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Judgment
Ruma Pal, J.—The disputes in these appeals arise out of the interpretation of five circulars issued by the Government of India relating to reassessment of reasonable rent of private buildings leased by the Government and their applicability to the tenancies in respect of premises Nos. 90A and 90B, Naresh Mitra Sarani (earlier known as Beltala Road), Calcutta. The premises belong to the landlords No. 1 and 2 (referred to as the landlords). In July 1978 the ground, first and second floors of these premises as well as, the garage covering 3846 sft., 3738 sft. and 438 sft. respectively were let out by the landlords to the Government of India, for the occupation of the Department of Atomic Energy, Atomic Minerals Division (Eastern Region) (referred to as the Department). The monthly rents of Rs. 7382.00 and Rs. 7588.00 in respect of the two premises were inclusive of all taxes and were fixed by the Hiring Committee of the Government of India. Formal agreements were executed between the landlord and the Government of India on May 28, 1979. Although in Clause 2 of the agreements the period has been left blank, parties proceeded on the basis that the tenancy was for a fixed period of three years with an option for renewal on a year to year basis. From time to time the landlords at the request of the Appellants agreed to the renewal of the lease for periods of one year at a time. According to the landlords, it had also been agreed that the rents would be periodically revised. However, before us they have based their case for enhancement of the rents on the five circulars issued by the Government of India.
The earliest circular was issued by the Government of India on July 10, 1972. This circular has laid down that rents once assessed cannot be enhanced even by mutual agreement but a request from the landlord for revision was to be forwarded by the hiring department to the C.P.W.D./hiring authorities.
The C.P.W.D. authorities will when reassessing the rent bear in mind whether any of the circumstances as indicated... were existing and that the rent on the basis of equity, needed revision.
The circumstances so indicated and which should have arisen subsequent to the initial hiring of the building were:
(i) The landlord has carried out alterations/additions to the building thereby increasing its effective utilizable area;
(ii) The landlord has subsequently i.e. after the building has been initially hired, provided additional facilities/amenities in the building such as additional fans, geysers, bath rooms, additional electric appliances, etc.;
(iii) The property and house tax have been increased by the local authorities proportionately reasonable (sic);
(iv) Some new element of tax such as education cess has been imposed by the State/Local authorities, as the case may be;
(v) Increase in rent is necessitated as per the rent control orders existing in the town/city concerned.
On September 1, 1982 a second circular was issued relating to the reassessment of reasonable rent of private building leased by the Government. This circular note that the standard lease deed provided for the execution of repairs by the landlord and in default of such repairs by the landlord, the government could execute the repairs and recover the costs from the rent. It was noted that the landlords did not undertake repairs since they were not assured of suitable enhancement. A decision was accordingly taken for allowing periodical revision of the rent payable for the hiring of private buildings. It was decided that the reasonableness of the rent may be got assessed from the C.P.W.D. on the expiry of a period of five years from the date of original assessment or the date of the issue of the second circular, whichever was later and after every five years thereafter. In making the reassessment the C.P.W.D. was to take into the account the variation in the cost index maintained by them during the relevant period in addition to the factors mentioned in the first circular. It was said that the orders had been issued with the concurrence of the Finance Division and would come into effect immediately. Copies of the circular were sent to all Ministries and Departments of the Government of India.
The third circular is dated May 9, 1983. It provided that the reassessment was to be done keeping in view variation in the cost of construction of the building including land appurtenant thereto and the depreciation due to wear and tear during the relevant period in addition to the factors mentioned in the first circular. This circular goes on to say in other words reassessment of rent will be treated as a case of fresh rent assessment.
On August 22, 1994 a fourth circular was issued. The relevant decisions in this circular were: (1) No initiative for revision was to be taken by the Government and cases for reassessment should be initiated only after a request from the owner, the later date between the date of receipt of the request and the date on which the revision is due being adopted as the date for revision of rent. (2) In all such cases or reassessment of reasonable rents, a fresh lease agreement in the form prescribed was to be entered into with the concerned landlord. (3) Wherever Hiring Committees are functioning such as in Bombay, Calcutta, Delhi, etc. refixation of rent would be done by such committee and intimated by them with full details, to the concerned department, and where such committees are not functioning, the concerned officer of the C.P.W.D. may send necessary details to the Departments direct. (4) All the Ministries/Departments may accordingly finalise the cases of reassessment of rents in consultation with the concerned Hiring Committee/C.P.W.D. Officers.
The last and fifth circular is dated July 13, 1985. This Government circular laid down guidelines for grant of certificates regarding reasonableness of rent by the concerned C.P.W.D. Officers/Hiring Department. As far as assessment for initial hiring was concerned assessment of rent was to be made according to certain specified principles. As far as reassessment was concerned they were to be treated as fresh cases of rent assessment and determined on the same principles. The principles enunciated were:
(i) Work out reproduction cost of the building as on the date of hiring based on the ruling cost of building construction in the locality.
(ii) Work out depreciated value of the property assuming a straight-line variation of depreciation depending on the age of the building. The date of construction of the building should be ascertained and depreciation allowed up to the date of assessment taking the anticipated total life of the building keeping in view the specifications adopted for its construction, otherwise the anticipated future otherwise the anticipated future life expectancy of the property should be estimated to work out the ever all life expectancy of the building in working out the depreciation, the residual value of the properly may be taken as 6 percent as is being followed at oiesent.
(iii) Work out land area appurtenant to the building taking into account local bye laws. In case no bye laws exist in the locality comparison can be made with the general practice in the locality.
(iv) The cost of land may be worked out on the basis of prevailing market rates for comparable land in the locality. Value of land appurtenant to the building and the surplus land may be worked out separately. The figure representing cost of land should be ascertained very carefully either from local Revenue Authority or from State Government Agencies.
Information obtained regarding cost of land should be authentic and should not be subject to any dispute or controversy. Any surplus land which does not enhance the utility of the property, i.e. land behind the building which does not have any access for parking or any other utilisation, should not be considered while assessing the rent of the property.
This fact should be indicated while giving the rent reasonableness certificate so that the Hiring Department can decide not to take on lease that portion of such surplus land.
(v) The cost of appurtenant land may be added to the depreciated value of the building to assess the reasonable return on the property, until further orders the following values may be adopted.
In the case of Metropolitan Towns/Cities this percentage rate of return may be taken as 10%. In the case of other Mofussil towns the figure may be taken as 9%. The above figures may be adopted for non-residential use of properties in the cace of residential building the figures may be reduced to 1% in the case of Mofussil towns and by 1% in the case of Metropolitan Towns/Cities.
(vi) For the surplus and within the compound of the property, if it is proposed to take over along with the building not return may be worked out taking the figure of 9% in the case of Metropolitan towns/cities and 8% in the case of Mofussil towns for nonresidential use of the properties.
(vii) The two components of net returns as worked out in para (v) an (vi) above may be added.
(viii) The following further additions may be made.
(a) Municipal Taxes as per actuals, if lease deed provided that the municipal taxes will be borne by the landlord. If actual figures are not available, municipal taxes have to be assessed based on the rateable value of the property based on the relevant local/municipal bye-laws.
(b) Maintenance and repairs may be allowed 12% of the gross return of the building including the appurtenant land, if any statutory provision exists in the areas binding the landlord to defray certain minimum expenses on maintenance and repairs the same figure should be adopted.
(c) An appropriate provision in the form of a sinking fund for recovery of capital after expiry of life of the building. This element can be ascertained by reference standard sinking fund table.
In all cases, in addition to working out the rent on the principles of valuation as enumerated aove, the market rate of the rent prevalent in the area should also be ascertained by the authority giving the rent reasonableness certificates. Such inquiries may be made taking into account rent being paid for properties taken on lease by other government or semi government organisations like public sector undertakings, banks etc. for similar accommodation in the locality. Officers of the C.P.W.D. should ascertain such figures of prevailing market rents and collect authentic date preferable based on documents taking into account the conditions included in the particular lease deed of those premises from which the figure is taken and also keeping in view the relative areas/size. The properties should be comparable in specifications and amenities provided.
They should make sure that the conditions of hiring are similar and also ensure that the factors for which landlord is landlords like municipal taxes, maintenance and repairs etc. in the cases are similar.
After assessing the two values for rent as enumerated above i.e. rent based on recognised principles of valuation and rent based on prevailing market rates in the locality, the reasonable rent certificate should indicate both figures in all cases where the prevailing market rent in more than the rent calculated on the principles of valuation otherwise the lower figure only need be indicated. The final decision regarding the actual rent to be paid to the owner of the building will rest with the authorities desiring the property keeping in view the two figures of rent indicated in the certificate, their own needs and availability of the accommodation in the locality at the rent to be determined.
It was, however, made clear that the earlier four circulars would continue to apply.
In this case on June 30, 1981 the landlords wrote to the Appellants (who are the principal officers of the Department) asking for revision of the rents fixed in 1978 with effect from July 1, 1982 and requesting that necessary steps should be taken in time. There is no response on record. The landlords repeated their demand by several letters. Ultimately the Department wrote to the landlords on May 2, 1984 stating that the matter was under consideration by the Department and asking for a plan of the building and the year of construction. This was replied to on May 17, 1984 by the landlords by forwarding a copy of the plan and giving the date of construction of the building as 1978. The landlords again wrote on June 11, 1984, July 12, 1984 and August 31, 1984 asking for enhancement of rent. The Department again wrote asking for the site plan, detailed floor-wise plan including the height of each of the floors and the municipal plan showing the year of construction, foundation details, latest municipal tax receipts and whether water connection exists and whether there were any underground or overhead water tanks and the measurement of such tanks. A similar letter was written on May 16, 1985. On March 16, 1985 the particulars and documents required were submitted by the landlords to the Appellants.
On May 3, 1985 the Department wrote to the landlords as follows:
it is hereby informed that the matter regarding reassessment of rent for the above premises and issues of fair rent is pending with the C.P.W.D. Calcutta. As soon as we obtain the F.R.C. further action will be taken in the matter. In the meantime, you are requested to convey your formal consent for renewal of the lease agreement for a further period of one year commencing from the 1st April, 1985.
On September 10, 1985 the Estate Manager, Government of India wrote to the First Land Acquisition Collector, Government of West Bengal enclosing copies of the site plan of the premises and requesting for information regarding the land value per cottah prevailing in September, 1982. On the very next date the Department wrote to the landlords stating that the papers had been submitted to the Central Public Works Department (C.P.W.D.), Calcutta for assessment of the fair rent in respect of the premises. According to the Department, the C.P.W.D. had asked for the site plan and for the latest Municipal Tax receipts. The letter ends with the following request:
You are therefore requested to submit the above documents for onward transmission to the C.P.W.D. authority at an early date to enable them to finalise assessment of fair rent.
As no steps were taken for finalisation of the enhanced rent, the landlords wrote to the Estate Manager. The Estate Manager forwarded this request to the Land Acquisition Collector again asking for value of the land per cottah as prevailing in September, 1982. On October .1, 1986 the Land Acquisition Collector wrote to the Estate Manager informing him that the land value in request of the premises had been assessed: at Rs. 37,202.00 per cottar as being fair and reasonable.
In December, 1986 the landlords sent 5 copies of the site plan signed by the Department and the landlord showing the departments occupation of the premises, 5 copies of the completion plan and section of the building and 5 copies of the foundation and structural details with a, request that these may be forwarded to the C.P.W.D. to enable them to finalise the fair rent.
On January 5, 1987 the landlords were requested by the Department for 11 copies of the site plan and section plan. This was also complied with by the landlords. Under cover of a letter dated January .12, 1987 the site plans and the photostat copies of the municipal tax receipt were forwarded by the department to the C.P.W.D. with a request that necessary action may be taken. A similar request was made by the Department on May 25, 1987.
At this stage the Estate Manager wrote to the First Land Acquisition Collector stating that the land value of the premises was required for July, 1983 instead of for September, 1982. The First Land Acquisition Collector was therefore requested to send a revised land value certificate as on July, 1983. On March 5, 1988 the Land Acquisition Collector certified that the land value of the premises had been assessed by his office at Rs. 39,000.00 per cottah in July, 1983 as being fair and reasonable.
On October 26, 1988 the landlords again wrote to the Department stating that after the date on which the first revision.was to have taken place viz. July, 1983 five more years had elapsed and that with effect from July 27, 1988 a further enhancement was called for. The department were accordingly requested to take it up with the C.P.W.D. and the First Land Acquisition Collector immediately. The plea was renewed by letters written on January 17, 1989 and May 23, 1989. On June 9, 1989 the Hiring Committee submitted its recommendation to the department in respect of the period 1983 to 1988.
The recommendation of the Hiring Committee records that the premises had been inspected and that the gross rate per square feet of the carpet area inclusive of ''Municipal taxes had been worked out at Rs. 6.95 per square foot per month for Block A and at Rs. 6.65 per square foot per month of the carpet area for Block B and at Rs. 3.30 per square foot per month for the garage. The break up of the rates show that 45% of the rate so fixed stood for Municipal Taxes and Surcharge (i.e. 33% consolidated rate taxes plus 0.5% Howrah Bridge tax plus 50% surcharge of annual value of maximum leviable under C.M.C. Act and the balance 55% in the rent and taxes on high rise buildings of Govt, of West Bengal)''. It was also noted that there was no similar accommodation in the locality occupied by other Government or semi Government organisation on the relevant dates and therefore the market rate could not be verified. It was also noted that the rates of rent in the city as a whole had got an upward trend due to the reasons of adequate space problem and lack of newly constructed building to cope with the increasing demand. The revision was stand to be effective from July 28, 1983. The occupation of the Hiring Department was to be subject to the following:
The monthly rent for the said premises should be inclusive of all Corporation Municipal Taxes and taxes on high rise building of Government of West Bengal now payable and payable in future. The carpet area for block A is 3846 sft. and for garage is 483 sft. carpet area in the back building.
The owners will be landlords to maintain the water pumps, etc. and ensure adequate water supply on the hired accommodation and on this account no extra charge will be payable by the Government.
The owners will be landlords for while washing/colour wasing to the premises and also painting to all wood and steel work i.e. doors and windows two years at their own cost, in addition to execution of periodical maintenance and repairs to the premises and fittings both electrical and sanitary at their costs.
The fans, tube lights, fittings cubicals, electric meters etc. which are already existing will remain as it is.
The owners will also execute an agreement with the President of India incorporating the above mentioned terms and conditions as additions to the prescribed/norms duly approved by the government.
It was, however, made clear in the recommendation that the final decision regarding the actual rent to be paid to the owner of the premises would rest with the authorities intending to hire the property, keeping in view the figure of rent recommended, their own needs and the availability of accommodation in the locality at the rent to be determined.
The decision of the Hiring Committee was not forwarded to the landlords by the department. This is clear from the letters dated July 10, 1989 and July 17, 1989 written by the landlords to the Department.
By a letter dated June 15/19, 1989 the department wrote to the Hiring Committee asking for clarifications of the recommendations dated June 9, 1989. It was inquired whether the land value as certified by the: authorities at Rs. 39,000.0 Per kattah'' had been taken into consideration. The second inquiry was whether the Hiring Committee had taken into consideration the rates paid by another Department of the Government (viz. Department of Forests) which was located behind the premises in question and as well as of a number of banks nearby. The third inquiry was whether the rates which had been determined on the basis of circular dated August 22, 1984 would apply retrospectively since the reassessment was made with effect from 1983. The final query related to a discrepancy in the carpet area. It was also mentioned that the premises were not located in a business/market area but were located in a residential area.
The Hiring Committee then requested the department to furnish the details including year of construction in support of their claim that another Department of the Government as well as nationalised banks in the locality were paying lower rent for the year 1983.
19 On August 14, 1989 the department wrote giving the names of three banks and requesting the Hiring Committee itself to obtain the information with regard to the rents paid by the banks, as well as other particulars/specifications relating to the buildings. It was further emphasized that the cost index in July, 1983 should be taken into account.
The Hiring Committee wrote back to the department affirming that (i) it had considered the cost index for 1983; (ii) the valuation of the premises was computed based on ''Delhi Plinth Area Rate, 1976 and on the basis of the land value given by the Land Acquisition Collector, and (iii) that the Hiring Department had not been able to find comparable rates for 1983 and if the department had any evidence to the contrary they should be most specific. It was stated that in any event, the decision of the Hiring, Committe was merely recommendatory.
In the meanwhile, on, August 25, 1989 the department wrote to the landlords as follows
Kindly refer to our discussions of 24.8.89 with you on the above subject. As you are aware, finalisation of fair rent reassessment of your premises is still pending with the C.P.W.D. In the meantime as already suggested to you verbally, You may like to submit an offer of your reasonable expectation of rent. Your offer may be considered for acceptance by the competent authority provided it clearly states that you would be willing to accept the rates offered, by you or the rates that may be assessed by the C.P.W.D. whichever is less.
The above Suggestion is being made to you keeping in view the delay in finalisation the matter by C.P.W.D. and facilitating an camicabte slettlement of the same at the earlist.
However, this offer is also pursuing the case with the C.P.W.D. for early finalisation by them.
By this time it is clear the landlords had learnt of the recommendation of the Hirling Committe and they sent a legal notice on October 29 1989 demanding payment of the rent as determinded by the hiling Committee.
On November, 28, 1989 the department wrote back to the landlords stating that the C.P.W.D.s assessment was not mandatory but only recommendatory. It was further stated that the assessment made by the Hiring Committee was on the higher side. It was further alleged that no evidence in support of the enhanced tax, if any, had been produced by the landlords and that the department would ''definitely be willing to pay proportionately any increased corporation tax if you produce any evidence in support thereof It was also pointed out that except on one occasion the building had not even been white washed, although in terms of the agreement of tenancy the landlords were to white wash the building every year and paint the doors and windows and other wooden works every two years. It was stated that notwithstanding this:
we are agreeable for revision of rent to the extent of Rs. 3.85 per sft. in Block ''A'' and Rs. 3.65 per sft. in Block ''B'' based on the cost index of 1983. In addition, as stated above, any additional burden of tax will be proportionately borne by us subject to production of documents connected therewith. As regards para (12) of the letter of the Advocates referring to our request to you for an offer of reasonable expectation of rent, we may reiterate that our intentions are not malafide but was done only with a view to have the matter mutually settled early considering the fact that we have been your tenants for a long time.
We hope you will appreciate our stand in the matter and communicate your acceptance for revision of rent as mentioned in para 5 of the above to enable us to obtain sanction from appropriate authority for enhancement of rent.
This letter was followed by another letter dated November 15, 1996 written by the department requesting the landlords to communicate their acceptance of the revision of rent as mentioned in the paragraph of the letter dated November 28, 1989 quoted above, to enable the department, to take further action in the matter.
25 A writ application was thereafter filed by the landlords for the issuance of a writ of mandamus directing the Department to pay the rents as recommended by the Hiring Committee and to take steps for finalisation of the next revision of rent w.e.f. July 30, 1988. An interim order was passed on May 15, 1990 directing the Department to pay rent as offered by them in their letter dated November 28, 1989 to the landlords without prejudice to the contentions of the parties.
In fact in the affidavit in opposition filed by the Appellants and affirmed by the then Appellant No. 1 the offer made in the letter dated November 28, 1989. It was stated:
Regarding paragraphs 30A and 31 of the said petition I say that the Hiring Govt. department has not acted in an arbitrary, unreasonable and unjust manner as alleged by the Petitioner. The matter of reassessment of rent was referred by the hiring Govt. department to the C.P.W.D. as early as 18.8.83 pending certain clarifications sought from the C.P.W.D. hiring committee, their recommendations could not be straightway accepted. Even then these recommendations have not been disregarded and the revised rents of Rs. 3.85 p. per sq. ft. for Block ''A'' and Rs. 3.65p. per sq. ft. for Block ''B'' (exclusive of taxes) offered to the Petitioners. The revised rents recommended by the C.P.W.D. Hiring Committee are inclusive of taxes.
In the affidavit in reply it was shown that if the municipal taxes were added to the rates offered by the Appellants it would amount to the same rates as recommended by the Hiring Committee. Against the Hiring Committee''s recommendation of Rs. 6,95 and Rs. 6.65 in respect of Blocks A and B on the basis of the Appellants, offer the calculation worked out at Rs. 7 and Rs. 6.64 per sq ft for Blocks A and B respectively.
The matter came up for hearing before a Learned Single Judge on September 2, 1992, In the course of the hearing reliance was placed on particulars given by the landlords in their affidavit of other government accommodations in the locality in respect of which the Hiring Commtttee had assessed higher rates of rent which had been accepted and paid by those departments. These figures had not been disputed on affidavit The Appellants prayed for leave to file a supplementary affidavit. Pursuant to the leave given a supplernentary affidavit was filed by the Appellants. This affidavit was affirmed by the new incumbent in the post of the Appellant No. 1 The particulars given by the landlords were dealt with. In addition it was stated that the earlier affidavit affirmed by the previous Regional Director contained a typographical error'' and the rate offered by the Appellants was inclusive of taxes.
28 During the pendenoy of the first writ petition in September 1994 a second writ application was filed by the landlords inter alia for a direction on the Appellants to forward the representations made by the landlords for revision of the rent with effect from Jully, 1988 to July, 1993, and July, 1993 to July, 1988 and for a direction on the Hiring Committee to determine the rents for those periods. An order was passed as prayed upon notice to the Appellants directing the Hiring Committee to dispose of the representation in accordance with law within a period of eight weeks from the date of communication of the order. According to the landlords the order was communicated but the Hiring Committee refused to take any action unless the matter was referred to them by the Appellant No. 1. The matter was thereafter mentioned by the landlords. The Court modified its earlier order and directed the Appellant No. 1 to communicate the Court''s order to the Hiring Committee with necessary instructions. According to the landlords the Appellants did not comply with this order. But on September 8, 1994 the Appellant No. 1 wrote a letter stating that they would vacate the'' premises on the expiry of December 31, 1994. An application for contempt was thereafter moved by the landlords. The contempt application was disposed of by an order dated April 28, 1995 holding that contempt had been committed. The statement made on behalf of the Appellants that the order of the Court would be complied with and the matter would be forwarded to the Hiring Committee as directed, the contempt proceedings were dropped.
On September 4, 1995 the Hiring Committee recommended further revisions of rent in respect of the premises for the 1988-93 and 1993-98. Their determination reads:
Certified that the rent of the building No. 90A and B, Naresh Mitra Sarani, located at Calcutta belonging to Sri Rabindra Nath Nahdy arid Sri Sabnarayan Nandy, hired by the Deptt of Atomic Mineral, Calcutta, as worked but according; to the principles laid down in the Directorate Central of Works, CPWD DM No. 21/8/85-WI (DW) of 13.6:85 per sft. of carpet area per month is:
W.e.f. 28.7.88 W.e.f. 28.7.93
Block-A Rs. 9.70 Rs. 13.15
Block-B Rs. 9.15 Rs. 12.25
Block-C Rs. 3.75 Rs. 4.75
Based on recommendation principles of valuation and Rs. 11.00 (Rupees Eleven) w.e.f. 28.7.88 and Rs. 15.00 (Rupees Fifteen) w.e.f. 28.7.93 based in prevailing market rent in the locality per sft. of carpet area per month. Rent between Rs. 9.15 and Rs. 11.00 (w.e.f. 18.7.88) and Rs. 12.75 to Rs. 15.00 (w.e.f. 28.7.93) per sft. of carpet area for month is considered as reasonable (for Block A and B).
The final decision regarding the actual rent to be paid to the owner other building rests with the authorities to the hire the property. The amount is effective for a period of 5 years.
The rent includes the following:
Municipal Taxes shall be paid by the landlord.
Maintenance and repair charges shall be borne by the landlord.
An application was then made in the second writ application by the landlords for a direction on the Appellants to make payment of the amounts as assessed by the Hiring Committee. Affidavits were filed in these proceedings.
It was in this background of facts that thre Learned Single Judge allowed both the writ applications on May 10, 1996. The Learned Single Judge held that the Appellants could not make submissions contrary to the policy declared in the Circulars. He held that the Hiring Committee was therefore competent to make recommendations and that the provisions relating to assessment of fair rent and enhancement thereof by the Rent Controller under the 1956 Act had No. application. He also held that in terms of the circulars each case of reassessment or rent was to be treated as a fresh case of rent assessment and therefore the question of fair assessment and enhancement thereof by the Rent Controller was immaterial. He also held that the Appellants as the Hiring Department could only take a decision on the basis of the two rates of rent recommended namely one based on valuation and one on the market rate. The Learned Judge also noted the offer made in the first affidavit-in-opposition and held that it was in conformity with the guidelines and said that in the absence of a second rate the parties were bound to accept the only rate recommended by the Hiring Committee. The Appellants were accordingly directed to act in terms of the recommendations made by the Hiring Committee in respect of the premises for the period July 27, 1983 to July 26, 1988 and from July 22, 1988 to July 6, 1993 ''as quickly as possible) but preferably within three months from the date of communiation of the order''. No interest was however allowed on the arrear payments.
These appeals were thereafter preferred. The operation of the order dated May 10, 1996 was stayed but the Appellants were directed to continue to pay rent at the rate at which they were paying during the pendency of the writ application. A cross objection was filed by the landlords in respect of their claim for interest.
The Appellants have submitted that the reference to the fixation of ''fair rent'' in the correspondence proved the applicability of the West Bengal Premises Tenancy Act, 1956. The phrase ''fair rent'' according to the Appellants, is a term of art with the special meaning ascribed to it in the definition of the phrase in the 1956 Act. It is said that the 1956 Act only allowed the Rent Controller to determine the fair rent and a maximum increase of 10% of the existing rent and the Hiring Committee had no jurisdiction to determine the fair rent.
It is said that the benefit of the 1956 Act could not be contracted out of. The second submission of the Appellants is that the decision of the Hiring Committee was merely recommendatory and was not legally enforceable. According to the Appellants they had independently applied their minds after having considered the views of the Hiring Committee and offered to pay a certain rent. It is said that this section was not arbitrary.
Thirdly, it is submitted that the decision of the Hiring Committee was not in any event acceptable as the Hiring Committee had not followed the conditions laid down by the circulars issued by the Central Government in this regard which were to be read suject to the provisions of the West Bengal Premises Act, 1956. As an alternative submission it is.said that the tenancy was a matter of contract and if the tenancy were seen as a new one then both parties would have to consent to the rate of rent. If there were no consent, No. contract could be forged for the parties by the writ Court. It is also submitted that the Court should not entertain the writ petition as disputed questions of fact were involved apart from the fact that what was sought to be enfoced was a monetary claim. Finally it is submitted that there was an arbitration clause under which in the event of any dispute or difference the matter was to be referred to the arbitration of an appointee of the Government of India.
The landlords on the other hand submitted that the rent determined by the Hiring Committee was binding on the Appellants. According to the landlords the tenancy was in effect a new one as new agreements of tenancy would have to be executed after the enhancement. The landlords, contend that therefore neither the arbitration clause in the old agreement nor the provisions of the Tenancy Act applied It is sajd that in any event the jurisdiction of the Rent Controller had not been involved. It is contended that the discretion in a hiring department1 was limited to choose whether or not to either enter into ''a fresh tenancy or to continue in occupation of certain premises. Secondly, it is submitted that the Appellants had themselves referred the matter to the Hiring Committee and had all along participated in the proceedings and that it was not open to them to question the jurisdiction of the Hiring Committee at this stage. It is further submitted that the rate of rent had been determined in accordance with the circulars by the Hiring committee which was an expert body and whose1 decision should not be interfered with in the absence of malafides. It is submitted that the decision of the, Appellants not to act in terms of the Hiring Committees recommendations was arbitrary and violative of Article 14. The argument is sought to be fortified by reference to the specific instances where other departments of the Government of India had accepted the rent determined by the Hiring Committee and had either paid it or vacated the premises being unable to do so. It is said that the Appellants had in fact not given any reasons as to why the recommendation of the Hiring Committee should not be followed by them and that this was sufficient to bring the grievance of the landlords within the ambit of Article 226 irrespective of the fact that the ultimate relief would be in monetary terms.
Several decisions were cited by both parties in support of their respective submissions. Written notes of arguments were also submitted by the parties both before the Single Judge and before this Court.
The objection of the Appellants that the writ petitions should not have been entertained by reason of the existence of an arbitration clause in the agreement is rejected because the question involved does not relate to the obligation of the Department to enhance rent by virtue of the contract of tenancy but relates to the nature and extent of that obligation if any in terms of the circulars issued by the Government in this regard.
All the authorities cited by the Appellants in this context are cases where the dispute raised was found to be one covered by the arbitration agreement. In Indian Aluminium Company Vs. Kerala State Electricity Board, the Supreme Court was dealing with three separate sets of cases. In two of the cases the issue raised was whether the State Electricity Board could revise the tariff for supply of electricity in exercise of powers u/s 49 of the Electricity (Supply) Act, 1948. The Supreme Court held that the Board could not. Those writ applications were accordingly allowed and the demand of the Board for the revised rates were quashed. In the third case there was a clause in the agreement which specifically provided that the tariff fixed under the agreement was subject to revision. The Supreme Court held that this clause empowered the Board to raise the rate. The agreement also contained an arbitration clause. According to the Supreme Court if the claim was founded on a power derived from a source de hors the agreement, the claim fell outside the ambit of the arbitration provision. But when the power was referable to the agreement itself, the dispute raised by the consumer was covered by the arbitration clause and therefore the issue was to be determined in accordance with the arbitration agreement.
The decision in Bisra Stone Lime Co. Ltd. and Another Vs. Orissa State Electricity Board and Another, was rendered when Article 14 of the Constitution had been suspended. The Court found as a matter of fact that the disputes raised were clearly covered by the arbitration clause and therefore the writ application was dismissed. Similarly in Smt. Rukmanibai Gupta Vs. Collector Jabalpur and Others, when pursuant to an arbitration agreement in a contract an award was passed assessing certain moneys as payable by the lessee. The Supreme Court held that the lessee could not challenge the award except in the manner provided under the Arbitration Act.
Even assuming for the purposes of this submission, that the clause relating to enhancement of rent formed part of the contract, nevertheless it is clear from the facts as narrated earlier that at no stage had the Appellants ever taken the stand that the question of enhancement should be decided by an arbitrator. Indeed no steps have been taken by the Appellants till today to refer the dispute to arbitration. In any event, the existence of an arbitration agreement is at the highest an alternative remedy and it is well established that an alternative remedy is not a bar to the Court''s jurisdiction under Article 226 particularly when violation of fundamental rights such as Article 14 are alleged.
The submissions of the Appellants that the writ application should not be entertained because disputed questions of fact are involved and the relief claimed is a monetary one are also misconceived. This Court is not called upon to determine whether in fact the rent assessed by the Hiring Committee is fair or not. The issues which need resolution by the Court relate to the nature of the decision of the Hiring Committee. Did the Hiring Committee at all have the jurisdiction to decide the revised rent? If so is the Hiring Committee''s decision only recommendatory in the sense contended by the Appellants or is it binding? Could the decision of the Hiring Committee be ignored by the Appellants as a matter of law? The answers do not involve any dispute as to the facts and any direction for payment of money would only be incidental to a finding on these questions.
I am not prepared to hold that the provisions of the 1956 Act are not applicable to the case because there was a ''new tenancy''. The tenancy of the department was never determined. Merely because the circulars provide for execution of a fresh agreement incorporating reassessed rents does not mean that a new tenancy was created and when the circulars say that reassessment would be treated as fresh rent assessment, this only means that the same principles which are followed for the assessment in the case a new tenancy should followed for the purpose of reassessment. This is quite clear particularly from the language used in the 5th and last circular.
It does not follow from this that the only authority to determine the rent in respect of the tenanted premises is the Rent Controller. The submission of the Appellants is based on the argument that the circulars are contrary to the 1956 Act and therefore illegal. It is doubtful whether the Appellants as Respondents to the writ petitions can at all attack the circulars issued by the Government on the ground of illegality. It is not necessary to decide this issue as there is in fact no conflict between the circulars and the 1956 Act. Resort to the Rent Controllers jurisdiction is made only when parties cannot agree either that rents should at all be reassessed or as to the quantum of reassessment. When there is no such dispute the parties to the tenancy are free to agree to a revision of the rent. ''Fair rent'' under the 1956 Act and agreed rent are different concepts. Section 4 of the 1956 Act recognizes this. The question of fair rent arises when either the landlord or tenant makes an application for such fixation u/s 10 of 1956 Act. The agreed rent is sought to be displaced by statutory intervention and if such application is made, it is the Rent Controller alone who would have the exclusive jurisdiction to fix the rent. This has nothing to do with parties agreeing to a rent or to a procedure for enhancement of such agreed rent. It is not in dispute that till today no application has been filed either by the Appellants or the landlords under the 1956 Act before the Rent Controller for fixation of the fair rent and the Appellants contention that only the Rent Controller has the jurisdiction in respect of the tenancy in question is misconceived.
The 1956 Act no doubt provides for the Rent Controller appointed under the Act to determine the fair rent. It is also true that the words ''fair rent'' have been defined in Section 2 of the 1956 Act. But it is clear from the opening words of Section 2 that the definition is only for the purposes of 1956 Act. In other words whenever the phrase is used in the Act, unless there is anything repugnant in the subject or context, the words ''fair rent'' will have the meaning as defined. This does not mean that whenever parties use the word ''fair rent'' they intend that the provisions of the West Bengal Tenancy Act will apply. The parties conduct in this case certainly does not bear out any such intention. It is clear that the words ''fair rent'' have been used to mean reasonable rent and not in the sense of the phrase used in the 1956 Act. In fact parties have all along conducted themselves on the basis of the five circulars noted earlier.
In any opinion the five circulars in effect provide for and envisage the revision of rent by consent. The Government being an amorphous body, the question of consent to a revision could not be left to the sole discretion of an individual officer who might at a given point of time be occupying a post in a department. It was to regulate this individual approach and to lay down a uniform policy that rationalised principles were laid down in the circulars according to which the consent in connection with reassessment of rents was required to be accorded. The circulars regulate not only the grant of consent but also provide the only method in which such consent can be accorded by a Government department. Seen from this perspective it cannot be said that the circulars are contrary to the provisions of 1956 Act. By taking this policy decision, as contained in the circulars the Government has not ''contracted out'' of the 1956 Act as contended by the Appellants as that Act clearly recognises and certainly does not take away the right of parties to themselves determine the reasonable rate of rent payable by them in respect of premises otherwise covered by the 1956 Act.
Griffiths v. Davies (1943) 2 ALL E.R. 209 cited by the Appellants in this connection is an authority for the proposition that a tenant is not precluded from invoking the provisions of the Rent Act despite having suffered a decree.
Prithvichand Ramchand Sablok Vs. S.Y. Shinde, and Devkaran Nenshi Tanna (dead) by LR''s Vs. Manharlal Nenshi and another, also cited by the Appellants were decisions u/s 12(3) of the Bombay Rents, Hotel and Lodging Houses Rates Control Act, 1947. In both the cases the Supreme Court observed that if the standard rent is fixed solely on the basis of agreement between the parties it would not preclude the tenant from contending in any subsequent proceeding that the rent was excessive and require the Court to fix the standard rent. In other words, the tenant cannot by agreement with the landlord give up its rights to proceed under the Tenancy Act.
The cases have no bearing on the issue raised before us. It cannot be contended that the Government could not in law file an application under the West Bengal Premises Tenancy Act for determination of the fair rent before the Rent Controller. But the Government did not choose to do so. It still does not do so. It took a conscious decision at the highest level and determined as a matter of policy to have the reasonable rent assessed in the manner prescribed every five years. There has been no change of policy. The decision expressed in the Circulars remains and the Department as a limb of the Government cannot deviate from it. As said in Home Secretary, U.T. of Chandigarh and Another Vs. Darshjit Singh Grewal and Others,
The policy guidelines are relatable to the executive power of the Chandigarh Administration. It is axiomatic that having enunciated a policy of general application and having communicated it to all concerned including the Chandigarh Engineering College, the Administration is bound by it. It can, of course, change the policy but until that is done, it is bound to adhere to it.
Apart from this, the notable feature in this case is the conduct of the Department both post and ante-litem. The legality of the circulars was never questioned. Even in the affidavits the offer of the revised rent by the Appellants was, according to them, in terms of the circulars.
In my opinion therefore the circulars are valid and binding on the Appellants. Under the Circulars, the Hiring Committee has the jurisdiction to make an assessment and to recommend it to the Hiring Department for payment. The several decisions cited by the Kiran Singh and Others Vs. Chaman Paswan and Others, , Kaushalya Devi and Others Vs. Shri K.L. Bansal, Ferozi Lal Jain Vs. Man Mal and Another, and Nutan Kumar and others Vs. IInd Additional District Judge, Banda and others, have no manner of application to this case as those decisions relate to the effect of a decree or order passed without jurisdiction.
Clearly the Department was and is agreeable that reassessment of the rents are to be made. The question is how much? According to the Circulars it is the Hiring Committee which is to assess the reasonable amount of rent strictly in the manner prescribed in the circulars.
The circulars lay down with precision the formulate to be followed by the Hiring Committee. Therefore the Hiring Committee''s recommendation in order to be valid would have to be in accordance with the circulars. If follows that if it is not, it would be open to the Hiring Department to refuse to abide by the recommendation of the Hiring Committee. But this would not mean that the Hiring Department could then itself determine the rate of reassessment as this would be contrary to and would defeat the very object sought to be achieved by the circulars.
State of Kerala Vs. Smt. A. Lakshmikutty and others, was cited by the Appellants to contend that the recommendations of the Hiring Committee was not binding on them. In any opinion, the decision rather supports the view taken by me. The decision in that case turned on the meaning of the word ''consultation'' in Article 233(1) of the Constitution.
It was held that the High Court under Article 233(1) can only recommend the names of persons for appointment as District Judges. The recommendation need not be accepted by the State Government which is to make the appointment. But if the State Government does not accept the names recommended, the State Government is bound to place the matter the High Court giving ''good and weighly reasons'' why the recommendations cannot be accepted. The State Government itself has no power to appoint any person as a District Judge and is bound to choose from the panel of names forwarded by the High Court. In other words the recommendation is binding on the State Government in that the choice of appointee is limited to the recommendation.
However, if the Hiring Committee duly follows the principles of reassessment as formulated in the circulars the Hiring Department would be bound to accept the recommendation with an option to choose between the rate arrived at on the basis of the relevant market rate and the rate based on the principles of valuation specified in the circulars. In other words, the Hiring Department cannot refuse to follow the recommendation of the Hiring Committee except on the ground that it is not in accordance with the circulars.
Consequently, in my view, under the Circulars, the recommendation of the Hiring Committee provided it is duly made binds the Hiring Department to pay on that basis and is enforcible against the department. Of course in Laxmi Kutti''s (Supra) case the Supreme Court held that if a person whose name has merely been recommended by the High Court for appointment cannot ask for appointment on the basis of such recommendation by way of an application under Article 226. But this principle would not apply in this case. There is a difference between a ''qualitative'' recommendation and a ''quantitative'' one. The latter can be objectively tested with mathematical exactitude. The former is not. A recommendation for appointment would fall within the former category. This case falls within the latter category. While there may be several value based factors weighing with the State Government for not accepting a recommendation for appointment there is hardly any scope for any such subjective evaluation in this case. The correctness of the decision of the Hiring Committee is demonstrable and objectively ascertainable.
There can be no two points of view unlike an appointment under Article 233(1).
This was also the case in Barindra Kr. Jha v. Coal India Ltd. 1996 (11) C.H.N. 273. A committee had been formed to consider the representations relating to refixation of seniority according to rules. The Committee submitted its recommendation. The recommendation was not implemented.
A writ application was moved for implementation of the recommendation. The writ application was dismissed on the ground of delay. Allowing the appeal, the Division Bench held that the recommendation which was also verifiable by the Court itself was binding on the authorities. So also if the Hiring Committee''s recommendation is in terms of the circulars it would be against public policy to allow the department to claim that the recommendation, was not binding on it and the Court can direct implementation of the recommendation under Article 226.
Having held that the circulars are valid and binding it is not necessary to decide the further submission of the Respondents that the Appellants were bound by the principles of promissory estoppel to abide by the recommendation of the Hiring Committee. Even assuming that the principles of promissory estoppel apply, the promise as contained in the circulars is that reassessment will be made every five years in the manner prescribed. There is no representation to pay the amount determined otherwise than in accordance with the mode prescribed. An assessment by the Hiring Committee not in accordance with the circulars would be an invalid one and an invalid representation cannot be enforced by invoking the doctrine of promissory estoppel See: Home Secretary v. Darshjit Singh Grewal (Supra) Furthermore merely because other departments may have without question accepted the recommendation of the Hiring Committee cannot preclude this Department from acting otherwise. It is not known to this Court as to what were the terms and other facilities available to those Departments under the terms of lease which justified those departments acting on the basis of the recommendation. Unless such an exact parity can be shown, it would not be proper for this Court to hold that the Appellants have acted arbitrarily merely because they refused to accept the decision of the Hiring Committee without question.
I am also unable to accept the submission of the landlords that the Appellants are precluded from raising this question by reason of the Hiring Committee being an ''expert body''. The Court cannot interfere with the decision of an expert body as an appellate forum but the Court can scrutinise the decision of the Committee to ascertain whether it was validly arrived at. The decisions cited by the Respondents viz. R.K. Jain Vs. Union of India and Others, Dalpat Abasaheb Solunke and Others Vs. Dr. B.S. Mahajan and Others, do not hold to the contrary. If the Appellants can show to this Court that the procedure prescribed in the Circulars has not been followed by the Hiring Committee, the action of the Appellants in refusing to, act on the basis of the recommendation of the Hiring Committee cannot be described as arbitrary or violative of Article 14.
Therefore the only question, which survives is whether the recommendation of the Hiring Committee was in terms of circulars. The Appellant''s argument that the Hiring Committee is bound to limit the enhancement to 10% in terms of the provisions of the Tenancy Act is not borne out by the language of the circulars. The first circulars only mentions ''an increase in rent as per the rent Control orders'' as being one of the four factors justifying an enhancement of the rent. Any one of the five circumstances mentioned in the first circular could give rise to enhancement. In addition to these, circular dated September 1, 1982 in modification of the first circular added on a further circumstance when reassessment could be made namely, the expiry of a period of five years from the date of original assessment. This reference to the Rent Control orders does not mean that the limits of enhancement fixed under the 1956 Act are incorporated into the circulars. If it were so, nothing could have prevented the Central Government from explicitly stating so, in the circulars, particularly when detailed provisions for calculation of the rent have been made. In my opinion, therefore, there are no limits on the amount to which enhancement can take place under the Circulars. This makes it imperative that there should be complete transparency in the decision making process of the Hiring Committee.
Unfortunately the members of the Hiring Committee who were all parties to the writ petitions have not affirmed any affidavit. No records were produced by the Hiring Committee in support of their conclusions.
Neither their recommendations for 1983-88 in the first writ petition nor their recommendation in the second writ petition for 1988-93 and 1993-98 show the calculation on the basis of which the rents were reassessed. The Hiring Department is entitled to scrutinise the bases for the decision. A broad break up has no doubt been indicated with regard to the basic rent and the tax element. But how did they arrive at the basic rent? Then again the Appellants have claimed that there were other private buildings occupied by other Government Departments at the relevant time. This needed to be and must be considered by the Hiring Committee. Indeed the Hiring Committee had called upon the Department to furnish the particulars. This was not done before the writ petition was moved. The Appellants cannot be compelled to act in terms of the recommendation unless the Court is satisfied that the Circulars have been fully complied with. For the reasons stated, the material before the Court is insufficient to be so satisfied. It must not be however, understood that this Court has held that the rents as assessed by the Hiring Committee are incorrect which may have in fact been arrived at in a manner warranted by the circulars. But it has not been so demonstrated.
Although no formal decision has been taken by the department yet the department has disclosed its mind in the proceedings that it does not accept the recommendation of the Hiring Committee. No useful purpose would be served, in the circumstances to ask them to pass a former order of refusal. It may also be said in this connection that the landlords have every reason to be aggrieved by the shift in the stand of the Appellants with regard to their offer. The language of the letter dated November 28, 1989 as well as the statement contained in the first affidavit filed by the Appellants before the Learned Single Judge clearly state that the offer of Rs. 3.85 per sq. ft. for Block ''A'' and Rs. 3.65 per sq. ft. for Block ''B'' was exclusive of tax. The method by which this offer was sought to be ''explained'' in the supplementary affidait of the Appellants is to be deprecated and it is unbecoming of a senior officer of the Government to have taken such an irresponsible stand. However, having said that, it is clear that the Appellants cannot be bound by the offer made by them either in the letter dated November 28, 1989 and reiterated in their affidavit-in-opppsition for the simple reason that this was the very act which the circulars prevent a department from doing namely to reassess the rents on their own. As already stated, in my opinion the only method in which the reassessment can take place is under the circulars and in no other manner.
Having held that the Hiring Committees recommendations cannot be enforced because of lack of particulars, in my opinion, the matter cannot be allowed to rest there. It it is also true that the decision of the Hiring Committee has not been challenged by the landlords. However, the Court is not powerless to mould the reliefs so that effective and expeditious justice may be rendered.
There can also be no doubt that the Appellants had delayed in referring the question of reassessment of the Hiring Committee in respect of each of the periods 1983, 1988 to 1993 and 1993 to 1998. The landlords are entitled to be compensated therefor. Madhav Gopai Sanap v. State of Maharastra AIR 1985 S.C. 239, RF (Rasat and Farhat) Charitable Trust, Hyderabad Vs. Special Deputy Collector (General) Land Acquisition, Hyderabad and others, Chandra Bansi Singh and Others Vs. State of Bihar and Others, and Govt. of Tamil Nadu and another Vs. R. Thillaivillalan, are all cases in which the Courts have directed payment of interest or compensation by reason of delay in the making payment of fund. Even under the 1956 Act interest is payable on all arrear rents at the rate of 8.33 per annum.
Therefore, I would allow both the appeal and cross objection and set aside the order under appeal with the following directions:
(1) The Hiring Committee must make available to the parties the details of all calculations made with regard to the assessment of rents within four weeks from date; (2) Any objections to such calculations by either party must be specific and made within 4 weeks thereafter, (3) Within the same period any relevant evidence as to the market rate for the periods in question with full particulars may be submitted by either party to the Hiring Committee with copies to the other side; (4) the Hiring Committee will then reconsider the matter in the light of the observations in this judgment and take a decision on the materials before it after verification within a period of three months thereafter; (5) the recommendations along with all the calculations in support thereof will be communicated to both parties within 48 hours thereof; (6) the Department shall take a decision on the recommendation in the light of the observations contained in this judgment within four weeks thereafter. Such decision is to be taken by the Regional Director, Atomic Minerals Division, Department of Atomic Energy. If the recommendation is not accepted detailed reasons for such non-acceptance must be given and communicated to the Appellants within 48 hours thereof; (7) if the recommendation is accepted, payments of all outstandings on account of such reassessed rents must be made to the landlords within four weeks from the date of the decision together with interest at the rate of 8 1/3% simple interest per annum calculated from the date on which the payments were due upto the date of payment; (8) there will be no order as to costs.
I have had the privilege of reading my learned brother''s judgment. While I agree with him that the appeal must be allowed (albeit for different reasons), I do not agree that the cross appeal filed by the landlords should be dismissed. There is also a divergence between the nature of consequential directions to be given. The appeal is accordingly allowed and the judgment and order under appeal is set aside. However, in view of the difference of opinion with regard to the cross appeal and reliefs to be granted the matter may be set before the Hon''ble Chief Justice for reference of the differences to any other Learned Judge as he may think fit.
Let a xerox copy of the judgment duly signed by the Assistant Registrar of this Court be given to the parties upon their undertakings to apply for certified copy of the judgment and on payment of usual charges.
Devendha Kumar Jain, J.
I agree.