MANGALA WAMAN KARANDIKAR (D) TR. LRS versus PRAKASH DAMODAR RANADE on 7 May 2021

SUPREME COURT REPORTS

[2021] 5 S.C.R.

A

MANGALA WAMAN KARANDIKAR (D) TR. LRS.

v.

PRAKASH DAMODAR RANADE

(Civil Appeal No. 10827 of 2010)

B

MAY 07, 2021[N.V. RAMANA, CJI., SURYA KANT ANDANIRUDDHA BOSE, JJ.]

Interpretation of documents: Contractual interpretation – Itdepends upon the intentions expressed by parties.

C

Evidence Act, 1872: s.92 – Contract between parties – Readingof the contract showed that the appellant had intended to transferbusiness to respondent during the contractual period and theagreement was not meant as a lease or license for the respondent toconduct business – Respondent contended that the meaning of theDdocument should not be culled solely with reference to the languageused in the document, rather extrinsic evidence needs to be utilizedbefore adducing proper meaning to the contract – Such contentionis not accepted – s.92 specifically prohibits evidence of any oralagreement or statement which would contradict, vary, add to orsubtract from its terms – If oral evidence could be received to showEthat the terms of the document were really different from thoseexpressed therein, it would amount to according permission to giveevidence to contradict or vary those terms and as such it comeswithin the inhibitions of s.92 – It could not be postulated that thelegislature intended to nullify the object of s.92 by enactingFexceptions to that section – Once the recitals and the contract wereaccepted, the respondent could not have adduced contrary extrinsicparole evidence, unless he portrayed ambiguity in the language –The evidence pointed that the license was created for continuationof existing business, rather than license/lease of shop premises –Once it is determined that the impugned agreement was a licenseGfor continuing existing business, Bombay Rent Act does not coversuch arrangements – The jurisdiction of the trial court is accordinglynot ousted – Rent Control and eviction.

Allowing the appeal, the Court

HELD: 1. Unlike a statutory interpretation, which is evenmore difficult due to assimilation of individual intention of lawmakers, contractual interpretation depends on the intentionsexpressed by the parties and dredging out the true meaning isan ‘iterative process’ for the Courts. In any case, the first toolfor interpreting, whether it be a law or contract is to read thesame. [Para 9][239-B-C]

2. It is usual that businessmen often do not sit over nitty-gritty in a contract. In a document the language used by the partiesmay have more than one meaning. It is ultimately the responsibilityof the Courts to decipher the meaning of the words used in acontract, having regards to a meaning reasonable in the line oftrade as understood by parties. It may not be out of context tostate that the development of rules of contractual interpretationhas been gradual and has taken place over century. [Para 10][239-C-E]

3.1 It is clear from the reading of the contract that the partieshad intended to transfer business from appellant to respondentduring the contractual period. This agreement was not meant asa lease or license for the respondent to conduct business.However, the respondent contends that the meaning of thedocument should not be culled solely with reference to thelanguage used in the document, rather extrinsic evidence needsto be utilized before adducing proper meaning to the contract. Inthis regard he submits that on consideration of all the extrinsicevidence, the contract should be read as a leave and licenseagreement, which is covered under the Bombay Rent Act. Hedraws his support from Section 95 of the Indian evidence Act tostate that the document needs to be interpreted having regardto external evidence such as receipts of payment under thecontract addressed as rent receipts etc. It is manifest from Section92 and Section 95 that it is only in cases where the terms of thedocument leave the question in doubt, then resort could be hadto the proviso. But when a document is a straightforward one andpresents no difficulty in construing it, the proviso does not apply.[Paras 11, 14][239-E-G; 240-A, H; 241-A]

3.2 Section 92 specifically prohibits evidence of any oralagreement or statement which would contradict, vary, add to or A

B

C

D

E

F

G

H

Asubtract from its terms. If oral evidence could be received toshow that the terms of the document were really different fromthose expressed therein, it would amount to according permissionto give evidence to contradict or vary those terms and as such itcomes within the inhibitions of Section 92. It could not bepostulated that the legislature intended to nullify the object ofBSection 92 by enacting exceptions to that section. [Para 15][241-B-D]

4. The contract mandated continuation of the business inthe name of ‘Karandikar Brothers’ by paying royalties of Rs. 90per month. Once the parties have accepted the recitals and theCcontract, the respondent could not have adduced contraryextrinsic parole evidence, unless he portrayed ambiguity in thelanguage. It may not be out of context to note that the extensionof the contract was on same conditions. [Para 16][241-D-E]

5. The High Court erred in appreciating the ambit of SectionD95, which led to consideration of evidence which only indicatesbreach rather than ambiguity in the language of contract. Theevidence also points that the license was created for continuationof existing business, rather than license/lease of shop premises.If the meaning provided by the High Court is accepted, then itEwould amount to Courts substituting the bargain by the parties.Once it is determined that the impugned agreement was a licensefor continuing existing business, Bombay Rent Act does not coversuch arrangements. Therefore, the jurisdiction of the trial courtis accordingly not ousted. [Paras 17, 18][241-F; 242-A]

FRohitash Kumar v. Om Prakash Sharma (2013) 11 SCC451 : [ 2012] 13 SCR 47 – relied on.

Investors Compensation Scheme v. West BromwichBuilding Society [1998] 1 WLR 896; Wigmore JH,“Wigmore on Evidence, Vol. 4” (1915) 25 The Yale LawJournal 163 – referred to.G

Case Law Reference

[2012] 13 SCR 47

relied on

Para 15

H

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 10827of 2010.

From the Judgment and Order dated 07.11.2009 of the High Courtof Judicature at Bombay in Second Appeal No.537 of 1991.

Ms. Abha R. Sharma, Ms. Gwen Karthika, Advs. for the Appellants.

Rajendra V. Pai, Sr. Adv., Ms. Bina R. Pai, Aloukik R. Pai, AkshayR. Pai, Ms. Nikita K. Dharamshi, Vitthal Devkhile, Anand Dilip Landge, Advs. for the Respondent.

The Judgment of the Court was delivered by

N. V. RAMANA, CJI

1. This appeal is filed against the judgment of the Bombay HighCourt, in Second Appeal No. 537 of 1991, wherein the second appealwas allowed in favour of the respondent and the decree in favour of theappellant herein was set aside.

2. This case arises out of a contract entered into between theAppellant (since deceased represented through Legal Heirs) and theRespondent. Initially Appellant’s husband was running a business ofstationary in the name of “Karandikar Brothers” before his untimelydemise in the year 1962. After his demise, she continued the businessfor some time. After a while, she was unable to run the business andaccordingly decided to let the Respondent run the same for some time.She entered into an agreement dated 07.02.1963, wherein following termswere reduced in writing:

“2. For the last about 24 to 25 years, a stationary shop by thename Karandikar Brothers belonging to you of the stationary, notebooks and books is being run in the premises situated in City Surveyno. 196/66 (New House No. 1643) at Sadashiv Peth, Pune. Irequest to you to give the said shop to me for running the same.Accordingly, you agreed for the same. Accordingly, an agreementwas reached between us. The terms and conditions whereof areas follows:

A. The stationary shop ꞏ by name “Karandikar Brothers”belonging to you of the stationary materials which is situated inthe premises described in Para 1 (a) above and in which thefurniture etc. as described in Para l(b) above belonging to you isexisting is being taken by me for conducting by an agreement fora period of two years beginning from 1[st] February 1963 to 31[st]January 1965.

A

B

C

D

E

F

G

H

AB. The rent of the shop described in Para 1 (a) above is to begiven by you only to the owner and I am not responsible therefor.I am to pay a royalty amount of Rs. 90 /-(Rupees Ninety only) fortaking the said shop for conducting, for every month which is tobe paid before the 5th day of every month.”

B3.Time after time, the contract was duly extended. In 1980s,desiring to start her husband’s business again, appellant herein issued anotice dated 20.12.1980 requesting the Respondent herein to vacate thesuit premises by 31.01.1981. The Respondent replied to the aforesaidnotice claiming that the sale of business was incidental rather the contractwas a rent agreement stricto sensu. Aggrieved by the Respondent’sCreply, the appellant herein filed a civil suit being RCS. No. 764 of 1981before the Court of Joint Civil Judge, Junior Division, Pune. During thecourse of the trial, one of the important questions that the Trial Courtframed, which is relevant for our purpose can be observed hereunder:

“Does the Defendant prove that from the year 1963 he is licenseeDin the said suit premises as contended in para 7 of the plaint? Andthereby on the date of suit he became tenant of the suit premisesunder Section 15A of the Bombay Rent Act?”

The Trial Court by Judgment dated 30.08.1988, decreed the Suitin favor of the appellant herein and held that the purport of the AgreementEwas to create a transaction for sale of business rather than to rent theaforesaid premises to the Respondent herein. The Court while negatingthe contention of the Respondent, that the shop premises was given tohim on license basis held as under:

“8. The defendant does not deny the fact that originally the husbandFof deceased Mangala Karandikar namely Waman Karandikar usedto conduct the business of the suit shop. The business of stationary,books and notebooks was being run by him. Same business hasbeen handed over to him. … The suit shop and the said businesscame to deceased Mangala Karandikar after the death of herhusband. It has come in the evidence 50 that because of death ofGher husband and after the death of her husband, she was unableto continue the business. In the meantime, the defendantapproached to her. Thereupon she agreed to hand over the runningbusiness to the defendant. This fact has been denied by thedefendant. The defendant raises the contention that the plaintiff H

never had the shop of stationary, but she had the grocery shop.After the death of her husband, it was lying closed for yearstogether. In the year 1963 the defendant approached the plaintiffand thereupon the plaintiff agreed to give the suit shop. On licencebasis to him. This plea of the defendant is negativated by theterms and conditions of the agreement deed itself. The heavyburden was lying on the defendant to prove that there was licenceagreement. He has not discharged the same. Therefore, thedocument became much relevant, and it has got materialimportance. If the conditions as enumerated in this documentExh.33 are carefully scrutinized, it will become significant thatthe deceased plaintiff had the sole intention to hand over’ therunning business of the suit shop to the defendant. There hadbeen no intention to create the leave and licence in respectof the suit premises.The deceased plaintiff had very specificallyand by taking at most case and precaution excluded the wordpremises of shop in the agreement. But all the while the word ꞏ“shop” was used with reference to business only. Nextly shehas also excluded the word rent to be used. She hadspecifically made the recital of imposing the royalty on thedefendant. The word licence, for the purpose of Bombay RentAct always refers to premises. The defendant has to seek thebenefit under the provisions of Bombay Rent Act. Here the plaintiffhad never intended to create the leave and licence in respect ofthe suit shop. The defendant has relied upon the receipt Exhibit-40. This is the document produced by the plaintiff. It disclosesthat the word “rent” has been shown in this respect. The defendantis taking benefit of this fact and alleging that the rent was beingrecovered and not the royalty. Here it is worth to be noted thatthe plaintiff had at all no intention to recover the rent. All thewhile, it has been the case of the plaintiff that the royalty wasbeing recovered. Therefore, I am unable to hold that the rent wasbeing recovered by the plaintiff. …

“14. Issue Nos. 5 and 6. - The defendant has alleged that he is thetenant in the suit shop. Initially, the premises were given to him onlicence basis but by virtue of amendment to Bombay Rent Actand by virtue of insertion of section 15(A) all the licensees havebecome the tenants. Learned advocate appearing on behalf ofthe defendant places his reliance on Case Law reported in A.I.R.

ABC

D

E

F

G

H

238SUPREME COURT REPORTS

A1987 Supreme Court page 117. No doubt there can be no disputeregarding the principles of law. In the instant suit, the defendanthas utterly failed to prove that the shop premises were givento him on licence basis.Therefore, no question of his tenancycan arise at any time. …”

(emphasis supplied)

B

4. Accordingly, the Trial Court ordered the respondent to handover the suit property to the appellant herein including the furniture andother articles.

5. Aggrieved by the Trial Court judgment, the Respondent filed anCAppeal before the Court of Additional District Judge, Pune in Civil AppealNo. 979 of 1988. On 29.07.1991, the Additional District Judge rendereda judgment dismissing the appeal filed by the Respondent herein.Aggrieved by the dismissal the Respondent herein filed a Second Appealbefore the High Court of Bombay in Second Appeal No. 537 of 1991.

D

6. By impugned order dated 07.11.2009 the High Court of Bombayallowed the Second Appeal and set aside the Trial Court’s Order as wellas the First Appellate Court’s Order and held that the Respondent hadentered into a license agreement which is covered under Section 15A ofthe Bombay Rent Act. Further the Court held that the Trial Court did notEhave the Jurisdiction to try the cases under the Bombay Rent Act, theappropriate Court should have been Small Causes Court established underthe Provincial Small Causes Court Act. The Second Appellate Courtalso observed on the merits of the case and held as under.

“22. Thus, considering the entirety of the case, in my view, bothFthe Courts below have incorrectly interpreted the document andthe surrounding circumstances which, in my view, indicate thatthe parties had in fact agreed that the premises were transferredto the appellant on a leave and license basis.”

7. Aggrieved by the same, the appellant herein filed this appeal.

G8. The counsel for the appellant contended that the impugnedorder of the High Court erred in appreciating the language of the contract,which clearly points towards the intention of the parties to create a licensefor continuing existing business, which was run by late husband of theappellant. On the other hand, the counsel for the respondent has supportedthe judgment by stating that there is extrinsic evidence which shows thatH

the contract entered into between the parties was a license to use theshop, which is covered under Bombay Rent Act. In this light, he supportsthe impugned order to state that the Trail Court did not have jurisdictionin the first place.

9. Having heard both the parties at some length, at the outsetbefore we analyse this case, we need to observe some principles oncontractual interpretation. Unlike a statutory interpretation, which is evenmore difficult due to assimilation of individual intention of law makers,contractual interpretation depends on the intentions expressed by theparties and dredging out the true meaning is an ‘iterative process’ forthe Courts. In any case, the first tool for interpreting, whether it be a law or contract is to read the same.

10. It is usual that businessmen often do not sit over nitty-gritty ina contract. In a document the language used by the parties may havemore than one meaning. It is ultimately the responsibility of the Courts todecipher the meaning of the words used in a contract, having regards toa meaning reasonable in the line of trade as understood by parties.[1] Itmay not be out of context to state that the development of rules ofcontractual interpretation has been gradual and has taken place overcentury. Without going into extensive study of precedents, in short, wemay only state that the path and development of law of interpretationhas been a progress from a stiff formulism to a strict rationalism.[2]

11. It is clear from the reading of the contract that the parties hadintended to transfer business from appellant to respondent during thecontractual period. This agreement was not meant as a lease or licensefor the respondent to conduct business. However, the respondent contendsthat the meaning of the document should not be culled solely with referenceto the language used in the document, rather extrinsic evidence needs tobe utilized before adducing proper meaning to the contract. In this regardhe submits that on consideration of all the extrinsic evidence, the contractshould be read as a leave and license agreement, which is covered underthe Bombay Rent Act. He draws his support from Section 95 of theIndian evidence Act to state that the document needs to be interpreted 1 Investors Compensation Scheme v. West Bromwich Building Society, [1998] 1 WLR

2 Wigmore JH, “Wigmore on Evidence, Vol. 4” (1915) 25 The Yale Law Journal 163.

A

B

C

DE

F

G

H

[2021] 5 S.C.R.

Ahaving regard to external evidence such as receipts of payment underthe contract addressed as rent receipts etc.

12. It may be noticed that the High Court had appropriatelyidentified the question of law in the following manner:

15. The debate therefore revolves around the question as toBwhether the agreement of 7th February, 1963 was a license toconduct a business in the premises or was a license to run theexisting business which was being run by the respondents in thesuit premises. Does the document create an interest in the premisesor in the business?C13. The High Court in order to answer the question utilized Section95 of the Evidence Act, which reads as under:

95. Evidence as to document unmeaning in reference to existingfacts.—When language used in a document is plain in itself, but isunmeaning in reference to existing facts, evidence may be givenDto show that it was used in a peculiar sense.

Illustration A sells to B, by deed, “my house in Calcutta”. A hadno house in Calcutta, but it appears that he had a house at Howrah,of which B had been in possession since the execution of thedeed. These facts may be proved to show that the deed related toEthe house of Howrah.Aforesaid Section is part of Chapter VI, which deals with ‘Of theexclusion of Oral by documentary evidence’ containing Section 91 to100. Section 92 reads as under:

92. Exclusion of evidence of oral agreement.—When the termsFof any such contract, grant or other disposition of property, or anymatter required by law to be reduced to the form of a document,have been proved according to the last section, no evidence ofany oral agreement or statement shall be admitted, as betweenthe parties to any such instrument or their representatives in interest,Gfor the purpose of contradicting, varying, adding to, or subtractingfrom, its terms:…

Proviso (6).—Any fact may be proved which shows in whatmanner the language of a document is related to existing facts.

14. It is manifest from these two sections that it is only in casesHwhere the terms of the document leave the question in doubt, then resort could be had to the proviso. But when a document is a straightforwardone and presents no difficulty in construing it, the proviso does not apply.In this regard, we may state that Section 95 only builds on the proviso 6of Section 92.

15. If the contrary view is adopted as correct it would renderSection 92 of the Evidence Act, otiose and also enlarge the ambit ofproviso 6 beyond the main Section itself. Such interpretation, providedby the High Court violates basic tenants of legal interpretation.[3] Section92 specifically prohibits evidence of any oral agreement or statementwhich would contradict, vary, add to or subtract from its terms. If, asstated by the learned Judge, oral evidence could be received to showthat the terms of the document were really different from those expressedtherein, it would amount to according permission to give evidence tocontradict or vary those terms and as such it comes within the inhibitionsof Section 92. It could not be postulated that the legislature intended tonullify the object of Section 92 by enacting exceptions to that section.

16. In line with the law laid down, it is clear that the contractmandated continuation of the business in the name of ‘KarandikarBrothers’ by paying royalties of Rs. 90 per month. Once the partieshave accepted the recitals and the contract, the respondent could nothave adduced contrary extrinsic parole evidence, unless he portrayedambiguity in the language. It may not be out of context to note that theextension of the contract was on same conditions.

17. On consideration of the matter, the High Court erred inappreciating the ambit of Section 95, which led to consideration ofevidence which only indicates breach rather than ambiguity in the languageof contract. The evidence also points that the license was created forcontinuation of existing business, rather than license/lease of shoppremises. If the meaning provided by the High Court is accepted, then itwould amount to Courts substituting the bargain by the parties. Thecounsel for respondent has emphasized much on the receipt of payment,which mentions the term ‘rent received’. However, in line with the clearunambiguous language of the contract, such evidence cannot beconsidered in the eyes of law.

18. Moreover, the contention that the aforesaid situation is coveredby the Bombay Rent Act is misplaced. Once we have determined that 3 Rohitash Kumar v. Om Prakash Sharma, (2013) 11 SCC 451 at pg. 459

A

BC

D

EF

G

H

Athe impugned agreement was a license for continuing existing business,Bombay Rent Act does not cover such arrangements. Therefore, thejurisdiction of the trail court is accordingly not ousted.

19. In light of the above, the impugned order of the High Courtcannot be sustained, and is accordingly, set aside. The decree of the trialBcourt is restored. The appeal is allowed in the above terms and thereshall be no order as to costs.

Devika Gujral

Appeal allowed.

C

D

E

F

G

H