Law Web: Supreme Court: Provision of Maharashtra rent control Act is not applicable to Insurance Company

From the aforesaid it is graphically clear that an Insurance

Company is not protected under the 1999 Act. Once it is held

that defendant No. 1, the New India Assurance Company, the

original tenant, is not protected, the question would be whether a

subtenant can be protected under the Act. In the case of Bhatia

Co-operative Housing Society Ltd. (supra), it has been clearly

laid down that Section 4(1) of the 1947 Act applies to premises

and not to parties or their relationship. Section 3 uses the term

‘premises’. The provision commences with the non-obstante

clause that the Act does not apply to any premises belonging to

the Government or a local authority. Sub-section 3(1)(b) makes

it clear that the Act does not apply to any bank, public sector

undertaking or certain other categories of tenants. The

Insurance Company is covered under Section 3(1)(b). Thus, as a

logical corollary, the Act does not apply to the premises held by

the Insurance Company who is a tenant.

23. The learned Single Judge has allowed protection to the

Government Department on the foundation that it has become a

tenant. We are disposed to think that the analysis is

fundamentally erroneous. When the Act does not cover the

tenant, namely, the Insurance Company as basically the

exemption applies only to premises and not to any relationship,

the subtenant who becomes a deemed tenant cannot enjoy a

better protection or privilege by ostracizing the concept of

premises which is the spine of the provision.

N THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL Nos . 3356-3357/2012

Kesri Commissariat Vs Ministry of Food and Civil Supplies,

Dipak Misra , J

Dated:April 03, 2012.
Citation: AIR 2012 SC 1271:2012(5) MHLJ 212 SC

Leave granted.

2. The plaintiffs, trustees of the Parsee Girls’ School

Association, being aggrieved by the judgment and order dated 5th

March, 2010 in Writ Petition No. 1171 of 2009 and the order

dated 17.9.2010 in Review Petition No. 160 of 2010 passed by the

High Court of Judicature at Bombay whereby the Writ Court has

overturned the judgment and order dated 29.8.2008 of the

Appellate Court of Small Causes at Bombay in Appeal No. 123 of

2005 wherein the Appellate Court had reversed the judgment and

decree passed by the Court of Small Causes at Bombay in T.E. &

R. Suit No. 241 of 2002 wherein the said court had decreed the

suit against defendant No. 1 and dismissed the suit against

defendant No. 2 for recovery of possession, and decreed the suit

in toto and directed recovery of possession with a further

direction of an enquiry as regards the future mesne profits under

Order 20 Rule 12(1)(c) of the Code of Civil Procedure (for short

‘the Code’); have preferred the present appeals by special leave

under Article 136 of the Constitution.

3. Shorn of unnecessary details, the facts which are essential

to be exposited are that the appellants/plaintiffs (hereinafter

referred to as ‘the plaintiffs’) filed a suit against defendant Nos. 1

and 2 for recovery of the suit properties situate at 4th and 5th

Floor of Bengallee Girls High School, 42, Sir Vithaldas

Thackersey Marg, New Marine Lines, Mumbai and for other

reliefs. The case of the plaintiffs before the court of first instance

was that the Parsee Girls’ School Association is a public trust

and owns the suit building where the B.S. Bengallee Girls High

School is run. In the year 1954, the plaintiffs had permitted

defendant No. 1, the New India Assurance Company Ltd., to

occupy the 4th and 5th floors of the suit building on payment of

rent of Rs.6114/- per month. The said company, in the year

1959, without the knowledge and consent of the plaintiffs,

inducted defendant No. 2, the Ministry of Food and Civil

Supplies, Government of Maharashtra, as a subtenant. It was

pleaded that the plaintiffs had the privity of contract only with

defendant No. 1 and had no relationship whatsoever with

defendant No. 2 and, therefore, defendant No. 2 was in unlawful

possession of the premises in question. It was the stance of the

plaintiffs that they, being in need of the suit property for the

School, requested the defendants to deliver the possession but as

sphinx like silence was maintained to the request, being

compelled, they issued notice on 19.11.2001 terminating the

tenancy of defendant No. 1 and instituted the suit for recovery of

possession. It was contended by the plaintiffs that the

defendants were not protected under the provisions of Section

3(1)(b) of the Maharashtra Rent Control Act, 1999 (for brevity ‘the

1999 Act’) and were liable for eviction. A claim for mesne profit

Page 4

was put forth and the same was assessed by the plaintiffs at

Rs.11,45,583/- per month as per the market value.

4. Defendant No. 1, the New India Assurance Company, filed

its written statement setting forth the stance that the suit was

misconceived and not maintainable as the proper remedy on the

part of the plaintiffs was to take recourse to Section 16 of the

1999 Act. It was also asserted that there was no cause of action

for eviction. The further stand of defendant No. 1 was that the

plaintiffs had not obtained permission from the Charity

Commissioner under the Bombay Public Trust Act, 1950. It was

asseverated that defendant No. 1 being a Government Company

was not exempted under the provisions of the 1999 Act. It was

the further stand that with the knowledge and consent of the

trustees, the predecessors of the plaintiffs, had given the suit

premises to defendant No. 2 in the year 1959 and the present

trustees were aware about these facts. The allegation that

defendant No. 2 was in unlawful occupation was strongly refuted.

The bona fide requirement of the plaintiffs was vehemently

controverted. The claim of mesne profits was seriously resisted

by the said defendant.

Page 5

5. Defendant No. 2 filed a separate written statement stating,

inter alia, that the suit was not maintainable; that it was barred

by limitation; that no notice under Section 80 of the Code was

served on it; that the Insurance Company had already shifted its

premises to its own building and sublet the suit premises to

defendant No. 2 and they are in peaceful occupation of the same

with the knowledge of the plaintiffs; and that it being a protected

tenant under the 1999 Act, the relief of eviction was untenable.

6. The learned trial Judge framed number of issues and came

to hold that the tenancy of defendant No. 1 had been validly and

legally terminated; that the suit is not flawed for want of

permission of the Charity Commissioner or want of notice under

Section 80 of the Code; that the plaintiffs are the validly

appointed trustees; that the plaintiffs are entitled to a decree for

possession in respect of the suit premises as far as defendant No.

1 is concerned; and that defendant No. 2 had proved that being a

lawful subtenant, it is protected under the provisions of the 1999

Act and, therefore, decree for possession in respect of the said

defendant could not be granted. The learned trial Judge, to

Page 6

arrive at the conclusion that the provisions of the 1999 Act would

not apply to the Insurance Company, relied on the evidence on

record, namely, the manner in which it has come into existence

and the paid-up capital is more than rupees one crore and that it

is not a Government Company. As far as defendant No. 2 is

concerned, an opinion was expressed that the 1999 Act is

applicable as the premises in question has been given on licence

to a Government Department. After so holding, as is perceptible,

the learned trial Judge proceeded to state that defendant No. 2 is

in exclusive possession of the suit property since 1959 and,

therefore, it had acquired the status of a deemed tenant by virtue

of Section 15(a) of the Bombay Rents, Hotel and Lodging House

Rates Control Act, 1947 as amended in 1987 (for short ‘the 1947

Act’). He also recorded a finding that after coming into force of

the 1999 Act, the status of deemed tenant of defendant No. 2 is

not affected and, therefore, it would get protection as provided

under the 1999 Act. Being of this view, he decreed the suit in

part as has been indicated hereinabove.

7. On an appeal being preferred, the Appellate Court, after

concurring with the findings recorded by the learned trial Judge

and analysing the ambit, purpose and scope of Section 3 (1) (b) of

Page 7

the 1999 Act, came to hold that Section 3(1)(b) of the 1999 Act is

applicable to both the defendants in respect of the suit premises

and, therefore, defendant No. 2 could not become a lawful tenant

of the landlord and claim protection under the provisions of the

1999 Act. On the basis of the aforesaid reasoning, the Appellate

Court decreed the suit for recovery of possession against both the

defendants and directed for mesne profits.

8. The reversal of the decree led defendant No. 2, the Ministry

of Food and Civil Supplies, Government of Maharashtra, to prefer

a writ petition under Article 227 of the Constitution of India in

the High Court at Bombay. It was contended before the learned

Single Judge that the second defendant was inducted as a

subtenant in the year 1959 and by virtue of the provisions of the

1947 Act, it had acquired the status of deemed tenant with effect

from 1st February, 1973 in view of the language employed in subsection

(2) of Section 15 of the said Act and, therefore, it was

entitled to protection. The said submission was combatted by

the respondents therein contending that the suit was governed

under the provisions of Transfer of Property Act and the

conclusion arrived at by the Appellate Court was absolutely

impeccable. The Writ Court, analysing the evidence and findings

Page 8

recorded by the courts below, came to hold that the writ

petitioner was inducted by the Insurance Company in the year

1959 as a subtenant and if the amendment brought in Section

15 of the 1947 Act by Maharashtra Act No. VIII of 1987 is

conjointly read with sub-section (11) of Section 5 of the 1947 Act,

it would be clear that a subtenant who is inducted by the tenant

before 1st February, 1973 becomes the tenant within the meaning

of Section 5(11) of the 1947 Act and hence, the irresistible

conclusion would be that the second defendant became a tenant.

The Writ Court further opined that the 1999 Act came into force

on 1st April, 2000 and by that time, by virtue of sub-section (1) of

Section 4 of the 1947 Act, defendant No. 2, being a Government

Department, had become a tenant and, as a logical corollary,

Clause (a) of Section 3(1) of the 1999 Act would apply to the

premises in question and, therefore, defendant No. 2 enjoyed the

protection of the 1999 Act. Being of this view, the Writ Court

unsettled the judgment and decree for eviction.

9. We have heard Mr. T.R. Andhiyarujina, learned senior

counsel for the appellants, Mr. Chinmoy A. Khaladkar, learned

counsel for respondent No. 1, and Mr. A.K. Raina, learned

counsel for respondent No. 2.

Page 9

10. The singular seminal issue that has emanated for

consideration is whether defendant No. 2, which is respondent

No. 2 herein, would be a protected tenant under the provisions of

the 1999 Act. The learned Single Judge has treated defendant

No. 2 as a deemed tenant and thereby opined that he is entitled

to protection under the 1999 Act. He has placed reliance on the

amended definition of ‘tenant’ and the language employed in

Section 15 of the 1947 Act to come to the conclusion that

defendant No. 2 is a protected tenant under the 1999 Act. To

understand the scheme of the 1947 Act, it is apposite to refer to

Section 4 of the said enactment. It deals with exemptions.

Section 4(1), being relevant, is reproduced below: -

“4. Exemptions. – (1) This Act shall not apply to

any premises belonging to the Government or a

local authority or apply as against the

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 by

the Government, including any premises taken

on behalf 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 authorised in this behalf; but it shall

apply in respect of 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.”

Page 10

11. At this juncture, it is apt to state that Section 4(1) of the

1947 Act in its original frame had come up for consideration

before this Court in Bhatia Co-operative Housing Society Ltd.

v. D.C. Patel1. This Court was considering the applicability of

the 1947 Act to a local authority, regard being had to the

provisions contained in Section 4 of the Act. The crucial point

that arose before the Court was to determine the question of

jurisdiction of the city civil court to entertain the suit keeping in

view the language in which Section 4 of the 1947 Act was

couched. The applicability of the provision was the core issue. It

was observed, if it applied, the city civil court had no jurisdiction

but if it did not, then it had such jurisdiction. After so observing,

the four-Judge Bench proceeded to deal with the fact whether the

Act applied to the demised premises and, accordingly, proceeded

as to what would be the true construction of Section 4(1) of the

1947 Act. This Court scanned the anatomy of the provisions of

Section 4 (1) into three parts, namely, (i) the Act shall not apply

to premises belonging to the Government or a local authority, (ii)

the Act shall not apply as against the Government to any tenancy

(1953) 4 SCR 185

Page 11

or other like relationship created by grant from the Government

in respect of premises taken on lease or requisitioned by the

Government, and (iii) the Act shall apply in respect of premises

let out to the Government or a local authority. After reproducing

the contentions, the Court proceeded to state as follows: -

“Section 4(1) provides for an exemption from or

exception to that general object. The purpose of

the first two parts of section 4(1) is to exempt two

cases of relationship of landlord and tenant from

the operation of the Act, namely, (1) where the

Government or a local authority lets out premises

belonging to it, and (2) where the Government

lets out premises taken on lease or requisitioned

by it. It will be observed that the second part of

section 4(1) quite clearly exempts "any tenancy or

other like relationship" created by the

Government but the first part makes no reference

to any tenancy or other like relationship at all

but exempts the premises belonging to the

Government or a local authority. If the intention

of the first part were as formulated in item (1),

then the first part of section 4(1), like the second

part, would have run thus :-

This Act shall not apply to any tenancy or

other like relationship created by

Government or local authority in respect of

premises belonging to it.

The Legislature was familiar with this form

of expression, for it adopted it in the second part

and yet it did not use that form in the first. The

conclusion is , therefore , irresistible that the

Legislature did not by the first part intend to

exempt the relationship o f landlord and tenant

but intended to confer on the premises belonging

to Government an immunity from the operation

o f the Act . ”

Page 12

[Emphasis added]

Thereafter, the Bench proceeded to state as follows: -

“It is said that if the first part of the section

is so construed as to exempt the premises from

the operation of the Act, not only as between the

Government or a local authority on the one hand

and its lessee on the other, but also as between

that lessee and his sub-tenant, then the whole

purpose of the Act will be frustrated, for it is well

known that most of the lands in Greater Bombay

belong to the Government or one or other local

authority, e.g., Bombay Port Trust and Bombay

Municipality and the greater number of tenants

will not be able to avail themselves of the benefit

and protection of the Act. In the first place, the

preamble to the Act clearly shows that the object

of the Act was to consolidate the law relating to

the control of rents and repairs of certain

premises and not of all premises. The Legislature

may well have thought that an immunity given to

premises belonging to the Government or a local

authority will facilitate the speedy development of

its lands by inducing lessees to take up building

leases on terms advantageous to the Government

or a local authority. Further, as pointed out by

Romer L.J. in Clark v. Downes [1931] 145 L.T.

20, which case was approved by Lord Goddard

C.J. in Rudler v. Franks [1947] 1 K.B. 530 such

immunity will increase the value of the right of

reversion belonging to the Government or a local

authority. The fact that the Government or a local

authority may be trusted to act fairly and

reasonably may have induced the Legislature all

the more readily to give such immunity to

premises belonging to the Government or a local

authority but it cannot be overlooked that the

primary object of giving this immunity was to

protect the interests of the Government or a local

Page 13

authority. This protection requires that the

immunity should be held to attach to the

premises itself and the benefit of it should be

available not only to the Government or a local

authority but also to the lessee deriving title from

it. If the benefit of the immunity was given only to

the Government or a local authority and not to its

lessee as suggested by learned counsel for the

respondent and the Act applied to the premises

as against the lessee, then it must follow that

under section 15 of the Act it will not be lawful

for the lessee to sublet the premises or any part

of it. If such were the consequences, nobody will

take a building lease from the Government or a

local authority and the immunity given to the

Government or a local authority will, for all

practical purposes and in so far at any rate as

the building leases are concerned, be wholly

illusory and worthless and the underlying

purpose for bestowing such immunity will be

rendered wholly ineffective. In our opinion ,

therefore , the consideration o f the protection o f

the interests o f the subtenants in premises

belonging to the Government or a loca l authority

cannot override the plain meaning o f the

preamble or the first part o f section 4(1 ) and

frustrate the rea l purpose o f protecting and

furthering the interests o f the Government or a

loca l authority by conferring on its property an

immunity from the operation o f the Act . ”

[Underlining is ours]

Eventually, this Court opined that the demised premises,

including the building, belonged to the local authority and are

outside the operation of the Act. The Act being out of the way the

appellants were well within their rights to file the suit in

Page 14

ejectment in the City Civil Court and that Court had jurisdiction

to entertain the suit and to pass the decree.

12. We have referred to the aforesaid dictum in extenso to

highlight that the provision exempted the premises let out and a

subtenant cannot claim protection in the premises belonging to

the Government or a local authority as that would frustrate the

real purpose of affording an immunity from the operation of the

Act.

13. In a similar situation, the Court of Appeal in England in the

case of Rudler v. Franks2, speaking through Lord Goddard, C.J.,

has opined thus: -

“The reason why the Acts do not apply when

the tenants of the Crown creates a subtenancy

is first because, as I have just said,

the Acts operate in rem and not in personam

and so are never attached to the house at

all.”

(1947) 1 K.B. 530

Page 15

14. In Percy G. Moore, Ltd. v. Stretch3, it has been held that

the Rent Act applies to property and not to a person or to a

tenant or a subtenant. It is worth noting, in the said cases, the

deliberation pertained to rent restriction.

15. Similarly, in Cow v. Casey4, it has been laid down that a

tenant of premises which are not protected by the Acts cannot

create a sub-tenancy, of part of those premises which would be

protected against the landlord.

16. In this regard, we may refer with profit to the decision in

Nagji Vallabhji and Company v. Meghji Vijpar and Company

and Another5 wherein the question arose as regards the

interpretation of Section 4(1) of the 1947 Act. Be it noted that

sub-section (4)(a) to Section 4 was introduced by the Bombay

Rent Act by the Act 4 of 1953. It was urged that they were lawful

(1951) 1 All ER 228

(1949) 1 K.B. 474

(1988) 3 SCC 68

Page 16

subtenants of the firm and were, therefore, entitled to protection

under Section 4(1) of the 1947 Act. The Bombay City Civil Court

decreed the suit for eviction. In appeal, the learned Single Judge

of the High Court of Bombay remanded the matter on two issues.

On remand, the City Civil Court recorded a finding that the

tenancy of the appellant was not validly terminated. In appeal,

the learned Single Judge came to hold that there was a valid

notice and the provisions of the Rent Act did not apply to the

premises in question. On a further appeal being preferred, the

Division Bench dismissed the same. The Bench referred to the

legislative history of the 1947 Act and the decision in Bhatia Cooperative

Housing Society Ltd. (supra) and referred to Section

4(1) and sub-section (4)(a) to Section 4 and eventually came to

hold as follows: -

“It is significant that the exemption granted

under the earlier part of sub-section (1) of

Section 4 is in respect of the premises and

not in respect of the relationship. In order

to confer the protection of the provisions of

the Bombay Rent Act to the sub-lessees

occupying the premises in any building

erected on Government land or on land

belonging to a local authority irrespective of

the question who has put up the building as

against the lessees of the land but without

affecting the immunity conferred to the

Government or local authorities as

Page 17

contemplated by sub-section (1) of Section 4

of the Bombay Rent Act, we would have

practically rewritten the provisions of

Section 4 and it is not open to us to do

that.”

Thereafter, the Bench proceeded to state as follows: -

“We can only observe that if the intention of

the Legislature is that the protection should

be given to the sub-lessee against the lessee

in a building taken on lease by the lessee

from the Government or a local authority, it

is for the Legislature concerned to make

appropriate amendments in the Bombay

Rent Act and it is not open for us to re-write

the provisions of Sub-section (4)(a) of

Section 4 of the Bombay Rent Act.”

17. In this regard, we may fruitfully refer to the decision in

Parwati Bai v. Radhika6. In the said case, the appellant had

filed a suit for eviction in the Civil Court. A plea was advanced

by the defendants that the suit premises are governed by the

provisions of the Madhya Pradesh Accommodation Control Act,

1961. The courts below accepted the stand of the defendant and

dismissed the suit. The second appeal preferred by the

AIR 2003 SC 3995

Page 18

plaintiff/landlord was dismissed. This Court referred to Section

3(1) of the 1961 Act and held as follows: -

“It is well settled by a decision of this Court in

Bhatia Co-operative Housing Society Ltd. v.

D.C. Patel [(1953) 4 SCR 185), wherein pari

materia provisions contained in the Bombay

Rents, Hotel and Lodging House Rates Control

Act, 1947 came up for consideration of this

Court. It was held that the exemption is not

conferred on the relationship of landlord and

tenant but on the premises itself making it

immune from the operation of the Act. In

identical facts, as the present case is, the

decision of this Court was followed by the High

Court of Madhya Pradesh in Radheylal

Somsingh v. Ratansingh Kishansingh [1977

MPLJ 335] and it was held that the immunity

from operation of the Madhya Pradesh

Accommodation Control Act, 1961 is in respect

of the premises and not with respect to the

parties. If a tenant in municipal premises lets

out the premises to another, a suit by the

tenant for ejectment of his tenant and arrears

of rent would not be governed by the Act as the

premises are exempt under Section 3(1)(b) of

Act though the suit is not between the

municipality as landlord and against its

tenant. We find ourselves in agreement with

the view taken by the High Court of Madhya

Pradesh in Radheylal’s case. It is unfortunate

that this decision binding in the State of

Madhya Pradesh was not taken note of by the

courts below as also by the High Court.”

From the aforesaid pronouncements, it is luminescent that the

provision applies to premises and not to parties or persons. The

learned Single Judge has referred to the definition of ‘tenant’

Page 19

which means ‘any person or by whom or in whose account rent is

payable and includes a tenant or subtenant as derived under a

tenant before the first day of February, 1973’ and has held that

the Government becomes a protected tenant.

18. The thrust of the matter is whether the original tenant is a

protected tenant or not and if not, what benefit would enure to a

subtenant.

19. At this stage we think it appropriate to refer to Section 3 of

the 1999 Act. The said provision also deals with exemption. For

our purpose Clauses (a) and (b) of sub-Section (1) of Section 3,

being relevant, are reproduced below: -

“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 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

by the Government, including any premises

taken on behalf 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 authorised

in this behalf; but it shall apply in respect of

premises let, or given on licence, to the

Page 20

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 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 a paid

up share capital of rupees one crore or

more.”

From the aforesaid provisions, it is quite plain that the Act does

not apply to Government or a local authority or to any premises

let or sub-let to a bank or any public sector undertaking or any

corporation established by or under any Central or State Act,

public limited companies and some other categories. The

exception that has been carved out is that it shall apply in

respect of premises let or given in 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. In the case on hand, the

trust has let out the premises to the Insurance Company.

20. In Leelabai Gajanan Pansare and Others v. Oriental

Insurance Company Limited and Others7, question arose

(2008) 9 SCC 720

Page 21

whether a Government Company falls within the compendious

expression `any public sector undertaking’ or `corporation’

established by or under any Central or State Act enshrined

under Section 7 (1) of the 1999 Act. The respondent in the said

case who was noticed was Oriental Insurance Company Limited.

It was contended before the two-Judge Bench that the concept of

a Government Company is not a part of Section 3 (1) (a) and in

the absence of the word 'Government’ and the presence of other

expressions in Section 3(1)(b), it is to be construed that the

Government Companies are not entitled to receive the protection

of the Rent Act. It was contended on behalf of the respondent

company that a Government Company is sui generis in structure

and in statutory treatment thereof and, therefore, it does not fall

within the compendious expression and the exclusion clause

which applies to public sector undertakings established by or

under any Central or State Act does not apply to a Government

Company like Oriental Insurance Company.

21. After dealing with various contentions, the two-Judge

Bench referred to the various provisions of the 1999 Act, the

Companies Act and dealt with Section 4(1) of the 1947 Act and,

Page 22

placing reliance on Malpe Vishwanath Acharya & ors. v.

State of Maharashtra & Anr8, came to hold as follows: -

“The above discussion is relevant because we

must understand the reason why Section

3(1)(b) came to be enacted. As stated above,

in our view, with the offer of an economic

package to the landlords, the legislature has

tried to maintain a balance. The provisions

of the earlier Rent Act, as stated above, have

become vulnerable, unreasonable and

arbitrary with the passage of time as held by

this Court in the above judgment. The

legislature was aware of the said judgment.

It is reflected in the report of the Joint

Committee. In our view, the changes made

in the present Rent Act by which landlords

are permitted to charge premium, the

provisions by which cash-rich entities are

excluded from the protection of the Rent Act

and the provision providing for annual

increase at a nominal rate of 5% are

structural changes brought about by the

present Rent Act, 1999 vis-ả-vis the 1947

Act. The Rent Act of 1999 is the sequel to

the judgment of this Court in Malpe

Vishwanath Acharya.

The entire discussion hereinabove is,

therefore, not only to go behind Section 3(1)

(b) and ascertain the reasons for enactment

of the said clause but also to enable this

Court to give purposive interpretation to the

said clause.”

(1998) 2 SCC 1

Page 23

After so stating, the two-Judge Bench speaking, through S.H.

Kapadia, J. (as His Lordship then was), observed as follows: -

“73. Moreover, if we are to hold that PSUs do

not include government companies, as held

by the High Court, we would be disturbing

the package offered by the legislature of

allowing increase of rent annually at 5%,

allowing the landlords to accept premium

and exclusion of certain entities from the

protection of the Rent Act under Section 3 (1)

(b). On the other hand, acceptance of the

arguments advanced on behalf of the

respondents on the interpretation of Section

3(1)(b) would make the Act vulnerable to

challenge as violative of Article 14 of the

Constitution. Therefore, we are of the view

that on a plain meaning of the word “PSUs”

as understood by the legislature, it is clear

that India’s PSUs are in the form of statutory

corporations, public sector companies,

government companies and companies in

which the public are substantially interested

(see the Income Tax Act, 1961). When the

word PSU is mentioned in Section 3 (1) (b),

the State Legislature is presumed to know

the recommendations of the various

Parliamentary Committees on PSUs. These

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.

74. Thirdly, we are of the view that, in this

case, the principle of noscitur a sociis is

clearly applicable. According to this

principle, when two or more words which are

susceptible to analogous meanings are

coupled together, the words can take their

colour from each other. Applying this test,

we hold that Section 3(1)(b) clearly applies to

different categories of tenants, all of whom

are capable of paying rent at market rates.

Multinational companies, international

agencies, statutory corporations, government

companies, public sector companies can

certainly afford to pay rent at the market

rates. This thought is further highlighted by

the last category in Section 3(1)(b). Private

limited companies and public limited

companies having a paid-up share capital of

more than Rs.1,00,00,000 are excluded from

the protection of the Rent Act. This further

supports the view which we have taken that

each and every entity mentioned in Section

3(1)(b) can afford to pay rent at the market

rates.

xxx xxx xxx

76. As stated above, Section 3(1)(b) strikes

a balance between the interest of the

landlords and the tenants; it is neither prolandlords

nor anti-tenants. It is pro-public

interest. In this connection, one must keep

in mind the fact that the said Rent Act, 1999

involves a structural change vis-ả-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. As stated above, the legislature

has to strive to balance the twin objectives of

Rent Act protection and rent restriction for

those who cannot afford to pay rents at the

market rates.

77. To accept the interpretation advanced

on behalf of the respondents for excluding

government companies from the meaning of

the word “PSUs” in Section 3(1)(b) would

amount to disturbing the neat balance

struck by the legislature.”

22. From the aforesaid it is graphically clear that an Insurance