The conditions specified in sub-section (3) of Section 18 of the Bombay Rent Act, 1947, are incorporated by operation of law in all construction loan agreements, whether they be oral or in writing.

Headnote:
BOMBAY RENT ACT, 1947 - SECTION 18(3) AND 18(4) - CONSTRUCTION LOAN AGREEMENT - REGISTRATION - CONDITIONS - BREACH - OFFENCE.
Fact of the Case:

The accused, a landlord, was convicted under Section 18(4) of the Bombay Rent Act, 1947, for contravention of the provisions of Section 18(3) thereof. The prosecution case was that the accused had received a loan of Rs.5001/- from the complainant for the purpose of financing the erection of a building, and that the accused had failed to complete the building within the stipulated date and had not given possession of the flat allotted to the complainant. The accused was acquitted of the offence under Section 18(1) of the Act, but was convicted under Section 18(4).
Finding of the Court:

The court held that the conditions specified in sub-section (3) of Section 18 of the Bombay Rent Act, 1947, are incorporated by operation of law in all construction loan agreements, whether they be oral or in writing. The court also held that the word "conditions" in sub-section (4) of Section 18 connotes only those conditions which are listed as (I) to (vi) in sub-section (3) or includes also the provision therein that the agreement should be in writing and registered. The court further held that the conditions listed in sub-section (3) must be complied with and breach thereof is an offence under sub-section (4) of Section 18, in all the three cases mentioned above unless of course reasonable excuse for non-compliance be proved.
Issues: 1. Whether the conditions specified in sub-section (3) of Section 18 of the Bombay Rent Act, 1947, are incorporated by operation of law in all construction loan agreements? 2. Whether the word "conditions" in sub-section (4) of Section 18 connotes only those conditions which are listed as (I) to (vi) in sub-section (3) or includes also the provision therein that the agreement should be in writing and registered? 3. Whether the conditions listed in sub-section (3) must be complied with and breach thereof is an offence under sub-section (4) of Section 18, in all the three cases mentioned above unless of course reasonable excuse for non-compliance be proved?
Ratio Decidendi: 1. The words "shall include" in sub-section (3) of Section 18 are capable of two constructors, viz. (a) that the conditions specified in sub-section (3) must, in fact, be included in the construction loan agreement in question; or (b) that they must be incorporated in all construction, loan agreements by operation of law. As a matter of plain language, both are equally correct without any stretching of language or addition of words. However, though these two constructions are possible in a theoretical sense, the only construction which in my opinion is reasonable is the second one, because I fail to see how the legislature could have intended merely to say "you must include these conditions in your agreement", without providing for the consequences of or penalty for their non-inclusion. 2. The provision that is to be found in sub-section (3) that the agreement should be in writing and registered is equally one of the conditions specified in sub-section (3) as there is no reason for excluding the same from the natural meaning of the term conditions. 3. The requirement of the agreement being in writing and being registered is as much a conditions as the other conditions listed in sub-section (3), no more and no less. If, therefore, the agreement under which a construction loan is taken by a landlord is not in writing, or is in writing but is not registered, the landlord commits an offence under sub-section (4) unless of course he can make out any reasonable excuse for not reducing the agreement into writing or not registering the same, in which case, as the language of sub-section (4) clearly shows, he commits no offence. However, even if the landlord has a reasonable excuse for the agreement not being in writing or not being registered, he would still commit an offence if he committed breach of any of the conditions that are to be found listed as (I) to (vi) in sub-section (3), unless he can prove a reasonable excuse for breach of such listed condition also.
Final Decision: The appeal was dismissed, but the sentence was reduced to a fine of Rs. 100/- in default of payment of which, the accused should suffer simple imprisonment for one month.

JUDGMENT - 1.This is an appeal filed by a former landlord against his conviction under Section 18(4) of the Bombay Rent Act, 1947, for contravention of the provisions of Section 18(3) thereof, though he had been acquitted of the offence under Section 18(1) of the same Act, with which also he had been charged in the trial Court. The facts of the prosecution case are that complainant K.S. Ghaswalla agreed to pay to the accused, through a firm of booking agents employed by the accused, a sum of Rs.5001/- as and by way of a construction loan in respect of a building proposed to be constructed by the accused at Kandivli in Bombay. Under the said agreement the said Ghaswalla was to be given the tenancy of Flat No. 36 on the first floor of building No. 3 in the housing colony of which the same was a part. The said Ghaswalla paid to the accused various sums aggregating to Rs.4000/- towards the said sum of Rupees 5001/- payable by him. The agreement between the said Ghaswalla and the accused was reduced into writing. (Exh F), and was dated 16th of September 1966, but was not registered as required by Section 18 (3) of the Bombay Rent Act, 1947. Under the said agreement, it was by necessary implication, though not in express terms, provided that the said building was to be completed on or before 30th December 1967, but the said agreement did not contain any provision creating a charge on the said Building No. 3 and the interest of the accused in the land on which the said building was erected as required by sub-section (3) of S. 18 of the Bombay Rent Act, 1947. The said agreement also contained certain other conditions to which, however, it is not necessary to refer, but it may be stated that the said agreement clearly showed that the loan of Rs. 5001/- which Ghaswalla was to give to the accused was to be given for the purpose of financing the erection of building No. 3 which was to be constructed by the accused. The prosecution case is that the accused, however, failed to complete the said building by the stipulated date viz. 30th December 1967 and that he has in fact not yet completed the same and given possession to Ghaswalla of the flat allotted to him. The accused was, therefore, charged under Section 18(1) and Section 18(4) of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 and was tried for the said offences by the learned Presidency Magistrate, 23rd Court, Esplanade, Bombay, who convicted him of the offence under Section 18(4) of the said Act and sentenced him to a fine of Rs. 500/- but acquitted him of the offence under Section 18(1) of the said Act in view of the decision of the Supreme Court in the case of Tolaram v. State of Bombay. (56 Bom LR 1206) == (AIR 1954 SC 496). It is from the order convicting him of the offence under Section 18(4), that the accused has preferred the present appeal.

2.Several interesting questions releasing to the construction of Section 18 of the Bombay Rent Act, 1947, arise in this appeal and it would, therefore, be convenient at the outset to set out the substance of that section. Sub-section (1) of S. 18 makes it an offence for a landlord to receive any fine, premium or other like sum or deposit or any consideration other than standard rent or the permitted increases in respect of the grant, renewal or continuance of a lease of any premises or for the transfer of a lease". Sub-section (2) of that section provides for the recovery of any fine, premium or other sum or deposit paid by the tenant to the landlord in violation of sub-section (1). Then come sub-sections (3) and (4), with which I am directly concerned in this appeal and I would, therefore, prefer to quote the same verbatim. These sub sections are in the following terms:

"(3) Nothing in this section shall apply to any payment made under any agreement entered into before the first day of September 1940 or to any payment made by any person to a landlord by way of a loan, for the purpose of financing the erection of the whol

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1971 Supreme(Bom) 63

The conditions specified in sub-section (3) of Section 18 of the Bombay Rent Act, 1947, are incorporated by operation of law in all construction loan agreements, whether they be oral or in writing.

Cases Referred (1)

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