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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.  127  OF 2007

M/S SHAHA RATANSI KHIMJI & SONS              … APPELLANTS

VERSUS

PROPOSED KUMBHAR SONS HOTEL P. LTD. & ORS.       … RESPONDENTS

J U D G M E N T

SUDHANSU JYOTI MUKHOPADHAYA, J.

This appeal is directed against the judgment and decree  

dated 18th July, 2006 passed by the High Court of Judicature at  

Bombay  in  Second  Appeal  No.  109  of  2006.  By  the  impugned  

judgment, the High Court affirmed the concurrent finding of  

the lower courts that the appellant’s tenancy right had lapsed  

and dismissed the second appeal. 2. When the matter came before this Court, vide order dated  

5th January, 2007, this Court referred the matter to a Bench of  

three Judges. The said order reads as under:

“Apparently there seems to be inconsistency in  the view taken by this Court in Vannattankandy  Ibrayi Vs. Kunhabdulla Hajee [(2001) 1 SCC 564]  and T.Lakshmipathi & Ors. Vs.  R.Nithyananda  Reddy & Ors. [(2003) 5 SCC 150].

Leave granted.

The matter shall be placed before a three  Judge Bench.

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Status  quo  shall  be  maintained  in  the  meanwhile.”

3. In  the  case  of  Vannattankandy  Ibrayi  Vs.  Kunhabdulla  

Hajee, (2001) 1 SCC 564,  this Court formulated two questions  

for consideration:

“(a) Whether the tenancy in respect of the  premises governed by the Kerala Buildings (Lease  and Rent Control) Act (hereinafter referred to as  “the  State  Rent  Act”)  is  extinguished  by  destruction  of  the  subject-matter  of  tenancy  i.e. the premises by natural calamities, and

(b) On the destruction of property whether the  civil  court  has  jurisdiction  to entertain  and  try the suit for recovery of possession of land  brought by the landlord.”

 Both questions were answered in the affirmative.  

4. In Lakshmipathi & Ors. Vs.  R.Nithyananda Reddy & Ors.  

(2003) 5 SCC 150,  this Court held that lease of a building  

includes, the land on which the building stands. So even if  

the  building  is  destroyed  or  demolished,  the  lease  is  not  

determined as long as the land beneath it continues to exist.  

Doctrine of frustration cannot be invoked on destruction or  

demolition of a building under lease where not only privity of  

contract but privity of estate is also created.

5. In the present case, the suit property comprises of Plot  

No. 525, Shaniwar Peth, Karad in District Satara, Maharashtra.  

There was a godown on the southern side of the suit property.  

The eastern portion of the suit property was open and there

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was a road admeasuring 10 to 12 ft. from which the municipal  

road could be accessed.  On the northern portion of the suit  

property, there was one RCC building.  The northern 11/16th  

portion  of  the  suit  property  belonged  to  one  Vinayak  

Patwardhan  whereas  the  southern  5/16th share,  on  which  the  

godown was constructed belonged to one Ujjwal Lahoti.

6. In or about 1961-62, the appellant firm took the godown  

over the suit property on rent from Ujjwal Lahoti;  Since then  

the  appellant  has  been  continuously  paying  rent  to  Ujjwal  

Lahoti and storing its goods in the godown. The appellant was  

using  the  access  on  the  eastern  side  of  the  godown  for  

approaching the municipal road and in bringing its goods to  

the godown.   

7. The  case  of  the  appellant  is  that  the  respondent  had  

purchased 11/16th share of Vinayak Patwardhan in Plot No. 525 by  

two sale deeds dated 9th September, 1971 and 21st January, 1978,  

After purchasing the plot, the respondent demolished the RCC  

building existing over the property and started digging for  

basement for construction of a hotel. Later, on 4th May, 1990,  

the respondent purchased the remaining 5/16th share from Ujjwal  

Lahoti.

8.   Further case of the appellant is that the respondent(s)  

without  obtaining  any  requisite  permission  from  the  

municipality started digging a ditch towards the northern side  

wall of the suit property, thereby exposing the northern base  

of the godown to the vagaries of nature. The said ditch was

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nearly  13.6  ft.  deep  and  exposed  the  entire  base  of  the  

godown. During the rainy season, water got accumulated in the  

said ditch and the entire structure of godown was threatened.  

It weakened the foundation of godown and subjected the entire  

structure of godown to the danger of collapsing.  When the  

appellant  inquired  the  respondent  about  the  same,  the  

respondent  asked  the  appellant  to  vacate  the  godown.  The  

respondent  also  threatened  the  workers  of  the  appellant.  

Therefore, according to the appellant, the excavation made by  

the  respondent  was  intentional  and  directed  towards  

terminating the tenancy of the appellant by adopting dubious  

methods. It is also alleged that the respondent also closed  

the access road to the suit property. Thus, the appellant was  

unable to keep its goods in or take out its goods from the  

suit property, causing irreparable loss to the appellant.

9. The appellant filed a Regular Civil Suit No. 211 of 1990  

in the Court of IInd Jt.Civil Judge, J.D. Karad, at Karad.  In  

the said civil suit, the appellant prayed that the respondent  

be restrained from closing the access of the appellant to the  

suit property from the municipal road.  The appellant further  

prayed that the respondent be restrained from digging in a  

manner which would cause damage to the godown.   

10. In  the  said suit,  initially ad  interim injunction  was  

granted restraining the respondent from further digging the  

suit  property. Finally, on  28th May, 1990,  ex-parte  interim  

injunction was vacated. Aggrieved by the same, the appellant

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filed a Misc. Civil Appeal No. 123 of 1990 before the IIIrd  

Additional District Judge, Satara against the order passed in  

RCS No. 211 of 1990.

11. The said appeal was also dismissed on 16th April, 1996. It  

was alleged that the respondent thereafter went ahead with  

further destruction of the godown and demolished the western  

wall of the godown on 21st October, 1996. Aggrieved by the same,  

the appellant moved an application for amendment of the plaint  

bringing on record that on 21st October, 1996, the respondent  

again pulled down some portion of the western wall of the  

godown and due to the damage caused to base of the property,  

during  the  rainy  season  the  remaining  walls  also  had  

collapsed.  The appellant sought amendment of the plaint and  

inclusion  of  prayer  to  the  effect  that  the  respondent  be  

directed  to  reconstruct  the  walls  by  order  of  mandatory  

injunction.   The  appellant  further  prayed  that  it  may  be  

allowed  to  reconstruct  the  walls  of  the  godown  and  the  

respondent should not be allowed to destroy or disturb the  

appellant from construction of the godown.

12. The amendment sought for by the appellant was initially  

not allowed by the learned Civil Judge. The High Court by  

order dated 15th March, 2002 in Civil Revision No. 447 of 2002  

allowed the amendment.

13. The  respondent  filed  written  statement  and  additional  

written statement in which one of the grounds was taken was

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that godown got demolished due to natural cause and not due to  

the acts of the respondent.

14. By  the  Judgement  and  decree  dated  30th August,  2002,  

learned Civil Judge dismissed the suit filed by the appellant.  

15. Being aggrieved by the judgement and decree passed by the  

Trial Court, the appellant filed a Regular Civil Appeal No. 86  

of 2002 before the learned Addl. District Judge, Karad.  By  

its judgement and order dated 30th November, 2005, the learned  

Addl.  District  Judge,  Karad  dismissed  the  appeal  of  the  

appellant.

16. Against  the  judgement  and  decree  of  the  Learned  

Additional District Judge, Karad,  the appellant filed  Second  

Appeal No. 109 of 2006 before the High Court of Judicature at  

Bombay.  By its impugned judgement and decree dated 18th July,  

2006, the High Court dismissed the second appeal on the ground  

that the tenancy right of the appellant had lapsed and no  

substantial question of law was involved in the appeal.  

17. Learned  counsel  appearing  for  the  appellant  submitted  

that even after the destruction of the tenanted premises, the  

tenancy is not determined, and hence the appellant is entitled  

to the benefit of Section 108(B)(e) of the Transfer of Property  

Act, 1882 (hereinafter referred to as ‘the TP Act’). It was  

contended  that  even  if  the  tenanted  premises  is  completely  

destroyed and  renders  the tenanted premises substantially or  

permanently unfit for the purpose for which it was let out,  

the lease subsists till the tenant terminates the lease.  

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18.  In order to fully and appropriately appreciate the issue  

involved in the present case, it is desirable to refer to the  

relevant provisions of the Transfer of Property Act, 1882 (T.P.  

Act for short).

19. Chapter V of the T.P. Act, 1882 deals with the lease of  

immovable property. Section 105 of the T.P. Act defines ‘lease’  

and the said definition is as under:

“105. Lease defined.- A  lease  of  immoveable  property is a transfer of a right to enjoy such  property, made for a certain time, express or  implied, or in perpetuity, in consideration of a  price paid or promised, or of money, a share of  crops, service or any other thing of value, to  be  rendered  periodically  or  on  specified  occasions to the transferor by the transferee,  who accepts the transfer on such terms.

Lessor, lessee,  premium  and  rent  defined.  —The  transferor is called the lessor, the transferee  is called the lessee, the price is called the  premium, and the money, share, service or other  thing to be so rendered is called the rent.”

20. Section  108  of  the  T.P.  Act  explains  the  rights  &  

liabilities of lessor and lessee and provisions of the said  

section relevant to the present case i.e. Section 108(B)(e)  

reads as under:

“108.  Rights  and  liabilities  of  lessor  or  lessee. – In the absence of a contract or local  usage  to  the  contrary,   the  lessor  and  the  lessee  of  immovable  property, as  against  one  another, respectively, possess  the  rights  and  are subject to the  liabilities mentioned in  the rules next following, or such of them as  are applicable to the property leased:-

(A) Rights and Liabilities of the Lessor

x x x x x

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(B) Rights and liabilities of the Lessee

  (e)  If  by fire,  tempest  or  flood,  or  violence  of  any army  or  of  a  mob,  or  other  irresistible  force,  any  material  part  of  the  property  be  wholly  destroyed  or  rendered  substantially  and  permanently  unfit  for  the  purposes for which it was let, the lease shall,  at the option or the lessee, be void:

Provided that, if the injury be occasioned by  the wrongful act or default of the lessee, he  shall not be entitled to avail himself of the  benefit of this provision;”

21. The lease of immovable property is determined by modes  

stipulated  under  Sections  106  and  111  of  the  T.P.  Act.  

Section 111 of the T.P. Act reads as under:

“111. Determination of lease

A lease of immovable property determines-

(a) by efflux of the time limited thereby,

(b) where such time is limited conditionally on  the happening of some event-by the happening of  such event,

(c)  where  the  interest  of  the  lessor  in  the  property terminates on, or his power to dispose  of the same extends only to, the happening of any  event-by the happening of such event,

(d) in case the interests of the lessee and the  lessor  in  the  whole  of  the  property  become  vested at the same time in one person in the  same right,

(e) by express surrender, that is to say, in case  the  lessee  yields  up  his  interest  under  the  lease to the lessor, by mutual agreement between  them,

(f) by implied surrender,

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(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.”

22. Immovable property means landed property and may include  

structures embedded in the earth such as walls or buildings  

for the permanent beneficial enjoyment. A lease of immovable  

property is a transfer of right to enjoy such property in  

consideration of price paid as per Section 105 of the T.P. Act.  

By way of lease, a right and interest is created which stands  

transferred in favour of the lessee.  The immovable property,  

thereafter, only can be reverted back on determination of such  

right and interest in accordance with the provisions of the  

T.P. Act. Therefore, once the right of lease is transferred in  

favour  of  the  lessee,  the  destruction  of  a  house/building  

constructed  on  the  lease  property  does  not  determine  the  

tenancy rights of occupant which is incidental to the contract  

of the lease which continues to exist between the parties.  

23. The Kerala High Court in  V. Kalpakam Amma vs. Muthurama  

Iyer Muthurkrishna Iyer, AIR 1995 Kerala 99, held that there

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cannot be a building without a site and once a structure is  

put up in the land the site becomes the part of the structure  

and, thereafter the site becomes part of the building. The  

Court further held:

“14. The Supreme Court had also occasion to  consider the meaning of the word ‘building’ in  D.G. Gouse and Co. v. State of Kerala (1980) 2  SCC  410:  (AIR  1980  SC  271).  It  was  a  case  challenging the constitutionality of the Kerala  Building Tax Act, 1975.  Paragraph 21 of the  judgment deals with the definition of the word  ‘building’. It read thus:-

“The word “building” has been defined in  the oxford Dictionary as follows:

That which is built; a structure, edifice;  now a structure of the nature of a house built  where it is to stand.

Entry  49  of  Schedule  VII  of  the  Constitution  of  India  therefore  includes  the  site  of  the  building  as  its  component  part.  That, if we may say so, inheres in the concept  or  the  ordinary  meaning  of  the  expression  “building”.

15. A  somewhat  similar  point  arose  for  consideration  in  Corporation  of  the  City  of  Victoria v. Bishop of Vancouver Island, AIR 1921  PC 240 with reference to the meaning of the word  “building” occurring in Section 197 (1) of the  Statutes of British Columbia 1914. It was held  that  the  word  must  receive  its  natural  and  ordinary  meaning  as  “including  the  fabric  or  which it is composed, the ground upon which its  walls stand and the ground embraced within those  walls”. That appears to us to be the correct  meaning of the word ‘building’.

15A.  In  Stroud’s  Judicial  Dictionary  (Vol.I. 5th Edn.), the word ‘building’ is defined  thus:  “What  is  a  building  must  always  be  a  question  of  degree  and  circumstances”.  In  Black’s Law Dictionary (5th Edn.), the meaning of  the  word  building  is  given  as  follows:  “A  structure or edifice enclosing a space within  its  walls,  and  usually,  but  not  necessarily,  covered  with  a  roof”.  In  Bourvier’s  Law  Dictionary (A Concise Encyclopedia of the Law  Vol.I. 3rd Revision) the meaning of building is  given as “an edifice, erected by art, and fixed

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upon  or  over  the  soil,  composed  of  brick,  marble,  wood,  or  other  proper  substance,  connected together, and designed for use in the  position in which it is so fixed.”

16. The  above  are  some  of  the  natural  meanings that are given to the word ‘building’.  Adopting the above meaning, the word ‘building’  must take in the site also, as part of it. If  that  is  so,  without  site,  there  cannot  be  a  structure and the site becomes an integral part  of  the  building.  Without  a  site,  the  super  structure of the building on the land cannot  normally exist. Thus, when there is a lease of a  building, such lease would normally take in the  site unless it specifically excluded from the  land.”

24. Similar issue was considered by the Bombay High Court in  

Hind  Rubber  Industries  (P)  Ltd.  vs.  Tayebhai  Mohammedbhai  

Bagasarwalla, AIR 1996 Bom. 389. In the said case, the High  

Court observed as under:  

“16. In my view, the correct legal position in  this country appears to be that the destruction  of the tenanted structure does not extinguish  the tenancy and the right of occupation of the  tenant under the contract of tenancy continues  to exist  between  the  parties.  Merely because  the  tenanted  structure  has  been  destroyed  or  demolished,  the  right  transferred  under  the  lease cannot be said to have come to an end,  and  the  relationship  of  lessor  and  lessee  continues  to  exist.  The  destruction  of  the  tenanted premises does not destroy the tenancy  rights  nor  does  it  bring  to  an  end  the  relationship of lessor and lessee or for that  matter  landlord  and  tenant.  The  lessee  continues to be lessee in the property leased  even after its destruction by fire or such like  event unless the lessee exercises his option of  treating such lease as void. It may be observed  that Section 108 of the T.P. Act deals with the  rights and liabilities of lessor and lessee and  Part-B and clause (e) of Section 108 provides  that if the property leased in wholly destroyed  or rendered substantially and permanently unfit  for the purposes for which it was leased by  fire, tempest or flood or violence of any army

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tenant has ceased to occupy the shop and he was  no  longer  carrying  on  business  therein.  A  perusal of Section 108(B)(e) shows that where a  premises  has  fallen  down  under  the  circumstances  mentioned  therein,  the  destruction of the shop itself does not amount  to determination of tenancy under Section 111  of  the  Act.  In  other  words  there  is  no  automatic  determination  of  tenancy  and  it  continues to exist. If the tenancy continues,  the tenant can only squat on the vacant land  but  cannot  use  the  shop  for  carrying  on  business  as  it  is  destroyed  and  further  he  cannot construct any shop on the vacant land.  Under such circumstances it is the tenant who  is  to  suffer  as  he  is  unable  to  enjoy  the  fruits of the tenancy but he is saddled with  the  liability  to  pay  monthly  rent  to  the  landlord. It is for such a situation the tenant  has been given an option under Section 108(B) (e) of the Transfer of Property Act to render  the lease of the premises as void and avoid the  liability to pay monthly rent to the landlord.  Section 108(B)(e) cannot be interpreted to mean  that the tenant is entitled to squat on the  open land in the hope that in future if any  shop is constructed on the site where the old  shop existed he would have right to occupy the  newly-constructed premises on the strength of  original contract of tenancy. The lease of a  shop is the transfer of the property for its  enjoyment.  On  destruction  of  the  shop  the  tenancy cannot be said to be continuing since  the tenancy of a shop presupposes a property in  existence  and  there  cannot  be  subsisting  tenancy where the property is not in existence.  Thus when the tenanted shop has been completely  destroyed,  the  tenancy  right  stands  extinguished as the demise must have a subject- matter  and  if  the  same  is  no  longer  in  existence, there is an end of the tenancy and  therefore Section 108(B)(e) of the Act has no  application in case of premises governed by the  State Rent Act when it is completely destroyed  by natural calamities.”

23. In V. Kalpakam Amma(supra) the Kerala High  Court relying upon the definition of “building”  in the State Rent Act held that there cannot be  a building without a site and once a structure  is put up in the land the site becomes part of

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the structure and thereafter the site becomes  part of the building and on that basis the High  Court held that once the premises covered by  the State Rent Act is raised to the ground the  tenancy continues to survive in respect of the  vacant  land.  In  our  view  this  is  not  the  correct interpretation of Section 2(1) of the  State  Rent  Act.  Section  2(1)  uses  the  words  “part of a building or hut”. The words “part of  the building” do not refer to the land on which  the building is constructed but refer to any  other superstructure which is part of that main  building e.g. in addition to the main building  if  there  is  any  other  superstructure  in  the  said  premises  i.e.  motor  garage  or  servant  quarters then the same would be part of the  building and not the land on which the building  has been so constructed. So far the appurtenant  land which is beneficial for the purpose of use  of the building is also a part of the building.  Thus according to the definition of “building”  in  the  State  Rent  Act  the  building  would  include any other additional superstructure in  the same premises and appurtenant land. We are,  therefore, of the view that the interpretation  put by the Kerala High Court on Section 2(1)  for holding that the words “part of a building”  mean the land on which the building has been  constructed is not correct. The provisions of  the State Rent Act clearly show that the State  Rent Act is a self-contained Act and the rights  and  liabilities  of  landlord  and  tenant  are  determined by the provisions contained therein  and not by the provisions of the Transfer of  Property Act or any other law. The rights of a  landlord  under  the  general  law  are  substantially  curtailed  by  the  provisions  of  the State Rent Act as the Act is designed to  confer  benefit  on  tenants  by  providing  accommodation  and  to  protect  them  from  unreasonable eviction. In the present case what  we find is that the subject-matter of tenancy  was  the  shop  room  which  was  completely  destroyed on account of accidental fire and it  was not possible for the tenant to use the shop  for which he took the shop on rent. After the  shop was destroyed the tenant, without consent  or permission of the landlord, cannot put up a  new  construction  on  the  site  where  the  old  structure stood. If it is held that despite the  destruction  of  the  shop,  tenancy  over  the

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vacant  land  continued  unless  the  tenant  exercises his option under Section 108(B)(e) of  the Act the situation that emerges is that the  tenant would continue as a tenant of a non- existing building and liable to pay rent to the  landlord when he is unable to use the shop. The  tenancy of the shop, which was let out, was a  superstructure  and  what  is  protected  by  the  State Rent Act is the occupation of the tenant  in the superstructure. If the argument of the  appellant’s counsel is accepted then it would  mean  that  although  the  tenant  on  the  destruction of the shop cannot put up a new  structure  on  the  old  site  still  he  would  continue  to squat  on  the  vacant  land.  Under  such situation it is difficult to hold that the  tenancy  is  not  extinguished  on  the  total  destruction  of  the  premises  governed  by  the  State  Rent  Act.  Under  English  law,  in  a  contractual tenancy in respect of building and  land  the  liability  to  pay  the  rent  by  the  tenant to the landlord continues even on the  destruction of the building whereas there is no  liability  of  the  tenant  to  pay  rent  to  the  landlord  on  the  destruction  of  the  premises  governed by the State Rent Act. Therefore, the  view taken by the Bombay High Court in  Hind  Rubber Industries (P) Ltd.(supra) does not lay  down  the  correct  view  of  law.  This  Court  a  number of times has held that any special leave  petition dismissed by this Court without giving  a reason has no binding force on its subsequent  decisions. Therefore, the two aforesaid cases  relied on by counsel for the appellant are of  no assistance to the argument advanced by him.

24. However, the situation would be different  where a landlord himself pulls down a building  governed  by  the  State  Rent  Act.  In  such  a  situation the provisions contained in Section  11 of the State Rent Act would be immediately  attracted and the Rent Control Court would be  free to pass an appropriate order.

25. Coming to the next question whether the  civil court was competent to entertain and try  the suit filed by the respondent for recovery  of possession of the vacant land. As already  stated above, the tenancy in the present case  was of a shop room which was let out to the  tenant. What is protected by the State Rent Act  is  the  occupation  of  the  tenant  in  the  superstructure.  The  subject-matter  of  tenancy

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having been completely destroyed the tenant can  no longer use the said shop and in fact he has  ceased to occupy the said shop. Section 11 of  the  State  Rent  Act  does  not  provide  for  eviction  of  the  tenant  on  the  ground  of  destruction  of  the  building  or  the  superstructure.  Thus  when  there  is  no  superstructure in existence the landlord cannot  claim  recovery  of  possession  of  vacant  site  under  the  State  Rent  Act.  The  only  remedy  available to him is to file a suit in a civil  court for recovery of possession of land. In  view  of  the  matter  the  civil  court  was  competent to entertain and try the suit filed  by the respondent landlord.”

26. Subsequently,  another  two-Judge  Bench  of  this  Court  

considered the same question in  T. Laxmipathi(Supra).  In the  

said case this Court noticed the decision of Bombay High Court  

in Hind Rubber Industries (supra) and other High Courts and  

observed as under:  

“20. The tenancy cannot be said to have been  determined by attracting applicability of the  doctrine  of  frustration  consequent  upon  demolishing of the tenancy premises. Doctrine  of frustration belongs to the realm of law of  contracts; it does not apply to a transaction  where  not  only  a  privity  of  contract  but  a  privity  of  estate  has  also  been  created  inasmuch  as  lease  is  the  transfer  of  an  interest  in  immovable  property  within  the  meaning  of  Section  5  of  the  Transfer  of  Property Act (wherein the phrase “the transfer  of  property”  has  been  defined),  read  with  Section 105, which defines a lease of immovable  property as a transfer of a right to enjoy such  property. (See  observations  of  this  Court  in  this  regard  in  Raja  Dhruv  Dev  Chand v.  Raja  

Harmohinder Singh6.) It is neither the case of  the appellants nor of Respondents 2 and 3 that  the  subject-matter of lease was  the  building  and the building alone, excluding land whereon  the  building  forming  the  subject-matter  of  tenancy stood at the time of creation of lease.

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22. A lease of a house or of a shop is a  lease not only of the superstructure but also  of its site. It would be different if not only  the site but also the land beneath ceases to  exist by an act of nature. In the present case  the appellants who are the successors of the  tenancy  right  have  demolished  the  superstructure but the land beneath continues  to exist. The entire tenancy premises have not  been lost. Moreover, the appellants cannot be  permitted to take shelter behind their own act  prejudicial  to  the  interest  of  Respondent  1  under whom Respondents 2 and 3 were holding as  tenants and then inducted the appellants.

24. We are, therefore, of the opinion that in  the event of the tenancy having been created in  respect of a building standing on the land, it  is the building and the land which are both  components of the subject-matter of demise and  the destruction of the building alone does not  determine the tenancy when the land which was  the site of the building continues to exist;  more so when the building has been destroyed or  demolished neither by the landlord nor by an  act  of  nature  but  solely by  the  act  of  the  tenant or the person claiming under him. Ample  judicial authority is available in support of  this proposition and illustratively we refer to  George J. Ovungal v. Peter [AIR 1991 Ker 55],  Rahim Bux v. Mohd. Shafi [AIR 1971 All 16], Hind  Rubber Industries (P) Ltd. (supra) and Jiwanlal  & Co. v.  Manot & Co. Ltd.[(1960)64 CWN 932].  The Division Bench decision of the Kerala High  Court  in  V.  Sidharthan  (Dr) v.  Pattiori  Ramadasan appears  to  take  a  view  to  the  contrary.  But  that  was  a  case  where  the  building  was  totally  destroyed  by  fire  by  negligence of the tenant. It is a case which  proceeds on very peculiar facts of its own and  was rightly dissented from by the Bombay High  Court  in  Hind  Rubber  Industries  (P)  Ltd. v.  Tayebhai Mohammedbhai Bagasarwalla.”

27. After referring to the aforesaid two authorities, we are  

required to scrutinize which view is in consonance with the  

statutory provisions enshrined under the Transfer of Property  

Act.  We have already referred to the statutory provisions

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that  control  the  relationship  between  the  lessor  and  the  

lessee,  the definition  of  lease  as  engrafted  under  Section  

105,  the  rights  and  liabilities  of  lessor  and  lessee  

enshrined under Section 108 and the conceptual circumstances  

and  the  procedure  which  find  mention  for  determination  of  

lease under Section 111 of the Act.

28. In  Vannattankandy  Ibrayi  (supra)  the  learned  Judges  

referred  to  the  decision  on  common  law, the  principles  in  

American  jurisprudence,  and  various  decisions  of  the  High  

Courts and adverted to two categories of tenants, namely, a  

tenant under the Transfer of Property Act and the other under  

the State Rent Laws and proceeded to interpret Section 108 (B)  

(e) to hold that where a premises has fallen down under the  

circumstances mentioned therein, the destruction of the shop  

itself  does  not  amount  to  determination  of  tenancy  under  

Section 111 of the Act and there is no automatic determination  

of  tenancy  and  it  continues  to  exist.  If  the  tenancy  

continues, the tenant can only squat on the vacant land but  

cannot  use  the  shop  for  carrying  on  business  as  it  is  

destroyed  and  further  he  cannot  construct  any  shop  on  the  

vacant land. Under such circumstances it is the tenant who is  

to suffer as he is unable to enjoy the fruits of the tenancy  

but he is saddled with the liability to pay monthly rent to  

the landlord. It is for such a situation the tenant has been  

given an option under Section 108(B)(e) of the Transfer of  

Property Act to render the lease of the premises as void and

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avoid the liability to pay monthly rent to the landlord. Taking  

note of this facet, the Court proceeded to rule that Section  

108(B)(e) cannot be interpreted to mean that the tenant is  

entitled to squat on the open land in the hope that in future  

if any shop is constructed on the site where the old shop  

existed he would have right to occupy the newly-constructed  

premises  on  the  strength  of  original  contract  of  tenancy  

because lease of a shop is the transfer of the property for  

its  enjoyment  and  on  destruction  of  the  shop  the  tenancy  

cannot be said to be continuing since the tenancy of a shop  

presupposes  a  property  in  existence  and  there  cannot  be  

subsisting tenancy where the property is not in existence. It  

was further laid down that  when the tenanted shop has been  

completely destroyed, the tenancy right stands extinguished as  

the demise must have a subject-matter and if the same is no  

longer in existence, there is an end of the tenancy.

29. As we notice from the aforesaid analysis it is founded on  

an interpretation of Section 108 (B) (e) by assuming when a  

building or structure is leased out, it is the superstructure  

that  is  leased  out  in  exclusivity.   As  we  perceive,  the  

language employed in Section 108 (B) (e) does not allow such a  

construction.  The singular exception that has been carved out  

is the wrongful act or default on the part of the lessee which  

results in the injury to the property that denies the benefit.  

In all other circumstances which find mention under Section 111  

of the Act, are the grounds for determination of the lease.

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This is the plainest construction of the provision and there  

is no other room for adding to or subtracting anything from  

it.   Be  it  stated,  Section  108  postulates  the  rights  and  

liabilities of lessor and lessee.  If a right is not conferred  

by the Statute on the lessor for determination, except one  

exception which is clearly stipulated there in Section 108 (B)  

(e) by the Legislature, it would not be permissible for the  

Court  to  add  another  ground  of  the  base  or  fulcrum  of  

ethicality, difficulty or assumed supposition.

30. In  T. Lakshmipathi’s  case,  the  Court  referred  to  the  

observations made by a three-Judge Bench in  Raja Dhruv Dev  

Chand  v. Harmohinder  Singh  and  another,  AIR  1968  SC  1024  

wherein it has been held that doctrine of frustration belongs  

to the realm of law of contracts; it does not apply to a  

transaction where not only a privity of contract but a privity  

of  estate  has  also  been  created  inasmuch  as  lease  is  the  

transfer  of  an  interest  in  immovable  property  within  the  

meaning of Section 5 of the Transfer of Property Act. In the  

said case, it has been further opined that under a lease of  

land there is a transfer of right to enjoy that land.  If any  

material part of the property be wholly destroyed or rendered  

substantially and permanently unfit for the purpose for which  

it was let out, because of fire, tempest, flood, violence of  

an army or a mob, or other irresistible force, the lease may  

at the option of the lessee, be avoided and that is the rule  

incorporated in Section 108 (e) of the Transfer of Property

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Act and applies to leases of land, to which the Transfer of  

Property Act applies.

31. It is apt to note here that when there is a lease of a  

house or a shop it cannot be treated as a lease of structure  

but also a lease of site.  The Court referred to the decision  

in D.G. Gose & Co. (Agents) (P) Ltd. v. State of Kerala  (1980)  

2 SCC  410  wherein this Court held that the site of the build-

ing is a component part of the building and, therefore, in-

heres in it the concept or ordinary meaning of the expression  

“building”.  The Court also placed reliance on Corpn. of the  

city of Victoria v. Bishop of Vancouver Island  AIR 1921 PC 240.

32. It has been further opined that once a tenancy is created  

in respect of a building standing on the land it is the build-

ing and the land which are both components of the subject-mat-

ter of demise and the destruction of the building alone does  

not determine the tenancy when the land which is the site of  

the building continues to exist.  This interpretation, as we  

find, is in accord with Section 108 of the Act. It is re-

flectible that in  Vannattankandy Ibrayi’s case, the two-Judge  

Bench observed that the rights stand extinguished as on the  

distinction of the demise, for there is destruction of the su-

perstructure and in its non-existence there is no subject mat-

ter. Thus, the land has been kept out of the concept of sub-

ject matter.  In our considered opinion, the Court in the said  

case failed to appreciate that there are two categories of  

subject-matters, combined in a singular capsule, which is the

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essence of provision under the Transfer of Property Act and  

not restricted to a singular one, that is, the superstructure.  

In T. Lakshmipathi (supra) the Court took note of the fact that  

the land and superstructure standing on it as a singular com-

ponent for the purpose of tenancy.  It is in tune with the  

statutory provision. Therefore, we agree with the proposition  

stated therein to the affect that “in the event of the tenancy  

having been created in respect of a building standing on the  

land, it is the building and the land which are both compo-

nents of the subject-matter of demise and the destruction of  

the building alone does not determine the tenancy when the  

land which was the site of the building continues to exist”.  

On the touchstone of this analysis, we respectfully opine that  

the decision rendered in  Vannattankandy Ibrayi (supra) does  

not correctly lay down the law and it is, accordingly, over-

ruled.          

33. In  the  present  case,  it  is  not  in  dispute  that  the  

respondent purchased the lessor’s interest. The lease continued  

even  thereafter  and  did  not  extinguish.   The  lease  was  

subsisting when the shares of the land were purchased by the  

respondent. But the interest of the lessee was not purchased  

by the respondent.  What has been purchased by the respondent  

is the right and interest of ownership of the property. The  

interest of the appellant as lessee has not been vested with  

the respondent. Therefore, we are of the view that the tenancy  

of  the  appellant  cannot  be  said  to  have  been  determined

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consequent  upon  demolition  and  destruction  of  the  tenanted  

premises.  

34. In view of the fact and circumstances of the case, we  

have no other option but to set aside the impugned judgment  

and decree dated 18th July, 2006 passed by the High Court of  

Judicature at Bombay in Second Appeal No. 109 of 2006 and  

Judgment and decree dated 30th November, 2005 passed by the  

Addl. District Judge, Karad in RCA No. 86 of 2002. However,  

taking into consideration the fact that the appellant is not  

in possession of the suit property since long, we are not  

inclined to direct restoration of possession of suit property  

to the appellant. Instead we direct the respondent to pay a  

sum of Rs. 20,00,000/- (Rupees Twenty Lakhs only) in favour of  

the appellant towards compensation for depriving the appellant  

from enjoying the suit property, within two months, failing  

which it shall be liable to pay interest @ 6% per annum from  

the date of the judgment.   

35. The appeal is allowed with the aforesaid observation and  

direction.  No costs.

…………………………………………………………………CJI.                      (R.M.LODHA)

………………………………………………………………………J.               (SUDHANSU JYOTI MUKHOPADHAYA)

………………………………………………………………………J.

(DIPAK MISRA)    

NEW DELHI,

JULY 10, 2014.