Lessee keeps superstructure ownership during lease; Clause can bar removal, disputes fall under Section 91 MCS Act jurisdiction

HC held that under the TP Act a lessee retains ownership of superstructures during the lease (dual ownership), but an agreement term (Clause 2(20)) could bar removal and vest improvements in the lessor on termination. However, the Trial and Appellate Co-operative Courts found the lessor could not validly terminate the lease for the alleged bye-law violation; disputes between a society and its member fall within Section 91 MCS Act and co-op court jurisdiction. Consequently the HC quashed the co-op court and appellate orders, denied recovery of possession, and allowed the petition.

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The core legal questions considered by the Court in this matter are:

1. Whether the lease deed executed by the Society in favor of the original lessees was a lease of land alone or of the land together with the superstructure constructed thereon;

2. Whether the doctrine of dual ownership applies, and if so, what is the ownership status of the superstructure during and after the lease term;

3. Whether the lease was validly terminated by the Society on account of breach of its bye-laws, particularly restrictions on ownership and use by non-Roman Catholics;

4. Whether the Society was entitled to recover possession of the Petitioner's premises following such termination;

5. The scope and jurisdiction of the Co-operative Court under the Maharashtra Co-operative Societies Act, 1960, especially with regard to disputes involving leasehold rights and bye-law violations;

6. The effect of the contractual terms in the lease deed, including the clauses relating to termination, compensation, and delivery of possession;

7. Whether the relief granted by the Co-operative Court and upheld by the Appellate Court was legally sustainable, particularly the mandatory injunction directing handover of possession of the Petitioner's premises.

Issue-wise Detailed Analysis:

1. Nature of Lease: Land Alone or Land with Superstructure

The Court examined the lease deed executed on 25th February 1958, which granted lease of Plot No. 57. The Schedule to the lease described only the land, without reference to any building or superstructure. The habendum clause demised the plot together with the dwelling house and outbuildings erected thereon, but these structures were constructed by the lessee after the lease was granted.

The Court noted that the lease deed used varying expressions such as "demised plot," "demised premises," and "demised plot and premises," but no clause expressly included the proposed superstructure as part of the demise. The bye-laws of the Society, a Tenant Ownership Society, further supported the position that the lease was of land only, as members were entitled to develop their plots and own the superstructures.

Thus, the Court concluded the lease was of the land alone, with ownership of the superstructure resting with the lessee during the lease term.

2. Doctrine of Dual Ownership and Ownership of Superstructure

The Court recognized the settled legal principle of dual ownership in India: the lessor owns the land, while the lessee owns the superstructure during the lease term. Section 108(h) of the Transfer of Property Act, 1882 (TP Act) grants the lessee the right to remove attached structures after lease termination, unless contractually restricted.

Judicial precedents, including the Apex Court decision in Dr. K.A. Dhairyawan v. J.R. Thakur and decisions of this Court and the Calcutta High Court, were cited to confirm that ownership of the superstructure remains with the lessee during the lease, but the parties may contractually agree to transfer ownership to the lessor upon lease termination.

In the present case, the lease deed contained Clause 2(20), which required the lessee to yield up the demised plot and premises "with all additions and improvements" at the end or sooner determination of the lease term, thereby restricting the lessee's right under Section 108(h) to remove the superstructure and transferring ownership of the superstructure to the lessor upon termination.

3. Validity of Lease Termination Due to Breach of Bye-laws

The Society's bye-laws restricted membership and use of premises to Roman Catholics. The Petitioner, a Scheduled Multi State Co-operative Bank, acquired the premises despite refusal of permission from the Society, constituting a breach of the bye-laws.

The Society issued notices under Clause 4 of the lease deed, terminating the lease for breach of Clause 2(17), which required compliance with the Society's bye-laws and rules. Clause 3(2) of the lease deed excepted cases of breach of Clause 2(17) from the obligation to pay compensation for the lessee's interest upon termination.

The Court found that the lease was validly terminated by the Society due to the Petitioner's breach of bye-laws restricting ownership and use.

4. Entitlement to Recovery of Possession of Petitioner's Premises

Clause 2(20) of the lease deed obligated the lessee to deliver possession of the demised plot and premises with all improvements to the lessor upon termination. The Society thus claimed possession of the Petitioner's premises as part of the leasehold property.

However, the Trial Court and the Appellate Court held that the violation by the Petitioner did not give the Society the right to terminate the lease, and the lease continued subsisting. The Trial Court further found that the Society could not claim possession of the entire plot without joining all members of the building as parties, as the relief sought was for the entire structure.

Since the lease was held subsisting, the doctrine of dual ownership applied, and the lessee retained ownership of the superstructure, precluding the Society's entitlement to possession of the Petitioner's premises.

5. Jurisdiction of the Co-operative Court

The dispute was initially filed before the Small Causes Court, which returned the plaint for want of jurisdiction. The dispute was then filed before the Co-operative Court under the Maharashtra Co-operative Societies Act, 1960 (MCS Act).

Section 91 of the MCS Act, prefaced by a non obstante clause, restricts jurisdiction over disputes touching the constitution, elections, conduct of meetings, management, or business of a society to the Co-operative Court, provided the parties fall within specified categories.

The Court examined whether the dispute related to the business of the Society. The Society's objects included building, buying, selling, hiring, letting, and developing land. The dispute concerned recovery of possession of leased premises for breach of bye-laws, thus touching the business of the Society.

Reliance was placed on the Apex Court decision in Deccan Merchants Co-operative Bank Ltd. v. Dalichand Jugraj Jain, which held that disputes relating to assets of a society engaged in letting property as part of its business fall within the scope of "business" under Section 91.

The Court held that the Co-operative Court had jurisdiction to adjudicate the dispute as it touched the business of the Society and involved parties within the enumerated class under Section 91.

6. Effect of Contractual Terms Relating to Termination and Compensation

The lease deed's Clause 3(2) provided that upon termination by notice under Clause 4(1) or (2), the lessor would pay the lessee the value of the lessee's interest, except in cases of breach of Clause 2(17), which involved compliance with bye-laws. Since termination was on this ground, the Society was not required to pay compensation for the lessee's interest.

The Court found that the contractual terms clearly contemplated that upon valid termination for breach of bye-laws, the lessee must yield possession of the land and superstructure without compensation.

7. Appropriateness and Sustainability of Relief Granted by Co-operative Court

The Co-operative Court granted a mandatory injunction directing the Petitioner to hand over possession of the ground and first floor premises. The Appellate Court upheld this relief.

However, the Trial Court had earlier held that the lease was not terminated and the Society was not entitled to possession, and that the entire building's members were necessary parties for relief involving the entire plot.

The Court observed that the Appellate Court's finding on non-termination of lease and the Trial Court's findings had attained finality as the Society did not file cross-objections.

Given the lease was held subsisting, the doctrine of dual ownership prevented the Society from recovering possession of the Petitioner's premises. The relief of mandatory injunction was thus unsustainable.

Treatment of Competing Arguments:

The Petitioner argued that membership requirements were met as its members were Roman Catholics, that the lease had not been validly terminated, and that the Society could only seek to enforce conformity with bye-laws rather than recover possession. The Petitioner also contended that the decree was inexecutable without impleading all flat purchasers and that the Society had no privity of contract with the Petitioner.

The Society contended that the lease was terminated for breach of bye-laws, that the contractual terms required surrender of the superstructure upon termination, and that the Co-operative Court had jurisdiction. The Society relied on the doctrine of dual ownership and contractual exceptions to the lessee's right to remove the superstructure.

The Court found the Petitioner's arguments on non-termination of lease binding due to finality of lower courts' findings and held that the Society was not entitled to possession without valid termination. The Society's arguments on contractual terms and jurisdiction were accepted but could not override the factual findings on termination.

Significant Holdings:

"The lease was only in respect of Plot No. 57, and the lessee would have the right over the superstructure constructed upon the said plot."

"The well recognised doctrine of dual ownership would prohibit the grant of mandatory injunction qua the Petitioner's premises in the absence of valid termination of the lease."

"Clause 2(20) of the Lease Deed sets out an agreement restricting the lessee from exercising the right granted under Section 108(h) of the Transfer of Property Act, requiring the lessee to yield up the demised plot and premises with all improvements upon determination of the lease."

"The Co-operative Court has jurisdiction to adjudicate disputes touching the business of the Society as envisaged under Section 91 of the Maharashtra Co-operative Societies Act, 1960."

"In view of the specific finding of the Trial Court that the violation of condition by the Petitioner would not give right to the Respondent No. 1 to terminate the lease, the Respondent No. 1 was not entitled to recovery of possession of the Petitioner's premises."

The Court ultimately quashed and set aside the impugned judgments and orders of the Co-operative Court and the Appellate Court, holding that the Society was not entitled to possession of the Petitioner's premises without valid termination of the lease, which had not been established.

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