Applying for renewal and accepting rent do not automatically renew a lease absent a registered renewal deed.

The plaintiff-firm obtained a lease of land situated at Blocks 1–4, Agra–Bombay Road, Shivpuri, under a lease deed dated 23 July 1960 for 25 years, for establishing a motor service station and workshop.

The lease contained a renewal clause requiring the lessee to apply for renewal six months before expiry and contemplated extension for ten years, subject to a maximum period of 99 years.

The plaintiff claimed that it applied for renewal on 7 November 1984, deposited lease rent for subsequent years, and was assured that a renewal certificate would be issued.

When the Municipal Council allegedly attempted to measure the land for road construction, the plaintiff instituted a suit seeking declaration of its leasehold rights and permanent injunction.

The trial court decreed the suit for declaration and partly granted injunction, holding that the lease stood automatically renewed. The first appellate court affirmed that decision.

The Court applied Section 69(2) of the Indian Partnership Act, 1932, which bars a suit by or on behalf of an unqualified partnership firm against a third party unless the firm is registered and the persons suing are shown as partners in the Register of Firms; read with Order XXX Rule 1 CPC, the Court held, relying principally on Vijay Kumar v. M/s Shriram Industries, 2016 (4) MPLJ 397, that a suit in the firm’s name must be instituted through at least two partners.

Under Section 17(1)(d) of the Registration Act, 1908, a lease of immovable property exceeding one year requires compulsory registration; therefore, a further lease term could not arise merely from an application or payment of rent without execution of a registered renewal deed.

Sections 111(g) and 112 of the Transfer of Property Act, 1882 concern forfeiture and waiver during a subsisting lease and do not govern renewal after expiry of the lease term.

Section 116 of the Transfer of Property Act creates a tenancy by holding over only where the lessor accepts rent or otherwise assents to the lessee’s continued possession without a contrary indication.

A violation of a material lease condition, including sub-letting, may defeat the lessee’s entitlement to renewal.

The Court held that the suit was instituted by only one partner, notwithstanding that the firm was registered. Since Section 69(2) uses prohibitory language and Order XXX Rule 1 contemplates two or more partners suing in the firm’s name, the defect went to the maintainability of the suit and was not cured by the firm’s registration or by the absence of a timely objection.

On the lease issue, the Court found that the plaintiff had applied for renewal within the stipulated period, but that compliance with the renewal condition merely created a right to seek renewal; it did not itself renew the lease. In the absence of a registered renewal deed, no automatic extension for ten years could be inferred.

The Court further found that the plaintiff’s own correspondence indicated that the Municipal Council had not assented to its continued possession. Consequently, payment or acceptance of rent did not establish holding over under Section 116.

Finally, the testimony of the plaintiff’s witnesses showed that third parties, including Indra Kumar Gandhi and Sudhir Automobiles, were conducting businesses on the premises and paying fixed amounts or profit shares to the plaintiff. This amounted to parting with exclusive possession and sub-letting, contrary to the lease conditions.

The lower courts’ contrary findings were therefore held perverse for disregarding material evidence.

It further held that the plaintiff’s renewal application and subsequent rent payments did not automatically renew the expired lease, did not create a tenancy by holding over, and could not overcome the plaintiff’s breach through sub-letting.

The judgments and decrees of the trial court and first appellate court were set aside, the plaintiff’s suit was dismissed, and the plaintiff was directed to bear the defendants’ costs.