Annaya Kocha Shetty (Dead EAD) Through Lrs Vs Laxmibai Narayan Satose Since Deceased Through Lrs & Others (Supreme Court of India)
Supreme Court of India has dismissed a civil appeal challenging an order of the Bombay High Court, which had upheld a lower appellate court’s decision against the legal representatives of the deceased plaintiff, Annaya Kocha Shetty. The dispute revolved around whether an agreement between the plaintiff and the original defendant, Laxmibai Narayan Satose (since deceased), constituted a leave and license agreement, thereby entitling the plaintiff to the status of a deemed tenant under Section 15A of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 (Bombay Rent Act).
The plaintiff had filed a suit seeking a declaration that he was a deemed tenant/protected licensee of shop nos. 5 and 6, located at Shri Samarthashraya Vishranti Graha, Dadar, Mumbai (the Plaint Schedule), owned by the second defendant, M.S. Nanabhoy. The first defendant, Laxmibai, was the lessee of the Plaint Schedule and was operating a hotel named “Shri Samarthashraya Vishranti Graha” (the Hotel). Following her husband’s demise, she continued the business but later allowed her brother to run it, an arrangement that proved unfavorable. Subsequently, on August 16, 1967, an agreement styled as one for “conducting hotel business” was entered into between the plaintiff and the first defendant. This arrangement continued under subsequent agreements, until the first defendant issued a notice to the plaintiff on February 28, 1997, to vacate and hand over the business.
The trial court ruled in favor of the plaintiff, holding that despite the nomenclature of the 1967 agreement, the nature and quality of the plaintiff’s occupation indicated a leave and license arrangement, not merely conducting the first defendant’s business. The trial court emphasized clauses in the agreement that granted the plaintiff the right to use and occupy the hotel premises in consideration of a monthly royalty, obligated the plaintiff to pay various charges like electricity and wages, and shifted the business risk to the plaintiff. The trial court also noted that the prevailing law at the time restricted direct landlord-tenant arrangements, leading to the “conducting” nomenclature, while the payment of a fixed monthly amount of Rs. 1000 suggested a rental arrangement. Oral evidence, which was not seriously challenged during cross-examination, also supported the plaintiff’s claim.
However, the appellate bench reversed the trial court’s judgment. It meticulously examined the 1967 agreement, emphasizing the bar under Sections 91 and 92 of the Evidence Act, 1872, against adducing oral evidence to contradict a written agreement. The appellate bench concluded that the agreement was plainly for conducting the first defendant’s business, not a leave and license of the premises. It heavily relied on 99 receipts issued between March 1967 and September 1973, which consistently referred to the payment as “royalty for conducting the business.” The appellate bench reasoned that the consistent use of “royalty” indicated an agreement to conduct a business, not a simple leave and license. It also considered other evidence like electricity bills and sales tax registration in assessing the nature of the plaintiff’s occupation.
The High Court, in the impugned order, affirmed the appellate bench’s view. It held that Sections 91 and 115 of the Evidence Act pointed towards the Plaint Schedule being given for running the Hotel on a conducting basis, not a leave and license basis. The High Court detailed several clauses of the 1967 agreement, including the recital noting the conducting basis, the payment of royalty, the plaintiff’s obligation to pay electricity charges, and clauses related to the hotel business, to support its conclusion. It further held that subsequent agreements were a continuation of the conducting arrangement and that the plaintiff could not deny the agreement’s nature based on a lack of English language proficiency.
In the Supreme Court, the plaintiff’s counsel argued that the nomenclature of a deed is not determinative and that the agreement should be interpreted based on its context and the rights enjoyed by the plaintiff, citing Provash Chandra Dalui and another v. Biswanath Banerjee and another. He also relied on Chandavarka Sita Ratna Rao v. Ashalata S. Guaram to argue that a valid pre-1973 license converts to tenancy under Section 15A of the Bombay Rent Act. He further cited Varisalli Mohd. Ilias v. Abdul Sattar Gulam Hussain as a directly applicable precedent for interpreting such agreements.
The defendant’s counsel countered that the plaintiff was estopped from resiling from the terms of the 1967 agreement, emphasizing that a deed’s construction depends on its text and tenor, not just its title, also citing Provash Chandra Dalui. He argued that Sections 91 and 92 of the Evidence Act barred the introduction of oral evidence to contradict or explain the clear clauses of the agreement. He highlighted the agreement’s preface, which explicitly stated the plaintiff’s role as a conductor of the first defendant’s hotel business. He pointed to various clauses detailing the plaintiff’s authority to conduct the business, not the occupancy rights of the Plaint Schedule, and relied on Mangala Vaman Karandikar vs. Prakash Damodar Ranadeon to underscore the primacy of the written agreement under Sections 91 and 92 of the Evidence Act.
The Supreme Court, after considering the arguments and the 1967 agreement, outlined the principles for construing deeds and contracts. The guide to the construction of deeds and tools adopted can broadly be summarised as follows:
(i) The contract is first constructed in its plain, ordinary and literal meaning. This is also known as the literal rule of construction. (ii) If there is an absurdity created by literally reading the contract, a shift from the literal rule may be allowed. This construction is generally called the golden rule of construction. (iii) Lastly, the contract may be purposively constructed in light of its object and context to determine the purpose of the contract. This approach must be used cautiously. (iv) The construction of a deed is “generally speaking, a matter of law.” However, when there is an ambiguity in the deed, determining its meaning is a mixed question of fact and law. This concept is encapsulated by sections 91 and 92 of the Evidence Act, 1872. (v) Section 91 of the Evidence Act, 1872 denotes that a deed constitutes the primary evidence of the terms to which the parties are to adhere. Whereas section 92 of the Evidence Act, 1872 forbids any contradictions or variations in a written document by extrinsic evidence. However, there are exceptions outlined in the proviso to section 92, that allow variations from this general rule. (vi) The subtle distinction in the point of law, as carved out by the provisos, is that the evidence to vary the terms of an agreement in writing is not admissible, but evidence to show that there is no agreement in the first place is admissible. Thus, unless the grounds fall within the provisos read with the illustrations to section 92, there is a bar on adducing oral evidence. (vii) In Provash Chandra Dalui v. Biswanath Banerjee (1989) Suppl 1 SCC 487, it was held that the court must look at the words used in the contract unless they are such that one may suspect that they do not convey the intention correctly. If the words are clear, there is very little the court can do about it. In constructing a deed, looking at the surrounding circumstances and subject matter is legitimate only if the words used are doubtful.
Applying these principles to the 1967 agreement, the Supreme Court highlighted several key clauses: the nomenclature as a “conducting” agreement, the designation of parties as “owner” and “conductor,” the acknowledgment of the first defendant’s ownership of the hotel business, the granting of the business on a conducting basis to the plaintiff, the payment of “royalty” as consideration, the plaintiff’s obligation to operate only the first defendant’s hotel business, the restrictions on sub-entrustment, the handing over of business upon termination, and the plaintiff’s responsibility for workers’ wages.
The Supreme Court concluded that the plain interpretation of the 1967 agreement clearly indicated an arrangement for conducting the first defendant’s business, not a leave and license of the Plaint Schedule. The court excluded oral evidence from consideration as no exceptions under Section 92 of the Evidence Act were applicable. The court also found that the registration certificate under the Bombay Sales Tax Act, obtained by the plaintiff as the business conductor, did not alter the fundamental nature of the agreement. Similarly, the royalty receipts were inconsistent with a claim of deemed tenancy. The court further emphasized the absence of a clause in the agreement explicitly transferring possession of the property from the first defendant to the plaintiff, a crucial element in a lease or license agreement under Section 108 of the Transfer of Property Act, 1882. This absence reinforced the conclusion that the agreement was for running the business, not occupying the premises under a leave and license.
For these reasons, the Supreme Court upheld the High Court’s order and dismissed the civil appeal, imposing costs of Rs. 1,00,000/- payable to the first defendant.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
