Case: Madan Lal Vs. Bhai Anand Singh &amp; Others

1. This appeal by Special Leave has arisen in the following circumstances :The respondents, landlord lessors, had executed a lease on 9-11-1949. Under its terms, the lessor had given some land to the lessees for the building and renting out of a Cinema house for a period of twenty years on a rent of Rs. 300/- per month for the first year, and, thereafter, at Rs. 600/- per month. The period within which the Cinema had to be constructed was also specified. Clause 6 of the lease laid down :"On the expiry of tenancy or the extended period of tenancy, as aforesaid, the entire structure, built by the lessees at their own cost becomes the property of lessor, and shall exercise all the rights of ownership and shall be entitled to sell the entire property, subject to this condition that lessor shall have to pay 50% of the market value of the structure built by the lessees at their expenses. If the lessor and the lessees fail to assess the value of the aforesaid structure by mutual consent, two arbitrators will be appointed, nominated by the lessor and the lessees. In case of their difference of opinion an umpire shall be appointed by parties whose award shall be final. In case the lessor fails to pay 50% of the value of the structure so assessed within period of six months of award of the umpire or arbitrators the whole structure shall be sold and out of the sale proceed 50% of the price of the structure so assessed by the umpire or arbitrators shall be paid to the lessees. The lessees shall have the first charge on the sale proceeds". The lease had expired. Therefore, the lessor applied under Section 13 (2) of the East Punjab Urban Rent Restriction Act 3 of 1949 (hereinafter referred to as the Act), to the Rent Controller, appointed under the Act, for the eviction of the former tenant and the appellant sub-tenant. During the pendency of this application, the lessees applied to the Rent Controller, under Section 34 of the Indian Arbitration Act, for the stay of eviction proceedings pending the decision of a dispute between the parties as to who was entitled to possession while the market value was being determined by Arbitrators under Clause 6 set out above. The Rent Controller held, inter alia, that the powers of ejectment under Section 13 of the Act, on specified grounds, could not be curtailed even by some agreement between the parties and had dismissed the stay application. The High Court of Punjab and Haryana dismissed the lessees appeal under Section 39 of the Arbitration Act, after interpreting the lease deed and holding that clause 6 of the deed "negatives any right in the lessees to retain possession after the expiry of the lease"It went on to observe :"It is specifically provided therein that as soon as the lease expired the lessor would become full owner of the super-structure which she would have the right to sell. The rest of the clause provides the method in which the sum paid to the lessees was to be ascertained or recovered and that method does not include a right in them to continue to possess either the land or the super-structure. What has been made subject to the payment of the said sum is the exercise by the lessor of her right to sell the property the delivery of possession of which on the expiry of the lease, however, is not stipulated to be postponed till such payment."

Court's reasoning:
6. We may mention that the High Court had made an observation, in the course of recording its conclusions, which made it appear that what was made subject to the payment of 50% of the market value of the building was only the right of the lessor to sell the property. On a reading the judgment as a whole, it is evident that all that the High Court meant to convey was that the rights of ownership were subjected to a liability incurred by the lessor to pay the stipulated sum in any event. Any further liability to allow the lessee to retain possession until the sum payable was actually ascertained or any other event took place is not to be found here. The ascertainment of the exact amount of the liability undertaken was, in our opinion, a separable matter referable to arbitration. No sufficient ground has been made out for disturbing this interpretation of clause 6 of the deed by the High Court7. Another question argued by learned Counsel for the appellant was that the Respondents Lessors had themselves placed an interpretation upon the lease deed which ought, even if it does not affect our interpretation of the deed, to be taken into account by the Rent Controller before passing an order of eviction in the pending proceedings.The lessors had stated, in their application under Section 13 of the Act : "The petitioners have undertaken to abide by the terms of the lease agreed to between the parties relating to the compensation payable by them before getting actual possession of the picture house." No commas separate the term relating to liability to pay compensation from the right to get actual possession8. It may be that the application was rather loosely or inaccurately worded. We have not been shown any undertaking given to the Rent Controller, apart from the assertion quoted above from the application under Section 13 of the Act. And, no order of the Controller on any such supposed undertaking has been placed before us. The parties had hotly contested before the Controller as well as the High Court what the exact meaning of the clause under consideration was. It could, therefore, not be either expected or assumed that the application under Section 13 would contain an acceptance of the very interpretation put forward on behalf of the lessees and denied by the lessors. The language of the alleged undertaking was certainly not so clear and unequivocal as to lead to that inescapable inference. Moreover, no argument seems to have been advanced on the strength of this alleged undertaking before either the Controller or the High Court. We, therefore, refrain from deciding the question whether there was any such undertaking before the Controller which, quite apart from the contract embodied in the deed, should affect the discretion of the Controller in passing an eviction order. All we need say here is that the meaning of the terms of the lease, interpreted by us also, is not affected by the alleged undertaking.