Decided on February 19,1972

N.R.MANIKYA RAO Respondents


- (1.) The defendant in O.S. No. 302 of 1967 on the file of the Court of the District Munsif, Bapatla is the appellant in this Second Appeal. He took on lease a vacant site in the town of Bapatla belonging to the plaintiff for a period of five years from 1954 on a monthly rent of Rs. 35. The lease expired but was renewed in 1960 for a period of six years from 20th May, 1960 on a monthly rent of Rs. 45. The period of lease expired on 19th May, 1966. According to the plaintiff the defendant failed to deliver possession of the site in spite of repeated demands and he was, therefore compelled to file the suit. The defendant pleaded that there Was a further agreement to renew the lease for a period of six years from 19th may, 1966. Alternatively the defendant pleaded that there was no proper notice to quit. The trial Court found that the case of the defendant that there was an agreement to extend the lease by another six years from 19th May, 1966 was not true. The trial Court found that the defendant was a tenant holding over, but held that there was no need for giving any notice to quit as the deed of lease, Exhibit A-11 expressly provided that no notice to quit would be necessary and that the tenancy would stand determined on the expiry of the period of lease. On those findings the learned District Munsif decreed the suit. The lower appellate Court confirmed the finding of the trial Court that the agreement to renew the lease for another period of six years, set up by the defendant, was not true. The lower appellate Court did not give any finding whether the defendant was a tenant holding over but held that in view of the express provision in Exhibit A-11 the defendant was not entitled to any notice to quit. The defendant has preferred this Second Appeal,
(2.) It was urged by Sri Ramajingeswara "Rao, learned Counsel for the appellant that the finding of the trial Court that the defendant was a tenant holding over was not disturbed by the lower appellate Court and that the admitted facts also showed that he was a tenant holding over. He submitted that if the defendant was a tenant holding over he was entitled to a proper notice to quit in accordance "With the provisions of the Transfer of Property Act notwithstanding the express provision in the original deed of lease. In support of his submission he relied upon the decision of the Madras High Court in Bapayya v. Venkataratnam. This decision undoubtedly lays down that a stipulation in the original lease that at the expiration of the term the lessee should give up possession without notice, could not bs imported into the new tenancy created by holding over and the acceptance of rent. The question, therefore is whether in the present case the defendant can be said to be a tenant holding over so as to attract the benefits of section 116 of the Transfer of Property Act. Section 116 says: "If a lessee or underlessee of property remains in possession thereof after the determination of the lease granted to the lessee, and the lessor or his legal representative accepts rent from the lessee or underlessee, or otherwise assents to his continuing in possession, the lease is, in the absence of an agreement to the contrary, renewed from year to year, or from month to month according to the purpose for which the property is leased, as specified in section 106." The use of the word 'otherwise' seems to suggest that acceptance of rent is but a mode of expressing the lessor's assent to the lessee continuing in possession. In other words, the acceptance of rent must be with a view to the lessee continuing in possession. In my view the words "the lessor........accepts rent from the lessee ........ or otherwise assents to his continuing in possession" really mean "the lessor assents to the lessee continuing in possession by accepting rent from him or otherwise". Thus, the continuance in possession of the lessee and the acceptance of rent by the lessor must result in a consensus ad idem. That the underlying principle of section 116 is implied contract has been explained by Patanjali Sastri J. in his dissenting opinion in K.B. Capadia v. Bai Jerbai Warden where he said : "Turning now to the main point, it will be seen that the section postulates the lessee remaining in possession after the determination of the lease which is conduct indicative, in ordinary circumstances, of his desire to continue as a tenant under the lessor and implies a tacit offer to take a new tenancy from the expiration of the old on the same terms so far as they are applicable to the new situation, and, when the lessor assents to the lessee so continuing in possession, he tacitly accepts the latter's offer and a fresh tenancy results by the implied agreement of the parties. When, further the lessee in that situation tenders rent and the lessor accepts it, their conduct raises more readily and clearly the implication of an agreement between the parties to create a fresh tenancy. As Wood fall remarks "actual payment of rent is not always essential although that is perhaps the clearest proof". That is why, I conceive, acceptance of rent is specifically mentioned in the section but, apart from its probative value, it has no special legal efficacy or significance. What creates the new relationship of landlord and tenant after the determination of the previous lease is not the acceptance of rent by itself, but the "assent " of the lessor which may bs proved by such acceptance or "otherwise", the assent of the lessee to the fresh arrangement being already there, implicit in his continuing in possession or tendering of rent. In other words, the conduct of the parties, in such circumstances, implies an offer by the person holding over to take a new tenancy on the terms of the old and an acceptance of that offer by the owner. That the section is based on an implied or presumed contractual, and not a statutory, relationship is also made clear by the reference to "an agreement to the contrary" excluding the operation cf the rule, for if it were the intention of the Legislature to bring into existence an arrange ment by force of the statute and independently of the consensus of the parties as under the recent rent control legislation, one would expect that it would not be made liable to be displaced by an agreement between the parties. In my opinion the principle underlying section 116 is implied contract, and the test of renewal is the consensus between the lessor and the lessee or underlessee holding over and not an option exercisable by the lessor alone." The facts of the case were : The plaintiff had let out certain premises to defendant No. 1. The tenancy expired on 31st August 1942, by efflux of time. During the pendency of the lease defendant No. 1 had introduced defendant Nos. 2 and 3 as sub-lessees. On 21st July, 1942 the plaintiff wrote to defendant No. 1 requiring him to vacate the premises by 31st August, 1942. Defendant No. 1 passed on the letter to defendant Nos. 2 and 3, who however, refused to vacate the premises. Cheques sent by defendant Nos. 2 and 3 for rent on 30th September, 1942 were returned by the plaintiff stating that he considered them to be the trespassers. When cheques were again sent in November the cheques were received by the plaintiff. Further cheques sent by defendant Nos. 2 and 3 were also received by the plaintiff On 5th January, 1943, the plaintiff wrote to defendant Nos. 2 and 3 that he had accepted the cheques as part deposits towards his claim for compensation for illegal use and occupation, without prejudice to his rights. Rents for subsequent months were also paid and accepted under similar protest.
(3.) The question was whether in the circumstances a monthly tenancy under the provisions of section 116 oi the Transfer of Property Act came into existence and whether the plaintiff could evict defendant Nos. 2 and 3 without issuing a previous notice to quit. Patanjali Sastri, J. thought that a fresh tenancy could arise only by agreement of the parties and that in the case before him so far from being ad idem as to the creation of a contractual tenancy, each party was consistently repudiating the position taken up by the other and maintaining his own". He said ''in such circumstances, the payment and acceptance of rent can lead to no inference of an implied contract of tenancy between the appellant arid the respodents. The facts of the case are, in my opinion, such as rebut any presumption of a monthly tenancy under section 116 of the Transfer of Property Act." The majority of the Judges of the Federal Court, however did not agree with the opinion of Patanjali Sastri, J. Mukherjea, J., who spoke for majority conceded: It is perfectly right that the tenancy which is created by the "holding over of a lessee or underlessee is a new tenancy in law even though many of the terms of the old lease might be continued in it, by implication and it cannot be disputed that to bring a new tenancey into existence, there must be a bilateral act. What section 116, Transfer of Property Act, contemplates is that on one side there should be an offer of taking a renewed or fresh demise evidenced by the lessee's or sub-lessee's continuing in occupation of the property after his interest has ceased and on the other side there must be a definite assent to this continuance of possession by the landlord expressed by acceptance of rent or otherwise. It can scarcely be disputed that the assent of the landlord which is founded on acceptance of rent must be acceptance of rent as such and in clear recognition of the tenancy right asserted by the person who pays it." The learned Judge, however, thought that these principles did not apply to the case before them. He observed that the facts clearly showed that when the cheques were cashed it was done without any reservation or condition whatsoever. The pretext made by the plaintiff was not a contemporaneous but a much subsequent event and if the agreement was already complete by acceptance of rent on 23rd November, 1942 when the cheques were cashed the subsequent conduct of one of the parties could not alter its legal consequences. The learned Judge also said: "It seems to be that when money was paid as rent, it did not lie in the mouth of the plaintiff to say that he would receive the money but not as rent. It is a settled principle of law that when money is paid by a debtor with an express intimation that it is to be applied to the discharge of a particular debt, the creditor may not accept the money at all; but if he receives and appropriates it, he cannot be allowed to say that he took it wrongfully on some other account. The ordinary legal consequence of accepting payment as indicated by the debtor would follow in such cases, however much the creditor might attempt to repudiate them. This being the position, it must be held on the facts of this case that money was not only paid is rent by defendants 2 and 3 but was received as rent by the plaintiff and consequently a monthly tenancy under the provisions of section 116 of the Transfer of Property Act did come into existence.";

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