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M.A Mohamed Burhanuddin v. The Official Trustee, Madras
Structured Summary of the Opinion
Factual and Procedural Background
The Official Trustee of Madras leased certain premises known as the Connemara Market in Pudupet to Mohamed Burhanuddin by a written agreement dated 25 December 1952 for a rent of Rs. 29 per day. The tenant (Mohamed Burhanuddin) filed H.R.C. No. 108 of 1957 before the Rent Controller complaining that the agreed rent was high and seeking fixation of a fair rent. The Official Trustee opposed, contending the tenant collected as much as Rs. 62 per day from stall keepers.
The Rent Controller fixed the fair rent at Rs. 21 (with some notation in the record as Rs. 21- nPs.) per day, having regard to the rental value recorded in the Corporation property tax assessment books for 1939-1940 together with an addition of 50% thereto. The Official Trustee appealed to the Second Judge, Court of Small Causes, Madras (H.R.A. No. 176 of 1958). The appellate Judge concluded that the rent agreed between the parties (Rs. 29 per day) was the fair rent and accordingly set aside the Rent Controller's order and fixed the fair rent at Rs. 29 per day, subject to collateral obligations specified in the 1952 lease (licence fee, Corporation property tax, water charges, quit rent, white/colour washing, sanitary condition, electrification).
The present revision petition under S. 12-B of the Madras Buildings (Lease and Rent Control) Act, 1949 was filed in the High Court by the tenant (Mohamed Burhanuddin) seeking revision of the appellate Judge's order dated 3 April 1959. The petition was disposed of on 17 November 1960.
Legal Issues Presented
- Whether the revision petition is maintainable after the enactment of Madras Act XVIII of 1960, in view of S. 35(2) which deems earlier decisions to be decisions under the new Act and the exclusion in S. 30 of the new Act of non-residential buildings with a recorded rental value exceeding Rs. 400 per mensem.
- Whether, in fixing the fair rent of a non-residential building, the Rent Controller's discretion to increase rent over the 1939–1940 Corporation-recorded rental value is limited by S. 4(4) of the Madras Buildings (Lease and Rent Control) Act, 1949 (specifically whether the increase may not exceed 50% in the present case).
- Whether the lease contract between landlord and tenant (the 1952 agreement fixing rent at Rs. 29 per day) can be given effect to where it results in a rent exceeding the statutory maximum increase permitted by S. 4(4), or whether the tenant may claim relief under the statute despite having agreed to higher rent.
- Whether an appellate court may impose on the tenant, in fair-rent proceedings, collateral obligations (such as payment of taxes and other charges) as additional liabilities distinct from the fixed fair rent amount, or whether such obligations should only be taken into account in fixing a single definite fair-rent amount.
Arguments of the Parties
Petitioner's (Tenant's) Arguments
- The increase in fair rent over the 1939–1940 Corporation-recorded rental value should be limited by S. 4(4) of the Act to the maximum prescribed (50% in the present case), and S. 4(4) restricts the exercise of the discretion under S. 4(2).
- Even though the tenant entered into the 1952 lease agreeing to Rs. 29 per day, the tenant cannot be made to contract himself out of the statutory protection; if the contract provides for an increase beyond the statutory maximum, the tenant should be relieved under the statute.
- The appellate Judge was wrong to impose collateral obligations (payment of Corporation tax and similar charges) as separate liabilities in addition to a stipulated fair rent; such obligations should be considered only as circumstances relevant to fixing a single fair rent amount.
Respondent's (Official Trustee's) Arguments
- Preliminary point: After enactment of Madras Act XVIII of 1960, S. 30 excludes the application of the Act to non-residential buildings whose rental value as per Corporation records exceeded Rs. 400 per mensem; relying on S. 35(2), the respondent argued that earlier decisions (including the Rent Controller's and the appellate Judge's decisions given before Act XVIII of 1960) should be deemed decisions under the new Act and thus the revision petition is not maintainable.
- Factual contention that the tenant was collecting up to Rs. 62 per day from stall keepers, supporting the appellate Judge's fixation of Rs. 29 per day as fair rent.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Ambavathi v. Superintendent, King George Hospital (1958) 2 And. W.R. 329 | Support for the proposition that in fixing fair rent, discretion is controlled by statutory limits (reference to S.4 and S.4(3) in that decision); legislature fixed a maximum having regard to a particular date. | The court relied on this view to hold that S.4(4) limits the Rent Controller's discretion to increase rent over the 1939–1940 recorded rental value (i.e., the increase is limited to the statutory maximum of 50% in this case). |
| George Oakes Ltd. v. Chief Judge, Small Cause Court, Madras (1950) 2 M.L.J. 317 = 63 L.W. 860 | Authority for the principle that a tenant cannot contract himself out of the benefit conferred by the Act; it would be against public policy for a tenant to forfeit statutory protections by agreement (discussed in context of S.6). | The court cited this decision to support the proposition that a tenant should be protected from contractual terms which attempt to deprive him of the benefits conferred by the statute; used to justify that contract terms cannot prevail if they exceed statutory maxima. |
| Raja Chetti's case (1949) 2 M.L.J. 694 = 62 L.W. 860 | Referenced in the discussion of whether tenants can contract out of statutory protections (cited in George Oakes discussion). | Mentioned as part of the authorities showing the principle that tenants cannot be deprived of statutory protections by private agreement; used in contextual reasoning but not directly applied as controlling precedent beyond that principle. |
| Ramalinga v. Gurumurthi Reddi (1954) 2 M.L.J. 752 = 67 L.W. 897 | Held tenant could not contract himself out of rights conferred by Madras Act XXV of 1949; tenant could take advantage of statutory protections despite lease for a specified period (invoking S.7). | Used to support the legal proposition that contractual terms cannot override statutory rights; court relied on this to justify giving the tenant relief where contract exceeded statutory maximum. |
| Subbier v. W. P. Chetty 71 L.W. 736 | Authority (Ramaswami, J.) that the Rent Controller should give effect to terms agreed between parties and should interfere where compromise was not freely arrived at or where there was over-reaching. | The court acknowledged this authority but distinguished it: it held that contractual terms should be respected provided they do not result in rent exceeding the statutory maximum; if they do, the tenant may be relieved by statute. |
| Unreported decision of Ramachandra Iyer, J., in C.R.P. No. 89 of 1957 | Similar to Subbier: the Rent Controller should give effect to parties' terms, subject to scrutiny as to freedom of consent and over-reaching. | The court observed that these decisions did not consider contracts exceeding the statutory maximum; used them to frame the reconciled rule that contracts are effective only to the extent they do not exceed statutory limits. |
| Tej Sing v. Soora Subbarayalu Chetti (1951) 1 M.L.J. 183 = 64 L.W. 127 | Authority that payment of taxes by the tenant is a circumstance of which the Rent Controller should have due regard in fixing the fair rent under S.4(2) of the Act. | The court relied on this to state that the appellate Judge should have taken such obligations into account in fixing a definite fair rent amount rather than imposing them as separate additional liabilities. |
Court's Reasoning and Analysis
The court's analysis proceeded in distinct stages:
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Preliminary maintainability objection (Madras Act XVIII of 1960 and S. 35(2)):
Issue and ruling:
The Official Trustee argued that, by virtue of S. 35(2) of Act XVIII of 1960, decisions given under the earlier Act should be deemed to be under the new Act and since the new Act excludes certain non-residential buildings, the present revision is not maintainable. The Court rejected this contention. It reasoned that S. 35(2) was intended to give continuing/prospective effect to rules, notifications and decisions but not to divest vested remedies and rights under the old Act. Accordingly, a person aggrieved by a decision under the old Act still retained his remedies (appeal and revision) as vested rights which the new Act did not expressly take away. The court overruled the preliminary objection and held the revision petition maintainable.
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Interpretation and application of S. 4 (2) and S. 4 (4) of the 1949 Act:
Statutory framework and central interpretive conclusion:
The court examined the statutory scheme: S. 4(2) prescribes factors the Rent Controller must have regard to in fixing fair rent (prevailing rates in locality during 12 months prior to 1 April 1940, rental value in the Corporation assessment book for the same period, and circumstances such as premiums or sums paid after 1 April 1949). S. 4(4) permits, in fixing fair rent of non-residential buildings, an increase not exceeding 50% of the rental value fixed in 1939–1940 (applicable to the present premises).
Relying on Ambavathi and similar authorities, the court held that S. 4(4) operates to govern and restrict the exercise of the Rent Controller's discretion under S. 4(2). In other words, the statutory maximum increase (50% here) limits how much the Controller may increase the 1939–1940 recorded rental value when fixing the fair rent. The court expressly adopted the view that S. 4(4) limits and controls S. 4(2) considerations.
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Effect of contractual agreements (the 1952 lease) vis-à-vis statutory maxima:
Tension between private contract and statutory protection:
The tenant contended that even though he had agreed in 1952 to Rs. 29 per day, he could not be compelled to accept a contractual bargain that took him beyond the statutory maximum, relying on authorities (George Oakes; Ramalinga) that a tenant cannot contract himself out of statutory benefits. The appellate Judge had relied upon Subbier and an unreported decision to give effect to the parties' agreement.
The Court reconciled these authorities by holding that the parties' contractual terms should be respected so long as the contract does not provide for a rent exceeding the maximum permitted by the statute. But if the contract exceeds the statutory maximum, the tenant must be relieved because a tenant cannot be permitted to contract himself out of statutory protections. Applying this principle, the court concluded that the Rent Controller's decision (which respected the statutory maximum) should be affirmed and the appellate Judge's decision (which allowed rent above that maximum) set aside.
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Evidentiary considerations and treatment of collateral obligations:
On evidence of actual receipts and treatment of obligations:
The appellate Judge noted the tenant's apparent receipt of nearly Rs. 62 per day; the tenant disputed this and pointed to documents suggesting lower collections (average Rs. 36 per day in a 1951 period and a 1957 report indicating possible renewal at Rs. 21 per day). The court observed that the Rent Controller had already fixed the maximum payable under the rules and that the tenant had not disputed the correctness of that fixation. Moreover, the tenant had not maintained accounts of collections and there was absence of independent evidence; therefore it was not proper to estimate his actual receipts.
Regarding collateral obligations imposed by the appellate Judge (payment of Corporation tax, etc.), the court referred to Tej Sing as authority that such obligations are circumstances to be taken into account in fixing fair rent. The court held the proper course would have been for the appellate Judge to take the obligations into account and fix a definite sum as fair rent, rather than levying them as separate additional obligations alongside a fixed fair-rent amount.
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Conclusion from the analysis:
Net outcome of the court's analytical steps:
Because the appellate Judge's decision did not give due weight to the relevant provisions of the Buildings (Lease and Rent Control) Act, 1949 (specifically the limiting effect of S. 4(4) and the proper treatment of contractual terms and collateral obligations), the appellate order was set aside and the Rent Controller's order was restored.
Holding and Implications
Holding: The revision petition is allowed. The Court set aside the order of the Appellate Judge and restored the order of the Rent Controller. The revision was allowed with costs.
Implications (consequences as reflected in the opinion):
- The Rent Controller's fixation of the fair rent (being within the statutory increase limit under S. 4(4)) is restored and prevails in this dispute.
- The court confirmed the interpretive principle that S. 4(4) limits the discretion conferred by S. 4(2): increases in fair rent for non-residential buildings are capped by the statutory maximum (50% in the facts of this case where that maximum applied).
- Contractual agreements between landlord and tenant (including compromises or lease terms) will be respected only to the extent that they do not result in a rent exceeding the maximum fixed by statute; a tenant cannot be compelled to contract himself out of statutory privileges.
- Collateral obligations (taxes, licence fees, etc.) should be taken into account in fixing a single definite fair-rent amount rather than being imposed as separate additional liabilities alongside that fixed sum.
- The court overruled the preliminary objection based on the subsequent Act (Madras Act XVIII of 1960), holding that the new Act did not divest vested appellate or revision remedies under the earlier Act for decisions made before the new Act; thus the revision proceeding was maintainable.
Note: This summary is strictly confined to the material and reasoning contained in the provided opinion and does not add or infer facts or legal propositions beyond what appears in the opinion text.
(Petition (disposed of on 17-11-1960) under S. 12-B of the Madras Buildings (Lease and Rent Control) Act, 1949, praying the High Court to revise the order of the Court of Small Causes, Madras, dated 3-4-1959 in H. R. A. 176/58—H. R. C. 108/57, Rent Controller, Madras.)
This revision petition is filed against the decision of the Second Judge, Court of Small Causes, Madras, in H. R. A. No. 176 of 1958, which in turn was an appeal against the decision of the Additional Rent Controller, Madras, in H. R. C. No. 108 of 1957. This revision petition is filed in the following circumstances.
The Official Trustee of Madras leased to one Mohamed Burhanuddin (petitioner in this revision petition respondent before the lower appellate Court and petitioner before the Rent Controller) certain premises, compendiously known as the Connemara Market in Pudupet, on a rent of Rs. 29 per day under a written agreement between the parties dated 25th December, 1952. For the sake of convenience, I will hereafter refer to Mohamed Burhanuddin as the tenant. The tenant filed H. R. C. No. 108 of 1957 complaining that the rent agreed upon was high and that it should be reduced and the fair rent fixed. The Official Trustee opposed the petition and urged that the tenant was collecting as much as. Rs. 62 daily from the various stall keepers in the market. However, the Rent Controller fixed the fair rent at Rs. 21- nP. per day. For arriving at the above decision the Rent Controller took into account the rental value of the premises as per the Corporation records 1939-1940, together with an addition of 50 per cent thereto. Against this decision the Official Trustee appealed to the Small Cause Judge, Madras. After discussing the evidence as to the exact amount which the tenant was able to realise from his stall-keepers and sublessees, the learned appellate Judge came to the conclusion that the rent agreed upon between the parties was the fair rent to be fixed. Accordingly, he set aside the order of the Rent Controller and fixed the fair rent at Rs. 29 per day subject to the conditions stipulated in the lease deed of 1952, which imposed upon the tenant several collateral obligations like payment of licence fee, Corporation property tax, water supply charges, quit rent payable to the Government, white washing and colour washing and keeping the market in good sanitary condition and electrifying the market. From the said decision of the appellate Judge, the present revision petition is filed.
The learned Counsel appearing for the respondent, Official Trustee, urged a preliminary point. After the enactment of Madras Act XVIII of 1960, under S. 30 thereof, the provisions of that Act (XVIII of 1960) will not apply to non-residential buildings, the rental value of which as per the property tax assessment book of the Corporation, exceeded Rs. 400 per mensem. It is not in dispute that the premises we are now concerned with, is a non-residential building and the rental value as per the entries in the Corporation records exceeds at the present time Rs. 400 per mensem. The learned Counsel for the respondent referred to S. 35 of the said Act which says:
(2) Notwithstanding the repeal of the said Act by Sub-S.(1)—
(a) All rules made, or deemed to have been made, notifications issued or deemed to have been issued, orders passed or deemed to have been passed, decisions made or deemed to have been made, proceedings or action taken or deemed to have been taken, and things done or deemed to have been done under any provision of the said Act (Act XXV of 1949) shall be deemed to have been made, issued, passed, taken or done by the appropriate authority under the corresponding provision of this Act and shall have effect accordingly.
(b) Any liability or penalty incurred or deemed to have been incurred, any punishment awarded or deemed to have been awarded, any application made or deemed to have been made and any prosecution commenced or deemed to have been commenced under any provision of the said Act shall be deemed to have been incurred, awarded, made, or commenced under the corresponding provision of this Act.”
The contention on behalf of the respondent was that the decision of the Rent Controller in this case, which was given on 30th May 1958 and the decision of the appellate Judge which was given on 3rd April 1959 both the dates being prior to the enactment of Act XVIII of 1960, should be deemed to have been decisions given under act xviii of 1960, and since the provisions of act xviii of 1960 are no longer applicable to a building like the one we are concerned with, this revision petition is not maintainable. There is an obvious difficulty in accepting this argument. The provision in S. 35 (2) of Act XVIII of 1960 was intended only for the purpose of giving continuing effect to the rules made, notifications issued and decisions given under the earlier Act, and for that purpose, though they were under the earlier Act, should be deemed to be under Act XVIII of 1960 for the purpose of giving prospective effect. But a person aggrieved by a decision under the old Act, had under the provisions of that Act a remedy by way of appeal and also a further remedy by way of revision. Act XVIII of 1960 does not purport to take away these rights which are vested in character. The mutual rights and liabilities between the Official Trustee and the tenant in regard to this building will be governed, in any event, upto the date when Act XVIII of 1960 was passed, by the decision of the appellate Judge in the matter of fixing the fair rent. The tenant is therefore an aggrieved party and he will be entitled to obtain his remedy by way of a revision, under the old Act, unless the new Act has specifically divested him of that right, which the new Act does not purport to do. Hence I overrule the preliminary objection.
I will next take up the contentions of the tenant urged in this revision petition. The first contention of the tenant before me was that where a building has been assessed to a rental value in the Corporation Register at a particular amount in the year 1939-1940, the increase of fair rent determined under the provisions of S. 4 of the Madras Buildings (Lease and Rent Control) Act, 1949, should be limited to the maximum prescribed in S. 4 (4) (ii) which in the case of the present building is 50 per cent of the rental value recorded in the Corporation books in 1939-1940. No doubt, in determining the fair rent, the Rent Controller shall have due regard (i) to the prevailing rates of rent in the locality for the same or similar accommodation during the 12 months prior to 1st April 1940 [S. 4 (2) (a) of the Act], (ii) the rental value as entered in the property tax assessment book of the Corporation during the twelve months prior to 1st April 1940 (S. 4 (2) (b) of the Act), and (iii) to the circumstances of the case including any amount paid by the tenant by way of premium or any other like sum, in addition to rent after 1st April 1949 (S. 4 (2) (c) of the Act). But S. 4 (4) of the Act which states that in fixing the fair rent of non-residential buildings, the Controller may allow an increase not exceeding 50 per cent of the rental value fixed in 1939-1940, governs and restricts the directions given in S. 4 (2), Cls. (a), (b) and (c) extracted above. It was contended by the learned Counsel for the petitioner that if this restriction is borne in mind the decision of the Rent Controller making only an increase of 50 per cent over the rental value of 1939-1940 is correct and the decision of the appellate Judge making a further enhancement is incorrect. For the view that S. 4 (4) restricts and controls Ss. 4 (2) (a), (b), (c), the learned Counsel for the petitioner relied upon the decision of the Andhra Pradesh High Court in Ambavathi v. Superintendent, King George Hospital (1958) 2 And. W.R. 329. That related to the case of a residential building and in the decision which was given by a Bench, it is observed at p. 330:
“in fixing the fair rent, his discretion is controlled by S. 4 (3)..It may be that, in some cases injustice may be caused to a particular party; but the legislature for reasons best known to it fixed the maximum rent having regard to particular date.”
I respectfully agree with the view set out above and I hold that in fixing the fair rent of a non-residential building the discretion given to the Rent Controller to make an increase over the total value entered in the Corporation books in 1939-1940 is limited to the maximum prescribed in S. 4 (4) of the Act.
The further contention of the learned Counsel for the petitioner is that the appellate Judge was wrong, in the circumstances of the case, to allow the contract between the parties entered into as per the lease agreement of 1952 to prevail over the restriction placed on the increase by the statute. For this position he relied on the decision in George Oakes Ltd. v. Chief Judge, Small Cause Court, Madras (1950) 2 M.L.J. 317 = 63 L.W. 860., a decision under the Madras Buildings (Lease and Rent Control) Act, 1949, where at page 318, the following observations of the learned Chief Justice are found:
“I would like to say something about the doubt expressed by my learned brother whether the decision in Raja Chetti's case (1949) 2 M.L.J. 694 = 62 L.W. 860. would impliedly lead to the conclusion that the tenant can also contract himself out of the benefit conferred on him by the Act by taking a lease after the Act containing terms and conditions which operate to curtail the rights and privileges conferred upon him by the Act. There was no doubt in our mind that he could not. I would be prepared to go the length of holding that it would be against public policy and the spirit of the Act. The provisions of S. 6 embody the principle that the tenant can be saved from the terms of an express agreement when such terms are to be detriment.”
This view was followed in a later decision of this Court in Ramalinga v. Gurumurthi Reddi (1954) 2 M.L.J. 752 = 67 L.W. 897., where the tenant had taken lease of a cinema hall for one year. When the landlord sought to evict him on the ground that the lease was only for one year, the tenant urged the provisions of S. 7 of the 1949 Act in his favour. It was held that the tenant could not contract himself out of the rights conferred on him by the Madras Act XXV of 1949 and that the tenant could take advantage of the provision of the said Act notwithstanding that the lease was for a specified period only. It was therefore contended, on behalf of the petitioner in this revision proceeding, that the tenant could claim that any increase in the rent payable by him should be limited to 50 per cent of the rental recorded in the Corporation records in 1939-1940, and that any contract he had entered into with the landlord regarding the rent payable by him should be upheld only if it provided for an increase within this maximum but if it provided for an increase above this maximum, he would be relieved against that increase, notwithstanding that he himself bad entered into a contract therefore.
The appellate Judge has relied upon the decision of Ramaswami, J., in Subbier v. W. P. Chetty 71 L.W. 736., and also the unreported decision of Ramachandra Iyer, J., in C. R. P. No. 89 of 1957. These two decisions laid down that the Rent Controller should give effect to the terms which the parties had between themselves agreed upon. The decision of Ramaswami, J., is also authority for the view that the Rent Controller should interfere if it was found that the compromise has not been freely arrived at and there has been over-reaching of one party by the other. But it has to be pointed out that in these two cases the learned Judges did not have occasion to consider whether the contract provided for an increase over the statutory maximum and whether if it had so provided, the tenant could be relieved against the obligation which he had undertaken under the contract, and given the benefit of the statute. But that is the exact question that has arisen in the present case and it appears to me that the proper way of reconciling the position is to hold that the terms in the contract are to be respected as long as the contract does not provide for a rent that exceeds the maximum fixed by the statute. But, if it exceeds the maximum paid by the statute, then on the principle that the tenant cannot be permitted to contract himself out of the statute which gives him certain privileges he should be given relief. In view of the foregoing, I hold that the decision of the Rent Controller has to be affirmed and the decision of the appellate Judge has to be set aside.
It was also urged by the learned Counsel for the petitioner that the appellate Judge was wrong in imposing upon the tenant the liability for a certain sum as a fair rent, and also several other collateral obligations like payment of Corporation tax and so on, according to the terms of the lease deed. It was pointed out that in fair rent proceedings the Court should fix an exact amount payable as fair rent, and for such fixation it can take into account the obligations of the kind referred to; but it cannot levy them as additional obligations to the payment of a fixed sum as fair rent. The decision in Tej Sing v. Soora Subbarayalu Chetti (1951) 1 M.L.J. 183 = 64 L.W. 127 (1)., relied upon by the petitioner's learned Counsel is authority for the view that payment of taxes by the tenant would be one of the circumstances of which the Rent Controller should have due regard in fixing the fair rent under S. 4 (2) of the Act. It appears to me that the proper course for the appellate Judge would have been to take all these obligations into account and fix a definite sum as fair rent.
The appellate Judge had observed that the tenant was getting nearly Rs. 62 per day and that the fixation of of fair rent at Rs. 29 per day would leave him a very favourable margin. This was disputed by the petitioner before me. He referred to two documents in this connection. The Official Trustee had reported in Ex. P. 9 that receivers appointed by the High Court collected during certain period in 1951 a certain sum, the average of which would work out to only Rs. 36 per day. Another document referred t o in this connection was Ex. R. 8, wherein some of the beneficiaries of the trust reported to this Court in 1957 that the lease may be renewed in favour of the present petitioner for a rental of Rs. 21 per day. It was urged by the petitioner that this would show that the fair rent fixed by the Rent Controller at Rs. 21- nPs, per day would not be unreasonable. But in view of the fact that the Rent Controller has already fixed the maximum payable under the rules, and the tenant has not disputed the correctness of this fixation, it is not necessary to go into the question as to the exact amount of rent that he had received from his stall keepers. Admittedly, the petitioner has not maintained any accounts for his collections and without the maintenance of such accounts and in the absence of independent evidence, it would not be proper to arrive at an estimate of his actual receipts.
In view of my findings above, I hold that the order of the appellate Judge has been made without giving weight to the relevant provisions of the Buildings (Lease and Rent Control) Act, and it has to be set aside. I accordingly set aside the order of the Appellate Judge and restore the order of the Rent Controller. This revision position is allowed with costs.
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