G.M. Enterprises Pvt. Ltd. vs Sem Tian Exports And Hotels Pvt. ...
2005 Latest Caselaw 475 Del

JUDGMENT

T.S. Thakur, J.

1. In this suit for ejectment and mean profits, the plaintiff has made an application under Order XII Rule 6 of the CPC for a decree in its favor on the admissions of the defendant. The facts leading to the institution of the suit and the application filed by the plaintiff may be set out thus:-

2. In terms of lease agreement dated 28th May, 1999 executed between the parties, the plaintiff company let out the suit premises comprising basement, ground floor and mezzanine floor of a commercial building situate in the Masjid Moth area of New Delhi.

The lease deed purported to create a lease initially for a period of three years commencing from 1st June, 1999 and gave to the lessee the option of renewal for two further terms of three years each subject to its fulfillling the terms stipulated for such renewals. The plaintiff's case is that the defendant lessee did not exercise the option of renewal of the lease inasmuch as the lessee did not comply with the conditions stipulated for such renewal in particular the lessee did not, according to the plaintiff, give to the latter, a notice in writing expressing its desire to avail of the option to renew the lease. It did not even pay the advance rent of six months and security deposit at the enhanced rate nor was any lease deed for the renewed period signed or registered. The plaintiff's further case is that it reminded the defendant about the conditions subject to which a renewal could be granted by plaintiff's letter dated 17th June, 2002 but the defendant did not respond to the same thereby showing that it was not interested in the renewal of the lease. It was, in that backdrop, that the plaintiff sent a letter dated 13th July, 2002 through its advocate intimating to the defendant, the latter's failure to comply with its obligations under the lease agreement for renewal of the lease and pointing out that the defendant was an unauthorised occupant of the premises hence liable to restore the same to the plaintiff. The notice called upon the defendant to treat its tenancy as having been terminated with the close of 31st August, 2002 and to hand over vacant physical possession thereof on or before 31st August, 2002.

3. The defendant did not comply with the notice sent to it. It, on the other hand, set up an oral settlement between the parties which settlement, according to the plaintiff, had never taken place. A reply to that effect was sent by the plaintiff through its advocate. The plaintiff, therefore, claims that the defendant is an unauthorised occupant of the suit premises and is liable to be evicted from the same. The plaintiff has also claimed compensation for use and occupation of the suit premises/mene profits pendente lite and future at the rate of Rs.12,25,000/- p.m.

4. In the written statement filed by the defendant it is inter alia asserted that the lease in question is for a period of nine years commencing from 1st June, 1999. The defendant's case is that enhancement of the rent by the defendant after every three years is of no consequence in so far as the defendant's right to continue in occupation of the premises is concerned. The defendant also asserts that the provision made in the lease agreement for a notice in writing as a condition precedent for renewal of the lease is devoid of any meaning. The plaintiff having accepted an advance rent of Rs.18,37,500/-, is not, according to the defendant, entitled to raise any controversy regarding the continuation of the lease for a period of nine years. The allegation that the defendant is an unauthorised occupant of the demised premises is denied and the suit, according the defendant liable to be dismissed.

5. It is in the above background that the plaintiff has filed IA No. 3142/2003 in which the plaintiff has prayed for a judgment and decree in its favor on the admissions made by the defendant. The plaintiff's case in the application is that it granted a lease in favor of the defendant for a period of three years only. The defendant, no doubt, had a right to seek two renewals of three years each but the said renewals were subject to the defendant complying with the terms and conditions stipulated in the lease deed one of which was that a fresh lease was to be executed and registered for the extended/renewed period. Non-compliance with the terms for the grant of a renewal, which according to the plaintiff is admitted by the defendant clearly implies that there was no occasion for renewal of the lease period thereby rendering the defendant's occupation over the suit premises unauthorised hence liable to be removed.

6. The defendant has, in tune with its defense, opposed the application and urged that the lease was for an initial period of nine years only and that the execution of a fresh lease agreement on expiry of the first three years term, was nothing but a ministerial act, non-compliance with which was inconsequential. The plaintiff is not, therefore, entitled to any decree in its favor leave alone one under Order XII Rule 6 of the CPC.

7. Appearing for the plaintiff, Mr. Sandeep Sethi, learned senior counsel argued that the admissions made by the defendant were sufficient to entitle the plaintiff to a decree under Order XII Rule 6 of the CPC. He submitted that in the light of the said admissions, the defense to the suit was no more than moon shine. He urged, on a plain reading of the lease deed the execution whereof is not disputed, that the lease was for a period of three years only subject of course to the right of the defendant to seek a renewal upon fulfilllment of the conditions prescribed for such renewal. The defendant had not admittedly complied with the said requirements nor was any lease deed executed or registered for the period beyond three years. The execution of such a deed was envisaged by the renewal clause itself and the failure of that requirement would mean that the plaintiff's legal status was that of a tenant holding over on month to month basis. He submitted on the strength of decisions of the Apex Court and that of this court that the renewal of a lease was effective only if the conditions subject to which such renewal could be granted or satisfied and not otherwise. Such being the position, the defendant's continuance in the premises after termination of the month to month tenancy by service of a notice upon it, the validity whereof had not been assailed, was clearly unauthorised hence liable to be removed.

8. On behalf of the defendant, Mr. Mirza, on the other hand, argued that the lease was on a true and proper interpretation thereof for a period of nine years and not for three years as alleged by the plaintiff. The performance of other steps and compliance with other requirements were, according to the learned counsel, only ministerial in nature, the failure whereof would not either reduce the term of the lease or render the defendant liable to eviction. The parties had, according to the learned counsel, agreed orally to continue the lease on payment of a reduced amount towards rent on account of what, according to the defendant, was a fall in the market rentals of the property in that area.

9. I have given my anxious consideration to the submissions made at the bar and perused the record. The question whether the defendant is liable to be evicted from the premises would depend upon whether the period for which the lease in question was granted in its favor has or has not expired and if the contractual period has expired whether the month to month tenancy that followed such expiry on account of the acceptance of the rent by the landlord, has been validly terminated by a notice under Section 106 of the Transport Property Act. The answer to the first part of the question would depend upon an interpretation of the term of the lease agreement. , reference to which may be made straight-away. Clause one of the lease agreement grants a lease in favor of the defendant on the conditions contained therein. Conditions a, c, d, k and l stipulated there under alone are relevant for our purposes as at present. These read as under:-

"a) The LESSEE shall pay to the Lesser rent of Rs. 5 lacs per month. The rent shall be paid quarterly in advance on or before the 7th day of the concerned quarter of tenancy, failing which the LESSEE shall be liable to pay the Lesser, without prejudice to its other rights and remedies, an interest @ 24% per annum for the period of delay on the outstanding amount. The liability of lessee to pay rent shall commence from 1 June, 1999.

c) The term of lease shall be three years commencing from 1 June, 1999.

d) The LESSEE shall be entitled to determine this lease, anything after 36 months from the commencement of the lease, by the giving to the Lesser 4.5 months advance notice in writing or by paying 4.5 month's rent in lieu thereof.

k)The lessee shall deposit and keep deposited with the Lesser interest free security deposit equivalent to 6 months rent to be paid, at the time of handing over possession and which amount shall be refunded to the LESSEE upon the expiry of the lease or its earlier termination. In case the LESSEE does not vacate the premises upon expiry or earlier termination of the lease, upon the Lesser willing to refund the interest free security deposit, the Lesser would be entitled to receive and the LESSEE would be liable to pay monthly use and occupation charges at 2 times the rate of rent payable just prior to termination in terms of this agreement.

l) LESSEE shall pay to the Lesser an advance rent equivalent to 6 months rent at the time of handing over of possession of the said premises to the LESSEE, which shall be adjusted equally over the first thirty six months of the lease.

10. It is evident from clause (c) above that the term of the lease is limited to a period of three years commencing from 1st June, 1999. The argument that the lease granted to the defendant was valid for a period of nine years is, therefore, clearly against the terms of the lease agreement. There is indeed nothing in the lease agreement to support even on a prima facie basis that contention. The defendant's argument appears to proceed on the assumption that the renewal of the lease envisaged by clause (2) of the lease agreement was automatic or inevitable. That, however, does not appear to be so on a plain construction of clause 2 which envisaged such renewals. Clause 2 may, in this regard, be extracted for ready reference.

"2. The LESSEE shall have the option of renewal of lease hereby granted for 2 further terms of 3 years each; provided that:

a) LESSEE gives to the Lesser notice in writing expressing its desire to avail of the option to renew atleast 3 months prior to the expiry of the current lease.

b) LESSEE pays rent enhanced by 22.5%, i.e., Rs. 6,12,500/- lacs for the first renewed term and Rs. 7,50,312,50/- the second renewed term.

c) LESSEE pays advance rent of 6 months at the time of each renewal and security deposit at the enhanced rate of rent before commencement of each renewed term. Such advance rent would be adjusted equally over the subsequent lease period.

d) After the expiry of every three years a fresh lease of the same terms except for variation in the rent and the balance renewal period shall be signed and registered.

11. The renewal of the lease for a further period of three years is, on a bare perusal of the above, subject to the fulfilllment of the conditions precedent under the same. The first and foremost of these conditions is the issue of a notice by the lessee in writing, three months prior to the expiry of the lease period expressing its desire to avail of the option to renew the lease. More importantly, the renewal is subject to lessee paying enhanced rent at Rs. 6 ,12,500/- p.m. for the first renewal and advance rent of six months and security deposit calculated at the enhanced rate of rent before commencement of each renewed term. The last but not the least of the requirements that had to be satisfied in order to effectuate any renewal of the lease period was the requirement of execution and registration of a fresh lease for a period of three years on the same terms and conditions except for variation in the rent and the balance renewal period. The defendant has admittedly violated each one of these requirements. No notice in terms of clause 2(a) of the lease agreement was issued to the plaintiff even according to the defendant. The rent for the period beyond the initial term of three years was far from being enhanced to Rs. 6,12,500/- reduced to Rs. 4 lakhs per month according to the defendant. The advance rent and security deposit at the enhanced rate was never deposited or offered by the defendant as required under clause 2 (c ) supra. More importantly, no lease agreement for the renewed period of three years was executed between the parties so as to contractually bind the parties to any such renewed term.. The defendant having thus filed to comply with the essential requirements which were conditions precedent for the renewal of the term, could not claim that the contractual period stood renewed either automatically or that any such renewal was unnecessary because the renewed terms must be deemed to have been granted from the beginning only without any further or positive action on the part of the defendant. The legal position regarding renewal of lease agreements is fairly well-settled. In State of U.P. and Ors. v. Lalji Tandon (Dead) through LRs (2004) 1 SCC, the Supreme Court made a distinction between an extension of the lease in accordance with the covenants contained in the principal lease and renewal of the lease in accordance with the covenant for renewal contained therein. The court held that in the case of an extension it is not necessary to have a fresh deed of lease executed, a the extension of lease for the term agreed upon shall be a necessary consequence of the clause for extension. In cases where the lessee has the option of a renewal, the same has to be exercised consistently with the terms of the covenant and a fresh deed executed failing which another lease of a fixed term does not come into existence though the lessee in spite of the expiry of the term may continue by holding over. The following passage is in this regard apposite.

"There is a difference between an extension of lease in accordance with the covenant in that regard contained in the principal lease and renewal of lease, again in accordance with the covenant for renewal contained in the original lease. In the case of extension it is not necessary to have a fresh deed of lease executed, as the extension of lease for the term agreed upon shall be a necessary consequence of the clause for extension. However, option for renewal has to be exercised consistently with the terms of the covenant for renewal and, if exercised, a fresh deed of lease shall have to be executed between the parties. Failing the execution of a fresh deed of lease, another lease for a fixed term shall not come into existence though the principal lease in spite of the expiry of the term thereof may continue by holding over for year by year or month by month, as the case may be."

12. In Caltex (India) Ltd. Bhagwan Devi Marodia , the lease was for a certain period. The terms stipulated in the lease deed gave the lessee the right to seek a renewal provided notice of such a renewal was given to the Lesser within the time stipulated for that purpose. The notice of renewal given by the lessee was delayed by 12 days. The question that arose was whether a renewal could be deemed to have taken effect the delay notwithstanding. Their lordships held that stipulations as to time in a contract giving an option for renewal of a lease of land was at common law considered to be the essence of the contract even if they were not expressed to be so and were construed as conditions precedent. The tenant, therefore, lost his right to seek a renewal unless he made the request for a renewal within the time stipulated for the purpose. Decisions of this court in Atma Ram Properties (P) Ltd. v. Pal Properties (India) Pvt. Ltd. and Ors. 91 (2001) DLT 438 and in M/s. Sun Chandra and C. v. Punjab and Sind Bank 1996 VAD (Delhi) 323 deal with analogous situations in which renewal of leases were set up by the tenants but held by the court to be untenable in the absence of registered lease deeds executed in accordance with th terms of the renewal clause contained in the principal lease deed.

13. The argument that execution of a separate lease deed for the renewed lease period was a mere formal or a ministerial act, the non-performance of which would not effect the right of the lessee to continue in occupation must be rejected out of hand. At lease deed for a period exceeding one year can be created only by and under a registered instrument. If the original lease deed in favor of the defendant was only for a period of three years as indeed it was in the present case, the continuance of the contractual period beyond that term would depend entirely on whether a proper lease document had been executed and registered in accordance with law for such extended period. The failure of that requirement was not just the failure of a ministerial act as sought to be pointed out by the defendant but failure of an essential legal requirement compliance with which could not be dispensed with or wished away. My answer to the first part of the question formulated in the beginning of this order, therefore, in the negative. The lease, in my opinion, was clearly for a period of three years, the renewal whereof was subject to the conditions stipulated in clause 2 of the lease deed which conditions not having been complied with, no renewal has or could take effect particularly in the absence of a notice exercising such an option and the execution of a proper lease deed for the extended period.

14. In the absence of a contractual period of tenancy, the defendant could continue in possession of the premises but only as a month to month tenant which tenancy was terminable by the Lesser on service of a notice. That such a notice was sent to and received by the lessee is not disputed. Even the validity of the said notice is not in dispute before me. If that be so, there is nothing left to be tried, examined or determined in the suit in so far as the same prays for a decree for possession against the defendant. The provisions of Order XII Rule 6 of the CPC are, therefore, squarely applicable, entitling the plaintiff to a judgment in its favor to the extent the said judgment can be sustained on admissions made by the defendant.

15. I, therefore, allow this application and decree the suit filed by the plaintiff in so far as the same relates to eviction of the defendant and delivery of possession of the suit premises to the plaintiff. The defendant shall have two months' time to vacate the premises failing which the plaintiff shall be entitled to have the same vacated by execution of the decree. The plaintiff shall, during this period, deposit in this court the interest free security deposit lying with it. In so far as the claim for mesne profits is concerned, the same shall continue for completion of an inquiry and a final decree that may be passed in that regard by this court.