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Expert Talk | Lease agreements, registration and tenancy laws

Does a rental/lease agreement require compulsory registration under Section 17(1) (d) of the Registration Act? A recent Supreme Court judgment sought to address the issue.

Published: 26th June 2020 08:35 PM  |   Last Updated: 26th June 2020 08:35 PM   |  A+A-

Supreme Court

Supreme Court. (File Photo | Shekhar Yadav, EPS)

This article addresses the impact of the recent decision of the Supreme Court in Siri Chand v. Surinder Singh and the requirement to register rental/lease agreements under provisions of the Registration Act and State tenancy laws.

Introduction

Section 2(7) of the Registration Act, 1908 (hereinafter 'the Act') defines a 'Lease' to 'include a counterpart, kabuliyat, an undertaking to cultivate or occupy and an agreement to lease'. 

Section 17 of the Act deals with documents of which registration is compulsory. Section 17(1) (d) of the Registration Act deals with 'Leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent'. Section 49 of the Act deals with effect of non-registration of a document which is compulsorily registerable.

Siri Chand Case - Facts

The Three Judge Bench of the Hon’ble Supreme Court has recently delivered a Judgment in the case of Siri Chand v. Surinder Singh1(hereinafter ‘Siri Chand case’) holding that a rental/lease agreement does not require compulsory registration under Section 17 (1) (d) of the Act if it does not mention a period of lease.

In the Siri Chand case, the agreement between the parties was a rent note which recorded that the tenant shall pay a monthly rent of Rs.2000/- and that there would be an increase of rent by 10% annually. Proceedings were initiated by the landlord for eviction of the tenant on the ground of non-payment of rent and the Rent Controller ordered eviction and held that the rent note "is not compulsorily registerable" since duration of the lease has not been specified therein.

On appeal filed by the tenant, the Appellate Court reversed the finding of the Rent Controlled and held that the document is compulsorily registerable under the provisions of the Act, taking into account the clause recording 10% increase of rent annually. The landlord filed a revision petition before the Hon'ble Punjab & Haryana High Court and the said High Court dismissed the revision by confirming the finding that the rent note 1 Judgment dated 17.06.2020 in Civil Appeal No.2617/2020 is compulsorily registrable. As against the order of the High Court, the landlord filed an before the Supreme Court of India.

Analysis of the position of law and findings:

The Supreme Court, in the Siri Chand case has analysed the law relating to registration vis-à-vis rental/lease agreements under the provisions of the Registration Act, 1908. As per Section 17(1) (d) of the Registration Act, 1908, leases of immovable property require compulsory registration if they fall under the following three categories, viz.,
(1) The lease is from year to year (“Category 1”);
(2) The lease is for any term exceeding one year or (“Category 2”);
(3) The lease reserves a yearly rent (“Category 3”). 

The Court has reiterated the position of law that “lease/rental agreements which do not fall within the above three categories, do not require to be registered.” 

On the facts of the Siri Chand case, the Court had tested the requirement to register the rent note, firstly, on the ground as to whether the lease is for any term exceeding one year (Category 2) as the said document prescribed an annual increase in rent; Secondly as to whether the lease mentioned a period of tenancy and thirdly as to whether the lease did not permit the tenant to continue the tenancy.

The Supreme Court while passing this judgement, also referred to the case of Ram Kumar Das v. Jagish Chandra Deb Dhabal Deb2 wherein it was held that “the recitals and object of the tenancy must be referred to, for determining the duration of the tenancy”. 

The Supreme Court finally concluded to hold that “the rent note does not have any provision regarding the period of tenancy and therefore it is not required to be registered under the provisions of the Registration Act, 1908.”

Applicability of the decision in the Siri Chand case:

The law regarding the requirement of registration for lease/rental agreement vis-à-vis the provisions of the Registration Act, 1908 may be summarised to say that a lease agreement is mandatorily registerable if “the lease is from year to year or if the period of lease is more than one year or if the lease mentions yearly rent.” If any of these conditions are applicable to a lease agreement, the same is compulsorily registerable in view of Section 17(1) (d) of the Act.

Two important points flow out of the Siri Chand case which is first that a lease agreement which does not mention a time period will not fall within the Second Category of Section 17(1) (d) of the Act and the same is not compulsorily registerable.

Secondly, merely because a clause in the lease agreement mentions an annual increase in the quantum of rent, it cannot be held to be falling within the Second Category of Section 17(1) (d) of the Act, owing to the contingent nature of the clause.

State laws on tenancy – Tamil Nadu

The decision in Siri Chand case deals with provisions of the Registration Act, 1908 visà-vis a lease agreement in which the period of tenancy is not mentioned. It is relevant to note that the tenancy laws have been enacted by various State Governments which are applicable to tenancies in their respective States. While matters relating to transfer of property and registration of deeds are covered under Entry 6 of the Concurrent List in Schedule VII to the Constitution of India, matters relating to relation of landlord and tenant and collection of rents are covered under Entry 18 of the State List in Schedule VII.

In Tamil Nadu, the Tamil Nadu Regulation of Rights and Responsibilities of Landlords and Tenants Act, 2017 (hereinafter ‘TNRLTA’) has been enacted by repealing the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960. The TNRLTA provides that all tenancy agreements shall be in writing and shall be registered with the Rent Authority.

Before the coming into force of the TNRLTA, tenancy agreements for a period less than one year were generally not registered and those exceeding one year were being registered as per Section 17(1) (d) of the Registration Act. Consequent to the new tenancy law, tenancy agreements, irrespective of their duration/period are compulsorily registerable under Section 4 of the TNRLTA before the Rent Authority appointed under the Act. This position of registration is independent of Section 17(1) (d) of the Registration Act and the findings of the Siri Chand case.

Conclusion:

In view of the above, it is clear that the decision in Siri Chand case has clarified the position of law that a lease agreement which does not provide duration of tenancy is not required to be registered under the provisions of the Registration Act. However, independent of the Registration Act, each party to the lease agreement would have refer the relevant State Tenancy laws and determine the requirement of registration.

Pawan Jhabakh and B Arvind Srevatsa are advocates practising in the Madras High Court. The views expressed are personal.



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