Transfer of Property Act, 1882 – ss. 111(g) & 112 – Sale of a portion of land – Allegation of breach of lease deed – The erstwhile Travancore-Cochin Government in 1953 auctioned certain properties – One ‘P.I’ offered his bid to an extent of 246.26 acres and took possession in the year 1955 – No lease agreement was entered between them – Then ‘P.I’ assigned the said property in favour of one ‘KKJ’ – Pursuant to such transaction, the State executed a lease deed dated 15.12.1979 in favour of ‘KKJ’ – ‘KKJ’ was representing a partnership firm – In 1983, ‘KKJ’ executed a sale deed and transfered an extent of 50 acres to one ‘R’ – Thereafter, the Partnership firm sought to rectify the defect of transferring a portion of lease land to ‘R’ – The said request was not considered – The Government by notice dated 19.02.1992 intimated the lessee about the order to terminate the lease – After the first round of litigation, again by the order dated 26.11.2004, termination of lease in respect of the entire 246.26 acres was confirmed – Writ petition – The Single Judge of the High Court did not interfere with the order terminating lease – However, the Division Bench of the High Court set aside the order of terminating lease – Before the Supreme Court, inter alia, it was contended that lessee had sought to rectify the default under clause 12 of the lease deed – Held: Clause 14 of the lease deed provided that lessee shall not be entitled to sublet or assign his interest in the said lease except with the prior permission in writing obtained with the lessor – Clause 12 of the lease deed indicates that the issue of notice is contemplated in the event of the lessee committing default and liberty to terminate the lease is exercised – The concession provided is to rectify the default before the notice is issued – The ‘default’ meaning is failure to fulfil the obligation, while ‘breach’ is an act of breaking a law, agreement or code of conduct – If the said distinction is kept in view, the breach if committed by sub-letting or assigning as provided in clause 14, the same would lead to its consequences and the liberty to remedy is not mandatory – Clause 12 contemplates that cause of termination will be default and permitting to remedy the same is only an indulgence to be shown – The reading of the lease deed as a whole would indicate that the right reserved to the lessor under clause 14 is independent of clause 12 and if breach of that nature occurs, it is irreversible and it will be taken to its logical conclusion unless the lessor waives its right – The sale deed executed by ‘KKJ’ in the year 1983 would indicate the intention of the parties and also the fact that possession was parted without consent of the lessor which was the clear breach of clause 14 – The breach was not of the nature contemplated for rectification as provided under clause 12 of the deed – Further, under clause 14, it does not matter as to whether the breach committed is by assigning a portion of the leased land or the whole when such interest was transferred without previous permission of the lessor – Therefore, the order passed by the Division Bench of the High Court is set aside.
Disposing of the appeals, the Court
HELD: 1. From a perusal of the relevant clauses in the lease deed it is seen that clause 14 thereof provides that the lessee shall not be entitled to sublet or assign his interest in the said lease except with the previous permission in writing obtained from the lessor. In that backdrop, the breach alleged against the respondent is that the lessee has assigned the interest in the leased land to an extent of 50 acres in favour of ‘R’ without the previous permission of the lessor. The fact that such sale has taken place cannot be in dispute nor is it in dispute. The said assignment has been made under the registered sale deed dated 16.12.1983. The question therefore is; whether the same would constitute breach of the terms in the lease deed so as to entail termination of the lease. [Para 13][611-B-D]
2. If in that context, Clause 12 is taken note, it indicates that the issue of notice is contemplated in the event of the lessee committing default and the liberty to terminate the lease is exercised. The concession provided is to rectify the default before the notice is issued. If there is failure of the lessee to remedy such default that may be reported to the lessor from time to time by the Chief Conservator of Forests. Before termination of the lease a notice is to be issued and be heard about the default if the default has not been remedied. The same would clearly indicate that the default referred to, the issue of notice there for and the fact that the same is based on the report to the lessor (State of Kerala) from Chief Conservator of Forests is that the rectification permitted is in respect of the default relating to deviation from the obligations contained in the covenants relating to maintaining the nature of the property and default should be of rectifiable nature. The Dictionary meaning of ‘default’ is; failure to fulfil an obligation, while the meaning of ‘breach’ is an act of breaking a law, agreement or code of conduct. If the said distinction is kept in view, the breach if committed by subletting or assigning as provided in Clause 14, the same would lead to its consequences and the liberty to remedy the same is not mandatory. All that Clause 12 signifies is that if default is reported and if such default is not remedied then termination can be made after issue of notice and hearing. The cause for termination will be the default and permitting to remedy the same is only an indulgence to be shown. Therefore, the Division Bench of the High Court was not justified in its conclusion that the non-issue of notice and not providing opportunity to remedy the default is fatal. In the instant facts, the reading of the lease deed as a whole would indicate that the right reserved to the lessor under Clause 14 is independent of Clause
12 and if the breach of that nature occurs, it is irreversible and it will have to be taken to its logical conclusion unless the lessor waives the right thereunder. [Para 16][612-E-H; 613-A-B]
3. When there was breach providing the right to terminate the lease in respect of the entire leased land, even if the lease rental paid by the lessee has been accepted by the appellantlessor, it has not been shown that the requirement of the conditions in the proviso to Section 112 of the T.P. Act is satisfied. In the present situation, the land is leased by the government and when the breach had occurred the competent authority had issued the notice and the proceedings was initiated. Once the proceedings had been initiated even if the lease rental was received the same is saved under the second proviso. Further the situation is also that the payment of the rental made to the government would in any event be accepted as different functions are performed by different offices and any amount tendered will be received. That cannot give any advantage to the lessee merely because the rent has been tendered in the government office and the same has been innocuously accepted without there being specific reference to waiver. [Para 19][614-G-H; 615-A-B]
4. A perusal of the extracted portion from the sale deed dated 16.12.1983 would indicate the outright nature of sale of a portion of the leased land. It is sold for a sale consideration despite knowing that the property belonging to the government is granted under lease. The recital in fact, categorically indicates that the absolute right and possession has been given and it has also been stated therein that henceforth the purchaser, ‘R’ is to pay the lease rent directly to the government and all taxes to the government are also to be paid by him. Further, neither ‘KKJ’ nor the partnership firm has retained any right over the property sold under that document. Therefore, the document itself would indicate the intention of the parties and also the fact that possession was parted without consent of the lessor which was a clear breach of Clause 14 in the lease deed. [Para 22][617-D-F]
5. The alternate contention urged by the respondent-lessee is that even if the breach is held against the lessee, the entire lease cannot be forfeited in view of the provision in Section 111(g) of T.P. Act. Having noted the contention, firstly, a perusal of clause
14 no doubt does not state ‘a part thereof ’ as contended. However, that does not mean that a breach committed in respect of a part of the leased land cannot be construed as breach and would disentitle the lessor to exercise the right thereunder. Secondly, Section 111(g) does not suggest that in respect of the lease as a whole, the forfeiture should be limited only to the portion regarding which the breach is alleged. The breach is of not adhering to the assurance given to lessor in respect of the property belonging to the lessor, be it the whole or a part of it. [Paras 25, 26][618-G-H; 619-A-C]
6. In contradistinction to the facts which arose for consideration in the cited cases where essentially the dispute was inter-se between the private owners of the property and their lessees and the nature of transaction, in the instant case, the leased land is the property which belong to the government and the leasehold right has been auctioned so as to earn revenue for the state, which is to the interest of its citizens and one citizen or a group is permitted to exploit the land to the exclusion of all others. Additionally, such government property is located in an area notified as reserve forest. In such circumstance, when the lessee is given the benefit of such property and the breach of the condition imposed is alleged, the strict construction of the forfeiture clause against the lessor in all circumstances would not arise as otherwise it would render the clause in the lease deed otiose. The principle contained in Section 111(g) of the T.P. Act though noticed, the parties are governed by the terms in the contract and as such the lessee cannot claim benefit under the said provision. Further, as already noted the consideration under Section 111(g) is based on equitable principles which will have to be applied depending on the facts and circumstances obtained in each case. While applying the equitable principles, the maxim he who seeks equity must do equity cannot be lost sight of. It is said, a court will not assist a lessee in extricating himself or herself from the circumstances that he or she has created, in the name of equitable consideration. In the instant facts as already noted when public largesse is bestowed on certain terms and conditions, a term of the lease deed is to be strictly adhered to and when Clause 14 provides that the lessee shall not be entitled to sublet or assign his interest in the lease except with the previous permission in writing of the lessor, it does not matter as to whether the breach committed is by assigning a portion of the leased land or the whole w hen such interest of the lessee has been transferred without previous permission of the lessor. Further, in all the cases referred to by the learned senior counsel, the breach alleged was either of creating mortgage or subletting the property. In the instant case, despite being a lessee the respondent has executed an absolute sale deed in respect of the leased land which belongs to the government and such breach cannot be condoned. [Para 30][621-B-G]
Sarup Singh Gupta vs. S. Jagdish Singh and Others (2006) 4 SCC 205: 2006 (4) JT 277 – referred to. Sh. Shiam Behari Lal Gour and Others vs. Madan Singh AIR (32) 1946 Allahabad 298; A. Venkataramana Bhatta and Ors. vs. Krishna Bhatta and Ors AIR 1925 Madras 57; Keshab Chandra Sarkar and Ors. vs. Gopal
Chandra Chanda AIR 1960 Calcutta 609;
Swarnamoyee Debya vs. Aferaddi and Ors. AIR 1932 Calcutta 787 – referred to.
Grove vs. Portal 1902 1 CH 727; Cook vs. Shoesmith (1951) 1 KB 752 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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