Supreme Court Clarifies Tenant Rights Under Chennai City Tenants Protection Act: National Company vs. Bharat Petroleum Corporation Ltd. (2021)

Date of the Judgment: November 11, 2021
Citation: Civil Appeal No. 6726 of 2021 (Arising out of Special Leave Petition (Civil) No.28057 of 2019)
Judges: L. Nageswara Rao, J. and B.R. Gavai, J.

Can a tenant who has sublet a property claim protection under the Chennai City Tenants Protection Act? The Supreme Court of India addressed this question in a recent case, clarifying the interpretation of “actual physical possession” for tenants seeking protection under the Act. This judgment settles the legal position regarding the rights of tenants who have sublet their properties, particularly concerning the applicability of the Chennai City Tenants Protection Act. The bench comprised of Justice L. Nageswara Rao and Justice B.R. Gavai, with the judgment authored by Justice B.R. Gavai.

Case Background

The case revolves around a property located in Chennai, which was initially leased to Burmah Shell Oil Storage and Distributing Company of India (predecessor of Bharat Petroleum Corporation Ltd. – BPCL) in 1960 for 20 years. The lease was renewed twice, first for another 20 years and then for 11 years, with the final lease expiring on December 31, 2009. BPCL had established a petrol bunk on the premises, which was operated by M/s Vijaya Auto Services, its licensor. Before the lease expired, the appellant (National Company) issued notices to BPCL in 2008 and 2009, terminating the lease and demanding the vacation of the premises. BPCL neither vacated the premises nor formalized a new lease agreement, leading the appellant to approach the Madras High Court for relief. Although there were attempts to settle the matter with BPCL showing interest in purchasing the property, these attempts were unsuccessful.

Timeline

Course of Proceedings

The matter was initially placed before a single judge of the Madras High Court, who noted a conflict in previous judgments regarding the maintainability of writ petitions in such cases. Some judgments held that writ petitions were not maintainable, while others held the opposite. Consequently, the single judge referred the matter to a Division Bench to decide on the maintainability of the writ petition. The Division Bench, in its judgment dated September 19, 2019, held that the relief sought by the appellant could not be granted under Article 226 of the Constitution of India and directed the appellant to pursue alternate legal remedies. The Division Bench considered previous judgments, including those of the Supreme Court, but ultimately decided that the protection granted to tenants under the Chennai City Tenants Protection Act, 1921, needed to be considered, which could not be done in a writ proceeding. The High Court also noted that a similar matter was pending before the Supreme Court.

Legal Framework

The primary legal framework in this case is the Chennai City Tenants Protection Act, 1921. The Division Bench of the High Court referred to Section 3 of the Chennai City Tenants Protection Act, 1921, which grants a tenant the right to receive compensation for the value of any building erected by them or their predecessor, subject to the agreement. It also referred to Section 9 of the Chennai City Tenants Protection Act, 1921, which allows a tenant entitled to compensation under Section 3, against whom eviction proceedings have been initiated, to apply to the court for an order directing the landlord to sell the land for the tenant’s convenient enjoyment. The court is then required to fix the price of the minimum extent of land to be sold. The High Court noted that these provisions could not be bypassed in a writ proceeding.

Arguments

Appellant’s Arguments:

• The appellant argued that the issue was no longer res integra, citing the Supreme Court’s decision in Bharat Petroleum Corporation Limited v. R. Chandramouleeswaran and others, which held that tenants are not entitled to the benefits of the Tenants Act unless they are in actual physical possession of the building constructed by them.
• It was contended that BPCL had sublet the premises to M/s Vijaya Auto Services and was therefore not in actual physical possession, thus not entitled to protection under the Chennai City Tenants Protection Act.
• The appellant argued that no disputed questions of law or fact existed and that the High Court should have exercised its jurisdiction under Article 226 of the Constitution of India to grant relief.
• The appellant also highlighted that BPCL was enjoying the property without paying any rent since the lease expired on December 31, 2009, which was not befitting of a statutory corporation.
• The appellant sought an order directing BPCL to hand over vacant possession of the premises and to pay market rent from December 31, 2009, until the date of delivery of possession.

Respondent’s Arguments:

• BPCL argued that the question of whether it had sublet or leased the premises to M/s Vijaya Auto Services was a disputed question of fact that could only be adjudicated in an appropriate forum.
• BPCL contended that the Supreme Court’s view in R. Chandramouleeswaran was not correct in law.
• It was argued that the agreements between BPCL and its dealers showed that BPCL retained possession and control of the premises, with dealers only having the right to operate the petrol pump.
• BPCL submitted that the High Court had rightly relegated the appellant to an alternate remedy.

Issues Framed by the Supreme Court

• Whether the High Court was correct in relegating the appellant to an alternate remedy, despite the facts of the case being similar to those in Bharat Petroleum Corporation Ltd. v. R. Ravikiran.
• Whether the respondent BPCL was entitled to protection under the Chennai City Tenants Protection Act, 1921, given that it was not in actual physical possession of the premises.

Treatment of the Issue by the Court

Authorities

Cases Cited by the Court:

• C. Albert Morris v. K. Chandrasekaran and others [ (2006) 1 SCC 228 ] – Supreme Court of India: This case was cited to support the proposition that once a lease has expired and the landlord has declined to renew it, the erstwhile tenant cannot assert any right over the site.
• Hindustan Petroleum Corporation Ltd. and another v. Dolly Das [ (1999) 4 SCC 450 ] – Supreme Court of India: This case was referred to where a similar claim by a landowner was allowed in writ jurisdiction.
• Bharat Petroleum Corporation Ltd. vs R.Ravikiran [2011 (5) CTC 437] – Madras High Court: This case was mentioned where the High Court held that the oil company was in legal possession but not in actual physical possession.
• S.R Radhakrishnan vs Neelamegam [(2003) 10 SCC 705] – Supreme Court of India: This case was cited in the High Court’s judgment to reject the oil company’s claim under Section 2(4)(ii)(a) of the Tenants Act.
• ABL International Ltd. and another v. Export Credit Guarantee Corporation of India Ltd. and others [(2004) 3 SCC 553] – Supreme Court of India: This case was cited by the High Court to emphasize that the court is not always bound to relegate parties to a suit just because a dispute of facts is raised.
• Bharat Petroleum Corporation Limited v. R. Chandramouleeswaran and others [(2020) 11 SCC 718] – Supreme Court of India: This case was pivotal in the Supreme Court’s decision, clarifying that tenants must be in actual physical possession to claim protection under the Tenants Act.
• Bharat Petroleum Corporation Ltd. v. Nirmala and others [(2020) 11 SCC 738] – Supreme Court of India: This case was referred to in R. Chandramouleeswaran, where it was held that the expression “actual physical possession” requires the tenant to be in actual physical possession.

Legal Provisions Considered by the Court:

• Article 226 of the Constitution of India: This article grants High Courts the power to issue writs.
• Section 3 of the Madras City Tenants Protection Act, 1921: This section provides tenants the right to compensation for buildings erected by them.
• Section 9 of the Madras City Tenants Protection Act, 1921: This section allows tenants to apply for an order to direct the landlord to sell the land.
• Section 2(4) of the Tamil Nadu City Tenants Protection Act, 1972: This section defines who is a tenant.

Judgment

How each authority was viewed by the Court:

• C. Albert Morris v. K. Chandrasekaran and others [(2006) 1 SCC 228]: The Court used this authority to reinforce the principle that after the expiry of the lease and the landlord’s refusal to renew, the tenant cannot claim any right over the property.
• Hindustan Petroleum Corporation Ltd. and another v. Dolly Das [(1999) 4 SCC 450]: This case was cited to show that the Court had previously allowed similar claims in writ jurisdiction.
• Bharat Petroleum Corporation Ltd. vs R.Ravikiran [2011 (5) CTC 437]: The Court noted that the High Court had relied on this case, but that the view taken in this case was pending before the Supreme Court.
• S.R Radhakrishnan vs Neelamegam [(2003) 10 SCC 705]: The Court acknowledged that the High Court had used this case to reject the oil company’s claim under Section 2(4)(ii)(a) of the Tenants Act.
• ABL International Ltd. and another v. Export Credit Guarantee Corporation of India Ltd. and others [(2004) 3 SCC 553]: The Court noted that the High Court had cited this case to emphasize that the mere existence of a factual dispute does not necessitate relegating parties to a suit.
• Bharat Petroleum Corporation Limited v. R. Chandramouleeswaran and others [(2020) 11 SCC 718]: This was a crucial authority, as the Court relied on it to hold that tenants must be in actual physical possession to claim protection under the Tenants Act. The Court held that this decision was binding and operated as res judicata for the parties in that case and as a binding precedent under Article 141 of the Constitution of India for other cases.
• Bharat Petroleum Corporation Ltd. v. Nirmala and others [(2020) 11 SCC 738]: This case was referred to in R. Chandramouleeswaran, and the Court used it to interpret the meaning of “actual physical possession”.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the interpretation of “actual physical possession” under the Chennai City Tenants Protection Act and the binding nature of its previous judgment in R. Chandramouleeswaran. The Court emphasized that the literal interpretation of “actual physical possession” requires the tenant to be in factual possession, not merely legal or deemed possession. The Court also expressed concern over BPCL’s conduct in continuing to occupy the premises without paying rent, which was deemed unbecoming of a statutory corporation. The Court’s reasoning was also influenced by the need to uphold the rule of law and ensure that its previous judgments are followed. The court also considered the fact that the High Court had itself expressed reservations about relegating the appellant to an alternate remedy, indicating that the High Court was also of the view that the matter could be decided in writ jurisdiction.

The Court’s reasoning was based on the following points:

• The Court emphasized the literal interpretation of “actual physical possession,” stating that it requires factual possession, not merely legal or deemed possession.
• The Court relied heavily on its previous decision in R. Chandramouleeswaran, which clarified that tenants must be in actual physical possession to claim protection under the Chennai City Tenants Protection Act.
• The Court noted that BPCL had sublet the premises to M/s Vijaya Auto Services, which meant that BPCL was not in actual physical possession of the property.
• The Court found that the conduct of BPCL in continuing to occupy the premises without paying rent was unbecoming of a statutory corporation.
• The Court concluded that the High Court was incorrect in relegating the appellant to an alternate remedy, as the facts of the case were similar to those in previous cases where relief was granted in writ jurisdiction.

The Court considered the arguments of BPCL that the question of sub-letting was a disputed question of fact, but rejected this argument because the agreement between BPCL and its dealer clearly indicated that BPCL was not in actual physical possession. The Court also rejected BPCL’s argument that the view taken in R. Chandramouleeswaran was not correct in law, stating that the decision was binding.

The Supreme Court quoted the following from the judgment:

“…the words “actual physical possession” are strong and emphatic. That means that the factual state of affairs has to be seen, not the legal or deemed state of affairs.”

“…we dismiss the present appeals by the appellant, that is, the three petroleum companies, and uphold the orders passed by the High Court that the appellant tenants would not be entitled to the benefit and rights under the Act unless they are in actual physical possession of the building constructed by them.”

“In other words, in case the appellants have let out or sub-let the building or given it to third parties, including dealers or licensees, they would not be entitled to protection and benefit under the Act.”

There were no dissenting opinions in this case. The decision was unanimous.

Key Takeaways

• Tenants seeking protection under the Chennai City Tenants Protection Act must be in actual physical possession of the property. Subletting or licensing the property to a third party disqualifies them from claiming protection under the Act.
• The Supreme Court’s decision in R. Chandramouleeswaran is a binding precedent and clarifies the interpretation of “actual physical possession” under the Act.
• Statutory corporations are expected to act responsibly and cannot continue to occupy property without paying rent after the expiry of a lease.
• Writ petitions under Article 226 of the Constitution can be entertained in cases where no disputed questions of fact exist and where the conduct of a statutory corporation is unbecoming.

Directions

The Supreme Court directed the following:

• BPCL was directed to vacate and hand over peaceful and vacant possession of the premises to the appellant within three months.
• BPCL was directed to pay arrears of market rent to the appellant from December 31, 2009, until the date of handing over possession.
• BPCL was directed to pay costs of Rs. 1,00,000 to the appellant.

Development of Law

The ratio decidendi of this case is that a tenant must be in actual physical possession of the property to claim protection under the Chennai City Tenants Protection Act. The Supreme Court clarified that the term “actual physical possession” means factual possession, not merely legal or deemed possession. This judgment reinforces the principle established in R. Chandramouleeswaran, which held that tenants who have sublet or licensed their properties are not entitled to protection under the Act. This decision solidifies the legal position on the interpretation of “actual physical possession” and provides clarity for future cases.

Conclusion

In conclusion, the Supreme Court allowed the appeal, setting aside the High Court’s judgment and directing BPCL to vacate the premises, pay arrears of market rent, and pay costs to the appellant. The Supreme Court clarified that tenants must be in actual physical possession of the property to claim protection under the Chennai City Tenants Protection Act, and that subletting or licensing the property disqualifies them from such protection. This judgment reinforces the interpretation of “actual physical possession” and provides clarity on the rights of tenants under the Act.