P. JOHN ZACHARIA & CO. v. ITTYCHERIAH — 1986 DIGILAW 282 (KER)

Judgment :- 1. The defendant in a suit for arrears of rent and accounts is the appellant. The suit was decreed by both the courts. The claim for arrears is in respect of a building which had been let out to the defendant by the plaintiff under Ext. Al indenture of lease dated 25-3-1955. The lease provided for a period of 10 years subject to renewal for another period of 10 years. The rent payable for the first period was at Rs. 3.000/-per year and for the subsequent period at Rs. 3.600/- per year. The tenant continued in occupation of the building for both the periods and subsequently. The second period expired on 30-6-1975. On 31-8-1975 proceedings were initiated under the Kerala Buildings (Lease and Rent Control) Act, 1965 for eviction of the tenant on the grounds postulated under S.11(2)(b) and 11(4)(iv). The claim for eviction on the ground of arrears of rent was not pressed before the Rent Control Court. That court ordered eviction under S.11(4)(iv). That order was confirmed finally by the Supreme Court. The appellant-tenant vacated the premises on 18-8-1980. The present suit was instituted on 31-10-1978 claiming arrears of rent at the rate of Rs. 1,696.25 per month from 1-9-1975 to 31-3-1977 and Rs. 2,875/- per month from 31-3-1977 to 31-8-1978. The claim is based on what is alleged to be due from the tenant in terms of S.8(2)(a) of the Act. The contention of the plaintiff has been that the contractual tenancy expired by efflux of time on 30-6-1975, subject to an additional period of two months as provided under the contract, and accordingly the defendant became liable to pay rent in terms of S.8(2)(a) instead of the rent agreed to be paid under the contract. This contention was accepted by both the courts. The courts construed the provisions of S.8 and came to the conclusion that, for the period of occupation by the tenant subsequent to the expiry of the contractual tenancy, the rent which was payable was not what had been stipulated under the contract, but an amount which, the courts held, the plaintiff was entitled to calculate with reference to the municipal assessment. The amounts claimed by the plaintiff, the courts found, were so calculated. 2. The amounts claimed by the plaintiff, the courts found, were so calculated. 2. Counsel for the appellant Shri. T. S. Venkataswara Iyer contends that the courts wrongly construed S.8(2), and failed to appreciate correctly the legal nature of the relationship between the parties. 3. S.8, in so far as it is material, reads: "8. Landlord not to claim or receive anything in excess of fair rent or agreed rent.- (1) Where the Rent Control Gouri has determined the fair rent of a building: (a) the landlord shall not claim, receive or stipulate for the payment of anything in excess of such fair rent: This sub-section has application only where a fair rent has been determined. In a case, such as the present, where no fair rent has been determined for the period in question, it is sub-s. (2) that would apply. That sub-section reads: "(2) Where the fair rant of a building has not been determined under S.5 (a) notwithstanding anything contained in any contract, the rent payable for the building in case it is a building falling under clause (i) or clause (ii) of the proviso to sub-s. (2) of S.5 shall be, where the property tax or house tax has been fixed by the local authority, the maximum rent that may be fixed by the Rent Control Court as provided for in sub-s (2) of S.5 or the agreed rent whichever is less, and in cases where no property tax or house tax has been fixed for the building or where it has been fixed not on a rental basis, the agreed rent; (b) It S. 5 is the provision under which fair rent is determined. It is to sub-s. (2) of that Section that reference is made under S.8(2). S.5(2) concerns a building for which property tax or house tax has been fixed, and it is in accordance with that sub-section that fair rent has to be determined in respect of such a building. The maximum fair rent which can be fixed under S.5(2) is 15 per cent in excess of the monthly rent on the basis of which property tax or house tax has been fixed. For example, if the monthly rent on the basis of which property tax or house tax has been fixed is Rs. 100/-, the fair rent shall not exceed Rs. 115/- per month. For example, if the monthly rent on the basis of which property tax or house tax has been fixed is Rs. 100/-, the fair rent shall not exceed Rs. 115/- per month. There is no reference to the maximum point at which the fair rent may be fixed. However, for the purpose of determining the rent payable under S.8(2), with reference to the amount computed in terms of S.5(2), such rent shall be determined at the maximum rate prescribed under S.5(2). That rent is, however, only one of the two alternative rents payable under S.8(2). In case the agreed rent is less than what is computed with reference to S.5(2) for the purpose of determining the rent under S.8(2), the tenant is liable to pay only such lower rent. In other words, S.8(2) which concerns a building in respect of which no fair rent has been fixed, the tenant is given the benefit of paying either the rent computed with reference to S.5(2) or the agreed rent whichever is less. So far there is no dispute as regards the constriction of these provisions. 4. Counsel for the respondent-plaintiff Shri. Vyasan Potti submits that in a case, such as the present, where the period of lease in terms of the contract had expired either by efflux of time or by forfeiture, the concept of agreed rent no longer survives, and, therefore, only such rent as is computed with reference to S.5(2), as warranted under S.8(2), is payable, and not any other rent. The rent which had been stipulated under the contract has no application to the period posterior to the termination of the contract. Therefore the rent that the tenant is liable to pay is the rent that is determined with reference to S.5(2). That is the rent which the plaintiff has demanded and decreed by the courts below. 5. Shri. Venkataswara Iyer, however, points out that the contract continued to be in force in terms of, and subject to, the statute until the tenant was evicted in due course of law. The contract rent therefore subsisted beyond the period provided under the contract, for the relationship between the landlord and tenant subsisted beyond that period. That, Shri. Iyer submits, is the effect of the statute which is intended to protect the interest of the tenant. I agree. 6. The contract rent therefore subsisted beyond the period provided under the contract, for the relationship between the landlord and tenant subsisted beyond that period. That, Shri. Iyer submits, is the effect of the statute which is intended to protect the interest of the tenant. I agree. 6. The fallacy of the plaintiff-respondent's contention is that it fails to take note of the fact that the relationship of landlord and tenant does not cease on the expiry of the contract, for it is kept alive beyond the contractual period until duly terminated in accordance with the provisions of the statute. Even where the lease is determined by efflux of time or forfeiture the tenant continues to be a tenant and there is no termination of the lease in the eye of law. The Rent Control Act has made a serious inroad into freedom of contract. The landlord is not allowed to snap his relationship with the tenant merely by his act of forfeiture or by reason of efflux of time. His relationship with the tenant continues upon the same terms and conditions as they existed during the period of the contract. S.11 of the Act is a self-contained provision in terms of which alone can the period of the lease come to an end. Like in the case of a contractual tenancy, so in the case of a statutory tenancy the tenant continues to have an estate in the subject matter of the lease. The estate does not disappear merely because the contractual lease has been determined. The sanctity of contract is thus controlled by legislation so as to obliterate the distinction between contractual tenancy and statutory tenancy The quality of the estate or interest is the same in either case. The determination of the contractual tenancy doss not therefore bring about any change in the status of the tenant or the terms and conditions upon which he is entitled to pay the rent. This means that even beyond the period originally stipulated under the contract, and until evicted in terms of S.11, the agreed rent alone is payable by the tenant, unless the amount computed in terms of S.8(2) with reference to S.5(2) happens to be less than the agreed rent. This means that even beyond the period originally stipulated under the contract, and until evicted in terms of S.11, the agreed rent alone is payable by the tenant, unless the amount computed in terms of S.8(2) with reference to S.5(2) happens to be less than the agreed rent. See D.N. Sanghavi v. A. T. Das, AIR 1974 SC 1026; Damadilal v. Parashram, AIR 1976 SC 2229; F. Dhanapal Chettiar v. Yesodai Ammal, AIR 1979 SC 1745; Mani Subrat Jain v. Raja Ram Vohra, AIR 1980 SC 299; and Gain Devi v. Jeevan Kumar, AIR 1985 SC 796. None has a case that in the instant case the agreed rent is not less than the amount payable with reference to S.5(2). I am, therefore, of the view that there is no substance in the contention that, upon termination of the contractual lease, the agreed rent ceased to operate, and that the tenant is no longer entitled to claim that the only rent payable is the agreed rent. 7.Shri. Potti, however, contends that in any view the contract rent did not subsist for the posterior period for the reason that the subject matter of the contract lost its identity on account of alterations and additions made to it. This argument is based on a provision in Ext. Al lease deed. Clause (7) of the deed provides that it was open to the lessee to construct at his costs any new building on the demised premises and also make alterations to or demolish the existing building subject to the approval of the lessor. This argument is based on a provision in Ext. Al lease deed. Clause (7) of the deed provides that it was open to the lessee to construct at his costs any new building on the demised premises and also make alterations to or demolish the existing building subject to the approval of the lessor. The lease says that the lessee agreed: "to surrender on the termination of the lease, possession of the demised premises to the lessor, restoring the buildings to their original conditions ordinary wear and tear expected or paying the lessor the cost of such restoration or otherwise compensating the lessor or as may then be agreed to in respect of the same and to remove at the lessee's cost any buildings, erections or constructions as may have been put up by the lessee in pursuance of this lease deed within two months of the termination of the lease paying for the said two months the proportionate rent namely Rupees Two hundred and fifty or Rupees three hundred per mensem as the case may be failing which] the lessee agrees to forfeit alibis claims to them or to the value thereof as against the lessor and they shall thence forward vest in and belong to the lessor" On the strength of that provision the lessee made certain alterations to the existing building and made additions thereto. Those additions were not removed by the lessee, and consequently, upon eviction of the lessee, they became the property of the landlord. There is no provision for payment of any additional rent by reason of the alterations or additions. The contract only provided that the lessee had the freedom to remove the additions at his costs and in case he did not do so, such additions would become the property of the lessor. The landlord has no claim for any additional rent by reason of the alterations or additions. The lessee has no claim for the value of any such additions. This means that, on the rent payable under the contract, the special provision concerning the lessee's freedom to construct by way of alterations or additions did not have any impact. The rent continued to be what was originally agreed upon, despite the alterations, and the terms of contract continued to operate, despite the termination of the lease, until such time as the lease was terminated in terms of S.11. The rent continued to be what was originally agreed upon, despite the alterations, and the terms of contract continued to operate, despite the termination of the lease, until such time as the lease was terminated in terms of S.11. The additions were made as agreed upon between the parties. The rent was payable also as agreed upon between the parties. There is no case that the agreed rent has not been paid in full until eviction. In the circumstances, the courts below went wrong in holding that any further sum was due and payable by the lessee to the landlord for the period covered by the suit. The preliminary decree and judgments are accordingly set aside. The appeal is allowed. I make no order as to costs.