2019 (6) TMI 1725 - HC - Indian Laws

Seeking a declaration of invalidity of a Lease Deed executed on its behalf - execution of the subject Lease Deed and the authority of the person to execute the Deed on behalf of the owner, namely, the society - burden of the plaint is that the Lease Deed was purportedly executed by the President of the plaintiff-society without any authority - HELD THAT - The charter of the society, which is on record, suggests clearly that the society shall be represented by a Manager acting as the President of the Administrative Committee in all cases, whether in Court or outside and whether actively or passively. The only restriction against such Manager or President is that he shall not take any initiative on important subjects prescribed in the internal statute of the society without the resolution of the Administrative Body. There is indeed nothing in the charter or otherwise to show that the society is forbidden by law or as a matter of contract from creating a lease of its property in favour of any villager. A person who deals with a society or corporate body must no doubt familiarize himself with the constitution of the society or corporate body (in case of a company, it would be its Memorandum and Articles of Association), but once it is found that there is no restriction on the authority of the person to execute the act in such constitution, there is no further duty on the person to enquire into the internal management of the society or the corporate body and assess whether or not due procedure has been followed for executing the act in accordance with the rules of management applicable to the society or corporate body, as the case may be. There is one more reason why the onus was on the plaintiff in the present case. Under Section 106 of the Evidence Act, the burden of proving any fact which is especially within the knowledge of any person is upon that person. Its own internal statute was a matter which was clearly within the special knowledge of the plaintiff. The impugned order of the learned Ad-hoc District Judge is accordingly set aside and the suit of the plaintiff is dismissed.

Summary

Issues Involved:
1. Validity of the Lease Deed executed by the President of the plaintiff-society.
2. Authority of the President to execute the Lease Deed.
3. Allegation of fraudulent transaction due to meager lease rent.
4. Additional ground of unlawful sub-letting in the companion appeal.

Detailed Analysis:

1. Validity of the Lease Deed:
The core issue in First Appeal No. 6 of 2010 was the challenge to a judgment and decree that declared a Lease Deed invalid. The plaintiff-society claimed that the Lease Deed was executed by its President without authority and contrary to the society's objectives. The learned District Judge found the Lease Deed invalid, noting that the President did not have the authorization from the administrative committee and that the lease rent was disproportionately low, indicating an abuse of authority and causing irreparable loss to the plaintiff.

2. Authority of the President:
The defendants contended that the President had the authority to execute the Lease Deed, citing the society's charter, which allowed the President to represent the society in all matters except those requiring specific resolutions. The doctrine of indoor management was invoked, arguing that the onus to prove lack of authority lay with the plaintiff. The court agreed, stating that the plaintiff failed to produce evidence of any internal statute restricting the President's authority. The court emphasized that the burden of proof was on the plaintiff to demonstrate the lack of authority, which it failed to do.

3. Allegation of Fraudulent Transaction:
The plaintiff argued that the lease rent of `500/- per annum for a 99-year lease indicated fraud. However, the court noted that no specific issue was framed regarding this allegation, and no evidence was provided to support the claim that the rent was unreasonably low. The court also highlighted that community properties are meant for villagers' use, not profit, and the defendants were villagers. Consequently, the court found no merit in the fraud allegation.

4. Additional Ground of Unlawful Sub-letting:
In First Appeal No. 8 of 2010, the plaintiff additionally claimed unlawful sub-letting by the defendants. However, the court found no issue was framed regarding sub-letting, and the plaintiff did not seek relief based on this ground. The court clarified that a mere reference to sub-letting in the plaint, coupled with a prayer for possession, did not constitute a valid claim. The court concluded that the additional ground lacked merit and did not alter the outcome.

Conclusion:
The court set aside the impugned orders and dismissed the suits filed by the plaintiff. It held that the plaintiff failed to prove the lack of authority of the President to execute the Lease Deed and that the burden of proof was on the plaintiff. The court also found no evidence of fraud or unlawful sub-letting. The amount deposited by the appellants was ordered to be refunded with accrued interest.