Supreme Court holds 1967 agreement is for conducting hotel business, not deemed tenancy under Bombay Rent Act

A Bench of Justices Pankaj Mithal and S.V.N. Bhatti heard an appeal challenging the Bombay High Court’s confirmation of an appellate order which had reversed a trial court decree that had held the plaintiff to be a “deemed tenant” under Section 15A of the Bombay Rents, Hotels and Lodging House Rates Control Act, 1947. The central question was whether the agreement dated 16.08.1967, by which the plaintiff took over operation of a hotel, created a leave-and-license/tenancy relationship attracting statutory protection or merely an agreement “for conducting” the hotel business.

The Court dismissed the civil appeal and upheld the appellate and High Court conclusions that the 1967 instrument was an agreement to conduct the hotel business and not an agreement conferring tenancy or deemed tenancy rights. The judges held that the written agreement must govern and that extrinsic oral evidence was inadmissible in the absence of an exception under Sections 91 and 92 of the Evidence Act. The Court noted that the agreement’s language, its repeated reference to the parties as “Owner” and “Conductor,” the stipulation of monthly “royalty,” and clauses restricting the conductor to carry on the owner’s business pointed to a conducting arrangement. The Court, in its reasoning, observed: “The subtle distinction in the point of law, as carved out by the provisos, is that the evidence to vary the terms of an agreement in writing is not admissible, but evidence to show that there is no agreement in the first place is admissible. Thus, unless the grounds fall within the provisos read with the illustrations to section 92, there is a bar on adducing oral evidence.” The appeal was dismissed with costs of Rs. 1,00,000 payable to defendant no.1.

Background The dispute arose after the plaintiff — who took over operation of “Shri Samarthashraya Vishranti Graha” under an agreement dated 16.08.1967 — was served notice to vacate and hand over the business on 28.02.1997. The plaintiff sued for a declaration of deemed tenancy under Section 15A of the Bombay Rent Act and for injunction against dispossession. At trial, the Small Causes Court examined the agreement and extensive oral evidence and held for the plaintiff, finding that the arrangement, despite its nomenclature, amounted to a leave-and-license and therefore conferred deemed tenancy protection. The appellate bench reversed, treating the instrument as a conducting agreement and relying on contemporaneous documentary evidence including 99 receipts described as “royalty” payments and other operational indicia (electricity bills, sales tax registration, items annexed in schedule). The High Court in revision upheld the appellate view.

On appeal, counsel for the plaintiff urged contextual construction and reliance on precedent that deeds must be read in light of their object and entirety. Counsel for defendant no.1 contended that Sections 91–92 forbade admitting oral evidence to contradict the clear written terms and that the document, in text and tenor, established a conducting arrangement. The Supreme Court applied established principles of contract construction, reaffirming the primacy of plain and literal meaning unless absurdity or ambiguity justified resort to context, and held that none of the provisos to Section 92 permitted the oral evidence adduced to alter the written agreement. The Court recorded its broader observation on pleadings and evidence, quoting that “Every word that is not a help is a hindrance because it distracts,” and emphasised the need for concise pleadings. The final result was that the plaintiff’s claim of deemed tenancy failed, the appellate and High Court orders were affirmed, and the appeal was dismissed with quantified costs.

Case Details: Case No.: Civil Appeal No. 84 of 2019 (2025 INSC 466) Case Title: Annaya Kocha Shetty (Dead) through LRs v. Laxmibai Narayan Satose since deceased through LRs & Others Appearances: For the Petitioner(s): Shri B.H. Marlapalle, Senior Counsel For the Respondent(s): Mr. Chinmoy Khaladkar, Advocate (for defendant no.1); Shri Vinay Navare, Senior Counsel (for respondent no.3)