ALLEN BERRY & CO. (P) LTD.

UNION OF INDIA, NEW DELHI.

January 5, 1971

(J. M. SHELAT,. C. A. VAIDIALINGAM AND P. JAGANMOHAN

REDDY, JJ.J

Arbitration Act ( 10 of 1940), s. 30-Setting aside award---Error apparent on the face ofaward-What is.

The Director General of Disposals, through corrspo<dence and salenotes, sold to the appellant-company, United States surplus was materials consisting of vehicles and other stores.

Disputes having arisen between the parties, both as regards the contents of and the quantity of the vehicles deliverable under the contracts, they were referred to arbitration as per

cl. 13 of the general conditions di the contract between the parties.

The disputes consisted of claims and counter claims and the umpire after deducting the amount of one claim allowed to the appellant, he'd that the appellant was liable to pay to the respondent Rs. 34,70,226.50 and costs amounting to Rs. 5,40,544,00.

The award was filed in the District Judi:e's Court and the appellant applied for having it set aside on various grounds. The Court held that with respeCit to certain matters claimed by the respondent the umpire had no jurisdiction and remei_tted the award for reconsideration of those items and also for readjustment of the amount of costs.

The High Court confirmed the judgment of the District Judge.

In appeal to this Court. it was contended that the award was liable to be set aside, because : ( 1) the contracts of sale were mcon.strued and the error appeared on the face of the award; (2) several documents bearing oo the scope of the sales were not considered; ( 3) the -umpire went beyond his jurisdiction when he awarded compensation to the respondent because the appellant removed certain vehicles; ( 4) that the umpire act'd as a conciliator deciding matters on conjecture; (5) that the umpire fixed ground rent payable by the aooella"ts without any evidence; and (6) that the costs awarded were totally disproportionate.

HELD : (I) When parties choose their own arbitrator to be the judge in the dispute between them, they caonot, when the award is good on the face of it, object to the d'!cision either upon the Jaw or th~ facts, Therefore even when an arbitrator commits a mistake either in Jaw or in fact in determining the matters referred to him .. but such mistake docs not appear on the face of the award or !" a document opeded to or in.corporated in it so as to form part of it, the award wL11. ntter be rem1ttd nor s:t aside.

Whether the contract or a clause of 1t 1s incorporated in award is a question of construction of the award.

The test is, did te arbitrator come to a finding on the wording of the co"tract. If he did, he caq be flaid to have impliedly incorporated the contract or the r"levant

claus~. hut 9. mre general reference to the contract in the award is not to be held as incof!'orating it. [288 F-H; 289 Al

Union of India v. Bungo Steel Furniture Pvt. Ltd. [1967] I S.C.R. 324, folhxod.

F •

• '

ALLEN BERRY & CO, V. UNION 2 s :i

Champsey Bhara & Co. v. Jivraj Ba/loo Spinning & Weavig Co. Ltd. [1923] A.C. 480, applied,

Kelanton \:'. Duff .Develop1nent Co. [1923] A.C.. 395 and Giaco1110 Costa Fu Andrea v. British [ta1ian Trading Co, Ltd. [1962] 2 All E.R. 53, 62, referred to,

2(a) The dispute in the present case being as to what was sold and as to whether besides the sale-notes, the subsequent clarifications or explanations given by various officers of the respondent formed part of the

cotract and were binding on the respondent, and both the questions having been referred to arbitration, the umpire's findings on them would bind the parties unless he laid down any legal proposition such as a construction which is made the basis of the award and is on the face of the award erronus. The award showed that the umpire had consic!•"ed

besides the sale-notes the oral and documentary evidence led by the parties as also the contentions urged by counsel. It could not, therefore, be contended that the several documents were not taken into consideration by the umpire. [291 E-F; 29'2 E-H]

(b) The umpire laid down the legal proposition that the clarifications or assurances given subsequent to the dates of the sale-notes were not binding on the respondent and conld not affect the scop~ of the sales; but !he fact that he answered legal point, which he hao to decide while deciding the questions referred to him, did not mean that he incorporated into the award or rnade part of it a document or documents, the construction of whk:h was the basis of the award.

If there was an error iti such a ca1!.e it could not be said to an error appearent on the face of the award entitling the court to consider the various documents placed before the umpire but not incorporated in the award so as to form part of it, and then to make a search if they had been misconstrued by him.

[293 B-EJ ( 3) Once it was found that it was competent for the umpire to decide that the appellant company was not entitled to keep certain vehicles which it had removed, he must, to do justice between the parties. order~ the appellant either to return them or to pay compensation for them.

Since the first course was not possible because of lapse of time the second was the only obvious course.

Clause 13 of the general conditions provides for ref'!rence to arbitration of all questions or disputes arising under these conditio,, s or in conne'"'tion with this co ... tract, and these words are wide and c-0mprehensive.

Therefore, the umpire did not go b 0 yond his judsdiction in accepting the respondent's counter claim for compensation.

[295 D-EJ

( 4) Merely because the umoire held that even though the aooellant was not entitled to some vehicles claimed by it, yet the authorities had G .delivered a substaritial number of them. without oing into details. it could not be said that he had acted without evidence or that he behaved in the matter as a co., ciliator. or gave findings on conjuncture and surmises, esoecially when the appellant withheld relevant evidence which was in its possession. [296 E-F]

(5) Und" the contracts of the sale. the appellant was bnund to nay to the respandent ground rent and other charl!es which the resoo., de11t ff in it'i turn Was liahle to oav the owners; and silice it 'Was not the aopellant's

cas~ that the rPSDO"'dnt had cJaimed a higher amount there was no substa'lce iri the co--t,.., tio., tilat the arbitrator fixed the ground rent wihtout any evidence. [297 A-Cl

.;.

(6) Considering the huge amounts claimed by the parties, the volume of evidence, adduced and the 'number of days occupied in recording tat evidence and in atguing the case. it could not be said that the discretion of the umpire exercised in the matter of costs was exercised in breach of any legal provision or unreasonably. [297 C-DJ

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2418 of 1966.

Appeal by special leave from the judgment and order dated February 19, 1963 of the Punjab High Court, Circuit Bench, at Delhi in F.A.O. Appeal No. 123-D of 1961.

R. L. Agarwal, K. L. Mehta, S. K. Mehta, P. N. Chadda.

M. G. Gupta and K. R. Nagara; a., for the appellant.

L. M. Singhvi, Badri Dass Sharma and S. P. Nayar, for the respondent.

The Judgment of the Court has delivered by

Shelat, J. By this appeal, under special le2.ve, the appellantcompany challenges the correctness of the judgment of the High Court of Punjab, dated February 19, 1963 refusing to set asirle

an umpire's award, dated March 22, 1958.

The award was in respect of certain disputes between the company and the Union of India in the matter of disposals of the United States

surplus war materials left by the Government of the U.S.A. at the -end of the last World War.

These surplus materials, called the U.S. Surplus Stores, consisted of vehicles and other stores .

It was said that these were sold to the company by the Director-

General, Disposals through correspondence and sale-notes.

These contracts of sale were subject to the General Conditions of Contract (Form Con. 117). Cl, 13 of these General Conditions provided that :

"In the event of any question or disoute arising under these conditions or any special conditions of contract or in connection with this contract-the same

shall be referred to the award of an arbitrator to be nominated by the Director General and an arbitrator to be nominated by the contractor, or in the case of G the said arbitrators not agreeing, then, to the award of an Umoire to be aooointed by the arbitrators in writing before proceeding on the reference-.

Uoon every and any such reference, the assessment of the costs incidental to the reference and award respectivelv shall be in the discret; n of the arbitrato.rs, or in the event of their not agreemg, of the Umptre

appointed by them."

ALLEN BF.11.RY & CO. V. UNION (She/at, J.) 285

Disputes having arisen between the parties both as regards the: comcn, s am.1 Lile quanucy o1 the ve111..:1s <lllllvcrcd u11uer

the comra..:ts, wey we1e r.:1erred, m the mst ms•an.; e, to two aroltra.urs nummated oy the parnes, and ulumate1y to an umjllfe.

The dlsputes wer~ crystallued mto mne claims by the appe1iantcompany 101a111ng .t<.s. o, 7 J, J4, JUU/-, and several countr claims oy the uovermnent ot lnd1a.

At the end of tne aro1tration, the umpire, by !us said award, dlsallowed all the claims made by the company, except one for which he awarded ks. b,~4, UUU/- and held, in respect of the counter-c1aims fikd oy the Govermnent of lndla, that the appeilant-company was liable to pay to the Government i:i all Rs. 36,23,682.50 l'. and costs amounting to Rs. 5,40,544/-. In the resu1t, after deducting the claim allowed to the appellant-company, the company was held liable to pay to the Government Rs. 34, 70,226.50 P.

The award having been filed by the umpire in the Court of the District Judge, Delhi and the Government of India having thereupon applied for a decree in term of the award, the company applied to the Court for setting aside the award urgmg several grounds for so doing.

The District Judge by an elaborate judgment declined to set aside the award. He, however, held that the

award sufiereci horn an error apparent on the face of the award in respect of the appellant's claim No. Ill(a), and further held that the counter-claims II, IV, V and VI made by the Government were not covered by the reference, and consequently, the umpire had no jurisdiction to go into them. Declining, however, to set aside the award, he remitted it for reconsideration of the aforesaid items and also for readjustment of the amount of costs in the event of enhanced compensation being awarded to the company in respect of its claim No. Ill (a}. Dissatisfied with the judgment of the court the company filed an aopeal before the High Court. The Union ofindia also fi'ed certain cos•-objections.

The High Court heard the appeal and the cross-obiections together and bv its aforesid iurl<Jm.nt di•mi<sed both the "'meal and the cross-objection& and upheld the judgment of the District Judge.

In suPoort of the claim that the award was liable to be set aside, counsel for the comoany submitted the following six propositions for our acceptance :

1. that the contracts of sale entered into by the company were misconstrued by the umpire and such misconstruction appears on the face of the award:

2. that the umnire. as also the High Court, failed to

talce into consideration several documents while deciding the scope of the sales;

3. th.:t in respect of claim No. VI and counter-claim No. VI of the Government, the umpire acted beyond his jurisdiction as those quetions did not fall within the scope of the reference;

4. that the umpire did not act according to law but acted as a conciliator and based his award on mere conjtures and surmises; 5, that his conclusion on ground rent awarded to the Government was based on no evidence; and

6. that the costs awarded to the Government were altogether disproportionate.

Before we proceed to consider these propositions, it is nees sary to ascertain the scope of s. 30 of the Arbitration Act 1940 and the principles underlying that section.

The general rule in matters of arbitration awards is that where parties have agreed upon an arbitrator, thereby displacing a court of law for a domestic forum, they must accept the award. ~~ final for good or

ill. In such cases the discretion ot the court either for remission or for setting aside the award will not be readily exercised and wiII be strictly confined to the specific grounds set out in ss. 16 and 30 of the Act.

In Hodgkinson vs. Fernie, (1) Williams, J. stated the principle as. follows :-

"where a cause or matters in difference are referred to an arbitrator, wh.ether a lawyer or a layman, he is constituted the sole and final judge of all questions both of law and fact. ... The only exceptions to that rule are, cases where the award is the result of corruption or fraud, and one other, which though it is to be regretted, is now, I think, firmly established, viz., where the question of law :necessarily arises on the face of the award, or upon some paper accompanying and forming. part of the award."

This observation was recently cited with approval m Union of India v. Bungo Steel Furniture Pvt. Ltd. (2 )

The principle is that the Court, while examining an award, will look at documents accompanying and forming part of the • award.

Thus, if an arbitrator were to refer to the pleadings of the parties so as to incorporate them into the award, the Court can look at them. In some cases, however, courts extended the princiole and set aside the award on a finding that the contract, though only referred to but not incorporated into the award as part of it, had been misconstrued and such misconstruction had

(I) ( 1857) (3) C. B."(N.S.) 189, 202.

(2) [ 1967) I S.C.R.324.

ALLEN BERRY & CO. v. UNION (ShekJt, J.) 287

ben the basis of , the award. Thus, in Landauer v. Asser( 1) the dispute between buyers and sellers of goods was as to who was entitled to certain sums paid upon a policy of insurance upon the goods.

This was referred to arbitration and the umpire made his award basing it on the construction he placed on the contract, namely, that as the parties to the contract were "by the terms thereof" principals, their interest and liability in insurance was defin.d to be the value of the invoice plus 5 per cent. On an application to set aside the award, the Court of Appeal held that inasmuch as the umpire had referred to the contract and the terms thereof, it was justified in looking at the contract, and having done so, found that he had based his decision entirely upon the terms of the contract. It also found that since the contract, if properly construed, did not justify the decision, the award was bad on the race of it and was liable to be set aside.

A similar view aopears also to have been taken in F.R. Absa/om Ltd. v. Great Western (London) Garden Village Society Ltd.(2) where the award set out the relevant words and cl. 30 of the contract and also the conclusion of law on the meaning of those words.

Lord Russel said that since the award recited the contract and referred in terms to the provisions of cl. 30, thereby incorporating it into the award, and then stated the comtruction which the arbitrator placed upon that clause, the Court was entitled to look at that clause to ascertain if the construction placed by the arbitrator was erroneous.

The correctness of the decision in Landauer v. Asser(1) was challenged before the Privy Council in Chempsey Bhara & Co.

v. Jivraj Balloo Spinning and Weaving Co. Ltd.(') Lord Dunedin,, however, did not expressly overrule it but rested content by observing that that decision was not binding on the Board. But he formulated the principle thus:

"An error in law on the face of the award means, -that you can find in the award or a document actu:illy incorporated thereto, as for instance, a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous.

It does not mean that if in a. narrative a reference is made to a contention of one party that opens the door to seeine; first what that contention is, and then going to the contract on which the parties' rights depend to see if that contention is sound." --- - --------

(1) [1905](2) K.B.184. (2) 19J.l A.C'. 592.

(J) [192Jj A.C. ~80.

The Privy Council upheld the award stating that it was impossible to say what was the mistake on the face of the award which the arl; litrators had made as they had not tied themse.ves down to any legal principle which was unsound: The mere fact that the court would have construed a document differently than the arbitrator would not induce the court to interfere unless the construciion given by the arbitrator is such that it is against the

we.1-establihed principles of construction. [see Kelanton v.

Duff Development Co. ( 1)]

In an illuminating.analysis of :a large number of earlier decisions, including Landauer(") and F. R. Absalom Ltd. (3 ) Diplock, L.J., in Giacomo Costa Fu Andrea v. British Italian Trading Co. Ltd.(') recorded his cop.clusion thus :

"It seems to me, therefore, that, on the cases, there is none which compels us to hold that a mere reference to the contract in the award entitles us to look at the contract. It may be that in pancular cases a sv..:eific reference to a particular clause of a contract may incorporate the contract, or that clause of it, in the award.

I think that we are driven back to first principles in this matter, namely, that an award can only be set aside for error whicli is on its face. It is true that an award --can incoroorate another document so as to entitle one to read that document as part of the award and, by reading them together, find an error on the face of the award."

The question whether a contract or a <; la1,1se of it is incorporated in the aard is a question of construction of the award.

The test is, ffcies the arbitrator come to a findinll on the wording of the contract. If he does, he can be said to have imT>liedly incorporated the con•ract or •a clause in it whicheve1 be the case.

Bu• a mere general reference {o the contract in the award is not to be hld a.ii incoroorating it. The-urinciole of reading contracts

or o•her documents into the' a.wad is not to b~ encoura "d or extende1. • (see Rrzhu R"m v.

N, onhema/ & n • ., r•) The rule thus is that as the oar•ies choose their own arbitrator to be the 'c judge in 'tlie disnute between •hem, tiley cannot. when the .award is good on the facP. of it, object to th~ deci•in.-, either unon the

law or the facts. Therefore. even .whel) "llnarhitra!or commit, a mis•"lre either in law or in fact in determining th" m""ers referred to him, but such mistake does not appear on the face of the

(1) [11 '9?3, AC.3'5 (2)(19051 1 KB. 18i.

(3) [19331 A.C. 592.

(4) [1962]2 All E.R. 53, 62

(5) C.A. N0.107of1966, Decided on 5-12-1968.

ALLEN BERRY & CO, v. UNION (She/at, J.) 289

award. or in a document appended to or incorporated in it so as to form part of it, the award will neither be reJ; I1itted nor set aside notwithstanding the mistake.

In the light of the principle above stated, the first question calling for determination is, is there an error apparent on the award, in the sense that the umpire misconstrued the contracts of sale inasmuch as though those contracts were contained in sale-notes as well as in several letters, he considered the sale-notes only as containing the contracts of sale disregarding the correspondence which had taken place between the company and the Director-General, Disposals and his officers ? Such a question would undoubtedly be one of law.

But the disputes referred to the umpire contained disputes both of fact and law. Ordinarily the decision of the umpire, even though it be on a question of law, would be binding on the parties.

The court would only interfere if the case falls within the exceptions mentioned by Williams, J. in Hodgkinson v. Fernie( 1) and reaffirmed by Diplock L. J., in Giacomo Costa Fu Andrea v. British Italian Trading Co. Ltd.(').

Therwere in all three separate sales to the appellant-compaay, whicl)., -according to the respondents were incorporated in sale- 1\Ptts Nos. 160, 161 and 197.

Before the sale-note 160 wa~ issued on July 11, 1946, it is a fact !hat the company had written a letter dated July 10, 1946 which was also endorsed by t'W officers of the Director-General, Disposals. The lette.r containe~ three clauses, the first of which stated that "M/s. Allen Berry will buy the Moran Vehicles Depot 'as is wi)ere is' for Rs. 1,80,00,000/". The two other clauses provided! the manner and time of payment of the sale price. But the letten commenced with the following words :

"Pending detailed record of terms tomorrow the following are the broad heads of agreement, which will form the ])as is of sale of surplus vehicles : ".

The next day, i.e., July 11, 1946, the Department issued salenote 160, which in .clear terms stated that what was purchased were "all vehicles and trailers lying in Moran Depot" which meant' that the vehicles sold were only those that W'Cre ctually lying in that depot on July 11, 1946, and not those outside it or those bome on the records of that depot, as contended by

th~ company.

It, however, appears from the judgment of the Trial Court (para 206) that on receipt of sale-note 160, the company wrote a letter on July 11, 1946 in which it contended that "We have purchased the entire vehicle depoLof Moran"

(I) [1857} 3 C.B. (N.S. 189,202. 57)

(2) [I 962] 2 All ER:SJ, 68. 5-807SupCl/71

SUPREME COURT REPORT~

[1971 J3 S.C.R.

it appears that in view of this difference of opinion, a meeting A -of representatives of the parties was held on July 23, 1946, the minutes of which, as recorded by the Assam Controller, U.S.AS.S., read as follows : ·

"(2)(a) The vehicles and trailers sold to Messrs.

Allen Berry and Co. Ltd., are deemed to B include all vehicles which were or should have been held in Moran Depot on the 10th July, also those which have been issued on a Memorandum Receipt as follows :-

(i) To' the Americans, left behind by them in various camps and depots and not yet turned in by us.

(ii) Vehicles issued on Mem9randum Receipt to military units assisting the U.S.A.S.S: Organisation.

(iii) Any surplus vehicles originally allotted to U.S.A.S.S. Units-for operational purposes and now no longer required by them."

Qn September 17, 1946, a secraphone message was sent from New Delhi to Calcutta which stated "We have sold U.S. Army

surplus vehicles presumed to be borne on Moran list, that is those actually in Moran Vehicle Depot or those that were intended to be moved to that depot, which was meant' to be parking depot for surplus U.S. vehicles in Assam area." On September 26, 1946, the Director-General, Disposals, wrote to the company that "The vehicles sold to you in Assam are those U.S. Army surplus vehicles actually in Moran Vehicle Depot or those that were intended to be moved to Moran Vehicle Depot.

Any mobile engineering equipment, such as mobile cranes, tracked tractors are excluded from the sale to you." On December I 0, 1946, the Controller issued a release order in respect of :

1. All vehicles and trailers lying, in Moran Depot on

10th July 1946 includinf,; all United States Army Surplus Stores, excl!Jding land .and buildings lying within Moran Depot and transferred to the Government Qf .India from the Government of the United -States.

2. Vehicles in operational use in Calcutta and Assam as and when no longer required by the U.S.A.S.S.

Organis.ation."

...

ALLEN BERRY & co. v. UNION (She/at, !.) 291

The question raised by counsel is that the umpire failed to consider all these documents while considering the scope and content of the contract of sale and relied on only sale-note No. 160, dated July 11, 1946, that the contract was not contained in the said note 160 alone, and that therefore, he misconstrued the contract, and that that misconstruction, which is a point of law, is apparent on the face of the award, as it was made the very basis of the award.

The first three issues raised by the umpire were :

( 1) whether the appellant was entitled to prove that any vehicles, stores etc. other than those men- C tioned in the sale-notes were sold to it;

(2) whether the Government was bound by the clarifications, representation, explanations or assurances made or given by any officer or officers of the Departm, ent regarding the subjectmatter of the contracts of sale except those D necessarily implicit in the sale-notes; and

( 3) whether the Government sold any vehicles except those lying in Moran Depot on July 11, 1946, or those intended to be moved t!rereto.

The dispute between the parties, thus, clearly was that whereas the company claimed that the sale was of all vehicles borne on the records of Moran Depot, irrespective -of whether they were actually lying there on July 11, 1946 or not, the Government claimed that the company was entitled to those actually lying in the Depot.

According to the respondents, the contract of sale was to be found in the sale-note, and therefore, any subsequent explanations or assurances given by any officer or officers of the Department could not vary or alter the terms of the contract.

These expanations and assurances were given only to remove the misunderstanding of the company over the question of the' scope and extent of the sale made to it.

The umpire set out part of the sale-notes 160 and 197 in the award and then observed :

"the language used in these sale letters is to my mind perfectly clear, explicit anJ unambiguous and exclues the possibility of any vehicls, trailers o.r stores J:ymg on the dates in question outside the Iocaltons specified in the sale letters having been included in the two .sales.

The 'contention that they in fact include all vehicular stores in Assam in one case and in Bengal area in the other has been made all seriousness and a good deal

of evidence both oral and documentary has been produced in support of or against such contention. The point has also been argued at great lengt!l by learned counsel for the parties. 1. have given the whole matter my most serious and earnest consideration and my view is that apart from the language of the two saledeeds being against such a contention, the evidence too considered as a whole does not support it. Accordingly, I hold that the stores sold to the claimants in the case of Assam were those actually located in Moran Depot on July 10, 1946 and in the case of Bengal those actually located in Jodhpur and other depots specified in the sale letter on July 31, 1946."

He next held :

"The alleged clarifications or representations made or explantions or assurances given by any officer or officers of the Disposals Department either verbally or in writing have been very carefully examined by me and I am of opinion that neither are they, considered as whole, capable of the interpretation sought to be put upon them by the claimants nor are the respondems bound by them. They are not in accordance with law and do :not amount to legal contracts binding the respondents." Thesepassages clearly show that the umpire had considered, besides the sale-notes, the oral and documentary evidence led by the parties as also the contentions urged on and as regards them by counsel for the company. It is impossible, therefore, to uphold the contention that the. various documents, i.e., the letter of the company dated July 10, 1946, the subsequent correspondence, minutes of the meetings which too place after the salenote 160 was issued etc. were not taken into consideration by the umpire whild coming to his conclusion as to what actually was sold to the company.

The dispute, amongst other disputes, referred to the umpire and crystallized by him in the form of issues on the pleadings of the parties involved, as already stated, the question first as to what was sold, and secondly, arising out of that, the questi9n whether besides the said sale-notes 160 and 197, the subsequent clarifications or explanations were binding on the Govefllment.

Thes.e \\'.ei:e,. no doubt, questions partly of fact and partly of la:W.

But questions 'both of. fact and law were referred to the umpire and prima facie his findirigs on them would bind the parties unless, as explained earlier, the umpire has laid down any legal proposition, such as a construction which is made the basis of the award and is on the face of the award an error.

ALLEN BERRY & CO. V. UNION (She/at, /.) 293

The point is, is this such a case ? True it is that this is not a case whe_re a question of law is specifically referred to. It is clearly a case falling in the category of cases, like Ka/anton v.

Duff Development Co. Ltd.( 1) wherein deciding the questions referred to him the umpire has to decide a point of law. ln doing . so, the umpire, no doubt, laid down the legal propsition that the clarifioations or assurances given subsequent to the dates of the said sale-notes by an officer or officers of the department were not binding on the respondents nor could they affect the scope of the sales.

That anwer the umpire was entitled to give.

But the fact that he answered a legal point does not mean that he has incorporated into the award or made part of the award a docu- .iuent or documents, the construction of which, right or wrong, is the basis of the award. The error, if any, in such a case cannot be said to be an error apparent on the face of the award entitling the court to consider the various documents placed in evidence before the umpire but not incorporated in the award so as to form . part of it and then to make a search if they have been misconstrued by him.

This, in our understanding, is the correct principle emerging from the decisions which counsel placed before us.

In any event, this is not a case where the umpire, in the words of Lord Dunedin, "tied himself down to a legal proposi-_

tion" which on the face of the award. was unsound. The award makes it clear in so many words that he took into account the entire evidence, including the documents relied on by counsel and then only came to the conclusion that it did not assist the company in its contentio'l as to the scope of the sales. Contentions I and 2 raised by Mr. Agarwal, therefore, cannot be i; pheld.

Contention No. 3 relates to 54 7 vehicles said to have been sold to the company under sale-note 197, dated August 2/6, 1946., There is no dispute that out of these vehicles the company removed 291 vehicles alleging that the delivery of the balance of 256 vehicles was withheld.

The company made a claim being claim No. VI for the price of these 256 undelivered vehicles.

The respondents' contention was that the sale . to the company was confined onlv to 'the U.S.A.

Surplus Stores. that these vehicles did not fall within that category, but were Reverse Land Lease vehicles belonging to the Government of India under an agreement between the U.S.A. and India.

On these allegations the respondents laid counter-claim No. VI claiming the price of the 291 vehicles admittedly removed by the company when they were lying in Jodhpur Depot, Calcutta.

The umoire found that the expression "Reverse Land LeliSe" related to the reciprocal aid articles referred to in the said agre ment.

A reciprocal aid article. according to that agreement, -(i)[T92l] A.C. 395.

meant an article transferred by the India Government to tlie U.S. Government under reciprocal aid under para 4-C of that agreement.

The U.S.A. Government was deemed to have acquired as on September 2, 1945 full title over such articles except that such reciprocal aid articles incorporated into installations in India were deemed to have been rreturned to India Government from the date when the U.S.A. forces relinquished possession of such installations.

From the inventories produced before him, the umpire held that these 54 7 vehicles were incorporated into installations in India, and therefore, ownership in them vested in India Government on and after the U.S.A. forces relinquished possession of those installations. They could not, therefore, be regarded as U.S. Surplus Stores which alone were and could be the subject-matter of sale-note 197. Consequently, the company was not entitled to remove the said 291 vehicles which it did, much .less could the company claim compensation for 256 vehicles , which it alleged were not delivered to it.. In the result, t)J.e. umpire allowed the Government's counter-claim No. VI, which was for the price of 291 vehicles unauthorisedly remowd by t)1e company from Jodhpur Depot.

The argument in connection with this paPt of th~ award was. fiNly, that the fi 0 ~·gs of the umnire were vitiated as there was tow! lack of evidence on which they could be based, and secondly that in any event, the umpire had no jurisdiction 10 award compensation to the Government in respect of counterclaim No. VI. The first part of the argument need not detain us as the finding that these vehicles formed part o' reciprocal aid articles, the ownership in which vested in the Government of India and were 'tl\.refore not U.S.A.S.S. was !Jased on the agreement between the two Governments and the inventories produced before the umpire from which he could hold that they belonged to the Government of India from the date when the installations in which they were incorporated were relinqmshed by the U.S. forces, and that therefore, they could not form the subject-ma; ter of sale-note 197 which related only to the U.S. Surplus Sfores.

The second part of the argument, however, requires consideration.

The question is whether the arbitration clause included a dispute relating to compensation in respect of the said 291 vehicles unauthorisedly removed by the company. Cl. 13 ill the General Conditions of Contract, quoted earlier, provides for reference to arbitration of all questions or disputes "arising under these conditions" or "in connection with this contract".

Dr. Singhvi referred us to cl. I 0. of these Conditions also but ' it is clear that it can in no sense apply to the dispute relating to compmi;; ation, _But the words "arising under these conditiom:•·

ALLEN , BERRY & co. v. UNION (Shefat, !.)

29S

and "in connection with this contract" are undoubtedly wide and comprehensive. It is, nonetheless, a question whether the dispute as to compensation on the ground of unauthorised appropriation of these vehicles by the company falls within cl. 13. In Vidya Sagar Joshi v. Surinder Nath Gautam(') the words "expenditure in connection with election" used in s. 77 of the Representation of the People Act, 1951 were construed to mean "having to do with".

An arbitration clause wherein the words "in relation to or in connection with the contract" were construed not to contemplate a dispute raised by a contractor that he could avoid the contract on the grour.d .that it was obtained by a fradulent. mis representation. (see Monro v. Bognor Urban District Council('). But a claim for damages on the ground of negligence on the part of the defendant in removing the plaintiff's furniture against a clause for due diligence in removing it was held to fall within the arbitration claus~. [Woolf v. Collis Removal Service( 8 )] •.

Counsel conceded that a dispute as to the interpretation or sale-note 197 would fall under the arbitration clause.. If that is so, it must follow that the umpire 'was competent to decide whether the said 547 vehicles fell within the purview of the sale-note or not.

E in determiniing that question he came to the conclusion that they did not, the obvious conclusion would be that the company was not entitled to talce away 291 vehicles admittedly removed by it from the Depot. If the company did that, would the question as to the return or of compensation in lieu of such vehicles, to which it was not entitled under the sale, be a question which arises out of or in connection with the contract ? Counsel went as far as to say that •the umpire in deciding the company's claim No. VI and the Government's counter-claim No. VI could decide that the company was not entitled to those vehicles, but could not take the next step either to direct the return of them or payment of compensation in lieu of those vehicles.

In Oljr view, such an argument cannot be accepted. The reason is that once it is found that he was competent to decide the dispute as to whether the said 54 7 vehicles were not the subject-matter of the sale and 291 of them were removed unauthorisedly, he must, to do justice !>etween the parties in respect of disputes referred to him, order the company either to return them or to pay compensation for them.

Since the first course was not possible after all these years, the second was the only and the obvious course. The d, jspute raised by the respondents that 291 vel:iicles were not included in the sale was co-extensive with and connected with the dispute that the com-

(!) A.LR. 1969 S.C. 288.

(2) [1915](3) K.B. 167. (3) [1947] 2 All E.R. 260.

pany was bound to return them if it was found that they were not covered by the sale.

On this reasoning it is not possible . to say that the umpire went beyond his jurisdiction either in rejecting the company's claim No. VI or in accepting the corresponding counter-claim No. VI of the respondents.

Contention 4 relates to 600 vehicles which had been taken out of Moran Depot. for operational pm; poses, but which the company claimed were part of the sale under sale-note 160.

The umpire held (I) that those vehicles having been taken out of the Depot for operational purposes did not fall within the sale, and ( 2) in the alternative, that the evidence disclosed that a substantial number of vehicles in operational use were delivered to the company even though strictly speaking it was not

entitled to them as they were not lying in the Depot on July l 0, 1946. The umpire further held that if some of them per chance were not handed over, the respondents had sufficiently compensated the company by handing over several non-operational vehicles from 1outside the depot to which the company was not entitled. . Counsel argued that this part of the award was vague and without any evidence to support it, and therefore, the umpire behaved in this respect more like a concilliator than as an arbitrator.

Having held that sale-note 160 covered only those vehicles which were actually lying in Moran Depot on July IO, 1946, it was not incumbent on the umpire to deCide the number of operational vehicles ou•side the depot.

Conseque1_:iy, if he was satis1ied that even though the company was not entitled to the said 600 vehicles claimed by it, yet the authorities had delivered a substantial number ol them, and for any deficiency, had also delivered non-operational vehicles, there would be no -purpose in going into the details_ of vehicles delivered to the company.

Even though, as the judgment of the Trial Court discloses (para 223), there was evidence, both oral and documentary, that the company had collected a number of vehicles lying at places outside the Depot, and the vehicls so collected were recorded by the company, yet the company had withheld the production of those records. In view of these facts it is impossible to say that the umpire had acted without evidence, or that he behaved in the manner of a conciliator, or gave findings on conjectures and surmises.

Our interference was invited next on the question of ground rent on the ground that the amount of such rent was fixed by the umpire without any evidence. There is hardly any substance in this contention. The sites, on which the various depots were

ituated. were requisitioned by the Government under the

ALLEN BERRY & CO. V. UNION (Shelat, J.) 297

Defence of India Rules.

The Government had a statutory obligation, therefore, to pay to the owners of those sites compensawn as provided by Jiose Rules.

Under the contracts of sale the company was bound to pay to the Government ground rent and other charges which the Government in its turn was liable to pay.

It is, therefore, not correct to say that tht: umpire could award only that amount which the Government had actually paid and that the umpire should, therefore, have taken an account from the Government.

It was never the case of the company that the Government had claimed ground rent higher than the compensation it was liable to pay.

The last objection was that the amount of costs awarded by the umpire to the respondents wa~ disproportionate. It appears from the award that the umpire fixed the amount of costs after considering the statements of expenses incurred by the parties for the hearing beforel him tendered by the respective counsel for the parties.

Considering the huge amounts claimed by the parties, <Ute volume of evidenc-:, both oral and documentary. adduced by them, the number of days occupied in recording that evidence and in arguing the case, we are not prepared to say that the discretion which the umpire exercised iii the matter of costs was exercised in .breach of any legal provision or unreasonably which can justify the Court's intervention.

In our view, none of the six contentions urged by counsel can be upheld.

The result is that the appeal fails and is dismissed with costs.

V.P.S.

ALLEN BERRY & CO. (P) LTD

UNION OF INDIA, NEW DELHI

January 5, 1971

M. SHELAT

REDDY, JJ

s. 30

cl. 13

ALLEN BERRY & CO

Clause 13

R. L. Agarwal

K. L. Mehta

S. K. Mehta

P. N. Chadda

M. G. Gupta

K. R. Nagara

L. M. Singhvi

Badri Dass Sharma

S. P. Nayar

Shelat

High Court of Punjab

February 19, 1963

March 22, 1958

Union of India

United States

Government of the U.S.A.

Court of the District Judge, Delhi

Government of India

s. 30

Arbitration Act 1940

ss. 16 and 30

Williams

cl. 30

Russel

cl. 30

Landauer

Diplock

Allen Berry

July 11, 1946

S. 189

U.S.AS.S.

Allen Berry and Co. Ltd.

U.S.A.S.S

September 17, 1946

New Delhi

Calcutta

Assam

September 26, 1946

December I 0, 1946

U.S.A.S.S.

Bengal

July 10, 1946

Jodhpur

July 31, 1946

Dunedin

Agarwal

August 2/6, 1946

India

U.S.A.

India Government

U.S. Government

U.S.A. Government

September 2, 1945

U.S.A. forces

Jodhpur Depot

Cl. 13

Singhvi

cl. 13

s. 77

Representation of the People Act, 1951

July l 0, 1946

July IO, 1946

Defence of India Rules


DIVL. FOREST OFFICER v.

MOOL CHAND SAROUGI JAIN )pnuary 6, 1971

(J. C. SHAH, C.J., K. S. HEGDE AND A. N. GROVER, JJ.] B

Assant Forest Regulation VII of 1891. Rules made under-Rule 10 scope of. '

The Divisional Forest Officer Kamrup Division Assam invited tenders for the jlllrchase of m, onopoly rights to quarry stone for the period July 1, 1963 to June 30, 1964. The tender submitted by the respondent was accepted and for the mihimum quantity of 1,25,000 c.ft. of stone allotted to the res- C pondent he was to pay R$. 31,250/-.

On appeal being filed against the order accepting the tender the Government of_Assam granted stay of the order.

When three months later the appeal v.•as dismiss'cd for non.prosecution the respondent declined to accept settlement of the quarry.

Thereafter tenders had to be invited again and it was only on January 10, 1964 that 'l settlement was made for a minimum quantity of 5000 c.ft. for'the period from January 25, 1964 to June 30, 1964 for Rs. 10,000. • The Divisional Forest Officer then sought to recover the amount of Rs. 31,250/- for .which D the tender of the respondent was accepted as arrears of ]and revenue in the manner provided by s. 75 of the Assam Forest Regulation VII of 1891.

The iespondent moved a petition in the High Court for an order quashing the proceeding for recovery of the amount demanded.

The High Court allo\ved the petition holding that the amoun' claimed was not recoverable under the aforesaid Regulation. The State of Assam appealed to this Court \Vith certificate. -It ws conceded that the amount was not recoverable undefs. 75 of the Regulation but reliance was placed on Rule 10 of the E rules made under the Regulation.

HELD : The appeal must fail.

Rule 10 docs not a!Sply to recovery of the amount alleged to be clue for failure to carry out the obligations of tho tender by proceeding~ under the Assam Forest Regulation 1891. It is again difficult to hold that 'stone' is forest produce within the meaning of the Act. In any event the Rule poes not give rise to any liability to pay a sum of money.

It merely imposes a limitation upon the power of the officers of the Forest Department to grant leases in respect of certain forest produce.

The lease may not be granted except in accordance with the general or special order of the conservator who alone is empowered to authorise a sale in respect of such a lease. [300 E-F]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 595 of 1967.

Appeal from the judgment and order dated July 28, 1966, of the Assam and Nagaland High Court in Civil Rule No. 242 of

1964.

Naunit Lal. for the appellants.

D. N. Mukherjee, for the respondent.

FOREST OFFICER v. MOOL CHAND (Shah, C.J.) 29!!·

The Judgment of the Court was' delivered by

Shah, C.J.

The Divisional Forest Officer, Kamrup Division,.

Assam invited tenders for the purchase of monopoly rights to quarry stone from certain areas, including Harengi Stone Quarry Mahal, for the period July 1, 1963 fo June 30, ! 964.

Moo!

Chand Sarougi-hereinafter called 'th.e .respondent' submitted a tender accompanied by. the requisite deposit of Rs. 100/- as earnest money, and offered the rate of RS. 5.25 per rupee of royalty.

The tender, submitted by the respondent was accepted and for the minimum quantity of 1,25,000 c. ft. of &tone allotted to the respondent out of the quarry he was to pay Rs. 31,250/-. Intimation of acceptance of the tender W?' <!iven to the respondent on July 13, 1963.

One Baputi Ram, a member of a scheduled tribe, appealed against the order of the Divisional Forest Officer accepting the tender, to the Government of Assam and obtained a stay order.

After about three months he declined to prosecute the appeal and his appeal was dismissed.

The , respondent then declined to accept the settment of the quarry.

The Divisional Forest Officer invited fresh tenders.

The offers made were not however accepted and tenders were invited again. c- On January!O, 1964 a settlement was made for a minimum quantity of 50,000 c. ft. for the period fro1,11 January 25, 1964 fo June 30, 1964 for Rs. 10,000/-

The Divisional Forest Officer, thereafter, sought to recover the amount of Rs. 31,250/ - for which the tender of the responl dent was accepted aa arrears of land .revenue in the manner pro- . vided bys. 75 of the Assam Forest Regulation VII of 1891. The respondent then moved a petition in the High Court of Assam for an orde.r quashing the proceeding for recovery of the amount demanded.

The High Court held that the amount claimed was not recoverable under the provisions of the Assam Forest Regulation. VII of 1891 and passed an order quashing the proceeding for recovery and issued a mandamus to the Divisional Forest Officer, Kamrup Division not to proceed with the recovery. The State of Assam has appealed to this Court with certificate granted by the High Court.

Section 75 of the Assam Forest Regulation VII of 1891 provides:

"All money, other than fines, payable to Crown under this Regulation, or under any rule made thereunder, or on account of the pi:ice of any forest produce, or of expenses incurred in the execution of t.1tis Regulation

~00

SUPREME COURT REPORTS [1971 J3 s.c.R.

in respect of any forest produce, may, if not paid when due, be recovered under the law for the time being in force lll; if it wer>~ an arrear of land revenue."

The amount claimed to be due from the respondent is not on account of the price of any forest produce, or of expenses incurred in the execution, for recovery of any forest produce. The amount is also not due in the e11:ecution of the Regulation. So far there is common ground. It was claimed, however, that the amount w~ due under rule 10 promulgated in exercise of power under the 'Regulation and o_n that account it was recoverable as an arrear of land revnue. Rule 10 provides :

"No lease for any . fixed period giving the right of removing India rubber, cane, kutcha or cutch, . lac, agar, ivory, or any other forests produce shall be given otherwise than in accordance with the genral or special

orders of the Conservator who is empowered to authorise sales in respect of such leases, by auction, tender or any other method at such rates as he may decide in his discretion."

The Rule in our judgment does not apply to recovery of the amount alleged to be due for failure t, o arry out the obligations of the tender by proceedings under the Assam Forest Regulation

1891. It is again difficult to hold that stone is forest produce within the meaning of the Act. In any event the Rule does not give rise to any liability to pay a sum of money.

It merely imposes a limitation upon the power of the officers of the. Forest Department to grant leases in respect of certain forest produce.

The lease may not be granted except in accordance with the general or special orders of the Conservator who alone is empowered to authorise a sale in respect of such a lease. It is a rule relating to the exercise of power to grant leases. The High Court was, in our judpnent, right in observing th!t the amount of damages for breach of the terms of the sale notice is not an amount due under the Regulation, or rule 10 made thereunder.

/ The appeal accordingly fails and is dismissed with costs.

G.C.

Appeal dismissea.

DIVL. FOREST OFFICER

MOOL CHAND SAROUGI JAIN

)pnuary 6, 1971

C. SHAH, C.J.

K. S. HEGDE

A. N. GROVER, JJ.

Assant Forest Regulation

January 10, 1964

January 25, 1964

June 30, 1964

s. 75

State of Assam

Assam Forest Regulation 1891

Naunit Lal

D. N. Mukherjee

Shah

July 1, 1963

June 30, ! 964

Chand Sarougi

July 13, 1963

Baputi Ram

Government of Assam

High Court of Assam

Section 75

Assam Forest Regulation

1891

Forest Department


301.

MAHABIR PRASAD

JAGE RAM & ORS.

January 6, 1971

[J. C. SHAH, C.J. AND K. S. HEGDE, J.)

Code of Civil Procedure (5 of 1908), 0. 41, r, 4-Scope of.

The appellant( his wife, and his mother held a joint decree. Against: an order dismissing the applie.ation for execution of , the . decree, the appellant alone appealed joining the other two as party respondents.

Pend:ng appeal his wife died.

The High Court dismissed the appeal. holding that because the heirs and legal representatives of the appellant wife were not brought on rec<ird _within the period of limitation the appeal. abated in its entirety. The High Court was of the view that the power of the appellate court undr O. 41. r. 4 Code of Civil Proceclure may be exercised only in those cases where there is a decree which proceeds upon a ground common to more persons than one and the appeal is filed by one 01 more of them but not all and other persons who are interested in the result of the appeal are not made parties to the appeal.

Allowing the appenl, HELD: (i) Power of the appellate court under O. 41, r. 4, C .P .C. to very or modify the decree of a Subordinate Court arises when one onhe persons out of many against whom a decree or an olrder had been made. on a ground which was common to him and others, has appealed, and that power may be exercised when 1!ther persons whQ were parties to the proceeding before the Subordinate Court are eitl)er not impleaded as parties .to the appeal or are impleaded as respondent.. The power is not loM merely because the person who was jointly interested in the claim has been made a party respondent and on his death his heirs have not been brou11i•t on the record.

Ratan Lal Shah v. Firm La/mandar Chhadamma/a/ & A.nr., [1970) !' S.C.R. 296, relied on.

Rameshwar Prasad 4c Ors. v. M /s. Shyam Behari/al lagannath & Ors., (19641 3 S.C.R. 549, distinauished.

(ii) Where in a proceeding a party dies and one of the leaal repre scntatives is already on . the rec<ird in anotb'er capacity, it is only neces sury that he should be described by an appropriate application made in that behalf that he is also on the record, ns an heir and legal represent&· llve. Even if there are other heirs nnd legal representatives and no appli

cation for impleding them is made within the od of llmitation pres•· cribed by the Limitation Act the proceeding will not abate.

On that ground also the order passed by the High Court cannot be sustained.

C1v1L APPELI, ATE Jua1so1cT10N: Civil Appeal No. 609 of 1967.

Appeal from the order dated March 3, 1965 of the Punjab High Court, Circuit Bench at Delhi in Execution First Appeal' No. 192-C of 1961.

S. T. Desai and A. D. Mathur, for the appellant.

v. D. Mahajan, for respondent No. 3.

SUPREME COURT REPORTS

(1971 ]3 S.C.R.

The Judgment of the Court was delivred by Shah, C. J.

Jage Ram and two others-hereinafter collectively called the defendants-were lesses of certain propery. belonging to Mahabir Prasad, his mother Gunwanti Devi and is wife Saroj Devi {collectively referred .to hefe)lfter as 'the plamtiffs'.) The plaintiffs comm:enced an act.ion in the court of the Subordinate Judge, First Class, Delhi, for a desree for Rs. 61,750,1being the amount of rent due by 'the defendants' The Subordinate Judge, Delhi decreed the suit. Execution of. the decree was resisted by the defendants on the plea inter alia, that the decree was inexecutable because of the provisions of the Delhi Land Reforms Act, 1954. The Subordinate Judge upheld the contention and dismissed the application for execution. Mahabir Prasa~ alone appealed against that order and impleaded Gunwanti Devi and Saroj Devias party-respondents. Saroj Devi died in Novem- _ber, 1962, and Mahabir Prasad applied that the name of Saroj Devi be struck of from the array of respondents. The High Court made an order granting the application "subject to all just exceptions".

The High Court dismissed the appeal holding that because the heirs and legal representatives of Saroj Devi were not brought on the record within the period of lintitation prescribed by the Limitation Act the appeal abated in its entirety. Against that order, this appeal is preferred with certificate granted by ihe High Court.

The decree in favour of Mahabir Prasad, Gunwanti Devi and Saroj Devi was a joint decree.

Order 41 r. 4 C0de of Civil Procedure provides :

"Where there are more plaintiffs or more defendants than one in a suit, and the decree appealed from proceeds on any ground common to all the plaintiffs, or to all the defendants, imy one of the plaintiffs or of the defendants may a, ppeal from the whole decree, .and thereupon the Appellate Court may reverse or vary the decree in favour of all the plaintiffs or defendants, as the case may be".

Order ~I r. 4 Code of Civil Procedure invests the appellate court with power to reverse or vary the decree -in favour of all the plaintiffs or defendants even though they had not joined in the ap.i:ea~ if the decree proceeds UJJO!l a ground common to all the plamttffs or defendants.

In the view of the High Court the power of the Appellate Court under 0. 41 r. 4 Code of Civil Procedure may be exercised only in those cases where there is a decree which proceeds upon a ground common to more persons than one and the appeal is filed by one or more of them but not all, and other persons who are interested in the result of the

MAHABIR PRASAD V. JAGE RAM (SIJah, C.J:) 303

appeal are not made parties to the appeal either as appellants or respondents.

Where, such other persons are made parties to the appeal and one of them dies and his heirs are not brought on the record within the period of limitation prescribed by the Limitation Act, the appeal abates in its entirety. The High Court observed:

"Appellant Mahabir Prasad has impleaded the re. maining two decree-holders as respondents to the.appeal. fhe execution application of allc the dectee-holders has been dismissed on a common ground that the decree which is sought to be executed has become null and void. The appeal bates so far as decree-holder Sarojni respondent is concerned because her legal representatives have not been brought on the record within time.

The order of the executing Court has become final so far as this deceased respondent is concernd. It follows that that order cannot be modified or varied. in favour of appellant Mahabir Prasad and the second surviving decree-holder respondent for obviously that may result in inconsistent orders with regard to the same decree.

The order of the executing Court in so far as Sarojni deceased respondent is concerned has become final and if the same order is modified or interfered with so far as the other two decree-holders, namely, appellant Mahabir Prasad and respondent Gunwanti Devi are concerned, the apparent result will be two inconsistent orders with regard to the same decree which the decreeholders seeks to execute. So the appeal of appellant Mahabir Prasad also abates".

In support of their view the High Court relied upon the judgment of tbis Court in Rameshwar Prasad and Others v. M / s Sh)' am

Behar.i/al Jagannath and Others.(') That was a case in which nine persons instituted a suit for a decree in ejectment and for recovery of rent against two defendants and obtained a decree. In appeal the District Judge set aside the decree, against one of the defendants. The plaintiffs filed a second appeal in the High Court and when the appeal was pending one of the plaintiffs (appellants in the High Court) died. No application for bringing his legal representl\tives on the record was made within the prescribed time. The respondents objected that the entire appeal had abated because the interest of the surviving appellants and of the deceased appellant was joint and indivisible and that in the event of the success of the appeal there would be two inconsistent and contradictory decrees. The surviving appellants claimed that the

(I) [1964] 'S.C.R. ;49.

SUPRE~E COURT REPORTS [1971]3 s.c.R.

the appeal was maintainable on the ground that without impleading. the . plaintiff who had dicii they could have appealed against , the entire decree in view of the provisions pf 0. 41 r. 4 of the Code of Civil Procedure, and on that account they were competent to continue the appeal, even after the death of one or the joint decree-holders and abatement of the appeal so far as he l!s concerned, and the Court had power to hear the appeal and to reverse or vary the whole decree. This Court held that the provisions of 0. 41 r. 4 of the Code of Civil Procedure were not pplicable, for the second appeal in the High Court was filed by all 'the plaintiffs jointly. and the surviving appellants could not be said to have filed the appeal as representing the deceased appellant.

The Coutt further held that the appellate court had no power to proceed to hear the appeal and to reverse or vary ihe decree in favour of all the plaintiffs or defendants under 0. 41 r. 4 of the Code of Civil Procedure, when the decree proceeded OI) a ground common to all the plaintiffs, •or defendantsi if all the plaintiffs or the defendants appealed from the i; tecree and any of them died, and the appeal abated in so far as he was concerned under 0. 22 r. 3, ?f the Code of Civil Procedure. Rameshwar Prasad's case(') is obviously distinguishable from the present case.

In Rameshwar Prasad' s case -all the plaintiffs whose suit had been dismissed had filed an appeal and thereafter one o1 them died and ·· his heirs were not brought on the record. In the. present case there is an order against the decree-holders but all the decree-holders did not appeal : only one of them .appealed and other two were joined as party respondents.

In a later judgment of this Courfin Ratan Lal Shah v. Firm Lalmandas Chhadammalal & Anr.( 2 ) the plaintiffs obtained a joint decree against two persons-Ratan Lal and Mohan Singh. Against the decree Ratan Lal alone l)ppealed to the High Court of Allah abad. Mohan Singh was impleaded as a party-respondent to the appeal. Notice of appeal sent to Mohan Singh was returned unserved, and no steps were taken to serve him with notice of the appeal. The High Court dismissed the appeal holding that there was a joint decree against Ratan Lal and Mohan Singh in a suit founded on a joint cause of action an'd the decree against Mohan Singh had become final.

The appeUant could not, on that account claim to be heard in his appeal : if he was heard and his claim was upheld. The High Court observed that there would be two conflicting decisions between the same parties and in the same suit based on the same cause of action. This Court set aside the judgment of the High Court observing that even though Mohan

(I) [1964] 3 S.C.R. 549.

' I

MAHABIR PRASAD v. JAGE RAM (Shah, C.J.) 305

Singh was not served with notice of appeal, the appeal filed by Ratan Lal was maintain!!ble, in view of -the provisions of O. 41 r. 4 Code of Civil Procedure. In Ratan Lal Shah's case(1) this Court allowed the appeal to be prosecuted, even though one of the joint decree-holders impleaded as a_party-respondent had not been served with the notice of appeal. In the present case one of the respondents had died and his heirs have not been brought on the record. No distinction in principle may be made between Ratan Lal Shah's case(') and the present case. Competence of the appellate court to pass a decree appropriate to the nature of the dispute in an appeal filed by one of severnl persons against whom a decree is made o, n a ground which is common to him and other~ is not lost merely because of the persons who was jointly interested in the claim has been made a. party-responde.nt and on his death his heirs have not been brought Qll the record.

Power of the appellate court under Order 41 r. !I to vary or modify the decree of a Subordinate Court arises when one of the persons out of many against whom a decree or an order had been made on a ground which was common to him and others has appealed. That power may be exercised when other persons who were parties to the proceeding before the .subordinate court and against whom a decree proceeded on a ground which was common to the appellant and to those other persons are either not impleaded as parties to the appeal or are impleaded as respondents. The view .taken by the High Coun cannot .therefore be sustained.

Even on the alternative ground that Mahabir Prasad being one of the heirs of Saroj Devi there can be no abatement merely because no formal application for sl)owing Mahabir Prasad as an heir and legal representative of Saroj Devi was made. Where in a proceeding a party dies and one of the legal representatives is already on the record in another capacity, it is only necessary that he should be des9ribed by an appropriate application made in that behalf that he is also on the record, as an heir and legal representative. Even if tl)ere are oilier heirs and legal represen

tatives and no application for impleading them is made within the period of limitation prescribed by the Limitation Act the proceeding will not abate. On that ground also the order passed by the High Court cannot be sustained.

The appeal is allowed and the proceeding remanded to the High Court to be dealt with and disposed of according to law.

Defendants will pay the costs of this appeal.

Cots in the High Court will be the costs in the appeal.

K.B.N.

Appeal allowed. fl) [19701 I S.C.R. 296. 6-L807 Sup CI/71

MAHABIR PRASAD

JAGE RAM & ORS

January 6, 1971

C. SHAH, C.J.

K. S. HEGDE, J.

Code of Civil Procedure

Limitation Act

S. T. Desai

A. D. Mathur

D. Mahajan

Shah

Jage Ram

Gunwanti Devi

Saroj Devi

Subordinate Judge, First Class, Delhi

Subordinate Judge, Delhi

Delhi Land Reforms Act, 1954

Mahabir Prasa~

Gunwanti Devi

Saroj Devias

Mahabir Prasad

Limitation Act

Code of Civil Procedure

Code of Civil Procedure

Limitation Act

Mahabir Prasad

Sarojni

Sarojni

the Code of Civil Procedure

the Code of Civil Procedure

the Code of Civil Procedure

the Code of Civil Procedure

Rameshwar Prasad

Ratan Lal

Mohan Singh

Ratan Lal

High Court of Allah abad

[1964] 3 S.C.R. 549

Singh

Code of Civil Procedure

Ratan Lal Shah

Mahabir Prasad

Limitation Act

K.B.N.


STATE OF ASSAM AND ORS.

RAMESHWAR AGARWALA AND ORS.

January 6, 1971

[J. C. SHAH, C.J. AND K. S. HEGDE, J.J

. Assam Lend Revenue Regulations-Rule 40 framed thereunder- Determination by Government of premium payable upon settlement of land for "special cultivation"-!/ rail? of premium mast be fixed for locality or can be fixed for tea garden-If premium can be fixed accordinR lo commercial value.

The first respondent applied to the Deputy Commissioner, Lakliimpur C ,! for settment of a Tea Garden for "special cultivaticn of tea".

In I" March, 1964 the Government of Assam permitted the settlement on payment of Rs. 3.86 lakhs as premi"m.

Upon the respondent failing to make payment of the amount, the State Government directed the auction of the tea garden. The first respondent thereafter moved a petition in the High Court for a declaration inter alia that the State Goven, iment had acted illegally in fixing the amount of premium. The High Court allow- , F ed the petition holding that the order flying the premium was not jn con- D formity with rule 40 framed under the Assam Land Revenue Regulations which required the State Government to fix the rate of premium for a particular locality; it did not empower the Government fo' nx''tlie premium payable by an intending holder in a particular case.

On appeal to this Court,

HELD : The High Court• was in error in setting aside the order E passed by the Government of Assam and in declaring that the offer to , settle the tea garden on payment df the amount specified Rs. 3,86,000 T was not in conformity with rule 40.

There was no warrant for the assumption made by the High Court that in settling the premium to be fixed in respect of its own property, the Government is bound to fix the premium generally in respect of a region.

The Government is by the Act or the Rules not disqualified from fixing the premium to be paid in respect of an individual tea garden.

In the absence of any indication to the contrary . a tea garden may appropriately be regarded as a locality within the meaning of Rule 40.

The rate of premium may be fixed by the State Government accd!:ding to its commercial value.

C1v1L APPELLATE JuR1so1cnoN: Civil Appeal No. 658 of 1967.

Appeal frnm the judgment and order dated June 27, 1966 of the Assam and Nagaland High C6urt in Civil Rule No. 296 of 1964.

Naimit Lal, for the appellants.

Sarjoo Prasad and S. N. Prasad. for the respondent_

G •

The Judgment of the Court was delivered by

Shah, C. J. On October 24, 1957 Rameshwar Agarwalahereinafter called 'the respondent' applied to the Deputy Commissioner, Lakhimpur, for settlement of a tea garden for "special

cultivation of tea". By order dated March 11, 196~ the Government of Assam permitted settlement of the tea garden for special tea cultivation on payment of Rs. 3,86, QOS/- a~ premium. The respondent failed to pay the amount demanded.

The State of Assam then put up the tea , garden for auction. The respondent moved a petition in the High Court of Assam for an order declaring tnat in fixing the amount of the premium at Rs. 3,86,008/- the State acted illegally, and that the order was void and unenforceable at law because in fixing the , amoun( of tile. premium the

State acted without jurisdiction and the order directing auction of the tea garden for . not depositing the amount demanded was also illegal. The High Court upheld the contention and ordered the State of Assam-not to give effect to the order dated March 31, 1964 c8lling upon the respondent to pay the amount due within two months of the order and the order dated November 26, 1964 directing that the tea garden be put up for auction. With certificate granted by the High Court, the State of Assam has appealed to this Court.

The tea garden belonged to the State of Assam. The Government of Assam in the absence of 'any binding statutory provision, could settle the tea garden on such commercial terms it could reasonably obtain. The respondent applied to the Deputy Commissioner for settlement of the tea garden and requesting the State Govemmnt for early fixation of the amount of premium.

When the premmm was fixed by the Government the respondent protested, contending that the action of the State was illegal.

Before the High Court it was contended by the Respondent that the power of the State Government to fix the premium for which it could lease the tea garden was restricted by Rule 40 framed under the Assam Land Revenue Regulations. The Rule reads :

"In addition to the land-revenue payable under rule 17 and value of the timber assessed under rule 37, an applicant to whom a lease for special cultivation is granted shall be liable to pay premium. The rate of premium shall be fixed by the State Government from time to time for .each locality. * * * * "

The reasons which persuaded the High to upheld the plea H raised by the respondent may be set out in their own words :

"The only power which the Government has got, is to fix the rate of premium under Rule 40 of the Rules

SUPREME COURT REPORTS

[1971] 3 S.C.R.

under the Land Revenue Regulation and the question for us to consider is whether the order of the Government fixing the premium for settlement of this land for special cultivation is an order in conformity with Rule

40. . . . .

In our opinion, what Rule 40 provides is to confer upon the Government power to fix the rate of premium in every case which shall be payable for the settlement and it is only the Deputy Commisioner that is authorised to settle the land. 'fhe whole pui:pose of Rule 40 is to confer power on the Government to fix the rate of premium . which wiJl be valid for a particular loi:ality and that the Deputy Commissioner has to make the settlement. He is given' the power to realise the premium fixed . by the Government from time to time and to see that no document of lease is issued before the premiuin has been paid by the intending holder. But Rule 40 does empower, in our opinion, the State Government to fix the amount of premium in the case of a particular settlement in a particular locality. . . . . .

.... The power under Rule 40 is a general power for fixing the rate of premium for a particular locality and the Legislature hen frami!lg the rules never intended that the Government should be empowered to E fixing the total amount of premium payble by the intending holder.

In our opinon, therefore, the order passed by the Government directing the authorities to offer the land for settlement in case the petitioners pay Rs. 3,86,000/- is not in conformity with Rule 40 and this order cannot be given etfec!to." F The expression "locality" is not defined_.. in the Act or. in the.

Rules. We see no warrant for the assumpli~ made by the Hi¥h Court that in settling the premium to be fil:ed in respect of its

own property, the Government is bound to fix fue premium generally in respect of a region. The Government is by the Act or the Rules not disqualified from: fixing the premium to be paid G in respect of an individual tea garden. In the absence of any 'indication to the contrary a tea garden may in our judgment be appropriately. regarded as a locality witltin the meaning of Rule

40. The pcwer to settle a tea garden on payment of land revenue, value of the timber and premium is to be exercised according to the Rules. The rate of premium may be Jb:ed by the State Gov- H . etnment according to its commercial value. In the absenc.e. of any restriction imposed upon the State Government requmng that a general rate shall be fixed covering a specified area larger

A than a tea garden there is nothing which prohibts the State Government from fi1'ing the 1ate of premium having regard to the commercial v.alue of the tea garden. In the pres.ent case the Sub- Divisional Officer reported 'that the price of the land of the Dirpai tea garden be valued at Rs. [ 500 I - per big ha and on that basis the State Government computed the premium to be paid in res- B pect of the entire Jokai Tea Garden.

Fixation of. a rate of Rs. 500/ - per bigha in respect of the entire area of the tea garden may be regarded as a premium fixed for the locality of the tea garden. The matter rested entirely in contract between the Respondent and the State Government.

There was an offer by the respondent for settlement of the tea C garden. He.agreed to pay the land revenue payable under r. 17.

He also agreed to pay the value of the timber assessed under r. 37.

For settlement of the tea garden for special cultivation the respondent was also liable to pay premium. The quantum of liability to pay land revenue was governed by r. 17 and value of the .timber was governed by r. 37. The liability to pay premium had D to be fixed bY the State Government. In the absence of any

restrictioo placed by the Rules upon the power of the State Government, we do not think that the High Court had any jurisdiction to compel the State to enter into a contract to settle the tea garden upon the respondent on payment of premium after determining a general rate for a region larger than the tea garden.

The High Court was in error in setting aside the order passed by the Government of Assam and in declaring that the offer to settle the land of the Dirpai Tea Garden on payment of Rs. 3,86,008/- was not in conformity with r. 40. The High Court also erred in directing that auction of the land for nonpayment of the premium shall be set aside.

The appeal is allowed and the petition filed by the respondent will be dismissed. The respondent will pay the costs in this Colll't--and in the High Court.

R.K.P.S.

Appeal a/lowed.

STATE OF ASSAM AND ORS

RAMESHWAR AGARWALA AND ORS

January 6, 1971

C. SHAH, C.J.

K. S. HEGDE, J.J

Assam Lend Revenue Regulations

Government of Assam

Naimit Lal

Sarjoo Prasad

S. N. Prasad

Shah

Rameshwar Agarwalahereinafter

State of Assam

March 31, 1964

November 26, 1964

Dirpai Tea Garden


HAKAM SINGH

MIS. GAMMON (INDIA) LTD.

January 8, 1971

[J. C. SHAH, C.J. AND K. S. HEGDE, J.]

Contract Act 1872, s, 28-Code of Civil Procedure, 1908, s. 20(a) Ex- _planation /I-Arbitration Act 1940, s. 41-Defendant a company registered under the Indian Companies Act having its principal place of business at Bombay-Contract providing for arbitration of disputes and further pro- .vidlng that disputes were to be adjudicated only in Bombay Courts-Restric- .tion whether binding or against public policy.

On October 5, 1960 the appellant agreed to do certain construction work for the responden•-a company registered under the Indian Com- , panies Act and having its principal place of business at Bombay-on the

terms and conditions of a written tender.

Clause 12 of the tender provided for arbitration in case of dispute. Clause 13 provided that notwithstanding the place where the work under the contract was to be executed the contract shall be deemed to have been entered into by the parties at Bombay and the court in Bombay alone shall have jurisdiction to adjudieate thereon.

On disputes arising between the parties the appellant . submitted a petition to the court at Varanasi for an order under s. 20

of the Arbitration. Act, 1940 that the agreement be filed and an order of reference be made to an arbitrator or arbitrators appointed by the Court. The respondent contended that in view of cl. 13 of the arbitration agreement only the courts at Bombay had jurisdiction.

The trial court held that the entire cause of action had arisen at Varanasi and the parties could not by agreement confer jurisdiction on the courts of Bombay which they did not otherwise possess. The High Court at Allahabad in exercise of its revisional jurisdiction held that the courts at Bombay had jurisdiction under the general law and henoe could entertain the petition.

It further held that in view of cl. 13 of the arbitration agreement the petition could not be entertained at Varanasi.

Against the order of the High Court directing the petition to be returned for presentation to the proper court, the appellant appealed to this Court by special leave. The questions that fell for consideration were : (i) whether the courts at Bombay alone had jurisdiction over the dispute; (ii) whether Explanation II to s. 20(a) of the Code of Civil Procedure refers only to Government corporations and not to companies registered under the. Indian Companies Act.

HELD : (i) The Code of Civil Procedure in its entirety applies to proceeding;; under the Arbitration Act by virtue of s .. 41 of the latter Act. The jurisdiction of the courts under the Arbitration Act to entertain a proceeding for filing an award is accordingly governed by the provisions cf the Code of Civil Procedu're. By the

1terms of s. 20(a) of the Code of Civil Procedure read with Exp. II thereto, the respondent company which had its principal place of business at Bombay, was liable to be sued at Bombay. [316 GJ ·

It is not open to the parti°' by agreenient to confer juri.sdiction on any •court which it did not otherwise possess un<!er the Code. But where two courts hape under the Code of Civil Procedure jurisdicti<ll) to try a suit <Ol' proceeding an agreement between the parties that the jlispute between

. --"-"j

them shall be tried in one of S\!~' courts is not contrary to public pulicy.

Such an agreement does not contravene s. 28 of the Contract Act.

[316 HJ

Since in the present case the courts at Bombay had jurisdiction under the Code of Civil P\"ocedure the agreement between the parties that the courts in Bombay alone shall have jurisdict.ion to try the proceedings relating to arbitration was binding between them. [318 A] (ii) Order 29 of the Code of Civil Procedure deals with suits by or against a corporation and there is nothing in the Code to suppolrt the contention that a Corporation referred to under s. 20 means only a statutory corporation and not a company registered under the Indian Companies Act. [317 G-H]

C1v1L A, PPBLLATB JURISDICTION : Civil Appeal No. 646 of c 1967 . .

Appeal by special leave from the judgment and order dated December 1, 1966 of the Allahabad High Court in Civil Revision No. 721 of 1964.

1. P. Goyal and G. S. Chatterjee, for the appellant.

V. S. Desai and B. R. Agarwala, for the respondent.

The Judgment of the Court was delivered by

Shah, C.J. On October 5, 1960 the appellant agreed to do certain construction work for the respondent on the terms and conditions of a "written tender".

Clauses 12 & 13 of the tender E were:

"12. In the event of any dispute, arising out of this sub-contract, the parties hereto agree that the matter shall be referred to arbitration by two Arbitrators under the Arbtration Act of 1940 and such amendments thereto as may be enacted thereafter.

13. Notwithstanding the place where the work under this contract is to be executed, it is mutually understood and agreed by and between the parties hereto that this Contract shall be deemed to have been entered into by the parties concerned in the City of Bombay and the Court of law in the City of Bombay alone shall have jurisdiction to adjudicate thereon."

Disputes arose between the parties and the appellant submitted a petition to the Court of the Subordinate Judge at Varanasi for an order under s. 20 of the Indian Arbitration Act 10 of 1940 that the agreement be filed and an order of reference be made to an Arbitrator or Arbitrators appointed by the Court to settle the dispute between the parties in respect of the construction works done by him.

The respondent contended that the Civil Courts in Bombay alone had because of the terms contained in cl. 13

jurisdiction to entertain the petition.

The Trial Judge rejected A that contention observing that the condition in cl. 13 . that "the contract shall be deemed to have been entered into by the parties ncemed in the city of Bombay has no meaning unless the contract is actuallritered into in the city of Bombay", and that .there was no evidence to establish that it was entered into in the ·- city of Bombay.

The Trial Judge concluded that the entire Jl cause of action had arisen at Varanasi and the parties could not by agreemt confer jurisdiction on the Courts at Bombay, which they did. not otherwise possess.

The High Court of Allahabad in exercise of its revisional jurisdiction set aside the order passed by the Subordinate Judge c and declared that the Courts in Bombay had jurisdiction un3er the general law to entertain the petition, and by virtue of the covenant in the agreement the second branch of cl. 13 was applicable and binding betwen the parties and since the parties had agreed that the Courts in Bombay alone hr.d jurisdiction to adjudicate. upon the contract, the petition to file the arbitration agree- \,, ment could not be enterta:ned by the Courts at Varanasi. Against D the order of the High Court directing that the petition be returned for presentation to the proper Court, the appellant has appealed to this Court'With special leave.

Section 41 of the Arbitration Act 1940 provides in so far as it is relevant : E "Subject to the provisions of this Act and of rules made thereunder :

(a) the provisions of the Code of Civil procedure,

1908, shall apply to all proceedings before the court, and to all appeals under this Act." F The Code of Civil Procedure in its entirety applies to proceedings under the Arbitration Act.

The jurisdiction of the Courts under the Arbitration Act to entertain a proceeding for filing an award is accordingly governed by the provisions of the Code of Civil Procedure.

By cl. 13 of the agreement it was expressly stipulated between the parties that the contract shall be deemed to have G been entered into by the parties concerned in the City of Bombay.

In any event th_e respondent have their principal office in Bombay and they were liable in respect of a caii8e of action arising under the terms of the tender to be sued in the Courts at Bombay.

It is not open to the parties by agreement to confer by their agreement jurisdiction on a Court which it does not possess under H the Code.

But where two courts or more have under the Code of Civil Procedure jurisdiction to try a suit or proceeding an agreement between the parties that the dispute between them shall

A be tried in one of such Courts is not contrary to public policy.

Such an agreement does not contravene s. 28 of the Contract Act. ..

Counsel for the appellant contended that merely because the

B respondent carried on business in Bombay the Courts at Bombay were not invested with jurisdiction to entertain any suit or a par- '" tition for filing an arbitration agreement.

Section 20 of the Code of Civil Procedure provides :

"Subject to the limitations aforesaid, every suit shall be instituted in a Court within the local limits of whose c jurisdiction-

(a) the defendant, or each of the defendants where

""'

there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or perSonallv works for gain; or

~~ D (b)

(c) the cause of action, wholly or in part, arises.

"Explanation II.-A corporation shall be deemed to carry on business at its sole or principal office in India, or, in respect of any cause of action arising at any place where it has also a suhordinate office, at such place."

Plainly by the terms of s. 20(a) read with Explanation II, the respondent Company was liable to be sued at Bombav where it

F had its principal place of business.

The argument of counsel for the appellant that the expression "corporation" in Explanation II includes only astatutory corporation and not a company registered under the Indian Companies Act is, iii our judgment, without substance.

The Code of Civil Procedure uses the expression "corporation" as meanin~ a G legal person and includes a company registered under the Indian Companies Act.

Order 29 of the Code of Civil Procedure deals with suits by or against a corporation and there is nothing-. in the Code of Civil Procedure that a corporation referred to under s. 20 means only a statutory corporation and not a company registered under the Indian Companies Act.

H Since an application for filing an award in respect of a dispute

,~:, arising out of the terms of the agreement could be filed in the

-~; n Courts in the City of Bombay, -both because of the terms of cl. 13 "'' ~\

of the agreement and because the respondents had their. Head A Office where they carry on business at Bombay, the agreement between the parties that the Courts in Bombay alone shall have jurisdiction to try the proceeding relating to arbitration was bind ing between them.

The appeal fails and is dismissed with costs.

G.C.

Appeal dismissed.

.J . ·"··.

,·,

HAKAM SINGH

MIS. GAMMON (INDIA) LTD

January 8, 1971

C. SHAH, C.J.

K. S. HEGDE, J.

Contract Act 1872

Code of Civil Procedure, 1908

s. 20(a)

Arbitration Act 1940

s. 41

October 5, 1960

Clause 12

Clause 13

Bombay

Varanasi

s. 20

cl. 13

High Court at Allahabad

cl. 13

s. 20(a)

the Code of Civil Procedure

Indian Companies Act

The Code of Civil Procedure

s. 20(a)

the Code of Civil Procedure

the Code of Civil Procedure

s. 28

the Code of Civil Procedure

s. 20

Companies Act

P. Goyal

G. S. Chatterjee

V. S. Desai

B. R. Agarwala

Shah

Arbitrators under the Arbtration Act

s. 20

Civil Courts in Bombay

cl. 13

cl. 13

High Court of Allahabad

cl. 13

Section 41

Arbitration Act 1940

Code of Civil procedure

The Code of Civil Procedure

the Code of Civil Procedure

cl. 13

the Code of Civil Procedure

s. 28

Section 20

the Code of Civil Procedure

India

s. 20(a)

Bombav

Companies Act

The Code of Civil Procedure

Companies Act

the Code of Civil Procedure

the Code of Civil Procedure

s. 20

Companies Act

cl. 13


SORAN LAL NARAINDAS v.

LAXMIDAS RAGHUNATH GADIT January 8, 1971 .

[J. C. SHAH, C.J., K, S. HEGDE AND A. N. GROVER, JJ.]

Lease and licence-Difference between-Tes~ of exclusive possession -Language of document must be read wi#l surrounding circumstances.

The plaintiff commenced an action in the City Civil Court, Bombay for a decree in ejectinent against the defendant alleging that the defendant was occupying loft on the upper floor of a building under an agreement of licence and the licence had been duly terminated and withdrawn.

The defendant contended that he was tenant of the loft, that the tenancy had not been duly terminated as required by law; that he was entitled to the protection of the Bombay Rents, Hotel and Lodging Rates Contract Act, 1947; and \bat the court had no jurisdiction to try the suit.

The trial court dismissed the suit.

The decree was confirmed in appeal by the High Court of BombfU'. The plaintiff applied for certificate under Aft. 133(1) (a) of the Constitution and in the alternative under Art. 133(1) (c) thereof.

The High Court passed an order certifying the case under Art. 133 (I) (c), and the plaintiff appealed.

HELD : (I) A certificte granted by the High Court must be supported by adequate reasons.

It is obligatory upon the High Court to set out the question of public or private importance which in their opinion falls to be determined in the proposed appeal.

In th~ present case since there was no merit in the appeal it was not necessary to vacate the certificate. [318 G]

(2) A licence confers a right to do or continue. to do something in or upon immovable property of grantdr which but for the grant Of the right may be unlawful, but it create no estate or interest in the immovable property of the grantor. A lease on the other hand creates an interest in the property demised. [322 G]

Intention of the parties to an instrument must be gathered from the terms of the agreement examined in the light of surrounding circumstan ces.

The description given by the parties may be evidence of the intention but is not decisive. The crucial test in each .case is whether the .. instrument is intended to create dr not to create an interest in the pro-·

pcrty, the subject matter of the agreement. If it is in fact intended to create interest in the property it is a lease, if it does not, it is a licence.

In determining whether the agreement creates a lease or a licence, the test of excrnsive possession though not decisive, is of significance. [322 H-323 Bl

Mrs. M. N, Clubwa/a v. Fida Hussain Saheb & Ors., [1964] 6 S.C.R.

642. relied on.

In the present case on a carefol consideration of .the covenants and in the light of the relevant surroundmg circumstances. 1t must held that the exclusive possession given to the defendant was mtended to confer an . mterest in the loft and on that account the agreement operated as a lease and not as a licence. [323 DJ

SUPREME COURT REPORT1 [1971] 3 ; S.C.lt.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2443'of A 1966. .

Appeal from the judgment and order dated January 21, 25 of the Bombay High Court in First Appeal No. 769 of 1963.

F. S. Nariman, P. C. Bhartari a.nd J. B. Dadao, hanji. for the appellant.

D. V. Patel, Ramesh Malik and Ganpat Rai, for the respondent.

The Judgment of the Court was deliyered by

Shah, C.J.

Sohan Lal Naraindas-hereinafter referred to c as 'the plaintiff'-commenced an action in the City Civil Court, Bombay, for a decree in ejectment against Laxmidas Raghunathhereinafter called 'the defendant'- iilleging that the defendant was occupying a loft 19' x 15' on the upper floor of a building at Pragraj Galli, Mulji Jetha Market, Bombay under an agreement of licence dated November 3, 1958 and tliat the licence had been duly terminated and withdrawn but the defendant had failed and D neglected to vacate the loft notwithstanding the demand.

The defendant contended that he was a tenant of the loft, that the tenancy had not been duly' terminated as required hy law, that he was entitled to the protection of the Bombay Rents Hotel & Lodging House Rates Contract Act 1947 and that the Court had no jurisdiction to try the suit.

The Trial Court dismissed the suit holding that the defendant was a tenant of the plaintiff and not his licensee.

The decree was confirmed in appeal, by the High Court of Bombay. The High Court held that on the terms of the agreement and in the light of the surrounding circumstance> the relatiorrship between the parties was that of landlord and tenant.

Wi\11 certificate F

ranted by the High Court the plaintiff has a.ppealed to this Court.

The certificate granted by the High Court is defective.

The 'plaintiff applied for certificate under Art. 133(1) (a) of the Constitution and in the alternative under Art. 133(1)(c) of the Constitution.

The High Court passed an order certifying the case G

1 under Art. 133(1)(c). A certificate granted ?Y th~ !Jigh Court must be supported by adequate reasons. It ts obhgatory upon the High Court to set out the question of public or private importance which in their opinion fall to be determined in the proposed appeal.

Sjnce we are of the view that there is no merit in this appeal, we have not thought it fit to vacate the certificate.

H The agreement dated November 3, 1958 was recorded formally in writing and was duly executed.

The plaintiff was the. lessee of a shop No. 11 in Pragraj Galli, Mulji Jetha Market, and

SOHAN LAL v. LAXMIDAS (Shah, C.J.) 321

the loft _of that shop was the subject matter of that agreement.

The penod of the agreement was one year.

It was stated in the agreement that the loft "was. given on leave al).d licence basis for use amroccupation" of the defendant on the terms and conditions mentionc:_d therein. The relevant conditions wre-

" I. The owner (the plaintiff) has agreed to grant the leave the licence for use and occupation of the said loft (Medo) of the said shop for a period one year commencing from 4so Vad 13 S. Y. 2014 to Aso Vad 12

S. Y. 2{)15.

2. The Licensee (the defendant) shall pay to the Owner monthly compensation or Licensee fee at the rate of Rs. 250 / • per month, and the Licensee has paid Rs. 3000/- (Rupee three thousand) only to the Owner as compensation or licence fee for the said period in advance on or before the execution of this agreement.

3. The Licensee shall have no right as a tenant or sub-tenant in respect of the said loft (Medo) of the said shop.

The Licensee shall not sub-let, allow to use, transfer or assign in any way the said loft (Medo) of the shop to any one else.

4. The Owner shall bear and pay the rent of the said shop.

5. The Licensee shall use and occupy the said loft (Medo) of the said shop as a cloth merchants only and shall not be entitled to carry on any other business.

6. The parties hereto shall give one month's clear notice of their intention to terminate this agreements in writing. 7.

8. If the Licensee commits breach of any of the terms of this agreement in that case the Owner shall be entitled to tem1inate and recoke the leave and licence G hereby granted without giving notice to the Licensee."

The defendant was put in exclusive possession of the loft. The plaintiff did not reserve possession of any pan of the loft or a right of entry therein.

The loft had a separate entrance. The customers of the defendant used the separate entrance to the loft during the business hours and his stock of cloth remained in the loft after business hours.

The plaintiff and defendant were both cloth merchants, and the only consideration for granting the licence was the payment of Rs. 250/- per month.

There is no

7-LS07Sup./71

SUPREME COURT REPORTS

[1971 ]3 S.C.R.

A evidence that the loft was given to the defendant out of sympathy or because of friendship, or relationship, or any similar motive.

It was stipulated that the plaintiff may terminate the agreement by giving one month's clear notice, the agreement could not be terminated by notice of a shorter duration.

An attempt was deliberately made to camouflage the true 8 nature of. the agreement, by reciting in several clauses that the agreement was for leave and licence, and to emphasise the presence it was also recited that the defendant was not to have any right as tenant or sub-tenant in respect of the loft.

At the trial the elder brother of the defendant was examined as a witness.

He stated that the agreement dated November 3, C 1958 was intended to be an agreement of lease, but the pl?intiff insisted that the agreement be drafted with the conditions set out therein.

Section 52 of the Easements Act defines a "Licence" :-

"Where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a licence "

Section 105 of the Transfer of Property Act defines "lease" :-

"A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, . express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transfer or by the transferee, who accepts the transfer on such terms.

A licence confers a right to do or continue to do something in or G upon immovable property of grantor which but for the grant of the right may be unlawful, but it creates no estate or interest in the immovable property of the grantor.

A lease on the other hand creates an interest in the property demised.

Intention of the parties to an instrument must be gathered from the terms of the agreement examined in the light of the surrounding circumstances.

The description given by the parties may be, evidence of the intention but is not decisive.

Mere

SOHAN LAL v. LAX?.1itoAs (Shah, C.J.) 323

use of the words appropriate to the creation of a lease will not preclude the agreement operating as a licence.

A recital that the agreement does not create a tenancy is also not decisive.

Tho crµcial test in each Cl!$e is whether the instrument is intended to create or not to create an interest in the property the subject matter of the agreement. If it is in fact intended to create an interest in the property it is a lease, if it does not, it i.; a licence. 1n determining whether the agreement creates a lease 9r a licence the test of exclusiv epossession, though not decisive, is .of signifi cance.

Mrs. M. N. Clubwala v. Fida Hussain Saheb and Ors(1).

The Trial Court regarded exclusive possession of the premises given to the defendant as conclusive of the question whether the loft was in the occupation of the defendant as a tenant.

The Court observed that on a consideration of the clauses of the agreement it was unable to reach a conclusion whether the agtee ment was intended to operate as a lease or as a licence but since exclusive possession was given it must be regarded a lease.

The High Court considered all the covenants and the attendant cirr cumstances and reached the conclusion that having regard to th~ exclusive possession given to the defendant it was intended

IOI confer an interest in the loft and on that account the agreement operated as n lease and not as a licence.

We have carefully considered the covenants in the light of the relevant surrounding circumstances.

We are unable to disagree with the view taken by the High Court that by the terms of the 11greement an interest was created in the loft in favour of the def eHdant.

The appeal fails and is dismissed with costs.

G.C.

Appeal dismissed.

(I) [1964!6S.C.R.642.

SORAN LAL NARAINDAS

LAXMIDAS RAGHUNATH GADIT

C. SHAH, C.J.

S. HEGDE

A. N. GROVER, JJ.

City Civil Court, Bombay

High Court of BombfU'

Art. 133(1)

Art. 133

[1964] 6 S.C.R.

642

F. S. Nariman

P. C. Bhartari

B. Dadao

D. V. Patel

Ramesh Malik

Ganpat Rai

Shah

Sohan Lal Naraindas

Laxmidas Raghunathhereinafter

Lodging House Rates Contract Act 1947

High Court of Bombay

Art. 133(1)

Art. 133(1)(c)

Art. 133(1)(c)

November 3, C 1958

Section 52

Section 105

Transfer of Property Act