Holding

Government companies are deemed Public Sector Undertakings and are excluded from the protection of the Maharashtra Rent Control Act, 1999 under Section 3(1)(b).

Summary

The landlords sought eviction of Oriental Insurance Company Ltd. (OIC) from premises in Thane, arguing that OIC, a Government company under Section 617 of the Companies Act, 1956, was exempt from protection under Section 3(1)(b) of the Maharashtra Rent Control Act, 1999. The High Court held that Government companies were not "PSUs" and thus were protected, but the Supreme Court reversed this, holding that Government companies are a class of Public Sector Undertakings (PSUs) and therefore fall within the exemption clause of Section 3(1)(b). Applying the principle of noscitur a sociis and a rational‑nexus test, the Court found the legislative intent was to exclude cash‑rich entities, including Government companies, from rent‑control protection. Consequently, OIC, United India Insurance and Bharat Petroleum were ordered to vacate, and the appeals were allowed.

Issues considered

Whether a Government company, as defined under Section 617 of the Companies Act, 1956, falls within the expression "any public sector undertakings" in Section 3(1)(b) of the Maharashtra Rent Control Act, 1999.
Whether the exclusion of Government companies from the protection of the Rent Act violates Article 14 of the Constitution.
Interpretation of the term "PSU" in the context of the Rent Act – literal, purposive and noscitur a sociis approaches.

Legislation cited

Companies Act, 1956s. 2(10), s. 3, s. 616, s. 617
Maharashtra Rent Control Act, 1999s. 2, s. 3(1)(a), s. 3(1)(b)

Subjects

Public Sector UndertakingGovernment CompanyMaharashtra Rent Control ActSection 3(1)(b) exemptionArticle 14noscitur a sociisrent controlevictionstatutory interpretation

Judgment

(2008] 12 S.C.R. 248
""'
~

~~
A SMT. LEELABAI GAJANAN PANSARE & ORS.
v.
THE ORIENTAL INSURANCE CO. LTD. & ORS.
(Civil Appeal No. 5136 of 2008 etc.)

AUGUST 20, 2008
B
[5.H. KAPADIA AND 8. SUDERSHAN REDDY, JJ.]
~--
Maharashtra Rent Control Act, 1999 - s. 3 (1) (b) - Ex-
emption from protection under the Act - To Government Com-
c pany as defined u/s. 617 of Companies Act - Held: govern-
ment Company falls within the meaning of 'Public Sector Un-
dertakings ('PSUs') - Hence not entitled to protection under
·the Act in view of the exemption provision - Exclusion of Gov-
ernment Company from the meaning of 'PSUs' and inclusion

-
of the Corporations established- under Central/State Statute
D
alone, would make the provision violative of Article 14 of the
Constitution - By application of the principle of noscittur a
i
sociis, the provision applies to different categories of tenants
having financial capability to pay the rent - Such differentia
has a rational nexus to the object sought to be achieved by
E the Statute - Constitution of India, 1950 - Article 14 - Com-
panies Act, 1956 - s. 617.
Interpretation of Statutes - Definition of an expression in
one Act must not be imported to .another Act, unless the same
F is incorporated or referred to in the latter.
Doctrines/Principles - Principle of noscittur a sociis -
·t-
Applicability of
Words and Phrases - 'Public Sector Undertakings' -
Meaning of in the context of s. 3 (10) (b) of Maharashtra Rent ;.
G
control Act, 1999. •
t- ,,_
The question for consideration in the present ap-
pea1s is whether a Government Company, as defined un-
der s. 617 of Companies Act, falls within the compendi-
H 248
-(

(
SMT. LEELABAI GAJANAN PANSARE & ORS. v. 249
THE ORIENTAL INSU. CO. LTD. & ORS.
'-f
ous expression "any public sector undertakings or Cor- A
poration established by or under any Central or State Act"
in s. 3 (1) (b) of Maharashtra Rent Control Act, 1999.
Disposing of the appeals, the Court
HELD: 1. Government companies as defined under B
•, f.
Section 617 of the Companies Act are not entitled to pro-
tection of the Maharashtra Rent Control Act, 1999 in view
of the provisions of Section 3(1)(b). The view of the High
Court that Government companies stand excluded from
PSU under Section 3(1)(b) of Maharashtra Rent Control c
Act, 1999, as Government companies are separate and
distinct entities from PSUs and since Government Com-
pany is not in the enumerated items in Section 3(1 )(b) one
cannot include the said entity within the meaning of the
word PSU is erroneous. The word PSU is not defined
D
under any Act. It is indicated in various Parliamentary
y Committees on Administrative Reforms so that in finan-
cial, employment and in policy matters, the Central/ State
Government could evolve norms/standards. It is the pub-
lie character of the functions of the undertaking which
makes it a PSU. However, there is no conclusive test for E
determining the status of an undertaking as a PSU. In judg-
ing the character of an entity, the court has to keep in mind
the context in which the word PSU is used in a given en-
actment. There are a number of tests which could be ap-
plied in judging the character of an entity, namely, the test F
~r
of origin, the test of agency or instrumentality of the State,
the functional test, the monopolistic status of an entity,
test concerning areas of operations, the test of econo-
mies of scale, the test of control, the role of the entity in
the priority sector etc. Therefore, there is no one conclu- G
..., ..J. sive test applicable to decide the character of an entity.
Government companies under Section 617 of Companies
Act, 1956 are understood by the Legislature to be a part
of PSUs. [Paras 42 and 49] [303,E; 296,A-F, 296,G]
H
250 SUPREME COURT REPORTS [2008] 12 S.C.R.

A Som Prakash Rekhi v. Union of India and Anr. 1981 (1)
*-'
SCC449 - relied on.
"Growth of Trade, Commerce and PSUs" by Shri Suresh
Prasad Padhy; "Public Enterprise in Theory and Practice" by
Bishwa Nath Singh- referred to.
B
2. On a plain meaning of the words 'PSUs' as under-
stood by the Legislature, it is clear that, India's PSUs are v
in the form of statutory corporations, public sector com- ~---

panies, Government companies and companies in which
c the public are substantially interested. When the word PSU
is mentioned in Section 3(1 )(b), the State Legislature is r-
presumed to know the recommendations of the various I
Parliamentary Committees on PSUs. [Para 47] [301,B-C]
3. It is wrong to say that only those PSUs which are
D established by or under any Central or State Act alone ->
stand excluded from the protection of the Rent Act and .-
the PSUs which are Government companies incorporated + l-

un_der Section 617 of Companies Act are entitled to the
protection as they are not expressly excluded under Sec-
'
)..-
\=
E tion 3(1 )(b) of the Rent Control Act. Several entities have
been enumerated in Section 3(1}{b}, namely, banks, PSUs
or statutory corporations, foreign missions, international r
agencies, multinational companies and private limited and
public limited companies having a paid up share capital I

r
F of Rs. 1,00,00,000 or more. The Act has brought about
structural changes in the legislation. In this case, it was Jc'-
open to the legislature to opt for any of the tests, namely,
test of origin, test of public character of the functions per- r
formed by each of these entities, test of public character
of each of the undertakings, test of agency or instrumen- •,
G
tality; test of monopolistic status, test of mobilization of
resources etc. In the present case, the legislature has f- -4 I

opted for an economic criteria, namely, entities which are
in a position to pay rent at market rates are to stand ex-
•
eluded from Rent Act protection. This is the test of Finan- ,.___
H
SMT. LEELABAI GAJANAN PANSARE & ORS. v. 251
THE ORIENTAL INSU. CO. LTD. & ORS.
'-f.
cial Capability. This is the golden thread which runs A
through Section 3(1 )(a). This criteria has been selected
by the legislature knowing fully well that each of these
entities including PSUs can afford to pay rent at the mar-
ket rates. In the present case, the principle of noscittur a
sociis is clearly applicable. According to this principle, B
. _.., when two or more words which are susceptible to analo-
gous meaning are coupled together, the words can take.
their colour from each other. Applying this test, it is held
that Section 3(1 )(b) clearly applies to different categories
of tenants all of whom are capable of paying rent at the c
market rates. [Paras 46 and 47] [299,C-G; 300,A-B, 301,D,E]
4. If Government companies are to be excluded from
Section 3(1 )(b) then the test of intelligible differentia hav-
ing rational nexus to the objects sought to be achieved
by the Rent Act would stand defeated. It would make Sec- D
) tion 3(1 )(b) vulnerable to challenge as violative of Article
+ 14 of the Constitution. To meet the challenge of discrimi-
nation under Article 14 it is not sufficient to state that there
is an intelligible differentia but it is further essential require-
ment to show that the differentia has a rational nexus to E
the objecf sought to be achieved by the Statute in ques-
tion. [Paras 46 and 47] [302,E; 300,C; 301,H; 302,A]
Shah and Co. v. State of Maharashtra 1967 (3) SCR 466
- relied on.
-Y- F
State of Rajasthan v. Mukanchand and ors. 1964 (6) SCR
903 - referred to.
5. Section 3(1 )(b) strikes a balance between the inter-
est of the landlords and the tenants; it is neither pro-land-
lords nor anti-tenants. It is pro-public interest. In this con- G
. -I nection, one must keep in mind the fact that the said Rent
Act, 1999 involves a structural change vis-a-vis the Bombay
Rent Act, 1947. To accept the interpretation advanced on
behalf of the respondents for excluding Government com-
panies from the meaning of the words "PSUs" in Section H
I-
I

252 SUPREME COURT REPORTS [2008] 12 S.C.R.

A 3(1 )(b) would amount to disturbing the neat balance struck
by the Legislature. [Para 47] [302,A-B; 302,C-D]
6. Th~ High Court judgment is erroneous when it ....
adds words to Sectio_n 3(1)(b), namely, "which is not a I

Government company". High Court has relied upon the I
''
B definition of Government Company under Section 617 of I
the Companies Act. The definition of an expression in one .y I!
Act must not be imported into another. It would be a new
terror in the construction of Acts if the Court is required
to limit a word to an unnatural sense because in some
C Act which is not incorporated or referred to such an in-
terpretation is given to it for the purposes of that Act alone.
The interpretation placed by the High Court on the word
"PS Us" in Section 3(1 )(b) amounts to judicial legislation
and further it defeats the very object of Section 3(1 )(b). I

D [Para 47] [302,G-H; 303,A-C] ~
'
Union of India and Ors. v. R:C. Jain and Ors. 1981 (2)
sec 308 - relied on.
7. If it is hel~ that PS Us do not include Government
E companies, it would be disturbing the package offered
by the Legislature of allowing increase of rent annually at
5%, allowing the landlords to accept premium and exclu-
sion of certain entities from the protection of the Rent Act
under Section 3(1)(b). [Para 47] [300,H; 301,A]
F 8. PSUs including Government Companies are inde-
pendent companies/corporations. They cannot be
equated. to the "Government" in Section 3(1 )(a). Section
3(1)(b) has to be read, in its entirety. The said Section has
to be read, keeping in mind the reasons for its enactment.
G [Para 47] [302,F-G]
Case Law Reference
·1981(1) SCC449 Relied on. 42
1967 (3) SCR 466 Relied on. 46
H
SMT. LEELABAI GAJANAN PANSARE & ORS. v. 253
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]

1964 (6) SCR 903 Referred to. 4 7 A
1981 (2) SCC 308 Relied on. 47
CIVILAPPELLATE JURISDICTION : Civil Appeal No. 5136
of 2008
From the Final Judgment and Order dated 20.12.2006 of B
,,_ f the High Court of Judicature at Bombay in First Appeal No. 1245
of 2004
~· WITH
C.A. Nos. 5137-39 of 2008 c
Parag Tripathi, ASG., Shyam Divan R.F. Nariman, Dr.
Rajeev Dhavan, Sudhir Chandra and Soli J. Sorabjee, Gaurav
Agrawal, Percy Gandy, Kaiwan Kalyaniwala, Debmalya
Banerjee, Sonia Nigam, Nandini Gore, Manik Karanjawala,
Parijit Sinha, Reshmi Rea Singh, S.C. Ghosh, Snehashish
0
Mukherjee, Mrinakl~nti Mandal, Vishnu Mehra, Kuna!, Sakshi
Mittal, Promod Dayal, Nikunj Dayal, Anantbhushan Kanade,
Yadunath Chaudhary, Gargi Shinde, D.B. Vohra, P.K. Seth,
Pankaj Seth, Manjit Chawla, Nooruddin Dhilla, E.C. Agrawala,
Mahesh Agarwal, Rishi Agrawala, Gaurav Goel, Amit Kumar E
Sharma and Gaurav Agrawal for the Appearing Parties.
The Judgment of the Court was delivered by
S. H. KAPADIA, J.
F
-'f Civil Appeals arising out of S.L.P.(C) Nos. 5855107 and
S.LP. (C) No. 16237108:
1. Leave granted.
2. Applications for interventions are allowed.
G
_, 3. An important question of law regarding interpretation of
Section 3(1)(b) of the Maharashtra Rent Control Act, 1999 is
involved in the present appeal, namely:-
"'JYhether a Government Company falls within the H
254 SUPREME COURT REPORTS [2008] 12 S.C.R.
,.\-

A compendious expression "any public sector undertakings
or corporation established by or under any Central or State
Act" in Section 3( 1)(b) of the Maharashtra Rent Control
Act, 1999 ("Rent Act" in short)."
4. For the sake of convenience we may state the facts of
B the case in SLP(C) No. 5855/07 in the case of Leelabai Gajanan
·'t-""'
Pansare & Ors. v. Oriental Insurance Company Ltd. & Ors.
~

Facts:
5. Appellants-landlords had let out the suit-premises ad-
c measuring 3214 sq. ft. (approx.) in Thane to Oriental Insurance ~
Company Ltd. ("OIC" for short). The rent was Rs. 10,000/- per
month. Vide notice dated 15.4.2002 under Section 106 of the
Transfer of Property Act, appellant terminated the tenancy of
the said Company. On failure of OIC to vacate the premises,
D they instituted a suit for eviction. OIC took the plea that it is not <1
covered under Section 3( 1)(b) of the Rent Act as it was "a pro- +
tected tenant" under the said Rent Act, 1999 and, therefore,
could not be evicted. In the said suit, the landlord pleaded that Ii.--
OIC is a Public Sector Undertaking and/or Corporation having
f.
E a total paid up share capital of more than Rs. 1,00,00,000. ~

6. OIC resisted the suit by filing its written statement inter
alia contending that it is neither a PSU nor a Corporation; that it
was not exempted under Section 3(1 )(b) of the Rent Act; that it
was neither a bank nor a PSU, nor a foreign mission, nor MNC
F and nor ~a public limited company having paid up share capital -Y-
of more than Rs. 1,00,00,000. According to OIC, it was a Gov-
ernment company carrying on its own insurance business and
that the premises let to it stood fully protected by the provisions
of the Rent Act as they did not fall in any of the categories men-
G tioned in Section 3(1 )(b) of the said Rent Act.
!-- ...
7. By Judgment and Order dated 9,7.2004 in Special Civil -~

Suit No. 202/03 the trial court held that OIC is a Government
company under Section 617 of the 1956 Act over wh.ich the
GOI has overall control qua insurance business. The trial court
H
SMT. LEELABAI GAJANAN PANSARE & ORS. v. 255
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]

further held that OIC stood established as a subsidiary of GIC A
.... ~
that came into existence in 1972 pursuant to nationalization of
General Insurance. According to the trial court si~ce OIC is a
·., Government company under Sectio·n 617 of the 1956 Act and
since GOI has overall control over its functioning, it is entitled to
protection from eviction by the landlords under Section 3(1 )(a) B
which gives protection to premises let to the Government or
local authority or to premises taken on behalf of the Govern-
t + ment. In other words, according to the trial court, since GOI ex-
ercises deep and pervasive control over the respondent com-
pany herein, the said premises occupied by it were entitled to c
protection under the second part of Section 3(1 )(a). According
to the said Judgment and Order dated 9.7.2004 the said suit
stood dismissed by the trial court.
8. Aggrieved by the dismissal of the suit by the trial court,
appellants herein preferred an appeal being FA No. 1245/04. D
By the impugned judgment dated 20.12.2006, the Bombay High
Court held that exempted premises under Section 3(1)(b) of
~
the Rent Act, 1999 are PSUs but not Government Companies
incorporated under the Companies Act, 1956. It was further held
that a Government Company stands in a different category and E
by the very absence of the words "Government Company" in
Section 3(1 )(b) it is clear that the Legislature did not intend their
exemption from the protection under the said Rent Act, 1999
consequently, the High Court dismissed FA No. 1245/04 filed
by the appellants. Hence, this civil appeal. F
Contentions:
-)'-
9. The basic ground of challenge in this civil appeal that
the High Court having held that OIC is the PSU had erred in
holding that a Government Company stood under a separate
G
category which is absent in Section 3(1 )(b) ·and thus continues
to enjoy protection of the said Rent Act. According to the appel-
~ lants, this amounts to judicial legislation by the High Court as
the High Court has read into Section 3(1 )(b) the words, namely,
"except Government companies". According to the appellants,
H
256 SUPREME COURT REPORTS [2008] 12 S.C.R.

A by such exclusion of Government companies from the PSUs,
the High Court has excluded a large number of PS Us from the
purview of Section 3(1 )(b), whic::h is not the intention of the Leg-
islature. This, according to the appellants, is contrary to the leg-
islative policy and such interpretation defeats the very purpose
s of Section 3(1)(b) of the Rent Act. According to the appellants,
in the· alternative, in any event, OIC is a public limited company
having a paid up share capital of rupees more than one crore
and, therefore, in any event, the said company would_ fall in the
second part of Section 3(1)(b) which denies to such public lim-
e ited companies the protection of the said Rent Act, 1999.
10. Shri Shyam Divan, learned senior counsel appearing
on behalf of the appellants submitted .that the concept of a "Gov-
ernment Company" is alien to the scheme of Section 3(1 )(b).
The legislature, according to the learned counsel, has not used
D the expression "Government Company" anywhere in Section
3(1)(b). There was no justification, according to the learned
counsel, for the High Court to introduce the concept of Govern-
ment Gompany when the legislature has not adverted to the
said expression. According to the learned counsel, by import-
E ing the concept of "Government Company" in Section 3(1)(b),
the High Court has resorted to judicial legislation, which is not
permissible. According to the learned counsel, it is the function
of the legislature to decide upon the entities to which Rent Act
protection should be extended to and conversely the entities
F that may be excluded from such protection. According to the
learned counsel, in enacting Section 3(1)(b), the legislature has
clearly indicated that premises let to PSUs and Public Limited
Companies having a paid up capital of Rs. 1,00,00,000 or more
would not be entitled to protection of the Rent Act, 1999. How-
G ever, the legislature did not include in Section 3( 1)(b) "holding
company", "subsidiary company", "sick industrial company" etc.,
all of which are concepts like "Government Company" that are
specifically defined in the 1956 Act. Instead, the legislature
employed the concept of Private Limited Companies and Pub-
lic Limited Companies having a paid up share capital of Rs.
H
SMT. LEELABAI GAJANAN PANSARE & ORS. v. 257
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]

')- 1,00,00,000 or more. It was submitted that although holding A
company or subsidiary company or sick industrial company are
not expressly mentioned in Section 3(1 )(b), it is not open to
such entities to claim that since none of these specific expres-
sions abovementioned are used in Section 3(1)(b), they are
entitled to Rent Act protection. According to the learned coun- 8
sel, a Holding company or Subsidiary company or Sick indus-
trial company is an addition to a public limited or private limited
t +
company having a paid up share capital of more than Rs.
1,00,00,000. According to the learned counsel, the concept of
holding company, subsidiary company or a sick industrial com- c
pany are additional characteristics.

11. Learned counsel next contended that Oriental Insur-
ance Company (OIC), United India Insurance Company(UIC)
as well as Bharat Petroleum Corporation Ltd. (BPCL) answers
the description of a "PSU", which is understood in several stat- D
utes to include a Government Company under Section 617 of
the 1956 Act. Therefore, according to the learned counsel, there
+ is no reason why the expression PSUs as used in Section
3(1)(b) should be read to exclude OIC which is a Government
Company where 100% of the shares are held by the Central E
Government.

12. On literal interpretation of Section 3(1 )(b), learned
counsel submitted that the expression "or any PSUs" as used ,/

in Section 3(1 )(b) is a separate stand-alone category like, banks,
foreign missions, international agencies etc .. The said expres- F
- )' sion is separated from the rest of the provision by the word 'or"
which is disjunctive and giving a natural meaning to the said
word separates PS Us from the next expression relating to statu-
tory Corporations. Therefore, according to the learned coun-
sel, there is no reason why the expression 'any PSUs" should G
be restricted to statutory corporations, particularly when the dis-
junctive word "or" separates the two phrases in Section 3(1 )(b).
In this connection, learned counsel submitted that the word PSU
is not specifically defined in the Rent Act. It is not defined in the
1956 Act. Learned counsel submitted that under Rules of Pro- H
258 SUPREME COURT REPORTS [2008] 12 S.C.R.

A cedure and Conduct of Business in Lok Sabha under Chapter
XXVI there is reference to Constitution of Parliamentary Com-
mittees. Rule 312A refers to functions of "Committee on PS Us"
specified in the Fourth Schedule. Item 5 of Part I of the Fourth
Schedule (List of Public Undertakings) refers to the Life lns·ur-
B ance Corporation of India (LIC) whereas Part II of the same
· Schedule refers to Public Undertakings which are Government
Companies under the 1956 Act. That, every Government Com-
pany whose annual report is placed before Parliament under
Section 619Aofthe 1956Actfalls in part II of the Fourth Sched-
C ule which refers to List of Public Undertakings. Accordin'g to the
learned counsel, OIC, UIC and BPCL are Government Compa-
nies, therefore, they fall in Part II of the Fourth Schedule to the
Rules of Proced.ure and Conduct of Business in the Lok Sabha.
Learned counsel further pointed out that even, according to the
annual reports/financial statements of OIC, the said undertak-
0
ing is a PSU.- Learned counsel submitted that the above Busi-
ness Rules indicate Legislative Understanding of the word PSU
to include Government Companies.
+
13. On the question of purposive interpretation, learned
E counsel submitted that in Malpe Vishwanath Acharya and ors.
v. State of Maharashtra and anr. (1998) 2 SCC 1 the Supreme
Court held that the provisions of the Bombay Rents, Hotel and
lodging House Rates Control Act, 1947 ("1947 Act") relating to
the determination and fixation of standard rent on account of
F inflation and price rise could no longer be considered to be
reasonable and, therefore, provisions in the Bombay Rent Act,
namely, Section 5(10), 18 and 19 dealing with the definitions of
"standard rent" and prohibition and receipt of premium were
liable to be struck down as unreasonable and arbitrary. Learned
G counsel submitted that following the said judgment of this Court
a Joint Committee was constituted by the Maharashtra Legis-
lature to evolve a package which was done and which consisted
of nominal increase in the standard rent, legalization of receipt
of premium by the landlords which was earlier prohibited under
the 1947 Act and the expansion of Section 3(1)(b) by which
H
SMT. LEELABAI GAJANAN PANSARE & ORS. v. 259
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]

'- j entities enumerated therein were to loose protection of the said A
Rent Act. According to the learned counsel, but for the said pack-
age the above provisions of the 1947 Act were liable to be struck
down. In the circumstance, learned counsel submitted that the
legislative scheme adopted by the legislature to protect the Rent
Act from the vice that was recognized in the case of Malpe B
Vishwanath Acharya (supra) hinges upon Section 3(1)(b) be-
ing interpreted in a fair manper. According to the learned coun-
f· -t
sel, should the scope of Section 3(1 )(b) be restricted by ex-
eluding Government companies as done by the impugned judg-
ment of the High Court then the larger objective of the legisla-
.. tu re would stand defeated and the standard rent provisions un- c
~

der the Rent Act (1999 Act) would be rendered vulnerable. Ac-
cording to the learned counsel, the golden thread which runs
through Section 3(1 )(b) of the Rent Act is the economic criteria.
In this connection, learned counsel submitted that each of the
D
entities mentioned in Section 3(1 )(b) are cash-rich entities.
These entities are tenants paying rent to the landlords. These
)
entities, according to the learned counsel, are excluded from
....
the Rent Act protection, particularly when with the passage of
time, the landlords were not able to maintain their property and,
consequently, these properties became dilapidated for want of E
maintenance on account of poor return on their investments and
on account of increase in taxes and price rise. According to the
learned counsel, the Report of the Joint Committee indicates
that it had taken into account all the above factors, including the
judgment of this Court in Malpe Vishwanath Acharya (supra) F
and, accordingly, gave a package of the above three items enu-
-l merated above including Section 3(1)(b) so that maximum num-
ber of poor tenants would continue to get protection with· the
exclusion of those tenants who have the paying capacity. There-
fore, according to the learned counsel, when PSUs, as under- G
stood by Parliament, the Reporting Ministry and the Comptrol-
-1
ler and Auditor-General have understood PSUs to include Gov-
ernment Companies and Statutory Corporations then this Court
must give a plain, simple and clear meaning to the words PS Us
in Section 3(1 )(b) in order to avoid any challenge to the said H
260 SUPREME COURT REPORTS [2008] 12 S.C.R.

A sub-section on the ground of invidious classification having no
rational nexus with the objects sought to be achieved. Accord-
ing to the learned counsel, if the said expression "PS Us" in the
said sub-section is confined to statutory corporations and if
PSUs and statutory corporations are classified under one dis-
8 tinct category, as contended on behalf of the respondents, then
the consequence would be that in the Insurance Industry, OIC
and UIC (Government companies) would get protection of the
Rent Act, 1999 whereas UC, which is a statutory corporation,
would stand excluded from such protection. It is this type of ar-
c bitrary discrimination which needs to be avoided in interpreting
Section 3(1 )(a). According to the learned counsel, therefore,
one needs to give the meaning to the words PSUs as under-
stood by the Committee on Public Undertakings, the Reporting
Ministry and by the Comptroller and Auditor-General and if so
read, all the three entities herein, namely, IOC/UIC/BPCL would
0
come within the meaning of expression PS Us in Section 3(1 )(b)
of the Rent Act. Therefore, according to the learned counsel,
the impugned judgment needs to be set aside. <

14. Shri R.F. Nariman, learned senior counsel appearing
E on behalf of the The Hongkong & Shanghai Banking Corpora-
tion Ltd. submitted that Section 3(1) of the said Rent Act must
be read as a whole in order to understand the meaning and
purport of the said section. According to the learned counsel,
the rationale behind under Section 3(1 )(a) in providing that the
F tenants of Government or a local authority will not have the pro-
tection of the Rent Act, whilst providing that the Government or
local authority in its capacity as a tenant will have the protection
of the Rent Act is that Government or a local authority performs
sovereign and governmental functions. In other words, learned
G counsel urged that Government or a local authority is covered
by the ambit of Section 3(1 )(a) as long as it does not enter the
arena of commercial activity. Learned counsel next submitted
that the concept of a "Government Company" is not a part of
Section 3(1 )(a). According to the learned counsel, the said sub-
section 3(1 )(a) is bodily lifted from Section 4(1) of Bombay Rent
H
SMT. LEELABAI GAJANAN PANSARE & ORS. v. 261
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]

'-f Act, 1947. That Act was a temporary enactment. According to A
the learned counsel, the absence of the words "Government
Company" in sub-section 3(1 )(a) and the presence of the ex-
pression "any PS Us" in Section 3(1 )(b) leads to the inevitable
conclusion that Government Companies were not entitled to
receive the protection of the said Rent Act. According to the B
learned counsel, banks, PSUs, statutory corporations and pri-

. t
vate and public limited companies mentioned in Section 3(1)(b)
+
are in the commercial sector and, therefore, they will not have
the protection of the Rent Act when they are the tenants. Ac-
cording to the learned counsel, the object of the said Rent Act c
is to extend protection of the said Rent Act to tenants who are
Government, local authorities and those who are not affluent
and who do not have the capacity to pay market rent. On the
point of literal interpretation, learned counsel submitted _that on
a plain reading of Section 3(1 )(b) it would be clear that PS Us
D
and statutory corporations fall in two separate and distinct cat-
egories/classes of tenants who are not entitled to the protec-
> ,.._ tion of the said Rent Act. In this connection, learned counsel
placed heavy reliance on the word "or" occurring in Section
3(1 )(b) after the word Banks and before the words "any corpo-
ration established by or under any Central or State Act". Learned E
counsel submitted that the word "or'' indicated the PSUs are
disjunctive and form a separate category by themselves. In this
connection, learned counsel further submitted that to interpret
"PS Us" to mean statutory corporations alone would lead to tau-
tology as it would make the said words superfluous and, there- F
fore, it was submitted that the expression "PSUs" must be read
~
to mean all PS Us, namely, statutory corporations, public sector
companies, Government companies etc .. Learned counsel sub-
mitted that the legislature has used the words PSUs in plural
deliberately as it desired statutory corporations, public sector G
companies and Government companies etc. to fall as part of
the genus, namely, PSU. Therefore, according to the learned
counsel, PSU is the genus whereas Government companies,
statutory corporations and public sector companies etc. are spe-
cies. H
262 SUPRE_ME COURT REPORTS [2008] 12 S.C.R.

A 15. Learned counsel next submitted that Section 3(1 )(b)
_\_,.
applies to any corporation established by or 1.mder any Central
or State Act; that, a "corporation" would include a company; that
such corporation does not have to be established by a Central
or State Act. It can also be estabiished under a Central or State
B Act, for example, GIG is established under General Insurance
Business Nationalisation Act, 1972 as a Government Company.
Therefore, according to the learned counsel, if Section 3(1 )(b)
is read in the manner suggested by the respondent the words +--,..
PS Us in Section 3(1 )(b) would be wholly redundant as there,
(
c would be no undertakings left apart from the statutory corpora-
tions established by or under any Central or State Act because
the expression "or under" subsumes all forms of corporations
so established. Learned counsel further submitted that Section
16 of General Insurance Business (Nationalisation) Act, 1972,
in particular sub-section (2), shows that four companies, includ-
D
ing OIC and UIC, render combined services of general insur-
ance business all over India. According to the learned counsel,
all the said four- companies are the Government Companies
_..
<
which even on the narrow interpretation placed by the respon-
dent, are corporations established under the Nationalisation Act.
E Therefore, learned counsel submitted that "PSUs" should be
read in the widest possible term so as to include within it every
kind of establishments through which the Government would do
business. Therefore, according to the learned counsel, PSUs
would encompass Government companies, statutory corpora-
F tions, public sector companies etc. through which the Govern-
ment is doing business. Reliance was placed on various stat-
·~
utes which have defined PSUs to include Government compa-
nies. One such statute is "Building and Other Construction
Workers (Regulation of Employment and Conditions of Service)
G Act, 1996" which defines PS Us under Section 2(1 )(a)(ii) as any
corporation established by or under any Central or State Act or
a.Government Company as defined in Section 617 of the said
~-
1956 Act, which is owned, controlled or managed by the Cen-
tral Government. Learned counsel pointed out further that LIC
H is a statutory corporation established under the LIC Act 1956;
SMT. LEELABAI GAJANAN PANSARE & ORS. v. 263
'-., THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]

that Sections 21, 27, 28, 28(A) and 38 of the said LIC Act show A
that LIC is under the control of the Central Government and not
Parliament. It is further pointed out that under Section 6(2)(g)
and (h), LIC is entitled to run business other than the business
of life insurance in certain circumstances. Therefore, accord-

._.
ing to the learned counsel, LIC could in given circumstances B
run the business of general insurance. What is pointed out by
the learned counsel is that various anomalies would arise if this
Court was to accept the interpretation placed on Section 3(1 )(b)
of the said Rent Act. According to the learned counsel, in terms
of Section 3(1)(b) LIC is not different from GIC, which is a Gov- c
ernment company established under a Central Act, or from other
four nationalized insurance companies including OIC and UIC.
All the said companies are doing the business of insurance,
namely, LIC is in the business of life insurance whilst the others
are in the business of general insurance. All the said insurance
D
companies, according to the learned counsel, are mammoth
undertakings having a paid up share capital ·in excess of Rs .
. 1,00,00,000. Therefore, learned counsel submitted that if the
interpretation of Section 3(1)(b) given by the respondent(s)
herein is accepted it would mean extension of protection of the
said Rent Act to the four insurance companies including, OIC E
and UIC, while not extending such protection to LIC and GIC,
which interpretation would run foul of Article 14 of the Constitu-
lion. Learned counsel submitted that any interpretation of Sec-
tion 3(1 )(b) must be such as would uphold its constitutional va-
~-t lidity and, therefore, the four insurance companies, namely, OIC, F
UIC, New India Assurance Company and National Insurance
Company must also not be entitled to the protection of the said
Rent Act.
16. Learned counsel submitted that while interpreting Sec-
G
tion 3(1 )(b) the principle of noscittur a sociis must be adopted
which would mean that Section 3(1)(b) applies to different cat-
egories of tenants all of whom can afford to pay at the market
rate. According to the learned counsel, all the different kinds of
tenants enumerated in Section 3(1 )(b) are financially giants,
H
264 SUPREME COURT REPORTS [2008) 12 S.C.R.

t;

A namely, PSUs, statutory corporations, banks, multinational com-
panies, international agencies, private or public limited com-
panies with a paid up share capital of Rs. 1,00,00,000 or more
etc. These tenants, according to the learned counsel, do not
require the protection of the Rent Act. Learned counsel next
B submitted that in any event OIC and UIC are public limited com-
panies having a paid up share capital of more than Rs.
~ '
1,00,00,000 and, therefore, stand excluded from the protection
of the Rent Act. In this connection, learned counsel urged that
Government Companies and Insurance Companies are merely
sub-species of public limited companies under the 1956 Act;
c
the genus "company" is divided into three species - "existing
company", "private company" and "public company"; that vari-
ous sub-species including holding and subsidiary companies,
insurance companies, Government companies etc. are all public
limited companies under 1956 Act.
D
17. Lastly, learned counsel urged that when the legislature
provided under Section 3(1 )(b) that private limited companies
and public limited companies having a paid up share capital of
Rs. 1,00,00,000 or more were to be excluded from the protec-
E tion of the Rent Act, it was providing for all bodies carrying on
business in the corporate form under the 1956 Act, which have
a paid up share capital of Rs. 1,00,00,000 or more. Therefore,
according to the learned counsel, the legislature had no inten-
tion of carving out an exception in the case of Government com-
F panies defined under Section 617 of the 1956 Act as errone-
ously held by the High Court.
18. Shri Soli J. Sorajbee, learned senior counsel appear-
ing for the applicants-intervenors submitted that the legislative
policy under the Rent Act legislation in India is to confine pro-
G tection to the weaker sections of the society and not to extend
such protection to the entities which can withstand the forces of ~

demand and supply. In this connection, learned counsel sub-
mitted that Section 3(1)(b) strikes a balance between the inter-
est of the landlord and the tenant; it is neither pro-landlord nor
H anti-tenant. It is pro - public interest. According to the learned
SMT. LEELABAI GAJANAN PANSARE & ORS. v. 265
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]
':J
counsel, the impugned judgment frustrates the object of Sec- A
,. tion 3(1 )(b) as indicated hereinabove. Further, according to the
..,
·learned counsel, it was not open to the High Court to exclude
Government Companies from PSUs referred to in Section
3(1)(b). According to the learned counsel, such an exercise
~ undertaken by the High Court amounts to judicial legislation as it B
was not open to the High Court to read into Section 3(1)(b) the
' ..... words, namely, "except Governmeril companies". According to
the learned counsel, such judicial legislation is liable to be set
aside by this Court. Learned counsel further submitted that the
basic rationale underlying the exemption granted by Section c
3(1 )(b} is that the entities and bodies mentioned therein, in the
legislative judgments are not in need of Rent Act protection. In
this connection, the learned counsel submitted that it is this ratio-
nale which becomes explicit when Section 3(1)(b) excludes a
private or public limited company having paid up share capital of
D
Rs. 1,00,00,000 or more from Rent Act protection. Learned coun-
sel submitted in this connection that if a company becomes a
Government company, it is not equally in need of RentAct pro-
tection so long as its paid up capital is Rs. 1,00,00,000 or more.
Learned counsel submitted that for the purpo,ses of Rent Act pro-
tection, there is no fundamental or qualitative distinction between E
a public limited company with Rs. 1,00,00,000 paid up share
capital and .a Government company with Rs. 1,00,00,000 paid
I .
up share capital. According to the learned counsel, a company
on becoming a Government company does not undergo meta-
morphosis so as to result in the emergence of a separate entity F
---t under the 1956 Act, which needs Rent Act protection to which it
was formerly not entitled. The consequence, according to the
learned counsel, of a company becoming a Government Com-
pany is that the Government Company is placed under a special
system of control and merely because the entire share holding is G
owned by the Central Government will not make the incorporated
-\
company a Central Government. In this connection, learned coun-
sel relied upon the judgment of this Court in A. K. Bindal and anr
v. Union of India and ors. 2003(5)SCC 163 at 175. According to
the learned counsel, the need for Rent Act protection does not H
266 SUPREME COURT REPORTS [2008] 12 S.C.R.

A arise merely because a company is placed under strict control
and regulations. The need for Rent Act protection or its absence
has no nexus whatsoever with the strict regime of control imposed
on a Government company by Section 619 of the 1956 Act. In
this connection, learned counsel submitted that if a public limited
B company with paid up share capital of Rs. 1,00,00,000 is not
entitled to Rent Act protection under Section 3(1 )(b), that com-
pany on becoming a Government company cannot claim protec-
tion of the Rent Act to which it was not entitled as a public limited
company so long as its paid up share capital is Rs. 1,00,00,000
C or more. According to the learned counsel, for the purpose of
Section 3(1 )(b) what is relevant and decisive is the criterion of
Rs. 1,00,00,000 paid up share capital and not the degree or ex-
tent of control exercised over the company as held by the trial
court and so long as the said criterion is satisfied and continues
to be satisfied, the company remains outside the puNiew of the
0
Rent Act. Any other interpretation, according to the learned coun-
sel, would lead to invidious discrimination between a public lim-
ited company with one crore paid up share capital and a Gov-
ernment company with the same paid up share capital. Accord-
ing to the learned counsel, if the share capital of a Government
E company is reduced to Rs. 99 lacs then it wciuld be entitled to
protection under the Rent Act.

19. According to Shri Parag P. Tripathi, learned Additional
Solicitor General appearing on behalf of the respondent-Orien-
F tal Insurance Co. Ltd.("OIC"), the principle issue raised revolves
around the meaning and purport of the compendious expres- ,f--
sion "any Public Sector Undertakings or any Corporation es-
tablished by or under any Central or State Act." According to
the learned counsel, a Government Company is sui generis in
G structure and in statutory treatment thereof, therefore, it does
not fall within the above compendious expression. According
to the learned counsel, the exclusion clause, namely, Section t-
3(1 )(b) applies to PSUs established by or under any Central or
State Act but not to a Government company, like the OIC, which
is not so established.
H
SMT. LEELABAI GAJANAN PANSARE & ORS. v. 267
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]
~j
20. Learned counsel next urged that a Government com- A
pany is sui generis and also does not fall either within the con-
cept of private or public limited company simplicitor. In other
words, according to the learned counsel, Section 3(1 )(b) does
not apply to a Government company as it is not established by
or under any Central or State Act and nor does it fall within the B
concept of public limited company simplicitor. In this connec-
' A. tion he submitted that an exemption or exclusionary clause,
particularly in the context of Rent Act, to the extent that it ex-
eludes a class or category of tenants has to be narrowly inter-
preted. According to the learned counsel, Section 3(1 )(b) of the
said Rent Act needs to be interpreted in the context of the 1956
c
Act. It was submitted that under the definition of "company" un-
der Section 2(10) of the 1956 Act, which refers to Section 3 of
that Act, the definition Section of Government Company refers
to Section 617 of the 1956 Act. According to the learned coun-
D
sel, Section 3 of the Companies Act deals with company [see
section 3(1 )(i)]; existing company [section 3(1 )(ii)]; private com-
pany [section 3(1 )(iii)] and public company [section 3(1 )(iv)].
According to the learned counsel, it is not possible to proceed
on the basis as if public and private companies are two sub-
sets, which exhausts the "field" of companies. In this connec- E
tion he submitted that Section 3 of the 1956 Act does not de-
fine a public company exhaustively as a company; that, Section
' 3 of the Companies Act merely states that the public limited
I
' company is not a private company and, therefore, the strict di-

_.. chotomy between public or private may not be entirely correct
insofar as the Companies Act is concerned.
F

21. According to the learned counsel, Section 617 of the
1956 Act is sui generis as is indicated by the Chapter Heading
in Part XIII "General" which is "Application of Act to Government
G
Companies"; that a Government company cannot be treated
-4 as public or private company, particularly when a separate chap-
ter is made applicable to Government companies. According
to the learned counsel, the scheme of Section 617 indicates
that, Government Companies have separate set of auditors,
H
268 SUPREME COURT REPORTS [2008] 12 S.C.R.

A namely, CAG; annual reports are required to be laid before the
Houses of Parliament under Section 619A and the wide rang-
ing power of the Central Government to modify and make non-
applicable any of the provisions of the Companies Act to such
companies except Sections 618, 619 and 619A. Similarly, ac-
8 cording to the learned counsel, under Section 616, there is ref-
erence to companies governed by Special Acts. According to
the learned counsel, Section 616 recognizes that several com- ' '
panies are covered by the Special Acts. They stand on a differ-
ent footing vis-a-vis public and private companies under the
c 1956 Act. In the event of inconsistency between the Special Acts
and the Companies Act, it is the former which would prevail.
Therefore, in respect of Government companies, which are
governed by the Special Acts, their status as a Government
company would prevail and the said companies would neces-
D sarily have to be treated as sui generis. In other words, accord-
ing to the learned counsel, the structure of a Government com-
pany like OIC under the Insurance Act is totally different from
the structure of a public limited company under the Companies
Act. In this connection, learned counsel placed reliance on the
various provisions of the Insurance Act in the context of winding
E up to bring out the difference between a Government company
on one hand and the public limited company on the other hand.
22. All the above arguments have been canvassed to
show that OIC is not a public limited company as is sought to
F be argued on behalf of the appellants. All the above arguments
are advanced to show that structurally there is a difference be-
tween a Government company and an ordinary company under
the provisions of the 1956 Act as well as Statutory Corpora-
tions.
G 23. In the context of the said Rent Act, learned counsel
submitted that, in Section 3(1 )(b) a compendious expression
used is "any public sector undertakings or any corporation es-
tablished by or under any Central or State Act". He urged that
there is no "comma" after the words "any public sector under-
H takings''. Therefore, according to the learned counsel, Section
SMT LEELABAI GAJANAN PANSARE & ORS. v. 269
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]
\;' ,
..
3(1 )(b) of the said Rent Act applies to PSUs and statutory cor- A
porations "established by or under any Central or State Act."
Therefore, according to the learned counsel, a Government
company incorporated under the Companies Act would fall out-
side Section 3(1 )(b) and thus would be entitled to the protec-
!ion of the Rent Act. In this connection, learned counsel placed B
reliance on the Report of the Joint Committee which vide para
' ~, 19 refers to "Other PSUs including Government Undertakings
or Corporations established by or under Central or State en-
actments. "According to the learned counsel, what has emerged
from the said report is that the Joint Committee intended to c
include Government/semi-Government undertakings or corpo-
rations within the words "other public sector undertakings", how-
ever, the Legislature has dropped the said inclusion from the
expression "Public Sector Undertakings" and simply proceeded
to specify "Public Sector Undertakings or Corporation" which
D
were established by or under any Central or State Act. There-
") fore, according to the learned counsel, in the said sub-section
3(1)(b) the expression "Public Sector Undertakings" was given
a narrow interpretation by the Legislature though the Joint Com-
mittee recommended much wider definition of the words PSUs.
E
24. Learned counsel submitted that the expression "PSU"
has not been defined in the said Rent Act. It was submitted that
even ifthe said expression has been defined as including Gov-
ernment companies, it would still be open to the respondent to
contend that for the purposes of the exclusion clause, the ex- F
pression PSU should be narrowly construed so as to exclude
.~
Government companies therefrom. Learned counsel submitted
that Section 3(1 )(b) is an exemption clause which excludes ten-
ants from applicability of the said Rent Act, 1999 and, there-
fore, has to be narrowly interpreted. Lastly, learned counsel sub-
G
mitted that in a landlord-tenant statute, if two views are pos-
-~
sible one favouring the tenant should be preferred.
25. On the aspect of incorporation, learned counsel sub-
milted that LIC is a statutory corporation whereas GIC is not.
According to the learned counsel, GIC is a Government com- H
270 SUPREME COURT REPORTS [2008] 12 S.C.R.

A pany. Therefore, according to the learned counsel, the legisla- ' '

tive scheme has maintained a distinction between statutory
corporation and a Government company incorporated under
the Companies Act. According to the learned counsel, this dis-
tinction cannot be said to be a distinction without any differ-
s ence. Therefore, it was submitted that it is always open to the
Legislature to either proceed on the basis that both LIC and
GIC will be excluded or that only LIC and not GIC, being a Gov-
ernment company, would be excluded. According to the learned
counsel, these are the options open to the Legislature and the
c exercise of one or the other option will not vitiate the Legisla-
ture as being violative of Article 14 of the Constitution. More-
over, according to the learned counsel, there is a valid differen-
tia between a statutory corporation like LIC and Government
companies, like GIC, OIC etc. According to the learned coun-
D sel, in the matter of categorization, it is open to the Legislature
to give protection only to statutory corporations. However, in
the present case, the Legislature has excluded statutory corpo-
rations from such protection. According to the learned counsel,
the Legislature has given protection to Government companies
but has not extended protection to statutory corporations as it
E has treated Government companies more akin to the Govern-
ment as is referred to in sub-section 3(1 )(a) of the Act.
26. To sum up, the basic contention advanced by learned
Additional Solicitor General is that a Government company does
F not fall within the compendious expression "any PSUs or any
corporation established by or under any Central or State Act". ~,
In other words, according to the learned counsel, the impugned
judgment of the High Court commends to be sustained though
in a different matrix.
G 2"7. Dr. Rajeev Dhavan appearing on behalf of Bharat
Petrole!um Corporation Ltd.-appellant (SLP(C) Nos. 24789-90/
07) submitted that the word 'PSU' is a term of parlance and that
it is not a term of art. Learned counsel submitted that in this
case the court is required to give contextual interpretation to
H the words 'PS Us' in Section 3(1 )(b) and if such a interpretation
SMT. LEEL,L\BAI GAJANAN PANSARE & ORS. v. 271
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]
' {
is given then the position which emerges is that the words PS Us A
or any statutory corporation constitute one separate specific
category and, therefore, to that extent he adopts the arguments
advanced on behalf of the Oriental Insurance Company Ltd. that
the Act vide Section 3(1 )(b) excludes PS Us and statutory cor-
porations established by or under Central or State Act alone B
.' from the protection of the Rent Act. Therefore, according to the
learned counsel, if a PSU or a corporation is a Government
company under the 1956 Act then such PSUs/corporations
would continue to get protection of the Rent Act. According to
the learned counsel, Oriental Insurance Company Ltd. is a Gov- c
ernment Company, it is not a PSU established by or under any
Central or State Act and, therefore, it continues to enjoy the pro-
tection of the Rent Act even after enactment of Section 3(1 )(b).
Learned counsel further urged that the said Rent Act has been
enacted to protect tenants from eviction; that, tenants protec-
D
tion is a part of housing; that, the said Rent Act is not concerned
with poverty/protection to the weaker section as is sought to be
contended on behalf of the appellants but essentially, accord-
ing to the learned counsel, it deals with two aspects, namely,
tenancy protection and rent fixation. According to the learned
counsel, it would be wrong to say that the said Rent Act has E
been enacted only to protect those who cannot afford to pay.
Learned counsel submitted that under the Rent Act a stipulated
percentage of rent increase is allowed to the landlords on an-
nual basis. This, according to the learned counsel, is one as-
pect of the Rent Act. The other aspect is to protect tenancy. F
?~
Therefore, according to the learned counsel, the Rent Act
touches both these aspects. Further, according to the learned
counsel, Section 3(1) has to be read in its entirety. Under the
second part of Section 3(1 )(a) protection is given in respect of
premises let to the Government or local authority and to pre- G
....\ mises taken on behalf of the Government by or in the name of a
designated officer. Learned counsel submitted that, in the
present case, a Government company gets protection from evic-
tion under second part of Section 3(1 )(a) and since Govern-
ment company is not one of the categories mentioned in Sec- H
272 SUPREME COURT REPORTS [2008] 12 S.C.R.

A tion 3('1 )(b) such companies which are tenants would continuE~
. '

to get protection under second part of Section 3(1 )(a). Learned
counsel submitted that even if one is to give purposive interpre-
tation to the said section, it is clear that in cases of tenancy
created in favour of Government, local authority or Government
B companies, the court is concerned with public necessity and
public need. According to the learned counsel, a bare reading
of the second part of Section 3(1 )(a) indicates that the Rent Act
in question also assumes that the Government, local authori-
ties and Government companies need protection of the Rent
Act. Learned counsel submitted that there is nothing in the re-
c
port of the Joint Committee or in the Statement of Objects and
Reasons to exclude premises let out to Government compa-
nies. Learned counsel further submitted that if Section 3(1 )(a)
is to be given full interpretation then all governmental functions
should be taken into account. That, Section 3(1 )(a) cannot be
D
confin1:id to non-commercial activity. Therefore, according to the
learned counsel, the distinction made between governmental
functions and commercial functions to interpret Section 3(1) is
erroneous. According to the learned counsel, Government op-
erates in railways, transport and energy sectors. It operates via
E departments, Government companies and statutory corpora-
lions. When it operates through its department like bureau of
public enterprises the matter will squarely come under Section
3(1)(a). However, in view of Section 3(1)(b) when a Govern-
ment operates through a statutory corporation the matter would
F fall under Section 3(1 )(b) because the legislature in its wisdom
..._ \

has excluded premises let to statutory corporations and to pub-
lie limited companies having paid up share capital of Rs.
1,00,00,000 or more from the protection of the Rent Act. Ac-
cording to the learned counsel since an ordinary company un-
G der the Companies Act is different from the Government com-
pany under that Act, it is clear that Government companies would .~

continue to get protection by virtue of Section 3(1 )(b) as the
said company is owned by the Government. Learned counsel
submitted that one need not go by ownership or the form in
H which an entity is incorporated. One h;is to take into account
SMT. LEELABAI GAJANAN PANSARE & ORS. v. 273
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J]

the test of incorporation, the nature of the functions which enti- A
ties carried on and the ownership. According to the learned
counsel, Section 3(1 )(b) refers to separate and distinct catego-
ries. According to the learned counsel, the last category con-
sists of private limited companies and public limited compa-
nies having a paid up Share capital of Rs. 1,00,00,000 or more. B
Learned counsel submitted that it would be wrong to contend
that this last category subsumes the categories enumerated
earlier in the first part of Section 3(1 )(b). For the aforestated
reasons, learned counsel submitted that no interference is called
for in this matter. c
28. Relevant Provisions for Consideration:
(a) Maharashtra Rent Control Act, 1999
Preamble
D
An Act to unify, consolidate and amend the law relating to
the control of rent and repairs of certain premises and of
eviction and for encouraging the construction of new
houses by assuring a fair return on the investment by
landlords and to provide for the matters connected with
the purposes aforesaid. E

Section 2. Application
(1) This Act shall, in the first instance, apply to premises F
let for the purposes of residence, education,
business, trade or storage in the areas specified in
Schedule I and Schedule II.

G
Section 3. Exemption

• (1) This Act shall not apply-
(a) to any premises belonging to the Government
or a local authority or apply as against the H
274 SUPREME COURT REPORTS [2008] 12 S.C.R.

A Government to any tenancy, licence or other "'
like relationship created by a grant from or a
licence given by the Government in respect of
premises requisitioned or taken on lease or on
licence t.iy the Government, including any
B premises taken on betialf of the Government
on the basis of tenancy or of licence or other
like relationship by, or in the name of any officer
subordinate to the Government authorized in
this behalf; but it shall apply in respect of
c premises let, or given on licence, to the
Government or a local authority or taken on
behalf of the Government on such basis by, or
in the name of, such officer;
(b) to any premises let or sub-let to banks, or any
D Public Sector Undertakings or any Corporation
established by or under any Central or State
Act, or foreign missions, international agencies,
multinational companies, and private limited
companies and public limited companies having
E a paid up share capital of rupees one crore or
more.
Explanation.- For the purpose of this clause the expression
"bank" means,-

F (i) the State Bank of India constituted under the State
Bank of India Act, 1955; A 1

(ii) a subsidiary bank as defined in the State Bank of
India (Subsidiary Banks) Act, 1959;
(iii) A corresponding new bank constituted under section
G
3 of the Banking Companies (Acquisition and
Transfer of Undertakings) Act, 1970 or under section •
3 of the Banking Companies (Acquisition and
Transfer of Undertaking) Act, 1980; or
H (iv) any other bank, being a scheduled bank as defined
SMT. LEELABAI GAJANAN PANSARE & ORS. v. 275
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]
' ,
in clause (e) of section 2 of the ReseNe Bank of A
India Act, 1934.
(2) The State Government may direct that all or any of
the provisions of this Act shall, subject to such
conditions and terms as it may specify, not apply-
B
(i) to premises used for public purpose of a
f -<\ charitable nature or to any class of premises
used for such purposes;
(ii) to premises held by a public trust for a religious
or charitable purpose and let at a nominal or c
concessional rent;
(iii) to premises held by a public trust for a religious
or charitable purpose and administered by a
local authority; or
D
(iv) to premises belonging to or vested in an
university established by any law for the time
being in force.
Provided that, before issuing any direction under this
sub-section, the State Government shall ensure that E
the tenancy rights of the existing tenants are not
adversely affected.
(3) The expression "premises belonging to the
Government or a local authority" in sub-section (1)
shall, notwithstanding anything contained in the said F
.')" sub-section or in any judgment, decree or order of a
court, not include a building erected on any land held
by any person from the Government or a local authority
under an agreement, lease, licence or other grant,
although having regard to the provisions of such G
agreement, lease, licence or grant the building so
erected may belong or continue to belong to the
Government or the local authority, as the case may
be, and such person shall be entitled to create a
tenancy in respect of such building or a part thereof.
H
276 SUPREME COURT REPORTS [2008] 12 S.C.R.

' ,
A (b) The Companies Act, 1956:
Preamble
An Act to consolidate and amend the law relating to
companies and certain other associations.
B

Section 2. Definitions.- In this Act, unless the context , ,
otherwise requires.-
(5) "banking company" has the same meaning as in the
C Banking Companies Act, 1949 (10 of 1949)
(7) "body corporate" or "corporation" includes a company
incorporated outside India but does not include-
(a) a corporation sole;
D (b) a co-operative society registered under any law
relating to co-operative societies; and
(c) any other body corporate (not being a company
as defined in this Act) which the Central
Government may, by notification in the Official
E
Gazette, specify in this behalf.
(10) "company" means a company as defined in section 3.
(16) "existing company" means an existing company as
defined in section 3.
F
(18) "Government company" means a Government
company within the meaning of section 617.
(19) "holding company" means a holding company within
the meaning of section 4.
G (21) "insurance company" means a company which
carries on the business of insurance either solely or
in conjunction with any other business or businesses.
(23) "limited company" means a company limited by
H shares or by guarantee.
SMT. LEELABAI GAJANAN PANSARE & ORS. v. 277
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]

(23A)"listed public companies" means a public company A
which has any of its securities listed in any recognized
stock exchange.

Section 3. Definitions of "company", "existing company", B
}
"private company" and "public company"
-'\'

( 1) In this Act, unless the context otherwise requires, the
expressions "company", "existing company'', "private
"company" and "public company" shall, subject to the
provisions of subsection (2), have the meanings specified c
below:

(i) "company'' means a company formed and registered under
. this Act or an existing company as defined in clause (ii);

(ii) "existing company" means a company formed and D
registered under any of the previous companies laws
specified below:

(a) any Act or Acts relating to companies in force before
the Indian Companies Act, 1866 (10 of 1866) and
repealed by the Act;
E

(b) the Indian Companies Act, 1866 (10 of 1866);
(c) the Indian Companies Act, 1882 (6 of 1882);
(d) the Indian Companies Act, 1913 (7 of 1933); F
\
'·~-
(e) the Registration of Transferred Companies
Ordinance 1942 (54 of 1942); and
(f) any law corresponding to any of the Acts or the
Ordinance aforesaid and in force- G
(1) in the merged territories or in a Part B State
(other than the State of Jammu and Kashmir),
or any part thereof, before the extension thereto
of the Indian Companies Act, 1913 (7of1913);
or H
278 SUPREME COURT REPORTS [2008] 12 S.C.R.

; ,
A (2) in the State of Jammu and Kashmir, or any part
thereof, before the commencement of the
Jammu and Kashmir (Extension of Laws) Act,
1956 (62 of 1956), in so far as banking,
insurance and financial corporations are
B concerned, and before the commencement of
the Central Laws (Extension to Jammu and
~
1
Kashmir) Act, 1968 (25of1968) insofar as other
corporations are concerned; and

(g) the Portugese Commercial Code in so far as it relates
c to "sociedades anonimas";
(iii) "private company" means a company which has a
minimum paid-up capital of one lakh rupees or such higher
paid-up capital as may be prescribed, and by its articles,-
D (a) restricts the right to transfer its shares, if any;
(b) limits the number of its members to fifty not including-
(i) persons who are in the employment of the
company, and
E
(ii) persons who, having been formerly in the
employment of the company, were members of
the company while in that employment and have
continued to be mem~ers after the employment
ceased; and
F
(c) prohibits any invitation to the public to subscribe for -~ ~

any shares in, or debentures of, the company;
(d) prohibits any invitation or acceptance of deposits
from persens other than its members, directors or
G their relatives:
Provided that where two or more persons hold one
or more shares in a company jointly, they shall, for
the purposes of this definition, be treated as a single
member;
H
SMT. LEELABAI GAJANAN PANSARE & ORS. v. 279
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.)

(iv) "public company" means a company which- A
(a) is not a private company;
(b) has a minimum paid-up capital of five lakh
rupees or such higher paid-up capital, as may
be prescribed; B
(c) is a private company which is a subsidiary of a
company which is not a private company.

(2) Unless the context otherwise requires, the following
companies shall not be included within the scope of any c
of the expressions defined in clauses (i) to (iv) of sub-
section (1), and such companies shall be deemed, forthe
purposes of this Act, to have been formed and registered
outside India:-
(a) a company the registered office whereof is in Burma, D
Aden or Pakistan and which immediately before the
separation of that country from India was a company
as defined in clause (i) of sub-section (1 );
. (3) Every private company, existing on the commencement E
of the Companies (Amendment) Act, 2000, with a paid-up
capital of less than one lakh rupees, shall, within a period
of two years from such commencement, enhance its paid-
up capital to one lakh rupees.
(4) Every public company, existing on the commencement F
of the Companies (Amendment) Act, 2000, with a paid-up
capital of less than five lakh rupees, shall within a period
of two years from such commencement, enhance its paid-
up capital to five lakh rupees.
(5) Where a private company or a public company fails to G
enhance its paid-up capital in the manner specified in
sub-section (3) or sub-section (4), such company shall be
deemed to be a defunct company within the meaning of
section 560 and its name shall be struck off from the
register by the Registrar. H
280 SUPREME COURT REPORTS [2008] 12 S.C.R.

A (6) A company registered under section 25 before or after ...
the commencement of Companies (Amendment) Act,
2000 shall not be required to have minimum paid-up
capital specified in this section.

B
Section 25. Power to dispense with "Limited" in name of
charitable or other company ,
* '
(1) Where it is proved to the satisfaction of the Central
Government that an association:-
c
(a) is about to be formed as a limited company for
promoting commerce, art, science, religion,
charity or any other useful object, and

(b) intends to apply its profits, if any, or other
D income in promoting its objects, and to prohibit
the payment of any dividend to its members,

the Central Government may, by licence, direct that the
association may be registered as a company with limited
liability, without the addition to its name of the word "Limited"
E
or the words "Private Limited".

(2) The association may thereupon be registered
accordingly; and on registration shall enjoy all the
privileges, and (subject to the provisions of this
F section) be subject to all the obligations, of limited
companies.
,{_' '
(3) Where it is proved to the satisfaction of the Central
Government-

G (a) that the objects of a company registered under
this Act as a limited company are restricted to
those specified in clause (a) of sub-section (1 ), ~
and
(b) that by its constitution the company is required
H to apply its profits, if any, or other income in
SMT LEELABAI GAJANAN PANSARE & ORS. v. 281
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]
'.-i promoting its objects and is prohibited from A
paying any dividend to its members,

the Central Government may, by licence, authorise the
company by a special resolution to change its name,
including or consisting of the omission of the word "Limited"
or the words "Private Limited"; and section 23 shall apply B

.> '
.
(~
,
.~·...
·'
{"
to a change of name under this sub-section as it applies
to a change of name under section 21.

(4) A firm may be a member of any association or
company licensed under this section, but on the c
dissolution of the firm, its membership of the
association or company shall cease.

(5) A licence may be granted by the Central Government
under this section on such conditions and subject to
such regulations as it thinks fit, and those conditions D
and regulations, shall be binding on the body to which
the licence is granted, and where the grant is under
sub-section (1 ), shall, if the Central Government so
directs, be inserted in the memorandum, or in the
articles, or partly in the one and partly in the other. E
(6) It shall not be necessary for a body to which a licence
is so granted to use the word "Limited" or the words
"Private Limited" as any part of its name and, unless
its articles otherwise provide, such body shall, if the
Central Government by general or special order so F
,.>. directs and to the extent specified in the directions,
be exempt from such of the provisions of this Act as
may be specified therein.

(7) The licence may at any time be revoked by the Central
G
Government, and upon revocation, the Registrar shall
enter the word "Limited" or the words "Private
Limited" at the end of the name upon the register of
the body to which it was granted; and the body shall
cease to enjoy the exemption granted by this section:
H
282 SUPREME COURT REPORTS [2008] 12 S.C.R.

,~ l
A Provided that, before a licence is so revoked, the
Central Government shall give notice in writing of its
intention to the body, and shall afford it an opportunity
of being heard in opposition to the revocation.

(8) (a) A body in respect of which a licence under this
B section is in force shall not alter the provisions of its
memorandum with respect to its objects except with
the previous approval of the Central Government
>

'
signified in writing.

c (b) The Central Government may revoke the licence
of such a body if it contravenes the provisions
of clause (a).

(c) In according the approval referred to in clause
(a), the Central Government may vary the licence
D by making it subject to such conditions and
regulations as that Government thinks fit, in lieu
of, or in addition to, the conditions and
regulations, if any, to which the licence was
formerly subject.
E
(d) Where the alteration proposed in the provisions
of the memorandum of a body under this sub-
section is with respect to the objects of the body
so far as may be required to enable it to do any
of the things specified in clauses (a) to (g) of
F sub-section (1) of section 17, the provisions of
.{._ ~
this sub-section shall be in addition to, and not
in derogation of, the provisions of that section.

(9) Upon the revocation of a licence granted under this
section to a body the name of which contains the
G
words "Chamber of Commerce", that body shall,
within a period of three months from the date of
revocation or such longer period as the Central
Government may think fit to allow, change its name
to a name which does not contain those words; and-
H
SMT LEELABAI GAJANAN PANSARE & ORS. v. 283
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]

(a) The notice to be given under the proviso to sub- A
section (7) to that body shall include a statement
of the effect of the foregoing provisions of this
sub-section; and
(b) Section 23 shall apply to a change of name
under this sub-section as it applies to a change B
of name under section 21.
(10) If the body makes default in complying with the
requirements of sub-section (9), it shall be punishable,
with fine which may extend to five thousands rupees c
for every day during which the default continues.

Section 616. Application of Act to Insurance, banking,
electricity supply and other companies governed by
D
special Acts.
.... The provisions of this Act shall apply-
(a) to insurance companies, except in so far as the said
provisions are inconsistent with the provisions of the
E
Insurance Act, 1938;
(b) to banking companies, except in so far as the said
provisions are inconsistent with the provisions of the

... (c)
Banking Companies Act, 1949;
to companies engag~d in the generation or supply
of electricity, except in so far as the said provisions
are inconsistent with the provisions of the Indian
F

Electricity Act, 1910 or the Electricity Supply 1948;
(d) to any other company governed by any special Act G
for the time being in force, except in so far, as the
}
said provisions are inconsistent with the provisions
of such special Act;
(e) to such body corporate, incorporated by any Act for
the time being in force, as the Central Government H
284 SUPREME COURT REPORTS (2008] 12 S.C.R.

A may, by notification in the Official Gazette, specify in
this behalf, subject to such exceptions, modifications
or adaptation, as may be specified in the notification.

B Section 617. Definition of "Government Company".
For the purposes of this Act Government company means
any company in which not less than fifty one per cent of the
"
paid-up share capital is held by the Central Government,
or by any State Government or Governments, or partly by
-. c the Central Government and partly by one or more State
Governments and includes a company which is a
subsidiary of a Government company as thus defined.

Point for Determination:
D 29. Whether the High Court was right in holding that the
words PSUs in Section 3(1)(b) excluded Government Compa-
nies as defined under Section 6'17 of the 1956 Act.

Findings:

E 30. Economics looks at life from the viewpoint of a man,
not from that of an angel.

31. In order to give purposive interpretation to Section
3(1 )(b) of the said Rent Act one has to go back in history to the
object behind enactment of the Bombay Rent Act, 1947 ("1947
F Act"). That Act was passed to amend and consolidate the law
relating to rents, repairs, eviction of tenants, control of rates of
hotels and lodging houses and to control charges of licensed
...
premises since 1.2.1973. The Act was passed to control the
rents so as to prevent the landlords from exploiting the tenants
G by charging exorbitant rents with a view to take wrong advan-
tage of growing acute shortage of accommodation in urban
f
areas. Thus, that Act was also enacted to give further protec-
tion to the tenants, it intended to provide for responsibility of
carrying out usual tenable repairs by transferring the duty of the
H tenants to carry out such repairs under the Transfer of Property
· SMT. LEELABAI GAJANAN 'PANSARE & ORS. v. 285
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]
~ ·Y
Act to the landlord and thereby compelling him to keep the pre- A
mises let out in good condition at his costs. In short, the said
1947 Act stood enacted with the intention to control rents, re-
pairs, rates of hotels and eviction of tenants.
32. Section 4 of the 1947 Act dealt with exemptions. There
were three limbs of Section 4(1) which are similar to Section B
~ ). 3(1 )(a)· of the Rent Act, 1999. The first limb exempted the pre-
mises belonging to the Government or local authority from the
operation of the 194 7 Act if the Government was the owner of a
building with sitting tenants therein, the latter were not protected
by the 1947 Act. The second limb of Section 4(1) inter alia pro- c
vided that the Act did not apply against the Government com-
panies to any tenancy created by a grant from the Government
in respect of premises taken on lease by the Government or in
respect of premises requisitioned by the Government. The third
limb of Section 4(1) applied when the Government or a local D
authority was a tenant. Section 3-A of the_ Bombay Housing
Board Act, 1948 placed.the Board in the same privileged posi-
tion as that of the Government under Section 4(1) of the 1947
Act. The said Bombay Housing Board Act, 1948 stood replaced
by Maharashtra Housing and Area Development Act, .1976 E
·("MHADA Act") which was enacted to consolidate, unify, and
amend laws relating to housing, repairing and reconstructing
dangerous buildings. In the Statement of Objects and Reasons
it is mentioned that in urban areas and, particularly in Greater
Mumbai area the old buildings had outlived their lives and have
. _} rendered themselves in a bad state of repairs and in order to
F
prevent possible collapse of old buildings necessity was felt to
take up the programme of repairs and reconstruction of such
buildings.
33. To continue our discussion on Bombay Rent Act, 1947, G
) Section 5(10) defined 'standard rent'. Under that section there
were six types of standard rent, namely, rent fixed by the court
under the previous Rent Acts of 1939 and 1944, rent charged
on 1 .9 .1940 if the premises were let for the first time on that
date, if the premises were let before 1.9.1940 then the rent first H
286 SUPREME COURT REPORTS [2008J 12 s_c.R.
y,)

A charged, if the premises were let after 1.9:194o:th~n_ the·:r~r:it
first charged when let, if the premise$ wer~ exemptec;l tro'm st~n::
dard rent then after the five years p'eriod the renl was not' to
exceed 15% On the investment made in CC:>nstruction· and dut-
goings and in any other cases rent fixed by the court which may
B vary from time to time. Thus, the fixed date-line: was 1.9.1.940.
The standard rent was subject to Section 11. ~- ·= A. W
' . - " . . . '

34. Our object of the above discussioti _regarding grovi-
sions of the Bombay Rent Act: 1947 is two-fold. firstly, to point
out that there has been· a structural change maqe by; the Legis-
C lature in the presentRentAc;t ~is~~-vis-the '.t947Act. s·econfily;
we have analysed the relev~nt prqyi~ions _bf .tti~ _1941 Acfj6
indicate the· change in th'e 'economic conditions betwe·en ·1947
and 31.3.2000 when t~e presen.t
. • '
_Rent
Acfca_rne. into t9rc'~.- ·. • ..
: •• --· ';..:: ''', ' .........: - ' :' ': ' t . ' ~ ·: '....., •

D 35. Broadly, we may state,that the twin objects for enact-
ing the 1947 Act was tenancy protection· and rent restriction'. In
1947, the economic scenario was· different from lhe· scenario
that prevails after31 :32000. ·In 1947 rent forming provided·an
important source· of une·arned ·income to the la'1'1dlords which.·
led to the landlords charging· exorbit_ant rent in urba_n ·areas;;:
E Return on investments atthat time constituted considerable re-.
turns to .the landlords. At that time, it was worth in.vesting··inthe
business of leasing. The cost of repairs was comparatively mu0h.
less: The purchasing power of the rupee was;re:latively .higher·
than the Pl1rchasing power of the· rupee after 31.3.2000~ . How..;·
F ever, by 1976, with the rise in the cost of living index, the~said
investments made in 1940~s started giving negative retams. ·
Coupled with the price rise and increase in cost of repairs and
maintenance, municipal taxes also increased. The result Was
that the net asset value became ne_gative._ Cpnsequently, old
G buildings started ·collapsing for la~k of maintenancEi. E'ilef1 to-,
day thousands of buildings _in Greater Mu.1T1ba·i are: in.a dilap'i-:' (
dated condition for lack of resources. Therefore, in 1.9.76, the·
Legislature enacted MHAOA 1~76_ pr_egi$ely to undert~~e>e
pairs and constructions of old dilapidated l:>1Jildjng$ fo.r whJqh
H cess was levied. However, with the passa·ge of time,' it appears
SMT. LEELABAI GAJANAN PANSARE & ORS. v. 287
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]

that the position deteriorated and investments in this sector A
becaryie ·negligible by 31.3.2000. With the price rise and with
the incr~ase in the cost of construction, certain provisions of
the 1947 Act by ·which standard rent stood pegged/frozen as
on 1.9.1940 arid the provision imposing a ban on the landlords
from receiving premium under Sections 18 and 19 of the 1947 B
Act became vulnerable to challenge as violative of Article 14 of
the· Constitution. Those provisions, as discussed. above, were
Sections 5(10), 11, 18 and 19. This position was further com-
pounded when large premises, particularly in South Mumbai
stood occupied by cash-rich entities like, statutory corporations c
'and corporate bodies who insisted on paying meager standard
rent under the.194 7 Act.

36. Ultimately, the economic reasons led one of the land-
lords by·ijie name MalpeVishwanath Acharya to challenge the
provisions of Section 5(10), 7, 9(2)(b) and 11(1)(a) of the 1947 D
Act. We quote hereinbelow paras 8, 15, 17, 22, 25, 26, 27, 28,
29, 30 and 31ofthejudgment of this Court in the case of Malpe
Vishwanath Acharya and ors. v. State of Maharashtra and anr.
(1.998) 2. sc.c '1:
"8. There is considerable judicial authority in support of the E
· submission of learned counsel for the appellants that with the
passage of time a legislation which was Justified when enacted
may become arbitrary and unreasonable with the change in
' circumstances. In the State of MP v. Bhopal Sugar Industries
Ltd. (1964)"6 SCR 846 dealing with a question whether F
• -~ geographical classification due to historical reasons would
be valid this Court at SCR p. 853 observed as follows:

' ;.
. "Differential treatment arising out of the application
of the laws so continued in different regions of the
same reorganised State, did not therefore G
) -'
immediately attract the clause of the Constitution
prohibiting discrimination. But by the passage of time,
·considerations of necessity and expediency would
be obliterated, and the grounds which justified
classification of geographical· regions for historical H
288 SUPREME COURT REPORTS [2008] 12 S.C.R.

A reasons may cease to be valid. A purely te.mporary
provision which because of compelling forces
justified differential treatment when the
Reorganisation Act was enacted cannot obviously
be permitted to assume permanency, so as to
B perpetuate that treatment withouta rational basis to·
support it after the -initial expediency aAd necessity.
have disappeared."
xxx
15. The aforesaid decisions clearly recognise and establish
c that a statute which when enacted was justified may, with the
passage of time, become arbitrary and unreasonable. It is,
therefore, to be seen whether the aforesaid principle is
applicable in the instant case. Can it be said thateven though
the provisions relating to the fixatjon of standard rent; were
D valid when the Bombay Rent Act was passed in 1947 the said.
provision, as amended, can still be regarded as valid now?
xxx
17. A perusal of the aforesaid extracts of report~ and resolutions·.
E clearly demonstrates that since the last two decades the
authorities themselves seem to be convinced that the pegging
down of the rents to the pre-war stage and even thereafter, is
no longer reasonable. Unfortunately apart from lip service
little of note has been done. Even the Rent Control Bill
introduced in 1993 has not yet become law.
F
Xxx
22. The aforesaid illustration, which has not been seriously
d1sputed, clearly brings out the arbitrariness of the standard
rent provisions contained in the Bombay Rent Act. It is true
G that the aforesaid illustration has reference to the monthly
rent of Rs 100 as on 1-9-1940 and does not relate to the (
premises which are let out after the Act had come -into force.
As far.as Section 5(10) is concerned the standard rent of the
,premises let out after" 1-9-1940 is_ that rent at which the
premises were first let. Even so the rapid increase in the
H
t~\

SMt.,LEELABAI GAJANAN PANSARE & ORS. v. 289
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]
' ~. y
expenses for repair and other outgoings and the decreasing A
net amount. of rent which remains with the landlord, clearly
show. that the non-provision in the Act for reasonable increase
'in the 'rent, with the passage of tim'e, is leading to arbitrary
· res·u1ts., This is also demonstrated from the facts in the case
of Petitioner 3 who owns Unit No. A-18 on the first floor
a_dmeasLiring 808 sq. ft. in t~e property k.nown as Shrl Ram B
> A Industrial Estate situated at 13 J.D. Ambedkar Road, Mumbai.
The said building belongs to. a cooperative society and Unit
~ No. ~-18 was given ori lease and licence basis by an agreement
dated 23-8-1964 by the appeilant to Lokmitra Sahakari Printing
. and .Publishing Society Ltd. on a monthly compensation of c
Rs 686.80 per month: Liabilities of repairs is on the appellant
and according to it this amount received in respect of the said
unit by the appellant is Rs 563.65 per month inclusive of all
, taxes. Out of this sum Appellant 3 has to pay Rs 216.33 as
municipal taxes· leaving a balance of Rs 320.22. From this
amoundhe society outgoings is Rs 250 per month, leavjng a D
·balance of only Rs' 70.20' per month with the said appellant.
Another instance which has been given is that of Appellant 4 '·
.who owns a prop~rty .~nown as Ram Mahal situated at 8,
.. Dinsh_aw Vachha Roa.d,: Mumbai. The said building has 20
... : .residential flats and the b.ull,ding was purchased by Appellant E
.. 4 in the year 1955, althoug~ it had been constructed prior to
· 1940 .. Flat No. 15 o·n the 5th flqor of the said building had been
let otit by the previous'owners tp Mis Bennett Coleman & Co.
Ltd.,who were the sitting tenants at the time when the property
. W?S purchased. The ~lat measures. 1710 sq. ft. and monthly
· rent for the same is Rs 460 per month inclusive of permitted F
··~ _increase and ·repairs. According to the. appellant the income
·by way of rent has remained constant while the expenditure
has been increased and the total gross rent of the building
which he receives is Rs 1,72,032 per annum while it incurs
an annual expense of Rs 1,93,245 consisting of BMC taxes,
G
repairs,. ground rent, maintenance charges inclusive of small
~ electricity bill and the insurance-premium. He is, therefore,
suffering a loss of Rs 21,213 ·every year. It is not necessary
to examine the correctness of these details except to note
that what was reasonable on 1-9-1940 or in 1950s or in 1960s
can no longer be regarded as reasonable at this point of time. H
290 SUPREME COURT REPORTS
;
[2008] 12 S.C.R.

A xxx
· - 25. It is true that one of the reasons for enacting the rent
control legislation is to prevent exploitation of the tenants by
the landlords. One of the protections which has been provided
to the tenants in the rent legislation throughout the country is
B the concept of standard rent. Each State has definite laws
with regard thereto. In some case, like in Delhi, the Rent
Control Act is not applicable if the rent is Rs :JSOO or more
·while in the other States Rent Control Act is not applicable to
· certain categories of persons.· ·1n the Bombay Rent Act, with
which we are concerned, the standard rent as on 1-~1940 or
c the fil'$t rent of the premises·whith was let out thereafter is
the standard rent The pegging down of rent, coupled with the
inability of the landlord to evicttheJenants, has given rise to
uniaWful tendencies. In the Statetnenf of Objects and Reasons
annexed.to LA Bill No. 79 of-1986 introduced in the.Maharashtra
D Legislature providing for amendment to the ·eombay Rent
·Control Act with regard to clause 3 it was, inter:alia,. stated as
follows:
.. "The freezing of standard rent prevailing on 1st
September, 1940 has deprived the· landlords of getting
E reasonable and adequate return fo undertake
maintenance and repair's 'to the Old buildings. Despite
the penal provisions in the Act for charging any premium
from a tenant, such freezing of rent results in charging
'pugree' or deposit or similar illicit payments which are
F widely prevalent. The construction of new tenements
on rental basis has considerably ceased with the result
that low and middle income groups are not getting
·premises on rent.. .. " ·
,.
(emphasis added)
G 26. Notwithstanding the fact that the. State. Legislature was
conscious of the .illegal payments which are made because
of the rent restriction law no effective steps have been taken
so far to strike a bal_ance between the interests of the landlords
. and the tenants. '"
H
SMT. LEELABAI GAJANAN PANSARE & ORS. v. 291
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]
\, j
a
27, It is true that whenever special provision, like the Rent A
Control Act, is made for a section of the society it may be at
a
the cost of another section, but the making of such provision
or enactment may be necessary in the larger interest of the ·
society as a whole but the benefit which is given initially if
~ontinued results in. increasing injustice to one section of the
B
society-and an unwarranted largess or windfall to another,
.> ..( without appropriate cor~esponding relief then the continuation
I

of such a law wliich necessarily, or most likely, leads to
increase in lawlessness and undermines the authority of the
law can no longer be regarded as being reasonable. Its
continuance becomes arbitrary. c
.-
28. The legislature itself, as already noticed hereinabove, has
taken notice of the fact that pugree system has become
prevalent in Mumbai because of the Rent Restriction Act.
This Court was also ~sked to take judicial notice of the fact
that in view of the unreasonably low rents which· are being D
received by the landlords, recourse is' being taken to other
methods to seek redress. These methods which are adopted
are outside the four corners of the law and are slowly giving
rise to a state of lawlessness where, it is fear~d, the courts
may become irrelevant in deciding .disputes between the
E
landlords and tenants. This should be a caus.e of. serious
concern because if this extra-judicial backlash gathers
momentum the main sufferers Will be the tenants, for whose
benefit the Rent Control Acts are framed.
!"-'·
29.. Insofar as social legislation, like the Rent Control Act is F
,. . --t concerned, the law must strike a balance between rival
interests and it should try .to be just to all. The law ought not
to be unjust to one and give a d.isproportionate benefit or
.protection to another section of the society. When there is
shortage of accommodation itis desirable, may, necessary
that some protection should be given to the tenants in order G
to ensure that they are not exploited. At the same time such
)
a law has to be revised. periodically so as to ensure that a
disproportionately larger benefit than the one which was
intended is not given to the tenants. It is not as if the
Government does not take remedial measures to try and H
292 SUPREME COURT REPORTS [2008] 12 S.C.R.

A offset the effects of inflation. In order to provide fair wage to
the salaried employees the Government provides for payment
of dearness and other aHowances from time to time.
· Surprisingly this -principle is lost sight of while providing for
·increase in the standard rent- the increases.made even in ·
1987 are not adequate, fair or just and the provisions continue
B to be arbitrary in today's context.
30. When enacting socially progressive legislation the need
· is greateno approach the problem_ from a holistic perspective
and not to have a narrow or short-sighted parochial approach.
Giving a greater than due emphasis· to a vocal section of
c society results not merely in the miscarriage ot'justice but in
the abdication of responsibility of the legislative authority. Social
legislation is treated with deference by the courts not merely
.because the legislature represents the people but also
because in representing them the entire spectrum of views is
D expected to be taken into account. The legislature ·is not
shackled by the same constraints as the courts of law: But its
power is 23 coupled with a responsibility. It is also the
responsibility of the courts to ·look at legislation from the altar
of Article 14 of the Constitution. This article is intended; as is
obvious from its words, to check this tendency; giving undue
E
preferel'.lce to some over others.
31. Taking all the facts and cir,cumstances into consideration
we have no doubt that the existing provisi_qns of th~ B_ombay
Rent Act relating to the determination and fixation Of' the
F standard rent can no longer be considered.to be reasonable.
The said provisions would have been struck d9Wn as having
now become unreasonable and arbitrary butwe thinkitis not
necessary to stri~e down the same in view of the fact that the
present extended period of the Bombay Rent Act comes to an
end on 31-3-'·1998. The Government's thinking reflected in
G .various documents itself shows that the existing ,provisions
have now become unreasonable and, therefore, require
reconsideration. The new bill is uncler consideration and we
leave it to the legislature to frame a just and fair law keeping
in view the interests ·of all concerned and in particular the
H resolution of the Sta,!e Ministers fer Housing of 1992.and the
293

.
SMT. LEELABAI GAJANAN PANSARE & ORS. v.
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]
·- National Model Law which has been circulated by the Centra1 A
Government in 1992. We are not expressing any opinion on
the provisions of the said Model Law but as the same has
been drafted and circulated amongst all the States after due
deliberation and thought, there will, perhaps, have to be very
good and compelling reasons in departing from the said Model
B
Law. Mr .Nargolkar assured us that this Model Law will be
• j. taken into consideration in the framing of the proposed new
"" Rent Control Act."
37. The important point to be noted is that in the above
judgment it has been held that with the passage of time the c
1947 Act which was justified when enacted had become arbi-
trary and unreasonable with the change in economic circum-
stances. It has been further observed in the said judgment that.
the 1947 Act relating to determination and fixation of standard
rent Gan no longer be considered to be reaso.nable. However,
D
this Court felt that though the provisions mentioned above were -
liable to struck down as unreasonable and arbitrary keeping in
mind the consequences that the tenants may lose protection of
the Rent Act, this Court gave an op.portunity to the Government
to consider enactment ota Model Law. This judgment was de-
livered by the apex Court on 19.12.1997. E

38. Therefore, the legislature was required to keep in mind
the vulnerability of fixing standard rent as on 1.9.1940. At the
same time, the legislature had to keep in mind two aspects,
namely, tenancy protection and rent restriction. The problem F
,. ·~ arose on account of economic factors. However, the legislature
found the solution by evolving an economic criterion. The legis-·
lature evolved a package under which the prohibition on receiv-
ing premium under Section 18 of the 1947 Act stood deleted. In
other words, landlords were given the liberty to charge premium.
G
The second package was to exclude cash-rich body corporates
) and statutory corporations from the protection of the Rent Act.
This part of the economic package helps the landlords to en-
hance the rent and charge rent to the entities menti.oned in Sec-
tion 3(1 )(b)-who can afford to .pay rent at the market rate. This
H-
294 SUPREME CO~RT REPORTS [2008] 12 S.C.R.
. .

A was Jhe secon.d item in the economic package. offered to the
land'lorc:ls under.the present Rent Act. The third 'item of the Rent
Act w·as to give the benefit of at1nuaf increase of re'nt @ s%
underthe. Pf~sent Rent ,t\ct. All threejtem~ cons~ituted Or1e com-
posite package fqr the :landlords·. The .1.,m~erlying. qbje,ct,pehind
B · the said.economic package is to balan_ce arid r:naintai11 t~e two-
fold objects of.the RentAct, namely, tenancy.pr.otection.and rent
protection. The idea. behind excluding cash-rich entities from
the protection of the Rent Act is also to continue to .give protec-
ti.?n t.o tenants _who can~ot affofd to pay r~nt at marketrate.
C ~ · · ·39. The.above discussion is relevant because we rpust
understand·thereason why Section.3(1)(b}came tObe enacted.
As stated: above, in our view, with the.offer ofafreconomic pack-
age,to the landlords; the legislature has tried to maintain a bal-
ance; The.provisions of the earlier Rent Act,:as stated-above,
D have become.vulnerable,·. unreasonable and ;;irbitrary With the
·passage-of time as. held by this Court .in the:above judgment.
The"legislature was aware of the said judgment ltis reflected in
the reportoftheJoint Committee. lri·ourview;lhe changes made
in·:the present Rent Act by which landlords are permitt~d·to
E charge premium, the provisions by which cash-rich entities are
excluded from the protection of the Rent Act and the provision
p~9viding for an nu.al increase a~ a norninalrat~ of 5%. are struc-
tural.changes broµght at>o~t by the present Rent Act, f999 yis-
~~yis. the .1947 'Act: The Rent Act of .1999 is .the ,se'que·I fot the
' .~ •• • ' (' . (• .
• ' .. : ' • ; .. . • ~ • • : • I. ' • • • .,, , ~

F judgment of this Court in· the case of Malpe Vishwanath Acharya .
(supr~):.. . . · · ,. ·· .· ·· ·.· · · · · ·' ·· '·~··.·:';,
"" ' ~ "

: · ·. 40,.'The' entire ·discussion hereinabove is; 'theretore,'·not
only to go behind Section·3(1)(b) and ascertain the reasons for
enactm:ent oMhe said sub-section but also to enable this Court
G to give purposive interpretation to the·said sub-'section, ·'
... ' •' • . :,. • • ;. ·- ·-. ' ' c- -:'- _.", ' . ~ ·.,. <i :-; ; ; . '. --·

.·.. · .41. lri t~e light of.th~ di.scussiori m~n~i9rJ.ed herei~above,
we.'ne~d .to)nterpret Section.3(1)(b). rt.e:'said sub;;~~dion.ex
cl1;1?es e.ntitfes enufoerated.therein, from the p_rotect!s>n. ()fth,e
ibt· sa.id R~ntA,C:t,
< • ' ~
nan:ie.ly, banks, PSPs. statutory corpprations,
, • - ' ~•
fqr- • ,. ; '·. • •• ''. ' ' - ·'
SMT> LEELABAI GAJANAN PANSARE & ORS·. v. 295
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]

eign missions, international agencies, multinational companies A
arid private limited companies and public limited companies
having a_paid up share capital of Rs.1 ,0_0,00,000 or.more. The
question. which "arises for determination concerns the charac.:.
ter of PSUs in the context ofSection 3(1)(b). ·
. 42. The word 'PSU' is not a term of art. It is not defined in B
/ -I
the said Rent Act. It is not defined in the Companies Act. How-
ever, the said term finds place in the Report of the Study Team
on Publi~ Sector. Undertakings. One such Report of the Study
Team is dated 10.6.1967. The Study Team was appointed on
20.5.1966 .. It submitted its Report to the Chairman, Administra- C'
five Reforms Commission, Government of ln~ia. Under Chap-
ter XIV, the Committee has discussed the forms of organiza-
tion, namely, departmental undertaking, Government C()mpany
and PSU. It ob~erved that departrnental undertakings are un-
suitable fo~commercial enterprises. It is furt_her D
obseFVed ttiat, in India, the Government has adopted the method
of running companies by directly ·holding shares in them. Ac-
cording to the Committee, this is the pattern of public sec.tor in
India: This,-according to the Committee, is apart from ~tatutory
corporations which are set up or established·under Central/State E
Acts. According to the Committee, a public corporation as a
form-covers statutory corporation, Government compa_ny and
public sector company. According to the Committee, PSU and
Government company are to be equated in the sense that these
two entities are the same when it comes.to autonomy and flex- F
ibility as compared to. departmental undertakings. One point
may be noted at this stage. The concept .of PSU and the con-
cept of Government company became relevant after introduc-
tion of economic reforms in 1991. With the said .reforms, mar-
ket orientation was given to our economy. It is around this time G
that the role of PSU became important. Both, the PSU as weil
as the Government company, were given autonomy and flex-
ibility in commercial sectors. Annexure I to the Report of the
Study Team on PS Us dated 10.6.1967 ·indicates clearly that
Government companies stood covered under the concept of H
296 SUPREME COURT REPORTS [2008] 12 S.C.R.

A PSUs. In the present matter, the High Court has taken a view
that Government companies stands excluded from PSU under
Section 3(1)(b) as Government companies are separate and
distinct entities from PS Us and since Government Company is
not in the enumerated item~ in Section 3(1 )(b) one cannot in-
8 elude the said entity within the meaning of the word PSU. This
view of the High Court is erroneous for the simple reason that
the word PSU is not defined under any Act. "the word PSU is
indicated in various Parliamentary Committees on Administra-
tive Reforms so that in financial, employment and in policy mat-
e ters, the Central/ State Government could evolve norms/stan-
dards. It is no doubttrue that the public character of the func-
tions performed by the Undertaking determine the character of
that undertaking. It is the public charac:;ter of the functions of the
undertaking which makes it a PSU. However, there is no con-
D elusive test for determining the status of an undertaking ~s a
PSU. In judging the character of an entity, the court has to keep
in mind the context in which the word PSU is used in a given
enactment. There are a number of tests which could be applied
in judging the character of an entity, namely, the test of origin,
E the tes·t of agency or instrumentality of the State, the functional
test, the monopolistic status of an entity, test concerning areas
of operations, the test of economies of scale, the test of control,
the role of the entity in the priority sector etc. Therefore, there is
no one conclusive test applicable to decide the character of an
entlty. For example, nationalized banks have been held to fall
F within State by this, Court on an application of the test of control.
Similarly, the test of "agency or instrumentality" that came to be
laid down brought the Government companies, as defined un-
der Section 617 of the 1956 Act. to be included within the con-
cept of. State for the purposes of Article 12 of the Constitution
G (see: Som Prakash Rekhi v. UOI and anr. [1981]1SCC449).
Therefore, none of the above tests is conclusive in itself. Suf-
fice it to state that Government companies under Section 617
are understoog by the Legislature to be a part of PSUs.. There-
fore, even on the web site of Central Government; Undertak~
. H ings under the caption of PSUsiPSEs, we find Government
SMT. LEELABAI GAJANAN PANSARE & ORS. v. 297
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]
\,. ,,
companies, State owned Government companies being listed A
under the caption of PSUs/PSEs. These items have been enu-
merated on the basis of Legislative Understanding. According
to the book titled "Growth of Trade, Commerce and PS Us" Writ-
ten by Shri Suresh Prasad Padhy, the PS Us may be in. the form
of departmental units, corporations, Government companies, B

... -i
autonomous bodies or authorities. Corporate governance, ac-
cording to Geeta Gouri; is one of the major process for putting
PS Es and PS Us on the right track. In the list of PS Us published
on the web site of the Central Govern met, BPCL is shown as a
PSU. Similarly, MTNL and BSNL are Government companies c
which are also shown as PSUs. According to Bishwa Nath
Singh, author of "Public Enterprise in Theory and Practice" for
"efficient working of public enterprises a combination of
economy and accountability is essential. The corporate form of
undertaking has an advantageous position because it has nee-
D
essary flexibility and operational freedom. The statutory corpo-
rations are set up under specific Statute of Parliament which
statute indicates the extent of their accountability and the na-
ture of Parliamentary control. On the other hand, a Government
·I
company is possessed with the merits of easy formation, flex-
ibility in administration, wider source of resources mobilization, E
freedom from accounting and audit laws and procedures appli-
cable to Government departments as well as providing a bal-
ance between autonomy and control. For its formation, there is
no need of a separate enactment. Under the Indian Campa-
nies Act, 1956, a company may be established by issue of ex- F
)-~
ecutive order by a Gazette notification or on a formal registra-
tion by a Memorandum and Articles of Association. This form
of organization is free from day-to-day Government Interference.
Thus, all the important forms of organization for the PS Us have
certain advantages and certain limitations. A majority of PSU"s G
in India are in the company form and the idea behind bringing
more PS Us in this form has been mainly that of autonomy. Simi-
lar is the case of statutory corporations which are also created
to mitigate the drawbacks of departmental administration" (see
·page 91). H
298 SUPREME COURT REPORTS [2008] 12 S.C.R.

A · · -· 43. In :the Elev·enth Report o{ the Gommitfee on Public
Undertakings (2005-2006) orie ofthe topics related to Health
Care ln-su_r~nce. ·1n .the introduction, the committee has referred
to health insurance schemes issued by four,'Public sectors gen~
eraf'insurance com-pani~s. namely, National Insurance Com-
8 pan'y Ltd., New India Assurance Company Ltd., OICLand UICL.
In the ·saldintroduCtion; there is.also referen·ce to LIC, a sta.tu-
tory· corporation, which also offers health covers. This Report
\- ...
indicates that companies under Section 617 of the Companies
Act, 1956, ·including OICL and UICL, are all classified under
c one category, namely· PS Us. The Committee ·was headed by
the Chairman, Rupchand Pal; it~'members consisted ofMPs
from~ Lok ·s-~t>ha and Rajya Sabha'. The Report also refe'rs to
.. - . -- the opening up of the insu'rance indu~try in the year 20.00 for
competitibn from private players including· banks and it also
refers to the cohstitutioh of a regulatory authority, namely, lnsur-
0
a_nce "Regulatory and Development Authority Act,• 1999_ ·
' • ,/ ' r '
I

44.-A similar Committee on Public Undertakings had cQn-
ducted studies on OICL and National Insurance Company Ltd.
in- 2001-2002 consisting of MPs from Lok Sabha and.R.ajya
E Sabha. This Report.also indicates that the Legislature has taken
into accqunt the impactof privatization on the insurance sector.
In. the Report, public s~ctor undertakings cover public sector
companies. The Report inc;licates that in the insurance sector,
the. players consist of public sectqr companies, LIC (statutory
F corporation) as well as Government companies under Section
617 .of the. 1956 Act. In the Report, the history of OIC is set out
(see: ·para 2). The point to be noted is that all. Parliamentary
Committees on public undertakings have proceeded pn the
basis that OIC and UICL are companies under Section 617 of
G · the.--1956 Act; that they are public sector-insurance companies
and accordingly they are all treated as body corporates falling
under PSUs., · 1
45. Therefore, the above discussion indicates clearly that
statutOrY. cbrporatfons, public sector companies ar.d Govern-
H ment companies are merely corporate forms. India's PS Us may
SMT. LEELABAI GAJANAN PANSARE & ORS. v. 299
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]

-- ., be in the corporate forms or in the form of statutory corpora-
tions or in the form of public sector companies. This is the leg-
islative understanding indicated by various Parliamentary Com-
A

mittees like Estimates Committee, Administrative Reforms
Commission and Study Team on PSUs constituted by Admin-
istrative Reforms Commission. The insurance industry in India B
has private players in it like Bajaj Allianz Life. It also has SBI
I

-4
Life as one of the players. It also has UC in the said sector/
~ industry besides OIC, UIC etc. This aspect is important.
46. According to the respondents, the words 'PSUs' in
Section 3(1 )(b) has to be read with the words any corporation c
established by or under Central or State Act. In other words,
according to the respondents, only those PSUs which are es-
tablished by or under any Central or State Act alone stand ex-
eluded from the protection of the Rent Act According to the re-
spondents, PSUs which are Government companies incorpo- D
rated under Section 617 of the 1956 Act are entitled to the pro-
tection as they are not expressly excluded under Section 3(1)(b).
~
We do not find merit in this submission. Firstly, it may be noted
that several entities have been enumerated in Section 3(1 )(b),
namely, banks, PSUs or statutory corporations, foreign mis- E
sions, international agencies, multinational companies and pri-
vate limited and public limited companies having a paid up share
capital of Rs. 1,00,00,000 or more. As stated above, the said
Rent Act, 1999 has brought about structural changes in the leg-

--
islation. In this case, it was open to the legislature to opt for any
F
of the tests, namely, test of origin, test of public character of the
~ functions performed by each of these entities, test of public char-
acter of each of the undertakings, test of agency or instrumen-
tality, test of monopolistic status, test of mobilization of resources
etc. In the present case, we find that the legislature has opted
for an economic criteria, namely, entities which are in a posi- G
tion to pay rent at market rates are to stand excluded from Rent
Act protection. This is the test of Financial Capability. This is
the golden thread which runs through Section 3(1 )(a). Be it banks,
PS Us. Statutory corporations, multinational companies, foreign
H
300 SUPREME COURT REPORTS [2008] 12 S.C.R.

A missions, international agencies and public and private limited
companies having a paid up share capital of Rs. 1,00,00,000
or more stand excluded from the Rent Act protection. This crite-
ria has been s.elected by the legislature knowing fully well that
each of these entities including PS Us can afford to pay rent at
B the market rates. Secondly, we have given in-depth consider-
ation to the contention advanced on behalf of the respondents
on the interpretation of Section 3(1 )(b). We are of the view that
to accept the contention of the respondents, namely, that only
PSUs which are established by or under the Central or State
c Acts will not get protection whereas PSUs which are Govern-
ment companies incorporated under the 1956 Act would con-
tinue to get protection would make the Section 3(1 )(b) vulner-
able to challenge as violative of Article 14 of the Constitution. In
this regard, it may be noted thaUn the insurance industry, we
have LIC, banks, private sector companies and Government
0
companies. To say that LIC being a statutory corporation stands
excluded from the provisions of the Rent Act whereas Govern-
ment companies incorporated under the Companies Act, 1956
would continue to get protection would lead to arbitrary discrimi-
nation under Article 14 to the Constitution. In the case cited by
E Mr. Soli J. Sorabjee, learned counsel for the appellants, namely,
Shah and Co. v. State of Maharashtra (1967) 3 SCR 466 this
Court held that to place such a construction as will save the
statute from constitutional challenge is a well settled principle
of interpretation. In the said Judgment, it has been held as fol-
F lows:
"to place such a construction as will save the statute from
constitutional challenge ... having special regard for the
principle of constitutional adjudication "which makes it
decisive in the. choice of fair alternatives that one
G construction may raise serious constitutional questions
avoided by another. ... ".
(emphasis supplied)
47. Moreover, if we are to hold that PSUs do not include
H
SMT. LEELABAI GAJANAN PANSARE & ORS. v. 301
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]

>' ') Government companies, as held by the High Court, we would A
be disturbing the package offered by the Legislature of allow-
ing increase of rent annually at 5%, allowing the landlords to
accept premium and exclusion of certain entities from the pro-
tection of the Rent Act under Section 3(1 )(b). On the other hand,
acceptance of the arguments advanced on behalf of the respon- B
dents on the interpretation of Section 3(1 )(b) would make the
Act vulnerable to challenge as violative of Article 14 of the Con-
stitution. Therefore, we are of the view that on a plain meaning
of the words 'PS Us' as understood by the Legislature, it is clear
that, India's PSUs are in the form of statutory corporations, public c
sector companies, Government companies and companies in
which the public are substantially interested (see: Income tax
Act, 1961). Whentheword PSU is mentioned in Section 3(1)(b),
the State Legislature is presumed to know the recommenda-
tions of the various Parliamentary Committees on PS Us. These
D
entities are basically cash-rich entities. They have positive net
asset value. They have positive net worths. They can afford to
pay rents at the market rate. Thirdly, we are. of the view that, in
this case, the principle of noscittur a sociisis clearly applicable.
According to this principle, when two or more words which are
susceptible to analogous meaning are coupled together, the E
words can take their colour from each other. Applying this test,
we hold that Section 3(1 )(b) clearly applies to different catego-
ries of tenants all of whom are capable of paying rent at the
market rates. Multinational companies, international agencies,
statutory corporations, Government companies, public sector F
companies can certainly afford to pay rent at the market rates.
~
This thought is further highlighted by the last category in Sec"'.
tion 3(1)(b). Private limited companies and public limited com-
panies having paid up share capital of more than Rs.
1,00,00,000 are excluded from the protection of the Rent Act. G
This further supports the view which we have taken that each
) and every entities mentioned in Section 3(1 )(b) can afford to
pay rent at the market rates. We may note that to meet the chal-
lenge of discrimination under Article 14 it is not sufficient to state
that there is an intelligible differentia but it is further essential H
302 SUPREME COURT REPORTS [2008] 12 S.C.R.

A requirement to show that the differentia has a rational nexus to ~ ,._,,
the object sought to be achieved by the Statute in question. (see:
State of Rajasthan v. Mukanchand and ors. (1964) 6 SCR 903.)
As stated above, Section 3(1)(b) strikes a balance between
the interest of the landlords and the tenants; it is neither pro-
8 landlords nor anti-tenants. It is pro-public interest. In this con-
nection, one must keep in mind the fact that the said Rent Act,
1999 involves a structural change vis-a-vis the Bombay Rent
....
Act, 1947. As stated above, with the passage of time, the 1947
Act became vulnerable to challenge as violative of Article 14.
c As stated above, the legislature has strike to balance the twin
objectives of Rent Act protection and rent restriction for those
who cannot afford to pay rents at the market rates. To accept
the interpretation advanced on behalf of the respondents for
excluding Government companies from the meaning of the
words "PSUs" in Section 3(1)(b) would amount to disturbing
D
the neat balance struck by the Legislature. OIC and UIC are
Government companies. They have paid up capital of more than
Rs. 100 crores. They can easily afford to pay rents at the mar- ... I,_
ket rates. The legislature in its wisdom has kept PSUs, includ-
ing Government companies, outside the Rent Act. We have to
E proceed on the basis that the State Legislature was aware of ~-

the meaning of the words PSUs as understood by the various
f
Parliamentary Committees. If Government companies are to t
be excluded from Section 3( 1)(b) then the test of intelligible
differentia having rational nexus to the objects sought to be
F ··achieved by the said Rent Act would stand defeated. We can-
not exclude such PSUs from Section 3(1)(b) as is sought to _be
contended on behalf of the respondents. PSUs including Gov-
.,.. ~
t

ernment Companies are independent companies/corporations.
They cannot be equated to the "Government" in Section 3(1 )(a).
G We have to read Section 3(1 )(b) in its entirety. We have to read
the said section keeping in mind the reasons for its enactment.
Lastly, we are of the view that the High Court judgment is erro-
~1
neous when it adds words to Section 3(1)(b), namely, "which is \
not a Government company". In other words, the High Court
states that OIC/UIC and BPCL are public undertakings, how- \
H
SMT. LEELABAI GAJANAN PANSARE & ORS. v. 303
THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]

ever, they are Government companies incorporated under Sec- A
tion 617 of the 1956 Act and, therefore, stand excluded from
Section 3(1 )(b). In this connection it may be stated that High
Court has relied upon the definition of Gbvernment Company
under Section 617 of the Companies Act. In the case of Union
of India and others v. R. C. Jain and others - 1981 (2) SCC B
308 this Court has enunciated the principle that "the definition
of an expression in one Act must not be imported into another.
It would be a new terror in the construction of Acts if we were
required to limit a word to an unnatural sense because in some
Act which is not incorporated or referred to such an interpreta- C
tion is given to it for the purposes of that Act alone." Lastly, the
interpretation placed by the High Court on the word "PSUs" in
Section 3(1 )(b) amounts to judicial legislation and further it de-
feats the very object of Section 3(1 )(b).
48. Before concluding, we may note that we have inter- 0
preted the words 'PS Us' in Section 3(1 )(b) purely in the context
of the provisions of the Maharashtr~ Rent Control Act, 1999.
Our judgment is, therefore, confined strictly to the said provi-
sions of the Rent Act.
49. For the aforestated reasons, we hold that OIC, UIC E
and BPCL and such other Government companies as defined
under Section 617 of the Companies Act are not entitled to pro-
tection of the Maharashtra Rent Control Act, 1999 in view of the
provisions of Section 3( 1)(b).
F
50. Accordingly, civil appeals arising out of SLP(C) No.
5855/07 and 16237/08 filed by Smt. Leelabai Gajanan Pansare
& Ors. and Hongkong & Shanghai Banking Corporation Ltd.
respectively are allowed with no order as to costs.
Civil Appeals arising out of SLP(C) Nos. 24789-247901 G
07:

-- [Bharat Petroleum Corporation Ltd. v. Sunil Niranjan
Jhaveri] '

51. Leave granted. H
r\
304 SUPREME COURT REPORTS [2008] 12 S.C.R.

~- ·'"'
A 52. A decree for possession was passed by the Small
Causes Court at Mumbai against the appellant herein - Mis
Bharat Petroleum Corporation Ltd. (BPCL). It was confirmed
by the Appellate Bench of the Small Causes Court.
53. The decree was challenged by BPCL by filing Civil Re-
B vision Application No ..173/07 in Bombay High Court. The said
-~
CRA No. 173/07 stood rejected by the impugned order dated ).....

·4.5.2007. That decision was given on the merits of the case and
not on the interpretation of Section 3(1)(b) of the Maharashtra
Rent Control Act, 1999 ("Rent Act"). However, thereafter a review
c petition was moved by BPCL vide CRA No. 173/07 in which one
of the grounds taken by BPCL was that in view of the decision of
the Division Bench of the Bombay High Court in the case of Smt.
Leela Gajanan Pansare v. Oriental Insurance Co. Ltd. and ors.
dated 20.12.2006 in First Appeal No. 1245/04 the Revision Pe-
D tition of BPCL needs to be made absolute and the decree of the
Small Causes Court was required to be set aside. ·The review
petition was dismissed by the High Court for lack of factual foun-
dation. Hence, these civil appeals.
54. Today, vide civil appeal arising out of SLP(C) No. 5855/ .L
E 07 we have set aside the Division Bench judgment of the
Bombay High Court dated 20.12.2006 in the case of Smt. Leela
Gajanan Pansare v. Oriental Insurance Co. Ltd ..
55. Accordingly, we dismiss these civil appeals filed by
F BPCL for the reasons contained in our judgment in the case of
Smt. Leela Gajanan Pansare v. Oriental Insurance Co. Ltd. (su-
. pra) with no order as to costs.
56. Since Oriental Insurance Company Ltd., United India
Insurance Company Ltd. and Bharat Petroleum Corporation Ltd.
G are liable to be evicted, decree against them for eviction shall
not be executed for a period of one year commencing from the

-
date of this judgment on their giving undertaking in the usual
form within a period of four weeks.
I..

H K.K.T. Appeals disposed of.