Non-payment of rent invalidates lease renewal under Section 107 of the Transfer of Property Act.

C O M M O N J U D G M E N T

[Judgment of the Court was delivered by R.SUBRAMANIAN, J The parties will be referred to as per their ranks for the purpose of convenience.

2. The respondents 1 to 8 filed a suit seeking a declaration that there is no renewal of the lease beyond 31.12.2009 as the right to renew conferred on the defendant has become nugatory on account of non-payment of the renegotiated rent and for eviction. The plaintiffs contended that the suit property was leased to the appellant to run a Petroleum outlet under a lease deed dated 27.02.1995 by one Rajagopal, who died on 12.09.2006. The plaintiffs are the legal heirs of said Rajagopal. The lease was for a period of 20 years commencing from 01.01.1989. The initial rent was Rs.4,500/- and it was subsequently enhanced to Rs.5,400/- for the second 5 years, to Rs.6,750/-

for the third 5 years and Rs.8,440/- for the last 5 years. As per the conditions in the lease deed, the lease can be terminated by the defendant by giving 3 months notice. The plaintiffs are given a right to repossess the property, if there is a default in payment of rent. It is also alleged that the lease will be automatically renewed for a further period of 10 years and the rent has to be fixed by negotiation. The renewal is also subject to the willingness of the defendant. The lease [30 years period] expired on 31.12.2018. The defendant did not opt out from renewal by giving a notice in advance. There were negotiations between the parties for renewal of the lease for a further period of 10 years. It was agreed between the parties that the lease could be renewed for the period of further 10 years from 01.01.2009 and it was agreed that the monthly rent should be Rs.80,000/- for the first 5 years and Rs.84,000/- for the second 5 years. It is claimed that even after fixation of the rent, the defendant did not pay the same. Terming the failure to pay the rent as a breach of terms indenture of the lease, the plaintiffs sought for a declaration that the lease was not renewed and sought for recovery of possession.

3. The claim of the defendant that the lease is perpetual was specifically denied. On service of notice, the defendant filed a Counter Claim accepting that the claim of the respondents for renewal of the lease on a monthly rent of Rs.80,000/- per month [Rupees eighty thousand only] for the first 5 years and Rs.84,000/- per month [Rupees eighty four thousand only] for the next 5 years was accepted by it and claimed that the lease rent was not paid only because the lease deed was not executed. It was also claimed that the Corporation sent the monthly rents as per the original agreement by cheques and it also claimed that the difference rent will be paid upon execution of the fresh lease deed.

4. A reply statement was filed by the second plaintiff, which was adopted by the other plaintiffs, wherein it was contended that the failure on the part of the defendants to pay the rent as agreed to would render the renewal clause itself as nugatory and therefore, they are entitled to the possession.

5. Upon the above pleadings, the learned Trial Judge framed the following issues in the suit and the Counter Claim:-

“1. Whether the clause of automatic renewal of the lease is valid and whether the plaintiff is entitled for the declaration to this effect?

2. Whether the defendant has to be directed to deliver vacant possession of the suit property to the plaintiff?

3. Whether the plaintiff is entitled for the damages from the defendant as prayed for?

4. What are the other relief the plaintiffs are entitled for?”

Counter Claim:-

1.Whether the defendant is entitled to a declaration that there is an automatic renewal of lease after 31.12.2009 with a renewal clause?

2.Whether the defendant is enti