The Supreme Court of India has set aside a judgment of the High Court of Orissa, ruling that the unilateral cancellation of a 99-year registered lease deed is illegal. The Division Bench, comprising Justice Pankaj Mithal and Justice S.V.N. Bhatti, clarified that an agreement constitutes a lease, rather than a mere licence, when the plain and literal meaning of the document establishes the transfer of an interest in the property, even if the lessor retains possession of a portion of the premises not included in the demised property.
The Court restored the concurrent decrees of the Trial Court and the First Appellate Court, ruling in favour of the plaintiff, Vivekananda Kendra.
Background of the Case
The dispute centers around a property situated in Baripada town, originally owned by Late Anima Bose. On March 23, 1998, Bose executed a registered 99-year “lease deed” (Exhibit 1) in favour of Vivekananda Kendra. The deed leased the property at an annual rent of Rs. 1,000 to establish a branch centre and carry out the organization’s objectives, while Bose retained possession of the first floor.
On December 3, 2003, Bose unilaterally executed a Deed of Cancellation of the lease and subsequently issued a notice seeking vacant possession. The Kendra contested this, asserting its right to continue for 99 years. After Bose executed a Power of Attorney in favour of Sujit Kumar Mohanty in May 2005, the Kendra alleged that its possession was forcibly disturbed.
Subsequently, in January 2006, the property was sold to Pradeep Kumar Agarwalla and Ratandeep Agarwalla (Defendant Nos. 3 and 4) via a registered sale deed. The Vivekananda Kendra filed a civil suit seeking a declaration of its leasehold rights, recovery of possession, and a permanent injunction.
The Trial Court decreed the suit in favour of the Kendra in 2018, declaring the unilateral cancellation illegal and void. This decision was confirmed by the First Appellate Court in 2021. However, the High Court of Orissa reversed these findings, holding that the document was merely a licence to administer a centre, not a lease, and dismissed the suit.
Arguments of the Parties
Appellant (Vivekananda Kendra): Represented by Counsel Mr. Rutwik Panda, the appellant argued that the plain and literal construction of the deed clearly indicated a lease simpliciter. The appellant contended that interpreting the document as a licence was contrary to the basic canons of construction and that the unilateral cancellation of a registered lease deed, which had already accrued rights to the lessee, was illegal.
Respondents (Purchasers): Represented by Senior Counsel Mr. Ashok Panigrahi, the respondents argued that the nomenclature of the document is not the deciding factor. They contended that since Bose retained possession of the first floor, she had merely permitted the plaintiff to establish a Kendra without parting with full possession and control of the premises, making the transaction a licence.
Court’s Analysis
The Supreme Court examined the legal distinction between a lease and a licence, citing landmark judgments including Associated Hotels of India Ltd. v. R.N. Kapoor and Mrs M.N Clubwala and another v. Fida Hussain Saheb and others. The Court noted that if a document creates an interest in the property, it is a lease; but if it merely permits another to make use of the property while legal possession remains with the owner, it is a licence.
Relying on Annaya Kocha Shetty v. Laxmi Narayan Satose, the Court emphasized the “literal rule of construction,” stating that the intention of the parties must first be derived from the plain and ordinary meaning of the text itself.
Analyzing the clauses of the deed, the Court highlighted phrases such as “The Lessor hereby demises to the Lessee,” the 99-year duration, and the stipulated “yearly rent of Rs. 1,000/-.” The Court observed:
“…interpreting intention through purposive construction or through ex-post facto circumstances is unnecessary when the intention is understood from the plain and ordinary meaning of the text. There is no doubt that the nomenclature alone of the document is not the decisive factor of the nature of a document; it is the text and the context that point to the obligations undertaken by the parties to a written document.”
Addressing the High Court’s reasoning that the lessor’s continued occupation of the first floor implied a licence, the Supreme Court firmly rejected this view, holding:
“…exclusive possession is assessed vis-à-vis the demised portion, and not the portion excluded from the scope of the Ext. 1-agreement.”
Decision
Concluding that the document was unequivocally a 99-year lease deed, the Supreme Court ruled that its unilateral cancellation was illegal. The Court stated:
“Thus, the unilateral cancellation, in the facts and circumstances of this case, is illegal, and it should be understood as having interfered with the right of the Plaintiff to remain in possession of the Plaint Schedule Property for 99 years.”
The Supreme Court allowed the Civil Appeal, set aside the High Court’s judgment, and restored the reliefs granted by the Trial and First Appellate Courts. The Court further clarified that the purchasers (Defendant Nos. 3 and 4) are allowed to enjoy the rights that were preserved and protected in favour of the original lessor. No order as to costs was passed.
- Case Title: The General Secretary, Vivekananda Kendra vs. Pradeep Kumar Agarwalla and Others
- Case Number: Civil Appeal No. of 2026 (@ Special Leave Petition (Civil) No. 9558 of 2023)
