Case: Karnani Industrial Bank, Limited Vs. The Province Of Bengal And Others

Fazl Ali, J.1. The principal question for determination in this appeal is whether a certain lease had validly terminated by efflux of time or whether there was holding over" by the lessee of the leasehold property as contemplated in S. 116, T. P. Act. The circumstances under which this question & several subsidiary questions to which reference will be made later have arisen may be briefly stated as follows.2.The Province of Bengal (hereinafter, refd. to as the resp. 1 or pltf., is admittedly the owner of an area of 1125 bighas & odd of land in villages Akra. On 17-9-1928, the resp. 1 executed a lease (Ex. 3) in respect of the said land for 10 years for manufacture of bricks in favour of the applt. at a rental of Rs. 6, 000 a year. The lease was to commence from 24-9-1928, & a years rent was payable in advance. By the terms of the said lease, the lessee was prohibited from assigning or subletting the premises or any part thereof without the consent of the lessor except to a limited co. & the lease also contained a general provision that the lessee would at the expiration of the lease restore to the lessor the demised premises in as good condition as it was at the date of the lease, reasonable wear & tear excepted. Two further clauses in the lease, which are material for the decision of this appeal, may be reproduced verbatim :Clause 11 of Part I of the Schedule."The Secretary of State reserves the right to terminate the lease at any time subject to six months notice in the event of the lessees failing to observe & duly perform the conditions hereinbefore & after mentioned & it is hereby agreed that the lessee shall before the expiration or prior termination of the lease hereby granted remove his boilers engines, trucks, kilns rly & tram lines bricks tools & plant & all, other materials whatsoever & yield up the said demised premises unto the Secretary of State & that those bricks tools & plant & other materials that shall not be removed before such expiration or prior termination shall become the property of the Secretary of State."Clause 1 of Part III of the Schedule.The lessee shall be at liberty to keep on the said premises hereby demised for three months after the expiration or prior termination of the term of this lease any bricks boilers engines tracks kilns rly. & tram lines & all other materials whatsoever as may have been manufactured by him in the premises in accordance with the conditions of these presents but any bricks & other materials left in contravention to this condition shall become the absolute property of the Secretary of State without payment."It may be stated here that at the time of the execution of the lease, the lessee had purchased from the lessor for Rs. 50, 000 "all the boilers, engines, trucks, kilns. rly. & tramway lines & all other movable property, plant & machinery, on the demised premises."3. The case of the resp. 1, who is the pltf. in the present litigation, is that the applt. (deft. 1) had, in contravention of the terms of the lease, sublet the brickfield to defts-resps 2 to 18 without the consent of resp. 1, & they had caused serious damage to the brick field in general & failed to maintain the embankments, slices, etc. in proper repair resulting in a total loss of Rs. 16, 840. It was further alleged that the defts. had refused to deliver possession though the lease had terminated, & they had not removed the bricks, pug mills & other materials within 3 months from the termination of the lease. On these allegations the resp. 1 prayed for the following reliefs : (a) a decree for ejectment & khas possession over the brickfield : (b) damages amounting to Rs. 4, 000 for the period between the termination of the lease & the institution of the suit & mesne profits for the subsequent period : (a) decree for Rs. 16, 840 for damages caused to the field ; & (d) a decree for permanent injunction restraining the defts. from removing or otherwise disposing of the bricks, pugmills, etc. which were claimed to have become the property of the pltf.4.The suit was contested by the applts & the other defts & their defence was that the applts. had held over with the implied consent of resp.1, & hence the lease had not validly terminated, that no. damage or injury had been caused to the land, that the resp. 1 was not entitled to forfeit the properties of the applts. lying in the brickfield, inasmuch as the term in the lease to that effect was by way of penalty & as such unenforceable, & that the resp. 1 was not entitled to the relief of injunction.5.The learned trial Judge by his judgment dated 24-11-1941. held that there was no. holding over with the assent of the pltf. & both parties were under a mistaken belief that the lease had expired on 23-2-1938. He, however, held that the evidence did not show that there was any damage or injury caused to the property. On these findings, the suit was decreed in part, & the resp. 1 was directed to be put in possession of the brickfield & was also granted a decree for Rs. 4000 as mesne profits up to the date on which the resp. 1 was put in possession. The prayer for damages for injury alleged to have been caused to the field & the prayer for injunction were, however, disallowed. The trial Judge allowed the applts. 3 months time "to remove their belongings from the Akra brickfield including kilns, pugmills, bricks, coals & any other brick making material that may be lying there" : after this period these properties, if any, left in the field, were to become the absolute properties of the pltf. The applts. thereafter preferred an appeal to the H. C. at Calcutta, & the resp. 1 also preferred a cross-objection claiming that the prayer for injunction should have been allowed & the claim for damages should have been decreed in full. The learned Judges of the H. C. who heard the appeal, by their judgment dated 13-2-1948, dismissed the applts. appeal & allowed the cross-objection of the resp.1 in part. They held that on the fact established in the case, there was no. holding over & that the clause in the lease stating that if the applts. did not remove the bricks etc. from the field within 3 months after the termination of the lease they would become the property of resp.1, was not a clause by way of penalty & should be given effect to. They further held that the claim of resp.1 for damages for injury caused to the demised premises was not established. The present appeal is directed against the judgment of the H. C.6.The admitted facts of the case are briefly these. The applts. duly paid Rs. 6 000 as rent to resp. 1 in February 1928. In February 1929, a sum of Rs. 6, 714 & odd was paid by the applts. as rent for the period 17- 2-1929 to 31-1l-1930 & thereafter they continued to pay Rs. 6, 000 as rent for the yearly period, lst April to 31st March of the succeeding year, & the last payment was made in April 1937 by means of a cheque sent with a covering letter, the material portion of which runs as follows :" We beg to enclose herewith a cheque for Rs. 6, 000 in payment of rent of Akra. brickfield for the year l937-38 ending 31-3-1938 & shall think you to please favour us with your formal receipt for the above."The cheque was duly cashed & the amount was entered in the cash book of the pltf. in the following terms :"5 -4-1937 (date of receipt) -Received without prejudice from Karnani Industrial Bank, Ltd. on account of yearly rent for Akra brickfield for the year ending 31-3-1938."On 27-8 1937, the applts. applied to the Secretary to the Govt. of Bengal, Public Works Dept, for renewing the lease for a further period of l0 years, but no. reply was received to that letter. After addressing several other letters, the applts. received a letter dated 23-2-1938, with which was enclosed a copy of an extract from a letter addressed by the Executive Engineer, Suburban Division to the Asst. Engineer, No. III Sub-division, which was as under : "He is requested to make arrangements with M/s Karnani Industrial Bank Ltd. for vacant possession of the Akra brick field on the 24th instant as the lease with the Bank will expire on the 23rd instant according to the terms of the agreement." Ultimately, on 17- 3-1938, the applts. received the following communication from the Executive Engineer, Suburban Division :"I would inform you that it is not the intention of Govt. in this Dept. to lease out the brickfields & arrangement is being accordingly made to make over the land to the Govt. in the Revenue Dept. for disposal."In a subsequent letter dated 14- 9-1938, the Executive Engineer wrote to the applts. as follows :"I am instructed to state that Govt. have decided that you cannot be allowed to continue in occupation of the premises any further . . . . However, as a matter of grace Govt. will allow you time till the 30th day of September next to dismantle the kilns & to remove all your bricks, boiler etc. from the site, on which date Govt. will take over possession of the property from you."7. The correspondence to which reference has been made does not show that at any point of time the pltf. had assented to the applts. continuance of possession. On the other hand, some of the letters written by the applts. show that, notwithstanding their having paid rent up to 31-3-1938, they had proceeded all along on the footing that the lease was to expire in February, 1938. For instance, in the applts letter of 23-8-1937, it is stated : "We are desirous of renewing the lease of the brickfield for & further period of 10 years from the date of the expiration of the period of the lease dated 17-2-1928." Again, in the letter dated 23-10-1937, reference is made to the applts appln. for renewal of the lease for a further period of 10 years on its expiry. Even in the letter which was written on behalf of the applts. on 3-3-1938, after the expiry of the date on which the lease was to terminate, the statement made in the earlier letters was repeated, & it was further stated : "we applied for renewal of the lease on 23-8-1937 six months prior to the date of expiration of the lease. In this letter, it is nowhere suggested that the applts. were holding over by reason of the acceptance of rent up to 31-3-1938. On the other hand, at the end of this letter, we find the following statement : "We, therefore, pray that if the Govt. is not at all inclined to renew the lease time may be granted to us for dismantling & removing till the end of December 1938, & we shall pay the proportional rent to the Govt.for several months time in pursuance of the terms of the lease." The reference to the period of 7 months shows that it was assumed that the lease had expired in February 1938.9. The letter written on behalf of the Govt. points to the same conclusion, namely, that both the parties were acting on the assumption that the lease was to expire on 23-2-1938. For instance in a letter written on behalf of the Govt. on 25-2-1938, the following statement is made :"I have the honour to inform you that none of your agents was present at the Akra brickfield today as previously arranged to make over the possession of the brickfields. You are, therefore, requested to please inform me about as to what arrangements are being made by you to make over the possession of the said brickfield to this dept. The term of lease expired on the afternoon of 23-9-1938."10. Apart from the fact that the applts. did not set up in any of their letters a case of holding over, we have to see whether the plea can be said to have been succesfully made out by them. There is no. doubt that the applts. have established that the rent was paid on their behalf up to 31-3-1938, & it was accepted by resp.1. It has also been established that this payment was made by a cheque & that cheque has been cashed by the Govt. S. l16, T. P. Act, on which reliance was placed on behalf of the applts, runs as follows : "If a lessee or under lessee of property remains in possession thereof after the determination of the lease granted to the lessee, & the lessor or his legal representative accepts rent from lessee or under lessee or otherwise assents to his continuing in possession, the lease is, in the absence of an agreement to the contrary, renewed from year to year, or from month to month, according to the purpose for which the property is leased . . . ." The section was construed by the F. C. in K. B Capadia v. Bai arbai, 1949 O. C. R. 262, & it was held that where rent was accepted by the landlord after the expiration of the tenancy by efflux of time, S. 116 applied even though the landlord accepted the amount remitted to him as "part deposit towards his claim for compensation for illegal use & occupation, & without prejudice to his rights". It is to be noted that in that case rent had been accepted after the expiry of the tenancy. In our judgment, the present case cannot be governed by that decision, because of the fact, which in our opinion is important, that here the payment of rent up to 31-3-1938, was made not after the date of expiry of the lease, but on 5-4-l937, nearly a year before the expiry of the lease. A reference to S. 116, T.P. Act, will for the application of that question, two things necessary : (1) the lessee should be in possession after the termination of the lease; & (2) the lessor or his representative should accept rent or otherwise assent to his continuing in possession. The use of the word otherwise suggests that acceptance of rent by the landlord has been treated as a form of his giving assent to the tenants continuance of possession. There can be no. question of the lessee "continuing in possession" until the lease has expired, & the context in which the provision for acceptance of rent finds a place clearly shows that what is contemplated is that the payment of rent & its acceptance should be made at such a time in such a manner as to be equivalent to the landlord assenting to the lessee continuing in possession. Both the Cts below, after dealing with the matter elaborately, have concurrently held that in the circumstance of the case the consent of resp. 1 to the applts. continuing in possession cannot be inferred, & we agree with this finding.11. It was pointed out to us in behalf of the resp. that the entry relating to this payment in the books of the pltf. contains the words :"received without prejudice from Karnani Industrial Bank. . . , ."The same words, however, occur in several earlier entries, & we are not inclined to attach any special significance to them. But it seems to us that the very fact that the payment was made at time when there was no. question of the lessor assenting to the lessees continuing in possession & neither party treated the payment as importing such assent is sufficient to take the case out of the mischief of S. 116, T. P. Act.12. There is also another view which we think is possible to take upon the facts of the case. As we have seen the rent for the first year was paid in advance near about the time of the execution of the lease & nothing turns upon it. When however the second payment was made, the sum paid was Rs. 6, 714 & odd, & the payment was made in respect of rent up to 31-3-1930. After this all the subsequent payments were made up to the 31st March of the succeeding year, evidently because the financial year, which the parties considered themselves to be governed by, ran from the 1st April to the 31st March of the succeeding year. It was presumably in view of this fact that the pltf. filed an appln. on 6- 11-1941, for amending the plaint so as to include the following statement : "The pltf submits that even assuming that the registered lease terminated on 23-2-1938 by an agreement between the pltf & the deft. 1, the latter was allowed to hold over up to 31-3-1938. This appln., however, was rejected, because it was made at a very late stage that is to say, after the defts. evidence had been closed & an adjournment had been granted to the plft. to adduce rebutting evidence. However that may be, the utmost that can be said upon the evidence as it stands is that by the implied consent of the parties the period of the lease was extended up to 31- 3 1938. In this view, the resp. 1 became entitled to re-enter after the 31st March, & no. notice u/s. 106, T. P. Act, was necessary. In the circumstances, the decree for ejectment passed by the Court below must be upheld.13. The next question which arises in this case turns on the proper construction of cl. 11 of part I & cl. 1 of part III of the lease, which have already been quoted. It seems to us that cl. 11 should be read as a whole, & when it is so read, it becomes clear that it was intended to be applicable only where the Secretary of State decided to exercise his right to terminate the lease at any time subject to 6 months notice, " in the event of the lessee failing to observe & duly perform the conditions mentioned in the lease. In such a case, if the lessee did not remove the boilers, engines & all other materials & yield up the premises to the Secretary of State, those articles were to become the property of the Secretary of State. This clause is evidently not applicable to the present case. The clause which applies to this case is cl. 1 of part III, which is intended to be applicable to the normal case of the lease expiring by efflux of time. This clause as we have seen provides that the lessee shall be at liberty to keep on the demised premises for 3 months after the expiration of the lease any bricks, boilers, etc., but it also provides that "any bricks & other materials in contravention of this condition shall become the absolute property of the Secretary of State without payment." There can be no. doubt that under this clause, the bricks & other materials have become the absolute property of the pltf. The only question is as to the meaning of "other materials." It seems to us on an examination of the lease as a whole that there must be a distinction between materials, & machinery & tools & similar articles, & the words "other materials" have no. reference to engines, trucks, rly. & tramway lines & plant. They mean building materials such as bricks, tiles & similar articles that might have been manufactured by the applts. on the demised premises. That being so, the decree under appeal should be modified accordingly.14. The only other point which arises for consideration relates to the pltfs prayer for a decree for permanent injunction against the defts. to restrain them from removing or otherwise disposing of the articles in regard to which the decree is to be passed. It was contended on behalf of the applts. that the resp. 1 not being in possession of these properties could not ask for the relief of injunction without asking for the declaration of its title in respect of them & possession over them, & in support of this proposition, the following cases were cited : -Rathnasabapathi Pillai v. Ramasami Aiyar, 33 Mad. 452) , Bhramar Lal v. Nanda Lal, (24 I. C. 199), and Valia Tamburathi v. Parvati, 13 Mad. 454. After reading & fully considering those cases, we find them to be wholly inapplicable to the present case. In the present case, it has been found that the bricks & other materials have become the property of the pltf. & there can be no. legal objection to the granting of an injunction as prayed.15.

Decision reasoning: 0[ds]It was pointed out to us in behalf of the resp. that the entry relating to this payment in the books of the pltf. contains the words :"received without prejudice from Karnani Industrial Bank. . . , ."The same words, however, occur in several earlier entries, & we are not inclined to attach any special significance to them. But it seems to us that the very fact that the payment was made at time when there was no. question of the lessor assenting to the lessees continuing in possession & neither party treated the payment as importing such assent is sufficient to take the case out of the mischief of S. 116, T. P. Act.There is also another view which we think is possible to take upon the facts of the case. As we have seen the rent for the first year was paid in advance near about the time of the execution of the lease & nothing turns upon it. When however the second payment was made, the sum paid was Rs. 6, 714 & odd, & the payment was made in respect of rent up to 31-3-1930. After this all the subsequent payments were made up to the 31st March of the succeeding year, evidently because the financial year, which the parties considered themselves to be governed by, ran from the 1st April to the 31st March of the succeeding year. It was presumably in view of this fact that the pltf. filed an appln. on 6- 11-1941, for amending the plaint so as to include the following statement : "The pltf submits that even assuming that the registered lease terminated on 23-2-1938 by an agreement between the pltf & the deft. 1, the latter was allowed to hold over up toThis appln., however, was rejected, because it was made at a very late stage that is to say, after the defts. evidence had been closed & an adjournment had been granted to the plft. to adduce rebutting evidence. However that may be, the utmost that can be said upon the evidence as it stands is that by the implied consent of the parties the period of the lease was extended up to 31- 3In this view, the resp. 1 became entitled to re-enter after the 31st March, & no. notice u/s. 106, T. P. Act, was necessary. In the circumstances, the decree for ejectment passed by the Court below must be upheld.e next question which arises in this case turns on the proper construction of cl. 11 of part I & cl. 1 of part III of the lease, which have already been quoted.It seems to us that cl. 11 should be read as a whole, & when it is so read, it becomes clear that it was intended to be applicable only where the Secretary of State decided to exercise his right to terminate the lease at any time subject to 6 months notice, " in the event of the lessee failing to observe & duly perform the conditions mentioned in the lease. In such a case, if the lessee did not remove the boilers, engines & all other materials & yield up the premises to the Secretary of State, those articles were to become the property of the Secretary of State. This clause is evidently not applicable to the present case. The clause which applies to this case is cl. 1 of part III, which is intended to be applicable to the normal case of the lease expiring by efflux of time. This clause as we have seen provides that the lessee shall be at liberty to keep on the demised premises for 3 months after the expiration of the lease any bricks, boilers, etc., but it also provides that "any bricks & other materials in contravention of this condition shall become the absolute property of the Secretary of State without payment." There can be no. doubt that under this clause, the bricks & other materials have become the absolute property of the pltf. The only question is as to the meaning of "other materials." It seems to us on an examination of the lease as a whole that there must be a distinction between materials, & machinery & tools & similar articles, & the words "other materials" have no. reference to engines, trucks, rly. & tramway lines & plant. They mean building materials such as bricks, tiles & similar articles that might have been manufactured by the applts. on the demised premises. That being so, the decree under appeal should be modified accordingly.The only other point which arises for consideration relates to the pltfs prayer for a decree for permanent injunction against the defts. to restrain them from removing or otherwise disposing of the articles in regard to which the decree is to be passed. It was contended on behalf of the applts. that the resp. 1 not being in possession of these properties could not ask for the relief of injunction without asking for the declaration of its title in respect of them & possession over them, & in support of this proposition, the following cases were cited : -Rathnasabapathi Pillai v. Ramasami Aiyar, 33 Mad. 452)  , Bhramar Lal v. Nanda Lal, (24 I. C. 199), and Valia Tamburathi v. Parvati, 13 Mad.After reading & fully considering those cases, we find them to be wholly inapplicable to the present case. In the present case, it has been found that the bricks & other materials have become the property of the pltf. & there can be no. legal objection to the granting of an injunction as prayed.