http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 14  

PETITIONER: DAMODHAR TUKARAM MANGALMURTIAND OTHERS

       Vs.

RESPONDENT: THE STATE OF BOMBAY

DATE OF JUDGMENT: 02/02/1959

BENCH: DAS, S.K. BENCH: DAS, S.K. IMAM, SYED JAFFER KAPUR, J.L.

CITATION:  1959 AIR  639            1959 SCR  Supl. (2) 130

ACT:        Lease-Construction-Enhancement of rent-" Fair and  equitable        enhancement  as the lessor shall determine "-Lease,  whether        void  for  uncertainty-Court’s Power to determine  fair  and        equitable rent.

HEADNOTE: In 1909, 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  Rs. 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 lie 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." 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 14  

lease, and whether, in any case, the lease was void for  un- certainty. 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, (18I5) 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.L.R. 50  Mad. 595, relied on. Collier  v.  Mason,  (1858) 25 Beav. 200; 53  E.R.  613  and Tekchand Kapurchand v. Mt.  Birzabai, A.I.R. 1942, Nag. 119, distinguished. Per  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. 182

JUDGMENT: CIVIL  APPELLATE  JURISDICTION: Civil Appeals Nos.  181  and 181-A of 1955. 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 Civil Suit No. 143-A of 1944. H.  J. Umrigar, Ratnaparkhi A. O and Shankar Anand     Zinj- arde,for the appellants. W.   S. Barlingay and B. 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 14  

Berar,  Nagpur, " opened up " an area known as the  Craddock 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:- 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 renewed 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  el. 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 184 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 14  

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 185 which  the lessees were entitled under cl.  III; he  further directed  the  grant of a rebate of 25 per  cent.  to  those lessees who 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 fair and equitable  rent  was not  satisfactory, because it had gone more by the  rule  of the thumb than upon the evidence adduced in the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 14  

24 186 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 should  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(1)(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 el.   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 187 the  lessor.   Mudholkar, J., had proceeded on  the  footing that  the  primary  intention of the parties  was  that  the enhancement  must be fair and equitable and  the  adjectival clause ,as the lessor shall determine " following the word I enhancement’  being subordinate to the primary intention  of the  parties  could  be 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. I  Fair’ and I equitable’ mean fair and equitable  in  fact, and  not what the lessor subjectively considered to be  fair and equitable.  The words I fair’ and ’equitable’ both  mean I 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 14  

the  lessor shall determine’.  We consider that the words  I 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 188 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  con- struction,  then no further difficulty is presented  by  cl. 111.   The  learned  Judges of the  High  Court  unanimously expressed  the  view  that  the  lease  ’Was  not  void  for uncertainty, and in that view we concur.  There is authority in support of the view that a covenant to settle land I at a proper  rate’ or I 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  (1) and Secretary of State, for India in Council  v. Volkart  Brothers  (2)).   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  case 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  (3)  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)  (18O7) 14 Ves. 400; 33 E.R. 574. 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 14  

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  and 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  that  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 (1)  (1813) 1 M. & S. 290; 105 E.R. 108. (2)  (1815) 19 Ves. 429; 34 E.R. 576. 190 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   con- tract......... 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 Collier v.  Mason (2 ). 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  (3).  The principle laid 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 14  

that  contract  unless  it  is  vitiated  by  fraud,   undue influence,   mistake,   etc.   If,   however,   the proper construction of el.  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. 119. 191 we  have  held it to be, then the contract  itself  provides that  the enhanced rent though determined by the  lessor  in the  first instance, must be fair and equitable.  On such  a construction  the  determination of the enhancement  by  the lessor would not be final and it would be open to the  court to determine what is fair and equitable enhancement. We say this with respect, but the Patna decisions (Secretary of State for India in Council v. Nistarini Annie Mitter  (1) and  Secretary  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 the  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  of 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 that the Government (8) (1927) I.L.R. 6 Pat. 446. (9) A.I.R. 1937 Pat. 391.           192 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 Addl.   District Judge said: "  As  regards the new form of lease, it is clear  that  the clause 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 14  

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 193 The facts are set out in the judgment of my learned brother, S.  K.  Das,  J., and it is not necessary  to  repeat  them. Plots  of land measuring about 10,000 sq. ft. were given  on lease  by the Government to the appellants and  others,  for which the premium to be paid was Rs. 350 and the rent Rs. 3- 8-0  per  annum or Re. 1 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  it  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 qualified by the words " fair and equitable " the determination became clothed with a qualification which made it subject to judicial review and determination  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 the  enhancement determined would not be conclusive but  the contention is that by using these words the quality and  the quantity   of  enhancement  is  no  longer    in  the   sole determination of the lessor but the final determination must

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 14  

be of the Court because otherwise 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 obligations  contained in the first clause with a  provision for  re-entry upon failure of certain conditions.  I 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 equitable enhancement as the lessor shall determine on the grant of every renewal ". 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 language  which  left the  discretion  in  regard to enhancement of  rent  to  the lessor.   What the enhancement was to be and what  would  be fair and equitable was left to the 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 be  determined  by the  lessor or an outside valuer and it s 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 14  

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. 196 Here  the referee has fixed the price, which is said  to  be evidence of miscarriage, but this Court, upon the  principle laid down by Lord Eldon, must act on that valuation,  unless there  be proof of some mistake, or some improper motive,  I do  not  say a fraudulent one; 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 appear 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 he make a  valuation which be (toes 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 the 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 Co. (1). In such contracts it must  be assumed that the parties laid weight on the  parti- cular  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 (2) which was a suit for specific (1) (1875) L.R. 20 Eq. 100, 112. (2) (1867) L.R. 4 Eq. 529. 197 performance  of a contract enforcing an option  of  purchase where  the  stock was to be valued in the usual way  by  two valuers  and one of the valuers was not allowed to  proceed, it  was held that there was no contract between the  parties which  the  Court could specifically enforce.  Sir  W.  Page Wood, V. C., said at 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 was held that in the abence of fraud or  collusion

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 14  

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.  The  arbitrator  is called  in  to settle judicially any matter  in  controversy between  the parties and the valuer by the exercise  of  his knowledge and skill has to make a valuation the object being to  prevent  disputes  from  arising.   A  valuer  like   an arbitrator  is  required to act fairly and  diligently.   He cannot  act  in  a fanciful or a  perverse  manner  and  his determination  must  be  fair  and  equitable  whether   the authority given to him uses these words or not.  But once a (1) (1869) 21 L.T. 655. (2) (1886) 18 Q.B.D. 710. 198 valuation  is properly made the valuation is  conclusive  as between  the parties and the Court in the absence of  fraud, mistake or collusion can- no more go into whether it is fair and  equitable  than a Court can sit in appeal  against  the award  of an arbitrator as to what would be fair  amount  of damages  in  a particular case of breach of  contract.   See also Emery v. Wase (1). The decision in Gourlay v. Somerset (Duke of) (2) was relied upon by the appellants in support of their case.  That  does not,  in  my opinion, deal with the matter  now  before  us. There the suit was for specific performance of an  agreement to grant a lease.  One of the conditions of the contract was that the farm was to be let on conditions, reservations  and agreements  "  as shall be judged reasonable and  proper  by John  Gale  . "   The Court was of the  opinion  that Gale’s agency  was not of the essence of the contract and  that  it could not be contended that the contract was to end if  Gale refused to settle a lease.  The Court said : "  Suppose the reference is made to Gale ; is  his  decision liable to exception ? If it is, the decision with regard  to the  propriety of the lease will ultimately be that  of  the Court.   If not, the Court may be carrying into execution  a lease,  which  it  may  think  extremely  unreasonable   and improper.   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 ". That was a case relating to covenants other than fixation of price.  With regard to the valuation or fixation of price it was  said  that if an agreement was that the  price  of  the estate would be fixed by arbitrators and they did not fix it there was no contract of sale as the contract as to the mode of  fixing the price was of the essence of the  contract  of sale and the Court could not make a contract where there  is none.  Similarly it may be said that where the valuation  is fixed by a valuer (1)  (1801) 5 Ves. 846, 847, 848 ; 31 E.R. 889. (2)  (1815) 19 Ves. 429; 34 E.R. 576.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 14  

199 the court will hold it conclusive in the absence of fraud or mistake  or misconduct.  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. The Transfer of Property Act contains no provision by  which the  Court  is  empowered to fix rent  of  premises  demised although by legislation in the case of agricultural holdings certain   tribunals   have  been  set  up   to   make   such determinations.   The appellant relied on The New  Beerbhoom Coal  Company v. Boloram Mahata (1).  The  covenant  between the parties was:-- Within that aforesaid mouzah we will not give a pottah,  let give   settlement  to  anybody.   If  you  take   possession according  to your requirement of extra land over and  above this pottah, and we shall settle any such lands with you  at a proper rate ". A  suit  was brought by the lessees against  the  lessor  to obtain specific performance to execute a permanent lease  of a large area of land claiming benefit of the covenant  above given  and contended that the defendants were bound  to  let them the land whenever called upon to do so.  The  appellant company stated that they had negotiated with the lessor  for lease  of  the adjoining land (not of land  which  they  had agreed to lease) upon the terms that they were to pay Rs. 1- 8-0  for  waste land and Rs. 3 for cultivable land  and  the suit  was  for  the grant of  specific  performance  of  the agreement  by compelling the lessor to grant them the  lease at those rates and if the Court would not order the lease at those  rates  then at such rates as the  Court  shall  think reasonable.  The trial Court held that apart from 51  bighas mentioned in the covenant the lessor could not be  compelled to grant a lease for the remaining land of the mouzah.   The High Court affirmed this decision but on the ground that  it was  impossible to determine what was the  reasonable  rate. Sir Barnes Peacock said:- (1)  (1880) L.R. 7 I.A. 107. 200 " Their Lordships cannot think that in the present case  the court,  upon  a proper inquiry, would have  been  unable  to determine   it  (proper  rent).   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 ". These  observations of the Privy Council are relied upon  by the  appellants to support the argument that it is  open  to the  Court to determine what the reasonable rate  would  be. This  was not a case where any question of  valuation  arose nor  was  it a case where a valuation made by a  valuer  was sought to be reviewed as not being proper and apart from the fact  that the observations are mere obiter this case is  no authority  for saying that the determination of a valuer  is subject to review by courts. Another  case  which  the  appellant  relied  upon  was  The Secretary  of  State  for India  v.  Volkart  Brothers  (1). There,  in a deed of lease granted for 99 years by the  East India  Company  there was a clause for renewal  for  another like  period on the lessee paying a sum of money and "  upon such terms and conditions as should be judged reasonable  ". The  Secretary  of  State assigned a major  portion  of  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 14  

holding  to  a third party and Volkart Brothers  before  the expiry of the original lease period tendered the due  amount and  asked for renewal of the lease which the  Secretary  of State refused to renew and sued to eject the lessees and the latter  sued  for specific performance of the  covenant  for renewal.   It was held by a majority that the  covenant  was not unenforceable on account of uncertainty.  Krishnan,  J., was  of the opinion that such a covenant was too  vague  and uncertain  and  unenforceable  because  the  clauses  to  be inserted  in the contract were themselves uncertain and  the contract could not be enforced. Venkatasubba Rao, J., was of the  opinion  that  if  the parties would  not  agree  to  a reasonable rent the Court will intervene and fix it; The New Beerbhoom (1)  (1926) I.L.R. 50 Mad. 595. 201 Coal Company v. Boloram Mahata (1) was relied upon.   Courts Trotter,  C. J., was also of the opinion that  the  covenant was not too vague to be enforced.  But this again was a case not of interfering with the determination of a valuer but of specific  performance  of a contract of renewal and  it  was held  that  by taking evidence even a vague  and  indefinite covenant relating to renewal could be made definite. In  my  opinion,  therefore, the Court cannot  go  into  the question of correctness or otherwise of the determination of the lease and the appeal should therefore be dismissed  with costs. By  COURT.-In  view  of the opinion  of  the  majority,  the appeals  are allowed, setting aside the judgment and  decree of the High Court dated September 30, 1952.  No order as  to costs of the hearing in this Court. Appeals allowed,