CONTINGENT CLAUSE IN RENT DEED TO INCREASE RENT EACH YEAR CANNOT BE READ TO MEAN THAT TENANCY WAS FOR MORE THAN ONE YEAR PERIOD.

SIRI CHAND V. SURINDER SINGH, JUNE 17, 2020.

INTRODUCTION

In a dispute involving the registration of a rent deed, the Bench of Justices Ashok Bhushan, MR Shah, and V Ramasubramanian decided against the decision of the Punjab & Haryana High Court while hearing an appeal. The primary challenge before the Court was whether, in the present case, the rent deed had to be mandatorily registered per Section 17(1)(d) of the Registration Act of 1908(“The Act”). The Supreme Court stated that if a rent deed is quiet on the period of the tenancy, a mere provision for a rent increase after one year cannot be interpreted as a yearly tenancy requiring the obligation to register the deed mandatorily as required by The Registration Act, 1908.

 

BACKGROUND

In this case, an application, according to Section 13 of the East Punjab Urban Rent Restriction Act, 1949, was filed by the Appellant-landlord praying for the tenant’s eviction along with rent and house tax arrears and interest on the rent arrears. The Appellant’s argument was that the rent and house tax had not been paid which was Tenant’s responsibility. The Rent Controller opined that there were a landlord and tenant relationship between the parties. The Rent Controller allowed the Appellant’s application and directed the Respondent’s eviction from the premises at issue.

The tenant filed an appeal against the order of the Rent Controller. The Appellate Court did not agree with the findings of the Rent Controller that document was not compulsorily registrable. Appellate Court observed that perusal of the document reveals that there would be an increase in the rent to the tune of 10% every year. Hence the document was not executed for a period of less than a year. Rather, the intention of the parties is clear that it was executed for more than one year. Hence the document was required to be registered under Section 17(1)(d) of the Act. However, the Appellate Court rejected the claim of the tenant that the rate of rent was Rs. 1,000 only. The Appellate Court, after holding that document, was compulsorily registrable, took the view that the Clause regarding 10% yearly increase cannot be relied on, and judgment of Rent Controller was accordingly set aside, and the appeal was allowed.

The Appellant aggrieved by order of the Appellate Court filed a revision before the High Court. The High Court dismissed the revision referring to the finding of the Appellate Court that rent note- was compulsorily registrable. Aggrieved by the said judgment, this appeal had been filed. Learned Counsel for the Appellant in support of the appeal contends that rent note dated July 27, 1993, which was signed by the tenant was valid Rent note and was covered within the definition of the lease as given in the Registration Act, 1908. The document was not registrable under Section 17(1)(d) of the Act.

The first question which arose for consideration in the appeal is whether the rent note dated 27.07.1993 was a document requiring compulsory registration pursuant to Section 17(1)(d) of the Registration Act, 1908 of the Act. The second problem addressed was that the Appellate Court should have set aside the judgment of eviction without recording the conclusion that there was no deficiency on the part of the applicant in the paying of rent and house tax, etc. and that the money deposited by the applicant was adequate to save him from eviction.

 

DECISION

The rent deed does not provide for any specific period for which the rent deed was executed. When the lease deed does not mention the period of tenancy, other conditions of the lease/rent deed and intention of the parties has to be gathered to find out the true nature of the lease deed/rent deed. Although in clause (9), it was mentioned that the tenant would be bound for making the rent money by increasing 10% each year, that was the promise by the tenant to increase the rent doubt by 10% each year for the period of tenancy, though the period of tenancy was unspecified.

Clause (9) was a contingent clause which binds the tenant to increase the rent by 10% each year, which was contingent on the tenancy to continue for more than a year, but that clause cannot be read to mean that the tenancy was for a period of more than one year. The rent note contains only monthly rent and payment month by month. When the clauses of rent note are cumulatively read, the intention of the tenant is more than clear that tenancy was only monthly tenancy, which could have been terminated on default of payment of rent by the 5th day of any month or by notice of one month. The rent deed did not confer any right to tenant to continue in the tenancy for a period of more than one year, nor it can be said that tenancy was created for a period of more than one year. Clause (9), which noticed the promise of the tenant of payment of rent by increasing 10% each year, was a promise contingent on tenancy being continued beyond one year but cannot make the tenancy year to year or tenancy for a period of more than one year. The rent note was not the kind of a rent note that required compulsory registration as under Section 17(1)(d) of The Act.

The Appellate Court did not return any finding that tenant was not in default, and that tenant had deposited the sum required to save himself from eviction. The Appellate Court’s decision on the above ground is therefore unsustainable. The appellate Court should not have meddled with the rent controller’s judgment and decree directing the eviction. A relevant excerpt from the judgment is “When the clauses of rent note are cumulatively read, the intention of the tenant is more than clear that tenancy was only monthly tenancy, which could have been terminated on default of payment of rent by 5th day of any month or by notice of one month. The rent deed did not confer any right to tenant to continue in the tenancy for a period of more than one year, nor it can be said that tenancy was created for a period of more than one year. Clause (9), which noticed the promise of the tenant of payment of rent by increasing 10% each year, was a promise contingent on tenancy being continued beyond one year but cannot make the tenancy year to year or tenancy for a period of more than one year.”

 

COMMENT

A contingency clause is a contract provision that requires a specific event or action to take place for the contract to be considered valid. This particular clause does not stand at par with other decided terms of the contract. The Court, in this case, brought to light the matter of contingent clause and determination of the period of a lease, which is not expressly mentioned. Section 106 of Transfer of Property Act, 1882 sets out a rule of construction that is to be followed when the parties have not explicitly decided whether the lease is annual or monthly. It is clear from a straightforward reading of the section that the legislature has classified leases into two categories according to their purpose and this section would be attracted to construe the duration of a valid lease in the absence of a contract or local law or usage to the contrary.  Where the parties have indicated the duration of a lease by contract, this section would not be attracted. In Ram Kumar Das v. Jagdish Chandra Deo, Dhabal Deb, and Another, this Court held that when there is no period agreed upon between the parties, duration has to be determined by referring to the purpose and object with which the tenancy is created. As per the law laid down by this Court, there shall be a presumption that the tenancy in the present case is monthly tenancy. When the clauses of rent note are cumulatively read, the intention of the tenant is more than clear that, tenancy was only monthly tenancy, and the contingent clause cannot determine the term of rent/lease agreement.