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SUPREME COURT OF INDIA
V.GOPALA GOWDA, ADARSH KUMAR GOEL, JJ.
M/S PARK STREET PROPERTIES (PVT) LTD. – APPELLANT
Versus
DIPAK KUMAR SINGH & ANR. – RESPONDENTS
CIVIL APPEAL NO. 8361 OF 2016 (Arising out of SLP (C) No.24486 of 2014)
Decided On : 29-08-2016
(b) Transfer of Property Act – Section 106 – Clause 6 of the agreement entitling the landlord was entitled to terminate the tenancy upon a breach of the terms of the agreement or on non-payment of rent for three consecutive months – Tenants failing to remedy the same within a period of thirty days of the receipt of the notice – Clause 6, held, contrary to provisions of Section 106 – Agreement being unregistered – Not valid contract – Section 106 would apply. (Para 11)
(2001) 5 SCC 259; (2008) 8 SCC 564; (2000) 6 SCC 394 – Relied upon
1952 (3) SCR 269 – Referred
(c) Transfer of Property Act – Section 106 – An unregistered agreement can be admitted in evidence and even relied upon to prove the factum of the tenancy – However, terms of the unregistered agreement cannot be used to derogate from the statutory provision of Section 106 of the Act. (Para 12)
Facts of the case:
One Karnani Properties Limited, a company incorporated under the Companies Act, 1956 was the owner of the suit premises. It had let out the suit premises in favour of the appellant herein with the right to sublet the same or portions thereof. The appellant herein entered into an agreement dated 15.10.2004 with the respondents subletting the suit premises for the purpose of carrying out business from the ‘Blue Fox Restaurant’. Subsequently, the respondents requested the appellant to allow them to run franchise or business dealing with McDonald’s family restaurant from the suit premises. In pursuance of the same, the agreement dated 15.10.2004 was terminated, and a tenancy of the suit premises was created in favour of the respondents on the basis of an unregistered agreement dated 07.08.2006 at a rent and on the terms and conditions agreed therein. In terms of the said agreement, the tenancy commenced from 01.08.2006, at a rent of Rs. 20,000/- per month, payable by the tenants-respondents by the 7th day of every succeeding month according to the English calendar. Further, as per the terms of the agreement, in case of breach of the agreement, the landlord-appellant was entitled to terminate the tenancy after serving a notice of period of thirty days.
On 30.10.2008, the appellant issued a notice under Section 106 of the Transfer of Property Act, 1882 terminating the monthly tenancy of the respondents in respect of the tenanted premises upon the expiry of 15 days from the date of receipt of the said notice. Upon the expiry of the period of 15 days, the respondents did not vacate the suit premises. The appellant thus, filed suit for recovery of khas possession and mesne profits of the suit premises before the City Civil Court at Calcutta. The respondents contested the suit inter alia contending that by necessary implication the parties had agreed to not terminate the lease of the premises before 30 years, and that it was for this reason, a clause was incorporated for enhancement of monthly rent at the rate of 15% after expiry of every 3 years. The respondents further urged that the appellant had permitted them to invest a substantial sum of money for further repair and renovation of the tenanted premises suitably for their business. Thus, the appellant, by its declaration, acts and omissions had intentionally caused and permitted the respondents to believe that they will not terminate the lease of the respondents in respect of the tenanted premises before the expiry of the franchise agreement for running the McDonald’s Family Restaurant from the tenanted premises. It was thus, urged by the respondents that the notice of termination of lease is bad and not in accordance with law.
The Trial Court decreed the suit in favour of the appellant.
High Court set aside the decree and remanded the matter to the trial court.
Finding of the Court:
The impugned judgment and order passed by the High Court is liable to be set aside. The judgment and order passed by the Trial Court is liable to be restored.
Result: Appeal allowed.
The legal document indicates that an unregistered agreement, such as a tenancy agreement, can be admitted in evidence to prove the fact of tenancy, but its terms cannot be used to derogate from the statutory provisions governing tenancy, specifically Section 106 of the applicable Act. Section 106 creates a fiction of tenancy in the absence of a registered instrument, meaning that even without a formal written or registered agreement, a tenancy can be deemed to exist based on conduct, possession, and other circumstances (!) (!) .
Furthermore, the document clarifies that in the absence of a valid, registered lease agreement, the law presumes a month-to-month tenancy, and the rent can be assessed or inferred from the conduct of the parties, such as payment of rent, possession, and other relevant circumstances (!) (!) .
Therefore, rent can indeed be assessed or determined even if there is no formal, registered rental agreement or document, provided that the parties' conduct and other evidence indicate the existence of a tenancy. The absence of a formal agreement does not preclude the assessment of rent; instead, the law allows for the inference of tenancy and rent based on conduct and circumstances.
JUDGMENT
V. GOPALA GOWDA, J.
Leave granted.
2. The present appeal arises out of the impugned judgment and order dated 15.05.2014 passed by the High Court of Calcutta in F.A. No. 151 of 2012, whereby the High Court has set aside the order of the Trial Court and remanded the matter to it for reconsideration from the stage of examining the question of validity of the notice dated 30.10.2008.
3. The relevant facts of the case required to appreciate the rival legal contentions advanced on behalf of the parties are stated in brief hereunder:
One Karnani Properties Limited, a company incorporated under the Companies Act, 1956 was the owner of the suit premises. It had let out the suit premises in favour of the appellant herein with the right to sublet the same or portions thereof. The appellant herein entered into an agreement dated 15.10.2004 with the respondents subletting the suit premises for the purpose of carrying out business from the ‘Blue Fox Restaurant’. Subsequently, the respondents requested the appellant to allow them to run franchise or business dealing with McDonald’s family restaurant from the suit premises. In pursuance of the same, the agreement dated 15.10.2004 was terminated, and a tenancy of the suit premises was created in favour of the respondents on the basis of an unregistered agreement dated 07.08.2006 at a rent and on the terms and conditions agreed therein. In terms of the said agreement, the tenancy commenced from 01.08.2006, at a rent of Rs. 20,000/- per month, payable by the tenants-respondents by the 7th day of every succeeding month according to the English calendar. Further, as per the terms of the agreement, in case of breach of the agreement, the landlord-appellant was entitled to terminate the tenancy after serving a notice of period of thirty days. On 30.10.2008, the appellant issued a notice under Section 106 of the Transfer of Property Act, 1882 (hereinafter referred to as the “Act”) terminating the monthly tenancy of the respondents in respect of the tenanted premises upon the expiry of 15 days from the date of receipt of the said notice. Upon the expiry of the period of 15 days, the respondents did not vacate the suit premises. The appellant thus, filed suit for recovery of khas possession and mesne profits of the suit premises before the City Civil Court at Calcutta. The respondents contested the suit inter alia contending that by necessary implication the parties had agreed to not terminate the lease of the premises before 30 years, and that it was for this reason, a clause was incorporated for enhancement of monthly rent at the rate of 15% after expiry of every 3 years. The respondents further urged that the appellant had permitted them to invest a substantial sum of money for further repair and renovation of the tenanted premises suitably for their business. Thus, the appellant, by its declaration, acts and omissions had intentionally caused and permitted the respondents to believe that they will not terminate the lease of the respondents in respect of the tenanted premises before the expiry of the franchise agreement for running the McDonald’s Family Restaurant from the tenanted premises. It was thus, urged by the respondents that the notice of termination of lease is bad and not in accordance with law. The Trial Court, after examining the evidence on record, decreed the suit in favour of the appellant.
“It appears that clause 6 of the unregistered Memorandum of Agreement dated 7th August, 2006, is an important clause which deals with determination or termination of the tenancy only in case of non-payment of rent for three consecutive months and the tenant in spite of notice to remedy such breach fails to make such payment. When the document is inadmissible in evidence, none of its terms can be admitted in evidence for the purpose of proving an important clause contained therein including the clause 6. Reliance on clause 6 of the memorandum of Agreement dated 7th August, 2006 cannot be termed
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