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Krishna Shetti Alias Krishnayya (Deceased) and anr. Vs. Gilbert Pinto and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Reported in50Ind.Cas.895; (1919)36MLJ367
AppellantKrishna Shetti Alias Krishnayya (Deceased) and anr.
RespondentGilbert Pinto and ors.
Cases ReferredNatesa Ayar v. Appavu Padayachi I.L.R.
Excerpt:
.....not relieve against a right of re-entry or forfeiture under any provision or stipulation in a lease for a breach of any covenant in the lease except the covenant for payment of rent. at first there seems to have been some hesitation whether this relief might not be extended to other cases of forfeiture for breaches of covenants such as to repair, to insure and the like where compensation could be made, but it was soon recognised that there would be great difficulty in estimating the proper amount of compensation and since the decision of lord eldon in hill v. the act was framed by eminent english lawyers to reproduce the rules of english law in so far as they are of general application and rest on principle as well as authority, and its provisions are in my opinion binding on us as..........transfer of property act which makes leases determinable by virtue of provisions for re-entry on breach of covenant.6. the fact that agricultural leases such as this one are except-ed from the operation of sections 105 to 116 of the transfer of property act does not in my opinion affect the present question. the act was framed by eminent english lawyers to reproduce the rules of english law in so far as they are of general application and rest on principle as well as authority, and its provisions are in my opinion binding on us as rules of justice, equity and good conscience, when we have to deal with agricultural leases in the absence of any special reason for not applying them. the legislature, wisely in my opinion, if i may say so, has refrained from making these sections applicable.....
Judgment:

John Wallis, C.J.

1. This is a Letters Patent appeal from the decision of Sadasiva Aiyar, J., who held (Bake-well, J. dissenting), that the court has power to relieve against a provision in a mulgeni or permanent lease, a form of agricultural lease in use in South Canara for re-entry by the landlord on breach of a covenant or condition against any alienation by the lessee of his mulgeni right except in the manner therein provided. The lease, which is inartistically drawn, provides in substance that, if the lessee or his representatives have to sell or mortgage their mulgeni right, they are first to give a written notice to the lessor or his heirs, and, if they fail to act on it or to reply thereto, the lessee is to be free to make the alienation, but that alienations in contravention of these provisions are to be void, and the lessor is to be at liberty to re-enter and enjoy the land inclusive of improvements. This we read as meaning that the lessee is to give notice to the lessor of the terms of any transaction which he proposes to effect by way of sale or mortgage of his mulgeni right, and that the lessor is then entitled to become himself the purchaser or mortgagee on those terms, and as in fact conferring a right of pre-emption.

2. Two question arise in the case whether the court has any general jurisdiction to relieve in a case of this kind, and if not, whether such jurisdiction has been conferred upon it by the amendment to Section 74 of the Indian Contract Act.

3. As regards the first question, it is well settled that a court of equity could not relieve against a right of re-entry or forfeiture under any provision or stipulation in a lease for a breach of any covenant in the lease except the covenant for payment of rent. The history of this question is most lucidly explained by Kay, L.J., in Barrow v. Isaacs and Son (1891) 1 Q.B. 425 : ' Courts of Equity ' he says 'assumed jurisdiction to relieve against forfeitures and penalties where the only object was to secure payment of a definite sum of money, even though there was no fraud, accident, surprise or mistake. On this principle it relieved against the payment of the whole penalty on a money bond before the Statutes of 4 and 5 Anne Ch. XVI Sections 12, 13 and 8 and 9 Wm. 3, C, 11, which enabled the courts of law to give the same relief. Also against forfeiture for non-payment of rent, and by statute 4 Geo.2 C. 28, its powers in this respect were somewhat restricted by limiting the time for their exercise to six months after execution in ejectment. At first there seems to have been some hesitation whether this relief might not be extended to other cases of forfeiture for breaches of covenants such as to repair, to insure and the like where compensation could be made, but it was soon recognised that there would be great difficulty in estimating the proper amount of compensation and since the decision of lord Eldon in Hill v. Barcklay (1811) 18 Ves. 56 it has always been held that equity would not relieve merely on the ground that it could give compensation upon breach of any covenant in a lease except the covenant for payment 'of rent. But of course this left unaffected the undoubted jurisdiction to relieve in case of breach occasioned by fraud, accident, suprise or mistake.'

4. The law as here laid down has been reproduced in the Transfer of Property Act which provides expressly in Section 111 that a lease of immoveable property determines.' (g) by forfeiture; that is to say (1) in case the lessee breaks an express condition which provides that on breach thereof the lessor may re-enter, or the lease shall become void' and only gives power to relieve against such determination by forfeiture for non-payment of rent (Section 114). It is noteworthy that the Indian Legislature preferred to adhere to the old law in this respect, and did not adopt the provisions of Section 14 of the Conveyancing Act of 188, which was followed in several other Sections. Section 14 of that Act imposes restrictions on, and confers powers of relief against, forfeiture of leases generally and not merely as regards forfeiture for non-payment of rent, but it leaves the law as it was before with regard to cases such as the present, because it provides in sub-Sec. (6) that the section does not extend 'to a covenant or condition against the assigning, under letting, parting with the possession or disposing of the land leased; or to a condition for forfeiture on the bankruptcy of the lessee, or on the taking in execution of the lessee's interest. This section gives the English courts power to relieve against stipulations which were not regarded by courts of equity as stipulations by way of penalty because they were not intended to secure the re-payment of money; but it did not interfere with provisions such as the present, designed to prevent transfer of the land to third parties against the landlord's will, As observed by Lord Eldon in Hill v. Barcklay (1811) 18 Ves 56 as regards a covenant of this kind. 'It is sufficient that the lessor insists upon his covenant; and no one has a right to put him in a different situation,'-a view to which the legislature has adhered in sub-sec. 6 of Section 14 of the Conveyancing Act.

5. Such a covenant in my opinion cannot properly be regarded as a stipulation by way of penalty, and it is therefore unnecessary to decide whether provisions in leases for re-entry for breaches of other covenants in the lease can be regarded as coming within Section 74 Indian Contract Act as amended. Section 74 in its present form provides that 'when a contract has been broken if a sum is named in the contract as the amount to be paid in case of such breach or if the contract contains any other stipulation by way of penalty the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named, or as the case may be, the penalty stipulated for.' This amendment and the decisions which give rise to it, have been very fully discussed in Natesa Ayar v. Appavu Padayachi I.L.R. (1909) M 375 where it is pointed out that the word 'penalty' was first inserted in the Contract Act in 1899 by this amendment and is not defined in the Act. Equity, as we have seen, only considered stipulations in contracts penal which were intended to secure the payment of money, and it may be questioned whether the term has a more extended meaning in this section, which was designed to abolish, so far as India is concerned, the distinction between stipulations, liquidated damages and stipulations for pecuniary payments by way of penalty, and which speaks of the party complaining of the breach receiving reasonable compensation not exceeding the amount named or the penalty stipulated for, and whether it can be construed as affecting the express provisions of Section 111 of the Transfer of Property Act which makes leases determinable by virtue of provisions for re-entry on breach of covenant.

6. The fact that agricultural leases such as this one are except-ed from the operation of Sections 105 to 116 of the Transfer of Property Act does not in my opinion affect the present question. The Act was framed by eminent English Lawyers to reproduce the rules of English Law in so far as they are of general application and rest on principle as well as authority, and its provisions are in my opinion binding on us as rules of justice, equity and good conscience, when we have to deal with agricultural leases in the absence of any special reason for not applying them. The legislature, wisely in my opinion, if I may say so, has refrained from making these sections applicable proprio vigore to agricultural leases for fear of unnecessarily interfering with settled usages which it is undesirable to disturb. But in the absence of special reasons there is no ground for applying a different rule in the cases of agricultural leases and there are many decisions to that effect. For these reasons, I would allow the appeal and modify the decree of the District Judge by giving the plaintiff possession in addition to the reliefs already granted with costs throughout. Four months for removal of superstructure, etc.

Napier, J.

7. I agree with the learned Chief Justice that Section 74 of the Contract Act does not apply to the terms of the contract in this case. I cannot agree with Sadasiva Aiyar, J., that we can apply the principle on which the amendment to that section is based, as I think that we should be very careful in applying statutory provisions that are not in pari materia. For the same reason I would not seek the assistance of the Transfer of Property Act as a guide when we are dealing with equitable reliefs especially as in this; case we are dealing with material that has been excluded from the purview of the act by express words. Vide, Section 117. The provisions as to forfeiture in the Transfer of Property Act do not coincide with those enacted in the Conveyancing Act which does apply to agricultural leases. There is however no statutory bar to our seeking guidance from English law and I entirely agree with the learned Chief Justice that courts of equity would not grant relief in the present case. For these reasons I agree that the appeal should be allowed.

Kumaraswami Sastri, J.

8. I agree with the judgment of my Lord and have nothing to add.


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