Bharat Petroleum Corporation Ltd. v. V. Ashvinraj .

The Judgment of the Court was delivered by

2. The defendant Bharat Petroleum Corporation Limited is the appellant in this Second Appeal against the judgment and decree granted by the Courts below for possession of the suit property in favour of the respondent plaintiff.

3. Only a short point is involved in this second appeal and the arguments of both the learned Counsel were heard. The case of the plaintiffs in brief, is as follows:— The defendant is tenants at sufference in respect of the suit property on a monthly rent, of Rs. 1,100/-. The plaintiffs grandfather entered into a registered lease deed on 16-3-1964 with Burmah Shell Oil Storage and Distributing Company of India Ltd., for a period of 20 years from 1-4-1963 till 31-3-1983. Subsequently, the said company became Government of India undertaking with effect from 1976. By efflux of time, the lease came to an end on 31-3-1983. The abovesaid plaintiffs grandfather sold the suit property on 21-5-1972 in favour of the plaintiff and the lessee attorned the tenancy to the plaintiff. The plaintiff was not willing to renew the lease in favour of the defendant and he is entitled to get possession of the property. There is a shed in the suit property and it is worth not even Rs. 2,000/-. The defendant is liable to remove the said superstructure put up by it and deliver vacant possession.

4. The case of the defendant is that it is in occupation of the property in pursuance of the abovesaid lease deed and the defendant is entitled to renew the said lease under Sections 5 and 7, Burma Shell (Acquisition of Undertakings in India) Act, 1976 and the defendant has exercised the said right of renewal as early as 9-2-1983 for another 20 years (under Ex. B-1). Therefore, the plaintiff is not entitled to terminate the lease. The defendant has petrol bunk, H.S.D pumps, underground tanks and other fittings for storage of petrol and H.S.D Oil and these pucca su perstructures were constructed by the defendant at a huge cost. Under Section 9 of the City Tenants Protection Act, the defendant is entitled to purchase the property and it had filed I.A No. 14462 of 1995 in the suit seeking purchase the said property.

5. When the abovesaid I.A No. 14462 of 1985 was taken up for enquiry, the defendant made an endorsement that it was not pressing the said I.A and hence it was dismissed. Therefore, it has to be seen whether the defendant has right under the abovesaid enactment for renewal of the lease. No doubt, incidentally it has also to be seen whether the defendant has duly exercised the option for renewal. It may also to be stated here that the Ex. B-1 letter ofthe defendant dated 9-2-1993. In Ex. A-1 (dated 8-4-1983), the plaintiff stated that he was not willing to renew the lease, and he called upon the defendant to hand over possession immediately.

6. It must be noted that the defendant, pursuant to exercising the abovesaid option to get renewal, under Ex. B-1, did not take any further action to get a fresh lease deed executed and registered.

7. Now, the question is whether pursuant to the abovesaid Act, the defendant has secured automatic renewal of the tease, despite the non-execution and non-registration of a fresh lease deed for a fresh period of 20 years on the expiry ofthe original lease for 20 years, which expired on 31-3-1983. Learned counsel for the respondent also argues that the abovesaid option itself was not properly exercised by Ex. B-1. So, incidentally that question also has to be gone into.

8. I shall first dispose of the above referred to latter incidental question. In considering this incidental question (as well as the main question) the relevant provisions ofthe abovesaid Act, by which the erstwhile Burma Shell Oil Storage and Distributing Company of India Limited (which is referred to as “Burmah Shell” in the abovesaid Act pursuant to Section 2(b) therein was taken over on the appointed day, viz., 24-1-1975 by the Central Government, have to be seen. It may also be stated that after the abovesaid taking over and pursuant to Section 7 ofthe above-said Act, the undertaking of the erstwhile ‘Burmah Shell’ came to be vested with a Government Company, viz., the defendant. The said Government company, as per Section 2(c) of the abovesaid Act, is a Government company, as defined in Section 6(17) of the Companies Act, 1956. Section 5 of the abovesaid Act runs as follows:—

“5(1) Where any property is held in India by Burmah Shell under any lease or under any right of tenancy, the Central Government shall, on and from the appointed day, be deemed to have become the lessee or tenant, as the case may be, in respect of such property as if the lease or tenancy in relation to such property had been granted to the Central Government, and thereupon all the rights under such lease or tenancy shall be deemed to have been transferred to, and vested in, the Central Government.

(2) On the expiry of the term of any lease or tenancy referred to in sub-section (1), such lease or tenancy Government be renewed on the same terms and conditions on which the lease or tenancy was held by Burmah Shell immediately before the appointed day.”

(Emphasis supplied)

9. Regarding the abovesaid option to be exercised what is stated in the abovesaid Section 5(2), is, “if so desired by the Central Government”. Learned Counsel for the respondent contends that the abovesaid Ex. B-1 letter dated 9-2-1993 was sent only by the delendant and not the Central Government. But, it must be pointed out that as per Section 7(3) of the Act, reference to ‘Central Government’ in Section 5(2) shall be construed as a reference to the abovesaid Government company, the defendant.

10. The abovesaid Ex. B-1 inter alia runs as follows:—

“This is to advise you that in terms of Section 5 and Sec. 7(3) of the Burmah Shell (Acquisition of Undertakings in India) Act, 1976, extract of which is enclosed for your reference we desire to renew the lease for a further period of 20 years commencing from 1-4-1983 on the same terms and conditions on which the lessee abovenamed viz., Burmah Shell Oil Storage and Distributing Co. of India Ltd., held the lease immediately before the appointed day viz. 24th January, 1976.

11. May we therefore request you to let us know when it will be convenient for you to lave the lease registered on terms similar to those existing in the current lease. On receipt of your advice in this matter, we shall take further action.”

12. In this connection, learned counsel “or the respondent also contends that the defendant only stated in Ex. B-1 that it “desires” to renew the lease and that a mere expression of desire is not exercising the required option. I cannot accept this argumnent. Apart from “sing the word “desire”, the defendant has also stated that pursuant to Sections 5 and 7(3) of the Act, the said desire is expressed. So, it is a clear case of exercising option pursuant to Section 5(2). Learned Counsel for the respondent also contends that he said exercise of option is not valid since in he suit, the defendant has chosen to file the abovesaid application under Section 9 of the City Tenants Protection Act for the purchase f the property. I am unable to accept this contention also. As already stated, the defendant made an endorsement to the effect that it was not pressing the said application and so the said application was dismissed as not pressed. At any rate, simply because the defendant also originally sought to purchase the suit property under the abovesaid Section 9, its right to get renewal of the lease will not be in any way affected, once the said I.A under Section 9 were not pressed. No doubt, if the defendant purchases, pursuant to Section 9, there is no necessity to get renewal. But, when the said application for purchase is not pressed, the defendant will have the right of renewal, no doubt subject to complying with the relevant provisions of the aforesaid Act.

13. I must also here add that there is also no plea by the plaintiff in the plaint that the abovesaid exercise of option by the defendant is not valid. In fact there was also no issue in this regard in the trial Court, nor it appears that this aspect was argued in the trial Court. So, the trial Court also does not deal with this question as to whether the abovesaid defendant's exercise of the option was valid. In fact, I may also add that even in Ex. A-6 dated 10-3-1983, the reply to Ex. B-1 it is not stated that the option was not exercised validly.

14. But, the respondent has succeeded in the trial Court only on the finding on the other main question viz., that the mere exercise of the abovesaid option would not confer leasehold interest on the defendant for a further period of 20 years since no lease deed as such, conforming to Section 107 of the Transfer of Property Act, has come into being pursuant to the exercise of the abovesaid option. No doubt, in this connection, I must observe that the following statement of the lower appellate Court is not correct:—

“……learned trial Judge held that the appellant was not entitled to renew the lease, since the option has not been properly expressed.”

15. It is not correct because, the trial Court did not hold that the abovesaid option was not properly expressed. In fact, as already mentioned, there was neither issue in this regard, nor the trial Court dealt with the said question. Even in the lower appellate Court, excepting the abovesaid observation the question whether the abovesaid option was exercised validly was not dealt with at all.

16. Now, coming to the main question whether there would be automatic renewal of the lease, once the abovesaid option for renewal is validly exercised, even though the defendant has not taken any steps to get the lease deed executed and registered duly and even though such a lease deed has not come into being at all. In this regard, both the trial Court and the appellate Court have held that there would not be any such automatic renewal and for coming to the conclusion the trial Court has relied on Section 5(2) and the lower appellate Court has also relied on the decision in Hindustan Petroleum Corporation Ltd. v. Vummidi Kannan, (1992) 1 LW 59 : (AIR 1992 Mad 190) (DB). But the contention of learned counsel for the appellant is that in view of Section 5(2) of the Act, the appellant would get automatic renewal of the lease pursuant to its exercise of the option to get renewal, under Ex. B-1. He also submits that 1992-1 LW 59 : (AIR 1992 Mad 190) (supra) would not apply to the present facts since that case only dealt with the exercise of option for renewal of the lease, pursuant to the relevant clause contained in the contract between the parties and not pursuant to statutory provision like Section 5(2) of the Act as in the present case.

17. In this connection, the relevant observation of this Court in the said decision is as follows:—

“There is another contention, which, though not vehemently argued, yet has been expressed by the learned senior counsel appearing for the defendant and that is, the renewal of the lease had come into existence and force by the exercise of option for renewal by the defendant………”

But, a bare exercise of option for renewal could not be of any avail to the defendant, because the law is well settled that a covenant for renewal contained in a lease does not ipso facto extend the tenure or term of the lease, but only entitles the lessee to obtain a fresh lease. If there is a clause for renewal in the original lease, and that clause has been taken advantage of and any option pursuant thereto has been properly exercised, it only gives a lever for the lessee to obtain new lease in accordance with and in due satisfaction of the law governing the making of leases. If to the renewal lease, the requirements of the first part of S. 107 of the Transfer of Property Act are attracted, as obviously are in the present case, no valid lease would come into existence unless the said requirements are satisfied. So far as present case is concerned, even if the defendant is stated to have exercised its option for renewal, which position we have accepted, it has not improved the lot of the defendant to say that there had been a renewed lease, which had enured in its favour, because admittedly the requirements of S. 107 of the Transfer of Property. Act were not satisfied. The proposition of law has been clearly recapitulated by Ismail, J., as he then was, after tracing the authorities on the subject in R.M Mehta v. Hindustan Photo Films Manufacturing Company, (1976 (1) Mad LJ 115 : (AIR 1976 Mad 194)”.

18. In my view, the abovesaid, reasoning would reply to the present case also, even though in the present case, the exercise, of the option for the renewal is not based on the contract between the parties, but on the above said statutory provision, viz., Section 5(2) of the Act. It has been noted already that Section 5(2) only says that the lease “shall if so desired by the Central Government, be renewed on the same terms and conditions “In other words, it does not say that the lease shall stand renewed or shall automatically get renewed, but it only says, “shall be renewed”. So, unless the other formalities required under Section 107 of the Transfer of Property Act are complied with and a lease deed as such is executed and registered duly, the defendant lessee would not secure leasehold interest in the property in question after the expiry of the prior lease on 31-3-1983. Admittedly, the defendant has not taken any further steps after the abovesaid exercise of option under Ex. B-1. Even though the plaintiff, under Ex. A-6, expressed his unwillingness to give a renewal of the lease, the defendant could have worked out remedies open to it under law, for compelling the plaintiff to execute and register a proper lease deed pursuant to the option exercised and pursuant to Section 5(2) of the abovesaid Act. The defendant, having not taken any such steps so far, cannot at this distance of time, contend that the possession suit initiated by the plaintiff should fail. At least when the suit notice Ex. A-1 dated 8-4-1983 terminating the lease and demanding possession was received by the defendant on 12-4-1983 (as borne out by Ex. A-2), the defendant should have taken necessary steps for working out remedies open to it in the light of Section 5(2) of the “Act and the fact that it has exercised its option for renewal. But, nothing has been done by the defendant so far. In such a situation, the plaintiff is bound to succeed.

19. No doubt, learned counsel for the appellant drew my attention to the following passage in Trade Centre D. and B. Pvt. Ltd. v. Union of India (AIR 1985 Bom 4):—

“Therefore practically by the unilateral choice of the Central Government or Government Companies the lease stands renewed. There is no scope for further negotiations or alterations or modifications.”

20. In the said case, the Bombay High Court was only considering the constitutional validity of Sections 5(2) and 7(3) of Esso (Acquisition of Undertakings in India) Act (14 of 1974). No doubt, the abovesaid Sections 5(2) and S. 7(3) of the abovesaid Esso Act are similar to Sections 5(2) and 7(3) of the abovesaid Burmah Shell Act, to which this second appeal relates. But, it must be noted that in AIR 1985 Bom 4 (supra), the only question was whether the said provisions were constitutionally valid. While dealing with that question, no doubt, the abovesaid extracted observation is also there, which purports to say that the “lease stands renewed.” However, there also, it must be noted that the learned Judges only say “practically” the lease stands renewed. Further, they only add “there is no scope for further negotiations or alterations or modifications.” This only means that once unilaterally the option is exercised, there cannot be any further negotiations for any modification. This does not mean that for the lease to come into being, there need not be a iease deed pursuant to Section 107 of the Transfer of Property Act.

21. Learned Counsel for the appellant also drew my attention to the following passage in P. Sankaranarayanan Nambiar v. Union of India (AIR 1990 Ker 5 (Paragraph 17)):—

“The landlord's title is not affected; his right to resume possession alone is affected. There is a requisition of his rights for a limited period as provided in these sections. Thus, it is impossible to accept the contention of the petitioners that Ss. 5(2) and 7(3) of the Acts, 4 of 1974 and 2 of 1976, are ultra vires of the” Parliament.”

22. Regarding this passage, learned Counsel laid emphasis on the abovesaid observation that the landlord's right to resume possession alone is affected. So, according to him, the present landlord's suit for possession should fail. But, I am unable to agree with this contention also. Here again, in the abovesaid decision, the only question was regarding the validity of Esso (Acquisition of Undertakings in India) Act. Further, if at all the abovesaid statement in the judgment only says that right to resume possession, of the landlord, is “affected”, it does not say that it gets barred.

23. If really the lessee after exercising the option and knowing that the lessee refuses to give a renewal of the lease, works out his remedies under law for compelling the lessor to give his duly executed and registered lease deed, then, the question may be different and there shall be a bar on the part of the lessor to resume possession. But, when the lessee in the present case, has not at all taken any such step for a very long time for working out its remedies despite the fact that the lessor has initiated legal action for taking possession, the lessee cannot oppose the suit on the footing that there is an automatic renewal by mere exercise of the abovesaid option for renewal.

24. The net result is, the second appeal is dismissed. However, in the circumstances of the case, there will be no order as to costs. C.M.P No. 3635 of 1995 for stay is consequently dismissed.

25. Appeal dismissed.