Andhra Pradesh High Court - Amravati
Hindustan Petroleum Corporation ... vs Tatikonda Kameswara Rao on 16 October, 2024
APHC010284852012
IN THE HIGH COURT OF ANDHRA PRADESH
AT AMARAVATI [3369]
(Special Original Jurisdiction)
WEDNESDAY, THE SIXTEENTH DAY OF OCTOBER
TWO THOUSAND AND TWENTY
TWENTY-FOUR
PRESENT
THE HONOURABLE SRI JUSTICE T
T. MALLIKARJUNA RAO
APPEAL SUIT NO: 239/2012
Between:
Hindustan Petroleum Corporation Limited ...APPELLANT
AND
Tatikonda Kameswara Rao and Others ...RESPONDENT(S)
Counsel for the Appellant:
1. SAMBOJU BALA GOPAL Counsel for the Respondent(S):
1. S. PRANATHI The Court made the following JUDGMENT:
1. The Appeal, under Section 96 of the Code of the Civil Procedure, 1908 (for short, 'C.P.C.'), is filed by the Appellant/Defendant challenging the decree and Judgment, dated 30.01.2012 in O.S.No.193 of 2005 passed by the learned Principal District Judge at Visakhapatnam,, (for short, 'trial court').
2. Respondents 1 to 3 are the Plaintiffs,, who filed the suit in O.S.No.193 O.S. of 2005 seeking a declaration that the rights and liabilities created by the lease deed dated 31.12.2001 stood extinguished with the shifting of retail outlet from Atchuthapuram to Pedda Gantyada and on termination of lease on 29.10.2005 and for eviction of the Defendant from the suit schedule 2 T.M.R., J A.S. No.239 of 2012 premises after removing the structures fixed by the Defendant company and for future damages at the rate of Rs.50,000/- per month for use and occupation of the premises by the Defendant company with effect from 01.12.2005 till the date of vacating the premises.
3. Referring to the parties as arrayed in the suit is expedient to mitigate potential confusion and better comprehend the case.
4. The factual matrix, necessary and germane for adjudicating the contentious issues between the parties inter se, may be delineated as follows:
Plaintiffs 1 and 2 constituted the 3rd Plaintiff firm and became retail dealers for Defendant, a company selling petroleum products in India. The 1st Plaintiff applied for a retail outlet at Atchuthapuram and was selected. The Plaintiffs purchased the land to the extent of Ac.0.34 cents at Veduruwada village and invested Rs.18,50,000/- in constructing facilities. A lease agreement was signed on 31.12.2001 for 30 years, with a monthly symbolic rent of Rs.100/-. The true consideration for the lease was the retail dealership.
After entering into a dealership agreement with the Defendant on 17.05.2002, the Plaintiffs began operating the retail outlet in May 2002, earning commission on sales. However, the business underperformed, partly due to a nearby BPCL outlet, leading to financial losses for the Plaintiffs. Following the Defendant's advice, the Plaintiffs shifted the retail outlet to Pedda Gantyada after obtaining permission. They leased the new site for Rs.15,000/- per month, with a 10% rent increase every five years, and spent Rs.12,00,000/- on construction. The Defendant executed a new lease deed under similar terms. After the relocation, the Plaintiffs requested 3 T.M.R., J A.S. No.239 of 2012 possession of the Atchuthapuram site. The Defendant proposed to convert it into a "Company Owned Outlet" and asked for an estimate of the construction and development costs. Defendant appointed one M. Surya Rao as the caretaker to manage the outlet at Atchuthapuram. After obtaining Head Office approval, the Defendant promised to issue a licence to M. Surya Rao. The Plaintiffs responded on 29.05.2004, estimating the value of construction and land at Rs.42,66,185.74ps. (value of land of Rs. 24,15,000/- + value of construction of Rs.18,51,185.74 ps), and demanded Rs.42,90,445.74ps, including Rs.24,260/- towards commission. The Defendant did not make the payment.
Defendant converted the Atchuthapuram retail outlet to an S.C. & S.T. women category without notifying or obtaining consent from the Plaintiffs and advertised for a new "Company Owned retail Outlet" in the newspaper on 20.6.2005. This change, which involved shifting the outlet, is claimed to extinguish the lease rights established under the 31.12.2001 lease deed. Since the outlet was moved to Pedda Gantyada, the investment in Atchuthapuram became worthless. The Plaintiffs further assert that the Defendant is liable for these losses. They offered to sell the site and structures for Rs.45,00,000/- or lease them at Rs.50,000/- per month, but the Defendant refused. On 28.07.2005, the Plaintiffs issued a legal notice to the Defendant, but the Defendant responded with a false reply notice.
As a result of relocating the retail outlet from Atchuthapuram to Pedda Gantyada, the Plaintiffs claim that the lease deed dated 31.12.2001 is no longer valid. Defendant is, therefore, required to return the Atchuthapuram land and the structures built by the Plaintiffs. Since the Defendant has not complied with this demand, the Plaintiffs have filed this suit.
4T.M.R., J A.S. No.239 of 2012
5. The defendant company vehemently contests the suit, asserting its maintainability is fundamentally flawed and merits dismissal ab initio. It acknowledges its status as a Government of India enterprise engaged in the petroleum sector and concedes the Plaintiffs' role as dealers in Atchuthapuram. However, it disputes the alleged land acquisition cost, claiming it was Rs.21,000/-, contrary to the Plaintiffs' assertion of Rs.5,00,000/-.While conceding the dealership was awarded to the Plaintiffs, the Defendant refutes the claim of a Rs.18,50,000/- expenditure on development. The fixed monthly rent of Rs.100/- is acknowledged, yet the Defendant maintains that the Plaintiffs did not have bargaining power regarding the lease agreement. The Defendant duly entertained the Plaintiffs' request to relocate to Pedda Gantyada, which was prompted by underwhelming business performance. Following the decommissioning of the Atchuthapuram outlet, Defendant plans to operate a COCO (Company Owned, Contractor Operated) outlet, arguing that the plaintiffs, as lessors, possess no grounds to object. Defendant further posits that operations will be assigned to candidates from the S.C. & S.T. women's category, thereby terminating the provisional arrangement with caretaker M. Suryarao. It asserts that the Plaintiffs' consent is unnecessary for this transition. In conclusion, the Defendant contends that the subsisting lease entitles them to unilateral action, rejecting any claims of extinguished rights or entitlements to possession, thus asserting that the suit lacks a viable cause of action and warrants dismissal.
6. Based on the above pleadings, the trial Court framed the following issues:
1. Whether the lease has been terminated in view of the contentions raised by the Plaintiffs?
2. Whether the Plaintiffs are entitled to the relief of declaration as prayed for?
3. Whether the Plaintiffs are entitled to the relief of eviction of the Defendant from the suit schedule premises?
4. Whether the Plaintiffs are entitled to the damages as claimed?5
T.M.R., J A.S. No.239 of 2012
5. To what relief?
7. During the trial, on behalf of Plaintiffs, PWs.1 and 2 were examined and marked Exs.A.1 to A.21. On behalf of Defendant, D.W.1 was examined, and Defendant adduced no documentary evidence.
8. After the trial was completed and both sides' arguments heard, the trial Court decreed the suit, declaring the rights and liabilities under the lease deed dated 31.12.2001 stood extinguished in so far as both the parties are concerned with the resitement of retail outlet to Pedda Gantyada and also directed the Defendant to vacate the plaint schedule property within two months from the date of Judgment and removing the structures erected in it by the Defendant and the Plaintiffs are also entitled to Rs.5000/- per month towards damages from the Defendant for use and occupation of the plaint schedule property from 01.12.2005 till the date of eviction.
9. Sri Samboju Bala Gopal learned Counsel representing the Appellant/Defendant, contends that the lease agreements executed on December 31, 2001, remain valid until the conclusion of the stipulated 30- year lease term. Consequently, the lease is not subject to automatic termination, nor do the rights and obligations enshrined within those agreements dissipate due to the cessation of the outlet at Pedaganchada or the decommissioning of the outlet at Atchuthapuram. Therefore, Defendant maintains the prerogative to allocate the dealership to any preferred entity or to lease the premises at their discretion until the lease period expires. The trial Court erred in invoking and relying upon the Doctrine of Novation of Contract. Section 62 of the Indian Contract Act has no relevance or application to the facts of the case in as much as two lease deeds, Exs.A4 and A.15, pertain to two separate and distinct sites which have no relation to each other and do not relate to the same site. He further contended that there is neither substitution, rescinding or alteration of Exs.A4 lease deed, Atchuthapuram by A.15 lease deed, Pedda Gantyada; He further argues 6 T.M.R., J A.S. No.239 of 2012 that the trial Court erred in holding that Section 111(f) of the Transfer of Property Act, dealing with the theory of implied termination applies since the Defendant allowed the Plaintiffs to deviate from the terms and conditions of the original lease deed dated 31.12.2001 for resitement of retail outlet to Pedda Gantyada and as the Defendant also entered into a new lease deed to that effect under Ex.A15, it also amounts to implied surrender of earlier lease deed (Ex.A4) dated 31.12.2001, is wholly erroneous and unfounded in the facts of the case; the two dealerships/lease deeds are entirely separate and distinct; a new lease deed (Ex.A15) was entered into on 28.10.2003 between both the parties only upon a request for such resitement made by the Respondents/Plaintiffs. He further contends that the Ex.A15 lease deed does not reference Ex.A4 or the dealership at Atchuthapuram and that the Respondents/Plaintiffs did not formally terminate to revoke the Ex.A4 lease deed dated 31.12.2001.
10. Per contra, Smt. S. Pranathi, learned Counsel representing the Respondents/Plaintiffs, submits that the primary objective of leasing the property specified in the plaint is to facilitate the operation of a retail outlet for the sale of petroleum and petroleum products by the Defendant to the Plaintiffs. Given that this purpose has been compromised due to the relocation of the outlet to another site at Pedda Gantyada, it is asserted that a novation of the original contract has occurred. Consequently, the Plaintiffs are not obligated to fulfil the terms of the original lease agreement, leading to the extinguishment of rights and liabilities under the said lease, thereby resulting in the termination of the lease itself. Learned Counsel further contends that the trial Court, on proper appreciation of the facts, reached a correct conclusion. The reasons given by the trial Court do not require any interference.
11. Concerning the pleadings in the suit and the findings recorded by the Trial Court, the following points would arise for determination:
7T.M.R., J A.S. No.239 of 2012
1) Is the trial Court justified in holding that the rights and liabilities under the lease deed dated 31.12.2001 stood extinguished?
2) Is the trial Court justified in directing the Defendant to vacate the schedule property and pay damages at Rs.5000/- per month?
3) Does the Judgment passed by the trial Court need any interference?
POINT NOs.1 to 3:
12. Before delving into the competing arguments presented by both parties, it is prudent first to outline the undisputed facts. It will provide a clearer insight into the actual dispute at hand.
(a) The Defendant's company is refining and selling petroleum products in India, distributing them through its outlets and authorized retail dealers, per regulations set by the Ministry of Petroleum. The 1 st Plaintiff applied for a retail outlet to sell Defendant's products in Atchuthapuram and was selected following an interview.
Consequently, Defendant issued Ex.A.6, a letter of intent dated 10.09.2001, outlining specific conditions for the retail outlet:
(i) The 1st Plaintiff must procure suitable land with minimum dimensions of 35 x 35 meters within two months from the date of the letter of intent. This land and any superstructures must then be leased to the Defendant's company for a period of fifteen years, with an option for one renewal of an additional five years.
(ii) The 1st Plaintiff is required to obtain all necessary clearances and permissions from the relevant authorities to construct the building on the designated land.8
T.M.R., J A.S. No.239 of 2012
(b) Subsequently, the 1st Plaintiff sent the Defendant an Ex.A.21 letter regarding a partnership with the 2nd Plaintiff, as the 1st Plaintiff needed assistance due to a disability. They entered into a partnership on 05.03.2002, obtaining the Defendant's permission and registered it under the name of the 3rd Plaintiff. The Plaintiffs have referenced Ex.A.1, the partnership deed, as evidence of this arrangement.
(c) Following Ex.A.6-Letter of Intent, Plaintiffs 1 and 2 purchased 0.34 acres of land in Veduruwada village for Rs.5,00,000/- on 24.09.2001, under registered sale deeds. They provided Exs.A.2 and A.3 certified copies of the sale deeds as evidence. To comply with the conditions of the letter of intent, Plaintiffs 1 and 2 executed registered lease deeds (Exs.A.4 and A.5) in favour of Defendant. According to these lease deeds, the lease period was set for 30 years at a rent of Rs.100/- per month, which the Defendant would recover as an additional license fee.
(d) Subsequently, Defendant and Plaintiffs entered into a dealership agreement (Ex.A.7) dated 17.05.2002, granting Plaintiffs a commission on the sale of petrol and petroleum products supplied by Defendant. The Plaintiffs launched the retail outlet in May 2002. However, the sales and overall business did not meet expectations. The establishment of another outlet by BPCL in the same area resulted in financial losses for the Plaintiffs.
(e) The 3rd Plaintiff, through Ex.A.9 letter, requested the Defendant Company to relocate the outlet from Atchuthapuram to Pedda Gantyada, following the Defendant's permission. Ex.A.8 proceedings, dated 16.09.2002, indicate that HPCL's internal committee approved this resettlement request. The Plaintiffs leased a site in Pedda Gantyada for Rs.15,000/- per month, with a 10% rent increase every five years. They invested Rs.12,00,000/- to construct a sales room and generator room. The Defendant subsequently executed a lease 9 T.M.R., J A.S. No.239 of 2012 deed with the Plaintiffs under similar terms (Ex.A.15). Additionally, Ex.A.14-Registered Extract of Lease Deed shows that Sri T. Chinna Appa Rao executed a lease deed in favour of the 3 rd Plaintiff for the land at Pedda Gantyada, documented as No. 3757/2002-03. After the resitement of a retail outlet to Pedda Gantyala from Atchuthapuram, the Plaintiffs issued a letter dated 07.05.2004 vide Ex.A.10, requesting the Defendant to deliver possession of the site with the building. Ex.A.13 letter dated 08.04.2004 shows that one M. Surya Rao was appointed as a caretaker to run a retail outlet at Atchuthapuram for one year.
13. The Plaintiffs assert that officials of the Defendant Company promised to regularize the outlet and issue a license in favour of Surya Rao after obtaining the necessary permissions. Following negotiations and the letter dated 07.05.2004 (Ex.A.10), Defendant informed Plaintiffs that the outlet at Atchuthapuram would operate as COCO, with rent determined based on the property's value. The Plaintiffs were requested to provide an estimated value for the construction and developments. In response, they submitted Ex.A.11, estimating the total value at Rs.42,66,185.74/- (comprising Rs.24,15,000/- for the land and Rs.18,51,185.74/- for the construction). The Plaintiffs subsequently demanded payment of Rs.42,90,445.74/-, which included Rs.24,260/- for commissions owed as of the resettlement date.
14. It is undisputed that the Defendant Company converted the Atchuthapuram retail outlet into a S.C. & S.T. women category outlet, calling for applications through a notification published in a daily newspaper on 20.06.2005 (Ex.A.20). In response, the Plaintiffs issued Ex.A.17, a legal notice to the Defendant, demanding the removal of the structures installed by the Defendant on the Plaintiffs' site within three months. They requested either the return of the property along with the superstructures or the purchase of the land and structures for Rs.45,00,000/-. Alternatively, they proposed a new 10 T.M.R., J A.S. No.239 of 2012 lease for the superstructures at a monthly rent of Rs.50,000/-, with a 20% rent increase every five years. The Defendant acknowledged receipt of the legal notice via Ex.A.18 and responded with Ex.A.19, a reply notice dated 10.09.2005.
15. As noted, Plaintiffs 1 and 2 purchased the schedule property per Ex.A.6, the Letter of Intent. After obtaining the Defendant's permission, the 1 st Plaintiff partnered with the 2nd Plaintiff, registering the partnership under the name of the 3rd Plaintiff firm. The Plaintiffs then leased the schedule property to the Defendant so that the dealership could operate the retail outlet. Upon confirming compliance with the conditions outlined in Ex.A.6, Defendant granted Plaintiffs a dealership for the retail outlet at Atchuthapuram, formalized in Ex.A.7, the Dealership Agreement. The trial court correctly observed that the Plaintiffs acquired the schedule property solely to meet the Defendant's conditions for operating a retail outlet and selling petroleum products on a commission basis.
16. In this context, the 1st Plaintiff, examined as PW.1, testified that sales of petroleum products at Atchuthapuram were minimal, further impacted by the establishment of another outlet by BPCL in the area. He stated that the Defendant's officers advised them to find a more viable location for resettlement by decommissioning the existing outlet. This testimony from PW.1 was not seriously disputed. The 2nd Plaintiff examined as P.W.2 corroborated these facts, and no attempts were made to discredit their evidence during cross-examination. It was revealed in PW.2's cross- examination that they had also applied for permission to shift the business.
17. DW.1, M. Srinivas, the Area Sales Manager at Hindustan Petroleum Limited, testified that due to poor business performance and at the Plaintiffs' request, the outlet was relocated to Pedda Gantyada, which is reportedly thriving. PW.2 also confirmed that the business at Pedda Gantyada is successful. DW.1 stated that no commission was paid to the Plaintiffs for 11 T.M.R., J A.S. No.239 of 2012 sales made at Atchuthapuram. Notably, after taking over the Atchuthapuram outlet, Defendant handed it over to Sri M. Surya Rao as a COCO operator for one year, renewable for another year. The Defendant indicated plans to transition COCO outlets to candidates from S.C. & S.T. categories, ending the arrangement with Mr. Surya Rao. Meanwhile, the Plaintiffs assert they invested significant sums in purchasing land and establishing the outlet, expecting substantial returns from operations at Atchuthapuram. Following the relocation to Pedda Gantyada, they no longer receive any remuneration from the Atchuthapuram outlet, a point not contested by the Defendant.
18. The Plaintiffs assert that after relocating from Atchuthapuram, they issued a letter dated 07.05.2004 (Ex.A.10) requesting the return of possession of the site and its buildings. It is undisputed that upon receiving this letter, the Defendant's officers negotiated with the Plaintiffs and agreed to operate the outlet as a Company Owned Outlet. Records show that the company officials instructed the Plaintiffs to estimate the value of the constructions and developments made on the site. However, the Plaintiffs claim that they were informed the retail outlet would be regularized in favour of Mr M. Surya Rao, who was appointed as a caretaker to manage the outlet at Atchuthapuram. Evidence indicates that both parties agreed to appoint Mr. M. Surya Rao as a temporary caretaker.
19. The Plaintiffs' claim regarding their investment in the retail outlet at Atchuthapuram is undisputed. The record shows that the Plaintiffs also secured a site at Pedda Gantyada, leased it to the Defendant, and were subsequently permitted to conduct business there. The Defendant does not contest that they provided the Plaintiffs with the opportunity to operate at Pedda Gantyada, which affects the Plaintiffs' entitlement to rent for the Atchuthapuram outlet. The trial Court noted that the Defendant allowed the Plaintiffs to relocate the outlet from Atchuthapuram to Pedda Gantyada without objection. It concluded that both parties willingly agreed to deviate 12 T.M.R., J A.S. No.239 of 2012 from the terms of the lease deed dated 31.12.2001. Upon reviewing the evidence, this Court agrees with the trial Court's finding that once the outlet was moved to Pedda Gantyada, the original purpose of leasing the property at Atchuthapuram was rendered moot. The trial Court rightly pointed out that the Plaintiffs leased the property solely to obtain a dealership to operate an outlet at that location. The trial court observed that the subsequent developments constituted a novation of the original contract under the earlier lease deed.
20. Learned Counsel for the Appellant relied on the decision in H.R. Basavaraj v. Canara Bank1, wherein the Hon'ble Supreme Court examined the scope of Section 62 of the Contract Act and observed as follows:
"62. Effect of novation, rescission and alteration of contract.--If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed."
This section gives statutory form to the common law principle of novation. The basic principle behind the concept of novation is substituting a contract for a new one only through the consent of both parties to the same. Such consent may be expressed in written agreements or implied through their actions or conduct. It was defined thus by the House of Lords in Scarf v. Jardine [(1882) 7 AC 345 : (1881-
85) All E.R. Rep 651 (H.L.)] : (A.C. p. 351) "... that there being a contract in existence, some new contract is substituted for it, either between the same parties (for that might be) or between different parties; the consideration mutually being the discharge of the old contract."
19. It might be useful at this juncture to turn to the decision of this Court in Lata Construction v. Dr. Rameshchandra Ramniklal Shah [(2000) 1 SCC 586] whereby this Court held that if the rights under the old contract were kept alive even after the second agreement and rights under the first agreement had not been rescinded, then there was no substitution of contracts and, hence, no novation.
1(2010) 12 SCC 458 13 T.M.R., J A.S. No.239 of 2012
21. Learned Counsel for the Appellant further relied on the decision in D.D.A. v. Joint Action Committee, Allottee of S.F.S. Flats.2, wherein the Hon'ble Supreme Court held that:
57. xxx It is a well-known principle of law that a person would be bound by the terms of the contract subject, of course, to its validity. A contract in certain situations may also be avoided. With a view to make novation of a contract binding and, in particular, some of the terms and conditions thereof, the offeree must be made known thereabout. A party to the contract cannot, at a later stage, while the contract was being performed, imposed terms and conditions which were not part of the offer and which were based upon unilateral issuance of office orders but not communicated to the other party to the contract and which were not even the subject matter of a public notice.
66. xxx The terms and conditions therefore were, therefore, required to be complied with by both parties. Terms and conditions of the contract can indisputably be altered or modified. They cannot, however, be done unilaterally unless there exists any provision either in the contract itself or in law. Novation of the contract in terms of Section 60 of the Contract Act must precede the contract-making process. The parties thereto must be ad idem so far as the terms and conditions are concerned.
22. Learned Counsel for the Appellant relied on the decision in Lata Construction v. Rameshchandra Ramniklal Shah (Dr)3, wherein the Hon'ble Supreme Court held that:
9. We may, at this stage, refer to the provisions of Section 62 of the Indian Contract Act, which provides as under:
"62. If the parties to a contract agree to substitute a new contract for it or to rescind or alter it, the original contract need not be performed."
This provision contains the principle of "novation" of contract.
10. One of the essential requirements of "novation", as contemplated by Section 62, is that there should be a complete substitution of a new contract in place of the old. It is in that situation that the original contract need not be performed. Substitution of a new contract in place of the old contract, which would have the effect of rescinding or completely altering the terms of the original contract, has to be done by agreement between the parties. A substituted contract should rescind or, alter or extinguish the previous contract. But if the terms of the two contracts are 2 (2008) 2 SCC 672 3 (2000) 1 SCC 586 14 T.M.R., J A.S. No.239 of 2012 inconsistent and cannot stand together, the subsequent contract cannot be said to be in substitution for the earlier contract.
23. Defendant does not claim that they provided Plaintiffs with a dealership for the retail outlet at Pedda Gantyada and Atchuthapuram. Considering the losses incurred by the Plaintiffs due to opening a new outlet nearby, the Defendant granted them a dealership for Pedda Gantyada. As an interim measure, Defendant appointed Mr.M.Surya Rao to manage the Atchuthapuram outlet, with Plaintiff's consent, for one year. The Defendant has not clarified how the Plaintiffs were expected to lease the property at Atchuthapuram to them, given that they incurred costs for the site and infrastructure at Pedda Gantyada and Atchuthapuram. The Defendant's position might be more tenable if they had provided the site and infrastructure for the Pedda Gantyada outlet at their own expense. In light of these circumstances, the trial court correctly observed that the parties effectively substituted the original contract under the lease deed dated 31.12.2001, by relocating the outlet from Atchuthapuram to Pedda Gantyada. Executing a new lease deed for the relocated outlet constitutes a new contract, invoking the doctrine of novation as outlined in Section 62 of the Act. Consequently, the parties are no longer bound to perform the original contract under the lease deed dated 31.12.2001.
24. The trial Court correctly noted that the Plaintiffs obtained a lease deed from a third party for the property at Pedda Gantyada. This resulted in Ex.A.15, a subsequent lease deed executed by the 3rd Plaintiff in favour of the Defendant for establishing the outlet post-relocation. This lease deed facilitates the Plaintiffs in relocating the outlet to Pedda Gantyada, effectively substituting the earlier contract under the previous lease. It is also clear that Defendant does not assert that the Plaintiffs, under Exs.A4 and A5, are entitled to operate the outlet at Atchuthapuram. Given the novation of the contract, the parties are no longer required to fulfil the terms of the original lease. This Court concurs with the trial Court's finding that, due to the 15 T.M.R., J A.S. No.239 of 2012 relocation of the outlet from Atchuthapuram to Pedda Gantyada, the Plaintiffs are not obligated to continue the lease as per the original lease deed dated 31.12.2001. Consequently, the earlier lease no longer exists, as the parties need not perform under it due to the subsequent changes governed by the novation doctrine.
25. The trial Court noted D.W.1's admission during cross-examination that the agreement concerning the Atchuthapuram outlet has ceased. Based on this admission, the trial Court correctly concluded that the rights and liabilities under the earlier lease were extinguished due to subsequent events and the novation of the contract. Consequently, this Court finds that the Defendant cannot allocate any dealership to a third party to establish a retail outlet on the premises. Defendant can operate the outlet temporarily on a COCO basis with the consent of the Plaintiffs through Mr. M. Surya Rao, who does not authorize any further dealership arrangements in light of the extinguished agreement.
26. The record clearly shows that the Plaintiffs issued Ex.A.17, a legal notice offering to sell the schedule property along with its superstructure and godown to the Defendant, or alternatively to enter into a new lease. However, the Defendant did not take advantage of this opportunity. The Plaintiffs had agreed to lease the schedule property for a nominal rent of Rs.100/-, solely to secure a dealership for running the outlet. They invested a substantial amount to purchase the property and to make it suitable for operations, as outlined in Ex.A.6, the Letter of Intent. In this context, the trial Court correctly determined that the Defendant cannot exploit subsequent events to continue the lease by assigning the dealership to a third party while paying the Plaintiffs an insignificant rent of Rs.100/- per month. Allowing this would be unreasonable and unjust, particularly since the Plaintiffs initially leased the premises for a specific purpose and were forced to relocate due to their losses. Accepting the Defendant's contention under these circumstances would result in a travesty 16 T.M.R., J A.S. No.239 of 2012 of justice, unfairly disadvantaging the Plaintiffs, the rightful owners of the schedule property.
27. The Plaintiffs' Counsel argues that the relationships established in Exs.A4, A5, and Ex.A15 are incompatible, asserting that the latter lease deed (Ex.A15) can only take effect upon the termination of the leases outlined in Exs.A4 and A5. Accepting the new lease while the old one is still in effect constitutes a legal surrender of the old one. In this context, it is relevant to reference Section 111 of the Transfer of Property Act, which addresses the determination of leases. Clauses (a) to (h) detail the circumstances under which a lease of immovable property may terminate. Section 111(f) pertains to implied surrender, which supports the Plaintiffs' position.
28. In this regard, the Plaintiffs' Counsel referenced the decision in T.K. Lathika v. Seth Karsandas Jamnadas, in which the Hon'ble Supreme Court held that:
12. The principle which governs the doctrine of the implied surrender of a lease is that when a certain relationship exists between two parties in respect of a subject matter and a new relationship has come into existence regarding the same subject matter, the two sets cannot coexist, being inconsistent and incompatible between each other, i.e. if the latter can come into effect only on termination of the former, then it would be deemed to have been terminated in order to enable the latter to operate. A mere alteration or, improvement or even impairment of the former relationship would not ipso facto amount to implied surrender. It has to be ascertained on the terms of the new relationship vis-à-vis the erstwhile demise and then judged whether there was termination of the old jural relationship by implication.
14. In Hill and Redman's Law of Landlord and Tenant (16th Edn.), at p.
451, it is observed that "a surrender does not follow from a mere agreement made during the tenancy for the reduction or increase of rent, or other variation of its terms, unless there is some special reason to infer a new tenancy, where, for instance, the parties make change in the rent under the belief that the old tenancy is at an end".
17T.M.R., J A.S. No.239 of 2012
29. The Plaintiffs' Counsel also relied on the decision in Shah Mathuradas Maganlal & Co. v. Nagappa Shankarappa Malage, where the Hon'ble Supreme Court held that:
19. A surrender under clauses (e) and (f) of Section 111 of the Transfer of Property Act, is an yielding up of the term of the lessee's interest to him who has the immediate reversion or the lessor's interest. It takes effect like a contract by mutual consent on the lessor's acceptance of the act of the lessee. The lessee cannot, therefore, surrender unless the term is vested in him, and the surrender must be to a person in whom the immediate reversion expectant on the term is vested. Implied surrender by operation of law occurs by the creation of a new relationship or by relinquishment of possession. If the lessee accepts a new lease that in itself is a surrender.
Surrender can also be implied from the parties' consent or from such facts as the relinquishment of possession by the lessee and taking over possession by the lessor. Relinquishment of possession operates as an implied surrender. There must be a taking of possession, not necessarily a physical taking, but something amounting to a virtual taking of possession. Whether this has occurred is a question of fact.
30. By adhering to the principles established in the decisions as mentioned above and examining the facts of this case, this Court concludes that the Defendant's granting of a dealership to the Plaintiffs for operating the outlet at Pedda Gantyada rather than at Atchuthapuram along with the execution of the fresh lease deed (Ex.A15) signifies an implied surrender of the earlier lease deed, as held by the trial court. Following the execution of Ex.A15, both parties initially appeared to agree on managing the outlet at Atchuthapuram through Sri M. Surya Rao, whom the Plaintiffs trusted; however, the Defendant did not consent to continue this arrangement. When Ex.A15 was executed, it was expected that both parties would formalize an agreement regarding the operation of the retail outlet at Pedda Gantyada. Given the competition in the business, the Plaintiffs were compelled to seek the Defendant's permission to relocate the outlet to Pedda Gantyada. An understanding was reached between both parties regarding operating the outlet on a COCO basis through a trusted associate of the Plaintiffs. The absence of a written agreement suggests that Defendant, a government 18 T.M.R., J A.S. No.239 of 2012 undertaking, intended to exploit the terms of the earlier lease deeds (Ex.A4 and A5) by paying a minimal lease amount, despite Plaintiff having made significant investments to purchase and develop the property for retail operations and further, the Defendant aimed to assign the dealership to third parties. Although Defendant initially requested the Plaintiffs to furnish the particulars of the valuation certificate for the schedule property and the estimated value of the construction and development undertaken, it later reversed its position. It failed to address the Plaintiffs' request. This change in Defendant's approach raises concerns about their intentions regarding the lease and the treatment of Plaintiff's investments in the property.
31. Learned Counsel for the Respondents further cited the decision in Urban Improvement Trust, Bikaner v. Mohan Lal, in which the Hon'ble Supreme Court held that:
6. This Court has repeatedly expressed the view that Governments and statutory authorities should be model or ideal litigants and should not put forth false, frivolous, vexatious, technical (but unjust) contentions to obstruct the path of justice. We may refer to some of the decisions in this behalf.
8. In Madras Port Trust v. Hymanshu International [(1979) 4 SCC 176], this Court held : (S.C.C. p. 177, para 2) "2. ... It is high time that Governments and public authorities adopt the practice of not relying upon technical pleas for the purpose of defeating legitimate claims of citizens and do what is fair and just to the citizens. Of course, if a Government or a public authority takes up a technical plea, the Court has to decide it and if the plea is well founded, it has to be upheld by the Court, but what we feel is that such a plea should not ordinarily be taken up by a Government or a public authority, unless of course the claim is not well founded and by reason of delay in filing it, the evidence for the purpose of resisting such a claim has become unavailable."
32. This Court views the Defendant, being a Government Undertaking, ought to have conducted itself equitably and justifiably. It is impermissible for Defendant to exploit the lack of a formalized written agreement between the parties as a pretext to undermine the legitimate and meritorious claims of the plaintiffs, particularly the 1st Plaintiff, a disabled person. Such an approach not only contravenes the tenets of fairness but also reflects a disconcerting 19 T.M.R., J A.S. No.239 of 2012 disregard for the rights of vulnerable individuals seeking redress. In this instance, the Court finds that the pursuit of a technical defence is an affront to the principles of justice and equity that should guide the conduct of a public entity.
33. Upon meticulous consideration, this Court affirms the trial Court's assessment of the evidence presented. There exists no compelling rationale for this Court to deviate from the conclusions reached by the trial Court. Accordingly, this Court concurs with the findings of the trial Court, determining that which are sound and well-founded. Furthermore, the Defendant has failed to substantiate any justifiable grounds for this Court to reach an alternative conclusion.
34. Consequently, the Points have been resolved in favour of the Plaintiffs. In light of the preceding considerations, the rationale adopted by the trial court stands unassailable, warranting no interference from this Court. As such, the Appeal is dismissed in its entirety. The decree and Judgment rendered by the trial court are hereby upheld. However, Defendant is hereby ordered to vacate the schedule property within two (2) months from the date of this Judgment, ensuring the removal of structures erected thereupon by Defendant.
35. As a result, the Appeal is hereby dismissed with costs by confirming the Decree and Judgment in O.S.No.193 of 2005, dated 30.01.2012, passed by the learned Principal District Judge at Visakhapatnam.
Miscellaneous petitions pending, if any, in this Appeal shall stand closed.
_____________________________ JUSTICE T. MALLIKARJUNA RAO Date: 16.10.2024 SAK / MS 20 T.M.R., J A.S. No.239 of 2012 THE HON'BLE SRI JUSTICE T.MALLIKARJUNA RAO APPEAL SUIT NO. 239 OF 2012 Date:16.10.2024 SAK