Filmistan Private Ltd. A Co. v. The Municipal Corporation For Greater Bombay .

Desai, J.:— This is a group of 39 appeals arising from the judgment of the learned Chief Judge of the Court of Small Causes, Bombay, sitting as the persona designata under Section 217 of the Bombay Municipal Corporation Act, 1888 (Bombay Act III of 1888); the said Act will be hereinafter referred to as tho Bombay Municipal Act.

2. The Appellants, Messrs. Filmistam Private Limited, are the owners of a property known as ‘Bombay Talkies Studios situated at Dady Seth Road, Malad, Bombay. Until 1960 the Appellants were using the property for their own purposes viz., for the production of cinema films. This property covers an extensive area of slightly over 18 acres. In 1960 the Appellants gave the various structures situated on the property on what was said to be leave and licence basis to various small scale industries. The Appellants had provided certain amenities to the ‘licensees' such as free use of electricity, water, electricians, sweepers, pumpmen, watchmen, etc.

3. For the year 1960–61 a special notice increasing the rateable value of the property was served on the Appellants by the Municipal Commissioner for Greater Bombay, who is the Respondent in this group Of appeals. The Appellants filed a complaint in accordance with the Act protesting against the increase in the rateable value. The objections of the Appellants were rejected by the Assessor and Collector of the Corporation, and being aggrieved thereby the Appellants filed an appeal to the Chief Judge of the Court of Small Causes under Section 217 of the Bombay Municipal Act. The Appellants were heard by the Chief Judge initially in March, 1964, when preliminary objections raised on behalf of the Corporation were disposed of. The Appellants were thereafter heard by the le arned Chief Judge on the remaining issues, and by his judgment dated 23rd November, 1964, the learned Chief Judge dismissed the appeals before him. The correctness of this decision is questioned in these appeals filed under Section 218(d) of the Bombay Municipal Act, which are for disposal before us.

4. These appeals had come up before a Division Bench of this Court consisting of Chandrachud and Wagle, I on 22nd October, 1969. By an interlocutory judgment (reported in (1970) 72 Bon LR 461) the Division Bench sought fmdirgs on two issues from the learned Chief Juege of the Court of Small Causes. The learned Chief Judge was directed to find, firstly whether the occupants of the structures, hough called ‘licensees’, were truly tenants; and, secondly, as to what would be the standard rent of the premises. The learnec Chief Judge was further directed to give opportunity to both the sides to lead evidence on thhese issues.

5. Evidence wag recorded beore the Additional Chief Judge of the Court of Small Causes, Bombay and by his judgment dated 16th April, 1970, the learne 1 Additional Chief Judge submitted his findings on the two issues which were remandence to him for determination by the Division 3 ench as aforectated.

6. On the first issue the learned Advocate for the Appellants appearing before the learned Chief Judge conceded that for purpose of these appeals the occupants of the structures, though called ‘licensees’, were truly tenants of the Appellants, and a note to that effect was taken by the learned Additional Chief Judge on 20th March, 1970. The answer to the first issue was accordingly recorded in consonance with concession.

7. For the purpose of the second Issue the Appellants had made an attempt to lead evidence before the learned Additional Chief Judge to prove that the premises in these appeals were not let out for the first time in 1960–61 but had been let out earlier sometime in 1947, and for this purpose the Appellants had sought to rely upon a lease alleged to have been executed on 9th August, 1947, between the executors and trustees of the last will of F.E Dinshaw and the Bombay Talkie Limited. The original lease was not produced and the Appellants had during the course of the proceedings tendered a photostat copy of the said lease and had submitted that the same should be admitted as secondary evidence. This submission of the Appellants was rejected by the learned Chief Judge who made a separate order in connection therewith. Having regard to this position the learned Advocate who appeared before the learned Additional Chief Judge on behalf of the Appellants made a further concession before him that on the evidence as it stood before the learned Additional Chief Judge the premises concerned in these appeals may be taken as having been let out to the occupants for the first time in 1960–61. The learned Additional Chief Judge gave his finding on the second issue on the basis of this concession made before him. A joint statement was tendered by the parties, signed by the respective Architects, showing the standard rents of the premises in these appeals worked out on the basis of the agreed data as admitted by both the sides. The learned Additional Chief Judge accordingly submitted his findings on the second issue as per that joint statement, which was put in and marked Exhibit L in the proceedings before him. The agreed standard rent in respect of each occupant as determined by the learned Chief Additional Judge in each matter is to be found in paragraph 5 of his judgment on remand.

8. In order to appreciate the rival contentions it is necessary to set out the relevant provisions pertaining to standard rent in the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947—LVII of 1947, hereinafter referred to as the bombay rent act). The expression “standard rent” has been defined in Section 5 of the Bombay Rent Act; this definition reads as follows:—

“5 (10) — Standard rait in relation to any premises means—

(a) where the standard rent Is fixed by the Court and the Controller respectively under the Bombay Rent Restriction Act, 1939, or the Bombay Rents, Hotel and Lodging House Rates (Control) Act, 1947, such standard rent; or

(b) Where the standard rent is not so fixed subject to the provisions of Sec. 11,

(i) the rent at which the premises were let on the first day of September, 1940, or

(ii) where they were not let on the first day of September, 1940, the rent at which they were last let before that day, or

(iii) where they were first let after the first day of September, 1940, the rent at which they were first let, or

(iv) in any of the cases specified in Section 11, the rent fixed by the Court.”

9. The bombay rent act provides for fixation of standard rent by the Court (Special Court as provided by the said Act) in certain cases. The relevant portion pertaining to fixation of standard rent is to be found in Section 11 and reads as follows:—

“11 (1) Subject to the provisions of section 11-a, in any of the following cases the court may, upon an application made to it for that purpose, or in any suit or proceedings, fix the standard rent at such amount as, having regard to the provisions of this Act and the circumstances of the case, the Court deems just—

(a) where any premises are first let after the first day of September, 1940 and the rent at which they are so let is in the opinion of the Court excessive, or

(b) where the Court is satisfied that there Is no sufficient evidence to ascertain the rent at which the premises were let in any one of the cases mentioned in sub-clauses (i) to (iii) of clause (b) of sub-section (10) of Section 5; OR

(c) where by season of the premises having been let at one time as whole or in part and at another time in parts or a whole, or for any other reasons, any difficulty arises in giving effect to this Part; OR

(d) where any premises have been or are let rent-free or at a nominal rent or for some consideration in addition to rent; cm

(e) where there is any dispute between the landlord and the tenant regarding the amount of standard rent”

10. Mr. Chitale appearing on behalf of the Appellants in the entire group of these appeals referred us first to Sections 146 and 154 of the Bombay Municipal Act, He submitted that for the purposes of fixing the reteable value of any premises the value of the premises which was to be considered was the value thereof to the lessor and not that to the lessee or to the occupant. He further submitted that the rateable value to be fixed must be based on the standard rent of th© premises and could not be in excess of such standard rent. According to him, the position has been crystallised in three decisions of the Supreme Court, viz., (i) Corporation of Calcutta v. Smt. Padma Debi, AIR 1962 SC 151 (ii) Corporation of Corporation Of Calcutta v. Life Insurance Corporation Of India, (1970) 2 SCC 44 : AIR 1970 SC 1417 and (iii) Guntur Municipal Council v. Guntur Town Rate Payers' Association Etc's Association, (1970) 2 SCC 803 : AIR 1971 SC 353. The first of these has been discussed in the interlocutory judgment in these appeals earlier referred to.

11. In Padma Debits case the Supreme Court was considering the rateable value of certain premises at Bowbazar Street, Calcutta. These were owned by the Respondens before the Supreme Court. The Corporation of Calcutta had fixed the annual rateable value of the said premises in the sum of Rs. 14,093/- and it was directed that this was to take effect from the second quarter of 1950–51. In fixing the annual value the Corporation took Rs. 1450/- as the monthly rental value of the said premises. Notice of assessment was served on the Respondents, who objected to the same. Meanwhile, under the West Bengal Premises Rents Control (Temporary Provisions) Act, 1950, (hereinafter referred to as the West Bengal Rent Control Act for brevity's sake) the standard rent of the premises was fixed by the Rent Controller of Calcutta at Rs. 550/° per month with effect from April, 1951 and at Rs. 632/8/- with effect from August, 1951 One of the objections raised on behalf of the owners was that the Corporation had no power to fix the annual value at a figuro higher than the standard rent. The Special Officer disallowed the objections, but the owners' appeal was allowed by the Court of Small Causes at Calcutta and the High Court by a majority judgment agreed with the findings of the Court of Small Causes and dismissed the Corporation's appeal. The Corporation preferred an appeal to the Supreme Court. The Supreme Court considered the provisions of Section 127(a) of the Calcutta Municipal Act, 1923 (3 of 1923) and the West Bengal Rent Control Act and dismissed the Corporation's appeal. The relevant observations of the Supreme Court; are to be found in paragraphs 6 and 7 of the judgment and are summarised in part of the headnote (a) which reads as follows:—

“(a)……… A combined reading of the Provisions of Sections 2(10)(b), 3 and 33 (a) of the Rent Control Act leaves no room for doubt that a contract for a rent at a rato higher than the standard rent is not only not enforceable but also that the landlord would be committing an offence if he collected a rent above the rate of the standard rent One may legitimately say under those circumstances that a landlord cannot reasonably be expected to let a building for a rent; higher than the standard rent A law of the land with its penal consequences cannot bo Ignored in ascertaining the reasonable expectations of a landlord in the matter of rent………”

It is true that Section 127(a) does not contemplate the actual rent received by a landlord but a hypothetical rent which ho can reasonably be expected to receive if the building is let But hypothetical rent may be described as a rent which a landlord may reasonably be expected to get in the open market. In that situation, a statutory limitation of rent circumscribes the scope of the bargain in the market. In no circumstance the hypothetical rent can exceed that limit.

12. In Padma Debi's case the standard rent, an we have seen above, had actually been fixed by the Rent Controller.

13. In a subsequent decision, also from Calcutta, the Supreme Court decided that the position was the same whether or not there was actual fixation of standard rent; this was the decision in (1970) 2 SCC 44 : AIR 1970 SC 1417. In that case the Supreme Court was considering Section 168(1) of the Calcutta Municipal Corporation Act, 1951 (33 of 1951) along with the relevant provision of th© West Bengal Rent Control Act. The relevant observations are to be found in paragraphs 6 and 8 of the judgment of the Supreme Court It was observed that “even if there Is no order of the Controller fixing the standard rent under Section 9, the standard rent stands determined by the definition of that expression in Section 2(10)(b) of that Act”

14. The third authority cited by Mr. Chitale is a very recently reported case, viz., (1970) 2 SCC 803 : AIR 1971 SC 353. Padma Debi's case was also referred to in this judgment and it was observed by the Supreme Court that there was no distinction between buildings, the fair rent of which has actually been fixed by the Rent Controller, and those in respect of which no such rent has been fixed. The Court went on to say that when the Controller has not fixed the fair rent, the Municipal authorities will have to arrive at their own figure of fair rent in accordance with the principles laid down in the Rent Control Act.

15. In view of these observations If was submitted by Mr. Chitale that the joint statement tendered by the respective Architects before the learned Additional Chief Judge of the Court of Small Causes on which was based his finding on the second issue indicated clearly that the rent actually charged by the Appellants to their tenants was substantially in excess of what would be the standard rent of the premises. It was submitted by Mr. Chitale that in the light of the observations of the Supreme Court in the three decisions above referred to the rateable value of the premises concerned in the appeals before us had to be fixed on the basis of the notional rent of the various premises as would be fixed on an application under Section 11 of the Bombay Rent Act It was further submitted that in view of the finding on the second issue submitted by the learned Additional Chief Judge, the rateable value had to be reduced and based on the standard rent as found by the learned Additional Chief Judge.

16. Mr. Singhavi on behalf of the Respondent-Corporation drew our attention to an important distinction between the provisions of the West Bengal Rent Control Act and the Bombay Rent Act. The definition of the expression ‘standard rent in the West Bengal Rent Control Act is to be found in Section 2(10)(b) of the said Act Under that definition (omitting parts not relevant), ‘standard rent in relation to any premises means:

“…… …… ……

Where the rent has been fixed under Section 9, the rent so fixed; or at which it would have been fixed if application were made under the said section.”

17. It was submitted that as far as the bombay rent act was concerned, in view of the express provision of Section 5(10)(b) (iii) of the said Act the agreed rent of the premises would be the standard till such time as an application was made under Section 11, and that until such application was made the Respondents were entitled to fix the rateable value on the basis of the agreed rent.

18. It becomes necessary, therefore to consider whether the rents at which these premises were first let in 1960–61 are or can be considered to be rents at which they were first let There was a clear concession made by the learned Advocate who appeared on behalf of the Appellants before the learned Chief Judge to the effect that the various premises, which are the subject-matter of these appeals, were first let in 1960–61. This concession is to be found recorded in paragraph 4 of the judgment of the learned Additional Chief Judge. Mr. Chitale was permitted by us, despite such concession, to go through the evidence recorded by the learned Additional Chief Judge, and he sought to establish that the premises had been in fact let earlier in 1947 and that, therefore, the rents at which these premises were let in 1960–61 could not be the standard rents Within the definition of Section 5(10)(b) (iii) of the Bombay Rent Act. It may be men tioned that the Appellants in this connection had sought to prove and produce before the learned Additional Chief Judge a photostat copy of the lease document entered into by the executors and trustees of the estate of F.E Dinshaw and the Bombay Talkies Limited. It was held by the learned Additional Chief Judge that they had failed to prove that the original was lost or misplaced. It was further held that the copy which was sought to be proved and produced as secondary evidence was not a complete copy inasmuch as the plan attached to the document was missing. In our opinion, the learned Additional Chief Judge was fully justified in disallowing such photostat copy to be proved and produced as secondary evidence. We may briefly refer to the evidence led by the Appellants in this connection.

19. One Raghunath Raoji Pradhan, who was working as head Clerk in the office of the F.E Dinshaw Trust, had been examined by the Appellant he deposed:

“………… In 1947 the Bombay Talkies Estate at Malad belonged to the estate of F.E Dinshaw. I know that the estate was leased to the Bombay Talkies Ltd………… of my personal knowledge I cannot say what rent was being paid by the Bombay Talkies Ltd…………”

20. According to this witness, there was a document of lease; and according to his information, which he had obtained from the former manager of the Trust, who was then dead, the document was with Messrs. Payne & Co., Solicitors. One Jamshed Ardeshir Jesan, a clerk working in the firm of M/s. Payne & Co., Solicitors, was then examined by the Appellants, and he stated that the Attorneys did not have the lease document, nor was it shown as having been with them in their register which was maintained in respect of original documents brought to and/left at the office of the Attorneys. Thus from this evidence it is clear that the Appellants had failed to chow where the original document was.

21. It is also not possible to find out from the evidence on record as to what was actually leased out, if at all, by the F.E Dinshaw Trust to the Bombay Talkies Limited. There is further no evidence about the terms and conditions of the alleged lease apart from a reference as to the quantum of rent payable. The nature of the properties leased out, and the terms and conditions of the lease including the rights and obligations of both the parties, on which would depend the quantum of rent, can only be proved by the original document of lease and in certain cases by satisfactory secondary evidence. The evidence led by the Appellants can hardly be termed satisfactory. The onus was on the Appellants to show that the premises had been let out prior to 1960–61. This was particularly so in view of the evidence given by the Appellant's employee Pancholi and their Architect Narwekar. According to Pancholi, upto the beginning of 1960 the Appellants were producing cinematograph pictures in these several structures, and that some time in 1960 it was decided to convert this property into an industrial estate and thereafter the various structures were let to different parties on the so-called leave and licence basis. This was confirmed by the Appellants' witness, J.S Narwekar, who has been the Architect of the Appellants since 1955. Narwekar deposes that he had first visited this estate at Malad in 1955 and that in that year 39 structures were existing, which were all in the occupation of the Appellants. According to Narwekar, these structures remained in the occupation of the Appellants till about 1958–59; thereafter the Appellants discontinued the work of producing motion pictures and gave these structures to outsiders for tho purpose of ruiming small industries.

22. On the evidence led before the learned Additional Chief Judge it is clearly established that the properties which are the subject-matter of these appeals before us, were first let out in 1960–61. The Appellants had sought to urge to the contrary and they must be held to have failed to prove any earlier letting out.

23. Mr. Chitale has, however, equalsy strenuously urged that the correct position in law was that in fixing the rateable value the agreed rent of these premises in 1960–61 must be ignored and the rateable value must be fixed with reference to the notional or hypothetical standard rent as would be fixed in an inquiry under Section 11 of the Bombay Rent Act.

24. In this connection reference may be made to the observations of Chagla, C.J, in Karamsey Kanji v. Velji Virji, (1954) 56 Bom LR 619. The relevant observations are to bo found at pages 624 and 625 of the said judgment At page 624 the following observations appear:—

“………… Now it is clear that the Act was passed to control rents so that in days of scarcity of houses the landlord should not exact unconscionable rents from the tenant. The Act was also passed in order to give protection to the tenant from being evicted, and it is in the light of these two main objects that the different provisions of the Act should be construed. I do not see any difficulty about giving effect to Section 7. So long as there is no determination by the Court under section 11(1)(a) the landlord is perfectly justified in recovering from the tenant or claiming from the tenant the contractual rent, the rent at which the premises were first let after September 1, 1940, Neither his recovery nor his claim is in any sense of the term unlawful. It is only when the standard rent has been altered that the recovery or the claim becomes unlawful…………”

25. At page 625 the learned Chief Juctico goes on to observe:

“…………What the landlord has charged under Section 5(10)(b) (iii) does not cease to be standard rent by reason of a subsequent determination by the Court that it was excessive. The only liability that is imposed upon the landlord is the liability to refund under Section 20 within the period of limitation. In my opinion this is the only way that the different sections of the Rent Act can be reconciled…………”

26. It was urged by Mr. Chitale that the interlocutory judgment given by the Division Bench of this Court proceeded upon the footing that it was the hypothetical standard rent as on an application under Section 11 of the Bombay Rent Act that would be the proper basis for determination of rateable value under Section 154 of the Bombay Municipal Act, That does not appear to be the correct position. The learned Chief Judge who dismissed the appeals under Section 217 had in his judgment observed that the standard rent of the premises can be fixed only by the Court of exclusive jurisdiction constituted under the bombay rent act, and that, therefore, the contractual rent must be taken as the standard rent and that must form the basis for fixing the annual letting value of the property. It was held by the Division Bench in its interlocutory judgment that the learned Chief Judge was not right in this view. The Division Bench, in our opinion, does not lay down that although the agreed rent at the time of letting out in 1960–61 could be the standard rent within the meaning of Section 5(10)(b) (iii) of the Bombay Rent Act, the notional or hypothetical standard rent as on an application under section 11 of that act must necessarily be the basis for determining the annual letting or rateable value.

27. The proposition of law as laid down by the Supreme Court in Padma Debi's case, AIR 1962 SC 151 undoubtedly is that in fixing the rateable value under the Bombay Municipal Act the hypothetical rent which the owner can reasonably be expected to receive if the building is to be let has to be considered. It has also been laid down that such hypothetical rent cannot exceed the standard rent or the statutory rent. In the subsequent case reported in (1970) 2 SCC 44 : AIR 1970 SC 1417 it has been clarified that this consideration was to apply not only to cases where rent was fixed by the authority which was to determine the standard rent but even otherwise. However, there is, as pointed out, a material difference between the West Bengal Rent Control Act and the Bombay Rent Act. The definition of ‘standard rent’ in the West Bengal Rent Control Act is in our opinion materially and vitally different from that under the bombay rent act. In our opinion under the bombay rent act, in case of premises first let after the first day of September, 1940, the agreed rent at which they were first let is by the statutory definition to be the standard rent. Such standard rent is, however, subject to the provisions of Section 11. In this later section provision has been made by the Legislature for recalculation or refixation of the standard rent in certain cases. So long as there is no determination by the Court under Section 11, the landlord is perfectly justified in recovering from the tenant or claiming from the tenant the contractual rent; neither his recovery nor his claim is in any sense of the term unlawful. Thus in such cases what the land-lord can charge under Sec. 5(10)(b) (iii) is the standard rent until there is subsequent determination by the Court that it is excessive; on such determination the standard rent would be recalculated and refixed at a lower amount Until such refixing is done, the agreed rent will be the standard rent. The two sections must be read together and when this is done it is clear that in case of premises let out after the first day of September, 1940, the rent at which they were let out is the standard rent which may be varied subsequently in case an application is made to the special Court under Section 11 in such proceedings as are indicated therein. Until such an application is made the agreed rent is the standard rent within the meaning and definition of ‘standard rent in the bombay rent act.

28. In the appeals before us it is clear from the evidence (even apart from the specific concession made by the learned Advocate for the Appellants before the learned Additional Chief Judge) that the premises in respect of which these appeals have come up were let out by the Appellants for the first time in 1960–61. Previous thereto these premises were occupied by the Appellants themselves. The Appellants attempted to show that these premises had been let out earlier and in such attempt the Appellants failed. The rateable value to be fixed by the Municipal Corporation under Section 154 of the Bombay Municipal Act undoubtedly cannot exceed the standard rent of the premises in respect of which the rateable value is fixed. As we have indicated above, the standard rent in respect of the premises which are concerned in these appeals before us appears to be, on the evidence led before the learned Additional Chief Judge, the agreed rent— the rent at which they were; let out in 1960–61 by the Appellants to the) various occupants. If that be so, the objection of the Appellants must necessarily fail’ and be rejected inasmuch as the rateable value fixed is not based on any rent which is in excess of the standard rent.

29. If and when an application is made under the provision of Section 11 of the Bombay Rent Act in respect of these premises, then it is possible that such rent may cease to be standard rent Thereafter the standard rent of each premises would be the rent which the Court may fix on such application. We are unable to accept Mr. Chitale's submission that the standard rent which will be the upper limit for the purpose of fixing the annual letting or rateable value must in all cases be such standard rent as would be notionally fixed as on an application under Section 11 of the Bombay Rent Act This does not appear to us to be the scheme under the bombay rent act Our view in this behalf appears to be in accordance with the observations of Chagla, C.J, in Karamsey Kanji's case referred to earlier in the coume of the judgment.

30. These were the only points argued on behalf of the Appellants before us.

31. In the result, the Appeals fail and will stand dismissed with costs.

32. Appeal dismissed.