09 January 1964
Supreme Court


Case number: Appeal (civil) 1041 of 1963






DATE OF JUDGMENT: 09/01/1964


CITATION:  1965 AIR  440            1964 SCR  (6) 181

ACT: Rent  Control-Order  for deposit of  rent  at  interlocutory stage-If  proper-Delhi Rent Control Act, 1958 (59 of  1958), s.  15(1)-Indian  Income-tax  Act, 1922  (11  of  1922),  s. 46(5A).

HEADNOTE: The  respondent  made an application against  the  appellant under s.  14  of the Delhi Rent Control Act.  In  reply  the appellant pleaded 182 that the respondent had no right to recover rent from him as a  notice under s. 46(5A) of the Indian Income-tax  Act  had been  issued by the Income-tax Officer, that the  respondent had  no locus standi as the property was in the  custody  of the  Court  and a receiver had been appointed and  that  his professional  fees were agreed and be adjusted  towards  the rent  dues.  The Rent Controller recorded the  statement  of the  appellant  and  after hearing  arguments  directed  the appellant under s. 15(1) of the Delhi Rent Control Act, 1958 to deposit back rents at Rs. 300/- per month. On appeal the decision of the Rent Controller was  affirmed, and a further appeal to the High Court also failed. The  appellant contended that the order under s.  15(1)  for deposit  of rent could only be made at the end of  the  case and not at an interlocutory stage. Held:(i)  that the order under sub-s. (1) of s.  15  is not  a  final order but is preliminary to the trial  of  the case  and is made only wherer the rent has in fact not  been paid.   For  the  purpose of an interim  order  it  was  not necessary that there should have been a fun trial and,  that this  was clear from the latter part of sub-s. (1) of s.  15 because  under it not only the arrears have to be  deposited but rent as it falls due has to be deposited month by  month by the 15th of each succeeding month. Nalinakhya  Bysack and Anr. v. Shyam Sunder  Halder,  A.I.R. 1952 Cal. 198, distinguished. (ii)The  notice under s. 46(5A) of the Income-tax  Act  did not amount to a garnishee order and the appellant could make payment  to the rent controller without  incurring  personal liability  because  the rent controller had  stated  in  his order  that the amount would not be paid to any one  till  a



clearance  certificate  was  obtained  from  the  Income-tax Department.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1041 of 1963. Appeal  by special leave from the judgment and order,  dated September 2, 1963, of the Punjab High Court (Circuit  Bench) at Delhi in L.P.A. No. 119-D of 1963. S.T. Desai, J. B.  Dadachanji, O. C. Mathur and  Ravinder Narain, for the appellant. H.N.  Sanyal,  Solicitor-General  of  India  and  B.   P. Maheshwari, for the respondent. 183 January 9, 1964.  The Judgment of the Court was delivered by HIDAYATULLAH  J.-This is an appeal by special leave  against the order of the High Court, Punjab, dated August 14,  1963, by  which an order of the Rent Controller under s. 15(1)  of the Delhi Rent Control Act, 1958, directing the appellant to deposit back rents at Rs. 300 per month from 1st July, 1957, was  confirmed.   The High Court granted the  appellant  one month’s time from the date of its own order, as the original time had already run out. The  appellant is an advocate, who is practising  at  Delhi. He  is  occupying No. 43, Prithvi Raj Road, New Delhi  as  a tenant,  and his landlord Seth Kirori Mal Luhariwala is  the respondent  in this appeal.  The tenancy commenced  on  July 28, 1957, and the memorandum of tenancy, dated July 1, 1957, produced in the case, shows that the premises were taken  on a  monthly  tent of Rs. 300.  The memorandum  also  contains other  terms which need not be mentioned here, because  they are  not  relevant to the present appeal.  It  appears  that Seth Kirori Mal was in arrears in payment of his income-tax, and  a  sum of Rs. 39,00,000 was outstanding from  him.   On October 31, 1957, the Income-tax Officer Central Circle, New Delhi,   to  whom  all  cases  of  Seth  Kirori   Mal   were transferred,  issued  a  notice to the  appellant  under  s. 46(5A) of the Indian Income-fax Act directing him to deposit with  the Income-tax Officer all sums due by way of rent  as also  future  rents.  The appellant sent no  reply  to  this notice.  He had, however,on September 29, 1957, addressed  a letter  to  the respondent Seth Kirori Mal.   The  reply  of Kirori Mal, dated October 15, 1957, figured in the arguments a great deal, and as it is brief, it may be quoted here: "From TO Dated Faigarh, the 15th October, 1957, 184 Dear Sir, With reference to letter No. M-17-58, dated 29th  September, 1957,  1 am to write that you may please adjust  six  months rent of 43, Prithviraj Road, New Delhi, i.e., Rs. 1800 (rent from 1-10-57 to 31-3-1958) towards your professional fee  in part payment thereof.  The balance of your fee will be  paid later at the time of final settlement. Yours faithfully, (Sd.) Paluram Dhanania, For Kirorimal Luhariwala. Kirori  Mal also sent a receipt, dated October 16, 1957,  or the amount, and is item 23 in the record. Kirori  Mal  had litigation in Calcutta.  He had  brought  a suit against four defendants, claiming the present  property as  his "absolute" and "exclusive  self-acquired  property". The case was pending in the High Court and on May 1,  1.958,



an  order was made appointing one Chakravarti as a  Receiver of  the  properties  including No.  43,  Prithvi  Raj  Road. Chakravarti  also  sent  a notice on July 8,  1958,  to  the appellant  demanding rent already due and also as  and  when due.  To this notice, the appellant sent a reply on July 19, 1958.   He  referred to the payment of  rent  by  adjustment towards fees for the period 1st October, 1957 to 31st March, 1958, which was the subject of the letter above.  He  stated that  as  regards  rent after 1st April,  1958,  he  had  no objection  to  pay the amount to the Receiver or  any  other claimant  but regretted that it was not possible for him  to make  the payment because of the notice served upon  him  by the  Income-tax Officer.  He asked the Receiver to  get  the notice withdrawn, and stated that he would be glad to  remit the  amount  of  rent to him when that was  done.   He  also raised  the question of certain other expenses which he  had incurred  in connection with the house which he  claimed  he was entitled to deduct from the rent and informed that a few repairs  were, required in the house.  A second  letter  was sent  by the Official Receiver on September 5. 1959,  making another demand.  In his reply, dated September 14, 1959,  to this letter, the appellant raised the 185 -question  that a sum of Rs. 23,500 was payable to  him  for _professional services rendered by him to Seth Kirori Mal. -He stated:               "You  will  therefore  appreciate  that  I  am               entitled  to adjust the rent  payable  against               the  fees due to me and the amount due  to  me               will  absorb  the rent for a little  over  six               years.               Even before this Seth Kirori Mal had paid me a               sum  of Rs. 1800 by way of adjustment of  rent               towards  my professional fees due.  You  will,               therefore, kindly agree that the rent  payable               is adjustable against the professional fee due               to me." With this letter, he enclosed a copy of a statement of  fees -amounting  to  Rs.  23,500 which he had  submitted  to  his ,client on February 4, 1959.  The Official Receiver then in- formed the appellant that the party concerned had denied the claim  for  fees as absolutely false, and  observed  in  his letter  that the professional fees should be the subject  of -some other proceeding but the rent should be paid  with,out delay.  He enquired if the amount of rent had been paid  ’to the Income-tax department in response to the notice.  In his reply to this letter, on July 5, 1960, the appellant for the first  time stated that there was an agreement  between  him and  Seth  Kirori  Mal  to  adjust  the  rent  towards   his professional  fees  until  the fees  were  fully  paid.   He offered  -to  reduce  the fees if Seth Kirori  Mal  had  any objection,  but stated that till the professional fees  were recouped, no rent could be considered to be due from him. On  November 25, 1960, Seth Kirori Mal applied to  the  High Court at Calcutta for directions to the Official Receiver to take appropriate proceedings to realise the arrears of  rent from the appellant, and on December 19, 1960, the High Court appointed Seth Kirori Mal receiver in the case.  Seth Kirori Mal  then  served  a notice on December  23,  1960,  on  the appellant  to pay the arrears of rent.  To this notice,  the appellant  sent  a detailed reply which, in  substance,  has been  his  defence  in  the  proceedings  before  the   Rent Controller, from which the present appeal has arisen. 186 On  January  4, 1961, Seth Kirori Mal  made  an  application



under  s. 14 of the Delhi Rent Control Act before  the  Rent Controller,  Delhi.   In his written statement in  reply  to that application, the appellant pleaded that Seth Kirori Mal had no right to recover rent from him, inasmuch as a. notice under  s.  46(5A)  of the Indian Income-tax  Act  had.  been issued  by  the Income-tax Officer, Central  Circle  V,  New Delhi.   He pleaded that the property was in the custody  of the  Court,  and  that  inasmuch  as  a  receiver  had  been appointed,  Kirori Mal had no locus stands to  maintain  the petition  denying  at  the same time  that  Kirori  Mal  had informed  him that he had been appointed a receiver  of  the property.  The appellant also contended that under the  Rent Control Act, a receiver had no right to act on behalf of the landlord.   He  referred to the alleged agreement  by  which fees were, to be recouped from rent as and when it fell due, pointing  out that on an earlier occasion a sum of Rs.  1800 was allowed to be adjusted towards fees.  Some other  please were  raised,  but  it is not necessary  to  refer  to  them because they were not raised before us. The  notice  to  quit which the appellant  alleged  was  not issued  to him was filed in the Court of the  Controller  on May  17, 1961.  The appellant was ordered to inspect it  and to  be ready for his statement as to the correctness of  the notice.  On the next date, a statement of the appellant  was recorded and he denied the notice and also its receipt.  The case  was then set down for arguments and after hearing  the arguments, the Rent Controller passed his order on July  22, 1961.   The Rent Controller held that there was no proof  on the  file to show that the respondent had any right to  make an adjustment of the rent against his professional dues.  He held that the rent was not paid after March 31. 1958.   With regard  to  the plea that a notice under s.  46(5A)  of  the Income-tax  Act, 1922, had been issued. the Rent  Controller observed  that the amount, if deposited in his court,  would not  be  paid to Kirori Mal unless he produced  a  clearance certificate  from  the  Income-tax  Department.   The   Rent Controller   also  said  that  if  in  the  enquiry  to   be subsequently made, the tenant proved that the amount of fees had  to be recouped from rent. the amount would not be  paid to Kirori Mal. 187 Against  the decision of the Rent Controller, the  appellant filed an appeal before the Rent Control Tribunal.  The  Rent Control  Tribunal affirmed the decision of  the  Controller, observing  that the plea taken by him that his  professional fees were to come out of rent was an after-thought and there was  no evidence to prove that there was such  an  agreement between  the  parties.   On  other  matters,  the   Tribunal expressed  its  agreement  with the  Rent  Controller.   The appellant  then appealed to the High Court of  Punjab.   The High  Court  upheld the orders so far made and  pointed  out that in the letter dated July 19, 1958, to the Receiver, the appellant  had not mentioned the agreement.  The High  Court hi-,Id  that  the order made under s. 15(1) of the  Act  was proper,  because it was an admitted fact that rent  had  not been  paid  to anybody from April 1, 1958.  The  High  Court endorsed the view of the Tribunals below that the notice  of the Income-tax Officer did not come in the way of making the deposit  of the rent in the office of the  Rent  Controller, because  the  amount was not to be paid to anyone  till  the Rent Controller had decided who was entitled to receive  it. The appeal was therefore dismissed. In  this court, emphasis is laid upon the letter of  October 15, 1957, by Kirori Mal in which there was an adjustment  of Rs.  1800 towards fees.  It was contended that there was  an



oral agreement to use the rent to pay the professional fees. The  letter  itself does not show that there  was  any  such agreement.  In fact it shows the contrary where it says:               "The  balance of your fees will be paid  later               at the time of final settlement." This shows that the appellant was not entitled to retain the rent in his hands, and the Tribunals below were justified in saying  that the plea about the so-called agreement  was  an after-thought,  because till September 14, 1959, the  appel- lant  had  not  mentioned such an agreement.   We  are  also satisfied  that  the plea was a mere device  to  retain  the money  and to avoid paying the rent.  It must be  remembered that there were as many as four claimants, viz., the Income- tax  Officer,  the  Receiver and Kirori Mal  in  person  and Kirori 188 Mal as Receiver, but the appellant avoided each of these  in turn by pointing to the others, and in this way continued to occupy the premises without payment of any rent. It  was contended however as a matter of law that a   proper opportunity  ought  to have been given to the  appellant  to prove his plea by leading evidence before ordering that  the rent be deposited.  Mr. S. T. Desai contended that under  s. 15(1) of the Delhi Rent Control Act, an order for deposit of arrears  of rent can only be made after the tenant has  been given  an opportunity of being heard, because if the  tenant makes a payment or deposit as required of him, the  landlord is  entitled  to  take the amount of  the  deposit  and  the Controller  can award such costs as he may deem fit  to  the landlord and the case comes to an end.  By way of  contrast, he pointed out that the case proceeds if the tenant fails to make  the payment or deposit as required of him.   In  other words,  it  was contended that an order under s.  15(1)  for deposit  of rent should only be made at the end of the  case and not at an interlocutory stage.  Mr. Desai contended that the present order was made at an interlocutory stage and  it was wrong, because if the tenant deposited the money,  there would  be no further hearing and his plea that there was  an agreement  between the parties that the rent as and when  it fell  due should be set off against the  professional  fees, would  remain untried.  In our opinion, this reading is  not permissible.   Section  15  (omitting  such  parts  as   are unnecessary for the present purpose) reads as follows:               Section   15.               (1)   In every proceeding for the recovery  of               possession  of  any  premises  on  the  ground               specified  in  clause (a) of  the  proviso  to               subsection  (1) of section 14, the  Controller               shall, after giving the parties an opportunity               of  being  heard, the an order  directing  the               tenant to pay to the landlord or deposit  with               the Controller within one month of the date of               the order, an amount calculated at the rate of               rent at which it was last paid for the  period               for which the arrears of the rent were legally               recoverable from the ten-               189               ant including the period subsequent thereto up               to  the end of the month previous to  that  in               which payment or deposit is made and to conti-               nue  to pay or deposit month by month, by  the               fifteenth  of  each succeeding  month,  a  sum               equivalent to the rent at that rate.               (3)   If,  in  any proceeding referred  to  in               subsection (1) or sub-section 2), there is any



             dispute  as to the amount of rent  payable  by               the  tenant,  the  Controller  shall,   within               fifteen days of the date of the first  hearing               of  the  proceeding, fix an  interim  rent  in               relation  to  the  premises  to  be  paid   or               deposited in accordance with the provisions of               sub-section (1) or subsection (2), as the case               may  be, until the standard rent  in  relation               thereto   is  fixed  having  regard   to   the               provisions  of  this Act, and  the  amount  of               arrears,  if any, calculated on the  basis  of               the  standard rent shall be paid or  deposited               by the tenant within next month of the date on               which  the  standard  rent is  fixed  or  such               further  time as the Controller may  allow  in               this behalf.               (6)   If a tenant makes payment or deposit  as               required  by  sub-section (1)  or  sub-section               (3),  no order shall be made for the  recovery               of possession on the ground of default in  the                             payment   of  rent  by  the  tenant but   the               Controller may allow such costs as he may deem               fit to the. landlord.               (7)   If  a tenant -fails to make  payment  or               deposit  as  required  by  this  section   the               Controller  may  order  the  defence   against               eviction to be struck out and proceed with the               hearing of the application." It will be noticed that sub-section (3) also contemplates 190 payment of interim rent determined by the Controller  before the  entire  dispute is settled.  Sub-section (6)  puts  the case under sub-s. (1) and sub-s. (3) on the same footing and makes  no distinction between them.  It is also possible  to visualise  cases in which the tenant may deposit the  amount of  rent under protest and claim that his defence be  tried. It is not that even on the deposit of the arrears of rent in these  circumstances  the case would come to  an  end.   The latter  part of sub-section (1) further shows that not  only the  arrears have to be deposited but rent as it  falls  due has  to  be  deposited month by month by the  15th  of  each succeeding month.  This also shows that the order under sub- section  (1) is not a final order but is preliminary to  the trial  of  the case and is made only where the rent  has  in fact not been paid.  For the purpose of an interim order  it was not necessary that there should have been a full  trial. The  Rent Controller had the affidavit of the appellant  and he could judge whether in the circumstances of the case,  an interim order ought or ought not to be made.  He came to the conclusion  that the rent was not paid and the plea that  it was  being withheld under an agreement was  an  afterthought and not true.  The High Court and the Rent Control  Tribunal have  agreed with this view of the Rent Controller  and  the conclusion  appears  to  us  to  be  sound.   Once  such   a conclusion  is reached, it is quite manifest that the  order was made after affording an opportunity to the appellant  to be heard.  No doubt, the appellant is entitled to lead  oral evidence in regard to the agreement he alleges, but for that he will have an opportunity hereafter.  At the moment, he is being   asked  to  deposit  the  arrears  in  court,   which admittedly are outstanding. Mr.  Desai  next contended that the notice under  s.  46(5A) amounted  to a garnishee order and the appellant could  not, while  the notice stood, make any payment without  incurring



personal  liability.   There was no question of  a  personal liability  because  the Rent Controller had  stated  in  his order  that the amount would not be paid to anyone till  the clearance  certificate  was  obtained  from  the  Income-tax Department.  The Rent Controller had informed the income-tax authorities and the appellant ran no risk in depositing  the arrears of rent in the circumstances. 191 It  was contended that the notice under s. 46(5A)  -amounted to an attachment of the rent in the hands of the  -appellant and reference was made to the provisions of s. 46 sub-s.  5A para 5. The argument overlooks the next para which provides:                "Where  a person to whom a notice under  this               subsection is sent objects to it on the ground               that  the sum demanded or any part thereof  is               not  due to the assessee or that he  does  not               hold  any  money  for or  on  account  of  the               assessee,  then,  nothing  contained  in  this               section shall be deemed to require such person               to  pay any such sum or part thereof,  as  the               case may be, to the Income-tax Officer." -If  there was an agreement between the parties  and  Kirori Mal  was  indebted for such a large  amount,  the  appellant could  have objected on the ground that he did not hold  any money  for or on account of the assessee and then  he  would not  have  been required to pay any sum  to  the  Income-tax ,Officer.  The appellant did nothing in the matter except to deny  the  payment  to everyone.  He  paid  nothing  to  the Income-tax Officer, declined to deposit the money before the Rent Controller and refused to recognise the demands by  the Receiver and his landlord.  In other words, be was trying to take full advantage of the law, when lie could have informed the  Income-tax Officer about his own position and paid  the money  to the Rent Controller subject to its being  paid  to the Income-tax Department. Reference  was made in this connection to a decision of  the Calcutta  High  Court  reported  in  Nalinakhya  Bysack  and another  v.  Shyam  Sunder Halder  and  others(1)  in  which Harries C. J. observed that before making an ,order for  the deposit  of the rent, a full enquiry should be  made.   That was a case in which the tenant had pleaded that there was an agreement  between  him and the landlord  -that  any  amount spent  on  repairs  would  be set  off  against  -the  rent. Harries C.J. held that without ascertaining the (1)  A.I.R, (1952) Cal. 198. 192 truth  of  the  plea that a large sum  had  been,  spent  on repairs,  an  order to deposit the entire  arrears  of  rent ought  not  to have been made.  It is quite clear  that  the facts  there  were  entirely  different.   Payment  by   the landlord for repairs was a part of the tenancy agreement and rent  under  that  tenancycould not  be  calculated  without advertence to every term of the agreement of tenancy.   Here the  special  agreement  which is  pleaded  is  outside  the tenancy  agreement  and  the allegation  about  the  special agreement has been held to bean after-thought and false.  It is  therefore difficult to apply the ruling to  the  present circumstances. The  appeal  is wholly devoid of merit and it  is  dismissed with  costs.   By the consent of parties, a  period  of  two months from the date of hearing (20-12-1963) was granted  to the  appellant  to  deposit the arrears of  rent  from  1st. April, 1958, in the Court of the Rent Controller. Appeal dismissed..