# I959 Lipton Ltd v. Their Employees · S. K. Das]. I9~9 February a

- **Citation:** [1959] Supp. 2 S.C.R. 180
- **Court:** Supreme Court of India
- **Decided:** 1959
- **Case number:** Nos. 181 and 181-A of 1955
- **Bench:** Syed Jafer Imam, S. K. Das, J. L. Kapur
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/i959-lipton-ltd-v-their-employees-s-k-das-i9-9-february-a-1607
- **Pages:** 22

## Headnote

Lease-Construction-Enha11ce1nent of rent-" Fair and eqititable enhancement as the lessor shall determine" -Lease, whether
void for uncertainty-Court's power to determine fair and equitable
rent.
In r909, for the purpose of residential accommodation, plots
of land were given on lease by the Government to the appellants
and others for which a premium of Rs. 350 and an annual rent
of ll.s. 3-8-0 for each plot had to be paid. Clause III of the deed
"of lease in each case provided: " And the lessor does further
covenant that he will at the end of the term of 30 years hereby
granted and so on from time to time thereafter at the end of
each successive further term of years as shall be granted at the
request of the lessee execute to him a renewed lease of the land
hereby demised for the term of 30 years: Provided that the rent
of the land hereby demised shall be subject to such fair and
equitable enhancement as the lessor shall determine on the grant
of every ~rene\val: Provided also that every such renewed lease
of the land shall contain such of the covenants, provisions and
conditions in these presents contained as shall be applicable and
shall always contain a covenant for further renewal of the lease.'
(2) S.C.R.
SUPREME COURT REPORTS
181
By the year 1939 the first 30 years' period of some of the leases
came to an end, and the Government sought to enhance the
annual rent from Rs. 3-8-0 to Rs. 21-14-0 per plot and also to
insert some new terms in the renewed deeds of lease. The
appellants brought a suit inter alia for a declaration that the
enhancement proposed was not fair and equitable within the
meaning of Clause III of the deed of lease, that the fair and
equitable rent should be Rs. 7 per plot and that if the court was
of the opinion that Rs. 7 was not a fair and equitable rent then
it should fix such sum as it considered fair and equitable. The
respondent pleaded that such a suit was incompetent. The question was whether the civil court had jurisdiction to enquire
whether the enhancement of the rent determined by the lessor
was fair and equitable within the meaning of cl,.. III of the deed
of lease, and whether, in any case, the lease was void for uncertainty.
Held, (per Jafer Imam and S. K. Das, JJ.), that the lease is
not void for uncertainty; that the expression "fair and equitable" in the clause in question means fair and equitable in fact,
and not what the lessor subjectively considered to be fair and
equitable ; and, that reading the clause as a whole and giving
effect to all the words used therein, the meaning is that the
lessor must first determine what it considers to be fair and
equitable enhancement, but, if in fact it is not so, it is open to
the lessee to ask the court to determine what is fair and equitable enhancement. Accordingly, the suit was maintainable.
The rule laid down in Gourlay v. The Duke of Somerset, (1815)
19 Ves. 429; 23 E.R. 576, held applicable.
The New Beerbhom Coal Company Limited v. Boloram Mahata
and others, (1880) L.R. 7 I.A. 107 and Secretary of State for India
in Council v. Volkart Brothers, (1926) I.LR. 50 Mad. 595, relied
on.
Collier v. Mason, (1858) 25 Beav. zoo; 53 E.R. 613 and
Tekchand Kapurchand v. Mt. Birzabai, A.LR. 1942 Nag. i19,
distinguished.
P~r Kapur, J.-The correct interpretation to be put on
cl. III of the deed of lease is that the lessor was given the
authority to determine the enhancement of rent but such
enhancement was to be fair and equitable and what would be
fair and equitable in any particular case was also to be determined by the lessor. The rule applicable to the present case is
that relating to valuation or fixation of prices that where the
valuation is fixed by a valuer the court will hold it conclusive
in the absence of fraud or mistake or misconduct and the court
will not enter into the propriety of the valuation made or substitute its own valuation in place of that determined by the
valuer because that will not be an execution of the contract of
the parties

## Text

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I959
Lipton Ltd.
v.
Their Employees
·
S. K. Das].
I9~9
February a.
180
SUPitEME .COURT REPOitTS [1959] Supp.
by the Industrial Tribunal to bring the present employees into the new scales of pay will stand subject to
the necessary modification that instead of January 1,
1954, the relevant date should be November I, 1955.
The result,, therefore, is as follows: Appeal No. 715
of 1957 is dismissed with costs. Appeals Nos. 713 and
714 off 957 are allowed to the extent indicated above.
The order for the grant of bonus for 1951 is set aside
and the new scales of pay will take effect from November 1, 1955, instead of from January 1, 1954. There
will be no order for costs in these two appeals.
Appeals Nos. 713 and 714 allowed in part.
Appeal N_o. 715 dismissed.
DAMODHAR TUKARAM MANGALMURTI
AND OTHERS
v.
THE STATE OF BOMBAY
(SYED JAFER IMAM, S. K. DAS and J. L. KAPUR, JJ.)
Lease-Construction-Enha11ce1nent of rent-" Fair and eqititable enhancement as the lessor shall determine" -Lease, whether
void for uncertainty-Court's power to determine fair and equitable
rent.
In r909, for the purpose of residential accommodation, plots
of land were given on lease by the Government to the appellants
and others for which a premium of Rs. 350 and an annual rent
of ll.s. 3-8-0 for each plot had to be paid. Clause III of the deed
"of lease in each case provided: " And the lessor does further
covenant that he will at the end of the term of 30 years hereby
granted and so on from time to time thereafter at the end of
each successive further term of years as shall be granted at the
request of the lessee execute to him a renewed lease of the land
hereby demised for the term of 30 years: Provided that the rent
of the land hereby demised shall be subject to such fair and
equitable enhancement as the lessor shall determine on the grant
of every ~rene\val: Provided also that every such renewed lease
of the land shall contain such of the covenants, provisions and
conditions in these presents contained as shall be applicable and
shall always contain a covenant for further renewal of the lease.'
(2) S.C.R.
SUPREME COURT REPORTS
181
By the year 1939 the first 30 years' period of some of the leases
came to an end, and the Government sought to enhance the
annual rent from Rs. 3-8-0 to Rs. 21-14-0 per plot and also to
insert some new terms in the renewed deeds of lease. The
appellants brought a suit inter alia for a declaration that the
enhancement proposed was not fair and equitable within the
meaning of Clause III of the deed of lease, that the fair and
equitable rent should be Rs. 7 per plot and that if the court was
of the opinion that Rs. 7 was not a fair and equitable rent then
it should fix such sum as it considered fair and equitable. The
respondent pleaded that such a suit was incompetent. The question was whether the civil court had jurisdiction to enquire
whether the enhancement of the rent determined by the lessor
was fair and equitable within the meaning of cl,.. III of the deed
of lease, and whether, in any case, the lease was void for uncertainty.
Held, (per Jafer Imam and S. K. Das, JJ.), that the lease is
not void for uncertainty; that the expression "fair and equitable" in the clause in question means fair and equitable in fact,
and not what the lessor subjectively considered to be fair and
equitable ; and, that reading the clause as a whole and giving
effect to all the words used therein, the meaning is that the
lessor must first determine what it considers to be fair and
equitable enhancement, but, if in fact it is not so, it is open to
the lessee to ask the court to determine what is fair and equitable enhancement. Accordingly, the suit was maintainable.
The rule laid down in Gourlay v. The Duke of Somerset, (1815)
19 Ves. 429; 23 E.R. 576, held applicable.
The New Beerbhom Coal Company Limited v. Boloram Mahata
and others, (1880) L.R. 7 I.A. 107 and Secretary of State for India
in Council v. Volkart Brothers, (1926) I.LR. 50 Mad. 595, relied
on.
Collier v. Mason, (1858) 25 Beav. zoo; 53 E.R. 613 and
Tekchand Kapurchand v. Mt. Birzabai, A.LR. 1942 Nag. i19,
distinguished.
P~r Kapur, J.-The correct interpretation to be put on
cl. III of the deed of lease is that the lessor was given the
authority to determine the enhancement of rent but such
enhancement was to be fair and equitable and what would be
fair and equitable in any particular case was also to be determined by the lessor. The rule applicable to the present case is
that relating to valuation or fixation of prices that where the
valuation is fixed by a valuer the court will hold it conclusive
in the absence of fraud or mistake or misconduct and the court
will not enter into the propriety of the valuation made or substitute its own valuation in place of that determined by the
valuer because that will not be an execution of the contract of
the parties but making a contract for them.
Case law discussed.
1959
M angalmurti
v.
State of Bombay
I959
M angalmurti
v.
Slate of Bombay
S. K. Das].
182
SUPREME COURT REPORTS [1959] Supp.
CIVIL
APPELLATE JURISDICTION:
Nos. 181 and 181-A of 1955.
Ci vii Appeals
Appeals from the judgment and decree dated September 30, 1952, of the former Nagpur High Court in
Second Appeals Nos. 699 and 700 of 1946, arising out
of the judgment and decree dated February 21, 1946,
of the court of First Additional District Judge, Nagpur, in Civil Appeals Nos. 22-A and 23-A of 1946,
against the judgment and decree dated January 2,
1945, of the Court of Second Subordinate Judge,
Nagpur, in Cjvil Suit No. 143-A of 1944.
H.J. Umrigar, Ratnaparkhi A. G. and Shankar·
Anand Zinjarde, for the appellants.
W. s; Barlingay and R. H. Dhebar, for the respondent.
·
1959. February 2.
The Judgment of Jafer Imam
and S. K. Das, JJ., was delivered by S. K. Das, J.
Kapur, J., delivered a separate judgment.
S. K. DAS, J.-These two appeals arise out of a
litigation which has had a chequered career in the
courts below. The short facts are these. The suit
out of which the appeals arise was instituted on
January 13, 1941, but the plaint was amended on
May 4, 1942.
The amended plaint was to the effect
that in or about the year 1905 the defendant, the then
Provincial Government of the Central Provinces and
Berar, Nagpur, "opened up" an area known as the
C1;addock Town Area which was originally called the
Sitabuldi Extension Area or Dhantoli Area.
Due to
the scarcity of residential accommodation in the city
of Nagpur, the then Provincial Government along with
some prominent members of ,the Nagpur Municipal
Committee devised a scheme to extend residential
accommodation by acquiring agricultural land and
making it available for residential purposes.
With
that object in view, the area .in question was acquired
and building sites of the average size of about 10,000
sq. ft. each were carved out. These were leased out
on a premium of Rs. 350 and an annual rent of
Rs. 3-8-0 each. The indenture of lease in each case
contained a. clause to the following effect :-
(2) S.C.R. SUPREME COURT REPORTS
183
"III. And the lessor does further covenant that
he will at the end of the term of 30 years hereby
granted and so on from time to time thereafter at the
end of each successive further term of years as shall
be granted at the request of the lessee execute to him
a renewed lease of the land hereby demised for the
term of 30 years; Provided that the rent of the land
hereby demised shall be subject to such fair and equitable enhancement as the lessor shall determine on the
grant of every renewal : Provided also that every
such renewed lease of the land shall contain such of
the covenants, provisions and conditions in these
presents contained as shall be applicable and shall
always contain a covenant for further renewal of the
lease."
One of the leases was executed on May 24, 1909, and
some other leases near about that year. By the year
1939 the first 30 years' period of some of the leases
came to an end. The original plaintiffs, who were
two in number and who sued in their individual right
as also representing the members of an association
known as the Craddock Town Plot-holders Association
alleged that on the expiry of the terms of the leases
in question, during which period some of the lessees
had built houses on the leasehold property, the then
Provincial Government proposed an enhancement of
Rs. 21-14-0 from Rs. 3-8-0 as annual rent and also
the insertion of some new terms in the re.newed deeds
of lease.
The plaintiffs, on the contrary, said that
Rs. 7 per plot was the fair and equitable enhancement. Various representations to the relevant authorities having proved unavailing, the plaintiffs instituted the suit in which they prayed (a) that the enhancement of rent from Rs. 3-8-0 to Rs. 21-14-0 per plot
was not fair and equitable within the meaning of
cl. III of the deed of lease; (b) that the offer of Rs. 7
as annual rent made by the association was fair and
reasonable; (c) that the defendant do insert in the
renewed deeds of lease only such conditions as were
to be found in the original deed and not to add to
them to the detriment of the lessees' interest ; and
(d) that in the event of this Court not agreeing that
r959
M angalmurti
v.
State of Bombay
S. K. Das].
I959
.i11 angalmurti
v.
State of Bombay
S. K. Das].
184
SUPREME COURT REPORTS [1959] Supp.
Rs. 7 was a fair and reasonable rent, a fair and
equitable rent should be fixed by it. The suit was
contested by the defendant on several grounds, with
most of which we are not now concerned.
The learned Subordinate Judge of Nagpur, who
dealt with the suit in the first instance, took up certain
preliminary issues for decision and by a judgment
dated April 13, 1942, he disposed of those preliminary ·
issues. One such issue material for our purpose was
in these terms: "In case of dispute as to what is
fair and equitable rent, has the civil court no right to
determine what is fair rent?" On this preliminary
issue, he found "that under the terms of cl. III of the
indenture of lease, the defendant was entitled to
fix a fair and equitable rent; but the civil court has
jurisdiction to enquire whether the rent fixed by the
defendant is fair and equitable within the meaning of
cl. III ". · We need not refer to the other preliminary
issues on which the learned Subordinate Judge gave
his decision, because those issues no longer survive.
On the disposal of the aforesaid preliminary issue, the
plaint was amended and some more lessees were
added, the 30 years' period of whose leases had also
expired ; therefore the position was that the plaintiffs
were those lessees, the 30 years' period of whose leases
had expired and as respects the renewal of whose
leases the defendant had proposed an enhancement of
Rs. 21-14-0. The defendant claimed that it had been
very reasonable in fixing the enhanced rent and it
further claimed the right of withdrawing the offer of
Rs. 21-14-0 and of making a fresh demand at a much
higher rent if the lessees did not agree to the terms
originally proposed by the defendant. The defendant
further denied that the offer of Rs. 7, that is, twice the
original rent, made by the lessees was a reasonable and
fair enhancement.
After the disposal of the preliminary issues the
learned Subordinate Judge proceeded to try the suit
on merits and on January 2, 1945, he found on issue
no. 4 that Rs. 14 per year would be the fair and equitable enhanced rent for each plot of about 10,000 sq. ft.
and he fixed that rent for the next term of 30 years to
(2) S.C.R.
SUPREME COURT REPORTS
185
which the lessees were entitled under cl. III; he further
directed the grant of a rebate of 25 per cent. to those
lessees 'Yho agreed to a renewal for a term ending in
1948.
From the decision of the learned Subordinate Judge
two appeals, one by the plaintiffs, and the other by
the defendant, were taken to the District Judge and
they were heard by the Additional District Judge
of Nagpur, who by his Judgment dated February 21,
1946, affirmed the decision of the learned Subordinate Judge that under cl. III of the indenture of lease
it was open to the Subordinate Judge to determine
what was the fair and equitable rent. The learned
Additional District Judge, however, reversed the finding of the learned Subordinate Judge as to the quantum of the fair and equitable rent. He came to the
conclusion that the enhancement of rent should not
exceed Rs. 7, as any increase over that amount would
not be a fair and equitable one within the meaning of
cl. III of the indenture of lease.
· From the decision of the learned Additional District
Judge, two appeals were taken to the then High Court
of Judicature at Nagpur by the defendant Government. The appeals were first placed before a single
Judge who directed that they should be heard by a
Division Bench. The appeals were then heard by B. P.
Sinha, C. J. (as he then was) and Mudholkar, J. The
learned Chief Justice came to the conclusion that the
suit must fail on the ground that the authority of the
court had been invoked in a matter which really lay
in contract and the civil court had no jurisdiction to
determine the fair and equitable rent. Mudholkar, J.,
came to a contrary conclusion and held that the suit
was maintainable and the courts below could determine the fair and equitable rent. On ·the question of
what should be the fair and equitable rent, the
learned Chief Justice gave no finding except saying
that " the decision of the lower appellate court on the
question of assessment of fai:u and equitable rent was
not satisfactory, because it had gone more by the rule
of the thumb than upon the evidence adduced in the
2~
I959
M angalmttrti
v.
Stale of Bombay
S. K. Das j.
•
'959
M angalmurti
v.
State of Bombay
S. K. Das].
'
186
SUPREME COURT REPORTS [1959] Supp.
case or upon any other sound basis." Mudholkar, J.,
however, said that he saw no adequate ground for
differing from the view taken by the lower appellate
court with regard to the quantum of fair and equitable rent. On this difference of opinion between the
learned Chief Justice and Mudholkar, J., the case was
referred to a third Judge, namely, Hemeon, J., who
agreed with the view of the learned Chief Justice that,
on a proper construction of cl. III of the indenture of
lease, the civil court had no jurisdiction to determine
the fair and equitable rent and the parties had consciously and deliberately stipulated to abide by the
lessor's fixation of a fair and equitable enhancement
of rent; and in that view of the matter, he expressed
no opinion as to what s.hould be the fair and equitable rent.
In accordance with the opinion of the majority of
Judges, the appeals in the High Court were allowed
and the suit was dismissed with costs.
The plaintiffs,
who are the appellants here, then asked for a certificate of fitness under Art. 133(l)(c) of the Constitution
of India. The High Court granted the necessary
certificate by an order dated October 23, 1953, and
the present appeals have been filed in pursuance
of that certificate. The area in question being now
within the State of Bombay, the State of Bombay has
been substituted as the respondent before us.
The principal question before us is one of construction of cl. III of the indenture of lease. On behalf of
the appellants it has been argued that the construction put upon the clause by the majority of Judges in
the High Court is not correct inasmuch as it gives no
effect to the words " fair and equitable enhancement "
occurring therein. On behalf of the respondent, it has
been submitted that the expression " subject to such
fair and equitable enhancement as the lessor shall
determine " is tantamount to saying " subject to such
enhancement as the lessor shall determine to be fair
and equitable,, ; in other words, the argument of
learned counsel for the respondent is that the parties
had deliberately chosen to abide by whatever was
determined to be fair and equitable enhancement by
(2) S.C.R. SUPREME COURT REPORTS
187
the lessor. Mudholkar, J., had proceeded on the footr959
ing that the primary intention of the parties was that
£
bl
d h
Mangalmurti
the enh~ncement must be air and equita e an
t e
v.
adjectival clause "as the lessor shall determine " state of Bombay
following the word 'enhancement' being subordinate
-
to the primary intention of the parties could be
s. K. Das J.
ignored. Learned counsel for the respondent has very
strongly submitted that this view is not correct. •
We think that the clause should be read as a whole
and every effort should be made to give effect to all
the words used therein. The relevant portion of the
clause states-" such fair and equitable enhancement
as the lessor shall determine ". If the construction is
that whatever the lessor determines as fair and equitable enhancement must be treated as binding- on the
lessee, then the words ' fair and equitable ' are not
given the meaning and sense which they have according to the ordinary acceptation of those words. ']'air '
and 'equitable' mean fair and equitable in fact, and
not what the lessor subjectively considered to be fair
and equitable. The words 'fair' and 'equitable' both
mean' just or unbiased' (see the Concise Oxford Dictionary, 4th Edn., p. 426 and p. 402). If the intention
was to.leave the enhancement to the subjective determination of the lessor, the clause would have more aptly
said-'such enhancement as the lessor shall determine'.
We consider that the words' fair and equitable' must
be given their due meaning and proper effect.
The
question then asked is-what meaning is to be given
to the words' such ...... as the lessor shall determine'.
It is indeed true that these words constitute an adjectival clause to the expression ' fair and equitable
enhancement', but we consider that the meaning of
the adjectival clause is merely this : the lessor must
first determine what it considers to be fair and equitable enhancement; but if in fact it is not so, it is open
to the lessee to ask the Court to determine what is
fair and equitable enhancement. We do not think
that on a proper construction of the clause, the intention was to oust the jurisdiction of the Court and
make the determination of the enhancement by the
lessor final and binding on the lessee.
We think that
'
I959
M angalmurti
v.
State of Bombay
S. K. Das].
188
SUPREME COURT REPORTS [1959] Supp.
the conclusion at which Mudholkar, J., arrived on this
point was correct, though not exactly for the reasons
given by him.
If the construction stated above is the correct constrm~tion, then no further difficulty is presented by
cl. III. The learned Judges of the High Court unanimously expressed the view that the lease was not void
for u\icertainty, and in that view we concur. There
is authority in support of the view that a covenant to
settle land 'at a proper rate' or 'upon such terms
and conditions as should be judged reasonable ' is not
void for uncertainty (see -The New Beerbhoom Coal
Company Limited v. Boloram Mahata and others(') and
Secretary of State for India in Council v. Volkart Brothers(')). In the former case, Sir Barnes Peacock who
delivered the judgment of their Lordships said :
" The High Court affirmed the decision, but not
for reasons which their Lordships consider to be
correct. They affirmed it upon the ground that it
was impossible to determine what was a reasonable
rate.
Their Lordships cannot think that in the present 9ase the Court, upon a proper inquiry, would
have been unable to determine it.
There might have
been considerable difficulty in fixing the rate; but
difficulties often occur in determining what is a reasonable price or a reasonable rate, or in fixing the
amount of damages which a man has sustained under
particular circumstances. These are difficulties which
the Court is bound to overcome."
Our attention has been drawn to some English
decisions in which the point arose if a contract which
appoints a way of determining the price can be specifically enforced.
There are two lines of decisions. In
Milnes v. Grey(') the contract provided that the price
shall be valued by two different persons to be nominated and if they happened to disagree then those two
persons shall choose a third person whose determination shall be final.
The question was whether such a
contract could be specifically performed and the
(1) (1880) L.R. 7 I.A. 107.
(2) (1926) I.L.R. 50 Mad. 595.
(3) (1807) 14 \?'"es, 400; 33 E.R. 574.
(2) S.C.R.
SUPREME COURT REPORTS
189
answer given by the Master of the Rolls can be best
put in his own words :
" The more I have considered this case, the more
I am satisfied, that, independently of all other objections, there is no such agreement between the parties,
as can be carried into execution. The only agreement,
into which the Defendant entered, was to purchase at
a price, to be ascertained in a specified mode.
No
price having ever been fixed in that mode, the parties
have not agreed upon any price; Where then is the
complete and concluded contract, which this Court is
called upon to execute ? "
In Taylor v. Brewer (1) a claim to compensation was
founded on the resolution of a committee which provided that "such remuneration be made as should be
deemed right ". It was held that the engagement
was merely an engagement of honour and no claim
could be made on it. An example of the other line of
decisions is furnished by Gourlay v. The Duke of
Somerset (2).
In that case the agreement provided for
" all such usual and proper conditions, reservations,
and agreements, as shall be judged reasonable and
proper by John Gale, land surveyor, and in case of
his death, by some other proper a.nd competent person
to be mutually agreed upon by the said parties". The
plaintiff came to court and the question arose whether
the reference to ;settle the lease to · be made by the
defendant to the plaintiff should be to the Master or to
Mr. Gale, the defendant contending tha.t the court
decreeing specific performance will take the whole subject to itself and determine by its own officer, not by a
particular individual, what are usual and proper covenants. Sir William Grant, Master of the Rolls,
said:-
,
·"When the agreement is, that the price of the
estate shall be fixed by arbitrators, and they do not
fix it, there is no contract as the price is of the essence
of a contract of sale, and the Court cannot make a
contract, where there is none; but, where the Court
has determined, that the agreement is binding and
(I) (I8I3) IM. & s. 290; I05 E.R. I08,
(2) (1815) 19 Yes. 429; 34 E.R. 576.
I959
M angalmurti
v.
State of Bombay
S. K. Das].
I959
Mangalniurti
v.
State of Bombay
..S. K. Das ].
190
SUPREME COURT REPORTS [1959] Supp.
concluded and such as ought to be executed, it does
not require foreign aid to carry the details into execution. Gale's agency is not of the essence of this contract ......... If the parties had gone to Gale, and got
him to settle a lease, and one of them had objected to
the covenants as improper, and the Bill had been filed
by the other, the Court would have inspected. the
lease; and if it were found unreasonable, would not
have decreed an execution of the agreement."
We consider that the present case comes within the
rule laid down in Gourlay v. The Duke of Somerset (1).
Learned counsel for the respondent placed strong reliance on Gollier v. Mason ('). That was a case in which
the defendant had agreed to purchase a property at a
valuation to be made by AB ; the Court, though it
considered AB's valuation very high and perhaps
exorbitant, decreed specific performance, there appearing neither fraud, mistake or miscarriage. The case was
decided on the footing that the contract provided
that the property shall be purchased at such a price
or sum as should be fixed by reference to AB, and it
was pointed out that there being no evidence of fraud,
mistake or miscarriage the parties were bound by the
contract they had made. There was no question in
that case of the court stepping in, under the terms of
the contract, to determine what was fair and · reasonable. Learned counsel for the respondent also relied
on Tekchand Kapurchand v. Mt. Birzabai (').
The
principle lai1'l down therein was that a contract binds
the parties to it and their representatives and the
court's power to interfere with contracts is limited to
such cases as fraud, undue influence or mistake and
relief against penalty or forfeiture.
Indeed, we agree
that if the contract in the present case was that whatever the lessor determined as the enhanced rent would
be binding on the parties, then the court has no power
to interfere with that contract unless it is vitiated by
fraud, undue influence, mistake, etc. If, however, the
proper construction of cl. III of the contract is what
(1) (1815) 19 Ves. 429; 34 E. R. 576.
(2) (1858) 25 Beav. 200; 53 E.R. 613.
(3) A.I.R. 1942 Nag. II9.
(2) S.C.R. SUPREME COURT REPORTS
191
w~ have held it to be, then the contract itself provides
1959
that the enhanced rent though determined by the lessM angalmurti
or in the first instance, must be fair and equitable. On
v.
such a construction the determination of the enhancestate of Bombay
ment by the lessor would not be final and it would be
-
open to the court to determine what is fair and equits. K. Das J.
able enhancement.
We say this with respect, but the Patna decisions
(Secretary of State for India in Council v. Nistarini
Annie Mitter (1) and Se.cretary of State v. Babu Rajendra
Prasad (2) ), referred to by the learned Chief Justice in
his judgment are not in point. Those decisions were
not concerned with interpreting a clause in the agreement like the one before us and it was rightly held
that in the absence of a contract between the parties,
the court had no power to impose upon the parties a
bargain not of their own making.
For the reasons given above, we hold that the decision of the majority of the learned ,Judges of the High
Court with regard to the interpretation of cl. III of the
indenture of lease is not correct and these appeals
must go back for a fresh hearing by the High Court in
accordance with law for determination of what should
be t!ie fair and equitable enhancement. On that point
there was no concluded finding by the majority of the
learned Judges of the High Court, but learned counsel
for the appellants submitted that the finding of the
learned Additional District Judge on the quantum of
fair and equitable enhancement was a finding ~f fact
and therefore binding in second appeal. At this stage
we express no opinion on such a submission, nor do we
express any opinion whether the courts below or any
of them have gone wrong in principle in determining
what should be the fair and equitable enhancement
and whether on merits it should be Rs. 7 or Rs. 14 or
Rs. 21-14-0, or even a higher sum.
All these points
must be considered afresh by the High Court.
There is a further point which must also be dealt
with in the High Court.
The learned Subordinate
Judge decided on issue no. 7 with regard to the conditions for a renewal of the lease tha,t the Government
(8) (1927) I.L.R. 6 Pat. 446.
(9) A.I.R. 1937 Pat. 391.
I959
M angaltnurti
v.
State of Bombay
S. K. Das].
Kapur J.
192 SUPREME COURT REPORTS [1959] Supp.
were not entitled to make any alterations in the clauses relating to re-entry and notice of demand as contained in cl. II of the original lease. The learned
Addi. District Judge said :
" As regards the new form of lease, it is clear that
the chi.use regarding building would be deleted if it is
found to be superfluous or redundant. While that in
respect of right of lessor to enter on the land without
a demand of ground rent (in case of failure to pay it
on the appointed date) it is not necessary to interfere
as it would amount to making a contract for the parties. It is better to leave the matter to the parties and
their legal advisers."
Whether the view of the learned Subordinate Judge
or of the District Judge is correct or not was not considered by the High Court and as the appeals are going back on remand this point should also be dealt
with by the High Court.
Accordingly, we allow the appeals and set aside the
judgment and decree of the High Court dated September 30, 1952.
The appeals must go back for a fresh
hearing by the High Court in accordance, with law
and in the light of the observations made above. In
the peculiar circumstances of this case, there will be
no order for costs of the hearing of the appeals in this
Court. Costs incurred in the two courts below and
costs incurred in the High Court, both before and
after remand, will be dealt with by the High Court
when finally disposing of the appeals.
KAPUR, J.-I regret I am unable to agree in the
proposed judgment that it is open to the Court in the
circumstances of this case to go into the question
of the valuation and to determine as to what, in its
opinion, would be fair and equitable enhancement in
rent and to interfere with the enhancement as determined by the lessor under the terms of the indenture
of lease executed on May 24, 1909.
The original lease
was for a term of 30 years with a provision for renewal for another 30 years with the proviso that the
rent of the land demised was "subject to such fair and
equitable enhancement as the lessor shall determine".
(2) S.C.R.
SUPREME COURT REPORTS
193.
The facts are set out in the judgment of my learned
r959
brother, S. K. Das, J., and it is not necessary to repeat
h
Pl
f l
d
b
0
f
Mangalmurti
t em.
ots o
an
measuring a out 1 ,000 sq. t.
v.
were given on lease by the Government to the appelstate of Bombay
lants and others, for which the premium to be paid
-
was Rs. 350 and the rent Rs. 3-8-0 per annum or Re. 1
Kapur J.
per cent. of the premium. Lease deeds were executed
in 1909 under clause III of which the lessor determined the enhanced rent at Rs. 21-14-0 and thus raised it
from Rs. 3-8·0 per plot to Rs. 21-14-0.
The appellants
brought a suit for declaration that the enhancement
proposed was excessive and the fair and equitable rent
should be Rs. 7 per plot and if the Court was of the
opinion that Rs. 7 was not a fair and equitable rent
then it should fix such sum as i1; considered fair and
equitable. The respondent pleaded that such a suit
was incompetent. The question for decision is what
is the effect of using the adjectival words "fair and
equitable". For the appellants it was argued that
because in the lease deed the enhancement contemplated was qualifiea by the words "fair and equitable"
the determination became clothed with a qualification
which made it subject to judicial review and determi.
nation because it was for the Court to say whether
the determined enhancement conformed to the standard prescribed in the disputed clause or not. The .
respondent contended on the other hand that the rule
applicable to determinations by valuers is that it is
conclusive and cannot be overhauled except upon
proof of fraud and imposition of gross misconduct.
Thus according to the submission of the appellant
the clause in dispute means such enhancement as
the lessor shall determine and which determination shall, in the opinion of the Court, be fair and
equitable and according to the respondent it means
that the amount of enhancement shall be fair and
equitable but what is fair and equitable shall be
determined by the lessor, such determination being
conclusive. The appellants do not contend that the
lessor is not a valuer and that if the qualifying
words " fair and equitable" had not been used then
25
· 194
SUPREME COURT REPORTS
[1959] Supp.
'959
the enhancement determined would not- be conclusive
but the contention is that by using these words the
M angalmurti
v.
quality and the quantity of enhancement is no longer
State of Bombay in the sole determination of the lessor but the final
determination must be of the Court because otherwise
Hapur J.
any fanciful amount would have to be accepted as
fair and equitable and that the parties intended that
the lessor was not the final determiner of the quality
and quantity of enhancement and his determination
was not conclusive but the lessee if dissatisfied could
get the matter reviewed by the Court.
In my view the correct interpretation to be put on
this clause of the lease deed is what is contended for by
the respondent. The lessor was given the authority to
determine the enhancement but such enhancement was
to be fair and equitable and what would be fair and
equitable in any particular case was also to be determined by the lessor. The lease deed entered into between
the parties is dated May 24, 1909. In the first clause
are given the usual obligations of the lessee as to
payment of rent, the purpose of the building to be constructed, the period in which it was to be completed, the
design of the building and keeping it in proper condition. In the second clause of the agreement the lessor
covenanted peaceful possession subject to the right of
the lessor to recover rent as arrears of land revenue
· and other remedies for non-observance of the obliga·-
tions contained in the first clause with a provision for
re-entry upon failure of certain conditions. In the
third clause the lessor covenanted for grant of lease
for further periods of 30 years at the request of the
lessee with the following proviso :
·
.
"Provided that the rent of the land_ hereby
demised shall be subject to such fair and eci,uitable
enhancement as the lessor shall determine on the grarit
of every ren.ewal ".
.
. . . · _.
This is the disputed clause .. Now it appears that this
further covenant was for the benefit of the lessee and
the reservations made are couched in such la.nguage
which left the discretion in regard to. eμhancement of
rent to the lessor. What the enhancement was to be
and what would be fair and equitable was left to the
(2) S.C.R.
SUPREME COURT REPORTS
195
determination of the lessor. It is not an unusual
provision in a lease for a long term of years with provision for renewal to leave the· question of rent to b'e
determined by the lessor or an outside valuer and it
would not, in my respectful opinion, be a correct interpretation to say that the enhancement by a valuer
would be unchallengeable if the adjectival words " fair
and equitable" are not used but would be subject to
court's review if these words are employed. That
is going contrary to the very notion of valuations and
their legal incidence.
The extent of the power of
courts over valuations by valuers has been stated in
text books and in certain decided cases. In Williston
on Contracts, Vol. 3, s. 802, at p. 2252 the law is stated
thus:
" In the absence of fraud or mistake, the price
fixed by agreed valuers is conclusive upon the parties.
Though an excessively large or an unreasonably small
price involves some element of penalty or forfeiture,
the possibility of this is not enough to overcome the
express terms of the contract in the absence at least of
fraud, gross mistake, or such arbitrary conduct as is
outside what the parties could have reasonably contemplated".
And it is not a far step to say that in all cases of
valuation the parties do contemplate a fair and equitable amount to be fixed or determined and not any
price fanciful- or otherwise.
In Collier v. Mason (1) the defendant agreed to purchase a property at a valuation to be made by a
third party. The defendant repudiated the value as
exorbitant and refused to complete his contract and
the plaintiff-vendor instituted a suit for specific performance.
The Court held that the valuation was
very high and perhaps exorbitant but it decreed
specific performance of the contract as there appeared
no fraud, mistake or miscarriage. It was said by
the Master of the Rolls "It may have been improvident as between these parties to enter into a contract
to buy and sell property at a price to be fixed by another person, but that cannot avoid the contract.
(1) (1858) 25 Beav. 200; 53 E. R 613.
1959
Mangalmurti
v.
State of Bombay
Kapur].
196
SUPREME COURT REPORTS
[1959] Supp.
r959
Here the referee has fixed the price, which is said to
be evidence of miscarriage, but this Court, upon the
Mangalmiuti
v.
principle laid down by Lord Eldon, must act on that
State of Hombay valuation, unless there be proof of some mistake, or
some improper motive, I do not say a fraudulent one;
Kapur J.
as if the valuer had valued something not included, or
had valued it on a wholly erroneous principle, or had
desired to injure one of the parties to the contract;
or even, in the absence of any proof of any of
these things, if the price were so excessive or so small
as only to be explainable by reference to some such
cause ; in any one ·of these cases the Court would
refuse to act on the valuation ".. It does not a.ppear
that in that case the words "fair and equitable"
were used but that is implied in every reference. for
valuation to be made by an agreed .referee. He cannot
act in a fanciful or a corrupt manner or with puerile
motives nor can be make a valuation which be does
not consider to be fair and equitable.
In cases of transfer of property the form of contract
to buy and sell may make a provision and very often
such a provision is made that the price payable shall
be that which a certain valuer shall fix.
Such a
requirement is an express condition or a condition
implied in fact qualifying the obligation of the buyer
to pay tbe price and such a contract cannot be performed unless the valuation first takes place. Such a
condition is a necessary condition or an inherent condition.
Williston on Contracts, 'Vol. 3, s. 800; Firth
v. Midland Railway Go. (1).
In such contracts it must
be assumed that the parties laid weight on the particular individuality of the valuer.
Accordingly if the
valuer dies. or refuses to act the buyer cannot be
compelled to pay the price.
A similar condition is
common in long-term leases and in provisions for
renewal of leases and where the parties choose to abide
by the determination of a valuer and that valuation
is not acceptable to one of the parties, Courts will not
interfere, the only exception being fraud, mistake or
misconduct.
·
In Vickers v. Vickers(') which was a suit for specific
{1) (1875) L.R. 20 Eq. 100, 112.·
(2) (1867) L.R. 4 Eq. 529.
(2) S.C.R.
SUPREME COURT REPORTS
197
performance of a contract enforcing an option of
r959
purchase where the stock was to be valued in the usual .
b
1
d ·
f
h
l
M angalnzurti
way y two va uers an
one o
t e va uers was
not allowed to proceed, it was held that there was no state 0;· Bombay
contract between the parties which the Court could
specifically enforce. Sir W. Page Wood, V. C., said at
I•apur J.
p. 535:
.
"If a nomination of that kind fails, or if the
two persons named do not make their award, this
Court has said there is no constat of the price ; the
contract is not a complete contract, and there is
nothing on which it can act".
In Weekes v. Gallard (1) where a contract was entered
into for the sale of certain property, the price to be
fixed by two valuers who afterwards valued the property at inadequate price, it w'as held that in the abence of fraud or collusion on the part of the valuer,
the buyer was entitled to specific performance of the
contract. Lord Romilly said :-
"The court has really no discretion in the matter.
The discretion of the court is bound, as Lord Ellenborough says, by fixed rules. In one case of this kind
a house and furniture were valued at three times their
value, and yet there was a decree for specific performance. The only defence to such a suit would be
fraud or collusion".
A valuer may, in one sense, be called an arbitrator but
not in the proper legal sense of the term. Per
Lindley, L. J., In re Carus Wilson & Greene (2).
But
there is this difference between arbitration and valuation that the object of the former is to settle a dispute
which has arisen and of the latter to avoid a dispute
arising.