Case: Bhatia Co-Operative Housingsociety Ltd Vs. D. C. Patel

1. This is an appeal filed with the special leave of this Court. It is directed against the judgment and decree passed on 2nd December 1949, by a Division Bench (Weston and Shah JJ.) of the Bombay High Court reversing, on the ground of absence of jurisdiction, the judgment and decree for possession passed on 24th January 1949 by the Bombay City Civil Court and directing the return of the plaint for presentation to the proper Court.2. There is no dispute as to the facts material for the purposes of this appeal. On or about 15th April 1908, the Board of Trustees for the Improvement of the City of Bombay put up to auction Plots Nos. 16, 17 and 18 of new survey Nos. 8234, 8235 and 8244 situate on the Princes Street Estate of the Board containing an area of 2235 square yards for being let on certain conditions. one Sitaram Luxman was the highest bidder and was declared the tenant at an annual rent per square yard to be calculated at the rate of 4 1/2 per cent of Rs. 29 per square yard and he signed the memorandum of agreement incorporating the conditions upon which the auction was held and by which he agreed to be bound. He deposited the moneys in terms of cl. 3 of the conditions, and upon such payment entered into possession of the Plots. By cl. 7 Sitaram Luxman agreed, within the time specified therein, to build and complete at a cost of not less than Rs. 50,000 a building Consisting of 5 floors with suitable offices, drains etc. according to plans and specifications to be made by an approved architect and approved by the Board. By cl. 17 he agreed, so soon as the main building should be roofed in, to insure in the joint names of the Board and of himself and until the granting of the lease thereinafter provided, keep insured the buildings and works on the plots for the full value thereof. Clause 18 of the conditions was as followsThe lease. Immediately after the completion within the time limited by condition 7 of the said buildings and works to the satisfaction of the Trust Engineer testified by his certificate the Trustees will if the contract how not previously been determined grant to the tenant or his approved nominee who shall accept the same a lease of the said plot with buildings thereon for the term of 999 years from the date of the auction at the year rent calculated in accordance with the accepted bidding for the25 gave power to the Board, if the buildings were not completely finished within we stipulated time and on certain other contingencies, to forfeit the deposit. and to enter upon and retain possession of the plots and all buildings and works then standing thereon.3. Pursuant to this agreement the said Sitaram Luxman erected on those plots a building which has since come to be known as the New Sitaram Building. On the completion of the building, by an Indenture of lease made on 19th April 1916, between the Trustees for the Improvement of the City of Bombay and one Rustomji Dhunjibhoy Sethna the receiver of the estate of Sitaram Luxman appointed by the High Court in Suit No. 720 of 1913, the Trustees, pursuant to the said agreement and in consideration of the monies which had been expended in the erection of the buildings and of the rent and the covenants thereinafter reserved and contained, demised unto the lessee all that piece of land situate on their Princess Street estate together with the buildings erected thereon to hold the same for 999 years from 15th April 1908, paying therefor up to 15th January 1909, the rent of Re. 1 and during the remainder of the term the yearly rent of Rs. 2,916 by equal quarterly payments. By the said Indenture the lessee covenanted to pay all rates and taxes, not to use or to permit to be used, without the lessors consent, the portion of land not built upon except as open space, not to pull down, add to or alter the buildings without such consent, to keep in repair all drains, sewers etc., to repair, pave, cleanse and paint and amend all the buildings, walls etc., to permit the lessors and their employees to enter upon the premises to inspect the conditions thereof on 48 hours notice, to use the demised premises for residential purposes or as offices and schools only and not as a public house or liquor shop or for any business or trade, throughout the term to keep the buildings insured against fire in the joint names of the lessor and the lessee and to rebuild or reinstate and repair the building if destroyed or damaged by fire or otherwise. There was a proviso for re-entry for non-payment of rent for 30 days or for breach of any of the lessees covenants.4. In 1925 all the properties of the Trustees for the Improvement of the City of Bombay vested in the Bombay Municipality under and by virtue of Bombay Act 16 ofBy a deed of assignment made on 26th April 1948, Shri Bhatia Co-operative Housing Society Limited, a society registered under the Bombay Co-operative Societies Act 7 of 1921, the appellant before us, acquired the lessees interest in the demised premises.On 29th June 1948, the appellant served a notice on the respondent before us who was a monthly ternate in occupation of Block No.B/2 on the ground floor of the New Sitaram Building at a monthly rental of Rs. 52-5-9 to quit and Vacate the same on 31st July 1948. By his advocates reply the respondent maintained that he had been Paying the rent regularly and otherwise performing the terms of his tenancy and claimed the protection of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947. (Act 57 of 1947).6. The respondent not having vacated the block under his occupation on the expiry of the notice to quit the appellant filed summary suit No. 106 of 1948 against the respondent in the City Civil Court at Bombay for vacant possession of the said Block No. B/2 on the ground floor of the said New Sitaram Buildings and mesne profits from 1st August1948 until delivery of possession. After stating the material facts, the appellant submitted that the Bombay Act 57 of 1947 did not apply to the demised premises. The respondent filed his written statement maintaining that under s. 28 of the Bombay Act the City Civil Court had no jurisdiction to entertain the suit. He averred that he had performed and observed all the conditions of his tenancy and was ready and willing to do so, that the New Sitaram Building had been constructed at the expense of the appellants predecessor in title and that the premises belonged to the appellant and not to the Government or a Local Authority and that the respondent was entitled to the protection of the Bombay Act 57 of 1947. Leaving out the issue as to whether the appellant was entitled to any compensation, there were 4 issues raising in effect two points, namely, (1) whether the Court had jurisdiction and (2) whether the Bombay Act 57 of 1947 applied to the premises in suit.7. The learned City Civil Court Judge in a well considered and Careful judgment answered the issues in favour of the appellant and decreed the suit. The respondent appealed to the High Court. The High Court reversed the decision of the trial Judge and holding that the Bombay Act 57 of 1947 did apply to the premises and consequently that the City Civil Court, by virtue of s. 28 of that Act, had no jurisdiction to entertain the suit, directed that the plaint be returned to the appellant for being filed in the proper court fine High Court having declined to grant leave to the appellant appeal to this Court, the appellant applied for and obtained special leave of this Court to prefer this appeal and. filed. this appeal. pursuant to such leave.

Court's reasoning:
13. It is said that if the first part of the section is so construed as to . exempt the premises from the operation of the Act, not only as between the Government or a local authority on the one hand and its lessee on the other, but also as between that lessee, and histhen the whole purpose of the Act will be frustrated, for it is, well known that most of the lands in Greater Bombay belong to the Government or one or other local authority, e. g., Bombay Port Trust and Bombay Municipality and the greater number of tenants will not be able to avail themselves of the benefit and protection of the Act. In the first place, the preamble to the Act clearly shows that the object of the Act was to consolidate the law relating to the control of rents and repairs of certain premises and not of all premises. The Legislature may well have thought that an immunity given to premises belonging to the Government or a local authority will facilitate the speedy development of its lands by inducing lessees to take up building leases on terms advantageous to the Government or a local authority. Further as Pointed out by Romer L. J., in clarkv. Downes, (1931) 145 L. T.20, which case was approved by Lord Goddard C. J. in Rudlerv. Franks, (1947) 1 K.B.530, such immunity will increase the value of the right of reversion belonging to the Government or a local authority. The fact that the Government or a local authority may be trusted to act fairly and reasonably may have induced the Legislature all the more readily to give such immunity to premises belonging to the Government or a local authority but it cannot be overlooked that the primary object of giving this immunity was to protect the interests of the Government or a local authority. This protection requires that the immunity should be held to attach to the premises itself and the benefit of it should be available not only to the Government or a local authority but also to the lessee deriving title from it. If the benefit of the immunity was given only to the Government or a local authority and not to its lessee as suggested bycounsel for therespondent and the Act applied to the premises as against the lessee, then it must follow that under s. 15 of the Act it will not be lawful for the lessee to sublet the premises or any part of it. If such were the consequences, nobody will take a building lease from the Government or a local authority and the immunity given to the Government or a local authority will, for all practical purposes and in so far at any rate as the building leases are concerned, be wholly illusory and worthless and the underlying purpose for bestowing such immunity will be rendered wholly ineffective. In our opinion, therefore, the consideration of the protection of the interests of thein premises belonging to the Government or a local authority. cannot override. the plain meaning of the preamble or the first part of s.4(1) and frustrate the real purpose of protecting and furthering the interests of the Government or a local authority by conferring on its property an immunity from the operation of theis pointed out that it was the lessee who erected the building at his own cost, he is to hold it for 999 years, he has the right of subletting the building in Whole or in part on rent and terms to be fixed by him, of ejectingand of assigning the lease. Therefore, it may fairly be said that the premises or, at any rate, the building belongs to the lessee and the rights reserved by the lease to the lessor are only by way of security for the preservation of the building which, on the expiry or sooner determination of the lease, will vest in the lessor. This line of reasoning has found favour with the High court which has held that although in form the building belongs to the Bombay Municipality who are theof the lessors, in ,substance the building belongs to the appellant, the assignee of the lessee, and not to the Bombay Municipality. We are unable to accept this reasoning for, we see no reason to hold, in the circumstance of this case, that the substance does not follow the form. By the operative part of the lease, the demise is not only of the land but also of the building standing thereon. This demise is certainly an act of ownership exercised by the lessor over the land as well as the buildings. Under s. 105, T. P. Act, a lease is a transfer only of a right to enjoy the demised premises, but there is no transfer of ownership or interest in the demised premises to the lessee such as there is in a sale (s. 54) or a mortgage (s. 58). In the present case, the lessee cannot, on his own covenant, use the buildings in any way he likes. He has to use the same only as offices or schools or for residential purposes and cannot, without the lessors consent, use them for purposes of any trade or business. He cannot pull down the buildings or make any additions or alterations without the lessors consent. He cannot build upon the open space. He must, if the premises are destroyed by fire or otherwise, reinstate it. The lessor has the right to enter upon and inspect the premises at any time on giving 48 hours notice. All these covenants clearly indicate that the lessor has the dominant voice and the real ownership. What are called attributes of ownership of the lessee are only the rights of enjoyment which are common to all lessees underleases, but the ownership in the land and in the building is in the lessor. It is true that the lessee erected the building at his own cost but he did so for the lessor and on the lessors land on agreed terms. The fact that the lessee incurred expenses in putting up the building is precisely the consideration for the lessor granting him a lease for 999 years not only of the building but of the land as well at what may, for all we know, be a cheap rent which the lessor may not have otherwise agreed to do. By the agreement the building became the property of the lessor and the lessor demised the land and the building which, in the circumstances, in law, and in fact belonged to the lessor. The law of fixtures under s. 108, T. P. Act, may be different from the English law, but s. 108 is subject to any agreement that the parties may choose to make. Here by the agreement the building became part, of the land and the property of the. lessor and the lessee took a lease on that footing. The lessee or a person claiming title through him cannot now be heard to say that the building does not belong to the lessor, Forfeiture does not, for the first time, give title to the lower. On forfeiture heupon what has. all along been his own property. said Lord Macnaghten in HeritableReversionary Company v. Mullar,L. R. (1892) A. C. 598 at p.e words property and belonging to are not technical words in the law of Scotland. They are to be understood, I think in their ordinary signification. They are in fact convertible terms; You can hardly explain the one except. by using the other. A mans property that which, is his own, that which. belongs to him. What belongs to, him is his Property.In our opinion the interest of the lessor in the demised premises cannot possibly be described as a contingent interest which will become vested on the expiry or sooner determination of the lease, for then the lessor could not have demised the premises including the building as he did or before the determination of the lease exercise any act of ownership or any control over it as he obviously has the right to do under the covenants referred to above. The truth is that the lesser, after the building was erected, became the owner of it and all the time thereafter the demised premises which include the building have belonged to him subject to the right of enjoyment of the lessee in terms of the lease. If it were to be held that the building belonged to the lessee by reason of his having pur it up at his own cost and by reason of the attributes of ownership relied on by, then as between the local authority (the lessor) and the lessee also the building must for the same reason founded on what have been called the attributes of ownership be held to belong to the lessee and the Act will apply. Surely that could not possibly be the case, for, it would mean that the Government or a local authority will always be bound by the Act in respect of the building put up by the lessee under building leases granted by it in respect of land belonging to it.In that case the immunity given to the Government or a local authority will be wholly illusory and worthless. In our view, in the case before us, the demised premises including the building belong to a local authority and are outside the operation of the Act. This Act being out of the way, the appellants were well within their rights to file the suit in ejectment in the City Civil Court and that Court had jurisdiction to entertain the suit and to pass the decree that it did.