Lalit Mohan Ghosh v. Gopali Chuck Coal Co. Ld.

Woodroffe and Caspersz, JJ.:— This suit is brought by the Plaintiffs as heirs of the late Nanda Lal Ghose to recover royalties in respect of a coal mining lease held by the Defendant the original lease, dated 25th July, 1896, was by Nanda Lal Ghose in favour of certain persons forming the Kurkend Coal Syndicate. This syndicate assigned its rights under the lease to the New Kurkend Coal Syndicate Ld., a joint stock company, on the 13th November, 1899. The latter company attorned to the lessor and paid royalties to him in terms of the original lease. Subsequently and on the 22nd December, 1903 the rates of royalty were by a registered deed of that date altered. The royally payable as so altered was 6 annas per ton for steam coal, soft coke, hard coke and steam rubble, three annas per ton for B.B rubble and dust free instead of the sliding scale provided for in the original lease. This document confirmed the original lease in other respects including the terms under which royalty was payable quarterly and if not paid, interest was chargeable on all sums unpaid at the rate of 1 per cent, per month. The New Kurkend Coal Syndicate worked under this arrangement but does not appear to have done well, the royalty for 1905 became overdue, and the liquidation of the company became necessary. Then at the close of 1905, and the commencement of 1906 negotiations (which were subsequently embodied in letters) took place with a view to the payment of the overdue royalty and the reduction of the rates of future royalties on coal. On the 18th January, 1906, Messrs McLeod and to Managing Agents, of the colliery, wrote to the proprietors as follows:—

“New Kurkend Coal Syndicate Ld.

The 18th January, 1906.

Babu Nanda Lal Ghose.

Dear Sir,

We confirm our conversation of date to the following effect.—That you reduce the royalty to be charged on coal raised at this property of the under mentioned rates.

Steam Coal … 41½ annas Rubble … … 4½ „ Dust … … 2 „

as a permanent arrangement to hold good from the 1st January, 1906. As regards the royalty due for the year 1905, we have to thank you for agreeing to allow this to remain over until it is convenient to make payment which we will make as soon as possible. As explained to you, it may be necessary to put the existing company into liquidation and to make over the property to another company, but in terms of out lease from you, you will duly be advised of any arrangement that may be contemplated. We beg to thank you for patiently listening to the declaration of the company's position and our views as (torn) for your considerate treatment as evidenced by the reduction in royalty you have made and the accommodation as regards back royalty due.

We are, Dear Sir,

Yours faithfully,

McLeod & Co.,

Managing Agents.”

This was followed by a letter from the proprietor, dated the 20th January, 1906, on which is based the main argument in the appeal.

“9, College Square,

Calcutta, the 20th January, 1906.

Messrs McLeod & Co.,

Managing Agents,

New Kurkend Coal Syndicate Ld.

Dear Sir,

I am in receipt of your letter, dated the 18th instant. Since my interview with your Mr. N.A McLeod I have consulted my lawyers about my position regarding the royalty due for the year 1905 in case it may be necessary for you to put the existing company into liquidation and make over the property to another company, and I have been advised that it would not be at all safe for me to allow this sum to remain over until it is convenient for you to make payments.

So I beg to inform you that I shall be glad to help you in your present difficult situation by reducing and altering the royalty to be charged on coal raised at this property to the under-mentioned rates.

Steam coal … 4½ annas. Rubble … … 4½ „ Dust … … 2 „

Hard and soft coke, as in the deed, as a permanent arrangement not to hold good from the 1st January, 1906 as you say but from the date on which you will pay me the royalty due for the year 1905, and on condition of your paying me the royalty hereafter monthly.

If you, however, fail to make payment of the royalty consecutively for 3 months this letter will be cancelled, and I shall be entitled to the rates of royalty as stipulated in our deed.

Yours faithfully,

Nanda Lal Ghose.”

The effect of this letter is as follows: The royalty for steam coal is reduced from 6 annas to 4½ annas. The rates for soft coke and hard coke remain the same. The rate for steam rubble is reduced from 6 to annas. The rate for B.B rubble is enhanced from 3 to 4½ annas per ton and on dust which was originally free is imposed a new charge of 2 annas ???. The above changes affect the rate only and the result of such changes in fact has been according to past working to reduce the total royalty payable. The second alteration which this agreement effects is as to date of payment of royalty which is to be paid monthly and not quarterly as heretofore.

As a necessary effect of such alteration a third is effected. The original term as to the payment of interest on royalty in arrear after the quarterly date disappears, as the royalty is to be paid monthly. In lieu, however, of this a new and fourth term is embodied, viz., that if there is a failure to pay royalty for three consecutive months the agreement is cancelled and royalty becomes payable according to the terms of the existing lease. It has been contended for the Respondent that the condition that the agreement has to come into effect not from the 1st January, 1906, but from the date on which the royalty for the year 1905 was paid was waived. In our opinion this is not so. That royal was fixed by a letter of the 27th January, 1906 at Rs. 10,000. Of this Rs. 8,000 was paid on the 31st January. The fact that Nanda Lal Ghose gave on the 3rd February time to pay up the balance does not affect the matter. This waived his demand for immediate payment only. But the agreement for reduced royalty, if enforceable, would not come into operation until the payment was made which was on the 28th June, 1906. On this point we agree with the lower Court. On the 20th February, 1906 Nanda Lal Ghose died. In March and April his heirs (it is said in ignorance of the facts) received royalty at the reduced rates mentioned in the letter of their father of the 20th January, 1906 to which we refer as the agreement. They were then informed that negotiations were taking place for the transfer of the lease to the Defendant company. On the 20th June, 1906 the New Kurkend Coal Syndicate, which was then in voluntary liquidation, and its liquidator assigned the colliery lease to the Defendant company. That deed which was registered recites that the original lease of the 25th July, 1896 had been ultimately modified by the document of the 22nd December, 1903 and the covenant by the Defendant company in favour of the assignor was to pay the rent or royalty mentioned in such last-mentioned document. By inadvertence, however, the company's solicitors overlooked the fact that the document of the 22nd December, 1903 bad itself been modified by the agreement of the 20th January, 1906. In June the company offered payment of royally for the months of March, April and May at the reduced rate provided for in the agreement and this offer was repeated as regards subsequently accruing royalties. The Plaintiff refused, however, to accept them and claimed payment according to the terms of the document of the 22nd December, 1903. On the 24th August, 1906 the new Kurkend Coal Syndicate and its liquidator attempted to repair the omission to which we have referred and by a registered document dated 24th August, 1906, reciting the agreement of the 20th January, 1906 and the fact that it had been inadvertently omitted from the assignment of the 20th June, 1906, assigned to the Defendants the full benefit of such agreement (which was set out in the schedule) to the intent and purpose that the assignment effected by the principal indenture might, with effect from the date when the agreement came into operation, be read and construed as if in and by the same indenture the properties, rights and premises comprised in the lease of the 25th July, 1896 had been expressly assigned with the full benefit of and subject to as well the said agreement as the agreement of the 22nd December, 1903 with full power and authority for the company to specifically enforce the said agreement.

It has been suggested that this transfer was ineffectual because at its date the company had been wound up and the liquidator discharged. No such issue was raised in the lower Court. No order of discharge has been produced. Under sec. 187 of the Companies Act the syndicate would not have been dissolved until three months after the sending in of the accounts. Mr. McLeod seems in his evidence to have wrongly assumed that he was discharged when he sent in his account. We hold that this contention fails.

As we have said the Plaintiffs refused the Defendants' money. We are satisfied that under the circumstances there was a sufficient tender by the Defendants.

The Plaintiffs worked for sometime apparently under the idea that the Defendant company would sue for specific performance. But as the company were apparently advised that this was not necessary and did not sue, the Plaintiffs instituted this suit claiming the recovery of Rs. 7,863-4-15 as royalty on the basis of the rates contained in the document of the 22nd December, 1903. The Defendant company set up the subsequent agreement of the 20th January, 1906, and claiming that reduced rates are chargeable under that agreement have paid info Court the sum of Rs. 6,657-6-6 The lower Court that accepted this view of the case subject to the modification that it has considered, and as we think tightly, that if reduced rates are payable they are so payable only from the date when the back royalty for 1905 was paid.

The Appellant has raised a number of objections which we deal with before treating of the substantial question which we desire to refer to the Full Bench. In our opinion, if other consideration than that involved in the substitution of agreements is necessary, the letter of the 20th January, 1906 on its face shows consideration as for instance in the substitution of monthly for the previous quarterly payments. The agreement was not, as contended, a mere personal agreement with the New Kurkend Syndicate of which it was not intended that the Defendant company should have the advantage. The correspondence shows that the royalty was reduced with the object of inducing some other substantial company to work the colliery. Nor in our opinion does any question arise as to the parties not being ad idem over the matter. There was no question as to the meaning of the terms of the letter of the 20th January, 1906. The difference which has arisen between the parties, and which as stated has been decided against the Defendants, was due to the latter contention that the term as to the date when the reduced royalties were to come into operation had been subsequently modified by later-correspondence. We hold with the lower Court that is a mistaken view of the effect of such correspondence. It is then said that the assignment of the 22nd June, 1906 was inoperative because it was an assignment of a mere right to sue. But such a right must be distinguished from a right which (as here) arises out of an interest. What was here assigned was the benefit of an agreement in connection with and arising out of the lease held by the Defendant company. It has been nearly said that the agreement is inoperative because there has been default in payment of royalty for three consecutive months. If the Plaintiffs have rightly refused to take the money offered by the Defendant's the question does not arise, but if they have wrongfully refused (and they have been offered the money) they cannot set up such wrongful refusal to bring the clause of forfeiture into operation.

The substantial question in this case is whether the agreement of the 20th January, 1906 required registration or not. If it did, the Defendant company took nothing; by the subsequent assignment of its benefit to them.

If that agreement constitutes a lease as the Appellants contend, then under sec if, cl. (d) of the Registration Act, it should have been registered. And on this ground documents containing the essential elements of a lease such as the area of the land, the nature of the interest conveyed, the duration of the tenancy and the rental have been held to be leases and as such requiring registration [see Biraj Mohinee Dasee v. Kedar Nath Karmokar(3), Raja Durga Prosad Singh v. Rajendta Narain Bagchi]. In our opinion, however, the document is not a lease but an agreement which modifies the conditions of a lease in three particulars, viz., the amount of rent or royalty, the period at which rent or royalty is payable, and the result of default of payment of rent or royalty. The variations thus touch the question of rent or royalty only. But then it is further contended for the Appellants that assuming that it is not a lease and that it can be treated merely as an agreement for reduction and payment of rent it is in efface an agreement purporting to limit and create an interest in immoveable property under cl. (b) of sec. 17 and requires registration. For the Respondent company it is contended, firstly, that cl. (b) of sec. 17 does not affect leases of (apparently) matters touching leases which are governed by cl. (d) and, secondly, that if that be not so the letter does not affect an interest in immoveable property and fall within cl. (b). Rent or royalty though derived from land are, it is argued, not interest in immoveable property within the meaning of cl. (b). Reliance is placed on Satyesh Ghunder Sircar v. Dhunpat Singh(4), where it was held that an agreement which did not operate as a lease but was merely a variation by way of abatement of rent did not require registration. In Obai Goundan v. Ramalinga, Ayyar(5), it was held following the last case that a document given by the owners of land to his tenant varying the terms of tenancy with reference to the amount of rent to be paid, is not an instrument relating to an interest in immoveable property and does not require registration. The principle of these cases was approved and applied in Hara Prosad Das v. Ram Narain Chowdhury(6). The Bombay case cited [Shrinivasbhat v. Waman Narsingh(7)] seems to have been to a similar effect though the decision was otherwise justifiable on the ground that the agreement related to a matter of a value less than Rs. 100.

Learned Counsel for the Appellant has contended that the decisions of this Court referred to are obiter dicta. It may be a question whether if that be so the same observation does not apply to the case on which he has relied [Durga Prasad Singh v. Rajendra Narain Bagchi*]. In that case it was held that the document in fact constituted a lease which we hold not to be the case here and it was further held that there was no consideration. The learned judges however went on to say that even if that document in question could be treated merely as an agreement for reduction of the rent it was in effect an agreement purporting to limit an interest in immoveable property and thus required registration. The learned Judges base their decision on certain English cases dealing with the Statute of Frauds and on inferences derived from the Privy Council decision in Subramanian Chettiar v. Arunachalam Chettiar. They distinguished the cases of Satyesh Chunder Sarcar v. Dhunpat Singh and Beni Madhub Gorani v. Lal Moti Dassi holding as regards the first-mentioned case that were it not that the agreement had been admitted in the plaint, the Court would have held that the document required registration. But this does not appear to us to be so, for what the Court stated was that had there been no admission the question of registration would “arise” and be “important”. It, however, then held that it was not necessary that the agreement in question should be registered.

In this conflict of authority we refer to the Full Bench the determination of the following questions:—

1. Has the case of Raja Durga Prosad Singh v. Rajendta Narain Bagchi been correctly decided in so far as it determines that a document though not amounting to a lease requires registration if it be an agreement for reduction of rent under a previously existing registered lease.

2. Does a document which is not a lease but which varies the amount of rent to be paid under an existing registered lease as also the incidents of such payments, viz., the date of payment and consequences of default of payment, require registration.

Dr. Rash Behari Ghose (with him Babus Jogesh Chandra Dey, Mohendra Naik Roy, Nqrendra Nath Sett and Srish Ckunder Dey) for the Appellants.

The amount of rent is an essential term in the lease. The argument of the other side is, that you can vary one such term one day, another the next day, and so on, and yet the lease would remain the same. Sanderson v. Grams(9) per Lord Bramwell, p. 247, Subramanian Chettiar v. Arunachalam Chettiar. The object of sec. 107, Transfer of Property Act, is to have the whole of the terms of a lease put in a registered document. You cannot gather the terms of a lease partly from a registered and partly from an unregistered instrument. The question in the last cited case would not have arisen if payment of rent was but a collateral personal agreement. See arguments before the Judicial Committee in Subramanian Chettiar v. Arunachalam Chettiar reported in 12 Mad. L.R 479-483. The question is, did the agreement in question ‘affect the incidents of the tenure in any way?

[The Chief Justice,—Is there not a current of authority against you?]

I would show there is not. The earliest case is Baijnath v. Putsohee(10).

If the document did not require registration as being a lease, registration would be necessary because it affects an interest or benefit arising out of land. Refers to sec. 3 of the Registration Act (definition of immoveable property), also to sec. 17(b). Rent not due (or future rent) is an interest in immoveable property. Venkaji v. Shidramapa(11), Mangala v. Subbia(12); Dart on Vendors and Purchasers (6th Ed.), pp. 219-220, 236; Donellan v. Redd(13).

Again “Rent” is a first charge on the tenure (assuming for the present that royalty is rent). A document affecting the amount of the charge should be registered.

Registration was necessary because, moreover, it was a sale of an interest in land. Gawan v. Christie(14), Munro v. Didcoll(15). Rights conferred are not incorporeal rights.

The decisions of this Court which seem to support a contrary view are distinguishable.

Satyesh Chunder Sircar v. Dhunpal Singh. The agreement to accept reduced rent was admitted by the lessors in the pleadings (see sec. 65, Evidence Act). None of the cases referred to by Ghose, J., were cases on the Transfer of Property Act. Obai Goundan v. Ramalinga Ayyar, whilst purporting to follow the case in Satyesh Chunder Sircar v. Dhunpat Singh, goes beyond it, and cannot be treated as authority. Hara Prosad Das v. Ram Narain Chowhury was a case of a dowl. There was no question of abatement and it follows the Full Bench case, Luchmissur v. Dakho(16). Sarat Chandra v. Nitya Gopal(17), Beni Madhuh Gotani v. Lal Moti Dassi(8) is a peculiar case. The document was a collusive one the object of which was to induce other tenants to pay a higher rent. The case has been distinguished in Raja Durga Prosad Singh v. Rajendra Narain Bagchi and Lakhatulla v. Bishwambhar(18).

Your Lordships are not in any way embarrassed by a long line of cases in which a different rule from that I am contending for has been laid down. This is not one of those cases where title to real property will be disturbed if a long series of decisions was overruled.

Mr. Bagram (with him Babu Monmatha Nath Mukerjee) for the Respondent.

The contract in question does not affect title to immoveable property. The Registration Act does not touch contracts. The essential part of an interest which is transferred by a lease is the right to enjoy. “Rights or benefits to arise out of land” means proprietary rights or interests which one person has over the lands of another. Rights like rent which the owner himself has in his own land, cannot be so described.

“Leases” are separately-dealt with in cl. (d) of sec if of the Registration Acts Cl. (b) has nothing to do with leases. A lease may be for service, e.g, as engineer. Can such service be described a benefit to arise out of the land”?

The Privy Council in Subramanian Chettiar v. Arunachalam Chettiar merely decided whether the term as to payment of the money was included in the lease, or in other words whether the two documents were part and parcel of one. The arguments of Counsel and observations of Judges in course of argument should not be referred to as authorities. I do not contend that all the component elements in the lease should not be incorporated in the registered instrument. Many of the terms must however be of a purely contractual character, and there is, I submit, nothing to prevent the parties from varying the obligations arising thereunder. The right to enjoyment and the duration of the lease make up the interest which is transferred by the lease and a lease in its essence is a transfer of an interest in property. Moreover by cl. (d) of sec. 17, the registrability of a lease is made to turn on the duration. If rent had been treated as an interest affecting immoveable property then a lease for two months at a rent of Rs. 10,000 would require registration contrary to the provisions of the Registration and the Transfer of Property Acts. What must be registered under cl. (b) of sec. 17 of the former Act is some interest in the property which is measurable in value of Rs. 100, not money or rent. Decisions which lay down that rent is a benefit to arise out of land is based on a misapprehension. A rent charge created in favour of one person in another person's land may be such an interest not rent which the owner derives from his own land, Southwell v. Scotter(19). There is nothing to prevent the duration part and the money part in a transaction to give a lease from being put in two different documents. The former may require registration, the latter will not. Premium is mentioned in the definition of lease. But the Privy Council expressed a doubt whether the premium must be specified in the document.

A letter varying rent is admissible under sec. 92, Evidence Act.

Rent is not regarded as property in the Transfer of property Act, Burjorji v. Muncharji(20).

Suppose the rent is commuted. Must this also be registered as an essential part of a lease?

The two Acts deal with transfer of rights inrem not with rights in personam. Freedom of contract as to these latter is left untouched.

There is a substantial current of authority in my favour and Dr. Ghose's evdeavour to distinguish them has been unsuccessful.

The decision in Raja Durga Prosad Singh v. Rajendra Narain Bagchi is based on the agrument before the Privy Council in the case of Subramanian Chettiar v. Arunachalam Chettiar, an argument based on English precedents and Statute of Frauds cases, not on a proper interpretation of the Indian Statutes.

Nor can mining leases be treated as being sales and not leases. All the incidents are those of a lease with this difference that under a mining lease you can consume the property. Moreover parties have throughout treated it as a lease.

Rent is not a charge under the Transfer of property Act.

[The Chief Justice draws attention to para. 8 of the lease,]

It is charged on our property not on the demised properly.

Dr. Ghose in reply. The policy of the Legislature is to introduce a public system of registration of transfer of interests in land. The whole policy would be defeated if the rent reserved could be left out. From the document it further appears that a registered document was in the contemplation of the parties.

The Judgment of their Lordships was as follows:—

The questions referred for decision to the Full Bench have been framed as follows:—

(1) Has the case of Raja Durga Prosad Singh v. Rajendra Narain Bagchi been correctly decided in so far as it determines that a document, though not amounting to a lease, requires registration if it be an agreement for reduction of rent under a previously existing registered lease?

(2) Does a document which is not a lease but which varies the amount of rent to be paid under an existing registered lease as also the] incidents of such payments, namely, the date of payment and consequences of default of payment require registration?

It is necessary to premise at the outset that the original lease in the case before the Court, dated the 25th July, 1896, and varied by a registered deed, dated the 22nd December, 1903, was compulsorily registrable under Sec. 107 of the Transfer of Property Act and sec. 17(d) of the Indian Registration Act. The answers to the questions propounded consequently depend upon the construction of these two sections. Sec. 107 of the Transfer of Property Act provides that a lease of immoveable property from year to year or for any term exceeding one year, or reserving a yearly rent, can be made only by a registered instrument. The plain intent of the section is that all the essential incidents of a lease of this description must be embodied in one or more documents duly registered. It as not necessary to attempt, on the present occasion, an exhaustive enumeration of all the essential incidents of such a lease: it is sufficient to hold that provisions about the amount of rent, the time of payment thereof, and the consequences of default, relate to essential incidents of the lease. This view deceives support from the terms of sec. 105 of tbs Transfer of Property Act, and is involved in the decision of the Judicial Committee in Subramanian Chettiar v. Arunachalam Chettiar. The answer of the Full Bench to the questions referred are, therefore, as follows:—

(1) The case of Raja Durga Prosad Singh v. Rajendta Narain Bagchi has been, for the reasons given here, correctly decided, in so far as it determines that a document embodying an agreement for reduction of rent under a previously existing lease registered as required by sec. 17(d) of the Indian Registration Act, requires registration.

(2) A document, which varies the amount of rent to be paid under an existing lease registered as required by sec. 17(a) of the Indian Registration Act, as also the incidents of such payments, namely, the date of payment and consequences of default of payment requites registration.

The case will be returned to the Division Bench, with this expression of opinion. The costs of the hearing before the Full Bench will abide the result of the appeal—hearing fee, five gold mohurs.