A) ABSTRACT / HEADNOTE

The central controversy concerns whether an agreement of conducting dated 16.08.1967 created a leave-and-license/tenant-like relationship (thereby attracting section 15A of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947) or whether it merely conferred a right to conduct the Hotel business of the owner. The plaintiff alleged deemed tenancy and sought injunctions; the trial court found in the plaintiff’s favour on the footing that occupation and the contractual terms established a leave-and-license; the appellate bench reversed, treating the written agreement and contemporaneous receipts as documentary proof of a conducting relationship; the High Court in revision affirmed the appellate court. The Supreme Court examined rules of contract construction, the bar on extrinsic oral evidence under sections 91–92 of the Evidence Act, 1872, the scope of provisos to section 92, and the significance of contemporaneous documentary material (royalty receipts, registration certificate photocopy) and the absence of any clause transferring occupation. The Court held that the document, read literally and purposively, evidenced an agreement to conduct the hotel business and not a grant of tenancy; oral evidence was inadmissible as no proviso to section 92 applied; photocopied registration certificate and royalty receipts did not transform the plaintiff’s status into a deemed tenant. The appeal was dismissed with costs. The judgment reiterates the primacy of written terms, cautions against meandering pleadings (inviting the use of Order VI, Rule 16 CPC), and summarises rules of deed construction — literal, golden and purposive — while emphasizing cautious resort to surrounding circumstances when ambiguity exists.

Keywords: Agreement for conducting hotel business; Leave and license; Section 15A (Bombay Rent Act); Sections 91–92 Evidence Act; Royalty receipts; Deemed tenancy; Construction of deed; Literal rule; Golden rule; Meandering pleadings.

B) CASE DETAILS 

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The litigation arises from the handing over for management of a hotel operated at Shop Nos. 5 & 6, Nanabhai Court, Dadar. The original owner (defendant no.2) leased the premises to her husband; after his death the first defendant continued to run the hotel. The plaintiff entered the premises under an agreement dated 16.08.1967 described repeatedly as an agreement of conducting by which the owner purported to give the business on a conducting basis to the plaintiff (the Conductor). Over decades a series of documents and conduct (notably monthly royalty payments and a photocopy of a sales-tax registration) followed. When the first defendant served notice in 1997 to vacate and hand back the business, the plaintiff sued, claiming status as a deemed tenant under section 15A of the Bombay Rent Act (as enforced from 01.02.1973) and sought injunctions against dispossession. The trial court accepted the plaintiff’s oral and documentary evidence, construed the arrangement as de facto leave-and-license (tenant-like occupancy) despite the title of the instrument, and granted relief. The appellate bench reversed, relying upon the written agreement and contemporaneous receipts, and the High Court in revision agreed. On appeal to the Supreme Court the principal legal axes were: the method of construing deeds, the bar on admitting oral evidence to vary written documents under sections 91–92 of the Evidence Act, and whether contemporaneous facts could recharacterise the agreement of conducting into a tenancy that attracts statutory protection. The Supreme Court distilled construction principles (literal/golden/purposive) and excluded oral evidence since no proviso to section 92 applied, affirming that the arrangement conveyed only authority to conduct the business and not tenancy/possession rights.

D) FACTS OF THE CASE

The owner (defendant no.2) had permitted her husband to hold the lease; after his death defendant no.1 ran the Hotel Shri Samarthashraya Vishranti Graha. She was unable to manage it successfully and permitted others (her brother and later the plaintiff) to run the business. On 16.08.1967 a written instrument titled an agreement of conducting was executed between the Owner (Smt. Laxmibai Narayan Satose) and Shri Annaya Shetty (the Conductor). The agreement recited that the owner desired “to give the said business on conducting basis” and that the conductor agreed “for conducting the said business… and for the purpose of carrying on the said business, the said Hotel premises and to use fittings and fixtures and furniture and other accessories… for the period and upon the terms and conditions herein after contained.” The instrument repeatedly uses the language of conductor/owner, stipulates monthly royalty (Rs. 1,000 for initial periods), obliges the conductor to bear electricity, wages and statutory compliances, prohibits change of business, requires returning utensils and fixtures on termination, mandates handing over complete charge on termination, and permits owner inspections. Over the years the plaintiff produced 99 receipts recording royalty payments and exhibited a photocopy of a sales-tax registration certificate. In 1997 the owner served notice to vacate and hand over the business; the plaintiff filed suit claiming deemed tenancy under s.15A of the Bombay Rent Act and injunctive relief. Trial court relied on oral testimony and the tenor of occupation to hold that despite nomenclature the arrangement effected exclusive occupation akin to leave-and-license and thus deemed tenancy; appellate and revisional courts, focusing on the written terms and documentary contemporanea, held the arrangement to be a mere conducting agreement and reversed. The Supreme Court examined clauses, the absence of any clause transferring possession, and the admissibility of oral evidence to alter a written instrument, concluding the plaintiff remained conductor only.

E) LEGAL ISSUES RAISED

1. Whether the agreement dated 16.08.1967 created a leave-and-license/tenant-like relationship attracting section 15A of the Bombay Rent Act?

2. Whether oral evidence could be admitted to contradict or vary the terms of the written agreement of conducting under sections 91–92 of the Evidence Act, 1872?

3. Whether contemporaneous documents (royalty receipts, sales-tax registration photocopy) could recharacterise the written agreement into a tenancy?

4. What principles of construction (literal, golden, purposive) govern interpretation of the deed and when may surrounding circumstances be resorted to?

F) PETITIONER / APPELLANT’S ARGUMENTS

The counsel for the plaintiff-appellant submitted that the written nomenclature (agreement titled “conducting”) cannot be conclusive; the letter and spirit of the agreement and the exclusive occupation, burden of paying statutory/incidental liabilities, long possession and continuous occupation pointed to a leave-and-license or tenant-like relationship. The plaintiff relied on oral testimony to explain clauses and on Provash Chandra Dalui v. Biswanath Banerjee for contextual construction, submitting that when words are doubtful surrounding circumstances and the object of the contract must be read to determine true intention. The plaintiff argued that the sale-tax registration and conduct of the business indicated effective control and enjoyment akin to tenancy attracting section 15A protection.

G) RESPONDENT’S ARGUMENTS

The first defendant argued that the deed, read in its plain terms, conferred only authority to conduct the owner’s hotel business; clauses (recital, clause I, III, VII, X, XIV) clearly show owner and conductor roles; monthly royalty receipts corroborate the conducting character; sections 91–92 bar admission of oral evidence to vary the written agreement and no proviso applies. The respondent relied on contemporaneous documentary matrix and prior decisions on exclusionary rule to contend that the trial court erred in relying on oral evidence to convert the agreement into leave-and-license.

H) JUDGEMENT 

The Supreme Court affirmed the appellate and High Court view. It recalled rules of construction: start with the plain, ordinary and literal meaning; apply the golden rule only to avoid absurdity; and use purposive construction with caution. The Court emphasised that the construction of a deed is generally a question of law, but where ambiguity exists it becomes a mixed question of fact and law — a principle encapsulated in ss.91–92 of the Evidence Act. The Court parsed the 16.08.1967 agreement clause by clause: the recital expressed the owner’s intent to give the business on conducting basis; clause 1 grants the conductor right to use premises and fittings for the purpose of conducting the owner’s hotel business; clause 3 fixes royalty; clauses 7–10, 12–16 impose obligations on the conductor to carry on only the owner’s hotel business, not to delegate, to return fixtures and hand over charge on termination, to pay workers and permit inspection. Crucially, the instrument contains no clause transferring possession or creating an entitlement to occupy in the nature of tenancy; the owner remained in possession as between defendant no.2 and defendant no.1. The Court excluded oral evidence: none of the provisos to section 92 were attracted; therefore evidence purportedly to vary, add to or subtract from the written terms could not be admitted. The Court also held that the photocopy of sales-tax registration and royalty receipts could not transmute the legal character of the agreement — the receipts reinforce the royalty/conducting structure rather than tenancy. Relying on precedents and doctrinal principles, the Court concluded the arrangement was an agreement to conduct the business and did not confer tenancy or deemed tenant status under s.15A. The appeal was dismissed with costs of Rs. 1,00,000 to defendant no.1.

a. RATIO DECIDENDI

The decisive legal proposition is that a written agreement which by its terms grants authority to a person to conduct an owner’s business, contains obligations consistent with mere conduct (royalty, payments, operational obligations, duty to hand back business and return fixtures), and lacks any clause transferring possession or creating an occupancy right, does not convert the conductor into a tenant or deemed tenant under statutory rent control. Where the written instrument is clear, sections 91–92 Evidence Act operate to exclude oral evidence to contradict, vary or add to its terms — unless one of the statutory provisos applies (fraud, separate non-inconsistent oral agreement on a matter on which the document is silent, condition precedent, subsequent rescission/modification, usage/custom, or facts showing relation of language to existing facts). Absent those exceptions, contemporaneous receipts pointing to royalty payments support the documentary character and do not convert the legal nature of the instrument. Therefore the construction of such deed must proceed primarily by literal reading, resorting to surrounding circumstances only if ambiguity exists. The Court applied these principles to hold the conductor had no tenancy right.

b. OBITER DICTA

The judgment contains notable obiter observations. The Court criticised meandering and prolix pleadings and warned against AI/computer-generated lengthy statements — urging trial courts to employ Order VI, Rule 16 CPC to strike out unnecessary material and to insist on concision for clarity and judicial economy. The Court restated construction methodology — literal, golden, purposive — emphasizing cautious use of purposive construction. It noted that photocopies of register entries (e.g., sales-tax registration) have limited potency to alter legal character when the main instrument is clear. The Court also observed that ownership and possession remain distinct legal concepts: a lease implies rightful separation; here defendant no.1 remained in possession vis-à-vis defendant no.2 and no clause in the conducting agreement effectuated a transfer of possession to the plaintiff. These comments are instructive for litigants and courts considering documentary primacy, evidentiary bars, and pleadings discipline in property and tenancy disputes.

c. GUIDELINES

• Courts must first construe a contract by its plain and literal language; only if literal reading yields absurdity may the golden rule be applied.

• Use purposive construction cautiously and restrictively; surrounding circumstances should be invoked only when wording is doubtful.

• Sections 91–92 Evidence Act bar admission of oral evidence to contradict/alter written instruments; exceptions (provisos) must be strictly proved before admitting extrinsic oral explanation.

• Contemporaneous documentary material (receipts evidencing royalty) generally corroborates the written instrument’s character rather than transforming it into an instrument of different legal effect.

• Absence of any clause conferring possession or authorising occupation is a vital circumstance in distinguishing a conduct agreement from a leave-and-license/lease.

• Trial courts should control pleadings and evidence to avoid prolixity; invoke Order VI, Rule 16 CPC where pleadings are unnecessary or frivolous.

I) CONCLUSION & COMMENTS

The decision underscores documentary primacy in contracts affecting property or occupancy rights. When parties reduce their arrangement to a written instrument which, read in entirety, creates a conductor role with obligations to pay royalty, bear operational liabilities, and return the business and fixtures on termination, courts should be cautious in recharacterising that relationship into tenancy on the basis of oral testimony or peripheral documents unless an exception under s.92 is convincingly established. The ruling preserves legal certainty and prevents retroactive conversion of commercial conducting arrangements into protected tenancies by after-the-event testimony. Practically, the case signals that litigants seeking tenancy protection must ensure that the written instrument contains explicit occupation/possession grant and that those seeking to rely on documentary photocopies or receipts to change legal status will face strict scrutiny. The Court’s admonition on pleadings is timely: concision assists adjudication and reduces appellate load. Finally, this judgment helps delineate the boundary between business-conduct arrangements and proprietary tenures under rent control statutes; it reminds practitioners that precise drafting and clear transferal of possession are determinative in tenancy disputes.

J) REFERENCES

a. Important Cases Referred

1. Provash Chandra Dalui & Anr. v. Biswanath Banerjee & Anr., (1989) Supp. 1 SCC 487.

2. Chandavarka Sita Ratna Rao v. Ashalata S. Guaram, (1986) 4 SCC 447.

3. Mangala Vaman Karandikar v. Prakash Damodar Ranadeon, (2021) 6 SCC 139.

4. Shakuntala Shukla v. State of Uttar Pradesh, (2021) 20 SCC 818.

5. Tyagaraja Mudaliyar & Anr. v. Vedathanni, (1936) AIR PC 70.

b. Important Statutes Referred

1. Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 (s.15A, s.28).

2. Evidence Act, 1872 (ss.91, 92).

3. Code of Civil Procedure, 1908 (Order VI, Rule 16).