Summary
The 1976 agreement to construct godowns for subsequent leasing to FCI was executory and did not itself create a lease. The owners’ damages claims depended on its terms, including completion certification, compliance with FCI specifications and actual takeover. No rent was due before possession, no liability arose for the two defective godowns at the relevant stage, and no covenant supported enhanced rent. Dismissal of the suit was affirmed.
Issues
- Whether the construction agreement created a lease or only an obligation to enter one later.
- Whether the owners established entitlement to rent, damages and enhanced rent under its terms.
Held
- Whether an instrument creates a lease depends on its operative effect and the parties’ intention. A mere executory agreement to grant and accept a future lease creates contractual obligations rather than an immediate demise. Here clauses 6 and 7 made the lease contingent on satisfactory construction and completion certification by competent FCI officers. (¶¶ 17, 18, 19, 20, 21, 22, 23, 24, 25)
- The damages suit had to be decided by the agreement’s conditions. FCI consistently disputed the two defective godowns and their defects were not rectified; waiver, acquiescence and estoppel did not arise. The relied-on acknowledgement was not accepted, and the supporting inspections did not meet contractual requirements. (¶¶ 26, 27, 28)
- Rent was payable only after actual takeover, excluding the claim for the period before 8 February 1978. The agreement contained no covenant entitling the owners to periodic enhanced rent. (¶¶ 29, 30)
Result
Appeal dismissed; High Court’s dismissal of the owners’ civil suit maintained. No order as to costs.