Holding

A lease executed before the 1965 amendment and lasting more than 20 years is governed by Section 3(1) of the West Bengal Premises Tenancy Act, 1956, and a contractual rent increase does not constitute novation or a new tenancy, entitling the landlord to possession.

Summary

Savita Dey leased premises to the respondents under a registered deed dated 6 July 1964 for a term of 21 years at Rs.475 per month, later increased to Rs.501 per month in accordance with a clause linking rent to municipal tax increases. When the lease expired on 30 June 1985, Dey served a quit notice, but the tenants failed to vacate, leading to a suit for possession which the trial court decided in Dey's favour. The Calcutta High Court reversed that decision, holding that the rent increase created a month‑to‑month tenancy governed by the West Bengal Premises Tenancy Act, 1956. The Supreme Court held that the lease, executed before the 1965 amendment, falls under Section 3(1) of the Act, which excludes leases exceeding 20 years, and that the rent increase was a contractual variation, not a novation creating a new tenancy. Consequently, no protection under Section 3(2) applied, and the landlord was entitled to possession. The Court set aside the High Court judgment and restored the trial court decree.

Issues considered

Whether Section 3 of the West Bengal Premises Tenancy Act, 1956 (pre‑amendment) applies to a lease executed before 24‑08‑1965 for a term exceeding 20 years.
Whether the increase in rent under the lease deed amounts to a novation or creation of a new tenancy, thereby invoking the Act’s provisions.
Whether the landlord retained an unfettered right to terminate the lease before its expiry, rendering the tenancy precarious.
Whether the rent increase was valid under the terms of the registered lease deed.

Legislation cited

Subjects

leaserent increasenovationWest Bengal Premises Tenancy Actpossession suitmunicipal taxtermination noticeadvance rent

Judgment

A SAVITA DEY
v.
NAGESHWAR MA.IUMDAR AND ANR.

SEPTEMBER 26, 1995

8 [MADAN MOHAN PUNCHHI, S.C AGRAWAL AND
B.P. JEEVAN REDDY, J.l.J

Rent Control and Eviction:

C Wert Bengal Premises Tenancy Act, 1956: Section 3 (as Amended w.ef
24.08.1965).

Section 3 (1)-Not applicable to premises under lease for more than
20 years-Section 3(2)-Not applicable to leases entered into before
24.08.1965-Such leases would be govemed by Section 3 as it stood and
D Section 3(1) as it now stand.~equirements of Section 3(2) cannot be
imported into Section 3(1).

Transfer of Property Act, 1882:

Section 111 (/)-Registered deed of lease-Vmiation of rent payable
E unde1-Does not necessarily imply SU/Tender of lease and creation of new
tenancy--Propo1tionate increase in rate with increase in niunicipal taxes
stipulated in the deed-Held: no question of novt;tion of contract could ever
arise or on that event creation of new tenancy.

The appellant by a registered lease deed dated July 6, 1964 leased
F out her pren1ises to the respondents for a period of 21 years commencing
from July 1, 19<>4 and ending on June 30, 1985 at the agreed rate of Rs.
475 per month which subsequently was increased to Rs. 501 per month,
consequent to the increase in municipal tax. Since the lease was expiring
on June 30, 1985, the appellant sent a quit notice on May 26, 1985 requiring
G the respondents to vacate the premises, on the etllux of time on June 30,
1985. Since the respondents did not vacate the demised premises despite
notice, a suit for possession was filed against the respondents.

The Trial Court decreed the suit for possession. On appeal by the
respondents the High Court reversed the judgment of the Trial Court.
H Aggrieved by the High Court's judgment, the appellant preferred the
80
SAVITA DEY v. N. MATUMDAR 81

present appeal. A

On behalf of the respondents it was contended that they had wTrrngly
been made to pay Rs. 5,000 as Salami at the time orthe execution of the
lease deed and that rent was enhanced to Rs. 501 per month contrary to
. the terms of the lease; and that this act of enhancement had the effect of
tenancy becoming from month to month, in substitution of the lease, B
attracting provisions of the West Bengal Premises Tenancy Act, 1956.

Allowing the appeal, this Court

HELD: 1.1. Section 3 of the West Bengal Premises Tenancy Act, 1956
prior to its amendment, effective from August 24, 1965, rendered the
c
provisions of the Act inapplicable to any premises held under a lease for
more than 20 years, whether the purpose of the lease was residential or
non-residential. By the amendment of 1965, this provision was retained
and re-numbered as Sub-section (1) of Section 3 while adding thereto
Sub-section (2). [84-E-F] D

• 1.2. A bare reading of the provision makes it obvious that sub-sec-
tion(2) does not touch those leases which were entered into before August
24, 1965 which remained to be governed by Section 3, as it stood and
Section 3 (1), as it now stands, whereunder the Act is not applicable to any
E
premises under a lease for more than 20 years. Since the lease in hand was
executed on July 6, 1964 for a period commencing from July 1, 1964 and
expiring on June 30, 1985 sub-section (2) of Section 3 obviously has no
applicability to it. Mahindra & Mahindra v. Smt. Kohinoor Debi, (Calcutta
High Court Notes 1989 (1) Reports, Second Appeal No. 142of1987 decided
on December 1, 1988), approved. [85-D-E] F

2.\. The requirements of Section 3(2) of the Act could never be
imported into Section 3(1). In the lease in hand neither the appellant nor
the respondent had reserved to himself the unfettered right of termination
of the lease during the period of 21 years. In the first place, as are the facts G
pleaded, neither of them has ever asserted the said right of premature
termination. Perhaps no occasion arose. Secondly, ·the 11uestion of the
precariousness of the tenure of the respondent did not arise in the cir-
cumstances of the case because the respondent had fully enjoyed the period
of lease of 21 years. The heart of the matter is that the tenancy was never
terminated either by the appellant or by the respondent during the period H
T
82 SUPREME COURT REPORTS [1995] SUPP. 4 S.C.R.

A of the lease. [86-F-87-C]

2.2. Adverting to the lease deed it is found that Rs. 5,000 had been
paid by the respondent as advance rent which was adjustable in SO ilistal-
ments at the rate of Rs. 100 per month from the monthly rent of Rs. 475 '·
payable during the period July 1964 to August 1968. In this period, the
B respondent was to pay Rs. 375 per mensem because of the adjustment of
Rs 100 per mensem, till the advance got exhausted. Thereafter from
September 1968 to June 1985, the respondent WdS to pay Rs 475 per
mensem. Under Clause 16 both the respondent and the appellant agreed
not to terminate the lease before the expiry of four years and two months
C from the commencement of the term of the lease, i.e., from July 1, 1964 to
August 31, 1968 (That period being in which rent would be adjusted).
subject to the proviso that if rent is not paid and goes in arrears, the
appellant shall have a right of re-entry. Subject to the conditions, the lease
also provided that a notice of an English calendar month shall be neces-
D sary for the termination of the lease by either the lessor or the respondent
in accordance with the statute law of the country. Nowhere in these terms
can anything be spelled out that the appellant had reserved to
herself the unfettered right to terminate the tenancy at her whim
and caprice. [87-D-F]

E 2.3. There is no inflexible principle that every variation at the rate of
rent payable under a registered deed of lease necessarily implies surrender
of the said lease and creation of a new tenancy, or that whenever rate of
rent is altered a new relationship between the parties gets created. By mere
increase or reduction of rent, surrender of the existing lease and the grant
f of a ne\v one, cannot be inferred in each case. It is a question of fact to be
determined. [88-B-C]

Gappulal v. Sluiji Dwarkadheeshji and Anotlw; AIR (1969) SC 1291,
referred to.

G 2.4. Instantly in the deed itself, provision had been made whereby the
respondent had undertaken to pay a proportionate increase in the share
of municipal taxes if in future the rate and taxes are increased by the
Corporation in respect of the demised premises. The increase of Rs. 26 per
month in tlie agreed rent has rightly been found to be because of increase
H in taxes. And since they were conceived of and stipulated in the deed itself,
•
SAV!TA DEY v. N. MA.JUMDAR jPUNCHHI, J.] 83

no <1uestion of novation of contract could ever arise or on that event A
· creation of ne\V tenancy, so as to lift the protection to the landlord available
under Section 3 (1) of the Act. [88-D]

Cl VIL AP PELLA TE .I URISDJCTION : Civil Appeal No. 3404 of
1993.
B
From the judgment and Order <lated 1.6.92 of the Calcutta High
Court in A.0.D. No. 5 of 1991.

P.K. Chakraborty for the Appellant.

R.N. Kovind for the Respondents. c
The Judgment of the Court was delivered by

PUNCHHI, J. Jn furtherance to our order dated May 11, 1994
allowing this appeal, setting aside the judgment and order of the Division
Bench of the Calcutta High Court, restoring that of the Trial Court, we D
hereby release our deferred reasons to complete the judgment.

The landlord-appellant herein was the plaintiff. The defendants-
respondents were the tenants. The appellant filed a suit for recovery of
possession of the demised premises and for mcsne profits in the City Civil
E
Court at Calcutta against the tenants-respondents. The suit was based on
the premise that by a registered deed of lease dated 6.7.1964, the demised
premises were leased out to the respondents for a period of 21 years
commencing form July 1, 1964 and ending on June 30, 1985 at the agreed
upon rate of Rs. 475 per month which subsequently was increased to
Rs.501 per month, consequent to the increase in n1unicipal tax. Since the F
lease was expiring on June 30, 1985, the appellant sent a quit notice on
26.5.1985 requiring the respondents to vacate the premises, on the efflux
of time on June 30,1985. Since the respondents did not vacate the demised
premises despite notice, a .suit for possession wac;; filed again~t the respon-
dents claiming Rs. 100 per diem for wrongful use and occupation after the G
expiry of the period of lease.

The respondents even though contesting the suit had not much to
offer in defence. They pleaded that they had wrongly been made to pay Rs
5,000 as Salami at the time of the execution of the lease deed and that rent
was enhanced to Rs. 501 per month contrary to the terms of the lease. And H
84 SUPREME COURT REPORTS [1995] SUPP. 4 S.C.R.

A lhis act of enhancement had the effect of lcnancy becoming from month
to month, in substitution of the lease, attracting provisions of the West
Bengal Premises Tenancy Act, 1956.

BcJore the Trial Court, the only question raised was \Vhcther on the
terms of the registered lease deed the appellant was entitled to a decree
B for possession as also for mesne profits from the date of the expiry of the
lease. The Trial Court in its well reasoned judgment came to the conclusion
that the stipulated rent of Rs.475 per month was rightly increased to Rs.
501 per month with effect from January 1969 because of increase in
· municipal tax and therefore on this factum, there could be no implied
c surrender under Section 111(1) of the Transfer of Properly Act, there being
no novation of the lease, or any change in the terms thereof. The Trial
Court further viewed that since enhancement in rent on account of the
enhancement of municipal lax was itself stipulated in the lease of deed,
there was in fact no enhancement of rent by the appellant. On that premise,
the Trial Court decreed the suit for possession and for payment of mesne
D profits at the rate and from the date claimed by the appellant. The High
Court on appeal by the tenants-respondents reversed the judgment and
decree of the Trial Court without demolishing the grounds on which the
judgment of the Trial Court was based, but on grounds totally different.

E Section 3 of the West Bengal Premises Tenancy Act, 1956, prior to
its amendment, effective from 24.8.1965, rendered the provisions of the Act
inapplicable to any premises held under a lease for more than 20 years,
whether the purpose of the lease was residential or non-residential. By the
an1endment of 1965, this provision was retained and re-numbered as sub-
section (1) of Section 3 while adding thereto Sub-section (2). The rrovision
F as it stands reads as follows:

"3. CERTAIN PROVISIONS OF THE ACT NOT TO APPLY
TO CERTAIN LEASES -

(1) The Provisions relating to rent and the provisions of Sections
G 31 and 36 shall apply lo any premises held under a lease for
residential purpose of the lessee himself and registered under the
Indian Registration Act, 1908, where-

(a) Such lease is for a period of not more than 20 years, and
H save as aforesaid nothing in this Act shall apply to any rrcmises
SAVITA DEY<: N. MAIUMDJ\R IPUNCHHI,J.] 85

held under a lease for a period of not less than 15 years. A

(2) Notwithstanding anything to the contrary contained in sub-sec-
tion (1) but subject lo sub-section (3) of Section 1 this Act shall
apply to all premises held under a lease which has been entered
into after the co1nn1encen1cnt of the West Bengal Premises Tenan-
cy (Amendment) Ordinance, 1965: B

Provided that if. any such lease is for a period of not less than
20 years and the period limited by such lease is not expressed to
be terminable before its expiration at the option either of the
landlord or of the tenant, nothing in this Act, other than the
provisions relating to rent and the provisions of sections 31 and
c
36, shall apply to any premises held under such lease.

A bare reading of the provision makes it obvious that Sub-section (2) does
not touch those leases which were entered into before 24-8-1965 which
remained to be governed by Section 3, as it stood and Section 3 (1), as it D
now stands, whereunder the Act is not applicable to any premises under a
lease for more than 20 years. Since the lease in han<l was executed on
6-7-1964 for a period commencing from July l, 1964 and expiring on June
30, 1985 sub-section (2) of Section 3 obviously has no applicability to it.

The learned Judge authoring the judgment of the Division Bench
E
under appeal had at an earlier occasion authored and delivered another
Division Bench Judgment of the High Court in Mahindra and Mahindra
v.·Smt. Kohinoor Debi, [Calcutta High Court Notes 1989 (1) Reports,
Second Appeal No. 142 of 1987 decided on December 1, 1988]. There the

- High Court pro111inently <lrc\v the distinction bct\vccn the pre-amendn1cnt
and post-amendment leases. In para 13 of the Report it observed as
follows:
F

"13 ....... A lease for, say, 21 years would not cease to be, but would
remain, such a lease in the eye of law even if the lessee has not
given an option to terminate it earlier. If a lease for a fixed term G
with the right or option for renewal in favour of the lessee remains ·
a lease for that fixed term only, until the option is exercised, a
lease for a fixed term with the right or option in favour of the
lessee of earlier termination should also remain a lease for the
period fixed, as the option in each case creates, enlarges, lilnits or H
86 SUPREME COURT REPORTS [1995} SUPP. 4 S.C.R.

A extinguishes no 1ight, title or interest, until exercised." (emphasis
supplied)

The High Court seemingly having talked for the Jessee then went on
to conclude in paragraph 18 of the Report aflirmingly as follows:

B
"18 ........ But if, while deliberately engrafting such a proviso to
S.3(2) while amending S.3 in 1965 to provide only for leases
executed after 24.8.65, the Legislature has conspicuously refrained
from incorporating any such provisions in S.3(1) governing leases
(
entered into before that date, we do not think that it would be
c open to us to project the provisions of that Proviso in S.3(1) also
and to hold that a lease for a fixed term would cease to be so, if
it is determinable before its expiration even at the option of the
tenant only. We would accordingly overrule both the contentions
made by Mr. Dutl and would dismiss the second appeal."
D
On the strength of the above observations, the High Court did the opposite
in the instant case on the superficial distinction drawn in the case of a
tenant who had been conferred the option to terminate the lease within the
duration of the term of the lease, which in no way was affected by any
action of the landlord, because the tenant had otherwise the right to
E
continue undeterred in the premises for the period fixed. Negatively the
case of the landlord was put at a different footing. The High Court
completely overlooked that the requirements of sub-section (2) of Section
3 could never be imported wholly or partially, for the tenant or against the
tenant, in sub-section (I) o[ Section 3. It could not have gone on to hold
F that if in a lease of the pre-1965 period a term exists entitling the landlord
to terminate the lease, the lease ceases to be the one governed by Section
3(1). The High Court, rather should have appreciated that both the
landlord and tenant were at par under sub-section (2) of Section 3 of the
Act. It was unfortunate for the High Court to have observed that in
G Mahindra & Malzindra's case, the question about the landlord having
reserved to himself the right to terminate the lease at his option, at any
time before the expiry of the lease period, so as to make the tenure of the
tenant precarious, was not finally decided as not being necessary for the
disposal of the matter at their end. The High Court should have kept in
H mind that for a pre-amendment lease the right of termination even if kept
SAVITADEY v. N. MATUMDAR[PUNCHHI,J.] 87

reserved by the landlord, to which Section 3(1) applied, could not have the A
consequence of the lease being governed under Section 3(2) of the Act.
The High Court should have borne in mind the distinction drawn by the
legislature. Had it thought otherwise, it could have made provision for the
same. The High Court could not have imported the requirements of
Section 3(2) into Section 3(1) and in so doing has committed a gross error. B

Additionally, in the lease in hand, neither the landlord nor the tenant
had reserved to himself the unfettered right of termination of the lease
during the period of 21 years. In the first place, as are the facts pleaded,
neither of them has ever asserted the said right of premature termination.
Perhaps no occasion arose. Secondly, the question of the suggested C
precariousness of the tenure did not arise in the circumstances of the case
because the lessee/tenant had fully enjoyed the period of lease of 21 years.
The heart of the matter is that the tenancy was never terminated either by
the landlord or by the tenant during the period of the lease.
D
Adverting now to the lease deed, we find that Rs. 5000 had been paid
by the lessee as advance rent which was adjustable in 50 instalments at the
rate of Rs. 100 per month form the. monthly rent of Rs. 475 payable during
the period July 1964 to August 1968. In this period, the lessee was to pay
Rs. 375 per mensem because of the adjustment of Rs. 100 per mensem, till
the advance got exhausted. Thereafter from September 1968 to June 1985, E
the lessee was to pay Rs. 475 per mensem. Under Clause 16 both the lessee
and the lessor agreed not to terminate the lease thereby created before the
expiry of four years and two months, from the commencement of the term
of the lease, i.e., form July 1, 1964 to August 31, 1968, (That period being
in which rent would be _adjusted) subject to the proviso that if rent is not F
paid and goes in arrears, the lessor shall have a right of re-entry. Subject
to the afore-conditions, the lease also provided that a notice.of an English
calendar month shall be necessary for the termination of the lease by either
the. lessor or the lessee in accordance with the statute law of the country.
Nowhqe in these terms can anything be spelled out that the lessor had
reserved to herself the unfettered right to terminate the tenancy at her G
whim and caprice. The High Court has not adverted to this fact situation.
It erroneously proceeded on the assumption that the lessor herein had an
unfettered right of bringing to· an end the tenure of the tenant termed
precarious. Thus neither on law, nor on fact does the judgment of the High
Court deserve sustaining; all the more, when it has not demolished the case H
88 SUPREME COURT REPORTS (1995] SUPP. 4 S.C.R.

A of the landlord, as succeeding in the Trial Court, and on projecting one
which was never canvassed before the Trial Court.

Now on the trial scene, we find that the argument of the tenant-
respondents about the increase of rent and novation of contract was rightly
rejected by the Trial Court. There is no inflexible principle that every
B variation at the rate of rent payable under a registered deed of lease
necessarily implie.s surrender of the said lease and creation of a new
tenancy, or that whenever rate of rent is altered a new relationship between
the parties gets created. By mere increase or reduction of rent, surrender
of the existing lease and the grant of a new one, cannot be inferred in each
C case. It is a question of fact to be determined. See in this regard Gappulal
v. Shriji Dwarkadheeshji and Another, AIR (1969) SC 1291 (at 1293).
Instantly in the deed itself, provision had been made whereby the lessee
had undertaken to pay a proportionate increase in the share of municipal
taxes if in future the rate and taxes get increased by the Calcutta Corpora-
tion in respect of the demised premises. The increase of Rs. 26 per month
D in the agreed upon rent has rightly been found to be because of increase
in taxes. And since they were conceived of and stipulated in the deed itself,
no question of novation of contract could ever arise or on that event
creation of new tenancy, so as to lift the protection to the landlord available
under Section 3 (1) of the Act.
E For all these reasons, the judgment and decree of the High Court
stands set aside, which reasons be supplemented to our Order dated May
11, 1994.

v.s.s. Appeal allowed.