Case: Ram Bharosey Lal Gupta(D) by Lrs. &amp; Others Vs. M/s. Hindustan Petroleum Corp. Ltd. &amp; Another

In the year 1977, the Parliament enacted the law, namely, the Caltex [Acquisition of Shares of Caltex Oil Refining (India) Ltd. and of the undertakings in India of Caltex (India) Limited] Act 1977, being Act No. 17 of 1977 (hereinafter referred to as the Caltex Act) as well as of M/s Hindustan Petroleum Corporation Ltd. as the successor of the original lessee5. The first respondent Hindustan Petroleum Corporation Ltd. is the successor of original lessee. On 15.04.1983, the appellant (since deceased) redeemed the said mortgaged property and the same was accordingly informed to the first respondent6. On 13.06.1983, the appellant issued a notice under Section 106 and 111 (g) of the Transfer of Property Act (hereinafter referred to as the T.P. Act) to respondent No.1 determining the tenancy of suit schedule property and directed the first respondent to vacate the same upon the expiry of the period of the notice and to hand over vacant possession of the same to him. The first respondent never sent any reply to the said notice7. A suit for ejectment of the respondents and for the possession of the suit schedule property was filed on 27.01.1984 despite service of notice of determination of tenancy which was neither replied nor complied with the demand for delivering the vacant possession of the leased property in favour of the appellant. The original suit was filed by the appellant seeking for arrears of rent and decree of eviction against the first respondent and to pass an appropriate decree against it8. During the pendency of the suit, on 27.06.1984 the first respondent sent a notice to the appellant to execute the renewal of lease deed and in the said notice it had made reference about their notice dated 1.04.1980, wherein it is stated that it has sent a notice to the appellant for renewal of lease deed and undisputedly the notice was not sent to the mortgagee as the leased property was mortgaged in his favour and the rent was being paid to him and he was receiving rent upto April, 1983 in respect of the suit schedule property9. The first respondent filed written statement denying the allegations made in the plaint and further specifically pleaded that the lease deed contemplated a provision for the renewal of the lease of the plot for a period of 20 years and a plea was taken that the notice for renewal of the lease was sent to the appellant. The respondent No. 2 filed an application for impleadment in the original suit proceeding which was allowed by the trial court. He also filed a written statement in the original suit10. On 09.02.1987, the trial court framed the issues and case went for trial where the suit for arrears of rent of Rs. 450/- was decreed but held that the appellant was not entitled to terminate the tenancy in view of the Act of 1977 as the said Act is a Special Act and prevails over the Transfer of Property Act11. On 13.03.1987, aggrieved by the judgment and decree of the trial court the appellant filed Civil Appeal No. 45 of 1987 before the Ist Additional District Judge Mainpuri. The Ist appellate court vide its judgment dated 10.08.1988, allowed the appeal by setting aside the judgment and decree of the trial court after holding that the provisions of the Transfer of Property Act apply to the property in question and the tenancy of the first respondent has rightly been determined by the appellant. The respondents herein being aggrieved by the said order of the appellate court filed second appeal No. 1812 of 1988 before the High Court of Judicature at Allahabad. The said second appeal was admitted on the following substantial question of law:(1) Whether under clause 3 (d) of the lease deed executed between Mansa Ram and M/s Caltex India Ltd., the lessor was under the legal obligation to renew the lease term for further period of 20 years, if the conditions of clause 3 (d) were complied with?12. The second appeal was allowed by the High Court by answering the aforesaid substantial question of law in favour of the first respondent13. During pendency of the second appeal, the appellant Ram Bharosey Lal Gupta expired. An application for substitution of legal representatives of the deceased appellant was filed by them along with applications for condonation of delay in filing the said substitution application and setting aside abatement. The High Court after hearing the parties answered the substantial question of law in the second appeal and set aside the judgment of the first appellate court and allowed the same by its judgment dated 04.07.2007.

Court's reasoning:
By careful reading of the said clause of the lease deed having regard to the undisputed fact that the demised premises was mortgaged in favour of the mortgagee with possession as the appellant had executed mortgage deed in his favour on 12.01.1962, he continued to be a mortgagee till the property was redeemed in his favour on 15.4.1983. It is also the case of the first respondent that it had sent a notice for renewal of the lease deed to the appellant, but not to the mortgagee as he had stepped into the shoes of the owner of the mortgaged property till the same was redeemed to the appellant on 15.04.1983. In view of the above undisputed fact to avail the benefit of Clause 3 (d) of the lease deed, the first respondent should have sent the notice to the mortgagee of the property seeking renewal of lease of the demised property as provided under the above clause. Therefore, the first respondent Corporation has failed to exercise its right to get the renewal of lease in respect of the demised premises. This aspect of the matter has been overlooked by both the trial court as well as the High Court though the first appellate court considered this aspect of the matter in its judgment. Therefore, the determination of tenancy of the demised property by the appellant under Section 106 of the T.P. Act is perfectly legal and valid. Further, it has been held that the first respondent after termination of tenancy continued in possession of the property as a tenant of holding-over. Thus, in law, holding over of the suit schedule property by the first respondent after the termination of lease is that of a trespasser not a tenant and therefore, it becomes liable to pay mesne profits by way of damages to the appellantsIn view of the undisputed facts referred to supra and the clause 3 (d) of the lease deed regarding the renewal of lease for a period of 20 years after expiry of the initial period of renewal it has come to an end on 1.7.2000. Therefore, the first appellate court was right in holding that the possession of the demised property by the first respondent Corporation is holding over month to month and therefore it is a trespasser of the said schedule property and therefore invoking Section 106 of the T.P. Act by the appellant and determining the tenancy by him and filing the suit for arrears of rent and also decree of ejectment of the first respondent from the demised premises is legally justified. Further, with reference to Section 7 of the Caltex Act the action of the first respondent is unfair as there is no fairness, reasonableness and non- arbitrariness on its part to avail the right under the above provision for continuing as a tenant in respect of the demised property. Hence, we are required to set aside the impugned judgment of the second appellate court and restore the judgment and decree of the first appellate court. The first respondent Corporation is not even willing to give fair and reasonable rent as it has offered only Rs.5000/- per month whereas the rental market value of the property according to the appellants counsel is more than Rs.30,000/- per monthTherefore, we are of the view that the aforesaid decision of this Court on all fours be applicable to the fact situation in favour of the appellants.