Swaroop Sharma Vs. Jagmohan Lal  INSC 584 (24 November 2000)
RUMA PAL, J.
appeal has been preferred from the decision of the High Court of Punjab and Haryana
affirming the order of the Appellate Authority under Section 4 of the Haryana
Urban (Control of Rent and Eviction) Act, 1973 (hereinafter referred to as the
Act) fixing the fair rent of the appellants shop at Rs.328/- per month w.e.f.
1989. The shop was constructed in August 1962. The appellant let out the shop
to the respondent in 1975 at a monthly rent of Rs.200/-. In 1989, the appellant
filed the application under Section 4 of the Act before the Rent Controller.
The Rent Controller considering the evidence of similar premises in the locality,
determined the fair rent payable in respect of the shop at Rs.1000/- per month.
The respondent preferred an appeal before the Appellate Authority. On the
construction of Section 4 of the Act, the Appellate Authority came to the
conclusion that the appellant having agreed to accept Rs.200/- from the
respondent, was not entitled to the market rent but to a percentage increase on
the agreed rent. The Appellate Authority calculated the percentage of increase
under Section 4 (3) of the Act and determined the fair rent of the shop to be
Rs.328/- per month with effect from the date of the application. This decision
was affirmed by the High Court on revision.
4 of the Act provides: Section 4: - Determination of fair rent:
The Controller shall, on application by the tenant or the landlord of a
building or rented land, fix the fair rent for such building or rent land after
holding such enquiry as he may think fit. Such fair rent shall be operative from
the date of application.
fixing the fair rent under this section, the Controller shall first determine
the basic rent which shall be : - (a) in respect of the building the
construction whereof was completed on or before the 31st day of December, 1961,
or land let out before the said date, the rent prevailing in the locality for
similar building or rented land let out to a new tenant during the year, 1962
and (b) in respect of the building the construction whereof is completed after
the 31st day of December, 1961 or land let out after the said date, the rent
agreed upon between the landlord and the tenant preceding the date of the
application, or where no rent has been agreed upon, the basic rent shall be
determined on the basis of the rent prevailing in the locality for similar
building or rented land at the date of application, (3) In fixing the fair
rent, the Controller may allow an increase or decrease on the basic rent
determined under sub-section (2) not exceeding twenty five per centum of the rise
or fall in the general level of prices since the date of agreed rent or the
date of application, as the case may be, in accordance with the average of All
India Wholesale Price Index Numbers, as determined by the Government of India,
for the calendar year immediately preceding the date of application.
section 4(2)(b) where a building is constructed after December1961, as in this
case, the fair rent is to be fixed on the basis of the rent agreed upon
preceding the date of the application. It is only when there is no such agreed
rent that the fair rent may be fixed on the basis of the rent payable in
respect of comparable premises.
to the appellant, the phrase rent agreed upon in Section 4(2) (b) does not
cover monthly tenancies. It is submitted that if this were not so, no landlord
would ever be in a position to avail of the benefit of the later part of
Section 4(2) (b), namely, the determination of basic rent prevalent in the
locality for similar buildings. It is claimed that since the tenancy in
question was a monthly tenancy, the agreement regarding rent came to an end
with each month. Therefore, when the application was made there was no agreed
rent within the meaning of Section 4(2)(b).
to the respondent, the shop had initially been let out to the respondent at a
monthly rent of Rs.50/-. This was increased to Rs.200/- in 1976 and an
endorsement was made by the tenant on the back of the rent receipt for October
1976 (Exhibit R-1) to the effect: As mutually agreed, I agree to pay rent at
the rate of Rs.200/- (two hundred) with effect from first of Nov. 1976 i.e.
Ishwar Sarup Sharma Jagmohan Advocate It is contended that after having
mutually increased the rent from 1.1.76 the landlord was bound to accept and
had continued to accept the sum of Rs.200/-. As such this was the rent agreed
upon within the meaning of Section 4 (2)(b) and this was the rent paid by the
respondent upto the date when the application under Section 4 was made. The key
to the resolution of the dispute raised lies in the words rent agreed used in
Section 4 (2)(b). In a narrow sense rent is understood as the payment agreed to
be made to the landlord by the tenant in consideration for the right to use the
rented premises. The landlord and the tenant agree that the tenant will be
entitled to occupy and use the demised premises at an agreed rent. Without an
agreement as to the rent payable there no tenancy is created. This is also how
rent is defined in Section 105 of the Transfer of Property Act, 1882. The
element of assent is an integral to the concept of rent. If the word rent is
given this narrow meaning then, as urged by the appellant the latter half of
Section 4(2)(b) would indeed be rendered redundant. But the Legislature has
used the word agreed in juxtaposition to rent. If the word rent is used in the
narrow sense the word agreed would be tautologous. We cannot assume that the
Legislature has used any word without purpose. In our view, by using the words
agreed rent the Legislature intended to indicate that the word rent must be
construed in a wider sense to include, apart from the narrow connotation, any
payment made for use of land where the quantum may have been fixed otherwise
than by agreement.
definition of the word tenant in Section 2(h) of the Act also makes this clear:
tenant means any person by whom or on whose account rent is payable for a
building or rented land and includes a tenant continuing in possession after
the termination of his tenancy...
tenancy being terminated the agreement ceases to operate as a voluntary
bilateral transaction. With the cesser of the agreed tenancy, the agreement as
to rent would also cease. Nevertheless, under Section 2(h) of the Act the
tenant would be liable statutorily to make payment of rent. Similarly after
fair rent is fixed under Section 4 of the Act, the rent payable is not the
for the purpose of determining fair rent Section 4 (2)(b) draws a distinction
between cases where the parties have agreed to the rent and cases where rent is
payable otherwise than by agreement. In the first case, the agreed rent is to
be taken as the base and the increase determined according to the formula
provided in Section 4(3). In the second case, the base is the market rate.
There is no warrant for drawing any distinction between a monthly tenancy and
tenancies for longer periods. Nor is it necessary that the agreement should
have been entered into immediately preceding the date of the application.
Section 4 (2)(b) uses the word preceding without any limitation.
may be contrasted with Section 3 where the word preceding is qualified by the
word immediately. For fixing the basic rent under Section 4 the only question
would be - was there a subsisting agreement of tenancy under which rent was
payable when the application for fixation of fair rent was filed? If the answer
is in the affirmative the agreed rent must be taken as the basic rent. If not,
then the basic rent is the prevailing market rate.
even though the agreement may have been entered into in 1976 as is admittedly
true in this case, but the tenancy was continuing until the date of the
application, the Rent Controller was obliged to take the rate agreed to in 1976
as the basic rent under the first limb of Section 4 (2)(b). It is only after
the fair rent is fixed that the landlord could seek re-fixation under the
second limb subject to the limitations provided in the Act, as the rent would
then cease to be the agreed rent. For these reasons, we uphold the decision of
the High Court and dismiss the appeal without any order as to costs.