Bombay High Court
Quality Cut Pieces And Etc. Etc. vs M. Laxmi And Co. on 26 April, 1984
Equivalent citations: AIR 1986 Bom 359, 1984 (2) BomCR 788
Author: V Vaze
Bench: V Vaze
JUDGMENT V.V. Vaze, J.
1. Summer of 42. The city of Bombay was slowly recovering from the erosion of war economy. Serpentine queues for essential commodities were seen everywhere. The mighty arch of yellow basalt hautily thrusting its frame above the promontory lapped by the waters of Bay of Bombay had witnessed the entry of many an Englishman–Administrators, Governors-General, dashing blades or humble quill-drivers — coming to India to keep Pax Britannica. That very arch was soon to serve as their exit.
2. A group of seven businessmen drawn from various fields like pharmaceuticals, textiles, tea, banking and insurance got together and surveyed the Indian economic scene. They had a vision of a possible cooperation of Indian and foreign entrepreneurs in the field of supply of essential commodities for civilian consumption — something which was very much relegated to the background by the more pressing need to keep the sinews of war flowing. They envisaged a free-flow of goods and merchandise — once the sea routes became open; took note of the fact that manufacturers in western countries had at their disposal large departmental chain stores to handle goods direct from the factory to the consumer and managed country-wide distribution system. This group regretted the absence of a similar large scale departmental store in India and decided to remedy the defect and build up a co-ordinated contact between the producer and consumer. With this object in view, the group incorporated a company “Departmental Service Stores Limited” (“DSS”).
3. The company could not function in view of the prohibition regarding the issue of shares under Rule 94A of the Defence of India Rules, without the sanction of the Examiner of Capital Issues. This sanction was granted on 15th Nov. 1943 authorising the company to raise capital of the value of Rs. 1,62,000/- under certain conditions. The hurdle of the Defence of India Rule was crossed and capital was raised. Having realised the capital by allotting shares to those who had applied before 17th May 1943, the company had money but no premises wherein to start the contemplated departmental stores. The company was all dressed up but had nowhere to go. On 8th Sept. 1944 the company acquired the house of Messrs. Dinshaw and Company, Colaba, Causeway, Bombay, from one Behram Rustom Irani, after paying Rs. 47,000/-out of which Rs. 4,000/- were towards the goodwill and the remainder towards the price of goods, electrical installations, type-writers etc. A store was started in the premises of Dinshaw and Co., for the 10 months ending 30th June 1945, DSS made a modest profit of Rs. 6,485-2-11 Ps.
4. The Examiner of Capital Issues permitted the company to issue further shares of capital of the value of Rs. 8,30,000/-. The signatories to the Memorandum and Articles of Association, the Directors, Managing Agents and their friends agreed to take a bulk of the new issue and remainder was offered for public subscription. Messrs. Begman Traders Ltd. of 41, Bruce Street, Fort, Bombay, were the Managing Agents of the company and Bagayatkar and Manjrekar of Bombay were ex-officio Directors nominated by the Managing Agents. The Prospectus issued by the company inviting subscription from the public, after taking a note of the possible increase in international trade on account of the opening of free sea routes, announced that the DSS will inaugurate a new era of “Shop as you please” under one roof and thereby obviate the necessity of standing in long queues and hunting for different goods and shops situated in far flung localities. The ambitious prospectus projected a picture of a store where a person can buy all his needs “from a pin to a piano” and that too with home delivery facilities. Twelve Departments were enumerated as being the ones which would be immediately opened in the stores and it was indicated that the DSS would further diversify their activities into thirty more Departments ranging from motor-cars, engineering goods, type writers, jewellery to flowers. By way of a foot note DSS promised that departments of refreshments, decoration and art gallery will follow after a while.
Mechanics of running the Stores.
5. Regarding the mechanics of running the stores, the prospectus proclaimed that the DSS shall bring together manufacturers under one roof and the concept being of cooperation, a selected group of merchants dealing in various types of merchandise were to be provided with facilities and accommodation in the store “for the display and sale of their goods, under the supervision and general management of the company”. The promotors felt that this would save the merchants good deal of overhead charges and exorbitant shop rents.
6. The projection of the Directors was that the income to the company from the Departments will be “the commission ranging from 2.1/2% to 15% or more” according to the nature of the commodities sold, and that many leading merchants in various lines had already expressed their willingness to avail themselves of this facility. The promoters announced that the DSS enjoyed the confidence of leading merchants “who had agreed to leave in their control their goods worth thousands of rupees for display and sale on retail and wholesale basis”.
7. The permission granted by the Controller for issue of the balance of the originally issued share capital of Rs. 10,00,000/-“created a problem of securing suitable premises at a suitable place, when for love or money even small premises were not available in Bombay”. As the report for the Year ending 30th June, 1946 suggests, the Directors were “fortunate in securing an ideal structure and land in an ideal locality at Dadar a most central place in Greater Bombay.” (After stating facts in paras 8 to 45, His Lordship proceeded –Ed) 8 to 45. x x x x x x x x x x x Lease or Licence?
46. The tests to be applied in order to find out whether a particular document operates as a lease or a licence have been crystallised by the Supreme Court in Sohanlal Naraindas v. Laxmidas Raghunath, 1971 Mah LJ 604, at p. 607 :
“Intention of the parties to an instrument must be gathered from the terms of the agreement examined in the light of the surrounding circumstances. The description given by the parties may be evidence of the intention but is not decisive. Mere use of the words appropriate to the creation of a lease will not preclude the agreement operating as a licence. A recital that the agreement does not create a tenancy is also not decisive. The crucial test in each case is whether the instrument is intended to create or not to create an interest in the property the subject-matter of the agreement. If it is in fact intended to create an interest in the property it is a lease, if it does not, it is a licence. In determining whether the agreement creates a lease or a licence the test of exclusive possession, though not decisive, is of significance. Mrs. M.N. Clubwala v. Fida Hussain Saheb,
47. During the war and in the post-war period, the freedom of parties to enter into a lease and the licencee’s rights to sublet the premises were seriously curtailed by the various Rent Control Acts. Section 15 of Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 (“Rent Act”) puts an embargo on the tenant to sublet, assign or transfer his interest in the premises let out to him, Hence, the first question that arises for determination is whether the parties could “contract out” of the provisions of the regulatory legislation pertaining to urban tenancies?
48. In Sheel-Mex and B.P. Ltd. v. Manchester Garages Ltd., (1971) 1 All ER 841 the plaintiffs were the owners of a petrol filling station. They allowed the defendants to go into occupations of the premises by an agreement contained in a document called a licence. By the terms of the agreement, it was expressed to be solely for the purpose of selling the plaintiffs’ brands of motor fuel and the defendants had agreed to promote the sale of the plaintiffs’ products. As differences arose between the parties, the plaintiffs asked the defendants to leave when the agreement expired upon which the latter claimed that the agreement gave them a tenancy and they are entitled to protection of the (U.K.) Landlord and Tenant Act, 1954. The defendants relied heavily on the fact that they were in exclusive possession of the petrol filling station. Lord Denning dismissed this ground :
“….. counsel for the defendants says that the defendants have exclusive possession, and that that carries with it a tenancy. That is old law which is now gone. As I have said many times, exclusive possession is no longer decisive. We have to look at the nature of the transaction to see whether it is a personal privilege, or not…..”
Next the Counsel argued that it would not be permissible for the parties to “get out” of the Landlord and Tenant Act, 1954. Repelling this argument, Lord Denning said (at p. 844) :
“It seems to me that when the parties are making arrangements for a filling station, they can agree either on a licence or a tenancy. If they agree on a licence, it is easy enough for their agreement to be put into writing, in which case the licensee has no protection under the Landlord and Tenant Act, 1954. But, if they agree on a tenancy, and so express it, he is protected. I realise that this means that the parties can agreeing on a licence, get out of the Act; but so be it; it may be no bad thing…..”
Sham and bogus?
49. The stall-holders in the present batch-appeals have branded the agreements with DSS etc. as ‘Sham and bogus’. Such an argument was advanced in Somma v. Hazelhurst, (1978) 2 All ER 1011 where it was urged that in a “Rent Act situation” any permission to occupy the premises exclusively must be a tenancy and not a licence, unless it comes into the category of hotels, hostels, family arrangements or service occupancy of a similar undefined special category. Dismissing the contention, the Court observed (at p. 1020):
“…..We can see no reason why an ordinary landlord not in any of these special categories should not be able to grant a licence to occupy an ordinary house. If that is what both he and the licensee intend and if they can frame any written agreement in such a way as to demonstrate that it is not really an agreement for a lease masquerading as a licence, we can see no reason in law or justice why they should be prevented from achieving that object. Nor can we see why their common intentions should be categorised as bogus or unreal or as sham merely on the grounds that the Court disapproves of the bargain.”
The Court approved the observations of Backely LJ in Shell-Mex and B.P. Ltd. v. Manchester Garages Ltd. case (supra)–
“and it may be that this is a device which has been adopted by the plaintiffs to avoid possible consequences of the Landlord and Tenant Act, 1954, which would have affected the transaction being one of landlord and tenant, but in my judgment one cannot take that into account in the process of construing such a document to find out what the true nature of the transaction is. One has first to find out what is the true nature of the transaction and then see how the Act operates on the state of affairs, if it bites at all. One should not approach the problem with a tendency to attempt to find a tenancy because unless there is a tenancy the case will escape the effects of the statute.”
50. The observations in a New Zealand decision Donald v. Baldwyn, (1953) NZLR 313 at p. 321) were also approved :
“The law will not be hoodwinked by shams: but real and lawful intentions cannot be dismissed as shams merely because they are disliked. It is a sham to say one thing while really intending another; but the Court cannot say that a licence is a sham for the reason that the Court thinks the parties ought to have intended a tenancy.”
Intention of the DSS.
51. “Why so large cost, having so short a lease, Dost thou upon thy fading mansion spend?” So asked Shakespeare in his early Sonnet 146.
52. DSS had taken the suit property from Ashar for a short lease of 10 years from 1-6-1946 to 31-5-1956. It had only one option of renewal for a further period of 10 years. All the same, in spite of dwindling finances, DSS constructed a building worth Rs. 1,51,585/-, furnished the same with furniture and fittings costing Rs. 1,32,768/- and installed electrical fittings worth Rs. 22,641/-. The property purchased by Ashar was an old godown of a mill; will a lessee of Ashar incur a ‘large cost’ of Rs. 2,00,000/- upon a ‘fading godown’ if he was only to sublet the same?
53. Exh. Z-196 dt. 20-6-1952 is a typical agreement which DSS used to enter into with the merchants. The preamble states that the merchant “Soni Watch Co.” in this case, had applied to DSS “to stock, display and sell his goods through DSS” and that the merchant shall sell the goods at ruling market rates. DSS shall try to obtain licences and permits, if necessary, in its own name, but DSS will be free to do business in the same or similar articles in the stores. The merchant had agreed to deposit by way of guarantee a sum of Rs. 1,000/- for a stall admeasuring about 120 Sq. ft. which was to bear interest at 3.50 per cent per annum. The merchant was to be provided by DSS with a stall complete with fittings and furnitures, provide his own cash memo, maintain a stock book and submit to the DSS monthly statement of accounts on or before the 5th of the following month. The ownership of the goods was to remain with the merchant. DSS were entitled to receive a minimum “share, remuneration or commission” at the rate of Rs. 135/- per stall or Rs. 250/- for two stalls or to “the share, remuneration or commission” at the rate of two per cent on the gross sale proceeds, exclusive of sales tax, whichever is more. The agreement was to remain in force for one year from 13-5-1953, but power was given to the Company to terminate the agreement for breach of the terms. Then follows Clause 34 : “The merchant shall have no right to assign the benefit of this agreement. The merchant is not a tenant of the Company and on termination of this agreement, he shall have no right to continue in or use of the premises of the Company”.
54. In short, the agreement not only clearly tells the merchant that he is not a tenant of the stall, but obligates him to send a statement of accounts so that DSS could work out whether they are entitled to a commission over and above the minimum agreed upon.
55. On 29-8-1952, some stall-holders wrote to the Collector of Bombay (Exh. Z-157) in connection with the notices dt. 26-8-1952 issued by the Collector asking the merchants to pay the dues. The merchants informed the Collector that with the exception of Dr. D.S. Patkar (who is not one of the defendants), “all are charged commission on the gross sale with a certain minimum according to the number of stalls or spaces required by the individual merchants for trading in the department stores.” They referred to the fact that prior to 1-5-1952, DSS were providing all facilities, such as service of the boys, delivery of the goods, collection of daily sales, maintenance of stock book and accounts, supervision, electricity and all other incidental expenses for which the merchants were paying higher rate of compensation. As one of the share-holders, the letter proceeds, has filed a winding up petition as DSS have changed their management practices, reduced the amount of deposit and the rate of commission. The merchants expressed fervent hope that the winding up petition will be dismissed, but requested the Collector to see that essential services like watchmen, electricity, etc. are maintained.
56. The earlier letter (Exh. 31) dt. 8-1-1951, by which the merchants had asked the Collector of Bombay to hold DSS responsible for the sales tax, has already been discussed. Vide Exhibit ‘O’ dt. 21st Oct. 1952, DSS told the Collector that except the case of Dr. Patkar, in whose favour they had created tenancy and whose premises are distinctly separate, all other persons who are trading with the DSS are not tenants. DSS charges the merchants certain percentage with a certain fixed minimum on the gross daily sales by way of Company’s commission. The letter goes on to say that the merchants, who attend the sales, “do so more as the Salesmen of the Company and not in their capacities as the owners of the goods”. None of the merchants have been allowed to put up sign-boards in his own name. DSS then referred to the case of Mrs. Sarla Shetty, who was allowed to conduct a tailoring class on leave and licence basis, but has picked up a quarrel and put up claim for tenancy rights. An attempt was made by DSS to ask Chinubhai whether the stalls can be let out, so that more money could be realised and the debt paid off more quickly (Exhibit “R” dt. 30th Oct. 1953). According to Chinubhai he tried to sell this idea to the mortgagees but the mortgagees did not agree and hence the idea was dropped.
57. The intention of the parties can be gathered from the surrounding circumstances, and so far as the present case is concerned, it is not one of a stray occupation by a stranger in a room in a residential house which may give rise to questions as to whether he was only a lodger or a boarder or a paying guest or a tenant. This is a case of no less than 47 people taking stalls and carrying on business for a period of over 22 years. Resultantly the behavioral pattern appearing on a broad canvas stretching over more than two decades has to be observed. It would make for a better appreciation of this pattern if the evidence is grouped under various heads.
58. Admittedly, Laxmi lost possession as a result of Court Decree on 19th Nov. 1968 and it has been urged by the stall-holders that the space that was allotted to them was in their exclusive possession, inasmuch as, they had put flap doors and for that purpose certain photographs were produced. The photographs did show an arrangement of a plywood shutter capable of being locked. It was also canvassed that there were rolling shutters to some stalls which would enure for a better locking system. But P. W. 6 Mahendra, who was commissioned to fix the rolling shutters, had admitted that the shutters were fixed after 1968 and thus the fixation of rolling shutters loses its relevance for the purposes of this appeal which deals with a period prior to 19-11-1958. It is now more or less an established fact that none of the stalls had a locking arrangement, for, the space allotted to each merchant was earmarked on two sides by show-cases placed back-to-back forming the walls and waist high-counters placed in the front across which the merchants would attend to the customers formed the third side.
Ingress, egress and control.
59. As the plan of the building shows, the stores (with the exception of Stall No. 6 of Nathani who is the Appellant in First Appeal No. 648 of 1972, and Stall No. 7 of Ramjivandas who is the Appellant in First Appeal No. 664 of 1972, to whom I would advert later), was like a fort having a single collapsible steel gate which controlled the ingress and egress. A second wooden gate was also provided inside the steel collapsible steel gate for greater security, the space between the two acting as a passage to the stores flanked by show windows on either sides. While handing over possession to the mortgagees Shah Brothers, DSS, vide Exhibit ‘D’ dt. 25th Oct. 1953, talked of giving the keys of the gates. That is to say, once the gate was locked, it was not possible for anyone to enter the stores.
60. Such was the control of the management, that the merchants had to request Ramniklal on 8th July, 1954 (Exh. ‘Z-61’) that “the stores should be kept open continuously from 9.00 am. to 8.00 p.m. without the present break of 12.00 a.m. to 3.00p.m. in order to improve the sales and remove the inconvenience of finding some shelter between 12.00 a.m. (Sic noon) to 3.00 p.m.” The management would close the stores at 12.00 noon, ask all the merchants to clear out, lock the gates and allow them entry only at 3.00 p.m.
61. The timings of the stores became the subject-matter of discussion amongst the merchants and the management, as would be apparent from the perusal of the bunch of letters (Exh. ‘Z-61’ (Colly.)). When the management conceded to the request of keeping the stores open non-stop without lunch break, some merchants, on 23-7-1954, wrote to Ramniklal that they should revert to the old timings as they did not get enough business to justify putting in extra work of three hours. Some complained that as the stores caters to office-goers hardly any one comes between 12.00 noon to 3.00 p.m. while others felt that a good number of customers coming from far off places such as Virar, Kalyan, would be disappointed to find the stores closed between 12.00 noon and 3.00 p.m. The management had the final say in the matter and they decided on 11th Dec. 1954 that the old timings should be restored. So complete was the control of Ramniklal over the timings of the stores that on 1st Dec., 1954 he decided that in view of inauguration of the Stainless Steel Department at the hands of Ashar the paramount landlord, the stores would be opened at 8.00 a.m. Similarly, Ramniklal closed the stores at 10.00 p.m. on 26-10-1954 and asked all the merchants to bring in ‘their account books for a joint Pooja at 10.30 p.m. Deployment of Staff.
62. If DSS, Ramniklal or Laxmi were only interested in acting as landlords, nothing would have been easier than to open an account in the nearest bank and ask the merchants to credit the monthly rent in that account. There would have been no need to appoint any staff whatsoever, not even a bill collector.
But right from the beginning DSS maintained an office in the stores and had a number of employees such as watchmen, accountants etc. As an exercise in business management, DSS, in the year ending 30th June, 1948, had engaged extra highly qualified and experienced staff of accountants and statisticians so that the contingency of accumulating large portion of dead stock did not occur.
Advertisements and Sales Promotion.
63. It appears that Chinubhai used to incur expenditure of about Rs. 5,000/- to Rs. 6,000/-per annum in inserting advertisements of the stores as a whole. (Exh. ‘Z-60’) (‘Z-80’). Whenever the stall holders desired that their names should be specificaly mentioned in the advertisements, Ramniklal used to comply, provided the particular stall-holder bore half the expenses. For instance, Soni Watch Company (vide letter — Exh. ‘Z-73’) wrote on 11th Nov. 1955 informing Ramniklal that an expense of Rs. 243-4-0 had been incurred by them in exhibiting cinema slides at ‘Chitra’, ‘Rivoli’ and ‘Broadway’ of Dadar, and claimed reimbursment of half the cost totalling to Rs. 121-10-0. Another stall-holder Gujar and Company also desired to boost up the sale of Samson Dresses. They intended to have an advertisement campaign which would cost him Rs. 60/- and requested Ramniklal to contribute his share of Rs. 30/-. Ramniklal was issuing calendars showing the name of the stores, but one Karamshi Monshi, holder of stall No. 26, desired that 500 calendars should bear his name as well and by a letter (Exh. ‘Z-70’) dated 3rd Sept. 1956, agreed to bear expenses for the same.
The Merchants’ Association by their Resolution dt. 12-1-1957 decided that the Executive Committee of their Association should discuss with the management a successful campaign of advertisement and that the facade of the stores should be given a face lift. The management, vide their letter dt. 25th March, 1956 (Exh, “Z-60”) agreed to share 50/o of the expenses and invited suggestions and proposals for the construction of the front gate.
Gifts to Customers.
64. It appears that the management gifted a telephone locking device to the customers as a part of their advertising campaign.
Decoration on festival occasions.
65. The acknowledged leader of the stallholders Soni, had admitted that the management-used to decorate the stores on festive occasions.
Rebate to Stall-holders.
66. In order to promote sales, the management had announced a 61/4% rebate on 15th Aug. 1957 to customers and the same was shared by the management. Next year, the merchants again requested the management on 18-7-1958 (Exh. ‘Z-60’) (Colly.) that a rebate of 6% should be allowed to the customers and half the burden of 3% should be borne by the management.
Concessions to Stall-holders.
67. It appears that in spite of advertisement campaign, and all other steps taken by the management, the sales of the stalls did not pick up appreciably. A circular was issued by Ramniklal (Exh. ‘Z-63’) on 3-12-1954 convening a meeting of the stall-holders with a view to giving rebate in the minimum commission. Ramniklal made it clear that the rebate in the commission will be granted only to those merchants who have no outstanding and who would give an undertaking “to remain in the stores for the next six months”. Ultimately, a rebate of 10% was granted but the circulars issued from time to time (Exh. “Z-63”) (Colly.) show that the merchants were in arrears not only in the payment of their minimum commission, but also electric charges. The management also offered a heavy reduction in the minimum commission when the stores was closed for about 10 days during the agitation consequent upon the report of the States Re-organisation Commission.
68. The merchants used to submit sales statements from time to time (‘Exh. “Z-86 to “Z-107”) and the recalcitrants amongst them were reminded to submit statements.
Change of Merchandise.
69. By a letter (Exh. “Z-64”) dt. 2nd Aug. 1956, Soni requested permission from Ramniklal to change the merchandise in which they were dealing till that date, but the management advised him to stock latest popular records of H.M.V. but did not permit him to deal in watches.
Stake or Permission.
70. One of the tests proposed by Lord Denning M. R. in Marchant v. Charters, (1977) 3 All ER 918 at p. 922 is “Was it intended that the occupier should have a stake in the room or did he have only permission for himself personally to occupy the room, whether under a contract or not?” Right from the beginning it was the management of the stores which had a stake not only in the various stalls which they had furnished but also in the sales of stallholders who were given permission to occupy the same. Some of the stall-holders like Paradkar (Exh. “Z-74 dt. 4th Oct. 1956) who could not boost their sales, surrendered their stalls because even the minimum commission was rather too heavy for them to pay. The advertisement compaign was geared to increase the sales of the stall-holders so that the management could augment their share of the commission on the gross sales figures. It was not the stall-holders who had the stake in the stalls but the management who had a stake not only in the stalls and the entire buildings, but also in the total sales so that they could claim higher commission. The interest of the stall-holders was not assignable and every time a new stall-holder was inducted, he was given a fresh permission by the management.
71. The sapling of a departmental stores nursed under the long shadows of Macy’s and Harrod’s did not take roots let alone burgeoing in Dadar soil. The Dadar housewife was accustomed to visit a row of shop-fronts displaying sarees when she wanted to buy a saree and was not mentally attuned to visit a conglomeration of shops selling anything from a pin to a piano. (A white collared Dadarite anyway preferred to do his Sunday morning riyaz squatting on the floor with his good old harmonium!).
72. Most of the stall-holders did not do well with the result that the management had to content itself with the minimum commission. But Century Mills, who had a stall, showed better performance and paid the percentage of commission calculated on the basis of sales which was higher than the minimum agreed upon. After their initial period was over, fresh negotiations were started with Century and a fresh permission granted to them under different terms.
Want of demur.
73. All the licenced agreements with the stall-holders came to an end on 31-12-1965 and the surprising feature of this case is that right from 1946 till this date, not a single assertion was made by the stall-holders that they are tenants. On 1-1-1966, notices of revocation (Exh. “Z-168”) (Colly.) were issued by Laxmi whereafter for the first time’ on 10-1-1966, the stall-holders claimed to be tenants and thus filed the first salvo in this battle. Within a month, they filed suits on 9-2-1966 (Exh. “Z-201”) in the Small Causes Court for obtaining a declaration that they are the tenants. This long acquiescence of the stallholders lends credence to the case of the plaintiffs that the stall-holders were merely licensees.
74. The surrounding circumstances marshalled above like want of facility to independently lock the stalls, the inability of the stall-holders to enter into the building or the stores at will, the requirement of having to seek permission of the management to change the hours of business or effect a change of merchandise, non-assignability of interest in the stalls, repeated recognition of the agreements to pay a fixed percentage of commission subject to a minimum with DSS, Ramniklal and Laxmi, the sale promotion campaigns lodged by DSS, Ramniklal and Laxmi, the correspondence of the stall-holders with the fiscal authorities reiterating the commission agreements, the deployment of staff like watchmen; accountants, statisticians by the management to monitor the sales, want of a single protest by the stall-holders till 10-1-1966 asserting rights of tenancy, submission of sales statements by the stall-holders to the management and payment of commission on the turnover higher than the minimum by Century Mills’ stall, unequivocally point out that all of them, with the exception of stall No. 6 of Nathani and Stall No. 7 of Ramjeevandas were merely licensees for reward.
75. The cases of Nathani and Ramjeevandas stand on different footing. It is not the case of Laxmi or their predecessors in interest that they have never given any premises in the stores on rent. Admittedly, Dr. Patkar who runs a maternity home and others were tenants. Though exclusive possession alone and by itself is not the acid test of determination whether the relationship between the parties is that of tenancy or licence, it assumes importance in the cases of Nathani and Ramjeevandas. Both these stalls are facing the road and the stall-holders have not to enter the collapsible gate at all to reach and open their stalls. Surely, these stalls facing the road could not be kept open as was the practice with the stalls inside the main gate. The exclusive possession in their case coupled with the fact that there are other persons who are recognised to be the tenants in the building of the stores, is a pointer to the fact Laxmi have failed to prove that Nathani and Ramjeevandas are mere licensees.
76. A feeble attempt has been made by the defendants-stall-holders to challenge the title of Laxmi to the suit premises and this has been countered by Laxmi pleading that the stall-holders are estopped from doing so. As, neither Ashar, nor DSS, nor Shah Brothers, nor Ramniklal are parties to the present proceedings, and as the suits are simple money suits it is obvious that no final adjudication can be made regarding the question of title of Laxmi to the suit premises in these proceedings. That belongs to this Court on its Original Side where a title suit is pending.
Under the first lease Exh. “1”, dt. 5th July, 1948, DSS, the Lessees, had acquired an interest in the premises for a term of 10 years computed from 1st June 1946 to 31st May 1956 with an option of one renewal. This option was exercised both by DSS and by Ramniklal. This position was accepted by Ashar in Exhibits “Z-173′ and “Z-58”. In Exhibit “Z-186” dt. 6th Sept. 1955 Mulla have referred to the letters dt. 1st and 2nd Aug. 1955 by which Ramniklal had purported to exercise option for the renewal of the lease. It is another matter that Mulla pointed out that rent has not been paid regularly at the rate of Rs. 100/-per month. On 6th Sept. 1960 that is much after the first period of 10 years was over, the Solicitors of Ashar accused DSS of having committed breaches of certain covenents of the lease and purported to terminate the same.
77. On 31st May 1956 the 20 year period under the original Lease Deed expired. Admittedly, a registered Conveyance for the second 10 year period was not executed, but the exchange of letters, as respects the renewal, would be admissible under the Proviso to Section 49 of the Registration Act for a collateral purpose of showing the nature and character of possession of Laxmi. Satish Chand Nakhan v. Govardhan Das Byas, . As Laxmi held over and continued in possession by paying rent, the holding over must be held as a tenancy from month to month. The rent was being received from Ramniklal but the receipts were being given in the name of DSS.
78. The possession of Ramniklal and Laxmi was a juridical one and Ramniklal and Laxmi being persons in juridical possession of the premises, had entered into a contract of licence permitting the stall-owners to use the premises for display and sale of their goods in return for a commission computed on the basis of an agreed percentage of the gross sales.
79. Even before coming into force of the Indian Evidence Act, 1872, this High Court has been following the principle of tenant estoppel. In Vasudev Daji v. Babaji Ranu, (1871) 8 Bom HCR 175, the Court held that a tenant cannot ordinarily dispute the title of his landlord in a suit brought against him for recovery of possession if the existence of a tenancy is established by the fact of the tenant’s payment of rent to his landlord or otherwise.
After the coming into force of the Indian Evidence Act which, in Section 116, incorporated the principle of estoppel of tenant, the Privy Council, in Kumar Raj Krishna Prosad Lal v. Baraboni Coal Concern Ltd. , held that Section 116 does not deal with all kinds of estoppel or occasions of estoppel which might arise between the landlord and the tenant.
80. Though Laxmi had exercised its right of renewal and the paramount landlord Ashar had agreed to grant the request, the conveyance was not registered as was contemplated by the original lease deed. Counsel for the Appellants argued that in the absence of a registered deed, the purported renewal for a fresh period of 10 years is ineffective and neither Ramniklal nor Laxmi could act as landlords and induct the appellants into the premises either as tenants or as licensees. As observed earlier, the principle of tenant estoppel is wider than that governed by the ambit of Section 116 of the Evidence Act and the absence of a registered lease deed for the renewed period would make no difference as regards the bar of estoppel against the appellants. In Industrial Properties (Barton Hill) Ltd. v. Associated Electrical Industries Ltd., (1977) 1 QB 580 (CA) though the purchase price was paid pursuant to an agreement to sell the freehold of an industrial estate, no conveyance of the property was made in order to save stamp duty and the premises were leased out to A.E.I. The landlord filed a suit claiming damages against A.E.I. for breach of covenant to repair the premises and the lessees who by then had discovered the defect in the title of the landlord, challenged the maintainability of the suit for damages. Holding that the landlords have become equitable owners of the premises, the Court found that the tenants are estopped from challenging the landlords’ equitable title, and that this rule of estoppel continued to operate after the expiry of the lease unless, after the termination of the lessee’s possession a claim was made against him by a title paramount in respect of some part of the period of the lease.
When a valid contract of tenancy had been created between the parties, the tenant would be estopped under the contract even though it might be that some other person, for example, the reminderman or a mortgagee might be able to assert some title paramount against the tenant who had been given, as between himself and his landlord, a perfectly valid tenancy. Stratford v. Syrett, (1958) 1 QB 107.
Consequently it is obvious that the stallholders having been inducted into the premises by Laxmi the equitable owners — are estopped from challenging its title.
Two minor points.
81. Two minor points remained to be discussed. The first was regarding the maintainability of the suit for which an argument was advanced that as minors who earlier were admitted to the benefits of partnership of the plaintiff firm have since become partners, a new partnership has been formed while the certificate (Exh. “B”) showing the entry in the register of firms deals with the old partnership. The learned trial Judge, after relying on the case of Bhogilal Laherchand v. Commr. of Income-tax, , has rightly held that the old partnership continued when a minor son attaining majority elects to continue as a partner.
Secondly, it was argued that in view of Section 15 of the Bombay Rent Act, the plaintiffs could not acquire any right, title and interest in the premises. The learned trial Judge, after taking note of the fact that Section 15 operates “subject to any contract to the contrary” has correctly dismissed this objection holding that the initial lease being Exh. 1 itself permitted transfer absolutely or by way of mortgage or sub-lease and also subsequent to such transfer. (The rest of the judgment is not relevant for this report — Ed.)