UCO Bank vs Kamlesh Gandotra and Others

The facts leading to the filing of this Civil Ist Appeal directed against the Decree dated 14.02.2011 of the Principal District Judge, Jammu

whereby respondents' Suit for appellant's eviction from House No. 92-B Block-A Gandhi Nagar, Jammu and compensation for use and

occupation thereof was decreed against the Appellant may, in brief, be stated thus:-

House No. 92-B Block A, Gandhinagar, Jammu comprising of a Main Hall with 1782.23 Sq.ft Carpet area and basement with 601.84 Sq.ft area

was leased out by the predecessor-in-interest of the respondents to the Appellant- UCO Bank vide Lease Deed dated January 8, 1993 for a

period of ten years with effect from December 16, 1992 at a monthly rent of Rs. 8,695/- with 20% increase in the monthly rent after the expiry of

five years. The Lease Deed executed by the parties inter alia provided for a further lease of five years after the expiry of the initial period of lease,

on mutually acceptable terms, conditions and covenants. During the currency of the lease, the partition of the tenanted premises was notified to the

Appellant who thereafter started paying rent, as suggested, to the respondents in whom the property was stated settled.

Before the expiry of the period of Lease, the appellant, through its Advocate served Notice dated October 03, 2002 expressing its desire for a

new lease of five years after the expiry of the earlier lease on enhanced rent @ 15% over and above the existing rate invoking Clause 4 (f) of the

Lease Deed which provided for the grant of fresh lease on mutually acceptable terms, conditions and covenants.

Though before the expiry of the initial lease, there were negotiations between the parties for a fresh Lease, yet the respondents declined the

appellant's request and served Notice dated January 03, 2003 on the appellant terminating its tenancy and requiring it to handover the possession

of the premises within one month from the date of determination of the tenancy. Thereafter, the parties again entered into negotiation for finalizing

the fresh lease.

A proposal indicating settlement between the parties was accordingly sent by the Appellant to the respondents informing them to offer their

premises for lease on the suggested terms. This was, however, not acceptable to the respondents, who, in turn, informed the appellant their own

terms and conditions for the new lease for another five years specifically indicating that the total Carpet area of the premises shall remain same as it

was accepted and acknowledged earlier. The rate of rent for further lease was indicated at the rate of Rs. 30/- per sq. ft. The respondents'

proposal was not acceptable to the Appellant, who would not agree to accept and reflect the same Carpet Area in the new lease as it existed

earlier, as also the rent claimed by the respondents. The respondents, thereafter, again issued notice to the appellant on 11.03.2006 through their

Advocate determining the tenancy and requiring the appellant to vacate the premises. The appellant was informed that after the determination of the

tenancy, they would charge Rs. 30/- Sq.ft. as compensation for the use and occupation of the premises.

The appellant did not vacate the premises and the respondents thereafter filed Suit for appellant's eviction and recovery of compensation for use

and occupation of the premises @ Rs. 35/- per Sq.ft. along with interest @ 12% per annum.

Controverting the case set up by the respondents in the Plaint, it was pleaded by the appellant that after the exercise of its option in terms of

Clause 4(f) of the Lease Deed, both the parties had agreed for fresh lease for a period of ten years on monthly rent of Rs. 12/- per Sq.ft. besides

other terms and conditions of the proposed lease, but the respondents backed out insisting for taking the carpet area of the lease hold as 2384.07

Sq.ft and not 2175 Sq.ft., as proposed by the appellant.

On the basis of the pleas raised in its Written Statement, the appellant sought dismissal of the respondents' Suit, inter alia, urging that its tenancy

having been impliedly continued by the respondents, the possession of the appellant was not in any way unauthorized.

In view of their pleadings, the Trial Court put the parties to issues, which read thus:-

Whether the Suit suffers from misjoinder of parties? OPD

Whether the plaintiffs have not paid proper court fee and what is its effect? OPP

Whether the defendant's lease of the Suit premises stands terminated by the efflux of time? OPP

Whether the plaintiffs have renewed the lease deed for further ten years? OPD

If the Issue No. 3 is proved in affirmative, whether the defendants are liable to pay a sum of Rs. 23,80,099/- as compensation for use and

occupation of the Suit premises from 16.12.2002 till April 2006 and after that @ Rs. 35/0 per Sq.ft till the delivery of possession along with

interest? OPP.

Relief. OP Parties.

Issue Nos. 1 and 2 were decided against the appellant vide Trial Court's order of March 18, 2008.

The respondents produced Dheeraj Bali Relationship Manager Relegare Securities Limited and Kulbir Singh besides Jia Lal, the predecessor-

ininterest of the respondents, as their witnesses in support of their claim.

The Appellant, on the other hand, produced Romesh Kumar Trakroo, Gopi Chand, Deputy General Manager, UCO Bank, Padam Singh

Choudhary and Badri Nath, as their witnesses to rebut the case set up by the respondents and discharge the onus of proof of the issues which lay

upon them.

Appreciating the evidence led by the parties on Issue Nos. 3 and 4, the Trial Court came to the conclusion that no fresh lease deed having

been executed by the parties before the expiry of the initial lease, the appellant's possession over the suit premises was un-authorized after the

determination of its tenancy by efflux of time. Issue Nos. 3 and 4 were decided accordingly rejecting the appellant's claim to stay in the premises as

tenant.

In view of the findings of the Trial Court on Issue Nos. 3 and 4 and on the basis of the evidence of the parties, the respondents were held

entitled to compensation @ Rs. 29/- per Sq.ft. per month with effect from 17.12.2002, until its realization along with interest @ 7.5% per annum

for total area of 2384.07 Sq. ft. Issue No. 5 was decided accordingly in favour of the respondents and against the appellant. Based on the findings

on issue Nos. 3 to 5, the respondents' suit was, accordingly, decreed.

Aggrieved by the Decree of the trial Court, the appellant has preferred this Civil First Appeal seeking setting aside of the Decree and Judgment

of the Trial Court.

Sri U. K. Jalali, learned Senior Counsel appearing for the appellant submitted that pursuant to the exercise of option by the appellant in terms

of Clause 4 (f) of the Lease Deed, the earlier lease stood extended making the appellant's possession authorized and no Decree for its eviction or

payment of compensation for use and occupation of the leased premises, could, therefore, be passed against the appellant. He would alternatively

submit that having been permitted by the respondents to stay in the Suit premises pending negotiations and without any reservation, the appellant's

possession was permissive and the finding of the trial Court to the contrary, was therefore unwarranted. Another limb of his argument is that the

acceptance of rent by the respondents after the expiry of the initial period of lease and their request to adjust part of the rent towards loan taken by

them from the appellant-Bank demonstrates extension of lease. The appellant's eviction from the premises in question, as ordered by the trial Court

is on the above pleas urged unwarranted.

The finding of the Trial Court on Issue No. 5 is questioned by the appellant's learned counsel urging that the respondents had failed to produce

any sustainable evidence to prove as to what was the market rate of rent for similar accommodation in the vicinity of the Suit premises and, in this

view of the matter, the issue was required to be decided against the respondents. The Decree of the Trial Court holding the appellant liable to pay

compensation @ Rs. 29/- per Sq. ft. per month to the respondents is urged illegal.

Per contra, Sri Rajneesh Oswal, learned counsel for the respondents would submit that there being no agreement between the parties for fresh

lease on mutually acceptable terms and conditions, the appellant's possession after the expiry of the lease, by efflux of time was that of a tenant at

sufferance, who, in law, was liable to eviction and payment of compensation so long as it remained in occupation of the premises.

Contesting the proposition propounded by the appellant's counsel that exercise of option by the appellant had resulted in extension of the

original lease, the learned counsel would submit that Clause 4(f) of the Lease Deed between the parties did not contemplate any extension of the

existing lease and all that was intended by the parties and which even otherwise stood demonstrated by explicitly clear phraseology employed in

Clause 4(f) of the lease deed, was the creation of a fresh lease between the parties on exercise of option during the period of initial lease, on

mutually acceptable terms, covenants and conditions.

Dealing with the appellant's submission of respondents' omission to lead any evidence justifying award of compensation @ Rs. 29/- per Sq.ft.

per month, the learned counsel submitted that the respondents had led cogent evidence to prove the market rate of rent in the close vicinity of the

premises in question to discharge the onus of proof of Issue No. 5. It is additionally submitted that rather than leading any evidence controverting

the evidence produced by the respondents in this respect, the appellant had produced such evidence in the case which too proved that the rate

claimed by the respondents for use and occupation of the premises was the prevalent market rate of rent for similar premises in the vicinity.

On the above submissions, the learned counsel, therefore, justifies the findings of the trial Court on Issue Nos. 3 to 5.

I have considered the submissions of learned counsel for the parties and gone through the evidence produced by them in the light of the case

law cited at the Bar.

It may not be necessary to refer to the evidence led by the parties in the case, for, the parties are not at variance on facts relevant for

determination of Issue Nos. 3 and 4. It would be appropriate at this stage to refer to some portions of the appellant's Written Statement filed in

answer to the respondents' Plaint.

Referring to the result of negotiations and the points agreed to by the parties, what the respondents deduced therefrom is reflected in later

portion of paragraph No. 2 of the Written Statement, which is reproduced hereunder for reference:-

The perusal of the above settlement/letter categorically reveals that the enhanced rent was settled at Rs. 12/- per sq. feet and that was with regard

to the carpet area which was stated by the plaintiff No. 1 and his son to be 2175 Sq.ft and the rent was worked out to the tune of Rs. 26100/- and

the same was payable w.e.f. 27.12.2002 and in accordance with clause III of this agreement the landlord and his co-sharers were required to

execute a Lease Deed for a period of 10 years (5 years + 5 years) and the rent was agreed to be divided in four parts and will be deposited in

their separate accounts. It was further made clear part from other things that the outstanding in the sum of Rs. 47000/- in the loan account of

landlord which was taken by him for purchase of Generator Set and which was overdue to be paid was also be recovered from the landlord. It

was further agreed that the bank will give a sum of Rs. 1.50 lacs interest free advance to be recovered in eight monthly installments from enhanced

rate of rent and the landlord have agreed to carry out necessary white & colour wash, civil works and making the demised premises in good

condition. The defendant no. 1 bank was directed by the controlling authority i.e. Assistant General Manager to obtain offer letter in triplicate from

the landlords and forward it in duplicate to them accordingly on 03.09.2003 the plaintiffs gave offer letter but very cleverly instead of writing 2175

carpet area which was agreed by tem in the discussion with the Assistant General Manager, New Delhi, they mentioned area as 2384.07 Sq. feet.

The offer letter dated 03.09.2003 is enclosed herewith and marked as Annexure-D5. The plaintiff no. 1 through controlling office of the defendant

no. 1 got a direction that Rs. 80,000/- be released to the plaintiffs and the same was paid to them on 10.10.2003 for the purpose of starting repair

and renovation activities and mentioned in the letter dated 27.08.2003 of Assistant General Manager, Regional Office, New Delhi. The plaintiffs

neither initiated any repair /rectification or civil work in the demised premises nor executed any fresh lease deed for a period of 10 years i.e. (5+5)

as per the spirit of letter dated 27.08.2003 and started demanding more interest free loan and more payment of rent with regard to the total area

and not carpet area as agreed by them in the Regional Office of the defendant No. 1 bank at New Delhi. The defendant no. 1 have vide letter

dated 05.09.2003 brought to the notice of Regional Office, New Delhi that the plaintiff No. 1 was demanding rent on total area and not on carpet

area and further it was brought to the notice of Regional Office that plaintiff no. 1 was also demanding a sum of Rs. 2.50 lacs interest free loan

recoverable from 40% of the rent as installments per month till the advance was liquidated. The copy of letter dated 05.09.2003 is enclosed

herewith and marked as Annexure-D6. The Regional Office vide letter dated 01.10.2003 wrote to defendant No. 1 bank that the carpet area be

got measured through an approved Engineer. The defendant No. 1 accordingly through approved Architects IPMG Architects Engineers, Valuers

and Interior Designers got the carpet area measured physically and it was calculated at 1948 Sq.feet. Copy of the letter of Architect dated

16.10.2003 is enclosed herewith and marked as Annexure-D7. The plaintiffs after obtaining a sum of Rs. 80,000/- against agreed enhanced rent at

the rate of Rs. 12/- per sq.feet as carpet area did not start any repair/renovation, white and colour wash, civil work activities nor executed lease

deed and started misbehaving and abusing the bank officers and staff making holes on the roof of the demised premises causing extensive damage

to the property of the bank, starting threatening the officials of the bank for dire consequences, threatening the disconnection of electricity and

water connections. The nuisance of leaking the roof is still continuing. Most of the sign boards of the bank were removed so much so the entry of

the bank for public was also threatened to be disrupted. The defendant no. 1 bank has to report the indecence behaviour of the landlord to Police

Station Gandhinagar, Jammu. Copy of one such complaints is enclosed herewith and marked as Annexure-D8. The plaintiffs did not stop

extending threats to the employees of the bank and in this regard two notices/reply notices dated 09.12.2005 & 25.12.2005 respectively sent by

defendant no. 1 bank through counsel are attached herewith for perusal of this Hon'ble Court and marked as Annexures D-9 & D-10

respectively.

It is additionally indicated by them in paragraph No. 3 of the Written Statement that the respondents had impliedly extended the lease for a

further period. According to the appellant, the respondents had backed out and had not agreed for execution of fresh lease deed.

In the light of the above pleadings of the appellant, regard needs to be had to the provisions of Clause 4(f) of the Original Lease, which for

facility of reference, is reproduced hereunder:-

4(f) If the lessee shall be desirous of taking a new lease of the demised premises after the expiration of the term hereby granted and such its

desire shall give to the lessor or leave at its usual or last known place of residence in Jammu Notice in writing not less than one month before the

expiration of the term then the lessor will at or before the expiration of the term hereby granted at the costs of the lessee grant to the lessee a new

lease of the demised premises for a further period of 5 years to commence from and after the expiration of the term hereby granted at such rate of

enhanced rent and subject to such terms, covenants and conditions as are mutually acceptable to the parties to this deed.

The phraseology used in the above clause is explicitly clear and leaves no manner of doubt that the parties had, in unequivocal terms agreed

that in the event of lessor's exercising option for a fresh lease for a further period of five years, it was required to exercise option by serving a

notice on the lessor not less than one month before the expiration of the term of lease and thereafter the new lease of five years would come into

operation only if the parties would mutually agree on the enhanced rate of rent for the new lease period and the terms, covenants and conditions

governing the new lease.

Clause 4(f), therefore, does not talk of any automatic extension of initial lease on the exercise of option, as contended by the appellant's

learned counsel. The Clause aforesaid eloquently speaks of the intention of the parties that fresh lease for five years would come into operation

only if the parties would agree on the terms, covenants and conditions for the new lease including the enhanced rate of rent, and that too before the

expiry of the initial period of lease.

It is not disputed by the parties that there was no agreement between the parties on the terms, conditions, covenants and rent that would

govern the new lease.

Although there appears to have been some agreement between the parties at some point of time on the rate of rent but even that failed to

mature when the appellant insisted for reduction of the carpet area as it was accepted and acknowledged in the earlier lease deed. Therefore, there

being substantial disagreement between the parties as to how much Carpet area would be lease hold, their tentative agreement on the rate of rent,

too looses significance. As a matter of fact, from the appellant's side too, there was actually no agreement as such even on rent, in that, pursuant to

the negotiations, a fresh offer had to be initiated by the respondents to which the appellant had to take final decision on the acceptance or

otherwise of the proposed terms, conditions and covenants for the new lease, which included the monthly rent of the premises. With the

disagreement of the respondents to make any offer, as suggested by the appellant, all negotiations ended concluding finally that the parties would

not agree on the terms, covenants, conditions and rent for the new lease. There was, therefore, no agreement between the parties for a new lease

before and even after the expiry of the initial lease.

The argument of the appellant's learned counsel that there was extension and in the alternative that there was an agreement between the parties

for permitting the appellant to remain in possession of the premises is, therefore, found without merit.

The findings of the Trial Court on Issue Nos. 3 and 4 that the parties had not agreed for a fresh lease and the possession of the appellant over

the premises was unauthorized after the determination of the existing lease by efflux of time fixed in the Principal lease is, therefore, found well

merited.

In this view of the matter, there being no agreement between the parties on any fresh lease before the expiry of the earlier lease, the possession

of the appellant over the tenanted premises, after the determination of the lease by efflux of time was, therefore, that of a tenant at sufferance. The

rent deposited by the appellant in the account of the respondents and its use thereof by the respondents, without any further agreement between

the parties to permit the appellant to remain in possession of the premises on any agreed terms and conditions, would, at the most, be that of a

tenant 'holding over' and nothing beyond that. The appellant had, therefore, no right to remain in possession of the premises in the absence of any

mutual agreement between the parties on the terms, conditions and covenants of a fresh Lease after the expiry of the earlier lease and

determination of tenancy. Its occupation was, therefore, un-authorized, pure and simple.

Perusal of learned counsel's submission that acceptance of rent by the respondents after the expiry of the initial period of lease, makes the

possession of the appellant permissive and the respondents were, therefore, disentitled to bring any suit for their eviction, is misconceived, for, the

legal position of a tenant whose tenancy determines by efflux of time and in the absence of any fresh extension of lease in terms of the earlier lease

deed, or pursuant to any agreement between the landlord and the tenant for permitting the tenant to stay in the premises, is well settled. It would be

advantageous at this stage to refer to what was held by their Lordships of Hon'ble Supreme Court of India in M/s. Raptakos Brett and Co. Ltd.

Vs. Ganesh Property, and Shanti Prasad Devi and Another Vs. Shankar Mahto and Others, , where while dealing with similar issues, it was held

as follows:-

M/s. Raptakos Brett & Co. Ltd. V. Ganesh Property:

In view of the aforesaid settled legal position, it must be held that on the expiry of the period of lease, the erstwhile lessee continues in

possession because of the law of the land, namely that the original landlord cannot physically throw out such an erstwhile tenant by force. He must

get his claim for possession adjudicated by a competent Court as per the relevant provisions of law. The status of an erstwhile tenant has to be

treated as a tenant at sufferance akin to a trespasser having no independent right to continue in possession.

Shanti Prasad Devi and another v. Shanker Mahto and others:

We fully agree with the High Court and the first appellate Court below that on expiry of period of lease, mere acceptance of rent for the

subsequent months in which the lessee continued to occupy the lease premises cannot be said to be a conduct signifying 'assent' to the continuance

of the lessee even after expiry of lease period. To the legal notice seeking renewal of lease, the lessor gave no reply. The agreement of renewal

contained in Clause (7) read with clause (9) required fulfillment of two conditions; first the exercise of option of renewal by the lessee before the

expiry of the original period of lease and second, fixation of terms and conditions for the renewed period of lease by mutual consent and in absence

thereof through the mediation of local Mukhia or Panchas of the village. The aforesaid renewal clauses (7) and (9) in the agreement of lease clearly

fell within the expression 'agreement to the contrary' used in Section 116 of the Transfer of Property Act under the aforesaid clauses option to seek

renewal was to be exercised before expiry of the lease and on specified conditions.

The lessor in the present case had neither expressly nor impliedly agreed for renewal. The renewal as provided in the original contract was

required to be obtained by following a specified procedure i.e. on mutually agreed terms or in the alternative through the mediation of Mukhias and

Panchas. In the instant case, there is a renewal clause in the contract prescribing a particular period and mode of renewal which was 'an agreement

to the contrary' within the meaning of Section 116 of the Transfer of Property Act. In the face of specific clauses (7) and (9) for seeking renewal

there could be no implied renewal by 'holding over' on mere acceptance of the rent offered by the lessee. In the instant case, option of renewal was

exercised not in accordance with the terms of renewal clause that is before the expiry of lease. It was exercised after expiry of lease and the lessee

continued to remain in use and occupation of the leased premises. The rent offered was accepted by the lessor for the period the lessee overstayed

on the leased premises. The lessee, in the above circumstances, could not claim that he was 'holding over' as a lessee within the meaning of Section

116 of the Transfer of Property Act.

In view of the above legal position, the findings returned by the Trial Court on Issue Nos. 3 and 4 are, accordingly, affirmed.

Coming to the next contention of the appellant's learned counsel that the Trial Court has erred in holding that the market monthly rent in the

vicinity of the suit premises as fixed by the Trial Court was not supported by the respondents' evidence, it is found on facts that the statement made

by Jia Lal Gandotra, on the market rate of rent and other witnesses of the respondents namely Dheeraj Bali and Kulbir Singh, had remained

unchallenged during their cross-examination. Not only this, rather than leading evidence to controvert the evidence produced by the respondents to

prove the market rate of rent in the locality, even the evidence produced by the appellant amply supports the respondents' evidence on the market

rate of rent of the premises. By production of the offer letters that the parties had given to the appellant to offer their premises on rent, the appellant

has supported the respondents' case that the rate at which they have been held entitled to compensation from the appellant is far less than the rate

on which the parties had offered their premises to the appellant.

In these circumstances, there is no substance in the appellant's learned counsel's submission that the findings returned by the Trial Court on

Issue No. 5 are not supported by the evidence. The evidence led by the parties on Issue No. 5 has been properly appreciated by the Trial Court

which has given cogent reasons for holding the respondents entitled to compensation for use and occupation of the premises at the rate of Rs. 29/-

per sq. ft. per month.

The finding of the Trial Court on Issue No. 5 too is, therefore, affirmed.

For all what has been said above, the finding of the Trial Court on Issue Nos. 3 to 5 is, therefore, affirmed.

This appeal is, accordingly, found without merit, hence dismissed with costs of Rs. 10,000/- . Registrar to draw the decree.