Abbobaker
& Anr Vs. Mahalakshmi Trading Co [1998] INSC 81 (10 February 1998)
S.Saghir
Ahmad, G.B. Pattanaik G.B.Pattanaik, J.
ACT:
HEAD NOTE:
THE
10TH DAY OF FEBRUARY, 1998 Present:
Hon'ble
Mr.Justice S.Saghir Ahmed Hon'ble Mr.Justice G.B.Pattanaik R.F.Nariman, Sr.
Adv., N.P.S.Panwar, S.N.Bhat, Advs. with him for the appellant G.V.Chandra Shekhar
and P.P.Singh, Advs for the Respondent
The
following Judgment of the Court was delivered :
Leave
granted, This appeal is by the landlord against the order dated 22nd August, 1996 passed by the Karnataka High Court
in HRRP No. 1769 of 1995 arising out of HRC No. 66 of 1994. The appellant -
landlord filed the aforesaid HRC case under Section 21(1)(i) of the Karnataka
Rent Control Act against the tenant - respondent in respect of the premises in
question. The aforesaid proceeding was ultimately disposed of on the basis of a
compromise entered into between the parties and the terms embodied in the
compromise petition date 22nd
April, 1994 formed a
part of the decree of the court. In accordance with the aforesaid compromise
decree the tenant delivered the vacant possession of the tenanted premises and
the landlord was permitted to demolish and reconstruct a new building thereon.
It was also stipulated in the compromise that the tenant will be accommodated
in the two shop rooms measuring 200 sq. ft. each on the ground floor soon after
the new construction is over and be further accommodated in two shop rooms
measuring 200 sq. feet each in cellar floor for the purpose of godown after the
construction is over. Clause (5) of the compromise decree dealt with the rent
to be paid by the tenant on occupying the premises in the new building after
construction of the same. The dispute in the present case centres round the
terms and conditions of the aforesaid clause (5) and what was the rent intended
to be paid by the tenant for occupation of one ship in the cellar floor and one
ship in the ground floor. The appellant - landlord on getting vacant possession
of the tenanted premises, demolished the same and put up a new construction.
The tenant - respondent filed a petition for getting possession of the newly
built shops in accordance with the compromise decree dated 22.4.1994 and the
said petition was registered as Execution Petition No.204 of 1995. In the said
execution proceedings the appellant - landlord was set ex-parte and the
executing court directed issue of delivery warrant. Subsequently, under the
orders of the executing court the lock was broke open and with the police help
the tenant - respondent got the possession of the premises as per the
compromise decree and the execution case was closed. The landlord - appellant
approached the High Court against the order of the executing court directing
delivery of the possession in favour of the respondent and obtained an interim
order of stay of issuance of delivery warrant on 6.12.1995, but much before the
said date the premises in question had been possessed by the respondent -
tenant on 28.11.1995, and therefore, the interim order issued by the High Court
became infructuous.
The
landlord - appellant before the High Court though raised a contention that the
compromise decree could not have been executed but Mr. R.F.Nariman, learned
senior counsel, appearing for the appellant did not press the same. The tenant
thus has obtained possession of 400 sq. ft. of the newly constructed building
in execution of the compromise decree and that has become final. A further
contention had been raised by the landlord before the High Court to the effect
that the compromise decree is an integrated open and under the decree though
the tenant would be entitled to get possession of two shop rooms measuring 200
sq. feet each after the new construction of the ship rooms are over but he said
tenant is also liable to pay rent at a concessional rate of 25% less of the
prevailing fair rent in the area and without discharging that obligation the
tenant could not have merely obtained possession of the two shop rooms
measuring 400 sq. feet in execution of a part of the decree.
The
tenant, however, resisted the aforesaid contention by contending that the
tenant would be liable to pay 25% less of the fair rent to be determined by the
Controller under Section 14 of the Act and until that determination is made the
landlord cannot resist the execution of the decree in relation to possession of
the two shop rooms measuring 400 sq. feet. The High Court on consideration of
the rival contention and applying its mind to the terms and conditions of the
compromise decree came to the conclusion that the parties waived under the
agreement the provisions of Section 26 to 28 of the Act and after construction
of the new building the tenant is entitled to get possession of two shop rooms
measuring 400 sq. feet in accordance with the provisions of the compromise
decree. The High Court further came to the conclusion that the fair rent for
the premises has to be determined by the Controller under Section 15 of the
Act, and therefore, it would be open for the parties to approach the Controller
for fixation of fair rent in respect of the premises which has been put in
possession of the tenant, so that, the Controller would determine the same and
on such determination being made the tenant would be liable to pay the same at
a concessional rate of 25% less fop the fair rent. It is this direction of the
High Court which is the subject matter of challenge in the present appeal.
Mr. R.F.Nariman
the learned senior counsel appearing for the appellant contended that the High
Court committed serious error in falling back upon the provisions of the Act
for the purpose of fixing the rent of the premises, possession of which had
been given to the tenant under the compromise decree, having held that by the
compromise entered into between the parties the provisions of Section 26 to 28
of the Act have been waived. The learned senior counsel further urged that the
expression prevailing rent in the area in clause (5) of the compromises decree
is foreign to the criteria for fixation of fair rent of a building by the
Controller under Section 14(6) of the Act and on a plain grammatical meaning
being given to the words used in clause (5), the only conclusion that can be
arrived at is that the parties intended that the tenant would pay rent at a concessional
rate of 25% less of the prevailing rent in the area in respect of one shop in
the cellar floor and one shop in the ground floor and the conclusion of the
High Court to the contrary is wholly unsustainable. Mr. G.V.Chandra Shekhar the
learned advocate appearing for the respondent on the other hand contended that
use of the phrase `fair rent' on clause (5) of the compromise decree can only
refer to the fair rent to be determined by the Controller under the provisions
of the Act, and therefore, the impugned order of the High Court is immune form
interference by this Court.
Mr. Shekhar
further contended that allowing the landlord to charge rent for the premises
higher than the fair rent to be fixed by the Controller would be against the
public policy and would frustrate the object for which the very enactment was
made and as such court should be slow in giving a meaning to the terms of a
compromise which would be against the public policy. Mr. Shekhar further
contended that in the absence of any mechanism as to how the prevailing rent in
the area could be determined it would be only logical to hold that the parties
intended under the aforesaid clause (5) for fixation of fair rent by the
Controller in exercise of power under Section 14 of the Act.
Having
considered the rival submissions at the Bar and having examined the terms and
conditions of the compromise decree the question that arises for our
consideration is : what in fact was intended by the parties with regard to the
payment of rent in respect of the shops to be occupied by the tenant in the new
building after the construction is over? To answer this question it would be
appropriate to extract clauses (4) and (5) of the application for compromise
which formed a part of the decree:
4. In
the new building the petitioners shall accommodate the respondent in the two
shop rooms measuring 200 Sq. feet each shown in red colour and demarcated as
`A' &`B' comprised in the ground floor facing Azizuddin Road mentioned in
the petition sketch soon after the new construction of the aforesaid two shop
rooms is over.
In the
new building facing Santhegalli
Road, the petitioner
also should accommodate the respondent in 2 shop rooms demarcated as `C' &
`D' 200 sq. feet each in cellar floor for the purpose of godown as shown in
green colour in the petition sketch after the construction of the same on or
before 31.12.1995.
5.
That the respondent is not liable to pay any deposit for any of the said new
shop rooms both to the cellar and ground floor.
However,
the respondent shall pay rent at a concessional rate of 25% less of the
prevailing fair rent in that area in expect of one shop in the cellar floor and
one shop in the ground floor. And no concession in the fair rent will be
allowed in the godown premises in cellar floor another shop room in the ground
floor facing Azizuddin
Road." As it
transpires from the records of this case, the landlord had filed an application
for demolition and reconstruction under Section 21(1)(i) of the Karnataka Rent
Control Act (hereinafter referred to as `the Act'). Under the said provision
the premises in question must be reasonably and bona fide required by the
landlord for the purpose of immediate demolition and such demolition is to be
made for the purpose of erecting a new building in place of the premises sought
to be demolished. The aforesaid application was disposed of on the basis of the
compromise arrived at between the parties as already stated and such order
providing for re-delivery of possession to the tenant after construction of the
new building by the landlord is an executable decree and has been executed by
the executing court. Under Section 21(1)(i) of the Act, the landlord has a
right to evict a tenant from the premises in question, if he reasonably and
bona fide requires the same, immediately for the purpose of demolishing and
erecting a new building thereon. After obtaining an order of eviction and
getting possession of the premises if the landlord does not demolish the
premises in question within the period specified in the order then the tenant
gets a right of re-entry for which purpose the tenant may give his landlord a
notice of his intention to occupy the premises and the landlord has the
obligation to deliver the vacant possession of the same to the tenant forthwith
as per Section 26 of the Act. Under sub-section (3) of Section 26 a landlord
can also be convicted if he fils to demolish and construct a new building
without n ay reasonable excuse or fails to comply with the order of the court.
Section 27 of the Act confers a right on the tenant to get possession of the
premises after the same be constructed and for that purpose the tenant has to
give a notice to the landlord of his intention to occupy the new building on
its completion and this notice can be served on the landlord within six months
from the date on which the tenant delivered vacant possession of the premises.
Thus, Section 27 recognises his right of re-entry into the reconstructed
building on he terms and conditions mentioned therein. But in the case in hand
the tenant has not taken the recourse to procedure prescribed under Section 27
for exercising his right of re-entry but on the other hand has got back
possession by executing the compromise decree. When the High Court as in the
present case came to the conclusion that the parties to the compromise decree
in fact waived the provision of Section 26 to 28 of the Act then necessarily it
could not have arrived at the e conclusion that in respect of the tenement now
under occupation of tenant in execution of the compromise decree fair rent has
to be fixed by the Controller under Section 14 of the Act. The tenant having
executed the compromise decree providing for re-delivery of possession to the
tenant after reconstruction by the landlord without taking recourses to filing
of application under Section 27 of the Act, is also liable to pay the rent as
agreed to under the compromise decree in respect of the two shops measuring of
area of 400 sq. feet in the new building. The question, therefore, arises is as
to what was the rent agreed upon by the parties under clause (5) of the
compromise decree? Does it refer to the fair rent to be fixed by the Controller
under Section 14 of the Act or it refers to the prevailing rent in the area in
respect of the tenement in question.
There
is no dispute that under Section 14 of the Act Controller has been vested with
the power for fixing the fair rent of a building. In fixing such fair rent the
Controller is required to take into consideration the rental value of the
building as entered in the property tax assessment book of the local authority
of that year in which the building was constructed as is apparent from Section
14(6) of the Act. Under the proviso to the said provision when no such records
are available, the Controller may fix the fair rent calculated on the basis of
six per cent per annum of the aggregate amount of the reasonable cost of
construction and the market price of the land comprised in the building on the
date of the commencement of the construction. Thus, in the matter of fixation of
fair rent under sub section (6) of Section 14 of the Act the prevailing rent in
the area is not germane and has no application. On the other hand, on the basis
on relevant data in respect of the very building as provided in the statute the
Controller is required to decide the matter and fix the fair rent. Judged from
this stand point the expression `prevailing rent in that area' used in clause
(5) of the terms of compromise is suggestive of the only conclusion that the
parties intended that liability of the tenant to pay rent after occupying the
new premises is at a concessional rate of 25% less of the rent which would be
prevailing in the area in respect of similar premises. The Word `fair rent' in
clause (5) does not refer to the fair rent to be fixed by the Controller under
the statute. The expression `fair' has been used in contradistinction with the
expression `unfair' of `unreasonable' In other words, the prevailing rent in
the are in respect of similar premises must be the reasonable rent received in
the fare in respect of similar premises and not a fanciful or whimsical rent
which a particular tenant might be offering to a landlord in the area in
question. In this view of the matter, we are of the considered opinion that the
High Court committed an error in interpreting clause (5) of the compromise
decree to mean that the tenant would be liable to pay rent at a concessional
rate of 25% less of the fair rent to be fixed in respect of premises b y the
Controller under Section 14 of the Act. The said conclusion of the High Court
is accordingly set aside.
The
next question that crops up for consideration is who the prevailing fair rent
in the area in respect of the premises can be arrived at. One possible mode is
to call upon the Controller to determine the prevailing rent in the area in
respect of the premises b y taking evidence from the parties not being guided
by the considerations of fair rent under the stature but in such a case the
litigation will be protracted and the tenant would continue to occupy the
premises without paying any rent therefore notwithstanding the terms of the
compromise decree by which he is equally bound, as the landlord. We are not
inclined to adopt this procedure as that would not be in the interest of
justice.
The
other option available is to require a valuer to inspect the premises and
submit a report for ultimate finding by this Court as to what would be the
prevailing rent in the area but hat procedure also would be subject to several
imponderables and would take considerable time in arriving at any final
conclusion. It is in this context in course of hearing we had called upon the
counsel appearing for the parties to indicate as to what would be the e
prevailing renting the area in respect of the premises in possession of the
respondent. While Mr. Nariman, appearing for the appellant indicated to us that
the prevailing rent would be Rs. 8,000/- basically relying upon there which the
appellant himself is receiving from other tenants (a) 20 rupees per square
feet, the learned counsel for the respondent on the other hand submitted that
at the most it would be only Rs.1,000/- the city of Mangalore not having developed much in the
last decade. The premises in question is located in the well known cit of
Mangalore in the State of Karnataka. It
is difficult to accept that a reasonable rent in respect of 400 sq. feet would
be a petty sum of Rs.1,000/-. But at the same time submission of the learned
counsel for the respondent that the appellants self-serving statement that he
has let out premises in the area (a) 20 rupees per sq. ft. cannot from the
basis to arrive at any conclusion as to what would be the prevailing rent in
the area, is also of great force. To avoid further protraction of litigation
and for doing compete justice in respect of the matter in this appeal we think
it appropriate to exercise our jurisdiction under Article 142 of the
Constitution and to decided as to what would b e the prevailing rent in the
area for the purpose of enforcing clause (5) of the compromise decree.
Having
considered the relevant suggestions given at the Bar and the rent at which the
respondent was occupying the earlier premises which stood demolished and the
new construction have come up, we think it appropriate to hold that the
prevailing rent in the area in respect of the premises in question should be Rs.
10/- per sq. ft. and as such 400 sq. ft., in occupation of the respondent would
fetch a rent of Rs. 4000/- per month. But in terms of the compromise decree the
respondent being entitled to occupy at a concessional rate of 25% less of the
prevailing rent, he would be liable to pay Rs. 3000/- per month and this he is
required to pay from the date he has taken possession of under the orders of
the executing court, and we accordingly so direct. The entire arrears till
today should be paid within 3 month from the date of this order an he would
continue to pay regularly at that rate until any further enhancement is made b
y the competent authority under the statute. Needless to mention if the
respondent fails to pay the appellant the areas of rent at the rate of Rs.
3000/- per month within 3 months as indicated above then he would b e liable to
be evicted an d the appellant can take steps for eviction of the respondent
from the premises. The appeal is accordingly allowed with the aforesaid
directions. There will be no order as to costs.
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