Damodhar Tukaram Mangalmurtiand... vs The State Of Bombay

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

Court: Supreme Court of India

Case Number: Civil Appeals Nos. 181 and 181-A of 1955

Decision Date: 2 February, 1959

Coram: S.K. Das, Syed Jaffer Imam, J.L. Kapur

In the matter titled Damodhar Tukaram Mangalmurtiand … versus The State of Bombay, the Supreme Court of India rendered its decision on 2 February 1959. The judgment was authored by Justice S. K. Das, with the bench constituting Justice S. K. Das, Justice Syed Jaffer Imam and Justice J. L. Kapur. This case fell under the civil appellate jurisdiction, specifically Civil Appeals Nos. 181 and 181-A of 1955. The appeals were taken from a judgment and decree dated 30 September 1952 issued by the former Nagpur High Court in Second Appeals Nos. 699 and 700 of 1946. Those decisions themselves arose from a judgment and decree dated 21 February 1946 of the Court of the First Additional District Judge, Nagpur, in Civil Appeals Nos. 22-A and 23-A of 1946, which had been rendered against the judgment and decree dated 2 January 1945 of the Court of the Second Subordinate Judge, Nagpur, in Civil Suit No. 143-A of 1944. Counsel for the appellants comprised H. J. Umrigar, Ratnaparkhi A. O. and Shankar Anand Zinj-arde, while the respondent was represented by W. S. Barlingay and B. H. Dhebar.

The Court noted that the judgment of Justices Jaffer Imam and S. K. Das was delivered by Justice S. K. Das, and that Justice J. L. Kapur delivered a separate judgment. The lease in dispute contained a covenant stipulating that the lessor would, at the conclusion of each thirty-year term, and thereafter at the request of the lessee, execute a renewed lease of the demised land for another thirty-year term. The covenant further provided that the rent payable on the renewed lease would be subject to a fair and equitable enhancement as determined by the lessor at each renewal, and that each renewed lease must incorporate those covenants, provisions and conditions applicable from the original deed, including a covenant for further renewal. One such lease had been executed on 24 May 1909, with several other leases executed around the same period. By 1939 the initial thirty-year periods of some of those leases had expired. The original plaintiffs, two individuals who also sued on behalf of the members of the Craddock Town Plot-holders Association, alleged that upon expiry of the lease terms—during which time some lessees had constructed houses on the leasehold land—the Provincial Government proposed to raise the annual rent from Rs 3-8-0 to Rs 21-14-0 and to insert new terms into the renewed lease deeds. The plaintiffs contended that a fair and equitable increase should be Rs 7 per plot. After several unsuccessful representations to the relevant authorities, the plaintiffs instituted the suit, seeking (a) a declaration that the proposed increase to Rs 21-14-0 per plot was not fair and equitable within the meaning of clause III of the lease;

The plaintiffs prayed that the Court grant several orders. First, they contended that the offer made by the association of Rs 7 per annum as rent was fair and reasonable. Second, they asked that the defendant limit the conditions inserted in the renewed deeds of lease to those that were already present in the original deed, and that no additional terms be added which might prejudice the lessees’ interests. Third, they urged that if the Court were not to accept Rs 7 as a fair and reasonable rent, the Court should itself determine and fix a rent that was fair and equitable under the terms of the lease.

The defendant opposed the suit on a number of grounds, although the specific arguments are not relevant to the present discussion. The matter was first heard by the learned Subordinate Judge of Nagpur, who framed several preliminary issues for determination. By a judgment dated 13 April 1942, he resolved those preliminary issues. One issue, which is material for the present analysis, asked whether the civil court possessed the authority to decide what constitutes a fair and equitable rent when a dispute arises. The Subordinate Judge held that, according to clause III of the indenture of lease, the defendant government was empowered to fix a fair and equitable rent; however, the civil court retained jurisdiction to examine whether the rent fixed by the defendant fell within the meaning of “fair and equitable” as prescribed by clause III. The remaining preliminary issues decided by the judge are not discussed because those decisions no longer survive in the record.

Following the resolution of the preliminary question, the plaintiff’s complaint was amended to include additional lessees whose thirty-year leases had also expired. Consequently, the plaintiffs comprised those lessees whose leases had ended and for whom the defendant had proposed a rent enhancement of Rs 21-14-0 per plot. The defendant asserted that the enhanced rent was reasonable and further claimed a right to withdraw the Rs 21-14-0 offer and to demand a substantially higher rent if the lessees refused the originally proposed terms. The defendant also denied that the lessees’ counter-offer of Rs 7, which represented double the original rent, was a reasonable or fair increase. After dealing with the preliminary issues, the Subordinate Judge proceeded to hear the case on its merits. On 2 January 1945, he decided on issue 4 that a rent of Rs 14 per year constituted a fair and equitable enhanced rent for each plot of approximately ten thousand square feet. He fixed this amount as the rent for the next thirty-year term to which the lessees were entitled under clause III and ordered a rebate of twenty-five percent to be granted to those lessees who agreed to renew their leases for a term ending in 1948.

The decision of the Subordinate Judge was appealed by both parties – one appeal was filed by the plaintiffs and another by the defendant – and the matters were taken before the District Judge. The appeals were subsequently heard by the Additional District Judge of Nagpur. In his judgment dated 21 February 1946, the Additional District Judge confirmed the Subordinate Judge’s authority under clause III of the lease indenture to fix a fair and equitable rent, but he overturned the Subordinate Judge’s determination of the amount. The Additional District Judge held that the rent increase could not lawfully exceed Rs 7, reasoning that any increase above that figure would not satisfy the requirement of a “fair and equitable” enhancement contemplated by clause III of the lease.

Following the Additional District Judge’s order, the Government, acting as the defendant, lodged two appeals before the then High Court of Judicature at Nagpur. Initially the appeals were presented before a single judge, who ordered that they be transferred to a Division Bench for fuller consideration. The Division Bench comprised the Chief Justice, then identified as B P Sinha, C.J., and Justice Mudholkar. The learned Chief Justice concluded that the suit should be dismissed because the dispute concerned a contractual matter and the civil courts lacked jurisdiction to adjudicate the determination of a fair and equitable rent. In contrast, Justice Mudholkar reached the opposite conclusion, holding that the plaintiff’s suit was maintainable and that the lower courts possessed the authority to assess and fix a fair and equitable rent.

Regarding the precise amount that should constitute a fair and equitable rent, the Chief Justice did not give a specific figure. He merely observed that the decision of the lower appellate court on the assessment of the rent was unsatisfactory, stating that it had been based more on a rule-of-thumb approach than on the evidence presented or any other reliable basis. Justice Mudholkar, however, expressed the view that there was no sufficient ground to depart from the lower appellate court’s determination of the rent amount.

The divergence of opinion between the Chief Justice and Justice Mudholkar prompted the bench to refer the matter to a third judge, Justice Hemeon. Justice Hemeon aligned with the Chief Justice’s interpretation, holding that a proper construction of clause III indicated that the civil court did not have jurisdiction to determine the fair and equitable rent because the parties had deliberately agreed to accept the lessor’s determination of such an enhancement. Consequently, Justice Hemeon refrained from expressing any view on the specific amount that should be fixed.

In line with the majority view expressed by the Chief Justice and Justice Hemeon, the High Court allowed the appeals and dismissed the suit.

The lower court had dismissed the suit and ordered the losing party to pay costs. Following that dismissal, the plaintiffs—who are now the appellants—applied for a certificate of fitness under article 133 paragraph 1 sub-paragraph c of the Constitution of India. The High Court issued the required certificate by an order dated 23 October 1953, and the present appeals were consequently filed on the basis of that certificate. Since the land involved in the dispute now falls within the territorial limits of the State of Bombay, the State of Bombay has been substituted as the respondent before this Court. The central issue for determination in this appeal is the proper construction of clause III of the lease indenture. The appellants contend that the interpretation adopted by the majority of Judges of the High Court is erroneous because it ignores the meaning of the words “fair and equitable enhancement” that appear in the clause. The respondent, on the other hand, argues that the phrase “subject to such fair and equitable enhancement as the lessor shall determine” is equivalent to saying “subject to such enhancement as the lessor shall determine to be fair and equitable.” In other words, counsel for the respondent maintains that the parties expressly agreed to be bound by whatever enhancement the lessor deemed to be fair and equitable. Judge Mudholkar had reasoned that the parties’ primary intention was that any enhancement must be fair and equitable, and that the adjectival clause “as the lessor shall determine” following the word “enhancement” was subordinate to that primary intention and therefore could be disregarded. Counsel for the respondent strongly disputed that view. The Court holds that the clause must be read as a whole and that every effort should be made to give effect to all of the words employed. The specific portion of the clause reads “such fair and equitable enhancement as the lessor shall determine.” If the clause were to be interpreted so that whatever the lessor determines as fair and equitable enhancement is automatically binding on the lessee, then the terms “fair and equitable” would not be given their ordinary meaning. The ordinary meaning of “fair” and “equitable” is that they denote fairness and equity in fact, not merely the lessor’s subjective perception of fairness and equity. Dictionaries define “fair” and “equitable” as meaning just or unbiased. Had the parties intended to leave the determination wholly to the lessor’s subjective judgment, the clause would have been more appropriately worded as “such enhancement as the lessor shall determine.” Accordingly, the Court considers that the words “fair and equitable” must be given their proper meaning and effect. The remaining question is what meaning should be attached to the words “such … as the lessor shall determine.” It is true that these words form an adjectival clause modifying the expression “fair and equitable enhancement,” and the Court must interpret that clause in a manner that preserves the significance of “fair and equitable.”

In interpreting the phrase “fair and equitable enhancement,” the Court held that the adjectival clause attached to it should be understood in a limited way. First, the lessor was required to decide what it considered to be a fair and equitable enhancement. However, if the lessor’s determination was not actually fair and equitable, the lessee retained the right to approach the Court and ask it to decide what constitutes a fair and equitable enhancement. The Court rejected the view that the clause was intended to remove the Court’s jurisdiction and to make the lessor’s assessment final and binding on the lessee. Although the Court agreed with the conclusion reached by Justice Mudholkar on this point, it noted that the agreement was not for the exact reasons expressed by that judge. By adopting the construction described above, the Court found that no further difficulty arose from clause 111 of the lease.

The learned judges of the High Court had unanimously held that the lease was not void for uncertainty, and the Supreme Court concurred with that assessment. The Court pointed to authority supporting the proposition that a covenant to settle land “at a proper rate” or “upon such terms and conditions as should be judged reasonable” does not suffer from uncertainty. The Court cited The New Beerbhoom Coal Company Limited v. Boloram Mahata and others (1) and Secretary of State for India in Council v. Volkart Brothers (2) as examples. In the former case, Sir Barnes Peacock, delivering the judgment of the House of Lords, observed that the High Court had affirmed the decision, but not on the grounds that the Court considered the affirmation correct. The High Court had affirmed the decision on the premise that it was impossible to determine a reasonable rate. Sir Barnes Peacock expressed that the Lords could not accept that, in the present case, a proper judicial inquiry would have been unable to determine the rate. He acknowledged that fixing a rate might be difficult, but noted that the Court regularly faces and overcomes difficulties in ascertaining reasonable prices, reasonable rates, or the amount of damages suffered under particular circumstances.

The Court also noted that English decisions had examined whether a contract that provides a mechanism for determining price could be specifically enforced. Two lines of authority were identified. In Milnes v. Grey (3), the contract stipulated that the price would be valued by two nominated persons, and if those two persons disagreed, they would select a third person whose determination would be final. The issue before the Master of the Rolls was whether such an agreement could be specifically performed. The Master of the Rolls answered, in his own words, that after considerable reflection he was satisfied that, apart from all other objections, there was no enforceable agreement between the parties that could be specifically performed.

In the English authorities that were cited, the Court explained that a contract which obliges a party to buy at a price that is to be determined by a prescribed method is not enforceable by specific performance unless that method actually produces a price. In Milnes v. Grey the agreement stipulated that the price would be fixed by two named valuers and, if they disagreed, by a third chosen by them. The Master of the Rolls observed that the only agreement the defendant entered into was to purchase at a price to be ascertained in a specified mode. Because no price had ever been fixed in that mode, the parties had not agreed on any price, and therefore there was no complete and concluded contract that the Court could execute. Similarly, in Taylor v. Brewer the claim for compensation was based on a committee’s resolution that remuneration should be made “as should be deemed right”. The Court held that such an engagement was merely an engagement of honour and could not give rise to a legally enforceable claim. By contrast, Gourlay v. The Duke of Somerset presented an agreement that left the determination of “usual and proper conditions, reservations, and agreements” to a particular surveyor, John Gale, or, if he died, to another competent person mutually selected by the parties. The defendant argued that a decree of specific performance would compel the Court itself to decide what covenants were “usual and proper”. Sir William Grant, Master of the Rolls, replied that when a price is to be fixed by arbitrators and they fail to do so, there is no contract because price is essential to a contract of sale, and the Court cannot create a contract where none exists. However, where the Court determines that the agreement is binding and complete, it does not need external assistance to give effect to the details. He further explained that if the parties had approached Gale and one objected to the covenants as improper, a suit could have been brought and the Court would have examined the lease and refused to order specific performance if the terms were unreasonable.

The present matter was held to fall within the principle articulated in Gourlay v. The Duke of Somerset. Counsel for the respondent relied heavily on the decision in Collier v. Mason, a case where the defendant agreed to purchase land at a valuation to be made by an entity referred to as AB. Although the Court considered AB’s valuation to be very high and perhaps exorbitant, it nevertheless decreed specific performance because there was no evidence of fraud, mistake, or miscarriage and the parties were bound by the contract they had executed. The Court noted that in that case there was no question of the Court stepping in under the terms of the contract to determine what was fair and reasonable; the contract itself provided the mechanism for fixing the price, and the Court was satisfied that the mechanism had been complied with. The respondent also cited Tekchand Kapurchand v. Mt. Birzabai, emphasizing the principle that a contract binds the parties and their representatives, and that the Court’s power to interfere is limited to situations involving fraud, undue influence, mistake, or relief against penalty or forfeiture. The Court agreed that if the present contract likewise made the lessor’s determination of an enhanced rent binding, the Court would have no authority to intervene unless the contract were vitiated by fraud or a similar defect. The case

The Court noted that the decision in Collier v. Mason rested upon a contract which provided that the purchase price should be fixed by reference to the valuation of AB. It further observed that, because no evidence of fraud, mistake or any miscarriage was presented, the parties were deemed bound by the agreement they had entered into. The Court explained that in that case there was no requirement for the court to intervene under the contract terms to decide what price was fair and reasonable. Counsel for the respondent also cited Tekchand Kapurchand v. Mt. Birzabai, wherein the principle stated that a contract binds the parties and their representatives, and judicial interference is limited to instances of fraud, undue influence, mistake, or relief against penalty or forfeiture. The Court agreed that, if the present lease contract were to make the lessor’s determination of enhanced rent absolutely binding, the court would have no power to intervene unless the contract were vitiated by fraud, undue influence, mistake, or similar defect. However, the Court held that a proper construction of clause III indicates that, although the lessor initially determines the enhanced rent, the contract requires that such determination be fair and equitable. Under that construction, the lessor’s assessment would not be final and the court could be called upon to evaluate what constitutes a fair and equitable enhancement. The Court respectfully disagreed with the Patna decisions cited by the learned Chief Justice, noting that those cases did not involve the interpretation of a clause like the one before the Court and correctly held that, in the absence of a contract, the court cannot impose a bargain on the parties. Consequently, the Court concluded that the majority view of the High Court judges on the interpretation of clause III of the lease indenture was erroneous, and directed that the appeals be remitted to the High Court for a fresh hearing in accordance with law to determine the appropriate fair and equitable enhancement. The Court also observed that, although the majority had not reached a final conclusion on that point, counsel for the appellants argued that the Additional District Judge’s finding on the quantum of fair and equitable enhancement was a factual finding and therefore binding on a second appeal. At this stage the Court expressed no opinion on the merits of that submission.

In response to that submission, the Court declined to express any opinion on whether any of the lower courts erred in principle in determining the amount that should constitute a fair and equitable enhancement, nor did the Court decide whether, on the merits, the appropriate amount should be Rs 7, Rs 14, Rs 21-14-0, or even a higher sum; all of those matters were directed to be reconsidered anew by the High Court. The Court also identified another issue that must be addressed by the High Court. The learned Subordinate Judge had ruled on issue number 7 concerning the conditions for renewal of the lease, holding that the Government, as referred to in the 1927 I.L.R. 6 Pat. 446 and the 1937 A.I.R. Pat. 391, was not authorized to alter the clauses relating to re-entry and notice of demand that were contained in clause II of the original lease. The learned Additional District Judge had observed that, with respect to a new form of lease, the clause dealing with the building would be deleted if it were found to be superfluous or redundant, and that, regarding the lessor’s right to enter the land without a demand for ground rent in case of non-payment on the appointed date, it was unnecessary to interfere because doing so would amount to creating a contract for the parties; he therefore preferred to leave the matter to the parties and their legal advisers. Whether the view expressed by the Subordinate Judge or by the District Judge is correct was not examined by the High Court, and because the appeals are being remanded, that point also must be dealt with by the High Court. Accordingly, the Court allowed the appeals, set aside the judgment and decree of the High Court dated 30 September 1952, and ordered that the appeals be returned to the High Court for a fresh hearing in accordance with law and in light of the observations made above. In the special circumstances of this case, the Court dispensed with an order for costs of hearing the appeals in this Court. The costs incurred in the two subordinate courts and the costs incurred in the High Court, both before and after the remand, were directed to be determined by the High Court when it finally disposes of the appeals. The disputed clause reads, “Provided that the rent of the land hereby demised shall be subject to such fair and equitable enhancement as the lessor shall determine on the grant of every renewal.” This covenant appears to have been made for the benefit of the lessee, and the reservations are expressed in language that leaves the discretion regarding the enhancement of rent to the lessor. The clause does not specify the amount of enhancement or what would be fair and equitable, leaving that determination to the lessor. Such a provision is not unusual in a long-term lease that contains a renewal provision, where the question of rent is left to the lessor or to an outside valuer.

The Court observed that a rent increase may be fixed either by the lessor himself or by an independent valuer, and it would be mistaken to hold that a valuation made by a valuer becomes immune from challenge merely because the words “fair and equitable” are not employed, while the same wording would render the valuation open to judicial scrutiny. Such a view would contradict the very purpose and legal effect of professional valuations. The extent to which courts may intervene in valuations performed by valuers has been explained in legal textbooks and affirmed in several decided cases. For example, in Williston on Contracts, volume three, section 802, page 2252, the law is stated that, in the absence of fraud or mistake, the price fixed by a competent valuer is conclusive upon the parties. Although an excessively high or unreasonably low price may contain an element of penalty or forfeiture, this possibility is insufficient to override the express terms of the contract unless there is at least fraud, gross mistake, or some arbitrary conduct beyond what the parties could reasonably have contemplated. The Court further noted that it is not a far stretch to assume that in every valuation the parties expect a fair and equitable amount to be fixed, rather than an arbitrary or fanciful figure. The Court then referred to the case of Collier v. Mason, reported in 1858 at 25 Beav. 200 and 53 E.R. 613, where the defendant agreed to purchase property at a valuation to be made by a third party, repudiated the valuation as exorbitant, and refused to complete the contract. The plaintiff-vendor instituted a suit for specific performance, and the Court held that, although the valuation was very high and perhaps excessive, there was no evidence of fraud, mistake or miscarriage, and therefore ordered specific performance. The Master of the Rolls observed that it may have been imprudent for the parties to agree to a price fixed by another person, but such imprudence does not void the contract. He explained that, based on the principle laid down by Lord Eldon, the court must accept the fixed price unless there is proof of a mistake, an improper motive, or a valuation so extreme that it can only be explained by such causes; in any of those situations the court would refuse to act on the valuation. The Court pointed out that the phrase “fair and equitable” was not expressly used in that case, but it is implicitly understood in every reference to a valuation that the amount should be fair and equitable.

The referee appointed to determine the price must not act in a fanciful, corrupt, or puerile manner, and the valuation he makes must be regarded as fair and equitable. In many transactions involving the transfer of property, the sale agreement includes a clause that the price to be paid shall be fixed by a designated valuer. Such a clause constitutes either an express condition or a condition implied in fact, which qualifies the buyer’s obligation to pay the price. The contract cannot be performed until the valuation is first carried out, making the condition a necessary or inherent one. This principle is reflected in the authorities cited, namely Williston on Contracts, volume three, section eight hundred, and the case of Firth v. Midland Railway Co. (1875) L.R. 20 Eq. 100, 112.

Because the parties rely on the particular individuality of the chosen valuer, the agreement assumes that the valuer will be available and willing to act. Consequently, if the valuer dies or refuses to perform his duty, the buyer cannot be compelled to pay the price before a new valuation is obtained. A comparable condition is frequently found in long-term leases and in provisions for lease renewal, where the parties agree to be bound by the determination of a valuer. Courts generally refrain from interfering with such valuations, intervening only in cases of fraud, mistake, or misconduct. This approach was illustrated in Vickers v. Vickers (1867) L.R. 4 Eq. 529, a suit for specific performance of an option of purchase where the stock was to be valued in the usual way by two valuers and one of the valuers was prevented from proceeding. The court held that there was no enforceable contract because the required valuation could not be completed. Sir W. Page Wood, V.C., observed that when the nominated valuers fail to render their award, “there is no constat of the price; the contract is not a complete contract, and there is nothing on which it can act.”

In Weekes v. Gallard (1869) 21 L.T. 655, the parties entered into a contract for the sale of certain property with the price to be fixed by two valuers. Although the valuers subsequently fixed an inadequate price, the court held that, in the absence of fraud or collusion on the part of the valuers, the buyer was entitled to specific performance of the contract. Lord Romilly emphasized that the court possesses no discretion in such matters, noting that “the discretion of the court is bound, as Lord Ellenborough says, by fixed rules.” He cited an earlier case in which a house and its furnishings were valued at three times their actual worth, yet a decree for specific performance was still granted. The only defence to such a suit, according to the judgment, would be fraud or collusion. While a valuer may, in a broad sense, be likened to an arbitrator, the judgment clarified that the term does not apply in the strict legal sense.

In this passage the Court referred to the observation of Lindley, L. J., in In re Carus Wilson & Greene, and explained the distinction between arbitration and valuation. The Court said that arbitration is intended to resolve a dispute that has already arisen, whereas valuation is intended to prevent a dispute from arising. Accordingly, an arbitrator is appointed to settle, by judicial determination, any matter that is in controversy between the parties. By contrast, a valuer, using his knowledge and skill, must prepare a valuation whose purpose is to avoid future disputes. The Court emphasized that a valuer, like an arbitrator, must act fairly and diligently; he may not act in a fanciful or perverse way, and his determination must be fair and equitable even if the instrument granting him authority does not expressly use those words. The Court then observed that once a valuation is properly made—citing (1) (1869) 21 L.T. 655 and (2) (1886) 18 Q.B.D. 710—the valuation becomes conclusive between the parties. In the absence of fraud, mistake or collusion, the Court cannot re-examine whether the valuation is fair and equitable, just as a Court cannot sit in appeal to alter an arbitrator’s award of damages in a breach-of-contract case. The Court also referred to Emery v. Wase (1) for further authority. The appellants relied on the decision in Gourlay v. Somerset (Duke of) (2), but the Court held that decision did not address the issue presently before it. In Gourlay the suit concerned specific performance of a lease-grant agreement, and one term required that the farm be let on conditions, reservations and agreements “as shall be judged reasonable and proper by John Gale.” The Court concluded that Gale’s agency was not an essential term of the contract and that the contract could not be said to terminate simply because Gale refused to settle a lease. The Court explained that if Gale’s decision were subject to challenge, the ultimate determination of the lease’s propriety would rest with the Court; if not, the Court might be forced to execute a lease it considered extremely unreasonable and improper. The Court illustrated that, had the parties approached Gale, obtained a lease settlement, and one party subsequently objected to the covenants as improper, the Court would have examined the lease and, upon finding it unreasonable, would have refused to decree execution of the agreement. That case concerned covenants other than price fixation. Regarding valuation or price fixation, the Court noted that if an agreement provides that the price of an estate be fixed by arbitrators and they fail to do so, there is no contract of sale because the method of fixing the price is essential to the contract.

The Court observed that when a contract of sale expressly required the price to be fixed, that requirement formed an essential part of the agreement. Accordingly, the Court held that it could not create a contract where none existed, even if the parties had stipulated a mechanism for fixing the price. In the same manner, the Court stated that when a valuation was determined by a recognized valuer, the valuation would be regarded as conclusive provided there was no evidence of fraud, mistake, or misconduct. The Court emphasized that it would not question the correctness of the valuation or replace it with its own assessment, because doing so would amount to fabricating a new contract rather than executing the parties’ existing agreement. The Court also noted that the Transfer of Property Act contained no provision granting the Court the power to fix the rent of demised premises. Although certain statutes had created tribunals empowered to determine rent for agricultural holdings, such statutory mechanisms did not extend the Court’s authority in ordinary cases. The Court referred to the authorities cited, including the decisions reported in Vesey’s Reports of 1801 and 1815, to illustrate the principle that a court must accept a valuer’s determination absent fraud, mistake, or misconduct.

In the matter of The New Beerbhoom Coal Company v. Boloram Mahata, the Court examined a covenant that read, “Within that aforesaid mouzah we will not give a pottah, let give settlement to anybody. If you take possession according to your requirement of extra land over and above this pottah, and we shall settle any such lands with you at a proper rate.” The lessees filed a suit against the lessor seeking specific performance of a permanent lease over a large tract of land, arguing that the covenant bound the lessor to lease the land whenever the lessees demanded it. The appellant company contended that it had negotiated with the lessor for a lease of adjoining land, distinct from the land originally agreed, on the basis that it would pay Rs 1-8-0 per unit for waste land and Rs 3 per unit for cultivable land. The suit therefore asked the Court to compel the lessor to grant the lease at those specified rates, or, failing that, at rates the Court deemed reasonable. The trial Court held that, apart from the fifty-one bighas expressly mentioned in the covenant, the lessor could not be forced to lease the remaining land of the mouzah. The High Court affirmed this finding, stating that it was impossible to determine a reasonable rate. Citing Sir Barnes Peacock’s judgment in an 1880 case, the Court noted that although fixing a proper rent could be difficult, the Court was obligated to overcome such difficulties and could, after a proper inquiry, determine a reasonable rate.

In this case the appellants relied upon the observations of the Privy Council to argue that the Court could determine what a reasonable rate would be. The Court noted that the present matter did not involve any question of valuation, nor was there a request to review a valuation made by a valuer on the ground that it was improper. Moreover, the Court observed that the Privy Council’s statements were merely obiter and therefore did not constitute authority for the proposition that a valuer’s determination is subject to judicial review. The appellants also cited The Secretary of State for India v. Volkart Brothers (1). In that case a lease deed executed by the East India Company for ninety-nine years contained a renewal clause providing that the lessee could obtain a further term of equal length on payment of a sum and on “terms and conditions as should be judged reasonable”. The Secretary of State later assigned a large portion of the holding to a third party. Before the original lease expired the Volkart Brothers tendered the stipulated sum and sought renewal, but the Secretary of State refused and instituted an action for ejectment, while the lessees sued for specific performance of the renewal covenant. A majority held that the covenant was not void for uncertainty. Justice Krishnan expressed the view that the covenant was too vague and therefore unenforceable because the terms to be inserted were themselves uncertain. Justice Venkatasubba Rao, however, held that where the parties could not agree on a reasonable rent the Court would intervene and fix it; see The New Beerbhoom (1) (1926) I.L.R. 50 Mad. 595. The Court also referred to Coal Company v. Boloram Mahata (1), where Chief Justice Trotter held that the covenant was not so vague as to preclude enforcement. The Court emphasized, however, that that decision concerned specific performance of a renewal contract and not the review of a valuer’s assessment, and that evidence could render even a vague renewal covenant definite. Accordingly, the Court expressed the opinion that it could not examine the correctness of the lease determination and, in that view, the appeal should be dismissed with costs. In view of the majority opinion, however, the Court allowed the appeals, set aside the judgment and decree of the High Court dated 30 September 1952, and made no order as to costs of the hearing in this Court.