When Plain Text Of Lease Deed Reveals Intention, Purposive Or Ex-Post Facto Construction Unnecessary: Supreme Court
The Apex Court held that where the intention of the parties is discernible from the plain and ordinary meaning of the document, there is no necessity to resort to purposive interpretation or rely upon ex-post facto conduct
The Supreme Court, while emphasising that the nomenclature of a Lease Deed is not decisive of its character, held that when the language employed is clear and unequivocal, the literal rule of construction must prevail.
The Court held that importing intention from surrounding circumstances or subsequent conduct is unwarranted where the document itself speaks with clarity.
The Court was hearing a civil appeal arising from a second appeal in which the High Court had reversed concurrent findings of the Trial Court and First Appellate Court that a registered instrument created a 99-year lease.
A Bench comprising Justice Pankaj Mithal and Justice S.V.N. Bhatti, while setting aside the High Court’s judgment, observed: “We note that interpreting intention through purposive construction or through ex-post facto circumstances is unnecessary when the intention is understood from the plain and ordinary meaning of the text.”
The Bench further underscored that “there is no doubt that the nomenclature alone of the document is not the decisive factor of the nature of a document; it is the text and the context that point to the obligations undertaken by the parties to a written document”.
Background
The suit property belonged to the original owner, who during her lifetime executed a registered document styled as a “lease deed” in favour of the appellant organisation.
The instrument recorded that the property was demised for establishing a centre and for carrying out the aims and objectives of the organisation, for a period of 99 years on an annual rent.
Subsequently, the lessor executed a registered deed cancelling the lease and issued notice calling upon the appellant to surrender possession. Thereafter, the property was sold to third parties.
The appellant instituted a civil suit seeking a declaration of its leasehold rights, recovery of possession, and injunction. The Trial Court decreed the suit, holding that the unilateral cancellation was illegal and that the subsequent purchasers were bound by the subsisting lease. The First Appellate Court affirmed these findings.
In the second appeal, the High Court framed a substantial question of law concerning the nature of the document and held that the instrument did not create a leasehold right. Consequently, the suit was dismissed.
The lessee approached the Supreme Court.
Court’s Observations
At the outset, the Apex Court reiterated settled principles distinguishing a lease from a licence, referring to the classic exposition in Associated Hotels of India Ltd. v. R.N. Kapoor, which underscores that the substance of the document must prevail over its form and that the real test is the intention of the parties.
The Bench restated the broad canons of construction: “The contract is first constructed in its plain, ordinary and literal meaning… If there is an absurdity created by literally reading the contract, a shift from literal rule may be allowed… Lastly, the contract may be purposively constructed in light of its object and context… This approach must be used cautiously.”
Examining the recitals and operative clauses of the document, the Court noted that the lessor had expressly used the words “hereby demises,” provided for a fixed term of 99 years, stipulated annual rent, and permitted alterations and construction by the lessee. The covenants extended to heirs, successors and assigns.
The Court observed that when the language of a document is clear, courts must derive intention directly from the text, stressing that “if the words in a contract/deed are clear, there is very little the courts must do in the construction of the contract in determining the intention of the parties.”
The Bench disapproved the High Court’s reliance on cross-examination and subsequent conduct to infer intention, holding that recourse to ex-post facto circumstances is unwarranted where literal construction yields a clear conclusion, holding that “the document’s nomenclature, text and context lead to only one conclusion: that Defendant No. 1 entered into a 99-year lease deed.”
It further held that “the unilateral cancellation, in the facts and circumstances of this case, is illegal, and it should be understood as having interfered with the right of the Plaintiff to remain in possession… for 99 years.”
The Court clarified that retention of occupation of a portion of the building by the lessor did not negate the lease, as exclusive possession must be assessed with reference to the demised portion. On this reasoning, the Court concluded that the High Court erred in re-characterising the lease as a licence and in interfering with concurrent findings of fact.
Conclusion
Holding that the intention of the parties was clearly manifested in the plain and ordinary meaning of the instrument, the Supreme Court set aside the impugned judgment of the High Court. It restored the decrees of the Trial Court and First Appellate Court, recognising the appellant’s subsisting leasehold right for the stipulated term.
The civil appeal was allowed. No order as to costs.
Cause Title: The General Secretary, Vivekananda Kendra v. Pradeep Kumar Agarwalla and Others (Neutral Citation: 2026 INSC 199)
Appearances
Appellant: Advocate Rutwik Panda
Respondents: Advocate Ashok Panigrahi