Important point
On expiry of period of lease, mere acceptance of rent for the subsequent months in which lessee continued to occupy lease premises cannot be said to be a conduct signifying “assent” to the continuance of the lessee as “holding over”.

Headnote:(i) Transfer of Property Act, 1882—Section 116—Holding over—Mere acceptance of rent after expiry of lease period for subsequent months in which lessee continued to occupy lease premises could not be said to be a conduct signifying “assent” to continuance of lease—Renewal clause in the lease agreement fell within expression “agreement to the contrary” used in Section 116 of the Act—In the face of specific clauses for seeking renewal, there could not be implied renewal by “holding over” on mere acceptance of rent offered by lessee—Lease of suit premises by registered lease deed for 15 years expired on 19.7.1977—Lease deed contained clause for option of renewal which could be exercised before expiry of lease—Option of renewal was exercised not in accordance with terms of agreement—Rent offered was accepted by lessor for the period lessee over-stayed—Lessee could not claim that he was “holding over” as lessee.
       Held : We fully agree with the High Court and the first appellate court below that on expiry of period of lease, mere acceptance of rent for the subsequent months in which the lessee continued to occupy the lease premises cannot be said to be a conduct signifying ‘assent’ to the continuance of the lessee even after expiry of lease period. To the legal notice seeking renewal of lease, the lessor gave no reply. The agreement of renewal contained in clause (7) read with clause (9) required fulfillment of two conditions; first the exercise of option of renewal by the lessee before the expiry of original period of lease and second, fixation of terms and conditions for the renewed period of lease by mutual consent and in absence thereof through the meditation of local Mukhia or Panchas of the village. The aforesaid renewal clauses (7) & (9) in the agreement of lease clearly fell within the expression ‘agreement to the contrary’ used in Section 116 of the Transfer of Property Act Under the aforesaid clauses option to seek renewal was to be exercised before expiry of the lease and on specified conditions. The lessor in the present case had neither expressly nor impliedly agreed for renewal. The renewal as provided in the original contract was required to be obtained by following a specified procedure i.e. on mutually agreed terms or in the alternative through the mediation of Mukhias and Panchas. In the instant case, there is a renewal clause in the contract prescribing a particular period and mode of renewal which was ‘an agreement to the contrary’ within the meaning of Section 116 of the Transfer of Property Act. In the face of specific clauses (7) & (9) for seeking renewal there could be no implied renewal by ‘holding over’ on mere acceptance of the rent offered by the lessee. In the instant case, option of renewal was exercised not in accordance with the terms of renewal clause that is before the expiry of lease. It was exercised after expiry of lease and the lessee continued to remain in use and occupation of the leased premises. The rent offered was accepted by the lessor for the period the lessee overstayed on the leased premises. The lessee, in the above circumstances, could not claim that he was ‘holding over’ as a lessee within the meaning of Section 116 of the Transfer of Property Act. (Paras 17 and 18)
       (ii) Specific Relief Act, 1963—Section 16—Suit for specific performance of agreement of renewal of lease—Dismissed by Courts below—Concurrent findings that option for renewal was not exercised in accordance with terms of agreement—Renewal clause in agreement were vague and incapable of specific performance—No interference was warranted.
       Held : So far as the cross suit for specific performance of agreement of renewal of lease filed by the lessee is concerned, there are concurrent findings of all the courts that the option for renewal was exercised after the expiry of the lease period. The option for renewal exercised was, therefore, contrary to terms of clause (9) of the lease agreement. The clauses of renewal requiring fixation of terms and conditions for renewed period of lease mutually or in the alternative through village Mukhia and Panchas are uncertain and incapable of specific performance. After legal notice of renewal, the lessor did not send any positive reply and instead filed a suit for ejectment, therefore, there was no mutual consent for renewal. The forum agreed to for deciding dispute was through local Mukhia and Panchas of the village. The renewal clauses of the agreement were vague and incapable of specific performance. The Mukhia and Panchas were not named in the agreement and the method of choosing either of the two forums was not specified. The cross suit filed by the lessor for specific performance of the agreement of renewal was rightly dismissed throughout. The original period of lease expired on 19.7.1977 and the suit for ejectment on the ground of expiry of the lease was filed on 16.6.1978 which was well within the period of limitation and rightly decreed. (Paras 19 and 20)

Judgment

Dharmadhikari, J.—The appellant obtained possession on lease of the suit premises for running a Petrol Pump under a registered lease deed dated 17.7.1962 for a period of fifteen years. It was an annual lease but the rent at agreed rate was payable in monthly instalments. The period of lease expired on 17.7.1977.

2. The registered sale deed contained clauses Nos. (7) & (9) giving option of renewal for a further period which could be exercised before expiry of the initial period. After the period of lease expired on 19.7.1977 the lessee continued to remit the rent till August 19, 1977. On 23.8.1977 the lessee sent a lawyer’s notice exercising his option under clause (7) and seeking renewal of the lease. The lessee thereafter remitted monthly rent of Rs. 345/- each for three months from March to May 1978. The rent was accepted by the lessor.

3. Clause (7) of the lease providing option of renewal to the lessee contained two conditions firstly that the option has to be exercised before expiry of the lease and secondly the terms and conditions of renewal for further period shall be decided either by mutual consent of parties or in case of failure of mutual consent, through the intervention of local Mukhia or Panchas of the village.

4. To the legal notice given by the lessee seeking renewal of the lease, the lessor gave no positive response and instead filed Title Suit No. 59/78 on 16.6.1978 seeking ejectment of the lessee from the suit premises on the ground that the term of lease had expired.

5. The lessee filed a counter suit No. 13/80 seeking specific performance of the alleged agreement of renewal of lease on his alleged right of option of renewal.

6. The two cross suits were tried jointly and decided by common judgment.

7. The trial court by common judgment dated 16.3.1987 dismissed the suit for ejectment filed by the lessor by holding that after expiry of the initial period of fifteen years of lease, acceptance of rent by the lessor had resulted in renewal of lease and the lessee would be held to be ‘holding over’ within the meaning of Section 116 of the Transfer of Property Act. Based on the above finding that the lessee was ‘holding over’ as a result of the acceptance of rent by the lessor for the period subsequent to the expiry of lease, the trial court came to the conclusion that the suit for ejectment could not have been filed without terminating the lease by statutory notice under Section 106 of the Transfer of Property Act.

8. The trial court by the common judgment dismissed the counter suit seeking specific performance of renewal of lease by the lessee. It was held that in accordance with clause (9) of the lease deed, the option of renewal was not exercised before expiry of original period. The specific performance of agreement of renewal claimed was also rejected on the ground that the terms and conditions of renewal were vague and incapable of enforcement. Thus, the trial court dismissed both the suits.

9. The dismissal of two suits by the trial court gave rise to two cross appeals one at the instance of lessor and the other at the instance of lessee. The first appellate court allowed the appeal of the lessor and decreed the suit of ejectment. It held that mere acceptance of rent by the lessor sent by the lessee after expiry of lease, in view of specific terms prescribing mode of renewal, did not result in deemed renewal of lease and the doctrine of ‘holding over’ under Section 116 of the Transfer of Property Act was not attracted. According to the first appellate court, the period of lease having expired there was no legal requirement of terminating the alleged renewed lease by issuing a statutory notice under Section 106 of the Transfer of Property Act.

10. The cross appeals filed by the lessee were dismissed and the dismissal of suit for specific performance of the alleged agreement of renewal was maintained.

11. The lessee filed two Second Appeals in the High Court. By the impugned common judgment the High Court up

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2005 Supreme(SC) 858

Important pointOn expiry of period of lease, mere acceptance of rent for the subsequent months in which lessee continued to occupy lease premises cannot be said to be a conduct signifying “assent” to the continuance of the lessee as “holding over”.

Cases Referred (1)

Important point
On expiry of period of lease, mere acceptance of rent for the subsequent months in which lessee continued to occupy lease premises cannot be said to be a conduct signifying “assent” to the continuance of the lessee as “holding over”.