Landlord not precluded from making an application for fair rent determination during subsistence of contractual tenancy: Supreme Court

The Supreme Court observed that a contract is void if prohibited by a statute under a penalty, even without express declaration that the contract is void

The Appellants are the tenants who appealed to the Hon’ble Apex Court against the fair rent fixed by the Respondent Landlord through Rent Controller, Hyderabad and in adherence to Telangana Rent Control Act. The Court held that the Petition was devoid of merits as both the tenant and landlord can determine the rent through appropriate authority during the existence of a contractual tenancy.

Case: N.Motilal and Ors. vs. Faisal Bin Ali and Anr.

Case No.: Civil Appeal no.- 710 of 2020

Judgment by- Ashok Bhusan,J.

A tenant can be a contractual tenant or a statutory tenant. A contractual tenant is someone who occupies the premises and is entitled to the possession of the premises during the term of the contract. While a statutory tenancy comes into existence where a contractual tenant retains possession after the contract is terminated. The Rent Control Legislations are enacted to protect both the tenant and the landlord. The object of the Act is that neither the landlord should charge more than the fair rent of the premises nor tenant should be forced to pay higher rent than the fair rent.

Brief facts

  • The appellants are tenants of a Shop and had entered into a lease agreement dated 27.08.1990 with the landlord by which the premises was let out for 20 years to the appellants from 21.08.1990 to 31.07.2010. The previous landlord Osman Bin Saleh transferred the premises in question in favour of the respondent by registered sale deed dated 28.03.2008.
  • The appellants were tenants on a monthly rent of Rs.1840/- excluding electricity charges and water charges. The Respondent who purchased the property on 28.03.2008 filed an application on 29.09.2009 for enhancement of rent. The application was contested by the appellants that they had admitted the tenancy at the monthly rate of Rs.1840/-.
  • The landlord had claimed that the market rent of the similar premises is Rs.75/- per sq. ft. and as per the market rent value the monthly rent of the shop shall be Rs.29,250/- to which the Rent Controller, Hyderabad allowed the application of the respondents and fixed the fair rent at the rate of Rs.60/- per sq. ft i.e.Rs.23,400/-. The tenants were directed to pay the fair rent from the date of filing of the petition with future enhancement of 10% for every two years. Aggrieved by the decision an appeal was filed by the appellants which appeal was dismissed by the Chief Judge, City Small Causes Court and further a civil revision petition has also been dismissed bythe HC.

Issues

  • Whether during currency of contractual tenancy i.e. during the currency of agreed rent between the landlord and the tenant whether landlord is precluded from making an application for determination of fair rent?
  • Whether Section 4 of the Telangana Building (Lease, Rent and Eviction) Control Rent, 1960 has application on the contractual tenancy or not?

Key features

  • Section 4 of the Telangana Act, 1960 provides for determination of fair rent. Section 4(1) provides, “The Controller shall, on application by the tenant or landlord of a building fix the fair rent for such building after holding such inquiry as the Controller thinks fit.”
  • It is only when the contract of tenancy is lawfully determined that the landlord becomes entitled to apply for fixation of fair rent and during subsistence of contractual tenancy landlord is precluded from making an application for fixation of fair rent.

Judgment

  • It was observed by the Court that determination of fair rent can be made both by the landlord and tenant during the existence of contractual tenancy. The determination of the fair rent has to be made as per the provisions of the 1960 Act and the above submission in no manner advance the case of the appellant. Thus, Court found the submission made by the learned counsel for the appellants in the above regard without any substance.
  • The Provision of Section 4(1) gives right to both the tenant and the landlord of a building to make an application for fixing fair rent and hence, cannot be read in a manner that it is not applicable with regard to the contractual tenancy.
  • Therefore, due to lack of merit the petition was dismissed by SC and thereby upholding the law that Landlord is not precluded from making an application for fair rent determination.

Edited by Vartika Gajendra Singh

Approved & Published – Sakshi Raje

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I am Shraddha a third year undergraduate student at S.R.M. University, Delhi NCR persuing B.A.LL.B (Hons.). As someone who is interested in research work, I am more into reading and exploring the unexplored part and law being an endless ocean of knowledge attracts me the most specially certain legal fields such as criminal law, family law, human rights laws, international law interests me the most. Being a passionate reader, I enjoy reading philosophical and motivational books and also autobiographies at times (comics and fairy tales as well). Apart from this Mandela art and travelling are also one of my hobbies.