Supreme Court Gives Interpretation Guidelines for Contingent Clause in Rent Deeds

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In this case, the issue before the Apex Court was whether a Rent note signed by the tenant required compulsory registration under Section 17(1)(d) of Registration Act, 1908. The Court looked into Section 17(1)(d) of the Registration Act. It observed that leases of immovable property for a yearly basis, or for any term exceeding one year or reserving a yearly rent requires compulsory registration.

The Court had observed that because a Rent deed contains an increment clause which allows the landlord to increase the rent by a certain percentage each year. It cannot read to mean that the tenancy was for a period of more than one year.

Contentions by the Parties

The landlord filed the case under Section 13 of East Punjab Urban Rent Restriction Act, 1949. He prayed for eviction of the tenant along with arrears of rent and house tax and interest on the arrears of rent. The tenant filed an objection on the application and contended that the rate of rent is 1000 per month. He also pleaded that at the time of taking shop in question, no other condition was agreed or settled on.

When the lease deed does not mention the period of tenancy, other conditions of the lease deed and intention of the parties has to be gathered. This is to find out the true nature of the rent deed. In this case, the rent deed in question does not reserve yearly rent and there is no mention in rent deed that the lease is from year to year. But there is clause (9), which states that the rent money will be increased by 10% each year.

Court’s Observation

The Court observed that clause (9) may or may not be operative in view of specific clauses. These are such as the right of the landlord to evict the tenant on committing default of non-payment of rent. This is also when the landlord needs the premises by giving one months notice. Clause 9 was a contingent clause which allows the landlord to increase the rent by 10% each year. This is contingent on the tenancy to continue for more than a year. But, that clause cannot be read to mean that the tenancy was for a period of more than one year.

Thus, the Court in this case concluded that the rent note was not of such kind that requires compulsory registration under Section 17(1)(d) of the Act.


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