Tenancy is an interest in property and right of occupation.

Let us first learn provisions of Transfer of property Act,1882 ( TP Act) relating to tenancy.

As per provisions of section 6 of the TP Act Property of any kind may be transferred, except as otherwise provided by this Act or by any other law for the time being in force, however under sub clause (i)  it is provided that, Nothing in this section shall be deemed to authorise a tenant having an untransferable right of occupancy, the farmer of an estate in respect of which default has been made in paying revenue, or the lessee of an estate, under the management of a Court of Wards, to assign his interest as such tenant, farmer or lessee.

The term Lease is defined  in TP Act as : 105. Lease defined. – A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.

Lessor, lessee, premium and rent defined. The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent.

106. Duration of certain leases in absence of written contract or local usage:– (1) In the absence of a contract or local law or usage to the contrary, a lease of immovable property for agricultural or manufacturing purposes shall be deemed to be a lease from year to year, terminable, on the part of either lessor or lessee, by six months notice; and a lease of immovable property for any other purpose shall be deemed to be a lease from month to month, terminable, on the part of either lessor or lessee, by fifteen days notice.

(2) Notwithstanding anything contained in any other law for the time being in force, the period mentioned in sub-section (1) shall commence from the date of receipt of notice.

(3) A notice under sub-section (1) shall not be deemed to be invalid merely because the period mentioned therein falls short of the period specified under that sub-section, where a suit or proceeding is filed after the expiry of the period mentioned in that sub-section.

(4) Every notice under sub-section (1) must be in writing, signed by or on behalf of the person giving it, and either be sent by post to the party who is intended to be bound by it or be tendered or delivered personally to such party, or to one of his family or servants at his residence, or (if such tender or delivery is not practicable) affixed to a conspicuous part of the property.

Under Section 111 of said TP Act in case the lessee renounces his character as such by setting up a title in a third person or by claiming title in himself

  1. Effect of holding over.– If a lessee or under-lessee 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 under-lessee, 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.

Under Maharashtra Rent Control Act,199 Section 26 bars assignment of tenancy.

It provides that, 26. In absence of contract tenant not to sub-let or transfer or to give on licence. – Notwithstanding anything contained in any law for the time being in force, but subject to any contract to the contrary, it shall not be lawful for any tenant to sub-let or give on licence the whole or any part of the premises let to him or to assign or transfer in any other manner his interest therein:

Provided that, the State Government may by notification in the Official Gazette, permit in any area the transfer of interest in premises held under such leases or class of leases any premises or class of premises other than those let for business, trade or storage to such extent as may be specified in the notification.

Under Uttar Pradesh Urban Buildings (Regulation of Letting, Rent and Eviction) Act, 1972 under Section 20 (e ) sub-letting of tenancy is one of the ground of eviction and Section 25 prohibits creating of sub-tenancy. Similar is the case in Rajasthan under Rajasthan Rent Control Act,2001 Section 9 (e). State of Gujarat has continued with Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 and under Section 13 of the said Act sub-letting is barred.

Judgments:

Under Section 26 is there absolute bar under Maharashtra Rent Control Act,1999 from assignment of Tenancy Rights?

Tangerine Electronics Systems Pvt. Ltd. v. Indian Chemicals, Mumbai, (Bombay)(FB) : Law Finder Doc Id # 721992004(2) ALL MR 551 : 2004(2) Mh.LJ 305 : 2004(2) RentLR 346 : 2004(2) RCJ 3 : 2004(1) R.C.R.(Rent) 652 : 2004(3) R.C.R.(Civil) 114 : 2005(1) LJR 425 : 2004 AIR (Bombay) 198 : 2004(5) BCR 673 : 2004 AIHC 2453 : 2004(2) CTC 654 : 2004(18) AIC 778 : 2004 SCFBRC 320 : 2004(2) BomLR 705 : 2004(17) IndLD 649 it was held by Full Bench of Bombay High Court that,  Section 26 does not absolutely prohibit or totally forbid the tenant – the tenant as meant by Section 7(15) – to sublet or give on licence or assign or transfer in any other manner whole or any part of the premises let to him since it is subject to the contract to the contrary with the landlord. In other words, the landlord is always at liberty to permit the tenant to sublet or give on licence or assign or transfer in any other manner whole or any part of the premises let to him. The contract contrary to the prohibition provided in Section 26 can be at any time – at the time the premises are let out to the tenant or any time thereafter, even after the tenant has sublet or given on licence or assigned or transferred his interest in the premises let out to him. The landlord can always ratify the action of the tenant in subletting or giving on licence or assigning or transferring in any other manner his interest in the premises let to him. Thus, Section 26 of the Act of 1999 cannot be held to contain the absolute bar against the tenant of the non-residential premises nor the transfer in contravention of Section 26 is absolutely void, that is, void against the whole world but may be void against the landlord furnishing him the ground to get a decree for ejectment.

In the light of the principles laid down by the Supreme Court in Ramesh Himmatlal Shah, when we view the provisions of Section 26 of the Act of 1999, we find the support for what we have held above that Section 26 does not contain an absolute bar against the tenant in subletting or giving on license or transfer or assign the premises let out to him as the said provision is subject to the contract to the contrary.

On the comparison of Section 15(1) of the Bombay Rent Act and Section 26 of the Act of 1999, it would be seen that both Sections are almost identical save little difference in the proviso appended to both Sections which empower the State Government to permit the transfer of interest in premises by publication of notification in the official Gazette. Proviso appended to Section 15(1) of the Bombay Rent Act provided that the State Government may by notification in the Official Gazette permit in any area the transfer of interest in premises held under such leases or class of leases or the giving on licence any premises or class of premises and to such extent as may be specified in the notification while the Proviso appended to Section 26 such notification can be issued by the State Government only for the premises other than those let for the business trade or storage. In our considered view, this difference in Proviso by taking out non-residential premises out of the purview of State Government’s power to permit the transfer of interest by issuance of notification in Official Gazette does not make the ratio of the Division Bench in Mittersain Rupchand inapplicable under Section 26 of the Act of 1999. Even if we assume that under the Proviso to Section 26 of the Act of 1999, the State Government cannot permit the transfer of interest in the premises let out for business, trade or storage, the prohibition contained in Section 26 being subject to the contract to the contrary does not alter the legal position that the restriction under Section 26 is neither absolute nor total.

In  M/s Veetrag Investments and Finance Company v. M/s Premier Brass and Metal Works Private Ltd., 2003(1) Mh.L.J. 458 : 2003(1) All MR 493 (Veetrag Investments II) considered the question whether Section 26 of the Act of 1999 contains an exact bar against the judgment-debtor assigning or transferring its interest in the tenanted premises. S. J. Vazifdar, J. considered the Division Bench judgment in the case of Mittersain Rupchand and the judgment of the learned Single Judge in Veetrag Investments I and after taking into consideration the relevant provisions of the Act of 1999 and Section 60 of the Civil Procedure Code held that Section 26 does not contain absolute bar against the judgment-debtor assigning or transferring its interest as a sub-tenant in the said premises.

Does bar on assignment apply to assignment by operation of law?

In the case of Golak Nath Roy Chowdhary v. Mathura Nath Roy Chowdhary, decided on September 1, 1891 and reported in 1893 Vol. XX Cal. 273, the Division Bench of Calcutta High Court held, “we take it to be clear law in India, as in England, that a general restriction of assignment does not apply to an assignment by operation of law taking effect in invitum, as a sale under an execution. The Bombay cases cited are authorities for this proposition as regards India”. Golak Nath Roy Chowdhary was a case where certain land was leased – the lease expressly prohibiting the lessee and his heir from making any assignment of the property either by sale or gift, though there was no provision for forfeiture or for re-entry by reason of assignment in violation of its terms. The leased property was sold in execution of the decree against the lessee. In the suit to recover possession, the plaintiff contended that by virtue of the provisions in the lease nothing passed to the purchaser under the sale nor was there any saleable interest within the provisions of Section 266 (now Section 60) of the Civil Procedure Code in the lessee. The defense of the auction purchaser, inter alia, was that the lease did not prevent a sale in execution. The Division Bench of Calcutta High Court referred to the judgment of this Court in Tamaya v. Timapa Ganpaya, ILR 7 Bombay 262 and held that a restriction on assignment does not apply to an assignment by operation of law. In Tamaya, this Court held that a clause against voluntary alienation afforded no ground for impeaching the title of an auction purchaser, to whom the alienation was by act of law and not by the lessee.

Section 20 of UP Rent Act.

In Dharmpal Singh vs Jitendra Prasad Gupta Allahabad High Court held that, A bare reading of Section 20(1) shows that no suit for eviction of a tenant from the building can be instituted, even if the tenancy rights have come to an end, either by efflux of time, or after determination or as a result of determination of tenancy, by giving him notice to quit by the landlord, or in any other manner. The last phrase ” in any other manner” is very wide and covers all residuary situations and circumstances, in which, a landlord may require a tenant to be evicted from a building by instituting a suit. The only permissible way in which such a suit can be instituted is only when it satisfies the requirements of sub-section (2) of Section 20. In other words, if suit is instituted for ejectment of a tenant, if he has suffered or incurred liability and satisfies any of the grounds mentioned in Clauses (a) to (g) of sub-section (2) of Section 20, in such a case, on such ground(s) a suit for ejectment/eviction of a tenant from the building may be instituted by the landlord in respect of a land which is covered by Section 29-A. A cumulative reading of sub-sections (1) and (2) of Section 20make it clear that, where tenancy rights comes to an end, either by efflux of time or otherwise, still a tenant cannot be evicted from the building, or let out premises, by instituting a suit for eviction, unless the ground(s) mentioned in clauses (a) to (g) of sub section (2) of Section 20 is/are available to the landlord. The status of tenant in such a case has been recognized in various authorities of this court, as that of a “statutory tenant”.

Sub-letting

In Gappulal Vs. Thakurji AIR 1969 SC1291 it was held that sub-letting prior to enforcement of Act is not covered under Rajasthan Premises (Control of Rent and Eviction) Act, 1950

With the consent of the landlord the premises are used both for residential and nonresidential can there be eviction ?

Delhi and Ajmer Rent Control Act, 1952  S.Sanyal Vs. Gian Chand 1968 AIR(SC) 438  If in respect of premises originally let for residential purposes a decree in ejectment cannot be passed on the grounds mentioned in s. 13(1)(e), if subsequent to the letting, with the consent of the landlord the premises are used both for residential and nonresidential purposes, the bar against the jurisdiction of the court would be more effective when the original letting was for purposes-non residential as well as residential. It may be recalled that the condition of the applicability of s. 13(1)(e) of the Act is letting of the premises for residential purposes.  Onus of proof of sub-letting on whom?When eviction is sought on that ground of sub-letting it is now settled law that the onus to prove sub-letting is on the landlord. If the landlord prima facie shows that the occupant who was in exclusive possession of the premises let out for valuable consideration, it would then be for the tenant to rebut the evidence. See: Associated Hotels of India Ltd. Delhi v. Sardar Ranjit Singh, (1968) 2 SCR 548 = (AIR 1968 SC 933). Death of original tenant , family member inducted in partnership amounts to sub-letting?Harish Tandon Vs. Additional District Magistrate, Allahabad, U.P. 1995 AIR(SC) 676 : 1995 (1) JT 290 :1995 (1) Scale 65 :1995 (1) SCC 537 : 1995 (25) ALR 184 :  it was held that, The framers of the Act have clearly expressed their intention in Sections 12, 20 and 25 while protecting the tenant from eviction except on the grounds mentioned in Section 20, that after the death of the original tenant his heirs will be deemed to be holding the premises as joint tenants, and for any breach committed by any of such joint tenants, all the heirs of the original tenant have to suffer. They cannot take a plea that unless the grounds for eviction mentioned in sub-section (2) of Section 20 are established individually against each one of them, they cannot be evicted from the premises in question. It was further held that, the judgment in Mohd. Azeems case (AIR 1985 SC 1118), does not lay down the correct law and on the other hand we hold that H. C. Pandeys case (AIR 1989 SC 1470) lays down the correct law.  Cox and Kings Limited vs.Chander Malhotra 1996 (11) JT 493 : 1997 (1) Scale 229 : 1997 (2) SCC 687 : 1997 (2) Supreme 234 :  While quoting Venkatarama Iyer v. Renters Ltd, K. Subba Rao, J., as he then was, had to consider a similar question under the Madras Buildings (Lease and Rent) Control Act. There was an assignment between the two companies and considering the effect thereof it was held that if a company doing business in a particular premises taken on lease, transfers its business as a going concern to another company and also the net assets for consideration and thereafter the transferee company takes over the business and carries on business in the premises let out to the former company, it cannot be said that there was no transfer of the right of the former company under the lease to the latter company. On such transfer, the tenant is liable to be evicted as a sub-tenant. The above judgment is clearly on the point in issue before us. In General Radio & Appliances Co. Ltd. v. M.A. Khader a three-Judge bench had approved the above ratio. Two companies having been amalgamated, eviction against the amalgamated company came to be filed. On consideration of all the decisions referred to above hereinbefore, the irresistible conclusion followed that there had been a transfer of the tenancy interest of Appellant 1 in respect of the premises in question to Appellant 2, subsequently, renamed Appellant 3, M/s National Radio Electronics Co. Ltd. Accordingly, their eviction was upheld under Section 10(ii)(a) of the A. P. Buildings (Lease, Rent and Eviction) Control Act, 1960. The facts in Madras Bangalore Transport Co. (West) v. Inder Singh are clearly distinguishable. In that case, a partnership firm was divided between the partners and two separate firms came to be formed with a distinct area of operation and one of the companies was to retain possession of the tenanted premises. After 10 years, application for eviction came to be filed on the ground of sub-letting of the premises. Considering the constitution of the companies, its operation and the nature of the incidence that flowed therefrom, this court had held that the limited company and the partnership firm were two only on paper but were one for practical purposes. There was substantial identity between the limited company and the partnership firm. On the basis of those findings, it was held that there was no sub-letting.Assignment between the Foreign Company and the Indian Company of the demised premises without any written consent of the respondent-landlord, it is a case of “sub-letting” within the meaning of Section 14(l)(b) of the Act. In Anand Niwas vs Anandji Kalyanji Pedi 1965 AIR 414, 1964 SCR (4) 892 it was held that , The protection which a sub-tenant is entitled to claim against his own landlord (that is the head tenant) becomes on determination of the head tenancy available to him against the head landlord, but the condition on which such a claim may be sustained is that there is a lawful subletting. A statutory tenant is, as we have already observed, a person who on determination of his contractual right, is permitted to remain in occupation so long as he observes and performs the conditions of the tenancy and pays the standard rent and permitted increases. His personal right of occupation is incapable of being transferred or assigned, and he having no interest in the property there is no estate on which subletting may operate. If it be assumed that a statutory tenant has the right of subletting, some very surprising consequences may ensue. A statutory tenant by parting with possession of the premises would forfeit all rights in the premises occupied by him, but he would still, if s. 14 is construed as suggested by the Company, be able to create an interest in the person inducted in the premises not derivatively but independently, for the statutory tenant had no interest in the premises and the protection granted by the statute is by the very act of transfer of possession extinguished.

Conclusion: Sub-letting requires permission of landlord.  There is no absolute bar on Assignment of Tenancy Rights.

Shruti Desai

Mumbai

30th August,2019

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