RAMNATH AGRAWAL & ORS. versus FOOD CORPORATION OF INDIA & ORS.

Citation: [2020] 4 S.C.R. 552 · Decided: 13-05-2020 · Supreme Court of India · Bench: N.V. RAMANA · Disposal: Dismissed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2020] 4 S.C.R.
RAMNATH AGRAWAL & ORS.
v.
FOOD CORPORATION OF INDIA & ORS.
(Civil Appeal No. 1305 of 2010)
MAY 13, 2020
[N. V. RAMANA, SANJIV KHANNA
AND KRISHNA MURARI, JJ.]
Transfer of Property Act, 1872 – s.105 – Agreement when not
a lease – In 1976, Food Corporation of India (‘FCI’) invited offers
for construction of godowns on the lands of interested parties and
subsequently taking over possession of the godowns on lease –
Appellants’ offer accepted – Agreement dated 16.12.1976 entered
between the parties – Appellants had to construct six godowns, to
be taken over by FCI on rent – Appellants informed FCI that the
construction of godowns was complete and the possession be taken
over – Competent officer of FCI on inspection recommended taking
over the possession of only four out of six godowns and pointed
out defects in respect of remaining two – Appellants sought damages
from FCI on account of non-realization of rent towards the remaining
two godowns – Demand not complied with – Appellants filed suit
for damages – Decreed – High Court allowed appeal filed by FCI –
Held: For an agreement to be considered as a lease and not as an
agreement to lease it is important that there must be an actual demise
of property on the date of the agreement – Agreement dated
16.12.1976 was not a lease but simply an agreement giving rise to
contractual obligations – Terms and conditions clearly demonstrate
that the execution of the lease deed was contingent upon the
construction of godowns being completed and the same being
approved by issuance of completion certificate by the Competent
Authority of FCI – Appellants did not dispute the facts that the
officers of FCI refused to take over the possession of the two
godowns in view of the defects pointed out by them and the said
defects were never rectified – As per Clause 6 of the agreement, in
case of defects, the findings of the officers of FCI were to be final
and there was no obligation to take such structure on lease – High
Court rightly discarded the evidence of PW-1, 2 & 5 (who issued
[2020] 4 S.C.R. 552
552
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certificates in respect of completion and fitness of the godowns) as
neither the inspection was carried out by an independent agency in
presence of the representatives of the appellants and respondents
nor the same was in accordance with the specifications laid down
by FCI in the agreement – Therefore, no rent was payable in respect
of the two disputed godowns as they were not completed as per
FCI’s specifications and the possession thereof were not taken over
by FCI at the time of filing of the suit by the appellants – No reason
to take a view different from the one taken by the High Court.
Dismissing the appeal, the Court
HELD: 1.1 For an agreement to be considered as a lease
and not as an agreement to lease it is important that there must
be an actual demise of property on the date of the agreement.
The agreement dated 16.12.1976 was not a lease but simply an
agreement giving rise to contractual obligations. The terms and
conditions clearly demonstrate that the execution of the lease
deed was contingent upon the construction of godowns being
completed and the same being approved by issuance of
completion certificate by the Competent Authority of FCI. [Paras
24, 25][562-F-H]
1.2 Clause 6 of the agreement dated 16.12.1976 made it
imperative for the appellants to obtain a completion certificate
from the competent officers of FCI, prior to execution of lease
agreement and handing over the possession of the godowns. In
case of defects and faulty workmanships, the findings of the
officials of FCI were final. The appellants contended that letter
dated 02.12.1977 issued by FCI was the completion certificate
and no subsequent certificate was to be issued. However,
inspection was carried out on 05.01.1978, whereafter FCI vide
letter dated 14.02.1978 had recommended taking over the
possession of only four out of six godowns. There arises no
question of waiver, acquiescence or estoppel, as all along FCI
has contended that two godowns were defective and the
possession of the same can not be taken over till the rectification
of the defects. The reliance placed on the letter dated 15.05.1978,
wherein FCI is said to have acknowledged taking over
possession is totally misplaced. No reliance can be placed on the
said letter which was manufactured in connivance with the
RAMNATH AGRAWAL & ORS. v. FOOD CORPORATION OF
INDIA & ORS.
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