Municipal Council, Udaipur Vs.
Mahendra Kumar  INSC 524 (27 March 2008)
Dr. ARIJIT PASAYAT & LOKESHWAR SINGH PANTA REPORTABLE CIVIL APPEAL NO. 2546 OF 2004 With CIVIL APPEAL NO. 2547 OF 2004
Dr. ARIJIT PASAYAT, J.
1. Challenge in these appeals is to the judgment rendered by a learned
Single Judge of the Rajasthan High Court in two second appeals. The appeals
were preferred by the appellant questioning correctness of the conclusions
arrived at by the Courts below.
2. Factual position which is almost undisputed in both the cases needs to be
noted in brief and is as follows:
3. For the sake of convenience the facts situation in Civil Appeal No.2546
of 2004 (Municipal Council, Udaipur v. Mahendra Kumar) is reflected.
4. The respondent as plaintiff filed a suit against the appellant seeking
"That a decree for permanent injunction be passed in favour of the
plaintiff and against the defendant to the effect that the defendant should
recover rent at the rate of Rs.175/- (rupees one hundred seventy five) per
month from the plaintiff fixed before coming into being of the relationship of
lessee and lessor between the plaintiff and the defendant and apart from this
not to increase the rent unilaterally, not to recover the late fee, nor recover
the rent by increasing the same, nor get the shops vacated forcibly from the
plaintiff, nor dispossess him from the disputed shops nor create any sort of
obstacle in his business, neither do such acts itself nor through its servants,
agents or any officer nor allow them to do the same."
5. For the purpose of the claim respondent relied on an agreement dated
8.11.1980. The agreement had been executed describing that it was based on a
license and was for a limited period of 11 months. According to the appellant
the license automatically stood terminated on expiry of the period. Thereafter no time was extended by the defendants. Plaintiffs claim that the
defendants were accepting the rent regularly. By notice dated 6.6.1986 which was challenged in the suit an offer was made
to occupy the property on payment of Rs.6,000/- per year. Stand of the
respondent was that he was entitled to occupy the premises by payment of rent
or license fee of Rs.175/- as agreed to in the agreement dated 8.11.1980 and
which stood terminated by time. The Trial Court decreed the suit. However, the
First Appellate Court allowed the appeal to enhance once by 10% and thereafter
to seek the consent of the respondent if there was to be any enhancement.
6. High Court dismissed the second appeal. The order of the High Court is
challenged in this appeal.
7. According to the learned counsel for the appellant- corporation the High
Court enlarged the scope of dispute and went on to decide as to whether the
agreement was a license or lease. It is submitted that property was that of the
local authority and, therefore, Rajasthan Rent and Premises (Control of Rent
Eviction) Act, 1950 (in short 'Rent Control Act') unilaterally does not apply
to the facts of the present case. It was pointed out that the respondent can be
evicted from the suit premises by giving notice under Section 106 of the
Transfer of Property Act, 1882 (in short 'TP Act') where the lease did not
subsist and the respondent had not occupied or continued the same property. The
High Court and the First Appellate Court erroneously came to the conclusion
that the appellant again increased the rent unilaterally. There was no question
of any bilateral agreement for fixation of new rent as a person occupying
property would never agree to enhance and would continue to remain in the
property for any length of time at a rate fixed years back. The conclusion that
it can be enhanced once is without any legal foundation. It was pointed out
that even if it is assumed that the agreement subsists, clauses 3 and 8
permitted the appellant to unilaterally alter the conditions by way of orders
which have to be complied with by the respondent and for a period of 11 months
renew for further fresh term.
8. Learned counsel for the respondent on the other hand submitted that the
respondent is willing to pay at such rate as may be fixed in accordance with
9. At the outset has to be noticed that the validity of the notice was not
challenged in the suit. Notice dated 6.6.1986 contained a reference to the
order No.F5(293)LB/77/2183- 2730 dated 10.8.83 of the Local Self Government
which permitted fixing of rent in a particular manner. According to the learned
counsel, the notice for fixing of rent was based on the aforesaid order of the
Local Self Government of the State.
10. It was not the stand of the respondent that the order of the Local Self
Government was not binding and/or that the same was without any authority.
Clauses 3 and 8 of the agreement are also relevant. They read as follows: "3. That the said agreement shall be deemed to have been executed for
eleven months and for further renewal the licensee shall have to move an
application one month before, which shall be considered by the Council and if
found property further renewal shall be made. The shop shall be handed over in
the same condition in which it has been taken and shall not make any
alterations therein nor shall cause any damage."
8. That apart from the said conditions in connection with this shop the
Council shall also issue other orders from time to time, which shall also be
complied with by the licensee."
11. The suit was for permanent injunction, in terms of Section 38 of the
Specific Relief Act, 1963 (for short 'Specific Relief Act').
Section 38 reads as under: "38. Perpetual injunction when granted
subject to the other
provisions contained in or referred to by this Chapter, a perpetual injunction
may be granted to the plaintiff to prevent the breach of an obligation existing
in his favour, whether expressly or by implication.
When any such obligation arises from
contract, the court shall be guided by the rules and provisions contained in
xxx xxx xxx"
12. An interesting question arises as to whether in the absence of the
subsisting agreement a decree for specific performance can be granted. There is
no dispute that the plaintiff can seek for performance only an agreement which
is subsisting. As was noted by this Court in Percept D'mark (India) (P) Ltd. v.
Zaheer Khan and Anr. (2006 (4) SCC 227), the plaintiff cannot maintain a suit
for specific performance after the contract is determined. In the aforesaid
case it was noted as follows: "60. We have perused the contract in detail. The terms of the contract were expressly limited to 3 years from 30.10.2000
to 29.10.2003, unless extended by mutual agreement, and all obligations and
services under the contract were to be performed. 61. Clause 31(b) was also to operate only during the term i.e. from the
conclusion of the first negotiation period under clause 31(a) on 29.7.2003 till
29.10.2003. This Respondent 1 has scrupulously complied with. So long as clause
31(b) is read as being operative during the term of the agreement i.e. during
the period from 29.7.2003 till 29.10.2003, it may be valid and enforceable.
However, the moment it is sought to be enforced beyond the term and expiry of
the agreement, it becomes prima facie void, as rightly held by the Division
13. It is to be noted that the property being of the local authority the
Rent Control Act did not have any application.
14. The High Court considered the agreement to be a lease overlooking the
fact that under the Rajasthan Municipality Act, 1959 (in short 'Municipal Act')
no lease can be made without following the procedure prescribed under the Rules
15. The controversy can be looked at from another angle. For a period of 11 months there was no attempt to modify the rent fixed
under the contract. On the expiry of the period a fresh agreement has to be
entered into. That has to be on agreed terms. In that view of the matter the
question of enhancement of rent unilaterally does not arise.
16. It is to be noted that even the original agreement in clause 8 permitted
the Council to issue such orders from time to time in relation to the
conditions. If the view expressed by the First Appellate Court and the High
Court is accepted then the power to issue orders from time to time in relation
to the conditions becomes redundant. Once there is no dispute about the power
of enhancement, the question of enhancing the rent once by 10% and thereafter
to enhance it on consent of both the parties is clearly without any foundation.
17. In the circumstances it is to be held that the agreement was for a
period of 11 months. For continuance a fresh agreement was required to be
entered into. If no agreement existed between the parties, the question of
unilateral possession does not arise. Since the power of enhancement has been
considered on the basis of clause 8, the question of restraining it to a
one-time exercise is clearly without any foundation as the clause itself
permits issue of orders "from time to time". Additionally, in the background
of the scope of Section 38 of the Specific Relief
Act, the First Appellate Court and the High Court were not justified in
granting relief to the respondent. In the normal course we would have left
fixation of rent to the authorities. Considering the long passage of time while
deciding the question of law, we feel interest of justice would be best served
if the rent is enhanced to Rs.1,000/- from 1.1.2007 and Rs.700/- for the previous
three years. The agreement on the aforesaid terms shall be duly entered into by
18. The appeals are accordingly disposed of without any order as to costs.
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