# C. SHAH v. RAMASWAMI AND A. N. GROVER, JJ.j

- **Citation:** [1970] 2 S.C.R. 140
- **Court:** Supreme Court of India
- **Decided:** 1969-08-29
- **Bench:** C. Shah, V. Ramaswam!, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/c-shah-v-ramaswami-and-a-n-grover-jj-j-4758
- **Pages:** 5

## Headnote

Transfer of Property Act, 4 of 1882, s. 14-Lease of premises with
op1ion to lessee to renew it every ten years--Covena.'lt lvhether offends
rule against perpetuity.
A
B
The respondent by 'a deed executed in 1951 took on lease from the
appellant certain premises in Bangalore.
It was stipulated in the deed
C
that the lease would be for a period of 10 years in the first instance with
an option to the lessee to rcne\V the, san1e every ten years so long as
desired.
When in 1961 the first
period of ten years was
about to
expire the respondent asked for a renewal of the lease.
On the appe11ant
refusing to do so, the respondent filed a suit for specific performance,
The suit was decreed by the trial court, the first appellate court and the
High Court.
Appeal in this Court was filed by special leave. The con·
D
tcntion of the appellant was that the lease in question being in the first
instance for ten ye.a.rs only \Vas not a lease in perpetuity as contemplated
by s. 105 of the Transfer of Property Act; however the clauses relating
to renewal which were covenants that ran with the land offended the rule
against perpetuity in s. 14 of the Act.
HELD : The appeal must be dismissed.
(a) Section 14 of the Act is applicable only where there is transfer
of property.
Even if creation of a lease hold interest is a transfer of a
right in property and would fall within th• expression 'Jransfer ilf- proper:y' the transfer was for a period of ten years only-by means of the
indenture in the present case.
The stipulation relating to renewal could
not be regarded as transferring properly or any rights therein. [143 Bl
E
(b) The option of renewal given to the lessee
did not contain
a
F
covenant which created an interest in the property of the nature
that
would fall within the ambit of s. 14. (143 Fl
Ganesh Sonar v. Purnendu Narayan SinRha & Ors. (1962) Pat. 201,
applied.
Woodall v. Clifton, (1905]2 Ch. 257, referred to.
(c) In English law the court would. give effect to a covenant for
perpetual renewal so long as the intention is clear and it will not be open
to objection on the ground of perpetuity.
In India the equitable n1le
that the burden of a covenant runs with the land is to be found in s. 40
of the Transfer of Property Act, but that section itself expressly says that
the right of the covenantee is not an interest in the land bound by the
covenant nor an easement.
It is not ·an interest because the Act does
not recognise equitable estate. [143 G; 144 F]
Thus even on the footing that the clauses relating to renewal in the
lease, in the present case, contained co,·enants running with the land the
G
H
-
A
KEMPRAJ V. BARTON SON (Gro\'er, !.)
141
rule against perpetuity contained in s. 14 of the Act \rould not be applicabk:
as no interest in property had been created of the nature contemplated in
the provision. [144 G]
Muller v. Trafford, [1901]1 Ch. 54, Weg Motors Ltd. v. Ha/es & Ors.
(19611 3 A.E.L.R. 181, 188 and London & South Wesiern R/y. v. Gomm,
(1882) 20 Ch. D. 562, 580, referred to.
B
C1VIL AP!ELLATE JURISDICTION:
Civil Appeal No. 1655
of 1968.
Appeal by special leave from the judgment and order dated
December 20, 1967 of the Mysore High Court in Regular Second
Appeal No. 811 of 1965.
c
A. K. Sen, Shyamala Pappu and Vineet Kumar, for the appelD
E
I
G
H
lant.
S. V. Gupte, Janendra Lal, B. R. Aganrnla and Kumar M.
Mehta, for the respondent.

## Text

R. KEMPRA.J
l'.
MIS. BARTON SON & CO.
August 29, 1969
(J, C. SHAH, V. RAMASWAM! AND A. N. GROVER, JJ.j
Transfer of Property Act, 4 of 1882, s. 14-Lease of premises with
op1ion to lessee to renew it every ten years--Covena.'lt lvhether offends
rule against perpetuity.
A
B
The respondent by 'a deed executed in 1951 took on lease from the
appellant certain premises in Bangalore.
It was stipulated in the deed
C
that the lease would be for a period of 10 years in the first instance with
an option to the lessee to rcne\V the, san1e every ten years so long as
desired.
When in 1961 the first
period of ten years was
about to
expire the respondent asked for a renewal of the lease.
On the appe11ant
refusing to do so, the respondent filed a suit for specific performance,
The suit was decreed by the trial court, the first appellate court and the
High Court.
Appeal in this Court was filed by special leave. The con·
D
tcntion of the appellant was that the lease in question being in the first
instance for ten ye.a.rs only \Vas not a lease in perpetuity as contemplated
by s. 105 of the Transfer of Property Act; however the clauses relating
to renewal which were covenants that ran with the land offended the rule
against perpetuity in s. 14 of the Act.
HELD : The appeal must be dismissed.
(a) Section 14 of the Act is applicable only where there is transfer
of property.
Even if creation of a lease hold interest is a transfer of a
right in property and would fall within th• expression 'Jransfer ilf- proper:y' the transfer was for a period of ten years only-by means of the
indenture in the present case.
The stipulation relating to renewal could
not be regarded as transferring properly or any rights therein. [143 Bl
E
(b) The option of renewal given to the lessee
did not contain
a
F
covenant which created an interest in the property of the nature
that
would fall within the ambit of s. 14. (143 Fl
Ganesh Sonar v. Purnendu Narayan SinRha & Ors. (1962) Pat. 201,
applied.
Woodall v. Clifton, (1905]2 Ch. 257, referred to.
(c) In English law the court would. give effect to a covenant for
perpetual renewal so long as the intention is clear and it will not be open
to objection on the ground of perpetuity.
In India the equitable n1le
that the burden of a covenant runs with the land is to be found in s. 40
of the Transfer of Property Act, but that section itself expressly says that
the right of the covenantee is not an interest in the land bound by the
covenant nor an easement.
It is not ·an interest because the Act does
not recognise equitable estate. [143 G; 144 F]
Thus even on the footing that the clauses relating to renewal in the
lease, in the present case, contained co,·enants running with the land the
G
H
-
A
KEMPRAJ V. BARTON SON (Gro\'er, !.)
141
rule against perpetuity contained in s. 14 of the Act \rould not be applicabk:
as no interest in property had been created of the nature contemplated in
the provision. [144 G]
Muller v. Trafford, [1901]1 Ch. 54, Weg Motors Ltd. v. Ha/es & Ors.
(19611 3 A.E.L.R. 181, 188 and London & South Wesiern R/y. v. Gomm,
(1882) 20 Ch. D. 562, 580, referred to.
B
C1VIL AP!ELLATE JURISDICTION:
Civil Appeal No. 1655
of 1968.
Appeal by special leave from the judgment and order dated
December 20, 1967 of the Mysore High Court in Regular Second
Appeal No. 811 of 1965.
c
A. K. Sen, Shyamala Pappu and Vineet Kumar, for the appelD
E
I
G
H
lant.
S. V. Gupte, Janendra Lal, B. R. Aganrnla and Kumar M.
Mehta, for the respondent.
The Judgment of the Court was delivered by
Grover, J.
This is an appeal by special leave from a judgment
of the Mysore High Court in which the question involved
i~
whether an option given to a lessee to get the lease, which is initially for a period of 10 years. renewed after every 10 years is hit
by the rule of perpetuity and is void.
The respondent entered into a deed of lease on October 26,
1951 with the appellant in respect of premises Nos. 8 & 9, Mahatma Gandhi Road, (South Parade), Civil Station, Bangalore.
It was stipulated that the lease would be for a period of 10 years
in the first instance with effect from November 1, 1961 "with an
option to the lessee to renew the same as long as desired as provided". Clauses 9 and 10 which are material may be reproduced:-
"9. The lessee shall have the right to renew the lease
of the scheduled premises at the end of the present period of ten years herein secured on the same rental of
Rs. 450/- per month, for a similar period and for further similar periods thereafter on the same terms and
conditions as are set forth herein; and the Lessee shall
be permitted and shall have the right to remain in occu1-ation of the premises on the same terms and conditions
for any further periods of ten years as long as they desire
to do so.
10. The Lessor shall not raise any objection whatsoever to the Lessee exercising his option to renew the
lease for any further periods of ten years on the same
terms and conditions as long as they desire to be in
142
SUPREME COURT REPORTS
[1970] 2 S.C.R.
occupation, provided that the Lessee shall not have the
A
right to transfer the lease or alienate any right thereunder."
It appears that before the expiry of the period of ten years
from the date of the commencement of the lease the lessee wrote
to the lessor informing him of the intention to exercise the option
given to the lessee under the deed of lease to get the same renewed on the same terms and conditions as before for a period
of ten years from November 1, 196 !. The lessor did not comply with the request.
After serving a notice the lessee filed a
suit for specific performance of the covenan~ in the lease for
renewal.
It was prayed that the lessor be directed to execute a
registered deed to lease in favour of the Jessee and if he failed to
do so the court should execute a deed in his favour.
The lessor
pleaded, inter alia, that the condition relating to renewal was hit
by the rule against perpetuity. Certain other pleas were taken with
which we are not concerned. The trial court decreed the suit.
The first appellate court and the High Court affirmed the decree.
The rule against perpetuity is embodied in s. 14 of the Transfer of Property Act, hereinafter called the Act. According to it
no transfer 'of property can operate to create an interest which
is to take effect after the lifetime of one or more persons living
at the date of such transfer and the minority of some person who
shall be in existence at the expiration of that period and to whom,
if he attains full age, the interest created is to belong. It is well
known that the rule against perpetuity is founded on the principle
that the liberty of alienation "shall not be exercised to its own
destruction and that all contrivances shall be void which tend to
create a perpetuity or place property for ever out of the reach of
th·~ exercise of the power of alienation". The words
"transfer
of property" have been defined by s. 5 of the Act to mean an act
by which a Jiving person ~onveys property in present or in future
to one or more other living persons etc. The words "living persons" include a Company or association or body of individuals.
Section 105 of the Act defines "lease''.
A lease of immovable
· property is a transfer of a right to enjoy such property made for a
certain time express or implied or in perpetuity in consideration
of a price paid or promised or of money, a share of crops, service
or any other thing of value.
A lease is not a mere contract but
it is a transfer of an interest in land and creates a right in rem.
Owing to the provisions of s. 105 a lease in perpetuity can be
created but even then an interest still remains in the lessor which
is called a reversion.
It is aot disputed on behalf of the appellant that a lease in
perpetuity could have been created but the lease in the present case
B
c
D
E
F
G
H
.
A
ll
c
D
E
F
-
G
H
KEMPRAJ V, BARTON SON (Grover, J.)
143
was not of that kind and was for a period of ten years only in the
first instance. It is said that the mischief is created by the clauses relating to :enewal which are covenants that run with the
land. It is pointed out that on a correct construction of the renewal clauses the rule of perpefuity contained in s. 14 would be
immediately attracted.
We are unable to agree.
Section 1~ is
applicable only where there is trapsfer of property. Even If creation of a lease-hold interest is a transfer of a right in property and
would fall within the expression "transfer of property" the transfer
was for a period of ten years only by means of the indenture
Exh. P-1. The stipulation relating to the renewai could not be
regarded as transferring property or any rights therein.
In Ganesh Sonar v. · Purnendu Narayan Singha & Urs. ( 1 ) in
the case of lease of land an option had been given to the lessor tG
determine the lease and take possession of the lease-hold land
under specified conditions.
The question was whether such a
covenant would fall within the rule laid down in the English case
Woodall v. Cliftorr(') in which it was held that a proviso in a
lease giving an option to the lessor to purchase the fee simple of
the land at a certain rate was invalid as infringing the rule against
perpetuity. The Patna High Court distinguished the English decision quite rightly on the ground that after the coming into force
of the Act a contract for the sale of immovable property did not
itself create an interest in such property as was the case under
the English law. According to the Patna decision the option given
by the lessee to the lessor to resume the lease hold land was merely
a personal covenant and was n0t a covenant which created an
interest in land and so the rule against perpetuity contained in s.
14 of the Act was not applicable. The same principle would govern the present case. The clauses containing the option to get
the lease renewed on the expiry of each term of ten years can by
no means be regarded as creating an interest in property of the
nature that would fall within the ambit of s. 14.
· Even under the English kN the court would give effect to a
covenant for perpetual renewal so lvng as the in~ention is clear
and it will not be open to objection on the ground o[ perpetuity;
Soe Halsbury's Laws of England, 3rd E<ln. Vol. 23, p. 627. In
;'\Jul/er v. Trafjword(') it was held that the covena!it in a lease
for
renewal
was
not
strictly
a
covenant
for
renewal.
llut Farwell, J., proceede~ to observe that a covenant to renew
had been held for af least two centuries to be a covenant running with the land. If so, then no question of perpetuity would
arise. It appears that in England whatever might have been the
reason, the objection of perpetuity had never been taken to cases
(I) (1962) Patna 201.
(2) (1905) 2. Ch. 257.
(J) (1901) I Ch. 54.
144
SUPREME COURT REPORTS
[ 1970] 2 S.CR.
of covenants for renewal.
Th.~ following
observatiom of FarA
well, J ., which were quoted with approval by Lord Evershed.
M. R. in Weg Motors Ltd. v. Haies
&
Others(')
are noteworthy :
"But now I ·•·ill assume that this is a covenant for
renewal running with the land;
it is then in my
opinion free from any taint of perpetuity because it is
B
annexed to the land. See Rogers v. Hosegood, ( 1900)
2 Ch. 388."
The equitable rule that the burden of a covenant runs with
the land is to be found in s. 40 of the Act. This section reads :
40. "Where for the more beneficial enjoyment of his
own immoveable property, a third person, has, independently of any interest in the immoveable property of
another or of any easement thereon, a right to restrain
the enjoyment in a particular manner of the latter property, or
where a third person is entitled to the benefit of an
obligation arising out of contract, and annexed to the
ownership of immoveable property, but not amounting
to an interest therein or easement thereon,
such right or obligation may be enforced against a
transferee with notice thereof or a gratuitous transferee
of the property affected thereby, but not against a transferee for consideration and without notice of the right
or obligation nor against such property in his hands."
As pointed out in Mulla's Transfer of Property Act, 5th Edn., at
page 194, s. 40 expressly says that the right of the covenantee
is not an interest in the land bound by the covenant nor an easement. It is not an interest because the Act does not recognise
equitable estates and it cannot be said as Sir George Jessa! said
in London & South Western Rly. v. Gomm(') that if a covenant
"binds the land it creates an equitable interest in the land." The
expression "covenant runs with the land" has been taken from
the English law of real property. It is an exception to the general
rule that all covenants are personal. Even on the fcoting that
the clauses relating to renewal in the lease, in the present case,
contain covenants running with the land the rule against perpetuity contained in s. 14 of the Act would not be applicable as
no interest in property has been created of the nature contemplated by that provision.
For the above reasons the appeal fails and it is dismissed with
costs ..
G.C.
Appeal dismissed.
(I) [1961] 3, A.E.L.R. 181, 188.
(2) )1882] 20 Ch. D. 562, 580.
c
D
E
F
G
H