Bombay Forgings Ltd. vs Messers Manilal and Son

A.S. Oka, J.(Oral)—By this Appeal, an exception is taken to the judgment and order dated 26th June 2015 passed by the learned Single Judge on a Chamber Summons taken out for rejection of the Plaint. By the impugned order, the learned Single Judge held that the suit was barred and, therefore, the learned Single Judge proceeded to reject the Plaint under Clause (a) of Rule 11 Order 7 of the Code of Civil Procedure, 1908 (for short "the said Code").

With a view to appreciate the submissions made by the learned senior counsel representing the parties, a brief reference to the facts of the case is necessary.

The suit property is described in the Exhibit - A to the Plaint. The case made out by the Plaintiff is that the suit property is owned by the Defendant. Reliance is placed on a Deed of Lease executed on 4th April 1972 by the predecessor of the Defendant. It is contended that under the said lease, the suit property was leased to the Plaintiff for a period of 30 years from 16th February 1972 on the terms and conditions incorporated therein. In the Plaint, reliance is placed on the Clause 5 of the Deed of Lease dated 4th April 1972 which reads thus:

"5. It is agreed by and between the parties hereto that if the Lessees perform all the terms and conditions of the lease and pay the rent regularly hereby reserved, then and in that event the Lessees shall be entitled to extend the period of the Lease for a further period of 30 years on the same terms and conditions mentioned in these presents, including this clause of renewal save and except that the rent shall be increased to the maximum extent of Rupees Two Thousand (Rs. 2,000/-) per mensum provided that the Lessees shall give notice of their intention to do so in writing to the Lessor at least three months before the expiration of the term hereby granted and the Lessor shall at the cost and expenses of the Lessees grant a lease of the premises hereby demised or expressed so t be for a further period of 30 years on the same terms and conditions and with all provisions and stipulations herein contained, including this clause of renewal and that the Lessor shall be entitled to increase the rent to a maximum limit of Rupees Two Thousand (Rs. 2,000/-) per mensum in the said term of the thirty years."

It is contended that in terms of the agreed terms and conditions, necessary payments were made by the Plaintiff to the Defendant. It is contended in Paragraph 7 of the Plaint that as per the practise followed, the lease rent for the period from 1st April 2001 to 31st March 2002 was paid by depositing a cheque in the Current Account of the Defendant. However, the Defendant by its letter dated 9th August 2001 responded that the amount deposited was in excess of the monthly bills payable by the Plaintiff and therefore, the Defendant purported to refund the sum of Rs. 37,500/- being the excess amount of lease rent by issuing a cheque in favour of the Plaintiff. There is a reference in the Plaint to further correspondence exchanged by the parties. The Plaintiff is relying upon a letter dated 21st January 2002 by which the Plaintiff had forwarded to the Defendant a Pay Order dated 22nd January 2001 in the sum of Rs. 40,500/- which was to cover the lease rent upto 31st March 2002.

The case made out by way of amendment by substituting Paragraph 15 of the Plaint and by inserting the Paragraph 15A in the Plaint is that by a notice dated 23rd October 2001, the Plaintiff extended the lease and prolonged the second term of the lease of 30 years with effect from 16th February 2002 till 15th February 2032. The contention is that the Plaintiff has a valid and subsisting lease in respect of the suit property for an aggregate period of 90 years with effect from 16th February 1972 comprising of initial term of 30 years with two unilateral extensions by a period of 30 years each. It is the case of the Plaintiff that on 8th February 2002, it forwarded to the Defendant a Draft Indenture of Lease for a further period of 30 years and forwarded a cheque in the sum of Rs. 6,000/- towards additional deposit. By the communication dated 5th March 2002, the Advocate for the Defendant communicated refusal to renew the lease and the cheque/demand draft forwarded by the Plaintiff was returned to the Plaintiff.

There is a reference to a suit for eviction filed by the Defendant against the Plaintiff in the Court of Small Causes at Mumbai. We must note here that it is pointed out across the bar that the suit has been decreed and an Appeal preferred by the Plaintiff against the said suit is pending.

In paragraph 24(A) as amended, it is contended that by notice dated 23rd October, 2001 issued by the Advocate for the plaintiff to the defendant, the lease stood extended and prolonged with effect from 16th February, 2002 for the second term of 30 (thirty) years. In further part, it is stated that the second lease period began without any refusal by the Defendant to the extend the lease. This clearly indicates waiver by the Defendant of any alleged breaches of Indenture of Lease and that the subsequent allegations of breaches are an afterthought.

As far as the prayers are concerned, by amendment a prayer is added for declaration that the lease of the suit property in the first instance comprised of the term of 90 (ninety) years and on issuance of the notice dated 23rd October, 2001, by the plaintiff to the defendant, the lease stood and stands extended and prolonged with effect from 16th February, 2002 for the second term of 30 (thirty) years, on the terms and conditions mentioned in the Indenture of Lease. Moreover, there is a prayer for declaration regarding valid, subsisting and binding agreement between the plaintiff and the defendant for renewal of the lease of the suit property. The third prayer is for directing the defendant specifically to perform their obligations under the said Indenture of Lease by renewing the said lease for a period of 30 years from 16th February 2002 with a further right to renewal to the plaintiff for an additional period of 30 years, by executing all the necessary documents for the said purpose and doing all acts, deeds and things necessary for the purpose of renewal of the Lease Deed. There is a prayer for perpetual injunction for protecting possession of the plaintiff and in the alternative, there is a prayer for passing a money decree.

The learned Senior Counsel appearing for the plaintiff has taken us to the impugned order. The learned Senior Counsel appearing for the plaintiff pointed out that the learned Single Judge in the impugned order has relied upon the decision of the learned Single Judge in the case of ING Vysya Bank Ltd. v. Modern India Ltd., 2008(2) Bom. C.R. 255. However, he invited our attention to the decisions of the Apex Court in the case of Delhi Development Authority v. Durga Chand Kaushish, AIR 1973 S.C. 2609. and Provash Chandra Dalui v. Biswanath Banerjee, AIR 1989 S.C. 1835. He invited our attention to the material averments made in the plaint and in particular to the prayer clauses. He pointed out that there is a specific prayer for enforcing specific performance of the obligations of the defendant under the said Indenture of lease by renewing the said Lease. In short, his submission on the basis of the decisions of the Apex Court is that there is a distinction between extension and renewal of the lease and in case of renewal, for all purposes and intents, a new lease is to be executed and in case of extension, the same lease continues in force during the additional period by the performance of stipulated acts. He urged that this principle laid down in binding precedent has not been considered by the learned Single Judge in the case of ING Vysya Bank Ltd., as the attention of the learned Single Judge was not invited to the said decision and to the fact that renewal may involve execution of an altogether fresh lease deed. He also pointed out that the decision of the learned Single Judge has been followed by the learned Single Judge in the case of BPM Industries Limited v. Samartha Development Corporation, 2011 (3) Bom. C.R. 443. His submission is that considering the prayer for specific performance of the agreement for renewal of lease in the suit, it will not be covered by Sub-Section (1) of Section 41 of the Presidency Small Cause Courts Act, 1882 (for short "Small Cause Courts Act").

The learned Senior Counsel appearing for the defendant has taken us through the averments made in the plaint and in particular in what manner the amendment has been carried out. He pointed out the fact that paragraph 15 in the original plaint has been deleted and replaced by a fresh paragraph in which it is contended that lease of the suit property is for an aggregate period of 90 (ninety) years and on expiry of initial 30 years, it stood extended for a second period of 30 years commencing from 16th February, 2002. He pointed out that in paragraph 15, there was a specific averment that the defendant neglected to perform their obligations as per the terms and conditions of the Indenture of Lease. He invited our attention to the decision of a Division Bench of this Court in the case of Nagin Mansukhlal Dagli v. Haribhai Manibhai Patel, AIR 1980 Bom.C.R. 123. His submission is that the plaint will have to be read as a whole and the prayer made for specific performance will have to be understood in the context. He submitted that in view of the specific contention raised in the plaint that the lease continues to be valid, the suit will be governed by Sub-Section (1) of Section 41 of the Presidency Small Cause Courts Act, 1882 and, therefore, no interference is called for with the impugned order.

We have given careful consideration to the submissions. We have perused the impugned order and the averments made in the Plaint. Firstly, it will be necessary to consider the material averments in the Plaint. As stated earlier, reliance is placed on Indenture of Lease dated 4th April, 1972 executed by and between the predecessor of the defendant and the plaintiff. Paragraph 8A of the Plaint reads thus :-

"(8A) The Plaintiff states and submits that the lease granted by the Defendant in favour of the Plaintiff in the first instance is for an aggregate term of 90 (ninety) years comprising of an initial term of 30 (thirty) years with two unilateral extensions by the Plaintiff, for the further periods of 30 (thirty) years each commencing from February 16, 2002 and February 16, 2002 respectively, by issuing notice to the Defendant, of its intention to extend the lease at least three months before the expiration of the initial term of the lease. The Plaintiff submits that the Plaintiff issued a notice dated 23rd October 2001 to the Defendant, by which the Plaintiff has extended and prolonged the lease for the second term of 30 (thirty) years in the manner provided in clause (5) of the indenture of Lease."

(emphasis supplied )

By further amendment, without prejudice to what is contended in paragraphs 8A and 8B and in the alternative, it is contended that the plaintiff in any case is entitled to renewal of the leasehold rights of the suit property for two periods of 30 years each.

It will be also necessary to make a reference to the original paragraph No.15 of the plaint which was subsequently deleted which reads thus :-

"15. The Plaintiffs had repeatedly requested the Defendants to renew the said lease as per the terms contained in the said Indenture. The Defendants have deliberately failed and neglected to do so. The Plaintiffs are and have at all material times been ready and willing to fulfil their obligations under the said lease and to have the same renewed as per the terms and conditions contained therein. The Defendants have, however, failed and neglected to perform their obligations as per the terms of the said lease."

What is important is what is averred in paragraph 15 as substituted which reads thus :-

"(15) The Plaintiff states and submits that the lease of the suit property in the first instance is for an aggregate term of 90 (Ninety) years and on the expiry of the initial term of 30 (thirty) years stood extended for the second term of 30 years commencing from February 16, 2002 and the Plaintiff repeatedly recorded the fact of such extension of the lease of the suit property in its various letters addressed to the Defendant : Without prejudice to what is stated above and in the alternative thereto the Plaintiff submits that in any event the Plaintiff is entitled to renewal of the lease of the Suit property for the term of 30 years commencing from February 16, 2002. The Plaintiff further states and submits that the Plaintiff has always performed and was at all material times ready, willing and able to perform its obligations under the lease and is even now ready and willing to perform its obligations under the lease."

(emphasis supplied)

In Paragraph 15A, the Plaintiff contended that "the Plaintiff submits that the Plaintiff had valid and subsisting lease of the suit property for the term of 90 years as commenced from 16th February 1972".

At this stage, it will be necessary to make a reference to the renewal decision of this Court in the case of Nagin Mansukhlal Dagli v. Haribhai Manibhai Patel and in particular what is held in paragraph 8 of the said decision which reads thus :-

"8. ..The use of the words "a licensor and licensee" and "a landlord and tenant" in the said Section 41 has no such particular significance or effect as canvassed for by Mr. Sanghavi. These words have been used in accordance with a very well-settled and normal Legislative drafting practise. In various statutes dealing with rights and obligations arising out of jural or contractual relationship and enforcement of such rights and obligations the parties are described by the legal character they bear. Thus, Section 108 of the Transfer of Property Act, 1882, which deals with the rights and liabilities of lessor and lessee, by Clause (h) provides that "the lessee may even after the determination of the lease remove, at any time whilst he is in possession of the property leased but not after-wards, all things which he has attached to the earth.....". Clause (i) of the said Section 108 provides that "when a lease of uncertain duration determines by any means except the fault of the lessee, he or his legal representative is entitled to all the crops planted or sown by the lessee and growing upon the property when the lease determines, and to free ingress and egress to gather and carry them." Clauses (h) and (i) use the word ''lessee'' in connection with the rights of a lessee even after the determination of the lease, because these rights which the lessee possesses in his character as a lessee and which came, into being by reason of the lease given to him. Certain rights he had during the continuance of the lease. Certain rights accrued to him on the determination of the lease. Rather than use the word ''lessee'' while the lease subsists and a clumsy terminology or a circumlocution to describe the same person after the lease has determined, following the well-settled legislative drafting practise, clauses (h) and (i) of Section 108 refer to that person in both eventualities by the word ''lessee''. Similarly, in various Matrimonial Acts when dealing with the grant of permanent alimony to a wife after divorce, these Acts provide that the Court may grant such alimony to the wife either at the time of the passing of the decree for divorce or on a subsequent application made to it for that purpose. The words used in the sections of the Matrimonial Acts are ''husband'' and ''wife'', even though after divorce the relationship of husband and wife between the divorced parties does not subsist. Examples of this will be found in Section 37 of the Special Marriage Act, 1954; Section 25 of the Hindu Marriage Act, 1955; Section 37 of the Indian Divorce Act, 1869; and Section 40 of the Parsi Marriage and Divorce Act, 1936. Words which describe a person''s legal character -- the character which he either holds or has once held -- are used in statutes as a means of identification or a label to point out the particular rights and obligations which arise out of such relationship either during its subsistence or after its termination, that is, either are existing relationship or are erstwhile relationship."

(emphasis supplied)

As far as the words used in Sub-Section (1) of Section 41 of the Small Cause Courts Act "relating to the recovery of possession" are concerned, it was held that the words are wide enough to include all other reliefs the plaintiff can claim in a suit for recovery of possession or the termination of licence or tenancy.

The learned Single Judge in the case of ING Vysya Bank Ltd. v. Modern India Ltd. was dealing with the question whether the provisions of Section 41 of the Small Causes Courts Act would bar jurisdiction of an Arbitral Tribunal to entertain a claim for specific performance of an agreement of renewal contained in an agreement of licence executed between a licensor and a licensee. In paragraph 5 of the said decision, the learned Single Judge has incorporated the reliefs which were proposed to be sought by the Petitioner in arbitration proceedings. The relevant part of paragraph 5 reads thus :-

"5. ....... Subsequent to the institution of the present proceedings under section 9 of the Arbitration and Conciliation Act, 1996, a further affidavit has been filed recording that by a letter dated 4th January, 2008 the petitioner has invoked the provision for arbitration stating that in the arbitral proceeding, the petitioner would be seeking the following relief:

(i) that the Hon''ble Arbitral Tribunal be pleased to declare that our clients have a right of renewal under the Agreement and you are bound and liable to specifically perform the same and renew the Agreement for a further period of three years on agreed terms;

(ii) that this Hon''ble Arbitral Tribunal be pleased to pass an award directing you and your servants, officers, assigns or agents to specifically perform your obligation contained in the Agreement by doing all things and taking all actions as are necessary to fully and effectively carry out its obligations thereunder including without limitation to execute fresh Leave and Licence Agreement in terms of the Agreement;

(iii) that for the aforesaid purpose, you be ordered, decreed and directed to do all acts, deeds and things and execute and register all writings necessary."

(emphasis added)

In paragraph 7, the learned Single Judge referred to Section 41 of the Small Cause Courts Act and observed that the principal issue that falls for determination is whether the provisions of Section 41 would bar the jurisdiction of an Arbitral Tribunal to consider the dispute that has been raised by the Petitioner before the Arbitral Tribunal. What is material is paragraph 8 of the said decision which reads thus :-

"8. The first thing to be noted about Section 41 is that it is prefaced with a non obstante provision as a result of which the provisions of Sub section (1) are given overriding force and effect notwithstanding anything contained elsewhere in the Act nonetheless, however, subject to subsection (2). The jurisdiction to entertain and try all suits and proceedings between a licensor and a licensee and/or a landlord or tenant is conferred upon the Court of Small Causes where the suit relates to the recovery of possession of immovable property or to the recovery of licence fees or charges or rent therefore, irrespective of the value of the subject matter of such suit or proceeding. The words "irrespective of the value of the subject matter of such suits or proceedings" are intended to indicate that even though the value of the subject matter would exceed the pecuniary limits on the jurisdiction of the Court, it is the Court of Small Causes which is conferred with the jurisdiction to entertain and try suits of the descriptions specified in subsection (1). However, subsection (2) carves out an exception in respect of those suits for the recovery of possession or of licence fees, rent or charges to which the Rent Act, the other Acts enunciated or any other law for the time being in force apply. The non-obstante clause in Sub section (1) of Section 41 has overriding effect over all the other provisions of the Act. That would include the provisions contained in Section 18 defining the pecuniary limits of the jurisdiction of the Small Causes Court. Suits falling in the description contained in Sub section (1) of Section 41 would lie within the exclusive jurisdiction of the Small Causes Court notwithstanding the fact that the value of the subject matter exceeds the limits on its pecuniary jurisdiction. The non-obstante provision in Sub section (1) of Section 41 will also prevail over Section 19 because when the suit is of the description contained in the former provision that will prevail over the latter. The primary determination which the Court must make in every such case is whether the suit in substance and in essence is a suit relating to the recovery of possession or the recovery of licence fee, rent or other charges between a landlord and tenant or a licensor and licensee. The Court will decide the issue by looking at the kernel and disregarding the chaff. The existence of a jural relationship of licensor and licensee or, as the case may be, of landlord and tenant; the nature of the cause of action; the character of the reliefs sought and whether the claim of the Plaintiff arises from and out of the obligations of the parties as licensor and licensee or, landlord and tenant are important considerations. The garb or cloak which is wrapped around the pleadings by an astute draftsman must be kept aside to deduce the pith and substance of the pleadings. If the suit relates to the recovery of possession, it is a suit to which Section 41(1) applies notwithstanding the fact that some of the reliefs or a portion of the cause of action is structured around a claim for specific performance. The Court must ask itself: Does the theme and the foundation relate to the recovery of possession? And in answering that question, the pleadings must be considered as a whole without severing its constituents or reading parts in isolation."

(emphasis added )

Thereafter, the learned Single Judge referred to the decision of the Apex Court in the case of Mansukhlal Dhanraj Jain v. Eknath Vithal Ogale, 1995 (3) Bom.C.R. 240. wherein the Apex Court had an occasion to interpret the words "relating to the recovery". Thereafter, the learned Single Judge proceeded to consider various decisions of the learned Single Judges of this Court. After considering the said decisions in paragraph 18, the learned Single Judge held thus :-

"18. There is in other words, a preexisting relationship of licensor and licensee between the parties; the occupation of the Petitioner is relatable to the existence of that relationship and the Petitioner seeks an extension of the relationship upon the exercise of the option of renewal under an existing agreement. The expression that is used in Section 41(1) is a suit relating to the recovery of possession. As the Supreme Court noted in Ogale''s case, a suit relating to the recovery of possession is a concept which is much wider in its ambit than a suit for possession. What the Petitioner claims in essence is the continuation of the relationship of a licensor and licensee on the strength of the exercise of the option of renewal."

(emphasis added)

Thus, the learned Single Judge concluded that in the case before him as there was a pre-existing relationship of licensor and licensee between the parties, the occupation of the Petitioner before him was relatable to the existence of that relationship and the Petitioner was seeking an extension of the relationship upon the exercise of an option of renewal under existing agreement. After referring to the decision of the Apex Court in the case of Mansukhlal Dhanraj Jain, the learned Single Judge held that what is claimed by the Petitioner before him in essence is the continuation of the relationship of licensor and licensee on the strength of the exercise option of renewal. Therefore, the learned Single Judge held that the prayer sought to be made before the Arbitral Tribunal for specific performance of agreement of renewal of license was barred as it was covered by Section 41(1) of the Small Cause Courts Act.

At this stage, we may reproduce Section 41 of the Small Causes Act.

"41. Suits or Proceedings between licensors and licensees or landlords and tenants for recovery of possession of immovable property and licence fees or rent, except to those to which other Act apply to lis in Small Cause Court

(1) Notwithstanding anything contained elsewhere in this Act but subject to the provisions of subsection (2), the Court of Small Causes shall have jurisdiction to entertain and try all suits and proceedings between a licensor and licensee, or a landlord and tenant, relating to the recovery of possession of any immovable property situated in Greater Bombay, or relating to the recovery of the licence fee or charges or rent therefor, irrespective of the value of the subject matter of such suits or proceedings.

(2) Nothing contained in subsection (1) shall apply to suits or proceedings for the recovery of possession of any immovable property, or of licence fee or charges or rent thereof, to which the provisions of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, the Bombay Government Premises (Eviction) Act, 1955, the Bombay Municipal Corporation Act, the Maharashtra Housing and Area Development Act, 1976 or any other law for the time being in force, apply."

As held by a Division Bench of this Court in the case of Nagin Mansukhlal Dagli, the words are used in the statute as a means of identification to point out the particular rights and obligations which arise out of such relationship either during its subsistence or after termination, that is, either are existing relationship or the erstwhile relationship.

Now, we turn to the decisions relied upon by the learned Senior Counsel appearing for the Plaintiff. In paragraph 12 of the decision of the Apex Court in the case of Provash Chandra Dalui and Another, the Apex Court made a distinction between the ''extension'' and ''renewal'' by observing that in the case of renewal, a new lease is required to be executed. The Apex Court was dealing with the issue of construction of a lease. Even in the case of Delhi Development Authority, the Apex Court was dealing with the issue of interpretation of documents. In the present case, we are concerned with the issue of jurisdiction. The issue is whether the suit is cognisable by the Small Cause Courts Act under Sub-Section (1) of Section 41. We have made extensive reference to the averments made in the plaint. The Plaintiff is not only relying upon preexisting relationship as lessee and lessor but is expressly relying upon the continuation of the said relationship and in fact, the claim proceeds on the footing that the plaintiff continues to be the lessee of the defendant. Thus, the prayer made for specific performance is essentially a prayer made for seeking continuation of relationship between the plaintiff and the defendant as tenant and landlord on the basis of option provided in the indenture of lease.

The decision of learned Single Judge in the case of ING Vyasa Bank Limited was dealing with the issue of jurisdiction. We have no manner of doubt that the law laid down by the learned Single Judge in the case of ING Vysya is a good law which will squarely apply to the present case and that is precisely the reason is recorded by the learned Single Judge in paragraph 8 of the impugned order.

Therefore, in our view, no fault can be found with the impugned order of the learned Single Judge where power under clause Clause (a) of Rule 11 Order 7 of the said Code was exercised for rejecting the Plaint. Accordingly, we see no merit in the Appeal and the same is dismissed. We, however, make it clear that the observations made in the Judgment are only for the purposes of considering the issue of jurisdiction based on Section 41(1) of the Small Causes Act. On the prayer made by the learned counsel appearing for the Applicant, interim relief which is operative till today will continue to operate for a period of 12 weeks from today.