Holding

The Court held that the parties' correspondence amounted only to an executory agreement to lease, lacking an actual demise, and therefore fell outside Section 2(n) of the Bombay Stamp Duty Act, making it not chargeable to stamp duty and permitting assignment of its benefit.

Summary

The State of Maharashtra invited tenders for a 99‑year lease of a plot in the Backbay Reclamation area. Atur India Pvt. Ltd. responded as a promoter, seeking to transfer the lease benefit to a cooperative housing society. The Collector accepted the tender but did not effect an actual demise, and later demanded stamp duty on the basis that a lease had been created. The High Court initially upheld the demand, but on appeal held that the parties had only entered into an agreement to lease, not a lease, and that the benefit could be assigned to the cooperative society, quashing the stamp duty demand. The Supreme Court affirmed this view, holding that the instrument lacked an actual demise, fell outside Section 2(n) of the Bombay Stamp Duty Act, and therefore was not chargeable to duty; the non‑transfer clause was not enforced, allowing assignment of the benefit. The appeal was dismissed.

Issues considered

The nature of the instrument between the State and Atur India – whether it constituted a lease chargeable to stamp duty under Article 36 of the Bombay Stamp Duty Act or merely an agreement to lease.
Whether the clause prohibiting transfer or assignment of the lease benefit was enforceable and if the benefit could be assigned to a cooperative society.
Whether Section 2(n) of the Bombay Stamp Duty Act applies to an executory agreement to lease.
The validity of the stamp‑duty demand made by the Superintendent of Stamps.

Legislation cited

Bombay Stamp Duty Act, 1958s. 2(n), s. 3, s. Schedule I-Article 36
Code of Civil Procedure, 1882s. 375
Law of Property Act, 1925s. 205(1)
Registration Acts. 2(7)
Transfer of Property Act, 1882s. 105

Subjects

leaseagreement to leasestamp dutyBombay Stamp Duty Actassignment of leasetransfer clauseproperty lawcooperative societyexecutory agreement

Judgment

STATE OF MAHARASHTRA AND ORS. A
v.
ATUR INDIA PVf. LTD.

FEBRUARY 11, 1994

[M.N. VENKATACHALIAH, C.J. AND S. MOHAN, J.) B

Bombay Stamp Duty Act, 1958: Sections 2(n), 3, Schedule I-Article
36.

Tender inviting offers for lease of plot-Acceptance of lease tender C
without effecting actual demise-Agreement terms not proving relationship of
lessor and lessee-Agreement held not of lease but only agreement to
lease-Such an agreement does not fall under section 2(n) and not chargeable
to duty.

Agreement to lease-Clause prohibiting trans/er or assignment of D
rights-When such clause is not enforced benefit under it can be assigned.

Transfer of Property Act, 1882: Section 105.

Agreement to lease-Agreement of leas~istinction between.
E
The appellant-State issued notice on 30.11.1970 inviting offers for
lease of a plot for putting up multi-storeyed building thereon. The notice
stipu~ated that (i) the use of building was for private residence only; (ii)
the lessee would be put in possession of the plot on his executing the
agreement to lease; and (iii) the lessee was debarred either directly or F
indirectly from transferring, assigning or encumbering or parting with
interest under the agreement. The respondent made an offer on 15.12.70
and in its accompanying questionnaire jQrm specifically stated that the
offer was made as a promoter as the cbll.pany propose to construd the
building on the plot and sell the flats on ownership basis and the prospec-
tive purchasers would form a cooperative society to which the rights of G
company including the rights of lease would be transferred. By its letter
dated 1.1.1971, the Collector informed the respondent that the Government
had accepted its tender for lease, but also stated that the actual demise
was not affected to. Thereafter, the respondent requested the appellant for
execution of lease in favour of sociefy which was specifically acceded to by H
881
882 SUPREME COURT REPORTS [1994) 1 S.C.R.

A the Collector. However, subsequently, the Collector impounded correspon-
dence between the parties on the ground that the agreement arrived at
between them amounted to lease under Article 36 of the Bombay Stamp
Duty Act, 1958 and accordingly demanded stamp duty on the basis that
there was a lease from the Govt. to the society.

B The respondent filed a writ petition in the High Court which held
that the demand was legal as Article 36 of Schedule-I of the Act was
applicable to the case. On appeal, the Division Bench of the High Court
held that the agreement between the parties was agreement to lease; but )-
that agreement was not for the benefit of the respondent but for the
C cooperatin society. Accordingly, it reversed the decision of the Single
Judge, quashed the demand and directed the State Govt. to execute lease
in favour of society.

In appeal to this Court, it was contended on behalf of the State that
having regard to the terms of agreement, it was clear that there could not
D be any assignment of benefit of contract.

On behalf of the respondent it was contended that (i) the c!ause
debarring the licencee either directly or indirectly from transferring or
assigning interest under the agreement was never enforced and, therefore,
E it was open to the respondent to assign benefit in favour of society to which
the Collector ·gave bis consent; and (ii) what was agreed between the
parties was nothing more than an agreement to lease which required
neither registration nor was it chargeable to duty.

Dismissing the appeal, this Court
F
HELD: 1. The facts mentioned are clearly indicative of an agreement
to lease and nQt an agreemen( Of lease. The notice of the 'appellant, the
offer of the respondent and the acceptance of the Collector of the tender
of respondent for lease merely constitute an agreement to lease. Clause 13
of the agreement clearly contemplates that the licensee will be put in
G possession of the plot on his executing the agreement to lease. Therefore,
it is cle?r that by the respondent accepting the offer, the relationship of
lessor and lessee between the appellant and the respondent had not come
to be established. Further, there was no actual demise on the date of the
accepting of tender. Therefore, it is only an agreement to lease. It does not
H fall under section 2(n) of the Bombay Stamp Duty Act, 1952 in which case,
y

STATE v. ATUR INDIA LTD. (MOHAN,J.] 883

it is not an instrument chargeable to duty and the question of impounding A
does not arise. Much less, there could be a demand for stamp duty.
[894-D, 899-G-H-900-A]
2. The clause prohibiting the licensee from transferring or assigning
benefit of the agreement was never enforced at any point of time. If really,
that was so, the appellant would not have agreed to the respondent's B
transferring the right, title and interest in favour of the cooperative society.
The request made by the respondent for execution of lease in favour of the
-( cooperative society was specifically acceded to by the Collector. In law, the
benefit of such an agreement can be assigned. [894-A-C-900-C]

Woodfall, Law of Landlord and Tenant Vol. I, 28th Edn., 1978, pages C
127, 184 and 185; Hill & Redman's, Law of Landlord and Tenant, 17th Edn.,
Vol. I, page 100; Woodfall Landlord and Tenant 25th Edn., p. 286 and 287.
and Molla, 'The Transfer of Property Act', 7th Edn. p. 647, referred to.

Gree.n v. Powes-Lyon, [196011 All E.R. 301 and Tiruvenibai & Anr. v. D
Smt. Lilabai, [1959) 2 Supp. S.C.R. 107, relied on. ·

Hemanta Kumari Debi v. Midnapur Zamindari Co. Ltd., (1919) LR.
46 A, 240; Panchanan Bose v. Chandra Charan Misra, 1910 I.L.l. 37 Cal.
808 and Walsh v. Lansdale, (1882) 21 Ch. D. 9, cited.

CIVIL APPELIATE JURISDICTION: Civil Appeal No. 3570 of E
1993.

From the Judgment and Order dated '13.7.92 of the Bombay High
Court in A. No. 1371/90 @ W.P. No. 2494 of 1983.

S.K. T>holakia, S.M. Jadhav ~d A.S. Bhasme for the Appellants.
F

Harish N. Salve, D.A. Dave and Sunil Dogra for P.H. Parekh for the
Respondent.

The Judgment of the Court was delivered by
G
-( MOHAN, J. 1. The. respondent is a company incorpor3,ted under the
Companies Act. It carries on business of construction of multi-storeyed
buildings and selling terments therein on ownership basis in accordance
with the provisions of Maharashtra Ownership Flats (Regulation of promo-
tion and construction of sale, management and transfer) Act, 1963. H
884 . SUPREME COURT REPORTS [1994] 1 S.C.R.

A 2. In the year 1968, the Government of Maharashtra started reclama-
tion work in the area known as Backbay Reclamation area abetting Bombay
City on the Cuffee Parade and Nariman Point. The object of reclamation
was to provide for construction of multi-storeyed buildings. The reclaimed
land was divided into five blocks; each was given number; for block No. V,
the appellant (State of Maharashtra) issued the invitation to the public to
B make offers for purchase of plot of land for putting up multi-storeyed
buildings. The plots and structures were to be given on 99 years lease at a
specified rates.

3. Pursuant to the advertisement, the respondent offered to secure
C the plot. It made an offer along with the letter dated 15.12.1970 in respect
of plot no. 46, block No. V, Backbay Reclamation Estate, measuring 2,500
. square metres. The respondent also filed a questionnaire as required to be
' filled in accordance with the advertisement in which it was clearly men-
. tioned that the offer was as promoter.

D 4. On January 1, 1971, the Collector of Bombay informed the respon-
dent that the State Government had accepted the tender for lease of the
plot at the rate of Rs. 2,225 per Sq. Metre. The respondent was also called
upon to make payment of security deposit of Rs. 75,000. This was complied
with. A guarantee bond was also furnished for a sum of Rs. 3,04,000. A
E cheque of Rs. 300 was deposited towards the cost of preparation of
agreement. In the letter dated 23.2.1971, it was stated, drawing the atten-
tion to the answer in the questionnaire that the respondent was acting as
a promoter and the lease might be granted in favour of co-operative
society.

F 5. Thus, it was made clear that the company will be acting as the
promoter and builder for the aforesaid scheme. The lease of the plot will
be taken in the name of cooperative housing society. A specific request was
made to the Collector to make necessary provisions for grant of_ lease in
the name of the co-operative society. On 16.3.1971, the Collector of Bom-
G bay informed the respondent that the Government had sanctioned the lease
of the plot in favour of respondent as promoter of the co-operative society.

6. On June 21, 1972, the respondent informed the Collector that it
had agreed to sell the plots in the buildings and the purchasers of the said
·flats would form a co-operative society under the name of Basant Co-
H operative Housing Society Limited. The respondent informed the Govern-
y

STATE v. ATUR INDIA LTD. [MOHAN,J.] 885

ment that the Co-operative Society was registered. On 30.7.1974, the A
building was completed and completion certificate was obtained. The
Collector sent a reply dated 13.12.1977 informing the respondent.

7. On receipt of this letter, a request was made that a deed of lease
be prepared in the name of the Navrang Basant Co-operative Housing
Society Ltd. at the earliest convenience. As the Secretary, Revenue Depart- B
ment, Ministry of Revenue & Forests Department did not respond to the
--( request, another letter was written on 17.2.1978 relating to the demand for
execution of lease. On 25.7.1980, the Collector of Bombay informed the
respondent that a direct lease deed in respect of plot No. 101 will be
executed in the name of co-operative housing society provided the respon- C
dent being the confirming party subject to charging of premium under the
following terms:

"(a) Amount equal to the stamp duty chargeable on a docu-
ment between the original allottee and the Government.
D
(b) Amount equal to the stamp duty chargeable on a document
of assignment by the original allottee to the co-operative society,
company etc. had the lease deed been executed with the original
allotted.

(c) 50 per cent of the unearned income i.e. 50 per cent of the E
difference between the valuation of the land at the time of the
original allotment and at the time of transfer. In case the lease
deed is to be executed with co-operative society the date of triµisfer
for the purpose of determining the value of the land for purposes
of calculating the unearned income should be the date on which F
the society has been registered. In the case of companies etc. also
the same criteria should be applied provided the company is
registered on a date later to the date of original allotment. Other-
wise the date on which request for execution of lease in the name
of such company etc. is made or the date on which the transfer G
has taken place.

(d) Legal expenses i.e. expenses on preparation of the agree-
ment to lease which may be done away with plus expenses on
preparation of the lease deed which might have been entered into
which the original allottee as the case may be. H
886 SUPREME COURT REPORTS (1994] 1 S.C.R.

A (e) Registeration charges with reference to (d) above."

8. The respondent, thereafter addressed several communications
informing the Collector that the assumption that the company was trans-
ferring the leasehold interest in favour of the co-operative housing society
is entirely misconceived. It was pointed out that right from the inception,
B it has been clearly held out that the lease is to be executed in favour of the
co-operative society formed by the purchasers of the flats. The Collector
specifically agreed to this course. It was further stated that at the time of
offer itl>elf, it was disclosed that the company was a promotor or builder
and the lease was never to be executed in its favour. Therefore, the
c Collector refu:;ed to pay any heed to the request made by the respondent
to execute the lease in favour of co-operative housing society without
demanding premi~~s and imposing other conditions on the assumption that
the leasehold right~ had to be transferred by the respondent in favour of
co-operative housing society.

D 9. On February 24, 1983, the Superintendent of Stamps addressed to
the respondent inter alia reciting that by virtue of certain correspondence
between the respondent and the Government of Maharashtra, the respon-
dent had agreed to abide by certain terms and conditions of lease to be
executed in respect of plot no. 101. The letter further recited that the lease
E had not been executed by the respondent. Therefore, the Superintendent
claimed that the agreement .arrived at by correspondence between the
respondent and the Government of Maharashtra amounted to lease falling
under Article 36 of the Bombay Stamp Duty Act, 1958. On that basis, a
demand for stamp duty for a sum of Rs. 1,86,175 was made. Failing to do
so, it was stated that the same would be recovered as arrears of land
F revenue. It was this which led to filing of Writ Petition No. 2494 of 1983
before the High Court of Bombay.

10. The learned Single Judge by judgment dated 30.8.1990 dismissed
the petition in the view that Article 36 of Schedule I of the Bombay Stamp
Act, 1958 replied .to the case. The demand was legal. In fact, the respon-
G
dent was not mere promoter. On the contrary, the respondent was a
nominee of the proposed co-operative housing society.

11.Aggrieved by the same, Appeal No. 1371of1990 was filed before
the High Court. The Division Bench by a judgment dated 23.7 .1992
H reversed the judgment of the learned Smgle Judge. It was found that the
'f
STATE v. ATURINDIALTD. (MOHAN,J.J 887

correspondence between the respondent and the Government spelt out an A
agreement to lease; but that agreement was not for the benefit of the
respondent but for the co-operative housing society. It is not open to the
State Government (appellant herein) to refuse to execute lease in favour
of the co-operative housing society on the ground that the correspondence
sets out an agreement between the Government of Maharashtra and the B
respondent herein. Accordingly, the letter dated 24.2.1983 and the demand
contained therein was quashed. The appeal was allowed and a writ of
mandamus was issued directing the State Government to execute the lease
in favour of Navrang Basant Co-operative Housing Society Ltd.

12. It is under these circumstances, the present appeal by special C
leave came to be preferred.

13. Shri S.K. Dholakia, learned counsel for the State of Maharashtra
would urge that an offer was invited on 30.11.1970. In part II of that offer,
memo of terms and conditions for lease of block V, Backbay Reclamation D
was enclosed. Condition No. 7 specifically stated that the use of the
building will be for private residence only. Condition No. 13 stipulated that
the licensee will be put in possession of the plot on his executing the
agreement to lease. More than this, under Condition No. 15, the licensee
was debarred either directly or indirectly from transferring, assigning or
encumbering or part with interest under or the benefit of the agreement E
to lease of any part thereof in any manner without the previous consent of
the Government in writing. It further stipulated that the Government will
be free to refuse to such consent or grant it in its absolute discretion.
Equally, condition No. 16 stated that the lessee will not assign or part with
possession of the demised premises or any part thereof or transfer the F
lessee's interest therein without the previous consent in writing of the
lessor. Having regard to all these terms, it is clear that there cannot be any
assignment of benefit of contract. On 15.12.1970, the respondent wrote a
letter making this offer. The Government in its reply dated 1.1.1971 had
stated that the Govemment has been pleased to accept the tender for the
lease at the rate of Rs. 2,225 per Sq. Metre. The request for grant of lease G
in the name of co-op•'!rative society came to be made prior to the registera-
tion of the society. The society was registered on 21.6.1972. For five years,
nor action was taken which is rather strange .. If really, the benefit of the
contract was intended for the co-operative society, there is no justification
for remaining quiet for these long number of years. Therefore, as learned H
888 SUPREME COURT REPORTS [1994) 1 S.C.R.

A Single Judge rightly held that the contention on behalf of the respondent
is purely technical. What remained to be done was mere execution of a
document. Thus, it is clear the priVity of the contract was between the State
of Maharashtra and the respondent, the co-operative society being
nowhere in the picture.
B 14. In opposition to this, Mr. Harish N. Salve, learned counsel for
the respondent would urge that apart from answering the questionnaire on
23.2~1971, it was specifically stated that the company proposed to construct
the building on the abovesaid plot and sell the flats on ownership basis.
)-
Thereafter the purchasers of the flats will form a co-operative housing
c society to which the rights of the company including the right of lease of
plot will be transferred. On that basis, the request was made for granting
the lease in the name of the said co-operative housing society. This was the
specific request made to the Collector. On 16.3.1971, the responaent
received a letter from the Collector stating that Government has sanctioned
D the lease of the above plot in favour of the respondent ~s promoters of a
co-operative housing society. It was on this basis that the request was made
on 21.6.1972 dra\ving the attention of the Collector to the letter dated
16.3.1971 and permission was sought to transfer the right, title and interest
in favour of Basant Co-operative Housing Society Ltd. after the formation
of Society. On 13.12.1977, the Government sanctioned the request to
E transfer rights, title and interest in plot No. 101 to the Basant Co-operative
Housing Society. Therefore, by-passing all these, to merely go by the terms
and conditions of a licence and to contend that what was granted was a
lease and nothing further remained excepting the execution of a formal
lease deed is not correct. When the tender of the respond~nt was accepted,
F it was nothing more than an agreement to lease. It is open to the
respondent's society to assign the benefit under that agreement. If really
what was agreed to between the appellant State and the respondent is
nothing more than an agreement to lease it does not require registration.
The benefit of it can be assigned in favour of the co-operative society to
which the Collector gave his consent and permitted the transfer. Now to·
G contend that it was an agreement of lease and therefore, liable to stamp
duty ignores· the important fact that throughout the respondent acted only
as promoters with the knowledge and consent of the appellant. Besides,
clause 15, on which reliance is placed now, was never enforced. >--

H 15. A brief analysis of the facts may be made before we go to the
STATE v. ATUR INDIA LID. (MOHAN,J.] 889

legal aspect. A
16. On 30.11.1977, a notice was issued inviting offers for the lease of
various plots from Block V, Backbay Reclamation Estate which specifically
mentioned plot no. 46 (which is re-numbered as plot no. 101) with which
we are concerned. To the said notice was annexed in part II, a memo of
terms and conditions for the lease. Clauses 7, 13, 15 & 16 are relevant for B
our purposes and they are extracted below:

"7: The user of the building will be for private residence only.

13: The licensee will be put in possession of the plot on his
executing the agreement to lease which will be prepared by the C
Solicitor to Government Law & Judiciary Department, at the
entire cost of the licensee including s.tamp duty and registeration
charges. The licensee will have to pay a deposit of Rs. 300 towards
the professional charges of the Solicitor to Government.

15: The licensee will not directly or indirectly transfer, assign,
D
encumber or part with the interest under or the benefit of the
agreement to lease of any part thereof in any manner without the
previous consent in writing of the Government. Government will
be free to refuse such consent or grant it, subject to such conditions
including a condition regarding the payment of premium as E
Government may in its absolute discretion think fit.

16: The lessee will not assign or part with possession of the
demiseJ premist.-s or dny part thereof or underlet or transfer the
lessee's interest th(.'.rein without the previous consent in writing of
the lessor. The lessor will be at liberty to refuse such consent or F
grant it object to such conditions including a condition requiring
payment of premium as the lessor may in his absolute discretion
think fit."

17. But w:1at is necessary to notice is the draft agreement of licence G
clearly stated in clause II as under:

"Noth.mg in these presents contained shall be construed as a
demise in Jaw of the said land hereby agreed to be demised or any
part thereof so as to give to the licensee any legal interest therein
until the lease hereby contemplated shall be executed and H
890 SUPREME COURT REPORTS (1994] 1 S.C.R.

A registered but the licensee shall only have a licence to enter upon
the said land for the purpose of performing this agreement."

18. On this, the respondent made an offer on 15.12.1970 in the
prescribed form duly stamped along with annexures enclosing the receipt
for payment of Rs. 75,000 a$ earnest deposit. In the questionnaire which
B ·accompanied this offer, it was stated as under:
'The company proposes to sell the flats in the said proposed
building on ownership basis and the purchasers of such flats will
form a co-operative society or an incorporated body to whom the
property and the rights of the company will be transferred."
c
19. On 1.1.,1971, the Collector wrote to the respondent as under:

"The Government has been pleased to accept your tender for
. the lease of the above plot at the rate of Rs. 2,225 per sq. Metre."
D 20. On 23.2.1971, the respondent requested the Collector to move
the Government for the issue of necessary orders for the lease of plot. It
was specifically stated in that letter as under:

"We would also like to inform you that at the time of making
the offer for the above plot, in the accompanying questionnaire
form we have stated that the company proposes to construct the
building on the above plot and to sell the flats on ownership basis
and the flat purchasers shall form into a co-operative society or
an iqcorporated body to which the rights of the company including
the rights for the tease of the above plot will be transferred. As
F such, the company will be acting as the promoters or the builders
for the aforesaid scheme and the lease of the plot will be taken by
us in the name of a co-operative society or an incorporated body
to be formed or constituted hereafter.

In these circumstances, we would request you that necessary
G
provision for granting lease in the name of a co-operative society
or an incorporated body as aforesaid, may please be made in the
orders to be passed by the Government."

21. Referring to this letter, the Collector in his reply dated 16.3.1971
. H stated as under:
y

STATE v. ATUR INDIA LTD. [MOHAN,J.) 891

,, "No. SB/CC'3/LND 2832 (46) A
~
Office of the Collector of Bombay,
(Survey Branch)
Old Custom House
Fort, Bombay-1.
B
Dated 16.3.1971

To

Mis Atur India Pvt. Ltd.,
Civil Engineers, 311, Mirabelle, c
33A, New Marine Lines,
Bombay-20.

Gentlemen,

Sub : Lease of plot No. 46, Block V, Backbay Reclamation. D

Please refer to your letter dated 23.2.1971.

2. Govt. has sanctioned the lease of the above plot in your
favour as promoters of a co-operative housing society or an incor-
porated body to be formed by you, on the ground rent calculated E
at 6 1/2% per annum on the value of the land at Rs. 2297 per sq.
metre subject to the terms and conditions detailed in the accom-
panying memo whose terms and conditions have already been
+ agreed to by you.
F
3. I am requesting the Asstt. Solicitor to Government L & J.
Deptt. to take in hand the preparation of the draft agreement to
lease.

Yours faithfully.
G
sd/
Collector of Bombay
-<
Copy forwarded with compliments to the:

Asstt. Solicitor to Govt. L & J. Deptt., with reference to G.R. & H
892 SUPREME COURT REPORTS [1994] 1 S.C.R.

A R & F Deptt. No. LBL 2570/290652-AI, dated 3rd March, 1971,
please take in hand the preparation of the draft agreement to lease.

Copy submitted for information to the Secretary to Gqvt. R & F
Deptt., A-I, Branch Sachivalaya.

B sd/
Collector of Bombay"

22. To this Jetter was enclosed the draft agreement to lease. On
16.2.1972, the Collector wrote to the respondent "as you have furnished the
required undertaking on stamp paper, the possession of the above plot may
c be deemed to have been handed over to you with effect from the date of
this letter." On 21.6.1972, the respondent informed the Collector that it
agreed to "sell the flats in the building under construction and the pur-
chasers would form a co-operative society under the name of Basant
Co-operative Housing Society Ltd. and that the society is being registered
D shortly. On that basis, it was requested to grant permission to transfer the
rights, title and interest of the respondent in favour of Basant Co-operative
Housing Society. The building was completed sometime in 1974 and Bom-
bay Municipal Corporation granted occupation certificate by a letter dated
30.7.1974. On 8.8.1977, the Basant Co-operative Housing Society Ltd. came
E into being. On 13.12.1977, the following letter was addressed to the respon-
derJ:

"No. SB/CC3/LND-2832 (101)
+
Collector's office,
F Survey Branch,
Old Custom House
Fort, Bombay.

Dated 13.l'.P977.
G
To

The Secretary,
M/s. Atur India Pvt. Ltd.,
311, Mirabelle, ·
H 33A, New Marine Lines,
y
STATE v. ATUR INDIA LTD. [MOHAN, J.] 893

Bombay-20. A
Sub : Lease of Plot No. 101, Block V, B.B.R. to Mis Atur India
P. Ltd.,

Sir,
B
Please refer your letter No. Al/110/71-72/582 dated 21st June, 1972.
Govt. has sanctioned your request to transfer rights, title and
interest in the plot No. 101 from Block V, Backbay Reclamation
to the Basant Co-operative Housing Society Ltd.

Yours faithfully, c
Sd/-
For Collector of Bombay."

Whereupon the request was made on 17.2.1978 reiterating the demand to
execute the lease in favour of the society. It was at this stage, the Collector D
wrote a letter dated 25.5.1978 demanding stamp duty on the basis that there
was a lease from the Appellant Government to the respondent and onward
to the society and further demanding unearned increase @ 50% of the
difference between the market value and the price at which allotment was
made. On 24.2.1983, a letter was addressed by the Superintendent of E
Stamps to the respondent requiring the respondent to pay stamp duty. The
correspondence was impounded on the ground that the agreement arrived
at by the correspondence in this case amounted to lease.

23. On a careful examination of these documents, the following
emerge: F

(i) What was contained in the notice dated 30.11.1970 was only an
offer to lease of land and the offer was specifically as promoter
which is evident from the answer to the questionnaire which has
been extracted above. G
(ii) The appellant stated that it was pleased to accept the tender
of the respondent for the lease. At that time, the appellant was
aware· of the offer of the respondent as promoter.

(iii) Right from 23.2.1971, again and again the respondent H
894 SUPREME COURT REPORTS [1994) 1 S.C.R.

A reiterated his position as promoter.

(iv) A request was made on 7.12.1977 for execution of lease in
favour of the co-operative society. That was specifically acceded
to by the Collector on 13.12.1977.

B (v) There was no a~tual demise on the date of acceptance of the
offer of tender of the respondent. Even on '16.2.1972, it was only
a case of deemed possession.

24. The notice dated 30.11.1970 contained various clauses requiring
the use of building only for private residence and debarred from transfer-
C ring or assigning the right. Clause 15 was never enforced at any point of
time. If really, that was so, the appellant would not have agreed to the
respondent's transferring the right, title and interest in favour of the
co;operative society. Therefore, the stand of Mr.. Harish.N. Salve, learned
counsel for respondent that clause 15 was not enforced, has to be accepted.
D 25. The facts mentioned above are clearly indicative of an agreement
to lease and not an agreement of lease. The distinction between the two may
b~ seen first with reference to English law. Woodfall in Law of Landlord
and Tenant, Volume I, 28th Edition, 1978 at page 127 states as under:

E "A contract for a lease is an agreement enforceable in law whereby
one party agrees to grant and another to take a lease. The expres-
sions "contract for lease" and "agreement for lease" is to be pref-
fered as being more definite, agreement frequently means one of
many stipulations in a contract. A contract for a lease is to be
distinguished from a lease, because a lease is actually a conveyance +
F of an estate in land, whereas a contract for a lease is merely an
agreement that such a conveyance shall be entered into at a future
date." (Emphasis supplied)

In contradistinction to this, in the case of a lease, there must be a words
G of demise. On this Woodfall states at page 184 as under:
"The usual words by which a lease is made are "demise" and "let";
but any words which amount to a grant are sufficient to make a >- .
lease. Whatever words are sufficient to expla1n the intent of the
parties, that the one shall divest himself of the possession and the
H other come into it, for any determinate time, whether they run in
y

STATE v. ATURINDIALTD. [MOHAN,J.] 895

the form of a licence, covenant or agreement, are sufficient, and A
will in construction of law amount to a lease for years as effectually
as if the most proper and pertinent words had been used for that
purpose; for if the words used are sufficient to prove a lease of
land, in whatsoever form they are introduced, the law calls in the
intent of the parties, and moulds and governs the words accord-
ingly." . B

Again at page 185, it is stated:

"Although no specific words are necessary to create a lease, yet
there must be words used which show an intention to demise, C
therefore, where, on the letting of land to a tenant, a memorandum
was drawn up, the terms of which were, that he should on a future
day bring a surety and sign the agreement, neither of which he ever
did; it was held, that the memorandum was a mere unaccepted
proposal, and did not operate as a lease. (Doe d. Bingham v.
C,artwright, [1820] 3 B & Aid. 326.)" D
26. Hill & Redman's in Law of Landlord and tenant, 17th Edition,
volume I at page 100 dealing with this aspect of the matter states as under:

"DISTINCTION BETWEEN LEASE AND AGREEMENT FOR
LEASE E

Rule 40

(1) A lease is a transaction which as of itself creates a tenancy in
favour of the tenant.
F
(2) An agreement for a lease is a transaction whereby the parties
bind themselves, one to grant and the other to accept, a lease.

(3) If the agreement for a lease is one of which specific perfor-
mance will be granted the parties are, for most but not all purposes, G
in the same legal position as regards each other and as regards
third parties as if the lease had been granted.

(4) Whether an instrument operates as a lease or as an agreement
for a lease depends on the intention of the parties, which intention
must be ascertained from all the relevent circumstances. H
896 SUPREME COURT REPORTS f1994] 1 S.C.R.
A 50. An instrument in proper form (a); by which the conditions of
a contract of letting are finally ascertained, and which is intended
to vest the right of exclusive possession in the lessee-either at once,
if the term is to commence immediately, or at a future date, if the
term is to commence subsequently- is a lease which takes effect
from the date fixed for the commencement of the term without the
B necessity of actual entry by the lessee (b). An instrument which
only binds the parties, the one to create and ~he other to accept a
lease thereafter, is an executory agreement for a lease, and al-
though the intending lessee enters, the legal relation of landlord
and tenant is not created."
c
27. A useful reference may be made to Green v. Bowes- Lyon, (1960)
1 All E.R. 301. This ruling clearly brings out the distinction between an
agreement to lease and a lease. At page 304-305, it is held by Pearson, J
as under:
D
"The defendant's contention is that the instrument dated March,
19, 1958, that is the instrument called a reversionary lease, is in
truth an agreement between the landlord and the tenant "for the
grant to the tenant of a future tenancy of the holding on terms and
from a date specified in the agreement" within the meaning of S.
E 28. If that is right then the defendant's sub-lease from the plaintiff
was the "current tenancy" referred to in Section 28, and it continued
only until April 5, 1959, and no longer, and was not, therefore, a
tenancy to which Part 2 of the Act applied. So it was not continued
indefinitely under Section 24. Then on that basis it is said that the
F agreement binds the interest of the plaintiff under para 3(1) of
Schedule 6 to the Act of 1954, and that para 4 of that schedule
gives the plaintiff a right to compensation.

The question in the end is a very simple one: is the instrument of
March 19, 1958, a reversionary lease or is it an agreement for the
G grant of a future tenancy?

Having regard to its name and provlSlons I hold that it is a
reversionary tenancy and not an agreement for the grant of a future
tenancy. It creates an estate and not merely a set of contractual
H rights and obligations.
y

STATE v. ATUR INDIA LTD. [MOHAN. J.) 897

There is a definition of term of years absolute in the Law of A
Property Act, 1925, Section 205 (1) (XXVII), as a term of years
"taking effect either in possession or in reversion whether or not
at a rent" and so on.

Then it is stated in WOODFALL ON LANDLORD AND
TENANT (25th Edn.), p. 286, that B

"A lease may be limited to take effect either immediately or from
a future date. It is provided by the Law of Property Act, 1925,
Section 205 (1) (XXVII), that 'term of years absolute' includes a
term of years taking effect either in possession or in reversion."
c
At p. 287 of WOODFALL ON LANDLORD AND TENANT
(25th Edn.) it is stated:

"Reversionary leases: All leases which are not to take effect in
""' possession immediately, but from a future day, are considered as
D
~ reversionary leases, within the meaning of powers to grant leases
in possession and not in reversion. In legal acceptance a lease for
years in reversion, and a future interest for years, are one and the
same: a future lease and a lease in reversion are synonymous. But
strictly speaking a reversionary lease is one granted for a term
which is to commence from or after the expiration or other deter- E
mination of previous lease."

In my view, this instrument is a reversionary lease which was
granted for a term which was to commence from and after the
expiration of the previous lease, which is the lease from Mr. Rye
to Mr. Wells, expiring on April 4, 1959, and this instrument granted
F
is a reversionary lease commencing on April 5, 1959.

It seems to me that the distinction between the reversionary lease
referred to in Section 65(3) and the agreement for a future tenancy
referred to in Section 28 is the difference between something which G
creates an estate and something which creates merely a set of
...( contractual rights and obligations."

We will now turn to Indian law:

Mulla in 'The Transfer of Property Act" (7th Edition) at page 647 dealing H
898 SUPREME COURT REPORTS [1994) 1 S.C.R.

A with agreement to lease states as under:

"An agreement to lease may effect an actual demise in which case
it is a lease. On the other hand, the agreement to lease may be
merely executory instrument binding the parties, the one, to grant,
and the other, to accept a lease in the future. As to such an
B executory agreement the law in England differs from that in India.
An agreement to lease not creating a present demise is not a lease
and requires neither writing nor registration.

As to an executory agreement to lease, it was at one time supposed
that an intending lessee, who had taken possession under an
c agreement to lease capable of specific performance, was in the
same position as if the lease had been executed and registered.
These cases have, however, been rendered obsolete by the
decisions of the Privy Council that the equity in Walsh V. Lonsdale
does not apply in India."
D
28. It it is merely an agreement to lease as to whether it requires
registration has come up for discussion of this Court in Tiruvenibai &
Another v. Smt. Lilaba~ [1959) 2 Suppl. S.C.R. 107. At page 111 it was held
as under:
E "Before dealing with these points, we must first consider what the
expression ."an agreement to lease" .means ·under Section 2(7) of
the Indian Registration Act, hereinafter referred to as the Act.
Section 2(7) provides that a lease includes a counterpart,
Kabuliyat, an undertaking to cultivate and occupy and an agree-
+
F ment to lease. In Hemanta Kumari Debi v. Midnapur Zamindari
Co. Ltd., 1919 L.R. 46 A. 240, the Privy Council has held that "an
agreement to lease, which a lease is by the statute declared to
include, must be a document which effects an actual demise and
operates as a lease." In other words, an agreement between two
parties which entitles one of them merely to claim the execution
G of a lease from the other without creating a present and immediate
demise in his favour is not included under Sec. 2, sub-section (7).
In Hemanta Kumari Debi's case (supra) a petition setting out the
terms of an agreement in compromise of a suit stated as one of
the terms that the plaintiff agreed that if she succeeded in another
H suit which she had brought to· recover certain land, other than that
y
STATE v. ATUR INDIA LTD. [MOHAN, J.] 899

to which the compromised suit related, she would grant to the A
defendants a lease of that land upon specified terms. The petition
was recited in full in the decree made in the compromised suit
under Section 375 of the Code of Civil Procedure, 1882. A snb-
sequent suit was brought for specific performance of the said
agreement and it was resisted on the ground that the agreement
in question was an agreement to lease under S. 2(7) and since it B
was not registered it was inadmissible in evidence. This plea was
rejected by the Privy Council on the ground that the document did
not effect an actual demise and was outside the provisions of Sec.
2(7). In coming to the conclusion that the agreement to lease under
the said section must be a document which effects an actual demise C
the Privy Council has expressly approved the observations made
by Jenkins, C.J., in the case of Panchanan Bose v. Chandra Charan
Misra, 1910, I.L.R. 37 Cal. 808 in regard to the construction of Sec.
17 of the Act. The document with which the Privy Council was
concerned was construed by it as "an agreement that, upon the D
happening of a contingent event at a date which was indetermillate
and, having regard to the slow progress of Indian Litigation, might
be far distant, a lease would be granted"; and it was held that "until
the happening of that event, it was impossible to determine
whether there would be any lease or not." This decision makes it
clear that the meaning of the expression "an agreement to lease" E
"which, in the context where it occurs and in the statute in which
it is found, must relate to some document that creates a present
and immediate interest in the land." Ever since this decision was
pronounced by the Privy Council the exp~essicn "agreement to
lease" has been consistently construed by all the Indian High F
Courts as an agreement which creates an immediate and a present
demise in the property covered by it."

29. Examining in. the light of above, we hold that the notice of the
appellant dated 30.11.1970, the offer of the respondent dated 15.12.1970 G
and the acceptance of the Collector of the tender of respondent for lease
dated 1.1.1971 would merely coµstitute an agreement to lease. Clause 13
...( clearly contemplates that the licensee will be put in possession of plot on
his executing the agreement to lease. Therefore, it is clear that by the
respondent accepting the offer on 15.12.1970, the relationship of lessor and
lessee between the appellant and the respondent had not come to be ff
900 SUPREME COURT REPORTS (1994] 1 S.C.R.

A established. Further as pointed out earlier there was no actual demise on
the date of the accepting of tender. Therefore, it is only an agreement to
lease. It will not fall under Section 2(n) of the Act in which case, it is not
an instrument chargeable to duty and the question of impounding does not
arise. Much less, there could be a demand for stamp duty.

B 30. It is the benefit of this agreement which is sought to be assigned
in favour of Basant Co-operative Housing Society. In the narration of facts,
we have pointed out as to how from the beginning i.e. from 15.12.1970
onwards, when the offer was made by the respondent in answer to a
questionnaire, it was made clear that the offer was made as a promoter.
C This position was again affirmed on 23.2.1971 which was accepted by
Collector on 16.3.1971. The letter from the Collector dated 13.12.1977 puts
the matter beyond doubt because the respondent's request to transfer the
right, title and interest in plot No. 101, in favour of Basant Co-operative
Housing Society was sanctioned. In law, the benefit of such a contract can
be assigned. That is precisely what the respondent did in the instant case.
D
31. In view of all these, we find that no exception could be taken to
the judgment under appeal. Accordingly, it stands dismissed. However,
there shall be no order as to costs.

T.N.A. Appeal dismissed.

+