Case: Leelabai Gajanan Pansare  Vs. Oriental Insurance Co.Ltd

5. Appellants-landlords had let out the suit-premises admeasuring 3214 sq. ft. (approx.) in Thane to Oriental Insurance Company Ltd. ("OIC" for short). The rent was Rs. 10,000/- per month. Vide notice dated 15.4.2002 under Section 106 of the Transfer of Property Act, appellant terminated the tenancy of the said Company. On failure of OIC to vacate the premises, they instituted a suit for eviction. OIC took the plea that it is not covered under Section 3(1)(b) of the Rent Act as it was "a protected tenant" under the said Rent Act, 1999 and, therefore, could not be evicted. In the said suit, the landlord pleaded that OIC is a Public Sector Undertaking and/or Corporation having a total paid up share capital of more than Rs. 1,00,00,000.6. OIC resisted the suit by filing its written statement inter alia contending that it is neither a PSU nor a Corporation; that it was not exempted under Section 3(1)(b) of the Rent Act; that it was neither a bank nor a PSU, nor a foreign mission, nor MNC and nor a public limited company having paid up share capital of more than Rs. 1,00,00,000. According to OIC, it was a Government company carrying on its own insurance business and that the premises let to it stood fully protected by the provisions of the Rent Act as they did not fall in any of the categories mentioned in Section 3(1)(b) of the said Rent Act.7. By Judgment and Order dated 9.7.2004 in Special Civil Suit No.202/03 the trial court held that OIC is a Government company under Section 617 of the 1956 Act over which the GOI has overall control qua insurance business. The trial court further held that OIC stood established as a subsidiary of GIC that came into existence in 1972 pursuant to nationalization of General Insurance. According to the trial court since OIC is a Government company under Section 617 of the 1956 Act and since GOI has overall control over its functioning, it is entitled to protection from eviction by the landlords under Section 3(1)(a) which gives protection to premises let to the Government or local authority or to premises taken on behalf of the Government. In other words, according to the trial court, since GOI exercises deep and pervasive control over the respondent company herein, the said premises occupied by it were entitled to protection under the second part of Section 3(1)(a). According to the said Judgment and Order dated 9.7.2004 the said suit stood dismissed by the trial court.8. Aggrieved by the dismissal of the suit by the trial court, appellants herein preferred an appeal being FA No. 1245/04. By the impugned judgment dated 20.12.2006, the Bombay High Court held that exempted premises under Section 3(1)(b) of the Rent Act, 1999 are PSUs but not Government Companies incorporated under the Companies Act, 1956. It was further held that a Government Company stands in a different category and by the very absence of the words "Government Company" in Section 3 (1)(b) it is clear that the Legislature did not intend their exemption from the protection under the said Rent Act, 1999 consequently, the High Court dismissed FA No. 1245/04 filed by the appellants. Hence, this civil appeal. Contentions:9. The basic ground of challenge in this civil appeal that the High Court having held that OIC is the PSU had erred in holding that a Government Company stood under a separate category which is absent in Section 3(1)(b) and thus continues to enjoy protection of the said Rent Act. According to the appellants, this amounts to judicial legislation by the High Court as the High Court has read into Section 3(1)(b) the words, namely, "except Government companies". According to the appellants, by such exclusion of Government companies from the PSUs, the High Court has excluded a large number of PSUs from the purview of Section 3(1)(b), which is not the intention of the Legislature. This, according to the appellants, is contrary to the legislative policy and such interpretation defeats the very purpose of Section 3(1)(b) of the Rent Act. According to the appellants, in the alternative, in any event, OIC is a public limited company having a paid up share capital of rupees more than one crore and, therefore, in any event, the said company would fall in the second part of Section 3(1)(b) which denies to such public limited companies the protection of the said Rent Act, 1999.A decree for possession was passed by the Small Causes Court at Mumbai against the appellant herein - M/s Bharat Petroleum Corporation Ltd. (BPCL). It was confirmed by the Appellate Bench of the Small Causes Court.53. The decree was challenged by BPCL by filing Civil Revision Application No. 173/07 in Bombay High Court. The said CRA No. 173/07 stood rejected by the impugned order dated 4.5.2007. That decision was given on the merits of the case and not on the interpretation of Section 3(1)(b) of the Maharashtra Rent Control Act, 1999 ("Rent Act"). However, thereafter a review petition was moved by BPCL vide CRA No. 173/07 in which one of the grounds taken by BPCL was that in view of the decision of the Division Bench of the Bombay High Court in the case of Smt. Leela Gajanan Pansare v. Oriental Insurance Co. Ltd. and ors. dated 20.12.2006 in First Appeal No. 1245/04 the Revision Petition of BPCL needs to be made absolute and the decree of the Small Causes Court was required to be set aside. The review petition was dismissed by the High Court for lack of factual foundation. Hence, these civil appeals.

Court's reasoning:
34. Our object of the above discussion regarding provisions of the Bombay Rent Act, 1947 is two-fold. Firstly, to point out that there has been a structural change made by the Legislature in the present Rent Act vis-à-vis the 1947 Act. Secondly, we have analysed the relevant provisions of the 1947 Act to indicate the change in the economic conditions between 1947 and 31.3.2000 when the present Rent Act came into force.The important point to be noted is that in the above judgment it has been held that with the passage of time the 1947 Act which was justified when enacted had become arbitrary and unreasonable with the change in economic circumstances. It has been further observed in the said judgment that the 1947 Act relating to determination and fixation of standard rent can no longer be considered to be reasonable. However, this Court felt that though the provisions mentioned above were liable to struck down as unreasonable and arbitrary keeping in mind the consequences that the tenants may lose protection of the Rent Act, this Court gave an opportunity to the Government to consider enactment of a Model Law. This judgment was delivered by the apex Court on 19.12.1997.38. Therefore, the legislature was required to keep in mind the vulnerability of fixing standard rent as on 1.9.1940. At the same time, the legislature had to keep in mind two aspects, namely, tenancy protection and rent restriction. The problem arose on account of economic factors. However, the legislature found the solution by evolving an economic criterion. The legislature evolved a package under which the prohibition on receiving premium under Section 18 of the 1947 Act stood deleted. In other words, landlords were given the liberty to charge premium. The second package was to exclude cash-rich body corporates and statutory corporations from the protection of the Rent Act. This part of the economic package helps the landlords to enhance the rent and charge rent to the entities mentioned in Section 3(1)(b) who can afford to pay rent at the market rate. This was the second item in the economic package offered to the landlords under the present Rent Act. The third item of the Rent Act was to give the benefit of annual increase of rent @ 5% under the present Rent Act. All three items constituted one composite package for the landlords. The underlying object behind the said economic package is to balance and maintain the two-fold objects of the Rent Act, namely, tenancy protection and rent protection. The idea behind excluding cash-rich entities from the protection of the Rent Act is also to continue to give protection to tenants who cannot afford to pay rent at market rate.39. The above discussion is relevant because we must understand the reason why Section 3(1)(b) came to be enacted. As stated above, in our view, with the offer of an economic package to the landlords, the legislature has tried to maintain a balance. The provisions of the earlier Rent Act, as stated above, have become vulnerable, unreasonable and arbitrary with the passage of time as held by this Court in the above judgment. The legislature was aware of the said judgment. It is reflected in the report of the Joint Committee. In our view, the changes made in the present Rent Act by which landlords are permitted to charge premium, the provisions by which cash-rich entities are excluded from the protection of the Rent Act and the provision providing for annual increase at a nominal rate of 5% are structural changes brought about by the present Rent Act, 1999 vis-à-vis the 1947 Act. The Rent Act of 1999 is the sequel to the judgment of this Court in the case of Malpe Vishwanath Acharya (supra).40. The entire discussion hereinabove is, therefore, not only to go behind Section 3(1)(b) and ascertain the reasons for enactment of the said sub-section but also to enable this Court to give purposive interpretation to the saiddo not find merit in this submission. Firstly, it may be noted that several entities have been enumerated in Section 3(1)(b), namely, banks, PSUs or statutory corporations, foreign missions, international agencies, multinational companies and private limited and public limited companies having a paid up share capital of Rs. 1,00,00,000 or more. As stated above, the said Rent Act, 1999 has brought about structural changes in the legislation. In this case, it was open to the legislature to opt for any of the tests, namely, test of origin, test of public character of the functions performed by each of these entities, test of public character of each of the undertakings, test of agency or instrumentality, test of monopolistic status, test of mobilization of resources etc. In the present case, we find that the legislature has opted for an economic criteria, namely, entities which are in a position to pay rent at market rates are to stand excluded from Rent Act protection. This is the test of Financial Capability. This is the golden thread which runs through Section 3(1)(a). Be it banks, PSUs. Statutory corporations, multinational companies, foreign missions, international agencies and public and private limited companies having a paid up share capital of Rs. 1,00,00,000 or more stand excluded from the Rent Act protection. This criteria has been selected by the legislature knowing fully well that each of these entities including PSUs can afford to pay rent at the market rates. Secondly, we have given in-depth consideration to the contention advanced on behalf of the respondents on the interpretation of Section 3(1)(b). We are of the view that to accept the contention of the respondents, namely, that only PSUs which are established by or under the Central or State Acts will not get protection whereas PSUs which are Government companies incorporated under the 1956 Act would continue to get protection would make the Section 3(1)(b) vulnerable to challenge as violative of Article 14 of the Constitution. In this regard, it may be noted that in the insurance industry, we have LIC, banks, private sector companies and Government companies. To say that LIC being a statutory corporation stands excluded from the provisions of the Rent Act whereas Government companies incorporated under the Companies Act, 1956 would continue to get protection would lead to arbitrary discrimination under Article 14 to the Constitution.Today, vide civil appeal arising out of SLP(C) No. 5855/07 we have set aside the Division Bench judgment of the Bombay High Court dated 20.12.2006 in the case of Smt. Leela Gajanan Pansare v. Oriental Insurance Co. Ltd..