2016 (8) TMI 1447 - SC - Indian Laws

Termination of lease / rent agreement - validity of notice of termination - deemed monthly tenancy - Whether the agreement dated 07.08.2006 can be read in evidence, and whether it is a contract to contrary in terms of Section 106 of the Act? - it is the case of the appellant that in terms of the lease, the same could not be terminated unless there was a breach of its provisions. HELD THAT - 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 section also lays down the requirements of a valid notice to terminate the tenancy, such as that it must be in writing, signed by the person sending it and be duly delivered. Admittedly, the validity of the notice itself is not under challenge. 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. It is also a well settled position of law that in the absence of a registered instrument, the courts are not precluded from determining the factum of tenancy from the other evidence on record as well as the conduct of the parties - 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. 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. The impugned judgment and order passed by the High Court is set aside - The judgment and order passed by the Trial Court is restored - Appeal allowed.

Issues Involved:
1. Validity of the notice dated 30.10.2008 under Section 106 of the Transfer of Property Act, 1882.
2. Admissibility of the unregistered agreement dated 07.08.2006.
3. Interpretation of "contract to the contrary" under Section 106 of the Transfer of Property Act, 1882.
4. Applicability of Section 107 of the Transfer of Property Act, 1882.
5. Validity of the High Court's remand order.

Issue-wise Detailed Analysis:

1. Validity of the notice dated 30.10.2008 under Section 106 of the Transfer of Property Act, 1882:
The appellant issued a notice under Section 106 of the Transfer of Property Act, 1882, terminating the monthly tenancy of the respondents. The respondents argued that the notice was invalid, claiming an implied agreement not to terminate the lease before 30 years. The Supreme Court emphasized that Section 106 creates a deemed monthly tenancy terminable at a notice period of 15 days unless there is a valid contract to the contrary. The Court found the notice to be legal and valid, rejecting the respondents' contention.

2. Admissibility of the unregistered agreement dated 07.08.2006:
The High Court remanded the matter, questioning the admissibility of the unregistered agreement. The Supreme Court clarified that while an unregistered document can be used to prove the factum of tenancy, its terms cannot derogate from statutory provisions. The Court cited precedents, emphasizing that unregistered documents cannot be used to prove important clauses affecting immovable property transactions.

3. Interpretation of "contract to the contrary" under Section 106 of the Transfer of Property Act, 1882:
The respondents relied on Clause 6 of the unregistered agreement, arguing it constituted a "contract to the contrary." The Supreme Court held that the phrase "contract to the contrary" requires a valid contract, which must be registered if it exceeds one year. The Court reiterated that parties cannot contract out of statutory provisions through unregistered agreements.

4. Applicability of Section 107 of the Transfer of Property Act, 1882:
Section 107 mandates registration for leases exceeding one year. The Supreme Court highlighted that in the absence of a registered instrument, a month-to-month tenancy is presumed, terminable under Section 106. The Court stated that the unregistered agreement could not override the statutory requirements of Section 107.

5. Validity of the High Court's remand order:
The High Court remanded the case, directing reconsideration of the notice's validity. The Supreme Court found this unnecessary, as the unregistered agreement's terms could not legally affect the tenancy's termination. The Court restored the Trial Court's judgment, which had decreed in favor of the appellant, directing the respondents to vacate the premises.

Conclusion:
The Supreme Court set aside the High Court's order and restored the Trial Court's judgment, affirming the validity of the termination notice under Section 106. The unregistered agreement could not be used to contradict statutory provisions, and the tenancy was terminable with a 15-day notice. The appeal was allowed, and the respondents were directed to vacate the premises.

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