THE COMMISIONER OF INCOME-TAX vs. M/S ESSAR DIGITRONICS PVT LTD

R BHASKAR

R.K. REDDY,

LIU KUO CHANG,

A. PAUL,

ING VYSYA BANK,

For sake of inconvenience, parties shall hereinafter be referred to as follows: Appellant - Sri. A Boopathi was defendant no.1 as 'Lessee'; whereas respondent no.1 Sri. Harish Kumar, plaintiff as 'Purchaser' and respondents no.2 to 7 were defendants in O.S.No.3484/2008 were 'Sub-tenants'.

O.S.No.3484/2008 was filed seeking for possession of suit property from defendants and for damages of Rs.4,60,000/- etc. In plaint, it was stated that Sri. A.P.Palaniveloo (hereinafter referred to as ‘Lessor’) was absolute owner of property bearing No.152/1 situated at Wheeler road, Frazer town, Civil Station, Bangalore. He leased a portion of suit property measuring 80 ft. X 50 ft. to Lessee

Subsequent to agreement, Lessee put up commercial complex at his own cost and leased portions thereof to third parties. As terms of lease provided for termination of sub-tenancy on date of expiry of lease, and possession of sub-tenants after expiry was illegal. Lessee filed O.S.no.27023/2007 and O.S.no.26745/2007

In meanwhile, on 17.03.2008, Lessor sold suit property to Purchaser and original sale deed was deposited by Purchaser in Bank in connection with loan obtained. On date of sale, Purchaser wrote a letter to Lessee about purchase of suit property and calling upon him to vacate same. Subsequently, he also got issued legal notice terminating tenancy, calling upon him to vacate. However, Lessee got issued a false and untenable reply alleging that notice was issued as a counter blast to O.S.no.25639/2008 filed by Lessee.

Upon service of suit summons, defendants no.1, 2, 3, 5 and 6 filed separate written statements. While denying plaint averments they stated that suit was untenable and filed as a counter blast to O.S.no.25639/2008 filed by Lessee. It was stated that conditions of lease provided for automatic extension for a further period of ten years and there was neither breach of terms nor any pleading by Purchaser. Therefore, there was no question of termination of tenancy. Title of Lessor over property bearing no.152/1, Wheeler road, Bangalore was admitted. Execution of

It was claimed that Lessee had acted in terms of agreement. Though he intended to construct only ground floor and first floor, at insistence of Lessor, he applied for sanction for constructing second floor and completed construction by incurring huge expenditure. Since Lessee was owner of superstructure on suit property, he sub-let portions of same to different tenants. Though filing of suit and obtaining decree against one such tenant in O.S.no.27023/2007 was admitted, it was alleged that Purchaser had illegally taken possession and separate suit was filed against such illegal action. Under such circumstances, Lessee was entitled for extension of lease for thirty years and lease had not expired on 21.01.2006. Allegation of being in arrears of rent was denied. Default in payment of property taxes was also denied.

Other defendants denied knowledge about title of Lessor, lease agreement dated 21.01.1986 and subsequent agreement. They also denied knowledge of sale of suit property to Purchaser and notice of termination of agreement issued to Lessee.

Based on pleadings, trial Court framed following issues: 1. Whether the plaintiff prove the jural relationship of landlord and tenant between himself and the defendants?

Whether the plaintiff proves valid and proper termination of the tenancy of the defendants?

Whether the plaintiff proves that he is entitled to recover mesne profits of

Whether the suit is bad for non-joinder of necessary parties?

Whether the valuation of the suit is correct and payment of court fee is sufficient?

What order or decree?

Thereafter, Purchaser examined himself as PW.1 and Exs.P1 to P21 were marked, while Lessee was examined as DW.1 and Exs.D1 to D59 were marked. On consideration, trial Court answered issues no.1, 2 and 5 in affirmative, issues no.4 and additional issue no.1 in negative, issue no.3 was kept open for enquiry under Order XX Rule 12 C.P.C., and issue no.6 by decreeing suit, directing defendants to vacate suit property within five months from date of judgment.

Brief facts in RFA No.397/2014 as stated are that appellant herein was plaintiff and respondents herein were defendants no.1 to 5 in O.S.no.25639/2008.

O.S.no.25639/2008 was filed by Lessee against Lessor and others seeking for declaration that Lessee was entitled for automatic extension of lease for further period of ten years in terms of clause-3(d) of lease agreement or alternative prayer for directing defendants to execute registered lease deed for extended period of ten years with effect from 01.02.2006. A further prayer for declaration of Lessee’s right for extension of ten years with clause for further extension, at monthly rent payable at last at Rs.9,050/-, and declaration that Lessee was entitled for refund of Rs.1,00,000/- on determination of lease i.e., on 31.01.2026 and for permanent injunction restraining interference etc.

In plaint, it was stated that Lessee had entered into registered lease agreement dated 22.01.1986 in respect of vacant land forming part of property bearing no.152/1, Wheeler Road, Bangalore (herein after referred to as ‘suit property’). It was asserted that since stamp duty for lease agreement for a period of thirty years was high and Lessor demanded and received an

It was further stated that considerable time was lost in securing permission. Firstly for bifurcation of plot, thereafter for change of land use and subsequently in clarifying boundaries and for obtaining sanction of building plan etc. It was agreed by Lessor that Lessee would be suitably compensated for investment made and loss incurred by extending period of lease by five to six years. Lessee claimed that he was owner of superstructure which was put up with an understanding that lease is for a period of thirty years with assurance that it would be extended for further ten years. Since Lessee had proceeded to construct second floor only on assurance of Lessor for further extension of time, he was entitled for same.

Lessee further pleaded that during year 2005, Lessor had approached Lessee with offer to sell his rights over suit property to Lessee or in alternative to buy out Lessee’s rights over

It was further pleaded that his continuation of paying monthly rent at Rs.6,844/- even after expiry of twenty years was due to inadvertence and immediately after realizing same, he sent cheque for Rs.27,326/- being shortfall amount as well as three cheques for Rs.7,870/- each towards rent upto April, 2008. Such being the case, Lessor illegally sold suit property with superstructure to Purchaser without his consent or notice. Upon receipt of notice by Purchaser, prompt replies were given. As there was no valid termination of tenancy and as lease was subsisting, Lessee had right for continuation and extension of lease. It was stated that Lessee had continued to pay property tax even after

Upon service of suit summons, Purchaser entered appearance and filed written statement alleging that suit was not tenable, based on false assertion and with malicious intent as a counterblast to suit filed by Purchaser. It was also with an intention to dilate proceedings.

It was stated that Lessor was absolute owner of property no.152/1 including extent of 80ft. X 50ft. leased for twenty years in favour of Lessee under lease deed dated 22.01.1986. There was separate agreement between them with a condition on Lessee for paying property tax of entire property. It was stated that as per lease conditions, Lessee constructed residential/commercial building from his own funds and sub-let portions to third parties. After expiry of lease, occupation of suit property by sub-tenants was illegal.

Though lease lapsed, Lessee continued to pay arrears of monthly rent at Rs.6,844/- to Lessor. As such, there was no relationship of landlord and tenant between Lessee and Purchaser and no rent was paid from December 2007. On 17.03.2008, Lessor executed a registered sale deed alienating suit property to Purchaser. Said fact was informed by Lessor to Lessee and directing him to pay rent henceforth to Purchaser. Thereafter, on 23.03.2008, Purchaser got issued a notice of termination of lease and demanding vacant possession of suit property. Instead of compliance, Lessee got issued false reply on 11.04.2008. Similarly notices were also issued to sub-tenants to vacate suit property. It was stated that Lessee had failed to pay property tax for 1999- 2000 totaling to Rs.2,05,897/- for which, Corporation of Bangalore

It was stated that by issuing notices on 23.03.2008 and 11.04.2008, tenancy was terminated and Purchaser was entitled for vacant possession. Though execution of lease deed on 22.01.1986 was admitted and it's period was asserted to be twenty years only. Payment of advance amount of Rs.1,00,000/- and agreement for extension of lease for ten years was denied. Even agreement by Lessor for extension of lease by five to six years was also denied. Averments regarding negotiation for purchase of suit property by Lessor were also denied. Claim by Lessee about his ownership over superstructure on suit property was denied as clause 5 of lease deed stipulates that on termination of lease, Lessor would become owner of constructed building also. Claim of automatic extension of period of lease was denied. It was alleged that there was no cause of action for filing suit and sought for its dismissal.

Based on pleadings, following issues were framed:

Whether the defendants are liable to execute a lease deed for the extended period of 10 years from 01.02.2006 rent at the rate of Rs.9,050/- p.m.?

Whether the plaintiff entitled for return of Rs.1,00,000/- after the expiry of lease? 4. Whether the plaintiff is entitled for permanent injunction?

Whether the defendant No.5 proves that D1 sold the suit properties to D5 on 17.03.2008, who became absolute owner in constructive possession of the suit properties?

Whether the defendant No.5 proves that he is tenant holding over on monthly basis, whose tenancy was terminated on 23.03.2008 and on 11.04.2008?

Whether suit is valued properly and court fee paid is sufficient?

What order or decree?

Thereafter, Lessee got himself examined as PW.1 and another witness as PW.2. Exhibits P1 to P59 were marked. On other side, Purchaser was examined as DW1. Exhibits D1 to D21 were marked.

On consideration, trial Court answered issues no.1 to 4 in negative, issues no.5 to 7 in affirmative and issue no.8 by

Sri. Anandarama, Sri. Prashanth and Sri.Vikram, learned counsel submitted that appellant was Lessee of suit premises under Lessor. He filed O.S.no.25639/2008 for specific performance and declarations regarding extension of lease as provided in clause 3(d) of Lease Agreement dated 22.01.1986 and for permanent injunction to protect his possession over suit property. He also sought further extension of lease and for decree of Rs.5,00,000/- per month from April, 2008 till restrictions on his right to sub-lease continued.

It was submitted that defendants no.2 to 4 were wife and children of Lessor. Purchaser was subsequent Purchaser under sale deed dated 17.03.2008. He filed O.S.no.3484/2008 for ejectment as a counter blast to Lessee’s suit. Defendant no.1 in said suit was Lessee, while defendants no.2 to 7 were his sub- tenants. Trial Court dismissed O.S.no.25639/2008, and decreed O.S.no.3484/2008.

After obtaining lease, Lessee applied for sanction of building plan. It was initially rejected requiring him to obtain change of land use and bifurcation of plot. As compliance would be tedious, Lessee intended not to proceed and seek cancellation. However at insistence and assurance of Lessor that he would be suitably compensated by extending lease for another five years, he proceeded. Bifurcation was obtained on 16.10.1986, change of land use was obtained on 30.11.1987 and building plan got sanctioned on 01.03.1988. Building consisting of basement, ground and first floor was completed during 1991 with all facilities. During 1993, Lessor insisted for construction of second floor and as incentive, offered to extend lease by another period of ten years after expiry of thirty years. Thereafter, Lessee completed construction of second

Learned counsel further submitted that property tax was being paid regularly. For 1998-1999, there was dispute about correctness of demand. However he paid tax upto March, 2008, without prejudice to his rights to question same. Lessee was offered to purchase suit property between 2005 to 2008, and negotiations were held, during which Lessor demanded payment of consideration in New Zealand dollars. Fearing violation of foreign exchange regulations, no written agreement was drawn. However, Lessor assured extension of lease period by further ten years. Meanwhile, Lessor sold suit property to Purchaser on 17.03.2008 vide sale deed - Ex.P57/D57. Recitals of said sale deed indicate acknowledgement about property tax being paid upto date. On same day, Lessor, his wife and children addressed a letter - Ex.P37/D37 to Lessee informing about sale to Purchaser and demanding rent upto 31.03.2008. On same day, Purchaser issued notice - Ex.P38/D38 calling upon Lessee to vacate and handover possession of suit property. Lawyer’s notice - Ex.P45/D45 was also issued on

On 27.03.2008, a rejoinder - Ex.P47/D47 was issued. Lessee’s reply to Lawyer’s notice - Ex.P45/D45 was similar to his reply issued to notice dated 17.03.2008. Thereafter, on 28.03.2008, Purchaser mortgaged suit property by deposit of title deeds in favour of State Bank of Mysore for availing financial assistance of Rs.1.45 crores contrary to lease agreement. Challenging same, O.S.no.27144/2010 was filed by impleading Bank also as a party. Thereafter, on 25.10.2017 when Purchaser discharged loan, suit was withdrawn. In meanwhile on 10.04.2008, Lessee filed O.S.no.25639/2008 for specific performance and declarations regarding extension of lease period as provided in clause 3(d) of lease agreement. On 11.04.2008, Purchaser issued notice of termination of tenancy - Ex-P54/D54 calling upon them to deliver vacant possession of suit property. Learned counsel submitted that in view of this notice, earlier notice dated 23.03.2008 was deemed waived as per Section 113 of T.P.Act.

On 30.05.2008, Purchaser filed O.S.no.3484/2008 against Lessee and his tenants for ejectment. On 09.09.2008, he illegally took possession of portion of ground floor of suit property. On 19.09.2008, an interim order of status-quo was granted in O.S.no.25639/2008. On 24.11.2008, an interim order was granted in O.S.no.3484/2008 restraining Lessee from inducting tenants. Similar restraint order was passed in O.S.no.25639/2008. Said order was challenged in MFA.no.8804/2010, which was allowed with a direction to dispose of IA.no.1 filed in O.S.no.3484/2008. But immediately thereafter, IA.no.1 was disposed of imposing restriction on sub-letting by Lessee.

In meanwhile, order was passed in Misc. Case.no.48/2013 on 11.06.2013 transferring both suits to CCH-20. Thereafter, impugned judgment and decree came to be passed dismissing O.S.no.25639/2008 and decreeing O.S.no.3484/2008. Though these appeals were filed on 04.03.2014, Purchaser took possession of portion of ground floor and basement floor on 25.04.2014, prior to grant of interim order of stay on 28.04.2014.

Learned counsel submitted that neither Lessor nor his wife and children appeared in suit or stepped into witness box. The only witness, who deposed against evidence led by Lessee was Purchaser, who did not have any personal knowledge of events occurring prior to date of purchase i.e. 17.03.2008. Therefore, his deposition was of no value and could not be accepted. Even Purchaser admitted during cross-examination that Lessor had instructed him to continue lease, at time of sale of suit property. Even recital in sale deed – Ex.P38/D38 that sale was subject to lease hold rights of Lessee corroborated intention. Above conduct indicates clear collusion between Lessor, his wife and children and Purchaser. They were all represented by same counsel. Even though Lessor, his wife and children were stated to have executed power of attorney in favour of Purchaser, they did not even execute vakalathnama. Therefore, suit filed by Purchaser was not maintainable.

Learned counsel further submitted that stamp duty of Rs.20,000/- paid on Ex.P1 - lease deed would be sufficient even for thirty years. Lessee continued to pay rent and Lessor accepted same without protest. Even property tax was paid upto 2008. Therefore, alleged termination of tenancy as per notices – Exs.P38 and P45 are not on ground of efflux of time, but on ground of lack of intention to extend lease. There was no valid termination and lease was deemed continued and extended even after 2006. Hence,

It was further submitted that trial Court in impugned judgment specifically held that on face of record it was clear that lease deed between Lessee and Lessor was for a total period of thirty years and Lessee had spent considerable amount to put up construction till second floor and termination of lease after initial period of twenty year would cause great prejudice and loss to Lessee. He further submitted that Lessee had not received any rent from tenants from April 2008. Because of illegal and high handed acts of Purchaser disturbing peaceful possession under valid lease

In support of his submissions, learned counsel for appellant relied upon following decisions: Sl. No. Citation Proposition of law 1 1989 Supp (1) SCC 487 Provash Chandra Dalui and anr. v/s Biswanath Banerjee and anr. While interpreting contract, best interpretation is from context. Every contract to be construed with reference to subject and whole of its terms. The whole context must be considered to ascertain intention of parties. Distinction between extension and renewal was chiefly that in case of renewal a new lease is required, while in extension same lease continuous by performance of stipulated act. In other words, ‘extension’ in its proper and usual sense in connection with a lease means prolongation of lease. 2

Sri. P.B. Raju, learned counsel for respondents submitted that lease deed between Lessor and Lessee was executed on 22.01.1986. It expired on 22.01.2006. Thereafter on 17.03.2008, suit property was sold to Purchaser intimating Lessee about purchase. On 25.03.2008, he gave reply to notice dated 17.03.2008. Thereafter on 23.03.2008, notice terminating lease was issued to Lessee. Said notice was replied on 28.03.2008.

Learned counsel submitted that Lessor was absolute owner of suit property. Under registered lease deed dated 22.01.1986, Lessee took it on lease from Lessor for twenty years. Thereafter, another agreement was executed on 05.04.1986 wherein Lessee under took to pay property taxes for entire property including construction to be put up. Under lease deed dated 22.01.1986, Lessee was entitled to put up residential/non- residential building on suit property with right to sub-lease same. It was stipulated that sub-lease would be co-terminus with lease. Lessee put up construction as per lease and let portions thereof to third party sub-lessees. Lease agreement stipulated that after expiry of lease period of twenty years, Lessor had to execute a

It was further submitted that contrary to agreement, Lessee failed to pay property tax from 1999 till filing of suit. Total accumulated dues towards property tax till date was Rs.1,05,78,062/-. Principal amount of tax due from 2008 till date without interest and penalty was Rs.25,71,450/-. Since period of lease expired without exercise of option for seeking extension of period, Lessor became absolute owner of entire suit property including superstructure as provided in lease agreement. Thereafter, Lessor sold suit property to Purchaser under registered sale deed dated 17.03.2008. On same day, Lessor intimated Lessee about sale of suit property to Purchaser. Said notice specifically

Learned counsel submitted that Lessee failed and neglected to pay admitted rent from date of suit till issuance of direction in appeal. During cross-examination Lessee admitted that rent of premises in locality to be at Rs.50/- per sq.ft. Even after determination of period of lease, Lessee was squatting over suit property without paying rent or property tax.

In view of above, Section 106 of T.P.Act, would come into play and Lessee would be a month to month tenant by holding over, terminable by issuing 15 days notice. It was submitted that Section 17 of Indian Registration Act, mandated that a lease in excess of period of 11 months required registration since rent stipulated was more than Rs.100/-. Without execution of fresh lease deed and getting it registered, claim of Lessee about

While dealing with issues no.1 and 2 in O.S.no.3484/2008, trial Court referred to sale deed dated 17.03.2008 - Ex.P4 and notices for attornment of tenancy - Ex.P5 and P6 to hold that there existed relationship of landlord and tenant between Purchaser and Lessee and his Sub-tenants. Referring to notices dated 23.03.2008 – Ex.P7 issued by Purchaser terminating tenancy and calling for handing over vacant possession – Ex.P7,

Learned counsel submitted that additional issue no.1 in O.S.no.3484/2008 was similar as issue no.1 in O.S.no.25639/2008. He submitted that clause 3(d) of lease deed specifically stated that right to claim option of extension of time was subject to Lessee performing all covenants and conditions on his part and by executing/registering new lease deed for option period of ten years. Said clause being clear, does not provide room for argument that after expiry of twenty years of lease period, it would extend automatically for additional ten years. It was further submitted that said contention contradicted with reliefs sought and demand made from Lessor to execute renewed lease deed.

It was further submitted that since clause 3(d) specifically stipulated rent for first five years of additional ten years at Rs.7,870/- and for next five years at Rs.9,050/- also clarified intention. Since Lessee continued to pay rent at Rs.6,844/-, it was clear that he was neither interested nor ready and willing for invoking option of renewal of lease for next ten years. Hence, he continued as month to month tenant, which was rightly terminated

Trial Court further observed that PW.2 – Sri.M.P.Vinod one of witnesses to Ex.P1 – lease deed admitted that after expiry of initial twenty years of lease period, another lease deed ought to have been executed for renewal period and there was no express mention for automatic extension in lease deed. Same also indicated that present case was one of renewal and not extension.

Learned counsel further submitted that reliefs sought for in O.S.no.25639/2008 virtually indicated intention to squat on suit property in perpetuity. Therefore, trial Court on appreciation had passed impugned judgment and decree, which did not call for any interference. 50. In support of his submissions, learned counsel for respondents relied upon following decisions:

Insofar as decisions relied upon by learned counsel for appellant, it was submitted that ratio in Provash Chandra Dalui's case (supra) would further case of respondent than appellant. By reading entire clause 3(d) in context of lease deed – Ex.P1, it would be clear that it was a clause for renewal and not extension.

It was submitted that Hon’ble Supreme Court in case of Hardesh Ores (P) Ltd. (supra), would support case of respondent than appellant, since it was held that in order to give effect to renewal of lease, a document has to be executed evidencing renewal. Grant of renewal would be a fresh grant and there was no concept automatic renewal of lease deed by mere exercise of option by Lessee. In Ranjith Kumar Dutta’s case (supra), Lessor had not terminated tenancy, but accepted rent even after expiry of initial lease period of 15 years. Under such circumstances, it was held that there was a renewal and principle of holding over would not

In reply to submissions of respondents, learned counsel submitted that contention that Lessee failed to pay property tax was denied. Interpretation of clause 3(d) was wholly misconceived as present case was one for extension of lease period and not renewal which was crystal clear from use of words “in such an event”, “continue” and “conferred” used in said clause read with other provisions of lease deed. Pre-condition for seeking continuation or extension of time, was Lessee paying rents and performing covenants of lease during first term of lease. Since it was not disputed that Lessee had performed conditions of lease, he was entitled for continuation/extension for further period of ten years after expiry of twenty years. Admitted rent as per lease deed deposited before this Court was withdrawn unconditionally.

Contentions that property tax were misconceived and beyond scope of appeal, as there was no prayer or issue framed about same. Therefore, enlargement of scope of suit/appeal was not permissible. Without prejudice to such contention, it was submitted that Exs.D20, D25 to 35 were receipts for having paid

Contention that lease came to an end in January, 2006 and therefore, purchaser became owner of suit property under sale deed dated 17.03.2008 and there was valid termination of tenancy. Therefore, liability to pay property tax would be on him. It was further submitted that possession of two portions of ground floor was taken from Mr.Liu Kuo Chiang on 09.09.2008 and from Sri.R.Bhaskar on 31.05.2014 in violation of interim order. Thus,

Insofar as decisions cited by respondents, it was submitted that decision in Hindusthan Petroleum's case (supra) was in context of clause for renewal which made it mandatory for Lessee to address letter opting for renewal before expiry of original term, which was not complied in that case. Therefore, said ratio would be inapplicable to this case. Even Uptron Powertronics case (supra) was also interpreting renewal and revocation clause. In S. Rajdev Singh's case (supra) tenant had not filed suit for specific performance of renewal clause, but merely continued to pay rent unlike in this case. In the cases of Abhinav Outsourcing (supra), Vijay Mahipal and Shashi Chander Tandon, High Court of Delhi proceeded on admitted position that clause in lease was one of renewal and not for extension, unlike facts in present case where it is for extension. On said submission, learned counsel sought for allowing appeal by rejecting contentions of respondents.

Heard learned counsel for parties, perusing impugned judgment and decree and records.

It is also his case that due to various circumstances, Lessor had assured him to extend lease beyond thirty years.

On other hand, it is the case of purchaser that lease deed dated 22.01.1986 clearly stipulated that term of lease would be twenty years. Though, clause 3(d) provided for an option to Lessee, to seek renewal, it was subject to mandatory terms and conditions. Without complying said conditions, no claim for renewal could be laid. It is also his contention that failing to invoke option for renewal, Lessee was deemed to have waived such right. Purchaser further contends that since initial period of lease expired on 21.01.2006, without invocation of right for renewal and execution of fresh lease deed, Lessor was justified in selling it to Purchaser. Further, as Lessee continued in possession of premises,

On consideration of rival claims, trial Court decreed suit filed by Purchaser and dismissed suit filed by Lessee.

In view of grounds urged, common point that arises for consideration in these appeals is: “Whether impugned judgments and decree passed by trial Court call for interference?”

Reasons assigned by trial Court for decree of Purchaser’s suit for ejectment are that, after purchase of suit property on 17.03.2008, Lessor and Purchaser intimated Lessee about purchase and attornment of tenancy. Thereafter, on 23.03.2008, Purchaser issued notice for termination of tenancy to Lessee and calling for handing over vacant possession. Subsequently, on 11.04.2008, Purchaser issued quit notices to sub- tenants also. In his reply to above, Lessee claims to have continued in tenancy. Based on same, it held relationship of landlord and tenant established.

It is also held that except his own oral evidence, Lessee failed to corroborate same with any other evidence. For want of efforts to invoke renewal clause and securing same by obtaining fresh registered lease deed, claim of Lessee for automatic renewal was liable for rejection.

Trial Court next proceeded to consider issue whether there was valid determination of lease agreement. Since it was not seriously disputed that Purchaser and Lessor had issued intimation letter dated 17.03.2008 – Ex.P3 to Lessee about sale of suit property by Lessor. Further as per Ex.P6 – legal notice dated

Insofar as claim for monthly damages of Rs.4,60,000/-, it held that same was required to be determined after proceedings under Order XX Rule 12 of C.P.C. It answered issue regarding non- joinder of necessary party in negative, since all necessary parties were arrayed. Considering likewise, it answered issue regarding sufficiency of Court fee in favour of purchaser and based on findings proceeded to decree O.S.no.3484/2008.

In O.S.no.25639/2008, issue no.1 was similar as that of additional issue no.1 in Purchaser’s suit. Issue no.2 was ancillary to issue no.1. Assigning same reasons as in other suit on this issue, it answered them against Lessee.

Referring to assertion by Lessee during cross- examination that he had document to establish payment of advance amount of Rs.1,00,000/-, which he failed to produce, it answered issue no.3 against Lessee.

While considering issue no.4 regarding entitlement of Lessee for grant of permanent injunction, it observed that Lessee had failed to offer any evidence to establish illegal interference to possession of Lessee over suit property. It held that as Purchaser had filed O.S.no.3484/2008 for ejectment after issuing notice of termination of lease, said conduct could not be termed as interference and answered said issue also against Lessee. Further as Lessee did not dispute alienation of suit property by Lessor to Purchaser under registered sale deed dated 17.03.2008 which was also marked in evidence, it answered issue no.5 in favour of Purchaser.

Further, as both Lessor and Purchaser had intimated Lessee about sale of suit premises and intimating attornment of tenancy in favour of Purchaser and thereafter Purchaser had issued notices on 23.03.2008 and 11.04.2008 to Lessee as well as sub- tenants for terminating lease as per Section 106 of T.P.Act. Since said notice was replied to service of notice was established and therefore it answered issue no.6 in favour of Purchaser.

It answered issue no.7 against Purchaser since he did not lead any evidence to substantiate that Court fee paid on plaint

From above, it is seen that there is no dispute about basic facts and relationship between parties. Thrust of Lessee’s claim is about automatic extension of lease based on terms of clause 3(d) of lease deed dated 22.01.1986. For better appreciation it is extracted as below:

Relying upon decisions in the cases of Provash Chandra Dalui, Lalji Tandon, Hardesh Ores, Govind Impex Pvt. Ltd., M/s. Dutta and Associates, Ranjith Kumar Dutta

Submission is sought to be infused with substance by stating that agreement between Lessor and Lessee was that, Lessee would construct building on suit property at his own cost, induct tenants and earn rental income to reimburse his investment during period of lease. It is also contended that time taken for obtaining sanction for construction of building and additional construction of second floor had reduced viability and profitability of said project for Lessee. Considering duration required for complete reimbursement and earn profits, duration was set at thirty years but split into two portions for sake of convenience only. It is further argued that as

In Provash Chandra Dalui's case (supra), Hon’ble Supreme Court has held that in order to construe true meaning of clauses in a contract, reference was to be made to its object and whole of its terms. Facts in said case reveal that only condition for obtaining extension of term of lease stipulated was payment of enhanced rent, rates and taxes without default. There was no dispute that tenant had exercised option of extension on enhanced rent as provided. Therefore it was held said clause was one of extension.

In Lalji Tandon's case, also lease contained a clause which conferred option on tenant to seek renewal of lease for another term and upon such option being exercised, landlord was to execute renewal lease agreement, without any fresh covenants. Hon’ble Supreme Court held that right of option of renewal exercised by tenant could not be stalled by subsequent exercise of right of re-entry on alleged breach. In instant case, as on date of

Admittedly, clause 3(d) mandated that for exercise of option of right of renewal, tenant was required to pay enhanced rent mentioned. On exercise of such option, Lessor was required to execute and register new lease deed for option period. Therefore option of renewal was subject to performance covenants. It is not in dispute that until after being notified of termination of lease, Lessee had continued to pay earlier stipulated rent and not called upon Lessor to execute new lease deed for option period. Purchase of suit property by Purchaser being more than two years after expiry of initial period of lease, without exercise of option of renewal by Lessee, benefit of ratio in Lalji Tandon's case (supra) cannot be claimed.

In Hardesh Ores Pvt. Ltd. case (supra), it was held that lessee had exercised option of renewal well before expiry of original period. Therefore mere denial of option by lessor would not

In Govind Impex Pvt. Ltd. case (supra), Hon’ble Supreme Court by reading two clauses of lease agreement, one providing period of lease to be nine years and another providing option to lessee to opt for renewal at its sole discretion for further period of nine years by giving notice of renewal etc., as indicating intention of parties that total duration of lease would be 18 years for purposes of prosecution under Section 269-UA(f)(i) of Income Tax Act. Applying said ratio, duration of lease cannot be disputed to be thirty years split into two portions of twenty years and ten years. But invocation of option period of lease was subject to performance of covenants and conditions, which as observed above were not fulfilled.

In M/s. Dutta & Associates case (supra), learned Single Judge of High Court of Calcutta considering renewal clause in lease deed which provided for perpetual right of renewal to lessee, on such terms and conditions as Government may find necessary to add to lease. Interpreting said clause, it was held that tenant continuing in possession without invoking right of renewal would

In Ranjith Kumar Dutta's case (supra), it was found that notice invoking option of renewal was issued before determination of lease and lessee had continued in possession by paying rent which was accepted by landlord. But in instant case, there was no express exercise of option of renewal. It was not demonstrated to be so even by conduct as Lessee had not paid rent as stipulated for option period, but continued to pay earlier rent.

In Smt. Renuka Seal & Ors. case (supra), Division Bench of High Court of Calcutta, in fact observed that renewal of lease can be made only through a bilateral process. It observed that renewal could be made at sole option of one of parties, where it is on same terms and conditions. Admittedly in instant case, renewal of lease for option period was subject to higher rate of rent

Further, though in Harshad Govardhan Sondagar's case (supra), Hon’ble Supreme Court held that so long as lease of immovable property get determined, lessee has right to enjoy property which was a right to property and could not be taken away without authority of law as provided in Article 300-A of Constitution of India. Ratio was laid down while considering rights of lessee under provisions of SARFAESI Act. Since decision was rendered interpreting provisions of SARFAESI Act, ratio would not apply to this case.

As per ratio of decision by Division Bench of High Court of Calcutta in Hindusthan Petroleum Corporation Ltd. case (supra) is that exercise of option of renewal can only be made in full compliance with conditions mentioned. In instant case, Lessee did not pay enhanced rent nor call upon Lessor to execute fresh lease deed for option period prior to expiry of period of lease. Further, Division Bench of High Court of Delhi, in Uptron Powertronics Ltd. case (supra) held that renewal of lease without registered instrument was invalid and could be terminated under

In Vijay Mahipal & Co., (supra) Single Judge of High Court of Delhi, by relying upon Division Bench decision in Bhanu Mehra v/s Dato Brij Kishore & Ors.1 and decision of Hon’ble Supreme Court in DDA v/s Durga Chand Kaushish2, held that there was no difference between renewal of lease and fresh lease and right of renewal would arise only when notice is given by lessee to lessor in terms of renewal clause and after performing all conditions precedent as provided in renewal clause. In instant case, Lessee has not notified Lessor of his intention to opt for renewal of lease. Therefore lease would continue by tenant holding over.

In Rasiklal M. Mehta's case (supra), learned Single Judge of High Court of Madras has held that once renewal period would fall within Section 107 of T.P.Act, it could only be by registered instrument, notwithstanding sole option conferred on lessor or lessee, for seeking renewal. It was further observed that once it is held so, unless lease was renewed by registered

In view of above, finding of trial Court that claim of Lessee for automatic renewal was not justified. 92. Further claim of Lessee for specific performance of oral agreement for extension of lease beyond thirty years by further period of six to seven years etc., is sought to be substantiated by leading oral evidence of Lessee as PW.1 in O.S.no.25639/2008. In his deposition, Lessee stated that after signing lease deed, when he applied for building permission to put up commercial complex on suit property, it was rejected by Corporation calling upon him to first obtain bifurcation of schedule property and thereafter obtain conversion of land use which would consume considerable time.

He further deposed that at that stage he offered to resile from agreement citing delay. However Lessor assured him and promised that delay and cost incurred for obtaining necessary permission, bifurcation etc., would be suitably compensated by

Further, Section 91 of Indian Evidence Act, 1892, states that where terms of contract are required by law to be reduced into writing, no evidence of any oral agreement or statement shall be admitted as between parties for purposes of varying or adding to its terms. Hon’ble Supreme Court in Raval & Co., case (supra) has

While discussing Lessee’s claim for automatic renewal of lease, it is concluded that on failure of Lessee to exercise option of renewal prior to expiry of initial period of lease, tenancy would continue on month to month basis and would be terminable by recourse to Section 106 of T.P.Act.

In instant case, after expiry of initial period of lease, Lessor sold suit premises to Purchaser on 17.03.2008. On same day, both Purchaser as well as Lessor issued intimation of purchase to Lessee and attorning tenancy in favour of Purchaser. Thereafter by notice dated 23.03.2008, Purchaser terminated lease agreement. Notice of termination was also issued to sub-tenants on 11.04.2008. Proof of service of said notice lies in form of replies issued by Lessee and Sub-tenants. Since there is clear expression of intention by Purchaser as Lessor to terminate lease deed and repossess suit property, requirement of Section 106 of T.P.Act,

In view of above findings, rejecting claim of Lessee for declaration, specific performance etc., and also holding that there was lawful termination of tenancy by Purchaser, Lessee would not be entitled for any relief. Therefore, rejection of his prayer for restitution cannot be faulted having due regard to ratio laid down in decisions i.e., South Eastern Coalfields Ltd. & Karnataka Rare Earth & Another (supra).

Hence, point for consideration is answered in negative. It is held that neither of appeals are meritorious. Consequently, we pass following: ORDER