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First appeal No. 19 of 1942, decided on 25th September, 1947, from the decree of Sub‑Judge, 1st Class, Hyderabad, dated 31st January, 1942.
, S. 73----Interest on sum claimed ---Deposit wrongly forfeited must be paid back in cash or otherwise.
After this deposit was forfeited, it had to be credited to the appellant when damages were computed. Interest (on sum found due) can be allowed only if it was payable under the terms of the contract. A I R 19 6 Sind 4 Relied on.
, Ss. 2 (6), (7) and 17 (d)‑‑Lease or licence‑Municipality granting right to collect fees‑Grant held was only a licence and not a lease‑It did not require registration.
The possession and control of the slaughterhouse remained with the respondent Municipality. The agreement in this case did not effect a demise of the slaughterhouse. but gave appellant, a right to collect fees recovered from butchers at the slaughterhouse and an implied right to use the slaughterhouse for that purpose. There is nothing in‑ the agree ment to show that the relationship between landlord and tenant was created or that possession of any kind and much less inclusive possession of the building was to be given to appellant. 'We are of the view that the contract in this case was only a licence and not a lease of immo vable property. The document, therefore, did not require registration. 1938 Mad. 746 dissented, 1940 Boni. 369 relied on. 27 All. 462 distin guished, 1923 B 228 ; 1925 M 434; (1863) 21 and C 121 & (1904) 1 K. B. 713 referred.
Fateh,Chand Assudomal for Appellants.
E. V. Castellino for Respondents.
This is an appeal from a judgment and decree passed against the two appellants by the First Class Sub‑Judge, Hyderabad, awarding Rs. 7509‑12‑9 as damages for breach of a contract.
Under the contract appellant I had the right to collect fees in the slaughter-houses at Hyderabad for three years from 1st April 1936, and appellant I had to pay annually Rs. 7,705 in four quarterly instalments, to the respondent. Appellant 1 became very irregular in the payment of the instalment; seed the Standing Committee of the respondent Municipality of Hyderabad, on the recommendation of its Chief Officer, cancelled the contract on 30th November 1937, and directed the Chief Officer to arrange for the o4eotiotr of the fees departmentally. The Chief Officer thereafter collected the fees from 11th December 1937 to 31st March 1939. Appellant 1 had to pay Rs. 23,115 on the entire contract, out of which he had paid Rs. 9,592-11-0, the balance being Rs, 13,522‑4‑0. The fees realised by the Municipality de partmentally after 11th December 1937, during the contract period, amounted to Rs. 8,080‑12‑6. The Municipality claimed that it had spent Rs. 1,140‑1‑3 over the establishment for collecting the fees, Rs. 139‑9-0 in respect of receipt books and Rs. 325‑6‑0 as supervision charges. In all the respond4nt claimed Rs. 9 tl6‑13‑0, Rs. 7,021‑7‑7 being the difference between the sums payable by the appellant in instalments and the sums paid by him, and Rs. 2,095‑5‑3 as interest at the rate of 9 per cent. tip to the date of the suit claimed to be due under the terms of the contract. The respondent. Municipality also claimed the right to forfeit the deposit of Rs. 1,926‑4‑0, which the appellant had deposited with the Municipality, under the terms of the contract. Appellant 2 was surety for appellant 1 under a surety bond executed by him.
Appellant 1 admitted the execution of the contract, but contended that it was not enforceable or admissible in evidence for want of registration. He further contended, inter alia, that he had not committed any breach of the contract and that, therefore, the plaintiff had no right to collect the fees departmentally.
The learned Sub‑Judge came to the conclusion that the appellant 1 was guilty of a breach of the contract, and that he and his surety (appellant 2) were liable to pay damages to the plaintiff Municipality as claimed by them, except the items of Rs. 1,140‑1‑3, Rs. 139‑9‑0 and Rs. 325‑6‑0, referred to above which lie held to be not proved.
The first point taken in this appeal by Mr. Fateh, Chand for the appellants is that the document containing the contract, tin which the respondent Municipality based their' suit, was not admissible, as it was not registered. It is contended that the contract was a lease of immovable property for three years and required registration.
It is necessary to set out here the terms of the contract, which are as follows :‑
" 1. Bhai Gopaldas, son of Bhai Jethmal, by caste Hindu Bhaibund, aged about 32 years, occupation contractor, resident of Hyderabad, Sind, agree and give in writing that I have taken lease of recovery of slaughter fee of slaughterhouses of Phuleli and Gidu Bunder towns on the following terms from the Municipality of Hyderabad, under the Standing Committee's resolution No. 663. dated 18th February 1936, in the sum of Rs. 7705 in words rupees seven thousand, seven hundred and five, per year, tenable for three years with effect from Ist April 1936 to 31st March 1939. 1 agree to pay the consideration of lease in. four instalments every year each on 5th April 1935, 5th July 1936, 5th October 1936, and 5th January 1937. Likewise I shall pay the consideration: payable during the remaining years, on the above dates. If I fail to pay any instalment within the scheduled period, the Chief Officer has every right either to give me time (for payment) on condition that I shall pay interest of twelve annas per cent. per mensem or in case of extension being refused to cancel the lease or having cancelled to re‑action or carry on the collections depart mentally, I shall not claim any interest if any profit thereon accrues to ;he Municipality, but in case of loss, I my he‑ins, and representativt4 shall be bound and liable to make good the loss, thus sustained.
2. I shell receive the following slaughter fees in the aforesaid lease according to the bellow mentioned rates.
I shall pass receipt to every butcher, as is usually done, immediately on receipt of slaughter fees. I shall get the receipt book printed with my monies and shall use there only after they are got sealed from the Municipal Officer.
4. If any butcher did not pay the fee, I shall recover it myself according to law. The Municipality shat) have no interest in it and neither shall I summon help from it, nor shall it he hound to help.
5. Only goats and sheep will be slaughtered in the slaughter houses shown in the lease‑deed. I shall not allow slaughter of .any other animal.
6. I shall permit slaughter of those goats and sheep as are examined and approved by the Municipality's approved doctor and which bear the mark and seal of the Municipality in token of its being approved The Municipality s approved officer will impress approved seals or the meat of the slaughtered cattle and the lessor shall not put any obstacle therein.
7. If the (rate of) slaughter is reduced on account of any calamity or disease and I am pit to loss, I shall not raise any plea but shall pay the consideration of the lease and the Municipality shall not he bound with me in that respect.
8. If airy instalment or any instalments remain to be paid out of the consideration of the lease, the Chief Officer has right to appropriate deposit money towards (payment of) lease money, and if any notice is given to me, I shall recoup the deposit money within the specified time, failing which the Chief Officer is authorised to cancel the lease and forfeit the deposit for which I shall not raise any dispute.
9. I shall be liable and bound by the decision of the Standing Committee for the fulfilment of the above terms or in case of any dispute or confusion.
l0. I shall keep deposit of (25) twenty five per cent. for the fulfilment of the above terms and which will be refunded (to me) after the specified period and compliance of the above terms. But, if I make default In complying with the terms, the Chief Officer shall have right to forfeit whole or any part of the deposit, and 1 shall not take any exception therefor.
Goat each 0 1 6 one anna six pies.
Sheep each 0 3 0 annas three.
Mr. Fateh Chand, in support of his argument, has relied on the definition of " immovable property " given in cl. (6) of section 2, Registration Act, which includes " any other benefit to arise out of land." He has relied on a case decided by the Madras High Court. Mahomed Rowther v. Tinnevelly Municipal Council reported in A I R (25) 1938 Mad. 746 : (182 1 C 299) of which the head‑note is as under :
The right to collect the fees of slaughterhouses and fish bazars amount to a profit arising out of land and falls within the definition of immovable property as given in section 3, cl. 25, General Clauses Act. The letting of such right would, therefore, fall within the definition of lease as defined in S. 105 Transfer of Property Act, and would require to be executed by both the lessor and the lessee under section 197, Transfer of Property Act. Where the lease is executed by the lessee and presented for registration by him, but at the tune of the registration it is not executed on behalf of the lessor, such lease is invalid.
Mr. Fateh Chand has also cited the case in Sikander and others v, Bahadur and others, 1905 A11. 462, where it was held that the right to collect market dues upon a given piece of land was a benefit arising out of land, within the purview of the Indian Registration Act, and that, therefore, the lease of such a right for period of more than one year must be nude by a registered instrument.
Stress was laid on sections 17,3 and 174, Bombay Municipal Boroughs Act, which are as follows
173 (1). The Municipality may from time to time open or close any public market or slaughterhouse. It may also either take stallage or other rents, or fees for the use by any person, of any such‑market or slaughter‑house, or from time to time sell by public auction or other wise the privilege of occupying any stall or space in or of otherwise using any such market or slaughterhouse. (2) Any person who without the permission of or, a licence from the Municipality, shall sell or expose for sale any article in the said market or use the said slaughterhouse, shall be punished with fine which may extend to twenty five rupees.
174. It shall be lawful for the Municipality to lease by public auction or private contract the collecting of any rent or fees which may be imposed under section 173 :
Provided that the lessee shall give security for the due fulfilment of the conditions of the lease.
Mr. Fateh Chand has argued that the fees paid ache slaughterhouse were, therefore fees for the use of the slaughterhouses" and such fees were benefits attached to and arising out of the piece of land where the slaughter house was and fell within the meaning of immovable property as defined in cl. (6) o section 2, Registration Act.
The learned Sub‑Judge was of the view that the document did not require registration as the plaintiff had not leased out the slaughter house to defendant 1, but had only assigned the right to collect the slaughter fees., He further observed that there was a distinction between profits arising out of immovable Property and profits arising out of the statutory right to collect fees. On this latter point, he relied on the case of Bhagwant Genuji Girme v. Gangabisan Ramgopal A I R (27) 1940 Bom. 369: a portion of the head note of which is as follows
The claim to levy toll by Government is based on a statutory right and in Bombay it is conferred by the Tolls on Roads and Bridges Act. The right of the Government to levy tolls under the Tolls on Roads and Bridges Act, is neither a benefit arising out of nor an incident of the ownership of Government in the soil of the road under section 37, Bombay Land Revenue Code. It is, therefore, not immovable property; and consequently, an assignment or extinguishments of the rights of the lessees of the tolls would not be compulsorily registrable under section 17. cl. (1) (b), Registration Act."
The reasoning in that cast is that the benefit to arise out of land necessarily implies a benefit which would arise as an incident of the ownership of the land, that the right to recover toll was not an incident of such owner ship, but was independent of the ownership of Government in the soil of the road. This reasoning is applicable here although the facts of the case before us are very different from the facts of this Bombay case.
We are of the opinion that the contract in this case was only a licence and not a leas of immovable property. We are of the opinion that the document in the Madras case, cited by Mr. Fateh Chand referred to, As regards the Allahabad case referred to above, it appears that what was transferred was a right to hold a market on a private land and it' would appear that tile transfer by the proprietor of the private land involved a transfer of the exclusive right to use the land, rind the case is, therefore, not in point for the decision in the present case.
The distinction between a lease and a licence which depends upon the questions, whether there was a transfer of a benefit arising out of land is stated in Halsbury's Laws of England Hailsham Edition, Vol. 20, page 8; as follows :
A grant under which tile grantee takes only the right to use the premises without exclusive possession operates as a licence, and not lease. In deciding whether a grant amounts to a lease, or is only a licence regard must be had to the substance of the agreement. If the effect of the instrument is to give the holder the exclusive right of occupation of the land, though subject to certain reservations; or to a restriction of the purpose for which it may be used, it is a lease ; if the contract is merely for the use of the property in a certain way and on certain terms, while it remains in the possession or control of the owner, it is a licence."
The point is also referred to in Woodfall's Law of Landlord and Tenant (page 6, 24th Edition) as follows :
It has been seen above that there is a demise where a right is granted to the exclusive possession, of lands or tenements for a determinate term. A grant of such exclusive possession is a lease although there stay be certain reservations or a restriction of the purpose for which the possession may be used, arid although it maybe‑described as a licence. Nor is an instrument a lease, although it contains the usual words of demise, if its contents show that such was not the intention of the parties.
In the case of the Indian Hotels Co. Ltd. v. Phiroz Sorabji Contractor, A I R (10) 1923 Bom. 228. (88 1 C 915) it was held by Fawcett J. that having regard to the definition of licence in section 52., Indian Easement Act, there is no substantial difference between the Indian and the English law or: the, subject, and that the words right to enjoy in section 105, Transfer of Property Act, when read with section 108 of the same Act, in which the rights of the lessee are stated, clearly show that there, must be a right to exclusive possession in a lease tinder the Transfer of Property Act, and that the question of exclusive possession is the main test to be applied in determining whether a document amounted to a lease or to a licence only. In that case the facts were that the plaintiffs, who were the owners of the immovable property known as the " Wellington Mews," had given cubicles or lock‑up rooms, each of which was sufficiently large to contain a motor car, for the use of motor car owners and a monthly rent was recovered from these owners. No particular portion of the cubicle was allotted to a particular car, but the cars, kept inside, took up their position as they happened to come in. It was held that it was not a case in which exclusive possession of any portion of toe mews was given, and that the contract in the case was a licence and not a lease.
We might refer to other cases in which the same principle was applied.
In the case Acting Secy, Board of Revenue v. The Agent, South Indian Railway Co. Ltd., Trichinopoly, A I R (12) 1925 Mad. 434 : (48 Mad. 378 F B) certain documents by which permission was given by the South Indian Railway Company to consignees of coal to stock coal in station yards on payment of rent were construed as licences and not as leases.
In Hill v. Tupher (1863) 2H and C. 121 : 32 L J. Ex. 217 where a canal company, by deed, granted to tile plaintiff the sole and exclusive right or liberty of patting or using pleasure boats for hire on their canal, it was held drat tile grant (lid not create such an interest or estate in the plaintiff as to enable him to maintain an action in his own name against a person who disturbed his right, but operated merely as licence.
In Warr & Co. Ltd., v. London C buns t, Council (1904) 1 K. B. 713 where the contract was expressly in the form of a demise for a term of years of the exclusive right to supply refreshments in the rooms, it was held that there was no‑demise of all interest in land, but only a licence.
We think that the principle applied in the above cases is applicable to tile case before us. It is not disputed that the possession and control of the slaughterhouse remained with the respondent Municipality. The agreement in this case did not effect a demise of the slaughterhouse, but gave appellant 1 a right to collect fees recovered front butchers at the slaughters house and an implied right to use the slaughter house for that purpose. By the, contract, appellant 1 agreed that he would permit the slaughter of only those goats and sheep which were examined and approved by the Municipality's doctor and which bore the mark and seal of the Municipality in token of their being approved. The Municipality's approved doctor was to impress seals on the meat of the slaughtered cattle. There is nothing in the agreement: to show that the relationship between landlord and tenant was created or that possession of any kind and much less exclusive possession of the building was to he given to appellant 1. We are of the view that the contract in this case was wily a licence and not a lease of immovable property. The docu ment, therefore, did not require registration.
The next point taken in this appeal is that there was no breach of the contract on the part of appellant 1 and that on the contrary it was the respondent Municipality which committed a breach of the contract when it cancelled the contract on 30th November 1937. Now, it is clear from the evidence on record, and it is not disputed on behalf of the appellant, that, from the very beginning, appellant 1 was irregular in the payment of instalments and that on the date on which the lease was cancelled, two instalments, each of Rs. 1,926‑4‑0 were over due. But it is contended that the Municipality should, on the first default, have appropriated the deposit money of Rs. 1,926‑4‑0 towards payment of lease money and given a notice to appellant 1 to furnish a fresh deposit, and that as this had not been done, the Municipality had no right to cancel the contract or to carry on the collections departmentally. It has been argued that cl. (8) of the contract must be read. along with cl. (1). Now by cl. (8) it was provided that the Chief Officer had the right to appropriate deposit money towards payment of lease money, and, on such appropriation, to give notice to appellant 1 to furnish a fresh deposit. Clause (10) also gave the Chief Officer the right to forfeit the deposit, if appellant 1 made any default in complying with the terms of the contract. It t5 clear that cls. (8) and (10) gave additional rights to the Municipality, and did not derogate from the clear terms of cl. (l ), under which, in case of default of payment of any instalment, the Municipality had the right to cancel the contract and re‑auction the collections, or to make the collections depart mentally. As‑appellant 1 was to default to the, extent of two instalments in breach of the contract on 30th November 1937, the Municipality clearly f had the right to cancel the contract and collect the dues departmentally.
The next point urged is that in calculating damages the learned Sub Judge was in error in not taking into account the deposit of Rs. 1,926‑4‑0 forfeited by the respondent Municipality. Ruder cl. (10) of the contract, the Chief Officer of the Municipality had the right to forfeit this deposit in case of any breach on the part of appellant 1. The appellant's contention is that after this deposit was forfeited, it had to b: credited to the appellant when damages were computed. This contention appears to us to be correct and has not been seriously disputed by the other side.
In Trikamji Jiwandas & Co. v. Trustees of the Port Trust of Karachi, (1915) 10 S L R 4 : (A I R (3) 1916 Sind 4) the Karachi Port Trust had sued the defendants, who were coal merchants, for a breach of contract to supply coal. The defendants had committed a breach of the contract and the Port Trust had forfeited a deposit. It was held that the plaintiffs could not recover damages without giving defendants credit for the deposit.
The last point taken in this appeal is that the item of interest amounting to Rs. 2,095‑5‑3 up to the date of suit, should not have been included in the amount awarded. In giving reasons for awarding this interest, the learned Sub‑Judge has stated :
The agreement (Ex. 71, clause 1) does provide a stipulation for interest at 9 per cent. in case the defendant did not pay any instalment regularly. There has been default, therefore, plaintiff' is entitled to claim interest at that stipulated rate.
Rut the 'terms of cl. (1) are :
if I fail to pay any instalment within the scheduled period, the Chief Officer has every right either to give me time (for payment) on condi tion that I shall pay. interest at twelve annas per cent. per mensem or in case of extension being refused to cancel the lease or having cancelled to re‑auction or carry on the collections departmentally.
It is clear, therefore, that under this clause interest was payable only on overdue instalments when an extension of time for payment was given by the Chief Office. This clause cannot be construed to mean that interest had to be paid on all overdue instalments. Interest can be allowed only if it was, payable under the terms of the contract. We think, therefore, that this item should not have been allowed by the lower Court.
The result is that the claim allowed by the lower Court has to be reduced by Rs. 1,926‑4‑0, the deposit forfeited by the Municipality, for which credit has not been given and by Rs. 2,0:'5‑5‑3 allowed as interest payable up to the date of the suit.
The decree of the lower .Court is modified to this extent ; the decree against the appellants will be for Rs. 3,513‑3‑6 only, and proportionate costs of the suit, and for interest at 6 per cent. per annum from the date of the suit till the date of realization. The appellants have succeeded in this appeal to the extent of Rs. 4,021‑9‑3. We direct that the respondent Municipality do pay the appellants the costs of the appeal on this account.
M. A. Order accordingly.
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