Whether lessee can exercise his exclusive privilege of renewing lease, two years after expiry of term of lease?

Property-Power of renewal of lease - Eviction - Present Revision filed challenging validity of judgment passed by Appellate Court whereby it dismissed order passed by trial Judge and directed Petitioner to hand over vacant and peaceful possession of suit premises to other party - Whether concerned lease deed is in perpetuity or determinable by efflux of time - Held, This Court observed on perusal of evidence on record that concerned deed was fixed for a term of 99 years as a term of lease - However, it has been provided in relevant document that lessee was entitled to ask for renewal of lease for another term if it so desired subject to compliance of specified terms and conditions - Therefore, it can be said that renewal of lease was not automatic and for that purpose, a fresh lease was required to be executed in accordance with provisions of the Transfer of Property Act, 1882 and Registration Act, 1908 as per the decision of the Apex Court in Hardesh Ores (P) Ltd. versus Hede & Company - Further, if proposition laid down by Calcutta High Court in Secretary of State for India in Council Vs. A.H. Forbes and Apex Court in State of U.P. & ors. vs. Lalji Tandon (dead) Through Lrs. And Caltex (India) Ltd. vs. Bhagwan Devi Marodia were considered then it was observed by this Court that it was for lessee to exercise option of renewal where indenture of lease has cast burden either on him or was silent as to who should exercise option - Moreover right to renew, therefore, has to be exercised by lessee as it was his exclusive privilege - However, this having not been done by Petitioner, he was not entitled to claim any right under terms of concerned lease - Consequently, a decree of eviction was passed against him.

Property - Right to renewal of lease - Section 107 of Transfer of Property Act,1882 - Whether Petitioner can exercise his exclusive privilege of renewing lease, two years after expiry of term of said lease - Held, This Court found that indenture of concerned lease had expired by efflux of time and that no fresh lease as required was executed between parties under Section 107 of Act - Hence, lower Courts had rightly decreed suit and no error,much less,error of jurisdiction committed by those Courts - Hence, no interference was made out with impugned order

IN THE HIGH COURT OF BOMBAY

Civil Revision Application No. 617 of 2008

Decided On: 22.10.2012

 The National Textile Corporation Ltd., a Public Sector Undertaking having its Regional Office at NTC House, 3rd Floor, Ballard Estate, Mumbai 400038
Vs.
: Byramjee Jeejeebhoy Pvt. Ltd. having its Registered Office at 83, Jolly Maker Chambers-II, Nariman Point, Mumbai-400021

Hon'ble Judges/Coram:
Ranjit More, J.

Equivalent Citation: 2013(2)ALLMR554, 2013(1)BomCR559, 2013(2)BomCR441, 2012(6)MhLj803

1. By consent of Learned Counsel appearing for the respective parties, the revision is taken up for final hearing. Heard Mr. Bharucha and Mr. Dhakephalkar, learned senior counsel for the respective parties.

2. By the present revision filed under Section 115 of the Code of Civil Procedure, 1908, the petitioner challenges the legality, validity and propriety of the judgment and decree dated 15th September, 2008, passed by the Appellate Bench of the Small Causes Court at Bombay in Appeal No. 88 of 2007 in T.E.R. Suit No. 428/451/2001. By the said judgment and decree, the petitioner's appeal was dismissed and the order passed by the learned Trial Judge in T.E. & R. Suit No. 428/451/2001 dated 22nd November, 2006, is confirmed and the petitioner was directed to handover the vacant and peaceful possession of the suit premises to the respondent.

3. The brief facts giving rise to the present revision are as follows:

The respondent is a company and is the owner of the suit plot of land admeasuring 45,022 square yards and another portion admeasuring 153 square yards bearing Survey No. 17 of Parel Sewri Division at Parel, Lalbaug, Mumbai-400012 together with spinning and weaving mill and other buildings standing thereon (hereinafter referred to as "the suit plot") as a successor in interest of one Byramjee Jeejeebhoy Trust Settlement 1872 (hereinafter called as "the said Trust"). The said Trust had executed an indenture of lease dated 1st November, 1900, in favour of the predecessor in interest of the petitioner viz. Maneckjee Petit Manufacturing Company Ltd.. The petitioner is a successor in interest of the original lessee and the respondent is a successor in interest of the original lessor. Under the lease, the suit plot was demised in favour of the lessee for a period of 99 years on the terms and conditions contained in the indenture of lease with renewal clause providing for renewal of the lease for further period of 99 years. The lease dated 1st November, 1900 expired on 31st October, 1999. Prior to the expiry of this period, the respondent had filed a suit against the petitioner being R.A.E. Suit No. 758/2049/1991. The said suit was filed in the year-1991 on the ground that the petitioner had breached the terms of the indenture of lease dated 1st November, 1900. The said suit was decreed ex-parte but the decree was set-aside on an application being made by the petitioner and the suit is still pending. After the expiry of the term of lease on 31st October, 1999, by efflux of time, the respondent called upon the petitioner to handover the vacant and peaceful possession of the suit plot by issuing notice dated 6th March, 2001. The respondent, thereafter, filed the present suit for eviction on 17th July, 2001, against the petitioner. The petitioner after the receipt of writ of summons in the present suit, issued a notice to the respondent on 1st January, 2002, demanding renewal of the lease and filed a civil suit in the City Civil Court, Bombay being Short Cause Suit No. 6244 of 2002 for specific performance of the terms and conditions of the indenture of lease dated 1st November, 1900 for renewal of the lease for a further term of 99 years. The respondent's T.E. & R. Suit No. 428/451/2001 was decreed by the learned Single Judge of the Small Causes Court by judgment and decree dated 22nd November, 2006. The petitioner challenged this decree by filing Appeal No. 88 of 2007 before the Appellate Bench of the Small Causes Court. As stated above, this appeal was also dismissed by the judgment and decree impugned in the present revision.

4. Mr. Bharucha, learned senior counsel, took me through the relevant clauses of the indenture of lease dated 1st November, 1900, prescribing procedure for renewal of the lease and submitted that the lessee is not required to make a written request for renewal of the lease. It was also submitted that the lease deed did not require the petitioner to seek formal renewal of the lease, but if the petitioner had paid all the rents and had performed all the covenants, the lease had to be extended by the respondent without anything further having to be done by the petitioner. He further submitted that the lease deed in the present case, clearly shows that the only manner in which the lessee is required to seek extension, was by continuing to stay in the property and by tendering the rent even after the period of 99 years was over. This was done in the present case and in view of the peculiar and specific provisions of the lease deed, there could never be any question of "Time Limit" for the lessee to seek renewal of the lease. Mr. Bharucha submitted that the lower courts below wrongly construed the lease deed and held that the petitioner should have given notice of renewal before the expiry of the lease. Mr. Bharucha submitted that the Lower Appellate Court committed an error by holding that the filing of specific performance suit shows that the petitioner knew that the lease was not one in perpetuity. He submitted that the lower courts misconceived the ratios of the cases cited by the respondent and failed to appreciate the ratios of decisions cited by the petitioner. He relied upon the decisions in Vali Pattabhirama Rao & anr. v/s. Sri Ramanuja Ginning & Rice Factory (P) Ltd. & ors. reported in MANU/AP/0002/1983 : AIR 1984 AP 176 and Gardner V/s. Blaxill (1960 1 WLR 752). He lastly submitted that the impugned judgment and decree deserves to be quashed by allowing the present revision.

5. Mr. Dhakephalkar, learned senior counsel, on the contrary, contested the revision by supporting the impugned judgment and decree. He submitted that in order to give effect to the renewal of lease, the document has to be executed evidencing the renewal of an agreement of lease and there is no concept of automatic renewal of lease by mere exercise of the option by the lessee. He also submitted that the right of renewal contained in the indenture of lease is the right of lessee, and therefore, exercise of such right has to be unilaterally exercised by the lessee. He further submitted that this right has to be exercised within a reasonable time before the expiry of the term of the lease. In the present case, he submitted that the petitioner has not exercised his right of renewal within the reasonable time. The lease dated 1st November, 1900 has expired by efflux of time and, therefore, the respondent's suit was rightly decreed. Mr. Dhakephalkar relied upon the Apex Court decisions in Hardesh Ores (P) Ltd. versus Hede & Company reported in MANU/SC/7671/2007 : (2007) 5 SCC 614. Secretary of State for India in Council Vs. A.H. Forbes reported in (1912) 17 I.C. 180. State of U.P. & ors. vs. Lalji Tandon (dead) Through Lrs. And Caltex (India) Ltd. vs. Bhagwan Devi Marodia reported in MANU/SC/0263/1968 : AIR 1969 SC 405.

6. Having considered the submissions advanced by the respective senior counsel and having gone through the impugned judgment and decree along with the compilation of the revision, indenture of lease dated 1st November, 1900 and various decisions cited at Bar, I find no merit in the revision. There is no dispute about the execution of indenture of lease dated 1st November, 1900, between predecessor-in-interest of the petitioner and respondent. It is also not disputed that the respondent filed an eviction suit against the petitioner in the year 1991 on the ground that the petitioner had breached the terms of the indenture of the said lease. This suit was decreed ex-parte. However, the ex-parte decree was set-aside at the instance of the petitioner and the suit is still pending. There is also no dispute that the present suit is filed by the respondent on 17th July, 2001 and the writ of summons in the present suit was served on the petitioner on 27th August, 2001, and thereafter, the petitioner issued notice on 1st January, 2002, demanding renewal of lease. The petitioner also thereafter filed Short Cause Suit No. 6244 of 2002 for specific performance of the terms and conditions of the indenture of the said lease.

7. The subject matter of the suit was the indenture of lease dated 1st November, 1900, and the question for consideration is whether the said lease deed is in perpetuity or determinable by efflux of time.

I have perused the indenture of lease dated 1st November, 1900. The said deed fixed the term of 99 years as a term of lease. It has been provided that a fresh document of granting lease would be executed upon the lessee's complying with various terms and conditions provided therein which are as follows:

i) The lessee has to deposit the rent on the first day of every calendar month.
ii) The lessee has to pay the ground rent to the Government.
iii) The lessee has to pay assessment or any other taxes, rates and charges, present and future to the Municipality.
iv) The lessee shall at all times during the term on their own costs and charges keep the said mill building, engine house and chimney in substantial repairs.
v) The lessee shall fulfill all other obligations mentioned in the indenture of the said lease.

Thus, the lessee is entitled to ask for renewal of the lease for another term if it so desires, subject to compliance of the above terms and conditions and upon payment of costs and charges. The renewal of the lease, however, is not automatic and for that purpose, a fresh lease is required to be executed in accordance with the provisions of the Transfer of Property Act, 1882 and the Registration Act, 1908 as per the decision of the Apex Court in Hardesh Ores (P) Ltd. (supra). The observations of the Apex Court in Paragraphs 31 and 39 are relevant in this regard, which reads as under:

31. Having regard to these decisions we must hold that in order to give effect to the renewal of a lease, a document has to be executed evidencing the renewal of the agreement or lease, as the case may be, and there is no concept of automatic renewal of lease by mere exercise of option by the lessee. It is, therefore, not possible to accept the submission urged on behalf of the appellant-plaintiffs that by mere exercise of option claiming renewal, the lease stood renewed automatically and there was no need for executing a document evidencing renewal of the lease.
39. We are of the view that the respondents are right in contending that enforcement of the negative covenants presupposes the existence of a subsisting agreement. As noticed earlier, the law is well settled that the renewal of an agreement or lease requires execution of a document in accordance with law evidencing the renewal. The grant of renewal is also a fresh grant.
...................

8. The petitioner, two years after the expiry of the term of the said lease, issued notice dated 1st January, 2002, to the respondent demanding renewal of the lease and thereafter filed a suit for specific performance of the terms of the said lease in the City Civil Court. The petitioner did not demand renewal of the lease prior to the expiry of the said lease i.e. before 31st October, 1999. In this regard, it must be noted that the respondent had already filed an eviction suit against the petitioner in the year 1991 itself under the Bombay Rent Act on the ground that the petitioner has breached the terms of the said lease. This suit itself was sufficient notice to the petitioner that the respondent is not willing to grant renewal of the lease. Yet the petitioner neither demanded renewal prior to the expiry of the term of the said lease.

9. The petitioner claimed that they are not required to seek formal renewal of the lease and if they had paid all the rents and performed all the covenants, the lease had to be extended by the respondent without anything further having to be done by the petitioner. The respondent, on the contrary, submitted that the option of renewal is a lessee's privilege and it has to be exercised unilaterally by the lessee. In order to appreciate these submissions, the relevant clause for renewal in the said lease deed is required to be reproduced, which reads as follows:

And the said lessors do hereby for themselves their heirs executors administrator and assigns covenant with the said Company and their Assignee that the said Company or their assignee duly pay, the rent herein before reserved and observing and performing all the covenants herein before contained and on the part of the said company and their assigns to be observed and performed they the said lessors their heirs executors administrators and assigns shall and will at the costs and charges of the said company their successors or assigns grant another lease to the said company their successors or assigns grant another lease to the said company their successors or assigns for further term of 99 years to commence from expiration of the term hereby granted at and under the same monthly rent contained therein like power authorities freedom and covenants and provisos (including this covenant for renewal) as are in these presents contained so as to end with the lease hereby granted shall be renewed in perpetuity for the term of 99 years (the said company for themselves and their successors and assigns hereby covenanting with the said lessors their heirs executors administrators and assigns to accept every such renewed lease and to execute at time at all times granting thereof counter part thereof.

10. Perusal of the above said renewal clause, clearly shows that that it neither puts the onus of executing the fresh lease on lessee or lessor. A Division Bench of the Calcutta High Court in Secretary of State for India in Council (supra), reviewed several English decisions and laid down the following propositions:

(1) A lease, which creates a tenancy for a term of years, may yet confer on the lease an option of renewal.
(2) If the lease does not state by whom the option is exercisable, it is exercisable (as between the lessor and lessee) by the lessee only, that is to say, a covenant for renewal, if informally expressed, is enforced only in favour of the lessee.
(3) The option is exercisable not merely by the lessee personally but also by his representative-in-interest.
(4) If the option does not state the terms of renewal, the new lease will be for the same period and on the same terms as the original lease, in respect of all the essential conditions thereof, except as to the covenant for renewal itself.
(5) There is no sort of legal presumption against a right of perpetual renewal. The burden of strict proof is imposed upon a person claiming such a right. It should not be inferred from any equivocal expressions which may fairly be capable of being otherwise interpreted. The intention in that behalf should be clearly shown; otherwise, the agreement is satisfied and exhausted by a single renewal.
(6) A covenant for renewal runs with the land.
(7) The position of a lessee, who has been always ready and willing to accept a renewal on proper terms, is the same in equity as if a proper lease had been granted. Where the covenant for renewal was still specifically enforceable at the commencement of a suit for ejectment against the lessee, the position of the lessee in equity is the same as if it had been specifically enforced.

The above propositions of law, laid down by the Division Bench of the Calcutta High Court has been fully accepted by the Apex Court in State of U.P. & ors. vs. Lalji Tandon (dead) Through Lrs. (supra). The observations of the Apex Court in para 13 in Lalji Tandon (supra), in this regard, are also important, which reads as follows:

13. In India, a lease may be in perpetuity. Neither the Transfer of Property Act nor the general law abhors a lease in perpetuity. (Mulla on the Transfer of Property Act, 9th Edn., 1999, p. 1011.) Where a covenant for renewal exists, its exercise is, of course, a unilateral act of the lessee, and the consent of the lessor is unnecessary. (Baker v. Merckel, also Mulla, ibid., p.1204.) Where the principal lease executed between the parties containing a covenant for renewal, is renewed in accordance with the said covenant, 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 in the original covenant for renewal and the surrounding circumstances. There is a difference between an extension of lease in accordance with the covenant in that regard contained in the principal lease and renewal of lease, again in accordance with the covenant for renewal contained in the original lease. In the case of extension, it is not necessary to have a fresh deed executed as the extension of lease for the term agreed upon shall be a necessary consequence of the clause for extension. However, option for renewal consistently with the covenant for renewal has to be exercised consistently with the terms thereof and, if exercised, a fresh deed of lease shall have to be exercised between the parties. Failing the execution of a fresh deed of lease, another lease for a fixed term shall not come into existence though the principal lease in spite of the expiry of the term thereof may continue by holding over for year by year or month by month, as the case may be.

If the above propositions laid down by the Calcutta High Court and approved by the Apex Court in Lalji Tandon (supra) are considered in proper perspective, then, it is clear to my mind that it is for the lessee to exercise the option of renewal where indenture of lease has cast burden either on him or is silent as to who should exercise the option. As stated above, in the present case, reading of renewal clause makes it clear that the onus of executing fresh lease is neither on lessee nor on lessor. The right to renew, therefore, has to be exercised by the lessee, inasmuch as, it is his exclusive privilege. This having not been done by the petitioner/lessee, he is not entitled to claim any right under the terms of the said lease dated 1st November, 1900 and the impugned decree of eviction is rightly passed.

11. Having held that it was for the petitioner to exercise the option of renewal, the question that falls for consideration is whether the petitioner could have exercised the said option by the notice first time given on 1st January, 2002 i.e. two years after the expiry of the term of the said lease. There is no dispute that the respondent has not exercised its right and privilege prior to the expiry of the said lease i.e. before 31st October, 1999. Similar question fell for consideration before the Apex Court in Caltrex (India) Ltd. (supra). The Apex Court held that in the absence of fixation of any time for the purpose of renewal of lease, the renewal should be made within reasonable time before the expiry of the term of the lease. The Apex Court has made relevant observations in Paragraph No. 6 which reads as under:

6. We may add that where no time is fixed for the purpose, an application of renewal for the lease, may be made within a reasonable time before the expiry of the term......

The Apex Court, in this case, also held that common law stipulation as to time in a contract giving option for renewal of the lease of land were considered to be of the essence of the contract even if, they were not expressed to be so and were considered as condition precedent. The Apex Court, in this regard, relied upon the commentary of Halsbury's Laws of England. The Apex Court reproduced the following propositions of law stated in Halsbury's Laws of England, 3rd ed, Vol. 3, Article 281 p.165 which reads as under:

An option for the renewal of a lease, or for the purchase or re-purchase of property, must in all cases be exercised strictly within the time limited for the purpose, otherwise it will lapse." This passage was quoted with approval by Danckworts L. J. in Hare v. Nicoll, 1966 2 QB 130, 145. A similar statement of law is to be found in Foa's General Law of Landlord and Tenant, 8th ed., Art. 453 p. 310 and in Hill and Redman's Law of Landlord and Tenant 14th ed., p. 54. The reason is that a renewal of a lease is a privilege and if the tenant wishes to claim the privilege he must do so strictly within the time limited for the purpose.

The Apex Court further observed that the renewal of lease is a privilege and if the tenants wish to claim the privilege, he must do so strictly within the time limit for the purpose. In this case, the Apex Court refused to condone the delay of even 13 days demanding a renewal of lease in the said case, since time was said to be the essence of contract.

12. In the present case, the term of the said lease expired on 31st October, 1999. The respondent thereafter issued notice on 6th March, 2001 demanding possession of the demised premises from the petitioner, and thereafter, respondent filed the present suit for eviction on 17th July, 2001. For the first time, the petitioner issued notice to the respondent on 1st January, 2002, demanding renewal of the said lease. If these facts are considered on the touchstone of the principle laid down by the Apex Court in Caltrex (India) Ltd. (supra), then, it is clear that the petitioner is not entitled for renewal of the said lease as it failed to apply within a reasonable time prior to the date of expiry of the lease.

13. A reference must be made to Mr. Barucha's argument that the option of renewal was exercised by the petitioner by payment of the rent. The allegation of the petitioner that it has paid rent after expiry of the term of the said lease is specifically denied by the respondent. In fact, the respondent filed a suit in Small Causes Court in the year 1991 on the ground that the petitioner has breached the terms and conditions of the indenture of lease dated 1st November, 1900. There is nothing on record to suggest that the petitioner's demand for renewal was in the form of payment of rent. The petitioner's case, in this regard, is disclosed in the written statement. The relevant portion of the written statement is reproduced herein for ready reference:

Without prejudice to the aforesaid contentions, these defendants say that as per the provisions of the said lease the plaintiffs are required to renew the lease from time to time and in perpetuity in favour of these defendants. The defendants submit that they being the lessees of plaintiffs are entitled to the said renewal for a further term of 99 years. These defendants by their Advocate's letter dated 1st January 2002 have already called upon the plaintiffs to renew the lease in favour of these defendants, for further term of 99 years and continue to do so in perpetuity thereafter.

14. Now let us consider the judgment cited by Mr. Barucha. Mr. Barucha relied upon Vali Pattabhirama Rao & anr (supra) to contend that where the document shows clearly that the lease is a perpetual lease, the onus is on the lessor to show that it is not so and this onus was not discharged by the respondent. Mr. Bharucha initially argued that the said lease is perpetual in nature, but, at the end of the argument when his attention was drawn to the renewal clause of the said lease, he agreed that the lease is not perpetual but the lease was for the term of 99 years with clause for renewal. In these circumstances, the ratio of this decision cannot be made applicable to the facts and circumstances of the present case. So far as the decision of the Queen's Bench Division in Gardner (Supra) is concerned, the same cannot be made applicable to the facts and circumstances of the present case, in view of the Apex Court decisions in Hardest) Ores (P) Ltd., Lalji Tandon (dead) Through Lrs. And Caltex (India) Ltd. (supra). There is also no clear evidence on record about the payment of rent by the petitioner to the respondent after the expiry of the term of the said lease.

15. Taking totality of the facts and circumstances of the case into consideration, I find that the indenture of the said lease has expired on 31st October, 1999 by efflux of time and there is no fresh lease as required under Section 107 of the Transfer of Property Act, 1882, executed between the parties. The lower courts below have rightly decreed the suit. I do not find any error, much less, error of jurisdiction committed by the lower courts below, and therefore, no interference with the impugned order is called for in the jurisdiction of this Court conferred under Section 115 of the Code of Civil Procedure, 1908. The Rule is, accordingly, discharged. The civil revision application stands dismissed.

16. It is made clear that the observations made hereinabove are for the purpose of disposal of the revision and Short Cause Suit No. 6244 of 2002 filed by the petitioner in the City Civil Court shall be decided independently on its own merits and in accordance with law.

17. In view of the disposal of the revision application, Civil Application No. 279 of 2008 will not survive for consideration, and therefore, the same is also disposed of. Learned Counsel for the petitioner, at this stage, seeks continuation of the stay granted at the time of admission. The prayer is opposed by Learned Counsel for the respondent. However, in the interests of justice and in order to enable the petitioner to approach the High Court the stay granted earlier shall remain in force for a period of eight weeks from today.

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