1. The question involved in this revision application is in regard to the fixation of standard rent. The property with which we are concerned was leased out by the opponent to the applicants on 8-11-1947, for a period of three years and the rent reserved was Rs. 1,500 a year. The trial Court fixed the standard rent on the basis of this contractual rent. In appeal the learned District Judge has reduced it to Rs. 1,080 and this decision is challenged by the tenant.
2. Now, Mr. Datar's contention that it is1 established as a fact that this property was let out on 1-9-1940, at the rent of Rs. 600. As a matter of fact it was let out to this very tenant who has been on the premises ever since then and Mr. Datar says that once the rent at which the premises were let on 1-9-1940 is determined, the standard rent can only be that rent and no other rent, and therefore according to Mr. Datar, the learned District Judge should have fixed the standard rent of these premises at Rs. 600 and not Rs. 1,080.
Now, there is one important fact to which attention might be drawn. It has been proved that between 1042 and 1945 the landlord spent Rs. 4,000 on the improvement over the building and this is the fact that the learned District Judge has taken into consideration in fixing the standard rent at Rs. 1,080. Mr. Datar says that even though the landlord may spend any amount on the improvement of the building, if the rent on 1-9-1940 was a certain amount, that amount only can be the standard rent and not the amount increased by any further amount out of consideration for the improvements made by the landlord.
3. Now, let us turn to the scheme of the Rent Act with regard to the fixation of standard rent. 'Standard rent' is defined under Section 5(10) and under Clause (a) standard rent is the rent fixed by the. Court or the Controller -- that does not apply to the present case--and Clause (b) provides: 'where the standard rent is not so fixed'--and the material part of the clause is--'The rent at which the premises were let on the 1st day of September 1940.' Now, if the Sub-section stood thus, Mr. Datar would be on very strong ground and all that the Court would have to do is to determine what was the rent on 1-9-1940, and fix it as the standard rent. But the Legislature has made this subject to the provisions of Section 11, and therefore it is not as if the rent at which the premises were let on 1-9-1940, automatically becomes the standard rent.
It becomes standard rent subject to the provi-, sions of Section 11 and Section 11 gives very wide jurisdiction to the Court and the operative part of Section 11(1) is:
'In any of the following cases the Court may, upon an application made to it for that purpose, or in any suit or proceeding, fix the standard rent at such amount as, having regard to the provisions of this Act and the circumstances of the case, the Court deems just--'
So the Court has to exercise the discretion not only having regard to the provision of the Act but also having regard to the circumstances of the case, and, then follows the various cases in which Section 11 comes into operation, and the one with which we are concerned is Clause (e) which provides:
'Where there is any dispute between the landlord and the tenant regarding the amount of standard rent.'
Mr. Datar says that this Sub-section only applies where the landlord or the tenant disputes the amount of the rent at which the premises were let on 1-9-1940. According to Mr. Datar if there is, no dispute with regard to that amount, then Clause (e) has no application. That contention is obviously untenable because Clause (e) does not refer to the dispute being about the amount of rent but the dispute is with regard to the amount of standard rent. In other words, if the landlord says that notwithstanding the fact that the premises were let on 1-9-1940, at the rent of Rs. 600 I still dispute that Rs. 600 should be fixed as the standard rent, then Clause (e) applies and the Court has jurisdiction to fix the standard rent as provided for by Section 11(1). Unless this construction is adopted, no explanation can be given as to why the Legislature made the rent at which the premises were let on 1-9-1940, subject to the provisions of Section 11.
If the Court had no discretion but to fix the standard rent at the amount at which the premises were let on 1-9-1940, then it was unnecessary to provide that that fixation was subject to the provisions of Section 11. If Section 11 was only to be requisitioned if there was dispute as to the amount of tile rent at which the premises were let on 1-9-1940, then the Legislature could have so provided in clear language.
But as I have pointed out, Clause (e) does not refer to the dispute as to the amount of the rent, but the dispute is as to the amount of standard rent, and even on principle the Legislature had to give wide jurisdiction to the Court with regard to the fixation of standard rent. Various circumstances may have to be considered apart from the fact that the premise were let at a particular rent on 1-9-1940.
Take this very case where the landlord has spent Rs. 4,000 before the Rent Act came into force. Surely that is an important circumstance which must be taken into consideration in fixing the standard rent. The tenant cannot say that he should be asked only to pay the rent which he paid on 1-9-1940, although he is receiving many more amenities from the landlord. Mr. Datar says that if I were to adopt that interpretation, then I would be making the provision that the standard rent should be the rent at which the premises were let on 1-9-1940, a dead letter, and Mr. Datar says that the Court may ignore this provision altogether, and as soon as the landlord disputes the standard rent, the Court would fix any standard rent irrespective of the rent at which the premises were let on 1-9-1940.
Now, I do not think that that is likely to happen because Section 11 lays down that the Court has to fix a standard rent which it deems just having regard not only to the circumstances of the case but a!so the provisions of the Act, and therefore if the Court has a case before it where the premises were let on 1-9-1940, then that fact has to be kept in mind by the Court as indicating the policy laid down by the Legislature that normally the standard rent should be the rent at which the premises were first let on 1-9-1940. But if over and above that fact there are other circumstances of the case, then the Court should not ignore those circumstances and should take them also into consideration. Therefore, in my opinion, there is no difficulty in permitting the Court to consider all the circumstances if the landlord disputes the standard rent.
If the dispute of the landlord is not bona fide or is flimsy or is based on considerations which have no force, then undoubtedly the Court will fix the standard rent at an amount at which the premises were let on 1-9-1940. But if there is force in the considerations put forward by the landlord, then there is no reason why the Court should omit to consider those considerations. Therefore, in my opinion, the learned District Judge was right in taking the view that he had jurisdiction to fix a rent different from the rent prescribed under Section 5(10)(b)(i) and that the case fell under Clause (e) of Section 11(1).
4. Mr. Datar then contends that the learned Judge in fixing the standard rent at Rs. 1,080 has practically allowed the landlord 10 per cent, interest on is investment of Rs. 4,000. Now, unfortunately, the learned Judge has not clearly indicated how he came to fix Rs. 1,080 as the standard rent. The correct approach to this question should be, what is the net return which a landlord should be reasonably allowed on his investment. A landlord having invested Rs. 4,000 it was for the District Judge to consider what return he should allow him on his investment of Rs. 4,000/-.
But I do not find that the learned District Judge has approached the matter from that point of view at all, and with respect to him it seems that he has arrived at the figure of Rs. 1,080 in a rather arbitrary fashion.
5. I would therefore send the matter back to him and direct him to consider in fixing die standard rent what net return the landlord should be entitled to on his investment of Rs. 4,000. He will take into consideration what the outgoings of the landlord were in September 1940 when he received the rent of Rs. 600, and he will consider how much more were his outgoings on 8-11-1947, when the property was leased to the tenant, and he will fix the net return after giving credit for all the outgoings which the landlord is bound to discharge in law.
6. No order as to costs.
7. Order accordingly.