Case Note & Summary
The dispute arose from a lease executed on 9 November 1949 between landlord lessors and lessees for land to build and run a cinema house for twenty years at a rent of Rs. 300 per month for the first year and Rs. 600 thereafter. Clause 6 of the lease provided that on expiry of tenancy, the entire structure built by the lessees at their own cost would become the property of the lessor, who would exercise all rights of ownership and be entitled to sell the entire property, subject to payment of 50% of the market value of the structure to the lessees. If the parties could not agree on market value, two arbitrators would be appointed, with an umpire in case of difference. If the lessor failed to pay 50% of the assessed value within six months of the award, the whole structure would be sold and the lessees would have a first charge on the sale proceeds. On expiry of the lease, the lessors applied under Section 13(2) of the East Punjab Urban Rent Restriction Act, 1949 to the Rent Controller for eviction of the former tenant and appellant sub-tenant. During pendency of that application, the lessees applied under Section 34 of the Indian Arbitration Act, 1940 for stay of eviction proceedings pending arbitration over the market value and possession. The Rent Controller dismissed the stay application, holding that the statutory power of ejectment under Section 13 could not be curtailed by agreement between parties. The High Court dismissed the lessee's appeal under Section 39 of the Arbitration Act, interpreting clause 6 as negativing any right in the lessees to retain possession after expiry. The appellant challenged the High Court's interpretation, arguing that the cinema had to be run by someone while market value was being ascertained, so a right to remain in possession during the interregnum was implicit. The respondents relied on Section 108(q) of the Transfer of Property Act, 1882, which requires the lessee to put the lessor into possession on determination of the lease in the absence of a contract to the contrary. The Supreme Court held that there was no provision in the lease expressly postponing possession until ascertainment of market value; clause 6 vested ownership and right to sell in the lessor immediately on expiry. The obligation to pay 50% market value was a condition attached to ownership, not a precondition to possession. The burden of proving a contract to the contrary was on the lessee, and no such contract existed. The Rent Controller was not concerned with ascertainment of market value; its statutory power under Section 13 was to give or refuse eviction direction when statutory requirements were fulfilled. The appeal was dismissed and the High Court's judgment upheld.
Headnote
A) Transfer of Property - Lease - Section 108(q) Transfer of Property Act, 1882 - In absence of contract to contrary, lessee bound to put lessor into possession on determination of lease; burden on lessee to prove contrary contract - Clause 6 of lease did not expressly postpone possession and vested ownership in lessor immediately on expiry; payment of 50% market value was condition attached to ownership not precondition to possession - Held that no contract to contrary existed. B) Arbitration - Stay of Eviction Proceedings - Sections 34 and 39 Indian Arbitration Act, 1940 - Rent Controller's statutory power under Section 13 East Punjab Urban Rent Restriction Act, 1949 cannot be curtailed by arbitration agreement; only market value dispute referable to arbitration - Rent Controller dismissed stay application and High Court upheld; no right to retain possession pending arbitration - Held that stay application rightly dismissed.
Issue of Consideration
Whether clause 6 of the lease deed constituted a contract to the contrary postponing the lessor's right to obtain possession after expiry until ascertainment and payment of 50% market value; whether the lessee had an implicit right to retain possession pending arbitration; whether the Rent Controller's jurisdiction under Section 13 of East Punjab Urban Rent Restriction Act, 1949 could be curtailed by an arbitration agreement.
Final Decision
Appeal dismissed; judgment of High Court upheld; lessees not entitled to retain possession after expiry of lease; clause 6 of lease deed does not postpone delivery of possession; payment of 50% market value is a condition attached to ownership, not a precondition to possession; Rent Controller's statutory power under Section 13 not concerned with market value ascertainment.
Law Points
- Section 108(q) Transfer of Property Act
- 1882 requires lessee to put lessor into possession on determination of lease absent contract to contrary
- burden of proving contract to contrary lies on lessee
- clause 6 of lease deed did not postpone possession but vested ownership immediately on expiry
- payment of 50% market value is condition attached to ownership
- not precondition to possession
- Rent Controller's statutory power under Section 13 of East Punjab Urban Rent Restriction Act
- 1949 is to give or refuse eviction direction when statutory requirements fulfilled
- not to decide market value disputes
