Annalakshmi Ammal and Another vs Shanmugam Pillai and Others

Alfred Henry Lionel Leach, C.J.—This appeal arises out of a suit filed in the Court of the Subordinate Judge of Madura for the redemption

of an alleged mortgage by conditional sale and in the alternative for a decree for specific performance of an agreement to resell. Admittedly the suit

on the basis of the alleged mortgage did not lie by reason of the proviso inserted in Section 58(c) of the Transfer of Property Act by the Amending

Act of 1929. The learned Subordinate Judge found, however, that the plaintiffs were entitled to a decree for specific performance. The defendants

have appealed.

On the 13th October, 1921, the first plaintiff''s elder brother, Arumugam, the first plaintiff and his younger brother, the second plaintiff, for

himself and his minor son, the fifth plaintiff mortgaged 58 59 acres of agricultural land to one Viswanatha Aiyar to secure a loan of Rs. 20,000

bearing interest at 10 1/2 per cent, per annum. On the 12th March, 1929, the first plaintiff, as the manager of the family, created a second

mortgage over the same properties in favour of the first mortgagee''s brother Balasubramaniam to secure a loan of Rs. 5,000. Viswanatha Aiyar

died in 1930 and the surviving members of the family became entitled to both the mortgages. On the 7th January, 1937, there was due under those

mortgages the sum of Rs. 31,300. On that date the mortgagors sold to Balasubramaniam 32 17 acres of the mortgaged property in settlement of

this claim. Two days later Balasubramaniam leased the 32-17 acres to the first plaintiff for a period of six years at an annual rental of Rs. 1,450.

The first instalment of the rent was to be paid on the 30th April, 1938, and the subsequent instalments on the 30th April in each succeeding year. In

default of payment of any instalment of rent by the due date the amount was to bear interest 12 per cent, per annum. On the same day

Balasubramaniam agreed with the lessee that if he paid the rent regularly and paid Rs. 31,500 before the 30th April, 1943, he would reconey to

him the 32.17 acres. It is this agreement which is made the basis of the claim for specific performance.

Balasubramaniam was joint with his younger brother Rangaswami. In 1938 they separated and to Rangaswami was assigned as part of his share

in the family estate the 32.17 acres of land, subject to the lease and the agreement of the 9th January, 1937. Rangaswami died on the 12th

October, 1942. The suit was brought against his daughters as his heirs. They are the appellants.

Clauses 2 and 3 of the agreement to re-sell are the important ones and they read as follows:

If this agreement does not stand cancelled under Clause 3, infra, this agreement shall be in force only up to 30th April, 1943. Time is the

essence of this agreement.

Should the said party No. 2 without making payment of the amount in full, be in arrears in respect of any instalment out of the 7 instalments of

the lease amounts payable in each year on the 30th April of the respective year and of the lease amount alone payable by 30th September, 1937,

on the succeeding due date, i.e., by 30th April, 1938, or, should he be in arrears without wholly paying the sircar kist, etc., pertaining to the lands

covered by the lease, which he himself has promised to pay for the lease period, i.e., from fasli 1345 (1935-36) to fasli 1352 (1942-43) as

mentioned in the lease deed, this sale agreement shall stand cancelled forthwith without reference to the subsequent due dates and furthermore, the

aforesaid party No. 2 shall forfeit all the rights and reliefs belonging to the said party No. 2 under this agreement. Subject to the aforesaid

conditions alone, we have entered into this agreement of sale, with mutual consent.

Only the first instalment of the rent payable under the lease was paid in time. On the 25th December, 1938, the lessee attorned to Rangaswami

Aiyar and on that date the lessee paid the rent which fell due on the 30th April, 1938. Admittedly, this default was waived both in respect of the

lease and of the agreement, but it was specifically provided that the waiver was to be without prejudice to subsequent defaults. The rent due on the

30th April, 1939, was not paid until the 12th December of that year and that due on the 30th April, 1940, not until the 22nd December, 1940. By

the 20th July, 1942, the lessee had paid less the sum of Rs. 447, what was due in respect of the fifth and sixth instalments. It is the case for the

plaintiffs that before the suit was filed they tendered the Rs. 31,500, and Rs. 1,450, the amount of the 7th and last instalment. We will assume this

to be the case.

The learned Subordinate Judge held that the plaintiffs were entitled to a decree for specific performance of the agreement because they were

prepared to pay the last instalment of the rent and had tendered the Rs. 31,500. The purchase consideration was in fact paid into Court. In these

circumstances the learned Subordinate Judge was of the opinion that the lessor had waived all default and consequently the plaintiffs were entitled

to enforce the agreement for re-sale. He overlooked, however, the fact that the terms of the lease and the terms of the agreement stood apart and

that in accepting rent after the due date the lessor had not waived his rights under the agreement. On the 19th August, 1940, the lessor through his

legal adviser wrote to the first plaintiff stating that the agreement for re-sale stood cancelled. On the 13th September, 1941, the lessor wrote to the

first plaintiff a further letter in which the same position was maintained.

The fact that the lessor did not insist on the forfeiture of the lease did not affect the terms of the agreement to reconvey. The plaintiffs could only

insist on a reconveyance by fulfilling the terms of the agreement. The case of Bastin v. Bidwell (1881) 18 Ch.D. 238. is 4irectly in point. There a

lease of a house contained a covenant by the lessee to pay the rent and keep the premises in repair, and to paint the outside and inside at certain

fixed periods. The lessor agreed that the lessee should be entitled, on giving six months'' notice before the end of the term, to have a further lease

for 21 years "" upon paying the rent and performing and observing the covenants "" in the lease. The lessee failed to fulfil his covenants and the lessor

refused to grant a renewal of the lease. It was held by Kay, J., that the lessee''s covenants constituted a condition precedent to his right to a

renewal of the lease and that as he had not carried out what he had undertaken to do in respect of painting and repairs, he was not entitled to a

renewal. The learned Judge based his decision on the judgment of Mellish, L.J., in Finch v. Underwood (1876) a Ch.D. 310 where it was argued

that where covenants in a lease had not been duly performed, but that the landlord had gone on receiving rent with full notice of the circumstances,

there was waiver. Kay, J., said:

Lord Justice Mellish answered that argument in this way : ''Receipt of rent waives a forfeiture'' (that is, of course, the right of re-entry under a

power to re-enter), ''because it admits the lease to be subsisting, but does it follow from that that a condition precedent to granting a new lease is

waived?'' I confess upon consideration that satisfies my mind completely. Supposing there was a waiver of the right of re-entry, it does not seem to

me at all to follow that the precedent condition would be waived or affected in the least degree. The condition precedent is this : If you have

performed your covenants altogether, then, that being the precedent condition you shall be entitled to have the renewed lease; if you have not

performed your covenants it does not matter that the lessor may have waived his right of forfeiting the lease; the condition precedent has not been

performed, and if the precedent condition has not been performed, the right which depends upon it does not arise at all.

That is the position here. The lessor did not, as he had a right to do, forfeit the lease, but he made it quite clear that in accepting payment of rent

after the due date he was still insisting on his right of ignoring the agreement for re-sale, because of the non-fulfilment of the conditions of that

agreement. In the present case the plaintiffs are not entitled to specific performance because they have not fulfilled the conditions of the contract for

re-sale.

The appeal is allowed and the suit dismissed with costs here and below.