Rights and Liabilities of Lessor and Lessee (Section 108)

Section 108 of the Transfer of Property Act, 1882 is the implied conveyancing code of every lease. It applies in the absence of a contract or local usage to the contrary, and supplies seventeen lettered clauses — three on the rights and liabilities of the lessor (clauses A: a, b, c) and fourteen on those of the lessee (clauses B: d to q). Express covenants in the lease deed override the implied ones; usage may displace both. The hierarchy mirrors the wider scheme of the operation of transfer under Sections 8 to 11. The section was the subject of substantial alterations by the amending Act 20 of 1929, which expanded clause (h) on fixtures, qualified clause (o) on user, and tightened the lessee's right of removal. Together the seventeen clauses anticipate every silence in the lease deed and assign default obligations between parties competent to contract. The leading judicial gloss is by Coutts Trotter J — the section sets out in convenient form the implied covenants usually subsisting in a lease — and by Rankin CJ, who described nearly all the clauses as expressions of well-settled principles familiar to the law of England.

Source of the rights and liabilities

The lessor's and lessee's rights and liabilities flow from three sources: the express covenants in the lease deed, the local usage, and section 108 itself. An express covenant always overrides an implied one — Line v Stephenson (1838) 5 Bing (NC) 183. A usage proved to be sufficiently established overrides both the express and the implied covenants, and even the express covenants are construed in the light of the usage. Section 108 has no application to a tenancy at will, for a tenancy at will is not a lease as defined in the Act: Ram Kishun v Bibi Sohila AIR 1933 Pat 561. The section is not exhaustive; it states the default position. Where rent control legislation supervenes, much of section 108 is displaced — particularly the lessor's right to recover possession on determination, which is replaced by the special grounds of eviction in the rent statute: Mangat Ram v Sardar Meharban Singh AIR 1987 SC 1003.

Part A — Rights and Liabilities of the Lessor

Clause (a) — duty of disclosure

The lessor is bound to disclose to the lessee any material defect in the property, with reference to its intended use, of which the lessor is aware and the lessee is not, and which the lessee could not with ordinary care discover. The clause adopts the principle applied to bailments by section 150 of the Indian Contract Act, 1872. The duty extends only to latent defects of which the lessor is himself aware. There is no obligation to disclose a patent defect, for the lessee is taken to see what he could see for himself; nor any obligation to disclose a latent defect of which the lessor too is unaware. The principle was tempered in a Bombay decision by Kemp J — there is no law against the letting of a tumble-down house — though disclosure is required if the house is known to be unsafe for the lessee's intended use: Lakhmichand v Ratanbai AIR 1927 Bom 115.

Clause (b) — duty to give possession

The lessor is bound, on the lessee's request, to put him in possession of the property. The duty is positive and arises only on the lessee's request — the lessee must be willing and able to take possession. The Supreme Court in Sant Lal Jain (1985) 2 SCC 332 emphasised that the symmetry of clause (b) and clause (q) — the lessor must give possession at the start, and the lessee must restore it at the end — supplies the pivotal moments around which the lease revolves. If the lessor's title is bad and he cannot put the lessee in possession, the lessee may sue for damages or rescind. Where the lessor purports to lease land to which he has no title — for example, a portion of a public road — the lease is void ab initio: Collector, District Gwalior v Cine Exhibitors Pvt Ltd (2012) 4 SCC 441.

Clause (c) — covenant for quiet enjoyment

The lessor shall be deemed to contract with the lessee that, if the latter pays the rent reserved and performs the contracts binding on him, he may hold the property during the lease without interruption. The covenant implied by section 108(c) is the absolute or unqualified covenant of the English lease — it protects the lessee not only against interruption by the lessor and persons claiming under him, but also against eviction by title paramount: Tayawa v Gurshidappa (1901) ILR 25 Bom 269. A qualified covenant, by contrast, would protect only against interruption by the lessor and his assigns. The covenant is annexed to the land and runs with it — the assignee of the lessee may enforce it, and the assignee of the lessor is bound by it. The Privy Council in S K Wodeyar v Ganapati AIR 1935 PC 134 affirmed that covenants relating to the demised land run with the lease in India as in England.

The covenant does not extend to fraudulent or tortious acts. The classic statement is by Vaughan CJ in Hayes v Bickerstaff (1669) Vaugh 118 — by covenant in law, the lessee is to enjoy his lease against lawful entry, eviction, or interruption, but not against tortious entries; for against tortious acts the lessee has his proper remedy against the wrongdoer. An act done under compulsion of statute is not within the covenant. Substantial interference with enjoyment that does not amount to dispossession is yet a breach: Sanderson v Berwick-on-Tweed Corporation (1884) 13 QBD 547. The remedy may be damages, or in some cases a suspension of rent. Damages for breach are not capped by the rule in Bain v Fothergill; the lessee in a case of eviction is entitled to the value of the term, the cost of any structure he has erected, and the costs of defending the action for eviction.

Part B — Rights and Liabilities of the Lessee

Clause (d) — accretions

If during the continuance of the lease any accession is made to the property, such accession (subject to the law of alluvion) shall be deemed to be comprised in the lease. The English law of accretion — gradual and imperceptible accession — was altered for India by the Privy Council, which held in Lopez v Muddun Mohun Thakoor (1870) 13 MIA 467 that gradual accession suffices, even if not imperceptible. The lessee enjoys the accretion during the term, paying a proportionate increment of rent, and surrenders it with the demised property at the end of the term. If the lessee himself encroaches on adjoining land of the lessor or of a stranger and acquires title by prescription, the encroached land must be surrendered to the lessor at the end of the lease.

Clause (e) — destruction of demised property

If by fire, tempest, flood, violence of an army or mob, or other irresistible force, any material part of the property is wholly destroyed or rendered substantially and permanently unfit for the purposes for which it was let, the lease shall, at the option of the lessee, be void. The clause is an option, not an automatic determination. The lease subsists until the lessee elects to avoid: Kundan Lal v Shamshad Ahmad AIR 1966 All 225. The Supreme Court in T Lakshmipathi v P Nithyananda Reddy (2003) 5 SCC 150 emphasised that destruction of the building alone does not determine the tenancy when the land on which it stood continues to exist; the option is the lessee's. The clause embodies a partial acceptance of the doctrine of frustration in its application to leases — Raja Dhruv Dev Chand v Harmohinder Singh AIR 1968 SC 1024 holds that the doctrine of frustration under section 56 of the Indian Contract Act does not apply to leases as such, the principle being codified to the extent of clause (e). The Bombay High Court in Hind Rubber Industries Pvt Ltd v Tayebhai Mohammedbhai Bagasarwalla AIR 1996 Bom 389 held that the right of the lessee in the demised property subsists even after destruction by fire, unless and until he exercises the option.

Clause (f) — lessor's covenant to repair

The clause does not by itself impose any duty on the lessor to repair. It applies only when the lessor has expressly covenanted to repair. If the lessor neglects to make a repair he is bound to make, the lessee may, after notice, do the repair himself and deduct the cost from the rent or recover it otherwise. The lessor's covenant to repair and the lessee's covenant to pay rent are independent — the lessee cannot terminate the lease for the lessor's default in repair, but he may exercise the statutory self-help under clause (f).

Clause (g) — payments made on behalf of lessor

If the lessor neglects to make any payment which he is bound to make and which, if not made, is recoverable from the lessee or against the property, the lessee may make the payment himself and deduct it with interest from the rent, or otherwise recover it. The clause is the property-law analogue of section 69 of the Indian Contract Act — payments by an interested party to prevent loss to himself. Examples include municipal taxes payable by the landlord and ground rent payable to a superior landlord. Once the lessee makes the payment to avert sale or distress, he is entitled to reimbursement.

Clause (h) — fixtures

The lessee may, even after the determination of the lease, remove at any time whilst he is in possession of the property all things which he has attached to the earth, provided he leaves the property in the state in which he received it. The clause was amended in 1929 to settle a conflict over whether the lessee had a reasonable time to remove after determination. The amended position is that the right exists during the term and continues so long as the lessee remains in possession; once he quits possession, the things attached become the property of the lessor. The clause is subject to a contract to the contrary: in Dhairyawan v J R Thakur AIR 1958 SC 789 the Supreme Court enforced an express agreement that the building put up by the lessee would vest in the lessor at the end of the term without compensation.

Clause (i) — crops on uncertain-duration leases

When a lease of uncertain duration determines by any means except the fault of the lessee, he or his legal representative is entitled to all the crops planted or sown by him and growing on the property when the lease determines, and to free ingress and egress to gather and carry them. The clause is a statutory expression of the doctrine of emblements. It applies only to leases of uncertain duration — a lease for a fixed term ends at a known date, and the lessee can plan accordingly. The clause does not apply if the lease ends through the lessee's own fault, such as forfeiture under Section 111(g).

Clause (j) — assignment and sub-lease

The lessee may transfer absolutely or by way of mortgage or sub-lease the whole or any part of his interest in the property, and any transferee may again transfer it. The lessee shall not, by reason only of such transfer, cease to be subject to any of the liabilities attaching to the lease. The clause is the default rule; an express covenant against assignment overrides it. A tenant having an untransferable right of occupancy, the farmer of an estate in respect of which default has been made in paying revenue, or the lessee of an estate under the management of a Court of Wards cannot assign his interest. The Calcutta High Court in Camberwell & South London Building Society v Holloway (1879) 13 Ch D 754 confirmed that a sub-lease is itself a lease within section 105. The lessee remains liable to the lessor on his original covenants notwithstanding assignment — privity of contract survives assignment, and only privity of estate passes to the assignee. The Supreme Court in Tinsukhia Electric Supply Co v State of Assam AIR 1990 SC 123 clarified that covenants which touch and concern the land run with the lease and bind successors. Sub-letting requires parting with exclusive legal possession; mere user by another while the tenant retains legal possession is not sub-letting: Mahendra Saree Emporium v G C Srinivasa Murthy (2005) 1 SCC 481; A Mahalakshmi v Bala Venkatram (2020) 2 SCC 531.

Clause (k) — lessee's duty of disclosure

The lessee is bound to disclose to the lessor any fact as to the nature or extent of the interest which the lessee is about to take, of which the lessee is aware and the lessor is not, and which materially increases the value of such interest. The clause is the mirror image of clause (a). It addresses the rare case of a lessee who knows that the demised land contains, for example, undisclosed minerals; he is bound to share the knowledge so that the lessor can adjust the rent. The duty is limited to facts which materially increase the value of the lessee's interest.

Clause (l) — obligation to pay rent

The lessee is bound to pay or tender, at the proper time and place, the premium or rent to the lessor or his agent in this behalf. The Supreme Court in Raja Mohammad Amir Ahmad Khan v Municipal Board Sitapur AIR 1965 SC 1923 held that mere refusal to pay rent is not in itself a disclaimer of the lessor's title, although it may evidence one. The time and place of payment are governed by the contract; failing express terms, by usage; failing both, by the section. Rent runs from the date of execution of the lease unless otherwise agreed. Rent may be suspended where the lessor's act has dispossessed the lessee from a substantial part of the demised property — partial eviction by the lessor of the entire premises suspends the rent until possession is restored. Eviction by title paramount, on the other hand, abates the rent in proportion to the part lost: the principle of apportionment applies.

Clause (m) — repairs by the lessee

The lessee is bound to keep, and on the termination of the lease to restore, the property in as good condition as it was in at the time when he was put in possession, subject only to changes caused by reasonable wear and tear or irresistible force. He must allow the lessor and his agents at all reasonable times during the term to enter and inspect; and where a defect is caused by the lessee's act or default, he must make it good within three months after notice. The standard is that of a person of ordinary prudence using his own property. "Reasonable wear and tear" is the lessee's friend — the natural deterioration that comes from ordinary use is not a breach. "Irresistible force" parallels clause (e). The clause is supplemented by clause (o) which prohibits acts destructive or permanently injurious.

Clause (n) — duty to disclose proceedings

If the lessee becomes aware of any proceedings to recover the property or any part of it, or of any encroachment on or interference with the lessor's rights concerning the property, he is bound to give notice with reasonable diligence to the lessor. The clause is the lessee's positive duty to keep the lessor informed; the lessee is in possession, the lessor is not, and the lessor's reversion would be irreparably prejudiced if encroachments matured into prescriptive titles before he knew of them. Failure to give notice may sound in damages, but does not by itself work a forfeiture.

Clause (o) — user

The lessee may use the property and its products as a person of ordinary prudence would use them if they were his own; but he must not use, or permit another to use, the property for a purpose other than that for which it was leased; or fell or sell timber; or pull down or damage buildings belonging to the lessor; or work mines or quarries not open when the lease was granted; or commit any other act destructive or permanently injurious to the property. The 1929 amendment inserted "or sell" and "belonging to the lessor". The clause is the textbook home of the doctrine of waste. Diversion of user from the agreed purpose — for example, residential premises let for residence put to commercial use — is a breach. Structural additions and alterations without the lessor's consent are prohibited by clause (p). Working mines or quarries not open at the date of the lease is a particularly heavy breach since it removes the corpus of the property.

Clause (p) — erection of permanent structures

The lessee must not, without the lessor's consent, erect on the property any permanent structure, except for agricultural purposes. The clause confines the lessee to the use of the property as it stood at the date of the lease. Permanent structures put up without consent may, at the lessor's option, be removed at the lessee's cost; or, if the lessor takes the benefit, may form the subject of express compensation. The exception for agricultural purposes is narrowly construed — sheds, water-tanks, and the like are within it; godowns and pucca buildings, generally, are not.

Clause (q) — restoration of possession

On the determination of the lease, the lessee is bound to put the lessor into possession of the property. The clause completes the symmetry of clauses (b) and (q) — possession at the start, possession at the end. The Supreme Court in Sant Lal Jain (1985) 2 SCC 332 held that the obligation to deliver possession on determination is a positive duty whose breach gives the lessor a cause of action for ejectment and mesne profits. The lessee cannot satisfy clause (q) by leaving a sub-lessee or licensee in possession; he must restore vacant possession. The Privy Council in S K Wodeyar v Ganapati (supra) emphasised that the obligation runs with the lease and binds assignees of the lessee. Where the lessee retains possession beyond determination he becomes a tenant at sufferance, liable for mesne profits, and may be ejected without notice unless he holds over with the lessor's assent and thereby attracts Section 116. The Supreme Court in Anar Devi v Parmeshwari Devi (2006) 8 SCC 656 reiterated that mere acceptance of rent is not enough — assent must be unequivocal.

Covenants running with the land

The second paragraph of clause (c) — "the benefit of such contract shall be annexed to and go with the lessee's interest" — is the statutory expression of the rule that covenants which touch and concern the land run with the lease. The principle was settled in Spencer's Case (1583) and is the foundation of the law on assignment. A covenant running with the land may be enforced by the assignee of the lessee against the lessor, and by the assignee of the lessor against the lessee. A merely personal covenant — for example, an undertaking by the lessor to allow the lessee free use of an unrelated parcel — does not run; it binds only the original parties. The Supreme Court in Tinsukhia Electric Supply Co v State of Assam AIR 1990 SC 123 reaffirmed that covenants that touch and concern the demised land — covenants for repair, payment of rates, restrictive user — pass with the reversion to the assignee of the lessor and bind him as if he had originally entered into them.

Distress, suspension, and apportionment of rent

Three doctrines colour the lessee's liability to pay rent. First, distress — the common-law right of the landlord to seize movables on the premises for arrears of rent — survives in India only in Presidency-town small-cause courts and in some agricultural tenancies under State legislation; it is otherwise unknown to general law. Secondly, suspension of rent — the lessor's wrongful eviction of the lessee from a substantial part of the demised premises suspends the entire rent until possession is restored: Pradeep Oil Corporation v Municipal Corporation of Delhi (2011) 5 SCC 270. Thirdly, apportionment of rent — eviction by title paramount of part of the demised property abates the rent pro tanto; on transfer of the lessor's reversion, the rent is apportioned between the transferor and the transferee under Section 109.

Section 109 — transferee of the lessor's reversion

Section 109 supplements Section 108 by providing that, on the transfer of the lessor's interest, the transferee acquires the rights and the burdens of the lessor as to the land transferred, save in respect of breaches occurring before the transfer. The transferor remains liable to the lessee for breaches that have already accrued, and the transferee for those that arise thereafter. The lessee is given a reasonable time to attorn — that is, to recognise the transferee as his new landlord — and the transferee may not enforce the rights against him without giving notice. The provision works in tandem with the rule that the covenant for quiet enjoyment runs with the reversion.

Where Section 108 is displaced — rent control overlay

State rent control statutes in most States have largely displaced section 108 in respect of urban tenancies. The Supreme Court in Dhanapal Chettiar v Yesodai Ammal AIR 1979 SC 1745 held that the rent statutes have done away with the law contained in section 108 to the extent of the rights and liabilities they expressly regulate — particularly the lessor's right to recover possession and the lessee's right to remain. The contractual obligations of payment of rent, repair, and disclosure may continue, but the eviction architecture is supplied by the special statute. The interplay is examined in detail in the chapter on Notice to Quit and the chapter on Determination of Lease.

Practical points for the exam-aspirant

The seventeen clauses of section 108 generate the largest single block of MCQs in the lease chapter. The standard examination angles are: clause (c) — absolute versus qualified covenant for quiet enjoyment, and the rule that the covenant does not extend to tortious acts; clause (e) — destruction is an option for the lessee, not automatic determination; clause (h) — fixtures may be removed only while in possession, subject to a contract to the contrary; clause (j) — sub-letting requires parting with exclusive legal possession, the test in Mahendra Saree Emporium; clause (l) — suspension of rent on partial eviction, abatement on eviction by title paramount; clause (m) — "reasonable wear and tear" and "irresistible force" as defences; clause (o) — opening of new mines is a particularly heavy form of waste; clause (q) — the lessee's positive duty to restore vacant possession. The interplay with Sections 105 and 107 on creation, with Section 106 on the notice to quit, and with the Code of Civil Procedure in the eviction suit, completes the picture. The cluster of decisions to remember by name is Sant Lal Jain, Tayawa v Gurshidappa, S K Wodeyar v Ganapati, Pradeep Oil Corp v MCD, Tinsukhia Electric, Mahendra Saree Emporium, A Mahalakshmi v Bala Venkatram, Anar Devi v Parmeshwari Devi, Hind Rubber Industries, and Raja Mohammad Amir Ahmad Khan v Municipal Board Sitapur.

Frequently asked questions

What is the difference between an absolute and a qualified covenant for quiet enjoyment under Section 108(c)?

An absolute or unqualified covenant protects the lessee against interruption by the lessor, his heirs and assigns, and any other person whomsoever, including eviction by title paramount. A qualified or restricted covenant protects the lessee only against interruption by the lessor and persons claiming under him; it does not extend to eviction by title paramount. The covenant implied by Section 108(c) is the absolute covenant — Tayawa v Gurshidappa (1901) ILR 25 Bom 269. The covenant does not, however, extend to tortious acts of strangers, against whom the lessee has his independent remedy: Hayes v Bickerstaff (1669) Vaugh 118.

What is the test for sub-letting under Section 108(j)?

Sub-letting requires the parting of exclusive legal possession in favour of the third party. The Supreme Court in Mahendra Saree Emporium v G C Srinivasa Murthy (2005) 1 SCC 481 and A Mahalakshmi v Bala Venkatram (2020) 2 SCC 531 held that mere user of the premises by another while the tenant retains legal possession does not amount to sub-letting. The initial onus is on the landlord to prove parting of possession; once established, the burden shifts to the tenant to explain. A tenant who has formed a partnership and retains active control over the premises has not sub-let; a tenant who has handed over physical control to a third party has.

Does Section 108(e) automatically end the lease when the demised premises are destroyed by fire?

No. Clause (e) confers an option on the lessee, not an automatic termination. The lease subsists until the lessee elects to avoid it: Kundan Lal v Shamshad Ahmad AIR 1966 All 225. The Bombay High Court in Hind Rubber Industries Pvt Ltd v Tayebhai Mohammedbhai Bagasarwalla AIR 1996 Bom 389 held that the lessee's right in the leased property continues even after destruction by fire, tempest or flood, until the lessee chooses to render the lease void. The Supreme Court in T Lakshmipathi v P Nithyananda Reddy (2003) 5 SCC 150 added that destruction of the building alone does not end the tenancy where the underlying land continues to exist.

Is the lessee bound to restore possession personally on the determination of the lease?

Yes. Clause (q) imposes a positive duty on the lessee to put the lessor into possession on the determination of the lease. The Supreme Court in Sant Lal Jain (1985) 2 SCC 332 held that this duty runs with the lease and binds the assignees of the lessee. The lessee cannot satisfy the duty by leaving a sub-lessee or licensee in possession; he must restore vacant possession. Failure to do so makes him a tenant at sufferance, liable for mesne profits, and exposes him to ejectment in due course of law.

Do covenants in a lease run with the land?

Covenants that touch and concern the demised land run with the lease. The principle was settled in Spencer's Case (1583) and codified in the second paragraph of Section 108(c). Such covenants — for repair, for restrictive user, for quiet enjoyment, for payment of rates and taxes — pass with the reversion to the assignee of the lessor and bind him as if he had originally entered into them. The Supreme Court in Tinsukhia Electric Supply Co v State of Assam AIR 1990 SC 123 confirmed the doctrine in India. Personal covenants unrelated to the land — for example, an undertaking by the lessor to do something on a separate parcel — do not run; they bind only the original parties.

When is the lessee entitled to remove fixtures under Section 108(h)?

The lessee may remove things he has attached to the earth even after the determination of the lease, but only whilst he is in possession of the property; once he quits possession the things become the property of the lessor. The 1929 amendment was inserted to settle a conflict over whether a reasonable time after determination was allowed. The right is subject to a contract to the contrary: in Dhairyawan v J R Thakur AIR 1958 SC 789 the Supreme Court enforced an express agreement that the building put up by the lessee would vest in the lessor at the end of the term. The lessee must leave the property in the state in which he received it.