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TITLE OF THE RESEARCH PAPER

NOTICE UNDER LEASE

By

Name 0f the Student: P. RAJ KUMAR

R0ll N0.: 18LLB068

Semester: IV

Name of the Pr0gram: 5 year (B.A., LL.B.)

NAME OF THE FACULTY MEMBER: PROF. P.J. NAIDU

Date of Submission:
SUBJECT: TRANFER OF PROPERTY

DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY

NYAYAPRASTHA “, SABBAVARAM,
VISAKHAPATNAM – 531035, ANDHRA PRADESH
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ACKNOWLEDGEMENT:

I am highly indebted t0 my H0n’ble Transfer of Property Pr0fess0rs, Pr0f. P.J. NAIDU f0r
giving me a w0nderful 0pp0rtunity t0 w0rk 0n the t0pic: “NOTICE UNDER LEASE” and it
is because 0f his excellent kn0wledge, experience and guidance, this pr0ject is made with
great interest and eff0rt. I w0uld als0 like t0 thank my seni0rs wh0 have guided my
kn0wledge 0f d0ing research 0n such significant t0pic. I w0uld always als0 take this as an
0pp0rtunity t0 thank my parents f0r their supp0rt. I have n0 w0rds t0 express my gratitude t0
each pers0n wh0 have guided and suggested me while c0nducting my research w0rk.
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TABLE OF CONTENTS

1. INTRODUCTION

a) PARTIES TO LEASE

b) SUBJECT MATTER OF LEASE

c) TRANSFER OF RIGHT

d) DURATION OF LEASE

e) CONSIDERATION

2. DURATION OF LEASES

3. FORM AND CONSTRUCTION NOTICE

4. HOW IS LEASE EXECUTED

5. RIGHTS AND LIABILITIES OF LESSOR AND LESSEE

a) LIABILITIES OF LESSEE

b) LIABILITIES OF LESSOR

6. HOW DOES A LEASE END?

7. WHAT IS NOTICE TO QUIT AND WHAT HAPPENS AFTER IT?

8. EFFECT OF HOLDING OVER?

9. CONCLUSION
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INTRODUCTION

Section 105 of the Transfer of Property Act, 1882 defines a lease as follows:
“A lease of immoveable 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.” As per Section 105 Transfer Of Property Act, a lease of immovable property is a
transfer of a right to enjoy such property made for a certain time or in perpetuity. The
expression “transfer of a right to enjoy” stands in contrast with the words “transfer of
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. 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

. Essentials ingredients of a lease agreement are

a) Parties to Lease

There must be two parties in a lease i.e. lesser (Transferor) and the lessee (transferee). A
lease arises in agreement between the owner of a property and the person who proposes to
take that property for a term on payment of consideration. A man could not grant a lease to
himself

b) Subject matter of lease

There may be composite leases also like lease of a building along with equipment and lease
of a factory along with machinery etc. A lease of a house or of a shop is a lease not only of
the superstructure but also of its site 1. Lease premises is not only a building or part of
building but also the land and other things appertaining to it and also furniture and other
fixtures provided by the landlord.

c) Transfer of right

1 T. Lakshmipathi v. P. Nithyananda Reddy, 2003 (3) RCR (Civil) 306 SC

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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 limited estate i.e., right of
enjoyment is known as “demise”. lease hold estate is transferred after being separated from
ownership. This is right in rem.

d) Duration of 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. The commencement of the lease must
be certain in the first instance or capable of being made certain afterwards. It may commence
either in the present or in the future or on the happening of a certain contingency which is
bound to happen.

Three types of lease are recognized by this section: -

(i) Lease for a certain time;

(ii) Periodic leases; and
(iii) Leases in perpetuity

e.) 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.

Duration of leases (Section 106)

However such leases are subject to contrary contract or local law or usage. Under section 106
, lease of immovable property for agricultural or manufacturing purposes where there is no
contract to t e contrary, shall be deemed to be a lease from year to year and lease of
immovable property for any other purpose shall be deemed to be a lease month to month.
Where the lease has other purpose shall be deemed to be lease month to month. Where the
lease has come to an end by efflux of time, no notice is required under section 1062.

2 Narayan Reddy v. Balasore Municipal Council, AIR 2001 Ori 1

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the duration of lease will be as under:-

(1) a monthly lease or tenency can be determined by the lessoror lessee by

(a) a notice in writing,

(b) notice must be of 15 days,
(c) the 15 days, notice must expire with the end of a month of tenancy, and
(d) the notice must be served in the manner provided in this section.

(2) A lease from year to year can be determined by the lessor or lessee by:

(a) a notice in writing,

(b) the notice should be of six months,
(c) the notice must expire with the end of a year of the tenancy, and
(d) the notice must be served in the manner provided in the section itself.

Form and construction of notice

Every notice under this section must be in writing and signed by or on behalf of the person
giving it. The notice must be either-

(a) sent by post to the party who is intened to be bound by it, or

(b) tendered or delivered personally to such party, or to one of his family or servats at his
residence, oraffixed to a conspicuous part of the property where such tender or
delivery is not practica

Mode of creation of lease (Section 107)

According to section 107(1) a lease of immovable property from year to year or for any term
exceeding one year or reserving a yearly rent can be made only be a registered instrument.

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.

Leases for a term exceeding one year

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Where the term of lease exceeds one year it must be registered. The Supreme court held in
Rajendra Pratap Singh v. Rameshwar Prasad3, 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 of the instrument the signing of thed
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 and
it is register able.

DURATION OF LEASES:

Section 105 states the definition of a lease which states 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.

WHAT ARE THE ESSENTIALS OF A LEASE?

Section 105 states the definition of a lease which states 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.

What are the essentials of a lease?

1. Parties must be competent: The parties in a lease agreement should be competent to

enter into a contract. Lesser should be entitled to a property and have absolute rights
over that property.

3 AIR 1999 SC 37
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2. Right of possession: Ownership rights are not transferred in a lease, only the
possession of the property is transferred.
3. Rent: Consideration for a lease can be taken in the form of a rent or premium.
4. Acceptance: Lessee, who is to get the interest in the property after lease, has to
accept the lease agreement along with the time period and terms & conditions
imposed on the transfer.
5. Time Period: Lease always takes place for a particular time period which is to be
specified in the lease agreement. It can be relaxed at the option of the lessor.
6. Parties must be competent: The parties in a lease agreement should be competent to
enter into a contract. Lesser should be entitled to a property and have absolute rights
over that property.

HOW IS LEASE EXECUTED:

Section 107 states about lease how made. This section covers three aspects:

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.
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.

In the case of Punjab nation bank vs ganga narain kapur (1.), Court held that if the lease is
done through an oral agreement, then the provisions of Section 106 will apply.

RIGHTS AND LIABILITIES OF LESSOR AND LESSEE

Rights of the lessor are

1. A lessor has a right to recover the rent from the lease which was mentioned in the
lease agreement.
2. Lessor has a right to take back the possession of his property from the lessee if the
lessee commits any breach of condition.
3. Lessor has a right to recover the amount of damages from the lessee if there is any
damage done to the property.
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4. Lessor has a right to take back the possession of his property from the lessee on
the termination of the lease term prescribed in the agreement.

LIABILITIES OF THE LESSOR

1. The lessor has to disclose any material defect relating to the property which the
lessee does not know and cannot with ordinary supervision find out.
2. Lessor is bound by the request of the lessee to give him the right of
possession over his property.
3. Lessor can enter into a contract with the lessee if he agrees to abide by all terms
and conditions prescribed in the agreement, he can enjoy the property for the rest
of the time period without any interference with an obligation to pay the rent later
on.

RIGHTS OF THE LESSEE

1. During the period lease is in effect if any alteration is made (alluvion for the time
being in force) then that alteration will come under that same lease.
2. If a significant part of the property that has been leased is destroyed wholly or partly
by fire, by flood, by war, by the violent acts of the mob or by any other means
resulting in its inefficiency of being a benefit for the lessee. If this happens, the lease
is voidable at his option.

There is a proviso to this section that states if the damage is done due to any act of the lessee
himself, this remedy will not be available for him.

1. Lessee has the right to deduct any expenses he has made for repairs in the property
from the rent if the lessor has failed to in reasonable time.
2. Lessee has a right to recover any such payment which a lessor is bound to make by
can deducting it from the interest of the rent or directly from the lessor. He has this
right when the lessor has neglected to make that required payment.
3. Lessee has a right to detach all things that he may have attached in the property or
earth. His only obligation is that he has to leave the property in the same condition as
he received it.
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4. When a lease is of unspecified duration in the lease agreement, lessee or his legal
representative have a right to collect all the profits or benefits from the crops which
were sown by the lessee at that property. They also have a right of free ingress and
egress from such property even if the lease ends.
5. Lessee has a right to transfer absolutely the property or any part of his interest in that
property by sub-leasing or through mortgaging. Lessee is not independent of the terms
and conditions mentioned in the lease agreement.

LIABILITIES OF THE LESSEE

1. Lessee is under an obligation to disclose all related material facts which are likely to
increase the value of the property for which the lessee has an interest in and the lessor
is not aware of.
2. Lessee is under an obligation to pay the rent or premium which is settled upon in the
agreement to the lessor or his agent within the prescribed time.
3. Lessee is under an obligation to maintain the property in the condition that he initially
got the property on commencement of the lease and he has to return it in the same
condition.
4. If lessee gets to know about any proceedings relating to the property or any
encroachment or any interference, then lessee is under an obligation to give notice to
the lessor.
5. Lessee has a right to use all the assets and goods which are on the property as an
owner would use which is preserving it to the best of its nature. He is although under
obligation to prevent any other person from using that asset or good for any other
purpose from what was prescribed in the lease agreement.
6. The lessee cannot attach any permanent structure without the consent of the lessor
except for the purpose of agriculture.
7. Lessee is under an obligation to give the possession of the property back to the lessor
after the expiry of the prescribed term of the lease.

HOW DOES A LEASE END?

Determination of lease
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Section 111 states about the determination of the lease, which lays down the ways in which
lease is terminated:

1. Lapse of time – When the prescribed time of the lease expires, the lease is terminated.
2. Specified event – When there is a condition on time of lease depending upon a
happening of an event.
3. Interest – Lessor’s interest to lease the property may cease, hence resulting in the
termination of the lease.
4. Same owner – When the interest of both lessor and lessee are transferred or vested in
the same person.
5. Express Surrender – This happens when the lessee ceases to have an interest in the
property and comes into a mutual agreement with the lessor.
6. Implied Surrender – When the lessee enters into a contract with another for the lease
of property, this is an implied surrender of the existing lease.
7. Forfeiture – There are three ways by which a lease can be terminated:

When there is a breach of an express condition by the lessee. The lessor may get the
possession of the property back. When lessee renounces his character or gives the title of
the property to a third person. When the lessee is termed as insolvent by the banks, and if
the conditions provide for it, the lease will stand terminated.

WHAT IS NOTICE TO QUIT AND WHAT HAPPENS AFTER IT?

Notice to quit is a formal written statement that is issued to the lessee if the lessor desires
to end the lease agreement, whether on the expiry of the duration as stated under Section
106 or on grounds specified in Section 111. Any lease can be forfeited as mentioned in
the sub-clause (g) of Section 111, by acceptance of the notice to quit.

But Section 112, states that if the lessor after initiating the process of termination of the
lease on the grounds of forfeiture accepts any rent from the lessee, it will be understood
that the lease will still exist and the termination and notice to quit has been waived.

Section 113 provides two ways in which the notice can be waived, that is expressly or
impliedly.
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1. Express Waiver of notice to quit – When a lessor accepts the rent from the
lessee after the notice to quit has been served, this is called express waiver of
notice to quit.
2. Implied Waiver of notice to quit – When a lessor issues notice to quit to the
lessee, and upon expiry of that notice, lesser issues another notice to quit to the
lessee. The first notice to quit is impliedly waived.

Waiver of notice also shows the intention to continue the existing lease.

Effect of Holding over

Section 116 states about the effect of holding overlays down that if there has been a waiver of
notice to quit, it will not be called a new lease instead it will be called as a lease on sufferance
or tolerance without objecting against it. The term ‘Holding over’ stands for retained
possession of a property which has been leased. After this, the lease is renewable as any
normal lease and in the way prescribed in Section 106. This section provides that if the lessor
agrees to the holding over of the property by the lessee, it will be renewed. But if the lessor
does not entertain the retained possession by the lessee, he can initiate suit proceedings
against him on grounds of trespass or tenant at sufferance.

CASE ANALYSIS

1.TULSI V. PARO

FACTS OF THE CASE:

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4
The admitted facts are that the suit properties of various Khasra nos, admeasuring 12.4
bighas and 22.4 bighas situated in Mohal Kanyarka Pargana Churah Tehsil Bhattiyat District
Chamba in the State of Himachal Pradesh, belonged to the respondent. She had filed a suit for
possession against the appellant pleading that the he is a licensee and had agreed to cultivate
the lands or her behalf as licensee and, therefore, he is liable to be ejected by a decree of
eviction in the suit. It is the case of the appellant that though the parties are related, he is only
a tenant giving the produce to the respondent-landlady for her as he was looking after her.
The admitted position is that the Revenue records for the appellant had been shown as 'Gar
Marusi'. It would appear that it means "tenant at will" Section 105 of the Transfer of Property
Act defined lease thus : "A lease of immovable property is a transfer of a right to enjoy such
property made for a certain time, express or paid or promised, or of money, a shore of crops,
service or any other thing of value, to be rendered periodically or on specified occassions to
the transferor by the transferee, who accepts the transfer on such terms". It is not necessary
that lease should always be reduced to writing. What is necessary is transfer of a right of
enjoyment of the property made for certain time, expressed or implied and for consideration
of the price, paid or promised, the transferee must have been put in possession of the demised
property. It is also necessary that an agreement can be entered into for rendering periodical
service and for consideration thereof and on transfer of the land to the transferee and
acceptance thereof, either orally or in writing, the lease comes into existence. It is seen that
when the name of the appellant has successively founded place in the records for period from
1951-52 to 1971-72 as "tenant at will", the necessary conclusion is that he is tenant at will
liable to eviction according to law. The theory that he is a licensee, as has been accepted by
the High Court and the trial Court, is untenable. A licensee has no right in the property, not to
speak of any right to the exclusive possession of the property and animus of possession
always remains with the licensor; the licensee gets the possession only with the consent of the
licensee and is liable to vacate when so asked.." Tulsi v. Paro

REASONING:

In this case, since the appellant remained in uninterrupted possession and enjoyment of the
property for over 20 years, it is unthinkable to conclude that they are only licensee. The High
Court and the trial Court, therefore, were clearly in error in reaching the conclusion that the
appellant is only a licensee. On the other hand, from the facts, it is clear that the appellant is a
tenant and he will be liable for ejectment only in accordance with law. If he is otherwise

4 (1997) 2 SCC 706

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entitled to tenancy right of the property, the right can be had in accordance with law and it is
open him to work out the same in accordance with law"

JUDGEMENT:

The appeal is allowed in the light of the above facts and circumstances. No costs.

2. 5STATE OF U.P. V. LALJI TANDON

FACTS:

"The land consisting in the suit property was given on fifty years lease to one J.W. Walsh.
The lease contained a clause for renewal which, as far as ascertainable from the material
available on record, and as found by the High Court, conferred an option on the lessee to seek
renewal of lease for another term of 50 years and on such option being exercised before the
expiry of term of 50 years of the existing lease, the lessor shall 'act upon forthwith and
execute and deliver to the lessee upon his duly executing a counter part or renew the lease for
the said premises for a further term of 50 years and with and subject to the same covenants
conditions and provisions as are herein contained."3. The original deed of lease though very
material for ascertaining the covenants thereof, including the one for renewal, has not been
placed on record by either party. The High Court has in its impugned judgment observed that
the suit property has changed hands but the document is certainly available with the State-
appellant, and in the facts and circumstances of the case, the State ought to have produced the
lease or its copy to assist the Court in arriving at a just decision, but the same was not done in
spite of several opportunities having been allowed for the purpose and though the State had
filed a counter-affidavit followed by two supplementary-affidavits. The High Court has
chosen to draw an adverse inference against the State without expressly stating so, as its
observation indicates, (to quote) - "initial lease deed has not been placed on record by either
party. It would be fair to assume that the State should be in possession of the same. The
condition whether renewal was permissible only once must be in the initial lease deed but
unfortunately it has not been placed before us. In our opinion it was for the State to have filed
a copy thereof if it wanted to rely upon such a term. That having not been done despite
several opportunities availed by it when filing supplementary counter affidavit we can safely
conclude that really no such term was contained in the initial lease deed. We have no

5 (2004) 1 SCC 1
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hesitation, therefore, in rejecting the contention of the State that the lease was renewable only
once. This is the most crucial part of the controversy and we will revert back to the same after
completing the narration of facts.4. Walsh alienated his interest in the suit property to Lalji
Tandon, the respondent-plaintiff, who has died during the pendency of the proceedings and
whose LRs have been brought on record; however, for convenience, we will refer to the
respondent Lalji Tandon, succeeded by his LRs, as 'the respondent'.5. The respondent, having
stepped into shoes of Walsh, the original lessee, sought for renewal of the lease consistently
with covenant for renewal as contained in the original lease. The State Government agreed to
renewal and the renewed lease deed came to be executed on February 20, 1945. It seems that
the State Government was agreeable to renew the lease for a term of 50 years but by February
20, 1945, the day on which the renewed lease came to be executed, a period of 42 years, 2
months and 20 days had remained available out of the 50 years of the second term and
therefore the term of the renewed lease as recited therein is '42 years, 2 months, 20 days'.
This lease has been placed on record. Covenant - 2 thereof is very crucial and the same is
extracted and reproduced hereunder:"It is hereby mutually covenanted and agreed by and
between the lessor and the lessee that the obligations hereunder shall continue throughout the
term hereby created and shall be binding on their respective successors-in-interest in the
demised premises that they will perform and observe the several covenants provisos and
stipulations in the aforesaid lease expressed as full as if the same covenants provisos and
stipulations had been herein repeated in full with such modifications only as are necessary to
make them applicable to this demise and as if the name of the parties hereto had been
substituted for those in the aforesaid lease provided always that the building referred to in the
aforesaid lease having been erected the lessee shall not be under any obligation to erect
another". (underlining by us)6. Proceeding on an assumption (the correctness whereof is the
core of the controversy and shall be dealt with shortly hereinafter) that the renewed lease
incorporated all the covenants of the original lease including the covenant for renewal, the
respondent sought for renewal of the lease for yet another term of 50 years. The Collector of
the District recommended renewal. The Board of Revenue also directed the renewal to be
expedited. The Government had also issued instructions to all the Commissioners and District
Magistrate generally directing them to renew such like leases. However, the State
Government set over the renewal which led to the respondent filing a writ petition in the High
Court of Allahabad which was disposed of at the admission stage itself by order dated
19.4.1989. The Division Bench passed the order in the following terms:"The grievance of the
petitioner is that in spite of the judgment of this court in the case of Purshottam Dass Tandon
and others vs. State of Uttar Pradesh and others, 1987, Allahabad Law Report page 92 and
 P a g e | 16

confirmed by the Supreme Court, the respondents are not renewing the lease of the petitioner.
The prayer is that a writ in the nature of mandamus be issued to the respondents to do so. The
respondents shall endeavour to renew the lease of the petitioner in accordance with the
aforesaid judgment as soon as possible". With these observations, this petition is dismissed
summarily."7. The observation made by the High Court holding out a hope from the State
that it shall renew the lease at the earliest did not bring any results and consequently the
respondent had to file another writ petition leading to the passing of the impugned order
dated 30.7.1991. The short grievance raised by the respondent as a writ-petitioner before the
High Court was that he was entitled for a renewal of lease for yet another term of 50 years,
which the State having not done, the writ-petitioner was entitled to a mandamus directing the
respondents (before the High Court) to renew the lease. However, the respondent was active
in politics which was not to the liking of the then ruling party and therefore, the State was
creating obstacles in the renewal of the lease, pleaded the respondent as writ-petitioner in the
High Court.8. In the counter-affidavit filed on behalf of the State Government it was pleaded
that the original lease was for a period of 50 years, renewable only once for a further term of
50 years, which light of renewal was exhausted on having been exercised once culminating
into the execution of lease deed dated February 20, 1945. On the expiry of the term limited
by the latter lease deed the respondent did not have any further right of renewal.9. Another
supplementary counter-affidavit sworn in by Shri Bira Ram, Naib Tahsildar was filed
wherein an additional plea was raised that on 28.3.1987 the State of U.P. had issued a
notification under Section 4 of the Land Acquisition Act, 1894 followed by declaration under
Section 6 dated 31.12.1987 whereby the land was acquired by the State and therefore the
renewal of lease was not legally possible.10. A third counter-affidavit sworn in by one
Lateefullah was filed on April 1, 1991 raising yet another plea that the respondent was
negotiating the sale of the leased land without prior sanction of the State Government which
was in violation of the terms of the lease deed and so also the respondent was not entitled for
any further renewal.11. In the decision dated 19.4.1989 referred to hereinabove, the High
Court had made a reference to the case of Purshottam Das Tandon & others and expected the
State of U.P. the endeavour to renew the lease or the respondent herein in accordance with
the aforesaid judgment as soon as possible. It seems that Purshottam Das Tandon was holding
lease of the land owned by the State on similar terms as was held by the respondent herein,
excepting for the difference that the land held by Purshottam Das Tandon was nazul land
while the land held by the respondent herein is government estate. Though this difference
was pointed out at the time of hearing, however, the learned counsel for the appellant State of
U.P. was unable to point out what difference it makes so far as the case for renewal is
 P a g e | 17

concerned if the covenants in the lease deeds held by Purshottam Das Tandon and the
respondent herein respectively were identical. The decision of the Allahabad High Court in
the case of Purshottam Das Tandon and others, is reported as AIR 1987 Allahabad 56. The
Division Bench presided over by R.M. Sahai, J. (as His Lordship then was) and who spoke
for the Division Bench deals with the history of such like lease, the several government
orders and instructions relating thereto and takes into consideration almost all the legal
aspects relevant thereto excepting a few with which we will be elaborately dealing hereafter.
The High Court held that the State Government was bound to renew the lease held by
Purshottam Das Tandon in accordance with the covenant for renewal. The State of U.P. &
others preferred special leave petition against the judgment of the Allahabad High Court
which was dismissed on January 14, 1987 refusing to interfere with the decision of the High
Court. The decision of this Court is reported as State of U.P. and others vs. Purshottam Das
Tandon and others

ARGUMENTS OF PETITIONER:

The first submission of Shri Subodh Markandeya, the learned senior counsel for the State of
U.P. has been that the respondent was entitled only for one renewal for a term of 50 years
consistently with the covenant for renewal contained in the original lease executed in favour
of John William Walsh dated May 10, 1887 which right to renewal stood exhausted with the
lease deed dated February 20, 1945 which came to an end on the expiry of 42 years 2 months
and 20 days from the date of the lease, i.e. February 20, 1945. It was submitted that the first
renewal evidenced by the lease deed dated February 20, 1945 shall be deemed to have
renewed all other covenants incorporating the rights and obligations between the lessor and
the lessee excepting the clause for renewal; else it would result in creating a lease in
perpetuity because every renewed lease shall have to incorporate the clause for renewal for
50 years as contained in the original lease deed which would mean endless renewals and
hence a lease in perpetuity.

REASONING:

The appellant's plea that the land having been acquired there could be no renewal of lease has
been termed by the High Court as 'ridiculous' and we find no reason to take a different view.
Suffice it to refer to a recent decision of this Court in Sharda Devi vs. State of Bihar, (2003) 3
SCC 128 wherein it has been held that the Land Acquisition Act, 1894 cannot be invoked by
the Government to acquire its own property. It would be an absurdity to comprehend the
 P a g e | 18

provisions of the Land Acquisition Act being applicable to such land wherein the ownership
or the entirety of rights already vests in the State. The notification and declaration under
Sections 4 and 6 of the Land Acquisition Act for acquisition of the land i.e. the site below the
bungalow are meaningless. It would have been different if the State would have proposed the
acquisition of leasehold rights and/or the superstructure standing thereon, as the case may be.
But that has not been done. the renewal of lease cannot be denied in the garb of so called
acquisition notification and declaration which have to be just ignored.21. Lastly, it was
submitted that the respondent is in breach of the terms of the lease and hence not entitled to
renewal. Firstly, the High Court has held the plea taken by the appellant State not
substantiated. Secondly, exercise for option for renewal cannot be stalled on the ground that
the lessor proposes to exercise right of re-entry on account of alleged breach when no steps
were taken for exercising the right of re-entry till the option for renewal was exercised by the
lessee. If the lessee is in breach and the lease entitles the lessor to re-enter, that right is
available to be exercised without regard to the renewal of the lease.

DECISION:

appeals are held devoid of any merit and liable to be dismissed. They are dismissed
accordingly as the respondent has chosen not to appear; we make no order as to the costs.

3. ISHWAR SWAROOP SHARMA V. JAGMOHAN LAL

FACTS:

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The shop was constructed in August 1962. The appellant let out the shop to the respondent
in 1975 at a monthly rent of Rs. 200/-. In 1989, the appellant filed the application under
Section 4 of the Act before the Rent Controller. The Rent Controller considering the evidence
of similar premises in the locality, determined the fair rent payable in respect of the shop at
Rs. 1000/- per month. The respondent preferred an appeal before the Appellate Authority. On
the construction of Section 4 of the Act, the Appellate Authority came to the conclusion that
the appellant having agreed to accept Rs. 200/- from the respondent, was not entitled to the
market rent but to a percentage increase on the agreed rent. The Appellate Authority
calculated the percentage of increase under Section 4(3) of the Act and determined the fair

6 (2001) 1 SCC 218

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rent of the shop to be Rs. 328/- per month with effect from the date of the application. This
decision was affirmed by the High Court on revision.

ISSUES:

This appeal has been preferred from the decision of the High Court of Punjab and Haryana
affirming the order of the Appellate Authority under Section 4 of the Haryana Urban (Control
of Rent and Eviction) Act, 1973.

REASONING:

The tenancy being terminated the agreement ceases to operate as a voluntary bilateral
transaction. With the cesser of the agreed tenancy, the agreement as to rent would also cease.
Nevertheless, under Section 2(h) of the Act the tenant would be liable statutorily to make
payment of `rent'. Similarly after fair rent is fixed under Section 4 of the Act, the rent payable
is not the agreed rent.10. Therefore for the purpose of determining fair rent Section 4(2)(b)
draws a distinction between cases where the parties have agreed to the rent and cases where
rent is payable otherwise than by agreement. In the first case, the agreed rent is to be taken as
the base and the increase determined according to the formula provided in Section 4(3). In the
second case, the base is the market rate.11. There is no warrant for drawing any distinction
between a monthly tenancy and tenancies for longer periods. Nor is it necessary that the
agreement should have been entered into immediately preceding the date of the application.
Section 4(2)(b) uses the word `preceding' without any limitation. This may be contrasted with
Section 3 where the word `preceding' is qualified by the word `immediately'.12. For fixing
the basic rent under Section 4 the only question would be was there a subsisting agreement of
tenancy under which rent was payable when the application for fixation of fair rent was
filed ? If the answer is in the affirmative the agreed rent must be taken as the basic rent. If
not, then the basic rent is the prevailing market rate. Therefore, even though the agreement
may have been entered into in 1976 as is admittedly true in this case, but the tenancy was
continuing until the date of the application, the Rent Controller was obliged to take the rate
agreed to in 1976 as the basic rent under the first limb of Section 4(2)(b). It is only after the
fair rent is fixed that the landlord could seek re-fixation under the second limb subject to the
limitations provided in the Act, as the rent would then cease to be the agreed rent.
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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 article to give clarification and a basic idea about the lease.
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