LAW OF PROPERTY

LEASE OF IMMOVABLE PROPERTY

(SECTION 105-107)

University Institute of Legal Studies

Panjab University

B.Com. LL.B. (Hons.) – 7th SEMESTER

2020-21

Presented To: Presented By:

Dr. Anju Choudhary Sakshi Mangla
Teacher In-Charge 191/17 – Section D

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 ACKNOWLEDGEMENT

Any work requires the effort of many people and this is no different. First of all,
I want to express my heartiest thanks to my teacher Dr. Anju Choudhary, for
firstly making me understand the contents of my topic and then giving me a
wonderful opportunity to present this topic in form of an assignment. Her support
and teaching helped me a lot to complete this assignment.

I would also like to thank my friends who were always available to me for help
and also helped me collect data for my project through various sources. They also
provided me with material I needed and made my work as easy as possible.

Regardless of anything, I wish to express my gratitude to those who may have

contributed to this assignment, even though anonymously.

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 TABLE OF CONTENTS

• Table of Cases …………………………………………………... 4

• Introduction ……………………………………………………... 5
• Of Lease of Immovable Property
➢ Section 105 …………………………………………………. 7
➢ Section 106 ………………………………………………….12
➢ Section 107 ………………………………………………….15
• Conclusion ……………………………………………………….18
• Bibliography ……………………………………………………. 19

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 TABLE OF CASES

• Bengal A & I Corp. v. Corp. of Calcutta …………………………. 9

• Chemical Sales Agencies v. Naraini Newar ……………………….17
• Kali Ram v. Mirza Wakar Ali ……………………………………. 14
• Kulkarni Patterns Pvt. Ltd. v. Vasant Baburao Ashtekar ………… 14
• Lov Rajkumar v. Daya Shankar …………………………………… 9
• Makali Engg. Works Pvt. Ltd. v. Dalhousie Properties Ltd. ………10
• NIIT v West Star Constructions Pvt. Ltd …………………….…… 10
• Punjab National Bank v. Ganga Narain Kapoor ……………...……13
• Rajendra Pratap Singh v. Rameshwar Prasad ……………….……. 16
• Ramdas Bansal v. Kharak Singh Baid ……………………………... 9
• Rye v. Rye …………………………………………………………. 9
• Shri Narain Gosain v. Collector of Cuttack …………………………9
• State Bank of Hyderabad v. Nehru Palace Hotels …………………. 8

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 INTRODUCTION

Under the Indian legal system, properties are divided into two categories –
movable and immovable. The Transfer of Property Act, 1882, which came into
force on July 1, 1882, deals with the aspects of transfer of properties between
living beings. One of the oldest laws in the Indian legal system, the TPA is an
extension of the law of contracts and runs parallel to the succession laws. Before
the Transfer of Property Act came into existence, property transfers in India were
regulated by the English law.

The Object of Act is given in its Preamble. The Act was enacted because it was
necessary to give a definite meaning and make changes in some rules which
existed before its enactment. The Act is applicable primarily on Transfer of
Immovable property from one living being (inter-vivos) to another. Also, the Act
is applicable on property transfer by individuals, as well as by companies.
However, the Transfer of Property Act is applicable to Acts of parties. It does
not cover transfers by the operation of law, in the form of inheritance, forfeiture,
insolvency, or sale through the execution of a decree. The Act is also not
applicable on the disposal of properties through Wills and does not deal with
cases of succession of property.1

The Scope of the Act is limited. It is not exhaustive. It does not contain complete
law for all kinds of transfers in India. There are other modes of transfer as well.
For example, even though the easementary rights are proprietary rights the Act
is not applicable to easements. Moreover, this Act has territorial limitations as
well. The Act is not applicable to all the territories. For example, certain
territories included in the State of Punjab.2

1
https://housing.com/news/transfer-of-property-
act/#:~:text=Before%20the%20Transfer%20of%20Property,effect%20on%20July%201%2C%20188
2(Visited on 12 December, 2020).
2
Sinha R.K., The Transfer of Property Act, Central Law Agency, Allahabad, Twentieth Edition, 2019.

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To make the transfer valid it is very essential that the person should be competent
to make a contract and it should not be forbidden by law. The Transfer of
Property Act talks about six types of property transfers – Sale, Lease, Mortgage,
Exchange, Gift, Actionable claim.

Lease is covered in Chapter V of the Act by the title – ‘Of Leases of Immovable
Property.’ Section (105-117) of the Act deals with the provisions governing
Lease.

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 OF LEASES OF IMMOVABLE PROPERTY

In India, transfer of property is not possible for every individual because of

financial issues. The permanent or absolute transfer is a luxury for some people,
but a temporary transfer is something that has given every citizen the right of
enjoying any property. One of the modes of transferring property for a particular
period of time is Lease. Lease is a transfer of an interest in the property for a
stipulated period of time without transferring the ownership of that property. In
a lease, right of possession is transferred instead of the right of ownership. Lease
is governed by the Transfer of Property Act, 1882 and it is given from Sections
105 to 117.3

➢ SECTION 105 – LEASE DEFINED

Section 105 of the Property Act 1882 defines Lease as – “A lease of immovable
property is a transfer of a right to enjoy such property, made for a certain time,
express or implied, or in perpetuity, in consideration of a price paid or promised,
or of money, a share of crops, service or any other thing of value, to be rendered
periodically or on specified occasions to the transferor by the transferee, who
accepts the transfer on such terms.

Lessor, lessee, premium and rent defined: The transferor is called the lessor, the
transferee is called the lessee, the price is called the premium, and the money,
share, service or other thing to be so rendered is called the rent.”

Explanation - Section 105 states the definition of a lease that it is a transfer of

immovable property for a particular time period for a consideration of which, the
transferee has accepted the terms surrounding the agreement. The expression
“transfer of a right to enjoy” stands in contrast with the words “transfer of

3
https://blog.ipleaders.in/lease-under-tpa-
1882/#:~:text=In%20a%20lease%2C%20right%20of,from%20Sections%20105%20to%20117(Visite
d on 13 December, 2020)

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ownership” occurring in Section 54 in the definition of sale. In a sale all the rights
of ownership, which the transferor has, passes on the transferee. Therefore, lease
is a transfer of only partial interest and not absolute interest.

In a lease transaction, the transferor is called the Lessor, the transferee is called
the Lessee, the price paid or promised is called the premium and the money,
share, service or other thing to be so rendered is called the Rent.

The definition of lease is also explained by the Supreme Court in the case of
State Bank of Hyderabad v. Nehru Palace Hotels.4 The Court in this case held
that a lease entails the transfer of right to enjoy such property in respect of which
a lease is made out for a defined time which is expressed or implied or even in
perpetuity in consideration of price paid or promised to be paid in cash or
anything of value which is to be rendered periodically or on specified occasions.5

Essential Ingredients of Lease –

The essential conditions for lease according to Section 105 of the Transfer of
Property Act, 1882 are:

1) The Parties to Lease – In a lease, two contracting parties are necessary.

The Parties are Lessor and Lessee. The owner or the titleholder of the
leased asset or property is called the ‘lessor’ and User of the leased asset
or property is called the ‘lessee.’ In a lease, there is not a transfer of
ownership but transfer of only possession. Therefore, not only the owner
but the lessee also is entitled to grant lease. Such lease is called the sub-
lease or the derivative lease. Lessee may be a juristic person as well. For
example, a company or a registered firm.

4
AIR 1991 SC 2130
5
https://thefactfactor.com/facts/law/civil_law/topa/lease-of-immovable-property/2610/(Visited on 11
December, 2020)

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 In Lov Rajkumar v. Daya Shankar,6 the court opined that a person who
himself is not possessed of any right or title in the property cannot pass
any interest and cannot create a lease.
Both the lessor and the lessee must be competent to enter into the contract
of lease. Therefore, a lease to a minor is void. In the case of Shri Narain
Gosain v. Collector of Cuttack,7 the court held that the lessor and lessee
must also be the persons who are competent to contract. A lawful
agreement of lease of immovable property is a contract within the meaning
of Section 10, Indian Contract Act.
Since one cannot contract with himself, In the case of Rye v. Rye,8 the
Court held that a man could not also grant a lease to himself.
2) Subject-matter of the lease - The subject-matter of the least must be the
transfer of the limited interest which is the right of the enjoyment of the
immovable property. Such limited interest is called the demise.
In Bengal A & I Corp. v. Corp. of Calcutta,9 the court held that the subject
matter of lease must be ascertained and clearly defined. If the land is yet
to be ascertained and carved out of a large parcel of land, there cannot be
a demise.
3) Transfer of Right of Enjoyment - In lease there is a transfer of right of
enjoyment of property. Right of enjoyment is transferred only when there
is transfer of possession. In mortgage and lease, only partial interest is
transferred, therefore it is transfer of a limited estate. This is right in rem,
i.e., against the whole world.
In the case of Ramdas Bansal v. Kharak Singh Baid,10 the Court held that
lease is a doctrine of separation of possession from ownership. By virtue

6
AIR 1986 DEL 364 (368)
7
AIR 1986 ORI 46
8
1962 A.V. 496
9
AIR 1960 CAL 123 (133)
10
2007 (3) Cal HIN 851 (858)

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 of the execution of a lease deed, the title remains with lessor while the
right of enjoyment passes to the lessee.
4) Duration of Lease – The period for which the right to use the property is
transferred is called ‘term’ of the lease. The essential of a lease is that the
right to enjoy the property must be transferred for a certain time, express
or implied or in perpetuity. The document of lease must show the time
period of operation of lease and when it is going to commence. It may
commence either in the present or in the future or on the happening of a
certain contingency which is bound to happen.
In Makali Engg. Works Pvt. Ltd. v. Dalhousie Properties Ltd.,11 the Court
held that to execute legally binding lease agreement, one of the essential
elements is that it has definite period unless it is a lease in perpetuity.
5) Consideration - A lease is a transaction which has always to be supported
by consideration. Consideration may be either premium or rent. Where the
whole amount payable as consideration is paid in lump sum it is called
premium the consideration which is paid periodically is called rent.
In NIIT v West Star Constructions Pvt. Ltd.12 case, the Court held that a
transfer of right to enjoy a property in consideration of a price paid or
promised to be rendered periodically as on specified occasion is the basic
fabric for a valid lease. Such a transfer can be made expressly or by
implication. Once there is such a transfer of the right to enjoy the property,
a lease stands created.
6) Agreement to Lease – Agreement to lease is a contract under which a
person promises to grant lease on a future date. It only creates a personal
obligation. It is a promise by one person to grant the lease and accepted by
the other. Agreement to lease is an executory contract and if this contract

11
2006 (1) Cal HN 419
12
2009 (2) ArbLR 535 (Del) (DB)

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 is in writing, the intending lessee is entitled to defend his possession under
Section 53-A.

Difference between Mortgage and Lease –

Mortgage is created to provide security for repayment of a debt but without

transfer of possession except when there is usufructuary mortgage or one with
conditional sale. In lease, the lessee gets possession of the property for its use
and enjoyment in return for lease money or rent. The rights of the parties in the
two transactions are different they being linked with the basic nature of the
transaction. There can be a perpetual lease but not a perpetual mortgage.13

Difference between Lease and License –

Lease is the transfer of the right of enjoyment in an immovable property. And

License, on the other hand is the right of a person to use the land of another while
it remains in possession of the latter. The following are the points of difference
between the two:

1) In a lease there is a transfer of an interest in the immovable property. In

the case of a license, there is no transfer of interest, although the licensee
acquires a right to occupy the property.
2) If during the continuance of the lease, any accretion is made to the
property, such accretion is deemed to be comprised in the lease. A licensee
has no property in the land, and therefore he acquires no right by accretion.
3) A lease is transferable and heritable. A license being purely a personal
privilege is non-transferable and non- heritable.
4) A lessee is entitled to maintain a suit in his own name against trespassers
and strangers. A license does not create an interest in property in favor of
licensee and therefore, he is not entitled to maintain suits in his own name.

13
Supra-note 2.

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 5) Death of either party does not affect a lease, whereas a license is
terminated in such circumstances.
6) A lease can be terminated only in eight different ways as mentioned
Section 111 of Transfer of Property Act. A license can be revoked at
pleasure.14
➢ SECTION 106 – DURATION OF CERTAIN LEASES IN THE
ABSENCE OF WRITTEN CONTRACT OR LOCAL USAGE –

This section was amended in 2002. It has a retrospective effect. It will only be
applicable if the contract is silent and there is no local law or usage of that region.
It is more of a procedural section. The provisions of Section 106 will have no
effect in case the lease is not valid as per Section 107, TPA.

“(1) In the absence of a contract or local law or usage to the contrary, a lease
of immovable property for agricultural or manufacturing purposes shall be
deemed to be a lease from year to year, terminable, on the part of either lessor
or lessee, by six months' notice; and a lease of immovable property for any other
purpose shall be deemed to be a lease from month to month, terminable, on the
part of either lessor or lessee, by fifteen days' notice.

Explanation – Section 106 provides for the duration of the lease in the absence
of the lease agreement. It lays down that in the absence of a contract, lease can
be ended by both parties to the lease by issuing a notice to quit.

Hence, two things can be derived from this Sub-section:

1) When a lease for Agricultural or manufacturing purpose is deemed to be

of year to year, then it will attract a 6-month notice that the lease will end
on the expiry of 1 year from the date of the commencement of the lease.

14
https://www.lawweb.in/2018/06/notes-on-leases-of-immovable-property.html (Visited on 12
December, 2020)

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 2) When a lease for any other purpose is deemed to be of the month to month,
then it will attract a 15-day notice that the lease will end on the expiry of
1 month from the commencement of the lease.15

In the case of Punjab National Bank v. Ganga Narain Kapoor,16 it was held
that if any person claims to the contrary that the lease was for a fixed term or to
be a yearly lease instead of a lease from month to month, he has to prove by
legal, valid and reliable evidence.

Q. A lets out a field to B at an annual rental of Rs. 40,000 per English calendar
year from 1st January to 31st December. A serves a six months’ notice under S.
106 of the TP Act to B, on 15.9.2002 terminating the lease. How early can A
institute a suit for eviction of B on the basis of the said notice?

Ans. Section 106 of the T.P. Act provides that a lease of immovable property for
agricultural or manufacturing purposes shall be deemed to be a lease from year
to year terminable on the part of either lessor or lessee, by six months’ notice
expiring with the end of a year of tenancy. In the instant case the notice was
served to B on 15.9.2002. As per provisions of said section 106, such a lease is
terminable by a six months’ notice ending with the month of tenancy. Here, the
said six months ending with the year of tenancy would commence from July to
December of any English calendar year. This period, the lessee is likely to get
only from July 2003 to December 2003. Hence at the earliest, A can institute a
suit for eviction of B on 1st January 2004, and not on any date before that.

(2)Notwithstanding anything contained in any other law for the time being in
force, the period mentioned in sub-section (1) shall commence from the date of
receipt of notice.

15
Supra-note 3.
16
AIR 1994 ALL 221.

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Explanation - Section 106 also clarified that the period of notice mentioned
above commences from date of receipt of notice.

(3) A notice under sub-section (1) shall not be deemed to be invalid merely
because the period mentioned therein falls short of the period specified under
that sub-section, where a suit or proceeding is filed after the expiry of the period
mentioned in that sub-section.

Explanation - It provided that even if a short period is mentioned in the notice,

as long as the suit or proceeding is filed after expiry of period stipulated above,
the notice would not be invalid.

(4) Every notice under sub-section (1) must be in writing, signed by or on behalf
of the person giving it, and either be sent by post to the party who is intended to
be bound by it or be tendered or delivered personally to such party, or to one of
his family or servants at his residence, or (if such tender or delivery is not
practicable) affixed to a conspicuous part of the property.]”

Explanation - There is proviso to this section which states that the notice to quit
in this section should be written and conveyed to the party who is required to
abide by it. If this is not possible, then it should be attached to a conspicuous
place in that property.

In the case of Kali Ram v. Mirza Wakar Ali,17 notice was sent on correct address
to addressee who refused to accept it. The presumption lies with regard to notice
on addressee/defendant. It is the addressee/defendant who has to prove that either
notice was not sent on correct address or same was not served upon him.

In the case of Kulkarni Patterns Pvt. Ltd. v. Vasant Baburao Ashtekar,18 it was
held by the Supreme Court that in case of a company, notice, as required by
section 106, could be sent by registered post in the name of a company.

17
AIR 2005 NOC 296 (UP).
18
AIR 1992 SC 1097.

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Tenancy at Will and Tenancy at Sufferance –

Under the Tenancy at will, a tenant occupies the property with the consent of the
owner but without necessarily a written contract or lease. It is not a lease for any
definite duration. Neither party is sure about the duration of the lease.

However, Tenancy at sufferance is an agreement in which a property renter is

legally permitted to live on a property after a lease term has expired but before
the landlord demands the tenant to vacate the property. If a tenancy at sufferance
occurs, the original lease conditions must be met including the payment of any
rents. Otherwise, the tenant can be evicted at any time without notice.19

➢ SECTION 107 – LEASES HOW MADE –

“A lease of immoveable property from year to year, or for any term exceeding
one year or reserving a yearly rent, can be made only by a registered instrument.

All other leases of immoveable property may be made either by a registered

instrument or by oral agreement accompanied by delivery of possession.

Where a lease of immoveable property is made by a registered instrument, such

instrument or, where there are more instruments than one, each such instrument
shall be executed by both the lessor and the lessee:

Provided that the State Government may from time to time, by notification in the
Official Gazette, direct that leases of immoveable property, other than leases
from year to year, or for any term exceeding one year, or reserving a yearly rent,
or any class of such leases, may be made by unregistered instrument or by oral
agreement without delivery of possession.”20

Explanation - According to section 107,

19
https://www.investopedia.com/terms/t/tenancy-at-sufferance.asp (Visited on 13 December, 2020).
20
The Transfer of Property Act, 1882.

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 1) When there is a lease of Immovable property for a term of 1 year or more
– This can only be made by a registered deed.

Lease from year to year –

Such a lease is a continuous lease. Here the lessee cannot terminate the lease
without giving a notice at the end of the year. Such a lease must be made
through a registered document.

Leases for a term exceeding one year –

Where the term of lease exceeds one year it must be registered. The Supreme
court held in Rajendra Pratap Singh v. Rameshwar Prasad,21 that a lease for
a term exceeding one year must be through a registered instrument. But for
the validity of the instrument, the signing of the instrument both by lessor and
lessee is not sine qua non. Joint execution of the instrument is sufficient for
the purpose.

Lease reserving yearly rent -

Where the rent is reserved for the whole year, there is a presumption that it a
year-to-year lease and it is compulsorily registerable.

Permanent Leases –

Permanent leases too are compulsorily registrable. Whether a lease is

permanent or not, depends on the terms laid down in the deed and the object
and the circumstances under which the lease was created.

2) All other leases of Immovable property – Can be either made by a

registered deed or an oral agreement or settlement along with the transfer
of possession of that property.
3) When the lease is of multiple properties that require multiple deeds, it will
be made by both the parties of the lease.

21
AIR 1999 SC 37

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In the case of Chemical Sales Agencies v. Naraini Newar,22 the court held that
if a lease agreement is neither a registered document nor an oral agreement
accompanied by deliver of possession, it cannot create lessor and lessee
relationship. Such document shall not affect any immovable property nor be
received as evidence of any transaction affecting such property.

Effect of Non-Registration –

Where a Lease is compulsorily registrable but has not been registered, the lease
is invalid. If the registration is necessary, the provision for its renewal shall not
affect the requirement of its registration when a registered lease is further
renewed.

However, a person holding possession under an unregistered lease (which is

invalid) is not a trespasser, he is treated as tenant at will. Further, a lessee holding
possession under an unregistered lease may defend his possession under Section
53-A (part performance) of this Act.23

22
AIR 2005 DEL 76.
23
Supra-note 2.

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 CONCLUSION

Lease is a very important aspect of real life. Every person has witnessed a lease
deal involving renting of a house, car or etc. Therefore, it is important for the
general public to know about the rights of every individual in a lease, and to
know about the provisions that govern lease. The lease is mentioned from
Sections 105 to Section 117, out of which Sections which may help the general
public, law students and the legal fraternity have been discussed in this project
to give clarification and a basic idea about the lease.

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 BIBLIOGRAPHY

Websites –

• https://housing.com/news/transfer-of-property-
act/#:~:text=Before%20the%20Transfer%20of%20Property,effect%20on
%20July%201%2C%20188
• https://blog.ipleaders.in/lease-under-tpa-
1882/#:~:text=In%20a%20lease%2C%20right%20of,from%20Sections
%20105%20to%20117
• https://thefactfactor.com/facts/law/civil_law/topa/lease-of-immovable-
property/2610/
• https://www.lawweb.in/2018/06/notes-on-leases-of-immovable-
property.html
• https://www.investopedia.com/terms/t/tenancy-at-sufferance.asp

Books –

• Sinha R.K., The Transfer of Property Act, Central Law Agency,

Allahabad, 20th Edition, 2019.

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