Citation Codes

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Case Number

L.P.A No. 63 of 1949.

Attorney(S)

Messrs. D. Ramaswami Ayyangar and S. Kuppuswami for Appt.
Messrs. M.A Srinivasan and M.A Rajagopalan for Respt.

Judges

Horwill
Balakrishna Ayyar, JJ.

Acts

provisions of S. 116 of the Transfer of Property Act
S. 116 of the Transfer of Property Act
S. 111 of the Transfer of Property Act,
provisions of the Rent Control Act,
provisions of Rent Restriction Act,
S. 111.The Rent Control Act
TRANSFER OF PROPERTY ACT
Rent Restriction Acts
Rent Control Act

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Smart Summary

Judgment Summary

Factual and Procedural Background

The appellant had been the tenant of the respondent for ten years. After failing to pay rent for August and September 1946, the respondent filed an application under the Rent Control Act for eviction on 1 February 1947. The appellant thereafter applied to the Rent Controller on 6 March 1947 for fixing a fair rent.

An order for eviction in favour of the respondent was obtained on 15 September 1947, but the appellant immediately appealed and obtained a stay of execution on 3 October 1947. On 1 November 1947 the Rent Controller fixed a fair rent at Rs. 41-4-0 from 1 October 1946 (the contractual rent had been Rs. 30). Pursuant to that order, the appellant sent two cheques on 5 November 1947 for Rs. 536-4-0 and Rs. 60. The respondent acknowledged and accepted those cheques on 21 November 1947, stating that he accepted them "without prejudice to the order of eviction and as damages for use and occupation." The respondent presented the cheques to the bank on 25 November 1947, and subsequently sent the amounts back to the appellant by cheque dated 9 December 1947.

The issue before Govinda Menon, J., in C.M.A. No. 91 of 1949 (and again before the court in this Letters Patent Appeal) was whether, by virtue of the provisions of Section 116 of the Transfer of Property Act, the appellant was to be regarded as a tenant from month to month by reason of the acceptance of money by the respondent and therefore entitled under the Rent Control Act to continue in possession. Govinda Menon, J. held that Section 116 had no application and dismissed the appeal. The present judgment (delivered by Horwill, J.) reviews that question and delivers the court's decision.

Legal Issues Presented

Whether, by virtue of the acceptance of sums tendered by the appellant, the appellant should be regarded under Section 116 of the Transfer of Property Act as a monthly tenant and therefore entitled under the Rent Control Act to continue in possession.
Whether Section 116 of the Transfer of Property Act has application to tenancies or disputes governed by the Rent Control Act (i.e., whether the Transfer of Property Act's rule about acceptance of rent can be applied where the Rent Control Act regulates the tenant's right to continue in possession).
Whether the money accepted by the respondent was received as rent (so as to create, or be evidence of, a fresh tenancy) or was accepted on some other basis (for example, "without prejudice" or as damages for use and occupation).

Arguments of the Parties

Appellant's Arguments

Mr. D. Ramaswami Ayyangar (for the appellant) contended that the contract came to an end upon the passing of the order for eviction; notwithstanding that, by virtue of Section 116 of the Transfer of Property Act an irrebuttable presumption arises that money received by a landlord after determination of a lease is received as rent and therefore a fresh month-to-month tenancy arises.
The appellant also argued that the original month-to-month tenancy continued up to the date of eviction because no notice to quit had been sent.
The appellant asserted, in correspondence, that the cheques were sent pursuant to the Rent Controller's order and therefore were payments "towards the rents due as per order of the Rent Controller" and could only be received as rent, not as damages for use and occupation.

Respondent's Arguments (as recorded in the opinion)

The respondent accepted the cheques but expressly did so "without prejudice to the order of eviction" and stated that the amounts were accepted as damages for use and occupation, not as admission of a new tenancy.
The respondent maintained throughout that he did not intend to permit the appellant to continue in possession on the old terms, having pursued an application for eviction and sought a higher rent through the Rent Controller.
Practically, the respondent accepted payment because he was prevented by the stay order from obtaining possession and would otherwise have received no rent; he later returned the amounts when he realised the tactical consequence of having accepted them.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Clarke v. Grant (Court of Appeal, England)	Distinguishes acceptance of rent after a notice to quit from acceptance after notice of a forfeiture; holds that payment after a proper notice to quit (periodic tenancy) does not, of itself, operate to create a new tenancy unless parties intended so.	The court treated Clarke v. Grant as authoritative, adopting its distinction and using it to show that acceptance of money after termination does not automatically operate as a waiver or create a new tenancy unless intention is shown.
Hartell v. Blackler	Previously applied rule on acceptance of rent (but as noted, it was overruled in Clarke v. Grant).	The court noted that Hartell v. Blackler was overruled by Clarke v. Grant and therefore did not support an opposite view.
Deo D Cheny v. Batten (Lord Mansfield, 1775)	Establishes the principle that the relevant inquiry is "quo animo" (with what intention) the rent was received — the real intention of the parties matters.	The court invoked this principle to examine the parties' intentions when the respondent accepted payments and concluded that the respondent did not accept the sums as rent in a way that created a new tenancy.
Kai Khushroo v. Bai Jerbai (Federal Court)	Reiterates principle that acceptance of rent after termination may create a new tenancy; facts there involved unconditional receipt of rent, but the Federal Court did not base its decision solely on that narrow ground. The decision also indicates limits to applying Section 116 where statutory tenancy protections exist.	The court relied on the Federal Court decision to state the general principle, but distinguished it on the facts (here the respondent's acceptance was not unconditional and the matter was governed by the Rent Control Act). The judgment also cited the Federal Court passage supporting non-application of Section 116 to statutory tenancies.
Davies v. Bristow and Morrison v. Jacobs	Support the proposition that where a tenant has statutory immunity (e.g., under Rent Restriction Acts), acceptance of rent by a landlord after expiry of a lease does not necessarily create a fresh tenancy which must be terminated by fresh notice to quit.	These authorities were cited (through the Federal Court decision) to support the position that Section 116 principles do not automatically apply to tenants enjoying statutory protection under Rent Restriction/Control legislation; the court treated them as supporting non-application of Section 116 to matters governed by the Rent Control Act.

Court's Reasoning and Analysis

The court first reviewed the authorities dealing with the legal consequences of a landlord's acceptance of rent after the tenancy has been brought to an end and accepted Clarke v. Grant as settling the law that acceptance of rent after a notice to quit does not necessarily operate to revive or create a new tenancy; the key inquiry is the intention (quo animo) with which the rent was received.

The court then focused on the material facts and the parties' intentions. It recorded that:

The respondent had applied for eviction as soon as he could (1 February 1947) and consistently sought a higher rent; he never showed any intention to allow the appellant to remain on the prior contractual terms.
The acceptance of the cheques was expressly made "without prejudice to the order of eviction" and described by the respondent as being accepted as damages for use and occupation.
The amounts accepted were the fair rent fixed by the Rent Controller, not the original contractual rent.
The respondent was practically constrained to accept payment because a stay order prevented obtaining possession; he later returned the amounts.

The court held that these facts demonstrated that the money was not received as rent in such a way as to create or evidence a fresh tenancy. It emphasized that the decisive question is the parties' intention at the time of reception of payment.

The court also addressed whether Section 116 of the Transfer of Property Act could be applied to a state of affairs governed by the Rent Control Act. It concluded that the Transfer of Property Act could not be divorced from its own provisions (notably Section 111 which enumerates methods of determination of a lease) and that Section 116 presupposes the kinds of lease determination contemplated by Section 111. Here the lease had not been determined in any of the ways set out in Section 111, and the Rent Control Act governs the tenant's right to continue in possession irrespective of the Transfer of Property Act's mechanics.

The court further relied on the reasoning (as reflected in Federal Court authority) that where statutory tenancy protections apply (as under Rent Restriction/Control legislation), acceptance of rent by a landlord after expiry cannot be treated as evidence of a new tenancy that must be terminated by fresh notice to quit. Consequently, Section 116 was inapplicable to the circumstances governed by the Rent Control Act in this case.

As an ancillary point (and not necessary to decide the case), the court noted that at the time of acceptance of the cheques the appellant was lawfully in possession by virtue of the stay order, and therefore for Rent Control Act purposes he was a tenant obliged to pay rent pending appeal; the appellant's own correspondence treated the payments as rent pursuant to the Rent Controller's order. Despite that, the court concluded that acceptance of the two cheques on 21 November 1947 did not give the appellant any new right to continue in possession.

Holding and Implications

Holding: The appeal is dismissed with costs. By consent, the appellant is given one month's time to leave the premises.

Implications and immediate consequences:

The court held that the acceptance of the two cheques by the respondent did not operate to create a fresh month-to-month tenancy or confer any new right on the appellant to remain in possession.
The court concluded that Section 116 of the Transfer of Property Act does not have application to matters governed by the Rent Control Act in the circumstances considered (the court explained that Section 116 must be read with other provisions of the Transfer of Property Act, such as Section 111, and that the Rent Control Act governs tenants' statutory right to continue in possession).
Direct effect on the parties: the appellant must vacate within one month and the respondent's eviction entitlement stands; the appellant did not acquire a fresh right to possession by reason of the payments accepted.

Note: This summary is restricted to the content and conclusions expressly stated in the provided opinion and does not attempt to infer holdings beyond the text.

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N.V Kuppuswami Ayyar v. P. Mahadeva Chettiar.

JUDGMENT

(Delivered by Horwill, J.)

The appellant has been the tenant of the respondent for the past ten years. As he did not pay rent for August and September 1946 the respondent, on 1-2-1947 filed an application under the Rent Control Act for eviction. Very shortly afterwards, on 6-3-1947 the appellant filed an application before the Rent Controller under the same Act for fixing a fair rent. An order of eviction was obtained by the respondent on 15-9-1947; but no action could be taken by him in execution of that order, because the appellant immediately filed an appeal and obtained on 3-10-1947 a stay order. On 1-11-1947, on the appellant's application a fair rent was fixed at Rs. 41-4-0 from 1-10-1946 as against the contractual rent of Rs. 30, the order being passed “without prejudice to the order of eviction and the order that might be passed in the appeal.” In pursuance of the order of the Rent Controller fixing the fair rent at Rs. 41-4-0, the appellant, on 5-11-1947 sent cheques for Rs. 536-4-0 and Rs. 60 to the respondent. On 21-11-1947 the respondent accepted these cheques for the amounts due to him under the Rent Controller's order; but he stated in acknowledging the receipt that he accepted the cheques without prejudice to the order of eviction and as damages for use and occupation. He presented the cheques to his bank four days later, on 25-11-1947. Soon realising that he had made a tactical mistake in accepting these cheques, the respondent sent the appellant a cheque on 9-12-1947 for the amount that he had received a few weeks earlier. The question for consideration before Govinda Menon, J., in C.M.A No. 91 of 1949, which has been raised before us again in this Letters Patent Appeal, is whether in view of the acceptance of money sent by the appellant as rent, the appellant is to be regarded by virtue of the provisions of S. 116 of the Transfer of Property Act as a tenant of the respondent from month to month and therefore entitled under the Rent Control Act to continue in possession. Govinda Menon, J., held that S. 116 of the Transfer of Property Act had no application and dismissed the appeal.

In his judgment, the learned Judge considered in detail the various authorities cited before him as to the effect of the acceptance of rent from a tenant. The cases have not been read to us in appeal; because the correctness of the principles laid down by the learned Judge and the effect of the decisions discussed by him are not now in dispute. If there had been an act by the tenant which entitled the landlord to bring the tenancy to an end and the landlord thereafter accepts rent, his action is construed as a waiver of his rights arising out of the forfeiture. Similarly, if after the issue of a notice to quit but before the period determining the lease has expired, the landlord accepts rent, it may be construed as a waiver of the right that has accrued to him upon the issue of a notice to quit. Where however the period fixed by the notice has expired, the tenancy is at an end; and no money accepted after the termination of the tenancy operates as a waiver or gives the tenant any right to continue in possession. Since the learned Judge considered the various authorities on the effect of receiving rent after the determination of the lease, the authoritative decision of the Court of Appeal in England in Clarke v. Grant(1) has been received, which sets at rest once and for all any doubt that existed as to the law on that question. Lord Goddard, C.J, said:

“The learned deputy judge held that the notice to quit had been waived. If one may say so with respect to the learned deputy judge, he fell into the error of confusing an acceptance of rent after a notice to quit with an acceptance of rent after notice that an act of forfeiture has been committed. If a landlord seeks to recover possession of property on the ground that breach of covenant has entitled him to a forfeiture, it has always been held that acceptance of rent after notice waives the forfeiture, the reason being that in the case of a forfeiture the landlord has the option of saying whether or not he will treat the breach of covenant as a forfeiture. The lease is voidable, not void, and if the landlord accepts rent after notice of a forfeiture it has always been held that he thereby acknowledges or recognises that the lease is continuing. With regard to the payment of rent after a notice to quit, however, that result has never followed. If a proper notice to quit has been given in respect of a periodic tenancy, such as a yearly tenancy, the effect of the notice is to bring the tenancy to an end just as effectively as if there has been a term which has expired. Therefore, the tenancy having been brought to an end by a notice to quit, a payment of rent after the termination of the tenancy would not operate in favour of the tenant if it could be shown that the parties intended that there should be a new tenancy.”

The learned Judges overruled Hartell v. Blackler(2) and held that the rule applying to a case of accepting rent after the termination of tenancy is the same as that laid down by Lord Mansfield as early as 1775 in Deo D Cheny v. Batten(3):

“The question therefore is quo animo the rent was received, and what the real intention of both parties was?”

If the contract came to an end, as Mr. D. Ramaswami Ayyangar for the appellant says it did upon the passing of the order for eviction, we have to ascertain what the intention of the parties thereafter was. There can be no manner of doubt that the respondent was not willing that the appellant should continue in possession on the same rent as before. The appellant stated in his application for fixing a fair rent that the respondent had been demanding rent which was double that originally paid by him and that was why he was asking the Rent Controller to fix a fair rent. Moreover, as soon as the respondent became entitled to file an application for eviction of the tenant on the ground that he had failed to pay his rent by the end of the succeeding month, he availed himself of his legal right and filed, as already stated, an application for the eviction of the appellant on 1-2-1947. It is however argued that by virtue of the provisions of S. 116 of the Transfer of Property Act, an irrebuttable presumption arises that he received these cheques as rent and that therefore a fresh tenancy from month to month came into being. It is not denied that the weight of authority is that if after the termination of a tenancy a landlord accepts rent, he must be deemed to have consented to a new tenancy on a year to year basis on the same terms as before, the reason being that when money is tendered as rent it can be received only as rent and that therefore if the landlord does receive it, he shows by his action that he has accepted it as rent, even though he may say in accepting it that he does so without prejudice or as damages for use and occupation. A recent decision of the Federal Court in Kai Khushroo v. Bai Jerbai reiterates that principle although that case could be distinguished by the fact that there the rent was received unconditionally, though the learned Judges of the Federal Court did not base their decision on that narrow ground. Even if we assume for a moment that S. 116 of the Transfer of Property Act can be applied to tenancies terminated by the Rent Control Act, it is clear in this case that the money was not received as rent. The respondent had long been attempting to enforce a higher rent and took the first opportunity, as already stated, of evicting the tenant; but he was unable to do so under the Rent Control Act until an order of eviction had been made and enforced by the Rent Controller. It is quite certain in the correspondence between the parties that the respondent never for a moment departed from that attitude or showed the slightest intention of consenting to the appellant's continuing as his tenant. He was prevented by the stay order from obtaining possession; and if he did not accept payments he would have received no rent for years on end. We have been shown no decision that goes as far as to say that however clear it may be that money was not received as rent, yet one must necessarily presume that it was. Moreover, the rent tendered and received was not the rent due under the original contract; but the fair rent fixed by the Rent Controller.

It is unnecessary to pursue this matter further; for we entirely agree with the learned Judge that the Transfer of Property Act can have no application to a state of affairs governed by the Rent Control Act. As the learned Judge pertinently pointed out, one cannot divorce S. 116 of the Transfer of Property Act from the other provisions of that Act; and when S. 116 speaks of the determination of the lease, it must have reference to a determination of the lease such as is contemplated in S. 111 of the Transfer of Property Act, which sets out the various methods by which a lease may be determined. It is conceded here, as before the learned Judge, that the lease was not determined in any of the ways set out in S. 111.

The Rent Control Act does not concern itself with the termination of leases. It gives the tenant (as defined in that Act) a right to continue in possession as long as he pays his rent regularly. If the rent is not paid regularly then whether the lease has been determined or not, the landlord has a right to evict the tenant. Mr. D. Ramaswami Ayyangar for the appellant argues that despite the provisions of the Rent Control Act, the month to month tenancy originally entered into must be considered to have been continued right up to the date of eviction, since no notice to quit had been sent to the tenant. We do not agree that such a useless formality was at all necessary. The landlord permitted the tenant to remain in possession without sending him a notice to quit, only because he knew that under the Rent Control Act he had no right to evict him until the tenant defaulted in the payment of rent. There is a passage in the Federal Court decision above referred to at page 128 which would indicate that the provisions of S. 116 of the Transfer of Property Act have no application to matters arising under the Rent Control Act. Mukerjee, J., delivering the leading judgment, with which the other learned Judges agreed stated:

“It may be pointed out that in cases of tenancies relating to dwelling houses to which the Rent Restriction Acts apply, the tenant may enjoy a statutory immunity from eviction even after the lease has expired. The landlord cannot eject him except on specified grounds mentioned in the Acts themselves. In such circumstances, acceptance of rent by the landlord from a statutory tenant, whose lease has already expired, could not be regarded as evidence of a new agreement of tenancy and it would not be open to such a tenant to urge, by way of defence, in a suit for ejectment brought against him, under the provisions of Rent Restriction Act, that by acceptance of rent a fresh tenancy was created which had to be determined by a fresh notice to quit.”

Reference is therein made to Davies v. Bristow, and Morrison v. Jacobs to the same effect, the former of which was referred to by Govinda Menon, J.

Although it is not necessary for us to base our decision on any ground other than the above, it seems to us that at the time when rent was accepted by the respondent, the appellant was still a tenant; because the appellant was not then a trespasser, in view of the fact that he was lawfully in possession by virtue of the stay order passed on 3rd October 1947. If he was lawfully in possession, then he was a tenant within the meaning of the Rent Control Act. This was clearly how the appellant in his notices understood the situation. When he sent the cheques, he said in Ex. A.3:

“As fixed by the Joint Rent Controller, Madras…… I am sending herewith enclosed a chequa for Rs. 536-4-0……and also one other cheque for Rs. 60 being the Rent for August and September 1946.”

In reply to a letter acknowledging the cheques, on 28th November 1947, the appellant's Advocate said:

“That the rent for the premises No. 37 Devaraja Mudali St., has been fixed by the Rent Controller and accordingly my client has sent the above cheques towards the rents due as per order of the Rent Controller, that your client can only receive the amount towards the rent due for the premises and not as damages for use and occupation.”

By these letters he was asserting what we feel to be the truth, that pending the appeal he was a statutory tenant, entitled to remain in possession and under an obligation to pay rent.

For the above reasons we are satisfied that by the acceptance of the two cheques on 21st November 1947, the appellant did not acquire any fresh right to continue in possession of the suit premises.

The appeal is dismissed with costs. By consent, the appellant is given one month's time to leave the premises.

N.R.R

N.V Kuppuswami Ayyar v. P. Mahadeva Chettiar.

Judgment Summary

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments

Respondent's Arguments (as recorded in the opinion)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

N.V Kuppuswami Ayyar v. P. Mahadeva Chettiar.

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