Case: Anthony C. Leo Vs. Nandlal Balkrishnan

3. Nandlal Balkrishnan Khanna and other partners of Khanna Construction House obtained a lease of Plot No. 44 of Scheme No. 58. Worli Estate, Bombay from the Municipal Corporation of Greater Bombay. The said partners constructed a building on the said plot known as Khanna Construction House. The appellant claims tenancy in respect of a room in the said premises under the said partners where he is running a business named and styled as Flora Chinese Restaurant. In view of disputes arising between the partners of M/s. Khanna Construction House, one of the partners filed a suit in the ordinary original civil jurisdiction of the Bombay High Court being Suit No. 1010 of 1973 against other partners for dissolution of the firm and distribution of assets including the building Khanna Construction House. The appellant is not a party in the said suit, Some time in 1973, the Bombay High Court appointed a Receiver in the said suit in respect of the assets of the partnership firm including the said building Khanna Constriction House.4. The appellants case is that the landlords of the building granted tenancy to Abdul Rehman Noor Mohammad and others in respect of ground floor premises where the said tenants started a restaurant in the name of Flora Restaurant. Some time in 1965, the said business together with the goodwill and benefit of tenancy rights was taken over by J. S. Khanna and S. G. Khanna. In April, 1967 the said Sri J. S. Khanna and S. G. Khanna assigned the said business as a going concern together with goodwill and benefit of tenancy rights to Father S. Perreira. On April, 10, 1970, Father Perreira transferred the said restaurant business to the appellant together with the goodwill and benefit of tenancy. After taking over the said business, the appellant changed the name of the business to Flora Chinese Restaurant. It is the specific case of the appellant that when he got assignment of tenancy and business of the restaurant, the tenanted premises had already in it lofts and two stand like boxes attached on the outer wall for storing gas cylinders and air conditioning units.5. The appellant has contended that in 1979, the landlords made a demand for additional compensation for the box type stands affixed on the outer wall of the premises for storing gas cylinders and air conditioning units. The landlord also raised some dispute regarding the chimney duct in the restaurant premises. According to the appellant, a meeting was held between the appellant and the landlords at the instance of Court receiver, and the landlords demanded extra compensation at the rate of Rs. 2/per square foot of the area where the said two stands for housing gas cylinders and air conditioning units were installed. On measurement, the said area was found to be 60 sq.ft, and the appellant had agreed to pay additional amount of Rs.120/per month. The landlords also insisted that the appellant would bear additional insurance premium and the appellant had agreed to such demand. The appellant has contended that under the Fire Brigade Rules, the gas cylinders cannot be stored inside the premises but such gas cylinders are required to be stored outside the premises. The appellant further contends that by letter dated June 25, 1979, the learned Advocate of the appellant had informed the Court receiver about such agreement between the landlords and the appellant. The appellant has also contended that in a meeting between the said receiver and the parties to the suit, it was decided that the receiver would file a suit for eviction of the appellant in the Court of Small Causes and one Mr. N. K. Desai was also engaged to file such suit for eviction on behalf of the receiver. But till today, no such eviction suit has been filed against the appellant.6. In March, 1995, after a lapse of about 16 years the landlords thought of a short cut measure to evict the appellant from the said premises without filing an ejectment suit in the Court of Small Causes and in furtherance of such measure, induced the Court receiver to submit a report to High Court in the pending suit making complaint against the appellant of construction of said lofts and the said two stand type boxes on the outer wall for storage of gas cylinders and air conditioning units and the receiver prayed for a direction from the High Court against the appellant for removal of the said lofts and the said box type stands.On August 22, 1995, the said receiver submitted a further report in the said suit alleging therein that appellant had a permit room in the said restaurant where liquor was being served and such activity was illegal and contrary to the terms of lease granted by Greater Bombay Municipal Corporation in favour of the landlords prohibiting running a bar in the premises built on the leasehold land. The receiver also sought for a direction from the High Court on the appellant for stopping the said illegal activity of using the premises as a permit room and serving liquor in a room in the said restaurant. The appellant contends that the appellant was carrying on the activity of having a permit room and serving liquor to customers since several years after the lifting of the prohibition policy in the State of Maharashtra. The appellant has also contended that he has obtained licence for such permit room and service of liquor in the restaurant. The appellant has further contended that Greater Bombay Municipal Corporation is agreeable to allow service of liquor and running a permit room in the leasehold property on payment of specified sum to the Corporation and the appellant agrees to pay such amount to the Corporation.7. In support of the contention of the appellant that long before the receiver was appointed in the said suit inter se the partners of the said firm, the said two box type stands and lofts were in existence in the premises where the appellant had been carrying on his business of restaurant, supporting affidavits were filed before the High Court by one Abdul Razak Dawood stating that Flora Restaurant was started in 1962 by Noor Mohammed and others (though the year of starting the said business of restaurant was wrongly mentioned as 1962 instead of 1964). It was stated by the said Razak that he was associated with the restaurant business ever since its inception and when J. S. Khanna and S. G. Khanna took over the said business from Noor Mohammad, the said lofts and stands for storing gas cylinders and air conditioning units were in existence. Mrs. Mande Dpente and her husband who were employed in the said restaurant in 1967, also filed an affidavit stating that the said lofts and two stands were in existence in 1967. Another affidavit affirmed by one Charlie DSouza was also filed. The deponent stated that he had been working in the restaurant since 1969 and ever since his employment, he had seen the said lofts and stands. Similar affidavit was filed by R. Murusen stating that he was employed in the kitchen of the restaurant in 1967 and he had seen the said boxes and lofts ever since his employment in 1967.8. The appellant also contended before the learned Single Judge, before whom the reports of the receiver against him were filed, that the receiver appointed in the suit for dissolution of partnership and for distribution of assets including the said building Khanna Construction House was limited to adjudication of rights and obligations inter se the parties and appellant not being party to the same, his rights qua tenant was not required to be adjudicated in the said suit and, in any event, his right as a tenant was protected under the Bombay Rents Act. Although the appellant had not resorted to any act for which his tenancy could be terminated and he could be evicted from the said premises under his occupation as a tenant, even if it is assumed that the appellant was liable to be evicted from the said premises, such eviction could only be effected by institution of appropriate suit for eviction of the appellant in the Small Causes Court under the Bombay Rents Act on permissible grounds under the said Act. It was quite open to the High Court to grant permission to the receiver for institution of suit for eviction of the appellant after being prima facie satisfied on materials submitted before the Court that a case for instituting suit for eviction was justified.9. The appellant also contended that the receiver is not entitled to bypass the statutory requirement of evicting a tenant only in due process of law by initiating eviction proceeding under the Bombay Rents Act in the appropriate Court simply by alleging, at the instance of landlords, that the tenant had made unauthorised constructions and had indulged in unauthorised activity of using a portion of the tenanted premises as a permit room and place for service of liquor to the customers. The appellant also contended that if the Court would decide the question of eviction of the appellant only on the basis of the reports of the receiver, the valuable rights of a tenant protected under the Bombay Rents Act would be defeated and the tenant would be deprived to have a full fledged trial where he would be entitled to lead evidence in support of his case and cross examine the witnesses of the landlord.10. Such contentions were, however, not accepted by the learned Single Judge and on the findings, inter alia, that the appellant had made unauthorised construction of the said lofts and box type stands on the outer wall and had also been using a portion of the tenanted premises as a permit room and has been serving liquors to the customers in such portion, when under the terms of lease granted by Greater Bombay Municipal Corporation to the landlords use of the leasehold property in vending liquors was prohibited, and by such action of appellant, the lease in favour of the landlords was liable to be cancelled. The learned Single Bench of the Bombay High Court directed that the concerned authorities would not renew the permit of the appellant for serving liquor and the receiver would demolish unauthorised constructions with the aid of the police, if necessary.11. The appellant being aggrieved by such directions of the learned Single Bench preferred Appeal (Lodged) No. 3 before the Division Bench of the High Court and the Division Bench by the impugned judgment dismissed the appeal and upheld the directions given by the learned Single Bench. The Division Bench, however, stayed demolition of the said constructions for a period of six weeks to enable the appellant to take legal steps against the order.

Court's reasoning:
20. It appears to us that since the Court must be presumed to be fully unbiased in deciding the allegation of unauthorised and illegal activities of a tenant causing prejudice against the lawful owner in the matter of preservation and maintenance of the property pendente lite, the necessity of adjudication of such dispute by another Court by bringing a legal action before it, as a matter of course, is neither necessary nor expedient. It, however, should be made clear that if for the purpose of deciding the dispute of unauthorised and illegal activity affecting maintenance and preservation of the property in custodia legis it becomes necessary, to determine any right claimed under a statute or flowing from some action inter parte as may he pleaded and required to be decided, it is only desirable that the Court would refrain from such determination in the summary proceeding initiated before it on the complaint of the receiver or a party to the suit and the court will direct the receiver to seek adjudication of the dispute before a competent Court by bringing appropriate legal action. Save as aforesaid, it will not be correct to contend that in no case the Court exercising control and supervision of the property in suit by appointing a receiver will be incompetent even to pass direction against a third party for the purpose of preservation of the property, once such third party pleads defence in justification of his action. The question of summary adjudication by the Court appointing the receiver or relegating the receiver to a regular suit for adjudication of the dispute concerning third party will depend on the nature of dispute and the defence claimed by the third party.21. In the facts of the case, however, it appears, to us that the appellant tenant has come out with a specific case that the structures in question were there before his induction as a tenant. In support of such contention, a number of supporting affidavits have been filed. The appellant has also contended that the landlords and the receiver were fully aware of the existence of the structures long back, and according to the appellant, at one point of time an agreement was reached between the landlords and the appellant for payment of a sum of Rs, 120/for such construction covering about 60 sq. ft. besides further amount on account of additional premium to be paid by the landlords and an Advocates letter was sent to the receiver apprising the receiver of such understanding between the parties.22. The appellant has also claimed right to operate in a portion of the tenanted premises a permit room for serving liquor to the customers of the hotel after obtaining licence from the statutory authority on the footing that such right is incidental and ancillary to his right to operate an eating house or restaurant. Such contentions should not be decided in a summary proceeding to dispose of reports of the receiver or a complaint by a party to the suit about alleged illegal activities by a tenant in a property in suit. Any summary disposal of such dispute on the claim of some legal right by the tenant is likely to seriously affect the tenant, because once some constructions in the tenanted premises are removed on a finding that such constructions were made illegally and unauthorisedly by the tenant, the tenant not only suffers the said direction of removal at present but becomes liable to be evicted from the suit premises for such unauthorised construction by him. Similarly, the finding against the tenant on the question of running a permit room cannot but seriously affect the tenants right to operate a permit room and is also likely to expose him to the risk of being evicted from the suit premises.Giving our careful consideration to the facts and circumstances of the case and submissions made by the learned counsel for the parties, it appears to us that a receiver is appointed by the Court when the Court entertains a view that for preservation of the properties in suit, till the rights of parties to the suit are finally adjudicated, such properties should be preserved by exercising control and supervision of the same through the officer of the Court, the receiver. The Court becomes custodia legis of the properties in suit in respect of which receiver is appointed. Such de Jure possession of the Court through its receiver, however, does not bring about vesting of the properties in receiver or in Court free from incumbrances even pendente lite. Despite appointment of a receiver, rights and obligations of third parties in respect of properties in custodia legis remain unaffected. Where a receiver appointed by the Court is in actual physical possession of a property, no one, whoever he may be, can disturb the possession of the receiver and the Court may hold such person who disturbs receivers possession as guilty for committing contempt of Court. A man, who thinks he has a right paramount to that of receiver, must, before he takes any step of his own motion, apply to the Court for leave to assert his right. Grant of leave in such case is the rule and refusal to grant leave is exception (Everest Coal Company Pvt. Ltd. v. State of Bihar. The rule that receivers possession will not be disturbed without leave of the Court is, however, not applicable if the receiver is not in actual physical possession of the property.16. Since the properties in a suit is being managed, maintained and administered by the Court through receiver, the receiver is under an obligation to take all reasonable steps for preservation and maintenance of such properties. If for such preservation, action in civil on criminal Court is necessary, receiver is to draw the attention of the Court of relevant facts necessitating such legal action and take leave of the Court to institute appropriate legal proceedings for the preservation of the property. As the property does not vest free from incumbrances in custodia legis by annulling all rights and obligations attached to the property, the receiver cannot interfere with any right of the third party.(2) of Rule 1 of Order 40 of the Code of Civil Procedure provides : "Nothing in this rule shall authorise the Court to remove from possession or custody of property any person whom any party to the suit has not a present right to remove."Suchclearly indicates that the Court and its officer, the receiver, does not possess any right higher than the right a party to the suit possesses.17. Where a Rent Act is applicable, the inter se rights and obligations of the landlord and tenant are regulated and controlled by such Rent Act. In areas where any special law governing, the incidences of tenancy is not applicable, the law relating, to lessor and lessee as envisaged by the general law of the land, namely, Transfer of Property Act, will regulate and determine inter se right and obligations which a third party may have in respect of a property in which a receiver has been appointed, the receiver, like a party to the suit, will have same limitation. The receiver will be bound by the incidences of tenancy flowing from the statute regulating and determining inter se rights of landlord and tenant. Therefore, there is no manner of doubt that no order for eviction of the tenant can be passed by the Court at the instance of its officer, the receiver, without taking recourse to appropriate proceedings for eviction of the tenant under the appropriate statute regulating and governing the inter se rights of landlord and tenant. It may also be emphasised here that even apart from an eviction proceeding, any incidence of tenancy which is regulated and controlled by a special statute cannot be altered, varied on interfered with except in accordance with the provisions of such statute. The Court in such cases has no jurisdiction to pass orders and direction affecting the right of the tenant protected, controlled or regulated by the Rent Act on the score of expediency in passing some order or direction for the maintenance and preservation of the property in custodia legis.18. It is to be indicated that though a tenant of a property in custodia legis cannot be deprived of statutory protection of the rights of tenantlandlord, a tenant cannot claim protection of any assumed right not flowing from the incidences of tenancy. For example, if a tenant starts making some unauthorised construction in the tenanted premises threatening safely and security of the tenanted premises or of the building as a whole, the landlord can certainly prevent such activities by the tenant by bringing appropriate action in Court seeking prohibitory and mandatory order against the tenant without seeking his eviction. Such right of the landlord must be held to be in addition to his right to seek eviction under the appropriate tenancy law, if permitted.19. In our view, if a tenant resorts to unauthorised and illegal activity in respect of tenanted premises when such premises is in custodia legis, for prevention of such illegal and unauthorised activities not consistent with any right flowing from the incidence of his tenancy, it may not be necessary to institute a suit for preventing the tenant from such illegal activities, but the Court, being apprised by the receiver of such illegal activities of a tenant, thereby obstructing the Courts overall supervision and concern for preserving or maintaining the property in custodia legis, will be within its right to pass suitable order or direction against the tenant for prevention of illegal and unauthorised activities after giving the tenant reasonable opportunity, to place his defences against allegation of unlawful and illegal activity. What should be the reasonable opportunity must depend on the facts of each case. The Court, in such a case, should ensure broadly that the tenant is not deprived of the reasonable opportunity to which he would have been entitled if an action against him in a Court of law had been brought on such complaint.