DHIRAJLAL VITTALJI v. IVY DICKSON — 1974 DIGILAW 214 (KAR)

( 1 ) THESE two second appeals are by defendants 1 and 2 respectively, against the decree passed by the Civil Judge, Mangalore, S. K. in RA. 34 of 1970, modifying the decree passed by the Munsiff, Mangalore, S. K. in os. 597 of 1965. ( 2 ) THE plaintiffs instituted the suit on 22-11-1965 for a declaration that the lease deed d/. 9-3-1962 entered into between the first and third defendants and registered as document No. 555 of Hook of 1962 of the office of the Registrar, S. K. , is void and invalid and not binding on the plaintiffs and defendant 2. The property, which is the subject matter of the lease deed d. 9-3-1962, originally belonged to one Gregory John Saldanha, he died on 11-3-1918 leaving behind his widow, the third defendant, and four daughters, plaintiffs 1 to 3 and the-second defendant. Before his death, he had executed a will d. 30-9-1916 produced in the case as Ext. P1. In op. 146 of 3920 a probate was granted in favour of the third defendant and one Joachim Vincent Saldanha, who was appointed as the managing executor. The first defendant was a monthly tenant of the suit premises, which is a non-residential building situate in the City of Mangalore. The agreed rent payable was Rs. 50 p. m. After the death of the managing executor, joachim Vincent Saldanha, the remaining executrix, viz. , the third defendant, executed a lease deed on 9-3-1962 as per Ext P2 in favour of the first defendant. The lease deed recites that the first defendant was already a tenant on a monthly rental of Rs. 50. It further recites that the building was in need of immediate repairs and renovation and that the executrix did not possess sufficient funds to effect the repairs and to renovate the building. Therefore, she entered into an agreement with the first defendant, who was already in possession of the building as a monthly tenant. It further stipulates that the first defendant should effect the repairs and make improvemen's, subject to the approval of the third defendant. It is further provided that the expenditure should not be Incurred so as to exceod a sum of Rs. 15,000. In lieu of this investment to be made by the first defendant, the third defendant agreed under Ext. It further stipulates that the first defendant should effect the repairs and make improvemen's, subject to the approval of the third defendant. It is further provided that the expenditure should not be Incurred so as to exceod a sum of Rs. 15,000. In lieu of this investment to be made by the first defendant, the third defendant agreed under Ext. P2 to grant a lease for ft period of twenty years renewable at the instance of the first defendant for a further period of twenty years on the same terms and conditions, viz. , on payment of Rs. 50 8s rental p. m. It further provides that if before the expiry of the period stipulated in Ext. P2 the lessor terminates the tenancy, the lessee would be entitled to the refund of the amount on the basis of the book value. It is this lease deed that is challenged by the plaintiffs as not binding on them and the second defendant who are the legatees entitled to. succeed to the suit property under the will executed by late Gregory John Saldanha. ( 3 ) THE case of the plaintiffs is that the third defendant had no power of management of the property as she was not appointed as a managing executrix. It is the further case of the plaintiffs that the third defendant, at any rate, had lost the power of management after the second defendant attained twenty-one (21) years of age. It is further pleaded that Ex. DS d/. 25-11-1964 is vitiated as it was obtained by undue influence, fraud etc. ( 4 ) THE Court of first instance dercreed the suit. It held that the lease ig not vitiated by fraud. It, however, decreed the suit on the ground that the third defendant had no power to deal with the property. On appeal against the said decree, the learned Civil Judge held that the lease is not binding on the plaintiffs. Ho held that the lease, in so far as it pertains to the interest of the second defendant is concerned, is binding. ( 5 ) IT is the correctness of the said decree that is challenged by the first defendant in RSA. 401 of 1971 and by the second defendant in RSA. 645 of 1971. Ho held that the lease, in so far as it pertains to the interest of the second defendant is concerned, is binding. ( 5 ) IT is the correctness of the said decree that is challenged by the first defendant in RSA. 401 of 1971 and by the second defendant in RSA. 645 of 1971. ( 6 ) AFTER these appeals were heard for some time, I asked the learned counsel to examine this effect of the bar contained in S. 18 (2) of the Karnataka rent Control Act, 1961 (hereafter referred to as the 'act'), on the validity of the lease deed. Sri Tukaram S. Pai, learned Counsel for the appellant in RSA. 401 of 1971, felt that as this question was not debated in the two Courts below, it is necessary for him to examine the legal position before making submissions to the Court. When these appeals were taken up for hearing yesterday, I granted him time till today to examine tho legal position and make his submissions. Today both the cases were taken up for hearing and both the Counsel were heard. ( 7 ) AS in my opinion the bar contained in sub-sec (2) of S. 18 of the act has the effect of invalidating the lease deed in question, I consider it unnecessary to deal with the, other contentions urged by both the learned counsel in these two appeals. ( 8 ) THE, Act came into, force on 31-12-1961 and was in force on the date on which the lease deed, Ext. P2 d. 9-3-1962, was executed by the third defendant in favour of the first defendant. On the date of the said lease deed the first defendant was admittedly in possession of the suit property as a monthly tenant, on an agreed rental of Rs. 50 p. m. It became necessary for the third defendant to execute the lease deed as stated in the document itself, because she was not possessed of sufficient funds to effect the repairs and renovate the building which was leased to the first defendant. Lessee, the first defendant, was agreeable to provide the necessary funds for effecting the repairs of an amount not more than Rs. 15,000. This amount was not required to be adjusted towards the payment of the rent, but was to be paid by the first defendant in addition to the agreed rent, of Rs. Lessee, the first defendant, was agreeable to provide the necessary funds for effecting the repairs of an amount not more than Rs. 15,000. This amount was not required to be adjusted towards the payment of the rent, but was to be paid by the first defendant in addition to the agreed rent, of Rs. 50 p. m. The said amount of Rs. 15,000 to be invested by the first defendant was required to be refunded only in the event of the lessor terminating the tenancy of the first defendant before the expiry of the term stipulated by Ext. P2. If the lessee was allowed the full term as prescribed in Ext. P2, ha would not be entitled to the. refund of the amount of Rs. 15,000, or any portion thereof, from the lessor. It is also clear from the document that the lesse-s liability to pay the agreed rent of Rs. 50p. m. had to continue for the stipulated period, even though the lessee had invested Rs. 15,000 towards improvements and renovation. It is therefore clear from the terms of Ext. P2 that the, first defendant, who was already a monthly tanant of the suit building, agreed to advance a sum of Rs. 15,000 to the lessor on his agreeing to fix the term of lease for twenty years, renewable at the option of the lessee for a further period of twenty years on the same agreed rent of Rs. 50 p m. It is manifest that if the lessee had not agreed to advance a sum of Rs. 15,000 for effecting repairs and improvements to the suit building, the lessoi would not have consented to grant a fixed term of twenty years, renewable at the option of the lessee for a further period of twenty years. Granting of a fixed term of lease was therefore a consideration for the lessee advancing Rs. 15,000. I have now to examine whe her an agreement of this nature is valid, having regard to the provisions of S. 18 of the Act. ( 9 ) SE. 18 of the Act provides that certain unlawful charges shall not ha claimed or received by the landlord or the tenant. Sub-sec (1) of S. 13 deals with cases where fair rent of a building has been determined. ( 9 ) SE. 18 of the Act provides that certain unlawful charges shall not ha claimed or received by the landlord or the tenant. Sub-sec (1) of S. 13 deals with cases where fair rent of a building has been determined. As this is not a case where fair rent was determined either under the Act or under any of the repealed enactments, the provisions of sub-sec (1) of S. 18 of the Act have no application. Sub-sec (2) of S. 18, which is relevant for the purpose of these appeals, may be extracted as follows :" (2) Where the fair rent of a building has not been so determined, (a) no person shall after the commencement of this Part receive or stipulate for the payment of any sum as premium or pugree or any consideration whatsoever in cash or kind, in addition to the agreed rent; (b) save as provided in Cl (a) any sum or consideration paid in excess of the agred rent whether before or after the commencement of this Part in consideration of the grant, continuance or renewal of the tenancy of the builaing after such commencement shall be refunded or returned by the landlord or other person to the person by whom it was paid or at the option of such person otherwise adjusted by the landlord or other person. "sub-sec (3) of S. 18 provides that any stipulation in contravention of sub- sec (1) or sub-sec (2) shall be null and void. Sub-sec (5) of S. 18 provides that any landlord who contravenes the provisions of sub-sec (1) or sub- sec (2) and any tenant or of her person who contravenes' the provisions of sub-see (4) shall, on conviction, be punished with fine which may -extend to five hundred rupees. ( 10 ) IT is clear from Cl (a) of sub-sec (2) of S. 18 that it contains a prohibition against the landlord to receive or stipulate payment of any amount other than the agreed rent. Cl (b) of sub-sec (2) of S. 18 provides that any amount paid in contravention of Cl (a) of sub-sec (2), shall be refunded or otherwise adjusted at the option of the tenant. Sub-sec (3) in express terms declares that any stipulation in contravention Off sub-sec (1) or sub-sec (2) of S. 18 shall be null and void. Cl (b) of sub-sec (2) of S. 18 provides that any amount paid in contravention of Cl (a) of sub-sec (2), shall be refunded or otherwise adjusted at the option of the tenant. Sub-sec (3) in express terms declares that any stipulation in contravention Off sub-sec (1) or sub-sec (2) of S. 18 shall be null and void. Under sub-sec (5)) a land-lord who stipulates or receives any amount which is prohibited by sub- sec (1) or sub-sec (2) is liable to be convicted and punished with fine ( 11 ) AS observed by this Court in T. Seenappa v. J. Mohanlal 1968 (1) Mys. L. J. 307. the prohibition contained in sub-sec (2) of S. 18 of the Act is intended for the protection of the tenant and the, aim of such protection is to, save the tenant from coercion or external pressure such as might be brought to bear upcn him by the landlord for the payment of a premium, pugree or other consideration in excess of that agreed rent. ( 12 ) AS the agreement in question contains a clear stipulation for the payment of Rs. 15,000 by the lessee, in addition to the agreed rent, the stipulation in regard to the payment of the said sum of Rs. 15,000 by the lessee to the lessor is null and void, in view of sub-sees (2) and (3) of S. 18 of the Act. The effect of the said stipulation being void, is that the lessor has to refund that amount to the lessee, or adjust it at to option of the lessee as provided in Cl (b) of sub-sec (2) of S. 18 of the Act. ( 13 ) THE next question for consideration is, whether the lessor is still bound by the term of the agreement fixing the period of the, lease. If that term is not binding on the lessor, it is obvious that it would not be binding on the plaintiffs and the second defendant in this case. ( 14 ) IT was maintained by Sri Tukaram S. Pai that as the object of s. 18 of the Act is to protect the tenants from exploitation of the landlords, terms of the agreement which are favourable to the tenant will be binding on the landlord and can be enforced. ( 14 ) IT was maintained by Sri Tukaram S. Pai that as the object of s. 18 of the Act is to protect the tenants from exploitation of the landlords, terms of the agreement which are favourable to the tenant will be binding on the landlord and can be enforced. It is true that sub-sec (3) of S. 18, in express terms, only declares a stipulation for payment of any amount in excess of the, agreed rent is void. The Statute is silent as to what should happen in regard to other stipulations favourable to the tenant. That question has to be examined, having regard to the terms of the relevant agreement find the provisions of the Contract Act. ( 15 ) S. 23 of the Indian Contract Act provides thus : * * * * * * sec. 24 of Indian Contract Act reads as follows:" 24. If any part of a single consideration of one or more objects, or any one or any part of any one of several considerations for a single object , is unlawful, the, agreement is void. "in this case, the considertion for the agreement, viz. , payment of Rs. 15,000 in addition to the agreed rent, is clearly forbidden by Cl (a) of sub-sec (2) of 3. 18 of the, Act. The consideration is therefore, unlawful under S. 23 of the Contract Act. ( 16 ) AS the aforesaid consideration is unlawful, the next question for consideration is, whether the entire agreement is void. The answer to this question has to be found by applying the principle of severability. If the illegal part cannot be severed from the legal part, the entire agreement is void. But, if the illegal part is severable, the rest can be enforced. ( 17 ) IN the present case the lease was not created by the agreement in question. On the date of the agreement, the lessee was already in possession as a monthly tenant on an agreed rent of Rs. 50 p. m. By the new agreement the monthly tenancy was converted into a lease for a specified period, the; consideration for which was Rs. 15,000, in addition to the agreed monthly rental amount. As the consideration for the agreement of paying rs. 15,000, in addition to the agreed rent, is unlawful, the entire agreement is void under S. 24 of the Contract Act. 15,000, in addition to the agreed monthly rental amount. As the consideration for the agreement of paying rs. 15,000, in addition to the agreed rent, is unlawful, the entire agreement is void under S. 24 of the Contract Act. The promise to give a fixed term of lease in this case is not a severable, part of the agreement. It is obvious that the lessor would not have promised to give a fixed term of lease, if the lessee had not promised lo advance Rs. 15,000. Hence, that part of the agreement fixing the term of the, lease is not severable, and therfore, the entire agreement is void. Neither the lessor nor the lessee can therefore claim any right under the agreement. But this will not affect the monthly tenancy which was in force on the date of the coming into force of the agreement, Ext. P2. As the first defendant was already a monthly tenant on the date of the execution of Ext. P2, he would continue to remain as a monthly tenant, notwithstanding the fact that the agreement, Ex. P2, is void, ( 18 ) AS the agreement, Ext. P2, is void, the plaintiffs are entitled to a declaration that the same is void and not binding on them and the second defendant. The Court below was therefore wrong in holding that, so far as the second defendant is concerned, the agreement is valid and binding on her interest in the suit property. ( 19 ) FOR the reasons stated above, RSA. 401 of 1971 fails and is dismissed. RSA. 645 of 1971 is allowed. The decree passed by the Court of first instance is restored. ( 20 ) IN the circumstances, there will be no order as to costs. --- *** --- .