Allowed

Loyola College Society, Guntur, Vijayawada. v. Pothineni Ramesh Babu

Andhra Pradesh HC12 Sept 2023CRP/186/2021

Case brief

AI extract

What is this about?

In a civil revision, the High Court allowed a petition to set aside the dismissal of an application for rejection of a plaint. The trial court had upheld the plaintiffs' suit for specific performance to renew a lease, holding the contract not determinable and the claim not barred by law. The revision court disagreed, finding the lease determinable by efflux of time under the Transfer of Property A

What did the court decide?

The order dated 19.01.2021 dismissing the rejection petition in I.A. No. 140 of 2020 was set aside; the rejection petition in I.A. No. 140 of 2020 was allowed; necessary steps to reject the plaint to

Loyola College Society, Guntur… — Contract and Commercial Disputes | Andhra Pradesh HC (2023)

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THE HON’BLE Ms. JUSTICE B.S.BHANUMATHI

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Civil Revision Petition No.186 of 2021

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ORDER:

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This revision petition is filed under Article 227 of the Constitution of India against the order dated 19.01.2021 dismissing the petition in I.A.No. 140 of 2020 in O.S.No. 39 of 2019 on the file of the Court of I Additional Senior Civil Judge, Vijayawada filed by the petitioner/defendant under Order VII Rule 11 CPC seeking to reject the plaint.

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The case of the petitioner is briefly as follows:

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a) The suit is filed for two separate prayers to direct the defendant to execute and register a lease deed each in favour of the 1^st and the 2^nd respondents/plaintiffs in respect of items 1 and 2 of the suit schedule properties respectively for 25 years with effect from 01.02.2019 failing which the court to do so. Further, two separate reliefs are sought for permanent injunction directing the defendant and its persons not to interfere with the 1^st and the 2^nd plaintiffs’ peaceful possession and enjoyment of items I and II of the suit schedule properties respectively.

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b) The 1^st and the 2^nd plaintiffs who are spouses filed the suit on the grounds that they entered into two separate registered lease deeds with the defendant society on 24.01.1994 and 30.04.1994

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with respect to items I and II of the suit schedule properties respectively for 9 years 11 months and later, it was agreed that on 21.09.2004 again two lease deeds were executed for 15 years, commencing from 01.01.2004 and ending on 31.01.2019. Though they agree that the lease deeds were registered and determinable after the specified period, they allege with regard to a letter dt.01.05.1994 written by the then Vice President and Procurator of the defendant that the option is given to the lessees to seek renewal of the lease for a further period of 25 years subject to the terms and conditions being mutually agreed upon by both the parties to be enforced within three months of the expiry of the lease period. The suit is filed on the ground that they invested huge amounts of money for construction of a hospital.

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c) both the registered lease deeds specify that the lease period is determinable and that the option for renewal of the lease is vested with the lessor and the constructions made over the leased premises shall be delivered to the lessor at the time of determination of the lease in ‘as is’ condition. As per the express terms, the lessor refused to renew the lease, there is no subsisting cause of action to seek the relief of specific performance, the suit is misconceived and not maintainable.

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d) the relief in the suit is drafted in a manner indirectly seeking the Court to assume the role of the lessor to execute a lease deed on failure of the defendant/ lessor to do it and it is impermissible in law.

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e) The suit relief of specific performance is expressly prohibited in section 14(c) of the Specific Relief Act that determinable contract cannot be enforced.

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f) Even the letter dt.01.05.1994 is time barred inasmuch as

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the said letter can never become the basis for enforcement of any relief, much less a declaration for specific relief under the facts and circumstances of the case.

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g) Thus, the petition is filed for rejection of the plaint invoking Order VII Rule 11(a) and (d) CPC as there is no subsisting cause of action and any attempt to enforce the letter dt.01.05.1994 at this juncture without seeking declaration is also barred for the purpose of limitation.

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The plaintiffs filed a counter opposing the petition briefly as follows:

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a) The petition is not tenable in law or on merits. It is not correct that the lease is determinable and that the option of renewal is vested with the lessor and accordingly the suit is not maintainable as

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there is no cause of action and that the constructions made over the

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leased premises shall be delivered to the lessor in ‘as is’ condition.

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b) It is incorrect that the suit is barred as per section 14(c) of the Specific Relief Act.

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c) It is incorrect that the letter dt.01.05.1994 is time barred

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and cannot be enforced for any relief.

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d) The scope of an enquiry under Order VII rule 11 CPC is very limited and no dissection of the plaint is permissible. Therefore, evaluation of the plaint pleadings in the light of the contentions of the defendant cannot be entertained. While exercising the jurisdiction under Order VII Rule 11 CPC, in order to hold whether the plaint is liable to be rejected or not, Court shall look into only the plaint averments and nothing else. The plaint discloses proper cause of action for this suit. Cause of action is a bundle of rights. It does not comprise evidence necessary to prove such facts, but every fact necessary for the plaintiff to prove to enable him to obtain a decree. It has neither a relation whatsoever to the defence which may be set up by the defendant nor does it depend upon the character of the relief prayed for.

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e) The plaintiffs were constrained under the lease contract to invest Rs.3,055-62 lakhs as on 30.11.2018 and permanent building complex was built and the investment was made on the assurance of

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perpetual lease by the defendant. A plea of estoppel was taken by the plaintiffs who altered their position under the contract and acquired vested interest over the suit schedule properties.

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f) The plaintiffs performed their part of contract and the defendant is yet to perform its part of contract.

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g) It is settled law that where a party has interest over the subject contract and the property, suit for specific performance is maintainable under section 14(1)(c) of the Specific Relief Act.

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h) The legal plea in this case is a mixed question of facts and law and the petition is untenable.

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i) The petition in IA No.92 of 2019 filed by the plaintiffs for interim injunction was allowed on merits on 03.06.2019 and the appeal filed against the same in CMA No.12 of 2019 on the file of V Addl. District Court at Vijayawada is pending. Distorting the facts, the defendant filed suits in OS Nos. 420 and 421 of 2019 before the Junior Civil Judge’s Court at Vijayawada and the suits are pending

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After hearing both parties, the trial court dismissed the petition holding that the pleadings in and documents annexed to the plaint alone are to be considered under Order VII Rule 11 CPC and that the ground neither under Order VII Rule 11(a) CPC that the plaint does not disclose a cause of action, nor under 11 (d) CPC thatthe plaint is barred by any law i.e limitation or section 14 (c) of old Act of Specific

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Performance is made out. It is observed that the cause of action is a bundle of rights and in the present case the plaint disclosed proper cause of action supported by the admissions of the petitioner regarding the terms and conditions of lease deeds dt.21.09.2004 and the petitioner never pleaded that the facts showing the cause of action in the plaint are not correct. It is further observed that the suit is not barred by limitation since the suit was filed within 3 years from the date of knowledge of denial to renew the lease by the lessor and further that the plaint discloses various correspondence and court cannot decide now whether it is for a fresh lease or not. It is further observed that the lessor’s option to renew the lease on fresh or existing terms as agreeable to the parties shows that lease does not automatically gets terminated on expiry of the term of the period and that there is a chance of renewal of lease and it is not restricted to the option of the lessor, but must be agreeable to both parties. It is further observed that the lessees admitted all the terms and conditions in the lease deeds, including the clause for renewal given to the lessor and they did not plea any term differently in the plaint, but pleaded that there is a mistake in giving option for renewal to the lessor instead of the lessee and this plea is not an alteration of the terms and conditions of the lease since taking a plea regarding contents of document is different from altering the contents of document. It is further held that the contract (lease) under the lease

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deed alone in its nature not determinable and the bar under section 14(c) of the Specific Relief Act, 1963 (=S.14(d) the new Act,2016) is not applicable.

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Being aggrieved by the said order, the petitioner/defendant filed this revision petition contending that the trial Court grossly erred in concluding that the contract of lease is not at all determinable in nature, though the lease deeds were marked as Exs.C.1 and C.2 and further that the question of limitation, though mixed question of fact and law, comes within the expression ‘barred by law under Order VII Rule 11(d) CPC. It is further contended that the cases cited and the pleadings in the plaint have not been properly appreciated.

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Order VII Rule 11 CPC reads as follows:

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11. Rejection of plaint.

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The plaint shall be rejected in the following cases-

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(a) where it does not disclose a cause of action;

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(b) …

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(c) …

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(d) where the suit appears from the statement in the plaint to be barred by any law:

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Provided…”

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The settled proposition of law is that while considering a petition to reject a plaint, the contents of plaint and the documents

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filed therewith alone shall be looked into and the defence in the

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written statement shall not be taken into account and that the plaint must be read as a whole and not in bits and pieces or a portion of it. That apart, the lessees relied on the decision of this High Court in Sri Durga Nageswara Swamy Temple Vs. Arja Suryanarayana¹ , wherein

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it was held that the examination of plaint at the stage of Order VII Rule 11 of CPC, at the threshold does not permit the Court to declare upon the correctness of the contents of the plaint. They further referred to the decision of the Supreme Court in Pawan Kumar vs

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Babulal² , on the aspect that the approach must be to proceed on a demurrer and see whether accepting the averments in the plaint, the

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suit is barred by law or not. In the case of Uavashiben vs. Krishnakant Manu Prasad Trivedi³ , relied by the lessees, it was held that the merits and demerits of the matter cannot be gone into at this stage. In the case of Kulideep Singh Pathania vs. Bikram Singh

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Jaryal⁴ , it was held that mere fact that in the opinion of the judge the plaintiff may not succeed cannot be a ground for rejection of the plaint. It was held that Court could not have gone into the disputed question of fact in M.Gurudas vs. Rasaranjan⁵ . In the case of Thanamki Prasad vs. Guntamadugu Pullamma⁶ , it was held that no

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Court can appreciate the matter of the case and reject the plaint on

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1 2001 (3) APLJ 449

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2 (2019) 4 SCC 367

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3 (2019) 13 SCC 372

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4 (2017) 5 SCC 345

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5 (2006) 8 SCC 378

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6 (2005) 4 ALD 247

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the ground that the case of the plaintiff is not well founded. On this premise the case on hand shall be dealt with.

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The main contention of the petitioner is that the contract of lease is determinable in nature with the option of renewal of lease period being absolutely vested with the lessor which was intimated by preemptive notice and that the intrinsic character of the lease cannot be changed by the pleadings and relied on the decision in Shanti Devi vs A K Banerjee⁷ . It is also contended that since the renewal of lease also requires further agreement of both parties on terms as to the rate of rent, the period of extended lease and any other conditions if required, there would be no concluded contract by which Court can pass a decree.Relying on the decision of the Supreme Court in T.Aravindam vs. T.V.Satyapal and another⁸ , it was argued vehemently that if clever drafting has created the illusion of cause of action, nip it in the bud at the first hearing by examining the party searchingly under Order X of CPC.

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As can be seen from the averments in the plaint along with the documents filed therein, the main contention of the plaintiffs is that the lease is renewable and it has to be considered as lease in perpetuity and further that it is the option of the lessee to extend the lease, but not the lessor which is mentioned in the lease deed by

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7 (1981) 2 SCC 199

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8 (1977) 4 SCC 467

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mistake. The learned counsel for the respondents/plaintiffs submitted that the perpetual lease is pleaded by the plaintiffs, and that all these contentions raised by the petitioner/defendant are not relevant or germane to the instant petition and are beyond the scope of Order VII Rule 11 CPC. He further argued that the law permits the plaintiffs to adduce evidence with regard to intent of the parties in the genesis of the contract and moreover any ambiguity in a document can be explained and illuminated by interpreting it with reference to the clause in a contract, correspondence exchanged, development out of such a contract, defect in a deed etc and, therefore, the letter dated 01.05.1994 executed by the plaintiff in favour of the 1^st and the 2^nd respondents are yet to be proved and the said contractual commencement is not disputed by the defendant and thereby the plaintiffs cannot be prevented from having a trial on the disputed aspect. It is further contended that in S.Chattanatha Kurayalar Vs

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Central Bank of India Ltd. & others⁹ , it is held that the principle is that the transaction is contained in more than one document between the same they must be read and interpreted together and they have the same legal effect for all purposes as if they are one document and, therefore, the main document of lease and the letter dated 01.05.1994 shall be read together, in which case there is no scope for passing order under Order VII Rule 11 CPC. That apart, it is also submitted

9 AIR 1965 SC 1856

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that when a lease is given for raising building purpose, the law presumes it as a perpetual lease and placed reliance on the decision of the High Court of Calcutta in GHC Ariff Vs Rai Jadu Nath Majumdar¹⁰ and Promada Nath Roy Vs SrigobindChowdhry¹¹ .

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The pleadings regarding the extension of the lease are mainly based on this letter. The provisions of Sections 91 and 92 of the Evidence Act read in the light of the decisions cited referred above, firstly it can be said that letter dated 01.05.1994 cannot be read with the registered lease deed, since all terms of lease form part of lease and a document of lease requires registration, whereas the letter dated 01.05.1994 is not a registered document and, therefore, it cannot be relied on for the purpose of altering the terms in a registered contract of lease. If the contents of registered document of lease are looked into, the option for renewal is given to the lessor and not the lessee. When the lessor did not choose to extend the lease after the expiry of the period agreed in the registered lease deed, it cannot be contended that by a combined reading of the registered lease deed and unregistered letter altering the material term of lease, the tenant is entitled to seek specific performance of renewal of lease. Insofar as the constructions made by the tenants in the land leased out, when the terms to that effect in the lease deed reflect the

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10 Calcutta Weekly Notes Vol.XXXIII, 333 on 18.01.1929

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11 32 Calcutta 648, on 03.03.1905

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intention of the lessor to have the building and not for the purpose of claiming ownership by the tenant, those terms cannot be read in favour of the tenant to call it as the intention of parties to have a lease in perpetuity, just by drawing presumption as against the expressly stipulated terms of the lease indicating expiry of the lease. Moreover, the terms in the lease indicated the intention of the parties to build the structure as per the control of the lessor. As such, it cannot be said that the intention of the parties is otherwise than what is expressly stated in the lease deed.

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That apart, as per Section 111(a) of the Transfer of Property Act, since the lease of immovable property determines by efflux of time limited thereby and in view of the observation that as per the terms in the registered lease deed, the time fixed expired and its extension cannot be sought as the relief claimed in the nature of specific performance is barred by Section 14(1)(d) of the Specific Relief Act, 1963 the suit itself is not maintainable as barred by law and, therefore, the plaint is liable to be rejected. The lessees, contending that section 14(1)(d) does not apply when once interest is created by investment, relied on the decision of the Supreme Court in Sushil

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Kumar Agarwal vs. Meenakshi Sadhu¹² , wherein the subject matter relates to a development agreement with a clause for a conditional sale. This case cannot be relied on by the lessees as a development

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12 (2019) 2 SCC 241

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agreement cannot be equated with a lease agreement with condition to develop the property, use and leave the property. This type of a lease is like a contract of BOT i.e. build, operate and transfer, but here the rent is also paid.

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As rightly contended since the renewal of lease also requires further agreement of both parties on terms as to the rate of rent, the period of extended lease and any other conditions if required, there would be no concluded contract by which Court can pass a decree and execute a registered lease deed on behalf of the defendant in case of failure of defendant to execute the lease deed in accordance with the decree, if any that may be passed in the suit. A clause for extension of lease would not ipso facto extend the lease. Therefore, when the main relief itself is impossible to be granted, for not there being any concluded terms of contract which are to be performed, the very basis of the suit has no legs to stand on its own, even if the whole case as set up by the plaintiffs is considered to be true. Therefore, for this reason also the plaint is liable to be rejected.

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Without going into the main aspect of the maintainability of the suit relief, just by considering the contentious issues, the trial Court erroneously dismissed the petition on hypothetical observations such as that the language employed in the lease deeds dt.21.09.2004 is not restricting the option of the lessor, but must be agreeable to both

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parties. If only the option to renew is exercised by the lessor, the next step of mutually settling the terms of the extended lease would arise. For all the above reasons, the order impugned in the revision is liable to be set aside.

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In so far as the question of limitation is concerned, the contention of the petitioner is that the lessees alleged that the lessor issued a letter dated 01.05.1994 to the lessees affirming the renewal of lease for further period after the lapse of initial 25 years and pleaded that there is an inadvertent unnoticed mistake occurred in the agreement of lease dated 21.09.2004 that the renewal option is that of the lessor instead of lessee and such mistake was noticed by the lessees a few days later, however the lessor assured and convinced lessees that it can be ignored etc., but the letter dated 01.05.1994 stipulates as to time of the indenture of lease deed dated 24.02.1994 should be regarded as the essence of contract and since the option of renewal of lease does not ipso facto extend the tenure, the lessees ought to have filed an application for renewal of the lease within a reasonable time before the expiry of the lease period in the deeds dated 24.02.1994/30.04.1994. It is further argued that by clever drafting of the plaint, a suit which is hopelessly barred by limitation, cannot be brought within the period of limitation and relied on the

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decision in N.V.SrinivasaMurty and Ors vs Mariyamma (dead) and Ors ,¹³ .

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On the other hand, the lessees contended that the defendant did not raise any plea of limitation with reference to the contractual affirmation letter dt.01.05.1994 executed by the defendant separately in favour of the plaintiffs No. 1 and 2 and the said letter affirms that the plaintiffs No. 1 and 2 since have to invest huge money, they can seek renewal of lease for further period after the lapse of initial 25 years as assured earlier and so after the initial period of 25 years ending on 31.01.2019, another 25 years of lease term is mandated from 01.02.2019 with the revised terms and conditions as per the market conditions and the contents of the plaint shall be regarded as correct. Therefore, it is contended that the suit is not barred by time. It is also contended that the question of limitation is a mixed question of law and fact and can be decided only after receipt of the evidence.

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A question of limitation can be pure question of law or mixed question of fact and law. So, it need not always be a mixed question of fact and law. But when a relief is challenged in a given case on the basis of limitation in relation to a fact, it would certainly be a mixed question of fact and law. But, it cannot be said that a mixed question of fact and law cannot be decided without leading evidence when it

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13 (2005) 5 SCC 548

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can be decided on the basis of undisputed fact(s). In the present case, it is rightly answered by the lessees, as noted in the preceding paragraph, in relation to the limitation. So, the plaint in this matter need not be rejected on the basis of the suit being barred by limitation, though Order VII Rule 11(d) CPC covers even limitation as ‘law’ within its scope.

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In the result, the revision petition is allowed by setting aside the order dated 19.01.2021 dismissing the petition in I.A.No.140 of 2020 in O.S.No. 39 of 2019 on the file of the Court of I Additional Senior Civil Judge, Vijayawada and the said IA is allowed. Further necessary steps shall be taken by the trial court. There shall be no order as to costs.

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Miscellaneous Petitions, if any pending, in this Civil Revision petition, shall stand closed.

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B.S.BHANUMATHI, J

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Dt.12.09.2023

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PNV

Loyola College Society, Guntur, Vijayawada. v. Pothineni Ramesh Babu

Case brief

What is this about?

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Loyola College Society, Guntur, Vijayawada. v. Pothineni Ramesh Babu

Case brief

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