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PETITIONER: ABBOBAKER & ANR.

       Vs.

RESPONDENT: MAHALAKSHMI TRADING CO.

DATE OF JUDGMENT:       10/02/1998

BENCH: S.SAGHIR AHMAD, G.B. PATTANAIK

ACT:

HEADNOTE:

JUDGMENT:                THE 10TH DAY OF FEBRUARY, 1998 Present:               Hon’ble Mr.Justice S.Saghir Ahmed               Hon’ble Mr.Justice G.B.Pattanaik R.F.Nariman, Sr.  Adv., N.P.S.Panwar,  S.N.Bhat, Advs.  with him for the appellant G.V.Chandra Shekhar and P.P.Singh, Advs for the Respondent                       J U D G M E N T      The following Judgment of the Court was delivered : G.B.PATTANAIK, J.      Leave granted,      This appeal  is by the landlord against the order dated 22nd August, 1996 passed by the Karnataka High Court in HRRP No. 1769  of 1995  arising out  of HRC  No. 66  of 1994. The appellant -  landlord filed  the aforesaid  HRC case   under Section 21(1)(i)  of the  Karnataka Rent Control Act against the tenant  - respondent  in  respect  of  the  premises  in question. The  aforesaid proceeding  was ultimately disposed of on  the basis  of a  compromise entered  into between the parties and  the terms  embodied in  the compromise petition date 22nd  April, 1994  formed a  part of  the decree of the court. In  accordance with  the aforesaid  compromise decree the tenant  delivered the  vacant possession of the tenanted premises and  the landlord  was permitted  to  demolish  and reconstruct a  new building  thereon. It was also stipulated in the  compromise that  the tenant will  be accommodated in the two  shop rooms measuring 200 sq. ft. each on the ground floor soon after the new construction is over and be further accommodated in  two shop  rooms measuring 200 sq. feet each in  cellar  floor  for  the  purpose  of  godown  after  the construction is  over. Clause  (5) of  the compromise decree dealt with  the rent  to be  paid by the tenant on occupying the premises  in the  new building after construction of the same.   The dispute  in the  present case  centres round the terms and  conditions of  the aforesaid  clause (5) and what was  the  rent  intended  to  be  paid  by  the  tenant  for occupation of  one ship  in the cellar floor and one ship in the ground floor. The appellant - landlord on getting vacant possession of the tenanted premises, demolished the same and put up  a new  construction. The tenant - respondent filed a

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petition for  getting possession of the newly built shops in accordance with  the compromise  decree dated  22.4.1994 and the said  petition was  registered as Execution Petition No. 204 of 1995. In the said execution proceedings the appellant - landlord was set ex-parte and the executing court directed issue of delivery warrant. Subsequently, under the orders of the executing  court the  lock was  broke open  and with the police help  the tenant  - respondent  got the possession of the premises  as per the compromise decree and the execution case was  closed. The  landlord -  appellant approached  the High  Court   against  the  order  of  the  executing  court directing delivery  of  the  possession  in  favour  of  the respondent and obtained an interim order of stay of issuance of delivery  warrant on  6.12.1995, but much before the said date the  premises in  question had  been possessed  by  the respondent  -  tenant  on  28.11.1995,  and  therefore,  the interim order  issued by  the High Court became infructuous. The landlord - appellant before the High Court though raised a contention  that the compromise decree could not have been executed  but   Mr.  R.F.Nariman,  learned  senior  counsel, appearing for  the appellant  did not  press the  same.  The tenant thus  has obtained  possession of  400 sq. ft. of the newly constructed  building in  execution of  the compromise decree and  that has  become final. A further contention had been raised  by the  landlord before  the High  Court to the effect that  the compromise decree is an integrated open and under the  decree though the tenant would be entitled to get possession of  two shop  rooms measuring  200 sq.  feet each after the new construction of the ship rooms are over but he said tenant  is also  liable to  pay rent  at a concessional rate of 25% less of the prevailing fair rent in the area and without discharging  that obligation  the tenant  could  not have merely  obtained  possession  of  the  two  shop  rooms measuring 400 sq. feet in execution of a part of the decree. The tenant,  however, resisted  the aforesaid  contention by contending that  the tenant  would be liable to pay 25% less of the  fair rent  to be  determined by the Controller under Section 14  of the  Act and until that determination is made the landlord  cannot resist  the execution  of the decree in relation to  possession of  the two shop rooms measuring 400 sq. feet.  The High  Court on  consideration  of  the  rival contention and applying its mind to the terms and conditions of the  compromise decree  came to  the conclusion  that the parties waived under the agreement the provisions of Section 26 to  28 of  the Act  and after  construction  of  the  new building the  tenant is  entitled to  get possession  of two shop rooms  measuring 400  sq. feet  in accordance  with the provisions of  the compromise decree. The High Court further came to  the conclusion  that the fair rent for the premises has to  be determined  by the Controller under Section 15 of the Act,  and therefore, it would be open for the parties to approach the Controller for fixation of fair rent in respect of the  premises which  has been  put in  possession of  the tenant, so that, the Controller would determine the same and on such  determination being made the tenant would be liable to pay  the same  at a concessional rate of 25% less fop the fair rent.  It is  this direction of the High Court which is the subject matter of challenge in the present appeal.      Mr. R.F.Nariman  the learned  senior counsel  appearing for the  appellant contended  that the  High Court committed serious error in falling back upon the provisions of the Act for  the  purpose  of  fixing  the  rent  of  the  premises, possession of   which had been given to the tenant under the compromise  decree,  having  held  that  by  the  compromise entered into  between the  parties the provisions of Section

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26 to  28 of  the Act  have been  waived. The learned senior counsel further urged that the expression prevailing rent in the area  in clause (5) of the compromises decree is foreign to the  criteria for  fixation of fair rent of a building by the Controller under Section 14(6) of the Act and on a plain grammatical meaning  being given to the words used in clause (5), the  only conclusion that can be arrived at is that the parties intended  that  the  tenant  would  pay  rent  at  a concessional rate  of 25% less of the prevailing rent in the area in respect of one shop in the cellar floor and one shop in the  ground floor and the conclusion of the High Court to the  contrary   is  wholly  unsustainable.  Mr.  G.V.Chandra Shekhar the learned advocate appearing for the respondent on the other hand contended that use of the  phrase ‘fair rent’ on clause (5) of the compromise decree can only refer to the fair rent  to be  determined by  the  Controller  under  the provisions of  the Act, and therefore, the impugned order of the High  Court is  immune form  interference by this Court. Mr. Shekhar  further contended that allowing the landlord to charge rent  for the  premises higher  than the fair rent to be fixed  by the  Controller would  be  against  the  public policy and  would frustrate  the object  for which  the very enactment was  made and  as such  court should  be  slow  in giving a meaning to the terms of a compromise which would be against the  public policy.  Mr. Shekhar  further  contended that  in  the  absence  of  any  mechanism  as  to  how  the prevailing rent  in the area could be determined it would be only logical  to hold  that the  parties intended  under the aforesaid clause  (5) for  fixation  of  fair  rent  by  the Controller in exercise of power under Section 14 of the Act.      Having considered  the rival submissions at the Bar and having examined  the terms  and conditions of the compromise decree the  question that  arises for our consideration is : what in  fact was intended by the parties with regard to the payment of  rent in  respect of  the shops to be occupied by the tenant  in the  new building  after the  construction is over? To  answer this  question it  would be  appropriate to extract  clauses   (4)  and   (5)  of  the  application  for compromise which formed a part of the decree:           4.   In the  new building  the      petitioners shall  accommodate  the      respondent in  the two  shop  rooms      measuring 200  Sq. feet  each shown      in red colour and demarcated as ‘A’      &‘B’ comprised  in the ground floor      facing Azizuddin  Road mentioned in      the petition  sketch soon after the      new construction  of the  aforesaid      two shop rooms is over.           In  the  new  building  facing      Santhegalli  Road,  the  petitioner      also   should    accommodate    the      respondent   in    2   shop   rooms      demarcated as   ‘C’  & ‘D’  200 sq.      feet each  in cellar  floor for the      purpose of godown as shown in green      colour in the petition sketch after      the construction  of the same on or      before 31.12.1995.           5.   That  the  respondent  is      not liable  to pay  any deposit for      any of the said new shop rooms both      to the  cellar  and  ground  floor.      However, the  respondent shall  pay      rent at  a concessional rate of 25%

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    less of the prevailing fair rent in      that area  in expect of one shop in      the cellar  floor and  one shop  in      the ground floor. And no concession      in the fair rent will be allowed in      the godown premises in cellar floor      another shop  room  in  the  ground      floor facing Azizuddin Road."      As it  transpires from  the records  of this  case, the landlord  had   filed  an  application  for  demolition  and reconstruction under  Section 21(1)(i) of the Karnataka Rent Control Act  (hereinafter referred  to as  ‘the Act’). Under the  said   provision  the  premises  in  question  must  be reasonably and  bona fide  required by  the landlord for the purpose of immediate demolition and such demolition is to be made for  the purpose of erecting a new building in place of the  premises   sought  to   be  demolished.  The  aforesaid application was  disposed of  on the basis of the compromise arrived at  between the  parties as  already stated and such order providing  for re-delivery of possession to the tenant after construction of the new building by the landlord is an executable decree  and has  been executed  by the  executing court. Under Section 21(1)(i) of the Act, the landlord has a right to evict a tenant from the premises in question, if he reasonably and  bona fide requires the same, immediately for the purpose  of demolishing  and  erecting  a  new  building thereon. After  obtaining an  order of  eviction and getting possession of the premises if the landlord does not demolish the premises  in question within the period specified in the order then  the tenant  gets a  right of  re-entry for which purpose the  tenant may  give his  landlord a  notice of his intention to  occupy the  premises and  the landlord has the obligation to  deliver the  vacant possession of the same to the tenant  forthwith as  per Section  26 of  the Act. Under sub-section (3)  of  Section  26  a  landlord  can  also  be convicted if   he  fils to  demolish  and  construct  a  new building without  n ay  reasonable excuse or fails to comply with the order of the court. Section 27 of the Act confers a right on  the tenant to get possession of the premises after the same  be constructed and for that purpose the tenant has to give  a notice to the landlord of his intention to occupy the new  building on  its completion  and this notice can be served on  the landlord  within six  months from the date on which  the   tenant  delivered   vacant  possession  of  the premises. Thus,  Section 27 recognises his right of re-entry into the  reconstructed building  on he terms and conditions mentioned therein.  But in  the case  in hand the tenant has not taken the recourse to procedure prescribed under Section 27 for  exercising his  right of  re-entry but  on the other hand has  got back  possession by  executing  the compromise decree. When  the High  Court as in the present case came to the conclusion  that the parties to the compromise decree in fact waived  the provision   of  Section 26 to 28 of the Act then  necessarily  it  could  not  have  arrived  at  the  e conclusion  that  in  respect  of  the  tenement  now  under occupation of  tenant in  execution of the compromise decree fair rent has to be fixed by the Controller under Section 14 of the   Act.  The tenant  having  executed  the  compromise decree providing for re-delivery of possession to the tenant after  reconstruction   by  the   landlord  without   taking recourses to  filing of  application under Section 27 of the Act, is  also liable  to pay the rent as agreed to under the compromise decree  in respect  of the two shops measuring of area of  400 sq.  feet in  the new  building. The  question, therefore, arises  is as to what was the rent agreed upon by

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the parties  under clause (5) of the compromise decree? Does it refer  to the  fair rent  to be  fixed by  the Controller under Section  14 of  the Act or it refers to the prevailing rent in  the area  in respect  of the  tenement in question. There is  no dispute  that  under  Section  14  of  the  Act Controller has  been vested  with the  power for  fixing the fair rent  of a  building. In  fixing  such  fair  rent  the Controller is required to take into consideration the rental value of  the  building  as  entered  in  the  property  tax assessment book of the local authority of that year in which the building  was constructed  as is  apparent from  Section 14(6) of  the Act.  Under the  proviso to the said provision when no  such records  are available, the Controller may fix the fair  rent calculated  on the  basis of six per cent per annum of  the aggregate  amount of  the reasonable  cost  of construction and  the market  price of the land comprised in the  building  on  the  date  of  the  commencement  of  the construction. Thus,  in the  matter of fixation of fair rent under  sub  section  (6)  of  Section  14  of  the  Act  the prevailing rent  in the  area is  not  germane  and  has  no application. On  the other  hand, on  the basis  on relevant data in  respect of  the very  building as  provided in  the statute the  Controller is required to decide the matter and fix  the  fair  rent.  Judged  from  this  stand  point  the expression ‘prevailing rent in that area’ used in clause (5) of the  terms  of  compromise  is  suggestive  of  the  only conclusion that  the parties  intended that liability of the tenant to  pay rent after occupying the new premises is at a concessional rate  of 25%  less of  the rent  which would be prevailing in  the area  in respect of similar premises. The Word ‘fair  rent’ in  clause (5)  does not refer to the fair rent to  be fixed  by the  Controller under the statute. The expression ‘fair’  has been  used in  contradistinction with the expression  ‘unfair’ of  ‘unreasonable’ In  other words, the prevailing  rent  in  the  are  in  respect  of  similar premises must be the reasonable rent received in the fare in respect of  similar premises and not a fanciful or whimsical rent which  a particular  tenant  might  be  offering  to  a landlord in  the area  in question.  In  this  view  of  the matter, we are of the considered opinion that the High Court committed  an  error  in  interpreting  clause  (5)  of  the compromise decree  to   mean that the tenant would be liable to pay  rent at  a concessional rate of 25% less of the fair rent to  be fixed  in respect of premises b y the Controller under Section 14 of the Act. The said conclusion of the High Court is accordingly set aside.      The next  question that  crops up  for consideration is who the  prevailing fair  rent in the area in respect of the premises can  be arrived  at. One  possible mode  is to call upon the  Controller to determine the prevailing rent in the area in respect of the premises b y taking evidence from the parties not  being guided by the considerations of fair rent under the  stature but in such a case the litigation will be protracted and  the tenant  would  continue  to  occupy  the premises without  paying any  rent therefore notwithstanding the terms  of the  compromise decree by which  he is equally bound, as  the landlord.  We are  not inclined to adopt this procedure as  that would  not be in the interest of justice. The other option available is to require a valuer to inspect the premises  and submit  a report  for ultimate  finding by this Court  as to  what would  be the prevailing rent in the area but  hat procedure  also would  be subject  to  several imponderables and  would take  considerable time in arriving at any  final conclusion. It is in this context in course of hearing we  had called  upon the  counsel appearing  for the

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parties to  indicate as  to what  would be  the e prevailing renting the area in respect of the premises in possession of the  respondent.   While  Mr.  Nariman,  appearing  for  the appellant indicated  to us that the prevailing rent would be Rs. 8,000/- basically relying upon there which the appellant himself is  receiving from  other tenants  (a) 20 rupees per square feet,  the learned  counsel for the respondent on the other hand  submitted that  at the most it would be only Rs. 1,000/-   the city of Mangalore not having developed much in the last  decade. The premises in question is located in the well known cit of Mangalore in the State of Karnataka. It is difficult to accept that a reasonable rent in respect of 400 sq. feet  would be  a petty  sum of  Rs. 1,000/-. But at the same  time   submission  of  the  learned  counsel  for  the respondent that  the appellants  self-serving statement that he has  let out  premises in  the area (a) 20 rupees per sq. ft. cannot  from the basis to arrive at any conclusion as to what would  be the  prevailing rent  in the area, is also of great force.  To avoid further protraction of litigation and for doing  compete justice  in respect of the matter in this appeal we  think it appropriate to exercise our jurisdiction under Article  142 of  the Constitution and to decided as to what would  b e  the prevailing  rent in  the area  for  the purpose of  enforcing clause  (5) of  the compromise decree. Having considered  the relevant suggestions given at the Bar and the  rent at  which the  respondent  was  occupying  the earlier  premises   which  stood   demolished  and  the  new construction have  come up,  we think it appropriate to hold that the  prevailing rent  in the  area in  respect  of  the premises in  question should  be Rs. 10/- per sq. ft. and as such 400  sq. ft.,  in occupation  of the  respondent  would fetch a  rent of  Rs. 4000/-  per month. But in terms of the compromise decree the respondent being entitled to occupy at a concessional  rate of 25% less of the prevailing rent,  he would be  liable to  pay Rs. 3000/- per month and this he is required to  pay from  the date  he has  taken possession of under the  orders of the executing court, and we accordingly so direct.  The entire  arrears till  today should  be  paid within 3  month from  the date  of this  order an  he  would continue to  pay regularly  at that  rate until  any further enhancement is  made b  y the  competent authority under the statute. Needless  to mention if the respondent fails to pay the appellant  the areas  of rent at  the rate of Rs. 3000/- per month within 3 months as indicated above then he would b e liable  to   be evicted  an d the appellant can take steps for eviction of the respondent from the premises. The appeal is accordingly  allowed with the aforesaid directions. There will be no order as to costs.