SECRETARY OF STATE Vs. KUCHWAR LIME AND STONE CO LTD

JUDGEMENT

(1.) The principal question in this appeal is whether two quarrying leases granted by the appellant to the respondents have been forfeited by reason of the breach of a covenant contained in each against assignment. The quarry lands were situated in the Shahabad District of the then Province of Bihar and Orissa; the leases were dated 1 April 1928, and were for terms of 20 years. The covenant against assignment was in similar terms in each, and provided that neither the lessee (the respondent company) nor any person claiming through or under it should assign the lease or transfer any right or interest thereunder, or underlet the whole or any portion of the premises comprised in such lease without the assent of the Board of Revenue of Bihar and Orissa first being obtained, and that the penalty for infraction of this condition should be the forfeiture of the lease. In January 1933, the respondent company went into liquidation, and on 30 September of that year the company, through its liquidators, contracted with one Subodh Gopal Bose for the sale to him of the lease-hold rights under both leases for the sum of Rs. 6,000, but subject to the sanction of the Board of Revenue : the agreement to stand cancelled if such sanction was not obtained. It was also provided that in the meantime Bose should act as the agent for the respondents in respect of the lease-hold rights in the quarries; that he should pay to the company the royalties and any other sums payable by it to the Government; and that he should be entitled to work the quarries for his own profit. The contract was in writing but was not registered. Cls. 4, 6, 7, 8 and 9 upon which the question stated above mainly depends were as follows : 4. It is stipulated in the leases in respect of the lands set out in the schedule that the lessees shall not assign the leases or transfer any right or interest thereunder without the assent of the Board of Revenue first obtained. The vendors shall apply for such assent, but shall not in any way be responsible and this agreement for transfer of the vendors' lease-hold right to the lands set out in the schedule hereto shall stand cancelled if such assent be not given by the said Board of Revenue. 6. The purchaser shall be appointed local agent of the vendors in respect of the leasehold right of the vendors to the lands set out in the schedule hereto and continue to act as such until the transfer of the lease-hold right be effected or until it is finally decided that such transfer cannot be made on and after the purchaser's furnishing guarantee to the vendors of regular payment of all royalties and other dues on despatches from the Murli Centre or otherwise in respect of the lands set out in the schedule hereto and on and after his depositing with the Liquidators a sum of Rs. 4,000 (Rupees four thousand) in cash by way of security for such payment, such deposit bearing interest at the rate of five per cent. per annum from the date of deposit till the transfer of the said leasehold rights or final decision that the leases should not be transferred. 7. Subject to the purchaser's furnishing guarantee and depositing the said sum of Rs. 4,000 (Rupees four thousand) as aforesaid, the purchaser shall be at liberty to quarry, burn, manufacture and sell lime and stone from the said lands on his own account without being liable to the vendors for any of the profit or loss thereof. 8. During the term of his local agency the purchaser shall - (a) submit to the vendors plans and details of working and monthly statement of account relating to quarrying, despatching and selling lime and stone from the said lands and regularly pay to the vendors the royalties and other dues if any payable to Government; (b) bear and pay all expenses of working the quarries, manufacturing, despatching and selling lime and stone and of otherwise using the said lands and shall perform and observe the covenants and conditions contained in the said leases under which the said lands are held; (c) indemnify the vendors against any loss or damage which the vendors may sustain by reason of the purchaser's working the quarries or burning, manufacturing, despatching and selling lime and stone from the said lands or Murli Centre. 9. If the purchaser do not take any appointment as local agent of the vendors as provided in Cl. 6 aforesaid, he shall not do any work in the quarries of the lands set out in the schedule or burn or manufacture lime thereon nor despatch lime and stone from the said Murli Centre until the transfer of the said leases has been accomplished.

(2.) Bose entered into possession of and worked the quarries upon the terms of this agreement, but the Board of Revenue refused their assent to the sale, and on 18 July 1934 they declared the leases to be forfeited on the ground that the respondent company had transferred or sublet the rights and interests under the lease to Bose in breach of the covenants above referred to. On 24 September, the respondent company instituted the suit out of which the appeal arises, in the Court of the Subordinate Judge of Shahabad claiming a declaration that the leases had not been validly forfeited, an injunction and Rs. 11,000 damages. A written statement of defence was put in by the appellant justifying the forfeiture, and the case went to trial before the Subordinate Judge upon the following two issues only : (1). Whether the plaintiff has under the terms of the indenture dated 1 April 1928 forfeited the lease by reason of the transaction between the plaintiff and Subodh Gopal Bose under the indenture dated 30 September 1933. (2). Is the plaintiff entitled to any damage ? If so, what amount ?

(3.) The Subordinate Judge delivered his judgment on 7 March 1935. He held that the agreement of 30 September 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 contained in the leases, and that they had therefore been duly forfeited. He accordingly passed a decree dismissing the suit with costs. The respondent company appealed to the High Court at Patna. The appeal was heard by Khwaja Mohammad Noor and Varma JJ. who delivered their judgment on 7 February 1936. On the question of forfeiture the learned Judges disagreed with the Subordinate Judge, holding that the agreement with Bose did not amount to either a sub-lease or a transfer within the covenants in question. They were also of opinion that if the agreement could be so construed, it would be void for want of registration. They accordingly allowed the appeal and granted the respondent company the declaration and injunction which it claimed. They also dealt with the question of damages to which their Lordships will revert later on in this judgment. From this decision the Secretary of State appeals to His Majesty in Council seeking to reinstate the decree of the Subordinate Judge for the dismissal of the suit. Before the Board a preliminary point was taken by the appellant that the suit was not maintainable on the ground that the respondent company was out of possession at the date of filing their plaint. This question had not been raised in the trial Court and the High Court held that the question, depending as it obviously did upon facts for which evidence would be necessary, was not open before them. On this their Lordships are in full agreement with the High Court and have not deemed it necessary to hear the respondents' counsel with respect to it.