1. Lease of land for building construction with a covenant to surrender the building without compensation upon expiry; dispute over building ownership and statutory tenancy. (Para 2 )
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1958 Supreme(SC) 68
SUPREME COURT OF INDIA
B.P.Sinha : J.L.Kapur : Syed Jafar Imam
K.A.Dhairyawan
Versus
J.R.Thakur
Case No. : 192 of 1954
Date of Decision : 4/28/58
Advocates:
A.V.VISHWANATHA SASTRI, L.K.JHA, NAUNIT LAL, P.L.VOHRA, RAMESHWAR NATH ROY, S.N.ANDLEY
A.V.VISHWANATHA SASTRI, L.K.JHA, NAUNIT LAL, P.L.VOHRA, RAMESHWAR NATH ROY, S.N.ANDLEY
In India, structures built on leased land do not automatically belong to the landowner. Under Section 108 of the Transfer of Property Act, ownership remains with the lessee during the lease, regardless of a contractual agreement to surrender the building without compensation upon expiry.
Headnote:(A) Transfer of Property Act, 1882 - Section 108 - Ownership of structures on leased land - No absolute rule of law in India that whatever is built on the soil becomes a part of it and is subject to the same rights of property as the soil itself - The party building on another's land is generally allowed to remove the materials - A contract to hand over the building to the lessor without compensation upon termination of the lease does not transfer ownership of the building to the lessor while the lease subsists. (Paras 6, 7)
(B) Rent Control Legislation - Statutory tenancy - Protection against eviction from land under rent control laws does not provide for the continuation of a lease beyond the specified period - A lessee may become a statutory tenant of the land, but this does not prevent the determination of the lease or the recovery of the building constructed thereon. (Para 10)
(C) Civil Procedure - Non-joinder of necessary parties - A suit is not necessarily bad for non-joinder if the relief sought can be granted in the absence of the parties not impleaded, especially where the effective control of the property is with the parties already on record. (Para 12)
Facts of the case:
A lease of land was executed for a term of 21 years, requiring the lessee to construct a building and surrender it, along with fixtures, to the lessor without compensation upon expiry. After the lease expired, the lessees refused to vacate, claiming protection under rent control legislation. The lessors filed a suit for a declaration of entitlement to the building and recovery of rents and profits.
Findings of Court:
The lease specifically demised the land, not the building. Ownership of the building remained with the lessees during the lease term and passed to the lessors upon expiry. The statutory tenancy of the land did not extend the lease of the building or entitle the respondents to its profits.
Issues: Whether the lease demised both the land and the building; whether the building could be recovered while the lessees remained statutory tenants of the land; and whether the suit was bad for non-joinder of necessary parties.
Ratio Decidendi: The court held that under Section 108 of the Transfer of Property Act, the lessee owns the structures they erect on leased land. A covenant to surrender such structures without compensation at the end of the lease is a contractual agreement that does not transfer ownership during the lease's subsistence.
Result: Appeal allowed.
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Table of Contents
2. Whether the lease demised both land and building or land only; whether statutory tenancy of land prevents recovery of the building and its rents. (Para 4 )
3. Absence of a positive clause transferring building ownership during the lease implies ownership remains with the lessee, notwithstanding the covenant to surrender it upon expiry. (Para 5 , 6 , 7 , 8 , 9 )
4. A covenant to surrender a building to the lessor without compensation at the end of a lease does not transfer ownership of the building during the lease. (Para 7 )
5. Appeal allowed; declaration that the building belongs to the trust; trust entitled to rents and profits; respondent ordered to render accounts. (Para 13 )
6. Does a building constructed by a lessee on leased land automatically belong to the lessor under Indian law?
No. There is no absolute rule of law in India that whatever is built on the soil becomes a part of it and is subject to the same property rights as the soil itself. (Para 6 )
7. Does a contract to hand over a building to the lessor without compensation upon lease expiry transfer ownership during the lease term?
No. While a lessee may contract to hand over a building without compensation at the end of the lease, such a contract does not transfer ownership of the building to the lessor while the lease subsists. (Para 7 )
8. Does the status of a statutory tenant of the land prevent the lessor from claiming ownership of a building constructed on that land?
The status of a statutory tenant protects the lessee's possession of the land, but it does not provide for the continuation of the lease beyond the specified period or transfer ownership of the building to the tenant. (Para 10 )
9. Can a party seek a declaration of entitlement to rents and profits of a building without seeking immediate physical possession of the land?
Yes. A declaration of the right to collect rents and profits from a building is a distinct legal remedy and does not require the party to enter upon the land to realize those profits. (Para 11 )
10. Does the failure to implead all legal heirs of a deceased lessee necessarily lead to the dismissal of a suit for declaration?
No. A suit cannot be dismissed for non-joinder of legal representatives if the omitted parties are not necessary to the suit or if the declaration sought can be granted in their absence. (Para 12 )
SYED JAFAR IMAM, J.
(1) THE appellants, as trustees, of the Mankeshwar Temple Trust had filed suit No. 2325 of 1948 in the High court of Bombay in its Ordinary Original Civil Jurisdiction, for a declaration that they were entitled to the building in suit and were entitled to claim possession of the same and to recover the rents and profits thereof. The appellants further prayed that the defendants may be ordered and decreed to obtain a letter of attornment from the tenants of the said property attorning to the appellants, that the first defendant may be ordered to render accounts of the rents received by him from the tenants of the said property from 23/05/1948, and that pending the hearing of the suit a Receiver may be appointed of the property in suit. The appellants had obtained leave of the High court under 0. 11, r. 2 of the Civil Procedure Code reserving to them liberty to file a separate suit with respect to the land on which the building was situated. The learned Judge who heard the suit decreed it in part in favour of the appellants. He also passed an order of injunction restraining the defendants 1, 2 and 5, their agents and servants, from interfering with the exercise of the right of the appellants in obtaining possession of the building or otherwise effectuating their possession consistently with the provisions of law. He further directed the first defendant to account for the rents recovered by him from and after 23/05/1948, till the date of the decree. He refused to grant the prayer that the defendants be directed to obtain letters of attornment from the tenants of the building in favour of the appellants. Against this decision the defendants appealed and a division bench of the High court allowed the appeal, reversed the decision of the trial Judge and dismissed the suit with costs.
(2) ON 23/05/1927, Krishnarao Ganpatrao and Shamrao Ganpatrao, as trustees of the Mankeshwar Temple, executed a registered lease, Exbt. A, in favour of Moreshwar Kasinath and Radhabal, wife of Ramkrishna Bhai Thakore, whereby they demised a parcel of land specified in the Schedule to the document. The lease was for twenty-one years. The area of land was about 213.66 square yards and the rent reserved was Rs. 50.00 per month. Under the terms of the lease the lessee had to construct within six months from the date of the lease a double storeyed building consisting of shops on the ground floor and residential rooms on the upper floor. The cost of construction was to be not less than Rs. 10,000.00. The construction had to be to the satisfaction of the lessors engineers. There were certain restrictive covenants in the lease. The building had to be insured for at least Rs. 12,000.00 in the joint names of the lessors and the lessees with an insurance firm approved by the lessors. If the building was damaged or destroyed it had to be repaired or restored by the use of the insurance money received from the insurance company. On the termination of the lease either at the end of twenty-one years or earlier, the lessees were to surrender and yield up the demised premises including the building with its fixtures and appurtenances to the lessors without any compensation for the same. On 14/05/1948, shortly before the lease was to expire, the appellants who were then the trustees of the temple gave notice to the respondents to deliver possession of the demised premises and the building on the expiry of the lease, that is to say, on 22/05/1948. On Ma 19/05/1948, the respondents replied that they. were entitled to the benefits of the provisions of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, hereinafter referred to as the Act, and that the appellants were not to interfere with their possession. All that they could get was the rent under the lease from the respondents. On 23/07/1948, the appellants gave the respondents notice to quit the building only as in their opinion the Act did not apply to it. On 27/07/1948, the
