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Bhuneshwar Prasad And Another v. United Commercial Bank And Others
Factual and Procedural Background
The appellants (landlords) and Respondents 3–7 own the disputed premises. United Commercial Bank (Respondent 1) has occupied the premises since 1963. A registered lease covering 1 April 1981 to 31 March 1986 contained two renewal options of five years each, exercisable one month before expiry. The Bank validly exercised the first option, extending the lease to 31 March 1991 at a rent of Rs 10,876 per month, but failed to exercise the second option in time.
After the lease expired, the landlords demanded that the Bank vacate by 31 May 1991. The Bank instead deposited rent directly into the landlords’ account—first at the old rate and, from September 1991, at an increased rate of Rs 13,595 per month, which the landlords withdrew. The landlords sued for eviction under Section 11(1)(e) of the Bihar Buildings (Lease, Rent and Eviction) Control Act, 1982, alleging mere holding-over without consent. The trial court decreed eviction, but the High Court reversed, holding that acceptance of enhanced rent created a month-to-month tenancy under Section 116 of the Transfer of Property Act, 1882. The landlords appealed to the Supreme Court.
Legal Issues Presented
- Whether the landlords’ acceptance of rent at an enhanced rate after expiry of the fixed-term lease constituted assent to the Bank’s continued possession, thereby creating a fresh month-to-month tenancy under Section 116 of the Transfer of Property Act, 1882.
- Consequently, whether the landlords were entitled to evict the Bank solely on the ground that the original lease term had expired.
Arguments of the Parties
Appellants (Landlords)
- Mere acceptance of rent after lease expiry does not imply consent to a new tenancy where the tenant enjoys statutory protection from eviction.
- Relied on Kai Khushroo Bezonjee Capadia v. Bai Jerbai Hirjibhoy Warden (1949 FCR 262) to argue that Section 116 TPA is not attracted without an express agreement in rent-controlled tenancies.
Respondent 1 (United Commercial Bank)
- The Bank has been a month-to-month tenant since 1963, as shown by landlords’ acceptance of rent—including an agreed 25% increase—after 31 March 1991.
- Acceptance and withdrawal of enhanced rent by the landlords amounted to their assent, creating a fresh tenancy that bars eviction on the sole ground of lease expiry.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Kai Khushroo Bezonjee Capadia v. Bai Jerbai Hirjibhoy Warden (1949 FCR 262; AIR 1949 FC 124) | Acceptance of rent, by itself, does not create a fresh tenancy under Section 116 TPA when rent-control protection exists. | Court agreed with its general proposition but distinguished the present case because rent was accepted at an increased rate, evidencing affirmative assent. |
| Ganga Dutt Murarka v. Kartik Chandra Das (AIR 1961 SC 1067; 1961 3 SCR 813) | Fresh tenancy can be inferred from parties’ conduct; determination is fact-specific. | Relied upon to hold that landlords’ conduct—demanding and withdrawing enhanced rent—implied a new month-to-month tenancy. |
| Bhawanji Lakhamshi v. Himatlal Jamnadas Dani (1972 1 SCC 388) | Acceptance of amounts equivalent to contractual or standard rent post-expiry does not, by itself, create a new tenancy. | Court noted that the case does not exclude Section 116 where circumstances (such as acceptance of higher rent) evince clear assent. |
Court's Reasoning and Analysis
The Court began by affirming that a fresh tenancy under Section 116 TPA requires (i) the tenant’s continued possession after lease expiry and (ii) the landlord’s assent to that possession. While rent-control statutes often negate implied assent—because tenants enjoy statutory protection—the Court emphasised that conduct may still supply evidence of a new agreement.
Key factual findings adopted from the High Court included:
- The landlords expressly demanded enhanced rent by letter dated 5 September 1992;
- The Bank deposited, and the landlords repeatedly withdrew, rent at Rs 13,595—25% higher than the contractual rate;
- There was no suggestion that this sum represented standard rent fixed by any authority.
From these facts, the Court inferred a deliberate assent by the landlords to the Bank’s continued occupation, distinguishing situations where landlords passively accept the same or statutorily fixed rent. By asking for and accepting increased rent, the landlords demonstrated an unequivocal intention consistent only with creation of a fresh month-to-month tenancy.
Because such tenancy existed, the sole ground of lease expiry under Section 11(1)(e) of the Bihar Act could not justify eviction. Consequently, the High Court’s decision setting aside the trial court’s eviction decree was legally correct.
Holding and Implications
APPEAL DISMISSED.
The Supreme Court affirmed the High Court’s finding that a month-to-month tenancy arose under Section 116 TPA due to landlords’ acceptance of enhanced rent. Therefore, the Bank cannot be evicted merely because the fixed-term lease expired. The judgment clarifies that, even in rent-controlled environments, affirmative conduct such as demanding and accepting higher rent may amount to assent, creating a fresh tenancy. No broader precedent was overturned, but landlords must exercise caution: seeking or accepting increased rent post-expiry may forfeit the right to evict on the ground of efflux of time.
Y.K Sabharwal, J.— The appellants and Respondents 3 to 7 are owners and landlords of the premises in question. United Commercial Bank, Respondent 1 is the tenant. Respondent 2 is an officer of the Bank.
2. A suit seeking a decree of eviction of the Bank from the premises was filed by the owners. It has been, inter alia, alleged in the plaint that the Bank was inducted as a tenant in the premises for a fixed period of five years commencing from 1-4-1981 to 31-3-1986 through a registered deed of lease. The Bank was given an option to get the lease renewed for two terms of five years each provided it gives notice for renewal of the lease each time one month prior to the expiration of the period of lease. The Bank exercised this option one month prior to 31-3-1986 and accordingly the lease was renewed for the period from 1-4-1986 to 31-3-1991 at a monthly rent of Rs 10,876. It seems that before 31-3-1991 the Bank did not exercise option for renewal of the lease. The Bank was asked to vacate the premises by 31-5-1991 under the plaintiff's letter dated 22-4-1991. Now, the Bank by letter dated 24-4-1991 requested the plaintiffs for renewal of lease but the plaintiffs did not agree and requested for vacation of the premises. It has also been stated in the plaint that after expiry of lease on 31-3-1991 the Bank used to deposit the rent in the account of the plaintiffs in their branch but that was without their consent and mere payment of rent without consent would not create any fresh tenancy. Under the aforesaid circumstances, the owners sought eviction of the Bank on the sole ground of expiry of the period of the lease under clause (e) of sub-section (1) of Section 11 of the Bihar Buildings (Lease, Rent and Eviction) Control Act, 1982 (for short “the Act”).
3. The suit was resisted by the Bank, inter alia, pleading that the Bank has been in occupation of the premises as tenant since 1963 and from time to time the rent has been enhanced. The Bank has claimed to be a tenant month to month. The Bank pleaded that it regularly deposited the rent in the account of the plaintiffs and they were withdrawing the rent so deposited every month after 31-3-1991 at the enhanced rate of rent of Rs 13,595 per month in place of Rs 10,876. The Bank pleaded that the amount is being paid as monthly rent as per its letter dated 7-9-1991 addressed to the owners and after discussion, they agreed to receive the said enhanced rent and are withdrawing the same. It has thus been claimed that the Bank is not a tenant for any fixed-term period but is a monthly tenant.
4. A decree for eviction on the ground above-stated was passed by the trial court directing the Bank to deliver vacant possession of the premises to the plaintiffs. In revision petition, however, judgment and decree of the trial court has been set aside by the High Court. The said judgment is under challenge in this appeal.
5. The High Court has recorded the finding of fact that even after expiry of the period of lease, rent of the premises at the increased rate, as per request of the plaintiffs, was regularly deposited by the defendant in their Bank in the accounts of the plaintiffs which has been subsequently withdrawn by them. Admittedly, the rent under the lease for the period up to 31-3-1991 was Rs 10,876 per month. The High Court has further held that the plaintiffs asked the Bank as per their letter dated 5-9-1992 to deposit the rent of the premises at the increased rate and the Bank deposited rent at the enhanced rate which amount was withdrawn by the plaintiffs. The amount being deposited by the Bank after 31-3-1991 was at the rate of Rs 13,595 per month. The High Court has held that “it is admitted position that the plaintiffs accepted 25% increased amount of monthly rent of the premises in question which is evident from Exts. B-3 and B-4”. The question to be considered, therefore, is as to the effect of payment of enhanced rent by the Bank to the owners. Does it create or not a fresh tenancy from month to month within the meaning of Section 116 of the Transfer of Property Act? Learned counsel for the appellants contends that mere acceptance of rent does not create a tenancy from month to month because of the protection from eviction available to the Bank under the provisions of the Act.
6. The present is not a case of payment and acceptance of the rent which was stipulated in the lease deed. It is also not a case where standard rent fixed by any authority has been paid. The increased rent as aforestated was deposited after 31-3-1991. The same was accepted by withdrawal of the amount. In terms of letter dated 5-9-1992, in fact, the owners asked for payment of the rent “hitherto deposited”. It has been established on the record that the rent demanded, deposited and withdrawn was increased rent. In the light of these established facts, we would examine whether in law monthly tenancy as contemplated by Section 116 of the Transfer of Property Act, 1882 came into existence or not.
7. Mr Sanyal, learned Senior Counsel appearing for the appellants contends that Section 116 of the Transfer of Property Act would not be attracted merely on acceptance of rent. Reliance is placed upon a decision of the Federal Court in Kai Khushroo Bezonjee Capadia v. Bai Jerbai Hirjibhoy Warden 1949 FCR 262, AIR 1949 FC 124. We agree that to bring a new tenancy into existence within the meaning of Section 116, there should be an agreement as the section contemplates that on one side, there should be an offer of taking a fresh demise evidenced by the lessee's continuing occupation of the property after the expiry of the lease and on the other side, there must be a definite assent to this continuance of possession by the lessor/landlord and that such an assent of the landlord cannot be assumed in cases of tenancies to which the Rent Restriction Acts apply on account of the immunity from eviction which a tenant enjoys even after the expiry of lease. In such cases, the landlord cannot eject him except on specified grounds mentioned in the Rent Restriction Acts and thus the acceptance of rent by the landlord from a statutory tenant, whose lease has already expired, would not be taken as evidence of a new agreement of tenancy and it would not be open to such a tenant to urge that by acceptance of rent, a fresh tenancy was created. We do not expect a lessor not to accept the rent when, in view of the protection granted by the rent restriction laws, without existence of one or the other ground, he is precluded from seeking eviction of the lessee and in such a case, there would be no question of creation of tenancy from month to month. Under these circumstances, mere acceptance of amount equivalent to rent or the standard rent would not attract Section 116. Assent to the lessee continuing in possession would be absent in such cases. However, an agreement creating fresh tenancy within the meaning of Section 116 can be implied from the conduct of the parties. In Ganga Dutt Murarka v. Kartik Chandra Das AIR 1961 SC 1067, (1961) 3 SCR 813 while affirming the dictum laid down in Khushroo case 1949 FCR 262, AIR 1949 FC 124 it was held that apart from an express contract, conduct of the parties may undoubtedly justify an inference that after determination of the contractual tenancy, the landlord had entered into a fresh contract with the tenant, but whether the conduct justifies such an inference must always depend upon the facts of each case. In Bhawanji Lakhamshi v. Himatlal Jamnadas Dani (1972) 1 SCC 388 again the question that came up for consideration was as to whether a fresh tenancy was created or not by acceptance of rent by the lessor after the termination of the tenancy by the efflux of time. This Court declined the prayer to reconsider Ganga Dutt Murarka case AIR 1961 SC 1067, (1961) 3 SCR 813 and held that acceptance by the landlord from the tenant, after the contractual tenancy had expired, of amounts equivalent to rent or an amount which was fixed as standard rent did not amount to acceptance of rent from a lessee within the meaning of Section 116 of the Transfer of Property Act. The present is not a case of acceptance of amounts equivalent to rent or amounts fixed as standard rent but acceptance of increased rent. It was also observed that:
“We do not say that the operation of Section 116 is always excluded whatever might be the circumstances under which the tenant pays the rent and the landlord accepts it.”
The whole basis of Section 116 is that a landlord is entitled to file a suit for ejectment and obtain a decree for possession and, therefore, his acceptance of rent after expiry of lease is an unequivocal act referable to his desire to assent to the tenant continuing possession. It would be absent in cases where there are restrictions as contemplated by rent laws. In such cases, therefore, it is for the tenant where it is said that the landlord accepted the rent not as a statutory tenant but only as a legal tenant indicating his assent to the tenant's continuing possession, to establish it.
8. In the present case, the Bank from the conduct of the owners has established that the acceptance of increased rent was in token of the owners' assent to the Bank continuing in possession after expiry of the lease, thereby creating lease from month to month within the meaning of Section 116 of the Transfer of Property Act, 1882. The High Court has rightly reversed the judgment and decree of the trial court. Before parting, we may make it clear that we are not concerned with the proceedings for fixation of the rent if pending before the appropriate authorities under the Act, as the same are not the subject-matter of this appeal and the fixation of the standard rent and from when it is payable is a matter to be decided by the said authorities in accordance with law.
9. For the aforesaid reasons, we dismiss the appeal. The parties are, however, left to bear their costs.
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