2019 (4) TMI 1887 - SC - Indian Laws

Unregistered Lease Invalid for Over a Year, Tenant at Sufferance, Possession Restored

Sevoke Properties Ltd. Versus West Bengal State Electricity Distribution Company Ltd.

The Supreme Court held that the unregistered lease was invalid for a term exceeding one year, as it must be made by a registered instrument. The tenancy ... Suit for eviction - whether a notice of termination under Section 106 was necessary? - HELD THAT:- After the expiry of the initial term, there was a draft agreement for renewal for a further period of nine years, which, however, was not registered under Section 17(1)(d) of the Registration Act 1908. The plaintiff served a notice for the determination of the tenancy on the ground of forfeiture under Section 111(g) and brought a suit for ejectment. The High Court held that the lease had been determined by efflux of time under Section 111(a) upon the expiry of the term of nine years and hence, no notice under Section 106 was required for the determination of the lease - This Court held that the unregistered draft lease agreement was inadmissible in evidence under Section 49 of the Registration Act except for a collateral purpose of proving the nature and character of the possession of the defendants. The terms of the lease did not constitute a collateral purpose. Consequently, the unregistered draft lease was held to be inadmissible to create a valid lease for a renewed term of nine years. In this background, this Court held that the defendants were tenants holding over under Section 116 in which event it was necessary for the plaintiff to serve a notice under Section 106. In the absence of such a notice, the suit, it was held, would not be maintainable. In the present case, there is an express admission on the part of the defendants that they were in occupation under the lease agreement for a period of fifteen years with effect from 1981 and that the period of lease expired on 24 May 1996. Such a specific admission on the part of the defendants is contained in paragraph 22 of the written statement. Under Section 111(a), a lease of immovable property determines by efflux of time limited thereby. Once this be the position, there can be no manner of doubt that the position of the respondent on the expiration of the lease was of a tenant at sufferance. In the circumstances, there was no necessity of a notice for the termination of the lease under the provisions of Section 106. The respondent having squarely admitted in its written statement that it was in occupation for a term of fifteen years, that term having expired, the lease stood determined by efflux of time. Once the lease stood determined by efflux of time, there was no necessity for a notice of termination under Section 106. Appeal allowed. Issues Involved:1. Validity of the unregistered lease.2. Necessity of notice under Section 106 of the Transfer of Property Act, 1882.3. Determination of the tenancy status.4. Admissibility of unregistered lease in evidence.5. Entitlement to mesne profits.Detailed Analysis:1. Validity of the Unregistered Lease:The primary issue was whether an unregistered lease for a term exceeding one year is valid. According to Section 107 of the Transfer of Property Act, 1882, a lease of immovable property for a term exceeding one year must be made by a registered instrument. Since the indenture of lease in this case was unregistered, it was inadmissible in evidence for proving the terms of the contract. This is supported by Sections 17 and 49 of the Registration Act, 1908, which mandate that such documents must be registered to affect any immovable property or be received as evidence of any transaction affecting such property.2. Necessity of Notice Under Section 106 of the Transfer of Property Act, 1882:The High Court held that in the absence of a registered lease, the tenancy would be deemed to be from month to month, terminable by fifteen days’ notice under Section 106. The appellant argued that the requirement of Section 106 was fulfilled by the suit for possession itself, as long as eviction followed beyond a period of fifteen days. The Supreme Court found merit in this argument, noting that the respondent had admitted in its written statement that it was in occupation for a period of fifteen years which ended on 24 May 1996. Therefore, the lease had determined by efflux of time under Section 111(a), making a notice under Section 106 unnecessary.3. Determination of the Tenancy Status:The Supreme Court concluded that upon the expiration of the lease term, the respondent became a tenant at sufferance. This means that the respondent continued to occupy the property wrongfully after the lawful title had expired. The Court cited R V Bhupal Prasad v State of A P (1995) 5 SCC 698, which explains that a tenant at sufferance holds possession by wrong after the termination of the lease, akin to a trespasser.4. Admissibility of Unregistered Lease in Evidence:The unregistered lease could be looked at only for assessing the nature and character of the respondent’s possession, not for proving the terms of the lease. This is consistent with the ruling in Satish Chand Makhan v Govardhan Das Byas (1984) 1 SCC 369, where the Supreme Court held that an unregistered draft lease was inadmissible to create a valid lease for a renewed term but could be used to understand the nature of possession.5. Entitlement to Mesne Profits:The trial court had passed a preliminary decree for mesne profits. The High Court had directed that the proceedings for ascertainment of mesne profits continue but no final decree be drawn without its leave. The Supreme Court restored the trial court’s judgment and allowed the respondent three months to challenge the valuation of mesne profits determined by the Commissioner.Final Judgment:The Supreme Court allowed the appeal, setting aside the High Court’s judgment and restoring the trial court’s decree for vacant and peaceful possession. The respondent was granted one year to vacate the premises, subject to filing an undertaking within four weeks. The bank guarantee furnished by the appellant was discharged, and the withdrawn amount would abide by the final determination of mesne profits. No order as to costs was made.