State the conditions under the Transfer of Property Act, 1882 whereunder a lease stands terminated.

Question: State the conditions under the Transfer of Property Act, 1882 whereunder a lease stands terminated. [RJS 2014]

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Answer

The termination of a lease is governed by Section 111 of the Transfer of Property Act, 1882. A lease of immovable property may be determined (i.e., brought to an end) under the following circumstances:

1. By Efflux of Time [Section 111(a)]

A lease automatically terminates when the fixed term for which it was granted expires. For example, if a lease is granted for 5 years, it ends by efflux of time upon the completion of the fifth year.

2. By Happening of a Specified Event [Section 111(b)]

A lease may be terminated when a condition mentioned in the lease deed occurs. For instance, if the lease is conditional upon the occurrence of a particular event (e.g., construction of a building), its occurrence can determine the lease.

3. By Termination of Lessor’s Interest [Section 111(c)]

If the lessor’s interest in the property is terminated (e.g., the lessor had only a life interest and dies), the lease also comes to an end.

4. By Merger [Section 111(d)]

When the rights of the lessor and lessee vest in the same person, and in the same capacity, the lease is said to be extinguished by merger.

5. By Express Surrender [Section 111(e)]

A lease may be terminated if the lessee voluntarily yields up the leasehold interest to the lessor by mutual agreement, which is known as express surrender.

6. By Implied Surrender [Section 111(f)]

Implied surrender arises from the conduct of the lessee that indicates an intention to surrender the lease. For example, accepting a new lease inconsistent with the existing lease may amount to implied surrender.

7. By Forfeiture [Section 111(g)]

A lease may be terminated by forfeiture in the following cases:

• If the lessee breaches an express condition which provides for re-entry;
• If the lessee denies the lessor’s title or claims ownership himself;
• If the lessee is adjudicated insolvent and the lease contains a clause for termination on insolvency.

However, forfeiture becomes effective only when the lessor gives a notice in writing to the lessee expressing the intention to determine the lease.

8. By Expiry of Notice to Quit [Section 111(h)]

When a valid notice to quit is served by either party in accordance with the lease terms or law, and the notice period expires, the lease stands terminated.

In Burmah Shell Oil Distributing Co. v. Khaja Midhat Noor & Ors. (1988 AIR 1470), the Supreme Court held that after the expiry of a written lease for ten years, the tenancy continued as a month-to-month tenancy under Section 106 of the Transfer of Property Act, 1882, due to acceptance of rent without execution of a fresh registered lease deed. A notice terminating the lease was held valid despite the absence of a separate notice to the sub-lessee (Burmah Shell), as the lease was lawfully terminated.

The Court ruled that a sub-lessee need not be made a party in an ejectment suit if the head lease is validly terminated, and such a decree would be binding on the sub-lessee.

Termination of a lease under the Transfer of Property Act, 1882 can occur in several modes—either automatically upon the expiry of the term, by mutual agreement, or by operation of law. Section 111 provides a comprehensive framework ensuring that leasehold interests are extinguished in a lawful, transparent, and predictable manner.