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HIGH COURT OF CALCUTTA
Bijayesh Mukherji
BABULALL CHOUKHANI - Appellant
Versus
CALTEX (INDIA) LTD. - Respondent
Suit 969 Of 1964
Decided On : SEPTEMBER 29, 1965
The suit was filed by the plaintiff to recover retention fee from the defendant for ten months from August 1, 1963, to May 31, 1964, at the rate of Rs. 2,500 a month. The agreement between the parties was contained in a letter dated April 30, 1963, and a letter dated May 8, 1963. The agreement provided for a lease of the plaintiff's land for a period of 10 years with two renewal options of 10 years each for constructing and maintaining a service station by the defendant. The rent was to be Rs. 2,500 per month, which would be increased by 10% on the exercise of each renewal option. The lease was to be finalized and rental payments commenced from May 1, 1963, on receipt of all necessary approvals from the concerned government authorities. For the first three months (May-July 1963), the defendant was to pay the plaintiff a retention fee of Rs. 3,750, which would be non-refundable. If the defendant required a further extension of time beyond July 31, 1963, to obtain the necessary approvals, the defendant was to pay the plaintiff Rs. 2,500 per month. Such payments were to be reckoned as and applied against rent on receipt of the necessary approvals. If the lease failed due to non-receipt of approvals, such payments would also be non-refundable. The defendant obtained the approval of the Director of Fire Services but not of the District Magistrate, within whose jurisdiction the proposed leasehold was situate. In August 1963, the defendant suggested certain variations to the terms of the agreement, which were not accepted by the plaintiff. On January 9, 1964, the defendant informed the plaintiff that the option on the plot of land had expired on July 31, 1963, and that the subject was dropped. The plaintiff filed the suit on June 1, 1964.
Fact of the Case:
The plaintiff, Babulall Choukhani, entered into an agreement with the defendant, Caltex (India) Ltd., for the lease of his land for the construction and maintenance of a service station. The agreement provided for a lease period of 10 years with two renewal options of 10 years each. The rent was to be Rs. 2,500 per month, which would be increased by 10% on the exercise of each renewal option. The lease was to be finalized and rental payments commenced from May 1, 1963, on receipt of all necessary approvals from the concerned government authorities. For the first three months (May-July 1963), the defendant was to pay the plaintiff a retention fee of Rs. 3,750, which would be non-refundable. If the defendant required a further extension of time beyond July 31, 1963, to obtain the necessary approvals, the defendant was to pay the plaintiff Rs. 2,500 per month. Such payments were to be reckoned as and applied against rent on receipt of the necessary approvals. If the lease failed due to non-receipt of approvals, such payments would also be non-refundable. The defendant obtained the approval of the Director of Fire Services but not of the District Magistrate, within whose jurisdiction the proposed leasehold was situate. In August 1963, the defendant suggested certain variations to the terms of the agreement, which were not accepted by the plaintiff. On January 9, 1964, the defendant informed the plaintiff that the option on the plot of land had expired on July 31, 1963, and that the subject was dropped. The plaintiff filed the suit on June 1, 1964, claiming retention fee for ten months from August 1, 1963, to May 31, 1964, at the rate of Rs. 2,500 a month.
Finding of the Court:
The court found that the agreement between the parties was a completed and valid agreement for lease, not merely an agreement for a further agreement, not merely an agreement for the first 3-month option only, but an agreement for a further option period at an enhanced retention fee till finality is reached one way or the other about the granting of all the requisite approvals. The court also found that the defendant was liable to pay the plaintiff retention fee for six months from August 1963 to January 1964 at the rate of Rs. 2,500 a month, amounting to Rs. 15,000.
Issues: 1. Has the Court jurisdiction to try the suit? 2. What is the true interpretation of the agreement dated April 30, 1963? 3. Is the plaintiff entitled to Rs. 25,000 at the rate of Rs. 2,500 a month from August 1, 1963 to May 31, 1964? 4. Did the defendant require a further extension of time beyond July 31, 1963, and was such extension granted by the plaintiff, as pleaded in paragraphs 8 and 16 of the plaint? 5. What reliefs, if any, is the plaintiff entitled to?
Ratio Decidendi: The court held that the agreement between the parties was a completed and valid agreement for lease, not merely an agreement for a further agreement, not merely an agreement for the first 3-month option only, but an agreement for a further option period at an enhanced retention fee till finality is reached one way or the other about the granting of all the requisite approvals. The court also held that the defendant was liable to pay the plaintiff retention fee for six months from August 1963 to January 1964 at the rate of Rs. 2,500 a month, amounting to Rs. 15,000. The court found that the defendant had breached the agreement by informing the plaintiff on January 9, 1964, that the subject was dropped. The court held that the plaintiff was entitled to damages for the breach, and that the measure of damages would be the retention fee that the plaintiff would have received if the defendant had not breached the agreement.
Final Decision: The court entered judgment for the plaintiff for Rs. 15,000 and awarded him costs. The operation of the decree was stayed till the end of 1965 to enable the defendant to appeal the decision.
( 1 ) BY this suit, the plaintiff Babulall Choukhani seeks to recover from the defendant Caltex (India) Ltd. , said to be a company incorporated under the Indian Companies Act, the sum of Rs. 25,000 as retention fee at the rate of Rs. 2,500 a month for ten months from August 1, 1963, to May 31, 1964.
( 2 ) A claim as this rested on a bilateral agreement in the form of a letter dated April 30, 1963, by Caltex to Babulall who by an endorsement at the bottom thereof over his signature dated May 1, 1963, confirmed the terms it embodied. The importance of this document to the fortunes of the present litigation is such that it deserves to be reproduced in full:mr. Babulal Chokhani, 24. A, Deshapriya Park Road, calcutta - 26. Dear Sir, lease of land owned by you at Prince Anwar Shah Road, Tollygunge, Calcutta. We refer to the discussions which took place this morning between our Messrs. E. M. Schmidt, R. Majumdar and K. C. Dutta and yourself regarding the abovementioned subject. We list below the points agreed upon and request that you sign the duplicate copy of this letter as a token of your confirmation and acceptance. It is understood that the conditions listed below are subject to the approval of our General Office and we will confirm the same to you by May 10, 1963 at the latest (1) Subject land is to be leased for the purposes of constructing and maintaining a Service Station. The initial period will be for 10 years with 2 renewal options of 10 years each. (2) The area to be leased will be approximately 144' X 100' -- (one bigha) for which we will pay a rental of Rs. 2500/- per month. (3) The rental will be increased by 10% as each 10 years option is exercised. (4) If we receive all the necessary approvals from the concerned Government authorities the lease will then be finalised and rental payments commenced retrospective from 1 May 1963, (5) For the 3 months period from 1 May to 31 July 1963 we agree to pay a retention fee of Rs. 3750 which will be non-refundable regardless of whether we receive all approvals or not. (6) If we require a further time extention past 31 July in order to receive the necessary approvals we agree to pay Rs. 2500/- per month. This amount will be non-refundable if we are not successful in receiving all the necessary approvals but will be applied against rental ft we do receive them. (7) Necessary ownership documents will be produced by you for review by our lawyers in order to ensure that the subject land is free from al! encumbrances etc. Thanking you and assuring you of our best attention at all times,i confirm the above terms Sd. /- Babulall Choukhani-------1-5-63. Yours very truly, caltex (INDIA) LIMITED, calcutta DISTRICT. By: Illegible.
( 3 ) THIS is a document upon which both parties rely. It therefore appears in the admitted brief on documents, exhibit A, as the plaintiff's document No. 1 and the defendant's document No. 1 too at pages 1 and 2 thereof. Presumably, by way of abundant caution, the original letter is marked exhibit M as well.
( 4 ) THE conditions listed in this document, exhibit M, seven in number, were subject to the approval of Caltex's "general Office", confirmation by which was promised "by May 10, 1963, at the latest"; vide the second paragraph of the letter dated 30-4-1963 Ext. M. The promise was honoured. By their letter dated May 8, 1963, which is Exhibit N and also the plaintiffs document No. 4 at page 7 of the admitted brief of documents. Ext. A, Caltex wrote to Babulall. "further to our letter No. C-Misc. : EMS dated April 30, 1963 (just the one reproduced in paragraph 2 ante) we are pleased to advise that confirmation has since been received from our General Office to the terms outlined in our letter under reference", and informed him (Babulall) that, for putting up the Service Station, they were submitting, to the authorities concerned, applications, copies of which would be forwarded to him (Babulall) for his information and such co-operat
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