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2024 Supreme(AP) 1320
IN THE HIGH COURT OF ANDHRA PRADESH
T. MALLIKARJUNA RAO, J.
Hindustan Petroleum Corpooration Limited – Appellant
Versus
Tatikonda Kameswara Rao and Others – Respondent
APPPEAL SUIT NO: 239/2012
Decided On : 16-10-2024
Advocate Appeared:
For the Appellant : SAMBOJU BALA GOPPAL
For the Respondent: S. PRANATHI
The relocation of a retail outlet constitutes a novation of the original lease agreement, extinguishing the rights and liabilities under it, and implying surrender of the original lease.
Headnote:(A) Code of Civil Procedure, 1908 - Section 96 - Transfer of Property Act - Section 111(f) - Lease agreement - Plaintiffs sought declaration of lease termination and eviction of Defendant after relocating retail outlet - Trial Court found lease rights extinguished due to novation of contract upon relocation - Defendant's unilateral actions deemed unjustified. (Paras 1, 8, 34)
(B) Novation of Contract - The court held that the relocation of the retail outlet constituted a novation of the original lease agreement, thus extinguishing the rights and liabilities under the earlier lease deed. (Paras 19, 24)
(C) Implied Surrender - The court found that the Defendant's actions impliedly surrendered the original lease, as the new lease for the relocated outlet could not coexist with the old lease. (Paras 27, 30)
Facts of the case:
Plaintiffs filed suit for eviction and damages after the Defendant relocated a retail outlet, claiming the lease was extinguished. The Defendant contested the suit, asserting the lease remained valid.
Findings of Court:
The trial Court decreed in favor of the Plaintiffs, declaring the lease extinguished and ordering eviction of the Defendant within two months.
Issues: The main issues were whether the lease was terminated, whether the Plaintiffs were entitled to eviction, and whether the trial Court's judgment required interference.
Ratio Decidendi: The court ruled that the relocation of the outlet constituted a novation of the original lease, extinguishing the rights under it, and that the Defendant's unilateral actions were unjustified.
Result: Appeal dismissed.
JUDGMENT:
1. The Appeal, under Section 96 of the Code of the Civil Proceedure, 1908 (for short, 'C.P.C.'), is filed by the Appellant/Defendant challenging the decree and Judgment, daated 30.01.2012 in O.S.No.193 of 2005 passed by the learned Principal Diistrict Judge at Visakhapatnam, (for short, ‘trial court’).
2. Respondents 1 to 3 are the Plaintiffs, who filed the suit in O.S.No.193 of 2005 seeking a declaratioon that the rights and liabilities created by the lease deed dated 31.12.2001 stood extinguished with the shifting of retail outlet from Atchuthapuram to Pedda Gantyada and on termination of lease on 29.10.2005 and for evicction of the Defendant from the suiit schedule premises after removing the structures fixed by the Defendant company and for future damages at the rate of Rs.50,000/- per month for use and occupation of the premises by the Defendant company with effect from 01.12.2005 till the date of vacating the premises.
3. Referring to the parties as arrayed in the suit is expedient to mitigate potential confusion and better comprehend the case.
4. The factual matrix, necessary and germane for adjudicating the contentious issues between the parties inter se, may be delineated as follows:
Plaintiffs 1 and 2 constituted the 3rd Plaintiff firm and became retail dealers for Defendant, a company selling petroleum products in India. The 1st Plaintiff applied for a retail outlet at Atchuthapuram and was selected. The Plaintiffs purchased the land to the extent of Ac.0.34 cents at Veduruwada village and invested Rs.18,50,000/- in constructing facilities. A lease agreement was signed on 31.12.2001 for 30 years, with a monthly symbolic rent of Rs.100/-. The true consideration for the lease was the retail dealership.
After entering into a dealership agreement with the Defendant on 17.05.2002, the Plaintiffs began operating the retail outlet in May 2002, earning commission on sales. However, the business underperformed, partly due to a nearby BPCL outlet, leading to financial losses for the Plaintiffs. Following the Defendant's advice, the Plaintiffs shifted the retail outlet to Pedda Gantyada after obtaining permission. They leased the new site for Rs.15,000/- per month, with a 10% rent increase every five years, and spent Rs.12,00,000/- on construction. The Defendant executed a new lease deed under similar terms. After the relocation, the Plaintiffs requested possession of the Atchuthapuram site. The Defendant proposed to convert it into a "Company Owned Outlet" and asked for an estimate of the construction and development costs. Defendant appointed one M. Surya Rao as the caretaker to manage the outlet at Atchuthapuram. After obtaining Head Office approval, the Defendant promised to issue a licence to M. Surya Rao. The Plaintiffs responded on 29.05.2004, estimating the value of construction and land at Rs.42,66,185.74ps. (value of land of Rs. 24,15,000/- + value of construction of Rs.18,51,185.74 ps), and demanded Rs.42,90,445.74ps, including Rs.24,260/-towards commission. The Defendant did not make the payment.
Defendant converted the Atchuthapuram retail outlet to an S.C. & S.T. women category without notifying or obtaining consent from the Plaintiffs and advertised for a new "Company Owned retail Outlet” in the newspaper on 20.6.2005. This change, which involved shifting the outlet, is claimed to extinguish the lease rights established under the 31.12.2001 lease deed. Since the outlet was moved to Pedda Gantyada, the investment in Atchuthapuram became worthless. The Plaintiffs further assert that the Defendant is liable for these losses. They offered to sell the site and structures for Rs.45,00,000/- or lease them at Rs.50,000/- per month, but the Defendant refused. On 28.07.2005, the Plaintiffs issued a legal notice to the Defendant, but the Defendant responded with a false reply notice.
As a result of relocating the retail outlet from Atchuthapuram to Pedda Gantyada, the Plaintiffs claim that the lease deed dated 31.12.200
