J.M. Seth, J.
1. This appeal is filed by the appellant who has been convicted of an offence punishable under Section 18(1) of the Bombay Rents, Hotel and Lodging House Rates Control Act. 1947 (which will be hereinafter referred to as 'the Act'), and sentenced to suffer one month's rigorous imprisonment and to pay a fine of Rs. 400/- and in de fault of payment of line to undergo one-month's further vigorous imprisonment, by the learned City Magistrate, 4th Court, Ahmedabad, in Summary Case No. 1658 of 1970.
2. The prosecution case is that Manubhai Dharamsinhbhai. the complainant, is a tenant of Laxmanbhai Hirajibhai (appellant) from 1st January, 1969, ' and a room and a Verandah were given to him on lease. The appellant took Rs. 300/- from him (complainant-tenant) as a landlord, by way of deposit. That the rent fixed for the premises was Rs. 25/- per month. As the aforesaid offence was committed by the appellant, he lodged complaint in the Court with regard to that offence on 17th December, 1970.
3. The defence version was that he had not taken any such amount by way of deposit in respect of the grant of lease. He had taken a loan of Rupees 300/- from the complainant for constructing his house.
4. The learned City Magistrate, on consideration of the prosecution evidence, came to the conclusion that such lease was granted to the complainant by the appellant-landlord on 1st January, 1969, and in respect of such grant of lease, he had taken a sum of Rupees 300/- by way of deposit from the complainant. Defence version that the appellant had taken building materials, etc. from several merchants much after 1st January, 1969, would not throw any doubt on the evidence led by the complainant, as regards the grant of lease of a room and a Verandah on 1st. January, 1969, as such building materials can be used by the appellant in respect of construction of his other properties. The learned City Magistrate, therefore, found that the offence in question was satisfactorily established against the appellant. It was further observed by him that it was true that receipt. Ex. 4, given by the appellant to the complainant in respect of this amount of Rupees 300/- did not mention that this amount, was paid by the complainant to the appellant by way of deposit. But it is also significant to note that it was not mentioned therein that this amount was given by way of loan, as stated by the appellant. Non-mention of the fact of a loan or a deposit, therefore, did not make any difference.
5. Mr. Shethna, appearing for the appellant, has vehemently urged that the prosecution evidence itself reveals that at the relevant date there was no grant of lease and there could not be any grant of lease, as the building in question was not in existence on 1st January, 1969 or near about that date. Rooms were being Jet to different tenants as and. when they were constructed. Defence has led evidence to show that the rooms in question were not constructed on or about 1st January, 1969. In the receipt, Ex. 4, itself there was no mention that this amount of Rupees 300/- was paid by the complainant to the appellant in consideration of grant of lease of a room and a Verandah by the appellant to the complainant. For the offence in question, it was one of the important ingredients and that important ingredient was not established in the present case. He has also further urged that in case of an executory agreement, such a payment by way of loan would not come within the mischief of Section 18(1) of the Act. In support of that argument of his, he has relied upon certain observations made by the Supreme Court in the nature of obiter dicta in Tolaram Relumal v. The State of Bombay 56 Bom LR 1206 : 1954 Cri U 1333 (SC), Mr. Shethna has submitted that examining the case from any point of view, it could not be said that the offence in question was satisfactorily established against the appellant.
6. Mr. Chhaya, learned Assistant Government Pleader, has urged that even if on consideration of the evidence led in the instant case and certain admissions made by the prosecution witnesses, this Court does not accept the finding of the learned City Magistrate, and comes to the conclusion that this amount of Rs. 300/- was taken by the appellant from the complainant by way of a loan, it is the appellant's own version that this amount was taken by him from the complainant for the construction of the house in question. It was not only in respect of the complainant alone that he had taken such a loan. Prosecution has examined several witnesses from whom also such amounts have been taken. Tt is also borne out by the record that as and when construction was completed, rooms came to be leased out to those persons from whom such payments had been received by the appellant. It could, therefore, be said that even though initially there was an executory agreement and it could be said with force that there was only at the most an agreement to lease; the lease having come into existence ultimately, nexus was completely established. It was inextricable. According to Mr. Chhaya. offence becomes complete as soon as the agreement to lease merges into a lease and there is actual grant of lease. The obvious reason is, Mr. Chhaya submitted, that it establishes the nexus between the receipt of money and grant of lease. Mr. Chhaya has submitted, that it is true that the ratio of decision of the Supreme Court is that an executory agreement of granting a lease cannot be the subject-matter of an offence, (1) if that executory agreement remains of the same nature on account of compulsion or supervening circumstances beyond the control between the parties, i.e., the landlord and tenant; and (2) the connotation given to the words in respect of the decision of the Full Bench of the Bombay High Court, reported in 55 Bom LR 366 : 1953 Cri LJ 1445 (FB), which was the subject-matter of appeal before the Supreme Court, in 56 Bom LR 1206 : 1954 Cri LJ 1333 (SC) (supra) was too wide and erroneous. It could not cover a case where the lease cannot come into existence and never come into existence. Mr. Chhaya has submitted that the Supreme Court reversed the decision of the Full Bench of the Bombay High Court, as it was a case where the lease did not come into existence and could not come into existence on account of the requisition of the premises in question under the Land Requisition Act.
7. Before I advert to the legal contentions raised at the Bar, I first propose to refer to the evidence led by the prosecution as well as the defence to find out whether the prosecution case is established at all.
8. It is significant to note that the complainant has, in his complaint, Ex. 1, filed in the Court, dated 17th December, 1970, in terms stated that the appellant has given him one room and osari of the Chawl building of his on lease on a monthly rental of Rs. 25/-, and he is recovering that rent from him. In para 2 of his complaint, he states that at the time of grant of lease of the aforesaid room and Osari, he (appellant) has taken a sum of Rs. 300/- from him by way of deposit and in respect of it, he had passed a receipt, dated 1st January, 1969. Taking the advantage of his necessity to take property on lease, the appellant has taken the aforesaid sum of Rs. 300/- in consideration of grant of lease and thereby he has committed the offence in question. It is thus evident that the case pleaded by the complainant was that at the time of grant of lease, in consideration of grant of lease, the appellant has taken a sum of Rs. 300/- from him and that is why he has committed the offence in question. The appellant was obliged to meet with this case of the complainant.
9. Complainant has examined himself at Ex. 3, and has produced receipt No. 32 at Ex. 4. One Popatlal who has also made similar payment, has been examined at Ex. 5. Another such person, namely, Popat Jiva, has been examined at Ex. 6, and one Madhu Bhawan has been examined at Ex. 7. and one Mavjibhai has been examined at Ex. 9.
10. Complainant Manubhai Dharamsinhbhai Ex. 3, has not even in examination-in-Chief stated that he had paid Rs. 300/-evidenced by the receipt, Ex. 4, in consideration of grant of lease. He has merely stated that he is a tenant from 1st January, 1969. Rent is paid at Rs. 25/- per month. From May, 1970, he is depositing the rent in the Civil Court. On 1st January, 1969, the appellant took Rs, 300/- as deposit from him and passed the receipt, Ex. 4. In cross-examination he states that in the receipt, it is not mentioned that payment is made by way of deposit and he had not given any notice to the appellant though he had not written the word 'deposit' in the receipt, Ex. 4. According to his evidence, he had gone to stay in the room in question on 1st January, 1969, and it was not true that the house was not ready on 1st January, 1969. He gave rent upto February, 1970 to the appellant. He applied for standard rent in the Civil Court. That application is pending, ft is an admitted position that after the dispute arose between the parties and there was standard rent application pending in the Civil Court, this complaint has come to be lodged after a period of about two years. Fie has further stated that he does not recollect the actual rent paid by him, as their leader was depositing the money in the Court, He states that he has got rent receipts from January, 1969, and he will produce them, in spite of such a categorical statement made by him, he has not chosen to produce any of such. rent receipts to show that really the house in question was ready and was leased to him on 1st. January, 1969, as deposed to, by him. He states that it was not true that he paid Rs. 300/- as the appellant had to build rooms on the open land. It was not true that he was not a tenant of the appellant when he gave Rs. 300/-, and that he was a tenant only from October, 1969. In the receipt, Ex. 4, there is no mention made that this amount of Rs. 300/- was paid by way of a loan in consideration of grant of lease, or even on agreement to lease. It only recites the fact of receipt of Rs. 300/- from the complainant by the appellant on 1st January, 1969.
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19. On consideration of the entire evidence led, 1 am of the opinion that the story given out by the complainant and his witnesses that the rooms in question were ready and they were given on lease to them on 1st January, 1969, and possession of them was given to them on that day and in consideration of grant of lease, Rs. 300/- were taken from the complainant by way of deposit, is very much doubtful. In my opinion, none of them has been able to produce any rent receipt for the period prior to September or October, 1969. or at any rate, near about the date 1st January, 1969, as the rooms must not have been ready on that day and they must have been ready later on, as the evidence led by the defence indicates. As stated earlier, in the receipt, Ex. 4, there is no mention that this amount of Rs. 300/-vvas given by way of deposit by the complainant to the appellant. There is no mention whatsoever that this amount was given in consideration of grant of lease. As said earlier, there was no specific mention even, that it was given in consideration of an agreement to lease.
20. If we now refer to the relevant provisions of Section 18(1) of the Act, there is no escape from the conclusion that the proof of this ingredient is necessary to constitute the offence in question. Section 18(1) of the Act reads:
18 (1) If any landlord either himself ... or if any person acting or purporting to act on behalf of the landlord receives any fine, premium or other like sum or deposit or any consideration other than the standard rent or the permitted increases, in respect of the grant, renewal or continuance of a lease of any premises, or for giving his consent to the transfer of a lease by sublease or otherwise such landlord or person shall be convicted in the manner indicated therein.
A plain reading of that Sub-Section clearly indicates that the receipt of payments specified therein must be in respect of the grant, renewal or continuance of a lease of any premises, or for giving his consent to the transfer of a lease by sub-lease or otherwise. In the instant case, even the complainant has, in his evidence, not stated that he had given this amount of Rs. 300/- in respect of any such consideration. At the cost of repetition I may state what he has stated in examination-in-chief in that behalf: 'On 1st January, 1969, the accused took Rupees 300/- deposit from me.' In cross-examination, in terms he has denied the suggestion made by the defence that he paid Rs. 300/-as the accused had to build rooms on the open land. It is thus evident that the evidence in respect of this most important ingredient to establish the offence in question is lacking in the instant case. It is true that in the complaint, complainant has stated about it. The complaint, Ex. 1, is not substantive evidence. It can only be used as corroborative piece of evidence. Complainant has not stated about it in his evidence at the trial.
21. On this ground alone, the order of conviction passed against the appellant cannot be sustained in law. Apart from it, I find that in the receipt itself, there is nothing to indicate that this amount of Rupees 300/- was given by way of deposit at the time of grant of lease. There is no mention of the word 'deposit' in that receipt. There is no mention that that amount was given in consideration of grant of lease or in consideration of agreement to lease a room as and when constructed. On consideration of the evidence further, I have come to the conclusion that this story of giving this amount by way of deposit is an afterthought. The story given out by the defence that it was taken by way of loan for construction of these rooms from the prospective tenants, appears to me to be a truthful version.
22. The next interesting question that arises for consideration is, what is the ratio of the decision of the Supreme Court in 56 Bom LR 1206 : 1954 Cri LJ 1333 (Supra). Before I advert to that point, it is necessary to refer to Sub-Section (3) of Section 18 of the Act, as that Sub-Section has also been relied upon by Mr. Chhaya in respect of his argument. It reads:
(3) Nothing in this section shall apply to any payment made under any agreement entered into before the specified date or to any payment made by any person to a landlord by way of a loan, for the purpose of financing the erection of the whole or part of a residential building or a residential section of a building on the land held by him as an owner, a lessee or in any other capacity, entitling him to build on such land, under an agreement which shall be in writing and shall, notwithstanding anything contained in the Indian Registration Act, 1908, be registered. Such agreement shall inter alia include the following conditions, namely ....
Sub-Section (4) of it reads:
(4) If any landlord who has received a loan under an agreement in accordance with the provisions of Sub-Section (3), contravenes. without any reasonable excuse any of the conditions specified in the said Sub-Section (3). such landlord shall, on conviction be punished in the manner indicated therein.
It, therefore, means that if there is any contravention of the provisions of Sub-Section (3) of Section 18 of the Act, an offence is constituted and punishment is provided by this Sub-Section (4). It is also necessary to refer to Explanation I in this context. it reads:
For the purpose of Sub-Section (1):
(a) except as provided in Sub-Section (3) receipt of rent in advance for more than three months in respect of premises let for the purpose of residence, or(b) xx xx xx
This explanation also indicates that the emphasis is on the phrase in respect of the premises let. The wording of that Explanation also has to be borne in mind while understanding the provisions of Section 18(1) of the Act.
23. In 56 Bom LR 1206 : 1954 Cri LJ 1333 (supra) the Supreme Court has considered the opinion expressed in that case by the Full Bench of the Bombay High Court in regard to the interpretation of this Sub-Section (1) of Section 18 of the Act. In that case, the matter was first heard in the Bombay High Court by a Division Bench of the Bombay High Court, consisting of Gajendragadkar and Chainani, JJ., on 8th October, 1952. In that case, the appellants were charged under Section 18(1) of the Act in question for receiving from Shanker Das Gupta through Mathuradas on 23rd November, 1950, a sum of Rs. 2, 400/-, as premium or Pugree in respect of grant of lease of Block No. 15 in a building under construction. They were found guilty of the said offence and sentenced. It was contended before the Division Bench inter alia, that even if it were held that the appellants had accepted the sum of Rs. 2, 400/-, they could not be said to have committed an offence under Section 18(1) of the Act inasmuch as the amount could not in law be held to be a premium in respect of the grant of a lease. On that point, the learned Judges said as follows:. In the present case the work (regarding the building) which still remained to be done was so important that both the parties agreed that the complainant should get into possession after the said work was completed. In such a case unless the building is completed the tenant has no right which can be enforced in a Court of law. If the landlord finds it impossible for any reason to complete the building, what is the right which an intending tenant can enforce against him Therefore, in our opinion, there is considerable force in the contention urged by Mr. Lulla that in the present case even if it be held that the accused had received Rs. 2, 400/-in the circumstances to which I have already referred, that would not bring them within the mischief of Section 18(1), because there has been no grant of a lease at all. There is only an agreement that the landlord would lease to the complainant a particular flat after the building has been fully and properly completed. It does appear that Section 18(1) does not bring within its mischief executory agreements of this kind.
But as a contrary view had been expressed in Mahadeo Shridhar Chandankar v. The State Criminal Revn. Appln. No. 1178 of 1949, decided by Bavdekarand Chainani, .JJ., on January 25. 1950 (Bom), that question came to be referred to the Full Bench in these terms:
If as owners of an incomplete building the appellants accepted Rs. 2, 400/- from the complainant in respect of an agreement between them that appellants were bound to give and the complainant was entitled to take possession of Flat No. 15 in the said building as soon as the said building was completed on the agreed rent of Rs. 75/- per month, did the acceptance of Rs. 2, 400/- by the appellants fall within the mischief of Section 18 of Bombay Act No. I.VII or 1947?
It is significant to note that at page 1207, the Supreme Court has in terms stated;
This question, if answered in the negative by the Full Bench, would have concluded the case.
But the Full Bench answered the question referred, in the affirmative. The Full Bench expressed its opinion in these terms:-. what the legislature has penalised is the receipt of a premium by the landlord and the legislature has also required a nexus between the receipt by the landlord of a premium and the grant of a lease of any premises. Therefore, a receipt alone by a landlord would not constitute an offence, but that receipt must be connected with the grant of the lease of any premises. Unless that connection is established, no offence would be committed. The contention of Mr. Lulla on behalf of the accused is that the receipt of the premium must be simultaneous with the grant of the lease. If the lease comes into existence at a future date, then the receipt of a premium according to him is not 'in respect of the grant of a lease. Therefore, the kev words according to us in This section are 'in respect of. It is relevant to observe that the legislature has advisedly not used the expression 'for' or 'in consideration of or 'as a condition of the grant of a lease. It has used an expression which has the widest connotation and the expression used is 'in respect of. In respect of means in its plain meaning 'connected with or attributable to and therefore it is not necessary that there must be a simultaneous receipt by the landlord with the grant of the lease. So long a-some connection is established between the grant of the lease and the receipt of the premium by the landlord, the provisions of 'he section would be .satisfied. In our opinion-it is impossible to contend that in the present case there was no connection whatever between the landlord receiving the premium and his granting the lease of the premises. It is true that when he received the premium he did not grant a lease. It is true that all that he did when he received the premium was to enter into a contract with his tenant to grant a lease in future. But the object of the landlord in receiving the premium and the object of the tenant in paying the premium was undoubtedly on the part of the landlord the letting of the premises and on the part of the tenant the securing of the premises. Therefore, the object of both the landlord and the tenant was the grant of the lease of the premises concerned and that object was achieved partly and to start with by an oral agreement being arrived at between the landlord and the tenant with regard to the granting of this lease, the lease being completed when delivery of possession of the premises would be given. Therefore in our opinion, on the facts of this case it is not possible to contend that the payment or the premium received by the landlord was unconnected with the grant of a lease of any premises. The fact that no grant was made at the time when the premium was received, the fact that there was merely an agreement to grant a lease, the fact that the lease would come into existence only at a future date, are irrelevant facts so long as the connection between the receiving of the premium and the granting of the lease is established.
24. We have now to consider whether this ratio laid down by the Full Bench of the Bomaby High Court has been approved by the Supreme Court in this case of Tolaram, 56 Bom LR 1206 : 1954 Cri LJ 1333 or not. It is significant to note that after referring to the wording of Sub-Section (1) of Section 18 of the Act and formulating the question whether the answer given by the Full Bench to the question referred to, is right, and whether the receipt of a sum of money by a person who enters into an executory contract to grant a lease of a building under construction falls within the mischief of Section 18(1) of the Act, the Supreme Court has observed at page 1203:. Under the section the money must be received by the landlord in respect of the grant of a lease. The section refers to the 'grant, renewal or continuance of a lease'. Prima facie, it would not cover an executory agreement to grant a lease. The words 'renewal or continuance of a lease' clearly suggest that there must be a renewal or continuance of a subsisting lease. In the context, grant of tenancy means the grant of new or initial tenancy; renewal of tenancy means the grant of tenancy after its termination; and continuance seems to contemplate continuance of a tenancy which is existing. Whether or not an executory agreement for grant of a lease comes within the ambit of the section by reason of the use of the words 'in respect of would be examined hereinafter.
It is no doubt true that the Supreme Court has pointed out that in fact, in that case, the lease never came into existence. In view of the provisions contained in the Bombay Land Requisition Act, 1948, as amended, the appellants in that case could not let out the building even after its completion unless on a proper notice being given the Controller of Accommodation did not exercise his powers under that Act.
25. At page 1209, it is observed:
The question that needs our determination in such a situation is whether Section 18(1) makes punishable receipt of money at a moment of time when the lease had not come into existence, and when there was a possibility that the contemplated lease might never come into existence. It may be here observed that the provisions of Section 18(1) are penal in nature, and it is a well settled rule of construction of penal statutes that if two possible and reasonable constructions can be put upon a penal provision, the Court must lean towards that construction which exempts the subject from penalty rather than the one which imposes penalty.
It is farther observed:
The High Court took the view that without stretching the language of Section 18(1) beyond its fair and ordinary meaning, the very comprehensive expression 'in respect of used by the legislature could lead to only one conclusion, that the legislature wanted the penal consequences of Section 18(1) to apply to any nexus between the receipt by a landlord of a premium and the grant of the lease.
It is significant to note at this stage that the aforesaid view expressed by the Full Bench has been in terms stated by the Supreme Court to be an incorrect view, observing:. In our judgment, the High Court laid undue emphasis on the words 'in respect of in the context of the section. Giving the words 'in respect of their widest meaning, viz., 'relating to' or 'with reference to' it is plain that this relationship must be predicated of the grant, renewal or continuance of a lease, and unless a lease comes into existence simultaneously or near about the time that the money is received, it cannot be said that the receipt was 'in respect of the grant of a lease. The relationship of landlord and tenant does not come into existence till a lease comes into existence; in other words, there is no relationship of landlord and tenant until there is a demise of the property which is capable of being taken possession of. If the legislature intended to make receipts of money on executory agreements punishable, the section would have read as follows: 'receives any fine, premium or other like sum or deposit or any consideration other than the standard rent in respect of the lease or an agreement of lease of the premises, such landlord or person shall be punished' in the manner indicated in the section.
In my opinion, these observations made by the Supreme Court undoubtedly indicate that the view taken by the Full Bench of the Bombay High Court was not approved. Very good reasons have been assigned for indicating why the aforesaid view taken by the Full Bench of the Bombay High Court cannot be approved. Sine qua non is that this consideration must be in respect of the grant, renewal or continuance of the lease. It must be indicated that the lease is to come into existence simultaneously or near about the time when the money is received. If that is not so, it cannot be said that the receipt was in respect of the grant of the lease. It is further observed therein in terms:. The section does not make the intention punishable; it makes an act punishable which act is related to the existence of a lease. It does not make receipt of money on an executory contract punishable; on the other hand it only makes receipt of money on the grant, renewal or continuance of the lease of any premises punishable and unless the lease comes into existence, no offence can be said to have been committed by the person receiving the money. It is difficult to hold that any relationship of landlord and tenant comes into existence on the execution of an agreement executory in nature or that the expression 'premium' can be appositely used in connection with the receipt of money on the occasion of the execution of such an agreement.
It is no doubt, further observed by the Supreme Court:
It may well be that if a lease actually comes into existence, then any receipt of money which has a nexus with that lease may fall within the mischief of Section 18(1), but it is unnecessary to express any final opinion on the question as in the present case admittedly no lease ever came into existence and the relationship of the landlord and tenant was never created between the parties.
Mr. Chhaya has laid considerable emphasis on these observations made by the Supreme Court. In my opinion, these observations do not indicate that the Supreme Court has decided that if the lease actually comes into existence, then any receipt of money, which has a nexus with that lease would undoubtedly fall within the mischief of Section 18(1) of the Act. On the contrary, this question has not been fully considered by the Supreme Court and no final opinion has been expressed, as in that case, the lease never came into existence in view of the requisition of those premises under the provisions of the Land Requisition Act, There are significant observations made thereafter, which can be referred to, with advantage at this stage.
On its plain, natural grammatic meaning, the language of the section does not warrant the construction placed upon it by the Full Bench merely by laying emphasis on the words in respect of. In our opinion the language of the section 'in respect of the grant, renewal or continuance of a lease' envisages the existence of a lease and the payment of an amount in respect of that lease or with reference to that lease. Without the existence of a lease there can be no reference to it. If the legislature intended to punish persons receiving Pugree on merely executory contracts it should have made its intention clear by use of clear and unambiguous language.
For that interpretation of that Sub-Section placed by the Supreme Court, their Lordships have derived support from the fact that it occurs in Part II of the Act, and that part applies to premises let for residence, education, business, trade or storage. Similarly, they derived support from the definition of the words 'landlord' and 'tenant' given in the relevant sections of the Act. They have also considered the provisions of Section 18(3) of the Act, as those provisions were relied upon by Mr. Mehta for the State. In that connection, it is observed at page 1210:
It was suggested that but for this exception the execatory agreement would be included within the mischief of Section 18(1) and that unless such agreements were within the mischief of the section there would have been no point in exempting them from its provisions. In our view, this contention is not sound.
For that view, they have given two-fold reasons. One of them is, 'the legislature by enacting Clause (3) made it clear that agreements of the nature indicated in the Sub-Section were never intended to be included therein. In our opinion, the language of that section is not of much assistance in construing the main provisions of Section 18(1).'
26. I am in respectful agreement with that opinion expressed. The language of Section 18(3) of the Act, therefore, cannot be of great assistance in interpreting the main provisions of Section 18(1) of the Act, which states as to when such an offence can be said to be constituted. As stated by me earlier, Explanation I also points to the same conclusion that such payment must be in consideration of the grant, renewal or continuance of lease of any premises. In the instant case, as said by me earlier, there is nothing to indicate that the amount of Rs. 300/- was given by the complainant to the appellant in consideration of any grant of lease or continuance of lease. The offence in question cannot be said to have been established against the appellant. Taking any view of the matter, therefore, in the circumstances of the case, the appellant cannot be said to have committed the offence in question. The appeal, therefore, succeeds.
27. The appeal is allowed and the order of conviction and sentence passed against the appellant is set aside. He is ac-quitted of the offence he was charged with. Fine, if recovered from him, is ordered to be refunded to him. His bail-bond is ordered to be cancelled.