High Court of Punjab and HaryanaCR/1096/1988dismissed

(O&M) Satish Kumar v. Laxmi Narain

2015-12-22Mr. Justice M.M. Aggarwal,Mr. Justice Dr. Shekher Dhawan23 pages

IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH

Date of Decision: 22nd December, 2015 1.

Civil Revision No. 1096 of 1988 Satish Kumar ..Petitioner

Versus

Laxmi Narain and another ..Respondents 2.

Civil Revision No. 1186 of 1989 Laxmi Narain and another

...Petitioners

Versus

Satish Kumar ....Respondent.

Present :

Mr. A.K.Singhal, Advocate for the petitioner in Civil Revision No. 1096 of 1988 and for the respondents in Civil Revision No. 1186 of 1989. Mr. Anil Rathee, Advocate, for the petitioners in Civil Revision No. 1186 of 1989 and for the respondent in Civil Revision No. 1096 of 1988. **** The landlords are the petitioners in Civil Revision No. 1186 of 1989 and the respondents in Civil Revision No. 1096 of 1988. The respondents in Civil Revision No. 1186 of 1989 and the petitioners in Civil Revision No. 1096 of 1988 are the heirs of the original tenant, one Satish Kumar, who died on 22.04.1984. They were brought on record by an order of the learned Single Judge dated 21.05.2003. We will for convenience refer to the parties as the landlords and the tenants. 2.

This Civil Revision No. 1186 of 1989 comes as a reference pursuant to the order of the then learned Chief Justice made in view of an

order dated 17.03.2004 passed by the learned Single Judge directing the office to place the matter before the Chief Justice for constitution of a larger Bench to consider the judgment of another learned Single Judge in

The learned Judge opined that the following questions arise for consideration by a larger Bench:A

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The following provisions of the Haryana Urban (Control of Rent & Eviction) Act, 1973 are relevant:A , -./ $

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The premises were admittedly constructed prior to 31.12.1961. 5.

The landlords filed an application being Rent Case No. 310 of 1975 against the earlier tenant one Moti Ram for fixing the fair rent under Section 4 of the Haryana Urban (Control of Rent & Eviction) Act, 1973 (hereinafter referred to as 'the Haryana Act'). This application was disposed of by an order and judgment dated 26.02.1979. The judgment records the basis on which the application was made and the contention on behalf of the tenant to be as follows:A

(A) The landlords let out the shop on rent to the said Moti Ram for the period 19.09.1971 to 18.09.1972 at the rate of 600/Aper annum. After determination of the tenancy by efflux of time, the status of the said Moti Ram was that of a statutory tenant. The tenancy had been determined by a notice dated 27.06.1975 under Section 106 of the Transfer of Property Act, 1882. The landlords stopped accepting the rent after determining the tenancy. The prevailing market rent for similar premises was not less than 3500/A per annum. There had also been substantial increase in the general level of the Whole Sale Price Index to the extent of about 400/A per annum. The landlords, therefore, sought an order fixing the fair rent at 3900/A per annum.

(B) The earlier, tenant Moti Ram contended that the contractual rent of 600/A per annum was the agreed rent between the parties and that he had not been served with a notice terminating the tenancy. Two of the issues raised by the learned Rent Controller were:A ,

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!0 (C) This application under Section 4 was disposed of by the judgment and order dated 26.02.1979. The Rent Controller held that there was no evidence on record and therefore, considered it appropriate to accept the contractual rent of 600/A per annum to be the basic rent of the premises in question. He also held that there had been a substantial rise in the All India Whole Sale Price Index since the date of the agreed rent and therefore, allowed an increase of 25% on the basic rent determined under Section 4(2) of the Haryana Act from the date of the contractual rent till the date of the filing of the application. The Rent Controller fixed the fair rent in respect of the premises at 786/A per annum.

It was recorded in paragraphA9 of the judgment and order dated 26.02.1979 that it was the admitted case of the parties that the construction over the premises was completed before 31.12.1961. The tenants before us are the heirs of the subsequent tenant Satish Kumar who having died is now represented by his heirs. By an agreement between the landlords and the tenants, the shop was rented out with effect from 27.10.1979 for a sum of 1900/A for a period of six months.

(A) The landlords filed Rent case No. 68 of 1986 under section 4 of the Haryana Act stating that upon the expiry of the period of six months, the tenants became the statutory tenants in respect of the shop. The landlords further claimed that after the year 1979 there had been a manifold increase in rent in respect of similar premises which fetched more than 12000/A per annum. The landlords sought an order fixing the rent accordingly. The Rent Controller framed the following issues:A

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& 3 ! (B) The Rent Controller by a judgment dated 15.01.1988 held that the earlier judgment of the Rent Controller dated 26.02.1979 was a judgment in rem and therefore, the rent fixed by that judgment of 786/A per annum could be taken into consideration, although the tenants were not parties in that matter. In this regard, he relied upon the judgment of this Court in

He held that a petition under Section 4 of the Haryana Act was not maintainable as the fair rent had already been fixed in the earlier matter. He, however, treated the petition to be one under Section 5 of the Haryana Act. Considering the All India Whole

Sale Price Index, the learned Judge held that there was an increase of 64% over the previous fair rent of 786/A per annum which amounted to 503/A per annum. The petitioners would have been entitled to 25% of the increase i.e. 126/A per annum. Accordingly the Rent Controller calculated the fair rent to be 912/A per annum. He, however, held that it was agreed between the parties that the premises had been let out on rent at the rate of 1900/A for the period of six months which aggregated to 3800/A per annum. He accordingly held that the fair rent of the premises in question previously fixed at 786/A per annum in the said judgment dated 26.02.1979 stood increased to 3800/A per annum and no further increase under section 5 of the Haryana Act could be allowed. He, therefore, disposed of the application by holding the amount of 3800/A per annum to be the fair rent of the premises in question.

The appeal against this order was dismissed. The above cross civil revisions have been filed by the parties. Civil Revision No. 1186 of 1989 is filed by the landlords and Civil Revision No. 1096 of 1988 is filed by the tenants. The learned Judge came to the correct decision but for the wrong reasons.

The learned Judge in the order of reference noted that the learned counsel appearing on behalf of the tenants had relied upon the judgment of a learned Single Judge in

who had heldthat the change in tenancy would not affect the fair rent fixed by the Court as fixation of the fair rent is relatable to the building in question and not to the parties in lis. In the reference order, the learned Judge stated that he was unable to subscribe to the view in

illustrating his points as follow:A ,2 / '

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D * '0 A1777 5880C The learned Judge accordingly considered it appropriate that the matter be decided by a larger Bench. 10.

We will now refer to

in respect whereof the order of reference expresses reservation and to the judgments referred to therein. It would be convenient if we were to preface a consideration of these cases by noting that they dealt with the East Punjab Urban Rent Restriction Act, 1949 and not the Haryana Urban (Control of Rent & Eviction) Act, 1973 that falls for our consideration. Certain differences between these Acts answer the reference to a large extent.

11.

The premises were taken in the year 1949 on rent by the respondent at the rate of 8/A per month. Subsequently, the petitioners purchased the property. The petitioners/landlords moved an application under Section 4 of the East

Punjab Urban Rent Restriction Act, 1949 (hereinafter referred to as 'the East Punjab Act') for fixation of fair rent at 27.50/A per month alleging that the basic rent in the year before 01.01.1939 was 20/A per month. The judgment records that the parties had made a statement before the Rent Controller that the basic rent prior to 01.01.1939 was 7.25 per month. The Rent Controller, therefore, after allowing the statutory increases fixed the fair rent at 10/A per month. The judgment noticed that the Rent Controller had not discussed the evidence on record and all that he said was that he had gone through the evidence and was satisfied that the basic rent of the shop should be 7.25 per month. The learned Judge held as under:A

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As we mentioned earlier, the judgment considered the provisions of the East Punjab Act and not the Haryana Act which falls for consideration in the case before us. It will be necessary, therefore, to see whether and if so, how far and in what circumstances the judgment, if affirmed applies to the Haryana Act. Before dealing with this aspect, we will refer to the judgments which were relied upon in

12.

In ! " !

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; This judgment was also under the East Punjab Act and not under the Haryana Act.

13.

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!))%**(the applicants had given their shop on lease in 1949 at 150/A per month. The respondent and one Ishar Lal used, as partners, the premises as a hotel. Ishar Lal applied under the East Punjab Act for fixation of fair rent. The matter was compromised and on 27.07.1950 a consent order was passed by the Rent Controller fixing the fair rent at 80/A per month. Three years later, the respondent applied for fixing the fair rent. The Rent Controller dismissed the petition on the ground that the fair rent had already been fixed in the year 1950. The Appellate Court held that the parties could not by a compromise fix the fair rent and therefore, remanded the case for further enquiry by the Rent Controller. The learned Single Judge dismissing the petition under Article 227 of the Constitution of India challenging the order, held as under:A 7

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These judgments considered the provisions of the East Punjab Urban Rent Restriction Act, 1949 whereas in the case before us the Haryana Urban (Control of Rent & Eviction) Act, 1973 falls for consideration. There is a vital difference between these Acts. The East Punjab Act does not contain a provision similar to sub section (5) of section 4 of the Haryana Act. The Haryana Act expressly states that notwithstanding anything contained in the Act, the Controller may fix the fair rent on the basis of the compromise arrived at between the parties to the proceedings. Thus the Haryana Act entitles the Controller to fix the fair rent on the basis of a compromise between the parties to the proceedings whereas the Punjab Act prohibits the same. For obvious reasons, the second sentence of subAsection

(5) of section 4 of the Haryana Act provides that such rent shall be binding only between the parties and their heirs. A compromise between parties ought not to govern or affect the rights and liabilities of strangers thereto. That would be most inequitable. Moreover, sub section (5) entitles the Controller to fix the fair rent and not the basic rent. In proceedings for fixing

the fair rent under sub section (1) the parties are entitled to have determined first and indeed the Controller must first determine the basic rent. This is on the criteria stipulated in sub section (2) of section 4. The fair rent would then be determined with reference to the basic rent. 15.

This explains the difference between the opening words in section 6 of both the Acts. Section 6 of the East Punjab Act opens with the words "Save as provided in Section 5...........". It prohibits the landlord from claiming or receiving any premium or other like sum in addition to fair rent or any rent in excess of such fair rent when the Controller has already fixed the fair rent under Section 4 of the Act but "Save as provided in Section 5........". The exception is only to the admissible increase in the fair rent provided in section 5 of the Punjab Act which reads as under:A "

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Section 6 of the Haryana Act in contrast opens with the words "Save as provided in this Act............". These words are wider than those of section 6 of the East Punjab Act. This is obviously because Section 4 (5) of the Haryana Act permits the Controller to fix the fair rent on the basis of a compromise between the parties to the proceedings whereas the Punjab Act does not have a similar provision. There is, therefore, an essential difference between the relevant provisions of the two Acts. 16.

As stated in the preamble, the Haryana Act is to control the increase of rent of certain buildings and rented land situated within the limits of urban areas and the eviction of tenants therefrom. Sub section (1) requires the Controller to fix the fair rent on an application by the tenant or the landlord of a building or rented land after holding such inquiry as he may think fit. The fair rent determined by the Controller is operative from the date of the application. Sub section (2) mandates that in fixing the fair rent under Section 4 (1) of the Haryana Act, in respect of a building, the construction whereof was completed on or before 31.12.1961, the Controller must first determine the basic rent thereof in accordance with sub section (2).

As we mentioned earlier, the building which is the subject matter of the case before us was constructed before 31.12.1961. Section 4 (2) (a) is, therefore, applicable to the case before us. Section 4 (2) (a) stipulates that the basic rent in respect of such building shall be the rent prevailing in the locality for a similar building let out to a new tenant during the year 1962. Any increase or decrease in the fair rent is, thereafter, controlled by the provisions of the Act such as Sections 4(3), 5 and 8 thereof. Thus the parameters for the determination of the basic rent in respect of a building constructed prior to 31.12.1961 are fixed.

section (5) of Section 4, the Controller could not have determined the basic rent on any other basis. As per section 6 when the Controller has fixed the fair rent of the building under section 4, the landlord cannot claim or receive any premium or other like sum in addition to fair rent or any rent in excess of such fair rent and any agreement for the payment of any sum in addition to the fair rent or of rent in excess of such fair rent shall be null and void. Section 6, however, opens with the words "+

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17.

The said judgments would apply to cases under the Haryana Act other than when the Rent Controller taken recourse to subAsection (5) of section 4. In such cases, it has been the consistent view of this Court that the judgment is in rem. We see no reason to take a different view. The judgments are affirmed in this regard for the reasons stated therein and we venture to add another.

18.

This view is supported by the second sentence in sub section (5) of section 4. It indicates that the legislature also considered a judgment fixing the fair rent other than on the basis of or even taking into consideration a compromise between the parties to be a judgment in rem as held by the above judgments albeit under the East Punjab Act. It is for this reason that the legislature out of abundant caution provided that where the Controller fixes the fair rent on the basis of a compromise arrived at between the parties to the proceedings, it shall be binding only between the parties thereto and their heirs.

19.

Section 6 read with section 4(5) entitles the Controller to fix the fair rent on the basis of a compromise arrived at between the parties to the proceedings. Under section 4 (5) of the Haryana Act, the Controller has the discretion to fix the fair rent on the basis of a compromise arrived at

between the parties to the proceedings. However, the fair rent fixed by the Controller on the basis of a compromise between the parties is binding only between the parties and their heirs. The reason is not far to see. Absent such a provision, a landlord could always in collusion with a party persuade the Controller to fix the fair rent on the basis of a compromise and then demand from the subsequent tenants such rent irrespective of the agreement between them. When the Controller fixes the fair rent on the basis of a compromise between the parties, it is not an order or judgment in

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!. It would in such cases always be open to the parties to make an application for fixing the fair rent under section 4 of the Haryana Act. In view of sub section (5) of Section 4 of the Haryana Act, an order passed by the Rent Controller fixing the fair rent under the Haryana Act based on a compromise between the parties can never be a judgment in rem. Thus the ratio in

and the judgments relied upon thereinthat an order fixing the rent is an order in rem would not apply to an order fixing the fair rent based on a compromise between the parties under the Haryana Act. The judgments in

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., therefore, have no application to cases under sub section (5) of Section 4 of the Haryana Act which expressly entitles the Controller to fix the fair rent on the basis of a compromise arrived at between the parties to the proceedings. The second sentence in sub section (5) that such rent shall be binding only between parties and their heirs leaves no room for doubt that a compromise between the parties cannot bind or affect in any manner strangers thereto. An

order under the Haryana Act on the basis of a compromise between the parties is, therefore, not a judgment in rem. However, once the rent is determined by the Controller under Section 4, otherwise than on the basis of a compromise between the parties, the rent so fixed is in relation to the buildings/premises and not in relation to the tenants and the judgment is one in rem.

20.

It is necessary now to determine the ambit of the term 'compromise' in section 4(5) of the Haryana Act. 21.

The words "between the parties to the proceedings" in sub section (5) of Section 4 do not relate only to a compromise arrived at between the parties to the proceedings during the course of or in the proceedings. These words include a compromise between the parties to the proceedings even otherwise including before the proceedings are institutedA even in the absence of any proceedings. Had it been otherwise, the language of sub section (5) would have been entirely different. It would have been clarified that the compromise ought to be one between the landlord and the tenant "in the proceedings" or "in the course of proceedings". 22.

The Chamber's 21st Century Dictionary defines a compromise as " .

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4 Parties may arrive at a compromise in the course of negotiations obviating the necessity of filing an action for the resolution of a dispute. A compromise is not necessarily only in the course of resolution of disputes relating to a relationship between parties contractual or otherwise. A compromise can be arrived at even otherwise leading to a contractual

relationship between the parties. The contract then comes about as a result of the compromise. It is reasonable to presume that the parties who intend entering into an agreement of tenancy are aware of the existence of the concerned laws relating thereto, in this case the Haryana Urban (Control of Rent & Eviction) Act, 1973. It is reasonable also to presume that they were aware of the concept of basic rent and fair rent. If instead of having the basic rent determined they enter into an agreement stipulating the rent in respect of the tenancy. They thereby arrive at a compromise in regard thereto. Thus, even if the rent is agreed upon without a process of bargaining, it would be a compromise.

23.

The compromise contemplated in section 4(5) of the Haryana Act is not limited to any particular stage or period of time. The Rent Controller may fix the fair rent on the basis of a compromise arrived at between the parties to the proceedings at any given point of time. In other words, it is not necessary for the Rent Controller while fixing the fair rent to consider a compromise arrived at between the parties to the proceedings only with respect to the period for which the fair rent is fixed. The compromise referred to section 4(5) of the Haryana Act is only one of the factors/parameters which the Controller may take into consideration while fixing the fair rent. If the parties rely upon a compromise which the Controller considers inappropriate or irrelevant for any reason including in relation to the period when it was arrived at, he is entitled to disregard the same.

24.

It is also important to note that sub section (5) refers to the Controller's discretion to fix the fair rent. It does not refer to the Controller fixing the basic rent referred to in sub section (2) of the Haryana Act. Thus,

in exercise of discretion under sub section (5) the Controller can fix the fair rent on the basis of the compromise without first fixing the basic rent. Once the Controller decides to fix the fair rent on the basis of a compromise it is not necessary for him to fix the basic rent under sub section (2) of Section 4 of the Haryana Act. He may for the purpose of exercising his discretion under sub section (5) ascertain approximately what the basic rent is but that is a different matter altogether. He is not bound to do so. The ratio of the judgments that we have referred to would apply in a case where the Controller fixes the fair rent otherwise than on the basis of or with reference to a compromise arrived at between the parties to the proceedings.

25.

In the case before us, the Controller by the order and judgment dated 26.02.1979 held that there was no evidence on record and therefore, considered it appropriate to accept the contractual rent of 600/A per annum to be the basic rent of the premises in question. He, however, did not determine the basic rent himself. The determination of the basic rent was a $5 $ to the determination of the fair rent as sub section (2) of Section 4 mandates that in fixing the fair rent "the Controller shall first determine the basic rent". Fixing the basic rent is, therefore, mandatory to fixing the fair rent. The fair rent is computed on the basis of and in relation to the basic rent. There was, therefore, no determination of the fair rent by the Controller as required by Section 4 of the Haryana Act.

In view of sub section (5) of Section 4, the rent determined by the judgment dated 26.02.1979 was on the basis of a compromise arrived at between the parties to those proceedings and therefore, again on the basis of sub section (5) of Section 4 it cannot bind parties subsequently.

Controller that the basic rent had been fixed at 600/A per month in the proceedings between the landlords and Moti Ram, the previous tenant, being Rent Case No. 310 of 1975, is therefore, erroneous as that rent was determined only on the basis of the agreement between the landlords and the previous tenant. In view of section 4(5) of the Haryana Act, it cannot bind the parties to the subsequent tenancy.

26.

The case before us commenced with the landlord having filed Rent Case No. 68 of 1996 under section 4 of the Haryana Act stating that upon the expiry of period of the agreement between the parties, the tenants became the statutory tenants in respect of the shop and that after the year 1979 there had been a manifold increase in rent in respect of similar premises which fetched more than 12,000/A per annum. The landlord accordingly sought an order fixing the rent. The issues framed by the Rent Controller required him to fix the basic rent and the fair rent. 27.

The Rent Controller was in view of section 4(5) of the Haryana Act entitled to fix the fair rent on the basis of the rent agreed to between the parties of 1900/A for a period of six months with effect from 27.10.1979. That rent was fixed on the basis of a compromise between the same parties. It was therefore a factor, a parameter which the Controller was entitled to take into consideration while fixing the fair rent under section 4(5). We see nothing irrational or arbitrary in his having done so. 28.

(A) Regarding question (a) framed by the order of reference, the reference is answered as follows:A i) A change in tenancy would not affect the fixation of fair rent by the Rent Controller under Section 4 of the Haryana Urban (Control of Rent & Eviction)Act, 1973

after determining the basic rent under section 4(2)(a) and without reference to sub section (5) of section 4. In other words, where the fair rent is arrived at after determining the basic rent under section 4 (2) (a) of the Haryana Urban (Control of Rent & Eviction) Act, 1973 and without reference to a compromise, it would bind the subsequent landlords and tenant. It would be a judgment in rem. The judgments in

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to this effect are, therefore, affirmed.

ii) Where the fair rent is arrived at on the basis of or even upon taking into consideration a compromise between the parties, the same is binding only between such parties and their heirs and does not affect any other parties. Such a judgment is one in personam and not one in rem. iii) The ratio of the judgments in

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does not apply to cases under section 4(5) of the Haryana Urban (Control of Rent & Eviction)Act, 1973. It is clarified that the ratio of these judgments would not apply even where one of the factors while determining the fair rent is a compromise arrived at between the parties one or more of

whom are not parties to the case in question, under consideration.

(B) Regarding question (b) the reference is answered as follows:A i) In view of what we have stated earlier, it is not necessary to answer the reference as regards question (b). We have held that the Rent Controller erred in coming to the conclusion that 600/A per annum fixed in Rent Case No. 310 of 1975 between the landlords and the erstwhile tenants was the basic rent. The Rent Controller fixed the fair rent in the present case on the basis of the compromise arrived at between the parties in relation to an earlier period namely six month's period from 27.10.1979. Further, he infact determined the fair rent in this case with reference to section 4 (5) of the Haryana Urban (Control of Rent & Eviction) Act, 1973. The determination was not on the basis of section 5 of the Haryana Urban (Control of Rent & Eviction) Act, 1973. 29.

In the result, both the Civil Revisions are dismissed with no order as to costs.

(S.J.VAZIFDAR) ACTING CHIEF JUSTICE 22.12.2015 (TEJINDER SINGH DHINDSA) 'ravinder'

JUDGE To be referred to the Reporter or not √ Yes No