1929 (12) TMI 3 - HC - Indian Laws

Summary

Issues:
- Interpretation of a covenant against assignment in a lease agreement
- Whether a sub-lease for the unexpired residue of a term constitutes an assignment under Indian law
- Application of the Transfer of Property Act, 1882 to the case

Analysis:
The judgment involves an appeal from the High Court of Calcutta regarding the enforcement of a forfeiture for an alleged breach of a covenant against assignment in a lease agreement. The lease was for a term of sixty-one years, and the dispute arose when the owners of the leasehold interest executed a mortgage by way of sub-lease for the unexpired residue of the term. The trial Judge initially held that there was no absolute demise in the mortgage, but the Appellate Bench disagreed, leading to the appeal.

The key issue was whether a sub-lease for the unexpired residue of the term constitutes an assignment under Indian law. The judgment highlighted that the law in India, as per the Transfer of Property Act, 1882, allows a lessee to grant a sub-lease for the unexpired residue of the term unless there is a contract to the contrary. Section 108(j) of the Act explicitly permits a lessee to transfer the whole or any part of their interest in the property, including by way of sub-lease.

The judgment emphasized that in India, a sub-lease for the unexpired residue of the term operates as a sub-lease unless there is a specific contract preventing it. In this case, the covenant against assignment was found to be subject to the express power to underlet granted to the lessees. As the lessees had only underlet the premises, there was no breach of the covenant against assignment, and therefore, no grounds for forfeiture.

The judgment underscored the importance of interpreting lease agreements in accordance with Indian law, particularly the Transfer of Property Act, rather than relying solely on English decisions. It clarified that the Act allows for sub-leasing of the unexpired residue of a term, unless there is a clear contract stating otherwise. Ultimately, the appeal was allowed, and the suit was dismissed with costs throughout.