Transfer of Property Act, 1872 – s.105 – Agreement when not a lease – In 1976, Food Corporation of India (‘FCI’) invited offers for construction of godowns on the lands of interested parties and subsequently taking over possession of the godowns on lease – Appellants’ offer accepted – Agreement dated 16.12.1976 entered between the parties – Appellants had to construct six godowns, to be taken over by FCI on rent – Appellants informed FCI that the construction of godowns was complete and the possession be taken over – Competent officer of FCI on inspection recommended taking over the possession of only four out of six godowns and pointed out defects in respect of remaining two – Appellants sought damages from FCI on account of non-realization of rent towards the remaining two godowns – Demand not complied with – Appellants filed suit for damages – Decreed – High Court allowed appeal filed by FCI – Held: For an agreement to be considered as a lease and not as an agreement to lease it is important that there must be an actual demise of property on the date of the agreement – Agreement dated 16.12.1976 was not a lease but simply an agreement giving rise to contractual obligations – Terms and conditions clearly demonstrate that the execution of the lease deed was contingent upon the construction of godowns being completed and the same being approved by issuance of completion certificate by the Competent Authority of FCI – Appellants did not dispute the facts that the officers of FCI refused to take over the possession of the two godowns in view of the defects pointed out by them and the said defects were never rectified – As per Clause 6 of the agreement, in case of defects, the findings of the officers of FCI were to be final and there was no obligation to take such structure on lease – High Court rightly discarded the evidence of PW-1, 2 & 5 (who issued certificates in respect of completion and fitness of the godowns) as neither the inspection was carried out by an independent agency in presence of the representatives of the appellants and respondents nor the same was in accordance with the specifications laid down by FCI in the agreement – Therefore, no rent was payable in respect of the two disputed godowns as they were not completed as per FCI’s specifications and the possession thereof were not taken over by FCI at the time of filing of the suit by the appellants – No reason to take a view different from the one taken by the High Court.
Dismissing the appeal, the Court
HELD: 1.1 For an agreement to be considered as a lease and not as an agreement to lease it is important that there must be an actual demise of property on the date of the agreement. The agreement dated 16.12.1976 was not a lease but simply an agreement giving rise to contractual obligations. The terms and conditions clearly demonstrate that the execution of the lease deed was contingent upon the construction of godowns being completed and the same being approved by issuance of completion certificate by the Competent Authority of FCI. [Paras 24, 25][562-F-H]
1.2 Clause 6 of the agreement dated 16.12.1976 made it imperative for the appellants to obtain a completion certificate from the competent officers of FCI, prior to execution of lease agreement and handing over the possession of the godowns. In case of defects and faulty workmanships, the findings of the officials of FCI were final. The appellants contended that letter dated 02.12.1977 issued by FCI was the completion certificate and no subsequent certificate was to be issued. However, inspection was carried out on 05.01.1978, whereafter FCI vide letter dated 14.02.1978 had recommended taking over the possession of only four out of six godowns. There arises no question of waiver, acquiescence or estoppel, as all along FCI has contended that two godowns were defective and the possession of the same can not be taken over till the rectification of the defects. The reliance placed on the letter dated 15.05.1978, wherein FCI is said to have acknowledged taking over possession is totally misplaced. No reliance can be placed on the said letter which was manufactured in connivance with the delinquent officers of the FCI who were charge-sheeted and subsequently punished in a departmental enquiry for the same. The appellants have not disputed the facts that the officers of FCI refused to take over the possession of the two godowns in view of the defects pointed out by the officers of FCI and the said defects were never rectified. As per Clause 6 of the agreement dated 16.12.1976, in case of defects, the findings of the officers of FCI were to be final and there was no obligation to take such structure on lease. The High Court rightly discarded the evidence of PW-1,2 & 5 as neither the inspection was carried out by an independent agency in presence of the representatives of the appellants and respondents nor the same was in accordance with the specifications laid down by FCI in the agreement dated 16.12.1976. Therefore, no rent was payable in respect of the two disputed godowns as they were not completed as per the specifications of FCI and the possession of the disputed godowns were not taken over by FCI at the time of filing of the suit by the appellants. The appellants were not entitled for claim of rent prior to 08.02.1978 as rent was payable only after taking over of possession as per Clause 8 of the agreement dated 16.12.1976. [Paras 27 -29][563-B-H; 564-A]
1.3 Further, there is no covenant in the agreement dated 16.12.1976, which admittedly is not a lease, stipulating enhancement of the rent after particular period once possession of the godowns has been taken over by FCI, which may entitle the appellants for payment of an enhanced rent. No reason to take a view different from the one taken by the High Court while allowing the first appeal of the respondents and dismissing the Civil Suit of the appellants herein. [Paras 30-31][546-B-C] Tiruvenibai v. Lilabai [1959] 2 Supp SCR 107; State of Maharashtra & Ors. v. Atur India Pvt. Ltd. (1994) 2 SCC 497 : [1994] 1 SCR 881 – relied on.
Rani Hemanta Kumari Debi v. Midnapur Zamindari Company Ltd AIR 1919 PC 79 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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