Case: Kumar Dhirendra Mullick  Vs. Tivoli Park Apartments (P) Ltd

Appellants herein are the Trustees of the Trust Estate of Raja Rajendra Mullick Bahadur owning suit premises bearing nos. 225B and 225C, Lower Circular Road, Calcutta with eight cottages and a main building, more particularly described in the schedule annexed to the lease dated 25.11.1960 executed by the Trustees in favour of Mohd. Ismail for 21 years commencing from 1.5.19603. Some of the relevant terms and conditions of the said lease are as follows:-(i) The lessee, i.e. Mohammad Ismail, would pay monthly rent at the rate mentioned in the said lease;(ii) The lessee would pay the entire occupiers share of Corporation rates and taxes;(iii) The lessee would be entitled to sublet all or any portion of the demised premises. The lessee would, however, be liable for regular payment of rents and for due observance and performance of the terms and conditions of the lease agreement;(iv) Upon the expiration or sooner determination of the lease, the lessee would be obliged to deliver quietly and peaceful possession of the property to the lessors;(v) The lessee would not do or suffer to be done anything in or upon the said property or any part thereof that may cause nuisance or annoyance to the lessors or the other tenants of the adjoining premises;(vi) The lease would take effect retrospectively from 1st May, 1960 and would be for a period of 21 years i.e. up to 1st May, 1981(vii) The lease would come to an end in the event of the rents being in arrear for two months after the due date or in case of beach of any of the covenants of the lease agreement4. Subsequent to the grant of the above lease, the said Mohd. Ismail executed a deed of assignment dated 20.8.1970 and assigned the suit premises to the respondent - decree holder for the un-expired period and was subject to the terms and conditions contained in the lease. In the premises, the respondent herein was entitled to remain in possession of the said premises up to 1.5.1981 when the said lease was due to expire5. Before expiry of the lease, on 16.8.1980, an agreement was entered into by the then Trustees and the respondent- decree holder to the effect that terms and conditions of the said lease would be extended / renewed in favour of the said respondent for a further period of 70 years from 1.5.1981 on payment of increased rent of Rs. 30,000/- per month plus premium of Rs. 30 lacs. Respondent herein paid Rs. 4 lacs being part of the total premium of Rs. 30 lacs agreed to be paid at the time of the execution of the Transfer Deed6. Since the Trustees failed to execute the deed, respondent herein filed Title Suit No. 176 of 1981 in the Court of Assistant District Judge, Alipore, Calcutta (hereinafter referred to as the trial Court) for specific performance of the agreement dated 16.8.1980. On 25.7.1985, the said suit was decreed7. In the said suit, the defendant-Trustees, made an application under Order IX Rule 13 CPC for recall for the decree. This application was not pursued, hence, it got dismissed. An appeal was also filed, however, the same was dismissed8. To complete the chronology of events, it may be mentioned, that, the Trustees had instituted suit No. 87/81 which got dismissed for non-prosecution9. On 3.10.1994, the Trustees - appellants herein, moved and application under section 28(1) of the 1963 Act read with section 151 CPC. It was alleged that there was a collusion between the two trustees and respondent; that the said two Trustees had alone agreed to renew the lease dated 25.11.1960 for a further period of 70 years; that these two Trustees received Rs. 4 lacs from the respondent; that they did not account for it; that on 23.12.1980 they approved draft deed; that the said draft was in connection with renewal of lease for 70 year on payment of premium of Rs. 30 lacs and increased monthly rent of Rs. 30,000/- on a from 1.5.1981; that the said Trustees had no authority to act on behalf of the said Trust; and, therefore, the agreement for renewal was null and void and not binding on the estate. It was further alleged that title No. 176/81 was a counterblast to suit no. 87/81; that even after passing of the decree dated 25.7.1985 in the title suit No. 176/81, the respondent did not tender the deed to be executed by the Trustees nor did it tender the rent for nine years; that the respondent even failed to pay the balance premium of Rs. 26 lacs as agreed. That the respondent was earning income by letting out premises for marriages etc. In the circumstances, it was alleged that the respondent herein was not ready and willing to discharge its obligations under the decree dated 25.7.1985. Hence, it was submitted that contract dated 16.8.1980 be rescinded and the decree dated 25.7.1985 in suit no.176/81 be recalled10. By reply dated 21.2.1995, the respondent herein alleged that the Trustees were avoiding the decree under various pretexts. In this connection, it was pointed out that the decree for specific performance was passed on 25.7.1995 in title suit no. 176/81; that the said decree was an ex-parte decree and, therefore, the said Trustees moved an application under Order IX Rule 13 CPC which was also dismissed. That, being aggrieved, the Trustees carried the matter in appeal, which was also dismissed. In the circumstances, it was alleged that the trustees had repeatedly tried to avoid the decree. Having failed to have the decree set aside, the trustees now opted for its rescission. It was further alleged that the respondent was repeatedly assured of the execution of the lease. In this connection, there were negotiations between the parties. At the insistence of the Trustees the respondent did not put the decree in execution. In the circumstances, it was submitted that the respondent was always ready and willing to perform its obligations under the agreement dated 16.8.1980 and that there was no intention on the part of the respondent to abandon the contract. In the written statement, the respondent further alleged that on 1.12.1994, the Trustees attempted to lease out the suit premises to one Dilip Kankaria and Smt. Sudha Kankaria. In this connection, the Trustees moved the High Court and obtained permission to transfer the suit premises without notice to the respondent herein. Being aggrieved, the respondent herein applied for setting aside the leave. By order dated 16.12.1994, the Division Bench of the High Court stayed the above permission on the condition of deposit of Rs. 50 lacs. In the circumstances, the respondent submitted that it was ready and willing to perform its obligations under the degree. In the circumstances, the respondent herein submitted that the application filed by the Trustees for rescission of the contract dated 16.8.1980 be dismissed11. By order dated 31.7.1996, the trial Court rescinded the agreement dated 16.8.1980 and also recalled the decree dated 25.7.198512. By order dated 31.7.1996, the trial Court held that under the terms and conditions of the agreement dated 16.8.1980, the respondent had to pay Rs. 30 lacs to the Trust at the time of renewal of the lease i.e. by 24.10.1985 and since the respondent had failed to pay the said amount within the stipulated period, the respondent herein was not entitled to the said renewal. Further, the said respondent had failed to pay the arrears of rent amounting to Rs. 39 lacs towards rent. In the circumstances, according to the trial Court, the respondent herein was not ready and willing to perform its obligations under the decree. The trial Court observed that under section 28(1) of the 1963 Act, the Court had unlimited and unfettered power to grant extension but has no power to condone the delay, if the period for complying with the terms and conditions stood expired. According to the trial Court, the date of payment of the premium of Rs. 30 lacs expired on 24.10.1985 and consequently, the respondent herein was not entitled to renewal of the lease. The trial Court further observed that at no point of time, the respondent had approached the Court, prior to 24.10.1985, for execution of the lease through the Court. Nothing prevented the respondent from approaching the Court, prior to 24.10.1985, seeking permission to deposit Rs. 30 lacs on account of premium and arrears of rent in Court and in the circumstances, the trial Court allowed the petition filed by the Trustees - appellants and recalled the decree dated 25.7.1985 after rescinding the agreement dated 16.8.198013. Being aggrieved by the order dated 31.7.1996, the respondent herein carried the matter in appeal to the High Court, being appeal from original order no. 3652 of 199614. During the pendency of the appeal, vide order dated 18.12.1996, the High Court directed the respondent to deposit Rs. 1 crore with the appellants-Trustees on account of arrears of rent. By the said order, the High Court also directed the respondent herein to deposit Rs. 40 lacs with the Register, High Court on account of arrears of corporation tax15. Being aggrieved by the order dated 18.12.1996, the respondent herein preferred SLP to this Court. By order dated 10.3.1997, this Court directed the respondent herein to deposit in all Rs. 83 lacs comprising of Rs. 57 lacs towards arrears of rent up to 31.3.1997 plus Rs. 26 lacs towards the balance premium which the respondent herein has paid. In addition, respondent herein was asked to deposit Rs. 40 lacs towards corporation tax subject to final according, which has also been paid16. By impugned judgment dated 10.6.1999 the High Court held that the order passed by the trial Court dated 31.7.1996 was contrary to section 28(1) of the 1963 Act, as there was no default clause in the decree dated 25.7.1985. According to the High Court, section 28(1) was not applicable as the decree dated 25.7.1985 did not direct the respondent herein to deposit the amounts within specific time frame. According to the High Court, under section 28, there was no power vested in the trial Court to set aside the decree. Section 28 contemplated rescission of the agreement. The only power which the Court has under section 28 is to rescind the agreement if it finds that the decree holder was a defaulter. The High Court further held that in the present case, the decree holder was put in possession under the deed of assignment dated 20.8.1970. The decree holder was never put in possession under the agreement dated 16.8.1980 for which the decree for specific performance was granted. In the circumstances, the High Court held that the trial Court had erred in directing the decree holder to restore possession to the Trustees. In the circumstances, the appeal preferred by the respondent was allowed and the order of the trial Court rescinding the agreement dated 16.8.1980 was set aside. Hence, this appeal.

Reasoning:
been submitted on behalf of the appellants herein that at the time of the agreement dated 16.8.1980, the value of the property in question was about Rs. 30 crores. On the basis of the said value, the market rate ought to have been Rs. 30 lacs. It was urged that if the Trust property is allowed to be leased out to the respondent herein on monthly rent of Rs. 30,000/- and at a premium of Rs. 30 lacs, the appellant-Trust will loose substantially. In this connection, reliance has been placed on the valuation report dated 26.4.2000.18. We do not find any merit in the aforestated arguments. As far back as 20.8.1970, the Trustees allowed the lessee, Mohd. Ismail, to assign the leasehold rights in favour of the respondent herein. Further, the assignee was allowed to be put in possession. On 16.8.1980, the Trustees entered into oral agreement to renew the above lease for 70 years w.e.f. 1.5.1981 at increased rent of Rs. 30,000/- per month plus premium of Rs. 30 lacs as found by the trial Court in title suit no. 176/81 decided on 25.7.1985. In the circumstances, increase in the value of the immovable property, on account of inflation, is no ground to rescind the agreement dated 16.8.1980. We have to see the circumstances prevalent as on 16.8.1980 when the parties entered into the oral agreement to leasenext contended on behalf of the appellants that the oral agreement dated 16.8.1980 for renewal of lease stood vitiated on account of collusion between Tivoli Court Pvt. Ltd., the constituted attorney appointed by the Trustees, and the respondent herein. In this connection, it has been alleged that the Trust had entered into an agreement dated 29.4.1981 to lease out the property to one Tivoli Court Pvt. Ltd., in whose favour a power of attorney was also executed. Under that power of attorney, Tivoli Court Pvt. Ltd. was authorized to adopt all legal proceedings against the respondent herein for eviction. It is further alleged that the respondent herein perpetrated fraud on the Trust by colluding with the Tivoli Court Pvt. Ltd., so that no effective legal steps could be taken against the respondent herein. It is further alleged that the Director of Tivoli Court Pvt. Ltd. was also a Director of the respondent company. Consequently, the suit for eviction bearing no. 87/81 was allowed to be dismissed for default while suit for specific performance was allowed to be decreed ex-parte. That even the subsequent application under Order IX Rule 13 CPC was allowed to be dismissed for default. In the circumstances, it is submitted that the trial Court was right in rescinding the agreement dated 16.8.1980.20. We do not find any merit in the above arguments. At stated above, prior to the purported agreement dated 29.4.1981 in favour of Tivoli Court Pvt. Ltd. the Trustees had consented to the Assignment dated 20.8.1970 by their lessee, Mohd. Ismail, in favour of the respondent herein. Pursuant to the said Assignment, the said respondent was put in possession. This assignment was followed by oral agreement dated 16.8.1980 to renew the lease. In the circumstances, one fails to appreciate the authority of the Trustees to enter into an agreement dated 29.4.1981 to lease out the said property in favour of Tivoli Court Pvt. Ltd. On 25.7.1985, when title suit no. 176/81 came for hearing, no evidence was led on behalf of the Trustees explaining circumstances under which the Trust entered into the agreement dated 29.4.1981 with Tivoli Court Pvt. Ltd. In the circumstances, it is not open to the appellants herein to go behind the said decree dated 25.7.1985. Lastly, it may be mentioned that the trial Court has rescinded the agreement dated 16.8.1980 basically on the ground of alleged breaches thereof. In the circumstances, it is not open to the appellants now to submit that the decree dated 25.7.1985 was collusive and not binding on the Trust estatenext contended on behalf of the appellants that the oral agreement dated 16.8.1980 for renewal of lease stood vitiated on account of collusion between Tivoli Court Pvt. Ltd., the constituted attorney appointed by the Trustees, and the respondent herein. In this connection, it has been alleged that the Trust had entered into an agreement dated 29.4.1981 to lease out the property to one Tivoli Court Pvt. Ltd., in whose favour a power of attorney was also executed. Under that power of attorney, Tivoli Court Pvt. Ltd. was authorized to adopt all legal proceedings against the respondent herein for eviction. It is further alleged that the respondent herein perpetrated fraud on the Trust by colluding with the Tivoli Court Pvt. Ltd., so that no effective legal steps could be taken against the respondent herein. It is further alleged that the Director of Tivoli Court Pvt. Ltd. was also a Director of the respondent company. Consequently, the suit for eviction bearing no. 87/81 was allowed to be dismissed for default while suit for specific performance was allowed to be decreed ex-parte. That even the subsequent application under Order IX Rule 13 CPC was allowed to be dismissed for default. In the circumstances, it is submitted that the trial Court was right in rescinding the agreement dated 16.8.1980.20. We do not find any merit in the above arguments. At stated above, prior to the purported agreement dated 29.4.1981 in favour of Tivoli Court Pvt. Ltd. the Trustees had consented to the Assignment dated 20.8.1970 by their lessee, Mohd. Ismail, in favour of the respondent herein. Pursuant to the said Assignment, the said respondent was put in possession. This assignment was followed by oral agreement dated 16.8.1980 to renew the lease. In the circumstances, one fails to appreciate the authority of the Trustees to enter into an agreement dated 29.4.1981 to lease out the said property in favour of Tivoli Court Pvt. Ltd. On 25.7.1985, when title suit no. 176/81 came for hearing, no evidence was led on behalf of the Trustees explaining circumstances under which the Trust entered into the agreement dated 29.4.1981 with Tivoli Court Pvt. Ltd. In the circumstances, it is not open to the appellants herein to go behind the said decree dated 25.7.1985. Lastly, it may be mentioned that the trial Court has rescinded the agreement dated 16.8.1980 basically on the ground of alleged breaches thereof. In the circumstances, it is not open to the appellants now to submit that the decree dated 25.7.1985 was collusive and not binding on the Trust estateOn behalf of the appellants, it was next submitted that the respondent herein was not serious about performing its obligations under the decree. In this connection, it was submitted that nothing prevented the respondent from applying to the Court for execution of the lease. That, nothing prevented the respondent from seeking extension of time to deposit the premium/rent. It was urged that the very fact that the respondent chose to make no such application and slept on its rights for nine years conclusively proves that it was not ready and willing to perform its part of the contract and also its obligations under the decree and in the circumstances, the trial Court had rightly rescinded the oral lease agreement dated 16.8.1980. It was further submitted that the trial Court while passing the decree had stated that within 90 days of the decree dated 25.7.1985, the lease shall be executed i.e. all payments were required to be made within that period. That without such payments, a lease could not be directed to be executed. No steps were taken by the respondent herein to renew the lease and pay the premium in accordance with the agreement dated 16.8.1980. No rent was offered during the period 25.7.1985 to 3.10.1994 when the appellants filed their application for rescission of the oral lease agreement dated 16.8.1980. In the circumstances, it was submitted, that, by implication, the respondent herein was obliged to pay or tender the amount of premium of Rs. 30 lacs within 90 days from the date of the decree dated 25.7.1985. It was urged that when the decree fixed 90 days for execution of the lease, it was implicit in the said direction that the respondent herein shall pay or tender Rs. 30 lacs on or before 24.10.1985. That, since the respondent failed to pay or tender Rs. 30 lacs on or before 24.10.1985, the appellants were entitled to seek rescission of the agreement dated 16.8.1980. That, when the agreement for renewal of the lease dated 16.8.1980 provided for payment of monthly rent of Rs. 30,000/-, it was implicit in the decree dated 25.7.1985 for the respondent to pay the monthly rent in terms of the agreement dated 16.8.1980 and since the decree holder failed to pay, in the aforestated terms, the appellants were entitled to seek rescission of the decree dated 25.7.1985 under section 28(1) of the 1963 Act. In the circumstances, it was urged, that the respondent herein was never ready and willing to abide by the terms and conditions of the agreement and consequently, the trial Court was right in rescinding the oral lease agreement dated 16.8.198022. We do not find merit in the above arguments. The short question which arises for determination in this case is - whether the oral lease agreement dated 16.8.1980 was liable to be rescinded for alleged breaches. Mr. L.N. Rao learned senior counsel appearing on behalf of the appellants, at the very threshold, submitted that he would like to confine his arguments to the question of rescission only. According to the learned counsel, the power of the Court under section 28(1) to order cancellation of the decree and order restoration of possession to the vendor was a very wide question which need not to be gone into in the present case. In the case of V.S. Palanichamy Chettiar Firm vs. C. Alagappan and another reported in [AIR 1999 SC 918 ], cited on behalf of the appellants, the vendee-decree holder filed application for execution of the decree of specific performance after five years. No reason was given for not putting the decree in execution for five years. Further, under the decree, there was a specific direction to the decree holder to deposit the balance purchase price within the stipulated period. Under the said decree, a further direction was given to the judgment debtor to execute the sale deed on the vendees depositing the balance purchase price. It was a case of a final decree. In the execution application, the judgment debtor applied for rescission of the agreement of sale on the ground of default on the part of the vendee in failing to deposit the balance price. Under the above circumstances, this Court held that the vendee, who had applied for extension of time to deposit the balance price, was not entitled to such extension. This Court observed that in deciding application under section 28(1), the Court has to see all the attendant circumstances including the conduct of the parties. On facts, this Court found that there was no default on the part of the vendor - judgment debtor. That no explanation whatsoever came from the vendee - decree holder for failure to deposit the balance price. In the circumstances, on facts, this Court refused extension of time to deposit the balance price. Therefore, the said judgment has no application to the facts of the present case34. Applying the above tests to the facts of the present case, the decree in question is not a self operative final decree. It is a preliminary decree. It merely directs the Trust to execute the lease on or before 24.10.1985. It does not prescribe any consequence of non deposit of premium. It does not prescribe any consequence of non tender of rent on or before 24.10.1985. Till date, the decree holder has paid the premium of Rs. 30 lacs. It has paid rent amounting to Rs. 96 lacs. In the circumstances, it cannot be said that the decree holder intended to abandon the contract dated 16.8.1980. There is no positive refusal on the part of the respondent to complete the lease. There is no explanation given by the Trust for not moving the application for rescission of the contract for nine years. The decree was passed on 25.7.1985 whereas the application for rescission of the agreement is dated 3.10.1994. As stated above, the Trust did not lead the evidence in suit no. 176/81. The corresponding suit no. 87/81 filed by the Trust was dismissed for non-prosecution. The Trust moved under Order IX Rule 13 CPC for setting aside the decree dated 25.7.1985. That application was dismissed for default vide order dated 1.8.1987. The Trust moved the application for restoration which was also dismissed for default on 16.7.1988. The Trust moved in appeal against the decree dated 25.7.1985. That appeal was also dismissed. The decree holder has referred to the entire correspondence between the parties which indicate that during this period of nine years in the guise of negotiations, the decree holder was prevented from filing execution application. The decree holder was repeatedly assured of settlement. The decree holder was repeatedly assured that lease would be executed in its favour. Attempt was also made by the Trustees during the interregnum to lease the property to Dilip Chand Kankaria and Smt. Sudha Kankaria. Lastly, in the present case, the decree holder was put in possession under the deed of assignment dated 20.8.1970. The respondent was not put in possession under the agreement dated 16.8.1980. In the circumstances, the trial Court erred in directing rescission of the said agreement dated 16.8.1980. For the aforestated reasons, we do not find any merit in this appeal