1. Application for fixation of standard rent for newly constructed premises under Section 7A of the Delhi and Ajmer-Merwara Rent Control Act, 1947. (Para 2 , 3 , 17 , 19 )
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1961 Supreme(SC) 264
SUPREME COURT OF INDIA
2nd August, 1961
B.P. SINHA, C.J.I., S.K. DAS, A.K. SARKAR, N. RAJAGOPALA AYYANGAR AND J.R. MUDHOLKAR, JJ.
Civil Appeal No. 171 of 1958.
Roshan Lal Mehra, Appellant
Versus
Ishwar Dass, Respondent.
with
Civil Appeals Nos. 172 to 186 of 1958.
British Medical Stores etc. Appellants
Versus
Amar Nath and others etc. Respondents.
Civil Appeal No. 171 of 1958 with Civil Appeals Nos. 172 to 186 of 1958.
Advocates appeared
Mr. Anoop Singh, Advocate, for Appellant; In C.A. No. 171 of 1958. Mr. Basant Kumar Jaggi, Advocate, for Respondent; In C. As. Nos. 172 to 186 of 1958. Mr. A. V. Viswanatha Sastri. Senior Advocate (Mr. R. Ganapathy Iyer, Advocate and G. Gopalakrishnan, Advocate of M/s. Gagrat and Co. with him), for Appellants; Mr. C. K. Daphtary, Solicitor-General of India and Mr. C. B. Aggarwala, Senior Advocate (Mr. K. P. Gupta, Advocate with them), for Respondents Nos. 1 to 4.
Important Points
The classification of newly constructed premises for rent fixation is constitutional under Article 14. Principles of natural justice are satisfied if a party is given reasonable opportunity to be heard; subsequent absence or non-cooperation does not invalidate the tribunal's ex parte findings.
Subject
Civil Law - Rent Control
Act Referred
Headnote
(A) Rent Control Act - Sections 7 and 7A, Schedule IV - Constitution of India - Article 14 - Fixation of standard rent for newly constructed premises - Classification between premises completed before and after a specific date is based on intelligible differentia having a rational nexus with the objects of the statute, including differences in construction costs, rates of return on investments, the need to encourage housing to meet acute shortages, and the prevention of excessive rent charging - Provisions do not grant arbitrary power as the Rent Controller is required to state reasons in writing and the order is appealable to the District Judge. (Para 9)
(B) Principles of Natural Justice - Procedure followed by a quasi-judicial tribunal - Rules of natural justice require that a party should have the opportunity of adducing all relevant evidence and that the evidence of the opponent should be taken in their presence - If a party chooses to be absent despite repeated notices and opportunities, they cannot later claim violation of natural justice - Recalcitrance of a party does not invalidate ex parte proceedings. (Paras 10, 11)
(C) Rent Control - Jurisdiction - "Newly constructed premises" includes additions such as a second floor built with reinforced concrete replacing temporary structures - A separate preliminary enquiry to determine if rent is "excessive" is not mandatory in all circumstances; a written complaint may provide sufficient prima facie grounds for the Rent Controller to proceed with the fixation of standard rent. (Paras 12, 17)
(D) Rent Control - Fixation of rent for vacant shops - Fixing standard rent for vacant shops within a building does not vitiate the proceedings for fixing rent for shops occupied by tenants. (Para 14)
Facts of the case:
Tenants applied for the fixation of standard rent for shops and flats in several buildings, alleging excessive rent. The Rent Controller fixed the rent after local enquiries and inspections, as the landlord failed to produce records despite multiple opportunities. The High Court set aside these orders, holding that the relevant section of the Rent Control Act was unconstitutional under Article 14 and that the principles of natural justice were violated. In another instance, the High Court held that the construction of a second floor was a mere improvement rather than new construction.
Findings of Court:
The court held that the classification between old and new buildings is constitutional. It found no violation of natural justice as the landlord was given ample opportunity to be heard. It affirmed that the construction of a second floor constituted "new construction" and that the Rent Controller's procedure for determining excessive rent was valid.
Issues: Whether the classification of newly constructed premises under the Rent Control Act violates Article 14; whether the Rent Controller's ex parte proceedings violated natural justice; whether the addition of a second floor constitutes new construction; and whether a preliminary enquiry is mandatory to establish excessive rent.
Ratio Decidendi: The court reasoned that the distinction between old and new buildings is justified by economic factors and housing needs. Natural justice is satisfied if a party is given a fair opportunity to present evidence; failure to utilize that opportunity does not render the proceedings void. A jurisdictional fact, such as "new construction," is determined by the nature of the work performed.
Result: Appeals allowed.
(B) Principles of Natural Justice - Procedure followed by a quasi-judicial tribunal - Rules of natural justice require that a party should have the opportunity of adducing all relevant evidence and that the evidence of the opponent should be taken in their presence - If a party chooses to be absent despite repeated notices and opportunities, they cannot later claim violation of natural justice - Recalcitrance of a party does not invalidate ex parte proceedings. (Paras 10, 11)
(C) Rent Control - Jurisdiction - "Newly constructed premises" includes additions such as a second floor built with reinforced concrete replacing temporary structures - A separate preliminary enquiry to determine if rent is "excessive" is not mandatory in all circumstances; a written complaint may provide sufficient prima facie grounds for the Rent Controller to proceed with the fixation of standard rent. (Paras 12, 17)
(D) Rent Control - Fixation of rent for vacant shops - Fixing standard rent for vacant shops within a building does not vitiate the proceedings for fixing rent for shops occupied by tenants. (Para 14)
Facts of the case:
Tenants applied for the fixation of standard rent for shops and flats in several buildings, alleging excessive rent. The Rent Controller fixed the rent after local enquiries and inspections, as the landlord failed to produce records despite multiple opportunities. The High Court set aside these orders, holding that the relevant section of the Rent Control Act was unconstitutional under Article 14 and that the principles of natural justice were violated. In another instance, the High Court held that the construction of a second floor was a mere improvement rather than new construction.
Findings of Court:
The court held that the classification between old and new buildings is constitutional. It found no violation of natural justice as the landlord was given ample opportunity to be heard. It affirmed that the construction of a second floor constituted "new construction" and that the Rent Controller's procedure for determining excessive rent was valid.
Issues: Whether the classification of newly constructed premises under the Rent Control Act violates Article 14; whether the Rent Controller's ex parte proceedings violated natural justice; whether the addition of a second floor constitutes new construction; and whether a preliminary enquiry is mandatory to establish excessive rent.
Ratio Decidendi: The court reasoned that the distinction between old and new buildings is justified by economic factors and housing needs. Natural justice is satisfied if a party is given a fair opportunity to present evidence; failure to utilize that opportunity does not render the proceedings void. A jurisdictional fact, such as "new construction," is determined by the nature of the work performed.
Result: Appeals allowed.
Legal Category Hierarchy
Advocates:
A.V.VISHWANATHA SASTRI, ANUP SINGH, BASANT CHOUDHARY, C.B.AGARWAL, C.K.DAFTARY, G.GOPALAKRISHNAN, GAGRAT JANEDRA LAL, K.P.GUPTA, R.Ganapathy Iyer
A.V.VISHWANATHA SASTRI, ANUP SINGH, BASANT CHOUDHARY, C.B.AGARWAL, C.K.DAFTARY, G.GOPALAKRISHNAN, GAGRAT JANEDRA LAL, K.P.GUPTA, R.Ganapathy Iyer
Table of Contents
2. Challenge to the constitutionality of Section 7A under Article 14 and allegations of violation of principles of natural justice in rent fixation proceedings. (Para 6 , 10 , 11 , 12 , 13 )
3. Classification of new and old buildings is based on intelligible differentia; natural justice requires opportunity to be heard, not strict adherence to Evidence Act procedures. (Para 9 , 10 , 11 , 12 , 14 , 15 , 17 )
4. Reasonable classification under Article 14 is valid if there is a rational nexus with the statute's object; natural justice is satisfied by providing opportunity to be heard. (Para 9 , 10 )
5. Appeals allowed; High Court orders set aside and District Judge's orders restored; application for rent fixation remanded for determination. (Para 16 , 18 , 21 , 22 )
6. Does the different procedure for fixing standard rent for newly constructed premises under Section 7A violate Article 14 of the Constitution?
No. The classification between old and new buildings is based on intelligible differentia with a rational nexus to the object of the statute, considering differences in construction costs, investment returns, and the need to encourage housing to meet acute shortages. (Para 9 )
7. Does the failure to record evidence as per the Evidence Act in rent fixation proceedings constitute a violation of natural justice?
No. Natural justice requires that a party has the opportunity to adduce relevant evidence and explain materials relied upon; strict adherence to the Evidence Act is not mandatory for tribunals exercising quasi-judicial powers. (Para 10 )
8. Is a separate preliminary enquiry mandatory to establish that rent is excessive before the Rent Controller proceeds to fix standard rent?
No. In cases where a written complaint provides prima facie reasons to believe the rent is excessive, the Rent Controller may proceed directly to the enquiry for fixing standard rent without a separate preliminary finding. (Para 12 )
9. Can a Rent Controller fix standard rent for vacant shops when determining rent for occupied premises in the same building?
Yes. While not strictly necessary for vacant shops, the Rent Controller must consider the cost of the entire building and land value to determine the standard rent for occupied shops. (Para 14 )
10. How is the distinction between new construction and improvement determined for jurisdiction under Section 7A?
It is a question of fact. If evidence shows a structure was built after the statutory date—such as replacing temporary wooden and iron structures with reinforced concrete—it constitutes new construction. (Para 17 )
Judgment
S. K. DAS, J. : These are 16 appeals which have been heard together. For facility of considering them on merits, it would be convenient to classify them into three categories. In the first category fall Civil Appeals Nos. 172 to 184 of 1958. In the second category are two appeals, Civil Appeals Nos. 185 and 186 of 1958. In the third category falls Civil Appeal No. 171 of 1958. The appeals in the first two categories arise out of a judgment in revison rendered by the High Court of Punjab at Simla on August 26, 1954. That decision was reported in British Medical Stores v. Bhagirath Mal , ILR (1955) Punj 639. The appeal in the third category arises out of a short order of the said High Court dated March 7, 1956, by which it dismissed an application made by the appellant-tenant under Art. 227 of the Constitution. It appears that the order was based on the decision given by the High Court in the first two categories of cases. The appeals in the first two categories have been brought to this Court on a certificate granted by the High Court, and have been consolidated by an order made by the said Court. Civil Appeal No. 171 of 1958 has been brought to this Court in pursuance of special leave granted by this Court on November 19, 1956.
2. The reason why these appeals have been put in three categories is this. The judgment of the High Court against which these appeals are really directed is the judgment rendered in the first two categories of cases (reported in ILR (1955) Punj 639. That judgment related to four sets of buildings of Chandni Chowk in Delhi. In Civil Appeals Nos. 172 to 186, we are concerned with two of these buildings owned by the landlord Bhagirath Mal, who has since died and is now represented by some of the respondents. For convenience, however, we shall refer to him as the landlord. The two buildings we are concerned with are called (1) "Chemists Market", also known as "Medicine Market", and (2) Prem Building ". Both these buildings are part of a colony called "Bhagirath Colony". Several tenants took on rent flats or rooms in the said buildings and the question which fell for determination was the fair and standard rent payable for the said flats or rooms under S. 7A of the Delhi and Ajmer-Merwara Rent Control Act, 1947 (Act XIX of 1947), hereinafter referred to as the Control Act, l947. In the first two categories of appeals, the main point for consideration before us is whether the judgment rendered by the High Court on August 26, 1954, was correct, the High Court having held that the whole proceedings taken before the Rent Controller were ultra vires and without jurisdiction. The reasons given for this finding by the High Court were not quite the same in respect of the two buildings ; somewhat different reasons were given in the cases of the two tenants in the Prem Building. Therefore, it would be convenient to deal with the main judgment of the High Court in Civil Appeals Nos. 172 to 184 of 1958 of the tenants in the building known as "Chemists Market". We shall then deal with the special considerations arising in the two appeals preferred by the tenants of the "Prem Building. Lastly, we shall deal with Civil Appeal No. 171 of 1958 which relates to a different building altogether belonging to a different proprietor, namely two ground-floor flats of a house on plot No. 20, Block no. 13 in Western Extension Area, Karolbagh, New Delhi. We shall later state the facts of that appeal, but it is sufficient to state here that the application for fixation of standard rent for the flats in the Karolbagh house was dismissed on the ground that the High Court had held earlier in the first two categories of cases, that S. 7A of the Control Act, 1947 was unconstitutional and void after the coming into force of the Constitution of India on January 26, 1950.
Civil Appeals Nos. 172 to 184 of 1958.
3. Having made these preliminary remarks with regard to the classification of the appeals, we proceed now to state the facts with
