Citation Codes

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Case Number

O.P Nos. 1289 of 1984 & 3547 of 1987

Attorney(S)

For the Appellant: Government Pleader George Varghese Kannanthanam

Judges

Viswanatha Iyer, J.

Acts

KERALA BUILDINGS LEASE AND RENT CONTROL ACT 1965

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Smart Summary

Structured Summary of the Court Opinion

Factual and Procedural Background

Two related original petitions were before the Court. O.P. No. 1289 of 1984 challenged a government notification (Ext. P2) issued by the 3rd respondent (the State Government) under Section 25(1) of the Kerala Buildings (Lease and Rent Control) Act, 1965. Ext. P2 exempted shop buildings constructed in Kerala State Housing Board housing colonies and owned by the Board from the provisions of the Act. The petitioners contended that the notification was issued arbitrarily, without reasons, and that the power under S.25(1) must be exercised in accordance with the Act's policy and public interest, which the petitioners said were not served.

The petition filed included an extract of the notification but omitted an explanatory note. The Government produced the file and the explanatory note (set out in the opinion) showing the rationale: the Board builds shop rooms in outskirts for colonists, rents them on a no profit–no loss basis, and had suffered losses because tenants applied to Rent Control Courts and fair rents fixed by those courts made the investment uneconomic.

The Court also dealt with O.P. No. 3547 of 1987 which similarly challenged Ext. P2; however, that petition failed because the State of Kerala, which issued the notification, was not made a party. The Court ultimately dismissed both original petitions and made no order as to costs.

Legal Issues Presented

Whether the notification (Ext. P2) issued under S.25(1) of the Kerala Buildings (Lease and Rent Control) Act, 1965 exempting certain Board-owned shop buildings from the Act is legally valid.
Whether the exercise of power under S.25(1) was arbitrary or required the disclosure of reasons in the notification (i.e., whether the absence of reasons in the notification invalidates the exemption).
Whether the exemption was justified as being in the public interest (and thus a valid classification under the statute).
In O.P. No. 3547 of 1987, whether the petition could proceed notwithstanding that the State of Kerala, which issued the notification, was not a party to that petition.

Arguments of the Parties

Petitioners' Arguments

The notification Ext. P2 was issued without any reason and was therefore arbitrary.
The power under S.25(1) is not unguided; it must be exercised in accordance with the policy and object of the Act and in the public interest. The petitioners contended no public interest was served by Ext. P2.
In at least one petition (O.P. No. 3547 of 1987), there is an implied procedural complaint regarding parties, though the primary substantive attack was on Ext. P2.

Respondents' / Government's Arguments

The Government produced the administrative file and the explanatory note showing the reasons for the exemption: the Kerala State Housing Board operates on a no profit–no loss basis, constructs shop buildings in outskirts to provide amenities to colonists, and sustained losses because Rent Control Courts fixed fair rent levels that made the investment uneconomic.
The matter had been examined by the Government over nearly three years before issuing the notification, demonstrating deliberation and relevant grounds for exemption.
Prior judicial determinations (cited by the Government) show: (a) granting exemption under S.25(1) is a legislative act and need not disclose reasons in the notification itself; and (b) reasons underlying exemptions can be shown de hors (outside) the notification, for example in affidavits or files produced by Government.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
State of Kerala v. Vijayn, 1978 KLT 342	The act of granting exemption under S.25(1) is a legislative act; such an act need not be by an order disclosing reasons; public interest underlying the exemption need not be expressly recited in the notification itself and may be shown de hors the notification (e.g., in affidavits or files).	The Court relied on this precedent to hold that the absence of reasons in the notification itself did not invalidate Ext. P2, and that the explanatory note and government file produced sufficed to disclose the public interest and relevant grounds for exemption.
Kandaswamy Chettiar v. State of Tamil Nadu, (1985) 1 SCC 290; AIR 1985 Supreme Court 257	Exemptions granted to buildings owned by public religious and charitable trusts were upheld where the classification relieved those owners from undue hardship resulting from uniform application of the Act; such classification had nexus with the object of the power to grant exemption (referred to under S.29 in the reported excerpt).	The Court cited this decision to demonstrate that exemptions are permissible where owners would suffer undue hardship from application of the Act (i.e., where fair rent fixation would make continued operation uneconomic), supporting the validity of Ext. P2 in the present case.
P.J. Irani's case (as cited in the opinion; specific citation not reproduced in the opinion)	Observation that the purpose of the Act is to prevent unreasonable eviction and to control rent, and that these two objectives are intertwined.	The Court used the principle to contextualize that control of rent and eviction are related purposes of the legislation, reinforcing the point that exemption may be necessary where application of the Act frustrates other statutory objectives (e.g., enabling owners to obtain reasonable market rent).
Shylaja Manoharlal v. State of Kerala, 1987 (2) KLT 515	S.25 specifies relevant considerations for granting exemption: "public interest" and "any other sufficient cause"; exemptions for municipal corporations were held to be in public interest, and the non-profit character of the owner was an important consideration.	The Court relied on these observations to support the relevance of the Board's non-profit/no profit–no loss character and the public interest rationale for exempting its shop buildings under Ext. P2.

Court's Reasoning and Analysis

The Court proceeded step-by-step as follows:

It recognized the core challenge: that Ext. P2 was arbitrary and issued without reasons; petitioners argued the power under S.25(1) is not unguided and must be exercised in public interest.
The Court noted that the copy of Ext. P2 produced by petitioners omitted the explanatory note. The Government produced the file and the explanatory note which explained the purpose: the Board built shops in outskirts to provide amenities to colonists, rented them on a no profit–no loss basis, and suffered losses because fair rents fixed by Rent Control Courts made the investment uneconomic.
Relying on State of Kerala v. Vijayn, the Court accepted that the grant of exemption under S.25(1) is a legislative act and that reasons need not be contained in the notification itself; reasons may be shown by extrinsic material produced by the Government.
The Court examined the explanatory note and the governmental file and found relevant grounds: (a) the Board's no profit–no loss mandate and significant investment in land and construction; (b) risk to the Board's ability to function if rents were reduced to uneconomic levels; and (c) the need to preserve the Board's capacity to perform its statutory duties for the common good.
The Court considered higher court authority (Kandaswamy Chettiar) holding that exemptions are permissible where the uniform application of the Act would cause undue hardship and where classification has a nexus with the object of the exemption power; it applied that reasoning here as analogous support for the exemption.
The Court also drew on Shylaja Manoharlal which explained that public bodies (like municipal corporations) may be exempted in public interest and that a non-profit characteristic supports exemption; the Court found those observations apt and applicable to the Housing Board.
Having found that relevant and sufficient grounds existed (as disclosed in the explanatory note and files), and that the exemption was rooted in public interest and legitimate classification, the Court concluded that Ext. P2 was valid.
With Ext. P2 upheld in O.P. No. 1289 of 1984, no other issues remained. O.P. No. 3547 of 1987 additionally failed because the State of Kerala was not a party; in any event Ext. P2's validity had already been so upheld.

Holding and Implications

Holding: The Court upheld the validity of the notification Ext. P2 and dismissed both original petitions. The petitions were dismissed without any order as to costs.

Implications:

Direct effect on the parties: The challenge to the exemption of the Kerala State Housing Board's shop buildings from the Kerala Buildings (Lease and Rent Control) Act, 1965 (Ext. P2) was negatived; the notification remains operative as to the buildings specified.
Procedural consequence in O.P. No. 3547 of 1987: that petition failed in part because the State, which issued the notification, was not impleaded as a party.
On precedent and law: The Court applied and followed earlier authorities (State of Kerala v. Vijayn; Kandaswamy Chettiar; Shylaja Manoharlal) and did not purport to lay down new legal principles. The decision affirms that: (a) an exemption under S.25(1) can be a legislative act and need not contain reasons in the notification itself, provided reasons are shown by extrinsic material; and (b) exemptions may be valid where classification has a nexus to the object of the statutory power and public interest considerations are satisfied.

This summary is derived exclusively from the provided opinion and does not add information beyond that text.

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Jacob Kurien v. Kerala State Housing Board & Others

1. These two original petitions are related. The facts in O.P No. 1289 of 1984 may be stated first. The challenge in this original petition is to a notification, an extract of which is produced as Ext. P2. This notification is one issued by the 3rd respondent Goveromeot, exempting the shop buildings constructed in the housing colonies of the Kerala State Housing Board (the Board for short) and owned by the said Board from all the provisions of the Kerala Buildings (Lease and Rent Control) Act, 1965. The notification has been issued in exercise of the powers vested in Govern (rent under S. 25(1) of the said Act. The challenge which was pressed was that there was absolutely no reason for Government to issue the said notification and in exempting buildings belonging to the Board from the provisions of the Act. It is also contended that the power under S. 25(1) is not an unguided, uncanalised or arbitrary power, but one to be exercised in accordance with the policy and object of the Act in public interest. It Is said that no public interest is subserved by the said notification.

2. The notification Ext. P2 produced along with the original petition omits the explanatory note to the said notification, which though not part of the notification, nevertheless indicates its general purport and the reason why the exemption has been granted. I shall extract it below:—

“The Kerala State Housing Board has to construct some shop buildings for the benefit of the colonists while implementing Housing Accommodation Schemes as the Schemes are implemented in the outskirts of the cities and towns. The shop rooms are rented out to intending applicants on executing agreement at the rate fixed by the Board based on the principles adopted by the Public Works Department. In recent years the Board has sustained loss due to default of payment of rent by the tenants and interference of Rent Control Courts. Hence it has become necessary to exempt the shop, buildings constructed in the Housing Colonies and owned by the Kerala State Housing Board from all the provisions of the Kerala Buildings (Lease and Rent Control) Act. 196S. The above notification is to achieve the above objective.”

3. Since there is a contention that the power has been exercised arbitrarily without any reason whatsoever, the file was produced before me by the Government Pleader who appeared for the respondents, which disclosed the following facts. The Housing Board had been undertaking construction of buildings for housing of the needy on a no loss no profit basis. For keeping up the norms of public housing, roads, internal water supply and other amenities like open space for recreation, parks etc. had to be provided. Since some of the schemes selected were in the outskirts of cities and towns, shop buildings were also put up for the benefit of the colonists. It was noted that tenants of some of these shop buildings threatened to go to the Rent Control Court for fixing the fair rent under the Act aforesaid. An instance is pointed out where on such a motion by a tenant the contract rent was reduced and the fair rent was fixed based on the assessment of building tax by the local authority which made it uneconomic having regard to the cost of construction and the value of the land. Since the shop buildings were put up for providing amenities to the colonists, it was felt that buildings owned by the Board may be got exempted from the provisions of the Act, such exemption not being extended to buildings constructed by the Board for the allottees on hire purchase agreement. The matter is seen to have been examined in great detail by Government over a period of nearly three years and it was ultimately that the notification in question was issued. It has been held by this court in the decision in State of Kerala v. Vijayn, 1978 KLT 342 that the act of granting exemption under S. 25(1) of the Act is a legislative act. This court observed as foilows:—

“The act of granting exemption under S. 25(1) is a legislative act. Such an act of exemption need not be by an order disclosing reasons. That apart, even if the act of granting exemption were not to be regarded as legislative there is enough authority that the public interest underlying the exemption need not be expressly recited in the notification Itself. It is enough if it is made to appear de hors the notification, as for instance, in the affidavit filed on behalf of the Government.”

4. One of the attacks made by counsel for the petitioner was that Ext. P2 did not disclose the reasons why the exemption was being granted. As held in Vfjayan's case aforesaid, the act of granting exemption being a legislative act no reasons were liable to be disclosed. Inspite of that Ext. P2 notification did disclose the reasons for the exemption in the explanatory note attached thereto-though the explanatory note was omitted by the petitioner in the copy produced in court. The said explanatory note as also the files produced disclose all the reasons for grant of the exemption based on relevant grounds. The Board, which has to operate on a no profit no loss basis and which has to cater to the needs of the people, had necessarily to invest large amounts in the land and in the construction of buildings, particularly shop buildings, to provide the necessary amenities for the colonists. If subsequent thereto the rent is to be reduced to a level which is not commensurate with the investment, the public interest of the Board functioning on a no profit no loss basis maybe in jeopardy. It is with that intent in view that exemption was sought and exemption was granted. The rationale behind the exemption is perfectly valid and based merely on public interest. Reasons are also available so that the ground urged by the petitioners is not sustainable.

5. The Supreme Court had occasion to consider the case of exemption granted to buildings owned by public religious trusts and public charitable trusts of Hindu, Christian and Muslim denominations, in the decision reported in Kandaswamy Chettiar v. State of Tamil Nadu, (1985) 1 SCC 290 : AIR. 1985 Supreme Court, 257. The challenge was negatived. Inter alia it was stated as follows:—

“In our view the aforesaid material clearly shows that buildings belonging to such public religious and charitable endowments or trusts clearly fall into a class where undue hardship and injustice resulting to them from the uniform application of the beneficial provisions of the Act needed to be relieved and the exemptions granted will have to be regarded as being germane to the policy and purposes of the Act. In other words the classification made has a clear nexus with the object with which the power to grant exemption has been conferred upon the State Government under S. 29 of the Act.

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It cannot be disputed that the two objectives of the enactment, namely, to control rents and to prevent unreasonable eviction are interrelated and the provisions which subserve these objectives supplement each other. In P.J Irani's case (supra) Sarkar, J. has also observed at page 193 of the Report that “the purpose of the Act quite clearly, is to prevent unreasonable eviction and also to control rent. These two purposes are intertwined.” It is obvious that if the trustees of the public religious trusts and public charities are to be given freedom to charge the normal market rent then to make that freedom effective it will be necessary to arm the trustees with the right to evict the tenants for nonpayment of such market rent. The State Government on materials before it came to the conclusion that the ‘fair rent’ fixed under the Act was unjust in case of such buildings and it was necessary to permit the trustees of such buildings to recover from their tenants reasonable market rent and if that be so non-eviction when reasonable market rent is not paid would be unreasonable and if the market rent is paid by the tenants no trustee is going to evict them. It is, therefore, clear that granting total exemption cannot be regarded as excessive or unwarranted.”

6. These passages disclose that exemption from the provisions of the Act could be granted in cases where the owners have to be relieved against the obligation of pegging down the rents to the fair rent level prescribed by the Act for valid reasons. That is precisely the case arising before me also. Reduction of the rents of shop buildings made it an uneconomic investment the object with which the Board was formed was not a desirable result. The Board bad to get a fair return on its investment if it has to carry on its statutory duty under the Kerala Housing Board Act properly and for the common good. This was achieved by exempting such buildings from the provisions of the Act.

7. The validity of such a notification under S. 25 exempting buildings owned by Municipal Corporations from the purview of the Act was again upheld by this court in Shylaja Manoharlal v. State of Kerala, 1987 (2) KLT 515 with the following observations:

“S. 25 of the Act specifies the considerations relevant for grant of exemption: one is “public interest”, and the other, ‘-any other sufficient cause”. The impugned notification recites that it is issued in public interest. Both on the terms of the statute and the notification, therefore, the court's enquiry could only be into the question whether the exemption recognised in favour of a Municipal Corporation could be regarded as one made in the public interest. City Corporations. Municipalities and Panchayats are instrumentalities of local self-government, established for rendering service to the public in areas like lightning, water supply, drainage, sanitation and maintenance of roads/streets. They also regulate construction of buildings, establishment of market places, slaughter houses, factories, trading centres etc. Their funds could be spent only for enumerated purposes all of which arejsupposed to subserve the common ground. They are most Drofit-making bodies, the extra income they get by way of higher rent, consequent on grant of exemption, will augment their resources for rendering services on a higher scale. Nor will it be proper to assume that the moment exemption is granted, every local body will start to behave like greedy landlords bent on rack-renting. Usually these bodies are governed by elected representatives of the communities in their areas, and they will naturally be slow to embark on unpopular measures, to the detriment of the poorer classes of tenants. That apart it is wellknown that they usually out up only shopping complexes or other buildings to be used for commercial purposes, and that their tenants are mostly businessmen, themselves not averse to making a few quick bucks at the expense of under S. 22 of the Act, must be held to be In the public interest”.

8. The fact that the owner of the building is a non-profit making body was particularly stressed in the above decision for upholding the exempton. The observations aptly apply to the case of the buildings belonging to the Board as well.

9. Following these decisions I uphold the validity of the notification Ext. P2. If the validity of this notification is upheld no other point arises for decision in this original petition. O.P No. 3547 of 1987 also challenges the validity of this notifica tion, which is marked Ext. P2. However, this original petition has to fail for the reason that the State of Kerala, which has issued the notification is not a party thereto. Even otherwise I have upheld the validity of this notification in the related original petition and hence no other point arises For consideration in this original petition as well.

10. Both the original petitions are therefore, dismissed, without however, any order as to costs.

M.MDismissed.

Jacob Kurien v. Kerala State Housing Board & Others

Structured Summary of the Court Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioners' Arguments

Respondents' / Government's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Jacob Kurien v. Kerala State Housing Board & Others

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