Rent Deed Did Not Confer Any Right To Tenant To Continue In Tenancy For Period Of More Than A Year, Says SC

The Supreme Court has restored the decree of the Rent Controller directing eviction of tenant who defaulted in payment of rent, while quashing the order of the Appellate Court since it failed to comment on whether the tenant had defaulted in payment of rent.

“The rent deed did not confer any right to tenant to continue in the tenancy for a period of more than one year nor it can be said that tenancy was created for a period of more than one year. Clause (9), which noticed the promise of the tenant of payment of rent by increasing 10% each year was a promise contingent on tenancy being continued beyond one year but cannot make the tenancy year to year or tenancy for a period of more than one year,” said the Supreme Court.

The appellant before the Court is a landlord, who rented his shop measuring 14 sq. yds to the tenant @Rs.2,000/- per month for running a hair cutting and dressing work. A rent agreement was executed between them on 27th July 1993 fixing the amount of rent at Rs 2000 per month, to be paid on the 5th day in each month to the owner. The agreement also stated that house tax and electricity bills were to be paid by the tenant, and the shop owner had the right to get the shop vacated if the rent wasn’t paid on due date. The tenant also undertook to make the payment of rent money by increasing 10 per cent each year.

The landlord in 2006 moved an application under Section 13 of East Punjab Urban Rent Restriction Act, 1949 seeking eviction of the tenant and payment of rent, house tax and the applicable interest. The tenant in his objection contended that rate of rent is Rs.1,000/- per month and at the time of taking shop in question, no other condition was agreed or settled. According to the tenant, his signatures were obtained on some blank paper as security by the landlord, which was then fabricated as an alleged rent note. He also claimed to have paid the rent of Rs 1000 per month till February, 2006, after which landlord refused to accept the rent.

The Rent Controller held that rent note is not signed by both the parties and that although time is not specified, but since it is not a lease deed, it’s not compulsorily registrable. The Rent Controller holding that there exist relationship of landlord and tenant between the parties held that tenant was liable to pay the house tax.

The Appellate Court after holding that document was compulsorily registrable took the view that the clause regarding 10% yearly increase cannot be relied and judgment of Rent Controller was accordingly set aside and the appeal was allowed.

The High Court also dismissed the revision referring to the finding of the Appellate Court that rent note was compulsorily registrable without relying on the case of the landlord to enforce condition in lease deed regarding increase of the rent was not relied.

The two issues to be considered by the Apex Court were:

• Whether the rent note was a document, which required compulsory registration under Section 17(1)(d) of the Registration Act, 1908.
• Whether the Appellate Court could have set aside the decree of eviction without recording finding that there was no default on the part of the tenant in payment of rent and house tax etc. and the amount deposited by the tenant was sufficient to save him from eviction.

The Court noted that even though a clause mentioned that the tenant will be bound for making the rent money by increasing 10% each year, the period of tenancy was unspecified.

This Clause was a contingent clause which binds the tenant to increase the rent by 10% each year, which was contingent on tenancy to continue for more than a year, but that clause cannot be read to mean that the tenancy was for a period of more than one year.

The Apex Court observed that the rent note, only contained only monthly rent and payment month by month and based on the law laid down previous decisions of the Court, there will have to be a presumption that the tenancy in the present case is monthly tenancy.

‘When the clauses of rent note are cumulatively read, the intention of the tenant is more than clear that tenancy was only monthly tenancy, which could have been terminated on default of payment of rent by 5th day of any month or by notice of one month. The rent deed did not confer any right to tenant to continue in the tenancy for a period of more than one year nor it can be said that tenancy was created for a period of more than one year’, the Court observed

The Court noted that a clause whereby tenant promises payment of rent by increasing 10% each year was a promise contingent on tenancy being continued beyond one year but cannot make the tenancy year to year or tenancy for a period of more than one year. Therefore, this was a case of tenancy for which no period was specified and hence the rent note was not one which requires compulsory registration under Section 17(1)(d).

The Court also observed that the Appellate Court did not say if the tenant was not in default and had deposited the necessary amount to save himself from eviction. Therefore the judgment of the Appellate Court is unsustainable decree of the Rent Controller directing eviction ought not to have been interfered by the Appellate Court.

Read the judgement here;

-India Legal Bureau