Holding

The phrase "agreed rent" under Section 4(2)(b) is to be construed broadly to include any payment for the use of land, irrespective of the tenancy period, so the 1976 agreed rent constitutes the basic rent.

Summary

The landlord, Ishwar Swaroop Sharma, let a shop to Jagmohan Lal on a monthly basis, with the rent increased to Rs 200 in 1976 and documented by an endorsement. In 1989 Sharma applied under Section 4 of the Haryana Urban (Control of Rent and Eviction) Act, 1973 for fixation of fair rent. The Rent Controller fixed Rs 1,000 as fair rent, but the Appellate Authority held that because there was an "agreed rent" of Rs 200, the landlord was entitled only to a percentage increase under Section 4(3), fixing the fair rent at Rs 328. The High Court affirmed this decision. The Supreme Court was asked to decide whether the phrase "rent agreed upon" in Section 4(2)(b) includes monthly tenancies and whether a prior rent agreement, even if not immediately preceding the application, can be taken as the basic rent. The Court held that "agreed rent" must be given a wide meaning to include any payment for use of land, irrespective of the tenancy term, and that no distinction can be drawn between monthly and longer tenancies. Consequently, the 1976 agreed rent was the basic rent, and the appellate authority's decision was upheld. The appeal was dismissed.

Issues considered

Whether the term "rent agreed upon" in Section 4(2)(b) of the Haryana Urban (Control of Rent and Eviction) Act, 1973 includes rent under a monthly tenancy.
Whether a rent agreement entered into prior to the application, but not immediately preceding it, can be treated as the basic rent for fixing fair rent.
Whether a distinction may be drawn between monthly tenancies and longer‑term tenancies for the purpose of Section 4(2)(b).

Legislation cited

Haryana Urban (Control of Rent and Eviction) Act, 1973s. 2(h), s. 4(2)(b), s. 4(3)
Transfer of Property Act, 1882s. 105

Subjects

rent controlfair rentagreed rentmonthly tenancyinterpretation of statutelandlord‑tenantHaryana Urban (Control of Rent and Eviction) Act

Judgment

A
ISHWAR SWAROOP SHARMA
v.
JAGMOHAN LAL

NOVEMBER 24, 2000 B
[S. RAJENDRA BABU AND RUMA PAL, JJ.]

Rent Control and Eviction

Haryana Urban (Control of Rent and Eviction) Act, 1973-Section
c
2(h) and 4-Fixation of fair rent-Rent Controller ftxing fair rent of shop
based on market rate-Appellate authority reftxing the fair rent on the basis
of percentage increase on agreed rent-Decision of appellate authority
affirmed by High Court-Held, since there is a prior agreement for rent, the
agreed rent is the basic rent and landlord entitled only to percentage D
increase and not market rent.

Words and Phrases-'agreed rent'-Meaning of

The Appellant filed an application under Section 4 of the Haryana Urban
(Control of Rent and Eviction) Act 1973, before the Rent Controller, Haryana E
for fixation of fair rent of his shop. The Rent Controller considering the
evidence of similar premises in the locality, determined the fair rent payable
in respect of the shop at Rs. 1,000 per month. The Respondent preferred an
appeal before the Appellate Authority. The Appellate Authority held that the
Appellant having agreed to accept Rs. 200 from the Respondent, was not
entitled to the market rent but to a percentage increase on the agreed rent. F
The Appellate Authority calculated the percentage of increase under Sertion
4(3) of the Act of 1973 and determined the fair rent of the shop to be R~. 328
per month with effect from the date of the application. This decision was
affirmed by the High Court on revision.

In appeal to this Court the Appellant contended that the phrase 'rent G
agreed upon' in Sertion 4 (2) (b) does not cover monthly tenancies, that if
that is the case then no landlord would ever be in a position to avail of the
benefit of the later part of Section 4(2) (b), namely, the determination of basic
rent prevalent in the locality for similar buildings, that since the tenancy in

51
H
52 SUPREME COURT REPORTS [2000) SUPP. 5 S.C.R.

A question was a monthly tenancy, the agreement regarding rent came to an
end with each month, and that when the application was made there was no
'agreed rent' within the meaning of Section 4 (2) (b).

The Respondent contended that the shop had initially been let out to the
Respondent at a monthly rent of Rs. SO, which was increased to Rs. 200 in
B 1976 and an endorsement was made by the tenant on the back of the rent
receipt, that after having mutually increased the rent from 1.1.76 the landlord
was bound to accept and had continued to accept the sum of Rs. 200 and that
this was the rent agreed upon within the meaning of Section 4(2) (b) and this
was the rent paid by the Respondent upto the date when the application under
C Section 4 was made.

Dismissing the Appeal, the Court

HELD : 1. By using the words 'agreed rent' the Legislature intended to
indicate that the word 'rent' must be construed in a wider sense to include,
apart from the narrow connotation, any payment made for use of land where
D the quantum may have been fixed otherwise than by agreement. (55-DI

2. There is no warrant for drawing any distinction between a monthly
tenancy and tenancies for longer periods. Nor is it necessary that the
agreement should have been entered into immediately preceding the date of
E the application. Section 4(2) (b) uses the word 'proceeding' without any
limitation. This may be contrasted with Section 3 where the word 'preceeding'
is qualified by the word 'immediately'. [56-81

3. Even though the agreement may have been entered into in 1976, since
the tenancy was continuing until the date of the application, the Rent
F Controller was obliged to take the rent agreed to in 1976 as the basic rent
under the first limb of Section 4(2)(b). It is only after the fair rent is fixed
that the landlord could seek re-fixation under the second limb subject to the
limitations provided in the Act, as the rent would then cease to be the agreed
rent. (56-DI

G CIVIL APPELLATE JURISDICTION : Civil Appeal No. 6755 of2000.

From the Judgment and Order dated 26.11.99 of the Punjab and Haryana
High Court in C.R.P. No. 5261of1998.

Neeraj Kumar Jain, Anil Khetarpal and Ugra Shankar Pd. for the Appellant.

H H.L. Narula and K.L. Metlla & Co. for the Respondent.
l.S. SHARMA v. JAGMOHAN LAL [RUMA PAL. .I.) 53
The Judgment of the Court was delivered by A
RUMA PAL, J. Leave granted.

This appeal has been preferred from the decision of the High Court of
Punjab and Haryana affirming the order of the Appellate Authority under
Section 4 of the Haryana Urban (Control of Rent and Eviction) Act, 1973 B
(hereinafter referred to as the 'Act') fixing the fair rent of the appellant's shop
L
at Rs. 328 per month w.e.f. 1989.

The shop was constructed in August 1962. The appellant let out the
shop to the respondent in 1975 at a monthly rent of Rs. 200. In 1989, the
appellant filed the application under Section 4 of the Act before the Rent C
Controller. The Rent Controller considering the evidence of similar premises
in the locality, determined the fair rent payable in respect of the shop at
Rs. I 000 per month. The respondent preferred an appeal before the Appellate
Authority. On the construction of Section 4 of the Act, the Appellate Authority
came to the conclusion that the appellant having agreed to accept Rs. 200 D
from the respondent, was not entitled to the market rent but to a percentage
increase on the agreed rent. The Appellate Authority calculated the percentage
of increase under Section 4 (3) of the Act and determined the fair rent of the
shop to be Rs. 328 per month with effect from the date of the application. This
decision was affirmed by the High Court on revision.
E
Section 4 of the Act provides:

Section 4:-Determination of fair rent:

(I) The Controller shall, on application by the tenant or the landlord
of a building or rented land, fix the fair rent for such building or rent F
> land after holding such enquiry as he may think fit. Such fair rent shall
be operative from the date of application.

(2) In fixing the fair rent under this section, the Controller shall first
determine the basic rent which shall be : -
G
(a) in respect of the building the construction whereof was completed
on or before the 3 Jst day of December, 1961, or land let out
before the said date, the rent prevailing in the locality for similar
building or rented land let out to a new tenant during the year,
1962 and I-I
54 SUPREME COURT REPORTS [2000] SUPP. 5 S.C.R.

A (b) in respect of the building the construction whereof is completed
after the 31st day of December, 1961 or land let out after the said
date, the rent agreed upon between the landlord and the tenant
preceding the date of the application, or where no rent has been
agreed upon, the basic rent shall be determined on the basis of
the rent prevailing in the locality for similar building or rented
B land at the date of application,

(3) In fixing the fair rent, the Controller may allow an increase or
decrease on the basic rent determined under sub-section (2) not
exceeding tw~nty five per centum of the rise or fall in the general level
c of prices since the date of agreed rent or the date of application, as
the case may be, in accordance with the average of All India Wholesale
Price Index Numbers, as determined by the Government of India, for
the calendar year immediately preceding the date of application.

(4) ......................... .
D
(5) ......................... "

Under section 4(2)(b) where a building is constructed after December
1961, as in this case, the fair rent is to be fixed on the basis of the rent agreed
upon preceding the date of the application. It is only when there is no such
E agreed rent that the fair rent may be fixed on the basis of the rent payable
in respect of comparable premises.

According to the appellant, the phrase 'rent agreed upon' in Section
4(2) (b) does not cover monthly tenancies. It is submitted that if this were not
so, no landlord would ever be in a position to avail of the benefit of the later
F part of Section 4(2) (b ), namely, the determination of basic rent prevalent in
the locality for similar buildings. It is claimed that since the tenancy in
question was a monthly tenancy, the agreement regarding rent came to an end
with each month. Therefore, when the application was made there was no
'agreed rent' within the meaning of Section 4(2)(b ).
G According to the respondent, the shop had initially been let out to the
respondent at a monthly rent of Rs. 50. This was increased to Rs. 200 in 1976
and an endorsement was made by the tenant on the back of the rent receipt
for October 1976 (Exhibit R-1) to the effect:

H "As mutually agreed, 1 agree to pay rent at the rate of Rs. 200 (two
LS. SHARMA v. .TAGMOHAN LAL [RUMA PAL, J.] 55
hundred) with effect from first of Nov. 1976 i.e. from 1.1.1976". A
Sd/- Sd/-
Ishwar Sarup Sharma Jagmohan"
Advocate

It is contended that after having mutually increased the rent from 1.1. 76 B
the landlord was bound to accept and had continued to accept the sum of
Rs. 200. As such this was the rent agreed upon within the meaning of Section
... 4 (2)(b) and this was the rent paid by the respondent upto the date when the
application under Section 4 was made.

The key to the resolution of the dispute raised lies in the words "rent C
agreed" used in Section 4 (2)(b). In a narrow sense rent is understood as the
payment agreed to be made to the landlord by the tenant in consideration for
the right to use the rented premises. The landlord and the tenant agree that
the tenant will be entitled to occupy and use the demised premises at an
agreed rent. Without an agreement as to the rent payable there no tenancy
is created. This is also how rent is defined in Section I 05 of the Transfer of D
Property Act, 1882. The element of assent is an integral to the concept of rent.
If the word 'rent' is given this narrow meaning then, as urged by the appellant
the latter half of Section 4(2)(b) would indeed be rendered redundant. But the
Legislature has used the word 'agreed' in juxtaposition to 'rent'. If the word
rent is used in the narrow sense the word 'agreed' would be tautologous. We E
cannot assume that the Legislature has used any word without purpose. In
our view, by using the words 'agreed rent' the Legislature intended to indicate
that the word 'rent' must be construed in a wider sense to include, apart from
the narrow connotation, any payment made for use of land where the quantum
may have been fixed otherwise than by agreement. The definition of the word
"tenant" in Section 2(h) of the Act also makes this clear: F
"tenant" means any person by whom or on whose. account rent is
payable for a building or rented land and includes a tenant continuing
in possession after the termination of his tenancy........."

The tenancy being terminated the agreement ceases to operate as a G
voluntary bilateral transaction. With the cesser of the agreed tenancy, the
agreement as to rent would also cease. Nevertheless, under Section 2(h) of
the Act the tenant would be liable statutorily to make payment of 'rent'.
Similarly after fair rent is fixed under Section 4 of the Act, the rent payable
is not the agreed rent. H
56 SUPREME COURT REPORTS (2000] SUPP. 5 S.C.R.

A Therefore for the purpose of determining fair rent Section 4 (2)(b) draws
a distinction between cases where the parties have agreed to the rent and
cases where rent is payable otherwise than by agreement. In the first case,
the agreed rent is to be taken as the base and the increase determined
according to the formula provided in Section 4(3 ). In the second case, the
base is the market rate.
B
There is no warrant for drawing any distinction between a monthly
tenancy and tenancies for longer periods. Nor is it necessary that the agreement
should have been entered into immediately preceding the date of the
applieation. Section 4 (2)(b) uses the word 'preceding' without any' limitation.
C This may be contrasted with Section 3 where the word 'preceding' is qualified
by the word 'immediately'.

For fixing the basic rent under Section 4 the only question would be -
was there a subsisting agreement of tenancy under which rent was payable
when the application for fixation of fair rent was filed? If the answer is in the
D affirmative the agreed rent must be taken as the basic rent. If not, then the
basic rent is the prevailing market rate. Therefore, even though the agreement
may have been entered into in 1976 as is admittedly true in this case, but the
tenancy was continuing until the date of the application, the Rent Controller
was obliged to take the rate agreed to in 1976 as the basic rent under the first
limb of Section 4 (2)(b). It is only after the fair rent is fixed that the landlord
E could seek re-fixation under the second limb subject to the limitations provided
in the Act, as the rent would then cease to be the agreed rent.

For these reasons, we uphold the decision of the High Court and
dismiss the appeal without any order as to costs.

VM. Appeals dismissed.