Thacker''s Press and Directories Ltd. vs Gopi Nath Auddy

P.N. Mookerjee, J.—This appeal is directed against a judgment of our learned brother Sinha, J., dismissing the Appellant''s application for relief against forfeiture. The application came as a sequel to a suit for ejectment in which a decree was passed by consent of parties. That decree itself provided for relief against forfeiture but, that relief having become unavailable due to lapse of time, the instant proceeding was started for fresh relief on an alleged fresh cause of action upon a broader basis and a much widened scope. The history of this litigation is somewhat long and its chequered career bristles with intricacies of law and variety and diversity of circumstances. A brief recapitulation of this history is necessary for the decision of this appeal.

The litigation started on July 26, 1955, in the form of a suit (Ejectment Suit No. 2105 of 1955) for ejectment (recovery of possession), arrears of rents and taxes, mesne profits, damages etc. Respondent No. 1 was the Plaintiff in the said suit and the present Appellant was the sole Defendant at the time of its institution. Ejectment was claimed on the ground of forfeiture of the Defendant''s tenancy of the suit premises (premises No. 6B Bentinck Street) on account of non-payment of rent since November 1954. This claim was made under a specific term of the lease between the parties, dated March 21, 1934, which provided, inter alia, for forfeiture of the lease "if the rent payable or any part thereof would at any time be unpaid for 21 days after becoming payable", the rent being payable under the said lease "on or before the 10th of every month in respect of the preceding month". In the suit, the present Respondent No. 2, the Metropolitan Bank Limited, got itself added as Defendant No. 2 on the allegation it was a ''hypothecate'' in respect of the demised property from the tenant Defendant No. 1.

On March 6, 1958, when the suit was called on for hearing before Dutta, J., counsel for the present Appellant admitted the claim of the Plaintiff-Respondent No. 1, so far as it was based on and referable to arrears of rent, and prayed for relief against forfeiture in terms of Section 114 of the Transfer of Property Act by offering its properties as security for the landlord''s dues on the above account and assuring payment within a month. To enable compliance with the Statute the suit was adjourned for a fortnight and on March 21, 1958, a consent decree was passed as follows:

Suit No. 2105 of 1955 In the High Court at Calcutta Ordinary Original Civil Jurisdiction Gopinath Auddy, residing at No. 58/1, Wellington Street, Calcutta, within the said jurisdiction...... Plaintiff v. Thacker''s Press & Directories Ltd., a Limited Liability company having its registered office and carrying on business at No. 6B Bentinck Street (formerly a portion of premises Nos. 6 and 7 Bentinck Street), Calcutta, within the said jurisdiction, (2) Metropolitan Bank Ltd., having its registered office at No. 7 Chowringhee Road, Calcutta, within the aforesaid jurisdiction...... Defendants.

Suit for recovery of possession of No. 6B Bentinck Street, Calcutta, for Rupees six thousand and eight hundred being the arrears of rent, for Rupees two hundred and ninety-four annas four and pies three being the occupier''s share of taxes, Rupees two hundred and twenty-seven annas thirteen being the excess owner''s share of taxes, Rupees five thousand for damages, Rupees three thousand for mesne profits, for costs &c. This cause coming on this day for final disposal before the Hon''ble Sushil Kumar Dutta, one of the Judges of this Court, in the presence of the Advocates for the parties. And it appearing that the Plaintiff is pressing his claim only with reference to arrear of rent in respect of the premises in suit and not on subletting or on other grounds as mentioned in the plaint. And upon the Defendant Thacker''s Press & Directories Ltd., charging its properties subject to the existing charges or decree in respect of the said properties, if any, at No. 6B Bentinck Street, Calcutta, in favour of the Plaintiff for the sum of Rupees forty thousand nine hundred and forty-seven being the arrears of rents mesne profits interest and excess arrears shares of Corporation taxes upto this date and costs of the Plaintiff. It is ordered and decreed that the interest at six per cent per annum will run on the sum of Rupees thirty-four thousand and five hundred and ninety-five which represent arrears of rents and mesne profits from the date of the decree until realisation. And upon the Defendant Thacker''s Press & Directories Ltd. paying to the Plaintiff the said sum of Rupees forty thousand nine hundred and forty-seven within fifteen days from the date hereof. It is further ordered and decreed that the Defendant Thacker''s Press & Directories Ltd. shall be entitled to hold the said property as if no forfeiture of the lease had occurred. And in default of payment of the said sum of Rupees forty thousand nine hundred and forty-seven within fifteen days from the date hereof as aforesaid. It is further ordered and decreed that the Defendant Thacker''s Press & Directories Ltd. do deliver up quite vacant and peaceful possession of the said property, and it is further ordered and decreed that the Defendant Thacker''s Press & Directories Ltd. do pay to the Plaintiff mesne profits at the existing rate of rent of the sum of Rupees eight hundred and fifty per month commencing from the twenty-second day of March one thousand nine hundred and fifty-eight until possession thereof is delivered up to the Plaintiff as aforesaid. It is further ordered and decreed that the Defendant Thacker''s Press & Directories Ltd. do pay to the Defendant the Metropolitan Bank Limited its cost of this suit to be taxed by the Taxing Officer of this Hon''ble Court as of a defended suit and such costs to be added by the said Defendant the Metropolitan Bank Ltd. to its claim under the mortgage decree obtained by it against the Defendant Thacker''s Press & Directories Ltd. in Suit No. 1734 of 1957 (The Metropolitan Bank Ltd. v. The Thacker''s Press and Directories Ltd.). It is further ordered that this decree be drawn up expeditiously.

Witness, Sri Phani Bhusan Chakrabarti, Chief Justice at Calcutta aforesaid, the twenty-first day of March in the year one thousand nine hundred and fifty-eight. The decree following and being based upon a minute of the Court recorded as herein below set out�

Suit No. 2015 of 1955 In the High Court at Calcutta Ordinary Original Civil Jurisdiction Friday, the 21st March, 1958.

Before The Honourable Mr. Justice Dutt.

Gopinath Auddy v. Thacker''s Press & Directories Ltd. and Anr.

Mr. S.R. Das Gupta for the Plaintiffs hands over brief of documents and filed additional written statement. Mr. Sudhamoy Bose for Defendant No. 1, Mr. B. C. Dutta for Defendant No. 2. It is recorded that the Plaintiff is pressing his claim only with reference to arrears of rent and not to subletting or other grounds mentioned in the plaint.

The Court: On the Defendant No. 1 charging its properties subject to the existing charges or decree in respect of the properties if any at No. 6B Bentinck Street in favour of the Plaintiff for the sum of Rs. 40,947 for the arrears of rent together with interest @ 6 % thereon from date. The Defendant upon making payments of this sum of Rs. 40,947 within 15 days from date. The Defendant will hold the property as if forfeiture of the lease had not occurred. In the case the sum of Rs. 40,947 is not paid within 15 days from date, there will be decree for ejectment and mesne profits at existing rate of rent @ Rs. 850 per month. Mr. Das Gupta states that the security is sufficient for the recovery of the sum of Rs. 40,947 costs of Defendant No. 2 to be added to the mortgage decree. Decree to be drawn up expeditiously.

No payment having been made in terms of the above decree, the decree-holder (Plaintiff) Respondent took out execution on July 22, 1958, On August 18, 1958, the Appellant preferred an appeal (Appeal No. 164 of 1958) from the above decree, which was eventually dismissed on March 22, 1961, by P. B. Mukharji and Sinha, JJ. on the ground that, the decree in question being a consent decree, no appeal lay therefrom. The intervening period was spent in a proceeding for determination of the nature of the above decree, as the Appellant pleaded before the Appellate Court that the same was not a consent decree, which plea was ultimately negatived by Dutta, J. in the above intervening proceeding on January 27, 1961, after a detailed and prolonged enquiry on evidence under the Appellate Court''s order. There were other proceedings filed by the Appellant in the meantime, but their only result was that the Appellant succeeded in getting interim stay of the above decree on certain terms as to deposit of certain amounts.

The dismissal of the above appeal was followed by the Appellant''s suit for setting aside the decree in question and until August 24, 1961, the Appellant succeeded in restraining execution of the said decree on certain further deposits, the total of all the above deposits amounting or coming upto Rs. 40,947. On August 30, 1961, the present application was made by the Appellant.

In this application the main prayer was relief against and in respect of the above consent decree for ejectment. Its breach on the part of the Appellant was admitted in that the amount of Rs. 40,947, payable under it to the Plaintiff, was not paid within the stipulated time, but it was claimed that that only entitled the Plaintiff to reasonable compensation and not to the ejectment, provided in the said decree. That provision, according to the Appellant, was in the nature of a penalty or forfeiture, and the Appellant claimed that it was entitled to be relieved against the same in law and/or in equity. The Statutes, apparently in contemplation, were Section 114 of the Transfer of Property Act and Section 74 of the Indian Contract Act.

Before Sinha, J., however, by whom the application came to be heard, the Appellant appears to have confined his claim only to relief against forfeiture, presumably u/s 114 of the Transfer of Property Act which, of course, embodied the relative principles of equity, but in this Court the claim was broadened by invoking, further, Section 74 of the Indian Contract Act and seeking relief also against penalty in terms of that Section.

Sinha, J. dismissed the application broadly on the ground that relief u/s 114 of the Transfer of Property Act, which is a discretionary and equitable relief, was not available to the Appellant in view of his conduct and the circumstances of this case. The relevant part of his judgment may be quoted here as follows:

...I will assume for the moment that relief against forfeiture can be granted in respect of a consent decree and in execution proceedings. The question is as to whether such relief should be granted upon the facts of this case. The lease was executed in 1934. As long ago as 1954 the right to forfeit the lease for non-payment of rent was exercised by the landlord. Since then, and until August 1961 no rents were paid, but on the contrary a series of litigation were launched. The lessee resisted the suit for ejectment and agreed to certain terms whereby he had to pay the dues of landlord within 15 days. Not only he did not pay within the stipulated time but he has taken a false defence that the decree was not by consent, and later on that the lessor was guilty of misrepresentation or fraud. The history of the litigation clearly shows that the lessee was making repeated attempts to have the period of the lease extended without payment of the rent. Further, a third party has not only come into picture but its rights are inextricably mixed up with the affairs of the lessee, I am referring to the Defendant Bank. Now, it has obtained an independent lease from the landlord, and although the demise is subject to the result of the pending litigation I do not think that this affects the question.... It would, therefore, be contrary to all accepted principles adumbrated above, to grant relief against forfeiture, to a tenant of this description. The tenant here has been guilty of harassing the landlord with frivolous litigations for over ten years. It has taken false defences and instituted frivolous suits and has made a habit of it. The rights of third parties have intervened. It is but apparent that unless the tenant is ejected the same state of things would continue and there will be no end to these series of litigations. The Petitioner has not come to a Court of equity with clean hands.

For his above conclusion, Sinha, J. relied on the well-known decision of the Supreme Court in Namdeo Lokman Lodhi Vs. Narmadabai and Others, , explaining and approving the opinion, expressed by Lord Loreburn in Hyman v. Rose (1912) A.C. 623.

In the above view and in view of his above riding on the merits, Sinha, J. did not deem it necessary to pronounce upon the two preliminary objections of the decree-holder that Section 114 of the Transfer of Property Act or, for the matter of that, relief against forfeiture, was not available in execution proceedings or in respect of a consent decree.

Before us, Sinha, J. decision has been assailed on two grounds. In the first place, it has been urged that he was wrong in holding, in the facts and circumstances of the present case, that the Respondent No. 2 was a third party in the true sense of the term and, its interest having intervened, there was no further any scope for the discretionary or equitable relief against forfeiture. In the second place, Mr. Mitter has contended that Sinha, J. over-looked that the Appellant was claiming relief not only under the discretionary Section 114 of the Transfer of Property Act or in equity against forfeiture but under the other or imperative statutory provision of Section 74 of the Indian Contract Act against penalty and the claim to this latter relief under this latter Section was statutory and imperative, where no question of exercise of discretion or of discretionary or equitable jurisdiction at all arose. Mr. Mitter has, accordingly, contended that in any view of the matter his client was entitled to be relieved against the rigors of the consent decree in question by way of relief against penalty u/s 74 of the Indian Contract Act. This aspect of the matter does not appear to have been urged before or considered by our learned brother Sinha, J. but, having regard to its importance, primarily as a point of law, we have allowed Mr. Mitter to urge in support of this appeal notwithstanding Mr. Roy''s objection that it is not a pure point of law but is at any rate a mixed question of law and fact.

On the first contention of Mr. Mitter we are prepared to hold that it is not a case where, strictly speaking, a third party''s interest has intervened and we would not refuse the Appellant relief, if it is otherwise available, merely on that ground. The Appellant, however, is not in such happy or fortunate position, as the other findings of Sinha, J. to the effect, namely, that "the tenant (Appellant) here has been guilty of a chronic non-payment of rent", that "it is in somewhat involved circumstances", that "it has been harassing the landlord (Respondent) with exasperating and protracted litigations and false and frivolous defence and has made a habit of it and has not come with clean hands", cannot be questioned on the materials before us. These findings are, in our opinion, sufficient to put the Appellant out of Court, so far as any discretionary and or equitable relief is concerned: vide Namdeo Lokman Lodhi v. Narmadabai (Supra ), and Sinha J. was, therefore, right in refusing such relief to the Appellant and dismissing its application, so far as it related to relief against forfeiture in equity or under the Statute: Section 114 of the Transfer of Property Act.

This brings us to the other argument of Mr. Mitter, founded on Section 74 of the Indian Contract Act. Here the Statute is positive and imperative. No question of equity arises under it and the point is not one of discretion. If the case comes under this Section and its conditions are satisfied, relief must be given under it and cannot be refused on equitable considerations or discretionary grounds. Sinha, J. findings, therefore, made for purposes of Section 114 of the Transfer of Property Act or for refusing relief against forfeiture under that Section, or in equity, would be irrelevant on this part of the case. Now, Section 74 is in these terms:

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, penalty stipulated for. The Section, so far as the instant case is concerned, provides in its relevant part, for, inter alia, relief against penalty on payment of reasonable compensation. That part postulates (a) breach of a contract, (b) a stipulation by way of a penalty in case of such breach and (c) relief against such penalty on payment of reasonable compensation. That, for the application of this part of the Section, there must be a stipulation by way of penalty cannot be disputed, whatever controversy may be raised as to the nature of this penalty, namely, whether it should be read ejus dem generis with the other part of the Statute and be held to include only damages in money or kind, or whether it should be held to extend to any kind of penalty, forfeiture of rights to property, corporeal, incorporeal or otherwise: vide in this connection Fateh Chand v. Balkishan Dass AIR 1963 S.C. 1465. What, however, is a penalty is often a very complicated question. On the one hand, it is clear that forfeiture of a right is a penalty, but forfeiture of a mere privilege is not. On the other hand, the distinction between a right and a mere privilege is thin and often elusive. This is illustrated by the decision of the Federal Court in Shanmugam Pillai v. Annalak Ammal AIR 1950 F.C. 38 where great minds differed on this point. The majority view, however, which held that the stipulation there was not a penalty, has since been approved and re-emphasised in the recent case of K. Simrathmull Vs. S. Nanjalingiah Gowder, . These decisions afford us valuable guide in the solution of the present problem.

Reading the minutes and the consent decree, which we have set out above, we have no doubt in our mind notwithstanding the unhappy and unsatisfactory wording of the said two documents that the same proceeded upon the accepted footing that the Plaintiff (Respondent No. 1) was entitled to the dues on account of rent etc., as claimed in the plaint, and that the Appellant Defendant''s lease had determined by forfeiture and they gave the Plaintiff a composite decree for money with interest, as mentioned therein, and for ejectment too, on the ground of forfeiture subject to this, that on payment of the above money dues within the stipulated time, the decree for money would be satisfied and the forfeiture of the lease also would be waived and the decree for ejectment, based thereon, would go, but on default both the above parts of the decree will become executable. In other words, it gave the tenant judgment-debtor the indulgence or privilege of avoiding and getting rid of the forfeiture and the decree for money on payment of the stipulated amount within the stipulated time. On the principle of the aforementioned Federal Court decision Shanmugam Pillai v. Annalak Ammal AIR 1950 F.C. 38 as now explained and accepted in the above-cited Supreme Court authority on the point, viz. K. Simrathmull Vs. S. Nanjalingiah Gowder, , this cannot be regarded as a term of penalty with the consequence that Section 74 would not, on this view of the matter, even apart from any other consideration, apply to the instant case.

In the above view of the matter, the two cases, particularly relied on by Mr. Mitter on this part of the case, namely the ''penalty� aspect, cease to have any relevance or importance. These two decisions�In Re: Dagenham (Thames) Dock Company, Ex parte Hulse (1873) L.R. 8 Ch. 1022 and John H. Kilmer v. British Columbia Orchard Trust Limited (1913) A.C. 319 �are well-known authorities on the point of ''penalty'', but they were clear cases of penalty, that is, forfeiture of money or property or its equivalent or some right in property as distinguished from forfeiture better termed ''lapse'' or ''withdrawal'' of some conditional privilege or indulgence because of non-fulfillment of or non-compliance with some essential prerequisite or condition. This distinction underlies the crux of the problem before us and its importance hag been well and sufficiently brought out in the two authoritative pronouncements in this country, namely Shanmugam v. Annalak (Supra) and Simrathmull v. Nanjalingiah (Supra), already cited. In both the said decisions, Kilmer''s case (1913) A.C. 319, which is the sheet-anchor of Mr. Mitter''s submission on the above point and where the Privy Council approved and applied the principle, laid down by the English Court of appeal in Chancery in In re: Dagenham Dock''s case was expressly considered and distinguished and held inapplicable to cases of the present type. That, indeed, is also the view-point in the latter Privy Council case of Steedman v. Drinkle (1916) 1 AC 275 where Kilmer''s case (7) was explained and distinguished and its distinctive features were carefully analysed.

On the other two cases, cited by Mr. Mitter, namely, House Property Investment Company Limited v. James Walker, Goldsmith and Silversmith Limited (1948) 1 K.B. 257 and Barrow v. Isaacs and Son (1891) 1 Q.B. 417 it is enough to say that, on the view taken above by us, they do not touch the present case. The first case cited is merely an illustration �an apt application of the statutory rule of relief against forfeiture, akin, on principle, to Section 114 and Section 114A of the Transfer of Property Act, but in an extended form as embodied in the English Statute concerned, and the second is a familiar example of the equitable relief against forfeiture, which underlies the above statutory rule. The test, again, which Mr. Roy emphasised to distinguish between penalty and liquidated damages, relying on the well-known decision of the Privy Council in Rowland Valentine Webster v. William David Bosanquet (1912) A.C. 394 is not of much relevance here as, apart from anything else, the amended Section 74 of the Indian Contract Act, with which we are here concerned, has laid down one uniform rule in the matter of relief against breaches of contract on all stipulations, whether by way of penalty or liquidated damages: vide Fateh Chand v. Balkishan Dass (Supra). On Mr. Roy''s plea of limitation under Article 181 of the Indian Limitation Act which does not impose us, prima facie, all we need say is that on the view taken above by us of this instant case, it is unnecessary to give it fuller consideration and pronounce finally upon it.

In the premises, we would overrule Mr. Mitter''s arguments and dismiss this appeal with costs to the Plaintiff Respondent.

Certified for two counsel.

The interim order, if any, will stand vacated, but the operation of this direction and of this judgment will remain stayed until November 26. 1963.

Sen, J.

I agree.