Supreme Court mandates interest on rent arrears: Bhagirath Agarwal vs. M/S Simplex Concrete & Piles (I) Pvt. Ltd. (23 March 2017)

Introduction

Date of the Judgment: 23 March 2017
Citation: 2017 INSC 257
Judges: Kurian Joseph, J., R. Banumathi, J.

Can a court deny interest on rent arrears if it allows a tenant to pay in installments? The Supreme Court of India addressed this question in a case concerning the West Bengal Premises Tenancy Act, 1956. The court clarified that when a tenant is allowed to pay rent arrears in installments, the landlord is statutorily entitled to interest on those arrears, and the court has no discretion to deny it. This judgment emphasizes the mandatory nature of interest payments in such cases, ensuring landlords receive their due compensation. The bench consisted of Justice Kurian Joseph and Justice R. Banumathi.

Case Background

The appellant, Bhagirath Agarwal, was the landlord, and M/S Simplex Concrete & Piles (I) Pvt. Ltd. was the tenant. The dispute arose from an ejectment suit (Ejectment Suit No.717 of 1992) filed by the landlord in the City Civil Court at Calcutta. The tenant had defaulted on rent payments since November 1990. The City Civil Court allowed the tenant to pay the arrears in installments but denied the landlord interest on the arrears. The landlord appealed this decision, seeking interest on the outstanding rent.

The City Civil Court, on 22.05.2006, determined that the tenant was a defaulter in payment of rent since November 1990, at a rate of Rs.19,000 per month. The total defaulting period was 186 months, amounting to Rs.35,34,000. After accounting for a previous payment of Rs.5,00,000, the remaining due amount was Rs.29,34,000. The court directed the tenant to pay the arrears in ten monthly installments, without any interest. The landlord was aggrieved by the denial of interest.

Timeline

Course of Proceedings

The City Civil Court at Calcutta allowed the tenant to pay the arrears in installments but denied interest to the landlord, citing a discretionary power. The landlord then approached the High Court, but the High Court declined to interfere with the order of the City Civil Court. Aggrieved by the denial of interest, the landlord appealed to the Supreme Court of India.

Legal Framework

The Supreme Court referred to Section 17(2A) of the West Bengal Premises Tenancy Act, 1956, which states:

“Provided that where payment is permitted by installments, such sum shall include all amounts calculated at the rate of rent for the period of default including the period subsequent thereto upto the end of the month previous to that in which the order under this sub-section is to be made with interest on any such amount calculated at the rate specified in sub-section (1) from the date when such amount was payable upto the date of such order.”

This provision mandates that when a court allows a tenant to pay rent arrears in installments, the total amount must include interest calculated from the date the amount was originally due until the date of the order. The court emphasized that this provision is clear and leaves no room for discretion in denying interest.

The Court also noted Section 34 of the West Bengal Premises Tenancy Act, 1956, which allows for a set-off if the landlord has failed to provide amenities and the tenant has spent money to provide them. However, in this case, no such set-off was granted by the trial court.

Arguments

The appellant/landlord argued that Section 17(2A) of the West Bengal Premises Tenancy Act, 1956, clearly mandates the payment of interest on arrears of rent when the court permits payment in installments. They contended that the City Civil Court had no discretion to deny interest, as the provision is statutory and not discretionary.

The respondent/tenant had argued that the default in payment of rent was due to the landlord’s conduct in denying amenities. However, the City Civil Court did not grant any set-off for the expenses incurred by the tenant in providing those amenities. The tenant did not appeal the order of the City Civil Court.

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was:

1. Whether the City Civil Court had the discretion to deny interest on the arrears of rent when permitting the tenant to pay the arrears in installments under Section 17(2A) of the West Bengal Premises Tenancy Act, 1956.

Treatment of the Issue by the Court

Authorities

The Supreme Court primarily relied on Section 17(2A) of the West Bengal Premises Tenancy Act, 1956, to reach its decision. The court emphasized the mandatory nature of the provision, stating that it leaves no room for discretion in denying interest when payment of arrears is permitted in installments.

Judgment

The Supreme Court held that the City Civil Court erred in denying interest to the landlord. The court clarified that Section 17(2A) of the West Bengal Premises Tenancy Act, 1956, mandates the payment of interest when arrears of rent are allowed to be paid in installments.

The court stated, “The statutory provision is very clear. Whenever payment of rent including arrears is permitted to be paid in installments, the Statute contemplates that the beneficiary shall be granted interest.”

The court further noted, “Once the arrears are permitted to be paid in installments, there is no discretion available with the Court to deny interest. It is not a discretionary relief; it is the statutory right and entitlement of the landlord to get interest.”

The Supreme Court allowed the appeal, holding that the appellant/landlord was entitled to interest under the West Bengal Premises Tenancy Act, 1956.

What weighed in the mind of the Court?

The court’s decision was primarily driven by the clear and unambiguous language of Section 17(2A) of the West Bengal Premises Tenancy Act, 1956. The court emphasized that the statute mandates the payment of interest when arrears of rent are allowed to be paid in installments. The court found that there was no discretion available to the court to deny interest.

Key Takeaways

• When a court allows a tenant to pay rent arrears in installments under the West Bengal Premises Tenancy Act, 1956, the landlord is statutorily entitled to interest on those arrears.
• Courts do not have the discretion to deny interest in such cases; it is a mandatory requirement under Section 17(2A) of the Act.
• This judgment clarifies the rights of landlords in cases of rent default and ensures they receive due compensation, including interest on arrears.

Directions

The Supreme Court directed that the appellant/landlord shall be entitled to interest under the West Bengal Premises Tenancy Act, 1956.

Development of Law

The ratio decidendi of this case is that when a court permits a tenant to pay arrears of rent in installments, it is mandatory under Section 17(2A) of the West Bengal Premises Tenancy Act, 1956, to include interest on those arrears. This judgment clarifies that the court has no discretion to deny interest in such cases, reinforcing the statutory right of the landlord to receive interest on delayed payments.

Conclusion

The Supreme Court’s judgment in Bhagirath Agarwal vs. M/S Simplex Concrete & Piles (I) Pvt. Ltd. clarifies that landlords are statutorily entitled to interest on rent arrears when tenants are allowed to pay in installments under the West Bengal Premises Tenancy Act, 1956. The court emphasized that this is a mandatory provision, leaving no discretion for courts to deny interest. This decision reinforces the financial rights of landlords and ensures they are compensated for delayed payments.