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The Supreme Court Bench of Hon’ble Chief Justice NV Ramanna, Justice Surya Kant & Justice Aniruddha Bose has recently observed that Proviso 6 of Section 92 of Indian Evidence Act would not apply if the document is straightforward & does not present any difficulty in construing it.

“Only in cases where the terms of the document leave the question in doubt, then resort could be had to the proviso. But when a document is a straightforward one and presents no difficulty in construing it, the proviso does not apply. In this regard, we may state that Section 95 only builds on the proviso 6 of Section 92.”, the Court noted. 

The Court in the present matter was hearing an appeal against the judgement passed by Bombay High Court which was allowed in Respondent’s favour which thereby resulted in setting aside the decree in appellant’s favour.

Factual Matrix

The appellant after her husband’s demise in 1962 continued running a business of stationary in the name of “Karandikar Brothers”. After a while when the appellant was unable to run the business, she decided to enter into an agreement with the respondent on 07.02.1963 which was duly extended from time to time. In the 1980’s, the appellant desiring to start her husband’s business again issued notice dated 20.12.1980 requesting the Respondent herein to vacate the suit premises by 31.01.1981. The Respondent replied to the aforesaid notice claiming that the sale of business was incidental rather the contract was a rent agreement stricto sensu. Aggrieved by the Respondent’s reply, the appellant filed a civil suit before the Court of Joint Civil Judge, Junior Division, Pune. The Trial Court by Judgment dated 30.08.1988, decreed the Suit in favor of the appellant and held that the purport of the Agreement was to create a transaction for sale of business rather than to rent the aforesaid premises to the Respondent herein. The Trial Court ordered the respondent to hand over the suit property to the appellant including the furniture & other articles.

Aggrieved by the Trial Court judgment, the Respondent filed an Appeal before the Court of Additional District Judge, Pune which was dismissed by order dated 29.07.1991. Aggrieved by the dismissal the Respondent filed a Second Appeal before the High Court of Bombay which was allowed & the Court thereafter, set aside the Trial Court’s Order as well as the First Appellate Court’s Order and held that the Respondent had entered into a license agreement covered under Section 15A of the Bombay Rent Act. Further the Court held that the Trial Court did not have the Jurisdiction to try the cases under the Bombay Rent Act, the appropriate Court should have been Small Causes Court established under the Provincial Small Causes Court Act. 

Aggrieved, the appellant approached this Court contending that the High Court’s order erred in appreciating the language of the contract, which clearly pointed towards the intention of the parties to create a license for continuing existing business, which was run by the late husband of the appellant. On the other hand, the Respondent’s counsel while supporting the judgment stated that there is extrinsic evidence which shows that the contract entered into between the parties was a license to use the shop, which is covered under Bombay Rent Act.

The Court observed that adopting a contrary view would render Section 92 of the Evidence Act, otiose and also enlarge the ambit of proviso 6 beyond the main Section itself. 

“Such interpretation, provided by the High Court violates basic tenants of legal interpretation.3 Section 92 specifically prohibits evidence of any oral agreement or statement which would contradict, vary, add to or subtract from its terms. If, as stated by the learned Judge, oral evidence could be received to show that the terms of the document were really different from those expressed therein, it would amount to according permission to give evidence to contradict or vary those terms and as such it comes within the inhibitions of Section 92. It could not be postulated that the legislature intended to nullify the object of Section 92 by enacting exceptions to that section.”, the Court further said.

The Bench while noting that it was clear that the contract mandated continuation of the business in the name of ‘Karandikar Brothers’ by paying royalties of Rs. 90 per month remarked that once the parties have accepted the recitals and the contract, the respondent could not adduce contrary extrinsic parol evidence, unless he portrayed ambiguity in the language. It may not be out of context to note that the extension of the contract was on the same conditions.

While upholding that the High Court erred in appreciating the ambit of Section 95, which led to consideration of evidence which only indicated breach rather than ambiguity in the language of contract noted that the evidence also pointed that the license was created for continuation of existing business, rather than license/lease of shop premises. If the meaning provided by the High Court was accepted, then it would amount to Courts substituting the bargain by the parties.

Thereafter, the Bench while setting aside High Court’s order & restoring Trial Court’s decree observed that, 

“It is usual that businessmen often do not sit over nitty-gritty in a contract. In a document the language used by the parties may have more than one meaning. It is ultimately the responsibility of the Courts to decipher the meaning of the words used in a contract, having regards to a meaning reasonable in the line of trade as understood by parties.1 It may not be out of context to state that the development of rules of contractual interpretation has been gradual and has taken place over century. Without going into extensive study of precedents, in short, we may only state that the path and development of law of interpretation has been a progress from a stiff formalism to a strict rationalism.”

Case Title: Mangala Waman Karandikar (D) TR. LRS. Versus Prakash Damodar Ranade| Civil Appeal No. 10827 of 2010