State Bank of Bikaner and Jaipur vs Vijay Kumar

V.K. Jhanji, J.—This is defendant''s second appeal directed against the judgment and decree of the Courts below whereby suit of the plaintiff for ejectment of the defendant from the property in dispute, and also for recovery of arrears of lease money with interest, has been decreed and defendant has been directed to vacate the premises and deliver possession thereof to the plaintiff.

In brief, the facts arc that defendant-bank has been occupying the building in dispute as tenant since about 1945 on a rent of Rs.200/- per month. In the year 1983, plaintiff made a proposal to the defendant-bank to construct new building and to give the same to the defendant on enhanced rent and in that regard, sought loan from it. Defendant accepted the offer of the plaintiff and vide its letter dated 14.7.1983, conveyed its acceptance on certain terms and conditions. Some of the conditions were that the plaintiff would provide 2735 sq. ft. On the ground floor and first floor as per plan and rent would be Rs. 1.50 per sq. ft; that the construction of the building would be according to the plan and loan of Rs.3 lacs or 75 per cent of the expenditure, whichever is less, will be granted on interest at the rate of 15 per cent per annum and the loan would be repaid within 10 years out of the rent payable every month. Plaintiff was to execute a lease for 10 years with an option to the defendant to renew the same for a further period of 10 years on the same terms and conditions except an increase of 15 per cent of rent after 10 years. The other conditions were in regard to building of strong-room, locker-room according to the plan and bank''s specifications and furnishing of fitness certificate and provision of electricity and water connections etc. In the first instance, plaintiff was to construct half portion, i.e. rear portion of the building and rest in the second instance. Plaintiff accepted the terms and conditions and constructed and completed firstly the rear portion in the year 1984 and defendant was asked to take possession 25/26.9.1984. Defendant shifted in the rear portion and thereafter, plaintiff constructed and completed front portion in June, 1985 and the possession thereof was handed over to the defendant-bank. From the pleadings of the parties, it appears that differences crept in between the parties in regard to certain irregularities allegedly committed by the plaintiff in constructing the building. The same were pointed out by the defendant and plaintiff was told that the possession is being taken subject to his removing the defects. Dispute also arose in regard to the area taken possession of by the defendant. Plaintiff alleged that the area of the premises is 4014.59 sq. ft., whereas the defendant contended that the area of the building is not more than 3388.24 sq. ft. Till settlement of the dispute, as an interim arrangement, defendant-bank started paying a sum of Rs.2,600/- per month towards the rent, but the plaintiff was not satisfied with the said payment and therefore, filed petition u/s 13 of the Haryana Urban (Control of Rent and Eviction) Act, 1973 (hereinafter referred to as Rent Act) before the Rent Controller, Dabwali, but the same was withdrawn because the building was newly constructed and was not covered under the provisions of the Rent Act. Plaintiff thereafter served a notice alleging that the defendant-bank has violated the terms and conditions of agreement dated 13.12.1983 and has not paid the rent at the rate of Rs. 1.50 per sq. ft. per month for the covered area of both floors. Plaintiff averred that he is entitled to recover possession of the building from the defendant-bank by terminating the lease before the agreed period and is also entitled to recover from the defendant-bank a sum of Rs. 1,15,970/- as arrears of lease-money (Rs.61,620/- ads arrears of lease-money of the rear portion @ Rs. 1,609/- per month w.e.f. 25.9.1984 to 3.12.1987 plus Rs.53,350/- as arrears of lease money of the front portion at the rate of Rs. 1,812/- per month w.e.f. 13.6.1986 to 3.12.1987 and interest at the-rate of 13-1/2 percent per annum which comes to Rs.21,478/-).

Upon notice, defendant-bank appeared and contested the claim of the plaintiff. It contended that the plaintiff was sanctioned a loan of Rs.2,60,000/- along with interest at the rate of 13-1/2 per cent per annum for construction of new building and the plaintiff availed of the loan facility of Rs.2,20,000/- only against the said sanctioned loan. It was contended that the plaintiff failed to construct the building as agreed and committed material irregularities in construction thereof. Defendant in its written statement gave various details of the defects in construction of the building, which according to the bank, were against the norms set out by the Bank. Defendant-bank further averred that the plaintiff was requested to register lease-deed dated 13.12.1983, but plaintiff failed to do so. It asserted that the covered area taken possession of by the bank measured 3388.24 sq. ft. and the defendant bank is prepared to pay rent at the rate of Rs. 1.50 sq. ft. per month provided the plaintiff removes and rectifies the defects and completes the formalities as agreed between the parties. It also asserted that the defendant is depositing Rs.2,600/- per month in the Joan account of the plaintiff. Defendant further contended that their possession is protected u/s 53-A of the Transfer of Property Act. It thus, prayed that suit of the plaintiff be dismissed.

Plaintiff filed replication controverting the allegations of the defendant in the written statement and reiterating the pleas taken in his plaint.

On the pleadings of the parties, the trial Court framed the following issues:-

(1) Whether the plaintiff is entitled to the possession of the suit property? OPP

(2) Whether the plaintiff is entitled to the recovery of Rs. 1,15,970/- as arrears of lease-amount? OPP

(3) Whether the plaintiff is entitled to interest, if so, to what rate and what amount? OPP

(4) Whether the possession of the defendant is protected u/s 53-A of the Transfer of Property Act? OPD

(5) Whether the suit of the plaintiff is not maintainable as alleged in preliminary objection No.2 in the written statement? OPD

(6) Whether the suit of the plaintiff is pre-mature and to what effect? OPD

(7) Whether the suit of the plaintiff is barred u/s 41-H of the Specific Relief Act? OPD

(8)Relief.

Trial Court decided all the issues in favour of the plaintiff and against the defendant, and resultantly, decreed the suit. Against the judgment and decree of the trial court, two appeals were filed: one by the defendant and other by the plaintiff. The learned Additional District Judge dismissed the appeal preferred by the defendant bank and accepted the appeal of the plaintiff and held that the plaintiff is entitled to interest on the decretal amount at the rate of 13-1/2 per cent per annum instead of 8 percent per annum as allowed by the trial Court. Hence, this second appeal by the defendant.

Mr.H.C.Gupta, Advocate, learned Counsel appearing on behalf of defendant-bank has contended that the defendant is continuing in possession of the building in terms of agreement dated 14.7.1983. It is contended that vide agreement dated 14.7.1983. It is contended that vide agreement dated 14.7.1983, plaintiff had agreed to let out the building initially for a period of 10 years with an option to the defendant-bank to remain in occupation for another 10 years with 15 per cent increase in rent. Counsel contended that in view of the afore-mentioned agreement, suit for ejectment against the defendant is not competent. It is contended that possession of the defendant-bank is protected u/s 53-A of the Transfer of Property Act. Against this, it is contended by Mr. Hemant Gupta, Advocate, learned counsel appearing on behalf of plaintiff, that agreement referred to above, being lease of immovable property for a term exceeding one year required compulsory registration u/s 17(1)(d) of the Registration Act, 1908. Counsel contended that agreement being not registered is inadmissible in evidence for want of registration and it has rightly been held so by the Courts below. Counsel also contended that the defendant is not entitled to seek protection of its possession u/s 53-A of the Transfer of Property Act for the reason that it itself committed breach of the terms and conditions of the agreement by not paying rent at the rate of Rs.1.50 per sq. ft. with effect from the date it took possession of the two newly constructed portions. Counsel further contended that provisions of Section 53-A of the Transfer of Property Act were never extended to the State of Punjab or the State of Haryana. In this regard, counsel has placed reliance upon judgment in Chairman. Corporation Bank and others v. H.S. Sandhu and others, 1987(1) RLR 632.

In order to appreciate the respective contentions of counsel for the parties, it is necessary to notice the relevant provisions of the Transfer of Property Act and the Registration Act. Section 107 of the Transfer of Property Act provides as under:

"107. Lease how made.-A lease of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent, can be made only by a registered instrument.

All other leases of immovable property may be made either by registered instrument or by oral agreement accompanied by delivery of possession.

xxx xxx xxx

xxx xxx

Likewise, Section 17(1)(d) of the Registration Act provides that leases of immovable properly from year to year or for any term exceeding one year or-reserving a yearly rent, can be made only by a registered document.

Section 49 of the Registration Act provides that no document required by Section 17 (or by any provision of Transfer of Property Act. 1882 (4 of 1A82) to be

registered shall -

(a) xxx xxx xxx

(b) xxx xxx xxx

(c) be received as evidence of any transaction affecting such property or conferring such power.

unless it has been registered:

Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act. 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act. 1877 (1 of 1877), or as evidence of part-performance of a contract for the purposes of Sec.53-A of the Transfer of Property Act. 1882 (4 of 1882). or as evidence of any collateral transaction not required to be effected by registered instrument."

Section 53-A of the Transfer of Property Act reads as under:-

"53-A. Part Performance. - Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty:

and the transferee has, in part performance of the contract taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract.

then, notwithstanding that the contract, though required to be registered, has not been registered, or, where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefore by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract:

Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof."

From a reading of the afore-mentioned provisions, it is clear that a lease of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent, can be made only by a registered document, while the other leases of immovable property can be created either by registered document or by an oral agreement accompanied by delivery of possession. In the former class of cases, no valid lease can be created unless it is made by a registered instrument. However, by virtue of the provisions of Section 49 of the Registration Act, an unregistered lease-deed which is compulsorily registrable can be received as evidence of part-performance of a contract for the purposes of Section 53-A of the Transfer or Property Act and can be looked at to see the nature and character of possession. What is necessary is that there should be a writing evidencing the term of lease which is signed and suffers from the defect of want of registration.

For making out the defence of part-performance (S.53-A. Transfer of Property Act) to an action in ejectment by the owner, the essential conditions necessary are: (1) there is a contract to transfer immovable properly; (2) the contract must be for consideration: (3) it must be in writing signed by or on behalf of transferor: (4) the terms can be ascertained from writing: (5) the transferee has taken possession or is already in possession of property: (6) he has done some act in furtherance of the contract: and, (7) has performed or is willing to perform his part of the contract.

If all the conditions arc satisfied, then lessee (or the transferee) is entitled to continue on possession, irrespective that the lease has not been registered. Section 53-A is principally for the protection of ignorant transferees who take possession or spend money in improvements relying on documents which are ineffective as transfers or on contracts which cannot be proved for want of registration. The effect of the section is to relax the strict provisions of the Transfer of Property Act and the Registration Act in favour of the transferees in order lo allow the defence of part performance to be established. It can be used not for an attack but only in defence and that too in defence only against the transferor or any person claiming under him. The right conferred is one available to the defendant to protect his possession.

In Milkha Singh v. Mst. Shankari and others. AIR 1947 Lah 1. the Full Bench of the Lahore High Court has held that Section 53-A is based on equitable principles which were previously applicable lo the whole of India, including the Province of the Punjab and even after the enactment of that section which is not applicable to the Punjab the principles embodied therein are applicable to the Punjab and therefore the position in the Punjab in respect of the defence of part performance is exactly the same as in the Provinces where the Transferor Properly Act is in force. While interpreting the words "for the purposes of S.53 A.T.P. Act, 1882" as contained in the proviso to Section 49 of the Registration Act, the Full Bench held that the words "for the purposes of S.53A, T.P. Act. 1882" merely mean that the unregistered document affecting immovable property shall be received as evidence of part performance to the limited extent to which part of performance is imported into the law of India by Section 53-A. T.P. Act. The mention of Section 53-A in the proviso to Section 49, Registration Act, cannot deprive the Province of the Punjab of the benefit of the proviso simply because the Transfer of Property Act is not in force in this Province.

In Maneklal Mansukhbhai V. Hormushi Jamshedji Ginwalla and Sons. AIR 1950(37) SC 1, the Hon''ble Supreme Court held that an agreement of lease creating a present demise but not registered is admissible u/s 49, Registration Act, as evidence of part performance. Their Lordships of the Supreme Court held that where in an action to eject a lessee on the ground that the had not registered deed of lease executed in his favour the defendant-lessee takes the plea of part performance and proves that there was a written and signed contract of lease in his favour and that he had taken possession in accordance with the terms of the agreement and also that he was paying rent to the plaintiffs in accordance with that agreement the defendant is entitled to retain possession inspite of an absence of the registered deed.

In the light of the afore-mentioned provisions of Section 53-A of the 1882 Act and Section 49 of the 1908 Act as also the judgments of the Lahore High Court and the Hon''ble Supreme Court, it is to be seen whether in the present case, defendant is entitled to the benefit of provisions of Section 53-A of the 1882 Act. It is not in dispute that the defendant was occupying old building as a tenant under the plaintiff since 1945 on a rent of Rs.200/- per month. In the year 1983, plaintiff offered to construct a new building to be given on enhanced rent to the defendant. The offer so made by the plaintiff was accepted by the defendant-bank vide letter dated 14.7.1983 on the following terms and conditions:

"(1) You will provide us 2735 sq. ft. on the ground and 1st floor as per plan attached.

(2) The rent will be 1.50 sq.ft. which comes to Rs.4102.50.

(3) The construction of building will be according to the plan enclosed for your reference.

(4) The loan of Rs.3,00,000/- or 75% of the expenditure whichever is lower will be granted at the usual rate of interest i.e. 15% p.a. The loan will be disbursed to you in the construction 3/4 or more instalments according to the progress of the construction work. You will have to offer the present building for equitable mortgage in favour of the bank. The loan will be repaid by you within 10 years out of the monthly rent payable to you, you must submit the estimate of the construction costs duly verified by an approved architect immediately.

(5) You will execute a lease for 10 years within an option to renew the same for a further period of 10 years on the same terms and conditions except an increase of 15 in the rent after 10 years.

(6) The RCC Strong Room/Locker Room will be constructed by you as per Bank''s approved specifications enclosed herewith at your own costs. You will have to obtain a fitness certificate in respect of thereof at your own costs from the Executive Engineer, P.W.D. (B&R) of the area and furnish the same to us. However, the Godrej Security Door and Steel Grill Door for the strong-room and partition iron gate will be supplied by us but shall be affixed by you at your own costs.

(7) Electricity, power, water pipe connection will be provided by you at your costs and the consumption charge will be borne by us as per meter/sub-meter to be provided by you for the purpose.

(8) Annual white/colour washing and repair to the premises and repairing/revarnishing to the wood work will be done by you at your own costs failing which the bank shall be at liberty to get the needful done and recover the actual amount spent from the rent payable to you."

In token of acceptance of the said terms and conditions, plaintiff, Vijay Kumar, gave following note under his signatures on the document itself:

"The enclosed paper received and agreed to the terms and conditions as laid in your letter.

Sd/- Vijay Kumar

17.7. 1983."

In pursuance of agreement dated 14.7.1983, defendant sanctioned a term loan of Rs.2.60 lacs and the plaintiff availed loan to the extent of Rs.2.20 lacs which was disbursed to him in instalments from 28.3.1984 to 18.3.1985. Plaintiff vide his letter dated 26.9.1984, Ex.D-7/A informed the Bank that the rear portion of the building is completed and accordingly, asked the Bank to take possession thereof. Defendant took possession of the rear portion. The construction of front portion of the building was completed in the year 1985 and possession of the same was taken by defendant on 13.6.1985. Defendant has proved on record various documents, especially Exhibits D-2, D-3, whereby it was pointed out to the plaintiff that the building has not been built as per plan and specifications supplied by the defendant to the plaintiff. Vide the said documents, various defects in construction of the building were pointed out. The bone of contention between the parties was also with regard to covered area taken possession of by the defendant, according to the defendant, the area occupied after the construction in the new building in their possession is 3388.24 sq. ft., whereas the plaintiff alleged that the covered area in possession of the defendant-bank is 4014.59 sq.ft. Because of the differences between the plaintiff and the defendant in regard to defect in construction of the building and also the covered area taken possession of by the defendant, plaintiff vide letter dated 7.1.1985. E.x.D-8/A agreed to accept a sum of Rs.2600/- per month for the time being. It appears that in pursuance of Condition-5 of the agreement whereby it had been provided that plaintiff would execute lease deed for giving on lease the building for 10 years with an option to renew the same for further period of 10 years on the same terms and conditions except an increase of 15 per cent in rent after 10 years, the lease-deed was executed on 13.12.1983 but the same was not got registered. Except a photocopy of lease deed dated 13.12.1983, original lease-deed has not been produced. In fact, neither the counsel for the plaintiff nor the defendant referred to unregistered lease-deed dated 13.12.1983, through in notice. Exhibit P-2, whereby the lease in favour of the defendant was terminated, a reference has been made to lease-deed dated 13.12.1983. In the said notice, plaintiff specifically averred that in breach of the expressed covenant dated 13.12.1983, defendant has failed to pay the rent and so, agreement dated 13.12.1983 stands terminated/cancelled. Since both the counsel have not referred to this document, the same is not being taken note of and the case is being decided only on the basis of agreement dated 14.7.1983.

Agreement dated 14.7.1983 specifically provided for giving on lease the newly constructed building for a period of 10 years and the said agreement is signed by the transferor (plaintiff herein). Plaintiff came in possession of the newly constructed building in furtherance of the agreement and the terms and conditions of the agreement are ascertainable with reasonable certainly. Under the agreement, the only acts to be performed by the defendant were to disburse loan and pay rent at the rate of Rs.1.50 per sq. ft., whereas all other acts were to be performed y the plaintiff. One of the salient conditions to be fulfilled by the defendant for invoking the principle of part-performance is that he has performed or is willing to perform his part of the contract. This condition is based upon the equitable principle that "he who seeks equity must do equity". In this case, in the written statement, defendant has specifically averred that rent at the rate of Rs.1.50 per sq. ft. was to commence "from the date of completion of entire construction of the building, i.e. front and rear portion w.e.f. 13.6.1985. but out of good-will and gesture, on the request of the plaintiff, the defendant has been paying Rs.2.600/- per month to his loan account w.e.f. 1.10.1984 to date for the time being although the defendant is legally liable to pay the rent after ratifying the irregularities as stated in construction on submitting completion certificates as stated in construction on submitting completion certificates and execution of lease-deeds duly registered etc. The defendant had always been ready and willing and is still ready to pay rent at the rate of Rs.1.50 per sq. ft. per month of the constructed area provided the plaintiff fulfills the requirement son his part." Defendant further submitted in its written statement that "a loan of Rs.2.60.000/- @ 13-1/2% per annum interest was sanctioned by the defendant on the request of the plaintiff for its new construction. The plaintiff has availed loan amounting to Rs.2,20,000/- only and he has invested less than he was to invest as per estimate of construction and has not utilised full amount of Rs.2.60.000/- for proper construction of the building". In addition to the afore-mentioned pleadings, defendant has proved on record that time and again, plaintiff was reminded to remove the defects in construction of the building, but to no avail. On the other hand, plaintiff has failed to prove that defendant at any stage showed its unwillingness to pay rent at the rate of Rs.1.50 per sq. ft. In fact, what has been proved on record is that defendant always showed its willingness to pay rent at the said rate provided plaintiff removed defects in construction of the building, pointed out by the defendant. It was the plaintiff who of his own volition vide letter dated 7.1.1985. Ex.DW-8/A. agreed to accept Rs.2,600/- per month towards rent for the lime being. Having agreed to accept rent at the rate of Rs.2.600/- per month as an interim arrangement, plaintiff is estopped from contending that the defendant failed to pay the rent at the agreed rate. The contention between the plaintiff and the defendant in regard to non-construction of the building according to the plan and specifications and the area occupied by the defendant was bona fide one and there was no mala fide intention on the part of the defendant to withhold the rent. It deserves to be mentioned at this stage that during the pendency of the Regular Second Appeal, G.C.Garg, J., appointed a Local Commissioner to measure the area in possession of the defendant so as to enable the Court to determine the rent to be paid by the defendant. Local Commissioner vide his report dated 9.12.1996. submitted that the total area in possession of the defendant is 3446.4 sq. ft. The records of the second appeal further shows that a sum of Rs.5,43,678/- was paid by the defendant on account of arrears of rent. Vide order dated 16.12.1996, defendant was also directed to pay arrears of rent, if any left, within one month. It is not in dispute that in pursuance of said order, rent at the rate of Rs.1.50 per sq. ft. is being by the defendant. Thus, after taking into consideration the material facts of the case. I am of the view that lease-agreement dated 13.12.1983. although not registered, is admissible u/s 49 of the Registration Act as evidence of part-performance and the defendant is entitled to protect is possession on the basis of equitable doctrine of part-performance u/s 53-A of the Transfer of Property Act The finding of the Courts below to the contrary being not sustainable, is set aside.

The next point to be considered is the effect of non-extenidng of the provisions of Section 53-A to the State of Punjab or Haryana. Sections 54, 107 and 123 of the Transfer of Property act were extended to the State of Punjab w.e.f. 1.4.1955 vide Punjab Government Gazette notification dated 26.4.1955. After these provisions have been extended, sales, mortgages and leases of immovable properly arc permissible only by a registered document. Prior to 1955. though the Transfer of Properly act did not apply to Punjab, yet the principles underlying the Act being based upon equity, justice and good conscience were applied by the Courts in the State of Punjab.

In Chairman, Corporation Bank''s case (supra), a learned Single Judge of this Court held that although the principles of equity, justice and good conscience underlying the different provisions of the Transfer of Property Act have been applied by the Courts in the areas to which different provisions of the Act have not been extended, but it would be too much to say that a document which must be regarded as unregistered in view of the statutory provisions of the Registration Act should be made admissible on the ground of any such principles. The learned Judge held that the equity principle contained in Section 53-A cannot be given effect to against the positive statutory provisions of the Registration Act. The learned Judge opined that once the reference to Section 53-A of the Act in the proviso to Section 49 of the Registration Act is eliminated the remaining provisions of that Section is to prevail.

A reading of the judgment shows that neither the judgment of the Full Bench of the Lahore High Court in Milkha Singh''s case (supra), nor the judgment of the Hon''ble Supreme Court in Maneklal Mansukhbhai''s case (supra) was brought to the notice of the learned Single Judge. In the light of the authoritative pronouncement of the Full Bench of the Lahore High Court and judgment of the Supreme Court, the statement to flaw that the equity principles contained in Section 53-A cannot be given effect to against the positive statutory provisions of the Registration Act cannot be regarded to be laying down correct law. Resultantly, the defendant is entitled to the benefit of doctrine of part-performance, though the provisions of Section 53-A of the Act have not been extended to the State of Punjab.

Learned counsel appearing on behalf of defendant lastly contended that defendant is not liable to pay interest at the rate of 13-1/2 per cent on the arrears of lease-money, as directed by the first appellate Court for the reason that it was the plaintiff who had not fulfilled his part of the contract by not removing the defects in the construction of the building, though the same were pointed out to him. It is contended that defendant at no stage refused to pay monthly rent at the rate of Rs.1.50 per sq. ft. It is true that the plaintiff has failed to prove that the building was constructed in accordance with the plan and specifications as had been agreed by him under the agreement, but nevertheless the plaintiff was entitled to the rent from the date the defendant took possession of the newly constructed portions of the building. During the course of arguments in second appeal learned counsel for the plaintiff also brought to the notice of this Court that most of the defects have since been removed. As the differences between the plaintiff and defendant in regard to construction of building and the area occupied by the defendant have been settled, I do not wish to interfere win the discretion exercised by the first appellate Court in granting interest at the rate of 13-1/2 per cent on the arrears of rent.

Consequently, the appeal is allowed and the judgment and decree of Courts below modified to the extent that suit of the plaintiff shall stand dismissed so far as it relates to ejectment of the defendant. As regards decree for recovery of arrears of lease-money with interest, the same is, however. maintained. No costs.