Deoki Nandan Dalmia vs F.E. Sachee and Company

Lahiri, J.—The subject-matter of dispute in these two Rules obtained by the landlords is the standard rent of a godown, known as godown No. 25 situate on the ground floor of municipal premises No. 150A, Lower Chitpur Road. The floor area of the godown is 8,488 sq.ft. and it is admitted that on December 1, 1941 the opposite parties were tenants in respect of the godown at a monthly rent of Rs. 575. It is also admitted that sometime after December 1, 1941 and before December 31, 1949. the tenants affected structural alterations inside the godown by erecting seven partition walls at their expense but with the consent of the landlord and that as a result of these alterations what was formerly a single godown was converted into eight godowns. It is further admitted that in consideration of the permission granted to the tenants to sub-let the godown the landlords from time to time enhanced the contractual rent. From March 26, 1943 up to January 1946 the godown was under requisition. After derequisition the godown was held at a monthly rent of Rs. 1,000 for three years from June, 1946 and after June, 1949 the contractual rent was enhanced to Rs. 1,721 per month. On March 18, 1953 the tenants filed an application for fixing the standard rent and on October 10. 1953 the Rent Controller fixed the standard rent at Rs. 879-12 per month with effect from April, 1953, holding that the standard rent should be determined u/s 9(1)(e) of the Rent Control Ate of 1950. Against that order there were two appeals, one by the landlords and the other by the tenants. By an order, dated February 10, 1955, the appellate Bench confirmed the decision of the Rent Controller that the standard rent should be determined u/s 9(1)(e), but dismissed the tenants'' application upon the view that the tenants had failed to furnish materials which would enable the court to come to a conclusion about the rent which would have been reasonably payable for the premises if let out on December 1, 1941. The appeal of the landlords was accordingly allowed and the appeal of the tenants dismissed. Against the two orders in the two appeals the tenants moved this Court u/s 32(4) of the Act and this gave rise to C. Rules 1102 and 1104 of 1955. By a judgment, dated January 3, 1953, Bachawat and Guha Ray, JJ made the two Rules absolute, set aside the orders passed by the appeal late Bench and remanded the appeal for rehearing for recording a finding on the question whether as a result of the structural alterations effected by the tenant with the consent of the landlord the premises had lost their identity; because in their Lordships'' opinion the appellate Bench had fallen into an error in applying Section 9(1)(e) without recording a finding on that point. As a result of the hearing the appellate Bench has come to the conclusion that having regard to the fact that the covered area of the godown remained the same as on December 1, 1941, the godown cannot be said to have lost its identity by the erection of seven partition walls inside the godown. In this view of the case the appellate Bench has held that the standard rent should be determined u/s 9(1)(a) are not 9(1)(e) and the rent paid on December 1, 1941, i.e., Rs. 575 per month should be taken as the basic rent. The result has been that the standard rent has been reduced from Rs. 879-12 as fixed by the Rent Controller to Rs. 727-6 per month in the tenants'' appeal and the landlords'' appeal has been dismissed. Against these two orders the landlords have obtained these two Rules.

The only question that requires consideration in these two Rules is whether the case should be governed by Section 9(1)(a) or 9(1)(e) and in determining that question it should be ascertained whether the "premises" were let out on December 1, 1941. If they were, Section 9(1) (a) will apply; but if they were not, Section 9(1)(e) will apply. If in the present case the standard rent has to be determined u/s 9(1)(a), the provisions of schedule A will apply and under para. (1)(b) of that schedule the basic rent is the rent "which was payable for the premises on December 1, 1941." If again, the standard rent is to be determined u/s 9(1)(e), the basic rent would be the rent "which would have been reasonably "payable for the premises if let on December 1, 1941". In either case, therefore, the basic rent is the rent either actually or reasonably payable for the premises, and the enquiry accordingly is whether the premises were or were not let on December 1, 1941. The word premises has an artificial meaning according the definition in Section 2(8) of the Rent Control Act of 1950. According to that definition it means "a building or part of a building "let separately". The idea of a tenancy is, therefore, inseparable from the word "premises" as used in the Act. Viewed in the light of the definition of the word "premises", therefore, the enquiry in a case like this is whether the tenancy was or was not in existence on December 1, 1941, and the point for determination is whether the tenancy of the opposite party as it existed on December 1, 1941 has lost its identity.

Mr. Jitendra Nath Guha appearing for the opposite party has argued that in view of the order of remand made by this Court in C. Rules 1103 and 1104 of 1955 the enquiry into the identity of the tenancy is no longer open and that the only enquiry open to the parties is an enquiry into the physical identity of the godown. Strong reliance has been placed upon the concluding portion of their Lordships'' judgment which runs as follows:

If the learned Judge of the Small Cause Court finds by reason of the construction of the partition walls, the godown has not lost its identity it will be his duty to apply the provisions of Section 9(1)(a) and fix the standard rent accordingly. If on the other hand, the learned Judge finds that premises has lost its identity, it will be his duty to apply Section 9(1)(e).

The first sentence of the above passage isolated from its context lends some support to the argument of Mr. Guha, but the judgment read as a whole and even the first sentence read with the second sentence does not support the contention. In an earlier part of the judgment their Lordships made it quite clear why they were interfering with the order of the Court of appeal below and they stated as follows:

The learned Judge has not recorded any finding on the question whether the premises has lost its identity. Without determining that question the learned Judge has come to the conclusion that the provisions of Section 9(1) (e) will apply.

Reading the judgment as a whole, therefore, I have no doubt in my mind that what their Lordships really intended to hold and did actually hold was that the applicability of Section 9(1)(a) or 9(1)(e) would depend upon the identity of the "premises" or tenancy and not upon the identity of the godown only. The identity of the godown is no doubt an important factor in considering the question of the identity of the tenancy; because if the godown which is the subject-matter of the tenancy be not the same, the tenancy can never be the same but it does not follow from this that the identity of the tenancy must under all circumstances depend upon the identity of the godown. The principal point for consideration, therefore, is whether the tenancy of which the standard rent is sought to be determined was in existence in the same condition on December 1, 1941.

With regard to the identity of the tenancy Dr. Gupta has argued that the question of identity may often be a baffling metaphysical problem but for the purposes of the Rent Control Act there can be little doubt that the tenancy as it exists now was not in existence on December 1, 1941. Mr. Guha has, on the other hand, contended that the tenancy as it existed on that date is still contemning because it was never determined in any way contemplated by Section 111. Transfer of Property Act. There is an obvious fallacy in this argument of Mr. Guha, because it is a matter of mutual admission that the godown was under requisition for a period of nearly three years from March 26, 1943 up to January 1946, and after derequisition the opposite part held under a fresh registered lease for a term of three years at as enhanced rate of Rs. 1,000 per month from June 1, 1946. The lease again expired by afflux of time and from June 1, 1949 the opposite party remained in possession for another term of three years by exchange of letters at a still higher rate of Rs. 1,721 per month. In view of these admitted facts it is idle to contend that- the tenancy existing in December, 1941 was never determined u/s 111, Transfer of Property Act and that the identical tenancy is still continuing. But in order to attract the operation of Section 9(1)(a) it is not necessary to prove that the identical tenancy which existed in December 1941 is still continuing it is enough to prove that the tenancy of which the standard rent is sought to be determined was, in its present condition in existence in December 1941 though it might have been determined in the meantime.

The court of appeal below has held that the tenancy as it now exists was in existence in December 1941, because the godown has not lost its identity and because the single tenancy in respect of a single godown has remained in existence throughout, in spite of the fact that the godown has been sub-divided into eight godowns by structural alterations made at the expense of the tenants. The court of appeal below has further held that the landlords are not entitled to the benefit of the structural alterations made at the expense of the tenants because the tenants have a right u/s 108(h), Transfer of Property Act, to remove the partition walls erected by them. But do the partition walls form part of the tenancy so long as they are not removed? I have little doubt in my mind that they do first because they could not have been erected by the tenants unless the landlords gave their consent under Clause (p) of Section 108, i.e., unless the landlords consented to the subdivision of the godown and secondly because a single godown as the subject matter of the tenancy is now non-existent and has been replaced by eight godowns. The result, therefore, is that what was formerly a single tenancy in respect of a single godown has been converted into a single tenancy in respect of eight godowns. The finding of the court of appeal below to the effect that the godown in itself apart from its relation to the tenancy has not lost its identity is entirely beside the point, because what has to be considered is not the identity of the godown in itself but the godown as the subject-matter of the tenancy As a single tenancy in respect of eight godowns is not identical with a single tenancy in respect of one godown I am unable to agree with the decision of the court of appeal below to the effect that the premises in their preset condition were let out on December 1, 1941, so as to attract the operation of Section 9(1)(a). The learned Judge below has observed that it does not appear from the evidence that the subject-matter of the tenancy was ever treated to be eight godowns formed by the seven partition walls erected by the tenants. This change in the subject-matter of the tenancy is not a matter of evidence but follows from the consent giver by the landlords u/s 108(p), Transfer of Property Act, to its subdivision.

Mr. Guha has relied upon a decision of the Bombay High Court in the case of Bhikaji Ram Chandra v. Vishnu Ram Chandra (1953) 56 Bom. L.R. 402 for the proposition that the standard rent is to be determined not by what the sub-tenants were paying to the immediate" tenant but by what the "immediate" tenant was paying to the landlord. There can be no doubt about this proposition but it is subject to the condition that the subject-matter of tie "immediate" tenancy is the same. The question of the identity of the subject-matter of the tenancy was not a point for decision in that case, because the subject-matter of the "immediate'''' tenancy the standard rent of which was sought to be determined was admittedly identical with the subject-matter of the tenancy as it exited on September 1, 1940, by reference to which date the standard rent was to be determined under the Bombay Rents Hotel and Lodging House Rates Control Act of 1947. The only claim made by the landlord in that case was that the standard rent was to be determined by the rent which was being realised by the "immediate" tenant from the subtenants and this claim was rightly negatived by Chagla, C.J. This is, therefore, of no help to the opposite party.

There is still another reason why the tenancy of the opposite party as it now stands cannot be said to be identical with the tenancy as it existed on December 1, 1941. Under the tenancy as it stood on December 1, 1941 the tenants had no right to sublet, but under the terms of the tenancy the standard rent which is sought to be determined the tenants enjoy that right and it is admitted by the tenants that in consideration of this right the contractual rent was enhanced by the landlords from time to time. Paragraphs 4 and 5 of the affidavit in opposition filed by the tenants in this Court contain the following statements:

The opposite party immediately after the taking of the lease of the godown in question in 1941, in order to sub-let the same to different sub-tenants to the knowledge and with the consent of the Petitioners effected additions and alterations in the disputed godown at his cost. The Petitioners enhanced the contractual rent from time to time in consideration of the sub-letting of the godown in dispute by the opposite party.

Dr. Gupta construes this statement as an admission that the contractual rent was enhanced in consideration of the consent given by the landlord u/s 108(p), Transfer of Property Act, to the subdivision of the Tenancy whereas according to Mr. Guha this statement merely means that the contractual rent was increased in consideration of the permission to sub-let. Whether it is the one or the other there can be no doubt that it constitutes an important variation of the terms of the old tenancy. As the subdivision of the godown was only a step to sub-letting and as sub-letting was possible only as a result of the subdivision it seems to me that the statement which I have read means that the contractual rent was increased both for the consent given by the landlords for effecting the additions and alterations and for the permission given to sub-let. The result, therefore, is that a single tenancy in respect of a single godown without the right of sub-letting as existing on December 1, 1941 has been converted into a single tenancy in respect of eight godowns with the right of of sub-letting. I find it impossible to accept the argument advanced on behalf of the opposite party that the tenancy as it existed in December 1941 has suffered no change on account of the structural alterations made by the tenant and that the structural alterations are mere "adjuncts'''' of the tenancy as Mr. Guha describes them.

The third reason which supports the conclusion that the tenancy which is the subject-matter of the present proceeding is entirely different from the tenancy existing in December 1941 is that the mode of user is entirely different. The tenancy as it now exists can be possessed wholly or partly by sub-letting to different sub-tenants in eight units whereas in December 1941, it could be possessed only by the tenants themselves as a single unit. This is of course a corollary of the second reason, but it is nevertheless an important factor in determining the question of the identity of the tenancy.

I accordingly hold that the tenancy in dispute in the present case is different from the tenancy existing in December( 1941, because the subject-matter is different, because the incidents are different and also because the mode of enjoyment is different. Consequently Section 9(1)(a) of the Rent Control Act of 1950 does not apply and the rights of the parties are to be determined by Section 9(1)(e) of that Act.

It now remains for me to consider the rulings which have been cited at the Bar. The case upon which some reliance has been placed on behalf of the Petitioners is Bata Shoe Company Ltd. v. Narayandas Mallik (1951) 56 C.W.N. 120 In that case there were two tenancies held by two persons in respect of two different rooms on December 1, 1941. Those two rooms were subsequently converted into one room by the removal of the separating wall and let out to the Petitioner. In ascertaining the standard rent of the room held by the Petitioner the basic rent was taken to be the aggregate of the rents paid by the two tenants in December 1941. This Court pointed out that the principle upon which the basic rent was arrived at was grong, because the room the standard rent of which was sought to be determined was not let out in December 1941. It is true that the facts of the instant case are somewhat different from the facts of Bata Shoe Company''s case. Here the godown was and is the subject-matter of a single tenancy both in December 1941 and also on the date on which the application for standardisation was filed and here a single godown existing in December 1941 has been converted into a plurality of godowns. But nevertheless, the principle laid down in that case that the word "premises" as used in the Rent Control Act of 1950, does not mean the building apart from its relation to the tenancy but, the building as the subject-matter of the tenancy, applies with equal force to this case, and viewed in that light the question becomes whether the building in its present condition was let out on December 1, 1941.

Mr. Guha argued that the contrary proposition was laid down in the case of Dudhewalla and Co. Ltd. Vs. Govindram Rameswarlal and Others, According to him this case lays down the proposition that the question for determination in cases of this description is the identity of the building itself apart from its relations to the tenancy. It would indeed be surprising if the same learned Judge who delivered the judgments in both the cases of Bata Shoe Company and Dudhewalla could be held to lay down two contrary principles in the two cases separated by an interval of eight or nine months. A perusal of the judgment in Dudhewalla''s case, however, clearly shows that the interpretation ought to be put upon it by Mr. Guha is wholly misconceived. In Dudhewalla''s case no part of the house, though in existence in December 1941 was let out to tenants, and was wholly in the possession of the then owner; after their purchase in 1946 the landlords let out portions of the house to tenants. The claim made by the landlords in the proceeding for fixation of standard rent was that they had made improvements which hanged the identity of the premises and they were therefore entitled to the benefit of Section 9(1)(c). This claim was negatived on two grounds, first because Section 9(1)(c) did not apply to improvements made before the coming into operation of the Act of 1950 and secondly because upon the evidence adduced by the landlord it had not been established that there was any change in the identity of the premises. In that case the competition was between cls. (c) and (e) of Section 9(1) and not between Clauses (a) and (e), as in the case of Bata Shoe Company Ltd. No. question arose in that case as to whether the building which was the subject-matter of the tenancy was to be taken apart from its relation to the tenancy, which was the direct point in Bata Shoe Company''s case.

In the result, I would make these two Rules absolute, set aside the judgment of the appellate Bench and direct that the appeals be reheard. At the rehearing the appellate Bench will apply Section 9(1)(e) of the Rent Control Act of 1950. The Petitioners are entitled to the costs of this Court as well as of the court below; but there will be only one set of hearing fee.

Parties will be at liberty to adduce additional evidence if they are so advised.

Guha, J.

I agree.