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CASE NO.:

Appeal (civil) 2805 of 2005

PETITIONER:

CARONA LTD

RESPONDENT:

M/S PARVATHY SWAMINATHAN & SONS

DATE OF JUDGMENT: 05/10/2007

BENCH:

C.K. THAKKER & P. SATHASIVAM

JUDGMENT:

J U D G M E N T

CIVIL APPEAL No. 2805 OF 2005

C.K. THAKKER, J.

1. This appeal by special leave is filed by the

appellant-Carona Ltd. (hereinafter referred to as 'the

tenant') against the judgment and order passed by the

High Court of Judicature at Bombay on November 1,

2004 in Writ Petition No. 8781 of 2004. By the said

order, the learned Single Judge of the High Court

dismissed the writ petition filed by the tenant and

confirmed the order passed by a Bench of Small Causes

Court at Bombay on August 3, 2004 in Appeal No. 277 of

2003 which in turn confirmed the judgment and decree

of eviction dated February 11, 2003, passed by a Judge

of Small Causes Court at Bombay in T.E. & R. Suit No.

226/240 of 2001 in favour of the respondent-partnership

firm (hereinafter referred to as 'the landlord').

FACTS

2. To appreciate the controversy raised in the

present appeal, few relevant facts may be stated.

3. The appellant-tenant was the original

defendant whereas the respondent-landlord was the

original plaintiff in the suit instituted in the Court of

Small Causes at Bombay. The landlord is a partnership

firm registered under the Partnership Act, 1932. It

owned a premises, bearing Shop No. 2, situated at

ground floor of Plot No. 3, A.M. Ward, Chembur, Govind

Road, Mumbai (hereinafter referred to as 'the suit

premises'). According to the landlord, the suit premises

was let out to the tenant. It was alleged that tenant was

not paying rent regularly. It also initiated certain

proceedings against the landlord. The landlord did not

want the tenant to continue to occupy the suit premises.

Accordingly, by a notice dated February 23, 2001, the

landlord determined the tenancy with effect from March

31, 2001. In spite of determination of tenancy, the

tenant did not hand over vacant and peaceful possession

of the suit premises to the landlord. The landlord,

therefore, filed a suit in the Small Causes Court, Bombay

on April 2, 2001. In a written statement, dated August 1,

2001, the tenant disputed the averments made and

allegations levelled by the landlord and contended that it

was not liable to be evicted. The Small Causes Court,

Bombay, however, passed a decree of eviction against the

tenant on December 16, 2002 which was confirmed by a

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Bench of that Court as also by the High Court. The said

order is challenged in the present appeal.

INTERIM ORDER BY THIS COURT

4. On February 21, 2005, notice was issued by

this Court. Status quo as regards possession was

ordered to be maintained. On April 18, 2005, leave was

granted. Pending appeal, stay of dispossession was

continued subject to the tenant depositing a sum of Rs.

twenty four lakhs with the Registry of the Court within

eight weeks which was allowed to be withdrawn by the

landlord without furnishing security. The matter was

ordered to be placed for final hearing and that is how the

matter is before us.

SUBMISSIONS

5. We have heard the learned counsel for the

parties.

6. Mr. Gupta, learned counsel for the appellant-

tenant contended that all the courts committed an error

of law and of jurisdiction in passing the decree of eviction

against the tenant. He submitted that the suit filed by

the landlord was not maintainable and it ought to have

been dismissed by the courts below. He also submitted

that the question as to constitutional validity of clause (b)

of sub-section (1) of Section 3 of the Maharashtra Rent

Control Act, 1999 (hereinafter referred to as 'the Rent

Act') is pending before this Court and in view of the said

fact, the courts below ought not to have proceeded to

decide the matter. Alternatively, it was argued that even

if it is assumed that the provision is legal, valid and intra

vires, it would not apply to the case on hand inasmuch

as tenant's net worth/paid up share capital has been

substantially eroded and it was not rupees one crore or

more when the proceedings were initiated by the

landlord. The provisions of the Rent Act, therefore,

applied to the suit premises and unless and until one of

the grounds of eviction specified in the Rent Act had been

made out, the landlord was not entitled to a decree for

possession. The learned counsel urged that the fact as to

'paid up capital' of the Company was a 'jurisdictional fact'

and in absence of such fact, the Court had no power,

authority or jurisdiction to consider, deal with and decide

the matter.

7. It was further contended that the proceedings

could not have been continued in view of the fact that the

tenant was a 'sick company' within the meaning of the

Sick Industrial Companies Act, 1985 (hereinafter referred

to as 'SICA'). In accordance with Section 22 of that Act,

hence, all proceedings against a sick company stood

suspended. No order of eviction, therefore, could have

been passed by the courts below. On all these grounds, it

was submitted that all the courts were wrong in passing

a decree of eviction against the tenant and the said order

deserves to be set aside by this Court.

8. Mr. Parekh, learned counsel for the

respondent-landlord, on the other hand, supported the

decree passed by the Small Causes Court, confirmed by a

Bench of that Court as also by the High Court. He

submitted that as far as constitutional validity of Section

3(1)(b) of the Rent Act is concerned, the point is covered

by a decision of the Division Bench of the High Court of

Bombay in M/s Crompton Greaves Ltd. v. State of

Maharashtra, AIR 2002 Bom 65. The Small Causes

Court as well as the High Court were, therefore, wholly

justified in proceeding with the matter and in deciding it

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on merits. He submitted that tenancy was terminated in

accordance with law. It was, therefore, obligatory on the

tenant to hand over vacant and peaceful possession of

the property to the landlord, but it failed to do so. The

landlord was, therefore, constrained to approach a Court

of law which passed a decree for possession in favour of

the landlord holding that since the paid-up share capital

of the Company was more than rupees one crore, the

provisions of the Act were not applicable to it. The

counsel urged that there was no illegality in the said

finding and obviously, therefore, the landlord was

entitled to possession of suit-premises and the tenant

could not resist eviction. An appellate Court confirmed

the said decree. Before the High Court it was contended

by the tenant that a unanimous resolution was passed by

the Company to decrease the share capital to less than

rupees one crore (Rs.41 lakhs from Rs.8.20 crores).

Such unilateral action at a subsequent stage, submitted

the counsel, would not deprive the owner of the property

to the 'right accrued' in favour of the landlord. The

'jurisdictional fact' (paid up share capital of more than

rupees one crore) was very much in existence at the time

when the proceedings were initiated against the

Company. But even otherwise, considering the factual

situation, the tenant was not entitled to any relief. It was

stated that though the so-called resolution was said to

have been passed, it had not been approved by the Board

for Industrial and Financial Reconstruction (BIFR). In the

eye of law, therefore, there was no decrease of share

capital. The High Court was, hence, wholly right in

observing that even on that ground, the tenant was not

entitled to any relief. The counsel also submitted that

this Court is exercising discretionary and equitable

jurisdiction under Article 136 of the Constitution. The

tenant is not entitled to such equitable relief. It was

submitted that the tenant has not paid rent since several

years i.e. from January 1, 1995. According to the

counsel, the amount due and payable by the tenant as

on August 31, 2007 comes to Rs. 56,22,000/- pursuant

to interim order passed by this Court on April 18, 2005,

an amount of Rs. 24 lakhs was deposited by the

appellant in this Court which was withdrawn by the

landlord, but even excluding that amount, the tenant

is liable to pay to the landlord an amount of

Rs.32,22,000/-. It was further stated that after order

dated April 18, 2005 i.e. for more than two years, the

tenant has not paid even a pie to the landlord. Such

tenant, urged the counsel, does not deserve sympathy

and cannot claim equitable relief. On all these grounds,

the counsel prayed for dismissal of the appeal.

CONSIDERATION OF CONTENTIONS

9. We have given anxious and thoughtful

consideration to the rival contentions of the parties. And

in our opinion, no case has been made out by the

appellant-tenant for grant of discretionary and equitable

relief from this Court.

CONSTITUTINAL VALIDITY OF SECTION 3(1)(b)

10. As far as constitutional validity of Section 3(1)

(b) of the Rent Act is concerned, in our opinion, the

courts below were right in rejecting the contention raised

by the tenant and in proceeding to decide the matter on

merits in view of the decision in M/s. Crompton Greaves

Ltd.

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11. Our attention has been invited by the learned

counsel for the parties to the relevant provisions of the

Act. The Act came into force with effect from March 31,

2000. It repealed the Bombay Rents, Hotel and Lodging

House Rates Control Act, 1947. The Preamble of the Act

recites;

An Act to unify, consolidate and amend

the law relating to the control of rent and

repairs of certain premises and of eviction and

for encouraging the construction of new

houses by assuring a fair return on the

investment by landlords and to provide for the

matters connected with the purpose aforesaid.

Whereas it is expedient to unify,

consolidate and amend the laws prevailing in

the different parts of the State relating to the

control of rents and repairs of certain premises

and of eviction and for encouraging the

construction of new houses by assuring a fair

return and to provide for the matters

connected with the purposes aforesaid.

12. Section 3 grants exemption and enacts that

the Act would not apply to certain premises. Clause (b)

of sub-section (1) of the said section declares that the Act

would not apply "to any premises let or sub-let to Banks,

or any Public Sector Undertakings or any Corporation

established by or under any Central or State Act, or

Foreign Missions, International Agencies, Multinational

Companies, and Private Limited Companies and Public

Limited Companies having a paid up share capital

of rupees one crore or more". (emphasis supplied)

13. It is an admitted fact that the appellant-tenant

is a Public Limited Company having a paid up share

capital of rupees more than one crore (Rs.8.20 crores).

The Courts below considered the contention as to

constitutional validity of clause (b) of Section 3(1) of the

Rent Act and observed that the vires of the provision was

upheld by the High Court in M/s. Crompton Greaves Ltd.

In that case, constitutional validity of Section 3(1)(b) was

challenged on the ground that it was arbitrary,

discriminatory and unjust. It was contended that the so-

called distinction between the Companies having a paid

up share capital of less than rupees one crore and the

Companies having a paid up capital of more than rupees

one crore was arbitrary, discriminatory and unreasonable

neither founded on any intelligible differentia nor the so-

called classification has rational or reasonable nexus to

the object sought to be achieved by the Legislation. It

was urged that denial of protection of the Act to the

Companies solely on the basis of 'paid up share capital'

was based on irrational criterion and was hit by Article

14 of the Constitution.

14. The Court, however, negatived the contention

and upheld the validity of the provision. The Court

stated;

"10. We do not see any force in any of

these contentions. The Bombay Rent Act was

enacted originally as a temporary measure in

order to protect the tenants from eviction from

their premises and also from arbitrary

enhancement of rent. The necessity for the

control of rents by special legislation for

properties located within the urban areas was

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felt during World War II. At that time not much

by way of new construction for civil population

was possible. A good proportion of private

accommodation was requisitioned by the

authorities for the war effort. In consequence,

rents were beginning to shoot up. Landlords

were trying to get rid of their existing tenants

to get better rents. The legislation was

undertaken primarily to save the tenants from

harassment of unscrupulous landlords. To

quote the words of Sarkaria J, Nagindas

Ramdas v. Dalpatram Ichharam, (1974) 1 SCC

242 at page 248 : (AIR 1974 SC 471) (at page

474). "The strain of the last World War,

industrial Revolution, the large scale exodus of

the working people to the urban areas and the

social and political changes brought in their

wake social problems of considerable

magnitude and complexity and their

concomitant evils. The country was faced with

spiralling inflation, soaring cost of living,

increasing urban population and scarcity of

accommodation. Rack renting and large scale

eviction of tenants under the guise of the

ordinary law, exacerbated those conditions

making the economic life of the community

unstable and insecure. To tackle these

problems and curb these evils the Legislatures

of the States in India enacted "Rent Control

Legislations".

11. The rent control laws are in force in

the State for more than 60 years. As a result of

these legislations a host of problems have

cropped up. These problems have been

discussed by various committees appointed by

the Central Government and State

Governments. The reports of such committees

indicate that freezing of rentals at old historic

levels, the excessive protection of tenancy

rights and the extreme difficulties of recovering

possession even for the owner's own use hit

hard the house owners of modest means;

rendered investment in housing for rental

unattractive; inhibited the letting out of

available accommodation and thus had

aggravated the acute scarcity of

accommodation for hire. It was felt that the

laws were being often abused by the rich

tenants against the poor or middle class

landlords.

12 The State of Maharashtra appointed a

Committee known as Rent Acts Enquiry

Committee (for short Tembe Committee) which

observed as under :

"........The result of all this has been

that the supply of rental housing in the

market is gradually shrinking. Except in

the public sector, the growing tendency is

to dispose off houses on ownership or

hire purchase basis. Rental housing has,

therefore, almost come to a halt in cities

like Bombay. This has adversely affected

the economically weaker sections of the

society";

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"....The rent law that was enacted for the

benefit of the tenants is thus operating to

the detriment of their interest in that the

flow of rental housing is gradually

shrinking".

Tembe Committee had recommended

exemption of premises of floor area more than

65 sq. meters for business, trade or storage

and 125 sq meters for residential purpose".

The Court, therefore, concluded;

"It is already seen from the Statement of

Objects and Reasons that the object of the Act

is not merely, to protect tenants but also to

provide fair returns to the landlords and to

encourage housing activity so as to augment

rental housing in the form of construction of

buildings and letting them out. It is also meant

to legitimise the pagadi or premium system

which was prohibited earlier. Thus the Act has

been enacted in order to strike a balance

between the interests of landlords and tenants

and for giving a boost to house building

activity and in doing so the legislature in its

wisdom has decided and thought it fit not to

extend the protection of the Rent Act to certain

class of tenants like multinationals scheduled

banks, public sector undertakings and private

and public limited companies having share

capital of more than Rs. 1 crore. This is

essentially a matter of legislative policy. The

legislature would have repealed the Rent Act

altogether. It could also withdraw the

protection under the Rent Act on rental basis

[see D.C. Bhatiya v. Union of India, (1995) 1

SCC 104] or on income basis [see Delhi Cloth

and General Mills Ltd. v. S. Paramjit Singh,

(1990) 4 SCC 923] or any other

understandable basis. In our view it is for the

legislature to decide" what should be the

appropriate basis for the purpose of

classification and the legislature as of

necessity must have a lot of latitude in this

regard. Whether any particular category of

tenants needs to be protected under the Rent

Act is a matter of legislative determination.

There is nothing arbitrary if such protection is

taken away in case of certain categories of

tenants having regard to their position

determined on objective and reasonable

criterion. These are essentially matters of

policy. Unless the provision is shown to be

arbitrary, capricious or to bring about grossly

unfair results, judicial policy should be one of

judicial restraint. The prescriptions may be

somewhat cumbersome or produce some

hardship in their application in some

individual cases; but they cannot be struck

down as unreasonable, capricious or

arbitrary".

15. It also appears that as the point was

concluded by a decision in M/s. Crompton Greaves Ltd.,

the issue as to vires was not pressed by the tenant before

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the Trial Court. This is clear from the following

observations made by the Court;

"However, the advocate for Defendant not

argued on this issue, may be in view of

judgment dated 20.7.2001 of the Hon'ble High

Court of Judicature at Bombay. The said

judgment is reported in AIR 2002 Bombay 65

(M/s Crompton Greaves Ltd., v. State of

Maharashtra) (not cited at Bar). In the said

ruling, Hon'ble High Court upheld the

constitutional validity of the provisions of

Section 3(1)(b) of the Maharashtra Rent

Control Act. Therefore, this issue does not

survive. Accordingly issue No.2 is answered".

16. The courts below were, therefore, in our

opinion, fully justified in proceeding to decide the matter

on merits.

MERITS OF THE MATTER

17. The Trial Court framed necessary issues and

held that the defendant-Company was the tenant; the

Rent Act was not applicable; the tenancy was legally and

validly terminated; and defendant was liable to be

evicted. A prayer was also made by the plaintiff for

payment of mesne profits. The Court held that the

landlord was entitled to a decree for possession. But

since the proceedings were pending before BIFR, Section

22 of SICA was applicable and the landlord could recover

amount of mesne profits only after taking requisite

permission from BIFR. The Court, in the light of the

above findings, issued the following directions;

"The Defendants shall deliver vacant

repossession of the suit premises to the

Plaintiffs within 4 months.

The Defendants shall pay mesne profits

to the plaintiffs in respect of suit premises for

the period from the date Operating Agency suit

till the Plaintiffs recover possession of the suit

premises.

For determination of quantum of mesne

profits, enquiry under O. 20 R. 12(c) of the

Code of Civil Procedure is directed.

However, the order to pay mesne profits

shall be subject to the Plaintiffs obtain

permission of the BIFR to recover mesne

profits against the Defendants.

Preliminary decree be drawn

accordingly".

18. A Bench of Small Causes Court, Bombay

confirmed the above order and dismissed the appeal.

Before the High Court, again all the contentions were

reiterated by the tenant, but the High Court negatived

them and dismissed the writ petition. The High Court

noted that it was not in dispute between the parties that

notice terminating the tenancy was issued by the

landlord on February 23, 2001 and tenancy was

determined with effect from March 31, 2001. On that

day, i.e. March 31, 2001, paid up share capital of the

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Company (tenant) was more than rupees one crore. If it

were so, observed the High Court, Small Causes Court

was right in proceeding with the matter and in passing

the decree of eviction against the tenant.

19. The Courts were also right in relying upon

Shree Chamundi Mopeds Ltd. v. Church of South India

Trust Association, (1992) 3 SCC 1 and in holding that

eviction proceedings initiated by the landlord against the

tenant were maintainable even if the Company was 'sick'

under SICA and Section 22 of that Act would not operate

as bar to such proceedings.

JURISDICTIONAL FACT

20. The learned counsel for the appellant-

Company submitted that the fact as to 'paid up share

capital' of Rs. one crore or more of a Company is a

'jurisdictional fact' and in absence of such fact, the Court

has no jurisdiction to proceed on the basis that the Rent

Act is not applicable. The learned counsel is right. The

fact as to 'paid up share capital' of a Company can be

said to be a 'preliminary' or 'jurisdictional fact' and said

fact would confer jurisdiction on the Court to consider

the question whether the provisions of the Rent Act were

applicable. The question, however, is whether in the

present case, the learned counsel for the appellant tenant

is right in submitting that the 'jurisdictional fact' did not

exist and the Rent Act was, therefore, applicable.

21. Stated simply, the fact or facts upon which the

jurisdiction of a Court, a Tribunal or an Authority

depends can be said to be a 'jurisdictional fact'. If the

jurisdictional fact exists, a Court, Tribunal or Authority

has jurisdiction to decide other issues. If such fact does

not exist, a Court, Tribunal or Authority cannot act. It is

also well settled that a Court or a Tribunal cannot

wrongly assume existence of jurisdictional fact and

proceed to decide a matter. The underlying principle is

that by erroneously assuming existence of a

jurisdictional fact, a subordinate Court or an inferior

Tribunal cannot confer upon itself jurisdiction which it

otherwise does not posses.

22. In Halsbury's Laws of England, (4th Edn.),

Vol.1, para 55, p.61; Reissue, Vol.1(1), para 68, pp.114-

15, it has been stated:

"Where the jurisdiction of a tribunal is

dependent on the existence of a particular

state of affairs, that state of affairs may be

described as preliminary to, or collateral to the

merits of the issue. If, at the inception of an

inquiry by an inferior tribunal, a challenge is

made to its jurisdiction, the tribunal has to

make up its mind whether to act or not and

can give a ruling on the preliminary or

collateral issue; but that ruling is not

conclusive".

23. The existence of a jurisdictional fact is thus a

sine qua non or condition precedent to the assumption of

jurisdiction by a Court or Tribunal.

JURISDICTIONAL FACT AND ADJUDICATORY FACT

24. But there is distinction between 'jurisdictional

fact' and 'adjudicatory fact' which cannot be ignored. An

'adjudicatory fact' is a 'fact in issue' and can be

determined by a Court, Tribunal or Authority on 'merits',

on the basis of evidence adduced by the parties. It is no

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doubt true that it is very difficult to distinguish

'jurisdictional fact' and 'fact in issue' or 'adjudicatory

fact'. Nonetheless the difference between the two cannot

be overlooked.

25. In Halsbury's Laws of England, (4th Edn.),

Vol.1, para 55, p.61; Reissue, Vol.1(1), para 68, pp.114-

15, it is stated:

"There is often great difficulty in

determining whether a matter is collateral to

the merits or goes to the merits. The

distinction may still be important; for an

erroneous decision on the merits of the case

will be unimpeachable unless an error of law is

apparent on the face of the record of the

determination or unless a right of appeal lies

to a court in respect of the matter alleged to

have been erroneously determined. An error of

law or fact on an issue collateral to the merits

may be impugned on an application for an

order of certiorari to quash the decision or in

any other appropriate form of proceedings,

including indirect or collateral proceedings.

Affidavit evidence is admissible on a disputed

issue of jurisdictional fact, although the

superior courts are reluctant to make an

independent determination of an issue of fact

on which there was a conflict of evidence

before the inferior tribunal or which has been

found by an inspector after a local inquiry".

26. In R. v. Fulham Rent Tribunal, (1950) 2 All ER

211, it was held that the question whether premium for

renewal of tenancy was or was not paid was a

jurisdictional fact and, therefore, was held to be a

condition precedent for the lawful exercise of jurisdiction

by a Rent Tribunal. In Brittain v. Kinnaird, (1819) 1 B&B

432, however, the factum as to possession of a 'boat' with

gunpowder on board was held to be a part of the offence

charged and thus a finding of fact or adjudicatory fact. It

was stated: "The logical basis for discriminating

between these cases and other falling on opposite

sides of the line, is not easily discernible".

(emphasis supplied)

27. Likewise, the fact whether the petitioner was

an 'adult' in adoption proceedings was not held to be a

'jurisdictional' fact (Eversole v. Smith, 159 SW 2nd 35).

28. In Jagdish Prasad v. Ganga Prasad, 1959

Supp (1) SCR 733, the questin was whether the landlord

was entitled to enhancement of rent. Under the Act, he

was not entitled to such rent unless a 'new construction'

had been made after June 30, 1946. It was held by this

Court that the question whether construction was new or

not was a 'jurisdictional fact' and if the court wrongly

decided the said fact and thereby conferred jurisdiction

not vested in it, the High Court could interfere with the

order. The Court stated that "once it had the power it

could determine whether the question of the date of

construction was rightly or wrongly decided". [See also

Arun Kumar v. Union of India, (2007) 1 SCC 732].

29. But, in Roshanlal v. Ishwardas, (1962) 2 SCR

947, this Court held that the Rent Controller had

jurisdiction to fix standard rent for new construction

made after March 24, 1947. The question was as to when

the construction was made. The Rent Controller recorded

a finding of fact that the construction was put up after

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March 24, 1947. The finding was confirmed by the

District Judge. But the High Court interfered in revision.

30. Setting aside the decision of the High Court,

this Court stated:

"It is clear from the orders of the Rent

Controller and of the District Judge in appeal

that the question whether the second floor was

newly constructed or not was really a question

of fact, though undoubtedly a jurisdictional

fact on which depended the power of the Rent

Controller to take action under s. 7A. If the

Rent Controller had wrongly decided the fact

and assumed jurisdiction where he had none,

the matter would be open to reconsideration in

revision. The High Court did not, however, go

into the evidence, nor did it say that the

finding was not justified by the evidence on

record. The High Court referred merely to

certain submissions made on behalf of the

landlord and then expressed the opinion that

what was done to the second floor was mere

improvement and not a new construction. We

think that the High Court was in error in

interfering with the finding of fact by the

Rent Controller and the District Judge, in

support of which finding there was clear

and abundant evidence which had been

carefully considered and accepted by both

the Rent Controller and the District Judge".

(emphasis supplied)

31. It is thus clear that for assumption of

jurisdiction by a Court or a Tribunal, existence of

jurisdictional fact is a condition precedent. But once

such jurisdictional fact is found to exist, the Court or

Tribunal has power to decide adjudicatory facts or facts

in issue.

32. As already seen earlier, in the case on hand,

the appellant Company was having 'paid up share

capital' of more than Rs. one crore, not only when the

notice was issued and tenancy was determined but also

when the suit for possession was instituted. What was

stated was that a resolution was passed by the Board of

Directors to reduce 'paid up share capital' from Rs.8.20

crores to Rs.41 lakhs (less than Rs.1 crore). But it was

not approved by BIFR. The Small Cause Court considered

this aspect and stated;

"The reasons are that the above suit is

filed on 4.4.2001. Whereas undisputed

document Ex.B. annual report of the

Defendant Company shows that on 30.9.1999

the paid up shares capital of the Defendant

Company was more than Rs.1 crore. If the

Defendants have moved BIFR by reference of

1997, by that time the Defendant ought to

have received favourable orders reducing the

paid-up capital of the Defendants to less than

Rs. one crore. But no such evidence is

produced by the Defendants to rebut the

annual report Ex.B of the Defendants showing

paid up capital of more than Rs.8 crores as on

30.9.1999. There is nothing before the court to

show that the paid up share capital of the

Defendants is brought down to Rs.41 lacs as

per para 1.3(1) of the revised rehabilitation

proposal in BIFR case No.74/1999 (Ex.4). The

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advocate for Defendants has not pointed out

any order to show that the said proposal is

accepted.

In the absence of such order of the

appropriate court or authority accepting

the proposal Ex.1 to reduce share capital

to less than 1 crore rupees, I am unable to

accept the case of the Defendants that the

said share capital of the Defendant

Company is reduced to less than Rs.1

crore". (emphasis supplied)

33. The High Court also dealt with this aspect and

concluded;

"It is not in dispute between the parties

that the tenancy of the petitioners was

terminated with effect from 31.3.2001 and on

that day the paid up share capital of the

petitioners/Company was more than Rupees

one crore, no fault can be found with trial

Court taking cognizance of the eviction

proceedings initiated against the petitioners,

as the trial Court definitely had jurisdiction to

entertain such proceedings, considering the

provisions of law comprised under Section

3(1)(b) of the said Act, as rightly submitted by

the learned advocate for the respondents. The

clause (b) of Section 3(1) of the said Act clearly

provides that "the said Act shall not apply to

any premises let or sub-let to banks, or any

Public Sector Undertaking or any Corporation

established by or under any Central or State

Act, or foreign missions, international

agencies, multinational companies, and private

limited companies and public limited

companies having a paid up share capital of

rupees one crore or more". Undisputedly, the

petitioner/Company is a Public Limited

Company having share capital of more

than Rupees one crore".

(emphasis supplied)

34. All the Courts were, therefore, in our

considered opinion, right in holding that the provisions of

the Rent Act were not applicable to the present case.

SUBSEQUENT EVENTS

35. The learned counsel for the tenant then

submitted that it was obligatory on the courts below

including the High Court to take into consideration

subsequent events. In support of the submission, our

attention has been invited by the counsel to a leading

decision of this Court in Pasupuleti Venkateswarlu v.

Motor & General Traders, (1975) 1 SCC 770. In that case,

the plaintiff filed a suit for possession on the ground of

personal requirement for starting business. A decree for

possession was passed in his favour which was

confirmed by the Appellate Court. At the stage of

Revision, however, due to subsequent event of acquisition

of non-residential building by the plaintiff-landlord, an

application for amendment was made by the defendant-

tenant. The High Court allowed the amendment. The

plaintiff challenged the said order by approaching this

Court. It was contended that the High Court committed

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an error in taking cognizance of subsequent event which

was 'disastrous'. This Court, however, held that the High

Court had not committed any illegality in doing so.

36. Referring to leading cases on the point,

Krishna Iyer, J. stated;

"We feel the submissions devoid of

substance. First about the jurisdiction and

propriety vis-`-vis circumstances which come

into being subsequent to the commencement

of the proceedings. It is basic to our

processual jurisprudence that the right to

relief must be judged to exist as on the date a

suit or institutes the legal proceeding. Equally

clear is the principle that procedure is the

handmaid and not the mistress of the judicial

process. If a fact, arising after the lis has come

to court and has a fundamental impact on the

right to relief or the manner of moulding it, is

brought diligently to the notice of the tribunal,

it cannot blink at it or be blind to events which

stultify or render inept the decretal remedy.

Equity justifies bending the rules of procedure,

where no specific provision or fairplay is not

violated, with a view to promote substantial

justice\027subject, of course, to the absence of

other disentitling factors or just

circumstances. Nor can we contemplate any

limitation on this power to take note of

updated facts to confine it to the trial Court. If

the litigation pends, the power exits, absent

other special circumstances repelling resort to

that course in law or justice. Rulings on this

point are legion, even as situations for

applications of this equitable rule are myriad.

We affirm the proposition that for making the

right or remedy claimed by the party just and

meaningful as also legally and factually in

accord with the current realities, the Court

can, and in many cases must, take

cautious cognizance of events and

developments subsequent to the institution

of the proceeding provided the rules of

fairness to both sides are scrupulously

obeyed." (emphasis supplied)

37. In our judgment, the law is fairly settled. The

basic rule is that the rights of the parties should be

determined on the basis of the date of institution of the

suit. Thus, if the plaintiff has no cause of action on the

date of the filing of the suit, ordinarily, he will not be

allowed to take advantage of the cause of action arising

subsequent to the filing of the suit. Conversely, no relief

will normally be denied to the plaintiff by reason of any

subsequent event if at the date of the institution of the

suit, he has a substantive right to claim such relief.

38. In the instant case, in our opinion, the courts

below were right in holding that the date on which

tenancy was determined, the right in favour of the

landlord got accrued. Such right could not have been set

at naught by the tenant by unilateral act by passing a

resolution to reduce 'paid up share capital' of the

Company.

39. In this regard, it may be profitable to refer to a

decision of this Court in Gajanan Dattatraya v. Sherbanu

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Hosang Patel & Ors., (1975) 2 SCC 668. In Gajanan, the

Court was called upon to consider clause (e) of Section

13(1) of the Bombay Rents, Hotel and Lodging House

Rates Control Act, 1947 which read thus;

13(1)(e). That the tenant has, since the

coming into operation of this Act,

unlawfully sublet, or after the date of

commencement of the Bombay Rents, Hotel

and Lodging House Rates Control

(Amendment) Act, 1943, unlawfully given on

licence, the whole or part of the premises or

assigned or transferred in any other manner

his interest therein.

(emphasis supplied)

40. The tenant took on lease the premises on

January 1, 1960. He, however, sublet a part of the

premises in August, 1965. The landlord issued a notice

on April 1, 1967 and terminated the tenancy. The tenant

denied that there was unlawful sub-letting of a part of

the premises. It was further submitted that in any case,

the so-called sub-tenant vacated the premises on April

14, 1967 i.e. before the suit was instituted by the

landlord and hence, cause of action did not survive. It

was contended on behalf of the tenant that Section

13(1)(e) used the expression "has sub-let", i.e. the

present perfect tense which contemplated the event

connected in some way with the present time. Since the

sub-tenant had already vacated and left the premises, at

the most it could be said that the tenant 'had sub-let'

the premises but it was not a ground for eviction under

the Act and hence no decree could have been passed.

Reliance was also placed on an earlier decision of this

Court in Goppulal v. Thakurji Shriji Shriji Dwarkadheshji,

(1969) 3 SCR 989 : (1969) 1 SCC 792.

41. Negativing the contention, upholding the

decree of eviction and distinguishing Goppulal, this Court

said;

"The provisions of the Bombay Rents,

Hotel and Lodging House Rates Control Act,

1947 indicate that a tenant is disentitled to

any protection under the Act if he is within the

mischief of the provisions of Section 13(1)(e),

namely, that he has sublet. The language is

that if the tenant has sublet, the protection

ceases. To accede to the contention of the

appellant would mean that a tenant would not

be within the mischief of unlawful subletting if

after the landlord gives a notice terminating

the tenancy on the ground of unlawful

subletting the sub-tenant vacates. The

landlord will not be able to get any relief

against the tenant in spite of unlawful

subletting. In that way the tenant can foil the

attempt of landlord to obtain possession of the

premises on the ground of subletting every

time by getting the sub-tenant to vacate the

premises. The tenant's liability to eviction

arises once the fact of unlawful subletting

is proved. At the date of the notice, if it is

proved that there was unlawful subletting,

the tenant is liable to be evicted".

(emphasis supplied)

42. The Court approved the view taken by the High

Court of Gujarat in Maganlal Narandas Thakkar v. Arjan

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Bhanji Kanbi, (1969) 10 Guj LR 837. In Maganlal, the

High Court of Gujarat had an occasion to consider a pari

materia provision under the Saurashtra Rent Control

Act, 1951?.

43. A similar argument was advanced before the

Court. However, considering the scheme of the Act, the

Court refuted the contention. The Division Bench

observed;

"So far as the first point is concerned, Mr.

Desai laid great stress, and relied very heavily,

on the grammatical meaning of the words 'has

sub-let'. His argument is that the meaning of

the words 'has sub-let' include the element

that the subletting must be continuing on the

date when the plaintiff filed his suit. He stated,

and there is no dispute on the point, that the

words 'has sub-let' do not use of the verb 'sub-

let' in the present perfect tense. He referred to

page 61 of the Handbook of English Grammar

by R.W. Zandvoort. In paragraph 140 of this

Book it is stated that when a verb is used in

present perfect tense, it denotes "a completed

past action connected, through its result, with

the present moment". The argument of Mr.

Desai was that the subletting which started

sometime after 1951, that is after the Act came

into operation, must be connected with the

present moment through its result; and his

argument was that once the sub-tenancy was

created, it must be connected with the present

moment-the date of filing the suit-by its result

by the sub-tenant continuing in possession of

the premises upto that date. Mr. Desai thus

urged before us that unless a sub-tenant were

in possession of the property sublet on the

date of the suit it cannot be said that the

tenant 'has sub-let' the premises, even though

a sub-tenancy was in fact created by the

tenant. In our opinion if this interpretation

were to be accepted, the result would be that a

tenant can with impunity put some other

person in possession of the premises as a sub-

tenant and avoid an order for delivery of

possession against him by seeing to it that the

sub-tenant departs from the property before

the plaintiff files a suit. Having regard to the

scheme of the Rent Control Act, particularly

the scheme of Sections 12 and 13 of the Act

and the context in which the words 'has sub-

let' are used, it appears to us that that is not

the way in which the meaning of the words

'has sub-let' should be gathered. If the Rent

Control Act were not in force and the parties

were left to their ordinary rights under the

Transfer of Property Act, the landlord will have

a vested right to recover possession in him as

soon as he terminates the tenancy of the

tenant in the manner provided in the Transfer

of Property Act. After terminating the tenancy

he can immediately call upon the tenant to

hand over possession to him. By enacting

Section 12 of the Rent Control Act, the

landlord's right to terminate the tenancy is not

affected, but the enforcement of his right to

recover possession immediately thereafter from

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the tenant is affected. The provisions of

Section 12 prevent a landlord from recovering

possession of the property from a tenant even

after a lawful termination of his tenancy,

provided the tenant fulfils the conditions

mentioned in Section 12. Section 12 does not

take away the right of the landlord to recover

possession of the premises but merely

postpones the enforcement of this right of the

landlord so long as the tenant fulfils the

conditions laid down in that section. Having

put this impediment in the enforcement of the

right of possession of the landlord or in other

words, having clothed the tenant with an

immunity from dispossession, the Legislature

proceeds in Section 13 to lay down those

conditions on the fulfillment of which the

landlord is entitled to recover possession of the

premises from the tenant. Section 13,

therefore, provides for those contingencies on

proof of which the tenant loses the immunity

from dispossession under Section 12. Some

discussion took place on the question whether

the tenant has a right of possession or whether

he has merely an immunity from being

dispossessed. Whether it be called an

immunity from dispossession or whether it be

called a personal right of possession, the fact

remains that by Section 13, the Legislature

has provided for dispossession of tenant,

despite provisions of Section 12, if the Court is

satisfied that any one of the grounds

mentioned in Section 13 does exist. One of

such grounds is the subletting of the premises

or a part thereof by the tenant. In view of this

scheme of the provisions in Sections 12 and 13

of the Act, it is necessary for us to construe

the meaning of the words 'has sub-let' keeping

in mind that the verb 'sub-let' is used in the

present perfect tense. First, it must be a

completed past action, that is the subletting

must be completed. A subletting is complete as

soon as the sub-tenant is put in possession of

the premises given to him on sublease. Now,

this completed act of subletting must have a

result. What would be that result in the

context of Sections 12 and 13 of the Act? The

result of subletting would be removal of the

impediment in the way of the landlord to

recover possession of the premises. In other

words, the result of subletting would be to take

away that personal right of possession which

the tenant enjoyed under the provisions of the

Rent Act. Now, this result must be connected

with the present moment. The present moment

will be the moment when the suit is filed. How

is this result connected with the filing of the

suit? The answer is quite obvious. It is this

removal of the impediment in the way of the

landlord's recovery of possession which

induces him to go forthwith to the Court and

file a suit for possession. Therefore, the words

'has sub-let' mean that a sub-letting has taken

place and as a result of that subletting the

impediment in the way of the landlord to

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recover possession has been removed, thus,

inducing him to go to Court and ask for

recovery of possession. It is the result of the

completed act, i.e. the removal of the

impediment in his way, which permits the

landlord to go to the Court and ask for a

decree for possession. It is not necessary,

therefore, that subletting must continue

enough if the premises have been sub-let

sometime after the coming into operation of

the Act. The provisions of Section 15 of the

Saurashtra Rent Control Act make subletting

unlawful. Therefore, any subletting by the

tenant after the Act came into operation

immediately removes the impediment in the

way of the landlord to recover possession and

entitles him immediately to go to the Court

and ask for recovery of possession. In order to

convey the correct meaning of the words 'has

sub-let' it is not necessary to show that the

subletting was in existence on the date of suit.

It is enough that the subletting has taken

place sometime after the Act came into

operation; it does not matter that the

subletting came to an end before the

landlord gave notice or before the landlord

filed a suit".

(emphasis supplied)

44. In our opinion, the ratio laid down in the above

cases applies to the present case as well. Admittedly, on

the date the tenancy was terminated, the tenant (Public

Limited Company) was having a paid up share capital of

rupees more than one crore. Under clause (b) of Section

3(1) of the Act, therefore, the provisions of the Act were

not applicable to the suit-premises. It is true that a

resolution was passed by the Company to reduce the

paid up share capital to less than rupees one crore, but

the said resolution was never approved by BIFR. But

even otherwise, once it is proved that the tenancy was

legally terminated and the Act would not apply to such

premises, a unilateral act of tenant would not take away

the accrued right in favour of the landlord. Unless

compelled, a Court of Law would not interpret a provision

which would frustrate the legislative intent and primary

object underlying such provision. We, therefore, see no

infirmity in the conclusions arrived at by the courts

below.

EQUITABLE CONSIDERATIONS

45. The learned counsel for the respondent-

landlord is also right in submitting that the appellant-

tenant does not deserve equitable relief under Article 136

of the Constitution. The tenant has not paid

'rent'/'mesne profits' since more than ten years. Even

after approaching this Court, it had made part payment

pursuant to interim order made in April, 2005. But

nothing was paid/deposited thereafter even though two

years have passed. These facts have not been disputed by

the appellant. We are, therefore, of the view that even on

that ground, the appellant-tenant cannot ask for

discretionary and equitable relief and we are not inclined

to grant such relief.

46. For the foregoing reasons, the appeal deserves

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to be dismissed and is, accordingly, dismissed with costs.