MANAKLAL Vs. BHAGWANDAS

JUDGEMENT

(1.) THIS second appeal arises from a suit for specific performance on foot of a bond dated 1 August 1960 (Ex. P -1), under which the respondent took a loan of Rs.2,500 from the appellant with the stipulation that if he did not repay the loan within one year from that date, he would be liable to sell his house and badi, described therein, in favour of the creditor. As the defendant did not repay the loan within the time fixed in the bond, the creditor sued for specific performance of the contract for sale. The suit was resisted by the defendant, contending, inter alia, that he could not be forced to sell the immoveable property just because be could not repay the loan within the stipulated time. The trial Court passed a decree for specific performance, but the first, appellate Court modified it and, rejecting the first prayer in the plaint, allowed the alternative relief of a decree for Rs.2,500. It also allowed interest on Rs.2,500 at 4 percent per annum from the date of the suit to the date of realisation. The plaintiff is aggrieved by this modification in the trial Court decree and, in this second appeal, prays that a decree for specific performance be passed.

(2.) SHRI Pandit, learned counsel for the appellant, contends that the first appellate Court was not right in refusing specific performance on the ground that the sale of the property was barred under section 165 (4) of the M.P. Land Revenue Code, 1959. Learned counsel points out that in order to get benefit under section 165 (4) of the Code, it was necessary for the defendant to allege how much land he had. Moreover, the property, which the debtor undertook to sell, is not agricultural land inasmuch as it consists of a house and a badi. Similarly, the first appellate Court was not justified in raising a new plea of undue influence, which was not contained in the written statement. Shri R.S. Dabir, learned counsel for the respondent, concedes those points. He supports the decree of the first appellate Court merely on the ground that the stipulation to sell the immoveable property, in case of default of payment of loan within the time fixed, was penal and the Court was entitled to relieve the debtor under section 74 of the Contract Act.

(3.) A penal provision contained in a contract is not restricted to money for enhanced rate of interest, but is wide enough to include a stipulation to convey immoveable property on default of payment of a debt on the fixed date. In the case of a loan, the debtor is bound to repay it to the creditor together with the interest agreed upon, but the stipulation that the debtor will convey his immoveable property to the creditor, in case he does not repay the loan within the time fixed for its repayment, is necessarily in terrorem of the debtor to drive him to repay the loan within the stipulated time. Therefore, where a creditor seeks to enforce that penalty, the Court will relieve the debtor from it and, instead, award reasonable compensation to the creditor. This view finds support in Phoolchand Vs. Punaram [1963 JLJ SN 124]. See also Rajah of Ramnad Vs. Sellachami [A1R 1917 Mad. 405], and Mahadeo Bakhsh Vs. Sant Bakhsh [AIR 1920 Oudh. 180].