Case: V.N.Vasudeva Vs. Seth Kirorimal Luhariwala

1. This is an appeal by special leave against the order of the High Court, Punjab dated August 14, 1963, by which an order of the Rent Controller under S. 15 (1) ofthe Delhi Rent Control Act, 1958 directing the appellant to deposit back rents at Rs. 300/- per month from July 1, 1957 was confirmed. The High Court granted the appellant one months time from the date of its own order, as the original time had already run out.2. The appellant is an advocate, who is practising at Delhi. He is occupying No. 43, Prithvi Rai Road, New Delhi as a tenant, and his landlord Seth Kirori Mal Luhariwala is the respondent in this appeal. The tenancy commenced on July 28, 1957, and the memorandum of tenancy dated July 1, 1957 produced in the case, shows that the premises were taken on a monthly rent of Rs. 300/-. The memorandum also contains other terms which need not be mentioned here because they are not relevant to the present appeal. It appears that Seth Kirori Mal was in arrears in payment of his income-tax, and a sum of Rs. 39,00,000/- was outstanding from him. On October 31, 1957, the Income-tax Officer Central Circle, New Delhi, to whom all cases of Seth Kirori Mal were transferred, issued a notice to the appellant under S. 46(5A) of the Indian Income-tax Act directing him to deposit with the Income-tax Officer all sums due by way of rent as also future rents. The appellant sent no reply to this notice. He had, however, on September 29, 1957, addressed a letter to the respondent Seth Kirori Mal. The reply of Kirori Mal dated October 15, 1957 figured in the arguments a great deal, and as it is brief, it may be quoted. . . . . . . . . . . . . . . .. .To. . . . . . . . . . . . . . . . . . . . . .Dated Raigarh, the 15th October, 1957.Dear Sir,With reference to letter No. M-17-58 dated 29th September 1957, I am to write that you may please adjust six months rent of 43, Prithviraj Road, New Delhi, i.e., Rs. 1800/- (rent from 1-10-57 to 31-3-1958) towards your professional fee in part payment thereof. The balance of your fee will be paid later at the time of final settlement.Yours faithfully,Sd./Paluram DhananiaFor KirorimalMal also sent a receipt dated October 16, 1957 for the amount, and it is item 23 in the record.3. Kirori Mal had litigation in Calcutta. He had brought a suit against four defendants claiming the present property as his "absolute" and "exclusive self-acquired property". The case was pending in the High Court and on May 1, 1958, an order was made appointing one Chakravarti as a Receiver of the properties including No. 43, Prithvi Raj Road. Chakravarti also sent a notice on July 8, 1958 to the appellant demanding rent already due and also as and when due. To this notice, the appellant sent a reply on July 19, 1958. He referred to the payment of rent by adjustment towards fees for the period 1-10-1957 to 31-3-1958, which was the subject of the letter above. He stated that as regards rent after 1-4-1958, he had no objection to pay the amount to the Receiver or any other claimant but regretted that it was not possible for him to make the payment because of the notice served upon him by the Income-tax Officer. He asked the Receiver to get the notice withdrawn, and stated that he would be glad to remit the amount of rent to him when that was done. He also raised the question of certain other expenses which he had incurred in connection with the house which he claimed he was entitled to deduct from the rent and informed that a few repairs were required in the house. A second letter was sent by the Official Receiver on September 5, 1959 making another demand. In his reply dated September 14, 1959 to this letter, the appellant raised the question that a sum of Rs. 23,500/- was payable to him for professional services rendered by him to Seth Kirori Mal. Hewill therefore appreciate that I am entitled to adjust the rent payable against the fees due to me and the amount due to me will absorb the rent for a little over six years.Even before this Seth Kirorimal had paid me a sum of Rs. 1,800 by way of adjustment of rent towards my professional fees due. You will, therefore, kindly agree that the rent payable is adjustable against the professional fee due tothis letter, he enclosed a copy of a statement of fees amounting to Rs. 23,500 which he had submitted to his client on February 4, 1959. The Official Receiver then informed the appellant that the party concerned had denied the claim for fees as absolutely false, and observed in his letter that the professional fees should be the subject of some other proceeding but the rent should be paid without delay. He enquired if the amount of rent had been paid to the Income-tax Department in response to the notice. In his reply to this letter, on July 5, 1960 the appellant for the first time stated that there was an agreement between him and Seth Kirori Mal to adjust the rent towards his professional fees until the fees were fully paid. He offered to reduce the fees if Seth Kirori Mal had any objection, but stated that till the professional fees were recouped, no rent could be considered to be due from him.4. On November 25, 1960, Seth Kirori Mal applied to the High Court at Calcutta for directions to the Official Receiver to take appropriate proceedings to realise the arrears of rent from the appellant, and on December 19, 1960, the High Court appointed Seth Kirori Mal Receiver in the case. Seth Kirori Mal then served a notice on December 23, 1960 on the appellant to pay the arrears of rent. To this notice, the appellant sent a detailed reply which, in substance, has been his defence in the proceedings before the Rent Controller, from which the present appeal has arisen.5. On January 4, 1961 Seth Kirori Mal made an application under S.14 of the Delhi Rent Control Act before the Rent Controller, Delhi. In his written statement in reply to that application, the appellant pleaded that Seth Kirori Mal had no right to recover rent from him, inasmuch as a notice under S. 46 (5 A) of the Indian Income-tax Act had been issued by the Income-tax Officer, Central Circle v. New Delhi. He pleaded that the property was in the custody of the Court, and that inasmuch as a receiver had been appointed, Kirori Mal had no locus standi to maintain the petition denying at the same time that Kirori Mal had informed him that he had been appointed a receiver of the property. The appellant also contended that under the Rent Control Act, a receiver had no right to act on behalf of the landlord. He referred to the alleged agreement by which fees were to be recouped from rent as and when it fell due, pointing out that on an earlier occasion a sum of Rs, 1800/- was allowed to be adjusted towards fees. Some other pleas were raised, but it is not necessary to refer to them, because they were not raised before us.6. The notice to quit which the appellant alleged was not issued to him was filed in the Court of the Controller on May 17, 1961. The appellant was ordered to inspect it and to be ready for his statement as to the correctness of the notice. On the next date, a statement of the appellant was recorded and he denied the notice and also its receipt. The case was then set down for arguments, and after bearing the arguments, the Rent Controller passed his order on July 22, 1961. The Rent Controller held that there was no proof on the file to show that the respondent had any right to make an adjustment of the rent against his professional dues. He held that the rent was not paid after March 31, 1958. With regard to the plea that a notice under S. 46 (5A) of the Income-tax Act, 1922 had been issued, the Rent Controller observed that the amount, if deposited in his court, would not be paid to Kirorimal unless he produced a clearance certificate from the Income-tax Department. The Rent Controller also said that it in the enquiry to be subsequently made, the tenant proved that the amount of fees had to be recouped from rent, the amount would not be paid to Kirorimal.7. Against the decision of the Rent Controller, the appellant filed an appeal before the Rent Control Tribunal. The Rent Control Tribunal affirmed the decision of the Controller, observing that the plea taken by him that his professional fees were to come out of rent was an after-thought and there was no evidence to prove that there was such an agreement between the parties. On other matters, the Tribunal expressed its agreement with the Rent Controller. The appellant then appealed to the High Court of Punjab. The High Court upheld the orders so far made and pointed put that in the letter dated July 19, 1958 to the Receiver, the appellant had not mentioned the agreement. The High Court held that the order made under S. 15 (1) of the Act was proper, because it was admitted fact that rent had not been paid to anybody from April 1, 1958. The High Court endorsed the view of the Tribunals below that the notice of the Income-tax Officer did not come in the way of making the deposit of the rent in the office of the Rent Controller, because the amount was not to be paid to anyone till the Rent Controller had decided who was entitled to receive it. The appeal was therefore dismissed.

Court's reasoning:
The letter itself does not show that there was any such agreement.In fact it shows the contrary where itbalance of your fees will be paid latter at the time of finalshows that the appellant was not entitled to retain the rent in his hands, and the Tribunals below were justified in saying that the plea about theagreement was anbecause till September 14, 1959, the appellant had not mentioned such an agreement. We are also satisfied that the plea was a mere device to retain the money and to avoid paying the rent. It must be remembered that there were as many as four claimants, viz., theOfficer, the Receiver and Kirorimal in person and Kirorimal as Receiver, but the appellant avoided each of these in turn by pointing to the others, and in this way continued to occupy the premises without payment of anyIn our opinion, this reading is notwill be noticed that sub-section (3) also contemplates payment of interim rent determined by the controller before the entire dispute is settled. sub-section (6) puts the case under sub-s. (1) and sub-s. (3) on the same footing and makes no distinction between them. It is also possible to visualise cases in which the tenant may deposit the amount of rent under protest and claim that his defence be tried. It is not that even on the deposit of the arrears of rent in these circumstances the case would come to an end. The latter part of sub-section (1) further shows that not only the arrears have to be deposited but rent as it falls due has to be deposited month by month by the 15th of each succeeding month. This also shows that the order under sub-section (1) is not a final order but is preliminary to the trial of the case and is made only where the rent has in fact not been paid. For the purpose of an interim order it was not necessary that there should have been a full trial. The Rent Controller had the affidavit of the appellant and he could judge whether in the circumstances of the case, an interim order ought or ought not to be made. He came to the conclusion that the rent was not paid and the plea that it was being withheld under anagreement was anafter-thought and not true. The High Court and the Rent Control Tribunal have agreed with this view of the Rent Controller and the conclusion appears, to us to be sound. Once such a conclusion is reached, it is quite manifest that the order was made after affording an opportunity to the appellant to be heard. No doubt, the appellant is entitled to lead oral evidence in regard to the agreement he alleges, but for that he will have an opportunitythere was an agreement between the parties and Kirorimal was indebted for such a large amount, the appellant could have objected on the ground that he did not hold any money for or on account of the assessee and then he would not have been required to pay any sum to the Income-tax Officer. The appellant did nothing in the matter except to deny the payment to everyone. He paid nothing to the Income-tax Officer, declined to deposit the money before the Rent Controller and refused to recognise the demands by the Receiver and his landlord. In other words, he was trying to take full advantage of the law, when he could have informed the Income-tax Officer about his own position and paid the money to the Rent Controller subject to its being paid to the Income-taxis quite clear that the facts there were entirely different. Payment by the landlord for repairs was a part of the tenancy agreement and rent under that tenancy could not be calculated without advertence to every term of the agreement of tenancy. Here the special agreement which is pleaded is outside the tenancy agreement and allegation about the special agreement has been held to be an afterthought and false. It is therefore difficult to apply the ruling to the present circumstances.