Case: Sushila Kashinath Dhonde &amp; Ors Vs. Harilal Govindji Bhogani &amp; Ors

1. This appeal, by special leave, by Defendants 5 to 7, is directed against the order dated December 2, 1968 of the Bombay High Court in Special Civil Application No. 2545 of 1968 filed by the appellants under Article 227. The circumstances leading up to the filing by the appellants of the Special Civil Application the High Court may be briefly mentioned2. Respondent No. 1, as plaintiff, instituted Rent Act Suit No. 78/ 6206 of 1963 in the Court of Small Cause at Bombay against Jayantilal Dayalal & Co., respondent No. 2 herein and its three partners, Respondents 3 to 5 who were Defendants 1 to 4. The appellants herein were impleaded as Defendants 5 to 7. According to the plaintiff, Respondents 2 to 5 were the owners of an open plot of land known as Jalaram Nagar, situate in Greater Bombay and were doing business of construction. The said defendants represented to the plaintiff that they were putting up a building in the said property according to the plans and specifications submitted to the Bombay Municipality. The plaintiff applied to the defendants 1 to 4 agreed to do so on the plaintiff advancing a sum of Rs. 12, 500/- as loan towards construction and on his executing a deed of charge, in accordance with the provisions of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 (Bombay Act No. LVII of 1947) (hereinafter called the Act. The plaintiff agreed to those conditions and accordingly advanced a sum of Rs. 12, 500/- to Defendants 1 to 4 on August 12, 1959 and the said defendants executed a deed of charge in favour of the plaintiff on the said date, which deed of charge was also registered with the Sub-Registrar of Bombay on the same day. Dependents 1 to 4 started construction of the building in question and though it was completed they failed to let out the said premises to the plaintiff in spite of the provisions to that effect in the deed of charge of August 12, 1959. On the other hand the said defendants let out the same to some third parties, contrary to and in breach of the provisions contained in the deed of charge. According to Section 18 of the Act, Defendants 1 to 4 were bound and liable to complete the construction of the building within a period of 2 years from the date of the agreement and were also bound to let out the said premises to the plaintiff obligation cast on them by the Act, the plaintiff had become entitled to the return of the sum of Rs. 12, 500/- with interest at 4% per annum from August 12, 1959 till the date of payment. The deed of charge complex the loan for construction of Rs. 12, 500/- together with interest due is a charge on the entire building as well as on the entire interest of the said defendants in the land on which the building has been put up. The appellants, who are Defendants 5 to 7 in the suit had purchased the property from Defendants 1 to 4 and as the amount repayable to the plaintiff with interest is a charge on the property, those defendants are also bound and liable to pay the amount together with interest. As the disputes between the parties arose out of the provisions of the Act, the Court of Small Causes where the suit has been instituted has jurisdiction to try and entertain the suit. On these averments, the plaintiff prayed for a declaration that the sum of Rs. 12, 500/- given by him as construction loan shall be a charge on the land as well as the buildings put up thereon and that the plaintiff is entitled to recover from the defendants the amounts mentioned in the plaint together with further interest and that in default the property be sold under the direction of the Court and that liberty be given to obtain a personal decree against the defendants in case the full amount is not recovered by sale of properties. The plaintiff also asked for certain other consequential reliefs by way of injunction and appointment of receiver3. Respondents 2 and 3 did not file any written statement, but Respondents 4 and 5 contended that the Court of Small Causes has no jurisdiction to try the suit in view of the pecuniary value given in the plaint. They had also denied the receipt of the sum of Rs. 12, 500/-. They further pleaded that the deed of charge referred to by the plaintiff had been executed only by respondent No. 3 in collusion with the plaintiff and that it is a sham and colourable document. They further contended that the plaintiff was not entitled to any reliefs by way of charge or for recovery of the amounts.4. The appellants, in their original written statement, pleaded that there was no privity of contract between them and the plaintiff in respect of the suit claim. While admitting that they had purchased the property from Defendants 1 to 4 on October 25, 1960 they pleaded that their vendors had already let out the property to various tenants and that they were not aware of any deed of charge having been executed in favour of the plaintiff. They further contended that the plaintiff was aware of these facts and, nevertheless, he has filed the suit without any bona fides. In an additional written statement filed by them, they raised the objection that the Court of Small Causes has no jurisdiction to enteration the suit. The plaintiff seeks a declaration of charge over the suit properties and such a declaration relating to immovable property cannot be granted by a Court of Small Causes, by a virtue of Section 19 of the Presidency Small Causes Court Act. The various averments in the plaint and the reliefs asked for do not established any cause of action arising under any of the provisions of the Act, as such. The reliefs asked for are on the basis of an agreement of charge stated to have been executed by Defendants 1 to 4 and the cause of action is on the basis of such agreement and not under any provisions of the Act5. The Court of Small Causes, Bombay, by its judgment dated March 23, 1968 overruled the objections raised on behalf of the defendants and decreed the suit as prayed for. That Court found that the plaintiff had advanced as construction loan the sum of Rs. 12, 500/- and that the deed of charge, dated August 12, 1959 had been properly executed by Defendants 1 to 4. The Trial Court further held that Defendants 5 to 7 who are the purchasers of the property from Defendants 1 to 4 did not disclose the transaction between them and the plaintiff, Defendants 5 to 7, as purchasers of the property over which a charge and their plea that they had no notice cannot be accepted. Regarding the objection raised by Defendants 5 to 7 to the jurisdiction of the Court to entertain the suit, the Trial Court after finding that the deed of charge dated August 12, 1959 complies with all the requirements of Section 18 (3) of the Act held that the suit for recovery of the construction loan is cognizable under Section 28 of the Act, being a claim arising out of the provison of Section 18(3) of the Act. Finally, that Court granted a decree as against all the defendants6. The defendants challenged this decision by filing an appeal under Section 29 of the Act before the Full Court of Small Causes, being Appeal No. 400 of 1968. The Full Court agreed with all the findings and conclusions arrived at by the Trial Judge and by its judgment dated August 12, 1968 dismissed the appeal. The appellants challenged both the judgments by filing Special Civil Application No. 2545 of 1968 before the Bombay High Court under Article 227. The learned Single Judge, by his order dated December 2, 1968 summarily rejected the same

Court's reasoning:
We are not inclined to agree with the reasoning of the learned Judge regarding the first condition extracted above, viz., that the suit or proceeding must in all cases be between the landlord and the tenant and unless that condition is satisfied, Section 28 could have no application. We have already indicated that one type of action contemplated under Section 28 is a suit or proceeding relation to the recovery of rent of possession of any premises as between a landlord and tenant. But there are various other matters dealt with in Section 28(1) in respect of which also the Special Court referred to therein has been given jurisdiction. For instance, a claim or question arising out of the Act or any of its provisions need not necessarily be one between a landlord and a tenant, but nevertheless the Special Court will have jurisdiction to deal with such a claim or question under Sectionthe above extract, this Court, in our opinion, has clearly laid down that when the Court of Small Causes under Section 28 of the Act is invited "to deal with any claim or question arising out of this Act or any of its provisions" the relationship between the parties to such proceedings need not be that of a landlord and a tenant. Mr. Hattangadi no doubt stressed the latter part of the observations in the above extract wherein, according to him, this Court has emphasised that in that particular case the suit was between the landlord- plaintiff and the first-defendant tenant and, in a consequence, held that the Small Causes Court had jurisdiction. In our opinion this is not a proper understating of the principle enunciated by this Court. This Court has categorically held that the claim or question which the Small Causes Court is called upon to consider need not necessarily be between a landlord and a tenant. After having so held, this Court gave only an additional reason for upholding the jurisdiction of the Small Causes Court on the ground that the suit was between the landlord and the first-defendant who was admittedly a tenant19. Having due regard to the aspects discussed above, the first contention of Mr. Hattangadi cannot beA perusal of the various clauses of the agreement, referred to above, clearly shows that the loan given by the first respondent to respondents 2 to 5 was for the purpose of financing the erection of the building on the land in question held by the landlords as owners and that the agreement was in wring and has been registered. It also includes the various conditions referred to in Section 18(3). Therefore it is clear that the arrangement by way of an advance of the construction loan and the conditions imposed therein and the manner in which the deed of charge has been executed are in accordance with Section 18(3) of the Act and the arrangement is a permissible one under the said sub-section. But for the type of arrangement entered into in accordance with Section 18(3), it is clear that any other payment of the types of amounts mentioned in Section 18(1) is notHaving due regard to the nature of the transaction entered into between the parties, viz., the deed of charge dated August 12, 1959 and the provisions of Section 18(3) read with Section 28 of the Act, we are of opinion that the subject-mater of he proceedings initiated by the plaintiff relates to claims or questions arising out of the Act. The question regarding the nature of the transaction, whether it is saved by Section 18(3) of the Act, and the nature of the reliefs to be granted to the plaintiff are all claims or questions arising to of the Act and can be dealt with only by the Special Court constituted under Section 28 of the Act. No doubt the deed of charge furnished the cause of action, but its legality, validity and binding nature and other incidental matters connected therewith are all questions arising out of the Act27. Further we are not inclined to accept the contention of Mr. Hatttangadi that the rights of the plaintiff flows not from the Act or any of its provisions but from the contract, namely the deed of charge. The registered agreement entered into between the parties regarding the construction loans, it must be pointed out, is the method contemplated by Section 18(3) of the Act. The payment made by the plaintiff under such an agreement is, in our view, an advance of a construction loan by the plaintiff in accordance with the Act and the relief for a charge as well as for the recovery of the amount are all claims arising out of the Act. In fact the claim made by the plaintiff in the suit could never have arisen and the transaction in question could not have taken place, but theIn view of the discussion contained in the above decision and the reasons given by us earlier, it follows that the reliefs asked for by the plaintiff in the suit and the controversy raised by the defendants regarding the plaintiffs right to obtain those reliefs, all relate to "claims or questions arising out of this Act or any of its provisions", and therefore, the Court having jurisdiction is the special Court under Section 28 of the Act. The mere fact that the parties had entered into an agreement by way of a deed of charge, does not affect the question because, as already stated, the Act permits the advancing of a loan for the purpose of financing the erection of the whole or part of a building under an agreement entered into in accordance with Section 18(3) and any claims or questions raised, though with reference to the agreement, are really "claims or questions arising out of this Act or any of its provisions".