Ishwar Swaroop Sharma v. Jagmohan Lal, (SC) BS7473
SUPREME COURT OF INDIA

Before:- S. Rajendra Babu and Ruma Pal, JJ.

Civil Appeal No. 6755 of 2000 (Arising out of SLP (Civil) No. 6424 of 2000). D/d. 24.11.2000

Ishwar Swaroop Sharma - Appellant

Versus

Jagmohan Lal - Respondent

For the Appellant :- Mr. Neeraj Kumar Jain, Mr. Anil Khetarpal and Mr. Ugra Shankar Pd., Advocates.

For the Respondent :- Mr. H.L. Narula, Advocate and M/s. K.L. Mehta and Co., Advocates.

Haryana Urban (Control of Rent and Eviction) Act, 1973, Sections 4(2)(b) and 4 (3) - Fixation of fair rent - Where there is agreed rent between the parties then agreed rent is to be taken as basic rent and increase be determined according to formula in Section 4(3) - Where there is no agreed rent then fair rent is to be fixed taking market rent as basic rent - For fixation of fair rent no distinction is to be drawn between a monthly tenancy and tenancy for a longer period - Nor is it necessary that the agreement should have been entered into immediately preceding the date of the application - 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.

[Paras 10, 11 and 12]

JUDGMENT

Ruma Pal, J. - Leave granted.

2. This 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 appellant's shop at Rs. 328/- per month w.e.f. 1989.

3. 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.

Section 4 of the Act provides :

4. Under Section 4(2)(b) where a building is constructed after December 1961, 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.

5. According 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).

6. According 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:

Sd/-

Ishwar Sarup Sharma

Advocate

Sd/-

Jagmohan"

7. It is contended that after having mutually increased the rent from 1.1.1976 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.

8. 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. The definition of the word "tenant" in Section 2(h) of the Act also makes this clear :

9. The 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 agreed rent.

10. Therefore 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.

11. 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. This may be contrasted with Section 3 where the word 'preceding' is qualified by the word 'immediately'.

12. 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. Therefore, 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.

13. For these reasons, we uphold the decision of the High Court and dismiss the appeal without any order as to costs.

Appeal dismissed.