Law Web: Whether the court can use an unregistered lease deed for collateral purpose, and what are its illustrations?

In Dina Ji and Others vs. Daddi & others reported

in AIR 1990 SC 1153, the Supreme Court had considered the

effect of an unregistered document which is required to be

registered under Section 17 of the Registration Act, 1908 or

under any of the provision under the Transfer of Property Act.

It was observed that such a document will not avail to create,

declare, assign, limit or extinguish any right, title or interest in

or to the immovable property made mention of in the

document. In other words, an unregistered document cannot

be used for the purpose of establishing that the document

created or declared or assigned or limited or extinguished a

right to immovable property. However, trend of the judicial

decisions or trend of judicial opinion is to the effect that

unregistered documents which are compulsorily registrable

under Section 17 of the Registration Act can be looked into

only for collateral purposes. Collateral purpose has a limited

scope and meaning. It is possible to lay down some haphazard

illustrations on the point in the light of judicial

pronouncements.

Purposes which are collateral in nature:

a) For proving the nature and character of possession of the
tenant (Per Satish Chand Mukhan and Others v.
Goverdhandas Byas and Others (AIR 1984 SC 143).
b) For ascertaining whether the purpose of lease was
residential or not. (Per Rai Chand Jain v. Miss Chandra Kanta
Khosla (AIR 1991 SC 744).
ig
c) For ascertaining the commencement of possession, rate of
rent etc. (Per Pieco Electronics and Electricals Ltd. v. Smt.
Tribeni Deve (AIR 1990 Cal. 135).
Purposes which are not collateral:
a) For ascertaining whether the lessee is entitled to create a
sublease or not. (Per M/s.Bajaj Auto Ltd. v. Bahari Lal Kolhi
(AIR 1989 SC 1806).
b) For ascertaining the term of lease. (Per Ishwar Dutt v.
Sunder Singh (AIR 1961 J&K 45).
c) For ascertaining the term in a lease regarding notice of
eviction. (Per M/s.Jagajit Industries Ltd. v. Rajiv Gupta (AIR
1981 Delhi 359).
d) For ascertaining the date on which the tenancy began. (Per
Zarif Ahmad and Another v. Satish Kumar and Another (AIR
1983 All. 164).
e) For ascertaining as to who is the tenant and on what terms
he has been created a tenant (Per Haran Chandra Chakravarti
v. Kaliprasanna Sarkar (AIR 1932 Cal. 83).

IN THE HIGH COURT OF JUDICATURE AT BOMBAY,

NAGPUR BENCH, NAGPUR

SECOND APPEAL NO.201 OF 2013

Mohd. Shakil Mohd. Yunus, Vs Chandrabali Ramai Gupta

DATE : 12.06.2014.

Citation; 2014(4) ALLMR 524Bom

CORAM : A.P.BHANGALE, J.

i) Can the learned lower Appellate Court legally upset the

finding of the learned trial Court dismissing the suit of

the plaintiff on the ground that the impugned lease is for

the period of five years and the same requires

compulsory registration under Section 17 (1) (d) of the

Registration Act in spite of observing that the

unregistered document cannot be admitted for proving

the relationship of Landlord and tenant and duration of

the lease and allow the appeal ?

ii) Is the learned Appellate Court right in law to allow

the appeal relying on the proviso to Section 49 of the

Registration Act that the lease document can be used for

collateral purposes ?

This Second Appeal is filed by the appellant (Original

Defendant) against the Judgment and Order, dated 21.12.2012

passed by District Judge, Akola in Regular Civil Appeal No.94

of 2005, which was allowed and the suit was decreed. The

said appeal arose from the Judgement and Order, dated

29.7.2005 passed by the trial Court (Civil Judge (Jr. Dn.,

Murtizapur) in Regular Civil Suit No.21 of 2004. The suit for

eviction, possession and damages was dismissed by the trial

trial Court.

Court. The parties are referred to by their nomenclature in the

Brief facts are as under :

The plaintiff is owner of Nazul plot nos.28 and 29, sheet

no.26D admeasuring about 100 square feet situated in Tanga

Chowk, Murtizapur. In the year 1998, the defendant was given

the plot on lease for a term of five years under the Lease deed,

dated 29.8.1998. As per the agreement, the plaintiff had

agreed to spend a sum of Rs. 10,000/ for construction of the

shop on the said plot. The defendant had deposited the sum of

Rs. 15,000/ for the said purpose, agreeing to bear expenses

exceeding Rs 10,000/ if spent by the plaintiff for construction

upon the suit plot. Defendant had agreed to vacate the plot

after expiration of the lease term of five years, but did not. The

tenancy stood terminated by efflux of time as also by notice

served upon the defendant by Registered Post A/D. with effect

from 15.10.2003. The defendant also did not pay the rent

from October 2000 to October 2003. The defendant continued

to hold over unlawfully. The defendant admitted the fact that

he had approached the plaintiff and requested him to give the

plot on lease. The defendant denied the suit claim. The trial

Court negatived the suit claim of possession and dismissed the

suit. Ownership of the suit plot with the plaintiff was not

disputed by the defendant. The fact of lease of the suit plot was

not disputed. Only term of the lease was disputed. The

document of lease was unregistered.

The trial Court dismissed the suit after it found that the

plaintiff had failed to prove the requirement of the suit

property for his own (Wife’s) occupation. The plaintiff had

proved that he was responsible for expenses of the

construction done by the defendant on the suit plot to the

extent of Rs. 10,000/ only. The trial Judge held that the

that the tenancy term was for 5 year.

plaintiff failed to prove termination of the tenancy and also

The first Appellate Court reversed the findings of the

trial Court, allowed the appeal and decreed the suit. The

question argued is as to whether the first Appellate Court was

right in invoking the proviso to section 49 of the Registration

Act to hold that the unregistered lease document can be used

for collateral purpose and whether it is justified to reverse the

Judgment and Order passed by the trial Court on the ground

that, in view of Section 17(1) (d) of the Registration Act, the

lease required compulsory registration of the document to

prove the relationship of the Landlord and the Tenant. The

appellant sought to support the Judgment and Order passed by

the trial Court. The first Appellate Court held from the

evidence on record that there was a relationship of lessor and

lessee between the parties and the lease was for a period of

five years and by efflux of time, the lease was terminated on

16.10.2003. The fact that the defendant continued to hold over

and refused to vacate despite notice to vacate from the lessor

would not justify refusal of the relief. Hence the appeal was

allowed.

Mr.L.A.Mohata, learned Counsel for the Appellant

submitted with reference to Section 49 of the Registration Act

collateral purpose.

that the unregistered document could not have been used for a

Mr.A.M.Ghare, learned Counsel for the respondents

urged that the Lease deed in the present case was executory

with effect from 15.10.1998 to 15.10.2003 for the term of five

years and since it was compulsorily registrable, it was

inadmissible in evidence and for this vital flaw, the suit was

rightly dismissed. Unregistered Lease, however according to

Shri Ghare could have been used for the collateral purpose.

Legal position in respect of Lease agreement for a term

exceeding a year may be examined now:

Section 107 of the Transfer of Property Act, 1882

provides the mode by which the contract of tenancy can be

entered into i.e. in which the lease can be made. Section 107

of the T. P. Act reads as under :

"Section 107 Leases how made

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 by a registered instrument.

All other leases of immovable property may be made

either by a registered instrument or by oral agreement

accompanied by delivery of possession.

Where a lease of immovable 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 immovable 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."

A perusal of Section 106 of the Transfer of Property Act

leads a rule of evidence as regards the duration of certain lease

and according to letter and spirit of Section 106 of the T. P. Act,

in the absence of any contract, local law or usage to the

contrary, a lease of immovable properly for any purpose other

than the agriculture or manufacturing purpose, is to be deemed

to be lease from month to month, but so far as lease for

immovable property taken for the agricultural purpose or

manufacturing purpose, these leases are unless there is

anything to the contrary in the contract or local law or the

usage, to be deemed to be leased from year to year. This is a

rule of evidence i.e. all leases of immovable properties are to be

deemed in the eye of law to be month to month and, if any,

person alleges or claims to the contrary i.e. in other words, if

any person alleges or as asserts lease particularly lease to be a

fixed term lease or to be a yearly lease, he has to prove the same

by legal, valid and reliable evidence keeping in view the

provisions of Section 107 of the Transfer of Property Act as well

as the provisions of the Registration Act and the Evidence Act.

So, in the present case, burden did lie on the defendant

10.

to prove the averments of fact made by him in the Written

Statement to the effect that fixed term of the lease was for five

years and the period of lease could be extended at the option

Section 107 of the T. P. Act provides that lease for a

11.

and wish of the lessee.

fixed term or for a term of more than a year or for year to year

or reserving yearly rent can be made only by a registered

instrument while all other leases of immovable property can be

made either by a registered instrument or by oral agreement

accompanied with delivery of possession. Thus, the provisions of

Section 107 of the Transfer of Property Act by use of expression

'only' indicates that the Legislature or the Parliament intended

to prescribe the specific mode for making of the fixed term lease

for more than one year or reserving yearly rent. It is well settled

principle of law as laid down by Supreme Court in the case of

State of U. P. vs. Singhara Singh and Others, reported in AIR

1964 SC 358 as well as by Privy Council in the case of Nazir

Ahamad v. KingEmperor, reported in AIR 1936 PC 253 when

the law prescribes a certain mode or specific mode of or for

doing a thing or certain mode of exercising certain power of

authority or right or for performing certain Act, then that act or

thing has got to be done in that manner alone and not

otherwise. Other modes in respect thereof are necessarily and by

necessary implication taken to have been forbidden and closed.

Apart from these general principles, further use of expression

"only” after the expression “can be made" and before expression

“by a registered instrument" indicates the legislative intent that

legislature has intended that fixed term lease for a period of

more than a year of a lease from year to year or reserving the

yearly rent is to be and can be made in no other manner than by

entering into the contract of tenancy by a registered lease deed.

This being the legal position, there can be no lease for fixed

term for a period more than a year or the like, if the same has

been entered into orally or by some deed which is not registered

one, and in those cases, the presumption about the duration of

lease under Section 106, T.P. Act will apply. (See Allenbury

Engineers Pvt. Ltd. v. Shri Ram Krishna Dalmia and Others, AIR

1973 SC 425 i.e. 1973 (1) SCC 7).

Under the Registration Act, Lease for any term exceeding

one year is compulsorily registrable document.

Section 12. Documents of which registration is compulsory :

(1) The following documents shall be registered, if the property

to which they relate is situated in a district in which, and if

they have been executed on or after the date on which, Act XVI

of 1864, or the Indian Registration Act, 1866, or the Indian

Registration Act, 1871, or the Indian Registration Act, 1877, or

this Act came or comes into force, namely,

(a) Instruments of gift of immovable property;

(b) other nontestamentary instruments which purport or

operate to create, declare, assign, limit or extinguish, whether

in present or in future, any right, title or interest, whether

vested or contingent, of the value of one hundred rupees and

upwards, to or in immovable property;

receipt or payment of any consideration on account of the

creation, declaration, assignment, limitation or extinction of

any such right, title or interest; and

(d) Leases of immovable property from year to year, or for any

term exceeding one year, or reserving a yearly rent;

(e) nontestamentary instruments transferring or assigning any

decree or order of a Court or any award when such decree or

order or award purports or operates to create, declare, assign,

limit or extinguish, whether in present or in future, any right,

title or interest, whether vested or contingent, of the value of

one hundred rupees and upwards, to or in immovable

property:

Provided that the State Government may, by order published

in the Official Gazette, exempt from the operation of this sub

section any leases executed in any district, or part of a district,

the terms granted by which do not exceed five years and the

annual rents reserved by which do not exceed fifty

rupees........................................................................

S. 49 of the Registration Act mention the consequence of the

nonregistration of the document

49. Effect of nonregistration of documents required to be

registered

No document required by section 17 or by any provision of the

Transfer of Property Act, 1882, to be registered shall

(a) affect any immovable property comprised therein, or

(b) confer any power to adopt, or

property or conferring such power, unless it has been

registered:

Provided that an unregistered document affecting

immovable property and required by this Act, or the

Transfer of Property Act, 1882, to be registered may be

received as evidence of a contract in a suit for specific

performance under Chapter II of the Specific Relief Act,

1872, or as evidence of any collateral transaction not

required to be effected by registered instrument.

In Dina Ji and Others vs. Daddi & others reported

12.

in AIR 1990 SC 1153, the Supreme Court had considered the

effect of an unregistered document which is required to be

registered under Section 17 of the Registration Act, 1908 or

under any of the provision under the Transfer of Property Act.

It was observed that such a document will not avail to create,

declare, assign, limit or extinguish any right, title or interest in

or to the immovable property made mention of in the

document. In other words, an unregistered document cannot

be used for the purpose of establishing that the document

created or declared or assigned or limited or extinguished a

right to immovable property. However, trend of the judicial

decisions or trend of judicial opinion is to the effect that

unregistered documents which are compulsorily registrable

under Section 17 of the Registration Act can be looked into

only for collateral purposes. Collateral purpose has a limited

scope and meaning. It is possible to lay down some haphazard

illustrations on the point in the light of judicial

pronouncements.

Purposes which are collateral in nature:

The aforesaid list is not exhaustive. The net

13.

conclusion that can be drawn from the decisions referred to

above is that an unregistered lease cannot be pressed into

service to create, declare, assign, limit or extinguish any right,

title or interest in or to the property comprised in the

document. As the term of lease imposes a limit on the interest

of the parties, an unregistered document cannot be relied on

for ascertaining the term of lease. This position is further

clarified by the Supreme Court in K.B.Saha and Sons Pvt. Ltd.

vs. Development Consultant Ltd. (2008) 8 SCC 564). Therein,

the Apex Court was considering a case where the eviction

proceedings were based on the memorandum of lease

agreement. The agreement was unregistered. There was a

clause in the agreement clause (9) which required the lessee

to use the tenanted premises only for its particular named

officer. The Apex Court found that it was an important term

forming part of lease agreement and it cannot be looked into

even for collateral purposes to come to a conclusion that the

respondent was liable to be evicted because of violation of the

aforesaid clause."

In Anthony v. K.C.Ittoop & Sons, (2000) 6 SCC

14.

394, the question arose whether a tenant of a building could

be evicted by filing a suit in the regular Court when the

building is situated in an area covered by the Kerala Buildings

(Lease and Rent Control) Act and when the lease was for a

period of more than one year and the lease deed was not

registered. The High Court held that the tenant has not

proved that independent of the void lease the relationship of

the landlord and tenant has come into existence between the

parties and therefore, the suit was maintainable. The

Supreme Court in the further appeal held that the instrument

of lease is required to be registered and the Court is disabled

from using the instrument as evidence and it goes out of

consideration. On the admission of the landlord that the

defendant was inducted into possession of the building by the

owner and thereafter, he was paying monthly rent, the legal

character of the defendant has to be attributed to a jural

relationship which cannot be placed in a way anything

different from that of lessor and lessee. Therefore, the

defendant could be evicted only under the provisions of the

Rent Control Act. In that case, the Court was concerned with

the status of the defendant as to whether he was a lessee or of

any other legal character. That by itself will not help the

revision petitioner in this case as by giving effect to the term

in the sale deed that the tenant can continue in possession for

ten years, he will be enforcing a term in a lease transaction,

which is otherwise unenforceable in law for want of a

registered document. If the original landlords were not bound

by the term of the lease deed as it was not a registered

document, the transferee also cannot be bound to do so. ..."

15. In the light of the discussion of the legal position as

mentioned above, the conclusion follows that, in the present

case, the lease for any period exceeding one year was

compulsorily registrable document requiring the registration

charges and the stamp duty in accordance with law. The

Court was, no doubt, wrong to admit the document of lease

in to evidence when it was compulsorily registrable

according to the law (supra) in view of the provisions in

Section 55 of the Maharashtra Rent Control Act read along

with Section 17(1) (d) of the Registration Act and further

read along with Section 107 of the Transfer of Property Act.

But then, the document can be taken into consideration for

collateral purposes, as stated above for proving the nature

and character of possession of the tenant and ascertaining

whether the purpose of lease was residential or not and for

ascertaining the commencement of possession, rate of rent

etc. as held by the first Appellate Court. Therefore, the suit

16.

was rightly decreed by the first Appellate Court.

In view of the above, the aforementioned

substantial questions of law are answered in the affirmative.

The Second Appeal lacks merits. Hence, it is dismissed with

costs. The tenant/occupant shall within three months from

today hand over possession of the suit property to the

plaintiff.

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Friday, 15 August 2014

Whether the court can use an unregistered lease deed for collateral purpose, and what are its illustrations?

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