CS(OS)No.2569/2000 & 524/2004 Page 1 of 63 THE HIGH COURT OF DELHI AT NEW DELHI % Judgment Reserved on: 28.2.2011 Judgment Pronounced on: 11.3.2011 + CS(OS) No.2569/2000 Tata Finance Ltd. ..…Plaintiff - versus - P.S.Mangla & Ors. .....Defendants Advocates who appeared in this case: For the Plaintiff: Mr. T.K. Ganju, Sr. Adv. with Mr. B.L. Wali. For the Defendant: Ms. Shalini Kapoor. AND + CS(OS) 524/2004 KAMAL MANGLA & ORS. …. Plaintiffs versus – TATA FINANCE Ltd. ….. Defendant Advocates who appeared in this case: For the Plaintiff: Ms. Shalini Kapoor. For the Defendant: Mr. T.K. Ganju, Sr. Adv. with Mr. B.L. Wali. CORAM:- HON’BLE MR JUSTICE V.K. JAIN 1. Whether Reporters of local papers may Yes be allowed to see the judgment? 2. To be referred to the Reporter or not? Yes 3. Whether the judgment should be reported Yes in Digest? CS(OS)No.2569/2000 & 524/2004 Page 2 of 63 V.K. JAIN, J CS(OS) No.2569/2000 1. This is a suit for recovery of Rs. 32,53,824/- instituted by the Tata Finance Ltd. through its attorney Mr. Anil Sharma. The plaintiff – company had taken flat No. 401, New Delhi, House 27, Barakhamba Road, New Delhi – 110 001 admeasuring 1076 sq. ft. and comprising of one hall and a toilet on rent, from defendants 1 to 3 for a period of three years vide registered lease deed executed on 18.04.1995. Vide another agreement of the same day, defendant No.4 leased the furnishings and fittings provided in the aforesaid premises to the plaintiff company, for the same period. A sum of Rs.25,82,400/- was deposited by the plaintiff company as security vide yet another agreement executed between the plaintiff company and all the four defendants on the same date. 2. Clause 17 of the lease agreement gave an option to the plaintiff company to renew the lease for a further term of three years by giving notice in writing, by registered post at least six months before the expiry of the lease term, on the same terms and conditions except that in case of renewal, the rent was to increase 25% from the last paid rent. In CS(OS)No.2569/2000 & 524/2004 Page 3 of 63 case of renewal, a fresh lease agreement was to be executed on the stamp papers of appropriate value at the cost of the plaintiff company. It was further stipulated in Clause 17 of the lease agreement that the lessee would be entitled to vacate the premises after giving a prior six English calendar months notice during the initial or renewed lease term. On expiry of six years, the lessee was to hand over vacant possession of the premises to the lessor unless the lease was renewed by execution of a fresh lease agreement. The security deposit was to be refunded to the lessee without any interest on the expiry of the said lease or the vacation of the said premises by lessee, whichever is earlier, against handing over peaceful vacant possession of the flat, furnishings and fittings in good condition and after deducting dues, if any. 3. The plaintiff company wrote a letter dated 07.10.1997 to the defendants exercising its option to renew the initial lease which was to expire on 31.03.1998 for a further period of three years, on payment of 25% higher rent in terms of clause 17 of the lease deed. Similar letter was issued by the plaintiff company with respect to furnishings and fittings provided in the premises. However, vide letter CS(OS)No.2569/2000 & 524/2004 Page 4 of 63 dated 16.12.1998, the plaintiff company claims to have written to the defendants expressing its intention to vacate the tenanted premises six months therefrom, in exercise of its option to terminate the lease as per clause 17. Similar notice was given to defendant No.4 with respect to agreement for furnishings and fittings. However, vide subsequent letters dated 14.5.1999 and 14.07.1999, the plaintiff company sought extensions from the defendants to continue to occupy the premises on a month to month basis till 31.08.1999 on the ground that they had not been able to remove all their furnitures etc. and shift to a new premises. 4. Vide letter dated 29th September, 1999, the plaintiff company finally called upon the defendants to take possession of the tenanted premises and collect keys without any further delay. The defendants, according to the plaintiff company, failed to take possession and also did not refund the interest free security amount, which the plaintiff company had deposited with them. By letter dated 4th May, 2000, the plaintiff demanded the security deposit of Rs.25,82,400/- along with interest on that amount at the rate of 24% per annum with effect from 30th September, 1999. The amount of interest comes to Rs.6,71,424/-, CS(OS)No.2569/2000 & 524/2004 Page 5 of 63 thereby making a total of Rs.32,53,824/-. 5. Defendant Nos. 2 to 4 have contested the suit and have also filed a counter claim for recovery of Rs.19,18,079/- from the plaintiff company. They have denied the authority of Mr. Anil Sharma to institute the suit on behalf of the plaintiff company. It has been claimed by them that defendant No.1 had gifted his share in the tenanted premises to defendant No.3 on 31st October, 1998 and the plaintiff was informed accordingly. On merits, execution of registered lease deed dated 18th April, 1995 has been admitted by the contesting defendants, who have claimed that the lease deed as also the agreement with respect to furnishing and fittings expired by efflux of time on 31st March, 2001. The contesting defendants have denied receipt of letters dated 16th December, 1998 and 14th May, 1999. They have, however, admitted receipt of letter dated 14th July, 1999 from the plaintiff company. They have also claimed that the plaintiff company wrongly stopped payment of rent with effect from September, 1999. The receipt of plaintiff‟s letter dated 29th September, 1999 has also been admitted by the contesting defendants. This is also their case that no notice terminating the tenancy in CS(OS)No.2569/2000 & 524/2004 Page 6 of 63 terms of Clause 17 of the lease agreement dated 18th April, 1995 was given by the plaintiff company to them at any point of time and, therefore, the lease expired only by efflux of time on 31st March, 2001. The contesting defendants have claimed rent at the rate of Rs.1,34,500/- per month for the period from 1st September, 1999 to 31st March, 2001, Rs.4,03,500/- towards damages for use and occupation at the same rate for the period 1st April, 2001 to 31st June, 2001, Rs.48,984/- towards maintenance charges payable to the Capital Maintenance Society, Rs.12,09,381/- towards increase in property tax for the years 1995-96 to 2000- 2001, Rs.1,05,114/- towards charges for use of electricity and water upto February, 2001 and Rs.18,000/- towards ground rent and insurance for the period of 1st April, 1995 to 31st March, 2001. They have also claimed Rs.1,60,000/- towards interest at the rate of 18% per annum on the balance amount after adjusting the security deposit. Thus, an amount of Rs.19,18,079/- has been claimed by the defendants after deducting the security deposit of Rs.25,82,400/-. 6. CS(OS) No.524/2004 has been filed by Shri P.S. Mangla, Shri Kamal Mangla and Smt. Sneh Lata Mangla, CS(OS)No.2569/2000 & 524/2004 Page 7 of 63 who are defendants No. 1 to 3 in CS(OS) No.2569/2010, claiming possession of the aforesaid tenanted premises as well as furnishing and fittings provided therein as also for recovery of Rs.38,87,050/- towards damages for use and occupation for the period from 1st July, 2001 to 30th April, 2004 at the rate of Rs.1,14,325/- per month, Rs.6,85,950/- towards hire charges for the period from 1st July, 2001 to 30th April, 2004 at the rate of Rs.20,175/- per month, Rs.12,94,092/- towards increase in property tax for the years 2000-01 to 2003-04, Rs.1,17,909/- towards maintenance charges for the period from 1st August, 2001 to 30th April, 2004 at the rate of Rs.3573/- per month and Rs.9,250/- as ground rent and insurance for the period from 1st April, 2001 to 30th April, 2004. They have also claimed interest on the aforesaid amount at the rate of 12% per annum amounting to Rs.10,19,022/- besides claiming future damages for use and occupation as well as hire charges for the future. 7. The defendant company in this suit, which is plaintiff in CS(OS) No.2569/2000 has denied its liability towards payment of damages for use and occupation, hire charges, increase in house tax, maintenance charges, CS(OS)No.2569/2000 & 524/2004 Page 8 of 63 ground rent and insurance. As regards claim for increase in house tax, it has been stated by the tenant that since no assessment has been finalized, the defendant company is not liable to pay any amount to the plaintiffs towards increase in house tax. 8. The following issues were framed on the pleadings of the parties in respect of both suits:- 1. Whether the plaint is signed, verified and suit filed by a duly authorized person? OPP. 2. Whether the suit is bad for misjoinder of defendant No.3, if so, to what effect? OPD 3. Whether the plaintiff has duly terminated the tenancy in terms of Clause 17 and/or otherwise in accordance with law? OPP 4. Whether the plaintiff is entitled to refund of security amount, if so, to what extent? OPP. 5. Whether the plaintiff is entitled to interest, if so, at what rate and for what period? OPP. 6. Whether the plaintiff is liable to pay rent, electricity charges, water charges, property tax w.e.f. 1st September, 1999 and if so, till what date? OPD. 7. Whether the defendants are entitled to claim amount stated in the counter claim and, if so, to what extent? OPD. 8. Whether the defendants are entitled to interest, if so, at what rate and for what period? OPD. 9. Whether the defendants are entitled to adjust the security amount, if so, to what effect and what extent? CS(OS)No.2569/2000 & 524/2004 Page 9 of 63 OPD. 10. What is the liability of the plaintiff in regard to payment of rent/damages and, if so, till what date? OPD. 11. Relief. ISSUE NO.1 9. PW-1 Mr. Pradeep Sehrawet, Regional Legal Incharge of the plaintiff company identified the signatures of Mr. Anil Sharma, Manager (Law) of the plaintiff company on the plaint and verification clause and stated that he was duly authorized to sign and institute the present suit vide power of attorney executed in his favour on 26th July, 2000. The original power of attorney in favour of Mr. Anil Sharma has not been filed by the plaintiff company though a photocopy is available on record, having been filed on 8th September, 2003. The cross-examination of the witness, however, shows that the original was not brought by him. 10. In Aktiebolaget Volvo and others v. R. Venkatachalam and another (I.A. No.5683/2008 in CS(OS) No.516/2007 decided by this Court on 18th May, 2009), this Court held that since a photocopy or a copy would also be a document and it cannot be said that the provisions of the CPC for filing of documents necessarily CS(OS)No.2569/2000 & 524/2004 Page 10 of 63 relate to original documents. Dealing with the question as to whether under Order 13 Rule 1 of the CPC, the original documents has to be placed on the file of the Court and whether Evidence Act while providing for proof of documents by primary evidence requires filing/placing of the original document on the record of the Court, it was held that the legislative scheme permits production of originals for inspection only and filing of copies only. It was also held that endorsement/exhibit mark can also be put on the copies of the court record as well. 11. A perusal of the photocopy filed by the plaintiff shows that the power of attorney in favour of Mr. Anil Sharma was attested by public notary on 26th July, 2000. Since the power of attorney in favour of Mr. Anil Sharma purports to be attested by a Public Notary, there is a statutory presumption under Section 85 of Evidence Act that the Power of Attorney was executed by the person by whom it purports to have been executed and the person who executed the power of attorney was fully competent in this regard. In Jugraj Singh and Anr. Vs. Jaswant Singh and Ors., AIR 1971 SC 761, the Power of Attorney attested by a Public Notary was disputed on the ground that it did CS(OS)No.2569/2000 & 524/2004 Page 11 of 63 not show on its face that the Notary had satisfied himself about the identity of the executant. Supreme Court held that there was a presumption of regularity of official acts and that the Notary must have satisfied himself in the discharge of his duties that the person who was executing it was the proper person. In Rajesh Wadhwa vs. Sushma Govil, AIR 1989, Delhi 144, it was contended before this Court that till it is proved that the person who signed the said power of attorney was duly appointed attorney, the court cannot draw a presumption under Section 57 and 85 of the Evidence Act. Repelling the contention, it was held by this Court that the very purpose of drawing presumption under Sections 57 and 85 of the Evidence Act would be nullified if proof is to be had from the foreign country whether a particular person who had attested the document as a Notary Public of that country is in fact a duly appointed Notary or not. When a seal of the Notary is put on the document, Section 57 of the Evidence Act comes into play and a presumption can be raised regarding the genuineness of the seal of the said Notary, meaning thereby that the said document is presumed to have been attested by a competent Notary of that country. In Punjab National Bank CS(OS)No.2569/2000 & 524/2004 Page 12 of 63 vs. Khajan Singh, AIR 2004 Punjab and Haryana 282, the Power of Attorney in favour of a bank, which had been duly attested, was rejected by the learned District Judge on the ground that the presumption under Section 85 of Evidence Act was available to a particular class of Power of Attorneys described in the section, which was confined to its execution and authenticity alone. The High Court, however, rejected the view taken by the learned District Judge holding that absence of proof of resolution authorizing the executant to execute the Power of Attorney could not be sustained and a presumption in favour of the attorney would arise under Section 85 Act. Hence in this case also, the Court can presume not only that the power of attorney dated 26th July, 2000 was executed by Shri Dilip Sudhakar Pendse, Managing Director of the plaintiff company in favour of Shri Anil Sharma, the then Manager (Law) of the plaintiff company, it can be further presumed that Mr. Dilip Sudhakar Pendse was duly authorized by the plaintiff company to execute a power of attorney in favour of Mr. Anil Sharma. Hence, it was not necessary for the plaintiff company to produce the power of attorney executed by the plaintiff company in favour of Mr. Dilip Sudhakar Pendse, CS(OS)No.2569/2000 & 524/2004 Page 13 of 63 Managing Director of the plaintiff company. In any case, since no arguments were advance on behalf of the defendants in CS(OS) No.2569/2000 on this issue, I need not dilate further and record a specific finding on this issue. ISSUE NO.2 12. There appears to be a typographical error in this issue since the case of the plaintiff is that it was defendant No.1, who had transferred his share in the tenanted premises to defendant No.3. It appears that the word defendant No.1 ought to have been typed in placed of defendant No.3 in this issue. 13. In para 2 of the written statement, the contesting defendants have specifically alleged that defendant No.1 had gifted his share of the tenanted premises to defendant No.3 Sneh Lata Bansal on 31st October, 1998 and informed the plaintiff about it vide letter dated 31st October, 1998 and 5th November, 1998. It is further alleged that by these letters, defendant No.1 had advised the plaintiff company to pay the rent of his share to defendant No.3. It is also alleged that defendant No.1 had also written to the plaintiff company that the security deposit had been transferred to defendant CS(OS)No.2569/2000 & 524/2004 Page 14 of 63 No.3, who had undertaken to abide by all the terms and conditions of the lease agreement. These averments have not been specifically denied in para 2 of the replication/written statement to the counter claim and, therefore, are deemed to have been admitted. On the other hand, the plaintiff company claimed that the alleged transfer does not absolve defendant No.1 to refund the security deposit paid to him thereby admitting the transfer and claim by the contesting defendants. Exhibit DW2/1 is the letter dated 31st October, 1998 written jointly by defendant Nos. 1 and 3, Shri P.S. Mangla and Mrs. Sneh Lata Mangla to the plaintiff company informing it that defendant No.1 had gifted his 20% share in flat No.401, New Delhi House to Mrs. Sneh Lata Mangla, who already held 20% share in the aforesaid flat and requested the plaintiff company to pay future rent for the period commencing 1st November, 1998 to her. Exhibit DW2/2 is a letter dated 5th November, 1998 from defendant Nos. 1 and 3 to the plaintiff company requesting the plaintiff company to pay his share in the rent to defendant No.3 Smt. Sneh Lata Mangla and also informing that security deposit had also been transferred to defendant No.3, who had undertaken to abide CS(OS)No.2569/2000 & 524/2004 Page 15 of 63 by all the terms and conditions of the lease deed. In fact, PW1, Mr. Pradeep Sehrawat has also admitted in para 9 of his affidavit dated 31st May, 2006 that defendant No.1 had informed the plaintiff company that he was gifting his interest in the property to defendant Nos. 2 and 3 as a part of his tax planning and the company had accordingly agreed to remit the future rent to defendant Nos. 2 and 3. Since, the rent with effect from 1st November, 1998 was required to be paid only to defendant Nos. 2 and 3 and the security deposit was also transferred to defendant No.3, the suit is bad for misjoinder of defendant No.1, whose name is struck off from the array of defendants in CS(OS) No.2569/2000. ISSUE No.3 14. Clause 17 of the lease deed dated 18th April, 1994 reads as under:- “On the expiry of the initial lease period of three years the lessees shall have the option to renew the lease for a further term of 3 years by giving notice in writing by Registered Post at least six months before the expiry of this lease term on the same terms and conditions except that the lease amount for the renewed 3 years term shall be increased by 25% of the last lease amount paid. In case of renewal of a fresh Lease Agreement will be executed on the stamp paper of appropriate value at Lessee‟s cost. It is however agreed that CS(OS)No.2569/2000 & 524/2004 Page 16 of 63 the Lessee shall be entitled to vacate the premises by giving a prior six English calendar months notice during the initial or renewed lease term. After the expiry of six years period of 31st March, 2001, the Lessee would handover peaceful vacant possession of the demised premises to the Lessors, unless of course, the lease is renewed further at mutually agreed terms 6 months prior to 31st March, 2001 by execution of a fresh Lease Agreement.” 15. In exercise of the option given to the plaintiff company, a letter dated 7th October, 1997 was written by the plaintiff company to defendant Nos. 1 to 3, giving a notice exercising option to renew the lease agreement for further period of 3 years from 1st April, 1998 on the same terms and conditions except that the monthly rent to increase by 25%. Similar notice was given to defendant No.4 with respect to furnishing and fittings provided to the plaintiff company and the same is Exhibit P-2. However, admittedly no lease agreement was executed between the parties despite exercise of option in this regard by the plaintiff company. 16. Clause 17 of the lease deed dated 18th April, 1998 specifically stipulated that in case of renewal, a fresh lease agreement would be executed on the stamp paper of CS(OS)No.2569/2000 & 524/2004 Page 17 of 63 appropriate value at Lessee‟s cost. Even otherwise, a lease for three years, even if it was a renewed lease in exercise of an option given to the tenant under the original lease, could be created only by execution and registration of an instrument as required by Section 107 of the Transfer of Property Act, which to the extent it is relevant, provides that a lease of immovable property from year to year, or for any term exceeding one year or reserving a yearly rent, can be made only by a registered instrument. 17. In Burmah Shell Oil Distributing now known as Bharat Petroleum Corporation Ltd. v. Khaja Midhat Noor and Others, (1988) 3 SCC 44, the lease was executed for a period of 10 years which expired on January 16, 1958. The lease could be renewed for a further period of 5 years. On considering the provisions of Sections 106 and 107 of the Transfer of Property Act, Supreme Court, inter alia, observed as under:- “In view of the para 1 of Section 107 of the Act, since the lease was for a period exceeding one year, it could only have been extended by a registered instrument executed by both the lessor and the lessee. In the absence of registered instrument, the lease shall be deemed to be “lease from month to month”. It is clear from the very language of Section CS(OS)No.2569/2000 & 524/2004 Page 18 of 63 107 of the Act which postulates that a lease of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent, can be made only by a registered instrument. In the absence of registered instrument, it must be a monthly lease.” Hence, in the absence of a registered lease deed, the lease dated 18th April, 1995 did not get renewed for a further period of 3 years and expired by efflux of time on 31st March, 1998. 18. It is, however, an admitted case that even after expiry of the lease deed dated 18th April, 1995 by efflux of time on 31st March, 1998, the tenant continued to occupy the tenancy premises and the landlords continued to accept rent from the tenant. 19. Section 116 of Transfer of Property Act, to the extent it is relevant, provides that if a lessee remains in possession of the tenanted premises after the determination of the lease granted to him, and the lessor or his legal representative accepts rent from the lessee, 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 CS(OS)No.2569/2000 & 524/2004 Page 19 of 63 for which the property is leased, as specified in Section 106. Section 106 of Transfer of Property Act, to the extent it is relevant, provides that in the absence of a contract or local law or usage to the contrary, a lease of immoveable property for other than agricultural or manufacturing purposes shall be deemed to be a lease from month to month, terminable, on the part of either lessor or lessee, by fifteen days' notice. Therefore, since the defendants allowed the plaintiff to continue in possession of the tenancy premises and also accepted rent from it, even after the term of the lease had expired by afflux of time, the lease came to be renewed from month to month being a lease for commercial purpose. In