REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICITION

CIVIL APPEAL NO.7471 OF 2003

Raj Kishore (Dead) By Lrs. …Appellants

Versus

Prem Singh & Ors. …Respondents

J U D G M E N T

T.S. THAKUR, J.

1.This appeal by special appeal arises out of a judgment

and order dated 25

th

February, 2003, passed by the High

Court of Madhya Pradesh at Jabalpur, Gwalior Bench,

whereby Second Appeal No.230 of 1995 filed by the

appellants-plaintiffs was allowed but only in part and to the

extent of granting a decree for injunction restraining the

defendants-respondents from interfering with the possession

of the appellants over the suit property till such time the

said property is partitioned between them through the

competent Revenue Court concerned. The facts necessary

for disposal of this appeal may be briefly stated as under:

2.Late Shri Raj Kishore the predecessor-in-interest of the

plaintiffs-appellants herein owned jointly with his brother

defendant-respondent no.2 Shri Jugal Kishore agricultural

land situate in different survey numbers of village Morasa,

Tehsil Kurwai in the State of Madhya Pradesh. In terms of a

sale-deed executed and registered on 6

th

July, 1974 by Shri

Raj Kishore an extent of 14 bighas and 15 biswas of the land

aforementioned from out of survey nos. 436, 439/1 and 441

was transferred to the defendant-respondent no.1 for a sum

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of Rs.6,000/- only. The plaintiff’s case is that the transfer

was only by way of security for the repayment of Rs.6,000/-

which according to the plaintiff was taken only as a loan.

The plaintiff’s further case is that return of the loan amount

by the 6

th

July, 1981 would result in the land in question

being transferred back to the plaintiff to which effect an

agreement was also executed between the parties to the

transaction on the 6

th

July, 1974 itself. The plaintiff alleged

that the possession of the land in question continued with

him and defendant no.2 as agreed. It was also agreed

between the parties that defendant no.1 shall not get the

disputed land mutated in their name till 6

th

July, 1981, the

date by which the plaintiff could repay the amount of loan

and secure the return of their land.

3.The plaintiff further alleged that contrary to the

agreement between the parties defendant no.1 got a

mutation regarding the land in question attested in his

favour although he had no right to do so in view of the

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specific stipulation contained in the agreement between the

parties forbidding any such mutation. The plaintiff asserted

that they had approached defendant no.1 several times to

receive back the sum of Rs.6,000/- borrowed from him and

to get the land in question transferred back to them, but the

said defendant had refused to do the needful. The plaintiff

in that backdrop prayed for a decree for declaration to the

effect that the sale-deed executed by him in favour of

defendant no.1 was void and ineffective and that he

continued to be in cultivating possession of the land as

owner thereof.

4.Defendant-respondent no.1 contested the suit by filing

a written statement in which he denied the assertion that

the sale-deed in question was executed by way of security

for repayment of any loan. It was also alleged that the

defendant was in possession of the land in question ever

since the execution of the sale-deed and that a mutation

based on the sale-deed had been attested in his favour.

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Defendant no.1 further alleged that he had made

improvements over the land and that a suit for declaration

simplicitor was not maintainable as the plaintiff was out of

the possession of the land in question.

5.On the pleadings of the parties the Trial Court of Civil

Judge First Class, Kurwai, District Vidisha, framed as many

as eight issues for determination and recorded evidence

adduced by the parties before it. The Trial Court eventually

held that the sale-deed in question was not executed as

security for any loan as alleged by the plaintiff nor was the

execution of agreement dated 6

th

July, 1974 proved. The

Trial Court further held that defendant no.1 had not forcibly

occupied the land in question during the pendency of the

suit as alleged by the plaintiff.

6.Aggrieved by the dismissal of the suit the plaintiff

appealed to the District Judge, Vidisha, M.P. During the

pendency of the said appeal the plaintiff filed an application

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for permission to amend the plaint to add an alternative

prayer to the effect that in case the sale-deed in favour of

defendant no.1 was held to be validly executed, the plaintiff

be given a decree for specific performance by execution of a

sale-deed for the transfer of the suit property in his favour.

This application was allowed by the Trial Court but in

revision the same was set aside and the amendment

application directed to be considered along with the main

appeal.

7.The First Appellate Court accordingly heard the appeal

and the application for amendment together and by its

judgment and order dated 19

th

July, 1995 dismissed both.

The First Appellate Court held that the prayer for

amendment of the plaint to seek a decree for the transfer of

the land in question in favour of the plaintiffs-appellant was

time barred and that the amendment would in any case alter

the nature of the suit.

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8.On the merits of the case the First Appellate Court held

that there was no stipulation in the sale-deed that the land

transferred thereby shall be retransferred to the Vendor by

executing a sale-deed in his favour. In so far as agreement

(marked Ex.D1) for retransfer of the land in question to the

plaintiff was concerned, the First Appellate Court held that

while the execution of the agreement was proved there was

no mention in the same about the sale-deed in question

being by way of security for repayment of the loan. The First

Appellate Court observed:

“It is clear from the above analysis that the alleged

sale deed of Ex.D-1 and agreement Ex.P-1 for which

dispute has been raised and evidence adduced is

actually a Sale deed. This Sale deed was not written

for the security of loan. Similarly it is also clear that

agreement of Ex.P-1 was written by the

Defendant No.1 but writing of Sale deed Ex.D-1 for

Security on the basis of this agreement is not proved

and the Appellants/Plaintiffs do not have eligibility of

any relief from Defendant No.1 on the basis of this

agreement. Hence, the judgment and decree passed

by the lower court is not erroneous.”

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9.Aggrieved by the judgment aforementioned the

plaintiffs-appellants filed second appeal No.230 of 1995

before the High Court of Madhya Pradesh, Gwalior Bench.

The High Court held that the dismissal of the application for

amendment by the First Appellate Court on the ground that

the prayer sought to be incorporated by the amendment was

barred by limitation was not correct. All the same the

proposed amendment would make no material difference

unless the plaintiff also pleaded that he was ready to

perform his part of the contract so as to entitle him to any

relief based on the agreement executed between the parties.

The dismissal of the application was on that ground upheld.

10.On the merits of the case the High Court took the view

that whenever a sale-deed was accompanied by a document

for re-conveyance of the property sold the transaction

between the parties would amount to a mortgage, subject to

the condition that the mortgagee must get the property re-

conveyed within the period stipulated for that purpose. The

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High Court further held that there was no cogent evidence

on record to prove that defendant no.1 was in possession of

the suit land on the date of the filing of the suit. Even in

Ex.D-2 relied upon by the defendant, the property was

recorded jointly in the names of the plaintiff and defendant

no.2 in the revenue records for the year 1980-81. The High

Court on that basis held that the finding of the Courts below

that the property was not held jointly by the plaintiff and

defendant no.2 was perverse. The appeal was accordingly

allowed in part and defendant no.1 restrained from

interfering with the possession of the plaintiff till such time

he obtained a decree for partition from the revenue court

concerned. The present appeal assails the above judgment

and order of the High Court as noticed earlier. Raj Kishore

the plaintiff in the suit having passed away during the

pendency of this appeal, his legal representatives were

brought on record on 5

th

November 2008.

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11.We have heard learned counsel for the parties at

length. As seen above, the High Court has, while dealing

with the substantial question of law framed by it for

determination, held that whenever conveyance of any

property is accompanied by a document for re-conveyance

of the same to the seller the transaction would amount to a

mortgage. That proposition of law is not in our opinion

correctly stated. Although the High Court has not elaborated

as to what kind of mortgage an agreement for re-

conveyance would bring about, it is obvious that the High

Court meant to say that the transaction would constitute a

mortgage by conditional sale. Mortgage by conditional sale

is described by Section 58 as under:

“58 (c) Mortgage by conditional sale.-Where, the

mortgagor ostensibly sells the mortgaged property—

on condition that on default of payment 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

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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.”

12.A bare reading of the above would show that for a

transaction to constitute mortgage by conditional sale it is

necessary that the condition is embodied in the document

that purports to effect the sale. That requirement is

stipulated by the proviso which admits of no exceptions.

13.The High Court it is manifest from the judgment under

appeal overlooked the proviso according to which the

condition regarding payment of the mortgage money as a

condition for transfer of the property to the seller must be

embodied in the sale-deed itself. That is not so in the instant

case. The sale-deed executed by the plaintiff in the instant

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case does not embody any condition like the one referred to

in clause (c) of Section 58 extracted above. The broad

statement of law made by the High Court to the effect that

every sale accompanied by an agreement for re-conveyance

of the property will constitute a mortgage by conditional sale

is not, therefore, correct. That is also the view taken by this

Court in K. Simrathmull v. Nanjalingiah Gowder AIR

1963 SC 1182 where the plaintiff had borrowed a certain

amount from the defendant and in lieu thereof executed a

deed of conveyance of certain land together with the house

standing thereon in favour of the defendant. Another deed

of re-conveyance was executed by the defendant on the

same date by which the defendant-purchaser of the property

agreed to re-convey the house provided the exercise of the

right of demanding re-conveyance took place within two

years and rent payable by the plaintiff is not in arrears for

more than six months at any time. On the breach of the

second condition stipulated by the agreement for re-

conveyance the defendant-purchaser refused to re-convey.

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In a suit for specific performance the plaintiff sought to

invoke the equitable jurisdiction of the Court to give him

relief against the forfeiture clause. This Court held that the

sale-deed and the deed of conveyance and rent were no

doubt parts of the same transaction yet the transaction did

not constitute a mortgage by conditional sale. This Court

observed:

“The sale deed the deed of reconveyance Ext. A-1

and the rent note Ext. B-1 were undoubtedly parts of

the same transaction. The plea of the plaintiff that

the sale deed Ext. A-1 constituted a transaction of

mortgage by conditional sale is inadmissible,

because the sale deed and the covenant for

reconveyance are contained in separate documents”.

14.The finding of the High Court as to the legal effect of

the transaction of sale followed by an agreement for re-

transfer of the property is not, therefore, legally sound.

15.Mr. Jain learned counsel for the appellants all the same

argued that the transaction in question was in the nature of

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an English Mortgage as defined under Section 58(e) of the

Transfer of Property Act, 1882 which reads as under:

“58 (e) English mortgage.- Where the mortgagor

binds himself to repay the mortgage-money on a

certain date, and transfers the mortgaged property

absolutely to the mortgagee, but subject to a proviso

that he will re-transfer it to the mortgagor upon

payment of the mortgage-money as agreed, the

transaction is called an English mortgage.”

16.A plain reading of the above would show that for a

transaction to constitute an English mortgage the following

essential conditions must be satisfied:

(1)The Mortgagor must bind himself to re-pay the

mortgage money on a certain date.

(2)The property mortgaged should be transferred

absolutely to the Mortgagee.

(3)Such absolute transfer should be made subject to

proviso that the Mortgagee shall re-convey the

property to the Mortgagor upon payment by him of the

mortgage money on the date the Mortgagor binds

himself to pay the same.

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17.It is only in cases where all the three requirements

indicated above are satisfied that the transaction constitutes

an English mortgage and not otherwise. The case at hand

does not satisfy all the three requirements mentioned

above. In particular the first requirement where under the

Mortgagor binds himself to re-pay the mortgage money on a

certain date is not satisfied in the instant case. We say so

because the sale-deed executed by the plaintiffs-appellants

does not contain any such stipulation binding the seller to

pay the amount of Rs.6,000/- on a certain date. As a matter

of fact, the sale-deed does not even remotely suggest that

the transaction is in the nature of a mortgage or that there

is any understanding or agreement between the parties

whereunder the property sold has to be re-transferred to the

seller. The only other document which could possibly contain

such a stipulation binding the Mortgagor to return the

mortgage money is the agreement for re-conveyance.

Significantly, this document is signed only by Prem Singh

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the purchaser and not by the seller. The document signed by

Prem Singh is described as an agreement for re-conveyance.

There is no doubt a stipulation that Prem Singh has agreed

to re-transfer the property to the seller in case the plaintiff

Raj Kishore returns the sum of Rs.6,000/- by 6

th

July, 1981

yet there is nothing in the document to suggest that the

seller had bound himself to abide by that stipulation. What is

important in terms of the requirement of Section 58 (e) is

not that the purchaser has agreed or bound himself to

transfer the property by a particular date but that seller has

bound himself to pay the amount by a certain date. Since

the seller is not a signatory to the agreement of re-

conveyance it is difficult to see how he can be said to have

bound himself to re-pay the mortgage money by the 6

th

July,

1981. We have, therefore, no difficulty in rejecting the

contention urged on behalf of the appellants that the

transaction was in the nature of an English Mortgage and the

suit was in essence a suit for redemption of such a

mortgage. We have also in that view no difficulty in repelling

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the contention urged by Mr. Jain that the stipulation of a

date for payment of money as a condition for re-conveyance

of the property is a clog on equity of redemption. We

cannot overlook the fact that the suit filed by the appellants

did not proceed on the basis that the transaction between

the parties tantamounted to a mortgage nor did the plaintiff

pray for a decree for redemption from the Court. The suit

was, as noticed earlier, one for declaration to the effect that

the sale-deed executed by him was void and the plaintiffs

continued to be owner and in occupation. The contention

that the transaction between the parties was in reality one in

the nature of a mortgage or that the suit was in substance

one for redemption has not, therefore, impressed us and is

accordingly rejected.

18.The only other question that arises for consideration is

whether the plaintiff could rely upon the agreement for re-

conveyance and pray for a decree for specific performance

thereof. The plaintiff had, in that regard, sought an

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amendment which was declined by the Courts below. The

first appellate Court was of the view that even if the relief

sought to be incorporated by amendment was allowed to be

incorporated the same would be time-barred. The High

Court was on the contrary of the view that even if the prayer

was allowed to be incorporated by amendment since there

was no averment in the plaint to the effect that the plaintiff

was ready and willing to perform his part of the contract any

such amendment would be of little value. The High Court

was, in our opinion, correct in the view taken by it. In a suit

for specific performance it is absolutely necessary for the

plaintiff to assert that he/she was always ready and willing

to perform the essential terms of the contract sought to be

enforced against the defendant. Section 16(c) of the Specific

Relief Act 1963 makes that requirement mandatory. There

is, in the present case, no averment as to the readiness and

willingness of the plaintiff to perform his part of the contract.

In the absence of such an averment, amendment of the

plaint to incorporate a prayer for specific performance of the

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agreement for re-conveyance would not have advanced the

case of the plaintiff or the appellants who have succeeded

him.

19.More importantly, in a case where the parties have

entered into a transaction of sale and also executed an

agreement for re-conveyance of the property sold, time

stipulated for re-conveyance is the essence of the contract.

The law on the subject is fairly well-settled by the decisions

of this Court in Chunchun Jha v. Ebadat Ali (AIR 1954 SC

345), Bismillah Begum (Smt) Dead by Lrs. v.

Rahmtullah Khan (Dead) by Lrs. (1998) 2 SCC 226 and

Gauri Shankar Prasad and Ors. v. Brahma Nand Singh

(2008) 8 SCC 287. Relying upon the decision of Federal

Court in Shanmugam Pillai v. Annalakshmi Ammal AIR

1950 FC 38, this Court in Caltex (India) Ltd. v. Bhagwan

Devi Marodia AIR 1969 SC 405, held that in contracts

relating to re-conveyance of property time is always the

essence of the contract. This Court observed:

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“At common law stipulation as to time in a contract

giving an option for renewal of a lease of land were

considered to be of the essence of the contract even

if they were not expressed to be so and were

construed as conditions precedent. Equity followed

the common law rule in respect of such contracts

and did not regard the stipulation as to time as not

of the essence of the bargain”

20.This Court also held that the principle stated by the

Federal Court in Ardeshir H. Mama v. Flora Sassoon AIR

1928 PC 208 to the effect that time is not normally the

essence of the contract in contracts relating to immovable

property did not apply to contracts for re-conveyance of the

immovable property. This Court observed:

“The above passage refers both to options for

renewal and options to repurchase where, in regard

to immovable property, as a matter of law time

becomes the essence of the contract. Therefore in

regard to contracts of reconveyance relating to

immovable property the principle laid down in A.H.

Mama v. Flora Sassoon – that time is not normally

the essence of the contract in contracts relating to

immovable property – does not apply. It is in fact,

so observed in Caltex (India) Ltd. case. In view of

the abovesaid decision of this Court relating to

contract of reconveyance, and inasmuch as the

amount was not paid within the stipulated time, the

said option in favour of the plaintiff must be deemed

to have “lapsed”. For the aforesaid reasons, the

appeal fails and is dismissed. No costs.”

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(emphasis added)

21.The Courts below have concurrently held that the

plaintiff had failed to prove that he had tendered the amount

of Rs.6,000/- to the purchaser within the date stipulated in

the agreement for re-conveyance. That being a finding of

fact any claim for re-conveyance made in default of the said

stipulation must fail for the right of re-conveyance cannot in

the case of default be saved from forfeiture. The general

principle of law that equity grants relief against penalty in a

money bond and also against the penal sums made payable

on breach of bonds has an exception to it. The exception

was recognized by the Federal Court in Shanmugam Pillai

case (supra) where by a majority the Court held that if

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 a privilege and may be exercised

in fulfillment of the conditions on the fulfillment of which it is

made exercisable. If the original vendor fails to act

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punctually according to the terms of the contract, the right

to repurchase will be lost and cannot be specifically

enforced. Refusal to enforce the terms 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

forfeiture arising as a result of breach of such a condition.

The Court followed the principle set out in Davis v. Thomas

(1830) 39 ER 195. The above principle was recognized to

be correct in K. Simrathmull case (supra). This Court also

quoted with approval the following passage from Halsbury’s

Laws of England Vol.14, III Edn., page 622, paragraph

1151:

“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 of the terms”.

22.In the present case there is no allegation of fraud,

accident or surprise to call for intervention of equity so as to

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save the plaintiffs right of re-conveyance of the property

against forfeiture.

23.In the result this appeal fails and is hereby dismissed

but in the circumstances without any order as to costs.

………… ……………… …J.

(MARKANDEY KATJU)

………… ……………… …J.

(T.S. THAKUR)

New Delhi

December 10, 2010

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