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In a recent judgement, the Karnataka High Court stated that if a lease agreement for a tenancy period of more than 11 months is not registered, it can only be considered for collateral purposes and not for rent enhancement. This decision came about after an appeal filed by Punjab National Bank (PNB) was allowed by a division bench of Justices PS Dinesh Kumar and CM Poonacha, which dismissed the original suit filed against the bank by Srinivasa Enterprises, a company based in Bengaluru.
The dispute began when Srinivasa Enterprises let out their property to Nedungadi Bank, which later merged with PNB. The property was leased on a monthly rent of Rs 13,574 and a refundable advance of Rs 81,444. The lease was renewed in 2002 for five years on a monthly rent of Rs 23,414, with effect from September 1, 1998. The agreement included an option to renew for a further five years with an enhanced rent of 20% every three years and an additional advance of Rs 1,32,969.
In September 2006, Srinivasa Enterprises moved a civil court to recover Rs 9,34,924 as rent arrears from September 1, 1998, in accordance with the lease agreement. However, PNB opposed the claim on the grounds that the lease agreement of September 23, 2002, was unregistered and insufficiently stamped, and the claim was also barred by limitation.
On December 20, 2018, the civil court partly decreed the claim made by Srinivasa Enterprises, allowing them to recover Rs 5,19,148 from PNB as arrears with interest of 18% per annum. However, PNB challenged this order by moving the high court.
The division bench allowed PNB's appeal and pointed out that the lease agreement should have been registered since the tenancy period was more than 11 months, as stated in section 17(1) of the Registration Act. The bench also referred to section 49 of the act, which deals with the effect of non-registration of documents required to be registered and stated that the lease agreement could only be considered for collateral purposes and could not be looked into for the purpose of considering the claim for enhanced rent.
This decision has significant implications for landlords and tenants who enter into lease agreements for tenancy periods of more than 11 months. Such agreements must be registered to be considered for rent enhancement, failing which they can only be used for collateral purposes.
In conclusion, this recent judgement by the high court clarifies the legal requirements for lease agreements and the consequences of non-registration. It is essential for landlords and tenants to comply with the provisions of the Registration Act to avoid legal disputes in the future.
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