Full Judgment Text
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CASE NO.:
Appeal (civil) 4332 of 2006
PETITIONER:
Everest Industries Ltd. and Anr.
RESPONDENT:
Board of Trustees for the Port of calcutta and Ors.
DATE OF JUDGMENT: 29/09/2006
BENCH:
S.B. Sinha & Dalveer Bhandari
JUDGMENT:
JUDGMENT
S.B. Sinha. J.
Leave granted.
Respondent herein is constituted under the Major Port Trusts Act, 1963 (for
short, "the Act’). It is owner of a large plot of land. By an indenture of
lease dated 15th March, 1938, Appellant No.l was given in lease a plot of
land bearing No. D-117, measuring 28344.716 square metre for a period of 30
years with effect from 1st February, 1938. The said deed of lease contained
a renewal clause providing that at the expiration thereof it could be
renewed for a further period of 10 years with two further options of
renewal of 10 years each, but at an increased rate of rent, which would not
exceed 50% of the rent for the period immediately preceding. Another deed
of lease was executed by Respondents in favour of Appellants in respect of
plot No. D-117/1, measuring 2380.919 square metre for a period of 10 years
with effect from 1st February, 1958. The said deed of lease also contained
identical renewal clause.
The period of lease in terms of the said instrument having come to an end,
a representation was made by Appellant No. 1 herein to Respondents for
renewal thereof. By a notification dated 19th September, 1996, the Rent
Schedule of land, inter alia., was altered. The said notification was
issued purported to be in terms of Section 56 of the Act. Item No. 17 of
the said notification refers to the lease hold properties in question,
stating :
17. Turawla Road from Budge 777.00 (50 Metres)
Budge Road to Circular 416.00 (2nd Belt)
Garden Reach Road"
Notes were appended to the said notification whereby, inter alia, it was
directed :
"(2) (a) In future long term leases will be granted for the period for 15
years on recovery of 4 years’5 rent as non-refundable and non-adjustable
premium in addition to the monthly rent.
(b) the long term leases coming up for further extension after expiry
of the lease term and where no renewal option is existing, the full
schedule rent will be applicable straightway and premium equivalent to 4
years rent will be recovered. In cases of renewals of leases having option
for the same, those will be governed by relevant covenants of the lease.
(c) In case of Port-owned structures generally monthly leases/licences
will be granted.
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(3) The schedule rates of rent will be applicable to all existing
tenancies, licences and leases excepting that the rates of rent in existing
long term leases will be governed by the relevant covenant of the lease.
(4) In cases of all long term leases granted in future and all existing
monthly leases and licences, the rent will be enhanced at the rate of 5.1%
per annum. In addition to the enhancement as stated above, the future long
term leases will also contain a provision to the effect that if such
escalated rent is found to be lower than the scheduled rent after every 5
years, then the rent payable will be raised to the level of the prevailing
schedule rent."
Appellants herein, inter alia, contended that as by reason of the said
notification, the quantum of rent has been increased by more than 5200% and
as they were required to pay a huge amount by way of premium and security,
the same was violative of Article 14 of the Constitution of India being
arbitrary in nature. Further contention of Appellants was that the said
notification is ultra vires the provisions of the Act.
Before the High Court the minutes of the meeting of the Public Accounts
Committee were placed recommending increase in rent in the manner specified
therein. It was opined that the notification in question was not violative
of Article 14 of the Constitution of India. It was further held that a
fresh lease was required to be granted in view of the conditions laid down
in original lease as the period of sixty years had expired. Referring to
various provisions of the Transfer of Property Act, 1882, it was held :
"......No attempt was made to show that the petitioners have got any equity
in their favour to be classified as a preferred class than others, who may
be interested to take the properties now in the occupation of the
petitioners on lease. On the other hand, as aforesaid, the lessees having
option to renew their existing leases have got a right inbuilt in their
leases to have a renewal and accordingly, they can always be classified as
a separate class and be dealt with separately in order to honour the
commitment the Board of Trustees have already made in the leases, which
granted such a right of renewal."
The court refused to apply the ‘Doctrine of proportionality’, stating
"....It would be totally inappropriate to compare the rent, that was being
paid by the Petitioners, with the rent, which is now being sought for on
the basis of the said Schedule and to conclude that the rise in the rent is
utterly disproportionate. The reason for the action was lapse of time from
the previous rent schedule and the result of the action was the schedule
itself. It was not urged that the same is disproportionate."
It was noticed:
"In case of the Petitioner in W.P. 1690 of 2001 there was no
renewal clause in the expired lease. The case of the said
petitioner is that it reasonably expected that after expiry of the
lease in question the same would be renewed for further period upon
reasonable increase in rent since on an earlier occasion after
expiry of earlier leases, the expired lease was executed."
On the aforementioned findings, the learned Single Judge dismissed the said
writ petition. An intra-court appeal was preferred by Appellants before the
Calcutta High Court which was registered as G.A. No. 54/2005 in APOT No.
7/2005. The Division Bench of the High Court, while admitting the appeal
for hearing, and upon taking into consideration the hardship which could be
faced by Appellant-Company if it is directed to pay the premium as also the
increased rent, passed the order impugned herein. Before the High Court,
the parties extensively relied upon a judgment of Jamshed Hormusji Wadia v.
Board of Trustees, Port of Mumbai & Anr., [2004] 3 SCC 214.
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Upon hearing the parties on the merit of the matter, it was directed :
"(i) Both the appellants shall pay the enhanced interest at the rate of
80% of the enhancement which has been enforced by the aforesaid Schedule
along with necessary payments/deposits introduced by the said schedule with
effect from the month of April, 2005.
(ii) In so far as the arrears are concerned, the appellants will pay within
4 weeks from the date 50% of the arrears without prejudice to their rights
and contentions in the appeal. The authorities will accept the same without
prejudice to their rights and contentions.
(iii) In so far as the balance of 20% of the rent as well as 50% of the
arrear amount is concerned, both the appellants shall furnish within 8
weeks from date bank guarantee with any nationalized Bank and shall keep on
renewing the same till the disposal of the appeal. We make it clear that if
the above directions are not complied with, the Port Trust Authorities will
be at liberty to take appropriate steps in accordance with law.
(iv) Payments in respect of the enhanced schedule of Rent as well as the
arrears shall have to be made within a period of four weeks from date."
Liberty, however, was granted to the parties to mention the matter for
early hearing of the appeals.
This Court, by an order dated 12.5.2005, while issuing notice, stayed only
the demand of premium.
Pursuant to the said direction Appellant No.l had paid 80% of the current
rate, as directed by the High Court. It also furnished bank guarantees as
directed. It is not in dispute that except for the premium, all other
directions of the High Court have since been complied with.
Mr. Ranjit Kumar, learned Senior counsel appearing on behalf of Appellants
submitted that the demand of Respondents is highly arbitrary and, thus,
violative of Article 14 of the Constitution of India. The learned counsel
would urge that the Division Bench of the High Court committed a serious
error in passing the impugned judgment in so far as it failed to take into
consideration that no premium was payable under the Deed of Lease. Demand,
therefore, on the basis of the impugned notification, which has no
statutory backing, was per se illegal.
The learned counsel appearing on behalf of Respondents, on the other hand,
submitted that the quantum of rent fixed for the lands in question is much
below the market rent. According to the learned counsel, the term of lease
having expired, in terms of the order passed in the writ petition, a
benefit has been conferred upon Appellant No. 1 as it had no right of
renewal.
Respondent-Board is a ‘State’ within the meaning of Article 12 of the
Constitution of India. It is not bound by the Rent Acts. The short
questions which would, therefore, arise for consideration before the
Division Bench, inter alia, is : As to whether the action impugned in the
writ petition by Appellants herein was arbitrary?’
In Jamshed Hormusji (supra), the law was stated in the following terms:
"The position of law is settled that the State and its authorities
including instrumentalities of States have to be just, fair and
reasonable in all their activities including those in the field of
contracts. Even while playing the role of a landlord or a tenant,
the State and its authorities remain so and cannot be heard or seen
causing displeasure or discomfort to Article 14 of the Constitution
of India.
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It is common knowledge that several rent control legislations exist
spread around the country, the emergence whereof was witnessed by
the post-World War scarcity of accommodation. Often these
legislations exempt from their applicability the properties owned
by the Government, semi-government or public bodies, Government-
owned corporations, trusts and other instrumentalities of State."
This Court proceeded to decide the questions in regard to the purpose for
granting such exemption and opined that the validity of the actions of
Respondents in the field of landlord-tenant relationship is available to be
tested not only under the rent control legislations but also under the
Constitution observing :
"The rent control legislations are temporary, if not seasonal; the
Constitution is permanent and an all-time law."
The writ petition filed by Appellants has been dismissed. The Division
Bench of the High Court exercised its discretionary jurisdiction in the
matter of grant of interim relief. Ordinarily, this Court does not
interfere therewith. We have noticed hereinbefore that a major part of the
directions issued by the High Court has been complied with. The only
payment which is required to be made by Appellant is 50% of the amount of
premium and furnishing of Bank Guarantee in respect of the rest 50%.
Appellant is an industry. It employs 600 persons. The High Court on
consideration of the afore-mentioned fact passed an order which according
to it would not be totally harsh. It directed payment of only 50% of the
amount of premium. We are not inclined to interfere with the said
direction. We, however, instead of directing Appellant to furnish bank
guarantee for the rest 50% of the amount of premium, direct that an
adequate security in respect thereof to the satisfaction of the Registrar,
Original Side of the High Court, be furnished. In the event, Respondents
are held not to be entitled to the entire increased rent or the amount of
premium, the payment of the amount deposited towards security in terms of
the said notification dated 19th September, 1996 as also the demand, as
contained in letter dated 13.7.2001 by Respondent, shall be subject to the
condition that in the event Respondents are found liable to get refund of
any amount, the same shall carry interest @12% per annum.
We would, however, in the peculiar facts and circumstances of this case,
request the Division Bench of the High Court to consider the desirability
of disposing of the appeal as expeditiously as possible and preferably,
within a period of two months from the date of issuance of this order.
This appeal is disposed of on the aforementioned terms. In the facts and
circumstances of this case, the parties shall pay and bear their own costs.