Conducting Agreements Versus Deemed Tenancy: Supreme Court Reaffirms Importance of Written Clauses and Concise Pleadings

Introduction

In Annaya Kocha Shetty (Dead) Through LRs v. Laxmibai Narayan Satose Since Deceased Through LRs & Ors. (2025 INSC 466), the Supreme Court of India examined the nature of a contract styled as an “agreement for conducting business” and determined whether such a contract could give rise to deemed tenancy rights under Section 15A of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 (“Bombay Rent Act”). The appeal was brought against decisions of the lower courts, which had reached conflicting conclusions on whether the agreement created a license or a right to conduct the hotel business.

The dispute centered on the plaintiff’s claim that he was in fact a protected licensee or deemed tenant under the Bombay Rent Act, whereas the first defendant (landlady) argued that the agreement only permitted the plaintiff to conduct her ongoing hotel business, subject to royalty payments, without conferring any tenancy rights in the premises. The decision addresses critical aspects of contract interpretation, limitations on evidentiary submissions under Sections 91 and 92 of the Evidence Act, 1872, and the legislative purpose of Section 15A of the Bombay Rent Act.

Notably, the Court also took the opportunity to admonish excessively lengthy or meandering pleadings, referencing the need for brevity and warning that courts may invoke Order 6 Rule 16 of the Civil Procedure Code to strike out frivolous or unnecessary material. This Judgment thus moves beyond the specific tenant-license dispute and raises significant points regarding good drafting practices, efficient litigation, and the role of technology in legal procedures.

Summary of the Judgment

The Supreme Court upheld the decision of the appellate bench and the High Court of Bombay, concluding that the contractual arrangement in question was an agreement for conducting business rather than a leave and license arrangement that could confer protected tenancy or license rights. The Court dismissed the plaintiff’s appeal, reaffirming that the nomenclature of a contract alone is not conclusive; rather, the totality of the agreement’s clauses must be considered.

The Court underscored that:

• The plain language of the agreement indicated a business-conducting arrangement, referencing the grant of a right to run an existing hotel business, as opposed to the handing over of possession of the premises for independent use.
• Given the clarity of the written document, Sections 91 and 92 of the Evidence Act, 1872 barred the introduction of contradictory oral evidence.
• The plaintiff’s reliance on the label “leave and license,” or the existence of certain registrations (e.g., sales tax documents), did not override the explicit terms that the parties had negotiated and recorded in writing.
• Allegations regarding arrangements intended to circumvent tenancy restrictions or earlier statutory prohibitions were insufficient to transform the underlying relationship into a deemed tenancy.
• The appellate court and the High Court were correct to reverse the trial court’s view that the plaintiff was a deemed tenant under Section 15A of the Bombay Rent Act.

As final relief, the Court dismissed the Civil Appeal and imposed costs of INR 1,00,000/- payable to the first defendant.

Analysis

Precedents Cited

Several judicial precedents and principles influenced the Court’s reasoning:

• Provash Chandra Dalui v. Biswanath Banerjee: This case provided the rule that when the words in a contract are unambiguous, courts cannot override them with extrinsic considerations. Courts must look to the plain meaning of the words unless they are ambiguous or meaningless.
• Chandavarka Sita Ratna Rao v. Ashalata S. Guaram: The Court referred to this decision for the interpretation of Section 15A of the Bombay Rent Act, explaining when a pre-1973 license might be converted into a valid tenancy. However, the Court emphasized that each factual scenario should be tested against the exact language of the deed.
• Mangala Vaman Karandikar v. Prakash Damodar Ranadeon: This judgment clarified the scope of Sections 91 and 92 of the Evidence Act, 1872, emphasizing that while the written contract is primary evidence, the Court may look beyond it only under certain narrowly defined exceptions.
• Varisalli Mohd. Ilias v. Abdul Sattar Gulam Hussain: Cited to distinguish between a genuine license arrangement and an authority to conduct a business, confirming that the parties’ intention, as expressed in their agreement, remains central to any analysis.

By synthesizing these precedents, the Supreme Court reiterated that the hallmark of judicial interpretation is consistent adherence to the substance of the document, rather than the superficial label.

Legal Reasoning

The Court’s legal reasoning can be broken down into the following key points:

1. Plain and Literal Interpretation: The Court carefully parsed the language of the agreement dated August 16, 1967. The repeated references to “conducting business,” “owner,” “conductor,” “royalty,” and the obligation to return utensils and fixtures all indicated that the plaintiff was entrusted with the operation of an existing hotel, rather than receiving any direct creation of rights in the immovable property itself.
2. Sections 91 and 92 of the Evidence Act, 1872: Because the original agreement was clear and explicit about the nature of the parties’ relationship, none of the exceptions under the provisos to Section 92 applied. Hence, the plaintiff’s attempt to introduce oral evidence claiming a disguised tenancy was barred.
3. Distinguishing Business Possession from Tenancy: The Court observed that possession for the purpose of independently occupying a property (as in tenancy) must be clearly conveyed or inferred from the contract. There was no explicit transfer of the landlady’s own right of possession over the premises to the plaintiff; rather, she retained possession as tenant/lessee from the original landlord, and the plaintiff only obtained the right to use the premises for her own business.
4. Purposive or Contextual Approach: Although courts should consider the overall context, the founding premise remains the words of the contract. The Court underscored that any ambiguity might invite broader consideration of context, but in this case the agreement was unambiguous.
5. Impact of Section 15A of the Bombay Rent Act: Section 15A grants protection to licensees by converting valid licenses subsisting as of certain cutoff dates into statutory tenancies. However, it does not authorize rewriting an agreement of conducting business into a license that confers possession akin to tenancy. Hence, the plaintiff could not claim protection under that provision.

Impact

Complex Concepts Simplified

Deemed Tenancy - Section 15A of the Bombay Rent Act: Introduced to protect certain licensees from eviction, Section 15A deems them tenants if their licenses were in force prior to the statutory date. However, a fundamental requirement is that the arrangement must be a valid license granting occupancy rights. Where an arrangement deals only with conducting a business in the owner’s name, no such license-based occupancy arises.

Sections 91 and 92 of the Evidence Act, 1872: These sections address the principle that a written contract’s terms must be proved by the document itself and not contradicted by oral evidence. Section 91 states that the document is the primary evidence of the contract, while Section 92 bars any party to a written contract from adducing oral evidence to alter or contradict the written terms. Exceptions are narrow (e.g., to show fraud, mistake, or illegality) and did not apply here.

Agreement of Conducting a Business: Sometimes termed a “conducting agreement,” this arrangement is different from a lease or license of immovable property. It allows one person to manage and operate the owner’s existing enterprise, typically in exchange for a fee described as “royalty.” The premises remain in the name or possession of the owner, and the “conductor” does not generally obtain any occupancy right in property law terms.

Conclusion

By confirming the appellate bench’s finding that the plaintiff was not a deemed tenant and had only been granted rights to conduct the defendant’s business, the Supreme Court underscores a clear principle: it is the substance of the agreement that governs the legal relationship, not the superficial label or extrinsic oral evidence. The Judgment illustrates how courts give primacy to the plain wording of a written contract and uphold the sanctity of Sections 91 and 92 of the Evidence Act.

Equally important is the Court’s critique of unfocused, lengthy pleadings and the pressing need for precision, brevity, and clarity. This decision serves as a guidepost for lawyers and litigants, reminding them to respect statutory rules of evidence, draft concise pleadings, and avoid conflating legal concepts (e.g., tenancy rights with a business-conducting license arrangement).

In an era of rapidly evolving legal practice and emerging technologies, the Supreme Court’s stance emphasizes rigorous drafting standards and the lasting authority of well-established evidentiary rules. Ultimately, Annaya Kocha Shetty (Dead) Through LRs v. Laxmibai Narayan Satose Since Deceased Through LRs & Ors. stands as a crucial reference point for any case disputing the true nature of possession, highlighting that where an enterprise is entrusted for operation without transferring real property rights, it remains a conducting agreement, not a license or tenancy granting occupancy rights.