M/S. Kothapalli Sreeramulu and Co. and Others Vs. the Krishna Gur and Khandasari Sugars - Court Judgment

1. This appeal is filed by the defendant against the Judgment and decree dated 22nd March, 1982 in O. S. No. 61 of 1979 on the file of the Subordinate Judge, Eluru. The suit filed by the plaintiff for recovery of a sum of Rs. 2,01,293/- with subseqeunt interest was decreed as prayed for. Aggrieved by the same, the defendants have filed the appeal.

2. The cross-objections are filed by the plaintiff regarding the interest which was disallowed partly. In the cross-objections, it is claimed that the future interest should have been granted at 18% per annum, which is the agreed rate, and the court is not justified in granting 6% per annum interest. It is also claimed that the future interest should have been allowed on the amount of Rs. 2,01,293 /- and not merely on Rs. 1,66,000/-. The pleadings have been set out very elaborately in paragraphs 1 to 10 of the trial court judgment. It would be sufficient, for purposes of this appeal, if the substance of the pleadings is given in a nutshell.

3. The first plaintiff is a parntership-firm represented by its Managing Partner V. Gopalakrishna. D.1 is a partnership-firm of which D.2 to D. 10 are the partners and D.2 is the Managing Partner. On 17-11-1977, D.1 represented by D.2, entered into an agreement of lease with the plaintiff in respect of the Khandasari Sugar Factory of the plaintiff. After the terms were settled, they were reduced into writing into a memorandum of the terms and conditions of the contract of lease. It was prepared on stamp-paper. Plaintiff and the first defendant, as Managing Partners, signed in it. A counter part of the agreement of lease, duly signed by the parties, was delivered to the second defendant. The possession of Khandasari Sugar Factory was delivered immediately after the terms of contract of lease were settled and before the memorandum was executed. The contract is for lease of the Sugar Factory for the cane-crushing season commencing from 26-11-1977 to 30-4-1978. But the lessee is entitled to be in possession of the godowns and molasses storage tanks up to 31-8-1978. The lessee should pay a rent of Rs. 1,20,000/- on or before 31-1-1978 failing which he is liable to pay the rent amount with interest at 18% per annum from 1-2-1978 till the date of payment.The lessor shall get all the repairs effected and put the mill in working condition and deliver it to D.2. For the repairs effected, the defendants undertook to pay Rs. 46,000/-. This amount was to be paid on or before 15-4-1978. The repairs should be completed before 26-11-1977. After possession isdelivered, for repairs done during the workingof the mill, the lessee alone is responsible. Hewill have to re-deliver the mill after the expiryof the lease period in good working conditionafter replacing broken parts. He will have tore-deliver the godowns and the molassestanks by 31-8-1978. There were certain otherminor terms which are not so important as faras the present appeal is concerned. The lessorgot all the repairs done and delivered possession of the mill in a perfectly sound andworking condition. The defendants workedthe sugar factory, produced sugar andrealised income, but they did not performtheir part of the contract. They neither paidthe rent nor did they pay the amount ofRs. 46,000/- payable before 15-4-1978. Theydid not deliver the godowns and the molassesstorage tanks. When a notice was issued, thedefendants raised all sorts of false defencesand denied the terms of the contract of lease.A totally new term was put up as the realterms of the contract between the parties. Allthe allegations in the reply notice are false.Hence the suit.

4. Eighth defendant remained ex parte. Defendants 1 and 2 filed a written statement, which was adopted by D.3 to D.7 and D.9. D.10 filed a separate written statement. It is the claim of D.10 that there is no valid partnership between him and the other defendants. The first defendant-partnership firm is void under law. He claims that he never participlated in the business of the first defendant.

5. The main defence raised in the written statement of D.1 and D.2 is as follows:

The alleged lease deed dated 17-11-1977 is unstamped and unregistered and, therefore, it is inadmissible in evidence. It cannot be looked into for any purpose. The plaintiff cannot rely upon it. A copy of the lease was never given to the second defendant. The plaintiff brought a typed document and took the signatures of D.2 in each page and D.2, who is not acquainted with English, signed the papers simply out of trust and confidence in the plaintiff. He never knew the contents. He was under the belief that it contained the usual conditions of similar leases. The trueterms agreed to between the two parties are that the lease is for payment of Rs. 10/- per ton cane crushed. The mill should be delivered in working after completing all repairs by 26-11-1977. The crushing should be stopped on or before 30-4-1978. The mill should be re-delivered by 30-4-1978. The lessor must enable the lessee to prepare third grade sugar out of the godown stocks and molasses storage stocks. The lessee can take away any machinery installed by him. The lessor should provide a weighing machine. The terms mentioned in the plaint were never accepted or agreed to by the parties. In the season 1977-78, there is a decrease in price of sugar and the mill incurred a total loss. The first defendant had to stop crushing the cane, as no cane was available. The Co-operative Sugar Factory, Bhimadole drew away all the avai-abletane at a higher price of Rs. 125/- per ton. The plaintiff committed several defaults. He did not deliver the mill in pucca working condition. The mill could not crush to full capacity. The plaintiff was taking monies from D.1 towards repairs. The plaintiff did not get the licences for the molasses. The mill could not be started till 7-12-1977. The plaintiff did not enable the defendants to get the permit to sell the molasses. The plaintiff took possession of the entire molasses and did not allow the defendants to enter the mill. The defendants sustained loss. The first defendant has to pay Rs. 49,691-09 towards the lease at the rate of Rs. 10/- per ton of cane crushed. The defendants suffered loss of Rs. 75.000/-, as the mill was not in working condition. The defendants also suffered a loss of Rs. 78,500/-as they were prevented from taking the molasses. Rs. 17,641-73 was paid to the plaintiff on several accounts and this will have to be adjusted. The mill was delivered back to the plaintiff on 1-3-1978. The defendants suffered various losses of which the plaintiff is responsible. The defendants are not liable to pay the rent of Rs. 1,20,000/- as claimed by the plaintiff nor are they liable to pay the amount of Rs. 46,000/- towards repairs. They never agreed to pay that amount. The defendants are agriculturists and hence they are entitled to benefits under Act 4 of 1938.

6. On the above pleadings, the courtframed the following issues:

(1) Whether the plaintiff committed any defaults and whether the 1st defendant sustianed any loss as contended in paras 8 and 9 of the written statement?

(2) What are the terms and conditions of lease agreed to by the parties?

(3) Whether the 1st defendant delivered the mill in the same condition in which it was given to him on 1-3-1978?

(4) Whether the defendants are not liable to pay rent due and payable by 31-1-1978 ?

(5) Whether the defendants are liable to pay a sum of Rs. 46,000/- as per Clause 13 of the agreement ?

(6) Whether the defendants are agriculturists entitled for the benefits of Act IV of 1938?

(7) To what amount, if any, is the plaintiff entitled to ?

(8) To what relief?

7. The following additional issue is framed as per order in I.A. No. 18 of 1982 on 16-1-1982:

(1) Whether the document dated 17-11-1977 is not valid and admissible in evidence Addl. Issue dt. 17-2-1982: Whether partnership-firm of D. 1 is void as contended by D. 10 On issue No. 1, the court came to the conclusion that the defendants never made any claim against the plaintiff for committing breach of agreement and in the suit for recovery of the amounts as per the agreed terms, these claims are put forward as counter-claims. The court held Issue No.1 in favour of the plaintiff and against the defendants. On Issue No.3 on the ground that the plaintiff took possession of the factory some time after the expiry of the lease period, the court held that it is not necessary to go into this question in this suit. Dealing with Issue Nos. 2, 4 and 5 and the Additional Issue No. 1 framed on 16-1-1982, the court recorded the following findings.

9. As per the terms and conditions of thelease agreed to, the agreed rent was Rupees. 1,20,000/- and that the lease amount was agreed to be paid before 31-1-1978 and that the defendants have also agreed to pay Rs. 46,000/- towards the repairs effected by the plaintiff-firm before putting the defendants in possession of the factory. The court held that the terms and conditions of the lease pleaded by the defendants are not true and that the agreed terms and conditions of the lease are as embodied in Ex. A.3 and as spoken to by the plaintiff. The court held that the agreed rent of Rs. 1,20,000/ - and Rupees 46,000/- towards repairs are payable by the defendants as claimed by the plaintiff. On additional issue, the court came to the conclusion that Ex. A.3 is admissible for the collateral purpose and that Section 17 of the Registration Act is not a bar. All the four issues were found in favour of the plaintiff. On Issue No. 6, the court held that the defendants are not agriculturists and they are not entitled to the benefits of Act 34 of 1938. They are liable to pay interest at 18% per annum as contracted by the parties. The court further remarked that all the defendants are incom-tax assessees since several years and they do not come within the definition of 'agriculturists'. On Issue No. 7, the court came to the conclusion that the plaintiff is entitled to recover the entire suit amount. On Additional issue framed on 17-2-1982, the court recorded a finding to the effect that the tenth defendant is also a partner of D.1 firm and that the partnership is valid and hence D. 10 is liable. On Issue No. 8, the court came to the conclusion that the defendants have to pay the stamp duty and penalty paid on Ex. A.3 and costs and that the defendants are liable to pay the entire suit amount of Rs. 2,01,293 with subsequent interest at 6% per annum on Rs. 1,66,000/- from the date of the suit till the date of realisation. The defendants are liable to pay costs including the stamp duty and penalty.

10. In this appeal and cross-objections, Sri P. V. R. Sarma, appearing for the appellants, contends that the crucial question in the appeal is whether the suit based on an unstamped and unregistered lease deed Ex. A.3 is maintainable. He contends that thelease deed Ex. A.3 is void and is inadmissible in evidence for any purpose. He further contends that even a lease deed, which is not compulsorily registerable, when once it is reduced to writing in the form of a document, it has necessarily to be registered and it is not admissible in evidence for want of registration. No oral evidence can be adduced to prove the terms of the lease. He contends that the suit to recover the rent and the repair charges as per the terms of Ex. A.3 is not at all maintainable. He places strong reliance upon Section 17 and Section 49 of the Registration Act and Sections 106 and 107 of the Transfer of Property Act. He has cited before the court a large number of decisions in support of his arguments. Mr. Sarma further contends that the defendants have set up an oral lease. Ample evidence has been adduced to prove the terms of the oral lease, Mr. Sarma further contends that as regards the claims for Rs. 46,000/- towards value of the repairs, as plaintiff has not produced any evidence except filing Ex. A.3 and as he did not produce any evidence to establish the factum of incurring Rs. 46,000/- towards repairs, this amount cannot be decreed. He further contends that under Exs. B.1 to B.6 receipts amounts was paid to the plaintiffs agent and hence the first defendant is entitled to credit for these amounts.

11. On behalf of the respondent Sri N. V. Suryanarayana Murthy contends that the trial court framed the issue only in regard to admissibility and validity of Ex.A.3. The truth of Ex.A.3 was never disputed nor was it put in issue. The court did not go into the question as to what is the nature of Ex.A.3 and whether it is hit by Section 107 of the T.P. Act and whether it is compulsorily register-able or not. He contends that Ex. A.3 is only a record of past transaction and the suit itself is based upon a contract of oral lease followed by delivery of possesion. Ex.A.3 is not compulsorily registerable. It is not hit by Section 17 of the Registration Act. He further contends that the trial court categorically held that the suit is based upon a contract for lease and that Ex.A.3 is a memorandum and record of past transaction. The appellants' advocate has not shown to the court how this finding iswrong. In a first appeal, unless the appellant is able to show that it is a wrong finding, it cannot be disturbed by the Appellate Court even if the court comes to the conclusion that it is not a correct finding. He submits that not a single decision cited by the appellants' counsel goes to the extent of saying that a contract or agreement of lease is hit by Section 107 of the T.P. Act and Section 49 of the Registration Act. A reading of the plaint, particularly paragraph 4 of the plaint, clearly indicates that the suit is based upon an agreement of lease and not on the basis of a lease deed. He contends that Ex. A.3 does not affect rights in immoveable properties. The trial court rightly relied upon Kuruga Mudaliar v. Subba Reddiar, : AIR1951Mad12 . Relying upon the language of Section 107 of T.P. Act, he contends that while the first clause empha-tically stipulates that a lease of immoveable property from year to year, to for any time exceeding one year, or reserving a yearly rent can be made only by registered instrument, the second clause mentions that all other kisses of immoveable property may be made either by registered instrument or by oral agreement accompanied by delivery of possession. He lays particular emphasis on the words 'can only be made' used in the first clause and 'may be made' used in the second clause as clearly indicative of the fact that under the first clause it is mandatory and the second clause is only directory. Mr. Murthy contends that in this case the lease is only for one reason and at the most, it extends from 17-11-1977 to 31-8-1978 and hence it is for less than one year and so it is not compulsorily registerable. He contends that under Ex.A.3 the right to enjoy the property, namely, the mill springs,, from 26-11-1977 and no right is tninsferred or created on 17-11-1977. He also contends that under the Stamp Act Section 29(c) dearly stipulates that the lessees should pay the stamp duty. In this case, as the stamp duty and penalty had to be paid by the plaintiff, the lessor, the first defendant is bound to pay the amount. Mr. Suryanarayana Murthy placed strong reliance on Muruga Mudaliar v. Subba Reddiar (supra), Md. Gosukani v. Md. Maracayar, AIR 1936 Mad 301, B. P. Singh v. Som Nath, : AIR1971All297 , Mohan Lal v. Ganda Singh, AIR 1943 Lah 127 (FB), Neelakantan v. Subba Bhakthan, : AIR1976Ker47 in support of his arguments. He also placed strong reliance upon the language of Sections 106 and 107 of the Transfer of Property Act, and Section 49 of the Registration Act. Mr. Murthy further contends that even assuming for a moment that the lease is void, even then the defendant is liable for paying damages for use and occupation and it has been held by courts that in cases of rent fixed, wherever the lease deed is found to be inadmissible in evidence on the ground of want of registration, the terms in it can be looked into to establish the damages, and the quantum of rent indicated would be a proper basis for fixing the damages or compensation for use and occupation. As regards the amount of Rs.46,000/- claimed towards repair charges, there is no duty cast on the plaintiff to adduce any evidence. He ' claims it on the basis of a condition agreed to by the parties. If the cost of repairs is more than Rs. 46,000/ - the defendant is liable only to the extent of Rs. 46,000/ -. There is absolutely no need for the plaintiff to prove by evidence the value of the repairs done. In fact, at the stage of reply notice, the complaint was that the repairs were not completed by 26-11-1977, but they were completed only by 7-12-1977. There was never a dispute about the repairs being done by the plaintiff. PW 1 categorically spoke that he incurred about fifty to fifty-five thousand rupees for effecting repairs for delivering the mill in good working condition. The court rightly granted the decree for this amount with interest at 18% per annum from the stipulated date to the date of suit.

12. Dealing with cross-objections Mr. Suryanarayana Murthy contends that the court is not justified in granting subsequent interest at 6% per annum only on the amount of Rs. 1,66,000/-. It should have granted subsequent interest on the entire suit amount of Rs. 2,01,293/- and it should have granted interest at 18% per annum as that is the agreed rate of interest between the parties.

13. Mr. P. V. R. Sarma, replying for the arguments of the respondents counsel con-tends that the main document Ex.A.3 is not an agreement of lease. The document comes under first clause of Section 107 of the T.P. Act. Hence it is compulsorily registrable. He also contends that the document evidences a completed transaction. He further contends that Md. Gosukani v. Md. Maracayar (AIR 1936 Mad 301) (supra) deals with a case prior to the 1929 amendment of the T.P. Act and it is no longer a good Jaw in view of Raghunath v. Kedarnath, : [1969]3SCR497 . He also contends that wherever a lease is for a Manufacturing process, there is a presumption that it is any yearly lease. Hence the lease in this case is governed by Section 107 of the T.P. Act and it is compulsorily registerable as it is an yearly lease.

14. On the basis of the arguments advanced by both parties, the following points arise for determination in this appeal and cross-objections:

(1) Whether Ex.A.3 dated 17-11-1977 is a document which is compulsorily register-able?

(2) Whether Ex,A.3 is adminissble in evidence and if it is found not admissible for want of registration, can it be looked into for any purpose in this suit ?

(3) Whether defendants are liable to pay Rs. 46,000/- towards repairs done by the plaintiff to the sugar mill ?

(4) Whether rent of Rs. 1,20,000/- is payable claimed by the plaintiff or only Rs. 50,000/- as pleaded by defendants?

(5) Is the plaintiff-respondent entitled to any relief in the cross-objections ...

Points 1 and 2;

15. To decide these two points, it would be pertinent to refer to a few provisions of the Transfer of Property Act and the Registration Act.

16. Section 2(7) of the Registration Act defines 'lease' which reads as follows:

''lease' includes a counterpart kabuliyat, an undertaking to cultivate or occupy, and an agreement to lease;'

From this definition, it is clear that an agreement of lease also comes within the ambit of 'lease'. Section 17 of the Registration Act deals with documents of which registration is compulsory. Clause (d) of Section 17(1) is relevant section for our purposes. According to Section 17(1)(d), leases of immoveable property from year to year, or for any term exceeding one year, or reserving a yearly rent are compulsorety registerable. The proviso to sub-section (1) gives power to the State Government to exempt from operation of sub-section (1) any leases executed in any district, or part of a district, if they do not exceed five years and the annual rents reserved do not exceed Rs. 50/-. It is not anybody's case that the proviso comes into play in the present case. We have to see whether Ex. A.3 answers the description given in clause (d) of sub-section (1). If we come to sub-section (2) of Section 17, we find that nothing in clauses (b) and (c) of sub-section (1) applies to a certain documents enumerated as (i) to (xii). Clause (v) of sub-section (2) reads as follows:

'any document not itself creating, declaring assigning, limiting or extinguishing any right, title or interest of the value of one hundred rupees and upwards to or in immovable property, by merely creating a right to obtain another document which will, when executed, create, declare, assign, limit or extinguish any such right, title or interest:'

It is interesting to see that under clause (v) if the document by itself does not create rights or declare rights, or extinguish any right or interest, then, it does not require registration. The next relevant provision in the Registration Act is Section 49. It reads as follows:

'EFFECT OF NON-REGISTRATION OF DOCUMENTS REQUIRED TO BE-REGISTERED:--

No document required by Section 17 or by any provision of the Transfer of Properly Act, 1882 (4 of 1882) to be registered shall -

(a) affect any immovable property comprised therein, or

(b) confer any power to adopt, or

(c) be received as evidence of any transaction affecting such property or conferringsuch power,

unless it has been registered;

Provided that an unregistered document affecting immovable property and required by this Act on the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 (J of 1877), or as evidence of part performance of a contract for the purposes of Section 53-A of the Transfer of Property Act, 1882 (4 of 1882), or as evidence of any collateral transaction not required to be effected by registered instrument.'

If we examine the language of Section 49, we find that a document, which is compulsorily registerable, shall affect any immovable property comprised therein, or confer any power to adopt, or be received as evidence of any transaction affecting such property unless it has been registered. The proviso, which was added in 1929, is very significant. The proviso enables an unregistered document, affecting immovable property may be received as evidence of a contract in a suit for specific performance or as evidence of party performance of a contract for the purpose of Section 53-A of the Transfer of Property Act or as evidence of any collateral transaction not required to be effected by registered instrument.

17. Coming to the provisions of the Transfer of Property Act, Section 105 defines 'lease', it also defines 'lessor', 'lessee', 'premium' and 'rent'. Section 106 deals with duration of certain leases in the absence of written contract or local usage. The Section reads as follow?:

'In the absence of a contract or local law or usage to the contrary, a lease of immovable property for agricultural or manufacturing purposes shall be deemed to be a lease from year to year, terminable, on the part of either lessor or lessee, by six months notice expiring with the end of a year of the tenancy; and a lease of immovable property for any other purpose shall be deemed to be a leasefrom month to month, terminable, on the part of either lessor or lessee, by fifteen days' notice expiring with the end of a month of the tenancy.

Every notice under this section must be in writing signed by or on behalf of the person giving it, and either be sent by post to the party which is intended to be bound by it or be tendered or delivered personally to such party, or to one of his family or servants, at his residence, or (if such tender or delivery is not practicable) affixed to a conspicuous part of the property.'

A reading of this Section 106 clearly indicates that the emphasis is on the words, 'In the obsence of a contract or local law or usage to the contrary'. A reading of the Section clearly indicates that there is a presumption raised in the case of leases of immovable property for agricultural or manufacturing purposes. They shall be deemed to be a lease from year to year. But this presumption is subject to the following words, 'In the absence of a contract or local law or usage to the contrary'. Leases of immovable property for any other purpose shall be deemed to be leases from month to month, terminable, on the part of either lessor or lessee by 15 days' notice expiring with the end of a month of the tenancy. The second limb of the Section indicates how the notice should be served and that it -should be in writing. Section 107 defines or stipulates as to how leases should be made. A lease of immovable property from year to year or for any term exceeding one year or reserving a yearly rent can be made only by a registered instrument. All other leases of immovable property may be made either by a registered instrument or by an oral agreement accompanied by delivery of possession. It is significant to remember that if the lease is not a yearly lease or for a term exceeding one year or if it does not reserve yearly rent, it need not necessarily be done by registered document. It can be done by oral agreement accompanied by delivery of possession.

18. In the light of the above provisions, if we examine Ex.A.3, we find the following cardinal facts:

(i) The document clearly mentions that the lessors decided to stop doing business in the said mill and lease out the same and the lessee has agreed it take on lease of the said milt and premises for the cane-crushing season commencing from 26-11-1977 to 30-4-1978 and thereafter up to 31-8-1978. Thus it is clear that the period of lease is for the cane-crushing season of 1977-78. The total period of the lease comes to 9 months and 5 days. It is not a lease from year to year or for a period exceeding one year.

(ii) The document mentions that in pursuance of the agreement to lease, lessors have put the lessee in possession of the demised premises on this day i.e., 17-11-1977 itself for commencing business from 26-11-1977. This is a clear indication that the document is executed after possession was delivered to the lessee on the same day.

(iii) Coming to the conditions of lease, it is clearly asserted that the lease shall be for only the cane-crushing season from 26-11-1977 to 30-4-1978, but the lessee will be entitled to continue in possession of godowns and molasses storage tanks up to 31-8-1978. That the period of lease is for less than year and that it only extends from 26-11-1977 to 31-8-1978 is thus emphasised.

(iv) Under Condition No. 3, it is stipulated that the lessee shall pay the rent of Rupees. 1,20,000 on or before 31st January, 1978, failing which he shall be liable to the same with interest at 18% per annum from 1-2-1978 till date of payment. The document nowhere mentions that it is a yearly rent or that it is for a period exceeding one year. Considering the specific terms of the contract, the presumption raised by Section 106 of the T.P. Act is rebutted by reason of the contract between the parties. The contract is contrary to the presumption indication in Section 106 of the T.P. Act.

(v) Clause 13 stipulates that the lessors shall get all the repairs effected and put the mill in working order for which the lessee shall pay the lessors Rs. 46,000/ - on or before 15-4-1978. The lessee should bear all expenses for any repairs after the mill is put in hispossession in working order. That clause also mentions that if the lessee fails to pay the amount of Rs. 46,000/- to the lessors on or before 15-4-1978, he shall be liable to pay the same with interest at 18% per annum from 16-4-1978 till the date of payment.

19. Various other terms and conditions of Ex.A.3 need not be adverted to at this stage and they will be referred to as and when necessary in the course of this judgment.

20. A thorough scrutiny of Ex.A.3 and the provisions of the T. P. Act and the Registration Act clearly indicate that Ex.A.3 is a lease for one cane-crushing season which extends for 9 months and five days' It is for less than one year. The rent stipulated is not annual rent reserved. Thought the mill is leased out for a manufacturing process, the presumption under Section 106 of the T.P. Act cannot be raised in this case to the effect that it is a lease from year to year in view of the specific terms of the contract. As rightly pointed out by Mr. Suryanarayana Murthy, the learned counsel for the respondent, the trial court only went into the question of admissibility and validity of Ex.A.3. It never went into the question whether Ex.A.3 is a document which is compulsorily registerable under the provisions of the Registration Act and the T.P. Act. The court adopted the approach by treating the document as the one which should be registered but which can be referred to for collateral purpose under Section 49 of the Registration Act. In my considered opinion, I find that Ex. A.3 is not a compulsorily registerable lease deed. By virtue of the second limb of Section 107 of the T.P. Act, all other leases of immovable property that is leases which do not come within the first limb of Section 107 may be made either by a registered instrument or by oral agreement accompanied by delivery of possession. In the present case on hand, there is ample evidence to show that the parties agreed to the terms, settled the terms of the lease, delivered possession of the mill and then got Ex.A.3 reduced into writing to evidence the terms of the agreement of lease settled between the parties. Even the interested evidence of D.W. 1 clearly indicates this.D.W. 1, i.e., the second defendant, admits in this cross-examination that he visited the mill ten days prior to 17-11-1977 and inspected the mill. In the chief-examination itself, he states that on 17-11-1977, P.W. 1 approached him at Nidadavolu and requested him to settle the lease on the same day. Later on the same day, they came to Eluru and stayed in Madhulatha hotel. PW 1 came to his room. They had a talk about the conditions of the lease and settled the terms of the lease. PW 1 agreed to effect all the repairs at his cost and deliver the mill in working condition by 26-11-1972. He claims that on that day he sent D.3 and his men to take formal possession of the mill. This clearly shows that possession was delivered on 17-11-1977. He then states that at 3.30 p.m., PW 1 went away saying that he would get an agreement written about the lease. Later he returned with a stamped agreement typed in English and took his signatures on every page. This evidence clearly establishes that originally it was an oral lease. The terms were settled at Madhulatha Hotel. Possession was delivered and later Ex. A.3 was reduced to writing. Thus Ex.A.3 is a document which is reduced into writing after the oral lease is completed by delivery of possession. It is nothing more than a memorandum of the terms settled between the parties and later reduced into writing. If Ex.A.3 is considered as a document reduced into writing subsequent to the delivery of possession after the lease terms were settled, then there is absolutely no question of this document requiring registration, because a lease can be effect ed orally followed by delivery of possession.

21. P.W. 1 clearly stated that the parties settled the terms of lease by mutual consent and later reduced into writing in the form of an agreement. He also speaks about delivering possession on the very same day i.e., 17-11-1977. He clearly stated that D.2 took him to P.W. 2C. Seetharamaiah and D.2 brought the stamps with him and then the draft of Ex.A.3 was prepared. Then it was typed by someone known to Seetharamaiah on stamp papers. He clearly stated that he and D.2 signed in Ex. A.3. Subsequently others signed. He denies the suggestion that the terms and conditions were not explained to D.2 andthat he signed without knowing the contents. A counterpart of Ex. A.3 was delivered to D.2 in the presence of PW 2. PW 2, who is an experienced advocate and who knew both 'PW 1 and D.2, categorically stated that he drafted the lease agreement on the instructions of D.2 and PW 1. Ex. A.3 is the typed agreement entered into by PW 1 and D.2 as per the draft written by him for both parties. Both of them voluntarily agreed to the terms of Ex.A.3 and signed before him. He clearly stated that two clauses were inserted in the manuscript as suggested by D.2. Ex.A.3 was prepared in duplicate and contents were explained in telugu to D.2. D.2 agreed for the terms and signed it. The witness also stated that Ex.A.3 was executed after the mill was put in good working condition and he was informed about it by PW 1 and D.2. PW 2 further stated that the parties did not consult him regarding the stamp on which the agreement should be written and he did not advise them to get the agreement registered. He denies the suggestion that D.2 did not come to him and signed in Ex.A.3 in his presence. There is overwhelming evidence on behalf of the plaintiff to prove the execution of Ex.A.3 by D.2 fully knowing the terms and conditions of Ex. A.2. The story put up by D.2, the second defendant, is not at all credible and the lower court rightly rejected his theory. As indicated earlier, D.W. 1 clearly admits that the terms were settled at the hotel Madhulatha, then possession was delivered and then Ex.A.3 was prepared. His evidence clearly indicates that the contract of lease was completed by oral agreement accompanied by delivery of possession. It is interesting to see that though D.W. 1 disputes the terms of Ex.A.3 in the suit; during the currency of the lease, he never disputed the terms and he never gave any notice complaining about any of the terms or about the so called defaults of PW 1. It is further interesting to see that though D.W. 1 claims that the terms of the lease are totally different and that the main terms is to pay Rs. 10/- per tonne, he never made any payment even on that basis to the plaintiff. It is crystal clear from the lengthy evidence tendered by D.W. 1 and the documents that here is a case where defendants,who claim to have suffered some loss, are trying to wriggle out of Ex.A.3 and they wish to avoid payment of the amounts payable by them. It is interesting to see that when Ex.B.7 was issued on 23-8-1978 setting out the terms, which are the terms of Ex.A.3 and demanding payment of with interest at 18% per annum as default was committed, for the first time a totally new story was set up by giving Ex.A.3 reply through an advocate. It is interesting to see that for the first time, on legal advice, defendants took up the plea that Ex.A.3 is inadmissible in evidence because it is unstamped and unregistered; and they put up the theory that without knowing the contents D.2 signed in it blindly and that the terms agreed to between the parties are something totally different. He claims that he signed it on the belief that the agreement contained the usual conditions of similar leases. It is interesting to see that though D.2 now comes forward with the theory that repairs were not effected and that the mill was not delivered in a good working condition, in Ex.A.2 reply notice the'only complaint was that the mill was not delivered in good working condition on 26-11-1977 and it was delivered in good working condition on 7-12-1977 and so they suffered loss for 11 days. The reply notice also mentions that till 1-3-1978, the relations between the defendants and plaintiff were cordial. There is no explanation as to why Rs. 50,000/ - was not paid; if in fact, it was the agreement between the parties to pay rent at the rate of Rs. 10/-per tonne of cane crushed. In paragraph 20 of the reply notice, it is clearly stated that the parties should adjust matters amicably. Obviously as there was a change of market conditions, defendants were trying to wriggle out of Ex.A.3 and they did not pay and they simply abandoned the mill and went away. As rightly pointed out by the trial court, the evidence of D.W.1, which is interested, is not credible. It runs counter to the conduct of the parties and the documents on record. D.W.1 was rightly disbelieved. D.W.1 is an experienced business man for the last several decades. He owned a rice mill and he was running several khandasari sugar mills. He acted as Municipal Chairman of Nidadavole. To say that he signed blindlyin Ex.A.3 is too much to be believed. An experienced business man of such vast experience of men and matters and business will not ordinarily sign a document without knowing the contents. In fact, various other agreements executed by him, though in English, were signed by him in Telugu. The theory f hat he signed in Ex.A.3 without knowing the contents is too much to be believed. On facts, the plaintiff is on the strongest ground. The case set up by the defendants is most unbelievable.

22. The further question that will have to be considered is the legal aspects, which are now raised. I have earlier indicated that Ex.A.3 is not a document which is compul-sorily registerable.

23. Mr. P. V. R. Sarma contends that even if a lease, which is not compulsorily registerable, if it is reduced into writing, it has necessarily to be registered. He relies upon Jai Narain Dass v. Zubeda Khatoon, : AIR1972All494 ; Ram Nath Mandal v. Jojan Mandal, : AIR1964Pat1 (FB); Sallomal V. Naina, : AIR1979All32 ; Ram Swarup v. Janki Devi Bhagat Trust, : AIR1974All424 .

24. Ram Swarup v. Janki Devi Bhagat Trust : AIR1974All424 (supra) is a case of lease for manufacturing purposes for a period of 12 months. Such a lease is necessarily and compulsorily registerable and an unregistered lease deed cannot be relied upon. This decision is not applicable to the facts of our case. The lease in that case comes within the ambit of the first limb of S. 107 of the T. P. Act and it is also a case covered by first limb of S. 106 of the T. P. Act. A similar decision relied upon is Sallomal v. Naina : AIR1979All32 (supra). A reading of the full judgment of the single Judge clearly indicates that the learned Judge did not consider the full import of S. 106 of the T. P. Act and though the court was dealing with a lease of 11 months stipulating payment of rent month by month and though the agreement mentions that the lease is a monthly tenancy, the court following the earlier decisions', especially, Ram Swarup v. Janki Devi Bhagat Trust : AIR1974All424 (supra), jumped to the conclusion that it is a compulsorily registerabledocument. The presumption under S. 106 relating to lease for manufacturing purposes was drawn and the court held that the notice for determination of the tenancy has necessarily to be given six months in advance. It should be remembered that it is a case where the question to be considered was determination of the leases. On facts, this decision is distinguishable. The principles laid down in that decision cannot be made applicable to the facts of our case. In my humble opinion, the court overlooked the significance of the clause 'in the absence of a contract to the contrary.'

25. Jai Narain Dass v. Zubeda Khatoon : AIR1972All494 (supra) lays down in paragraph 12 at page 497 as follows:

'A lease of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent, can be made only by a registered instrument as provided in S. 107 of the Transfer of Property Act. In the instant case the lease was not from year to year or for any term exceeding one year or reserving an yearly rent. Para 2 of S. 107 (T. P. Act) however, stipulates that all other leases of immoveable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession. So in those cases where the lease is neither from year to year nor for a term exceeding one year or reserving yearly rent the lease can be made either by a registered instrument or by an oral agreement accompanied by delivery of possession. In other words in all such cases which are covered by para 2 of S. 107 a lease can be made by oral agreement accompanied by delivery of possession and it is not necessary that a document should be executed evidencing the terms thereof.'

Then the court added the following significant words:

'However, if the parties choose to execute a lease deed so as to bring the terms and conditions there in writing it would be necessary that such a document should be registered one. If the document is not registered the provisions of S. 49 of the Registration Act would come into play andin that event the document itself would not be admissible in evidence except for collateral purposes.'

26. In that decision, His Lordship was dealing with a case where only one party to the lease signed the document and the other party did not sign it. It is also a case where the parties did not plead that the lease was an oral lease. In such circumstances, the court held that the suit filed for recovery of arrears of rent and damages as well as ejectment of defendant is not maintainable. The court pointed out in the later part of paragraph 12 that 'it is not a bilateral document signed by both lessor and lessee. It was not the case of the lessee that the lease was created by oral agreement accompanied by delivery of possession,' and then remarked that the document ought to have been registered and as it was not registered, it is not admissible except for collateral purposes, and hence reference to clause (7) was not possible.

27. Ram Nath Mandal v. Jojan Mandal : AIR1964Pat1 (FB) (supra) lays down the principle that if an oral lease is reduced into writing, it requires registration. If unregistered the lease will be inadmissible in evidence under S. 49 of the Registration Act. The court pointed out that under S. 117 of the Transfer of Property Act, a lease for agricultural purposes is not necessary to be made by a written instrument. It may be effected by an oral agreement, and when so effected no registration is required, but if the transaction is reduced to writing, then, in the case of lease from year to year or for any term exceeding a year or reserving a yearly rent, registration would be required under Sec. 17 of the Registration Act and hence oral evidence to prove the terms of the lease is excluded. There, the lease involved is a lease for a long period. The shares of the lessees were also in dispute. On facts, that decision is distinguishable. The principles of that decision are not applicable to the facts of our case.

28. Mt. Nasiban v. Md. Saved (AIR 1936 Nag 174) is a case of a rent note being executed by one party for granting lease for 11 months. The defence of the party was that he was in possession as a mortgagee. Thecourt pointed out that where a person signing a document alleges that the recitals therein are incorrect and do not represent the true state of facts, the burden lies on him to show that it is so. The suit was for possession of the houses on the basis of a rent deed which is not registered. The defence was that he was in possession as a mortgagee. In such circumstances, the court held that the unregistered document is inadmissible to prove the period of lease and rent due under it. That decision is distinguishable.

29. Mr. P. V. R. Sarma relies upon Chinta Venkata Jagannatha Rao v. Naran Naidu : AIR1967AP331 . That decision lays down that where a document is unstamped and unregistered, even if the stamp duty and penalty is paid later, only one defect is cured and still it remains inadmissible as it is an unregistered document. Nobody disputes this proposition.

30. Rajendra Singh v. Hulas Dass (AIR 1945 Nag 69) is a Bench decision dealing with a case of very peculiar facts. An unregistered lease deed was executed for a period of five years. Subsequently the lessee abandoned the lease and delivered possession after one year. As there were no purchasers for the lease-hold rights, a suit was filed for recovery of the rent for the five years on the basis of the lease deed. The court found that though the document is not admissible in evidence, the plaintiff is not entitled to relief, because he cannot claim damages for use and occupation for a period when the lessee was not in possession. In that background, the court observed as follows (at p. 70):

'The Registration Act strikes at documents and not at transactions. The Registration Act enacts that a document of a particular character which affects immovable property and falls within the terms of Section 17, Registration Act, shall be registered. The Registration Act does not direct what transactions should be reduced to writing. The Transfer of Property Act, on the other hand, enacts what transactions have to be reduced to writing and registered.'

31. On the particular facts of that decision, the principle laid down is perfectlycorrect, but such a situation does not prevail in our case.

32. S. Amar Singh v. Surinder Kaur : AIR1975MP230 (FB)) is cited in support of the proposition that where a lease which is not compulsorily registerable, is reduced into writing, it becomes compulsorily registerable. Hence its effect is to exclude oral evidence. A reading of the decision indicates that the Judges were relying upon the provisions of the 1929 Amendment Act of the T. P. Act as well as the Registration Act and they seem to have proceeded on the footing that by reason of S. 4 of the Transfer of Property Act, S. 54 paragraphs 2 and 3, Ss. 59, 107 and 123 of the T. P. Act, such a document becomes compulsorily registerable. If we examine the provisions of the Transfer of Property Act as amended in 1929, we find that S.4 only stipulates that 'the chapters and sections of this Act which relate to contracts shall be taken as part of the Indian Contract Act, 1872.' Section 54 defines 'sale' and paragraphs 2 and 3 contemplate that for sale of immoveable property of the value of Rs. 100/- and upwards, it should be made by a registered instrument. In other cases, it can be made either by registered instrument or by delivery of property. This section is similar to S. 107 of the T. P. Act which deals with leases. So also S. 123 which deals with gifts and stipulates how a gift should be effected. I am unable to understand where exactly is the statutory provision which says that the document, which is not compulsorily registerable, if it is reduced into writing has to be registered. With utmost respect, I am unable to follow the principle laid down in this decision.

33. As can be seen from the various decisions relied upon by the appellants' counsel an unregistered lease deed cannot be looked into or received in evidence for establishing the main terms of the lease, but it can be looked into for collateral purpose under S. 49 of the Registration Act. When the suit itself is brought on the basis of terms of an unregistered lease deed, certainly there would be difficulties. But where the suit itself is based upon an oral agreement of leasefollowed by delivery of possession and subsequently the terms and conditions are reduced into writing by way of'a memorandum, the document is not registerable and hence it can be looked into.

34. Muruga Mudaliar v. Subba Reddiar : AIR1951Mad12 (FB) (supra) is a Full Bench decision of five Judges. In this decision, the Full Bench held that an agreement of lease in writing which is required to be registered, but unregistered, may be used as evidence of the agreement in a suit for damages for its breach. In this judgment, there was an exhaustive discussion of the entire law relating to S. 17 and S. 49 of the Registration Act. Justice Viswanatha Sastri in his judgment from paragraph 52 onwards dealt with the matter in an exhaustive manner and observed that 'S. 49(c) of the Act is a disabling provision which excluded material evidence and if it is a fairly capable of two constructions, I should prefer that which is in harmony with what is just and reasonable. In view of the evasive language of S. 49 of the Act, the interpretation put upon it by the Judicial Committee and a Full Bench of five Judges of this Court, and the conclusion reached by my Lord and Satyanarayana Rao, J., I would minimise the conflict of judicial opinions of which S. 49, Registration Act, has been the unfortunate victim, by answering the question referred to us in the affirmative.' Chief Justice Rajamannar agreed with the judgment of Justice Satyanarayana Rao who pronounced the leading judgment while Justice Panchapagesa Sastri took a different view. Justice Satyanarayana Rao, after referring to the entire case law, pronounced the leading judgment. The question considered by the Full Bench is whether an agreement of lease, required to be registered, but unregistered, may be used as evidence of the agreement in a suit for damages for its breach. The Judge observed in paragraph 36 that the decision in Rajah of Venkatagiri v. Narayana Reddi (1894) ILR 17 Mad 456: 4 Mad LJ 198 (FB)) lays down the law correctly and the question referred to the Full Bench may be answered in the affirmative. Dealing with the decision in Rajah of Venkatagiri v. Narayana Reddi (supra),the court observed in paragraph 33 as follows:

'This decision shows that the restriction contained in S. 49 is confined only to the use of the document as evidence of a transaction affecting such property, and not its use for any other purpose. So long as the intended use is not to establish title to the property and is not made the basis or the foundation for a judgment affecting immoveable property, there is no objection for the use of the document in evidence. The effect of this judgment of the Judicial Committee cannot be belittled.'

35. In view of this authoritative pro-, nouncement, in the present case as Ex.A.3 is; not used as the basis for effecting rights of any immoveable property, but it is only a basis for recovering the amounts payable under the document, in spite of it being unregistered, it could be utilised as evidence of the agreement.

36. Md. Gosukani v. Md. Sekka Mara-cayar (AIR 1936 Mad 301) (supra) lays down that, 'being unregistered it is of course inoperative as a sale deed, but may it not be used to prove the oral agreement between the parties, which, together with delivery, is sufficient to effect a sale?' The court then observed at page 303, after dealing with S. 54 and S. 107 as follows (at p. 303):

'The expression 'mere delivery of property' does not, of course, find a place in S. 54; and with respect I am unable to see why, if the property is such as may be sold by delivery, it is any the less so sold because the parties, upon agreement to the sale, unnecessarily have recourse to the execution of a document. Nor am I able to understand why the incontestable proof afforded by such a document of an agreement between the parties may not be accepted as such. It is true that, in the case of a lease S. 107 speaks of an 'oral agreement', but this only means, I take it, that if the parties are shown to be ad idem, no writing is necessary.'

37. It should be borne in mind that Md. Gosukani v. Md. Sekka Maracavar (AIR 1936 Mad 301) (supra) was dealing withSection 107 of the T. P. Act before its amendment in 1929.

38. Mohan Lal v. Ganda Singh (AIR 1943 Lab 127 (FB)) (supra) deals with a case of an unregistered rent deed. The court held that 'a rent deed (not compulsorily register-able under the Registration Act) executed by a tenant in favour of landlord, if not registered, can be relied upon to establish the relationship existing between the parties. For, it contain an admission or an acknowledgment by the person attempted to be made liable and should be the very best evidence that one can possibly have as to the oral agreement of a lease and a court is not prevented from looking into it for this purpose.' This decision aptly applies to the facts of our case. This decision also lays down that the definition of the word 'lease' in the Registration Act does not apply to that word in S. 107 of the T. P. Act. So far as S. 107 of the T. P. Act is concerned, only the definition under S. 105 of the T. P. Act applies to it.

39. As pointed out by me, the document Ex.A.3 is not compulsorily registerable, as it is not lease for a year to year or exceeding one year. As it is a lease for less than one year, it can be looked into for oral lease followed by delivery of possession. In such a case, if the document is reduced into writing it forms the best evidence of the oral agreement between the parties.

40. Md, Rowther v. Tinnevelly Municipal Council (AIR 1938 Mad 746) deals with a case where the lease is invalid and inadmissible. There, a contractor executed a lease deed in favour of the Municipality, but as it was not in conformity with Ss. 68 and 69 of the Madras Municipalities Act and S. 107 of the T. P. Act when a suit was filed on the basis of that document, the question arose whether the lessee who has secured the benefit of the lease is entitled to have the suit dismissed or whether the Municipality is entitled to be granted relief invoking S. 65 of the Contract Act. The argument was advanced to the effect that having secured the benefit of the lease it would be extremely unjust to dismiss the plaintiffs suit on merely technical grounds when it is possible to grant relief on theprinciple under lying S. 65, Contract Act and decree the claim as the amount of compensation can be very fairly taken to what the defendant had agreed to pay each month..... After, hearing the above argument, the court observed as follows (at p. 748):

'There is a great deal of force in these contentions but I consider it to be inequitable to, permit the defendant to succeed on the merely technical objections when he has apparently had advantage of the lease and it in possible to go into the merits of the case on the principle underlying S.65, Contract Act and to ascertain if the plaintiff is entitled to any relief. I do not think the invalidity of the lease prevents the Municipal Council from recovering such amount as may be found to be reasonable in the circumstances.'

41. Judged in the light of this decision, in the present case, Ex.A.3 can be the basis for awarding damages for use and occupation. For that purpose, the rent stipulated in Ex.A.3 can be taken into consideration as it affords a reasonable basis. To a similar effect is Jawaharmal v. Jagannath (AIR 1930 Lah 915). In that case the lease deed was inadmissible in evidence for want of registration. In such a background, the court held that rent agreed is a reasonable basis of damages and for that purpose the lease deed can be looked into for ascertaining the quantum of damages.

42. Considering the entire case law cited by both parties and the nature of the document and the evidence on record, I come to the following conclusions.

43. Ex.A.3 is not compulsorily register-able. It is not hit by the presumption under S. 106 of the T. P. Act, nor does it come within the first paragraph of S. 107 of the T. P. Act. Ex.A.3 is also a document which is nothing more than a memorandum reduced into writing of the terms and conditions of the oral lease which was completed by delivery of possession of the property. It does not create rights in the present demise in property, because the lease was to have effect from 26-11-1977 and not 17-11-1977. Assuming for a moment that Ex.A.3 is inadmissible inevidence for want of registration, even then it can be looked into for collateral purposes and the amounts payable indicated in it as rent and as the charges for repairs, certainly it can be looked into. I hold points 1 and 2 in favour of the respondents.

Point No. 3:

44. It is the case of the plaintiff that the plaintiff undertook to effect repairs and deliver possession in working condition. At no point of time till the filing of this suit did the defendants dispute the factum of plaintiff carrying out the repairs. Even at the stage of Ex.A.2 reply notice, the only grievance was that the repairs were continued up to 7-12-1977 and that they not completed by 26-11-1977. It was never stated in Ex.A.2 notice that the plaintiff did not carry out the repairs. There is positive evidence of P,W. 1 to show that he carried out all the repairs and delivered the mill in good working condition and he undertook to pay Rs.46,000/- towards cost of the repairs. In fact, in the oral evidence of P.W.1 stated that he incurred the expenditure of fifty to fifty five thousand rupees for effecting the repairs. It should be remembered that by reason of clause 13 of the agreement, the defendant is liable to pay a specific amount, if the value of repairs exceeds Rs. 46,000/-, he will not pay it. Similarly if the value of the repairs is less, he cannot claim any benefit, because he undertook to pay a specific amount of Rs. 46,000/- and this amount is liable to be paid on or before 15-4--1978. It is in the evidence of P.W. 1 that the defendant wanted time till 15-4-1978 and hence the clause was drafted in that manner. I hold that the defendants are liable to pay Rs.46,000/- towards repairs done by the plaintiff and as he did not pay the amount by 15-4-1978, he is also liable to pay with interest at 18% per annum as stipulated in clause 13.1 hold point No. 3 in favour of the respondents.

Point No. 4:

45. I have clearly indicated that the theory of lease on the basis that Rs. 10/- per tonne of cane crushed would be paid is absolutely false which was trotted out for the first time at the stage of Ex.A.2 reply. If wejudge the bona fides of D.W. 1 we find that he never paid the rent on that basis though he claims that he is liable to pay Rs. 50.000/- on that basis. The conduct of the parties clearly indicates that the parties agreed and proceeded on the basis that Rs. 1,20,000/- is the rent payable and that it should be paid by 31st January, 1978 and on failure to pay it by that time, he should pay with interest at 18% per annum. 1 hold that the claim of the defendant on this particular aspect is false and that the plaintiff's claim is perfectly justified and the trial Court rightly decreed the same.

Point No. 5:

46. The agreed court granted 18% per annum interest from the respective dates for the amounts of Rs. 46,000/- repair charges and Rs. 1,20,000/- rent due. The court granted subsequent interest at 6% per annum on Rs. 1,66,000/- which represents the principal amount. It should be remembered that under the Civil Procedure Code, the subsequent interest is at the discretion of the court. Except in a mortgage decree, the contract rate of interest cannot be granted. Considering the entire material on record, I feel that the plaintiff-respondent is not entitled to any relief in the cross-objections, his claim for subsequent interest on the entire amount of Rs.2,01,293/- is also not justified. Interest has necessarily to be paid only on the principal amount. The cross-Objections are liable to be dismissed.

47. In the result, the appeal is dismissed with costs. The cross-objections are dismissed without costs.

48. Appeal dismissed.