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Citation Codes
Equivalent Citations
citation codes
Case Number
Advocates
  • S.Triviwalla
  • Dipankar Ghosh
  • Ashim Ghosh
Judges
  • Mr. Justice B.C. Mitral
  • Mr. Justice S.C. Ghose
Acts
  • provisions of sub - section (1) , (2) and (2a) of section 17
  • section 2 (6) of the indian registration. Act
  • subsection (1) , (2) and (2a) of section 17
  • sub - sections (1) and (2) of section 17
  • sub - section (1) of section 17
  • sub - section (3) of section 17
  • provisions of sub - section (2)
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Advocates
  • S.Triviwalla
  • Dipankar Ghosh
  • Ashim Ghosh
Judges
  • Mr. Justice B.C. Mitral
  • Mr. Justice S.C. Ghose
Acts
  • provisions of sub - section (1) , (2) and (2a) of section 17
  • section 2 (6) of the indian registration. Act
  • subsection (1) , (2) and (2a) of section 17
  • sub - sections (1) and (2) of section 17
  • sub - section (1) of section 17
  • sub - section (3) of section 17
  • provisions of sub - section (2)
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Smart Summary

Structured Summary of the Opinion (Ghose, J.)

Factual and Procedural Background

The respondent no. 1, Dhanuka Industries (P) Ltd., was a tenant of the appellant in respect of part of the second floor of premises at 19 Rajendra Mukherjee Road, Calcutta, paying rent of Rs. 2,020 per month. The income-tax authorities served notices on the tenant under section 226(3) of the Income-tax Act, 1961, on several occasions (December 6, 1966; January 29, 1969; June 29, 1970), each of which was later withdrawn. The appellant by letter of June 11, 1970 instructed tenants to pay rent to United Bank of India; by letter of August 14, 1970 the appellant's solicitor stated that rent had been assigned to United Bank of India. The tenant had not paid rent to the appellant since August 1968.

By notice dated April 15, 1972 the appellant determined the tenancy with effect from the expiry of May 1972 and, on or about June 4, 1973, instituted a suit for recovery of possession (ejectment). The tenant was served with writ of summons on July 31, 1973 and on August 22, 1973 applied in that suit for (inter alia) determination of the rent payable by it, directions for deposit or payment in instalments, and an extension of time to deposit.

The tax recovery officer issued a prohibitory notice on August 25, 1973 restraining the tenant from paying any rent (including arrears) to the appellant until further orders. The tenant relied on multiple demand notices from the Corporation of Calcutta and the revenue, and on the assignment letter to United Bank of India, to contend that no amount was payable to the appellant. The court of first instance (Ramendra Mohan Dutta, J.) held that because of the appellant's default in paying income-tax and the prohibitory notices the tenant was not obliged to deposit rent or pay the appellant, and therefore need not deposit in court any amount equivalent to rent or arrears.

The present appeal challenges the judgment and order dated November 8, 1973 of the court of first instance and concerns the interpretation and application of subsections (1), (2) and (2A) of section 17 of the West Bengal Premises Tenancy Act, 1956.

Legal Issues Presented

  1. Whether prohibitory notices issued by income-tax authorities (under section 226(3) of the Income-tax Act) and demand notices by the municipal corporation prevent or negate the tenant's statutory obligation under section 17(1) of the West Bengal Premises Tenancy Act to deposit in court or pay to the landlord arrears of rent and continue monthly deposits pending determination of the suit for eviction.
  2. Whether the purported assignment of rent by the appellant to United Bank of India (by a letter dated August 14, 1970) constitutes a valid transfer of a debt or actionable claim under section 130 of the Transfer of Property Act, and, relatedly, whether future rent can be assigned without an appropriate written instrument and registration under the Indian Registration Act.
  3. Whether the court of first instance erred in holding that the tenant had no obligation to deposit any sum as required by section 17(1) of the West Bengal Premises Tenancy Act.

Arguments of the Parties

Respondent (Tenant) — Contentions as recorded in the petition

  • Multiple demand notices were served by the Corporation of Calcutta claiming sums (owner's and occupier's share of taxes) and the respondent made payments against such demands.
  • Income-tax authorities had served notices (under section 226(3)) and the tax recovery officer had issued a prohibitory notice preventing payment of any rent to the appellant; in view of these conflicting claims and prohibitions, the respondent contended that no amount was payable to the appellant.
  • On that basis the respondent asserted the appellant had no cause of action to institute the ejectment suit for default in payment of rent, and alternatively sought determination of the rent payable, directions to deposit such amount in instalments, and an extension of time for deposit (a fortnight after final determination of controversies).

Appellant (Landlord) — Contentions as recorded in the opinion

  • The appellant maintained that the tenant had defaulted in payment of rent (tenant had not paid rent since August 1968) and therefore, under section 17(1) of the West Bengal Premises Tenancy Act, the tenant was statutorily obliged to deposit arrears and continue monthly payments pending the suit.
  • The appellant disputed the effectiveness of the purported assignment by letter dated August 14, 1970; counsel (Mr. Dipankar Ghose) submitted that the tenant's alternative contention was not a 'dispute' within the meaning of section 17(2) (the court refrained from deciding that specific point).
  • The appellant (through the court's analysis) contended that no proper instrument of assignment under section 130 of the Transfer of Property Act had been executed and no registration under the Indian Registration Act had been effected for any assignment of future rent.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
V. N. Vashudeba v. Kishorimal Luhariwala, AIR (1965) S.C. 440 Held that a notice under section 46(5A) of the repealed Income-tax Act (identical in terms to section 226(3) of the Income-tax Act, 1961) did not have the effect of attaching, in the hands of a tenant, the rent or arrears of rent payable to the landlord; the tenant remained obliged to deposit amounts equivalent to rent under the rent control provisions. The court relied on this precedent to support the proposition that notices by income-tax authorities do not override the tenant's statutory obligations under the tenancy law (section 17(1) of the West Bengal Premises Tenancy Act) to deposit rent-equivalents in court or pay the landlord.
M. E. Molla and Sons Ltd. (in liquidation) v. The Official Assignee of the High Court of Judicature at Rangoon and Ors., 63 I.A. 349 = 65 C.L.J. 275 (Privy Council) Establishes that future rent is a "benefit arising out of land" and falls within the definition of immovable property under section 2(6) of the Indian Registration Act, and that an assignment of future rent requires a proper instrument in writing and registration; however, an assignment of arrears of rent (already due) is different and falls outside that definition. The court applied this principle to conclude that the documents before it (letters at pages 40 and 56 of the paper book) were not instruments effecting an assignment in the sense of section 130 of the Transfer of Property Act, and that an assignment of future rent could not be effective absent the necessary written instrument and registration.

Court's Reasoning and Analysis

The court began by identifying the statutory provisions at issue: subsections (1), (2) and (2A) of section 17 of the West Bengal Premises Tenancy Act, 1956. Section 17(1) imposes a statutory obligation on a tenant, on the institution of a suit by the landlord on specified grounds, to deposit in court (or with the controller) or to pay to the landlord an amount calculated at the rate of the last-paid rent for the period of default (up to the end of the month previous to deposit/payment), together with interest at 8 1/3% per annum, and to continue monthly deposits by the 15th of each succeeding month.

Applying the statute to the facts, the court observed that the tenant had not paid rent since August 1968 and had not paid any money to the revenue purporting to discharge rent due to the landlord. The court reasoned that the prohibitory notices issued by revenue authorities at most restrained payment to the landlord but did not absolve the tenant of the statutory obligation under section 17(1) to deposit amounts equivalent to rent in court or to pay the landlord. The court relied on the Supreme Court decision in V. N. Vashudeba v. Kishorimal Luhariwala to the effect that notices under the income-tax provision do not have the effect of attaching rent in the hands of the tenant so as to prevent a statutory rent-deposit obligation under rent-control/tenancy law.

Turning to the asserted assignment of rent to United Bank of India by a solicitor's letter dated August 14, 1970, the court analysed the requirements of section 130 of the Transfer of Property Act for transfer of a debt or actionable claim: a transfer must be effected by a written instrument signed by the transferor or his authorised agent. The court found that no such instrument had been executed; the documents before it were merely statements and authorisations to the bank to collect rent as agent rather than instruments transferring the debt. The bank, although served with notice of the application, had not claimed any rights under the alleged assignment.

The court further noted the principle from the Privy Council decision in M. E. Molla that future rent constitutes a benefit arising out of land and therefore requires a properly executed written instrument and registration for valid assignment; consequently, an assignment of future rent could not be effected by the letter before the court. The court therefore concluded that there was no valid assignment of future rent to the bank that would relieve the tenant from the obligation to deposit under section 17.

Because the tenant had defaulted in paying rent, had not paid revenue amounts in discharge of rent to the landlord, and because the prohibitory notices and the asserted assignment did not negate the statutory obligation under section 17(1), the court held that the lower court's finding (that the tenant had no obligation to deposit sums under section 17(1)) was erroneous.

The court expressly refrained from finally deciding whether the respondent's alternative case amounted to a 'dispute' within the meaning of section 17(2), limiting itself to the conclusions above and remanding the matter for further consideration in light of these observations.

Holding and Implications

Core Ruling: The appeal is allowed; the judgment and order of the court of first instance are set aside and the matter is remanded to the court of first instance to be heard and decided in accordance with the observations made in this opinion.

Implications:

  • Direct effect on the parties: The lower court's determination that the tenant was not obliged to deposit sums under section 17(1) is overturned. The case is remanded for further hearing and decision taking into account the appellate court's findings: (a) the tenant had defaulted in paying rent; (b) prohibitory notices by revenue authorities do not absolve the tenant of the statutory obligation under section 17(1); and (c) the purported assignment to United Bank of India (by the letters before the court) did not constitute a valid assignment under section 130 of the Transfer of Property Act and, insofar as it purported to assign future rent, required a written instrument and registration.
  • The court did not pronounce upon, and expressly refrained from deciding, whether the tenant's alternative case constitutes a 'dispute' under section 17(2); that question is left open for the court of first instance on remand.
  • No new legal precedent beyond application of established principles was announced; the court applied existing statutory rules and prior decisions (as summarized above) to the facts and remanded for further proceedings consistent with these conclusions.

Costs of the appeal are to abide the result of the application which is remanded to the court of first instance.

Show full summary ...

    Hanuman Estates P Ltd v. Dhanuka Industries P Ltd

    Ghose, J.:-

    (1) This appeal is directed against the judgment and order dated november 8, 1973 passed by the court of first instance in an application filed by the respondents no. 1 under subsection (1) , (2) and (2a) of section 17 of the west bengal premises tenancy act, 1956 (west bengal act xii of 1956). The application was made upon notice to the income - tax recovery officer, calcutta, income - tax officer, central circle - x, calcutta, corporation of calcutta and united bank of india.

    (2) The respondent, dhanuka industries (p) limited, became a tenant under the appellant in respect of a portion of the second floor of the premises no. 19, rajendra mukherjee road, calcutta at a rent of rs. 2,020/ - per month as per english calendar. By a notice dated december 6, 1966, the respondent no. 1 was asked under section 226 (3) of the income tax act, 1961, to pay all amounts due from the respondent no. 1 to the appellant or held by the respondent no. 1 on account of the appellant towards the arrears of taxes due and payable by the appellant. The notice, however, was withdrawn on or about march 6. 1967. A similar notice dated january 29, 1969 under section 226 (3) of the income tax act 1961 was served upon the respondent no. 1 and was again withdrawn on or about february 22, 1970. By a letter dated june 11, 1970, the appellant issued instructions to its tenants of the premises no. 19, rajendra nath mukherjee road, calcutta, including the respondent no. 1 to pay rent to its bankers united bank of india in respect of the portions let out to them respectively from the month of june 1970. The third notice under section 226 (3) of the income tax act, 1961 dated june 29, 1970 on similar terms as the previous ones was served upon the respondent no. 1 and was also withdrawn on or about june 27, 1970.

    (3) By a letter dated august 14, 1970 the appellant informed the respondent no. 1 that it had assigned and transferred the rent payable by the respondent no. 1 in respect of the portion of the said premises under its occupation to united bank of india. By a notice dated august 28, 1970 issued under section 226 (3) of the income - tax act 1961, the income tax officer, central circle - x, calcutta asked the despondent no. 1 to pay to him any money that was due from the respondent no. 1 or that might subsequently became due from it to the appellant.

    (4) The respondent no. 1 did not pay any rent to the appellant in respect of it? tenancy since august 1968. By a notice dated april 15, 1972, the appellant determined the tenancy of the respondent in respect of the portion of the said premises with effect from the expiry of may, 1972. On or about june 4, 1973, the appellant instituted a suit inter alia for recovery of possession of the said portion of the said premises against the respondent no. 1 in this court. Writ of summons was served upon the respondent no. 1 on july 31, 1973. On or about august 22, 1973 the respondent no. 1 applied to this court on a notice of motion in the above mentioned suit instituted by the appellant, for the reliefs mentioned hereinafter.

    (5) In the said application the respondent no. 1 prayed for determination of the amount payable by the respondent no. 1 on account of rent and interest and direction for depositing in court or paying such amount so determined in instalments to such person or persons as the court could think fit. The respondent no. 1 further prayed for extension of time to deposit the rent due by the respondent no. 1 by a fortnight until after the final determination of the controversies involved in the said application.

    (6) By a notice dated august 25, 1973 the respondent no. 1 was further prohibited and restrained by the tax recovery officer, calcutta and 24 - parganas from making payment of any rent including arrear of rent to the appellant until further orders.

    (7) In the said application, the respondent no. 1 mentioned various demand notices served by the corporation of calcutta claiming diverse sums from the respondent no. 1 on account of owner's as well as occupier's share of taxes in respect of the said premises and stated that the respondent no. 1 made several payments to the said corporation of calcutta as against the said demand notices. In view of the above mentioned demands made by the corporation of calcutta as well as the income - tax authorities and the prohibitory orders passed and served upon the respondent by the tax recovery officer as mentioned hereinabove and further in view of the above mentioned assignment in favour of the united bank of india, the respondent no. 1 stated that no amount was payable by the respondent no. 1 to the appellant. The respondent no. 1 stated that the appellant had no cause of action to institute the said suit for ejectment on the ground of default in payment of rent nor was entitled to claim any sum on account of arrears of rent as it did in the said suit.

    (8) Alternatively, the respondent no. 1 stated in the said petition that in view of the abovementioned conflicting claims and or attachments, the amount payable by the respondent no. 1 to the appellant in respect of its tenancy should be determined and directed to be paid in instalments and time for such payment as mentioned hereinabove should be extended.

    (9) The said application was heard by ramendra mohan dutta j. After service of the notice of the said application upon the revenue, the corporation of calcutta and the united bank of india. Ramendra mohan dutta, j. Was pleased to hold that on account of the default or the appellant in paying its income - tax dues and in view of the prohibitory notices mentioned hereinabove served upon the respondent no. 1 by the income - tax authorities, no rent was payable by the respondent no. 1 to the appellant and the respondent no. 1 was not required to deposit in court any amount equivalent to rent or arrears of rent payable in respect of the premises in suit.

    (10) For the purpose of the instant appeal, it is necessary for us to consider the provisions of sub - section (1) , (2) and (2a) of section 17 of the west bengal premises tenancy act, 1956. The said sub - sections are set out hereunder:

    "sub - section (1) : on a suit or proceeding being instituted by the landlord on any of the grounds referred to in section 13, the tenant shall, subject to the provisions of sub - section (2) , within one month of the service of the writ of summons on him (or where he appears in the suit or proceeding without the writ of summons being served on him, within one month of his appearance) deposit in court or with the controller or pay to the landlord an amount calculated at the rate of rent at which it was last paid, for the period for which the tenant may have made default including the period subsequent thereto up to the end of the month previous to that in which the deposit or payment is made together with interest on such amount calculated at the rate of eight and one - third percent per annum from the date when any such amount was payable up to the date of deposit, and shall thereafter continue to deposit or pay, month by month, by the 15th of each succeeding month a sum equivalent to the rent at that rate. Sub - section (2) : if in any suit or proceeding referred, to in sub - section (1) there is any dispute as to the amount of rent payable by the tenant, the tenant shall, within the time specified in sub - section (1) deposit in court the amount admitted by him to be due from him together with an application to the court for determination of the rent payable. No such deposit shall be accepted unless it is accompanied by an application for determination of the rent payable, on receipt of such application, the court shall - (a) having regard to the rate at which rent was last paid, and the period for which default may have made by the tenant, make, as soon as possible within a period not exceeding one year, a preliminary order, pending final decision of the dispute, specifying the amount, if any, due from the tenant and thereupon the tenant shall, within one month of the date of such preliminary order, deposit in court or pay to the landlord the amount so specified in the preliminary order; and (b) having regard to the provisions of this act, make as soon after the preliminary order as possible a final order determining the rate of rent and the amount to be deposited in court or paid to the landlord and either fixing the time within which the amount shall be deposited or paid or, as the case may be, directing that the amount already deposited or paid be adjusted in such manner and within such time as may be specified in the order. Sub - section (2a) : notwithstanding anything contained in sub - section (1) or sub - section (2) on the application of the tenant, the court may, by order, - (a) extend the time specified in sub - section (1) or sub - section (2) , for the deposit or payment of any amount referred to therein ; (b) having regard to the circumstances of the tenant as also of the landlord and the total sum inclusive of interest required to be deposited or paid under sub - section (1) on account of default in the payment of rent, permit the tenant to deposit or pay suck sum in such instalments and by such dates as the court may fix."

    (11) The suit in the instant case was instituted by the appellant against the respondent no. 1 for eviction on the ground of default in payment of rent. As contemplated in section 13 of the west bengal premises tenancy act. In v. N. Vashudeba v. Kishorimal luhariwala, air (1965) s. C. 440 it was held that notice under section 46 (5a) of the repealed income - tax act of 1922 which was in identical terms as section 226 (3) of the income - tax act, 1961 did not have the effect of attaching in the hands of the tenant the rent or arrears of rent payable to the landlord. Because of such a notice served on him in the said case, the tenant sought to impeach an order directing him to deposit with the controller amounts calculated at the rate of rent in terms of section 15 (1) of the delhi rent control act of 1951. The said sub - section of the said section of said act and the sub - section (2) thereof are almost identical as the sub - sections (1) and (2) of section 17 of the west bengal premises tenancy act 1956. The supreme court held that notwithstanding the service of the notice under section 46 (5a) of the repealed income tax act upon the tenant, the order for depositing of some equivalent to rent by the tenant under section 15 (1) of the delhi rent control act passed by the rent controller was justified and could not be assailed.

    (12) It should be noted that the respondent no. 1 in the instant case has not paid any rent to the appellant since 1968 nor has paid any sum to the revenue pursuant to the notices served in regard to the rate of rent payable by the tenant. There is also no dispute as to the time since when the tenant defaulted in paying rent to the appellant. The only dispute raised by the respondent no. 1 is that the respondent no. 1 was or is not liable to deposit any rent in view of the demand notices served by the corporation of calcutta and the above - mentioned notices served by the revenue.

    (13) It has to be noted that by and under sub - section (1) of section 17 of the said act a statutory obligation has been imposed upon the tenant against whom a suit or proceeding for ejectment is instituted on any of the grounds mentioned in section 13 of the act to deposit in court or with controller or pay to the landlord within one month from the service of the writ of summons, all arrears of rent calculated up to the month previous to that in which the deposit or payment is made together with interest at the rate of 81/3% per annum. The tenant has been visited by the said sub - section with a further obligation of com tinning to deposit or pay month by month by the 15th of the following month a sum equivalent to rent. Only by performing or discharging the above - mentioned obligations the tenant is entitled to the protection against the eviction. If the tenant does not discharge the obligation mentioned above, his defence so far as possession is concerned will be struck out under sub - section (3) of section 17 of the said act.

    (14) The notices served by the revenue prohibited and restrained at the most the payment of rent to the appellant. The said notices, in our opinion, could not and cannot have the effect of overriding the specific provisions of section 17 (1) of the act casting obligations upon the respondent to deposit sums equivalent to rent in court.

    (15) The respondent no. 1 has not paid any money to the revenue on account of rent due and payable by it and it has to be held in our opinion that the respondent no. 1 has defaulted in payment of rent. The second contention of the respondent no. 1 accepted by the court of first instance was that no rent was payable by the respondent no. 1 to the appellant in view of the assignment, a copy whereof appears at page 40 of the paper book.

    (16) The said purported assignment is a letter dated august 14, 1970 written by the solicitor of the appellant to the respondent no. 1. The said letter inter alia stated

    ". Our clients have, therefore, assigned and transferred the rent payable by you to them in favour of m/s. United bank of india, 67a, netaji subhas road, calcutta. The assignment takes effect from the date from which the rent is due."
    .

    (17) Assignment and the manner in which it may be effected has been defined in section 130 of the transfer of property act. By and under section 130 of the transfer of property act, the transfer of a debt or actionable claim may be effected by the execution of an instrument in writing signed by the transferor or his authorised agent. Upon such execution, the rights and remedies of the transferor will vest in the transferee. No instrument of transfer as contemplated by section 130 of the transfer of property act was executed by the appellant. The united bank of - india although served with the notice of the application has not come forward or made any claim on the basis of such assignment the copies of the documents appearing at page 40 and 56 of the paper book are not instruments of assignments within the meaning of section 130 of the transfer of property act. They are merely statements that the rent has been assigned and authority given to united bank of india to collect the rent due from the respondent no. 1 as the agent of the appellant respectively. In any event there could not be an assignment of future rent in the absence of an instrument in writing to that effect within the meaning of section 130 of the transfer of property act and duly registered under the indian registration act. Future rent is benefit arising out of land and falls within the mischief of section 2 (6) of the indian registration. Act as has been held in 63 i. A. 349 = 65 c. L. J. 275 (m. E. Molla and sons limited (in liquidation) v. The official assignee of the high court of judicature at rangoon and ors.) section 2 (6) of the registration act defines immovable property amongst others "any other benefit to arise out of land. " sir george rankin expressing the opinion of the judicial committee of the privy council in the said case stated inter alia ". If the assignment is, however, of an arrear of rent, the benefit has already arisen cut of land and is therefore outside the definition of immovable property. It has been held that a lease of a right to market - dues upon a certain land requires registration as an instrument dealing with a benefit to arise out of land. " thus, in any event it appears that there was no and could not be assignment of rent that was to accrue due and payable by the respondent no. 1 to the appellant after august, 1970.

    (18) It was submitted by mr. Dipankar ghose on behalf of the appellant that the respondent no. 1 stated in the petition that there was no rent due and payable by it to the appellant. The alternative case made out by the respondent no. 1 in its petition was not a 'dispute' within the meaning of section 17 (2) of the west bengal premises tenancy act, 1956. We, however, refrain from expressing any opinion on the said question.

    (19) We are of the view that the learned judge's finding that there was no obligation on the part of the respondent to deposit any sum as required by section 17 (1) of the said act is erroneous, for the reasons stated hereinabove. For the reasons stated hereinabove, the appeal is allowed and the judgment and order under appeal are set aside. The matter, however, is remanded back to the court of first instance, to be heard and decided on the basis of the observations made hereinabove. All the parties have stated that they are agreeable that the matter should be referred back and remanded to the court of first instance. The costs of this appeal shall abide by the result of the application which is remanded back, to be heard by the court of first instance.

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    Hanuman Estates P Ltd v. Dhanuka Industries P Ltd
    (Sep 23, 1974)