N. Motilal vs Faisal Bin Ali on 30 January, 2020


Supreme Court of India

N. Motilal vs Faisal Bin Ali on 30 January, 2020

Author: Ashok Bhushan

Bench: Ashok Bhushan, Navin Sinha

                                                                      REPORTABLE

                                 IN THE SUPREME COURT OF INDIA

                                 CIVIL APPELLATE JURISDICTION

                                 CIVIL APPEAL NO.710 OF 2020
                          (arising out of SLP (C) No. 28951 of 2019)


          N. MOTILAL & ORS.                                   ...APPELLANT(S)

                                                  VERSUS

          FAISAL BIN ALI & ANR.                               ...RESPONDENT(S)


                                            J U D G M E N T

ASHOK BHUSHAN,J.

This appeal has been filed by the appellants, who

are tenants of a non-residential building,

challenging the judgment of the High Court for the

State of Telangana at Hyderabad dated 30.08.2019 by

which civil revision petition filed by the appellants

challenging the order dated 30.04.2019 of the Chief

Judge, City Small Causes Court, Hyderbad has been

dismissed.

Signature Not Verified

Digitally signed by

2.
ARJUN BISHT
Date: 2020.01.30
15:56:44 IST
Brief facts of the case necessary to be noted for
Reason:

deciding the appeal are:

1
The appellants are tenants of a Shop No.M-1-

938/39 admeasuring 390 sq. ft. in New Marketing

Complex, Tilak Road, Abids, Hyderabad. The appellants

had entered into a lease agreement dated 27.08.1990

with the landlord by which the premises was let out

for 20 years to the appellants from 21.08.1990 to

31.07.2010. The previous landlord Osman Bin Saleh

transferred the premises in question in favour of

respondent Nos.1 and 2 by registered sale deed dated

28.03.2008. The appellants were tenants on a monthly

rent of Rs.1840/- excluding electricity charges and

water charges. Respondent Nos. 1 and 2 who purchased

the property on 28.03.2008 filed an application on

29.09.2009 for enhancement of rent. The application

was contested by the appellants. The appellants had

admitted the tenancy at the monthly rate of

Rs.1840/-. The landlord had claimed that the market

rent of the similar premises is Rs.75/- per sq. ft.

and as per the market rent value the monthly rent of

the shop shall be Rs.29,250/-. The Rent Controller,

Hyderabad by order dated 04.11.2013 allowed the

application of the respondents and fixed the fair

2
rent at the rate of Rs.60/- per sq. ft i.e.

Rs.23,400/-. The tenants were directed to pay the

fair rent from the date of filing of the petition

with future enhancement of 10% for every two years.

Aggrieved by the judgment of the III Additional Rent

Controller an appeal was filed by the appellants

which appeal was dismissed by the Chief Judge, City

Small Causes Court vide judgment and order dated

05.06.2017. Against the Appellate order dated

05.06.2017 a civil revision petition was allowed by

the High Court on 20.09.2018 and the matter was

remanded back to the Appellate Authority. After

remand, Chief Judge, City Small Causes Court vide

order dated 30.04.2019 dismissed the R.A.No.5 of

2014. Aggrieved by which judgment Civil Revision

Petition No.1650 of 2019 was filed by the appellants

in the High Court. The High Court after considering

the submissions of the parties dismissed the revision

petition vide its judgment dated 30.08.2019 which

judgment has been challenged by the appellants in

this appeal.

3

3. Shri Yelamanchili Shiva Santosh Kumar, learned

counsel for the appellants submits that the contract

of tenancy between the appellants and the landlord

entered into on 27.08.1990 was to subsist till

31.07.2010, hence, the respondent-landlord had no

authority or jurisdiction to file the application for

enhancement of rent on 29.09.2009. He submits that

Section 4 of the Telangana Building (Lease, Rent and

Eviction) Control Rent, 1960 has no application on

the contractual tenancy. It is submitted that

landlord is bound by the contractual rent and during

subsistence of contractual tenancy he cannot be

allowed to file application for enhancement of rent.

He submits that permitting the landlord to file

application for enhancement of rent even though he is

bound by a contract, will be permitting something

which is against Rent Control Legislation. The Rent

Control Legislations have to be interpreted in a

manner so as to save tenant from exorbitant rent.

4. Learned counsel for appellants has placed strong

reliance on minority judgment of this Court delivered

by Bhagwati, J. in M/s. Raval and Co. vs. K.G.

4
Ramachandran
, 1974(1) SCC 424. Reliance has been

placed on paragraphs 25 to 30 of the minority

judgment which had taken the view that it is only

when the contract of tenancy is lawfully determined

that the landlord becomes entitled to apply for

fixation of fair rent and during subsistence of

contractual tenancy landlord is precluded from making

an application for fixation of fair rent. Learned

counsel further submits that the respondents have

purchased the property for a meagre amount of

Rs.5,24,500/- in the year 2008 and looking to the

fair rent fixed by the Rent Controller 20 months of

rent covers the sale price of the property.

5. Learned counsel for the appellants has further

submitted that Model Rent Control Legislation has

been circulated by the Central Government to all

States to uniformly amend the State Legislation where

it is now provided that during subsistence of

contract landlord is precluded from making any

application for fair rent.

6. Smt. Kiran Suri, learned senior counsel appearing

for the respondents refuting the submission of the
5
counsel for the appellants contends that the reliance

of appellants on a minority judgment of this Court in

M/s. Raval and Co. is misplaced. The majority

judgment delivered by Alagiriswami, J. has

categorically laid down that in Section 4 of the

Tamil Nadu (Lease, Rent and Eviction) Control Act,

1960(Tamil Nadu Act 18 of 1960) which is pari materia

of Section 4 of Telangana Buildings (Lease, Rent and

Eviction) Control Act, 1960 permits filing of

application for fixing of fair rent by the landlord

during subsistence of contractual tenancy. She

further submits that the judgment of this Court in

M/s. Raval & Co. has been further approved by seven-

Judge judgment in V. Dhanapal Chettiar vs. Yesodal

Ammal, 1979(4) SCC 214. It is further submitted that

the appellants cannot be allowed to make submission

in regard to sale consideration of the property, sale

between the relatives, consideration was fixed

accordingly.

7. We have considered the submissions of learned

counsel of the parties and perused the records.

6

8. The moot question to be answered in this appeal

is as to whether during currency of contractual

tenancy i.e. during the currency of agreed rent

between the landlord and the tenant whether landlord

is precluded from making an application for

determination of fair rent. Section 4 of the

Telangana Act, 1960 provides for determination of

fair rent. Section 4(1) provides:

“Section 4(1) The Controller shall, on
application by the tenant or landlord of a
building fix the fair rent for such
building after holding such inquiry as the
Controller thinks fit.”

9. The above provision gives right to both the

tenant and the landlord of a building to make an

application for fixing fair rent. The provision of

Section 4(1) cannot be read in a manner that it is

not applicable with regard to the contractual

tenancy. The Rent Control Legislations are enacted to

protect both tenant and the landlord. In the event

the submission of the appellants is accepted that

during the currency of the contract of tenancy, no

one can file application for fixing of fair rent, the

7
said provision shall operate detrimental to both the

tenant and the landlord. This can be explained by

taking an illustration. A tenant, who is in urgent

need of premises, entered into a contract with

landlord where he had to agree to pay an unreasonable

higher rent during the force of circumstances, if the

tenant has no right to make an application for fixing

of fair rent during the currency of tenancy, the said

provision will harshly operate against the tenant.

The concept of determination of fair rent is to

operate equal for the tenant as well as the landlord.

The object of the Act is that neither the landlord

should charge more than the fair rent of the premises

nor tenant should be forced to pay higher rent than

the fair rent. The statutory scheme brought in the

statute by way of Section 4 which is a beneficial

both to the tenant as well as the landlord.

10. The Constitution Bench of this Court in M/s.

Raval & Co. had occasion to consider Section 4 of the

Tamil Nadu Act 18 of 1960. Section 4 of the said Act

provides for application for fixation of the fair rent

8
for the tenant as well as the landlord. In the

majority judgment speaking through Alagiriswami, J. in

paragraphs 18 and 19 following has been laid down:

“18. The provisions of the Act under
consideration show that they are to take
effect notwithstanding any contract even
during the Subsistence of the contract. We
have already referred to the definition of
the terms ‘landlord’ and ‘tenant’ which
applies both to subsisting tenancies as
well as tenancies which might have come to
an end. We may also refer to the provision
in Section 7(2) which lays down that where
the fair rent of a building has not been
fixed the landlord shall not claim anything
in addition to the agreed rent, thus
showing that the fair rent can be fixed
even where there is an agreed rent. That is
why we have earlier pointed out that the
various English decisions which provide for
fixation of rent only where the contractual
tenancy has come to an end do not apply
here. We may also refer to Sub-section (3)
of Section 10 which deals with cases where
a landlord requires a residential or non-
residential building for his own use.
Clause (d) of that sub-section provides
that where the tenancy is for a term the
landlord cannot get possession before the
expiry of the term, thus showing that in
other cases of eviction covered by Section
10 eviction is permissible even during the
continuance of the contractual tenancy if
the conditions laid down in Section 10 are
satisfied.

19……………A close analysis of the Madras Act
shows that it has a scheme of its own and
it is intended to provide a complete code
in respect of both contractual tenancies as
well as what are popularly called statutory
9
tenancies. As noticed earlier the
definition of the term ‘landlord’ as well
as the term ‘tenant’ shows that the Act
applies to contractual tenancies as well as
cases of “statutory tenants” and their
landlords. On some supposed general
principles governing all Rent Acts it
cannot be argued that such fixation can
only be for the benefit of the tenants when
the Act clearly lays down that both
landlords and tenants can apply for
fixation of fair rent. A close reading of
the Act shows that the fair rent is fixed
for the building and it is payable by
whoever is the tenant whether a contractual
tenant or statutory tenant. What is fixed
is not the fair rent payable by the tenant
or to the landlord who applies for fixation
of fair rent but fair rent for the
building, something like an incident of the
tenure regarding the building.”

11. Learned counsel for the appellants has placed

reliance on the minority judgment delivered by

Bhagwati, J. for himself and K.K. Mathew, J. although

the minority judgment has held that landlord can make

an application for determination of fair rent only

after the determination of tenancy and during

subsistence of contractual rent no application for

fair rent can be given. We are bound by the majority

opinion of the Constitution Bench in M/s. Raval & Co.

We further notice that both the learned counsel have

referred to seven-Judge Bench judgment of this Court
10
in V. Dhanapal Chettiar vs. Yesodal Ammal (supra).

Seven-Judge Bench had occasion to refer to the

Constitution Bench judgment in M/s. Raval & Co.

(supra) which was quoted with approval. Referring to

majority judgment in M/s. Raval & Co.’s case seven-

Judge Bench made following observation:

“15………Alagiriswami J. at page 635 after
having made that observation with reference
to Bhaiya Panjalat’s case has said-“Be that
as it may, we are now concerned with the
question of fixation of a fair rent.” In
our opinion the majority decision with
regard to Section 4 was undoubtedly correct
and the minority stretched the law, if we
may say so with respect, too far to hold
that Section 4 was not available to the
landlord. It should be remembered, as we
have said above, that the field of freedom
of contract was encroached upon to a very
large extent by the State Rent Acts. The
encroachment was not entirely and wholly
one sided. Same encroachment was envisaged
in the interest of the landlord also and
equity and justice demanded a fair play on
the part of the legislature not to
completely ignore the helpless situation of
many landlords who are also compared to
some big tenants sometimes weaker Section
of the society. As for example a widow or a
minor lets out a family house in a helpless
situation to tide over the financial
difficulty and later wants a fair rent to
be determined. Again suppose for instance
in a city there is an apprehension of
external aggression, severe internal
disturbances or spread of epidemics, A man
in possession of his house may go to

11
another town letting out his premises to a
tenant financially strong and of strong,
nerves at a rate comparatively much lower
than the prevailing market rates. Later on,
on the normalization of the situation as
against the agreed rate of rent be
approaches the Building Controller for
fixing a fair rent in accordance with a
particular State Rent Act. Why should she
or he be debarred from doing so. The
statute gives him the protection and
enables the Controller to intervene to fix
a fair rent as against the term of contract
between the parties. In a large number of
cases it is the tenant who gets this
protection. But in some as in the case of
Raval the landlord needs and gets the
protection. But this is not a direct
authority on the point of notice.”

12. The above observation clearly indicates that

majority view of the Constitution Bench expressed by

Alagiriswami, J. was quoted with approval and the

seven-Judge Bench held that the encroachment on the

freedom of contract between the landlord and tenant

has been envisaged for protecting both the tenant and

landlord. The example as quoted in paragraph 15 as

extracted above clearly indicates that denial of

landlord in moving application for fixation of rent in

several cases may operate against the interest of the

landlord.

12

13. The Constitution Bench judgment in M/s. Raval &

Co.’s case as well as seven-Judge Bench judgment in V.

Dhanapal Chettiar’s case are binding which

categorically had laid down that application for

determination of fair rent can be made both by the

landlord and tenant which can be made even during

currency of contractual tenancy. We, thus, find the

submission made by the learned counsel for the

appellants in the above regard without any substance.

14. The submission of the counsel for the appellants

that the consideration on which property was purchased

by the landlord in 2008 is equivalent to 20 months’

rent as enhanced by Rent Controller has no bearing on

the issue which has been sought to be raised. The

determination of the fair rent has to be made as per

the provisions of the 1960 Act and the above

submission in no manner advance the case of the

appellant.

15. The last submission of the learned counsel for

the appellants is that the Central Government,

Ministry of Housing and Urban Development has

circulated a Model Rent Control Legislation to be
13
adopted by all the States which precludes the landlord

for making application for fixation of fair rent

during the currency of contractual tenancy (which

circular has also not been brought on record), suffice

it to say that as per submission of the counsel for

the appellants himself that Model Legislations are

only guidelines, which in no manner, can have any

effect on the statutory provisions of 1960 Act which

are still occupying the field. No other submission has

been advanced by the counsel for the appellants.

16. We do not find any merit in this appeal. The

appeal is dismissed.

………………….J.

( ASHOK BHUSHAN )

………………….J.

New Delhi,                                ( M.R. SHAH )
January 30, 2020.




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