Andhra HC (Pre-Telangana)
Kothapalli Sreeramulu & Company And ... vs Krishna Gur And Khandasari Sugar on 5 November, 2002
Equivalent citations: 2003(3)ALD319, 2003(3)ALT360
Author: G. Rohini
Bench: Bilal Nazki, G. Rohini
JUDGMENT G. Rohini, J.
1. This Letters Patent Appeal is preferred against the Judgment dated 24.8.1993 in A.S. No. 633 of 1982, whereunder the learned single judge affirmed the Judgment and decree dated 22.3.1982 in O.S. No. 61 of 1979 on the file of the Court of the Subordinate Judge, Eluru.
2. The defendants are the appellants. The respondent/plaintiff filed O.S.No. 61 of 1979 seeking a decree against the defendants 2 to 6 and 8 to 10 personally and against the estate of the 1st defendant for recovery of a sum of Rs. 2,01,293 with subsequent interest and also for certain other consequential reliefs. The said suit was decreed as prayed for granting future interest at 6% p.a. on principal amount from the date of suit till realisation. Aggrieved by the same, the defendants filed A.S. No. 633 of 1982. Regarding future interest, which was disallowed partly by the trial Court, the plaintiff filed Cross-objections. A learned single Judge dismissed both the appeal as well as the Cross-objections. Hence the Letters Patent Appeal by the defendants.
3. The parties shall be referred to, hereinafter, as the plaintiff and the defendants for the sake of convenience.
4. The case of the plaintiff as per the plaint averments is as follows:
The plaintiff is a partnership firm owning the plaint schedule Khandasari Sugar Factory. The defendant No. 1 is a partnership firm, of which the defendants 2 to 10 are the partners, the 2nd defendant being the Managing Partner. The 1st defendant, represented by the 2nd defendant entered into an agreement of lease dated 17.11.1977 with the plaintiff in respect of Khandasari Sugar Factory of the plaintiff. After the terms were settled between the parties, they were reduced into writing and the said contract of lease dated 17.11.1977 (marked as Ex.A3), was signed by the partners of the plaintiff and the 2nd defendant representing the 1st defendant firm. The possession of the Khandasari Sugar Factory was delivered to the defendants on 17.1.1977 itself even before the memorandum of lease was executed. The contract is for lease of the sugarcane factory for the cane-crushing season commencing from 26.11.1977 to 30.4.1978. However, the lessee is entitled to be in possession of the godowns and molasses storage tanks up to 31.8.1978. The lessee shall pay a rent of Rs. 1,20,000/- on or before 31.1.1978 failing which he is liable to pay interest at 18% per annum from 1.2.1978 till the date of payment. The lessees shall redeliver the factory after the expiry of the lease period in good working condition after replacing the broken parts. It was agreed that the lessor shall get all the repairs effected and deliver the factory in working condition to the 2nd defendant. For the repairs effected the defendants undertook to pay Rs. 46,000/- on or before 15.4.1978. The repairs should be completed before 26.11.1977. After the delivery of possession the lessee alone is responsible for the repairs done during the working of the factory. As agreed between the parties, the plaintiff got all the repairs done and delivered possession of the mill in perfect working condition to the defendants. It is alleged that the defendants having used the sugar factory and having realised income failed to pay the agreed rent nor did they pay the amount of Rs. 46,000/- payable towards the repairs effected by the plaintiff. The defendants also failed to deliver the godown and molasses storage tanks. When the plaintiff issued Ex.B7 notice dated 23.8.1978, the defendants gave Ex.A2 reply dated 1.9.1978 raising several objections and denying the terms of Ex.A3 contract of lease. They have set up totally new terms. In the circumstances, the plaintiff filed the suit seeking the aforesaid reliefs.
5. The defendants 1 and 2 filed a written statement, which was adopted by defendants 3 to 7 and 9. Defendant No. 10 filed a separate written statement. Defendant No. 8 remained ex parte.
6. The plea raised in the written statement filed by defendants 1 and 2 is that Ex. A3 lease deed dated 17.11.1977 which is unstamped and unregistered is inadmissible in evidence and it cannot be looked into for any purpose. It is contended that the defendant No. 2 who signed Ex. A3 on behalf of the 1st defendant-firm was not aware of the contents of the said document and a copy of the same was never furnished to him. It is pleaded that as per the terms settled between the parties, the lease amount is Rs. 10/- per each ton of cane crushed. The lessor shall deliver the factory in working condition by 26.11.1977 and that the crushing should be stopped on or before 30.4.1978 and the factory should be redelivered by 30.4.1978. The lessor must enable the lessee to prepare third grade sugar out of molasses storage tanks. The lessee was also entitled to take away the machinery installed by them. The terms of the lease as mentioned in the plaint were never accepted by or agreed to between the parties. It is also alleged that the plaintiff committed several defaults. They did not deliver the mill in working condition and consequently the mill could not crush to its full capacity. The plaintiff also collected the repairing charges from the 1st defendant. The plaintiff did not get the licences and permits to enable the defendants to sell the molasses. The mill could not be started till 7.1.1977, however, the plaintiff took possession of the entire molasses and did not allow the defendants to enter into the mill. Consequently the defendants sustained loss of Rs. 75,000/- as the mill was not in working condition. They also suffered a loss of Rs. 78,500/- as they were prevented by the plaintiff from taking the molasses. That apart, the defendants paid a total sum of Rs. 17,641.73 Ps to the plaintiff from time to time which has to be adjusted. The mill was delivered back to the plaintiff on 1.3.1978 and since the defendants suffered various losses due to the defaults committed by the plaintiff, the defendants cannot be made liable to pay the rent of Rs. 1,20,000/- as claimed by the plaintiff. Hence the suit claim is without any basis and the suit is liable to be dismissed.
7. The 10th defendant in his separate written statement contended that there is no valid partnership between him and the other defendants and that he never participated in the business of the 1st defendant-firm. According to him the 1st defendant partnership firm is void under law and he cannot be made liable for the suit claim.
8. On the above pleadings the trial Court settled as many as eight issues and one additional issue for trial.
9. Before the trial Court the plaintiff examined two witnesses and got marked four documents in support of the suit claim. On behalf of the defendants two witnesses were examined and 14 documents were marked.
10. On appreciation of the evidence on record, both oral and documentary, the learned trial Judge answered all the issues in favour of the plaintiff and held that the plaintiff is entitled to recover the entire suit amount. The learned trial Judge while rejecting the objections raised by the defendant No. 10 held that the defendant No. 10 is one of the partners of the 1st defendant-firm and he is also liable for the suit claim. Accordingly, the suit was decreed for recovery of Rs. 2,01,293/- with subsequent interest at 6% p.a. on Rs. 1,60,000/-from the date of the suit till the date of realisation.
11. Whereas the defendants preferred A.S.No. 633 of 1982 challenging the correctness of the said Judgment and decree, the plaintiff filed the Cross-objections contending that the learned trial Judge ought to have granted future interest at 18% p.a. as agreed between the parties. It is also the further contention of the plaintiff that the future interest should have been allowed on the suit claim of Rs. 2,01,293/-.
12. The learned single Judge on reappreciation of the entire evidence on record and having considered the rival contentions raised by both the parties, by Judgment dated 24.8.1993 affirmed the Judgment and decree granted by the trial Court and accordingly dismissed both the appeal and cross-objections. Aggrieved by the same the defendants preferred the Letters Patent Appeal.
13. We have heard the learned Counsel for the appellants as well as the learned Counsel for the respondent. The learned Counsel for the appellants Sri P. V.R. Sharma, while submitting that the findings recorded by the learned trial Judge as upheld in Appeal are not based on the evidence on record, contended that Ex. A3 lease deed, which was unstamped and unregistered, is inadmissible in evidence for any purpose. The learned Counsel vehemently contended that the suit which is entirely based upon Ex.A3 lease deed is not maintainable and both the trial Court as well as the appellate Court erred in granting a decree in favour of the plaintiff. On the other hand, learned Counsel for the respondent while supporting the Judgment under appeal submitted that the same does not warrant any interference.
14. We have perused the Judgments of the learned trial Judge as well as the learned appellate Judge and the other material on record.
15. It is clear from the pleadings of both the parties as well as the evidence on record that admittedly the defendants have taken on lease the sugar factory of the plaintiff during the cane-crushing season of the year 1977-78 and having operated the same, they have redelivered the factory to the plaintiff on 1,3.1978. The only dispute between the parties is regarding the conditions agreed upon between them, which include the quantum of rent, and the amount alleged to have been spent by the plaintiff towards repairs before handing over the sugar mill to the defendants. Whereas the plaintiff relied upon Ex.A3 and contended that as per the terms and conditions agreed between the parties the defendants shall pay Rs. 1,20,000/- towards rent and Rs. 46,000/- towards repairs, the case of the defendants is that the agreed rent was only in Rs. 10/- per ton of the cane crushed and that they never agreed to pay Rs. 46,000/- towards repairs effected by the plaintiff. Though the defendants did not dispute the signatures of the 2nd defendant on Ex.A3, they contended that the 2nd defendant who signed as Managing Partner of the 1st defendant-firm was not aware of the contents of Ex.A3, which is in English, and that his signatures were obtained without explaining to him the recitals of Ex.A3. They also raised an objection that Ex.A3 is inadmissible in evidence and therefore the plaintiff is not entitled to any relief.
16. It is pertinent to note that in the written statement itself the defendants raised a plea that Ex.A3 being an unstamped and unregistered document is inadmissible in evidence and cannot be looked into for any purpose. Though the document was initially unstamped, the record shows that before instituting the suit, the plaintiff, on his own got it impounded by paying the stamp duty as well as penalty levied under the provisions of the Indian Stamp Act, 1899 and the irregularity, if any, under the Stamp Act was cured. However, admittedly Ex.A3 is an unregistered document. In view of the objection raised by the defendants, the said document was received by the trial Court in evidence leaving open the question of admissibility of Ex.A3 to be considered at the time of final hearing. For the said reason the following additional issue was framed on 16.1.1982 by the learned trial Judge.
"Whether the document dated 17.11.1977 is not valid and admissible in evidence?
17. The learned trial Judge, on appreciation of the entire material on record, held that Ex.A3 is a memorandum of terms of lease already concluded between the parties. The learned Judge opined that the said document can be received in evidence under the proviso to Section 49 of the Registration Act as no relief touching the immoveable property is claimed in the suit and as the reliefs claimed in the suit are in the nature of specific performance of the lease agreement, and accordingly decreed the suit.
18. The learned single Judge on reappreciation of the evidence adduced by both the parties affirmed the finding that Ex.A3 is a memorandum of terms and conditions reduced to writing after the oral lease is completed by delivery of possession. Though the trial Court did not go into the question whether Ex.A3 requires compulsory registration, but merely held that the document is admissible in evidence under proviso to Section 49 of the Registration Act, the learned single Judge dealt with the said aspect in detail and on consideration of the recitals of the document and the relevant statutory provisions concluded that Ex.A3 does not come within the scope of the first Para of Section 107 of Transfer of Property Act, 1882 and therefore, it is not a compulsorily registerable document. Accordingly the learned Judge held that Ex.A3 is admissible in evidence and affirmed the decree granted by the trial Court.
19. The learned Counsel for the appellant contends that the conclusion of the trial Court as well as the learned single Judge that Ex.A3 document is a memorandum of terms of oral lease already concluded between the parties is erroneous. The learned Counsel further contends that even assuming that Ex.A3 is a memorandum of past transaction the same is not admissible in evidence and cannot be looked into for any purpose. According to the learned Counsel though a lease, which was effected orally followed by delivery of possession does not require registration, once the terms of the lease settled between the parties are reduced to writing, the document is necessarily to be registered and in the absence of registration it is inadmissible in evidence.
20. Before we proceed to consider the contention raised by the learned Counsel regarding the admissibility of Ex.A3, it is necessary to examine the correctness of the finding recorded by the Courts below as to the nature of Ex.A3.
21. It may be pointed out that the defendants never denied the lease of plaint schedule property. The only case of the defendants is that the conditions of lease agreed between the parties are different and that the terms mentioned in Ex.A3 were never agreed to nor accepted by them. The defendants also did not deny the delivery of possession on 17.11.1977 before execution of Ex.A3. Admittedly, the agreement of lease was acted upon and the defendants enjoyed the possession of suit schedule property for the entire period of lease. Thus, the fact that the lease was made by oral agreement accompanied by delivery of possession cannot be said to be in dispute.
22. It is also pertinent to note that the Managing Partner of the plaintiff-firm who was examined as P.W.1 deposed that the terms of lease were mutually settled between himself and the 2nd defendant and that the possession of the mill was delivered to the defendants on 17.11.1977 and later they got drafted Ex.A3 by P.W.2, who is an Advocate at Eluru. The evidence of P.W.2, who is an independent witness and who drafted Ex.A3 corroborated the evidence of P.W.1 in all material particulars. P.W.2 stated that he was informed by both the P.W.1 and the 2nd defendant as to the delivery of possession and that he drafted Ex.A3 as per their instructions and both of them signed in his presence. The clear evidence of P.W.2 also belies the plea of the defendants that the signatures of the 2nd defendant were obtained on Ex.A3 without revealing the contents thereof. The evidence of P.W.2 also shows that the 2nd defendant as Managing Partner of the 1st defendant-firm signed Ex.A3 having agreed to all the terms specified thereunder and after signing the same the counterpart of Ex.A3 which was also signed by both the parties was delivered to him. Hence the plea of the defendants that there is variance between the terms agreed between them and the terms reduced to writing under Ex.A3 is without any basis and cannot be accepted. In the circumstances, we are of the view that the Trial Court as well as the learned Single Judge rightly accepted the plea of the plaintiff that the terms of oral lease already concluded between the parties accompanied by delivery of possession were reduced to writing under Ex.A3. The said finding cannot be said to be against the evidence on record and we do not see any reason to disturb the said concurrent finding of fact.
23. As a matter of fact the learned Counsel for the appellant also did not seriously dispute the said finding, but contended that even such a memorandum of past transaction requires compulsory registration and in the absence of registration the document is not admissible in evidence to establish the terms agreed between the parties.
24. For proper appreciation of the said contention, it is necessary to examine the relevant statutory provisions.
25. Section 107 of the Transfer of Property Act, 1882 which provides for making of leases runs as follows:
"107. Leases how made :--A lease of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent, can be made only by a registered instrument.
All other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession."
Where a lease of immovable property is made by a registered instrument, such instrument or, where there are more instruments than one, each such instrument shall be executed by both the lessor and the lessee Provided that the State Government may (x x x) from time to time, by notification in the Official Gazette, direct that leases of immovable property, other than leases from year to year, or for any term exceeding one year, or reserving a yearly rent, or any class of such leases, may be made by unregistered instrument or by oral agreement without delivery of possession."
26. Then coming to the relevant provisions of the Registration Act, 1908, Section 2(7) defines "lease" as under:
"Lease" includes a counterpart Kubuliyat, an undertaking to cultivate or occupy, and an agreement to lease."
27. Section 17 of the Registration Act to the extent it is relevant for the purpose of the issue in question is as follows:
"17. Documents of which registration is compulsory:--(1) The following documents shall be registered, if the property to which they relate is situate in a district in which and if they have been executed on or after the date on which, Act No. XVI of 1864, or the Indian Registration Act, 1866, or the Indian Registration Act, 1876, or the Indian Registration Act, 1877, or this Act came or comes into force, namely:
(a)......................................
(b).........................................
(c).......................................
(d) lease of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent;
(e)...........................
Provided that the State Government may, by order published in the Official Gazette, exempt from the operation of this subsection any leases executed in any district, or part of a district, the terms granted by which do not exceed five years, and the annual rents reserved by which do not exceed fifty rupees.
28. It is also relevant to note Section 18 of the Registration Act, which provides for documents of which registration is optional.
"18. Documents of which registration is optional:--Any of the following documents may be registered under this Act, namely-
(a) instruments (other than instruments of gift and wills), which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of a value less than one hundred rupees, to or in immovable property;
(b) instruments acknowledging the receipt or payment of any consideration account of the creation, declaration, assignment, limitation or extinction, of any such right, title or interest.
(c) leases of immovable property for any term not exceeding one year and leases exempted under Section 17; (cc) instruments transferring or assigning any decree or order of a Court of any award when such decree or order or award purports or operates to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, or a value less than one hundred rupees, to or in immovable property.
(d) instruments (other than wills) which purport or operates to create, declare, assign, limit or extinguish any right, title or interest to or in movable property;
(e) wills; and
(f) all other documents not required by Section 17 to be registered".
29. Section 49 of the Registration Act, which prohibits the admissibility of an unregistered document in evidence, runs as follows:
49. Effect of non-registration of documents required to be registered :--No document required by Section 17 or by any provision of the Transfer of Property Act, 1882 to be registered shall,--
(a) affect any immovable property comprised therein, or
(b) confer any power to adopt; or
(c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered:
Provided that an unregistered document affecting immovable property and required by this Act, or the Transfer of Property Act, 1882 to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877, or as evidence of part performance of a contract for the purposes of Section 53-A of the Transfer of Property Act, 1882, or as evidence of any collateral transaction not required to be effected by registered instrument.
30. As can be seen, the provisions of the Transfer of Property Act, 1882 and the Registration Act, 1908 are supplemental to each other regarding the transactions affecting immovable property. Under Section 17(d) of the Registration Act, registration of the lease deed is compulsory only in respect of lease of immovable property from year to year or for any term exceeding one year or reserving a yearly rent. Section 18(c) of the Registration Act makes it further clear that registration of the document of leases of immovable property for any term not exceeding one year and leases exempted under Section 17 is only optional. Under Section 107 of the Transfer of Property Act whereas, para-1 requires that a lease of immoveable property from year to year or for any term exceeding one year or reserving a yearly rent can be made only by a registered instrument, para-2 of Section 107 states that all other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession. Thus, in respect of leases of immovable property for any term not exceeding one year the parties are at liberty to affect the same either by way of a registered instrument or by oral agreement accompanied by delivery of possession. In other words, though the term of the lease does not exceed one year, the parties may opt for executing an instrument in which event it requires compulsory registration.
31. Then the question is where the lease for a term not exceeding one year was effected by oral agreement accompanied by delivery of possession and subsequently, the terms of lease settled between the parties are reduced to writing, whether such document requires registration. In our considered opinion, either the provisions of the Transfer of Property Act, 1882 or the provisions of the Registration Act, 1908 do not require either expressly or by necessary implication registration of such document. On a combined reading of Sections 17 and 18 of the Registration Act and Section 107 of the Transfer of Property Act, the only inference that can be drawn is that the Legislature intended compulsory registration of only the leases of immovable property for a term exceeding one year, or where the parties themselves opt for making a lease even for a term less than one year by way of an instrument. But, where there is an oral lease of immovable property for a term not exceeding one year accompanied by delivery of possession and subsequently the terms agreed between the parties are reduced to writing, such a memorandum of past transaction of oral lease does not fall within the scope of Section 17 of the Registration Act, 1908, and therefore, the same is not compulsorily registerable.
32. In the instant case, the period of lease agreed between the parties under Ex.A3 is for one cane-crushing season of 1977-78. The total period of lease comes to nine months and five days. It is not a lease from year to year nor for a period exceeding one year. It is further specified that the lessee shall pay a rent of Rs. 1,20,000/-on or before 31.1.1978, failing which they shall be liable to pay interest at 18% p. a., from 1.2.1978 till the date of payment. Thus, it is a rent payable at one time. There was absolutely no indication to show that the lease period exceeds one year nor was there any agreement for payment of yearly rent. In the circumstances, Ex.A3 is not covered by either para-1 of Section 107 of the Transfer of Property Act, 1882 or Section 17 (1) (d) of the Registration Act, 1908 and therefore, the same does not require registration. Consequently, it is beyond the bar imposed under Section 49 of the Registration Act and there cannot be any objection as to its admissibility in evidence on the ground of want of registration.
33. The learned Counsel for the appellant placed reliance upon the decision of Nagpur High Court in Ramjiwan v. MT. Maharani, AIR 1936 Nagpur 295, and also the decision of Allahabad High Court in Ram Swarup v. J.D. Bhagat Trust, , in support of his contention that an unregistered lease deed is inadmissible in evidence under any circumstances.
34. In Ram Jeevan case (supra), no doubt, the lease pleaded was an oral lease. But admittedly it was a perpetual lease on an annual rent. In the circumstances, it was held that a lease of that kind can only be made by a registered instrument. In Ram Swamp case (supra), the lease in question was for manufacturing purpose for a period of twelve months and there was a written lease deed. Hence, it was held that the document of lease which is reduced to writing is required to be registered under Section 107 of the Transfer of Property Act and cannot be received in evidence in view of the provisions of Section 49 of the Registration Act. It was not a case of oral lease accompanied by delivery of possession.
35. The facts in the case on hand are entirely different. The document in question in the instant case is a memorandum of terms and conditions of oral lease, which was completed between the parties and accompanied by delivery of possession. Hence, in our considered opinion, both the decisions relied upon by the learned Counsel do not lend any support to the contention of the appellant that the document in question in the present case requires registration.
36. No other point is urged before us.
37. For the reasons stated supra, in our considered opinion the judgment and decree under appeal do not suffer from any factual or legal infirmity. Ex.A3 has been rightly received in evidence by the learned trial Judge and the defendants are bound by the terms and conditions under Ex.A3 regarding payment of rent as well as the amounts payable towards the repairs effected by the plaintiff. Hence, we confirm the decree in favour of the plaintiff.
38. In the result, the Letters Patent Appeal is dismissed. However, in the circumstances, there shall be no order as to costs.