Supreme Court sets aside decree for possession based on admissions: Karan Kapoor vs. Madhuri Kumar (2022)

Introduction

Date of the Judgment: 06 July 2022
Citation: 2022 INSC 604
Judges: Indira Banerjee, J. and J.K. Maheshwari, J.

Can a court issue a decree for possession of a property based solely on the admission of a landlord-tenant relationship, without considering the tenant’s claim of a subsequent agreement to sell? The Supreme Court of India recently addressed this critical question in a case where a tenant claimed that a subsequent agreement to sell the property had altered their legal status, thus challenging the landlord’s suit for eviction. This judgment clarifies the scope of Order XII Rule 6 of the Code of Civil Procedure (CPC) regarding judgments on admissions.

The Supreme Court bench, comprising Justices Indira Banerjee and J.K. Maheshwari, delivered the judgment. The Court set aside the High Court’s order, which had upheld the Trial Court’s decision to decree the suit for possession based on admissions. The Supreme Court emphasized that a judgment on admissions should not be passed if the admissions are not clear and categorical, and if the defendant has raised a plausible defense that needs to be considered through a full trial.

Case Background

The case involves a dispute between Karan Kapoor (the Appellant/Tenant) and Madhuri Kumar (the Respondent/Landlord) concerning a residential property in Delhi. The Respondent, Madhuri Kumar, had leased the property to the Appellant’s proprietorship concern, M/s. Fantasy Lights, through a lease agreement dated 07 August 2011. The initial lease was for 24 months at a monthly rent of Rs. 1,17,000, with a security deposit of Rs. 3,51,000. After the expiry of this lease, an extended lease agreement was executed on 07 August 2013 for 11 months at a monthly rent of Rs. 1,50,000.

The Appellant continued to occupy the property after the expiry of the extended lease on 06 July 2014, without paying any rent. On 12 April 2018, the Respondent served a legal notice to the Appellant, demanding that he vacate the property. When the Appellant failed to comply, the Respondent filed a civil suit for recovery of possession, arrears of rent, mesne profit, and interest. The Appellant contended that after the expiry of the lease, the Respondent offered to sell the property, leading to the execution of an Agreement to Sell dated 22 April 2017 (ATS-I) for Rs. 3,60,00,000. The Appellant also claimed that there were further agreements (ATS-II and ATS-III) involving adjustments to the sale consideration and transfer of another property in Amloh.

Timeline:

Course of Proceedings

The Trial Court, after considering the admissions made by the Appellant in his written statement, passed a judgment and decree under Order XII Rule 6 of the CPC, ordering the Appellant to hand over possession of the suit property to the Respondent. The Trial Court noted that there was no dispute regarding the ownership of the property, the identity of the property, the execution of the lease agreements, the security deposit, and the non-payment of rent since July 2014. The Trial Court also rejected the Appellant’s defense based on the Agreements to Sell, noting that no consideration had been exchanged and that the landlord-tenant relationship did not cease with the execution of the Agreements to Sell.

The Appellant then filed a review petition, which was also dismissed by the Trial Court. Aggrieved, the Appellant appealed to the High Court of Delhi, arguing that a suit for specific performance of the Agreements to Sell was pending, and that there was no clear admission in the written statement to warrant a judgment under Order XII Rule 6 of CPC. The High Court dismissed the appeal, upholding the Trial Court’s findings that there was a clear admission of the landlord-tenant relationship and that the suit for specific performance was not an impediment to the suit for possession. The High Court also noted that an agreement to sell immovable property where possession is delivered requires a registered document.

Legal Framework

The judgment primarily revolves around the interpretation and application of Order XII Rule 6 of the Code of Civil Procedure (CPC), which allows a court to pass a judgment on admissions made by a party. Specifically, it states:

“6. Judgment on admissions. —(1) Where admissions of fact have been made either in the pleading or otherwise, whether orally or in writing, the Court may at any stage of the suit, either on the application of any party or of its own motion and without waiting for the determination of any other question between the parties, make such order or give such judgment as it may think fit, having regard to such admissions.”

The Supreme Court also considered the implications of Section 53A of the Transfer of Property Act, 1882, which deals with part performance of a contract. However, it was noted that this section is applicable only when consideration has been exchanged, which was not the case here.

Arguments

Appellant’s Arguments:

• The Appellant argued that the execution of the Agreements to Sell (ATS-I, ATS-II, and ATS-III) demonstrated an intention to transfer ownership of the property, thereby altering the landlord-tenant relationship.
• The Appellant contended that the Trial Court should not have dismissed the suit summarily under Order XII Rule 6 of CPC, as the issues before the court were triable and required a full-fledged trial.
• The Appellant argued that the acceptance of earnest money by the Respondent indicated an action under the agreement, thus terminating the tenancy.
• The Appellant relied on Shrimant Rao Suryavanshi v. Prahlad Bhairoba Suryavanshi, 2002 (3) SCC 676, to argue that he had a right to defend his possession based on the Agreement to Sell.
• The Appellant cited Hari Steel and General Industries Limited and Another v. Daljit Singh and Others, (2019) 20 SCC 425 and Himani Alloys Ltd. v. Tata Steel Ltd, 2011 (15) SCC 273, to argue that the Trial Court should have refrained from exercising its jurisdiction under Order XII Rule 6, as it denies the Appellant a remedy on merit.
• The Appellant cited R. Kanthimathi v. Beatrice Xavier, 2000 (9) SCC 339, to argue that by accepting the earnest money, the landlord-seller had acted under the agreement, thus terminating the landlord-tenant relationship.

Respondent’s Arguments:

• The Respondent argued that the Appellant’s possession of the property was based on the lease agreements and that he continued to be in possession without paying rent since 2014.
• The Respondent contended that the Appellant’s defense based on the Agreements to Sell was sham, as no consideration was exchanged.
• The Respondent argued that once the landlord-tenant relationship was admitted, a termination notice under Section 106 of the Transfer of Property Act, 1882, was issued, and the rent was not paid, the Respondent had a prima facie case for a judgment on admission under Order XII Rule 6.
• The Respondent argued that Section 53A of the Transfer of Property Act, 1882, was not applicable as no consideration was exchanged.
• The Respondent relied on Nagindas Ramdas v. Dalpatram Ichharam, 1974 (1) SCC 242, to argue that admissions in pleadings or court proceedings are admissible evidence under Section 58 of the Evidence Act, 1872.

Submissions of Parties

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section, but the core issue can be summarized as:

1. Whether the Trial Court was justified in passing a judgment and decree under Order XII Rule 6 of the CPC based on the admissions made by the Appellant, without considering the defense based on the Agreements to Sell.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

The Court relied on S.M. Asif v. Virendar Kumar Bajaj, (2015) 9 SCC 287, to emphasize that the power under Order XII Rule 6 of CPC is discretionary and should be exercised only when the admissions are clear and categorical. The Court distinguished R. Kanthimathi v. Beatrice Xavier, 2000 (9) SCC 339, noting that in the present case no consideration was exchanged and possession was not surrendered under the agreement to sell. The Court also discussed Shrimant Rao Suryavanshi v. Prahlad Bhairoba Suryavanshi, 2002 (3) SCC 676, Hari Steel and General Industries Limited and Another v. Daljit Singh and Others, (2019) 20 SCC 425 and Himani Alloys Ltd. v. Tata Steel Ltd, 2011 (15) SCC 273, and Nagindas Ramdas v. Dalpatram Ichharam, 1974 (1) SCC 242, in the context of arguments made by the parties.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to ensure a fair trial and to prevent the misuse of Order XII Rule 6 of CPC. The Court emphasized that the power to pass a judgment on admissions is discretionary and should only be exercised when the admissions are clear, categorical, and unequivocal. The Court noted that the defense taken by the Appellant, based on the Agreements to Sell, was plausible and needed to be considered through a full-fledged trial. The Court was also concerned that the Trial Court and the High Court had not considered the defense taken by the Appellant and had passed the judgment solely based on the admission of the landlord-tenant relationship.

Fact:Law Ratio

The Court’s reasoning was more inclined towards the legal aspects of the case, particularly the interpretation of Order XII Rule 6 of CPC and the discretionary nature of the power to pass a judgment on admissions. While the factual aspects of the case were considered, the legal principles played a more significant role in the Court’s decision.

Logical Reasoning

Judgment

The Supreme Court set aside the judgment and decree passed by the Trial Court, as confirmed by the High Court. The Court held that the judgment under Order XII Rule 6 of CPC was not based on a clear and categorical admission, and the defense taken by the Appellant needed to be considered through a full-fledged trial. The Court emphasized that the power under Order XII Rule 6 is discretionary and should not be used to deny a party the right to contest the suit.

The Court observed that while there was an admission of the landlord-tenant relationship based on the lease agreements, the Appellant had also raised a defense based on the Agreements to Sell. The Court noted that the defense taken by the Appellant was plausible and required a proper evaluation through a trial. The Court held that the Trial Court and the High Court had erred in passing a judgment solely on the admission of the landlord-tenant relationship without considering the defense.

The Court highlighted the importance of ensuring a fair trial and preventing the misuse of Order XII Rule 6 of CPC. The Court reiterated that the power to pass a judgment on admissions should be exercised cautiously and only when the admissions are clear and unequivocal. The Court also emphasized that if there is a plausible defense, the Court should not pass a judgment on admissions and should allow the parties to lead evidence.

The Court remitted the matter back to the Trial Court to decide the suit as expeditiously as possible, affording due opportunity to the parties to record evidence. The Court also directed the Trial Court to decide the issue of payment of monthly rent, applying the increase in rent as per the extended lease agreement on a year-to-year basis, and to pass appropriate orders for payment of arrears and deposit of regular monthly rent. The said payment was made subject to the outcome of the suit.

The Court quoted the following from the judgment:

“Thus, legislative intent is clear by using the word ‘may’ and ‘as it may think fit’ to the nature of admission. The said power is discretionary which should be only exercised when specific, clear and categorical admission of facts and documents are on record, otherwise the Court can refuse to invoke the power of Order XII Rule 6.”

“There may be admission with respect to tenancy as per lease agreements but the defense as taken is also required to be looked into by the Court and there is need to decide justiciability of defense by the full-fledged trial.”

“In our view, for the purpose of Order XII Rule 6, the said admission is not clear and categorical, so as to exercise a discretion by the Court without dealing with the defense as taken by Defendant.”

There were no dissenting opinions in this case. The judgment was delivered by a bench of two judges.

Implications: This judgment clarifies that a judgment on admissions under Order XII Rule 6 of CPC should be passed with caution, especially when the defendant has raised a plausible defense. The judgment emphasizes that the power under Order XII Rule 6 is discretionary and should not be used to deny a party the right to contest the suit. The judgment also highlights the need for a full-fledged trial when the admissions are not clear and categorical, and when there is a plausible defense that needs to be considered.

New Doctrines or Legal Principles: The judgment reinforces the existing legal principle that the power under Order XII Rule 6 of CPC is discretionary and should be exercised cautiously. It does not introduce any new doctrines but clarifies the application of existing legal principles in the context of a suit for possession based on a landlord-tenant relationship.

Key Takeaways

• A judgment on admissions under Order XII Rule 6 of CPC should not be passed if the admissions are not clear, categorical, and unequivocal.
• The power under Order XII Rule 6 is discretionary and should be exercised cautiously.
• If a defendant raises a plausible defense, the court should not pass a judgment on admissions and should allow the parties to lead evidence.
• The mere admission of a landlord-tenant relationship is not sufficient to pass a judgment on admissions if the defendant has a plausible defense.
• Courts should ensure a fair trial and prevent the misuse of Order XII Rule 6 of CPC.
• Tenants cannot avoid paying rent by claiming an agreement to sell if no sale deed is executed and the agreement to sell is not acted upon.

Directions

The Supreme Court gave the following directions:

• The judgment and decree passed by the Trial Court, as confirmed by the High Court, was set aside.
• The matter was remitted back to the Trial Court to decide the suit as expeditiously as possible.
• The Trial Court was directed to afford due opportunity to the parties to record evidence.
• The Trial Court was directed to decide the issue of payment of monthly rent, applying the increase in rent as per the extended lease agreement on a year-to-year basis.
• The Trial Court was directed to pass appropriate orders for payment of arrears and deposit of regular monthly rent, subject to the outcome of the suit.