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Shankerlal Gupta Vs. V. Jagadishwar Rao - Court Judgment

LegalCrystal Citation
SubjectTenancy
CourtAndhra Pradesh High Court
Decided On
Case NumberC.C.C.A. Nos. 161 and 169 of 1974
Judge
Reported inAIR1980AP181
ActsHyderabad Houses (Rent, Eviction & Lease) Control Act, 1954 - Sections 3(3) and 3(5); Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960 - Sections 3(5); Uttar Pradesh (Temporary) Control of Rent and Eviction Act, 1947 - Sections 7(I); Indian Contract Act, 1872 - Sections 23
AppellantShankerlal Gupta
RespondentV. Jagadishwar Rao
Appellant AdvocateBankatlal Mandhana, Adv.
Respondent AdvocateN. Rajeswara Rao, Adv.
Excerpt:
tenancy - validity of tenancy - sections 3 (3) and 3 (5) of hyderabad houses (rent, eviction and lease) control act, 1954, section 3 (5) of andhra pradesh buildings (lease, rent and eviction) control act, 1960, section 7 (i) of uttar pradesh (temporary) control of rent and eviction act, 1947 and section 23 of indian contract act, 1872 - whether tenancy created in contravention of provisions of section 3 (3) of hyderabad act of 1954 or section 3 (5) of andhra pradesh act of 1960 is void and unenforceable under section 23 of contract act as being forbidden by law and opposed to public policy - such tenancy not to be rendered illegal or void inter se between landlord and tenant though void against controller - policy of enactments in question postulating welfare and benefits of tenants -.....seetharam reddy, j. 1. the proposition posed by the division bench comprising a. v. krishna rao, and mahusudan rao, jj. in this reference is, 'is the authority in g. eswaraiah v. mahendrappa khani 1969 (2) aplj 66 shaken and is no longer good law by reason of the decision in muralidhar v. state of u. p. : [1975]1scr575 as held by the division bench of this court in srikanth neemkar v. g. yelloji rao 1977 (1) aplj 80?' 2. in order to appreciate the rival contentions, a brief re 'sume' of the facts is necessary. the sole defendant in o. s. no. 88 of 1971 is the appellant. the suit was filed for recovery of vacant possession by ejecting the defendant from the plaint schedule premises situated at kattalmandi, hyderabad, and also for damages for use and occupation of the said premises at the.....
Judgment:

Seetharam Reddy, J.

1. The proposition posed by the Division Bench comprising A. V. Krishna Rao, and Mahusudan Rao, JJ. In this reference is, 'Is the authority in G. Eswaraiah v. Mahendrappa Khani 1969 (2) APLJ 66 shaken and is no longer good law by reason of the decision in Muralidhar v. State of U. P. : [1975]1SCR575 as held by the Division Bench of this Court in Srikanth Neemkar V. G. Yelloji Rao 1977 (1) APLJ 80?'

2. In order to appreciate the rival contentions, a brief re 'sume' of the facts is necessary. The sole defendant in O. S. No. 88 of 1971 is the Appellant. The suit was filed for recovery of vacant possession by ejecting the defendant from the plaint schedule premises situated at Kattalmandi, Hyderabad, and also for damages for use and occupation of the said premises at the rate of Rs. 1,000/- per month. The plaintiff purchased the suit property in the year 1961. The defendant executed an agreement of lease on 1-6-1961. Admittedly , the house property was built before 26th August, 1957 and is, therefore, not exempt from the provisions of the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960, hereinafter referred to as 'the Act'. It is also not disputed that the notice of vacancy as required by section 3 (1) of vacancy as required by section 3 (1) of vacancy as required by Section 3 (1) (a) of the Act has not been issued by the landlord and the letting to the tenant is in contravention of section 3 (5) of the Act.

3. One of the issues framed was, 'Whether the Civil Court has jurisdiction to entertain the suit and grant the relief claimed'? The trial court decreed the suit answering the aforesaid issue in the affirmative. Hence the appeal, C. C. C. A. NO. 161 of 1974?'

4. It is needless to refer in detail to the facts in the connected appeal, C. C. C. A. No. 169 of 1974 filed against the judgment in O. S. No. 94 of 1972 which is filed by the defendant in O. S. No. 88 of 1971 for perpetual and mandatory injunctions against the defendant therein restraining him from reconstructing rooms which he had illegally demolished in the suit property and also from further demolishing any portion of the said property. However , as consequence of decreeing O. S. No. 88 of 1971, O. S. No. 94 of 1972 was dismissed. Hence the appeal, C. C. C. A. No. 169 of 1974.

5. Therefore, the sole point that arises in this reference is whether the Civil Court has no jurisdiction to entertain the suit; and an answer to this, one way or the other, would ipso facto resolve the proposition posed under reference.

6. The argument advanced by Sri Bankatlal Mandhana learned Counsel for the appellant, is, the suit is for recovery of possession of property situated in the City of Hyderabad and constructed prior to August , 1957. An agreement of lease was entered into between the parties , the relationship of landlord and tenant is subsisting, and the tenant can only be evicted in accordance with the provisions of the Act. The Civil Court has, therefore, no jurisdiction to entertain the suit. The learned Counsel submits that since 1952, the premises in question was let out to one Mumtaj who was running a dal mill therein. In the year 1958, he suffered a loss and sold away the mill to the appellant; and the previous owners Sriram Bhagawandas and Smt. Badami Bai attorned the tenancy in favour of the appellant in 1960. The respondent-plaintiff purchased the suit premises under a registered sale deed dated 18-4-1961; and a fresh lease deed was executed by the appellant in favour of the respondent on 1-6-61. The appellant was already a tenant when the premises was purchased by the respondent, and there was no vacancy after the respondent purchased the property. It is submitted that it is the Hyderabad Houses (Rent, Eviction and Lease) Control Act. 1954, hereinafter referred to as 'the Hyderabad Rent Control Act' that is applicable to this case but not the provisions of the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960, hereinafter referred to as the A. P. Rent Control Act'. However, with out prejudice to the rights of the respective parties, both the counsel agreed that since there is not much difference between the provisions of the two enactments , the case can be decided on the basis of the Hyderabad enactment.

7. Learned counsel for the appellant further submits that up to 1960, all eviction petitions under the Rent Control Act were being entertained by the Rent Controllers only in spite of contravention of Section 3 of the Hyderabad Rent control Act or Section 3 of the Andhra Pradesh Rent Control Act. But, in Eswarajah's case (supra) a Division Bench of this Court observed that a tenancy created contrary to the provisions of Sections 3 of the Hyderabad Rent Control Act is illegal and void and as such, the Rent Controller has no jurisdiction. Subsequent to the said decision the parties in cases of similar nature, resorted to common law and filed suits against the tenants for possession on the ground of their title. This position continued up to 1974 when the supreme Court, while deciding a matter under the U. P. Rent Control Act, held in Murlidhar's case (supra) that the tenancies created in contravention of Section 7 of the U. P. Rent Control act which is similar to section 3 of the Hyderabad Rent Control Act or the A. P. Rent control Act are valid as between the parties and that there is a relationship of landlord and tenant. The supreme Court, in the said decision, agreed with the view expressed by a Full Bench of the Allahabad High Court in Udhoo Das V. Prem Prakash : AIR1964All1 . After the aforesaid decision of the Supreme Court, came the decision of this court in Mirza (Mohd) v. K. Balakistaiah 1975 (2) APLJ 96, wherein Lakshmaiah, J. following the decision of the Supreme Court, held that the tenancy, though in contravention of Section 3 of the Rent Control Act was valid as between the parties, though not binding upon the Government. Similar is the view taken by Vimadalal, J. in S. Anjaiah v. K. Kishtamma 1976 (2) APLJ 109. Thereafter, when a similar matter came up before a Division Bench of this Court comprising Alladi Kuppuswami and Sheth, JJ. In Srikanth Neemkar v. G. Yeelloji Rao 1977 (1) APLJ 80, following the judgment of the Supreme Court the Bench held that the authority of the decision in Eswaraiah's case (supra) is shaken and so no longer 'good law'. The learned counsel contends that the decision in Eswaraiah's case (supra) does not deal directly with Section 3 of the Rent control Act and Section 23 of the Indian Contract Act. Though in the judgment, the provisions of Section 3 of the Rent Control Act and its attraction to Section 23 of the Contract Act and the consequential effect have been discussed and it is held that the tenancy created in contravention of Section 3 of the Rent control Act is illegal and void and the Rent Controller has no jurisdiction, the said principle was not applied to the facts of the case. In fact, the decree passed by the Rent Controller for eviction against the tenant was upheld by the Division Bench on the ground that the tenant was estopped, by the principle of res judicate, from challenging the relationship. Therefore, the whole of the observation regarding Section 3 of the Rent Control Act and Section 23 of the Contract Act is an obiter dictum. If the judge thinks it desirable to give his opinion on some point which is not necessary for the decision of the case, it has no binding effect. For this, he seeks to place reliance on the principle laid down by the Supreme Court in Mumbai Kamgar Sabha v. Abdulbhai : (1976)IILLJ186SC and a Division Bench of this Court in Y. Venkateswarlu v. State : AIR1978AP333 .

8. The contention of Sri. N. Rajeswara Rao learned counsel for the respondent, is that Eswaraiah's case (supra) resolved the conflict between Fathima Bai v. State of Madras : AIR1953Mad257 and Balaiah v. Ahmed Khan (1960) 2 Andh WR 496, with reference to Section 3 (3) of the Hyderabad Rent Control Act and Section 3 (5) of the A. P. Rent Control Act. Therefore, the Bench in Eswaraiah's case held that a contract entered into between a landlord and a tenant in violation of the provisions of Sec. 3(3) of the Hyderabad Rent Control Act is void for all purposes and, therefore no rights accrued to the tenant. It was further held that a suit for possession by the landlord would lie against the tenant in the civil court on the strength of his title. Therefore, the decision in Eswaraiah's case is not an obiter dictum.

9. We are inclined to agree with the contention of the learned counsel for the respondent. In fact, by a common judgment, the Division Bench disposed of the Second Appeal and two Civil Revision Petitions which had earlier come up before a single judge and were referred to a Bench a view of the Conflicting views in Fathima Bai v. State of Madras (supra) and Balaiah v. Ahmed Khan (1960) 2 Andh WR 496. The very question that was framed to be answered was: The short but important question is whether a tenancy created in contravention of the provision s of Section 3 of the Hyderabad Houses (Rent Eviction and Lease) Control Act (XX of 1954) hereinafter called 'the Act' is void and unenforceable under Section 23 of the Indian Contract Act as being one that is forbidden by law and opposed to public policy. The Bench then held.,

'We have already held that the contract of tenancy is unlawful and void. What must follow from the conclusion is that neither the tenant could file an application for fixation of fair rent under the Act before the Rent Controller nor the landlord could file an application for eviction before the Controller under the said Act.'

10. Therefore, it is quite manifest from the conclusion that the entire decision was with reference to Section 3 of the Rent Control Act in the light of Section 23 of the Contract Act, and we have no hesitation in holding that the judgment in Eswaraiah's case is not an obiter dictum as contended by the learned counsel for the appellant.

11. The next contention of the learned counsel for the appellant is that the object of the Act and the public policy involved in it have to be taken into consideration while interpreting Section 3 of the Rent Control Act. The preamble to the Hyderabad Rent Control Act shows very clearly that the purpose of the enactment is for the better control of houses and to prevent unreasonable eviction of tenants. Further, Section 3 of the Hyderabad Rent Control Act enjoins upon the landlords to intimate the vacancy to the Accommodation Controller under Section 3 (3) of the said Act. There is no corresponding obligation on the tenant. The prohibition also is not absolute but is confined only to the landlords in the matter of letting out the buildings without the permission of the Controller. The tenancy created contrary to Section 3 cannot be said to be forbidden by law. Apart from it, Section 3 also does not by itself declare such tenancies illegal or void nor does it oust the jurisdiction of the Rent Controller in respect of such tenancies. The purpose of enacting Section 3 is made clear in Section 4 of the Hyderabad Rent Control Act and Section 3 (8) of the Andhra Pradesh Rent Control Act, where in the Government had an absolute power to make the allotments or requisition the vacant buildings for a public purpose. Any contract between the tenant and the landlord has not been made binding on the Government and is void as against the Government and not inter se. even under Section 23 of the Indian Contract Act although the statute may in terms separately prohibit the act or omission and affix the penalty in a case of disobedience it does not necessarily follow that all transactions to which the penalty attaches are illegal. Some of the contracts, such as wagering contracts are void and unenforceable but still they have not been forbidden by law and it is only the enforcement of a wagering contract or a void contract that is barred, and the Court will not come to the assistance of the parties for enforcement of such a contract. But all collateral contracts have been treated to be valid. The learned Counsel places reliance on the following decisions :-

St. John Shipping Corporation v. Joseph Bank Ltd. (1957) I QB 267, Gherulal v. Mahadeo Das : AIR1959SC781 Dorairaj v. N. G. Rajan : AIR1977Mad243 , Bhikanbhai v. Hiralal (1900) ILR 24 Bom 622, Abdulla v. Mammod (1903) ILR 26 Mad 156 and Nazaralli v. Babamiya AIR 1915 Bom 244 and submits that the aforesaid decisions and also the observations of the Supreme Court in Muralidhar's case (supra) make it abundantly clear that though the contract is contrary to the provisions of Section 3 of the Rent Control Act, still it is binding on the parties to it and, therefore, the decision in Eswaraiah's case (supra) is no longer a good law, and its authority is therefore shaken.

12. Sri Rajeswar Rao learned counsel for the respondent submits that decision of the Supreme Court in Muralidhar's case (supra) is with reference to the provisions of the U. P. Rent Control Act, which are dissimilar to the provisions of the A. P. Rent Control Act, and therefore, the decision given thereafter by this Court including the latest one in Sri Kanth's case do not reflect the correct position of law, and therefore, the decision in Eswaraiah's case is still a good law and the authority of the said decision cannot be said to have been shaken. The argument is that there is no express prohibition in the U. P. Rent Control Act prohibiting the landlord from letting out the premises when it has fallen vacant without the permission of the District Magistrate as obtained in the case of the Hyderabad and A. P. Rent Control Acts. Section 7 (1) (a) of the U. P. Rent Control Act casts an obligation both on landlord as well as tenant to intimate the vacancy. A penalty is provided under Section 8 (1) for violation of any of the provisions of the Act. So, there is no impediment for an agreement of lease to be entered into, whereas the Hyderabad Rent Control Act and the A. P. Rent Control Act prohibit any such agreement to be entered into, and therefore, there would not be any relationship of landlord and tenant between the parties. Secondly Section 7-A of the U. P. Rent Control Act comes into operation only when the provisions of Section 7 (2) of the said Act are violated. Otherwise the District Magistrate has the authority to invoke the power under Section 7-A as the word used in Section 7 (2) is 'may'. Therefore, the District Magistrate may or may not pass any order even though a premises has fallen vacant. So, Section 7 (2) of the U. P. Act is not mandatory, whereas Section 3 (3) of the Hyderabad Rent Control Act is mandatory. Thirdly the power under Section 7-A of the U. P. Rent Control Act conferred on the District Magistrate is not absolute. In support of this argument, the learned counsel relies on the following passage in Eswariah's case wherein the Bench held:

'We have already noticed that S. 3 (3) expressly forbids the formation of any contract without any permission of the controller. The imposition of penalty for contravention of Section 3 is clear indication that a contract in contravention of Section 23 is forbidden. Section 23 of the Contract Act, therefore gets attracted.'

Further, from the preamble of the Hyderabad Rent Control Act, it is clear that it is passed in the interest of the public and therefore, the consideration or object of an agreement, if it is opposed to public policy, will be unlawful and void under Section 4 of the Hyderabad Rent Control Act the controller can give a vacant building to such person as he thinks fit, whether intimation of the vacancy is given or not under Section 3 (1) and (2). This he can do for a public purpose as defined in Section 2 (1) of the Act. Therefore, the object or consideration of any agreement, if opposed to this public purposes, will render the agreement illegal and invalid and unenforceable. For this, he relies on Eswaraiah's case and other decisions in Mahmoud & Ispahani In re (1921) 2 KB 716, Bostel Bros. Ltd. v. Hurlock (1948) 2 All ER 312 Dennis & Co. Ltd. v. Munn (1949) 1 All ER 616 B. and B. Viennes Fashions v. Losane (1952) 1 All ER 909 and Waman Shriniwas v. R. B. & Co. : AIR1959SC689 .

13. We may usefully extract the relevant provisions of the Hyderabad Rent Control Act, the A. P. Rent Control Act and the U. P. Rent Control Act. ]

14. The relevant provisions of the Hyderabad Rent Control Act read

Section 3 (1). If any house situated in any area specified by the Government by notification in the Official Gazette is vacant on the date of such notification or becomes vacant after such date, the landlord of such house shall give intimation thereof in the prescribed form to the Controller. (3) A landlord shall not, without the permission of the Controller, let, occupy or permit to be occupied such house without giving intimation and for a period of fifteen days from the date on which intimation is received or within a period of one week after the termination of the proceedings under clause (6), if any, whichever is later.

Section 4: The Controller may, for a public purpose, by order in writing served on the landlord direct that any vacant house whether intimation of its vacancy has been given by the landlord under sub-sec. (1) of Section 3 or not, be given on lease to such person, as he may think fit.

Explanation : A house may be directed to be leased under this section notwithstanding that it is subject to an agreement of lease or has been let or occupied in contravention of sub-section (3) of Section 3. Section 33 enacts imposition of a fine in case of contravention of Section 3. Similar are the provisions in Section 3 of the A. P. Rent Control Act.

The relevant provisions of the U. P. Rent Control Act read:

'Section 7: (1) Every landlord shall, within 7 days after an accommodation becomes vacant by his ceasing to occupy it or by the tenant vacating it, or otherwise ceasing to occupy it or by termination of a tenancy or by release from requisition or in any other manner whatsoever, give notice of vacancy in writing to the District Magistrate.

(b) Every tenant occupying accommodation shall within 7 days of vacation of such accommodation, or ceasing to occupy it give notice thereof in writing to the District Magistrate.

(c) The notice given under cl. (a) or (b) shall contain such particulars as may be prescribed.

(2) The District Magistrate may by general or special order require a landlord to let or not to let to any person any accommodation which is or has fallen vacant or is about to fall vacant.

Section 7-A District Magistrate's power to take action against unauthorised occupants: (1) Where in pursuance of an order of the District Magistrate under sub-section (2) of Section 7, the vacancy of any accommodation is required to be reported and is not reported, or where an order requiring any accommodation to be let or not to be let has been duly passed under sub-section (2) of Section 7 and the District Magistrate believes or has reason to believe that any person has in contravention of the said order occupied the accommodation or any part thereof, he may call upon the person in occupation to show cause, within a time to be fixed by him, why he should not be evicted therefrom provided that no order under this Section shall be passed if the District Magistrate is satisfied that there has been undue delay or it is otherwise inexpedient to do so.'

15. It is true that the concerned provisions of the U. P. Rent Control Act are rather at variance with the provisions of either the Hyderabad Rent Control Act or the A. P. Rent Control Act. But, the principal question to be posed and answered is, what would be the effect, in the ultimate analysis, of contravention of the provisions of Section 7 (1) of the U. P. Rent Control Act on the one hand and Section 3(3) and Section 3 (5) of the Hyderabad and A. P. Acts respectively on the other? It is, no doubt, true that the language of Section 7 of the U. P. Rent Control Act is rather different. But, it would be fallacious to accept that the language of section 7(1) of the U. P. Rent Control Act would not lead to the conclusion that there is no embargo whatsoever regarding agreements of lease to be entered into between the landlord and tenant. From the mere reading of Section 7 (7), it is clear that notice of vacancy must be given to the District Magistrate. If that were so, it is irresistible inference that it was with a definite purpose enabling the District Magistrate to take a decision one way or the other, to allot or not to allot. It may be that in so far as Section 7 (2) of the U. P. Rent Control Act is concerned, the District Magistrate may or may not pass any order requiring a landlord to let or not to let. But that does not absolve the mandate under Section 7 (1) Whereunder the vacancy has to be notified by the landlord. If that is the position, it makes very little difference whether the provision as it obtains under Section 3 (3) or Section 3 (5) of the Hyderabad and the A. P. Rent Control Acts respectively does not exist in the U. P. Rent control Act, because the consequences which ensue either way would be one and the same. There is yet another circumstances for this conclusion. In either case, viz. Section 7 (1) of the U. P. Act or Section 3 (3) and Section 3 (5) of the Hyderabad and A. P. Acts respectively, there is no provision rendering the transaction illegal, though a penalty of fine is provided for. This is deliberate and the resultant effect of the intendment of the Legislature in either case will be one and the same.

16. Now, we come to the question as to what consequences will flow if the relevant provisions, and in particular Section 3 (3) or Section 3 (5) of the Hyderabad and A. P. Acts respectively, are contravened. The argument is that under Section 23 of the Indian Contract Act the lease agreement is void for two reasons: (1) it is forbidden by law as the very format is in contravention of Section 3 (3) and (2), it is opposed to public policy.

17. In so far as the first contention is concerned we have already concluded, on the basis of the decision of the Supreme Court in Muralidhar's case (supra) that notwithstanding the fact that the provisions of the U. P. Rent Control Act, in juxtaposition to those of the Hyderabad and A. P. Rent Control Acts, are not in some respects in pari materia, yet, because of the statutory obligation case under Section 7 (1) of the U. P. Rent Control Act, it was necessary for the landlord to have notified the vacancy and therefore, any formation of agreement of lease contravening the said provision would be illegal and void against the District Magistrate though not inter se between the parties; similarly without any hesitation, we conclude that contravention of Section 3 (3) or Section 3 (5) of the Hyderabad and A. P. Rent Control Acts respectively notwithstanding the agreement of lease would be null and void as against the Controller and not inter se between the landlord and the tenant, and the landlord herein would be estopped from denying that the appellant is a tenant. Further, the Act makes a distinction between a tenant otherwise than by virtue of an allotment order. Either way, therefore, he is a tenant though the tenant occupying the accommodation without an allotment order will be deprived of several privileges conferred by the Act, nevertheless, we are of the firm view that the appellant is a tenant though it is contrary to sub-section (3) of Section 3 of the Hyderabad Rent control Act or sub-section (5) of Section 3 of the A. P. Rent Control Act and the respondent landlord's suit is, therefore, liable to be dismissed, as the building was admittedly constructed before 1957, and it is a case which will have to be necessarily instituted before the Rent Controller. We, however, make it clear that the agreement of lease is perfectly valid and binding inter se between the parties, i. e. landlord and tenant, but as against the Rent Controller, it is a void agreement. Further Section 4 of the Hyderabad Rent Control Act, which has already been extracted, empowers the Rent Controller to allot any building on lease to any person, whether or not intimation of its vacancy has been given by the landlord under Section 3 (1). The same is the position under Section 3 (8) of the A. P. Rent Control Act. Further the obligation of intimating the vacancy is only cast on the landlord and not on the tenant, unlike in the U. P. Rent Control Act. Even so, in Muralidhar's case the Supreme Court held that the contract as between the landlord and tenant is valid though void against the District Magistrate. It is a fortiori, more so in the case before us. It is significant to notice that even in Eswaraiah's case, the Bench upheld the decree of eviction by the Rent Control Court, observing that the landlord is estopped from pleading that the other party is not this tenant.

18. The decisions relied on by the learned Counsel for the respondent are not of any assistance, in view of our decision based on the decision of the Supreme Court in Murlidhar's case. In Mahmood and Isphani, In re (supra) by a wartime statutory order, it was forbidden to by or sell linseed oil without licence from the Food controller. The plaintiff agreed to sell and deliver to the defendant a quantity of linseed oil and, before the contract was made, asked the defendant whether he possessed a licence. The defendant falsely assured him that he did, Subsequently, however, he refused to accept the oil on the ground that he had no licence. The plaintiff brought an action for damages for non-acceptance. The Court of Appeal refused to entertain the action. It was held that the order is a clear and unequivocal declaration by the Legislature in the public interest that this particular kind of contract shall not be entered into. Likewise, in Bostle Bros. Ltd. v. Hurlock (supra) Dennis & Co. Ltd. v. Munn (supra) B. & B. Viennese Fashions v. Losane (supra) and Waman Shriniwas v. R. B. & Co. (supra) it is held that even an equal participant in the illegality is allowed relief by way of restitution though not on the contract. In none of these cases, the court has addressed itself to the question as to what would be the effect of contract inter se between the parties.

19. The following decisions cited by the learned counsel for the appellant provide guidance to a great extent. In St. John Shipping Corporation v. Joseph Bank Ltd. (supra) for the unilateral acts of the plaintiff in overloading the ship contrary to the Merchant Shipping Act, 1932, the Master was prosecuted and fined for the offence, and when the defendants tried to avoid the payment of freight due, on that ground, they were not allowed to do so and the Court granted a decree for the sum due. This shows that the Act did not render unlawful the contract of carriage but merely imposed a penalty in respect of its infringement. In Gherulal Parakh v. Mahadeodas (supra) the Supreme court while dealing with a case arising out of a wagering contract observed that the entering into a partnership for purposes of carrying on wagering transactions, does not render the partnership itself illegal, though the intention of carrying out wagering transactions may be illegal and void still the obligations arising under such partnership are binding on the partners inter se. Likewise, in B. N. Dorairaj v. N. G. Rajan (supra) a Division Bench of the Madras High Court held that under Section 23 of the Indian Contract Act an agreement is not unlawful unless it is forbidden by law, or the court regards it as opposed to public policy. The Bench referred to 'Lindlay on Partnership' (13th Edition, pp-130-131) wherein it is stated:

'Although the statute in terms may separately prohibit the act or omission and affix a penalty in a case of disobedience, it does not necessarily follow that all transactions to which penalty attaches, are illegal XX XXX X Thus, when an unlawful agreement is brought before the Court, it would be necessary to find out the exact scope of the provision. It is a matter of construction of a particular statute in each case, except in cases where the law forbids it with a view to give protection to public. Normally the Court may enforce the contract.

The Bench then referred to the decisions in Bhikanbai v. Hiralal (supra) Abdulla v. Mammod (supra) and Nazaralli v. Babamiya (supra) where there were contraventions of Ferries Act and Tolls Act and partnership and sub-leases created contrary to the Acts. Nevertheless it held, that inter se between the parties the contract was enforceable, though it is not binding on the Government.

20. From the foregoing, we are of the firm view that the various provisions of either the Hyderabad Rent Control Act or the A. P. Rent Control Act amply demonstrate that an agreement of lease made in contravention of Section 3 (3) of the Hyderabad Rent Control Act or Sec. 3 (5) of the A. P. Rent Control Act, is not rendered illegal or void inter se between the landlord and tenant, though void against the Controller. The contention of the learned counsel for the respondent is therefore untenable and must fail.

21. The second limb of the contention of learned counsel for the respondent, viz. That the agreement is opposed to public policy and is, therefore, hit by the provisions of Section 23 of the Contract Act, and consequently it should be held illegal and void cannot be acceded to either.

22. The predominant purpose of the public policy, as is stated earlier, is quite evident from the preamble of the statute itself. It is to prevent unreasonable eviction of tenants to regulate the leasing of buildings and the control of rent. 'Public Policy' has been defined by Winfield as 'a principle of judicial legislation or interpretation founded, on the current needs of the community.' Now, this would show that the interests of whole public must be taken into account but it leads in practice to the paradox that in many cases what seems to be in contemplation is the interest of one section only of the public, and a small section at that. The explanation of the paradox is that the courts must certainly weigh the interests of the whole community as well as the interests of a considerable section of it, such as tenants, for instance, as a class, as in this case. If the decision is in their favour it means no more than that there is nothing in their conduct which is prejudicial to the nation as a whole. Nor is the benefit of the whole community always a more tacit consideration. In the ultimate analysis, the courts may have to strike a balance in express terms between community interests and sectional interests, as has been observed by Mathew J. in Murlidhar's case. There is no lack of judicial authority for the view that the categories or heads of public policy are not closed and that there remains a broad filed within which courts can apply a variable notion of policy as a principle of judicial legislation or interpretation founded on the current needs of the community. See Dennis Lyod, 'Public Policy' (1953) pages 112-113. Public Policy, observed Mathew, J. does not remain static in any given community. It may vary from generation to generation and even in the same generation. Public Policy would be almost useless if it were to remain in fixed moulds for all times.

23. The policy is quite apparent from the various provisions of these two enactments; it positively postulates the welfare and benefit of the tenants. If that were so, it becomes irresistible to conclude that the agreement sought to be entered into between the landlord and tenant, in contravention of Section 3 (3) and Section 3 (5) of the enactments, will not become illegal or void inter se between the parties.

24. From the foregoing, it is clear and we unhesitatingly hold that agreements of lease entered into between the landlord and tenant in contravention of Section 3 (3) of the Hyderabad Rent Control Act or Section 3 (5) of the A. P. Rent Control Act will not be illegal and void inter se between the parties, either on the ground that it is forbidden by law or on the ground that it is opposed to public policy in terms of Section 23 of the Contract Act.

25. In view of our judgment, we hold that the authority in G. Eswaraiah v. Mahendrappa Khani is shaken and is no longer good law by reason of the decision in Murlidhar v. State of U. P. as held by the Division Bench of this Court in Srikanth Neemkar v. G. Yelloji Rao.

26. The reference is accordingly answered.

27. We now remit the case to the Division Bench to decide on merits according to law.

Jeevan Reddy, J.

28. I agree with my learned brother that the authority of G. Eshwariah v. Mahendrappa Khani 1969 (2) APLJ 66 is eroded by the decision of the Supreme court in Murlidhar v. State of U. P. : [1975]1SCR575 and that although there is no express provision in the A. P. Act corresponding to sub-section (3) of Section 3 of the Hyderabad Rent Control Act ( and sub-section (5) of Section 3 of the Andhra Pradesh Act) such a prohibition is implicit in its very scheme. Even otherwise I am of the opinion that the ratio of the decision in Eswaraiah's case cannot be supported in principle and is a negation of the very spirit and scheme of the Rent Control enactments, Mr. N. Rajeswara Rao, the learned Counsel for the respondent specifically agreed with us that the correctness of G. Eswariah's case is open to scrutiny by us, notwithstanding the rather narrow wording of the reference.

29. The relevant provisions of Hyderabad and Andhra Pradesh Acts have been set out in the judgment of Seetharam Reddy, J. and need not be repeated here. Both the acts oblige the landlords to intimate the vacancy as and when it arises. No such obligation is cast on the tenant. The landlord is enjoined not to let out the premises or to occupy it himself without giving such intimation and/or within fifteen days of giving such intimation unless, of course, he receives an intimation from the Controller/Authorised officer within the said fifteen days that the building is not required. The Acts further empower the Controller/Authorised officer to allot the building for any of the recognized purposes, notwithstanding the fact that it has been occupied or leased out by the landlord in violation of the Act, to dispossess the person in occupation of such building and to put the allottee in occupation thereof.

30. The provisions aforesaid are, undoubtedly conceived in public interest. The object of these provisions is to secure accommodation for purpose specified therein-broadly of a public nature. It is for this purpose that an obligation is created on the landlord to intimate every vacancy, and a reasonable period is given to the Controller/Authorised Officer to decide whether to avail of the vacancy or not. For a proper implementation of the scheme, it is provided that the landlord shall not occupy or let out any building without giving such an intimation. It is also provided with the same end that even if any building is so occupied or let out, the same shall be ignored and allotment made. Now, how is the above scheme served or effectuated by ignoring the validity of tenancy as between the landlord and the tenant. Where the building is let out by the landlord without giving the intimation or without waiting for the fifteen days? It should and can certainly be ignored by the Controller/Authorised officers, but why should it be as between the landlord and tenant? Indeed, such a course tends to defeat the very object and purpose of the enactment besides enabling the landlord to take advantage of his own wrong. By saying that in such a case the relationship of landlord and tenant does not arise or cannot be recognized in law, the tenant would be deprived of the several beneficial provisions of the Act, conceived in his interest. He would have neither security of tenure, nor benefit of fair rent. If he does not please the landlord he can be evicted at any time. The only temporary inconvenience of the landlord if the tenant does not vacate when demanded is that he would be entitled to recover from the tenant as part of the costs of the suit (sic). In such a suit, the tenant would be totally defenseless and may as well be liable for damages for use and occupation. Thus, the ratio of the decision in G. Eswaraiah ultimately works to the advantage of the landlord though it is he who is guilty of violation of law. The real sufferer would be the tenant who has in no way violated the law. As already stated, the law casts the obligation to give intimation on the landlord alone, and it is the landlord who is prohibited from occupying or leasing out the building No. obligation is created on the tenant to make an enquiry before entering into the lease agreement, whether the landlord has complied with the provisions of Section 3.

31. Now, on the other hand, by treating the lease as valid as between the landlord and tenant, in such cases, the object and scheme of Section 3 is in no way defeated or obstructed. It does not prevent the Controller/Authorised Officer from allotting the building for the purposes specified by the Act or from giving effect to such an order by evicting the person in occupation. Agreed that the landlord has not given the intimation or has otherwise violated the law, but how is that going to be remedied or cured by ignoring the validity of the tenancy as between the landlord and tenant? The landlord can always be dealt with and punished under Section 33 of the Hyderabad Act or Section 29 of the Andhra Pradesh Act, as the case may be, to ensure future compliance on his part and also to serve as an example and as a deterrent to others.

32. Mr. N. Rajeswara Rao contends and that is the main basis of the judgment in G. Eswaraiah that a tenancy created in contravention of Section 3 is hit by Section 23 of the Contract Act and hence no rights or obligations arise or attach thereunder. Section 23 reads as follows:

'23. The consideration or object of an agreement is lawful, unless it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent or involves or implies injury to the person or property of another; or the court regards it as immoral or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful, is void.'

33. The agreement of tenancy in this case is not one which 'is of such a nature that, if permitted, it would defeat the provisions of any law'. I have already dealt with this aspect. There remains only to see whether the agreement is 'forbidden by law' and /or whether it is opposed to public policy.

34. Wherever a contention is raised that a contract is void on account of its being forbidden by law, the court has to examine the object behind the statute, the mischief sought to be remedied by it, the position of the parties, and other attendant circumstances with a view to delineate the scope and sweep of the prohibition. There are no hard and fast rules of universal application. A glance at the several cases decided under Section 23 bears out this observation. As stated by a Division Bench of the Madras High Court in B. N. Dorairaj v. N.G.Rajan : AIR1977Mad243 :

'Where an unlawful agreement is brought before the court, it would be necessary to find out the exact scope of the statutory prohibition. It is a matter of construction of the particular statute in each case.'

35. Now the object of Section 3 (3) of the Hyderabad Act or Section 3 (5) of the Andhra Pradesh Act is not to prohibit the agreements of tenancy as such, or altogether. The prohibition is conceived in the interests of and is intended to facilitate the procurement of buildings for public purposes. It is only a means to the end. The prohibition is not an independent or absolute one, like say Section 7 of the Andhra Pradesh Act prohibiting any agreement or stipulation to receive any premium or other like sum in addition to the fair rent. The court should, therefore, give effect to it within those limits and for achieving its intended purpose, and not extend its sweep beyond its conceptual confines. Within its field, it should undoubtedly be given full play, but its field of operation should be unmistakably delineated. Viewed in this light, there is no warrant for holding that the contract of tenancy is illegal as between the landlord and tenant. Vis--vis the Controller/Authorised Officer, it undoubtedly is.

36. The above reasoning holds good even while examining whether the contract is opposed to public policy. In other words, the Court has to see the public policy sought to be served or furthered by the provisions in question and see whether by giving effect to the contract the public policy would suffer in any manner. While the public policy demands that the contract should be ignored vis--vis the Controller/Authorised Officer, the same public policy under lying the enactments as such demands that it should not be ignored as between the landlord and tenant.

37. For the above reasons, I am of the opinion that G. Eswariah's case does not lay down the correct law and must accordingly be overruled.

38. Answered accordingly.


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