Lord Chloro Alkali Ltd. vs Mohinder Pal Singh Khurana & Ors.
2013 Latest Caselaw 985 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

                             RESERVED ON : 10th OCTOBER, 2012
                             DECIDED ON : 28th FEBRUARY, 2013

+                        RFA (OS)_96/2010

       LORD CHLORO ALKALI LTD.                  ....Appellant
               Through : Mr.Ravinder Sethi, Sr.Advocate with
                         Mr.Rahul Gupta, Mr.Shekhar Gupta,
                         Mr.Rajeev Ghawana and Mr.Nitesh,
                         Advocates.

                               versus

       MOHINDER PAL SINGH KHURANA & ORS. ....Respondents
               Through : Mr.Arun Kumar Varma, Advocate with
                         Ms.Mansi Wadhera and Mr.Ashish
                         Bansal, Advocates.

       CORAM:
       HON'BLE MR. JUSTICE SANJIV KHANNA
       HON'BLE MR. JUSTICE S.P.GARG

S.P.GARG, J.

1. The appellant-Lord Chloro Alkali Limited, formerly known

as Modi Alkalies and Chemicals Limited, has filed the present intra-Court

appeal against the judgment and decree dated 30 th July, 2010 in CS(OS)

No. 131/2005 (original suit No. CS(OS) 344/1998) for possession of

property bearing No. 18, Community Centre, New Friends Colony, New

Delhi in favour of the respondents, the original plaintiffs, namely,

Mohinder Pal Singh Khurana and Khushbir Singh Baweja, now

represented by his legal heirs-Harcharan Kaur, Harshbir Kaur Rana,

Gulbir Singh Baweja and Darshbir Kaur Uppal. The same

judgment/decree dismisses two other suits; CS(OS) No. 594/1998 for

recovery of mesne profits etc. and Suit No. 206/2002 for mandatory

injunction etc., which were preferred by Mohinder Pal Singh Khurana and

Khushbir Singh Baweja. The respondents have accepted the judgment

and decree of the Single Judge dismissing their suits Nos. 594/1998 and

206/2002. We are, therefore, not concerned and not examining the said

aspects.

2. The undisputed facts are that Mohinder Pal Singh Khurana,

respondent No.1 and Khushbir Singh Baweja, now represented by his

legal heirs (hereinafter referred to as the respondent Nos. 2 to 5) acquired

leasehold rights from Delhi Development Authority on a plot of land and

constructed a commercial building thereon. The said property is given

municipal No. 18, Community Centre, New Friends Colony, Delhi. By a

registered lease deed dated 14th December, 1981 (Exhibit PW-1/2) an area

of 7647.12 square feet was rented out to three companies, namely, the

appellant (5000 square feet), Modi Industries Limited (2000 square feet)

and Modi Carpets Limited (647 square feet). The demarcation of the area,

i.e., 5000 square feet apportioned to the appellant, 2000 square feet

apportioned to Modi Industries Limited and 647 square feet apportioned

to Modi Carpets Limited was not specifically made in the site plan or in

the lease deed. The rent specified in the lease was Rs.3/- per square feet

payable by 7th day of each calendar month. The relevant clauses of the

lease deed about which there are disputes and interpretation is required are

reproduced and discussed below. It is, however, not disputed that the

respondents had constructed the commercial building, on the land,

consisting of 7647.12 square feet from their own resources.

3. It is also an undisputed position that the respondents constructed a

mezzanine floor of 1845 square feet sometimes after the lease deed dated

14th December, 1981 was executed. By the supplementary lease deed

(Exhibit PW-1/4) dated 19th September, 1985, the mezzanine floor was

rented out to the appellant at Rs.6/- per square feet per month. Modi

Industries Limited and Modi Carpets Limited were not parties or tenants

under the supplementary lease deed.

4. The respondents through their advocate, before filing the suit, had

sent two legal notices dated 29th November, 1997 (Ex.PW1/5) and 21st

January, 1998 (Ex.PW-1/11) determining the lease. The notices were sent

by registered post. No reply to the said notices was received.

5. The suit for possession was filed on 18th February, 1998. At that

time, the total rent being paid for the entire premises to the respondents

was Rs.49,570/- per month. The break-up of this is not available, but

probably it represents rent at the rate of Rs.3.70 per square feet for

7647.12 square feet, which was originally let out by the respondents to the

three companies, including the appellant vide lease deed dated 14 th

December, 1981 (Exhibit PW-1/2) and Rs.6/- per square feet for 1845

square feet of the mezzanine area, which was rented out to the appellant

herein vide supplementary lease deed (Exhibit PW-1/4). Modi Industries

Ltd. and Modi Carpets Ltd. were defendants to the said suit but they did

not enter appearance despite service and were proceeded ex-parte vide

order dated 6th April, 2000.

6. The suit has been decreed after protracted trial and adjudication

vide impugned judgment dated 30th July, 2010 i.e. after nearly more than

12 years.

7. Challenge to the impugned judgment and decree by the appellant is

primarily on two grounds. Firstly, the two notices of termination dated

29th November, 1997 (Ex.PW1/5) and 21st January, 1998 (Ex.PW-1/11)

are invalid and did not validly terminate the tenancy under Section 106 of

the Transfer of Properties Act, 1882 (TPA, for short). Secondly and the

main plea was that the tenancy of the appellant was perpetual and,

therefore, the respondents cannot ask for and pray for a decree of

possession. A supplementary plea raised was that the respondents had not

approached the Court with clean hands.

8. The plea of the appellant that the tenancy rights given to them in

respect of the property by the respondents are perpetual is based upon

three assertions. Firstly, the appellant placed reliance on the terms and

conditions of the registered lease deed (Exhibit PW-1/2) and submitted

that terms and the clauses indicate that the tenancy is perpetual.

Secondly, the respondents did not file any suit for ejectment or possession

though the Delhi Rent Control Act, 1958 ceased to be applicable with

effect from October, 1988. The suit for ejectment was filed on 18 th

February, 1998, nearly ten years after the amendment. Thirdly and lastly

the appellant and the other two companies had made payment of lease

premium of Rs.25/- lacs to the respondents at the time of creation of

tenancy, which fact was concealed, but is now accepted and admitted by

the respondents. This contention will be dealt with and examined in detail

separately, but at this stage, it is suffice to notice that the appellants had

filed an application CM No. 5453/2011 for additional evidence under

Order XLI Rule 27, CPC, which was disposed of vide order dated 2nd

May, 2011 recording, inter alia, that the respondents had not only

admitted receipt of Rs.16,61,070/- but receipt of total amount of Rs.25

lacs. The order records that the appellant had pleaded that the payment

was towards "lease premium", whereas the stand of the respondents was

that it was non interest bearing "security deposit" refundable at the time of

vacation. Thereafter, the appellant was permitted and allowed to amend

the written statement in terms of order dated 3rd November, 2011. Parties

were permitted to file additional documents by the same order and lead

oral evidence. Consequent thereto some additional evidence was recorded

in the form of affidavits and cross-examination of Mr. S.K. Nair on behalf

of the appellant and Ms. Harcharan Kaur on behalf of the respondents.

9. In Bejoy Gopal Mukherji versus Pratul Chandra Ghose, AIR

1953 SC 153 it was observed that permanency of tenancy does not

necessarily imply both fixity of rent and fixity of occupation. At the same

time, it was observed that mere possession for generations at a uniform

rent and construction of permanent structure by itself is not conclusive

proof of permanent right but cumulative effect of such facts coupled with

several other facts may lead to an inference of permanent tenancy. The

Supreme Court observed that question of permanency of tenancy was not

directly and substantially in issue in the said case. In fact, it was not

known how the earliest known tenant in occupation had acquired the

property and what was the nature of the tenancy, but the tenancy had

passed from one person to another by inheritance, will or by transfer inter

vivos. There were deeds of transfer under which the transferee was given

the right to enjoy the property from generation to generation forever. At

no time, the landlord sought eviction/ejectment. Though several

judgments have been cited at the Bar, we deem it appropriate and

necessary to only refer to another decision of the Supreme Court in State

of U.P. and Others versus Lalji Tandon (Dead) Through LRs, (2004) 1

SCC 1and some judgments of the High Court referred to with approval in

the said case.

10. At the outset, it would be appropriate to refer to the law as

enunciated in Secy. of State for India in Council versus A.H. Forbes,

(1912) 17 IC 180 wherein it has been observed:

"(1) A lease, which creates a tenancy for a term of years, may yet confer on the lessee an option of renewal.

(2) If the lease does not state by whom the option is exercisable, it is exercisable (as between the lessor and lessee) by the lessee only, that is to say, a covenant for renewal, if informally expressed, is enforced only in favour of the lessee.

(3) The option is exercisable not merely by the lessee personally but also by his representative-in-interest.

(4) If the option does not state the terms of renewal, the new lease will be for the same period and on the same terms as the original lease, in respect of all the essential conditions thereof, except as to the covenant for renewal itself.

(5) There is no sort of legal presumption against a right of perpetual renewal. The burden of strict proof is imposed upon a person claiming such a right. It should not be inferred from any equivocal expressions which may fairly be capable of being otherwise interpreted. The intention in that behalf should be clearly shown; otherwise, the agreement is satisfied and exhausted by a single renewal.

(6) A covenant for renewal runs with the land.

(7) The position of a lessee, who has been always ready and willing to accept a renewal on proper terms, is the same in equity as if a proper lease had been granted. Where the covenant for renewal was still specifically enforceable at the commencement of a suit for ejectment against

the lessee, the position of the lessee in equity is the same as if it had been specifically enforced."

11. The following observations of a Division Bench of Andhra Pradesh

High Court in Syed Jaleel Zone versus P. Venkata Murlidhar, AIR 1981

AP 328, are apposite:-

"(i) In India, the law does not prohibit a perpetual lease; clear and unambiguous language would be required to infer such a lease. If the language is ambiguous the court would opt for an interpretation negating the plea of the perpetual lease;

(ii) To find an answer to the question whether a covenant for renewal contained in the lease deed construed properly and in its real context, entitles the tenant to continue as long as he chooses by exercising the option of renewal at the end of each successive period of 5 years subject to the same terms and condition depends on the deed of lease being read as a whole and an effort made to ascertain the intention of the parties while entering into the contract. No single clause or tem should be read in isolation so as to defeat other clauses. The interpretation must be reasonable, harmonious and be deduced from the language of the document;

(iii) The court always leans against a perpetual renewal and hence where there is a clause for renewal subject to the same terms and conditions, it would be construed as giving a right to renewal for the same period as the period

of the original lease, but not a right to second or third renewal and so on unless, of course, the language is clear and unambiguous."

12. The facts in Lalji Tandon's case (supra) may be noticed. Land was

given on 50 years lease with the option clause for renewal for another 50

years before expiry of the term to the existing lessee, „subject to the same

covenants, conditions and provisions as contained in the original lease‟.

The original lease, however, was not placed on record by the parties and it

was noticed that the High Court had drawn adverse inference against the

State of U.P. because they were in possession of the same. The High

Court had accordingly rejected the contention that the lease was

renewable only once. After expiry of the first 50 years, the lease was not

initially renewed. The State Government agreed to renew the lease for the

term of 50 years but after a period of 42 years and some months had

already passed in the second term. The lease executed was placed on

record. The Supreme Court opined that clause (2) of the said lease was

crucial and stipulated that the lessee and the lessor would be bound by the

obligations and would perform and observe the covenants, provisos and

stipulations in the original/first deed as if the same covenants, provisos,

stipulations had been repeated in full. The Supreme Court thereafter

observed that the short question was whether the clause of renewal as

mentioned in the original lease was got incorporated in view of the

covenant 2 in the second lease executed in 1945 after expiry of more than

42 years in the second term. We note that the second term expired in

1991 and the grievance of Lalji Tandon, the lessee, was that he was

entitled to another renewal of 50 years. The stand of the State of U.P. was

that there could be only one renewal for the second term of 50 years and

that had exhausted itself. In these circumstances, the Supreme Court

observed as under:

"13. In India, a lease may be in perpetuity. Neither the Transfer of Property Act nor the general law abhors a lease in perpetuity. (Mulla on the Transfer of Property Act, 9th Edn., 1999, p. 1011) Where a covenant for renewal exists, its exercise is, of course, a unilateral act of the lessee, and the consent of the lessor is unnecessary. (Baker v. Merkel, also Mulla, ibid., p. 1204) Where the principal lease executed between the parties containing a covenant for renewal, is renewed in accordance with the said covenant, whether the renewed lease shall also contain similar clause for renewal depends on the facts and circumstances of each case, regard being had to the intention of the parties as displayed in the original covenant for renewal and the surrounding circumstances. 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 consistently with the covenant for renewal has to be exercised consistently with the terms thereof 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."

13. Reference was made to English decision in Green versus Parmer,

(1944) 1 All England Reporter 670, wherein the relevant covenant read as

under:-

"The tenant is hereby granted the option of continuing the tenancy for a further period of six months on the same terms and conditions including this clause, provided the tenant gives to the landlord in writing four weeks‟ notice of his intention to exercise his option."

and the Chancery Division had held:

"The first thing one observes is that, in terms, there is granted to the tenant a single option

exercisable only once upon the named event, and the subject-matter of that option is an option of continuing the tenancy for a further period of six months on the same terms and conditions including this clause. To my mind, what that means is this: the tenant is to be allowed once, and once only, the opportunity of continuing the tenancy--continuing it for a further six months. Then we come to the critical words „on the same terms and conditions including this clause‟. As I read it, that means there is included in the new tenancy agreement a right in the tenant, if he thinks fit, to go on, for one further six months, and when you have got to that stage you have finished with the whole matter. In other words, it comes to this: „Here is your present lease. You may continue that, but I tell you, if you continue it, you continue it on the same terms as you were granted the original lease. You may continue it for a further 6 months with the right to go on for another 6 months.

Upon that footing, in the events which have happened, all the landlord was bound to do under this arrangement was to permit the tenant to occupy for a period not exceeding 18 months in the whole from the time when the original lease was granted."

14. It was accordingly held as under:

"18. We find ourselves in full agreement with the view of the law taken in the decisions cited hereinabove. It is pertinent to note that the respondent is not claiming a lease in perpetuity

or right to successive renewals under the covenant for renewal contained in the 1887 lease. The term of 50 years under the 1887 lease came to an end in the year 1937 and the option for renewal was exercised by the respondent as assignee of the original lessee which exercise was honoured by the lessor State executing a fresh deed of lease belatedly on 20-2-1945. This lease deed does not set out any fresh covenants, mutually agreed upon between the parties for the purpose of renewal. Rather it incorporates, without any reservation, all the covenants, provisos and stipulations as contained in the principal lease as if they had been herein repeated in full. Not only was a fresh deed of lease executed but the conduct of the parties also shows that at the end of the term appointed by the 1945 lease i.e.. in or around the year 1987, the lessor did not exercise its right of re-entry. On the other hand, the respondent exercised his option for renewal. The officials of the appellant State i.e. the Collector and the Board of Revenue, all recommended renewal and advised the State Government to expedite the renewal. The State Government was generally renewing such like leases by issuing general orders/instructions to its officers. At no point of time prior to the filing of the coutner-affidavit, on the present litigation having been initiated, the State or any of its officers took a stand that the right of renewal, as contained in the principal deed of lease, having been exhausted by exercise of one option for renewal, was not available to be exercised again.

19. Now that the covenant for renewal has been referentially incorporated without any reservation in the lease deed of 1945, the exercise of option for renewal cannot be denied to the respondent. However, in the lease deed to be executed for a period of 50 years commencing 20-5-1987, the covenant for renewal need not be incorporated and therefore the term of the lease would come to an end on expiry of 50 years calculated from 20-5-1987. This view also accords with the view of the law taken in Green v. Palmer."

15. Now we turn to the relevant clauses of the present lease dated 14th

December, 1981 (Ex.PW1/2), which are as under:

"2. The tenancy will commence by the 16th of December 1981 and after the expiry of first four years the rent would be revised to Rs.3.70 paise per sq ft, per month and would be revised by 10% on the first of the expiry of every four years.

In case permanent electricity connection is not provided by 16/12/1981 then the rent will be charged from the date the permanent connection is given.

3. The tenants shall be entitled to make alterations in the tenanted premises in accordance with the plan to be approved by the Municipal and/or other authorities but shall restore the same in the same conditions if the tenants vacate the premises on their own. In case of any illegal construction or alterations violating the laws of DDA or municipal corporation, the penalty, if any, levied would be paid by the Tenants.‖

4. The tenants shall be entitled to use the said tenanted premises for commercial purposes and/or for

the purpose of running their offices and/or carrying on business therein.

5. The Tenants, if they of their own decided to vacate the premises, will be entitled to remove all fixtures, fittings or additional equipment brought in by them by way of air- conditioning or for any other purposes in the tenanted premises. The Landlords will not in any manner claim any ownership for retaining all those fixtures and fittings and additional materials brought in by the Tenants in the tenanted premises and will not in any manner cause any difficulty in their removal by the Tenants.

6. (iii) The Tenants will have the right to use the whole or any part of the tenanted premises during the tenancy for companies, firms, trusts, associates of the Tenants. However, the responsibility of paying the rent will be of the Tenants under this Dead.

7. The Landlords do hereby covenant with the Tenants in the manner followings:

(a) the tenants paying the rent and other charges and outgoings hereby reserved on the days and in the manner hereinbefore mentioned and observing and performing all covenants and conditions herein contained and on their part to be observed and performed shall peacefully and quietly held, occupy and enjoy the tenanted premises and the said fittings and fixtures free from all disturbances by the Landlords or any person or persons rightfully claiming from, under on in trust for the Landlords.

(b) To bear and pay the Municipal rates and taxes, house-taxes any imposition by DDA or other authority or authorities in respect of the tenanted premises during the said term of tenancy." ‖

16. It is not possible to accept the contention of the appellant that the

lease Exhibit PW-1/2 is for infinite or perpetual duration. Covenant 2 of

the lease agreement reproduced above is to the contrary. It states that the

tenancy would commence on 16th December, 1981 and after expiry of first

four years the rent would be revised to `3.70 paise per sq. foot per month.

It would be revised by 10% on expiry of every four years.

17. Covenant 2 merely states that after the expiry of first four years, the

rent would be revised to ` 3.70 paisa per sq.ft. per month and would be

revisable by 10% on the first of the expiry of every four years. It merely

talks that whenever there is renewal of the lease, it would be on enhanced/

revised rate. It does not say that the renewal would be automatic and the

lessee as a matter of right would have the option of renewal for an

indefinite period after the expiry of every four years block. After the

expiry of first four years, no such option of renewal in writing was

exercised by the lessee. No such fresh lease deed incorporating all the

terms and conditions in the original lease deed including renewal clause

was executed between the parties.

18. Clause (3) of the lease deed authorizes the appellants to make

altercations in the tenanted premises in accordance with the plan to be

approved by the Municipal and /or other authorities. They were to restore

the premises in the same condition when they vacated it on their own.

Admittedly, the premises in question were let out to the appellant for

commercial purpose and /or for the purpose of running their offices and

/or carrying their own business therein. Some amount was purportedly

incurred by the appellant in carrying out the renovation to make the

premises useable for that purpose. This authorization to make altercation

in the tenanted premises, as per the law cannot be interpreted to mean that

the appellant was authorized to make structural changes or to raise

independent structure or cause substantial changes in the tenanted

premises. They could carry out the altercations as per the building bylaws

of the Municipal Corporation and /or other authorities. It was specifically

mentioned that in case of any illegal construction or altercation violating

the laws of DDA or Municipal Corporation, the penalty, if any, would be

payable by the tenants.

19. In clause (5), it was agreed that when the tenants decided to vacate

the premises on their own, they would be entitled to remove all fixtures,

fittings or additional equipment brought in by them by way of air

conditioning or for any other purposes in the tenanted premises. The

landlords would not claim any ownership for retaining all those fixtures

and fittings and would not in any manner cause any difficulty in their

removal by the tenants. Again, the tenants were permitted to remove the

additions or fittings carried out by them with their own funds at the time

of vacating the premises. Apparently, the landlords had no right over the

improvements made by the tenants in the tenanted premises as per law.

20. Section 108(B)(h) of the TPA is to the same effect and permits the

lessee even after on determination of the lease to remove all things that he

had attached to earth at any time, but while he was in possession but not

afterwards, provided he leaves the property in the state in which he had

received it. The covenant is not unusual and even in the absence of any

provision/covenant in the lease deed Exhibit PW-1/2, the implied term in

Section 108(B)(h)of TPA would have been applicable. Under Section

108(B)(p) a lessee without the lessor‟s consent cannot erect on the

property any permanent structure except for agricultural purposes. This

does not mean that internal changes or modification are not made by

tenants unless they are perpetual tenant. Erection of structures or

modification of property by a lessee is not something unusual and this

does not show and establish that the tenancy was permanent.

21. Clause (6) (iii) gives rights to the tenants to use the whole or any

part of the tenanted premises for companies, firms, Trusts and associates.

It stipulates that the responsibility to pay the rent would be that of the

tenants. In our view, no inference can be drawn from this covenant that

the tenancy was perpetual in nature. The landlords had given permission

of use the premises in question by the associate companies, firms and

trusts. It does not say that the tenants were free to sublet or part with the

possession of the premises in question to any stranger without the written

consent of the landlords. It prescribed that the responsibility of payment

would remain with the appellant and the two other companies meaning

thereby that the relationship of landlord and tenant would continue only

between the signatories to the agreement.

22. Under Section 108(B)(j) a lessee has right, subject to contract to the

contrary, to transfer absolutely by way of mortgage or sub-lease the whole

or in part his interest in the property and the transferee of such interest or

part may again transfer it. The clause, therefore, permitting the group

companies, firms etc. to use the property is not peculiar and in fact

restricts the right of the appellant under Section 108(B)(j). It is not an

indication that the lease was perpetual.

23. The words in clause 5 that the tenants, i.e., "the appellant on their

own decide to vacate the premises" or that the respondents, i.e., the

landlords would permit the tenants, i.e., the appellant, to peacefully and

quietly occupy and enjoy tenanted premises/fittings/fixture is a normal

clause, which is invariably incorporated in most written leases. Clause is

in consonance with the general understanding about the rights and

obligations of a tenant and a landlord.

24. Clause 8 of the lease Ex.PW1/2 reads as under:-

"It is agreed by and between the Landlords and the tenants that if and when the landlords intended to construct another floor or floors to the said premises the tenants will have no objection to the same provided, however, that as and when the said floor would be constructed and completed, the Landlords shall offer the tenancy of the said floor to the tenant at the first instance and the tenants would have the first right of refusal."

The said clause is a clear pointer that the respondents, i.e., the

landlord had the right to carry out further construction in the property in

spite of the tenancy right granted under lease. By permitting construction

in the property, the respondents could add to the constructed area and

make new construction. The respondents also had the right to rent it out

but the tenants were given right of first choice to take the new constructed

portion on rent. The appellant and other tenants had the first right of

refusal. The respondents in fact had constructed the mezzanine floor and

increased the covered area by 1845 square feet. The new construction

was leased out to the appellant under supplementary agreement Exhibit

PW-1/4 executed on 19th September, 1985. Monthly rent for the new

portion was Rs.6/- per square feet. The supplementary lease agreement

(Exhibit PW-1/4) is not registered. Therefore, it created month to month

tenancy and not a tenancy for four years or a perpetual tenancy as

claimed. The contention of the appellant that supplementary agreement

Exhibit PW-1/4 though an unregistered document creates perpetual

tenancy in respect of 1845 square feet is fallacious and flawed. It is

contrary to Sections 106 and 107 of the TPA.

25. A long and undisturbed possession by itself is not sufficient to

establish a claim for permanent tenancy. There has to be other co-existing

substantive evidence and material to justify the said claim as observed by

the Supreme Court in Bejoy Gopal Mukherji (supra). We in this case do

not find any such co-existing factors to justify the said claim. The fact

that the respondent did not initiate litigation and asked for ejectment or

possession does not justify the claim that there was permanent tenancy.

Litigation is not easy and is normally a matter of last resort for most. In

the present case, it took nearly 12 years for suit for ejectment to be

decided and thereafter it has taken another three years in the first appeal.

There is no mention in the lease deed that the appellant or the tenants

would enjoy property infinitive or a word to the effect that the tenancy

right was permanent. On the contrary, the clauses negate that the nature

of tenancy as permanent. Various restrictions were put on how the

appellant-tenant would use the property. In case they violate the

municipal bye-laws, penalties had to be paid by the appellant. As noticed,

right to further constructions continued and was specifically granted to the

respondents. Importantly clause 2 of the lease specifically stated that it

was for four years. It is on the basis of this clause that the lease deed was

registered. Under the Stamp Act, stamp duty is payable depending on the

tenure or the term of the lease. A lease for long terms of 12 years and

beyond are virtually treated and regarded as „transfers‟ and higher stamp

duty is paid. Clause 2 of the lease is clear and categorical that the tenancy

was for four years. Language employed does not show that the lease was

permanent, in fact contra to the claim that the lease is permanent or

perpetual, it gave an option to renew at enhanced rent.

26. It is admitted position that no fresh or further lease was executed

after the period of four years came to an end as stipulated in clause 2 of

Exhibit PW-1/2. The rent may have been increased to Rs.3.70 per square

feet after the end of four years but this only resulted in creation of month

to month tenancy and not a tenancy for infinite or indefinite period. In

Samir Mukherjee versus Davinder K. Bajaj and others, (2001) 5 SCC

259 Sections 106 and 107 of the TPA were examined and it was observed

that the two Sections have to be read harmoniously. Section 106

classifies leases into two categories; leases for immovable property for

agricultural or manufacturing purposes and leases for other purposes. But

where the parties to the contract have indicated a duration of lease,

Section 106 is not applicable. Leases other than leases for agriculture or

manufacturing purposes are month to month leases unless there is a valid

contract to the contrary, i.e., contract as prescribed meets the mandate of

Section 107 of TPA and the Registration Act. Section 107 TPA

prescribes the procedure for execution of a lease between the parties from

year to year or for any term exceeding one year. Section 107 stipulates

that such leases can be only by way of an registered instrument. Other

leases are treated as oral agreements with delivery of possession and are

accordingly month to month leases. Unless there is a valid lease within

the meaning of the opening words of Section 106, the same would not be

attracted. It was accordingly opined as under:

"9. In a recent decision of this Court in Janki Devi Bhagat Trust this Court held that under Section 107 of the Transfer of Property Act a lease of immovable property from year to year or for a term exceeding one year can be made only by a registered instrument and any lease of this kind would be void unless it is so created.

10. In the present case though the appellant has claimed that it was a lease for manufacturing purpose, admittedly there was no registered written lease. Therefore, the rule of construction as envisaged in Section 106 would not be applicable as the statutory requirement of Section 107 of the Act has not been satisfied. The plea of the appellant that 15 days‟ notice terminating the present tenancy is bad in law would not be sustainable.

11. XXXX

12. In Krishna Das v. Bidhan Chandra and Balwant Singh v. L. Murari Lal the Courts have taken the view that Section 106 was not intended to be controlled by Section 107. Similar view has been expressed by the High Court of Assam and Nagaland. The contrary view has been expressed by the Calcutta High Court in Sati Prasanna Mukherjee v. Mohd. Fazel and the Allahabad High Court in Kishan Lal v. Lal Ram

Chander. It is not necessary to refer to all the decisions of other High Courts.

13. On a perusal of these decisions we find the view that fiction in Section 106 was not intended to be controlled by Section 107 was due to a misunderstanding of the decision of this Court in Ram Kumar Das as we have already indicated that in Ram Kumar Das this Court did not apply the rule of construction of Section 106 as there was no registered instrument. The High Courts taking that view have not laid down the law correctly.

14. In Jagat Taran Berry v. Sardar Sant Singh the Delhi High Court considered the views expressed by different High Courts and correctly took the view that there is no conflict between Sections 106 and 107 of the Act and for application of Section 106 a valid year-to-year lease shall be deemed to exist only when it is created by a registered instrument; non-existence of a registered instrument to create such a lease will by itself exclude Section 106."

27. Applying the aforesaid decision once it is held that there was no

further registered lease after the term stipulated in the lease dated 14th

December, 1980 (Exhibit PW-1/2) came to an end; it means and implies

that thereupon there was only month to month lease and nothing more.

28. Order dated 3rd November, 2011 allowing the written statement to

be amended and permitting the appellant to take the plea that they had

made payment of lease premium records in the first paragraph as under:

"1. Too much money. Neither the one who gave, nor the one who received remember giving and receiving the money. And when they recollect, the one who gave recollects having paid Rs.16,61,070/- but the one who received acknowledges having received much more i.e. Rs.25,00,000/-. A fairly funny situation."

29. As noticed above, the appellant had filed CM No. 5453/2011,

which was allowed vide order dated 2nd May, 2011. The respondents

have accepted that they had received total payment of Rs.25 lacs at the

time of initial letting out. The appellant, however, claims that this was

lease premium as the tenancy was perpetual and without any authority to

the respondents to terminate the same. The respondents contend that this

was interest free security deposit refundable on vacation of the premises

under tenancy.

30. The payment of Rs.25 lacs is not mentioned in the original lease

deed dated 14th December, 1981 Exhibit PW-1/2, which was the

registered document. The appellant claims this was because the

respondents were sub-leases of the Delhi Development Authority and

transfers were not permitted. It was submitted that the respondents had

paid premium of Rs.2,44,000/- to Delhi Development Authority to acquire

rights on the land as per perpetual lease dated 7 th April, 1980 Exhibit PW-

1/1. The contention has to be rejected for various reasons. Firstly, the

onus that this payment was towards lease premium is on the appellant. It

is surprising that this claim was not made by the appellant till 2011, i.e.,

the claim was made after 13 years of litigation. It is difficult to accept and

believe that the appellant and Modi Industries Limited and Modi Carpets

Limited would have paid "lease premium", but were not aware and forgot

about the same. "Lease premium" would be a capital account payment

and, therefore, reflected in the books of accounts. The appellant has not

placed on record their books of account and the treatment given to

payment of Rs.25 lacs in their books. They have not filed their annual

returns, balance sheet etc. More importantly there is no written

instrument for this payment. As already noticed above, this payment is

not mentioned in the registered lease (Exhibit PW-1/2) which form the

binding contract. S.K. Nair, who has filed the affidavit and appeared as

DW-1 is not a signatory to the two lease agreement (Exhibit PW-1/2) and

(Exhibit PW-1/4). He is not even a witness to them. S.K. Nair, DW-1

had also appeared before the single Judge and at that time he did not make

any averment or statement that "lease premium" was paid. In the affidavit

mark „A‟ dated 16th January, 2012 S.K. Nair came up with the plea that

recently they had come to know that payment of Rs.16.35 lacs was made

by two demand drafts but how he came to know that this was "lease

premium" is not indicated or stated. There is no document or even

internal notings of the appellant company to show that this was "lease

premium". On the other hand, it has come on record that Rs.26,070/- out

of this amount of Rs.16,61,070/- was on account of rent. In his cross-

examination, DW-1 S.K. Nair admitted that he had joined Modi Carpets

on 19th January, 1979 as a sales coordinator but claimed that he came to

know about the terms and conditions of the lease agreement as they were

discussed in the meetings. This statement is unreliable and unbelievable

as he was not certainly involved in the deliberations with the landlords

and claims that information came to him from third parties, i.e., persons

who were negotiating with the landlords. Dr. D.K. Modi did not appear

as a witness and testify. S.K. Nair, DW-1 has given evasive replies in the

cross-examination. We may at this stage also record that the plea and

contention that there was a perpetual tenancy was not taken in the original

statement filed by the appellant dated 16th April, 1999. The said plea was

taken for the first time in the amended written statement dated 25th

October, 2005, i.e., after gap of 6 ½ years. We hold that the appellant has

not been able to substantiate and prove that they had made payment of

lease premium.

31. The respondents have relied upon the affidavit of Harcharan Kaur,

who was also cross-examined. She is a co-owner of the property but it is

apparent that she was not directly dealing with the appellant and other

tenants. In fact to the credit of the respondents, they came forward and

stated in reply to CM No. 5453/2011 that they had received payment of

Rs.25 lacs and not Rs.16,61,070/-, a fact which was obviously not in the

knowledge of Mr. S.K. Nair. This also shows that S.K. Nair had no

personal knowledge as to what was agreed and on what account payment

of Rs.25 lacs was made. The said averment was made by Harcharan Kaur

on the basis of documents she came across including copy of the bank

account Exhibit RX-2 and details of security deposit as mentioned in the

relevant page of the account books Exhibit RX-3. The respondents have

only produced a copy of the said page of their books. Even if we

disregard the statement, it is difficult to accept that Rs.25 lacs was "lease

premium" for perpetual tenancy. Anyone familiar with the property tax

provisions as they were then applicable would be aware that property tax

was calculated and computed on the basis of rent received by the landlord

during first five years after construction and on first letting. Huge and

disproportionate security deposits were taken by the landlords to avoid

payment of higher property tax. However, we would not like to give any

firm opinion on the said aspect but observe that there is insufficient

evidence to hold that the payment of Rs.25 lacs is towards lease premium.

Supplementary lease deed (Exhibit PW-1/4) was executed on 19th

September, 1985. By this agreement extended area of 1845 square feet of

mezzanine floor was rented out at Rs.6/- per square feet, i.e., Rs.11,070/-

per month. There is no mention of any "lease premium" in this document

also. Separate „security deposit‟ was paid for the mezzanine floor. There

is no plausible explanation why the appellant paid and the respondents

received the „security deposit‟ for the mezzanine floor after they had

received "lease premium". Terms of the lease (Exhibit PW-1/2) do not

support the contention that "lease premium" for permanent/perpetual lease

was paid.

32. The aforesaid discussion negates the contention of the appellant

that the appeal should be allowed and the decree be set aside because the

respondents have deliberately concealed facts. It is a case where both the

appellant and the respondents have forgotten true and correct facts, viz.

payment of Rs.25 lacs. Perhaps it was not convenient to remember the

said facts because the respondents wanted to avoid incidence of taxation.

Both parties were pari delicto. The respondents as noted, have come

forward and admitted that they had received Rs.25 lacs at the time of

creation of tenancy in 1981 and not mere Rs.16,61,070/- as claimed by the

appellant. We do not think that the appeal should be allowed and the suit

of the respondents should be dismissed on this ground. Of course, the

respondents are bound to refund Rs.25 lacs to the appellant and Modi

Carpets Limited and Modi Industries Limited.

33. The contention of the appellant is that the respondents did not serve

valid fifteen days‟ notice ending with the tenancy month as mandated and

required under Section 106 of the TPA. It is stated that as per document

letter dated 16th March, 2003 (Exhibit PW-1/3) the tenancy commenced

from 1st February, 1982 and not from 16th December, 1981. Clause 2 of

the lease deed is highlighted and stated that the tenancy would not

commence from 16th December, 1981 as permanent electricity connection

was not provided and commenced from the date the permanent connection

was granted. It is submitted that the second notice dated 21 st January,

1998 Exhibit PW-1/11 terminated the lease but without waiting for the

end of the tenancy month, i.e., February, 1998 the suit was filed

prematurely on 18th February, 1998.

34. Section 106 of the TPA was amended by Transfer of Property

(Amendment) Act, 2002 (Act No. 3 of 2003) and the substituted Section

106 reads as under:

"For section 106 of the Transfer of Property Act, 1 882 (4 of 1882) (hereinafter referred to as the principal Act), the following section shall be substituted, namely:--

"106. Duration of certain leases in absence of written contract or local usage.--(1) In the absence of a contract or local law or usage to the contrary, a lease of immovable property for agricultural or manufacturing purposes shall be deemed to be a lease from year to year, terminable, on the part of either lessor or lessee, by six months' notice; and a lease of immovable property for any other purpose shall be deemed to be a lease from month to month, terminable, on the part of either lessor or lessee, by fifteen days' notice.

(2) Notwithstanding anything contained in any other law for the time being in force, the period mentioned in sub-section (1) shall commence from the date of receipt of notice.

(3) A notice under sub-section (1) shall not be deemed to be invalid merely because the period mentioned therein falls short of the period

specified under that sub-section, where a suit or proceeding is filed after the expiry of the period mentioned in that sub-section.

(4) Every notice under sub-section (1) must be in writing, signed by or on behalf of the person giving it, and either be sent by post to the party who is intended to be bound by it or be tendered or delivered personally to such party, or to one of his family or servants at his residence, or (if such tender or delivery is not practicable) affixed to a conspicuous part of the property.".

35. The aforesaid amendment has been given retrospective effect by the

transitory provisions incorporated in Section 3 of the Transfer of Property

(Amendment) Act, 2002, which for the sake of convenience is reproduced

below:-

"The provisions of section 106 of the principal Act, as amended by section 2, shall apply to--

(a) all notices in pursuance of which any suit or proceeding is pending at the commencement of this Act; and

(b) all notices which have been issued before the commencement of this Act but where no suit or proceeding has been filed before such commencement"

36. As per amended Section 106 of the TPA, 15 days‟ notice for

termination is required in case of month to month tenancy. The earlier

requirement that the notice period must end with the month of tenancy has

been deleted. The new amendment is retrospective and is applicable to all

notices on which suit or proceedings were pending at the commencement

of the Act, i.e., on 31st December, 2002. Thus, Section 3 of the Transfer

of Property (Amendment) Act, 2002 is applicable.

37. We have also examined the two notices dated 29th November, 1997

Exhibit PW-1/5 and 21st January, 1998 Exhibit PW-1/11. The two notices

were sent under registered cover. The notice Exhibit PW-1/5 dated 29th

November, 1997 was correctly addressed to the appellant at his registered

office SP-460, Matyasa Industrial Area, Alwar, Rajasthan. Notice was

also sent to the appellant at the tenanted premises. The relevant postal

receipts were Exhibited as PW-1/6, PW-1/7, PW-1/8 and PW-1/8A

38. The second notice Exhibit PW-1/11 was also sent under registered

cover and the postal receipts and A.D. cards have been marked Exhibit

PW-1/12, Exhibit PW-1/14, Exhibit PW-1/14A, Exhibit PW-1/15 and

Exhibit PW-1/16A. DW-1 S.K. Nair in his affidavit had stated that no

notices were received but accepted that the address of the appellant on the

AD card Exhibit PW-1/15 was correct. The notice dated 29th November,

1997 Exhibit PW-1/5B in paragraph 12 had stated as under:

"12. The lessors hereby terminate your tenancy of the aforesaid demised premises, and call upon you to hand over vacant possession on the expiry of 15th day of January, 1998 for which you are hereby given fifteen days notice expiring with the end of the month of tenancy. Alternatively you may hand over possession on such date that you may consider to be the date on which the notice of fifteen days expires with the end of the month of the tenancy and, if according to you, your tenancy commences and ends on any other day of the English calendar month, then please treat this notice by having fifteen days notice and your tenancy would be deemed to have been terminated on the expiry of such tenancy month according to you."

39. Notice dated 21st January, 1998 in paragraph 12 again had stated as

under:

"12. The Lesors(sic) hereby terminate you(sic) tenancy of the aforesaid demised premises, and call upon you to hand over vacant possession on the expiry of 15Ith(sic) day of February, 1998 for which you are hereby given fifteen days notice expiring with the end of the month of tenancy. Alternatively you may hand over possession on such date that you may consider to be the date on which the notice of by having fifteen days notice

and your tenancy would be deemed to have been terminated on the expiry of such tenancy month according to you."

40. In view of the aforesaid position, the contention of the appellant on

validity of the notice has to be rejected.

41. In the light of above discussion, we find no merit in the appeal and

it is dismissed. The appellant shall handover the vacant possession of the

premises in question to the respondents within two months. The

respondents shall deposit ` 25 lacs with the Registrar General of this

Court within fifteen days after the premises are vacated by the appellant.

The amount of ` 25 lacs shall be released to the appellant, Modi Industries

Limited and Modi Carpets Limited thereafter.

42. The appeal stands disposed of in the above terms.

(S.P.GARG) JUDGE

(SANJIV KHANNA) JUDGE FEBRUARY 28, 2013/tr/vkr