Holding

When a lease contains a specific renewal clause that must be exercised before expiry, mere acceptance of rent after expiry does not constitute a renewal under Section 116, and the lessee cannot claim holding over or specific performance.

Summary

The lessee, Shanti Prasad Devi, held a petrol pump on premises leased for fifteen years and sought renewal after the lease expired, sending a notice and continuing to pay rent which the lessor accepted. The lease contained specific renewal clauses requiring the option to be exercised before expiry and the terms to be fixed by mutual consent or village elders. The lessor filed an ejectment suit, and the lessee filed a cross‑suit for specific performance of the renewal. The Supreme Court held that, because the lease expressly provided an "agreement to the contrary," mere acceptance of rent after expiry did not amount to "holding over" under Section 116 of the Transfer of Property Act, and the renewal option was not validly exercised. Consequently, the ejectment suit was upheld and the specific performance suit dismissed. The appeals by the lessee were dismissed with costs, and a two‑month period was granted to vacate the premises.

Issues considered

Whether acceptance of rent after the expiry of a lease containing a specific renewal clause constitutes a renewal under Section 116 of the Transfer of Property Act.
Whether the renewal clause in the lease is an "agreement to the contrary" within the meaning of Section 116, thereby precluding implied renewal by holding over.
Whether the lessee is entitled to specific performance of the renewal agreement when the renewal was exercised after expiry and the terms are vague.
Whether a suit for ejectment can be filed without a statutory notice under Section 106 when the lease has expired.

Legislation cited

Specific Relief Act, 1963
Transfer of Property Act, 1882s. 106, s. 116

Subjects

leaseholding overrenewal clausespecific performanceejectmentTransfer of Property ActSpecific Relief Actagreement to the contrary

Judgment

_A SHANTI PRASAD DEVI AND ANR.
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v.
-sHANKAR MAHTO AND ORS.

JULY 11, 2005

B [D.M. DHARMADHIKARI AND B.N. SRIKRISHNA, JJ.]

Transfer of Property Act, 1882:

s. J16-'Holding over '-Lease deed-Renewal of-After expiry of lease,
C lessee continuing in possession-Lessor accepting rent/or subsequent months-
On notice by lessee to renew lease, lessor filing suit for ejectment-Held,
under renewal clauses of the lease _agreement, option to seek renewal was to
be exercised before expiry of lease and on specified conditions-Renewal
clearly fell within the expression '"agreement to the contrary" occurring in
·D s. I 16-There could be no implied renewal by 'holding over' on mere acceptance
of rent-Option of renewal was no! exercised in accordance with terms of
renewal clauses-Decree of ejectment upheld.

Specific Relief Act, 1963:

E Suit for ejectment-Cross suit for specific performance of agreement/or
renewal of lease-Held, option for renewal having been exercised after expiry
of lease period and renelial clauses being vague and incapable of specific
performance, suit rightly dismissed by courts below.

Appellant was running a Petrol Pump on the suit property on a
F monthly rent under a registered lease deed with a renewal clause
stipulating that option would be exercised before expiry of the lease and
the terms and conditions of the renewal would be decided either by mutual
consent of parties or, on its failure, through local Mukhia/Panchas of the
village. The appellant, after expiry of the period of lease, remitted rent
for few months and also sent a notice to the lessor seeking renewal of the
G lease. The lessor accepted the rent, but tiled a suit for ejectment contending
that term of lease had expired. The lessee also filed a suit for specific
performance of the agreement of renewal of the lease. The trial court
dismissed the suit for ejectment holding that after expiry of initial period
of the lease, acceptance of rent by the lessor resulted in renewal of lease
II 418
SHANTI PRASAD DEVI v. SHANKAR MAHTO 419

- and lessee was 'holding over' within the meaning ofs.116 of the Transfer of A
Property Act, 1882, and the suit could not have been filed without terminating
the lease by notice u/s 106 of the Act. The suit for specific performance was
)
also dismissed. The first appellate eourt, while maintaining dismissal of the
suit for specific performance, decreed the suit for ejectment The High Court
dismissed the second appeals of the lessee, who filed the present appeals.
B
Dismissing the appeals, the Court

H_ELD: 1. The High Court and the first appellate court below rightly
held that on expiry of period of lease, mere acceptance of rent for the
subsequent months in which the lessee continued to occupy the leased premises
cannot be said to be a conduct signifying 'assent' to the continuance of the C
lessee even after expiry of lease period. Under the renewal clauses option to
seek renewal was to be exercised before expiry of the lease and on specified
conditions. The renewal clauses (7) and (9) in the agreement of lease clearly
__, fell within the expression 'agreement to the contrary' used in s.116 of the
I
Transfer of Property Act, 1882. In the face of specific clauses for seeking D
renewal there could be no implied renewal by 'holding over' on mere
acceptance of the rent offered by the lessee. Option of renewal was exercised
not in accordance with the terms of renewal clause, that is, befw:e..the-.expiry
of lease. The rent offered was accepted by the lessor for the period the lessee
overstayed on the leased premises. The lessee, in these circumstances, could
not claim that he was 'holding over' as a lessee within the meaning of s.116 E
of the Transfer of Property Act. [423-C, E]

2. The cross-suit for specific performance of agreement of renewal of
lease filed by the lessee was rightly dismissed throughout. There are
concurrent findings of all the courts that the option for renewal was exercised
after the expiry of the lease period. The option for renewal exercised was, F
therefore, contrary to terms of renewal clauses of the lease agreement. After
legal notice of renewal, the lessor did not send any positive reply and instead
filed a suit for ejectment, therefore, there was no mutual consent for renewal.
The renewal clauses were vague and incapable of specific performance.
(424-B~D] G
Bhawanji Lakhamshi v. Himatlal Jamnadas Dani, (1972)1 SCC 388 and
Kai Khushroo Bezonjee Capadia v. Bai Jerbai Hirjibhoy Warden, AIR (1949)
FC 124, cited.

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos_ 2718-2719 of H
2000.
420 SUPREME COURT REPORTS [2005] SUPP. l .S.C.R.

A From the Judgment and Order dated 6.8.99 of the Patna High Court in
S.A.Nos: 465 and 486 of 1989.

S.B. Sanyal and Akhilesh Kumar Pandey with him for the Appellants.

Prabhash Kr. Yadav and Dr. Krishan Singh Chauhan for the Respondents.
B
The Judgment of the Court was delivered by

DHARMADHIKARI, J. The appellant obtained possession on lease of
the suit premises for running a Petrol Pump under a registered lease deed
dated 17. 7 .1962 for a period of fifteen years. It was an annual lease but the
C rent at agreed rate was payable in monthly instalments. The period of lease
expired oil 17.7.1977.

The registered sale deed contained clauses Nos.(7) and (9) giving option
of renewal for a further period which could be exercised before expiry of the
initial period. After the period of lease expired on 19.7.1977 the lessee continued
D to remit the rent till August 19, 1977. On 23.8.1977 the lessee sent a lawyer's
notice· exercising his option under clause (7) and ~eeking renewal of the lease.
The lessee thereafter remitted monthly rent of Rs. 345 each for three m(!nths
from March to May 1978. The rent was accepted by the lessor.

Clause (7) of the .lease providing option of renewal to the lessee contained
E two conditions firstly that the option has to be exercised before expiry of the
lease and secondly the terms and conditions of renewal for further period
shall be decided either by mutual consent of parties or in case of failure of
mutual consent, through the intervention of local Mukhia or Panchas of the
village.
F
To the legal notice given by the lessee seeking renewal of the lease, the
lessor gave no positive response and instead filed Title Suit No.5?178 on
16.6.1978 seeking ejectment of the lessee from the suit premises on the ground
that the term of lease had expired.

G The lessee filed a counter suit No.13/80 seeking specific performance of
the all\!ged agreement of renewal of lease on his alleged right of option of
renewal.

H
The two cross suits were tried jointly and decided by common judgment.

The trial court by common judgment dated 16.3 .1987 dismissed the suit
I
j
SHANTI PRASAD DEVI v. SHANKAR MAHTO [DHARMADHIKARI, J.] 421

for ejectment filed by the lessor by holding that after expiry of the initial A
period of fifteen years of lease, acceptance of rent by the lessor had resulted
in renewal of lease and the lessee would be held to be 'holding over' within
the meaning of Section 116 of the Transfer of Property Act. Based on the
above finding that the lessee was 'holding over' as a result of the acceptance
of rent by the lessor for the period subsequent to the expiry of lease, the trial B
court came to the conclusion that the suit for ejectment could not have been
filed without terminating the lease by statutory notiCe under Section 106 of
the Transfer of Property Act.

The trial court by the common judgment dismissed the counter suit
seeking specific performance of renewal of lease by the lessee. It was held C
that in accordance with clause (9) of the lease deed, the option of renewal
was not exercised before expiry of original period. The specific performance
of agreement of renewal claimed was also rejected on the ground that the
terms and conditions of renewal were vague and incapable of enforcement.
Thus, the trial court dismissed both the suits.
D
The dismissal of two suits by the trial court gave rise to two cross
appeals one at the instance of lessor and the other at the instance of Ie~see.
The first appellate court allowed the appeal of the lessor and decreed the suit
of ejectment. It held that mere acceptance of rent by the lessor sent by the
lessee after expiry of lease, in view of specific terms prescribing mode of
renewal, did not result in deemed renewal of lease and the doctrine of 'holding
over' under Section 116 of the Transfer of Property Act was not attracated.
According to the first appellate court, the period of lease having expired there
was no legal requirement of terminating the alleged renewed lease by issuing
a statutory notice under Section 106 of the Transfer of Property Act.
F
The cross appeals filed by the lessee were dismissed and the dismissal
of suit for specific performance of the alleged agreement of renewal was
maintained.

The lessee filed two Second Appeals in the High Court. By the impugned
common judgment the High Court upheld the common judgment of the first G
appellate court. The High Court agreed with the reasoning of the first appellate
court that mere acceptance of rent by the lessor on expiry of original period
of lease, for use and occupation of the leased premises by the lessee, did not
signify 'assent' of the lessor to the continuance in possession of the lessee
so as to infer deemed renewal of the lease under Section 116 of the Transfer
~~~~ H
422 SUPREME COURT REPORTS [2005) SUPP. I S.C.R.

A The High Court agreed with the concurrent findings of the trial court
and the first appellate court that the option of renewal given to the lessee in
the lease deed was not exercised before expiry of the original period of lease.
The High Court also. agreed that conditions stipulated for the renewed period
of lease were vague and incapable of specific enforcement. Thus the dismissal
of suit ·of the lessee for specific perfonnance of contract of renewal of lease
B was also upheld.

Having thus lost her case in the courts below, the lessee has approached
this Court in these two appeals.
-
Learned Senior Counsel Shri S. B. Sanyal reiterated the legal stand taken
C by the lessee in the courts below. It is contended that on expiry of original
period of lease, acceptance of rent for the month of August and from March
1978 to May 1978 clearly showed an •assent' on the part of the lessor to
continue the lease. There was deemed renewal of the lease on the same terms
and conditions of original lease as an effect of 'holding over' by the lessee
D under Section 116 of the Transfer of Property Act. It is argued that the courts
below erred in holding that the lease, which sto?d renewed as an effect of
'holding over' under Section 116 of the Transfer of Property Act, was not "
required to be terminated by statutory notice under Section 106 of the Transfer
of Property Act as a pre-condition for filing a suit for ejectment.

E In respect of the cross suits of the lessee seeking specific performance
of the contract of renewal of the lease, it is submitted that the relevant
contract clauses (7) & (9) of the lease deed should have been construed
reading them with other clauses therein to hold that option for renewal could
have been exercised within a reasonable period which in the present case was
F 35 days from the date of the expiry of the original lease. It is also argued that
the suit for specific-performance of the agreement of renewal could not have
been rejected on the ground that clause of renewal was vague and incapable
of specific perfonnance. Reliance is placed on Bhawanji Lakhamshi v. Himat/al
Jamnadas Dani, [ 1972] l SCC 388 and Kai Khushroo Bezonjee Capadia v.
Bai Jerbai Hirjibhoy Warden, AIR {1949) FC 124].
G
In reply, we have heard learned counsel Shri Prabhash Kumar Yadav
assisted by Dr. Krishan Singh Chauhan, advocate who supported the view
taken by the High Court and the courts below in decreeing the suit for
ejectment.

H
SHANTI PRASAD DEVI v. SHANKAR MAHTO [DHARMADHIKARI, J.] 423

. Section 116 of the Transfer of Property Act reads thus:- A
"Effect of holding over. If a lessee or under-lessee of property remains
in possession thereof after the determination of the lease granted to
the lessee, and the lessor of his legal representative accepts rent from
the lessee or under lessee, or otherwise assents to his continuing in
possession, the lease is, in the absence of an agreement to the B
contrary, renewed from year to year, or from month to month, according
to the purpose for which the property is leased, as specified in
Section 106."

[Emphasis supplied ]
c
We fully agree with the High Court and the first appellate court below
that on expiry of period of lease, mere acceptance of rent for the subsequent
months in which the lessee. continued to occupy the lease premises cannot ·
be said to be a conduct signifying 'assent' to the continuance of the lessee
even after expiry of lease period. To the legal notice seeking renewal of lease, D
the lessor gave no reply. The agreement of renewal contained in clause (7)
read with clause (9) required fulfillment of two conditions; first the exercise
of option of renewal by the lessee before the expiry of original period of lease
and second, fixation of terms and conditions for the renewed period of lease
by. mutual consent and in absence thereof through the mediation of local
Mukhia or Panchas of the village. The aforesaid renewal clauses (7) & (9) in E
the agreement of lease clearly fell within the expression 'agreement to the
contrary' used in Section 116 of the Transfer of Property Act Under the
aforesaid clauses option to seek renewal was to be exercised before expiry of
the lease and on specified conditions.

The lessor in the present case had neither expressly nor impliedly F
agreed for renewal. The renewal as provided in the original contract was
requir.ed to be obtained by following a specified procedure i.e. on mutually
agreed terms or in the alternative through the mediation of Mukhias and
Panchas. In the instant case, there is a renewal clause in the contract
prescribing a particular period and mode of renewal which was 'an agreement G
to the contrary' within the meaning of Section 116 of the Transfer of Property
Act. In the face of specific clauses (7) & (9) for seeking renewal there could
be no implied renewal by 'holding over' on mere acceptance of the rent
offered by the lessee . In the instant case, option of renewal was exercised
not in accordance with the terms of renewal clause that is before the expiry
H
424 SUPREME COURT REPORTS [2005] SUPP. 1 S.C.R.

A of lease. It was exercised after expiry of lease and the lessee continued to
remain in use and occupation of the leased premises. The rent offered was
accepted by the lessor for the period the lessee overstayed
I
on the leased
premises. The lessee, in the above circumstances, could not claim that he was ,~

'holding over' as a lessee within the meaning of Section 116 of the Transfer
B of Property Act.

So far as the cross suit for specific performance of agreement of renewal
of lease filed by the lessee is concerned, there are concurrent findings of all
the courts that the option for renewal was exercised after the expiry of the
lease period, The option for renewal exercised was, therefore, contrary to
C terms of clause (9) of the lease agreement. The clauses of renewal requiring
fixation of terms and conditions for renewed period of lease mutually or in the
alterntive through village Mukhia and Panchas are uncertain and incapable
of specific performance. After legal notice of renewal, the lessor did not send
any positive reply and instead filed a suit for ejectment, therefore, there was
no mutual consent for renewal. The forum agreed to for deciding dispute was
4
' ·- D through local Mukhia and Pane has of the village. The renewal clauses of the
agreement were vague and incapable of specific performance. The Mukhia
and Panchas were not named in the agreement and the method of choosing
either of the two forums was not specified.

The cross suit filed by the lessor for specipc performance of the
E agreement of renewal. was rightly dismissed throughout. The original period
of lease expired on 19.7.1977 and the suit for ejectment on the ground of
expiry of the lease was filed on 16.6.1978 which was well within the period
of limitation and rightly decreed.

F For the additional reasons discussed by us above, the appeals have no
force.

As the leased premises were in use for running a petrol pump, we grant
the appellant a reasonable period of two months from the date of this order
to deliver possession of the leased premises after removing her installations
G and other movables.

The above grace period to vacate is granted to the appellant only on
her filing an undertaking on affidavit to this Court, within a period of two
months that she would pay all arrears of rent' and mesne profits at the
originally agreed rate for the total period of occupation of the property. The
H
SHANTI PRASAD DEVI v. SHANKAR MAHTO [DHARMADHIKARI, J.) 425

lessee shall also undertake to deliver vacant possession of the property in A
the same condition in which it was initially taken.

For the aforesaid reasons, we find no merits in these appeals preferred
by the lessee, they are accordingly dismissed with costs.

RP. Appeals dismissed. B

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