Case: Satya Narain Pandey Vs. State Of U.P. &amp; Others

These matters involve the interpretation of Section 2(1)(d) of the U.P. Urban Buildings (Regulation of Letting, Rent and Eviction Act, 1972, (Act 13 of 1972), (hereinafter referred to as the Act). Section 2(1) of the Act exempts certain classes of buildings from the application of the Act. One such exemption, under clause (d), is in respect of(d) any building used or intended to be used for any other industrial purpose (that is to say, for the purpose of manufacture, preservation or processing of any goods) or as a cinema or theatre, where the plant and apparatus installed for such purpose in the building is leased out along with the buildingThough the question for out ultimate decision is a short one, there has been a multiplicity of proceedings between the concerned parties. The relevant facts, therefore, need to be set out at some length2. The building known as Prem Talkies, situated in Mohalla Sahadatpura, Maunath Bhanjan, District Azamgarh, U.P., belongs to Behari Lal Tandon and five others, (hereinafter referred to as the Landlords). They had let out the building to Sunil Sharma and another. Though the landlords claim that the lease was of the building along with certain fixtures, it has to be taken for the purposes of the present proceedings that the lease to the Sharmas was the lease of the building simpliciter and that the building was them subject to the provisions of the Act. This was the finding given in the suit for eviction which the landlords had instituted against the Sharmas. That decree has since become final and the respondents have made out before us no grounds to differ from that finding. The landlords succeeded in obtaining delivery of vacant possession of the building from the Sharmas on September 30, 19843. It appears that the Sharmas had filed a revision petition in the High Court against the eviction order, which was eventually dismissed on August 1, 1985. The landlords claim that, subsequent to the recovery of possession, they wished to let out the building along with plant, machinery, furniture and apparatus installed therein for running a cinema theatre. However, steps in this direction by way of renovation of the building, installation of plant, machinery, new furniture and electrical fittings and the execution of a lease deed could be embarked upon only after the revision petition of the Sharmas was dismissed. They claim that they proceeded to do the needful. Thereafter on February 5, 1986 an agreement of lease was executed between the landlords and the Mehrotras (respondents in the matters before us). Under this agreement, the Mehrotras agreed to take the building fully equipped with projector, machines, fixtures and furniture in full running condition for a period of five years with an option to renew for a further period of two years, on certain terms and conditions which are not relevant for out present purposes. It was provided that the Mehrotras should obtain a cinematographic licence from the appropriate authorities by the end of the year 1987, failing which the lease agreement would stand cancelled. It is claimed that a generator was purchased on June 20, 1986 and a projector on September 22, 1986 and that these were duly installed in the building on October 26, 1986. A lease deed pursuant to the agreement of lease between the landlords and the Mehrotras was entered into on December 30, 1986, more or less broadly on the same terms as the agreement of lease earlier referred to. It is claimed that actual physical possession of the building was given to the Mehrotras on January 8, 19874. In the meantime, it appears, the present appellant, Satya Narain Pandey had made an application under Section 16 of the Act, praying that the building in question should be allotted to him. There is a dispute regarding the date of the application. Pandey claims that the application was filed on September 25, 1986 and that, on the basis of this application, the Additional District Magistrate had called for a report from the Rent Control and Eviction Inspector, who submitted a report on October 28, 1986, stating that the building was vacant as on that date. On the other hand, the landlords claim that the vacancy of the building had been declared on March 6, 1987, that a notification calling for applications for allotment had been issued on March 9, 1987 and that the application by Pandey for allotment has been made only on March 9, 1987. The landlords, thereupon filed Writ Petition No. 10346 of 1987 in the Allahabad High Court praying that the order dated March 6, 1987 and the notification dated March 9, 1987 be quashed. They also say that, on coming to know of the alleged report of the Rent Control and Eviction Inspector dated October 28, 1986, they had applied to the Additional District Magistrate on March 23, 1987, pointing out that the report of the Eviction Inspector had been obtained behind their back and requesting that a fairly high placed official should be sent to inspect the premises again and submit a report. This application was granted by the Additional District Magistrate and, in pursuance of the said order, the Sub-Divisional Magistrate submitted a report on April 28, 1987. According to this report, the building as on that date was a full-fledged cinema building fully equipped with projector, exhaust and electric fans, electric fixtures, diesel generating set, etc., and the building was not vacant. He also reported that the landlords appeared to have let out the building to the Mehrotras under the agreements of February 5, 1986 and December 30, 19865. When these proceedings were taking place, the Mehrotras, in pursuance of the lease deed entered into by them with the landlords, applied for the grant of a licence for running a cinema in the premises in question under the U.P. Cinemas (Regulation) Act, 1955. They did this on January 8, 1987. This application was granted by the Additional District Magistrate, Azamgarh by his order dated June 22, 1987. Pandey, who, as mentioned above, had applied for the allotment of the premises to himself, considered himself aggrieved by the grant of the cinematographic licence to the Mehrotras on June 22, 1987. He, therefore, filed Writ Petition No. 11907 of 1987 before the Allahabad High Court. This writ petition was dismissed. The court held that the order granting a licence to the Mehrotras could not be quashed on the ground of the pendency of the allotment proceedings before the Rent Control and Eviction Officer and that Pandey did not have any right to challenge the grant of licence merely because the vacancy of the building was declared at his instance, particularly when the dispute as to whether the Act applied or not to the premises in question is yet to be decided. C.A. No. 1502 of 1987 has been preferred against the judgment of the Division Bench in the above writ petition. This Court granted special leave to Pandey by its order dated July 14, 1987 and also directed, that, in the meantime the proceedings for the grant of the cinema licence be stayed6. We have mentioned that the landlords had filed Writ Petition No. 10346 of 1987 in the Allahabad High Court against the order of the Additional District Magistrate declaring a vacancy in respect of the premises in question by the order dated March 6, 1987 and notice dated March 9, 1987 inviting applications for allotment of accommodation thereto. Their contention was that the cinema building stood excluded from the purview of the Act by virtue of Section 2(1)(d) and that, therefore, the question of declaring a vacancy or allotting it to any person did not arise. The Mehrotras also filed Writ Petition No. 12263 of 1987 raising the same pleas and seeking the same relief. These writ petitions were heard together and disposed of by a consolidated order of the High Court dated November 20, 1987. The High Court accepted the contentions of the petitioners and allowed the writ petitions. The order dated March 6, 1987 and notice dated March 9, 1987 were set aside and the Rent Control and Eviction Officer, Azamgarh, was directed not to proceed with the allotment of the cinema building in question under the Act. Pandey, who was one of the respondents in the above writ petitions, has filed S.L.P. Nos. 15030-31 of 1987 for leave to appeal from the decision of the Allahabad High Court in these writ petitions

Court's reasoning:
There is no dispute that, as on that date, the building was subject to the provisions of the Act. That being so, and a vacancy having arisen in such a building, it was the duty of the landlords to have intimated the same to the District Magistrate and then gone through the procedure prescribed under the Act before letting out the property to any person. Any letting out of the property by them to the Mehrotras was unlawful in view of Section 13 of the Act and the landlords cannot be heard to contend, on the strength of such an unlawful letting that the premises stand outside the purview of the Act. We are unable to agree. We are of the opinion that this determination has to be arrived at by the District Magistrate after hearing the landlord and on the basis of such inspection or enquiries as he may consider necessary. We are clearly of the opinion that at this stage he should not permit the intervention of any other party. A contrary interpretation would make the provisions almost impossible of being worked. There may be several applicants for allotment, some general and some with regard to the specific property. If they are considered as having a right to be heard on the availability of a property for allotment, every one of them must be allowed to intervene. Different persons might come in at different stages and challenge the contention of the landlord that the building is not available for allotment. The landlord may have to face innumerable challenges by various applicants at different points of time and they might claim that they want to lead evidence and thus delay the proceedings. We do not think that all this envisaged under the Act. It is for the District Magistrate to come to the conclusion whether a building is available for allotment or not, and once he decides that it is not a building to which the Act applies, that is an end of the matter. If he comes to a conclusion that the building falls within the provisions of the Act and the landlord is aggrieved, the landlords remedy has only to be by way of a writ petition where such conclusion is on its face erroneous or based on no material or perverse18. In the present case, the District Magistrate registered the vacancy on March 6, 1987; in other words, he came to a conclusion, mainly on the basis of the appellants averments, that the Act continues to be applicable to the premises. The landlords challenged this conclusion successfully in the writ petition. As pointed out by them, subsequent to March 6, 1987, the District Magistrate himself had the property inspected and there is a report available on record. Apparently, the District Magistrate has not applied his mind to the terms of the report. Perhaps, in the normal course, we would have sent the matter back to enable him to do this. However, in the circumstances of the present case, we think no useful purpose would be served by remitting the matter back to the District Magistrate for fresh consideration. As pointed out by the High Court, the report of the Sub-Divisional Magistrate, the terms of the lease agreement and the registered lease deed as well as the application for, and the grant of, a cinematographic licence in the name of the Mehrotras, clearly show that the landlord intended to let out the property as a fully equipped cinema theatre and that they have done so. In the face of this evidence, the District Magistrate had clearly no jurisdiction to proceed with the allotment of the premises in question. We would, therefore, uphold the findings of the High Court in this regardThe other controversy in C.A. No. 1502 of 1987 regarding the grant of the cinema licence to the Mehrotras need not detain us long. The High Court was clearly right in holding that Pandey had no locus standi in the matter. However, the issue of a valid licence to Mehrotras will ultimately depend on the outcome of their right to occupy the premises in question. If Pandey succeeds in his contention that the building continues to be subject to the provisions of the Act, then, obviously, the allotment of the building on its vacation by the Sharmas will have to be made by the Additional District Magistrate in accordance with law and the Mehrotras will not be in a position to occupy the building and run the cinema theatre in pursuance of the lease deed and the licence obtained by them. This is clear from the provision contained in Section 13 of the Act. If, on the other hand, the contention of Pandey is not acceptable, then the Mehrotras will be entitled to run the theatre in pursuance of the lease deed in exercise of the cinematographic licence obtained by them. In this view of the matter, the grant of licence to the Mehrotras recedes to the background and is only relevant to this extent that, in case the lease of the building to the Mehrotras is held to be contrary to the provisions of the Act, they may not be entitled to the licence, a condition precedent for which will be the availability, to the exhibitor, of a building in which he has a right to exhibit cinema shows. We may, therefore, leave the controversy in Civil Appeal No. 1502 of 1987, aside for the time being. We shall, therefore, grant special leave to Pandey in the special leave petitions and proceed to dispose of the same, as we have heard the learned counsel on both sides9. The clear effect of this section is that if any building falls under any one of the above clauses, it is exempt from the operation of the Act11. Though there is a plausibility in the contention urged on behalf of the appellant, we are of opinion, on a careful consideration of the scheme and language of the Act, that the judgment of the High Court should be affirmed and the appeals dismissed12. Section 2(1) of the Act exempts from the operation of the Act various classes of buildings set out in clauses (a) to (f) of that. The initial attempt on behalf of the appellants was to suggest that the above exemptions are available only where the premises in question was of the nature specified in one or the other of those clauses as on the date of the commencement of the Act, namely, July 15, 1972. We cannot accept this contention. A perusal of the various clauses makes it clear that the building should fulfil the character indicated therein on the date on which the provisions of the Act are sought to be made applicable thereto. To give an illustration, clause (a) exempts "any building of which the government or a local authority or a public sector corporation is the landlord". In ore opinion it is clear that even a building which might have belonged to private individuals since 1972 will automatically fall within this exemption clause as soon as it is purchased by the government or a local authority or a public sector corporation. It will not be correct to read the section as conferring an exemption only on the buildings which belonged to the government etc. on July 15, 1972 and not to those acquired by them thereafter. The position must be construed likewise in respect of the other clauses tooThere is no dispute that, as on that date, the building was subject to the provisions of the Act. That being so, and a vacancy having arisen in such a building, it was the duty of the landlords to have intimated the same to the District Magistrate and then gone through the procedure prescribed under the Act before letting out the property to any person. Any letting out of the property by them to the Mehrotras was unlawful in view of Section 13 of the Act and the landlords cannot be heard to contend, on the strength of such an unlawful letting that the premises stand outside the purview of theAct.There is, as we said earlier, a plausibility about this contention but, in our opinion, it cannot be accepted as this construction of the provisions would render the exemption section totally unworkable14. We may first consider the nature of the exemption conferred by Section 2(1). It takes out of the provisions of the Act certain classes of buildings. Some of these exemptions are based on the nature of the ownership of the property and some of them on the nature of the use to which the property is either put or intended to be put. So far as the former is concerned, there can be no doubt that any building that satisfies the ownership requirements set out therein automatically goes outside the purview of theAct.Thus, under clauses (a) and (b), even if a building was previously subject to the provisions of the Act, it will cease to be so the moment it is purchased by a government or a local authority or a public sector corporation or a recognised educational institution. The vesting of the ownership of the premises in one of the categories of bodies mentioned effects a statutory cut off of the building from the applicability of the provisions of theAct.The exclusion of the Act would be automatic and does not need any application by the previous or subsequent landlord or any order by the Additional District Magistrate under any of the provisions of theAct.So far as clauses (e) and (f) are concerned the exemption depends upon the nature of the use to which the property is put. There is no difficulty in cases where the building, at the time it falls vacant, was actually used for the purposes specified in these clauses : say, as a place of public entertainment or amusement. It would, like the buildings described in clauses (a) and (b) fall outside the provisions of theAct.So far there is no difficulty. But the exemption conferred by these clauses takes in not only actual user but also intended user; that is, the use to which the property is proposed to be put, whatever may have been the use it was put to earlier. Thus, if a building let out privately earlier, is intended to be used as a place of amusement or entertainment or a cooperative society decides to convert a flat let out to an outsider earlier into one for occupation by its own officer, it will stand outside the purview of theAct.Now we come to clauses (c) and (d) which not only talk of user or intended user but also impose a further requirement that plant and apparatus "is leased out along with the building". This creates a somewhat anomalous situationIn our opinion this is not the correct interpretation of these clauses. What they exempt are : "a building intended to be used as a factory .... where the plant of such factory is leased out along with the building" and a "building intended to be used for any other industrial purpose or a cinema or theatre where the plant and apparatus installed for such purpose in the building is leased out along with the building". Each of these clauses should be read as a whole and doing so, the exemption is not restricted only to cases where there is a prior valid lease of the building with plant and apparatus but would also extend to cases where, though the building earlier was without such plant and apparatus or was not being used for such purposes as are specified, the owner intends to put them to the specified uses by letting them out with the necessary plant and apparatus. The words "is leased", therefore, do not connote the idea of a valid actual subsisting lease of the building with plant on the date of vacancy; they are only descriptive of the manner in which the building is intended to be used. What is needed is (a) that the building should be intended to be used, by the prospective tenant, for the purpose specified in either of the clauses and (b) that in order to facilitate the purpose being achieved the building is intended to be let out to him along with necessary plant and apparatus. In our view, therefore, even in respect of a building covered by the Act, the Act will cease to be applicable if, on a vacancy occurring therein, the landlord intends to put it to the use specified in clauses (c) to (f) and, in cases covered by clauses (c) and (d), also intends to let it out for such use along with the plant and apparatus necessary therefor15. We lean in favour of this interpretation, of an automatic exclusion of certain classes of buildings from the purview of the Act, for the following reasons(i) The declaration in Section 2(1) that nothing in the Act applies to the classes of buildings mentioned therein has to be given effect to. It is patent that buildings falling under clauses (a) and (b) go out automatically. A different rule cannot apply in respect of the other clauses(ii) The Act does not contain any provision or machinery whereby the owner of a building subject to the provisions of the Act can ask the District Magistrate or other authority to record the purchase of the property by the bodies specified in clauses (a) and (b) or to grant permission for converting it into a category of building for which exemption would be applicable under clauses (c) to (f). It does not specifically confer jurisdiction on any authority to adjudicate upon a claim that a building falls within the exemption clause and that the provisions of the Act are, therefore, not applicable to it(iii) On the other hand, under the scheme of the Act on there being a vacancy in a building to which the Act applies, it can only bed in terms of either an allotment order or a release order. A release order under Section 16 can be only got in certain circumstances. It cannot be obtained by a landlord for the mere asking. The District Magistrate cannot release the building to the landlord, even if he is satisfied of the landlords intention to use the building in the manner specified in one of the clauses of Section 2(1) and his intention to let it out with plant and apparatus. This being so, the interpretation suggested by the appellants would mean that, once a building is subject to the provisions of the Act, it can never be taken out of the Act even if the requirements of clauses (A) and (b) or the intended user in terms of clauses (c) to (f) of Section 2(1) can be established(iv) The above interpretation does not result in facilitating any avoidance of the provisions of the Act as contended for by the appellants. As rightly pointed out on behalf of the landlords, the Act is intended to regulate the letting of the premises but it is not intended to curb commercial activities or to impair the right of the landlord to change the nature of the use to which his building should be put. Rather, the manner in which clauses (c) to (f) are phrased would show that the intention of the legislature was to exempt buildings used or intended to be used for commercial or industrial purposes and that intention should be given effect to. A lease given by the landlord in this manner cannot be attacked as illegal or collusive to get over the provisions of the Act as there is nothing in law to prevent the landlord from doing so(v) The appellants argument overlooks that the restrictions in Sections 11, 13, 16 and other provisions are all applicable only where the building does not fall under Section 2(1). When it does, the right of the landlord to let it out to a tenant of his choice cannot be defeated by continuing to read those restrictions merely because they were applicable at one time to the propertyIt can certainly not be ipse dixit of the landlord. If a landlord acts on his own and lets out the property or otherwise deals with it, he takes the risk and, if he is found at fault, will not only render himself punishable but will also be unable to resist an allotment of the property by the District Magistrate in due course. Since the District Magistrate has been empowered to deal with buildings to which the Act applies, it is for the District Magistrate to satisfy himself, before he proceeds to deal with any premises, that it is in fact a building to which the provisions of the Act are applicable. It is open to the landlord to intimate the vacancy but make a claim before the District Magistrate that the Act has ceased to be applicable to his building but he is not obliged to do this. Where the landlord fails to do so, the Magistrate may consider the issue if the vacancy in respect of the building is brought to his notice. The District Magistrate has powers to inspect the property and then decide whether the Act continues to apply or not. It is for the District Magistrate to consider the circumstances and to satisfy himself that the landlord intends to let out the premises for one of the purposes specified and, in respect of clauses (c) and (d), that he intends to let it out not as a mere building but with plant and apparatus. We would like to make it clear, however, that, in this process, the District Magistrate has to satisfy himself on the materials made available to him. But it will not be incumbent or proper on his part to gave notice to or convene any of the proposed allottees of the property and hear them on this issue. Whether a building is one to which the provisions of the Act are applicable or not is a matter which has to be decided by the District Magistrate after hearing the landlord. It is a matter between the landlord and the government. An application for allotment merely confers on the applicant a right to be considered for allotment of a building to which the provisions of the Act are applicable, and he has no rights qua any property until the District Magistrate comes to the conclusion that the building is one which he can deal with by way of allotment