In line with the law laid down, it is clear that the contract mandated continuation of the business in the name of ‘Karandikar Brothers’ by paying royalties of Rs. 90 per month. Once the parties have accepted the recitals and the contract, the respondent could not have adduced contrary extrinsic parole evidence, unless he portrayed ambiguity in the language. It may not be out of context to note that the extension of the contract was on same conditions.
{Para 16}
17. On consideration of the matter, the High Court erred in
appreciating the ambit of Section 95, which led to consideration of evidence which only indicates breach rather than ambiguity in the language of contract. The evidence also points that the license was created for continuation of existing business, rather than
license/lease of shop premises. If the meaning provided by the High Court is accepted, then it would amount to Courts substituting the bargain by the parties. The counsel for respondent has emphasized much on the receipt of payment, which mentions the term ‘rent received’. However, in line with the clear unambiguous language of the contract, such evidence cannot be considered in the eyes of law.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 10827 of 2010
Mangala Waman Karandikar Vs Prakash Damodar Ranade
Author: N.V. RAMANA, CJI
Dated: MAY 07, 2021
1. This appeal is filed against the judgment of the Bombay High Court,
in Second Appeal No. 537 of 1991, wherein the second appeal was
allowed in favour of the respondent and the decree in favour of the
appellant herein was set aside.
2. This case arises out of a contract entered into between the
Appellant (since deceased represented through Legal Heirs) and the
Respondent. Initially Appellant’s husband was running a business
of stationary in the name of “Karandikar Brothers” before his
untimely demise in the year 1962. After his demise, she continued
the business for some time. After a while, she was unable to run the
business and accordingly decided to let the Respondent run the
same for some time. She entered into an agreement dated
07.02.1963, wherein following terms were reduced in writing:
“2. For the last about 24 to 25 years, a stationary shop by
the name Karandikar Brothers belonging to you of the
stationary, note books and books is being run in the
premises situated in City Survey no. 196/66 (New House
No. 1643) at Sadashiv Peth, Pune. I request to you to give
the said shop to me for running the same. Accordingly,
you agreed for the same. Accordingly, an agreement was
reached between us. The terms and conditions whereof are
as follows:
A. The stationary shop ∙ by name "Karandikar Brothers"
belonging to you of the stationary materials which is
situated in the premises described in Para 1 (a) above and
in which the furniture etc. as described in Para l(b) above
belonging to you is existing is being taken by me for
conducting by an agreement for a period of two years
beginning from 1st February 1963 to 31st January 1965.
B. The rent of the shop described in Para 1 (a) above is to be
given by you only to the owner and I am not responsible
therefor. I am to pay a royalty amount of Rs. 90 /(
Rupees
Ninety only) for taking the said shop for conducting, for
every month which is to be paid before the 5th day of
every month.”
3. Time after time, the contract was duly extended. In 1980s, desiring
to start her husband’s business again, appellant herein issued a
notice dated 20.12.1980 requesting the Respondent herein to
vacate the suit premises by 31.01.1981. The Respondent replied to
the aforesaid notice claiming that the sale of business was
incidental rather the contract was a rent agreement stricto sensu.
Aggrieved by the Respondent’s reply, the appellant herein filed a
civil suit being RCS. No. 764 of 1981 before the Court of Joint Civil
Judge, Junior Division, Pune. During the course of the trial, one of
the important questions that the Trial Court framed, which is
relevant for our purpose can be observed hereunder:
“Does the Defendant prove that from the year 1963
he is licensee in the said suit premises as contended
in para 7 of the plaint? And thereby on the date of
suit he became tenant of the suit premises under
Section 15A of the Bombay Rent Act?”
The Trial Court by Judgment dated 30.08.1988, decreed the Suit in
favor of the appellant herein and held that the purport of the
Agreement was to create a transaction for sale of business rather
than to rent the aforesaid premises to the Respondent herein. The
Court while negating the contention of the Respondent, that the
shop premises was given to him on license basis held as under:
“8. The defendant does not deny the fact that originally the
husband of deceased Mangala Karandikar namely Waman
Karandikar used to conduct the business of the suit shop.
The business of stationary, books and notebooks was being
run by him. Same business has been handed over to him. …
The suit shop and the said business came to deceased
Mangala Karandikar after the death of her husband. It has
come in the evidence 50 that because of death of her
husband and after the death of her husband, she was
unable to continue the business. In the meantime, the
defendant approached to her. Thereupon she agreed to hand
3
over the running business to the defendant. This fact has
been denied by the defendant. The defendant raises the
contention that the plaintiff never had the shop of stationary,
but she had the grocery shop. After the death of her
husband, it was lying closed for years together. In the year
1963 the defendant approached the plaintiff and thereupon
the plaintiff agreed to give the suit shop. On licence basis to
him. This plea of the defendant is negativated by the terms
and conditions of the agreement deed itself. The heavy
burden was lying on the defendant to prove that there was
licence agreement. He has not discharged the same.
Therefore, the document became much relevant, and it has
got material importance. If the conditions as enumerated in
this document Exh.33 are carefully scrutinized, it will
become significant that the deceased plaintiff had the sole
intention to hand over' the running business of the suit shop
to the defendant. There had been no intention to create
the leave and licence in respect of the suit premises. The
deceased plaintiff had very specifically and by taking at most
case and precaution excluded the word premises of shop in
the agreement. But all the while the word ∙ "shop" was used
with reference to business only. Nextly she has also
excluded the word rent to be used. She had specifically
made the recital of imposing the royalty on the
defendant. The word licence, for the purpose of Bombay
Rent Act always refers to premises. The defendant has to
seek the benefit under the provisions of Bombay Rent Act.
Here the plaintiff had never intended to create the leave and
licence in respect of the suit shop. The defendant has relied
upon the receipt Exhibit40.
This is the document produced
by the plaintiff. It discloses that the word "rent" has been
shown in this respect. The defendant is taking benefit of this
fact and alleging that the rent was being recovered and not
the royalty. Here it is worth to be noted that the plaintiff had
at all no intention to recover the rent. All the while, it has
been the case of the plaintiff that the royalty was being
recovered. Therefore, I am unable to hold that the rent was
being recovered by the plaintiff. …
“14. Issue Nos. 5 and 6. The
defendant has alleged that he
is the tenant in the suit shop. Initially, the premises were
given to him on licence basis but by virtue of amendment to
Bombay Rent Act and by virtue of insertion of section 15(A)
all the licensees have become the tenants. Learned advocate
appearing on behalf of the defendant places his reliance on
Case Law reported in A.I.R. 1987 Supreme Court page 117.
No doubt there can be no dispute regarding the principles of
law. In the instant suit, the defendant has utterly failed
to prove that the shop premises were given to him on
licence basis. Therefore, no question of his tenancy can
arise at any time. …”
(emphasis supplied)
4. Accordingly, the Trial Court ordered the respondent to hand over
the suit property to the appellant herein including the furniture and
other articles.
5. Aggrieved by the Trial Court judgment, the Respondent filed an
Appeal before the Court of Additional District Judge, Pune in Civil
Appeal No. 979 of 1988. On 29.07.1991, the Additional District
Judge rendered a judgment dismissing the appeal filed by the
Respondent herein. Aggrieved by the dismissal the Respondent
herein filed a Second Appeal before the High Court of Bombay in
Second Appeal No. 537 of 1991.
6. By impugned order dated 07.11.2009 the High Court of Bombay
allowed the Second Appeal and set aside the Trial Court’s Order as
well as the First Appellate Court’s Order and held that the
Respondent had entered into a license agreement which is covered
under Section 15A of the Bombay Rent Act. Further the Court held
that the Trial Court did not have the Jurisdiction to try the cases
under the Bombay Rent Act, the appropriate Court should have
been Small Causes Court established under the Provincial Small
5
Causes Court Act. The Second Appellate Court also observed on the
merits of the case and held as under.
“22. Thus, considering the entirety of the case, in my view,
both the Courts below have incorrectly interpreted the
document and the surrounding circumstances which, in my
view, indicate that the parties had in fact agreed that the
premises were transferred to the appellant on a leave and
license basis.”
7. Aggrieved by the same, the appellant herein filed this appeal.
8. The counsel for the appellant contended that the impugned order of
the High Court erred in appreciating the language of the contract,
which clearly points towards the intention of the parties to create a
license for continuing existing business, which was run by late
husband of the appellant. On the other hand, the counsel for the
respondent has supported the judgment by stating that there is
extrinsic evidence which shows that the contract entered into
between the parties was a license to use the shop, which is covered
under Bombay Rent Act. In this light, he supports the impugned
order to state that the Trail Court did not have jurisdiction in the
first place.
9. Having heard both the parties at some length, at the outset before
we analyse this case, we need to observe some principles on
contractual interpretation. Unlike a statutory interpretation, which
is even more difficult due to assimilation of individual intention of
law makers, contractual interpretation depends on the intentions
expressed by the parties and dredging out the true meaning is an
‘iterative process’ for the Courts. In any case, the first tool for
interpreting, whether it be a law or contract is to read the same.
10.It is usual that businessmen often do not sit over nittygritty
in a
contract. In a document the language used by the parties may have
more than one meaning. It is ultimately the responsibility of the
Courts to decipher the meaning of the words used in a contract,
having regards to a meaning reasonable in the line of trade as
understood by parties.1 It may not be out of context to state that the
development of rules of contractual interpretation has been gradual
and has taken place over century. Without going into extensive
study of precedents, in short, we may only state that the path and
development of law of interpretation has been a progress from a stiff
formulism to a strict rationalism.2
11. It is clear from the reading of the contract that the parties had
intended to transfer business from appellant to respondent during
1 Investors Compensation Scheme v. West Bromwich Building Society, [1998] 1 WLR 896
2 Wigmore JH, “Wigmore on Evidence, Vol. 4” (1915) 25 The Yale Law Journal 163.
7
the contractual period. This agreement was not meant as a lease or
license for the respondent to conduct business. However, the
respondent contends that the meaning of the document should not
be culled solely with reference to the language used in the
document, rather extrinsic evidence needs to be utilized before
adducing proper meaning to the contract. In this regard he submits
that on consideration of all the extrinsic evidence, the contract
should be read as a leave and license agreement, which is covered
under the Bombay Rent Act. He draws his support from Section 95
of the Indian evidence Act to state that the document needs to be
interpreted having regard to external evidence such as receipts of
payment under the contract addressed as rent receipts etc.
12. It may be noticed that the High Court had appropriately identified
the question of law in the following manner:
15. The debate therefore revolves around the question as to
whether the agreement of 7th February, 1963 was a license
to conduct a business in the premises or was a license to
run the existing business which was being run by the
respondents in the suit premises. Does the document create
an interest in the premises or in the business?
13. The High Court in order to answer the question utilized Section 95
of the Evidence Act, which reads as under:
95. Evidence as to document unmeaning in reference to
existing facts.—When language used in a document is plain
in itself, but is unmeaning in reference to existing facts,
evidence may be given to show that it was used in a peculiar
sense.
Illustration A sells to B, by deed, “my house in Calcutta”. A
had no house in Calcutta, but it appears that he had a
house at Howrah, of which B had been in possession since
the execution of the deed. These facts may be proved to show
that the deed related to the house of Howrah.
Aforesaid Section is part of Chapter VI, which deals with ‘Of the
exclusion of Oral by documentary evidence’ containing Section 91 to
100. Section 92 reads as under:
92. Exclusion of evidence of oral agreement.—When the
terms of any such contract, grant or other disposition of
property, or any matter required by law to be reduced to the
form of a document, have been proved according to the last
section, no evidence of any oral agreement or statement shall
be admitted, as between the parties to any such instrument
or their representatives in interest, for the purpose of
contradicting, varying, adding to, or subtracting from, its
terms:…
Proviso (6).—Any fact may be proved which shows in what
manner the language of a document is related to existing
facts.
14. It is manifest from these two sections that it is only in cases where
the terms of the document leave the question in doubt, then resort
could be had to the proviso. But when a document is a
straightforward one and presents no difficulty in construing it, the
proviso does not apply. In this regard, we may state that Section 95
only builds on the proviso 6 of Section 92.
15. If the contrary view is adopted as correct it would render Section 92
of the Evidence Act, otiose and also enlarge the ambit of proviso 6
9
beyond the main Section itself. Such interpretation, provided by the
High Court violates basic tenants of legal interpretation.3 Section 92
specifically prohibits evidence of any oral agreement or statement
which would contradict, vary, add to or subtract from its terms. If,
as stated by the learned Judge, oral evidence could be received to
show that the terms of the document were really different from
those expressed therein, it would amount to according permission
to give evidence to contradict or vary those terms and as such it
comes within the inhibitions of Section 92. It could not be
postulated that the legislature intended to nullify the object of
Section 92 by enacting exceptions to that section.
16. In line with the law laid down, it is clear that the contract mandated continuation of the business in the name of ‘Karandikar Brothers’ by paying royalties of Rs. 90 per month. Once the parties have
accepted the recitals and the contract, the respondent could not
have adduced contrary extrinsic parole evidence, unless he
portrayed ambiguity in the language. It may not be out of context to
note that the extension of the contract was on same conditions.
3 Rohitash Kumar v. Om Prakash Sharma, (2013) 11 SCC 451 at pg. 459
17. On consideration of the matter, the High Court erred in
appreciating the ambit of Section 95, which led to consideration of
evidence which only indicates breach rather than ambiguity in the
language of contract. The evidence also points that the license was
created for continuation of existing business, rather than
license/lease of shop premises. If the meaning provided by the High
Court is accepted, then it would amount to Courts substituting the
bargain by the parties. The counsel for respondent has emphasized
much on the receipt of payment, which mentions the term ‘rent
received’. However, in line with the clear unambiguous language of
the contract, such evidence cannot be considered in the eyes of law.
18. Moreover, the contention that the aforesaid situation is covered by
the Bombay Rent Act is misplaced. Once we have determined that
the impugned agreement was a license for continuing existing
business, Bombay Rent Act does not cover such arrangements.
Therefore, the jurisdiction of the trail court is accordingly not
ousted.
19. In light of the above, the impugned order of the High Court cannot
be sustained, and is accordingly, set aside. The decree of the trial
court is restored. The appeal is allowed in the above terms and
there shall be no order as to costs.
..…..…….................CJI.
(N.V. RAMANA)
…...….................J.
(SURYA KANT)
……..………............J.
(ANIRUDDHA BOSE)
NEW DELHI;
MAY 07, 2021
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