IMPORTANT POINT
Whether a right to a new lease consequent upon the option for renewal having been successfully exercised should again contain the covenant for renewal, would depend on the wordings of the covenant for renewal contained in the principal lease, the intention of the parties as reflected therein and as determinable in the light of the surrounding relevant circumstances.

Headnote:Transfer of Property Act, 1882-Section 116-Lease-Renewal of-Suit property consisting of 5 acres of plot belonging to State was given on fifty years lease to one JW-Lease contained a clause for renewal conferring an option on lessee to seek renewal for another term of 50 years-JW alienated his interest in suit property to respondent-plaintiff-Respondent sought for renewal of lease consistently with covenant for renewal as contained in original lease-Renewal deed executed in 1945-Respondent sought for renewal of lease for yet another term of 50 years-Refusal on part of State Government to grant renewal stating that right of renewal was exhausted on having been exercised once-Writ Petition-Whether a right to a new lease consequent upon the option for renewal having been successfully exercised should again contain covenant for renewal-Held, it would depend on wordings of covenant for renewal-Covenant for renewal having been referentially incorporated without any reservation in lease deed of 1945-Exercise of option for renewal cannot be denied to respondent.
       Held : In India, a lease may be in perpetuity. Neither the Transfer of Property Act nor the general law abhors a lease in perpetuity. (Mulla on The Transfer of Property Act, Ninth Edition, 1999, p.1011). Where a covenant for renewal exists, its exercise is, of course, a unilateral act of the lessee, and the consent of the lessor is unnecessary. (Baker v. Merckel (1960) 1 All ER 668, also Mulla, ibid, p.1204). Where the principal lease executed between the parties containing a covenant for renewal, is renewed in accordance with the said covenant, whether the renewed lease shall also contain similar clause for renewal depends on the facts and circumstances of each case regard being had to the intention of the parties as displayed in the original covenant for renewal and the surrounding circumstances. There is a difference between an extension of lease in accordance with the covenant in that regard contained in the principal lease and renewal of lease, again in accordance with the covenant for renewal contained in the original lease. In the case of extension it is not necessary to have a fresh deed of lease executed; as the extension of lease for the term agreed upon shall be a necessary consequence of the clause of extension. However, option for renewal consistently with the covenant for renewal has to be exercised consistently with the terms thereof and, if exercised, a fresh deed of lease shall have to be executed between the parties. Failing the execution of a fresh deed of lease, another lease for a fixed term shall not come into existence though the principal lease in spite of the expiry of the term thereof may continue by holding over for year by year or month by month, as the case may be. The issue - whether a right to a new lease consequent upon the option for renewal having been successfully exercised should again contain the covenant for renewal, is not free from difficulty and has been the subject matter of much debate both in England and in India. It would all depend on the wordings of the covenant for renewal contained in the principal lease, the intention of the parties as reflected therein and as determinable in the light of the surrounding relevant circumstances. (Paras 13 & 14)
       It is pertinent to note that the respondent is not claiming a lease in perpetuity or right to successive renewals under the covenant for renewal contained in the 1887 lease. The term of 50 years under the 1887 lease came to an end in the year 1937 and the option for renewal was exercised by the respondent as assignee of the original lessee which exercise was honoured by the lessor State executing a fresh deed of lease belatedly on February 20, 1945. This lease deed does not set out any fresh covenants, mutually agreed upon between the parties for the purpose of renewal. Rather it incorporates, without any reservation, all the covenants, provisos and stipulations as contained in the principal lease as if they had been herein repeated in full. Not only was a fresh deed of lease executed but the conduct of the parties also shows that at the end of the term appointed by the 1945 lease, i.e. in or around the year 1987, the lessor did not exercise its right of re-entry. On the other hand, the respondent exercised his option for renewal. The officials of the appellant State, i.e. the Collector and the Board of Revenue, all recommended renewal and advised the State Government to expedite the renewal. The State Government was generally renewing such like leases by issuing general orders/instructions to its officers. At no point of time prior to the filing of the counter-affidavit, on the present litigation having been initiated, the State or any of its officers took a stand that the right of renewal, as contained in the principal deed of lease, having been exhausted by exercise of one option for renewal, was not available to be exercised again. (Para 18)

Judgement Key Points

The provided legal document is the judgment itself (State of U.P. & Ors. vs. Lalji Tandon (Dead), decided on 3-11-2003). It contains parallel citations for this case and references to prior cases (e.g., on lease renewal under Section 116 of the Transfer of Property Act, 1882), but no data or mentions of subsequent judgments citing it. Citation counts in later cases are not addressed or included.

JUDGMENT

R.C. Lahoti, J.-The property in question is plot no. 81/1-M area 5 acres (out of 98 bighas) in village Nasibpur, Bhaktiara, Chhail, District Allahabad, U.P. over which stands a bungalow bearing no. 241 Mor Road, Allahabad. This property shall hereinafter be referred to as the suit property . The ownership of the land vests in the State. The superstructure which is a bungalow seems to have been brought up by the lessee or his transferee, as stated hereinafter, and which is not very clearly borne out from the pleadings, also not very relevant for the issue at hand.

2. The land consisting in the suit property was given on fifty years lease to one J.W. Walsh. The lease contained a clause for renewal which, as far as ascertainable from the material available on record, and as found by the High Court, conferred an option on the lessee to seek renewal of lease for another term of 50 years and on such option being exercised before the expiry of term of 50 years of the existing lease, the lessor shall "act upon forthwith and execute and deliver to the lessee upon his duly executing a counter part or renew the lease for the said premises for a further term of 50 years and with and subject to the same covenants conditions and provisions as are herein contained."

3. The original deed of lease though very material for ascertaining the covenants thereof, including the one for renewal, has not been placed on record by either party. The High Court has in its impugned judgment observed that the suit property has changed hands but the document is certainly available with the State-appellant, and in the facts and circumstances of the case, the State ought to have produced the lease or its copy to assist the Court in arriving at a just decision, but the same was not done in spite of several opportunities having been allowed for the purpose and though the State had filed a counter-affidavit followed by two supplementary-affidavits. The High Court has chosen to draw an adverse inference against the State without expressly stating so, as its observation indicates, (to quote) - "Initial lease deed has not been placed on record by either party. It would be fair to assume that the State should be in possession of the same. The condition whether renewal was permissible only once must be in the initial lease deed but unfortunately it has not been placed before us. In our opinion it was for the State to have filed a copy thereof if it wanted to rely upon such a term. That having not been done despite several opportunities availed by it when filing supplementary counter affidavit we can safely conclude that really no such term was contained in the initial lease deed. We have no hesitation, therefore, in rejecting the contention of the State that the lease was renewable only once". This is the most crucial part of the controversy and we will revert back to the same after completing the narration of facts.

4. Walsh alienated his interest in the suit property to Lalji Tandon, the respondent-plaintiff, who has died during the pendency of the proceedings and whose LRs have been brought on record; however, for convenience, we will refer to the respondent Lalji Tandon, succeeded by his LRs., as the respondent .

5. The respondent, having stepped into shoes of Walsh, the original lessee, sought for renewal of the lease consistently with covenant for renewal as contained in the original lese. The State Government agreed for renewal and the renewed lease deed came to be executed on February 20, 1945. It seems that the State Government was agreeable to renew the lease for a term of 50 years but by February 20, 1945, the day on which the renewed lease came to be executed, a period of 42 years, 2 months and 20 days had remained available out of the 50 years of the second term and therefore the term of the renewed lease as recited therein is "42 years, 2 months, 20 days". This lease has been placed on record. Covenant - 2 thereof is very crucial and the same is ext

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2003 Supreme(SC) 1087

Cases Referred (3)