Joy Alukkas Traders (India) Pvt. Ltd. v. Varghese Thomas

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE P.N.RAVINDRAN & THE HONOURABLE MR. JUSTICE K.RAMAKRISHNAN WEDNESDAY, THE 30TH DAY OF MARCH 2016/10TH CHAITHRA, 1938 RCRev..No. 327 of 2015 () -------------------------- AGAINST THE ORDER/JUDGMENT IN RCA 9/2015 of RENT CONTROL APPELLATE AUTHORITY,PATHANAMTHITTA DATED 20.10.2015 I.A.NO.1007/2015 IN R.C.P.NO.14/2014 OF RENT CONTROL COURT, THIRUVALLA REVISION PETITIONER(S)/APPELLANT/RESPONDENT/TENANT: -------------------------------------------------- JOY ALUKKAS TRADERS (INDIA) PVT. LTD MARINE DRIVE, ERNAKULAM VILLAGE, KANAYANNUR TALUK, ERNAKULAM REPRESENTED BY ITS AUTHORISED REPRESENTATIVE MR. BIJU KURIEN BY ADVS.SRI.SHYAM PADMAN SRI.S.K.SAJU RESPONDENT(S)/RESPONDENT/PETITIONER/LAND LORD: ---------------------------------------------- VARGHESE THOMAS S/O.KOSHY THOMAS, KALAIKATTILE PANIKKARU VEEDU, NJALBHAGOM MURI, KAVIYOOR VILLAGE, THIRUVALLA TLUK, PATHANAMTHITTA NOW RESIDING AT KALAIKATTILE PANIKKARU VEEDU, M.M NAGAR, MANJADIP.O, THIRUVALLA R. BY ADV. SRI.JACOB P.ALEX R. BY ADV. SRI.JOSEPH P.ALEX R. BY ADV. SRI.K.JAYAKUMAR (SR.) THIS RENT CONTROL REVISION HAVING BEEN FINALLY HEARD ON 30-03-2016, ALONG WITH RCR. 333/2015, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: ## **P.N. Ravindran & K. Ramakrishnan, JJ.** **- - - - - - - - - - - - - - - - - - - - - - - - R.C.R.Nos.327 and 333 of 2015 - - - - -- - - - - - - - - - - - - - - - - - - - - Dated this the 30[th] March, 2016** ## **O R D E R** ## **P.N. Ravindran, J.** A common question arises in these revision petitions. They were therefore heard together and are being disposed of by this common order. The brief facts of the case are as follows: 2. The common petitioner herein is the tenant in R.C.P.Nos.14 and 17 of 2014 on the file of the Rent Control Court, Thiruvalla. The respondent/landlord had in R.C.P.No.14 of 2014 prayed for an order of eviction under sections 11(2)(b) and 11(4)(ii) of the Kerala Buildings (Lease and Rent Control) Act, 1965, hereinafter referred to as 'the Act' for short. In R.C.P.No.17 of 2014 filed in respect of another portion of the same structure, he had prayed for an order of eviction under section 11(2)(b) of the Act. The landlord had in R.C.P.No.14 of 2014 averred that the tenant has kept rent at the rate of Rs.94,295/- per mensem in arrears from June, 2014 onwards. He had in R.C.P.No.17 of 2014 averred that the tenant has kept rent at the rate of Rs.1,15,000/- per mensem in arrears from June, 2014 onwards. 3. After the tenant entered appearance and filed separate counter statements in the aforesaid rent control petitions, the landlord filed I.A.No.1007 of 2015 in R.C.P.No.14 of 2014 and I.A.No.1006 of RCR 327 & 333 of 2015 2 2015 in R.C.P.No.17 of 2014 under section 12 of the Act, for an order directing the tenant to deposit the admitted arrears of rent. The tenant had in the counter statement filed in R.C.P.No.14 of 2014 stated that though he had paid rent upto and inclusive of May, 2014, it has fallen in arrears thereafter on account of the act and conduct of the landlord in not remitting service tax. The tenant had further averred that it is ready to deposit the arrears of rent before court as and when directed. The tenant had also disputed the averment that it has kept the rent in arrears as stated by the landlord in the petition for eviction. In the applications filed by the landlord under section 12 of the Act, the tenant filed separate counter statements. The tenant did not, either in the counter statements filed in the rent control petitions or in the applications filed under section 12 of the Act, seriously dispute the rate of rent payable by it. The main contention of the tenant was that it stopped paying the rent on account of the failure of the landlord to remit service tax. The rent control court considered the rival contentions and allowed I.A.No.1007 of 2015 in R.C.P.No.14 of 2014 by order passed on 15.6.2015 and directed the tenant to deposit the sum of Rs.4,62,875/- towards rent for the period commencing from June 2014 and ending with March 2015 within thirty days. It was further directed that in the event of failure, the landlord will be at liberty to proceed under section 12(3) of the Act. A similar order was RCR 327 & 333 of 2015 3 passed on the very same day on I.A.No.1006 of 2015 in R.C.P.No.17 of 2014 and the tenant was directed to pay to the landlord the sum of Rs.11,50,000/- towards rent for the period commencing from June 2014 and ending with March 2015, within thirty days. In that order also, it was clarified that in the event of failure to pay or deposit the rent as directed, the landlord will be at liberty to proceed further under section 12(3) of the Act. 4. Challenging the aforesaid orders, the tenant filed R.C.A.Nos.9 and 10 of 2015 on the file of the Rent Control Appellate Authority, Pathanamthitta. The appeals were not filed within the time limit stipulated in section 18 of the Act and were accompanied by separate applications to condone the delay of 35 days in filing the appeals. While the appeals were pending, the landlord filed I.A.No.2302 of 2015 in R.C.P.No.14 of 2014 and I.A.No.2303 of 2015 in R.C.P.No.17 of 2014 praying for an order under section 12(3) of the Act. Those applications were allowed by separate orders passed on 21.8.2015, all further proceedings in the rent control petitions were stopped and the tenant was directed to put the landlord in vacant possession of the tenanted premises within thirty days from the date of the order. The tenant did not challenge the orders passed by the rent control court on 21.8.2015 on I.A.No.2302 of 2015 in R.C.P.No.14 of 2014 and I.A.No.2303 of 2015 in R.C.P.No.17 of 2014, with the result, when RCR 327 & 333 of 2015 4 R.C.A.Nos.9 and 10 of 2015 came up for consideration before the appellate authority on 20.10.2015, the appellate authority dismissed the appeals with the observation that it is not necessary to go into the merits of the order passed by the rent control court under section 12 (2) of the Act which alone was impugned in the said appeals. The tenant has, aggrieved by the judgment delivered by the appellate authority on 20.10.2015 dismissing R.C.A.Nos.9 and 10 of 2015, filed these revision petitions under section 20 of the Act. 5. The main point raised in the instant revision petitions is that the rent control appellate authority erred in dismissing the appeals without going into the merits of the rival contentions on the short ground that after the appeals were instituted, a final order under section 12(3) of the Act has been passed and therefore, it is not necessary to go into the merits of the rival contentions. It is contended that the procedure adopted by the rent control appellate authority is contrary to law. It is further contended that in the event of the appellate authority allowing the appeals, the dependent order, viz. the order under section 12(3) of the Act would automatically cease to be in force and therefore, the impugned judgments are liable to be set aside. It is contended that the amounts directed to be paid by the rent control court by way of arrears of rent are not admitted arrears of rent and the default in payment of rent had arisen only on account of RCR 327 & 333 of 2015 5 the failure of the landlord to pay service tax to the competent authority in spite of repeated demands. It is also contended that while in R.C.P.No.14 of 2014 the direction is to deposit Rs.4,62,875/-, the direction in R.C.P.No.17 of 2014 is to pay Rs.11,50,000/- to the landlord. It is contended that section 12 of the Act contemplates only a deposit and that payment to the landlord is not automatic but only after a further order under section 12(4) of the Act is passed. 6. We heard Shri Shyam Padman, learned counsel appearing for the tenant/revision petitioner and Shri K. Jayakumar, learned Senior Advocate appearing for the respondent/landlord. Learned counsel appearing for the revision petitioner reiterated the submissions made in the counter statement fled before the rent control court as also the stand now taken by the landlord in the affidavit filed in support of I.A.No.87 of 2016 in R.C.R.No.327 of 2015 and I.A.No.89 of 2016 in R.C.R.No.327 of 2015 to vacate the interim orders passed in these revision petitions and submitted that the landlord has admitted his liability to pay service tax and therefore, having regard to the subsequent event, the impugned orders may be set aside and the applications filed under section 12 of the Act may be remanded to the rent control court for fresh disposal. Learned counsel contended that it was on account of the conduct of the landlord in not depositing or paying the service tax that the tenant kept the rent in arrears, that the RCR 327 & 333 of 2015 6 rent control court did not accept the said contention on the reasoning that section 12 of the Act does not contemplate an enquiry as to the liability to pay service tax and a dispute as to the person who is liable to pay service tax is not a ground entitling the tenant to evade payment of rent. Learned counsel contended that in such circumstances, the impugned orders may be set aside and the applications filed under section 12 of the Act may be remanded to the rent control court for fresh disposal. Learned counsel also submitted that as the landlord has now conceded his liability to pay service tax, the tenant is prepared to deposit the entire arrears of rent at the contract rate, subject to the condition that the landlord should honour his commitment to pay service tax to the competent authority. Learned counsel further submitted that the delay in filing the appeals was condoned by the appellate authority as per order passed on I.A.No.799 of 2015 in R.C.A.No.9 of 2015 and I.A.No.801 of 2015 in R.C.A.No.10 of 2015. 7. Per contra, Shri K. Jayakumar, learned senior counsel appearing for the respondent/landlord submitted that the tenant did not in the counter statements filed by him, seriously dispute or deny the rate of rent set out in the petition for eviction, that the only explanation for not paying the rent was that the landlord has not deposited the service tax component with the competent authority, RCR 327 & 333 of 2015 7 that even assuming that the landlord was at fault, nothing prevented the tenant from depositing the rent in the rent control court in time and thereafter filing an appropriate application in the rent control court regarding disbursement of the rent deposited by him. Instead, the tenant has deprived the landlord of his only source of income for the past several months and driven him to the necessity of filing an application under section 12 of the Act. Learned senior counsel also submitted that R.C.A.Nos.9 and 10 of 2015 were filed along with applications to condone the delay of 35 days in filing the appeals, but the applications to condone the delay were allowed notwithstanding the objection filed by the landlord that the appellate authority could not have condoned the delay for the reason that such power is not expressly conferred on it by the Act and also for the reason that section 5 of the Limitation Act, 1963 has no application to appeals filed before the rent control appellate authority. 8. Inviting our attention to the decision of the Apex Court in _**M.P. Steel Corporation v. Commissioner of Central Excise**_ (2015 (2) KLT 996), learned senior counsel contended that the Apex Court has in the said decision held that, it is only when a suit, appeal or application as described in the Schedule to the Limitation Act, 1963, is filed in a court (even admitting that the rent control appellate authority is a court) under a special or local law that the provision gets RCR 327 & 333 of 2015 8 attracted, that the entirety of the Limitation Act, 1963 including section 29(2) thereof would apply only to three kinds of proceedings, namely, suit, appeal or application of the description mentioned in the Schedule to the Limitation Act and to no other proceedings and therefore, as the appeals before the rent control appellate authority (even assuming that the rent control appellate authority is not a persona designata but a court) are not appeals of the description mentioned in the Schedule to the Limitation Act, 1963, section 29(2) of the Limitation Act, 1963 cannot be pressed into service, for the purpose of conferring the power to condone the delay contained in Section 5 of the Limitation Act, 1963 on the rent control appellate authority. Learned senior counsel also contended that, that the Apex Court has in _**M.P. Steel Corporation v. Commissioner of Central Excise**_ (supra) held that the dictum laid down in _**Mukri Gopalan v. Cheppilat Puthanpurayil Aboobacker**_ (1995) 5 SCC 5) is no longer good law and therefore, for that reason also, the impugned judgments are liable to be upheld, notwithstanding the fact that the landlords have not chosen to challenge the orders passed by the rent control appellate authority allowing the applications filed by the tenant to condone the delay of 35 days in filing R.C.A.Nos.9 and 10 of 2015. 9. Sri.S.Shyam Padman, learned counsel appearing for the tenants submitted in reply to the submissions made by RCR 327 & 333 of 2015 9 Sri.K.Jayakumar, learned senior counsel appearing for the landlord that, it is only to the extent of holding that the Limitation Act, 1963 will not apply to quasi judicial bodies or tribunals that the Apex Court has in _**M.P. Steel Corporation v. Commissioner of Central Excise**_ (supra) held that, _**Mukri Gopalan v. Cheppilat Puthanpurayil Aboobacker** (supra)_ does not lay down the correct law, that in _**M.P. Steel Corporation v. Commissioner of Central Excise**_ (supra) the Apex Court has held (in paragraph 25) that, the fact that the District Judge is the appellate authority exercising jurisdiction under section 18 of the Act is sufficient for the Limitation Act to apply and therefore, there is no merit or force in the contention of the landlord that the rent control appellate authority did not possess the power to condone the delay in filing the appeals. 10. We have considered the submissions made at the Bar by learned counsel appearing on either side. We have also gone through the pleadings and the materials on record as also the decisions referred to and relied on by learned counsel appearing on either side. As the landlord has not challenged the orders passed by the rent control appellate authority, allowing the applications to condone the delay of 35 days in filing the appeals, they cannot in these revision petitions contend that the appellate authority had no jurisdiction to condone the delay in filing the appeals. It is evident from the counter RCR 327 & 333 of 2015 10 statement filed by the tenants in the respective rent control petitions, that the tenant had admitted the fact that it had kept the rent in arrears from June 2014. The tenant did not seriously dispute the rate of rent payable in respect of the tenanted premises. The tenant had in the counter statement filed by them admitted the rate of rent at the time of entrustment. The tenant had however disputed its liability to pay enhanced rent or payment of rent at the rate stipulated in the agreements dated 25.05.2005 and 10.11.2009 on the ground that they are unregistered documents and are therefore not admissible in evidence. The rent control court has, by the impugned order granted relief to the landlord only in terms of the stipulations contained in the original deeds of entrustment and not going by the disputed documents. The tenant had admitted that it had kept the rent stipulated in the original deeds of entrustment in arrears from June, 2014. The tenant's explanation for keeping the rent in arrears is that, the landlord had defaulted payment of service tax. The rent control court held that in an enquiry under section 12 of the Act, the question as to whether the landlord is liable to pay service tax or it is the tenant's burden need not be gone into. We are afraid, the view taken by the rent control court cannot be sustained. 11. Renting of immovable property was subjected to service tax by Finance Act, 2007 with effect from 01.06.2007. Going by the RCR 327 & 333 of 2015 11 provisions contained in the Finance Act, 1994 as amended from time to time, the liability to pay service tax is on the recipient of the service. The landlord is however permitted to realise it from the beneficiary of service viz., the tenant. It is not in dispute that in the instant case, the agreement between the parties does not contain any stipulation to the effect that the rent payable is exclusive of service tax and that the tenant will have in addition to the liability to pay rent, meet the expenses in connection with the payment of service tax as well. That part of the dispute no longer survives in view of the stand taken by the landlord in the affidavit filed by him in this court, namely the affidavit filed in support of I.A.No.87 of 2016 in R.C.R.No.327 of 2015 and I.A.No.89 of 2016 in R.C.R.No.332 of 2015. The landlord has in paragraph 7 of the said affidavit stated as follows: _“It is submitted that earlier a notice was issued by the Office of the Deputy Commissioner of Customs, Central Excise and Service Tax to the petitioner demanding to pay service tax. Since petitioner was under the bona fide belief that in view of the decision of the Delhi High Court reported in 223 CTR 191, the rent amount received on an immovable property was totally exempted from the tax liability, the service tax is not remitted. But later in the Department issued demand notice. The same was challenged by the petitioner the same before this Hon'ble Court in WPC No.28764 of 2014. Later, as per judgment of this Hon'ble Court in the said WPC, petitioner has remitted the entire service tax demanded by the Department 6 equal installments and the liability was cleared. Since the respondent refused to pay rent since May_ RCR 327 & 333 of 2015 12 _2014, no service tax was paid thereafter and this fact was intimated to the Office of the Assistant Commissioner of Customs, Central Excise and Service Tax. It is also relevant to note that the liability to pay service tax is on the landlord/petitioner and the tenant/respondent is having no liability in this regard and as such this is not an issue that is to be considered while quantifying the admitted arrears of rent. Even in the relevant Lease Deeds, there is no stipulation with regard to the payment of service tax by the respondent. It may also be noted that petitioner/landlord is the assessee under the relevant Finance Act and Service Tax Rules in respect of the category of Renting of Immovable Property Service and the respondent/tenant is having no liability in this regard.”_ The landlord has in his affidavit conceded that the tenant has no liability to pay the service tax. In other words, it is evident from the landlord's affidavit that the rent paid by the tenant is inclusive of the service tax and that, it is for the landlord to pay the service tax from time to time. 12. That takes us to the question whether it is really necessary for us to consider the question whether the rent control appellate authority is empowered to condone the delay in filing the appeals, having regard to the law laid down by the Apex Court, in _**M.P. Steel Corporation v. Commissioner of Central Excise**_ (supra). The decision in _**M.P. Steel Corporation v. Commissioner of Central Excise**_ (supra) was rendered on 23.04.2015 and it was reported in the Kerala Law Times issue dated 22.06.2015. The appeals before the rent control appellate authority were filed only thereafter. It is evident from RCR 327 & 333 of 2015 13 the materials placed before us that the contention now sought to be raised was not pressed into service before the rent control appellate authority, when it considered the applications to condone the delay. The delay was condoned having regard to the law laid down by the Apex Court in _**Mukri Gopalan v. Cheppilat Puthanpurayil Aboobacker**_ (supra). The landlords have not chosen to challenge the order passed by the appellate authority on the applications to condone the delay. In such circumstances and also for the reason that there was a serious dispute between the parties as regards payment of service tax, we are of the opinion that in the interests of justice, it would not be just and proper to go into the question whether the appellate authority had jurisdiction to condone the delay in filing the appeals filed by the tenants. We accordingly leave open the said question to be decided in an appropriate case. 13. It is evident from the materials now before us that but for the dispute between the parties as regards the person who is liable to pay service tax, the tenant would not have kept the rent in arrears. It is evident from the impugned order passed by the rent control court that the rent control court has not accepted the rate of rent claimed by the landlord. The rent control court has not accepted the rate of rent stipulated in the lease deeds dated 25.05.2005 and 10.11.2009 for the reason that the tenant had objected to the said documents being RCR 327 & 333 of 2015 14 received into evidence, on the ground that they are unregistered documents. The rent control court has proceeded to pass an order under section 12 of the Act, relying on the terms and stipulations contained in the original deeds of entrustment. In our opinion, notwithstanding the fact that the tenant has raised an objection to the admissibility of the lease deeds dated 25.05.2005 and 10.11.2009, the landlord should be given an opportunity to plead and prove that the tenant was paying rent till June, 2014 at the rate stipulated in the said deeds and not as per the terms and stipulations in the original deed of entrustment. We are therefore of the considered opinion that the applications filed by the landlord under section 12 of the Act should be remanded to the rent control court for fresh disposal after setting aside the impugned orders as also the final order passed by the rent control court under section 12(3) of the Act on 21.08.2015. We also deem it appropriate to permit the landlord and the tenant to suitably amend their pleadings and produce evidence in support of their rival contentions. For the reasons stated above, we allow these revision petitions, set aside the judgment delivered by the Rent Control Appellate Authority, Pathanamthitta on 20.10.2015 in R.C.A.Nos. 9 of 2015 and 10 of 2015 as also the orders passed by the Rent Control Court, Thiruvalla on 21.08.2015 in R.C.P.Nos.14 and 17 of 2014, the orders RCR 327 & 333 of 2015 15 passed by the Rent Control Court, Thiruvalla on 15.06.2015 on I.A.No.1007 of 2015 and I.A.No.1006 of 2015 in R.C.P.Nos.14 and 17 of 2014 respectively, restore R.C.P.Nos.14 and 17 of 2014 to file and direct the Rent Control Court to pass revised orders on I.A.No.1007 of 2015 in R.C.P.No.14 of 2014 and I.A.No.1006 of 2014 in R.C.P.No.17 of 2014 expeditiously and in any event within one month from the date on which the civil courts reopen after the summer vacation of 2016, after affording both sides an opportunity to suitably amend their pleadings and an opportunity to adduce evidence oral or documentary in support of their rival contentions. We also deem it appropriate, having regard to the fact that the landlord has now admitted his liability to pay service tax, to direct the petitioners/tenants to deposit the sum of Rs.4,62,875/- directed to be deposited by the Rent Control Court, Thiruvalla in R.C.P.No.14 of 2014 and the sum of Rs.11,50,000/- directed to be paid by the Rent Control Court, Thiruvalla in R.C.P.No.17 of 2014 on or before 18.05.2016 and to continue to deposit rent at the rate stipulated in the original deeds of entrustment until the disposal of the rent control petitions. After such deposit is made, the rent control court shall disburse to the landlord in the first instance, only the amount required for clearing the service tax liability. The balance amount shall be released only on the landlord RCR 327 & 333 of 2015 16 producing proof of such payment. The parties shall appear before the rent control court, through counsel on 17.05.2016. We make it clear that, we have not expressed any opinion on the merits of the rival contentions regarding the admissibility of the deeds of entrustment dated 20.05.2005 and 10.11.2009. No costs. ## **( P.N. Ravindran, Judge)** ## **(K. Ramakrishnan, Judge)** ## **kav/ss**