Transfer of Property Act, 1882 — Section 105 — Lease v. Licence — Tests for determination — Intention of parties — Literal construction preferred — Exclusive possession of demised portion decisive unless contrary intention established. (Paras 14–16, 18–21)
The substantial question concerned whether Ext. 1 dated 23.03.1998 created a lease for 99 years or merely a licence. The High Court treated the document as a licence, relying inter alia on subsequent conduct and retention of first floor by the owner. The Supreme Court, applying the settled principles in Associated Hotels of India Ltd. v. R.N. Kapoor and M.N. Clubwala v. Fida Hussain Saheb, held that the decisive test is intention gathered from the substance of the document.
Ext. 1 expressly used the words “demise”, fixed a term of 99 years, stipulated yearly rent of Rs.1,000/-, permitted alterations by the lessee, and extended the benefit to heirs, successors and assigns. These clauses unequivocally created an interest in immovable property. Retention of occupation of the first floor by the lessor did not negate lease, as exclusive possession is assessed qua the demised portion.
Ratio Decidendi: Where the document, read as a whole, transfers an interest in immovable property for a definite term in consideration of rent and grants exclusive possession of the demised portion, it constitutes a lease under Section 105 TPA notwithstanding nomenclature or partial retention of occupation by the owner.
Construction of Documents — Literal rule — Limited scope for purposive or ex-post facto interpretation — Subsequent conduct not primary guide when language is clear. (Paras 17–21)
The Court reiterated the principles governing interpretation of deeds, including literal, golden and purposive rules, referring to Annaya Kocha Shetty v. Laxmi Narayan Satose. When the language of the instrument is clear and unambiguous, courts must give effect to its plain meaning. Reliance on post-execution conduct to infer intention is unwarranted unless ambiguity exists.
The High Court erred in relying on cross-examination and subsequent conduct to construe Ext. 1 as a licence, despite clear covenants creating leasehold interest.
Ratio Decidendi: Where the terms of a written instrument are clear, intention must be gathered from the plain language of the document itself; recourse to subsequent conduct is impermissible in absence of ambiguity.
Registration Act, 1908 and Transfer of Property Act, 1882 — Unilateral cancellation of registered lease — Impermissible — Absence of forfeiture clause — Determination under Section 111 TPA not established. (Paras 10.2, 21)
The lease deed contained no clause permitting unilateral cancellation by the lessor. There was no proof of determination in terms of Section 111 of the Transfer of Property Act. Hence, the unilateral deed of cancellation dated 03.12.2003 was illegal and non est.
Ratio Decidendi: In absence of contractual stipulation or statutory ground under Section 111 TPA, a registered lease cannot be unilaterally cancelled by the lessor; such cancellation is void.
Doctrine of Lis Pendens — Purchasers during pendency of suit — Rights subject to outcome — Bona fide purchaser plea rejected on facts. (Paras 10.3, 22)
Defendant Nos. 3 and 4 purchased the property during pendency of the suit and with knowledge of the 99-year lease reflected in the encumbrance certificate. Their rights were subject to the leasehold interest and outcome of litigation.
Ratio Decidendi: A transferee pendente lite takes the property subject to subsisting rights and pending litigation; knowledge of prior encumbrance negates plea of bona fide purchase without notice.
Final Order
The impugned judgment of the High Court in RSA No. 123 of 2021 set aside. Judgments and decrees of the Trial Court and First Appellate Court restored. Ext. 1 held to be a valid 99-year lease; unilateral cancellation illegal. Civil Appeal allowed. No order as to costs. (Paras 21–23)**
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