Annaya Kocha Shetty v. Laxmibai Narayan Satose

Case snapshot

Sections / provisions: Bombay Rent Act; Indian Contract Act

Questions before the Court / Tribunal

• Characterisation of business-conducting agreement versus leave and licence: The reported Supreme Court decision discusses how contracts and deeds should be interpreted by substance and operative clauses rather than labels, in deciding whether an arrangement was a business-conducting agreement or leave-and-licence.

Material facts and background

the time did not allow for a tenant-landlord arrangement in the factual matrix at hand. Consequently, the agreement dated 16.08.1967 was styled as an agreement of conducting, but the contents pointed towards an agreement of leave and license. This is also buttressed, the trial court held, by the fact that the plaintiff was paying rent of Rs. 1000/- per month. The trial court held 6

that the evidence of the witnesses deserves to be relied upon, especially because during cross-examination, the said oral and documentary evidence was not seriously challenged. Thus, it was held that the plaintiff is a deemed tenant under section 15A of the Act. 7.

The appellate bench examined and interpreted the agreement dated

16.08.1967 in its entirety and reversed the judgement and decree of the trial court. The appellate bench examined the scope and object of sections 91 and 92 of the Evidence Act, 1872 and the bar on parties to an agreement to adduce oral evidence contrary to the clauses in a written agreement. The appellate bench held that the contemporaneous agreement through which the plaintiff secured permission to enter into the Plaint Schedule is a plain agreement to conduct the business of the first defendant and not a leave and license of premises in favour of the plaintiff. The appellate bench found that the trial court failed to interpret relevant clauses in the agreement that pointed to the arrangement as one of leave and license. The appellate bench appreciated the consideration received by the first defendant between March 1967 and September 1973, i.e., 99 receipts evidencing receipt and payment of royalty for conducting the business. The appellate bench heavily relied on these royalty receipts as evidence supporting the existence of conducting agreements for running the hotel business rather than a simple leave and license arrangement. Further, it pointed out that the trial court...

occupation and business operations. By relying on the applicable clauses in the agreement dated 16.08.1967 and the contemporaneous situation, the agreement was styled as an agreement for conducting business. The appeal of defendant no.1 was hence allowed. 8.

Aggrieved by the reversal of the trial court order by the appellate bench,

the plaintiff filed Civil Revision Application No. 247 of 2016. The High Court, through the Impugned Order, confirmed the view of the appellate bench. It was held by the High Court that sections 91 and 115 of the Evidence Act, 1872 point to the finding that the Plaint Schedule was given for running the Hotel on a conducting basis and not on a leave and license basis. 9.

Appellant / assessee submissions

The judgment copy does not separately set out this component in a distinct section; refer to the full order and the reasoning section below.

Revenue / respondent submissions

The judgment copy does not separately set out this component in a distinct section; refer to the full order and the reasoning section below.

Court / Tribunal analysis and reasoning

paying the workers their wages and exempts defendant no. 1 regarding the same. None of the servants initially employed by the deceased defendant no. 1 were there after the execution of the said agreement. 6.8

agreement indicate that the deceased defendant no. 1 did not retain any dominant control in the hotel business being run by the plaintiff in the suit premises. Hence, if the plaintiff carried on the business, defendant no. 1 ought not to have discontinued paying sales tax. Merely mentioning the word “royalty” in receipts is not sufficient to conclude that there was an agreement of conducting the Hotel between the parties. Considering the nature of exclusive use, occupation, and possession of the plaintiff with respect to the suit premises from 1967 to date, the nomenclature of the agreement has no wider significance in determining the relationship. 6.9

the time did not allow for a tenant-landlord arrangement in the factual matrix at hand. Consequently, the agreement dated 16.08.1967 was styled as an agreement of conducting, but the contents pointed towards an agreement of leave and license. This is also buttressed, the trial court held, by the fact that the plaintiff was paying rent of Rs. 1000/- per month. The trial court held 6

that the evidence of the witnesses deserves to be relied upon, especially because during cross-examination, the said oral and documentary evidence was not seriously challenged. Thus, it was held that the plaintiff is a deemed tenant under section 15A of the Act. 7.

16.08.1967 in its entirety and reversed the judgement and decree of the trial court. The appellate bench examined the scope and object of sections 91 and 92 of the Evidence Act, 1872 and the bar on parties to an agreement to adduce oral evidence contrary to the clauses in a written agreement. The appellate bench held that the contemporaneous agreement through which the plaintiff secured permission to enter into the Plaint Schedule is a plain agreement to conduct the business of the first defendant and not a leave and license of premises in favour of the plaintiff. The appellate bench found that the trial court failed to interpret relevant clauses in the agreement that pointed to the arrangement as one of leave and license. The appellate bench appreciated the consideration received by the first defendant between March 1967 and September 1973, i.e., 99 receipts evidencing receipt and payment of royalty for conducting the business. The appellate bench heavily relied on these royalty receipts as evidence supporting the existence of conducting agreements for running the hotel business rather than a simple leave and license arrangement. Further, it pointed out that the trial court...

occupation and business operations. By relying on the applicable clauses in the agreement dated 16.08.1967 and the contemporaneous situation, the agreement was styled as an agreement for conducting business. The appeal of defendant no.1 was hence allowed. 8.

the plaintiff filed Civil Revision Application No. 247 of 2016. The High Court, through the Impugned Order, confirmed the view of the appellate bench. It was held by the High Court that sections 91 and 115 of the Evidence Act, 1872 point to the finding that the Plaint Schedule was given for running the Hotel on a conducting basis and not on a leave and license basis. 9.

was to give the hotel business on a conducting basis to the plaintiff and that there was no intention to execute a leave and license agreement regarding the said premises. The Impugned Order looked into the agreement dated 16.08.1967 in detail and stated that – • The “recital” notes the conducting basis nature of the agreement. • Clause III refers to the payment of royalty at Rs. 1000 pm. • Clause IV requires the plaintiff to incur and pay electricity charges. • Clause V requires the rent of the premises to be borne by defendant no. 1 to the landlord defendant no. 2. • Clause VII and X point towards conducting of the hotel business. • Utensils and furniture were annexed. 10.

of the conducting agreements. Moreover, the plaintiff cannot deny the execution of the conducting agreement on the premise that he was not wellconversant with the English language. Thus, the High Court held that the

Operative decision and relief

agreement with the view taken by the first appellate court and the Impugned Order of the High Court. The Civil Appeal fails and is accordingly dismissed with costs quantified at Rs. 1,00,000/- payable to defendant no. 1. Pending applications, if any, shall stand disposed of.

Authorities and precedents appearing in the judgment

• Shakuntala Shukla v. State of Uttar Pradesh
• Dalui and another v. Biswanath Banerjee and another3 for the proposition that
• Chandavarka Sita Ratna Rao v. Ashalata S. Guaram 4 to
• He relies on the test in Varisalli Mohd. Ilias v. Abdul Sattar Gulam
• TN Electricity Board v. N. Raju Reddiar
• Tyagaraja Mudaliyar and another v. Vedathanni

This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on Characterisation of business-conducting agreement versus leave and licence. The operative result is classified as Disposed. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with Characterisation of business-conducting agreement versus leave and licence. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Use the judgment as a fact-specific precedent: match the statutory version, assessment period, procedural stage and evidentiary record before relying on the result.
• Check whether a later High Court/Supreme Court order has affirmed, reversed, distinguished or rendered the decision academic.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

Full judgment and source trail

Read / download the authenticated official judgment PDF

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