Underletting of the unexpired lease term was not an assignment, defeating forfeiture under the lease covenant.

Under the Transfer of Property Act, 1882, a lessee may transfer the unexpired residue of the term by sub-lease unless the lease contract provides otherwise, and an express covenant permitting underletting must be read with any covenant against assignment. On that construction, a disposition for the remainder of the term was treated as an underlease rather than an assignment, so the covenant against assignment was not breached and forfeiture could not be enforced. The appeal was allowed and the suit dismissed with costs throughout.

---

---

Issues: Whether, under the Transfer of Property Act, 1882 and the terms of the lease, a sub-lease for the unexpired residue of the term amounted to an assignment so as to constitute a breach of the covenant against assignment and justify forfeiture, or whether it remained a permissible underletting.

Analysis: Section 105 of the Transfer of Property Act, 1882 recognises a lease of immovable property for a certain time or in perpetuity, and Section 108(j) permits the lessee, in the absence of contract to the contrary, to transfer by mortgage or sub-lease the whole or any part of his interest, including the unexpired residue of the term. The lease also contained an express covenant allowing the lessees to underlet the demised property, while the covenant against assignment had to be read subject to that express power. On that construction, the transaction effected by the lessees was an underlease and not an assignment.

Conclusion: The alleged breach of covenant was not made out and no forfeiture could be enforced; the appeal succeeded and the suit was dismissed with costs throughout.

---