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Judgment
Valmiki J Mehta, J.—Plaintiff is the owner of tanks which store oil. These tanks are located at Shakur Basti, Delhi. Two of these tanks being tank nos. 4 and 5 were licenced to the defendant under an agreement dated 1.7.1983 (Ex.PW1/1) for a period of 3 years. As per Clause 24 in the agreement dated 1.7.1983 the three years term could be extended for another period of two years. The defendant exercised an option for renewal for the first time on 29/31.7.1986 i.e. after the expiry of the original period. Even during the so called extended period fresh tenders were called for by the defendant for storing of oil. The plaintiff participated in the tender process by offering the tanks at Rs. 40/- per metric ton per month inclusive of handling charges, and which charges were subsequently reduced to Rs. 32/- per metric ton per month by the plaintiff. The letter by which the plaintiff reduced his tender quote from Rs. 40/- per metric ton per month to Rs. 32/- per metric ton per month is the letter dated 3.3.1988 (Ex.PW1/9). The communications between the parties in this regard are contained in the correspondences dated 28.8.1987, 29.8.1987 and 2.11.1987. The defendant was not satisfied with the original rate of Rs. 40/- offered by the plaintiff and therefore again fresh advertisement was issued in the Times of India on 31.10.1987. The rate of Rs. 32/- which was mentioned by the plaintiff in his letter dated 3.3.1988 (Ex.PW1/9) is pursuant to the extension of the validity period of original tender of July, 1987 by the Times of India''s advertisement dated 31.10.1987. The plaintiff from 1.9.1987 sent to the defendant bills claiming charges at Rs. 40/- per metric ton per month for the storage charges and the handling charges. I may note that even in the original agreement, the defendant paid charges both towards storing and handling of the oil in the tanks inasmuch as the plaintiff besides storing and handling of the oil in the tanks also provided the handling facility for pumping the oil into the tanks and then later pumping out the oil from the tanks to the vehicles/wagons of the defendant when so asked by the defendant. The defendant by its letter dated 25.3.1988 (Ex.D5) contested the claim of the plaintiff made from September, 1987 at the higher rate and which rate was different from that as contained in the agreement dated 1.7.1983 (Ex.PW1/1). The plaintiff by its letter dated 11.4.1988 (Ex.PW1/10) mentioned to the defendant that the option for renewal was not exercised as per law because the same was not exercised during the currency of the original period of 1.7.1983 to 30.6.1986 and which became clear from the fact that tenders were invited by the defendant for storage of oil during the so-called extended term. The defendant by its letter dated 14.4.1988 (Ex.D6) disputed the claim of the plaintiff for higher storage charges, however in the same breath, it said that for the interim period they will pay negotiated fresh rates after entering into the fresh agreement thereby indicating that the defendant was aware that for the period post 1.7.1986 it was liable to pay rates higher than the contractual rates contained in the agreement dated 1.7.1983. Correspondence between the parties continued and the defendant kept on using the storage tank nos. 4 and 5 till 31.3.1989 and the tank no. 5 till 30.6.1989. The plaintiff in the suit therefore has crystallized the amount due to him as under:-
The defendant contested the suit and denied its liability. The defendant claimed that the agreement was extended for a period of two years with effect from 1.7.1986 pursuant to the defendant''s letter dated 29/31.7.1986 (Ex.D1). The defendant also disputed the claim of damages filed by the plaintiff.
The disputes in the present case thus pertain to the claim of the plaintiff for storage and handling charges for the tank nos. 4 and 5 from 1.9.1987 to 31.3.1989 (19 months) and additionally from 1.4.1989 to 30.6.1989 (3 months) for tank no.5.
The following issues were framed by this Court on 6.12.1995:-
Whether the respondent is liable to pay the storage charges at the rate of Rs. 32 per M.T. for the period of 1.9.1987? If so, to what effect?\\
To what amount, if any, is the petitioner entitled?
Relief.
Issues no.1 and 2 can be dealt with together and are therefore being dealt with together hereinafter.
The law with respect to exercising of an option for renewal of a lease is now well settled and contained in the judgment of the Supreme Court in the case of Caltex(India) Ltd., Vs. Bhagwan Devi Marodia AIR 1969 SC 405. The relevant paras of this judgment are paras 3 and 6 which read as under:-
At common law stipulations as to time in a contract giving an option for renewal of a lease of land were considered to be of the essence of the contract even if they were not expressed to be so and were construed as conditions precedent. Equity followed the common law rule in respect of such contracts and did not regard the stipulations to time as not of the essence of the bargain. As stated in Halsbury''s Laws of England, 3rd ed., Vol: 3, Article 281, p.165: "An option for the renewal of a lease, or for the purchase or re-purchase of property, must in all cases be exercised strictly within the time limited for the purpose, otherwise it will lapse." This passage was quoted with approval by Danckworts L.J. in Hare v.Nicoll, 1966-2 QB 130, 145. A similar statement of law is to be found in Foa''s General Law of Landlord and Tenant, 8th ed., Art. 453 p.310, and in Hill and Redman''s Law of Landlord and Tenant 14th ed., p.54. The reasons is that a renewal of a lease is a privilege and if the tenant wishes to claim the privilege he must do so strictly within the time limited for the purpose.
We may add that where no time is fixed for the purpose, an application of renewal for the lease may be made within a reasonable time before the expiry of the term (see Foa''s General Law of Landlord and Tenant, 8th ed., article 455, pp.311-12, Ram Lal Dubey v. Secretary of State of India, 29 Cal LJ 314=(AIR 1918 Cal 59), Hemanta Kumari Debi Vs. Sefatulla Biswas, . In the present case, the lease fixes a time within which the application for renewal is to be made. The time so fixed is of the essence of the bargain. The tenant loses his right unless he makes the application within the stipulated time. Equity will not relieve the tenant from the consequences of his own neglect which could well be avoided with reasonable diligence.(emphasis added)
A reference to the ratio of Caltex (India) Limited (supra) shows that unless the option for renewal is exercised before the expiry of the lease period, the option cannot be said to have been validly exercised and therefore the lessee (licensee in this case) will not be entitled to renewal even if there was a clause of renewal in the lease deed. In the present case, it is not disputed that the option of the renewal was not exercised at any time prior to 30.6.1986 when the lease expired and was exercised only for the first time on 29/31.7.1986 (Ex.D-1) by the defendant. Applying the ratio of Caltex (India) Limited (supra), I hold that no valid agreement from 1.7.1986 to 30.6.1988 could have been created inasmuch as the option for renewal was not validly exercised.
In the present case, admittedly no fresh deed has been entered into pursuant to the Clause 24 of the agreement dated 1.7.1983. Possibly, even on this ground it can thus be said that there did not come into existence a fixed period contract. There had to be a specific license agreement for a fixed period failing which, the defendant will only be a month to month licensee and not a licensee for a fixed term.
I therefore, hold that the defendant after the expiry of the original period/term on 30.6.1986, continued only as a month to month licensee.
The issue now to be addressed is whether the month-to-month license was an agreed month-to-month license at the original rates between the parties. If the defendant was a licensee similar to a tenant holding over after expiry of the lease period, then possibly the defendant will not be liable to pay license charges at market rates for the storage tank and would only be liable to pay the contractual monthly license charges which were otherwise paid for the period from 1.7.1986 to 30.6.1988 i.e. if the plaintiff would not have questioned payment of monthly license charges at the contractual rate as contained in agreement dated 1.7.1983 only then the plaintiff would not have a case to claim higher charges. The moot point however is if that is so. In my opinion, it cannot be said that the plaintiff and the defendant agreed that the defendant should be taken as a monthly licensee with respect to the storage tanks after the expiry of the original term inasmuch as admittedly the plaintiff has been sending bills for the storage tanks to the defendant with
effect from 1.9.1987 at the rate of Rs. 40/- per metric ton per month and not at the contractual rate. This action of the plaintiff in my opinion clearly shows that he had not accepted that the defendant will continue to be the monthly licensee by holding over, liable to pay license fee only as per the terms and conditions contained in the agreement dated 1.7.1983. In my opinion therefore the defendant will be liable to pay market rate of monthly license fee charges with respect to tank nos. 4 and 5 for the period as stated in para 25 of the plaint as reproduced above. I note that the plaintiff has not claimed higher charges from 1.7.1986 but only from 1.9.1987 inasmuch as the bills for higher charges were raised only from September 1987.
The issue now to be addressed is what is the rate at which defendant will be liable to pay license fee charges for the storage tanks no. 4 and 5 for the period from 1.9.87 to 31.3.89 (19 months) and additionally from 1.4.89 to 30.6.89 (3 months) so far as the tank no. 5 is concerned. Be it noted that the tank no.4 was emptied out by the defendant by 31.3.1989 i.e. the same was not used after 31.3.1989 and tank no.5 was emptied out on 30.6.1989, and consequently the plaintiff is entitled for license fee charges so far as the tank nos. 4 and 5 are concerned only till 31.3.1989 and for one tank no.5 for three more months i.e till 30.6.1989.
Learned senior counsel for the plaintiff very passionately sought to argue that the plaintiff has offered charges at Rs. 32/- per metric ton per month pursuant to the negotiations entered into with the defendant in accordance with the tenders of July/October 1987, and hence, plaintiff should be awarded license fee charges for storage and handling at Rs. 32/- per metric ton per month. Counsel for the defendant however countered that since no agreement was entered into for this rate of Rs. 32/- per metric ton per month it cannot be said that the market rate of license fee charges should be taken at Rs. 32/- per metric ton per month inasmuch as Rs. 32/- per metric ton per month could be taken as market rate only if there was a concluded agreement.
I agree with the argument as urged on behalf of the defendant inasmuch as once there is no concluded agreement at Rs. 32/- per metric ton per month, it cannot be argued by the plaintiff that this rate of Rs. 32/- per metric ton per month is the market rate for the relevant period.
I have thus to consider if there is any other evidence on record for deciding that what should be charges which would be payable by the defendant for user of tank Nos. 4 and 5 from 1.9.1987 to 31.3.1989 and of tank no. 5 additionally from 1.4.1989 to 30.6.1989. In this regard I have to say that where the plaintiff failed, unfortunately the defendant seems to have made up for the default of the plaintiff. The defendant itself has filed letters of various storage tank owners which show the rates which were offered by these storage tank owners for the relevant period of 1.9.1987 to 30.6.1989. Though these letters are not proved, but since the defendant itself has filed them, they can be taken as evidence against the defendant. First of all, reference can be made to a letter dated 1.3.1988 issued by Modi Industries Ltd., Modinagar, UP showing that this company was claiming charges for storage tanks at Rs. 15.50 per metric ton per month plus additional handling charges of Rs. 6/- per metric ton per month i.e. Rs. 21.50 per metric ton per month in total. Then there is a letter dated 3.3.1988 of one M/s. Supreme Traders claiming consolidated rates of Rs. 22/- per metric ton per month with respect to the storage tanks on long term basis. The storage tanks of M/s Supreme Traders are at Dhulkot in Haryana. Finally, there is an agreement dated 7.11.1989 entered into between the defendant and M/s. National Trading Corporation wherein the defendant was paying a total of Rs. 22/- per metric ton per month with respect to storage charges and handling charges. These tanks of M/s National Trading Corporation are situated at Karnal in Haryana. It is therefore clear that approximately consolidated charges of Rs. 22/- per metric ton per month were being paid by the defendant for storage facilities outside Delhi in the year 1988/1989. Delhi being the capital, and a city having many more facilities than facilities existing at Dhulkot in Haryana or Karnal in Haryana or Modi Nagar in UP, surely, the charges would definitely be higher than the charges which are payable in the aforesaid small towns. Since some amount of honest guesswork is always involved in deciding the amount of damages, and considering the imponderables of the period, location etc etc I would hold that instead of Rs. 32/- per metric ton per month as claimed by the plaintiff and the rate of Rs. 22/- per metric ton per month which is otherwise proved on record for satellite towns around Delhi, I would fix the monthly license fee charges at a mean/average figure of Rs. 25/- per metric ton per month consolidated i.e. both for storage and handling for the period from 1.9.1987 to 30.6.1989.
I also hold that the plaintiff will be entitled to pendente lite and future interest at the rate of 9% per annum simple on the amount which is decreed for the storage and handling charges payable.
On the amounts so calculated, the plaintiff shall be liable to give credit adjustment for a sum of Rs. 19,81,282.35, being the amount received by the plaintiff from the defendant for this period towards storage and handling charges. In view of the above, suit of the plaintiff shall stand decreed against the defendant for license fee charges at Rs. 25/- per metric ton per month with respect to storage tank Nos. 4 and 5 from 1.9.1987 to 31.3.1989 and additionally at the rate of Rs. 25/- per metric ton per month for storage tank no. 5 from 1.4.1989 to 30.6.1989 i.e. for Rs. 37,50,125 plus Rs. 4,42,125 less Rs. 19,81,282/- i.e. Rs. 22,10,968/-. The plaintiff will also be entitled to pendente lite and future interest at the rate of 9% per annum simple on this aforesaid amount of Rs. 22,10,968/-. Plaintiff is also awarded costs of the suit in terms of the Rules as applicable to this Court. Suit is decreed and disposed of accordingly.