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CASE NO.: Appeal (civil)  2546 of 2004

PETITIONER: Municipal Council, Udaipur

RESPONDENT: Mahendra Kumar

DATE OF JUDGMENT: 27/03/2008

BENCH: Dr. ARIJIT PASAYAT & LOKESHWAR SINGH PANTA

JUDGMENT: J U D G M E N T  REPORTABLE

CIVIL  APPEAL NO. 2546 OF 2004 With CIVIL  APPEAL NO. 2547 OF 2004

Dr. ARIJIT PASAYAT, J.

        1.      Challenge in these appeals is to the judgment rendered  by a learned Single Judge of the Rajasthan High Court in two  second appeals.  The appeals were preferred by the appellant  questioning correctness of the conclusions arrived at by the  Courts below.   2.      Factual position which is almost undisputed in both the  cases needs to be noted in brief and is as follows:

3.      For the sake of convenience the facts situation in Civil  Appeal No.2546 of 2004 (Municipal Council, Udaipur v.  Mahendra Kumar) is reflected.

4.      The respondent as plaintiff filed a suit against the  appellant seeking following reliefs:

"a) That a decree for permanent injunction be  passed in favour of the plaintiff and against  the defendant to the effect that the defendant  should recover rent at the rate of Rs.175/-  (rupees one hundred seventy five) per month  from the plaintiff fixed before coming into  being of the relationship of lessee and lessor  between the plaintiff and the defendant and  apart from this not to increase the rent  unilaterally, not to recover the late fee, nor  recover the rent by increasing the same, nor  get the shops vacated forcibly from the  plaintiff, nor dispossess him from the disputed  shops nor create any sort of obstacle in his  business, neither do such acts itself nor  through its servants, agents or any officer nor  allow them to do the same."          

5.      For the purpose of the claim respondent relied on an  agreement dated 8.11.1980. The agreement had been executed  describing that it was based on a license and was for a limited  period of 11 months.  According to the appellant the license

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automatically stood terminated on expiry of the period.  Thereafter no time was extended by the defendants.  Plaintiffs  claim that the defendants were accepting the rent regularly.   By notice dated 6.6.1986 which was challenged in the suit an  offer was made to occupy the property on payment of  Rs.6,000/- per year.  Stand of the respondent was that he was  entitled to occupy the premises by payment of rent or license  fee of Rs.175/- as agreed to in the agreement dated 8.11.1980  and which stood terminated by time.  The Trial Court decreed  the suit. However, the First Appellate Court allowed the appeal  to enhance once by 10% and thereafter to seek the consent of  the respondent if there was to be any enhancement.   

6.      High Court dismissed the second appeal.  The order of  the High Court is challenged in this appeal.

7.      According to the learned counsel for the appellant- corporation the High Court enlarged the scope of dispute and  went on to decide as to whether the agreement was a license  or lease. It is submitted that property was that of the local  authority and, therefore, Rajasthan Rent and Premises  (Control of Rent Eviction) Act, 1950 (in short ’Rent Control  Act’) unilaterally does not apply to the facts of the present  case. It was pointed out that the respondent can be evicted  from the suit premises by giving notice under Section 106 of  the Transfer of Property Act, 1882 (in short ’TP Act’) where the  lease did not subsist and the respondent had not occupied or  continued the same property.  The High Court and the First  Appellate Court erroneously came to the conclusion that the  appellant again increased the rent unilaterally.  There was no  question of any bilateral agreement for fixation of new rent as  a person occupying property would never agree to enhance  and would continue to remain in the property for any length of  time at a rate fixed years back.  The conclusion that it can be  enhanced once is without any legal foundation.  It was pointed  out that even if it is assumed that the agreement subsists,  clauses 3 and 8 permitted the appellant to unilaterally alter  the conditions by way of orders which have to be complied  with by the respondent and for a period of 11 months renew  for further fresh term.

8.      Learned counsel for the respondent on the other hand  submitted that the respondent is willing to pay at such rate as  may be fixed in accordance with law.

9.      At the outset has to be noticed that the validity of the  notice was not challenged in the suit.  Notice dated 6.6.1986  contained a reference to the order No.F5(293)LB/77/2183- 2730 dated 10.8.83 of the Local Self Government which  permitted fixing of rent in a particular manner.  According to  the learned counsel, the notice for fixing of rent was based on  the aforesaid order of the Local Self Government of the State.

10.     It was not the stand of the respondent that the order of  the Local Self Government was not binding and/or that the  same was without any authority.  Clauses 3 and 8 of the  agreement are also relevant. They read as follows: "3.     That the said agreement shall be deemed  to have been executed for eleven months and  for further renewal the licensee shall have to  move an application one month before, which  shall be considered by the Council and if found  property further renewal shall be made.  The  shop shall be handed over in the same  condition in which it has been taken and shall

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not make any alterations therein nor shall  cause any damage."                                    

8.      That apart from the said conditions in  connection with this shop the Council shall  also issue other orders from time to time,  which shall also be complied with by the  licensee."    

11.     The suit was for permanent injunction, in terms of  Section 38 of the Specific Relief Act, 1963 (for short ’Specific  Relief Act’). Section 38 reads as under:

"38. Perpetual injunction when granted \026 (1)  subject to the other provisions contained in or  referred to by this Chapter, a perpetual  injunction may be granted to the plaintiff to  prevent the breach of an obligation existing in  his favour, whether expressly or by  implication.   

(2)     When any such obligation arises from  contract, the court shall be guided by the rules  and provisions contained in Chapter II.

(3)             xxx                     xxx                     xxx"

12.     An interesting question arises as to whether in the  absence of the subsisting agreement a decree for specific  performance can be granted.  There is no dispute that the  plaintiff can seek for performance only an agreement which is  subsisting.  As was noted by this Court in Percept D’mark  (India) (P) Ltd. v. Zaheer Khan and Anr. (2006 (4) SCC 227),  the plaintiff cannot maintain a suit for specific performance  after the contract is determined.  In the aforesaid case it was  noted as follows:

"60.    We have perused the contract in detail.  The terms of the contract were expressly  limited to 3 years from 30.10.2000 to  29.10.2003, unless extended by mutual  agreement, and all obligations and services  under the contract were to be performed.  

61.     Clause 31(b) was also to operate only  during the term i.e. from the conclusion of the  first negotiation period under clause 31(a) on  29.7.2003 till 29.10.2003.  This Respondent 1  has scrupulously complied with. So long as  clause 31(b) is read as being operative during  the term of the agreement i.e. during the  period from 29.7.2003 till 29.10.2003, it may  be valid and enforceable. However, the moment  it is sought to be enforced beyond the term  and expiry of the agreement, it becomes prima  facie void, as rightly held by the Division  Bench."        13.     It is to be noted that the property being of the local  authority the Rent Control Act did not have any application.

14.     The High Court considered the agreement to be a lease  overlooking the fact that under the Rajasthan Municipality  Act, 1959 (in short ’Municipal Act’) no lease can be made  without following the procedure prescribed under the Rules

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made hereunder.

15.     The controversy can be looked at from another angle.   For a period of 11 months there was no attempt to modify the  rent fixed under the contract.  On the expiry of the period a  fresh agreement has to be entered into.  That has to be on  agreed terms. In that view of the matter the question of  enhancement of rent unilaterally does not arise.

16.     It is to be noted that even the original agreement in  clause 8 permitted the Council to issue such orders from time  to time in relation to the conditions. If the view expressed by  the First Appellate Court and the High Court is accepted then  the power to issue orders from time to time in relation to the  conditions becomes redundant.  Once there is no dispute  about the power of enhancement, the question of enhancing  the rent once by 10% and thereafter to enhance it on consent  of both the parties is clearly without any foundation.   

17.     In the circumstances it is to be held that the agreement  was for a period of 11 months. For continuance a fresh  agreement was required to be entered into.  If no agreement  existed between the parties, the question of unilateral  possession does not arise.  Since the power of enhancement  has been considered on the basis of clause 8, the question of  restraining it to a one-time exercise is clearly without any  foundation as the clause itself permits issue of orders "from  time to time".  Additionally, in the background of the scope of  Section 38 of the Specific Relief Act, the First Appellate Court  and the High Court were not justified in granting relief to the  respondent. In the normal course we would have left fixation  of rent to the authorities. Considering the long passage of time  while deciding the question of law, we feel interest of justice  would be best served if the rent is enhanced to Rs.1,000/-  from 1.1.2007 and Rs.700/- for the previous three years. The  agreement on the aforesaid terms shall be duly entered into by  the parties.

18.     The appeals are accordingly disposed of without any  order as to costs.