Customs, Excise and Services Tax Appellate Tribunal
Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The coram of Sulekha Beevi C.S. (Judicial Member) and P. Anjani Kumar (Technical Member) allowed an appeal which was filed aggrieved by the order of the original authority confirming the demand interest and imposed penalty, including a separate penalty on the Former Chief Financial Officer of Indian Overseas Bank. 

 

Appellant-bank allegedly  had wrongly availed CENVAT Credit in respect of the Service Tax paid on deposit insurance service provided by Deposit Insurance and Credit Guarantee Corporation (hereinafter referred to as ‘DICGC’), investigation was initiated by the Kochi Regional Unit of the Directorate General of Central Excise Intelligence (DGCEI). Scrutiny of documents and statements recorded indicated that the credit availed on the Service Tax paid on deposit insurance service was ineligible. Show Cause Notice was issued proposing to disallow the wrongly availed credit and also to recover the same along with interest and also for imposing penalty.  

 

Counsel of the appellants submitted that the question involved was whether the appellant-bank can avail credit of the Service Tax on the deposit insurance service provided by DICGC. As per Section 15 of the DICGC Act, every insured bank has to pay premium at the rate notified by them. That the appellant has paid Service Tax on the basis of the premium / fees paid by them to DICGC to insure the deposits. That this is an input service for the appellant-bank and the appellant has correctly availed credit of the Service Tax paid to DICGC. 

 

The Tribunal followed the decision in South Indian Bank Ltd. v. CCE, 2020 SCC OnLine CESTAT 2395 wherein it was held that insurance service provided by DICGC to the banks is an input service and the credit of Service Tax is eligible. 

The Tribunal while allowing the appeal held that the credit of the Service Tax paid on the basis of premium paid to DICGC is eligible for Cenvat Credit. 

 

[Indian Overseas Bank v. Commr. of CE&ST, Service Tax Appeal No. 40702 of 2016, decided on June 10, 2022] 


Ms Shwetha Vasudevan, Advocate for the Appellant 

Ms K. Komathi, Authorized Representative for the Respondent 


*Suchita Shukla, Editorial Assistant has reported this brief.

Case BriefsTribunals/Commissions/Regulatory Bodies

National Consumer Disputes Redressal Commission (NCDRC): Ram Surat Maurya (Presiding Member) addressed a matter wherein the date of issue of the Risk Confirmation Letter was in a serious dispute leading to Insurance Broker’s fraudulent act.

The complainant had a factory, and the OP was engaged in the business of providing insurance services. Further, the complainant obtained standard Fire and Special Peril Policy from the OP, for a period of 10-2-2005 to 9-2-2006 for its buildings, furniture, fixtures, fittings and electrical installation, Plant and Machinery, machinery parts, Dies & moulds and stock for a sum of Rs 23 crores. The said policy was renewed.

In February 2008, the complainant invited offers from Insurances brokers for renewal of the above-said policy. It was stated that the Western Regional Office of the OP accepted the proposal form and issued risk confirmation for fire and allied perils insurance policy and Satyan Insurance Broker sent a Risk Confirmation letter to the complainant on 18-2-2008.

On 17-2-2008, a major fire occurred at the factory premises of the complainant causing extensive loss to the buildings, plant & machineries, furniture and stock etc. The complainant informed the insurer about the said incident and the insured appointed a surveyor and loss adjuster, and further the surveyor declined to proceed in the absence of the insurance policy.

The complainant received a letter (bearing the date 18-02-2008) on 28-02-2008 from the Insurer, stating therein that the consideration received for covering the risk was less than the offer given by them. Hence, they were not in a position to cover the risk as requested.

The Insurer, vide dated 13-03-2008, denied issuance of Risk Confirmation on 14-02-2008.

The complainant then gave a legal notice, to the Insurer for either making payment of Rs 2.70 crores within seven days or to refer the dispute to an Arbitrator. The Insurer, vide reply declined to refer the dispute to an Arbitrator or to pay.

Further, the complainant filed an arbitration application in the Bombay High Court which was ultimately rejected on the ground that in the absence of an arbitration agreement between the parties, the application was not maintainable. Then the present complaint was filed.

What is the serious dispute about?

The dispute between the parties was with regard to the date of issue of Risk Confirmation letter and the letter of the Insurer, declining to issue policy on the ground that the premium was deficient.

Analysis and Discussion

The Commission stated that two circumstances clearly proved the fraudulent act of Satyan Insurance Broker, firstly cheque of Rs 6,825 was bearing a date of 13-02-2008. The complainant issued his cheque of Rs 23,891 on 13-02-2008. Had Satyan Insurance Broker informed the complainant that an insurance premium of Rs 30,176 was payable then the complainant instead of issuing a cheque of Rs 23,891 would have issued the cheque of the full amount. Secondly, it was not a normal conduct that any insurance agent would give a premium of a client from his account.

Section 19 of Contract Act, 1872, provides that when the consent of an agreement is caused by coercion, fraud, or misrepresentation, the agreement is voidable at the option of the party whose consent is so caused.

In Supreme Court’s decision of Reliance Life Insurance Company v. Rekhaben Nareshbhai Rathod, (2019) 6 SCC 175 and New India Assurance Company Ltd. v. Satpal Singh Muchal, (2009) 12 SCC 673, it was held that a contract insurance is a contract of uberrima fide and non-disclosure of material fact, vitiates the insurance policy.

Therefore, no illegality in not issuing the insurance policy by the Insurer as the Risk Confirmation letter was obtained on concealment of material facts relating to the fire incident.

Coram concluded by stating that,

“If Risk Confirmation letter had been issued on 14.02.2008, the complainant would not have committed two days delay in informing the Insurer in respect of fire incident. Appointment of the surveyor on 20.02.2008 was an innocent mistake, the complainant cannot get any benefit of it.”

In view of the above, no merit was found in the complaint and it was dismissed. [Tainwala Personal Care Products (P) Ltd. v. Royal Sundaram Alliance Insurance Co. Ltd., 2022 SCC OnLine NCDRC 11, decided on 25-1-2022]


Advocates before the Commission:

For the Complainant: Ms. Fareshte Sethna, Mr. Munindra Dvivedi, Ms. Divya Bhalla, Ms. Aathira Pilllai, Advocates

For the OP: Mr. S.M. Tripathi, Advocate and Ms. Deepa Chacko, Advocate

National Consumer Disputes Redressal Commission
Case BriefsTribunals/Commissions/Regulatory Bodies

National Consumer Disputes Redressal Commission (NCDRC): C. Viswanath (Presiding Member) expressed that:

Section 50 of the Insurance Act imposes a statutory obligation on the part of the Insurance Company to issue notice before the expiry of three months from the date on which premium is payable and has not been paid and to give notice to the Policyholder informing him about the options available to him, unless the said conditions are set forth in the Policy.

The instant revision petition was filed under Section 21(1) (b) of the Consumer Protection Act, 1986 against the Order of Punjab State Consumer Disputes Redressal Commission.

Factual Matrix

Complainant’s son obtained a Personal Life Insurance Policy from petitioner 2 for a sum of Rs 2.70 lakh. On the said policy a quarterly instalment of the premium was fixed which was being paid through an agent. The complainant was the nominee.

Complainant’s son died in a road accident. Later the insurance company appointed a surveyor who demanded a bribe to make a favourable report, which the complainant did not pay.

Petitioner 1informed the complainant that since the premium due was not paid, therefore the claim of the complainant could not be considered.

On being aggrieved with the deficiency in service on the part of the petitioners, respondent filed a complaint before the District Forum.

District Forum concluded that there was no deficiency in service on the part of the petitioners as the Insurance Policy of the deceased had lapsed and the complaint was dismissed.

Though the State Commission while accepting the appeal and setting aside the District Forum’s order observed that:

“Consequently, the Complaint filed by the Appellant/ Complainant is allowed and the Respondents are directed to pay the sum insured of Rs.2.70 lakh under the Policy to the Appellant and Rs.1.00 lakh on account of accidental death of the young and unmarried son of the Appellant. The Respondents are also directed to pay Rs.20,000/- as compensation and Rs.10,000/- as litigation expenses to the Appellant.

The Respondents shall comply the order within 45 days of the receipt of copy of the order.”

Complainant aggrieved with the State Commission’s order filed the present revision petition.

Decision

Commission observed that the entire case revolved around Section 50 of the Insurance Act, which states as follows:

“50. Notice of options available to the assured on the lapsing of a policy:

An insurer shall (before the expiry of three months from the date on which the premiums in respect of a policy of life insurance were payable, but not paid), give notice to the policy-holder informing him of the options available to him (unless these are set forth in the policy)”.

Bench observed that the petitioner’s main issue was that the premium was payable on 06-03-2007 and even during the grace period it was not paid. Policy stood lapsed at the end of 31st day from the date of premium fell due.

Further, since the complainant did not apply for reinstatement, no benefits under the policy could be given to them. Petitioners kept notifying the complainant about the policy being lapsed and were also informed about the reinstatement option.

Later on not receiving any information from the insured, the policy lapsed and the same was notified to the complainant.

Hence, the Commission found that the petitioners had acted in accordance with the terms and conditions of the Policy, therefore the complaint deserved to be dismissed.

District Forum’s Order was upheld.[Tata AIG Life Insurance Company Ltd. v. Kishan Lal Arora, Revision Petition No. 4415 of 2013, decided on 01-02-2021]

Op EdsOP. ED.

1. Chapter V (Sections 105 to 117) of the Transfer of Property Act, 1882[1] (for short ‘TPA’) embodies the provisions relating to the leases of immoveable property. Section 105 of TPA defines a lease as:

105. Lease defined.—  A lease of immoveable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.

Lessor, lessee, premium and rent defined.— The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent.”

2. The above definition of the lease under TPA postulates that besides other essential elements of a lease i.e. the parties being the lessor and the lessee; the subject-matter being an immoveable property; demise being a transfer of a right to enjoy; and the consideration being a price paid or promised being the premium or the rent, the time or the term or period of the said lease is an essential requisite of a valid lease. A valid lease may be granted for a certain time, express or implied, or in perpetuity. A lease which is silent as to the duration of its term will not be lease within the meaning of Section 105 of TPA.

3. The commencement of a lease must be certain or capable of being ascertained with certainty afterwards, so that both the time when it begins and the time when it ends, is fixed. A provision in the lease relating to duration thereof may be implied by law or usage. Even Section 106 of TPA, inter alia provides that in absence of a contract or local law or usage to the contrary, a lease of immoveable property for agricultural or manufacturing purposes shall be deemed to be lease from year to year and that a lease of immoveable property for any other purpose shall be deemed to be lease from month to month.

4. Section 107 of TPA provides as to how the leases of immoveable property shall be made in law. The said section reads as under:

107. Leases how made.— A lease of immoveable property from year to year, or for any term exceeding one year or reserving a yearly rent, can be made only by a registered instrument.

All other leases of immoveable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession.

Where a lease of immoveable property is made by a registered instrument, such instrument or, where there are more instruments than one, each such instrument shall be executed by both the lessor and the lessee:

Provided that the State Government may from time to time, by notification in the Official Gazette, direct that leases of immoveable property, other than leases from year to year, or for any term exceeding one year, or reserving a yearly rent, or any class of such leases, may be made by unregistered instrument or by oral agreement without delivery of possession.”

5. This section prescribing the procedure for making of a lease between the parties classifies them into two”

One, a lease of immoveable property from year to year, or for a term exceeding a year, or lease reserving a yearly rent, can only be made by a registered document; and

Second, all other leases other than the above, can either be made by registered instrument, or the said lease to be made by an oral agreement accompanied by delivery of possession.

6. Therefore, it is manifest that all the leases of immoveable property not covered in the second classification shall have to be necessarily made by a registered document only. Needless to state that all the leases not covered by the first above have to be made either by registered document or by an oral agreement accompanied by delivery of possession.

 Effect of non-registration

7. Section 17(1)(d) of the Registration Act, 1908[2] provides that leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent have to be necessarily registered.

8. Section 49 of the same Act, inter alia provides that no instrument which is compulsorily required to be registered shall affect any immovable property comprised therein, or confer any power to adopt, or be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered. However, an unregistered document affecting immovable property and required by the Registration Act or the TPA to be registered, may be received as evidence of any collateral transaction not required to be effected by registered instrument.

9. As already noted, period of tenancy is an essential requisite of a valid lease. Therefore, an unregistered lease deed cannot be looked into for purposes of period of tenancy. It thus follows that in respect of the leases classified in One under Section 106 TPA which require compulsory registration for making of a lease in law under Section 107 of TPA and is not so registered, the said instrument cannot be used for the purpose of establishing that it created, declared, assigned, limited or extinguished any right to the property comprised in the said document, and the said document will only create a month to month tenancy or year to year depending upon the purpose thereof. Therefore, if Sections 106 and 107 TPA are read accordingly, there shall be no conflict between the two.

10. The Calcutta High Court in the decision reported as Debendra Nath Bhowmick v. Syama Prosanna Bhowmick[3],  laid down the following dicta:

 “Then assuming that this case is governed by the Transfer of Property Act, I should like to notice the argument that because an annual rent was mentioned, the tenancy must be taken to be a yearly one. The lease was not for agricultural or manufacturing purposes and therefore must, in the absence of a contract to the contrary, be deemed to be a tenancy from month to month. It is said here that there was such a contract, for a yearly tenancy is to be implied from the mention of an annual rent. But when Section 106 speaks of a contract I think it means a valid contract. But in the present case there is no such contract and under Section 107 a lease such as is argued, for in this appeal can only be created by a registered instrument and there is none here. The notice was therefore sufficient so far as the tenancy is concerned.”

 11. Whether tenancy of immovable property for any purpose other than agricultural or manufacturing created by an unregistered instrument would be deemed to be ‘month to month’ tenancy even where the tenant has paid annual/yearly rent to the landlord has been answered in a three-Judge Bench decision of the Supreme Court reported as Ram Kumar Das v. Jagdish Chandra Deo[4]. The facts of said case were that the landlord had not executed a registered instrument for lease of land in favour of tenant. The tenancy created was neither for agricultural or manufacturing purpose. On two occasions, the tenant had tendered annual rent to the landlord. The landlord had terminated the tenancy by giving 15 days’ notice in terms of the second paragraph of Section 106 of TPA by treating the tenancy as from month to month. The question which had arisen before the Supreme Court was whether the tenancy was a monthly tenancy as treated by the landlord or a yearly tenancy since the tenant had paid annual rent to the landlord. It was argued on behalf of the tenant that in view of the fact that rent paid by the tenant was annual rent, it can be inferred that the intention of the parties was certainly not to create monthly tenancy but yearly tenancy, which argument was negatived by the Court in the following terms:

“….It is conceded that in the case before us the tenancy was not for manufacturing or agricultural purposes. The object was to enable the lessee to build structures upon the land. In these circumstances, it could be regarded as a tenancy from month to month, unless there was a contract to the contrary. The question now is, whether there was a contract to the contrary in the present case? Mr. Setalvad relies very strongly upon the fact that the rent paid here was an annual rent and he argues that from this fact it can fairly be inferred that the agreement between that parties was certainly not to create a monthly tenancy. It is not disputed that the contract to the contrary, as contemplated by Section 106 of the Transfer of Property Act, need not be an express contract; it maybe implied, but it certainly should be a valid contract. If it is no contract in law, the section will be operative and regulate the duration of the lease. It has no doubt been recognised in several cases that the mode in which a rent is expressed to be payable affords a presumption that the tenancy is of a character corresponding thereto. Consequently, when the rent reserved is an annual rent, the presumption would arise that the tenancy was an annual tenancy unless there is something to rebut the presumption. But the difficulty in applying this rule to the present case arises from the fact that a tenancy from year to year or reserving a yearly rent can be made only by registered instrument, as laid down in Section 107 of the Transfer of Property Act (vide Debendra Nath v. Syama Prosanna[5]. The Kabuliyat in the case before us is undoubtedly a registered instrument but ex concessis it is not an operative document at all and cannot consequently fulfil the requirements of Section 107 of the Transfer of Property Act.

  1. This position in fact is not seriously controverted by Mr. Setalvad; but what he argues is that a lease for one year certain might fairly be inferred from the payment of annual rent, and a stipulation like that would not come within the mischief of Section 107 of the Transfer of Property Act. His contention is that the payment of an annual rent, as was made in the present case, is totally inconsistent with a monthly lease. We are not unmindful of the fact that in certain reported cases, such inference has been drawn. One such case has been referred to by Reuben, J. in his judgment [Aziz Ahmad v. Alaudd in Ahmad[6] , where reliance was placed upon an earlier decision of the Calcutta High Court (Md. Moosa v. Jaganund[7])]. A similar view seems to have been taken also in Matilal v. Darjeeling Municipality[8].
  2. But one serious objection to this view seems to be that this would amount to making a new contract for the parties. The parties here certainly did not intend to create a lease for one year. The lease was intended to create a lease for one year, but as the intention was not expressed in the proper legal form, it could not be given effect to. It is one thing to say that in the absence of a valid agreement, the rights of the parties would be regulated by law in the same manner as if no agreement existed at all; it is quite another thing to substitute a new agreement for the parties which is palpably contradicted by the admitted facts of the case.
  3. It would be pertinent to point out in this connection that in the second appeal preferred by the plaintiff against the dismissal of his earlier suit by the lower appellate court, the High Court definitely held that the defendant’s tenancy was one from month to month under Section 106, Transfer of Property Act, and the only question left was whether payment to the Receiver amounted to payment to the plaintiff himself. In this suit the defendant admitted in his written statement that payment to the Receiver had the same effect as payment to the plaintiff, and the trial Judge took the same view as was taken by the High Court on the previous occasion, that by payment too and acceptance of rent by the Receiver, the defendant become a monthly tenant under Section 106, Transfer of Property Act. In his appeal before the District Judge which was the last court of facts, the only ground upon which the defendant sought to challenge this finding of the trial Judge was that the Receiver was an unauthorised person because of the decision of the Judicial Committee which set aside his appointment and consequently acceptance of rent by such person could not create a monthly tenancy. This shows that it was not the case of the defendant at any stage of this suit that because one year’s rent was paid a tenancy for one year was brought into existence. We think, therefore, that on the facts of this case it would be quite proper to hold that the tenancy of the defendant was one from month to month since its inception in 1924. This view finds support from a number of reported cases (vide Debendra Nath v. Syama Prasanna[9] ; Sheikh Akloo v. Emaman[10]), and in all these cases the rent payable was a yearly rental. On this finding no other question would arise and as the validity of the notice has not been questioned before us, the plaintiff would be entitled to a decree in his favour. The appeal thus fails and is dismissed with costs.”

 12. The effect of a compulsorily registrable lease, if not registered, was also explained by the e Delhi High Court in Deluxe Dentelles Pvt. Ltd. v. Ishpinder Kochhar[11] as under:

“21. A lease granted for any purpose, be it residential, commercial, manufacturing or agricultural, can be made only by a registered instrument if duration of the lease is for the period stated in the first paragraph of Section 107 of the Transfer of Property Act, 1882. But, a lease for the same purpose(s) of a lesser duration can be made, under the second paragraph, either by a registered instrument or by an oral agreement accompanied by delivery of possession.

  1. If one looks to Section 106 of the Transfer of Property Act it becomes evident that the classification of leases is according to their purpose. Section 106 classifies leases of immovable property for agricultural and manufacturing purposes in one class and all other leases in different class.
  2. Sub-section (1) of Section 106 is a deeming provision as per which, 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. Thus, where the parties have themselves indicated the duration of the lease relatable to agricultural or manufacturing purposes, sub-section (1) of Section 106 o f the Transfer of Property Act would be redundant. This is evident from the fact that sub-section (1) of Section 106 operates only “in the absence of a contract…..to the contrary”.
  3. Pertaining to leases, excluding leases for agricultural or manufacturing purposes, the legal fiction created in the second paragraph of sub-section (1) of Section 106 is to deem the leases to be from month to month. Of course, this deeming provision would also be ‘in the absence of a contract….to the contrary’.
  4. In the present case, the defendants have admitted the jural relationship of landlord and tenant between the plaintiff and Defendant 1. As per both plaintiff and defendants, Defendant 1 was inducted as a tenant in the suit premises by virtue of unregistered lease-deed dated November 21, 1999 for a period of eleven years and eleven months.
  5. The case (defence) set up by the defendants is that notwithstanding the fact that the lease-deed dated November 21, 1999 executed between the parties is an unregistered document, the tenancy of Defendant 1was not from month to month but for a period of eleven years and eleven months with an option to Defendant 1 to renew the lease by another period of eleven years inasmuch as Defendant. 1 had paid rent in advance to Ms. Neeta Mehra, erstwhile owner of the suit premises for a period of fourteen years approximately at the time when it was inducted in the suit premises.

                *                           *                      *

  1. In view of afore-noted authoritative pronouncement of law laid down by Supreme Court in Ram Kumar’s case (supra), the answer to the question posed above is: tenancy of immovable property for any purpose other than agricultural or manufacturing created by an unregistered instrument would be deemed to be ‘month to month’ tenancy even where the tenant has paid annual/yearly rent to the landlord.

  2. As a necessary corollary thereof, the tenancy of Defendant 1 in suit premises is deemed to be ‘month to month’ tenancy which could be terminated by giving 15 days’ notice. (We again note here that Defendant 1 has admitted the receipt of legal notice dated May 03, 2010 issued by the plaintiff terminating the tenancy of Defendant 1).” 

13. The Supreme Court in Park Street Properties (Pvt.) Ltd. v. Dipak Kumar Singh[12], held as under:

“9. A perusal of Section 106 of the Act makes it clear that it creates a deemed monthly tenancy in those cases where there is no express contract to the contrary, which is terminable at a notice period of 15 days. The section also lays down the requirements of a valid notice to terminate the tenancy, such as that it must be in writing, signed by the person sending it and be duly delivered.

11. It is also a well-settled position of law that in the absence of a registered instrument, the courts are not precluded from determining the factum of tenancy from the other evidence on record as well as the conduct of the parties…” 

14. The High Court of Delhi in  Sanjay Gupta v. Krishna Hospitality[13] , observed as under:

“11. Per Section 107 of the Transfer of Property Act, 1882, a lease of immovable property for any term exceeding one year can be made only by a registered instrument and all other leases may be made either by registered instrument executed by the lessor and lessee or by oral agreement accompanied with delivery of possession. The defendants in their written statement have pleaded lease agreement dated 23rd November, 2015, for a period of three years, executed by plaintiff and defendants and where under claim to be entitled to occupy premises till 31st October, 2018. The same is not registered and is admitted to be not registered. The same thus, under Section 49 of Registration Act, 1908, cannot be received in evidence of any transaction effecting such property. Per Section 106 of Transfer of Property Act, in the absence of registered lease deed, a lease of immovable property for any purpose other than agricultural or marketing, is deemed to be a lease from month to month, terminable by a fifteen days’ notice…”

15. The principle was reiterated by the Supreme Court in Sevoke Properties Ltd. v. West Bengal State Electricity Distribution Company Ltd.[14],  when it observed as under:

“13. In terms of the provisions of Section 107, a lease of immovable property for a term exceeding one year can only be made by a registered instrument.  Admittedly, in the present case, the indenture of lease has not been registered. In consequence, the contents of the indenture would be inadmissible in evidence for the purpose of determining the terms of the contract between the parties. This is the plain consequence of the provisions of Sections 17 and 49 of the Registration Act, 1908. The only purpose for which the lease can be looked at is for assessing the nature and character of the possession of the respondent.”

 Renewal v. Extension of lease

16. An instrument of lease may contain a provision to the effect that on the expiry of the term of the lease, it is to be renewed or extended. Such a provision may not ipso facto renew or extend the term of the lease but it entitles the lessee to obtain a new lease in his favour after the expiry of the original term. The Supreme Court in its judgment in Hindustan Petroleum Corporation Ltd.   Dolly Das[15], observed as under:

“12…Covenant for renewal is not treated as part of terms prescribing the period of lease but only entitles a lessee to obtain a fresh lease…”

 17. Renewal and extension of lease are two different concepts. They are not defined in TPA. As per Webster dictionary, ‘to renew’ means ‘to make like new’or ‘to restore to existence’; and ‘to extend’ means ‘to stretch out to fullest length’.

18. The distinction between these two concepts has often been a subject of discussion and has been considered by the Supreme Court in its judgment titled as Provash Chandra Dalui. v. Biswanath Banerjee[16] , while observing as under:

“14. It is pertinent to note that the word used is ‘extension’ and not ‘renewal’. To extend means to enlarge, expand, lengthen, prolong, to carry out further than its original limit. Extension, according to Black’s Law Dictionary, means enlargement of the main body; addition to something smaller than that to which it is attached; to lengthen or prolong. Thus extension ordinarily implies the continued existence of something to be extended. The distinction between ‘extension’ and ‘renewal’ is chiefly that in the case of renewal, a new lease is required, while in the case of extension the same lease continues in force during additional period by the performance of the stipulated act.”

19. The distinction between the said two concepts was reiterated by the Supreme Court in the judgment of State of U.P.   Lalji Tandon[17], in the following words:

“13….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..”

 20. This distinction was reiterated by the High Court of Delhi in  Aggarwal and Modi Enterprises (Cinema Project) Pvt. Ltd.   New Delhi Municipal Council[18].

21. Reiterating the distinction between the two concepts, as enunciated in Provash Chandra Dalui and Lalji Tandon (supra), the Supreme Court in its judgment titled as Hardesh Ores Pvt. Ltd. v. Hede and Company[19],  observed as under:

“25. Having regard to these decisions we must hold that in order to give effect to the renewal of a lease, a document has to be executed evidencing the renewal of the agreement or lease, as the case may be, and there is no concept of automatic renewal of lease by mere exercise of option by the lessee. It is, therefore, not possible to accept the submission urged on behalf of the appellants-plaintiffs that by mere exercise of option claiming renewal, the lease stood renewed automatically and there was no need for executing a document evidencing renewal of the lease.”

 22. The High Court of Calcutta in the judgment of Renuka Seal  Sabitri Dey[20]  has made distinction between the concepts of renewal and extension of lease in the following words:

 “24…”To extend” means to enlarge, expand, lengthen, prolong to carry out further than its original limit. In other words, “extension” means enlargement of the main body; addition of something smaller than that to which it is attached; to lengthen or prolong. Thus, extension ordinarily implies the continued existence of something to be extended. But “renewal of lease” means creation of a new lease which creates a fresh right and obligation between the contracting parties. Thus, once a renewed lease comes within the scope of Section 107 of the Transfer of Property Act, such a lease can be made only by registered instrument…

32…when renewal is effected by a bilateral process on fresh terms and conditions to be settled between the parties after the expiry of the original lease period, it creates a new lease creating fresh relationship between the parties and under such circumstances it requires registration of a deed for renewal of lease.

33. The extension of lease, however, can be made through an unilateral process,inasmuch as, such extension is made on the option of one of the parties to the lease, as the party on the other part had and/or has no option but to accept the option for renewal exercised by the said party and to extend the said lease as per the provisions contained in the original registered lease deed.”

 23. It is thus clear that a clause in the instrument of lease either for renewal or for extension of lease is its important term and therefore, it has to be clear and specific, so as to enable the Court to ascertain the same. In case of uncertainty or ambiguity in the terms and conditions of the lease, whether there is an option clause for renewal or extension of lease, has to be determined reading all other covenants of lease as also the other evidence on record, so as to determine the intention of the parties.

Procedure of Renewal

24. The renewal of a lease is a privilege and the same is required to be done within the time limited and in the stipulated manner as provided in the lease for the said purpose. In the celebrity case of Caltex (India) Ltd. v. Bhagwan Devi Marodia[21], the Supreme Court held as under:

“4. At common law stipulations as to time in a contract giving an option for renewal of a lease of land were considered to be of the essence of the contract even if they were not expressed to be so and were construed as conditions precedent. Equity followed the common law rule in respect of such contracts and did not regard the stipulation as to time as not of the essence of the bargain. As stated in Halsbury’s Laws of England, 3rd Edn., Vol. 3, Art. 281, p. 165 : “An option for the renewal of a lease, or for the purchase or re-purchase of property, must in all cases be exercised strictly within the time limited for the purpose, otherwise it will lapse.” This passage was quoted with approval by Danckwerts L. J. in Hare v. Nicoll[22]. A similar statement of law is to be found in Foa’s General Law of Landlord and Tenant, 8th Edn., Article 453, p. 310, and in Hill and Redman’s Law of Landlord and Tenant, 14th Edn., p. 54. The reason is that a renewal of a lease is a privilege and if the tenant wishes to claim the privilege he must do so strictly within the time limited for the purpose.

  1. With regard to equitable relief against the failure of the tenant to give notice of renewal within the stipulated time, the law is accurately stated in Halsbury’s Laws of England, 3rd Edn., Vol. 23, p. 626, Article 1329, footnote (u) thus :”Relief will not be given in equity against failure to give notice in time, save under special circumstances. The decided cases show that in such cases relief is not given in equity save upon the ground of unavoidable accident, fraud, surprise, ignorance not wilful or inequitable conduct on the part of the lessor precluding him from refusing to give the renewal. The limits of the equitable interference in such cases were clearly stated by the Master of the Rolls (Sir R. P. Arden) in Eaton v. Lyon[23] . He observed:

“At law a covenant must be strictly and literally performed; in equity it must be really and substantially performed according to the true intent and meaning of the parties so far as circumstances will admit; but if unavoidable accident, if by fraud, by surprise or ignorance not wilful, parties may have been prevented from executing it literally, a Court of Equity, will interfere; and upon compensation being made, the party having done everything in his power, and being prevented by means, I have alluded to, will give relief … I decide this case upon the principles on which, Lord Thurlow decided (Bayley v. The Corporation of Leominster 1792, 1 Ves. 476), and I hope now, it will be known, that it is expected, these covenants shall be literally performed where it can be done; and that equity will interpose, and go beyond the stipulations of the covenant at law, only where a literal performance has been prevented by the means, 1 have mentioned, and no injury is done to the lessor.”

6. We are of the opinion that the stipulation as to time in Clause 3(c) of the indenture of lease dated February 17, 1954 should be regarded as of the essence of the contract. The appellant not having exercised the option of renewal within the time limited by the clause is not entitled to a renewal.”

25. This principle was reiterated by the Delhi High Court in its judgments titled as Frankfinn Aviation Services Pvt. Ltd. v. B.C. Gupta[24]; Punchip Associates P. Ltd. S. Rajdev Singh[25]; Jagdish Gupta v. The State Trading Corporation of India Ltd.[26]; and MGR Holding (P) Ltd. v Loil Overseas Foods Ltd.[27].

26. It, therefore, follows that if the original registered lease deed contained an option clause for renewal, it has to be exercised strictly in accordance with the terms thereof, to be followed by execution and registration of a fresh lease deed in accordance with Section 107 of TPA, failing which the lessee cannot claim renewal of the lease or to continue in possession of the premises as a lawful lessee. The lessee continuing in possession without actual renewal only becomes a tenant holding over under a month to month tenancy, determinable by a notice in accordance with Section 106 of TPA.


*Advocate and a qualified Chartered Accountant. Author is currently a Senior Associate in Dispute Resolution Practice at L&L Partners Law Offices, New Delhi. Author’s views are personal.

[1] Transfer of Property Act, 1882

[2] Registration Act, 1908

[3] 1906 SCC OnLine Cal 83

[4] 1952 SCR 269

[5] 1906 SCC OnLine Cal 83

[6] 1933 SCC OnLine Pat 55

[7] 20 IC 715

[8] 17 CLJ 167

[9] 1906 SCC OnLine Cal 83

[10] 1916 SCC OnLine Cal 39

[11] 2015 SCC OnLine Del 14507 

[12] (2016) 9 SCC 268

[13] 2018 SCC OnLine Del 8942

[14] 2019 SCC OnLine SC 592

[15] (1999) 4 SCC 450

[16] 1989 Supp (1) SCC 487

[17] (2004) 1 SCC 1

[18] 2005 SCC OnLine Del 898

[19] (2007) 5 SCC 614 

[20] 2007 SCC OnLine Cal 501

[21] (1969) 2 SCR 238

[22] [1966] 2 QB 130 

[23] 3 Ves. Jun. 690:30 E.R. 122

[24] 2007 (9) AD (Delhi) 449

[25] 2011 SCC OnLine Del 131 

[26] 2012 SCC OnLine Del 3315 

[27] 2015 SCC OnLine Del 11953

Case BriefsHigh Courts

Delhi High Court: C. Hari Shankar, J., addressed three different petitions between the same parties arising out of the award passed by Arbitral Tribunal, out of which, first petition was rejected, the second was passed and third stayed.

GMR and NHAI were under a concession agreement to build a six-lane, 555 km Kishangarh-Udaipur-Ahmedabad Highway, which was terminated by GMR on the ground that there had been a “change in law”, during the period of the agreement.

GMR claimed that it was entitled to compensation, under Clauses 41.1 and 41.3 of the Concession Agreement. The learned Arbitral Tribunal held that there was a “change in law” and that, GMR was entitled to compensation under Clauses 41.1 and 41.3. The majority award, however, permitted NHAI to take a fresh decision, on the claims of GMR, and assess the compensation to which it would be entitled. While the majority Award directed GMR to establish, before NHAI, its entitlement to compensation, under Clause 41.1 and 41.3 of the Concession Agreement, the dissenting Award(minority) opined that, instead of allowing NHAI to adjudicate thereon, the exercise ought to be delegated to an independent authority, such as a reputed firm of Chartered Accountants, or the like. The petitions, O.M.P. (COMM.) 426/2020, and O.M.P. (COMM.) 425/2020, were filed by NHAI and  GMR respectively and were preferred under Section 34 of the Arbitration and Conciliation Act, 1996, to set aside the award by the Tribunal. O.M.P. (I) (COMM.) 92/2020, was filed by GMR under Section 9 of Arbitration and Conciliation Act, 1996 essentially for the interim stay of operation of a letter demanding premium and, further, restraining GMR from taking any coercive steps, under the Concession Agreement.

NHAI claimed to be aggrieved by the decision, of the Arbitral Tribunal, holding GMR to be entitled to compensation, and contended, in its petition [O.M.P. (COMM.) 426/2020] that GMR was not entitled to any compensation on the ground of “change in law”. GMR challenged [in O.M.P. (COMM.) 425/2020] the majority Award, to the extent, it delegated the decision-making power, qua the claim, of GMR, to compensation, to NHAI. In other words, GMR sought to contend that the minority Award of Nayar, J., ought to be accepted.

The Court first decided the petition,O.M.P. (COMM.) 426/2020, and found the Arbitral Tribunal’s Judgment to be in order. Court found that the tribunal’s decision that change of circumstance did result in “change of law” under Clause 48 of the Concession Agreement, the claim of GMR had to be assessed under Clauses 48.1 and 48.3 and GMR had to establish the “financial burden” to claim this compensation.

Therefore, Court disposed of this petition. In O.M.P. (COMM.) 426/2020, the court sided with the minority judgment of the Arbitral tribunal and assigned a new arbitrator who would be taking up the task from where the learned Arbitral Tribunal passed its Award. The Court decided that the Sole Arbitrator would have a time of six months from the date of presentation GMR’s claims for compensation. Therefore, the petition was accepted. The remaining petition, O.M.P. (I) (COMM) 92/2020, was on the issue of the premium to be paid to NHAI, which was stayed by the court in the “the interests of justice”.  Therefore, the third petition stayed.[GMR Hyderabad Vijayawada Expressways (P) Ltd. v. NHAI, 2020 SCC OnLine Del 923, decided on 4-08-2020].

Case BriefsHigh Courts

Chhattisgarh High Court: The petition filed by the National Insurance Co. seeking to evade its liability to indemnify the petitioner, was dismissed by a Single Judge Bench comprising of Sanjay Agrawal, J.

Undisputed facts of the case were that the claimant’s motorcycle was dashed vehemently by the jeep of the respondents which was being driven in a rash and negligent manner. The claimant claimed compensation under Section 166 of the Motor Vehicles Act 1988 subsequent to which the Claims Tribunal fastened liability upon the petitioner Insurance Co. Being aggrieved, the Insurance Company filed the instant petition.

The High Court noted that the main contention raised by the Insurance Company was that at the concerned time, the premium was not paid to the Company and the Development Officer who collected the premium amount was not authorized for the same. However, such contention was rejected by the Court. It was held that on a bare perusal of the record, it was evident that at the relevant time, the premium had already been collected by the petitioner by issuing a ‘Deposit Challan’ in its printed form. Therefore the Insurance Company could not run away from its liability to pay the assured. In accordance, the petition was dismissed. [National Insurance Co. Ltd. v. Jitendra Kumar Jain, 2018 SCC OnLine Chh 487, dated 24-4-2018]