Supreme Court clarifies rent revision under Rajasthan Rent Control Act, 2001: Harbans Kaur vs. Iqbal Singh (29 January 2019)

Date of the Judgment: 29 January 2019

Citation: 2019 INSC 82

Judges: Ashok Bhushan, J., K.M. Joseph, J.

Can a tenant unilaterally reduce rent based on a new interpretation of a rent control act, or is the agreed rent at the time of the act’s commencement the baseline? The Supreme Court addressed this question in a dispute arising from the Rajasthan Rent Control Act, 2001. The core issue revolved around whether a tenant could recalculate rent based on the Act’s provisions, reducing it from the previously agreed amount. The bench, comprising Justices Ashok Bhushan and K.M. Joseph, delivered the judgment.

Case Background

In August 1995, Harbans Kaur (the landlord) leased Shop Nos. 3 and 4 to Iqbal Singh (the tenant) for a monthly rent of Rs. 8,500. The lease agreement included a clause for a 10% annual increase in rent. The tenant paid the rent with the agreed-upon 10% annual increase. By April 2003, the rent had reached Rs. 16,564 per month, and the tenant continued to pay this amount until July 2003. On March 27, 2004, the landlord issued a notice stating that the tenant had not paid rent for seven months, from August 1, 2003, to February 29, 2004, and demanded Rs. 1,15,945. The tenant deposited Rs. 95,200 on April 26, 2004. Subsequently, the landlord filed an eviction application under Section 9 of the Rajasthan Rent Control Act, 2001, citing rent arrears. The tenant contended that according to the Act, the rent should be calculated at Rs. 13,600 per month from April 1, 2003, based on a 7.5% annual increase from the original rent, and that he had deposited the rent accordingly.

Timeline

Course of Proceedings

The Rent Tribunal ordered the tenant’s eviction on April 22, 2011, stating that the rent was payable at Rs. 16,564 per month, and the tenant had defaulted. The Rent Appellate Tribunal upheld this order on January 15, 2014. The tenant then filed a writ petition in the High Court, which was allowed on October 9, 2014. The High Court set aside the eviction orders. The landlord’s appeal against this decision was dismissed by the Division Bench of the Rajasthan High Court on December 14, 2015, deeming the writ appeal not maintainable. The landlord then appealed to the Supreme Court.

Legal Framework

The case is primarily governed by the Rajasthan Rent Control Act, 2001, which repealed the Rajasthan Premises (Control of Rent and Eviction) Act, 1950. Key provisions of the 2001 Act include:

• Section 4: “Rent to be as agreed. – The rent payable for any premises shall, subject to other provisions of this Act, be such as may be agreed upon between the landlord and the tenant and it shall not include the charges payable for amenities which may be agreed upon separately; and shall be payable accordingly.” This section states that the rent should be as agreed between the landlord and tenant, subject to other provisions of the Act.
• Section 6: “Revision of rent in respect of existing tenancies. – (1) Notwithstanding anything contained in any agreement, where the premises have been let out before the commencement of this Act, the rent thereof shall be liable to be revised according to the formula indicated below: … (3) The rent arrived at according to the formula given in Sub-section (1) and (2) shall, after completion of each year from the year of commencement of this Act, again be liable to be increased and paid at the rate of 5% per annum and the amount of increase of rent shall be merged in such rent after ten years. Such tent shall further be liable to be increased at similar rate and merged in similar manner till the tenancy subsists.” This section outlines how rent is to be revised for existing tenancies, limiting annual increases to 5%.
• Section 7: “Revision of rent in respect of new tenancies. – (1) In the absence of any agreement to the contrary, the rent of the premises let out after the commencement of this Act shall be liable to be increased at the rate of 5% per annum and the amount of increase of rent shall be merged in such rent after ten years. Such rent shall further be liable to be increased at the similar rate and merged in similar manner till the tenancy subsists. (2) Any agreement for increase of rent in excess of 5% per annum shall be void to that extent.” This section deals with rent revision for new tenancies, also limiting annual increases to 5%.
• Section 14(1): “Procedure for revision of rent. – (1) The landlord may seek revision of rent under Section 6 or Section 7 by submitting it petition before the Rent Tribunal accompanied by affidavits and documents, if any.” This section specifies that only the landlord can initiate a rent revision petition.
• Section 9(a): “Eviction of tenants. – Notwithstanding anything contained in any other law or contract but subject to other provisions of this Act, the Rent Tribunal shall not order eviction of tenant unless it is satisfied that, – (a) the tenant has neither paid nor tendered the amount of rent due from him for four months…” This section states that a tenant can be evicted if they have not paid rent for four months.

Arguments

Landlord’s Arguments:

• The High Court erred in interpreting Sections 4, 6, 7, and 14 of the Rajasthan Rent Control Act, 2001.
• The rent being paid by the tenant when the Act came into force (April 1, 2003) was Rs. 16,564 per month, and the tenant was liable to pay rent at the same rate.
• The landlord was not demanding a 10% increase after the enforcement of the Act.
• The tenant’s calculation of rent at Rs. 13,600 per month by revising the rent from 1995 under Section 6 of the Act is incorrect.
• The tenant defaulted by not depositing the demanded amount of Rs. 1,15,945 and only depositing Rs. 95,200.
• The rent being paid on the date of the commencement of the Act should be treated as the agreed rent between the parties.
• The Act entitles the landlord to seek revision of rent, but the tenant does not have a right to seek a revision of the agreed rent.

Tenant’s Arguments:

• The High Court correctly held that the landlord was not entitled to an enhancement of more than 5% of the rent under the Act.
• The landlord could not claim rent with a 10% annual increase.
• Permitting the landlord to demand rent with a 10% increase would be contrary to Section 6 of the Act.
• Any agreement cannot be given effect if it provides for a revision of rent above 5%.
• After receiving the notice, the tenant deposited Rs. 95,200, which covered the rent up to December 2003 and part of January 2004.
• The tenant was not in default for four months, thus, could not have been evicted under Section 9 of the Act.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court addressed the following key issue:

1. Whether the agreed rent, which was being paid by the tenant immediately before the commencement of the Rajasthan Rent Control Act, 2001, can be re-determined by the tenant as per the provisions of Section 6 of the Act, and whether the tenant can unilaterally revise the rent under the new Section 6.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

The Supreme Court analyzed the submissions and authorities and made the following observations:

How each authority was viewed by the Court:

• The Supreme Court followed the precedent set in Prakash Mehra vs. K.L.Malhotra, (1989) 3 SCC 74*, stating that the arrears of rent are the arrears demanded by the notice for payment of arrears of rent.
• The Court referred to the provisions of the Rajasthan Premises (Control of Rent and Eviction) Act, 1950, to contrast it with the Rajasthan Rent Control Act, 2001.
• The Court interpreted Section 4 of the Rajasthan Rent Control Act, 2001, stating that the rent payable is as agreed between the parties.
• The Court interpreted Section 6 of the Rajasthan Rent Control Act, 2001, stating that the section empowers the landlord to obtain revision of rent but does not allow the tenant to unilaterally reduce the rent.
• The Court interpreted Section 7 of the Rajasthan Rent Control Act, 2001, stating that the section limits the increase of rent to 5% per annum.
• The Court interpreted Section 9 of the Rajasthan Rent Control Act, 2001, stating that the section provides for eviction of tenants for non-payment of rent for four months.
• The Court interpreted Section 14 of the Rajasthan Rent Control Act, 2001, stating that the section provides for procedure for revision of rent and only the landlord can seek revision of rent.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following:

• The interpretation of the Rajasthan Rent Control Act, 2001, particularly Sections 4, 6, 7, 9 and 14.
• The principle that the agreed rent at the time of the commencement of the Act should be the baseline, subject to the landlord’s right to seek revision.
• The understanding that the tenant cannot unilaterally reduce the rent based on their interpretation of Section 6.
• The fact that the tenant had not paid the arrears as demanded by the landlord in the notice.

The court’s reasoning was primarily based on the legal interpretation of the Rajasthan Rent Control Act, 2001, and the specific facts of the case.

Logical Reasoning:

The court rejected the tenant’s argument that the rent should be recalculated from the beginning of the tenancy based on Section 6 of the Act. The court emphasized that Section 6 is primarily for the benefit of the landlord, allowing them to seek rent revision, but it does not give the tenant the right to unilaterally reduce the rent. The court stated, “The statutory scheme does not indicate that the tenant can unilaterally compute the rent as per formula under Section 6(1) from the inception of the tenancy and reduce the amount of rent which he was paying immediately before the enforcement of the Act.” The court also noted, “Section 4 of the Act which deals with the agreed rent provides that rent payable for any premises shall subject to the provisions of this Act, be such as may be agreed between the landlord and the tenant.” Further, the court held, “The arrears of rent as envisaged in provision of Section 14(1)(a) of the Delhi Rent Control Act are the arrears demanded by the notice for payment of arrears of rent.” The court concluded that the tenant had defaulted on rent payment and was liable to be evicted.

Key Takeaways

• The agreed rent at the time of the commencement of the Rajasthan Rent Control Act, 2001, is the baseline.
• Tenants cannot unilaterally reduce rent based on their interpretation of Section 6 of the Act.
• Section 6 of the Act primarily empowers landlords to seek revision of rent.
• Tenants can be evicted under Section 9(a) of the Act if they fail to pay rent for four months, and the arrears of rent are the arrears demanded by the notice.
• Landlords cannot increase rent at a rate higher than 5% per annum after the enforcement of the Act.

Directions

The Supreme Court allowed the appeals, set aside the judgment of the High Court, and restored the order of the Rent Tribunal.

Development of Law

The Supreme Court clarified that the agreed rent at the time of the commencement of the Rajasthan Rent Control Act, 2001, is the baseline and that tenants cannot unilaterally reduce rent based on their interpretation of Section 6 of the Act. The ratio decidendi of the case is that Section 6 of the Act is primarily for the benefit of the landlord, allowing them to seek rent revision, but it does not give the tenant the right to unilaterally reduce the rent.

Conclusion

The Supreme Court’s judgment in Harbans Kaur vs. Iqbal Singh clarifies the interpretation of the Rajasthan Rent Control Act, 2001, emphasizing that tenants cannot unilaterally reduce rent based on their interpretation of the Act. The agreed rent at the time of the Act’s commencement is the baseline, and while the Act provides for rent revision, it is primarily a right of the landlord. The court’s decision underscores the importance of adhering to the agreed terms of tenancy and the procedures outlined in the Act.

Category

Parent Category: Rajasthan Rent Control Act, 2001

Child Categories:

• Section 4, Rajasthan Rent Control Act, 2001
• Section 6, Rajasthan Rent Control Act, 2001
• Section 7, Rajasthan Rent Control Act, 2001
• Section 9, Rajasthan Rent Control Act, 2001
• Section 14, Rajasthan Rent Control Act, 2001
• Rent Control
• Landlord-Tenant Dispute
• Rent Revision
• Eviction

FAQ

Q: Can a tenant reduce their rent if they believe it is too high under the Rajasthan Rent Control Act, 2001?

A: No, a tenant cannot unilaterally reduce the rent based on their interpretation of the Act. The agreed rent at the time of the Act’s commencement is the baseline. While the Act allows for rent revision, it is primarily a right of the landlord.

Q: What is the significance of Section 6 of the Rajasthan Rent Control Act, 2001?

A: Section 6 allows landlords to seek a revision of rent based on a formula provided in the Act. It does not grant tenants the right to unilaterally reduce the rent. It also restricts the annual increase of rent to 5% after the commencement of the Act.

Q: Can a landlord increase the rent by 10% annually after the Rajasthan Rent Control Act, 2001 came into force?

A: No, landlords cannot increase the rent by 10% annually after the enforcement of the Act. The Act limits the annual increase to 5%.

Q: What happens if a tenant does not pay rent for four months?

A: Under Section 9(a) of the Act, a tenant can be evicted if they have not paid rent for four months. The arrears of rent are the arrears demanded by the notice for payment of arrears of rent.

Q: What is the baseline rent under the Rajasthan Rent Control Act, 2001?

A: The baseline rent is the agreed rent at the time of the commencement of the Act, i.e., April 1, 2003.