Civil Appeal No 503 of 1974
From the Judgement and order dated 293081973 of the Gujarat High Court in Special Civil Application No 129 of 1973
Joseph Vellapally and DN Mishra for the Appellants
RN Sachthey Anip Sachthey and Ms Rashmi Dhariwal for the Respondents
393 The Judgement of the Court was delivered by RM SAHAI J Validity of demand under Section 58A of the Bombay Prohibition Act for maintenance of excise staff for supervision of the manufacture of industrial alcohol was assailed on lack of legiislative competence of the State
Section 58A is extracted below 58A The State Government may by general or special order direct that the manufacture import export transport storage sale purchase use collection or cultivation of any intoxitant denatured spirituous preparations hemp Mowra flowers or molasses shall be under the supervision of such Prohibition and Excise or Police Staff as it may deem proper to appoint and that the cost of such staff shall be paid to the State Govt
by person manufacturing importing exporting transporting storing selling purchasing using collecting or cultivating the intoxicant denatured spirituous preparation hemp Mowra flowers or molasses Provided that the State Government may exempt any class of persons or institutions from paying the whole or any part of the cost of such staff
Rule 2 of Bombay Prohibition Manufacture of Spirit Gujarat Rules 1963 framed by the State of Gujarat empowered the director to grant a licence for working of the distillery for the manufacture of the spirit
Condition Nos2 and 3 of the licence issued provided for employment of excise staff for supervision of the operations of manufacture and storage of spirit as well as for payment of salary and allowances to staff so posted
Attack was not on power to supervise or even the right to post staff for supervision but on demand of cost of maintenance of such personnel
Levy was upheld by the High Court as fee under entry 8 of List II of the VIIth Schedule read with entry 66 of the same list
In Synthetics  Chemicals Ltd  Ors
vs State of UP  Ors
  a Constitution Bench after exhaustively reviewing the constitutional entries and various decisions held that industrial alcohol being unfit for human consumption as no levy on it could be made by a State either under Entry 51 or Entry 8 of List II of VIIth Schedule
Nor such levy could be justified on doctrine of privilege or police power
Therefore it was urged that the order of High Court was liable to be set aside and the provision was liable to be struck down as ultra vires
Such understanding of the judgement is not warranted
The Constitu 394 tion Bench while distinguishing between potable and non potable alcohol and holding that the State had no privilege in it upheld the power of State to regulate and ensure that non potable alcohol was not diverted and misued
According to learned counsel since the entire judgment of the High Court proceeded on privilege theory it cannot withstand the principle laid down in Synthetic  Chemical s case
Levy as a fee under Entry 8 of List II of VIIth Schedule or excise duty under Entry 51 are different than cost of supervision charged under Section 58A
The former has to stand the test of levy being in accordance with law on power derived from one of the constitutional entries
Since Synthetic  Chemical s case finally brought down the curtain in respect of industrial alcohol by taking it out of the purview of either Entry 8 or 51 of List II of VIIth Schedule of the competency of the State to frame any legislation to levy any tax or duty is excluded
But by that a provision enacted by the State for supervision which is squarely covered under Entry 33 of the concurrent list which deals with production supply and distribution which includes regulation cannot be assailed
The Bench in Synthetic  Chemical s case made it clear that even though the power to levy tax or duty on industrial alcohol vested in the Central Government the State was still left with power to lay down regulations to ensure that non potable alcoholthat is industrial alcohol was not diverted and misused as substitute for potable alcohol
This is enough to justify a provision like 58A
In paragraph 88 of the decision it was observed that in respect of industrial alcohol the States were not authorised to impose the impost as they have purported to do in that case but that did not effect any imposition of fee where there were circumstances to establish that there was quid pro quo for the fee nor it will affect any regulatory measure
This completely demolishes the argument on behalf of appellant
Principle of occupied field precluded State from trenching on any power which was already covered by central legislation
But in absence of any provision in Industries Development  Regulation Act touching upon regulation or ensuring that industrial alcohol was not diverted the state was competent to legislate on it under Entry 3 List III of VIIth Schedule which is extracted below 33
Trade and Commerce in and the production supply and distribution of a The products of any industry where the control of such industry by Union is declared by Parliament by Law to be 395 expedient in the public interest and imported goods of the same kind as such products
b     c     d     e    
Trade and commerce and supply and distribution of goods are exclusive state subjects under entry 26 and 27 of List II of VIIth Schedule
But both are subject to entry 33 of List III
That is what is covered in entry 33 is excluded from list II
And the power to legislate in respect of what is covered by list III is enjoyed both by Central and State subject to Article 246 of the Constitution
Since 58A can be traced to regulatory power of the State exercisable under entry 33 the challenge to its validity is liable to fail
It could not therefore be successfully claimed that it was violative of any constitutional provision or the section was invalid in view of the ratio in Synthetic  Chemicals  case
Failing on the principal submission the learned counsel urged that no cost for supervision could be demanded unless the power to issue licence for production was found to exist in State
Reliance was placed on observations in Synthetic  Chemical s case
Since it stands answered by the constitution Bench itself it is unnecessary to dilate on it
Suffice it is to extract the following observation The position with regard to the control of alcohol industry has undergone material and significant change after the amendement of 1956 to the IDR Act
After the amendment the State is left with only the following powers to legislate in respect of alcohol a      b It may lay down regulations to ensure that non potable alcohol is not diverted and misued as a substitute for potable alcohol
c      d However in case State is rendering any service as distinct from its claim of so called grant of privilege it may charge fees based on quid pro quo
Feeble attempt was made to challenge absence of any quid pro quo
But no serious effort was made in High Court is clear from following observation
 396 If any quid pro quo is to be established between the quantum of the levy and the services rendered it must be established between the actual cost of supervision paid by a manufacturer or a businessman and the quantum of profits made by him by lawfully carrying on his business into a prohibited commodity
We have no doubt in our mind that the annual payment of a few thousand rupees by way of cost of supervision under Section 58A brings to each of the three petitioners profits which must be quite disproportionate in size
We need not go into the details of this aspect because it has not been contended before us that if the levy under Section 58A is held to be a fee there is no sufficient quid pro quo between the quantum of the impost and the services rendered to the manufacturer or businessman
 In the result this appeal fails and is dismissed with costs
GN Appeal dismissed


Summary:
The respondent was the daughter of the original landlord who had let out the premises to the appellant on October 1 1961
She purchased the property from her father on June 27 1964 and thus stepped into his shoes as the landlord  as defined under section 2 e of the Delhi Rent Control Act 1958
The respondent sought eviction of the appellant from the demised premises on the ground of personal bonafide requirement
The appellant resisted the eviction petition on the grounds that the premises were not let out for residential purpose only but for commercial purpose also ie for keeping foreign students as paying guests and that the respondent does not have a bonafide need or requirement as such
Relying upon the Rent Note and the appellant s letters dated October 7 1961 and August 18 1962 addressed to the respondent s father and the earlier proceedings between them for eviction of the appellant on the ground of sub letting the premises for commercial purpose both the statutory authorities the Additional Rent Controller and the Rent Control Tribunal found that the premises which had also been used incidentally for commercial purposes so as to exclude the application of section 141 e read with the explanation thereto and dismissed the respondent s application for eviction
473 This finding was reversed by the High Court in the respondent s second appeal under Section 29 of the Act
The High Court found that there was no evidence for the statutory authorities to come to the conclusion which they did as regards the premises having been used for commercial purpose
The High Court accepted the appeal and set aside the judgment and order of the Rent Controller and the Rent Control Tribunal and allowed the eviction application
The tenant appealed to this Court by Special appeal
On behalf of the respondent landlord it was submitted that even if the High Court was wrong in coming to the conclusion that there was no evidence about foreign students being lodged by the tenant the mere fact that foreign students stayed as paying guests in the premises did not imply either that they lodged with the consent of the landlord or that such lodging amounted to a commercial use of the building and that the High Court was right in saying that the ground contained in clause e of sub section 1 of section 14 was attracted
Allowing the appeal and setting aside the judgment of the High Court and restoring the orders of the Additional Rent Controller and the Rent Control Tribunal this Court HELD 1
The finding of the High Court is unsustainable
The High Court was not justified in saying that there was no evidence to hold that the premises were used for boarding and lodging foreign students
The specific plea of the landlord in the earlier proceedings was that the tenant had sub let the premises for commercial purposes
The tenant contended that she had never parted with her exclusive possession of any part of the premises and the foreign students who were lodging with her were her paying guests and were not her tenants
The plea of sub tenancy raised by the landlord was thus rejected on the ground that those who lodged with her were not sub tenants but only paying guests
476 G H 2
The letters dated October 7 1961 and August 18 1962 clearly disclosed the fact that foreign students were lodged in the premises as the guests of the appellant
The evidence let in by the appellant and not contradicted by the respondent clearly showed that apart from the appellant all the other inmates of the premises were foreign students staying with her as her paying guests
The appellant testified that she earned her livelihood from the income she received as lodging fee from students who lodged with her and 474 that is was out of that income that all her personal expenses including the rent payable by her for the premises had been met
These are the findings of the two fact finding authorities and those findings are based on oral and documentary evidence
To have reversed those findings by the High Court in Second Appeal on the ground that they were perverse was totally uncalled for
477 A C 3
In the absence of any question of law much less any substantial question of law the High Court was not justified in reversing the concurrent findings of the statutory authorities
480 B 4
Clause e of section 141 of the Act is applicable only if the landlord is in a position to establish that the premises let for residential purposes are required bona fide by him for occupations as residence
Assuming that the bona fide requirement of the landlord is established the landlord must still prove that the premises had been let for residential purposes
The Explanation of clause e makes it clear that the words premises let for residential purposes  included any premises let for residential purposes but used incidentally without the consent of the landlord for commercial or other purposes
The Explanation is attracted when  1 the premises have been let for residential purposes ii the premises have been used incidentally for commercial or other purposesand iii the landlord has not given his consent for such incidental use for commercial or other purpose
478 D F 5
If the premises have never been used for any non residential purpose the aid of the explanation is unnecessary to attract clause e
The Explanation is called in aid only where premises let for residential purpose have been used incidentally for commercial or other non residential purpose but without the consent of the landlord
478 G 6
If the landlord is in a position to establish that the premises have been let for residential purposes and that he has never consented to the user of the premises for any other purpose the mere fact that such premises have been incidentally used for commercial or other purposes would not change or affect the residential character of the premises
479 A 7
If the premises have been regularly and openly used for non residential purposes the knowledge and consent of the landlord unless proved to the contrary are ordinarily presumed and in 475 that event the explanation would be of no avail to save the ground under clause e
479 B 8
In the instant case it is not disputed that the premises had been let for residential purposes but it is also beyond doubt that to the knowledge of the landlord the premises have been regularly used by the tenant not only for her own residence but also for her foreign guests
The landlord has as all material times known or is presumed to have known that foreign students have been staying with the appellant as her paying guests and that she has been ever since 1961 running a boarding house in the premises
At no time did the landlord object to the user of the premises by the appellant for such purpose
479 C D 9
The continued user of the building ever since 1961 for the purpose of lodging paying guests shows that the respondent landlord and her father have not only been aware of such user of the building but have also impliedly consented to such user
This presumption is irresistible from the evidence on record
Such user takes the premises in question out of the ambit of premises let for residential purpose  so as to exclude the ground contained in clause e
479 E Dr Gopal Dass Verma vs Dr SK Bhardwaj  Anr   Kartar Singh vs Chaman Lal  Ors SC 1969 IV All India Rent Control Journal 349 Hobson vs Tulloch 1898 1 Chancery Division 424 Thorn  Ors
vs Madden 1925 All ER321 and Tandler vs Sproula  referred to