13 May 1954
Supreme Court


Case number: Appeal (crl.) 18 of 1953






DATE OF JUDGMENT: 13/05/1954


CITATION:  1954 AIR  496            1955 SCR  439  CITATOR INFO :  RF         1970 SC1597  (37)

ACT:    Bombay Rents, Hotel and Lodging House Bates Control  Act, 1947,  (Bombay  Act LVII of 1947)-Section 18(1)-Words  "  in respect of "--Meaning of Receipt of money by landlord or any person   on   his  behalf--On   executory   contract-Whether punishable under the Act.

HEADNOTE:   Section 18(1) of the Bombay Rents,..,......... Control Act 1947 provides;- "  If  any  landlord either himself or  through  any  person acting  or  Purporting   to act  on  his  behalf............ receives  any fine, premium or other like sum or deposit  or any consideration, other than 159 the standard rent  in respect of the grant,  renewal or continuance of a lease of any premises  such  landlord or in the manner indicated by the section. Held,  that  the words " renewal or continuance of  a  lease clearly suggest that there must be a renewal or  continuance of  a subsisting lease.  They would not cover  an  executory contract to grant a lease. Giving  the  words " in respect of " their  widest  meaning, viz.,  relating  to " or " with reference to " it  is  plain that  this  relationship must be predicated  of  the  grant, renewal  or continuance of a lease and unless a lease  comes into  existence simultaneously or near about the  time  that the money is received it cannot be said that the receipt was " in respect of " the grant of a lease.  The relationship of landlord  and  tenant does not come into  existence  till  a lease  comes  into existence, in other words,  there  is  no relationship of landlord and tenant until there is a  demise of  the property which is capable of being taken  possession of. The section does not make the intention punishable, it makes an  act  punishable which is related to the existence  of  a lease.   It does not make receipt of money on  an  executory



contract punishable. London  and  North  EasterN Railway Co.  v.  Berriman  (1946 A.C.278, 295) referred to.

JUDGMENT:      CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 18 of 1953. Appeal under article 134(1)(c) of the Constitution of  India from  the Judgment and Order dated the 18th February,  1953, of the High Court of Judicature at Bombay in Criminal Appeal No. 592 of 1952 arising out of the Judgment and Order  dated the  21st  May,  1952,  of  the  Court  of  the   Presidency Magistrate, 19th Court,  Bombay,   in   Case   No.    147/P/ 1951. B.   H. Lulla and Rajinder Narain for the appellants. Porus A. Mehta for the respondent. 1954.  May 13.  The Judgment of the Court was delivered by MEHR  CHAND MAHAJAN C.J.-The appellants were  charged  under section  18(1) of the Bombay Rent I Restriction  Act,  1947, for  receiving  from Shankar Das Gupta through  Mathra  Das, accused No. 3, on 23rd November, 1950, a sum of Rs. 2,400 as premium or 160 pugree in respect of the grant of lease of Block No. 15 in a building  under  construction.  The  magistrate  found  ’the appellants  guilty of the charge and sentenced each of  them to two months’ R.I. and a fine of Rs. 1,200.  Mathra Das was convicted and sentenced to one day’s S.I. and a fine of  Rs. 100.  The fourth accused, Roshanlal Kanjilal, was acquitted. Mathra  Das preferred no appeal against his  conviction  and sentence.   The appellants preferred an appeal to  the  High Court   against  their  conviction.   This  was   heard   by Gajendragadkar and Chainani JJ. on the 8th of October, 1952. It was contended, inter alia, that even if it were held that the appellants had -accepted the sum of Rs. 2,400 they could not be said to have committed an offence under section 18(1) of  the Act inasmuch as the amount could not in law be  held to  be  a premium in respect of the grant of -a  lease.   On this point the learned Judged said as follows :- " In the present case the work regarding the building  which still  remained  to be done was so important that  both  the parties   agreed  that  the  complainant  should  get   into possession  after  the said work was completed.  In  such  a case  unless  the building is completed the  tenant  has  no right  which  can  be enforced in a Court of  law.   If  the landlord finds it impossible for any reason to complete  the building,  what is the right which an intending  tenant  can enforce  against him.  Therefore, in our opinion,  there  is considerable force in the contention urged by Mr. Lulla that in the present case even if it be held that the accused  had received  Rs.  2,400 in the circumstances to which  we  have already  referred  that  would not  bring  them  within  the mischief of section 18(1) because there has been no grant of a  lease  at  all.   There is only  an  agreement  that  the landlord  would lease to the complainant a  particular  flat after  the building has been fully and  properly  completed. It  does appear that section 18 1 does not bring within  its mischief executory agreements of this kind." A contrary view had been expressed in Criminal Revision  No. 1178  of  1949, by another Bench of the High  Court  on  the construction of section 18(1).  The 161 matter  was  therefore  referred to  the  Full  Bench.   The



question framed for the consideration of the Full Bench  was in these terms:- If  as  owners  of an in complete  building  the  appellants accepted  Rs.  2,400 from the complainant in respect  of  an agreement  between  them that the appellants were  bound  to give and the complainant was entitled to take possession  of flat  No.  15  in  the said building as  soon  as  the  said building  was  completed on the agreed rent of  Rs.  75  per month,  did  the acceptance of Rs. 2,400 by  the  appellants fall within the mischief of section 18 of Bombay Act LVII of 1947 This  question,  if  answered in the negative  by  the  Full Bench, would have concluded the case. The  Full  Bench  answered  the  question  referred  in  the affirmative.   It  held  that the  oral  agreement  did  not constitute a lease but it amounted to an agreement to  grant a lease in future, and that the receipt of consideration for an  executory agreement was within the mischief  of  section 18(1)  of the Act.  The Full Bench Expressed its opinion  in these terms:- "  What  the Legislature has penalized is the receipt  of  a premium  by  the  landlord  and  the  Legislature  has  also required  a nexus between the receipt by the landlord  of  a premium and the grant of a lease of any premises.  Therefore a  receipt  alone  by a landlord  would  not  constitute  an offence,  but that receipt must be connected with the  grant of  the  lease of any premises.  Unless that  connection  is established  no offence would be committed.  The  contention of Mr. Lulla on behalf of the accused is that the receipt of the  premium  must  be simultaneous with the  grant  of  the lease.  If the lease comes into existence at a future  date, then  the receipt of a premium according to him is  not  "in respect of " the grant of a lease.  Therefore the key  words according to us in this section are " in respect of." It  is relevant  to observe that the Legislature has advisedly  not used the expression "for" or "in consideration of" or  "  as a condition of " the grant of a lease.  It has used an expression which has the widest connotation and 21 162 means in its plain meaning " connected with or  attributable to,"  -and therefore it is not necessary that there must  be simultaneous  receipt by the landlord with the grant of  the lease.  So long as so ’me connection is established  between the grant of the lease and the receipt of the premium by the landlord, the provisions of the section would be  satisfied. In  our  opinion  it is impossible to contend  that  in  the present  case there was no connection whatever  between  the landlord receiving the premium and his granting the lease of the premises.  It is true that when he received the  premium he  did not grant a lease.  It is true that all that he  did when  he received the premium was to enter into  a  contract with his tenant to grant a lease in future.  But the  object of  the landlord in receiving the premium and the object  of the tenant in paying the premium was undoubtedly on the part of the landlord the letting of the premises and oh the  part of  the tenant the securing of the premises.  Therefore  the object of both-the landlord and the tenant was the grant  of the  lease  of the premises concerned and  that  object  was achieved partly and to start with by an oral agreement being arrived  at between the landlord and the tenant with  regard to  the  granting of this lease, the lease  being  completed when delivery of possession of the premises would be  given. Therefore,  in our opinion, on-the facts of this case it  is not  possible  to contend that the payment  of  the  premium



received by the landlord was unconnected with the grant of a lease  of any premises.  The fact that no grant was made  at the time when the premium was received, the fact that  there was merely an agreement to grant a lease, the fact that  the lease  would come into existence only at a future date,  are irrelevant  facts  so  long as the  connection  between  the receiving  of the premium and the granting of the  lease  is established." On return from the Full Bench, the Division Bench considered the other contentions raised on behalf of the appellants and held  that there were no merits in any one of  those  points and  in  the  result  the  appeal  was  dismissed.   It  was certified  that the case involved a substantial question  of law and was a fit one for appeal to this Court.  This appeal is before us on that certificate, 163 The  principal question to decide in the appeal  is  whether the answer given by the Full Bench to the question  referred to  it is right, and whether receipt of a sum of money by  a person  who  enters into an executory contract  to  grant  a lease  of  a building under construction  falls  within  the mischief of section 18(1) of the Act Section 18(1) provides: "  If  any  landlord either himself or  through  any  person acting or purporting to act on his behalf receives any fine, premium  or other like sum or deposit or any  consideration, other than the standard rent... "   in  respect of the grant, renewal or  continuance  of  a lease  of  any  premises such landlord or  person  shall  be punished  " in the manner indicated by the section Under the section the money  must  be received by the landlord in respect  of  the grant  of  a  lease.  The section refers  to  the  "  grant, renewal  or continuance of a lease." Prima facie,  it  would not  cover  an executory agreement to grant  a  lease.   The words " renewal or continuance of a lease " clearly  suggest that there must be a renewal or continuance of a  subsisting lease.  In the context, grant of tenancy means the grant  of new  or initial tenancy; renewal of tenancy means the  grant of  tenancy after its termination; and continuance seems  to contemplate  continuance  of a tenancy  which  is  existing. Whether  or not an executory agreement for grant of a  lease comes  within the ambit of the section by reason of the  use of   the  words  "  in  respect  of  "  would  be   examined hereinafter.   Before  doing  so it may be  stated  that  an instrument  is usually construed as a lease if  it  contains words  of present demise.  It is construed as  an  executory agreement, notwithstanding that it contains words of present demise,  where certain things have to be done by the  lessor before  the  lease  is granted, such as  the  completion  or repair  or  improvement of the premises, or by  the  lessee, such as the obtaining of sureties. (Vide Halsbury’s Laws  of England, Second Edition, Vol. 20, pp. 37-39).  On the  facts of this case therefore the Full Bench very rightly held that the 164 oral, agreement made between the parties did not  constitute a lease but it amounted to an agreement to grant a lease  in future. It  may further be pointed out that, in fact, in  this  case the  lease never came into existence.  Moreover, in view  of the provisions contained in the Bombay Land Requisition  Act XXXIII of 1948, as amended, the appellants could not let out the  building even after its completion unless on  a  proper notice  being given the Controller of Accommodation did  not



exercise his powers under that Act.  It so happened that  as soon as the building was completed the Controller of  Accom- modation  requisitioned it, and thus no occasion  arose  for giving effect to the executory contract. The  question  that  needs  our  determination  in  such   a situation is Whether section 18(1) makes punishable  receipt of  money  at a moment of time when the lease had  not  come into  existence, and when there was a possibility  that  the contemplated lease might never come into existence.  It  may be  here observed that the provisions of section  18(1)  are penal   in  nature  and  it  is  a  well  settled  rule   of construction  of  penal statutes that if  two  possible  and reasonable constructions can be put upon a penal  provision, the Court must lean towards that construction which  exempts the  subject from penalty rather than the one which  imposes penalty.   It if; not competent to the Court to stretch  the meaning of an expression used by the Legislature in order to carry out the intention of the Legislature.  As pointed  out by Lord Macmillan in London and North Eastern Railway Co. v. Berriman(1), " where penalties for infringement are  imposed it  is  not legitimate to stretch the language  of  a  rule, however  beneficent  its  intention,  beyond  the  fair  and ordinary meaning of its language." The  High  Court took the view that without  stretching  the language  of  section  18(1) beyond its  fair  and  ordinary meaning, the very comprehensive expression " in respect of " used  by the Legislature could lead to only one  conclusion, that the Legislature wanted the (1)  [1946] A.C. 278, 295, 165 penal  consequences of section 18(1) to apply to  any  nexus between the receipt by a landlord of a premium and the grant of  the lease.  In our judgment, the High Court  laid  undue emphasis on the words "in respect of" in the context of  the section.   Giving the words " in respect of "  their  widest meaning,  viz., " relating to " or " with reference to",  it is  plain that this relationship must be predicated  of  the grant, renewal or continuance of a lease, and unless a lease comes  into existence simultaneously or near about the  time that  the  money  is received, it cannot be  said  that  the receipt  was  " in respect of " the grant of a  lease.   The relationship  of  landlord  and tenant does  not  come  into existence  till  a,  lease comes into  existence;  in  other words, there is no relationship of landlord and tenant until -there  is  a, demise of the property which  is  capable  of being  taken  possession of If the Legislature  intended  to make  receipts of money on executory agreements  punishable, the section would have read as follows: " receives any fine, premium  or other like sum or deposit or  any  consideration other  than the standard rent in respect of the lease or  an agreement of lease of the premises, such landlord or  person shall be punished " in the manner indicated in the  section. The section does not make the intention punishable; it makes an act punishable which act is related to the existence of a lease.   It does not make receipt of money on  an  executory contract punishable; on the other hand it only makes receipt of  money on the grant, renewal or continuance of the  lease of  any premises punishable and unless the lease  come  into existence  no offence can be said to have been committed  by the  person  receiving the money.  It is difficult  to  hold that  any  relationship of ’landlord and tenant  comes  into existence  on  the execution of at  agreement  executory  in nature or that the expression " premium " can be  appositely used in connection with the receipt of money on the occasion of the executor of such an agreement, It may well be that if



a  leas( actually comes into existence then any  receipt  of money which has a nexus with that lease may fall within  the mischief of section 18(1), but it is unnecessary to ex press any final opinion on the question as in the present 166 case  admittedly no lease ever came into existence  and  the relationship  of  landlord  and  tenant  was  never  created between the parties.  The landlord never became entitled  to receive the rent from the tenant and the tenant never became liable  to pay the rent.  There was no transfer of  interest in  the  premises from the landlord to the tenant.   On  its plain,  natural,  grammatic  meaning, the  language  of  the section does not warrant the construction placed upon it  by the  Full Bench merely by laying emphasis on the words "  in respect of." In our opinion the language of the section ;’in respect  of the grant, renewal or continuance of a  lease  " envisages  the  existence of a lease and the payment  of  an amount  in respect of that lease or with reference  to  that lease.   Without  the existence of a lease there can  be  no reference  to  it.  If the Legislature  intended  to  punish persons  receiving pugree on merely executory  contracts  it should  have  made its intention clear by use of  clear  and unambiguous language. The construction we are placing on the section is borne  out by  the  circumstance that it occurs in Part I of  the  Act. Section 6 of this Part provides that " in areas specified in Schedule  I,  this  Part shall apply  to  premises  let  for residence, education, business, trade or storage." This Part relates to premises let, in other words, premises demised or given  on lease and not to premises that are promised to  be given  on lease and of which the lease may or may  not  come into  being.  The definition of the expression  "  landlord" also suggests the same construction.  Landlord " as  defined in section 5 of the Act means any person who is for the time being receiving, or entitled to receive, rent in respect  of any premises whether on his own account or on account, or on behalf,  or  for the benefit, of any other person, or  as  a trustee,  guardian or receiver for any other person  or  who would so receive the rent or be entitled to receive the rent if  the  premises  were let to a  tenant............  It  is obvious  that  on the basis of an  executory  agreement  the appellants would not be entitled to receive any rent.   They would  only be entitled to receive rent after the  lease  is executed and actual 167 demise  of the premises or their transfer is made in  favour of  the  complainant.   The  definition  of  the  expression tenant" also suggests the same construction. Mr.  Mehta  for the State, besides supporting  the  emphasis placed  by  the High Court on the words "  in  respect  of," contended that that construction could be supported in  view of the provisions of sub-section (3) of section 18 which  is in these terms: "  18(3)-Nothing in this section shall apply to any  payment made under any agreement entered into before -the first  day of September, 1940, or to any payment made by any person  to a  landlord by way of a loan, for the purpose  of  financing the erection of the whole or part of a residential  building or  a residential section of a building on the land held  by him  as  an  owner,  a lessee  or  in  any  other  capacity, entitling  him  to build on such land,  under  an  agreement which  shall  be  in  writing  and  shall,   notwithstanding anything contained in the Indian Registration Act, 1908,  be registered.   Such  agreement shall inter alia  include  the following conditions, namely,



(1)  that the landlord is, to let to ’such person the  whole or  part of the building when completed for the use of  such person or any member of his family........ It  was suggested that but for this exception the  executory agreement  would be included within the mischief of  section 18(1)  and  that  unless such  agreements  were  within  the mischief  of the section there would have been no  point  in exempting  them  from  its provisions.  In  our  view,  this contention is not sound.  In the first place, the  exception was  added to the section by Act 42 of 1951,  subsequent  to the agreement in question, and for the purposes of this case section  18(1) should ordinarily be read as it stood in  the Act, at the time the offence is alleged to have been commit- ted.  Be that as it may, it appears that sub-section (3) was added to the section by reason of the fact that some  Courts construed  section 18(1) in the manner in which it has  been construed   by  the  Full  Bench  in  this  case,  and   the Legislature  by  enacting  clause (3)  made  it  clear  that agreements of the nature indicated in the 168 subjection  were never intended to be included therein.   In our  opinion,  the language of that section is not  of  much assistance  in  construing the main  provisions  of  section 18(1). The  result  therefore is that in our view  the  receipt  of money by the appellants from the complainant at the time  of the   oral  executory  agreement  of  lease  was  not   made punishable under section 18(1) of the Act and is outside its mischief,  and  the Presidency Magistrate was  in  error  in convicting  the  appellants and the High Court was  also  in error  in upholding their conviction.  We accordingly  allow this appeal, set aside the conviction of the appellants  and order that they be acquitted.                                Appeal allowed.