has miserably failed to prove that any fraud was practised upon him at the time of execution and registration of the sale deed Ex. 2. The plaintiff very well knew that the document he was executing in favour of the defendant was sale out and out. The only question worth consideration is whether the intention of the parties behind this transaction was to treat the deed of sale as a mortgage by conditional sale. On that point, however, oral evidence adduced by the parties need not be looked into because the position of law is clearly against the plaintiff. Reference in this connection may be made to the proviso to Section 58(c) of the Transfer of Property Act which reads as under:--

'(c) Where the mortgagor ostensibly sells the mortgaged property-

on condition that on default of pay ment 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

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'.

In the present case admittedly the agreement by the defendant to retransfcr the property to the seller is not embodied in the document which effects the sale, that is, Ex. 2. A separate agreement has been executed though on the same day by the defendant in favour of the plaintiff for resale of the property. Consequently, the plaintiff is debarred from asserting that the transaction shall be deemed to be a mortgage.

6. In K. Simrathmull v. Nanjalingiah Gowder, AIR 1963 SC 1182, it has been held by the Supreme Court that proviso to Section 58(c) makes it clear that the transaction cannot be a mortgage if the sale and agreement to repurchase hadbeen embodied in separate documents. Consequently, the contention raised on behalf or the appellant that the transaction between him and the defendants was a mortgage by condtional sale cannot be accepted.

7. Learned counsel for the appellant then argued that the time fixed in the agreement Ex. 1 for payment of the price and execution of the sale deed was not of the essence of the contract, because the agreement pertains to immovable property and the defendant had not given any notice so as to make time the essence of the contract. In support of his contention learned counsel for the appellant relied on a number of authorities, which, however, I do not think necessary to refer to as, in my opinion, they are all cases of ordinary agreements to sell immovable property and not of reconveyance by the purchaser.

8. On the other hand, there seems to be a plethora of authorities taking the view that the doctrine that time may not be of the essence of a contract, which arises on the construction of contracts of sale, should not be applied to contracts for the re-sale of property conveyed, and that the right to repurchase must be exercised according to the strict terms of the contract. This was the view taken in Sama-rapuri v. Sutharsana, AIR 1919 Mad 544.

9. In Shriram v. Rambilas, AIR 1947 Nag 208, it was held that the cases where there is an option of repurchase of immovable property once sold form an exception to the equitable rule, that time is not the essence of the contract and where a time limit has been laid down in the agreement of repurchase, and where there is no question of mutual obligation the exceptional provision for the seller's benefit must be exercised strictly within the time prescribed.

10. In Phukan All v. Mt. Sahjadi, AIR 1954 Assam 54, relying on AIR 1919 Mad 544, it was held that the doctrine that time may not be of the essence of the contract which arises on the constniction of contracts of sale of immovable property, is not applicable to contracts of resale of property conveyed, and it is for the plaintiff to show that he had not forfeited his right of reconveyance even though he did not make the offer within time.

11. Again in Krishna Chandra v. Ramgulam, AIR 1958 Madh Pra 295, the learned Judges observed that normally in the case of contracts to sell immovable property, time is not of the essence of the contract and specific performance can be compelled if a tender is made within a reasonable time, but cases of agreements to reconvey stand on a different footing as they amount to concessions. In such cases, the contract must be performed within the stipulated period. It was further observed that in the case of such a contract, there is no mutuality, and the vendor is given a concession to purchase the property within a specific period, if he pays the necessary amount but there is no corresponding right in the vendee. There is yet another reason for treating contracts of reconveyance of property on a different footing and that is that the uncertainty in the title of the vendee which is introduced by the indulgence shown by him to the vendor must be set at rest after the stipulated period expires.

12. The following observations occurring in Shanmugam Pillai v. Annalakshmi, AIR 1950 FG 38, further clarify the position:

'It is well settled that, when a person stipulates for a right in the nature of a concession or privilege on the fulfilment of certain conditions, with a proviso that in case of default the stipulation should be void, the right cannot be enforced if the conditions are not fulfilled according to the terms of the contract, such conditions though relating only to payment of money, are not regarded as a penalty and Courts of equity will not afford relief against a forfeiture for their breach.'

13. The aforesaid case decided by the Federal Court was relied on by their Lordships of the Supreme Court in AIR 1963 SC 1182.

14. I am aware of the distinction in the cases decided by the Federal Court and the Supreme Court referred to above where there was a clause for forfeiture as a result of breach of conditions contained in the agreement itself, but the absence of such a clause in my opinion does not make any difference in the application of the principle enunciated in these cases.

15. Lord Halsbury in the Laws of England, Third Edition, Volume 14, says in paragraph 1151 at page 622:

'1151. Conditions must as a general rule be strictly observed: 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 ol the terms.'

16. Again there is the following passage in Volume 27, bearing on the subject at page 159, para 245:

'245: Sale and option of repurchase: If an intended arrangement is not a lending and borrowing transaction but an absolute sale, accompanied by a contemporaneous agreement for repurchase or a stipulation that the conveyance should be void upon payment of a certain sum at a fixed time, this does not entitle the vendorto such a right to redeem as is incidental to a mortgage, but creates a mere right of repurchase to be exercised in accordance with the terms of the power. The question always is -- was the original transaction a bona fide sale with a contract for repurchase, or was it a mortgage under the form of a sale? In the former case the condition for repurchase is construed strictly against the vendor, and where there is a time limited for the purpose it must be precisely observed.'

17. The following sentence from Fisher & Lightwood's Law of Mortgage, Eighth Edition (Tyler), 1969 at page 10 would throw further light on the subject:

'Although in certain cases conveyances, apparently absolute, may be construed as mortgages, an absolute conveyance with an agreement for repurchase, or that the conveyance shall be void upon payment of a certain fixed sum at a fixed time, will create a mere right of repurchase to be exercised according to the strict terms of the power.'

18. Lastly reference may be made to Balasundara v. Muthuvenkatachala, AIR 1954 Mad 799, wherein it was observed that the title of the first purchaser in such cases would be practically in abeyance till after the expiry of the period mentioned in the agreement as such the title would be lost at the option of the other party. In such cases it would be inequitable to hold that time would not be the essence of the contract as there would be uncertainty in the title of the first purchaser. In those cases time should be always considered essence of the contract. Thus the result arrived at by the learned Judges of the Madras High Court is the same though by a different process of reasoning.

19. The net result of the foregoing discussion is that cases seem to be overwhelming in favour of the view that if the transaction is not a mortgage but a sale, the right of repurchase being optional must be exercised according to the strict terms of the power.

20. Now, therefore, it remains to be seen whether in the present case the plaintiff has strictly complied with the terms of the agreement? Oral evidence has been led by him to show that he had tendered the sale price of Rs. 1000/- to the defendant on the stipulated date that is 31-3-1962 and thereafter. But this evidence has been found to be unsatisfactory and not reliable, by both the Courts below. In the first place this is a finding of fact which I am not supposed to interfere with while sitting as a Court of Second Appeal, but apart from that, I have gone through this oral evidence and find that the view taken by the Courts below is perfectly correct and it must be held that the plaintiff did not perform his part of the contract and consequently did not comply with the terms of the agreement Ex. 1, It may be stated here that the stipulated date for performance of the contract was 31-3-1962 and the present suit was brought on 25-4-1963 after more than a year. It is remarkable that according to the plaintiffs own statement he had coma to know only about a fortnight after the stipulated date of performance of the contract, that is, 31-3-1962, that the defendant was intending to transfer the property to the defendant No. 2, yet curiously enough, he did not even care to serve a notice upon the defendant to desist from doing so and expressing his willingness to perform his part of the contract. I am, there-' fore, firmly of the opinion that the plaintiff having failed to perform strictly his part of the contract was guilty of the breach of the terms of the agreement Ex. 1, and, therefore, cannot claim specific performance of the same. In this view of the matter I hold that the Courts below were right in dismissing the plaintiff's suit.

21. However, it does appear to me that the plaintiff purchased the house from Kanaram for a much higher price, as would be clear from the statement of P.W. 2 Kanaram, than the price for which he sold it to the defendant by Ex. 1. May be, that the intention of the parties was merely to bring into existence a mortgage by conditional sale but, as already stated above, on account of the proviso to Section 58(c) of the Transfer of Property Act the plaintiff is debarred from proving that the transaction was in the nature of a mortgage. The defendant appears to have over-reached the plaintiff and a document of sale conveying the property Ex. 2 was obtained from the latter. In the circumstances the parties should be left to bear their own costs throughout.

22. The result is that I partially allow the appeal and set aside the direction in the judgment under appeal awarding costs of the lower Courts against the appellant and leave the parties to bear their own costs throughout. Rest of the appeal is dismissed, and the decree of dismissal of the plaintiff's suit is upheld.


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