Compliance with terms in lease deed for renewal of lease is mandatory

Ram Bharosey Lal Gupta v. Hindustan Petroleum Corpn. Ltd., (2013) 9 SCC 714

Transfer of Property Act, 1882
S. 109 r/w S. 58(d) and S. 111(a) - Lessor - Who is - Transferee of lessor when possesses all the rights of the lessor,
though lessor retaining right of redemption - Absence of contract to the contrary - Transfer of lessor's reversion/renthold
during subsistence of lease by usufructuary mortgage (UM) (by appellant lessor to R-2 usufructuary mortgagee) - Rent
being paid thereafter to usufructuary mortgagee R-2 by lessee R-1 - Lessor during subsistence of the usufructuary
mortgage, held, in present case was R-2 and not appellant - Hence, when renewal clause in lease deed provided that
written request for renewal had to be made to lessor, such request had to be made to the transferee of the lessor i.e. R-2
to whom R-1 lessee was paying the rent, and not the appellant - Thus, R-1, the lessee having improperly invoked
renewal clause, not entitled to renewal of lease, 

Transfer of Property Act, 1882
S. 105, S. 109 r/w S. 58(d) and S. 111(a) - Lease with renewal clause which was not a unilateral renewal clause -
Renewal, held, possible only if such clause is strictly complied with - Lessor granting usufructuary mortgage during
subsistence of lease, so lessee R-1 paying rent directly to mortgagee (R-2) - In such case, held, notice of renewal as
required by relevant clause in lease deed, had to be sent to lessor's transferee i.e. the usufructuary mortgagee (R-2) and
not the lessor (appellant) - Thus, R-1, the lessee having improperly invoked renewal clause, not entitled to renewal of
lease, 
Ss. 111 and 116 - Holding over - Benefit of, when available - Renewal clause in lease - Lessor not at all acquiescing to
continued possession after valid termination of lease upon its non-renewal - No deemed renewal on facts either - Held,
lessee continued in possession only as trespasser after termination of initial period of lease upon its non-renewal, and
thus lessee (R-1) was liable for mesne profits as a trespasser in possession from date of termination of lease i.e. 30-6-
1980, 
Acquisition, Requisition and Nationalisation
Caltex [Acquisition of Shares of Caltex Oil Refining (India) Limited and of the Undertakings in India of Caltex (India)
Limited] Act, 1977
S. 7 - Renewal of lease/tenancy held by transferee(s) of Caltex - Automatic renewal of lease, held, is not permissible -
Compliance with terms in lease deed for renewal of lease is mandatory - S. 7 of 1977 Act cannot be read in a manner not
in consonance with requirements of fairness, reasonableness and non- arbitrariness by State or its instrumentalities (as
lessees in this case) in complying with requirements provided in lease deed for renewal of said lease - Demised property
leased out to R-1 Corporation lessee for a period of 20 yrs under a registered lease deed by appellant-plaintiff lessor,
providing for renewal of lease subject to conditions (Cl. 3) specified in said deed - Reversionary interest of appellant-
plaintiff lessor then mortgaged by usufructuary mortgage to R-2 - Thereafter, R-1 used to pay rent directly to mortgagee
R-2 - On expiry of lease period while the abovesaid mortgage was subsisting, R-1 continued to occupy said premises
contending that in view of enactment of 1977 Act, there shall be a deemed renewal of the lease - Despite serving notice
terminating lease, possession having not been returned, appellant lessor filed suit for eviction - Trial court decreed suit
for arrears of rent but held that appellant lessor was not entitled to terminate lease in view of S. 7 - Said judgment and
decree of trial court set aside by appellate court holding that lease was rightly terminated by appellant lessor, which was
reversed by High Court in second appeal - Legality - Held, having continued to pay rent for demised property to
mortgagee R-2, R-1 should have sent notice seeking renewal of lease to mortgagee, who had stepped into shoes of
lessor while the mortgage subsisted, and not to appellant - Since R-1 failed to exercise its right to get renewal of lease as
per the requirements laid down in Cl. 3(d) in lease deed (one of the key requirements was the lessor had to be given a
renewal request in writing two months before expiry of the lease), held, termination of lease is perfectly legal and valid -
Further held, continuation of holding over of suit property by R-1 after termination of lease amounts to trespass as lessor
did not acquiesce to R-1's continued possession in any way, and hence, R-1 is liable to pay mesne profits by way of
damages to appellants - Hence, held, High Court erred in interpreting S. 7 of 1977 Act to conclude that there is deemed

renewal and appellant lessor was under legal obligation to renew lease term for further period of 20 yrs in favour of R-1
despite non-compliance with terms of lease deed for renewal of lease - Also, held, action of R-1 is unfair as there is no
fairness, reasonableness and non-arbitrariness on its part to avail the right under S. 7 for continuing as lessee in respect
of demised property,