Landlords Can Increase Rent only in Accordance with Section 6 & 8A of the Delhi Rent Control Act

Justice R.S. Endlaw
Delhi High Court

We had earlier discussed the observations / guidelines issued by the Hon'ble Supreme Court of India to reduce landlord tenant litigation by suggesting, inter alia, the increase in the rentals at the prevalent rates. However, the Division Bench of the Hon'ble Delhi High Court in Santosh Vaid & Anr. v. Uttam Chand has recently held that such increase in rental can only be made as per the mechanism provided in the Delhi Rent Control Act and not otherwise. While distinguishing the dicta laid down in Mohammed Ahmed v Atma Ram Chauhan, the Delhi High Court observed that the facts therein related to the UP Rent Act and its ratio has no application to Delhi. The relevant extracts from the judgment of the Division Bench of the Delhi High Court are as under;

10. The appellant in RSA 116/2011 has again pegged his case on Pearey Lal and has argued that depriving a landlord from rent equivalent in value to the rent at the time of letting amounts to violation of rights of the landlord. The counsel for the appellant during the hearing has also referred to Milap Chandra Jain v. State of UP 2001 (2) RCR (Civil) 686 (Allahabad), judgment dated 12 th March, 2010 of the same Learned Single Judge of this Court who has pronounced the judgment in Pearey Lal, in CM (M) 539/2009 titled Smt. Leena Joseph v. Mohd. Fazil and on Mohd. Ahmad v. Atma Ram Chauhan AIR 2011 SC 1940.

11. In the aforesaid backdrop the legal question for adjudication can be framed as under:-

Whether in the case of premises fetching rent of less than `3,500/- per month, the owner / landlord can claim increase in rent other than as provided under Sections 6A & 8 of the Act or have the rent increased in proportion to the rate of inflation or devaluation of money and if so on what basis and/or to what extent?

12. The Delhi Rent Act was enacted to provide for the control of rents and evictions in the Union Territory of Delhi. The same, as originally enacted, applied to all premises in Delhi save premises belonging to the Government; Section 4 thereof disentitled the landlord from claiming any rent in excess of standard rent of the premises as defined and to be fixed under Sections 6 & 9 of the Act; Section 7 permitted increase in rent only in the event of the landlord incurring any expenditure on improvement, addition or alteration in the premises and that too with the approval of the Rent Controller; Section 14 prohibited the landlords from, notwithstanding anything to the contrary contained in any other law or contract, recovering possession from the tenant save on the grounds mentioned therein and after satisfying the Rent Controller (constituted under the Act and as distinct from Civil Courts) that such grounds existed; Section 50 barred the Civil Court from entertaining any suit in so far as it related to the fixation of standard rent in relation to premises to which the Act applied and/or to any other matter which the Rent Controller was empowered by or under the said Act to decide.

13. The position thus was that even if the premises were let out for say five years and the said time had expired, the landlord could not evict the tenant unless one of the grounds of eviction (viz. non payment of rent, subletting, misuser, non-use, self requirement etc.) specified under the Act was available. There was no provision in the Act for increase in rent also, save if the landlord carried out any improvement in the premises. On the contrary, the tenant if had agreed to pay the rent of say `5,000/- per month could within two years from taking the premises on rent apply to the Rent Controller for fixation of standard rent of the premises and which generally was much lower than the agreed / market rent. Even if the tenant continued in the premises after the term of letting had expired, the landlord had no way to have the rent increased.

14. An amendment to the Delhi Rent Act was made w.e.f. 1st December, 1988. The premises, monthly rent whereof exceeded `3,500/- were taken out of the purview of the Act; Section 6A was incorporated enabling the landlord to have the rent increased by 10% every three years by issuing a notice under Section 8 intimating to the tenant of his desire to so have the rent increased and the increased rent became due and recoverable after expiry of 30 days from the date on which the notice was given.

15. A Division Bench of this Court in Raghunandan Saran Ashok Saran held that Sections 4,6 & 9 of the Delhi Rent Act relating to standard rent had not taken into account the huge difference between the cost of living in the past and the present time and did not pass the test of reasonableness and had become obsolete and archaic and accordingly struck down the same. However the only effect of the said judgment is that a tenant could not apply to have the standard rent thereof determined and thus could not avoid paying agreed rent, as he was able to before this judgment. Undoubtedly the Division Bench, while so striking down the said provisions, did observe that the said provisions dealing with the standard rent did not take into account the rise in the consumer price index and the huge costs required for maintaining the tenanted premises and there was no justification for not updating the frozen rents but all this was in the context of striking down Sections 4,6&9 only. Thus the said judgment cannot be said to be a judgment on the proposition that landlords are entitled to have the rent increased as per the consumer price index or rate of inflation.

16. In Pearey Lal, doubts as to the correctness of the view wherein have led to this reference, the premises were let out in the year 1956 at a rent of `400/- p.m. and the rent had remained the same. In the year 2008 the landlord filed a suit in the Court of Civil Judge for recovery of possession of the premises from the tenant and for mesne profits. The said suit was valued for the relief of possession for purposes of court fee and jurisdiction at `4800/- i.e. on the basis of annual rent. The tenant applied under Order 7 Rule 11 CPC contending the suit to be barred by Section 50 of the Delhi Rent Act. The landlord in reply contended that the premises were outside the purview of the Delhi Rent Act since the tenant had sublet the premises and the rent paid by the subtenant for the premises, though to the tenant, was in excess of `3500/- p.m. The Civil Judge dismissed the application under Order 7 Rule 11 CPC holding that the question whether the premises were outside the purview of the Delhi Rent Act or not was subject matter of evidence. In challenge to the said order by the tenant before this Court, the said finding of the Civil Judge was affirmed. (We may notice that this Court in P.S. Jain Co. Ltd. v. Atma Ram Properties (P) Ltd 65 (1997) DLT 308 and Atma Ram Properties Pvt. Ltd v. Pal Properties (India) Pvt. Ltd 91 (2001) DLT 438 had already held that in the event rent payable by the subtenant to the tenant is more than `3500/- p.m. the premises would be outside the scope of Delhi Rent Act even if the rent payable by the tenant to the principal landlord was less than `3500/- p.m.) While doing so some observations were made to the effect that there was no justification for keeping the rents frozen and not allowing the landlords to reap present value of the rent originally agreed. However, the said observations were also in the context of the tenants while paying old rents subletting the tenancy premises at much higher market rents. It would thus be seen that the said judgment cannot be said to be laying down that a landlord is entitled to have the rent increased to keep pace with inflation or devaluation. Rather, when it was urged that the landlord ought to value the suit and pay court fees as per market rent, the learned Judge observed "If the Court cannot tell a tenant to pay rent at the present day market value of the property or taking into account the present value of rent of ` 400/- fixed in 1956, the Court cannot tell the landlord to pay the court fee on the present day market value in order to get the premises vacated".

17. It would thus be seen that Pearey Lal cannot be said to be an authority in favour of the right of a landlord to have the rent increased to bring it at par with the consumer price index or to account for the rate of inflation. It is the settled position in law (See Jitendra Kumar Singh v. State of U.P. (2010) 3 SCC 119) that a judgment is a precedent on what it decides and not on other things. Though certain observations of wide sweep were certainly made in the said judgment but that judgment also towards the end accepts that the Court cannot tell a tenant to pay the rent at the present day market value.

18. In that view of the matter, we feel that the reference to the Larger Bench was not really called for. Be that as it may, since we are seized of the matter it is deemed appropriate to deal with the issue.

19. A Coordinate Bench in Model Press Pvt. Ltd. (supra) has already held that for landlords who are receiving rent of less than `3,500/- per month there is no provision available to unilaterally increase the rent to bring it at par with market rent. Though Pearey Lal was not noticed but it was observed that notwithstanding the decision in Raghunandan Saran, the legislature had not filled up the vacuum created in law with Sections 4,6 & 9 of the Rent Act being held ultra vires and had not put any mechanism for increase in rent in place thereof. Unfortunately the provision for increase in rent as introduced by amendment to the Act w.e.f. 1 st December, 1988 with insertion of Section 6A was not noticed by the said Division Bench.

20. A Single Judge of this Court in the order dated 5 th December, 2005 in CM (M) 948/2004 titled Kamlesh Bagga v. Mahinder Kaur held: 

"Counsel for the respondent submits that although in the plaint the rent has been admitted to be `715/- per month but by legal notice dated 22.04.2003 increase of `20,000/- per month based on the judgment of the High Court in Raghunandan Saran Ashok Saran Vs. UOI 2002 RCR 149 where the High court has struck down Section 4, 6 and 9 of the Delhi Rent Control Act. He also submits that the Court has held that a triable issue has been raised whether Section 50 of the Delhi Rent Control Act is a bar which can only be deciding (sic decided) after adducing evidence.

Heard counsel for the parties and have carefully gone through the submissions made by the parties and perused the orders under challenge. To my mind, contractual rent below `3,500/- (Rupees Three Thousand Five Hundred) attracts the provisions of the Delhi Rent Control Act. Any contractual rent below the aforesaid figure would be governed under the Delhi Rent Control Act. In that event, a contractual rent of `715/- would squarely bring the case under the Delhi Rent Control Act. Increase of rent from the contractual rent under the Delhi Rent Control Act can only be done by recourse to Section 6A thereof. A unilateral notice increasing rent beyond ten percent is not permissible under Section 6A of the Delhi Rent Control Act and cannot be acted upon to take the case out of the purview of the Delhi Rent Control Act.

In that view of the matter, the plaint itself reads that the contractual rent is `715/- which has been raised by a notice dated 02.04.2003 to `20,000/- taking the case out of the purview of the Delhi Rent Control Act is not tenable.

The reference made by learned counsel for the respondent of the Delhi High Court judgment does not support the proposition that Section 6A has also been rendered ultra vires."

We find SLP(Civil) No. 11536/2006 preferred thereagainst to have been dismissed in limine on 14th July, 2006.

21. Another Single Judge of this Court in Tilak Raj Narula v. M.L. Sethi 164 (2009) DLT 39 was also faced with a claim of a landlord, of the rent fixed at `141.75p per month in the year 1962, having stood increased in the year 2006 to `25,000/- per month owing to inflation. It was again held that the landlord, the rent of whose premises was less than `3,500/- per month, could claim increase of rent only in accordance with Sections 6A & 8 of the Act and not otherwise.

22. We put our imprimatur on the judgments of the Single Judges of this Court in Kamlesh Bagga and Tilak Raj Narula (supra). The same have correctly interpreted the provisions of the Delhi Rent Act.

23. In so far as the reliance by the counsel for the appellant in RSA 116/2011 on other judgments supra is concerned:-

i. Milap Chandra Jain (supra) struck down the provisions in the U.P. Urban Buildings (Regulation of Letting, Rent and Eviction) Act, 1972 pertaining to standard rent. Again though certain observations anti allowing rent to remain frozen were made but again the said judgment cannot be said to be laying down that a landlord is entitled to unilaterally increase the rent in accordance with the consumer price index and/or the rate of inflation;

ii. Abdul Jalil was a case where the Allahabad High Court in exercise of powers under Article 226 of the Constitution of India increased the rent, however that was in the context of UP Rent Act (supra). As far as Delhi is concerned, as aforesaid, w.e.f. 1st December, 1988 a provision for increase in rent does exist. Once the legislature has provided for something to be done in a particular manner, then it has to be done in that manner and not in any other manner (See Chandra Kishore Jha v. Mahavir Prasad (1999) 8 SCC 266). The legislature having provided for increase in rent by 10% only and after three years, is deemed to have prohibited increase of more than 10% and before three years.

iii. Mohd. Ahmed (supra) was also a case where the Supreme Court gave certain suggestions/laid guidelines to minimize landlord-tenant litigation. The same were again in the context of UP Rent Act. The same also have no application to the position as prevailing in Delhi.

iv. In Smt. Leena Joseph (supra) a Single Judge of this Court exercising powers under Article 227 of the Constitution of India, as a matter of fact, found the rent agreed to be `4,000/- per month. The same can also not be read as a precedent for the landlords in Delhi being entitled to so unilaterally increase the rent.

24. The counsel for the appellant in RSA 116/2011 in the list of judgments filed has also referred to :-

(i) M/s Nopany Investments Pvt. Ltd. v. Santokh Singh AIR 2008 SC 673 but we are unable to find any relevance thereto in the present context. The same merely lays down that the landlord can in accordance with Section 6A (supra) raise rent by 10% every three years but has to serve a notice of increase of rent under Section 8 to be entitled to such increase. 

ii. Aboobacker v. Vasu (2004) 1 RCJ 129 where a Division Bench of Kerala High Court held a suit under Section 9 of the CPC for determination of fair rent to be maintainable. However the same was in the context of the Kerala Buildings (Lease and Rent Control) Act, 1965 which did not contain any provision for increase in rent as in Section 6A of the Delhi Act.

25. The views taken by the Allahabad and by the Kerala High Courts cannot be accepted in Delhi in the face of the legislature in its wisdom having already made a provision for increase in rent and in the face of the bar contained in Section 50 of the Delhi Rent Act.

26. Rate of rent is a matter of contract and can be varied in accordance with agreement only and not unilaterally. The Rent Control Legislations enacted in the pre-independence and immediately after independence era to prevent exploitation of tenants provided a statutory mechanism enabling a tenant to, notwithstanding having entered the premises with a promise to pay rent at a certain rate, apply to the Rent Controller/Court for fixation of standard rent which as aforesaid was generally lower than the prevalent market rent. However, with the passage of time, several Courts have found such provisions in the State Rent Legislations entitling tenants to wriggle out of the agreed rent to be archaic and struck down the same. Else the rent agreed between the landlord and the tenant binds both of them and neither is entitled to unilaterally vary the same during the period for which it has been agreed. On the expiry of the said period, if unable to agree on extension / renewal of the lease at a mutually agreed rate, the remedy of the landlord is only to evict a tenant and to for the period of unauthorized occupation recover mesne profits defined in Section 2(12) of the CPC as profits which the person in wrongful possession actually received or might with ordinary diligence have received. A landlord cannot be heard to while not wanting to evict the tenant, as per his own calculation claim increased rent. However, if the premises are within the purview of the Rent Act which prohibits the landlord from evicting the tenant for the reason of expiry of the term for which the premises were let out, the landlord cannot while being so prohibited be permitted to claim mesne profits or increase in rent unless permitted under the Rent Act. If the eviction is prohibited, the possession cannot be said to be unauthorized and the question of mesne profits does not arise. If it were to be held that though owing to the prohibition against eviction contained in the Rent Control Legislations, the landlord is not entitled to evict the tenant but is nevertheless entitled to recover mesne profits for the period after the expiry of the period for which the premises were let out, the same would result in reducing the Rent Control Legislation to a dead letter and defeating its purpose. The same cannot be permitted. Thus, in the absence of a provision in the statute it cannot be held that a landlord is entitled to market rent from a protected tenant.

27. The Apex Court in Chander Kali Bai v. Jagdish Singh Thakur AIR 1977 SC 2262 held that the occupation of a tenant in a premises governed by the Rent Control Legislation becomes unauthorized and wrongful only after an order of eviction under the said legislation is passed against him and mesne profits can be recovered for the period thereafter only and not from the date of determination of tenancy since such a tenant continues to be a tenant (statutory tenant) till order of eviction under the Rent Control Legislation is passed. A Division Bench of this Court in Hindustan Steel Pvt. Ltd. v. Usha Rani Gupta AIR 1969 Delhi 59 held that in case of property of which rent is controlled by the Rent Control Act the landlord cannot complain of having suffered any loss by being deprived of possession of the property, beyond the rent for which the property is let out to the tenant holding over except to the extent of any permissible increase of rent under the Rent Control Act itself.

28. Even though the 10% increase in rent every three years provided for under the Delhi Rent Act may be perceived by some as inadequate but that is no reason for this Court to provide for a higher or more frequent increase. The same falls in legislative domain. This Court cannot step into the shoes of legislature (see Union of India v. Deoki Nandan Aggarwal 1992 Supp(1) SCC 323). It may be noted that Section 6A (supra) was inserted in the Delhi Rent Act with effect from 1st December, 1988 to quell the criticism thereof of being unevenly balanced against the landlord. The Legislature in its wisdom having considered increase in rent as provided in Section 6A as appropriate to balance the rights of the landlord and the tenant governed by the provisions of the Delhi Rent Act, it is not for this Court to delve into the validity thereof particularly in exercise of appellate/revisionary jurisdiction.

29. We accordingly answer the question framed by us herein above as under:-

A landlord of a premises governed by the Delhi Rent Control Act, 1958 is entitled to have increase(s) in rent only in accordance with Section 6A and 8 thereof and not otherwise; such a landlord cannot approach the Civil Court contending that the rent stands increased or should be increased in accordance with the inflation or cost price index; the jurisdiction of the Civil Court in this regard is barred by Section 50 of the Delhi Rent Act.

Object & Purpose of Slum Clearance Act : The Law

Justice Nandrajog
Delhi High Court

The Division Bench of the Delhi High Court in a recent decision in Virender Singh v State Bank of India has recapitulated the importance and object of the Slum Clearance Act in matters where the landlord seeks to evict tenants under the relevant rent control legislation. The relevant extracts from the judgment are reproduced hereinbelow;

12. The object and purpose of a Rent Control Legislation was highlighted by the Supreme Court in the decision reported as 1985 (2) SCC 683 Gian Devi Anand Vs. Jeevan Kumar. In para 23 it was observed:- 

“The Rent Acts which are indeed in the nature of social welfare legislation are intended to protect tenants against harassment and exploitation by landlords, safeguarding at the same time the legitimate interest of the landlords. The Rent Acts seek to preserve social harmony and promote social justice by safeguarding the interests of the tenants mainly and at the same time protecting the legitimate interests of the landlords. Though the purpose of the various Rent Acts appear to be the same, namely, to promote social justice by affording protection to tenants against undue harassment and exploitation by landlords, providing at the same time for adequate safeguards of the legitimate interests of the landlords, the Rent Acts undoubtedly lean more in favour of the tenants for whose benefit the Rent Acts are essentially passed.” 

13. In the context of the Delhi Rent Control Act, 1958, the word "Tenant‟ is defined in clause (ii) of Section 2(l) of the Act, as follows: 

“2 (l) “tenant” means any person by whom or on whose account or behalf the rent of any premises is, or, but for a special contract, would be, payable, and includes . . . 

(ii) any person continuing in possession after termination of his tenancy . . .” 

14. It is apparent that the definition of "tenant‟ in the Delhi Rent Control Act incorporates the concept of a statutory tenant. But since the Delhi Rent Control Act is not applicable to tenancies where the monthly rent payable is in excess of Rs. 3,500/-, the question of a tenant whose tenancy has expired by efflux of time or has been otherwise validly determined as per the Transfer of Property Act, 1882 becoming a statutory tenant does not arise. 

15. The essential object of the Slum Act is entirely different. It was noted by a Full Bench of this Court in the decision reported as AIR 1972 Del 34 (FB) Bardu Ram v. Ram Chander. It was observed:- 

“An essential object of the Slum Areas Act is to enable the poor, who have no other place to go to and who, if they were evicted to remain in their dwellings until provision is made from a better live for them elsewhere..” 

16. For holding as aforesaid, reliance was placed by the Full Bench on the decision of the Supreme Court reported as AIR 1961 SC 1602 Jyoti Pershad v. U.T. of Delhi, wherein it was observed:- 

“Obviously, if the protection that is afforded is read in the context of the rest of the Act, it is clear that it is to enable the poor who have no other place to go to, and who if they were compelled to go out would necessarily create other slums in the process and live perhaps in less commodious and more unhealthy surroundings than those from which they were evicted to remain in their dwellings until provision is made for a better life for them elsewhere...The Act, no doubt, looks at the problem not from the point of view of the landlord, his needs, the money he has sunk in the house and the possible profit that he might make if the house were either let to other tenants or was reconstructed and let out, but rather from the point of view of the tenants who have no alternative accommodation and who would be stranded in the open if an order for eviction were passed.” 

17. It is because of the difference in the object and purpose of the Slum Act and the Delhi Rent Control Act that in the decision reported as AIR 1977 SC 789 Lal Chand (dead) by L.Rs. & Ors. Vs. Radha Kishan‟, the Supreme Court observed as under:- 

“15. The Slum Clearance Act was passed, inter alia, for the protection of tenants in slum areas from eviction. As observed by this Court in Jyoti Pershad v. Administrator for the Union Territory of Delhi, (1962) 2 SCR 125 = (AIR 1961 SC 1602) the Slum Clearance Act looks at the problem of eviction of tenants from slum areas not from the point of view of the landlord and his needs but from the point of view of tenants who have no alternative accommodation and who would be stranded in the open if they were evicted. The policy of the Slum Clearance Act being that the slum dweller should not be evicted unless alternative accommodation is available to him, we are of the view that the word „tenant‟ which occurs in Section 19 (1)(a) must for the purpose of advancing the remedy provided by the statute be construed to include a person against whom a decree or order for eviction has been passed. We might mention that a Full Bench of the Delhi High Court in Bardu Ram Dhanna Ram v. Ram Chander Khibru, AIR 1972 Delhi 34 (FB) has taken the same view, namely, that the word „tenant‟ in Section 19 of the Slum Clearance Act includes a person against whom a decree or order of eviction has been passed.” 

18. Purpose of the Slum Act is to protect the occupiers of properties in slum areas irrespective whether they were tenants or not and relevant would it be to highlight that the Slum Act only defines an occupier and does not define a tenant. The object of the Slum Act is to protect the occupiers from eviction unless permission is obtained from the competent authority and relevant would it be to highlight that as per Section 19, while granting or declining permission the relevant criteria is the means of the occupier. If the occupier has no means to relocate himself, permission for ejectment has not to be granted inasmuch as it would be presumed that upon ejectment the occupier would create a further slum. It is well settled that protection under Section 19 would be available to a person, whether he is a tenant or an occupier who is poor and is unable to arrange for alternative accommodation. 

19. In the decision reported as 71 (1978) DLT 318 Dimple Pvt. Ltd. Vs. Harsh Kaur Aggarwal & Ors. it was observed that the 

The decisions referred to above clearly bring out that the protection under Section 19 of the Slum Act is not available to a company. In paras 33 to 35 it was observed as under:- 

“33. Learned Counsel for respondent No. 1, Mr. Ishwar Sahai, on the other hand has argued that the petitioner company are a jurisdiction. They are not a natural person. Thus the protection meant for the eviction of poor tenants from their respective accommodations cannot be made available to the petitioner. I find myself in perfect agreement with the learned Counsel for respondent No. 1. 

34. Admittedly the petitioners are a company. Thus they are a juristic person.A Company is formed when certain persons join hands with a view to carrying on some commercial or industrial undertaking. Thus it can naturally be formed by those persons who have got sufficient funds to carry on their business. A Company cannot be run by poor persons with no financial means to run the same. The object and the purpose for the enactment of the Slum Areas (Improvement & Clearance) Act, 1956 was to clear the slums and to provide protection to poor tenants against harassment at the hands of landlords who bring forward and initiate proceedings for their eviction... 

35. I am also tempted to cite the observations of a Single Judge of this Court as reported in Bismilla Jan v. Jain Tractors & Auto Spare, 1985 Rajdhani Law Reporter 477, (para 13).....”The Slum Act was enacted for giving protection to poor individual tenants who have small means and cannot afford to get alternate accommodation outside the slum area or within the slum if evicted. If a couple of persons with substantial means float a company which goes into losses, even if they are evicted from the premises, they cannot create slums, particularly when the same persons own other concerns which also have offices at different places”. 

20. The view taken by the learned Single Judge was earlier on taken by another Single Judge in the decision reported as 105 (2003) DLT 422 Shyam Kishore & Anr. Vs. Roop Saree Kendra. 

21. The view is incorrect for the reason it ignores the law on the subject that the concept of a contractual tenancy is only applicable where the Rent Control Legislation so envisages and that ejectment of an occupier of a property in a slum area, be the occupier a tenant or otherwise is entirely different than the issue of payment of damages for unauthorized use and occupation. A person occupying a slum property upon becoming liable to pay damages may not be evicted from the property for non-payment of damages, but that would not mean that damages cannot be recovered. The Slum Act does not regulate the rent payable by a tenant or the charges payable for unauthorized use and occupation. If the Rent Act does not apply to a slum area, rent payable would be governed as per contract between the parties and damages for unauthorized occupation as per the general law applicable. 

Sub-Letting - Concept, Scope & Ingredients : The Law

Justice Tarun Chatterjee
Supreme Court of India

The Supreme Court Celina Coelho Pereira Vs. Ulhas Mahabaleshwar Kholkar has carefully examined the meaning, scope and ingredients of 'Sub-Letting' under various rent control legislations in India. Justice Tarun Chatterjee has succinctly summarized the broad principles / guidelines to be followed in cases involving sub-letting of the premises by the tenant. The relevant extracts from this judgment are reproduced hereinbelow;

18. In the case of Associated Hotels of India Ltd., Delhi v. S.B. Sardar Ranjit Singh AIR 1968 SC 933, this Court held that when eviction is sought on the ground of subletting, the onus to prove subletting is on the landlord. It was further held that if the landlord prima facie shows that the third party is in exclusive possession of the premises let out for valuable consideration, it would then be for the tenant to rebut the evidence. 

19. The aforesaid legal position was also noticed by this Court in the case of Smt. Krishnawati v. Hans Raj (1974) 1 SCC 280. 

20. In Helper Girdharbhai v. Saiyed Mohmad Mirasaheb Kadri & Others (1987) 3 SCC 538, this Court held that in a case where a tenant becomes a partner of a partnership firm and allows the firm to carry on business in the demised premises while he himself retains legal possession thereof, the act of the landlord does not amount to subletting. It was held that whether there is genuine partnership or not must be judged in the facts of each case in the light of the principles applicable to partnership. 

21. While dealing with the mischief contemplated under Section 14(1)(b) of the Delhi Rent Control Act, 1958 providing for eviction on the ground of subletting, this Court in the case of Jagan Nath (Deceased) through LRs. vs. Chander Bhan And Ors. (1988) 3 SCC 57 held: 

"The question for consideration is whether the mischief contemplated under Section 14(1)(b) of the Act has been committed as the tenant had sublet, assigned, or otherwise parted with the possession of the whole or part of the premises without obtaining the consent in writing of the landlord. There is no dispute that there was no consent in writing of the landlord in this case. There is also no evidence that there has been any subletting or assignment. The only ground perhaps upon which the landlord was seeking eviction was parting with possession. It is well settled that parting with possession meant giving possession to persons other than those to whom possession had been given by the lease and the parting with possession must have been by the tenant; user by other person is not parting with possession so long as the tenant retains the legal possession himself, or in other words there must be vesting of possession by the tenant in another person by divesting himself not only of physical possession but also of the right to possession. So long as the tenant retains the right to possession there is no parting with possession in terms of clause (b) of Section 14(1) of the Act. Even though the father had retired from the business and the sons had been looking after the business, in the facts of this case, it cannot be said that the father had divested himself of the legal right to be in possession. If the father has a right to displace the possession of the occupants, i.e., his sons, it cannot be said that the tenant had parted with possession" 

22. The question whether the tenant has assigned, sublet or otherwise parted with the possession of the whole or any part of the premises without the permission of the landlord within the meaning of Section 13(1)(e) of the Rajasthan Premises (Control of Rent and Eviction) Act, 1950, fell for consideration in Gopal Saran vs. Satyanarayana (1989) 3 SCC 56. This Court held: 

"Sub-letting means transfer of an exclusive right to enjoy the property in favour of the third party. In this connection, reference may be made to the decision of this Court in Shalimar Tar Products Ltd. v. H.C. Sharma [(1988) 1 SCC 70] where it was held that to constitute a sub-letting, there must be a parting of legal possession, i.e., possession with the right to include and also right to exclude others and whether in a particular case there was sub-letting was substantially a question of fact. In that case, a reference was made at page 77 of the report to the Treatise of Foa on Landlord and Tenant, 6th edn., at page 323, for the proposition that the mere act of letting other persons into possession by the tenant, and permitting them to use the premises for their own purposes, is not, so long as he retains the legal possession himself, a breach of covenant. In paragraph 17 of the report, it was observed that parting of the legal possession means possession with the right to include and also right to exclude others. In the last mentioned case, the observations of the Madras High Court in Gundalapalli Rangamannar Chetty v. Desu Rangiah (AIR 1954 Mad 182) were approved by this Court in which the legal position in Jackson v. Simons [(1923) 1 Ch 373) were relied upon. The Madras High Court had also relied on a judgment of Scrutton L.J. in Chaplin v. Smith [(1926) 1 KB 198] at page 211 of the report where it was said : He did not assign, nor did he underlet. He was constantly on the premises himself and kept the key of them. He did business of his own as well as business of the company. In my view he allowed the company to use the premises while he himself remained in possession of them. This position was also accepted in Vishwa Nath v. Chaman Lal (AIR 1975 Del. 117) wherein it was observed that parting with possession is understood as parting with legal possession by one in favour of the other by giving him an exclusive possession to the ouster of the grantor. If the grantor had retained legal possession with him it was not a case of parting with possession." 

The court also reiterated that to prove sub-tenancy, two ingredients have to be established, firstly, the tenant must have exclusive right of possession or interests in the premises or part of the premises in question and secondly, the right must be in lieu of payment of some compensation or rent. 

23. In the case of G.K. Bhatnagar (Dead) By LRs. v. Abdul Alim (2002) 9 SCC 516, this Court held as follows: 

"A conjoint reading of these provisions shows that on and after 9-6-1952, sub-letting, assigning or otherwise parting with the possession of the whole or any part of the tenancy premises, without obtaining the consent in writing of the landlord, is not permitted and if done, the same provides a ground for eviction of the tenant by the landlord. However, inducting a partner in his business or profession by the tenant is permitted so long as such partnership is genuine. If the purpose of such partnership may ostensibly be to carry on the business or profession in partnership, but the real purpose be sub-letting of the premises to such other person who is inducted ostensibly as a partner, then the same shall be deemed to be an act of sub-letting attracting the applicability of clause (b) of sub- section (1) of Section 14 of the Act." 

24. A three-Judge Bench of this Court in Parvinder Singh v. Renu Gautam and Others (2004) 4 SCC 794 commented upon the device adopted by tenants many a time in creating partnership as a camouflage to circumvent the provisions of the Rent Control Act. The following observations are worth noticing: 

"The rent control legislations which extend many a protection to the tenant, also provide for grounds of eviction. One such ground, most common in all the legislations, is sub- letting or parting with possession of the tenancy premises by the tenant. Rent control laws usually protect the tenant so long as he may himself use the premises but not his transferee inducted into possession of the premises, in breach of the contract or the law, which act is often done with the object of illegitimate profiteering or rack-renting. To defeat the provisions of law, a device is at times adopted by unscrupulous tenants and sub-tenants of bringing into existence a deed of partnership which gives the relationship of tenant and sub-tenant an outward appearance of partnership while in effect what has come into existence is a sub-tenancy or parting with possession camouflaged under the cloak of partnership. Merely because a tenant has entered into a partnership he cannot necessarily be held to have sub-let the premises or parted with possession thereof in favour of his partners. If the tenant is actively associated with the partnership business and retains the use and control over the tenancy premises with him, maybe along with the partners, the tenant may not be said to have parted with possession. However, if the user and control of the tenancy premises has been parted with and deed of partnership has been drawn up as an indirect method of collecting the consideration for creation of sub- tenancy or for providing a cloak or cover to conceal a transaction not permitted by law, the court is not estopped from tearing the veil of partnership and finding out the real nature of transaction entered into between the tenant and the alleged sub-tenant. A person having secured a lease of premises for the purpose of his business may be in need of capital or finance or someone to assist him in his business and to achieve such like purpose he may enter into partnership with strangers. Quite often partnership is entered into between the members of any family as a part of tax planning. There is no stranger brought on the premises. So long as the premises remain in occupation of the tenant or in his control, a mere entering into partnership may not provide a ground for eviction by running into conflict with prohibition against sub-letting or parting with possession. This is a general statement of law which ought to be read in the light of the lease agreement and the law governing the tenancy. There are cases wherein the tenant sub-lets the premises or parts with possession in defiance of the terms of lease or the rent control legislation and in order to save himself from the peril of eviction brings into existence, a deed of partnership between him and his sub-lessee to act as a cloak on the reality of the transaction. The existence of deed of partnership between the tenant and the alleged sub- tenant would not preclude the landlord from bringing on record material and circumstances, by adducing evidence or by means of cross-examination, making out a case of sub- letting or parting with possession or interest in tenancy premises by the tenant in favour of a third person. The rule as to exclusion of oral by documentary evidence governs the parties to the deed in writing. A stranger to the document is not bound by the terms of the document and is, therefore, not excluded from demonstrating the untrue or collusive nature of the document or the fraudulent or illegal purpose for which it was brought into being. An enquiry into reality of transaction is not excluded merely by availability of writing reciting the transaction........." 

25. In yet another decision, a three-Judge Bench of this Court in Mahendra Saree Emporium (II) v. G.V. Srinivasa Murthy (2005) 1 SCC 481 considered earlier decisions, few of which have been referred above, while dealing with a matter relating to subletting of the premises within the meaning of Section 21(1)(f) of Karnataka Rent Control Act, 1961 and observed as follows : 

"The term "sub-let" is not defined in the Act - new or old. However, the definition of "lease" can be adopted mutatis mutandis for defining "sub-lease". What is "lease" between the owner of the property and his tenant becomes a sub-lease when entered into between the tenant and tenant of the tenant, the latter being sub-tenant qua the owner- landlord. A lease of immovable property as defined in Section 105 of the Transfer of Property Act, 1882 is a transfer of a right to enjoy such property made for a certain time for consideration of a price paid or promised. A transfer of a right to enjoy such property to the exclusion of all others during the term of the lease is sine qua non of a lease. A sub-lease would imply parting with by the tenant of the right to enjoy such property in favour of his sub-tenant. Different types of phraseology are employed by different State Legislatures making provision for eviction on the ground of sub-letting. Under Section 21(1)(f) of the old Act, the phraseology employed is quite wide. It embraces within its scope sub-letting of the whole or part of the premises as also assignment or transfer in any other manner of the lessee's interest in the tenancy premises. The exact nature of transaction entered into or arrangement or understanding arrived at between the tenant and alleged sub-tenant may not be in the knowledge of the landlord and such a transaction being unlawful would obviously be entered into in secrecy depriving the owner-landlord of the means of ascertaining the facts about the same. However still, the rent control legislation being protective for the tenant and eviction being not permissible except on the availability of ground therefor having been made out to the satisfaction of the court or the Controller, the burden of proving the availability of the ground is cast on the landlord i.e. the one who seeks eviction. In Krishnawati v. Hans Raj [(1974) 1 SCC 289] reiterating the view taken in Associated Hotels of India Ltd. v. S.B. Sardar Ranjit Singh [(1968) 2 SCR 548] this Court so noted the settled law: (SCC p. 293, para 6) 

"[T]he onus to prove sub-letting is on the landlord. If the landlord prima facie shows that the occupant who was in exclusive possession of the premises let out for valuable consideration, it would then be for the tenant to rebut the evidence." 

Thus, in the case of sub-letting, the onus lying on the landlord would stand discharged by adducing prima facie proof of the fact that the alleged sub-tenant was in exclusive possession of the premises or, to borrow the language of Section 105 of the Transfer of Property Act, was holding right to enjoy such property. A presumption of sub-letting may then be raised and would amount to proof unless rebutted. In the context of the premises having been sub-let or possession parted with by the tenant by adopting the device of entering into partnership, it would suffice for us to notice three decisions of this Court. Murlidhar v. Chuni Lal (1970 Ren CJ 922) is a case where a shop was let out to a firm of the name of Chuni Lal Gherulal. The firm consisted of three partners, namely, Chuni Lal, Gherulal and Meghraj. This partnership closed and a new firm by the name of Meghraj Bansidhar commenced its business with partners Meghraj and Bansidhar. The tenant firm was sought to be evicted on the ground that the old firm and the new firm being two different legal entities, the occupation of the shop by the new firm amounted to sub-letting. This Court discarded the contention as "entirely without substance" and held that a partnership firm is not a legal entity; the firm name is only a compendious way of describing the partners of the firm. Therefore, occupation by a firm is only occupation by its partners. The two firms, old and new, had a common partner, namely, Meghraj, who continued to be in possession and it was fallacious to contend that earlier he was in possession in the capacity of partner of the old firm and later as a partner of the new firm. The landlord, in order to succeed, has to prove it as a fact that there was a sub- letting by his tenant to another firm. As the premises continued to be in possession of one of the original tenants, Meghraj, then by a mere change in the constitution of the firm of which Meghraj continued to be a partner, an inference as to sub-letting could not be drawn in the absence of further evidence having been adduced to establish sub-letting. In Helper Girdharbhai v. Saiyed Mohd. Mirasaheb Kadri [(1987) 3 SCC 538] the tenant had entered into a partnership and the firm was carrying on business in the tenancy premises. This Court held that if there was a partnership firm of which the appellant was a partner as a tenant, the same would not amount to sub-letting leading to forfeiture of the tenancy; for there cannot be a sub-letting unless the lessee parted with the legal possession. The mere fact that another person is allowed to use the premises while the lessee retains the legal possession is not enough to create a sub-lease. Thus, the thrust is, as laid down by this Court, on finding out who is in legal possession of the premises. So long as the legal possession remains with the tenant the mere factum of the tenant having entered into partnership for the purpose of carrying on the business in the tenancy premises would not amount to sub-letting. In Parvinder Singh v. Renu Gautam [(2004) 4 SCC 794] a three-Judge Bench of this Court devised the test in these terms: (SCC p. 799, para 8) "If the tenant is actively associated with the partnership business and retains the use and control over the tenancy premises with him, maybe along with the partners, the tenant may not be said to have parted with possession. However, if the user and control of the tenancy premises has been parted with and deed of partnership has been drawn up as an indirect method of collecting the consideration for creation of sub-tenancy or for providing a cloak or cover to conceal a transaction not permitted by law, the court is not estopped from tearing the veil of partnership and finding out the real nature of transaction entered into between the tenant and the alleged sub- tenant"." 

26. In Vaishakhi Ram and Others v. Sanjeev Kumar Bhatiani (2008) 14 SCC 356, one of us (Tarun Chatterjee, J.), in a case of subletting under Section 14(1)(b) of Delhi Rent Control Act, held: 

"A plain reading of this provision would show that if a tenant has sub-let or assigned or otherwise parted with the possession of the whole or any part of the premises without obtaining the consent in writing of the landlord, he would be liable to be evicted from the said premises. That is to say, the following ingredients must be satisfied before an order of eviction can be passed on the ground of sub-letting: 

(1) the tenant has sub-let or assigned or parted with the possession of the whole or any part of the premises; 

(2) such sub-letting or assigning or parting with the possession has been done without obtaining the consent in writing of the landlord." .............."It is well settled that the burden of proving sub- letting is on the landlord but if the landlord proves that the sub- tenant is in exclusive possession of the suit premises, then the onus is shifted to the tenant to prove that it was not a case of sub-letting." 

27. In Nirmal Kanta (Dead) Through LRs. v. Ashok Kumar and Another (2008) 7 SCC 722 , this Court held thus : 

"What constitutes sub-letting has repeatedly fallen for the consideration of this Court in various cases and it is now well-established that a sub-tenancy or a sub-letting comes into existence when the tenant inducts a third party stranger to the landlord into the tenanted accommodation and parts with possession thereof wholly or in part in favour of such third party and puts him in exclusive possession thereof. The lessor and/or a landlord seeking eviction of a lessee or tenant alleging creation of a sub-tenancy has to prove such allegation by producing proper evidence to that effect. Once it is proved that the lessee and/or tenant has parted with exclusive possession of the demised premises for a monetary consideration, the creation of a sub-tenancy and/or the allegation of sub-letting stands established." 

28. The legal position that emerges from the aforesaid decisions can be summarised thus: 

(i) In order to prove mischief of subletting as a ground for eviction under rent control laws, two ingredients have to be established, (one) parting with possession of tenancy or part of it by tenant in favour of a third party with exclusive right of possession and (two) that such parting with possession has been done without the consent of the landlord and in lieu of compensation or rent. 

(ii) Inducting a partner or partners in the business or profession by a tenant by itself does not amount to subletting. However, if the purpose of such partnership is ostensible and a deed of partnership is drawn to conceal the real transaction of sub-letting, the court may tear the veil of partnership to find out the real nature of transaction entered into by the tenant. 

(iii) The existence of deed of partnership between tenant and alleged sub-tenant or ostensible transaction in any other form would not preclude the landlord from bringing on record material and circumstances, by adducing evidence or by means of cross- examination, making out a case of sub-letting or parting with possession in tenancy premises by the tenant in favour of a third person. 

(iv) If tenant is actively associated with the partnership business and retains the control over the tenancy premises with him, may be along with partners, the tenant may not be said to have parted with possession. 

(v) Initial burden of proving subletting is on landlord but once he is able to establish that a third party is in exclusive possession of the premises and that tenant has no legal possession of the tenanted premises, the onus shifts to tenant to prove the nature of occupation of such third party and that he (tenant) continues to hold legal possession in tenancy premises. 

(vi) In other words, initial burden lying on landlord would stand discharged by adducing prima facie proof of the fact that a party other than tenant was in exclusive possession of the premises. A presumption of sub-letting may then be raised and would amount to proof unless rebutted.

Guidelines to Reduce Landlord Tenant Litigation : Supreme Court

Justice Deepak Varma

The Supreme Court in Mohammad Ahmad v. Atma Ram Chauhan & Ors. has laid down illustrative guidelines which aim to reduce landlord - tenant disputes and to avoid unnecessary litigation arising therefrom. Justice Deepak Varma, speaking for the bench has observed as under;

21. According to our considered view majority of these cases are filed because landlords do not get reasonable rent akin to market rent, then on one ground or the other litigation is initiated. So before saying omega, we deem it our duty and obligation to fix some guidelines and norms for such type of litigation, so as to minimise landlord-tenant litigation at all levels. These are as follows:-

(i) The tenant must enhance the rent according to the terms of the agreement or at least by ten percent, after every three years and enhanced rent should then be made payable to the landlord. If the rent is too low (in comparison to market rent), having been fixed almost 20 to 25 years back then the present market rate should be worked out either on the basis of valuation report or reliable estimates of building rentals in the surrounding areas, let out on rent recently.

(ii) Apart from the rental, property tax, water tax, maintenance charges, electricity charges for the actual consumption of the tenanted premises and for common area shall be payable by the tenant only so that the landlord gets the actual rent out of which nothing would be deductible. In case there is enhancement in property tax, water tax or maintenance charges, electricity charges then the same shall also be borne by the tenant only.

(iii) The usual maintenance of the premises, except major repairs would be carried out by the tenant only and the same would not be reimbursable by the landlord.

(iv) But if any major repairs are required to be carried out then in that case only after obtaining permission from the landlord in writing, the same shall be carried out and modalities with regard to adjustment of the amount spent thereon, would have to be worked out between the parties.

(v) If present and prevalent market rent assessed and fixed between the parties is paid by the tenant then landlord shall not be entitled to bring any action for his eviction against such a tenant at least for a period of 5 years. Thus for a period of 5 years the tenant shall enjoy immunity from being evicted from the premises.

(vi) The parties shall be at liberty to get the rental fixed by the official valuer or by any other agency, having expertise in the matter.

(vii) The rent so fixed should be just, proper and adequate, keeping in mind, location, type of construction, accessibility with the main road, parking space facilities available therein etc. Care ought to be taken that it does not end up being a bonanza for the landlord.

22. These are some of the illustrative guidelines and norms but not exhaustive, which can be worked out between landlord and tenant so as to avoid unnecessary litigation in Court.

Eviction of Tenants by Police Force

Justice Katju

Justice Markandey Katju and Justice Gyan Sudha Mishra in M/s Ram Prakash Sharma v. Baulal (D) by LR's has issued general directions in all cases where the tenants do not vacate the premises in eviction cases despite granting time by the Court or despite furnishing an undertaking to the Court. The short order reads as follows;

"Heard learned counsel for the parties. In the facts and circumstances of the case, time to vacate the premises in question is extended till 31st August, 2011 and if the tenants do not vacate on or before the said date, they will be evicted by police force. We further make it clear that when this Court allows the petition/appeal of the landlord or dismisses the petition/appeal of the tenant and grant some time to vacate the premises in question and if the tenant does not vacate within the time granted, the tenant shall be evicted by police force. This is a general direction we are passing because we are coming across several cases where the tenants are not vacating the premises in question despite granting time by this Court or despite furnishing an undertaking to this Court with a result that the landlord has to initiate contempt proceedings or any other proceedings. 

Hence, we give a general direction that when tenant's petition/appeal is dismissed and he is given time to vacate then on the expiry of that time, he will be evicted by police force if he does not vacate of his own.

If any extension of time to vacate is desired, that application should be filed well in advance. The Interlocutory Application is allowed accordingly.

Effect of Sub-Letting : Relevant Rate of Rent under Delhi Rent Control Act: The Law

Justice A.K. Sikri
Delhi High Court

An interesting question was raised in the instant case (M/s. Atma Ram Properties (P) Ltd. vs M/s. Pal Properties (India) Pvt. Ltd. And Others), where the Premises in question was let out to the tenant for a rent less than Rs. 3500/- per month and the said tenant further sub-let the Premises for an amount exceeding Rs. 3500/- per month. The question that arose for the consideration of the Bench was which rate of rent would be applicable to determine the question regarding jurisdiction of the Civil Court in view of S. 50 of the Delhi Rent Control Act.

The Bench held that once the tenant sublets the property for a rent exceeding Rs. 3500/- per month, then the relevant rent for the consideration of the Court would be the amount exceeding Rs. 3500/- per month. The Court held that once the premises fetches a rent exceeding Rs. 3500/- per month, the tenant loses the protection afforded by the Delhi Rent Control Act. The relevant Para(s) of the judgments are reproduced hereinbelow;

14. The last question which calls for determination is as to whether the tenancy of the defendants is protected under the provisions of Delhi Rent Control Act and the suit is not maintainable in view of Section 50 of the said Act. On this aspect facts are not in dispute. Defendants 1 to 3 are paying the rent of Rs. 1540/-. However, they have sub-let a part of the tenanted premises to defendant No. 4 and defendant No. 4 is paying the rent of Rs. 24,701.25 paise to defendants 1 to 3. Therefore, no evidence is required and legal question which calls for determination is as to whether it is a rent of Rs. 1540/- paid by tenants to the landlord or it is a rent of Rs. 24,701.75 paise paid by sub-tenant to tenants which would be a determinative factor in such proceedings. This issue is no more res integra. Identical question came up for consideration before the Division Bench of this Court in the case of P.S. Jain Company Ltd. Vs. Atma Ram Properties (P) Ltd. & Ors. . In para-5, the question which fell for consideration was posed. It reads as under:

"The point for consideration in the appeal is: Whether a tenant who is paying a rent of Rs. 900/- p.m. Section 3(c) of the Delhi Rent Control Act, 1958) can be evicted by a simple notice under Section 106 Transfer of Property Act, through the civil Court if he has lawfully sub-let there premises to two tenants, one for Rs. 40,000/- p.m. and another for Rs. 4,500/- p.m. (in each cases for more than Rs. 3,500/- p.m.)?

15. The answer to this question is found in paras 8, 9 and 12 of that judgment. After relying upon for Supreme Court judgments dealing with purposeful construction of a statute rather than adopting mechanical approach, in para-12 the Court observed as under:

"12. In our view, the intention behind Section 3(c) is that a premises which fetches a rent of Rs. 3,500/- p.m. should be exempt and that protection should be restricted to buildings fetching a rent less than Rs. 3,500/- p.m. In case a tenant paying less than Rs. 3,500/- p.m. to his landlord has sublet the very same premises may be lawfully for a rent above Rs. 3,500/- p.m., then the question naturally arises whether such a tenant can be said to belong to weaker sections of society requiring protection. By sub-letting for a rent above Rs. 3,500/- p.m., the tenant has parted with his physical possession. He is receiving from his tenant (i.e. the sub-tenant) more than Rs. 3,500/- p.m. though he is paying less than Rs. 3,500/- p.m. to his landlord. The above contrast is well illustrated by the facts of the case before us. The appellants tenant is paying only Rs. 900/- p.m. to the plaintiff, while one for Rs. 40,000/- p.m. and another for Rs. 4,500/- p.m. In regard to each of these units, the sub-tenants have no protection of the Rent Act. In our view, the purpose of Section 3(c) is not to give any protection to such a tenant.

16. Thus it is clear that the relevant rent is the one which is paid by sub-tenant to the tenant. In the instant case it is more than Rs. 3,500/- PM and, therefore, no protection under the Delhi Rent Control Act would be available to the defendants and the present suit is not hit by Section 50 of the Rent Control Act.

Delhi Rent Control Act

Law relating to the Delhi Rent Control Act