Case Note & Summary
The case involves a dispute between Hindustan Petroleum Corporation Ltd. (HPCL), the applicant/defendant, and Navjeevan Co-operative Housing Society Ltd., the respondent/plaintiff, regarding the renewal of a lease for premises admeasuring about 10,000 sq. ft. in Madhav Mills Estate, Lamington Road, Bombay. The lease was originally granted by the respondent society to Caltex India Ltd. for a period of 20 years from 1964, with an option for renewal for two further terms of 10 years each, provided the option was exercised before the expiry of the term. The annual rent was Rs.33,000 for the first term, Rs.36,000 for the first renewal, and Rs.39,660 for the second renewal. During the original term, the Central Government acquired the shares and assets of Caltex India Ltd. under the Caltex (Acquisition of Shares of Caltex Oil Refining (India) Ltd. and of the Undertakings in India of Caltex (India) Ltd.) Act, 1977. Under Section 7(1) of that Act, the lease rights vested in the Central Government on the same terms and conditions, and under Section 9, the Government directed vesting of those rights in HPCL, a Government company. The original 20-year lease expired on 30.1.1984. HPCL continued in possession and paid rent, which was accepted by the society. HPCL claimed that it had exercised the option for the first renewal by letter dated 27.1.1984, and the society accepted rent at the enhanced rate of Rs.36,000 per annum, thereby renewing the lease for 10 years. That period expired on 30.1.1994. HPCL did not exercise the option for the second renewal before the expiry of the first renewal term. The society filed a suit for eviction, which was decreed by the trial court and confirmed by the appellate court. HPCL filed a civil revision application in the High Court. The High Court held that the option to renew must be exercised strictly in accordance with the contract terms, i.e., before the expiry of the term. Since HPCL failed to exercise the option for the second renewal before 30.1.1994, it was not entitled to renewal. The court also held that holding over after expiry does not create any right to renewal. The revision application was dismissed, confirming the eviction decree.
Headnote
A) Lease Law - Renewal of Lease - Option to Renew - Option must be exercised strictly in accordance with contract terms, before expiry of original term - The lease deed provided for two renewal terms of 10 years each, with option to be exercised before expiry of the term - Tenant failed to exercise option before expiry of original 20-year term - Held that option cannot be exercised after expiry, and holding over does not create right to renewal (Paras 2-6). B) Transfer of Property Act, 1882 - Section 116 - Tenant Holding Over - Holding over after expiry of lease does not confer right to renewal - Tenant continued in possession after expiry of original term and first renewal term without exercising option for second renewal - Held that mere holding over does not entitle tenant to claim renewal (Paras 5-6). C) Caltex (Acquisition of Shares of Caltex Oil Refining (India) Ltd. and of the Undertakings in India of Caltex (India) Ltd.) Act, 1977 - Sections 7(1) and 9 - Vesting of Lease Rights - Lease rights held by Caltex India Ltd. vested in Central Government on same terms and conditions - Central Government directed vesting in Hindustan Petroleum Corporation Ltd. - Held that the Government company steps into the shoes of the original lessee and is bound by the same terms, including the obligation to exercise renewal option before expiry (Paras 3-4).
Issue of Consideration
Whether the tenant, having failed to exercise the option to renew the lease before the expiry of the original term, is entitled to claim renewal after the expiry of the term, and whether the tenant's holding over after expiry creates any right to renewal.
Final Decision
The Civil Revision Application is dismissed. The concurrent decrees of eviction passed by the trial court and appellate court are confirmed. No order as to costs.
Law Points
- Option to renew lease must be exercised strictly in accordance with contract terms
- before expiry of original term
- Section 7(1) of Caltex (Acquisition of Shares of Caltex Oil Refining (India) Ltd. and of the Undertakings in India of Caltex (India) Ltd.) Act
- 1977 vests lease rights in Central Government on same terms
- Section 9 allows vesting in Government company
- Lease renewal option cannot be exercised after expiry of term
- Tenant holding over after expiry does not create right to renewal.
