Delhi High Court
Dcb Bank Ltd. vs J.S. Sawhney & Anr. on 16 January, 2018
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ RFA No.30/2018
% 16th January, 2018
DCB BANK LTD. ..... Appellant
Through: Mr. Ravinder Sethi, Senior
Advocate with Mr. Sanjay
Gupta, Advocate, Mr. Ateev
Mathur, Advocate, Mr. Amol
Sharma, Advocate and Ms.
Jagriti Ahuja, Advocate.
versus
J.S. SAWHNEY & ANR. ..... Respondents
Through: Mr. P.S. Bindra, Advocate.
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA
To be referred to the Reporter or not? YES
VALMIKI J. MEHTA, J (ORAL)
Caveat No.19/2018
1. Counsel appears for the caveators. Caveat accordingly
stands discharged.
C.M. No.1300/2018 (exemption)
2. Exemption allowed subject to just exceptions.
C.M. stands disposed of.
RFA No.30/2018 and C.M. No.1299/2018
3. This Regular First Appeal under Section 96 of Code of
Civil Procedure, 1908 (CPC) is filed by the defendant in the suit
impugning the judgment of the Trial Court dated 8.11.2017 whereby
the trial court has decreed the suit for possession and mesne profits
filed by the respondents/plaintiffs/landlords. The suit property is the
ground floor portion of the property bearing no. 484, Block-S, Greater
Kailash-II, New Delhi situated on a plot of 550 sq. yards.
4. I need not set in detail the respective cases of the parties
on merits as per their pleadings because the admitted position is that a
registered lease deed dated 17.5.2002 was entered into between the
respondents/landlords/plaintiffs and the appellant/defendant. The lease
period under this lease deed dated 17.5.2002 was a period of 10 years
commencing from 15.5.2002. In terms of the registered lease deed, the
appellant/defendant was entitled to renew the lease for two successive
terms of 10 years each commencing from 15.5.2012 and 15.5.2022.
For this renewal periods even the rate of rent which was payable was
specified. The relevant clause of the lease dated 17.5.2002 is clause
2C and this clause 2C reads as under:-
"2C. The said Lease shall come into force and shall be effective for a
period of 10 years from 15th May 2002 provided that the monthly rental
will become payable upon extension of Load to 40 KVA and conversion of
electricity connection to three phase connection and compliance of all the
terms and conditions of the Lessee‟s Letter of Intent dated March 6, 2002
and completion of all refurbishment of the demised premises making it fit
for transacting business of banking from the demised premises. The said
period of 10 years for the sake of brevity is hereinafter referred to as the
„period of lease‟. The Lessee shall have the sole and absolute right to
renew the Lease for further two successive terms of ten years each
commencing from 15th May 2012 to 14th May 2022 and thereafter for a
further period of ten years commencing from 15th May 2022 to 14th May
2032. Unless the Lessee gives a written notice terminating the Lease
and/or three months prior to expiry of the initial Lease it shall be deemed
and construed that the Lease stands renewed for a further period of ten
years („the renewed period of lease‟) as per above.
The Lessors and the Lessee hereby agree that on renewal of Lease.
-A fresh Lease Deed shall be executed and registered by and between the
parties;
-The terms and conditions as agreed herein and in the Letter of Intent
dated March 6, 2002 agreed to by both parties hereby shall remain
applicable for the renewed period of the lease;
-The Lessors shall be bound to renew the lease without raising any
objection, protest or demur in connection therewith;
-The right of first refusal in respect of renewal of the lease shall lie only
with the Lessee;
-The rental payable for the renewed period of Lease ie from 15th May 2012
to 14th May 2022 shall be as under :
Sr. No. Period No. of Escalation Monthly Lease
From To Years @ Amount Rent payable
(Rs.) (Rs.)
1. 2012 2014 2 345,600/-
2. 2014 2017 3 20% 69,120/- 414,720/-
3. 2017 2020 3 20% 82,944/- 497,664/-
4. 2020 2022 2 20% 99,533/- 597,197/-
-The rental payable for the renewed period of Lease ie from 15th May
2022 to 14th May 2032 shall be as under :
Sr. No. Period No. Escalation Monthly Lease
From To of Rent payable
Years (Rs.)
1. 2022 2023 1 - 597,197/-
2. 2023 2026 3 20% 119,439/- 716,636/-
3. 2026 2029 3 20% 143,327/- 859,963/-
4. 2029 2032 3 20% 171,993/- 10,31,956/-
The monthly lease rent shall be inclusive of charges for the office premises
area, car parking area, area for generator set and also, the area provided for
VSAT Dish Antenna on the terrace of the said building."
5. Before expiry of the initial lease period on 15.5.2012,
discussions took place between the parties in terms of the option
exercised by the appellant/defendant for renewing the lease period in
terms of the renewal clause in the lease deed. Before expiry of the 10
years lease period on 15.5.2012, the appellant/defendant vide its email
dated 10.8.2011 intimated the respondents/plaintiffs of the desire of
the appellant/defendant to renew the lease for the further period of 10
years from 15.5.2012. The discussions between the parties however
were not successful as the appellant/defendant was not successful in
getting the respondents/plaintiffs to execute a registered lease deed.
There were various issues and contentions between the parties with the
primary contention of the respondents/plaintiffs/landlords being to
seek payment of rent higher than the rent which was agreed to be paid
for the renewed lease periods in terms of clause 2C of the lease
agreement dated 17.5.2002. Since the negotiation between the parties
failed, consequently the respondents/plaintiffs/landlords terminated
the tenancy of the appellant/defendant vide notice dated 30.7.2012.
The appellant/defendant contested this legal notice terminating the
tenancy by sending its reply dated 11.8.2012 drawing attention of the
respondents/plaintiffs to the renewal clause. The appellant/defendant
on account of failure of respondents/plaintiffs/landlords to execute and
register a lease for the period from May 2012 to May 2022 ultimately
filed a suit for specific performance seeking to renew the lease in the
first instance for a period of 10 years from 15.5.2012. The
respondents/plaintiffs/landlords on account of having terminated the
monthly tenancy and failure of the appellant/defendant to vacate the
suit property filed the subject suit for recovery of possession and
damages.
6. The registered lease deed between the parties dated
17.5.2002 has been proved and exhibited as Ex.PW1/1.
Correspondence between the parties with respect to renewal of the
lease has been proved and exhibited as Ex.PW1/7 to Ex.PW1/22
except Ex.PW1/18 to Ex.PW1/22 which were subsequently de-
exhibited and marked as A to E. I may note that email sent by the
appellant/defendant to the respondents/plaintiffs dated 10.8.2011 is an
admitted document though no exhibit number is given to the same as
informed by the counsels for the parties.
7. The subject suit filed by the
respondents/plaintiffs/landlords was filed in the original side of this
Court as also the suit for specific performance. Admittedly both the
suits were being taken up on the same date in this Court, though not
consolidated by a specific order, but thereafter on account of
enhancement of pecuniary jurisdiction of this Court with respect to
original side matters, both the suits were transferred to the District
Courts. In the District Courts whereas the subject suit came to be tried
by one ADJ, the suit filed by the appellant/defendant for specific
performance was marked to another ADJ and is presently pending at
the stage of evidence of the present appellant/defendant who is the
plaintiff in the suit for specific performance.
8. Trial court by the impugned judgment has dealt with the
suit for possession and damages/mesne profits by holding, and rightly
so, that since there is no registered lease deed of the premises after
expiry of the lease period on 14.5.2012, the tenancy became only a
monthly tenancy which could be terminated by a notice under Section
106 of the Transfer of Property Act, 1882. Section 107 of the Transfer
of Property Act and Section 17(1)(d) of the Registration Act, 1908
clearly provides that any lease for a period beyond 12 months has
necessarily to be by a registered lease deed. Therefore trial court has
rightly held that the tenancy being a monthly tenancy could be
terminated by a notice sent under Section 106 of the Transfer of
Property Act. The conclusion of the trial court that a renewal clause in
itself will not automatically be a lease deed is supported by the
observations of the Supreme Court in the case of State of U.P. and
Others Vs. Lalji Tandon (dead) Through LRs. (2004) 1 SCC 1 and
wherein the Supreme Court in para 13 has 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, Ninth Edition, 1999, p.1011). Where a
covenant for renewal exists, its exercise is, of course, a unilateral act or the
lessee, and the consent of the lessor is unnecessary. (Baker v. Merckel,
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." (underlining added)
9.(i) Learned senior counsel for the appellant/defendant also
argued before this Court that the decree for possession could not have
been passed because the respondents/plaintiffs had after termination of
the tenancy accepted and received rents till date in terms of the
renewal clause in the lease deed dated 17.5.2012, and accordingly it is
argued that respondents/plaintiffs are estopped from seeking
possession inasmuch as on acceptance of the enhanced rent pursuant
to the renewal clause of the registered lease deed dated 17.5.2002, the
respondents/plaintiffs have created a fresh lease in favour of the
appellant/defendant.
(ii) In my opinion this argument however cannot be accepted in
view of the ratio of the judgment of the Supreme Court in the case of
Sarup Singh Gupta Vs. S. Jagdish Singh & Others (2006) 4 SCC
205 wherein SupremeCourt has laid down the ratio that after
termination of the tenancy if any amount is received by the landlord
from the tenant, and which payment is called by the tenant as rent, yet,
receipt of such amount called as rent by the tenant can be in fact
appropriated and adjusted by the landlord not towards rent but towards
use and occupation charges of the tenanted premises after termination
of the tenancy. The relevant observations of the Supreme Court in the
case of Sarup Singh Gupta (supra) are contained in para 8 of the
judgment and this para 8 reads as under:-
"8. In the instant case, as we have noticed earlier, two notices to quit
were given on 10th February, 1979 and 17th March, 1979. The suit was
filed oh June 2, 1979. The tenant offered and the landlord accepted the rent
for the months of April, May and thereafter. The question is whether this
by itself constitute an act on the part of the landlord showing an Intention
to treat the lease as subsisting. In our view, mere acceptance of rent did not
by itself constituted an act of the nature envisaged by Section
113, Transfer of Property Act showing an Intention to treat the lease as
subsisting. The fact remains that even after accepting the rent tendered, the
landlord did file a suit for eviction, and even while prosecuting the suit
accepted rent which was being paid to him by the tenant It cannot,
therefore, be said that by accepting rent, he intended to waive the notice to
quit and to treat the lease as subsisting. We cannot ignore the fact that in
any event, even if rent was neither tendered nor accepted, the landlord in
the event of success would be entitled to the payment of the arrears of rent.
To avoid any controversy, in the event of termination of lease the practice
followed by courts is to permit the landlord to receive each month by way
of compensation for the use and occupation of the premises, an amount
equal to the monthly rent payable by the tenant. It cannot, therefore, be
said that mere acceptance of rent amounts to waiver of notice to quit
unless there be any other evidence to prove or establish that the landlord so
Intended. In the instant case, we find no other fact or circumstance to
support the plea of waiver. On the contrary the filing of and prosecution of
the eviction proceeding by the landlord suggests otherwise."
(underlining added)
(iii) In view of the categorical ratio of the judgment of the Supreme
Court in the case of Sarup Singh Gupta (supra) holding that courts
will permit landlord to receive rent each month by way of
compensation for use and occupation charges of the premises an
amount equal to monthly rent paid by the tenant, therefore it is held
that the respondents/plaintiffs simply because of the receiving
enhanced rent pursuant to the renewal clause contained in the
registered lease deed dated 17.5.2002 did not agree to create any fresh
lease in favour of the appellant/defendant and which lease in any case
has to be a registered lease deed as per Section 107 of the Transfer of
Property Act read with Section 17(1)(d) of the Registration Act.
10.(i) In view of the legal and admitted factual position I do not
find that the trial court has committed any illegality in decreeing the
suit for possession of the respondents/plaintiffs against the
appellant/defendant, however certain observations and clarifications
are required to be given by this Court with respect to bindingness
between the parties of certain issues including as to whether the
judgment in the present suit would operate as res judicata against the
appellant/defendant and in favour of the respondents/plaintiffs with
respect to the suit for specific performance filed by the
appellant/defendant against the respondents/plaintiffs. These
clarifications are required as respondents/plaintiffs/landlords have
filed an application under Section 11 CPC for dismissal of the
appellant/defendant's suit for specific performance on the basis of the
impugned judgment by pleading that the impugned judgment operates
as res judicata for dismissing the specific performance suit.
(ii) In this regard therefore, the following aspects are required to be
noted:-
(A) In this subject suit for possession etc the issue which would be
res judicata would only be that there was a relationship of landlord
and tenant between the parties in terms of the registered lease dated
17.5.2002, though there were two renewal clauses to rent successively
of 10 years each in favour of the appellant/defendant w.e.f 15.5.2012
but the respondents/plaintiffs did not execute the registered lease deed
in favour of the appellant/defendant for whatever be the reason, and
since there was no registered lease deed as required by Section 107 of
the Transfer of Property Act and Section 17(1)(d) of the Registration
Act, therefore the tenancy in favour of the appellant/defendant was a
monthly tenancy which could have been terminated by a notice under
Section 106 of the Transfer of Property Act.
(B) The decision in the subject suit culminating in the judgment of
the trial court dated 8.11.2017 as also the present judgment will
however not operate as res judicata against the appellant/defendant in
favour of the respondents/plaintiffs of the entitlement or otherwise of
the appellant/defendant to seek specific performance of the renewal
clauses as contained in the registered lease deed dated 17.5.2002
entered into between the parties because that renewal clause entitles
grant of specific performance is not an issue which is decided by the
impugned judgment. It is trite that when specific performance is
sought of a contract, a specific performance qua a contract can include
a contract to enter into a lease deed for a specific period.
(C) Accordingly, the judgment of the trial court as affirmed by this
Court, with respect to the entitlement of the respondents/plaintiffs to
seek possession will not in any manner operate as res judicata as
against the appellant/defendant either for seeking the final relief in the
specific performance suit or including for that matter for seeking
interim relief of stay of dispossession in the specific performance suit
which has been filed by the appellant/defendant against the
respondents/plaintiffs. I agree with the argument urged on behalf of
the appellant/defendant that the appellant/defendant is also entitled in
the suit for specific performance filed by it to seek interim order in
order to protect possession in spite of decreeing the present suit
inasmuch as if possession is taken away by the respondents/plaintiffs
from the appellant/defendant, then, the suit filed by the
appellant/defendant for specific performance would become
infructuous and possession of the suit premises may be protected by
the appellant/defendant by filing an application seeking interim relief
in the subject suit for specific performance. Of course, I hasten to add
that I have not made, and nor can make any observations on merits
with respect to the entitlement or otherwise of the appellant/defendant
to seek interim order for protecting its possession by filing an
application for interim relief in the suit for specific performance.
(D) I would like to observe that a curious position has arisen in this
case only because of the transfer of both the suits to the District Courts
and the respective suits thereafter being taken up by the different
courts of ADJs, inasmuch as when the suits were pending in the
original side of this Court, they were being taken up on the same dates
of hearing.
11. Learned senior counsel for the appellant/defendant then
argued that since both the suits filed by the appellant/defendant for
specific performance and respondents/plaintiffs for possession and
mesne profits were taken up on the same dates, consequently, the
decree of the present suit as regards possession should not be executed
otherwise the suit for specific performance filed by the
appellant/defendant would become infructuous, however I cannot
agree because as already stated above the remedy of the
appellant/defendant herein is to seek an interim relief in the suit for
specific performance by it and this Court cannot while affirming the
impugned judgment and decree dated 8.11.2017 in favour of the
respondents/plaintiffs in these proceedings, at the same time yet grant
orders for the decree not being executed because such a situation
would lead to finality of the decree yet a final decree not being
executed and which position is impermissible in law. These
observations are being made subject to other observations with respect
to the judgment in the present suit not operating as res judicata against
the appellant/defendant and therefore for the appellant/defendant to
seek interim or final relief in its suit for specific performance which is
pending.
12. In view of the aforesaid discussion, so far as the
impugned judgment of the trial court dated 8.11.2017 granting decree
for possession is concerned, the same has to be and is accordingly
sustained, and this appeal is therefore dismissed so far as the same
challenges the relief granted to the respondents/plaintiffs of possession
of the suit premises in terms of the impugned judgment and decree
dated 8.11.2017.
13. Although this appeal will stand dismissed so far as the
decree granted for possession to the respondents/plaintiffs, however, the
learned senior counsel for the appellant/defendant is justified in arguing
that so far as the relief granted by the trial court in terms of the impugned
judgment for mesne profits payable at a rate higher than the agreed rent
for the fresh period w.e.f. 15.5.2012 is concerned, such a decree cannot
be taken to be final for execution because in case the appellant/defendant
herein succeeds in the suit for specific performance, then, the
appellant/defendant will not be bound to comply with the impugned
judgment but will be only be bound to comply with the renewal
agreement between the parties to pay the agreed rent in terms of the
renewal clause 2C of the registered lease deed dated 17.5.2002. Learned
senior counsel for the appellant/defendant states, and as confirmed by the
counsel for the respondents/plaintiffs, that the enhanced amount of
payment in terms of the registered lease deed dated 17.5.2002 for the
renewal period from 15.5.2012 is being paid by the
appellant/defendant to the respondents/plaintiffs and has been received
up to date by the respondents/plaintiffs. Therefore, subject to the
appellant/defendant depositing 50% of the decretal amount in this
Court subject to adjustment of the amounts already paid by the
appellant/defendant to the respondents/plaintiffs for the period
commencing from 15.5.2012 till date, there shall be stay of operation
of the impugned judgment and decree granting mesne profits to the
respondents/plaintiffs in terms of the impugned judgment and decree
dated 8.11.2017.
14. On the aspect of grant of mesne profits by the impugned
judgment and decree, let notices be issued to the
respondents/plaintiffs. Counsel for the respondents/plaintiffs accepts
notice. Admit this appeal on the aspect of mesne profits decreed under
the impugned judgment and decree.
15. List the interim application being C.M. No.1299/2018 for
hearing as regards the money decree of mesne profits, on 3rd May,
2018.
JANUARY 16, 2018/Ne VALMIKI J. MEHTA, J
