Failure to dispute standard rent within one month attracts mandatory eviction under Section 12(3)(a).

Indian Oil Corporation Limited (IOCL), the tenant, had taken the suit premises on a registered lease from M/s C.C. Dalal & Company for operating a petroleum outlet. The lease initially ran for 20 years from 19 July 1973, with an automatic ten-year renewal; rent was fixed at ₹1,120 per month initially and ₹1,232 per month after renewal. IOCL subsequently entered into dealership arrangements with M/s Vijay Petroleum, which operated the retail outlet on the premises

The property was transferred first to M.B. Rajput and D.R. Aanchal, and thereafter the respondent-landlord acquired their respective shares, becoming the absolute owner on 11 April 2005. The landlord served attornment notices on IOCL, but IOCL continued paying rent to the erstwhile owners and did not pay rent to the landlord

The landlord issued a statutory demand notice dated 21 February 2006 claiming arrears of rent. IOCL neither replied to the notice nor paid or deposited the arrears within one month of its receipt

The Small Causes Court decreed eviction on the ground of arrears under Section 12(3)(a) of the Gujarat Rents, Hotel and Lodging House Rates Control Act, 1947 (“Rent Act”), and the Appellate Bench confirmed the decree on 23 February 2022

During execution, the executing court appointed a Court Commissioner to remove the construction and inflammable petroleum products and deliver vacant possession to the landlord. M/s Vijay Petroleum challenged the execution order under Article 227, contending that it was a necessary and proper party and that the decree could not be executed without protecting its dealership rights

1. Whether the eviction decree was legally sustainable under Section 12(3)(a) of the Rent Act when the tenant raised the dispute regarding standard rent for the first time in its written statement rather than within one month of receiving the statutory notice

2. Whether payments made by the tenant to the erstwhile owners, despite receiving attornment notices from the new landlord, constituted valid payment of rent and negated the tenant’s statutory default

3. Whether the statutory demand notice was defective because the landlord initially owned only a 75% share of the property and claimed the full rent for the relevant period

4. Whether the dealer was a necessary or proper party to the eviction suit and was entitled to obstruct or challenge execution of the eviction decree

5. Whether the High Court should interfere under Section 29(2) of the Rent Act or Article 227 of the Constitution with the concurrent findings of the courts below and the executing court’s order

The Court applied Sections 12(3)(a), 12(3)(b) and Explanation I of the Rent Act, holding that where monthly rent is in arrears for six months or more, the tenant does not pay within one month of the statutory notice, and no dispute regarding standard rent is raised within that period, eviction under Section 12(3)(a) follows mandatorily

A dispute regarding standard rent raised for the first time in the written statement does not shift the case to Section 12(3)(b), as held in Jaywant S. Kulkarni v. Minochar Dosabhai Shroff , (1988) 4 SCC 108, Arjun Khiamal Makhijani v. Jamnadas C. Tuliani , (1989) 4 SCC 612, and Taraben Wd/o Bansilal Maganlal v. Gulamhusssain Rajabali Lokhandwala , 2000 (2) GLH 754

Even under Section 12(3)(b), the tenant must strictly comply with the statutory conditions, including payment of all rent due on the first date of hearing and regular subsequent payment; the provision does not confer a discretionary power to relieve a defaulting tenant, as explained in Yusufbhai Noormohammed Jodhpurwala v. Mohd. Sabir Ibrahim Byavarwala , (2015) 6 SCC 526

The scope of revision under Section 29(2) is limited and does not permit reappreciation of evidence unless the findings are perverse, based on no evidence, or affected by a gross error of law, following Hindustan Petroleum Corporation Ltd. v. Dilbahar Singh , (2014) 9 SCC 78

A person is a necessary party only where no effective decree can be passed in their absence, and a proper party only where their presence is necessary for complete adjudication, as held in Mumbai International Airport (P) Ltd. v. Regency Convention Centre & Hotels (P) Ltd. , (2010) 7 SCC 417

The Court found that IOCL had received two attornment notices informing it of the landlord’s acquisition of the property, yet continued paying rent to the former owners and never paid the landlord, including after receiving the statutory demand notice

Payments to the erstwhile owners could not be treated as valid payment to the current landlord after notice of the transfer of ownership. The tenant also failed to raise any dispute regarding standard rent within one month of the statutory notice; its plea, raised only in the written statement, was therefore insufficient to invoke Section 12(3)(b)

The Court further held that, even assuming Section 12(3)(b) applied, IOCL remained in arrears on the date of framing of issues and consequently failed to satisfy the statutory payment conditions

The alleged defect in the notice concerning the landlord’s 75% ownership was rejected because the tenant was aware of the ownership change and, in any event, had failed to pay even the amount payable to the landlord after he became absolute owner

The dealer had no privity of contract with the landlord, possessed no independent interest in the property, and was merely authorised by IOCL to operate the retail outlet. It was therefore neither a necessary nor a proper party to the eviction suit and could not defeat execution of the decree

Since the findings of the courts below were neither perverse nor legally erroneous, no interference was warranted in revision or under Article 227

The Court also upheld the executing court’s direction for removal of the petroleum products and construction and delivery of vacant possession to the landlord. All connected applications were rejected, the executing court was directed to conclude the execution proceedings expeditiously, and no order as to costs was made

The subsequent request to suspend operation of the judgment was also refused