Case Note & Summary
In a significant 2026 ruling, the Supreme Court held that a registered 99-year lease creates a valid leasehold interest and cannot be cancelled unilaterally by the lessor without a contractual clause or statutory ground under Section 111 of the Transfer of Property Act, 1882.
In this case, the property owner had executed a registered lease in favour of Vivekananda Kendra for 99 years at an annual rent. Later, the owner cancelled the lease through a unilateral deed and sold the property to third parties. While the Trial Court and First Appellate Court upheld the lease, the High Court treated the document as a licence and dismissed the suit.
Reversing the High Court, the Supreme Court ruled that the intention of the parties must be gathered from the substance of the document. The use of terms like “demise,” fixed tenure, yearly rent, and rights to make constructions clearly indicated a lease and not a licence.
The Court further held that purchasers who buy property during pending litigation take it subject to existing rights under the doctrine of lis pendens.
Accordingly, the Supreme Court restored the decree in favour of the lessee and declared the unilateral cancellation illegal.
Headnote
A) Property Law – Transfer of Property Act, 1882 – Section 105 – Lease v. Licence – 99-year registered document styled as lease – Issue whether document created leasehold right or mere licence – Trial Court and First Appellate Court held it to be lease and declared unilateral cancellation illegal – High Court in Second Appeal construed document as licence and dismissed suit – Supreme Court examined text, clauses and surrounding circumstances – Held that nomenclature not decisive but substance and intention govern – Document used expressions “demise”, fixed 99-year term, yearly rent, right to construct, inclusion of heirs and assigns – Exclusive use granted to lessee – Clear transfer of right to enjoy property – Held: Document created leasehold interest and not licence – High Court erred in ignoring plain and literal construction – Decree of Trial Court restored (Paras 15-21). B) Transfer of Property Act, 1882 – Section 111 – Registration Act, 1908 – Unilateral Cancellation of Registered Lease – Validity – Lessor executed deed of cancellation without clause of re-entry in original lease – No ground under Section 111 TPA established – Held: Registered lease creating interest in immovable property cannot be unilaterally cancelled in absence of contractual stipulation or statutory ground – Such cancellation illegal and non-est in law – Rights of lessee cannot be divested by unilateral act. C) Civil Procedure Code, 1908 – Section 52 TPA (Lis Pendens) – Sale during pendency of suit – Effect – Purchasers bought property during pendency of litigation and with knowledge of existing lease – Plea of bona fide purchaser rejected – Held: Transfer pendente lite subject to outcome of litigation – Purchasers take subject to leasehold rights – High Court’s interference under Section 100 CPC unsustainable – Appeal allowed (Paras 10-22).
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Issue of Consideration: The Issue of whether the unilateral cancellation of a 99-year lease deed by the lessor was valid and whether the subsequent sale of the property to bona fide purchasers could be set aside, involving questions of maintainability, limitation, and the legal effects of the cancellation and sale under the Transfer of Property Act, 1882
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Final Decision
The Supreme Court set aside the High Court judgment and held that the 99-year registered document created a valid lease, not a licence. The unilateral cancellation was declared illegal, and the decree of the Trial Court in favour of the lessee was restored.
