Judgement

Appeal (No. 24 of 1937) from a decree of the High Court (February 7, 1936) which reversed a decree of the Subordinate Judge of Arrah (March 7, 1935).

The main question for determination in this appeal involved the interpretation of a clause in each of two leases, dated April 1, 1928, granted by Government to the respondent company. By one of the leases the Government leased to the company for twenty years the right to quarry limestone and manufacture lime in an area known as Lower Murli Hill. The second lease was of the land in Upper Murli Hill together with the right to quarry and extract limestone and manufacture lime. The company had to pay to Government royalties on the limestone and lime at rates stated in the leases. In both leases there was a clause prohibiting, without the previous assent of the Board of Revenue, the assignment of the lease, or the transfer of any right or interest acquired thereunder, or the underletting of the whole or any portion of the premises comprised in the lease. The penalty prescribed for the infraction of any of the conditions in that clause was forfeiture of the lease.

In January, 1933, the company went into voluntary liquidation. By an agreement of September 30, 1933, the company, through its liquidators, contracted with one Subodh Gopal Bose for the sale to him for Rs.6ooo of the leasehold rights in the properties comprised in the two leases of April 1, 1928, subject to the sanction of the Board of Revenue of Bihar and Orissa, it being provided that the agreement for transfer should stand cancelled if such sanction was not given. The agreement was not registered. It was further provided that the prospective purchaser should act as the agent of the vendor company in respect of the leasehold rights in the quarries; that he should be entitled to work the quarries for his own profit; and that he should pay to the company the royalties and any other sums payable by the company to Government under the two leases.

The Board of Revenue in fact refused their assent to the sale, and on July 18, 1934, they declared the leases to be forfeited on the ground that the company had transferred or sub-let the rights and interests under the leases to Bose in breach of the covenants therein. On September 24, 1934, the company instituted the suit out of which this appeal arose, claiming a declaration that the leases had not been validly forfeited, an injunction restraining the defendant from granting to other persons a lease in respect of the lands comprised in the two leases of April 1, 1928, and from interfering with any of the rights of the company, possessory or otherwise, over or in respect thereof, and Rs.11,000 damages. The facts and the material terms of the contract of September 30, 1933, appear from the judgment of the Judicial Committee.

The Subordinate Judge held that the agreement of September 30, 1933, though purporting to appoint Bose to work the quarries as agent of the respondent company, was in substance and reality a sub-lease to him of the quarrying rights, and being without the consent of the Board of Revenue was in breach of the covenants in the leases, which had therefore been forfeited, and he dismissed the suit.

On appeal, the High Court (Khaja Mohamad Noor and Varma JJ.) were of opinion that the agreement with Bose did not amount to either a sub-lease or a transfer within the covenants. They were further of opinion that if the agreement could be so construed it would be void for want of registration under s. 17 of the Indian Registration Act, 1908. They accordingly granted the respondent company the declaration and injunction claimed. The appeal is reported at ( 1936) I. L. R. 15 Pat. 460.

1937. Oct. 25, 26. Fergus Morton K.C. and Wallach for the appellant. The substance of the agreement between the company and Bose must be looked at; the rights of the company under the leases became vested in him, and he entered into possession of the quarries and worked them; he was not a