IMPORTANT POINT
In fixation of fair rent u/s 4(4) of Tamil Nadu Rent Control Act, neither the value of building raised by the tenant on leased vacant land with permission of landlord nor the vacant land as a built up area can be taken into consideration.

JUDGMENT

Dharmadhikari, J.-These appeals are by the landlord and the question raised is on the method of valuation of the premises leased to the respondent tenant, in accordance with Section 4(4) of the Tamil Nadu Buildings (Lease & Rent Control) Act, 1960 (hereinafter referred to as the "the Act" for short) for fixation of `fair rent .

2. The question, neatly put is whether in valuation of land with the superstructure of landlord let out, the portion of the land which has been built upon by the tenant with the permission of the landlord, has to be valued as a built up land or as vacant land under Section 4(4) of the Act for fixation of fair rent? The Rent Controller, the Appellate Court and the High Court of Madras by the impugned order dated 14.9.2001 have concurrently held against the landlord that in valuation of the leased premises, for fixation of fair rent, the portion of the land on which the tenant had been allowed to construct by the landlord cannot be valued as a built up land.

3. The learned counsel appearing for the landlord after taking us through the provisions of the Act and the decision of the Madras High Court including one of the full Bench, contended that the words used in section 4(4) "market value of the site on which the building is constructed" include both the lands on which the building leased out of the landlord stands as also the building raised by the tenant.

4. After hearing learned counsel appearing for the parties we have come to the conclusion that the contention advanced on behalf of the landlord has to be answered against him on the plain language of Section 4(4) of the Act read with the definition of the word building given in section 2(2) of the Act.

5. Section 4 which provides the method of valuation of fixation of fair rent reads as under:

Section 4(4) : Fixation of fair rent :

(1) The Controller shall on application made by the tenant or the landlord of a building and after holding such enquiry as he thinks fit, fix the fair rent for such building in accordance with the principle as set out in the following sub-sections.

(2) The fair rent for any residential building shall be nine per cent gross return per annum on the total cost of such building.

(3) The fair rent for any non-residential building shall be twelve per cent gross return per annum on the total cost of such building.

(4) The total cost referred to in sub-section (2) and sub-section (3) shall consist of the market value of the site in which the building is constructed, the cost of construction of the building and the cost of provisions of anyone or more of the amenities specified in Schedule-I as on the date of application for fixation of fair rent:

Provided that while calculating the market value of the site in which the building is constructed, the Controller shall take into account only that portion of the site on which the building is constructed and of a portion upto fifty per cent, thereof of the vacant land, if any, appurtenant to such building the excess portion of the vacant land, being treated as amenity;

Provided further that the cost of provision of amenities specified in Schedule I shall not exceed-

(I) In the case of any residential building, fifteen per cent; and

(II) In the case of any non-residential building, twenty five per cent,

of the cost of site in which the building is constructed, and the cost of construction of the building as determined under this section."

6. As seen from Section 4(4) above, in valuation of the property leased for fixation of fair rent three factors are to be considered (1) market-value of the site in which the building is constructed (2) the cost of construction of the building (3) cost of provision of any one or more of the amenities specified in Schedule-I.

7. The first proviso to the sub-section then provides that in calculating market-value of the site in which the building is constructed, the actual built up area covered by construction and the appurte