property law

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The Supreme Court has culled out the ratio decidendi of the decisions in Atma. Ram Mittal,37 Mneet K ~ m a l ; ~ ~. Ram Saroop Rai,39 Ramesh Chandrdo and ...
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PROPERTY LAW Annam Subrahmanyam * I INTRODUCTION THE TRANSFER of Property Act, 1882 (hereinafter TP Act) deals with the transfer of immovable property in general. The Act is not a complete code of transfer of property. The Act does not apply to all the transfers taking place in India. Its scope is limited. The Act applies to transfer by the act of parties and not by application of the law. Thus, its operations are limited to transfers by the act of parties only except in a few cases saved by section 2 of the Act. The Transfer of Property Act, 1882 is better understood not in isolation but when read with certain provisions of other enactments like Indian Contract Act, 1872 the Partition Act, 1893 General Clauses Act, 1897 Tenancy Act, Registration Act,1908 and the Securitisation and Reconstruction of Financial Assets Enforcement of Security Interest Act, 2002 and other important local tenancy laws. This year under survey, various issues of considerable significance on the property law have come up before the Supreme Court and the various high courts. The courts have scanned applications provisions of the TP Act on property rights issues and other relevant laws to interpret and delineate the legal position. These cases have been researched and summarised in the present survey on the property law. I1 GENERAL PRINCIPLES Vested interest The High Court of Calcutta in Goods of Purushottam Dass Bangur,' wherein the court considered application of provisions of section 12 of the Hindu Adoptions

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Senior Fellow, ICSSR, New Delhi (Emeritus Professor of Law) B.R. Ambedkar College of Law, Andhra University, Visakhapatnam, Andhra Pradesh. The author acknowledges the apt and able assistance rendered by Prof. (Dr.) Mohan R. Bolla, Principal, Kristu Jayanti College of Law and visiting Professor, Alliance University, Bangalore in the preparation of the research report. Email: [email protected] AIR 2016 Cal. 227.

Annual Survey of Indian Law and Maintenance Act, 1956 read with section 19 of the TP Act which deals with vested interest. A vested interest in a property is understood to mean that a person has acquired proprietary interest therein. However, the enjoyment of such proprietary interest may be postponed till the happening of a certain event. Once that event happens such person would enjoy proprietary rights in respect of the property. A coparcener in a Mitakshara coparcenary acquires an interest in the properties of the Hindu family on his birth. His interest is capable of variation by events such as birth, adoption or death in the coparcenary. In the event of a partition of the coparcenary, a coparcener is entitled to a share of the properties belonging to joint Hindu family. On partition his share gets defined. He can still continue to enjoy his share jointly with other family members or he can ask for partition of the properties by metes and bounds in accordance with the shares. This interest, which the coparcener in a mtakshara family acquires by his birth in the natural family, continues to remain with him in spite of the adoption in view of section 12 (b) of the Hindu Adoptions and Maintenance Act, 1956. Priority of rights Section 48 of the TP Act deals with the priority of rights. The rule enshrined under this section is based on the maxim 'qui prior est tempore potiorest jure '. It means he who is prior in time is stronger in law'. The one who has the advantage in time should have precedence in law as well, is the basis of the rule where two successive transfers of the same property have been effected. The section lays down the transfer effected later must submit to the earlier. In other words, the section embodies the rule of priority founded on law and justice. the High Court of Delhi discussed In Punjab and Sind Bankv. MMTC Li~nited,~ provisions of section 48 of TP Act order 34, rule 14 of Civil Procedure Code, 1908 (CPC) priority of charge or mortgagee vis-a-vis certificate holder under Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDB Act), mortgagor obtaining loan by deposit of title deed as well as credit facilities from bank and recovery certificate in favour of bank cannot effect prior charge of mortgagee. Held non-obstante clause in RDB Act would not over-ride prior charge of the mortgagor in view of section 48 of TP Act. If the mortgage does indeed exist, it will create a prior charge over the property, being prior in time on the basis of provisions of section 48 of the TPAct. The opinion

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Transfer of Property Act, 1882, s. 19 reads: Where, on a transfer of property, an interest therein is created in favour of a person without specifying the time when it is to take effect, or in terms specifying that it is to take effect forthwith or on the happening of an event which must happen, such interest is vested, unless a contrary intention appears from the terms of the transfer; A vested interest is not defeated by the death of the transferee before he obtains possession; Explanation- An intention that an interest shall not be vested is not to be inferred merely from a provision whereby the enjoyment thereof is postponed, or whereby a prior interest in the same property is given or reserved to some other person, or whereby income arising from the property is directed to be accumulated until the time of enjoyment arrives, or from a provision that if a particular event shall happen the interest shall pass to another person." 3 AIR 2016 Del 15.

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of the recovery officer that the recovery act, by virtue of the non-obstante provision in section 34, overrides a prior charge is unacceptable. The non-obstante clause would operate only where there is a conflict, and the court holds that the applicable rules themselves envision a situation where the recovery officer is confronted with a property that is already charged. Rule 11 of the second schedule as applied to the debt recovery officer, sets out how the recovery officer should investigate such a claim. The fact that the mortgage debt must be enforced by sale through a separate civil suit does not obviate the mortgage itself. So far as the debt recovery officer is concerned, rule 11 merely requires him to investigate, if evidence of a prior charge on the property exists, and then proceed accordingly. His task is not to finally give effect to the mortgage debt, nor is it to deny its existence in law. Indeed, his determination is not final and is subject to a civil suit that may be filed in that regard rule 11(6) which states, inter alia that 'the party against whom an order is made may institute a suit in a civil court to establish the right which he claims to the property in dispute; but, subject to the result of such suit, the order of the debt recovery officer shall be conclusive. ' Feeding the grant by estoppel In N. Venkateshappa v. M ~ n e m m a the , ~ Supreme Court discussed about the provisions of sections 7 and 5 of Karnataka Village Offices Abolition Act, 1961 deals with eviction of unauthorized holder- alienation made by holder of service inam land between period of appointed date and date when amendment act came into force, by principle of "feeding the grant by estoppel" alienation would ensure to benefit of alienee who would get good title to such land after re-grant to his alienor. It was held that alienee would not be "unauthorized holder" and proceeding for eviction cannot be initiated against alienee. The court held that though the holder or the authorized holder of a service inam land got title to such land only when it was actually re-granted to him under section 5 or 6 of the principal act, such title related back to the date of coming into force of the Act. From this, it would follow that if he purported to alienate such land before it was re-granted to him, but after the principal Act came into force, the doctrine of feeding the grant by estoppels embodied in section 43 of the TP Act, would ensure to the benefit of his alienee, who would get a good title to such land after such re-grant to his alienor. The court observed that as laid down in these cases,5upon re-grant of the land in favour of the holder of a service-inam, the re-grant must ensure to the benefit of the alienee, if such alienation was between February 1, 1963, and August 7, 1978. Further, upon such re-grant, the title of a holder of the Service-inam land would relate back to

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AIR 2016 SC 889. Lakshmana Gowda v. State of Karnataka, ILR 1980 Kar. 892; Syed Bhasheer Ahamed v. State of Karnataka, 1994 (1) Kar LJ 385.

Annual Survey of Indian Law the date of coming into force of the Act. In the circumstances, upon re-grant, the title of the predecessors of the respondents herein would relate back. The alienation effected by them on May 13, 1971, by principles of "feeding the grant by estoppel: would ensure to the benefit of the alienee who would get good title to such land after such re-grant. As observed by the Full Bench, where the alienation occurred between February 1,1963 and August 7,1978, the alienee would not be "unauthorized holder". In the circumstances, the tehsildar was not competent to initiate proceedings for eviction under section 7 of the Act against the alienee, namely, the predecessor in interest of the present appellant. Both the courts below were, therefore, right and justified in accepting the claim of the plaintiff appellant and the high court was completely in error in setting aside the concurrent view and allowing the second appeal. Right of ostensible owner and SARFAESI Act, 2002 In Sudha Sharma v. Punjab National Bank,6 the High Court of Uttarakhand considered the applicability of provisions of section 13 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and section 41 of TPAct. It was observed that enforcement of security interest cannot be opposed on the ground of purchaser being an ostensible owner of property. SARFAESI Act being complete Code in itself, taking recourse to provisions of section 4 1 of TPAct would not be tenable. As the aforesaid provision is not dependent on any other provision of law it is, in a way, complete Code in itself to enforce security interest. Thus, the court was inclined to hold that neither section 4 1 of the TP Act nor section 125 of the Companies Act, 1956 are applicable to the facts of the instant case. Principle in section 44 and transfer by co-owner In Syscon Consultants P.Ltd. v. M/s. Parimella Sanitary Prod. P. Ltd.,7 an agreement for sale of the joint property was executed by defendants. The property was already mortgaged with Co-operative bank. Under an agreement the vendors agreed to make good marketable title and to execute proper conveyance by joining necessary person so as to convey absolute title or to redeem any charge or encumbrance. Accordingly, the time for performance starts within one month from the date of the vendors making out a marketable title to the property. The agreement also contained a provision to join any other person or persons to covey an absolute title to the purchasers or for redeeming any mortgage. And thus, the suit by the plaintiffs originally had the bank as a party defendant, and, after clearing the loan, the Bank was deleted from the array of parties and Kishori and her husband were joined as defendants 7 and 8. The plaintiff purchaser was always ready and was willing to perform the obligation. He got discharged the mortgage with the bank by paying amount three times the amount of agreed consideration with the clear understanding that defendants thereafter executed sale deed.

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AIR2016Utt 1. AIR 2016 SC 4564.

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In view of the conduct of the parties, the court held that it was not a fit case to exercise discretionaryjurisdiction under article 136 of the Constitution of India.8Three prominent features of this case stare us in the face. First and foremost, on reading the correspondence between the parties, the apex court expressed satisfaction that the plaintiff has throughout been ready and willing to perform its obligations under the agreement to sell. In particular, a reference may be made to the letters dated April 4, 1986, and April 15, 1987, and the legal notice dated April 8, 1987. The other unique feature of this case is that the suit property is an island off the coast of Goa which is not readily capable of evaluation-indeed both sides were unable to the present market value to the court. This fact according to the court shows that monetary compensation would not suffice and be an adequate alternative to specific performance. The third unique feature of this case was that the plaintiff went to the extent of discharging the mortgage with the bank by paying a sum of Rs. 17 lakhs which was almost three times the amount of the consideration mentioned in the agreement, i.e., Rs. 6,50,000/-. The apex court relied on a long line of judgments9 based on the equitable principle, which states that even if the undivided share of one of the other heirs of the property cannot be transferred, the remaining share of the other heirs certainly can be transferred. In the facts and circumstances of the case, the grant of a decree to the extent of the share of defendants in favour of plaintiff was held not liable to be interfered with. Lis pendense Wharton's Law Dictionary has been defined 'lis pendens 'as pending suit. 'Lis' means a suit, action, controversy, or dispute, and dispute is a conflict or contest, while controversy is a disputed question, a suit at law; and the 'pendens' of the lis is not disturbed on in any manner affected by the fact of an appeal taken from one Court to another. The litigation or contest still goes on. Section 52 of the TP Act deals with the doctrine of lis pendens. It states that during pendency, in any Indian court of competent jurisdiction of any suit or proceeding, which is not collusive and in which any right to property is directly or specifically in question, the property cannot be transferred or dealt with by any party to the suit or proceedings so as to affect the rights of any other party there to under any decree or order which may be made therein except under the authority of court or such terms as it may impose. In Shaik Afial v. Mohd. Amjad Ali,1° a petition was filed seeking execution of registered sale deed in terms of a decree for specific performance and objection to the execution of registered sale deed raised by appellant purchaserpendent lite. The crucial aspect in the instant case was that in the suit filed by the appellant against the first defendant obtained an injunction restraining him or his men or agents from alienating

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Taherakhatoon (D) by Lrs. v. Salambin Mohammad (1999) 2 SCC 635. Kartar Singh v. Harjinder Singh (1990) 3 SCC 517; Sardar Singh v. Krishna Devi (Smq (1994) 4 SCC 18; A. Abdul Rashid Khan (Dead) v. P.A.K.A. Shahul Humid (2000) 10 SCC 636; Surinder Singh v. Kapoor Singh (Dead) Through LRs. (2005) 5 SCC 142. AIR 2016 Hyd 230.

Annual Survey of Indian Law the suit schedule property. The same was granted and subsequently, it was also made absolute. After his death, the defendants 2 and 3 were brought on record. Yet, the defendants sold part of the scheduled property to the appellant-third party. Thus, the third party-appellant is purchaserpendente lite but not absolute owner of the property in his own right. The defendants 2 and 3 did not bring to the notice of the trial court that pending suit they sold the property to the appellant. The appellant also did not get himself impleaded as a party in the suit by making an appropriate application. It was held that even though the appellant was not a party to the suit, he is bound by the decree passed by virtue of the provisions of section 52 of the TP Act. Therefore, he cannot set up an independent right in the schedule property and file a claim petition, taking objection to the execution of the registered sale deed in terms of the decree and judgment passed by the trial court. Rule 102 of Order XXI of CPC lays down that a purchaser of the suit property during the pendency of the litigation cannot resist the possession. Hence, as rightly held by the executing court, the execution application was held not maintainable. In Hemogenomics Private Limitedv. State of Odisha, l1 the High Court of Orissa discussed provisions of articles 14 and 226 of the Constitution of India, disqualification of tenderer in technical bid- decision taken without giving opportunity to tenderer to explain shortcomings pointed out by the technical committee, held arbitrary and violative of article 14 of Constitution even though it is a contractual matter, writ petition was held maintainable for enforcement of terms of contract. Lispendense in section 52 of the TP Act and provisions of Constitution of India, matter as to disqualifying tenderer in the technical bid is sub judice before court and grant of tender to another tenderer and allowing him to start functioning would be hit by doctrine of lispendens and held not permissible. It appears that the technical committee while taking a decision, has not given any opportunity to the petitioner to explain the shortcomings,whch had been pointed out in declaring it as disqualified in the t e c h c a l bid. This clearly indicates that the authorities have acted arbitrarily and unreasonably and, therefore, have violated article 14 of the Constitution of India. Therefore, the writ application was held maintainable for enforcement of terms of the contract I11 SPECIFIC TRANSFERS Agreement for sale and creation of charge In Puthiya P u r q i l Ramakrishnan v. Pullani Prabhakal; l 2 High Court of Kerala was asked to consider the provisions of sections 55(6)(b) and 100 of TPAct, 1882, section 17(l)(b) of Registration Act, 1908, regarding buyer's charge on property of unregistered agreement for sale. The court observed that a close reading of section 55(6)(b) of the TP Act would indicate that the creation of charge as per the said provision is dependent on the issue as to whether the buyer has improperly recognized

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AIR 2016 Ori 178. AIR 2016 Ker 66.

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or not. It is thus evident that if the buyer does not improperly decline to accept delivery of the property as per the terms of the agreement, a charge will be created in favour of the buyer in respect of the property by operation of the provision contained in section 55(6) (b). The charge claimed by the buyer over a property, which is the subject matter of an agreement for sale is therefore, a charge created in his favour by operation of law and not by virtue of the provisions of the agreement.As such, the question whether the agreement for sale is registered would be irrelevant. On the other hand, section 17(1) (b) of the Registration Act, 1908 provides that all non-testamentary instruments which purport or operate to create any interest of the value of 100 rupees and upwards, to or in immovable property are compulsorily registrable. The court observed that it is trite that an agreement for sale does not by itself create any interest in or charge on any property and that it only creates an obligation annexed to the ownership of the property. Therefore, the said provision does not apply to an agreement for sale. Further, explanation to section 17(2) of the Registration Act, 1908 clarifies that a document purporting or operating to effect a contract for the sale of immovable property shall not be deemed to require or ever to have required registration by reason only of the fact that such document contains a recital of the payment of any earnest money or of the whole or any part of the purchase money. It may not be out of place that the lawmakers in India might revisit section 17(1) (b) of the Registration Act, 1908. When the Act has been enacted the then framers of the Law must have set the minimum value as Rs1001- and upwards. Needless to mention that the minimum value needs a change in view of the change in the value of money. Mortgage by conditional sale Section 58 (c) of the TP Act, 1882,13deals with the mortgage by conditional sale. In Ramvilas (Dead) Thl: Lrs. v. Karim Khan,14R Bhanumathi J has dealt with the question whether the sale deed executed in favour of the appellants-defendants was only a mortgage as a security for repayment of the loan taken by the 1st respondentplaintiff. The apex court referred to the judicial precedents in Bhaskar WamanJoshi (D) v. Shrinarayan Rambilas Agarwal15 and Narasingerji Gyanagerji v. P.

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Supra note 2, s. 58 reads: "Mortgage", "mortgagor", "mortgagee", "mortgage-money" and "mortgage-deed" d e f i n e d . (a). . . .(b). . . .. (c) Mortgage by conditional sale.-Where, the mortgagor ostensibly sells the mortgaged property- on condition that on default of payment of the mortgage-money on a certain date the sale shall become absolute, or on condition that on such payment being made the sale shall become void, or on condition that on such payment being made the buyer shall transfer the property to the seller, the transaction is called mortgage by conditional sale and the mortgagee a mortgagee by conditional sale: 1[Provided that no such transaction shall be deemed to be a mortgage, unless the condition is embodied in the document which effects or purports to effect the sale.] Rarnvilas (Dead) Thr. Lrs. v. Karirn Khan, 2016 (12) SCALE 548. AIR 1960 SC 301.

Annual Survey of Indian Law Parthasaradhi.16 The apex court reiterated that the definition of a mortgage by conditional sale postulates the creation by the transfer of a relation of mortgagor and the mortgagee, the price being charged on the property conveyed. In a sale coupled with an agreement to reconvey, there is no relation of debtor and creditor nor is the price charged upon the property conveyed, but the sale is subject to an obligation to retransfer the property within the period specified. What distinguishes the two transactions is the relationship between debtor and creditor and the transfer being a security for the debt. The form in which the deed is clothed is not decisive. The definition of a mortgage by conditional sale itself contemplates an ostensible sale of the property. The Supreme Court held that as pointed out by the judicial committee of the Privy Council in Narasingerji Gyanagerji v. P. Parthasaradhi,17the question in each case is one of determination of the real character of the transaction to be ascertained from the provisions of the deed viewed in the light of surrounding circumstances. If the words are plain and unambiguous they must in the light of the evidence of surrounding circumstances be given their true legal effect. If there is ambiguity in the language employed, the intention may be ascertained from the contents of the deed with such extrinsic evidence as may by law be permitted to be adduced to show in what manner the language of the deed was related to existing facts. Oral evidence of intention is not admissible in interpreting the covenants of the deed but evidence to explain or even to contradict the recitals as distinguished from the terms of the documents may of course be given. Evidence of contemporaneous conduct is always admissible as a surrounding circumstance, but evidence as to subsequent conduct of the parties is inadmissible. In the light of the well-settled principles, the Supreme Court considered the sale deed and the agreement both dated June 14, 1972. In the sale deed, no condition was incorporated indicating that it would constitute mortgage by that conditional sale. It was clear that the 1st respondent-plaintiff had never intended to sell the property to the appellants-defendants. As rightly pointed out by the courts below, in the agreement it was clearly stated that if 1st respondent-plaintiff payback Rs.50001- by the specified date, then the sale deed would be canceled and 1" respondent-plaintiff would get back the land sold to the appellants-defendants. Therefore, it was opined that as held by the courts below, had it been the intention of the parties to sell the property, the parties would not have agreed for the return of the land on payment of Rs.50001-by the specified date. Hence, the court ruled that it need not interfere with the decisions of the lower courts which considered the transaction as a mortgage by conditional sale.

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AIR 1924 PC 226. Ibid.

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Mortgage by conditional sale and sale with option of purchase Pate1 Ravjibhai Bhulabhai (D) Thl: Lrs. v. Rahemanbhai M. Shaikh (D) Thr: Lrs.,18 is a case where the Supreme Court has mentioned clear dissection between mortgage by conditional sale and Sale with an option of purchase. Here the court considered conditional sale or mortgage and redemption of mortgage where a deed executed in favour of defendants titled as a conditional sale for a sum of Rs. 10,0001 -. The conditions were put in the deed that if repayment is made within five years, defendants shall handover possession of property in a suit back to plaintiff. It reflects that actual transaction between parties was of a loan, and relationship of debtor and creditor existed and deed in question is a mortgage by way of conditional sale. It was held that the order of high court decreeing suit for redemption in favour of the plaintiff proper. Distinguishing features between 'mortgage by conditional sale' and 'sale with an option to repurchase' are enumerated in Mulla's Transfer of Property Act as under: (i) In a mortgage with conditional sale, the relation of a debtor and a creditor subsists while in a sale with an option of re-purchase, there is no such relationship and the parties stand on an equal footing. (ii) A mortgage by conditional sale is effected by a single document, while a sale with an option of repurchase is generally effected with the help of two independent documents. (iii) In a mortgage with conditional sale the debt subsists as it is borrowing arrangement, while in a sale with an option of repurchase, there is no debt but a consideration for sale. (iv) In a mortgage with conditional sale, the amount of consideration is far below the value of the property in the market but in a sale with an option of repurchase the amount of consideration is generally equal to or very near to the value of the property. (v) In a mortgage with conditional sale, since this is a mortgage transaction, the right of redemption subsists in favour of the mortgagor despite the expiry of the time stipulated in the contract for its payment. The mortgagor has the option to redeem the mortgage and take back the property on the payment of the mortgage money, after the specified time, but in a sale with an option of repurchase, the original seller must re-purchase the property within the stipulated time period. If he commits a default the option of re-purchase is lost.

The Supreme Court referring to Tulsi v. Chandrika Prasad,19stated the court explaining the difference between mortgage by conditional sale or sale with condition to repurchase has observed as under:20

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AIR 2016 SC 2146. (2006) 8 SCC 322: AIR 2006 SC 3359. Id. at 327.

Annual Survey of Indian Law A distinction exists between a mortgage by way of conditional sale and a sale with condition of purchase. In the former, the debt subsists and a right to redeem remains with the debtor but in case of the latter the transaction does not evidence an arrangement of lending and borrowing and, thus, right to redeem is not reserved thereby. The apex court has adopted the definition of a mortgage by conditional sale ~ held that:22 given in P.L. Bapuswami v. N. P a t t q G o ~ n d e rit, ~was The definition of a mortgage by conditional sale postulates the creation by the transfer of a relation of mortgagor and mortgagee, the price being charged on the property conveyed. In a sale coupled with an agreement to reconvey there is no relation of debtor and creditor nor is the price charged upon the property conveyed, but the sale is subject to an obligation to retransfer property within the period specified. The distinction between the two transactions is the relationship of debtor and creditor and the transfer being a security for the debt. The form in which the deed is clothed is not decisive. The question in each case is one of determination of the real character of the transaction to the ascertained from the provisions of the document viewed, in the light of surroundingcircumstances.If the language is plain and unambiguous it must in the light of the evidence of surrounding circumstances, be given its true legal effect. In the case at hand i.e., PatelRavjibhai Bhulabhai (D) Thr: Lrs. v. Rahemanbhai M. Shaikh (D) THr: L ~ S the . , ~document ~ in question contained the condition as under:24 In this deed condition is that the said amount of Rs. 10,000.00 when we pay back to you within five years from today, you shall give back the said property to us with possession. And in the same manner, we shall have no right to ask back the same after expiry of the time limit. Needless to say, since the possession of the land was handed over to the mortgagee, no interest was charged. It has also come on record that the defendants leased the land to third parties, after possession was given by the plaintiffs in 1960. In the circumstances, after perusal of the evidence on record, we agree with the view taken by the high court.

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AIR 1966 SC 902. Id. at 903. AIR 2016 SC 2146. Id.at2149.

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Compulsory registerability of mortgage deed In Satti Venkateswara Reddy v. Mallidi Venkata R e d d ~the ,~~ document was styled as 'Memorandum of deposit of title deeds' authorising lender to take action for recovery of money on the basis of such deposit of titled deeds. It was held the transaction can be termed as mortgage deed in terms of section 58(Q ofAct, 1882 and the document is compulsorily registerable and also requires stamp duty. The court stated that the document in question contained two statements viz., i) the document relating to the land, which was registered as document no. 433 of 2003 was handed over as security for the loan amount; ii) In case of failure to repay the amount, the lender was given full rights to recover the amount against the property secured. If it is a simple document depositing title deed as a security, it would not have required registration, but when authorized the lender to take action for recovery of money on the basis of such deposit of title deed coupled with memorandum, it requires registration. The court opined that the distinction was not maintained by the trial court. The legal position was explained by the court. The document was executed on a white paper. Article 7 of schedule 1-A of the Indian Stamp Act, 1899 was amended by substituting the said Article under the Act 19 of 2005 w.e.J: 01.08.2005 requiring proper stamp duty. Article 35 of schedule 1-A of the Act, deals with mortgage deed. It was held that in either of the cases, it requires stamp duty and if it is mortgage deed, it further requires registration though it is styled as memorandum of deposit of title deeds. In another case of Shivaji Dagadu Mahangadev v. Aba Gopala Shinde,26the deed was executed on March 1, 1972. It refers to a property situated at Village Parkhandi, Taluka Wai, district Satara. The deed was between Shivaji Dagadu Mahangade and Aba Gopala Shinde, both agriculturists. It was stated therein that one month before the deed, the respondent had taken loan of Rs. 9,0001- from a Cooperative Bank and for that purpose Aba Shinde (respondent) has taken Rs. 10,0001from Shivaji Mahangade (appellant) and the deed thereafter states that to repay the amount the conditional sale deed was executed of the ancestral property and the possession with all the annexures was handed over to the appellant. It was stated in the deed that the property will be used for a period of 10 years and before 10 years the respondent shall hand over Rs. 10,0001- and after receipt of the amount, the property should be handed over to the respondent. If the respondent fails to pay the amount within period of 10 years, then the deed will not be considered as a conditional saledeed but a final sale-deed and thereafter, the respondent will have no interest left himself or anybody claiming through him. It was specified that this will be a document of mortgage. Thus, the document showed some ingredients of sale and some of mortgage. It is precisely because this language of the deed that dispute has arisen between the parties.

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AIR 2016 Hyd 24. AIR 2016 Born 213.

Annual Survey of Indian Law Going by the plain language of the deed, if the amount was not repaid by the Respondent within the stipulated period, the deed was to be considered as an absolute sale deed and Appellant was to become owner of the property. Both the courts have rendered the finding of fact that the amount was not paid within a period of 10 years. The court held that inspite of this finding of the fact, both the courts have directed the appellant to hand over possession to the Respondent on the basis that the mortgage had to be redeemed which is clearly erroneous. It may be submitted that the decision of the high court appears to be unfair based on the popular maxim 'once a mortgage always a mortgage.' The intention of the parties at the time of executing the deed was only a mortgage by conditional sale and not absolute sale. Mortgagor's right of redemption and the right of auction purchaser under the SARFAESI Act, 2002 In M/s Sree Jayalakshimi Textiles, Chitradurga v. M/s International Asset , ~ ~ 13(2) of the Securitisation Reconstruction CompanyPrivate Limited, M ~ m b a isection and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, rules 8,9 of Security Interest (Enforcement) Rules, 2002 and recovery of debt through auction sale of secured assets and certificate of sale issued in favour of auction purchaser, held mortgagor's right to redeem would not survive and sale cannot be set aside on ground of balancing equities or on mere circumstance that borrower is ready to repay entire dues. The right of redemption, which is embodied in section 60 of the TP Act, is available to the mortgagor unless it has been extinguished by the act of parties. In India, it is only on execution of the conveyance and registration of transfer of the mortgagor's interest by a registered instrument that the mortgagor's right to redeem would be extinguished. The mortgagor's right to redeem will survive until there has been completion of the sale by the mortgagee executing and registering a deed of conveyance. In the instant case, it was found that it happened by the issuance of a certificate of sale. However, if a certificate of sale had indeed been executed in favour of the auction purchaser, it would not have been possible to set aside the same on the ground of balancing equities or on the mere circumstance that the borrower was thereafter ready to repay the entire dues and meet other liabilities and expenses unless it could be demonstrated that the sale was vitiated by fraud or other irregularity. Hence, the court held that the petition lacked merit and was dismissed. Section 69 and 69A and the SARFAESI Act In its second report, the Narasimham Committee on Banking Sector Reforms observed that non-performing assets (NPA) in 1992 were uncomfortably high for most of the public sector banks. The committee could look at the scheme of mortgage in the TP Act, which is critical to the work of financial intermediaries. One of the measures recommended in the circumstances was to vest the financial institutions

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AIR 2016 Kar 40.

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through special statutes, the power of sale of the assets without intervention of the court and for reconstruction of assets. It was thus to be seen that the question of nonrecoverable or delayed recovery of debts advanced by the banks or financial institutions has been attracting attention and the matter was considered in depth by the committees specially constituted consisting of the experts in the field. In the prevalent situation where the amounts of dues are huge and hope of early recovery is less, it cannot be said that a more effective legislation for the purpose was uncalled for or that it could not be resorted to. After the Report of the Narasimham Committee, yet another committee was constituted headed by Andhyarujina for bringing about the needed steps within the legal framework. We are therefore, unable to find much substance in the submission made on behalf of the petitioners that while the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 was in operation it was uncalled for to have yet legislation for the recovery of the mounting dues. Considering the totality of circumstances and the financial climate world over, if it was thought as a matter of policy to have yet speedier legal method to recover the dues, such a policy decision cannot be faulted with nor is it a matter to be gone into by the courts to test the legitimacy of such a measure relating to financial policy. The Supreme Court has considered the main enforcing provision whch is pivotal to the whole controversy, namely, section 13 in chapter I11 of the, The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. It provides that a secured creditor may enforce any security interest without intervention of the court or tribunal irrespective of section 69 or section 69A of the TPAct where according to sub-section (2) of section 13, the borrower is a defaulter in repayment of the secured debt or any installment of repayment and further the debt standing against him has been classified as a non-performing asset by the secured creditor. Sub- section (2) of section 13 further provides that before taking any steps in the direction of realizing the dues, the secured creditor must serve a notice in writing to the borrower requiring him to discharge the liabilities within a period of 60 days failing which the secured creditor would be entitled to take any of the measures as provided in sub-section (4) of section 13. It was also noted that as per sub-section (3) of section 13 a notice given to the borrower must contain the details of the amounts payable and the secured assets against which the secured creditor proposes to proceed in the event of non-compliance with the notice given under sub-section (2) of Section 13."28The Securitization Act, 2002 section 13, Enforcement of security interest (1) Notwithstanding anything contained in section 69 or section 69A of the TP Act, any security interest created in favour of any secured creditor may be enforced, without the intervention of court or tribunal, by such creditor in accordance with the provisions of this Act.

28

M/SMadras Petrochem Ltd. v. Bifr,AIR 2016 SC 898: as quoted by R.F. Nariman J

Annual Survey of Indian Law Clog on redemption Mukhtiar Singh v. Budhasingh 29 deals with section 60 of the TPAct. The section provides that at any time after the money has become due, the mortgagor has a right, on payment or tender, at a proper time and place of the mortgagor money to require the mortgagee to deliver the mortgage deed and all documents relating to the mortgaged property and where the mortgagee is in possession of the mortgaged property, to deliver possession thereof to the mortgagor. Such a right of the mortgagor is called, in English Law, the equity of redemption. The mortgagor being an owner who has parted with some rights of ownership has a right to get back the mortgage deed or mortgaged property, in exercise of his right of ownership. The right of redemption recognized under the TP Act is thus a statutory and legal right which cannot be extinguished by any agreement made at the time of mortgage as part of the mortgage transaction. It was further observed that any provision incorporated in the mortgage deed to prevent or hamper the redemption would thus be void. The right of redemption, therefore, cannot be taken away. The court will ignore any contract the effect of which is to deprive the mortgagor of his right to redeem the mortgage. One thing, therefore, is clear, namely that the term in the mortgage contract, that on the failure or the mortgagor to redeem the mortgage within the specified period of six months the mortgagor will have no claim over the mortgaged property, and the mortgage deed will be deemed to be a deed of sale in favour of the mortgagee, cannot be sustained. It plainly takes away altogether, the mortgagor's right to redeem the mortgage after the specified period. This is not permissible, for "once a mortgage alwqs a mortgage "and therefore always redeemable. The same result also follows from section 60 of the TP Act. So, it was said in Mohammad Sher Kahn v. Seth Swami DqaL30 Both the courts below on appraisal of evidence have found that the incorporation of the term that the redemption shall not be redeemed for a period of 90 years is a clog on the equiv of redemption. In the connected appeal it has been found that date of May 2, 1968 in fact was fixed for execution of the sale deed of the suit land under the agreement dated April 10, 1968 but instead of getting the sale deed executed this mortgage deed was got executed and the plea in that case has been taken that the sale deed was to be got executed in the year 2025. All this according to the apex court would indicate the well calculated design of the appellants who instead of purchasing the land from the mortgagor wanted to keep a lien over the same for a period of 90 years which in the facts and circumstances as discussed above was misuse of their dominant status by the mortgagee who took benefit of the monetary need and financial stress of the respondents. Right to redemption of mortgaged property under OTS Scheme In Punjab and Sindh Bank v. Punjab Breeders Ltd.,31the respondent had mortgaged its property and defaulted the payment. The bank offered a (one time

29 30 31

AIR 2016 P&H 234. AIR 1922 PC 17 at 19. AIR 2016 SC 1899.

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settlement) OTS scheme. In response to the offer made by the bank, the first respondent managed to enter into an agreement with the second respondent for sale of half of the mortgaged property and pursuant to that agreement, the whole amount of Rs.5.42 crores, as per the offer made by the bank, was paid in terms of the OTS. However, the bank declined to settle the accounts and released the mortgage on the ground that the third party interest having been created, the bank was entitled to 50% of the fair market value. The high court, as per the impugned judgment, directed the bank to accept the payment of Rs.5.42 crores in full and final settlement of all the claims, as per the OTS proposed on March 1, 2012 and release the mortgaged property with a further direction not to sell the property for a period of three years from March 1, 2012. Aggrieved, the appellant-bank was before the Supreme Court. Recovery of debt due to banks and provisions of section 25 of Financial Institutions Act, 2004 and release of mortgagedproperty on one time settlement offered by the bank for settlement of entire due subject to certain conditions which have not accepted and the appellant bank is directed to release the title deed of the mortgaged property to the mortgagor within two weeks. Right to possession under section 65A In K Juvalamukhi v. The District Magistrate-cum-District Collector, C o i m b a t ~ r ethe , ~ ~petitioners entered into two separate lease agreements with the respondents 3 and 4 in respect of a portion situated in the ground floor of the building in Coimbatore for a period of eleven months. The monthly rent was Rs. 30,0001- per month. The respondents 3 and 4 stood guarantee for the loan availed by one Vignesh Alloys Private Ltd. from the second respondent, Canara Bank on mortgage of the properties in question belonging to the fourth respondent. Upon the secured asset having been classified as NPA, demand notices under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 were issued to the borrower, viz., Vignesh Alloys Private Ltd., as well as the guarantors calling upon to pay a sum of Rs. 26, 20, 84, 716. Owning to default in making payment of the amount, a possession notice taking symbolic possession under section 13(4) of the SARFAESI Act was issued. Eventually the property in question was sold to one R. Asokan for a sum of Rs. 4,23,00,000/- and a certificate to that effect was also issued. The respondent bank, being unable to recover possession of the premises in question, made an application before the first respondent under section 14 of the SARFAESI Act for recovery of the premises. The sole contention of the petitioners was that they were not afforded an opportunity of hearing before the impugned order came to be passed. The High Court of Madras held that the impugned order deserves to be set aside with a direction to the first respondent to consider the matter, after affording an opportunity of hearing to the petitioners, afresh. It was ruled that the petitioners have entered into the premises in question as tenants on the

32

AIR 2016 Mad 56.

Annual Survey of Indian Law basis of invalid lease deeds, they were not entitled to continue therein or delivery of possession. Post mortgage agreement and creation of tenancy rights In P.M. Kelukutv v. Young Men b Christian Association, K ~ z i k o d ethe , ~ ~High Court of Kerala has dealt with section 65 A of TPAct, 1882. After the mortgage of an immovable property created by the borrower in favour of a secured creditor, the right of the borrower to lease a mortgaged property is regulated by section 65A of the TP The court observed that section 65A(1) of the TPAct states that the mortgagor has the power to make lease of a mortgaged property while he is in lawful possession of the same subject to the provisions of section 65A(2) of the TP Act and such lease was binding on the mortgagee. Section 65A(3) further provides that such a power is available with the mortgagor to make a lease of the mortgaged property only if and as far as a contrary intention is not expressed in the mortgage deed. Thus, according to the court, so long as the mortgage deed does not prohibit a mortgagor from making a lease of the mortgaged property and so long as the lease satisfied the requirements of section 65A(2), a lease made by a borrower as a mortgagor will not only be valid but is also binding on the secured creditor as a mortgagee. The court considered whether the provisions of the SAFAESI Act have the effect of terminating these valid leases made by the borrower or the mortgagor made in accordance with the provisions of the TP Act. The question then arises as to whether the impugned agreement could be construed as a mortgage deed and, if so, whether the terms of the said deed contain an express permission by the mortgagee to the mortgagor to create leases that were not hedged in by the conditions stipulated in section 65A(2) of the TP Act. The high court

33 34

AIR 2016 Ker 135. Supra note 2, s. 65Areads: "Mortgagor's power to lease- (1) Subject to the provisions of subSection (2), a mortgagor, while lawfully in possession of the mortgaged property, shall have power to make leases thereof which shall be binding on the mortgagee. (a) Every such lease shall be such as would be made in the ordinary course of management of the property concerned, and in accordance with any local law, custom or usage. (b)Every such lease shall reserve the best rend that can reasonably be obtained and no premium shall be paid or promised and no rent shall be payable in advance. (c) No such lease shall contain a covenant for renewal. (d) Every such lease shall take effect from a date not later than six months from the date on which it is made. (e) In the case of a lease of buildings, whether leased with or without the land on which they stand, the duration of the lease shall in no case exceed three years, and the lease shall contain a covenant for payment of the rent and condition of re-entry on the rent not being paid within a time therein specified. (3) the provisions of sub-section (1) apply only if and as far as a contrary intention is not expressed in the mortgage deed; and the provisions of sub-section (2) may be varied or extended by the mortgage deed and, as so varied and extended, shall, as far as may be, operate in like manner and with all like incidents, effects and consequences, as if such variations or extensions were contained in that sub-section."

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found from a reading of the clauses in the impugned agreement, especially Clause 3 of the agreement, read with Appendix I11 thereto that the agreement between the lst and 2"* respondent did envisage the creation of tenancy rights in the building in question. The specific terms of repayment clearly stipulate that repayments should be effected utilizing the advance amounts received from prospective tenants. The said clause, when read with clause 3 of the agreement, must be seen as permitting the entering into of lease agreements by the mortgagor. Consequently, the impugned agreement can be said to have contained the expression of a contrary intention for the purposes of section 65A (3) of the TP Act, though not in a valid mortgage deed. The finding to the contrary in the common order of the chief judicial magistrate was therefore held factually and legally incorrect. Payment of stamp duty on hypothecation In MIS Saumya Mining Ltd. v. Srei Equipment jnance ltd.,35the court was considering sections 7 and 9 of Arbitration and Conciliation Act, 1996, schedule lA, article 40(2), section 35 of Stamp Act, 1899 and section 100 TP Act. A loan was sought to be obtained by the appellant solelylexclusively for the purchase andlor refinancing of Iacquiringlfinancing the assets in annexure 111A of schedule VII of the said agreement. Clause 4.1 of the said agreement stipulates hypothecation on charge over the assets to the effect that 'in consideration of grant of the facility by the company to the customer and as security for the payment, repayment, reimbursement, as the case may be of the secured obligations, the customer hereby hypothecates and charges unto and in favour of the company as and by way of first/exclusive charge of the assets including but not limited to any receivables thereto in a form satisfactory to the company upon the terms and conditions specified in the agreement. The court held that the single Judge has committed no error in invoking the jurisdiction under section 9 of the Arbitration Act, 1996, and there are no infirmities in the order under appeal. We hold that the relevant clause in the agreement being clause no. 4.1 comes within the second exemption under article 40(2) of schedule IA of the Stamp Act, 1899. Letter of hypothecation accompanying a Bill of Exchange being exempted, by implication, all the other types of hypothecations fall within the ambit of the said Article and payment of stamp duty is not mandatory. Right of the landlord to evict the tenant In Rajender Bansal v. Bhum (D) Thr: L ~ sthe. appellants ~ ~ in this appeal are the landlords who had filed suit for eviction of the respondents herein, their tenants. Suit was filed in the civil court. The premises in-question were outside the ambit of rent legislation. It is because of this reason that civil suit for possession/ ejectment was filed. However, during the pendency of the suit and before it could be finally decided,

35 36

AIR2016Cal189. Civil Appeal No.8194 of 2016; ManulSCOR135 12412016

Annual Survey of Indian Law the area in question was brought within the sweep of rent legislations by requisite notifications. The effect of such coverage was to give protective umbrella to the tenants. As a fortiorari, the landlord can now evict the tenant only by taking recourse to the rent legislation, that too, by filing the petition for eviction under the Rent Act, 1973 before the rent controllerltribunal constituted under the said Acts. Civil court ceases to have jurisdiction over the matter insofar as evictionlejectment of tenant is concerned. In this backdrop, the question that has arisen for consideration is as to whether the civil court would cease to have jurisdiction to try the suit of eviction if the suit property came under notified area during pendency of the suit? To put it differently, the question is: whether Rent Act, 1973 would apply even to the pending suits or it will be enforced only from the date when notification covering the area in- question is issued and, therefore, will have no effect on the suits which are already pending before the civil courts? The apex court found that at the relevant time suit property was in rural area and, therefore, not covered by the said Rent Act, 1973. This suit was filed, after terminating the tenancy, by the landlord, namely, father of the appellants (predecessor of the appellants) under Section 106 of the TP Act. The ground taken was that shop was let out to one Rehmat who inducted his son (respondentldefendant herein) as a sub- tenant without the consent of the landlords. Rehmat passed away in the year 1997 and had not even paid rent for 10 years. Therefore, possession of the respondent as sub-tenant was unauthorised and illegal. Notice of vacating the premises and handing over the possession was given on October 22,200 1 and as the respondent failed to vacate the premises, suit was filed on February 11,2002. In the suit, brother of the respondent, Yasin, was also impleaded as a defendant, who did not appear and was proceeded ex- parte. The Supreme Court has culled out the ratio decidendi of the decisions in Atma Ram Mittal,37Mneet K ~ m a lRam ; ~ ~Saroop Rai,39Ramesh Chandrdoand Shri Kishan alias Krishna KumalA1cases, as under: i) Rights of the parties stand crystallised on the date of the institution of the suit and, therefore, the law applicable on the date of filing of the suit will continue to apply until suit is disposed of or adjudicated. ii) If during the pendency of the suit, Rent Act becomes applicable to the premises in question, that would be of no consequence and it would not take away the jurisdiction of civil court to dispose of a suit validly instituted. iii) In order to oust the jurisdiction of civil court, there must be a specific provision in the Act taking away the jurisdiction of the civil court in respect of those cases also which were validly instituted before the

37 38 39 40 41

(1988) (1984) (1980) (1992) (1998)

4 SCC 284. 3 SCC 352. 3 SCC 452. 1 SCC 751. 2 SCC 710.

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date when protection of Rent Act became available in respect of the said area/premises/tenancy. iv) In case aforesaid position is not accepted and the protection of the Rent Act is extended even in respect of suit validly instituted prior in point of time when there was no such protection under the Act, it will have the consequence of making the decree, that is obtained prior to the Rent Act, 1973 becoming applicable to the said arealpremises, inexecutable after the application of these Rent Act, 1973 in respect of such premises. This would not be in consonance with the legislative intent. In laying down the aforesaid dicta, the court also took support of two well known maxims viz., (i) ubijus ibi remedium which lays down the principle that where there is a right there is a remedy and it can be excluded only by substantial legislation expressly extinguishing the said right and (ii) actus curiae nemin emgravabit, which means that nobody should be allowed to suffer because of the act of the court. Here the act attributed is delay in disposal of the case. Additionally, the court took aid of purposive interpretation i.e., legislative intent in not making Rent Act applicable to new constructions for a period of ten years." The Supreme Court held that under the scheme of the Rent Act, 1973 no protection to the ex- tenants is provided and no provision is made excluding the jurisdiction of civil courts in respect of pending cases, expressly or impliedly. On the other hand, in the facts of the present case, it needs to be highlighted again that the respondents had not only sublet the premises but had not paid rent for a period of 14 years. The civil court struck off his defence and ultimately suit was even decreed. It is only during the pendency of the appeal that the notification was issued covering the area where suit premises are situate under the Rent Act. The court opined that it will be travesty of justice if the appellantsllandlords are deprived of the fruits of the said decree. Thus, the apex court did not accept the view taken by the high court. Accordingly, the appeal was allowed and the judgment of the first appellate court as well as high court was set aside. Protection of tenant by holding- over In Shyam La1 v. Deepa Dass Chela Ram Chela Garib D a s ~case , ~ the ~ Supreme Court considered rights of tenant by holding-over wherein provisions of sections 2(6), 9,14Aof Punjab Security of LandTenure Act, 1953, sections 39,40 of Punjab Tenancy Act, 1887 and sections 106 and 116 of TPAct for protection from eviction. The lease in the instant case has been deemed to be a lease from year to year. It would follow that the tenant remained in possession beyond the legally presumptive period of the

42

AIR 2016 SC 3243.

Annual Survey of Indian Law lease (one year) with the implied consent of the landlord. In the present case such consent ceased to exist only upon institution of the cross-objection in the suit filed by the tenant. The tenant, therefore, acquired the status of a tenant holding over or a tenant at will, which would confer on him protection under the 1953 Act requiring the landlord to establish proof of any of the conditions specified in section 9 of the 1953 Act before being entitled to a decree of eviction. Such continuance even after expiry of the deemed period of the lease under section 106 of the TP Act, as in the present case, would clothe the occupant with the status of a tenant under the Act in view of section 116 of the TP Act which deals with the consequences of holding over. The operation of section 116 of the TP Act would confer legitimacy to the possession of the tenant even after the termination or expiration of the deemed period of the lease so as to confer on him a status akin to that of a statutory tenant and hence protection from eviction as envisaged by the provisions of the Act of 1953. The court clarified that both the enactments i.e., the 1887 Act and the 1953 Act were in force and continue to operate in their respective fields. Insofar as common spheres are concerned, the 1953Act by virtue of the non-obstante clause in the relevant provisions prevail over the pari materia provisions of the 1887 Act. Section 40 of the 1887 Act dealing with ejectment of tenants and section 9 of the 1953 Act is one instance where such interplay between the provisions of the two Acts occur. Section 107 of the TP Act which has been made applicable to the State of Punjab by the above notifications require annual leases of immovable property to be made by a registered instrument. Though section 117 of the TP Act makes the provisions of chapter V, which includes section 107, inapplicable to agricultural leases, section 117 has not been made applicable to the State of Punjab by the notifications referred to above. Therefore, the provisions of section 107 of the TPAct would apply with full force and vigor to all leases of immovable property including agricultural lease in the State of Punjab. The apex court observed that the tenant, therefore, acquired the status of a tenant holding over or a tenant at will, which would confer on him protection under the 1953 Act requiring the landlord to establish proof of any of the conditions specified in section 9 of the 1953 Act before being entitled to a decree of eviction. It may be noted here that if the tenant continues his possession beyond the period of lease or tenancy, clothing h m with right not be evicted by legal presumptions prima facie appears untenable and unjust. The tenancy needs to be revisited in this respect. However, if there is evidence to show that the land lord wantonly, keeps silent and waits until the tenant start the agricultural operations and then seeks to evict him in the middle, the presumption by estoppel and the burden shall lie on the owner to prove the lease. Notice to quit lease /tenancy In M/s Park Street Properties Pvt. Limited v. Dipak Kumar Si~zgh,4~ the court has dealt with the quit notice phrase 'in section 106 of the Act. It was observed that a

43

AIR 2016 SC 4038.

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perusal of section 106 of the Act makes it clear that it creates a deemed monthly tenancy in those cases where there is no express contract to the contrary, which is terminable at a notice period of 15 days. The section also lays down the requirements of a valid notice to terminate the tenancy, such as that it must be in writing, signed by the person sending it and be duly delivered. Admittedly, the validity of the notice itself is not under challenge. The main contention advanced on behalf of the respondents is that the impugned judgment and order is valid, in the light of second part of section 107 of the Act, which requires that lease for a term exceeding one year can only be made by way of a registered instrument. Reading clause 6 of the agreement the court found that the landlord was entitled to terminate the tenancy in case there was a breach of the terms of the agreement or in case of non-payment of rent for three consecutive months and the tenants failed to remedy the same within a period of thirty days of the receipt of the notice. The above said clause of the agreement is clearly contrary to the provisions of section 106 of the Act. While section 106 of the Act does contain the phrase 'in the absence of a contract to the contrary', it is a wellsettled position of law, as pointed out by the learned senior counsel appearing on behalf of the appellant that the same must be a valid contract. The apex court observed that it was a well-settled position of law that in the absence of a registered instrument, the courts are not precluded from determining the factum of tenancy from the other evidence on record as well as the conduct of the parties. The court referred to the three judge bench decision of the court in the case of Anthony v. KC Ittoop and Sons.44It was quoted as under:45 Alease of immovable property is defined in Section 105 of the TPAct. A transfer of a right to enjoy a property in consideration of a price paid or promised to be rendered periodically or on specified occasions is the basic fabric for a valid lease. The provision says that such a transfer can be made expressly or by implication. Once there is such a transfer of right to enjoy the property a lease stands created. What is mentioned in the three paragraphs of the first part of Section 107 of the TPAct are only the different modes of how leases are created. The first paragraph has been extracted above and it deals with the mode of creating the particular kinds of leases mentioned therein. The third paragraph can be read along with the above, it contains a condition to be complied with if the parties choose to create a lease as per a registered instrument mentioned therein. All other leases, if created, necessarily fall within the ambit of the second paragraph. Thus, dehors the instrument parties can create a lease as envisaged in the second paragraph of Section 107...

44 45

(2000) 6 SCC 394: AIR 2000 SC 3523. Id. at 395.

Annual Survey of Indian Law When lease is a transfer of a right to enjoy the property and such transfer can be made expressly or by implication, the mere fact that an unregistered instrument came into existence would not stand in the way of the court to determine whether there was in fact a lease otherwise than through such deed. If the agreement advanced on behalf of the respondents is taken to its logical conclusion, this lease can never be terminated, save in cases of breach by the tenant. Accepting this argument would mean that in a situation where the tenant does not default on rent payment for three consecutive months, or does not commit a breach of the terms of the lease, it is not open to the lessor to terminate the lease even after giving a notice. This interpretation of the clause 6 of the agreement cannot be permitted, as the same is wholly contrary to the express provisions of the law. The phrase 'contract to the contrary' in section 106 of the Act cannot be read to mean that the parties are free contract out of the express provisions of the law, thereby defeating its very intent. As is evident from the cases relied upon by the learned senior counsel appearing on behalf of the appellant, the relevant portions of which has been extracted, the contract between the parties must be in relation to a valid contract for the statutory right under section 106 of the Act available to a lessor to terminate the tenancy at a notice of 15 days to not be applicable. SARFAESI Act, not to override Rent Control Act In another case, VishalN. Kalsaria v. Bank ~ f I n d i a Supreme ,~~ Court observed regarding provisions of sections 13, 14 and 35 of Securitization and Reconstructions of Financial Assets and Enforcement of Security Interest Act, 2002 and section 33 of Maharashtra Rent Control Act, 2000 and Enforcement of security interest, recovery of secured asset and provisions of SARFAESI Act, 2002, do not override provisions of Rent Control Act when tenanted premises offered as collateral securities for loans by defaulter landlord and banks cannot arbitrary evict tenants residing is said tenanted premises by using provisions under SARFAESI Act. Held non-obstinate clause in section 35 of 2002 Act cannot be used to deny statutory rights vested in tenants under Rent Control Act. The court observed that once tenancy is created, a tenant can be evicted only after following the due process of law, as prescribed under the provisions of the Rent Control Act. A tenant cannot be arbitrarily evicted by using the provisions of the SARFAESI Act as that would amount to stultifying the statutory rights of protection given to the tenant. Anon-obstante clause section 35 of the SARFAESIAct cannot be used to bulldoze the statutory rights vested on the tenants under the Rent Control Act. The expression 'any other law for the time being in force' as appearing in section 35 of the SARFAESI Act cannot mean to extend to each and every law enacted by the central and state legislatures. It can only extend to the laws operating in the same field. The apex court observed that a landlord cannot be permitted to do indirectly what he has been barred from doing under the Rent Control Act, more so when the

46

AIR 2016 SC 530.

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two legislations, that is the SARFAESI Act and the Rent Control Act operate in completely different fields. While SARFAESI Act is concerned with NPA's of the banks, the Rent Control Act governs the relationship between a tenant and the landlord and specifies the rights and liabilities of each as well as the rules of ejectment with respect to such tenants. The provisions of the SARFAESIAct cannot be used to override the provisions of the Rent Control Act. The issue of determination of tenancy is also well settled. While section 106 of the TP Act does provide for registration of leases, which are created on a year-to-year basis, what needs to be remembered is the effect of non-registration, or the creation of tenancy by way of an oral agreement. According to section 106 of the TP Act, a monthly tenancy shall be deemed to be a tenancy from month to month and must be registered if it is reduced into writing. The TP Act, however, remains silent on the position of law in cases where the agreement is not reduced into writing. If the two parties are executing their rights and liabilities in the nature of a landlord-tenant relationship and if regular rent is being paid and accepted, then the mere factum of non-registration of deed will not make the lease itself nugatory. If no written lease deed exists, then such tenants are required to prove that they have been in occupation of the premises as tenants by producing such evidence in the proceedings under section 14 of the SARFAESI Act before the magistrate. Further, in terms of section 55(2) of the special law Maharashtra Rent Control Act, 1999 in the instant case, the onus to get such a deed registered is on the landlord. In light of the same, neither the landlord nor the banks can be permitted to exploit the fact of non-registration of the tenancy deed against the tenant. The Supreme Court observed that a lease of immovable property is defined in section 105 of the TP Act. A transfer of a right to enjoy a property in consideration of a price paid or promised to the rendered periodically or on specified occasions is the basic fabric for a valid lease. The provision says that such a transfer can be made expressly or by implication. Once there is such a transfer of right to enjoy the property a lease stands created. What is mentioned in the three paragraphs of the first part of section 107 of the TP Act are only the different modes of how leases are created. Thus, de hors the instrument parties can create a lease as envisaged in the second paragraph of section 107 which reads thus: All other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession. The Supreme Court ruled that the factual matrix in the backdrop of the objectives of the above two legislations, the controversy in the instant case assumes immense significance. There is an interest of the bank in recovering non-performing asset on the one hand, and protecting the right of the blameless tenant on the other. The Rent Control Act being a social welfare legislation must be construed as such. A landlord cannot be permitted to do indirectly what he has been barred from doing under the Rent Control Act, more so when the two legislations, that is the SARFAESI Act and the Rent Control Act operate in completely different fields. While SARFAESI Act is concerned with NPA's of the banks, the Rent Control Act governs the relationship between a control Act governs the relationship between a tenant and the landlord and specifies the rights and liabilities of each as well as the rules of ejectment with respect

Annual Survey of Indian Law to such tenants. The provisions of the SARFAESI Act cannot be used to override the provisions of the Rent Control Act. If the contentions of the learned counsel for the respondent banks are to be accepted, it would render the entire scheme of all Rent Control Acts operating in the country as useless and nugatory. Tenants would be left wholly to the mercy of their landlords and in the fear that the landlord may use the tenanted premises as a security interest while taking a loan from a bank and subsequently default on it. Conversely, a landlord would simply have to give up the tenanted premises as a security interest to the creditor banks while he is still getting rent for the same. In case of default of the loan, the maximum brunt will be borne by the unsuspecting tenant, who would be evicted from the possession of the tenanted property by the bank under the provisions of the SARFAESI Act. Under no circumstances can this be permitted, more so in view of the statutory protections to the tenants under the Rent Control Act and also in respect of contractual tenants along with the possession of their properties which shall be obtained with due properties which shall be obtained with due process of law. The Supreme Court appreciated the settled position of law that once tenancy is created, a tenant can be evicted only after following the due process of law, as prescribed under the provisions of the Rent Control Act. A tenant cannot be arbitrarily evicted by using the provisions of the SARFAESI Act as that would amount to stultifying the statutory rights of protection given to the tenant. Anon-obstante clause section 35 of the SARFAESI Act cannot be used to bulldoze the statutory rights vested on the tenants under the Rent Control Act. The expression 'any other law for the time being in force' as appearing in section 35 SARFAESI Act cannot mean to extend to each and every law enacted by the central and state legislatures. It can only extend to the laws operating in the same field. Interpreting the non obstante clause of the SARFAESI Act, a three judge bench of this court in the case of Central Bank ofIndia v. State of Kerala,47has held that the Delhi Rent Control Act, 1958 (DRC Act) and the Securitisation Act were enacted by Parliament in the backdrop of recommendations made by the expert committees appointed by the Central Government for examining the causes for enormous delay in the recovery of dues of banks and financial institutions which were adversely affecting fiscal reforms. The committees headed by T. Tiwari and Shri M. Narasimham suggested that the existing legal regime should be changed and special adjudicatory machinery be created for ensuring speedy recovery of the dues of banks and financial institutions. Narasimham and Andhyarujina Committees also suggested enactment of new legislation for securitization and empowering the banks etc. to take possession of the securities and sell them without intervention of the court. The non-obstante clauses contained in section 34(1) of the DRT Act and section 35 of the Securitisation Act, 2002 give overriding effect to the provisions of those Acts only if there is anything inconsistent contained in any other law or instrument

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(2009) 4 SCC 94: 2010 AIR SCW 2436.

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having effect by virtue of any other law. The Supreme Court categorically maintained that if there is no provision in the other enactments which are inconsistent with the DRT Act or Securitisation Act, 2002 the provisions contained in those Acts cannot override other legislation^.^^ Suit for ejectment In R.K. Rametra v. Prakash Chand K a ~ s h i kthe , ~ ~High Court of Delhi was asked to consider whether suit is barred under section 50 of DRC Act. The plea by defendantltenant that 'premises' in question, which was let out to him, were not a vacant land but a premise. Accordingly, the civil court's jurisdiction was barred by virtue of section 50 of DRC Act. Rent deed executed by plaintiff landlord in favour of defendant did not state that there was any construction on land. Tenant had also admitted to have been vacant land on rent. Merely because wooden planks are mentioned by the witness to have been lying on vacant land would not mean that there was some structure casting at the land in question whch would make it 'premises' Hence, jurisdiction of civil court to pass decree for ejectment and possession not barred. High Court of Calcutta In Essjay Ericssor Pvt. Ltd. v. Dilip Kumar Khandel~al,~' considered necessary of notice of terminating tenancy. In this case, initial lease agreement executed between parties providing for termination of lease upon notice of three months and lease was monthly lease and expiry of said agreement would not in itself change nature and character of tenancy and make it yearly lease. Agreement having been expired, it was held that there was no need to give notice of three months. Notice of 15 days as provided in Section 106(1) would suffice. It was clarified that under section 106(1), in the absence of contract or local law or usage to the contrary, immovable property let out for the purpose of agriculture or manufacture is deemed to be a yearly lease with a reserved yearly rent, even though the lease may not have been created by a registered instrument. The deeming provision of section 106(1) will not, however, be attracted when there is contract or local law or usage to the contrary. Decree of ejectment In M/s. Jagdambey Builders Pvt. Limited v. J.S. V ~ h r a , court ~l held that agreement by landlord to sell demised premises let out to tenant does not prevent landlord from suing tenant for ejectment unless landlord has put the tenant into possession of the property in part performance of agreement to sell. It was found that the alleged agreement to sell was not registered as required by the amended provisions of the Stamp Act, 1899 and Registration Act, 1908. Further, non-mentioning of fact

48 49 50 51

Vishal N. Kalsaria v. Bank of India, AIR 2016 SC 530 at 786. AIR 2016 Del 127. AIR 2016 Cal6. AIR 2016 Del203.

Annual Survey of Indian Law of entering into agreement with tenant by landlord in ejectment would not affect his right. Hence it was held that the tenant was liable to deliver possession to landlord in view of section 108B (q) in pursuance of ejectment decree passed by the court. The court also observed that even if the appeallantldefendant were to succeed in his suit for specific performance of agreement to sell, till the execution of a conveyance deed in pursuance to the decree, if any in favour of the appellant, the appellant has no ground in law to save his possession of the premises. The status of the appellant would continue to be as before i.e., of a tenant whose tenancy has been determined. The court referred to the Supreme Court judgment in Raptakos Brett & Co. Ltd. v. Ganesh P r ~ p e r v .In~ Raptakos ~ Brett case, it was held that in the absence of any contract to the contrary, section 108 B (q) of the TP Act remains fully operative by force of the statute itself. Therefore, it was reiterated that if the tenant wants to show that he is not bound to hand over the vacant possession to the landlord as he had paid the market value of the construction put in by him on the leased premises, there should be an express term to the contrary in the contract of tenancy which would override section 108 B (q) obligation. Naturally, such express term must be there in a contract in accordance with the amended law. Accordingly, the law requires the contract must be a registered document. Therefore, it was held that there being no contract to the contrary. Section 108B (q) has to be given effect to. The court also mentioned that an agreement to sell by the landlord to sell the premises let out to the tenant does not, in the absence of the landlord having put the tenant into possession of the property in part performance of the agreement to sell, prevent the landlord from suing the tenant from ejectment. What is not relevant for adjudication of the lis being brought before the court is not required to be pleaded or proved. Acquisition of land by municipal authority and notice to tenant In Rausunna Begaum v. Premsukhai the High Court of Hyderabad was asked to refer whether notice to the tenant in a shop is necessary in case of acquisition of land by Municipal authorities for road widening even if the landlord of the premises has given his consent. Municipal Corporation being statutory authority has right to take possession of the land but they must exercise their right within four corners of the stature. It is one thing to say that the provisions of the MCHAct for acquiring land are not required to be taken recourse to as the owner thereof has given consent but the same would not mean that the lessee's consent need not be taken. The consent granted by the lessor would not be binding upon a lessee and in that view of the matter the corporation has no right to take forcible possession of shop relying on the purported consent obtained by it from the lessor, without taking recourse to the provisions of the Land Acquisition Act, thereby depriving the lessee of his valuable right. Thus a notice to the lessee in the shop is necessary in case of acquisition of land by the

52 53

(1998) 7 SCC 184: AIR 1998 SC 3085. AIR 2016 Hyd 100.

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municipal authorities for road widening on consent of landlord of at a shop. The , ~ ~ the court opined that the judgment of the full bench in Ushodqa P ~ b l i c a t i o nstates correct position of law and that we do not find any reason to take a differing view. The question referred to the larger bench is, accordingly, answered in the affirmative. In other words, we hold that a notice to the tenant in a shop is necessary in case of acquisition of land by municipal authorities for road widening even if the landlord owner of the premises has given his consent. Eviction decree and its validity In Dev Kishan v. Nand P R a k a ~ hHigh , ~ ~ Court of Rajasthan expressed opinion that the Court Sale of tenanted property by attornment of tenancy in favour of purchaser landlord is automatic and sale of premises by registered sale deed proved. Hence decree of eviction in favour of purchaser valid. The court opined that the trial court had completely failed to appreciate the correct legal position about the automatic attornment of the tenancy in favour of purchaser of the suit property i.e., plaintiff, Nand Prakash. It was held that there was no requirement in law for the plaintiff to prove separately the landlord-tenant relationship except proving the registered saledeed in his favour, which in the instant case, was proved. The defendantltenant was held not entitled to raise the plea or doubt about the chain of title in favour of owner of the suit property. The title of the plaintiffllandlord cannot be questioned by the tenantldefendant and as a matter of fact, the Rent Control Act of 1950 enumerates the denial of title of the landlordlplaintiff by the defendant as one of grounds of eviction of the tenant. Therefore, the court did not find any reason to upset the eviction decree granted by the learned appellate court as no substantial question of law arises in the present second appeal. The eviction decree given under section 13(1)(Q of the Act was upheld and the appeal filed by the appellantldefendantltenant was dismissed. Termination of lease by afflux of time In Delhi Development Authoriv v. M/s. Anant Raj Agencies Pvt. Ltd.,56the Supreme Court held that when lease stands terminated by efflux of time and merely accepting amount towards rent by office of DDA after expiry of lease period cannot be construed as automatic renewal of lease. Under sections 2(e), 3 of Public Premises (Eviction of Unauthorized Occupants) Act, 1971 and TP Act, Public premises' belonging to Delhi Development Authority and the TP Act would not apply to the public premises. It was held that the TP Act is a general law governing the landlord and the tenant relationship in general. The specific Rent Control Acts are advancement over the TP Act thereby providing more protection to the tenant from arbitrary increase

54 55 56

Ushodaya Publications, Hyderabad v. Commissioner, Municipal Corporation ofHyderabad, AIR 2001 AP 345. AIR 2016 Raj 18. AIR 2016 SC 1806.

Annual Survey of Indian Law of rent and ejectment from the rented premises by the landlord. Thus, in the light of the aforesaid case law, it can be concluded that the TP Act is not applicable in respect of the public premises. The property in question is public premises by virtue of section 2(e)3(ii) of the Public Premises (Eviction of Unauthorised Occupants) Act, 1971. Therefore, in the instant case, as per clause I11 (b) of the lease deed and sections 21 and 22 of the DD Act read with rule 43 of the Nazul Land Rules and in the light of Shanti Prasad Devi, Sarup Singh Gupta and Ashoka Marketing Ltd. cases,57there cannot be an automatic renewal of lease in favour of the original lessee once it stands terminated by efflux of time and also by issuing notice terminating the lease. Merely accepting the amount towards the rent by the office of the DDA after expiry of the lease period shall not be construed as renewal of lease of the premises in question, in favour of the original lessee, for another period of 20 years as contended by the respondent. In Navratan Singh Rajpurohit v. Indian Oil Corporation Ltd. ,58decided by High Court of Rajasthan was referred provisions of sections 106 and 1 1 1 O of TP Act, termination of lease and lessor purchasing leasehold rights in court auction. Held terms of previous lease deed would not bind on lessor and renewallextension clause cannot be enforced against him, unless and until fresh lease deed is executed with same terms and conditions on termination of lease, lessee is liable to be evicted. The court has held that there was no renewal in terms of clause (n) of the lease-deed by the purchaser of the leasehold rights in the court auction and the terms of previous leasedeed do not bind him, therefore, the contention of the counsel for the respondent1 defendant IOCL, that it was merely a case of extension of lease period as per clause (n) nowhere uses the words 'extension of period' but employs the word 'renewal' more than once in the said clause, therefore, the said judgment is also distinguishable. The other clauses of the lease-deed, re-produced above, giving pre-emptive right to the lessee, IOCL, the peremptorily extend such period of renewal even against the transferee and also to peremptorily purchase the leased premises, did not apply in the present case since the sale in question of the suit property was not by the original lessor, namely, Bhanwarlal, but by the court in a court auction held against said Bhanwarlal upon the said judgment debtor defaulting in satisfying of decree against him. Since, the lease deed itself has been held by this court to be not applicable and binding the present plaintifflappellant, Navatan Singh Rajpurohit and, therefore, all these clauses are of little help to the defendant, IOCL in the present case against the appellantlplaintiff, not they were ever invoked by the lessee IOCL in the present case. Therefore, an assumed applicability thereof cannot be of any help to the defendantIOCL. The plaintiff purchaser was never put to notice of all these terms, nor he ever

57

58

Shanti Prasad Devi v. Shankar Mahto (2005) 5 SCC 543; Sarup Singh Gupta v. S. Jaghsh Singh (2006) 4 SCC 205; Ashoka Marketing Ltd. v. Punjab National Bank (1990) 4 SCC 406. AIR2016Raj117.

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accepted the same. Unless and until a fresh lease-deed with same terms was executed between these parties also after the court auction, these terms of the lease-deed cannot be enforced against the present plaintiff purchaser. Presumption on donee's acceptance of gift In Subodh Nath v. Fullu Rani D e ~ ithe , ~ High ~ Court of Guahati considered about acceptance of gift. Donee not only produced gift deed from her custody but also established that said deed was accepted by her during lifetime of donor. Since gift deed would confer right, title and interest upon the donee in respect of valuable property the court ruled that it would be difficult to presume that donee would not accept the gift deed in absence of anything contrary. The high court held that the donee having established validity of gift and acceptance by her, the gift deed cannot be said to be illegal and fraudulent. Registration of gift after execution and its validity In Sumit Kumar v. Naresh K~mar,~O cancellation of sale deed and gift deed executed but due to illiteracy of parties regarding legal requirement of document, it could not be got registered. Unregistered gift deed leaves no impact as provided under section 49 of Registration Act, 1908 and getting gift deed registered later is obviously to obviate concurrent decrees of two courts was held impermissible. It was held sale deed executed by donor valid and cannot be cancelled. Revocation of gift In Jagmmet Kaur Pannu v. Ranjit Kaur P a n n ~ ,there ~ ' was a plea that the mother had executed the gift in favour of her daughter with reference to 25% of the share through a registered instrument and that her own hope that she will be supported and maintained by the donee was belied by her conduct. The court observed that the order passed by the tribunal was a shocking revelation of utter lack of application of mind or application of any principle of law. Apart from setting out all the averments regarding the relationship between the parties, the tribunal makes a sudden inference in one line that by virtue of section 23 the document is to be treated as void. There was no judicial exercise undertaken by the tribunal to examine whether the documents contained any condition and whether there had been any demand made by the mother on the daughter that provided the proof for the tribunal to render a finding that the transferee refused to provide such amenities and physical needs. The court opined that there was no averment or proof that transferee was not willing to maintain her or refused or failed to provide for such amenities and physical needs. The order passed by the Tribunal was held wholly erroneous and legally unsupportable. It may be submitted that in the

59 60 61

AIR 2016 Gau 57. AIR 2016 Utt 72. AIR2016P&H210

Annual Survey of Indian Law interest of justice the apex court must have required the daughter to maintain her mother. Justice could have been rendered to the mother by non-interference by the court. It would have been more appropriate to require the tribunal to reconsider the case basing on the merits. It would serve the purpose of establishing the Tribunal. Gift of Musha property (Muslim Gift) In Khusida Begum (D) By Lrs. v. KomammadFarooq (D) by L ~ S the . , ~Supreme ~ court considered about gift ofMusha property (undivided share in property) by father to his minor son by registered deed and property is under tenancy and right to collect rent stands transferred to done said property is commercial property located in city of Jaipur, held gift deed not invalid either on ground that possession was not delivered or on ground that it was hit by Hiba-bil-Musha. While gift of immovable property is not complete unless the donor parts with the possession and donee enters into possession but if the property is in occupation of tenants, gift can be completed by delivery of title deed or by request to tenants to attorn to the done or by mutation. It is further clear that gift of property, which is capable of division is irregular but can be perfected and rendered valid by subsequent partition or delivery. Exceptions to the rule are: where the gift is made by one co-heir to the other; where the gift of share in a zamindari or taluka; where gift is of a share in freehold property in a large commercial town, and where gift is of share in a land company. In the present case, the appellant filed suit for recovery of the amount received by the defendants by way of rent to the extent of one-third share of the plaintiff (based on gift deed in his favour by his father) in the property which was rented out to the tenants and the respondents defendants contested the suit denying the validity of the gift deed. The description of property mentioned in plaint and in the gift deed itself shows that it is commercial property in the city of Jaipur, which is the capital of the State of Rajasthan and is, thus, a large commercial town. Requirement of possession is also met when right to collect rent has been assigned to the plaintiff under the gift deed itself, genuineness of which stands proved. The gift was by father to his minor son. Property is under tenancy. The gift is by a registered deed. Right to collect rent stands transferred to donee. Thus, the gift had no infirmity under the Muslim Law either on the ground that the possession was not delivered or on the ground that the gift was hit by Hiba-BilMusha. IV CONCLUSION

In the year under survey, there are several bank recovery cases under the SARFAESIAct, on which the courts have given apt interpretations. It is desirable that while interpreting the cases pertaining to the Registration Act, 1908 the court could have expressed its opinion about the need for revisiting a provision of law on the

62

AIR 2016 SC 694.

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monetary cap requiring the registration of a document worth Rs 1001-. The apex court's ruling in Mshan N Kalsaria(j3is laudable in view of its commitment to protect social welfare embodied in the tenancy law that a tenant cannot be brutally evicted without following the tenancy law. It is noteworthy that, in S u b r q a M N case,64the apex court has clarified that even oral agreements of family partition are valid. If the partition agreements are reduced into writing, they need be registered for producing in evidence before the court. But, the unregistered written agreements may be admitted in evidence to corroborate and to assess the conduct of the parties. It is interesting to note that even if the members of the joint family property do not claim their share, they have the right in the property. The relinquishments if any shall only be done during the trial before the courts in specific terms to that effect. It may also be noted that when the high courts accept the appeals from tribunals, the courts might lay guidelines and might send back the cases for reconsideration of the cases by the tribunals themselves. However, the clarifications by the courts in the judgments of this year are useful to avoid a lot of litigation and would settle several disputes pending.

63 64

Supra note 43. AIR 2016 SC 3236.