Appayya Shetty vs B.P.M. Mahammad Beari and Others

Seshagiri Ayyar, J.—I have had the advantage of reading the judgment which my learned brother is about to deliver. As the question is one

of considerable importance and as the decisions bearing on it are not consistent with each other, I think it desirable to state my views on the

subject shortly.

The lease to defendants Nos. 1 and 2 is a permanent one. The plaint says that the produce was set apart for a religious service. I take it that the

grantor was only anxious that ho should be paid the rent. He gave up rights of possession, etc., when he granted this permanent lease. The original

grantees paid the rant regularly for sixteen years. It was after the transfer of their interests to the third defendant in 1907 that default was made.

There were three years'' arrears of rent when the suit was brought. The document in question provides for the payment of the first year''s rent with

that of the second year. If rent remained unpaid even then, the lessees were liable to be evicted. The question is whether under the circumstances

above set forth, the defaulting lessees were entitled to be relieved from forfeiture. There is no statutory provision (or forfeiture on non-payment of

rent regarding agricultural leases. It is open to Courts to look at legislative provisions regarding the liability of other lessees and tanants as

embodying the principles of equity, justice and good conscience. I cannot accede to the proposition that such a guidance should be sought only

from English decisions and not from statutory provisions in this country.

Let us first see how the Legislature has treated tenants under the Estates Land Act. Chapter VI of the Act deals exhaustively with the remedies

open to the landholder. He can sue for the rent or distrain. The proceedings to be taken cm distraint are hemmed in with strict conditions. The

landholder has to exhaust all available/sources before he sells the defaulter''s interest in the holding. The distress will have to be withdrawn, if the

arrears are deposited or security given for their payment. Even after the commencement of the sale, the tenant is given a locus penitentiae to save

his property. It is thus clear that the Legislature has provided very salutary restrictions against turning out a tetant from bis fields. As regards other

lessees the Transfer of Property Act lays down that the forfeiture clause must be express. Section 114 provides for relief from the forfeiture

incurred even after the institution of the suit. The Indian Statute Law therefore distinctly leans against forfeiture for non-payment of rent. I may also

refer to Section 74 of the Contract Act which has abolished the distinction between penalty and liquidated damages and has enacted a general rule

affording relief to the defaulting party under certain limitations. Now, turning to the English law, the course of decisions leaves no room for doubt

that Courts have striven against evicting tenants from their holdings. Peachy v. Duke of Somerset (1724) 1 Str. 447 White and Tudor''s Leading

cases 255 to which our attention was drawn by Mr. Sitarama Rao and which was followed in the earlier decisions of this Court enunciates the

proposition that where the intention of the parties is only to enforce punctual payment, the forfeiture clause should be relieved against. In Bouser v.

Colly (1841) 1 Hare 109 the tenant applying to redeem a forfeited lease was not required to pay the rent and costs into Court before being

decreed possession. All the cases have been reviewed in Peachy v. Duke of Somerset (1724) 1 Str. 447 White and Tudor''s Leading cases 255

and the result of the authorities is stated to be that the proviso for re-entry on nonpayment of rent is regarded in equity as merely a security for the

rent, and that relief will be given on payment of the arrears and of the expenses incurred. In England there can be relief after suit is brought and

before judgment. There is a further indulgence given even after judgment provided the costs of the suit are paid in addition. The period within which

this latter remedy is available is now restricted to six months after judgment (15 & 16 Vict., cap. 76, Section 210). Belief after decree may not be

granted in India, as the effect of it will be to enable the executing Court to vary the decree. The decision in Nagappa v. Venkat Row ILR (1901)

Mad. 265 proceeded on the footing that the compromise decree was only evidence of the contract between the parties and that the Court was not

varying the decree in such cases. Balambhat v. Vinayak Ganpat Row ILR (1910) 35 Bom. 239 is to the same effect.

The rule to be deduced from an examination of legislative provisions and authorities bearing on;the subject is that prime facie the clause for re-

entry-for non-payment of rent is intended only as security for the payment of the rent. Therefore Courts should relieve against this clause, if the

arrears and expenses are paid and if the parties can be placed in status quo ante. In Kilmer v. British Columbia Orchard Lands, Ltd. (1913) A.C.

319 it was pointed out that Courts should not encourage the enforcement of the strict letter of the contract which contains a penal provision. The

payment of the money being the principal aim of the contract, the proviso is designed to hold out a threat relating to its fulfilment. As has been

concisely put in Story''s Equity Jurisprudence, Article 1316: ""In reason, in conscience, in natural equity, there is no ground to say, because a man

has stipulated for a penalty, in case of his omission to do a particular act (the real object of the parties being the performance of the act), that, if he

omits to do the act, he shall suffer an enormous loss, wholly disproportionate to the injury to the other party, If it be said that it is his own folly to

have made such a stipulation, it may equally well be said, that the folly of one man cannot authorize gross oppression on the other side. And law, as

a science, would be unworthy of the name if it did not to some extent provide the means of preventing the mischiefs of improvidence, rashness,

blind confidence, and credulity on one side, and, ""of skill, avarice, cunning, and a gross violation of the principles of morals and conscience on the

other, There are many cases in which Courts of Equity interfere upon mixed grounds of this sort."" In no country is there a greater need for the

application of this beneficent statement of the law than in India, and if it is true that we are administering both equity and law in our Courts, there

must be an endeavour on our part to soften the, rigour of the law and to mete out substantial justice unless our hands are tied by the legislature.

It is this view of the functions of a Court that inclines me to hesitate to follow some of the decisions of this Court to which I shall presently refer.

In Naraina Naik v. Vasudeva Bhatta ILR (1905) Mad. 389 it was broadly laid down that if a contract provides for days of grace where rent is not

paid in time, Courts should not relieve against forfeiture. Narayana Kamti and Others Vs. Handu Shetty, is to the same effect. The learned Judges

seem to suggest that the English decisions are distinguishable inasmuch as ordinarily days of grace are not provided in lease deeds executed in

England. Our attention has been drawn by Mr. Sitarama Rao to the forms of lease deeds printed in Wood-fall on Landlord and Tenant which give

days of grace (see page 1069). Apart from this, I fail to see on what principle the insertion of such a clause should be held to disentitle the tenant

from equitable relief. The observations of that great jurist Story are particularly applicable to such carefully designed provisions. I think the true

principle is that which Ramakrishna Mallay Vs. Baburaya alias Venkatesha Hegade and Others, enunciates. Each case must be judged by itself.

The delay, the conduct of the parties and the difficulties to which the landholder had been put, should be weighed against the tenant. A number of

circumstances may be mentioned which would induce Courts to condone the faults of the tenant. A hard and fast rule that a contract providing for

days of grace ought to be enforced strictly is not calculated to advance justice. Ramakrishna Mallay Vs. Baburaya alias Venkatesha Hegade and

Others, has been followed by Sadasiva Ayyar and Tyabji, JJ., in Vidyapurna Thirthaswamiar Vs. Rangappayya and Others, . In Kinnanalva v.

Puvakke Second Appeal No. 2568 of 1912 the same learned Judges relieved against non payment of six years'' arrears. The earlier decisions of

this Court are all favourable to the tenants; Kottal Uppi v. Edavalath Thathan Nambudiri (1871) 6 M.H.C.R. 258 and Subraya v. Krishna (1882)

6 Mad. 159, In Timmarsa Puranik v. Badya (1865) 2 Bom. H.C.R. 70, the rule of Peachy v. Duke of Somerset (1724) 1 Str. 447 White and

Tudor''s Leading Cases 255 was applied.

In the present case, the pleadings and the findings do not show that the defendants have forfeited their claim to equitable relief by any conduct

on their part.

I would therofore reverse the decrees of the Courts below and direct that if the defendants do not pay the arrears of rent due up to November

1914 with interest thereon at 12 per cent per annum as well as the costs of the plaintiff in all the three Courts, within four months from the date of

this decree, they shall deliver up possession of the property, and this second appeal shall stand dismissed with costs. If the payment is made they

shall be put in possession of the suit property, if the plaintiff has already taken possession, with mesne profits to he determined in execution.

Napier, J.

The only question that arises in this appeal is whether the third defendant the assignee from defendants 1 and 2 of the lease under the mulgeni

karar is entitled to be relieved against forfeiture for non-payment of rent. The rent is three years in arrears and the karar exhibited allowed a period

of one year before the operation of the forfeiture clause. On behalf of the plaintiff it is conceded that the forfeiture clause can be relieved against,

but it is contended that where there are days of grace, this rule does not apply on behalf of the defendants it is contended that the alleged rule that

after the days of grace the clause must be enforced is not supported by authority. In Narayana Kamti and Others Vs. Handu Shetty, and in

Naraina Naik v. Vasudeva Bhatta ILR (1905) Mad. 389 Judges of this Court undoubtedly laid down the strict rule, bat in the earliest case of this

Court--Kottal Uppi v. Edavalath Thathan Nambudiri (1871) 6 M.H.C.R. 258--the principle is stated to be this: that where the intention of the

parties was that the forfeiture clause should be a penalty for the purpose of securing rent, it should always be relieved against. It is true that in that

case there were no days of grace, but I fail to see how what was intended as a benefit to the lessee can be made use of to deprive the Court of its

power to grant relief. The latest case is Ramakrishna Mallay Vs. Baburaya alias Venkatesha Hegade and Others, . There the late Chief Justice and

Mr. Justice Sankaran Nair laid down that relief must depend upon the facts of the particular case. They distinguish Narayana Kamti and Others

Vs. Handu Shetty, on the ground that in that case a long period was allowed, some eight months, and there was no stipulation that the tenant

should in default lose the value of his improvements, and rely on the doctrine laid down in Kottal Uppi v. Edavalath Thathan Nambudiri (1971) 6

M.H.C.R. 258 and on Mahalakshmi Amma and Another Vs. Lakshmi and Others, a case in which a period of grace was allowed and in spite of

that, the clause was relieved against. I quite agree that the question must to a certain extent depend upon the facts of each particular case, but I

think that it is necessary to decide whether the existence of days of grace is a bar as held in the two cases quoted above.

It is sought to apply the provisions of the Transfer of Property Act as laying down the principle which should guide the Court although

admittedly those sections do not apply to agricultural leases; and this contention has found favour with some Judges of this Court, and my learned

brother adopts this view. With all respect I regret I cannot agree. I entirely accept the proposition that whore the statute embodies equities with

respect to certain classes of transactions with which it is dealing it is reasonable to found equities with regard to other classes of transactions on the

principles there enunciated, but where the statute specifically excludes one transaction of the same class as that which is being dealt with from its

purview, we cannot apply the same doctrine. We do not know why the legislature exempted agricultural leases from the purview of the Transfer of

Property Act lease sections. It might be that the legislature thought that the provisions for forfeiture of rent embodied in those sections were not

suitable to agricultural leases. It is not open to us to investigate the reasons for the exclusion and we cannot therefore presume that some other

cause operated on the mind of the legislature. If we are to apply any equity in relieving against forfeiture, we must in my view seek for it outside the

Transfer of Property Act; and the proper course is to ascertain the practice in England and apply it subject to such modifications that seem proper

in view of the conditions in this country. This was the course adopted by this Court in Kottal Uppi v. Edavalath Thathan Nambadri (1971) 6

M.H.C.R. 258. There reliance is placed on Peachy v. Duke of Somerset (1724) 1 Str. 447 White and Tudor''s Leading Cases 255. The language

of the Lord Chancellor is as follows: ""The true ground of the relief against penalties is from the original intent of the case where the penalty is

designed only to secure money and the Court gives him all that he expected or desired."" This is treated as the leading case in White and Tudor,

Vol. II, where the learned editor points out that even whore the penalty of the bond is to secure a collateral ] object, the Court will grant relief

[vide, Sloman v. Walter (1784) 1 Bro. Ch. 418 White and Tudor''s Leading Cases 8th Edn. 264] and states as the result of the examination of the

authorities that from a very early period, equity would, at any indefinite time after the tenant had incurred forfeiture and been ejected for

nonpayment of rent at a particular time under the stipulation in his lease relieve him upon his paying to the lessor the rent accrued due, interests and

costs; upon this principle that as the right of entry was intended merely as security for the rent, the lessor thereby received full compensation and

was put in the same situation as if the rent had been paid to him when it was originally due. The principle was restated by the Lord Chancellor in

Sanders v. Pope (1906) 12 Ves. J. 282 with an explanation at page 289 as to the origin of the covenant which is as follows:

The obvious intention of the clause is to secure payment of the rent that the landlord may not be put to his action of debt coming from time to time

against an insolvent estate; but may be enabled to recover possession of the premises. In that case equity is in the constant course of relieving the

tenant paying the rent and all expenses, and placing his landlord in exactly the same situation.

In a later case Hill v. Barclay (1811) 18 Ves. J. 56, the Lord Chancellor distinguishes the case of forfeiture arising out of a covenant to repair

on the ground that in soma cases it might not be possible to put the landlord in exactly the same position by ordering the tenant to make the

necessary repairs. The doctrine is stated in Story''s Equity Jurisprudence as founded on the theory that the right of entry is deamed to be intended

to be a mere security for the payment of rent, and in paragraph 1316, the learned editor states as follows: ""In reason, in conscience, in natural

equity, there is no ground to say, because a man has stipulated for a penalty in case of his omission to do a particular act (the real object of thd

parties being the performance of the act) that, if he omits to do the act, he shall suffer enormous loss, wholly disproportionate to the injury to the

other party."" It seems to me that we should apply these principles in India and I find nothing in the cases and nothing in the principles on which they

are founded to support the view that the insertion of days of grace in a lease will oust the jurisdiction of the Court to relieve. The origin of the

covenant and its purpose are enunciated in the above cases. We have to apply it to the present case. This is a permanent lease, a lease very

common on the West Coast of India, one by which the lessor deprives himself of any possibility of increase of rent for all time.

He has reserved nothing to himself but his muli right. The lease-holder has a permanent and alienable right in the property, a position infinitely

stronger than that of the agricultural lessee, in England for a term of 7-14 or 21 years. In relieving against the forfeiture we can therefore give to the

janmi ""all that he expected or desired"" in the words of the Lord Chancellor in Peachy v. Duke of Somerset (1724) 1 Str. 447. White and Tudor''s

Leading Cases 255, i.e., the rent reserved and in my opinion we should be very slow to refuse to do this, in these circumstances. Neither the fact

that there were days of grace nor that the rent is three years in arrears should operate to prevent the application of the doctrine. I recognize that

this could lead to a systematic refusal to pay rents until after a suit to enforce the forfeiture clause; but I think that the injury is exaggerated. Such

practice will bring its own punishments for it would lead to the discontinuance of permanent leases by mulgenidars and compel them to grant

mulgeni chits for short terms only as is done in many cases. I would add that legislative authority was given to this doctrine of relief in 4 Geo. Ill,

cap. 28, and its extent curtailed by the Common Law Procedure Act of 1852, Section 210. I do not think it necessary however to refer to the

specific provisions of the Act as I would prefer to base my judgment on the principles enunciated by the Courts of Chancery apart from the Act.