The Supreme Court has held that where the language of a registered deed is clear and unambiguous, courts cannot rely on the subsequent conduct of the parties to alter its legal character. It ruled that a lease validly created on the face of the document cannot later be treated as a licence merely on the basis of ex-post facto conduct.
A Bench comprising Justice Pankaj Mithal and Justice S.V.N. Bhatti delivered the judgment while setting aside a decision of the Orissa High Court, which had treated a registered lease deed as a licence by relying on statements made during cross-examination.
Emphasising judicial restraint, the Court observed:
“Courts must exercise far greater restraint when inferring the parties’ intention from circumstances arising after the creation of the terms. Such conduct may not align with either the literal expression or the purpose of the document.”
High Court Erred in Relying on Subsequent Conduct
The dispute arose from findings recorded by the Orissa High Court in a second appeal. The High Court concluded that a registered lease deed was, in substance, a licence. It relied on subsequent conduct, including evidence suggesting that the lessor retained effective control and possession of the property.
Disagreeing with this approach, the Supreme Court held that when the deed’s terms unequivocally establish a lease, courts cannot alter its character without examining the text and context of the instrument itself.
The Bench reiterated that the title or nomenclature of a document is not decisive. Instead, its contents and the surrounding context determine the nature of the rights created. The Court observed:
“There is no doubt that nomenclature alone is not decisive. It is the text and context that indicate the obligations undertaken by the parties to a written document.”
Background of the Dispute
The litigation concerned a property at Baripada, Odisha, originally owned by the late Anima Bose. On March 23, 1998, Bose executed a registered deed in favour of Vivekananda Kendra. The deed granted rights over the property for 99 years at an annual rent of ₹1,000.
The instrument repeatedly used expressions such as “demise,” “lease,” and “to hold for 99 years.” It also contemplated succession to heirs and permitted assignment.
In December 2003, Bose unilaterally cancelled the registered lease deed and issued a notice directing Vivekananda Kendra to vacate the premises. The Kendra challenged the cancellation and asserted its leasehold rights. After its possession was disturbed in 2005, it instituted a civil suit.
During the pendency of the suit, the property was sold to the respondents in January 2006.
Findings of Courts Below
The Trial Court and the First Appellate Court held that the instrument constituted a lease. Both courts ruled that the unilateral cancellation was unlawful. They also held that the subsequent purchasers were bound by the doctrine of lis pendens.
However, the Orissa High Court reversed these concurrent findings in second appeal. This prompted Vivekananda Kendra to approach the Supreme Court.
Supreme Court’s Analysis
In the judgment authored by Justice S.V.N. Bhatti, the Supreme Court clarified that subsequent conduct cannot determine the nature of a deed. Courts must primarily examine the language of the document and the context in which it was executed.
The Bench found that the deed vested exclusive possession in the appellant for a fixed term of 99 years. Such a grant, the Court held, is incompatible with the concept of a licence.
The Court relied on Associated Hotels of India Ltd. v. R.N. Kapoor (AIR 1959 SC 1262), which draws a clear distinction between a lease and a licence. Quoting the decision, the Court reiterated:
“If the document creates an interest in the property, it is a lease. If it merely permits use of the property while legal possession remains with the owner, it is a licence.”
Applying this test, the Bench concluded that the instrument created a leasehold interest.
The Court observed:
“The document’s nomenclature, text and context lead to only one conclusion—that Defendant No. 1 entered into a 99-year lease deed. The unilateral cancellation is illegal and interferes with the plaintiff’s right to remain in possession for the agreed term.”
Accordingly, the Supreme Court allowed the appeal and set aside the judgment of the Orissa High Court.
Case Details and Appearances
Cause Title: The General Secretary, Vivekananda Kendra v. Pradeep Kumar Agarwalla & Ors.
For the Petitioner:
Mr. Rutwik Panda, AOR; Ms. Nikhar Berry, Advocate; Ms. Anshu Malik, Advocate.
For the Respondents:
Mr. Ashok Panigrahi, Senior Advocate; Mr. R. Chandrachud, AOR;
Mr. Dhuli Venkata Krishna, Advocate; Mr. Surajit Bhaduri, Advocate;
Mr. Aryan Singh, Advocate; Mr. Piyush Negi, Advocate.
