Madras High Court
M/S. Tambaparni Paints And Chemicals vs K. Sangeetha on 7 December, 2023
SA.No.1122 of 2009
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 07.12.2023
CORAM
THE HON'BLE Mr.JUSTICE C.KUMARAPPAN
S.A.No.1122 of 2009
and
M.P.No.1 of 2009
1.M/s. Tambaparni Paints and Chemicals
represented by its Chairman, K.S.Sundaram,
2. K.S. Sundaram, Chairman of
M/s. Tambaaparni Paints and Chemicals
3. Shankar Sundaram, Partner
M/s. Tambaaparni Paints and Chemicals
4. Laxmi Narayanan, Partner
M/s. Tambaaparni Paints and Chemicals
... Appellants
- Vs -
K. Sangeetha, proprietrix
Kiran Ploy Pack Industry ...
Respondent
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1/10
SA.No.1122 of 2009
Second Appeal filed under Section 100 of the Civil Procedure Code
against the Judgment and decree dated 16.04.2009 in A.S.No.54 of 2007 on
the file of III Additional District Court at Pondicherry partially modifying the
Judgment and Decree dated 17.08.2007 in O.S.No.23 of 2006 on the file of
the Principal Sub Court, Puducherry.
For Appellants : Mr.Niranjan Rajagopalan
for M/s G.R.Associates
For Respondent : Mr.P. Pranan Jain for
M/s Ramesh Kumar chopra
JUDGMENT
The instant second appeal has been filed at the instance of the
defendants. The respondent is the plaintiff before the Trial Court.
2. For the sake of convenience, the parties will be referred according to
their litigative status before the Trial Court.
3. The brief facts which give rise to the instant second appeal are as
follows:
The second defendant is the chairman and the third and the fourth
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defendants are partners of the first defendant firm. The suit property belongs
to the first defendant firm. There was a registered lease agreement entered
into between the plaintiff and the defendants on 11.10.2004 in respect of the
suit scheduled property. As per the terms of the said lease agreement, the
defendants leased out an extent of 3,600 square feet of building to the
plaintiff for the purpose of running an industry. The lease was agreed for a
period of four years from 11.10.2004 to 10.10.2008. The monthly rent
agreed to be paid by the plaintiff is Rs.20,500/- per month with an increase of
5% every year. When the plaintiff came to know about the lesser extent of the
leasehold property, an amendment came into existence on 16.10.2004 signed
between the plaintiff and the defendants. By virtue of the subsequent lease
agreement, only 3150 square feet was leased out on a monthly rent of
Rs.17,955/- for the first 12 months with 5% increase every year.
(ii) Though originally a security deposit of Rs.2,05,000/- was paid,
subsequently to the amendment dated 16.10.2004 for a lesser extent, the
defendants returned the proportionate security deposit. Thus, the balance
security deposit available in the hands of the defendants is Rs.1,79,550/- and
the same is liable to be re-paid by the defendants. According to the plaintiff,
the defendants are entitled to one month notice for termination of lease.
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Therefore, in the said amount of Rs.1,79,550/- a sum of Rs.17,955/- is to be
deducted in lieu of one month notice. As such the defendants are liable to re-
pay a sum of Rs.1,61,595/- together with interest at the rate of 24%. per
annum. Hence, came forward to file a suit for recovery of the above amount.
4. The said suit was resisted by the defendants by contending that in
order to lease out the property to the plaintiff, they made so many
improvements in the suit property. Therefore, the plaintiff should continue to
be as lessee be in the suit property for a period of 4 years. In any case, if the
plaintiff terminates the lease agreement before its expiry, then by virtue of
the forfeiture clause, the plaintiff is not entitled for refund of the security
deposit. Thus, the defendants prayed to dismiss the suit.
5. Before the Trial Court the plaintiff examined herself as P.W.1. The
second defendant was examined as D.W.1. On behalf of the plaintiff, 7
documents were marked as Ex.A1 to A7. On behalf of the defendants three
documents were marked as Ex.B1 to Ex.B3.
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6. The Trial Court, after considering oral and documentary evidence
decreed the suit by directing the defendants to pay a sum of Rs.1,43,640/-
with interest at the rate of 12% p.a from 11.12.2005 till filing of the suit, and
at 6% per annum from the date of plaint till the date of realization. Aggrieved
by the Judgment of the Trial Court, the defendants preferred an appeal before
the First Appellate Court. The First Appellate Court concurred with the
findings of the Trial Court. However, by invoking Section 106 of the Transfer
of Property Act, the First Appellate Court deducted six months rent in lieu of
six months notice and directed the defendants to pay a sum of Rs.71,820/-
together with interest at the rate of 12% per annum from 11.12.2005 till
realization. Aggrieved by the Judgment of the First Appellate Court, the
defendant preferred the second appeal.
7.On 22.10.2009, the Second Appeal was admitted on the following
substantial questions of law:-
(i)Whether the Appellate court was justified in
invoking Section 106 of the Transfer of Property Act
and permitting the Appellants to adjust only six
months rent from the security deposit paid by the
respondent?
(ii) Whether the Appellate Court failed to see
that the forfeiture of deposit on breach of lease
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agreement is in the nature of liquidated damages
and once inquiry suffered by the Appellants are
established, the entire amount determined by the
parties as liquidated damages can be claimed by the
Appellants.?
(iii) Whether the Appellate Court was justified
in decreeing the suit and granting interest at 12%
per annum to the respondent?
8. The learned counsel for the appellants would invite the attention of
this Court in respect of the lease agreement dated 16.10.2004, which is
marked as Ex.B1 namely the amendment to Ex.A1/lease agreement. There
was a clause under Section 3(1) wherein it provides for the forfeiture of
security deposit for any violation to the terms of the agreement. Therefore,
the learned counsel would contend that since the defendants spent huge
amount for alteration to lease out the suit property to the plaintiff, if the
plaintiff vacates the premises before the completion of 4 years' period, then
there would be a huge loss to them, and that is why they introduced the
forfeiture clause. It was also the further contention of the learned counsel for
the appellants that Ex.A1/ lease agreement does not have any clause for
termination. Therefore, it is the submission of the learned counsel that the
Judgments rendered by both the Courts below are contrary to the evidence.
Hence, he prayed to interfere with the findings of the Courts below.
9. However, the learned counsel for the respondent would invite the
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attention of this Court to Paragraph No.9 of the Judgment of the First
Appellate Court, wherein it was argued by the appellants for invoking Section
106 of the Transfer of Property Act. Only on that basis, Section 106 of the
Transfer of Property Act was invoked and 6 months rent was deducted in
lieu of the six months notice period. Therefore, it is the contention of the
respondent that the Judgment of the First Appellate Court is based on merits
and does not require any interference.
10.This Court has given its anxious consideration to either side
submissions.
11. It is an admitted fact that Ex.A1/lease Agreement does not contain
any clause in respect of the termination of the lease. Now we must see, in the
absence of clause for termination, whether Section 106 of the Transfer of
Property Act can be invoked for termination .
12. Section 106 of the Transfer of Property Act is extracted hereunder
for ready reference.
“ In the absence of contract or local law or usage
to the contrary, a lease of immovable property for
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agricultural or 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. ”
13. According to the above section, whenever the lease agreement has
no clause in respect of the termination, then such lease must deem to be
terminable subject to the provisions under Section 106 of the Transfer of
Property Act. In other words, whenever any property is leased out for the
purpose of manufacturing, for termination, six months notice period is
essential. It is further relevant to refer here that, even the appellants
themselves had taken such a defence before the First Appellate Court. Only
based upon such a defence, the First Appellate Court invoked Section 106 of
the Transfer of Property Act. Therefore, when the appellants contended
before the First Appellate Court with regard to the stipulations under Section
106 of the Transfer of Property Act, now at the second appellate stage, the
appellants cannot turn around and contend that Section 106 of the Transfer
of Property Act is not applicable, when the agreement does not reflect
anything about the termination of the lease.
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14. Therefore, this Court is of the indubitable view that the invocation
of Section 106 of the Transfer of Property Act by the First Appellate Court is
well merited. Thus, deducting six months rent in lieu of the six months notice
period is also perfectly in order. Therefore, in view of the above discussion
the substantial questions of law are answered in favour of the respondent.
However, in the interest of justice, 12% p.a interest ordered by the First
Appellate Court is modified to 6% per annum from 11.12.2005 till
realization.
15. In the result, this second appeal is partly allowed by modifying
the decree of the First Appellate Court directing the defendants to pay the
plaintiff the security deposit of Rs.71,820/- together with interest at the rate
of 6% per annum from 11.12.2005 till realization. No order as to costs.
Consequently the connected miscellaneous petition is also dismissed.
07.12.2023
Index : Yes/No
Internet:Yes/No
Speaking Order : Yes/No
smn
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C.KUMARAPPAN, J.
smn
To
1.The III Additional District Judge
2. The Principal Sub Judge, Puducherry.
and
07.12.2023
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