P L D 1964 Dacca 230 (PLP)

7. In support of his contention the learned Advocate relied on the decision of the Privy Council in the case of Jamshed Khodaram Irani v. Burjori Dhunjibhai Contractor (20 C W N 744), where it has been held that :‑-- " the special jurisdiction of equity to disregard the letter of the contract in ascertaining what the parties to the contract are to be taken as having really and in substance intended as regards the time of its performance may be excluded by any plainly expressed stipulation. But to have this effect the language of the stipulation must show that the intention was to make the rights of the parties depend on the observance of the time limits prescribed in a fashion which is unmistak able

Prima facie equity treats the importance of such time limits as being subordinate to the main purposes of the parties and it will enjoin specific performance notwithstanding that from the point of view of a Court of Law the contract has not been literally performed by the plaintiff as regards the limit specified. But equity will not assist where there has been undue delay on the part of one party to the contract, and the other has given him reasonable notice that he must complete within a definite time. Nor will it exercise its jurisdiction when the character of the properly or other circumstances would render such exercise likely to result in injustice. In such cases, the circumstances themselves, apart from any question of expressed intention, exclude the jurisdiction." At page 747 of the report their Lordships of the Privy Council observed as follows :‑ " The law applicable to the point is contained in section 55 of the Indian Contract Act, 1872, which provides that ` when a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such things at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract.' Their Lordships do not think that this section lays down any principle which differs from those which obtain under the law of England as regards contracts to sell land. Under that law equity, which governs the rights of the parties in cases of specific performance of contracts to sell real estate, looks not at the letter but at the substance of the agreement in order to ascertain whether the parties, notwithstanding that they named a specific time within which completion was to take place, really and in substance intended more than that it should take place within a reasonable time. The principle is well- expressed in what Lord Redesdale said in his well known judge ment in Lennon v. Napper (2 Sch. and Lef. 682 1802), which was adopted by Knight Bruce, L. J., in Roberts v. Berry (3 DeG M & G 289 1853). The doctrine laid down in these cases was again formulated by Lord Cairns in Tilley v. Thomas (3 Ch. App. 61 1867), and by the House of Lords in the recent case of Stickney v. Keeble (1915 A C 386 1914). Their Lordships are of opinion that this is the doctrine which the section of the Indian Statute adopts and embodies in reference to sales of land. It may be stated concisely in the language used by Lord Cairns in Tilley v. Thomas. The construction is and must be in equity, the same as in a Court of law. A Court of Equity will indeed relieve against and enforce specific performance, notwithstanding a failure to keep the dates assigned by the contract, either for completion or for the steps towards completion, if it can do justice between the parties, and if (as Lord Justice Turner said in Roberts v. Berry), there is nothing in the ' express stipulations' between the parties, ' the nature of the property' or the 'surrounding circumstances', which would make it inequitable to interfere with and modify the legal right. That is what is meant, and all that is meant, when it is said that in equity, time is not of the essence of the contract. Of the three grounds mentioned by Lord Justice Turner ' express stipulations ' requires no comment. The ` nature of the property ' is illustrated by the case of reversions, trusts, or trades. The ' surrounding circum stances ' must depend on the facts of each particular case. Their Lordships will add to the statement just quoted these observations. The special jurisdiction of equity to disregard the letter of the contract in ascertaining what the parties to the contract are to be taken as having really and in substance intended as regards the time of its performance may be excluded by any plainly expressed stipulation. But to have this effect the language of the stipulation must show that the intention was to make the rights of the parties depend on the observance of the time limits prescribed in a fashion which is unmistakable. The language will have this effect if it plainly excludes the notion that these time limits were of merely secondary impor tance in the bargain, and that to disregard them would be to disregard nothing that lay at its foundation. Prima facie, equity treats the importance of such time limits as being subordinate to the main purpose of the parties, and it will enjoin specific performance notwithstanding that from the point of view of a Court of law the contract has not been literally performed by the plaintiff as regards the time‑limit specified. This is merely an illustration of the general principle of disregarding the letter for the substance which Courts of equity apply, when, for instance they decree specific performance with compensation for a non‑essential deficiency in subject‑matter. But equity will not assist where there has been undue delay on the part of one party to the contract, and the other has given him reasonable notice that he must complete within a definite time. Nor will it exercise its jurisdiction when the character of the property or other circumstances would render such exercise likely to result in injustice. in such cases, the circumstances themselves, apart from any question of expressed intention, exclude the jurisdiction. Equity will further infer an intention that time should be of the essence from what has passed between the parties prior to the signing of the contract." which has been followed by this Court in the case of Hajee Saree Meah Sowdagar and another v. Mst. Al‑Haj Jahanara Begum and others (1956 (8) D L R 616). The learned Advocate also relied on the case of Mahadeo Prosad Agarwala v. Narain Chandra Chakrabarty and another (30 C L J 224), which is also based on the decision of the above mentioned Privy Council case of Jamshed Khodaram Irani v. Burjorji Dhunjibhai Contractor.

8. On the other hand the learned Advocate Mr. R. K. Banik contends that the principle enunciated in the Privy Council case and followed in the case of Mahadeo Prasud Agarwala v. Narain Chandra Chakrabarty and another, and in the case of Hajee Saree Meah Sowdagar and another v. Mst. Al‑Haj Jahanara Begum and others, cannot be disputed and they are only applicable in a suit for specific performance of contract for sale but is not applicable in the case of an agreement for reconveyance because the time‑limit stipulated in the agreement for reconveyance is not a penalty imposed for proper performance of the contract in due time but a privilege given to the vendor of the property and must be strictly performed for getting benefit of the privilege. In support of his contention Mr. Banik relied upon the case of Shanmugam Pillai and others v. Annalakshmi Ammal and others (AIR1950FC38), where it has been held that " the agreement reserved an option to A to repurchase the property and was in the nature of con cession or privilege on fulfilment of certain conditions with a proviso that in case of default the stipulation should be void. A not having paid the instalments punctually according to the terms of the contract the right to repurchase was lost and could not be specifically enforced. It was not in the nature of penalty and the Court had no power to afford relief against forfeiture for its breach " though the minority Judges (Mahajan and B. K. Mukherjee, JJ.) on the construction of the transaction held that the right of repurchase given to A on payment of the considera tion money within the stipulated period was not a mere privilege or concession given to A which A could avail of no fulfilment not certain terms and the only object was that the threat of losing all benefits under the agreement might keep the lessee perpetually alert and alive to his duty of paying the instalments of rent with punctillious regularity. From this decision it is quite clear that where time is the essence of the contract equity may relieve the party of the penalty clause in order to give effect to the main object of the parties, but if it is a privilege or concession then the terms of agreement must be strictly conformed before a party is to take advantage of the privilege and concession. In Fisher and Lightwood's Law of Mortgage, seventh Edition, Chapter I, section 11, page 12 under the heading ` Mortgage or Option of Repurchase' we find the following passage:‑

" Although in certain cases conveyance, apparently absolute, may be construed as mortgages, an absolute conveyance with an agreement for repurchase, or that the conveyance shall be void upon payment of a certain sum at a fixed time, will create a mere right of repurchase to be exercised according to the strict terms of the power, and not such a right of redemption as is incidential to a mortgage ; unless it is proved that the transaction was in the nature of a mortgage security, and that the grantor and grantee were intended to have mutual and reciprocal rights to insist upon reconveyance of the estate and repayment of the consideration. In the case of a mortgage, the penalty or forfeiture is introduced for the purpose of security only, in case of default in payment at the appointed time, the mortgagee is compensated by receiving interest. But in the case of a defeasible purchase, forfeiture is out of the question, the estate being absolutely vested in the grantee ; and the power of repurchase, not arising from the nature of the contract, but being a special privilege given to one of the parties without any corresponding right in the other, must be strictly exercised."

9. In the light of the position in law, as stated above, if we read the circumstances of the present case and the terms of agree ment and the case made out by the plaintiff it will be quite clear that it is a privilege or a concession granted to the plaintiff by the defendants after completion of the transfer by the plaintiff to the defendants of the properties in suit. What happened is that the plaintiff transferred the disputed land to the defendants by a kabala dated 22nd Falgoon, 1354 B. S. corres ponding to 6‑3‑

48. On the same date the defendant executed a deed of agreement in favour of the plaintiff to reconvey the property sold to him to the effect that if the plaintiff pays the consideration money of Rs. 900 to the defendants within five years from the month of Magh, 1355 B. S. up to the month of Pous, 1360 B. S. the defendants would reconvey the property to the plaintiff failing which the plaintiff would be entitled to enforce the specific performance of the contract in that Court of law. But if the plaintiff fails to pay the money within the stipulated period then the kabala executed by the plaintiff in favour of the defendants will remain in force, It is not the case of the plaintiff' that it is a mortgage by conditional sale but that it is an out and out sale with a condition of repurchase. In the present case the plaintiff's specific case is that it is an agreement to reconvey the property already conveyed to the defendants on condition of repayment of the entire con sideration money of the first sale to the defendants within the stipulated period failing which the kabala executed by the plaintiff in favour of the defendants will remain in force. Had the plaintiff's case been that it is a mortgage by conditional sale not that it is a sale with a condition of repurchase then certainly the time limit might have been the essence of the contract and the equity would relieve him of the duty of performing his part of the contract within the stipulated period as there would have been a reciprocal right to insist upon reconveyance of the estate and repayment of the consideration money. But treating it by the plaintiff, as a simple agreement for reconveyance the right to repurchase given to the plaintiff cannot but be special privilege or a concession given to him and if the plaintiff wants to take advantage of that special privilege and concession he must strictly conform to the terms of the agreement. In view of the findings of fact arrived at that the plaintiff failed to offer the money he is not entitled to take advantage of the special privilege granted to him. His argument, as stated above, would have been of considerable force if the plaintiff's case would have been that it is a mortgage by conditional sale and not that it is a sale with a condition of repurchase. In that case whether he has offered the money or not he would have been able to enforce his right within three years from the last date of the period stipulated but having failed to perform his part within the time given to him as a special privilege he is not entitled to enforce his agreement to repurchase. In this view of the matter we dismiss the appeal and affirm the decision of the Single Judge though not absolutely on the same ground. But in the circumstances of the case we direct that the parties will bear their own costs all throughout. A. S. CHOWDHURY, J.‑I agree with my Lord, the Chief Justice. S. Q./K. E. A. Appeal dismissed.