Madras High Court
S. Raman vs Nithyakalyani Flush Doors Company ... on 25 October, 1994
Equivalent citations: (1995)1MLJ575
ORDER S.S. Subramani, J.
1. The defendant in O.S. No. 105 of 1993 before the Subordinate Judge's Court, Tenkasi, is the revision petitioner in both these revisions.
2. The suit filed by the plaintiff was one for specific performance of an agreement for lease dated 14.9.1991. After the suit was filed, the petitioner filed I.A. 633 of 1993 that the suit document, i.e., agreement for lease must be impounded, since it is not properly stamped and registered. He wanted the said petition to be decided preliminarily. According to the petitioner the agreement for lease is stamped only at Rs. 5. Since, it is not properly stamped it is not admissible in evidence for two reasons, i.e., it ought to have been registered and that too after impounding. According to him, the agreement for lease creates a present right in favour of the lessee. The nomenclature of the document is not conclusive.
3. For the said petition, the respondent/ plaintiff contended that the document is only an agreement and there is no present demise and no lease is created by virtue of the document. There must be some other action on the part of the landlord, and only then, the lease comes into force. According to him, the conditions to the proposed lease have been agreed.
4. Without a proper document, the lease has not come into force, for which he has filed the suit.
5. The only question that arises for consideration is, whether the document dated 14.9.1991 is properly stamped.
6. Under Article 35 of the Indian Stamp Act the stamp duty for an agreement for lease is also to be calculated as if it is a lease. So, it is the contention of the petitioner that even if the document only amounts to an agreement for lease, the stamp duty payable is as if it were a lease. According to him, the law does not make any difference between the two. For the said purpose, he has relied on two decisions, namely, Narayanan Chetty v. Muthiah Servai I.L.R. 35 Mad. 63 and Purmananddas Jiwandas v. Dharsey Virji I.L.R. 10 Bom. 102.
7. In Narayanan Chetty v. Muthiah Servai I.L.R. 35 Mad. 63, it was held by the Full Bench as follows:
An agreement to execute a sub-lease and to get it registered at a future is a lease within Section 30 of the Indian Registration Act, III of 1877 and is compulsorily remittable under Clause (d) of Section 17.
Such an agreement to grant a lease which requires registration affects immovable property and cannot be received in evidence in a suit for specific performance of such agreement.
It is immaterial whether possession has passed or not in accordance with the agreement.
Section 49 of the Registration Act indicates that a document should not be received in evidence even where the transaction sought to be proved does not amount to a transfer of interest in immovable property but has only created an obligation to transfer the property.
From a reading of the subject matter of the lease deed in that case, it is seen that even though the document was written as an agreement, present right was created in favour of the sub-lessee.
8. In Purmananddas Jiwandas v. Dharsey Virji I.L.R. 10 Bom. 102, the learned Judges of the Bombay High Court held thus:
Under Clause (d) Section 17 of the Registration Act, III of 1877, an agreement for a lease needs registration if the parties to such agreement intend to create a present demise. Although the agreement may contemplate a formal document being subsequently executed, the paramount intention as gathered from the whole of the instrument must prevail.
On the basis of these two decisions, we have to analyse the wordings in the document dated 14.9.1991. It is necessary to extract some of the relevant clauses in the agreement and they are as follows:
(1) The lessor hereby leased out to the lessee the premises more fully described under Schedule 'B' together with land, building, Office Block, Well, O.H. Tank, etc., for a period of Ten Years commencing from the day first above written.
(3) The LESSOR shall hand over possession of the premises to LESSEE within FOUR months from the date of this agreement the premises, completing all additional building works, etc. as agreed upon.
(4) In consideration of the lease, the LESSEE has to-day paid a sum of Rs. 1,00,000 (Rupees One lakh only) as deposit which shall bear no interest to the LESSOR and the same shall be refunded to the LESSEE at the time of termination of this lease.
(7) The Rent shall commence from the day the LESSOR hand over the premises after completing all works herein mentioned under Schedule 'C' to the satisfaction of the LESSEE.
(15) Subject to Clause 17, the LESSOR agrees to lease the premises for a total period of 10 years from the day first above written and the Lessee agree to revise the rent amount amenities charges upward by 25% on the expiry of every 5th year so long as the lease continues.
(17) THIS LEASE AGREEMENT is for a period of 11 months from the date first above written to be renewed every 11th month and till the end of the total lease period, unless terminated earlier.
(19) The Lessee has no right to construct, expand or add buildings in the land. If there is a need for additional accommodation, the Lessee shall inform the Lessor who will do so on mutually agreed terms as to increased advance and increased rent.
(20) The lessee shall give 10 months notice for termination of this agreement.
(21) The Lessor shall give 6 months notice for termination of this agreement after expiry of tenth year lease period and on the expiry of the said notice the lease shall terminate automatically.
(23) In the event of termination of this agreement the LESSOR shall return the Deposit after adjusting for all outstandings.
It is clear from the above extract, that there was an obligation on the pan of the lessor, petitioner herein, that he must complete the works and then hand over possession. The lease is for the enjoyment of those buildings to be constructed by the lessor within the period mentioned above. The rent is also payable only thereafter. If the building is not constructed within the period, the lease cannot come into effect. It is further provided that the lessee has no right to construct, expand or add buildings in the land, and if there is a need for additional accommodation, the lessor alone shall do it after intimation by the lessee. When there is an obligation on the part of the lessor, and the lease is to commence only after the said obligation is complied with, according to me, there is no present demise. For the said position, I am supported by the following decisions:
9. In Hemanta Kumari Debi v. Midnapur Zamindari Company 37 M.L.J. 525 : A.I.R. 1919 P.C. 79 : 47 Cal. 485 : 46 LA. 240: 17 A.L.J. 1117 : 22 Bom L.R. 488 : 24 C.W.N. 177 : 27 M.L.T. 42 : 1920 M.W.N. 66 : 53 I.C. 534, it was held thus:
The phrase "agreement for a lease" must relate to some document that creates a present and immediate interest in the land. An agreement that upon the happening of a contingent event at a date which is indeterminate and might be far distant, a lease would be granted does not satisfy the meaning of "agreement for a lease." The same was followed in Sir Mohamed Yusuf Ismail v. Secretary of State A.I.R. 1921 Bom. 200 : I.L.R. 45 Bom. 8 : 22 Bom.L.R. 872 : 57 I.C. 971 and it was held that "an agreement to lease immovable property that does not constitute a present demise of the property need not be registered.
10. In Maneklal Manilal, In re. A.I.R. 1928 Bom. 553 : 30 Bom. L.R. 1396 : 11 I.C, 758 : I.L.R. 53 Bom. 1, which is a case under the Indian Stamp Act, a Division Bench of that High Court held that 'an agreement to lease is included in the word "lease" under the Stamp Act, but an agreement to lease must amount to an actual demise and not an agreement that in certain contingencies a lease will be granted. In that case it was further held thus:
When by means of a document a person agreed to lease property in which he had no present interest, and where the property to be leased is not actually in existence, the document does not amount to an agreement to lease but a simple agreement to which Article 35, Stamp Act will not apply.
XXX XXX XXX Though the Stamp Act and the Registration Act are not strictly in pari materia, the two Acts may be read together.
Their Lordships held that the definition in the Indian Stamp Act with regard to a composition deed might be accepted in considering the question under the Indian Registration Act. Their Lordships relied on the earlier decision of Privy Council referred to supra Hemanta Kumari Debi v. Midnapur Zaminadari Company 37 M.L.J. 525 : A.I.R. 1919 P.C. 79 : 47 Cal. 485 : 46 I.A. 240 : 17 A.L.J. 1117 : 22 Bom L.R. 488: 24 C.W.N. 177 : 27 M.L.T. 42 : 1920 M.W.N. 66 : 53 I.C. 534 and held that it must be a document which effects an actual demise and operates as a lease in praesenti, and not an agreement that in certain contingencies a lease will be granted. Their Lordships further held that so far as the Indian Registration Act is concerned, there is consensus of opinion in the different High Courts as reflected in the decisions of different High Courts that an agreement to lease must be an actual demise. It was further held that if that view is accepted with regard to the Indian Registration Act, it can be applied in considering the question under the Indian Stamp Act also.
11. In Trivenibai and Anr. v. Smt. Lilabai A.I.R.1959 S.C. 620, it is held as follows:
A document executed by laymen without legal assistance must be liberally construed without recourse to technical considerations. The heading of the document, though relevant, would not determine its character. It is true that an agreement would operate as a present demise although its terms may commence at a future date. Similarly it may amount to a present demise even though parties may contemplate to execute a more formal document in future. In considering the effect of the document the Court must enquire whether it contains unqualified and unconditional words of present demise and includes the essential terms of lease. Generally if rent is made payable under an agreement from the date of execution "or other specified date, it may be said to create a present demise. Another relevant test is the intention to deliver possession. If possession is given under an agreement and other terms of tenancy have been set out, then the agreement can be taken to be an agreement to lease. As in the construction of other documents, so in the construction of an agreement to lease, regard must be had to all the relevant and material terms: and an attempt must be made to reconcile the relevant terms if possible and not to treat any of them as idle surplusage.
Their Lordships of the Supreme Court did not distinguish the decision in Narayanan Chetty v. Muthiah Servai I. L. R. 35 Mad. 63. It was held that in that case that the question about the constructions of the words 'agreement to lease' was not specifically argued before the Full Bench, and the main point considered was the effect of the provisions of Section 49 of the Indian Registration Act. In that connection the argument had centred round the effect of the provisions of Clause (h) of Section 17 of the Registration Act and Section 54 of the Transfer of Property Act. The Full Bench took the view that in enacting Section 49 of the Act, the Legislature meant to indicate that the instrument should not be received in evidence even where the transaction sought to be proved did not amount to a transfer of interest in immovable property but only created an obligation to transger the property. Their Lordships further said that since the scope o f 'agreement to lease' was not decided in that case, the same was not of much help and need not be followed. The decision in I.L.R. 35 Mad. 63, was not followed by our own High Court in the decision reported in Swaminatha Mudaliar v. Ramaswami Mudaliar 40 M.L.J. 161 : A.I.R. 1921 Mad. 72 : I.L.R. 44 Mad. 399 : 13 L.W. 327 : 1921 M.W.N. 145 : 62 I.C. 354. In view of the decision of the Privy Council referred to supra.
12. In Sudesh Kumar v. Mool Chand A.I.R. 1969 Raj. 22, also, it was held that unless there is a present demise, an agreement to lease will not amount to a lease proper stamp duty need be paid only as if it is an agreement.
13. In Mrs. Birender Amarjit Singh v. General Marketing and Manufacturing Company Limited, Calcutta A.I.R. 1976 Del. 15, it was held that a document to be treated as a lease must satisfy the test of immediate and present demise in respect of the property covered by it and an agreement to lease is no exception and this test would apply to determine not only the liability of a document to stamp but also to its registrability.
14. Our High Court also had the opportunity to decide the question in the decision reported in T.N. Habib Khan v. Arogya Mary Shanthi Lucien (1981)2 M.L.J. 298 : (1981) 94 L.W. 539 : A.I.R. 1982 Mad. 156. This decision was rendered by Ratnavel Pandian, J. (as he then was). The learned Judge took into consideration the various circumstances to distinguish between 'lease' and agreement to lease where no present demise is created and the liability to pay stamp duty thereon, after following the decision reported in Ramjoo Mahomed v. Haridas Mullick A.I.R. 1925 Cal. 1087 : I.L.R. 52 Cal. 695 : 91 I.C. 320, wherein it was held that it becomes necessary for the court, therefore, to determine the meaning of the term "present demise". The learned Judge has exhausted most of the decisions on the subject and after narrating the characteristics of both the documents, has enunciated the law as to whether the document has to be registered and how the document has to be stamped. It is well-settled that whether an agreement amounted to a present demise or not depends upon the intention of the party which is to be gathered from the language in which it is couched. If possession is not handed over on the date of the document but postponed to a later date, where an option is given to take delivery or the lessor handing over possession on a later date, coupled with the fact that the rent payable is not immediate, that is a circumstance where no present demise is created. There is no transfer of any right over any immovable property. The agreement is executed only to bind the parties as any agreement for lease, so that they may execute a formal document later. There is no clause of enjoyment from the date of lease. Without an enjoyment of a land, there cannot be a subject matter of a lease. Finally, an obligation on the part of the lessor to be fulfilled so that the lease may come into effect on a future date, are indicative of the fact that no present demise is created in this case.
15. Taking into consideration the above position of law, I am of the view that the document dated 14.9.1991 also does not create a present demise, and that the document is only an executory contract. The parties bind themselves as to conditions of a lease when the lease comes into force. It is not disputed that there was an obligation on the part of the lessor to complete the constructions suggested by the proposed lessee, and the rent is fixed inclusive of the buildings to be constructed. The entire subject matter of the lease was not in existence, when the document was executed. The rent is also payable only when possession is handed over. Possession is retained by the lessor, promising to construct the building. The right of termination is given to the proposed lessee, giving 10 months notice, and so far as the lessor is concerned, it is six months after the expiry of the 10th year period. There is also a provision for return of the deposit after adjusting all outstandings. In this connection, it is also worthwhile to mention that the payment of Rs. 1 lakh by the proposed lessee is termed only as 'deposit' and not as 'premium.' So taking into consideration all these characteristics of the document, it goes without saying that the document dated 14.9.1991 is only an agreement and it is properly stamped. It does not constitute a lease or an agreement for lease where a present demise is created. The revision (C.R.P. No. 3424 of 1993) is dismissed, with no order as to costs.
C.R.P. No. 448 of 1994:16. Along with the plaint, the plaintiff filed an application for the issue of a Commission.
17. The Commissioner, after giving notice to parties, visited the property, and filed a report on 5.7.1993. When the Commissioner visited the property, at the spot, the petitioner gave a memo to the Commissioner that certain other facts also must be verified and reported. The Commissioner did not ascertain those matters since they were beyond the scope of the warrant issued to him. Therefore, the petitioner filed I.A. No. 596 of 1993 for the issue of a Commission. In that application, he wanted the Commission to be reissued to the same Commissioner, for taking measurements, for the purpose of filing a fresh Report including a detailed plan with front and side elevation of the new construction made by the defendant, and also wanted the Commissioner to file a report with the estimated cost of construction of the new buildings as on 14.1.1992, or in the alternative, prayed for setting aside the Commissioner's Report dated 5.7.1993 and for appointing a new Commissioner.
18. But the impugned order, the lower court dismissed the application.
19. The petitioner (defendant) challenges the said Order in this revision.
20. The lower court dismissed the same on two grounds, namely, (1) when one report is already on file, a second commission cannot be issued without setting aside the first report; and (2) The matters sought to be ascertained are not necessary for the proper disposal of the suit.
21. Learned Counsel for the petitioner submitted that he is not insisting that another Commission should be issued, but what he wanted was only that the Advocate- Commissioner should visit the property and ascertain those matters and file a Report before the Court. If that is so, the only question is, whether those matters are necessary for the proper disposal of the suit.
22. It is admitted that the suit is one for specific performance. The agreement for lease provides that certain constructions have to be made by the petitioner. The cost of construction is not material since it is only after the construction of the entire building, the rent is fixed. So, the petitioner or the parties might not have estimated the cost of the building even at the time when the document was executed. How far the Report of the Commissioner after valuing the building is relevant for the disposal of the suit, is not explained by the learned Counsel for the petitioner, nor is it mentioned anywhere in the affidavit filed in support of the petition.
23. Hence the finding of the lower court that in a suit for specific performance, the issue of a Commission is unnecessary is only to be upheld.
24. C.R.P. No. 448 of 1994 is also dismissed, with no order as to costs.