REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.  5136   OF 2008 (arising out of SLP(C) No. 5855/07)

Smt. Leelabai Gajanan Pansare & Ors.    … Appellants

               v.

The Oriental Insurance Co. Ltd. & Ors.    … Respondents

with Civil Appeal Nos.5137-5138/08 @ SLP (C) No. 24789-24790/07 and

Civil Appeal No. 5139/08 @ SLP (C) No. 16237/08.

J U D G M E N T

S. H. KAPADIA, J.

Civil Appeals arising out of S.L.P.(C) Nos. 5855/07 and S.L.P. (C) No. 16237/08:

Leave granted.

2. Applications for interventions are allowed.

3. An important question of law regarding interpretation of Section 3(1)

(b) of the Maharashtra Rent Control Act, 1999 is involved in the present

appeal, namely:-

“Whether  a  Government  Company  falls  within  the compendious expression “any public sector undertakings or  corporation  established  by or  under  any Central  or

State  Act”  in  Section  3(1)(b)  of  the  Maharashtra  Rent Control Act, 1999 (“Rent Act” in short).”

4. For the sake of convenience we may state the facts of the case in SLP

(C) No. 5855/07 in the case of Leelabai Gajanan Pansare & Ors. v. Oriental

Insurance Company Ltd. & Ors.

Facts:

5. Appellants-landlords had let out the suit-premises admeasuring 3214

sq. ft. (approx.) in Thane to Oriental Insurance Company Ltd. (“OIC” for

short). The rent was Rs. 10,000/- per month. Vide notice dated 15.4.2002

under Section 106 of the Transfer of Property Act, appellant terminated the

tenancy of the said Company. On failure of OIC to vacate the premises, they

instituted a suit for eviction. OIC took the plea that it is not covered under

Section 3(1)(b) of the Rent Act as it was “a protected tenant” under the said

Rent Act,  1999 and, therefore, could not be evicted. In the said suit,  the

landlord  pleaded  that  OIC  is  a  Public  Sector  Undertaking  and/or

Corporation  having  a  total  paid  up  share  capital  of  more  than  Rs.

1,00,00,000.  

6. OIC  resisted  the  suit  by  filing  its  written  statement  inter  alia

contending  that  it  is  neither  a  PSU nor  a  Corporation;  that  it  was  not

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exempted under Section 3(1)(b) of the Rent Act; that it was neither a bank

nor  a  PSU,  nor  a  foreign  mission,  nor  MNC  and  nor  a  public  limited

company  having  paid  up  share  capital  of  more  than  Rs.  1,00,00,000.

According  to  OIC,  it  was  a  Government  company  carrying  on  its  own

insurance business and that the premises let to it stood fully protected by the

provisions  of  the  Rent  Act  as  they did  not  fall  in  any of  the  categories

mentioned in Section 3(1)(b) of the said Rent Act.

7. By Judgment  and  Order  dated  9.7.2004  in  Special  Civil  Suit  No.

202/03 the trial court held that OIC is a Government company under Section

617 of the 1956 Act over which the GOI has overall control qua insurance

business.  The  trial  court  further  held  that  OIC  stood  established  as  a

subsidiary  of  GIC  that  came  into  existence  in  1972  pursuant  to

nationalization of General Insurance. According to the trial court since OIC

is a Government company under Section 617 of the 1956 Act and since GOI

has  overall  control  over  its  functioning,  it  is  entitled  to  protection  from

eviction by the landlords under Section 3(1)(a)  which gives protection to

premises let to the Government or local authority or to premises taken on

behalf of the Government. In other words, according to the trial court, since

GOI exercises  deep  and  pervasive  control  over  the  respondent  company

herein, the said premises occupied by it were entitled to protection under the

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second part of Section 3(1)(a). According to the said Judgment and Order

dated 9.7.2004 the said suit stood dismissed by the trial court.  

8. Aggrieved by the dismissal of the suit by the trial court, appellants

herein  preferred  an  appeal  being  FA  No.  1245/04.  By  the  impugned

judgment  dated  20.12.2006,  the  Bombay High Court  held that  exempted

premises under  Section  3(1)(b)  of  the Rent  Act,  1999 are PSUs but  not

Government  Companies  incorporated  under  the  Companies  Act,  1956.  It

was further held that a Government Company stands in a different category

and by the very absence of the words “Government Company” in Section 3

(1)(b) it is clear that the Legislature did not intend their exemption from the

protection  under  the  said  Rent  Act,  1999  consequently,  the  High  Court

dismissed FA No. 1245/04 filed by the appellants. Hence, this civil appeal.

Contentions:

9. The basic ground of challenge in this civil appeal  that the High Court

having held that OIC is the PSU had erred in holding that a Government

Company stood under a separate category which is absent in Section 3(1)(b)

and thus continues to enjoy protection of the said Rent Act. According to

the appellants, this amounts to judicial legislation by the High Court as the

High  Court  has  read  into  Section  3(1)(b)  the  words,  namely,  “except

Government companies”. According to the appellants, by such exclusion of

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Government companies from the PSUs, the High Court has excluded a large

number  of  PSUs  from the  purview of  Section  3(1)(b),  which  is  not  the

intention of the Legislature. This, according to the appellants, is contrary to

the legislative policy and such interpretation defeats  the very purpose of

Section  3(1)(b)  of  the  Rent  Act.  According  to  the  appellants,  in  the

alternative, in any event, OIC is a public limited company having a paid up

share capital of rupees more than one crore and, therefore, in any event, the

said company would fall in the second part of Section 3(1)(b) which denies

to such public limited companies the protection of the said Rent Act, 1999.

10. Shri Shyam Divan, learned senior counsel appearing on behalf of the

appellants submitted that the concept of a “Government Company” is alien

to the scheme of Section 3(1)(b). The legislature, according to the learned

counsel, has not used the expression “Government Company” anywhere in

Section  3(1)(b).  There  was  no  justification,  according  to  the  learned

counsel,  for  the  High  Court  to  introduce  the  concept  of  Government

Company  when  the  legislature  has  not  adverted  to  the  said  expression.

According to the learned counsel, by importing the concept of “Government

Company”  in  Section  3(1)(b),  the  High  Court  has  resorted  to  judicial

legislation, which is not permissible. According to the learned counsel, it is

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the function of the legislature to decide upon the entities to which Rent Act

protection should be extended to and conversely the entities  that  may be

excluded  from  such  protection.  According  to  the  learned  counsel,  in

enacting Section 3(1)(b), the legislature has clearly indicated that premises

let to PSUs and Public Limited Companies having a paid up capital of Rs.

1,00,00,000 or more would not be entitled to protection of the Rent Act,

1999. However, the legislature did not include in Section 3(1)(b) “holding

company”,  “subsidiary  company”,  “sick  industrial  company”  etc.,  all  of

which  are  concepts  like  “Government  Company”  that  are  specifically

defined in the 1956 Act. Instead, the legislature employed the concept of

Private Limited Companies and Public Limited Companies having a paid up

share capital  of  Rs.  1,00,00,000 or  more.  It  was submitted that  although

holding company or subsidiary company or sick industrial company are not

expressly mentioned in Section 3(1)(b),  it  is  not  open to such entities  to

claim that since none of these specific expressions abovementioned are used

in Section 3(1)(b), they are entitled to Rent Act protection. According to the

learned  counsel,  a  Holding  company  or  Subsidiary  company  or  Sick

industrial  company  is  an  addition  to  a  public  limited  or  private  limited

company  having  a  paid  up  share  capital  of  more  than  Rs.  1,00,00,000.

According  to  the  learned  counsel,  the  concept  of  holding  company,

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subsidiary  company  or  a  sick  industrial  company  are  additional

characteristics.

11. Learned  counsel  next  contended  that  Oriental  Insurance  Company

(OIC), United India Insurance Company(UIC) as well as Bharat Petroleum

Corporation  Ltd.  (BPCL)  answers  the  description  of  a  “PSU”,  which  is

understood  in  several  statutes  to  include  a  Government  Company  under

Section 617 of the 1956 Act. Therefore, according to the learned counsel,

there  is  no  reason  why  the  expression  PSUs  as  used  in  Section  3(1)(b)

should  be read  to  exclude  OIC which  is  a  Government  Company where

100% of the shares are held by the Central Government.

12. On literal interpretation of Section 3(1)(b), learned counsel submitted

that the expression “or any PSUs” as used in Section 3(1)(b) is a separate

stand-alone  category like,  banks,  foreign  missions,  international  agencies

etc.. The said expression is separated from the rest of the provision by the

word ‘or” which  is  disjunctive and  giving  a natural  meaning to  the  said

word  separates  PSUs  from  the  next  expression  relating  to  statutory

Corporations. Therefore, according to the learned counsel, there is no reason

why  the  expression  ‘any  PSUs”  should  be  restricted  to  statutory

corporations, particularly when the disjunctive word “or” separates the two

phrases  in  Section  3(1)(b).  In  this  connection,  learned counsel  submitted

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that  the  word  PSU is  not  specifically  defined  in  the  Rent  Act.  It  is  not

defined  in  the  1956 Act.  Learned  counsel  submitted that  under  Rules  of

Procedure  and  Conduct  of  Business  in  Lok  Sabha  under  Chapter  XXVI

there is reference to Constitution of Parliamentary Committees. Rule 312A

refers  to  functions  of   “Committee  on  PSUs”  specified  in  the  Fourth

Schedule.  Item  5  of  Part  I  of  the  Fourth  Schedule  (List  of  Public

Undertakings)  refers  to  the  Life  Insurance  Corporation  of  India  (LIC)

whereas Part II of the same Schedule refers to Public Undertakings which

are Government Companies under the 1956 Act. That, every Government

Company whose annual  report  is  placed before Parliament under Section

619A of the 1956 Act falls in part II of the Fourth Schedule which refers to

List of Public Undertakings. According to the learned counsel,  OIC, UIC

and BPCL are Government Companies, therefore, they fall in Part II of the

Fourth Schedule to the Rules of Procedure and Conduct of Business in the

Lok Sabha. Learned counsel further pointed out that even, according to the

annual reports/financial statements of OIC, the said undertaking is a PSU.

Learned  counsel  submitted  that  the  above  Business  Rules  indicate

Legislative  Understanding  of  the  word  PSU  to  include  Government

Companies.  

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13. On  the  question  of  purposive  interpretation,  learned  counsel

submitted  that  in  Malpe  Vishwanath  Acharya  and  ors.  v.   State  of

Maharashtra and anr. (1998) 2 SCC 1 the Supreme Court held that the

provisions of the Bombay Rents, Hotel and lodging House Rates Control

Act,  1947  (“1947  Act”)  relating  to  the  determination  and  fixation  of

standard  rent  on  account  of  inflation  and  price  rise  could  no  longer  be

considered to be reasonable and, therefore, provisions in the Bombay Rent

Act,  namely,  Section  5(10),  18  and  19   dealing  with  the  definitions  of

“standard rent” and prohibition and receipt  of premium were liable to be

struck down as unreasonable and arbitrary. Learned counsel submitted that

following the said judgment of this Court a Joint Committee was constituted

by the Maharashtra Legislature to evolve a package which was done and

which  consisted  of  nominal  increase  in  the  standard  rent,  legalization  of

receipt of premium by the landlords which was earlier prohibited under the

1947 Act and the expansion of Section 3(1)(b) by which entities enumerated

therein  were to  loose  protection of  the  said Rent  Act.  According to the

learned counsel, but for the said package the above provisions of the 1947

Act  were  liable  to  be  struck  down.  In  the  circumstance,  learned counsel

submitted that the legislative scheme adopted by the legislature to protect

the  Rent  Act  from the  vice  that  was  recognized  in  the  case  of  Malpe

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Vishwanath Acharya (supra) hinges upon Section 3(1)(b) being interpreted

in  a  fair  manner.  According  to  the  learned  counsel,  should  the  scope of

Section 3(1)(b) be restricted by excluding Government companies as done

by the impugned judgment of the High Court then the larger objective of the

legislature would stand defeated and the standard rent provisions under the

Rent  Act  (1999  Act)  would  be  rendered  vulnerable.  According  to  the

learned counsel, the golden thread which runs through Section 3(1)(b) of the

Rent  Act  is  the  economic  criteria.  In  this  connection,  learned  counsel

submitted that each of the entities mentioned in Section 3(1)(b) are cash-

rich entities. These entities are tenants paying rent to the landlords. These

entities, according to the learned counsel, are excluded from the Rent Act

protection, particularly when with the passage of time, the landlords were

not  able  to  maintain  their  property  and,  consequently,  these  properties

became dilapidated for want of maintenance on account of poor return on

their  investments  and  on  account  of  increase  in  taxes  and  price  rise.

According  to  the  learned  counsel,  the  Report  of  the  Joint  Committee

indicates that it had taken into account all the above factors, including the

judgment  of  this  Court  in  Malpe  Vishwanath  Acharya (supra)  and,

accordingly,  gave  a package  of  the above three items enumerated  above

including Section 3(1)(b) so that maximum number of poor tenants would

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continue to get protection with the exclusion of those tenants who have the

paying capacity. Therefore, according to the learned counsel, when PSUs, as

understood by Parliament, the Reporting Ministry and the Comptroller and

Auditor-General have understood PSUs to include Government Companies

and Statutory Corporations then this Court  must give a plain, simple and

clear meaning to the words PSUs in Section 3(1)(b) in order to avoid any

challenge to the said sub-section on the ground of invidious classification

having no rational nexus with the objects sought to be achieved. According

to the learned counsel, if the said expression “PSUs” in the said sub-section

is confined to statutory corporations and if PSUs and statutory corporations

are  classified  under  one  distinct  category,  as  contended on behalf  of  the

respondents, then the consequence would be that in the Insurance Industry,

OIC and UIC (Government companies)  would get  protection of the Rent

Act,  1999  whereas  LIC,  which  is  a  statutory  corporation,  would  stand

excluded  from such  protection.  It  is  this  type  of  arbitrary  discrimination

which needs to be avoided in interpreting Section 3(1)(a). According to the

learned counsel, therefore, one needs to give the meaning to the words PSUs

as  understood  by the  Committee  on  Public  Undertakings,  the  Reporting

Ministry and by the Comptroller and Auditor-General and if so read, all the

three  entities  herein,  namely,  IOC/UIC/BPCL  would  come  within  the

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meaning of expression PSUs in Section 3(1)(b) of the Rent Act. Therefore,

according to the learned counsel, the impugned judgment needs to be set

aside.

14. Shri R.F. Nariman, learned senior counsel appearing on behalf of the

The  Hongkong  &  Shanghai  Banking  Corporation  Ltd.  submitted  that

Section  3(1)  of  the  said  Rent  Act  must  be  read  as  a  whole  in  order  to

understand the meaning and purport of the said section. According to the

learned counsel, the rationale behind under Section 3(1)(a) in providing that

the tenants of Government or a local authority will not have the protection

of the Rent Act, whilst providing that the Government or local authority in

its  capacity  as  a  tenant  will  have  the  protection  of  the  Rent  Act  is  that

Government  or  a  local  authority  performs  sovereign  and  governmental

functions. In other words, learned counsel urged that Government or a local

authority is covered by the ambit of Section 3(1)(a) as long as it does not

enter the arena of commercial activity. Learned counsel next submitted that

the concept of a “Government Company” is not a part of Section 3(1)(a).

According  to  the  learned  counsel,  the  said  sub-section  3(1)(a)  is  bodily

lifted  from  Section  4(1)  of  Bombay  Rent  Act,  1947.  That  Act  was  a

temporary enactment. According to the learned counsel, the absence of the

words “Government Company” in sub-section 3(1)(a) and the presence of

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the  expression  “any  PSUs”  in  Section  3(1)(b)  leads  to  the  inevitable

conclusion   that Government Companies were not entitled to receive the

protection of the said Rent Act. According to the learned counsel, banks,

PSUs,  statutory  corporations  and  private  and  public  limited  companies

mentioned in Section 3(1)(b)  are in the commercial sector  and, therefore,

they will not have the protection of the Rent Act when they are the tenants.

According  to  the  learned  counsel,  the  object  of  the  said  Rent  Act  is  to

extend protection of the said Rent Act to tenants who are Government, local

authorities and those who are not affluent and who do not have the capacity

to  pay market  rent.  On the point  of literal  interpretation,  learned counsel

submitted that on a plain reading of Section 3(1)(b) it would be clear that

PSUs  and  statutory  corporations  fall  in  two  separate  and  distinct

categories/classes  of tenants  who are not  entitled to the protection of the

said Rent Act. In this connection, learned counsel placed heavy reliance on

the word “or” occurring in Section 3(1)(b) after the word Banks and before

the words  “any corporation  established by or  under  any Central  or  State

Act”. Learned counsel submitted that the word “or” indicated the PSUs are

disjunctive and form a separate category by themselves. In this connection,

learned counsel further submitted that to interpret “PSUs” to mean statutory

corporations alone would lead to tautology as it would make the said words

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superfluous  and,  therefore,  it  was  submitted  that  the  expression  “PSUs”

must be read to mean all PSUs, namely, statutory corporations, public sector

companies, Government companies etc.. Learned counsel submitted that the

legislature  has  used  the  words  PSUs  in  plural  deliberately  as  it  desired

statutory corporations, public sector companies and Government companies

etc. to fall as part of the genus, namely, PSU. Therefore, according to the

learned  counsel,   PSU  is  the  genus  whereas  Government  companies,

statutory corporations and public sector companies etc. are species.

15. Learned counsel  next  submitted that  Section 3(1)(b)  applies  to any

corporation  established  by  or  under  any  Central  or  State  Act;  that,  a

“corporation”  would  include  a  company;  that  such  corporation  does  not

have to be established by a Central or State Act. It can also be established

under a Central or State Act, for example, GIC is established under General

Insurance Business Nationalisation Act, 1972 as a Government Company.

Therefore, according to the learned counsel, if Section 3(1)(b) is read in the

manner  suggested  by the  respondent  the  words  PSUs  in  Section  3(1)(b)

would be wholly redundant as  there would be no undertakings  left  apart

from the statutory corporations established by or under any Central or State

Act because the expression “or under” subsumes all forms of corporations

so established. Learned counsel further submitted that Section 16 of General

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Insurance  Business  (Nationalisation)  Act,  1972,  in  particular  sub-section

(2), shows that four companies, including OIC and UIC, render combined

services  of  general  insurance  business  all  over  India.  According  to  the

learned counsel, all the said four companies are the Government Companies

which  even  on  the  narrow  interpretation  placed  by  the  respondent,  are

corporations established under the Nationalisation Act. Therefore, learned

counsel submitted that “PSUs” should be read in the widest possible term so

as  to  include  within  it  every  kind  of  establishments  through  which  the

Government  would  do  business.  Therefore,  according  to  the  learned

counsel,   PSUs  would  encompass  Government  companies,  statutory

corporations, public sector companies etc. through which the Government is

doing business. Reliance was placed on various statutes which have defined

PSUs to include Government companies. One such statute is “Building and

Other Construction Workers (Regulation of Employment and Conditions of

Service) Act, 1996” which defines PSUs under Section 2(1)(a)(ii)  as any

corporation  established  by  or  under  any  Central  or  State  Act  or  a

Government  Company as  defined  in  Section  617  of  the  said  1956  Act,

which  is  owned,  controlled  or  managed by  the  Central  Government.

Learned  counsel  pointed  out  further  that  LIC  is  a  statutory  corporation

established under the LIC Act 1956; that Sections 21, 27, 28, 28(A) and 38

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of  the  said  LIC  Act  show  that  LIC is  under  the  control  of  the  Central

Government and not Parliament. It is further pointed out that under Section

6(2)(g) and (h), LIC is entitled to run business other than the business of life

insurance  in  certain  circumstances.  Therefore,  according  to  the  learned

counsel,  LIC  could  in  given  circumstances  run  the  business  of  general

insurance.  What  is  pointed  out  by  the  learned  counsel  is  that  various

anomalies would arise if this Court was to accept the interpretation placed

on Section 3(1)(b) of the said Rent Act. According to the learned counsel, in

terms  of  Section  3(1)(b)  LIC  is  not  different  from  GIC,  which  is  a

Government company established under a Central Act, or from other four

nationalized  insurance  companies  including  OIC  and  UIC.  All  the  said

companies  are  doing  the  business  of  insurance,  namely,  LIC  is  in  the

business of life insurance whilst  the others are in the business of general

insurance.  All  the  said  insurance  companies,  according  to  the  learned

counsel, are mammoth undertakings having a paid up share capital in excess

of  Rs.  1,00,00,000.  Therefore,  learned  counsel  submitted  that  if  the

interpretation  of  Section  3(1)(b)  given  by  the  respondent(s)  herein  is

accepted it would mean extension of protection of the said Rent Act to the

four  insurance  companies  including,  OIC and  UIC,  while  not  extending

such protection  to  LIC and GIC, which  interpretation  would run  foul  of

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Article  14  of  the  Constitution.  Learned  counsel  submitted  that  any

interpretation  of  Section  3(1)(b)  must  be  such  as  would  uphold  its

constitutional validity and, therefore, the four insurance companies, namely,

OIC,  UIC,  New  India  Assurance  Company  and  National  Insurance

Company must also not be entitled to the protection of the said Rent Act.  

16. Learned counsel submitted that while interpreting Section 3(1)(b) the

principle  of  noscittur  a  sociis must  be  adopted  which  would  mean  that

Section 3(1)(b) applies to different categories of tenants all of whom can

afford to pay at the market rate. According to the learned counsel, all the

different  kinds  of  tenants  enumerated  in  Section  3(1)(b)  are  financially

giants,  namely,  PSUs,  statutory  corporations,  banks,  multinational

companies, international agencies, private or public limited companies with

a  paid  up  share  capital  of  Rs.  1,00,00,000  or  more  etc.  These  tenants,

according to the learned counsel, do not require the protection of the Rent

Act.  Learned counsel  next  submitted that  in any event  OIC and UIC are

public limited companies having a paid up share capital of more than Rs.

1,00,00,000 and, therefore, stand excluded from the protection of the Rent

Act. In this connection, learned counsel urged that Government Companies

and  Insurance  Companies  are  merely  sub-species  of  public  limited

companies under the 1956 Act; the genus “company” is divided into three

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species – “existing company”, “private company” and “public company”;

that  various  sub-species  including  holding  and  subsidiary  companies,

insurance  companies,  Government  companies  etc.  are  all  public  limited

companies under 1956 Act.

17. Lastly,  learned  counsel  urged  that  when  the  legislature  provided

under  Section  3(1)(b)  that  private  limited  companies  and  public  limited

companies having a paid up share capital of Rs. 1,00,00,000 or more were

to be excluded from the protection of the Rent Act, it was providing for all

bodies  carrying  on  business  in  the  corporate  form under  the  1956  Act,

which have a paid up share capital of Rs. 1,00,00,000 or more. Therefore,

according to the learned counsel, the legislature had no intention of carving

out  an  exception  in  the  case  of  Government  companies  defined  under

Section 617 of the 1956 Act as erroneously held by the High Court.  

18. Shri  Soli  J.  Sorajbee,  learned  senior  counsel  appearing  for  the

applicants-intervenors submitted that the legislative policy under the Rent

Act legislation in India is to confine protection to the weaker sections of the

society and not to extend such protection to the entities which can withstand

the  forces  of  demand  and  supply.  In  this  connection,  learned  counsel

submitted that Section 3(1)(b) strikes a balance between the interest of the

landlord and the tenant; it is neither pro-landlord nor anti-tenant. It is pro -

1 8

public interest. According to the learned counsel, the impugned judgment

frustrates the object  of  Section 3(1)(b) as indicated hereinabove.  Further,

according  to  the  learned  counsel,  it  was  not  open  to  the  High  Court  to

exclude Government Companies from PSUs referred to in Section 3(1)(b).

According to the learned counsel, such an exercise undertaken by the High

Court amounts to judicial legislation as it was not open to the High Court to

read  into  Section  3(1)(b)  the  words,  namely,  “except  Government

companies”. According to the learned counsel, such judicial legislation is

liable to be set aside by this Court. Learned counsel further submitted that

the basic rationale underlying the exemption granted by Section 3(1)(b) is

that the entities and bodies mentioned therein, in the legislative judgments

are  not  in  need  of  Rent  Act  protection.  In  this  connection,  the  learned

counsel  submitted  that  it  is  this  rationale  which  becomes  explicit  when

Section 3(1)(b) excludes a private or public limited company having paid up

share capital of Rs. 1,00,00,000 or more from Rent Act protection. Learned

counsel  submitted  in  this  connection  that  if  a  company  becomes  a

Government company, it is not equally in need of Rent Act protection so

long  as  its  paid  up  capital  is  Rs.  1,00,00,000  or  more.  Learned  counsel

submitted  that  for  the  purposes  of  Rent  Act  protection,  there  is  no

fundamental  or  qualitative  distinction  between a  public  limited  company

1 9

with Rs. 1,00,00,000 paid up share capital and a Government company with

Rs. 1,00,00,000 paid up share capital. According to the learned counsel, a

company  on  becoming  a  Government  company  does  not  undergo

metamorphosis so as to result in the emergence of a separate entity under

the 1956 Act, which needs Rent Act protection to which it was formerly not

entitled. The consequence, according to the learned counsel, of a company

becoming  a  Government  Company  is  that  the  Government  Company  is

placed under a special system of control and merely because the entire share

holding is owned by the Central Government will not make the incorporated

company a Central Government. In this connection, learned counsel relied

upon the judgment of this Court in  A. K. Bindal and anr. v.  Union of

India and ors.  2003(5)SCC 163 at 175. According to the learned counsel,

the need for Rent Act protection does not arise merely because a company is

placed under strict control and regulations. The need for Rent Act protection

or its  absence has no nexus whatsoever with  the strict  regime of control

imposed on a Government company by Section 619 of the 1956 Act. In this

connection, learned counsel submitted that if a public limited company with

paid  up  share  capital  of  Rs.  1,00,00,000  is  not  entitled  to  Rent  Act

protection under Section 3(1)(b), that company on becoming a Government

company  cannot  claim  protection  of  the  Rent  Act  to  which  it  was  not

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entitled as a public limited company so long as its paid up share capital is

Rs. 1,00,00,000 or more. According to the learned counsel, for the purpose

of  Section  3(1)(b)  what  is  relevant  and  decisive  is  the  criterion  of  Rs.

1,00,00,000 paid up share capital  and not the degree or extent of control

exercised over the company as held by the trial court and so long as the said

criterion  is  satisfied  and  continues  to  be  satisfied,  the  company remains

outside the purview of the Rent Act. Any other interpretation, according to

the  learned  counsel,  would  lead  to  invidious  discrimination  between  a

public  limited  company  with  one  crore  paid  up  share  capital  and  a

Government company with the same paid up share capital. According to the

learned counsel, if the share capital of a Government company is reduced to

Rs. 99 lacs then it would be entitled to protection under the Rent Act.

19. According  to  Shri  Parag  P.  Tripathi,  learned  Additional  Solicitor

General appearing on behalf of the respondent-Oriental Insurance Co. Ltd.

(“OIC”), the principle issue raised revolves around the meaning and purport

of  the  compendious  expression  “any Public  Sector  Undertakings  or  any

Corporation established by or under any Central or State Act.” According to

the learned counsel, a Government Company is sui generis in structure and

in statutory treatment thereof, therefore, it  does not  fall  within  the above

compendious expression. According to the learned counsel,  the exclusion

clause, namely, Section 3(1)(b) applies to PSUs established by or under any

2 1

Central or State Act but not to a Government company, like the OIC, which

is not so established.

20. Learned  counsel  next  urged  that  a  Government  company  is  sui

generis and also does not fall either within the concept of private or public

limited  company  simplicitor.  In  other  words,  according  to  the  learned

counsel, Section 3(1)(b) does not apply to a Government company as it is

not  established by or under any Central or State Act and nor does it  fall

within the concept of public limited company simplicitor. In this connection

he submitted that an exemption or exclusionary clause, particularly in the

context  of Rent Act,  to the  extent  that  it  excludes a class  or category of

tenants  has to be narrowly interpreted. According to the learned counsel,

Section 3(1)(b) of the said Rent Act needs to be interpreted in the context of

the  1956  Act.  It  was  submitted  that  under  the  definition  of   “company”

under Section 2(10) of the 1956 Act, which refers to Section 3 of that Act,

the definition Section of Government Company refers to Section 617 of the

1956 Act. According to the learned counsel, Section 3 of the Companies Act

deals with  company [see section 3(1)(i)]; existing company [section 3(1)

(ii)]; private company [section 3(1)(iii)] and public company [section 3(1)

(iv)]. According to the learned counsel,   it is not possible to proceed on the

basis as if public and private companies are two sub-sets, which exhausts

the “field” of companies. In this connection he submitted that Section 3 of

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the 1956 Act does not define a public company exhaustively as a company;

that, Section 3 of the Companies Act merely states that the public limited

company  is  not  a  private  company  and,  therefore,  the  strict  dichotomy

between  public  or  private  may  not  be  entirely  correct  insofar  as  the

Companies Act is concerned.

21. According to the learned counsel, Section 617 of the 1956 Act is sui

generis as is indicated by the Chapter Heading in Part XIII “General” which

is  “Application  of  Act  to  Government  Companies”;  that  a  Government

company cannot be treated as public or private company, particularly when

a separate chapter is made applicable to Government companies. According

to  the  learned  counsel,  the  scheme  of  Section  617  indicates  that,

Government Companies have separate set of auditors, namely, CAG; annual

reports  are  required   to  be  laid  before  the  Houses  of  Parliament  under

Section 619A and the wide ranging power of the Central  Government to

modify and make non-applicable any of the provisions of the Companies

Act  to  such  companies  except  Sections  618,  619  and  619A.  Similarly,

according to the learned counsel, under Section 616, there is reference to

companies  governed  by Special  Acts.  According  to  the  learned  counsel,

Section 616 recognizes  that several companies are covered by the Special

Acts.  They  stand  on  a  different  footing  vis-à-vis  public  and  private

companies under the 1956 Act. In the event of inconsistency between the

2 3

Special Acts and the Companies Act, it is the former which would prevail.

Therefore, in respect of Government companies, which are governed by the

Special Acts, their status as a Government company would prevail and the

said companies would necessarily have to be treated as sui generis. In other

words,  according  to  the  learned  counsel,  the  structure  of  a  Government

company  like  OIC under  the  Insurance  Act  is  totally  different  from the

structure  of  a  public  limited  company under  the  Companies  Act.  In  this

connection, learned counsel placed reliance on the various provisions of the

Insurance  Act   in  the  context  of  winding up to  bring  out  the  difference

between  a  Government  company  on  one  hand  and  the  public  limited

company on the other hand.

22. All the above arguments have been canvassed to show that OIC is not

a  public  limited  company  as  is  sought  to  be  argued  on  behalf  of  the

appellants. All the above arguments are advanced to show that structurally

there  is  a  difference  between  a  Government  company  and  an  ordinary

company  under  the  provisions  of  the  1956  Act  as  well  as  Statutory

Corporations.

23. In the context of the said Rent Act, learned counsel submitted that, in

Section  3(1)(b)  a  compendious  expression  used  is  “any  public  sector

undertakings or any corporation established by or under any Central or State

2 4

Act”.  He urged that there is no “comma” after the words “any public sector

undertakings”. Therefore, according to the learned counsel, Section 3(1)(b)

of the said Rent Act applies to PSUs and statutory corporations “established

by or under any Central or State Act.” Therefore, according to the learned

counsel,   a  Government company incorporated under  the Companies  Act

would  fall  outside  Section  3(1)(b)  and  thus  would  be  entitled  to  the

protection  of  the  Rent  Act.  In  this  connection,  learned  counsel  placed

reliance on the Report of the Joint Committee which vide para 19 refers to

“Other  PSUs  including  Government  Undertakings  or  Corporations

established by or under Central or State enactments.” According to the

learned counsel,  what  has  emerged from the  said report  is  that  the  Joint

Committee intended to include Government/semi-Government undertakings

or  corporations  within  the  words  “other  public  sector  undertakings”,

however, the Legislature has dropped the said inclusion from the expression

“Public  Sector  Undertakings”  and  simply  proceeded  to  specify  “Public

Sector Undertakings or Corporation” which were established by or under

any Central or State Act. Therefore, according to the learned counsel, in the

said sub-section 3(1)(b) the expression “Public Sector Undertakings” was

given a narrow interpretation by the Legislature though the Joint Committee

recommended much wider definition of the words PSUs.  

2 5

24. Learned counsel submitted that the expression “PSU” has not  been

defined  in  the  said  Rent  Act.  It  was  submitted  that  even  if  the  said

expression has been defined as including Government companies, it would

still  be  open  to  the  respondent  to  contend  that  for  the  purposes  of  the

exclusion clause, the expression PSU should be narrowly construed so as to

exclude Government companies therefrom. Learned counsel submitted that

Section  3(1)(b)  is  an  exemption  clause  which  excludes  tenants  from

applicability of the said Rent Act, 1999 and, therefore, has to be narrowly

interpreted.  Lastly,  learned  counsel  submitted  that  in  a  landlord-tenant

statute,  if  two  views  are  possible  one  favouring  the  tenant  should  be

preferred.

25. On the aspect of incorporation, learned counsel submitted that LIC is

a  statutory  corporation  whereas  GIC  is  not.  According  to  the  learned

counsel, GIC is a Government company. Therefore, according to the learned

counsel,  the  legislative  scheme  has  maintained  a  distinction  between

statutory corporation  and  a  Government  company incorporated  under  the

Companies Act. According to the learned counsel, this distinction cannot be

said to be a distinction without any difference. Therefore, it was submitted

2 6

that it is always open to the Legislature to either proceed on the basis that

both LIC and GIC will be excluded or that only LIC and not GIC, being a

Government  company,  would  be  excluded.  According  to  the  learned

counsel, these are the options open to the Legislature and the exercise of

one or the other option will not vitiate the Legislature as being violative of

Article 14 of the Constitution. Moreover, according to the learned counsel,

there  is  a  valid  differentia  between  a  statutory corporation  like  LIC and

Government  companies,  like  GIC,  OIC  etc.  According  to  the  learned

counsel, in the matter of categorization, it is open to the Legislature to give

protection only to statutory corporations. However, in the present case, the

Legislature  has  excluded  statutory  corporations  from  such  protection.

According to the learned counsel,  the Legislature has given protection to

Government  companies  but  has  not  extended  protection  to  statutory

corporations  as  it  has  treated  Government  companies  more  akin  to  the

Government as is referred to in sub-section 3(1)(a) of the Act.

26. To  sum up,  the  basic  contention  advanced  by  learned  Additional

Solicitor  General  is  that  a Government company does not  fall  within the

compendious expression “any PSUs or  any corporation established by or

under any Central or State Act”. In other words, according to the learned

2 7

counsel,  the  impugned  judgment  of  the  High  Court  commends  to  be

sustained though in a different matrix.

27. Dr.  Rajeev  Dhavan  appearing  on  behalf  of  Bharat  Petroleum

Corporation Ltd.-appellant  (SLP(C) Nos. 24789-90/07) submitted that the

word ‘PSU’ is a term of parlance and that it is not a term of art. Learned

counsel submitted that in this case the court is required to give contextual

interpretation  to  the  words  ‘PSUs’  in  Section  3(1)(b)  and  if  such  a

interpretation is  given then the position which emerges is  that  the words

PSUs or any statutory corporation constitute one separate specific category

and, therefore, to that extent he adopts the arguments advanced on behalf of

the  Oriental  Insurance  Company  Ltd.  that  the  Act  vide  Section  3(1)(b)

excludes PSUs and statutory corporations established by or under Central or

State Act alone from the protection of the Rent Act. Therefore, according to

the learned counsel, if a PSU or a corporation is a Government company

under  the  1956  Act  then  such  PSUs/corporations  would  continue  to  get

protection  of  the  Rent  Act.  According  to  the  learned  counsel,  Oriental

Insurance  Company  Ltd.  is  a  Government  Company,  it  is  not  a  PSU

established by or under any Central or State Act and, therefore, it continues

to enjoy the protection of the Rent Act even after enactment of Section 3(1)

2 8

(b). Learned counsel further urged that the said Rent Act has been enacted

to protect tenants from eviction; that, tenants protection is a part of housing;

that,  the  said  Rent  Act  is  not  concerned  with  poverty/protection  to  the

weaker section as is sought to be contended on behalf of the appellants but

essentially,  according  to  the  learned  counsel,  it  deals  with  two  aspects,

namely,  tenancy  protection  and  rent  fixation.  According  to  the  learned

counsel, it would be wrong to say that the said Rent Act has been enacted

only to protect those who cannot afford to pay. Learned counsel submitted

that under the Rent Act a stipulated percentage of rent increase is allowed to

the landlords on annual basis. This, according to the learned counsel, is one

aspect of the Rent Act. The other aspect is to protect tenancy. Therefore,

according to the learned counsel, the Rent Act touches both these aspects.

Further, according to the learned counsel, Section 3(1) has to be read in its

entirety.  Under  the  second  part  of  Section  3(1)(a)  protection  is  given  in

respect of premises let to the Government or local authority and to premises

taken on behalf of the Government by or in the name of a designated officer.

Learned  counsel  submitted  that,  in  the  present  case,   a  Government

company gets protection from eviction under second part of Section 3(1)(a)

and since Government company is not one of the categories mentioned in

Section 3(1)(b)  such companies  which are tenants  would continue to  get

2 9

protection under second part of Section 3(1)(a). Learned counsel submitted

that even if one is to give purposive interpretation to the said section, it is

clear  that  in  cases  of  tenancy  created  in  favour  of  Government,  local

authority  or  Government  companies,  the  court  is  concerned  with  public

necessity and public need. According to the learned counsel, a bare reading

of the second part of Section 3(1)(a) indicates that the Rent Act in question

also  assumes  that  the  Government,  local  authorities  and  Government

companies need protection of the Rent Act. Learned counsel submitted that

there is nothing in the report of the Joint Committee or in the Statement of

Objects and Reasons to exclude premises let out to Government companies.

Learned counsel further submitted that if Section 3(1)(a) is to be given full

interpretation then all governmental functions should be taken into account.

That,  Section  3(1)(a)  cannot  be  confined  to  non-commercial  activity.

Therefore, according to the learned counsel,  the distinction made between

governmental functions and commercial functions to interpret Section 3(1)

is  erroneous.  According  to  the  learned  counsel,  Government  operates  in

railways,  transport  and  energy  sectors.  It  operates  via  departments,

Government  companies  and  statutory  corporations.  When  it  operates

through  its  department  like  bureau  of  public  enterprises  the  matter  will

squarely come under Section 3(1)(a). However, in view of Section 3(1)(b)

3 0

when  a  Government  operates  through  a  statutory  corporation  the  matter

would fall under Section 3(1)(b) because the legislature in its wisdom has

excluded  premises  let  to  statutory  corporations  and  to  public  limited

companies having paid up share capital of Rs. 1,00,00,000 or more from the

protection  of  the  Rent  Act.  According  to  the  learned  counsel  since  an

ordinary  company  under  the  Companies  Act  is  different  from  the

Government company under that Act, it is clear that Government companies

would continue to get  protection by virtue of Section 3(1)(b) as  the said

company is owned by the Government. Learned counsel submitted that one

need not go by ownership or the form in which an entity is incorporated.

One has  to  take into  account  the  test  of  incorporation,  the  nature  of  the

functions  which  entities  carried  on  and  the  ownership.  According  to  the

learned counsel,  Section 3(1)(b) refers to separate and distinct categories.

According  to  the  learned  counsel,  the  last  category  consists  of  private

limited  companies  and  public  limited  companies  having  a  paid  up  share

capital of Rs. 1,00,00,000 or more. Learned counsel submitted that it would

be  wrong  to  contend  that  this  last  category  subsumes  the  categories

enumerated earlier in the first part  of Section 3(1)(b). For the aforestated

reasons, learned counsel submitted that no interference is called for in this

matter.

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28. Relevant Provisions for Consideration:

(a) Maharashtra Rent Control Act, 1999

Preamble

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 purposes aforesaid.

…

Section 2.  Application

(1) This Act shall, in the first instance, apply to premises let for the purposes of residence, education, business, trade or  storage  in  the  areas  specified  in  Schedule  I  and Schedule II.

…

Section 3.   Exemption

(1) This Act shall not apply-

(a) to any premises belonging to the Government or a local authority  or  apply  as  against  the  Government  to  any tenancy, licence or other like relationship created by a grant  from  or  a  licence  given  by  the  Government  in respect of premises requisitioned or taken on lease or on licence by the Government, including any premises taken on behalf of the Government on the basis of tenancy or of licence or other like relationship by, or in the name of any officer subordinate to the Government authorized in this behalf; but it shall apply in respect of premises let, or  given  on  licence,  to  the  Government  or  a  local

3 2

authority or taken on behalf of the Government on such basis by, or in the name of, such officer;

(b) 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.

Explanation.-  For  the  purpose  of  this  clause  the expression “bank” means,-

(i) the State Bank of India constituted under the State Bank of India Act, 1955;

(ii) a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959;

(iii) A corresponding new bank constituted under section 3 of the  Banking  Companies  (Acquisition  and  Transfer  of Undertakings)  Act,  1970  or  under  section  3  of  the  Banking Companies  (Acquisition  and  Transfer  of  Undertaking)  Act, 1980; or

(iv) any other  bank,  being  a  scheduled  bank as  defined  in clause (e) of section 2 of the Reserve Bank of India Act, 1934.

(2) The State Government may direct that all or any of the provisions  of  this  Act  shall,  subject  to  such  conditions  and terms as it may specify, not apply-

(i) to premises used for public purpose of a charitable nature or to any class of premises used for such purposes;

(ii) to  premises  held  by  a  public  trust  for  a  religious  or charitable purpose and let at a nominal or concessional rent;

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(iii) to  premises  held  by  a  public  trust  for  a  religious  or charitable purpose and administered by a local authority; or

(iv) to  premises  belonging  to  or  vested  in  an  university established by any law for the time being in force.

Provided  that,  before  issuing  any  direction  under  this  sub- section,  the  State  Government  shall  ensure  that  the  tenancy rights of the existing tenants are not adversely affected.

(3) The expression “premises belonging to the Government or a local authority” in sub-section (1) shall, notwithstanding anything contained in the said sub-section or in any judgment, decree or order of a court, not include a building erected on any land  held  by  any  person  from  the  Government  or  a  local authority  under  an  agreement,  lease,  licence  or  other  grant, although  having regard  to  the  provisions  of  such agreement, lease, licence or grant the building so erected may belong or continue to belong to the Government or the local authority, as the case may be, and such person shall be entitled to create a tenancy in respect of such building or a part thereof.

(b) The Companies Act, 1956:

Preamble

An Act  to  consolidate  and  amend  the  law  relating  to companies and certain other associations.

…

Section  2.  Definitions.-  In  this  Act,  unless  the  context otherwise requires.-

(5) “banking  company”  has  the  same  meaning  as  in  the Banking Companies Act, 1949 (10 of 1949)

(7) “body corporate”  or  “corporation”  includes  a company incorporated outside India but does not include-

(a) a corporation sole;

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(b) a  co-operative  society  registered  under  any  law relating to co-operative societies; and

(c) any other body corporate (not being a company as defined in this Act) which the Central Government may,  by  notification  in  the  Official  Gazette, specify in this behalf.

(10) “company” means a company as defined in section 3.

(16) “existing  company”  means  an  existing  company  as defined in section 3.

(18) “Government company” means a Government company within the meaning of section 617.

(19) “holding company” means a holding company within the meaning of section 4.

(21) “insurance company” means a company which carries on the business of insurance either solely or in conjunction with any other business or businesses.

(23) “limited company” means a company limited by shares or by guarantee.

(23A) “listed  public  companies”  means  a  public  company which has any of its securities listed in any recognized stock exchange.

…

Section  3.  Definitions  of  "company", "existing company", "private company" and "public company"

(1)  In  this  Act,  unless  the  context  otherwise  requires,  the expressions  "company",  "existing  company",  "private "company"  and  "public  company"  shall,  subject  to  the provisions  of  subsection  (2),  have  the  meanings  specified below:

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(i) "company" means a company formed and registered under  this  Act  or  an  existing  company  as  defined  in clause (ii);

(ii)  "existing  company"  means  a  company formed  and registered  under  any  of  the  previous  companies  laws specified below:

(a) any Act or Acts relating to companies in force before  the  Indian  Companies  Act,  1866  (10  of 1866) and repealed by the Act;

(b) the Indian Companies Act, 1866 (10 of 1866);

(c) the Indian Companies Act, 1882 (6 of 1882);

(d) the Indian Companies Act, 1913 (7 of 1933);

(e)  the  Registration  of  Transferred  Companies Ordinance 1942 (54 of 1942); and

(f) any law corresponding to any of the Acts or the Ordinance aforesaid and in force-

(1) in the merged territories or in a Part B State (other than the State of Jammu and Kashmir), or any part thereof, before the extension thereto of the Indian Companies Act, 1913 (7 of 1913); or

(2) in the State of Jammu and Kashmir, or any part thereof,  before the commencement of the Jammu and Kashmir (Extension of Laws) Act, 1956  (62  of  1956),  in  so  far  as  banking, insurance  and  financial  corporations  are concerned,  and  before  the  commencement  of the  Central  Laws  (Extension  to  Jammu  and Kashmir)  Act,  1968  (25  of  1968)  insofar  as other corporations are concerned; and

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(g) the Portugese Commercial Code in so far as it relates to "sociedades anonimas";

(iii)  "private company" means a company which has a minimum paid-up  capital  of  one  lakh  rupees  or  such higher paid-up capital as may be prescribed, and by its articles,-

(a) restricts the right to transfer its shares, if any;

(b) limits the number of its members to fifty not including-

(i) persons who are in the employment of the company, and

(ii) persons who, having been formerly in the employment of the company, were members of the  company  while  in  that  employment  and have  continued  to  be  members  after  the employment ceased; and

(c)  prohibits  any  invitation  to  the  public  to subscribe for any shares in, or debentures of, the company;

(d)  prohibits  any  invitation  or  acceptance  of deposits  from  persons  other  than  its  members, directors or their relatives:

Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the  purposes  of  this  definition,  be  treated  as  a single member;

(iv) "public company" means a company which-

(a) is not a private company;

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(b)  has  a  minimum paid-up  capital  of  five  lakh rupees or such higher paid-up capital, as may be prescribed;

(c) is a private company which is a subsidiary of a company which is not a private company.

(2)  Unless  the  context  otherwise  requires,  the  following companies shall not be included within the scope of any of the expressions defined in clauses (i) to (iv) of sub-section (1), and such companies shall be deemed, for the purposes of this Act, to have been formed and registered outside India:-

(a) a company the registered office whereof is in Burma, Aden  or  Pakistan  and  which  immediately  before  the separation of that country from India was a company as defined in clause (i) of sub-section (1);  

(3) Every private company, existing on the commencement of the Companies (Amendment) Act, 2000, with a paid-up capital of less than one lakh rupees, shall, within a period of two years from such commencement, enhance its paid-up capital to one lakh rupees.

(4) Every public company, existing on the commencement of the Companies (Amendment) Act, 2000, with a paid-up capital of less than five lakh rupees, shall within a period of two years from such commencement, enhance its paid-up capital to five lakh rupees.

(5)  Where  a  private  company  or  a  public  company  fails  to enhance  its  paid-up  capital  in  the  manner  specified  in  sub- section (3) or sub-section (4), such company shall be deemed to be a defunct company within the meaning of section 560 and its name shall be struck off from the register by the Registrar.

(6) A company registered under section 25 before or after the commencement  of  Companies  (Amendment)  Act,  2000  shall not be required to have minimum paid-up capital specified in this section.

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…

Section  25.   Power  to  dispense  with "Limited"  in  name  of  charitable  or  other company

(1)  Where  it  is  proved  to  the  satisfaction  of  the  Central Government that an association:-

(a)  is  about  to  be  formed  as  a  limited  company  for promoting  commerce,  art,  science,  religion,  charity  or any other useful object, and

(b) intends to apply its profits, if any, or other income in promoting its objects, and to prohibit the payment of any dividend to its members,  

the  Central  Government  may,  by  licence,  direct  that  the association  may  be  registered  as  a  company  with  limited liability, without the addition to its name of the word "Limited" or the words "Private Limited".

(2) The association may thereupon be registered accordingly; and on registration shall enjoy all the privileges, and (subject to the provisions of this section) be subject to all the obligations, of limited companies.

(3)  Where  it  is  proved  to  the  satisfaction  of  the  Central Government-

(a) that the objects of a company registered under this Act as a limited company are restricted to those specified in clause (a) of sub-section (1), and

(b)  that  by its  constitution  the company is  required  to apply its profits, if any, or other income in promoting its objects and is prohibited from paying any dividend to its members,

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the  Central  Government  may,  by  licence,  authorise  the company by a special resolution to change its name, including or  consisting  of  the  omission  of  the  word  "Limited"  or  the words "Private Limited"; and section 23 shall apply to a change of name under this sub-section as it applies to a change of name under section 21.

(4) A firm may be a member of any association or company licensed under this section, but on the dissolution of the firm, its membership of the association or company shall cease.

(5) A licence may be granted by the Central Government under this section on such conditions and subject to such regulations as it thinks fit, and those conditions and regulations, shall be binding on the body to which the licence is granted, and where the  grant  is  under  sub-section  (1),  shall,  if  the  Central Government so directs, be inserted in the memorandum, or in the articles, or partly in the one and partly in the other.

(6) It shall not be necessary for a body to which a licence is so granted  to  use  the  word  "Limited"  or  the  words  "Private Limited"  as  any  part  of  its  name  and,  unless  its  articles otherwise provide, such body shall, if the Central Government by general or special order so directs and to the extent specified in the directions, be exempt from such of the provisions of this Act as may be specified therein.

(7)  The  licence  may at  any time  be  revoked  by the  Central Government, and upon revocation, the Registrar shall enter the word "Limited" or the words "Private Limited" at the end of the name upon the register of the body to which it was granted; and the body shall  cease  to  enjoy the exemption  granted  by this section:  

Provided  that,  before  a  licence  is  so  revoked,  the  Central Government shall give notice in writing of its intention to the body,  and  shall  afford  it  an  opportunity  of  being  heard  in opposition to the revocation.

(8)(a) A body in respect of which a licence under this section is in force shall not alter the provisions of its memorandum with

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respect to its objects except with the previous approval of the Central Government signified in writing.

(b) The Central Government may revoke the licence of such a body if it contravenes the provisions of clause (a).

(c)  In  according  the  approval  referred  to  in  clause  (a),  the Central Government may vary the licence by making it subject to such conditions and regulations as that Government thinks fit, in lieu of, or in addition to, the conditions and regulations, if any, to which the licence was formerly subject.

(d)  Where  the  alteration  proposed  in  the  provisions  of  the memorandum of a body under this sub-section is with respect to the objects of the body so far as may be required to enable it to do any of the things specified in clauses (a) to (g) of sub- section  (1)  of  section  17,  the  provisions  of  this  sub-section shall be in addition to, and not in derogation of, the provisions of that section.

(9) Upon the revocation of a licence granted under this section to a body the name of which contains the words "Chamber of Commerce", that body shall,  within a period of three months from the date of revocation or such longer period as the Central Government may think fit to allow, change its name to a name which does not contain those words; and-

(a)  The  notice  to  be  given  under  the  proviso  to  sub- section (7) to that body shall include a statement of the effect of the foregoing provisions of this sub-section; and

(b) Section 23 shall apply to a change of name under this sub-section  as  it  applies  to  a  change  of  name  under section 21.

(10)  If  the  body  makes  default  in  complying  with  the requirements of sub-section (9), it shall be punishable with fine which  may  extend  to  five  thousands  rupees  for  every  day during which the default continues.

…

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Section  616.    Application  of  Act  to Insurance,  banking,  electricity  supply  and other companies governed by special Acts.

The provisions of this Act shall apply-

(a)  to  insurance  companies,  except  in  so  far  as  the  said provisions are inconsistent with the provisions of the Insurance Act, 1938;

(b)  to  banking  companies,  except  in  so  far  as  the  said provisions are inconsistent with the provisions of the Banking Companies Act, 1949;

(c)  to  companies  engaged  in  the  generation  or  supply  of electricity,  except  in  so  far  as  the  said  provisions  are inconsistent with the provisions of the Indian Electricity Act, 1910 or the Electricity Supply 1948;

(d) to any other company governed by any special Act for the time being in force, except in so far, as the said provisions are inconsistent with the provisions of such special Act;

(e)  to  such  body corporate,  incorporated  by any Act  for  the time  being  in  force,  as  the  Central  Government  may,  by notification  in  the  Official  Gazette,  specify  in  this  behalf, subject to such exceptions, modifications or adaptation, as may be specified in the notification.  … Section  617.  Definition  of  "Government Company".

For the purposes of this Act Government company means any company in which not less than fifty one per cent of the paid- up share capital is held by the Central Government, or by any State  Government  or  Governments,  or  partly  by  the  Central Government and partly by one or more State Governments and includes  a  company which  is  a  subsidiary  of  a  Government company as thus defined.

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Point for Determination:

29. Whether the High Court was right in holding that the words PSUs in

Section 3(1)(b) excluded Government Companies as defined under Section

617 of the 1956 Act.

Findings:  

30. Economics looks at life from the viewpoint of a man, not from that of

an angel.

31. In order to give purposive interpretation to Section 3(1)(b) of the said

Rent Act one has to go back in history to the object behind enactment of the

Bombay Rent Act, 1947 (“1947 Act”). That Act was passed to amend and

consolidate the law relating to rents, repairs, eviction of tenants, control of

rates  of  hotels  and  lodging  houses  and  to  control  charges  of  licensed

premises since 1.2.1973. The Act was passed to control the rents so as to

prevent  the  landlords  from exploiting  the tenants  by charging  exorbitant

rents  with a view to take wrong advantage of growing acute shortage of

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accommodation  in  urban  areas.  Thus,  that  Act  was  also  enacted  to  give

further protection to the tenants, it intended to provide for responsibility of

carrying out usual tenable repairs by transferring the duty of the tenants to

carry out such repairs under the Transfer of Property Act to the landlord and

thereby compelling him to keep the premises let out in good condition at his

costs. In short, the said 1947 Act stood enacted with the intention to control

rents, repairs, rates of hotels and eviction of tenants.

32. Section 4 of the 1947 Act dealt  with exemptions. There were three

limbs of Section 4(1) which are similar to Section 3(1)(a) of the Rent Act,

1999. The first limb exempted the premises belonging to the Government or

local authority from the operation of the 1947 Act if the Government was

the  owner  of  a  building  with  sitting  tenants  therein,  the  latter  were  not

protected  by  the  1947  Act.  The  second  limb  of  Section  4(1)  inter  alia

provided that the Act did not apply against the Government companies to

any tenancy created by a grant from the Government in respect of premises

taken on lease by the Government or in respect of premises requisitioned by

the  Government.  The  third  limb  of  Section  4(1)  applied  when  the

Government or a local authority was a tenant. Section 3-A of the Bombay

Housing Board Act, 1948 placed the Board in the same privileged position

as that  of the Government under Section 4(1)  of the 1947 Act.  The said

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Bombay Housing Board Act, 1948 stood replaced by Maharashtra Housing

and Area Development Act, 1976 (“MHADA Act”) which was enacted to

consolidate,  unify,  and  amend  laws  relating  to  housing,  repairing  and

reconstructing  dangerous  buildings.  In  the  Statement  of  Objects  and

Reasons  it  is  mentioned  that  in  urban  areas  and,  particularly  in  Greater

Mumbai area the old buildings had outlived their lives and have rendered

themselves in a bad state of repairs and in order to prevent possible collapse

of old buildings necessity was felt to take up the programme of repairs and

reconstruction of such buildings.

33. To continue our discussion on Bombay Rent Act, 1947, Section 5(10)

defined ‘standard rent’. Under that section there were six types of standard

rent, namely, rent fixed by the court under the previous Rent Acts of 1939

and 1944, rent charged on 1.9.1940 if the premises were let for the first time

on  that  date,  if  the  premises  were  let  before  1.9.1940  then  the  rent  first

charged, if the premises were let after 1.9.1940 then the rent first charged

when let, if the premises were exempted from standard rent then after the

five years period the rent was not to exceed 15% on the investment made in

construction and outgoings and in any other cases rent fixed by the court

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which may vary from time to time. Thus, the fixed date-line was 1.9.1940.

The standard rent was subject to Section 11.

34. Our  object  of  the  above  discussion  regarding  provisions  of  the

Bombay Rent Act, 1947 is two-fold. Firstly, to point out that there has been

a structural change made by the Legislature in the present Rent Act vis-à-vis

the 1947 Act.  Secondly, we have analysed the relevant  provisions  of the

1947 Act to indicate the change in the economic conditions between 1947

and 31.3.2000 when the present Rent Act came into force.

35. Broadly, we may state that the twin objects for enacting the 1947 Act

was tenancy protection and rent restriction. In 1947, the economic scenario

was different from the scenario that prevails after 31.3.2000. In 1947 rent

forming  provided an important source of unearned income to the landlords

which led to the landlords charging exorbitant rent in urban areas. Return on

investments at that time constituted considerable returns to the landlords. At

that  time,  it  was  worth  investing  in  the business  of  leasing.  The cost  of

repairs was comparatively much less. The purchasing power of the rupee

was  relatively  higher  than  the  purchasing  power  of  the  rupee  after

31.3.2000. However, by 1976, with the rise in the cost of living index, the

said investments made in 1940’s started giving negative returns. Coupled

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with  the  price  rise  and  increase  in  cost  of  repairs  and  maintenance,

municipal  taxes  also  increased.  The  result  was  that  the  net  asset  value

became negative. Consequently, old buildings started collapsing for lack of

maintenance. Even today thousands of buildings in Greater Mumbai are in a

dilapidated  condition  for  lack  of  resources.  Therefore,  in  1976,  the

Legislature  enacted  MHADA  1976  precisely  to  undertake  repairs  and

constructions  of  old  dilapidated  buildings  for  which  cess  was  levied.

However, with the passage of time, it appears that the position deteriorated

and investments  in  this  sector  became negligible  by 31.3.2000.  With  the

price  rise  and  with  the  increase  in  the  cost  of  construction,  certain

provisions of the 1947 Act by which standard rent stood pegged/frozen as

on  1.9.1940  and  the  provision  imposing  a  ban  on  the  landlords  from

receiving  premium  under  Sections  18  and  19  of  the  1947  Act  became

vulnerable to challenge as violative of Article 14 of the Constitution. Those

provisions, as discussed above, were Sections 5(10),  11, 18 and 19. This

position was further compounded when large premises, particularly in South

Mumbai  stood  occupied  by cash-rich  entities  like,  statutory  corporations

and corporate bodies who insisted on paying meager standard rent under the

1947 Act.

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36. Ultimately,  the  economic  reasons  led  one  of  the  landlords  by  the

name Malpe Vishwanath Acharya to challenge the provisions of Section 5

(10), 7, 9(2)(b) and 11(1)(a) of the 1947 Act. We quote hereinbelow paras 8,

15, 17, 22, 25, 26, 27, 28, 29, 30 and 31of the judgment of this Court in the

case of  Malpe Vishwanath Acharya and ors.  v.  State of Maharashtra

and anr. (1998) 2 SCC 1:

“8. There is considerable judicial authority in support of the submission of learned counsel for the appellants that with the passage of time a legislation which was justified when  enacted  may become arbitrary  and  unreasonable with the change in circumstances. In the  State of M.P. v.  Bhopal  Sugar  Industries  Ltd.  (1964)  6  SCR  846 dealing  with  a  question  whether  geographical classification  due  to  historical  reasons  would  be  valid this Court at SCR p. 853 observed as follows:

“Differential treatment arising out of the application  of  the  laws  so  continued  in different  regions  of  the  same  reorganised State, did not therefore immediately attract the  clause  of  the  Constitution  prohibiting discrimination. But by the passage of time, considerations of necessity and expediency would be obliterated, and the grounds which justified  classification  of  geographical regions for historical reasons may cease to be  valid.  A  purely  temporary  provision which  because  of  compelling  forces justified  differential  treatment  when  the Reorganisation  Act  was  enacted  cannot obviously  be  permitted  to  assume permanency,  so  as  to  perpetuate  that treatment without a rational basis to support it  after the initial expediency and necessity have disappeared.”

xxx

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15.  The  aforesaid  decisions  clearly  recognise  and establish that a statute which when enacted was justified may,  with  the  passage  of  time,  become  arbitrary  and unreasonable.  It  is,  therefore,  to  be  seen  whether  the aforesaid principle is applicable in the instant case. Can it be said that even though the provisions relating to the fixation of  standard rent  were valid  when the Bombay Rent  Act  was  passed  in  1947  the  said  provision,  as amended, can still be regarded as valid now? xxx

17.  A perusal  of  the  aforesaid  extracts  of  reports  and resolutions  clearly demonstrates  that  since the last  two decades the authorities themselves seem to be convinced that the pegging down of the rents to the pre-war stage and  even  thereafter,  is  no  longer  reasonable. Unfortunately  apart  from lip  service  little  of  note  has been  done.  Even  the  Rent  Control  Bill  introduced  in 1993 has not yet become law. Xxx

22. The  aforesaid  illustration,  which  has  not  been seriously disputed, clearly brings out the arbitrariness of the  standard  rent  provisions  contained  in  the  Bombay Rent  Act.  It  is  true  that  the  aforesaid  illustration  has reference to the monthly rent of Rs 100  as  on  1-9- 1940 and does not  relate to the premises which are let out after the Act had come into force. As far as Section 5 (10) is  concerned the standard rent  of the premises let out after 1-9-1940 is that rent at which the premises were first let. Even so the rapid increase in the expenses for repair and other outgoings and the decreasing net amount of  rent  which  remains  with  the  landlord,  clearly  show that the non-provision in the Act for reasonable increase in  the  rent,  with  the  passage  of  time,  is  leading  to arbitrary results. This is also demonstrated from the facts in the case of Petitioner 3 who owns Unit No. A-18 on the  first  floor  admeasuring  808  sq.  ft.  in  the  property known as Shri Ram Industrial Estate situated at 13 J.D. Ambedkar Road, Mumbai. The said building belongs to a cooperative society and Unit No. A-18 was given on lease and licence basis by an agreement dated 23-8-1964 by  the  appellant  to  Lokmitra  Sahakari  Printing  and Publishing  Society Ltd.  on a monthly compensation of Rs 686.80  per  month.  Liabilities  of  repairs  is  on  the

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appellant  and  according  to  it  this  amount  received  in respect of the said unit by the appellant is Rs 563.65 per month inclusive of all taxes. Out of this sum Appellant 3 has  to  pay  Rs 216.33  as  municipal  taxes  leaving  a balance  of  Rs 320.22.  From  this  amount  the  society outgoings is Rs 250 per month, leaving a balance of only Rs 70.20  per  month  with  the  said  appellant.  Another instance which has been given is that of Appellant 4 who owns  a  property  known  as  Ram Mahal  situated  at  8, Dinshaw Vachha Road, Mumbai. The said building has 20 residential  flats  and the building  was  purchased by Appellant  4  in  the  year  1955,  although  it  had  been constructed prior to 1940. Flat No. 15 on the 5th floor of the said building had been let out by the previous owners to  M/s  Bennett  Coleman  &  Co.  Ltd.,  who  were  the sitting  tenants  at  the  time  when  the  property  was purchased.  The flat  measures 1710 sq.  ft.  and monthly rent for the same is Rs 460  per  month  inclusive  of permitted  increase  and  repairs.  According  to  the appellant  the  income  by  way  of  rent  has  remained constant  while the expenditure  has  been increased  and the total gross rent of the building which he receives is Rs 1,72,032  per  annum  while  it  incurs  an  annual expense of Rs 1,93,245  consisting  of  BMC  taxes, repairs,  ground  rent,  maintenance  charges  inclusive  of small electricity bill and the insurance premium. He is, therefore, suffering a loss of Rs 21,213 every year. It is not necessary to examine the correctness of these details except to note that what was reasonable on 1-9-1940 or in  1950s  or  in  1960s  can  no  longer  be  regarded  as reasonable at this point of time. xxx

25. It is true that one of the reasons for enacting the rent control  legislation  is  to  prevent  exploitation  of  the tenants  by the landlords.  One of the protections which has been provided to the tenants in the rent legislation throughout the country is  the concept  of standard rent. Each State has definite laws with regard thereto. In some case, like in Delhi, the Rent Control Act is not applicable if the rent is Rs 3500 or more while in the other States Rent Control Act is not applicable to certain categories of persons. In the Bombay Rent Act, with which we are concerned, the standard rent as on 1-9-1940 or the first rent of the premises which was let out thereafter is the standard rent.  The pegging down of rent,  coupled with

5 0

the  inability  of  the  landlord  to  evict  the  tenants,  has given  rise  to  unlawful  tendencies.  In  the  Statement  of Objects and Reasons annexed to LA Bill No. 79 of 1986 introduced in the Maharashtra Legislature providing for amendment to the Bombay Rent Control Act with regard to clause 3 it was, inter alia, stated as follows:

“The freezing of standard rent prevailing on  1st  September,  1940  has  deprived  the landlords  of  getting  reasonable  and adequate  return  to  undertake  maintenance and repairs to the old buildings. Despite the penal provisions in the Act for charging any premium  from  a  tenant,  such  freezing  of rent results in charging ‘pugree’ or deposit or similar illicit payments which are widely prevalent.  The  construction  of  new tenements  on rental  basis  has considerably ceased with the result that low and middle income groups are not getting premises on rent....”           (emphasis added)

26. Notwithstanding the  fact  that  the  State  Legislature was conscious of the illegal  payments  which are made because of the rent restriction law no effective steps have been taken so far to strike a balance between the interests of the landlords and the tenants.

27. It is true that whenever a special provision, like the Rent Control Act, is made for a section of the society it may be at the cost of another section, but the making of such a provision or enactment may be necessary in the larger interest of the society as a whole but the benefit which is given initially if continued results in increasing injustice to one section of the society and an unwarranted largess  or  windfall  to  another,  without  appropriate corresponding relief, then the continuation of such a law which  necessarily,  or  most  likely,  leads  to  increase  in lawlessness and undermines the authority of the law can no  longer  be  regarded  as  being  reasonable.  Its continuance becomes arbitrary.

28. The  legislature  itself,  as  already  noticed hereinabove,  has  taken  notice  of  the  fact  that  pugree system has become prevalent in Mumbai because of the

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Rent Restriction Act. This Court was also asked to take judicial  notice  of  the  fact  that  in  view  of  the unreasonably low rents which are being received by the landlords,  recourse  is  being  taken to  other  methods  to seek  redress.  These  methods  which  are  adopted  are outside the four corners of the law and are slowly giving rise  to  a  state  of  lawlessness  where,  it  is  feared,  the courts  may  become  irrelevant  in  deciding  disputes between  the  landlords  and  tenants.  This  should  be  a cause  of  serious  concern  because  if  this  extra-judicial backlash gathers  momentum the main sufferers  will  be the tenants, for whose benefit the Rent Control Acts are framed.

29.   Insofar as social legislation, like the Rent Control Act is concerned, the law must strike a balance between rival interests and it should try to be just to all. The law ought not to be unjust to one and give a disproportionate benefit  or  protection  to  another  section  of  the  society. When there is shortage of accommodation it is desirable, may, necessary that some protection should be given to the tenants in order to ensure that they are not exploited. At  the  same  time  such  a  law  has  to  be  revised periodically  so  as  to  ensure  that  a  disproportionately larger  benefit  than  the  one  which  was  intended  is  not given to the tenants. It is not as if the Government does not take remedial measures to try and offset the effects of inflation.  In  order  to  provide fair  wage to  the salaried employees  the  Government  provides  for  payment  of dearness  and  other  allowances  from  time  to  time. Surprisingly  this  principle  is  lost  sight  of  while providing  for  increase  in  the  standard  rent  —  the increases made even in 1987 are not adequate, fair or just and  the  provisions  continue  to  be  arbitrary  in  today’s context.

30. When  enacting  socially  progressive  legislation  the need is greater to approach the problem from a holistic perspective  and  not  to  have  a  narrow or  short-sighted parochial approach. Giving a greater than due emphasis to  a vocal  section  of  society  results  not  merely in  the miscarriage  of  justice  but  in  the  abdication  of responsibility  of  the  legislative  authority.  Social legislation  is  treated  with  deference  by  the  courts  not merely because the legislature represents the people but also because in representing them the entire spectrum of views  is  expected  to  be  taken  into  account.  The legislature is not shackled by the same constraints as the courts  of  law.  But  its  power  is  coupled  with  a responsibility. It is also the responsibility of the courts to

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look  at  legislation  from the  altar  of  Article  14  of  the Constitution. This article is intended, as is obvious from its  words,  to  check  this  tendency;  giving  undue preference to some over others.

31. Taking  all  the  facts  and  circumstances  into consideration  we  have  no  doubt  that  the  existing provisions  of  the  Bombay  Rent  Act  relating  to  the determination  and fixation  of  the standard  rent  can  no longer  be  considered  to  be  reasonable.  The  said provisions would have been struck down as having now become unreasonable and arbitrary but we think it is not necessary to strike down the same in view of the fact that the  present  extended  period  of  the  Bombay  Rent  Act comes  to  an  end  on  31-3-1998.  The  Government’s thinking reflected in various documents itself shows that the existing provisions have now become unreasonable and,  therefore,  require reconsideration.  The new bill  is under consideration and we leave it to the legislature to frame a just and fair law keeping in view the interests of all concerned and in particular the resolution of the State Ministers for Housing of 1992 and the National Model Law  which  has  been  circulated  by  the  Central Government in 1992. We are not expressing any opinion on the provisions of the said Model Law but as the same has  been drafted  and circulated  amongst  all  the  States after  due deliberation and thought,  there  will,  perhaps, have  to  be  very  good  and  compelling  reasons  in departing  from  the  said  Model  Law.  Mr  Nargolkar assured  us  that  this  Model  Law  will  be  taken  into consideration in the framing of the proposed new Rent Control Act.”

37. The important point to be noted is that in the above judgment it has

been held that with the passage of time the 1947 Act which was justified

when enacted had become arbitrary and unreasonable  with the change in

economic circumstances. It has been further observed in the said judgment

that the 1947 Act relating to determination and fixation of standard rent can

no  longer  be  considered  to  be  reasonable.  However,  this  Court  felt  that

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though  the  provisions  mentioned  above  were  liable  to  struck  down  as

unreasonable  and  arbitrary  keeping  in  mind  the  consequences  that  the

tenants may lose protection of the Rent Act, this Court gave an opportunity

to the Government to consider enactment of a Model Law. This judgment

was delivered by the apex Court on 19.12.1997.

38. Therefore,  the  legislature  was  required  to  keep  in  mind  the

vulnerability of fixing standard rent as on 1.9.1940. At the same time, the

legislature had to keep in mind two aspects, namely, tenancy protection and

rent  restriction.  The  problem  arose  on  account  of  economic  factors.

However,  the  legislature  found  the  solution  by  evolving  an  economic

criterion. The legislature evolved a package under which the prohibition on

receiving premium under Section 18 of the 1947 Act stood deleted. In other

words,  landlords  were  given  the  liberty  to  charge  premium. The  second

package  was  to  exclude  cash-rich  body  corporates  and  statutory

corporations from the protection of the Rent Act. This part of the economic

package  helps  the  landlords  to  enhance  the  rent  and  charge  rent  to  the

entities  mentioned  in  Section  3(1)(b)  who  can  afford  to  pay rent  at  the

market rate. This was the second item in the economic package offered to

the landlords under the present Rent Act. The third item of the Rent Act was

to give the benefit of annual increase of rent @ 5% under the present Rent

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Act. All three items constituted one composite package for the landlords.

The underlying object behind the said economic package is to balance and

maintain the two-fold objects of the Rent Act, namely, tenancy protection

and rent protection. The idea behind excluding cash-rich entities from the

protection of the Rent Act is also to continue to give protection to tenants

who cannot afford to pay rent at market rate.

39. The  above  discussion  is  relevant  because  we must  understand  the

reason why Section  3(1)(b)  came to  be enacted.  As stated  above,  in  our

view, with the offer of an economic package to the landlords, the legislature

has tried to maintain a balance. The provisions of the earlier Rent Act, as

stated above, have become vulnerable, unreasonable and arbitrary with the

passage of time as held by this Court in the above judgment. The legislature

was aware of the said judgment.  It  is reflected in the report of  the Joint

Committee. In our view, the changes made in the present Rent Act by which

landlords are permitted to charge premium, the provisions by which cash-

rich  entities  are  excluded  from the  protection  of  the  Rent  Act  and  the

provision  providing  for  annual  increase  at  a  nominal  rate  of  5%  are

structural changes brought about by the present Rent Act, 1999 vis-à-vis the

1947 Act. The Rent Act of 1999 is the sequel to the judgment of this Court

in the case of Malpe Vishwanath Acharya (supra).

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40. The entire discussion hereinabove is, therefore, not only to go behind

Section  3(1)(b)  and ascertain  the  reasons  for  enactment  of  the  said  sub-

section but also to enable this Court to give purposive interpretation to the

said sub-section.

41. In  the  light  of  the  discussion  mentioned  hereinabove,  we  need  to

interpret Section 3(1)(b). The said sub-section excludes entities enumerated

therein  from the  protection  of  the  said  Rent  Act,  namely,  banks,  PSUs,

statutory  corporations,  foreign  missions,  international  agencies,

multinational companies and private limited companies and public limited

companies having a paid up share capital of Rs. 1,00,00,000 or more. The

question which arises for determination concerns the character of PSUs in

the context of Section 3(1)(b).

42. The word ‘PSU’ is not a term of art. It is not defined in the said Rent

Act. It is not defined in the Companies Act. However, the said term finds

place in the Report of the Study Team on Public Sector Undertakings. One

such Report of the Study Team is dated 10.6.1967. The Study Team was

appointed  on  20.5.1966.  It  submitted  its  Report  to  the  Chairman,

Administrative Reforms Commission, Government of India. Under Chapter

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XIV,  the  Committee  has  discussed  the  forms  of  organization,  namely,

departmental undertaking, Government company and PSU. It observed that

departmental  undertakings  are  unsuitable  for  industrial  and  commercial

enterprises. It is further observed that, in India, the Government has adopted

the  method  of  running  companies  by  directly  holding  shares  in  them.

According to the Committee, this  is  the pattern of public sector in India.

This,  according  to  the  Committee,  is   apart  from statutory  corporations

which are set up or established under Central/State Acts. According to the

Committee,  a  public  corporation  as  a  form covers  statutory  corporation,

Government  company  and  public  sector  company.  According  to  the

Committee, PSU and Government company are to be equated in the sense

that  these  two  entities  are  the  same  when  it  comes  to  autonomy  and

flexibility  as  compared  to  departmental  undertakings.  One  point  may be

noted at  this  stage.  The concept  of  PSU and the concept  of Government

company became relevant after introduction of economic reforms in 1991.

With the said reforms, market orientation was given to our economy. It is

around this time that the role of PSU became important. Both, the PSU as

well as the Government company, were given autonomy and flexibility in

commercial sectors. Annexure I to the Report of the Study Team on PSUs

dated 10.6.1967 indicates clearly that Government companies stood covered

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under the concept of PSUs. In the present matter, the High Court has taken a

view that Government companies stands excluded from PSU under Section

3(1)(b)  as  Government  companies  are  separate  and distinct  entities  from

PSUs and since Government  Company is not  in  the enumerated items in

Section 3(1)(b) one cannot include the said entity within the meaning of the

word PSU. This view of the High Court is erroneous for the simple reason

that the word PSU is not defined under any Act. The word PSU is indicated

in various Parliamentary Committees on Administrative Reforms so that in

financial, employment and in policy matters, the Central/ State Government

could evolve norms/standards. It is no doubt true that the public character of

the functions performed by the Undertaking determine the character of that

undertaking. It is the public character of the functions of the undertaking

which makes it a PSU. However, there is no conclusive test for determining

the status of an undertaking as a PSU. In judging the character of an entity,

the court has to keep in mind the context in which the word PSU is used in a

given enactment.  There are a number of  tests  which could be applied in

judging the  character  of  an entity,  namely,  the test  of  origin,  the  test  of

agency or instrumentality of the State, the functional test, the monopolistic

status of an entity, test concerning areas of operations, the test of economies

of scale, the test of control, the role of the entity in the priority sector etc.

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Therefore, there is no one conclusive test applicable to decide the character

of an entity. For example, nationalized banks have been held to fall within

State by this Court on an application of the test of control. Similarly, the test

of  “agency  or  instrumentality”  that  came  to  be  laid  down  brought  the

Government companies, as defined under Section 617 of the 1956 Act, to be

included within the concept of State for the purposes of Article 12 of the

Constitution (see: Som Prakash Rekhi  v.  UOI and anr. [1981]1SCC449).

Therefore, none of the above tests is conclusive in itself. Suffice it to state

that  Government  companies  under  Section  617  are  understood  by  the

Legislature to be a part of PSUs. Therefore, even on the web site of Central

Government,  Undertakings  under  the  caption  of  PSUs/PSEs,  we  find

Government companies,  State owned Government companies being listed

under the caption of PSUs/PSEs. These items have been enumerated on the

basis of Legislative Understanding. According to the book titled “Growth of

Trade,  Commerce  and  PSUs”  written  by  Shri  Suresh  Prasad  Padhy,  the

PSUs may be in the form of departmental units, corporations, Government

companies,  autonomous  bodies  or  authorities.  Corporate  governance,

according to Geeta Gouri, is one of the major process for putting PSEs and

PSUs on the right track. In the list of PSUs published on the web site of the

Central  Governmet,  BPCL is    shown  as  a  PSU.  Similarly,  MTNL and

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BSNL  are  Government  companies  which  are  also  shown  as  PSUs.

According to Bishwa Nath Singh, author of “Public Enterprise in Theory

and Practice” for “efficient working of public enterprises a combination of

economy and accountability is essential. The corporate form of undertaking

has  an  advantageous  position  because  it  has  necessary  flexibility  and

operational  freedom. The statutory corporations are set  up under specific

Statute  of  Parliament  which  statute  indicates  the  extent  of  their

accountability and the nature of Parliamentary control. On the other hand, a

Government  company  is   possessed  with  the  merits  of  easy  formation,

flexibility  in  administration,  wider  source  of  resources  mobilization,

freedom  from  accounting  and  audit  laws  and  procedures  applicable  to

Government departments as well as providing a balance between autonomy

and control.  For  its  formation,  there  is  no need of  a separate  enactment.

Under the Indian Companies Act, 1956, a company may be established by

issue of executive order by a Gazette notification or on a formal registration

by a Memorandum and Articles of Association. This form of organization is

free  from  day-to-day  Government  Interference.  Thus,  all  the  important

forms of  organization  for  the  PSUs  have  certain  advantages  and  certain

limitations. A majority of PSUs in India are in the company form and the

idea  behind  bringing  more  PSUs  in  this  form  has  been  mainly  that  of

6 0

autonomy.  Similar  is  the  case  of  statutory  corporations  which  are  also

created to mitigate the drawbacks of departmental administration” (see page

91).

43. In  the  Eleventh  Report  of  the  Committee  on  Public  Undertakings

(2005 – 2006) one of the topics  related to Health Care Insurance. In the

introduction, the committee has referred to health insurance schemes issued

by  four  public  sectors  general  insurance  companies,  namely,  National

Insurance Company Ltd., New India Assurance Company Ltd., OICL and

UICL. In the said introduction, there is also reference to LIC, a statutory

corporation,  which  also  offers  health  covers.  This  Report  indicates  that

companies under Section 617 of the Companies Act, 1956, including OICL

and  UICL,  are  all  classified  under  one  category,  namely  PSUs.  The

Committee  was  headed  by  the  Chairman,  Rupchand  Pal,  its  members

consisted of MPs from Lok Sabha and Rajya Sabha. The Report also refers

to the opening up of the insurance industry in the year 2000 for competition

from private players including banks and it also refers to the constitution of

a  regulatory  authority,  namely,  Insurance  Regulatory  and  Development

Authority Act, 1999.

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44. A similar Committee on Public Undertakings had conducted studies

on OICL and National Insurance Company Ltd. in 2001-2002 consisting of

MPs from Lok Sabha and Rajya Sabha. This Report also indicates that the

Legislature  has   taken  into  account  the  impact  of  privatization  on  the

insurance  sector.  In  the  Report,  public  sector  undertakings  cover  public

sector  companies.  The  Report  indicates  that  in  the  insurance  sector,  the

players consist  of public sector companies, LIC (statutory corporation) as

well as Government companies under Section 617 of the 1956 Act. In the

Report, the history of OIC is set out (see: para 2). The point to be noted is

that all Parliamentary Committees on public undertakings have proceeded

on the basis that OIC and UICL are companies under Section 617 of the

1956 Act; that they are public sector insurance companies and accordingly

they are all treated as body corporates falling under PSUs.

45. Therefore,  the  above  discussion  indicates  clearly  that  statutory

corporations,  public  sector  companies  and  Government  companies  are

merely corporate forms. India’s PSUs may be in the corporate forms or in

the form of statutory corporations or in the form of public sector companies.

This  is  the  legislative  understanding  indicated  by  various  Parliamentary

Committees  like  Estimates  Committee,  Administrative  Reforms

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Commission  and  Study  Team  on  PSUs  constituted  by  Administrative

Reforms Commission. The insurance industry in India has private players in

it like Bajaj Allianz Life. It also has SBI Life as one of the players. It also

has LIC in  the said  sector/industry besides  OIC, UIC etc.  This  aspect  is

important.

46. According to the respondents,  the words ‘PSUs’ in Section 3(1)(b)

has  to  be  read  with  the  words  any  corporation  established  by  or  under

Central  or  State  Act.  In  other  words,  according  to  the respondents,  only

those PSUs which are established by or under any Central or State Act alone

stand  excluded  from  the  protection  of  the  Rent  Act.  According  to  the

respondents,  PSUs which  are  Government  companies  incorporated  under

Section 617 of the 1956 Act are entitled to the protection as they are not

expressly  excluded  under  Section  3(1)(b).  We do  not  find  merit  in  this

submission.  Firstly,  it  may  be  noted  that  several  entities  have  been

enumerated  in  Section  3(1)(b),  namely,  banks,  PSUs  or  statutory

corporations,  foreign  missions,  international  agencies,  multinational

companies and private limited and public limited companies having a paid

up share capital of Rs. 1,00,00,000 or more. As stated above, the said Rent

Act,  1999 has brought about structural  changes in the legislation.  In this

case, it was open to the legislature to opt for any of the tests, namely, test of

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origin, test of public character of the functions performed by each of these

entities, test of public character of each of the undertakings, test of agency

or  instrumentality,  test  of  monopolistic  status,  test  of  mobilization  of

resources etc. In the present case, we find that the legislature has opted for

an economic criteria, namely, entities which are in a position to pay rent at

market rates are to stand excluded from Rent Act protection. This is the test

of  Financial  Capability.  This  is  the  golden  thread  which  runs  through

Section  3(1)(a).  Be  it  banks,  PSUs.  Statutory corporations,  multinational

companies, foreign missions, international agencies and public and private

limited companies having a paid up share capital of Rs. 1,00,00,000 or more

stand excluded from the Rent Act protection. This criteria has been selected

by the legislature knowing fully well that each of these entities including

PSUs can afford to pay rent at the market rates. Secondly, we have given in-

depth consideration to the contention advanced on behalf of the respondents

on the interpretation of Section 3(1)(b). We are of the view that to accept

the  contention  of  the  respondents,  namely,  that  only  PSUs  which  are

established by or under the  Central  or State  Acts  will  not  get  protection

whereas  PSUs  which  are  Government  companies  incorporated  under  the

1956 Act would continue to get protection would make the Section 3(1)(b)

vulnerable to challenge as violative of Article 14 of the Constitution. In this

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regard, it may be noted that in the insurance industry, we have LIC, banks,

private sector companies and Government companies. To say that LIC being

a statutory corporation stands excluded from the provisions of the Rent Act

whereas  Government  companies  incorporated  under  the  Companies  Act,

1956  would  continue  to  get  protection  would  lead  to  arbitrary

discrimination under Article 14 to the Constitution. In the case cited by Mr.

Soli J. Sorabjee, learned counsel for the appellants, namely, Shah and Co.

v.  State of Maharashtra (1967) 3 SCR 466 this Court held that to place

such a construction as will save the statute from constitutional challenge is a

well  settled principle  of  interpretation.  In  the said  Judgment,  it  has been

held as follows:

“to place such a construction as will save the statute from constitutional challenge … having special regard for the principle  of  constitutional  adjudication  which  makes it decisive  in  the  choice  of  fair  alternatives  that  one construction  may raise  serious  constitutional  questions avoided by another. …”.                   (emphasis supplied)

47. Moreover, if we are to hold that PSUs do not include Government

companies, as held by the High Court, we would be disturbing the package

offered  by  the  Legislature  of  allowing  increase  of  rent  annually  at  5%,

allowing the landlords to accept premium and exclusion of certain entities

from the protection  of  the Rent  Act  under  Section 3(1)(b).  On the other

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hand, acceptance of the arguments advanced on behalf of the respondents

on the interpretation of Section 3(1)(b) would make the Act vulnerable to

challenge as violative of Article 14 of the Constitution. Therefore, we are of

the view that on a plain meaning of the words ‘PSUs’ as understood by the

Legislature,  it  is  clear  that,  India’s  PSUs  are  in  the  form  of  statutory

corporations,  public  sector  companies,  Government  companies  and

companies in which the public are substantially interested (see: Income tax

Act, 1961). When the word PSU is mentioned in Section 3(1)(b), the State

Legislature  is  presumed  to  know  the  recommendations  of  the  various

Parliamentary Committees on PSUs. These entities are basically cash-rich

entities. They have positive net asset value. They have positive net worths.

They can afford to pay rents at the market rate. Thirdly, we are of the view

that,  in  this  case,  the  principle  of  noscittur  a  sociisis  clearly  applicable.

According to this principle, when two or more words which are susceptible

to analogous meaning are coupled together, the words can take their colour

from each other.  Applying this  test,  we hold that  Section  3(1)(b)  clearly

applies to different categories of tenants all of whom are capable of paying

rent  at  the market  rates.  Multinational  companies,  international  agencies,

statutory corporations, Government companies, public sector companies can

certainly  afford  to  pay  rent  at  the  market  rates.  This  thought  is  further

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highlighted  by  the  last  category  in  Section  3(1)(b).  Private  limited

companies  and public  limited companies  having paid  up share capital  of

more than Rs. 1,00,00,000 are excluded from the protection of the Rent Act.

This  further  supports  the view which we have taken that  each and every

entities mentioned in Section 3(1)(b) can afford to pay rent at the market

rates.  We  may  note  that  to  meet  the  challenge  of  discrimination  under

Article 14 it is not sufficient to state that there is an intelligible differentia

but  it  is  further  essential  requirement  to  show that  the  differentia  has  a

rational nexus to the object sought to be achieved by the Statute in question.

(see: State of Rajasthan  v.  Mukanchand and ors. (1964) 6 SCR 903.) As

stated above, Section 3(1)(b) strikes a balance between the interest of the

landlords and the tenants; it is neither pro-landlords nor anti-tenants. It is

pro-public interest. In this connection, one must keep in mind the fact that

the said Rent Act, 1999 involves a structural change vis-à-vis the Bombay

Rent Act, 1947. As stated above, with the passage of time, the 1947 Act

became vulnerable to challenge as violative of Article 14. As stated above,

the  legislature  has  strike  to  balance  the  twin  objectives  of  Rent  Act

protection and rent restriction for those who cannot afford to pay rents at the

market  rates.  To  accept  the  interpretation  advanced  on  behalf  of  the

respondents for excluding Government companies from the meaning of the

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words  “PSUs”  in  Section  3(1)(b)  would  amount  to  disturbing  the  neat

balance struck by the Legislature. OIC and UIC are Government companies.

They have paid up capital  of  more than Rs. 100 crores.  They can easily

afford to pay rents at the market rates. The legislature in its wisdom has kept

PSUs, including Government companies, outside the Rent Act. We have to

proceed on the basis that the State Legislature was aware of the meaning of

the words PSUs as understood by the various Parliamentary Committees. If

Government companies are to be excluded from Section 3(1)(b) then the test

of  intelligible differentia having rational nexus to the objects sought to be

achieved by the  said Rent Act would stand defeated.  We cannot exclude

such PSUs from Section 3(1)(b) as is sought to be contended on behalf of

the respondents.  PSUs including Government Companies are independent

companies/corporations.  They cannot  be equated to  the “Government” in

Section 3(1)(a). We have to read Section 3(1)(b) in its entirety. We have to

read the said section keeping in mind the reasons for its enactment. Lastly,

we are of the view that the High Court judgment is erroneous when it adds

words to Section 3(1)(b), namely, “which is not a Government company”. In

other  words,  the  High  Court  states  that  OIC/UIC  and  BPCL are  public

undertakings, however, they are Government companies incorporated under

Section 617 of the 1956 Act and, therefore, stand excluded from Section 3

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(1)(b). In this connection it may be stated that High Court has relied upon

the definition of Government Company under Section 617 of the Companies

Act. In the case of Union of India and others  v.  R.C. Jain and others -

1981  (2)  SCC  308  this  Court  has  enunciated  the  principle  that  “the

definition of an expression in one Act must not be imported into another. It

would be a new terror in the construction of Acts if we were required to

limit  a  word  to  an  unnatural  sense  because  in  some  Act  which  is  not

incorporated  or  referred  to  such  an  interpretation  is  given  to  it  for  the

purposes of that Act alone.” Lastly, the interpretation placed by the High

Court on the word “PSUs” in Section 3(1)(b) amounts to judicial legislation

and further it defeats the very object of Section 3(1)(b).  

48. Before concluding, we may note that we have interpreted the words

‘PSUs’  in  Section  3(1)(b)  purely in  the  context  of  the  provisions  of  the

Maharashtra Rent Control Act, 1999. Our judgment is, therefore, confined

strictly to the said provisions of the Rent Act.

49. For the aforestated reasons, we hold that OIC, UIC and BPCL and

such  other  Government  companies  as  defined  under  Section  617  of  the

Companies  Act  are  not  entitled  to  protection  of  the  Maharashtra  Rent

Control Act, 1999 in view of the provisions of Section 3(1)(b).

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50. Accordingly,  civil  appeals  arising  out  of  SLP(C) No.  5855/07 and

16237/08 filed by Smt. Leelabai Gajanan Pansare & Ors. and Hongkong &

Shanghai Banking Corporation Ltd. respectively are allowed with no order

as to costs.

Civil Appeals arising out of SLP(C) Nos. 24789-24790/07: [Bharat Petroleum Corporation Ltd.  v.  Sunil Niranjan Jhaveri]

51. Leave granted.

52. A decree for  possession  was passed by the  Small  Causes  Court  at

Mumbai against the appellant herein – M/s Bharat Petroleum Corporation

Ltd. (BPCL). It was confirmed by the Appellate Bench of the Small Causes

Court.  

53. The  decree  was  challenged  by  BPCL  by  filing  Civil  Revision

Application No. 173/07 in Bombay High Court. The said CRA No. 173/07

stood rejected  by the impugned order  dated  4.5.2007.  That  decision  was

given on the merits of the case and not on the interpretation of Section 3(1)

(b)  of  the  Maharashtra  Rent  Control  Act,  1999  (“Rent  Act”).  However,

thereafter a review petition was moved by BPCL vide CRA No. 173/07 in

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which one of the grounds taken by BPCL was that in view of the decision of

the Division Bench of the Bombay High Court in the case of Smt. Leela

Gajanan Pansare  v.  Oriental Insurance Co. Ltd. and ors. dated 20.12.2006

in First  Appeal  No. 1245/04 the Revision  Petition  of  BPCL needs  to  be

made absolute and the decree of the Small Causes Court was required to be

set aside. The review petition was dismissed by the High Court for lack of

factual foundation. Hence, these civil appeals.

54. Today, vide civil appeal arising out of SLP(C) No. 5855/07 we have

set  aside the  Division Bench judgment of the  Bombay High Court  dated

20.12.2006 in the case of Smt. Leela Gajanan Pansare v. Oriental Insurance

Co. Ltd..

55. Accordingly, we dismiss these civil  appeals filed by BPCL for the

reasons  contained  in  our  judgment  in  the  case  of  Smt.  Leela  Gajanan

Pansare v.  Oriental Insurance Co. Ltd. (supra) with no order as to costs.

56. Since  Oriental  Insurance  Company  Ltd.,  United  India  Insurance

Company  Ltd.  and  Bharat  Petroleum  Corporation  Ltd.  are  liable  to  be

evicted,  decree against them for eviction shall not be executed for a period

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of  one year commencing from the date  of  this  judgment  on  their  giving

undertaking in the usual form within a period of four weeks.

……………………………J.                                      (S.H. Kapadia)

……………………………J.                                                 (B. Sudershan Reddy)

New Delhi; August 20, 2008.

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