# Shanmugam Pillai v. Annnlakshmi Ammal, A. I. R

- **Citation:** [1962] Supp. 3 S.C.R. 476
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Case number:** CIVIL APPELLA~'E JURISDIW'ION : Civil Appeal No. 8 of 1960
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/shanmugam-pillai-v-annnlakshmi-ammal-a-i-r-2393
- **Pages:** 6

## Headnote

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476 sui>.RE'ME oodk'f .R.E.PdRTsp9a2j·sdi>P.
K., SIMRATHMULL
·V.
S. NANJALI.1\GfAH GOW DER
I
(::i. K. DAS, ·M . .l:ImAYA'T(JLLA.H·a.nd J'. l). SILl'.H,:Jlf.)
\
~
..
~ ...
,
Contr!'l't-Co~enan!Jor re?onve11~>1c~. ~.prqp~~IK.~.U.?jeYf. to
fulfilment of oonditoons-lfailure of cond•t•JJ:J>, whe!her specific
'·performarlce could be deln"nded=Where ri!Jht extinguished-
·O'ou>ts equitable.iurisdiction could be invoked-'I'mnsfer of Property Act; (4 of 1882)-Specific 'Reli~' Act (1· of•J877).
'
'
•
I
• ,
·By a, deed dated FebruFy, 19, 1948 the -respondeμ,t .1old
his house to the appellant in cohsideration of
0
dis~harging
liability to·repay a.loan of Rs, 1500/- borrowed by 1ihe lres-
.pondent.
T\VO other documents Telflting.;to the house were
executed on the same day (J) a -deed by• the appellantragreeing,to reconvey the house if the ryspo'!dent paiq, ~s., l/iOQ/,• in
these two years; (2) p. rent note by the, p;spon?ent .,a\'d. his
father agreeing tc1 pay Rs. 26-4-0 per menscm as rent for
occupation of the house.
Under 1the agreement of 'iec6nveyance the exercise of the right td demarfd reconV'eyanc"'e 'was
subject to~ t,vo,conditions, firstlY, that the right nius.t. be exer·
cised within 2 ·years and
1 secondly, that,,~he rent -payal;>lct_,under
.the rent note should not remain in arrears for more than six
months at any time.
When thai iespoildent Cle'manped sP~ci·
fie perfdtmance of -the agreem~nt of reconve1ance, !the
first condition was fulfilled but the second was,not. The
suit for,, specific performance o'f the igreemcnf Of reco~vey~
·anc;e was dismissed, for in the view of the· trial.ct:>urt the
conditions of the agrcement.t hasi: inot been ,st~iA•l~.comJSlied
with, and the· agreement stood cancelled.
Tc1e High Court
in second appeal reversed
the decree and ordered specific
J
p;:rformabce.
..,
Held, that the covenant for reconveyance was in the
n_ature of a concession granted by the purchaser .
. ,
Held, further that the conces-sion being subject to certain conditions were not fulfilled the right to demand reconveyancc could not be enforced.
The court had no equitable
jurisdictio11 to relieve against the extinction of the right to
demand reconveyence.
Shanmugam Pillai v. Annnlakshmi Ammal, A. I. R.
( 1950) F. C. 38, folbwed.
John H. Kilm<r v. British Col1'mbi'1. Orchard Lands Ltd.
J
L· R. (1913) A. C. 319, DeQendrtl. Pr<!Bad Sitk.fl v. Sttrll!ldr\l·
'"i
•
3 s.ci.R.
SUPRtllME COUR'r REPOR'rS
477
Prasad Sukul, (1935) L. R. 63 I.A. 26 and Davis v. 1'homas,
( 1930) 39 E. R. 195, referred to.
CIVIL APPELLA~'E JURISDIW'ION : Civil Appeal
No. 8 of 1960.
Ajlpeal by special leave from the judgment and
decree dated January 30, 1956, of the Madras High
Court in Special L. Appeal No. 2174 of 1952.
Bhawani Lal and P. G. Agarwala, for the
appellant.
R. Ganapathy Iyer,
R. Thiagarajan
and
G. Gopalakrishnan, for the respondent .
. 1962. February 28. The Judgment of the Court
was delivered by
·SHAH, J.-This is an appeal with special leave
against the judgment of the High Court of Madras.
On February 18, 1948, S. Nanjalingiah Gowderhereinafter referred to as the plaintiff-borrowed
Rs.
1,500/-
from K. Simrathmull-hereinaHer
called the defendant.
On February 19, 1948
the plaintiff executed a sale deed conveying to
the defendant certain land at Ootacamund together
with a house standing thereon and belonging to
him for Rs. 700/-. Two other documents were executed on the same day : ( l) a deed of reconveyance
(Ext. A-1) (counterpart of the sale deed) in favour
of the plaintiff which contained the following
covenant:
"If you pay the sum of Rs. 1500/- within a
period of two years I shall at your cost and
your responsibility execute a sale in respect of
the under-mentioned 'land and house.
You.
shall pay the assessment for the house and the
municipal tax, you shall if there is any
arrears of rent pay the same, prior to the sale,
a.i per the rental deed executed by you and
your father~ If there is arre

## Text

""ili62
1Veb;u(f';·j·zs.
'
t
> '~· I ,: l
~ ~· \
!
\ i
476 sui>.RE'ME oodk'f .R.E.PdRTsp9a2j·sdi>P.
K., SIMRATHMULL
·V.
S. NANJALI.1\GfAH GOW DER
I
(::i. K. DAS, ·M . .l:ImAYA'T(JLLA.H·a.nd J'. l). SILl'.H,:Jlf.)
\
~
..
~ ...
,
Contr!'l't-Co~enan!Jor re?onve11~>1c~. ~.prqp~~IK.~.U.?jeYf. to
fulfilment of oonditoons-lfailure of cond•t•JJ:J>, whe!her specific
'·performarlce could be deln"nded=Where ri!Jht extinguished-
·O'ou>ts equitable.iurisdiction could be invoked-'I'mnsfer of Property Act; (4 of 1882)-Specific 'Reli~' Act (1· of•J877).
'
'
•
I
• ,
·By a, deed dated FebruFy, 19, 1948 the -respondeμ,t .1old
his house to the appellant in cohsideration of
0
dis~harging
liability to·repay a.loan of Rs, 1500/- borrowed by 1ihe lres-
.pondent.
T\VO other documents Telflting.;to the house were
executed on the same day (J) a -deed by• the appellantragreeing,to reconvey the house if the ryspo'!dent paiq, ~s., l/iOQ/,• in
these two years; (2) p. rent note by the, p;spon?ent .,a\'d. his
father agreeing tc1 pay Rs. 26-4-0 per menscm as rent for
occupation of the house.
Under 1the agreement of 'iec6nveyance the exercise of the right td demarfd reconV'eyanc"'e 'was
subject to~ t,vo,conditions, firstlY, that the right nius.t. be exer·
cised within 2 ·years and
1 secondly, that,,~he rent -payal;>lct_,under
.the rent note should not remain in arrears for more than six
months at any time.
When thai iespoildent Cle'manped sP~ci·
fie perfdtmance of -the agreem~nt of reconve1ance, !the
first condition was fulfilled but the second was,not. The
suit for,, specific performance o'f the igreemcnf Of reco~vey~
·anc;e was dismissed, for in the view of the· trial.ct:>urt the
conditions of the agrcement.t hasi: inot been ,st~iA•l~.comJSlied
with, and the· agreement stood cancelled.
Tc1e High Court
in second appeal reversed
the decree and ordered specific
J
p;:rformabce.
..,
Held, that the covenant for reconveyance was in the
n_ature of a concession granted by the purchaser .
. ,
Held, further that the conces-sion being subject to certain conditions were not fulfilled the right to demand reconveyancc could not be enforced.
The court had no equitable
jurisdictio11 to relieve against the extinction of the right to
demand reconveyence.
Shanmugam Pillai v. Annnlakshmi Ammal, A. I. R.
( 1950) F. C. 38, folbwed.
John H. Kilm<r v. British Col1'mbi'1. Orchard Lands Ltd.
J
L· R. (1913) A. C. 319, DeQendrtl. Pr<!Bad Sitk.fl v. Sttrll!ldr\l·
'"i
•
3 s.ci.R.
SUPRtllME COUR'r REPOR'rS
477
Prasad Sukul, (1935) L. R. 63 I.A. 26 and Davis v. 1'homas,
( 1930) 39 E. R. 195, referred to.
CIVIL APPELLA~'E JURISDIW'ION : Civil Appeal
No. 8 of 1960.
Ajlpeal by special leave from the judgment and
decree dated January 30, 1956, of the Madras High
Court in Special L. Appeal No. 2174 of 1952.
Bhawani Lal and P. G. Agarwala, for the
appellant.
R. Ganapathy Iyer,
R. Thiagarajan
and
G. Gopalakrishnan, for the respondent .
. 1962. February 28. The Judgment of the Court
was delivered by
·SHAH, J.-This is an appeal with special leave
against the judgment of the High Court of Madras.
On February 18, 1948, S. Nanjalingiah Gowderhereinafter referred to as the plaintiff-borrowed
Rs.
1,500/-
from K. Simrathmull-hereinaHer
called the defendant.
On February 19, 1948
the plaintiff executed a sale deed conveying to
the defendant certain land at Ootacamund together
with a house standing thereon and belonging to
him for Rs. 700/-. Two other documents were executed on the same day : ( l) a deed of reconveyance
(Ext. A-1) (counterpart of the sale deed) in favour
of the plaintiff which contained the following
covenant:
"If you pay the sum of Rs. 1500/- within a
period of two years I shall at your cost and
your responsibility execute a sale in respect of
the under-mentioned 'land and house.
You.
shall pay the assessment for the house and the
municipal tax, you shall if there is any
arrears of rent pay the same, prior to the sale,
a.i per the rental deed executed by you and
your father~ If there is arrears of rent for six
1962
K. Simr'athmull
v,
S. Non;O'lingiah
GowJ,r
Shah J,
1962
}, . SimralAmull
v.
S. Nonjalihtioh
Ot11tdt1
Shah J,
478 SUPREME COURT REPORTS [1962) SUPP.
months, the aforesaid counterpart deed shall
become cancelle<l.",
and (2) a lien\ Note by t.he plaintiff and ·his fath•·r
Rora Gowder in favour of the defendant agreeing to
pay rent@ 1 's. 26/4/- per mensem for occupation of
the house and the land.
Rent accruing dull was not paid regularly by
the plaintiff and his father, and by April 1949 it was
in arrears for sev<'n monthR.
The plaintiff sent
Rs. 52/8/- by postal money ord<·r being rent for two
months, on April 20, 19'19, but it waR not accepted
by the defendant.
The plaintiff then filed on
November 7, 1949 a suit in the Court of the Subonlinate Judge, Ootacamun<l for specific performance of
the agreement of recunveyance contained in the
deed Ext. A-1.
The suit was dismissed, for, in tho
view of tho trial Court, the conditions incorporated
in Ext. A-1, had not been strictly complied with,
and the agreement stood cancelled. The decree of
the trial Court was affirmed in appn~ I. But in second
app•al the High Comt of \Tadras reversed the decree
and ordered specific performance.
The sale deer!, the deed of reconveyance Ext.
A-I and the Rent Xoto Ext. B-1 were undoubtedly
parts of th!l same transaction.
The plea of the
plaintiff that the sale deed Ext. A- I conatituted a
transaction of mortgage
by conditional sale is
inadmissible, because the sale dc~d and the covenant
for reconveyance aro contained in separate documents.
Indisputably, ou tho findings of the trial
Court and confirmed by tho Appellate Courts, the
plaintiff has not c;implied with the terms of the
agreement for reconvcyance. The plaintiff, however
submitted that the court could relieve him against
the forfeiture of his rigtits in exerciso of the courts
equitable jurisdiction. Tho defendant submitted
that the covenant for roconvcyance was in the nature
of a eoncossion grunted by the ddendant subject to
certain conditions and if the conditions were not
3 S.C.R.
SUPREME COURT REPORTS
479
fulfilled the right could not be enforced. On this
question the trial Judge with whom the First Appellate Court agreed held that the court had no
jurisdiction to relieve against the extinction of the
right to demand reconveyance, because the plaintiff
had failed to comply strictly with the conditions of
the deed. The High Court held that the equitable
jurisdiction of the Court could properly he exerciseed in favour of the plaintiff so as to relieve him
against the extinction of his right.
The plaintiff had sold his property to the
defendant.. There is now no dispute that though
the sale deed was for Rs.700/-. it was in satisfaction
of the loan bmrowed on February 18, 1948 for
Rs. 1500/- that the sale deed was executed. By the
deed Ext. A-1 the defendant gave plaintiff a concession: he agreed to reconvey the house, but the exercise of the right of demanding reconveyance hy the
plaintiff was subject to two conditions (1) that the
right must be exercised within two years, and (2)
that the rent payable under Ext. B-1 should not be
in arrears' for more than six months at any time.
When the plaintiff dt~anded specific performance
of the agreement of reconveyance, the first condition was fulfilled but the second was not. It is true
that equity relieves against penalties when the intention of the the penalty is to secure payment of a
sum of money or attainment of some other object,
and when the event upon which the penalty is made
payable can be adequately compensated by payment of interest or otherwise. Thus relief is granted
in equity against the penalty in a money bond, and
also against penal sums made payable on breach of
bonds, covenants and agreements for payment of
money by instalments, or for doing or omitting to
do a particular act (see Halsbury's Laws of England
· III Edition vol. 14 page 620 Art. 114 7). The cases
in John H. Kilmer v. BritiNh Columbia Orchard Land,s
Ltd. (') and Devendra Prasad Sukul and others v.
Surendra Prasad Sukul and Another(') are illustrations
(I) L.R, (1918) A,.C. 319.
(2) ( 193S) L.R. 63 I.A. 26.
1962
K. ~imrathmull
v.
S. Nanjalingiah
Gowder
Shah J.
198t
K. Simrallamull
v
,\'. NOnjaJingi41a
Gowitr
Sh oh J,
480 SUPRE:.'.!E COURT REPOP.TS [1002) SUPP.
of that principle. Bnt there is a well recognised exception to thiH rulo which i~ enunciated in Halshury's
Laws of England Vol. 14 TTI Eclition page 622 p1tragraph 1151, as follows: "Where under a contract., conveyance, or will it beneficial ri11ht is to arifie up,m
tho performance by the beneficiary of some act in a
statc<l manner, or at a stated timl', the act must bo
performed accordingly in order to obtain the enjoyment of the right, and in the .absence of fraud,
accident or surprisP, equity will not rnlicve against a
breach of the terms".
The Federal Court in 8hanmuyam Pillai and others v. Annalakskmi Ammal and
others(') held by a majority of three to two that where
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 privilego and may be exercised on strict fulfilment of the conditions on the fulfilment of which
it is made exercisable. If the original vendor fails
to act punctually according to the terms of the contract, the right to repurchase will be Jost and cannot be spocifically enforced.
Hefusal to enforce
the tHms sprcifica!Jy 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 forf~iture arising as a result of breach
of such a eondition.
A majority of the Judges of
the Court in that case followed the principle set out
in Davis v. '!'lwma.~ (').
We accept the view of tho
majority enunciated in Slummur;am Pillai's case. The
decree passed by tbc High Court must therefore be
sot aside and the decree pnssed by the trial Court
restored.
But the property in dispute is valuable.
Evon on the defond1int's case it was on thl' date of
tho institution of the suit worth Rs. 15000/-. The
defendant purchased it only about a year and seven
months prior h> the <late of the institution of the
suit for Rs. 1500/-.
He appears to have overreached the plaintiff and taken a document of salo
(IJ Al R. (19SOJ P.C. 38.
(2) ( 1930) 39 E.R. ! 95.
3 S.C.R.
SUPREME COURT REPORTS
481
conveying the property when a mere loan was intended on the security of the property. It is unfortunate, having regard to the provision of s. 58(c) of
the Transfer of Property Act, that the plaintiff is
debarred from proving that the transaction was
in the nature of a mortgage. In the circumstances
we direct that there will be no order as to costs
throughout.
Appe,al allowed.
ORIENT WEAVING MILLd (P) LTD.
v.
THE UNION OF INDIA
(B. P. SINHA, c. J., J. L. KAPUR, M. HIDAYATULLAH,
J. c. SHAH and J. R. MUDHOLKAR, JJ.)
Central Excise-Power of Central Government to grant
exemption-Rule-Notification granting exemption to co-operah'.ve
society-Constitutional mlidity-Central Excises and Salt Act,
1944 (1of1944), ss. 37(2), cl. (xvii)-Central Excise Rules,
1944, r. 8(1)-Constitution of India, Arts, 14, 19(1)(/) and
(g), 43.
By r. 8 (1) of the Central Excise Rules, 1944, framed by
the Central Government in exercise of its Power under s. 37(2)
cl. xvii of the Central Excises and Salt Act, 1944, "the
Central Government may from time to time, by notification
in the Official Gazette, exempt subject to such conditions as
may be specified in the notification any excisable goods for
the whole or any part of the duty leviable on such go'.>ds."
By two notifications issued under the said rule the Central
Government exempted cotton· fabrics
produced on po,ver
looms owned Dy co-operative societies ti'om the duty leviable
thereon subject to certain conditions.
Under s 38 of the Act ·
the said rule and notifications on publication in the Official
Gazette had effect as if enacted in the Act. The petitioners,
apprehending loss of business in competition with the fifth
respondent, a co-operative society, chal1enged the rule and the
notifications on the grounds( I) that the power of exemption
conferred on the Union Government violated Arts. 14, 19(l)(fl
and (g} of the Constitution and (2) that assuming that it did
196!
K. Simrathmull
'.
S. Nanjalingioh
Gowder
Shah J.
1962
Ftb~uary 38.