While adjudicating a dispute recently, the Hon’ble Supreme Court not just dealt with resolution of a landlord-tenant dispute but revisited the doctrinal foundations of how courts must interpret deeds and contracts, especially when labels, language, and lived conduct appear to blur lines.

In Annaya Kocha Shetty (Dead) Through LRs v. Laxmibai Narayan Satose (Dead) Through LRs & Ors., 2025 INSC 466, the dispute stemmed from a 1967 agreement by which the plaintiff claimed that he had been given the suit premises under a leave-and-license arrangement, thereby gaining the status of a deemed tenant by operation of Section 15A of the Bombay Rent Act. The agreement, however, was titled and drafted as a conducting agreement. While the trial court decreed the suit in favour of the plaintiff, emphasising occupation, payment of fixed royalty, and assumption of business liabilities, both the appellate court and the High Court reversed the decision. The matter thus came before the Hon’ble Supreme Court, where the Court ultimately upheld the findings of the higher courts and dismissed the plaintiff’s claim.

But the most instructive part of the judgment lies not in the procedural journey or even the conclusion, but in how the Court arrived at its interpretive stance.

On the issue of interpretation of deeds, the Court referred to its judgment in Provash Chandra Dalui v. Biswanath Banerjee, (1989) Suppl 1 SCC 487, and reiterated a fundamental rule: when the words of a contract are clear, the Court must give effect to those words. Interpretation does not begin with suspicion. Only if the words used are ambiguous or fail to capture the intended relationship can one legitimately look to context, background, or subsequent conduct. The Court reminded that contracts are to be constructed first in their ordinary, plain and literal sense, i.e., what is often called the literal rule of construction.

The Court, however, was conscious in recognising that language can sometimes be misleading or result in conclusions that defeat commercial common sense or (legal) coherence. In such cases, the golden rule of construction allows a court to depart from the literal meaning where doing so would otherwise create absurdity. This principle acts as a safety valve but is not an invitation to rewrite the terms. Finally, where ambiguity persists despite clear terms, a purposive interpretation may be adopted to reflect the objective of the parties, but this too must be exercised with caution.

In short, these are not mutually exclusive approaches, but a hierarchical framework. Literal first, golden rule next, and purposive construction last, and only where justified.

This rule is enshrined in Sections 91 and 92 of the Indian Evidence Act, as highlighted by the Court’s in its judgment. Section 91 declares that a written contract is the primary evidence of the terms agreed and Section 92 bars any party from introducing oral evidence to vary, add to or contradict the written terms. Exceptions to this rule are narrow and include cases of fraud, mistake, or where the very existence of the agreement is in dispute. The distinction is subtle but crucial; as observed, evidence to vary the terms of an agreement in writing is not admissible, but evidence to show that there is no agreement in the first place is admissible.

In the present case, per the Hon’ble Supreme Court, the plaintiff could not bring himself within any of the recognised exceptions. The Court refused to look beyond the letter of the agreement, which unequivocally reflected a business conducting arrangement, not a transfer of possessory rights. The parties were described as owner and conductor. The clauses referred to royalty and included obligations such as maintaining records, returning utensils, and handing back control after termination. Thus, the entire structure of the agreement was inconsistent with any inference of tenancy or license.

The judgment specifically highlights the rules of constructions of deeds. By clearly setting out the three-tiered approach, being literal reading as the starting point, deviation through the golden rule only to avoid absurdity, and purposive construction reserved for rare cases, the Court highlighted the idea that clarity in drafting is not just desirable, it is decisive. In doing so, it has also cautioned against the tendency to dilute written contracts through post-facto reconstructions based on conduct or convenience. This decision serves as a reminder that the architecture of a contract lies in its words, not in how one party later wishes them to be understood. For litigants and lawyers alike, it is a reaffirmation that the integrity of legal documents begins with fidelity to their language.

By - Vaibhav Mehra