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Smart Summary

Judicial Opinion Summary — Bishan Narain, J.

Factual and Procedural Background

The applicants are owners of a shop said to have been constructed as per a design given to Ishar Lal, who took it on lease in 1949 at Rs. 150 per mensem. Ishar Lal, who was in partnership with Khushi Ram, used the premises as a hotel. On 26 May 1950 Ishar Lal applied under section 4 of the East Punjab Urban Rent Restriction Act, 1949, for fixation of fair rent. Before the Controller could hold an inquiry and fix the rent in accordance with the Act, the parties compromised and on 27 July 1950 a consent order was passed recording that the fair rent was Rs. 80 per mensem. On 18 August 1953 Khushi Ram again applied for fixation of fair rent. The Rent Controller dismissed that later petition on the ground that fair rent had already been fixed at Rs. 80 per mensem in the earlier proceedings. On appeal the Additional District Judge held that parties could not by compromise fix fair rent under the Rent Control Act and remanded the matter for further inquiry by the Controller. The landlords (petitioners) filed the present petition under Article 227 challenging the order of the Additional District Judge. The principal issue identified by the court is whether the fixation of fair rent by compromise on 7 July 1950 can be treated as the final fixation of fair rent for the premises.

Legal Issues Presented

  1. Whether the fixation of fair rent on compromise (consent order dated 27 July 1950 recording fair rent at Rs. 80 per mensem) can be considered the fair rent of the premises in dispute.
  2. Whether a petition lies against an order of remand and whether a revision under section 115 of the Civil Procedure Code is maintainable (a preliminary objection raised by the respondent relying on Pitman's Shorthand Academy v. B. Lila Ram & Sons).

Arguments of the Parties

Respondent's Arguments

  • A preliminary objection was raised that no petition lies against an order of remand and that a petition for revision under section 115 CPC is not maintainable, as relied upon in Pitman's Shorthand Academy v. B. Lila Ram & Sons (1950 52 P.L.R 1 F.B.).

Petitioners' Arguments

  • The learned counsel for the petitioners urged that the admission by Ishar Lal in the prior proceedings that the fair rent was Rs. 80 per mensem operates as res judicata in the present proceedings or, alternatively, amounts to an estoppel preventing the Controller from fixing a different fair rent.
  • The opinion records that the petitioners' counsel also contended that Ishar Lal and Khushi Ram are (text in the opinion is unclear at this point), but the core contention pressed was that the prior fixation (or consent) should be treated as binding on subsequent proceedings.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Pitman's Shorthand Academy v. B. Lila Ram & Sons (1950 52 P.L.R 1 F.B.) Authority cited for the preliminary objection that no petition lies against an order of remand and that revision under section 115 CPC may not be maintainable. The court noted the objection relying on this authority but did not decide the preliminary point because it found the petition to lack merit on substantive grounds.
Maharaj Jagat Bahadur Singh v. Shri Badri Parshad Seth (1954 56 P.L.R 549) (Civil Revision No. 200 of 1954) Held that the primary object of the East Punjab Urban Rent Restriction Act and similar Acts is to prevent landlords from charging excessive rents and forcing tenants to pay increased rents by threat of ejectment. The court relied on this statement of purpose to support the view that statutory provisions preventing excessive rents must be given full effect and cannot be circumvented by private agreements between landlord and tenant.
Griffiths v. Davies (1943 2 All E.R. 209) Principle that where a later proceeding shows contractual rent is too high, the court in the later proceeding is bound to give effect to statutory provisions; a prior judgment in favour of contractual rent cannot preclude application of the statute. The court invoked this decision to support the proposition that the Court must not act contrary to the statutory scheme (i.e., cannot allow a private agreement or prior judgment to defeat the Act's restrictions on rent).
Punamchand Mehta v. S. Mukherjee (16 C.W.N 15) Held that the Controller alone has jurisdiction or power to ascertain or fix the standard (fair) rent in the manner laid down in the Act. The court relied on this authority to hold that parties cannot, by agreement between themselves, fix the standard/fair rent for the purposes of the Rent Control Act and that the Controller must decide in accordance with the statutory procedure.
Mortime Electric Co. Ltd. v. General Dairies Ltd. (1937 1 All E.R. 748) Quoted for the principle that a person cannot be estopped from alleging the invalidity of an action which the statute has declared to be invalid on grounds of public policy; i.e., there cannot be estoppel against law. The court cited this authority (via Arkin, L.J.'s statement) to support the view that estoppel cannot operate to prevent the Controller or the court from enforcing statutory provisions which render certain agreements invalid.
Ahamuddin v. Banku Behary Dutt (A.I.R. 1927 Cal. 305) Used to support the proposition that the decision fixing fair/standard rent under the Rent Acts attaches to the premises (is in rem) and not merely to the parties (in personam). The court relied on this authority to emphasize that standard/fair rent is a permanent attribute of the house and binds all persons interested in the property; therefore it cannot be fixed merely by agreement between particular parties without the Controller's statutory determination.

Court's Reasoning and Analysis

The court's analysis proceeded in a sequence grounded in the statutory scheme and public policy embodied in Rent Control legislation:

  1. Statutory purpose: The court began by explaining the general purpose of Rent Control Acts — to protect tenants when accommodation is scarce by restricting increases in rents and landlords' rights to eject tenants. The Acts fix a statutory standard (fair or basic rent) and make any excess unenforceable.
  2. Statutory machinery (sections 4, 5 and 6 of the East Punjab Urban Rent Restriction Act, 1949): Section 4 empowers the Controller, on application by landlord or tenant, to hold an inquiry and fix the basic/fair rent. Section 5 restricts increases except where additions/improvements are made by the landlord. Section 6 prohibits the landlord from claiming or receiving rent in excess of fair rent and declares agreements for payment of sums in excess to be null and void.
  3. Effect of those provisions: Given the penal and remedial consequences (recoverability by tenants, limits on recovery, and criminal liability under section 9/19 for contraventions), the court held that the statutory scheme aims to prevent parties from circumventing these protections by private arrangements.
  4. On the facts: The court found that the prior "fixation" arose from a compromise/consent order where the Controller did not hold any inquiry as required by section 4. Because the Controller had not exercised the statutory jurisdiction by an inquiry and formal determination, that earlier consent could not be treated as a statutory fixation of fair rent.
  5. Res judicata and estoppel: The petitioners' reliance on res judicata and estoppel was rejected. The court held (drawing on Punamchand Mehta and authorities on estoppel) that the Controller alone has the jurisdiction to fix standard rent and that an agreement which would contravene the statute is void. Further, estoppel cannot operate against the statute — one cannot be precluded from alleging invalidity of what the statute declares invalid.
  6. In rem nature of rent fixation: The court emphasized that decisions fixing fair/standard rent operate in rem — they attach to the premises and not to particular parties. Therefore, a disposal without inquiry, or a consent between the parties, cannot bind future proceedings or constitute a valid statutory determination for all time.
  7. Conclusion of analysis: For these reasons — statutory text, purpose, penalties, the Controller's exclusive statutory role, the in rem nature of rent fixation, and the inapplicability of estoppel/res judicata to bypass the statute — the court concluded that the prior consent order could not be treated as the final fixation of fair rent.

Holding and Implications

HOLDING: The court dismissed the petition. The court held that the fixation of fair rent by compromise on 27 July 1950 (recording fair rent at Rs. 80 per mensem) cannot be considered the final statutory fixation of fair rent for the premises because the Controller did not conduct the statutory inquiry under section 4 and parties cannot, by private agreement, fix fair rent contrary to the Act.

Implications:

  • The direct effect is that the prior consent order does not bind the Controller or future proceedings for fixation of fair rent under section 4; the Controller retains power to fix fair rent in accordance with the statutory procedure.
  • The petitioners' contentions of res judicata and estoppel were rejected; estoppel cannot be invoked to validate or uphold agreements or orders that would contravene the statute.
  • The court ordered that the parties bear their own costs in this Court.
  • The opinion does not purport to establish a novel legal principle beyond application and reinforcement of existing statutory interpretation and authorities cited; it applies the established rules concerning the Controller's statutory role, the in rem character of rent fixations, and the limits of estoppel/res judicata in the face of statutory prohibitions.

Disposition

DISMISSED.

The court left the parties to bear their own costs in this Court.

Show full summary ...

    Ladha Ram And Others v. Khushi Ram .

    Bishan Narain, J.:— The present petition under Article 227 of the Constitution of India arises in the following circumstances. The applicants are owners of a shop which, it is alleged by them, was constructed according to the design given by one Ishar Lal to whom it was given on lease in 1949 at Rs. 150 per mensem. It appears that Ishar Lal was working in partnership with Khushi Ram and was using the premises as a hotel. On 26th May, 1950 Ishar Lal applied under section 4 of the East Punjab Urban Rent Restriction Act, 1949, for fixation of fair rent. Before the Controller could fix the rent in accordance with the Act, the parties compromised and on 27th July, 1950 a consent order was passed to the effect that the fair rent of the premises was Rs. 80 per mensem. Three years later, i.e on 18th August, 1953, Khushi Ram again applied for fixation of fair rent. The Rent Controller came to the conclusion that the fair rent had already been fixed at Rs. 80 per mensem in the previous proceedings and therefore dismissed the petition. On appeal, however, the Additional District Judge held that the parties could not by compromise fix fair rent of any premises under the Rent Control Act and therefore remanded the case for further enquiry by the Controller. The landlords have filed this petition against the order of the additional District Judge and the only point that requires decision is whether the fixation of fair rent on compromise on 7th July, 1950 can be considered to be fair rent of the premises in dispute.

    2. Tie learned counsel for the respondent has raised a preliminary objection that no petition lies against an order of remand and the petition for revision under section 115 Civil Procedure Code, is not maintainable as held in Pitman's Shorthand Accadamy v. B. Lila Ram & Sons . 1950 52 P.L.R 1 F.B.. It is, however not necessary to decide this point as in my opinion the petition has no force on merits.

    3. When there is a serious shortage of accommodation, tenants are at the mercy of landlords and the Legislature has generally found it necessary and expedient to protect the tenants from the landlords and various States have passed what may in general be called Rent Control Acts. The object of these Acts, generally speaking, is inter alia to restrict increase in renrs and also to restrict the landlords' rights to eject tenants. In the case of rents, a standard is fixed and any refit in excess of that standard is declared by the statute to be irrecoverable from the tenants notwithstanding any contract to the contrary between the landlord and the tenant.

    4. Now, the East Punjab Urban Rent Restriction Act, 1949, lays down in section 1 that on an application by the landlord or the tenant for fixation of fair rent the Controller shall, after holding such inquiry as he considers fit, fix the basic rent as defined in the Act and then increase it by certain percentage as laid down in the section. This section in fact provides machinery for the purpose of deciding questions as to the amount of fair rent. It is a jurisdiction which enables the Controller to decide without reference to any existing claim for rent or possession the question as to the amount which should be considered fair rent for the premises in question. An order obtained under this section can be used in subsequent proceedings. It is then provided in section 5 that once fair rent is fixed it cannot be increased unless some addition, improvement or alteration has been carried out in the premises at the expense of the landlord. Section 6 then read—

    “6. Landlord not to claim anything in excess of fair rent.—(i) Save as provided in section 5, when the Controller has fixed the fair rent of a building or rented land under section 4—

    (a) the landlord shall not claim or receive any premium or other like sum in addition to fair rent or any rent in excess of such fair rent, but the landlord may stipulate for and receive in advance an amount not exceeding one month's rent;

    (b) any agreement for the payment of any sum in addition to rent or of rent in excess of such fair rent shall be null and void.

    (2) Nothing in this section shall apply to the recovery of any rent which became due before the 1st day of January, 1939.”

    5. This section thus prohibits the landlord from realizing any rent in excess of fair rent and declares an agreement fixing rent which is in excess of fair rent as null and void Section 8 enables the tenant to recover back any rent paid in excess of fair rent subject to a limitation of six months. It is then provided in section 9 that a landlord who contravenes section 6(1)(a) of the Act is liable to be punished with imprisonment which may extend to two years and with fine. It is, therefore, clear that the Act is so drawn as to penalise landlords who realize more than standard rent by making it recoverable by the tenants and if a landlord tries to get more than fair rent as rent or by means of fine or premium, lie becomes guilty of an offence under section 19 for which he is liable to be prosecuted and sent to jail. Therefore the scheme of the Act is to prevent the landlord or tenant from coming to any agreement or doing anything which shall increase the fair rent of the premises and the statute declares such an increase to be not only illegal but also renders the landlord liable to imprisonment, if he tries to enforce such an agreement. It was held by Mr. Justice Falshaw in Maharaj Jagat Bahadur Singh v. Shri Badri Parshad Seth . 1954 56 P.L.R 549. (Civil Revision No. 200 of 1954) that the primary object of the East Punjab Urban Rent Restriction Act and other Acts of this kind is quite clearly to prevent the landlords from charging excessive rents and from forcing tenants to pay increased rents by the threat of ejectment. That being so, it appears to me that on grounds of general public policy and expediency the Courts must give full effect to these statutory provisions and a party cannot be allowed to circumvent the statutory prohibitions by private arrangements. Therefore the fair rent cannot be increased by any admission or omission on the part of a tenant. In the circumstances I am of the opinion that the admission of Ishar Lal tenant on 7th July, 1950 in previous proceedings that the fair rent of the premises was Rs. 80/- per mensem cannot be considered to fix the fair rent of the premises finally and I am supported in my view by the decision in Griffiths v. Davies . 1943 2 All. E.R 209., wherein it was held that if two actions are brought in respect of two rent periods and in the first judgment for the contractual rent is given and in the second it is shown that the contractual rent is too high, the Court is bound in the second action to give effect to the provisions of the section. Otherwise, it was held, that the Court would be doing something which is prohibited by law. The learned counse for the petitioners has however, urged before me that Ishar lal and Khushi Ram are ??? and the Controller fixed the fair rent at Rs. 80/- per mensem on the application of Ishar Lal and this decision, according to him, operates as res judicata in the present proceedings or, in any case, it amounts to an estoppel. It is, however, clear that the previous application under section 4 of the Act was decided on agreement between the parties then before the Controller who did not hold any inquiry and did not fix any fair rent as laid down in the Act. In a case similar to the present one it was held by Mr. Justice Bose in Punamchand Mehta v. S. Mukherjee . 16 C.W.N 15. that the Controller alone has jurisdiction or power to ascertain or fix the standard rent in the manner laid down in the Act and the landlord and tenant cannot by agreement between them fix the standard tent for the purpose of the Rent Control Act. Moreover, an agreement which cannot be enforced without violating the law is clearly void and in the present Act it is specifically laid down in section 6 that an agreement fixing rent in excess of fair rent shall be null and void. It may be, and it is not necessary to decide the point in the present case, that the tenant cannot recover back the rent paid under the previous judgment which was obtained by the landlord on account of the tenant agreeing to the fixation of fair rent at a particular figure, but it cannot prevent the Controller from fixing fair rent in accordance with law when an application is made under section 4 of the Act by a person for that purpose. The previous judgment there fore cannot operate as res judicata in the present proceedings.

    6. As regards estoppel, it is well established that there cannot be any estoppel against law. Indeed, it is the duty of Court to avoid giving a judgment contrary to the statute. It was laid down by Arkin, L.J in Re. A Bankruptcy Notice5, at p. 97—

    “It seems to me well established that it is impossible in law for a person to allege any kind of principle which precludes him from alleging the invalidity of that which the statute has, on grounds of general public policy, enacted shall be invalid.”

    7. And this passage was quoted with approval by lord Maugham in Mortime Electric Co. Ltd. v. General Dairies, Ltd. . 1937 1 All E.R 748 at p. 755.. After all estoppel is only a rule of evidence which cannot avail to release a Court or a party from the obligation to obey the statute or to escape from a statutory obligation. I am therefore of the opinion that there is no bar in law to prevent the controller from fixing fair rent in accordance with the provisions of section 4 of the East Punjab Urban Rent Restriction Act, 1949, in the present case.

    8. The present question can also he considered from another point of view. It is well established that the decision fixing fair rent under the Rent Acts attaches to the premises and not to the persons or parties and therefore such a decided is a judgment in rem and not in personam (vide Punamchand Mehla v. S. Mukherjee, and Ahamuddin v. Banku Behary Dutt . A.I.R 1927 Cal. 305.) Mr. R.E Megarry has stated the law in this respect in his book on. “The Rent Acts” to be—

    “It has been said that the Acts apply to houses, not persons; that they operate in rem and not in personam; and that they stereotype the rent of a house. The Acts interfere drastically with contractual arrangements, and impose a certain status on the house, which binds both landlord and tenant. The Rent Acts, speaking generally, operate in rem, i.e they operate on property. Thus where the standard rent of premises has been fixed or it has been ascertained that the premises have become decontrolled, i.e, free from the Acts, this binds all persons who at any time may be interested in the property. The Acts operate not merely in relation to a particular tenancy of a house and the parties to it, but by attaching to a dwelling-house a standard rent which applies to the whole house, and where necessary also applies by apportionment to every part. The standard rent is a permanent attribute of the house.”

    9. If this be so, then fair or standard rent of premises cannot possibly be fixed by agreement between the particular parties before the Controller nor can a dismissal of an application in default or its disposal without enquiry fix fair or standard rent for the premises for all times. It appears to me that the object of the Rent Control Acts will be defeated to a great extent if the parties are allowed to fix fair or standard rent of the premises between themselves.

    10. For the reasons given above, I see no force in this petition and I dismiss it, but I leave the parties to bear their own costs in this Court.

    11. Petition dismissed.

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    Comments

    Ladha Ram And Others v. Khushi Ram .
    (Nov 24, 1954)