V.N.Vasudeva Vs. Seth Kirorimal
Luhariwala  INSC 2 (9 January 1964)
09/01/1964 HIDAYATULLAH, M.
CITATION: 1965 AIR 440 1964 SCR (6) 181
Rent Control-Order for deposit of rent at
interlocutory stage-If proper-Delhi Rent Control Act, 1958 (59 of 1958), s.
15(1)-Indian Income-tax Act, 1922 (11 of 1922), s. 46(5A).
The respondent made an application against
the appellant under s. 14 of the Delhi Rent Control Act. In reply the appellant
pleaded 182 that the respondent had no right to recover rent from him as a
notice under s. 46(5A) of the Indian Income-tax Act had been issued by the
Income-tax Officer, that the respondent had no locus standi as the property was
in the custody of the Court and a receiver had been appointed and that his
professional fees were agreed and be adjusted towards the rent dues. The Rent
Controller recorded the statement of the appellant and after hearing arguments
directed the appellant under s. 15(1) of the Delhi Rent Control Act, 1958 to
deposit back rents at Rs. 300/per month.
On appeal the decision of the Rent Controller
was affirmed, and a further appeal to the High Court also failed.
The appellant contended that the order under
s. 15(1) for deposit of rent could only be made at the end of the case and not
at an interlocutory stage.
Held:(i) that the order under sub-s. (1) of
s. 15 is not a final order but is preliminary to the trial of the case and is
made only where the rent has in fact not been paid. For the purpose of an
interim order it was not necessary that there should have been a fun trial and,
that this was clear from the latter part of sub-s. (1) of s. 15 because under
it not only the arrears have to be deposited but rent as it falls due has to be
deposited month by month by the 15th of each succeeding month.
Nalinakhya Bysack and Anr. v. Shyam Sunder
1952 Cal. 198, distinguished.
(ii)The notice under s. 46(5A) of the
Income-tax Act did not amount to a garnishee order and the appellant could make
payment to the rent controller without incurring personal liability because the
rent controller had stated in his order that the amount would not be paid to
any one till a clearance certificate was obtained from the Income-tax
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 1041 of 1963.
Appeal by special leave from the judgment and
order, dated September 2, 1963, of the Punjab High Court (Circuit Bench) at
Delhi in L.P.A. No. 119-D of 1963.
S.T. Desai, J. B. Dadachanji, O. C. Mathur
and Ravinder Narain, for the appellant.
H.N. Sanyal, Solicitor-General of India and
B. P. Maheshwari, for the respondent.
183 January 9, 1964. The Judgment of the
Court was delivered by HIDAYATULLAH J.-This is an appeal by special leave
against the order of the High Court, Punjab, dated August 14, 1963, by which an
order of the Rent Controller under s. 15(1) of the Delhi Rent Control Act,
1958, directing the appellant to deposit back rents at Rs. 300 per month from
1st July, 1957, was confirmed. The High Court granted the appellant one month's
time from the date of its own order, as the original time had already run out.
The appellant is an advocate, who is
practising at Delhi.
He is occupying No. 43, Prithvi Raj Road, New
Delhi as a tenant, and his landlord Seth Kirori Mal Luhariwala is the
respondent in this appeal. The tenancy commenced on July 28, 1957, and the
memorandum of tenancy, dated July 1, 1957, produced in the case, shows that the
premises were taken on a monthly tent of Rs. 300. The memorandum also contains
other terms which need not be mentioned here, because they are not relevant to
the present appeal. It appears that Seth Kirori Mal was in arrears in payment
of his income-tax, and a sum of Rs. 39,00,000 was outstanding from him. On
October 31, 1957, the Income-tax Officer Central Circle, New Delhi, to whom all
cases of Seth Kirori Mal were transferred, issued a notice to the appellant
46(5A) of the Indian Income-fax Act directing
him to deposit with the Income-tax Officer all sums due by way of rent as also
future rents. The appellant sent no reply to this notice. He had, however,on
September 29, 1957, addressed a letter to the respondent Seth Kirori Mal. The
reply of Kirori Mal, dated October 15, 1957, figured in the arguments a great deal,
and as it is brief, it may be quoted here:
"From TO Dated Faigarh, the 15th
October, 1957, 184 Dear Sir, With reference to letter No. M-17-58, dated 29th
September, 1957, 1 am to write that you may please adjust six months rent of
43, Prithviraj Road, New Delhi, i.e., Rs. 1800 (rent from 1-10-57 to 31-3-1958)
towards your professional fee in part payment thereof. The balance of your fee
will be paid later at the time of final settlement.
Yours faithfully, (Sd.) Paluram Dhanania, For
Kirori Mal also sent a receipt, dated October
16, 1957, or the amount, and is item 23 in the record.
Kirori Mal had litigation in Calcutta. He had
brought a suit against four defendants, claiming the present property as his
"absolute" and "exclusive self-acquired property".
The case was pending in the High Court and on
May 1, 1.958, an order was made appointing one Chakravarti as a Receiver of the
properties including No. 43, Prithvi Raj Road.
Chakravarti also sent a notice on July 8,
1958, to the appellant demanding rent already due and also as and when due. To
this notice, the appellant sent a reply on July 19, 1958. He referred to the
payment of rent by adjustment towards fees for the period 1st October, 1957 to
31st March, 1958, which was the subject of the letter above. He stated that as
regards rent after 1st April, 1958, he had no objection to pay the amount to
the Receiver or any other claimant but regretted that it was not possible for
him to make the payment because of the notice served upon him by the Income-tax
Officer. He asked the Receiver to get the notice withdrawn, and stated that he
would be glad to remit the amount of rent to him when that was done. He also
raised the question of certain other expenses which he had incurred in connection
with the house which he claimed he was entitled to deduct from the rent and
informed that a few repairs were, required in the house. A second letter was
sent by the Official Receiver on September 5. 1959, making another demand. In
his reply, dated September 14, 1959, to this letter, the appellant raised the
185 -question that a sum of Rs. 23,500 was payable to him for _professional
services rendered by him to Seth Kirori Mal.
"You will therefore appreciate that I am
entitled to adjust the rent payable against the fees due to me and the amount
due to me will absorb the rent for a little over six years.
Even before this Seth Kirori Mal had paid me
a sum of Rs. 1800 by way of adjustment of rent towards my professional fees
due. You will, therefore, kindly agree that the rent payable is adjustable
against the professional fee due to me." With this letter, he enclosed a
copy of a statement of fees -amounting to Rs. 23,500 which he had submitted to
his ,client on February 4, 1959. The Official Receiver then informed the
appellant that the party concerned had denied the claim for fees as absolutely
false, and observed in his letter that the professional fees should be the
subject of -some other proceeding but the rent should be paid with,out delay.
He enquired if the amount of rent had been paid 'to the Income-tax department
in response to the notice. In his reply to this letter, on July 5, 1960, the
appellant for the first time stated that there was an agreement between him and
Seth Kirori Mal to adjust the rent towards his professional fees until the fees
were fully paid. He offered -to reduce the fees if Seth Kirori Mal had any
objection, but stated that till the professional fees were recouped, no rent
could be considered to be due from him.
On November 25, 1960, Seth Kirori Mal applied
to the High Court at Calcutta for directions to the Official Receiver to take
appropriate proceedings to realise the arrears of rent from the appellant, and
on December 19, 1960, the High Court appointed Seth Kirori Mal receiver in the
case. Seth Kirori Mal then served a notice on December 23, 1960, on the
appellant to pay the arrears of rent. To this notice, the appellant sent a
detailed reply which, in substance, has been his defence in the proceedings
before the Rent Controller, from which the present appeal has arisen.
186 On January 4, 1961, Seth Kirori Mal made
an application under s. 14 of the Delhi Rent Control Act before the Rent
Controller, Delhi. In his written statement in reply to that application, the
appellant pleaded that Seth Kirori Mal had no right to recover rent from him,
inasmuch as a. notice under s. 46(5A) of the Indian Income-tax Act had. been
issued by the Income-tax Officer, Central Circle V, New Delhi. He pleaded that
the property was in the custody of the Court, and that inasmuch as a receiver
had been appointed, Kirori Mal had no locus stands to maintain the petition
denying at the same time that Kirori Mal had informed him that he had been
appointed a receiver of the property. The appellant also contended that under
the Rent Control Act, a receiver had no right to act on behalf of the landlord.
He referred to the alleged agreement by which fees were, to be recouped from
rent as and when it fell due, pointing out that on an earlier occasion a sum of
Rs. 1800 was allowed to be adjusted towards fees. Some other please were
raised, but it is not necessary to refer to them because they were not raised
The notice to quit which the appellant
alleged was not issued to him was filed in the Court of the Controller on May
17, 1961. The appellant was ordered to inspect it and to be ready for his
statement as to the correctness of the notice. On the next date, a statement of
the appellant was recorded and he denied the notice and also its receipt. The
case was then set down for arguments and after hearing the arguments, the Rent
Controller passed his order on July 22, 1961. The Rent Controller held that
there was no proof on the file to show that the respondent had any right to
make an adjustment of the rent against his professional dues. He held that the
rent was not paid after March 31. 1958. With regard to the plea that a notice
under s. 46(5A) of the Income-tax Act, 1922, had been issued. the Rent
Controller observed that the amount, if deposited in his court, would not be
paid to Kirori Mal unless he produced a clearance certificate from the
Income-tax Department. The Rent Controller also said that if in the enquiry to
be subsequently made, the tenant proved that the amount of fees had to be
recouped from rent. the amount would not be paid to Kirori Mal.
187 Against the decision of the Rent
Controller, the appellant filed an appeal before the Rent Control Tribunal. The
Rent Control Tribunal affirmed the decision of the Controller, observing that
the plea taken by him that his professional fees were to come out of rent was
an after-thought and there was no evidence to prove that there was such an
agreement between the parties. On other matters, the Tribunal expressed its
agreement with the Rent Controller. The appellant then appealed to the High
Court of Punjab. The High Court upheld the orders so far made and pointed out
that in the letter dated July 19, 1958, to the Receiver, the appellant had not
mentioned the agreement. The High Court hi-,Id that the order made under s.
15(1) of the Act was proper, because it was an admitted fact that rent had not
been paid to anybody from April 1, 1958. The High Court endorsed the view of
the Tribunals below that the notice of the Income-tax Officer did not come in
the way of making the deposit of the rent in the office of the Rent Controller,
because the amount was not to be paid to anyone till the Rent Controller had
decided who was entitled to receive it.
The appeal was therefore dismissed.
In this court, emphasis is laid upon the
letter of October 15, 1957, by Kirori Mal in which there was an adjustment of
Rs. 1800 towards fees. It was contended that there was an oral agreement to use
the rent to pay the professional fees.
The letter itself does not show that there
was any such agreement. In fact it shows the contrary where it says:
"The balance of your fees will be paid
later at the time of final settlement." This shows that the appellant was
not entitled to retain the rent in his hands, and the Tribunals below were
justified in saying that the plea about the so-called agreement was an
after-thought, because till September 14, 1959, the appellant had not mentioned
such an agreement. We are also satisfied that the plea was a mere device to
retain the money and to avoid paying the rent. It must be remembered that there
were as many as four claimants, viz., the Incometax Officer, the Receiver and
Kirori Mal in person and Kirori 188 Mal as Receiver, but the appellant avoided
each of these in turn by pointing to the others, and in this way continued to
occupy the premises without payment of any rent.
It was contended however as a matter of law
that a proper opportunity ought to have been given to the appellant to prove
his plea by leading evidence before ordering that the rent be deposited. Mr. S.
T. Desai contended that under s. 15(1) of the Delhi Rent Control Act, an order
for deposit of arrears of rent can only be made after the tenant has been given
an opportunity of being heard, because if the tenant makes a payment or deposit
as required of him, the landlord is entitled to take the amount of the deposit
and the Controller can award such costs as he may deem fit to the landlord and
the case comes to an end. By way of contrast, he pointed out that the case
proceeds if the tenant fails to make the payment or deposit as required of him.
In other words, it was contended that an order under s. 15(1) for deposit of
rent should only be made at the end of the case and not at an interlocutory
stage. Mr. Desai contended that the present order was made at an interlocutory
stage and it was wrong, because if the tenant deposited the money, there would
be no further hearing and his plea that there was an agreement between the
parties that the rent as and when it fell due should be set off against the
professional fees, would remain untried. In our opinion, this reading is not
permissible. Section 15 (omitting such parts as are unnecessary for the present
purpose) reads as follows:
(1) In every proceeding for the recovery of
possession of any premises on the ground specified in clause (a) of the proviso
to subsection (1) of section 14, the Controller shall, after giving the parties
an opportunity of being heard, the an order directing the tenant to pay to the
landlord or deposit with the Controller within one month of the date of the
order, an amount calculated at the rate of rent at which it was last paid for
the period for which the arrears of the rent were legally recoverable from the
ten189 ant including the period subsequent thereto up to the end of the month
previous to that in which payment or deposit is made and to continue to pay or
deposit month by month, by the fifteenth of each succeeding month, a sum
equivalent to the rent at that rate.
(3) If, in any proceeding referred to in
subsection (1) or sub-section 2), there is any dispute as to the amount of rent
payable by the tenant, the Controller shall, within fifteen days of the date of
the first hearing of the proceeding, fix an interim rent in relation to the
premises to be paid or deposited in accordance with the provisions of
sub-section (1) or subsection (2), as the case may be, until the standard rent
in relation thereto is fixed having regard to the provisions of this Act, and
the amount of arrears, if any, calculated on the basis of the standard rent
shall be paid or deposited by the tenant within next month of the date on which
the standard rent is fixed or such further time as the Controller may allow in
(6) If a tenant makes payment or deposit as
required by sub-section (1) or sub-section (3), no order shall be made for the
recovery of possession on the ground of default in the payment of rent by the
tenant but the Controller may allow such costs as he may deem fit to the.
(7) If a tenant -fails to make payment or
deposit as required by this section the Controller may order the defence
against eviction to be struck out and proceed with the hearing of the
application." It will be noticed that sub-section (3) also contemplates
190 payment of interim rent determined by the Controller before the entire
dispute is settled. Sub-section (6) puts the case under sub-s. (1) and sub-s.
(3) on the same footing and makes no distinction between them. It is also
possible to visualise cases in which the tenant may deposit the amount of rent
under protest and claim that his defence be tried.
It is not that even on the deposit of the
arrears of rent in these circumstances the case would come to an end. The
latter part of sub-section (1) further shows that not only the arrears have to
be deposited but rent as it falls due has to be deposited month by month by the
15th of each succeeding month. This also shows that the order under subsection
(1) is not a final order but is preliminary to the trial of the case and is
made only where the rent has in fact not been paid. For the purpose of an
interim order it was not necessary that there should have been a full trial.
The Rent Controller had the affidavit of the
appellant and he could judge whether in the circumstances of the case, an
interim order ought or ought not to be made. He came to the conclusion that the
rent was not paid and the plea that it was being withheld under an agreement
was an afterthought and not true. The High Court and the Rent Control Tribunal
have agreed with this view of the Rent Controller and the conclusion appears to
us to be sound. Once such a conclusion is reached, it is quite manifest that
the order was made after affording an opportunity to the appellant to be heard.
No doubt, the appellant is entitled to lead oral evidence in regard to the
agreement he alleges, but for that he will have an opportunity hereafter. At
the moment, he is being asked to deposit the arrears in court, which admittedly
Mr. Desai next contended that the notice
under s. 46(5A) amounted to a garnishee order and the appellant could not,
while the notice stood, make any payment without incurring personal liability.
There was no question of a personal liability because the Rent Controller had
stated in his order that the amount would not be paid to anyone till the
clearance certificate was obtained from the Income-tax Department. The Rent
Controller had informed the income-tax authorities and the appellant ran no risk
in depositing the arrears of rent in the circumstances.
191 It was contended that the notice under s.
46(5A) -amounted to an attachment of the rent in the hands of the -appellant
and reference was made to the provisions of s. 46 sub-s. 5A para 5. The argument
overlooks the next para which provides:
"Where a person to whom a notice under
this subsection is sent objects to it on the ground that the sum demanded or
any part thereof is not due to the assessee or that he does not hold any money
for or on account of the assessee, then, nothing contained in this section
shall be deemed to require such person to pay any such sum or part thereof, as
the case may be, to the Income-tax Officer." -If there was an agreement
between the parties and Kirori Mal was indebted for such a large amount, the
appellant could have objected on the ground that he did not hold any money for
or on account of the assessee and then he would not have been required to pay
any sum to the Income-tax ,Officer. The appellant did nothing in the matter
except to deny the payment to everyone. He paid nothing to the Income-tax
Officer, declined to deposit the money before the Rent Controller and refused
to recognise the demands by the Receiver and his landlord. In other words, be
was trying to take full advantage of the law, when lie could have informed the
Income-tax Officer about his own position and paid the money to the Rent
Controller subject to its being paid to the Income-tax Department.
Reference was made in this connection to a
decision of the Calcutta High Court reported in Nalinakhya Bysack and another
v. Shyam Sunder Halder and others(1) in which Harries C. J. observed that
before making an ,order for the deposit of the rent, a full enquiry should be
made. That was a case in which the tenant had pleaded that there was an
agreement between him and the landlord -that any amount spent on repairs would
be set off against -the rent.
Harries C.J. held that without ascertaining
the (1) A.I.R, (1952) Cal. 198.
192 truth of the plea that a large sum had
been, spent on repairs, an order to deposit the entire arrears of rent ought
not to have been made. It is quite clear that the facts there were entirely
different. Payment by the landlord for repairs was a part of the tenancy
agreement and rent under that tenancycould not be calculated without advertence
to every term of the agreement of tenancy. Here the special agreement which is
pleaded is outside the tenancy agreement and the allegation about the special
agreement has been held to be an after-thought and false. It is therefore
difficult to apply the ruling to the present circumstances.
The appeal is wholly devoid of merit and it
is dismissed with costs. By the consent of parties, a period of two months from
the date of hearing (20-12-1963) was granted to the appellant to deposit the
arrears of rent from 1st.
April, 1958, in the Court of the Rent