Case: Delhi Motor Company And Ors Vs. U.A. Basrurkar And Ors

1. The first appellant, Messrs. Delhi Motor Company, is a partners ship firm (hereinafter referred to as "the firm"), of which the other four appellants Nos. 2 to 5 are partners. Respondent No 6, New Garage Ltd. is a private limited company (hereinafter referred to as "the Company"), of which respondent No. 1 was the Managing Director, and respondents Nos. 2 to 5 were members of the Board of Directors. The firm brought a suit against the Company far possession of part of the building known as "Scindia House" situated in Connaught Circus, New Delhi, on the basis of an agreement of sub-lease. Possession was claimed of a portion of the Show-Room on the ground floor, of 1/2 portion of the Balcony, and another portion of the premises which were, in the year 1950, in the possession of Messrs. Kanwar Brothers Ltd. The case put forward by the firm was that the Company was the tenant of Scindia House and was in occupation of the Show-Room and other parts of the building, while a part of it was occupied by Messrs. Kanwar Brothers Ltd. as sub-lessee of the Company. According to the firm, the agreement to sub-lease, or the sub-lease on the basis of which possession was claimed by the firm from the Company, is evidenced by three documents, the first one of which is letter, Ext. P. 1, dated 20th February. 1950, written by K. S. Bhatnagar, appellant No. 2, on behalf of the firm, to U. A. Bagrurkar, respondent No l, who was the Managing Director of the Company. The second document is letter, Ext. P. 2, dated 22nd February, 1960, written by respondent No. l Basrurkar to appellant No. 2 Bhatnagar; and the third document is Ext. P. 3, which purports to be notes on agreement arrived at between Basrurkar and Bhatnagar on 22nd February, 1950. The case of the firm was that, though these documents did not purport in so many words to be an agreement of sub-lease to be granted by the Company to the firm, in substance and in fact, the agreement arrived at was of a sub-lease in respect of the premises mentioned above. Since, under the Delhi and Ajmer Merwara Rent Control Act 19 of 1947, if a sub-lease had been granted by the Company to the firm without the consent of the landlord, the Company would have been liable to ejectment from the premises, the agreement was not made as directly evidencing a sub-lease, so that the landlord should not have an opportunity of suing the Company for ejectment. In February, 1950, when the agreement evidenced by these three documents was arrived at, respondent No 1, U. A. Basrurkar as Managing Director did not have the authority to enter into this transaction on behalf of the Company with the firm and, consequently, on 22nd March 1950, the Board of Directors of the Company, by a resolution Ext. P 9, authorised the Managing Director to enter into this transaction. Thereafter, the firm came into possession of two portions of the leased property and started its business in them with effect from 1st April, 1950. The two portions of the leased property which came into the possession of the firm were a portion of the Show-room on the ground floor and a half portion of the balcony on the first floor. The agreement contained in these letters and documents also required parties to carry out some other obligations and, according to the firm, it complied with them. In order to avoid the liability of the Company for ejectment under the Delhi and Ajmer Merwara Rent Control Act, 1947, the agreement wag sought to be given the form of a partnership; and in order to enable the Company to enter into such a transaction, a special resolution Ext. P. 4 was passed on 24th November, 1950 at an Extraordinary General Meeting of the Shareholders of the Company amending the Memorandum of Association of the Company. This amendment was subsequently approved by the District Judge and was registered with the Registrar of Companies. So far as the landlord is concerned, he was not a party to these transactions, though, on 5th April, 1951, the landlord gave a letter Ext. P. 22 recognising the possession of the firm, but he specifically stated in that letter that the firm would be a licensee and not a sub-lessee. One other term in the agreement arrived at was that appellant No. 2, K. S. Bhatnagar, was to be taken as a Director of the Company and he was in fact included in the Directors of the Company thereafter. The further case of the firm was that when Messrs. Kanwar Brothers Ltd. vacated the portion of the premises which was included in the sub-lease, the Company did not give possession of that portion of the leased property to the firm and also started obstructing the use of those portions of the property by the firm of which the firm had secured possession by 1st April, 1950. A stage came when the firm was completely dispossessed from the property leased and, ultimately, after giving notices the firm instituted a suit on 18th June. 1952. The principal prayer in the suit was for delivery of possession in respect of all the three portions of the leased property. Then, there was a claim for damages to the extent of Rs. l0,000 in respect of loss incurred on account of dispossession and obstruction in use of the leased property at the instance of the Company Injunctions were also sought restraining the Company from interfering with the rights of the firm and with their uninterrupted use of the leased property. There were further prayers for other consequential injunctions which need not be described in detail.2. On behalf of the Company and the Directors, the plea put forward was that there was no agreement of sub-lease or a completed sub-lease between the Company and the firm and that, in fact, all that took place were negotiations for entering into a partnership. Even the agreement for partnership was never completed, so that the firm was not entitled to any relief at all.3. The trial Court held that the contract evidenced by these documents was an agreement for a sub-lease and, since this agreement did not require registration, the firm was entitled to the reliefs claimed on the basis of this agreement. The Company and its Directors appealed to the High Court of Punjab and that Court held that these documents constituted a completed lease or at least an agreement to lease falling within S. 2 (7) of the Indian Registration Act and, since the lease or the agreement to base was evidenced by documents in writing and they were unregistered, the lease or the agreement to lease could not be enforced. On this sole ground, the High Court allowed the appeal and dismissed the suit of the firm. The firm has now come up in appeal to this Court by special leave.

Court's reasoning:
Since reliance was placed on these documents on behalf of the firm to urge that there was a completed lease, reamed counsel for the firm was asked to point out the provision which fixed the rent payable in respect of the leased property. The only provision, on which he relied to show that rent had, in fact, been agreed upon and fixed, was para. 1 of Ext. P. 3 which contains notes on agreement dated 22nd February,this submission that this paragraph lays down the rent payable, it is clear that, under it, the rent payable for the first time would be 10 per cent of the not profits earned by the firm in its New Delhi business up to 30th June, 1951. The period would naturally begin on the date on which the lease commenced. That date, according to the firm itself was 1st April, 1950. From these facts it follows that when the rent is to be paid for the first time, it would be an amount of 10 per cent of the net profits earned by the firm in its New Delhi business between 1st April, 1950 and 30th June, 1951, and, naturally enough, the rent will he in respect of the same period. This term therefore, clearly laid down that the very first payment of rent was to be for a period of one year and three months, so that, even though no further period for the continuance of the lease after 30th June, 1951 was laid down, the lease at least made rent payable for the first period of fifteen months. The lease was, therefore, at least for a period of fifteen months and, consequently, for a period exceeding one year. Section 107 of the Transfer of Property Act was, thus clearly applicable and such a lease could not have been validly made, except under a registered instrument. Admittedly, there was no registration of the documents which constituted the lease and, consequently, the firm could not claim any rights on the basis of this lease evidenced by unregisteredare unable to accept this submission, because none of the documents, on which reliance has been placed on behalf of the firm to prove the lease, contains any clause indicating that the tenancy was to be from month to month or the rent was payable monthly. In fact, the indication from para. I of Ext. P. 3 quoted above is that the rent was to be payable annually, so that the contract itself seems to give an indication that it was to be a lease from year to year and annual rent was payable.These circumstances, however, are immaterial, because we have already indicated earlier our finding that this lease was at least for a minimum period of 15 months and, consequently Section 107 of the Transfer of Property Act becomes applicable irrespective of the question whether it was a lease from month to month or from year to year. The High Court was, therefore, quite correct in holding that on the basis of this lease the reliefs claimed by the firm could not be granted toexpressing any opinion as to the correctness of the view taken by the Allahabad High Court, we have to point out that the interpretation put on Section 53A of the Transfer of Property Act even by that Court is of no assistance to the firm in the present case. In this case, the firm is seeking to enforce lights under the unregistered lease and to seek a decree for possession against the lessor. The Allahabad High Court in that case proceeded on the basis that the plaintiff of that suit was in the position of a defendant and was only seeking to protect his rights by resort to the provisions at Section 58A of the Transfer of Property Act, so that no principle was laid down by the High Court that Section 53A is available to a lessee otherwise than as a defence. We are unable to accept the submission that the judgment in that case should be read as recognising a right of a lessee to enforce rights on the basis of an unregistered lease by resort to that provision ofare three reasons why we are unable to accept this submission. The first is that, in the plaint itself, no specific performance of contract was claimed on behalf of the firm. Though the pleadings included averment about this contract, the relief claimed was for a decree for possession, damages and injunctions. These reliefs could only be claimed on the basis of a completed lease and could not be the reliefs in a suit for specific performance of a contract to lease. The second reason is that, as mentioned be us earlier, the firm itself came forward with the case that the entire contract was not included within these three documents Exts. P. 1 to P. 3, because, at the stage when these documents came into existence, the Managing Director of the Company had no authority to enter into such a contract on behalf of the Company and that the contract was only completed subsequently when the Board of Directors passed a resolution authorising the Managing Director to enter into such a contract anti actual possession of part of the property was given on or about the 1st April, 1950. The contract being a contract to lease immovable property and unregistered, specify performance of it could not be sought, except under Sec. 27A of the Specific Relief Act.That section however, applies only if the entire contract is made in writing, while, according to the case put forward on behalf of the firm itself the entire contract was not in writing.The third reason why specific performance of the contract cannot be claimed by the firm under Section 27A of the Specific Relief Act is that such a claim under that provision of law is only available to a lessee, when the lessee, in part performance of the contract, has taken possession of the property or, being already in possession, continues in possession in part performance of the contract. In the present case, the pleas put forward on behalf of the firm itself show that the firm never got possession of the entire property to which the contract related. Possession was taken by the firm of only two items of properly, while the firm never obtained possession of the third item of property which was in possession of Messrs Kanwar Brothers Ltd.Clause (b) of Section 27A can apply only if possession of the entire property, which is the subject matter of the contract of lease, has been taken by the lessee.The pleadings in the plaint show that, even though the third item of property was vacated by M/s. Kanwar Brothers Ltd. in December, 1950, possession of that property was never obtained by the firm.10. To meet this objection, it was urged by learned counsel on behalf of the firm that we should interpret Section 27A of the Specific Relief Act as being applicable even if possession of part of the property, which is the subject-matter of the contract, is obtained by the lessee, but we are enable to accept this submission. The language used makes it clear that possession must be obtained of the entire property to which the contract relates. In this connection, it is significant to note that under Section 53A of the Transfer of Property Act, a transferor is barred from interfering with the lights of the transferee, even if the transferee gets possession of any part of the property sought to be transferred by the unregistered document of transfer. That section specifically uses the expression "taken possession of the property or any part thereof" whereas the words used in Section 27A of the Specific Relief Act are: "taken possession of the property"The omission of the words "any part thereof" in Section 27A of the Specific Relief Act when compared with the provision in Section 53A of the Transfer of Property Act clearly brings out the position that the former section is only applicable when possession of the entire property, which is the subject-matter of the contract, has been taken, while the latter section is made applicable even if the lessee takes possession of any part of the property. Consequently on the facts of the present case, the firm could not claim specific performance of the contract under Section 27A of the Specific Relief Act, even if such a claim had been put forward in the plaint.This alternative contention also. therefore, fails.