ONE KARNANI PROPERTIES LIMITED, A COMPANY incorporated under the Companies Act, 1956 was the owner of the suit premises. It had let out the suit premises in favour of M/s Park Street Properties (Pvt.) Ltd. (the appellant) with the right to sublet the same or portions thereof. The appellant herein entered into an agreement dated 15.10.2004 with the respondents subletting the suit premises for the purpose of carrying out business from the ’Blue Fox Restaurant’. Subsequently, the respondents requested the appellant to allow them to run franchise or business dealing with McDonald’s family restaurant from the suit premises. In pursuance of the same, the agreement dated 15.10.2004 was terminated, and a tenancy of the suit premises was created in favour of the respondents on the basis of an unregistered agreement dated 07.08.2006 at a rent and on the terms and conditions agreed therein. In terms of the said agreement, the tenancy commenced from 01.08.2006, at a rent of Rs. 20,000/- per month, payable by the tenants-respondents by the 7th day of every succeeding month according to the English calendar. Further, as per the terms of the agreement, in case of breach of the agreement, the landlord- appellant was entitled to terminate the tenancy after serving a notice of period of thirty days. On 30.10.2008, the appellant issued a notice under Section 106 of the Transfer of Property Act, 1882 (hereinafter referred to as the “Act”) terminating the monthly tenancy of the respondents in respect of the tenanted premises upon the expiry of 15 days from the date of receipt of the said notice. Upon the expiry of the period of 15 days, the respondents did not vacate the suit premises. The appellant thus, filed suit for recovery of khas possession and mesne profits of the suit premises before the City Civil Court at Calcutta. The respondents contested the suit inter alia contending that by necessary implication the parties had agreed to not terminate the lease of the premises before 30 years, and that it was for this reason, a clause was incorporated for enhancement of monthly rent at the rate of 15% after expiry of every 3 years. The respondents further urged that the appellant had permitted them to invest a substantial sum of money for further repair and renovation of the tenanted premises suitably for their business. Thus, the appellant, by its declaration, acts and omissions had intentionally caused and permitted the respondents to believe that they will not terminate the lease of the respondents in respect of the tenanted premises before the expiry of the franchise agreement for running the McDonald’s Family Restaurant from the tenanted premises. It was thus, urged by the respondents that the notice of termination of lease is bad and not in accordance with law. The Trial Court, after examining the evidence on record, decreed the suit in favour of the appellant.
“It appears that clause 6 of the unregistered Memorandum of Agreement dated 7th August, 2006, is an important clause which deals with determination or termination of the tenancy only in case of non-payment of rent for three consecutive months and the tenant in spite of notice to remedy such breach fails to make such payment. When the document is inadmissible in evidence, none of its terms can be admitted in evidence for the purpose of proving an important clause contained therein including the clause 6. Reliance on clause 6 of the memorandum of Agreement dated 7th August, 2006 cannot be termed as using the document for a collateral purpose, in as much as proving and/ or reliance on clause 6 is an important term of the agreement which cannot be proved by admission of an unregistered lease deed into evidence.
So the notice appears to be legal and valid.”
The respondents were accordingly, directed to vacate the suit premises within three months from the date of the order. Aggrieved of the judgment and order of the Trial Court, the respondents challenged the correctness of the same by way of filing appeal before the High Court. The High Court observed as under:
“It is the general proposition of law in view of the provisions of Section 49 of the Indian Registration Act that when a document is required to be registered under a provision of law, it cannot be accepted in evidence of any transaction affecting an immovable property in absence of registration of that document. It is also true that in accordance with the provisions of Section 107 of the Transfer of Property Act, 1882, 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. But the above observation does not exhaust the scope of determination of a question as regards admissibility of an instrument which has been improperly admitted in evidence. The decision of Javer Chand & Ors v. Pukhraj Surana reported in [AIR 1961 SC 1655] is an authority for the proposition that once document has been marked as an exhibit in a case and the trial has proceeded all along on the footing that the document was an exhibit in the case and has been used by the parties in examination and cross examination of their witnesses, it is not open either to the trial court itself or
to a court of appeal or revision to go behind that order.
The learned Court below committed an error in passing the decree in favour of the respondent. The impugned judgment is, therefore, required to be interfered with and the validity of the notice dated October 30,2008 is required to be reconsidered by the learned Court below looking into the “Exhibit-4”
The High Court accordingly, allowed the appeal and remanded the suit back to the Trial Court for reconsideration from the stage of examining the question of validity of notice dated 30.10.2008.
Against the judgement of the High Court special leave petition was filed by M/s Park Street Properties. The Supreme Court set aside the impugned judgement passed by the High Court and restored that of trial court. The appeal was accordingly allowed.
The operative part of the judgment reads as under:-
A perusal of Section 106 of the Act makes it clear that it creates a deemed monthly tenancy in those cases where there is no express contract to the contrary, which is terminable at a notice period of 15 days. The main contention advanced on behalf of the respondents is that the impugned judgment and order is valid in light of the second part of Section 107 of the Act, which requires that lease for a term exceeding one year can only be made by way of a registered instrument.
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In terms of clause 6 of the agreement, the landlord was entitled to terminate the tenancy in case there was a breach of the terms of the agreement or in case of non-payment of rent for three consecutive months and the tenants failed to remedy the same within a period of thirty days of the receipt of the notice. The above said clause of the agreement is clearly contrary to the provisions of Section 106 of the Act. While Section 106 of the Act does contain the phrase ’in the absence of a contract to the contrary’, it is a well settled position of law, as pointed out by the learned senior counsel appearing on behalf of the appellant that the same must be a valid contract.
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In the absence of registration of a document, what is deemed to be created is a month to month tenancy, the termination of which is governed by Section 106 of the Act.
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Thus, the question of remanding the matter back to the Trial Court to consider it afresh in view of the fact that the same has been admitted in evidence, as the High Court has done in the impugned judgment and order, does not arise at all. While the agreement dated 07.08.2006 can be admitted in evidence and even relied upon by the parties to prove the factum of the tenancy, the terms of the same cannot be used to derogate from the statutory provision of Section 106 of the Act, which creates a fiction of tenancy in absence of a registered instrument creating the same. If the argument advanced on behalf of the respondents is taken to its logical conclusion, this lease can never be terminated, save in cases of breach by the tenant. Accepting this argument would mean that in a situation where the tenant does not default on rent payment for three consecutive months, or does not commit a breach of the terms of the lease, it is not open to the lessor to terminate the lease even after giving a notice. This interpretation of the clause 6 of the agreement cannot be permitted as the same is wholly contrary to the express provisions of the law. The phrase ’contract to the contrary’ in Section 106 of the Act cannot be read to mean that the parties are free to contract out of the express provisions of the law, thereby defeating its very intent. As is evident from the cases relied upon by the learned senior counsel appearing on behalf of the appellant, the relevant portions of which have been extracted supra, the contract between the parties must be in relation to a valid contract for the statutory right under Section 106 of the Act available to a lessor to terminate the tenancy at a notice of 15 days to not be applicable.
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Authorities relied upon : 1952 (3) SCR 269.
Reference : Supreme Court. M/S Park Street Properties (Pvt) Ltd. v. Dipak Kumar Singh & Anr., Civil Appeal No. 8361 of 2016 (Arising out of SLP(C) No.24486 of 2014) [From the Judgment and Order dated 15.05.2014 of the High Court at Calcutta in F.A. No. 151 of 2012].