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Case Number

W.P No. 15579 of 86

Attorney(S)

For the Appellant: A.V.S. Rama Krishna, C.P. Sastry, C.Y.N. Shastry, K. Srikrishna, N.V. Ramnganadham, S.S. Prasad, Advocates.

Judges

Amareswari
Upendralal Waghray, JJ.

Acts

section 32 (b)

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Smart Summary

Structured Summary of the Judgment (Amareswari, J.)

Factual and Procedural Background

This is a batch of writ petitions filed by tenants challenging the validity of Government Order (G.O.) Ms. No. 636, General Administration (Accommodation - A) Department dated 29-12-1983 issued by the Government of Andhra Pradesh under Section 26 of the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960 ("the Act").

Background statutory context: Section 32 of the Act exempted certain buildings from the Act's provisions, including by clause (b) "any building constructed on or after 26-8-1957". The Supreme Court in Motor General Traders v. State of A.P. (AIR 1984 SC 121) struck down Section 32(b) as violative of Article 14, but indicated that a state government could, by legislation or notification under Section 26 of the Act, provide limited exemptions (for example for 5, 7 or 10 years) to incentivize building activity.

Following those observations of the Supreme Court, the Government of Andhra Pradesh issued G.O. Ms. No. 636 dated 29-12-1983 which (a) exempted "all buildings" for a period of ten years from the date on which their construction is completed, and (b) exempted buildings the monthly rent of which exceeds Rs.1,000. The notification came into effect from 26-10-1983. The petitioners challenge the validity and scope of that G.O.

Legal Issues Presented

Whether the G.O. applies only to buildings constructed on or after the date the G.O. came into force (i.e., whether the exemption applies only prospectively to buildings constructed after 26-10-1983).
Whether the G.O. requires both conditions simultaneously (i.e., that the exemption is operative only for buildings which both were newly constructed and fetch more than Rs.1,000 per month) or whether the two clauses create separate classes of exemption.
Whether the G.O. is violative of Article 14 of the Constitution because it contemplates a permanent exemption for buildings whose rent exceeds Rs.1,000 per month (i.e., whether absence of a time limit for clause (b) renders it arbitrary).
Whether fixation of the Rs.1,000 threshold is arbitrary and unrealistic such that it offends the purpose of the Act (i.e., whether the figure has no reasonable nexus to present-day conditions and frustrates the Act's objective of protecting tenants, particularly lower and middle classes).

Arguments of the Parties

Petitioners' Arguments (as presented in the opinion)

The impugned G.O. applies only to buildings constructed on or after 26-10-1983 (i.e., the G.O. is prospective).
The notification is applicable only to buildings which satisfy both clauses (a) and (b) — meaning exemption for 10 years applies only to buildings whose monthly rent exceeds Rs.1,000; buildings with rent ≤ Rs.1,000 receive no exemption.
The G.O. is violative of Article 14 because it contemplates a permanent exemption for all buildings whose rent exceeds Rs.1,000 (absence of time limit makes it unreasonable).
The fixation of Rs.1,000 is arbitrary and unrealistic; many small buildings fetch more than Rs.1,000 and the figure unfairly disadvantages middle and lower middle classes, defeating the object of the Act.

Government's Submissions (as recorded in the opinion)

The figure of Rs.1,000 was fixed having regard to present-day conditions and the government is free to change the figure on review.
Mere absence of a temporal prescription for clause (b) does not render the G.O. arbitrary; if conditions change and the figure becomes unrealistic, the G.O. may be challenged at that time.
The power to issue a notification under Section 26 carries with it the power to cancel, rescind or modify it; the government can review and alter the exemption if rents rise significantly.
The G.O. is designed to protect tenants who cannot afford rents above Rs.1,000 and to avoid giving benefits to affluent persons — the Rs.1,000 threshold is a reasonable basis of classification in the absence of data showing it to be arbitrary.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Motor General Traders v. State of A.P., AIR 1984 SC 121	Struck down Section 32(b) as violative of Article 14; held that exempting buildings constructed on or after a fixed past date creates an irrational privileged class. Observed that there is justification for exempting new buildings for limited periods (5, 7 or 10 years) to provide incentive to builders and that state governments may legislate or issue notifications under Section 26 to grant temporary exemptions.	The court relied on these observations as the antecedent justification allowing the State to issue G.O. Ms. No. 636 to provide a temporal exemption (10 years) to incentivize building activity; the judgment supported reading the notification as legitimately aiming to encourage construction while protecting tenants.
Riazur Rahman v. Venkata-ratnam, 1984 (1) A.P.L.J. 356 (Single Judge)	Interpreted the G.O. as benefiting only buildings constructed subsequent to 26-10-1983 (i.e., prospective application).	The court noted this view but held it was no longer good law because it had been overruled by a later Division Bench decision.
Sr. Administrative & A.O.A.N.B. Deptt. v. E.P.B. Manian, A.I.R. 1985 A.P. 96 (Division Bench)	Interpreted Section 26 and the notification to include buildings already constructed (i.e., the phrase "any building or class of buildings" covers existing buildings and not only future constructions).	The court expressly agreed with this Division Bench and applied its reasoning to reject the petitioners' contention that the G.O. was prospective only; the G.O. was held to cover existing buildings and to grant exemption for ten years from each building's date of completion.
Shankar Rao v. Government of Andhra Pradesh, 1982 (2) A.P.L.J. (S.N.) 40 (Division Bench)	Considered and rejected the contention that exempting buildings fetching more than a specified rent (the threshold) is arbitrary.	The court relied on and expressed complete agreement with this Division Bench's view when rejecting the petitioners' challenge to the Rs.1,000 threshold as arbitrary.
Writ Appeal No. 63 of 1987 (Division Bench) — dated 13-2-1987	Affirmed the earlier Division Bench view that the G.O. is not arbitrary regarding the rent-threshold exemption.	The court noted this affirmation and relied upon it in concluding that the Rs.1,000 exemption limit could not be held to be unreasonable on the record before the court.
Ratanarya v. State of Tamil Nadu, AIR 1986 SC 1444	Concerned the distinction between tenants of residential and non-residential buildings; held that exempting residential buildings above a rent threshold while not exempting non-residential buildings was unreasonable. Also observed that a fixed exemption limit (Rs.400 in that case) had become unrealistic with the passage of time.	The court examined this Supreme Court decision and distinguished it: Ratanarya dealt with a residential/non-residential classification, whereas in the present matter the classification relates to ability to pay (rent > Rs.1,000). The court found that, absent data showing the Rs.1,000 figure to be unreasonable, it could not invalidate the G.O. on that basis.

Court's Reasoning and Analysis

The court analysed the petitioners' contentions seriatim and followed the text of Section 26 of the Act and authoritative precedents:

On the question whether the G.O. applies only prospectively, the court examined the language of Section 26 which empowers the government "by notification" to exempt "any building or class of buildings". The court concluded that the phrase "any building or class of buildings" includes buildings already constructed; therefore the notification is not limited to buildings to be constructed in the future. The court agreed with the Division Bench decision in Sr. Administrative & A.O. A.N.B. Deptt. v. E.P.B. Manian and rejected the contrary Single Judge view in Riazur Rahman.
On the construction of clauses (a) and (b) of the G.O., the court held they must be read disjunctively. Clause (a) exempts "all buildings" for a period of ten years from the date of their completion — that exemption applies irrespective of the rent they fetch. Clause (b) creates a separate class exempted on the basis that their monthly rent exceeds Rs.1,000. The court explained the policy basis: clause (a) provides temporal incentive to encourage building activity (referencing Motor General Traders), whereas clause (b) is a classification directed at not conferring benefit on affluent persons who can pay rents above the threshold.
On the Article 14 challenge to clause (b) for lack of a time limit, the court observed that absence of a temporal prescription does not automatically render the G.O. arbitrary. The government pleader's submission that the government can review and change the figure was accepted as a practical safeguard. The court indicated that if in future the figure becomes artificial or unrealistic, it remains open to challenge; but on the present record mere non-prescription of time does not invalidate the G.O.
On the contention that the Rs.1,000 threshold is arbitrary or unrealistic, the court reviewed earlier Division Bench decisions (Shankar Rao and writ appeal no.63 of 1987) which had rejected similar challenges. The petitioners relied on the Supreme Court decision in Ratanarya (which criticized a residential/non-residential classification and observed a particular exemption limit had become unrealistic), but the court distinguished Ratanarya on its facts: Ratanarya involved different classification issues and contained no supporting data to show the monetary threshold was unreasonable. The court stated that in the absence of any data on the record it could not hold the Rs.1,000 figure to be unreasonable, and also took judicial notice that it could not be said to be unreasonable on the material before it.
The court reiterated the policy balance: the Act's object is to protect tenants (particularly lower and middle income groups) but there must also be incentives for building activity; the two clauses in the G.O. serve these complementary purposes.

Holding and Implications

DISMISSED. For the reasons stated, the writ petitions and the writ appeal fail and are accordingly dismissed.

Direct consequences and practical implications (as recorded in the opinion):

The G.O. Ms. No. 636/29-12-1983 is upheld: clause (a) grants a ten-year exemption from the date of completion to all buildings; clause (b) exempts buildings fetching more than Rs.1,000 per month (the court did not strike down this clause as arbitrary on the record before it).
The G.O. is applicable to buildings already constructed as well as future buildings — i.e., it is not confined to buildings constructed only after 26-10-1983.
The clauses must be read disjunctively: the ten-year exemption for all buildings is one class; the rent-threshold exemption is a separate classification directed at those able to pay higher rents.
The government retains the power to review, modify, rescind or alter the notification (and the Rs.1,000 figure) in the future; if circumstances change such that the figure becomes unrealistic, the G.O. may be attacked on that basis.
Costs: No costs. Advocate's fee awarded: Rs.150 in each petition.

The court did not set aside any precedent; rather it followed and applied relevant Division Bench decisions and distinguished the Supreme Court decision in Ratanarya on the facts and absence of data.

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Buywell Corporation v. Mahadevmal

Amareswari, J.:-

(1) In this batch of writ petitions, the petitioners who are all tenants challenge the validity of g. O. Ms. No. 636, general administration (accommodation - a) department dated 29 - 12 - 1983 issued by the government of andhra pradesh under section 26 of the andhra pradesh buildings (lease, rent and eviction) control act, 1960, hereinafter called the act.

(2) The rent control act is a legislation enacted by the legislature of the state of andhra pradesh regulating the lease of buildings, the control of rent and prevention of unreasonable eviction of tenants from the demised premises, section 32 of the act provides that the provisions of the act shall not apply (a) to any building owned by the government and (b) to any building constructed on or after 26 - 8 - 1987. Apparently, the object of clause (b) is to see that the rent act does not adversely affect the building activity. The vires of this section was challenged in several writ petitions before the supreme court.

(3) In motor general traders vs. State of a. P. (a. I. R. 1984, supreme court, page 121) the supreme court ruled that section 32 (b) which exempts all buildings constructed on or after 26 - 8 - 57 from the operation of the act, is violative of article 14 and the continuance of that provision on the statute book will imply the creation of a privileged class of landlords without any rational basis as the incentive to build which provided a nexus for the reasonable classification of such class of landlords no longer exists by lapse of time in the case of majority of such landlords. The supreme court added that the decision may adversely affect many who might have built houses recently during the inflationary days at high rates of interest, on the expectation and belief that they would not be subjected to the restrictions imposed by the act and the incentive to build provides a rational basis for classification and it is necessary, in the national interest, that there should be freedom from restrictions for a limited period of time and that it is always open to the state legislature or the state government to take action by amending the act itself or under section 26 of the act, as the case may be, not only to provide incentive to persons who are desirous of building new houses, as it serves a definite social purpose but also to mitigate the rigour to such class of landlords who may have recently built their houses for a limited period as it has been done in the union territory of chandigarh and the question whether new legislation should be initiated to exempt newly constructed buildings for a limited period of time on the pattern of similar legislation undertaken by different states or to exempt such class of buildings for a given number of years from the provisions of the act by the issue of a notification under section 26 of the act is one of the state government to decide.

(4) Pursuant to the above mentioned observations of the supreme court, the state of andhra pradesh issued a notification in g. O. Ms. No. 636 dated 29 - 12 - 83 exempting (a) all buildings for a period of 10 years from the date on which their construction is completed and (b) buildings, the monthly rent of which exceeds rs. L,000/ - the notification came into effect on and from 26 - 10 - 83. The validity of this notification is now challenged in these writ petitions.

(5) The learned counsel mr. S. Satyanarayana prasad, mrs. C. P. Sarathy and mr. A. V. Ramakrishnaiah raised four contentions.

1. The impugned notification applies only to buildings constructed on or after 26 - 10 - 1983.

2. The notification is applicable to buildings which satisfy both conditions mentioned in clauses (a) and (b) i. E. , that the exemption is operative for 10 years from the date of construction of a building the monthly rent of which exceeds rs. 1,000/ - and not to any other buildings.

3 the g. O. Is violative of article 14 of the constitution of india as it contemplates a permanent exemption of all buildings, whose rent exceeds rs. 1. 000/ -.

4. The fixation of rs. 1,000/ - is arbitrary and unrealistic and in any event it has no bearing to the realities to the present day conditions as even small buildings are fetching a rent of more than rs. 1,000/ - and the middle class and the lower middle class are put at a great disadvantage thereby defeating and frustrating the object of the act.

(6) We will take up these contentions in seriatim. The first submission that the g. O. Is applicable only to buildings constructed after the issuance of the g. O. This is not the first time that this question was raised. In fact, one of the learned single judges of this court rama rao j. , as he then was accepted that view and held that the benefit of the exemption should be given only to buildings constructed subsequent to 26 - 10 - 1983 from which date the exemption came into - force. (vide riazur rahman vs. Venkata - ratnam (1984 (1) a. P. L. J. Page 356). But this view is no longer good law as it had been over ruled by a division bench of this court in sr. Administrative and a. O. A. N. B. 'deptt. - vs. E. P. B. Manian (a. I. R. 1985, andhra pradesh, page 96). We are in complete agreement with the view expressed by the division bench in sr. Administrative and a. O. A. N. B. Deptt. Vs. E. P. B. Manian (a. I. R. 1985, andhra pradesh, page 96). Section 26 of the act is as follows: -

"26. Exemption: - notwithstanding anything in this act, the government may by notification in the andhra pradesh gazette exempt, subject to such conditions and terms, if any, as they may specify in the notification, any building or class of buildings from all or any of the provisions of this act."

The language used is "any building or class of buildings". This covers buildings already constructed. It cannot be postulated that the g. O. Is made applicable only to the buildings to be constructed in future. There fore, there is no warrant for the proposition that section 26 intends to grant exemption only to buildings to be constructed after the issuance of the g. O. The intention is very clear and it is to grant exemption to all buildings for a period of 10 years from the date of their completion. We therefore, see no force in this contention.

(7) The second submission of the learned counsel is that the notification is applicable only to buildings, the monthly rent of which exceeds rs. 1,000/ - per month and clause 2 limits the period to ten years. The effect of this argument is that in respect of buildings, whose rent is rs. 1,000/ - and less than rs. 1,000/ - , there is no exemption at all, and it is only such buildings that fetch a rent of more than rs. 1,000/ - that are exempted for a period of 10 years from the date of their completion. They say that all buildings are covered by the rent control act and by virtue of the present g. O. Only buildings fetching a rent of more than rs. 1000/ - are exempt from the provisions of the act for a period of 10 years.

(8) We do not think that we can accede to this contention in view of the plain - language of the notification. Clause (a) of the g. O. Exempts 'all' buildings for a period of ten years from the date on which their construction is completed. The expression used is "all". The exemption for ten years is for all buildings, irrespective of the rent they fetch. Clause (b) speaks of exemption on a different basis i. E. Buildings whose monthly rent exceeds rs. 1,000/ -. Two classes of exemption are contemplated. One is to exempt all buildings for a limited time. The other is to exempt the buildings, whose monthly rent exceeds rs. 1,000/ -. The expression "all" in clause (a) includes every building whether the monthly rent is above rs. 1,000/ - or less than rs. 1,000/ -. The object is to provide an incentive for building activity as otherwise it comes to a stand still, in which case the very purpose for which the rent. Act is enacted namely, to provide some benefits to the tenants may be defeated. The second clause is based on another principle namely, that no benefits need be conferred on the rich and the affluent who can pay a rent of more than rs. 1000/ - the act is designed to help lower and middle class groups of persons. The object as specified in the notification is that the protection was considered necessary only to tenants belonging to those income groups who cannot afford to pay rent for more than rs. 1,000/ - per month and the government felt that the interests of such tenants constituting majority of the society should be protected from unreasonable evictions from the houses and that it was not necessary to protect tenants who are affluent in the society capable of paying more than rs. L,ooo/ - per month. In fact, this is the underlying principle of classification adopted for the purpose of notification and it serves a social purpose. At the same time, it cannot be for gotton that there must be some incentive for the building activity. Hence clauses (a) and (b) must be read disjunctively and not conjunctively.

(9) The supreme court in motor general trders vs. State of a. P. (a. I. R. 1984, supreme court, page 121) while striking down section 32 observed that

"there is some justification for exempting new buildings for 5, 7 or 10 years old from the act in order to provide an incentive to the builders of new buildings"

. Such an interpretation would subserve the purpose of the act, namely, the interests of the tenants as well as the landlords and in a larger sense the interests of the tenants as unless there is an incentive for building activity, the very purpose of the act is defeated.

(10) This third submission of the learned counsel for the petitioners is that the g. O. Is violative of article 14 of the constitution of india as it grants a permanent exemption to all buildings, whose rent is more than rs. 1,000/ -. The non - prescription of a time limit renders the g. O. Unreasonable as the state of things may not be same for all time to come.

(11) The learned government pleader submitted that having regard to the present day conditions, the figure of rs. 1,000/ - is fixed and it is always open to the government to change the figure on a review of the situation. We do not think that mere absence of a prescription of a time renders the g. O. Arbitrary. If tne conditions change and the figure become unrealistic, it may be open to challenge on that ground. But so long as it is not artificial or unrealistic and reflects the present day conditions, the notification cannot be said to be bad.

(12) The power to issue a notification carries with it the power to cancel, rescent or modify. If after a lapse of time it is found that the figure of rs. 1,000/ - is low and the rents spiral up, the government may take that into account and review the position and issue suitable alterations. If it is not done, it is always open to the petitioners to challenge. We, therefore, do not find any substance in this contention either.

(13) Lastly, it is submitted that the order exempting buildings fetching more than rs. 1,000/ - per month from the act is arbitrary and invalid. This point was considered by a division bench of this court in shankar rao vs. Government of andhra pradesh (1982 (2) a. P. L. J. (s. N.) page 40) and the division bench rejected this contention. The same point was again canvassed before another division bench in writ appeal no. 63 of 1987. The latter division bench had affirmed the view that the g. O. Is not arbitrary. It is contended before us that the view of the earlier benches is no longer good law in view of the decision of the supreme court in ratanarya vs. State of tamilnadu (a. I. R. 1986 supreme court, page 1444). We have examined the decision of the supreme court. It is mainly concerned with the distinction made between the tenants of residential buildings and the tenants of "non - residential buildings. The tamil nadu government exempted residential buildings fetching a rent of more than rs. 400/ - per month from the purview of the act while not exempting the non - residential buildings altogether. The supreme court held that the exemption granted in favour of the residential buildings fetching more than a monthly rent of rs. 400/ - while not granting such exemption to non - residential buildings even though they are fetching rs. 1000/ - per month is unreasonable. In other words, the classification between the tenants of residential buildings and tenants of non - residential buildings was held to be not reasonable and as having no relation to the object of enactment. True, the supreme court observed in the said judgment that fixing the exemption limit at rs. 400/ - has become unrealistic with the passage of time particularly in view of the raise in rents. In the present case, g. O. Ms no. 636 fixes the exemption limit at more than rs. 1000/ - whereas in the supreme court case arising from tamil nadu state, the limit was rs. 400/ - except stating that the figure is unrealistic, no particulars are furnished. In the absence of any data, it is not possible to hold whether the figure is reasonable or not. Even taking a judicial notice of the situation prevailing, it cannot be said that it is unreasonable. The learned government pleader submitted that the g. O. Is intended only to benefit the middle class and lower middle class sections of the society. It cannot be said that persons who are capable of spending more than rs. 1000/ - towards rent alone can be said to be lower middle class. In the absence of any data, we are not inclined to hold that the amount of rs. 1000/ - fixed as exemption limit is unreasonable. We are in complete agreement with the view expressed in the decision of the division bench in shankar rao vs. , government of andhra pradesh 1982 (2) a. P. L. J. Page 40 and writ appeal no. 63 of 1987 dated 13 - 2 - 1987.

(14) For all the above reasons, the writ petitions and the writ appeal fail and they are accordingly dismissed. No costs. Advocate's fee rs. 150/ - in each.

Buywell Corporation v. Mahadevmal

Structured Summary of the Judgment (Amareswari, J.)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioners' Arguments (as presented in the opinion)

Government's Submissions (as recorded in the opinion)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Buywell Corporation v. Mahadevmal

Comments