1991 (12) TMI 271 - SC - Indian Laws

Recovery of possession in case of tenancies for limited period - Availability of premises for indefinite letting - application of the tenant resisting the objection of the landlady by placing the burden on her -Protection of tenants against fraudulent conduct of landlords - misapplication of law and misconstructions of the provisions of Section 21 - presumption of legality in favour of a statutory order - Scope and Applicability of Section 21 - HELD THAT - Since the landlady did not agree to extend the lease and filed an application under Section 21 of the Act for a direction to the Controller to place her in vacant possession of the premises an objection was filed by the tenant on all possible grounds which could be imagined from inaccuracy lack of knowledge fraud collusion etc. One of the objections was that since the premises was taken by one of the partners of the firm only without any authority the agreement entered into by him for grant of permission under Section 21 was not binding. It was also alleged that this was done without knowledge of other partners. Therefore the permission was neither binding nor enforceable. But the partner who made the statement was neither examined nor it was stated that the firm was not aware that the tenancy was for short duration only. The tenant went to the length of averring that in fact they were already in occupation of the premises from a date before the tenancy was created a plea which was rejected by the Rent Control Authorities. Even the plea that the premises were let out for residential-commercial purposes did not find favour with any of the authorities. Nor did the Controller find any merit in the claim that the order of permission was mindless or it was bad for non-disclosure of reason. But the challenge succeeded because the permission was obtained by playing fraud as the landlady knew from the very beginning that premises were available for letting out indefinitely. The Controller found that in absence of any averment in the objection that she had let out the premises in 1978 for three years as she would require it after expiry of this period for her younger son her statement in support of it could not be looked into. The authority further found that variance between pleading and proof apart the landlady failed to establish that premises were let out with intention to get it back after three years for her second son. Inference was drawn against her due to non-production of the son who could have been the best person to throw light on it as later on he not only joined another service but purchased a flat in Bombay. It was held that even if it was assumed that the premises were not needed by her for son that could not validate the sanction. The Appellate Authority agreed with the finding of the Controller as there was no statement in the application made at the time for grant of permission that the premises shall be required after three years by her son. In other words since she stated that she required the premises for herself after three years and she was having an accommodation which was sufficient for her and family the permission obtained by her was vitiated by fraud. The High Court did not consider it proper to examine the matter as it was concluded by findings of fact. Sri Rajeev Dhavan rightly urged that both the Controller and the Tribunal misdirected themselves in placing the burden on the landlady to prove that the permission obtained by her was genuine. According to him the primary burden was on the tenant to establish that the permission was obtained by playing fraud. Unfortunately it appears the authorities assumed fraud and misrepresentation on mere averment in the objection of the tenant and proceeded to record the finding on premise that the landlady was required to prove it. Apart from the procedural error even the finding that the premises were not needed by her after three years is not well founded. The averment in the application that the premises shall be needed by her after three years could not be construed as misrepresentation. The requirement of a landlord includes the requirement of a son or daughter or any member of the family. If she gave the premises for three years believing that in the meantime her son in Military might be posted at Delhi or the son at Bombay may start a business at NOIDA which may not have come out to be exactly as she desired it to be it could not invalidate the permission. Further the landlady in her statement before Controller stated that she informed the partner who had taken the premises that she shall need it after three years for her second son. And yet the tenant instead of producing that partner without any excuse chose to examine another partner and the authorities did not attach any weight to it Letting under Section 21 is not hedged with any restriction. Throwing the whole or part of the premises by landlord for letting out is not linked with his existing accommodation its number or sufficiency. The one is not dependent on the other. Even letting for paying instalment of loan for constructing the premises or its re-letting has not been held to be contrary to Section 21. Validity of permission has to be judged on the date of grant of application. Availability of premises for indefinite letting cannot be judged by subsequent events or the failure of the landlord to occupy immediately for personal financial economic or other reasons. Therefore the authorities committed manifest of error of law both in entertaining the application of the tenant resisting the objection of the landlady by placing the burden on her erroneously and deciding against her by misapplication of law and misconstructions of the provisions of Section 21. For the reasons stated by us in our concurring judgments dated December 3 1991 we set aside the impugned judgment of the High Court and the Order of the Additional Rent Controller and that of the Rent Control Tribunal. The appeal shall accordingly stand allowed.

Summary

Issues Involved:

1. Scope and applicability of Section 21 of the Delhi Rent Control Act, 1958.
2. Conditions precedent for the exercise of power by the Controller under Section 21.
3. Protection of tenants against fraudulent conduct of landlords.
4. Definition and proof of fraud in the context of Section 21.
5. Procedural aspects and burden of proof in challenging the validity of permission granted under Section 21.

Detailed Analysis:

1. Scope and Applicability of Section 21:

The Supreme Court considered the scope of Section 21 of the Delhi Rent Control Act, 1958, which has been discussed in several prior decisions. The section embodies a legislative policy to increase the supply of accommodation by allowing landlords to let out premises for a limited period under specific conditions. Once the Controller grants permission, the relationship between the landlord and tenant is governed by the terms of their contract, notwithstanding any other law unless the contract or permission is vitiated by fraud.

2. Conditions Precedent for the Exercise of Power by the Controller:

The conditions precedent for the exercise of power by the Controller under Section 21 include:
- The landlord must not require the premises for a particular period.
- The landlord must obtain the Controller's permission in the prescribed manner.
- There must be a written agreement between the landlord and tenant for the lease of the premises as a residence for the agreed period.
- If the tenant refuses to vacate the premises on the expiry of the period, the landlord may apply to the Controller for eviction.

The section provides the Controller with extraordinary power to restore possession of the premises to the landlord through a quick and summary action, protected by a non-obstante clause from challenges based on other laws.

3. Protection of Tenants Against Fraudulent Conduct of Landlords:

While the Act generally protects tenants, Section 21 carves out an area where this protection is limited. The tenant is protected against fraudulent conduct by the landlord. The landlord must honestly believe that they do not require the premises for the specified period when seeking the Controller's permission. If the landlord's belief is honest, subsequent events proving otherwise do not invalidate the permission.

4. Definition and Proof of Fraud in the Context of Section 21:

Fraud is a question of fact, and the burden of proof lies on the party alleging it. Fraud involves a false representation made knowingly, without belief in its truth, or recklessly. In public law, fraud in relation to a statute means a colorable transaction to evade the provisions of the statute. The misrepresentation must relate to the conditions provided in the section, and non-disclosure of facts not required by law does not amount to fraud.

5. Procedural Aspects and Burden of Proof in Challenging the Validity of Permission Granted Under Section 21:

The law on procedural aspects has evolved, and the tenant must raise objections to the validity of the permission before the expiry of the lease or immediately upon discovering the fraud. The burden of proving fraud lies with the tenant, and a fishing or roving inquiry is not permitted at the stage of execution. The permission carries a presumption of correctness and can only be challenged on grounds of fraud or collusion.

Conclusion:

The Supreme Court found that the statutory authorities misunderstood the guiding principles of the burden of proof and misconstrued the requirements of Section 21. The authorities' conclusion that the original order of the Controller was obtained by fraud was unjustified. The High Court's affirmation of this conclusion was also incorrect. The appeal was allowed, and the impugned judgment of the High Court and the orders of the Additional Rent Controller and the Rent Control Tribunal were set aside. The appellant was entitled to costs assessed at Rs. 5,000.