Indian Oil Corporation Limited Vs. Karem Zaheer Yar Jung and anr. - Court Judgment

Excerpt:
- - 2,500/- per month towards rent but stipulating the condition that the lease deed should clearly mention that the first term of the lease had expired on 2-8-1976 and the further period shall be deemed to be in continuation of that period and that she should have the choice to accordor refuse further extension. although he has conceded that the quantum of rent can be higher for the subsequent period than what it was for the earlier period, still, any failure in this regard would not vitiate the efficacy of the renewal clause. , clarified the matter by restating the well accepted principle that the substance of the matter must be looked at while interpreting the terms of the contract: , must fail. but this is a position well understood by him when he took the sub-lease.m.n. rao, j.1. these two letters patent appeals and the two miscellaneous petitions arise out a common judgment of a learned single judge of this court in ccca nos. 41 and 112 of 1986 dismissing the appeals filed by the indian oil corporation (ioc) against the decree granted by the additional chief judge- cum-i addl. special judge for spe and acb cases, at hyderabad in the suit o.s.no. 465 of 1983 filed by the landlady for eviction of the ioc from the suit site and dismissing the suit filed by the ioc for specific performance. as all these matters are inter-connected, we dispose them of by this common judgment. for the sake of convenience, the appellant is referred to as the ioc and the respondent as the landlady.2. the ioc taken on lease an extent of 545 sq. yards of prime land bearing 25 no. 5-9-29/3 situate at basheerbagh, hyderabad a highly valuable commercial area, for a period of ten years from the landlady mrs. karim zahir yarjung commencing from 1-8-1966 and ending with 31-7-1976 with a condition for renewal. the purpose for which the ioc obtained the lease was to instal a petrol pump and servicing station. the registered lease deed executed in this behalf was ex.a-8 document bearing no. 1182 of 1967. as there was certain discrepancy, a rectification deed, ex.a-2, was got executed and registered on 30-4-1968. the lease amount fixed was rs. 1,150/- per month.3. the i.o.c. in turn, entered into a dealership agreement with one m/s'; excels under which the latter was appointed as a dealer and was permitted to run the business for and on behalf of the ioc as its dealer. on expiry of the period of ten years, the ioc called upon the landlady to execute a lease deed renewing the lease for a further period of ten years with effect from 31-7-1976. as that did not materialise, the ioc filed a suit for specific performance - o.s.no. 1145 of 1981 on 14-8-1981, which was subsequently renumbered as o.s.no. 385 of 1983 - directing the landlady to execute and register a lease deed in its favour for a period of ten years from 1-8-1976 on a monthly rental of rs. 1,800/- incorporating all the terms and conditions contained in the earlier lease deed, ex. a-8, inclusive of the clause as to renewal. it was alleged by the ioc in the plaint that the landlady avoided executing a renewal lease deed on some pretext or the other and after some correspondence in this regard, the landlady insisted upon higher rental of rs. 2,500/- per month. a meeting took place between the representative of the ioc and one mr. chenoy acting on behalf of the landlady and in that meeting it was made clear on behalf of the landlady that the fresh lease deed should stipulate that the ioc should vacate the premises by 31-7-1986 and that the renewal clause should be deleted. as this condition was not to the liking of the ioc, the landlady thereafter sent a letter dated 6-12-1978, ex.a-7, expressing her willingness to receive rs. 2,500/- per month towards rent but stipulating the condition that the lease deed should clearly mention that the first term of the lease had expired on 2-8-1976 and the further period shall be deemed to be in continuation of that period and that she should have the choice to accordor refuse further extension. rejecting this request, the suit was laid by the ioc.4. the landlady, in her written statement, inter alia, had asserted that the renewal clause in ex.a-8 contemplated an agreement as to the quantum of rent payable after the expiration of the first period of ten years i.e., subsequent to 31-7-1976 and unless such an agreement had materialised, there would not be any question of renewing the lease. as the ioc did not agree to her condition to receive rent at rs. 1,800/- per month and delete the clause concerning renewal from the lease deed to be executed in future, the lease ex.a.8, stood terminated and the tenancy after 31-7-1976 was from month to month as per the english calendar and so the ioc had no right to be in possession of the property.5. the landlady also filed o.s.no. 966 of 1982 which was subsequently renumbered as o.s.no. 465 of 1983 against the ioc seeking its eviction from the suit premises and to put her back in vacant possession after removing 30 the structures put up by the ioc and for past mesne profits in a sum rs. 15,300/- with interest at the rate of 12% per annum and also for future mesne profits at the rate of rs. 3,000/- per month and for a decree in respect of the arrears of rent. she alleged in the plaint that the ioc ought to have asked for renewal of ex.a-8 prior to 31-7-1976 but it did not do so and as there was no mutual agreement between her and the ioc as to the rate of rent for the renewal period, the ioc had lost its 'conditional choice to ask for renewal of the said lease'. resisting this suit, the ioc, inter alia, pleaded in the written statement that after the expiry of the first period of ten years on 31-7-1976, there was no need for any mutual agreement and the lease stood automatically renewed without any further act of the parties. the written statement also refers to the correspondence between the ioc and the landlady and the meeting held on 27-7-1977 at which no agreement could be reached in regard to the execution of the lease deed and the quantum of rent.6. both the suits were tried together by the learned i additional judge, city civil court, hyderabad, who, after considering the evidence on record, both documentary and oral, found that the ioc was not entitled to claim automatic renewal of the lease in the absence of any mutuality concerning the quantum of rent for the period subsequent to 31-7-1976. as the suit of the ioc was filed on 14-8-1981, more than three years after 31-7-1976, the date when the first term of ten years came to an end, the same was barred by limitation under article 54 of the limitation act. in the result, the learned judge decreed the suit of the landlady and dismissed that of the ioc7. the ioc filed two appeals - ccca nos. 41 of 1986 and 112 of 1992 - against both the judgments of the trial court. a learned single judge of this court by a common judgment dated 21-3-1996 dismissed both the appeals taking the view that as per the relevant clause concerning renewal in the lease agreement, ex.a-8, in the absence of mutuality concerning the quantum of rent, no right has accrued to the ioc to insist upon the landlady for renewal of the lease deed. 8. aggrieved by the common judgment, the present appeals were brought by the ioc. m/s. excels, with whom the ioc had entered into dealership agreement, was not a party to either of the suits or the first appeals. after the l.p.as., filed by the ioc were admitted, two applications - c.m.p. nos. 15617 and 15618 of 1996 - seeking leave to appeal against the common judgment in the two first appeals were filed by m/s. excels along with the memoranda of l.p.as.9. the two questions that arise for consideration in the two l.p.as filed by the ioc concern the interpretation of the renewal clause in ex.a-8 and the bar of limitation.10. sri koka raghava rao, learned counsel for the ioc, has argued that there is no need for any mutuality with regard to the quantum of rent for the period subsequent to 31-7-1976; after the first period of ten years expired on 31-7-1976, automatically, the second period of ten year lease comes into existence without any requirement of the parties agreeing as to how much rent the premises should fetch for the subsequent period of ten years. although he has conceded that the quantum of rent can be higher for the subsequent period than what it was for the earlier period, still, any failure in this regard would not vitiate the efficacy of the renewal clause. as the landlady refused to execute the renewal lease by her letter dated 6-12-1979, ex.a-7, the three years period of limitation runs from that date and as the suit was filed on 14-8-1981, the same was within time.11. in opposition to these submissions, sri vilas afzalpurkar, learned counsel for the landlady, has urged that as there was no consensus either with regard to the quantum of rent or the renewal for the period subsequent to 31-7-1976, ex.a-8, the lease deed, became inoperative and unenforceable. as there was no contract at all for the period subsequent to 31-7-1976, there being no lease deed or any agreement whatsoever, the suit for specific performance as laid by the ioc was not maintainable. the suit also was barred by time since the term of ten years expired by 31-7-1976 but the suit was filed only on 14-8-1981, much later than the three year period prescribed under article 54 of the limitation act.12. we shall first take up for consideration, the question concerning the interpretation of the renewal clause contained in the lease deed, ex.a-8.13. the lease in question was to be in effect from 1-8-1966 for a period of ten years. after referring to the conditions concerning the payment of monthly rent, the rights and obligations of the ioc and the landlady, ex.a.8 incorporates the following clause, which is subject matter of controversy and referred to as the 'renewal clause':'......it is agreed and declared that at the expiration of the said term of ten years this lease will be automatically and without any further act of any of the parties hereto be renewed for a further term of ten years from the expiration of the said term hereby granted unless the lessee shall prior to the expiration of the last mentioned term give to the lessors one calendar month's previous notice in writing of their intention not to take any renewed lease. the renewed lease will be on the same monthly rent/at the rate to be mutually agreed upon and subject to the same covenants, conditions and agreements as are herein contained including the present covenant for renewal.'the automatic renewal without any further act of the parties contemplated in the renewal clause to become effective for a further term of ten years after the expiry of the first term is subject to the condition of mutual agreement of the parities concerning the monthly rent. if there was no mutuality concerning the monthly rent, the lessee has no right to insist upon a fresh agreement to be executed for the period subsequent to 31-7-1976 when the first term of ten years expired. the contention of sri raghava rao that in the absence of mutual agreement as to rent, the renewal agreement should be bayed upon the same monthly rent is not supported by the language employed in the renewal clause.14. one more important aspect that needs to be noticed in the interpretation of the renewal clause is that the words 'to be renewed for a father term of ten years from the expiration of the said term.' necessarily contemplate a fresh lease agreement to be brought into existence for the period subsequent to 31-7-1976. the words 'without any further act of any of the parties' preceding the above words do not have the effect of creating a valid lease agreement for the second term of ten years without there being actually no document in existence. the right of the party to have an agreement executed is different from approximating that right to the document itself coming into existence. the fresh document as contemplated by the agreement, it is uncontroversial, did not and could not materialise for the reason that there was no mutuality with regard to the rent to be paid for the said premises after 31-7-1976.15. yet another aspect that has a vital bearing on the question is the fact that there was no agreement between the ioc and the landlady either with regard to the renewal period or the quantum of rent. on both the aspects, no part of the evidence supports the case of the ioc. paragraph 5 of the written statement filed by the ioc in o.s. no. 966 of 1982 (suit filed by the landlady) admits to the fact that 'there was no meeting ground for settlement in regard to the execution of the lease deed and the quantum of rent'. in the plaint filed by the ioc in o.s. no. 1145 of 1981, the relief claimed was for a direction to the landlady to execute a lease deed for ten years from 1-8-1976 inclusive of the 'clause as to renewal'. it is, therefore, clear that there was no agreement in law based upon which the ioc could seek specific performance.16. both the courts, after examining the renewal clause, have interpreted the same as not conferring any right upon the ioc in the absence of mutuality concerning the rent to be paid after 31-7-1976. we do not find any justifiable grounds to come to a different conclusion.17. as to the contention of sri raghava rao, learned counsel for the ioc, that the renewal clause is one to be interpreted as in perpetuity, we are of the view that it is untenable. a division bench of this court in syed jaleel zane v. p. venkata murlidhar, : air1981ap328 held: 'the principle that emerges from the above decision is that while in india, the law does not prohibit a perpetual lease, clear and unambiguous language would be required to infer such a lease. if the language is ambiguous, the court would opt for an interpretation negativing the plea of a perpetual lease. the court always lease (leans?) against a perpetual renewal and hence where there is a clause for renewal subject to the same terms and conditions, it would be construed as giving a right to renewal for the same period as the period of the original lease but not a right to second or third renewal and so on, unless, of course, the language is clear and unambiguous.'the principle enunciated in the aforesaid case was that unless the language of the renewal clause is clear and unambiguous, it would not be construed as one in perpetuity.18. in the instant case, the renewal clause does not, in clear and unambiguous terms, state that the lease shall be renewed in perpetuity without the fulfilment of any conditions.19. one other submission made by sri koka raghava rao is that the court is empowered to determine the fair rent for the renewed period of lease in the absence of mutuality and for the said proposition, relied upon the decision of the supreme court in d.t. mangahnurti v. state of bombay, : air1959sc639 . in that case, the clause provided for renewal 'subject to such fair rent', which was interpreted by the court as conferring jurisdiction on the court to determine the fair rent. 20. stating the rule as an inflexible one that in every case where there is permission for the lessee to put up structures, the lease must be construed as one in perpetuity, sri raghava rao has placed reliance upon the ruling of the supreme court in sivayogeswara cotton press v. panchakshamppa, : [1962]3scr876 which, in our opinion, is misconceived .the lease deed in that case did not contain any fixed period and the land which was the subject matter of lease was to be utilised for construction of buildings. the presumption in such a case according to the supreme court was that the lease was intended to create a permanent tenancy. the supreme court approved the observations of gajendra gadkar, j., (as he then was) in bavasaheb walad mansursaheb korti v. west patent press co. ltd., : air1954bom257 , wherein it was held:'if the tenancy is for a building purpose, prima facie, it may be arguable that it is intended for the life-time of the less ee or may in certain cases be even a permanent lease. prima facie, such a lease is not intended to be tenancy at will.' gajendragadkar j., clarified the matter by restating the well accepted principle that the substance of the matter must be looked at while interpreting the terms of the contract:'but whether it is a tenancy for life or a permanent tenancy must ultimately depend upon the terms of the contract itself. and in construing the terms of such contracts the courts must look at the substance of the matter and decide what the parties really intended to do.'21. in ex.a-8, it is true, the lessor had permitted the lessee to put up structures not for any residential purpose but for carrying on business in petroleum products during the term of the lease. the term was fixed and the purpose for which the structures were required to be put up also was stated. therefore, the precedent relied upon by sri raghava rao cannot be considered as an authority for the proposition that in every case where permission was accorded by the lessor to the lessee to put up structures on the demised land, it becomes a lease in perpetuity. the other rulings cited by sri raghava rao have been considered by a division bench of this court in syed jaleel zane's case (1 supra) and, therefore, we do not think it necessary to consider them separately.22. coming to the question of limitation, we have no doubt at all that the suit laid by the ioc - o.s.no. 1145 of 1981 - was barred by time. under article 54 of the limitation act, for specific performance of a contract, the period of limitation is three years commencing from the date fixed for the performance. but if no such date is fixed, the period commences from the date when the plaintiff has notice that the performance is refused. the date fixed for the performance in the present case is 31-7-1976 when the first term of ten years expired under ex.a-8. within three years from that date, the ioc had the right to bring an action against the landlady seeking a direction for execution of a renewal lease deed. the suit laid by the ioc on 14-8-1981 is, therefore, barred by time.23. coming to the question of the right of m/s. excels seeking leave to appeal, we are not disinclined to grant the leave for the reason that it is an admitted fact that m/s. excels have been carrying on business as dealers for and on (sic) of the ioc. c.m.p.nos. 15617 and 15618 of 1996 are accordingly ordered and the office shall number the l.p.a. (srs) filed by m/s. excels. 24. but the granting of leave does not make any difference to the conclusion reached by us viz., that both the . l.p.as., must fail. although sri s. ramachander rao learned senior advocate for m/s. excels, has strongly urged that this court must remand the matter to the trial court for the purpose of determination of the status of m/s. excels-whether they are the sub- tenants or mere licencees - in our considered opinion, such a course of action is totally unwarranted. sri ramachander rao has admitted that if only m/s. excels had been made a party to the proceedings either by the ioc or the landlady, they would have taken the plea that the lease in question was in perpetuity. to thir extent m/s. excels want to go. as we have already held that the lease was not in perpetuity, there is no point in remitting the matter at this distance of time to the trial court for the purpose of determining the status of m/s. excels. whatever rights m/s. excels can claim must be the rights which accrued to the ioc. m/s. excels have no right to claim anything higher than what the ioc had claimed in the suit. as the claims of m/s. excels depend upon the rights of the ioc, the judgment-debtor, there is no need to embark upon an enquiry as to what higher rights other than the ioc is entitled under ex.a-8, m/s. excels could claim. taking a realistic view, we therefore, reject the argument advanced by sri s. ramachander rao. 25. one other contention very seriously pressed into service by sri ramachander rao is that m/s. excels being a necessary party, the suit filed by the landlady was not maintainable. we do not agree. it is not the requirement in law that in a proceeding between the lessor and the lessee, the sub-lessee is a necessary party. this position was made clear long ago by the supreme court in rupchand v. raghuvanshi (pvt.) -ltd., : [1964]7scr760 .:'.......it is quite clear that the law does not require that the. sub-lessee need be made a party. it has been rightly pointed out by the high court that in all cases where the landlord institutes a suit against the lessee for possession of the land on the basis of a valid notice to quit served on the lessee and does not implead the sub-lessee as a party to the suit, object of the landlord is to eject the sub-lessee from the land in execution of the decree and such an object is quite legitimate. the decree in such a suit would bind the sub-lessee. this may act harshly on the sub-lessee; but this is a position well understood by him when he took the sub-lease. the law allows this and so the omission cannot be said to be an improper act.'26. the trial court while decreeing the suit of the landlady granted mesne profits at the rate of rs. 1,265/- per month from the date of the suit till the date of possession. in the appeal, however, the same was enhanced to rs. 3,000/- per month from the date of the suit till the date of possession. when the above appeals were filed by the ioc and cmp nos. 15524 and 15525 of 1996 were listed before the court seeking stay of all further proceedings in furtherance of the decree in the landlady's suit - o.s.no. 465 of 1983 -, this court by orders dated 16-10-1996 while staying all further proceedings directed that mesne profits from the date of the suit i.e., 30-7-1982 till 21-3-1996 calculated at the rate of rs. 3,000/- per month shall be paid by the ioc and for the period subsequent to 21-3-1996, the ioc shall pay at the rate of rs. 10,000/- per month to the landlady. on the representation of sri s. ramachander rao that his clients m/s. excels are running the petrol outlet, permission was granted to m/s. excels to pay directly to the landlady at the rate of rs. 10,000/- per month with effect from 21-3-1996. however, it is now noticed that the plaintiff-landlady has not questioned the mesne profits as determined by the learned single judge in the first appeals and, therefore, the sum of rs. 3,000/- per month towards mesne profits from the date of suit till the date of possession has become final. consequently, the landlady is directed to refund the sum received over and above rs. 3,000/- for the period subsequent to 21-3-1996 to the ioc/excels or to adjust the same until the delivery of possession is obtained. the mesne profits determined at rs. 3,000/- per month by the learned single judge in the first appeals, in the circumstances, needs no interference or variation by this court in the above proceedings.27. in the result, the two l.p.as filed by the ioc - l.p.a.no. 138 of 1996 and l.p.a. no, 3 of 1997 - be and hereby are dismissed with costs. consequently, l.p.a. (sr) nos. 61257 and 61268 of 1996 (to be numbered by the registry) are also dismissed but in the circumstances, without costs. keeping in view the fact that the premises in question is being used as a petrol retail outlet, we consider it appropriate to grant six months time from today to the appellants to vacate and deliver vacant possession of the suit premises to the landlady subject to the condition that the ioc and m/s. excels file undertakings in the form of an affidavit before this court within thirty days from to-day undertaking to vacate the suit premises by the end of the said term of six months stipulated hereinabove without the landlady having to take recourse to execution proceedings for the said purpose.