Supreme Court Clarifies Registration Requirements for Rent Deeds: Siri Chand vs. Surinder Singh (2020)

Date of the Judgment: June 17, 2020

Citation: 2020 INSC 446

Judges: Ashok Bhushan, J., M.R. Shah, J., V. Ramasubramanian, J.

Can a rent agreement that includes a clause for a 10% annual increase in rent be considered a lease for a term exceeding one year, thus requiring compulsory registration? The Supreme Court of India addressed this question in a recent case, clarifying the interpretation of Section 17(1)(d) of the Registration Act, 1908, concerning the compulsory registration of lease deeds. This judgment revolves around a dispute between a landlord and a tenant regarding the validity of an unregistered rent agreement and its implications for eviction proceedings. The bench comprised of Justices Ashok Bhushan, M.R. Shah, and V. Ramasubramanian, with the judgment authored by Justice Ashok Bhushan.

Case Background

The appellant, Siri Chand, was the landlord of a shop measuring 14 sq. yds. The respondent, Surinder Singh, took the shop on rent for a monthly rent of Rs. 2,000 for running a hair cutting and dressing business. On July 27, 1993, the tenant executed a rent agreement, agreeing to pay Rs. 2,000 per month, with the tenancy commencing on July 28, 1993. The tenant was also responsible for paying house tax and electricity bills. The rent was to be paid by the 5th of each month. The agreement also stipulated that if the tenant failed to pay rent on time, the landlord could have the shop vacated. Additionally, the agreement mentioned that the rent would increase by 10% each year, and the landlord could get the shop vacated by serving a one-month notice if he needed it.

Timeline:

Course of Proceedings

The landlord filed an application under Section 13 of the East Punjab Urban Rent Restriction Act, 1949, seeking the tenant’s eviction for non-payment of rent from January 28, 2004, to February 28, 2005, and for non-payment of house tax from 1999 to 2005, amounting to Rs. 22,302. The tenant contested, claiming the rent was Rs. 1,000 per month and denying any other agreed conditions. The Rent Controller ruled in favor of the landlord, holding the rent deed as valid, and ordered the tenant’s eviction. On appeal, the Appellate Court reversed the Rent Controller’s decision, stating that the rent deed was compulsorily registrable under Section 17(1)(d) of the Registration Act, 1908, due to the clause for a 10% annual rent increase. The High Court dismissed the landlord’s revision, upholding the Appellate Court’s view that the rent deed required compulsory registration. Aggrieved, the landlord appealed to the Supreme Court.

Legal Framework

The central legal issue revolves around Section 17(1)(d) of the Registration Act, 1908, which specifies the documents for which registration is compulsory. The relevant part of the section states:

“17. Documents of which registration is compulsory.— (l) The following documents shall be registered, if the property to which they relate is situate in a district in which, and if they have been executed on or after the date on which, Act No. XVI of 1864, or the Indian Registration Act, 1866, or the Indian Registration Act, 1871, or the Indian Registration Act, 1877, or this Act came or comes into force, namely:—

XXXXXXXXXXXXXX

(d) leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent;”

This section mandates the registration of leases of immovable property that are either from year to year, for a term exceeding one year, or reserving a yearly rent. The Supreme Court had to determine whether the rent agreement in question fell under this provision, particularly due to the clause stipulating a 10% annual increase in rent. The Registration Act, 1908, also defines “lease” under Section 2(7) as:

“(7) “lease” includes a counterpart, kabuliyat, an undertaking to cultivate or occupy, and an agreement to lease;”

The court also considered Section 106 of the Transfer of Property Act, 1882, which deals with the duration of leases in the absence of a specific agreement between the parties.

Arguments

Appellant (Landlord)’s Arguments:

• ✓ The rent note dated 27.07.1993, signed by the tenant, was a valid rent agreement.
• ✓ The rent note did not require compulsory registration under Section 17(1)(d) of the Registration Act, 1908, as it was not a lease from year to year, for a term exceeding one year, or reserving a yearly rent.
• ✓ The Appellate Court erred in setting aside the eviction order without finding that the tenant had not defaulted on rent and house tax payments.

Respondent (Tenant)’s Arguments:

• ✓ The rate of rent was Rs. 1,000/- per month, not Rs. 2,000/- as claimed by the landlord.
• ✓ The signatures on the rent note were obtained on a blank paper as security and were later fabricated by the landlord.
• ✓ The tenant claimed to have paid rent at Rs. 1,000/- per month until February 2006, after which the landlord refused to accept the rent.

Submissions of the Parties:

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Whether the rent note dated 27.07.1993 required compulsory registration under Section 17(1)(d) of the Registration Act, 1908.
2. Whether the Appellate Court could have set aside the eviction decree without finding that the tenant had not defaulted on rent and house tax payments.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Supreme Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• ✓ The Court relied on Section 2(7) of the Registration Act, 1908* to define “lease,” which includes various forms of agreements.
• ✓ The Court interpreted Section 17(1)(d) of the Registration Act, 1908* to determine if the rent agreement required compulsory registration, noting that it applies to leases from year to year, for a term exceeding one year, or reserving a yearly rent.
• ✓ The Court referred to Section 106 of the Transfer of Property Act, 1882* to understand the duration of leases when no specific period is agreed upon.
• ✓ The Court followed the ratio of Ram Kumar Das Vs. Jagdish Chandra Deo, Dhabal Deb and Another, AIR 1952 SC 23* to determine that when there is no period agreed upon between the parties, the duration has to be determined by reference to the object or purpose for which the tenancy is created.
• ✓ The Court considered Kashi Nath and Ors. Vs. Abdur Rahman Khan and Ors., AIR 1922 All. 54* to support the view that a lease that might continue for an undefined number of years does not necessarily require compulsory registration if there is no certainty it would last beyond one year.
• ✓ The Court used Mengh Raj Vs. Nand Lal and Ors., AIR 1939 Lah.558* to support the view that a lease with monthly rent is not compulsorily registrable, even if an annual rent is mentioned.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the interpretation of Section 17(1)(d) of the Registration Act, 1908, and the specific clauses of the rent agreement. The court emphasized that the rent agreement was for a monthly tenancy, not a yearly one, and the clause for a 10% annual increase was contingent on the tenancy continuing beyond one year. The court also noted that the Appellate Court erred in setting aside the eviction order without considering the tenant’s default in rent and house tax payments.

Fact:Law Ratio

Logical Reasoning:

The court’s reasoning was that the rent agreement did not create a lease for a term exceeding one year. The clause for a 10% annual increase was a promise by the tenant, but it did not convert the monthly tenancy into a yearly lease or a lease for a period exceeding one year. The court also emphasized that the Appellate Court should not have set aside the eviction order without considering the tenant’s default.

The Supreme Court considered an alternative interpretation that the 10% annual increase clause could imply a lease for more than one year but rejected it by stating that the clause was contingent on the tenancy continuing beyond one year and did not alter the fundamental nature of the monthly tenancy. The court also reasoned that the Appellate Court had erred in focusing only on the registration aspect and not on the tenant’s default.

The Court held that the rent note was for a monthly tenancy, and the clause for a 10% annual increase did not make it a lease for a term exceeding one year. The court also found that the Appellate Court should not have set aside the eviction order without considering the tenant’s default in paying rent and house tax. The court stated that,

“Present was a case of tenancy for which no period was specified and looking to all the clauses cumulatively, we find that the rent note was not such kind of rent note, which requires compulsory registration under Section 17(1)(d).”

The Supreme Court also noted that,

“The Appellate Court after holding that document-rent deed was compulsorily registrable and having not registered allowed the appeal. No finding was returned by the Appellate Court that tenant was not in default and tenant has deposited the necessary amount to save himself from eviction.”

The Court further observed that,

“We, thus, are of the view that the judgment and decree of the Rent Controller directing eviction ought not to have been interfered by the Appellate Court.”

There were no majority or minority opinions in this case. The judgment was delivered by a three-judge bench, with all judges concurring.

Key Takeaways

• ✓ A rent agreement with a clause for a 10% annual increase in rent does not automatically make it a lease for a term exceeding one year.
• ✓ The primary nature of the tenancy (monthly, yearly, etc.) is determined by the agreement’s clauses and the intention of the parties.
• ✓ A rent agreement for a monthly tenancy does not require compulsory registration under Section 17(1)(d) of the Registration Act, 1908, even if it includes a clause for an annual rent increase.
• ✓ Appellate courts should not set aside eviction orders without considering whether the tenant has defaulted on rent and other payments.
• ✓ Landlords and tenants should ensure that their rent agreements clearly specify the nature and duration of the tenancy.

Directions

The Supreme Court restored the judgment and decree of the Rent Controller, directing the eviction of the tenant. No specific directions were given.

Specific Amendments Analysis

There was no specific amendment discussed in the judgment.

Development of Law

The ratio decidendi of this case is that a rent agreement for a monthly tenancy, even with a clause for a 10% annual rent increase, does not require compulsory registration under Section 17(1)(d) of the Registration Act, 1908. The Supreme Court clarified that the nature of the tenancy is determined by the intention of the parties and the clauses of the agreement. This judgment confirms that a clause for an annual increase does not automatically convert a monthly tenancy into a yearly one or a lease for a term exceeding one year. This clarifies the legal position regarding the registration of such rental agreements.

Conclusion

In the case of Siri Chand (Deceased) Thr. Lrs. vs. Surinder Singh, the Supreme Court held that a rent agreement for a monthly tenancy, even if it contains a clause for a 10% annual increase in rent, does not require compulsory registration under Section 17(1)(d) of the Registration Act, 1908. The court emphasized that the nature of the tenancy is determined by the agreement’s clauses and the intention of the parties. The Supreme Court set aside the Appellate Court’s order and restored the Rent Controller’s eviction order, clarifying that appellate courts should not overturn eviction orders without considering the tenant’s default in rent and other payments. This judgment provides clarity on the interpretation of Section 17(1)(d) of the Registration Act, 1908, and its application to rent agreements with annual increase clauses.