Supreme Court Clarifies Limitation for Landlords Seeking Possession from Tenants: Nand Ram vs. Jagdish Prasad (2020)

Introduction

Date of the Judgment: 19 March 2020

Citation: 2020 INSC 272

Judges: L. Nageswara Rao, J., Hemant Gupta, J.

Can a landlord’s right to reclaim their property be time-barred if they don’t act immediately after a lease expires? The Supreme Court of India recently addressed this critical question in a case involving a long-standing property dispute. The core issue revolved around determining the correct limitation period for a landlord to file a suit for possession against a tenant after the lease term had ended. This judgment clarifies the legal position on the status of a tenant after the expiration of a lease and the applicable limitation period for eviction suits. The bench comprised Justices L. Nageswara Rao and Hemant Gupta, with the judgment authored by Justice Hemant Gupta.

Case Background

The case began with a lease agreement dated 22nd September, 1954, where Bhagwana and Nand Ram (the original plaintiffs) leased 2 Bighas and 15 Biswas of land in Village Tatarpur, Delhi, to Jagdish Prasad (the defendant) for 20 years. The lease was set to expire on 22nd September, 1974. The annual rent was Rs. 235. A key clause in the lease stated that the lessor could seek eviction if rent remained unpaid for a year. However, before the lease expired, the land was acquired by the government on 24th August, 1959, under the Land Acquisition Act, 1894. This led to a dispute over compensation, which was referred to the Reference Court. The Reference Court determined that the lease had ended due to non-payment of rent, and the defendant was not entitled to compensation for the unexpired lease period. Subsequently, part of the land (1 Bigha 19 Biswas) was de-notified on 18th June, 1961, and the defendant continued to occupy it. The plaintiffs then served a notice on 12th February, 1981, seeking possession, and filed a suit on 13th March, 1981, after the defendant refused to vacate the land. The defendant argued that he was the owner by adverse possession and that the suit was barred by limitation.

Timeline:

Course of Proceedings

The Trial Court decreed the suit in favor of the plaintiffs, holding that they were the owners and the defendant was a lessee. The court also noted that the defendant had admitted to being a tenant in the Reference Court proceedings. The First Appellate Court upheld the trial court’s decision, rejecting the defendant’s plea of limitation and res judicata. The defendant then filed a second appeal before the High Court. The High Court reversed the lower courts’ decisions, holding that the Reference Court’s finding that the lease had been terminated due to non-payment of rent operated as res judicata. The High Court also held that the suit was barred by limitation, as it was filed more than 12 years after the termination of the lease.

Legal Framework

The Supreme Court examined the following legal provisions:

• Section 111 of the Transfer of Property Act, 1882: This section outlines the various ways a lease can be determined, including by efflux of time, forfeiture, and notice. Specifically, clause (g) deals with forfeiture due to breach of an express condition, and clause (h) deals with determination by notice. The court quoted the provision:
  
  “111. Determination of lease. – A lease of immoveable property determines-
  (a) by efflux of the time limited thereby:
  xx xx xx
  (g) by forfeiture; that is to say, (1) in case the lessee breaks an express condition which provides that, on breach thereof, the lessor may re-enter; or (2) in case the lessee renounces his character as such by setting up a title in a third person or by claiming title in himself; or (3) the lessee is adjudicated an insolvent and the lease provides that the lessor may re-enter on the happening of such event; and in any of these cases the lessor or his transferee gives notice in writing to the lessee of his intention to determine the lease;
  (h) on the expiration of a notice to determine the lease, or to quit, or of intention to quit, the property leased, duly given by one party to the other.”
• Section 116 of the Transfer of Property Act, 1882: This section defines “holding over,” where a lessee remains in possession after the lease term expires. The court emphasized that acceptance of rent by the lessor is necessary to create a new tenancy.
• Article 65 of the Limitation Act, 1963: This article provides a 12-year limitation period for suits based on title to immovable property, starting when the defendant’s possession becomes adverse.
• Article 66 of the Limitation Act, 1963: This article provides a 12-year limitation period for suits for possession of immovable property when the plaintiff has become entitled to possession by reason of any forfeiture or breach of condition.
• Article 67 of the Limitation Act, 1963: This article provides a 12-year limitation period for a landlord to recover possession from a tenant, starting when the tenancy is determined.

Arguments

Appellants’ (Plaintiffs’) Arguments:

• The appellants argued that the High Court erred in applying the principle of res judicata based on the Reference Court’s decision. They contended that the Reference Court’s findings were limited to the apportionment of compensation and did not decide the issue of title or possession.
• They argued that the suit was within the limitation period under Article 65 of the Limitation Act, 1963, which allows a suit for possession based on title. They asserted that the defendant’s possession was not adverse but permissive, as he was a tenant at sufferance after the lease expired.
• The appellants contended that the lease did not automatically terminate upon non-payment of rent, but rather gave the lessor the right to seek ejectment. They argued that the defendant’s possession after the expiry of the lease was that of a tenant at sufferance, not a tenant holding over, as no rent was accepted after the lease expired.
• They argued that the defendant had not denied the tenancy prior to the filing of the suit for possession.

Respondent’s (Defendant’s) Arguments:

• The respondent argued that the Reference Court’s finding that the lease stood terminated due to non-payment of rent operated as res judicata. They relied on the High Court’s finding that the tenancy was terminated on 23rd September, 1960.
• The respondent contended that the suit was barred by limitation under Article 67 of the Limitation Act, 1963, as it was filed more than 12 years after the lease was allegedly terminated.
• The defendant asserted that the land in his possession was not part of the lease and that he had become the owner by adverse possession.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues:

1. Whether the judgment rendered by the Land Acquisition Court on 21st August, 1961 (Ex.PW-1/12) operates as res judicata between the parties as regards the title of the suit property?
2. If the first question is answered in the negative, whether the suit filed by the Respondent for possession is barred by time?

Treatment of the Issue by the Court:

Authorities

The Supreme Court considered the following authorities:

Cases:

• Sajjadanashin Sayed Md. B.E. Edr. v. Musa Dadabhai Ummer [(2000) 3 SCC 350] – The Court discussed the principle of res judicata and held that a matter that was only collaterally or incidentally in issue in an earlier proceeding would not be res judicata in a later proceeding where the matter is directly and substantially in issue.
• Ishwer Singh v. Sarwan Singh [AIR 1965 SC 948] – This case was cited to support the test for determining which matters are directly in issue and which are only collaterally or incidentally in issue.
• Syed Mohd. Salie Labbai v. Mohd. Hanifa [(1976) 4 SCC 780] – This case was cited to support the test for determining which matters are directly in issue and which are only collaterally or incidentally in issue.
• Run Bahadur Singh v. Lucho Koer [ILR (1885) 11 Cal 301 : 12 IA 23 (PC)] – This Privy Council decision was cited to illustrate that a matter decided collaterally in a previous suit would not operate as res judicata in a subsequent suit where the matter is directly in issue.
• Asgar & Ors. v. Mohan Varma and Others [Civil Appeal No. 1500 of 2019] – This case was cited to explain the principles of res judicata and constructive res judicata.
• Union of India v. Nanak Singh [AIR 1968 SC 1370] – This case established that what operates as res judicata is the decision and not the reasons given by the Court in support of the decision.
• Mathura Prasad Bajoo Jaiswal & Ors. v. Dossibai N.B. Jeejeebhoy [(1970) 1 SCC 613] – This case reiterated that the previous decision on a matter in issue alone is res judicata, the reasons for such decision are not res judicata.
• Bhawanji Lakhamshi and Others v. Himatlal Jamnadas Dani and Others [(1972) 1 SCC 388] – This case discussed the concept of “holding over” under Section 116 of the TP Act and held that the assent of the landlord is necessary to create a new tenancy.
• Badrilal v. Municipal Corpn. of Indore [(1973) 2 SCC 388] – This case reiterated the view that the lease would be renewed as a tenant holding over only if the lessor accepts the payment of rent after the expiry of lease period.
• R.V. Bhupal Prasad v. State of A.P and Others [(1995) 5 SCC 698] – This case held that the possession of a licensee after the expiry of the license period is that of a tenant at sufferance.
• Sevoke Properties Ltd. v. West Bengal State Electricity Distribution Company Ltd. [Civil Appeal No. 3873 of 2019] – This case examined the scope of Section 116 of the TP Act and held that the lease would be renewed as a tenant holding over only if the lessor accepts the payment of rent after the expiry of the lease period.
• Bisheshar Nath v. Kundan & Ors. [ILR (1922) 44 All 583] – This case was cited to explain the status of a tenant holding over without paying rent, as a tenant by sufferance.
• Sheo Dulare Lal Sah v. Anant Ram & Anr. [AIR 1954 All. 475] – This case discussed the duty of a lessee to put the lessor into possession of the property after the expiry of the lease.
• Sidram Lachmaya v. Mallaya Lingaya Chilaka [ILR 1949 Bom 135 (FB)] – This Full Bench decision of the Bombay High Court held that a specific article of the Limitation Act should be applied in preference to a general article.
• MEC India Pvt. Ltd. v. Lt. Col. Inder Maira & Ors. [80 (1999) Delhi Law Times 679] – This case discussed the liability of a lessee to the lessor till possession is restored.
• Uttam Chand (D) through LRs. v. Nathu Ram (D) through LRs & Ors. [Civil Appeal No. 190 of 2020] – This case was cited to explain the concept of adverse possession.

Legal Provisions:

• Section 111 of the Transfer of Property Act, 1882 – Determination of lease.
• Section 116 of the Transfer of Property Act, 1882 – Effect of holding over.
• Article 65 of the Limitation Act, 1963 – Limitation for suits based on title.
• Article 66 of the Limitation Act, 1963 – Limitation for suits based on forfeiture.
• Article 67 of the Limitation Act, 1963 – Limitation for suits by a landlord to recover possession.

Judgment

How each authority was viewed by the Court?

• Sajjadanashin Sayed Md. B.E. Edr. v. Musa Dadabhai Ummer [(2000) 3 SCC 350]*: The Court relied on this case to define res judicata and to distinguish between matters directly in issue and those collaterally or incidentally in issue.
• Run Bahadur Singh v. Lucho Koer [ILR (1885) 11 Cal 301 : 12 IA 23 (PC)]*: The Court approved this Privy Council decision to illustrate that a matter decided collaterally in a previous suit would not operate as res judicata in a subsequent suit where the matter is directly in issue.
• Union of India v. Nanak Singh [AIR 1968 SC 1370]*: The Court followed this case to reiterate that what operates as res judicata is the decision and not the reasons given by the Court in support of the decision.
• Bhawanji Lakhamshi and Others v. Himatlal Jamnadas Dani and Others [(1972) 1 SCC 388]*: The Court relied on this case to explain the concept of “holding over” under Section 116 of the TP Act and held that the assent of the landlord is necessary to create a new tenancy.
• R.V. Bhupal Prasad v. State of A.P and Others [(1995) 5 SCC 698]*: The Court relied on this case to explain that the possession of a licensee after the expiry of the license period is that of a tenant at sufferance.
• Bisheshar Nath v. Kundan & Ors. [ILR (1922) 44 All 583]*: The Court relied on this case to explain the status of a tenant holding over without paying rent, as a tenant by sufferance.
• Sidram Lachmaya v. Mallaya Lingaya Chilaka [ILR 1949 Bom 135 (FB)]*: The Court relied on this Full Bench decision of the Bombay High Court to state that a specific article of the Limitation Act should be applied in preference to a general article.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• The limited scope of the Reference Court’s decision, which was confined to the issue of compensation and did not extend to the issue of title or possession.
• The correct interpretation of Section 116 of the Transfer of Property Act, 1882, which requires the landlord’s acceptance of rent to create a new tenancy after the expiry of the lease.
• The distinction between a tenant at sufferance and a tenant holding over, and the fact that the defendant’s possession was that of a tenant at sufferance.
• The application of Article 67 of the Limitation Act, 1963, which specifically governs suits by a landlord to recover possession from a tenant.
• The lack of evidence of hostile possession by the defendant to the knowledge of the true owner.

Logical Reasoning:

The Court considered the argument that the notice dated 23rd September, 1960, produced in the Reference Court proceedings, could be the starting point of limitation. However, the Court rejected this argument because the notice was not produced as evidence in the suit for possession. The Court also emphasized that mere non-payment of rent does not amount to forfeiture of tenancy but only confers a right onthe landlord to seek ejectment. The Court held that the lease was determined by efflux of time on 22nd September, 1974, and the suit filed on 13th March, 1981, was within the 12-year limitation period under Article 67 of the Limitation Act, 1963.

Final Order

The Supreme Court allowed the appeal, set aside the judgment of the High Court, and restored the judgment of the Trial Court. The Court held that the suit for possession was not barred by limitation and that the plaintiffs were entitled to recover possession of the suit property.

Key Takeaways

This judgment has significant implications for landlords and tenants regarding the limitation period for filing suits for possession. The key takeaways are:

• Limitation Period: The limitation period for a landlord to file a suit for possession against a tenant after the lease expires is 12 years, starting from the date of the determination of the lease. This is provided under Article 67 of the Limitation Act, 1963.
• Tenant at Sufferance: After the expiry of the lease, a tenant who continues to occupy the premises becomes a tenant at sufferance. This means that the tenant’s possession is not wrongful but is subject to the landlord’s right to seek possession.
• Holding Over vs. Tenant at Sufferance: A tenant holding over requires the landlord’s assent, usually through acceptance of rent, to create a new tenancy. If the landlord does not accept rent, the tenant remains a tenant at sufferance.
• Res Judicata: A decision on a collateral matter in a previous proceeding will not operate as res judicata in a subsequent proceeding where the matter is directly in issue.
• Adverse Possession: A tenant at sufferance cannot claim adverse possession unless they prove hostile possession to the knowledge of the true owner.
• Forfeiture: Mere non-payment of rent does not automatically terminate a lease but gives the landlord a right to seek ejectment.

Practical Implications:

• Landlords should file suits for possession within 12 years of the lease’s expiration to avoid being time-barred.
• Landlords should avoid accepting rent from tenants after the lease expires if they intend to seek possession, as this may create a new tenancy.
• Tenants should be aware that their possession after the lease expires is permissive and subject to the landlord’s right to seek possession.

Conclusion

The Supreme Court’s judgment in Nand Ram vs. Jagdish Prasad provides much-needed clarity on the limitation period for landlords seeking possession from tenants after the expiration of a lease. It reinforces the distinction between a tenant at sufferance and a tenant holding over and clarifies the applicability of Article 67 of the Limitation Act, 1963. This judgment serves as an important precedent for future cases involving similar disputes, ensuring that the rights of landlords and tenants are balanced within the framework of property law.