Concluded lease contract and token money issues led to refund, no damages, and interest in a lease negotiation dispute.

Correspondence and receipt did not create a concluded lease because the material terms remained subject to finalisation of the lease deed. The Rs. 1 lakh payment was therefore token money, not advance rent, and could not be retained by the defendant. The defendant's unclear disclosure of its capacity to lease amounted to misrepresentation, although the absence of an occupancy certificate did not by itself invalidate an agreement to lease. The counter-claim for damages and interest failed for want of proof of recoverable loss, and additional court fee was required. The plaintiff was entitled to refund of the token money with interest and costs.

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Issues: (i) whether the correspondence and receipt created a concluded contract for lease or only continued negotiations; (ii) whether the amount of Rs. 1 lakh was received as advance rent or only as token money; (iii) whether the defendant's non-disclosure of its capacity to lease and the absence of an occupancy certificate affected the transaction; (iv) whether the defendant was entitled to damages and interest on the counter-claim; (v) whether the court fee on the counter-claim was properly paid; and (vi) whether the plaintiff was entitled to refund with interest.

Issue (i): Whether the correspondence and receipt created a concluded contract for lease or only continued negotiations?

Analysis: The documents exchanged between the parties were read together to ascertain whether all material terms of the proposed lease had been finally settled. The plaintiff's letter and the defendant's receipt showed that the money was received subject to finalisation of the lease deed and as per the defendant's terms and conditions. The language used in the receipt indicated that the lease deed was still to be finalised and that the parties had not yet reached consensus on the final terms. Mere reference to a future lease deed did not, on these facts, establish that a binding and completed contract had already come into existence.

Conclusion: No concluded contract for lease came into existence.

Issue (ii): Whether the amount of Rs. 1 lakh was received as advance rent or only as token money?

Analysis: The receipt described the amount as token money to be adjusted against the total advance only after execution of the lease deed. Since no concluded contract and no lease deed existed, the amount could not be treated as advance rent or as consideration under a completed bargain. Its character remained that of token money pending finalisation of the arrangement.

Conclusion: The amount was received only as token money and not as advance rent.

Issue (iii): Whether the defendant's non-disclosure of its capacity to lease and the absence of an occupancy certificate affected the transaction?

Analysis: The material correspondence did not clearly disclose whether the defendant was the owner, an agent, or a proposed sub-lessor. The later explanation that the defendant was acting under authority was not made clear at the outset, and the capacity in which the premises were to be let remained uncertain during the negotiations. That lack of candour on a material aspect amounted to misrepresentation affecting the transaction. As regards the occupancy certificate, the absence of such certificate did not by itself render the lease agreement void, because no legal prohibition was shown against entering into an agreement to lease before the certificate was obtained.

Conclusion: The transaction was vitiated by misrepresentation as to the defendant's capacity to let out the premises, but the absence of an occupancy certificate did not by itself invalidate the agreement.

Issue (iv): Whether the defendant was entitled to damages and interest on the counter-claim?

Analysis: The property did not belong to the defendant and no lease deed from the owner in favour of the defendant was produced. In the absence of proof that the defendant itself suffered any legally recoverable loss, the claim for damages could not succeed. Since the damages claim failed, no interest on that claim could be awarded either.

Conclusion: The defendant was not entitled to damages or interest on the counter-claim.

Issue (v): Whether the court fee on the counter-claim was properly paid?

Analysis: The counter-claim was treated as including a claim beyond a mere adjustment of the amount already received. The amount of Rs. 1 lakh was not advance rent and could not be absorbed as a simple adjustment against rent. The defendant was therefore required to pay court fee on that amount as well.

Conclusion: Proper court fee had not been paid on the counter-claim and additional court fee was required.

Issue (vi): Whether the plaintiff was entitled to refund with interest?

Analysis: Since no concluded contract existed and the defendant could not retain the token money, the plaintiff was entitled to restitution. Interest was awarded from the date of service of the legal notice, at a reasonable rate.

Conclusion: The plaintiff was entitled to refund of Rs. 1 lakh with interest at 12% per annum from 20 September 1983 until realisation.

Final Conclusion: The suit succeeded, the plaintiff obtained refund with interest and costs, and the counter-claim failed in entirety.

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