Case BriefsHigh Courts

Delhi High Court: Rajiv Sahai Endlaw, J., passed a decree for recovery of possession in favour of the plaintiffs without a trial, where it was found that the defendants were insisting upon the recording of evidence and a trial only to defer the evil day of a decree being passed against them.

Factual Matrix

In the instant matter, plaintiffs’ purpose for the institution of the case was:

  • For declaration of their title and ownership of ground floor of property.
  • For recovery of possession thereof.
  • For ancillary reliefs against defendants 1 to 8 namely: (a) Arun Jethmalani, (b) Mohiney K. Jethmalani, (c) Ashish Hingorani, (d) C.V. Hingorani, (e) G.V. Hingorani, (f) Tulsi V. Hingorani, (g) Padma V. Hingorani, and (h) Delhi Development Authority (DDA).

Plaintiffs submitted that Devi Verhomal Hingorani was the owner of the property comprising of two and a half storey building with land underneath. After her demise, defendant 3 i.e. Ashish Hingorani became the owner of the ground floor of the property; defendants 6 and 7 i.e. Tulsi V. Hongorani and Padma V. Hongorani became the owner of the first floor of the property. Defendant 5 i.e. G.V. Hingorani became the owner of the second floor of the property and defendant 4 i.e. C.V. Hingorani was the named executor under the Will.

Ashish vide an agreement to sell, sold the ground floor of the property to the plaintiffs and on receipt of the entire purchase consideration executed the Will, Receipts, Affidavits, Indemnity Bonds, Special Power of Attorney in favour of the plaintiffs.  Since 1992, plaintiffs have been in the possession of the property. Further, the plaintiffs permitted defendants 1 and 2 i.e. Arun and Mohiney to access the ground floor as the caretaker.

Further, it was stated that Mohiney, the sister of the husband of plaintiff 1, during a conversation with the husband of plaintiff 1 mentioned that the ground floor belonged to her as she had purchased the same from Ashish.

With regard to first and second floors of the property, plaintiffs got to know that the owners of the said floors had executed certain documents including the Special Power of Attorney in favour of the husband/father of Mohiney/Arun. It was further learnt that the husband/father of Mohiney/Arun had also obtained a Special Power of Attorney from Ashish.

Leasehold rights of the land underneath the property had been converted into freehold vide Conveyance Deed jointly in favour of defendants 3 to 7, to whom different portions of the property were bequeathed under the Will.

Later, in 2012, when plaintiff 2 visited the property, found that Arun had opened his office on the ground floor and Arun and Mohiney were claiming themselves to be the owners in the possession of the ground floor of property.

In 2013, summons were ordered to be issued to Arun, Mohiney and Ashish to be restrained from creating any third party rights in the ground floor of the property.

Since both Arun and Mohiney died, they were substituted by the wife, son and daughter of Arun; another son of Mohiney was also impleaded as an heir.

High Court’s Analysis and Decision

Bench on perusal of the facts and circumstances of the case found that no trial was required in the matter, plaintiffs were entitled to a decree for possession:

  • Defendants contention that since issues were framed trial was necessary, was no longer res integra. Bench referred the decision of Supreme Court in  Charanjit Lal Mehra v. Kamal Saroj Mahajan, (2005) 11 SCC 279 and Delhi High Court’s decision in Parivar Seva Sansthan v. Veena Kalra, 2000 SCC OnLine Del 469.
  • As far as the plea of the defendants, of oral Agreement to Sell is concerned, the defendants, notwithstanding the pendency of this suit since the year 2013, have till date not initiated any action for specific performance thereof and the claim, even if any of the defendants for specific performance, would now be barred by time.
  • The defendants have pegged their case on adverse possession and all that needs to be adjudicated at this stage is, whether there is any plea of adverse possession and whether the plea, even if any of adverse possession, is such which is required to be put to trial. If the defendants fail on their plea of adverse possession, a decree for possession would be liable to be passed against them.
  • The existence of the Agreement to Sell, even if any, does not entitle the defendants to defend a claim for possession on the basis of title by the owner. The only remedy of an agreement purchaser is to sue for specific performance and which has not been done by the defendants.
  • It is quite obvious that it was only pursuant to the order dated 5th November, 2019, that the yarn of Arun and Mohiney having separate defences, with Arun having a defence of agreement purchaser and Mohiney having a defence of adverse possession, has been spun/woven.
  • The contention, that while the possession of Mohiney was adverse to the plaintiffs, the possession of Arun was as agreement purchaser from the plaintiffs, cannot be accepted.
  • Once Arun and Mohiney, both were in possession of ground floor of the residential House No. B-59, East of Kailash, New Delhi, there can be no plea of adverse possession by one when the other is claiming to be in possession as an agreement purchaser.
  • Owing to the relationship between Arun and Mohiney and owing to the lack of any plea, of Arun and Mohiney being in possession of the separate portions of the ground floor of the residential House No. B-59, East of Kailash, New Delhi, the plea of adverse possession and the argument of adverse possession on behalf of Mohiney, is nothing but a red herring and which clever drafting and arguments cannot and ought not make the Court put to trial something which can otherwise clearly be seen as a ruse in day light and permits of no ambiguity.
  • It is quite obvious that the defendants were insisting upon recording of evidence, to defer the evil day of a decree for recovery of possession being passed against them. However, the Court has to cut through the web of pleas spun in the written statement of the defendants and if finds the plea of adverse possession on which emphasis is laid today, to be without any substance, on account of other pleas in the written statement, is not to pedantically and mechanically order evidence to be recorded and allow its process being abused. The time and resources of the Court can be utilised for appropriate cases indeed requiring recording of evidence and trial and in which findings cannot be returned without such trial.

Mala fides of the defendants were also found much evident.

Plaintiffs were held entitled to a decree for recovery of possession forthwith. The Court expected that the defendants at least now will see reason and not indulge in any further litigation on false mutually destructive pleas bordering on contemptuous conduct interfering with administration of justice. The mesne profits at Rs 30,000 per month were fixed by the Court. [Asha V. Wadhwani v. Arun Jethmalani, 2020 SCC OnLine Del 480, dated 18-3-2020]

Case BriefsHigh Courts

Bombay High Court: A.K. Menon, J., addressed a matter wherein an arrangement was executed between the parties for taking care of the elderly mother in light of a conditional gift deed.

The instant application was filed by the plaintiffs praying for urgent relief. Plaintiff 1 is not a resident of India and plaintiff 2 being his mother, was being looked after by the defendant under an arrangement between them.

As a part of the above-stated arrangement, plaintiff 1 contended that defendant executed an undertaking by which the defendant agreed and undertook to look after plaintiff 2 i.e. the elderly mother of plaintiff 1.

A Gift Deed was also executed on the same date in favour of the defendant when the above-stated undertaking was executed by the defendant.

The subject matter of the said Gift Deed was a flat situated in Mumbai in a co-operative housing society. Plaintiffs contended that the gift was conditional upon compliance with the undertaking and hence sought the gift deed needed to be revoked as the defendant had declined to honour the undertaking.

The reason for seeking urgent ad-interim relief is the plaintiffs’ apprehension that the defendant may dispose of the said flat to the detriment of the plaintiffs since the plaintiffs sought to revoke the said gift deed.

Prima facie, the documents stated that the gift deed was indeed executed and so was the undertaking.

Further, there was no satisfactory explanation as to why the execution of the undertaking was denied since it appears that the undertaking was initially shared by the defendant himself in the draft form by e-mail, copy of which was found in the additional compilation of documents filed by the plaintiffs.

Hence, prima facie it appeared that there was a link between the undertaking, obligation therein and the gift deed.

Further, it was submitted that the gift deed purported to gift the flat described therein out of love and affection to the defendant. It was contended on behalf of the defendant by Mr Petkar that even under Section 126 of the Transfer of Property Act, 1882, such a gift deed cannot be revoked and that no case is made out for revocation even assuming that there was an undertaking in place.

In the Court’s opinion, the denial of the execution of the undertaking is suspect and will have to be examined in greater detail. If the defendant had in fact not executed the undertaking, there was no reason for him to have sent those undertaking in draft form and in PDF form to plaintiff 1.

Hence, prima facie case was made out for grant of an ad-interim relief. Bench directed the co-operative housing society housing the suit flat shall make note of this injunction and shall not permit the transfer of the flat till further orders.

Flat in question is to be protected from alienation.[Edward D’Cunha v. Mark Madhu Suvarna, 2020 SCC OnLine Bom 3083, decided on 23-11-2020]


Advocates who appeared in the matter:

Rashmin Khandekar, i/by Taurus Legal, for the Applicants-Original Plaintiffs.

Akshay Petkar, with Aniket Malu, for the Defendant.

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

A very efficacious, substantive and procedural mechanism to facilitate the realisation of deserving and intrinsic value of encumbered estates and other immovable properties – within the annals of the Transfer of Property Act, 1882 — strangely appears very rarely to have been invoked in Courts, which impression is inevitable because the case law on it is scarce, if not, none.

— Kerala High Court

Kerala High Court: Devan Ramachandran, J., addressed matter surrounding Section 57 of the Transfer of Property Act, which has attracted very little or no reported Judgments in India.

Section 57 of the Transfer of Property Act, 1882 enables any party to the sale of immovable property burdened by an encumbrance, to apply to Court for a declaration that the said property is freed from such encumbrance on deposit of sums to be adjudged by it; and for the issuance of a conveyance order or vesting order, proper for giving effect to the sale.

Bench examined the above-stated Section of the TP Act vigilantly from both academic and practical ambit.

Purpose of Section 57 of the TP Act

Intended to assist any party to the sale of immovable property, which is subject to an encumbrance, to fructify the sale for its fair value after receiving in deposit — for payment to the incumbrancer — the capitalised value of the periodical charge, or capital sum charged on the property, together with incidental charges.

Thus, the said Section enables the parties to a sale to invoke the jurisdiction of the Court for the purpose of fulfilling their contracts, notwithstanding the encumbrances on the property.

Section 57 of TP affirmatively provides that on the application of a party to a sale, the Court may, if it thinks fit, direct or allow payment into Court.

This section is intended to facilitate sale out of court, as much as it is for sale by a court or in execution of a decree.

When can Section 57 of TP Act not be applied? | Golden Rule 

In the Madras High Court decision of  Mallikarjuna Sastri v. Narasimha Rao, (1901) ILR 24 Mad 412, held that the said Section,

cannot be applied when it comes to a charge or encumbrance already adjudicated by a court and which has become part of a decree or even in a case of adjustment of a decree out of court.

Facts of the Case

Appellant and Respondents are siblings and their father’s property was partitioned in the year 1980, through a partition deed.

Partition Deed consisted of a covenant that both he and his brother must pay Rs 500 each to their sister within a year, failing which she can recover it, for which the said amounts would stand charged on the respective properties.

Contentions

The Sister, who is also the first respondent in the present matter refused to accept the stated amount when offered by the appellant, due to which he is still obligated and burdened with the same.

Appellant due the stated obligation has been unable to execute the sale deed and in view of the circumstances, he approached the District Court under Section 57 of the TP Act volunteering to deposit the amount of Rs 500 in favour of the first respondent in order to obtain the declaration that the property is free from any encumbrance.

Though, the above-stated application to the District Court was dismissed on grounds of maintainability.

By the present appeal, the appellant has assailed the District Court’s Order.

Developments in the present appeal

Bench in an earlier order had directed the first respondent to file an affidavit stating that she is unwilling to take the money from the appellant with reasons.

The first respondent filed the affidavit stating that she is unwilling to take the said amount but the reasons placed by her were that due to personal issues with appellant along with the said amount not being offered within the stipulated time as stated in the Partition Deed she refused the said amount.

Counsels for Appellant and First Respondent are P. Thomas Geeverghese and Shiju Varghese, respectively.

Decision

On perusal of the facts and circumstances of the matter, Court stated that when the amount of Rs 500 alone stands charged on the property as a capital sum, without any further obligation on the appellant towards interests or other incidental expenses, it is irrefragible that if the appellant pays it to the first respondent or deposits it in the Court, the said encumbrance would stand extinguished.

In the affidavit filed by the first respondent, she only asserted that her refusal for the payment is for personal reasons.

Looking at the above stated, Court determined whether the appellant was justified in invoking Section 57 of the TP Act or not?

Bench stated that in light of the circumstances of the present case, there can be little divergence that the provisions of Section 57 of the TP Act would come to play.

Court noted that the first respondent only says that ‘her conscience is not willing to accept the money’ without showing any cause against its tender or deposit by the appellant.

Hence, in view of the above circumstances, Court finds the decision of District Court erring, since the appellant has clearly averred that he intends to sell his property as per the sale agreement submitted by him.

Since the first respondent failed to show any legally acceptable cause, the appellant is entitled to a declaration under Section 57 of the TP Act.

Therefore, the District Court’s decision is set aside and the appeal is allowed while permitting the appellant to tender the amount of Rs 500 to the first respondent by depositing it in the District Court.

In view of the above, the property will stand free from any charge, created by the Partition Deed. [M.P. Varghese v. Annamma Yacob, 2020 SCC OnLine Ker 3321, decided on 05-08-2020]

Op EdsOP. ED.

This article concerns with a recurrent issue that arises from an ever-widening relationship of landlord-tenant. There can be no hesitation mentioning that almost all the societies have witnessed conflicts when it comes to determination of tenancy and thus, regulate the same. In India, Part V of the Transfer of Property Act, 1882, (hereinafter referred to as “the Act” or “TPA”) governs such a relationship entered into through a lease. A perplexing question that needs discussion here pertains to procedural requirement of “giving a notice” under Sections 106 and 111(g) of the Act, by the landlord, of his intention to determine the jural relationship of tenancy before filing a suit for eviction under the various State Rent Acts. The issue within this is not regarding what amounts to “giving of a notice” or whether a notice given in a certain way fulfils all requirements to be a valid notice. The controversy centres on whether such a notice is at all necessary to be given. The major takeaway for the readers would be knowledge of confined situations where notice is required to be served by the landlord and consequently, would reduce the confusion regarding the same. Before moving on to the question on hand it becomes pertinent to shed some light on the concept and scope of the aforesaid provisions.

Ordinarily, a contract between the parties would regulate all the relevant terms including the duration of the subsistence of tenancy, however, there might be a case where the contract mentions no date of termination of such relation. On a plain reading of Section 106, it is clear that the legislature has classified the leases into two categories and according to their purposes this provision would be attracted to construe the duration of the lease and accordingly duration of notice to be served in absence of a contract or local usage to the contrary[1]. This implies that this section is applicable only in the absence of contract as to the duration of lease. Also, it is open to the parties to contract themselves out of the provision and to make a valid contract between themselves as regards duration of their lease and the manner of termination of the same. It is obvious that the lease of tenancy, mostly, if not always, would be covered by the mandate of giving 15 days’ notice to the tenant. Even the length of the notice or the calendar for computation of the period can be subject to contract between the parties[2].

The other indispensable requirement of giving notice is rooted under Section 111(g) of the Act. The sub-section deals with the subject known as forfeiture of leases. Forfeiture ordinarily implies a penalty for an offence or unlawful act or for some wilful omission of a tenant of property whereby he loses it, together with his title, which devolves upon others[3]. To constitute forfeiture in a matter, there must be a breach of an express condition of the lease which provides for the landlord’s re-entry to the premises.

The question that stares us at this stage is whether both the notices under the impugned sections technically are identical to each other. To start with, a bare reading of Section 111(g) shows that it is nowhere mentioned as to the nature and time period of the notice that needs to be given is identical to that of Section 106. Clearly, Section 106 of the Act was incorporated as an equitable provision so that a tenant may not be taken by surprise. The rationale behind such a mandate could be intimating the intention of landlord so that the tenant could arrange for himself another roof. It seems to be in the interests of hapless tenants who are without just cause thrown out of the premises at the mercy of the landlord. On the other hand, the latter’s purpose apparently is not the one as of the former and is not based on the principles of justice, equity or good conscience[4]. It cannot be said to be guided by reason and equity as the tenant after liability has been incurred cannot be given benefit of his own wrong. Therefore, notice under the latter sub-section is not the one to be given under Section 106 of the Act. However, at most, it can be said that the similarities that can be drawn in both the notices are with respect to the procedural formalities but not the technical ones.

This brings us to the real question of this article as to whether the “giving of notice” as contemplated by the Act is a prerequisite condition that needs to be adhered to prior to filing of a suit of eviction against tenant under the State Rent Acts.

Here, it becomes imperative to appreciate the fact that the State List[5] of the Constitution of India prescribes the State Governments to regulate rights in or over land, land tenures including the relation of landlord and tenant, and the collection of rents. Resultantly, almost all the States have enacted their law governing determination of tenancy. The controversy now is limited to whether the provisions of the relevant State Rent Act was in addition to the provision of the TPA or was in derogation thereof. In other words, whether it would supplement or supplant the same. The Rent Acts  passed in different States were intended to prevent indiscriminate eviction of tenants and were intended to be a protective statute to safeguard the security of possession of the tenants and therefore, should be construed in the light of it being a social legislation[6].

As far as the answer to the present question is concerned it can be said that there were mixed and inconsistent views iterated by the Supreme Court and various High Courts in catena of judgments. A few of the judgments deserves to be highlighted herein. The Supreme Court in Manujendra Dutt v. Purendu Prosad Roy Chowdhury[7], while deciding requirement of notice in both the sections to be sine qua non before filing suit for eviction under the State rent provisions, has remarked that:

5. … Rent Acts are not ordinarily intended to interfere with contractual leases and are Acts for the protection of tenants and are consequently restrictive and not enabling, conferring no new rights of action but restricting the existing rights either under the contract or under the general law.

In addition to the above case, the Supreme Court while referring to its judgment in Namdeo Lokman Lodhi v. Narmadabai[8], has held that giving notice under Section 106 is a principle of equity and hence mandatory but laid down contrary with respect to Section 111(g). It observed that:

26. … The irrelevance of the English Law as such to notions of good conscience in India notwithstanding, we agree that a written notice is no part of equity. The essential principles, not the technical rules, of the TP Act form part of justice, equity and good conscience. The conclusion emerges that the landlord’s termination of the tenancy in this case is good even without a written notice.[9]

Either of the above view was adopted by the Supreme Court of India in many more pronouncements until the landmark judgment[10] by a seven-Judge Bench of the Court. The ruling marked the end of all the chaos and confusing and thus overruled all the previous conflicting views. Moreover, it emphasised the need to have a uniform law in all the States despite having some difference in phraseology of relevant provisions in the State laws.

The Court pointed out with no hesitation that notice under both the sections is different kind of intimation. As far as Section 106 is concerned it brushed aside the previous position of law and stated that when under the various State Rent Acts, either in one language or the other, it has been provided that a tenant can be evicted on the grounds mentioned in certain sections of the said Acts, then how does the question of determination of a tenancy by notice arise? If the State Rent Act requires the giving of a particular type of notice in order to get a particular kind of relief, such a notice will have to be given. It further observed that:

11. … It is true that the Rent Act is intended to restrict the rights which the landlord possessed either for charging excessive rents or for evicting tenants. But if within the ambit of those restricted rights he makes out his case it is a mere empty formality to ask him to determine the contractual tenancy before institution of a suit for eviction[11].

Thus, the action of the landlord in instituting a suit for eviction on the ground mentioned in any State Rent Act will tantamount to an expression of his intention that he does not want the tenant to continue as his lessee and the legal relationship of lessor and lessee will come to an end on the passing of an order or a decree for eviction. Until then, under the extended definition of the word “tenant” under the various State Rent Acts, the tenant continues to be a tenant even though the contractual tenancy has been determined by giving of a valid notice under Section 106 of the TPA.

On the other hand, the Court while considering the requirement under Section 111(g) obliterated the difference between “contractual tenantandstatutory tenant. It observed that where any tenant has violated any term of the contract and the landlord having served the notice determines the contractual lease under Section 111(g) of the Act, nevertheless, he would be provided with the protection under various State Acts as statutory tenant and can only be evicted after obtaining an order or decree to that effect. Stating it in words of the Bench:

16. … Why this dual requirement? Even if the lease is determined by forfeiture under the Transfer of Property Act the tenant continues to be a tenant, that is to say, there is no forfeiture in the eye of the law. The tenant becomes liable to be evicted and forfeiture comes into play only if he has incurred the liability to be evicted under the State Rent Act, not otherwise. In many State statutes different provisions have been made as to the grounds on which a tenant can be evicted and in relation to his incurring the liability to be so evicted. Some provisions overlap those of the Transfer of Property Act. Some are new which are mostly in favour of the tenants but some are in favour of the landlord also.[12]

Therefore, it can be aptly concluded that determination of a lease in accordance with the TPA is unnecessary and a mere surplusage because the landlord cannot get eviction of the tenant even after such determination. The tenant continues to be so even thereafter.

Thereafter, this position of law has been followed in a plethora of judgments by the Supreme Court. In Shakuntala S. Tiwari v. Hem Chand M. Singhania[13], the Court held that it is an act in law and not an act of law because under the scheme a determination of tenancy which takes place under the TPA, according to the appellant, is wholly irrelevant for founding a cause of action in ejectment because the provisions of the TPA are superseded by the provisions of the Rent Act. Interestingly, the Court has broadened its sweep to the extent saying that Section 111(g) in such situations be treated as inoperative and deemed to be repealed[14].

Conclusion

On a careful consideration of all the material referred to, it can be aptly remarked that requirement of giving a notice to the tenant under Sections 106 and 111(g) in a case of filing an eviction petition under the respective State rent legislations is not based on rule of equity and reason. Hence, it is an additional technical formality, absence of which ensue no legal consequences and cannot be insisted upon the landlord. But does that mean that the impugned provisions have no role to play in shaping the rent control jurisprudence? The answer cannot be in affirmative. The two provisions would still operate in a larger field of regulating other leases of immovable property other than tenancy. Also, it cannot be said that both of them are in nullity when we talk about regulation of landlord-tenant relationship. The judgment of the Supreme Court in Nopany Investments (P) Ltd. v. Santokh Singh (HUF)[15] can be interpreted to the extent that giving a notice under Section 106 of the Act is not a requirement even when filing a suit in general law. However this does not seem to be the correct proposition of law laid down in Yesodai Ammal case[16] as these provisions of the Act would apply in absence of Rent Act in the State concerned and where the landlord presses a ground which does not find mention in the State Act but in general law[17]. In furtherance to this, there can be another situation which is a necessary corollary to the intent of State Legislatures i.e. where the State rent law itself expressly or by necessary implication entails to give a notice in accordance with the terms of Section 106.

Ergo, the requirement of giving a notice can be summed up in the following categories as noted hereinbelow:

  1. Where the rent agreement speaks for giving notice in a manner which is not inconsistent with the statute in force of that State or the general law (in case no State Act exists) as the case maybe, then that specific clause of the agreement shall prevail.
  2. Where no clause for giving notice is provided in the agreement or if provided is inconsistent with the State law or Central law (in case of absence of State law), then:

(a) Where that particular State has not enacted its rent statute, then the terms provided under TPA shall apply and would become a mandate.

(b) Where a particular State has enacted its rent statute but does not provide any provision regarding giving of notice, then no notice need to be served before filing a petition for eviction and tenancy shall only be terminated once a decree is granted by the proper rent court.

(c) Where the State rent statute itself expressly or by necessary implication entails to give a notice in accordance with the terms of Section 106 of TPA.

(d) Where the landlord presses a ground which does not find mention in the relevant State Rent Act in a particular State of India but in TPA, then terms of TPA shall be complied with.


*Final Year Student of BA LLB (Hons.), University School of Law & Legal Studies, GGSIPU.

[1] Samir Mukherjee v. Davinder K. Bajaj, (2001) 5 SCC 259 

[2] Harbhajan Singh v. P.N. Chopra, 1976 SCC OnLine Del 174

[3] Wharton’s Law Lexicon, see also Sunil Kumar Modi v. Munna Lal Gupta, 2007 SCC OnLine All 899

[4] Rattan Lal v. Vardesh Chander, (1976) 2 SCC 103; see also, Namdeo Lokman Lodhi v. Narmadabai,  1953 SCR 1009

[5] Sch. VII, List II, Entry 18,  Constitution of India

[6] Manujendra Dutt v. Purendu Prosad Roy Chowdhury, (1967) 1 SCR 475

[7] Ibid

[8] 1953 SCR 1009

[9] Rattan Lal v. Vardesh Chander, (1976) 2 SCC 103, 117

[10] V. Dhanapal Chettiar v. Yesodai Ammal, (1979) 4 SCC 214

[11] Id. at p. 22

[12] V. Dhanapal Chettiar v. Yesodai Ammal, (1979) 4 SCC 214, at p. 227

[13] (1987) 3 SCC 211

[14] Palani Ammal v. Viswanatha Chettiar, (1998) 3 SCC 654

[15] (2008) 2 SCC 728

[16] (1979) 4 SCC 214

[17] Biswanath Agarwalla v. Sabitri Bera, (2009) 15 SCC 693

COVID 19Op EdsOP. ED.

The national lockdown imposed in India due to the coronavirus outbreak has paralysed the economy and had a devastating effect on lives and livelihoods across the country. In light of the crisis, a number of commercial tenants and tenant associations have been seeking complete waivers of rents due to their landlords, and many have resolved not to pay the same. The Doctrine of Frustration/force majeure/Act of God has been invoked by the tenants to justify non-payment of rent. This article shall seek to analyse the Doctrine of Frustration and explore whether such an invocation is permissible in the context of lease agreements, and what may be the consequences thereof.

The Doctrine of Frustration

The Doctrine of Frustration finds place under Section 56 of the Contract Act – which provides that a contract may become void if it becomes impossible to perform due to reasons not preventable by the parties. This “frustration” or discharge of contract occurs immediately at the time of the occurrence of the event, and does not depend upon the whims of the parties to the contract [1] . Section 56 is the statutory provision that enshrines the principles of act of God, force majeure and impossibility in Indian Law for general contracts. The key elements necessary for invoking the doctrine are (a) the occurrence of an event that could not be prevented and (b) the impossibility of performing obligations under the contract due to the occurrence of that event.

The impossibility to perform under Section 56 is not limited to physical or literal impossibility but also includes practical impossibility [2]. However, practical impossibility is not to be read to mean economic unviability or unprofitability. A mere increase in the cost of performing the contract does not frustrate the contract [3]. The rule enshrined under Section 56 of the Contract Act is a positive law, and does not need to be specifically spelt out in a contract [4]. Therefore, even if a contract does not explicitly specify the existence of a force majeure clause, the parties to the contract can still claim frustration of contract for the occurrence of an event beyond their control.

A number of experts trace the doctrine of force majeure back to Section 32 of the Contract Act that deals with the enforcement of contingent contracts. In this author’s opinion, such reliance is misplaced. The doctrine of force majeure (from civil law) is most similar to the Doctrine of Frustration under common law, and both work as an exception to the ordinary rule of absolute liability for contractual obligations. These doctrines come in effect to excuse parties from a contract on occurrence of an “unforeseeable” event. Contingent contracts on the other hand are contracts which come into effect on the occurrence of a foreseeable, yet “uncertain” future event. The mere existence of such a contingent, force majeure clause, does not automatically entitle a party to invoke it, nor does it automatically disentitle a party to seek discharge of obligation by claiming frustration under Section 56.

The determination of rights of the parties will thus depend upon the facts of the individual case and the terms of the contract therein. The Doctrine of Frustration is distinct from a force majeure clause; as most commercial lease agreements in India do not contain a force majeure clause, the scope of this article is limited to the doctrine.

Delving into the History of Frustration

Ironically, it was a case concerning rent arrears in 1647, that eventually resulted in the birth of the Doctrine of Frustration. In Paradine v. Jane (1647) [5], the UK House of Lords – when faced with a dispute concerning a landlord who was denied rent on the grounds that the Royalist forces in the English Civil War had occupied the property and rendered the lessee landless – established a rule of absolute liability for contractual debts. The Court held while deciding in favour of the landlord that, ‘when the party by his own contract creates a duty or charge upon himself, he is bound to make it good, if he may, notwithstanding any accident by inevitable necessity, because he might have provided against it by his contract.’

In order to soften this rigid rule of construction, the Queens Bench – for the very first time in Taylor v Caldwell in 1863 [6] – carved an exception, and established the doctrine of common law impossibility. When the Contract Act, 1872 came into force 9 years later, this doctrine of impossibility was given statutory force under Section 56. Thus, while the frustration of contract remains a common law exception under English Law, under Indian Law it commands statutory force.

Frustration and Commercial Lease Agreements

The application of the Doctrine of Frustration to lease agreements was discussed as part of the celebrated Cricklewood decision [7], where the House of Lords decided that a 99-year building lease wouldn’t be frustrated and the lessee wouldn’t be discharged from his obligations merely due to a temporary disability in utilising the property. The Court opined that a lease could rarely, if ever, be frustrated, and would require a ‘vast convulsion of nature’. The Courts in England have since held on multiple occasions, that a mere suspension in possessory rights for a period of time does not operate to frustrate the lease or discharge the lessee from his payment obligations[8] .

In India, the Supreme Court in Raja Dhruv Dev Chand v. Raja Harmohinder Singh [9] observed that generally Indian courts were of the view that Section 56 of the Contract Act is not applicable when the rights and obligations of the parties are under a transfer of property. The Court held that the Doctrine of Frustration would not apply to a contract of lease when there was transfer of a property by way of lease under the Indian Law, owing to the transfer of right to enjoy the land as well. If any material part of the property was wholly destroyed or rendered substantially and permanently unfit for the purpose for which it was let out, the Court held that the lessee had the option of avoiding the lease under Section 108(e) of the Transfer of Property Act.

Mulla [10] echoed the findings of the Court, and opined that as far as leases were concerned, there was no scope for the Doctrine of Frustration to apply as the rights and obligations of the parties in such cases are settled (subject to a contract to the contrary) according to the terms of Section 108(e). Thus, it is clear that Section 56 and the Doctrine of Frustration have very limited (if any) applicability to lease agreements. However, the lessees can – in appropriate circumstances – seek protection under Section 108(e) of the Transfer of Property Act.

Can tenants avoid payment of rent due to COVID-19?

The Transfer of Property Act, 1882 – the law that deals with tenancy rights – provides the right to discharge a lease under Section 108(e). The obligations under a lease may be discharged, at the lessee’s option, when:

an unforeseen event destroys either the entire, or material part of the property; or
an unforeseen event that makes the property substantially and permanently unfit for the purpose for which it was let.

Unlike Section 56 which automatically and necessarily terminates the agreement on occurrence of a frustrating event, discharge under Section 108(e) only occurs when the lessee elects to void the lease. The burden to prove the occurrence of either event falls on the lessee, who must establish that either a material part of the property is destroyed or that the property has been rendered ‘substantially and permanently’ unfit for use by the lessee.

If a lessee is able to show that the conditions in Section 108(e) are met, a mere refusal to pay rent is not sufficient for the lessee to avoid his payment obligations. The lessee must notify the lessor of his intent to invoke his option to void the lease in terms of Section 108(e). It is important to bear in mind that relief under Section 108(e) voids the entire agreement, and consequently, a lessee cannot continue to use the property and must forthwith hand over peaceful vacant possession of the property to the lessor. If the lessee fails to hand over the property, he will be liable for rent on (implied) tenancy by holding over [11]. Therefore it goes without saying that once the option under Section 108(e) is validly invoked, the lease comes to an end and the lessee has no right to continue possession of the property. The Madras High Court in Alanduraiappar Koil Chithakkadu v. T.S.A. Hamid [12], rejected a tenant’s claim for remission of rent on account of two cyclones that had caused suspension of his business. The Court held that a temporary suspension of business caused by cyclones in a 5-year lease agreement would not frustrate the contract.

Thus, in the context of the coronavirus outbreak, tenants may not be able to rely on Section 108(e) to justify default on payment of rent. The enforced lockdown does not meet the criteria for invocation of Section 108(e). Neither the lockdown nor the pandemic can be said to have resulted in the destruction of leased property, nor can it be claimed that the lockdown has left the property permanently unfit for use. Furthermore, an enforced suspension of business for a limited period of time cannot be said to have rendered the property substantially unfit for the purpose of the lease.

Even while the pandemic and resultant lockdowns across the world have caused tremendous financial distress and precipitated a steep global recession, revenue losses alone cannot be the grounds for the tenants to avoid their payment obligations. Unless the lease agreement itself provides for a discharge of payment obligations, it may not be possible for a commercial tenant to unilaterally refuse payment of rent. Tenancy being subject to contract, the tenants can always seek waivers of rent or deferrals in payment from the lessors. Only through negotiation and mutual consent therefore, can a tenant be discharged from his obligations under the lease without forcing the tenant to permanently shut shop. Parties looking for a quick solution in the form of a rent default would do well to bear in mind the consequences of being found in breach of contract, a shoddy quick fix may only exacerbate their financial condition.


*Ramchandra Madan is an Advocate, based in New Delhi. He holds a Master in Laws from The London School of Economics & Political Science. He currently practices the law in the courts of Delhi. He can be reached at Ramchandramadan@gmail.com

[1] Hirji Mulji v. Cheong Yue Steamship Co. Ltd., (1926) AC 497 

[2] Satyabrata Ghose v. Mugneeram Bangur & Co., 1954 SCR 310 

[3] Tsakiroglou & Co. Ltd. v. Noblee Thorl GmbH, 1962 AC 93 : 1961 (2) All ER 179, Energy Watchdog v. Central Electricity Regulatory Commission, (2017) 14 SCC 80 

[4] Supra Note 2

[5] Paradine v. Jane, [1647] EWHC KB J5

[6] [1863] EWHC QB J1

[7] Cricklewood Property and Investment Trust Ltd. v. Leighton’s Investment Trust Ltd.,[1945] A.C. 221 

[8] Matthey v. Curling (1922) 2 AC 180 (HL) , London & Northern Estates Co. v. Schlesinger (1916) 1 KB 20 , National Carriers Ltd. v. Panalpina,  1981 AC 675 

[9] (1968) 3 SCR 339

[10] Mulla DF, Mulla on Transfer of Property Act (Lexis Nexis 2013)

[11] Damodar  Coal Co. Ltd. v. Harmook Marwari, 1915 SCC OnLine Cal 48 

[12] 1962 SCC OnLine Mad 102 

Case BriefsHigh Courts

Rajasthan High Court: A Division Bench of Sangeet Lodha and Mahendar Kumar Goyal, JJ. dismissed an appeal regarding irregularity of a suit for declaration of land under Sections 88 and 188 of the Rajasthan Tenancy Act, 1955 belonging to a Scheduled Caste member while also finding no illegality in the earlier Single Bench Judgment of the same Court.

In this case, the appellant had filed a suit for declaration and was also seeking correction of the entry in the revenue record in the Court of Sub-Divisional Officer, Sikar. The appellant stated that there was an erroneous entry in the Jamabandi as neither the defendant 2 was in possession nor he was sold any land. The suit was eventually decreed by the Court of Sub-Divisional Officer. The appeal against it was subsequently rejected first by the Revenue Appellate Authority and then by the Board of Revenue. But later on, the District Collector allowed the application of the defendants setting aside the previous judgment. This was appealed against in the High Court in which a Single Bench upheld the Judgment, but then an intra-court appeal was preferred.

The counsel for the appellant R.K. Agarwal contended that the reference made under Section 82 or under Section 232 of the Rajasthan Tenancy Act, 1955 was not maintainable in absence of any public element involved. He also asserted that there was an inordinate delay of about 19 years in making the reference which was fatal. He also stated that since there was no transfer of the land in question, as stipulated under the Transfer of Property Act, 1882, by a member of Scheduled Castes/Scheduled Tribes in favour of a non-member, the judgment of Court of Sub-Divisional Officer could not have been set aside.

The counsel for the defendant R.P. Singh contended that the pleadings of the appellant have been self-contradictory, first that the land exists in two different places and again that there was no sale between the two. The counsel further contended that it is apparent that the judgment of the Sub-Divisional Officer was obtained by the appellant playing fraud and collusion, which was accepted by the Revenue Authorities as well as by the learned Single Judge of this Court and thus it cannot be sustained. Lastly, the learned Senior Counsel contended that the Court cannot restore the order of the Court of Sub-Divisional Officer which, per-se, was illegal and the Court would not like to restore an illegal order. He, therefore, prayed that the special appeal to be dismissed.

The Court observed that the appellant had consistently taken inconsistent pleas such as the stand that he was in the possession of the land; and that the land was not in two parts. Therefore, the Court opined that the appellant has come with a dishonest plea with regard to his possession over the disputed land and so his contention with regard to possession over half of the land, had no merit.

The Court also accepted the findings of the Revenue Authorities as well as by the learned Single Judge that the previous judgment of Sub-Divisional Officer obtained was a fraudulent one. The Court also remarked that there is no limitation prescribed under Section 82 of the Act to make reference although it has to be exercised within a reasonable time. Also, the Court found no illegality in an order dated passed by the Board of Revenue in 2001. The Court further relied on Pandey Oraon v. Ram Chander Sahu, 1992 Supp (2) SCC 77 and analysed the word ‘transfer’.

At last, the Court said that the judgment that was obtained by playing fraud, cannot be saved by applying the principle of the merger. They opined that the law will take its own course and no direction in this regard was warranted from the Court. For these reasons, the appeal was dismissed. [Vidhyadhar Sunda v. State of Rajasthan, 2020 SCC OnLine Raj 76, decided on 16-01-2020]

OP. ED.Practical Lawyer Archives

The doctrine of constructive notice is often criticised for being used extensively and harshly against the parties, particularly in property related matters. In certain situations, the parties might not have the means or resources to inquire or acquire knowledge about the title of a property and other related information.

In India, it is a major problem to prove the title of a property. This is because in India the system of “presumptive titles” is prevalent where title documents are not certified by the State. They remain private documents and do not get the status of public records.[1] This is because the present system under the Registration Act, 1908 only provides for registration of deeds and documents. Moreover even though the Transfer of Property Act, 1882 mandates compulsory registration of transfer of immovable property, there is still lack of proper documentation in this regard. More often than not, this contributes to unsatisfactory state of affairs in conveyancing the transfer of legal title of a property from one person to another.

Due to the lack of clarity in the title of ownership, the onus to inquire and confirm about the ownership and other title related facts lies with the buyer. It is difficult for a buyer to ascertain such facts due to the existing ambiguity and lack of conclusive ownership. A conclusive title may be defined as an unassailable and conclusive proof of ownership of property.[2] The Ministry of Rural Development had prepared a Model Land Titling Bill, 2011, wherein it proposed to set up a Title Registration Authority and an Appellate Tribunal. The conclusive title system provides for certainty of title to land. The proposed system registers the title gives finality and indefeasible rights which cannot be overturned or annulled. Therefore, it does away with repeated, imperfect and costly examination of past titles which is often a problem to the parties while acquiring all the information related to the property.

The court imputes constructive notice on parties in cases of failure to find out all facts related to the title of the party. In certain situations the implication of the doctrine of constructive notice can be harsh and unreasonable on the parties as this notice is implied irrespective of the difficulties in acquiring complete knowledge of the title deeds. The title documents are not certified by the State and therefore remain private, making it very difficult for the parties to locate the documents and find out all the information. The doctrine of constructive notice, however, fails to recognise the ground realities and practical difficulties and tends to arbitrarily impose notice on the parties on their failure to ascertain and verify certain facts for safeguarding his one interest.

Conclusive title of ownership removes the scope of bona fide mistakes as to the past titles or existing burdens affecting the subject property. It also removes the ever-present possibility of fraud by duplication or suppression of deeds, and gives State-guaranteed safety. A conclusive title system requires a single agency to handle property records. Moreover, such single agency should at any given moment mirror the ground reality of the property records. This is known as the mirror principle. In addition, the curtain principle should also be applicable. This principle requires that the record of a title should depict the conclusive ownership status and probing into past transactions and titles of the property should become unnecessary.[3]

Once a property is registered with the aforementioned land titling centre, there shall be a detailed title search including probing into past ownership, transactions and litigation history (if any) to establish non-encumbrance on the land. Thus, before purchasing a property, the buyer would have a clear understanding of the ownership issues and past record. Hence, granting of conclusive title of ownership will make the doctrine of constructive notice redundant and inapplicable to the parties because then there shall be no ambiguity with regard to the title of a property and a court shall not have to impute constructive notice on any party due to their failure to acquire the desired knowledge. This system is followed in Australia, Canada and the United Kingdom wherein one has to prove conclusive title of the property which is thereafter registered. Thereafter, the titleholder registered with the State cannot be dispossessed.

Constructive notice is the equity which treats a man who ought to have known a fact, as if he actually does know it. It presupposes, that in property transactions, a transferee ought to ascertain and verify certain facts for safeguarding his one interest. These facts may relate to the property or the transferor. The basic objective behind these inquiries and verifications is to find whether the property sought to be transferred is free from any charges or encumbrances and whether the transferor is eligible to convey a valid title to the transferee. The rule that applies here is that when a prudent man enters into the market, he would like to take the property free from any charge or encumbrances. Therefore, the rule of “caveat emptor” or “buyer beware” applies here and the transferee has to make inquiry about (a) whether the transferor is competent to make the transfer; (b) whether there is a charge due over the property; and (c) whether any person has temporary or permanent claim over the property.

Constructive notice is only imputed in situations where a person has means of knowing a particular fact but has failed to do so. There exists circumstances which ought to put him on an inquiry, which if prosecuted would lead to discovery of it.[4] However, if the person has no means or opportunities to obtain information about something, notice cannot be imputed on him about that thing. Thus, when the purchaser does not have the slightest idea or suspicion about any earlier agreement entered into, far away from the place where the property is situated, it cannot be said that there was any wilful abstention from the party.

Therefore, the theory upon which courts proceed in holding possession to be constructive notice of whatever rights the occupant may have in the premises is that possession, being prima facie evidence of some interest in the land by the tenant, should normally place a purchaser upon guard and lead him to investigate the extent and nature of such interest. Any failure on his part to make inquiry is, therefore regarded as an exhibition of negligence or bad faith which ought to place him in no better position than that of a purchaser with full knowledge of the adverse claim.[5]

However, in certain situations, this doctrine has been extended to cases hardly within its jurisdiction. For instance, in a case, it was held that possession by one tenant in common is constructive notice of an unrecorded conveyance to him from his co-tenant as against subsequent mortgagee of the latter who had no actual notice. As the object of registry system is to facilitate transfers of property, the purchaser ought, unless there is some potent reason to the contrary, to be able to rely upon the registered records.

In company law parlance, the effect of the doctrine of constructive notice is harsh on the outsider who is entering into a contract with the company because that person is deemed to have a constructive notice of the contents of the documents of the company. In case of default of any condition, the outsider cannot claim relief on the ground that he was unaware of the powers of the company in case of ultra vires of the company.

Moreover, this doctrine does not take notice of the realities of business life because people know a company mostly through the reputation of its promoters and officers and not through its documents. As an antithesis, a new theory called the doctrine of indoor management has been evolved by the courts.[6] The doctrine of constructive notice seeks to protect the company against the outsider; whereas the doctrine of indoor management operates to protect outsiders against the company. The rule of indoor management is based upon obvious reasons of convenience in business relations.

Firstly, the memorandum and articles of association are public documents, open to public documents. However, the details of internal procedures are not thus open to public inspection. Therefore, as per the application of this theory, an outsider is presumed to know the constitution of a company but not what may or may not have taken place within the doors that are closed to him. Moreover, as discussed above the passing of the Land Titling Bill proposed in 2008 shall provide conclusive title of ownership which would in turn reduce if not remove the ambiguity surrounding the information related to the past and present titles.

A shift from the presumptive titling system to the conclusive titling system for recording land titles will make the use of the doctrine of constructive notice redundant as the buyer will only have to prove the conclusive title of the property.


*Bhumesh Verma is Managing Partner at Corp Comm Legal and can be contacted at bhumesh.verma@corpcommlegal.in. **Abhisar Vidyarthi is a Student Researcher with Corp Comm Legal (4th-year student of Maharashtra National Law University, Mumbai)
[1]    Why You May Never Prove Ownership of Your Land, <http://www.indiaspend.com/snapshots/why-you-may-never- prove-ownership-of-your-land>, last accessed on 20-4-2019.

[2]    Dr Madalasa Venkataraman, What is Title Guarantee Worth in Land Markets, IIMB-WP N0. 473, <https://iimb.ac.in/ research/sites/default/files/WP%20No.%20473.pdf>.

[3]    Rita Sinha, Moving Towards Clear Land Titles in India: Potential Benefits, A Road Map and Remaining Challenges <siteresources.worldbank.org/INTIE/Resources/R_Sinha.docx> last accessed on 29-8-2017.

[4]    Ram Coomar Coondoo v. Mcqueen, (1872) 11 Beng LR 46.

[5]    Limitations of the Doctrine of Constructive Notice by Possession. Harvard Law Review 18, No. 3 (1905): 218-19. 33 Royal British Bank v. Turquand, (1856) 6 E&B 327.

[6]    Royal British Bank v. Turquand, (1856) 6 E&B 327.

Case BriefsSupreme Court

Supreme Court: A Bench comprising of CJ Ranjan Gogoi and Navin Sinha and K.M. Joseph, JJ. dismissed an appeal filed against the appellate order whereby interference in the order of Company Judge was declined.

The appellant was an assignee of debt by Industrial Finance Corpn. of India Ltd. for the outstandings of Mahendra Petrochemical Ltd. Earlier, a company petition was filed for winding up of MPL. Subsequently, after assignment of debt by IFCI in its favour, the appellant filed another company appeal for substitution of its name in place of IFCI as a secured creditor. The Company Judge rejected the application holding that the appellant was neither a bank or a banking company or a financial institution or a securitisation company or a reconstruction company, and therefore could not be substituted in place of IFCI as a secured creditor for the purpose of Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI). It was also held that in the nature of the relief sought under the SARFAESI Act, the appellant could not draw any benefit from Section 130 of the Transfer of Property Act. The review application filed to the Company Court under Section 9 of the Companies (Court) Rules, 1959 was rejected. The appellant submitted that it never sought substitution as a secured creditor, but simply desired substitution as a transferee of an actionable claim under Section 130 of Transfer of Property Act.

The Supreme Court, after considering the submissions and perusing the record, was of the view that the submissions made before the Company Judge left no room for doubt that as an assignee of debt from IFCI, the appellant essentially sought substitution as a secured creditor under SARFAESI Act and for that purpose sought to draw sustenance from Section 130 of Transfer of Property Act. After the claim of the appellant of being a secured creditor was rejected, it realised the unsustainability of its claim and made a complete volte face from its earlier stand contrary to its own pleadings. The contention of the appellant was belied from its own recitals before the Company Court. Referring to Amar Singh v. Union of India, (2011) 7 SCC 69 and Joint Action Committee for Airline Pilots’ Assn. of India v. Director General of Civil Aviation, (2011) 5 SCC 435, the Supreme Court held that a litigant can different stands at different times but cannot take contrary stands in the same cases. A party cannot be permitted to approbate and reprobate on the same facts and take inconsistent shifting stands. [Suzuki Parasrampuria Suitings (P) Ltd. v. Official Liquidator of Mahendra Petrochemicals Ltd.,2018 SCC OnLine SC 1798, dated 08-10-2018]