Supreme Court explains when an unregistered lease deed, compulsorily registrable, can be admitted to prove possession

Supreme Court explains when an unregistered lease deed, compulsorily registrable, can be admitted to prove possession

The judges upheld the verdict of the high court

The Supreme Court has held that an unregistered lease deed (otherwise compulsorily registrable) can be admitted in evidence to show the ‘nature and character of possession’, only when it is not the main term of the lease and is not the primary dispute.

The bench comprising Justice Aniruddha Bose and Justice Vikram Nath stated thus while interpreting Section 49 of the Registration Act, 1908.

In 2003, a landlady and a tenant entered an unregistered Tenancy Agreement of a property for five years. Though the agreement was not renewed after five years, the tenant continued in possession without paying the rent.

In 2008, the landowner sent a notice to the tenant (addressing him as a monthly tenant) and directed him to vacate the premises within 15 days. However, the tenant did not comply with her directions.

What the Transfer of Property Act says:

Section 106 of the Transfer of Property (TP) Act, 1882 stipulates that in the absence of a contract, the lease of the immovable property for agricultural or manufacturing purposes shall be from year to year, terminable, on the part of either the lessor or the lessee, on six months’ notice. Also, the lease for any other purpose shall be deemed to be month-to-month, terminable on the part of either the lessor or the lessee, on a 15-day notice.

Section 107 states that 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.

Section 17 provides a list of documents that are to be compulsorily registered. It includes a document whereby an immovable property has been given on lease for a term exceeding one year.

When the premises were not vacated, the landowner filed a civil suit seeking recovery of possession and decree for mesne profits.

The tenant contended that the premises were let out for manufacturing purposes. Hence, as per Section 106 of the TP Act, it could only be terminated by giving a six-month notice. It was a lease agreement for a period exceeding one year under which he was inducted as a tenant, which required compulsory registration. Since it was unregistered, it was not admissible as evidence in court, therefore, the suit was not maintainable.

The trial court held that the lease was on a month-to-month basis being governed by the TP Act and was not for any manufacturing purpose. Thus, a 15 days’ notice was valid, and the suit was maintainable. The court gave the verdict in favor of the landlady.

On an appeal, the division bench of the high court upheld the judgment of the trial court. It held that an unregistered agreement (which is otherwise compulsorily registrable) could not be investigated for determining the rights and liabilities of the parties and for its duration.

Aggrieved by the high court’s decision, the tenant approached the Supreme Court. He 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.

Section 49 of the Registration Act says:

“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 -xxxx (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 the 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 a registered instrument.”

Thus, the issue before the apex court was whether the unregistered lease deed could be used as evidence to prove the nature and character of possession, invoking the proviso to Section 49, which allows the use of unregistered documents to prove the ‘collateral transactions.’

The judges observed that the Tenancy Agreement was a compulsorily registrable document under Section 17 of the Registration Act, as it provided a five-year term.

The bench cited the Sevoke Properties Ltd. v West Bengal State Electricity Distribution Company Limited, (2020) 11 SCC 782 case, wherein it was held that the contents of an unregistered lease agreement were inadmissible in evidence.

While distinguishing the present matter from the Sevoke Properties case, the bench observed that the earlier case was decided based on admission in a written statement. In that case, the issue was whether the lease stood determined by efflux of time, and once it did, what would be the position of the lessee. The observations therein were inapplicable to the present case, where the primary issue was regarding the nature of possession.

The court noted that the purpose of the lease formed an integral part of the Lease Deed and was the main dispute between the two entities. The expression ‘collateral purpose’ used in proviso to Section 49 of the Registration Act implied that the content of the document could be used for a purpose other than for which it was executed or entered between the parties, or for a purpose remote to the main transaction.

Justice Bose and Justice Nath noted the tenant’s argument that for establishing the nature and purpose of possession, even an unregistered document could be considered as that would come within the ambit of the ‘collateral purpose.’ They stated that the nature and character of possession contained in an unregistered document (otherwise compulsorily registrable) could form ‘collateral purpose’ when it was not the main term of the lease and not the primary dispute before the court for adjudication.

The bench ruled, “The nature and character of possession contained in a flawed document (being unregistered) in terms Section 107 of the TP Act and Sections 17 and 49 of the Registration Act can form ‘collateral purpose’ when the nature and character of possession was not the main term of the lease and did not constitute the main dispute for adjudication. The nature and character of possession constitute 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, the purpose of the lease is the main list, not a collateral incident.”

The top court held that the tenant had failed to prove that the premises were let out to him for manufacturing purposes. Thus, it upheld the verdict of the high court, and the appeal was dismissed.