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 25th 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 6th 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 6th 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 6th 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 6th 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  6th 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 19th 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 5th 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 6th 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 6th 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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