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PETITIONER: KARNANI INDUSTRIAL BANK, LIMITED

       Vs.

RESPONDENT: THE PROVINCE OF BENGAL AND OTHERS

DATE OF JUDGMENT: 14/05/1951

BENCH: FAZAL ALI, SAIYID BENCH: FAZAL ALI, SAIYID MUKHERJEA, B.K. AIYAR, N. CHANDRASEKHARA

CITATION:  1951 AIR  285            1951 SCR  560

ACT:     Transfer  of  Property  Act  (IV  of  1882),  ss.   106, 116--Lease for a term--Acceptance of rent for further period before  expiry of term--New tenancy--Necessity of notice  to quit--Lessee’s  property  becoming  property  of  lessor  by failure   to   remove  within  time--   Injunction   against removal--Whether can be granted.

HEADNOTE:    The  context  in which the provision for  acceptance  of rent finds a place in s. 116 of the Transfer of Property Act shows that what is contemplated is that the payment of  rent should  be  made at such time and in such manner  as  to  be equivalent to the landlord assenting to the lessee  continu- ing  in  possession. Where payment is made at  a  time  when there  was no question of the lessor assenting to  the  les- see’s continuing in possession and neither party treated the payment  as  importing such assent the case  does  not  fall within s. 116.     A lease deed was executed on the 17th February, 1928, in respect of a land for a period of ten years from 24th Febru- ary,  1928,  the annual rent of Rs. 6,000 being  payable  in advance every year. In April, 1937, a cheque for Rs.  6,000, being  the rent from 1st April, 1937, to 31st  March,  1938, was  sent  by the lessee and accepted by the  lessor:  Held, that as the rent was paid before the expiry of the lease and neither  party  treated  the payment of  rent  as  importing assent on the part of the lessor to allow the lessee 561 to  continue in possession as a lessee after the  period  of the  lease, no new tenancy was created under s. 116  of  the Transfer of Property Act.  The utmost that could be said was that by implied consent the period of the lease was extended up to the 31st March, 1938, and even then no notice under s. 106 of the Transfer of Property Act was necessary for termi- nating the lease.      K.B. Capadia  v. Bai Jerbai Warden  and Another  [1949] F.C,R. 262 distinguished.      Where  in accordance with the terms of a  lease  bricks and other materials manufactured by the lessee on the leased premises  had become the property of the lessor as they  had

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not  been removed by the lessee within the period  fixed  by the lease: Held, that the lessor was entitled to ask for  an injunction restraining the lessee from removing the  materi- als  even  though  he was not in possession  of  the  leased premises.      Rathnasabhapathi  Pillai and Others v. Ramaswami  Aiyer (I.L.R. 33 Mad, 452), Bhramar Lal Banduri & Others v. Nanda- lal Chowdhuri (24 I.C. 199) and Valia Thamburatti v. Parvati and Others (I.L.R. 13 Mad. 455) distinguished.

JUDGMENT: CIVIL APPELLATE JURISDICTION. Civil Appeal No. 58 of 1950.      Appeal  against the Judgment and Decree dated the  13th February, 1948, of the High Court of Judicature at  Calcutta (Mitter  and Sharpe JJ.) in Appeal No. 117 of  1942  arising out of Decree dated the 24th November, 1941, in Suit No.  85 of 1938.      N.C.  Chatterjee and Harish Chandra (K. C.  Chopra  and G.C. Mathut, with them) for the appellant.      Chandra Sekhar Sen (C. N. Laik, with him) for  respond- ent No. 1.      1951. May 4. The Judgment of the Court was delivered by      FAZL  ALI J.  The principal question for  determination in this appeal is whether a certain lease had validly termi- nated by efflux of time or whether there was "holding  over" by  the lessee of the leasehold property as contemplated  in section  116 of the Transfer of ,Property Act.  The  circum- stances  under  which this question and  several  subsidiary questions to which reference will be made later have  arisen may be briefly stated as follows: 562     The Province of Bengal, (hereinafter referred to as  the respondent No. 1 or plaintiff) is admittedly the owner of an area of 1125 bighas and odd of land in village Akra.  On the 17th  February, 1928, the respondent No. 1 executed a  lease (exhibit  a) in respect  of the said land for 10  years  for manufacture  of  bricks  in favour of the  appellant,  at  a rental  of Rs. 6,000 a year. The lease was to commence  from the  24th February, 1928, and a year’s rent was  payable  in advance.  By  the terms of the said lease,  the  lessee  was prohibited from assigning or subletting the premises or  any part  thereof without the consent of the lessor except to  a limited  company  and  the lease also  contained  a  general provision  that  the lessee would at the expiration  of  the lease restore to the lessor the demised premises in as  good condition  as  it was at the date of the  lease,  reasonable wear  and tear excepted. Two further clauses in  the  lease, which  are material for the decision of this appeal, may  be reproduced verbatim :-- Clause 11 of Part I of the Schedule.     "The Secretary of State reserves the right to  terminate the  lease at any time subject to six months’ notice in  the event  of the lessee’s failing to observe and  duly  perform the  conditions hereinbefore and after mentioned and  it  is hereby agreed that the lessee shall before the expiration or prior  termination  of the lease hereby granted  remove  his boilers  engines trucks kilns railway and tram lines  bricks tools and plant and all other materials whatsoever and yield up the said demised premises unto the Secretary of State and that  those bricks tools and plant and other materials  that shall not be removed before such expiration or prior  termi- nation shall become the property of the Secretary of State."

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Clause 1 of Part 111 of the Schedule.     "The  lessee  shall be at liberty to keep  on  the  said premises  hereby demised for three months after the  expira- tion or prior termination of the term of this 563   lease  any  bricks boilers engines  trucks  kilns  railway and  tram lines and all other materials whatsoever  as   may have been manufactured by him in the premises  in accordance with  the conditions of these presents but  any  bricks  and other  materials  left in contravention  to  this  condition shall  become  the absolute property  of  the  Secretary  of State without payment."   It may be stated here that at the time of the execution of the lease, the lessee had purchased from the  lessor for Rs. 50,000" all the boilers, engines trucks,  kilns, railway and tramway  lines  and all other movable  property,  plant  and machinery on the demised  premises."      The case of the respondent No. 1, who is the  plaintiff in the present litigation, is that the appellant  (defendant No.  1)  had, in contravention of the terms  of  the  lease. sublet  the  brickfield to defendants-respondents  2  to  18 without the consent of respondent No. 1. and they had caused serious  damage to the brickfield in general and  failed  to maintain  the  embankments, sluices, etc. in  proper  repair resulting  in  a total loss of Rs. 16,840.  It  was  further alleged  that the defendants had refused to deliver  posses- sion  though  the  lease had terminated, and  they  had  not removed  the bricks, pugmills and other materials  within  3 months from the termination of the lease.  On these  allega- tions, the respondent No. 1 prayed for the following reliefs :--   (a) a decree for ejectment and khas possession over  the brick field;     (b)  damages amounting to Rs. 4,000 for the  period  be- tween  the termination of the lease and institution  of  the suit and mesne profits for the subsequent period;     (c)  a decree for Rs. 16,840 for damages caused  to  the field; and     (d)  a decree for permanent injunction  restraining  the defendants  from  removing  or otherwise  disposing  of  the bricks, pugmills, etc. which were claimed to have become the property of the plaintiff.     The suit was contested by the appellants, and the  other defendants, and their defence was that the 564 appellants  had  held over with the implied consent  of  re- spondent  No. 1, and hence the lease had not validly  termi- nated,  that  no damage or injury had been  caused   to  the land, that the respondent No. 1 was not entitled to  forfeit the  properties  of the appellants lying in  the  brickfield inasmuch as the term in the lease to that effect was by  way of penalty and as such unenforceable, and that the  respond- ent No. 1 was not entitled to the relief of injunction.     The trial Judge by his judgment dated the 24th November, 1941, held that there was no holding over with the assent of the plaintiff and both parties were under a mistaken  belief that  the lease had expired on the 23rd February,  1938.  He however  held that the evidence did not show that there  was any damage or injury caused to the property. On these  find- ings, the suit was decreed in part, and the respondent No. 1 was  directed to be put in possession of the brickfield  and was also granted a decree for Rs. 4,000 as mesne profits  up to the date on which the respondent No. 1 was put in posses- sion. The prayer for damages for injury alleged to have been caused  to  the  field and the prayer  for  injunction  were

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however disallowed.  The trial Judge allowed the  appellants 3  months’  time" to remove their belongings from  the  Akra brick field including kilns, pugmills, bricks, coals and any other brick-making material that may be lying there "; after this  period  these properties, if any, left in  the  field, were  to  become the absolute properties of  the  plaintiff. The  appellants thereafter  preferred an appeal to the  High Court at Calcutta, and the respondent No. 1 also preferred a cross-objection  claiming  that  the prayer  for  injunction should  have been allowed and the claim for  damages  should have been decreed in full.  The  learned Judges of the  High Court  who  heard the appeal; by their  judgment  dated  the 13th  February, 1948, dismissed the appellants’  appeal  and allowed the cross-objection of the respondent No. 1 in part. They  held that on the facts established in the  case  there was no holding over, and that the clause in the lease  stat- ing that if the 565 appellants  did  not remove the bricks etc  from  the  field within  3  months after the termination of  the  lease  they would  become the property of respondent  No. 1, was  not  a clause  by  way of penalty and should  be given  effect  to. They  further held that the claim  of respondent No.  1  for damages  for injury caused to  the demised premises was  not established.  The present ’ appeal is directed  against  the judgment of the High Court.     The  admitted facts of the case are briefly  these.  The appellants  duly paid Rs. 6,000 as rent to respondent No.  1 in  February, 1928.  In February, 1929, a sum of  Rs.  6,714 and  odd was paid by the appellants as rent for  the  period 17th February, 1929, to the 31st March, 1930, and thereafter they  continued  to  pay Rs. 6,000 as rent  for  the  yearly period, 1st April to 31st March of the succeeding year,  and the  last  payment was made in April, 1937, by  means  of  a cheque sent with a covering letter, the material portion  of which runs as follows :--     "We  beg to enclose herewith a cheque for Rs.  6,000  in payment  of  rent of Akra brickfield for  the  year  1937-38 ending  31st  March,  1938, and shall thank  you  to  please favour us with your formal receipt for the above."   The  cheque was duly cashed and the amount was entered  in the cash book of the plaintiff in the following terms :--   "5-4-37  (date of receipt)... Received  without  prejudice from Karnani Industrial Bank Ltd. on account of yearly  rent for Akra brickfield for the year ending 31st March, 1938." On  the  27th August, 1937, the appellants  applied  to  the Secretary to the Government of Bengal, Public Works  Depart- ment,  for  renewing the lease for a further  period  of  10 years,  but  no  reply was received to  that  letter.  After addressing several other letters,  the appellants received a letter  dated  the 23rd February, 1938, with which  was  en- closed a copy of an extract from as letter addressed by  the Executive Engineer 73 566 Suburban  Division to the Assistant Engineer, No.  III  Sub- division, which was as under:--     "He  is  requested  to make  arrangements  with  Messrs. Karnani Industrial Bank Limited for vacant possession of the Akra  brickfield on the 24th instant as the lease  with  the Bank will expire on the 23rd instant according to the  terms of the agreement."     Ultimately,  on  the 17th March,  1938,  the  appellants received  the  following communication  from  the  Executive Engineer, Suburban Division :--

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   "I  would  inform you that it is not  the  intention  of Government  in this Department to lease out the  brickfields and  arrangement is being accordingly made to make over  the lands  to the Government in the Revenue Department for  dis- posal."     In  a subsequent letter dated the 14th September,  1938, the  Executive Engineer wrote to the appellants  as  follows :--     "I  am instructed to state that Government have  decided that you cannot be allowed to continue in occupation of  the premises  any  further  ........  However, as  a  matter  of grace  Government will allow you time till the 30th  day  of September  next,  to dismantle the kilns and to  remove  all your bricks, boiler etc from the site, on which date Govern- ment will take over possession of the property from you."     The correspondence to which reference has been made does not show that at any point of time the plaintiff had assent- ed  to  the appellant’s continuance of possession.   On  the other  hand, some of the letters written by  the  appellants show that, notwithstanding their having paid rent up to  the 31st March, 1938, they had proceeded all along on the  foot- ing  that  the lease was to expire in February,  1938.   For instance,  in  the appellants’ letter of  the  23rd  August, 1937,  it is stated: "we are desirous of renewing the  lease of the brickfield for a further period of 10 years from  the date  of  the expiration of the period of  the  lease  dated 17-2-1928."   Again, in the letter dated the  23rd  October, 1937, reference is made to the appellants’ 567 application for renewal of the lease for a further period of 10 years on its expiry. Even in the letter which was written on  behalf of the appellants on the 3rd March,  1938,  after the expiry of the date on which the  lease was to terminate, the statement made in the  earlier letters was repeated, and it was further stated: "we applied for renewal of the  lease on  the 23rd August, 1937, six months prior to the  date  of expiration  of  the lease". In this letter,  it  is  nowhere suggested that the appellants were holding over by reason of the  acceptance of rent up to the 31st March, 1938.  On  the other hand, at the end of this letter, we find the following statement :’-     "We therefore pray that if the Government is not at  all inclined  to renew the lease, time may be granted to us  for dismantling and removing till the end of December, 1938, and we  shall  pay the proportional rent to the  Government  for seven months time in pursuance of the terms of the lease."     The  reference to the period of 7 months shows  that  it was assumed that the lease had expired in February, 1938.     The letters written on behalf of the Government point to the  same  conclusion, namely, that both  the  parties  were acting on the assumption that the lease was to expire on the 23rd  February, 1938.  For instance in a letter  written  on behalf  of  the Government on the 25th February,  1938,  the following statement is made :--     "I  have  the  honour to inform you that  none  of  your agents was present at-the Akra brickfield today as previous- ly arranged to make over the possession of the  brickfields. You are therefore requested to please inform me about as  to what  arrangements  are being made by you to make  over  the possession  of the said brickfield to this  department.  The term of lease expires on the afternoon of the 23rd February, 1938."     Apart  from the fact that the appellants did not set  up in  any of their letters a case of holding over. we have  to see whether the plea can be said to have been

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568 successfully  made out by them.  There is no doubt that  the appellants have established that the rent was  paid on their behalf  up to the 31st March, 1938, and  it was accepted  by the  respondent No. 1.  It has also  been  established  that this payment was made by a  cheque and that cheque has  been cashed by  the Government.  Section 1 IS of the Transfer  of Property Act, on which reliance was placed on behalf of  the appellants, runs as follows :--     "If a lessee or underlessee of property remains in  pos- session thereof after the determination of the lease granted to  the lessee, and the lessor or his  legal  representative accepts  rent from the lessee or underlessee,  or  otherwise assents  to his continuing in possession, the lease  is,  in the  absence of an agreement to the contrary,  renewed  from year  to  year,  or from month to month,  according  to  the purpose for which the property is leased  .........  "      This  section  was construed’ by the Federal  Court  in K.B.  Capadia v. Bai Jerbai Warden and Another (1),  and  it was held that where rent was accepted by the landlord  after the expiration of the tenancy by efflux of time, section 116 applied even though the landlord accepted the amount  remit- ted to him as "part deposit towards his claim for  compensa- tion  for illegal use and occupation, and without  prejudice to  his rights".  It is to be noted that in that  case  rent had  been accepted after the expiry of the tenancy.  In  our judgment, the present case cannot be governed by that  deci- sion,  because of the fact, which in our opinion  is  impor- tant;  that here the payment of rent up to the  31st  March, 1938,  was made not after the date of expiry of  the  lease, but on the 5th April, 1937, nearly a year before the  expiry of the lease.  A reference to section 116 of the Transfer of Property  Act  will show that for the  application  of  that section,  two things are necessary:(1) the lessee should  be in  possession after the termination of the lease;  and  (2) the  lessor  or  his representative should  accept  rent  or otherwise assent to his continuing in possession. The use of the word ’otherwise’ (1) [1949] F.C.R. 262. 569 suggests  that acceptance of rent by the landlord  has  been treated  as  a  form of his giving assent  to  the  tenant’s continuance of possession.  There can be no question of  the lessee  "continuing in possession" until the lease  has  ex- pired, and the context in which the provision for acceptance of rent finds a place clearly shows that what is contemplat- ed is that the payment of rent and its acceptance should  be made at such a time and in such a manner as to be equivalent to  the landlord assenting to the lessee continuing in  pos- session.   Both  the courts below, after  dealing  with  the matter  elaborately,  have  concurrently held  that  in  the circumstances of the case the consent of respondent No. 1 to the appellants’ continuing in possession cannot be inferred, and we agree with this finding.     It  was  pointed out to us on behalf of  the  respondent that the entry relating to this payment in the books of  the plaintiff  contains the words: "received  without  prejudice from Karnani Industrial Bank  ......  "The same words howev- er occur in several earlier entries, and we are not inclined to attach any special significance to them. But it seems  to us  that the very fact, that the payment was made at a  time when  there was no question of the lessor assenting  to  the lessee’s continuing in possession and neither party  treated the payment as importing such assent, is sufficient to  take the case out of the mischief of section 116 of the  Transfer

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of Property Act.     There is also another view which we think is possible to take  upon the facts of the case. As we have seen, the  rent for  the first year was paid in advance near about the  time of  the execution of the lease, and nothing turns  upon  it. When  however the second payment was made, the sum paid  was Rs.  6,714 and odd, and the payment was made in  respect  of rent up to the 31st March, 1930. After this, all the  subse- quent  payments were made up to the 31st March of  the  suc- ceeding  year, evidently because the financial  year,  which the  parties  considered themselves to be governed  by,  ran from the 1st April to the 31st March of the succeeding year. It was presumably in view of this fact that the 570 plaintiff  filed an application on the 6th  November,  1941, for  amending  the  plaint so as to  include  the  following statement :-- "The  plaintiff submits that even assuming that  the  regis- tered  lease  terminated on the 23rd February, 1938,  by  an agreement between the plaintiff and the defendant No. 1, the latter was allowed to hold over up to the 31st March, 1938."     This  application however was rejected, because  it  was made at a very late stage, that is to say, after the defend- ants’  evidence had been closed and an adjournment had  been granted  to  the  plaintiff to  adduce  rebutting  evidence. However  that may be, the utmost that can be said  upon  the evidence as it stands is that by the implied consent of  the parties the period of the lease was extended up to the  31st March,  1938.   In this view, the respondent  No.  1  became entitled  to  re-enter after the 31st March, and  no  notice under section 106 of the Transfer of Property Act was neces- sary. In the circumstances, the decree for ejectment  passed by the courts below must be upheld.     The next question which arises in the case turns on  the proper  construction of clause 11 of Part I and clause 1  of Part  III of the lease, which have already been  quoted.  It seems  to us that clause 11 should be read as a whole,  and, when  it is so read, it becomes clear that it was  ’intended to  be applicable only where the Secretary of State  decided to  exercise his right to terminate the lease "at  any  time subject  to  6 months’ notice, in the event  of  the  lessee failing to observe and duly perform the conditions mentioned in  the lease. In such a case, if the lessee did not  remove the  boilers, engines and all other materials and  yield  up the premises to the Secretary of State, those articles  were to  become  the property of the Secretary  of  State.   This clause is evidently not applicable to the present case.  The clause  which applies to this case is clause 1 of Part  III, which is intended to be applicable to the normal case of the lease  expiring by efflux of time. This clause, as  we  have seen, provides that the lessee 571 shall  be at liberty to keep on the demised premises  for  a months after the expiration of the lease any bricks,   boil- ers, etc., but it also provides that "any bricks and   other materials  left  in contravention of  this  condition  shall become  the  absolute  property of the  Secretary  of  State without  payment."   There can be no doubt that  under  this clause,  the  bricks  and other materials  have  become  the absolute property of the plaintiff. The only question is  as to  the meaning of "other materials." It seems to us  on  an examination  of the lease as a whole that there must   be  a distinction  between materials, and machinery and tolos  and similar  articles, and the words "other materials"  have  no reference to engines, trucks, railway and tramway lines  and

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plant.   They mean building materials such as bricks,  tiles and  similar articles that might have been  manufactured  by the  appellants on the demised premises. That being so,  the decree under appeal should be  modified accordingly.     The  only  other point which  arises  for  consideration relates to the plaintiff’s prayer for a decree for permanent injunction  against  the defendants, to restrain  them  from removing or otherwise disposing of the articles in regard to which the decree is to be passed. It was contended on behalf of  the  appellants that the respondent No. 1 not  being  in possession of these properties could not ask for the  relief of  injunction  without asking for the  declaration  of  its title  in respect of them and possession over them,  and  in support  of  this  proposition,  the  following  cases  were cited:--Ratnasabhapathi  Pillai  and  Others  v.   Ramaswami Aiyar(1), Bhramar Lal Banduri and Others v. Nanda Lal Chowd- huri(2) and Valia Tamburatti v. Parvati and others(3). After reading  and fully considering those cases, we find them  to be  wholly inapplicable to the present case. In the  present case, it has been found that the bricks and other  materials have become the property of the plaintiff, and there can  be no  legal  objection  to the granting of  an  injunction  as prayed.  (1) I.L.R. 33 Mad. 482.         (a) I.L.R, 13 Mad, 455,  (2) 24 I.C. 199. 572 The,  appeal therefore substantially fails and it  is   dis- missed  with  costs.  But it should be made  clear  in   the decree  that only the building materials such as     bricks, tiles  and similar articles that might have  been   manufac- tured by the appellants on the demised premises shall become the  property of the respondent No. 1. As for  the  boilers, engines, trucks, kilns, rail-way and tram lines, etc., three months’ time is given from the date of this decree to enable the appellants to remove them from the demised premises. Appeal dismissed. Agent for the appellant: Rajinder Narain. Agent for respond- ent No. 1: P.K. Bose.