N. MOTILAL & ORS. versus FAISAL BIN ALI & ANR. on 30 January 2020

1. This appeal has been filed by the appellants, who are tenants ofa non-residential building, challenging the judgment of the High Courtfor the State of Telangana at Hyderabad dated 30.08.2019 by whichBcivil revision petition filed by the appellants challenging the order dated30.04.2019 of the Chief Judge, City Small Causes Court, Hyderbad hasbeen dismissed.

2. Brief facts of the case necessary to be noted for deciding theappeal are:C

The appellants are tenants of a Shop No.M-1-938/39 admeasuring390 sq. ft. in New Marketing Complex, Tilak Road, Abids, Hyderabad.The appellants had entered into a lease agreement dated 27.08.1990with the landlord by which the premises was let out for 20 years to theappellants from 21.08.1990 to 31.07.2010. The previous landlord OsmanDBin Saleh transferred the premises in question in favour of respondentNos.1 and 2 by registered sale deed dated 28.03.2008. The appellantswere tenants on a monthly rent of Rs.1840/- excluding electricity chargesand water charges. Respondent Nos. 1 and 2 who purchased the propertyon 28.03.2008 filed an application on 29.09.2009 for enhancement ofErent. The application was contested by the appellants. The appellantshad admitted the tenancy at the monthly rate of Rs.1840/-. The landlordhad claimed that the market rent of the similar premises is Rs.75/- persq. ft. and as per the market rent value the monthly rent of the shop shallbe Rs.29,250/-. The Rent Controller, Hyderabad by order dated04.11.2013 allowed the application of the respondents and fixed the fairFrent at the rate of Rs.60/- per sq. ft i.e. Rs.23,400/-. The tenants weredirected to pay the fair rent from the date of filing of the petition withfuture enhancement of 10% for every two years. Aggrieved by thejudgment of the III Additional Rent Controller an appeal was filed by theappellants which appeal was dismissed by the Chief Judge, City SmallGCauses Court vide judgment and order dated 05.06.2017. Against theAppellate order dated 05.06.2017 a civil revision petition was allowedby the High Court on 20.09.2018 and the matter was remanded back tothe Appellate Authority. After remand, Chief Judge, City Small CausesCourt vide order dated 30.04.2019 dismissed the R.A.No.5 of 2014.Aggrieved by which judgment Civil Revision Petition No.1650 of 2019H

was filed by the appellants in the High Court. The High Court afterconsidering the submissions of the parties dismissed the revision petitionvide its judgment dated 30.08.2019 which judgment has been challengedby the appellants in this appeal.

3. Shri Yelamanchili Shiva Santosh Kumar, learned counsel forthe appellants submits that the contract of tenancy between the appellantsand 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 theapplication for enhancement of rent on 29.09.2009. He submits thatSection 4 of the Telangana Building (Lease, Rent and Eviction) ControlRent, 1960 has no application on the contractual tenancy. It is submittedthat landlord is bound by the contractual rent and during subsistence ofcontractual tenancy he cannot be allowed to file application forenhancement of rent. He submits that permitting the landlord to fileapplication 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 asto save tenant from exorbitant rent.

4. Learned counsel for appellants has placed strong reliance onminority judgment of this Court delivered by Bhagwati, J. in M/s. Ravaland Co. vs. K.G. Ramachandran, 1974(1) SCC 424. Reliance hasbeen placed on paragraphs 25 to 30 of the minority judgment which hadtaken the view that it is only when the contract of tenancy is lawfullydetermined that the landlord becomes entitled to apply for fixation of fairrent and during subsistence of contractual tenancy landlord is precludedfrom making an application for fixation of fair rent. Learned counselfurther submits that the respondents have purchased the property for ameagre amount of Rs.5,24,500/- in the year 2008 and looking to the fairrent fixed by the Rent Controller 20 months of rent covers the sale priceof the property.

5. Learned counsel for the appellants has further submitted thatModel Rent Control Legislation has been circulated by the CentralGovernment to all States to uniformly amend the State Legislation whereit is now provided that during subsistence of contract landlord is precludedfrom making any application for fair rent.

6. Smt. Kiran Suri, learned senior counsel appearing for therespondents refuting the submission of the counsel for the appellantscontends that the reliance of appellants on a minority judgment of this A

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ACourt in M/s. Raval and Co. is misplaced. The majority judgmentdelivered by Alagiriswami, J. has categorically laid down that in Section4 of the Tamil Nadu (Lease, Rent and Eviction) Control Act, 1960(TamilNadu Act 18 of 1960) which is pari materia of Section 4 of TelanganaBuildings (Lease, Rent and Eviction) Control Act, 1960 permits filing ofapplication for fixing of fair rent by the landlord during subsistence ofBcontractual tenancy. She further submits that the judgment of this Courtin M/s. Raval & Co. has been further approved by seven-Judgejudgment in V. Dhanapal Chettiar vs. Yesodal Ammal, 1979(4) SCC214. It is further submitted that the appellants cannot be allowed tomake submission in regard to sale consideration of the property, saleCbetween the relatives, consideration was fixed accordingly.7. We have considered the submissions of learned counsel of theparties and perused the records.

8. The moot question to be answered in this appeal is as to whetherduring currency of contractual tenancy i.e. during the currency of agreedDrent between the landlord and the tenant whether landlord is precludedfrom making an application for determination of fair rent. Section 4 ofthe Telangana Act, 1960 provides for determination of fair rent. Section4(1) provides:

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

9. The above provision gives right to both the tenant and thelandlord of a building to make an application for fixing fair rent. Theprovision of Section 4(1) cannot be read in a manner that it is notFapplicable with regard to the contractual tenancy. The Rent ControlLegislations are enacted to protect both tenant and the landlord. In theevent the submission of the appellants is accepted that during the currencyof the contract of tenancy, no one can file application for fixing of fairrent, the said provision shall operate detrimental to both the tenant andGthe landlord. This can be explained by taking an illustration. A tenant,who is in urgent need of premises, entered into a contract with landlordwhere he had to agree to pay an unreasonable higher rent during theforce of circumstances, if the tenant has no right to make an applicationfor fixing of fair rent during the currency of tenancy, the said provisionwill harshly operate against the tenant. The concept of determination ofH

fair rent is to operate equal for the tenant as well as the landlord. Theobject of the Act is that neither the landlord should charge more than thefair rent of the premises nor tenant should be forced to pay higher rentthan the fair rent. The statutory scheme brought in the statute by way ofSection 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 fairrent for the tenant as well as the landlord. In the majority judgmentspeaking through Alagiriswami, J. in paragraphs 18 and 19 following hasbeen laid down:

“18. The provisions of the Act under consideration show that theyare to take effect notwithstanding any contract even during theSubsistence of the contract. We have already referred to thedefinition of the terms ‘landlord’ and ‘tenant’ which applies bothto subsisting tenancies as well as tenancies which might havecome to an end. We may also refer to the provision in Section7(2) which lays down that where the fair rent of a building has notbeen fixed the landlord shall not claim anything in addition to theagreed rent, thus showing that the fair rent can be fixed evenwhere there is an agreed rent. That is why we have earlier pointedout that the various English decisions which provide for fixationof rent only where the contractual tenancy has come to an end donot apply here. We may also refer to Sub-section (3) of Section10 which deals with cases where a landlord requires a residentialor non-residential building for his own use. Clause (d) of that sub-section provides that where the tenancy is for a term the landlordcannot get possession before the expiry of the term, thus showingthat in other cases of eviction covered by Section 10 eviction ispermissible even during the continuance of the contractual tenancyif the conditions laid down in Section 10 are satisfied.

19……………A close analysis of the Madras Act shows that ithas a scheme of its own and it is intended to provide a completecode in respect of both contractual tenancies as well as what arepopularly called statutory tenancies. As noticed earlier the definitionof the term ‘landlord’ as well as the term ‘tenant’ shows that theAct applies to contractual tenancies as well as cases of “statutorytenants” and their landlords. On some supposed general principles A

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562SUPREME COURT REPORTS

Agoverning all Rent Acts it cannot be argued that such fixation canonly be for the benefit of the tenants when the Act clearly laysdown that both landlords and tenants can apply for fixation of fairrent. A close reading of the Act shows that the fair rent is fixedfor the building and it is payable by whoever is the tenant whethera contractual tenant or statutory tenant. What is fixed is not theBfair rent payable by the tenant or to the landlord who applies forfixation of fair rent but fair rent for the building, something like anincident of the tenure regarding the building.”

11. Learned counsel for the appellants has placed reliance on theminority judgment delivered by Bhagwati, J. for himself and K.K.CMathew, J. although the minority judgment has held that landlord canmake an application for determination of fair rent only after thedetermination of tenancy and during subsistence of contractual rent noapplication for fair rent can be given. We are bound by the majorityopinion of the Constitution Bench in M/s. Raval & Co. We furtherDnotice that both the learned counsel have referred to seven-Judge Benchjudgment of this Court in V. Dhanapal Chettiar vs. Yesodal Ammal(supra). Seven-Judge Bench had occasion to refer to the ConstitutionBench judgment in M/s. Raval & Co.(supra) which was quoted withapproval. Referring to majority judgment in M/s. Raval & Co.’s caseseven-Judge Bench made following observation:E

“15………Alagiriswami J. at page 635 after having made thatobservation with reference to Bhaiya Panjalat’s case has said-”Be that as it may, we are now concerned with the question offixation of a fair rent.” In our opinion the majority decision withregard to Section 4 was undoubtedly correct and the minorityFstretched the law, if we may say so with respect, too far to holdthat Section 4 was not available to the landlord. It should beremembered, as we have said above, that the field of freedom ofcontract was encroached upon to a very large extent by the StateRent Acts. The encroachment was not entirely and wholly oneGsided. Same encroachment was envisaged in the interest of thelandlord also and equity and justice demanded a fair play on thepart of the legislature not to completely ignore the helpless situationof many landlords who are also compared to some big tenantssometimes weaker Section of the society. As for example a widowor a minor lets out a family house in a helpless situation to tide H

N. MOTILAL & ORS. v. FAISAL BIN ALI & ANR.[ASHOK BHUSHAN, J.]

over the financial difficulty and later wants a fair rent to bedetermined. Again suppose for instance in a city there is anapprehension of external aggression, severe internal disturbancesor spread of epidemics, A man in possession of his house may goto another town letting out his premises to a tenant financiallystrong and of strong, nerves at a rate comparatively much lowerthan the prevailing market rates. Later on, on the normalization ofthe situation as against the agreed rate of rent be approaches theBuilding Controller for fixing a fair rent in accordance with aparticular State Rent Act. Why should she or he be debarredfrom doing so. The statute gives him the protection and enablesthe Controller to intervene to fix a fair rent as against the term ofcontract between the parties. In a large number of cases it is thetenant who gets this protection. But in some as in the case ofRaval the landlord needs and gets the protection. But this is not adirect authority on the point of notice.”

12. The above observation clearly indicates that majority view ofthe Constitution Bench expressed by Alagiriswami, J. was quoted withapproval and the seven-Judge Bench held that the encroachment on thefreedom of contract between the landlord and tenant has been envisagedfor protecting both the tenant and landlord. The example as quoted inparagraph 15 as extracted above clearly indicates that denial of landlordin moving application for fixation of rent in several cases may operateagainst the interest of the landlord.

13. The Constitution Bench judgment in M/s. Raval & Co.’scase as well as seven-Judge Bench judgment in V. Dhanapal Chettiar’scase are binding which categorically had laid down that application fordetermination of fair rent can be made both by the landlord and tenantwhich can be made even during currency of contractual tenancy. We,thus, find the submission made by the learned counsel for the appellantsin the above regard without any substance.

14. The submission of the counsel for the appellants that theconsideration on which property was purchased by the landlord in 2008is equivalent to 20 months’ rent as enhanced by Rent Controller has nobearing on the issue which has been sought to be raised. Thedetermination of the fair rent has to be made as per the provisions of the1960 Act and the above submission in no manner advance the case ofthe appellant.

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A15. The last submission of the learned counsel for the appellantsis that the Central Government, Ministry of Housing and UrbanDevelopment has circulated a Model Rent Control Legislation to beadopted by all the States which precludes the landlord for makingapplication for fixation of fair rent during the currency of contractualtenancy (which circular has also not been brought on record), suffice itBto say that as per submission of the counsel for the appellants himselfthat Model Legislations are only guidelines, which in no manner, canhave any effect on the statutory provisions of 1960 Act which are stilloccupying the field. No other submission has been advanced by thecounsel for the appellants.C

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

Divya Pandey

Appeal dismissed.

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