Mangan Lal Deoshi vs Mohammad Moinul Haoque and Others
Rewritten Version Notice: This is a rewritten version of the original judgment.
Court: Supreme Court of India
Case Number: Civil Appeal No.94 of 1949
Decision Date: 1 December 1950
Coram: Hiralal J. Kania, Patanjali SASTRI
In the matter of Mangan Lal Deoshi versus Mohammad Moinul Haoque and others, the Supreme Court of India delivered its judgment on 1 December 1950. The opinion was authored by Justice Hiralal J. Kania, who presided as Chief Justice, with Justices Das, Sudhi Ranjan and Patanjali Sastri forming the bench. The citation for this decision is reported as 1951 AIR 11 and 1950 SCR 833. The case concerned the interpretation of the Indian Registration Act, 1908, specifically sections 8.17 (1)(b) and (d), and section 17 (2), in relation to whether a particular agreement could be characterised as a “lease” and consequently whether it required compulsory registration.
The headnote of the judgment explains that, under the Indian Registration Act, an agreement that constitutes a lease must be a document that effectuates an actual demise of land and creates a present and immediate interest in the property. The Court held that an agreement which creates a perpetual under-lease between two parties, A and B, conditioned upon A’s payment of a fixed sum to a third party C, does not satisfy the definition of a lease in clause (e)(a) of section 17 (t) of the Act. Although the agreement fell within clause (b) of the same section, it was held to be exempt from registration under clause (vi) of sub-section (2) of section 17. The Court relied upon the authority in Hemanta Kumari Debi v. Midnapur Zamindari Co. (I L.R. 47 Cal. 485 P.C.).
The appeal before the Supreme Court was Civil Appeal No. 94 of 1949, filed against a judgment and decree of the Patna High Court dated 23 December 1947. That High Court decision had affirmed the decree of the District Judge of Purulia rendered in Appeal No. 159 of 1944. Counsel for the appellant appeared before the Supreme Court, as did counsel for the respondents. The factual background, which the Court noted was not in dispute, involved a suit initiated by the respondents in the Subordinate Court of Dhanbad seeking recovery of arrears of royalty and cess from the appellant and another party. The claim arose under a compromise decree dated 6 March 1923, which had been issued in a preceding suit between the parties’ predecessors in interest.
The sole material plea raised on appeal was that the compromise decree, having not been registered, was inadmissible as evidence. The lower courts had concluded that the document did not fall within the statutory requirement for registration and therefore gave effect to its terms when rendering their decree. The second defendant, dissatisfied with that conclusion, preferred the present appeal. The Supreme Court, after reviewing the record, proceeded to examine whether the compromise decree constituted a lease within the meaning of the Registration Act and whether the lack of registration rendered it unenforceable.
On 11 March 1921 Kumar Krishna Prasad Singh, hereinafter referred to as Kumar, executed a registered patta granting a permanent lease of the right to extract underground coal from five thousand eight hundred bighas of his land to Shibsaran Singh and Sitaram Singh, hereinafter referred to as the Singhs. The patta stipulated that the Singhs would pay a salami of eight thousand rupees and a royalty of two annas per ton of coal mined, subject to a minimum annual royalty of eight thousand rupees, together with certain other cesses and interest.
Subsequently, on 7 June 1921 Kumar executed another permanent patta leasing the right to the coal in five hundred bighas, which formed part of the earlier five thousand eight hundred bighas, to Prayngji Ballavji Deoshi and his son Harakchand Deoshi, hereinafter referred to as the Deoshis. Under this document the Deoshis covenanted to pay a royalty of two annas per ton on all classes of coal extracted, subject to a minimum annual royalty of seven hundred fifty rupees.
Feeling aggrieved by the later lease to the Deoshis, the Singhs instituted a title suit (No. 1291 of 1921) before the Subordinate Judge of Dhanbad, seeking a declaration of their title and possession of the five hundred bighas leased to the Deoshis. Kumar was impleaded as defendant No. 3, while the Deoshis were defendants 1 and 2. The parties subsequently arrived at a compromise on 6 March 1923, and a decree based on that compromise was passed on the same day.
In 1935 the Singhs’ interest in the five hundred bighas was attached and sold in execution of a decree obtained against them. The plaintiff who purchased the interest instituted the present suit on 3 October 1942, claiming the royalty and cesses due under the compromise decree for the period from Pous 1345 to Asadh 1349 B.S. The claim was made against defendants 1 and 2, who were litigants in the compromise of March 1923 and represented the Deoshis.
For a proper appreciation of the parties’ contentions, the Court set out the material terms of the compromise decree. The decree required the Singhs, within two months of the decree, to pay eight thousand rupees as salami to defendant 3 (Kumar); failure to do so would render the compromise void and the Singhs would lose any right to or possession of the land covered by the patta dated 11 March 1921. The decree also confirmed that the patta executed by defendant 3 in favor of the Singhs for the five thousand eight hundred bighas of coal land in the village of Rahraband would remain in force. Moreover, the Singhs were to obtain a decree declaring their right and title to the disputed five hundred bighas, while defendants 1 and 2 (the Deoshis) would retain possession of that land as tenants. In addition, the Deoshis were bound by all the remaining terms of the agreement, including the obligation to pay the plaintiffs a commission of two annas and six paise per ton on all sorts of coal, superseding the earlier rate of two annas per ton stipulated in the patta for the larger parcel.
The compromise decree recorded that the plaintiffs had taken settlement of five hundred bighas of coal land from defendant No. 3 under a patta and a Kabuliyat. It further provided that defendants 1 and 2 would hold possession of that land on behalf of the plaintiffs, and that such possession would continue from generation to generation. All the conditions contained in the original patta and Kabuliyat were declared to remain effective and binding between the parties.
According to the decree, defendants 1 and 2 were obligated to pay the plaintiffs a commission of two annas six paisa for each ton of coal extracted, replacing the earlier rate of two annas per ton that had been stipulated in the patta covering five thousand eight hundred bighas of coal land.
The decree also altered the financial obligations of the plaintiffs towards defendant No. 3. It required the plaintiffs to pay a minimum annual royalty of six thousand rupees, which was a reduction from the previously stipulated eight thousand rupees in the original patta dated 11 March 1921. In addition, the commission payable by the plaintiffs to defendant No. 3 was to be one anna nine paisa per ton, replacing the earlier rate of two annas per ton as mentioned in the patta of March 21.
The decree made the payment of eight thousand rupees to defendant No. 3 a condition precedent. It stated that if the plaintiffs failed to make this payment within two months from the date of the decree, they would be barred from executing the decree or taking possession of the disputed land.
It further required that, within one month after the plaintiffs had paid the eight thousand rupees to defendant No. 3, defendants 1 and 2 must execute a new Kabuliyat in favour of the plaintiffs. This new Kabuliyat was to embody the modified terms, including the commission rate of two annas six paisa per ton payable by the defendants to the plaintiffs.
The decree stipulated that the new patta to be executed by defendant No. 3 in favour of the plaintiffs would expressly incorporate two conditions: first, that the annual minimum royalty would be six thousand rupees instead of eight thousand rupees; and second, that the commission payable would be one anna nine paisa per ton rather than two annas per ton as previously set.
If defendant No. 3 failed to execute the new patta incorporating the modified terms within the stipulated period, and if defendants 1 and 2 also failed to execute a Kabuliyat reflecting those terms, the decree provided that the original rafanama would be treated as both the parts and the Kabuliyat. Under that fallback arrangement, the plaintiffs would continue to pay defendant No. 3 a minimum royalty of six thousand rupees and a commission of one anna nine paisa per ton for the five thousand eight hundred bighas, while defendants 1 and 2 would remain bound to pay the commission of two annas six paisa per ton to the plaintiffs.
The court observed that the key issue for determining whether this compromise decree required registration depended on the legal effect of the changes it effected in the parties’ pre-existing positions. A careful analysis of the decree disclosed several alterations, the first of which was that the lease to the Singhs reduced the royalty or commission rate from two annas per ton of coal raised to one anna nine paisa per ton.
The compromise reduced the minimum royalty payable by the plaintiffs from Rs 8,000 to Rs 6,000 and simultaneously decreased the area of coal-land that was in their khas possession by five hundred bighas. In the lease that was executed in favour of the Deoshis, the rate of royalty or commission was raised from 2 a. per ton to 2 a. 6p. per ton, and the tiff (tenant-in-fact-payable) was made payable to the Singhs. Consequently, a new legal relationship was created between the Singhs and the Deoshis: the Singhs accepted the Deoshis as tenants who would hold the disputed five hundred bighas, and in return the Deoshis obligated themselves to pay the higher royalty to the Singhs.
The entire arrangement was subject to a condition that required the Singhs to pay Rs 8,000 to Kumar within two months from the date of the compromise. The compromise expressly stipulated that the Singhs would not be entitled to execute the decree or to take possession of the disputed area of five hundred and three bighas, which, at that time, had not yet passed into their possession.
Section 17(1) of the Registration Act enumerates five categories of documents for which registration is compulsory; clause (d) specifically includes “leases of immoveable property from year to year, or for any term exceeding one year, or reserving a yearly rent.” Section 17(2) provides an exception, stating that “nothing in clauses (b) and (c) of sub-section (1) applies to … (vi) any decree or order of court.” It should be noted that this exception was amended, with effect from 1 April 1930, by the Transfer of Property (Amendment) Supplementary Act, 1929, which sought to exclude from the exemption compromise decrees concerning immovable property that were not the subject-matter of the suit. The amendment, however, could not affect the present document because it was executed in 1923, prior to the amendment.
Before the amendment, the Supreme Court had held that the exception in clause (vi) extended even to compromise decrees involving immovable property that was not the subject of the suit, as decided in Hemanta Kumari Debi v. Midnapur Zamindari Co. That precedent applied to the present case and dispelled the objection that the compromise, which also covered the remaining 5,300 bighas not litigated in the 1921 title suit, fell outside the scope of the exception in sub-section (2), clause (vi).
The remaining issue, therefore, was whether the compromise decree constituted a “lease” – an expression that, under section 2(7), includes “an agreement to lease” – within the meaning of clause (d) of sub-section (1). It was clear that if the compromise decree did not fall within clause (d), it would not be protected by the exception in clause (vi) of sub-section (2), which only shields documents covered by categories (b) and (c) of sub-section (1). The High Court, after a careful construction of the compromise’s terms, held that it did not fall within clause (d). Justice Manohar Lall, delivering the leading judgment, observed that the instrument was a tripartite agreement embodied in the decree of the court.
The Court observed that the compromise decree, being a decree issued by the court, was exempt from the requirement of registration. It further noted that the defendants continued to hold possession of the five-hundred bighas in question; their possession was not disturbed, and they remained lessees. However, instead of remitting the royalty to the plaintiffs as previously agreed, the parties had consented that the defendants would in the future pay the royalty to Shibsaran and Sitcram. The Court stated that, had the matter ended at this point, the counsel for the appellant would have found it difficult to dispute the situation. Nevertheless, the appellant’s counsel contended vigorously that because the agreement altered the amount of royalty and commission payable, the document should be regarded as falling within the mischief provision of section 17(1)(d) of the Registration Act.
In response, the Court referred to a Full Bench decision of this Court—Charu Chandra Mitra’s case—where it was held that a mere alteration of the stipulated rent did not constitute a new lease that would bring the transaction within clause (d) of subsection (1). The Court rejected this narrow view, explaining that the compromise involved far more than a simple change in the royalty rates fixed in the earlier pattas executed by Kumar. The Court also dismissed the suggestion advanced by counsel for the respondents that the compromise operated as an assignment of Kumar’s reversion under the lease granted to the Deoshis, thereby merely acknowledging the Singhs as landlords. It was pointed out that Kumar had, by his patta dated 11 March 1921, leased the entire area of 5,800 bighas to the Singhs. The compromise, by providing that the Singhs should pay a reduced royalty of one anna and nine paisa per ton for the whole area, preserved Kumar’s reversion in its entirety. Consequently, Kumar could not be said to have assigned any part of his interest in the 5,800 bighas to the Singhs, who therefore continued to hold the whole extent as tenants.
The Court clarified that the true effect of the compromise was to create a new legal relationship between the Singhs and the Deoshis concerning the 500 bighas that formed the subject-matter of the title suit. In effect, the compromise established a perpetual under-lease between the Singhs (as under-lessors) and the Deoshis (as under-lessees). Such an under-lease would ordinarily fall within clause (d) of subsection (1). However, the Court noted that the under-lease was conditioned upon the Singhs paying Rs 8,000 to Kumar within two months of the decree. Until that payment was made, it was impossible to determine whether an under-lease would actually arise. Because the agreement was contingent on that payment, the Court held that it did not fall within clause (d) but was covered by clause (b) and therefore saved by the exception in clause (vi) of subsection (2).
The Court observed that the relevant period mentioned in the record was two months, a point corroborated by the authority cited at 3 P.L.J. 255. In referring to the Judicial Committee’s decision in Hemanta Kumar’s case, the Court reproduced the Committee’s observation that “an agreement for a lease, which a lease is by the statute declared to include, must, in their Lordships’ opinion, be a document which effects an actual demise and operates as a lease… The phrase, in the context where it occurs and in the statute in which it is found, must, in their opinion, relate to some document which creates a present and immediate interest in the land.”
The compromise decree in the present matter expressly stipulated that the Singhs could not execute the decree or take possession of the disputed property unless they paid the sum of Rs 8,000 within the time prescribed. Consequently, until the payment was made, it was impossible to determine whether an under-lease would arise at all. The Court therefore held that such a contingent agreement did not fall within the ambit of clause (d). Although the agreement might be captured by clause (b), it was expressly excluded by clause (vi) of sub-section (2).
Having examined the arguments, the Court concurred with the High Court’s ultimate conclusion, albeit arriving at that conclusion on different reasoning. Accordingly, the appeal was dismissed and costs were awarded against the appellant. The appeal was thus dismissed. The appellant was represented by counsel, and the respondent was represented by counsel.