RAHMAN COTTON FACTORY Versus NICHIMEN CO, LTD

1. MUHAMMAD GuL, J.- This appeal by special leave is from the judgment of a Division Bench of the former High Court of West Pakistan in R. F. A. No. 84 of 1962 maintaining the decree of the trial Court for the recovery of Re. 49,666 as damages for the wrongful occupation and use of a ginning factory situate in Mandi Bahauddin, District Gujrat.

2. The respondent company by an unregistered agreement dated 16-2-1954 leased the ginning factory to the appellant-Frm for a period of three year3 beginning from the cotton season 1953-54 and ending the 30th June 1956 on an annual rental of Re. 20,000. Under the terms of the agreement, the appellant was required to deliver possession of the factory to the respondent on the expiry of the three years term.

3. Before the expiry of the lease the appellant, it appears, twice requested the respondent-Company to extend the period of lease beyond the 30th June 1956. Each time the latter refused the appellant's request and asked for the return of the possession of the factory on the expiry of the stipulated period. Notwithstanding that the appellant continued in possession of the factory even after the 30th June 1956. Ultimately on 27-7-1957, the respondent brought a suit for the possession of the factory and for damages amounting to Re. 45,000 for its wrongful use and occupation by the appellant from the expiry of the lease until the institution of the suit and for further damages until the delivery of the possession to the owner.

4. It is common ground between the parties that after the institution of the suit, the respondent was able to recover possession of the factory. Therefore, the prayer with regard to the possession of the factory became infructuous and the suit proceeded only with regard to the recovery of damages.

5. The learned Administrative Judge who tried the suit, by judgment dated 6-7-1962 accepted the respondent's claim for damages and awarded a decree for Re. 49,666 which, as pointed out in the beginning, was maintained by the High Court in the impugned judgment. The damages were determined at twice the rate of annual rent reserved under the agreement.

6. Leave was granted to consider whether in view of the provisions of the West Pakistan Urban Rent Restriction Act 1957 (Act, IX of 1957)-an Act enacted by the President while the Proclamation under Article 193 of the 1956 Constitution was in force-the respondent can in law, claim damages at twice rate of the reserved rent in the circumstances of the case ?

7. Learned counsel for the appellant submitted at the outset that the agreement of lease dated 16-2-1954 per se created lease in favour of the appellant for a period exceeding one year and therefore was compulsorily registrable under the Registration Act, 1908; and not being registered, it was inadmissible in evidence. Altcrn4tively it was argued that if at all, the lease in favour of the appellant took effect as lease from month to month terminable on 15 days prior notice in writing in terms of section 106 of the Transfer of Property Act, 1882. No such notice having issued to the appellant, he be name a tenant "holding over" within the meaning of section 116 ibid, On these premises it was sought to be argued that the appellant was liable to pay rent for the period after the expiry of the period of lease at the agreed rate and not on twice the agreed rate as allowed by the trial Court and the High Court.

8. The agreement of lease is not on the record and therefore it is uncertain whether it immediately created a demise in favour of the appellant or was a mere agreement not creating any interest in the premises demised. Even otherwise the argument is without merit. An instrument requiring compulsory registration under section 17 of the Registration Act but not so registered is not a dead letter. Vide clause (a) of section 49 ibid, it does not "operate to create, declare, assign . . . . . any right, title or interest . . . . . in any immovable property". It is well settled that such instrument can be received in evidence for a collateral purpose.

9. That apart it is not denied that in rte instant case the agreed term of the lease expired on 30-6-1956 but that the appellant continued in occupation of the factory after the respondent twice turned down the former's request for the extension of period of lease.

10. As to the submission that the appellant's position after the 30th June 1956 continued to be that of a tenant "holding over" within the meaning of section 116 of the Transfer of Property Act, there is clear distinction between a tenant continuing in possession after the determination of the lease with the consent of the lessor whether express or tacit and a tenant continuing in possession without the consent of his lessor. In the latter case the lessee's position is that of a "tenant by sufferance" in the language of the English Law. Under section 116 of the Transfer of Property Act, the essential condition for treating a lessee, as tenant "holding over" is that the lessor accepts rent or otherwise assents to the lessee's continuing in a possession. But there i3 not a speck of evidence to that effect : rather all indications on the record point to the opposite. It is not denied that twice the respondent peremptorily refused the appellant's request for extension of lease beyond the 30th June 1956, because the respondent had decided to re-enter the business of ginning cotton in Pakistan, itself. Therefore, the Courts rightly concluded that the appellant's possession of the factory after the 30th June 1956 was contumacious and therefore wrongful. Hence the liability to pay damages.

11. Learned counsel for the appellant next argued that because of the operation of Rent Restriction Laws, the appellant is not liable to pay any amount to the respondent in excess of the agreed rent even for the period after the expiry of the lease. At the time the suit was instituted the President's Act IX of 1957, held the field. The Act, according to its preamble was enacted, "to restrict the increase of rent of certain premises within the limits of urban areas and eviction of tenants therefrom". Clause (j) of section 2 of the Act defines "urban area" as "any area administered by a Municipal Corporation, a Municipality, a Municipal Committee, a Town Committee. or a Notified Area Committee". The ginning factory leased to the appellant is stated to be situate in Manoi Bubauddin. But there is nothing. whatever, to show that the factory is situate within the territorial limits if the local authority in Mandi Bahauddin. Moreover, the Act applies to "residential building, non-residential building" and "rental land" as defined in section of the Act and situate within an Urban area. It is common ground that the lease in the instant case was of a running ginning factory equipped with machinery for processing and ginning cotton and not merely of a "non-residential building". Therefore, it did not fall under any of the above three categories of the properties to which the Act applied. The statement in the preamble of the Act, that it applied "to certain premises" within the limits of urban area is also not without significance. Reading these qualifying words with definitions of the above-stated three specified kinds of property defined in section 2, leaves no manner of doubt that the Ace did not apply generally to all manner of properties in an urban area: else it was otiose to particularize the properties to which the Act applied. A fortiori, the Act excluded from its operation what were property known as a factory equipped with machinery requisite for a particular manufacturing process. In essence in all such cases, the lease is for the use of the machinery which is permanently fixed in certain defined premises and not of the premises simpliciter.

12. Finally learned counsel prayed for relief ex debito justitiae. He submitted that damages at twice the rate of agreed rent was penal and therefore, should be disallowed. The argument ignores the fact that the decree was passed as far back as 6-7-1962 and until today stands wholly unsatisfied. Since then the value of Pakistan rupee has declined sharply. Therefore, in the event of the recovery of the decretal amount, the respondent decree-holder will in effect get only a small fraction of what was the purchasing value of the decretal amount at the time when the decree was originally made in his favour. Judged from this point of view, which it is not possible to suggest, is not relevant, the equities of the case lean heavily against the appellant.

13. For the foregoing reasons there is no merit in this appeal, which is hereby dismissed with costs.

14. S. A. H. Appeal dismissed.