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Reportable IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 4153 OF 2009 (ARISING OUT OF SLP(C) NO.1234 OF 2007)

National Sample Survey Organisation & Anr. ... APPELLANTS

VERSUS

Champa Properties Ltd. & Anr. ...RESPONDENTS

J U D G M E N T

R.V.RAVEENDRAN, J.

Leave granted. Heard the learned counsel.  

2.    The National Sample Survey Organization, the appellant herein was  

the tenant under the first respondent (for short the 'respondent') in respect  

of premises No.25A, Shakespeare Sarani, Calcutta, a building constructed  

in 1925 with a carpet area of 16157 sq. ft.  The premises was taken on  

lease on 1.6.1972 on a monthly rent of Rs. 13,733/- (at the rate of Rs 0.85  

per sq. ft.).  On a request by respondent for increase in rent, the appellant  

made a reference to the Hiring Committee for reassessment on 1.4.1986.  

Based on its recommendation, the rent was increased to Rs.74,645/- per  

month (that is  Rs.4.62 per sq. ft.) with retrospective effect from 3.8.1983

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and the increase was communicated  as per  the appellant’s  letter  dated  

27.7.1988. The very next day (28.7.1988), the respondent wrote to the  

appellant  again  requesting  for  reassessment  of  the  rent  for  the  period  

commencing from 3.8.1988 (that is, from the date of expiry of five years  

from the date  of  last  increment)  by  referring the  matter  to  the  Hiring  

Committee. Acting on the said request, the appellant again made a request  

to the Hiring Committee, by letter dated 25.10.1988 for re-assessment of  

rent.

3. The  Hiring  Committee  (consisting  of  three  members  -  (i)  

Superintending Engineer, Calcutta Central Circle No.II, CPWD, (ii) the  

Estate Manager,  and (iii)  Surveyor of Works cum Executive Engineer,  

Calcutta  Central  Division  No.IV  CPWD)  by  its  proceedings  dated  

6.6.1989, reassessed and recommended a rent of Rs.13.10 per sq.ft.  of  

carpet area (inclusive of all municipal taxes) with effect from 3.8.1988.  

The appellant found the increase suggested by the Hiring Committee was  

unreasonably high and therefore initiated correspondence with the Hiring  

Committee  for  reviewing  the  reassessment.  When  the  matter  was  

pending,  the  respondent,  by  letter  dated  27.6.1989,  requested  the  

appellant to fix the rent at Rs. 19/- per sq.ft. plus municipal taxes.  

4. In  the  meanwhile,  the  respondent  landlord  entered  into  lease

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agreements every year, with the appellant on 11.4.1989, 10.5.1990 and  

29.4.1991  each  for  a  duration  of  one  year,  on  a  monthly  rent  of  

Rs.74,645.34.

5. As  the  premises  was  old  and  lacking  in  amenities  and  as  the  

respondent was not interested in carrying out repairs/improvements in  

view of its intention to demolish and reconstruct the building, and as  

the appellant was unwilling to pay a higher rent, the appellant, by its  

letter  dated  16.3.1992,   notified  the  respondent  of  its  intention  to  

vacate  the  premises.  In  pursuance  of  it,  the  appellant  vacated  and  

delivered  vacant  possession  of  the  premises  to  the  respondent  on  

25.6.1992. The respondent however went on representing for revision  

of rent with effect from 3.8.1988. The appellant was not agreeable for  

the rent recommended by the Hiring Committee,   and wrote to the  

Hiring  Committee  on  22.5.1992  and  5.11.1993  to  review  the  

reassessment of rent, and furnished several documents in support of its  

request. The Hiring Committee sent a reply dated 4.2.1994 stating that  

its recommendation in regard to rent will not be reviewed.

6. When matters stood thus, the respondent filed W.P. No.1675/1995 in  

the Calcutta High Court for the following reliefs : (i) a direction to  

respondents to reassess the rent from 3.8.1988 in accordance with the  

guidelines  contained  in  the  Government  order  dated  13.6.1985 and

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related orders/circulars; and  (ii) to give effect to the decision of the  

Hiring Committee recommending Rs.13.10 per sq. ft. with effect from  

3.8.1988  by  way  of  interim  reassessment  of  rent  subject  to  final  

assessment.

7. In  the  said  proceedings,  by  interim  order  dated  6.2.1998  and  

24.2.1998, the High Court directed the appellant to pay Rs.5.08 (that is  

the  rent  of  Rs.4.62  plus  10%  increase)  for  the  period  3.8.1988  to  

25.6.1992. The appellant paid the rent accordingly. The writ petition was  

allowed by a Learned Single Judge, by order dated 22.8.2002, directing  

the appellant to pay the rent in regard to the period 3.8.1988 to 25.6.1992,  

to the respondent in accordance with the recommendations of the Hiring  

Committee, within 6 weeks with interest at the rate of 8.33% from 1998  

till date of payment and in default to make payment within 6 weeks, pay  

interest at 10% per annum. The learned Single Judge was of the view that  

the matter was covered by a decision of the division bench of that High  

Court in Regional Director (ER, AMD), Department of Atomic Energy v.  

Rabindra  Nath  Nandi  (A.P.O.  No.243-244/1996  decided  on  

16.5.1997/18.9.1998) and that the appellant was bound to pay increased  

rent as assessed by the Hiring Committee.

8. Feeling aggrieved, the appellant challenged the order of the learned  

Single Judge in an appeal.  By interim order dated 16.6.2003, the division

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bench stayed  the  operation  of  the  order  of  the  Learned  Single  Judge,  

subject to appellant depositing  50% of the rent calculated at the rate of  

Rs. 13/10 per sq.ft. recommended by the Hiring Committee, with liberty  

to the respondent to withdraw the same. The Division Bench disposed of  

the  appeal  by  order  dated  31.8.2006  with  the  following  directions,  

purporting to follow the decision in Rabindra Nath Nandi (supra) :

(i) The  appellant  should  deposit  the  balance  50%  of  the  arrears  calculated at the rate of Rs.13.10 per sq.ft. within two weeks.

(ii) As  the  Hiring  Committee  had  made  available  the  details  of  calculations, the appellant and respondent should offer their views on the  assessment of rent by Hiring Committee within four weeks.

(iii) The Hiring Committee should reconsider the matter (in the light of  the observations of the High Court in Rabindra Nath Nandi) and take a  final decision within three months thereafter.

(iv) The Hiring Committee should communicate its recommendations  along with all calculations in support of it, to both the parties.

(v) The  appellant  should  then  take  a  decision  on  the  said  recommendations in the light of the observations contained in Rabindra  Nath Nandi within four weeks thereafter. If the recommendation was not  accepted,  it  should communicate  the  reason for non-acceptance to  the  respondent within 48 hours thereof. If the recommendation was accepted,  all outstanding dues should be paid to respondent with interest at 10% per  annum, within four weeks.

(vi) The Bank guarantee furnished by the respondent should continue  till  the  controversy  was  finally  resolved.  The  respondent  would  be  entitled  to  withdraw  further  50%  of  the  amounts  deposited  by  the  appellant by furnishing a further bank guarantee.  

9. The said order is challenged in this appeal by special leave. The  

appellant  contends  that  the  writ  petition  was  not  maintainable,  as  the

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lease agreement contained an arbitration clause for settlement of disputes.  

It also contends that the landlord was entitled to increase in rent only in  

terms of the provisions of the West Bengal Premises Tenancy Act, 1956  

and not otherwise. It is further contended that the reassessment by the  

Hiring  Committee  was  only  a  recommendation  and  as  the  increase  

recommended by the Hiring Committee was arbitrary and excessive, it  

was not bound to accept  the same. Lastly it  is pointed out that it  had  

already vacated the premises on 25.6.1992 and the tenancy till that date  

was regulated by lease agreements executed on 11.4.1989, 10.5.1990 and  

29.4.1991 which stipulated a monthly  rent of Rs.74,645/-, and therefore  

it was not liable to pay any increased rent. On the contentions urged, the  

following questions arise for our consideration :

(i)  Whether  the  writ  petition  by  the  respondent  was  not  maintainable, in view of clause 17 of the lease agreements  dated  11.4.1989,  10.5.1990  and  29.4.1991  providing  for  settlement of disputes by arbitration ?

(ii) Whether the recommendation by the Hiring Committee  was binding on the appellant and whether the respondent- landlord could enforce payment of the rent recommended  by the Hiring Committee ?

(iii)Whether the directions issued by the High Court in the  impugned  order  dated  31.8.2006  are  warranted  or  justified ?

Re : Question No. (i) :

10. The appellant submit that the parties had entered into three lease

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agreements  dated 11.4.1989, 10.5.1990 and 29.4.1991 in regard to the  

periods  1.4.1989 to  31.3.1990,  1.4.1990 to  31.3.1991 and 1.4.1991 to  

31.3.1992 and all  the  three agreements  contained an arbitration  clause  

(Clause No. 17) providing that any dispute or difference arising between  

the parties, concerning the subject matter of the lease agreements or any  

covenant, clause or thing contained therein or otherwise arising out of the  

said  leases,  shall  be  referred  to  an  arbitrator  to  be  appointed  by  the  

Government  of  India  and  the  decision  of  such  arbitrator  shall  be  

conclusive and binding on the parties hereto. Having regard to the said  

provision for arbitration, the appellant contends that the remedy of the  

landlord-respondent,  if  it  wanted  any  increase  in  rent,  was  to  seek  

reference to arbitration and the writ petition was misconceived and not  

maintainable.  

11. A careful reading of the arbitration clause in the lease agreements  

discloses that what is referable to arbitration, is any dispute or difference  

concerning  the  subject  matter  of  said  three  lease  agreements  or  any  

clauses thereof or any matter  arising out of the said lease agreements.  

But the writ  petition was not  in respect  of any of the said three lease  

agreements or any term thereof. The grievance of the respondent put forth  

in the writ petition is as under :

“On 28.7.1988, the respondent requested the appellant to refix the rent for  a period of five years with effect from 3.8.1988 by referring the matter to

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the Hiring Committee. The appellant accordingly referred the matter to  the Hiring Committee by letter dated 25.10.1988. The Hiring Committee  after considering the matter, recommended payment of rent of Rs.13.10  per sq. ft. of carpet area, inclusive of all municipal taxes with effect from  3.8.1988. The appellant, a department of Government of India, was bound  by the said recommendation, having regard to the terms of the Official  Memoranda  dated  19.7.1972,  1.9.1982,  9.5.1983,  22.8.1984  and  13.6.1985 of Government of India. But the appellant failed to implement  the said recommendation of the Hiring Committee. Nor did it choose to  itself  reassess  the  rent  from  3.8.1988  in  terms  of  the  O.M.  Dated  13.6.1985, if it was not agreeable to accept the recommendation of the  Hiring Committee. Therefore the appellant should be directed to increase  the rent from 3.8.1988 in terms of the O.M. dated 13.6.1985.”

The relief sought in the writ petition thus did not relate to, nor arise from  

the contract of lease (the three lease agreements containing the arbitration  

agreement)  but  allegedly  arose  out  of  the  O.M.  dated  13.6.1985  and  

related  official  memoranda  issued  by  the  Government  of  India.  The  

subject  matter  of  those  official  memoranda  was  not  subject  to  any  

provision for arbitration. The arbitration clauses in the lease agreements  

dated  11.4.1989,  10.5.1990 and 29.4.1991,  therefore,  did  not  cover  or  

govern  the  issue  raised  in  the  writ  petition.  Therefore  the  arbitration  

clause in the three lease agreements would not come in the way of the  

writ  petition  being  entertained.   We  are  fortified  in  our  view  by  the  

decision in  Titagarh Paper Mills Ltd. v. Orissa State Electricity Board  

[1975 (2) SCC 436] wherein this Court held :

“...  when  the  Board  decided  to  levy  the  coal  surcharge  on  the  consumers  receiving  electricity  from the  Talcher-Hirakund  grid,  it  claimed to do so under Sections 49 and 59 and the Sixth Schedule to  the  Supply Act.  We must,  therefore,  first  examine  whether  any of  these provisions of the Supply Act empowered the Board to levy the  coal  surcharge.  We  fail  to  see  how  the  machinery  of  arbitration

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contained in clause (23) of the agreement can possibly cover such a  question. The arbitration agreement in that clause applies only to a  dispute or difference 'as to the supply of electrical energy hereunder   or the pressure thereof or as to the interpretation of this Agreement or   the right of the supplier or the consumer respectively to determine the   same or any other question, matter or thing arising hereunder.'  The  question as to whether the Board had the power under Sections 49 and  59 and the Sixth Schedule to the Supply Act to levy the coal surcharge  is not a question, matter or thing arising under the agreement. It is a  claim founded on the provisions of the Supply Act to impose the coal  surcharge in addition to the rates payable by the appellant to the Board  under the agreement. Such a claim clearly falls outside the ambit and  coverage of the arbitration provision contained in clause (23) of the  agreement. The arbitration agreement cannot therefore, be regarded as  a relevant factor which should legitimately influence the discretion of  the Court in declining to entertain the writ petition on merits.”    

      (emphasis supplied)

Re : Questions  (ii) and (iii) :

13. Neither the Single Judge nor the division bench of the High Court  

examined the scope, purport and effect of the O.M. dated 13.6.1985 and  

other  related  government  orders.  They  merely  relied  upon  the  earlier  

judgment in Rabindra Nath Nandi and held that the appellant was legally  

bound to increase the rent from 3.8.1988 as per the recommendations of  

the Hiring Committee.

14. It  is  necessary  to  refer  to  the  background  in  which  Hiring  

Committees were constituted and the effect of the Official Memoranda  

relating   to  assessment/reassessment  of  rent,  before  examining  these  

questions.  Government  was  taking  on  rent  several  privately  owned  

premises.  The  officers  in  charge  of  the  hiring  departments  of  the

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government were not experienced in real estate matters and lacked the  

technical expertise in rent fixation.  They faced difficulties in verifying  

whether  the  rents  demanded  by  the  landlords  were  reasonable  or  

excessive. Many a time, owners of plots were also required to construct  

buildings  or  make  additions  to  existing  rented  premises,  to  meet  the  

specific requirements of the government departments. That also gave rise  

to problems in assessing the reasonable rent. Sometimes, there was also  

collusion  between  the  building  owners  and  the  local  officers  of  the  

government departments, resulting in fixation of exorbitant rent for the  

premises, to the detriment of public interest.  Having thus felt the need to  

have  expert  advise,  the  government  constituted  'Hiring  Committees'  

consisting of Engineers from Public Works department, in various cities  

to advise the hiring government departments  proposing to take private  

buildings on rent. A somewhat similar difficulty was also faced when it  

became necessary to increase the rent at the time of renewal or extension  

of lease, as refusal to increase rents, after the expiry of the lease period  

was likely to result in action for eviction. It was therefore necessary to  

periodically re-assess the rent for purpose of revising the rent. Where the  

contracts of lease did not provide for periodical increases, subject to facts  

and circumstances of each case,  it  was thought fit  to increase the rent  

every five years, by consent of both parties. Here again, the expertise of  

the Hiring Committee was required to assess the increase in rent, so  as to

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enable the lessee departments to negotiate with the landlords to arrive at  

an agreed increase in rent.  

14.1) The  first  circular  regarding  revision  in  rent  was  issued  by  the  

Government  of  India  on  19th July,  1972.  It  directed  that  rents  once  

assessed cannot be enhanced even by mutual agreement. But a request  

from  the  landlord  for  revision  was  to  be  forwarded  by  the  hiring  

department  to  the  CPWD.   The  CPWD  authorities  were  required  to  

decide whether the rent required an equitable revision, after ascertaining  

whether any of the following circumstances existed  :

(i) Alternations/additions to the building having been carried out by the  landlord, thereby increasing its effective utilizable area;

(ii)Additional facilities/amenities having been provided in the building  (such  as  additional  fans,  geysers,  bath  rooms,  additional  electric  appliances etc.) by the landlord, after the initial letting;  

(iii)Increase in the property/house tax by the local authorities;

(iv)Imposition  of  new  element  of  tax  such  as  education  cess  by  the  State/Local authorities.  

(v)The rent control law applicable to the town/city concerned requiring  increase in rent.  

14.2) The  subsequent  OM  dated  1st September,  1982  noted  that  the  

standard lease deeds provided for the  repairs  to  be carried out  by the  

landlord and in default of such repairs by the landlord, the government  

could execute the repairs and recover the cost from the rent. It was also  

noted  that  the  landlords  were  not  undertaking  repairs  or  works  of

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maintenance, as they were not assured of suitable enhancement in rent. A  

decision  was  therefore  taken  for  allowing  periodical  revision  of  rent  

payable for private buildings. It was decided that the reasonableness of  

the rent may be got assessed from the CPWD on the expiry of the period  

of five years (from the date of original assessment or the date of the issue  

of the said OM dated 1.9.1982, whichever was later) and after every five  

years thereafter. In making the reassessment, the CPWD was required to  

take into the account the variation in the cost index during the relevant  

period in addition to the factors mentioned in the O.M. dated 10.7.1972.

14.3) The third OM dated 9th May 1983 provided that the reassessment  

was to be done keeping in view, the variation in the cost of construction  

of the building including land appurtenant thereto and the depreciation  

due to wear and tear during the relevant period in addition to the factors  

mentioned in the O.M. dated 10.7.1972.

14.4) The fourth OM dated 22nd August,  1994 provided the  following  

clarifications  :  (1)  No  initiative  for  revision  was  to  be  taken  by  the  

government (tenant) and the process of reassessment should be initiated  

only after a request from the owner of the leased premises, the later of the  

dates between the date of receipt of the request and the date on which the  

revision was due being adopted as the date for revision of rent. (2) In all  

such cases or reassessment of reasonable rent, a fresh lease agreement in

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the form prescribed was to be entered into with the concerned landlord.  

(3)  Wherever Hiring Committees were functioning (such as in Bombay,  

Calcutta,  Delhi  etc.),  refixation  of  rent  was  to  be  done  by  such  

committees and intimated to the concerned departments with details. (4)  

All  the  Ministries/Departments  were  required  to  finalize  the  cases  of  

reassessment  of  rents  in  consultation  with  the  concerned  Hiring  

Committee.

14.5) The last OM dated 13.6.1985 required the Hiring Committees to  

follow the guidelines given below, while reassessing the rents :

“(i) to work out the reproduction cost of the building as on the date of  hiring  based  on  the  ruling  cost  of  building  construction  in  the  locality.

(ii)  to  work out  the depreciated  value of  the property assuming a  straight-line variation of depreciation depending on the age of the  building.

(iii) to work out the land area appurtenant to the building taking into  account local bye laws or in its absence with reference to the general  practice in the locality.

(iv) to work out the cost of land on the basis of prevailing market  rates for comparable land in the locality and also the value of land  appurtenant to the building and the surplus land separately.

(v) to add the cost of appurtenant land to the depreciated value of the  building to assess the reasonable return on the property.  

(vi)  to  add :  (a)  the  actual  Municipal  taxes;  (b)  maintenance  and  repairs (12% of the Gross returns) and (c) an appropriate provision in  the form of a sinking fund for recovery of capital after expiry of life  of the building (with reference to Sinking Fund Table).

    The  said  OM  dated  13.6.1985  contained  the  following  further

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instructions:

“3.  In all cases, in addition to working out the rent on the principles  of  valuation  as  enumerated  above,  the  market  rate  of  the  rent  prevalent  in  the  area  should  also  be  ascertained  by  the  authority  giving  the  rent  reasonableness  certificate.  Such  inquiries  may  be  made taking into account rent being paid for properties taken on lease  by other government or semi government organizations like public  sector  undertakings,  banks  etc.  for  similar  accommodation  in  the  locality.  Officers  of  the  CPWD  should  ascertain  such  figures  of  prevailing market rents and collect authentic date preferably based on  documents  taking  into  account  the  conditions  included  in  the  particular lease deed of those premises from which the figure is taken  and  also  keeping  in  view  the  relative  areas/size.  The  properties  should be comparable in specifications and amenities provided. They  should make sure that the conditions of hiring are similar and also  ensure that the factors for which landlord is landlord like municipal  taxes, maintenance and repairs etc in the cases are similar.

4.  After assessing the two values for rent as enumerated above i.e.  rent based on recognized principles of valuation and rent based on  prevailing market rates in the locality, the reasonable rent certificate  should indicate both figures in all cases where the prevailing market  rent is more than the rent calculated on the principles of valuation  otherwise the lower figure only need be indicated. The final decision  regarding the actual rent to the paid to the owner of the building  will  rest  with  the  authorities  desiring  to  hire  the  property  keeping  in  view  the  two  figures  of  rent  indicated  in  the  certificate,  their  own  needs  and  availability  of  the  accommodation in the locality at the rent to be determined.”

5.  Reassessment of rent of leased building will be treated as fresh  case  of  rent  assessment  and  may  be  done  according  to  the  same  principles as discussed in the preceding paragraphs.”    

(emphasis supplied)

15. In  Rabindra  Nath  Nandi,  which was followed by the  impugned  

judgment,  the  Calcutta  High  Court  after  referring  to  the  O.Ms.  dated  

19.7.1972,  1.9.1982,  9.5.1983,  22.8.1984  and  13.6.1985  concluded  as  

under :  

(a) The five circulars (Official  Memoranda) in effect  provided for and

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envisaged revision of rent by consent. As the revision of rent could not be  left to the discretion of any individual officer and to lay down a uniform  policy, rationalized principles were laid down by the said circulars. The  said circulars regulated not only the grant of consent but also provided the  method  by  which  the  consent  could  be  accorded  by  the  government  department.  

(b) The policy decision contained in the said circulars did not amount to  contracting out of the provisions of the West Bengal Premises Tenancy  Act, 1956, as the said Act recognized the right of parties to determine by  consent reasonable rate of rent payable in regard to any premises covered  by the said Act.   

(c) As the circular dated 13.6.1985 and connected circulars were valid  and  binding  on  the  Hiring  Department  (Government)  and  the  Hiring  Committee  had the jurisdiction  to assess and recommend the rent,  the  assessment  by  the  Hiring  Committee  were  binding  on  the  Hiring  Department  (tenant)  if  the  assessment  has  been  made  strictly  in  the  manner prescribed in the circulars.  

(d) The Hiring Department cannot refuse to follow the recommendations  of  the  Hiring  Committee  except  on  the  ground  that  it  was  not  in  accordance  with  the  circulars.  If  the  recommendation  by  the  Hiring  Committee  was  not  in  accordance  with  the  circulars,  the  following  procedure had to be followed:

(i) The Hiring  Committee  must  make  available  to  the  parties  the  details of all calculations made with regard to the assessment of  rents within four weeks from date;

(ii)any  objections  to  such  calculations  by  either  party  must  be  specific and made within four weeks thereafter;

(iii)within the same period any relevant evidence as to the market  rate  for  the  periods  in  question  with  full  particulars  may  be  submitted by either party to the Hiring Committee with copies to  the other side;

(iv)the  Hiring  Committee  will  then  reconsider  the  matter  in  the  light of the observations in this judgment and take a decision on  the materials before it after verification within period of three  months thereafter;

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(v) the  recommendations  alongwith  all  the  calculations  in  support  thereof  will  be communicated  to  both parties  within  48 hours  thereof;

(vi)  the Department shall take a decision on the recommendation  in the light of the observations contained in the judgment within four  weeks  thereafter.  If  the  recommendation  is  not  accepted,  detailed  reasons  for  such  non-acceptance  must  be  recorded  and  communicated to the landlord within 48 hours thereof;

(vii)if the recommendation is accepted, payments of all outstanding  on  account  of  such  reassessed  rents  must  be  made  to  the  landlords  within  four  weeks  from  the  date  of  the  decision  together with interest  at  the rate of 8 1/3% simple interest  per  annum calculated from the date on which the payments were due  upto the date of payment.

The decision is curiously silent as to what should happen if the Hiring  

Department does not accept the recommendation of the Hiring Committee  

and gives the reasons for such non-acceptance. Be that as it may.  

16. We are of the view that the elaborate decision in  Rabindra Nath  

Nandi missed  the  core  issue  and  ignored  the  relevant  law  governing  

landlords and tenants. A lease is governed by the terms of the contract  

(deed  or  agreement  of  lease)  between  the  parties.  If  the  contract  

prescribes a rent for the period of lease, the same being agreed rent, it is  

binding  on  the  parties.  If  the  lease  provides  for  revision  of  rents  

periodically,  and  specifies  the  method  and  manner  of  revision,  such  

revised rent  would also be the agreed rent.  Where a statute governing  

tenancies and/or rents provides for fixation of rent or increases in rent,

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and such statute is applicable to the tenancy in question, then the rent will  

have  to  be  determined  in  accordance  with  the  statutory  provisions.  

Subject to the above, any increase can be only by consent of parties. If the  

lease period expires and the parties are not able to agree upon the increase  

in rent or terms of renewal, it is open to the landlord to initiate action for  

evicting the tenant. But under no circumstances can the landlord require  

the tenant to pay during the period of a lease, a rent higher than what is  

agreed  between  them  or  what  is  provided  for  in  the  statute.  The  

assessment or determination of rent by the Hiring Committee is an expert  

advice  to  the  lessee  and  nothing  more.  Except  where  there  is  an  

agreement  to  abide  by  the  fixation  of  rent  by  the  Hiring  Committee,  

neither  party can insist  or  require the other  party  to abide by the rent  

assessed  by  such  Committee,  as  determination  of  rent  by  the  Hiring  

Committee is not statutory or contractually binding on the parties.  

17. If  the  parties  (lessor  and  lessee)  agree  that  an  increase  in  rent  

determined by the Hiring Committee will  be binding on them, then of  

course, the determination by the Hiring Committee will be binding upon  

the  parties.  The  lease  deed/agreement  between  the  parties  itself  may  

contain  a  clause  that  the  rent  will  be  as  determined  by  the  Hiring  

Committee  and the parties  will  be bound by the same.  It  is  of some  

relevance  to  note  that  in  the  year  1987,  the  respondent  proposed  to  

demolish  the  existing  building  and  construct  a  new  building.  The

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appellant and respondent entered into a memorandum of agreement dated  

28.9.1987 under  which  the  respondent  agreed  to  put  up  an  additional  

building in the vacant space, and the appellant agreed to temporarily shift  

to the said building to enable the landlord to demolish the old building  

and reconstruct the same and thereafter let out the reconstructed building  

to the appellant. The said agreement specifically contemplated (Proviso to  

clause 31) fixation of rent as assessed by the Hiring Committee. But the  

said proposal for demolition and reconstruction did not materialise.  Be  

that as it may.  

19. The fundamental requirement relating to consent, has been ignored  

in  Rabindra Nath Nandi. The said decision proceeds on the assumption  

that the O.M. dated 13.6.1985 and other related circulars prescribed the  

procedure for revision of rents every five years, and there was an implied  

consent on the part of the government department to revise the rent as  

assessed by the Hiring Committee and pay rent  in terms of  it.  It  also  

proceeds on the assumption that whenever government takes a premises  

on lease, irrespective of the contract of lease, the OM dated 13.6.1985  

and related  circulars  would make it  obligatory for  the government to  

revise the rent every five years. Both these assumptions are baseless and  

arise  from a  misreading  of  the  said  OMs.   The  decision  ignores  the  

specific  provision  in  the  OM dated  13.6.1985  that  any  assessment  or  

reassessment  of  rent  by  the  Hiring  Committee  will  be  only

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recommendatory  and  not  binding  upon  the  Hiring  Department,  which  

takes the premises on  lease from the private landlord. The OM dated  

13.6.1985 specifically states that the final decision regarding the actual  

rent to be paid to the owner of the building will rest with the authorities  

desiring  to  hire  the  property  keeping  in  view the  two  figures  of  rent  

indicated  in  the  certificate,  their  own  needs  and  availability  of  the  

accommodation in the locality at the rent to be determined.

20. As rightly observed in Rabindra Nath Nandi, the government was  

aware of the fact that the Hiring Departments or their individual officers  

will  not  have  the  expertise  to  assess  the  rent.  Therefore,  it  devised  a  

procedure for assessment or reassessment of rent by an Expert Committee  

(Hiring  Committee)  whose  recommendation  would  help  the  Hiring  

department to take a decision in regard to fixation of rent or  revision of  

rent. But the mere fact that a mechanism had been evolved to assess or  

reassess the rent by the Hiring Committees or that a Hiring department  

had referred a demand for increase for rent by the landlord, to the Hiring  

Committee  for its  assessment/recommendation,  does not mean that  the  

assessment or reassessment of rent by the Hiring Committee is binding  

upon the Hiring department or the landlord. Nor will the assessment by  

the Hiring Committee, would create in the private landlord or the tenant  

(government  department),  an  enforceable  right  with  reference  to  the  

recommendation of rent made by the Hiring Committee, against the other

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party  to  the  lease.  The  Hiring  Committee  is  an  expert  body,  and  a  

consultant to the lessee department. In considering the recommendations  

of the Hiring Committee, the Hiring department is of course expected to  

act  reasonably  and  not  arbitrarily.  The  Hiring  department  may  also  

usually  abide  by  the  advise  of  the  Hiring  Committee.  But  the  Hiring  

department is not bound by its recommendation. For several reasons, it  

may refuse to act upon it. The following portion of the proceedings dated  

6.6.1989 of the Hiring Committee itself makes this clear :  

“From the directives contained in the office Memo dated 13.6.85, it will  be observed that the final decision regarding the actual rent to be paid to  owner of the premises will rest with the authorities intending to hire the  property, keeping in view the above two figures of rent, their own needs,  and , no less, the availability of accommodation in the locality at the rent  to be determined.”   

We are therefore of the considered view that in the absence of an express  

contract  agreeing  to  be  bound  by  the  recommendation  of  rent  by  the  

Hiring Committee, its recommendations are neither binding on the hiring  

departments nor on the lessors.  Rabindra Nath Nandi,  to the extent it  

holds to the contrary, in our considered view, is not good law.  

21. It  is  relevant  to note  that  even the respondent proceeded on the  

basis  that  the  reassessment  by  the  Hire  Committee  was  only  

recommendatory  and  was  not  binding.  In  its  letter  dated  27.6.1989  

addressed to the appellant, the respondent referred to the recommendation  

by  the  Hiring  Committee  in  regard  to  a  rent  of  Rs.13.10  per  sq.  ft.

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(inclusive of municipal taxes), but requested the appellant to fix the rent  

at  Rs.19  per  sq.  ft.  exclusive  of  municipal  taxes  with  effect  from  

3.8.1988. Even in the writ petition filed by respondent, the contention of  

the respondent was not that the rent of Rs.13.10 recommended by the  

Hiring Committee was only provisional and its prayer was for increasing  

the rent in terms of the O.M. dated 13.6.1985 for the period commencing  

from 3.8.1988.

22. The appellant has categorically stated that it was not willing to pay  

the higher rent suggested by the Hiring Committee.  In fact,  it  made it  

clear that it was not willing to pay higher rent as the landlord failed to  

carryout  repairs/maintenance  and  as  it  vacated  the  premises.  There  is  

therefore no question of subjecting the question of rent to another round  

of determination by the Hiring Committee.  The respondent is not entitled  

to the reliefs sought in the writ petition.  

23. We therefore allow this appeal, set aside the orders of  the Single  

Judge and Division Bench of the High Court and dismiss the writ petition.  

The respondent shall refund all amounts received in excess of the agreed  

rent, to the appellant within three months.         

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………………...............J.         (R.V. RAVEENDRAN)

       ………..……….............J.            (J M PANCHAL)           

New Delhi, July 7, 2009.

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