Case: Kalyanpur Lime Works Ltd Vs. State Of Bihar And Another

3. The facts leading up to the present appeal are these :4. Defendant No. 1 is admittedly the owner of what is called Murli Hills situate in theof Sasaram in the District of Shahabad, the upper portion of which is known as the upper Murli Hill and the lower portion as the lower Murli Hill. On the 1st April, 1928, the defendant No. 1 gave a lease of the Murli Hill to the Kuchwar Lime and Stone Co. Ltd., hereinafter called the Kuchwar Co., for 20 years for the purpose of quarrying limestone therein, on the basis of two indentures of leases in respect of the two portions of the Murli Hill. The leases contained a prohibition against assignment of the Companys leasehold rights without the permission of the Government.In January 1933, Kuchwar Co. went into voluntary liquidation and the liquidators of the Company purported to assign the leasehold interest of the Company to one Subodh Gopal Bose for Rs. 35,000/by an unregistered deed dated the 30th September, 1933. The assignee took possession of the property, on the 9th October, 1933, but was stopped from working the quarries under orders of the Government from the 8th December, 1933, as the Government considered the assignment to be a breach of the contract in the lease which made the lessees interest liable to forfeiture. It appears from the proceedings of the Lime Co. that on the 4th January, 1934, the Managing director and the Manager of the Lime Co. were authorized to take all steps to apply for and secure the lease of the Muril Hill property and on the 25th January, 1934, the Lime Co. made an application (Exhibit A) to the Collector of Shahabad for getting the lease. The Lime Co. offered a minimum royalty of Rs. 10,000/and on the 14th March, 1934, the Board of Revenue granted an interview to Mr. Banerjee, the representative of the Lime Co., and recorded an orderCommissioner may be told that the Board approves of the execution of the lease but the letter should not issue until the Government order cancelling the old lease, is received"defendant no. 1 forfeited the lease in favour of Kuchwar Co. by an order dated the 27th March, 1934, andinto possession. Thereafter the defendant No. 1 offered to grant leases of Murli Hill to the Lime Co., for a period of 20 years on the existing terms and conditions as set forth in Chapter V of the Bihar and Orissa Waste Lands and Mineral Concession Mannual. This offer was made by a letter of the Board of Revenue dated the 31st March, 1934. (Annexure B) and was accepted by the Lime Co, in their letter dated the 15th April, 1934, communicated to the Collector of Shahabad (Annexure C). The Lime Co. obtained possession on the 15th of April, 1934, but the lease were to take effect from the 1st April, 1934. The Lime Co. started quarrying operations on the 15th May, 1934.It appears that on the 24th September, 1934, the Kuchwar Co. sued the Secretary of State for India for declaration that the leases in their favour had not been validly forfeited and for an injunction restraining him from granting leases to any one else and for damage. The suit was dismissed by the trial Court but was decreed by the High Court of Patna on the 7th February , 1936. While the appeal pending before the High Court, an ad interim injunction was issued on the 25th April, 1935, restraining the Secretary of State for India from granting leases to the Lime Co. The decision of the High Court was affirmed by the Privy Council on the 19th November, 1937. The Lime Co., not being impleaded as a party to the suit filed by Kuchwar Co., continued to remain in possession. The Kuchwar Co., however, started proceedings for contempt against the Manager and the Managing Director of the Lime Co., vacated the quarries in April, 1936. The order of the High Court in contempt proceedings was ultimately set aside by the Privy Council on the 31st October, 1938, but the Lime Co., did not succeed in getting restitution.

Court's reasoning:
13. The first question which arises for consideration before us in whether the contract is void andunder Section 20 of the Contract Act because both parties were under a mistake of fact as regards the title of the Government to the subject matter of the proposed leases. It is contended on behalf of the appellants that the point was not raised in the pleadings and is not open to the defence.This contention is not without substance. It appears that originally the trial court framed a draft issue to the effect whether the contract alleged by the Lime Co., was bad due to mutual mistake of law and fact but on the objection of the plaintiff the issue was deleted on the 29th November 1950, and was substituted by another Issue which has no bearing upon the point.Furthermore, as have been stated already, neither party was in error as regards the essential facts upon which the contract proceeded. It was known to both parties that there was an assignment of the lease by the Kuchwar Company in favour of S. G. Bose and both parties knew that under the terms of the lease an assignment by the lessee without the consent of the lessor would make his interest liable to forfeiture. The mistake, if any, was with regard to the effect of the law of registration the validity of the assignment deed. At the most, such mistake would be a mistake of law and under Section 21 of the Indian Contract Act the contract would not be void on that ground.17. As the facts of the present case seem to us to negative the existence of any mistake of fact under which either of the parties laboured, we are of opinion that the High Court was wrong in the conclusion that the contract was void under Section 20 of the Contract Act. We may also observe that the finding of the High Court that the parties came to a final agreement on all the essential terms of the leases which were embodied in Exhibits 22 and 22(a) would leave no room for the further finding that it was induced by a mistake ofs agreed that there was no particular manner prescribed by theas to how the contract was to be executed. The first question which arises in this connection is whether the contract was to be executed by a formal document or whether it could be spelt out from the correspondence in which the negotiations were carried on by the parties.We do not think it necessary to go into this question for assuming that a formal document was necessary, the plea of Section 30, it is to be noted, was not raised in the pleadings. Objection is taken on behalf of the appellant that the point not having been raised in the written statement, it was not incumbent upon the plaintiff to show that the contract was executed according to the provisions of Section 30, before it could be specifically enforced and reliance was placed upon the provisions of Order VI, Rule 8 and Order VIII, Rule 2 of the Civil Procedureview of these facts it seems to us clear that the High Court was not justified in allowing this question to be raised at the time of the arguments when the plaintiff had no opportunity to adduce evidence upon the question of fact whether the leases were signed on behalf of the Government. It is also clear that despite the best efforts of the plaintiff, the Government with held the production of the other leases. Without going further into the matter, we shall rest our decision on the ground that the question ought not to have been allowed to be raised and we accordingly reject the plea founded on Section 30 on this ground.The High Court of Patna rightly took the view that Section 18(a) was applicable to the facts of this case and although defendant No. 1 was not in a position to grant a lease from the time it agreed to do, the impediment being now removed and a suit for specific performance not being barred, the Lime Company was entitled to sue for that relief. We have already held in agreement with the view of the High Court that Section 18 is attracted to the facts of this case, and the contract of which specific performance can be decreed in favour of the plaintiff is the one embodied in exhibits 22 and 22(a) but as a substantial portion of the period has already expired, relief can be given only under Section 15 of the Specific Relief Act and in compliance with itsof the claim to further performance can be made at any stage of the litigation. SeeWaryam Singh v. Gopi Chand, AIR 1930 Lah 34 (B). We think, therefore, that subject to what we are going to say on the last point, the plaintiff can claim relief under Section 15 of the Specific Relief Act.23. Although we hold that Section 15 applies to the case, we do not think this is a fit case in which we should decree specific performance in favour of the plaintiff. The High Court refused this relief on the ground that the Lime Co. was not the real plaintiff and that the suit was for the benefit of the Kalyanpur Lime and Cement Works Ltd. This may or may not be so, but it cannot be doubted that the plaintiff Co. has not been dissolved under the provisions of the Indian Companies Act, and therefore still possesses a legal entity. The consideration which, however, appeals to us as one of overriding weight in refusing specific performance is that there are only a few months left before theportion of the lease will run out; indeed by the time the leases come to be executed in pursuance of the order of this Court it would be scarcely worthwhile to carry on any quarrying operations.Butit was urged before us on behalf of the appellant that on the expiration of the period of the lease, the appellant will be entitled to renewal on fresh terms.This, however, is far form being the case. Para 20 of the draft lease does not confer any right upon the leases to obtain a renewal. All that it says is that on the expiration of the period of the lease the lessee may, if it has duly observed all the foregoing conditions, have renewal of the lease on terms to be agreed upon by the Collector and the lessee subject to the approval of the Commissioner. Assuming that this paragraph applies to the present case and does not require a lessee to have been in occupation for the whole period of twenty years, there are still two important conditions to be fulfilled before a renewal can be granted. The terms of renewal must be agreed upon by the Collector and the lessee. Where the Collector does not agree, no renewal will take place, and even if he does the Commissioner may decline to approve the lease.In these circumstances, we do not think any material benefit will accrue to the Lime Co. to get the lease executed for a few months. The case would have been different if the Lime Co. had an option of renewal as a matter of right. Such is, however, not the case. We think, however, that though we decline to give a decree for specific performance of the contract for the short period, there is no reason why the Lime Co., should be deprived of compensation. The plaintiff had prayed for a decree for compensation in the plaint and the trial court had decreed compensation for the period commencing from 1st April, 1948, till the date of getting possession of the leasehold property and the amount of compensation was left to be ascertained in subsequent proceedings. As no question of possession arises in the view that we have taken in the case, it follows that the plaintiff is entitled to compensation form the 1st April, 1948, till the 31st March, 1954.