http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 7  

PETITIONER: MADAN LAL

       Vs.

RESPONDENT: BHAI ANAND SINGH & ORS.

DATE OF JUDGMENT12/10/1972

BENCH: BEG, M. HAMEEDULLAH BENCH: BEG, M. HAMEEDULLAH RAY, A.N. PALEKAR, D.G. DWIVEDI, S.N.

CITATION:  1973 AIR  721            1973 SCR  (2) 677  1973 SCC  (1)  84

ACT: Transfer of Property Act, s. 108(q)--East Punjab Urban  Rent Restriction  Act  3  of 1949,  S.13  (2)--Interpretation  of lease--Lessor whether entitled to possession of property  on expiry  of  lease  by  efflux  of  time--Rent   Controller’s jurisdiction  to evict lessee--Effect of term in lease  deed that  lessor was bound to pay to lessee 50% of market  value of  superstructure built by lessee--Lessee whether  entitled to remain in possession during period whenmarket    value being determined by arbitrators.

HEADNOTE: The respondents,landlord  lessors, had executed a  lease on 9-11-1949. Under its terms, thelessors  had  given  some land to the lessees for the building and rentingout  of  a cinema  house for a period of twenty years. Clause 6 of  the lease laid down that on the expiry of the tenancy the entire structure  built by the lessees at their cost  would  become the  property of the lessor who shall then exercise all  the rights  of  ownership,  subject to the  condition  that  the lessor  shall  have to pay 50% of the market  value  of  the structure  to the lessees.  If there was disagreement  about the  market value the same would be decided by  arbitration. There  was provision for sale of the structure in  case  the lessors  failed to pay to the lessees within a fixed  period 50%   of   market  value  of  the  structure   assessed   by arbitration,  and  that  the lessees would  have  the  first charge  on the sale proceeds.  On the expiry of  the  lease, the  lessors applied under section 13(2) of the East  Punjab Urban   Rent  Restriction  Act  3  of  1949,  to  the   Rent Controller,  for the eviction of the former tenant  and  the appellant   sub-tenant.    During  the  pendency   of   this application the lessees applied to the Rent Controller under s.  34  of  the  Indian Arbitration Act,  for  the  stay  of eviction  proceedings  pending  the decision  of  a  dispute between  the  parties as to who was entitled  to  possession while  the market value was being determined by  Arbitrators under  clause  6 of the lease.  The  Rent  Controller  held, inter  alia that the powers of ejectment under s.13  of  the Act,  on specified grounds, could not be curtailed  even  by

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 7  

some  agreement between the parties and dismissed  the  stay application.   The High Court dismissed the lessee’s  appeal under  s. 39 of the Arbitration Act, after interpreting  the lease deed and holding that clause 6 of the deed ",negatives any  right  in the lessees to retain  possession  after  the expiry of the lease." In appeal by special leave before this court it was argued on behalf of the appellant that the High Court  had not taken into account the fact that  the  cinema had necessarily to be run by somebody while the market value of   the  property  was  being  ascertained  by  resort   to arbitration.  The respondents, inter alia, relied on s.  108 of the Transfer of Property Act which lays down that in  the absence  of a contract or usage to the contrary, the  lessee is,  on  the determination of the lease, bound  to  put  the lessor  into  possession of the  property.   Dismissing  the appeal. HELD  : There is no provision in the lease expressly  laying down that the right to obtain possession will be  postponed, after  the  expiry  of  the term of  the  lease,  until  the ascertainment of the market value of the building has  taken place.   On  the other hand the clause relied  upon  by  the respondents not only lays down that the super-structure will become  the  property  of the lessor on the  expiry  of  the period of tenancy, but 678 goes on to specify that the lessor ’shall’ then exercise all the  rights  of ownership including the right  to  sell  the entire  property.  It is apparent that the exercise  of  all rights  of ownership according to the terms of  the  clause, literally interpreted, could take place on the expiry of the tenancy immediately. The contention that the lessor’s rights were subject to  the payment of 50% of the market value of the building could not be  accepted.  If this had really been the intention of  the parties,  there was nothing to prevent them  from  inserting such  a  term  in  the deed so as  to  make  that  intention explicit.   The more natural construction of the  clause  is that  rights  of  ownership, including  the  right  to  take possession  of  the  building, would become  vested  in  the lessor at the expiry of the period of lease, and that 50% of the  market value of the building, which was to be  paid  in any  case, became a condition attached to this ownership  of the  building  when  it vested in the lessee.   In  view  of s.108(q)  of  the  Transfer of Property Act  the  burden  of proving ’a contract to the contrary’ was on the lessee; and, something to indicate an agreement to the contrary should be there  on such a matter involving a valuable  right,  before this burden could be held to have been discharged. [680E] The Rent Controller was not, strictly speaking, concerned at all  with the question ’of the ascertainment of  the  market value.  The statutory power vested in the Rent Controller by s.  1  3  of the Act ’is that of giving  or  not  giving  or conditionally  giving  a direction for the eviction  of  the tenant  when certain statutory requirements  are  fulfilled. Both  sides  had proceeded on the assumption that  the  Rent Controller  had jurisdiction in the proceedings before  him, to  order eviction.  The correctness of that assumption  had not been challenged by the appellant. [681D] The judgment of the High Court must accordingly be upheld. Ethirajulu Naidu v. Rangancthan Shetty and Ors., 72 I.A. 72, 73, distinguished.

JUDGMENT:

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 7  

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 57 of 1972. Appeal  by special leave from the judgment and  order  dated October 11, 1971 of the Punjab & Haryana High Court in  F.A. from Order No. 34 of 1971. M.C.  Chagla, S. R. Agarwal and E. C. Agarwala,  for  the appellant. V.M.  Tarkunde,  D. N. Mishra, J. B.  Dadachanji,  O.  C. Mathur and Ravinder Narain, for the respondents. The Judgment of the Court was delivered by BEG,  J.-This  appeal  by Special Leave has  arisen  in  the following circumstances : The  respondents, landlord lessors, had executed a lease  on 9-11-1949.   Under  its terms, the lessors, had  given  some land  to the lessees for the building and renting out  of  a cinema  house for a period of twenty years on a rent of  Rs. 300/- per month 679 for the first year, and, thereafter, at Rs. 600/- per month. The period within which the cinema had to be constructed was also specified.  Clause 6 of the lease laid down :               "On  the  expiry of tenancy  or  the  extended               period  of tenancy, as aforesaid,  the  entire               structure,  built by the lessees at their  own               cost becomes the property of lessor, and shall               exercise all the rights of ownership and shall               be  entitled  to sell  the  entire,  property,               subject  to this condition that  lessor  shall               have  to  pay 50% of the market value  of  the               structure  built by the lessees at  their  ex-               penses.  If the lessor and the lessees fail to               assess the value of the aforesaid structure by               mutual   consent,  two  arbitrators  will   be               appointed,   nominated  by  the   lessor   and               lessees.   In  case  of  their  difference  of               opinion  an  umpire  shall  be  appointed   by               parties  whose award shall be final.  In  case               the lessor fail to pay 50% of the value of the               structure  so  assessed within period  of  six               months  of award of the umpire or  arbitrators               the  whole structure shall be sold and out  of               the  sale  proceed  50% of the  price  of  the                             structure   so  assessed  by  the   um pire   or               arbitrator shall be paid to the lessees.   The               lessees  shall  have the first charge  on  the               sale proceeds. The lease had expired.  Therefore, the lessors applied under Section 13(2) of the East Punjab Urban Rent Restriction  Act 3 of 1949 (hereinafter referred to as ’the Act)’ to the Rent Controller, appointed under the Act, for the eviction of the former  tenant  and the appellant  sub-tenant.   During  the pendency  of  this application, the lessees applied  to  the Rent Controller, under Section 34 of the Indian  Arbitration Act,  for  the  stay of  eviction  proceedings  pending  the decision  of  a dispute between the parties as  to  who  was entitled  to  possession while the market  value  was  being determined by Arbitrators under clause 6 set out above.  The Rent Controller held, inter alia, that the powers of  eject- ment  under  Section 13 of the Act,  on  specified  grounds, could  not be curtailed even by some agreement  between  the parties  and had dismissed the stay application.   The  High Court  of Punjab and Haryana dismissed the  lessee’s  appeal under Section 39 of the Arbitration Act, after  interpreting the  lease  deed  and  holding that clause  6  of  the  deed "negatives  nay  right in the lessees to  retain  possession

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 7  

after he expiry of the lease." It went on to observe :               "It  is specifically provided therein that  as               soon  as  the lease expired the  lessor  would               become full owner of the super-structure which               she would have the right to sell.  The rest of               the  clause provides the method in  which  the               sum paid to the lessees was to be ascertained               680               or recovered and that method does not  include               a right in them to continue to possess  either               the  land  or the super-structure.   What  has               been  made subject to the payment of the  said               sum is the exercise by the lessor of her right               to sell the property the delivery of possesion               of which on the expiry of the lease,  however,               is  not stipulated to be postponed  till  such               payment". The first submission made by Mr. Chagla, learned Counsel for the  appellant, is that the High Court had put an  erroneous and  inequitable interpretation on the deed inasmuch as  the Court did not take into account the fact that the Cinema had necessarily to be run by somebody while the market value  of the property was being ascertained by resort to arbitration. Hence, it was argued that the lessees’ right to continue  in possession  during what was described as  an  "interregnums" was implicit.  The reply is that no such gap is warranted by the terms of the lease.  The respondents also contended that no  specific  provision for recovery of  possession  in  the lease  deed need be inserted as Section-108 of the  Transfer of Property Act provides : "In the absence of a contract  or local usage to the contrary........ (q) On the determination of  the  lease, the lessee is bound to put the  lessor  into possession  of the property".  The main question before  us, therefore, is whether a "contract to the contrary" could  be found  in the lease deed itself for postponing  delivery  of possession,  after  the expiry of the lease, on  any  ground whatsoever. It  is  noticeable that there is no provision in  the  lease expressly  laying down that the right to  obtain  possession will be postponed, after the expiry of the term of the lease until the ascertainment of the market value of the  building has  taken place, On the other hand, the clause relied  upon by  the  respondents  not only lays  down  that  the  super- structure  will  become the property of the  lessor  on  the expiry of the period of tenancy, but goes on to specify that the lessor "shall" then exercise all the rights of ownership including  the  right to sell the entire  property.   It  is apparent  that  the  exercise of all  rights  of  ownership, according   to   the  terms  of   this   clause,   literally interpreted, could take place on the expiry of the period of tenancy  immediately.   Learned Council for  the  appellant, however   lays considerable stress on the subjection of  the exercise  of these rights of ownership to the  liability  to pay  50% of the market value of the building.   He  contends that  such  a condition necessarily means  that,  until  the market  value is actually ascertained and paid,  the  lessee shall  retain  possession.   If this  had  really  been  the intention of the parties, there was nothing to prevent  them from  inserting such a term in the deed so as to  make  that intention explicit.  It appears to us that the more  natural construction  of  the clause is that  rights  of  ownership, Including  the  right to take possession  of  the  building, would 681

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 7  

become  vested in the lessor at the expiry of the period  of the lease, and that 50% of the market value of the building, which  was  to  be  paid in any  case,  became  a  condition attached  to this ownership, of the building when it  vested in the lessee.  The lessor was, in, any case, to pay 50%  of the  market value of the structure, and, in the event  of  a sale,  the payment of this amount became a first. charge  on the proceeds of sale.  It is also significant that it is not mentioned in the deed that a purchaser of the Cinema  house, who,  would presumably prefer to obtain possession so as  to be able to run it, could not get possession of it until  the market  value  was ascertained or fifty per cent of  it  was paid.   Posession  of a Cinema house after the expiry  of  a building  lease involving the passiong of ownership  of  the building on such expiry is, after all, an important  matter. In  view of Section 108 (q) of the Transfer of Property  Act the  burden of proving "a contract to the contrary"  was  on the lessee; and, something’ to indicate an agreement to  the contrary  should  be  there, on such a  matter  involving  a valuable  right,. before this burden could be held  to  have been duly discharged. The only matter which could be referred to arbitration was a difference  between  the  lessors and ;the  lessees  on  the market value of the building.  The tent Controller was  not, strictly  speaking,  concerned at all with the  question  of ascertainment  of  the market value.   The  statutory  power vested  in Rent Controller by Section 13 of the Act is  that of giving or not giving or conditionally giving a  direction for  the  eviction  of the  tenant  when  certain  statutory requirements  are fulfilled.  There was no objection by  any party to the exercise of the jurisdiction of the  Controller to  order eviction in the circumstances of a case  in  which the  tenancy of premise,% demised had expired by  efflux  of time or to the entertainment of an application under Section 34 Arbitration Act.  The lessors, by applying under Section- 13  of the Act, had themselves invoked the  jurisdiction  of the Controller.  And, the lessees had, by relying on Section 34  of  the Arbitration Act, asked for stay  of  proceedings only  until  the value of the building was  ascertained  and paid.   Bothsides thus proceeded on the assumption that  the Rent Controller had jurisdiction, in the proceedings  before him, to order eviction.  The correctness of that  assumption is not challenged by the appellent before us. Learned  Counsel  for the appellant had sought  to  rely  on Ethirajulu  Naidu v. Ranganathan Chetty & Ors.(1) which  was also  cited before the High Court and the  Rent  Controller. In  that  case there was the following specific  term  in  a lease of a limited duration :               "The  lessee shall always and in any event  be               entitled   to  be  paid  the  price   of   the               superstructure built on the                (1)  72 Indian Appeals 72, 73.               682               said   plot  of  land  before  he   surrenders               possession of the land either on the expiry of               the  lease hereby granted or any other  future               lease  or  at any time.  The  price  shall  be               fixed  according  to the market value  of  the               buildings as at the time of ascertainment  and               payment". The  Privy Council had held that this provision  meant  that pos  session  was to be surrendered only on payment  of  the price of the building.  The deed before us would, as we have already  indicated, also have contained a similar  provision if  that  had been the intention of the  parties.   We  find

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 7  

that,  in the lease deed under consideration, the  condition that the lessor will have to pay 50% of the market value  of the building imposes a liability upon the lessor only to pay the  stipulated amount in any event.  The use of  the  words "shall  have  to pay", in clause 6 of the  deed  before  us, could  not  imply anything more than a future  liability  to pay.   But,  the time from which the  rights  of  ownership, including   that  of  actual  physical  possession,   became exercisable  was immediately upon the expiry of the  tenancy itself and not in future when 50% of the market value was to be  ascertained or paid.  The case cited by learned  Counsel for  the appellant, where the terms of the lease  were  very obviously different, could not advance the leasee’s claim. We may mention that the High Court had made an  observation, in  the course of recording its conclusions, which  made  it appear  that what was made subject to the payment of 50%  of the  market value of the building was only the right of  the lessor to sell the property.  On a reading the judgment as a whole,  it is evident that all that the High Court meant  to convey was that the rights of ownership were subjected to  a liability  incurred by the lessor to pay the stipulated  sum in any event.  Any further liability to allow the lessee  to retain  possession  until  the  sum  payable  was   actually ascertained or any other event took place is not to be found here.   The  ascertainment  of  the  exact  amount  of   the liability undertaken was, in our opinion, a separable matter referable  to  arbitration.  No sufficient ground  has  been made  out for disturbing this interpretation of clause 6  of the deed by the High Court. Another question argued by learned Counsel for the appellant was  that the Respondents Lessors had themselves  placed  an interpretation  upon the lease deed which ought, even if  it does not affect our interpretation of the deed, to be  taken into account by the Rent Controller before passing an  order of  eviction  in the pending proceedings.  The  lessors  had stated,  in their application under Section 13 of  the  Act: "The  petitioners have undertaken to abide by the  terms  of the  lease  agreed to between the parties  relating  to  the compensation payable by them before getting actual possesion of the picture house".  No commas separate the term 683 relating to liability to pay compensation from the right  to get actual possession. It may be that the application was rather loosely or inaccu- rately worded.  We have not been shown any undertaking given to  the  Rent Controller, apart from  the  assertion  quoted above  from  the application under Section 13  of  the  Act. And,  no  order  of  the Controller  on  any  such  supposed undertaking  has  been placed before us.   The  parties  had hotly  contested before the Controller as well as  the  High Court   what   the  exact  meaning  of  the   clause   under consideration  was.   It  could, therefore,  not  be  either expected  or assumed that the application under  Section  13 would  contain an acceptance of the very interpretation  put forward’ on behalf of the lessees and denied by the lessors. The  language, of the alleged undertaking was certainly  not so  clear  and unequivocal as to lead  to  that  inescapably inference.   Moreover,  no  argument  seems  to  have   been advanced on the strength of this alleged undertaking  before either  the  Controller or the High Court.   We,  therefore, refrain  from  deciding the question whether there  was  any such  undertaking before the Controller which,  quite  apart from  the contract embodied in the deed, should  affect  the discretion  of the Controller in passing an eviction  order. All we need say here is that the meaning of the term of  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 7  

lease,  interpreted  by  us also, is  not  affected  by  the alleged undertaking. For  the  reasons given above, we dismiss this  appeal  with costs.  G.C.                    Appeal dismissed.. 684