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CASE NO.: Appeal (civil)  2718-2719 of 2000

PETITIONER: SHANTI PRASAD DEVI AND ANOTHER

RESPONDENT: HANKAR MAHTO AND OTHERS

DATE OF JUDGMENT: 11/07/2005

BENCH: D. M. Dharmadhikari & B. N. Srikrishna

JUDGMENT: J U D G M E N T

DHARMADHIKARI J.

The appellant obtained possession on lease of the suit premises   for running a Petrol Pump under a registered lease deed dated  17.7.1962 for a period of fifteen years.  It was an annual lease but the  rent at agreed rate  was payable in monthly instalments.  The period  of lease expired on 17.7.1977.

The registered sale deed contained  clauses Nos.(7) & (9) giving   option of renewal for a further period which could be exercised before  expiry of the initial period.  After the period of lease expired on  19.7.1977 the lessee continued to remit the rent till August 19, 1977.   On 23.8.1977 the lessee sent a lawyer’s notice exercising his option  under clause (7) and seeking renewal of the lease.  The lessee  thereafter remitted monthly rent of Rs.345/-  each for three months  from March to May 1978.   The rent  was accepted by the lessor.

Clause (7) of the lease providing  option of renewal to the lessee  contained two conditions firstly that the option has to be exercised  before expiry of the lease and secondly the terms and conditions of  renewal for further period shall be decided either by mutual consent of  parties or in case of failure of mutual consent, through the intervention  of local Mukhia or Panchas of the village.

To the legal notice given by the lessee seeking renewal of the  lease, the lessor gave  no positive response and instead filed Title Suit  No.59/78 on 16.6.1978 seeking ejectment of the lessee from the suit  premises on the ground that the term of lease had expired.  

The lessee filed a counter suit No.13/80 seeking specific  performance of the alleged agreement of renewal of lease on his  alleged right of option of renewal.

The two cross suits were tried jointly and decided by common  judgment. The trial court by common judgment dated 16.3.1987 dismissed  the suit for ejectment filed by the lessor by holding that after expiry of  the initial period of fifteen years of lease,  acceptance of rent by the  lessor had resulted in renewal of lease  and the lessee would be held  to be ’holding over’ within the meaning of  Section 116 of the Transfer  of Property Act.  Based on the above finding that the lessee was  ’holding over’ as a result of the acceptance of rent by the lessor for the  period subsequent to the expiry of lease, the trial court came to the  conclusion that  the suit for ejectment could not have been filed  without terminating the lease by statutory notice under Section 106 of  the Transfer of Property Act.

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The trial court by the common judgment dismissed the counter  suit seeking  specific performance of renewal of lease by the lessee.  It  was held that in accordance with clause (9) of the lease deed, the  option of renewal was not exercised before expiry of original period.   The specific performance of agreement of renewal claimed was also  rejected on the ground that  the terms and conditions of renewal were  vague and incapable of enforcement.  Thus, the trial court dismissed  both the suits.

The dismissal of two suits by the trial court gave rise to two  cross appeals one at the instance of lessor and the other at the   instance of lessee.  The first appellate court allowed the appeal of the  lessor and decreed the suit of ejectment.  It held that mere acceptance  of rent by the lessor sent by the lessee after expiry of lease, in view of  specific terms prescribing mode of renewal, did not result in deemed  renewal of lease and the doctrine of ’holding over’ under Section 116  of the Transfer of Property Act was not attracated. According to the  first appellate court, the period of lease having expired there was no  legal requirement of terminating the alleged renewed lease by issuing  a statutory notice under Section 106 of the Transfer of Property Act.

The cross appeals filed by the lessee were dismissed and the  dismissal of suit for specific performance of the alleged agreement of  renewal was maintained.

The lessee filed two Second Appeals in the High Court.  By the  impugned common judgment the High Court upheld the common  judgment of the first appellate court.  The High Court agreed with the  reasoning of the first appellate court that mere acceptance of rent by  the lessor on expiry of original period of lease, for use and occupation  of the leased premises by the lessee, did not signify ’assent’ of the  lessor to the continuance in possession of the lessee so as to infer   deemed renewal of the lease under Section 116 of the Transfer of  Property Act.

The High Court  agreed with the concurrent findings of the trial  court and the first appellate court that the option of renewal given to  the lessee in the lease deed was not exercised before expiry of the  original period of lease. The High Court also agreed that conditions  stipulated for the renewed period of lease were vague and incapable of  specific enforcement.  Thus the dismissal of suit of the lessee for  specific performance of contract of renewal of lease was also upheld.

Having thus lost her case in the courts below, the lessee has  approached this Court in these two appeals.

Learned Senior Counsel Shri S. B. Sanyal reiterated the legal  stand taken by the lessee in the courts below.  It is contended that on  expiry of original period of lease, acceptance of rent for the month of  August and from March 1978 to May 1978 clearly showed an ’assent’  on the part of the lessor to continue the lease.  There was deemed  renewal of the lease on the same terms and conditions of original lease  as an effect of ’holding over’ by the lessee under Section 116 of the  Transfer of Property Act.  It is argued that the courts below erred in  holding that the lease, which stood renewed as an effect of ’holding  over’ under Section  116 of the Transfer of Property Act, was not  required to be terminated by statutory notice under Section 106 of the  Transfer of Property Act as a pre-condition for filing a suit for  ejectment.

In respect of the cross suits of the lessee seeking specific  performance of the contract of renewal of the lease, it is submitted  that the relevant contract clauses (7) & (9)  of the lease deed should   have been construed reading them with other clauses therein to hold  that option for renewal could have been exercised within a reasonable

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period which in the present case was 35 days from the date of  the  expiry of the original lease.  It is also argued that the suit for specific  performance of the agreement of renewal could not have been  rejected on the ground that clause of renewal was vague and  incapable of specific performance. Reliance is placed on Bhawanji  Lakhamshi  vs.  Himatlal Jamnadas Dani [1972 (1) SCC 388]  and  Kai Khushroo Bezonjee Capadia vs. Bai Jerbai Hirjibhoy Warden  [AIR 1949 FC 124].   

In reply, we have heard learned counsel Shri Prabhash Kumar  Yadav assisted by Dr. Krishan Singh Chauhan, advocate who  supported the view taken by the High Court and the courts below in  decreeing the suit for ejectment. Section 116 of the Transfer of Property Act reads thus:- "Effect of holding over. \026 If a lessee or under-lessee of property  remains in possession thereof after the determination of the lease  granted to the lessee, and the lessor of his legal representative  accepts rent from the lessee or under lessee, or otherwise assents to  his continuing in possession, the lease is, in the absence of an  agreement to the contrary, renewed from year to year, or from  month to month, according to the purpose for which the property is  leased, as specified in Section 106."

                                            [ Emphasis supplied ] We fully agree with the High Court and the first appellate court  below that on expiry of period of lease, mere  acceptance of rent for  the subsequent  months in which the lessee continued  to occupy the  lease premises cannot be said to be a conduct signifying ’assent’ to the  continuance of the lessee even after expiry of lease period. To the  legal notice seeking renewal of lease, the lessor gave no reply. The  agreement of renewal contained in clause (7) read with clause (9)  required fulfillment of two conditions; first the exercise of option of  renewal by the lessee before the expiry of original period of lease and  second, fixation of terms and conditions for the renewed period of  lease by mutual consent and in absence thereof through the mediation  of local Mukhia or Panchas of the village.  The aforesaid renewal  clauses (7) & (9) in the agreement of lease clearly fell within the  expression ’agreement to the contrary’ used in Section 116 of the  Transfer of Property Act  Under the aforesaid clauses option to seek  renewal was to be exercised before expiry of the lease and on  specified conditions.   

       The lessor in the present case had neither expressly nor  impliedly agreed for renewal.  The renewal as provided in the original  contract was required to be obtained by following a specified  procedure i.e. on mutually agreed terms or in the alternative through  the mediation of Mukhias and Panchas.  In the instant case, there is a  renewal clause in the contract prescribing a particular period and mode  of renewal which was ’an agreement to the contrary’ within the  meaning of Section 116 of the Transfer of Property Act.  In the face of  specific clauses (7) & (9) for seeking renewal there could be no implied  renewal by ’holding over’ on mere acceptance of the rent offered by  the lessee .  In  the instant case, option of renewal was exercised not  in accordance with the terms of renewal clause that is before the  expiry of lease.  It was exercised after expiry of lease and the lessee  continued to remain in use and occupation of the leased premises. The  rent offered was accepted by the lessor for the period the lessee  overstayed on the leased premises.  The lessee, in the above  circumstances, could not claim that he was ’holding over’ as a lessee  within the meaning of Section 116 of the Transfer of Property Act.

       So far as the cross suit for specific performance of agreement of  renewal of lease filed by the lessee is concerned, there are concurrent  findings of all the courts that the option for renewal was exercised  after the expiry of the lease period.  The option for renewal exercised

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was, therefore, contrary to terms of clause (9) of the lease agreement.   The clauses of renewal requiring  fixation of terms and conditions for  renewed period of lease mutually or in the alterntive through village  Mukhia and Panchas are uncertain and incapable of specific  performance.  After legal notice of renewal, the lessor did not send any  positive reply and instead filed a suit for ejectment, therefore, there  was no mutual consent for renewal.  The forum agreed to for  deciding  dispute was through local Mukhia and Panchas of the village. The  renewal clauses of the agreement were vague and incapable of specific  performance.  The Mukhia and Panchas were not named in the  agreement and the method of choosing either of the two forums was  not specified.

The cross suit filed by the lessor for specific performance of the  agreement of renewal was  rightly dismissed throughout.  The original  period of lease expired on 19.7.1977 and the suit for ejectment on the  ground of expiry of the lease was filed on 16.6.1978 which was well  within the period of limitation and rightly decreed.  

       For the additional reasons discussed by us above, the appeals  have no force.            As the leased premises were in use for running a petrol pump,  we grant the appellant a reasonable period of two months from the  date of this order to deliver possession of the leased premises after  removing her installations and other movables.

       The above grace period to vacate is granted to the appellant only  on her filing an undertaking on affidavit to this Court, within a period  of two months that she would pay all arrears of rent and mesne profits  at the originally agreed rate for the total period of occupation of the  property.  The lessee shall also undertake to deliver vacant possession  of the property in the same condition in which it was initially taken.

       For the aforesaid reasons, we find no merits in these appeals  preferred by the lessee, they are accordingly dismissed with costs.