Appeal Without Stay Is No Shield: Supreme Court Clarifies Wilful Default and Notice under Section 10(2)(i) of the Tamil Nadu Rent Control Act

Introduction

In K. Subramaniam (Died) through LRs v. M/s Krishna Mills Pvt. Ltd., 2025 INSC 1309 (11 November 2025), the Supreme Court of India addressed a recurring and practically significant rent control question: does the pendency of appeal/revision/SLP against an order fixing fair rent relieve a tenant from paying that fair rent in the absence of a stay, and is a two‑month statutory notice a mandatory precondition to maintain an eviction petition for wilful default?

The litigation concerned a large leased industrial/commercial premises in Coimbatore measuring 15,500 sq. ft. (three 5,000 sq. ft. portions plus a 500 sq. ft. shed). The landlord, M/s Krishna Mills Pvt. Ltd. (respondent), claimed the agreed contractual rent was Rs. 48,000 per month; the tenant, late K. Subramaniam (proprietor, M/s Royal Agencies), claimed it was Rs. 33,000 per month. In a 2005 fair rent proceeding, the Rent Controller fixed fair rent at Rs. 2,43,600 per month w.e.f. 01.02.2005; the High Court later reduced it marginally to Rs. 2,37,500 per month on 09.09.2011; this Court dismissed SLPs on 23.03.2012 while directing arrears to be cleared in instalments “without prejudice.”

The landlord’s eviction petition on wilful default was initially dismissed by the Rent Controller (2019), reversed by the Appellate Authority (2020) and affirmed in revision by the High Court (2021). The tenant’s legal representatives appealed to the Supreme Court.

Key issues:

Whether continuing to pay only the earlier contractual rent and clearing arrears belatedly while a challenge to fair rent fixation is pending, but without an interim stay, amounts to “wilful default” under Section 10(2)(i) of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960.
Whether issuance of a two‑month notice under the Explanation to Section 10(2)(i) is a mandatory precondition to sustain eviction for wilful default.
What is the effect of “without prejudice” payment directions made by the Supreme Court when dismissing SLPs in the tenant’s challenge to fair rent?

Summary of the Judgment

The Supreme Court (per Dipankar Datta, J.; Manmohan, J. concurring) dismissed the tenant’s appeal and upheld the eviction on wilful default. The Court held:

An appeal/revision/SLP does not operate as a stay. Absent an express stay of the fair rent order, the tenant was bound to pay fair rent. Persisting with lower payments and clearing arrears only after prolonged delay constituted wilful default.
The Explanation to Section 10(2)(i) (two‑month notice) is not a mandatory precondition to maintain an eviction action. It creates a presumption of wilful default when notice is served and non‑payment continues; in the absence of notice, the Controller still has discretion to determine wilfulness on the facts (Sundaram Pillai v. V.R. Pattabiraman).
“Without prejudice” directions in the Supreme Court’s prior order authorizing instalment payments did not waive the landlord’s rights or bar the landlord from pursuing eviction for earlier wilful default.
The High Court rightly refrained, in revision, from re‑appreciating concurrent factual determinations establishing wilful default, and correctly affirmed eviction.

Relief: Appeal dismissed. Six months’ time granted to vacate subject to filing usual undertakings; failing which, the landlord may execute for possession.

Factual Background and Procedural History

1999–2001: Tenant takes three 5,000 sq. ft. portions (total 15,000 sq. ft.) and a 500 sq. ft. shed; landlord asserts aggregate contractual rent Rs. 48,000 p.m.; tenant asserts Rs. 33,000 p.m.
10.01.2007: Rent Controller fixes fair rent at Rs. 2,43,600 p.m. w.e.f. 01.02.2005.
20.02.2008: Appellate Authority dismisses the tenant’s appeal; fair rent confirmed. No stay obtained at any stage.
09.09.2011: High Court partly allows revision; fair rent reduced to Rs. 2,37,500 p.m.
01.10.2011: Landlord issues demand notice claiming arrears. Tenant remits only Rs. 2,13,750 (after TDS) for September 2011.
23.03.2012: Supreme Court dismisses tenant’s SLPs but directs arrears to be paid in Rs. 15,00,000 instalments plus regular monthly rent, “without prejudice.”
11.01.2013: Tenant completes “full and final” settlement of arrears (landlord accepts without prejudice).
06.02.2019: Rent Controller dismisses landlord’s eviction petition (no wilful default found).
25.02.2020: Appellate Authority reverses; holds tenant committed wilful default; orders eviction.
22.06.2021: High Court dismisses tenant’s revision; affirms eviction.
11.11.2025: Supreme Court dismisses tenant’s appeal; eviction stands.

Detailed Analysis

Precedents Cited and Their Influence

1) Giridharilal Chandak & Bros. v. Mehdi Ispahani, 2011 (5) CTC 252 (Madras High Court)

The Supreme Court cited with approval Justice V. Ramasubramanian’s analysis emphasizing:

An appeal does not operate as stay (Order XLI Rule 5 CPC).
Under Section 23(2) of the 1960 Act, only the Appellate Authority may grant stay; Section 25 (revision) contains no such automatic stay provision.
Absent stay, orders of the Appellate Authority attain finality under Section 23(4), subject to revision, and remain operative until modified or set aside.

This directly underpinned the Court’s conclusion that the tenant was duty-bound to pay fair rent once fixed, notwithstanding pending challenges, in the absence of a stay.

2) Sundaram Pillai & Ors. v. V.R. Pattabiraman, (1985) 1 SCC 591 (Three-Judge Bench)

The Court relied on the majority’s seminal exposition of Section 10(2)(i), its proviso and Explanation:

Two-month notice under the Explanation is not a condition precedent for eviction on wilful default; it creates a presumption when served and non-payment continues.
Where no notice is given, the Controller retains discretion to adjudge wilfulness on the facts and, if appropriate, grant a brief “locus poenitentiae” (up to 15 days) to clear arrears; if paid, eviction must be rejected.
Wilful default connotes deliberate, intentional, calculated, and conscious non-payment.

Applying this, the Supreme Court held that the landlord’s lack of a two-month notice did not bar the eviction; the tenant’s conduct satisfied the attributes of wilful default.

3) Trimurthi Fragrances (P) Ltd. v. GNCT of Delhi, 2022 SCC OnLine SC 1247

Cited to reiterate binding discipline on bench strength: as Sundaram Pillai is a three‑Judge decision, it binds a two‑Judge Bench despite a minority view therein.

4) Rupa Ashok Hurra v. Ashok Hurra, (2002) 4 SCC 388

The tenant invoked this to argue finality attaches only to Supreme Court decisions. The Court clarified that while the principle is unexceptionable, it cannot be used to justify non-compliance with operative orders lacking a stay. Pending appeals, absent stay, do not suspend obligations imposed by orders of lower fora.

Authorities Invoked by the Tenant but Not Accepted

Chordia Automobiles v. S. Moosa, (2000) 3 SCC 282: Cited to contend that compliance with interim arrangements during pendency negates wilful default. The Court distinguished the scenario by emphasizing the continued obligation to pay fair rent absent stay, and the long delay in clearing arrears.
P.M. Punnoose v. K.M. Munneruddin, (2003) 10 SCC 610; N. Velmurugan v. K.N. Govindarajan, (2002) 2 SCC 500: Invoked to urge the Controller’s power to grant time when arrears are bona fide disputed. On the present facts—prolonged non-payment despite an operative fair rent order and no stay—the Court found wilful default established and did not extend discretionary indulgence.
J. Visalakshi Ammal v. T.B. Sathyanarayana (Madras High Court reports cited): Relied upon to argue that liability attains finality only after conclusion of appellate tiers. The Supreme Court instead applied Order XLI Rule 5 CPC and Giridharilal Chandak to hold that, absent stay, operative orders must be complied with.

Legal Reasoning

A. Duty to Pay Fair Rent Absent a Stay

Central to the Court’s reasoning is the basic procedural rule: filing an appeal/revision/SLP does not by itself stay the operation of the impugned order (Order XLI Rule 5(1), CPC). Under the 1960 Act:

Stay, if any, is a matter of discretion for the Appellate Authority under Section 23(2); there is no automatic stay in revision under Section 25.
In the absence of a stay, the fair rent order remained operative and binding. The tenant neither sought nor obtained a stay, yet continued paying only a fraction of the fair rent for years.

The Court stressed that mere pendency of proceedings “cannot excuse non‑payment.” Payments were made only after prolonged litigation and even then in piecemeal instalments—conduct inconsistent with a bona fide doubt.

B. Wilful Default under Section 10(2)(i): Notice Not Mandatory

Applying Sundaram Pillai, the Court held that a landlord’s failure to issue two‑month notice under the Explanation does not bar eviction. That Explanation creates a presumption when notice is served and non‑payment continues; otherwise, the Controller assesses wilfulness on facts.

On the facts, the default bore the attributes of wilfulness—“deliberate, intentional, calculated and conscious”—in view of:

Fair rent fixed from 01.02.2005, appellate affirmation on 20.02.2008, slight reduction on 09.09.2011—yet no stay at any time.
Continued underpayment and allowing arrears to accumulate for over five years.
Belated “full and final” settlement only on 11.01.2013, ten months after dismissal of SLPs.

C. Effect of “Without Prejudice” in Prior Supreme Court Order

The Court explained that its earlier order permitting instalment payments “without prejudice” did not waive the landlord’s rights to seek eviction for earlier wilful default or to recover arrears. Payments made under such orders do not “close the issue.”

D. “Finality” Cannot Be Used as a Shield Against Operative Obligations

The Court clarified that while finality in the appellate hierarchy is a settled principle, it is distinct from the operation of an order pending challenge. Absent a stay, the order operates and must be complied with. One cannot invoke the doctrine of finality to deprive the other party of the fruits of an operative judicial determination.

E. Scope of Revisional Jurisdiction

The High Court correctly refrained from re‑appreciating concurrent factual findings of wilful default and therefore rightly affirmed eviction in revision. The Supreme Court found “no error” in that approach.

Impact and Implications

This ruling has material, forward‑looking consequences for landlord‑tenant litigation under the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960 (and, by parity of reasoning, analogous rent control regimes):

Tenants must either secure a stay or pay fair rent: Challenging a fair rent order without obtaining a stay will not suspend the obligation to pay the fair rent. Prolonged underpayment risks a finding of wilful default and eviction.
Strategic use of the Explanation to Section 10(2)(i): While not mandatory, landlords can strengthen their position by issuing the two‑month demand notice to invoke the presumption of wilfulness upon continued non‑payment.
“Without prejudice” deposits do not purge prior default: Compliance with interim or instalment directions will not, by itself, wipe out earlier wilful default unless the underlying statutory criteria are met.
Revisional restraint reaffirmed: High Courts will be circumspect in interfering with concurrent factual determinations on wilfulness, enhancing stability of appellate outcomes.
Continuing relevance despite the 2017 Act: Although parties referenced the Tamil Nadu Regulation of Rights and Responsibilities of Landlords and Tenants Act, 2017, the Supreme Court’s ratio decidendi rests on the 1960 Act and general procedural law. The principles on stay, operative orders, and wilful default will continue to inform adjudication of pending legacy matters and analogous contexts.

Complex Concepts Simplified

Contractual rent vs. Fair rent: Contractual rent is what parties agree to. “Fair rent” is a statutory rent fixed by the Rent Controller based on prescribed criteria. Once fixed, it supersedes the contractual rent from the effective date mentioned in the order.
Wilful default (Section 10(2)(i)): A tenant commits default if he does not pay within the time fixed by the tenancy or by the statutory fallback. “Wilful” means deliberate and intentional non‑payment. The Controller may, in appropriate cases and where notice under the Explanation is absent, grant a brief opportunity (up to 15 days) to clear dues (“locus poenitentiae”).
Two‑month notice under the Explanation: If served and non‑payment continues, the default is presumed wilful (subject to unavoidable circumstances). If no notice is served, the Controller still decides wilfulness on the facts; the notice is not a jurisdictional precondition.
Appeal does not equal stay: Filing an appeal/revision/SLP does not stop the order from operating. A separate stay order is required. Without it, the obligations imposed by the order continue.
“Without prejudice” payments: Payments directed or made “without prejudice” do not admit liability and do not extinguish the other party’s rights or defenses. They are neutral in terms of rights, preserving the parties’ positions in pending litigation.
Revisional jurisdiction: A High Court, in revision, generally examines legality and jurisdictional errors; it is slow to re‑appraise concurrent factual findings unless there is perversity or material irregularity.

Observations on Parties’ Specific Contentions

Notice and timing: The tenant argued the landlord failed to issue notices pegged to the evolving fair rent determination and that arrears were cleared promptly after the SLP dismissal. The Court held that what mattered was the absence of any stay and the sustained underpayment despite operative orders.
Quantum disputes and TDS/service tax: While the record reflects payments “after TDS” and later invoices for service tax, the Supreme Court’s conclusion on wilful default turned on sustained non‑payment of fair rent in full, not on tax accounting nuances. Deductions or collateral tax disputes do not justify withholding the legally fixed fair rent.
2017 Act arguments: The respondent invoked the 2017 Act to suggest forum changes and exclusions. The Supreme Court’s ratio did not depend on this; the case was decided squarely within the 1960 Act framework and general procedural law.

Key Takeaways

Challenging a fair rent order without obtaining a stay does not suspend the tenant’s duty to pay that fair rent; prolonged underpayment can constitute wilful default.
The two‑month notice in the Explanation to Section 10(2)(i) is not a mandatory precondition for eviction; it only creates a presumption when served and ignored.
“Without prejudice” instalment directions or deposits do not automatically cure prior wilful default or waive the landlord’s rights.
High Courts, in revision, will generally not disturb concurrent findings of wilful default absent jurisdictional error or perversity.

Conclusion

The Supreme Court’s decision in K. Subramaniam (Died) through LRs v. M/s Krishna Mills Pvt. Ltd. delivers a clear and pragmatic message for rent control litigation in Tamil Nadu: without a stay, pay the fair rent. The Court harmonizes the procedural principle that appeals do not operate as stays with the substantive standard of wilful default under Section 10(2)(i). By reaffirming the majority in Sundaram Pillai, it clarifies that the two‑month notice is a facilitative tool, not a jurisdictional gateway, and that wilfulness may be inferred from conduct. The Court’s explanation of “without prejudice” safeguards the landlord’s substantive rights despite interim payment regimes.

Practically, tenants must be vigilant: obtain a stay, or comply with operative orders. Landlords can pursue eviction for wilful default even in the absence of the Explanation notice if the facts reveal deliberate non‑payment. The ruling promotes procedural discipline and timely compliance with Rent Controller orders, ultimately advancing certainty and fairness in rent control adjudication.