DCB Bank Ltd. v. J.S. Sawhney & Anr.

7. The subject suit filed by the respondents/plaintiffs/landlords was filed in the original side of this Court as also the suit for specific performance. Admittedly both the suits were being taken up on the same date in this Court, though not consolidated by a specific order, but thereafter on account of enhancement of pecuniary jurisdiction of this Court with respect to original side matters, both the suits were transferred to the District Courts. In the District Courts whereas the subject suit came to be tried by one ADJ, the suit filed by the appellant/defendant for specific performance was marked to another ADJ and is presently pending at the stage of evidence of the present appellant/defendant who is the plaintiff in the suit for specific performance.

8. Trial court by the impugned judgment has dealt with the suit for possession and damages/mesne profits by holding, and rightly so, that since there is no registered lease deed of the premises after expiry of the lease period on 14.5.2012, the tenancy became only a monthly tenancy which could be terminated by a notice under Section 106 of the Transfer of Property Act, 1882. Section 107 of the Transfer of Property Act and Section 17(1)(d) of the Registration Act, 1908 clearly provides that any lease for a period beyond 12 months has necessarily to be by a registered lease deed. Therefore trial court has rightly held that the tenancy being a monthly tenancy could be terminated by a notice sent under Section 106 of the Transfer of Property Act. The conclusion of the trial court that a renewal clause in itself will not automatically be a lease deed is supported by the observations of the Supreme Court in the case of State of U.P. and Others Vs. Lalji Tandon (dead) Through LRs. (2004) 1 SCC 1 and wherein the Supreme Court in para 13 has observed as under:- “13. In India, a lease may be in perpetuity. Neither the Transfer of Property Act nor the general law abhors a lease in perpetuity. (Mulla on The Transfer of Property Act, Ninth Edition, 1999, p.1011). Where a covenant for renewal exists, its exercise is, of course, a unilateral act or the lessee, and the consent of the lessor is unnecessary. (Baker v. Merckel, also Mulla, ibid, p. 1204). Where the principal lease executed between the parties containing a covenant for renewal, is renewed in accordance with the said covenant, whether the renewed lease shall also contain similar clause for renewal depends on the facts and circumstances of each case, regard being had to the intention of the parties as displayed in the original covenant for renewal and the surrounding circumstances. There is a difference between an extension of lease in accordance with the covenant in that regard contained in the principal lease and renewal of lease, again in accordance with the covenant for renewal contained in the original lease. In the case of extension it is not necessary to have a fresh deed of lease executed, as the extension of lease for the term agreed upon shall be a necessary consequence of the clause for extension. However, option for renewal consistently with the covenant for renewal has to be exercised consistently with the terms thereof and, if exercised, a fresh deed of lease shall have to be executed between the parties. Failing the execution of a fresh deed of lease, another lease for a fixed term shall not come into existence though the principal lease in spite of the expiry of the term thereof may continue by holding over for year by year or month by month, as the case may be.” (underlining added) 9.(i) Learned senior counsel for the appellant/defendant also argued before this Court that the decree for possession could not have been passed because the respondents/plaintiffs had after termination of the tenancy accepted and received rents till date in terms of the renewal clause in the lease deed dated 17.5.2012, and accordingly it is argued that respondents/plaintiffs are estopped from seeking possession inasmuch as on acceptance of the enhanced rent pursuant to the renewal clause of the registered lease deed dated 17.5.2002, the respondents/plaintiffs have created a fresh lease in favour of the appellant/defendant.

(ii) In my opinion this argument however cannot be accepted in view of the ratio of the judgment of the Supreme Court in the case of Sarup Singh Gupta Vs. S. Jagdish Singh & Others (2006) 4 SCC 205 wherein SupremeCourt has laid down the ratio that after termination of the tenancy if any amount is received by the landlord from the tenant, and which payment is called by the tenant as rent, yet, receipt of such amount called as rent by the tenant can be in fact appropriated and adjusted by the landlord not towards rent but towards use and occupation charges of the tenanted premises after termination of the tenancy. The relevant observations of the Supreme Court in the case of Sarup Singh Gupta (supra) are contained in para 8 of the judgment and this para 8 reads as under:- “8. In the instant case, as we have noticed earlier, two notices to quit were given on 10th February, 1979 and 17th March, 1979. The suit was filed oh June 2, 1979. The tenant offered and the landlord accepted the rent for the months of April, May and thereafter. The question is whether this by itself constitute an act on the part of the landlord showing an Intention to treat the lease as subsisting. In our view, mere acceptance of rent did not by itself constituted an act of the nature envisaged by Section 113, Transfer of Property Act showing an Intention to treat the lease as subsisting. The fact remains that even after accepting the rent tendered, the landlord did file a suit for eviction, and even while prosecuting the suit accepted rent which was being paid to him by the tenant It cannot, therefore, be said that by accepting rent, he intended to waive the notice to quit and to treat the lease as subsisting. We cannot ignore the fact that in any event, even if rent was neither tendered nor accepted, the landlord in the event of success would be entitled to the payment of the arrears of rent. To avoid any controversy, in the event of termination of lease the practice followed by courts is to permit the landlord to receive each month by way of compensation for the use and occupation of the premises, an amount equal to the monthly rent payable by the tenant. It cannot, therefore, be said that mere acceptance of rent amounts to waiver of notice to quit unless there be any other evidence to prove or establish that the landlord so Intended. In the instant case, we find no other fact or circumstance to support the plea of waiver. On the contrary the filing of and prosecution of the eviction proceeding by the landlord suggests otherwise." (underlining added)

(iii) In view of the categorical ratio of the judgment of the Supreme

Court in the case of Sarup Singh Gupta (supra) holding that courts will permit landlord to receive rent each month by way of compensation for use and occupation charges of the premises an amount equal to monthly rent paid by the tenant, therefore it is held that the respondents/plaintiffs simply because of the receiving enhanced rent pursuant to the renewal clause contained in the registered lease deed dated 17.5.2002 did not agree to create any fresh lease in favour of the appellant/defendant and which lease in any case has to be a registered lease deed as per Section 107 of the Transfer of Property Act read with Section 17(1)(d) of the Registration Act. 10.(i) In view of the legal and admitted factual position I do not find that the trial court has committed any illegality in decreeing the suit for possession of the respondents/plaintiffs against the appellant/defendant, however certain observations and clarifications are required to be given by this Court with respect to bindingness between the parties of certain issues including as to whether the judgment in the present suit would operate as res judicata against the appellant/defendant and in favour of the respondents/plaintiffs with respect to the suit for specific performance filed by the appellant/defendant against the respondents/plaintiffs. These clarifications are required as respondents/plaintiffs/landlords have filed an application under Section 11 CPC for dismissal of the appellant/defendant's suit for specific performance on the basis of the impugned judgment by pleading that the impugned judgment operates as res judicata for dismissing the specific performance suit.

(ii) In this regard therefore, the following aspects are required to be noted:-

(A) In this subject suit for possession etc the issue which would be res judicata would only be that there was a relationship of landlord and tenant between the parties in terms of the registered lease dated 17.5.2002, though there were two renewal clauses to rent successively of 10 years each in favour of the appellant/defendant w.e.f 15.5.2012 but the respondents/plaintiffs did not execute the registered lease deed in favour of the appellant/defendant for whatever be the reason, and since there was no registered lease deed as required by Section 107 of the Transfer of Property Act and Section 17(1)(d) of the Registration Act, therefore the tenancy in favour of the appellant/defendant was a monthly tenancy which could have been terminated by a notice under Section 106 of the Transfer of Property Act. (B) The decision in the subject suit culminating in the judgment of the trial court dated 8.11.2017 as also the present judgment will however not operate as res judicata against the appellant/defendant in favour of the respondents/plaintiffs of the entitlement or otherwise of the appellant/defendant to seek specific performance of the renewal clauses as contained in the registered lease deed dated 17.5.2002 entered into between the parties because that renewal clause entitles grant of specific performance is not an issue which is decided by the impugned judgment. It is trite that when specific performance is sought of a contract, a specific performance qua a contract can include a contract to enter into a lease deed for a specific period.

(C) Accordingly, the judgment of the trial court as affirmed by this

Court, with respect to the entitlement of the respondents/plaintiffs to seek possession will not in any manner operate as res judicata as against the appellant/defendant either for seeking the final relief in the specific performance suit or including for that matter for seeking interim relief of stay of dispossession in the specific performance suit which has been filed by the appellant/defendant against the respondents/plaintiffs. I agree with the argument urged on behalf of the appellant/defendant that the appellant/defendant is also entitled in the suit for specific performance filed by it to seek interim order in order to protect possession in spite of decreeing the present suit inasmuch as if possession is taken away by the respondents/plaintiffs from the appellant/defendant, then, the suit filed by the appellant/defendant for specific performance would become infructuous and possession of the suit premises may be protected by the appellant/defendant by filing an application seeking interim relief in the subject suit for specific performance. Of course, I hasten to add that I have not made, and nor can make any observations on merits with respect to the entitlement or otherwise of the appellant/defendant to seek interim order for protecting its possession by filing an application for interim relief in the suit for specific performance.

(D) I would like to observe that a curious position has arisen in this case only because of the transfer of both the suits to the District Courts and the respective suits thereafter being taken up by the different courts of ADJs, inasmuch as when the suits were pending in the original side of this Court, they were being taken up on the same dates of hearing.

11. Learned senior counsel for the appellant/defendant then argued that since both the suits filed by the appellant/defendant for specific performance and respondents/plaintiffs for possession and mesne profits were taken up on the same dates, consequently, the decree of the present suit as regards possession should not be executed otherwise the suit for specific performance filed by the appellant/defendant would become infructuous, however I cannot agree because as already stated above the remedy of the appellant/defendant herein is to seek an interim relief in the suit for specific performance by it and this Court cannot while affirming the impugned judgment and decree dated 8.11.2017 in favour of the respondents/plaintiffs in these proceedings, at the same time yet grant orders for the decree not being executed because such a situation would lead to finality of the decree yet a final decree not being executed and which position is impermissible in law. These observations are being made subject to other observations with respect to the judgment in the present suit not operating as res judicata against the appellant/defendant and therefore for the appellant/defendant to seek interim or final relief in its suit for specific performance which is pending.

12. In view of the aforesaid discussion, so far as the impugned judgment of the trial court dated 8.11.2017 granting decree for possession is concerned, the same has to be and is accordingly sustained, and this appeal is therefore dismissed so far as the same challenges the relief granted to the respondents/plaintiffs of possession of the suit premises in terms of the impugned judgment and decree dated 8.11.2017.

13. Although this appeal will stand dismissed so far as the decree granted for possession to the respondents/plaintiffs, however, the learned senior counsel for the appellant/defendant is justified in arguing that so far as the relief granted by the trial court in terms of the impugned judgment for mesne profits payable at a rate higher than the agreed rent for the fresh period w.e.f. 15.5.2012 is concerned, such a decree cannot be taken to be final for execution because in case the appellant/defendant herein succeeds in the suit for specific performance, then, the appellant/defendant will not be bound to comply with the impugned judgment but will be only be bound to comply with the renewal agreement between the parties to pay the agreed rent in terms of the renewal clause 2C of the registered lease deed dated 17.5.2002. Learned senior counsel for the appellant/defendant states, and as confirmed by the counsel for the respondents/plaintiffs, that the enhanced amount of payment in terms of the registered lease deed dated 17.5.2002 for the renewal period from 15.5.2012 is being paid by the appellant/defendant to the respondents/plaintiffs and has been received up to date by the respondents/plaintiffs. Therefore, subject to the appellant/defendant depositing 50% of the decretal amount in this Court subject to adjustment of the amounts already paid by the appellant/defendant to the respondents/plaintiffs for the period commencing from 15.5.2012 till date, there shall be stay of operation of the impugned judgment and decree granting mesne profits to the respondents/plaintiffs in terms of the impugned judgment and decree dated 8.11.2017.

14. On the aspect of grant of mesne profits by the impugned judgment and decree, let notices be issued to the respondents/plaintiffs. Counsel for the respondents/plaintiffs accepts notice. Admit this appeal on the aspect of mesne profits decreed under the impugned judgment and decree.

15. List the interim application being C.M. No.1299/2018 for hearing as regards the money decree of mesne profits, on 3rd May,

2018.

JANUARY 16, 2018/Ne VALMIKI J. MEHTA, J