Dr. K. A. Dhairyawan And Others vs J. R. Thakur And Others

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 192 of 1954

Decision Date: 28 April 1958

Coram: Syed Jaffer Imam, Bhuvneshwar P. Sinha, J.L. Kapur

In the matter titled Dr. K. A. Dhairyawan and others versus J. R. Thakur and others, the Supreme Court of India rendered its judgment on 28 April 1958. The opinion was authored by Justice Syed Jaffer Imam and the bench was composed of Justices Syed Jaffer Imam, Bhuvneshwar P. Sinha and J. L. Kapur. The case is reported in the law reports with citations 1958 AIR 789 and 1959 SCR 799. The dispute centered on the operation of the Bombay Rents, Hotel and Lodging House Control Act, 1947 in the context of a lease of land granted for a fixed term. The lessors, identified as J. R. Thakur and others, granted the lessees, Dr. K. A. Dhairyawan and others, a lease of a parcel of land for a period of twenty‑one years at a monthly rent of fifty rupees. The lease expressly required the lessees to erect a double‑storeyed building on the leased land at a cost not less than ten thousand rupees. The construction was to be completed to the satisfaction of engineers appointed by the lessors, and the completed building had to be insured for a minimum sum of twelve thousand rupees in the joint names of both parties with an insurer approved by the lessors. In the event of damage or destruction, the insurance proceeds were to be used to repair the building. The lease also stipulated that, upon termination—whether at the end of the twenty‑one‑year term or earlier—the lessees were to surrender the demised premises together with the building, its fixtures and appurtenances, to the lessors without any compensation. After the expiry of the twenty‑one‑year period, the lessors instituted suit seeking a declaration that they were entitled to possession of the building, the right to recover rents and profits arising therefrom, and that the lessees were obligated to deliver the structure to them.

The lessees contended that they held a tenancy not only in the land but also in the building constructed thereon, and that the Bombay Rents, Hotel and Lodging House Control Act, 1947 protected them from eviction. They argued that the covenant requiring delivery of possession of the building could not be enforced because the Act barred termination of the lease of the land, thereby extending their rights as statutory tenants. The Court examined the terms of the lease and held that the lease created a demise only of the land, not of the building that was to be erected upon it. Consequently, the provisions of the 1947 Act, which safeguard lessees of land from eviction, did not extend to the contractual obligation to deliver possession of the building. The Court further observed that ownership of the building remained with the lessees for as long as the lease subsisted, and that the lessors possessed no proprietary right in the structure. In rejecting an absolute rule that anything affixed to the soil becomes part of the soil with the same property rights, the Court clarified that the building was not deemed part of the land for purposes of the Act. Accordingly, the covenant for delivery of possession was enforceable, and the lessors were entitled to possession of the building upon the lease’s termination.

In this case, the Court observed that the decisions in Narayan Das Khettry v. Jatindra Nath Roy Chowdhury (1926) 54 I.A. 218 and Vallabhdas Narranji v. Development Officer, Bandra (1928) 56 I.A. 259 were followed. The Court further held that the provisions of the Bombay Rents, Hotel and Lodging House Control Act did not contain any clause that allowed a lease to continue beyond the period expressly stated in the lease. The statute only conferred upon a lessee who remained in possession after the lease term the status of a statutory tenant, thereby shielding that lessee from eviction. The present appeal fell under the civil appellate jurisdiction. It was Civil Appeal No. 192 of 1954, which challenged the judgment and decree dated 29 August 1952 rendered by the Bombay High Court in Appeal No. 79 of 1952. That appellate judgment itself arose from the decree dated 27 June 1952 issued by the same High Court while exercising its ordinary original civil jurisdiction in Suit No. 2325 of 1948. Counsel for the appellants comprised A.V. Viswanatha Sastri and Naunit Lal, while counsel for the respondents were L.K. Jha, Rameshwar Nath, S. N. Andley and P. L. Vohra. The judgment was delivered on 28 April 1958 by Justice Imam J.

The appellants, who were trustees of the Mankeshwar Temple Trust, had instituted Suit No. 2325 of 1948 in the Bombay High Court, seeking a declaration that they possessed a right to the building that was the subject of the suit, that they could claim possession of that building, and that they could recover the rents and profits generated therefrom. In addition, the appellants prayed that the court order the defendants to obtain letters of attornment from the tenants of the property, thereby causing those tenants to acknowledge the appellants as their new landlords; that the first defendant be required to render accounts of the rents that he had collected from the tenants starting from 23 May 1948; and that, pending the hearing of the suit, a receiver be appointed to manage the property. The appellants had previously obtained leave from the High Court under Order 11, Rule 2 of the Civil Procedure Code, which reserved to them the liberty to institute a separate suit concerning the land on which the building stood. The trial judge, after hearing the suit, decreed the suit partially in favour of the appellants. He also granted an injunction restraining defendants numbered one, two and five, together with their agents and servants, from interfering with the appellants’ right to obtain possession of the building or from otherwise obstructing the exercise of that right in accordance with law. Moreover, the judge directed the first defendant to account for all rents that he had recovered from the tenants from 23 May 1948 up to the date of the decree. However, the judge declined to grant the prayer that would have compelled the defendants to secure letters of attornment from the tenants in favour of the appellants. The defendants appealed this decision, and a division bench of the High Court allowed the appeal, set aside the trial judge’s decree, and dismissed the suit, ordering the appellants to pay costs. On 23 May 1927, Krishnarao Ganpatrao and Shamrao …

In this case, the trustees of the Mankeshwar Temple, namely Ganpatrao, executed a registered lease identified as Exhibit A. The lease was granted in favour of Moreshwar Kasinath and Radhabal, who was the wife of Ramkrishna Bhai Thakore. By this lease the trustees demised a specific parcel of land that was described in the Schedule annexed to the lease document. The lease term was fixed for twenty‑one years. The demised land measured approximately two hundred and thirteen point six six square yards and the lease stipulated a monthly rent of fifty rupees. According to the conditions of the lease, the lessee was required to erect, within six months from the date of the lease, a double‑storeyed building that would contain shops on the ground floor and residential rooms on the upper floor. The lease further required that the cost of construction not be less than ten thousand rupees and that the completed structure be approved by the engineers appointed by the lessors. The lease also contained several restrictive covenants. One such covenant mandated that the building be insured for a minimum sum of twelve thousand rupees, with the insurance policy taken out in the joint names of the lessors and the lessees and with an insurer approved by the lessors. The covenant further provided that, in the event the building suffered damage or destruction, the insurance proceeds had to be used to repair or restore the building. The lease stipulated that on its termination, whether at the expiry of the full twenty‑one years or earlier by mutual agreement, the lessees were required to surrender and deliver up the demised premises together with the building, its fixtures and appurtenances, to the lessors without any compensation for the same. On 14 May 1948, a short time before the lease was due to end, the appellants, who at that moment were the temple trustees, served notice on the respondents demanding that they deliver possession of the demised premises and the building on the date of expiry, which was 22 May 1948. On 19 May 1948, the respondents replied that they were entitled to the protection of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 (hereinafter “the Act”) and that the appellants should not interfere with their possession, stating that the only right the appellants could claim was the receipt of rent under the lease. On 23 July 1948, the appellants issued a notice to the respondents requiring them to quit the building, asserting that, in their view, the Act did not apply to the premises. The respondents replied on 27 July 1948, maintaining that the Act did in fact apply to the premises. Consequently, the appellants instituted the present suit in the High Court on 1 September 1948. Since the lease period under Exhibit A had expired and the respondents had been served with a notice to quit, the respondents were obligated to vacate the demised premises unless they were shielded by the provisions of the Act. Under the Act, land used for non‑agricultural purposes is defined as “premises.” Although the lease term had ended, the respondents continued to occupy the premises without the consent of the lessors. By operation of the Act, they consequently became tenants of the land within the meaning of the expression defined in the Act. There is no doubt that, with respect to the land itself, the respondents’ occupancy was governed by the provisions of the Act.

The Court observed that with respect to the portion of the lease that demised the land, the respondents could not be evicted as long as they complied with the provisions of the Act. Consequently, the lessors, in their capacity as landlords, were unable to invoke any of the remedies provided by section 13 of the Act to remove the respondents from the demised land. The appellants, however, did not allege in their plaint that they possessed a right to evict the respondents from the demised premises. The reliefs pleaded in the plaint were expressly limited to matters relating to the building that had been constructed on the land, not to possession of the land itself. Thus, the principal issue presented to the Court was whether, upon a construction of lease Exhibit A, the lease could be interpreted as demising both the land and the building intended to be erected thereon. Additional questions were raised during the arguments, and the respondents contended that the appellants could not obtain possession of the building until the lease itself was terminated. They argued that the lease could not be terminated because, under the law, the respondents were tenants of the demised land within the meaning of the Act and therefore could not be compelled to vacate. A submission by the respondents was that, even if the lease did not purport to demise the building to be constructed, the appellants were not entitled to declaration they could claim rents and profits from that building. They also argued that the respondents could not be restrained from interfering with the collection of rents and profits from the building as long as the respondents remained in possession of the demised land. Ground was that the suit should fail because defendant four had died before the suit was instituted, her name had been removed from list of defendants, and her heirs and representatives had not been impleaded. The lease Schedule was examined and it was found that the demised property consisted of a parcel of land measuring approximately 213 square yards, identified as New Survey No. 1/2600 and cadastral survey No. 96. The Schedule left no doubt as to the identity of the demised land. According to the lease terms, the monthly rent payable for this land was Rs. 50. The lease expressly indicated that the land was demised for the purpose of constructing a building thereon by the lessees. Clause 1 of the lease, which the respondents relied upon, was quoted to support their contention that the lease demised not only the land but also the building to be erected on it, and clause runs.

The lease begins with a declaration of the consideration for the expenses that the lessees would incur in erecting and completing the building described later, as well as for the rents reserved and the covenants contained therein. It then states that the lessors, in consideration of these expenses, covenants and rent, hereby demise unto the lessees the entire piece or parcel of land situated at Supari Baug Road, more particularly described in the Schedule attached to the lease and delineated in the annexed plan marked “A”. The demised premises are bounded by a red line on the plan. The lease grants the lessees the right to hold the premises for a term of twenty‑one years, calculated from the date of the lease, with the rent payable on the tenth day of each calendar month, the first payment to be made on the tenth of the following month, and subject to the covenants and conditions that follow in the lease.

Another clause on which the respondents relied was clause six, which provides that the building to be erected shall be insured in the joint names of the lessors and the lessees with an insurance company approved by the lessors. It was also pointed out that the building would be surrendered to the lessors at the end of the lease without any compensation to the lessees. Upon examination of all the clauses of the lease, the Court found that none of them expressly states that the building, once erected on the demised land, would become the property of the lessors or that the building was deemed to be leased together with the land. Legally, there was no obstacle to the parties having inserted a positively worded clause to that effect, but such a clause is absent. Consequently, the existing clauses must be construed to determine whether, on a proper construction, a demise of the building can be inferred. The Schedule to the lease, as already noted, specifically mentions the demised land and makes no reference to the building becoming part of the demised property. When the lease was executed in 1927, the relevant Act did not exist, and it is reasonable to conclude that the parties did not contemplate that any future legislation would affect their rights under the lease. The various lease clauses are consistent with the building remaining owned by the lessees, with the lessors having no right to the building during the lease term. The Court cited the decision in Narayan Das Khettry v. Jatindra Nath Boy Chowdhury, where the Privy Council approved Sir Barnes Peacock’s observations in Thakoor Chunder Poramanick v. Ramdhone Bhuttacharjee, indicating that no absolute rule exists that a structure becomes part of the soil and thus subject to the same property rights. The Court also referred to Vallabhdas Naranji v. Development Office, Bandra, where the Privy Council again relied on Sir Barnes Peacock’s view, and to Couch, C. J.’s remarks in Narayan v. Bholagir, which state that English doctrine, which makes a building belong to the landowner, does not apply in India; instead, Indian doctrine allows the party who builds on another’s land to remove the structure. Accordingly, under Section 108 of the Transfer of Property Act, a lessee may remove all structures and buildings erected by him on the demised land before the lease expires.

The Court observed that in the law and customs of this country there is no absolute principle stating that whatever is attached to or built upon the soil automatically becomes part of the soil and acquires the same property rights as the soil itself. It cited the decision in Vallabhdas Naranji v. Development Office, Bandra, where the Privy Council reiterated Sir Barnes Peacock’s observation that such an absolute rule does not exist in our jurisprudence.

The Court further referred to an observation made by Chief Justice Couch in the case of Narayan v. Bholagir. The observation noted that English law, which treats buildings as belonging to the owner of the land, cannot be applied to Indian cases. Instead, the Indian doctrine allows the party who constructs a building on another’s land to remove the materials used for construction.

Under section 108 of the Transfer of Property Act a lessee, before the lease expires, is entitled to dismantle any structures and buildings he has erected on the demised land, provided he returns the land to the lessor in the condition it was in at the start of the lease. Consequently, the ownership of the building in the present dispute rested with the lessees, not with the lessors, during the subsistence of the lease.

Section 108 does not forbid the lessees from agreeing contractually to surrender any building or structure they have erected to the lessor without receiving compensation at the termination of the lease. In other words, although the statutory provision grants the lessee the right to remove the building, the parties may, by contract, agree that the building will be handed over to the lessor without any compensation, making the arrangement purely contractual.

The Court clarified that such a contractual agreement does not transfer legal ownership of the building to the lessor while the lease remains in force. The lease’s various clauses clearly differentiate between the demised premises and the building, employing the expression “demised premises including the building to be erected thereon.” This wording indicates a distinction rather than a merger of rights in the land and the structure.

Respondents argued that clause I of the lease demonstrated that the lease demised not only the land but also any building to be constructed upon it. They emphasized that the opening words of clause I state that, in consideration of the lessees’ expenses for erecting and completing the building and the rent reserved, the lessors demised the land described in the Schedule to the lessees. The respondents highlighted the phrase “to hold the premises” as crucial, contending that it encompassed both the land and the building, and that the lessees were obliged to hold the entire premises, not merely the demised land.

In the lease, the term “premises” was intended to include both the land and the building that was to be erected on it. The parties agreed that the premises would be held at a modest rent of Rs 50 per month because the lessees would bear all expenses of constructing the building, maintaining it in proper repair, and paying all taxes related to it. Over a period of twenty‑one years, the lessees would not only recover the money they invested in erecting the building but would also obtain a substantial profit. Clause 5 provided that, at the expiration of the lease, the lessees would surrender the premises to the lessors; this surrender comprised both the land and the building constructed thereon, and the lessors were not required to pay any compensation for the building. Clause 6 stipulated that the building was to be insured in the joint names of the lessors and the lessees. Clause 9 referred to “the said demised premises” and guaranteed the lessees peaceful enjoyment of possession. This clause appeared after all provisions concerning the building to be erected on the land. When clauses 1, 5, 6 and 9 are read together and given a proper construction, it appears that the parties intended that not only the land but also the building to be constructed on it formed the subject of the lease, since the lease was granted solely for that purpose. The clauses do not inevitably lead to the conclusion suggested by the respondents. If ownership of the building had been intended to vest in the lessors, there would have been no need to provide that the lessees would receive no compensation when the building was handed over. Instead, that provision indicates that ownership of the building rested with the lessees. The respondents relied heavily on the decision of this Court in Bhatia Cooperative Housing Society Ltd. v. D. C. Patel (1). Many terms of the lease in that case were similar to those in the present lease. However, clause 18 of the cited lease expressly stated that immediately after completion of the building within the time specified in clause 7, the lessors would grant the lessees a lease of the land with the building thereon for a term of 999 years from the date of auction, with an annual rent calculated according to the accepted bid for the plot. In that case, it was clear from interpretation that a lease would be granted of both the land and the building for a 999‑year term. No such clause exists in the lease under consideration. Consequently, the reliance placed on that decision does not support the respondents’ case, because the present lease contains no clause suggesting that, upon completion of the building, a lease of both land and building for a long term would be created.

In the present case the Court observed that the earlier decision relied upon by the respondents could not support their position because none of the lease clauses, either expressly or by implication, indicated that when the building on the demised land was completed the lease granted to the lessees would cover both the land and the building erected thereon. The appellants, on the other hand, argued that the lease only demised the land itself and that the expression “to hold the premises” in clause I was intended solely to refer to the demised land. They contended that ownership of any building constructed on the land did not pass to the lessors under the lease. According to the appellants, throughout the subsistence of the lease the title to the building remained with the lessees, and the lessees had agreed to surrender the building without compensation at the termination of the lease. In exchange for this surrender, the lessees were demised the land for a nominal rent of Rs. 50 per month. After a careful examination of all the lease provisions, the Court was satisfied that not a single clause, when properly construed, created any contractual obligation whereby the building to be erected would become the property of the lessors or would be deemed demised together with the land to the lessees.

The Court further considered the argument that, even if the lease did not expressly demise the building, possession of the building could not be transferred to the appellants until the lease itself was determined, a determination that could not occur so long as the respondents remained in possession of the demised land as tenants within the meaning of the governing Act. The Court found this contention untenable because the Act does not permit a lease to continue beyond the period expressly stipulated in the lease instrument. The Act merely provides that a person who remains in possession of the land after the lease term has expired, without the lessor’s consent, acquires the status of a statutory tenant and may be evicted only in accordance with the procedures laid down in the Act. Consequently, the mere continuation of possession does not extend the lease or create additional rights to the building. The appellants also argued that they could not obtain a declaration that they were entitled to the rents and profits from the building let out by the respondents because they could not realize those rents without entering the land on which the building stood. They noted that entry onto the land for rent collection required the consent of the respondents, who were the tenants of the land, and that entry could be permitted only as provided for by the Act. However, the Court observed that the declaration sought by the appellants did not request a right to enter the land; it merely sought a declaration that the appellants were entitled to the rents and profits generated by the building let to various persons by the respondents. The Court concluded that there was no legal obstacle to granting the relief sought, as the appellants only required a declaration of their right to collect those rents and profits, and the manner of collection was a matter for them to arrange. The Court also noted that the original lessees were Moreshwar Kashinath and Radhabai, wife of Ramakrishna Bhai Thakore, who were deceased, and that the suit had been filed against their heirs and legal representatives.

The respondents were tenants of the land, therefore the appellants could not enter the land without the respondents’ consent and could only do so as permitted by the Act. However, the declaration sought by the appellants does not request permission to enter the land. It merely asks to be declared entitled to the rents and profits of the building that the respondents had let to several persons. In other words, the appellants only desire a legal declaration that they have the right to collect the rents and profits generated by the building, leaving the method of collection to their own discretion. Consequently, after considering the submissions, the Court found no valid legal objection to granting the relief that the appellants requested. The original lessees of the premises were Moreshwar Kashinath and Radhabai, wife of Ramakrishna Bhai Thakore, both of whom were deceased at the time the suit was instituted. The suit was consequently filed against defendants I to III as heirs and legal representatives of Radhabai, and against defendants IV and V as heirs and legal representatives of Moreshwar Kashinath Thakore. After the filing, it was discovered that defendant No. IV could not be served with the plaint because she had died before the suit was instituted, and her name was therefore struck off as a defendant. At trial, the defendants conceded that the suit could not be dismissed solely on the ground of non‑joinder of the legal representatives of the deceased defendant No. IV. The court noted that the cause of action had been framed against those representatives, yet dismissal on that basis was impermissible. The learned Judges on appeal expressed the view that deciding the joinder issue was unnecessary because, in their opinion, the suit was bound to fail on other substantive grounds. Nonetheless, the respondents also admitted at trial that the suit could not be dismissed merely because the heirs and legal representatives of defendant No. IV were not impleaded. The Court, however, observed that it would have been preferable to bring those heirs and representatives onto the record as parties. It seems to us, however, that the suit cannot be dismissed merely on this ground because the nature of the declaration which the appellants sought could be granted even in the absence of the heirs and representatives of defendant No. IV being on the record. Though the plaintiffs impleaded five persons as defendants in the suit, the plaintiffs claimed a decree against the first defendant only in respect of the rents received by him from the tenants in the building in question. There is no claim against the other defendants for accounts in respect of the usufruct of the property. The correspondence disclosed in the suit, which passed between the plaintiffs and the first defendant, showed that it was only he who was in effective control of the building.

The Court observes that the suit should not be dismissed merely on that procedural deficiency, as the relief sought does not depend on it. It holds that the specific declaration sought by the appellants could be granted even though the heirs and representatives of defendant No. IV were not on the record. Although the plaintiffs named five defendants, their claim for a decree was directed only against the first defendant for the rents he had received from the tenants occupying the building. No monetary claim was made against the remaining defendants with respect to any account of the usufruct of the property. The documentary correspondence produced in the suit, exchanged between the plaintiffs and the first defendant, demonstrated that the first defendant alone exercised effective control over the building. Accordingly, the suit was contested, and the defence raised arguments concerning the lack of joinder, but the Court found those arguments insufficient to defeat the claim. The contestation focused on the right to recover rents, not on ownership of the land, reinforcing the Court's view that the relief could be granted without the missing heir. Thus, the procedural defect did not affect the substantive entitlement to the rents and profits claimed by the appellants.

In this matter, the Court observed that the claim and defence were pursued only by the first three defendants, who appear to be brothers and who asserted that they continued to occupy the building after the critical date of May 22, 1948. These three defendants were the ones who invoked the protection afforded by the relevant Act. Defendants 4 and 5, who were alleged to have been sued in their capacity as representatives of one of the joint lessees, did not demonstrate any interest in the building. Moreover, after the institution of the suit, Defendant No. 5 remained ex parte throughout the proceedings. Following the decree of the trial court, it was solely the first three defendants who filed an appeal before the High Court. Considering these circumstances, the Court concluded that the fourth defendant, or her heirs or legal representatives, were not indispensable parties to the suit, and therefore the suit could be continued in their absence. Accordingly, the appeal was allowed with costs awarded throughout, and the decision of the High Court on the appeal was set aside. The appellants were granted a declaration that the building erected on the land demised under lease Ext. A belongs to the Mankeshwar Temple Trust, and that the aid trust is entitled to recover all rents and profits derived from that building, since the respondents have no right, title, or interest in the premises after the expiration of the said lease. The first respondent was directed to render a full account of the rents he had received from the tenants of the building commencing on 23‑5‑48, and to pay to the appellants the amount determined to be due, together with interest calculated at six per cent per annum from 23‑5‑48 until the date of payment. In addition, an injunction was ordered restraining the respondents, their agents and servants, from interfering with the collection of rents and profits by the appellants from the tenants of the aforesaid building. The appeal was therefore allowed.