IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 16TH DAY OF DECEMBER, 2019 BEFORE The Hon’ble Mr.Justice B.M.Shyam Prasad Regular Second Appeal No.301 OF 2019 Between:
Indian Oil Corporation Limited Indian Oil Bhavan, Abbakka Nagar Kottara, Kuloor Ferry Road Mangalore-515 006 Represented by its Assistant Manager Dinesh Patel ... Appellant (By Sri. Dhananjay Joshi, Advocate) And:
1. Mr. John Lobo Son of Antony Lobo Aged about 66 years 2. Mr. Shelton Lobo Son of John A Lobo Aged about 33 years Both are residing at Irish Residency Marakada Village, Kunjathbail Post Mangalore-575 015 3. Mr. John Mendonca Son of Patrick Mondonca Aged about 48 years Lobo Villa, Marakada Village Kunjathbail Mangalore-575 015 ... Respondents (By Sri. Sanath Kumar Shetty .K, Advocate for C/R1 and R2; Notice served on R3) This Regular Second Appeal is filed under Section 100 of CPC, 1908 against the judgment and decree dated 27.11.2018 passed in R.A.No.105/2017 on the file of the Principal Senior Civil Judge and CJM., Mangaluru, D.K., dismissing the appeal and confirming the judgment and decree dated 10.04.2017 passed in O.S.No.783/2011 on the file of the III Additional Civil Judge and JMFC., Mangaluru, D.K.
This Regular Second Appeal coming on for admission this day, the Court delivered the following:
Judgment This appeal is filed by the defendant No.2 in O.S.No.783/2011 on the file of the III Additional Civil Judge and JMFC, Mangaluru, D.K. (for short ‘the Civil Court’) calling in question the judgment and decree dated 10.04.2017 therein and the judgment and decree dated 27.11.2018 in R.A.No.105/2017 on the file of the Principal Senior Civil Judge and CJM, Mangaluru, D.K. (for short ‘the appellate Court’).
2. The respondent Nos. 1 and 2 have filed the suit in O.S.No.783/2011 for delivery of vacant possession of the property bearing Sy.No.64/3B1(p), measuring 33.75 cents of Marakada Village, Mangalore Taluk (for easy reference called, ‘the subject property’). The appellant is in possession of the subject property and runs a petroleum retail outlet. The civil Court has decreed the suit directing the appellant and the respondent No.3 to deliver vacant possession of the subject property. The civil Court has also declared that the appellant and the respondent No.3 are liable to pay mesne profits at the rate of Rs.10,000/- per month commencing from November, 2011 till the date the vacant possession of the subject property is delivered. The appellant’s first appeal in R.A.No.105/2017 is dismissed confirming the civil Court’s judgment.
3. The facts leading to the suit in O.S.No.783/2011 can be concised thus in all its material details:
a) The respondent Nos.1 and 2 being the owners of the subject property have granted lease thereof to the respondent No.3 under the registered Lease Deed dated 18.10.2004 (‘the Lease Deed’), and as assured in writing, the respondent No.3 shall pay the agreed monthly rent of Rs.10,000/- on or before the fifteenth day of each calendar month. The respondent No.3 is authorized to grant sub lease of the subject property in favour of M/s. IBP Company Ltd., for the purpose of operating a petroleum retail outlet.
b) The respondent No.3 has executed the Deed of Sub-Lease dated 12.11.2004 (‘the Deed of Sublease’) in favour of M/s. IBP Company Limited, who commenced operating a petroleum retail outlet. It is undisputed that M/s. IBP Company Limited has merged with the appellant, and the appellant is entitled to all the rights under the Deed of Sub-Lease.
c) The respondent Nos.1 and 2 have filed the suit in O.S.No.783/2011 for possession of the subject property and for damages asserting inter alia that the respondent No.2 intends setting up his own business in the subject property. The respondent No.3 is informed of this intendment, and he also agreed to handover vacant possession of the subject property. But the respondent No. 3 is procrastinating on his assurance to deliver vacant possession of the subject property.
d) The respondent No. 3 is in rental arrears of Rs.8,05,000/- for the months commencing from January, 2006. The respondent has paid only a sum of Rs.1,50,000/- towards the rental arrears. Therefore, the respondent No. 3 is in breach of the assurance to pay rent without default. The respondent Nos. 1 and 2, who have reserved the right to re-enter possession of the subject property in the event of the breach of the assurance to pay rent without default, are therefore entitled to forfeit the lease and take possession of the Subject Property.
e) The respondent Nos.1 and 2 have got the legal notice dated 26.07.2011 issued to the respondent No.3 putting the respondent No.3 on notice that the lease of the subject property stands forfeited with effect from 31.10.2011 and that they require the subject property to commence their own business. The respondent No. 3 will have to quit and surrender vacant possession of the subject property on or before 31.10.2011; otherwise, the respondent No.3 would be liable to pay damages at the rate of Rs.5,000/- per month.
f) The appellant, on receiving intimation that legal notice dated 26.07.2011 is served on the respondent No.3, has caused Notice dated 26.10.2011. The appellant in this response has asserted that the respondent No.3, being duly authorized to enter into a sub - lease arrangement, has executed the Deed of Sub-Lease inducting the appellant’s predecessor-in-interest, M/s. IBP Company Limited, in possession of the subject property for a period of twenty years, and after M/s. IBP Company Limited is merged with the appellant. Consequentially, the appellant has taken over the assets of M/s. IBP Company Limited. As such, the appellant is in possession and enjoyment of the subject property as a sub lessee under the Deed of Sub lease. A sum in excess of Rs.70,00,000/- is invested to put up a petroleum retail outlet. The appellant has not defaulted in making rents in terms of the Deed of Sub-Lease and that the legal notice dated 26.07.2011 is caused because of inter se collusion to defeat the appellant’s rights duly secured in law.
g) The appellant has followed up this Notice dated 26.10.2011 with a Show Cause notice dated 08.03.2012 for termination of the dealership agreement dated 29.11.2005 with M/s. Lobo’s Fuels and Services, a proprietary concern of the respondent No.3. The appellant has initiated proceedings under the Karnataka Public Premises (Eviction of unauthorized Occupants) Act, 1974 for securing exclusive possession of the petroleum retail outlet consequent to the termination of the dealership agreement. In the meanwhile, the respondent Nos.1 and 2 have filed the present suit in O.S.No.783/2011 for possession as stated above.
4. The respective pleadings by the respondent Nos.1 and 2 and the appellant in the suit in O.S.No.783/2011 are in the lines as aforesaid. The respondent No.3 has remained ex-parte and has not contested the suit. The civil Court has framed Issues which require the respondent Nos.1 and 2 to establish that they are entitled for possession of the subject property and for mesne profits at the rate of Rs.5,000/- per day, and that a direction could be issued to the appellant and the respondent No. 3 to quit and surrender vacant possession of the subject property.
5. The respondent No.1 has examined himself as PW.1 and marked Exs.P.1 to P.10, which include the registered Lease Deed dated 18.10.2004, the legal notice dated 26.07.2011 and the correspondence between the appellant and the respondent No.3 on 27.06.2012 and 25.07.2011. The appellant has examined one of its officers and authorized personnel as DW.1. The appellant inter alia has marked the registered Deed of Sub- Lease and a certified copy of the judgment in M.A.No.18/2014 on the file of the II Additional District and Sessions Judge, Mangalore. The order dated 25.10.2014 in M.A.No.18/2014 is an order in appeal under Section 9 of the Karnataka Public Premises (Eviction of unauthorized Occupants) Act, 1974 confirming the appellant’s right to take exclusive possession of the subject property with the petroleum retail outlet as declared by the competent authority under the aforesaid enactment.
6. The civil Court has concluded that the respondent Nos.1 and 2 have rightly issued the legal notice dated 26.07.2011 forfeiting the lease of the subject property because of the breach of the terms of the Lease Deed by the respondent No. 3. Despite the legal notice dated 26.07.2011, the respondent No.3 has not paid the rental arrears. As such, the forfeiture of the lease is justified and the respondent Nos.1 and 2 are entitled for vacant possession of the subject property. Insofar as the appellant, the civil Court has concluded that the appellant cannot contend that the respondent Nos.1 and 2 should issue a separate and independent notice to the appellant, and if the forfeiture of the lease in favour of the lessee (respondent No.3) is valid, it would suffice even as against the appellant. The civil Court has concluded that the appellant consequentially, will have to yield possession of the subject property to the respondent Nos. 1 and 2. As regards the appellant’s defense that the respondent No. 1 and 2 have filed the suit in O.S.No.783/2011 in collusion with the respondent No. 3, and the right that could flow to the appellant if indeed such collusion is established, the civil Court has concluded that the appellant has not been able to establish collusion inter se respondents.
7. The appellate Court, which is required to reappraise the evidence and decide on the controversy not only inter se the respondents, but also the appellant and the respondent Nos.1 and 2 formulated the following points for its determination:
“1) Whether the appellant/2nd defendant proves that the finding recorded by the learned Trial Court is contrary to law and facts and it needs interference.
2) What Order or Decree.”
8. The appellate Court in answering these points for determination, has concluded that because the appellant is admittedly in possession of the subject property only as a sub-lessee and that the appellant is unable to establish any privity of contract with the respondent Nos. 1 and 2. The appellate Court’s confirmation of the civil Court’s conclusion and the right of the respondent No. 1 and 2 to recover possession of the subject property even from the appellant is premised in the reasoning that because the appellant is a sub-lessee, the appellant cannot assert any independent right to continue in possession of the subject property.
9. After hearing the learned counsel for the appellant and the respondent No. 1 and 2, the following questions were formulated as substantial questions of law for consideration in this appeal:
“a) Whether the appellant is able to establish collusion between the respondent Nos.1 and 2 and the respondent No. 3 to its detriment and whether the courts below have erred in not giving a finding on “collusion” as asserted by the appellant.
b) Whether the appellant is justified in setting up the plea of defence under Section 115 of the Transfer of Property Act, 1882 for the first time in this appeal, and if justified, whether the appellant is entitled to succeed on such defence.
c) Whether the levy of mense profits by the trial Court, and the confirmation thereof by the appellate Court, would be justified in the facts and circumstances of the case.”
The learned counsel for the appellant and the respondent Nos.1 and 2 are heard on the aforesaid questions with their consent for the final disposal of the appeal.
10. The learned counsel for the appellant argued in support of the appeal essentially on the following twin-fold submissions. The civil Court has not appreciated the evidence on record as required in law in arriving at its conclusion that the respondent Nos.1 and 2 have established that there is default in tendering the rent and the appellant has failed to establish collusion. The civil Court has accepted the assertion as regards breach of the agreed term by the respondent No. 3 without examining whether the respondents have indeed discharged the burden of proving such assertion. The learned counsel for the appellant relies upon the decision of the Hon’ble Supreme Court in C.N. Ramappa Gowda Vs. C.C.Chandregowda (Dead) by LRs and Another1 in support of his canvass that the civil Court has adopted an erroneous approach in accepting the assertion on breach of the terms of lease as proof of such assertion without examining the evidence on record to decide whether there was necessary proof in this regard. Insofar as the appellate Court, the question of collusion is not at all examined. Therefore, the learned counsel for the appellant submits that neither of the judgments are permissible in law.
11. The learned counsel for the appellant submits that the evidence on record establishes collusion inter se respondents, and once collusion inter se respondents is established, the appellant is entitled to the exemption provided in the second para of Section 115 of the Transfer of Property Act, 1882 (for short ‘T.P.Act’) insofar as 1 (2012) 5 SCC 265 forfeiture of lease annulling even sub-lease. Neither the civil Court nor the appellate Court has considered the question of exemption from the annulment of sublease as contemplated in the second para of Section 115 of T.P.Act.
12. The learned counsel for the respondent Nos.1 and 2 argued in support of the impugned judgment and decree by the Courts below submitting that the Courts below are justified in concluding that there would be no privity of contract between the lessors and sub-lessee (the respondent No. 1 and 2 and the appellant), and if there is a valid termination of lease in favour of the lessee, the sub- lessee (the appellant) will have to yield possession. In this regard the learned counsel relied upon the decision of the Hon’ble Supreme Court in Raghuram Rao and Others Vs. Eric.P Mathias and Others2 and the earlier decision of the Hon’ble Supreme Court in Burmah Shell Oil Distributing 2 2002 (2) SCC 624 (Now known as Bharath Petroleum Ltd) Vs. Khaja Midhat Noor and Others3.
13. The learned counsel for the respondent Nos. 1 and 2 contends that the appellant cannot succeed on the plea of collusion because the plea as regards collusion is not sufficiently detailed as required in law. In support of this proposition the learned counsel for the respondent Nos. 1 and 2 relies upon the decision of the Hon’ble Supreme Court in Varanasaya Samskrutha Vishwavidyalaya vs. Raj Kishore4, and also the decision of the Hon’ble Supreme Court in Roopchand Gupta vs. Private Limited and another5. In fact, the learned counsel for the respondent Nos.1 and 2, placing reliance on the decision of the Hon’ble Supreme Court in Roopchand Gupta (supra) submits that mere initiation of suit for ejectment/possession preceded by legal notice under 3 AIR 1988 SC 1470 4 1977 SC 615 5 Section 106 of the T.P.Act cannot be construed as collusion especially if the lessee did not have a valid defence, and a sub lessee must establish collusion independently.
14. Further, the learned counsel for the respondent Nos. 1 and 2 submits that the witness, PW 1 - the respondent No. 1, in response to a query in cross- examination has specifically stated that the respondent No.3 has paid rents by cheque and the same is reflected in the pass book. However, there is no suggestion to the witness that this evidence is false. This, in the light of the evidence on behalf of the appellant, will have to be construed as an admission of breach. Furthermore, the learned counsel for the respondent Nos. 1 and 2 submits that the plea of exemption from forfeiture is being canvassed for the first time in the second appeal and that would be entirely impermissible. As such, according to the learned counsel for the respondent Nos. 1 and 2, none of the questions arise for consideration in this appeal.
15. It is settled law that the first appellate Court will have to formulate appropriate points for determination and re-appreciate the entire evidence on record in deciding such points for determination. The Hon’ble Supreme Court in Vinod Kumar vs. Gangadhar6 has reiterated the earlier exposition in B.V.Nagesh v. H.V. Sreenivasa Murthy7 that the first appeal is a valuable right of the parties, and unless restricted by law, the whole case is therein open for rehearing both on questions of fact and law. The judgment of the appellate court must, therefore, reflect its conscious application of mind, and the appellate court must record findings supported by reasons on all the issues arising along with the contentions put forth, and pressed by the parties, for the decision.
16. The adherence to this salutary principle could be ensured if the appellate Court formulate appropriate 6 (2015) 1 SCC 391 7 (2010) 13 SCC 530 points for its determination based on the grounds pleaded and argued by the parties, and such points for determination are decided on re-appreciation of evidence. However, it must also be immediately stated that the first appellate Court’s failure to formulate appropriate points for determination as contemplated under the provisions of Order XLI Rule 31 of the Code of Civil Procedure, 1908 would not in itself be fatal if the higher appellate Court is able to gather from the judgment of the first appellate Court that the real controversy is identified and decided based on re-appreciation of the evidence on record. A useful reference in this regard could be made to the decision of the Hon’ble Supreme Court in H Siddiqui v. a Ramalingam8.
17. The appellate Court has formulated a very generic point for its determination viz., whether the appellant proves that the finding recorded by the civil Court 8 (2011) 4 SCC 240 is contrary to law and facts and any interference is required. In answering this generic question, which does not indicate the real controversy between the appellant and the respondent Nos. 1 and 2, the appellate Court has concluded that because there would be no privity of contract between the respondent Nos. 1 and 2, the lessors, and the appellant, the sub-lessee, and termination of lease by the lessors with the issuance of the legal notice to the lessee would entail a decree for delivery of possession even as against the appellant.
18. It is obvious from canvass by the learned counsel for the parties that they do not join debate on the proposition that there cannot be privity of contract between a lessor and a sub-lessee, and because there will be no privity of contract between the lesser and sub-lessee, a separate legal notice need not be issued to the sub-lessee terminating, or forfeiting, the lease. However, the controversy between the appellant and respondent Nos.1 and 2 is because the appellant contends that there is collusion inter se the respondents in setting up forfeiture of the lease and the initiation of the present suit while the respondent Nos. 1 and 2 refute such submissions.
19. The appellant relies upon certain circumstances to bolster the defense of collusion. The circumstances relied upon by the appellant are alleged failure to establish that the respondent No. 3 has defaulted in paying rents for the months from January 2006, that these respondents have made a demand for payment of rental arrears, that the respondent No. 3 made a partial payment of Rs.1,50,000/-, and that the respondent Nos.1 and 2 mostly reside abroad and they now propose to settle down and establish new business. It is contended that if these circumstances are considered, the appellant’s defense of collusion inter se respondents would be validated.
20. The canvass on behalf of the respondent Nos. 1 and 2 is that the witness, PW.1 is asked in his cross- examination about the mode of payment of rent by the respondent No.3. The witness has stated that the respondent No. 3 has made payment towards rent by cheques and that these cheques are credited to the savings account, and the necessary entries are found in the passbook issued by such Bank. But there is no suggestion to the witness that the assertions in this regard are false. The failure to make suggestions in this regard is significant and will have to be seen in the light of the evidence by the appellant’s own witness who had stated that the appellant has no information about any default by the respondent No.3 in tendering the rents. It is contended that these circumstances demonstrate that the appellant has admitted breach by the respondent No. 3 of the assurance to pay rent without default and therefore, the appellant cannot rely upon the aforesaid circumstances to contend that collusion is established.
21. The consideration of the circumstances relied upon by the appellant and the respondent Nos. 1 and 2 undoubtedly will be in the realm of re-appreciation of evidence. If, after appreciation of the evidence on record, it can be reasonably inferred that there is collusion inter se respondents in forfeiture of lease and initiation of the suit based on such forfeiture, the appellant, subject to rules of pleadings as regards the necessary factual matrix and application of law in such factual matrix, would be entitled to demonstrate that the alleged forfeiture would not annul the sublease in favour of the appellant. However, as already observed, the appellate Court has not even addressed to itself the question of collusion much less the circumstances relied upon by the contesting parties.
22. This Court is therefore of the considered view that for a proper adjudication of the first appeal, the appellate Court should have considered the questions viz., whether the appellant is able to establish collusion, and if such collusion is established, whether the appellant is entitled to contend that the forfeiture, a result of such collusion, cannot annul sub-lease in its favour. These are the questions that are canvassed in this appeal, and they reflect the real controversy between the appellant and the respondent Nos. 1 and 2. As the real controversy is not decided by the appellate Court as it should have in law, its judgment and decree cannot be sustained in law, and it would be just and reasonable to set aside the judgment and decree of the appellate Court and remit the matter to the appellate court to decide on the real controversy between the appellant and the respondent Nos. 1 and 2 as aforesaid without this Court entering upon such adjudication in the second appeal. Further, given the nature of the dispute, it would be appropriate to call upon the appellate Court to dispose of the appeal expeditiously, and if possible, within three months from the date of first appearance of the appellant and the respondent No. 1 and 2. Therefore, the following:
ORDER The appeal is allowed in part. The judgment and decree of the appellate Court in R.A.No.105/2017 dated 27.11.2018 on the file of the Prl.Senior Civil Judge and CJM, Mangaluru, DK is set aside and the matter is remanded to the Court of the Prl. Senior Civil Judge and CJM, Mangaluru, DK for rehearing in the light of the observations made hereinabove. The appeal shall be disposed of as expeditiously as possible but within an outer limit of three months from the date of the first hearing on 13.1.2020. The appellant and the respondent Nos. 1 and 2 shall appear before the appellate Court on 13.1.2020 without further notice.
NV/RB Sd/- Judge