2003 (11) TMI 617 - SC - Indian Laws

Seeking to 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 - Acquisition of Land - Alleged Breach of Lease Terms - whether the respondent was entitled to a second renewal of the lease for the suit property - HELD THAT - It is pertinent to note that 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. 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 (1) TMI 724 - SUPREME COURT 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. Thus the appeal is held devoid of any merit 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.

Summary

Issues Involved:
1. Renewal of Lease
2. Acquisition of Land
3. Alleged Breach of Lease Terms

Summary:

1. Renewal of Lease:
The primary issue was whether the respondent was entitled to a second renewal of the lease for the suit property. The original lease, executed in 1887, contained a covenant for renewal for another 50 years. The respondent, as the assignee of the original lessee, exercised this option, leading to a renewed lease executed on February 20, 1945, for a term of 42 years, 2 months, and 20 days. The respondent sought another renewal, which the State Government delayed, leading to litigation. The High Court drew an adverse inference against the State for not producing the original lease deed, concluding that no term limited the renewal to only once. The Supreme Court agreed, noting that the 1945 lease incorporated all covenants of the original lease, including the renewal clause, without reservation. Thus, the respondent was entitled to another renewal for 50 years from May 20, 1987, but future leases need not include the renewal clause.

2. Acquisition of Land:
The State argued that the land was acquired u/s 4 and 6 of the Land Acquisition Act, 1894, making renewal impossible. The High Court termed this argument 'ridiculous,' and the Supreme Court concurred, citing Sharda Devi Vs. State of Bihar, (2003) 3 SCC 128, which held that the Land Acquisition Act cannot be invoked to acquire property already owned by the State. The notifications for acquisition were deemed meaningless as they did not propose acquiring leasehold rights or the superstructure.

3. Alleged Breach of Lease Terms:
The State also contended that the respondent violated lease terms by negotiating the sale of the leased land without prior sanction. The High Court found this plea unsubstantiated. The Supreme Court held that alleged breaches could not stall the renewal process, as the lessor had not exercised the right of re-entry before the renewal option was exercised. The right of re-entry could be exercised independently of the renewal.

Conclusion:
The Supreme Court dismissed the appeal, affirming the respondent's right to lease renewal for 50 years from May 20, 1987, and rejected the State's arguments regarding land acquisition and breach of lease terms. No costs were awarded as the respondent did not appear.