Bombay High Court
Kharatilal Haveliram And Ors vs Jagdish Rajaram Shah on 22 September, 2015
Bench: Naresh H. Patil
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
LETTERS PATENT APPEAL NO. 143 OF 1999
1. Shri Kharatilal Haveliram Kalra
(since deceased) by his legal heirs
and representatives:
1(a) Shri Anil Kharatilal Kalra,
Age 55 years, Occu.: Business,
1(b) Shri Sunil Kharatilal Kalra,
Age 53 years, Occu.: Business,
1(c) Mrs.Poonam Ashok Handa,
Age 44 years, Occu.: Business,
(Nos.1(a) to 1(c) above residing at
6, Guru Nanak Nagar, Shankar Shet
Road, Pune- 411 042
1(d) Mrs.Kiran Harish Chhabra,
Age 51 years, Occu.: Housewife,
Residing at Flat No.2, Building No.19,
Anand Park Society, Shankar Shet Road,
Pune- 411 037.
2. Shri Anil Kharatilal Kalra,
Age 45 years, Occu.: Business,
residing at 6, Guru Nanak Nagar,
Pune- 411 002.
3. Shri Sunil Kharatilal Kalra,
Age 43 years, Occu.: Business,
residing at 6, Guru Nanak Nagar,
Pune- 411 002. ... Appellants.
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V/s.
Shri Jagdish Rajaram Shah,
Age about 53 years,
Occupation- Business,
residing at 380, 'S' Building,
Adinath Society, Pune. ... Respondent.
Ms.Chandana Salgaonkar for the appellants.
Aashish Agarwal i/b. Mrs.Anita Agarwal for the respondent.
CORAM :ig NARESH H. PATIL AND
S.B. SHUKRE, JJ.
RESERVED ON : 27th August 2015.
PRONOUNCED ON : 22nd September 2015.
JUDGMENT : (Per S.B.SHUKRE, J.)
This is an appeal preferred against the judgment and order
dated 25th September 1998 passed in First Appeal No.563/1982 thereby
allowing the appeal and partly decreeing the suit of the appellants by
declaring that they are entitled to refund of Rs.25,001/- together with
interest at the rate of 6% per annum from the date of suit till the date of
realization of the amount from the respondent.
2. The appellants are the original plaintiffs and the respondent
is the original defendant No.1. A suit was filed by the appellants claiming
decree of specific performance of oral agreement of lease and also decree
of possession of suit premises. The suit premises is a shop in the building
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constructed on the land bearing CTS No.1049 situated at Pune. It was
the case of the appellants that an oral agreement was entered into
between them and the respondent whereby appellants were to pay to the
respondent an advance of Rs.51,300/- by way of construction loan and it
was agreed that in lieu thereof, the respondent would let out the suit
premises to the appellants on monthly rent of Rs.850/-. Towards part
performance of the oral agreement, the appellants paid an amount of
Rs.25,001/- to the respondent by cheque on 15 th October 1978 which was
encashed by him. The suit premises were to be let out by executing a
lease in favour of the appellants. The lease agreement that was agreed
to be entered into between the parties was initially for a period of 9 years
with an option to renew the same. It was also agreed that out of the rent
amount of Rs.850/-, an amount of Rs.475/- per month would be deducted
towards repayment of loan. However, the respondent refused to execute
the lease as promised, though appellants were always ready and willing to
perform their part of contract.
3. The suit was resisted by the respondent. They took a defence
that the oral agreement was not capable of enforcement it being opposed
to law inasmuch as there was no readiness and willingness on the part of
the appellants to perform their part of the contract.
4. The trial Court, on merits of the case, decreed the suit in
favour of the appellants. An appeal was preferred against the said
judgment and decree of the trial Court, being First Appeal No.563/1992,
before High Court. After considering the evidence adduced by both sides
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and their arguments, learned single Judge of this Court disposed of the
appeal by his order passed on 25 th September 1998. While disposing of
the appeal, the learned single Judge declared that the appellants are
entitled to only relief of refund of Rs.25,001/- which the appellants had
paid towards part performance of the oral agreement between them and
the respondent. An interest at the rate of 6% per annum on the said
amount was also granted. Being aggrieved by the same, the appellants/
original plaintiffs, who have sought the relief of specific performance of
the agreement, are before this Court in the present appeal.
5.
We have heard the learned counsel for the appellants and
learned counsel for the respondent. With their assistance we have gone
through the paper book of the appeal including impugned judgments and
order.
6. The first contention of learned counsel for the appellants is
that learned single Judge has committed grave error of law when he
found that the oral agreement of lease was opposed to law it being
contrary to the provision of section 18(1) of the Bombay Rent Act, 1947
("Rent Act" for short). She submits that learned single Judge erroneously
proceeded on the premise that underlying consideration of the oral
agreement was extension of loan amount by the appellants to the
respondent for execution of lease agreement in their favour by the
landlord i.e. respondent. According to her, the underlying consideration
was not really in the nature of loan but advance rent, a permissible act
under the provisions of section 18 of the Rent Act. In support of her
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contention, she has taken us through the provisions of section 18 and also
relied upon the judgments in the cases of Smt.Sulochana Rege v.
Madan Dattatraya Wadke, 1969 Bom.C.R. 35; and Ranganayaki
Ammal v. M.Chockalingam, 1966 (2) Mh.L.J. 139.
7. Learned counsel for the respondent submits that the provision
of section 18(1) is very clear and it lays down that when a landlord
receives any fine, premium or other like sum or deposit or any any
consideration other than the standard rent or the permitted increases, in
respect of the grant, renewal of continuance of lease of any premises, the
landlord commits an offence punishable thereunder. He submits that
when the oral agreement was entered into between the parties, the
agreement was only executory in nature and at that time no offence was
committed as the lease agreement had not come into being. He further
submits that the moment the lease would come into existence the offence
would be complete as the consideration for creation of lease in favour of
the appellants would be extension of loan by the appellants to the
landlord, a consideration other than the standard rent and, therefore,
prohibited under the law. He further submits that under the scheme of
section 18 any payment made by any person to the landlord by way of
loan for the performance of financing the erection of residential building
is permissible, subject to certain conditions, as could be seen from the
provision of sub-section (3) of section 18. He submits that in the instant
case, however, the suit premises were commercial in nature and the
agreement was not in writing and, therefore, the oral agreement
between the parties would not be covered by exception to the
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provision of sub-section (1) carved out under sub-section (3) of section
18 of the Rent Act.
8. In the case of Smt.Sulochana Rege (supra), learned single
Judge of this Court took a view that section 18 of the Rent Act does not
prohibit extension of loans to the landlord by tenant or intending tenant
but only casts certain obligations on the landlords to obtain such loans.
While taking this view, the learned single Judge considered the scheme of
section 18 and construed in particular the provision of sub-section (3) of
section 18 to hold that under the Act taking of loans by landlords from
the tenants is not prohibited, if the conditions prescribed therein for
obtaining of such loans are fulfilled. We have no reason to take a
different view. The exception carved out to prohibition of obtaining of
any fine or premium or any other amount other than standard rent by the
landlords from the tenants applies only to amount taken by way of loan
for the purpose of financing residential building and not commercial
building and, that too, subject to fulfillment of various conditions
delineated in sub-section (3) of section 18. This provision does not apply
to loans taken for the purpose of construction of commercial building. In
this case, there is no dispute between the parties that the suit premises
were commercial. Therefore, the ratio of the case of Smt.Sulochana
Rege (supra), in our considered view, would be of no assistance to the case
of the appellants.
9. However, it is also the case of the appellants that ultimately
the transaction lying at the root of the oral agreement between the parties
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was in the nature of rent in advance and this is something which is
permissible under section 18. Learned counsel for the appellants has
submitted that there is a clear distinction between "rent" on one hand and
"premium" or "other like sum" on the other and that provision of section
18(1) of the Rent Act being penal in nature, as per the settled law would
require strict construction. Learned counsel for the appellants has also
placed reliance upon the observations contained in N.S.Bindra's
Interpretation of Statutes, tenth edition, published by Lexis Nexis
Butterworths, pages 1162 to 1166. If we go through the provisions of
section 18(1), we would find, what has been prohibited is fine or premium
or other like sum or deposit or any consideration, which is not the
standard rent or the permitted increases, in respect of the grant, renewal
or continuance of lease of any premises. It is certainly a penal provision
and, therefore, by applying the settled principles of interpretation of
statutes, which, in fact would be the rule of strict interpretation of
statutes and the doctrine of ejusdem generis, which doctrine has been
applied in Ranganayaki Ammal (supra), we would have to read and
understand the expressions "any fine, premium or any other like sum or
any consideration" and "standard rent or permitted increases". By this
method, what would emerge without any equivocation is that acceptance
of anything in the nature of rent, present or future, in respect of grant or
renewal or continuance of lease is not proscribed under section 18(1) of
the Rent Act.
10. The conclusion so reached is further strengthened by
explanation I which reads as under:
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"Explanation I. - For the purposes of sub-section (1)-
(a) except as provided in sub-section (3) receipt of
rent in advance for more than three months in
respect of premises let for the purpose of
residence, or
(b) where any furniture or other article is sold by the
landlord to the tenant either before or after the
creation of tenancy of any premises, the excess of
the price received over the reasonable price of
the furniture or article,
shall be deemed to be a fine or premium or
consideration."
It would be clear from Explanation-I that for the purpose of sub-section
(1) of section 18 of the Rent Act even the advance rent for more than
three months is deemed to be a fine or premium or consideration as
contemplated under section 18(1), provided the advance rent is in respect
of premises leased out for the purpose of residence. It is evident from it
that the legislature was conscious of the fact that in order to circumvent
the provision of section 18(1) an unscrupulous landlord may accept
certain sums of money other than the standard rent by giving them colour
of advance rent and, thus, exploit insecure tenants desperately seeking
shelters. Therefore, the legislature in its wisdom thought it fit to even
include those residential advance rents which were in excess of three
months in the expression "fine or premium or consideration" appearing in
section 18(1). But, the advance rents accepted by the landlords in respect
of leases of commercial premises have been kept out of this explanation.
The distinction made by the legislature between the advance rent for the
residential premises and the advance rent for the commercial premises
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appears to be made with a purpose. The commercial tenants may not
have so much disadvantageous position as like residential tenants while
dealing with the landlords with their comparative easy access to finance
and, therefore, the legislature left out the category of advance rent taken
for leasing commercial premises. Thus, under the scheme of section 18,
advance rent taken for lease of commercial premises is permissible.
11. Now the question would be whether the underlying
transaction of the oral agreement between the appellant and the
respondent was in the nature of taking of advance rent by the landlord or
purely a loan transaction prohibited under section 18(1). If we consider
carefully the terms of oral agreement between the parties, which are
discernible from the evidence available on record, we would find answer
to the question. What was agreed between the parties was advancement
of loan of Rs.51,300/- by the appellants to the respondent for construction
of commercial building and, in lieu of that, the respondent was to lease
out the suit premises to the appellants on rent of Rs.850/- per month.
Out of the amount of Rs.51,300/-, an amount of Rs.25,001/- was already
paid to the respondent. It was further agreed that an amount of
Rs.475/- per month would be deducted from the amount of Rs.850/- and,
thus, effectively the appellants were to pay to the respondent only an
amount of Rs.375/- per month. The initial period of lease that was to be
executed in favour of the appellants was to be of nine years or, in other
words, of 108 months. As rightly submitted by learned counsel for the
appellants, if sum of Rs.475/- is multiplied by 108 months, the resultant
figure would be Rs.51,300/-. This would only show that under the oral
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agreement what was paid and agreed to be paid was ultimately the
advance rent. We must mention here that there is no dispute between
the parties about the oral agreement being a concluded contract between
them. Thus, the consideration of the oral agreement, in reality, was not
any construction loan but the rent in advance for more than three months
and it being for the purpose of letting out of a commercial premises, it was
not covered by explanation-I and, therefore, by the prohibition of section
18(1) of the Rent Act. Learned single Judge, we must say, was not right
when he found that agreement could not have been specifically enforced
in the court of law under the scourge of section 18(1) of the Rent Act.
12.
There is one more reason for which the learned single Judge
did not endorse the decree of specific performance of the contract. The
learned single Judge, relying upon the ratio of the judgment of the
Supreme Court in the case of N.P.Thirugnanam v. Dr.R.Jagan Mohan
Rao, AIR 1996 SC 116, found that the appellants did not prove their
continuous readiness and willingness to perform their part of the contract
right from the date of execution till the date of decree. Learned single
Judge considered two facts appearing in the evidence as disproving the
claim of the appellants in respect of their persistent readiness and
willingness to perform their part of contract. Referring to the specific
admission given by appellant No.2 that he had no funds in his account in
November 1976 and also failure on the part of the appellants to give any
notice offering the amount to the respondent, learned single Judge held
that the respondent has conclusively proved the fact that no readiness and
willingness contemplated under the law was shown by the appellants.
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13. The learned counsel for the appellants submits that it is not
necessary that in a case of this kind there has to be a formal tender of the
remaining amount to the defendant and it is enough to show that at the
relevant time the plaintiff was having with him the requisite funds.
Learned counsel for the appellants in this regard has placed reliance upon
the judgments of the Supreme Court in the cases of Sukhbir Singh v.
Brij Pal Singh, AIR 1996 SC 2510; and International Contractors Ltd.
v. Prasanta Kumar Sur, AIR 1962 SC 77. She has also submitted,
referring to the observation of the Hon'ble Apex Court in the case of
Boramma v. Krishna Gowda, 2000 (9) SCC 214, that while
appreciating the evidence the Court should not pick up an answer from
the cross-examination of the witness and draw inference taking it to
isolation, as has been done by the learned single Judge in the instant case.
14. There can be no doubt about the principles of law set out in
the above-referred cases relied upon by learned counsel for the appellants.
The question is, whether, in the facts and circumstances of the case, those
principles of law could be applied to this case and, according to us, on a
careful consideration of the evidence adduced by the parties, the answer is
"No". It is true that no formal tender of an amount is required to be
made by the plaintiff to the defendant and it is enough for the plaintiff to
show that he was always ready with the cash or finance during the
relevant period of time. It is also true that a single admission given in
isolation cannot be picked up for reaching a conclusion. But here the
evidence of the appellants does on the whole show that the appellants
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failed to prove their ceaseless readiness and willingness to perform their
part of contract which is an essential ingredient of a decree for specific
performance of the contract as held in the case of N.P.Thirugnanam
(supra).
15. The readiness and willingness of the party are to be
ascertained from the overall conduct of the party prior and subsequent to
the suit along with other attendant circumstances. The evidence of PW1-
Kharatilal Havelilal Kalra (appellant No.1) shows that he had a bank
account with cash credit facility sanctioned to him by his bank and its
limit was of Rs.35,000/-. His evidence points out that he dealt in sports
goods and sports gears and also scientific goods through his firms, Quality
Sports Company and Atlas Scientific Era. The evidence discloses that he
is an experienced businessman who sought financial assistance of bank for
his business purposes. It also indicates that he was aware of maximum
limit of the cash credit facility granted to him by his bank. His evidence
further reveals that he had borrowed Rs.25,001/- from his bank. This
evidence would lead to an inference that the appellant No.1 is an
experienced businessman having reasonable knowledge of banking
transactions and, it is in this background that some of the admissions
given by him are required to be considered.
16. P.W.1- Kharatilal (appellant No.1) has admitted that in
November 1976, he had no bank balance. When a businessman like
appellant No.1 gives an admission to the effect "I have no bank balance in
Nov. 1976", what conclusion should be drawn by the court other than the
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one that the cash credit limit account that the appellant No.1 was talking
about did not have any inexhausted credit limit therein enabling the
appellants to draw some amount therefrom. This is what the learned
single Judge has done in the present case. He has rightly inferred about
lack of funds by taking into consideration all the attendant facts and
circumstances of the case and not by reading an admission dehors its
contextual setting. Apart from this admission, appellant No.1 has also
admitted that he did not issue any notice to defendant No.1 i.e.
respondent herein till the date of suit calling upon the respondent to sign
the agreement or to come for registration. At one stage, he even admitted
the relations obtaining between himself and the respondent were of
landlord and tenant, though the lease agreement was waiting to see the
light of the day. Therefore, it is strange on his part to have not even
issued any notice to the respondent requesting him to execute the lease
agreement in his favour knowing fully well that the deadline of 1 st
November 1976 had already been crossed, his amount of Rs.25,001/- was
stuck and the landlord or the respondent was refusing to come forward
in the matter. This conduct of appellant No.1 would show that he was
also not very much keen on performing his part of contract and this
would further explain yet another admission given by him to the effect
that he did not attempt to send agreed rent to defendant No.1.
17. The above-referred discussion of the evidence of the parties
would reasonably establish the fact that the conduct of the appellants was
such as would not lead one to infer that the appellants were always and
all the time ready and willing to perform their part of contract. The
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requisite bank balance in November 1976 was not available with them.
The availability of funds could possibly have been presumed, had the
appellants at least intimated the respondent about their being ready with
the remaining amount out of amount of Rs.51,300/- and called upon him
to execute the lease agreement in their favour. In the case of Aniglase
Yohannan v Ramlatha, (2005) 7 SCC 534, the Hon'ble Apex Court has
held that any person seeking benefit of the specific performance of
contract must manifest that his conduct has been blemishless throughout
thereby entitling him to the specific relief. Such is not the case here and,
therefore, the learned single Judge was right in finding that the overall
conduct of the appellants did not exhibit unabated readiness and
willingness on their part and, therefore, they were not entitled to the
relief of specific performance of contract but entitled only to an alternate
relief of refund of Rs.25,001/-, paid by them to the respondent, with
interest.
18. Learned counsel for the appellants has also placed reliance on
the judgments of the Supreme Court in the cases of Prakash Chandra v.
Angadlal, 1979 (4) SCC 393; S.V.R.Mudaliar v. Rajabu F. Buhari, 1995
(4) SCC 15; and P.D'Souza v. Shondrilo Naidu, 2004 (6) SCC 649 in
support of her contention that ordinarily specific relief should be granted,
unless equitable consideration points to its refusal and only because a
claim for liquidated damages as alternate relief has been sought, prayer of
specific performance should not be refused and that escalation in the
prices of the suit property should be no ground for denial of specific
performance.
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19. There is no quarrel about the principles of law so laid down
in the above-referred three cases but, in the instant case, we have found
no error of law or fact in the conclusion reached by the learned single
Judge regarding failure of the appellants to establish, by their conduct and
other attendant circumstances, their being always ready and willing to
perform their part of contract, an essential ingredient of the suit for
specific performance of contract. Therefore, no assistance could be seen
to be lent by these judgments to the case of the appellants here.
In the circumstances, we find that learned single Judge was
right in refusing specific performance of the contract and granting
alternate relief of refund of amount of Rs.25,001/- together with 6%
interest per annum. No illegality or perversity is seen in the impugned
judgment and order. Appeal deserves to be dismissed.
21. Appeal stands dismissed. No costs.
22. After pronouncement of the judgment, learned counsel
appearing for the appellants prays for continuation of interim order for
eight weeks. Said prayer is opposed by learned counsel for the
respondent. In the facts, we direct that the interim order passed by this
Court earlier to continue for a period of four weeks.
(S.B. SHUKRE, J.) (NARESH H. PATIL, J.)
Sanjay Nanoskar, P.S..
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CERTIFICATE
Certified to be true and correct copy of the original signed
Judgment.
