A covenant not to build in a lease agreement does not affect a tenant's right to compensation for buildings erected in breach of the covenant under S. 3 of the Madras City Tenants Protection Act, 1921, and does not bar the tenant's right to purchase the land under S. 9 of the Act.

Headnote:
MADRAS CITY TENANTS PROTECTION ACT, 1921 - S. 3, 9, 12 - TENANT'S RIGHT TO PURCHASE LAND - COVENANT NOT TO BUILD - EFFECT - INTERPRETATION OF STATUTE - PREAMBLE - SCOPE.
Fact of the Case:

The appellants were tenants of the respondent landlord. They had entered into a written lease agreement for a year, which included a covenant not to build on the leased land. However, they constructed buildings on the land and continued to occupy it even after the lease expired. The landlord filed a suit for ejectment, and the appellants applied under S. 9 of the Madras City Tenants Protection Act, 1921, claiming the right to purchase the land.
Finding of the Court:

The Court held that the appellants were entitled to purchase the land under S. 9 of the Act, despite the covenant not to build. The Court interpreted S. 3 of the Act, which provides for compensation to tenants for buildings erected by them, to include all tenants, including those who had breached a covenant not to build. The Court also held that the covenant not to build could not be used to interpret S. 3 or S. 9, as it would render S. 12, which protects tenants' rights under the Act from being taken away or limited by contract, ineffective.
Issues: Whether the appellants were entitled to purchase the land under S. 9 of the Madras City Tenants Protection Act, 1921, despite the covenant not to build.
Ratio Decidendi: The Court interpreted S. 3 of the Act to include all tenants, including those who had breached a covenant not to build. The Court also held that the covenant not to build could not be used to interpret S. 3 or S. 9, as it would render S. 12, which protects tenants' rights under the Act from being taken away or limited by contract, ineffective.
Final Decision: The Court allowed the appeal, set aside the judgment of the Division Bench, and restored the judgment of the Single Judge, which had granted the appellants' application to purchase the land.

Judgement

SARKAR, J. : (Subba Rao and Mudholkar, JJ. with him) : By an unregistered instrument of lease, dated February 3, 1953, the respondent let out a piece of vacant land in the town of Coimbatore to the appellants for the term of one year at a rent of Rs. 30 per month. The tenants held over after the expiry of the term reserved and the tenancy was continued. The lease provided that the tenants "shall not raise any building whatsoever in the vacant site" but they committed a breach of the covenant by putting up a building on the land.

2. On December 4, 1956, the lessor filed a suit for ejectment of the tenants and their sub-tenants. Pending the suit, the Madras City Tenants Protection Act, 1921, was on February 19, 1958 made applicable to the town of Coimbatore and thereupon the tenants made an application in the suit under S. 9 of the Act for an order directing the lessor to sell the land to them. The trial Court, a learned Sub-Judge in first appeal and Anantanarayanan, J. in second appeal to the High Court of Madras held that the tenants were entitled to the order. A Division Bench of the High Court took a contrary view in a Letters Patent Appeal preferred by the lessor. The tenants have appealed to this Court against the judgment of the Division Bench.

3. The question naturally turns upon the provisions of the Act the relevant parts of which we will, therefore, set out at once.

Section 2 (4). " Tenant means tenant of land liable to pay rent on it.

Section 3. "Every tenant shall on ejectment be entitled to be paid as compensation the value of any building which may have been erected by him."

Section 9. "Any tenant who is entitled to compensation under S. 3 and against whom a suit in ejectment has been instituted .... may ...... apply to the Court for an order that the landlord shall be directed to sell ....... the extent of land to be specified in the application."

Section 12. "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."

It will be noticed that a tenant entitled to purchase under S. 9 must be a tenant entitled to compensation under S. 3. The real question, therefore, is whether the tenants in the present case were entitled to compensation under S. 3. We may observe that we shall not in the present case be concerned with the proviso to S. 12 as the lease was not by a registered document and hence reference in this judgment to that Section will be to that Section without the proviso. We should also state that by virtue of S. 10. S. 9. is applicable to suits pending in Coimbatore Courts when the Act was applied to that city.

4. It was not disputed in this Court that if the covenant was left out of consideration, the tenants would be entitled to the benefit of Ss. 3 and 9. They would be tenants within the definition of that word in the Act and the ingredients of the other two Sections would be fully satisfied. The learned Judges of the Division Bench also accepted this position.

5. The question then is, Does the covenant make any difference? The learned Judges thought, in our opinion wrongly, that it did. They put the matter in this way : A covenant not to build is valid. If it is valid, it must be enforceable all along and, therefore, also after the termination of the lease by an order for demolition. If it can be so enforced, S. 3 which gives the tenant a right to compensation for the building cannot be applicable to a case where there was such a covenant for the Act could not at the same time have countenanced a compulsory demolition of a building at the instance of the lessor and a right in the tenant to compensation for that building. The enforceability of the covenant, therefore, indicated the scope of S. 3 in spite of its wide terms and the equally wide definit

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