Chandroth Vennalakath Ibrahim, S/o. Ummer Haji v. "Twinkle" M. G. Road, Ernakulam
2018-08-14
ANNIE JOHN, K.HARILAL
body2018
DigiLaw.ai
ORDER : K. HARILAL, J. 1. The revision petitioners are the landlords, and the respondent is the tenant in R.C.P. No.9/2012 on the files of the Rent Control Court, Ernakulam. The revision petitioners/landlords filed the aforesaid R.C.P. against the respondent under Sections 11(3) and 11(4)(iii) of the Kerala Buildings(Lease and Rent Control) Act, 1965('the Act' for short) seeking an order of eviction. After considering the objection raised by the respondent/tenant, the Rent Control Court found that the Rent Control Petition is not maintainable, as it is barred by Section 11(9) of the Act. Though they had preferred Rent Control Appeal No. 11 of 2014 before the Rent Control Appellate Authority, Ernakulam, the Appellate Authority also concurred with the findings of the Rent Control Court and dismissed the Appeal. Thus, the legality and propriety of the concurrent findings of the courts below, that the Rent Control Petition is not maintainable as it is barred by Section 11(9) of the Act, are challenged in this Revision Petition. 2. The parties are referred to as in the Rent Control Petition. According to the petitioners, they are in bona fide need of the petition schedule building for their own occupation, for starting a hotel business and they have experience and means to start the hotel business. They have no other buildings of their own in their possession to start the said business and several other buildings are available to the respondent in the same locality, to shift his business from the petition schedule building. On the above premises, the petitioners prayed for an order of eviction, under Section 11(3) of the Act. Further, they contended that the respondent has subsequently acquired possession of two other buildings in the same locality and thereby, they are entitled to get an order of eviction under Section 11(4)(iii) also. Thus, the petitioners prayed for an order of eviction under Section 11(3) and 11(4)(iii) of the Act. 3. The respondent resisted the claim for eviction, under Sections 11(3) and 11(4)(iii) of the Act, mainly contending that the Rent Control Petition itself is not maintainable, as it is barred by Section 11(9) of the Act. According to him, the original lease was for a period of five years as per Ext.B1 agreement, dated 1.02.1990. On the expiry of the said lease deed, they have executed another lease agreement on 24.12.1994 for a period of 15 years, commencing from 01.02.1994.
According to him, the original lease was for a period of five years as per Ext.B1 agreement, dated 1.02.1990. On the expiry of the said lease deed, they have executed another lease agreement on 24.12.1994 for a period of 15 years, commencing from 01.02.1994. In that lease agreement, there was a condition that for every five years the rent shall be enhanced by 25%. Moreover, clause (5) of the agreement stipulates that after the expiry of the original lease period, the period of lease shall stand extended for a further period of 15 years on payment of 25% increase in rent, for every five years. The original lease period of 15 years expired on 31.01.2010. At that time, the rent payable was Rs.14,500/-. From 01.02.2010 onwards, the lease period would stand automatically extended for another 15 years by the payment of enhanced rent and hence the lease period would expire only on 31.01.2025. From 01.02.2010 onwards, the respondent has been paying the enhanced rent of 25%, which comes to Rs.18,750/-and the petitioners have been receiving the enhanced rent, knowing fully that the lease stands extended for another 15 years from 31.01.2010. In short, according to the respondent, the period of lease would expire only on 31.01.2025. Therefore, the present Rent Control Petition filed in the year 2012 is barred by Section 11(9) of the Act. As regards the claim for eviction under Section 11(3), it is contended that the need projected in the petition is not bona fide and it is a ruse for eviction only. Hence, he is not liable to be evicted under Section 11(3) of the Act. As regards the claim for eviction under Section 11(4)(iii) of the Act, it is contended that the averment that he has subsequently acquired other buildings in his possession is not correct. The said buildings are owned by a partnership firm, of which, the respondent is only a partner. He has not acquired possession of any building subsequently, after the commencement of tenancy. Therefore, he is not liable to be evicted under Section 11(4)(iii) of the Act. 4.
The said buildings are owned by a partnership firm, of which, the respondent is only a partner. He has not acquired possession of any building subsequently, after the commencement of tenancy. Therefore, he is not liable to be evicted under Section 11(4)(iii) of the Act. 4. On the rival pleadings, both parties adduced evidence, which consists of the oral testimony of PW1 and the documentary evidence Exts.A1 to A22 from the part of the petitioners, the oral testimony of RW1 and the documentary evidence Exts.B1 to B13 from the part of the respondent and Ext.C1 Commission Report as Court Exhibit. 5. After appreciating and re-appreciating the evidence on record, the courts below concurrently found that the Rent Control Petition is not maintainable, as it was barred by Section 11(9) of the Act. 6. Heard the learned counsel for the revision petitioners/landlords and the learned counsel for the respondent/tenant. 7. The learned counsel for the revision petitioners mainly focused his arguments to canvass the point that the courts below have miserably failed to interpret clause (5) of Ext.B2 rent deed in its correct perspective. According to the learned counsel, the concurrent findings of the courts below, that Ext.B2 lease agreement was got extended for a further period of 15 years from 31.01.2010 by virtue of clause (5), are perverse. On the other hand, as per clause (5) of the lease agreement, it is clear that the lease period was for 15 years only and the further extension for 15 years would come into force only if a new lease agreement is executed and registered. But, no registered lease deed was executed and consequently, the term of lease was not renewed or extended for another 15 years from 31.01.2010. The learned counsel for the revision petitioners drew our attention to the statutory mandate under Section 107 of the Transfer of Property Act and Sections 17 and 49 of the Registration Act and submits that in the absence of a new registered lease deed, the original period of lease would not stand extended further beyond 31.01.2010 by operation of clause (5) of Ext.B2. A lease of immovable property for any term exceeding one year must be made by a registered lease deed only and a lease for a period exceeding one year cannot be presumed from the recitals in a document or act of parties. 8.
A lease of immovable property for any term exceeding one year must be made by a registered lease deed only and a lease for a period exceeding one year cannot be presumed from the recitals in a document or act of parties. 8. Per contra, the learned counsel for the respondent submits that the courts below have interpreted clause (5) of Ext.B2 lease deed in its correct perspective. According to him, on a close reading of the said lease deed, it could be seen that the lease deed was actually intended for a period of 30 years from 1995. He further contended that the absence of a renewed registered lease deed, after the expiry of Ext.B2, is of no significance at all, as Ext.B2 was originally intended for 30 years and Ext.B2 was executed and registered in compliance with the statutory mandate under Section 107 of the Transfer of Property Act and Sections 17 & 49 of the Registration Act. It is further contended that clause (5) itself has created a title to continue the lease, for a further period of 15 years, and there was no need for registration of a fresh lease deed extending the period of lease for a further period of 15 years, from 31.01.2010. 9. In view of the arguments at the Bar, broadly the question to be considered in this revision petition is as follows: Whether there is any illegality or impropriety in the findings of the courts below, under Section 11(9) of the Act, in holding that the Rent Control Petition itself is not maintainable? 10. The scope and extent of consideration in this revision petition is centered around the interpretation of clause (5) of Ext.B2 lease deed, which reads as follows: "After the expiry of the period of lease stipulated, the lease shall stand extended for a further period of 15 years on payment of 25% increase in rent for every five years and to that effect a new lease deed shall be executed and registered." 11. At first, we must examine the interpretation of the Appellate Authority on clause (5) of Ext.B2, which reads thus: “From the above, it is clear that on expiry of the period of lease stipulated in Ext.B2 lease deed, the lease shall stand further extended for a further period of 15 years on payment of 25% increase in rent for every five years.
The condition precedent, for the extension of the lease, after the expiry of the period seems to be that the respondent shall pay 25% increase in rent for every five years. If the respondent exercises the said option, then it is the duty of the petitioners to execute and register a new lease deed to that effect. So, from clause (5) in Ext.B2, it is to be found that once the respondent exercised its option to pay the enhanced rent at the rate of 25% increase for every five years, the lease should be extended. Ext.B2 does not provide any condition or option for the petitioners from retracting extension of lease, once the respondent exercises the option. The respondent has exercised the said option by payment of the enhanced rate of rent. Thus, the lease stands automatically extended from 01.02.2010 to 31.01.2025.” 12. On a bare reading of the aforesaid findings itself, we find that the courts below have lost sight of the second part of clause (5), which stipulates that 'for the effect of extension, a new lease deed shall be executed and registered'. The said extension clause consists of two limbs i.e, (i) the payment of 25% increase in rent for every five years (ii) the execution and registration of a new lease deed, and both the limbs are conjunctive. So, it can safely be concluded that unless and until both limbs are complied, the said clause cannot be enforced and there cannot be an automatic extension of lease for a further period of 15 years, as observed by the court below. 13. Secondly, the courts below found that “as per the said clause, there is an option to extend the term of lease by paying enhanced rent at the rate of 25% to the petitioners. The respondent has exercised the said option by paying the enhanced rent. But, the petitioners have retracted from the performance of their part, by refusing the execution of a registered lease deed. If once the option is exercised by the tenant by paying enhanced rent, the lease should be extended by the landlord, failing which the lease would stand automatically extended”, the learned Judge found. 14. We are of the opinion that the points, which ought to have been considered are, what is the legal effect and impact of the said clause?
If once the option is exercised by the tenant by paying enhanced rent, the lease should be extended by the landlord, failing which the lease would stand automatically extended”, the learned Judge found. 14. We are of the opinion that the points, which ought to have been considered are, what is the legal effect and impact of the said clause? Did it come into force?, and the question, who failed to perform the obligation, casts under Clause 5 is irrelevant and insignificant. 15. Here, the questions that emerge for consideration are; (1) can the term of lease in a registered lease deed of immoveable property for a fixed term be extended for a further period exceeding one year, by the operation of a self working extension clause in the existing lease deed or by mutual consent of both lessor and lessee, without a fresh registered lease deed to that effect; (2) what is the effect and impact of an extension clause in a registered lease deed extending the term of lease for a period of more than one year at the option of the lessee without a registered lease deed. 16. Indisputably, the extension of the term amounts to creation of lease for a fresh term. How can a lease be made? Section 107 of the Transfer of Property Act prescribes the manner in which lease is made. 17. Section 107 of the Transfer of Property Act reads thus: 107. Leases how made.—A lease of immovable 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 immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession. [Where a lease of immovable 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 immovable 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.]” 18.
Similarly, Sections 17 and 49 of the Registration Act deals with the requirement of registration of a lease deed and the consequences thereof, on the failure. 19. Sections 17 and 49 of the Registration Act read thus: “17. Documents of which registration is compulsory.-The following documents shall be registered, if the property to which they relate is situate in a district in which, and if they have been executed on or after the date on which, Act No. XVI of 1864, or the Indian Registration Act, 1866 (20 of 1866), or the Indian Registration Act, 1871 (8 of 1871), or the Indian Registration Act, 1877, or this Act came or comes into force, namely:— xxxxxxxxxxxxx (d) leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent; and 49. Effect of non-registration of documents required to be registered.—No document required by section 17 [or by any provision of the Transfer of Property Act, 1882 (4 of 1882)], to be registered shall— (a) affect any immovable property comprised therein, or (b) confer any power to adopt, or (c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered: [Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 (3 of 1877) or as evidence of any collateral transaction not required to be effected by registered instrument.] 20. The legal proposition that can be deduced from Section 107 of the Transfer of Property Act r/w Sections 17 and 49 of the Registration Act can be summed up as follows: 21. The lease of immovable property for a term exceeding one year cannot be made without a registered lease deed and the registered lease deed must be executed jointly by the lessor and lessee. It follows that a lessor or lessee alone cannot make a registered lease deed of immovable property for a term exceeding one year.
The lease of immovable property for a term exceeding one year cannot be made without a registered lease deed and the registered lease deed must be executed jointly by the lessor and lessee. It follows that a lessor or lessee alone cannot make a registered lease deed of immovable property for a term exceeding one year. A lease of immovable property for a term exceeding one year can never be presumed from the wording of a document or by the act of parties as the execution of the registered lease deed is mandatory, where the lease is for a period exceeding one year. So, a lease of immovable property for any term exceeding one year would come into existence by a registered lease deed only. If a lease of immovable property is made without a registered lease deed, that lease deed would not affect any immovable property comprised therein. The option for renewal for a term exceeding one year would become redundant, unless a new registered lease deed is executed jointly by both the lessor and lessee. Failing the execution of a fresh lease deed, another lease for a fixed term exceeding one year will not come into existence, though the principal lease in spite of the term thereof may continue by holding over for month to month. In other words, there cannot be a unilateral or automatic extension of lease or renewal of lease, for a term exceeding one year, by the lessor or lessee alone. 22. The above view is supported by the decision reported in Burmah Shell Oil Distributing (Bharath Petroleum Corporation Ltd.) v. Khaja Midhat Noor and Others [AIR 1988 SC 170] In this decision, the Supreme Court held that in view of paragraph 1 of Section 107 of the Transfer of Property Act, since the lease was for a period exceeding one year, it could only have been extended by a registered instrument executed by both the lessor and the lessee. In the absence of registered instrument, the lease shall be deemed to be “lease from month to month". It is clear from the very language of Section 107 of the Transfer of Property Act, which postulates that a lease of immovable property from year to year or for any time exceeding one year or reserving yearly rent can be made only by a registered instrument.
It is clear from the very language of Section 107 of the Transfer of Property Act, which postulates that a lease of immovable property from year to year or for any time exceeding one year or reserving yearly rent can be made only by a registered instrument. In Anthony v. KC Ittoop and Sons and Others [ 2000(6) SCC 394 ] the Supreme Court held that nonregistration of a document would cause two consequences. One is that no lease exceeding one year was created. Second is that the instrument became useless so far as creation of lease is concerned. 23. The above view is further fortified by the methodology adopted in the computation of requisite stamp duty, for the execution of a lease deed, under the Kerala Stamp Act. Going by Sl.No.33 of the schedule appended to the Kerala Stamp Act, it could be seen that, in the case of a lease, the proper stamp duty payable has to be determined on the basis of the term of lease and the consideration or value of the average annual rent reserve. If the term of lease is more, the stamp duty chargeable will also be more. Therefore, the validity of the lease deed must be confined to the original term of lease, for which stamp duty is paid at the time of execution and registration. The extension, if any, after the expiry of the original term of lease without registration of a new lease deed, would defeat the purpose of stamp duty. Therefore, the lease, for a term more than one year, cannot be allowed to be extended by the operation of a self working clause, without making a new registered sale deed. Otherwise, such an automatic extension by the operation of extension clause or by the mutual consent or act of parties alone would cause heavy loss to the State revenue. I f the lease deed is registered for a minimum period of one year, by paying a lesser amount, as stamp duty and thereafter, the term of lease could be extended recurringly without paying stamp duty, such practice would defeat the methodology employed in computation of stamp duty. So, no legal validity could be given to a self working extension clause, extending the term of lease for a period of more than one year, unless a new lease deed is registered to that effect. 24.
So, no legal validity could be given to a self working extension clause, extending the term of lease for a period of more than one year, unless a new lease deed is registered to that effect. 24. To sum up, an extension clause in a lease deed, permitting extension of lease for a term exceeding one year at the option of the lessee or lessor or by mutual consent of both lessor and lessee, without registration of a new lease deed, is invalid and unenforceable under law. The self working clause providing Extention for a term exceeding one year would become redundant, unless a registered fresh lease deed is executed to that effect. The question of law raised above are answered accordingly. 25. The learned counsel for the respondent vehemently contended that by clause (5), the respondent has got title to continue for a further period of 15 years from 2010 and he has exercised that right by the payment of enhanced rent. It is further contended by the learned counsel for the respondent that Ext.B2 itself has created a title. Therefore, no further creation of title is required to get an extension for a further period of 15 years. 26. We have gone through Ext.B2. Ext.B2 is a registered lease deed executed on 24.12.1994. The lease deed begins as follows: "Whereas the lessee has expressed his willingness to extend lease for a further period of 15 years from 01.09.1995 and the lessor has agreed to give the scheduled premises on lease for a further period of 15 years on the terms and conditions hereinafter mentioned". The said statement in the beginning of Ext.B2 itself shows that Ext.B2 was executed for a period of 15 years from 01.02.1994 and the lessor has agreed to give the scheduled premises on lease to the lessee for a period of 15 years only. From the above statement, it can never be interpreted to mean that Ext.B2 was executed for a period of 30 years from 01.02.1994. Obviously, the respondent has got title to continue as lessee for 15 years from 01.02.1994 only. 26. The absence of a new lease deed after 31.01.2010 is an admitted fact.
From the above statement, it can never be interpreted to mean that Ext.B2 was executed for a period of 30 years from 01.02.1994. Obviously, the respondent has got title to continue as lessee for 15 years from 01.02.1994 only. 26. The absence of a new lease deed after 31.01.2010 is an admitted fact. That apart, going by the impugned order, it could be seen that before the date of expiry of Ext.B2, the petitioners have issued Ext.A7 letter to the respondent informing him that they are in bona fide need of the petition schedule building for their own occupation. Ext.A8 notice was issued by the respondent to the petitioners expressing his intention to get the lease renewed by payment of rent at the enhanced rate. In Ext.A8, it is stated that as per clause (5) of Ext.B2, the lease will be extended for a further period of 15 years on payment of 25% increase on the rent by every five years and he has demanded the petitioners to execute a lease deed as stipulated in clause (5) of Ext.B2 within 15 days of receipt of notice. Ext.A9 is the letter issued by the respondent to the petitioners stating that he has remitted the rent in the account of the petitioners in Oman International Bank. In response to Ext.A9, the petitioners have issued Ext.A10 lawyer notice to the respondent stating that they have not instructed the respondent to deposit or remit the rent for the month of February, 2010 in Oman International Bank or in any other bank and the said remittance is a clear violation of the law concerned. In response to Ext.A10, the respondent had sent Ext.B3 stating that he had opted the extension of lease period for a further period of 15 years and he had remitted enhanced rent since February, 2010 in the account of the petitioners in Oman International Bank. But it has come out in evidence that though the respondent had sent 22 cheque leaves, which were marked as Ext.A11 series, to the petitioners, they have not encashed those cheque leaves. It is true that by sending the cheque leaves, he had expressed his willingness to get the lease extended for a further period of 15 years, invoking clause (5) of Ext.B2.
It is true that by sending the cheque leaves, he had expressed his willingness to get the lease extended for a further period of 15 years, invoking clause (5) of Ext.B2. But Exts.A7, A10 and A11 series of cheque leaves would show that the petitioners were not willing to renew the lease after the expiry of the original period of 15 years, stipulated in Ext.B2. The sequence of events disclosed by the aforesaid documents would prove that the lease made by Ext.B2 expired on 31.01.2010 and the present occupation is a holding over only. Therefore, the Rent Control Petition, seeking order of eviction, is perfectly maintainable. 27. In the above analysis, we further find that the concurrent finding of the courts below that there was an automatic extension of lease for a further period of 15 years at the option of the respondent alone, is illegal and perverse, warranting interference of this Court, invoking the revisional jurisdiction under Section 20 of the Act and we do so. We find that the Rent Control Petition is maintainable. 28. When the Rent Control Petition was found not maintainable, the courts below ought not to have gone further and rendered the findings evasively on the other issues, on merits. We set aside the impugned judgments passed by the Appellate Authority and the Rent Control Petition is remitted to the Rent Control Court for fresh consideration and disposal, on merits. The Rent Control Court shall pass orders afresh on merits, after affording an opportunity of being heard to both parties, at the earliest, at any rate within a period of three months from the date of receipt of a copy of this order. This revision petition is accordingly allowed.