Dr. H. S. Rikhy & Ors Vs. The New
Delhi Municipal Committee  INSC 268 (13 September 1961)
SINHA, BHUVNESHWAR P.(CJ) GAJENDRAGADKAR,
CITATION: 1962 AIR 554 1962 SCR Supl. (3) 604
Rent control--Fixation of standard
rent-Maintainability of application-Relation of land and tenant, if
esseatial-Delhi and Ajmer Rent Control Act, 1952 (38 of 1952), ss. 2(c), 2(g),
2(j), 8, 38-Punjab Municipal Act, 1911 (Punjab III of 1911), ss.18, 47.
The respondent Municipal Committee, in
pursuance of a resolution passed by it, called for tenders and put the
respondents, who made the highest offers, into possession of certain shops and
premises on amounts varying from Rs. 135-8-0 to Rs.520 payable for every month.
After they had continued in possession for some years on payment of the said
amounts, described as rents in the receipts, the appellants applied under s.8
of the Delhi and Ajmer Rent Control Act, 1952, for standardisation of rent.
There were admittedly no contracts of transfer in writing signed and attested
in the manner prescribed by S.47 of' the Punjab Municipal Act, 191 1. The
respondent took the preliminary objection that the applications were not
maintainable as there was no relation of landlord and tenant between the
parties within the meaning of the Rent Control Act. The trial court found in
favour of the appellants but the High Court in the exercise of its revisional
jurisdiction set aside the decision of the trial court.
Held, that it was evident from the
definitions of the terms landlord', 'Premises and tenant contained in ss. 2(c),
2(g) and 2(j) that the Delhi and Ajmer Rent Control Act, 1952, that the Act
applied only to such letting of premises as created an interest in the property,
whatever its duration, and gave rise to the relation of landlord and tenant
between the parties.
605 It was not correct to say that the
letting' contemplated by the Act included not merely a transfer to a tenant but
also to a licensee, or that the use of the word 'rent' in receipts precluded
the landlord from pleading that there was no relation of landlord and tenant
between the parties.
Although s. 18 of the Punjab Municipal Act,
191 1, vested power in a Municipal Committee to enter into contracts for the
transfer of its properties, the mandatory provisions of s.47 laid down the
essential conditions of the exercise of it. Those conditions were not in any
way inconsistent with the provisions of the Rent Control Act and did not come
within the mischief of s.38 of that Act.
Crook v. Corporation of Seaford, (1871) L.R.
6 Ch. 551 and Deo v. Taniere (1848) 116 E.R. 1144, held inapplicable.
H. Young & Co. v. The Mayor and
Corporation of Royal Leamington Spa, (1883) L.R. 8 App. Cas. 517, referred to.
Where a statute makes a specific provision
that a body corporate has to act in a particular manner that provision is
mandatory, and not directory and must be strictly followed.
Consequently, in the instant cases, no
relation of landlord and tenant was created between the parties and the
applications must fail.
CIVIL APPELLATE JURISDICTION : Civil Appeals
Nos. 30 to 32 of 1959.
Appeals from the judgment and order dated
April 25, 1956, of the' Punjab High Court in Civil Revision Applications Nos. 186,
187 and 203 of 1954.
M. C. Setalvad, Attorney-General for India,
Anoop Singh and R. Gopalakrishnan, for the appellants.
C. K. Daphtary, Solicitor-General of India R.
Ganapathi Iyer and G. Gopalakrishnaa, for the respondents.
1961. September 13. The Judgment of the Court
was delivered by SINHA, C. J.--The question for determination in these three
appeals, on certificates 'of fitness granted by the High Court of Punjab under
Art. 133(1)(c) of the Constitution, is whether the provisions of S. 8 of the
Delhi and Ajmer Rent Control Act (38 of 1952) (which hereinafter will be
referred 606 to as the Act) apply to the transactions in question between the
appellants in each case and the New Delhi Municipal Committee (which for the
sake of (tee brevity we shall call the Committee' in the course of this
It is necessary to state, the following facts
in order to bring out the nature and scope of the controversy. It is not
necessary to refer in detail to the 'facts of each case separately for the
purpose of those appeals. The Committee built in 1945 what is known as the
Central Municipal Market Lodi Colony. This Market has 32 shops, with
residential flats on 28 of them. In April 1945, the Committee, in pursuance of
a resolution passed by it, invited tenders from intending bidders for those
shops and premises. On receipt of tenders, the highest bidders were allotted
various shops on rents varying from Es. 135-8-0 to Rs. 520 per mensem.
The allottees occupied the shops and the
premises in accordance with the allotments made by the Committee and continued
to pay the respective amounts, which may be characterised as rents, without
prejudice to our decision on the question whether it was legally a rent',
because as will presently appear, one of the controversies between the parties
is whether it is 'rent' within the meaning of the Act. Towards the end of 1952,
30 of the occupants filed applications under s. 8 of the Act praying for the
fixation of standard rent in respect of the premises in their respective
occupation. The Committee raised a preliminary objection to the maintainability
of the aforesaid applications on the ground that there was no relationship of
landlord and tenant between the applicants and the Committee, within the
meaning of the Act. The Trial Court accordingly framed the following issue for
determination in the first instance :
"Whether the relationship of tenant and
landlord exists between the parties, therefore, those applications are
competent and the 607 Court has jurisdiction to fix the standard rent?"
The learned Subordinate Judge, who dealt with these cases in the first
instance, came to the conclusion that the several applicants were tenants
within the meaning of the Act, and that, therefore, the applications were
competent. The committee moved the High Court in its revisional jurisdiction,
and the learned Chief Justice, sitting singly, referred those cases to be heard
by a Division Bench, as they raised questions of general importance. The matter
was thus heard by a Division Bench composed of G. D. Khosla and Dulat, JJ. The
High Court, by its judgment dated April 25, 1956, set aside the aforesaid
finding of the Trial Court, but made no order as to costs. The High Court in an
elaborate judgment, on an examination of the relevant provisions of the Act,
came to the conclusion that there was no relationship of landlord and tenant,
between the parties, inasmuch as there was no letting', there being no properly
executed lease, and the doctrine of part performance was not attracted to the
facts and circumstances of the case. For coming to the conclusion that there
was no valid lease between the parties, the High Court relied upon the
provisions of s. 47 of the Punjab Municipal Act (Punjab Act III of 1911). The
High Court also negatived the contention that the Committee was estopped from
questioning the status of the applicants as tenants, having all along
admittedly accepted rent from them. The appellants moved the High Court and
obtained the necessary certificates of fitness for Coming up in appeal to this
Court. The certificates of the High Court are dated October 28, 1957. That is
how the matter has come before this Court.
It has been argued on behalf of the
appellants that the Transfer of Property Act does not apply to the transactions
in question, and that therefore, the High Court was not justified in insisting
upon a registered lease, or even a written lease, executed 608 between the
parties. It was enough that the tenants in each case had given a written
Kabuliyat from which the terms of the respective tenancies could lee be
ascertained. It was also contended that the High Court was in error in relying
upon the provisions of s. 47 of the Punjab Municipal Act which, it was
contended, was subject to the provisions of the Act, in view of the overriding
provisions of s. 38 of the Act. It was further contended that the definitions
of landlord' [s. 2(c)], of 'premises'[s. 2(g)]. and of tenant' [s. 2 (j)] in
the Act were comprehensive enough to take in the transactions between the
appellants and the Committee.
Reference was also made to s. 3 of the Act to
show that a public body like the Committee was not intended to be excluded from
the opt-ration of the Act.
On the other hand, the learned Solicitor
General, appearing for the Committee, contended that the essential element of
'letting' becomes apparent from the consideration of the provisions of the Act,
with particular reference to the definitions of landlord', 'Premises' and
'tenant'. His contention was that the key word 'letting' should be equated with
the creation of an interest in immovable property by a valid contract; hence,
if there was no valid contract, there was no transfer of property, and,
therefore, no letting. If there was no letting, the relationship of landlord
and tenant was not created between the parties and the amount received by the
Committee as rent was legally not rent in the strict sense of the term. Though
the Act (lid not prescribe any form of 'letting', the provisions of s. 47 of
the Municipal Act applied, and as the provisions of that section are not in
direct conflict with any of the provisions of the Act, there was no
inconsistency between them. That being so S. 38 of the Act was 'out the way of
the Committee. The Committee, being a corporation, has no capacity to contract
or to transfer property except in accordance with the provisions of s. 47.
609 Admittedly the provisions of s. 47 have
not been complied with. Therefore, the,, Committee is not bound to recognise
the transactions in question as creating an interest in immovable property;
there being no interest in immovable property in favour of the appellants, they
cannot be called 'tenants' within the meaning of the Act, and' as only a tenant
can invoke the provisions of s. 8, the applications must be held to be
incompetent. There could be no question of estoppel because both parties knew
that under thelaw there had to be'& transfer of property by the Committee
inaccordance with the provisions of s. 47 of the Municipal Act. It is well
settled law that there cannot be an estoppel against the provisions of a
The question whether the petitions under s. 8
of the Act were competent, it is common ground must depend on whether or not
there was relation. ship. of. landlord' and tenant between the parties The
learned Attorney General, who appeared in. support of these appeals contended
in the first place, that: the definitions of landlord', premises,. and ,tenant'
in s. 2, cls.(c), (g) and (j) respectively, of the Act make it clear that the
person for, the time. being receiving rent is the landlord and the, person who
paying the rent is the tenant of the
premises. These definitions are as follows:
"landlord' means a person who, for the
time being is receiving, or is entitled to receive the rent of any premises
whether on his own account or on account of, or on behalf of, or for the
benefit of, any other person or as a, trustee, guardian or receiver for any
other person or who would so receive the rent or be entitled to;. receive the
rent, if the premises were let to a tenant;...
'premises' .'moans any, building or Part of a
buildings which is., or is intended' to be let separately for use as residence
or for 610 commercial use or for any other purpose, and includes(i) the garden
grounds and outhouses if any, appertaining to such building or part of a
(ii) any furniture supplied by the landlord
for use in Such building or part of a building;
but does not include a room in a, hotel or
'tenant' means any person by whom or on whose
account rent is payable for any premises and includes such sub-tenants and
other persons as have derived title under a tenant under the provisions of any
law before the commencement of this Act...".
The argument is that the Act has been enacted
for the control of rents and evictions' and
that in making these provisions for safeguarding the interests of tenants under
the Act the provisions of other enactments relating to the creation of the,
relationship of landlord and tenant and regulating the incidence of tenancy and
grounds of eviction, the Act has provided for a simple rule that without paying
any regard to formalities, the fact of receiving rent by a person Constitutes
him the landlord and the payer of the rent the tenant, within the meaning of the
Act. The Act does not stop to consider whether there is a lease, and if so,
what are the terms contained in the lease regulating the relationship of
landlord and tenant, and that if there is any inconsistency between the
provisions of the Act and any other law for the time being in force, the former
shall prevail, as laid down in s. 38 of the Act. The section reads as follows:
"The provisions of this act and the
rules made there under shall have effect notwithstanding anything inconsistent
therewith contained in any, other law for the ; time being 611 in force or in
any instrument having effect by virtue of any such law." With reference to
the terms of the section, just quoted, it has been contended, that the
provisions of the Transfer of Property Act regulating the grounds of eviction,
or even the provisions of the, Municipal Act, particularly s. 47, have no legal
effect in so far as they are inconsistent with the provisions of the Act. In
this connection it is, asserted that the formalities required by s. 47 of the
Municipal Act, in order to invest binding force to the transfer of property or
the contract made by. the Committee, are inconsistent with the provisions of
the Act, namely, the definitions of landlord' 'tenant' and 'Premises'. With
reference to s. 47 of the Municipal Act, it is further contended that the,
section does not confer capacity to contract or to transfer property but only
prescribes the mode for-., entering into a contract or for making a transfer of
property by the Committee, and that therefore s 47 cannot have the effect of
rendering null and void what was done by the Committee, namely, advertising the
premises for being allotted to the highest bidders on terms and conditions as
contained in the Kabuliyat given by the, tenants. In this connection reliance
was placed upon Crook v. Corporation of Seaford (1) and Deo v. Taniere(2). It
has also been urged that the letting' contemplated by the Act does not
necessarily connote a transfer of property, but simply permitting the tenant to
occupy the premises for a sum of money. In other words, even a licensee, as
distinguished from a lessee, would come within the purview of the Act. In this
connection reference was made to the Shorter Oxford Dictionary, which contains
the following words, inter alia, under the 'word let':
"to grant the temporary possession and
use of in consideration of rent or hire".
(1) (1871) L.R 6 Ch, 551. (2) (1848) 116 E.
R. 11.44 612 If this contention is correct,
then there cannot be the, least doubt that a licensee would also come within
the ambit of the Act. But we are not prepared to hold that the Act, by its
terms, intended to be so comprehensive as to include within its sweep not only
tenants properly so called, but also licensees. It is true that the dictionary
meaning applies the, term letting' to inducting a tenant and delivering
possession to him as such, of the premises for a consideration which can be
characterized as "rent', or a licensee who has been permitted to occupy
the premises for a consideration which may be called 'hire', If the argument is
correct, then a person hiring a room in a hotel as a licensee would also come
-within the purview of the Act.
But the Act, in terms, has excluded a room in
a hotel or lodging house from the definition of 'premises'.
It was also contended that it was admitted by
the respondent that rent *as received and receipts for rent were granted by its
agents. The use of the word "rent' is, not conclusive of the matter. It
may be used in the legal sense of recompense paid by the tenant to the landlord
for the exclusive possession of premises occupied by him. It may also be used
in the generic, sense, without importing the legal significance aforesaid, of
compensation for use and occupation. 'Rent' in the legal sense can only be
reserved on a demise of immovable property. Reference may be made in this
connection to paragraphs II 93 and 11 94 of Halsbury's Laws of England (Third
Edition, Vol. 23) at pages 536-537.
Hence, the use of the term -,rent' cannot
preclude the landlord from pleading that, there was no relationship of landlord
and tenant. The -question must, therefore, depend upon whether or not there was
a relationship of landlord and tenant in the sense that there was a transfer of
interest by the landlord in favour of the tenant.
In our opinion, the Act applies only to that
species of 'letting' by which there relationship of land613 lord and tenant is
created, that is to say, by which an interest in the property-, however limited
in duration, is created.
Having held that the Act applies to 'letting'
which creates an interest in immovable' property we have to determine the
question whether in these cases there was a contract creating such a relation.
ship. Now, under the Punjab Municipal Act-, s. 18, a Committee is a corporate
body with perpetual succession and a common seal, with power to acquire and
hold property and to transfer any property held by it "subject to the
provision of this Act, or of any rules there under". Section 18,
therefore, contains the authorisation in favour of the committee to enter into
contracts and to transfer property belonging to it. This power is subject to
the other provisions of the Act. Thus, in so far as the Committee's power to
enter into a contract or to transfer a property is concerned the power may be
delegated in accordance with the provisions of s. 46. The contract to transfer
property has to satisfy the conditions laid down in s. 46 (2) of the Municipal
Act if the value or amount thereof exceeds Rs. 500. No such contract can be made
until it has been sanctioned at a meeting of the Committee. That condition has
been satisfied in these cases. But we have to consider he provisions of s. 47
which have been very strongly relied upon on behalf of the Committee. The
section is in these terms :
"47. (1) Every contract made by or on
behalf of the Committee of any municipality of the first class whereof the
value or amount exceeds one hundred rupees,, and made by or on behalf of the
Committee of any municipality of the second and third class whereof the value
or amount exceeds fifty rupees shall be in writing, and must be signed by two
members, of whom the president or a vice president shall be one, and
countersigned by the secretary:
614 Provided that, when the power of entering
into any contract on behalf of the committee has been delegated under the last
foregoing section, the signature or signatures of the member or members to whom
the power has been delegated shall be sufficient.
(2) Every transfer of immovable property
belonging to any committee, must be made, by an instrument in writing, executed
by the president or vice-president, and by at least two other members of
committee whose executions thereof shall be attested by the secretary.
(3) No contract or transfer of the description
mentioned in this section executed otherwise than in conformity with the provisions
of this section shall be binding on the committee." Now in order that the
transfer of the property in ,question should be binding on the Committee, it
was essential that it should have been made by an instrument in writing
executed by the President or the Vice-President and at least two other members
of the Committee, and the execution by them should have been attested by the
Secretary. If these conditions are not fulfilled, the contract of transfer
shall not be binding on the Committee. But it has been contended on behalf of
the appellants that the noncompliance with the provisions aforesaid of s. 47,
quoted above, would not render the contract of transfer of property void but
only voidable. In other words, where the actings of the parties have given
effect to the transactions, as in the instant cases by delivery of possession
of the pro. Perty by the Committee and payment of the rent 'by" the
appellants, the absence of formalities would not render the transactions of no
legal effect But it has to be noted that it was not contended on behalf of
appellants that the provisions of s.47(3) of the Municipal Act, are not
mandatory and 615 are merely directory.. Such an argument was not 'and could
not have been advanced, because it is settled Law. that. the provisions of a
Statute in those peremptory terms could not but be construed as mandatory.
But the learned counsel for the appellants
placed a great deal of reliance on the decisions: in the cases of Crook v.
Corporation of Seaford (1) and Deo v. Taniere
(2). In the first case, the suit was for specific performance of' a contract by
theCorporation which was evidenced by a resolution of the Corporation, to let
to the plaintiff a piece of land the boundaries of which had not been fully
determined. though there was no contract under seal, Crook pursuance of the
contract built a wall and terrace on parts of the land in question. The
Corporation brought a suit for ejectment, and the plaintiff thereupon filed a
bill in Chancery for specific performance. It was held by the Lord Chancellor,
Lord Hatherley, confirming the decision of the Vice-Chancellor, that though the
agreement was not under seal, the corporation, was bound by acquiescence and
must perform the agreement to grant the lease. It must be remembered that was a
suit to obtain a lease from the grantor, the Corporation, that is to say, it
was an action in equity, and the Court of Equity held, in the words of the Lord
Chancellor, that "at all events, a Court, of Equity could not allow the
ejectment to proceed after the plaintiff had spent so much money on 'the
wall". The decision was, therefore, explicitly based on. the doctrine of
'Standing by'. In that case there is no reference to any statute., the terms of
which could said to have been infringed. In the second case [Deo V. Taniere
(2)] again there was no question of the infringement of any. mandatory
provision of a Parliamentary statute. That is the case of a grant of lease for
99 years, omitting a covenant to build. It was held, that whether (1) (1871)
L.R. 6 Ch. 551. (2) (1848) 116 E.R. 1144.
616 the lease was only voidable, or void,
receipt of rent without proof of any instrument under seal could raise a
presumption of a demise from seal to year. It is thus clear that neither of
those cases, strongly relied upon by the counsel for the appellant is an
authority for the provisions that where the statue makes it obligatory that
there should be a contract under seal, the absence of such a contract could be
cured by mere receipt of rent. We have here to determine whether the provisions
of a. 47 of the Municipal Act prevent the committee from entering into a
'contract or making a transfer of property without complying with the conditions
laid down in that section. That the two cases referred to above are no
authority on the question now arising for determination in the instant cases is
clear from the decision of the House of Lords in Young & Co. v., The Mayor
and Corporation of Royal Leamington Spa (1). In that case, their Lordships had
to consider the effect of s. 174 of the Public Heath Act, 1875 (38 & 39 Act
c. 55) which required that every contract made by an urban authority of the
value or amount exceeding pound 50 shall be in writing and sealed with the
common seal of the authority. It was hold that the provisions of s. 174 were
obligatory and not merely directory and applied to an executed contract of
which the urban authority had taken full benefit and had been in enjoyment thereof.
That was a case which came before the Queen's Bench Division on a reference.
The question referred was whether the absence of the common seal of the
Corporation required by a. 174 of the Public Health Act aforesaid WA* fatal to
the plaintiff's claim to recover from the Corporation the costs of the works
constructed by the, plaintiff at the instance of the Corporation. The decision
of the Court of Appeal, composed of Brett, Cotton and Lindley, L. JJ.
(1) (1888) L.R. 8 App. Cas. 517.
617 confirming the judgment of the Queens
Bench Division is reported in.
8 Q.B.D. 579. In the House of Lords, Lord
Blackburn made an extensive quotation from the judgment of Lindley, L.J., from
which the following passage may be read.
"The cases on this subject are very
numerous and conflicting, and they require review and authoritative exposition
by a Court of appeal but, in my opinion, the question thus raised does not
require decision in the present case.
We have here to construe and apply an Act of
Parliament. The Act draws a line between contracts for more than pound 50 and
contracts for pound 50 and under. Contracts for not more than pound 50 need not
be sealed and can be enforced whether executed or not and without reference to
the question whether they could be enforced at common Law by reason of their
trivial nature. But contracts for more than pound 50 are positively required to
be under seal; and in a case like that before us, if we were to hold the
defendants liable to pay for what has been done under the contract.
we should in effect be repealing the Act of
Parliament and depriving the ratepayers of that protection which Parliament
intended to secure for them." It a pears that in England there is a
distinction between contracts made under the Common Law by Municipal
Corporations which may not be under seal, and contracts made by them in
pursuance, of a statute like the one now under consideration. The following
except from the Judgment of Brett, L. J., quoted in the judgment of Lord
Blackburn, is instructive from this point of view:
"I should wish to say that I have come
to the same conclusion after weeks spent 618 in attempting to Come to another.
However, I come to the same conclusion as Lord Justice Lindley and Lord Justice
Cotton in this case, upon the ground that, although this was a municipal
corporation, yet in the transaction in question, it was acting as a board of
'health, and that therefore it was bound by the statute, and that as to the
construction of that statute we are bound by a former decision of this Court
which held that the enactment as to the necessity for a seal is mandatory and
not merely directory".
The same distinction is very we I brought out
in the following observations of Lord Bramwell at page 528 :
"As I think-the case turns on the
construction of the statute, I have not thought it necessary to go into the
doubtful and conflicting cases governed by the Common Law." It is
noteworthy that neither of the two cases discussed above was even referred to
at the bar or by their Lordships in the course of their judgment, though many
cases appear to have been cited at the bar. That was apparently for the reason
that these earlier cases, rather ancient, did not turn upon the construction of
any statute like the one we are now considering.
Thus, the provisions of s,47 being mandatory
and not merely directory the question which now has to be determined is whether
those provisions are inconsistent with any of the provisions of the Act, as
contemplated by s. 38 of the Act. It has not been contended before us that
there is anything in the Act which in terms is inconsistent with the provisions
of s. 47 of the Municipal Act. But it has been contended that such an
inconsistency is implicit in the terms of the Act as they appear from the
definitions of landlord', 'premises' and 'tenant'. In our opinion, there is no
substance 619 in this contention. We have already pointed' out that those
definitions postulate the' relationship of landlord and tenant which can come
into existence only by a' transfer of interest in immovable property, in
pursuance of a contract.
These definitions are entirely silent as to
the mode of creating the relationship of landlord and tenant.
Therefore, the question is whether the.
complete silence as to the mode of creating the relationship between landlord
and tenant can be construed as making a "provision, by implication,
inconsistent, with the terms of s. 47 of the Municipal Act. In our opinion, the
mere absence of such provisions does not create any inconsistency as would
attract the application of S. 38 of the Act. It is noteworthy that the
provisions of s. 38 of the Act were not relied upon either in the High Court or
in the Court of first instance. In those Courts great reliance had been placed
on the doctrine of part performance which has now been crystalised in s. 53A of
the Transfer of Property Act (IV of 1882) and which in terms cannot apply.
Rightly, therefore, no reliance was placed on behalf of the appellants on the
provisions of s. 53A of the Transfer of Property Act.
On the question of the validity of the
transfer, it is necessary to consider the further argument raised on behalf of
the appellants, namely,, that the power of the Committee is contained in s. 18
and not in s. 47 of the Municipal Act, which only lays down the mode of
executing contracts and transfer of property, as appears from the marginal note
to the section i. e., the words "Mode of Executing Contract and Transfer
of Property". It is true that s. 18 contains the power to enter into a
contract and to transfer any property held by the Committee, but s. 47. lays
down-the' essential conditions of the exercise of the Power and unless those
conditions are fulfilled there could be no contract 'and no transfer of
property. In this connection, it was further argued that sub s. (3) of s. 47
only 620 says that a, contract or transfer of Property contemplated in the
section executed otherwise than in accordance with the provisions of the
section shall not be binding on the Committee. Therefore, the argument further
is that the contract may not be binding of it the Committee but it is not void.
Now, what is the legal significance of the expression shall 'not be binding on
the Committee"? It against the Committee, and it is clear beyond doubt
that an agreement not enforceable in law is void. It must, therefore, be held that.
the provisions of s. 47 aforesaid are essential ingredients of the power
contained in s. 18 of the Act.
The same argument was advanced in another Act
form, viz., that the effect of s. 47 of the Municipal Act is not to render the
transactions in question between the parties entirely void but it was only
declared to be not binding an the Committee. In other words, the argument is
that a distinction has to be made between acts which are ultra vire's and those
for the validity of which certain formalities are. necessary and have not been
This distinction assumes an importance where
the rights of third parties have come into existence and those parties tire not
expected to know the true facts as to the fulfillment of those formalities.
That it is so becomes clear from the following statement of the law in
Halsbury's Laws of England (3rd edition, Vol. 15) paragraph 428 at page 227:
"Distinction between ultra vires and
irregular acts. A distinction must be made between acts which are ultra vires
and those for the validity of which certain formalities are necessary. In the
latter case, persons dealing Without notice of any informality ate entitled to
presume omnia rite esse acta.
Accordingly a company which, possessing the
requisite powers, so conducts itself in issuing debentures as to represent to
the public that 621 they are legally transferable, cannot set up any
irregularity in their issue against an equitable transferee for value who has
no reason to suspect it." In this connection, it is, also convenient here
to notice the argument, that the Committee is estopped by its conduct from
challenging the 'enforceability of the contract. The answer lo the argument is
that where a statute makes a specific provision that a body corporate has to
act in a particular manner, and in no other, that provision of law being
mandatory and not directory, has to be strictly followed. The statement of the
law in paragraph 427 of the same Volume of Halsbury's Laws of England to the'
following effect settles the controversy against the appellants:
"Result must not be ultra vires-A party
cannot by representation, I any more than by other means, raise against himself
an estoppel so as to create a state of things which he is legally disabled from
creating. Thus, a corporate or statutory body cannot be estopped from denying
that it has 'entered into a contract which it was ultra vires for it to make.
No corporate body can be bound by estoppel to do something beyond its powers,
or to refrain from doing what it is its duty to do......
In view of these considerations it must be
held that there was no relationship of landlord and tenant between the parties
and that, therefore, the applications under s. 8 of the Act made by the
appellants had been rightly dismissed by the High Court as incompetent. The
appeals are accordingly dismissed with costs, one set of hearing fees.