Sunday, 2 February 2020

Whether landlord can make application for fixation for fair rent?

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. 

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.710 OF 2020

N. MOTILAL  Vs FAISAL BIN ALI 

ASHOK BHUSHAN,J.
Dated:January 30, 2020.

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

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
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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.

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
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.
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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 nonresidential
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
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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

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.

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

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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