1986 JTR(SC) 159
1986 AIR(SC) 1194 ; 1986 AllLJ 1027 ; 1986 3 BomCR(SC) 98 ; 1986 2 CurCC(SC) 533 ; 1986 JLJ 566 ; 1986 MhLJ(SC) 506 ; 1986 MPLJ 499 ; 1986 2 RCR(Rent) 253 ; 1986 2 RentLR 260 ; 1986 1 Scale 916 ; 1986 3 SCC 83 ; 1986 2 SCR 839 ; 1986 2 UJ 535
SUPREME COURT OF INDIA
R.S. PATHAK; V. BALAKRISHNA ERADI AND R.B. MISRA, JJ.
Nanakram, Appellant
Versus
Kundalrai, Respondent.
Civil Appeals Nos. 5371 of 1983 and 1200 (N) 1979, D/-29-4-1986.
WITH
M/s. Kakubhai and Co. Appellant
Versus
Nathmal, Respondent.
(A) The Rent Control Order imposes a statutory framework requiring landlords to obtain prior written permission from the Controller to terminate a lease, strictly regulating declarations of vacancy and subsequent re-letting to ensure controlled succession. Under Cl. 22, landlords must provide intimation of vacancy to the Deputy Commissioner and are barred from letting except in accordance with Cl. 23, which mandates that the property be offered to specified priority persons by the Deputy Commissioner. Cl. 23 vests discretionary power in the Deputy Commissioner to direct re-letting and empowers the State Government under Cl. 30 to exempt certain classes of property, such as non-residential buildings constructed before January 1, 1967, from Chapter III provisions. These provisions were held not to render a lease void inter-partes merely because of non-compliance, provided the Deputy Commissioner does not actively intervene under Cl. 28 to evict the tenant.
(B) A lease contravening Cl. 22 is not void between the parties; it remains operative as a valid contract unless and until the competent authority acts. The statutory prohibition is not intended to invalidate private agreements but to regulate procedure, and the remedies for breach are enforcement by the authority rather than automatic nullity. The burden of proving a vacancy and compliance with Cl. 22 lies on the landlord seeking termination. The exemption notified under Cl. 30 is prospective in nature and does not retrospectively validate prior non-compliance.
Facts of the case:
The landlord sought permission to terminate tenancies in two separate properties on the ground that he required the premises for personal use or because the tenant was in unauthorized occupation. In one property, constructed before January 1, 1967, the tenant had been in occupation since 1968, and the landlord argued that the lease was void due to non-compliance with Cl. 22. In the other property, a lease executed in 1953 and 1961 was challenged as void for the same reason. The tenants contended that the lease was valid as between the parties and that the landlord could not assail it in a proceeding for termination.
Findings of Court:
The Court held that Cl. 22 and Cl. 23 regulate procedure and do not declare a lease void ab initio. If the Deputy Commissioner does not exercise the power of eviction under Cl. 28, the lease remains binding between the landlord and tenant. The landlord is not entitled to urge the lease is void in a proceeding for permission to terminate or for possession. The exemption Notification is prospective only and does not operate retrospectively. A finding of fact as to the occurrence of a vacancy in 1961 was not interfered with.
Issues:
Whether a lease executed in violation of Cl. 22 of the Rent Control Order is void and whether a landlord can challenge the validity of such a lease in a proceeding for permission to terminate the tenancy or for eviction.
Ratio Decidendi:
The statutory scheme under Cl. 22 and Cl. 23 is regulatory, not annulling. The lease remains valid as a contract between the parties, and neither party can attack it in inter-partes proceedings unless and until the competent authority acts to evict the tenant under Cl. 28. The exemption Notification is prospective, and the landlord cannot rely on the alleged voidness of the lease to defeat a tenants occupancy.
Result:
Both appeals were allowed. The appellate orders and the High Court decrees setting aside the leases and declaring them void were set aside. The tenants were permitted to continue in possession subject to the terms of the lease, and the respective parties bore their costs.
(A) The Rent Control Order imposes a statutory framework requiring landlords to obtain prior written permission from the Controller to terminate a lease, strictly regulating declarations of vacancy and subsequent re-letting to ensure controlled succession. Under Cl. 22, landlords must provide intimation of vacancy to the Deputy Commissioner and are barred from letting except in accordance with Cl. 23, which mandates that the property be offered to specified priority persons by the Deputy Commissioner. Cl. 23 vests discretionary power in the Deputy Commissioner to direct re-letting and empowers the State Government under Cl. 30 to exempt certain classes of property, such as non-residential buildings constructed before January 1, 1967, from Chapter III provisions. These provisions were held not to render a lease void inter-partes merely because of non-compliance, provided the Deputy Commissioner does not actively intervene under Cl. 28 to evict the tenant.
(B) A lease contravening Cl. 22 is not void between the parties; it remains operative as a valid contract unless and until the competent authority acts. The statutory prohibition is not intended to invalidate private agreements but to regulate procedure, and the remedies for breach are enforcement by the authority rather than automatic nullity. The burden of proving a vacancy and compliance with Cl. 22 lies on the landlord seeking termination. The exemption notified under Cl. 30 is prospective in nature and does not retrospectively validate prior non-compliance.
Facts of the case:
The landlord sought permission to terminate tenancies in two separate properties on the ground that he required the premises for personal use or because the tenant was in unauthorized occupation. In one property, constructed before January 1, 1967, the tenant had been in occupation since 1968, and the landlord argued that the lease was void due to non-compliance with Cl. 22. In the other property, a lease executed in 1953 and 1961 was challenged as void for the same reason. The tenants contended that the lease was valid as between the parties and that the landlord could not assail it in a proceeding for termination.
Findings of Court:
The Court held that Cl. 22 and Cl. 23 regulate procedure and do not declare a lease void ab initio. If the Deputy Commissioner does not exercise the power of eviction under Cl. 28, the lease remains binding between the landlord and tenant. The landlord is not entitled to urge the lease is void in a proceeding for permission to terminate or for possession. The exemption Notification is prospective only and does not operate retrospectively. A finding of fact as to the occurrence of a vacancy in 1961 was not interfered with.
Issues:
Whether a lease executed in violation of Cl. 22 of the Rent Control Order is void and whether a landlord can challenge the validity of such a lease in a proceeding for permission to terminate the tenancy or for eviction.
Ratio Decidendi:
The statutory scheme under Cl. 22 and Cl. 23 is regulatory, not annulling. The lease remains valid as a contract between the parties, and neither party can attack it in inter-partes proceedings unless and until the competent authority acts to evict the tenant under Cl. 28. The exemption Notification is prospective, and the landlord cannot rely on the alleged voidness of the lease to defeat a tenants occupancy.
Result:
Both appeals were allowed. The appellate orders and the High Court decrees setting aside the leases and declaring them void were set aside. The tenants were permitted to continue in possession subject to the terms of the lease, and the respective parties bore their costs.
A.Chauhan, A.K.Sanghi, J.I.Jain, LATA KRISHNAMURTHY, M.N.Phadke, N.M.GHATATE, P.H.Parekh, S.V.DESHPANDEY, V.A.BOBDE, V.N.Phadke
Judgment
PATHAK, J. :- These are two civil appeals by special leave. The question common to these appeals is whether a lease concluded between a landlord and a tenant in contravention of Cl. 22 of the Central Provinces and Berar Letting of Houses and Rent Control Order, 1949 (hereinafter referred to as the Rent Control Order) can be assailed by the landlord as a void transaction in a proceeding between the parties to the lease?
2. Civil Appeal No. 5317 of 1983 is concerned with a shop described as Block No. 5 in a non-residential building situated in Dharampeth, Nagpur. The respondent is the landlord and the appellant is the tenant. The building was constructed before January 1, 1967, and the appellant became a tenant from October 1, 1968.
3. Clause 13 of the Rent Control Order provides that no landlord can determine a lease except with the previous written permission of the Controller, for which he must apply in writing to the Controller. Cl. 13(3)(vi) provides that if after hearing the parties the Controller is satisfied that the landlord needs the premises for himself the Controller must grant the landlord permission to determine the lease. On January 19, 1980 the respondent petitioned the Controller for permission on the ground that he required the premises occupied by the appellant as his son wanted to commence business therein.
4. It may be pointed out at this stage that Cl. 22 in Chapter III of the Rent Control Order requires :
"22(1) Every landlord of a house situate in an area to which this Chapter extends, shall -
(a) within seven days from the date of the extension of this chapter, if the house is vacant on such date; or
(b) within seven days from the date on which the landlord becomes finally aware that the house will become vacant or available for occupation by himself or for other occupation on or about a specified date;
give intimation of this fact to the Deputy Commissioner of the district in which the area is included or such other officer as may be specified by him, in the Form given in the Schedule appended to this Order, and shall not let or occupy the house except in accordance with Cl. 23.
(2) No person shall occupy any house in respect of which this chapter applies except under an order under sub-clause (1) of Cl. 23 or Cl. 24 or on an assurance from the landlord that the house is being permitted to be occupied in accordance with sub-cl. (2) of Cl. 23."
Clause 23 provides :
"23. (1) On receipt of the intimation in accordance with Cl. 22, the Deputy Commissioner may, within fifteen days from the date of receipt of the said intimation, order the landlord to let the vacant house to any person holding an office of profit under the Union or State Government or to a displaced person or to an evicted person and thereupon notwithstanding any agreement to the contrary, the landlord shall let the house to such person and place him in possession thereof immediately, if it is vacant or as soon as it becomes vacant :
Provided that, if the landlord has, in the intimation given under Cl. 22, stated that he needs the house for his own occupation, the Deputy Commissioner shall, if satisfied after due enquiry that the house is so needed, permit the landlord to occupy the same.
(2) If no order is passed and served upon the landlord within the period specified in sub-cl. (1), he shall be free to let the vacant house to any person."
Clause 30 of the Rent Control Order empowers the State Government to exempt, by Notification in the Official Gazette, any house or class of houses or any person or class of persons from all or any of the provisions of the Rent Control Order. On October 24, 1968 a Notification was issued under the said Cl. 30 exempting from all the provisions of Chapter III of the Rent Control Order any house used for a non-residential purpose if it was constructed before January 1, 1967.
5. On September 23, 1980 the respondent submitted in writing that the building comprising the premises in question had been constructed for a non-residential purpose prior to January 1, 1967 and the appellant had entered into its tenancy from October 1, 1968, and, therefore as the tenancy had been created in violation of Chapter III of the Rent Control Order it was void and there was no valid relationship of landlord and tenant. The appellant filed his reply stating that Chapter III did not apply to buildings constructed before January 1, 1967 and, therefore, even if no intimation had been given as required by Chapter III the tenancy did not become void. On October 6, 1980 the Controller found that the premises had been constructed prior to January 1, 1967 and the appellant had become a tenant therein for a non-residential purpose from October 1, 1968 and that the premises were exempt from the provisions of Chapter III. He held that the respondents petition for the grant of permission was maintainable. As regards the respondents submission that the tenancy was void he held that the plea was premature and could not be sustained without evidence being adduced on the record. Accordingly he directed the parties to lead evidence.
6. Against the order of the Controller the respondent appealed, and the Appellate Authority allowed the appeal on February 17, 1981 holding that the Notification of exemption operated from October 24,1968 and the tenancy in favour of the appellant had become void. He observed that at the time when the tenancy was created the provisions of Chapter III were in operation and there was no exemption from such operation. The appellant filed a review petition contending that the appeal filed by the respondent was not maintainable and could not be entertained by the Appellate Authority. He also questioned the findings on the merits rendered by the Appellate Authority in the appeal. The review petition was rejected on March 2, 1982.
7. The appellant then filed a writ petition in the Bombay High Court which was dismissed by its judgment and order dated November 22, 1982. The High Court held that the appeal filed by the respondent was maintainable under Cl. 21(1) of the Rent Control Order, that the exemption provided by the Notification of October 24, 1968 operated prospectively only, that therefore Cl. 22 in Chapter III was in operation at the time when the tenancy was entered into, and consequently the Appellate Authority was justified in holding that as no intimation was given as contemplated by Cl. 22 the tenancy was invalid.
8. In Civil Appeal No. 1200 of 1979 the respondent is the owner of a shop situated at Akola. He instituted a suit for possession of the shop alleging that it was first taken on lease by one Shamji Bhai in 1953 and during the next year it passed into the joint possession of Shamji Bhai and the appellant Kaku Bhai as tenants. Some time after November 1961 the appellant Kaku Bhai alone continued in possession. The respondent contended that the lease in favour of Shamji Bhai in 1958 and thereafter to Kaku Bhai in 1961 were invalid and inoperative inasmuch as they were entered in violation of Cl. 22 of the Central Provinces and Berar Letting of Houses and Rent Control Order, 1949 (the Rent Control Order), as no intimation was given that the premises had fallen vacant in 1958 when let out to Shamji Bhai nor in 1961 when let out to the appellant Kaku Bhai. Alleging that the appellant Kaku Bhai was in possession not as a tenant but as a mere licencee or a trespasser the respondent claimed possession and mesne profits. The appellant resisted the suit and inter alia pleaded that he was a tenant of the premises, and that having accepted him as tenant it was not open to the respondent to take the plea that the lease was void. The trial Court held that the lease in favour of Shamji Bhai and also the lease in favour of the appellant were void because intimation of the vacancy had not been communicated to the statutory authority at the relevant time and, therefore, the appellant must be treated as being in permissive possession as a licencee. The suit was decreed. On appeal the Bombay High Court held that the lease in favour of Shamji Bhai and thereafter the lease in favour of the appellant were hit by Cl. 22(2) of the Rent Control Order and were, therefore, void. The appeal was dismissed.
9. The point common to both the appeals is whether it is open to a landlord in a proceeding for permission to terminate the tenancy and for possession of the premises to urge that the lease between the parties is void inasmuch as it was entered in contravention of Cl. 22 of the Rent Control Order.
10. It is contended for the appellants in both the appeals that it is is not open to the landlord to take such a plea because although the lease may not be binding on the Controller or the Deputy Commissioner it is operative as between the parties and cannot be questioned by either in a proceeding instituted by the one against the other. The appellants rely on Murlidhar Agarwal v. State of U.P., (1975) 1 SCR 575. That was a case arising under the U.P. (Temporary) Control of Rent and Eviction Act, 1947 (hereinafter referred to as the U.P. Rent Act). The Court was concerned with the question whether a suit filed by the appellants for recovery of possession, on the basis that the tenancy created by the predecessor-in-interest of the appellants in favour of the respondent had expired, was maintainable in law inasmuch as it was instituted without obtaining the permission of the District Magistrate under S. 3(1) of the U.P. Rent Act. The trial Court decreed the suit, but on appeal the High Court reversed the decree holding that the suit was not maintainable in view of S. 3 and, in the circumstances, it dismissed the suit. On appeal to this Court, the Court repelled the plea raised by the appellants-landlords that the respondent was not a tenant and held that, therefore, permission was necessary in order to maintain the suit. In taking that view this Court referred to Udhoo Dass v. Prem Prakash, AIR 1964 All 1 where a Full Bench of the Allahabad High Court had laid down that a lease made in violation of the provisions of S. 7(2) of the U.P. Rent Act would be valid between the parties and would create a relationship of landlord and tenant between them although it might not bind the Rent Control Officer. This Court did not doubt the correctness of the principle propounded in that case and held that the respondent before them was a tenant. Learned counsel for the respondent invited our attention to Waman Shriniwas Kini v. Ratilal Bhagwandas & Co., 1959 Supp (2) SCR 217. That was a case under the Bombay Rents. Hotel and Lodging House Rates Control Act, 1947. The appellant was a tenant of a shop. He let it out to sub-tenants. The respondent-landlord brought a suit for ejectment against the appellant on the ground that S. 15 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 prohibited sub-letting and that as a landlord he had a right to evict the tenant on that ground. When the matter came in appeal to this Court, the Court held that even though the lease between the parties recognised sub-letting, as the suit was brought not for the enforcement of the agreement but to enforce the right of eviction flowing directly from an infraction of S. 15 of the Act, the respondent was entitled to sue for ejectment.
11. The provisions of Cl. 22 and Cl. 23 of Chapter III of the Rent Control Order have been extracted earlier. It is apparent that under Cl. 22(1) every landlord of a house situated in an area to which those provisions extend is required by the statute to give intimation of a vacancy to the Deputy Commissioner. Cl. 22(1) further declares that the landlord shall not let or occupy. the house except in accordance with Cl. 23. Cl. 22(2) provides that no person shall occupy a house except under an order under Cl. 23(1) or Cl. 24 or on an assurance from the landlord that the house is being permitted to be occupied in accordance with Cl. 23(2). Cl. 23 provides that the Deputy Commissioner may, within fifteen days from the date of receipt of the intimation of a vacancy, order the landlord to let the vacant house to any person holding an office of profit under the Union or State Government or to a displaced person or to an evicted person and thereupon, notwithstanding any agreement to the contrary, the landlord is obliged to let the house to such person and place him in possession thereof. If the landlord states that he needs the house for his own occupation he must satisfy the Deputy Commissioner in that behalf. The clause provides further that if no order is passed and served upon the landlord within the period mentioned in Cl. 23(1), it is open to the landlord to let the vacant house to any person. Cl. 28 empowers the Deputy Commissioner to take or cause to be taken such steps and use or cause to be used such force, as may be reasonably necessary for the purpose of securing compliance with, or for preventing or rectifying any contravention of, the Rent Control Order.
12. Now, in deciding Murlidhar Agarwal (AIR 1974 SC 1924) (supra) this Court approved of the proposition of law laid down by the Allahabad High Court in Udhoo Das (AIR 1964 All 1) (FB) (supra). The High Court had the provisions of S. 7 and S. 7A of the U.P. Rent Act before it. Section 7 required the landlord to report to the District Magistrate if his house had fallen vacant or was about to fall vacant, and thereupon the District Magistrate was empowered to direct the landlord to let the premises to a person specified in the order. The High Court dealt with the question whether a lease between the landlord and another person in violation of the order of the District Magistrate would be a valid lease as between the parties thereto. It held that such a lease would be valid between the parties. It would not, however, be binding on the District Magistrate. That it would not be binding on the District Magistrate was evidenced by the power conferred upon him under S. 7A(1) of the U.P. Rent Act to take proceedings for the eviction of such tenant. S. 7A(1) provided that if the vacancy of an accommodation was not reported or a person occupied an accommodation in contravention of an order issued under S. 7(2) the District Magistrate could require him to show cause why he should not be evicted from it. If he failed to show cause the District Magistrate could direct him to vacate the accommodation and if he failed to vacate the District Magistrate could use force to evict him. The power conferred on the District Magistrate to take proceedings for the eviction of such tenant was discretionary. It was open to the District Magistrate not to exercise the power if there was undue delay or if for other good reason he found it inexpedient to do so. If he did not exercise the power conferred by S. 7A(1), the lease between the landlord and the other person would continue to subsist and that other person would continue to enjoy the status of a tenant. It would be a valid lease. It could not be regarded as a void lease. In a case under the Rent Control Order, with which these appeals are concerned, the position appears to be materially similar. The landlord is prohibited by Cl. 22(1) from occupying the house or granting a lease except in accordance with Cl. 23. There is a prohibition under Cl. 22(2) on any other person seeking to occupy the house, except again in accordance with Cl. 23. In Cl. 23 it is the Deputy Commissioner who will order the landlord to let the vacant house to a person indicated by him, a person who falls in one of the categories specified in the clause or, if he is satisfied, he may permit the landlord himself to occupy the house. As was the position under the U.P. Rent Act, so also under the Rent Control Order, the Deputy Commissioner has power under Cl. 28 to take steps and use force for the purpose of securing compliance with, or for preventing or rectifying, any contravention of the Rent Control Order. Cl. 28 speaks of a power conferred on the Deputy Commissioner in that behalf. Nowhere does the Rent Control Order mandate that the Deputy Commissioner must eject a person who has entered into possession of a house in violation of Cl. 22. If upon a view of the circumstances prevailing then, the Deputy Commissioner takes no action in the matter, there is no reason why the lease between the landlord and the tenant, although inconsistent with Cl. 22, should not be binding as between the parties thereto. It is not a void transaction. There is nothing in the Rent Control Order declaring it to be so. Now if the lease is not void then it is not open to either party to avoid the lease on the ground that it is inconsistent with Cl. 22. The parties would be bound, as between them, to observe the conditions of the lease, and it cannot be assailed by either party in a proceeding between them.
13. On this view alone both the appeals must be allowed.
14. In Civil Appeal No. 5317 of 1983 an alternative point has been raised on behalf of the appellant. It is urged that although the Notification dated October 24, 1968 exempts from the provisions of Chapter III of the Rent Control Order a house used for a non-residential purpose if it is constructed before January 1, 1967 the Notification must be construed to be retrospective in operation, and that, therefore, the tenancy created in favour of the appellant with effect from October 1, 1968 is exempted from the operation of Cl. 22 of the Rent Control Order. In other words, because of the exemption the tenancy could not be regarded as violating the provisions of Cl. 22 and no question could arise of the tenancy being void on that account. It is not possible to accept the contention. Ex facie the terms of the Notification are prospective only. There is nothing to suggest that they operate retrospectively also. It is true that they refer to houses constructed before January 1, 1967, but that is by way of description only, in order to define the category of houses covered by the operation of the exemption conferred by the Notification. Words used merely to define the subject-matter of the exemption should not be confused with the dimension of time during which the exemption operates. This point must fail.
15. In Civil Appeal No. 1200 of 1979 another point raised on behalf of the appellant is that no vacancy of the premises took place in 1961 when the appellant was in possession as a tenant. The case is that the appellant was in joint possession with Shamji Bhai before that, and the tenancy continued on Shamji Bhai surrendering his tenancy rights in November 1961. The trial Court and the High Court have concurrently held as a finding of fact that a vacancy arose in November 1961 and a tenancy was created by the respondent in favour of the appellant on that occasion. We do not propose to interfere with that finding.
16. In the result, on the view taken by us on the first point in each of the two appeals, the appeals are allowed. In Civil Appeal No. 5317 of 1983, we set aside the appellate order dated February 17, 1981 of the Appellate Authority under the Rent Control Order and the judgment and order of the Bombay High Court in the writ petition filed by the appellant insofar as they proceed on the finding that the lease is void. In Civil Appeal No. of 1979 we set aside the judgment and decree of the Bombay High Court and dismiss the suit filed by the respondent. The parties in each appeal will bear their costs.
Appeals allowed.
For Citation AIR 1986 SC 1194
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