Case: R. Kempraj Vs. M/S. Barton Son &amp; Co

2. The respondent entered into a deed of lease on October 26, 1951 with the appellant in respect of premises Nos. 8 and 9, Mahatma Gandhi Road, (South Parade), Civil Station, Bangalore. It was stipulated that the lease would be for a period of 10 years in the first instance with effect from November 1, 1961 with an option to the lessee to renew the same as long as desired as provided". Clauses 9 and 10 which are material may beThe lessee shall have the right to renew the lease of the scheduled premises at the end of the present period of ten years herein secured on the same rental of Rs. 450 per month, for a similar period and for further similar periods thereafter on the same terms and conditions as are set forth herein; and the Lessee shall be permitted and shall have the right to remain in occupation of the premises on the same terms and conditions for any further periods of ten years as long as they desire to do so. 10. The Lessor shall not raise any objection whatsoever to the Lessee exercising his option to renew the lease for any further periods of ten years on the same terms and conditions as long as they desire to be in occupation, provided that the Lessee shall not have the right to transfer the lease or alienate any right thereunder."3. It appears that before the expiry of the period of ten years from the date of the commencement of the lease the lessee wrote to the lessor informing him of the intention to exercise the option given to the lessee under the deed of lease to get the same renewed on the same terms and conditions as before for a period of ten years from November 1, 1961. The lessor did not comply with the request. After serving a notice the lessee filed a suit for specific performance of the covenant in the lease for renewal. It was prayed that the lessor be directed to execute a registered deed of lease in favour of the lessee and if he failed to do the court should execute a deed in his favour. The lessor pleaded, inter alia, that the condition relating to renewal was hit by the rule against perpetuity. Certain other pleas were taken with which we are not concerned. The trial court decreed the suit. The first appellate court and the High Court affirmed the decree.

Court's reasoning:
4. The rule against perpetuity is embodied in S. 14 of the Transfer of Property Act, hereinafter called the Act. According to it no transfer of property can operate to create an interest which is to take effect after the lifetime of one or more persons living at the date of such transfer and the minority of some persons who shall be in existence at the expiration of that period and to whom, if he attains full age, the interest created is to belong.It is well known that the rule against perpetuity is founded on the principle that the liberty of alienation "shall not be exercised to its own destruction and that all contrivances shall be void which tend to create a perpetuity or place property forever out of the reach of the exercise of the power of alientation".The words "transfer of property" have been defined by section 5 of the Act to mean an act by which a living person conveys property in present or in future to one or more other living persons etc. The words "living persons" include a Company or association or body of individuals. Section 105 of the Act defines "lease".A lease of immovable property is a transfer or 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. A lease is not a mere contract but it is a transfer of an interest in land and creates an right in rem. Owing to the provisions of section 105 a lease in perpetuity can be created but even then an interest still remains the lessor which is called aare unable to agree. Section 14 is applicable only where there is transfer of property. Even if creation of a leasehold interest is a transfer of a right in property and would fall within the expression "transfer of property" the transfer was for a period of ten years only by means of the indenture Exh. P-1.The stipulation relating to renewal could not be regarded as transferring property or any rightssame principle would govern the present case.The clauses containing the option to get the lease renewed on the expiry of each term of ten years can by no means be regarded as creating an interest in property of the nature that would fall within the ambit of sectionequitable rule that the burden of a covenant runs with the land is to be found in section 40 of theAs pointed out in Mullas Transfer of Property Act, 5th Edn., at p. 194, section 40 expressly says that the right of the covenantee is not an interest in the land bound by the covenant nor an easement. It is not an interest because the Act does not recognise equitable estates and it cannot be said as Sir George Jessel said in Londonand South Western Rly. v. Gomm, (1882) 20 Ch D 562 at p. 580thatif a covenant "binds the land it creates an equitable interest in the land." The expression "covenant runs with the land" has been taken from the English law of real property. It is an exception to the general rule that all covenants are personal. Even on the footing that the clauses relating to renewal in the lease, in the present case, contain covenants running with the land the rule against perpetuity contained in section 14 of the Act would not be applicable as no interest in property has been created of the nature contemplated by that provision.