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of <h1>Unregistered lease agreements exceeding one year deemed invalid, converting to month-to-month tenancy with 15-day termination notice</h1> <h3>Ajay Ahuja and Ors. Versus Subhiksha Trading Services Ltd.</h3> SC ruled that unregistered lease agreements for over one year are invalid, rendering the tenancy a month-to-month arrangement terminable by 15 days' ... - 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court are:(a) Whether the unregistered lease agreements, purporting to create tenancy for more than one year, confer any enforceable tenancy rights on the Defendant in light of the mandatory registration requirements under the Transfer of Property Act and the Registration Act.(b) Whether the tenancy of the Defendant, in absence of a registered lease deed, is to be treated as a month-to-month tenancy terminable by 15 days' notice under Section 106 of the Transfer of Property Act.(c) Whether the notice of termination of tenancy issued by the plaintiffs was duly served on the Defendant, despite the Defendant's non-receipt and the returned postal and courier notices.(d) Whether the plaintiffs are entitled to possession of the suit premises, arrears of rent, and mesne profits/damages for use and occupation from the Defendant.2. ISSUE-WISE DETAILED ANALYSISIssue (a) & (b): Validity and Effect of Unregistered Lease AgreementsRelevant Legal Framework and Precedents: Section 107 of the Transfer of Property Act mandates that leases of immovable property from year to year or for any term exceeding one year or reserving yearly rent must be created by registered instrument. Section 17(1)(b) of the Registration Act requires compulsory registration of non-testamentary instruments creating or affecting rights in immovable property exceeding Rs. 100 in value. Section 49 of the Registration Act states that unregistered documents required to be registered shall not affect immovable property.The proviso to Section 49 allows unregistered documents to be received as evidence of collateral transactions not requiring registration. However, the Supreme Court in State of Punjab v. Raninder Singh held that if a document is inadmissible for want of registration, important clauses cannot be proved by such document.Court's Interpretation and Reasoning: The Court held that since the lease agreements purported to create tenancy for more than one year, they were compulsorily registrable and their non-registration renders them ineffective to confer tenancy rights for the stipulated term. Consequently, the tenancy is deemed to be a month-to-month tenancy terminable by 15 days' notice under Section 106 of the Transfer of Property Act.The Court rejected the contention that the term of tenancy stipulated in the unregistered lease deeds could be treated as a collateral transaction. It observed that the term of tenancy and notice period are essential components of the lease affecting immovable property and cannot be severed as collateral purposes. The Court relied on its earlier decision in Jagatjit Industries Ltd. v. Rajiv Gupta, which held that terms regarding notice of eviction cannot be looked into if contained in an unregistered lease deed.Application of Law to Facts: The lease agreements dated 20th October 2005 and 1st October 2007 were unregistered despite the lease term exceeding one year. Therefore, the Defendant's tenancy is treated as month-to-month tenancy terminable by 15 days' notice.Conclusions: The Defendant's tenancy was valid only on a month-to-month basis and not for the fixed terms stipulated in the unregistered lease deeds. The plaintiffs were entitled to terminate the tenancy by giving 15 days' notice under Section 106.Issue (c): Validity of Service of Notice of TerminationRelevant Legal Framework and Precedents: Section 106 of the Transfer of Property Act requires notice to terminate tenancy. The General Clauses Act, Section 27, provides a presumption that service of notice by registered post to the correct address is deemed effective. Supreme Court decisions in Madan and Co. v. Wazir Jaivir Chand, K. Bhaskaran v. Sankaran Vaidhyan Balan, D. Vinod Shivappa v. Nanda Belliappa, V. Raja Kumari v. P. Subbarama Naidu, State of M.P. v. Hiralal, and C.C. Alavi Haji v. Palapetty Muhammed have elaborated that notice sent by registered post to the correct address, even if returned unserved with remarks like 'shifted', 'premises locked', or 'left without instructions', is deemed served unless the addressee proves otherwise.Court's Interpretation and Reasoning: The Court noted that the notices sent by registered post and courier were returned with endorsements indicating the Defendant had either shifted or was deliberately avoiding receipt. The Defendant did not contest the suit or claim non-receipt of notice. The Court held that the plaintiffs had done everything reasonably possible to serve the notice.The Court emphasized that if a tenant deliberately avoids service by locking premises, shifting address without informing the landlord, or failing to give forwarding instructions, the landlord cannot be faulted for non-receipt. The statutory presumption under Section 27 of the General Clauses Act applies.Application of Law to Facts: The notice dated 11th November 2009 was sent to the suit premises and the registered office of the Defendant by registered post and courier. All were returned with remarks evidencing avoidance. The Defendant did not rebut the presumption of service.Conclusions: The notice of termination was validly served on the Defendant, and the tenancy was effectively terminated as per the notice.Issue (d): Entitlement to Possession, Arrears of Rent, and Mesne Profits/DamagesRelevant Legal Framework: Upon valid termination of tenancy and failure to vacate, the landlord is entitled to possession and recovery of arrears of rent. Damages or mesne profits may be awarded for use and occupation during unlawful occupation. The agreed rent and terms in the lease deed form the basis for calculating arrears and mesne profits, subject to the validity of the lease.Court's Interpretation and Reasoning: The Court accepted the plaintiff's evidence, including the lease agreements and affidavit, establishing the rent payable by the Defendant as Rs. 1,02,000/- per month from 1st February 2008, increasing to Rs. 1,17,300/- per month from 15th November 2008. The Defendant had not paid rent since October 2008, resulting in arrears of Rs. 16,42,200/-.Regarding mesne profits/damages, the plaintiffs claimed Rs. 10,000/- per day based on alleged market rent of Rs. 3,00,000/- per month. However, the Court found no credible evidence such as expert testimony or comparable leases to support this figure. The Court held that damages should be based on the rent agreed in the lease deed, which the Defendant had agreed to pay and was liable for until possession was delivered.Application of Law to Facts: The Defendant's arrears and continued occupation entitled the plaintiffs to possession, recovery of arrears, and mesne profits at the agreed rent rate of Rs. 1,17,300/- per month from the date of suit filing until possession was delivered.Conclusions: The plaintiffs were entitled to possession, arrears of rent amounting to Rs. 16,42,200/-, and mesne profits/damages at Rs. 1,17,300/- per month from the date of suit filing to delivery of possession.3. SIGNIFICANT HOLDINGS'Since the lease deeds executed between the plaintiffs and the Defendant being for more than one year were required to be compulsorily registered and has not been got registered, it does not confer any right on the Defendant to continue to be a tenant for the term stipulated in these deeds. As a result, the tenancy of the Defendant in respect of the suit premises became a month to month tenancy, which could be terminated by giving notice to the Defendant under Section 106 of Transfer of Property Act.''The collateral transaction referred in the proviso to Section 49 of Registration Act must necessarily be independent of or divisional from the transaction, to effect which the law required registration and such collateral transaction must be a transaction which by itself is not required to be effected by a registered document... If a document is inadmissible in evidence for want of registration, it cannot be used for the purpose of proving an important clause contained in the document.''The plaintiffs did whatever they could possibly have done to serve the notice upon the Defendants and if the Defendants chose to lock the suit premises and either shift its registered office or altogether stop its functioning and close down its operations and its registered office, without any intimation to the plaintiffs, that would amount to deliberate avoidance to receive the notice and consequently constitute a valid service.''Section 27 gives rise to a presumption that service of notice has been effected when it is sent to the correct address by registered post... Unless and until the contrary is proved by the addressee, service of notice is deemed to have been effected at the time at which the letter would have been delivered in the ordinary course of business.''The plaintiff is entitled to damages for use and occupation of the suit premises, at the rate of Rs. 1,17,300/- per month w.e.f. the date of the filing of the suit till the possession of the suit premises is delivered to the plaintiffs.'The Court finally decreed the suit for recovery of possession, arrears of rent amounting to Rs. 16,42,200/-, and mesne profits/damages at Rs. 1,17,300/- per month from the date of suit filing until delivery of possession, with costs.
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