Report No. 70
Leases for Indefinite Duration
Parties do not often define the duration of the lease with reference to a particular period or event. Sometimes, the period initially provided for has expired and the relationship of lessor-lessee continues without any further definition of period. In these and similar cases, where the term of the lease has not been specified, the law must supplement the gap and provide a rule to regulate the duration of the lease. Local law or usage may occasionally deal with the matter, but otherwise there must be a guiding rule of uniform application.
Section 106 seeks to create one such guideline. It treats the lease as from year to year or month to month, terminable by the notice of specified period. But the section does not apply in so far as a contract to the contrary makes a different provision on any point. Thus, even where the parties do not define the duration so that section 106 is potentially attracted, yet the parties may increase or decrease the period or mode of notice or the date of expiry or other ingredients or add thereto or modify them, it is only in so far as a contract or local law or usage does not provide to the contrary that the section applies.
The primary function of the section, then, is to supplement the parties' contract, and the primary aim is to avoid difficulties that might arise by reason of the insufficiency in the content of the contract. That a provision so intended to remove difficulties has led to certain practical hardships in relation to the notice contemplated by the section1 is one of the ironies of life.
We propose to make certain recommendations2 which are intended to minimise such difficulties. In view of past experience of the section, we are not unduly optimistic that after the proposed amendment the law relating to notice to quit will be a model of perfection. But we shall at least have the satisfaction of having tried our best to analyse and, where necessary, to reform the most important topic in the law of landlord and tenant in India.
1. See infra.
2. See infra.
The section is not divided into numbered sub-sections, but consists of un-numbered paragraphs, and the first paragraph itself combines a pretty large number of ideas. Such a structure of the section has obscured the significance and impact of several important phrases in the section and led to an incomplete realisation of the wealth of statutory mandatory provisions enacted by the section. For this reason we propose to discuss the section not necessarily with reference to its text, but with reference to its important ingredients.
91.4. Dichotomy based on purpose.-
The section makes a dichotomy between agricultural and manufacturing leases (on the one hand) and other leases. In the former case, the lease is deemed to be a lease from year to year, terminable with six months notice on either side. In the latter case, according to the latter part of the first paragraph of the section, the lease is deemed to be a lease from month to month, terminable on the part of either lessor or lessee by fifteen days' notice expiring with the end of a month of the tenancy-of course, this provision applies only where there is no contract or local law or usage to the contrary.
We are not, at the moment, concerned so much with the duration of the lease or the period of notice, as with the broad question as to the transactions to which the second part of the first paragraph in general applies. What we would like to point out is that this is an omnibus provision, applying to all leases which are not for agricultural or manufacturing purposes, and requires consideration.
The question to be considered is whether at the present day, this omnibus provision is enough as it stands, or whether some kind of distinction ought to be made, within this category, between leases may, for the purposes of office or business or profession and leases of residuary purposes? Would it not be more in consonance with reality to provide that a lease of immovable property, any, for the purposes of office or business or profession shall be deemed to be a lease from quarter to quarter, terminable by a month's notice expiring with the end of a quarter of the tenancy?
At present, they are deemed to be from month to month, terminable by fifteen days notice. This is hardly realistic-particularly, the period of notice. Perhaps, the same amendment could be made for residential leases also, but that question does no have much practical importance, since rent control legislation, which is primarily concerned with residential premises, takes care of the matter in regard to areas where it applies.
The point to which we wish to draw attention is that a lease of immovable property for the purposes of office, business or profession is normally intended to be of a more permanent duration than a residuary lease or a residential lease in a locality not highly urbanised. Therefore, the provision to be applied primarily, in the absence of a contract etc., ought to be one prescribing a longer duration than a mere month to month tenancy.
91.5. Recommendation as to lease for business etc.-
We recommend that the section should be so amended. The amendment is not intended to show any special favour to men belonging to a profession or carrying on a business, but to bring the law nearer to realities by substituting a provision which, one may presume, would have been made by the parties if their attention had been focussed on it.
91.6. Applicability to building leases.-
It is to be noted that the rule of construction embodied in section 106, first paragraph, would apply even to a building lease, according to the generally accepted view,1-3 though occasionally one comes across a view that a building lease is to be construed as having a duration co-terminous with the period for which the building stands.4
In fact, even a lease by the Government for building purposes has (on the anatogy of the English common law) been held to be a yearly tenancy determinable by six month's notice.5-6
In Bombay case,7 a tenancy for building purposes was, on the facts, held to be a tenancy not at will, but either permanent or one for the lifetime of the lessee.
1. Ram Dhari Sarma v. Jogendra Kumar Biswas, AIR 1959 Assam 174 (175).
2. Ram Kumar Das v. Jagdish Chander Deo, AIR 1952 SC 23 (27).
3. Bajrang Sahai v. Muhl? (Mt.), AIR 1941 All 399 (400).
4. Kanhaiya Lal v. Abdullah, AIR 1936 All 385 (386).
5. Secretary of State v. Babu Rajindra Prasad, AIR 1937 Pat 391 (395).
6. Secretary of State v. Babu Beni Prasad Sahu, AIR 1937 Pat 444 (646).
7. AIR 1954 Bom 257 (258, 259, 261).
91.7. Recommendation as to building lease.-
In our view, a lease for building purposes should be co-terminous with the period for which the building is to stand in the absence of a contract or local law or usage to the contrary. We recommend that the section should be so amended.
91.8. Agricultural purposes.-
Now, a few matters of detail, section 106 though it refers to agricultural leases, does not apply to them unless made applicable by notification under section 117. Most agricultural tenures in India arose before the Act, and are regulated not by this Act but by local Acts or custom.
91.9. Manufacturing purposes.-
The phrase "manufacturing purposes" is used in section 106 in its popular sense, and means the making of articles of trade and commerce by means of machinery.1 If the main or substantial purpose was manufacturing, the lease is for a manufacturing purposes; whether it should be the exclusive purpose has been left open by the Supreme Court,2 in the case of MacKertich.
If the lessee, to the knowledge of the lessor, required and used the land for manufacturing purposes, then, in the absence of a contract, he is a yearly tenant, and entitled to six month's notice.3
A tenancy for residential purposes and for stacking timber is a tenancy for a commercial purpose.4
1. Secretary of State v. Babu Rajindra Prasad, AIR 1937 Pat 391 (395).
2. MacKertich C. v. Stauart & Co. Ltd., AIR 1970 SC 839, reversing Stauart Rupeshzvari Debi v. Kokanath Hosiery, (1962) 414 AIR 1962 Cal 608.
3. Jacks & Co. v. joosab Mohamad, (1924) 48 Born 38: AIR 1924 Born 115; Steuart & Co. Ltd. v. MacKertich, AIR 1963 Cal 198.
4. Himataingka, AIR 1952 Assam 100.
91.10. Questions arise where more than one purpose is combined. It has been held1 that a lease partly for agricultural and partly for manufacturing purposes only requires a notice of fifteen days. But this case may require consideration2 in view of the judgement of the Supreme Court in the case of MacKertich.3
1. L.A. Saunders v. Corporation of Calcutta, (1955) 93 aj 354 (355).
2. See Mulla.
3. MacKertich C. v. Stauart & Co. Ltd., AIR 1970 SC 839, supra.