IN THE SUPREME COURT OF PAKISTAN 
(Original Jurisdiction) 
 
 
PRESENT: 
Mr. Justice Mushir Alam 
Mr. Justice Faisal Arab 
Mr. Justice Ijaz ul Ahsan 
 
 
Civil Appeal No.25-K of 2018 
(On Appeal against the impugned 
judgment dated 07.05.2018 passed 
by the High Court of Sindh, Karachi 
in F.R.A.No. 22/2017) 
 
 
Abdul Latif and another 
…Appellant(s) 
Versus 
M/s Parmacie Plus 
Respondent(s) 
 
For the appellant(s): 
Mr. Shahid Qadeer ASC with  
Abdul Latif, appellant in person 
 
 
For the respondent(s): 
Mr. Muhammad Pervaiz Khan Tanoli, ASC 
 
 
Date of hearing: 
25.02.2019 
 
JUDGMENT 
 
 
Faisal Arab, J.- The respondent was inducted as a tenant in 
the premises in question at a monthly rent of Rs.331,700/-. The tenancy 
agreement dated 30.11.2014 was for a period of eleven months starting 
from 25th September, 2014 to 24th August, 2015. Clause 15 of the 
tenancy agreement stipulated that rent shall be increased by seven 
percent after every eleven months. When the period of eleven months 
expired and the rent became due, the respondent remitted rent at the 
rate of Rs.287,262/- per month i.e. less than the rate of rent that was 
initially agreed upon at the time of execution of the agreement i.e. 
Rs.331,700/- per month. As the rent i.e. of Rs.354,919/- per month with 
seven percent increase as envisaged by clause 15 of the tenancy 
agreement was not remitted by the respondent, the appellant demanded 
the same. As the demand for increased rent was resisted by the 
Civil Appeal No.25-K of 2018 
-: 2 :-
respondent, who kept on remitting rent at original rate, the appellant 
filed eviction application before the Controller of Rents, Clifton 
Cantonment, Karachi seeking eviction of the tenant on the ground of 
default and also sought eviction on the ground of personal need.  
 
2. 
 
During the pendency of the rent case, the Controller of Rents 
passed an order under Section 17(8) of the Cantonments Rent Restriction 
Act, 1963 (the Act) directing the respondent to deposit the rent at the rate 
of Rs.354,919/- i.e. with seven percent increase in terms of clause 15 of 
the tenancy agreement. As the respondent failed to deposit the same, the 
appellant filed an application under Section 17(9) of the Act for striking 
off the defence of the respondent. Vide order dated 15.05.2017 the 
Controller of Rents struck off the defence and directed the respondent to 
vacate the rented premises and handover its possession to the appellant 
within a period of 60 days. Aggrieved by such decision, the respondent 
filed an appeal before the learned High Court which was allowed by the 
learned Single Judge after holding that the provisions of Section 7(5) of 
the Act prohibits increase in rent beyond what is determined under the 
tenancy agreement unless a period of three years has elapsed, therefore, 
no default in the payment of rent has been committed. Hence, this 
appeal with the leave of this Court.   
 
3. 
 
The tenancy agreement was for eleven months and clause 15 
of the tenancy agreement provided that the rent of the premises shall be 
increased by seven percent after every eleven months. Under the urban 
rent laws tenancy continues even after the expiry of the term provided 
under the tenancy agreement. Hence where the tenant continues to 
occupy the tenement after the expiry of the term mentioned in the 
agreement the covenants of the agreement continue to apply except such 
covenants that are in conflict with the provisions of the applicable rent 
Civil Appeal No.25-K of 2018 
-: 3 :-
law. In that eventuality rent law would prevail. In the present case seven 
percent increase in rent as provided in clause 15 of the tenancy 
agreement has been called in question on the basis of Section 7(5) of the 
Act which reads as follow:- 
“When the fair rent of a building has been fixed under this 
section, or where the rent of any building has been 
determined by an agreement between the landlord and the 
tenant, no further increase in such fair rent shall, during the 
continuance of tenancy be permissible within a period of three 
years from the date fixed by the Controller under sub-section 
(3) or from the date of the agreement, as the case may be, 
except in case where some addition, improvement or alteration 
has been carried out at the landlord’s expense and at the 
request of the tenant.” 
 
  
4. 
 
Parties are free to agree to a fixed rate of rent or a rate that is 
variable to be increased either by a certain amount or by a certain 
percentage of the existing rent after a specified period of time. There is no 
prohibition in law. So the periodical increases agreed between the parties 
under the tenancy agreement has to be regarded as the rent determined 
by an agreement between the landlord and the tenant within the 
meaning of Section 7(5) of the Act. What is meant by the prohibition 
contained in Section 7(5) of the Act is that no unilateral increase to the 
surprise of the tenant is permissible before the expiry of three years. An 
increase, which is not unilateral but with the consent of both the parties 
cannot be subsequently disputed by the tenant unless it is called in 
question through an application made for fixation of fair rent. So it 
becomes quite clear that what is prohibited under Section 7(5) of the Act 
is that no unilateral increase is to be made beyond what is determined 
under the tenancy agreement, be it fixed or variable rate. On the 
contrary, Section 7(5) of the Act acknowledges the sanctity of the rent 
determined by an agreement between the parties. So only unilateral 
increase in rent or where fair rent has been fixed by a Court of Controller 
Civil Appeal No.25-K of 2018 
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of Rents that rent cannot be increased unless a period of three years has 
elapsed.  
 
5. 
 
In the present case, seven percent increase after every eleven 
months term of tenancy has been agreed upon between the parties under 
clause 15 of the tenancy agreement, this is to be treated as the rent 
determined by an agreement between the landlord and tenant. Such rate 
of rent gets unaffected by the bar contained in Section 7(5) of the Act, 
which only prohibits unilateral increase within a period of three years. As 
stated earlier, the only way to challenge a rate of rent agreed upon with 
the consent of the parties is by moving the Rent Controller to fix fair rent 
under the provisions of rent law not otherwise. In the present case no 
application for fixation of fair rent has been moved by the respondent, 
therefore, the consequence of non-payment of agreed rent within the 
period prescribed by law would amount to commission of default in the 
payment of rent and would make it liable for eviction. In the present case 
as the respondent failed to pay the rent in terms of clause 15 of the 
tenancy agreement, this appeal is allowed and the impugned judgment is 
set aside. 
 
 
Judge 
 
Judge 
 
Judge 
Karachi, the  
25th of February, 2019 
Approved For Reporting