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Structured Summary of the Opinion

Factual and Procedural Background

This appeal arises from a suit for rent based on a kabuliyat dated 25 August 1884. The kabuliyat describes the land let and sets out sums as follows:

  • Sadder jama (base rent) as Rs. 21-7-3;
  • An additional sum of Rs. 3-1 described as "enhanced rent for collection charges" (hadish); and
  • The total jama described as Rs. 24-8-3 and, together with other undisputed items, a "grand total" of Rs. 29-4, payable in four instalments (kists), with the tenant agreeing to pay the rent according to those instalments.

The kabuliyat further contained a clause that if the tenant failed to pay, the landlord could realise the rent with interest and damages (specified in the document) and take steps including sale by auction and attachment of properties. It also distinguished a separate kajat jama of eight annas per kani for nazar and subscriptions at ceremonial occasions, which would be added to the jama if the lessee failed to pay such nazar and subscription.

The courts below disallowed the amount of Es. 3-1 (the collection charge) as an abwab and awarded damages at 25 percent. The appeal raises questions about recoverability of Rs. 3-1 and the validity of the stipulated interest and damages.

Legal Issues Presented

  1. Whether the sum of Rs. 3-1 described as "enhanced rent for collection charges" (hadish) is recoverable as part of the rent under the kabuliyat or is an illegal imposition (abwab).
  2. Whether the contractual stipulation to pay interest at 75% and damages at four annas per rupee per mensem (amounting to 300% per annum) is valid and enforceable.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Radha Charan Roy Choudhury v. Golak Chandra Ghose Collection charges in a lease may, upon construction of the lease, be held to be part of the rent and not an abwab. The Court cited this case as an authority where collection charges were held part of rent, supporting the view that similar charges in the present kabuliyat may be part of the rent.
Mohammed Fayez Choudhury v. Jamoo Gazee A similar view (to the Radha Charan case) that a covenant for collection charges in a lease can amount to part of the rent. Referred to as another authority taking a similar view that collection charges can be part of the rent agreed in a lease.
Sree Kanta Persad Hazari v. Irshad Ali Sarkar An agreement to pay a sum described as "price of presents and unpaid labour" was treated as an abwab and disallowed, notwithstanding its inclusion under a head of total rent, because other document parts and pleadings treated it as distinct from rent. The Court distinguished this case from the present one on the ground that there the document and the plaint made a clear distinction between rent and the additional sum; hence that authority did not control the present kabuliyat which consistently referred to the total as rent.
Mathura Prosad v. Tota Singh An item provided in a clause distinct from the rent assessment (delivery of husk) was held not to be recoverable as rent where it was not made part of the rent by express or implied terms. Distinguished: the Court noted the distinct clause circumstance in that case, which is different from the present kabuliyat where instalment details cover the whole amount including collection charges.
Gayratulla Sardar v. Girish Chandra Bhoumik An agreement to deliver goats (or pay for them) at puja was held to be an abwab because such deliveries could not reasonably be treated as part of rent. Distinguished as inapposite to the present case where the claimed sum is a monetary, specified charge included in the instalment descriptions.
Radha Prosad Singh v. Bal Kowar Koeri (Full Bench) Considered whether certain cesses (sarakneg and khuruch) paid for a long time but not specified in rent receipts were illegal or recoverable; there was no written engagement at the creation of the lease and the sums appeared to be subsequent impositions. The Court observed that the Full Bench did not decide questions arising where there is a written engagement to pay a specific sum as part of the rent; the Full Bench's observations on abwabs generally were not directly applicable to a case with a written covenant such as the present one.
Tilukdhari v. Chulhan Mahton Items claimed as "old usual abwabs" and shown in accounts were treated as abwabs; if they existed at Permanent Settlement they should have been consolidated under sec. 54 of Act VIII of 1793, and if not then they were new abwabs under sec. 55. The Court noted this case but distinguished it on the ground that those items represented impositions not covered by a written engagement at the creation of the tenancy; thus it does not control where a lease expressly provides for a specific sum.
Kalanand Singh v. Eastern Mortgage Agency Co. Where payment of specific sums is provided for and agreed upon in the lease creating the tenancy, those stipulations constitute definite clauses in the engagement and are part of the consideration for the tenancy even if not described as rent. The Court relied on the reasoning in this case to support the proposition that specific sums agreed in the lease are in reality part of the rent and should be enforced as such; this case was used to distinguish cases involving subsequent impositions without written engagement.

Court's Reasoning and Analysis

The Court proceeded in two analytical steps: (1) whether Rs. 3-1 is an abwab or part of the rent; and (2) whether the stipulated rates of interest and damages are enforceable.

On the nature of Rs. 3-1 (collection charges)

  • The Court observed that although the kabuliyat identifies Rs. 21-7 as the sudder jama and Rs. 3-1 as enhanced rent for collection charges, the instalment details do not confine themselves to the sudder jama alone but deal with the whole amount including collection charges.
  • The total amount is consistently referred to as the "rent" in the document; the kajat jama for nazar and subscriptions is expressly distinguished in the kabuliyat as a separate potential addition. This distinction in the document showed the drafter knew how to separate items when intended.
  • The Court emphasized that whether a particular item is an abwab depends on construing the lease: the central question being whether the sum is part of the rent agreed as consideration for the lease.
  • The Court reviewed precedents and accepted authorities holding that where a lease contains a written engagement to pay specific sums, those sums may properly be regarded as part of the rent.
  • Applying these principles to the terms of the kabuliyat before it, the Court concluded that Rs. 3-1 is part of the consideration for the lease and not an abwab.

On the stipulation for interest and damages

  • The kabuliyat stipulated interest at 75% and damages at four annas per rupee per mensem (which the Court observed amounts to 300% per annum).
  • The learned Judge below had doubted that the agreement was a deliberate bargain by the tenants and considered it to be a threat or penalty intended to secure punctual payment rather than genuine compensation for loss.
  • The Court treated such stipulations as potentially penal and noted that they may come under section 74 of the Contract Act (as amended), and that courts may grant relief in equity if a contract is unconscionable.
  • Finding the contractual rate to be unconscionable and intended as a penalty, the Court upheld the lower Appellate Court's decision to limit damages to 25% as a reasonable compensation rather than enforce the stipulated 75% interest and 300% damages.

Holding and Implications

Core Ruling: The decree of the Court below is varied.

More specifically:

  • The Plaintiffs are entitled to recover the sum of Rs. 3-1 as part of the rent as specified in the kabuliyat.
  • The Plaintiffs are not entitled to the contractual interest at 75% or damages at four annas per rupee per mensem as claimed in the kabuliyat; they are limited to the damages awarded by the lower Appellate Court (25%).
  • The decree will be adjusted accordingly, and each party is to pay their own costs in this Court and in the Court of Appeal below.

Implications: The decision enforces a rule of construction that specific monetary stipulations contained in a lease instrument may constitute part of the rent where the instrument consistently treats them as such, while prohibiting enforcement of unconscionable penalty-like stipulations for interest and damages. The opinion distinguishes cases involving later impositions where there was no written engagement. The opinion does not assert the creation of a novel legal principle beyond these applications to the facts of this lease.

Decree varied.

    Upendra Lal Gupta v. Meheraj Bibi

    This appeal arises out of a suit for rent on the basis of a kabuliyat dated the 25th August, 1884. The kabuliyat after describing the land let out states the Sadder Jama as Rs. 21-7-3, the enhanced rent for hadish (collection charges) as Rs. 3/1, the total jama being described as Rs. 24-8-3, which, together with certain other items which are not in dispute, come up to the “grand total” of Rs. 29-4. The total amount of Rs. 29-4 is made payable in 4 instalments, and the tenant agrees to pay “the aforesaid rent according to the kists mentioned above”. Then the kabuliyat goes on to say, “If we fail to do so, we shall not take any objections to your realising the rent together with interest for breach of instalment at the rate of one anna and damages at the rate of four annas per rupee per mensem by causing this taluk to be sold by auction twice in the year according to Act VIII of 1819, and by bringing a suit according to the laws that are now or may in future be in force and attaching and selling our moveable and immoveable properties.

    The jama is assessed at the aforesaid rate after keeping in abeyance eight annas per kani from the jama on account of nazar and subscription on the occasions of marriage, puja, nam-karan and chura-karan, and other ceremonies at the house of landlord. If we do not pay nazar and subscription on the occasions of marriage, puja, nam-karan, chura-karan and other ceremonies, we shall not take objections to the adding of the said eight annas per kani to the jama.”

    The Courts below disallowed the amount of Es. 3-1 on account of hadish as abwab and allowed damages only at 25 per cent.

    The questions raised in the appeal therefore are whether the Plaintiffs are entitled to recover the said amount of Rs. 3-1, and whether they are entitled to the interest and damages as stipulated in the kabuliyat.

    We are of opinion that the said sum of Rs. 3-1 is not an illegal imposition, but is part of the rent. It is true that in arming at the total amount of rent, Rs. 21-7 is described as the sudder jama, and Rs. 3-1 as enhanced rent for collection charges. But the details of the instalments do not deal with the kists of the sudder jama only, but with the whole amount including the collection charges and the total amount is throughout referred to as the rent.

    It is to be observed that this jama is distinguished from the kajat jama of eight annas per kani on account of nazar and subscription on the occasions of marriage and such other ceremonies at the house of the landlord which was to be added to the jama if the lessee did not pay the said nazar and subscription.

    We think that upon a proper construction of the kabuliyat the sum of Rs. 3-1 is part of the consideration for the lease, and is as much part of the rent as the sudder jama, and is not an abwab.

    We have been referred to several cases dealing with the question of abwab. But the question whether any particular item is or is not an abwab must depend upon the construction of the contract of lease in each case, and the question in each case is whether the sum claimed is really part of the rent agreed upon to be paid as consideration for the lease. We may refer to the case of Radha Charan Roy Choudhury v. Golak Chandra Ghose(1), in which, upon a construction of a lease, certain collection charges were held by the learned Judges (Maclean, C.J and Bodily, J.) to be part of the rent and not an abwab. See also the case, of Mohammed Fayez Choudhury v. Jamoo Gazee(2), in which Chief Justice Garth took a similar view of such a covenant in a lease. The cases cited before us on behalf of the Respondent are clearly distinguishable. In the case of Sree Kanta Persad Hazari v. Irshad Ali Sarkar(3), an agreement to pay Rs. 17-4 as the “price of presents and unpaid labour” was disallowed as an abwab, although the said sum together with a rent of Rs. 360 was put down as amounting to Rs. 37-7-4 under the head of total rent. But as the learned Judges pointed out there were other facts in other parts or the document which had an important bearing on the question. The tenant agreed to pay the rent proper, that is, the amount specified as the rent, and then the kabuliyat went on to provide that the tenant would have no objection to pay the sum of Rs. 17-4 as the “price of the said presents and labour” in addition to the amount of rent. Moreover, in the plaint itself a distinction was made by the Plaintiff between the rent and the value of the presents and labour. Similarly in the case of Mathura Prosad v. Tota Singh(4), where a certain yearly rent was specified as assessed at a certain rate, and at the end of the lease in a clause entirely distinct from the one where the rent was assessed, a provision was made for delivery of husk which was not expressly or by implication made part of the rent; it was held that it could not be rocovered. In the case of Gayratulla Sardar v. Girish Chandra Bhoumik(5), all agreement to deliver two goats at puja or to pay Rs. 3 as the price thereof was held to be an abwab, as the goat obviously could not be held to be part of the rent.

    We have been pressed with certain observations made by some of the Judges in the Full Bench case of Radha Prosad Singh v. Bal Kowar Koeri. But the, question in that case was whether certain cesses under the denomination of sarakneg and khuruch were illegal, or recoverable as rent by reason of their having been paid for a long time along with the tent and without specification in the rent receipts. There was no written engagement to pay the said amounts as part of the rent at the creation of the lease and they appear to have been subsequent impositions. The observations relied upon on behalf of the Respondents were made by some of the learned Judges in that case in discussing the question of abwabs generally. The question, whether in a case where there is a written engagement a specific sum, which is neither indefinite nor arbitrary and which is agreed upon to be paid as part of the rent in the lease creating the tenancy can be recovered, was not referred to the Full Bench.

    In the case of Tilukdhari v. Chulhan Mahton(7) the items claimed were described in the plaint as “old usual abwabs” and were also described as “abwabs” in the zomindary accounts, so that they were claimed expressly as abwabs. The Judicial Committee held that if they existed at the time of the Permanent Settlement they ought to have been consolidated with the rent under sec. 54 of the Act VIII of 1793. Not being so consolidated they cannot be recovered under sec. 61 of the Regulation, and if they were not payable at the time of the Permanent Settlement, they would come under the description of new abwabs in sec. 55, and that this Court was right in treating them as abwabs, and not as part of the rent the cases of Radha Prosad v. Bal Kowar Koeri and Tilukdhari v. Chulhan Mahton were considered in the recent case of Kalanand Singh v. Eastern Mortgage Agency Co.(8), and the learned Judges distinguished the above cases on the ground that “in those cases there were no written engagements, and the sums claimed represented impositions or demands made upon the raiyat Defendants at various times subsequently to the creation of the tenancies and the settlement of their rents”. In that case the lease by which a permanent tenure was created in 1874 provided for payment of a fixed sum of Rs. 4,310, of which the sum of Rs. 4,300 was described as jama, Rs. 5 as “selami touji” and Rs. 5 as “tehwari dasahara”. The learned Judges observed:— “But where, as in the present case, the payment of these specific sums is provided for and agreed upon in the lease creating the tenancy, the stipulation for such payment is not in our opinion a stipulation or reservation for the payment of arbitrary or indefinite casses, but in the language of sec. 3 of Reg. V of 1812 is a “definite clause in the engagement contracted between the parties” which should be maintained and given effect to. In fact the two sums now in question, though not described in the lease as rent, are in reality part of the consideration for which the tenancy was created and part of the rent agreed to be paid.”

    It is to be noted that in all the cases subsequent to the Full Bench decision the question whether a particular item is an abwab or not, is treated as one of construction of the lease, although more items than one are described as constituting the rent, the question considered in each case being whether the item objected to is really a part of the rent agreed upon between the parties. Having regard to all the terms of the lease in the present case we are of opinion that the sum of Rs. 3-1 is not an abwab.

    The next question is whether the stipulation to pay interest at the rate of 75 per cent, and damages at the rate of four annas per rupee per mensem is a valid one. The learned Judge says, “I do not think the agreement was a deliberate one by the tenants, nor was it meant to be enforced except as a treat or penalty”. The damages at four annas per rupee per mensem amount to 300 per cent, per annum. The lease no doubt is a permanent makurari one. But interest represents compensation for detention of the rent, and we think that a stipulation to pay interest at 75 per cent, and damages at 300 per cent, is intended to secure punctual payment of rent rather than represent the loss to which the landlord is put for the non-payment of the rent. Any stipulation by way of penalty may come under sac. 74 of the Contract Act as amended. In any case the Court can grant relief in the exercise of its equitable jurisdiction if the contract is unconscionable. We think the contract is an unconscionable one, and that the Court below was right in awarding damages at 25 per cent, which is a reasonable compensation.

    The result is that the decree of the Court below will be varied. The Plaintiffs will get a decree for the amount of Rs. 3-1 as part of the rent. He will not however be entitled to interest and damages as claimed, but will only get the damages allowed by the lower Appellate Court. The decree will be varied accordingly. Each party will pay his own costs in this Court and the Court of Appeal below.

    N.G
    Decree varied.

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    Upendra Lal Gupta v. Meheraj Bibi
    (Jul 3, 1916)