Holding

The notice of demand was valid and the tenant was liable to deposit the permitted increases, which are part of rent, and his payment of only the standard rent did not discharge that liability.

Summary

Chase Bright Steel Ltd., a tenant since 1963, was served a notice in 1977 by the landlord demanding arrears of permitted increases of Rs 56.50 per month from February 1976, along with allegations of unauthorized alterations and nuisance. The tenant applied under Section 11(3) of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 for fixation of standard rent; an interim order fixed the rent at Rs 358 per month, which the tenant paid to the landlord and later deposited in court. In 1979 the landlord filed a suit for arrears of permitted increases, rent, and possession; the trial court decreed eviction for rent arrears but not for permitted increases, a decision upheld on appeal and by the High Court, which held the tenant was in default of permitted increases. The tenant contended that the notice of demand was invalid and that permitted increases, being part of rent, were not payable monthly. The Supreme Court held that the notice was valid despite its wording, that permitted increases are part of rent and must be deposited by the tenant during the pendency of the suit, and that the tenant’s payment of only the standard rent did not discharge his liability. Consequently, the appeal was dismissed and the tenant was ordered to vacate the premises.

Issues considered

Whether a valid notice of demand for permitted increases is a prerequisite for the maintainability of a suit for arrears of rent or permitted increases under the Bombay Rents Act.
Whether the notice dated 27 July 1977, which referred to arrears of rent, also constituted a demand for permitted increases.
Whether permitted increases, though part of rent, are payable monthly or can be recovered for a period of arrears.
Whether the landlord must have paid the permitted increases before recovering them from the tenant.
Whether the tenant’s deposit of only the interim standard rent satisfies the statutory obligation under Section 12(3)(b).

Legislation cited

Bombay Rents, Hotel and Lodging House Rates Control Act, 1947s. 11(3), s. 12(2), s. 12(3)(a), s. 12(3)(b)

Subjects

permitted increaserent arrearsnotice of demandevictionstandard rentSection 12landlord-tenantcivil appeal

Judgment

_, CHASE BRIGHT STEEL LTD. A
v.
SHANTARAM SHANKAR SAWANT AND ANR.

MARCH 2, 1994

[S. MOHAN AND M.K. MUKHERJEE, JJ.) B

, Bombay Rents, Hotel and Lodging House Rates Control Act 1947:
Sections 11(3), 12(2) and 12(3)(b)-Permitteil increases not paid by
tenant-l.andlord issuing demand notice for payment of arrears-Tenant filing
application for fixing standard rent-Interim rent fixed and tenant depositing c
rent in Court but not the permitted increases-Eviction petition filed by
landlord-Permitted increases-Whether payable month/y-4'alidity of the
demand notice-Maintainability of the suit.

The appellant-company has been the lessee of the suit premises since
1963 though the property changed many hands. In 1975 respondents D
., purchased the property, and the appellant continued as lessee and was
paying rent and taxes at the rate of Rs,358.211 p.m.

In 1m the respondents Issued a notice through their lawyer to the
appellant terminating its tenancy and calling upon the appellant to hand
E
over vacant possession as the appellant was in arrears of permitted
Increases amounting to Rs.5650 from Feburary, 1976. The notice also
specified two of the grounds of eviction, viz. that the appellant had altered
the premises and causing nuisance to the neighbours. Thereupon the
appellant filed an application u/s. 11 (3) of the Bombay Rents, Hotel and
Lodging House Rates Control Act, 1947 for fixation of standard rent. An F
interim order was passed fixing the rent at Rs. 358 p.m. The appellant paid
the interim rent to the respondent for four months and the respondents
accepted the same. Thereafter appellant has been depositing the rent in
Court.
G
In 1979 respondents filed a suit for arrears of permitted increases,
rent and for possession. It was claimed that the permitted increases at the
- rate of Rs. 56.SO p.m. since 1976 were not paid. Grounds for eviction viz.
' unauthorised alteration and creating nuisance were also urged.

In 1981, the 11pplicatlon for fixation ofstandard rent was dismissed H
287
,I

288 SUPREME COURT REPORTS [1994] 2 S.C.R.

A in default tor non-appearance. This was noted by the Advocate only in ,_
1985. However, the appellant had been depositing the Interim standard
rent all along.

Defending the suits the appellant pleaded that it was paying the rent
regularly and there was no arrears. It also denied the other grounds, viz.,
B unauthorised construction and causing nuisance to the neighbours. The
Trial Court decreed the suit for eviction on account of arrears of rent but
not permitted increases.
t

The appellant preferred and appeal and It was dismissed. There-
after, the appellant preferred a Writ Petition and the High Court dis-
c missed the same, holding that the appellant was not in arrears of rent, but
had defaulted In payment of permitted increases. Hence the appeal by the
appellant-tenant.

On behalf of the appellant, it was contended that there was no valid
D notice of demand which 'was a condition precedent for the maintainability
of suit; that the respondent could not recover permitted increases until be
<
bad paid the same and that the Interim rent f1Xed bad been regularly paid
throughout the pendency of the suit and appeal.

The Respondents contended that when the notice was issued calling
E upon the appellant to pay the entire arrears, all the charges which were
permissible increases were part of the rent required to be paid; and that
since there was a valid demand the maintainability of the suit could not
be questioned.

Dismissing the appeal, this Court
F
HELD: 1. No doubt there must be valid demand for maintainability of
suit for arrears of rent or permitted Increases. But the notice clearly stated
that the tenant was supposed to pay Rs.56.50 per month as permitted
increases. Though the word 'supposed' bas been used Incorrectly, it does
not in any way affect the validity of the notice. Besides, merely because the
G
notice stated 'arrears of rent' It does not mean that there was no demand for
permitted increases as part of the rent. Also, the tenant never disputed the
payment of municipal taxes by the landlord. [293-E; 294-F) ..
_Chiman Lal v. Mishrilal, [1985) 2 SCR 39 and R.K Shetty v. R.P.
H Shirole, (1991] 1 SCC 570, distingufsbed.
CHASEBRIGHTSTEELLTD. v.SAWANT [MOHAN.J.] 289

2. There is no demur to the proposition that the perinited increases, A
·though part of rent, is not payable monthly. The plaint clearly stated that
the permitted increases were from 1.2.1976 till the date of filing of suit in
1979. Hence this proposition does not in any way affect either the claim or
the recovery thereof. (292-E-F)

3. On 14.9.1983, the standard rent 'Mis rixed at Rs. 358 per month and B
the permitted increases were fixed at Rs. 56 per month. The appellant
1 continued to pay Rs.358 per month being the standard rent. He did not pay
the permitted increases. The fact that he was depositing throughout Rs. 358
p.m. and even during the stage of writ petition, can hardly relieve him from
such an obligation. Under Section 12(3)(b) of the Bombay Rent Hotel and C
Lodging House Rates Act, 1947, there is an obligation cast on the tenant to
deposit the permitted increases not only during the pendency of the stand-
ard rent application which in this case bas come to be dismissed for default
but even during the pendency of suit for eviction. [294-GH, 295-A)

CIVIL APPELLATE JURISTICTION : Civil Appeal No. 1354 of D
1987.

From The Judgment and Order dated 19/20.2.1987 of the High Court
of Judicature at Bombay in Writ Petition No. 5035/1985.

SJ Sorabjee, G.Banerjee, R.Karanjawala, P.K.Mullick, M.Karan- E
jawala and R. Ray for the Appellants.

AM. Khanwilkar for the Respondent.

The Judgment of the Court was delivered by
F
MOHAN, J. The short facts leading to this Civil Appeal are as under:

The original owner of suit property situate at Ramamaruti Road,
Then (Maharashtra) was. one Omji Mulji. He leased out three small flats
having two rooms and a kitchen in favour of the appellant company in 1963. G
The rent was fixed at Rs. 300 plus Rs. 20 municipal taxes and Rs. 15 water
charges.

In 1968, Omji Mulji sold away the property to one Gavand..There-
after, the appellant tendered the rent including the taxes to the said
Gavand from 1968. In the same year of 1968, the municipal taxes were H
t

290 SUPREME COuRT REPORTS [1994] 2 S.C.R.

A increased. The appellant paid a lump-sum of Rs.338.58 as rent. D11e lo
further increase in the tru<es, the appellant tendered Rs. 358.29 inclucli11g
tru<es to the owner.

In the year 1975, the respondents came to purchase the suit property,
Since then, the appellant had been paying regularly rent and tai<es at the
B rate of Rs. 358.29 p.m.

The Advocate for the respondents issued a notice dated 27.7.1977 to
the appellant terminating their tenancy and called upon the appellant to
hand over vacant possession since the appellant was in arrears of permitted
C increase amounting to Rs. 5,650 from February, 1976. The notice a)~o
stated two of the grounds for eviction, in that the appellant had altered tile
premises and causing nuisance to the neighbours.

On receipt of the above notice, the appellant filed an application
under Section 11 (3) of the Bombay Rents, Hotel and Lodging Hoµse
D Rates Control Act, 1947 (hereinafter referred to as 'the Act') for fixation
of standard rent. On 30.8.1987, an interim order fixing the rent at Rs.358
was passed. It was directed to be deposited in the court on or before 10th
of every month. For the months of August, September, the appellant paid
the interim rent to the respondents. The same had been accepted. How-
E ever, since October, 1977 the appellant was depositing the interim rent ln
the court of Civil Judge, Junior Division, Thane.

m
On 26.4.1979, the respondents filed Civil Suit N.o.384/79 the C::ollft
of Civil Judge, Junior Division, Thane for arrears of permitted increases,
rent and for possession. The ground urged was that the appellant was in
F arrears of permitted increased amounting to Rs.56.50 per month since
October, 1976. This was on the basis of calculation at 7% as edl!Piltion cess
on the rent of Rs.358.29, Rs.30 water charges, 114% as unemployment
charges and 1/4% as tree cess. Further grounds for eviction namely un-
authorised alteration and creating nuisance were also urged. In September,
G 1981 the application for fixation of standard rent was dismissp iii default
for non-appearance. This dismissal came to be noted by the Advocate only
in the year 1985. However, the appellant had been depositing the interim
standard rent all along.

In defence to the Regular Civil Suit No.384 of 1979, it was urged that
H the payment of standard rent had been made without fail throughout and,
CHASEBRIGHTSTEELLTD. v. SAWANT [MOHA."1,J.J 291

therefore, he was not in arrears. The other grounds namely, unauthorised A
construction and causing nuisance were also denied. The Trial Court
decreed the suit for eviction on account of arrears of rent but not permitted
increases.

Aggrieved by the said order, appeHant filed Civil Appeal
No.452/1983 before the District Judge, Thane. The said appeal was dis- B
missed. Thereafter, the appellant preferred Writ Petition No.5035 of 1985
before the High Court. That was dismissed on 19.2.1987 that the tenant
was not in arrears of rent but had defaulted in payment of permitted
increases. Thus, the present civil appeal.

Mr. Soli J. Sorabjee, learned Senior Counsel for the appellant raised
c
the following points for our consideration.

(i) A valid notice of demand is a condition precedent for the
maintainability of suit for arrears of rent or permitted increase. In
the absence of requisite demand, there can be no question of D
non-compliance. In such a case, the consequences mentioned
)
under Section 12(3) sub-section (3)(a) or (b) will not be attracted.
In support of this submission, reliance is placed on Chiman· Lal v.
Mishri/a~ (1985) 2 SCR 39.

E
(ii) In the present case, the notice of demand dated 27.7.lm does
not mention the period of alleged arrears or the permitted in-
crease. The demand is only for the payment of entire arrears of
rent and not permitted increases.

(iii) Permitted increase, though part of rent, is not payable month- F
ly. It is well settled that education cess ·being payble on a year to
year basis, the rent ceases to be payable every month within Section
12(3)(a) of the Act as laid down in R.K Shetty v. R.P. Shiro/e,
1199111 sec 510.

(iv) The landlord can have no cause of action to recover permitted G
increase until he had paid the permitted increases, Therefore, he
must plead and prove payment of permitted increase. There is no
such pleading in this case. In spite· of this point having been urged
before the lower appellate court as well as the High Court it has
not been dealt with. The High Court has gone wrong in misreading H
I

292 SUPREME COURT REPORTS [1994] 2 S.C.R.

A the provisions of Section 12 of the Act. It has read into it obliga-
tions and conditions which are not statutorily prescribed. It should
have taken note of the following facts:

{a) That the application for standard rent was made in time,

B {a) That the interim rent as fixed by the Court has been paid
regularly throughout the pendency of the suit and the appeal,

{c) That the interim rent fixed was the same as the contractual r
rent.
c Mr. A.M. K.hanwilkar, learned counsel for the respondents in
answering these submissions would urge that it is not correct to state that
there is no valid demand. The notice specifically states as to what exactly
the tenant was liable to pay namely; the rent at Rs. 358.29 7% education
cess Rs.30 for water charges, lJ4% as unemployment charges, lJ4% as tree
D cess. All these total up to Rs.56.50 per month as permitted increases. When
the notice called upon the tenant to pay the entire arrears of rent, all these (
which are part of rent required to be paid. As a matter of fact, the plaint
clearly discloses as to what exactly·was the demand. Therefore, on facts
the ruling of Chiman Lal case (supra) has no application.
E There is no demur to the proposition that the permitted increases,
of
though part rent, is not payable monthly. But, in this case, the plaint
clearly states that the permitted increases were from 1.2.1976 till the date
of filing of suit in 1979. Hence this proposition does not in any way affect
either the claim or the recovery thereof.
F •
The landlord never disputed that the tenant had not paid the
municipal taxes. As a matter of fact, the municipal demands had been
produced in evidence. The High Court had appropriately appreciated the
matter and it warrants no interference.
G -As a proposition of law, it cannot be disputed that there must be a
valid demand for maintainability of suit for arrears of rent or permitted
increases. It has been so laid down in Chiman Lat's case (supra) at pages
,-
43-44.

H In this case, the notice dated 27.7.1977 is as follows:
CHASE BRIGHT STEEL LTD. v. SAWANT [MOHAN,J.] 293

-~
"You have been leased out the entire second second floor. You A
are in occupation of the entire second floor. The month of tenancy
is according to British Calendar Month. You have accommodated
your three officers in the three blocks on the second floor. The
net rent in respect of the said second floor is Rs.358.29. Over and
above the said rent you req1>ire to pay to my client 7% as education
cess, Rs.30 for water charges and lJ4% as unemployment charges
B
and 1/4% as the tree cess. Thus you are supposed to pay to my
client Rs.56.50 per month as permitted increases. You are at
present in arrears of rent from Ferbuary 1976. My client has
demanded the same but you have neglected and failed to pay the
same. You are thus a defaulter. You are not ready and willing to C
pay the rent as and when it becomes due.

You are also called upon to pay the entire arrears of rent on
receipt thereof. Failing compliance of which, my client will be
compelled to go to the court of law for getting their grievances
redressed entirely at your risk as to the costs and consequences D
which· please note."

No doubt, the word 'supposed' in paragraph 3 has been incorrectly
used. But that does not in any way affect the validity of the notice. Besides,
merely because it is stated 'arrears of rent', it does not mean that there is E
no demand for permitted increases since those permitted increases are part
of rent. The plaint in no mistakable terms says as follows:

"The month of the tenancy of the defandant was according to
British Calendar Month. The net rent in respect of the said second
• floor was Rs. 358.29 over and above the said rent the defendant F
was required to pay to these defendant 7% as education cess, Rs.30
for water charges, 1/4% as unemployment charges and 1/4% as
tree cess. These plaintiffs submit that thus the defandant was
required to pay the permitted increases per month amounting to
Rs. 56.90. The defandant was in arrears of permitted increasese G
since February, 1976. These plaintiffs demanded the same time
and again but the defendant has failed to pay the same. The
defendant is, thereby a defaulter."
'
Therefore, this "contention of Mr. Soli J. Sorabjee cannot be ac-
cepted. Factually, the ruling stated as Chiman La/'s case (supra) is distin- H
294 SUPREME COURT REPORTS [1994] 2 S.C.R.

A guishable. In R.K Shetty's case (supra), it is stated at page 581 as under:
"In Maheshwari Mills Ltd., under the terms of the tenancy the
tenant was obliged to pay the municipal taxes and property taxes
in respect of the demised premises. The court took the view that
such payment was by way of rent and since the municipal taxes
B and property taxes were payable on year to year basis, a part of
the rent was admittedly not payable by the month and, therefore,
section 12(3)(a) was not attracted. In Prakash Surya the tenant had
agreed to pay the municipal tax and education cess. The amount t
payable towards these taxes constituted rent and since the same
c was payable at the end of the year the court held that the rent had
ceased to be payable by the month and hence Section 12(3)(a) had
no application."

As rightly urged by Mr. Khanwilkar, learned counsel for the respon-
dent the permitted increased may not be payable monthly; but in the instant
D case, the period, for which the permitted increases are claimed, is between
1.2.1976 till 27.4.79. This is evident from paragraph 6 of the plaint as under:
(

'The cause of action for the purpose of filing of this suit first
arose on or about 1.3.1976, for arrears of permitted increases and
for possession on 1.9.1977 and is being continued respectively from
E time to time till the filing of this suit.'

Therefore, R.K Shetty's case (supra) cannot be pressed into service.

At no point of time, the tenant disputed the payment of municipal
taxes by the landlord. In fact, the evidence is to the following effect:
F
'Permitted increase was amounting to Rs.56.50 since February
1976. I have produced the zerox copy of the notices issued by
Municipality at Ex.13. We demanded the permitted increase to the
defendant. But they failed to pay the same.'
G On 14. 9.1983, the standard rent was fixed at Rs.358 per month and
the permitted increases were fixed at Rs.56 per month. The appellant
continued to pay Rs.358 per month being the standard rent. He did not
pay the permitted increases. The fact that he was depositing throughout
Rs.358 and even during the stage of writ petition, can hardly relieve him
'
H from such an obligation. Under Section 12(3)(a) of the Act, there is an
·.
CHASEBRIGHTSTEELLTD. v. SAWANT [MOHAN,J.) 295
j
obligation to deposit the permitted increases not only during the pendency A
of the standard rent application which in this case has come to be dismissed
for default but even during the pendency of suit for eviction. As rightly
held by the High Court, if this were not to be so, the tenant could claim
protection on its showing that he had within a period of one month from
the date of service of notice of demand under section 12{2) filed an
application for standard rent and that he had obeyed that order; in this B
case the interim standard rent.
,
Accordingly, we hold that there are no merits in this Civil Appeal
which stands dismissed. The tenant shall hand over vacant possession of
the said premises within six months Oii condition that he files the usual C
undertaking within four weeks from the date of this order.

G.N. Appeal dismissed.

'