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CASE NO.: Appeal (civil)  2805 of 2005

PETITIONER: CARONA LTD

RESPONDENT: M/S PARVATHY SWAMINATHAN & SONS

DATE OF JUDGMENT: 05/10/2007

BENCH: C.K. THAKKER & P. SATHASIVAM

JUDGMENT: J U D G M E N T

CIVIL APPEAL No. 2805 OF 2005

C.K. THAKKER, J.

1.              This appeal by special leave is filed by the  appellant-Carona Ltd. (hereinafter referred to as ’the  tenant’) against the judgment and order passed by the  High Court of Judicature at Bombay on November 1,  2004 in Writ Petition No. 8781 of 2004.  By the said  order, the learned Single Judge of the High Court  dismissed the writ petition filed by the tenant and  confirmed the order passed by a Bench of Small Causes  Court at Bombay on August 3, 2004 in Appeal No. 277 of  2003 which in turn confirmed the judgment and decree  of eviction dated February 11, 2003, passed by a Judge  of Small Causes Court at Bombay in T.E. & R. Suit No.  226/240 of 2001 in favour of the respondent-partnership  firm (hereinafter referred to as ’the landlord’).

FACTS 2.              To appreciate the controversy raised in the  present appeal, few relevant facts may be stated. 3.              The appellant-tenant was the original  defendant whereas the respondent-landlord was the  original plaintiff in the suit instituted in the Court of  Small Causes at Bombay.  The landlord is a partnership  firm registered under the Partnership Act, 1932.  It  owned a premises, bearing Shop No. 2, situated at  ground floor of Plot No. 3, A.M. Ward, Chembur, Govind  Road, Mumbai (hereinafter referred to as ’the suit  premises’).  According to the landlord, the suit premises  was let out to the tenant.  It was alleged that tenant was  not paying rent regularly.  It also initiated certain  proceedings against the landlord. The landlord did not  want the tenant to continue to occupy the suit premises.  Accordingly, by a notice dated February 23, 2001, the  landlord determined the tenancy with effect from March  31, 2001.  In spite of determination of tenancy, the  tenant did not hand over vacant and peaceful possession  of the suit premises to the landlord.  The landlord,  therefore, filed a suit in the Small Causes Court, Bombay  on April 2, 2001. In a written statement, dated August 1,  2001, the tenant disputed the averments made and  allegations levelled by the landlord and contended that it  was not liable to be evicted.  The Small Causes Court,  Bombay, however, passed a decree of eviction against the  tenant on December 16, 2002 which was confirmed by a

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Bench of that Court as also by the High Court.  The said  order is challenged in the present appeal. INTERIM ORDER BY THIS COURT 4.              On February 21, 2005, notice was issued by  this Court.  Status quo as regards possession was  ordered to be maintained. On April 18, 2005, leave was  granted.  Pending appeal, stay of dispossession was  continued subject to the tenant depositing a sum of Rs.  twenty four lakhs with the Registry of the Court within  eight weeks which was allowed to be withdrawn by the  landlord without furnishing security. The matter was  ordered to be placed for final hearing and that is how the  matter is before us.

SUBMISSIONS 5.              We have heard the learned counsel for the  parties. 6.              Mr. Gupta, learned counsel for the appellant- tenant contended that all the courts committed an error  of law and of jurisdiction in passing the decree of eviction  against the tenant.  He submitted that the suit filed by  the landlord was not maintainable and it ought to have  been dismissed by the courts below. He also submitted  that the question as to constitutional validity of clause (b)  of sub-section (1) of Section 3 of the Maharashtra Rent  Control Act, 1999 (hereinafter referred to as ’the Rent  Act’) is pending before this Court and in view of the said  fact, the courts below ought not to have proceeded to  decide the matter.  Alternatively, it was argued that even  if it is assumed that the provision is legal, valid and intra  vires, it would not apply to the case on hand inasmuch  as tenant’s net worth/paid up share capital has been  substantially eroded and it was not rupees one crore or  more when the proceedings were initiated by the  landlord. The provisions of the Rent Act, therefore,  applied to the suit premises and unless and until one of  the grounds of eviction specified in the Rent Act had been  made out, the landlord was not entitled to a decree for  possession. The learned counsel urged that the fact as to  ’paid up capital’ of the Company was a ’jurisdictional fact’  and in absence of such fact, the Court had no power,  authority or jurisdiction to consider, deal with and decide  the matter. 7.              It was further contended that the proceedings  could not have been continued in view of the fact that the  tenant was a ’sick company’ within the meaning of the  Sick Industrial Companies Act, 1985 (hereinafter referred  to as ’SICA’). In accordance with Section 22 of that Act,  hence, all proceedings against a sick company stood  suspended.  No order of eviction, therefore, could have  been passed by the courts below. On all these grounds, it  was submitted that all the courts were wrong in passing  a decree of eviction against the tenant and the said order  deserves to be set aside by this Court. 8.              Mr. Parekh, learned counsel for the  respondent-landlord, on the other hand, supported the  decree passed by the Small Causes Court, confirmed by a  Bench of that Court as also by the High Court.  He  submitted that as far as constitutional validity of Section  3(1)(b) of the Rent Act is concerned, the point is covered  by a decision of the Division Bench of the High Court of  Bombay in M/s Crompton Greaves Ltd. v. State of  Maharashtra, AIR 2002 Bom 65.  The Small Causes  Court as well as the High Court were, therefore, wholly  justified in proceeding with the matter and in deciding it

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on merits.  He submitted that tenancy was terminated in  accordance with law. It was, therefore, obligatory on the  tenant to hand over vacant and peaceful possession of  the property to the landlord, but it failed to do so.  The  landlord was, therefore, constrained to approach a Court  of law which passed a decree for possession in favour of  the landlord holding that since the paid-up share capital  of the Company was more than rupees one crore, the  provisions of the Act were not applicable to it.  The  counsel urged that there was no illegality in the said  finding and obviously, therefore, the landlord was  entitled to possession of suit-premises and the tenant  could not resist eviction.  An appellate Court confirmed  the said decree. Before the High Court it was contended  by the tenant that a unanimous resolution was passed by  the Company to decrease the share capital to less than  rupees one crore (Rs.41 lakhs from Rs.8.20 crores).   Such unilateral action at a subsequent stage, submitted  the counsel, would not deprive the owner of the property  to the ’right accrued’ in favour of the landlord. The  ’jurisdictional fact’ (paid up share capital of more than  rupees one crore) was very much in existence at the time  when the proceedings were initiated against the  Company. But even otherwise, considering the factual  situation, the tenant was not entitled to any relief.  It was  stated that though the so-called resolution was said to  have been passed, it had not been approved by the Board  for Industrial and Financial Reconstruction (BIFR). In the  eye of law, therefore, there was no decrease of share  capital. The High Court was, hence, wholly right in  observing that even on that ground, the tenant was not  entitled to any relief.  The counsel also submitted that  this Court is exercising discretionary and equitable  jurisdiction under Article 136 of the Constitution.  The  tenant is not entitled to such equitable relief.  It was  submitted that the tenant has not paid rent since several  years i.e. from January 1, 1995. According to the  counsel, the amount due and payable by the tenant as  on August 31, 2007 comes to Rs. 56,22,000/- pursuant   to interim order passed by this Court on April 18, 2005,  an amount of Rs. 24 lakhs was deposited by the  appellant in this Court which was withdrawn by the  landlord, but even excluding that amount, the tenant      is liable to pay to the landlord an amount of  Rs.32,22,000/-. It was further stated that after order  dated April 18, 2005 i.e.  for more than two years, the  tenant has not paid even a pie to the landlord.  Such  tenant, urged the counsel, does not deserve sympathy  and cannot claim equitable relief. On all these grounds,  the counsel prayed for dismissal of the appeal.

CONSIDERATION OF CONTENTIONS 9.              We have given anxious and thoughtful  consideration to the rival contentions of the parties. And  in our opinion, no case has been made out by the  appellant-tenant for grant of discretionary and equitable  relief from this Court.

CONSTITUTINAL VALIDITY OF SECTION 3(1)(b) 10.             As far as constitutional validity of Section 3(1)  (b) of the Rent Act is concerned, in our opinion, the  courts below were right in rejecting the contention raised  by the tenant and in proceeding to decide the matter on  merits in view of the decision in M/s. Crompton Greaves  Ltd.

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11.             Our attention has been invited by the learned  counsel for the parties to the relevant provisions of the  Act.  The Act came into force with effect from March 31,  2000.  It repealed the Bombay Rents, Hotel and Lodging  House Rates Control Act, 1947.  The Preamble of the Act  recites;         An Act to unify, consolidate and amend  the law relating to the control of rent and  repairs of certain premises and of eviction and  for encouraging the construction of new  houses by assuring a fair return on the  investment by landlords and to provide for the  matters connected with the purpose aforesaid.

       Whereas it is expedient to unify,  consolidate and amend the laws prevailing in  the different parts of the State relating to the  control of rents and repairs of certain premises  and of eviction and for encouraging the  construction of new houses by assuring a fair  return and to provide for the matters  connected with the purposes aforesaid.

12.             Section 3 grants exemption and enacts that  the Act would not apply to certain premises.  Clause (b)  of sub-section (1) of the said section declares that the Act  would not apply "to any premises let or sub-let to Banks,  or any Public Sector Undertakings or any Corporation  established by or under any Central or State Act, or  Foreign Missions, International Agencies, Multinational  Companies, and Private Limited Companies and Public  Limited Companies having a paid up share capital  of rupees one crore or more".           (emphasis supplied) 13.             It is an admitted fact that the appellant-tenant  is a Public Limited Company having a paid up share  capital of rupees more than one crore (Rs.8.20 crores).   The Courts below considered the contention as to  constitutional validity of clause (b) of Section 3(1) of the  Rent Act and observed that the vires of the provision was  upheld by the High Court in M/s. Crompton Greaves Ltd.   In that case, constitutional validity of Section 3(1)(b) was  challenged on the ground that it was arbitrary,  discriminatory and unjust. It was contended that the so- called distinction between the Companies having a paid  up share capital of less than rupees one crore and the  Companies having a paid up capital of more than rupees  one crore was arbitrary, discriminatory and unreasonable  neither founded on any intelligible differentia nor the so- called classification has rational or reasonable nexus to  the object sought to be achieved by the Legislation.  It  was urged that denial of protection of the Act to the  Companies solely on the basis of ’paid up share capital’  was based on irrational criterion and was hit by Article  14 of the Constitution. 14.             The Court, however, negatived the contention  and upheld the validity of the provision.  The Court  stated; "10. We do not see any force in any of  these contentions. The Bombay Rent Act was  enacted originally as a temporary measure in  order to protect the tenants from eviction from  their premises and also from arbitrary  enhancement of rent. The necessity for the  control of rents by special legislation for  properties located within the urban areas was

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felt during World War II. At that time not much  by way of new construction for civil population  was possible. A good proportion of private  accommodation was requisitioned by the  authorities for the war effort. In consequence,  rents were beginning to shoot up. Landlords  were trying to get rid of their existing tenants  to get better rents. The legislation was  undertaken primarily to save the tenants from  harassment of unscrupulous landlords. To  quote the words of Sarkaria J, Nagindas  Ramdas v. Dalpatram Ichharam, (1974) 1 SCC  242 at page 248 : (AIR 1974 SC 471) (at page  474). "The strain of the last World War,  industrial Revolution, the large scale exodus of  the working people to the urban areas and the  social and political changes brought in their  wake social problems of considerable  magnitude and complexity and their  concomitant evils. The country was faced with  spiralling inflation, soaring cost of living,  increasing urban population and scarcity of  accommodation. Rack renting and large scale  eviction of tenants under the guise of the  ordinary law, exacerbated those conditions  making the economic life of the community  unstable and insecure. To tackle these  problems and curb these evils the Legislatures  of the States in India enacted "Rent Control  Legislations". 11. The rent control laws are in force in  the State for more than 60 years. As a result of  these legislations a host of problems have  cropped up. These problems have been  discussed by various committees appointed by  the Central Government and State  Governments. The reports of such committees  indicate that freezing of rentals at old historic  levels, the excessive protection of tenancy  rights and the extreme difficulties of recovering  possession even for the owner’s own use hit  hard the house owners of modest means;  rendered investment in housing for rental  unattractive; inhibited the letting out of  available accommodation and thus had  aggravated the acute scarcity of  accommodation for hire. It was felt that the  laws were being often abused by the rich  tenants against the poor or middle class  landlords. 12 The State of Maharashtra appointed a  Committee known as Rent Acts Enquiry  Committee (for short Tembe Committee) which  observed as under : "........The result of all this has been  that the supply of rental housing in the  market is gradually shrinking. Except in  the public sector, the growing tendency is  to dispose off houses on ownership or  hire purchase basis. Rental housing has,  therefore, almost come to a halt in cities  like Bombay. This has adversely affected  the economically weaker sections of the  society";

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"....The rent law that was enacted for the  benefit of the tenants is thus operating to  the detriment of their interest in that the  flow of rental housing is gradually  shrinking". Tembe Committee had recommended  exemption of premises of floor area more than  65 sq. meters for business, trade or storage  and 125 sq meters for residential purpose".

       The Court, therefore, concluded; "It is already seen from the Statement of  Objects and Reasons that the object of the Act  is not merely, to protect tenants but also to  provide fair returns to the landlords and to  encourage housing activity so as to augment  rental housing in the form of construction of  buildings and letting them out. It is also meant  to legitimise the pagadi or premium system  which was prohibited earlier. Thus the Act has  been enacted in order to strike a balance  between the interests of landlords and tenants  and for giving a boost to house building  activity and in doing so the legislature in its  wisdom has decided and thought it fit not to  extend the protection of the Rent Act to certain  class of tenants like multinationals scheduled  banks, public sector undertakings and private  and public limited companies having share  capital of more than Rs. 1 crore. This is  essentially a matter of legislative policy. The  legislature would have repealed the Rent Act  altogether. It could also withdraw the  protection under the Rent Act on rental basis  [see D.C. Bhatiya v. Union of India, (1995) 1  SCC 104] or on income basis [see Delhi Cloth  and General Mills Ltd. v. S. Paramjit Singh,  (1990) 4 SCC 923] or any other  understandable basis. In our view it is for the  legislature to decide" what should be the  appropriate basis for the purpose of  classification and the legislature as of  necessity must have a lot of latitude in this  regard. Whether any particular category of  tenants needs to be protected under the Rent  Act is a matter of legislative determination.  There is nothing arbitrary if such protection is  taken away in case of certain categories of  tenants having regard to their position  determined on objective and reasonable  criterion. These are essentially matters of  policy. Unless the provision is shown to be  arbitrary, capricious or to bring about grossly  unfair results, judicial policy should be one of  judicial restraint. The prescriptions may be  somewhat cumbersome or produce some  hardship in their application in some  individual cases; but they cannot be struck  down as unreasonable, capricious or  arbitrary".

15.             It also appears that as the point was  concluded by a decision in M/s. Crompton Greaves Ltd.,  the issue as to vires was not pressed by the tenant before

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the Trial Court. This is clear from the following  observations made by the Court; "However, the advocate for Defendant not  argued on this issue, may be in view of  judgment dated 20.7.2001 of the Hon’ble High  Court of Judicature at Bombay. The said  judgment is reported in AIR 2002 Bombay 65  (M/s Crompton Greaves Ltd., v. State of  Maharashtra) (not cited at Bar). In the said  ruling, Hon’ble High Court upheld the  constitutional validity of the provisions of  Section 3(1)(b) of the Maharashtra Rent  Control Act. Therefore, this issue does not  survive. Accordingly issue No.2 is answered".

16.             The courts below were, therefore, in our  opinion, fully justified in proceeding to decide the matter  on merits.

MERITS OF THE MATTER 17.             The Trial Court framed necessary issues and  held that the defendant-Company was the tenant; the  Rent Act was not applicable; the tenancy was legally and  validly terminated; and defendant was liable to be  evicted.  A prayer was also made by the plaintiff for  payment of mesne profits.  The Court held that the  landlord was entitled to a decree for possession. But  since the proceedings were pending before BIFR, Section  22 of SICA was applicable and the landlord could recover  amount of mesne profits only after taking requisite  permission from BIFR.  The Court, in the light of the  above findings, issued the following directions;         "The Defendants shall deliver vacant  repossession of the suit premises to the  Plaintiffs within 4 months.          The Defendants shall pay mesne profits  to the plaintiffs in respect of suit premises for  the period from the date Operating Agency suit  till the Plaintiffs recover possession of the suit  premises.

       For determination of quantum of mesne  profits, enquiry under O. 20 R. 12(c) of the  Code of Civil Procedure is directed.

       However, the order to pay mesne profits  shall be subject to the Plaintiffs obtain  permission of the BIFR to recover mesne  profits against the Defendants.

       Preliminary decree be drawn  accordingly".

18.             A Bench of Small Causes Court, Bombay  confirmed the above order and dismissed the appeal.  Before the High Court, again all the contentions were  reiterated by the tenant, but the High Court negatived  them and dismissed the writ petition.  The High Court  noted that it was not in dispute between the parties that  notice terminating the tenancy was issued by the  landlord on February 23, 2001 and tenancy was  determined with effect from March 31, 2001.  On that  day, i.e. March 31, 2001, paid up share capital of the

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Company (tenant) was more than rupees one crore.  If it  were so, observed the High Court, Small Causes Court  was right in proceeding with the matter and in passing  the decree of eviction against the tenant. 19.             The Courts were also right in relying upon  Shree Chamundi Mopeds Ltd. v. Church of South India  Trust Association, (1992) 3 SCC 1 and in holding that  eviction proceedings initiated by the landlord against the  tenant were maintainable even if the Company was ’sick’  under SICA and Section 22 of that Act would not operate  as bar to such proceedings.

JURISDICTIONAL FACT 20.             The learned counsel for the appellant- Company submitted that the fact as to ’paid up share  capital’ of Rs. one crore or more of a Company is a  ’jurisdictional fact’ and in absence of such fact, the Court  has no jurisdiction to proceed on the basis that the Rent  Act is not applicable. The learned counsel is right. The  fact as to ’paid up share capital’ of a Company can be  said to be a ’preliminary’ or ’jurisdictional fact’ and said  fact would confer jurisdiction on the Court to consider  the question whether the provisions of the Rent Act were  applicable. The question, however, is whether in the  present case, the learned counsel for the appellant tenant  is right in submitting that the ’jurisdictional fact’ did not  exist and the Rent Act was, therefore, applicable. 21.             Stated simply, the fact or facts upon which the  jurisdiction of a Court, a Tribunal or an Authority  depends can be said to be a ’jurisdictional fact’. If the  jurisdictional fact exists, a Court, Tribunal or Authority  has jurisdiction to decide other issues. If such fact does  not exist, a Court, Tribunal or Authority cannot act. It is  also well settled that a Court or a Tribunal cannot  wrongly assume existence of jurisdictional fact and  proceed to decide a matter. The underlying principle is  that by erroneously assuming existence of a  jurisdictional fact, a subordinate Court or an inferior  Tribunal cannot confer upon itself jurisdiction which it  otherwise does not posses. 22.             In Halsbury’s Laws of England, (4th Edn.),  Vol.1, para 55, p.61; Reissue, Vol.1(1), para 68, pp.114- 15, it has been stated: "Where the jurisdiction of a tribunal is  dependent on the existence of a particular  state of affairs, that state of affairs may be  described as preliminary to, or collateral to the  merits of the issue. If, at the inception of an  inquiry by an inferior tribunal, a challenge is  made to its jurisdiction, the tribunal has to  make up its mind whether to act or not and  can give a ruling on the preliminary or  collateral issue; but that ruling is not  conclusive".

23.             The existence of a jurisdictional fact is thus a  sine qua non or condition precedent to the assumption of   jurisdiction by a Court or Tribunal.

JURISDICTIONAL FACT AND ADJUDICATORY FACT 24.             But there is distinction between ’jurisdictional  fact’ and ’adjudicatory fact’ which cannot be ignored. An  ’adjudicatory fact’ is a ’fact in issue’ and can be  determined by a Court, Tribunal or Authority on ’merits’,  on the basis of evidence adduced by the parties. It is no

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doubt true that it is very difficult to distinguish  ’jurisdictional fact’ and ’fact in issue’ or ’adjudicatory  fact’. Nonetheless the difference between the two cannot  be overlooked. 25.             In Halsbury’s Laws of England, (4th Edn.),  Vol.1, para 55, p.61; Reissue, Vol.1(1), para 68, pp.114- 15, it is stated: "There is often great difficulty in  determining whether a matter is collateral to  the merits or goes to the merits. The  distinction may still be important; for an  erroneous decision on the merits of the case  will be unimpeachable unless an error of law is  apparent on the face of the record of the  determination or unless a right of appeal lies  to a court in respect of the matter alleged to  have been erroneously determined. An error of  law or fact on an issue collateral to the merits  may be impugned on an application for an  order of certiorari to quash the decision or in  any other appropriate form of proceedings,  including indirect or collateral proceedings.  Affidavit evidence is admissible on a disputed  issue of jurisdictional fact, although the  superior courts are reluctant to make an  independent determination of an issue of fact  on which there was a conflict of evidence  before the inferior tribunal or which has been  found by an inspector after a local inquiry".

26.             In R. v. Fulham Rent Tribunal, (1950) 2 All ER  211, it was held that the question whether premium for  renewal of tenancy was or was not paid was a  jurisdictional fact and, therefore, was held to be a  condition precedent for the lawful exercise of jurisdiction  by a Rent Tribunal. In Brittain v. Kinnaird, (1819) 1 B&B  432, however, the factum as to possession of a ’boat’ with  gunpowder on board was held to be a part of the offence  charged and thus a finding of fact or adjudicatory fact. It  was stated: "The logical basis for discriminating  between these cases and other falling on opposite  sides of the line, is not easily discernible".            (emphasis supplied) 27.             Likewise, the fact whether the petitioner was  an ’adult’ in adoption proceedings was not held to be a  ’jurisdictional’ fact (Eversole v. Smith, 159 SW 2nd 35).  28.             In Jagdish Prasad v. Ganga Prasad, 1959  Supp (1) SCR 733, the questin was whether the landlord  was entitled to enhancement of rent. Under the Act, he  was not entitled to such rent unless a ’new construction’  had been made after June 30, 1946. It was held by this  Court that the question whether construction was new or  not was a ’jurisdictional fact’ and if the court wrongly  decided the said fact and thereby conferred jurisdiction  not vested in it, the High Court could interfere with the  order. The Court stated that "once it had the power it  could determine whether the question of the date of  construction was rightly or wrongly decided". [See also  Arun Kumar v. Union of India, (2007) 1 SCC 732]. 29.             But, in Roshanlal v. Ishwardas, (1962) 2 SCR  947, this Court held that the Rent Controller had  jurisdiction to fix standard rent for new construction  made after March 24, 1947. The question was as to when  the construction was made. The Rent Controller recorded  a finding of fact that the construction was put up after

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March 24, 1947. The finding was confirmed by the  District Judge. But the High Court interfered in revision. 30.             Setting aside the decision of the High Court,  this Court stated: "It is clear from the orders of the Rent  Controller and of the District Judge in appeal  that the question whether the second floor was  newly constructed or not was really a question  of fact, though undoubtedly a jurisdictional  fact on which depended the power of the Rent  Controller to take action under s. 7A. If the  Rent Controller had wrongly decided the fact  and assumed jurisdiction where he had none,  the matter would be open to reconsideration in  revision. The High Court did not, however, go  into the evidence, nor did it say that the  finding was not justified by the evidence on  record. The High Court referred merely to  certain submissions made on behalf of the  landlord and then expressed the opinion that  what was done to the second floor was mere  improvement and not a new construction. We  think that the High Court was in error in  interfering with the finding of fact by the  Rent Controller and the District Judge, in  support of which finding there was clear  and abundant evidence which had been  carefully considered and accepted by both  the Rent Controller and the District Judge".                                                  (emphasis supplied) 31.             It is thus clear that for assumption of  jurisdiction by a Court or a Tribunal, existence of  jurisdictional fact is a condition precedent. But once  such jurisdictional fact is found to exist, the Court or  Tribunal has power to decide adjudicatory facts or facts  in issue. 32.             As already seen earlier, in the case on hand,  the appellant Company was having ’paid up share  capital’ of more than Rs. one crore, not only when the  notice was issued and tenancy was determined but also  when the suit for possession was instituted. What was  stated was that a resolution was passed by the Board of  Directors to reduce ’paid up share capital’ from Rs.8.20  crores to Rs.41 lakhs (less than Rs.1 crore). But it was  not approved by BIFR. The Small Cause Court considered  this aspect and stated; "The reasons are that the above suit is  filed on 4.4.2001. Whereas undisputed  document Ex.B. annual report of the  Defendant Company shows that on 30.9.1999  the paid up shares capital of the Defendant  Company was more than Rs.1 crore. If the  Defendants have moved BIFR by reference of  1997, by that time the Defendant ought to  have received favourable orders reducing the  paid-up capital of the Defendants to less than  Rs. one crore. But no such evidence is  produced by the Defendants to rebut the  annual report Ex.B of the Defendants showing  paid up capital of more than Rs.8 crores as on  30.9.1999. There is nothing before the court to  show that the paid up share capital of the  Defendants is brought down to Rs.41 lacs as  per para 1.3(1) of the revised rehabilitation  proposal in BIFR case No.74/1999 (Ex.4). The

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advocate for Defendants has not pointed out  any order to show that the said proposal is  accepted.

In the absence of such order of the  appropriate court or authority accepting  the proposal Ex.1 to reduce share capital  to less than 1 crore rupees, I am unable to  accept the case of the Defendants that the  said share capital of the Defendant  Company is reduced to less than Rs.1  crore".                         (emphasis supplied)

33.             The High Court also dealt with this aspect and  concluded; "It is not in dispute between the parties  that the tenancy of the petitioners was  terminated with effect from 31.3.2001 and on  that day the paid up share capital of the  petitioners/Company was more than Rupees  one crore, no fault can be found with trial  Court taking cognizance of the eviction  proceedings initiated against the petitioners,  as the trial Court definitely had jurisdiction to  entertain such proceedings, considering the  provisions of law comprised under Section  3(1)(b) of the said Act, as rightly submitted by  the learned advocate for the respondents. The  clause (b) of Section 3(1) of the said Act clearly  provides that "the said Act shall not apply to  any premises let or sub-let to banks, or any  Public Sector Undertaking or any Corporation  established by or under any Central or State  Act, or foreign missions, international  agencies, multinational companies, and private  limited companies and public limited  companies having a paid up share capital of  rupees one crore or more". Undisputedly, the  petitioner/Company is a Public Limited  Company having share capital of more  than Rupees one crore".                                         (emphasis supplied)

34.             All the Courts were, therefore, in our  considered opinion, right in holding that the provisions of  the Rent Act were not applicable to the present case.

SUBSEQUENT EVENTS 35.             The learned counsel for the tenant then  submitted that it was obligatory on the courts below  including the High Court to take into consideration  subsequent events.  In support of the submission, our  attention has been invited by the counsel to a leading  decision of this Court in Pasupuleti Venkateswarlu v.  Motor & General Traders, (1975) 1 SCC 770.  In that case,  the plaintiff filed a suit for possession on the ground of  personal requirement for starting business.  A decree for  possession was passed in his favour which was  confirmed by the Appellate Court.  At the stage of  Revision, however, due to subsequent event of acquisition  of non-residential building by the plaintiff-landlord, an  application for amendment was made by the defendant- tenant.  The High Court allowed the amendment. The  plaintiff challenged the said order by approaching this  Court.  It was contended that the High Court committed

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an error in taking cognizance of subsequent event which  was ’disastrous’.  This Court, however, held that the High  Court had not committed any illegality in doing so. 36.             Referring to leading cases on the point,  Krishna Iyer, J. stated;         "We feel the submissions devoid of  substance.  First about the jurisdiction and  propriety vis-‘-vis circumstances which come  into being subsequent to the commencement  of the proceedings.  It is basic to our  processual jurisprudence that the right to  relief must be judged to exist as on the date a  suit or institutes the legal proceeding.  Equally  clear is the principle that procedure is the  handmaid and not the mistress of the judicial  process.  If a fact, arising after the lis has come  to court and has a fundamental impact on the  right to relief or the manner of moulding it, is  brought diligently to the notice of the tribunal,  it cannot blink at it or be blind to events which  stultify or render inept the decretal remedy.   Equity justifies bending the rules of procedure,  where no specific provision or fairplay is not  violated, with a view to promote substantial  justice\027subject, of course, to the absence of  other disentitling factors or just  circumstances.  Nor can we contemplate any  limitation on this power to take note of  updated facts to confine it to the trial Court.  If  the litigation pends, the power exits, absent  other special circumstances repelling resort to  that course in law or justice.  Rulings on this  point are legion, even as situations for  applications of this equitable rule are myriad.   We affirm the proposition that for making the  right or remedy claimed by the party just and  meaningful as also legally and factually in  accord with the current realities, the Court  can, and in many cases must, take  cautious cognizance of events and  developments subsequent to the institution  of the proceeding provided the rules of  fairness to both sides are scrupulously  obeyed."                           (emphasis supplied)

37.             In our judgment, the law is fairly settled. The  basic rule is that the rights of the parties should be  determined on the basis of the date of institution of the  suit.  Thus, if the plaintiff has no cause of action on the  date of the filing of the suit, ordinarily, he will not be  allowed to take advantage of the cause of action arising  subsequent to the filing of the suit.  Conversely, no relief  will normally be denied to the plaintiff by reason of any  subsequent event if at the date of the institution of the  suit, he has a substantive right to claim such relief. 38.             In the instant case, in our opinion, the courts  below were right in holding that the date on which  tenancy was determined, the right in favour of the  landlord got accrued.  Such right could not have been set  at naught by the tenant by unilateral act by passing a  resolution to reduce ’paid up share capital’ of the  Company. 39.             In this regard, it may be profitable to refer to a  decision of this Court in Gajanan Dattatraya v. Sherbanu

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Hosang Patel & Ors., (1975) 2 SCC 668.  In Gajanan, the  Court was called upon to consider clause (e) of Section  13(1) of the Bombay Rents, Hotel and Lodging House  Rates Control Act, 1947 which read thus;         13(1)(e). That the tenant has, since the  coming into operation of this Act,  unlawfully sublet, or after the date of  commencement of the Bombay Rents, Hotel  and Lodging House Rates Control  (Amendment) Act, 1943, unlawfully given on  licence, the whole or part of the premises or  assigned or transferred in any other manner  his interest therein.                                            (emphasis supplied)

40.             The tenant took on lease the premises on  January 1, 1960.  He, however, sublet a part of the  premises in August, 1965.  The landlord issued a notice  on April 1, 1967 and terminated the tenancy.  The tenant  denied that there was unlawful sub-letting of a part of  the premises.  It was further submitted that in any case,  the so-called sub-tenant vacated the premises on April  14, 1967 i.e. before the suit was instituted by the  landlord and hence, cause of action did not survive.  It  was contended on behalf of the tenant that Section  13(1)(e) used the expression "has sub-let", i.e. the  present perfect tense which contemplated the event  connected in some way with the present time.  Since the  sub-tenant had already vacated and left the premises, at  the most it could be said that the tenant ’had sub-let’  the premises but it was not a ground for eviction under  the Act and hence no decree could have been passed.   Reliance was also placed on an earlier decision of this  Court in Goppulal v. Thakurji Shriji Shriji Dwarkadheshji,  (1969) 3 SCR 989 : (1969) 1 SCC 792. 41.             Negativing the contention, upholding the  decree of eviction and distinguishing Goppulal, this Court  said; "The provisions of the Bombay Rents,  Hotel and Lodging House Rates Control Act,  1947 indicate that a tenant is disentitled to  any protection under the Act if he is within the  mischief of the provisions of Section 13(1)(e),  namely, that he has sublet.  The language is  that if the tenant has sublet, the protection  ceases.  To accede to the contention of the  appellant would mean that a tenant would not  be within the mischief of unlawful subletting if  after the landlord gives a notice terminating  the tenancy on the ground of unlawful  subletting the sub-tenant vacates.  The  landlord will not be able to get any relief  against the tenant in spite of unlawful  subletting.  In that way the tenant can foil the  attempt of landlord to obtain possession of the  premises on the ground of subletting every  time by getting the sub-tenant to vacate the  premises.  The tenant’s liability to eviction  arises once the fact of unlawful subletting  is proved.  At the date of the notice, if it is  proved that there was unlawful subletting,  the tenant is liable to be evicted".                                                (emphasis supplied) 42.             The Court approved the view taken by the High  Court of Gujarat in Maganlal Narandas Thakkar v. Arjan

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Bhanji Kanbi, (1969) 10 Guj LR 837. In Maganlal, the  High Court of Gujarat had an occasion to consider a pari  materia provision under the Saurashtra Rent Control  Act, 1951?. 43.             A similar argument was advanced before the  Court. However, considering the scheme of the Act, the  Court refuted the contention. The Division Bench  observed; "So far as the first point is concerned, Mr.  Desai laid great stress, and relied very heavily,  on the grammatical meaning of the words ’has  sub-let’. His argument is that the meaning of  the words ’has sub-let’ include the element  that the subletting must be continuing on the  date when the plaintiff filed his suit. He stated,  and there is no dispute on the point, that the  words ’has sub-let’ do not use of the verb ’sub- let’ in the present perfect tense. He referred to  page 61 of the Handbook of English Grammar  by R.W. Zandvoort. In paragraph 140 of this  Book it is stated that when a verb is used in  present perfect tense, it denotes "a completed  past action connected, through its result, with  the present moment". The argument of Mr.  Desai was that the subletting which started  sometime after 1951, that is after the Act came  into operation, must be connected with the  present moment through its result; and his  argument was that once the sub-tenancy was  created, it must be connected with the present  moment-the date of filing the suit-by its result  by the sub-tenant continuing in possession of  the premises upto that date. Mr. Desai thus  urged before us that unless a sub-tenant were  in possession of the property sublet on the  date of the suit it cannot be said that the  tenant ’has sub-let’ the premises, even though  a sub-tenancy was in fact created by the  tenant. In our opinion if this interpretation  were to be accepted, the result would be that a  tenant can with impunity put some other  person in possession of the premises as a sub- tenant and avoid an order for delivery of  possession against him by seeing to it that the  sub-tenant departs from the property before  the plaintiff files a suit. Having regard to the  scheme of the Rent Control Act, particularly  the scheme of Sections 12 and 13 of the Act  and the context in which the words ’has sub- let’ are used, it appears to us that that is not  the way in which the meaning of the words  ’has sub-let’ should be gathered. If the Rent  Control Act were not in force and the parties  were left to their ordinary rights under the  Transfer of Property Act, the landlord will have  a vested right to recover possession in him as  soon as he terminates the tenancy of the  tenant in the manner provided in the Transfer  of Property Act. After terminating the tenancy  he can immediately call upon the tenant to  hand over possession to him. By enacting  Section 12 of the Rent Control Act, the  landlord’s right to terminate the tenancy is not  affected, but the enforcement of his right to  recover possession immediately thereafter from

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the tenant is affected. The provisions of  Section 12 prevent a landlord from recovering  possession of the property from a tenant even  after a lawful termination of his tenancy,  provided the tenant fulfils the conditions  mentioned in Section 12. Section 12 does not  take away the right of the landlord to recover  possession of the premises but merely  postpones the enforcement of this right of the  landlord so long as the tenant fulfils the  conditions laid down in that section. Having  put this impediment in the enforcement of the  right of possession of the landlord or in other  words, having clothed the tenant with an  immunity from dispossession, the Legislature  proceeds in Section 13 to lay down those  conditions on the fulfillment of which the  landlord is entitled to recover possession of the  premises from the tenant. Section 13,  therefore, provides for those contingencies on  proof of which the tenant loses the immunity  from dispossession under Section 12. Some  discussion took place on the question whether  the tenant has a right of possession or whether  he has merely an immunity from being  dispossessed. Whether it be called an  immunity from dispossession or whether it be  called a personal right of possession, the fact  remains that by Section 13, the Legislature  has provided for dispossession of tenant,  despite provisions of Section 12, if the Court is  satisfied that any one of the grounds  mentioned in Section 13 does exist. One of  such grounds is the subletting of the premises  or a part thereof by the tenant. In view of this  scheme of the provisions in Sections 12 and 13  of the Act, it is necessary for us to construe  the meaning of the words ’has sub-let’ keeping  in mind that the verb ’sub-let’ is used in the  present perfect tense. First, it must be a  completed past action, that is the subletting  must be completed. A subletting is complete as  soon as the sub-tenant is put in possession of  the premises given to him on sublease. Now,  this completed act of subletting must have a  result. What would be that result in the  context of Sections 12 and 13 of the Act? The  result of subletting would be removal of the  impediment in the way of the landlord to  recover possession of the premises. In other  words, the result of subletting would be to take  away that personal right of possession which  the tenant enjoyed under the provisions of the  Rent Act. Now, this result must be connected  with the present moment. The present moment  will be the moment when the suit is filed. How  is this result connected with the filing of the  suit? The answer is quite obvious. It is this  removal of the impediment in the way of the  landlord’s recovery of possession which  induces him to go forthwith to the Court and  file a suit for possession. Therefore, the words  ’has sub-let’ mean that a sub-letting has taken  place and as a result of that subletting the  impediment in the way of the landlord to

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recover possession has been removed, thus,  inducing him to go to Court and ask for  recovery of possession. It is the result of the  completed act, i.e. the removal of the  impediment in his way, which permits the  landlord to go to the Court and ask for a  decree for possession. It is not necessary,  therefore, that subletting must continue  enough if the premises have been sub-let  sometime after the coming into operation of  the Act. The provisions of Section 15 of the  Saurashtra Rent Control Act make subletting  unlawful. Therefore, any subletting by the  tenant after the Act came into operation  immediately removes the impediment in the  way of the landlord to recover  possession and  entitles him immediately to go to the Court  and ask for recovery of possession. In order to  convey the correct meaning of the words ’has  sub-let’ it is not necessary to show that the  subletting was in existence on the date of suit.  It is enough that the subletting has taken  place sometime after the Act came into  operation; it does not matter that the  subletting came to an end before the  landlord gave notice or before the landlord  filed a suit".                                          (emphasis supplied)

44.             In our opinion, the ratio laid down in the above  cases applies to the present case as well.  Admittedly, on  the date the tenancy was terminated, the tenant (Public  Limited Company) was having a paid up share capital of  rupees more than one crore.  Under clause (b) of Section  3(1) of the Act, therefore, the provisions of the Act were  not applicable to the suit-premises.  It is true that a  resolution was passed by the Company to reduce the  paid up share capital to less than rupees one crore, but  the said resolution was never approved by BIFR.  But  even otherwise, once it is proved that the tenancy was  legally terminated and the Act would not apply to such  premises, a unilateral act of tenant would not take away  the accrued right in favour of the landlord.  Unless  compelled, a Court of Law would not interpret a provision   which would frustrate the legislative intent and primary  object underlying such provision.  We, therefore, see no  infirmity in the conclusions arrived at by the courts  below.

EQUITABLE CONSIDERATIONS 45.             The learned counsel for the respondent- landlord is also right in submitting that the appellant- tenant does not deserve equitable relief under Article 136  of the Constitution. The tenant has not paid  ’rent’/’mesne profits’ since more than ten years. Even  after approaching this Court, it had made part payment  pursuant to interim order made in April, 2005. But  nothing was paid/deposited thereafter even though two  years have passed. These facts have not been disputed by  the appellant. We are, therefore, of the view that even on  that ground, the appellant-tenant cannot ask for  discretionary and equitable relief and we are not inclined  to grant such relief.

46.             For the foregoing reasons, the appeal deserves

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to be dismissed and is, accordingly, dismissed with costs.