About eviction & ownership

Written by Indu Bhan | Indu Bhan | Updated: Apr 10 2013, 06:20am hrs
SC upholds BPCLs eviction

Upholding eviction of Bharat Petroleum Corporation Ltd (BPCL) from a Mumbai property, the Supreme Court has asked the PSU to vacate the premises within two months and also allowed the landlord to take criminal action, including contempt proceeding, against it for inducting rank outsiders in collusion with its dealer. Dismissing its appeal with R50,000 costs in the case of Bharat Petroleum Corporation Ltd vs Rama Chandrashekhar Vaidya & another, the apex court said that the oil firm could not claim further renewal of lease of the property, for which it was paying a rent of R400 since 1955, beyond 2005.

BPCLs predecessor Burmah Shell Oil Storage and Distributing Company of India Ltd had entered into a lease deed in September 1955 for 19,188 sq feet of land, now included in Greater Bombay, for 25 years. The lease gave it the unilateral right of renewal for an additional period of 25 years. Later, in 1976, the right, title and interest and the liabilities of Burmah Shell were transferred to BPCL. While the lease was renewed from March 1980 for next 25 years, no fresh lease deed was executed. Despite the landlord sending a termination notice in March 2005, the PSU continued remitting rent at the old rate. The lessor then filed a suit for eviction of the PSU in the court of Small Causes at Mumbai, which dismissed the suit in 2007. On appeal, the Appellate Bench of the Small Causes Court and the Bombay High Court ruled in favour of the landlord.

Senior counsel CA Sundaram, appearing for BPCL, contended that it was not a case of renewal of lease but a case of extension of the term of the lease and in that case no fresh deed was required to be executed and registered between the parties.

Escorts plea rejected

Dismissing Escorts Ltds plea, the Supreme Court has held that the arbitration award made in the US against the firm was binding. In this case, Universal Tractor Holding LLC (UTH) and Escorts Agri Machinery Inc (EAMI), a subsidiary of the Escorts Ltd, were holding 49% and 51% shares, respectively, in Beever Creek Holdings BCH. After an agreement between the parties, UTH sold its shareholding in BCH to EAMI for $1.2 million, which was to be paid in four instalments. While Escorts AMI paid the first two instalments, it defaulted in the payment of the other two, leading to a suit in North Carolina. The dispute was then referred to arbitration in June 2009 and an award was given in favour of UTH, which moved an execution petition in India as Escorts firms had merged. The Delhi High Court rejected the Indian firms objections to the execution of the US award in India. While declaring the award is enforceable under section 49 of the Arbitration and Conciliation Act, the high court held that the award was not opposed to the public policy of India, against which the firm moved the Supreme Court.

Senior counsel Parag Tripathi, appearing for Escorts, argued that under the terms of agreement it was necessary for UTH to go for confirmation of the award in the concerned court in the US and then come to India for execution. On the other hand, UTH pointed out that the requirement of double exequatur had been dispensed with in the New York Convention, which has been now adopted under the Arbitration and Conciliation Act, 1996. The apex court also rejected Escorts stand, saying that the submission was not tenable in view of the changed law.

Tax payment and ownership

While setting aside the judgment of the Andhra Pradesh High Court in the case of State of AP vs Star Bone Mill & Fertiliser Co, the apex court has ruled that payment of municipal or agricultural tax on a property or a revenue record would not confer ownership of the property on the claimant. In this case, the City Improvement Board, Hyderabad, had converted the disputed 3.525-acre land in favour of the Forest Department in 1920. The land was then leased to M/s A Allauddin & Sons for a fixed time on certain conditions.

Despite the state in December 1954 asking the proprietary firm to vacate the site, the latter executed a lease deed in 1958 and then a sale deed in 1959 in favour of Star Bone Mill and Fertiliser Co for R45,000. The government invoked the Land Encroachment Act to evict the mill in 1974. This was challenged in the civil court and the high court, both maintaining that the new buyer had a better title to the land than the government. On appeal, the Supreme Court rejected the argument of the buyer that M/s A Allauddin & Sons was paying taxes and the entries in the revenue records showed it was the owner.

The top court said that the courts below have failed to appreciate that mere acceptance of municipal tax or agricultural tax by a person cannot stop the state from challenging ownership of the land as there may not be estoppel against the statute.