Lease Agreement Would Not Be Sufficient To Demonstrate The Purpose Of Lease To Be For Manufacturing: Supreme Court

M/S Paul Rubber Industries Private Limited V/S Amit Chand Mitra & Anr. 

The Supreme Court ruled that lease agreement would not be sufficient to demonstrate the purpose of lease to be for manufacturing.

The division bench of Justice Aniruddha Bose and Justice Vikram Nath said that in the case of Rai Chand Jain v/s Miss Chandra Kanta Khosla, dispute arose as to whether certain premises were let out for residential purpose or as to whether there was an oral agreement of letting out the premises to the tenant, for running a press. It was in that perspective, it was held in the said case that a lease deed though unregistered, could be considered for collateral purposes to show the purpose for which the premises was leased out. Thus, the lease deed was referred to for the sole purpose to defeat the claim of subsistence of an oral agreement. 

The bench opined that nature and character of possession contained in a flawed document (being unregistered) in terms Section 107 of the 1882 Act and Sections 17 and 49 of the Registration Act can form collateral purpose when the “nature and character of possession” is not the main term of the lease and does not constitute the main dispute for adjudication by the Court.

It was noted by the court that the nature and character of possession constitutes the primary dispute and hence the Court is excluded by law from examining the unregistered deed for that purpose. In respect of the suit out of which the appeal arose, the purpose of lease is the main lis, not a collateral incident.

The main point which the court has to address in the appeal is as to what extent the Court can take cognizance of a clause relating to purpose for which a lease is granted contained in an unregistered deed of lease for immovable property stipulating its duration for a period of five years. 

The tenant had not delivered vacant possession as a result of which the suit, which gave rise to the appeal.

It was observed by the court that the lease was for use by the predecessor of the appellants “for the purpose of his business and/or factory.” The property was described in the schedule to be estimated 16 cottahs of land “with a factory shed/godown space”. Such description would not be sufficient to establish that the same was for manufacturing purpose. 

“A mere statement by the DW-1 to which we have referred earlier or the purpose of lease as specified in the lease agreement would not be sufficient to demonstrate the purpose of lease to be for manufacturing. This could be proved by explaining what kind of work was being carried on in the factory shed. In such a situation also, the registration of the deed would have been necessary. In absence of such registration, tenancy would have been of “month to month” character. For these reasons, we do not think the High Court erred in law in dismissing the defendant’s appeal”, the court held.