Case Note & Summary
The dispute concerned an open piece of land in Bombay originally owned by Sir Shapurji Bharucha Mills Co. Ltd. and later purchased by Bharat Insurance Co. Ltd. in 1953. In 1947, the land was leased to Allenbury & Co. on a monthly rent of Rs. 1800, where the lessee kept American vehicles bought from the Government of India's Disposal Department after the Second World War. In 1950, the appellant company was incorporated for the specific purpose of taking over the business of Allenbury & Co., and from 1954 it occupied the land as tenant at the same rent. A lease document was executed purporting to create a ten-year lease, but it was not registered and therefore could not be tendered in evidence to prove its terms. The relationship of landlord and tenant was admitted, and rent of Rs. 1800 per month was paid and accepted. On January 20, 1960, Bharat Insurance Co. served a notice terminating the tenancy on the ground of subletting and demanded vacant possession. After nationalisation of life insurance companies, the Life Insurance Corporation of India was substituted as plaintiff, and a suit for possession was filed in the Court of Small Causes at Bombay. The Small Causes Court and its Appellate Bench concurrently held that the tenancy was not satisfactorily proved to be for manufacturing purposes and decreed the suit. The appellant's Special Civil Application under Article 227 of the Constitution was dismissed by the Bombay High Court. The Supreme Court granted special leave limited to the question whether the tenancy was for manufacturing purposes and, if so, whether the notice was inadequate. The appellant contended that the premises were used for repairing and reconditioning vehicles and for manufacturing spare parts, so the tenancy fell within Section 106 of the Transfer of Property Act as a manufacturing lease, requiring six months' notice, and that Section 107 did not control the presumption under Section 106. The respondent disputed this, arguing that the dominant purpose was storage and resale of vehicles. The Court explained that 'manufacturing purposes' in Section 106 is used in its popular and dictionary meaning; the burden lies on the party claiming the lease is for manufacturing purposes to establish that the exclusive or at least dominant purpose was manufacturing. It defined manufacture as implying a change, but not every change is manufacture; there must be transformation resulting in a new and different article with a distinctive name, character or use. The Court referred to C. Mackertich v. Sturt & Co. Ltd. and R. v. Wheeler. On the facts, the premises were used mostly for storing vehicles and spare parts; even if some spare parts were manufactured, that activity was incidental to the main purpose of storage and resale. The appellant failed to prove a dominant manufacturing purpose, so the one-month notice was valid. The Court did not decide whether Section 107 impacts Section 106. Consequently, the appeal was dismissed and the decree for possession was upheld.
Headnote
A) Transfer of Property Act - Section 106 - Manufacturing Purposes - Burden of Proof - Transfer of Property Act, 1882, Section 106 - The appellant tenant contended that the tenancy was for manufacturing purposes, requiring six months' notice under Section 106. The Court held that the burden lies on the party claiming the lease is for manufacturing purposes to establish that the exclusive or at least dominant purpose was manufacturing. The appellant failed to prove that the dominant purpose was manufacturing; the premises were mainly used for storage and resale of vehicles, and any manufacturing of spare parts was incidental. Held: the month's notice was valid and the suit was decreed. (Paras 6-9) B) Transfer of Property Act - Section 106 - Definition of Manufacture - Transformation Test - Transfer of Property Act, 1882, Section 106 - The Court referred to the dictionary meaning and authorities including R. v. Wheeler (2 B. & Ald. 349) and C. Mackertich v. Sturt & Co. Ltd. (AIR 1970 SC 889), stating that manufacture implies a change, but not every change is manufacture; there must be transformation, a new and different article emerging with distinctive name, character or use. The activities of repairing and reconditioning vehicles and possibly manufacturing some spare parts did not constitute manufacturing as the dominant purpose. Held: the test of transformation was not met for the tenancy as a whole. (Paras 7-8) C) Transfer of Property Act - Sections 106 and 107 - Interplay of Presumption and Registration - Transfer of Property Act, 1882, Sections 106, 107 - The appellant argued that Section 106 presumption (lease from year to year terminable by six months' notice) applies independently of Section 107's requirement for registered instrument for leases exceeding one year. The respondent disputed the construction. Since the Court found the appellant failed to prove manufacturing purpose, it expressly did not decide the question whether Section 107 impacts Section 106. Held: question left open; appeal dismissed on ground of failing to prove dominant manufacturing purpose. (Paras 4-5, 9)
Issue of Consideration
Whether the tenancy in favour of the appellant company was for manufacturing purposes and, if so, whether the notice terminating the tenancy was inadequate; also whether Section 107 of Transfer of Property Act impacts Section 106 presumption.
Final Decision
Appeal dismissed. The Supreme Court held that the appellant failed to establish that the dominant purpose of the lease was manufacturing; the premises were mainly used for storage and resale of vehicles, and any manufacturing of spare parts was incidental. Therefore, the one month's notice was valid and the suit for possession was decreed. The Court did not decide the question of Section 107's impact on Section 106.
Law Points
- Meaning of 'manufacturing purposes' under Section 106 Transfer of Property Act
- 1882 is used in popular and dictionary meaning
- burden of proving lease is for manufacturing purposes lies on party claiming it and must establish exclusive or dominant purpose
- manufacture implies change but every change is not manufacture
- there must be transformation resulting in new and different article having distinctive name
- character or use
- repairing and reconditioning vehicles primarily for storage and resale does not constitute manufacturing purpose
- incidental manufacturing of spare parts does not alter dominant purpose
- question of interplay between Sections 106 and 107 left open.
