N. MOTILAL & ORS. versus FAISAL BIN ALI & ANR.
[2020] 1 S.C.R. 556, Supreme Court of India, 2020
Outcome: Dismissed (Dismissed)
Segment: Ratio
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SUPREME COURT REPORTS
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N. MOTILAL & ORS.
v.
FAISAL BIN ALI & ANR.
(Civil Appeal No. 710 of 2020)
JANUARY 30, 2020
[ASHOK BHUSHAN AND M. R. SHAH, JJ.]
Telangana Building (Lease, Rent and Eviction) Control Act,
1960 – s.4 – Appellants are tenants of a shop on monthly rent of
Rs.1840/- excluding electricity charges and water charges –
Appellants had entered into lease agreement dtd. 27.08.90 with the
landlord by which the premises was let out for 20 years – Previous
landlord transferred the premises in question to respondent nos.1
& 2 on 28.03.08 – Respondent nos.1 & 2 filed application for
enhancement of rent – Landlord claimed that the market rent of
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/- – Application
allowed by Rent Controller – Fair rent fixed @ Rs.60/- per sq. ft i.e.
Rs.23,400/-  – Appeal filed by the appellants was dismissed – In
civil revision petition, High Court remanded the matter back to
Appellate Authority – Dismissed – High Court dismissed the revision
petition filed by the appellants – Plea of appellants that the contract
of tenancy entered on 27.08.90 was to subsist till 31.07.10, hence,
the respondent-landlord had no authority to file application for
enhancement of rent on 29.09.09 – Held: s.4 provides for
determination of fair rent – It gives right to both the tenant and the
landlord to make an application for fixing fair rent – Provision of
s.4(1) cannot be read in a manner that it is not applicable with
regard to contractual tenancy – Rent control legislations are enacted
to protect both tenant and the landlord – Concept of determination
of fair rent is to operate equal for the tenant as well as the landlord
– 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 – No merit in present appeal.
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Dismissing the appeal, the Court
HELD : 1.1 Section 4 of the Telangana Building (Lease,
Rent and Eviction) Control Rent, 1960 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 said
provision shall operate detrimental to both the tenant and the
landlord. 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 is beneficial both to the tenant as well as the
landlord. [Para 9] [560-F-H; 561-A-B]
M/s. Raval and Co. v. K.G Ramachandran (1974) 1 SCC
424 : [1974] 2 SCR 629 ; V. Dhanapal Chettiar v.
Yesodal Ammal (1979) 4 SCC 214 : [1980] 1 SCR 334
– followed.
Case Law Reference
[1974] 2 SCR 629
followed
Para 4
[1980] 1 SCR 334
followed
Para 6
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 710 of
2020.
From the Judgment and Order dated 30.08.2019 of the High
Court
for the State of Telangana at Hyderabad in CRP No. 1650 of 2019.
Yelamanchili Shiva Santosh Kumar, Tarun Gupta, Advs. for the
Appellants.
Kiran Suri, Sr. Adv., Mullapudi Rambabu, N. Eswara Rao,
Ms. Prity Kumari, Ms. Vijayshree Pattnaik, M/s. Rambabu & Co., Advs.
for the Respondents.
N. MOTILAL & ORS. v. FAISAL BIN ALI & ANR.
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The Judgment of the Court was delivered by
ASHOK BHUSHAN, J.
1. 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
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
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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. 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
N. MOTILAL & ORS. v. FAISAL BIN ALI & ANR.
[ASHOK BHUSHAN, J.]
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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.
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 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
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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 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 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
N. MOTILAL & ORS. v. FAISAL BIN ALI & ANR.
[ASHOK BHUSHAN, J.]
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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 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
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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.
N. MOTILAL & ORS. v. FAISAL BIN ALI & ANR.
[ASHOK BHUSHAN, J.]
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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.
Divya Pandey
Appeal dismissed.