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Bombay High Court
The Gujrat Ginning And … vs The Motilal Hirabhai Spinning And … on 26 September, 1928
Equivalent citations: 123 Ind Cas 481
Author: A Marten
Bench: A Marten, Murphy


Amberson Marten, C.J.

1. This litigation is mainly concerned with two pieces of land, the first containing an area of 1,590 square yards at present occupied by a godown and a tank, and the second some 6,771 square yards of open land. There is a subsidiary point about 10 square yards at present occupied by a steam chest. Suit No. 208 of 1923 was brought by the Motilal Hirabhai Spinning and Weaving and Manufacturing Company Limited against the Gujrat Ginning and Manufacturing Company, Limited, for ejectment as regards the 1,590 square yards, viz., the built on land, and asking for an injunction as regards the other 6,771 square yards, viz., the open land, to prevent the defendants from trespassing thereon.

2. The learned Judge in effect decided in favour of the defendants as regards the built on land, and in favour of the plaintiffs as regards the open land. As regards the built on land he, by a supplemental judgment, directed the plaintiffs to grant a lease of the land in question for certain periods and on certain conditions. There are appeals and cross-appeals and cross objections on almost everything that the learned Judge decided. Appeal No. 237 of 19.5 before us is by the defendants against so much of the judgment as is in favour of the plaintiffs. There are cross-objections filed in that appeal by the plaintiffs. Then Appeal No. 32 of 1926 is also by the defendants objecting to the lease granted, and asking that a different lease should be directed. Then Appeal No. 119 of 1926 is by the plaintiffs objecting incidentally to any lease at ail being granted to the defendants.

3. In appeal this Court endeavoured to get the parties to arrive at compromise of the disputes between them, but in the end those efforts proved unsuccessful, and accordingly we have to determine what are the strict legal rights of the parties. As regards the facts I do not propose to detail them because we have here the benefit of a careful and detailed judgment by the learned Judge, which relieves me from the necessity of a detailed statement. But shortly stated, it may be said that in form at any rate this is a dispute between two Companies engaged in the cotton business who own adjoining lands. For many years they had common agents, but those common agents utilised the land of the plaintiffs for the benefit of the defendants, and we have to solve the conundrums arising therefrom, because unfortunately the common agents were extremely unbusinesslike, as I shall presently show, and it is largely their carelessness which had led to the present litigation.

4. Taking first the plaintiff Company, they were incorporated in 1890, and on March 24, 1893, they took on lease by Ex. 79, the Survey No. 210, a portion of which is now in question. That was taken on a permanent lease at a rent of Rs. 595 a year. It is the agents who have caused the difficulty here, and, therefore, it is important to note as to who at various times were the agents. Now the original agents of this Company were Lalubhai Motilal: but in 1896 that agency was transferred to a firm called Mansukhbhai Bhagubhai & Co. That firm consisted of two brothers, Mansukhbhai and Jamnabhai, Ex. 88, and when Mansukhbhai died in 1913, Jamnabhai carried on till October 19i4 when Maneklal, the son of Mansukhbhai, took over the agency on attaining his majority. This firm of Mansukhbhai Bhagubhai & Co. had at all material dates been the agents of the defendant Company. Consequently, we get this that from 1896 down to 1913 or October 1914 the same individuals were the agents for both the Companies.

5. It appears that Maneklal after attaining his majority had disputes with his uncle Jamnabhai, and so after that date Jamnabhai managed the plaintiff Company alone, and Maneklal managed the defendant Company alone, with the result that cross claims between the two Companies were made in June and July 1916. There were references to the arbitration first of one gentleman and then of another, both of whom unfortunately died, Then in May 1922 Jamnabhai assigned the agency of the plaintiff Company to one Somnath Rupjidas, who in his turn, we are told, assigned it to Motilal, a relative of the original agents of the plaintiff Company. That quickly led to fresh disputes in September 1922. There was a notice by the plaintiff Company to the defendants to give up a portion at any rate of the suit land, and then in February 1923 this suit was filed.

6. I will now mention the precise conflict. The defendants’ case is that they were put in possession of all the suit lands by the common agents about 1897, that they have remained in possession of that land ever since, and that in 1907 or 1908 they were given permission to erect a large tank and a godown on about 1,500 square yards. They accordingly contend that in accordance with the understanding arrived at the time they ought to be allowed a present lease of the whole of the suit area, or alternatively that they are entitled under the Indian Easements Act to an irrevocable license to use the building erected on the 1,590 square yards. Alternatively, they base their case on the principle of Ramsden v. Dyson (1865) 1 H.L. 129 : 12 Jur. (N.S.) 506 : 14 W.R. 926 : 249 R.R. 543 to the effect that they had built upon the plaintiffs’ land in the expectation induced by the plaintiffs that they would be granted a permanent lease of that land.

7. The plaintiffs, on the other hand, say that the defendants were never given possession of the open land; that at most they were given possession to place certain loose articles, such as scrap iron thereon; that the plaintiffs’ scrap iron was also deposited on the open land, and that as regards the built on portion, that was a matter which was done by the common agents on the understanding that at any time the arrangement would be determined, and that no legal right was thereby conferred on the defendants.

8. At the trial the plaintiffs offered to pay compensation for the buildings, and they repeated that offer before us, but that offer was refused in both Courts.

9. Now we may start with certain matters which were either common ground, or findings of fact by the learned Judge which cannot be disputed. On important fact to remember is that the plaintiff Company from first to last has been the owner of these lands on the Record of Rights, and that there is no entry of any sort or kind in favour of the defendant Company. Therefore what I may call the paper title is quite clearly with the plaintiffs, and under the Land Revenue Code it lies on the defendants to prove that the entries in the Register are inaccurate or insufficient. It is also equally clear that there never was any definite binding agreement which could be enforced by, say, a suit for specific performance. Admittedly, there was nothing whatever in writing: the date of the alleged arrangement we do not know: and the terms we do not know because nothing definite about the rent was ever fixed. Therefore, it is clear that the learned Judge was right in holding that there is no ordinary contract here which the defendants can enforce in the ordinary way.

10. The defendants say that we ought to infer a permanent tenancy at a proportionate rent for this land as compared with the whole land comprised in the head lease, but as far as that proposition is concerned I think it is unsound. Their main case is really based on this that there was’ here a license under the Indian Easements Act which cannot be revoked so far as regards buildings. Alternatively they rely on adverse possession.

11. I will take the point about adverse possession first. The defendants put it forward not only as regards the built on land, but also as regards the open land. I do not propose to go in detail into the evidence here. In my opinion the learned Judge was quite correct in his judgment that no claim for adverse possession was made out as regards either of these lands. To my mind it is clear that the occupation was at the most permissive, viz., by the common agent. Whether that common agent had power to grant that permission is another matter, but I am satisfied that there was no adverse possession here. As regards the open field, the evidence which the learned Judge accepted is that the plaintiffs also deposited articles on this field. Consequently there was no exclusive possession by the defendants.

12. As regards the buildings I agree with the learned Judge that it is not proved that these buildings were erected prior to 12 years before suit brought. I attach particular importance to the fact that in my judgment the defendants have deliberately suppressed their account books. The engineer Barjorji Ex, 53, admits that the books will show when the construction of the tank and the godowns commenced. This is no doubt correct. The godowns occupy a strip of land some 345 feet long by 35 to 42 feet in breadth. The tank itself which is underneath a part of that strip is 155 feet long by 32 to 40 feet wide and 10 feet deep. It is common ground that that large building required even in those days a substantial expenditure; and of course it must be in the defendants’ books. Those books will show when that expenditure was incurred. To my mind it is clear that if those books could show that, the expenditure was incurred, say, in 1907 and 1908 (which is the date the defendants’ witnesses give), those accounts would undoubtedly have been put forward. As it is, the defendants’ witnesses were cross-examined on these accounts, but the defendants never produced them. Accordingly, I would unhesitatingly draw an inference under Section 114(g) of the Indian Evidence Act that if those books had been produced, the result would have been unfavourable to the defendants.

13. We also get this that the Municipal permission to build (Ex. 81) was only given in April 1909. That also, tends to show that this statement of an earlier building was false, in fact it was easy for the defendants’ witnesses to antedate the building by two years or so, On the other hand, when it came to cross-examination on certain details, their evidence was shaken. The learned Judge preferred to accept the evidence of Barjorji’s brother to the effect that this building had not been erected at the time when he completed his apprenticeship in 1909 or thereabouts.

14. There is another point to which I attach importance, and that is that Maneklal, when he made a statement to the arbitrators, Ex. 69-II-A, stated that: “The field bearing Survey No. 210 belongs to the Motilal Hirabhai Mills.” “There are a water reservoir and a godown built thereon by the Gujrat Ginning Mills.” Lower down he says: “the whole of the said field should be caused to be transferred to the name of the Gujrat Ginning (Mills) at cost price.” That, to my mind, is a clear acknowledgment that even at that late date the ownership of this field was with the plaintiffs and not with the defendants.

15. I, therefore, respectfully agree with the learned Judge on the question of adverse possession as to all the lands in dispute. So this disposes of the open land, because it is clear that if any license was ever granted as regards this land, that license could be and has been revoked.

16. Turning next to the built on land, the crux of the case to my mind is that under Section 51 of the Indian Easements Act:

The grant of a license may be express or implied from the conduct of the grantor.

17. A license is defined in Section 52, viz.:

Where one person grants to another, or to a definite number of other persons, a right to do or continue to do in or upon the immoveable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a license.

18. Then Section 60 says:

A license may be revoked by the grantor unless…(6) the licensee, acting upon the license, has executed a work of a permanent character and incurred expenses in the execution.

19. Stopping there, there is no doubt that the defendant Company have erected a work of a permanent character and incurred expenses in the execution. But have they done so acting upon the license, and can we here infer a license from the conduct of the grantor? Now, who is the grantor here? It must, I think, be the plaintiff Company and not merely their agents because Section 53 contemplates that a license is to be granted “in the circumstances and to the extent in and to which the grantor may transfers his interests in the property affected by the license.” The agents had no interest in this property in their own right. The interest in the property belonged to the plaintiff Company.

20. The practical difficulty then is one which I have experienced before in dealing with Indian limited liability Companies, viz., that a practice has been established by which in effect their affairs are managed by what are called Secretaries, Treasurers and Agents. You have a limited liability Company with a Memorandum and its Articles of Association provide for Directors, but over and over again those Directors are mere dummies, and substantially all the powers are vested in these so-called agents. To such a length is this carried by some practitioners that clauses are inserted in the Memorandum providing for the agency firm being agents, I remember in one case, for 999 years and so on. The practical result is that the agents imagine that they are quasi’ proprietors of the Company and that the legal entity of the Company and its Directors do not really matter. This has led to much legal trouble in India, and, in my opinion, it will lead to more trouble still in various ways unless that practice is modified. Even the learned Judge, if I may say so with all respect, fell into an error here, because the lease he directed to be granted was to be given by one set of agents to an other.

21. Now turning to the evidence of the old agents, as I have already said Mansukhbhai died in 1913 : so he is not available. His eon Maneklal has not gone into the witness-box. One of the old agents Jamnabhai is examined, and in weighing his evidence one must remember that he was examined on commission by the defendants, and that he was to some degree a hostile witness. That is because he had quarrelled with his nephew Maneklal who was then running the defendant Company, and because he, Jamnabhai, had sold the agencys of the plaintiff Company to outsiders. One may also partly infer this hostility from the strange lack of memory which the witness showed in examination-in-chief as to many matter which he might fairly have been expected to remember. But when it came to cross-examination on the other hand, he was far more definite. He said:

Until the death of Sheth Mansukhbhai the management of the plaintiff Mill, of the defendant Mill, the Gujarat Spinning and the Purshottam Mill–all these Mills, was carried on by Sheth Mansukhbhai, and I was working under him in the Gujrat Spinning. Sheth Mansukhbhai was carrying on his management without consulting any other person.

22. Then lower down he says:

No matter as regards this land was placed before the Board of Directors.

23. That evidence on commission was put in at the trial, and yet the defendants produced no counter evidence to show that in fact this matter of the building of the go-down and tank was ever formally before the Directors of the plaintiff Company, or authorised expressly by them, On the contrary, as I have already said. Maneklal does not even go into the witness-box,

24. The question, therefore, is what ought we properly to imply under Section 54? Here was a legal entity acting by a Board of Directors and under them this common agent; and substantially all we have got to go on is the fact that these big buildings were undoubtedly erected : that they were erected partly in connection with the extension of the defendants’ Mill, viz., Mill No. 3, and that the tank in particular was required for fitting an enlarged engine in this Mill No. 3:

25. Before answering that question I propose to go to the alternative case of the defendants, viz., as to the alleged expectation induced by the plaintiff Company which caused the defendants to build. I also propose to see on what grounds and under what circumstances the English Courts have felt themselves able to infer a license, or to grant relief to a person who has erected buildings on the land of another. The leading case is Ramsden v. Dyson (1865) 1 H.L. 129 : 12 Jur. (N.S.) 506 : 14 W.R. 926 : 249 R.R. 543, which I have already referred to, and there the judgment of Lord Kingsdown, although it is a dissenting judgment, has been constantly cited as being a correct statement of the English Law on the point, viz., (page 170 Page of (1865) 1 H.L. -[Ed.]):

If a man, under a verbal agreement with a landlord for a certain interest in land, or what amounts to the same thing, under an expectation, created or encouraged by the landlord, that he shall have a certain inter eat, takes possession of such land, with the consent of the landlord, and upon the faith of such promise or expectation, with the ‘ knowledge of the landlord, and without objection by him, lays out money upon the land, a Court of Equity will compel the landlord to give effect to such promise or expectation…If, at the hearing of the cause, there appears to be such uncertainty as to the particular terms of the contract as might prevent a Court of Equity from giving relief if the contract had been in writing, but there had been no expenditure, a Court of Equity will nevertheless, in the case which is above stated, interfere in order to prevent fraud.

26. Then, after referring to certain judgments the learned Judge proceeds (page 171 Pages of (1861) 1 H.L. -[Ed.]):

I do not understand any doubt to have been entertained by any of them that, either in the form of a specific interest in the land, or in the shape of compensation for the expenditure, a Court of Equity would give relief, and protect in the meantime the possession of the tenant. If, on the other hand, a tenant being in possession of laud, and knowing the nature and extent of his interest, lays out money upon it in the hope or expectation of an extended term or an allowance for expenditure, then if such hope or expectation has not been created or encouraged by the landlord, the tenant has no claim which any Court of Law or Equity can enforce. This was the principle of the decision in Pilling v. Armitage (1806) 12 Ves. 78 : 8 R.R. 295 : 33 E.R. 31 and, like the decision in Gregory v. Mighell (1811) 18 Ves. 328 : 11 R.R. 207 : 34 E.R. 341 seems founded on plain rules of reason and justice.

27. In that particular case the Court, with the exception of Lord Kingsdown came to the conclusion that the person who had erected the building had not entitled himself to the relief sought. Thus at page 142 Pages of (1865)1 H. L.–[Ed]. Lord Cranworth says:

If I had come to the conclusion that Thornton, when he erected his building in 1837, did so in the belief that he had against Sir John an absolute right to the lease he claims, and that Sir John knew that he was proceeding on that mistaken notion, and did not interfere to set him right. I should have been much disposed to say that he was entitled to the relief he sought. Bat a full consideration of the evidence has not led me to any such conclusion. It has failed to satisfy me, first, that Thornton supposed that he had against Sir John any absolute right beyond that of a tenant from year to year; or, secondly, that Sir John knew or believed that Thornton was expending his money in the mistaken belief that he possessed such a right.

28. That particular case was one of a large building estate in Huddlesfield, where tenants-at-will at specified rent had claimed that they had been induced by the action, of Sir John’s agent Thornton to build in the expectation that they would be given a lease for 60 years renewable.

29. Then Plimmer v. Wellington Corporation (1884) 9 App. Cas. 699 : 53 L.J.P.C. 104 : 51 L.T. 475 : 49 J.P. 116 is a case where the equity was applied. There the appellant had in effect extended a jetty at the request and for the benefit of the Government, and it was held that the original license for erecting a certain wharf ceased to be revocable when the jetty was extended under the above circumstances. At page 712 Page of (1884) 9 App. Cas. -[Ed.] a it is stated:

In the present case, the equity is not claimed because the land-owner has stood by in silence while his tenant has spent money on his land. This is a case in which, the land-owner has, for his own purposes, requested the tenant to make the improvements…Is it to be said that, when he had incurred the expenses of doing the work asked for, the Government could turn round and revoke his license at their will? Could they in July, 1856, have deprived him summarily of the use of the jetty? It would be in a high degree unjust that they should do so, and that the parties should have intended such a result is in the absence of evidence, incredible.

30. Then in Attorney-General to Prince of Wales v. Collom (1916) 2 K.B. 193 : 85 L.J.K.B. 1484 : 114 L.T. 1121 : 32 T.L.R. 448 the equity was applied in favour of the defendant, because the defendant had established a good equitable defence based on estoppel, the expenditure on the house having been made to the knowledge of the agent to the Dachy and on property which the defendant reasonably believed to be her own; and. that such equitable defence was good against the Duchy. There I may notice that the findings of the learned Judge are stated at page 199 Page of (1916) 2. K. B.–[Ed.] where Mr. Justice Atkin said:

I am satisfied upon consideration of all the circumstances that at the time that Miss Collom was making the alterations in question at the house Mr. Richards must have been aware that they were being made. I am quite satisfied that Miss Collom made them thinking reasonably that the house and grounds were her property, and I am also satisfied that no one could have been aware that she was making them without also being aware that she was making them in the belief that she was spending the money on her own property.

31. Mr. Richards, I should mention, was the agent of the Duchy, and it was suggested that he had acted without authority. Then, after citing the principle laid down in Ramsden v. Dyson (1865) 1 H.L. 129 : 12 Jur. (N.S.) 506 : 14 W.R. 926 : 249 R.R. 543 the learned Judge said (page 203):

It appears to me that all the conditions necessary to give rise to this equity exist in this case. Mr. Richards knew the real facts throughout, and, though a doubt was thrown upon his authority, I think that in a case where it can only be contemplated that the Duke of Cornwall can act through agents, the knowledge or conduct of the agent whose special duty it is to look after mine buildings, such as this is, must bind the Duchy, I think the true inference from the facts is that knowing the facts he remained passive : I accept the defendant’s account of the interview between the defendant and Mr. Richards in 1911 after the expenditure had been incurred.

32. Next, turning to the Indian cases, it will be found in Lala Beni Ram v. Kundan Lall 26 I.A. 58 : 21 A. 296 : 3 C.W.N. 502 : 1 Bom.L.R. 400 7 Sar.P.C.J. 523 (P.C.) that the headnote runs:

Lessors are not estopped in equity from bringing ejectment by reason of their tenants having erected permanent structures upon the land leased in the knowledge of and without interference by the lessors.

33. That was a case in which in November 1858 land was let to certain tenants for the term of the then current settlement, and notice to quit was given in June, 1890. Meanwhile buildings had been erected and at page 63+ their Lordships says:

In order to raise the equitable estoppel which was enforced against the appellants by both the Appellate Courts below, it was incumbent upon the respondents to show that the conduct of the owner, whether consisting in abstinence from interfering or in active intervention, was sufficient to justify the legal inference that they had by plain implication contracted that the right of tenancy under which the lessees originally obtained possession of the land should be charged into a perpetual right of occupation. Their Lordships have had no difficulty in coming to the conclusion that the respondents have failed to discharge themselves of that onus. If there be one point settled in the equity law of England, it is that, in circumstances similar to those of the present case, the mere erection by the tenant of permanent structures upon the land let to him, in the knowledge of and without interference by his lessor, will not suffice to raise the equitable right against the latter which has been affirmed by the Courts below.

34. Then their Lordships deal with Ramsden v. Dyson (1865) 1 H.L. 129 : 12 Jur. (N.S.) 506 : 14 W.R. 926 : 249 R.R. 543 and hold at page 65 Page of 26 I.A.–[Ed.]:

Acquiescence is not a question of fact but of legal inference from the facts so found.

35. Ahmad Yar Khan v. Secretary of State for India in Council 28 I.A. 211 : 28 C. 693 : 5 C.W.N. 634 : 3 Bom.L.R. 505 : 8 Sar.P.C.J. 39 (P.C.) is a case on the other side of the line where the equity was enforced. Now that case more resembles Collom’s case (1916) 2 K.B. 193 : 85 L.J.K.B. 1484 : 114 L.T. 1121 : 32 T.L.R. 448 because there the plaintiff constructed a canal for the purpose of irrigation with the sanction and encouragement of the Government, partly on Government lands and partly on the lands of private owners under the arrangement made with them. Lord Macnaghten states (page 218 Page of 28 I.A.–[Ed.]):

The principles applicable to such a case are nowhere stated more clearly than by Lord Kingsdown in this judgment in the case of Ramsden v. Dyson (1865) 1 H.L. 129 : 12 Jur. (N.S.) 506 : 14 W.R. 926 : 249 R.R. 543.

36. Then he proceeds to say (page 218 Page of 28 I.A.–[Ed.]):

Now, taking all the circumstances into consideration, having regard to the permanent character of the proposed work, the indefinite amount of the probable expense of construction, and the fact that the Government encouraged the undertakers to acquire the necessary land where the line of the canal passed through property in private ownership, and also bearing in mind the view of the Government at the time, as appears from Government records, that the work might be constructed and maintained more economically by the Khans than by Government, and that it would be better to leave the settlement of the country in the hands of native chiefs, it seems to be pretty clear that the Government must have intended the Khans to understand, and in fact must have led them to expect, that all Government land required for the canal would be made over to them in proprietary right. If the Government had intended that at the termination of the period of the then current settlement the Government land required and used for the canal should revert to the Government, it is difficult to suppose that the Government would have omitted to say so in plain language, or that they would have neglected to make provision for securing the transfer to them of the land acquired by the undertakers from private owners.

37. There, again, it will be observed that the Courts had to arrive at a conclusion in one of those difficult cases as to the proper and fair inference to be drawn from the action of two unbusinesslike parties.

38. I now come to another case of the same character, but rather nearer the present one, viz., Municipal Corporation of Bombay v. Secretary of State 29 B. 580 : 7 Bom.L.R. 27. It was a case between the Municipal Corporation and Government, where Government had induced the Corporation to give up certain pro-party under the belief that the Corporation would get certain other property for a lengthy lease on which they could eract certain stables. The Corporation carried out their part of the bargain, and gave up the land, but Government in the end did not carry out their part of the bargain, at any rate in law, and that was how the dispute arose. There was a Resolution of Government on the subject, but as Sir Lawrence Jenkina held that lands in Bombay could only be legally transferred in a particular way, this Resolution of Government was not effective for the purpose. On the other hand the arrangement like the one we have got in the present case, was so vague that you could not hold there was a definite contract which could be enforced, say, in a suit for specific performance, I do not propose to read the whole of Sir Lawrence Jenkins’ interesting judgment, but will quote enough to show the position in which he found himself. He says, for instance, at page 606:

But then it is argued that, if the Resolution was ineffective as a disposition, it was good as a contract; that, specific performance could have been successfully demanded.

39. But he continues:

Still looking at matters as they stood in January 1866, the claim for specific performance was open to similar objections: the Court would not have granted specific performance of a contract for an interest tot recognised by the law, and the Resolution regarded as a contract was equally open to the objection that the statutory formalities, had not been observed.

40. Then the learned Judge, after stating that the plea of estoppel under Section 115 of the Indian Evidence Act is distinct from the equitable doctrine formulated by Lord Kingsdown in Ramsden v. Dyson (1865) 1 H.L. 129 : 12 Jur. (N.S.) 506 : 14 W.R. 926 : 249 R.R. 543 which I have already mentioned, and after referring to Plimmer v. Wellington Corporation (1884) 9 App. Cas. 699 : 53 L.J.P.C. 104 : 51 L.T. 475 : 49 J.P. 116 and the case in Ahmad Yar Khan v. Secretary of State for India in Council 28 I.A. 211 : 28 C. 693 : 5 C.W.N. 634 : 3 Bom.L.R. 505 : 8 Sar.P.C.J. 39 (P.C.) further says (page 607 Pages of 29 B.–[Ed.]:

The question then is whether the facts of the case invite an application of the principle, and to determine this calls for a detailed examination of those facts.

41. Then after detailing the facts at length he came to the conclusion at page 610 Pages of 29 B.–[Ed.] that this equity had arisen in favour of the Municipality. He said:

It is (in my opinion) the reasonable, and the only reasonable inference that the Municipality gave up the old stables, levelled the ground, and erected the moveable stables in 1866 in the belief that they had against the Government an absolute right not to be turned out until not only the expiration of six months notice, but also other suitable ground was furnished: that this belief is referable to an expectation created by the Government that their enjoyment of the land would be in accordance with this belief: and that the Government knew that the Municipality were acting in this belief so created. We have, therefore, in the case the conditions which create an equity entitling the Municipality to appeal to the Court for its aid in assisting them to resist the Secretary of State’s claim that they shall be ejected from the ground.

42. Then he adds (page 610 Pages of 29 B.–[Ed.]):

I do not think it is any objection to that equity that the interest the Municipality was to have in the land was not originally moulded in a form recognised by the law: that does not prevent us from now imposing such terms as will prevent that which a Court of Equity would regard as a fraud, and this, as I have already said, is the foundation of the jurisdiction invoked.

43. Then he says (page 611 Pages of 29 B.–[Ed.]):

In what’ ‘shape should effect be given to this equity.

44. And he eventually came to the conclusion that there should be an option to the Municipality to take a lease on terms to be settled, and if the parties could not agree, there must be an enquiry as to the length, terms and conditions of the lease, and as to what would be a fair and reasonable rent for the land.

45. The report does not show what happened subsequently to the suit, but we have called for the record, and we find that by a subsequent consent decree of April 19, 1907, in effect certain leases were granted, one for 99 years, renewable perpetually and another for 99 years, renewable once. That, therefore, may be regarded as an instance where the Court has framed a lease on lines which certainly could not have been enforced in a suit for specific performance. In other words, it did exercise that very unusual jurisdiction of making a bargain which the parties themselves had not specifically made. Ordinarily this Court has said over and over again that it does not exist for the purpose of making a new contract between the parties, but merely to determine and enforce such a contract, if any, as the parties themselves have made. And I would add that this jurisdiction being unusual, and that the same time of a powerful character must, I think, be exercised with all due discretion, and that looking at the authorities as a whole, it would seem that one main ground of it is really to prevent what would otherwise be something in the nature of a fraud on the party who has erected buildings on the other man’s land and has been led thereto by the expectation held out to him.

46. There are certain other cases in our own Court, viz., Onkarapa v. Subaji Pandurang 15 B. 71, Dattatraya Rayajipal v. Shridhar Narayan 17 B. 736 Yeshwadabai v. Ramchandra 18 B. 66 and Jugmohandas v. Pallonjee 22 B. 1.

47. But with all deference I do not think it necessary to go into those cases in any detail. The guiding principles are clearly laid down in the House of Lords and in the Privy Council cases, and, therefore, other cases are really applications of those principles to the particular facts, and naturally the facts in each case vary. For instance, in Dattatraya Rayajipal v. Shridhar Narayan 17 B. 736 although the decision of the Court may have been justified on the facts before it, it is possible that some observations of the learned Judges went beyond what could fairly be relied on as coming within the principles laid down in the House of Lords and Privy Council.

48. With those principles then before us, and seeing how they have been applied in particular cases, what is the proper inference that we should draw here, either under the Indian Easements Act, or under the equitable doctrine of Ramsden v. Dyson. (1865) 1 H.L. 129 : 12 Jur. (N.S.) 506 : 14 W.R. 926 : 249 R.R. 543 from the conduct of the alleged grantor? I think the case is near the line, and I confess it has caused me a great deal of anxiety, but we have had the benefit of a full argument extending over some three days, and I do not think that anything would be gained by reserving my judgment on this point. What finally weighs with me most is that in fact there were here some three Companies engaged in the same general trade–I mean the cotton trade–and owning adjoining properties and having for a long series of years the same agents, and that undoubtedly during those years matters were carried on to some degree for the joint benefit of all the Mills, without considering very particularly the individual rights of each Mill or how business arrangements should be clothed in legal form in order to carry out the paramount intention, viz., the benefit of all the Mills as a whole.

49. Thus we find that in the statement submitted by the plaintiff Company to the arbitrators, Ex. 107, at page 163 of our paper-book, the plaintiff Company deals with the question then outstanding of the matter of rent for a certain siding which had been demanded by the defendants from the plaintiffs. The explanation is somewhat lengthy, but the allegation is that the siding was taken by the agents for the benefit of the Mills, that the agents came to an understanding about taking the siding, that expenses were incurred proportionately, and then it proceeds:

The agents themselves used to exercise thrift in the matter of expenses in regard to all the three Mills, maintain an impartial attitude towards all the three Mills and (thus) manage things while providing things for conveniences (for the same) and they used to publish these matters before meetings. The aforesaid two reasonable brothers (that is the agents) who were well versed in the ways of the world would not separately put all the three Mills to expenses for the sake of one single thing. They would not do such an act as would lock improper to people and would not take an undue advantage. Generally considering these and other facts, such demand for rent now improperly put forth by one side is unjustified. In short the siding jointly belonged to all the three Mills, and they are not entitled to demand rent in respect of the same and the proportionate share of the joint expenses has already been paid according to the original arrangements.

50. Then they go on to another matter about the demand for rent in respect of the gutter. Then they also refer to a passage by the suit land, and then they come to the suit land itself No. 210 in which they say:

The Gujrat Ginning Mills have no right of any nature whatever to the lands belonging to the Motilal Hirabhai Mills. But on account of there being the same agents of both of the Mills and with a view to remove for some time the inconvenience of the Gujrat Ginning Mills, buildings for stores and small reservoirs were built on lands of our ownership on the understanding that the Gujrat Ginning Mills should continue to pay the Motilal Hirabhai Mills rents in respect of the same with due regard to the times; that in case the Motilal Hirabhai Mills required the lands, then they might cause the reservoirs to be filled up and the buildings to be removed; and in case they required the buildings, then they might take the same on payment of proper price.

51. At that time, I may notice the plaintiff Company did not demand possession : they only demanded rent. I appreciate that in fact rent was never paid by the defendant Company, but one cannot shut one’s eyes to the fact, in view of what is there stated, that there was something in the nature of cross claims between these two Mills. And it would appear from the statement I have just read, that the plaintiffs had enjoyed the use of a certain siding, but that they in their turn denied any liability to pay rent in respect of it.

52. We have not to decide anything as to this siding in the present case, but we have to draw as best we can a fair inference from what undoubtedly took place. And here my finding is that the legal entity and the Directors of the Company left the common agents in charge of the Company’s property and affairs–some of those Directors being also the managing agents–and that having regard to the nature of the buildings erected, it would be improper for us to infer that the legal entity and its Directors did not know of what was being done, viz., that these large buildings were being erected on the plaintiffs’ land. On the contrary, the reasonable inference which I would draw is that the erection of these buildings was a part of the arrangement arrived at by the then common management of the two Mills; that that arrangement was never repudiated by the plaintiff Company for, many years; and that even in 1917 it only asked that rent should be paid and did not demand possession, or challenge the rights of the agents to have effected this arrangement.

53. Under these circumstances, I have come to the conclusion that the learned Judge was right here in holding that there was a grant of a license implied from the conduct of the plaintiff Company acting by its agents. I also think that the defendants are entitled to rely on the principle of Ramsden v. Dyson (1865) 1 H.L. 129 : 12 Jur. (N.S.) 506 : 14 W.R. 926 : 249 R.R. 543 which I have already referred to.

54. Now I should here mention one matter to show that it has not been overlooked. Curiously enough, in the lower Court the Memorandum and the Articles of Association of the plaintiff Company were not put in evidence, nor were the agency terms. We have thought it right to call for both, and they have been put in here as Exhibits, and also the special Resolutions which were subsequently passed dealing with the question of agency. There would appear to have been some further agreement between the Company and the agents beyond what is stated specifically in the Memorandum and Articles : but that is not before us.

55. Now looking at the Memorandum of the plaintiff Company, I agree that specifically it does not give power to sell or let land. The Memorandum is in a short old fashioned form and one which I personally prefer to the modern form containing a long string of alleged objects which are really powers more than objects and which have often been adversely criticised by Chancery Judges. Be that as it may, in In Re: Kingsbury Collieries and Moore’s Contract (1907) 2 Ch. 259 : 76 L.J.Ch. 469 : 96 L.T. 829 : 14 Manson 212 : 23 T.L.R. 497 Mr. Justice Kekewich held that a commercial corporation has such powers as are expressly or impliedly warranted by its constitution. In that case it was held that the Company had power to sell land which-it had acquired, as a power to sell real estate ought to be implied from the constitution of the Company.

56. As then the present Company is given by its Memorandum express power to purchase land, I think it is implied as part of its constitution that it has power to let the land and if necessary also to sell it. Then if one turns to the Articles, the Directors are given power by Article 8 “to do all works mentioned in the Memorandum of Association.” I think that would extend to all powers fairly implied from what is mentioned in the Memorandum. Next if one turns to the agents, they are given very wide powers of management. These are supplemented by special Resolutions which referred to certain other special Resolutions which are not before us. It is clear that in fact the agent’s managed with the acquiescence or approval of the Company ail its affairs at all material dates.

57. Under these circumstances I do not think it can fairly be said that the agents were acting outside the scope of their authority in what they did. It is of course difficult to speak of a legal entity in the same way as a human being. A legal entity can only act by its Directors and agents, Bat even there I think that the legal entity must be taken to be aware that these buildings had been erected through its common agents and, therefore, must ratify what was thereby done, even though possibly it might have been contended that that action was not within the four corners of the express authority conferred upon the agents in the Articles of Association. I have dealt with this point on its merits without prejudice to the argument of the learned Counsel for the defendants that this Court had no right to take up that point. It is fair to say that it had never been specifically urged either in the pleadings, or the issues, or the Memorandum of Appeal, that the common agents were acting ultra vires, or beyond the scope of their authority in granting the particular permission or particular user of this land and buildings in the way they did.

58. Moreover, it is not alleged that in what the common agents did they were committing a fraud on the plaintiff Company. It must be taken, I think, that they acted as they thought in the best interests of all the Mills of which they were the common agents: and when one considers what a comparatively trifling rental value this land had at that time, there is really no ground for imputing anything in the nature of financial fraud in this case.

59. The result then in my judgment is that the learned Judge arrived at a correct conclusion in finding that the plaintiffs succeeded as regards the open land and failed as regards the built on land. I think he also arrived at a correct conclusion on the small piece of land. Ten square yards, on which the defendants erected a steam chest after the suit had been filed. But as to the terms of the lease which should be granted by the plaintiff Company to the defendant Company, I Wish to hear Counsel not only as to the length of the term, but also as to the rent. Similarly, we will hear Counsel later on the question of costs.

Murphy, J.

60. The parties to this dispute are two Mill Companies at Ahmedabad. Their premises adjoin each other, and the matter of difference between them is as to the title to. and possession of a piece of land measuring 8,361, square yards out of Survery No. 210 of Shahr Kotda in Ahmedabad.

61. The history of this survey number is that it was originally owned by a Mahomedan, who, on March 24, 1893, executed a permanent lease in favour of the plaintiff Company. The heirs of the original owner have also since mortgaged the annual rent payable to them to the same Company for Rs. 5,000. Originally the plaintiff Company does not seem to have, made any great use of the land in suit except for stacking coal, timber and other similar articles. Ultimately, about 1,580 square yards were used by the defendant Company, whose premises adjoin this strip, for constructing a large tank and godowns at what must have been considerable expense. They also appear to have stored miscellaneous articles on the remainder of the 8,361 square yards in suit, and after the suit had been filed, they erected a steam chest and a shed on another 10 square yards. The plaintiff firm claimed possession of the land with the tank and buildings on it, and also asked for an injunction to restrain the defendant firm from obstructing them in the use of the remainder of the land and the removal of the steam chest and shed over it, and possession of that portion of the survey number also. The defendant firm pleaded that they held under an oral assignment, or, in the alternative, that their possession had become adverse to the plaintiff Mill. A third suggestion, made at the trial, as appears from the judgment of the learned Subordinate Judge was that they were licensees of the plaintiff firm,

62. It was on these allegations that the parties went to trial. The learned Subordinate Judge found in favour of the plaintiff Company as regards the open land and that used for the steam chest. I think there can be no dispute about the land used for the purpose of the steam chest, for it was only taken possession of very recently, and no question of the license, or of adverse possession can arise, while it is admittedly within Survey No. 210, which belongs to the plaintiff-firm. As to the rest of the open land, there is no evidence of any oral assignment of a portion of the permanent lease to the defendant firm. At the best, all that the defendants can prove is that they used to deposit certain unused pieces of machinery, coal, etc., on it. I think it has been correctly found that the plaintiff Company also made similar use of the portion of the same plot of land, and, on the evidence, I agree with the learned Subordinate Judge that no adverse possession has been made out by the defendant firm against the plaintiffs. The defendant Company’s acts on this land could only have been done on sufferance, or by license, and this being so, and the defendants having no title, they cannot, I think, resist the plaintiffs’ claim to the open land, for their acts being based on a license, such a license would not fall under Clause (a) or (b) of Section 60 of the Indian Easements Act, and so may be revoked, either expressly or by implication. I think that the plaintiff Company is clearly entitled to the relief granted them as to this land. The remaining dispute is as to the 1,580 square yards on which the defendants’ buildings stand. The defence here is similar to that in the case of the open land, that is to say, that it has either been held on an assignment of a portion of the permanent lease, or by adverse possession. The plea of adverse possession depends on when the buildings in question were put up, and this plain fact obviously could have easily been proved by the defendant Company from their books, for the costs must necessarily have been debited in the accounts. But these accounts have never been produced, and the permission to build on the land granted by the Municipality was given in April, 1909, though the defendants’ evidence is to the effect that the building was put up two years earlier. I think that, in the circumstances, an adverse inference can safely be drawn against the defendant firm to the effect that the evidence they have failed to produce would have been against their interest, and that the buildings were put up inside the period of limitation.

63. I now come to the other ground on which the defendants base their case. There is no direct evidence of any assignment-such as is referred to in the written statement, and if it was oral, it would in fact involve other difficulties. Mr. Thakor’s argument was that his clients could only be trespassers, lessees, or licensees. That they were trespassers, is no one’s case. There being no evidence of a lease, his conclusion was that they were in fact licensees.

64. Mr. Coyajee, for the plaintiff firm, has argued that in the circumstances, there being no possible grant or grantee, the defendant-firm could not be considered to hold this land in the character of licensees. The facts are, that at all material times the agents of both these Companies were the same, and the business of both was carried on by the late Sheth Mansukhbhai Bhagubhai who seems to have treated these two Mills, and a third one, more or less as a joint concern. In fact, what appears to have happened is that Sheth Mansukhbhai, as the managing agent of the defendant Company, built the godowns and the tank on plaintiff Company’s land, as if those two Companies were joint owners. The difficulty now is to disentangle the confusion which has resulted. For the two Companies are distinct legal entities, and the land in suit indubitably belonged to the plaintiff Company. We are in consequence faced with the problem of what is the correct inference to be drawn from these facts. There is no reason to think that the late Sheth Mansukhbhai was acting in any other than what he considered to be the best interests of both the Companies in question, and I think we must assume that, as managing agent of the plaintiff-firm he granted a license to the defendant Company to use the former Company’s land for the purpose of putting up these buildings, probably with the intention of later adjusting matters between the two Companies–an intention. which he unfortunately never carried out.

65. I think that on these facts we may, under Section 54 of the Indian Easements Act, imply a license, which in this case, since it was to erect buildings of a permanent character, would fall within the terms of Section 60 (b) of the Act, and could not be revoked.

66. For these reasons I believe that the original Court’s decree in favour of the plaintiff Company, except as to possession of the tank and building, is correct, and that it should be confirmed as proposed in my Lord the Chief Justice’s judgment.

67. [The remaining portion of the judgment is not material for the purposes of this report.]

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