REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.710 OF 2020  (arising out of SLP (C) No. 28951 of 2019)

N. MOTILAL & ORS.          ...APPELLANT(S)  

VERSUS

FAISAL BIN ALI & ANR.    ...RESPONDENT(S)

J U D G M E N T

ASHOK BHUSHAN,J.

This appeal has been filed by the appellants, who

are  tenants  of  a  non-residential  building,

challenging the judgment of the High Court for the

State of Telangana at Hyderabad dated 30.08.2019 by

which civil revision petition filed by the appellants

challenging the order dated 30.04.2019 of the Chief

Judge, City  Small Causes Court, Hyderbad has been

dismissed.  

2. Brief facts of the case necessary to be noted for

deciding the appeal are:

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The  appellants  are  tenants  of  a  Shop  No.M-1-

938/39  admeasuring  390  sq.  ft.  in  New  Marketing

Complex, Tilak Road, Abids, Hyderabad. The appellants

had entered into a lease agreement dated 27.08.1990

with the landlord by which the premises was let out

for 20 years to the appellants from 21.08.1990 to

31.07.2010.  The  previous  landlord  Osman  Bin  Saleh

transferred  the  premises  in  question  in  favour  of

respondent Nos.1 and 2 by registered sale deed dated

28.03.2008. The appellants were tenants on a monthly

rent of Rs.1840/- excluding electricity charges and

water charges. Respondent Nos. 1 and 2 who purchased

the property on 28.03.2008 filed an application on

29.09.2009 for enhancement of rent. The application

was contested by the appellants. The appellants had

admitted  the  tenancy  at  the  monthly  rate  of

Rs.1840/-. The landlord had claimed that the market

rent of the similar premises is Rs.75/- per sq. ft.

and as per the market rent value the monthly rent of

the shop shall be Rs.29,250/-. The Rent Controller,

Hyderabad  by  order  dated  04.11.2013  allowed  the

application  of  the  respondents  and  fixed  the  fair

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rent  at  the  rate  of  Rs.60/-  per  sq.  ft  i.e.

Rs.23,400/-.  The  tenants  were  directed  to  pay  the

fair rent from the date of filing of the petition

with future enhancement of 10% for every two years.

Aggrieved by the judgment of the III Additional Rent

Controller  an  appeal  was  filed  by  the  appellants

which appeal was dismissed by the Chief Judge, City

Small  Causes  Court  vide  judgment  and  order  dated

05.06.2017.  Against  the  Appellate  order  dated

05.06.2017 a civil revision petition was allowed by

the  High  Court  on  20.09.2018  and  the  matter  was

remanded  back  to  the  Appellate  Authority.  After

remand,  Chief  Judge,  City  Small  Causes  Court  vide

order  dated  30.04.2019  dismissed  the  R.A.No.5  of

2014.  Aggrieved  by  which  judgment  Civil  Revision

Petition No.1650 of 2019 was filed by the appellants

in the High Court. The High Court after considering

the submissions of the parties dismissed the revision

petition  vide  its  judgment  dated  30.08.2019  which

judgment  has  been  challenged  by  the  appellants  in

this appeal.

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3. Shri  Yelamanchili  Shiva  Santosh  Kumar,  learned

counsel for the appellants submits that the contract

of tenancy between the appellants and the landlord

entered  into  on  27.08.1990  was  to  subsist  till

31.07.2010,  hence,  the  respondent-landlord  had  no

authority or jurisdiction to file the application for

enhancement of rent on 29.09.2009. He submits that

Section 4 of the Telangana Building (Lease, Rent and

Eviction) Control Rent, 1960 has no application on

the  contractual  tenancy.  It  is  submitted  that

landlord is bound by the contractual rent and during

subsistence  of  contractual  tenancy  he  cannot  be

allowed to file application for enhancement of rent.

He  submits  that  permitting  the  landlord  to  file

application for enhancement of rent even though he is

bound  by  a  contract,  will  be  permitting  something

which is against Rent Control Legislation. The Rent

Control  Legislations  have  to  be  interpreted  in  a

manner so as to save tenant from exorbitant rent.  

4. Learned counsel for appellants has placed strong

reliance on minority judgment of this Court delivered

by  Bhagwati,  J.  in  M/s.  Raval  and  Co.  vs.  K.G.

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Ramachandran,  1974(1)  SCC  424.  Reliance  has  been

placed  on  paragraphs  25  to  30  of  the  minority

judgment which had taken the view that it is only

when the contract of tenancy is lawfully determined

that  the  landlord  becomes  entitled  to  apply  for

fixation  of  fair  rent  and  during  subsistence  of

contractual tenancy landlord is precluded from making

an  application  for  fixation  of  fair  rent.  Learned

counsel  further  submits  that  the  respondents  have

purchased  the  property  for  a  meagre  amount  of

Rs.5,24,500/- in the year 2008 and looking to the

fair rent fixed by the Rent Controller 20 months of

rent covers the sale price of the property.  

5. Learned counsel for the appellants has further

submitted  that  Model  Rent  Control  Legislation  has

been  circulated  by  the  Central  Government  to  all

States to uniformly amend the State Legislation where

it  is  now  provided  that  during  subsistence  of

contract  landlord  is  precluded  from  making  any

application for fair rent.  

6. Smt. Kiran Suri, learned senior counsel appearing

for the respondents refuting the submission of the

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counsel for the appellants contends that the reliance

of appellants on a minority judgment of this Court in

M/s.  Raval  and  Co.  is  misplaced.  The  majority

judgment  delivered  by  Alagiriswami,  J.  has

categorically  laid  down  that  in  Section  4  of  the

Tamil Nadu (Lease, Rent and Eviction) Control Act,

1960(Tamil Nadu Act 18 of 1960) which is pari materia

of Section 4 of Telangana Buildings (Lease, Rent and

Eviction)  Control  Act,  1960  permits  filing  of

application for fixing of fair rent by the landlord

during  subsistence  of  contractual  tenancy.  She

further submits that the judgment of this Court in

M/s. Raval & Co. has been further approved by seven-

Judge judgment in  V. Dhanapal Chettiar vs. Yesodal

Ammal, 1979(4) SCC 214. It is further submitted that

the appellants cannot be allowed to make submission

in regard to sale consideration of the property, sale

between  the  relatives,  consideration  was  fixed

accordingly.  

7. We  have  considered  the  submissions  of  learned

counsel of the parties and perused the records.

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8. The moot question to be answered in this appeal

is  as  to  whether  during  currency  of  contractual

tenancy  i.e.  during  the  currency  of  agreed  rent

between the landlord and the tenant whether landlord

is  precluded  from  making  an  application  for

determination  of  fair  rent.  Section  4  of  the

Telangana  Act,  1960  provides  for  determination  of

fair rent. Section 4(1) provides:

“Section 4(1) The Controller shall, on application by the tenant or landlord of a building  fix  the  fair  rent  for  such building after holding such inquiry as the Controller thinks fit.”

9. The  above  provision  gives  right  to  both  the

tenant  and  the  landlord  of  a  building  to  make  an

application for fixing fair rent. The provision of

Section 4(1) cannot be read in a manner that it is

not  applicable  with  regard  to  the  contractual

tenancy. The Rent Control Legislations are enacted to

protect both tenant and the landlord. In the event

the  submission  of  the  appellants  is  accepted  that

during the currency of the contract of tenancy, no

one can file application for fixing of fair rent, the

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said provision shall operate detrimental to both the

tenant and the landlord. This can be explained by

taking an illustration. A tenant, who is in urgent

need  of  premises,  entered  into  a  contract  with

landlord where he had to agree to pay an unreasonable

higher rent during the force of circumstances, if the

tenant has no right to make an application for fixing

of fair rent during the currency of tenancy, the said

provision  will  harshly  operate  against  the  tenant.

The  concept  of  determination  of  fair  rent  is  to

operate equal for the tenant as well as the landlord.

The object of the Act is that neither the landlord

should charge more than the fair rent of the premises

nor tenant should be forced to pay higher rent than

the fair rent. The statutory scheme brought in the

statute by way of Section 4 which is a beneficial

both to the tenant as well as the landlord.

10. The  Constitution  Bench  of  this  Court  in  M/s.

Raval & Co. had occasion to consider Section 4 of the

Tamil Nadu Act 18 of 1960. Section 4 of the said Act

provides for application for fixation of the fair rent

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for  the  tenant  as  well  as  the  landlord.  In  the

majority judgment speaking through Alagiriswami, J. in

paragraphs 18 and 19 following has been laid down:

“18.  The  provisions  of  the  Act  under consideration  show  that  they  are  to  take effect  notwithstanding  any  contract  even during the Subsistence of the contract. We have already referred to the definition of the  terms  'landlord'  and  'tenant'  which applies  both  to  subsisting  tenancies  as well as tenancies which might have come to an end. We may also refer to the provision in Section 7(2) which lays down that where the fair rent of a building has not been fixed the landlord shall not claim anything in  addition  to  the  agreed  rent,  thus showing  that  the  fair  rent  can  be  fixed even where there is an agreed rent. That is why we have earlier pointed out that the various English decisions which provide for fixation of rent only where the contractual tenancy has come to an end do not apply here. We may also refer to Sub-section (3) of Section 10 which deals with cases where a landlord requires a residential or non- residential  building  for  his  own  use. Clause  (d)  of  that  sub-section  provides that where the tenancy is for a term the landlord cannot get possession before the expiry of the term, thus showing that in other cases of eviction covered by Section 10 eviction is permissible even during the continuance of the contractual tenancy if the conditions laid down in Section 10 are satisfied.

19……………A close analysis of the Madras Act shows that it has a scheme of its own and it is intended to provide a complete code in respect of both contractual tenancies as well as what are popularly called statutory

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tenancies.  As  noticed  earlier  the definition of the term 'landlord' as well as  the  term  'tenant'  shows  that  the  Act applies to contractual tenancies as well as cases  of  "statutory  tenants"  and  their landlords.  On  some  supposed  general principles  governing  all  Rent  Acts  it cannot  be  argued  that  such  fixation  can only be for the benefit of the tenants when the  Act  clearly  lays  down  that  both landlords  and  tenants  can  apply  for fixation of fair rent. A close reading of the Act shows that the fair rent is fixed for  the  building  and  it  is  payable  by whoever is the tenant whether a contractual tenant or statutory tenant. What is fixed is not the fair rent payable by the tenant or to the landlord who applies for fixation of  fair  rent  but  fair  rent  for  the building, something like an incident of the tenure regarding the building.”

11. Learned  counsel  for  the  appellants  has  placed

reliance  on  the  minority  judgment  delivered  by

Bhagwati, J. for himself and K.K. Mathew, J. although

the minority judgment has held that landlord can make

an application for determination of fair rent only

after  the  determination  of  tenancy  and  during

subsistence of contractual rent no application for

fair rent can be given. We are bound by the majority

opinion of the Constitution Bench in M/s. Raval & Co.

We further notice that both the learned counsel have

referred to seven-Judge Bench judgment of this Court

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in  V. Dhanapal Chettiar vs. Yesodal Ammal (supra).

Seven-Judge  Bench  had  occasion  to  refer  to  the

Constitution  Bench  judgment  in  M/s.  Raval  &  Co.

(supra) which was quoted with approval. Referring to

majority judgment in M/s. Raval & Co.’s case seven-

Judge Bench made following observation:

“15………Alagiriswami J. at page 635 after having made that observation with reference to Bhaiya Panjalat's case has said-"Be that as it may, we are now concerned with the question of fixation of a fair rent." In our  opinion  the  majority  decision  with regard to Section 4 was undoubtedly correct and the minority stretched the law, if we may say so with respect, too far to hold that  Section  4 was  not  available  to  the landlord.  It  should  be  remembered,  as  we have said above, that the field of freedom of contract was encroached upon to a very large extent by the State Rent Acts. The encroachment  was  not  entirely  and  wholly one sided. Same encroachment was envisaged in the interest of the landlord also and equity and justice demanded a fair play on the  part  of  the  legislature  not  to completely ignore the helpless situation of many  landlords  who  are  also  compared  to some big tenants sometimes weaker Section of the society. As for example a widow or a minor lets out a family house in a helpless situation  to  tide  over  the  financial difficulty and later wants a fair rent to be determined. Again suppose for instance in  a  city  there  is  an  apprehension  of external  aggression,  severe  internal disturbances or spread of epidemics, A man in  possession  of  his  house  may  go  to

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another town letting out his premises to a tenant  financially  strong  and  of  strong, nerves at a rate comparatively much lower than the prevailing market rates. Later on, on  the  normalization  of  the  situation  as against  the  agreed  rate  of  rent  be approaches  the  Building  Controller  for fixing  a  fair  rent  in  accordance  with  a particular State Rent Act. Why should she or  he  be  debarred  from  doing  so.  The statute  gives  him  the  protection  and enables the Controller to intervene to fix a fair rent as against the term of contract between the parties. In a large number of cases  it  is  the  tenant  who  gets  this protection. But in some as in the case of Raval  the  landlord  needs  and  gets  the protection.  But  this  is  not  a  direct authority on the point of notice.”

12. The  above  observation  clearly  indicates  that

majority view of the Constitution Bench expressed by

Alagiriswami,  J.  was  quoted  with  approval  and  the

seven-Judge Bench held that the encroachment on the

freedom of contract between the landlord and tenant

has been envisaged for protecting both the tenant and

landlord.  The example as quoted in paragraph 15 as

extracted  above  clearly  indicates  that  denial  of

landlord in moving application for fixation of rent in

several cases may operate against the interest of the

landlord.

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13. The Constitution Bench judgment in  M/s. Raval &

Co.’s case as well as seven-Judge Bench judgment in V.

Dhanapal  Chettiar’s  case are  binding  which

categorically  had  laid  down  that  application  for

determination of fair rent can be made both by the

landlord  and  tenant  which  can  be  made  even  during

currency of contractual tenancy. We, thus, find the

submission  made  by  the  learned  counsel  for  the

appellants in the above regard without any substance.

14. The submission of the counsel for the appellants

that the consideration on which property was purchased

by the landlord in 2008 is equivalent to 20 months’

rent as enhanced by Rent Controller has no bearing on

the issue which has been sought to be raised. The

determination of the fair rent has to be made as per

the  provisions  of  the  1960  Act  and  the  above

submission  in  no  manner  advance  the  case  of  the

appellant.  

15. The last submission of the learned counsel for

the  appellants  is  that  the  Central  Government,

Ministry  of  Housing  and  Urban  Development  has

circulated  a  Model  Rent  Control  Legislation  to  be

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adopted by all the States which precludes the landlord

for  making  application  for  fixation  of  fair  rent

during  the  currency  of  contractual  tenancy  (which

circular has also not been brought on record), suffice

it to say that as per submission of the counsel for

the  appellants  himself  that  Model  Legislations  are

only  guidelines,  which  in  no  manner,  can  have  any

effect on the statutory provisions of 1960 Act which

are still occupying the field. No other submission has

been advanced by the counsel for the appellants.  

16. We  do  not  find  any  merit  in  this  appeal.  The

appeal is dismissed.

......................J.                              ( ASHOK BHUSHAN )

......................J.  New Delhi,     ( M.R. SHAH ) January 30, 2020.        

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