Rajasthan High Court

State Of Rajasthan vs M/S Niramaya Wellness Retreats ... on 5 March, 2022

Bench: Pankaj Bhandari, Birendra Kumar

      HIGH COURT OF JUDICATURE FOR RAJASTHAN
                  BENCH AT JAIPUR

               D.B. Civil Writ Petition No. 1295/2022

1.     State     Of      Rajasthan,           Through             Sub-Registrar-VII,
       Department Of Registration And Stamps, Jaipur.
2.     Collector (Stamps), Jaipur Circle-II, Jaipur.
                                                                      ----Petitioners
                                     Versus
1.     M/s Niramaya Wellness Retreats Private Limited
       54, Richmand Road, Rokline Centre, Bangalore-560025
       through Authorized Representative Mohan Dhamrajan S/o
       Shri K.V. Dharmrajan, Resident Of 305, Madhav Durga
       Enclave, 60 Feet Road, BEML, 5th Stage, Bangalore-
       560025.
2.     M/s Chitra Hospitality And Development Services Pvt.
       Ltd., 205, Mahaveer Bhawan, Karampura Complex, New
       Delhi Through Director.
                                                                   ----Respondents

For Petitioner(s) : Mr. R.P. Singh, AAG Mr. Hemant Kothari For Respondent(s) : Mr. Ashutosh Bhatia Mr. Kamlendra Sihag Mr. Abhay Jain

HON'BLE MR. JUSTICE PANKAJ BHANDARI HON'BLE MR. JUSTICE BIRENDRA KUMAR Order

Reserved on : 28/02/2022 Date of Pronouncement : 05/03/2022

(PER HON. BIRENDRA KUMAR,J.):

1. In this application under Articles 226 and 227 of the

Constitution of India, the State of Rajasthan has challenged the

correctness and legality of order dated 22.12.2021 passed in

Revision No.2021/574/Jaipur, by the Rajasthan Tax Board, Ajmer,

in exercise of power under Section 65 of the Rajasthan Stamp Act,

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1998, (a copy at Annexure-2) whereby the Board has set aside

the order of the Collector (Stamps), Jaipur Circle-II dated

23.06.2021 passed in case No. 41/2021, (a copy at Annexure-2)

whereby the Collector held that the agreement between

respondents No. 1 and 2 dated 26.03.2018, (Annexure-1) is a

"leave and licence" and as such liable to pay stamp duty under the

Rajasthan Stamp Act.

2. It is not in dispute that "leave and licence" is chargeable with

stamp duty under Rajasthan Stamp Act. We are not going into the

details of the charging Provisions of Section 3, definition of Section

2(xix), wherein word "instrument" has been defined, 2(xi) wherein

"conveyance" has been defined, 2(xxi) wherein "lease" has been

defined and 2(xxi-a) wherein "Leave and Licence" has been

defined, as there is no dispute at the bar that if the agreement, in

the nature is a document of leave and licence, it is liable to be

charged with stamp duty.

3. The only disputed question is whether agreement dated

26.03.2018 at Annexure-1 is a "leave and licence", as defined

under the Act and as such chargeable with stamp duty under

Rajasthan Stamp Act or it is simply a Hotel Management

Agreement between the parties, as such exempted under Article

5(g) of the Schedule to the Rajasthan Stamps Act, 1988 as

claimed by respondent No.1.

Another point for consideration is whether the Revisional

Authority was within its jurisdiction under Section 65 of the Stamp

Act in reappraising the same set of evidence and recording a

different conclusion without meeting with the reasons of the

Collector (Stamps).

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4. The factual matrix giving rise to this application is that

respondent No.2-M/s Chitra Hospitality And Development Services

Pvt. Ltd., the owner of Hotel Royal Heritage entered into a written

agreement with respondent No.1- M/s Niramaya Wellness Retreats

Private Limited on 26.03.2018. A copy at Annexure-1 stating

therein as follows:-

"1. The owner has vide lease dated 23rd May 2014 (hereinafter referred to as Lease Deed") taken on lease a Hotel commonly known as Royal Heritage Haveli, which is situated at Plot no. 116 & 117, Near Khatipura Tiraya, Khatipura, Jaipur, Rajasthan- 302012, from its actual owner SMS Investment Corporation Pvt. Ltd. (hereinafter referred to as Property") for a period of 19 years 11 Months to operate and manage the hotel as a heritage resort.

2. With effect from the date of this Agreement, the balance term of the Lease Deed shall be 16 years 1 month

3. The Operator (respondent No.1) has the requisite industrial, commercial and scientific knowledge and has experience, skill and technical know-how in owning operating and managing resorts of similar nature and has a goodwill and brand in hospitality sector

4. For the purpose of day to day operations in the Hotel and for the purpose of managing and operating the Hotel, the Owner has approached the Operator to run operate and manage the property as a resort, in consideration of fees hereinafter mentioned."

5. A complaint was received by Collector (Stamps) that the

aforesaid agreement was not registered just to evade the stamp

duty. The Collector registered a suo moto case No. 41/2021. After

notice and hearing to the parties and after going through details of

the contents of agreement, came to the conclusion that it was a

"leave and licence" as defined under Section 2 (xxi-a) of the

Rajasthan Stamp Act, 1998 and it is not a simple agreement of

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Hotel Management as such not exempted under Article 5(g) of the

Schedule attached to the Act. Accordingly asked respondent No.1

to pay the stamp duty.

6. The learned Revisional Authority exercised its jurisdiction as

a regular Appellate Court and reappraised the evidence and came

to the conclusion that the document was a simple agreement, as

such the Revisional Court set aside the order of Collector without

meeting with the reasons recorded by the Collector.

7. Mr. R.P. Singh, learned Additional Advocate General

appearing for the appellant contends that the Revisional Authority

exceeded the jurisdiction as it was only to examine legality and

propriety of the order, and as to regularity of the proceedings,

rather substituting its own views upon the view taken by the

Collector. Learned counsel has referred in details the different

terms and conditions of agreement and submits that it is within

the definition of leave and licence, hence the document is

chargeable with stamp duty and the finding of the Revisional

Authority is contrary to law and suffers from error of record.

8. To the contrary, Mr. Ashutosh Bhatia, learned counsel for

respondent No.1 submits that consistent stand of respondent No.1

before the authorities below and herein is that no right was

transferred by the said agreement to respondent No.1, rather only

management of the hotel, already existing, was given to the

respondent No.1, hence, it was a simple agreement, therefore, not

chargeable with stamp duty. He further contends that learned

Collector wrongly held that it was "leave and licence" in absence of

consideration clause which was payable by respondent No.1 to

respondent No. 2, in lieu of licence, therefore, order of the

Revisional Court requires no interference.

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9. Section 2 (xxi-a) defines the term leave and licence as

follows:-

"(xxi-a) "Leave and Licence" means any instrument, whether called leave or licence or called by any other name, by which 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 immovable property of the granter, something which would, in the absence of such right, be unlawful, and such right does not amount to an easement or an interest in property;"

Identical definition is there of the word "licence" in Section

52 of the Easement Act, which reads as follows:-

"52 'Licence' defined.-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 immovable 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 licence."

The Hon'ble Supreme Court considered the definition of word

"licence" under Easement Act in the case of Prabhudas

Damodar Kotecha and ors. v. Manhabala Jeram Damodar

and anr. (2013)15 SCC 358 and recorded in para-47 of the

judgment as follows:-

"This Court in State of Punjab v. Brig. Sukhjit Singh has observed that payment of licence fee is not an essential attribute for subsistence of licence. Section 52, therefore, does not require any consideration, material or non-material to be an element, under the definition of licence nor does it require that the right under the licence must arise by way of contract or as a result of a mutual promise"

10. Thus, it is evident that in a licence, (a) 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 immovable property of grantor (b)

something which would, in absence of such right, be unlawful and

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the property. There is no dispute that the agreement between the

parties, is not an easement or an interest in the property. It would

be evident that respondent No.1 would have been a trespasser on

the immovable property of grantor, in absence of such agreement.

11. The law is well settled that intention of the parties to a

document and nature of the document can be gathered only by

going through the entire document and not by its nomenclature.

The subject matter of the agreement between the parties is Royal

Heritage Haveli, located at Plot No. 116-117, near Khatipura

Tiraha, Khatipura, Jaipur of which respondent No.2 was a lessee.

By the said agreement, right of management of the hotel was

given to respondent No.1. In absence of such a right entry of

respondent No.1 on the property of respondent No.2 in the

capacity of taking managements of the same, would have been

unlawful. The agreement details about the several right partially

transferred to respondent No.1 and some of the rights were kept

under supervision and care of respondent No.2. Relevant

provisions are reproduced below:

"ARTICLE II The owner hereby covenants that it has lease hold rights to the said Hotel for a period of 19 years 11 Months which effect from the date of the Lease Deed. As on date of signing this Agreement balance lease term for the Owner as per the Lease Deed is 16 years 1month. Further, apart from the lease hold rights, the Lease Deed of has granted powers to the Owner to assign the operations and management of the Hotel to third party on a Management Contract. The Operator shall have the exclusive right to operate and manage the Hotel and shall accordingly supervise and direct the operation of the Hotel. Operator hereby undertakes to discharge and perform efficiently and with due diligence the obligation of the Operator hereunder

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1. From the date of commencement of operations by the Operator, the Operator, as an agent of the Owner, shall have the exclusive right to manage and operate the Hotel.

2. Operator in its capacity as the controller of the operation and management of the Hotel shall have absolute and sole discretion in the direction, management and supervision of the operation of the Hotel and without limiting the generality the foregoing such discretions of Operator shall include and extend to inter alia operation of the Hotel for all customary purposes and particularly in respect of, but not limited to the following:

2.1 Recruitment, appointment, transfer, termination, training and assignment of duties of all personnel as may, in the Operator's opinion, is required for the purpose of operating the Hotel; 2.2 Fixing of emoluments of all personnel, including fringe and employee benefits;

2.3 Formulation and administration of all personnel policies in conformity with local laws and regulations. 2.4 Institution and supervision of all operating policies, reporting and control systems and other procedures for all departments, including, but not limited to general administration, purchasing, accounting, credit policies (including entering into agreements with credit card organizations), front office, housekeeping, security, food and beverage including kitchens, restaurants, bars and banquets, engineering, maintenance, laundry and dry cleaning. 2.5 Fixing of all prices, rates and tariffs and credit policies;

2.6 Determination of the terms and conditions of and granting of all licences, leases and concessions as Operator may deem necessary or desirable in connection with the operation of the Hotel provided that no licence, lease or concession shall be granted for a period exceeding the Term of Agreement; 2.7 Appointment in the course of Hotel operations of contractors, agents, consultants and other parties to perform services deemed necessary or desirable by Operator for the operation of the Hotel. 2.8 Maintenance of suitable records and books of accounts;

2.9 Granting discounts and complimentary rooms or stays;

2.10 Purchase of such Operating Supplies, Consumable Supplies, additions to or replacement of Operating Equipment and as Operator may deem necessary or desirable for the proper operation of the Hotel;

2.11 Making such repairs, improvements, decorations to the Hotel as Operator may deem necessary or desirable for the proper maintenance and operation of the Hotel at the cost of the Owner. However, the

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Operator shall not be obliged nor be liable to do repairs and improvements to the Hotel which would involve the external structures, Mechanical Electrical and Plumbing (MEP), the Plant and such other repairs which could affect the stability of the Hotel; 2.12 Planning, preparation and contracting for marketing, advertising, publicity, public relations and promotional programmes for the Hotel; 2.13 Performing all acts and rendering all services necessary in connection with the operation of the Hotel in a diligent and proper manner;

2.14 Taking such action in law or in equity in the name of Operator or Hotel as may be necessary and proper in connection with the operation of the Hotel.

3. Operator shall provide and maintain in the Hotel all facilities and services normally provided by operator as per its brand standard and shall not lease or sub-lease or grant concessions in respect of such facilities and services. For any such requirement, the LESSOR's permission is required.

ARTICLE V

(b) The Owner acknowledges and agrees that Hotel will comply with any and all policies, guidelines, practices and requirements, from time to time, of Operator's Group Services.

ARTICLE VI

a) This Agreement does not create any tenancy on the property, and the Operator is allowed to discharge its duties only under the provisions of this Agreement.

b) The Operator shall deliver to the Owner prior to the end of the 20th day of the succeeding month, a profit and loss statement showing the results of operation of the Hotel for the preceding calendar month and the year to date and containing the computation of amounts payable to Owner and Operator. Within 60 days after the end of the Fiscal Year, the Operator agrees to deliver to the Owner a Profit and Loss statement showing the result of the operations of the Hotel and payments due to Owner and Operator for the Fiscal Year.

ARTICLE IX After the opening date of the Hotel, the supervisory services to be rendered by the personnel of the Operator, and its supervisory and technical staff, shall be provided by the Operator and the expenses shall be charged to Gross Operating Expenses. In case of Senior Staff member of Operator travel to Jaipur for official purpose their stay, food, local conveyance

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except liquor will be taken care by hotel and will be part of Gross Operating Expenses.

ARTICLE XI

1. In consideration of the operation of the Hotel by Operator, Owner shall pay to Operator the following Management Fees:

a. Basic Management Fee: During the term of this Agreement, Operator shall be paid a Basic Management Fee as follows:

A Basic Management Fee is payable of 5% (Five percent) of the Total Revenue net of all operating taxes of the Hotel on a monthly basis to be paid before the 10 th of the succeeding month. This fee shall be payable by the Owner to the Operator upon receipt of the invoice with statement of working.

b. Incentive Management Fee: In addition to the Basic Management Fee, Operator shall be paid during the term of this Agreement an Incentive Management Fee of 6% (Six percent) of Gross Operating Profit (GOP) on achieving GOP of 40%. Incentive Management fee of 8% shall be paid on achieving GOP of 40% or more up to 45% and 10% in the event of achieving GOP of 45 to 50% and 12% if the GOP is greater 50% This fee shall be payable at the end of the Financial year and payable to the operator not later than 15th of June of the succeeding year.

Any taxes, surcharges or any government levy of any type including GST or any other such taxes, applicable currently or in future on both the above fees will be payable by the Owner in addition to the fees above. It is, as per law, be offset through input credit.

2. Operator shall submit an Annual Operating Plan (AOP) which shall form part of this Agreement which is a summary of the financial projections for the Hotel for the first 3 years of this Agreement. It is agreed here that the Owner shall release:

I. 19 Sellable rooms as a part of resort facility and an additional coffee shop in the year 2018-19.

II. 22 rooms in the 2nd operational year; and

III. 25 rooms in the 3rd operational year as taken in its projections.

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3. All projections are made keeping in mind a dynamic increasing inventory and an additional F&B outlet.

4. AOP would stand adjusted on pro rata basis depending on the actual inventory and commissioning of the additional coffee shop facility.

ARTICLE XX

Use of the Name

1. The Business shall be branded as Royal Heritage Haveli by Niraamaya Retreats name. ("Brand"). As the Owner's brand gets integrated with the Operator's brand the generic style of visual and written communication will be as per brand standard of the Operator. The Brand along with all the Rights shall always remain the sole property and vest in the Operator and the Owner shall not have any rights or interest in this regard. The Parties agree and understand that nothing contained in this Agreement transfers or intends to transfer any interest in the Brand to the Owner and the Owner undertakes not to use or allow to be used the Brand and the Rights under any circumstances whether during the subsistence of this Agreement or after the termination of the Agreement for any purpose whatsoever.

2. The Use of the Brand Name

The Brand name as decided upon by Operator is the exclusive property of Niraamaya Wellness Retreats Pvt. Ltd. The Owner owns the individual hotel brands Royal Heritage Haveli and the Operator shall only use it for marketing the Hotel premises during the existence of this agreement. However, the Operator has not right to the Owner's brand, and shall not claim ownership of the same.

3. Breach of the Use of the Brand Name

In the event of any breach of this covenant by Owner or the Operator, the person suffering the breach shall be entitled to damages or relief by injunction or any other right or remedy under Applicable Laws or otherwise. This provision shall be deemed to survive the expiration or sooner termination of this Agreement.

ARTICLE XXII The "Initial Term" term of the agreement shall commence from the date the Hotel first commence business under the Brand of and will be for a period

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of Nine Years (9) with an initial term of Three Years (3) and shall be renewed/extended by a further two terms of three years (3) upon achievement of agreed targets of revenue and GOP as defined in this Agreement. After completion of every 3 years, next 3 years AOP will be mutually decided and approved.

ARTICLE XXIII

Termination of the Agreement

1. The Owner shall have the right to terminate this Agreement, by giving ninety (90) days written notice, thereof, if the Operator is disabled or prohibited by law, to discharge its obligations.

2. If the Operator shall be in breach of the terms and conditions herein contained which adversely affects the business of the Owner, and has failed to observe and performed, within thirty (30) days, after receipt of a written notice thereof given by the Owner to the Operator, unless such failure cannot be cured within that thirty (30) days period, and the Operator is using its best efforts to cure the default and the same can be and is cured within reasonable time after such thirty (30) days period."

12. On careful scrutiny of contents of the agreement between

the parties, it is evident that the agreement assigned, right of user

and management of immovable property to one of the parties to

the agreement, which could not have been exercised without

permission of the owner of the property. As such, the nature of

the agreement was a grant of "leave and licence" as defined under

Rajasthan Stamp Act and only for the reason that it does not

specifically contains any clause of payment of fee to respondent

No.2 by respondent No.1, would not change the nature of

document. Moreover, one of the signatory to the agreement i.e.

respondent No.2 is specific in his reply to the writ petition that

"the agreement between the parties was a "leave and license",