Expired 10-Year Petrol-Pump Lease Made HPCL A Month-to-Month Tenant After Owner Accepted Rent: Bombay HC Restores Eviction Decree

The appellant-plaintiff claimed ownership of land originally leased by his mother to Esso under a ten-year lease commencing 1 January 1964.

HPCL continued in possession after the lease expired in 1974, and the plaintiff alleged that it paid monthly rent of Rs. 4,100.

In 1998, the plaintiff served a notice terminating the tenancy and sought possession and arrears of rent.

The Trial Court decreed the suit, but the District Court allowed HPCL’s appeal, holding that the tenancy was yearly and required six months’ notice.

The plaintiff’s second appeal was admitted on three substantial questions of law.

The Court applied Sections 106, 107, 111 and 116 of the Transfer of Property Act, 1882.

Under Section 106, absent a contrary contract or local usage, leases for agricultural or manufacturing purposes are from year to year and terminable by six months’ notice; leases for other purposes are from month to month and terminable by fifteen days’ notice.

Section 107 requires a registered instrument for a lease from year to year, for a term exceeding one year, or reserving yearly rent.

A lease determines by efflux of time under Section 111(a), but under Section 116, where the lessee remains in possession and the lessor accepts rent or otherwise assents, a holding-over tenancy arises; its periodicity is determined by the purpose of the lease as specified in Section 106.

The Court also noted the appellant’s reliance on Burmah Shell Oil Distributing v. Khaja Midhat Noor, (1988) 3 SCC 44, in support of his submissions.

The original lease expressly provided for yearly rent and was yearly during its contractual term. However, once it expired in 1974, HPCL’s continued possession with the plaintiff’s acceptance of rent created a holding-over tenancy under Section 116.

Because the land was leased for operating a petrol pump—not for agricultural or manufacturing purposes—the post-expiry tenancy was monthly under Section 106; the original lease’s yearly terms did not govern the holding-over tenancy.

The Court further held that the cheques and HPCL’s letter referring to “monthly rent” supported the finding that rent was tendered monthly.

The appellate court erred in treating the cheques’ non-encashment as depriving them of evidentiary value.

The holding-over tenancy required notice to determine it, but only fifteen days’ notice was necessary.

It allowed the second appeal, set aside the District Court’s judgment and decree, restored the Trial Court’s decree, and directed HPCL to deliver possession of the suit land to the plaintiff within three months, with costs.