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PETITIONER: CHHATU RAM HORIL RAM LTD.

       Vs.

RESPONDENT: STATE OF BIHAR AND ANR.

DATE OF JUDGMENT: 31/01/1968

BENCH: SHAH, J.C. BENCH: SHAH, J.C. RAMASWAMI, V.

CITATION:  1969 AIR  177            1968 SCR  (2) 881  CITATOR INFO :  R          1976 SC1978  (9,24,33)  R          1976 SC2520  (17)

ACT: Bihar  Land Reforms Act (30 of 1950), ss. 3, 4 and  10-Lease of mica bearing lands-Covenant for renewal of  lease-Vesting of  estate in State Government under the Act-Whether  lessee entitled to renewal.

HEADNOTE: The  appellant-company  obtained  a lease  of  certain  mica bearing land from the owners for a period of fifteen  years. The  lease deed provided for a renewal of the lease  on  the expiry of the period at the option of the lessee.  The  land was  within an estate and by virtue of a notification  under the  Bihar Land Reforms Act, 1950, the estate vested in  the State Government under s. 4, free from all encumbrances  and free  from  all rights of the lessees.   But  the  appellant continued  in  occupation for the remaining  period  of  the contractual  lease, under a statutory lease deemed  to  have been granted by the State under s. 10 of the Act. On  the  question  whether the  appellant  was  entitled  to specific performance of the covenant of renewal, HELD : The agreement of renewal of the lease infuture was not binding upon the State Government after the  vesting ofthe estate. (1) The Original contractual lease came to an endby     the operationof  s. 4 and under s. 10 a fresh  statutory  lease for theremainder of the term of that lease, in favour  of the  lessee,  came  into being  with  terms  and  conditions mutatis mutandis the ’same as the conditions of the original lease.   But the covenant granting an option of  renewal  of the lease on the expiry of the period of the lease is merely a  covenant running with the land, and does not  create  any interest in land.  It being in the nature of an  encumbrance and  by  virtue  of s. 4 it was extinguished  and  the  land vested in the State free from the obligation created by  the renewal clause. [885 C-E] The State of Bihar v. Indian Copper Corporation Ltd.  I.L.R. 38 Pat. 1160, approved. (2)  Rule  40 of the Mineral Concession Rules,  1949,  under which a lessee of a mining lease is entitled to at least one

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renewal  for  a  period not exceeding the  duration  of  the original lease, applies to grants made by Government and not to   statutory   leases.   Therefore,  the   rule   has   no application.   Even  assuming the rule was  applicable,  the duration  of  the  original  lease in the  case  of  such  a statutory  lease  must be deemed to be no  longer  than  the period between the date of vesting and the date of expiry of the  original lease and that period, for which  renewal  may have been claimed, expired many years ago. [885 G; 886 A-B]

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 47 of 1965. Appeal from the judgment and decree dated December 12,  1962 of  the Patna High Court in Appeal from Original Decree  No. 433 of 1959. H.   R.  Gokhale,  S.  N. Prasad and B. P.  Singh,  for  the appellant. 883 emption and not of renewal was granted to the appellant Com- pany.   The High Court of Patna confirmed the decree  passed by the Trial Court but on different grounds.  The High Court held  that  the  right granted by cl. 29  gave  rise  to  an "encumbrance"  which was extinguished when the  interest  of the   owners  in  the  land  vested  in  the  State.    With certificate granted by the High Court, this appeal has  been preferred by the Company. A notification under s. 3(1) of the Bihar Land Reforms  Act, 1950, on June 27, 1953 was issued in respect of the land  of the   owners.    Section  4  of  the  Act   prescribes   the consequences of the publication of the notification under s. 3(1) : it provides, insofar as it is relevant :               "Notwithstanding  anything  contained  in  any               other  law for the time being in force  or  in               any  contract,  on  the  publication  of   the               notification under sub-section (1) of  section               3, or sub-section (1) or (2) of section 3A the               following consequences shall ensue, namely :               (a)   Such  estate  or  tenure  including  the               interests  of the proprietor or  tenure-holder               in   any  building  or  part  of  a   building               comprised  in such estate or tenure  and  used               primarily  as  office  or  cutchery  for   the               collection  of rent of such estate or  tenure,               and  his  interests in trees,  forests,  fish-               eries, jalkars, hats, bazar, mela and  ferries               and  all other sairati interests as  also  his               interest in all sub-soil including any  rights               in  mines and minerals, whether discovered  or               undiscovered, or whether being worked or  not,               inclusive of such rights of a lessee of  mines               and  minerals  comprised  in  such  estate  or               tenure  (other than the interests  of  raiyats               and under-raiyats) shall, with effect from the               date of vesting, vest absolutely in the  State               free from all encumbrances and such proprietor               or  tenure-holder  shall  cease  to  have  any               interests in such estate or tenure, other than               the interests expressly saved by or under  the               provisions of this Act." The opening words of this clause "Subject to the  subsequent provisions of this Chapter" were omitted by Bihar Act 16  of I  959, but that omission has no practical  significance  in

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this case.  Section 10 of the Act provides :               "(1)  Notwithstanding  anything  contained  in               this  ,Act, where immediately before the  date               of vesting of the estate or tenure there is  a               subsisting   lease   of  mines   or   minerals               comprised in the estate or tenure or any  part               thereof, the whole or that part of the  estate               or tenure               884               comprised  in  such lease shall,  with  effect               from  the date of vesting, be deemed  to  have               been  leased  by the State Government  to  the               holder  of the said subsisting lease  for  the               remainder of the term of that lease, and  such               holder shall be entitled to retain  possession               of the leasehold property.               (2)   The  terms  and conditions of  the  said               lease  by, the State Government shall  mutatis               mutandis   be  the  same  as  the  terms   and               conditions of the subsisting lease referred to               in  sub-section (1), but with  the  additional               condition that, if in the opinion of the State               Government  the holder of the lease  had  not,               before  the date of the commencement  of  this               Act, done any prospecting or developing  work,               the State Government shall be entitled at  any               time  before the expiry of one year  from  the               said  date  to determine the lease  by  giving               three month’s notice in writing               Provided               (3) Counsel  for  the appellant Company contended  that  cl.  29 created  an  interest in the demised land in favour  of  the Company and the State of Bihar as successor-in-title of  the original owners took the land subject to that interest.   In the  alternative,  counsel contended, the  Company  acquired immediately  on  execution  of the indentures  of  lease  an indefeasible  right  to obtain renewal and  that  right  was enforceable  against  the owners  and  their  successors-in- interest   alike.   We  are  unable  to  agree  with   those contentions.  The covenant granting an option of renewal  of the  lease  on  the  expiry  of  the  period  of  the  lease outstanding is a covenant running with the land : it creates no  interest  in  land.  In The, State of  Bihar  v.  Indian Copper Corporation Ltd.(1) the High Court of Patna held that a clause for renewal of a lease on the expiry of it%  period has  not the effect of a present demise nor does it  operate to  create  an  interest in land on the date  on  which  the original lease was executed : a covenant for renewal is  not tantamount  to an actual demise and therefore "no  leasehold interest  is created for the renewed term when the  original lease  is  granted."  Under the terms  of  the  lease  dated September 30, 1940, the appellant Company became entitled to a  lease  for a period of fifteen years.  On the  expiry  of that  period the Company could have entorced their right  to get  a  renewal of the lease for a period of  fifteen  years against   the  owners  if  their  interest  had   not   been extinguished.   If  the owners declined to carry  out  their obligation,  the Company could sue for specific  performance and claim a right to remain I ) I.L.R. 38 Pat. 1160, 885 in  possession for a period of fifteen years  stipulated  in cl.  29.  But the provisions of the Bihar Land  Reforms  Act intervened.  By the express terms of s. 4 (a) of the Act all

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the  interests of the owners in all sub-soil  including  any rights   in  mines  and  minerals,  whether  discovered   or undiscovered  or whether being worked or not,  inclusive  of such rights of the lessee of mines and minerals comprised in such estate or tenure became vested in the State with effect from the date of vesting absolutely and free from all encum- branches.  Even the interest of the lessees of the mines and minerals  comprised in the estate therefore ceased, and  all encumbrances  on  the interest of the  owners’  estate  were extinguished and the State took the estate free from all the rights of the lessees.  The original contractual lease  came to an end by the operation of s. 4 (1 )(a,) of the Act,  and a  fresh  statutory lease for the remainder of the  term  of that lease in favour of the lessee came into being under s.1 0 ( 1 ) of the Act. The  appellant  Company therefore acquired the rights  of  a statutory  lessee for the period between June 27,  1953  and September  30,  1955,  with  terms  and  conditions  mutatis mutandis  the same as the conditions of the  original  lease granted by the owners on September 30, 1940.  But by  virtue of  s.  4 that covenant by which ,he owners  had  agreed  to renew the lease at the option of the lessee being merely  of the nature of an encumbrance and not an interest in the land was extinguished, the land vested in the State free from the obligation created by the renewal clause. We  agree with the High Court that "a clause for renewal  of the lease at a future date was a limitation imposed upon the lessor.   His freedom as an absolute owner was sought to  be curtailed by such agreement.  It was thus an encumbrance and all    encumbrances    were    wiped    out    by    section 4......................  Taking  all these  provisions  into consideration, an agreement for renewal of a lease in future cannot  be  binding  upon the  State  Government  after  the vesting of the estate". Counsel  for the appellant relied upon r. 40 of the  Mineral Concession Rules, 1949, and contended that under the  scheme of  the Rules a lessee of a mining lease is entitled  to  at least  one  renewal.  Rule 40, insofar as  it  is  material, provides :               "(1)  The period for which a mining lease  may               be  granted shall be 30 years in the  case  of               coal, iron-ore and bauxite for manufacture  of               aluminium,  and  20 years in the case  of  any               other  minerals, unless the applicant  himself               asks for a shorter period.  The lease shall be               renewable at the option of the lessee, for one               or   two  periods,  each  not  exceeding   the               duration of the original lease, in the case of               iron-ore   and  bauxite  for  manufacture   of               aluminium, and one period not exceeding the               8 8 6               duration of the original lease in the case  of               other minerals." But r. 40 has no application.  Manifestly, the rule  applies to grants made by the Government : it has no application  to statutory  leases  arising by virtue of s. 10 of  the  Bihar Land Reforms Act.  Even assuming that r. 40 applies to  such a statutory lease, the duration of the "original lease"  may be  deemed to be no longer than the period between the  date of  vesting and September 30, 1955.  That period  for  which renewal  may have been claimed has expired many  years  ago, and recognition of the rights of the appellant Company  will be of no practical significance in this appeal. The appeal fails and is dismissed with costs.                                  Appeal dismissed.

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