Bright Steel Ltd. Vs. Shantaramshankar Sawant  INSC 156 (2 March 1994)
S. (J) Mohan, S. (J) Mukherjee M.K. (J)
1994 AIR 2114 1994 SCC (4) 89 JT 1994 (2) 192 1994 SCALE (1)832
Judgment of the Court was delivered by S. MOHAN, J.- The short facts leading to this civil appeal are as under.
original owner of suit property situate at Ramamaruti Road, Thane (Maharashtra)
was one Omji Mulji. He leased out three small flats having two rooms and a
kitchen in favour of the appellant company in 1963. The rent was fixed at Rs
300 plus Rs 20 municipal taxes and Rs 15 water charges.
1968, Omji Mulji sold away the property to one Gavand. Thereafter, the
appellant tendered the rent including the taxes to the said Gavand from 1968.
In the same year of 1968, the municipal taxes were increased. The appellant
paid a lump sum of Rs 338.58 as rent. Due to further increase in the taxes, the
appellant tendered Rs 358.29 including taxes to the owner.
the year 1975, the respondents came to purchase the suit property. Since then,
the appellant had been paying regularly rent and taxes at the rate of Rs 358.29
Advocate for the respondents issued a notice dated July 27, 1977 to the
appellant terminating their tenancy and called upon the appellant to hand over
vacant possession since the appellant was in arrears of permitted 91 increases
amounting to Rs 5650 from February 1976. The notice also stated two of the
grounds for eviction, in that the appellant had altered the premises and
causing nuisance to the neighbours.
receipt of the above notice, the appellant filed an application under Section
11(3) of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947
(hereinafter referred to as 'the Act') for fixation of standard rent. On August 30, 1977, an interim order fixing the rent
at Rs 358 was passed. It was directed to be deposited in the court on or before
10th of every month. For the months of August and September, the appellant paid
the interim rent to the respondents. The same had been accepted. However, since
October 1977 the appellant was depositing the interim rent in the Court of
Civil Judge, Junior Division, Thane.
7. On April 26, 1979, the respondents filed Civil Suit
No. 384 of 1979 in the Court of Civil Judge, Junior Division, Thane for arrears
of permitted increases, rent and for possession. The ground urged was that the
appellant was in arrears of permitted increases amounting to Rs 56.50 per month
since October 1976. This was on the basis of calculation at 7% as education cess
on the rent of Rs 358.29, Rs 30 water charges, 1/4% as unemployment charges and
1/4% as tree cess. Further grounds for eviction namely unauthorised alteration
and creating nuisance were also urged. In September 1981 the application for
fixation of standard rent was dismissed in default for non-appearance.
dismissal came to be noted by the Advocate only in the year 1985. However, the
appellant had been depositing the interim standard rent all along.
8. In defence
to the Regular Civil Suit No. 384 of 1979, it was urged that the payment of
standard rent had been made without fail throughout and, therefore, he was not
in arrears. The other grounds namely, unauthorised construction and causing
nuisance were also denied. The trial court decreed the suit for eviction on
account of arrears of rent but not permitted increases.
Aggrieved by the said order, appellant filed Civil Appeal No. 452 of 1983
before the District Judge, Thane.
said appeal was dismissed. Thereafter, the appellant preferred Writ Petition
No. 5035 of 1985 before the High Court. That was dismissed on February 19, 1987 on the ground that the tenant was
not in arrears of rent but had defaulted in payment of permitted increases. Thus,
the present civil appeal.
Soli J. Sorabjee, learned Senior Counsel for the appellant raised the following
points for our consideration.
valid notice of demand is a condition precedent for the maintainability of suit
for arrears of rent or permitted increase. In the absence of requisite demand,
there can be no question of noncompliance. In such a case, the consequences
mentioned under Section 12(3) sub-section (3)(a) or (b) will not be attracted.
In support of this submission, reliance is placed on Chimanlal v. Mishrilall.
(1985) 1 SCC 14: (1985) 2 SCR 39 92 (ii) In the present case, the notice of
demand dated July 27, 1977 does not mention the period of alleged arrears or
the permitted increase. The demand is only for the payment of entire arrears of
rent and not permitted increases.
increase, though part of rent, is not payable monthly. It is well settled that
education cess being payable on a year to year basis, the rent ceases to be
payable every month within Section 12(3)(a) of the Act as laid down in Raju Kakara
Shetty v. R. P. Shirole2.
The landlord can have no cause of action to recover permitted increase until he
had paid the permitted increases. Therefore, he must plead and prove payment of
permitted increase. There is no such pleading in this case. In spite of this
point having been urged before the lower appellate court as well as the High
Court it has not been dealt with.
High Court has gone wrong in misreading the provisions of Section 12 of the
Act. It has read into it obligations and conditions which are not statutorily
prescribed. It should have taken note of the following facts :
That the application for standard rent was made in time;
That the interim rent as fixed by the court has been paid regularly throughout
the pendency of the suit and the appeal;
That the interim rent fixed was the same as the contractual rent.
A.M. Khanwilkar, learned counsel for the respondents in answering these
submissions would urge that it is not correct to state that there is no valid
demand. The notice specifically states as to what exactly the tenant was liable
to pay namely; the rent at Rs 358.29, 7% education cess, Rs 30 for water
charges, 1/4% as unemployment charges, 1/4% as tree cess. All these total up to
Rs 56.50 per month as permitted increases. When the notice called upon the
tenant to pay the entire arrears of rent, all these which are part of rent were
required to be paid. As a matter of fact, the plaint clearly discloses as to
what exactly was the demand.
on facts the ruling of Chimanlal case' has no application.
There is no demur to the proposition that the permitted increases, though part
of rent, are not payable monthly.
in this case, the plaint clearly states that the permitted increases were from February 1, 1976 till the date of filing of suit in
1979. Hence this proposition does not in any way affect either the claim or the
The landlord never disputed that the tenant had not paid the municipal taxes.
As a matter of fact, the municipal demands had been produced in evidence. The
High Court had appropriately appreciated the matter and it warrants no
(1991) 1 SCC 570 93
a proposition of law, it cannot be disputed that there must be a valid demand
for maintainability of suit for arrears of rent or permitted increases. It has
been so laid down in Chimanlal case' (at SCR pp. 43-44).
this case, the notice dated July 27, 1977
is as follows :
have been ]eased out the entire second floor. You are in occupation of the
entire second floor. The month of tenancy is according to British Calendar
Month. You have accommodated your three officers in the three blocks on the
second floor. The net rent in respect of the said second floor is Rs 358.29.
and above the said rent you require to pay to my client 7% as education cess, Rs
30 for water charges and 1/4% as unemployment charges and 1/4% as the tree cess.
Thus you are supposed to pay to my client Rs 56.50 per month as permitted
increases. You are at present in arrears of rent from February 1976.
client has demanded the same but you have neglected and failed to pay the same.
You are thus a defaulter. You are not ready and willing to pay the rent as and
when it becomes due.
are also called upon to pay the entire arrears of rent on receipt hereof.
Failing compliance of which, my clients will be compelled to go to the court of
law for getting their grievances redressed entirely at your risk as to the
costs and consequences which please note.
doubt, the word 'supposed' in paragraph 3 has been incorrectly used. But that
does not in any way affect the validity of the notice. Besides, merely because
it is stated 'arrears of rent', it does not mean that there is no demand for
permitted increases since those permitted increases are part of rent. The
plaint in no mistakable terms says as follows :
month of the tenancy of the defendant was according to British Calendar Month.
The net rent in respect of the said second floor was Rs 358.29 over and above
the said rent the defendant was required to pay to these defendant 7% as
education cess, Rs 30 for water charges, 1/4% as unemployment charges and 1/4%
as tree cess. These plaintiffs submit that thus the defendant was required to
pay the permitted increases per month amounting to Rs 56.90. The defendant was
in arrears of permitted increases since February 1976. These plaintiffs
demanded the same time and again but the defendant has failed to pay the same.
The defendant is, thereby a defaulter."
Therefore, this contention of Mr Soli J. Sorabjee cannot be accepted.
Factually, the ruling stated as Chimanlal case' is distinguishable. In R.K. Shetty
case2 it is stated at p. 581 as under : (SCC para 13) "In Maheshwari Mills
Ltd.3 under the terms of the tenancy the tenant was obliged to pay the
municipal taxes and property taxes in respect of the demised premises. The
court took the view that such payment was by way of rent and since the
municipal taxes and property taxes were payable on year to year basis, a part
of the rent was admittedly not 3 Panchal Mohanlal lshwardas v. Maheshwari Mills
Ltd.,(1962) 3 Guj LR574 94 payable by the month and, therefore, Section
12(3)(a) was not attracted. In Prakash Surya 4 the tenant had agreed to pay the
municipal tax and education cess. The amount payable towards these taxes
constituted rent and since the same was payable at the end of the year the
court held that the rent had ceased to be payable by the month and hence
Section 12(3)(a) had no application."
rightly urged by Mr Khanwilkar, learned counsel for the respondent the
permitted increase may not be payable monthly; but in the instant case, the
period, for which the permitted increases are claimed, is between February 1,
1976 till April 27, 1979. This is evident from paragraph 6 of the plaint as under
cause of action for the purpose of filing of this suit first arose on or about
March 1, 1976, for arrears of permitted increases and for possession on
September 1, 1977 and is being continued respectively from time to time till
the filing of this suit." Therefore, R.K. Shetty case 2 cannot be pressed
no point of time, the tenant disputed the payment of municipal taxes by the
landlord. In fact, the evidence is to the following effect "Permittedincrease
was amounting to Rs 56.50 since February 1976. I have produced the xerox copy
of the notices issued by Municipality at Ex. 13. We demanded the permitted
increase to the defendant. But they failed to pay the same."
September 14, 1983, the standard rent was fixed at Rs
358 per month and the permitted increases were fixed at Rs 56 per month. The
appellant continued to pay Rs 358 per month being the standard rent. He did not
pay the permitted increases. The fact that he was depositing throughout Rs 358
and even during the stage of writ petition, can hardly relieve him from such an
obligation. Under Section 12(3)(b) of the Act, there is an obligation to
deposit the permitted increases not only during the pendency of the standard
rent application which in this case has come to be dismissed for default but
even during the pendency of suit for eviction.
rightly held by the High Court, if this were not to be so, the tenant could
claim protection on its showing that he had within a period of one month from
the date of service of notice of demand under Section 12(2) filed an
application for standard rent and that he had obeyed that order; in this case
the interim standard rent.
Accordingly, we hold that there are no merits in this civil appeal which stands
dismissed. The tenant shall hand over vacant possession of the said premises
within six months on condition that he files the usual undertaking within four
weeks from the date of this order.