Date of the Judgment: 28 January 2020
Citation: [Not Available in Source]
Judges: N.V. Ramana, J., Sanjiv Khanna, J., Krishna Murari, J.
Can a tenant who has sublet a property claim the right to purchase the land under the Madras City Tenants’ Protection Act, 1921? The Supreme Court of India recently addressed this critical question in a batch of appeals filed by major oil companies. The core issue revolved around the interpretation of “actual physical possession” under the Act and its implications for tenant rights. This judgment clarifies the scope of tenant protection under the Act, especially for those who have sublet their properties.
Case Background
The case involves appeals by Bharat Petroleum Corporation Limited, Indian Oil Corporation Limited, and Hindustan Petroleum Corporation Limited (referred to as ‘the appellant’). These oil companies had taken land on long-term leases from various landlords, upon which they constructed petrol pumps. These petrol pumps were then operated by dealers appointed by the oil companies through dealership agreements. While some leases were renewed following the nationalization of oil companies, all lease terms had expired.
The landlords initiated suits for eviction to recover possession of the land. In response, the oil companies filed applications under Section 9 of the Madras City Tenants’ Protection Act, 1921, seeking to purchase the leased land at a price fixed by the court. The Madras High Court rejected these applications, leading to the present appeals before the Supreme Court.
Timeline
| Date | Event |
|---|---|
| Various Dates | Oil companies entered into long-term lease agreements with landlords. |
| Various Dates | Oil companies constructed petrol pumps on the leased lands. |
| Various Dates | Lease terms expired in all cases. |
| Various Dates | Landlords filed suits for ejectment to recover possession. |
| Various Dates | Oil companies filed applications under Section 9 of the Madras City Tenants’ Protection Act, 1921, seeking to purchase the land. |
| 3rd December 2009 | Division Bench of the Supreme Court passed a remand order. |
| Various Dates | Madras High Court rejected the applications filed by the oil companies. |
| 28 January 2020 | Supreme Court dismissed the appeals. |
Course of Proceedings
The Madras High Court, in various judgments, rejected the applications filed by the oil companies. Some of these judgments arose from a remand order dated 3rd December 2009, passed by a Division Bench of the Supreme Court. The High Court either affirmed or reversed the findings of the trial court or the lower appellate court. The core issue in all these cases was whether the oil companies, as tenants, were entitled to purchase the land under Section 9 of the Madras City Tenants’ Protection Act, 1921.
Legal Framework
The Madras City Tenants’ Protection Act, 1921, was enacted to protect tenants who constructed buildings on leased land, with the expectation of undisturbed possession as long as they paid fair rent. Key provisions include:
- Section 2(4): Defines ‘tenant’. Originally, it included those liable to pay rent and those continuing in possession after the tenancy ended. It was amended to include specific categories of tenants, particularly those who had constructed buildings. The definition was further amended by the Amendment Act, 1973, to include tenants who were previously excluded due to the proviso in Section 12.
- Section 3: Entitles tenants to compensation for the value of buildings, trees, and improvements made on the land.
- Section 9: Allows tenants facing eviction to apply for an order directing the landlord to sell the land to them at a price fixed by the court. The court determines the minimum land necessary for the tenant’s convenient enjoyment.
- Section 12: Originally, this section stated that contracts made by a tenant would not limit their rights under the Act, except for stipulations in registered written leases regarding the erection of buildings. However, the proviso to this section, which gave primacy to written registered agreements, was deleted by the Amendment Act, 1972, with retrospective effect.
The Act has undergone significant changes through amendments, particularly in 1955, 1960, 1972, and 1973. These amendments extended the Act’s protection to leases made after 1921 and to areas beyond the city of Madras.
Arguments
The appellant oil companies argued that they were entitled to the benefits under Section 9 of the Act, as they were tenants who had constructed buildings on the leased land. They contended that the definition of ‘tenant’ under Section 2(4) included them, and they had the right to purchase the land.
The landlords argued that the oil companies were not in “actual physical possession” of the land and buildings, as they had sublet the petrol pumps to dealers. They contended that the benefit of Section 9 was only available to tenants in actual physical possession of the property. They relied on the interpretation of Section 2(4)(ii)(b) which requires “actual physical possession” for a tenant to claim the right to purchase the land.
The Supreme Court had previously held that sub-clause (b) of Section 2(4) requires the tenant to be in actual physical possession, and this benefit is not available if the tenant has given the premises on lease or license to a third party. However, the court had not given any finding on the question whether such benefit is available to the appellant under Section 2(4)(i) or Section 2(4)(ii)(a).
| Submission | Appellant’s Argument | Respondent’s Argument |
|---|---|---|
| Definition of Tenant | ✓ Oil companies are tenants under Section 2(4) as they are liable to pay rent and have constructed buildings. | ✓ Oil companies are not in actual physical possession, thus not qualifying as tenants under Section 2(4)(ii)(b). |
| Right to Purchase Land | ✓ Entitled to purchase land under Section 9, as they fulfill the criteria of a tenant who has constructed buildings. | ✓ Section 9 benefit is only for tenants in actual physical possession, which the oil companies are not. |
| Interpretation of “Actual Physical Possession” | ✓ The term should not be interpreted strictly to exclude tenants who have sublet for business purposes. | ✓ The term “actual physical possession” in Section 2(4)(ii)(b) is clear and requires the tenant to be in direct possession. |
| Application of Section 12 | ✓ The deletion of the proviso to Section 12 means all tenants are now equally protected, regardless of lease terms. | ✓ The deletion of the proviso to Section 12 does not override the requirement of actual physical possession under Section 2(4)(ii)(b). |
Issues Framed by the Supreme Court
The Supreme Court framed the following key issues:
- Whether the appellant oil companies, as tenants, were entitled to the benefit of Section 9 of the Madras City Tenants’ Protection Act, 1921.
- Whether the expression “actual physical possession” under Section 2(4)(ii)(b) of the Act requires the tenant to be in direct possession of the land and building.
- Whether the oil companies, who have sublet the petrol pumps to dealers, could be considered to be in “actual physical possession” of the land.
- Whether the benefit of Section 9 is available to the appellant under Section 2(4)(i) or Section 2(4)(ii)(a).
Treatment of the Issue by the Court
| Issue | Court’s Decision | Reasoning |
|---|---|---|
| Whether the appellant oil companies, as tenants, were entitled to the benefit of Section 9 of the Madras City Tenants’ Protection Act, 1921. | No. | The Court held that the oil companies were not entitled to the benefit of Section 9 unless they were in actual physical possession of the building. |
| Whether the expression “actual physical possession” under Section 2(4)(ii)(b) of the Act requires the tenant to be in direct possession of the land and building. | Yes. | The Court interpreted “actual physical possession” to mean direct possession, excluding tenants who have sublet or licensed the property. |
| Whether the oil companies, who have sublet the petrol pumps to dealers, could be considered to be in “actual physical possession” of the land. | No. | The Court found that subletting or licensing the property to third parties meant the oil companies were not in actual physical possession. |
| Whether the benefit of Section 9 is available to the appellant under Section 2(4)(i) or Section 2(4)(ii)(a). | No specific finding in the source. | The Court did not provide a specific finding on this issue, but the overall judgment suggests that the requirement of actual physical possession applies to all categories of tenants seeking to purchase the land. |
Authorities
The Supreme Court considered the following authorities:
| Authority | Court | Legal Point | How Considered |
|---|---|---|---|
| N. Vajrapani Naidu v. New Theatres Carnatic Talkies Ltd., Coimbatore | Supreme Court of India | Validity of the Act and its application to leases before the Act’s extension. | Referred to for the purpose and objective of the Act, which was to protect tenants who had constructed buildings on leased land. |
| Haridas Girdhardas and Others v. Varadaraja Pillai and Another | Supreme Court of India | Interpretation of ‘erection of buildings’ in Section 12. | Mentioned but not discussed in detail as the question did not arise in the present appeals. |
| Bharat Petroleum Corporation Ltd. v. Nirmala and Another | Supreme Court of India | Interpretation of “actual physical possession” under Section 2(4)(ii)(b). | Followed the interpretation that “actual physical possession” requires the tenant to be in direct possession. |
| Swami Motor Transports (P) Ltd. And Another v. Sri Sankaraswamigal Mutt and Another | Supreme Court of India | Constitutional validity of the Amendment Act, 1960. | Referred to for the principle that the statutory right to purchase land is a non-proprietary right. |
| Dr. K.A. Dhairyawan and Others v. J.R. Thakur and Others | Supreme Court of India | Ownership of buildings on leased land. | Referred to for the principle that buildings do not automatically belong to the owner of the land in India. |
| P. Ananthakrishnan Nair and Another v. Dr G. Ramakrishnan and Another | Supreme Court of India | Interpretation of Section 2(4) and Section 9. | Referred to for the principle that the policy underlying Section 9 is to safeguard tenants who have constructed superstructures on the land. |
| S.R. Radhakrishnan and Others v. Neelamegam | Supreme Court of India | Interpretation of Section 2(4) and 9. | Referred to for the principle that the policy underlying Section 9 is to safeguard tenants who have constructed superstructures on the land. |
| Section 2(4) of the Madras City Tenants’ Protection Act, 1921 | Madras City Tenants’ Protection Act, 1921 | Definition of ‘tenant’. | Interpreted to determine who qualifies as a tenant under the Act. |
| Section 3 of the Madras City Tenants’ Protection Act, 1921 | Madras City Tenants’ Protection Act, 1921 | Compensation for buildings. | Mentioned as a right available to tenants under the Act. |
| Section 9 of the Madras City Tenants’ Protection Act, 1921 | Madras City Tenants’ Protection Act, 1921 | Right to purchase land. | Central to the case, interpreted to determine who can avail the right. |
| Section 12 of the Madras City Tenants’ Protection Act, 1921 | Madras City Tenants’ Protection Act, 1921 | Effect of contracts made by tenants. | Interpreted to understand the impact of the deletion of the proviso. |
| Section 108(h) of the Transfer of Property Act, 1882 | Transfer of Property Act, 1882 | Rights of a lessee to remove structures. | Referred to for the principle that a lessee can remove structures he has erected on the land. |
Judgment
| Submission | Court’s Treatment |
|---|---|
| Oil companies are tenants under Section 2(4) and entitled to purchase land under Section 9. | Rejected. The Court held that while the oil companies may be tenants, they are not entitled to purchase the land under Section 9 unless they are in actual physical possession. |
| The term “actual physical possession” should not be interpreted strictly to exclude tenants who have sublet for business purposes. | Rejected. The Court interpreted “actual physical possession” to mean direct possession, excluding tenants who have sublet or licensed the property. |
| The deletion of the proviso to Section 12 means all tenants are now equally protected. | Partially Accepted. The Court agreed that the deletion of the proviso removed the distinction between tenants with and without specific lease stipulations, but it did not override the requirement of actual physical possession under Section 2(4)(ii)(b). |
The Court held that the oil companies were not entitled to the benefit and rights under the Act unless they were in actual physical possession of the building constructed by them. In other words, if the oil companies had sublet the building or given it to third parties, including dealers or licensees, they would not be entitled to protection and benefit under the Act.
The Supreme Court upheld the orders passed by the High Court, dismissing the appeals of the oil companies.
| Authority | Court’s View |
|---|---|
| N. Vajrapani Naidu v. New Theatres Carnatic Talkies Ltd., Coimbatore | *Referred to for the purpose and objective of the Act.* The court used this case to understand the original intent of the Act, which was to protect tenants who had constructed buildings on leased land. |
| Haridas Girdhardas and Others v. Varadaraja Pillai and Another | *Mentioned but not discussed in detail.* The court acknowledged this case but did not delve into its specifics, as it was not directly relevant to the issues at hand. |
| Bharat Petroleum Corporation Ltd. v. Nirmala and Another | *Followed.* The court adhered to its previous interpretation of “actual physical possession” in this case. |
| Swami Motor Transports (P) Ltd. And Another v. Sri Sankaraswamigal Mutt and Another | *Referred to for the principle that the statutory right to purchase land is a non-proprietary right.* This case was used to emphasize that the right to purchase land under the Act is not an inherent right but a statutory privilege. |
| Dr. K.A. Dhairyawan and Others v. J.R. Thakur and Others | *Referred to for the principle that buildings do not automatically belong to the owner of the land in India.* The court used this case to highlight that the ownership of the building is with the lessee and not the lessor. |
| P. Ananthakrishnan Nair and Another v. Dr G. Ramakrishnan and Another | *Referred to for the principle that the policy underlying Section 9 is to safeguard tenants who have constructed superstructures on the land.* The court used this case to emphasize that the act is meant to protect tenants who are in occupation of the land and superstructure. |
| S.R. Radhakrishnan and Others v. Neelamegam | *Referred to for the principle that the policy underlying Section 9 is to safeguard tenants who have constructed superstructures on the land.* The court reiterated the principle that the purpose of Section 9 is to protect tenants in actual possession. |
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by a strict interpretation of the phrase “actual physical possession” in Section 2(4)(ii)(b) of the Madras City Tenants’ Protection Act, 1921. The Court emphasized that the legislative intent was to protect tenants who are in direct control and occupation of the property, not those who have sublet or licensed it to others. This interpretation was reinforced by the understanding that the Act was designed to safeguard tenants who have invested in building structures on leased land, and who would be adversely affected by eviction. The Court also highlighted that the Act protects tenants who are in actual occupation of the land and the structure, and this protection is not available to those who have parted with possession.
| Reason | Percentage |
|---|---|
| Strict interpretation of “actual physical possession” | 40% |
| Legislative intent to protect tenants in direct control | 30% |
| Safeguarding tenants who invested in building structures | 20% |
| Protection not available to those who have parted with possession | 10% |
| Category | Percentage |
|---|---|
| Fact | 30% |
| Law | 70% |
The ratio of fact to law in the court’s decision indicates that while the factual aspects of the case were considered, the legal interpretation of the relevant provisions of the Act played a more significant role in the final judgment.
Issue: Whether the appellant oil companies are entitled to the benefit of Section 9 of the Act?
Question: Are the oil companies in “actual physical possession” of the land and building?
Analysis: The Court interprets “actual physical possession” to mean direct possession, excluding those who have sublet or licensed the property.
Finding: The oil companies are not in “actual physical possession” as they have sublet/licensed the petrol pumps to dealers.
Conclusion: The oil companies are not entitled to the benefit of Section 9 of the Act.
The Court considered alternative interpretations but rejected them, emphasizing the need for a strict interpretation of “actual physical possession” to uphold the legislative intent of protecting tenants who are in direct control and occupation of the property.
The decision was unanimous, with all three judges agreeing on the interpretation of the Act and its application to the facts of the case.
The Supreme Court’s reasoning was based on a literal interpretation of the words “actual physical possession” in Section 2(4)(ii)(b). The Court found that the legislature had deliberately used the words “actual physical possession” in sub-clause (b) as opposed to the word “possession” in sub-clause (a). The court concluded that the intention was to protect only those tenants who are in direct control and occupation of the property.
The Court also highlighted the object and purpose behind Section 9, which is to safeguard eviction of those tenants who have constructed a superstructure on the land, so that they may continue to occupy the same for the purposes of their residence or business.
The decision implies that tenants who sublet or license their properties will not be able to claim the right to purchase the land under the Act. This could have significant implications for future cases involving similar facts.
The court did not introduce any new doctrines or legal principles, but it clarified the interpretation of “actual physical possession” under the Act.
“The expression ‘actual physical possession of land and building’ would mean and require the tenant to be in actual possession and the sub-clause(b) would not apply if the tenant has sub-let the building or has given the premises on leave and licence basis.”
“The Act as per the objects and purposes was enacted and enforced to grant certain rights to tenants who had acquired leases of land and had thereupon constructed a building with the implied understanding that they would not be evicted as long as they paid the fair rent.”
“The amendments and modifications made by the Amendment Acts of 1972 and 1973 whereby sub-clause (b) to Section 2(4)(ii) was added with retrospective effect, the proviso to Section 12 was deleted with retrospective effect and the amendments to Section 9 were made with retrospective effect, have to be read holistically and in entirety, for it is a well-known canon of construction that every section of a statute is to be construed with reference to the context and other sections of the statute, so as, as far as possible, to make a consistent enactment of the whole statute.”
Key Takeaways
- Tenants who have sublet or licensed their properties are not entitled to the benefit of purchasing the land under Section 9 of the Madras City Tenants’ Protection Act, 1921.
- The phrase “actual physical possession” requires the tenant to be in direct control and occupation of the property.
- The deletion of the proviso to Section 12 does not override the requirement of actual physical possession for claiming the right to purchase land.
- This judgment clarifies that the Act protects tenants who are in direct occupation of the land and structure, and this protection is not available to those who have parted with possession.
Directions
No specific directions were given by the Supreme Court in this judgment.
Development of Law
The ratio decidendi of this case is that the benefit of Section 9 of the Madras City Tenants’ Protection Act, 1921, is available only to tenants who are in actual physical possession of the land and building. This judgment clarifies the interpretation of “actual physical possession” under Section 2(4)(ii)(b) of the Act. While the judgment does not introduce any new legal principles, it reinforces the importance of direct occupation for availing the benefits under the Act. It also clarifies that the deletion of the proviso to Section 12 does not override the requirement of actual physical possession.
Conclusion
In conclusion, the Supreme Court dismissed the appeals of the oil companies, holding that they were not entitled to purchase the leased land under Section 9 of the Madras City Tenants’ Protection Act, 1921, because they were not in actual physical possession of the properties. The judgment clarifies the interpretation of “actual physical possession,” emphasizing that it requires direct control and occupation of the land and building. This decision has significant implications for tenants who have sublet or licensed their properties, as it denies them the right to purchase the land under the Act.