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Disposition
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  • Article 226
  • Section 5, Subsection 2 of the 1983 Income Tax Act
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Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Disposition
Judges
Acts
  • Article 226
  • Section 5, Subsection 2 of the 1983 Income Tax Act
Smart Summary

Factual and Procedural Background

The appellant-tenant fell into arrears of rent from March 1979 to March 1980 at the agreed rate of Rs 80 per month. The respondent-landlord, invoking clause 13(3)(ii) of the C.P. & Berar Letting of Houses and Rent Control Order, 1949 (“the Order”), sought permission to issue a notice determining the tenancy for habitual default. The Rent Controller rejected the application, holding that the landlord had been accepting rent, albeit belatedly, without objection and, therefore, the tenant was not a habitual defaulter. The appellate authority reversed that finding and granted permission to evict; a learned Single Judge of the High Court affirmed the appellate decision in a writ petition, and a Division Bench upheld it in Letters Patent Appeal on 14 October 1986. The present appeal to the Supreme Court arose by special leave.

Legal Issues Presented

  1. Whether a tenant who pays rent at irregular intervals can be deemed a “habitual defaulter” under clause 13(3)(ii) of the Order when the landlord has consistently accepted such payments without protest.
  2. Whether the Supreme Court may entertain a pure question of law (regarding the effect of the landlord’s conduct) even if it was not argued before the Division Bench of the High Court.

Arguments of the Parties

Appellant’s Arguments

  • The landlord’s continuous acceptance of rent paid at irregular intervals, without any protest or warning, created a tacit contract modifying the monthly payment obligation; therefore the arrears do not constitute habitual default.
  • The appellate and High Court orders were passed in ignorance of binding Supreme Court precedents establishing the above principle.
  • Even if not pressed before the Division Bench, the question is purely legal, based on undisputed facts, and can be raised for the first time before the Supreme Court.

Respondent’s Arguments

  • The tenant had confined his case before the Division Bench to challenging the constitutional validity of clause 13(3)(ii); consequently, he should be barred from advancing a new argument in the Supreme Court.
  • Irregular payment of rent from March 1979 to March 1980 amounts to habitual default warranting eviction.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
S.P. Deshmukh v. Shah Nihal Chand Waghajibai Gujarati, (1977) 3 SCC 515 Landlord’s long-standing acceptance of belated rent without protest implies a contract to receive rent at irregular intervals; such conduct negates “habitual default.” The Court relied on this case to hold that the appellant’s late payments, accepted without objection, did not constitute habitual default.
Rashik Lal v. Shah Gokuldas, (1989) 1 SCC 542 The “crucial test” is the landlord’s conduct: unprotested acceptance of late rent estops the landlord from suddenly initiating eviction for default. Used to reinforce that the respondent, having lulled the tenant into believing irregular payments were acceptable, could not later treat them as habitual default.
Mangalbhai v. Dr Radheyshyam, (1992) 3 SCC 448 Reaffirmed the precedents above; conduct of parties may create a contrary contract regarding payment intervals. Confirmed the consistent line of authority applied in deciding that the appellant was not a habitual defaulter.

Court's Reasoning and Analysis

1. The Court reviewed the factual finding of the Rent Controller that the landlord and tenant were neighbours on good terms and that the landlord had persistently accepted rent paid after delays without registering any protest.

2. Referring to the trilogy of Supreme Court judgments—Deshmukh, Rashik Lal and Mangalbhai—the Bench stated that such acceptance creates a “contract to the contrary,” displacing the statutory obligation of monthly payment for the purpose of determining habitual default.

3. Because neither the appellate authority nor the High Court considered these binding authorities, their conclusion that the tenant was a habitual defaulter constituted a manifest error of law.

4. On the procedural objection, the Court held that it may entertain a pure question of law not involving fresh fact-finding, especially when that issue was argued up to the stage of the learned Single Judge and is decisive of the appeal.

Holding and Implications

HELD: The appeal is allowed; the orders of the appellate authority, Single Judge, and Division Bench are set aside, and the Rent Controller’s order dismissing the landlord’s application is restored.

Implications: The tenant retains possession, and the case reaffirms that a landlord’s unprotested acceptance of belated rent negates allegations of habitual default under clause 13(3)(ii) of the Order. No costs were awarded, and the decision applies established precedent without creating new legal doctrine.

    Swami Ratanbabu v. Wamanrao Shankarrao Deshmukh .

    Order

    1. Leave granted.

    2. The appellant-tenant committed default in the payment of rent from March 1979 to March 1980 at the rate of Rs 80 per mensem. The respondent-landlord filed an application under clause 13(3)(ii) of the C.P & Berar Letting of Houses and Rent Control Order, 1949, for short ‘the Order’. The Rent Controller found that the respondent being the neighbour has been receiving the rent without any objection and therefore the appellant is not a habitual defaulter. The appellate authority reversed the finding and granted permission for serving notice to eject the appellant. In a writ petition filed under Article 226, the High Court affirmed that finding. On further LPA, the Division Bench in the impugned order dated October 14, 1986 affirmed the order directing permission to determine the tenancy. Thus this appeal by special leave.

    3. In S.P Deshmukh v. Shah Nihal Chand Waghajibai Gujarati (1977) 3 SCC 515 this Court held that:

    “Normally, a monthly tenant is under an obligation to pay the rent from month to month but this obligation is subject to a contract to the contrary. Such a contract need not be reflected in a formal document and can be spelt out from the conduct of the parties, spread over a fairly long period of time. The evidence in the case, which was believed by the two tribunals of fact, shows that the tenant has been paying rent at an interval of 3 or 4 months, which the landlord has been willingly accepting and always without even so much as a murmur.”

    On that finding this Court accepted that the tenant is not in habitual default in payment of the rent. This view was reiterated in Rashik Lal v. Shah Gokuldas (1989) 1 SCC 542, (1989) 1 SCR 439. This Court held in a paragraph at page 443 of the above-cited judgment that:

    “The crucial test appears to be the conduct of the landlord in receiving the rent offered belatedly. If he receives the same under a protest and warns the tenant to be regular in payment in the future, he cannot be assumed to have agreed to a modified agreement in this regard. But if he, without any objection and without letting the tenant know his thought process, continues to receive rent at intervals of several months, he cannot be allowed to spring a surprise on the tenant by suddenly starting a proceeding for eviction. Having lulled the tenant in the belief that things were all right, the landlord was under a duty to serve him with a notice demanding regular payment, if he wished to insist upon it.”

    4. This view was further followed in Mangalbhai v. Dr Radheyshyam (1992) 3 SCC 448. In view of this consistent law laid by this Court, it is now well settled that by conduct of the landlord that if he accepts the rent though paid belatedly, there arises a contract to the contrary that the landlord is willing to receive the rent at irregular intervals. That conduct will be displaced by receiving the rent under protest and warns the tenant that henceforth if the payments are made at irregular intervals it would constitute habitual default and he will be liable to ejectment. If that conduct is not established and if the landlord continues to receive the rent, the conduct on the part of the parties in payment of the rent at irregular intervals cannot be said to constitute habitual default liable to ejectment under clause 13(3)(ii) of the Order.

    5. The finding of the Controller and even the defence taken in the written statement filed by the appellant is that the appellant and the respondent are neighbours and are on good terms. He has been receiving the rent at irregular intervals and that he has not at any time protested in receipt of the rent though paid belatedly. Under those circumstances, we have no hesitation to conclude that though the tenant is under an obligation to pay the monthly rent regularly, by conduct there is a contract to the contrary that the rent paid at irregular intervals would not constitute habitual default in payment of rent. This being the finding of fact based on the evidence on record. The appellate tribunal and the High Court had not had advantage of the law laid by this Court. Deshmukh case (1977) 3 SCC 515 was not cited before the authorities. Thereby there is a manifest error of law committed by the courts below in granting permission to determine the tenancy of the appellant.

    6. It is then contended by Shri Wad, counsel for the respondent that though this point was argued before the learned Single Judge, the appellant had not argued this point before the Division Bench, but confined to the constitutional validity of clause 13(3)(ii) of the Order and that therefore the appellant cannot be permitted to raise this point in this Court. We find no force in this contention. Though it is stated in his special leave petition that this point was argued before the Division Bench and not dealt with, we proceed on the basis that the point had not been argued. Yet being a pure question of law, it is always open to this Court to permit the parties to raise pure questions of law untrammelled by questions of fact, to be raised and decided in an appropriate case. In this case that is the only question that arises and that question was squarely gone into up to the learned Single Judge and therefore we permitted the counsel to argue the point and we answered it accordingly.

    7. The appeal is allowed and the appellate and orders in writ proceedings before the Single Judge and the Division Bench are set aside and that of the Rent Controller confirmed. But in the circumstances there shall be no order as to costs.

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    Comments

    Swami Ratanbabu v. Wamanrao Shankarrao Deshmukh .
    (Sep 29, 1993)