Ekin Box Mollah vs Dharam Pal Chandha

Das Gupta, J.—On an application of the opposite party, who is the tenant of room in 3, Madan Street, of which the petitioner is the owner, the Rent Controller fixed the rent at Rs. 133-11 per month. On appeal, the learned Judge fixed the rent at Rs. 140 per month. The landlord asks this Court to set aside the order u/s 32(4) of the West Bengal Premises Rent Control Act of 1950. The room comprised in the tenancy was admittedly constructed in 1946. Consequently, the provisions of section 9(1) (g) of the Act are applicable. It is contended, however, that in coming to his conclusion as to what is the "fair and reasonable rent" within the meaning of section 9(1) (g), the learned Judge acted arbitrarily, and that there was really no basis in law for his decision.

The Act itself contains no indication as to the standards the Court should apply in deciding what is fair and reasonable rent. A study of the provisions of section 9 makes it clear that while the Legislature considered that for tenancies in buildings which were in existence on the 1st December, 1941, the fair and reasonable rent would be the rent at which the tenancy was let on the 1st December, 1941, or the rent which would have been reasonably payable for the premises if let on that date, plus certain small additions and for buildings which were constructed after the 31st December, 1949, it considered that the fair and reasonable rent would be the rent as ascertained on the basis of a rate not less than four per centum and not more than six per centum of the reasonable cost of construction added to the reasonable price of the land included in the premises and taking into account the prevailing rate of rent in the locality for similar accommodations with similar advantages and amenities, the Legislature left it entirely to the Rent Controller to decide what is fair and reasonable rent for tenancies in building which were not in existence on the 1st December, 1941, but came into existence before the 31st December, 1949. This cannot, however, mean that the Rent Controller or the Court of Appeal which has to decide the, correctness of his decision, can act arbitrarily in the wide field of discretion the Legislature has left to him. It is necessary that in deciding what is fair and reasonable rent in cases where provisions of section 9(1) (g) apply the Rent Controller and the Appellate Court formulate for their own guidance proper principles to arrive at the correct decision and then apply those principles to the facts of each particular case.

The one principle the Legislature lays down for all the cases which come within section 9 (1) (g) is that the rent must be fair and reasonable. This certainly means that it must be fair to both the landlord and the tenant and must also satisfy the reason or conscience of the Judge. The first question is what is fair to the landlord? When houses are in short supply it is not reasonable that rents will go up, but it is not fair that full advantage should be taken by the owners thereof of this shortage. At the same time it is not fair that the landlords investing capital in house property should suffer by getting a lesser net return than on investments with similar risks and disadvantages in other fields. What is not fair to the parties cannot satisfy the reason. So, ordinarily the rent that is fair to both parties will be the reasonable rent, but when, as will often be the case, the rent fair to the landlord and the rent fair to the tenant works out differently, the mean between the two figures should obviously be the fair and reasonable rent.

The first question, therefore, is to decide what gives a fair return to the landlord. In considering this matter it is, of course, necessary to take into consideration on the one hand the special disabilities of investments in buildings, such as the costs of collection, corporation rents, repair, charges, bad tenants and occasionally no tenants, depreciation of buildings, and on the other hand, the special advantages such as the almost certain appreciation of the value of the land and the undoubted prestige and the pleasure of being a landlord. Obviously, in view of greater risks, the return from what is known as guilt-edge securities will not be a fair return on houses, but at the same time less than the return on securities which fluctuate like, say jute or tea or iron charges, will be fair return. To ascertain what rent will give a fair return the Court will have to decide first the capital invested, and secondly, the rate which similar investments with similar risks and advantages are expected to bring in the market.

It is very much more difficult to find out what rent is fair to the tenant. One way is to ascertain the rate of rent is to ascertain the rate of rent prevailing in the locality for similar accommodation with similar advantages and disadvantages. It is necessary to remember, however, that very often specially in the case of residential accommodation the prevailing rate may be far from fair, being the result of unusual circumstances which have pressed different tenants in the locality to agree to whatever the landlord demanded. The rate of rent which tenants are readily paying without the pressure of unusual circumstances--such as sudden influx of people from Pakistan which make many seek accommodation at any price--will be a dependable index; but it will generally be difficult to obtain evidence about such rents. It is, I think, proper, in the absence of other materials, to consider the rent paid for similar accommodation--at a time when no such shortage existed-- as a better index to what is far to the tenant than the rent paid for such accommodation in the circumstances of short supply and urgent demand.

Faced with the task of ascertaining fair and reasonable rent the Court should, therefore, ask, in my opinion, for (1) evidence about the capital actually invested or failing that the capital that may reasonably be estimated to have been invested and about what would he the rate of return for investments with similar risks and advantages in the free market, (2) evidence about the rate of rent for similar accommodation at a time when the tenant was not in need of getting accommodation at any price.

If evidence on both these were available, I would consider a mean between the figures arrived at thus to be fair and reasonable rent. (3) Failing evidence as in (2) above, the Court, I think, should ask for evidence about the rate of rent for similar accommodation in the circumstances prevailing at the time of the application for fixation of rent. If this rate is lower than the rate that would give fair return of the capital as ascertained on the evidence in (1) above, the mean between the two figures would be fair and reasonable rent. If this rate is higher than the rate what gives fair return, the rent which gives fair return on the capital should be considered to be the fair and reasonable rent, as it will be reasonable to think that the higher rate of rent prevailing is the result of exceptional circumstances of urgent demand.

If evidence under (1) alone is available, the rate that would give fair return to the landlord should be held to be fair and reasonable rent. I have not overlooked the fact that the result of this may in many cases be to apply practically the provisions of sec. 9 (1) (g) to these cases, though the Legislature did not make such provisions for houses constructed between the 1st December, 1941, and 31st December, 1949. I do not think, however, that to be a sufficient reason against following the course indicated above.

I think it right to add that even where it is difficult to obtain evidence as in (2) or (3) above, it should ordinarily be possible to obtain evidence as mentioned in (1) above:

Turning now to the facts of the present case, I find that no evidence was adduced to show the capital invested. In other words, nothing was done to show what would be fair to be landlord. As it was open to the landlord and indeed easier for him-to give evidence about this, he could not now be heard to complain about the deficiency if there was some evidence on the record to justify the findings of the Appellate Court that Rs. 140 in place of the agreed rent was fair and reasonable. The basis for his conclusion appears to be mainly the rent that was fixed by a Rent Controller for a tenancy in 6, Madan Street, at Rs. 55. Though the learned Judge referred also to the rent of Rs. 250 that was fixed for another tenancy at the rate of |5|6p per sq. ft., he has not given any indication why in place of the rate given in that case he has chosen a different rate for these premises.

The fact that in one case a certain rate of rent was considered by the Rent Controller to be "fair and reasonable" does not provide a just and legal basis for holding in another case between other parties that rate to be fair and reasonable. If Courts have in a number of cases considered a certain rate of rent fair and reasonable for similar accommodation in the locality, they may make it highly probable that this is the fair rate and evidence about this may be given by the judgments in those cases provided evidence is also given to show the nature of the accommodation in the tenancy dealt with in those cases as compared with the case to be decided. But it is wholly wrong, in my judgment, to consider the decision of a Court in a single case, as deciding the "fair and reasonable" rate of rent for all houses in the locality.

In this view, I am of opinion that this was really case of no evidence, for the evidence that was adduced could not enable any Court to consider the question properly and to answer the question what would be the fair and reasonable rent. It appears to me that one reason why further evidence was not adduced to show what the fair and reasonable rent would be was the failure of the parties to appreciate properly the evidence that was really necessary in such cases to enable the Court to arrive at a finding on this question.

In view of this, I think it fair that the matter should go back to the Rent Controller for decision, in accordance with the directions given above.

I would, accordingly, set aside the orders passed by the Rent Controller and the Court of Appeal below and remand the case to the Rent Controller for decision in accordance with law in the light of the directions given above, after giving both sides opportunity to adduce evidence. There will be no order for costs.

Debabrata Mookerjee, J.

I agree.