Phrase ‘contract to the contrary’ does not mean that the parties are free to contract out of the express provisions of the law: SC [Read Judgment]

The phrase ‘contract to the contrary’ in Section 106 of the Act cannot be read to mean that the parties are free to contract out of the express provisions of the law, thereby defeating its very intent, the Bench said.

The Supreme Court in M/S PARK STREET PROPERTIES (PVT) LTD.  VS. DIPAK KUMAR SINGH & ANR has held that the phrase ‘contract to the contrary’ in Section 106 of the Transfer of Property Act means a ‘valid contract’ and it cannot be read to mean that the parties are free to contract out of the express provisions of the law, thereby defeating its very intent.

Apex Court Bench comprising of Justices V. Gopala Gowda and Adarsh Kumar Goel restored the Judgment of Trial Court which had decreed the suit of Landlords for recovery and Khas possession.

As per the agreement, the landlord was entitled to terminate the tenancy only in case there was a breach of the terms of the agreement or in case of non-payment of rent for three consecutive months and the tenants failed to remedy the same within a period of thirty days of the receipt of the notice. The notice issued by Landlord requiring it to vacate the premises was contested by the Tenants terming it as illegal. This contention, though initially rejected by the Trial Court, was accepted by the High Court which had remanded back the case to Trial Court. The Landlords challenged the High Court judgment before the Apex Court.

Setting aside the Judgment of High Court which had remanded back the matter to Trial Court, the Bench said: “The above said clause of the agreement is clearly contrary to the   provisions of Section 106 of the Act. While Section 106 of the Act does contain the phrase ‘in the absence of a contract to the contrary’, it is a well settled position of law, as pointed out by the learned senior counsel appearing on behalf of the appellant that the same must be a valid contract.”

The Court also said that contract between the parties must be in relation to a valid contract for the statutory right under Section 106 of the Act available to a lessor to terminate the tenancy at a notice of 15 days to not be applicable. The Bench further observed: “If the argument advanced on behalf of the respondents is taken to its logical conclusion, this lease can never be terminated, save in cases of breach by the tenant. Accepting this argument would mean that in a situation where the tenant does not default on rent payment for three consecutive months, or does not commit a breach of the terms of the lease, it is not open to the lessor to terminate the lease even after giving a notice. This interpretation of the clause 6 of the agreement cannot be permitted as the same is wholly contrary to the express provisions of the law. The phrase ‘contract to the contrary’ in Section 106 of the Act cannot be read to mean that the parties are free to contract out of the express provisions of the law, thereby defeating its very intent. As is evident from the cases relied upon by the learned senior counsel appearing on behalf of the appellant, the relevant portions of which have been extracted supra, the contract between the parties must be in relation to a valid contract for the statutory right under Section 106 of the Act available to a lessor to terminate the tenancy at a notice of 15 days to not be applicable.”

Read the Judgment here.