G. Reghunathan v. K. V. Varghese

.A ## G.REGHUNATHAN _v._ ## K.V. VARGHESE ## AUGUST 23, 2005 ## B ## [R.C. LAHOTI, CJ AND P.K. BALASUBRAMANY AN, J.] _Kera/a Buildings (Lease and Rent Control) Act, 1965-Sections 11 (2)_ & _11 (4) (ii)-Premises let out for setting up a shop for carrying on gold and silver jewellery business-Tenant defaulting in payment of rent_ C _and making major alterations to the premises without the consent of landlord-Landlord filing eviction petition be/ere Rent Controller for wilful default of payment of rent and for destroying/reducing the value and utility of the premises materially and permanently-Rent Controller, Appellate Authority and High Court holding in favour of landlord-Correctness of-_ D _Held, tenant is liable to be evicted only if the landlord proved that the value or utility of the premises is materially and permanently affected by the act of the tenant-On facts, landlord has failed to prove it-Hence, eviction order is set aside gra1zting the tenant two months time for payment of arrears of rent to the landlord_ . E Appellant-tenant took on rent a room in the building belonging to respondent-landlord for setting up a shop for carrying on gold and silver jewellery business. As per the agreement, a sum of Rs.85,000 was given to the landlord as security by the tenant. The tenant was allowed to install electrical fittings and all necessary instruments or equipments F in the room for the purpose of his business. The tenant removed a door and three windows from the walls of the room and closed up the openings, cut off the rafters in the front to a length of two-feet and lowered the level of the floor by one foot. He also erected two pillars touching the walls and fixed a rolling shutter in front of the shop. These were done without the written permission of the landlord. The tenant failed to pay G the rent to the landlord from the very next month of the agreement itself. The landlord issued a notice under section 11(2) of the Kerala Buildings (Lease and Rent Control) Act, 1965 calling upon the tenant H to pay the rent in arrears. On the failure by the tenant to tender the 848 G. REGHUNATHANv. K.V. VARGHESE 849 rent, the landlord filed an eviction petition before Rent Controller A against the tenant for wilful default of payment of rent and for destroying or reducing the value and utility of the premises materially and permanently. under section 11(2) and 11(4)(ii) of the Act respectively. The Rent Controller allowed the eviction petition of the landlord on both the grounds. The appeal filed by the tenant before the Appellate B Authority challenging the Rent Controller's order was also dismissed. The tenant filed a revision petition before High Court under the Act. The High Court dismissed the revision petition. Hence the appeal by the tenant before this Court. ## Allowing the appeal, the Court c HELD : 1.1. For seeking eviction under section l 1(4)(ii) of the Kerala Buildings (Lease and Rent Control) Act, 1965, the user should destroy or reduce the value or utility of the building materially and permanently. Even if the user leads to some reduction in the value or utility of the building, eviction cannot be ordered. But, if the value or D utility is materially and permanently affected, an order for eviction could be passed. The destruction or damage has to be adjudged from the stand point of the landlord. The respondent landlord has not pleaded that the alterations made by the appellant tenant have destroyed or reduced the value or utility of the building materially and permanently. E **The words "material and permanent" are . ..not disjunctive like in some** other Acts. The landlord had not proved the material and permanent impairment in value or utility. The landlord admits that he will get a higher rent ifthe room is again let out. The landlord has failed to prove that the acts of the tenant constitute the user of the building in such a F manner as to destroy or reduce the value or utility of the building materially and permanently. Hence the order for eviction under section 11(4)(ii) of the Act is set aside. [857-A-E] D F _Manmohan Das_ v. _Bishun Das,_ [1967] _1_ SCR 836; _Om Prakash_ v. _Amar Singh,_ AIR (1987) SC 617; _Brijendra Nath_ v. _Harsh Wardhan,_ [1988] 2 SCR 124; _Arunachalam {died) through LRs & Anr._ v. _Thondarperienambi & Anr.,_ AIR (1992) SC 977; _Vipin Kumar_ v. _Roshan Lal Anand,_ [1993] 2 SCC 614 and _Waryam Singh_ v. _Baldev Singh,_ [2003] l SCC 59, referred to. G _Ahammad Kanna_ v. _MuhammedHaneef_ (1967) K.L.T. 841; _Ayissabeevi_ H 850 SUPREME COURT REPORTS (2005] SUPP. 2 S.C.R. A v. _Aboobaker,_ (1971) K.L.T. 273; _Shanmugam_ v. _Rao Saheb,_ (1988) 1 K.L.T. 86; _Prabodhini_ v. _Rajammal,_ (1991) 1 K.L.J. 113; _Thankappan_ v. _Reji. Xavier,_ (1995) 1 K.L.J. 86; _Mathew_ v. _Gzlbert,_ (1998) 2 K.L.T. 19; _Aboobacker_ v. _Nanu,_ (2001) 3 K.L.T. 815; _Seethalakshmi Ammal_ v. _Nabeesath Beevi,_ (2003) 1 K.L.T. 391, referred to. B 2. When the appellant tenant had pleaded that _he_ had deposited the rent even while filing his objectiori in the Rent Control Court, it is not necessary to pronounce finally on this question. It is clarified that the tenant will have two months from the date of judgment to deposit the rent in arrears till date and the other sums in terms of Section 11 (2) (c) of the C Act so as to avert the execution of the order for eviction on the ground of arrears of rent granted under section 11(2) of the Act. [858-C-D-E) _Modern Hotel_ v. _K. Radhakrishnaiah,_ [1989) 2 SCC 686 and _K. Narasimha Rao_ v. _T.M Nasimuddin Ahmed,_ [1996) 3 SCC 45, referred D to. _Issac Ninan_ v. _State of' Kera/a,_ (1995) 2 KLT 848, referred to. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5188 of 2005. E From the Judgment and Order dated 17.12.2003 of the Kera! High Court at Ernakulam in C.R.P. No. 1628 of 1997 (C). C.K. Sasi for the Appellant. F Dhruv Mehta, A. Raghunath and A.D. Sikri for the Respondent. > The Judgment of the Court was delivered by ## P.K. BALASUBRAMANY AN, J. : Leave granted. G 1. The tenant is before us. He is the tenant of a building governed by the Kerala Buildings (Lease and Rent Control) Act, 1965 (hereinafter called "the Att"). He took on rent a room in the building belonging to the respondent-landlord. He executed an unregistered, insufficiently stamped rent deed on 5 .9 .1988 which was accepted by the landlord. He ::ntered into possession H thereunder. The lease was taken for the purpose of conducting a gold and **==> picture [15 x 4] intentionally omitted <==** **----- Start of picture text -----**<br> -<br>**----- End of picture text -----**<br> D ## G. REGHUNATHAN _v._ K.V. VARGHESE [BALASUBRAMANYAN, J.] 851 silver jewellery shop. As per the rent deed, the term of the lease was 15 A years. The rent payabie was Rs.750 a month. A sum ofRs.85,000 was given to the landlord as security. That amount was to be returned to the tenant when he vacated the room. The monthly rent of Rs. 750 was to be paid by the 5th of the succeeding month. The tenant was given the right to install electrical fittings and to take water and telephone connections. He had the B right to install all necessary instruments or equipments in the room for the purpose of gold and silver business. 2. Disputes seem to have arisen immediately thereafter. The tenant did not tender the rent that fell due on 5.10.1988. He removed a door and three windows from the walls of the room and closed up those openings. He cutoff the rafters in the front to a length of two feet. He lowered the level of the floor by one foot. He erected two pillars touching the walls and fixed a rolling shutter in front of the shop. These were done without the written permission of the landlord. C 3. The landlord issued a notice in terms of the proviso to Section l l (2) of the Act. He called upon the tenant to pay the rent in arrears. The tenant failed to tender the rent. He tiled an application R.C.P. No.2of1990 before the Rent Controller for eviction of the tenant. He invoked Section l l (2) of the Act pleading that the tenant had not paid or tendered the rent due by him for the period from 5.10.1988 to 3 l.12.1990 in spite of the statutory notice. He also relied on the ground under Section l l(4)(ii) of the Act. He alleged that the tenant had used the building in such a manner as to destroy or reduce its value or utility materially and permanently. His case was that by removing the door and the windows and by his other acts the tenant has incurred the liability to be evicted under Section. I I (4) (ii) of the Act. The tenant resisted the application. He pleaded that the landlord did not cooperate **with him in getting electricity and water connections and refused to issue** receipts for the rent he tendered. Therefore, he had not paid the rent. He had not done anything in the building which materially affected the value or utility of the building. In fact, what he had done, had only made the building safe and enhanced its value. He pleaded that he was not liable to be evicted. He also deposited the rent that was in arrears so as to enable him to contest the proceedings. E F G 4. A commission was taken out. The Commissioner visited the shop in the presence of the tenant. The Commissioner noted the relevant features 852 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R. A and also recorded what the tenant told him in respect of the removal of the door and the windows. He noted the lowering of the floor, the erection of the pillars and the fixing of the rolling shutter. The landlord examined himself as PW 1. He admitted the rent note. He admitted that he had received Rs.85,000 as advance. He pleaded that in spite of the statutory notice, the B tenant had not paid the rent. He also spoke of the alterations to the building brought about by the tenant. The tenant, in his ::vidence tried to justify the non payment of rent. He deposed that what he had done in the premises was only to facilitate the jewellery trade for which the building was taken on rent. He was entitled to do so on the terms of the rent deed. What he had done, was only to strengthen the premises. The value of the building has C not been permanently or materially diminished. He was not liable to be evicted. 5. The Rent Controller found that the rent note was inadmissible in evidence. It was a tenancy from month to month. He found that the tenant had defaulted payment of rent. An order for eviction under Section 11 (2) D of the Act was liable to be passed. The fact that he had deposited the entire rent during the pendency of the proceedings, was relevant only for the purpose of Section l 1(2)(c) of the Act. He found that the question of materiai ·alteration had to be approached from the angle of the landlord. From that angle, it was clear that by the closing of the windows and the door, E the amenity to the room had been destroyed by the tenant. The fact that such closing of the door and the windows was necessary to secure the jewellery of the tenant was not relevant. What had been done amounted to material alteration within the meaning of Section l 1(4)(ii) of the Act. The tenant was liable to be evicted. He, thus, ordered eviction on both grounds. F 6. The tenant filed an appeal under Section 18 of the Act. He raised a fresh contention. The term of the lease was 15 years. The landlord was not entitled to seek eviction before the expiry of that term. The claim for eviction was barred by Section 11 (9) of the Act. Since this aspect is not agitated before us, it is only necessary to mention that this contention was G negatived by the Appellate Authority. It held that since the rent deed was unregistered, it was not admissible in evidence. The tenant could not take advantage of the term therein. By payment and acceptance of rent, only a tenancy from month to month has come into existence. Therefore, the application for eviction filed before the expiry of 15 years, was maintainable: H 7. As regards the claim under Section 11 (2) of the Act, that authority ,, G. REGHUNATHAN _v._ K.V. VARGHESE [BALASUBRAMANYAN, J.] 853 - reiterated the reasoning of the Rent Controller and found that the tenant had A not tendered the rent or established that as a matter of fact, the landlord had refused to issue a receipt for payment of the same. It relied on a notice issued by the tenant himself accusing the landlord of not cooperating in his getting electrical and water connections and taking the stand that he was not bound to pay the rent. Regarding the claim under Section 11(4) (ii) of the Act, it B held that the alterations made by the tenant came within the purviow of that provision. The order for eviction thereunder was justified. It dismissed the appeal. > 8. The tenant filed a revision under Section 20 of the Act. The High > Court, re-appraised the relevant materials. It held that the application for C eviction was not premature and was maintainable. It further held that the order for eviction under Section l 1(4)(ii) of the Act was sustainable. There was no specific discussion on the order for eviction under Section 11(2) of the Act and the revision was dismissed and the orders for eviction were confirmed. This is what is challenged here. D 9. First, the claim under Section IJ(4)(ii) of the Act. The relevant provision in the Act reads :- "11 ( 4) A landlord may apply to the Rent Control Court for an order directing the tenant to put the landlord in possession of the building- E - (i) ***** - (ii) if the tenant uses the building in such a manner as to destroy or reduce its value or utility materially and per- **manently."** p For seeking eviction, the user should destroy or reduce the value or utility of the building materially and permanently. Even ifthe user leads to some reduction in the value or utility of the building, eviction cannot be ordered. G But, if the value or utility is materially and permanently affected, an order for eviction could be passed. l 0. The Kerala High Court has interpreted this provision in the context of a number of fact situations. _Ahammad Kanna_ v. _Muhammed Haneef,_ H 0 854 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R. A (1967) K.L.T. 841, held that the demolition of any wall in a building can be deemed to be an act of waste which is likely to impair materially the value and utility of the building. But that was not enough. The Court had to see whether there was sufficient evidence to show that the tenant had committed such acts of waste as to impair the value or utility of the building. It was B found that the motive for the removal of the wall was for convenience of trade. Since it was not shown that any damage to the building was caused by the removal of the wall and the boundary was not obliterated, an order for eviction under Section I 1(4)(ii) could not be granted. When the tenant destroyed a boundary wall, the decision in _"Ahammad Kanna"_ was distinguished and it was held in _Ayissabeevi_ v. _Aboobaker,_ (1971) K.L.T. 273, C that the pulling down of a wall might or might not amount to waste, and the question will depend upon the purpose for which the wall was pulled down. When the purpose was to remove the boundary wall and that resulted in the obliteration of the boundary line and the tagging on of the property with the adjoining property through the medium of a corridor, it attracted D Section I 1(4)(ii) of the Act. _Shanmugam_ v. _Rao Saheb,_ <1988) l K.L.T. 86, reiterated that there can be no hard and fast rule that the removal of a wall or construction of a door or providing a common verandah should, necessarily lead to an inference that there was destruction or reduction of the value or utility. Such acts of the tenant have to be judged on the facts of each case. Mere proof of reduction or even destruction of utility or value was not E sufficient and the words "materially and permanently" were important. The destruction or reduction of utility or value of the building must be of a reasonably substantial magnitude. _Prabodhini_ v. _Ra Jammal,_ ( 1991) l K.L.J. 113 decided that the fixing of a gate after removing a portion of the wall, could not be taken as an act which destroyed or reduced the value or utility F of the building. Nor could it be considered to be an act which materially affected the value or utility of the building, that too, permanently. In _Thankappan_ v. _Reji Xavier,_ (l 995) 1 K.L.J. 86, it was held that the removal of a ceiling attracted Section l 1(4)(ii) of the Act since the value of the building was not only reduced but its utility was also materially and perG manently reduced. _Mathew_ v. _Gilbert,_ (1998) 2 K.L.T. 19 held that the failure of the tenant to protect the furniture in the building passed on to him with the letting of the building, would not attract Section l 1(4)(ii) of the Act. In _Aboobacker_ v. _Nanu,_ (2001) 3 K.L.T. 815 it was held that on proof of minor destruction or alteration even if it resulted in marginal reduction of value or utility, the landlord could not get an order of eviction under H Section l 1(4)(ii) of the Act. _Seethalakshmi Amma/.v. Nabeesath Beevi,_ ## G. REGHUNATHANv. K.V. VARGHESE [BALASUBRAMANYAN, J.] 855 (2003) 1 K.L.T. 391 held that the dismantling of the original roof followed A by the substitution of a new roof, the replacing of old walls by new walls, the old flooring by a new flooring and the placing of shutters replacing the doors after practically demolishing the old building, were acts that attracted Section 11(4) (ii) of the Act. B 11. This Court had considered the scope of the analog0us provision in sister enactments. The U.P. Cantonments (Controi of Rent and Eviction) Act was involved in _Manmohan Das_ v. _Bishun Das,_ [1967] I SCR 836. Even if the alterations did not cause any damage to the premises or did not substantially diminish its value, the alterations were material alterations. On that basis alone, the landlord was entitled to evict the tenant. That was in C the context of the provision which enabled a landlord to get an order for eviction, ifthe tenant had, without the permission of the landlord, made any construction which has materially altered the accommodation. Eviction could also be ordered even if that construction or alteration was likely to substantially diminish the value of the building. The difference with the D Kerala Act is that the two requirements were disjunctive. It was enough to ~atisfy **either one of them. It was clarified that although the expression** "material alteration" was not defined, the question would depend on the facts of each case. In that case the acts of the tenant were held to amount to material alterations. In _Om Prakash_ v. _Amar Singh,_ AIR (1987) SC 617, interpreting the same provision, it was held that the question whether a E construction materially altered the accommodation was a mixed question of fact and law. The dictionary meaning of the expression "materia.ly" and "alter" were considered. It was held to mean "a substantial change in the character, form and the structure of the building without destroying its identity". It had to be seen whether the constructions were substantial in F nature and they altered the form, front and structure of the accommodation. No exhaustive list of constructions that constitute material alteration could be given. The determination of that question depended on the facts of each case. On facts, it was held that ~here was no material alteration. It was also laid down that the construction of a temporary shed in the premises which G could easily be removed did not come within the mischief of the section. _Brijendra Nath_ v. _Harsh Wardhan,_ [1988] 2 SCR 124, held that the construction of a wooden balcony in the showroom did not amount to material alteration. Replacing of wooden plank on the front door of the building by a rolling shutter was held to be not an alteration that caused any damage to the building and that was held not to provide a ground for eviction in H 856 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R. A _Arunachalam (died) through L.Rs. and Another_ v. _Thondarperienambi and Another,_ AIR (1992) SC 977. In _Vipin Kumar_ v. _Roshan Lal Anand,_ [1993] 2 SCC 614, a claim under Section 13(2) (iii) of the East Punjab Urban Rent Restriction Act, 1949, it was held that the impairment of the value or utility of the building was from the point of the landlord and not of the tenant. It B had to be shown that there was impairment of the building due to acts of the tenant and, secondly, it had to be shown that the utility or value of the building had been materially impaired. The Court went on to say that the statute on proof of facts gave discretion to the Court to order eviction. The wording of the provision was "if the tenant has committed such acts as are likely to impair the value or utility of the building or rented land". The Rent C Controller had to independently consider and exercise the discretion vested in him keeping in view the proved facts to decree ejectment. It was for the landlord to prove such facts which warrant the Controller to order eviction in his favour. In _Waryam Singh_ v. _Baldev Singh,_ [2003] 1 SCC 59 construing the same provision, it was held that enclosing a verandah by constructing D walls and placing a rolling shutter in front, did not justify an inference that the value or utility of .the building had been impaired, in the absence of evidence led by the landlord to prove that the value or utility had been affected. So an order of eviction could not be granted. 12. From the above, it is clear that the question depends on the facts E of the case. The nature of the building, the purpose of the letting, the terms of the contract and the nature of the interference with the structure by the tenant, are all relevant. The destruction or damage has to be adjudged from the stand point of the landlord. Let us look at the facts in the present case. The building is 75 years old. According to the tenant, it is 80 years old. The F difference is not of any significance. It is the northern room in a building consisting of a number of.rooms. It is let out for 15 years for a jewellery trade. The term has, of course, not come into effect for want of registration of the deed. The door in the western wall has been bricked up. The windows on the northern, western and southern walls have also been bricked up. Obviously, the bricked up portions can be removed and the doors and G windows restored without weakening the structure. But more importantly, the level of the floor was lowered, the rafters cut, two concrete pillars erected and a rolling shutter fixed. The lowering of the floor and the tampering with of the roof, is of some significance. They could lead to impairment of the value or utilit~ of the building, materially and permanently. That again has H to be judged in the light of the surrounding circumstances. But a rolling ## G. REGHUNATHAN v. K.V. VARGHESE [BALASUBRAMANYAN, J.] 857 shutter has been fixed. That provides more security to the premises. The A height of the floor can be restored without impairment to the structure. Here, we find that the landlord has not even pleaded that the alterations made by the tenant have destroyed or reduced the value or utility of the building materially and permanently. No doubt, he has stated so in his evidence. But the tenant has stated that, considering that it was a jewellery business that B was being started, these things had to be done. Securing of the premises was essential. He had given to the landlord Rs. 85,000 as security to be returned, when he vacated the building. The value of the building, if at all, has only been enhanced. In this state of the record, it is not possible to infer that the acts of the tenant have materially and permanently destroyed or reduced the value or utility of the building. The age of the building cannot be ignored. c The purpose of the letting cannot be ignored. c 13. We find that the Authorities below have not approached the question from the proper perspective. They have not given sufficient emphasis to the statutory requirement of the effect being material and permanent. It is "material and permanent". The words are not disjunctive, like in some other Acts. Here the landlord had not proved the material and permanent impairment in value or utility. One suspects that the value and utility are enhanced. The landlord admits that he will get a higher rent if the room is again .let out. We are, therefore, satisfied that interference is justified. We hold that the landlord has failed to prove that the acts of the tenant constitute the user of the building in such a manner as to destroy or reduce the value or utility of the building materially and permanently. We set aside the order for eviction under Section 11(4) (ii) of the Act. D E 14. Now, the claim. under Section 11(2) of the Act. There cannot be F any dispute that the tenant had not paid the rent from 5.10.1988 onwards as claimed by the landlord. He had deposited the rent in the proceeding. If **he has done so, it is relevant only for considering the question whether he** is entitled tnrelief in terms of Section 11 (2)(c) of the Act. The only question is whether the fact that he had paid a sum of Rs. 85,000 as security, which G the landlord was liable to refund to him at the time of his vacating the room, could be taken note of as an amount available with the landlord for being adjusted against the rent due. Under Section 8(1) of the Act, the landlord is not entitled to take any premium or other like sum. Under _Section 8(2),_ he could receive or stipulate for payment only, an amount not exceeding one month's rent by way of advance. In both cases, if he has received it, it H G SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R. 858 F A becomes refundable at once. Hence, it would be an amount available with him. In _Issac Ninan_ v. _State of Kera/a,_ (1995) 2 KLT 848, the High Court has declared that provisions relating to fair rent, that is, Sections 5, 6 and 8 of the Act, put together, are _ultra vires_ the Constitution of India and are void. The questions may have, therefore, to be considered without reference B to Section 8 of the Act. In a case where a substantial amount had been received as advance at the time of letting, which was liable to be refunded without interest on the expiry of the lease, this Court held in _Modern Hotel_ v. _K. Radhakrishnaiah,_ [ 1989) 2 SCC 686, that when the amount of arrears of rent was smaller than the advance amount held by the landlord on account of the tenant, there was no default in payment of rent and the grant of C eviction on the ground of arrears of rent was not justified. This was reiterated in _K. Narasimha Rao_ v. _T.M. Nasimuddin Ahmed,_ [1996] 3 SCC 45. For the purpose of this case, especially when the tenant had pleaded that he had deposited the rent even while filing his objection in the Rent Control Court, we do not think that it is necessary to pronounce finally on this question. D We feel that it is only necessary to clarify that the tenant will have two months from today to deposit the rent in arrears till date and the other sums in terms·of Section 11(2) (c) of the Act so as to avert the execution of the order for eviction on the ground of arrears of rent granted under Section 11 (2) of the Act. ## E 15. The appeal is, thus, allowed by setting aside the order of eviction under Section 11 ( 4 )(ii) of the Act and by granting the tenant time of two months from today for averting the order of eviction under Section 11(2) of the Act by making the deposit (or by making up the needed deposit) in terms of Section l 1(2)(c) of the Act. We make no order as to costs. B.S. Appeal allowed.