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PETITIONER: MYLAPORE HINDU PERMANANT LTD.  MADRAS

       Vs.

RESPONDENT: K.   S. SUBRAMANIA IYER

DATE OF JUDGMENT: 06/05/1970

BENCH: VAIDYIALINGAM, C.A. BENCH: VAIDYIALINGAM, C.A. SIKRI, S.M. BHARGAVA, VISHISHTHA

CITATION:  1970 AIR 1683            1971 SCR  (1) 546  1970 SCC  (2) 307  CITATOR INFO :  RF         1971 SC2366  (7,10)

ACT: The  Madras City Tenants Protection Act (Mad. 3 of 1922)  as amended by Amending, Act 19 of 1955, ss. 3, 9 and  12--Scope of.

HEADNOTE: Two  kinds  of rights have been conferred on  lessees  under tenancies  ’falling  within  the scope of  the  Madras  City Tenants’  Protection Act, 1921, as amended by the  Amendment Act  of 1055.  The first is a right to be paid  compensation under  s.3  for  ’buildings erected by the  tenants  on  the leased  land  before they are evicted, and- the  second,  a, right  under  s. 9 to the tenant  entitled  to  compensation under  s. 3, to exercise the option to require the  landlord to sell to him the land covered by the lease for a price  to be  computed in accordance with that section.  Under s.  12, nothing  in any contract made by the tenant shall take  away or  limit his rights under the Act, provided  that,  nothing herein  contained shall affect any stipulations made by  the tenant,  in  writing  ’registered, as  to  the  erection  of buildings in relation to buildings erected after the date of the  contract.   The first part of s. 12 protects  a  tenant against  the deprivation or limitation of his  rights  under the Act, and the fights conferred by the Act do not directly relate to covenants relating to, erection of buildings. The respondent took the appellant’s vacant land on lease for ten  years.   The registered lease deed  provided  that  the lessee could put up a building whose cost should not  exceed Rs. 10,000, that the plan of the proposed building was to be approved  by  the  directors of  the  appellant,  ,that  the construction should be in accordance with the approved plan, that  the  lessee  should  surrender  possession  with   the construction  at  the end of the lease period and  that  the lessor  would  pay the valuation of  the  construction  then current, or Rs. 5,000 whichever is less.  The respondent put ,up  a building.  On the question, whether on the expiry  of the lease period, the respondent was entitled to the  rights under  ss.  3 and 9, or the stipulations in the  lease  deed

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were covered by the proviso in s. 12. HELD:In  Vajrapani  Naidu v. New Theatre  Carnatic  Talkies, [1964] 6 S.C.R. 1015, it was held that the object of the Act was  to protect tenants against any contractual  engagements entered  into by them expressly or by implication  depriving themselves  wholly or partially of the rights  conferred  by the  statute;  that  the only class of cases  in  which  the protection becomes ineffective is when the tenant had made a stipulation as per the proviso in s. 12; that a  stipulation to   vacate  and  deliver  possession  of  the  land   after demolishing  the building constructed by the tenant,  really amounted  to the tenant giving up his right under s. 9,  and that the stipulation was not one as to erection of building, and  hence,  would  not come under the  proviso  in  s.  12. Stipulations  regarding restrictions about size,  nature  of the  building constructed the building materials to be  used therein,  and the purpose for which the building is  to  be- utilized,  are  given in the decision as  some  illustrative examples  of stipulations covered by the proviso in  s.  12. [558 F-H; 559 A-B] (1)  In  the present case although the stipulations  do  not expressly  refer to the size and nature of the building  add the  building  materials to be used therein,  they  are  all implicit  in the stipulations which fix the upper  limit  of the  cost of the building to be constructed and require  the approval  ,of the plan of the building by the  directors  of the appellant.  Therefore, 547 the stipulations are as to the erection of the buildings and attract the proviso in s. 12. [560 A-C] (2)  In  V.  S. Mudaliar v. N. A. Raghava  Chary,  [1969]  2 S.C.R.  158, it was held that a stipulation that the  tenant shall  not erect any permanent structures so as  to  entitle him to claim their value was a stipulation under the proviso in  s. 12 as to the erection of buildings-  and  disentitled the tenant from claiming compensation under s. 3, in respect of  buildings  put  up  by  him  in  contravention  of   the stipulation.  Therefore, the stipulation in the present case under  which the respondent agreed to limit the  quantum  of compensation payable in respect of the building  constructed by  him  was  also  a stipulation  as  to  the  erection  of buildings attracting the proviso in s. 12. [561 G-H-, 562 A] R.   V.  Naidu v. Naraindas, [1966] 1 S.C.R. 110,  ’referred to. (3)  Since  the  stipulation  prevails  and  overrides   the tenant’s  rights  under  s.  3,  he  was  not  entitled   to compensation  under that section, and therefore,  could  not claim the benefit under s. 9. [562 A-B]

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 596 of 1967. Appeal  from the judgment and decree dated December 1,  1964 of the Madras High Court in Letters Patent Appeal No. 32  of 1963. M.   Natesan and R. Gopalakrishnan,, for the appellant. S.   C. Manchanda and M. S. Narasimhan, for the respondent. The Judgment of the Court was delivered by Vaidialingam  J  The  short question  that  aries  for  con- sideration in this appeal, by certificate, is whether a term in a registered lease deed, in and by which the lessee of  a vacant piece of land agrees to surrender, on termination  of the  lease, not only the land but also  the  super-structure put  up by him, for the price agreed to between the  parties

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and provided for in the lease, is "a stipulation made by the tenant   in  writing  registered  as  to  the  erection   of buildings" so as to attract, in favour of the landlord,  the proviso to s.12 of the Madras City Tenants’ Protection  Act, 1921 (Madras Act III of 1922) as amended by the Madras  City Tenants’  Protection  (Amendment)  Act,  1955  (Act  XIX  of 1955)--hereinafter  called the Act.  In this appeal  we  are not concerned with the later amendments made to the Act. The  appellant  was the owner of a vacant site  bearing  No. 4/7.   Ponnambala Vathiar Street, Mylapore,  Madras-4.   The respondent  made a request to the appellant, by  his  letter Exhibit  A-2, dated January 30, 1947 to lease in his  favour the said vacant site for a period of ten years on a  monthly rental  of Rs. 30/-.  In that letter the  respondent  stated that  he wanted to put up a building on that site at a  cost of  not more than Rs. 6,5001- and that, after the expiry  of the  lease period it was open to the appellant  to  continue the  lease  or  not;  but, in  case  lease  period  was  not extended,  the respondent made a request that he  should  be paid  back the amount of Rs. 6,500/ or any less amount  that might have been 548 incurred  for  putting up the super-structure on  the  plot. After  further  correspondence  between  the  parties,   the appellant finally wrote, on April 22, 1947 to the respondent a  letter,  Exhibit  A-6, by which  they  intimated  to  the respondent that on vacating or giving possession of the land and  building  that  may  be  put  up  by  the  lessee,  the appellants  will  pay the valuation of the building  on  the date  of  surrender or a sum of Rs.  5,000/-,  whichever  is less.    The  appellant  further  intimated  that   it   the respondent was agreeable, the draft lease agreement sent  by them  might be approved for being finalised.  It was,  under those  circumstances,  that finally the  lease  arrangement, Exhibit  A-1, was jointly entered into by the parties  by  a registered document, dated April 30, 1947. Under Exhibit A-1 the respondent took the land on lease  for a  period  of ten years commencing from May  1,  1947.   The document  provided that the lessee was to pay a ground  rent of Rs. 45/- per month.  Clauses 2, 4 and 9 of the lease deed are relevant and may be set out :               "2.  The  Lessee  is permitted  to  put  up  a               building  at  a  cost of  not  more  than  Rs.               10,000/-  on  the plot leased  to  him,  after               approval of the plan of the proposed  building               by the Board of Directors of the Lessors,  and               the  construction  to  be put up  must  be  in               accordance  with  the  plan  approved  by  the               Directors of the Lessors.               4.    The  lease shall be in force for a  term               of ten years    commencing from the First  day               of May, 1947 and on  the  expiry  thereof  the               lessee  shall  surrender  possession  of   the               entire  property and the constructions if  any               thereon.  On vacating of giving possession  as               above  the  lessor  shall  pay  the  valuation               thereof, then current or the sum of Rs. 5,000-               whichever is less.               9.    In case of breach or infringement of any               of  the  conditions  above-mentioned  by   the               Lessee,   the  Lessors  are  at   liberty   to               determine the lease irrespective of the period               provided herein by giving three months’ notice               to  the  lessee  and  the  lessors  may   take               possession of the property themselves  without

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             any compensation." There  were  other clauses relating to the  payment  by  the lessee  of an taxes that may be imposed on the  property  so long as he was in possession and prohibiting the lessee from sub-letting,  assigning or transferring the plot to any  one without  the  permission in writing of the  lessors.   There were also provisions ,,regarding payment of advance rent and also the date within which the monthly rent was to be paid..  549 There is no controversy that the respondent put up a  build- ing  at  his  own cost for the purpose of  his  business  in accordance with the terms and conditions of the lease  deed. On  the  expiry  of  the  lease  period  of  10  years,  the appellant,  by  notice dated August 1, 1957  (Exhibit  A-36) called  upon the respondent to surrender possession  of  the land  as  well  as  the  building  in  accordance  with  the provisions  of  the  lease deed dated  April  30,  1947  and offering  to pay a sum of Rs. 5,000- for the building.   The respondent sent a reply, Exhibit A-37, dated August 27, 1957 declining to surrender possession either of the land or  the building.  He stated that in view of the rights conferred on him as a tenant of the land under the Act as amended by  Act XIX  of  1955, he was entitled to  continue  in  undisturbed occupation as a tenant of the leasehold and that if eviction proceedings are taken by the appellant he will be obliged to apply under the Act for directing the landlord to convey  to him the land at a price to be fixed by the Court as per  the provisions  of the Act.  The respondent declined  to  accept the  amount of Rs. 5,000/- offered by the appellant  as  the value of the house put up by him on the property- The  appellant instituted on April 22, 1958 O.S. No. 796  of 1958  in  the City Civil Court, Madras, seeking  to  recover possession from the respondent of the land and building  and also offering to pay the sum of Rs. 5,000/- as the value for the building in accordance with the terms of the lease deed. There  was also a claim for mesne profits.   The  respondent contested  the suit on various grounds. *In particular,  the respondent  pleaded  that under the Act he is not  bound  to surrender  possession  of  the land with  the  building,  as claimed  by the plaintiff.  On the other hand, according  to the  respondent,  notwithstanding the expiry  of  the  lease period,  he  was entitled to continue in possession  of  the land  and  that he had a right under s. 9 to call  upon  the plaintiff to sell the land to him for a price to be fixed by the Court in accordance with the provisions of the Act.  For this purpose. the respondent filed an application, I.A.  No. 484  of  1958, under s.9 requesting the Court for  an  order that  the landlord be directed to sell the land for a  price to be fixed by the Court. The  learned  City Civil Judge, by his judgment  and  decree dated  December  10,  1959 upheld  the  contentions  of  the respondent.  ’Me learned Judge held that notwithstanding the agreement  entered into by the tenant to surrender the  land and  also the building on receiving the value  mentioned  in Exhibit A-1 after the termination of the lease period,  such an  agreement no longer held good in view of the  protection conferred on tenants by the Act.  The learned Judge  further held that the respondent was entitled to exercise his option under s. 9 to purchase the land for 550 the  price  fixed by the Court.  In this  view  the  learned Judge  disallowed  the plaintiff’s prayer  for  recovery  of possession of the land and building and allowed I.A. No, 484 of 1958 filed by the respondent under s. 9. But the  learned Judge  however  directed  that it was only  if  default  was

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committed by the respondent in paying the value that may  be fixed by the Commissioner in I.A, 484 of 1958 the  appellant would be entitled to get a decree for possession on  payment of  Rs.  5,0001- to the respondent as compensation  for  the super-structure, under S. 3 of the Act. The  appellant  carried the matter in appeal to  the  Madras High Court in A.S. No. 208 of 1960.  By judgment dated janu- ary 30, 1963 the learned Single Judge, Ramakrishnan, J., set aside  the decree of the City Civil Judge holding  that  the tenant  was bound by the terms and conditions under  Exhibit A-1  and,  as such, was liable to surrender  possession  not only of the land but also of the building, on receipt of the sum  of  Rs.  5,000/from the landlord as  per  clause  4  of Exhibit A-1.. That is, the learned Judge took the view  that the  terms  contained  in clause 4 read  with  clause  2  of Exhibit  A-1 amounted to stipulations as to the erection  of buildings,   attracting  the  proviso  to  s.12  and   those stipulations will have to be enforced as against the tenant. Ultimately, the learned Single Judge decreed the plaintiff’s claim for recovery of possession of the land and building on his depositing the sum of Rs. 5,000/- representing the value of the super-structure.  There was a further direction given to  the  trial Court for ascertaining the quantum  of  mesne profits. The respondent carried the matter in appeal before the Divi- sion  Bench  of the High Court under cl. 15 of  the  Letters Patent.   By decree and judgment dated December 1, 1964  the Letters  Patent  Bench reversed the decree  of  the  learned Single Judge and dismissed the appellant’s suit, with  costs throughout.  According to the learned Judges of the  Letters Patent Bench, clauses 2 and 4 of the lease deed did not  and could not deprive the rights conferred on a tenant under the Act, of claiming compensation for the building under s.3  or his exercising the option to purchase the I-and under s.  9. The  further view of the Division Bench is that the  matters referred  to  in  clause 2 and 4 in Exhibit  A-1  cannot  be considered  to  be  "stipulations  as  to  the  erection  of buildings,"  so  as to attract the proviso to s. 12  of  the Act. It  may  be stated, at this stage, that the  Division  Bench has,  by  and  large, taken the view that  the  position  is concluded against the appellant-landlord by the decision  of this  Court  in N. Vajrapani Nadiu v. New  Theatre  Carnatic Talkies(1), wherein this Court (1)  [1964] 6 S.C.R 1015.  551 had  upheld  a  decision of the Madras  High  Court  that  a stipulation in the lease for demolition of the building  and surrender  of  vacant  possession of the site  was  not  one within  the proviso to s. 12 of the Act.  We shall refer  to that decision at the appropriate stage and consider  whether the  point  in issue before us is covered by  the  same,  as assumed by the Letters Patent Bench of the High Court.   But we  may indicate that the appellant had raised a  contention in the suit, as well as before the High Court that the lease in  favour  of the respondent was not of a vacant  piece  of land  but of a land together with a building and  hence  the Act had no application to that lease arrangement., So far as this aspect is concerned, it has been now concurrently  held by  all the Courts that the lease under Exhibit A-1  was  of only  a vacant piece of land.  Therefore we have to  discuss the  problem arising before us on the basis that  the  lease was only; of vacant land.  If clause 4 read with clause 2 of the  lease deed Exhibit A-1, is construed as  a  stipulation ’as  to  the erection of buildings’ within  the  proviso  to

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s.12,  the  appellant  will have to succeed.   If  not,  the respondent  will be entitled to the rights conferred on  him under the Act and pursue the relief asked For by him in, the application filed by him under s. 9 of the Act. The Act was passed with a view to give protection to tenants who, in certain, areas, had constructed buildings in others’ lands in the hope that they would not be evicted so long  as they  paid  the fair rent of the land.  Originally  the  Act applied  only  to  tenancies  of  land  created  before  its commencement, viz., February 8, 1922.  But, by the  Amending Act  XIX  of 1955, which came into force  on  September  10, 1955, the Act has been made applicable in the City of Madras to tenancies of land created before the commencement of  the Amendment  Act of 1955.  Therefore it follows that the  suit lease is one to which the Act will apply.  It is not  really necessary  for us to elaborately consider the scheme or  the various provisions of the Act as amended from time to  time, as they have all been referred to in decisions of this Court to  which we will advert later.  It is enough to  note  that under the Act,, ’land’ does not include buildings [s. 2  (2) ]; ’Landlord’ means any person owning any land [s. 2 (3) ] ; ’Tenant’  in relation to any land is a person liable to  pay rent  in respect of such land, and includes any  person  who continues in possession of the land after the  determination of the tenancy agreement [s. 2(4)].  Section 3 provides that every tenant shall, on ejectment, be entitled to be paid  as compensation  the value of any building which may have  been erected  by him and for which compensation has  not  already been paid.  Section 4 provides, among other matters, for the Court ascertaining the amount of compensation payable  under s.  3  in  a suit for ejectment of a  tenant  in  which  the landlord succeeds. 552 Section  5  deals  with  computation  of  the   compensation awardable under s.4. Section 9(1) provides that a tenant who is  entitled  to compensation under s.3 and against  whom  a suit  in ejectment has been instituted may, within the  time prescribed therein, apply to the Court for an order that the landlord should be directed to sell the whole or part of the land  for  a  price to be fixed by the  Court.   Section  12 provides :               "Nothing  in  any contract made  by  a  tenant               shall take away or limit his rights under this               Act  provided  that nothing  herein  contained               shall  affect  any stipulations  made  by  the               tenant   in  writing  registered  as  to   the               erection  of  buildings,  in so  far  as  they               relate to buildings erected after the date  of               the contract." Section  13 provides that in its application to the City  of Madras and to other notified areas, the Transfer of Property Act,  1882 shall, to the extent necessary to give effect  to the  provisions of the Act, be deemed to have been  repealed or modified. Mr.  M.  Natesan, learned counsel for the  appellant,  urged that  in this case, clauses 2 and 4 of the lease  deed  read together  would amount to a ’stipulation as to the  erection of buildings’ within the proviso to s.12 of the Act and,  as such, the respondent is bound to surrender, on expiry of the lease  period, possession of the land and also the  building after  receiving the sum of Rs. 5.000/- as the value of  the super-structure.  The counsel pointed out that in this  case the respondent-tenant in Exhibit A-1, a document which is in writing,  registered, has agreed to surrender possession  of the  entire property and the constructions thereon,  on  the

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expiry  of the period of the lease, on receiving the sum  of Rs.  5,000/- as the value of the super-structure.   In  this case,  that  term really relates to the building  which  has been put up by the tenant after the date of the contract and clauses  2 and 4 amount to a stipulation made by the  tenant as to the erection of buildings.  That is, according to  the learned  counsel, the tenant’s agreement to receive the  sum of Rs. 5,000/- as the value of the super-structure that  may be put up by him on the land demised under the lease and  to surrender  possession  of  the  land  and  building,  is   a stipulation  as to the erection of buildings,  coming  under the  proviso  to S. 12 and, as such, the respondent  is  not entitled  to  any rights under the Act.   The  counsel  also pointed  out that the Letters Patent Bench has not  properly appreciated  the  scope  of the decision of  this  Court  in Vairapani’s  case(1).   Counsel further urged that  in  this case,  as  the tenant had agreed to receive  the  particular amount  of  compensation  under Exhibit A-1,  there  was  no question  of his claiming any further right to  compensation under (1)  [1964] 6 S.C.R. 1015.  553 s.3  in  which case alone s.9 would apply.  As s.3  did  not apply,  he  pointed  out,  the  application  filed  by   the respondent under s. 9 was not maintainable. Mr.  S.  C.  Manchanda, learned counsel  appearing  for  the respondent-tenant,  on,  the  other  hand,  urged  that  the clauses  in  the lease deed, Exhibit A-1, relied on  by  the appellant,  cannot be considered to be a stipulation as,  to the  erection of buildings, so as to attract the proviso  to s. 12 and that, on the other hand, the opening part of  s.12 which  preserves the rights conferred on a tenant under  the Act,  has full force and effect.  The counsel further  urged that  neither the right to claim compensation in the  manner provided  under the Act, by s.3, nor the right  to  exercise the option to purchase the land, conferred on a tenant under s.9,  can  be either taken away or limited by  any  contract and, if, so, the respondent’s application, filed under  s.9, to  direct  the  appellant to sell the  land,  was  properly entertained  and allowed by the Letters Patent  Bench.   The counsel  also pointed out that the decision  in  Vajrapani’s case(1)  fully covers the point in issue and  concludes  the case in favour of the tenant. Before  we proceed to discuss the above contentions  of  the learned  counsel, it is necessary to point out that  on  the date when the registered lease arrangement was entered  into between the parties (April 30, 1947), the Act did not  apply to  such  leases.  It is only by the Amendment  Act  XIX  of 1955,  which came into force on September 10, 1955 that  the Act   has  been  made  applicable  to  the  present   lease. Therefore,  on  the  date when the  lease  (arrangement  was entered into neither party would have contemplated  entering into  any  arrangement taking away or  limiting  the  rights conferred on a tenant by the Act.  Now that the Act has been made applicable to the present lease, without anything  more and  as  is  made clear by the  opening  words  of  s.12-the respondent-tenant  will be entitled to avail himself of  the rights  conferred  on  him under the Act  and  any  contract limiting  or  taking away such rights will have  no  effect, unless the appellant-landlord is able to establish that this claim for recovery of possession of the land and building is saved by the proviso to s.12 of the Act. We  shall  now consider what the rights given  to  a  tenant under  the  Act are.  Broadly speaking two kinds  of  rights have been coffered on lessees under tenancies falling within

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the  scope  of  the Act.  The first is a right  to  be  paid compensation for the buildings erected by them on the leased land  before  they are evicted under s.3 of  the  Act.   The second right is the one conferred under s.9 to the tenant to exercise  the option to require the landlord to sell to  him the I-and covered by the lease for a price to be computed in accordance  with  the said section.  It  should  be  further pointed (1)  [1964] 6 S.C.R. 101 5. 554 out that under s.9 (1 ) (a) ‘ any tenant who is entitled  to compensation under’s. 3’ is alone made eligible, when a suit in  ejectment against him has been instituted,  to  exercise the option given to him under the said section.   Therefore, before a tenant can apply to the Court for an order that the landlord should be directed to sell the land for a price  to be  fixed by it, he must satisfy the  essential  requirement that  he is a ’tenant who is entitled to compensation  under S.  3. Without anything more if a land has been leased to  a tenant and if the latter puts up a building on the property, he will be entitled on ejectment to be paid compensation for the  value of the building under s.3, to be computed in  the manner prescribed under the Act.  Or, in the alternative, he can fall back upon his right to have the land sold to him in accordance with s.9 of the Act. Therefore,  the question naturally arises whether  the  res- pondent, in this case, having entered into an agreement with the  landlord  under  Exhibit A-1,  to  receive  the  amount specified therein as the value of the building and surrender possession of the land and the said building, is entitled to ignore  those  terms and fall back-upon s.3 of the  Act  and claim  compensation in accordance with the Act.  If he  can, then  it  is needless to state that he will be  eligible  to file  an  application  under s.9.  Ultimately  the  question resolves  itself to this : Whether a stipulation made  by  a tenant in the registered lease-leed limiting the quantum  of compensation  payable  to him in respect  of  the  buildings constructed by him on the land is covered by the proviso  to s. 12 of the Act. There is no controversy that in this case the tenant has en- tered into a written agreement which has been registered and he has put up the building on the land after the date of the contract. Section 12 of the Act consists of two parts.  The first part is a general provision saving to tenants comprehended by the Act   the   rights   conferred  by   its   operative   terms notwithstanding  any contract.  Such rights  would,  amongst others, include the rights to claim compensation under  ss.3 and 4 and the right to exercise option to purchase the  land from the lessor by an order of Court under S. 9 of the  Act. The  second part consists of the proviso which, so  to  say, makes an inroad into the generality of the saving, by saving contradictory  stipulations  from  the  operation  of,   the statutory  rights  created by the Act.  It  is  needless  to state  that  if s.12 had stopped with the  first  part,  the respondent  would be entitled to the benefit of every  right conferred upon tenants by the Act.  There is no  controversy that  the proviso is intended to cut down the scope of  that saving;  so to say, from and out of the prohibition  against the operation of any stipulation in a contract limiting  the rights conferred on tenants by the Act, an  555 exception  is  carved  out.  The controversy  before  us  is centered round the scope and limits of that exception. We have already referred to the fact that s.13 provides that

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in  its application to the City of Madras and to  any  other area to which the Act is extended, the Transfer to  Property Act,  1882 shall, to the extent necessary to give effect  to the provisions of the Act,, be deemed to have been  repealed or modified.  If the provisions of the Act do not apply, the position would be that normally, under s.108 of the Transfer of  Property Act, before the expiry of the lease,  a  lessee can  remove all structures and buildings erected by  him  on the  demised land.  Further, under s. 108, there is  nothing to prevent the lessee’s contracting to handover any building or  superstructure  erected  on  the land  by  him  to  the. lessors,  without  receiving  any  compensation.   That  is, though  under  s.108 the lessee has a right  to  remove  the building, by contract he may agree to hand over the same  to the lessor without the right to receive compensation at  the end  of the lease, the matterbeing entirely one of  contract between  the  parties.   But  this  normal  rule  under  the Transfer of Property Act will not apply to this case  before us  as the provisions of the Act govern the rights.  of  the parties. With  the background mentioned above, we shall now  proceed: to  refer to the decisions to which our attention  has  been drawn,  by learned counsel on both sides.  Quite  naturally, Mr.  Manchanda placed considerable reliance on the  decision of  this  Court in Vajrapani’s case(1), which  decision,  we have already stated, has been treated by the Letters  Patent Bench  also  as concluding the case against  the  appellant- landlord.    On  the  other  hand,  Mr.  Natesan,  for   the appellant,  has  urged that the question that  arose  before this  Court  in the said decision was a very  limited  ’one, viz.,  whether a stipulation, made by a tenant,  for  giving vacant  possession  of  the land  after  demolition  of  the building which he had been authorised to construct  thereon, is  not  one ’as to the erection of  buildings’  within  the proviso  to s.12 and it was answered in the negative.   That decision,  according to the counsel, has no  application  to the facts of this case where, the object of the Act viz., of preserving  a  building constructed on the land,  has.  been given  effect to by the terms of the contract  entered  into between  the  parties.   As the  Letters  Patent  Bench  has proceeded on the, basis that the said decision concludes the point against the appellant, it is necessary to refer to the facts of that case in some detail. In Vajrapani’s case(1) the appellant had granted a lease  of an  open  site  in the town of  Coimbatore  to  one  Abirama Chettiar tinder a registered lease deed dated September  19, 1934 for 20 (1)[1964] S-C.R. 1015 556 years  at  an  annual rent of Rs. 1080/- for  putting  up  a building suitable for use as a theatre.  After the expiry of the  term of 20 years stipulated under the deed, the  lessee had  an option of renewal for another period of 20 years  on fresh terms and conditions.  The deed further provided  that if  after  the  termination ,of the  stipulated  period  the lessees  fail to pay the arrears of rent that will fall  due till  that date and hand over possession of the site to  the lessors  after  making  it clear  by  dismantling  the  con- structions  therein and by demolishing the walls  etc.,  the lessors shall, besides realising the arrears of rent due  to them  according  to law, have the right to  take  possession through  Court of the site in which the aforesaid  buildings are   put  up  after  dismantling  the   ’construction   and demolishing  the  buildings therein’.  The  original  lessee constructed a theatre on the site and assigned his rights to

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the  New  Theatre  Carnegie  Talkies  Ltd.,  which  was  the respondent in the said appeal.  The. assignee was recognised as  tenant  under  the original lease  deed  of  1934.   The lessors   called  upon  the  lessees  to  surrender   vacant possession  of  the site on the expiry of the  lease  period and,  on  the  lessee, declining to  comply  with  the  said requisition,  a  suit  was instituted  by  the  lessors  for recovery of possession of the land.  During-the pendency  of the  litigation,  the Act, as amended by Madras Act  XIX  of 1955,  was  extended to Coimbatore and the tenant  filed  an application under s.9 for an order directing the lessors  to convey the site covered by, the lease deed for a price to be fixed by the Court.  The learned Single Judge of the  Madras High Court allowed the application of the tenant under  s.9, on  payment of full market value of the land.  The  landlord unsuccessfully appealed to a Division Bench under cl. 15  of the Letters Patent and came up to this Court on  certificate :granted by the High Court. The  question that was debated before this Court, on  behalf of the appellant-landlord was that the application filed  by the tenant under s.9 was not maintainable as the proviso  to s.12 is, attracted to the stipulation made by the tenant  to demolish the building and surrender vacant possession of the land.   After  stating that, the Act was passed  to  prevent loss to tenants who had constructed buildings on lands taken on  lease  by them consequent upon the  enforcement  of  the strict  provisions  of the Transfer of  Property  Act,  this Court  considered  the  scheme of the  Act  with  particular reference to ss. 3, 9 and 12.  It was contended on behalf of the  land-lord-appellant  that the stipulation  relating  to delivery of vacant possession of the site on’ the expiry  of the  period  of  lease, after removing the  buildings  is  a stipulation  as to the erection of buildings, coming  within the proviso to s. 12 and, as such, therestriction  on  the liberty of contract between the landlord andtenant  imposed by the opening clause of s. 12 stood removed.     It     was further contended on this basis that the lessee  557 was  bound  by the terms of the lease and that  he  was  not entitled,, to claim the benefit of s.9 of the Act. The  majority  constituting the Bench did  not  uphold  this contention of the landlord, and said :               "A   covenant  in  a  lease  which   is   duly               registered that the tenant shall on expiry  of               the  lease remove the building constructed  by               him   and   deliver  vacant   possession,   is                             undoubtedly  a  stipulation  relating  to   the               building,  but it is not a stipulation  as  to               ’the  erection of building’.  Section  12  has               manifestly  been  enacted  to  effectuate  the               object  of  the Act which is set  out  in  the               preamble-viz.  ’to give protection to  tenants               who. . . have constructed buildings on others’               lands  in  the  hope that they  would  not  be               evicted  so long as they pay a fair  rent  for               the land’.  The Legislature has sought thereby               to protect the tenants against any contractual               engagements   which   may  have   been   made,               expressly   or  by  implication   to   deprive               themselves   wholly   or  partially   of   the               protection  intended  to be conferred  by  the               signature.   And  the only class of  cases  in               which  the protection becomes  ineffective  is               where  the  tenant has made a  stipulation  in

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             writing  registered  as  to  the  erection  of               buildings,  erected  after  the  date  of  the               contract   of  lease.   The  res-triction   is               therefore  made only in respect of  a  limited               class  of  cases which expressly  attract  the               description  of  the stipulations  as  to  the               erection  of buildings.  Having regard to  the               object  of the Act,, and the language used  by               the   Legislature,  the  exception   must   be               strictly  construed, and a stipulation  as  to               the erection of buildings would not, according               to  the  ordinary meaning of the  words  used,               encompass a stipulation to vacate and  deliver               possession  of the land on the expiry  of  the               lease   without   claiming  to   enforce   the               statutory right’, conferred upon the tenant by               s.9.  The stipulations not protected in s.  12               are  only  those  in  writing  registered  and               relate  to  erection  of  buildings  such   as               restrictions about the size and nature of  the               building  constructed, the building  materials               to  be used therein and the purpose for  which               the building is to be utilised." Based upon the concluding portion of the above extract.  Mr. Manchanda  has  urged that the proviso to s. 12  will  apply only to those stipulations as to the restrictions as to  the size,  the nature of the building constructed, the  building material  to be used therein and the purpose for  which  the building  is to be utilised.  The Letters Patent  Bench  has also   adopted  the  same  test  for  holding  against   the appellant. 558 The minority judgment, on the other hand, in the said  deci- sion,  held that a stipulation by the lessee to remove  the, buildings,  ,which  he  has been permitted  to  erect,  when surrendering the land on the termination of the tenancy,  is a stipulation as to the erection of buildings coming  within the  proviso to s.12 of the Act.  A perusal of the  minority judgment further shows that it was conceded by Mr. Setalvad, learned counsel appearing for the appellant-landlord, that a stipulation limiting the quantum of compensation payable  in respect  of buildings constructed by a tenant, provided  for by  s.  3 is within the meaning of the proviso  to  s.12  as being  one with respect to the erection of buildings.   This concession  is  no  doubt not referred to  in  the  majority judgment  ,but,  apart  from the  concession,  the  minority judgment  has discussed this aspect further and it was  held ultimately that the stipulation in the leas-deed before them whereunder the tenant agreed to dismantle the buildings  put up  by  him on the leased and was a stipulation  as  to  the erection  of buildings and covered by the proviso  to  s.12. But,  in accordance with the majority view, the  appeal  was dismissed. Though  prima  facie  the last part of the  extract  in  the majority  judgment,  quoted  above, and  relied  on  by  Mr. Manchanda, may appear to support his contention as also  the view  taken by the Letters Patent Bench, we are however  not inclined  to  bold that the majority judgment in  the  above decision  intended  to  lay  down  that  only   stipulations regarding  restrictions  about  the  size,  nature  of   the building  constructed,  the building materials  to  be  used therein  and  the purpose for which the building  is  to  be utilised,  exhaust completely all the stipulations that  are protected by the proviso to s.12. Those observations  cannot be taken out of the context in which they appear.  A reading

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of  the  extract  quoted above from  the  majority  judgment clearly shows that the object of the statute was to  protect tenants  against any contractual engagements which may  have been made expressly or by implication to deprive  themselves wholly  or  partially  of  the  protection  intended  to  be conferred by the statute.  Having regard to this object, the learned   Judges  have  come  to  the  conclusion   that   a stipulation  to  vacate and deliver possession of  the  land after  demolishing  the building constructed by  the  tenant will  not  amount  to a stipulation as to  the  erection  of buildings, coming under the proviso to s. 12.  On the  other hand,  the majority view is that the stipulation, that  came up  for consideration before them, would really amount to  a stipulation  by a tenant giving up his right to enforce  the statutory  right  conferred  on him under s.9.  It  is  also significant  to  note  that  in  the  earlier  part  of  the judgment,  the  majority  judgment has  emphasized  that  on account  of  the inflationary pressure in the  wake  of  the First World War many tenants who had  55 9 constructed  buildings on lands taken on lease by them  were sought  to ’be evicted by the landlords and, with a view  to prevent  loss  to such tenants,, the Act  was  passed.   The concluding  part of the observations in the extract,  relied on by Mr. Manchanda; will have to be read in this background and, so read, in our opinion the position becomes clear that the  learned  Judges were only referring to  the  size.  and nature  of the building, materials used for building,  etc., as  illustrative  examples  of stipulations  which  will  be covered by the proviso to s.12 of the Act. The provision in the lease deed which came up for considera- tion  in  the, above decision, in and by  which  the  tenant agreed to surrender possession of the land after demolishing the  building,  will, in our opinion, really amount  to  the tenant contracting himself out of the right to claim  either compensation  for the building under s.3 or to exercise  his option  under  s.9  to purchase the land  and  that  such  a provision  will be hit by the first part of s. 12 which,  as we  have already indicated, preserves the rights given to  a tenant  under  the  Act.  Therefore,  in  our  opinion,  the decision  in Vajrapani’s case(1) has been  misunderstood  by the learned Judges of the Letters Patent Bench and the  said decision  is  no  authority for  the  proposition  that  the stipulation  contained  in the lease deed before  us  cannot come within the proviso to s. 12.  The case before us is not one  under  which the tenant has in  any  manner  contracted himself  out of the rights conferred on him by the  statute. On the other hand, by allowing the building to stand on  the property and agreeing to receive the amount of  compensation provided  for in the,lease deed, the object of the  legisla- tion  is fully satisfied.  It must also be  emphasized  that the  first  part  of  s.12 protects  a  tenant  against  the deprivation  or limitation of his rights under the  Act  and the  rights conferred by the Act do not directly  relate  to covenants relating to erection of buildings. We  may  add that clause 2 of Exhibit A-1  clearly  provides that the lessee can put up a building whose cost should  not exceed  Rs. 10.000/- and the plan of the  proposed  building has  also to be approved by the Directors of the  appellants and  the construction to be put up by the tenant must be  in accordance  with the plan approved by the directors  of  the lessors.   Though clause 2 does not, in so may words,  refer to the size and nature of the building to be constructed  or the  building  materials to be used therein, ,they  are  all implicit  in  the  said  clause  where  the  cost  has  been

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mentioned and the plan of the building has to be approved by the  directors of the appellants.  Apart from the fact  that in  view of the upper limit of the cost having  been  fixed, which  itself win place a limitation on the size and  nature of  the  building  that could be constructed,  as  also  the building materials that could be used therein, there is  the further stipulation that the plan has to be (1)  [1964] 6 S.C.R 1015. 5 60 approved  by  the directors of the lesson as the  plan  will clearly  and accurately give a correct idea about  the  size and  nature  of the building proposed to be put  up  on  the land.  It is only as per the plan so approved by the lessors that  the  building  has to be put tip on  the  land.   This stipulation clearly shows that there is a restriction  about the  size and nature of the building.  And it is in  respect of  such a building put up by the tenant in accordance  with clause  2 that the value is fixed under clause 4.  Therefore it  follows  that  clause 2 read with  clause  4  amount  to stipulations  as to the erection of buildings and, in  this, view  the proviso to s.12 will apply.  This aspect  has  not been adversed to by the Letters Patent Bench. In R. V. Naidu v. Naraindas(1) this Court had to deal with a clause  in  the lease deed which provided that  the  tenants ’shall  not  raise  any building whatsoever  in  the  vacant site’, but the lessee committed a breach of the covenant  by putting up a building on the land.  In the suit filed by the landlord  for  ejectment, the tenant claimed  the  right  of opinion  to  purchase the land under s.9 of  the  Act.   The Letters  Patent Bench of the Madras High Court rejected  the claim  of  the tenant and declined to grant  relief  on  his application  filed under s.9. In dealing with the  claim  of the tenant who was the appellant, this Court noted that  the lease  was not by a registered document and, therefore,  the proviso  to. s. 12 has no application.  But this  Court  has emphasised  that a tenant, entitled to purchase  under  s.9, must  be  a tenant entitled to compensation under s.  3.  In view of the fact that the lease deed was not registered  and as  the  proviso to s.12 was ruled as not  applicable,  this Court  held that the covenant in the lease deed  prohibiting the  tenants from putting up constructions will have  to  be ignored  and the tenants declared entitled  to  compensation under  s.  3  of the Act and in turn also  to  exercise  the option  to  purchase the land under  s.9.  Ultimately,  this Court  held  that the tenants, in that case,  must  be  held entitled  to their rights under ss.3 and 9, in spite of  the covenant not to build and breach of it by them. It is to be noted that this decision had to deal with a case where  the lease deed was not a registered document and,  as such, the application of the proviso to s. 12 was  summarily ruled  out.   Hidayatullah,  J. (as he  then  was),  in  his separate  judgment,  while  agreeing  with  the   conclusion reached  by the other learned Judges, has emphased  that  by the first part of S. 12, the tenant is protected against his own  contract  and the landlord is protected by  the  second part  of the said section; but in the case before  them  the landlord  could  not  seek protection  of  the  second  part because the lease deed was not registered. (1)  [1966] 1 S.C.R. 110.  561 In  V. S. Mudaliar v. N. A. Raghavachary(1) by a  registered lease  a  vacant land was let to a tenant on  the  specific, condition that the tenant ’should not erect any of permanent superstructures, on. the vacant site so as to entitle him to claim in future the value thereof. In contravention of  this

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stipulation and without ,my authority from the landlord, the tenant put up a permanent super-structure on the land.   The lease  was for a period. of 5 years.  As the tenant  refused to  vacate  the land on the expiry of the  lease  term,  the landlord  filed  a suit for recovery of  possession  of  the land.  The tenant claimed protection under the Act and  also filed  an  application under s.9. The High Court  of  Madras decreed   the  suit  of  the  landlord  and   rejected   the application filed by the tenant under s.9. This Court, after again  adverting  to  the scheme of  the  Act  with  special reference  to ss.3, 9 and 12 distinguished the  decision  of this  Court  in  Naidu’s  case(1) on  the  ground  that  the stipulation  which was almost identical with the one  before them  was  contained  in  an  unregistered  lease  deed  and ultimately  held that a stipulation by a tenant, made  in  a registered lease deed that he would not build any  permanent structure  on  the  land so as to entitle him  to  claim  in future  the  value  thereof, is a  stipulation  ’as  to  the erection of a building’ within the proviso to s. 12 and,  as such,  upheld the decision of the High Court which  declined to  grant relief to the tenant.  In the said decision,  this Court  again emphasised that ss. 3 and 9 are subject to  and controlled by the proviso to s. 12 though s. 3 provides that a  tenant  shall, on ejectment, be entitled to  be  paid  as compensation  the value of any building erected by him,  the right  conferred on the tenant by s. 3 is controlled by  the stipulation  in the registered lease deed that he shall  not erect permanent structures of any kind of the land so as  to entitled  him  to claim in future the  value  thereof.  This Court  further held that the said stipulation in the  regis- tered  lease deed overrides the tenant’s rights under  s.  3 and  that  if  a  tenant erects  a  permanent  structure  in contravention of the stipulation, he is not entitled to  any compensation  under  s. 3. It was further held that  as  the said tenant was not entitled to any compensation under  s.3, be cannot claim the benefit of s.9. If a stipulation, contained in a registered lease deed  that the tenant shall not erect permanent structures on the  land so as to entitle him to claim the value thereof and if  such a  stipulation  over-rides  the tenant’s  rights  under  s.3 disentitling him to claim compensation under s.3 in  respect of  buildings  put up by him in contravention  of  the  said stipulation,  as  held  in Mudaliar’s  case(1)  we  have  no hesitation  in holding that clause 4 read with clause  2  of Exhibit A-1, under which the respondent has agreed to  limit the quantum of compensation payable in respect of the (1) [1969] 2 S.C.R. 158. 13SupCI/70-7 (2) [1966] 1 S.C.R. 110. 562 buildings  constructed  by him is a ’stipulation as  to  the erection  of buildings’, attracting the proviso to s. 12  of the  Act.   In  this view, we further  hold  that  the  said stipulation over-rides the tenant’s rights under s.3, as  he will  not be eligible to claim compensation under  the  Act. It follows that as he s not entitled to. compensation  under s.3,  but  only  to the value of the  building  as  per  the agreement  Exhibit A-1, the tenant cannot claim the  benefit of s. 9. Therefore, it follows that the decree and  judgment of the Letters Patent Bench appeal has to be set aside. Before  we conclude we may also state that Mr. Natesan  drew our  attention  to a Division Bench judgment of  the  Madras High  Court in Palaniappa Gounder v. Sridharan Nair(1).   We do not propose to consider that decision as it is seen  that the  learned Judges had to consider the question  whether  a

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term  in  the contract as to transfer of  ownership  of  the building,  without  an,,,  claim for  compensation,  at  the termination  of  the  lease,  could be  construed  to  be  a stipulation  made  by  the  tenant as  to  the  erection  of buildings.  The clauses that arise for consideration  before us to which reference has been made, are entirely different. Though under Exhibit A-1 the respondent is bound to surender possession of the land and the building, after receiving the sum of Rs. 5,000/- as the value of the building, during  the arguments  Mr. Natesan, learned counsel for  the  appellant- landlord  has  quite  fairly stated  that  his  clients  are prepared  to  pay  a sum Rs. 10,000/- as the  value  of  the building  provided the respondent tenant  surrenders  vacant possession  of  the building and The land  to  the  landlord within  a  period  of  six months  from  the  date  of  this judgment, without putting the appellant to the necessity  of taking  out execution proceedings.  We are of the view  that the  appellants’  offer is quite  reasonable.   Accordingly, while  allowing while allowing the appeal and setting  aside the  decree  and judgment of the Letters  Patent  Bench,  we restore the judgment and decree of the learned Single  Judge of  the  Madras  High Court in A.S No.  208  of  1960  dated January 30, 1963, subject to the following conditions (1)  The  appellant will deposit in the trial Court,  within three months   from  this  date  the  sum  of  Rs.  10.000/- (rupees  ten  thousand) as offered by their counsel  as  the value of the building. (2)  The  respondent is directed to surrender possession  of the land and building within a period of six months from the date of this judgment. (3)  If  the respondent so surrenders vacant  possession  of the’  building  and  the land within six months  or  at  any earlier time, (1) (1963) 2 M.L.J. 559.  5 6 3 on  such  surrender  of possession he will  be  entitled  to withdraw   from  Court the sum of Rs. 10,000/-  (rupees  ten thousand) deposited by the appellants. (4)  If  the respondent does not deliver possession  of  the land  and  building within the period mentioned  above,  the appellants can levy execution and recover possession of  the properties, but, under that contingency the respondent  will be entitled only to a sum of Rs. 5,000/- as the value of the building  and  the balance amount &an be  withdrawn  by  the appellants. (5)  If the respondent surrenders possession of the building and the   land within the period mentioned in this judgment, there will be  no  liability  for  mesne  profits  and   the direction  given by the learned Single Judge in that  regard will  stand  cancelled.   If  however,  possession  is   not delivered  within time, the enquiry into mesne  profits,  as ordered by the learned Single Judge, will proceed. (6)  If  the respondent delivers possession of the land  and the building within six months, parties will bear their  own costs  throughout.   If  on the other  hand  the  respondent commits  default  in the matter of delivery  of  possession, the, appellants will be entitled to their costs throughout. V.P.S.                                    Appeal allowed. 564