A lease was executed by A in favour of B, with a renewal option given to B after every 10 years in perpetuity.
After 10 years B exercised the option for renewal and upon A’s failure to execute the same, sought the court’s help in issuing a direction to A to execute a registered lease deed in his favour.
A contended that the condition relating to renewal was hit by rule against perpetuity and therefore, was not binding on him.
ISSUE
Whether a renewal of lease can be regarded as creating an interest in property, and thus hit by rule against perpetuity?
HELD
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.
Perpetuity is a limitation which place the property forever out of reach of the exercise of power of alienation.
Owing to section 105 of the TPA, a lease is the transfer of right to enjoy property for a certain time or in perpetuity, but even then, an interest still remains in the lessor, the reversioner.
Lease is not dealing with ownership. It only leads to transfer of possession.
It was held that s. 14 is applicable only when there is a transfer of property and the clause containing renewal after every 10 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.
Therefore, renewal of lease deed is not violative of S. 14.