Report No. 70
Formalities for Lease
The formalities for leases are prescribed by section 107. To quote the section:
"107. A lease of immovable property from year to year, or for term exceeding one year, or reserving a yearly rent, can be made only by a registered instrument. All other leases of immovable property may be made either by a registered instrument or by lessee agreement accompanied by delivery of possession. Where a lease of immovable property is made by a registered instrument, such instrument or, where there are more instruments than one, each such instrument shall be executed by both the lessor and the lessee:
Provided that the State Government may, from time, to time by notification in the official Gazette, direct that leases of immovable property, other than leases from year to year, or for any term exceeding one year, or reserving a yearly rent, or any class of such leases, may be made by unregistered instrument or by oral agreement without delivery of possession."
92.2. Section 107-formality of registration and formality of execution of both the parties.-
The section thus deals with certain points relating to the formal requirements of a lease. The Amendment of 1929 made a radical change in the law by providing for the compulsory registration of instruments of lease even for a period of less than a year-unless the lease was made by oral agreement accompanied with delivery of possession. The amendment further provided that an instrument of lease should be executed by both the lessor and the lessee.
On both these points, the amendment has not been accepted by the citizens. We shall refer to the practice later,1 but it is enough to point out at this state that even when the amendment was on the anvil, the legislative proposals were strongly criticised in knowledgeable circles. By way of example, a comment published in the Madras Law Journal may be2 cited in this context-
"We do not think it is necessary to make any change in the old section 107. The clause providing for compulsory registration even in the capes of leases for less than a year is likely to cause an unnecessary hardship, especially in the cause of leases of dwelling houses in towns which form a large class of transactions. Again, there is no case made out for insisting on the execution of the lease by both lessor and the leases. In this part of India, at any rate, the general practice is only to have a rent deed executed by the lessee, the same being delivered to and accepted by the lessor."
In the same comment, reference is made to a Madras Full Bench decision justifying the validity of a lease executed by the lessee and accepted, though not executed, by the lessor.3 It was pointed out in the same comment that there was no necessity "to modify an existing usage which had not been found to involve any particular hardship".
1. Para. 92.3, infra.
2. S.P. Shastri The Transfer of Property Amending Bill, (1928) 55 Mad LJ (Journal Section) 143.
3. Syed Ajam Saheb v. Ananthanarayana Aiyar, 1910 ILR 35 Mad 95 (FB).
92.3. Current practice.-
As to the actual practice, it would be proper to point out that in the Transfer of Property Act, the chapter on leases, particularly, the provisions relating to formalities-does not accurately reflect the present practice. In practice, in India, agreements of leases are almost invariably executed by the party taking the property for use and occupation.1 The deed executed by the party taking the property is termed as rent deed, rent chit, Kirayanama, Kabuliat or Karar, .
It is well-known that leases of small dwelling houses in the cities are effected by a written but an unregistered rent-note (or similar document), not signed by the lessor. The third paragraph of section 107, inserted by the Amending Act of 1929, is not in conformity with this practice. We are not so much concerned with the judicial decisions prior to the amendment, as with the hardship resulting from the present stringent provisions. In general, the public has found it difficult to comply with them.
Of course, the fact that a law has not been complied with is not, in itself, a reason for modifying it in every case, but it is certainly one relevant factor for considering whether it is not possible to evolve another alternative which could cause less inconvenience. One cannot disregard the fact that even citizens who are ordinarily law abiding find it inconvenient-and sometimes even harsh-to comply with the present law.
Although some courts have tried to relax the rigidity of the section by holding that an instrument executed by the lessee and accepted by the lessor is valid,2 or by holding that if there is no registered instrument but only an unregistered note (Kabuliyat), it does not come within the mischief of section 107, third paragraph,3-4 yet it must be stated, with respect, that such a view is not strictly justified by the language of section 107, and the hardship caused by the present provision should be more appropriately remedied by amendment.
If substantial justice is to be achieved, it is desirable to modify both these requirements by providing that leases falling within the third paragraph of section 107 can be executed (besides the modes already provided by an unregistered writing signed by the lessee accompanied by possession.
1. Gour Transfer of Property Act, (1974), Vol. 4, p. 3542.
2. Manlnder Nath v. Pancha Nand, ILR (1951) 2 Cal 444.
3. Ram Avtar v. Shantabala, AIR 1954 Cal 267.
4. Abdul Kadir v. Noor Mohammed, AIR 1959 Ker 400.
Having considered all aspects of the matter, we recommend an important modification in section 107, namely, leases other than those falling within the first paragraph should be permissible by an unregistered instrument if signed by the lessee and accompanied by possession.
92.5. Rent notes how far to be regarded as leases.-
While on section 107, third paragraph, we may state that rent notes may fall under the wider definition of lease in the Registration Act, which definitely includes a Kabuliyat and an undertaking to cultivate or occupy. The rent note or agreement to lease may be in counterparts signed by both parties, or it may be in correspondence.1-5 Or it may be an application for a lease accepted by the endorsement of the world "granted"6, or it may be an application for a lease accepted orally or by the conduct of the lessor putting the applicant into possession.7-8
If there is no present demise, the agreement may be effected by an unregistered instrument, or even orally. So when a tenant agreed orally to take three successive yearly leases after the expiry of his term, it was held that the agreement was valid, as the oral agreement did not operate as a transfer of property.9 If there is a present demise, the rent note operates as a transfer by way of lease and if the term does not exceed one year, registration is not necessary.10
But if the term exceeds one year, registration is necessary not under section 107, but under the Registration Act. A transfer by way of lease must be made by a person who owns the interest to be transferred. A rent deed which is executed by the transferee of the interest to be conveyed by a lease, and reciting that the transferee had taken the premises from the transferor and the transferee merely agrees by the terms of the deed to pay certain rent for a certain period, cannot be considered to be a lease.11 This is because it merely records a past transaction.
1. Boyd v. Kreig, 1890 ILR 17 Cal 548 (554).
2. Morgan v. Fernandez, (1916) 30 Mad LJ 519.
3. Mahomed Yusuf v. Secretary of State, AIR 1921 Born 200.
4. Ramanna v. Ramaszvamy, AIR 1951 Mys 13.
5. Hassan Sait v. Mirchandani, AIR 1951 Mys 24.
6. Syed Sulday v. Amzad Ali, 1881 ILR 7 Cal 703 (707); Ramaszvamy v. Thirunrthi, 1904 ILR 27 Mad 43.
7. Moro v. Tukaram, (1868) 5 Born HC 92 (AC); Hiralal v. Collector of Surat, 1876 PJ 36.
8. Mulla, (1973), pp. 663-664.
9. Syrian Land Co. v. I.D. Rodrigues, AIR 1933 Rang 220.
10. Hirachand v. H.H. Hammond, AIR 1934 AP 81 (rent-note of a bungalow for five months signed by the lessee only).
11. Taj Din v. Abdul Rahim, AIR 1939 Lah 423.
92.6. Rent note whether a lease under the Registration Act.-
A rent note or a Kabuliyat signed only by the intending lessee is not a lease under this Act, as the law now stands, but would be a lease under the Registration Act and the question of its registration would be decided under that Act.1 A rent note not compulsorily registrable under the Registration Act, executed by a tenant in favour of a landlord, if not registered, can be relied upon to establish the relationship existing between the parties.2
1. Jagdish Chandra Deo v. Bisheszvar Lal, AIR 1942 Pat 323; Tulsiram Rajaram v Govinda Ramji, AIR 1940 Nag 143.
2. Mohan Lal v. Genda Singh, AIR 1943 Lah 127.
92.7. Section 107-whether applicable to section 106.-
We should now deal with one question which involves three sections-sections 105 to 107. Where a lease is silent about its duration, the question arises whether it can be held to be a lease "from year to year" for the purposes of section 107. It may be recalled that section 106 lays down that "a lease of immovable property for agricultural or manufacturing purposes shall be deemed to be a lease from year to year". Can a lease which is governed by the deeming provision in section 106 be treated as a lease from year to year under section 107 also? The position has in this regard been clarified by a Calcutta case,1 which in 1950 held:
"Section 107 deals with the creation of tenancy by act of parties,2 while section 106 provides for the case where the lease is for manufacturing purposes but the contract is silent as to its duration. In such a case the law supplies the omission and enacts that the lease shall be deemed to be a lease from year to year. The attachment of this incident to the lease by operation of law is a very different thing from the creation of a lease from year to year by act of parties."
Thus, according to judicial construction, section 107 does not control section 106.3-4 Hence such a lease is not a lease from year to year for the purposes of registration under section 107, though it may be a lease from year to year for the limited purposes of notice under section 106. On this point also, we recommend that the section should be made clears by codifying what has been held in the Calcutta judgment of 1950, and reiterated5 subsequently.
1. Ram Pratap v. National Petroleum Co., AIR 1950 Cal 23 (29), para. 23: 1950 ILR 2 Cal 443, (R.C. Mitter & P.N. Mitra, B.).
2. Emphasis supplied.
3. Krishnadas v. Bidhan Chand, AIR 1959 Cal 181 (185).
4. J.A. Mirande v. Datha Nair, AIR 1971 Mys 365.
5. This recommendation is subject to reservation by Shri Sen-Varma.
6. Para. 92.7, supra.
92.8. Revised section 107.-
In the light of what we have stated above, we recommend the following re-draft of section 107:
"107. (1) A lease of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent, can be made only by a registered instrument.
(2) All other leases of immovable property, including a lease deemed to be a lease from year to year only by virtue of the provisions of section 106, may be made either by a registered instrument or by oral agreement accompanied by delivery of possession or unregistered instrument signed by the lessee and accompanied by delivery of possession.
(3) Where a lease of immovable property is made by a registered instrument, such instrument or, where there are more instruments than one, each such instrument, shall be executed by both the lessor and the lessee.
(4) Notwithstanding anything in this section the State Government may, from time to time by notification in the Official Gazette, direct that leases of immovable property, other than those falling within subsection (1) may be made by unregistered instrument or by oral agreement without delivery of possession."