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Contingent Clause In Rent Deed To Increase Rent Each Year Cannot Be Read To Mean That Tenancy Was For More Than One Year Period: SC

The Supreme Court in Civil Appeal No. 2617 of 2020 [arising out of SLP (C) No. 9866 of 2019 titled Siri Chand (Deceased) through LRs v/s Surinder Singh noted that as per Section 17 (1)(d) of the Registration Act, 1908 leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent requires compulsory registration. The rent deed in question did not provide for any specific period for which the rent deed was executed. In such a situation, the Bench comprising of Justices Ashok Bhushan, M. R. Shah and V. Ramasubramanian observed:
When the lease deed does not mention the period of tenancy, other conditions of the lease/rent deed and intention of the parties has to be gathered to find out the true nature of the lease deed/rent deed.

The rent deed in question does not reserve yearly rent and there is no mention in the rent deed that it is a lease from year to year. But there is a clause (9), which provided that the tenant will be bound for making the rent money by increasing 10% each year. Referring to this clause, the Supreme Court said:
Clause (9) may or may not operate in view of specific clauses reserving right of landlord to evict the tenant on committing default of non-payment of rent by 5th of every month or when landlord requires shop by giving one month's notice. clause (9) was a contingent clause which binds the tenant to increase the rent by 10% each year, which was contingent on tenancy to continue for more than a year, but that clause cannot be read to mean that the tenancy was for a period of more than one year.

Therefore, the Supreme Court concluded that the rent note was not such kind of rent note, which requires compulsory registration under Section 17 (1)(d) of the Act.

In this case, the issue before the Apex Court was whether a rent note signed by the tenant which required compulsory registration under Section 17 (1)(d) of the Registration Act, 1908?

Section 17 (1)(d) of the Registration Act, 1908 deals with documents of which registration is compulsory. Section 17 (1)(d), which is relevant for the present case and has been relied by the Appellate Court is as follows: 
17. Documents of which registration is compulsory.—(l) The following documents shall be registered, if the property to which they relate is situate in a district in which, and if they have been executed on or after the date on which, Act No. XVI of 1864, or the Indian Registration Act, 1866, or the Indian Registration Act, 1871, or the Indian Registration Act, 1877, or this Act came or comes into force, namely:
(d) leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent;

As per Section 17 (1)(d), leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent requires compulsory registration. Whether the rent deed can be treated to be a lease of immovable property:
  1. from year to year;
  2. for any term exceeding one year;
  3. or reserving a yearly rent?

Respondent-Surinder Singh took the shop measuring 14 sq. yds., on rent @ Rs. 2, 000/- per month for running a Hair Cutting and Dressing Work, from Appellant-Siri Chand on 27.07.1993 while executing an agreement / rent deed to be applicable w. e. f. 28.07.1993. The House Tax and Electricity Bills were undertaken to be paid by the tenant. Rent was to be paid up to 5th day in each month to the owner.

In event, the tenant failed to make the payment of rent up to the prescribed date in advance, the owner shall have right to get the shop vacated. The shop owner, if is in need of the shop, can serve notice of one month and get the shop vacated from the tenant. The tenant also undertook to make the payment of rent money by increasing ten per cent each year.

An application under Section 13 of East Punjab Urban Rent Restriction Act, 1949 was filed by the Appellant-Landlord dated 18.03.2006 praying for eviction of the tenant along with arrears of Rent and House Tax and interest on the arrears of rent. The Appellant’s case was that rent is not paid from 28.01.2004 to 28.07.2004 and from 29.07.2004 to 28.02.2005. House Tax since 1999 to 2005 amounting to Rs. 22, 302/- was not paid.

The tenant filed objection to the application and contended that rate of rent is Rs. 1, 000/- per month. It was further pleaded that at the time of taking shop in question, no other condition was agreed or settled. However, the signatures were obtained on some blank paper as security by the landlord, which appears to have been fabricated as alleged rent note. The tenant claimed to have paying the rent @ Rs. 1, 000/- per month till February, 2006, after which landlord refused to accept the rent.

The copy of the rent note dated 27.07.1993 was brought on the record as Exh. A-1. The  Rent Controller held Exh.A-1- Rent Deed as proved. The Rent Controller further held that although time is not specified, but it is not a lease deed, so not compulsorily registrable. The Rent Controller also held that tenant was liable to pay the House Tax. The Respondent tendered rent @ Rs. 2, 000/- w. e. f. 28.01.2004, which was accepted under protest.

The Rent Controller held that tenant was in arrears of rent and House Tax so the Respondent-Tenant is liable to eviction from the premises in dispute. The Rent Controller held that there exist relationship of landlord and tenant between the parties. The Rent Controller allowed the application of the Appellant and directed eviction of the Respondent from the premises in question.

An appeal was filed by the tenant against the Order of the Rent Controller. The Appellate Court did not agree with the findings of the Rent Controller that document Exh. A-1 was not compulsorily registrable.

Appellate Court observed that perusal of the document Exh.A-1 reveals that there would be increase in the rent to the tune of 10% every year, hence the document was not executed for a period of less than a year rather the intention of the parties is clear that it was executed for more than one year, hence the document was required to be registered under Section 17 (1)(d) of the Registration Act, 1908.

However, the Appellate Court rejected the claim of the tenant that rate of rent was Rs. 1, 000/- only. The Appellate Court after holding that document was compulsorily registrable took the view that the clause regarding 10% yearly increase cannot be relied and Judgment of Rent Controller was accordingly set aside and the Appeal was allowed.

The Appellant aggrieved by the Order/Judgment of the Appellate Court filed a Revision before the High Court. The High Court dismissed the Revision referring to the finding of the Appellate Court that rent note was compulsorily registrable. The case of the landlord to enforce condition in lease deed regarding increase of the rent was not relied. Aggrieved by the said Judgment, Appeal was filed before the Supreme Court.

In {Ram Kumar Das Vs. Jagdish Chandra Deo, Dhabal Deb & Another, AIR 1952 SC 23} after quoting Section 106 of the Transfer of Property Act, 1882, Supreme Court held that when there is no period agreed upon between the parties, duration has to be determined by referring to the purpose and object with which the tenancy is created. Following observations were made:
13. The section lays down a rule of construction which is to be applied when there is no period agreed upon between the parties. In such cases the duration has to be determined by reference to the object or purpose for which the tenancy is created.

The rule of construction embodied in this section applies not only to express leases of uncertain duration but also to leases implied by law which may be inferred from possession and acceptance of rent and other circumstances. It is conceded that in the case before us the tenancy was not for manufacturing or agricultural purposes. The object was to enable the lessee to build structures upon the land. In these circumstances, it could be regarded as a tenancy from month to month,  unless there was a contract to the contrary.....

Supreme Court further held that:
it has no doubt been recognised in several cases that the mode in which a rent is expressed to be payable affords a presumption that the tenancy is of a character corresponding thereto. Consequently, when the rent reserved is an annual rent, the presumption would arise that the tenancy was an annual tenancy unless there is something to rebut the presumption.

Similarly, the Allahabad High Court in {Kashi Nath & Ors. Vs. Abdur Rahman Khan & Ors., AIR 1922 All. 54}, had occasion to consider an agreement where defendant had contracted to pay eight annas a year as a rent of the site. Section 17 of the Registration Act, 1866 was also referred to and relied by the High Court.

The High Court held that when the terms of the lease are looked at, one sees that though in fact it might continue for an undefined number of years, there was no certainty that it would last for more than one year, hence lease was held not exceeding a term of one year. Following was held by the High Court:
.....The terms of the kabuliyat have been read to us. Shortly, they are to the effect that the Zamindar let the site to Sheo Prasad on a payment of eight annas a year and incidental obligations but the kabuliyat provided that if the eight annas was not paid in any one year, or if the tenant failed to make the incidental payments for marriages et cetra, the lease would thereby some to an end. Furthermore, the lease would also come to an end if the lessee did not conduct himself properly towards the Zemindar.

Therefore, when the terms of the lease are looked at one sees that though in fact it might continue for an undefined number of years, there was no certainty that it would last beyond the term of one year. Therefore, it did not come within the classification of Section 17 (d) as being a lease for a term exceeding one year. That being so, it was not a document which had compulsorily to be registered.....

In another Judgment of Lahore High Court in {Mengh Raj Vs. Nand Lal & Ors., AIR 1939 Lahore 558}, in the lease, rate of rent was payable per mensem, condition of payment of annual rent was also mentioned there.

The High Court noted the condition of the lease and has also applied the provisions of Section 17 (1)(d) of the Registration Act, 1908 and held that the said lease was not registrable. In paragraph 1 of the Judgment, the contents of the lease have been quoted, which are to the following effect:
.....The main provisions of the lease in question may be translated as follows: We, Nand Lal and Murli, sweepers of Hazro, have taken on rent a house from Mengh Baj of Hazro on condition of payment of an annual rent of Rs. 40-8-0 for a period of one year certain.

We agree that we will live as tenants in this house and will pay rent at the rate of Rs. 3-6-0 per mensem, month by month on a receipt being granted to us by the landlord. In default of payment of rent the landlord can eject us and recover arrears of rent in any manner he likes. After the expiry of the term it will be the option of the landlord to give the house to us on rent or eject us and give it to other tenants.
We will have no objection to this. The term of the lease is from the 1st Har, Sambat 1984 to the end of Jeth, Sambat 1985. We have been tenants under the landlord for a long time and have been paying rent.

Supreme Court while allowing the Appeal questioning the Judgment of Punjab and Haryana High Court dated 05.09.2018, thereby, dismissing the Revision filed by the Appellant-Landlord and holding that the Judgment and Decree of the Rent Controller directing eviction ought not to have been interfered by the Appellate Court, observed as under:
16. Clauses of the rent note makes it clear that there was a categorical promise that tenancy is a monthly tenancy and rent is paid every month by 5th of every month. It is true that although in clause (9), it was mentioned that the tenant will be bound for making the rent money by increasing 10% each year, that was promise by the tenant to increase the rent by 10% each year for the period of tenancy, though the period of tenancy was unspecified.

Clause (9) may or may not operate in view of specific clauses reserving right of landlord to evict the tenant on committing default of non-payment of rent by 5th of every month or when landlord requires shop by giving one month’s notice. Clause (9) was a contingent clause which binds the tenant to increase the rent by 10% each year, which was contingent on tenancy to continue for more than a year, but that clause cannot be read to mean that the tenancy was for a period of more than one year.

Written By: Damini Singh Chauhan, Semester 10th, The Law School, University of Jammu.
Email; [email protected] 

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