Upgrad
LCI Learning

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

Shreya Shah (Company Secretary)     16 February 2010

Execution of lease

Dear All,
 
We have two group companies say Company A & Company B. We are executing a letter and not a leave and license agreement whereby company A agrees to give on lease its certain premises to Company B on the following terms:
 
1. Security Deposit: Rs. _________
2. Monthly Rent:     Rs. _________
3. Period of Lease:  11 months
 
My query is whether the above transaction is valid. Whether the above arrangement can be executed without preparing a leave and license agreement and without payment of stamp duty.
 
Thanks & Regards,
Shreya Shah


Learning

 5 Replies

Adv Mathew (Legal Advice)     18 February 2010

Hello Sherya

In your case it should be registered with the appropriate stamp fee, as this involves money consideration it should be in a agreement. Tommorow say the one of the company doesnt repay your security deposit ? what will u do to enforce it unless it is properly enforcebale in the court. so its better to invest some money and register it.

If u have any querry on this let me know


Thanks and regards

Naiju Mathew
9096095129

Daksh (Student)     18 February 2010

Dear Shreya,

It is evident from the perusal of your post that although the transaction is perfectly just and valid but from the modality point of view this arrangement seems to be more sort of Memorandum of Understanding amongst two Companies.   

About the enforceability part yes if the transaction has been done by the duly authorized person then ipso facto it binds the Corporate entity as well.

Best Regards

Daksh

V.RAJESHWAR (Advocate)     18 February 2010

hi shreya!

The difference between the  Lease Agreement and Leave & License Agreement is that In lease there is a transfer of interest, whereas in leave and license there is no transfer of interest although possession is granted.

If the premises are given on Tenancy, there is an element of non-eviction of the tenant by the owner except on the grounds of eviction, mentioned under the Rent Act and whereas the premises are given under the Leave and License Agreement, the same can be terminated as per the terms of the agreement or otherwise and can demand possession, back from the licensee.

The real nature of the transaction has to be determined upon a proper construction of the document as a whole and not upon particular words, used in the document.

Courts have considered two issues to arrive whether a given agreement is a lease or a license, they are (i) the intention of the parties and (ii) whether the agreement creates an interest in the property.

Further words used in section 2(16) of Stamp Act, lease means ........any writing to occupy, or to pay or to deliver rent for immovalbe property,..........

In your case, you may apply the above principle to decide whether the transaction is lease or license and pay the stamp duty accordingly.

Rajeshwar.v

 

Ram K (Manager)     19 February 2010

Either you are registering or non register is respect to the term between the parties. Initially upto the period of 11 months is not compulsory to register, more than this you may required to registered. if the company A & B are inter related or subsidiary or sister concern the MOU is sufficient but the enforcibility to be cover and terms and conditions are certain for a valid contract. upto the period of enforcibility nothing will happen, if there is any non fullfillment of terms only it will arise.

you have adise to the management according to the requirement. only the point is if there is any breach you can not save your part.

 

V. VASUDEVAN (LEGAL COUNSEL)     21 February 2010

Hi Shreya

If the transaction is between group companies, there is no necessity of leave and license. Instead a Business Centre Agreement (stamp paper of Rs.100) between the parties, agreeing to provide furniture and fixtures, work stations, cafeteria, general house keeping service etc. on a monthly rent. This could be simple process and need not registered. 

Vasudevan


Leave a reply

Your are not logged in . Please login to post replies

Click here to Login / Register