Shri Ravi Jagannath Mahanti v. Parshuram Tukaram Shinde & Ors

Another clause provided that the furniture other articles lying in the suit premises belonged to the owner- petitioner. Further, the running expenses of the business were to be borne by the conductor-respondent. v) Anusayabai Ghate v. Maktumbi Nadaf, 1999(2) B.C.R 374 :8: vi) Varden T.James V. Farhang Azhar,2005(2)ALL MR 1. In this case the Court further held that as the agreement was for conducting business, hence no protection was available to the Defendant under Rent Legislation. vii) Sagir A. Nanhe v. Maria P. Gonsalves, 2003(4) Bom C.R.635 viii) Kumble Achutrao Ramrao (deceased) V. Shantilal Pranjivandas Dalal (deceased) 1998 (5) Bom C.R. 686: In this case, the Court considered the jurisdiction of the Court prior to the 1973 amendment with regard to a conducting agreement. It was recognized that at the time of the filing of the suit in 1966, there was no protection to licensees under the Bombay Rents Act, 1947, as was subsequently created by the 1973 amendment.

Therefore, the suit was held rightly filed in the City Civil Court. ix) Southern Roadways Limited, Madurai V. S.M. Krishnan AIR 1990 SC 673: Herein, the Court held that it was unnecessary for the principal to file a suit for the recovery of possession against the agent, as the latter had no right to remain in possession of the premises after the termination of agency. x) Conrad Dias v Joseph Dias AIR 1995 Bom. 210: A person residing with his parents cannot claim any legal :9: character, much less the character of a licensee as defined in Section 52 of the Easements Act, 1882.

The abovementioned documents show H.N. Zalpuri as the owner. d) The Appellants had sought to pursue a two-pronged argument: the first being that the conducting agreements were a sham and not intended to be acted upon. Consequently, the premises were actually sub-let in favour of the Appellant. However, the appellant is not pursuing this argument further and now merely seeks to prove that he is a licensee of the premises and is thus protected under Section 15A of the Bombay Rents Act, 1947, by virtue of the 1973 amendment. The appellant can seek the protection of amendment since the conducting agreement was subsisting in his favour as on 1/2/1973. The Respondents however contend that despite the 1973 Amendment to the Bombay Rent Act, Mahanti entered into the Conducting Agreement in 1976 and cannot, therefore, claim the protection of the said amendment. Further, Mahanti has not claimed to be a protected licensee until the death of Zalpuri in 1977. e) The Appellants contend that having admitted the execution of the conducting agreement dated 1/10/1976, the burden of proving that what was given was only the premises, without any business, lies on Respondents. :11: f) In order to prove that it was merely the business which was given to Mahanti, the Respondents have relied upon a number of factors: (a) that both parties had a substantial knowledge of the hotel business,(b) that the parties were aware that their rights might be affected by future laws and further, that their 1976 agreement shows awareness of the amendment to the Bombay Rent Act in 1973.

This awareness is highlighted by the absence of the clauses in the 1961 and 1966 agreements, (c) the conduct of the parties before the agreement was entered into and that Zalpuri was relying upon the competency of the Appellant’s father to run his hotel. Also, Zalpuri’s will also refers to Mahanti as the conductor of his business; (d) that the nature of the Appellant’s agreement should be determined by reference to the original agreement with the Appellant’s father, under which the latter merely obtained a right to conduct the business. g) Several clauses in the conducting agreement show that the intention of the parties was only to transfer the running business and not the premises, and moreover, that the ownership of the business was still retained by the Respondent. Clauses in the agreement which enable the appellant to look after the day to day management of the business strengthen the proposition that he is a mere conductor, and not an owner of the business.

The primary purpose of entering into a conducting agreement is to relieve the owner of the daily affairs of management, while reserving to himself the right to guard his :12: right and interest in the business. These clauses include : (i) 4, 10, 11 and 22, which protect the owner’s rights in his business licenses (ii)clauses 4 and 14 to protect his goodwill in the business (iii) Clauses 9, 17 and 18 for the general protection of his rights in the business (iv) Clause 15 for the protection of his tenancy rights in his premises (v) Clause 23, which provides for the termination of the contract in case of breach. The owner also reserves the right to interfere with the management of the hotel if it is affected by the negligence of the conductor. h) The Respondents also refute the contention of the Appellants, who submit that since the burden of paying municipal and other taxes, license fees, bills, permitted increases in rent and taxes falls on the Appellant, the conducting agreement is in fact a license agreement.

The Respondents, however, contend that such expenses are payable by the conductor merely as a business expense. i) The reliance, by the Appellant, on receipts wherein the royalty amount under the conducting agreement is referred to as ‘lease money’ (Exhibit D-2 dated 15/7/1961) is unfounded. The Respondents submit that these receipts are to be interpreted in the context of the conducting agreement and cannot be given another connotation. Moreover, these receipts were not relied upon by the Appellant until 2001, which shows that the original deceased Defendant (Jagannath Mahanti, the Appellant’s father) understood the receipts only receipts :13: under conducting agreements for royalty and not for rent. The Appellant has not disclosed the receipt dated 29/3/1973 (Exhibit- D-8) which clearly refers to payment for ‘conducting the Hotel.’

Reply: The Respondent submits, however, that what the abovementioned clause confers is the business of the hotel and not the hotel premises. This is implied from the use of the words :14: conducting the same. It is apparent that only a business, and not its premises can be conducted. Contention 3: Clause (4) of the agreement shows that the proprietor shall not normally interfere in the business. Reply: Clause (4) merely safeguards the right of the owner to take charge of the business if the conductor is not diligent in performing the terms of the contract. This, and the following clauses strengthen the proposition that the agreement is a conducting agreement, not a license agreement. Contention 4: The right of the owner to inspect only during business hours and not to exercise such right unreasonably shows that permission was required. Reply: Rather than requiring the owner to obtain permission, this clause merely records and reserves the inherent right of inspection.

Contention 5: The payment by the conductor of municipal taxes and license fees, as also the permitted increase in rent, shows his interest in the premises as such. Reply: Since conducting agreements were generally for a term of five years, it became impossible to predict increase in rateable value and other factors and the burden of expenses was cast on the conductor only to ensure a stable income to the owner. Such a generic/standard clause of conducting agreements does not serve to prove an interest of the conductor in the premises. :15: Contention 6 : Since Clause 14 of the agreement provides that the conductor shall not permit the use of the hotel for any purpose other than the running of the hotel business himself, shows that the conductor had such control over the property that he could have changed its use. Reply: This clause reinforces the right of the owner over that of the conductor and cannot be interpreted to mean that the conductor could have changed its use.

Contention 7: Since Clause 16 provides that the conductor has to carry out necessary repairs in the premises, when required, at his own cost, with the knowledge of the owner, shows that the conductor had complete charge of the premises and could have carried out renovations without asking the owner. Reply: This clause must be read with Clauses 13 and 15. The former provides for inspection by the owner, while the latter does not allow the conductor to make permanent alterations without the owner’s permission. These clauses impose liability on the conductor for the regular wear and tear of assets in the running of the business, and do not permit him to make permanent alterations. The emphasis should be on the words of the clause: “necessary repairs, when they are required.” Contention 8: Since Clause 17 provides that the conductor is not to give the benefit of the agreement to a third party, it proves that the conductor had the right to give such benefit to a third party. :16: Reply: Rather, such a clause shows the control of the owner over the business as regards the person in charge of it.

It did not permit the conductor to give benefit to a third party. Contention 9: Since Clause 18 provides that a deposit of Rs. 20, 000 is to be returned to the conductor by the owner at the determination of the agreement, upon the conductor returning possession, it shows that exclusive possession of the hotel premises had been given to the conductor. Reply: The security deposit is only for the due performance of the terms and conditions of the contract by the conductor, and not for the premises, as contended. Contention 10: Since Clause 24 exempts the owner from liability for losses incurred due to damage to the premises by an act in the nature of force majeure , it proves that the conductor had rights in the premises and was in fact, required to bear the burden of all the losses suffered by the premises. Reply: The losses required to be borne by the conductor are merely in the nature of business losses, not losses to the premises.

The premises can only suffer damage, not loss. Such a clause should be interpreted either to protect the owner from the conductor claiming compensation for the non-conduct of business due to an unforeseen event or it should be interpreted to mean that the owner is not liable to make good damage to the premises, since the owner is himself only a tenant. :17: Contention 11: Since Clause 25 of agreement allows the owner and his family the right to use the hotel premises for toilet and other purposes, when desired, it shows that the conductor actually had exclusive possession of the premises and the owner was required to seek his permission to use the same. Reply: This clause shows rather the reservation of the right of the owner to use the hotel for himself and his family. The clause merely records his existing right. Contention 12: Since there exists four agreements for five years, the lengthy period of twenty years goes to show that exclusive possession of the premises was given.

Reply: The Respondents submit that the length of time is an irrelevant criterion. On the contrary, the practice in those days was to grant a license for a period of less than a year, while a genuine conducting agreement for running a business was always for a longer period of three-five years. Contention 14: The Income Tax orders show decreasing profits and therefore, what was given was the premises and not the business. Reply: On the contrary, the Respondent contends that a running business was given to the conductor, as supported by the surrender receipt dated 1/10/1961. The Income Tax orders do not prove any decrease in the profits of the business. :18: Contention 15: The police license shows Mahanti as the owner, proving that he was the owner of the business, as also licensee of the premises. The Trade license also shows Mahanti as the conductor; however, the name of the owner is not shown, therefore proving that the business belonged to Mahanti and that he was the licensee.

The Shops and Establishments Registration Certificate also bears the name of Zalpuri as owner and Mahanti as conductor. The name of Mahanti as conductor shows his interest in the business and premises. Reply: The very proof of Mahanti as conductor, falsifies his claim that he was the owner of the business. Moreover, the representation of his name as conductor only goes to prove that the conducting agreements have been acted upon as such. Since non-compliance with the provisions of the police license entails criminal liabilities, even the fact that the police license is exclusively in the name of the conductor does not make him a licensee of the premises. Additionally, the Respondents advanced the following arguments in furtherance of their contention that what was given was the mere running of the business and not the premises:- i) The owner reserved ultimate interest in the three broad things given for use: goodwill, licenses (intangible assets), furniture, articles (movable property) and premises (immoveable property). :19: ii) Clause 2 of the agreement refers to a ‘contract to run a hotel.’ This clearly refers only to a conducting agreement, since it is impossible to ‘run’ premises. iii) Further, in Clauses 6 (conductor to run the hotel on stipulated terms and conditions), 7(payment of royalty for conducting the hotel), 10 (conductor to renew licenses), 11 (owner to sign necessary applications for the renewal of licenses), the reference to ‘hotel’ clearly implies the running the business of the hotel and is not to be understood as referring to the hotel premises.

(Clause 4) b) The right of the proprietor to inspect during business hours is not to be exercised unreasonably. (Clause 13) c) The Conductor is required to pay municipal taxes, licence fees and permitted increase in rent. (Clause 8) d) The Conductor shall not use, and/or permit any other use of the Hotel premises or any part thereof(Clause 14) e) The Conductor is required to carry out all necessary repairs at his own cost with the ‘knowledge’ of the owner, not his permission. (Clause 16) f) The Conductor shall not give the benefit of the Agreement to any other party(Clause 17) g) The refund of Rs. 2000 is to be given to the Conductor on possession of the Hotel premises being handed over (Clause 18) h) The owner is not responsible for losses incurred during the period of conducting the Hotel. (Clause 24) iii. The following documentary evidence also shows that the transfer of premises was an integral part of the Agreement: :21: a) The abovementioned clauses in the four Conducting Agreements b) Receipts of 15 years all refer to the payment of ‘lease money’, which buttresses the contention of the Appellants that the premises were not merely incidental to the transfer of the business. c) IT orders, which indicate that the business was running losses prior to 1957 d) Police licences (1961 – 2004) exclusively in the name of the Conductor. e) f) g) Trade licence (BMC) in the name of the Conductor Increase in royalty amount Increase in deposits iv.

The abovementioned documents and circumstances amply prove that the possession of premises by the Appellant prior to 1st February 1973 was not merely incidental to running of the business, thereby giving the Appellant a right to claim protection under Section 15A inserted by the 1973 amendment. All the above factors clearly indicate that this Court does not have the jurisdiction to entertain the present suit, which should properly be tried by the Court of Small Causes Court by virtue of Section 41 of the Presidency Small Causes Court Act, 1882.