Citation Codes

Equivalent Citations

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Case Number

Second Appeal from Order No. 5-D of 1956

Attorney(S)

R.S. Narula and P.C. Khanna
H.R. Khanna

Judges

A.N Bhandari, C.J
Bishan Narain
Capoor, JJ.

Acts

section 7-A read with Schedule IV of the Delhi and Ajmer-Merwara Rent Control Act, 1947 contravenes and violates Article 14 of the Constitution.2.
provisions contained in Section 7-A read with Schedule IV of the Delhi and Ajmer-Merwara Rent Control Act, 1947
provisions of section 7-A read with Schedule IV of 1947 Act violate Article 14 of the Constitution
Rule 81 of the Defence of India Rules the New Delhi House Rent Control Order 1939.
provisions of the Delhi and Ajmer-Merwara Rent Control Act of 1947
provisions of the Civil Procedure Code and the Punjab Courts Act,
section 7-A read with Schedule IV of the 1947 Rent Control Act.
ARTICLE 14 CONSTITUTION OF INDIA
Rent Control Act, 1947 (19 of 1947) repealing the Punjab Act
section 7-A and Schedule IV to the Act. Section 7A
Civil Procedure Code or the Punjab Courts Act.14.
SECTION 72 GOVERNMENT OF INDIA ACT 1935
Rent Control (Amendment) Act, 1947 (No. 50 of 1947).
provisions of Article 14 of the Constitution
Article 14 of the Constitution. Section 7
Punjab Urban Rent Restriction Act, 1941
1947 Rent Control Act
Rent Control Act, 1947
section 1(2) the Act
Rent Control Act
section 4(2)

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Smart Summary

Legal Opinion Summary: Validity of Section 7-A read with Schedule IV of the Delhi and Ajmer-Merwara Rent Control Act, 1947

Factual and Procedural Background

The central factual matrix concerns residential premises on plot No. 17A/35, Western Extension Area, Karol Bagh, New Delhi, owned by S.N. Bhalla. The premises were not completed nor let before the Delhi and Ajmer-Merwara Rent Control Act, 1947 (operative 24 March 1947). Bhalla leased the premises to G.D. Soni for Rs. 175 per mensem (excluding house-tax). Soni applied for fixation of standard rent under section 7-A read with Schedule IV of the 1947 Act. The Rent Controller fixed the standard rent at Rs. 110; this Court later raised it to Rs. 124/8/- by order dated 3 May 1953.

After fixation, and following a Division Bench decision in British Medical Stores v. Lala Bhagirath Mal (56 P.L.R. 449), the landlord refused to accept the standard rent and insisted on contractual rent. The tenant refused to pay contractual rent. In March 1955 the landlord filed a petition seeking eviction on grounds of non-payment of rent and that the landlord required the premises for his own occupation.

The trial Court dismissed the eviction petition, finding the tenant had offered and deposited the (court-fixed) standard rent and that the landlord did not require the premises for his own occupation. On appeal the Additional District Judge affirmed the finding on occupation but remanded for fresh fixation of standard rent because an earlier fixation had been made under provisions held unconstitutional in Bhagirath Mal's case. The tenant filed a second appeal. The matter was referred to progressively larger Benches and was ultimately placed before the Bench delivering this opinion to decide, authoritatively, whether section 7-A read with Schedule IV contravenes Article 14 of the Constitution.

Legal Issues Presented

Whether section 7-A read with Schedule IV of the Delhi and Ajmer-Merwara Rent Control Act, 1947 contravenes and violates Article 14 of the Constitution of India.
More specifically, whether the legislative classification that treats newly constructed premises (completed or first let after 24 March 1947) differently from older premises (in the fixation of standard rent and the procedure for fixation) lacks a reasonable basis or rational nexus to the Act's object.
Whether conferring fixation power over newly constructed premises on a Central Government-appointed Rent Controller (under Schedule IV) while leaving fixation of other premises to the courts (under section 7) constitutes impermissible discrimination violative of Article 14.
Whether procedural features of Schedule IV (including the absence of explicitly prescribed modes of evidence, oath, or recording) offend principles of natural justice and thus render Schedule IV unconstitutional under Article 14.

Arguments of the Parties

Landlord's Arguments

There is no reasonable basis for fixing the standard rent of newly constructed premises by different principles from those used for older buildings in the same locality.
It is discriminatory to have the standard rent of newly constructed buildings fixed by Rent Controllers appointed by the Central Government while other premises' standard rent is fixed by courts that follow Civil Procedure Code procedures.
The Rent Controller under Schedule IV is not bound by Civil Procedure Code or the Punjab Courts Act and therefore may proceed without established procedural safeguards (e.g., recording evidence, oath), risking arbitrary decisions and breach of natural justice.
Specific differences pointed out: (a) retrospective effect of standard rent under para 10(d) of Schedule IV versus court-discretion under section 7(5) to set effective date; (b) differing rates of permissible increase for improvements (7½% under para 6 of Schedule IV vs 6¼% under section 4(2)).

Tenant's Arguments

The opinion does not contain a detailed account of the tenant's legal arguments beyond factual positions (application for standard rent, offer and deposit of court-fixed rent); no further pleading-level arguments of the tenant are set out in the provided text.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Charanjit Lal v. Union of India, A.I.R. 1951 S.C. 41	One of a series of Supreme Court decisions discussing and explaining the scope of Article 14.	Listed as part of authoritative jurisprudence establishing tests for Article 14; used to situate the legal standard applied to the impugned provisions.
Budhan Choudhry v. State of Bihar, A.I.R. 1955 S.C. 191	Another Supreme Court decision concerning the interpretation of Article 14.	Included among the decisions forming the framework for assessing whether classification meets intelligible differentia and rational nexus tests.
A. Thangal Kunju Musaliar v. M. Venkatachalam Potti, A.I.R. 1956 S.C. 246	Supreme Court authority on Article 14; also cited for the presumption that administration of laws will be done without an "evil eye and unequal hand".	Cited to support the presumption that a Rent Controller will act judicially and properly, and that administrative officers are to be presumed to discharge functions fairly unless shown otherwise.
Bidi Supply Company v. Union of India, A.I.R. 1956 S.C. 479	Part of the body of Supreme Court decisions discussing Article 14.	Referenced as part of the jurisprudential context for testing constitutionality of classifications under Article 14.
Ram Krishna Dalmia v. Mr. Justice S.R. Tendolkar, A.I.R. 1958 S.C. 538	Supreme Court authority included among cases on Article 14.	Part of the cited authorities forming the standard principles applied in reviewing the impugned statutory classification.
Mahomed Hanif Qureshi v. State of Bihar, A.I.R. 1958 S.C. 731	Sets out the two-part test for permissible classification under Article 14: intelligible differentia and rational relation to the statute's object; also statements on presumption of constitutionality.	The Court reproduced and applied this test (intelligible differentia + rational nexus) as the governing standard for assessing section 7-A and Schedule IV.
In re The Kerala Education Bill, 1957 (Special Reference No. 1 of 1958)	Recent reference reiterating and reproducing the principle from Mahomed Hanif Qureshi on permissible classification under Article 14.	Quoted to reinforce the two-condition test for classification and the presumption of constitutionality that places burden on the challenger.
British Medical Stores v. Lala Bhagirath Mal, 56 P.L.R. 449 (referred to as "Bhagirath Mal's case")	A Division Bench decision which the opinion notes had held certain prior provisions to be unconstitutional and prompted remand and further litigation.	The Court respectfully considered that Division Bench decision but concluded, after analysis, that Schedule IV and section 7-A were not unconstitutional; the earlier decision influenced procedural history but was not followed as binding on the present conclusion.
Suraj Kumari v. Dr. D.C. Chitani, A.I.R. 1956 Punj. 157	A case whose observations prompted referral of the instant second appeal to a larger Bench.	Used to justify referring the matter to a larger Bench for authoritative decision; the opinion records that the second appeal was referred in view of observations in that case.
Baroness Wenlock v. River Dee Co., 1887 19 Q.B.D. 155 (Lord Esher, M.R.)	English authority on the nature of an "inquiry" — that an inquiry can, and ordinarily should, involve taking evidence and resemble a judicial inquiry though not equivalent to a trial.	Quoted by the Court to support the proposition that the Rent Controller's inquiry under Schedule IV is judicial in nature and involves taking evidence and giving reasons; used to rebut the contention that Schedule IV permits arbitrary, non-judicial action.

Court's Reasoning and Analysis

The Court's reasoning proceeds from first principles established by the Supreme Court on Article 14 and the legislative history of rent control measures affecting Delhi. The governing legal test applied is the two-part test for permissible classification under Article 14: (1) the classification must be founded on an intelligible differentia; and (2) the differentia must have a rational relation to the object sought to be achieved by the statute. The Court emphasizes the presumption of constitutionality and places the burden on the challenger to show clear violation.

The opinion then surveys the legislative history of rent control in Delhi (1939 New Delhi House Rent Control Order; 1941 Punjab Urban Rent Restriction Act as extended; 1944 Delhi Rent Control Ordinance; the 1947 Act and its September 1947 amendment introducing section 7-A and Schedule IV). From this historical context the Court concludes that different treatment of newly-constructed premises (post-24 March 1947) and older premises is grounded in distinct historical circumstances: namely, different prevailing rents and market conditions before and after the War and before and after 1947 (e.g., very low pre-1939 rents; acute shortage and higher rents around 1947).

On the specific contention that Schedule IV and section 7(2) set materially different criteria for fixation, the Court compares the texts: Section 7(2) (for older premises) requires regard to the standard rent of similar premises in the same locality and other considerations; Paragraph 4 of Schedule IV (for new premises) requires the Rent Controller to take into consideration "all the circumstances of the case including any amount paid ... by way of premium." The Court holds that Paragraph 4 is broad enough to encompass consideration of standard rents of similar premises even though not expressly stated — and that any failure by a Rent Controller to consider such relevant matters is corrigible on appeal to the District Judge whose powers are co-extensive with those of the Controller.

The Court addresses concerns about the Rent Controller's power to increase or decrease agreed rents, and about the Controller's power to consider premiums. It reasons from legislative purpose and historical facts: pre-1939 rents were low (justifying provisions allowing increases for old buildings) while post-1947 newly constructed buildings arose out of an acute housing shortage, making contractual rents unlikely to be artificially low; hence the legislature rationally omitted a general provision to increase agreed rents for new buildings.

Procedural safeguards under Schedule IV are analyzed next. The Court notes that Paragraph 2 vests the Rent Controller with power to make such inquiry as he considers fit; Paragraph 7 empowers the Controller to require documents and to inspect premises; Paragraph 3 requires written reasons; Paragraph 11 provides appeal to the District Judge. The Court invokes English authority (Baroness Wenlock) and Indian precedent (A. Thangal Kunju Musaliar) to support the view that such enquiries are judicial in character and that a presumption must be made that appointed Rent Controllers will conduct proper inquiries. The Court finds that the possibility of a Rent Controller acting improperly does not render Schedule IV discriminatory or unconstitutional, especially given appellate oversight.

The Court also considers two specific differences highlighted by the landlord (retroactive effect of rent fixation under para 10(d) of Schedule IV; different allowable returns on cost of improvements) and finds rational explanations: the timing of the Act's operation and the need to fix standard rent from the beginning of the lease for newly constructed premises, and a legislative choice to treat returns on improvements differently for new versus old buildings. The Court emphasizes that such legislative choices lie within the legislature's domain and are not, in themselves, arbitrary or irrational.

Overall, applying the Article 14 test, assessing legislative history and purpose, and relying on procedural protections (appeal, requirement for reasons, powers to call for documents and inspect), the Court concludes the classification and the procedural scheme in Schedule IV bear a rational nexus to the Act's objectives and do not offend Article 14.

Holding and Implications

Holding: The Court's final decision is that the provisions contained in Section 7-A read with Schedule IV of the Delhi and Ajmer-Merwara Rent Control Act, 1947 do not violate Article 14 of the Constitution of India and are valid and constitutional.

Implications:

The immediate legal consequence is that fixation of standard rent for newly constructed premises under section 7-A and Schedule IV remains a constitutionally permissible scheme; the statutory distinction between newly completed/first-let premises (to be determined by a Central Government-appointed Rent Controller under Schedule IV) and other premises (to be determined by the courts under section 7 and the Second Schedule) is upheld.
The Court recognized and preserved procedural safeguards: the Rent Controller must give reasons in writing and decisions are appealable to the District Judge, which mitigates concerns about arbitrary administrative action.
The matter in the specific dispute was to be remitted: the case is sent back to the Single Judge for decision on other issues (i.e., points other than the Article 14 challenge that were reserved or remained outstanding).
The opinion does not profess to set aside any wider doctrinal innovation beyond applying established Article 14 principles; it rests on existing tests (intelligible differentia and rational nexus) and on presumption of constitutionality. The text does not assert that a new precedent was deliberately established beyond resolving the question presented in these circumstances.

Disposition

Reference answered in favour of constitutionality; the matter is remitted to the Single Judge for decision on other points in the litigation. The opinion records the concurrence of the other members of the Bench (S.B. Capoor, J. and Bhandari, C.J.).

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G.D Soni v. S.N Bhalla .

Bishan Narain, J.:— The question that is required to be determined by this Bench is whether or not section 7-A read with Schedule IV of the Delhi and Ajmer-Merwara Rent Control Act, 1947 contravenes and violates Article 14 of the Constitution.

2. The facts which have led to the raising of this question are these. S.N Bhalla is the owner of the residential premises constructed on plot No. 17A/35, Western Extention Area, Karol Bagh, New Delhi. The construction of these premises was admittedly not completed before the commencement of the 1947 Act on 24th March 1947 nor were they let to a tenant before that date. S.N Bhalla let the premises on lease to G.D Soni who agreed to pay rent at Rs. 175/- per mensem excluding house-tax. During the tenancy Soni applied for fixation of standard rent under section 7-A read with Schedule IV of the 1947 Rent Control Act. The Controller fixed the standard rent at Rs. 110/- which was ultimately raised by this Court to Rs. 124/8/- by order dated 3rd May 1953. After the fixation of this standard rent a Division Bench of this Court decided British Medical Stores v. Lala Bhagirath Mal . 56 P.L.R 449. Thereafter when the tenant offered standard rent to the landlord he refused to accept it and insisted that the tenant must pay contractual rent on the ground that the fixation of standard rent under section 7-A was void. The tenant on his part refused to comply with this demand. Thereupon the landlord in March 1055 filed the present petition out of which these proceedings have arisen for the tenant's eviction on the grounds (1) of non-payment of rent and (2) that the landlord required the premises for his own occupation.

3. The trial Court dismissed the petition with the findings that the tenant had offered and deposited the standard rent fixed by courts and further that the landlord did not require the premises for his own occupation. On appeal the Additional District Judge affirmed the trial Court's finding that the landlord did not require the premises for his own occupation but remanded the case for fixation of standard rent on the ground that previously the standard rent had been fixed under provisions which had been held to be unconstitutional by the High Court in Bhagirath Mal's case. Dissatisfied with this remand order the tenant filed this second appeal in this Court.

4. This second appeal came up for hearing before me and I referred it to a larger Bench in view of observations of Falshaw, J. in Suraj Kumari v. Dr. D.C Chitani . A.I.R 1956 Punj. 157.. The Division Bench then referred the question to a still larger Bench so that the controversy may be decided authoritatively. The case has now been placed before us for decision.

5. Now the provisions of Article 14 of the Constitution have been discussed and explained by the Supreme Court in a number of cases (Vide inter alia, Charanjit Lal v. Union of India . A.I.R 1951 S.C 41., Budhan Choudhry v. State Of Bihar . A.I.R 1955 S.C 191., A. Thangal Kunju Musaliar v. M. Venkatachalam Potti, Authorised Official and Income-tax Officer . A.I.R 1956 S.C 246., Bidi Supply Company v. Union of India . A.I.R 1956 S.C 479., Ram Krishna Dalmia v. Mr. Justice S.R Tendolkar* . A.I.R 1958 S.C 538. and Mahomed Hanif Qureshi v. State of Bihar . A.I.R 1958 S.C 731.). The most recent case on the subject is In re The Kerala Education Bill, 1957 (Special Reference No. 1 of 1958)9, and in this case the principle laid down in Mahomed Hanif Qureshi v. State of Bihar has been reproduced with approval as follows:

“* * It is now well established that while Art. 14 forbids class legislation it does not forbid reasonable classification for the purposes of legislation and that in order to pass the test of permissible classification two conditions must be fulfilled, namely, (1) the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group and (ii) such differentia must have a rational relation to the object sought to be achieved by the statute in question. The classification, it has been held, may be founded on different basis, namely, geographical or according to objects or the occupations or the like and what is necessary is that there must be a nexus between the basis of classification and the object of the Act under consideration. The pronouncements of this Court further establish, amongst other things, that there is always a presumption in favour of the constitutionality of an enactment and that the burden is upon him, who attacks it, to show that there has been clear violation of the constitutional principles. The Courts, it is accepted, must presume that the legislature understands and correctly appreciates the needs of its own people, that its laws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds. It must be borne in mind that the legislature is free to recognise degrees of harm and may confine its restrictions to those cases where the need is deemed to be the clearest and finally that in order to sustain the presumption of constitutionality the court may take into consideration matters of common knowledge, matters of report, the history of the times and may assume every state of facts which can be conceived existing at the time of legislation.”

6. In view of these decisions all that remains to be done is to examine the impugned provisions in the light of the above principles. For this purpose it is necessary to discuss the provisions of the Delhi and Ajmer-Merwara Rent Control Act of 1947 and the legislative history of these provisions so far as it is material for the present purpose.

7. The Second World War was declared in August 1939. At that time New Delhi was exclusively an official city and mostly government servants serving in the Central Government resided there. It was not fully built up. Similarly certain areas lying within the Notified Area Committee of the Civil Station Delhi were being developed as building sites. On declaration of the War it was feared that influx of officials etc. will further make the already acute shortage of house accommodation more acute. Accordingly the Government notified under Rule 81 of the Defence of India Rules the New Delhi House Rent Control Order 1939. It applied only to the New Delhi and the Civil Lines and did not apply to the Delhi Municipal Area. Under this Order a Controller appointed by the Central Government was empowered to hold a summary enquiry and determine the fair rent of residential premises. For this purpose he was given the power to require the landlord to produce any book of account or any document and to inspect the premises. In fixing the fair rent the Controller had to have due regard to the prevailing rates of rent for the same or similar accommodation in similar circumstances during twelve months prior to 1st of September 1939 and in a case where a house had been constructed after the Control Order came into force then the Controller had to have regard to any general increase in the cost of sites and building construction. This Control Order also restricted the powers of the landlord to evict the tenant but with those provisions we are not concerned in the present case. From 1939 till 1942 no Rent Control Act applied to the Municipal area of Delhi. On 15th October 1942 the Punjab Urban Rent Restriction Act, 1941 with suitable adaptations was extended to this area. Under this Act a landlord could recover only standard rent from the tenant. The term. “standard rent” was defined as meaning the rent at which the premises were let on 1st January 1939 and if not so the rent at which they were last let. If the premises were to be let for the first time after 1st January 1939 then the rent at which they are so let. In cases not governed entirely by this definition the Court was given the power to fix the standard rent (section 14). In 1944, the then Governor-General promulgated the Delhi Rent Control Ordinance, 1944 (No. XXV of 1944) under section 72 of the Government of India Act, 1935. Under this Ordinance the Chief Commissioner could apply it to any area within the Province of Delhi. Whenever this Ordinance was made applicable to any area the Punjab Act ceased to be operative. In this Ordinance also the standard rent was defined substantially in the same terms as in the Punjab Act. In case of dispute section 7 enabled a court to determine standard rent and in so doing it had to have regard to the standard rents of other similar premises in the same locality.

8. The Central Legislature then enacted the Delhi and Ajmer-Merwara Rent Control Act, 1947 (19 of 1947) repealing the Punjab Act as extended to Delhi and also repealing the Rent Control Act became operative in the entire area of the Delhi province. By section 1(2) the Act was made inapplicable to any premises the construction of which was not completed by 24th March 1947 and which had not been let to a tenant before the enforcement of the Act. Under section 7 of this Act the Court in case of dispute had to determine the standard rent on the principles set forth in the Second Schedule and also having regard to the standard rents of similar premises in the same locality and other relevant considerations. The Second Schedule laid down that the Court shall determine the basic rent of the premises according to rents on dates specified in the Schedule and then shall determine the standard rent by increasing the basic rent by specified percentage. If the premises were let for the first time after 2nd June 1944 then it was laid down that the basic rent would be the standard rent. Rules framed under the Act laid down that the Courts for this purpose shall follow the provisions of the Civil Procedure Code and the Punjab Courts Act, 1918 as nearly as may be. The order of the Court was subject to appeal and revision according to the valuation specified in the Rules.

9. Six months later, however, the Governor General promulgated Ordinance No. XVIII of 1947 to amend the 1947 Act. This Ordinance came into force on 20th September, 1947. Section 1(2) of the 1947 Act was repealed so far as the sub-section excluded the applicability of the Act to the newly constructed premises in Delhi. It inserted a new Section 7-A which dealt with standard rent of newly constructed premises. By paragraph 7-A(c) various clauses of 1939 Order were revived. This revival had the effect of the Controller retaining the power of fixation of standard rent of such premises. The Central Legislature then repealed the Ordinance and enacted the Delhi and Ajmer-Merwara Rent Control (Amendment) Act, 1947 (No. 50 of 1947). By this enactment newly constructed buildings were brought within the purview of the Rent Control Act of 1947 by repealing section 1(2) of the Act so far as it affected the Delhi buildings and by introducing section 7-A and Schedule IV to the Act. Section 7A laid down that standard rent of newly constructed buildings shall be fixed according to the provisions set forth in Schedule IV. Schedule IV lays down that the standard rent of such premises shall be determined by the Rent Controller appointed by the Central Government and that for this purpose the Rent Controller shall take into consideration all the circumstances of the case. It is the validity of Section 7-A read with Schedule IV that is challenged by the landlord in the present case.

10. From this comparatively brief survey of the legislative history of rent controls of the premises situated in the province or State of Delhi, it is clear that the standard rent of premises whether newly constructed or otherwise situated within new Delhi and Civil Lines was determined by the Rent Controller appointed by the Central Government from 1939 onwards while the standard rent of all the premises situated within the Municipal limits of Delhi was determined by courts of law. The 1947 Rent Control Act has brought about uniformity in the law relating, to Rent Control by laying down that the standard rent of newly constructed premises wherever situated within the State of Delhi shall be fixed by the Rent Controller while of other premises Courts will fix it.

11. The ground is now clear to determine if the provisions of section 7-A read with Schedule IV of 1947 Act violate Article 14 of the Constitution in the light of the various decisions of the Supreme Court on the scope of this Article.

12. It was not argued that the classification of premises as defined in the Rent Control Act, 1947 into premises completed before and after 24th March, 1947 violated Article 14 of the Constitution. The legislature in its wisdom decided to classify premises in this way and this differentiation cannot be considered to be unreasonable for the purposes of achieving the object sought by the enactment.

13. The learned counsel for the landlord challenged the validity of these provisions on the grounds (1) that there is no reasonable basis for fixing the standard rent of newly constructed premises differently on a different principle from the principle on which standard rent is fixed for old buildings in the same locality and (2) that there is no reason for discriminating against the landlords of newly constructed buildings by laying down that their standard rent shall be fixed by Rent Controllers appointed by the Central Government while the standard rent of other buildings is to be fixed by courts of law which are bound to follow procedure laid down in the Civil Procedure Code. It is urged that the Rent Controller is not bound by any procedure laid down by the Civil Procedure Code or the Punjab Courts Act.

14. The first contention is supported by the observations made in Bhagirath Mal's case. With great respect to the learned judges constituting the Bench, I find it impossible to hold that the basis for fixing the standard rent of the two types of premises violates Article 14 of the Constitution. Section 7 says that the standard rent shall be determined in accordance with the principles set forth in the Second Schedule. The Second Schedule fixes basic rent as determined under the Control Order of 1939 or under the 1944 Ordinance and in other cases the contractual rent on 1st November, 1939 or if not let on that day then on the date first let after 1st of November, 1939. The standard rent thus fixed is to be increased by certain percentage specified in the Schedule. If the premises were let after 2nd June 1944 then the basic rent and the standard rent were to be the same. Obviously this principle for fixation of standard rent could not possibly have any application to premises constructed and let after 24th March 1947. Section 7 then proceeds to lay down that if for any reason it is not possible to determine the standard rent of any premises set forth in the Second Schedule then the courts shall determine it having “regard to the standard rent of similar premises in the same locality and other relevant considerations.” Para 4 of Schedule IV lays down:

“In fixing the standard rent the Rent Controller shall take into consideration all the circumstances of the case including any amount paid or to be paid by the tenant by way of premium or any other like sum in addition to rent.”

15. It was argued on behalf of the landlord that the criteria laid down in Section 7(2) and para 4 of Schedule IV of the Act is substantially different and that there is no valid reason for such a differentiation. He urged that the Rent Controller (1) may ignore the standard rent of similar premises in the same locality while he is under an obligation to take into consideration any amount paid or agreed to be paid by the tenant by way of premium etc. in addition to rent and that the Rent Controller (2) cannot interfere with the agreed rent unless he finds it excessive and in that case he can only reduce the rent fixed between the parties and cannot increase it. It is urged that under section 7(2) it is open to the Court to increase the standard rent and also not to take into consideration any amount paid by the tenant as premium in addition to rent.

16. Now the Rent Controller is enjoined by para 4 to take into consideration all the circumstances of the case when fixing standard rent. It is not understood how a Rent Controller can omit to consider the standard rent of similar premises in the same locality. This is obviously a relevant consideration though para 4 does not specifically mention it. It is true that this criteria has been specifically mentioned in section 7(2) of the Act and has not been so mentioned in Section 7-A but this circumstance cannot lead to the inference that it is open to the Rent Controller to ignore it. The words of para 4 are in fact as wide in effect as the words used in section 7(2) of the Act. In this context it must not be forgotten that if such a mistake is made by the Rent Controller then the aggrieved party (may he be the landlord or the tenant) can appeal to the District Judge whose powers are co-extensive with those of the Rent Controller and who can set right any mistake made by the Rent Controller. I am, therefore, of the opinion that the criterion laid down for fixation of standard rent in section 7(2) and para 4 is substantially the same in scope and is not different.

17. It is true that the Rent Controller in fixing standard rent must take into consideration any amount paid to the landlord in addition to rent but I am unable to see how this circumstance adversely affects a landlord. Section 7(2) does not mention this circumstance but it appears to me that it is open to a court to take this circumstance into consideration when fixing standard rent for old buildings if it considers such a payment relevant for the purpose.

18. Undoubtedly under Schedule IV the Rent Controller can fix standard rent only if he finds that the rent agreed upon between the parties is excessive. This provision is to protect the landlord from frivolous applications by tenants and it is not clear why a landlord should object to this provision. The reason for this provision is intelligible. It is well known that rents in Delhi prior to 1st November 1939 were very low and in some cases uneconomic. Therefore the legislature decided that in such cases a landlord should be in a position to get standard rent fixed at a rate higher than fixed by agreement of the parties in 1939 or earlier. No such consideration arises in the case of buildings constructed or completed after 1947. In 1947 there existed an acute shortage of accommodation in Delhi and the landlords were in a position to dictate terms and, therefore, presumably the rents fixed between the parties were not so low as to require increase. It is for this reason that it was considered unnecessary to provide for increase of rent in Schedule IV. I am, therefore, of the opinion that it is not possible on these grounds to hold that section 7-A and Schedule IV are unconstitutional.

19. The learned counsel then brought to our notice two other matters in which the newly constructed buildings have been treated differently from the old buildings. He pointed out that under para 10(d) of Schedule IV the standard rent fixed by Rent Controller must necessarily be retrospective in effect while under section 7(5) the Court can fix the date from which the payment of standard rent would become effective. He further pointed out that under section 4(2) a landlord on making improvements can increase the standard rent by an amount not exceeding 6¼ per cent of the cost of improvement while under para 6 of the Schedule IV the Rent Controller can increase the standard rent in such circumstances to an amount not exceeding 7½ per cent of the cost of improvement. These are, however, no grounds for holding the impugned provisions to be unconstitutional. The Delhi and Ajmer Merwara Rent Control Act, 1947 came into force on 24th March 1947 originally for two years only and section 7-A with Schedule IV were introduced in September 1947, Therefore the standard rent for new buildings could well be fixed from the beginning of the lease. The old buildings were let long before 1947 and, therefore, it was considered advisable to leave it to courts to fix the date from which the payment of standard rent would become effective. This is a rational difference. So is the matter of difference of return on the cost of improvements. There is no reason for equating the return on cost of improvements of old buildings with the return on the cost of improvements of new buildings. This is a matter for the legislature to consider and this possible slight difference in returns cannot be said to be discriminatory and violative of Article 14 of the Constitution.

20. For these reasons I am of the opinion that the criteria for the fixation of standard rent for new and old buildings is substantially the same and does not violate Article 14 of the Constitution and there is no valid reason for coming to the conclusion that the standard rent of old and new buildings of the same type and in the same locality would necessarily be different. The first ground, therefore, fails and is rejected.

21. The second ground also has no force. It is urged that in Schedule IV there is no provision for recording the evidence of the parties nor is it laid down whether the evidence is to be on oath. It is further urged that the principles of natural justice have been disregarded by Schedule IV and it is open to the Rent Controller to fix standard rent arbitrarily without recording any evidence. Now para 2 of Schedule IV says that the Rent Controller shall make such enquiry as he considers fit to fix the standard rent. For this purpose he can require the landlord to produce any book of account, document or give other information relating to the premises (Para 7(a). He can also inspect the premises after due notice or authorise any officer subordinate to him to do so (Para 7(b) and (c)). The Rent Controller then must state his reasons in writing in fixing the standard rent (Para 3). His decision is subject to appeal to the District Judge (Para 11). As noticed by the Division Bench in Bhagirath Mal's case, Lord Esher, M.R, in Baroness Wenlock v. River Dee Co. . 1887 19 Q.B.D 155., observed:

“The reference under section 56 is to be for inquiry and report. It does not appear to me that the word ‘inquiry’ only includes an inquiry which the referee is to make with his own eyes. The word ‘inquiry’ in my opinion signifies an inquiry in which he is to take evidence and hold a judicial inquiry in the usual way in which such inquiries are held. The word ‘inquiry is used because it is not meant to have the same result as a trial.”

In fixing standard rent the Rent Controller decides a dispute between a landlord and a tenant. To do this effectively he has to take evidence and to hold a judicial inquiry particularly when he has to give reasons for his decision. Para 7 is also indicative of such a judicial inquiry. There is no reason for presuming and assuming that the Rent Controller would not hold such an inquiry. If he does not do so then the aggrieved party can always appeal to the District Judge Delhi who invariably is a very senior and experienced judicial officer. The Central Government appoints a Rent Controller. It is not to be assumed that such an officer would not hold a proper inquiry into the dispute. As observed by the Supreme Court in A. Thangal Kunju Musaliar v. M. Venkatchalam Potti, “it is to be presumed unless the contrary is shown that the administration of a particular law would be done not with an evil eye and unequal hand”. In any case the possibility of a Rent Controller acting against the principles of natural justice would not render the provision relating to inquiry in Schedule IV discriminatory.

22. In this context it must not be forgotten that considering the recent rise in prices of land, building material and labour costs in Delhi the standard rent should be correlated to these costs. In the circumstances the legislature in its wisdom has thought fit that the enquiry into standard rent of new buildings should continue to remain with the Rent Controllers who can expeditiously decide the matter. In this context it can be reasonably expected that the Central Government will appoint only those persons as Rent Controllers who can use their own knowledge and experience to calculate these costs. In these circumstances it cannot be said that the differentiation in the procedure adopted in the statute has no rational relation to the object sought by the legislature.

23. For all these reasons with great respect to the decision of the Division Bench in Bhagirath Mal's case I am of the opinion that Schedule IV cannot be held to be violative of Article 14 of the Constitution on this ground also.

24. The result is that in my opinion the provisions contained in Section 7-A read with Schedule IV of the Delhi and Ajmer-Merwara Rent Control Act, 1947 do not violate Article 14 of the Constitution of India and these provisions are valid and constitutional.

25. The case now must be sent to the Single Judge for decision on the other points involved in the case.

26. S.B Capoor, J.:— I agree.

27. Bhandari, C.J:— I agree.

Reference answered.

G.D Soni v. S.N Bhalla .

Legal Opinion Summary: Validity of Section 7-A read with Schedule IV of the Delhi and Ajmer-Merwara Rent Control Act, 1947

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Landlord's Arguments

Tenant's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Disposition

G.D Soni v. S.N Bhalla .

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