Case: N. Vajrapani Naidu And Another Vs. The New Theatre Carnatic Talkies Ltd.,Coimbatore

The appellant Vajrapani Naidu and his mother Bangarammal-hereinafter collectively called the lessors - granted a lease of an open site in the town of Coimbatore to Abirama Chettiar under a registered deed dated September 19, 1934, for 20 years at an annual rental of Rs. 1,080/- for putting up a building suitable for use as a theater. Abirama Chettiar constructed a theater on the site, and assigned his rights to the New Theater Carnatic Talkies Ltd., Coimbatore-hereinafter called the Company. The Company attorned to the lessors and was recognised as tenant under the lease dated September 19, 1934. On March 9, 1954 the lessors served a notice calling upon the Company to vacate and surrender vacant possession of the site, and the company having failed to comply with the requisition, the lessors commenced an action against the Company for a decree in ejectment and for mesne profits at the rate of Rs. 1,000/- per mensem from September 19, 1954. The Subordinate Judge at Coimbatore awarded to the lessors a decree for possession and mesne profits at the rate of Rs. 350/- per mensem and costs of the suit. Against the decree the Company preferred an appeal to the District Court at Coimbatore which was transferred for trial to the High Court at Madras. During the pendency of this appeal by G. O. No. 608 dated February 10, 1958, the State of Madras extended the Madras City Tenants Protection Act 3 of 1922, as amended by Madras Act 19 of 1955, to the Municipal Town of Coimbatore. The Company then applied under S. 9 of the Act for an order directing the lessors to convey the site demised to the Company for a price to be fixed by the Court. Panchapakesa Iyer, J., directed that the lessors do sell to the Company the site in dispute under S. 9 of the Madras City Tenants Protection Act, 1922, against payment of the full market value of the land on the date of the order, and further directed that the trial Court to appoint a Commissioner to fix the value of the site based on the market value prevalent on July 28, 1958. An appeal under Cl. 15 of the Letters Patent of the High Court against the order of Panchapakesa Iyer J., was dismissed. With certificate granted by the High Court of Madras, this appeal is preferred by the lessors.

Reasoning:
6. The lease granted by the lessors in this case was before the date on which the Act was extended to the Coimbatore municipal town and it is common ground that the buildings were constructed after the date of the contract of lease. Ex facie , the company as lessee had, when an order for ejectment was made, an option to receive compensation for the value of the structure, or to claim that the lessors shall sell to it the land demised. But the lessors contend that because of the stipulations in the deed of lease (which is registered under the law in force for registration of assurances) relating to the obligation of the tenant on the expiry of the lease to deliver vacant possession of the land after dismantling the constructions therein, the Company has by the terms of S. 12 disentitled itself to the benefit of S. 9 of the Act. It is submitted that the stipulation relating to delivery of vacant possession of the site on the expiry of the period of the lease after removing the buildings is a stipulation "as to the erection of buildings" within the meaning of S. 12, and therefore the restriction on the liberty of contract between, landlord and tenant imposed by the opening clause of S. 12 is removed, and the Company is bound by the terms of the lease and is not entitled to claim the benefit of S. 9 of the Act. We are, for reasons presently to be set out, unable to uphold thatrestriction is therefore made only in respect of a limited class of cases which expressly attract the description of the stipulations as to the erection of buildings. Having regard to the object of the act, and the language used by the Legislature, the exception must be strictly construed, and a stipulation as to the erection of buildings would not, according to the ordinary meaning of the words used, encompass a stipulation to vacate and deliver possession of the land on the expiry of the lease without claiming to enforce the statutory rights conferred upon the tenant by S. 9. The stipulations not protected in S. 12 are only those in writing registered and relate to erection of buildings such as restrictions about the size and nature of the building constructed, the building materials to be used therein and the purpose for which the building is to be utilized. It is true that the operative part of S. 12 protects the tenant against the deprivation or limitation of his rights under the Act and the rights conferred by the Act do not directly relate to covenants relating to erection of buildings. But on that account it is not possible to give a wider meaning to the expression "as to the erection of buildings" that the stipulation as to the erection of buildings would include stipulations to remove buildings on the determination of the lease. It cannot be said that the literal meaning of the expression is likely to render the exception ineffective, for stipulations concerning erection of buildings in registered leases, or contracts subsequent to the leases, providing for forfeiture on failure to comply with the terms of the lease relating to the erection of buildings may undoubtedly involve limitations or deprivation of the rights of the tenant under the Act and to that extent the protection conferred by S. 12 in favour of the landlord may be lost. The construction for which the appellant contends assigns no meaning to the words "as to the erection of buildings" and makes them superfluous, besides it materially affects the scope of the relief which the Act obviously extends to the tenants falling under its provisions.Section 9(1) which enables a tenant to purchase on determination of the lease the land of the landlord is somewhat unusual. But it cannot be said that it impose an unreasonable restriction upon the right of the landlord to hold and dispose of property within the meaning of Art. 19(1)(f) of the Constitution. The Act applies to only a limited class of lands: it applied to lands granted in lease for construction of buildings before the date with effect from which the Act is extended to the town or village. It was enacted with a view to give protection to the tenants who had, notwithstanding the usual covenants relating to determination of tenancies, obtained lands on lease in the hope that so long as they paid and continued to pay fair rent, they would not be evicted, but because of changed conditions as a result of the War, appreciation in land values and consequent increase in the level of rents, were faced with actions in ejectment involving dismantling of properties constructed by them, and eviction. The protection becomes effective only when the landlord seeks to obtain, in breach of the mutual understanding, benefit of the unearned increment in the land values, by instituting a suit in ejectment. It was manifestly in the interest of the general public to effectuate the mutual understanding between the landlords and the tenants as to the duration of the tenancies, and to conserve building materials by maintaining existing buildings for purposes for which the leases were granted. Restriction imposed upon the right of the landlord to obtain possession of the premises demised according to the terms of the lease would, therefore, not be regarded as imposing an unreasonable restriction in the exercise of the right conferred upon the landlord by Art. 19(1) (f) of the Constitution, because the restriction would be regarded as in the interests of the general public. We ought to emphasise that what S. 9 does is not so much to deprive the landlord of his property or to acquire his rights to it as to give effect to the real agreement between him and his tenant which induced the tenant to construct his building on the plot let out to him. If the law is not invalid as offending Art. 19(1) (f) of the Constitution, no independent infringement of Art. 31(1) of the Constitution may be setit is not necessary for the purpose of this case to decide that question, for the Company has offered to pay the market value of the land as at the date on which the order was passed by Panchapakesa Iyer, J. That absolves us from the necessity to adjudicate upon the reasonableness of the provisions relating to payment of compensation at the rate prescribed by the Act as amended by Act VI of 1926. We may observe that by the Amending Act 13 of 1960 several alterations have been made as regards the extent of the right of the tenants to require the landlords to sell the land and the price which has to be paid by the tenants for purchasing the land. For instance, under the Amending Act the Court may direct sale only of the minimum area of land necessary for convenient enjoyment by the tenant of the house built by him and the price is to be the average market value in the three years immediately preceding the date of the order. In view of this amendment, and having regard to the special circumstances, viz. the offer made by the Company, notwithstanding the provisions of the Act, to pay the market value of the land at the date of the order, we decline to enter upon an academic consideration as to the validity of the provision fixing compensation at the lowest market value prevalent within seven years preceding the date of the order. Assuming that a provision fixing such compensation is unreasonable and therefore invalid, it would be clearly severable from the rest of the statute and would not affect the validity of the provision relating to acquisition by the tenant of the land demised by purchasing it from the landlord. At best, the landlord would be entitled to obtain compensation which is equivalent to the market value, and that the Company has agreed to pay. That, however, is a matter on which we express no opinion.