When Can An Unregistered Lease Deed, Which Is Compulsorily Registrable, Be Admitted To Show Nature & Character Of Possession? Supreme Court Explains

The Supreme Court Bench comprising Justice Aniruddha Bose and Justice Vikram Nath, while interpreting Section 49 of the Registration Act, 1908, has held that an unregistered lease deed (which is otherwise compulsorily registrable) can be admitted in evidence to show the ‘nature and character of possession’, only when the ‘nature and character of possession’ is not the main term of the lease and is not the primary dispute before the Court for adjudication.

BACKGROUND FACTS

In 2003, a Landlady and Tenant entered into an unregistered Tenancy Agreement in respect of a property (“Premises”) for a period of 5 years. The Tenancy Agreement was not renewed after 5 years but Tenant continued in possession without payment of rent. In 2008, the Landlady sent a notice to the Tenant (addressing him as monthly tenant) directing him to vacate the Premises within 15 days, which the latter didn’t comply with.

Section 106 of Transfer of Property Act, 1882 (“TP Act”) stipulates that in absence of a contract, the lease of immovable property for agricultural or manufacturing purposes shall be from year to year, terminable, on the part of either lessor or lessee, by six months’ notice. It further states that a lease of immovable property for any other purpose shall be deemed to be a lease from month to month, terminable, on the part of either lessor or lessee, by fifteen days’ notice.

Section 107 of TP Act states that a lease of immoveable 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.

Section 17 of the Registration Act, 1908 provides a list of documents which are to be compulsorily registered and it includes a document whereby an immovable property has been given on lease for a term exceeding one year.

When the Premises was not vacated, the Landlady filed a civil suit seeking recovery of possession and decree for mesne profits.

The Tenant contended that the Premises was let out for manufacturing purpose and hence as per Section 106 of TP Act it could only be terminated by giving a 6 months’ notice. Further, it was a lease agreement for a period exceeding one year under which he was inducted as a Tenant, which requires compulsory registration. The same being unregistered, was not admissible as evidence in court and the suit was accordingly not maintainable.

The Trial Court held that the lease was from month to month being governed by TP Act and was not for any manufacturing purpose. Thus, a notice of 15 days’ was valid and suit was maintainable. The suit was decided in favour of Landlady.

In appeal, the Division Bench of High Court upheld the Trial Court judgment and held that an unregistered agreement (which is otherwise compulsorily registrable) could not be looked into for determining the rights and liabilities of the parties and for its duration.

The Tenant filed an appeal before the Supreme Court against the High Court’s decision. It was argued that the Trial Court could not have admitted the unregistered Tenancy Agreement in evidence in view of prohibition under Section 49 of the Registration Act, 1908.

RELEVANT LAW

Section 49 of the Registration Act, 1908

“49. Effect of non-registration of documents required to be registered.— No document required by section 17 [or by any provision of the Transfer of Property Act, 1882 (4 of 1882)], to be registered shall—

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(c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered:

[Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 (3 of 1877), or as evidence of any collateral transaction not required to be effected by registered instrument.]”

SUPREME COURT VERDICT

The issue before the Court was whether the unregistered lease deed could be used as an evidence to prove the nature and character of possession, invoking the proviso to Section 49, which allows use of such unregistered documents to prove "collateral transactions".

The Bench observed that the Tenancy Agreement in question is a compulsorily registrable document under Section 17 of Registration Act, since the Agreement itself provides a term of five-years.

In Sevoke Properties Ltd. v West Bengal State Electricity Distribution Company Limited, (2020) 11 SCC 782, it was held the contents of an unregistered lease agreement were inadmissible in evidence. The Bench distinguished from the Sevoke Properties case while observing that the same was decided on the basis of admission in written statement. The issue in Sevoke Properties case was whether the lease stood determined by efflux of time and once it did, what would be the position of the lessee. Hence, the observations therein are inapplicable to the case at hand, where the primary issue is regarding nature of possession.

It was noted that the purpose of lease forms an integral part of the Lease Deed and is the main dispute between the Parties. The expression “collateral purpose” used in proviso to Section 49 of Registration Act implies that content of such a document can be used for purpose other than for which it has been executed or entered into by the parties or for a purpose remote to the main transaction.

The Bench took note of the Tenant’s argument that for establishing nature and purpose of possession, even an unregistered document could be looked into as that would come within the ambit of collateral purpose. It was held that nature and character of possession contained in an unregistered document (which is otherwise compulsorily registrable) can form collateral purpose when “nature and character of possession” is not the main term of the lease and is not the primary dispute before the Court for adjudication.

“In our opinion, nature and character of possession contained in a flawed document (being unregistered) in terms Section 107 of the 1882 Act and Sections 17 and 49 of the Registration Act can form collateral purpose when the “nature and character of possession” is not the main term of the lease and does not constitute the main dispute for adjudication by the Court. In this case, the nature and character of possession constitutes the primary dispute and hence the Court is excluded by law from examining the unregistered deed for that purpose. In respect of the suit out of which this appeal arises, purpose of lease is the main lis, not a collateral incident.”

It was further held that the Tenant failed to prove that the Premises was let out for manufacturing purpose. Accordingly, the Bench upheld the High Court’s verdict and dismissed the appeal.

Case Title: M/S Paul Rubber Industries Private Limited v Amit Chand Mitra & Anr.

Citation: 2023 LiveLaw (SC) 827

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