MUNICIPAL COUNCIL, UDAIPURversusMAHENDRA KUMAR

                          [2008] 5 S.C.R. 552

                                                                                y
A                 MUNICIPAL COUNCIL, UDAIPUR
                                   V.
                          MAHENDRA KUMAR
                   (Civil Appeal No. 2546 of 2004)

                          MARCH 27, 2008
B
       (DR. ARIJIT PASAYAT AND LOKESHWAR SINGH                             >        .'
                        PANTA, JJ.)

         Leave and Licence:
c       Enhancement of licence fee - Shop belonging to
  Municipal Council - Given for 11 months under an agreement
  -After expiry period, notice to occupant offering him to occupy
  premises on higher amount - Suit for perpetual injunction by
  occupant to restrain the owner from enhancing the amount
D and from getting him evicted - HELD: Property being of local
  authority, High Court wrongly considered the agreement to be          .....
  a lease overlooking the provisions of Rajasthan Municipality
  Act, 1959 - Besides, in view of s. 38 of Specific Relief Act, after
  contract is determined, suit for specific performance is not
E maintainable   - In the interest of justice rent enhanced as
  specified in judgment - Rajasthan Municipality Act, 1959 -
  Specific Relief Act, 1963 - s. 38 - Deeds and Documents -
  Interpretation of                                                                 ,_
         The appellant-Municipal Council gave a shop to the
F respondent for 11 months on a monthly payment of
  Rs.175/- under an agreement dat~d 8.11.1980. The                      ),..


  appellant issued a notice dated 6.6.1986 making an offer
  to the respondent to occupy the suit premises on
  payment of Rs.6,000/- per year. The respondent filed a suit,                      f
G inter alia, for perpetual injunction restraining the appellant                    >-
  from enhancing the rent and getting the premises vacated.
  The trial court decreed the suit. The first appellate court
  modified the decree by allowing a one time 10% increase               ~
  of the a'mount, and enhancement, if any, thereafter by
H                               552                                                 \.
                        MUNICIPAL COUNCIL, UDAIPUR v.                 553
                              MAHENDRA KUMAR

               consent of the respondent. The High Court dismissed the      A
               second appeal.
                    In the appeal filed by the Municipal Council, it was
               contended for the appellant that the property being of the
               local authority and the Fajasthan Rent and Premises
               (Control of Rent and !viction) Act, 1950 not being           B
     ~   -4.
               applicable to the suit premises, the High Court erred in
               enlarging the scope of the dispute as to whether the
               agreement was a licence or lease and holding that the
               appellant unilaterally increased the rent.
                    Disposing of the appeals, the Court
                                                                            c
                    HELD: 1.1 The property being of th.e local authority,
               the Rent Control Act did not have any application. The
               High Court considered the agreement to be a lease
               overlooking the fact that under the Rajasthan Municipality D
         _.,   Act, 1959, no lease could be made without following the
-4
               procedure prescribed under the Rules made hereunder.
               [para 13-14] [558-F, G]
                    1.2 It is significant that validity of the notice dated.
               6.6.1986 fixing the rent was not challenged in the suit. The E
               said notice contained a reference and was said to have
               been based on the order No.F5(293)LB/77/2183-2730
               dated 10.8.83 of the Local Self Government which
               permitted fixing of rent in a particular manner. It was not
               the stand of the respondent that the order of the Local F
               Self Government was not binding and/or that the same
         'x    was without any authority; [para 9-1 O] [557-B, G]
                    1.3 It is to be noted that even the original agreement
               in clause 8 permitted the Council to issue such orders
               from time to time in relation to the conditions. Once there G
               is no dispute about the power of enhancement, the
               question of enhancing the rent once by 10% and
         ~'    thereafter to enhance it on consent of both the parties is
               clearly without any foundation. Since the power of
               enhancement has been considered on the basis of clause H
    554      SUPREME COURT REPORTS               [2008] 5 S.C.R.

                                                                    ~
A 8, the question of restraining it to a one-time exercise is
  clearly without any foundation as the clause itself permits               >-
  issue of orders "from time to time". [para 16-17] [559-8,
  C, D, E]
       2. In the background of the scope of Section 38 of
B the Specific Relief Act, the first appellate court and the
  High Court were not justified in granting relief to the          >        •
  respondent. There is no dispute that the plaintiff can
  seek for performance only of an agreement which is
  subsisting. The plaintiff cannot maintain a suit for
c specific performance after the contract is determined.
  [para 12, 17] [559-E, F; 558-8-C]
        Percept O'mark (India) (P) Ltd. v Zaheer Khan and Anr.
    2006 (4) sec 227 - relied on.

D        3. The controversy can be looked at from another
    angle. The agreement was for a period of 11 months. For
    continuance, a fresh agreement was required to be              ,...     Po

    entered into. If no agreement existed between the parties,
    the question of unilateral possession does not arise.
    [para 15, 17] [559-A, D-E]
E
       4. In the normal course, fixation of rent would have
  been left to the authorities; but, considering the long
  passage of time while deciding the question of law,
  interest of justice would be best served if the rent is
F enhanced to Rs.1,000/- from 1.1.2007 and Rs.700/- for
  the previous three years. An agreement on the aforesaid
  terms shall be duly entered into by the parties. [para 17]       )..

  [559-F, G]
       CIVILAPPELLATE JURISDICTION: Civil Appeal No. 2546
G of 2004.
          From the final Judgment and Order dated 03.08.2000 of
    the High Court of Judicature of Rajasthan at Jodhpur in S.B.
    Civil Regular Second Appeal No. 393 of 1999.                   ....-'
                               WITH
H
            MUNICIPAL COUNCIL, UDAIPUR v. MAHENDRA                  555
                  KUMAR [DR ARIJIT PASAYAT, J.]

             Civil Appeal No. 2547 of 2004.                               A
             Sushi! Kumar Jain, Puneet Jain, Sarad Singhania and
        Christi Jain for the Appellant.
             Arun K. Sinha for the Respondent.
             The Judgment of the Court was delivered by                   B
--4.
             DR. ARIJIT PASAYAT, J. 1. Challenge in these appeals
        is to the judgment rendered by a learned Single Judge of the
        Rajasthan High Court in two second appeals. The appeals were
        preferred by the appellant questioning correctness of the
        conclusions arrived at by the Courts below.                       c
            2. Factual position which is almost undisputed in both the
        cases needs to be noted in brief and is as follows:
            3. For the sake of convenience the facts situation in Civil
        Appeal No.2546 of 2004 (Municipal Council, Udaipur v.             D
>
 ...    Mahendra Kumar) is reflected .
            4. The respondent as plaintiff filed a suit against the
        appellant seeking following reliefs:
             "a) That a decree for permanent injunction be passed in
             favour of the plaintiff and against the defendant to the E
             effect that the defendant should recover rent at the rate of
             Rs.175/- (rupees one hundred seventy five) per month
             from the plaintiff fixed before coming into being of the
             relationship of lessee and lessor between the plaintiff and
             the defendant and apart from this not to increase the rent F
,,.._        unilaterally, not to recover the late fee, nor recover the rent
             by increasing the same, nor get the shops vacated forcibly
             from the plaintiff, nor dispossess him from the disputed
             shops nor create any sort of obstacle in his business,
             neither do such acts itself nor through its seNants, agents G
             or any officer nor allow them to do the same."

    I        5. For the purpose of the claim respondent relied on an
    ~   agreement dated 8.11.1980. The agreement had been executed
        describing that it was based on a license and was for a limited
        period of 11 months. According to the appellant the license       H
    556        SUPREME COURT REPORTS                     [2008] 5 S.C.R.
                                  '


A   automatically stood terminated on expiry of the period. Thereafter
    no time was extended by the defendants. Plaintiffs claim that
    the defendants were accepting the rent regularly. By notice dated
    6.6.1986 which was challenged in the suit an offer was made to
    occupy the property on payment of Rs.6,000/- per year. Stand
B ' of the respondent was that he was entitled to occupy the
    premises by payment of rent or license fee of Rs.175/- as
    agreed to in the agreement dated 8.11.1980 and which stood
    terminated by time. The Trial Court decreed the suit. However,
    the First Appellate Court allowed the appeal to enhance once
C by 10% and thereafter to seek the consent of the respondent if
    there was to be any enhancement.
         6. High Court dismissed the second appeal. The order of
    the High Court is challenged in this appeal.
         7. According to the learned counsel for the appellant-
0
  corporation the High Court enlarged the scope of dispute and
  went on to decide as to whether the agreement was a license
  or lease. It is submitted that property was that of the local authority
  and, therefore, Rajasthan Rent and Premises (Control of Rent
E Eviction) Act, 1950 (in short 'Rent Control Act') unilaterally does
  not apply to the facts of the present case. It was pointed out that
  the respondent can be evicted from the suit premises by giving
  notice under Section 106 of the Transfer of Property Act, 1882
  (in short 'TP Act') where the lease did not subsist and the
  respondent had not occupied or continued the same property.
F The High Court and the First Appellate Court erroneously came
  to the conclusion that the appellant again increased the rent
  unilaterally. There was no question of any bilateral agreement
  for fixation of new rent as a person occupying property would
  never agree to enhance and would continue to remain in the
G property for any length of time at a rate fixed years back. The
  conclusion that it can be enhanced once is without any legal
  foundation. It was pointed out that even if it is assumed that the
                                                                            '
  agreement subsists, clauses 3 and 8 permitted the appellant to
  unilaterally alter the conditions by way of orders which have to
                                                                            *
H be complied with by the respondent and for a period of 11
                MUNICIPAL COUNCIL, UDAIPUR v, MAHENDRA                    557
                      KUMAR [DR. ARIJIT PASAYAT, J.]
     --(
            months renew for further fresh term.                                 A
-(

                8. Learned counsel for the respondent on the other hand
            submitted that the respondent is willing to pay at such rate as
            may be fixed in accordance with law.
                  9. At the outset has to be noticed that the validity of the    B
            notice was not challenged in the suit. Notice dated 6.6.1986
            contained a reference to the order No.F5(293)LB/77/2183-2730
            dated 10.8.83 of the Local Self Government which permitted
            fixing of rent in a particular manner. According to the learned
            counsel, the notice for fixing of rent was based on the aforesaid
            order of the Local Self Government of the State.
                                                                                 c
                  10. It was not the stand of the respondent that the order of
            the Local Self Government was not binding and/or that the same
            was without any authority. Clauses 3 and 8 of the agreement
            are also relevant. They read as follows:                             D
      ,._        "3. That the said agreement shall be deemed to have
                 been executed for eleven months and for further renewal
                 the licensee shall have to move an application one month
                 before, which shall be considered by the Council and if
                 found property further renewal shall be made. The shop          E
                 shall be handed over in the same condition in which it has
                 been taken and shall not make any alterations therein nor
                 shall cause any damage."
                 8. That apart from the said conditions in connection with
                                                                                 F
                 this shop the Council shall also issue other orders from time
     '.;(        to time, which shall also be complied with by the licensee."
                 11. The suit was for permanent injunction, in terms of
            Section 38 of the Specific Relief Act, 1963 (for short 'Specific
            Relief Act'). Section 38 reads as under:                         G
                 "38. Perpetual injunction when granted - (1) subject to the
                 other provisions contained in or referred to by this Chapter,
     4           a perpetual injunction may be granted to the plaintiff to
                 prevent the breach of an obligation existing in his favour,
                 whether expressly or by implication.                            H
    558         SUPREME COURT REPORTS                  [2008] 5 S.C.R.


A         (2) When any such obligation arises from contract, the
                                                                                   )•
          court shall be guided by the rules and provisions contained
          in Chapter II.
          (3)      )()()(                 )()()(                 XXX:.'
B      12. An interesting question arises as to whether in the
  absence of the subsisting agreement a decree for specific
  performance can be granted. There is no dispute that the plaintiff
  can seek for performance only an agreement which is subsisting.
  As was noted by this Court in Percept D'mark (India) (P) Ltd. v.
C Zaheer Khan and Anr (2006 (4) SCC 227), the plaintiff cannot
  maintain a suit for specific performance after the contract is
  determined. In the aforesaid case it was noted as follows:

          "60. We have perused the contract in detail. The terms of
          the contract were expressly limited to 3 years from
o         30.10.2000 to 29.10.2003, unless extended by mutual
          agreement, and all obligations and services under the
          contract were to be performed.
          61. Clause 31 (b) was also to operate only during the term
          i.e. from the conclusion of the first negotiation period under
E         clause 31(a) on 29.7.2003 till 29.10.2003. This
          Respondent 1 has scrupulously complied with. So long as
          clause 31 (b) is read as being operative during the term of
          the agreement i.e. during the period from 29.7.2003 till
          29.10.2003, it may be valid and enforceable. However,
F         the moment it is sought to be enforced beyond the term
          and expiry of the agreement, it becomes prima facie void,
          as rightly held by the Division Bench."
         13. It is to be noted that the property being of the local
    authority the Rent Control Act did not have any application.
G
        14. The High Court considered the agreement to be a lease
  overlooking the fact that under the Rajasthan Municipality Act,
  1959 (in short 'Municipal Act') no lease can be made without
                                                                           _...I
  following the procedure prescribed under the Rules made
H hereunder.
                MUNICIPAL COUNCIL, UDAIPUR v MAHENDRA                    559
                      KUMAR [DR. ARIJIT PASAYAT, J.]

---..;          15. The controversy can be looked at from another angle.        A
         For a period of 11 months there was no attempt to modify the
         rent fixed under the contract. On the expiry of the period a fresh
         agreement has to be entered into. That has to be on agreed
         terms. In that view of the matter the question of enhancement of
         rent unilaterally does not arise.                                      B
                16. It is to be noted that even the original agreement in
         clause 8 permitted the Council to issue such orders from time
         to tim.e in relation to the conditions. If the view expressed by the
         First Appellate Court and the High Court is accepted then the
         power to issue orders from time to time in relation to the             C
         conditions becomes redundant. Once there is no dispute about
         the power of enhancement, the question of enhancing the rent
         once by 10% and thereafter to enhance it on consent of both
         the parties is clearly without any foundation.
                                                                                D
               17. In the circumstances it is to be held that the agreement
         was for a period of 11 months. For continuance a fresh
         agreement was required to be entered into. If no agreement
         existed between the parties, the question of unilateral
         possession does not arise. Since the power of enhancement
         has been considered on the basis of clause 8, the question of          E
         restraining it to a one-time exercise is clearly without any
         foundation as the clause itself permits issue of orders "from time
         to time". Additionally, in the background of the scope of Section
         38 of the Specific Relief Act, the First Appellate Court and the
         High Court were not justified in granting relief to the respondent.    F
         In the normal course we would have left fixation of rent to the
         authorities. Considering the long passage of time while deciding
         the question of law, we feel interest of justice would be best
         seNed if the rent is enhanced to Rs.1,000/- from 1.1.2007 and
         Rs. 700/- for the previous three years. The agreement on the           G
         aforesaid terms shall be duly entered into by the parties.
              18. The appeals are accordingly disposed of without any
         order as to costs.
         R.P.                                       Appeals disposed of.        H