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CASE NO.:

Appeal (civil) 4698-4700 of 1994

PETITIONER:

State of U.P. & Ors.

RESPONDENT:

Lalji Tandon (Dead)

DATE OF JUDGMENT: 03/11/2003

BENCH:

R.C. LAHOTI & ASHOK BHAN

JUDGMENT:

J U D G M E N T

R.C. Lahoti, J.

The property in question is plot no.81/1-M area 5 acres (out of

98 bighas) in village Nasibpur, Bhaktiara, Chhail, District Allahabad,

U.P. over which stands a bungalow bearing no. 241 Mor Road,

Alllahabad. This property shall hereinafter be referred to as 'the suit

property'. The ownership of the land vests in the State. The super-

structure which is a bungalow seems to have been brought up by the

lessee or his transferee, as stated hereinafter, and which is not very

clearly borne out from the pleadings, also not very relevant for the

issue at hand.

The land consisting in the suit property was given on fifty

years lease to one J.W.Walsh. The lease contained a clause for

renewal which, as far as ascertainable from the material available on

record, and as found by the High Court, conferred an option on the

lessee to seek renewal of lease for another term of 50 years and on

such option being exercised before the expiry of term of 50 years of

the existing lease, the lessor shall "act upon forthwith and execute

and deliver to the lessee upon his duly executing a counter part or

renew the lease for the said premises for a further term of 50 years

and with and subject to the same covenants conditions and

provisions as are herein contained."

The original deed of lease though very material for ascertaining

the covenants thereof, including the one for renewal, has not been

placed on record by either party. The High Court has in its impugned

judgment observed that the suit property has changed hands but the

document is certainly available with the State-appellant, and in the

facts and circumstances of the case, the State ought to have produced

the lease or its copy to assist the Court in arriving at a just decision,

but the same was not done in spite of several opportunities having

been allowed for the purpose and though the State had filed a

counter-affidavit followed by two supplementary-affidavits. The High

Court has chosen to draw an adverse inference against the State

without expressly stating so, as its observation indicates, (to quote) \026

"Initial lease deed has not been placed on record by either party. It

would be fair to assume that the State should be in possession of the

same. The condition whether renewal was permissible only once must

be in the initial lease deed but unfortunately it has not been placed

before us. In our opinion it was for the State to have filed a copy

thereof if it wanted to rely upon such a term. That having not been

done despite several opportunities availed by it when filing

supplementary counter affidavit we can safely conclude that really no

such term was contained in the initial lease deed. We have no

hesitation, therefore, in rejecting the contention of the State that the

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lease was renewable only once". This is the most crucial part of the

controversy and we will revert back to the same after completing the

narration of facts.

Walsh alienated his interest in the suit property to Lalji Tandon,

the respondent-plaintiff, who has died during the pendency of the

proceedings and whose LRs have been brought on record; however,

for convenience, we will refer to the respondent Lalji Tandon,

succeeded by his LRs., as 'the respondent'.

The respondent, having stepped into shoes of Walsh, the

original lessee, sought for renewal of the lease consistently with

covenant for renewal as contained in the original lese. The State

Government agreed for renewal and the renewed lease deed came to

be executed on February 20, 1945. It seems that the State

Government was agreeable to renew the lease for a term of 50 years

but by Febraury 20, 1945, the day on which the renewed lease came

to be executed, a period of 42 years, 2 months and 20 days had

remained available out of the 50 years of the second term and

therefore the term of the renewed lease as recited therein is "42

years, 2 months, 20 days". This lease has been placed on record.

Covenant - 2 thereof is very crucial and the same is extracted and

reproduced hereunder:

"It is hereby mutually convenanted and

agreed by and between the lessor and the

lessee that the obligations hereunder shall

continue throughout the term hereby created

and shall be binding on their respective

successors-in-interest in the demised

premises that they will perform and observe

the several convenants provisos and

stipulations in the aforesaid lease expressed

as fully as if the same convenants provisos

and stipulations had been herein repeated in

full with such modifications only as are

necessary to make them applicable to this

demise and as if the name of the parties

hereto had been substituted for those in the

aforesaid lease provided always that the

building referred to in the aforesaid lease

having been erected the lessee shall not be

under any obligation to erect another."

(underlining by us)

Proceeding on an assumption (the correctness whereof is the

core of the controversy and shall be dealt with shortly hereinafter) that

the renewed lease incorporated all the covenants of the original lease

including the covenant for renewal, the respondent sought for renewal

of the lease for yet another term of 50 years. The Collector of the

District recommended renewal. The Board of Revenue also directed

the renewal to be expedited. The Government had also issued

instructions to all the Commissioners and District Magistrates generally

directing them to renew such like leases. However, the State

Government set over the renewal which led to the respondent filing a

writ petition in the High Court of Allahabad which was disposed of at

the admission stage itself by order dated 19.4.1989. The Division

Bench passed the order in the following terms :

"The grievance of the petitioner is

that in spite of the judgment of this court

in the case of Purshottam Dass Tandon and

others Vs. State of Uttar Pradesh and

others, 1987, Allahabad Law Report, page

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92 and confirmed by the Supreme Court,

the respondents are not renewing the lease

of the petitioner. The prayer is that a writ

in the nature of mandamus be issued to

the respondents to do so. The respondents

shall endeavour to renew the lease of the

petitioner in accordance with the aforesaid

judgment as soon as possible."

With these observations, this petition

is dismissed summarily."

The observation made by the High Court holding out a hope

from the State that it shall renew the lease at the earliest did not bring

any results and consequently the respondent had to file another writ

petition leading to the passing of the impugned order dated 30.7.1991.

The short grievance raised by the respondent as a writ-petitioner

before the High Court was that he was entitled for a renewal of lease

for yet another term of 50 years, which the State having not done,

the writ-petitioner was entitled to a mandamus directing the

respondents (before the High Court) to renew the lease. However, the

respondent was active in politics which was not to the liking of the

then ruling party and therefore the State was creating obstacles in the

renewal of the lease, pleaded the respondent as writ-petitioner in the

High Court.

In the counter-affidavit filed on behalf of the State Government

it was pleaded that the original lease was for a period of 50 years,

renewable only once for a further term of 50 years, which right of

renewal was exhausted on having been exercised once culminating

into the execution of lease deed dated February 20, 1945. On the

expiry of the term limited by the latter lease deed the respondent did

not have any further right of renewal.

Another supplementary counter-affidavit sworn in by Shri Bira

Ram, Naib Tahsildar was filed wherein an additional plea was raised

that on 28.3.1987 the State of U.P. had issued a notification under

Section 4 of the Land Acquisition Act, 1894 followed by declaration

under Section 6 dated 31.12.1987 whereby the land was acquired by

the State and therefore the renewal of lease was not legally possible.

A third counter-affidavit sworn in by one Lateefullah was filed

on April 1, 1991 raising yet another plea that the respondent was

negotiating the sale of the leased land without prior sanction of the

State Government which was in violation of the terms of the lease

deed and so also the respondent was not entitled for any further

renewal.

In the decision dated 19.4.1989 referred to hereinabove, the

High Court had made a reference to the case of Purshottam Das

Tandon & Ors. and expected the State of U.P. to endeavour to renew

the lease of the respondent herein in accordance with the aforesaid

judgment as soon as possible. It seems that Purshottam Das Tandon

was holding lease of the land owned by the State on similar terms as

was held by the respondent herein, excepting for the difference that

the land held by Purshottam Das Tandon was nazul land while the land

held by the respondent herein is government estate. Though this

difference was pointed out at the time of hearing, however the learned

counsel for the appellant State of U.P. was unable to point out what

difference it makes so far as the case for renewal is concerned if the

covenants in the lease deeds held by Purshottam Das Tandon and the

respondent herein respectively were identical. The decision of the

Allahabad High Court in the case of Purshottam Das Tandon & Ors.

is reported as AIR 1987 Allahabad 56. The Division Bench presided

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over by R.M. Sahai, J. (as His Lordship then was) and who spoke for

the Division Bench deals with the history of such like leases, the

several government orders and instructions relating thereto and takes

into consideration almost all the legal aspects relevant thereto

excepting a few with which we will be elaborately dealing hereafter.

The High Court held that the State Government was bound to renew

the lease held by Purshottam Das Tandon in accordance with the

covenant for renewal. The State of U.P. & Ors. preferred special leave

petition against the judgment of the Allahabad High Court which was

dismissed on January 14, 1987 refusing to interfere with the decision

of the High Court. The decision of this Court is reported as State of

U.P. & Ors. Vs. Purshottam Das Tandon & Ors., 1989 Supp.(2)

SCC 412.

The first submission of Shri Subodh Markandeya, the learned

senior counsel for the State of U.P., has been that the respondent was

entitled only for one renewal for a term of 50 years consistently with

the covenant for renewal contained in the original lease executed in

favour of John William Walsh dated May 10, 1887 which right to

renewal stood exhausted with the lease deed dated February 20, 1945

which came to an end on the expiry of 42 years 2 months and 20 days

from the date of the lease, i.e. February 20, 1945. It was submitted

that the first renewal evidenced by the lease deed dated February 20,

1945 shall be deemed to have renewed all other covenants

incorporating the rights and obligations between the lessor and the

lessee excepting the clause for renewal; else it would result in creating

a lease in perpetuity because every renewed lease shall have to

incorporate the clause for renewal for 50 years as contained in the

original lease deed which would mean endless renewals and hence a

lease in perpetuity. We find it difficult to agree with Shri Markandeya

in the facts and circumstances of this case.

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

of the lessee, and the consent of the lessor is unnecessary. (Baker v.

Merckel (1960) 1 All ER 668, 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.

The issue - whether a right to a new lease consequent upon the

option for renewal having been successfully exercised should again

contain the covenant for renewal, is not free from difficulty and has

been the subject matter of much debate both in England and in India.

It would all depend on the wordings of the covenant for renewal

contained in the principal lease, the intention of the parties as

reflected therein and as determinable in the light of the surrounding

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relevant circumstances.

A Division Bench decision of Andhra Pradesh High Court in Syed

Jaleel Zane Vs. P. Venkata Murlidhar & Ors., AIR 1981 AP 328,

wherein Jeevan Reddy, J., as His Lordship then was, spoke for the

Division Bench makes almost an exhaustive discussion of the relevant

English and Indian Law available on the point and we express our

respectful agreement with the exposition of law as made therein. We

note with approval the following proposition of law laid down therein:-

(i) In India, the law does not prohibit a perpetual lease; clear and

unambiguous language would be required to infer such a lease.

If the language is ambiguous the Court would opt for an

interpretation negating the plea of the perpetual lease;

(ii) To find an answer to the question whether a covenant for

renewal contained in the lease deed construed properly and in

its real context, entitles the tenant to continue as long as he

chooses by exercising the option of renewal at the end of each

successive period of 5 years subject to the same terms and

conditions depends on the deed of lease being read as a whole

and an effort made to ascertain the intention of the parties while

entering into the contract. No single clause or term should be

read in isolation so as to defeat other clauses. The

interpretation must be reasonable, harmonious and be deduced

from the language of the document;

(iii) The Court always leans against a perpetual renewal and hence

where there is a clause for renewal subject to the same terms

and conditions, it would be construed as giving a right to

renewal for the same period as the period of the original lease,

but not a right to second or third renewal and so on unless, of

course, the language is clear and unambiguous.

Another illuminating decision on the point is by Sir Ashutosh

Mookerjee, J., speaking for the Division Bench of Calcutta High Court

in Secretary of State for India in Council Vs. A.H. Forbes, (1912)

17 IC 180. The Division Bench on a review of several English decisions

held:-

"(1) A lease, which creates a tenancy for a

term of years, may yet confer on the lessee

an option of renewal.

(2) If the lease does not state by whom

the option is exercisable, it is exercisable (as

between the lessor and lessee) by the lessee

only, that is to say, a covenant for renewal,

if informally expressed, is enforced only in

favour of the lessee.

(3) The option is exercisable not merely

by the lessee personally but also by his

representative-in-interest.

(4) If the option does not state the terms

of renewal, the new lease will be for the

same period and on the same terms as the

original lease, in respect of all the essential

conditions thereof, except as to the covenant

for renewal itself.

(5) There is no sort of legal presumption

against a right of perpetual renewal. The

burden of strict proof is imposed upon a

person claiming such a right. It should not

be inferred from any equivocal expressions

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which may fairly be capable of being

otherwise interpreted. The intention in that

behalf should be clearly shown; otherwise,

the agreement is satisfied and exhausted by

a single renewal.

(6) A covenant for renewal runs with the

land.

(7) The position of a lessee, who has been

always ready and willing to accept a renewal

on proper terms, is the same in equity as if a

proper lease had been granted. Where the

covenant for renewal was still specifically

enforceable at the commencement of a suit

for ejectment against the lessee, the position

of the lessee in equity is the same as if it

had been specifically enforced."

Green Vs. Palmer, (1944) 1 All ER 670, bears a close

resemblance with the facts of the present case. There the parties had

entered into a lease agreement for six months. One of the covenants

in the lease read so ____ "The tenant is hereby granted the option of

continuing the tenancy for a further period of six months on the same

terms and conditions including this clause, provided the tenant gives

to the landlord in writing four weeks' notice of his intention to exercise

his option." The plea raised on behalf of the tenant was that the

clause gave him a perpetual right of renewal. Uthwatt, J. of Chancery

Division held ____

"\005\005.the first thing one observes is that, in

terms, there is granted to the tenant a single

option exercisable only once upon the named

event, and the subject-matter of that option

is an option "of continuing the tenancy for a

further period of six months on the same

terms and conditions including this clause."

To my mind, what that means is this : the

tenant is to be allowed once, and once only,

the opportunity of continuing the tenancy

____ continuing it for a further six months.

Then we come to the critical words "on the

same terms and condition including this

clause." As I read it, that means there is

included in the new tenancy agreement a

right in the tenant, if he thinks fit, to go on

for one further six months, and when you

have got to that stage you have finished with

the whole matter. In other words, it comes

to this : "Here is your present lease. You

may continue that, but I tell you, if you

continue it, you continue it on the same

terms as you were granted the original

lease. You may continue it for a further 6

months with the right to go on for another 6

months."

Upon that footing, in the events which

have happened, all the landlord was bound

to do under this arrangement was to permit

the tenant to occupy for a period not

exceeding 18 months in the whole from the

time when the original lease was granted."

We find ourselves in full agreement with the view of the law

taken in the decisions cited hereinabove. It is pertinent to note that

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the respondent is not claiming a lease in perpetuity or right to

successive renewals under the covenant for renewal contained in the

1887 lease. The term of 50 years under the 1887 lease came to an

end in the year 1937 and the option for renewal was exercised by the

respondent as assignee of the original lessee which exercise was

honoured by the lessor State executing a fresh deed of lease belatedly

on February 20, 1945. This lease deed does not set out any fresh

covenants, mutually agreed upon between the parties for the purpose

of renewal. Rather it incorporates, without any reservation, all the

covenants, provisos and stipulations as contained in the principal lease

as if they had been herein repeated in full. Not only was a fresh deed

of lease executed but the conduct of the parties also shows that at the

end of the term appointed by the 1945 lease, i.e. in or around the year

1987, the lessor did not exercise its right of re-entry. On the other

hand, the respondent exercised his option for renewal. The officials of

the appellant State, i.e. the Collector and the Board of Revenue, all

recommended renewal and advised the State Government to expedite

the renewal. The State Government was generally renewing such like

leases by issuing general orders/instructions to its officers. At no point

of time prior to the filing of the counter-affidavit, on the present

litigation having been initiated, the State or any of its officers took a

stand that the right of renewal, as contained in the principal deed of

lease, having been exhausted by exercise of one option for renewal,

was not available to be exercised again.

Now that the covenant for renewal has been referentially

incorporated without any reservation in the lease deed of 1945 the

exercise of option for renewal cannot be denied to the respondent.

However, in the lease deed to be executed for a period of 50 years

commencing May 20, 1987, the covenant for renewal need not be

incorporated and therefore the term of the lease would come to an end

on expiry of 50 years calculated from May 20, 1987. This view also

accords with the view of the law taken in Green Vs. Palmer (supra).

The other two pleas raised on behalf of the appellant State merit

a short and summary burial. The appellant's plea that the land having

been acquired there could be no renewal of lease has been termed by

the High Court as 'ridiculous' and we find no reason to take a different

view. Suffice it to refer to a recent decision of this Court in Sharda

Devi Vs. State of Bihar, (2003) 3 SCC 128 wherein it has been held

that the Land Acquisition Act, 1894 cannot be invoked by the

Government to acquire its own property. It would be an absurdity to

comprehend the provisions of the Land Acquisition Act being applicable

to such land wherein the ownership or the entirety of rights already

vests in the State. The notification and declaration under Sections 4

and 6 of the Land Acquisition Act for acquisition of the land i.e. the

site below the bungalow are meaningless. It would have been

different if the State would have proposed the acquisition of leasehold

rights and/or the superstructure standing thereon, as the case may be.

But that has not been done. The renewal of lease cannot be denied in

the garb of so called acquisition notification and declaration which

have to be just ignored.

Lastly, it was submitted that the respondent is in breach of the

terms of the lease and hence not entitled to renewal. Firstly, the High

Court has held the plea taken by the appellant State not substantiated.

Secondly, exercise for option for renewal cannot be stalled on the

ground that the lessor proposes to exercise right of re-entry on

account of alleged breach when no steps were taken for exercising the

right of re-entry till the option for renewal was exercised by the lessee.

If the lessee is in breach and the lease entitles the lessor to re-enter,

that right is available to be exercised without regard to the renewal of

the lease.

For the foregoing reasons the appeal is held devoid of any merit

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and liable to be dismissed. It is dismissed accordingly. As the

respondent has chosen not to appear we make no order as to the

costs.