N.G Nandi, J.— The appellant (defendant) has been assailing the order dated 31.1.1996 passed by the learned Additional District Judge, Delhi in Suit No. 31/95 rejecting the application under Section 34 of the Arbitration Act (hereinafter referred to as ‘The Act’) for the stay of further proceedings in the suit.

2. The facts leading to the present appeal, shortly stated are that the respondent (plaintiff) filed the suit claiming to be the landlord/owner of the premises bearing Flat No. 207, admeasuring 740 sq. ft. in the building known as Surya Kiran at 19 Kasturba Gandhi Marg, New Delhi, alleging that the said property was given on rent to the appellant/defendant at a monthly rent of Rs. 7,400/- for a period of four years, vide Rent Note dated 1.1.1980; that thereafter, the defendant had been enhancing the rent unilaterally and the plaintiff had been accepting the same and that finally the rent was increased to Rs. 9,849.40 w.e.f 1.11.1990 that the enhancement of the rent by the defendant was not agreed to by the plaintiff, who never wanted the defendant to continue the tenancy after 30.11.1994; that the plaintiff terminated the tenancy of the defendant vide notice dated 26.11.1994 and the tenancy of the defendant stood terminated on 31.10.1994/1.11.1994; that the tenancy of the defendant was monthly tenancy terminable by 15 days notice; that the occupancy of the defendant after termination of tenancy was unauthorised and accordingly, the plaintiff claimed possession of the suit property and also the mesne profit for the period the defendant continues to be in possession of the suit property. The appellant/defendant filed application under Section 34 of the Act contending that there is an arbitration agreement between the parties, as contained in lease agreement dated 1.11.1980, which is on a stamp paper of Rs. 2/- and is not registered; that the arbitration clause in the unregistered lease deed dated 1.11.1980 provides for the resolution of all disputes arising between the parties to the agreement during the pendency of the agreement or thereafter by the arbitration of Indian Council of Arbitration, New Delhi; that the initial lease to the appellant/defendant was for a period of four years at a monthly rent of Rs. 7,400 renewable for a further period of four years on the same terms and conditions contained in the agreement upon the enhancement of rent 10% over and above that which was paid during the previous tenure of the lease; that as per Clause 4(II) of the lease deed upon each such extension, the lease tenure stands extended at the enhanced rent at 10% over and above the rent payable for the previous period; that pursuant to Clause 4(II) the appellant/defendant enhanced the rent of the suit premises w.e.f 1.11.1992 and the rent is being paid at Rs. 9,849.40, which has been accepted by the defendant for the last two and half years; that since the lease deed dated 1.11.1980 contains an arbitration clause for determination of any dispute arising between the parties, the same has be decided by way of arbitration as per arbitration-clause contained in the lease. Hence the prayer under Section 34 of the Act.

3. The Additional District Judge dismissed the application under Section 34 of the Act and there by refused the prayer to stay the further proceedings in the suit. It is this order, which is assailed in this appeal under Section 39 of the Arbitration Act by the appellant/defendant.

4. It is not in dispute that the defendant was inducted in the suit premises pursuant to the unregistered lease deed dated 1.11.1980 by a writing on a stamp paper of Rs. 2/- at a monthly rent of Rs. 7,400/-. It is also not disputed that the said unregistered lease deed contained Clause 4(II) where by the lessee reserved the right to extend the lease for further periods of four year's on the same terms and conditions as of the initial lease deed by paying 10% increased rent over the rent paid for the last period of lease. The said clause also required that the lessee shall intimate the lessor, by registered letter three months before the expiry of each term of four years, indicating the intention for extending the lease for a further period of four years. It is also not in dispute that the first lease expired after four years of 1.11.1890 i.e on 31.10.1984 and the appellant/defendant continued to remain in the suit premises on 10% increase of rent at the end of every previous lease. It is also not in dispute that the agreement dated 1.11.1980 contained arbitration clause whereby any dispute arising between the parties to the agreement concerning the interpretation, observance, performance and breach of covenants and conditions, omissions, during pendency of the agreement or thereafter the, matter was required to be referred to the arbitration of the Indian Council of Arbitration New Delhi, whose decision was to be final and binding on the parties. It is also not in dispute that even after 1.11.1992 and till the service of notice dated 5.10.1994 by the respondent/plaintiff, the defendant paid rent Rs. 9,849.400p. per month.

5. In order to strengthen the submission of the applicability of Section 53-A of the Transfer of Property Act, Mr. Rohtagi, learned Counsel for the appellant has placed reliance on the case of Sheth Maneklal Mansukhbhai v. Messers Hormusji Jamshedji Ginwalla and Sons reported in 1950 SCR p. 75. In the instant case, the appellant/defendant has been inducted in the possession of the suit property by the unregistered lease deed dated 1.11.1980 which has determined by efflux of time. The appellant/defendant is admittedly not put in possession of the property pursuant to the correspondence subsequent to agreement dated 1.11.1890 under which the rent is accepted after 1.11.1984 In the case (supra), the predecessor in title of the defendant was put in possession in furtherance of the letter by the Taluqdari (Officer's to the Government and the resolution of the Government dated 5.9.1917 which was proved as the contract in writing to grant a lease on terms stated in the Taluqdari Officer's letter and the rent agreed, upon was accepted for several years and in light of these facts, Section 53-A of the Transfer of Property Act was held applicable and the plaintiff not entitled to eject the defendant. In the instant case, the correspondence between the plaintiff and the defendant suggest the payment of rent at the ennanced rate by the defendant and the acceptance of the same by the plaintiff during the period referred to in each of the correspondence. Admittedly, here is no lease deed writing entered into for the period subsequent to. 31.10.1984 i.e from 1.11.1984 and onwards.

“In the case of Biswabani Pvt. Ltd. v. Santosh Kumar Dutta and Others reported in AIR 1980 SC p. 226, the appellant was a tenant of the premises under the lease which turned out to be void and that on, its application standard rent in respect of demised premises was determined and the same was accepted as the rent to be paid under the second lease…..It is observed by the Supreme Court that “however, it would not be correct to hold that the tenant who was in possession of the demised premises as tenant and who, negotiated a fresh agreement of lease with the landlord for a period acceding one year which in order to be legal must be by a registered instrument and which turns out to be void for want of registration would alter the possession from one as tenant at the commencement of such void lease and would render him a licencee continuing in possession under the terms of a lease being void, and therefore, ineffective and he ceases to be a tenant and would be forcibly removed at the end of the period which was reserved under the void lease. Such an incomplete and ineffective attempt at creating a fresh lease would not have an impact on the tenant, who was in possession as tenant at the commence of such a void lease and he would continues to be tenant because Section 53-A would not be attracted as he was not put in possession in part performance of a void agreement of lease not registered and the payment of the standard rent fixed by the Rent Controller having jurisdiction could not by any process of construction be treated as payment under such an agreement of lease.”(emphasis supplied)

This would also provide answer in the negative to the submission of Mr. Rohtagi about the applicability to Section 53-A of the Transfer of Property Act to the present case.

In the submission of Mr. Rohtagi each correspondence i.e letters dated 3.6.1985, 8.11.1988, 11.11.1992/12.11.1992 constitute a fresh lease for further period of four years. As pointed out above, Clause (II) of para 4 of the agreement dated 1.11.1980 provides for the renewal of lease for a period of four years at the option of the lessee on the enhanced rent by paying 10% increase over the rent paid for the last period of lease. By no stretch of imagination Clause (II) referred to above can be construed to mean that the same by itself creates a fresh lease for a further period of four years. Clause (II) merely gives a right to the lessee to have a lease extended/renewed for a further period four years.

Section 105 of the Transfer of Property Act defines “lease” and provides that “lease is a transfer of interests made for a certain time. The lease must be for a certain time expressed or implied or in perpetuity in consideration of a price paid or promised, or of money, a share of crops, service”. Section 107 of the said fact provides that “a lease of immovable property from year to year, or for any terms exceeding one year, or reserving a yearly rent, can be made only by a registered instrument.”

In the case of Rasiklal Mr. Mehta and Another v. The Hindustan Photo FILMS Manufacturing Co. Ltd. reported in AIR 1976 madras p. 194 considering sections 107 and 116 of the t.p act, it is held that once the option is exercised either by the lessor or the lessee, a valid lease as such does not come into existence unless a registered document is executed, if the renewed lease in question satisfies the requirements of Section 107, T.P Act. After all, the option conferred either to the lessee or on the lessor is more or less in the nature of a pre-emption and neither the conferment of such option itself nor the exercise thereof automatically or of its own force brings into existence a new lease irrespective of other statutory provisions regarding the form procedure or the modalities by which alone such a lease can be brought into existence. Therefore, once a renewed, lease comes within the scope of Section 107 such a lease can be made only by a registered instrument. This is because it is a new lease, that comes into existence as a result of the exercise of option for renewal and that too by the bilateral acts of the parties. Consequently, the new lease is made within the scope of the expression occurring in Section 107 of the T.P Act and, therefore, it has to be only by a registered, instrument.”

In the case of Burmah Shell Oil Distributing now known as Bharat Petroleum Corporation Ltd. v. Khaja Midhat Noor and Others reported in AIR 1988 SC p. 1470 it is held that “in view of Section 107 since the lease was for a period exceeding one year, it could only have been extended by a registered instrument executed by both the lessor and the lessee. In the absence of registered instrument, the lease shall be deemed to be lease from month to month'. It is clear from the very language of Section 107 of the Act which postulates that a lease of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent, can be made only by a registered instrument. In the absence of registered instrument, it must be a monthly lease. The lessee and the sub-lessee in the facts of this case continued to remain in possession of the property on payment of rent as a tenant from month to month. In view of provisions of section 107 and in the absence of a registered instrument, it must be held that it was holding over and not continuation of old tenancy for a further period of five years. That would be the harmonious construction of Section 107 read with Section 116 in the facts of this case.”

6. The agreement dated 1.11.1980 admittedly contains arbitration clause vide para 4(IV). In the submission of Mr. Rohtagi, taking aid of Section 49 of the Registration Act, the agreement dated 1.11.1980 can be looked into for collateral purpose and the arbitration clause is a collateral purpose and not an integral part of the agreement. It may be appreciated that the agreement dated 1.11.1980, besides other terms and conditions creating rights and obligations also contains an arbitration clause requiring the reference of disputes arising between the parties during the pendency of the agreement and thereafter for resolution to the Arbitrator, namely, Indian Council of Arbitration, New Delhi. Even for the purpose of deciding as to what are the rights and obligations of the parties under the agreement dated 1.11.1980 and in order to appreciate what are the disputes between the parties, relating to the interpretation, performance, etc. of the agreement one will have to fall back upon the agreement dated 1.11.1980 The method of settlement of disputes flowing from the agreement like the other terms and conditions of the agreement, forms integral part of the lease and none of the terms of the lease can be regarded as a collateral transaction. In the case of Om Parkash Chawla v. The Union of India reported in LXXIV - 1972 PUNJAB LAW REPORTER P. 53 it has been held that “the term with regard to arbitration, being integral part of the lease deed, cannot be treated as collateral transaction, and where the lease deed is inadmissible for want of registration, the term regarding reference to arbitration in case of a dispute, cannot be enforced and accordingly proceedings before a Court cannot be stayed under Section 84 of the Arbitration Act”.

7. One of the arguments advanced by Ms. Bawa Shiv Charan Singh, learned Counsel for the respondent/plaintiff is that the lease created by agreement dated 1.11.1980 was determined by afflux of time and the lease deed dated 1.11.1980 vanished by afflux of time. The unregistered lease deed dated 1.11.1980 having been determined by afflux of time in the year 1984, the arbitration clause perishes alongwith the determination of original lease deed dated 1.11.1980 and cannot be availed of by the appellant/defendant. In the case of I.T.C Ltd. v. George Joseph Fernandes and Another reported in AIR 1989 SC p. 839, it has been held that “where the dispute between the parties is that the contract itself does not subsists either as a result of its being substituted by a new contract or by rescission or alteration, that dispute cannot be referred to the arbitration as the arbitration clause itself would perish if the averment was found to be valid. As the very jurisdiction of the Arbitrator is dependent upon the existence of the arbitration clause under which he is appointed, the parties have no right to invoke a clause which perished with the contract… As dispute as to the binding nature of the contract cannot be determined by resort to arbitration because the arbitration clause itself stands or falls according to the determination of the question in dispute”. As pointed out above in the instant case the agreement dated 1.11.1980 has been determined by afflux of time. There has been no fresh registered lease creating mutual rights and obligations by and between the parties include the arbitration clause and the payments of rents from 1.11.1984 have been under the correspondence referred to above.

It would thus be seen that neither Section 49 of the Registration Act can be taken aid of to read Sub-clause (iv) of Clause 4 of the agreement dated 1.11.1980 nor by taking advantage of II proviso to Section 49 of the said Act Section 53-A of the Transfer of Property Act can be attracted, for the reasons aforesaid.

8. It the result, appeal fails.