Union of India and others vs Dr. Bhimrao Narayanrao Randaye, Nagpur

V.A. Mohta, J.—Respondent Dr. Bhimrao Randaye, landlord of a house situated in Laxminagar, Nagpur, applied under Clauses 4 and 5 of the C. P. and Berar Letting of Houses and Rent Control Order, 1949 (the HRC Order), for fixation of fair rent for the premises let out to the petitioner - the Union of India for housing a post office. The petitioner filed a reply, inter alia, contending that since Clauses 6, 7 and 7-A of the HRC Order have been struck down as unconstitutional by a Division Bench of this Court in the case of Omprakash vs. Fattelal, 1986 Mh.L.J. 414, the application was not maintainable. The Rent Controller on the basis of a Single Bench decision of this Court in the case of Oyaldas vs. Shrikant, 1986 Mh.L.J. 706 came to the conclusion as validity of Clauses 4 and 5 was upheld in Omprakash (supra), application was maintainable and fair rent could be determined on the basis of tests enumerated in Oyaldas (supra) even though the basis for determination fixed by Clauses 6(1), 7(1) and 7A viz. rates prevalent on the cut off date 1st April 1940 ceased to exist. Preliminary objection was thus overruled and the matter was set down for recording evidence .Aggrieved thereby, the present petition has been filed.

That such a view of Clauses 4 and 5 has been taken in Oyaldas and that the Rent Controller was bound by that decision cannot be and is not disputed. Inviting my attention to the earlier Single Bench decision in the case of Purushottamdas vs. Anant, W.P. No. 1701 of 1981 decided on 20th March 1986 in which it is held that since the basis or measure of determination was declared invalid, fair rent could not be determined. It was vehemently urged by Shri Vidhwans, the learned counsel for the petitioner, that the learned Single Judge in Oyaldas was obliged either to follow the earlier view or to refer the question to a larger Bench in case he was'' inclined to differ and had no jurisdiction just to mention the earlier view and ignore it. Strong reliance was placed in support upon the cases of (i) Mahadeolal Kanodia Vs. The Administrator-general of West Bengal, , (ii) K. Balakrishna Rao and Others Vs. Haji Abdulla Sait and Others, and (iii) Union of India (UOI) and Others Vs. Godfrey Philips India Ltd., . It is further contended that Oyaldas is also contrary to the law laid down in Omprakash and the question should be referred to a Full Bench.

My pointed attention was drawn to the following passages in Omprakash and to the fact that they are based upon the ratio of the case Motor General Traders vs. State of Andhra Pradesh, AIR 1984 SC 121 :

In our judgment therefore the ratio of Motor General Traders applies to Clauses 6(1) and 7(A) of the HRC Order also and hence they are declared violative of Article 14 and are struck down as such.

We must make it clear that we see nothing basically wrong in initial fixing of a particular outer limit with relation to a particular cut off date. What gives blow to the validity is indefinite continuation of the formula without any justification despite wholly changed circumstances during a long span of time of which judicial notice can be taken.............................

It is contended that as a result of striking down clauses 6(1) and 7(1) as violative of Article 14, the whole HRC Order or in any case whole Chapter relating to fixation of rent should be struck down. We do not agree. The HRC Order deals with many facets of landlord-tenant relationship and fixation of fair rent is but one of them and is a separate part of the scheme. Even different provisions relating to fixation of fair rent are separable. Clause 4 refers to the width of power to determine fair rent, clause 5 to the mechanics of determination and clauses 6 and 7 to the norms on the basis of which determination is to take place. It is not our view that in such a social legislation fair rent cannot be legally determined. Indeed in our view it is necessary to do so. We have found fault merely with the norms of fixation and nothing else. Those provisions are Clauses 6, 7 and 7A. However, it does seem to us that these provisions are inextricably mixed up with each other and are inseparable. If clauses 6(1) and 7(1) are expunged, the remainder cannot be enforced without making alterations and modifications. To make such alteration would mean judicial legislation which is impermissible. As an inevitable result Clauses 6(2), 7(2) and 7A are also struck down as unconstitutional along with clauses 6(1) and 7(1)." (Paras 6, 7 and 9)

To complete the background it will be necessary to notice that the Motor General Traders (supra) is all about. It has struck down as discriminatory section 32(b) the of Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960, by which the said Act did not apply to any building constructed on or after 26th August, 1957, holding :

What may be unobjectionable as a transitional or temporary measure at an initial stage can still become discriminatory and hence violative of Article 14 of the Constitution if it is persisted in over a long period without any justification........................... The long period that has elapsed after the passing of the Act itself serves as a crucial factor in deciding the question whether the impugned law has become discriminatory or not because the ground on which the classification of buildings into two categories is made is not a historical or geographical one but is an economic one ................. After giving our anxious consideration to the learned arguments addressed before us, we are of the view that clause (b) of Section 32 of the Act should be declared as violative of Article 14 of the Constitution because the continuance of that provision on the statute book will imply the creation of a privileged class of landlords without any rational basis as the incentive to build which provided a nexus for a reasonable classification of such class of landlords no longer exists by lapse of time in the case of the majority of such landlords. There is no reason why after all these years they should not be brought at par with other landlords who are subject to the restrictions imposed by the Act in the matter of eviction of tenants and control of rents." (Paras 16, 23 and 30).

Shri Chandurkar, the learned counsel for the respondent, contended that all these questions are rendered purely academic in view of a recent subsequent development in law which, according to him, gives a new turn to the whole issue of the fixation of fair rent, i.e. the latest decision of the Supreme Court in the case of Sant Lal Bharti Vs. State of Punjab, in which validity of a provision similar to Clauses 6(1), 7(1) and 7A of the HRC Order, viz. Section 4 of the East Punjab Urban Rent Restriction Act, 1949 (the Punjab Act) has been upheld. Having examined the said decision and the basic schemes of both the enactments it seems to me that he is right.

I do not see any substance in the contention of the petitioner that the two provisions are not basically similar. I reproduce them for ready reference and comparison :

Section 4 of the Punjab Act reads : �

Determination of fair rent - (1) The Controller shall on application by the tenant or landlord of a building or rented land fix the fair rent for such building or rented land after holding such inquiry as the Controller thinks fit.

(2) In determining the fair rent under this section, the Controller shall first fix a basic rent taking into consideration �

(a) The prevailing rates of rent in the locality for the same or similar accommodation in similar circumstances during the twelve months prior to January 1, 1939; and

(b) The rental value of such building or rented land if entered in property tax assessment register of the municipal town or notified area committee, cantonment board, as the case may be, relating to the period mentioned in clause (a) :

Provided that, notwithstanding anything contained in sub-sections (3), (4) and (5), the fair rent for any building in the urban area of Simla shall not exceed the basic rent.

(3) In fixing the fair rent of a residential building the Controller may allow, if the basic rent �

(i) In the case of a building in existence before January 1, 1939-

(a) does not exceed Rs. 25/- per mensem, an increase not exceeding 8 1/3 per cent on basic rent;

(b) exceeds 25 per mensem but does not exceed Rs. 50 per mensem, an increase not exceeding 12 1/2 per cent on such basic rent;

(c) exceeds Rs. 50 per mensem, an increase not exceeding 25 per cent on such basic rent;

(ii) in the case of a building constructed on or after January 1, 1939-

(a) does not exceed Rs. 25 per mensem, an increase not exceeding 25 per cent on such basic rent;

(b) exceeds Rs. 25 but does not exceed Rs. 50 per mensem, an increase not exceeding 37 1/2 per cent on such basic rent;

(c) exceeds Rs. 50 per mensem, an increase not exceeding 50 per cent on such basic rent.

(4) In fixing the fair rent of a scheduled building the Controller may allow, if the basic rent �

(i) in the case of a building in existence before January 1, 1939 �

(a) does not exceed Rs. 25 per mensem, an increase not exceeding 13 1/3 per cent on such basic rent;

(b) exceeds Rs. 25 but does not exceed Rs. 50 per mensem, an increase not exceeding 17 1/2 per cent on such basic rent;

(c) exceeds Rs. 50 per mensem, an increase not exceeding 30 per cent on such basic rent;

(ii) in the case of a building constructed on or after January 1, 1939 -

(a) does not exceed Rs. 25 per mensem, an increase not exceeding 30 per cent on such basic rent;

(b) exceeds Rs. 25 but does not exceed Rs. 50 per mensem, an increase not exceeding 42 1/2 per cent on such basic rent;

(c) exceeds Rs. 50 per mensem, an increase not exceeding 55 per cent on such basic rent.

(5) In fixing the fair rent of a non-residential building or rented land the Controller may allow, if the basic rent �

(i) in case of a building in existence before January 1, 1939, or in the case of rented land �

(a) does not exceed Rs. 50 per mensem, an increase not exceeding 37 1/2 per cent on such basic rent;

(b) exceeds Rs. 50 per mensem, an increase not exceeding 50 per cent on such basic rent;

(ii) in case of a building constructed after January 1, 1939 �

(a) does not exceed Rs. 50 per mensem, an increase not exceeding 50 per cent on such basic rent;

(b) exceeds Rs. 50 per mensem, an increase not exceeding 100 per cent on such basic rent.

(6) Nothing in this section shall be deemed to entitle the Controller to fix the fair rent of a building or rented land at an amount less than the rent payable for such building or rented land under a subsisting lease entered into before the first day of January 1939.

Clauses 4 to 7A of the HRC Order read thus :

When on a written application by the landlord or tenant, the Controller has reason to believe that the rent of any house within his jurisdiction is insufficient or excessive, as the case may be, he shall hold such enquiry as may be necessary and record a finding.

If, on consideration of all the circumstances of the case.

including any amount paid before the 1st December 1952 by the tenant by way of premium or any other like sum in addition to rent, the Controller finds that the rent of the house is insufficient or excessive, as the case may be, he shall determine the fair rent to be charged for the house.

(1) In determining the fair rent under clause 5 of a house constructed before the 1st April, 1940 and occupied wholly or mainly for purposes of residence, the Controller shall have due regard to the prevailing rates of rent for the same or a similar house in similar circumstances during the 12 months immediately before that date and the rental value as entered in the Municipal or Local Board Assessment Registers, as the case may be, relating to that period and shall increase the rent so determined by 12''/2 per cent if he is satisfied that the house has been maintained by the landlord in a proper state of repair.

(2) In determining the fair rent under clause 5 of a house constructed after the 1st April, 1940 and occupied wholly or mainly for purposes of residence, the Controller shall have due regard to the prevailing rate of rent for the same or a similar house in similar circumstances and also to any general increase in the cost of sites and building construction.

(1) In determining the fair rent under clause 5 of a house constructed before the 1st April 1940 and occupied wholly and mainly for non-residential purposes, the Controller shall have due regard to the prevailing rates of rent for the same or a similar house in similar circumstances during the twelve months immediately before that due date and may, after considering any general rise in the rental values for business or other similar purposes, increase the rent so determined upto 50 per cent if he is satisfied that the house has been maintained by the landlord in a proper state of repair :

Provided that, where a house has been let for educational purposes the increase shall not exceed 12 1/2 per cent.

(2) In determining the fair rent under clause 5 of a house constructed after the 1st April, 1940 and occupied wholly or mainly for non-residential purposes, the Controller shall have due regard to the prevailing rates of rent for the same or a similar house for similar purposes and also to any general increase in the cost of sites and building constructions.

7A. In the case of a house constructed before the 1st April, 1940 of which the fair rent has not been determined, the landlord may with the consent of the tenant increase the rent within the limits of the increase allowed under sub-clause (1) of clause 6 or clause 7, as the case may be, and the rent so agreed shall subject to any order that may be made the Controller in pursuance of clauses 4, 5, 6, 7 and 8 be deemed to be fair rent for the purposes of this Order.

Bare reading of the above provisions leaves no manner of doubt that both the schemes are principally the same. Mere difference in the cut off date and permissible increases will make no difference for applicability of the ratio.

Once that ground is clear, all that remains to be examined is what the ratio of Sant Lal Bharti is. Since there was a debate also on that aspect, I will notice in short the background of that case. The High Court of Punjab and Haryana dismissed a petition by which the validity of section 4 of the Punjab Act was challenged. Supreme Court upheld the said decision on the following three points :

(i) In the absence of material particulars about the premises, the question of vires of the Act could not be decided.

(ii) Pegging the rent prevalent in 1938 as the basis for determination of fair rent in the Act passed in 1949 was not invalid.

(iii) Article 14 does not authorise striking down of a law of one State on the ground that in contrast with law of another State on the same subject its provisions are different or discriminatory.

Points Nos. (i) and (iii) are not germane to the controversy before me. On point No. (ii). it is held :

The learned counsel for the appellant submitted that Section 4 of the said Act is ultra vires the Constitution and unreasonable inasmuch as the section provides that rent prevalent in 1938 the basis for the determination of fair rent if (sic is) unreasonable and unjust. He urged that pegging the rent prevalent in 1938 the basic rent was inequitable and unjust in the background of the tremendous rise in prices. But it has to be borne in mind that certain increases have been provided for in Section 4 from the rent prevalent in 1938. It must, however, be remembered that the Act was passed as the preamble of the said Act states, inter alia, "to restrict the increase in rent". One of the objects of the Act was to restrict the increase in rent. With that object the Act has provided certain provisions as to fixation of the fair rent............................... It must, however, be borne in mind that the Act in question was passed in 1949 and it pegged the rent prevalent in the similar houses in 1938 and as such is not unreasonable perse. The rises started tremendously after the end of the Second World War and after the partition of the country. In that view of the matter, we cannot say that per se there is unreasonableness in fixing the prices in 1938 level. Having regard in the specific preamble of the Act we find nothing unreasonable in the scheme contemplated u/s 4 of the present Act.

The learned counsel for the petitioner contended that in Sant Lal Bharti, the question of validity of a provision of law made in 1949 pegging the rent prevalent in 1938 as the basis of determination of fair rent has been examined only with reference to the time when the law was made and not with reference to the aspect of continuation of that basis for indefinite period despite change of circumstances as was done in the case of Motor General Traders. It is further contended that since that aspect was neither argued nor was attention of the Court drawn to the case of Motor General Traders the ratio of that earlier case and not the latter case would be binding upon me. It is difficult to accept the submission for it is against the settled principles of law of precedent. Even if there is a seeming conflict between the decisions of Benches of Supreme Court consisting of equal number of Hon''ble Judges, the latter and not the former is binding. Moreover, binding nature of a conclusion under Article 141 does not depend upon the question whether a particular angle relating to the controversy was presented before the Court or not. In this connection, useful reference may be made to the following two decisions : (i) Case of Ballabhadas Mathurdas Lakhani and Others Vs. Municipal Committee, Malkapur, wherein it is held that the decision of the Supreme Court could not be ignored by the High Court on the ground that relevant provisions were not brought to the notice of the Supreme Court, (ii) Case of K. Balkrishna Rao (supra) wherein it is held that binding effect of a decision of the Supreme Court-does not depend upon whether a particular argument was considered therein or not, provided the point with reference to which an argument was subsequently advanced was actually decided.

There is yet another angle to the controversy. While Sant Lal Bharti''s case is directly on a similar provision of fair rent, ratio of Motor General Traders'' case was applied only by extension. Conclusion is thus inevitable. It is - Clauses 6(1), 7(1) and 7A are valid. Omprakash stands impliedly overruled by Sant Lal Bharti and curtain must be dropped on the controversy.

To conclude, the petition is dismissed. Rule discharged. No order as to costs. Needless to mention that the interim order stands automatically vacated.