Case: Hardesh Ores Pvt. Ltd. & Another Vs. M/s. Hede & Company


Decision reasoning: 0[ds]25. Having regard to these decisions we must hold that in order to give effect to the renewal of a lease, a document has to be executed evidencing the renewal of the agreement or lease, as the case may be, and there is no concept of automatic renewal of lease by mere exercise of option by the lessee. It is, therefore, not possible to accept the submission urged on behalf of thethat by mere exercise of option claiming renewal, the lease stood renewed automatically and there was no need for executing a document evidencing renewal of the lease.26. We shall now advert to some of the facts stated in the plaint itself. The case of theis that since it was not possible to commence mining operation after taking possession of the mine, in exercise of its right under clause 15 of the agreement, it permitted the respondent to carry on mining operations confined to the pits already opened up. Its case was that under its permission the respondents were carrying on limited mining operation. The appellants were awaiting permission of the Central Government under the Forest Conservation Act as also consent of the surface right holders permitting them to carry on mining operations. When the original term of the lease expired, they exercised their option to get the lease renewed for a further period of 5 years but the respondents refuted their claim and denied the fact that the lease stood renewed automatically. The option was exercised by the appellant and refuted by the respondent in December, 2001. Thereafter nothing much appears to have happened and during this period the respondent carried on mining operations. It was only on 15.5.2005 that the appellant Hardesh wrote to the respondent stating that they had been permitted to extract ore from the broken pits in the forest area under Clause 15 of the Extraction Agreement. The appellant also permitted the respondent to sell the ore to others like Dempo or Chowgules since Fomento was not interested in purchasing the low grade ore. The communication also referred to the option exercised by the appellant for renewal for a period of 5 years from 1.1.2002 to which the respondent replied saying that they were not entitled to exercise any option. The letter then goes on to say that the appellants were led to believe that the respondent had obtained the consent from the surface right owners of the privately owned land within the mining area about which no information had been given to the appellants. Therefore, by letter dated 27.4.2005 the respondent were called upon to furnish the documents evidencing consent given by the surface right owners. It was further stated that if no documents, as aforesaid, were furnished within a period of 15 days from the date of receipt of this notice or if no reply was received, the appellants shall presume that such consent had been obtained since the respondents were doing the extraction in the area of the captioned mining lease. Since no documents were furnished pursuant to notice dated 27.4.2005, the appellants assumed that such consent had been obtained. It, therefore, withdrew the permission given to the respondents under Clause 15 of the Extraction Agreement so that the appellants could make preparation to start the extractionis not necessary to refer to the correspondence exchanged thereafter. The suits came to be filed on August 04, 2005 in which a prayer for injunction was made with a view to enforce the negative covenants contained in clauses 15 and 20 of the agreement.27. The respondent sought rejection of the plaint by filing application under Order VII Rule 11 CPC contending that the suit was barred by limitation on the face of it. It was contended before the High Court as also before us that the plaint has been cleverly drafted to give it the appearance of a simple suit for injunction to enforce the terms of Clauses 15 and 20 of the agreement which incorporated negative covenants prohibiting mining operation by anyone else except theor without its permission. It was submitted before us that the law is well settled that the dexterity of the draftsman whereby the real cause of action is camouflaged in a plaint cleverly drafted cannot defeat the right of the defendant to get the suit dismissed on the ground of limitation if on the facts, as stated in the plaint, the suit is shown to be barred by limitation.The respondent strongly relied on the decision of this Court in Srinivasa Murthys case (supra). That was a case where the plaintiffs alleged in the plaint that their father had incurred some debts and had therefore borrowed a sum of Rs.2000 from the predecessor in title of the defendants. Only by way of security for the loan advanced, a registered sale deed had been executed on 5.5.1953 with a contemporaneous oral agreement that on return of the borrowed sum with interest payable thereon @ 6% per annum a registered reconveyance deed shall thereafter be executed in favour of the borrower. The case of the plaintiff was that despite the registered sale deed, the plaintiff continued to be in possession of the suit lands. The receipt was obtained on 25.3.1987 from the defendants and the original registered sale deed dated 5.5.1953 was returned to the first plaintiff with an oral promise by the defendants to execute the registered document in favour of the plaintiff/borrower. On reading of all the averments of the plaint, it appeared that the cause of action for obtaining a registered reconveyance deed from the defendants in favour of the plaintiff first arose on 25.3.1987 when the entire loan amount was alleged to have been paid and an oral promise was given by the defendants to reconvey the suit lands. In the mutation proceedings an order was passed in favour of the defendants and the said order was confirmed in appeal by order of the Assistant Commissioner dated 28.4.1994. The cause of action is said to have arisen when the appellate authority confirmed the order of the lower authority directing mutation of the names of the defendants and then again in the first week of July, 1995 when the defendants were alleged to have made an attempt to interfere with the plaintiffs possession and enjoyment of the suit lands. The suit was filed on 26.8.1996 in which the reliefs claimed were, (a) declaration that the plaintiffs are absolute owners of the suit lands and (b) permanent injunction restraining the defendants from wrongfully entering the scheduled property and from interfering with the peaceful possession and enjoyment of scheduled lands.29. This Court after examining the pleadings observed that the foundation of the suit was that the registered sale deed dated 5.5.1953 was in fact only a loan transaction executed to secure the amount borrowed from the plaintiffs predecessor. The amount borrowed was alleged to have been fully paid back on 25.3.1987 and in acknowledgment thereof a formal receipt was obtained. At the same time there was an alleged oral agreement by the defendants to reconvey the property to the plaintiffs by registered deed. This Court held that on the basis of the averments contained in the plaint relief of declaring the registered sale deed dated 5.5.1953 to be a loan transaction and second relief of specific performance of oral agreement of recoveyance of property by registered document ought to have been claimed in the suit. A suit merely for declaration that the plaintiffs are absolute owners of the suit lands could not have been claimed without seeking a declaration that the registered sale deed dated 5.5.1953 was a loan transaction and not a real sale. The cause of action for seeking such a declaration and for reconveyance deed according to the plaintiffs own averments arose on 25.3.1987 when the plaintiff is claimed to have obtained the entire loan amount and obtained a promise from the defendants to reconvey the property. The mutation proceedings did not furnish any independent or fresh cause of action to seek a declaration of the sale deed of 5.5.1953 to be merely a loan transaction. The foundation of the suit was clearly the registered sale deed of 1953 which is alleged to be a loan transaction and the alleged oral agreement of reconveyance of the property on return of borrowedRelying upon these decisions it was contended before us that though the suit is for grant of injunction, real foundation of the suit is that there exists an agreement containing negative covenants which can be enforced by theThe relief is sought on the assumption that there is an existing agreement containing negative covenants in clauses 15 and 20 thereof, as they were in the original agreement. Counsel submitted that even the negative covenants in clauses 15 and 20 of the agreement presuppose the subsistence of the agreement and, therefore, unless thesatisfy the Court that there is a subsisting agreement, they cannot seek any relief from the Court to enforce the negative covenants contained therein.31. On the other hand, it is the case of thethat on mere exercise of option by theclaiming renewal the agreement got renewed automatically.32. We are of the view that the respondent is right in contending that enforcement of the negative covenants presupposes the existence of a subsisting agreement. As noticed earlier, the law is well settled that the renewal of an agreement or lease requires execution of a document in accordance with law evidencing the renewal. The grant of renewal is also a fresh grant. In the instant case, thedid exercise their option and claimed renewal. The respondents denied their right to claim renewal in express terms and also unequivocally stated that the agreement did not stand renewed as contended by the appellants. Having regard to these facts it must be held that a cause of action accrued to thewhen their right of renewal was denied by the respondents. This happened in December, 2001 and, therefore, within three years from that date they ought to have taken appropriate proceedings to get their right of renewal declared and enforced by a court of law and/or to get a declaration that the agreement stood renewed for a further period of 5 years upon the appellants exercising their option to claim renewal under the original agreement. Thehave failed to do so. However, the plaint proceeds on the assumption that the original agreement stood renewed including the negative covenants contained in clauses 15 and 20 of the original agreement which authorised only the appellants to extract ore from the mine with an obligation cast on theMr. Nariman contended that this case was governed not by Article 58 of the Limitation Act but, if at all, by Article 113 thereof because there is no specific article provided for enforcement of positive or negative covenants. We shall assume that he is right in contending that Article 113 may apply where enforcement of a positive or negative covenant is sought in a suit for injunction. However, in this case we have found that the real foundation for the suit was that the earlier agreement stood renewed automatically containing the same terms and conditions as in the original agreement including the negative covenants. There is neither a document to prove that the agreement stood renewed nor is there a declaration by a court that the agreement stood renewed automatically on exercise of option for renewal by the appellants. The basis for claiming the relief of injunction, namely, a subsisting renewed agreement did not exist in fact. In its absence, no relief as prayed for in the suit could be granted by the clever device of filing a suit for injunction, without claiming a declaration as to their subsisting rights under a renewed agreement, which is apparently barred by limitation.