2023 (9) TMI 1601 - SC - Indian Laws

Admissibility of an unregistered lease deed as evidence - recovery of possession and decree for mesne profit - default in payment of rent - HELD THAT - The appeal of the Defendant was examined by the Division Bench of the High Court and on considering a large body of authorities, the High Court found no reason to interfere with the judgment of the Trial Court. The appeal was dismissed. It was the view of the High Court that the agreement being unregistered, the same could not be looked into for determining the rights and liabilities of the parties and for its duration. On the question as to whether the purpose of the lease was manufacturing or not, the High Court held that it was for the Appellant to establish that factor. The Appellant not having adduced any evidence in that regard, the High Court drew adverse inference on that count and the Trial Court judgment was not interfered with. So far as Section 106 of the said statute is concerned, in which distinction is made between lease of immovable property for agricultural or manufacturing purpose and lease of immovable property for any other purpose, the same provides that a lease of immovable property for agricultural or manufacturing purpose shall be deemed to be a lease from year- to-year terminable by six months' notice. In other cases, termination would require fifteen days' notice. The subject agreement had a duration of five years with a provision for renewal for a further period of five years. Hence under the first part of Section 107, for the said lease agreement to be admissible, registration of the same would have been necessary. The deeming provision of Sub-section (1) of Section 106 so far the same related to lease for agriculture or manufacturing purpose would not be applicable as the deed was not registered. The Appellant has argued that the Trial Court had admitted the lease agreement in evidence, and for determining the purpose of lease, we can examine the deed. But this argument is flawed. In Park Street Properties Private Limited v. Dipak Kumar Singh and Anr. 2016 (8) TMI 1447 - SUPREME COURT , which was cited in the case of Sevoke Properties 2019 (4) TMI 1887 - SUPREME COURT , it was observed that in the absence of a registered instrument, the courts are not precluded from determining the factum of tenancy from other evidence on record as well as the purpose of tenancy. In this case, factum of creation of tenancy has been established. But the purpose of tenancy, so as to attract the six months' notice period Under Section 106 of the 1882 Act cannot be established by such evidence as in such a situation, registration of the deed would have been mandatory. The onus would be on the Defendant to establish the fact that manufacturing activity was being carried on from the demised premises. A mere statement by the DW-1 to which we have referred earlier or the purpose of lease as specified in the lease agreement would not be sufficient to demonstrate the purpose of lease to be for manufacturing. The High Court has not erred in law in dismissing the Defendant's appeal. The present appeal shall stand dismissed on the same rationale.

Summary

Issues Involved:

1. Admissibility of an unregistered lease deed as evidence.
2. Determination of the nature and purpose of the lease.
3. Validity of the notice period for lease termination under the Transfer of Property Act, 1882.

Issue-wise Detailed Analysis:

1. Admissibility of an Unregistered Lease Deed as Evidence:

The primary issue addressed was whether the Court could consider a clause in an unregistered lease deed stipulating a lease duration of five years. According to the judgment, the Division Bench of the Calcutta High Court ruled that such a deed cannot be received as evidence of any transaction affecting the property. The Supreme Court reiterated that under Section 107 of the Transfer of Property Act, 1882, a lease exceeding one year must be registered. Sections 17 and 49 of the Registration Act, 1908, further stipulate that an unregistered document required to be registered cannot affect immovable property or be received as evidence. The Court cited precedents, including Anthony v. K.C. Ittoop & Sons, which emphasized that an unregistered lease deed cannot be used to establish a lease. Thus, the unregistered lease deed in question was inadmissible for proving the lease's duration or terms.

2. Determination of the Nature and Purpose of the Lease:

The second issue was whether the lease was for "manufacturing" purposes, which would affect the notice period required for termination. The Trial Court found that the property was not let out for agricultural or manufacturing purposes, thus requiring only a 15-day notice for termination under Section 106 of the Transfer of Property Act, 1882. The High Court upheld this finding, noting that the burden of proving the lease's purpose as "manufacturing" lay with the Defendant, who failed to provide sufficient evidence. The Supreme Court agreed, emphasizing that the purpose of the lease is integral to the lease deed and not merely a collateral matter. The Court referenced Allenbury Engineers Pvt. Ltd. v. Ramkrishna Dalmia, which defined "manufacturing purposes" as involving transformation into a different article with a distinctive name, character, or use.

3. Validity of the Notice Period for Lease Termination:

The Defendant argued that a six-month notice was required, claiming the lease was for manufacturing purposes. However, the Trial Court and the High Court found that the lease was not for manufacturing purposes, thus only necessitating a 15-day notice. The Supreme Court supported this conclusion, noting that the lease's purpose was not proven to be manufacturing. The Court also highlighted that the unregistered lease deed could not be used to determine the lease's purpose or duration, reinforcing the requirement for registration in such cases. Consequently, the Defendant's appeal was dismissed, and the 15-day notice was deemed valid.

In conclusion, the Supreme Court upheld the lower courts' findings, emphasizing the inadmissibility of the unregistered lease deed for determining the lease's duration or purpose, and confirming the validity of the 15-day notice period for termination.