Supreme Court Upholds Tenant’s Right to Change Business: Ravi Chand Mangla vs. Dimpal Solania (2018)

Date of the Judgment: 18 September 2018

Citation: (2018) INSC 794

Judges: L. Nageswara Rao, J. and Mohan M. Shantanagoudar, J.

Can a landlord evict a tenant simply because the tenant changed the nature of their business, even if the lease agreement doesn’t explicitly restrict such changes? The Supreme Court of India addressed this question in a recent case, focusing on the interpretation of lease agreements and the concept of “change of user” under the Haryana Urban (Control of Rent and Eviction) Act, 1973. The Court examined whether a tenant, initially permitted to run a saw mill, could be evicted for later operating a grill manufacturing business. This judgment clarifies the rights of tenants regarding business activities within rented premises. The bench comprised Justices L. Nageswara Rao and Mohan M. Shantanagoudar, with Justice L. Nageswara Rao authoring the judgment.

Case Background

The appellant, Ravi Chand Mangla, is the landlord of a property that was rented out on January 4, 1957, for a monthly rent of 58.26 paisa. The tenant, initially, was permitted to operate a saw mill. Over time, the tenant transitioned to manufacturing grills. The landlord filed a petition seeking eviction of the tenants under Section 13 of the Haryana Urban (Control of Rent and Eviction) Act, 1973, citing several grounds, including non-payment of rent, sub-letting, impairment of property value, nuisance, and change of user.

Timeline

Course of Proceedings

The Rent Controller dismissed the eviction petition, finding no merit in the landlord’s claims of sub-letting, impairment of property value, nuisance, or change of user. The Rent Controller noted that the tenant had deposited the arrears of rent for three years. The Appellate Authority upheld the Rent Controller’s decision. The High Court of Punjab and Haryana at Chandigarh also affirmed the lower courts’ judgments, stating that there was no sub-letting, no impairment to the value and utility of the premises, and no change of user. The High Court observed that the rent agreement allowed the tenant to run any business, not just a saw mill.

Legal Framework

The case revolves around Section 13 of the Haryana Urban (Control of Rent and Eviction) Act, 1973, which outlines the grounds for eviction of tenants. The relevant grounds in this case were the alleged change of user of the rented premises. The Court examined the terms of the rent agreement to determine whether the tenant was restricted to running only a saw mill or was permitted to engage in other businesses as well. The court also considered the interpretation of “change of user” in the context of the Act.

Arguments

Appellant’s Arguments:

• The appellant argued that the tenant had defaulted on rent payments, specifically pointing to arrears from 01.04.1993 to 31.08.2009, which were paid only on 24.09.2009.
• The main argument was that the premises were initially let out for a saw mill, and the tenant’s current use for manufacturing grills constitutes a change of user, violating the terms of the lease.

Respondent’s Arguments:

• The respondents contended that the arrears of rent for three years before the filing of the eviction petition were already deposited in the Court.
• The respondents argued that the rent agreement did not restrict them to running only a saw mill and that they were permitted to carry on any other business.

Submissions Categorized by Main Arguments

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the primary issues addressed were:

1. Whether the tenant defaulted in payment of rent.
2. Whether the change from a saw mill to a grill manufacturing business constitutes a change of user under the Haryana Urban (Control of Rent and Eviction) Act, 1973.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Court relied on the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Court agreed with the principle laid down in Mohan Lal v. Jai Bhagwan [1988 (2) SCC 474]* that in the absence of a negative covenant, the user does not amount to user for the purpose other than for which the premises was leased.
• The Court agreed with the principle laid down in Dashrath Baburao Sangale and Ors. v. Kashimath Bhaskar Data [1994 Supp (1) SCC 504]* that a change in the nature of business does not amount to change of user in the absence of a specific restriction.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the interpretation of the rent agreement and the absence of any explicit restriction on the type of business the tenant could conduct. The Court emphasized that the agreement did not contain a negative covenant that would prevent the tenant from changing the nature of their business. The Court also noted that the arrears of rent were paid for three years prior to the filing of the eviction petition. The Court’s reasoning was based on the principle that in the absence of a specific restriction, a change in the nature of business does not amount to a change of user.

Fact:Law Ratio

Logical Reasoning:

The Court considered the interpretation of the rent agreement and the absence of a specific restriction on the type of business the tenant could conduct. The Court rejected the argument that the change from a saw mill to a grill manufacturing business constitutes a change of user. The Court also rejected the appellant’s argument on non-payment of rent, noting that the arrears of rent were paid for three years prior to the filing of the eviction petition. The Court’s decision was based on the principle that in the absence of a negative covenant, a change in the nature of business does not amount to a change of user. The Court quoted from the judgment: “On a perusal of the agreement, we are convinced that there is no restriction placed on the Respondents-tenant to run business only relating to the saw mill. The tenant was given the liberty to carry on any other business as well.” The Court also quoted: “In the absence of any negative covenant the user does not amount to user for the purpose other than for which the premises was leased.” The Court further quoted: “We agree with the judgments of the Courts below which are in accordance with the law laid down by this Court.”

Key Takeaways

• A tenant cannot be evicted solely for changing the nature of their business if the lease agreement does not explicitly restrict such changes.
• Landlords must include specific restrictions in lease agreements if they wish to control the type of business a tenant operates.
• The absence of a negative covenant in a lease agreement implies that the tenant is permitted to conduct any business.

Directions

No specific directions were given by the Supreme Court in this judgment.

Development of Law

The ratio decidendi of this case is that a change in the nature of business by a tenant does not constitute a change of user under the Haryana Urban (Control of Rent and Eviction) Act, 1973, if the lease agreement does not contain a negative covenant restricting the tenant to a specific type of business. This judgment reinforces the principle that lease agreements should be interpreted strictly, and any ambiguity should be resolved in favor of the tenant. There is no change in the previous position of law.

Conclusion

The Supreme Court dismissed the appeal, upholding the decisions of the lower courts. The Court ruled that the tenant’s change from operating a saw mill to manufacturing grills did not constitute a change of user because the rent agreement did not restrict the tenant to a specific type of business. This judgment clarifies the rights of tenants and the interpretation of lease agreements in the context of rent control laws.