Source: Supreme Court 

Why in News? 

A bench of Justice Pankaj Mithal and Justice SVN Bhatti laid down guidelines for construction of deeds and contracts. 

• The Supreme Court held this in the case of Annaya Kocha Shetty (Dead) through LRs v. Laxmibai Narayan Satose since Deceased through LRs (2025). 

What was the Background of Annaya Kocha Shetty (Dead) through LRs v. Laxmibai Narayan Satose since Deceased through LRs (2025) Case?   

• This case involves a civil appeal arising from an order dated 16th July 2018 in Civil Revision Application No. 247 of 2016. 
• The plaintiff sought declaration as a deemed tenant/protected licensee of defendant no. 1 under Section 15A of the Bombay Rent Act for shop nos. 5 and 6 at Shri Samarthashraya Vishranti Graha. 
• The plaintiff and defendant no. 1 entered into an agreement dated 16th August 1967, which is the core document in the dispute. 
• Defendant no. 1 was the landlady running a hotel business, while defendant no. 2 was the actual owner of the premises. 
• On 28th February 1997, defendant no. 1 served notice to the plaintiff to vacate the premises. 
• Trial Court Findings: 
  • The Court held that the plaintiff was a licensee, not merely a conductor of defendant no. 1's business. 
  • The Trial Court found that despite being styled as a "conducting agreement," the actual relationship established was that of leave and license. 
  • The Court determined the relationship was based on the nature of occupation rather than the nomenclature of the agreement. 
  • Noted that clauses in the agreement indicated the plaintiff had exclusive possession and control:  
    • Plaintiff paid Rs. 1000/month for use and occupation. 
    • Plaintiff bore all operational costs (electricity, water, wages, license fees). 
    • Plaintiff assumed all business risks. 
    • Plaintiff was responsible for paying workers. 
  • The Court concluded that the plaintiff qualified as a deemed tenant under Section 15A of the Bombay Rent Act. 
• The matter went to the Appellate Court and the Court held that the arrangement was merely to conduct a business and not a license of the premises. 
• The High Court also confirmed the view of the Appellate Court. 

What were the Court’s Observations? 

• The Court in this case summarized the guidelines on construction of deeds and contracts: 
  • The contract is first constructed in its plain, ordinary and literal meaning. This is also known as the literal rule of construction. 
  • If there is an absurdity created by literally reading the contract, a shift from literal rule may be allowed. This construction is generally called the golden rule of construction. 
  • Lastly, the contract may be purposively constructed in light of its object and context to determine the purpose of the contract. This approach must be used cautiously. 
• The Court also held that construction of a deed is “generally speaking a matter of law”. However, when there is an ambiguity in the deed, determining its meaning is a mixed question of fact and law. 
• The law for construction of deeds is encapsulated in Section 91 and 92 of Indian Evidence Act, 1872 (IEA). 
• It was concluded by the Court that by looking at the deed it can be held that the agreement talked about in the present facts is one for conducting the business of first defendant. Also, the oral evidence was not considered as there are no circumstances that would make the case fall under the provisos of Section 92. 
• Thus, the Court concluded that it was in agreement with the views of the Appellate Court and High Court.   

What is Section 91 and Section 92 of IEA? 

• Section 91 of IEA denotes that a deed constitutes the primary evidence of the terms to which the parties are to adhere. 
• Whereas section 92 of IEA forbids any contradictions or variations in a written document by extrinsic evidence. 
• However, there are exceptions outlined in the proviso to section 92, that allow variations from this general rule. 
• It is to be noted that these provisions are contained in Section 94 and 95 of Bharatiya Sakshya Adhiniyam, 2023 (BSA). 
• Section 91 of IEA: Evidence of terms of contracts, grants and other dispositions of property reduce to form of document. 
  • When any agreement, property transfer, or legally required matter is documented:  
    • The actual document itself must serve as evidence. 
    • Verbal testimony cannot substitute for the document's contents. 
  • This rule has two exceptions:  
    • Public officers: If someone has been acting as a public officer, their written appointment need not be produced. 
    • Wills: Wills already approved in India can be proven using the probate document. 
  • Important clarifications:  
    • This rule applies whether the agreement is in one document or spread across multiple documents. 
    • If multiple original copies exist, only one original needs to be provided. 
    • The rule only blocks verbal evidence about the specific terms of the agreement or grant - verbal evidence about other facts mentioned in the document remains admissible. 
  • In essence: When important matters are documented in official form, the document itself must be presented as evidence - not recollections or claims about its contents. 
• Section 92 of IEA: Exclusion of evidence of oral agreement 
  • The main body of Section 92 of IEA provides that once a written document has been presented as evidence, no oral testimony can be admitted that contradicts, changes, adds to, or takes away from the document's terms. 
  • The six exceptions to this rule are as follows: 
    • Facts that would invalidate the document can be proven, such as:  
      • Fraud 
      • Intimidation 
      • Illegality 
      • Improper execution 
      • Lack of capacity of a party 
      • Lack or failure of consideration 
      • Mistake in fact or law 
    • A separate oral agreement about matters not mentioned in the document may be proven, if it doesn't contradict the document's terms. The court considers the document's formality when applying this exception. 
    • An oral agreement that establishes a condition that must be met before any obligations under the document become effective may be proven. 
    • A later oral agreement that cancels or modifies the document may be proven, unless the law requires such modifications to be in writing or registered. 
    • Customary practices that are typically included in similar contracts may be proven, provided they don't conflict with the document's express terms. 
    • Facts that show how the document's language relates to existing circumstances may be proven.