Source: Supreme Court

Why in News?

Justice Aniruddha Bose and Justice Vikram Nath heard the admissibility of an unregistered lease deed as evidence.

• Supreme Court gave its observation in the case of M/S Paul Rubber Industries Private Limited v. Amit Chand Mitra & Anr.

What is the Background of M/S Paul Rubber Industries Private Limited v. Amit Chand Mitra & Anr.?

• In 2003, a Landlady and Tenant agreed to an unregistered Lease Agreement for a property for a duration of 5 years.
• Once the initial 5-year term expired, the Tenant did not renew the lease but continued to occupy the property without paying rent.
• In 2008, the Landlady issued a notice to the Tenant, referring to them as a monthly tenant, instructing them to vacate the Premises within 15 days. However, the Tenant did not adhere to the notice.
• The landlady filed a civil suit for recovery of possession and mesne profit as the tenant did not vacate the premises.
• The Tenant argued that the Premises were intended for manufacturing purposes and, according to Section 106 of the Transfer of Property Act, 1882 (TOPA), could only be terminated with a 6-month notice.
• Additionally, since the lease agreement exceeded one year, it required compulsory registration and it being unregistered cannot be admissible in court as evidence.
• The Trial Court held in the favor of landlady stating that the lease was on a month-to-month basis under the TOPA and not for manufacturing purposes. Therefore, a 15-day notice was valid.
• The High Court upheld the decision of the Trial Court.
• The tenant then filed the appeal before SC arguing that the Trial Court should not have accepted the unregistered Tenancy Agreement as evidence due to the prohibition under Section 49 of the Registration Act, 1908.

What were the Court’s Observations?

• SC observed that an unregistered lease deed will only be allowed to show the ‘nature and purpose of a possession’ when the ‘nature and purpose of the possession’ is not the main term of the lease and does not constitute the main dispute.

What is a Lease Agreement?

• About:
  • Under Section 105 of TOPA, a lease of immoveable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity.
• Consideration and Duration under Section 105 of TOPA:
  • It is made in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.
• Parties:
  • The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent.
  • The TOPA lays down the rights and duties of both the lessor and the lessee. For example, the lessor must ensure that the lessee gets peaceful possession of the property, and the lessee must pay rent and maintain the property as agreed.
• Types of Leases:
  • Leases can be of various types, including leases for a fixed term, periodic leases, and leases in perpetuity.
• Registration:
  • In some cases, lease agreements may need to be registered, depending on the duration and terms of the lease, as per local laws. However, law related to duration of lease and procedure of lease is mentioned under Section 106 & 107 of TOPA.
• Termination:
  • A lease can be terminated on several conditions such as expiration of the lease term, breach of terms by either party, or mutual agreement.

What were the Legal Provisions Involved?

• Section 106 of TOPA: Duration of certain leases in absence of written contract or local usage
  • In the absence of a contract or local law or usage to the contrary, a lease of immovable property for agricultural or manufacturing purposes shall be deemed to be a lease from year to year, terminable, on the part of either lessor or lessee, by six months' notice; and a lease of immovable property for any other purpose shall be deemed to be a lease from month to month, terminable, on the part of either lessor or lessee, by fifteen days' notice.
  • Notwithstanding anything contained in any other law for the time being in force, the period mentioned in sub-section (1) shall commence from the date of receipt of notice.
  • A notice under sub-section (1) shall not be deemed to be invalid merely because the period mentioned therein falls short of the period specified under that sub-section, where a suit or proceeding is filed after the expiry of the period mentioned in that sub-section.
  • Every notice under sub-section (1) must be in writing, signed by or on behalf of the person giving it, and either be sent by post to the party who is intended to be bound by it or be tendered or delivered personally to such party, or to one of his family or servants at his residence, or (if such tender or delivery is not practicable) affixed to a conspicuous part of the property.
• Section 107 of TOPA: Lease how made -
  • A lease of immoveable 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 immoveable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession.
  • Where a lease of immoveable 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 immoveable 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.
• Section 49 of Registration Act. 1908: Effect of non-registration of documents required to be registered.—
  • No document required by Section 17 (or by any provision of TOPA), to be registered shall—
    • affect any immovable property comprised therein, or
    • confer any power to adopt, or
    • be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered:
  • Provided that an unregistered document affecting immovable property and required by this Act or TOPA 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, 1877 (SRA) as evidence of any collateral transaction not required to be effected by registered instrument.