The Supreme Court has held in Mahendra Saree Emporium v.

GC Srinisava Murthy (2005) 1

SCC 481 that: a renewal of a lease is really a grant of a fresh lease though it is called a renewal
because it postulates the existence of a prior lease. If enhancement of rent is made conditional
upon the grant of a fresh lease, renewal could take place only on the expiry of initial lease and
not before.
The terms of a lease may provide for renewal or extension of the lease. The distinction between
renewal and extension of lease is chiefly that in the case of renewal, a new lease is required,
while in the case of extension, the same lease continues in force during the additional period by
the performance of the stipulated act. A covenant for renewal is not treated as a part of the terms
prescribing the period of lease, but only entitles a lessee to obtain a fresh lease. 1 If the renewal
clause is not clear and specific regarding the terms of renewal, the court is to ascertain the
intention of the parties from the materials on record. Whether the option clause contained in a
lease provides for renewal or extension is to be ascertained primarily from its terms and
conditions. If there is uncertainty or ambiguity, the other covenants of the lease would be read to
find out the intention of the parties. Oral evidence led by the parties at trial would resolve the
issue.
Renewal of a lease is a creation of a fresh lease and a fresh lease is required to be registered
according to law, but where no such fresh lease is created in terms of the renewal clause of the
original registered deed of lease, no question of registering it arises. If in such a case, the lessee
continues in possession in exercise of his option as per the renewal clause over the leased period
after the initial period is over, his continuance in possession would be deemed to be under the
original registered deed. The further period is to be treated in such a case as part of the period of
the original registered deed of lease. Thus, in such a case, where a lease contains a renewal or
extension clause, the period does not remain limited to the initial period only, but it breaks the
limit to further flow for another term and the lease does not determine at the end of the initial
period on exercise of unilateral option by the lessee, as in such a case, there does not arise any
question of fresh assent by the lessor because the right to enjoy for a further period gets
conveyed to the lease under the original registered deed itself.2
Whether the principal lease executed between the parties containing a covenant for renewal, is
renewed in accordance with the said covenant, the question whether the renewed lease shall also
contain similar clause for renewal depends on the facts and circumstances of each case, regard
being had to the intention of the parties as displayed on the original covenant for renewal and the
surrounding circumstances.
A lease with the right of renewal is, in the absence of clear language, construed as giving a right
to one renewal, but not a right to a second or third renewal.3

1 Hindustan Petroleum Corporation Ltd v. Dolly Das (1999) 4 SCC 450, para 12
2 Ranjit Kumar Dutta v. Tapan Kumar Shaw AIR 1997 Cal 278.
3 Syed Jaleel Zame v. R Venkata Murlidhar AIR 1981 AP 328.