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Sultanali Mulla Rasoolji v. Tyeb Pir Mahomed

Bombay High Court

Mar 18, 1929

Judgment

Subsequent
References

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Structured Summary of the Opinion

Factual and Procedural Background

The defendant tendered into evidence two letters, both dated 24th October 1924, which the defendant contended together constituted an agreement of lease under which he constructed a shed on demised land and now claims compensation by way of counter-claim. The plaintiff objected to the admission of these letters on the ground that they amounted to an agreement to lease immovable property for a period of five years and therefore, under the Registration Act, were compulsorily registrable and inadmissible in evidence without registration. The court was asked to rule on the admissibility of these letters.

Legal Issues Presented

Whether the two letters of 24th October 1924, when read together, constitute a present demise (i.e., create a present and immediate interest in land) despite providing for the lease to commence from a specified future date (1st January 1925).
If they do constitute a present demise, whether they are consequently compulsorily registrable and inadmissible in evidence for want of registration under the Registration Act (specifically cited: Sections 17(1)(d) and 49).

Arguments of the Parties

Plaintiff's Arguments (Mr. Vachha)

The two letters constitute an agreement to lease immovable property for a period of five years and therefore are compulsorily registrable under the Registration Act.
Because they are not registered as required, the letters are inadmissible in evidence.

Defendant's Arguments (Mr. Desai)

The two letters together constitute an agreement (and were relied upon as such) under which the defendant took a lease and constructed a shed; they should therefore be admitted in evidence.
He relied on authorities (including Purmananddas Jiwandas v. Dharsey Virji, Hemanta Kumari Debi v. Midnapur Zamindari Co., and Sir Mahomed Yusuf Ismail … v. Secretary of State …) to argue that the document should be construed so as not to be caught by the registration requirement in the circumstances or that, alternatively, the words used show a present demise.
He contended that because the lease was to commence on a future date (1st January 1925), this might negate a present demise — an argument the court considered in light of the authorities cited.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Narayanan Ghetty v. Subbiah	Holds that it is immaterial whether possession has passed in accordance with the agreement when deciding whether a document creates a present demise.	The court relied on this authority for the proposition that it is immaterial to the legal characterization of the instrument whether the parties acted upon it (possession passing) and noted it was common ground that possession commenced on 1st January 1925.
Purmananddas Jiwandas v. Dharsey Virji	Ratio: an agreement for a lease needs registration if the parties intend to create a present demise; even if a formal lease is contemplated, the paramount intention gathered from the whole instrument governs.	The court acknowledged the case and its ratio as establishing that intention declared by the instrument is paramount in deciding whether a present demise was created (and thus whether registration is required).
Hemanta Kumari Debi v. Midnapur Zamindari Co.	Held that an agreement contingent on the happening of an indeterminate future event does not amount to an "agreement to lease" as it does not create a present and immediate interest in the land.	The court distinguished this authority: it held that Hemanta Kumari Debi was inapplicable because, in the present case, the tenancy creation was not made dependent on a contingency and the lease was to commence on a definite later date, whereas Hemanta Kumari concerned a contingent event at an indeterminate time.
Sir Mahomed Yusuf Ismail … Defendant v. Secretary Of State … Plaintiff	Shows that words like "shall let" have been held not to be words of present demise; collateral circumstances may indicate the parties did not intend a present demise (Pratt, J.).	The court considered and distinguished this case: it found the present letters did contain indications of a present demise (e.g., use of the terms "demised premises/land", deposit kept as security, proviso for re-entry), unlike the contractual matrix in Pratt, J.'s decision where improvements and conditions precedent negatived a present demise.
Poole v. Bentley	Support for the principle that the intention of the parties, as declared by the words of the instrument, governs the construction of the instrument.	The court cited this principle (as quoted in the judgment) to reinforce that the words of the instrument must be read to discover the parties' intention and that a paramount intention that an instrument operate as a lease will determine its character.
Pinero v. Judson	Authority for the rule that where there is a paramount intention that the instrument shall operate as a lease, the court will so hold despite conflicting expressions.	The court invoked this principle to justify examining the overall intention expressed in the letters and holding that if the paramount intention is to create a lease, that intention controls the characterization.

Court's Reasoning and Analysis

The court undertook a close textual analysis of the two letters dated 24th October 1924. It identified the following relevant terms in the correspondence:

An express statement that the writer "has agreed to take a lease" from the addressee.
A definite term: the lease is to be for a period of five years commencing from 1st January 1925.
Provision for payment of monthly rent in advance on the first day of each month and a cheque for Rs. 151 to be kept as a deposit during the continuance of the lease.
The premises are repeatedly referred to as "demised premises" and "demised land."
A clause anticipating that a formal lease will be executed later and that such lease will contain a proviso for re-entry in case of default in payment of rent for a month after it becomes due or in case of breach of any covenants.

The court stated the governing test: the document itself must be examined to see whether it contains words which can be construed as constituting a present demise. It held that collateral matters such as the subsequent conduct of the parties (for example, whether possession passed) are immaterial to that primary textual inquiry, citing Narayanan Ghetty v. Subbiah for that proposition.

The court considered authorities relied upon by the defendant and analyzed whether they were applicable:

Purmananddas Jiwandas v. Dharsey Virji: the court accepted the principle that the paramount intention as gathered from the whole instrument determines whether an agreement creates a present demise; this principle guided the textual inquiry.
Hemanta Kumari Debi v. Midnapur Zamindari Co.: the court distinguished this Privy Council decision because that case concerned an agreement contingent on an indeterminate event and therefore did not create a present interest; by contrast the present letters created an interest by writing which was to commence on a definite later date.
Sir Mahomed Yusuf Ismail …: the court distinguished Pratt, J.'s reasoning in that case (where the words used and surrounding circumstances negatived a present demise) from the present correspondence, finding that the present letters did contain expressions and terms indicative of a present demise.
The court further relied on the general principle (citing Poole v. Bentley and Pinero v. Judson) that the intention of the parties as declared by the words of the instrument governs construction and that where the instrument manifests a paramount intention to create a lease, the court will so construe it even if a formal lease is contemplated later.

Integrating the textual indicators in the letters with the governing principles, the court concluded that the two letters together gave the defendant a present and immediate interest in the land (i.e., amounted to a present demise) even though the lease was to commence from a definite future date.

Consequently, the court held that the letters fell within Sections 17(1)(d) and 49 of the Registration Act and, because they were not registered as required, were inadmissible in evidence for want of registration.

Holding and Implications

Holding: The court upheld the plaintiff's objection, held that the two letters constituted a present demise of the land and therefore fell under Sections 17(1)(d) and 49 of the Registration Act, and rejected the documents as inadmissible for want of registration.

Direct consequences and implications:

The two tendered letters were excluded from evidence and cannot be relied upon by the defendant in support of his counter-claim for compensation for the shed.
The decision turns on the textual construction of the letters and application of established principles about present demise and registration; the opinion distinguishes earlier authorities relied on by the defendant but does not purport to establish any new legal principle beyond applying existing authorities to the facts before it.

Order: The objection was upheld and the documents were rejected. (Opinion signed R.M/R.K.)

Show all summary ...

1. Mr. Desai on behalf of the defendant has tendered for being admitted into evidence two letters, each dated 24th October 1924, one being from the defendant to the plaintiff and the other from the plaintiff to the defendant, as constituting an agreement between the parties on the faith of which the defendant constructed a shed on the land demised to him for which he now claims compensation by his counter-claim. Mr. Vachha on behalf of the plaintiff objects to these letters being admitted into evidence on the ground that they constitute an agreement to lease an immovable property for a period of five years which, under the Registration Act, is compulsorily registrable and would be inadmissible in evidence without registration.

2. The first of these two letters, which the second letter confirmed, is in the following terms:

“Bombay, 21th October 1924.

Sultan Ali Mulla Rasoolji, Esq.

Dear Sir,

I bag to note that I have agreed to take a lease from you of the vacant land lying in front of your three chawls at Foras Road in Bombay excluding the portion of the land ten fact in width running along the front of the three chawls and also excluding a ten feet passage for ingress to and engress from the chawls.

The lease is to be for a period of five years commencing from 1st January 1925, at the monthly rent of Rs. 151. You are to pay all municipal taxes in respect of the land, provided that if the annual rent of the property for the purpose of municipal assessment is fixed at over Rs. 1812, I am to pay the increase in the municipal taxes by reason of the annual rent being fixed at over 1812.

I am to pay rent for every month in advance on the first day of the month. I have given pou a cheque for Rs. 151 which sum is to be kept by you as deposit during the continuance of the lease.

I am not to use demised premises for any other purpose other than that of storing timber.

I am not to assign the demised premises without your previous consent in writing and am not to erect any building or structure on the land which may contravene the rules and regulations of the municipality or any other public body.

You are to be at liberty to determine the lease after giving me three months' notice in writing in the event of your deciding to build on the demised land.

A formal lease is to be executed, such lease will contain a proviso for re-entry in case of default in payment of rent for a month after it became due or in case of breach of any of the covenants and conditions contained in the lease and to be performed and observed by me and such other usual for is and conditions as your attorneys may think fit to be inserted in the lease.

The charges in connexion with the preparation and execution and registration of the lease will be paid by us in equal shares.

Your faithfully.”

3. Paragraph 1 of the letter states that the writer has agreed to take a lease from the addressee. Para. 2 states that the case is to be for a period of five years commencing from 1st January 1925; para. 3 states that the rent for each month is to be paid by the writer in advance on the first day of the month and that he has given to the addressee a cheque for Rs. 151 which sum is to be kept by the addressee as deposit during the continuance of the lease. Para. 4 refers to the premises as demised premises. The premises are referred to as “demised premises” and “demised land” respectively in para. 5 and 6. Para. 7 of the letter states that a formal lease will be executed and such lease will contain a proviso for re-entry in case of default in payment of rent for a month after it becomes due or in case of breach of any of the covenants and conditions in the lease to be performed and observed by the writer and such other usual terms and conditions as the addressee's attorneys may think fit to be inserted in the lease. The test to be applied in a case like the present is to see from the document itself whether it contains words which can be construed as constituting a present demise. It would be immaterial, in my opinion, to consider for the purpose of deciding this point what the conduct of the parties in respect of the document was. Whether the parties acted upon the document to the extent of giving and taking possession of the premises in terms of the document, would be immaterial. In Narayanan Ghetty v. Subbiah (1) a Full Bench of the Madras High Court has held that it is immaterial whether possession has passed or not in accordance with the agreement. In the case before me it is common ground that the defendant went into possession of the premises on 1st January 1925, the date from which the lease for five years was to commence. Mr. Desai has relied upon the case of Purmananddas Jiwandas v. Dharsey Virji (2), where Sargent, C.J has observed (p. 104):

“Now, here the agreement, which is dated 8th October 1882, provides that the lease was to commence from 1st October a date already passed, that the rent was to commence from that day, and the rent then due to be paid by next day. This shows dearly that the defendant was regarded as tenant for four years from 1st October 1882, subject to a right of forfeiture in the lessor if the Rs. 500 were not paid next day.”

4. These observations of the learned Chief Justice apply to certain facts which were found in the case before him; the ratio decidendi of the case was that an agreement for a lease needs registration if the parties to such agreement intend to create a present demise and that although the agreement may contemplate a formal document being subsequently executed, the paramount intention as gathered from the whole of the instrument must prevail.

5. Mr. Desai has further relied on the judgment of their Lordships of the Privy Council in Hemanta Kumari Debi v. Midnapur Zamindari Co. (3). The agreement in that case which was held not to need registration is described by Lord Buckmaster at page 245 (of 46 I.A) of the judgment of the Privy Council. Their Lordships observe:

“The present agreement is an agreement that, upon the happening of a contingent event at a date which was indeterminate and, having regard to the slow progress of Indian litigation, might be far distant, a lease would be granted. Until the happening of that event it was impossible to determine whether there would be any lease or not. Such an agreement does not, in their Lordships' opinion, satisfy the meaning of the phrase “agreement to lease,” which in the context where it occurs and in the statute in which it is found must in their opinion relate to some document that creates a present and immediate interest in the land.”

6. With regard to the terms contained in this letter, dated 24th October 1924, it cannot be reasonably contended that the creation of the tenancy is made dependent upon the happening of a contingency. The lease is here stated to commence from January 1925. Mr. Desai contends that as the lease is to commence at a future date from that of the agreement it cannot be said that there is a present demise or any immediate interest created in the land. The judgment of their Lordships of the Privy Council in Hemanta Kumari Debi v. Midnapur Zamindari Co. would not, in my opinion, apply to a case like the one I am here dealing with where the interest in land is-created by the writing first and is to commence at a definite later date. The agreement concluded by the two letters seems to give to the defendant a present and immediate interest in its subject matter, viz., land, although the agreement, is to be performed at a future date which the contract mentions. Wood fall in “Law of Landlord and Tenant,” Edn. 21, p. 166, has the following observations:

“It is very seldom, if ever, that any question now arises whether a contract for less than three years amounts to a lease or only to an agreement. It depends upon the intention of the parties to be collected from the writing and from collateral circumstances. If it contains words of present demise (“doth agree to let,” &c.), although to hold from a subsequent day, it will amount to a lease notwithstanding a more formal lease is stipulated for, that being considered only as a further assurance.”

7. Mr. Desai has also relied on the case of Sir Mahomed Yusuf Ismail…Defendant v. Secretary Of State…Plaintiff . (4). The facts of that case were that on 1st February 1915, defendant 1 in that case had written a letter to the Presidency Post Master saying that he “shall let on a lease for ten years” a portion of the building at Rs. 175 a month, the defendants making the necessary arrangements for the Post Office and keeping the premises ready for occupation by 1st April 1915. Pratt, J., in his judgment at p. 14 observes in this connexion:

“the defendant proceeded to make What he called the necessary arrangements, that is to adapt the premises for use as a Post Office; but by the 1st April these arrangements were not complete. The counters were not varnished, the shelves were not put up, and the electric lights were not installed. Nevertheless the Post Office went into occupation on 1st April and the improvements were not completed in the following month.”

8. At p. 16 the learned Judge observes:

“Does this agreement import such a (present) demise? Under the authorities “the intention of the parties, as declared by the words of the instrument, must govern the construction Poole v. Bentley (5); and where there is any doubt as to the operation of the contract, the Court must endeavour to discover the intention of the parties from the contents of the instrument; and if we see a paramount intention that the instrument shall operate as a lease, we must hold it to be such although it may contain conflicting expressions:” Pinero v. Judson (6).”

9. The learned Judge proceeds (p. 17):

“Now, there are no words of present demise in the correspondence. “I let” or “I agree to let” have been held to be words of present demise but here the words are “shall let.” Again as to the intention of the parties, the terms of the agreement and the collateral circumstances negative a present demise. The defendant offers to provide accommodation for a Post Office and to make the necessary improvements, and the plaintiffs accept subject to a counter-offer which is itself accepted. The making of the improvements was a condition precedent to the acceptance of the tenure and there can be no doubt but that the plaintiff could have refused to enter into possession on the 1st April if counters had not been constructed. The parties, therefore, could not have intended the agreement to operate as a present demise. And the fact the plaintiff waived the previous construction of come of the improvements and did enter into possession on the faith of the defendant's promise to complete does not affect this conclusion.’

10. In my opinion the documents with which I have to deal are not similar to those referred to in the judgment of Pratt, J. There is nothing in them to indicate that the demise was not a present demise. The agreement arrived at as set out in the letter constitutes in my judgment a present demise of the land and the condition that a formal lease was to be thereafter drawn up and executed is in the nature of a further assurance only. I am of opinion that these two letters fall under Sections 17(1)(d) and 49 of the Registration Act, and are inadmissible in evidence for want of registration. The objection is upheld and the documents rejected.

R.M/R.K

11. Order accordingly.