Full Judgment Text
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PETITIONER:
MYLAPORE HINDU PERMANANT LTD. MADRAS
Vs.
RESPONDENT:
K. S. SUBRAMANIA IYER
DATE OF JUDGMENT:
06/05/1970
BENCH:
VAIDYIALINGAM, C.A.
BENCH:
VAIDYIALINGAM, C.A.
SIKRI, S.M.
BHARGAVA, VISHISHTHA
CITATION:
1970 AIR 1683 1971 SCR (1) 546
1970 SCC (2) 307
CITATOR INFO :
RF 1971 SC2366 (7,10)
ACT:
The Madras City Tenants Protection Act (Mad. 3 of 1922) as
amended by Amending, Act 19 of 1955, ss. 3, 9 and 12--Scope
of.
HEADNOTE:
Two kinds of rights have been conferred on lessees under
tenancies ’falling within the scope of the Madras City
Tenants’ Protection Act, 1921, as amended by the Amendment
Act of 1055. The first is a right to be paid compensation
under s.3 for ’buildings erected by the tenants on the
leased land before they are evicted, and- the second, a,
right under s. 9 to the tenant entitled to compensation
under s. 3, to exercise the option to require the landlord
to sell to him the land covered by the lease for a price to
be computed in accordance with that section. Under s. 12,
nothing in any contract made by the tenant shall take away
or limit his rights under the Act, provided that, nothing
herein contained shall affect any stipulations made by the
tenant, in writing ’registered, as to the erection of
buildings in relation to buildings erected after the date of
the contract. The first part of s. 12 protects a tenant
against the deprivation or limitation of his rights under
the Act, and the fights conferred by the Act do not directly
relate to covenants relating to, erection of buildings.
The respondent took the appellant’s vacant land on lease for
ten years. The registered lease deed provided that the
lessee could put up a building whose cost should not exceed
Rs. 10,000, that the plan of the proposed building was to be
approved by the directors of the appellant, ,that the
construction should be in accordance with the approved plan,
that the lessee should surrender possession with the
construction at the end of the lease period and that the
lessor would pay the valuation of the construction then
current, or Rs. 5,000 whichever is less. The respondent put
,up a building. On the question, whether on the expiry of
the lease period, the respondent was entitled to the rights
under ss. 3 and 9, or the stipulations in the lease deed
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were covered by the proviso in s. 12.
HELD:In Vajrapani Naidu v. New Theatre Carnatic Talkies,
[1964] 6 S.C.R. 1015, it was held that the object of the Act
was to protect tenants against any contractual engagements
entered into by them expressly or by implication depriving
themselves wholly or partially of the rights conferred by
the statute; that the only class of cases in which the
protection becomes ineffective is when the tenant had made a
stipulation as per the proviso in s. 12; that a stipulation
to vacate and deliver possession of the land after
demolishing the building constructed by the tenant, really
amounted to the tenant giving up his right under s. 9, and
that the stipulation was not one as to erection of building,
and hence, would not come under the proviso in s. 12.
Stipulations regarding restrictions about size, nature of
the building constructed the building materials to be used
therein, and the purpose for which the building is to be-
utilized, are given in the decision as some illustrative
examples of stipulations covered by the proviso in s. 12.
[558 F-H; 559 A-B]
(1) In the present case although the stipulations do not
expressly refer to the size and nature of the building add
the building materials to be used therein, they are all
implicit in the stipulations which fix the upper limit of
the cost of the building to be constructed and require the
approval ,of the plan of the building by the directors of
the appellant. Therefore,
547
the stipulations are as to the erection of the buildings and
attract the proviso in s. 12. [560 A-C]
(2) In V. S. Mudaliar v. N. A. Raghava Chary, [1969] 2
S.C.R. 158, it was held that a stipulation that the tenant
shall not erect any permanent structures so as to entitle
him to claim their value was a stipulation under the proviso
in s. 12 as to the erection of buildings- and disentitled
the tenant from claiming compensation under s. 3, in respect
of buildings put up by him in contravention of the
stipulation. Therefore, the stipulation in the present case
under which the respondent agreed to limit the quantum of
compensation payable in respect of the building constructed
by him was also a stipulation as to the erection of
buildings attracting the proviso in s. 12. [561 G-H-, 562 A]
R. V. Naidu v. Naraindas, [1966] 1 S.C.R. 110, ’referred
to.
(3) Since the stipulation prevails and overrides the
tenant’s rights under s. 3, he was not entitled to
compensation under that section, and therefore, could not
claim the benefit under s. 9. [562 A-B]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 596 of 1967.
Appeal from the judgment and decree dated December 1, 1964
of the Madras High Court in Letters Patent Appeal No. 32 of
1963.
M. Natesan and R. Gopalakrishnan,, for the appellant.
S. C. Manchanda and M. S. Narasimhan, for the respondent.
The Judgment of the Court was delivered by
Vaidialingam J The short question that aries for con-
sideration in this appeal, by certificate, is whether a term
in a registered lease deed, in and by which the lessee of a
vacant piece of land agrees to surrender, on termination of
the lease, not only the land but also the super-structure
put up by him, for the price agreed to between the parties
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and provided for in the lease, is "a stipulation made by the
tenant in writing registered as to the erection of
buildings" so as to attract, in favour of the landlord, the
proviso to s.12 of the Madras City Tenants’ Protection Act,
1921 (Madras Act III of 1922) as amended by the Madras City
Tenants’ Protection (Amendment) Act, 1955 (Act XIX of
1955)--hereinafter called the Act. In this appeal we are
not concerned with the later amendments made to the Act.
The appellant was the owner of a vacant site bearing No.
4/7. Ponnambala Vathiar Street, Mylapore, Madras-4. The
respondent made a request to the appellant, by his letter
Exhibit A-2, dated January 30, 1947 to lease in his favour
the said vacant site for a period of ten years on a monthly
rental of Rs. 30/-. In that letter the respondent stated
that he wanted to put up a building on that site at a cost
of not more than Rs. 6,5001- and that, after the expiry of
the lease period it was open to the appellant to continue
the lease or not; but, in case lease period was not
extended, the respondent made a request that he should be
paid back the amount of Rs. 6,500/ or any less amount that
might have been
548
incurred for putting up the super-structure on the plot.
After further correspondence between the parties, the
appellant finally wrote, on April 22, 1947 to the respondent
a letter, Exhibit A-6, by which they intimated to the
respondent that on vacating or giving possession of the land
and building that may be put up by the lessee, the
appellants will pay the valuation of the building on the
date of surrender or a sum of Rs. 5,000/-, whichever is
less. The appellant further intimated that it the
respondent was agreeable, the draft lease agreement sent by
them might be approved for being finalised. It was, under
those circumstances, that finally the lease arrangement,
Exhibit A-1, was jointly entered into by the parties by a
registered document, dated April 30, 1947.
Under Exhibit A-1 the respondent took the land on lease for
a period of ten years commencing from May 1, 1947. The
document provided that the lessee was to pay a ground rent
of Rs. 45/- per month. Clauses 2, 4 and 9 of the lease deed
are relevant and may be set out :
"2. The Lessee is permitted to put up a
building at a cost of not more than Rs.
10,000/- on the plot leased to him, after
approval of the plan of the proposed building
by the Board of Directors of the Lessors, and
the construction to be put up must be in
accordance with the plan approved by the
Directors of the Lessors.
4. The lease shall be in force for a term
of ten years commencing from the First day
of May, 1947 and on the expiry thereof the
lessee shall surrender possession of the
entire property and the constructions if any
thereon. On vacating of giving possession as
above the lessor shall pay the valuation
thereof, then current or the sum of Rs. 5,000-
whichever is less.
9. In case of breach or infringement of any
of the conditions above-mentioned by the
Lessee, the Lessors are at liberty to
determine the lease irrespective of the period
provided herein by giving three months’ notice
to the lessee and the lessors may take
possession of the property themselves without
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any compensation."
There were other clauses relating to the payment by the
lessee of an taxes that may be imposed on the property so
long as he was in possession and prohibiting the lessee from
sub-letting, assigning or transferring the plot to any one
without the permission in writing of the lessors. There
were also provisions ,,regarding payment of advance rent and
also the date within which the monthly rent was to be paid..
549
There is no controversy that the respondent put up a build-
ing at his own cost for the purpose of his business in
accordance with the terms and conditions of the lease deed.
On the expiry of the lease period of 10 years, the
appellant, by notice dated August 1, 1957 (Exhibit A-36)
called upon the respondent to surrender possession of the
land as well as the building in accordance with the
provisions of the lease deed dated April 30, 1947 and
offering to pay a sum of Rs. 5,000- for the building. The
respondent sent a reply, Exhibit A-37, dated August 27, 1957
declining to surrender possession either of the land or the
building. He stated that in view of the rights conferred on
him as a tenant of the land under the Act as amended by Act
XIX of 1955, he was entitled to continue in undisturbed
occupation as a tenant of the leasehold and that if eviction
proceedings are taken by the appellant he will be obliged to
apply under the Act for directing the landlord to convey to
him the land at a price to be fixed by the Court as per the
provisions of the Act. The respondent declined to accept
the amount of Rs. 5,000/- offered by the appellant as the
value of the house put up by him on the property-
The appellant instituted on April 22, 1958 O.S. No. 796 of
1958 in the City Civil Court, Madras, seeking to recover
possession from the respondent of the land and building and
also offering to pay the sum of Rs. 5,000/- as the value for
the building in accordance with the terms of the lease deed.
There was also a claim for mesne profits. The respondent
contested the suit on various grounds. *In particular, the
respondent pleaded that under the Act he is not bound to
surrender possession of the land with the building, as
claimed by the plaintiff. On the other hand, according to
the respondent, notwithstanding the expiry of the lease
period, he was entitled to continue in possession of the
land and that he had a right under s. 9 to call upon the
plaintiff to sell the land to him for a price to be fixed by
the Court in accordance with the provisions of the Act. For
this purpose. the respondent filed an application, I.A. No.
484 of 1958, under s.9 requesting the Court for an order
that the landlord be directed to sell the land for a price
to be fixed by the Court.
The learned City Civil Judge, by his judgment and decree
dated December 10, 1959 upheld the contentions of the
respondent. ’Me learned Judge held that notwithstanding the
agreement entered into by the tenant to surrender the land
and also the building on receiving the value mentioned in
Exhibit A-1 after the termination of the lease period, such
an agreement no longer held good in view of the protection
conferred on tenants by the Act. The learned Judge further
held that the respondent was entitled to exercise his option
under s. 9 to purchase the land for
550
the price fixed by the Court. In this view the learned
Judge disallowed the plaintiff’s prayer for recovery of
possession of the land and building and allowed I.A. No, 484
of 1958 filed by the respondent under s. 9. But the learned
Judge however directed that it was only if default was
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committed by the respondent in paying the value that may be
fixed by the Commissioner in I.A, 484 of 1958 the appellant
would be entitled to get a decree for possession on payment
of Rs. 5,0001- to the respondent as compensation for the
super-structure, under S. 3 of the Act.
The appellant carried the matter in appeal to the Madras
High Court in A.S. No. 208 of 1960. By judgment dated janu-
ary 30, 1963 the learned Single Judge, Ramakrishnan, J., set
aside the decree of the City Civil Judge holding that the
tenant was bound by the terms and conditions under Exhibit
A-1 and, as such, was liable to surrender possession not
only of the land but also of the building, on receipt of the
sum of Rs. 5,000/from the landlord as per clause 4 of
Exhibit A-1.. That is, the learned Judge took the view that
the terms contained in clause 4 read with clause 2 of
Exhibit A-1 amounted to stipulations as to the erection of
buildings, attracting the proviso to s.12 and those
stipulations will have to be enforced as against the tenant.
Ultimately, the learned Single Judge decreed the plaintiff’s
claim for recovery of possession of the land and building on
his depositing the sum of Rs. 5,000/- representing the value
of the super-structure. There was a further direction given
to the trial Court for ascertaining the quantum of mesne
profits.
The respondent carried the matter in appeal before the Divi-
sion Bench of the High Court under cl. 15 of the Letters
Patent. By decree and judgment dated December 1, 1964 the
Letters Patent Bench reversed the decree of the learned
Single Judge and dismissed the appellant’s suit, with costs
throughout. According to the learned Judges of the Letters
Patent Bench, clauses 2 and 4 of the lease deed did not and
could not deprive the rights conferred on a tenant under the
Act, of claiming compensation for the building under s.3 or
his exercising the option to purchase the I-and under s. 9.
The further view of the Division Bench is that the matters
referred to in clause 2 and 4 in Exhibit A-1 cannot be
considered to be "stipulations as to the erection of
buildings," so as to attract the proviso to s. 12 of the
Act.
It may be stated, at this stage, that the Division Bench
has, by and large, taken the view that the position is
concluded against the appellant-landlord by the decision of
this Court in N. Vajrapani Nadiu v. New Theatre Carnatic
Talkies(1), wherein this Court
(1) [1964] 6 S.C.R 1015.
551
had upheld a decision of the Madras High Court that a
stipulation in the lease for demolition of the building and
surrender of vacant possession of the site was not one
within the proviso to s. 12 of the Act. We shall refer to
that decision at the appropriate stage and consider whether
the point in issue before us is covered by the same, as
assumed by the Letters Patent Bench of the High Court. But
we may indicate that the appellant had raised a contention
in the suit, as well as before the High Court that the lease
in favour of the respondent was not of a vacant piece of
land but of a land together with a building and hence the
Act had no application to that lease arrangement., So far as
this aspect is concerned, it has been now concurrently held
by all the Courts that the lease under Exhibit A-1 was of
only a vacant piece of land. Therefore we have to discuss
the problem arising before us on the basis that the lease
was only; of vacant land. If clause 4 read with clause 2 of
the lease deed Exhibit A-1, is construed as a stipulation
’as to the erection of buildings’ within the proviso to
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s.12, the appellant will have to succeed. If not, the
respondent will be entitled to the rights conferred on him
under the Act and pursue the relief asked For by him in, the
application filed by him under s. 9 of the Act.
The Act was passed with a view to give protection to tenants
who, in certain, areas, had constructed buildings in others’
lands in the hope that they would not be evicted so long as
they paid the fair rent of the land. Originally the Act
applied only to tenancies of land created before its
commencement, viz., February 8, 1922. But, by the Amending
Act XIX of 1955, which came into force on September 10,
1955, the Act has been made applicable in the City of Madras
to tenancies of land created before the commencement of the
Amendment Act of 1955. Therefore it follows that the suit
lease is one to which the Act will apply. It is not really
necessary for us to elaborately consider the scheme or the
various provisions of the Act as amended from time to time,
as they have all been referred to in decisions of this Court
to which we will advert later. It is enough to note that
under the Act,, ’land’ does not include buildings [s. 2 (2)
]; ’Landlord’ means any person owning any land [s. 2 (3) ] ;
’Tenant’ in relation to any land is a person liable to pay
rent in respect of such land, and includes any person who
continues in possession of the land after the determination
of the tenancy agreement [s. 2(4)]. Section 3 provides that
every tenant shall, on ejectment, be entitled to be paid as
compensation the value of any building which may have been
erected by him and for which compensation has not already
been paid. Section 4 provides, among other matters, for the
Court ascertaining the amount of compensation payable under
s. 3 in a suit for ejectment of a tenant in which the
landlord succeeds.
552
Section 5 deals with computation of the compensation
awardable under s.4. Section 9(1) provides that a tenant who
is entitled to compensation under s.3 and against whom a
suit in ejectment has been instituted may, within the time
prescribed therein, apply to the Court for an order that the
landlord should be directed to sell the whole or part of the
land for a price to be fixed by the Court. Section 12
provides :
"Nothing in any contract made by a tenant
shall take away or limit his rights under this
Act provided that nothing herein contained
shall affect any stipulations made by the
tenant in writing registered as to the
erection of buildings, in so far as they
relate to buildings erected after the date of
the contract."
Section 13 provides that in its application to the City of
Madras and to other notified areas, the Transfer of Property
Act, 1882 shall, to the extent necessary to give effect to
the provisions of the Act, be deemed to have been repealed
or modified.
Mr. M. Natesan, learned counsel for the appellant, urged
that in this case, clauses 2 and 4 of the lease deed read
together would amount to a ’stipulation as to the erection
of buildings’ within the proviso to s.12 of the Act and, as
such, the respondent is bound to surrender, on expiry of the
lease period, possession of the land and also the building
after receiving the sum of Rs. 5.000/- as the value of the
super-structure. The counsel pointed out that in this case
the respondent-tenant in Exhibit A-1, a document which is in
writing, registered, has agreed to surrender possession of
the entire property and the constructions thereon, on the
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expiry of the period of the lease, on receiving the sum of
Rs. 5,000/- as the value of the super-structure. In this
case, that term really relates to the building which has
been put up by the tenant after the date of the contract and
clauses 2 and 4 amount to a stipulation made by the tenant
as to the erection of buildings. That is, according to the
learned counsel, the tenant’s agreement to receive the sum
of Rs. 5,000/- as the value of the super-structure that may
be put up by him on the land demised under the lease and to
surrender possession of the land and building, is a
stipulation as to the erection of buildings, coming under
the proviso to S. 12 and, as such, the respondent is not
entitled to any rights under the Act. The counsel also
pointed out that the Letters Patent Bench has not properly
appreciated the scope of the decision of this Court in
Vairapani’s case(1). Counsel further urged that in this
case, as the tenant had agreed to receive the particular
amount of compensation under Exhibit A-1, there was no
question of his claiming any further right to compensation
under
(1) [1964] 6 S.C.R. 1015.
553
s.3 in which case alone s.9 would apply. As s.3 did not
apply, he pointed out, the application filed by the
respondent under s. 9 was not maintainable.
Mr. S. C. Manchanda, learned counsel appearing for the
respondent-tenant, on, the other hand, urged that the
clauses in the lease deed, Exhibit A-1, relied on by the
appellant, cannot be considered to be a stipulation as, to
the erection of buildings, so as to attract the proviso to
s. 12 and that, on the other hand, the opening part of s.12
which preserves the rights conferred on a tenant under the
Act, has full force and effect. The counsel further urged
that neither the right to claim compensation in the manner
provided under the Act, by s.3, nor the right to exercise
the option to purchase the land, conferred on a tenant under
s.9, can be either taken away or limited by any contract
and, if, so, the respondent’s application, filed under s.9,
to direct the appellant to sell the land, was properly
entertained and allowed by the Letters Patent Bench. The
counsel also pointed out that the decision in Vajrapani’s
case(1) fully covers the point in issue and concludes the
case in favour of the tenant.
Before we proceed to discuss the above contentions of the
learned counsel, it is necessary to point out that on the
date when the registered lease arrangement was entered into
between the parties (April 30, 1947), the Act did not apply
to such leases. It is only by the Amendment Act XIX of
1955, which came into force on September 10, 1955 that the
Act has been made applicable to the present lease.
Therefore, on the date when the lease (arrangement was
entered into neither party would have contemplated entering
into any arrangement taking away or limiting the rights
conferred on a tenant by the Act. Now that the Act has been
made applicable to the present lease, without anything more
and as is made clear by the opening words of s.12-the
respondent-tenant will be entitled to avail himself of the
rights conferred on him under the Act and any contract
limiting or taking away such rights will have no effect,
unless the appellant-landlord is able to establish that this
claim for recovery of possession of the land and building is
saved by the proviso to s.12 of the Act.
We shall now consider what the rights given to a tenant
under the Act are. Broadly speaking two kinds of rights
have been coffered on lessees under tenancies falling within
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the scope of the Act. The first is a right to be paid
compensation for the buildings erected by them on the leased
land before they are evicted under s.3 of the Act. The
second right is the one conferred under s.9 to the tenant to
exercise the option to require the landlord to sell to him
the I-and covered by the lease for a price to be computed in
accordance with the said section. It should be further
pointed
(1) [1964] 6 S.C.R. 101 5.
554
out that under s.9 (1 ) (a) ‘ any tenant who is entitled to
compensation under’s. 3’ is alone made eligible, when a suit
in ejectment against him has been instituted, to exercise
the option given to him under the said section. Therefore,
before a tenant can apply to the Court for an order that the
landlord should be directed to sell the land for a price to
be fixed by it, he must satisfy the essential requirement
that he is a ’tenant who is entitled to compensation under
S. 3. Without anything more if a land has been leased to a
tenant and if the latter puts up a building on the property,
he will be entitled on ejectment to be paid compensation for
the value of the building under s.3, to be computed in the
manner prescribed under the Act. Or, in the alternative, he
can fall back upon his right to have the land sold to him in
accordance with s.9 of the Act.
Therefore, the question naturally arises whether the res-
pondent, in this case, having entered into an agreement with
the landlord under Exhibit A-1, to receive the amount
specified therein as the value of the building and surrender
possession of the land and the said building, is entitled to
ignore those terms and fall back-upon s.3 of the Act and
claim compensation in accordance with the Act. If he can,
then it is needless to state that he will be eligible to
file an application under s.9. Ultimately the question
resolves itself to this : Whether a stipulation made by a
tenant in the registered lease-leed limiting the quantum of
compensation payable to him in respect of the buildings
constructed by him on the land is covered by the proviso to
s. 12 of the Act.
There is no controversy that in this case the tenant has en-
tered into a written agreement which has been registered and
he has put up the building on the land after the date of the
contract.
Section 12 of the Act consists of two parts. The first part
is a general provision saving to tenants comprehended by the
Act the rights conferred by its operative terms
notwithstanding any contract. Such rights would, amongst
others, include the rights to claim compensation under ss.3
and 4 and the right to exercise option to purchase the land
from the lessor by an order of Court under S. 9 of the Act.
The second part consists of the proviso which, so to say,
makes an inroad into the generality of the saving, by saving
contradictory stipulations from the operation of, the
statutory rights created by the Act. It is needless to
state that if s.12 had stopped with the first part, the
respondent would be entitled to the benefit of every right
conferred upon tenants by the Act. There is no controversy
that the proviso is intended to cut down the scope of that
saving; so to say, from and out of the prohibition against
the operation of any stipulation in a contract limiting the
rights conferred on tenants by the Act, an
555
exception is carved out. The controversy before us is
centered round the scope and limits of that exception.
We have already referred to the fact that s.13 provides that
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in its application to the City of Madras and to any other
area to which the Act is extended, the Transfer to Property
Act, 1882 shall, to the extent necessary to give effect to
the provisions of the Act,, be deemed to have been repealed
or modified. If the provisions of the Act do not apply, the
position would be that normally, under s.108 of the Transfer
of Property Act, before the expiry of the lease, a lessee
can remove all structures and buildings erected by him on
the demised land. Further, under s. 108, there is nothing
to prevent the lessee’s contracting to handover any building
or superstructure erected on the land by him to the.
lessors, without receiving any compensation. That is,
though under s.108 the lessee has a right to remove the
building, by contract he may agree to hand over the same to
the lessor without the right to receive compensation at the
end of the lease, the matterbeing entirely one of contract
between the parties. But this normal rule under the
Transfer of Property Act will not apply to this case before
us as the provisions of the Act govern the rights. of the
parties.
With the background mentioned above, we shall now proceed:
to refer to the decisions to which our attention has been
drawn, by learned counsel on both sides. Quite naturally,
Mr. Manchanda placed considerable reliance on the decision
of this Court in Vajrapani’s case(1), which decision, we
have already stated, has been treated by the Letters Patent
Bench also as concluding the case against the appellant-
landlord. On the other hand, Mr. Natesan, for the
appellant, has urged that the question that arose before
this Court in the said decision was a very limited ’one,
viz., whether a stipulation, made by a tenant, for giving
vacant possession of the land after demolition of the
building which he had been authorised to construct thereon,
is not one ’as to the erection of buildings’ within the
proviso to s.12 and it was answered in the negative. That
decision, according to the counsel, has no application to
the facts of this case where, the object of the Act viz., of
preserving a building constructed on the land, has. been
given effect to by the terms of the contract entered into
between the parties. As the Letters Patent Bench has
proceeded on the, basis that the said decision concludes the
point against the appellant, it is necessary to refer to the
facts of that case in some detail.
In Vajrapani’s case(1) the appellant had granted a lease of
an open site in the town of Coimbatore to one Abirama
Chettiar tinder a registered lease deed dated September 19,
1934 for 20
(1)[1964] S-C.R. 1015
556
years at an annual rent of Rs. 1080/- for putting up a
building suitable for use as a theatre. After the expiry of
the term of 20 years stipulated under the deed, the lessee
had an option of renewal for another period of 20 years on
fresh terms and conditions. The deed further provided that
if after the termination ,of the stipulated period the
lessees fail to pay the arrears of rent that will fall due
till that date and hand over possession of the site to the
lessors after making it clear by dismantling the con-
structions therein and by demolishing the walls etc., the
lessors shall, besides realising the arrears of rent due to
them according to law, have the right to take possession
through Court of the site in which the aforesaid buildings
are put up after dismantling the ’construction and
demolishing the buildings therein’. The original lessee
constructed a theatre on the site and assigned his rights to
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the New Theatre Carnegie Talkies Ltd., which was the
respondent in the said appeal. The. assignee was recognised
as tenant under the original lease deed of 1934. The
lessors called upon the lessees to surrender vacant
possession of the site on the expiry of the lease period
and, on the lessee, declining to comply with the said
requisition, a suit was instituted by the lessors for
recovery of possession of the land. During-the pendency of
the litigation, the Act, as amended by Madras Act XIX of
1955, was extended to Coimbatore and the tenant filed an
application under s.9 for an order directing the lessors to
convey the site covered by, the lease deed for a price to be
fixed by the Court. The learned Single Judge of the Madras
High Court allowed the application of the tenant under s.9,
on payment of full market value of the land. The landlord
unsuccessfully appealed to a Division Bench under cl. 15 of
the Letters Patent and came up to this Court on certificate
:granted by the High Court.
The question that was debated before this Court, on behalf
of the appellant-landlord was that the application filed by
the tenant under s.9 was not maintainable as the proviso to
s.12 is, attracted to the stipulation made by the tenant to
demolish the building and surrender vacant possession of the
land. After stating that, the Act was passed to prevent
loss to tenants who had constructed buildings on lands taken
on lease by them consequent upon the enforcement of the
strict provisions of the Transfer of Property Act, this
Court considered the scheme of the Act with particular
reference to ss. 3, 9 and 12. It was contended on behalf of
the land-lord-appellant that the stipulation relating to
delivery of vacant possession of the site on’ the expiry of
the period of lease, after removing the buildings is a
stipulation as to the erection of buildings, coming within
the proviso to s. 12 and, as such, therestriction on the
liberty of contract between the landlord andtenant imposed
by the opening clause of s. 12 stood removed. It was
further contended on this basis that the lessee
557
was bound by the terms of the lease and that he was not
entitled,, to claim the benefit of s.9 of the Act.
The majority constituting the Bench did not uphold this
contention of the landlord, and said :
"A covenant in a lease which is duly
registered that the tenant shall on expiry of
the lease remove the building constructed by
him and deliver vacant possession, is
undoubtedly a stipulation relating
to the
building, but it is not a stipulation as to
’the erection of building’. Section 12 has
manifestly been enacted to effectuate the
object of the Act which is set out in the
preamble-viz. ’to give protection to tenants
who. . . have constructed buildings on others’
lands in the hope that they would not be
evicted so long as they pay a fair rent for
the land’. The Legislature has sought thereby
to protect the tenants against any contractual
engagements which may have been made,
expressly or by implication to deprive
themselves wholly or partially of the
protection intended to be conferred by the
signature. And the only class of cases in
which the protection becomes ineffective is
where the tenant has made a stipulation in
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writing registered as to the erection of
buildings, erected after the date of the
contract of lease. The res-triction is
therefore made only in respect of a limited
class of cases which expressly attract the
description of the stipulations as to the
erection of buildings. Having regard to the
object of the Act,, and the language used by
the Legislature, the exception must be
strictly construed, and a stipulation as to
the erection of buildings would not, according
to the ordinary meaning of the words used,
encompass a stipulation to vacate and deliver
possession of the land on the expiry of the
lease without claiming to enforce the
statutory right’, conferred upon the tenant by
s.9. The stipulations not protected in s. 12
are only those in writing registered and
relate to erection of buildings such as
restrictions about the size and nature of the
building constructed, the building materials
to be used therein and the purpose for which
the building is to be utilised."
Based upon the concluding portion of the above extract. Mr.
Manchanda has urged that the proviso to s. 12 will apply
only to those stipulations as to the restrictions as to the
size, the nature of the building constructed, the building
material to be used therein and the purpose for which the
building is to be utilised. The Letters Patent Bench has
also adopted the same test for holding against the
appellant.
558
The minority judgment, on the other hand, in the said deci-
sion, held that a stipulation by the lessee to remove the,
buildings, ,which he has been permitted to erect, when
surrendering the land on the termination of the tenancy, is
a stipulation as to the erection of buildings coming within
the proviso to s.12 of the Act. A perusal of the minority
judgment further shows that it was conceded by Mr. Setalvad,
learned counsel appearing for the appellant-landlord, that a
stipulation limiting the quantum of compensation payable in
respect of buildings constructed by a tenant, provided for
by s. 3 is within the meaning of the proviso to s.12 as
being one with respect to the erection of buildings. This
concession is no doubt not referred to in the majority
judgment ,but, apart from the concession, the minority
judgment has discussed this aspect further and it was held
ultimately that the stipulation in the leas-deed before them
whereunder the tenant agreed to dismantle the buildings put
up by him on the leased and was a stipulation as to the
erection of buildings and covered by the proviso to s.12.
But, in accordance with the majority view, the appeal was
dismissed.
Though prima facie the last part of the extract in the
majority judgment, quoted above, and relied on by Mr.
Manchanda, may appear to support his contention as also the
view taken by the Letters Patent Bench, we are however not
inclined to bold that the majority judgment in the above
decision intended to lay down that only stipulations
regarding restrictions about the size, nature of the
building constructed, the building materials to be used
therein and the purpose for which the building is to be
utilised, exhaust completely all the stipulations that are
protected by the proviso to s.12. Those observations cannot
be taken out of the context in which they appear. A reading
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of the extract quoted above from the majority judgment
clearly shows that the object of the statute was to protect
tenants against any contractual engagements which may have
been made expressly or by implication to deprive themselves
wholly or partially of the protection intended to be
conferred by the statute. Having regard to this object, the
learned Judges have come to the conclusion that a
stipulation to vacate and deliver possession of the land
after demolishing the building constructed by the tenant
will not amount to a stipulation as to the erection of
buildings, coming under the proviso to s. 12. On the other
hand, the majority view is that the stipulation, that came
up for consideration before them, would really amount to a
stipulation by a tenant giving up his right to enforce the
statutory right conferred on him under s.9. It is also
significant to note that in the earlier part of the
judgment, the majority judgment has emphasized that on
account of the inflationary pressure in the wake of the
First World War many tenants who had
55 9
constructed buildings on lands taken on lease by them were
sought to ’be evicted by the landlords and, with a view to
prevent loss to such tenants,, the Act was passed. The
concluding part of the observations in the extract, relied
on by Mr. Manchanda; will have to be read in this background
and, so read, in our opinion the position becomes clear that
the learned Judges were only referring to the size. and
nature of the building, materials used for building, etc.,
as illustrative examples of stipulations which will be
covered by the proviso to s.12 of the Act.
The provision in the lease deed which came up for considera-
tion in the, above decision, in and by which the tenant
agreed to surrender possession of the land after demolishing
the building, will, in our opinion, really amount to the
tenant contracting himself out of the right to claim either
compensation for the building under s.3 or to exercise his
option under s.9 to purchase the land and that such a
provision will be hit by the first part of s. 12 which, as
we have already indicated, preserves the rights given to a
tenant under the Act. Therefore, in our opinion, the
decision in Vajrapani’s case(1) has been misunderstood by
the learned Judges of the Letters Patent Bench and the said
decision is no authority for the proposition that the
stipulation contained in the lease deed before us cannot
come within the proviso to s. 12. The case before us is not
one under which the tenant has in any manner contracted
himself out of the rights conferred on him by the statute.
On the other hand, by allowing the building to stand on the
property and agreeing to receive the amount of compensation
provided for in the,lease deed, the object of the legisla-
tion is fully satisfied. It must also be emphasized that
the first part of s.12 protects a tenant against the
deprivation or limitation of his rights under the Act and
the rights conferred by the Act do not directly relate to
covenants relating to erection of buildings.
We may add that clause 2 of Exhibit A-1 clearly provides
that the lessee can put up a building whose cost should not
exceed Rs. 10.000/- and the plan of the proposed building
has also to be approved by the Directors of the appellants
and the construction to be put up by the tenant must be in
accordance with the plan approved by the directors of the
lessors. Though clause 2 does not, in so may words, refer
to the size and nature of the building to be constructed or
the building materials to be used therein, ,they are all
implicit in the said clause where the cost has been
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mentioned and the plan of the building has to be approved by
the directors of the appellants. Apart from the fact that
in view of the upper limit of the cost having been fixed,
which itself win place a limitation on the size and nature
of the building that could be constructed, as also the
building materials that could be used therein, there is the
further stipulation that the plan has to be
(1) [1964] 6 S.C.R 1015.
5 60
approved by the directors of the lesson as the plan will
clearly and accurately give a correct idea about the size
and nature of the building proposed to be put up on the
land. It is only as per the plan so approved by the lessors
that the building has to be put tip on the land. This
stipulation clearly shows that there is a restriction about
the size and nature of the building. And it is in respect
of such a building put up by the tenant in accordance with
clause 2 that the value is fixed under clause 4. Therefore
it follows that clause 2 read with clause 4 amount to
stipulations as to the erection of buildings and, in this,
view the proviso to s.12 will apply. This aspect has not
been adversed to by the Letters Patent Bench.
In R. V. Naidu v. Naraindas(1) this Court had to deal with a
clause in the lease deed which provided that the tenants
’shall not raise any building whatsoever in the vacant
site’, but the lessee committed a breach of the covenant by
putting up a building on the land. In the suit filed by the
landlord for ejectment, the tenant claimed the right of
opinion to purchase the land under s.9 of the Act. The
Letters Patent Bench of the Madras High Court rejected the
claim of the tenant and declined to grant relief on his
application filed under s.9. In dealing with the claim of
the tenant who was the appellant, this Court noted that the
lease was not by a registered document and, therefore, the
proviso to. s. 12 has no application. But this Court has
emphasised that a tenant, entitled to purchase under s.9,
must be a tenant entitled to compensation under s. 3. In
view of the fact that the lease deed was not registered and
as the proviso to s.12 was ruled as not applicable, this
Court held that the covenant in the lease deed prohibiting
the tenants from putting up constructions will have to be
ignored and the tenants declared entitled to compensation
under s. 3 of the Act and in turn also to exercise the
option to purchase the land under s.9. Ultimately, this
Court held that the tenants, in that case, must be held
entitled to their rights under ss.3 and 9, in spite of the
covenant not to build and breach of it by them.
It is to be noted that this decision had to deal with a case
where the lease deed was not a registered document and, as
such, the application of the proviso to s. 12 was summarily
ruled out. Hidayatullah, J. (as he then was), in his
separate judgment, while agreeing with the conclusion
reached by the other learned Judges, has emphased that by
the first part of S. 12, the tenant is protected against his
own contract and the landlord is protected by the second
part of the said section; but in the case before them the
landlord could not seek protection of the second part
because the lease deed was not registered.
(1) [1966] 1 S.C.R. 110.
561
In V. S. Mudaliar v. N. A. Raghavachary(1) by a registered
lease a vacant land was let to a tenant on the specific,
condition that the tenant ’should not erect any of permanent
superstructures, on. the vacant site so as to entitle him to
claim in future the value thereof. In contravention of this
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stipulation and without ,my authority from the landlord, the
tenant put up a permanent super-structure on the land. The
lease was for a period. of 5 years. As the tenant refused
to vacate the land on the expiry of the lease term, the
landlord filed a suit for recovery of possession of the
land. The tenant claimed protection under the Act and also
filed an application under s.9. The High Court of Madras
decreed the suit of the landlord and rejected the
application filed by the tenant under s.9. This Court, after
again adverting to the scheme of the Act with special
reference to ss.3, 9 and 12 distinguished the decision of
this Court in Naidu’s case(1) on the ground that the
stipulation which was almost identical with the one before
them was contained in an unregistered lease deed and
ultimately held that a stipulation by a tenant, made in a
registered lease deed that he would not build any permanent
structure on the land so as to entitle him to claim in
future the value thereof, is a stipulation ’as to the
erection of a building’ within the proviso to s. 12 and, as
such, upheld the decision of the High Court which declined
to grant relief to the tenant. In the said decision, this
Court again emphasised that ss. 3 and 9 are subject to and
controlled by the proviso to s. 12 though s. 3 provides that
a tenant shall, on ejectment, be entitled to be paid as
compensation the value of any building erected by him, the
right conferred on the tenant by s. 3 is controlled by the
stipulation in the registered lease deed that he shall not
erect permanent structures of any kind of the land so as to
entitled him to claim in future the value thereof. This
Court further held that the said stipulation in the regis-
tered lease deed overrides the tenant’s rights under s. 3
and that if a tenant erects a permanent structure in
contravention of the stipulation, he is not entitled to any
compensation under s. 3. It was further held that as the
said tenant was not entitled to any compensation under s.3,
be cannot claim the benefit of s.9.
If a stipulation, contained in a registered lease deed that
the tenant shall not erect permanent structures on the land
so as to entitle him to claim the value thereof and if such
a stipulation over-rides the tenant’s rights under s.3
disentitling him to claim compensation under s.3 in respect
of buildings put up by him in contravention of the said
stipulation, as held in Mudaliar’s case(1) we have no
hesitation in holding that clause 4 read with clause 2 of
Exhibit A-1, under which the respondent has agreed to limit
the quantum of compensation payable in respect of the
(1) [1969] 2 S.C.R. 158.
13SupCI/70-7
(2) [1966] 1 S.C.R. 110.
562
buildings constructed by him is a ’stipulation as to the
erection of buildings’, attracting the proviso to s. 12 of
the Act. In this view, we further hold that the said
stipulation over-rides the tenant’s rights under s.3, as he
will not be eligible to claim compensation under the Act.
It follows that as he s not entitled to. compensation under
s.3, but only to the value of the building as per the
agreement Exhibit A-1, the tenant cannot claim the benefit
of s. 9. Therefore, it follows that the decree and judgment
of the Letters Patent Bench appeal has to be set aside.
Before we conclude we may also state that Mr. Natesan drew
our attention to a Division Bench judgment of the Madras
High Court in Palaniappa Gounder v. Sridharan Nair(1). We
do not propose to consider that decision as it is seen that
the learned Judges had to consider the question whether a
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term in the contract as to transfer of ownership of the
building, without an,,, claim for compensation, at the
termination of the lease, could be construed to be a
stipulation made by the tenant as to the erection of
buildings. The clauses that arise for consideration before
us to which reference has been made, are entirely different.
Though under Exhibit A-1 the respondent is bound to surender
possession of the land and the building, after receiving the
sum of Rs. 5,000/- as the value of the building, during the
arguments Mr. Natesan, learned counsel for the appellant-
landlord has quite fairly stated that his clients are
prepared to pay a sum Rs. 10,000/- as the value of the
building provided the respondent tenant surrenders vacant
possession of the building and The land to the landlord
within a period of six months from the date of this
judgment, without putting the appellant to the necessity of
taking out execution proceedings. We are of the view that
the appellants’ offer is quite reasonable. Accordingly,
while allowing while allowing the appeal and setting aside
the decree and judgment of the Letters Patent Bench, we
restore the judgment and decree of the learned Single Judge
of the Madras High Court in A.S No. 208 of 1960 dated
January 30, 1963, subject to the following conditions
(1) The appellant will deposit in the trial Court, within
three months from this date the sum of Rs. 10.000/-
(rupees ten thousand) as offered by their counsel as the
value of the building.
(2) The respondent is directed to surrender possession of
the land and building within a period of six months from the
date of this judgment.
(3) If the respondent so surrenders vacant possession of
the’ building and the land within six months or at any
earlier time,
(1) (1963) 2 M.L.J. 559.
5 6 3
on such surrender of possession he will be entitled to
withdraw from Court the sum of Rs. 10,000/- (rupees ten
thousand) deposited by the appellants.
(4) If the respondent does not deliver possession of the
land and building within the period mentioned above, the
appellants can levy execution and recover possession of the
properties, but, under that contingency the respondent will
be entitled only to a sum of Rs. 5,000/- as the value of the
building and the balance amount &an be withdrawn by the
appellants.
(5) If the respondent surrenders possession of the building
and the land within the period mentioned in this judgment,
there will be no liability for mesne profits and the
direction given by the learned Single Judge in that regard
will stand cancelled. If however, possession is not
delivered within time, the enquiry into mesne profits, as
ordered by the learned Single Judge, will proceed.
(6) If the respondent delivers possession of the land and
the building within six months, parties will bear their own
costs throughout. If on the other hand the respondent
commits default in the matter of delivery of possession,
the, appellants will be entitled to their costs throughout.
V.P.S.
Appeal allowed.
564