# MYLAPORE HINDU PERMANENT FUND LTD. MADRAS v. K. S. SUBRAMANIA IYER

- **Citation:** [1971] 1 S.C.R. 546
- **Court:** Supreme Court of India
- **Decided:** 1970-05-06
- **Bench:** S. M. SiKRI, V. Bhargava, C. A. Vaidialingam
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mylapore-hindu-permanent-fund-ltd-madras-v-k-s-subramania-iyer-5096
- **Pages:** 18

## Headnote

The Madras City Tenants Protection Act (Mad. 3 of 1922) as amended by Amer.ding Act 19 of 1955, ss. 3, 9 and 12--Scope of.
Two kinds of ·rights have been conferred on lessees under tenancies
falling within the scope of the Madras City Tenants' Protection Act, 1921.
A
B
as amended by the Amendment Act of 1955.
The first is a right to be
paid compensation under s. 3 for buildings erected by the tenants on the
leased land before they are evicted,
and the second, a right under s. 9
C
to the tenant et1titJed to contpensation under s. 3, to exercise the option
to require the landlord to sell to him the J?nd covered by the lease for a
price to be computed in accordance with that section. Under s. 12, nothing in any contract made by the tenant
shall take away or limit his
right,\' under the Act, provided that, nothing herein contained shall affect
. any slipulal'ions nzcule by the tenant, in writing registered, a.i; to the erection of buildings in relation to buildings erected after the date o'f the contract. The first part of s. 12 protects a tenant against the deprivation or
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limitation of his ·rights under the Act, and the rights conferred by
the
Act do not directly relate to covenants relating to erection of buildings.
The respondent took the appellant's
vacant ]and
on lease for ten
years.
The registered lease deed provided that the lessee could put up a
building whose cost should not exceed Rs. 10,000, that the plan of the
:proposed building was to be approved qy the directors of the appellant.
that the construction should be in accmdance with the approved plan, that
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the Jessee. should surrender possession with the constructi0n at the end of
the lease period and that the lessor would pay the valLiation cf the con~~
truction then current, or Rs. 5,000 whichever is Jess.
The respondent put
up a building.
On the question,
whether on the expiry of the lease
period, the respondent was entitled to the rights under ss. 3 and 9, or the
stipulations in the tease deed \\'ere covered by the proviso in s. 12.
HELD: In Vajrapani Naidu v. New Theatre Carnatic Talkies,
[1964]
F
·6 S.C.R. 1015, it was held that the object of the Act was to protect
tenants against any contractual engagements entered into by them expre~.s~
Jy or by implication depriving th~mselves wholly or partially of the rights
conferred by the statute; that the only class of cases in which the protection becomes ineffective is when the tenant had made a stipulation as per
the proviso in s. 12; that a stipulation to vacate and deliver possession of
the land after demolishing the building constructed by the tenant, really
amounted to the tenant giving up his right under ~. 9, and that the stipula- , G
tion was not one as to erection of building, and hence, would not come
under the proviso in s. 12.
Stipulations regarding restriotions about size.
nature of the building constructed the building materials to be used therein,
and the ourpose 'for which the building is to be utilized, are given in the
t!~isioo as some illust.rative exan1~les of stipulations covered by the pro~
viso in s. 12. [558 F-H; 559 A-Bl
( 1) In the present case although the stipulations do not expressly refer
to the size and nature of the building and the building materials to be
used thP'l'e;n, they are all implicit in the stipulations which fix the upper
limit of th• cost of the building to be constructed and require the approval
of the »lo~ of the building by the directors of the appellant. Therefore,
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MYLAPORE FUND LTD. v. K. s. IYER (Vaidialingam, !.)
547
the stipulations are as to the erection of the buildings and attract the proviso in s. 12. [560 A-CJ
(2) In V. S. Mudaliar v. N. A. Raghava Chary. Ll969] 2 S.C.R. 158.
it was held that a stipulation that the tenant shall not erect any permanent
structures so as to entitle hin1 to claim their value was a stipulation under
the proviso in s. 12 as to the ~ection of buildings and disentitled the
tenant from claiming compensation under s. 3, i

## Text

_Characters 0–39,636 of 51,278. This is a partial read: ask again with offset=39636 for what follows._

546
MYLAPORE HINDU PERMANENT FUND LTD. MADRAS
v.
K. S. SUBRAMANIA IYER
May 6, 1970
[S. M. SiKRI, V. BHARGAVA AND C. A. VAIDIALINGAM, JJ.]
The Madras City Tenants Protection Act (Mad. 3 of 1922) as amended by Amer.ding Act 19 of 1955, ss. 3, 9 and 12--Scope of.
Two kinds of ·rights have been conferred on lessees under tenancies
falling within the scope of the Madras City Tenants' Protection Act, 1921.
A
B
as amended by the Amendment Act of 1955.
The first is a right to be
paid compensation under s. 3 for buildings erected by the tenants on the
leased land before they are evicted,
and the second, a right under s. 9
C
to the tenant et1titJed to contpensation under s. 3, to exercise the option
to require the landlord to sell to him the J?nd covered by the lease for a
price to be computed in accordance with that section. Under s. 12, nothing in any contract made by the tenant
shall take away or limit his
right,\' under the Act, provided that, nothing herein contained shall affect
. any slipulal'ions nzcule by the tenant, in writing registered, a.i; to the erection of buildings in relation to buildings erected after the date o'f the contract. The first part of s. 12 protects a tenant against the deprivation or
D
limitation of his ·rights under the Act, and the rights conferred by
the
Act do not directly relate to covenants relating to erection of buildings.
The respondent took the appellant's
vacant ]and
on lease for ten
years.
The registered lease deed provided that the lessee could put up a
building whose cost should not exceed Rs. 10,000, that the plan of the
:proposed building was to be approved qy the directors of the appellant.
that the construction should be in accmdance with the approved plan, that
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the Jessee. should surrender possession with the constructi0n at the end of
the lease period and that the lessor would pay the valLiation cf the con~~
truction then current, or Rs. 5,000 whichever is Jess.
The respondent put
up a building.
On the question,
whether on the expiry of the lease
period, the respondent was entitled to the rights under ss. 3 and 9, or the
stipulations in the tease deed \\'ere covered by the proviso in s. 12.
HELD: In Vajrapani Naidu v. New Theatre Carnatic Talkies,
[1964]
F
·6 S.C.R. 1015, it was held that the object of the Act was to protect
tenants against any contractual engagements entered into by them expre~.s~
Jy or by implication depriving th~mselves wholly or partially of the rights
conferred by the statute; that the only class of cases in which the protection becomes ineffective is when the tenant had made a stipulation as per
the proviso in s. 12; that a stipulation to vacate and deliver possession of
the land after demolishing the building constructed by the tenant, really
amounted to the tenant giving up his right under ~. 9, and that the stipula- , G
tion was not one as to erection of building, and hence, would not come
under the proviso in s. 12.
Stipulations regarding restriotions about size.
nature of the building constructed the building materials to be used therein,
and the ourpose 'for which the building is to be utilized, are given in the
t!~isioo as some illust.rative exan1~les of stipulations covered by the pro~
viso in s. 12. [558 F-H; 559 A-Bl
( 1) In the present case although the stipulations do not expressly refer
to the size and nature of the building and the building materials to be
used thP'l'e;n, they are all implicit in the stipulations which fix the upper
limit of th• cost of the building to be constructed and require the approval
of the »lo~ of the building by the directors of the appellant. Therefore,
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MYLAPORE FUND LTD. v. K. s. IYER (Vaidialingam, !.)
547
the stipulations are as to the erection of the buildings and attract the proviso in s. 12. [560 A-CJ
(2) In V. S. Mudaliar v. N. A. Raghava Chary. Ll969] 2 S.C.R. 158.
it was held that a stipulation that the tenant shall not erect any permanent
structures so as to entitle hin1 to claim their value was a stipulation under
the proviso in s. 12 as to the ~ection of buildings and disentitled the
tenant from claiming compensation under s. 3, in respect of 'buildings put
up by him in contravention of the stipulation. Therefore, the >ripulation
in the present case under which the respondent agreed to Jin1it 1hi: quantum of compensation payable in respect of the building con,tructed by
him was·also a stipulation as to the erection of buildings attracting the
proviso in s. 12. [561 G-H; 562 Al
R. V. Naidu v. Naraindas, [19661 1 S.C.R. llO, referred to.
( 3) Since the stipulation prevails
and overrides
the tenant's rights
under s. 3, he was not entitled to compensation under that section, and
therefore, could not claim the benefit under s. 9. [562 A-Bl
CtVIL APPELLATE Jua1sOicT10N : Civil Appeal' No. 596 of
1967.
Appeal from the judgment and decree dated December l, 1964
of the Madras High Court in Letters Patent Appeal No. 32 of
1963.
M. Natesan and R. Gopalakrishnan, for the appellant.
S. C. Manchanda and M. S. Narasimhan, for the respondent.
The Judgment of the Court was delivered by
Vaidialingarn, J. The short question
that aries for
consideration in this appeal, by certificate, is whether a tenn in a
registered lease deed, in and by which the lessee of a vacant piece
of land, agrees to surrender, on termination of the lease, not
only the land but also the super-structurec_put up by him, for the
price agreed to between the parties and provided for in the lease,
is "a stipulation made by the tenant in writing registered as to the
erection of buildings" so as to attract, in favour of the landlord,
the proviso to s.12 of the Madras City Tenants' Protection Act,
1921 (Madras Act III of 1922) as ~mended by the Madras City
Tenants' Protectkm (Amendment) Act, 1955 (Act XIX
of
1955 )-· hereinafter called the Act.
In this appeal we are not
cqncemed with the later amendments made to the Act.
The appellant was the owner of a vacant site bearing No. 417.
Ponnambala Vathiar Street, Mytapore, Madras-4. The respondent
made a request to the appellant, by his letter Exhibit A-2, dated
January 30, 1947 to lease in his favour the said va :ant site for a
period of ten years on a monthly rental of Rs. 30/ -.
In that Jetter
the respqndent stated that he wanted to put up a building on that
site at a cost of not more than Rs. 6,500/- and that, after the
expiry of the lease period it was open to the appellant to continue
the lease or not; but, in case lea:.e period was not extended, the
respondent made a request that he should be paid back the
amount of Rs. 6,500/- or any less amount that might have been
548
· SUPREME COURT REPORTS
(l97 l] l S.C.R..
incurred for putting up the super-structure on the plot.
After
further correspondence between the parties, the appellant finally
wrote, on April 22, 1947 to the respondent a letter, Exhibit A-6,
by which they intimated to the respondent that on vacating or
giving possession of the land and bμi!ding that may be put up
by the lessee, the appellants will pay the valuation of the building:
on the date oj' surrender or a sum of Rs. 5,000/-, whichever is
l.>ss.
The appellant further intimated that if the respondent was
agreeable, the draft lease agreement sent by them might
be
approved for being finalised. It was, under those circumstances.
that finally the lease arrangement, Exhibit A-1. was jointly ent~red into by the parties by a registered document. dated April 30.
1047.
Under Exhibit A-1 the respondent took the land on leas~
for a period of ten years commencing from May 1, 194 7. The
document provided that the lessee was to pay a ground rent of
Rs. 45/- per month. Clauses 2, 4 and 9 of the lease deed are
relevant and may be set out :
"2. The Lessee is permitted to put up a
building
at a cost of not more than Rs. 10,000/- on the plot
leased to him, after appro•ial of the plan of the proposed
building by the
Board of Directors of
the
Lessors, and the construction to be put up must be
in accordance with the plan approved by the Directors of the Lessors.
4. The lease shall be in force for a term ot ten
years commencing from the First day of May, 1947
and on the expiry thereof the lessee shall surrender
possession of the 'entire property and
the
constructtions if any thereon. On vacating of giving possession
as above the lessor shall pay the valuation thereof,
then current or the sum of Rs. 5,000/- whichever is
less.
9. In case of breach or infringement of any of the
conditions above-mentioned by the Lessee, the Lessors
are at liberty to determine the lease irrespective of the
period provided herein by giving three month'' notice
to the Jessee and the lessors may take possession of the
property themselves without any compensation."
There were other clauses relating to the payment by the lessee
of :al taxes that may be imposed on the property so long as he
was in posses~~on and prohibiting the lessee from sub-letting.
assigning or transferring the plot to any one without the permission in writing of the lessors.
There were also provisions
regarding p3iYffient of advance rent and also the date within
which the monthly rent was to be paid.
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MYLAPORE FUND LTD. l'. K. s. IYER (Vaidialingam, J.)
549
There is no controversy that the respondent put up a building at his own cost for the purpose of his business in accordance
with the terms and conditions of the lease deed. On the expiry
of the lease period of I 0 years, the appellant, by notice dated
August 1, 1957 (Exhibit A-36) called upon the re'pondent lo
surrender possession of the land as well as the building in accord-
;mce with the provisions of the lease deed dated April 30, 194 7
and offering to pay a sum of Rs. 5,000/- for the building. The
respondent sent a reply, Exhibit A-37, dated August 27, 1957
declining to surrender possession either of the land or the building.
He stated that in view of the rights conferred on him as
u tenant of the land under the Act as amended by Act XIX of
1955, he was entitled to continue in undisturbed occupation as
a tenant of the leasehold and that if eviction proceedings
are
taken by the appellant he will be obliged to apply under the Act
for directing the landlord to convey to him the land at a price
to be fixed by the Court as per the provisions of the Act. The
respondent declined to accept the amount of Rs. 5,000/- offered
hy the appellant a' the value of the house put up by him on the
property.
The appellant instituted on April 22, 1958 0.S. No. 796 of
J 958 in the City Civil Court, Madras, seeking to recover possession from the respondent of the land and building and alst> offering to pay the sum of Rs. 5,000/- as the value for the building in
accordance with the terms of the lease deed. There was alsu a
daim for rnesne profits.
The respondent contested the suit on
various grounds. In particular, the respondent pleaded that und,~r
the Act he is not bound to surrender possession of the land with
the building, as claimed by the plaintiff.
On the other hand,
according to the respondent, notwithstanding the expiry of the
lease period, he was entitled to continue in possession of the land
and that he had a right under s. 9 to call upon the plaintiff to
sell the land to him for a price to be fixed by the Court in accordance with the provisions of the Act.
For this purpose.
the
respondent filed an a-pplication, I.A. No. 484 of 1958, under s. 9
requesting the Court for an order that the landlord be directed
to sell the land for a price to be fixed by the Court.
The learned City Civil Judge, by his judgment and decree
dated December l 0, 1959 upheld the contentions of the respondent.
The learned Judge held that notwithstanding the agreement entered into by the tenant to surrender the land and also the building on receiving the v.alue mentioned in Exhibit A-1
~fter the
termination of the lease period, such an agreement no longer
held good in view of the protection conferred on tenants by the
Act.
The learned Judge further held that the respondent was
entitled to exercise his option under s. 9 to purchase the land for
550
SUPREME COURT REPORTS
[1971] l S.C.R.
the price fixed by the Court. Iin this view the learned Judge disallowed the plaintiff's prayer for recovery of possession of the land
and building and allowed I.A. No. 484 of 1958 filed by the respondent under s. 9. But the learned Jydge however directed that it was
only if defauit was committed by the respondent in paymg the
value that may be fixed by the Commissioner in I.A. 484 of 1958
the appellant would be entitled to get a decree for possession on
payment of Rs. 5,000/- to the respondent as compensation for
the super-structure, under s. 3 of the Act.
The appellant carried the matter in appeal to the Madras
High Court in A.S. No. 268 of 1960. By judgment dated january 30, 1963 the learned Single Judge, Ramakrishnau, J., set
aside the decree of the City Civil Judge· holding that the tenant
was bound by the t((rms and conditions under Exhibit A-1 and.
as such, was liable to surrender possession not only of the land
but also of the building, on receipt of the sum of Rs. 5,000/-
from the landlord as per clause 4 of Exhibit A-1.
That is, the
learned Judge took the view that the terms contained in c],au5e 4
read with clause 2 of Exhibit A-1 amounted to stipulations as to
the erection of buildings, attracting the proviso to s.12 and those
stipulations will have to be enforced as against the tenant.
Ultimately, the learned Single Judge decreed the plaintiff's claim
for recovery of possession of the land and building on his depositing the sum of Rs. 5,000/- representing the value of the
super-structure.
There was a further direction given to the trial
Court for a>certai1ning the quantum of mesne profits.
The respondent carried the matter in appeal before the Division Bench of the High Court under cl.15 of the Letters Patent. By
decree and judgment dated December 1, 1964 the Letters Patent
Bench reversed the decree of the learned Single Judge and dismissed the appellant's suit, with costs throughout.
According to the
learned Judges of the Letters Patent Bench, clauses 2 and 4 of
the lease deed did not and could not deprive the rights conferred
on a .tenant under the Act, of claiming compensation for the
building under s.3 or his exercising the option to purchase the
land under s. 9.
The further view of the Division Bench is that
the matters referred to in clause 2 and 4 in Exhibit A-1 cannot
be considered to be "stipulations as to the erection of buildings,''
so 'as to attract the proviso to s. 12 of the Act.
It may be stated, at this stage, that the Division Bench has.
hy and large, taken the view that the position is concluded against.
the appellant-landlord by the decision of this Court in N. Vajrapani
Nadi11 v. New Theatre Carnatic Talkies('), wherein this Court
(1) [1964) 6 S.C.R. 1015.
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MYLAPORE FUND LTD. v. K. s. !YER (Vaidia/ingam, !.) 551
had upheld a decision of the Madras High Court that a stipulation
in the lease for demolition of the building and surrender of vacant
possession of the site was not one within the proviso to s.12 of the
Act. We shall refer to that decision at the appropriate stage and
consider whether the point in issue before us is covered by the
same, as assumed by the Lett~rs Patent Bench of the High Court.
But we may indicate that the appellant had raised a contention
in the suit, as well as before the High Court that the lease in favour of the respondent was not of a vacant piece of I.and but of
a land together with a building and hence the Act had no
application to that lease arrangement.
So far as this aspect is
concerned, it has been now concurrently held by all the Courts
that the lease undei;. Exhibit A-1 was of only a vacaint piece of
land.
Therefore we have to discuss the problem arising before
us on the basis that the lease was only of vacant land. lf clause
4 read with clause 2 of the lease deed Exhibit A-1, is construed
as a stipulation 'as to t.he erection of buildings' within the proviso
to s.12, the appellant will have to succeed. !f not, the respondent
will be entitled to the rights conferred on him under the Act and
pursue the relief asked for by him in the application filed by
him under s. 9 cf the Act,
·
The Act was passed with a view to give protection to tenant>
who, in certain" areas, bad constructed buildings in others' land>
'n the hope that they would not be evicted so long as they paid
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the fair rent of the land.
Originally the Act applied only
to
tenancies of land created before its commencement, viz., Februun
8, 1922. But, by the Amending Act XIX of 1955, which came
into force on September 10, 1955, the Act has been made applicable in the City of Madras to tenancies of land created before the commencement of
the
Amendment Act
of
1955.
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Therefore
it follows
that the
suit leas.~ is
one to
which
the Act will apply. It is
not really necessary for us
to
elaborately consider the scheme or the various provisions
of
the Act
as amended from time
to time, as they
haw
all been referred to in decisions of this Court to which we will
advert later. It is enough to note that under the Act, 'land' does
not include buildings [s. 2(2)]; 'Landlord' means any person ownG
ing a1ny land [s. 2(3)]; 'Tenant' in relation to any land is a person
liable to pay rent in respect of such land, and includes any person who continues in possession of the land after the determination
of the tenancy agreement [s. 2(4)]. Section 3 provides that
every tenant shall, on ejectment, be entitled to be paid as compensation the value of any building which may have been erected
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by him and for which compensation has not already been paid.
Section 4 provides, among other matters, for the Court ascertaining the amount of compensation payable under s. 3 in a
suit for e.iectment of a tenant in which the landlord succeeds.
552
SUPREME COURT REPORTS
(1971] I S.C.R.
Section 5 deals with computation of the compensation awardable
unde~ s.4.
Section 9 (1) provides that a tenant who is entitled
to compensation under s.3 and against whom a suit in ejectment
has been instituted may, within the time prescribed therein, apply
to the Court for an order that the landlord should be directed to
sell the whole or part of the land for a price to be fixed by the
Court. Section 12 provides :
'"Nothing in any contract made by a tenant shall
take away or lin1it his rights under this Act provided
that nothing herein contained shall affect. any stipulations made by the tenant in writing registered as to the
erection of buildings, in so far as they relate to buildings erected !after the date of the contt"act."
·
Section 13 provides that in its application to the. City
of
Madras and to other notified areas, the Transfer of Property
Act, 1882 shall, to the extent necessary to give effect to the provisions of the Act, be deemed to have been repealed or modified.
Mr. M. Natesan, learned counsel for the appellant, urged
that in this case, clauses 2 and 4 of the lease deed read together
would amount to a 'stipulation as to the erection of buildings·
within the proviso to s.12 of the Act and, as such, the respondent
is bound to surrender, on expiry of the lease period, possession of
the lan:l and also the building after receiving the sum of Rs.
5,000/- as the value of the super-structure. The counsel pointed
out that in this case the respondent-tenant in Exhibit A-1,
a
document which is in writing, registered, bas agreed to surrender
possession of the entire property and the constructions thereon,
on the expiry of the period of the lease, on receiving the sum of
Rs. 5,000/- as the value of the super-structure. In this case, that
term really relates to the building which has been put up by the
tenant after the date of the contract and clauses 2 and 4 amount
to a stipulation made by the tenant as to the erection of buildings.
That is, according to the learned counsel, the tenant's agreement
to receive the sum of Rs. 5,000/- as the value of lb.e super-structure that may be put up by him on the land demised under the
lease and to surrender possessioin of the land and building, is a
stipulation as to the erection of buildings, coming under the proviso to s.12 and, as such, the respondent is not entitled to any
rights under the Act.
The counsel also pointed out that the
Letters Patent Bench has not properly appreciated the scope of
the decision of this Court in Vajrapani's case(1 ).
Counsel further
urged that in this case, as the tenant had agreed to receive the particular amount of compensation under Exhibit A-1, there was no
question of his claiming any further right to compensation under
(I) [1964] 6 S.C.R. 1015.
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MYLAPORE FUND LTD. v. K. s. IYER (Vaidialingam, J.)
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s.3 in which case alone s.9 would apply. As s.3 did not apply,
he pointed out, the application filed by the respondent under s. 9
was not maintainable.
Mr. S. C. Manchanda, learned counsel appearing for the
respondent-tenant, on, the other hand, urged that the clauses in
the lease deed, Exhibit A-1, relied on by the appellant, cannot
be considered to be a stipulation as to the erection of buildings,
so as t;; attract the proviso to s.12 and that, on the other hand, the
opening part of s.12 which preserves the rights conferred on a
tenant und.~r the Act, has full force and effect. The counsel further urged that neither the right to claim compensation in the
manner provided under the Act, by s.3, nor the right to exercise
the option to purchase the land, conferred on a tenant under s.9,
can be either taken away or limited by any contract and, if, so.
the respondent's application, filed under s.9, to direct the appellant
to sell the land, was properly entertained and allowed by
the
Letters Patent Bench. The counsel also pointed out that the de·
cision in Vajrapani's case(') fully covers the point in issue and
concludes the case in favour of the tenant.
Before we proceed to discuss the above contentions of
the
learned counsel. it is necessary to point out that on the date when
the registered lease arrangement was entered into between the
parties (April 30, 1947), the Act did not apply to such leases.
It is only by the Amendment Act XIX of 1955. which came into
force on September I 0, 1955 that the Act has been made applicable to the present lease. Therefore, on the date when the lease
I arrangement was entered into neither party would have con·
templated cntering into any arrangement taking away or limiting
the rights conferred on a tenant by the Act. Now that the Act
has been made applicable to the present lease, without anything
more -and as is made ciear by the opening words of s.12-the
respondent-tenant will be entitled to avail himself of the rights
conferred on him under the Act and any contract limiting or taking away such rights will have no effect, unless the appellant-landlord is able to establish that this claim for recovery of possession
of the land and building is saved by the proviso to s.12 of the Act.
We shall now consider what the rights given to a tenant under
the Act are. Broadly speaking, two kinds of rights have been confered on lessees under tenancies .falling within the scope of the·
Act. The first is a right to be paid compensation for the buildings
erected by them on the leased land before they are evicted under
,,3 of the Act. The second right is the one conferred under s.9 to
the tenant to exercise the option to require the landlord to sell to
him the land covered by the lease for a price to be computed in
accordance with the said section.
It should be further pointed
(l1.[T964]6-S~CR. 10t5.
554
SUPREME COURT REPOl\TS
(1971] l S.C.R.
out that under s.9( 1 )(a). 'any tenant who is entitled to compensation under s. 3' is alone made eligible, when a suit in ejectment
against him has been instituted, to exercise the option given to
him under the said section. Therefore, before a tenant can apply
to the Court for an order that the landlord should b.~ directed to
sell the land for a price to be fixed by it, he must satisfy the
essential requirement that he is a 'tenant who is entitled to compensatipn under s. 3'. Without anything more if a land has been
leased to a tenant and if the latter puts up '\ building on the property, he will be entitled on ejectment to be paid compensation
for the value of the building under s.3, to be computed in the
manner prescribed under the Act. Or, in the alternative, he can
foll back upon his right to have the land sold to him in accordance
with s.<J of the Act.
Therefore,
the
question naturally
arises whether the res-
')Jondent, in this case, having ente1 ed into an agreement with the
landlord under Exhibit A-1, to receive the amount specified therein as the value of the building and surrender possession of the
land and the said building, is entitled to ignore those terms and
fall back upon s.3 of the Act and claim compens.ation in accordance with the Act. If he can, then it is needless to state that he
will be eligible to file an application under s.9.
Ultimately the
question resolves itself to this : Whether a stipulation made by a
t~nant in the registered lease-Iced limiting the quantum of compensation payable to him in respect of the buildings constructed
by him on the land is covered by the proviso to s. 12 of the Act.
There is no controversy that in this case the tena,nt has entered into a written agreement which bas been registered and he
!ms put up the building on the land after the date of the contract.
Section I 2 of the Act consists of two parts.
The first part
is· a general provision saving to tenants comprehended by
the
/,ct the rights conferred by its operative terms notwithstanding
•my contract.
Such rights would, amongst others, include
the
rights to claim compensation under ss.3 and 4 and the right to
c.xercise option to purchase the land from the lessor by an order
of Court under s. 9 of the Act. The second part consists of the prol'iso which, so to say, makes an inroad into the generality of
the saving. by saving contradictory stipulations from the operution of the statutory rights created by the Act. It is needless to
state that if s.12 had stopped with the first part, the respondent
would be entitled to the benefit of every right conf.erred upon ten·
nnts by the Act.
There is no controversy that the proviso is intended to cut down the scope of that saving; so to say, from and
out of the prohibition against the operation of any stipulation in
a contract limiting the rights conferred on tenants by the Act, an
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exception is carved out.
The controversy before us is centered
round the scope and limits of that exception.
We have already referred to the fact that s.13 provides that
in its application to the City of Madras .and to any other area to
which th~ Act is extended, the Transfer to Property Act, 1882
shall, to the extent necessary to give effect to the provisions of
the Act, be deemed to have been repealed or modified. If the
provisiom of the Act do not apply, the position would be that
normally, under s.108 of the Transfer of Property Act, before the
expiry of the lease, a lessee can remove all structures and build·
ings erected by him on the demised l;md.
Further, uinder s. 108
there is nothing to prevent th.e lessee's contracting to handover
any building or superstructure erected on the land by him to the
lessors, without receiving any compensation.
That is, though
under s. 108 the lessee has a right to remove the building, by contract he may agree to hand over the same to the lessor without the
right to receive compensation at the end of the lease, the matter
being entirely one of contract between the parties.
But this
uormal rule under the Transfer of Property Act will not apply
to this case before us as the provisions of the Act govern the rights
ot the parties.
With the background mentipned above, we shall now proceed
t•J refer to the decisions to which our attention has been drawn,
hy learned counsel on both siUes.
Quite naturally, Mr. Manchanda placed considerable reliance on the decision of this Court
in Vajrapani's case( 1), which decision, we have already stated.
has been treated by the Letters Patent Bench also as concluding
the case a1rninst the appellant-landlord. On the other hand, Mr.
Natesan, for the appellant,' has urged that the question that arose
before this Court in the said decision was a very limited one.
vi~ .• whether a stipulation. made by a tenant, for giving vacant
possession of the land after demolition of the building which h.~
had been authorised to construct thereon, is not one 'as to the
erection of buildings' within the proviso to s.12 and it was answered in the negative, That decision, according to the counsel.
has no application to the facts of this case where, the object of
the Act viz., of preserving a building constructed on the land, has
,lbeen given effect to by the terms of the contract entered into
between the parties. As the Letters Patent Bench has ptoceeded
on the basis that the said decision concludes the point against
'ie appellant. it is necessary to refer to the facts of that case in
rnme detail.
In Vajrapaiii's case(1) the appellant had granted a lease of
Hn open site in the town of Coimbatore to 011e Abirama Chettiar
under a registered lease deed dated September 19, 1934 for 20
<1)[1964]6-s.c.R.ToTs-:-
556
SUPREME COURT REPORTS
[1971] 1 S.C.R.
years at an annual rent of Rs. 1080/- for putting up a building
suitable for use as a theatre.
After the expiry of the tenn of
20 years stipulated under the deed, the Jessee had an option of
renewal for another period of 20 years on fresh terms and conditions.
The deed further provided that 'if after the tennination
of the stipulated period the lessees fail to pay the arrears of rent
that will fall due till that date and hand over possession of the
site to the lessors after making it clear by dismantling the constructions therein and by demolishing the walls etc., the lessors
shall, besides realising the arrears of rent due to them according
ro law, have tile right to take possession through Court of the site
il1 which the aforesaid buildings are put up after dismantling the
. .:onstruction and demolishing the buildings therein'.
The originul
J~ssee conslrncled a theatre qn the site and assigned !tis rights to
the New Theatre Carnatic Talkies Ltdl' which was the respondent
in the said appeal. The assignee was recognised as tenant under
the original lease deed of 1934.
The lessors called upon
the
lc,ssees to surrender vacant possession of the site on the expiry of
the lease period and, on the lessee declining to comply with the
•;aid requisition, a suit was instituted by the lessors for recovery of
possession of the land.
Durin~ the pendency of the litigation, the
Act, as amended by Madras Act XIX of 1955, was extended to
('oimbatore and the tenant filed an application under s.9 for an
-order directing the lessors to convey the site covered by the lease
<ieed for a price to be fixed by the Court.
The learned Sioglc
.ludgc of the Madras High Court allowed th.~ application of the
.tenant under s.9, on payment of full market value of tile land.
The landlord unsuccessfully appealed to a Divisioa Bench under
cl. 15 of the Letters Patent and came up to this Court on certificate
.~'anted by the High Court.
The question that was debated before this Court, on behalf
of the appellant-landlord was that the application filed by
the
t~nant under s.9 was not maintainable as the proviso to s.12 is
;1ttractl'!d to the stipulation made by the tenant to demolish the
building and surrender vacant possession of the land.
After statmg that the Act was passed to prevent loss to tenants who had
.:onstructed buildings on lands taken on lease by them consequent
upon the enforcement of the strict provisions of the Transfer of
Property Act, this Court considered the scheme of the Act with
particular reference toss. 3. 9 and 12. It was contended on behalf of the land-lord-appellant that the stipulation relating 10
delivery of vacant possession of the site on the expiry of the period
of lease, a~ter removing the buildings is a stipulation as to the
erection of buildings, coming within the proviso to s. 12 and, as
such, the restriction on the liberty of contract between the land-
. lord and tenant imposed by the opening clause of s. 12 stood removed.
It was further contended on this basis that the Jessee
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was bound by the terms of the lease and that he was not entitled
to claim the benefit of s.9 of the Act.
The majority constituting the Bench did not uphold
thb
c0ntention of the landlord, and said :
"A covenant in a lease which is duly registered that
the tenant shall on expiry of the lease remove the building constructed by him and deliver vacant possession, is undoubtedly a stipulation relating to the building, but it is not a stipulation as to 'the erection of
building'.
Section 12 has manifestly been enacted to
effectuate the object of the Act which is set out in the
preamble-ri~. 'to give protection to tenants who ...
have constructed buildings on others· lands in the.hope
that they would not be evicted so long as they pay a fair
rent for the land'.
The Legislature has sought thereby
to protect the tenants against any contractual engagements which may have been made expressly o,
by
implication to deprive themselves wholly or partially
of the protection intended to be conferred by the statute.
And the only class of cases in which the protection becomes ineffective is where the tenant has made a stipulation in writing registered as to the erection of buildings.
erected after the date of the contract of lease. The restriction i< therefore made only in respect of a limited
class of ca>es which expressly attract the description of
the stipulations as to the erection of buildings.
Having
regard to the object of the Act. and the language used
by the Legislature. the exception must be strictly construed.
and
a
stipulation as to
the erection of
buildings would not, according to the ordinary meaning
of the words used .. encompass a stipulation to vacate and
deliver possession of the
land on the expiry of
the
lease without claiming to enforce the statutory right~
conferred upon the tenant by s.9. The stipulations not
protected in s.12 are only those in writing registered
and relate to erection of buildings such as restrictions
aboL1t the size and nature of the building constructed.
the building materials to be used therein~ and the pm;-
pose for which the buildin~ is to be utilised."
Based upon the concluding portion of the above extract. Mr.
Manchanda. has _urged that the pro'l'.iso to s.12 will apply only
kl tho'e st1pulahons as to the re;tnctions as to the size.
the
nature of the building constructed, the building material to be
used therein and the purpose for which the building is to be
11tilised.
The Letters Patent Bench has also adopted the same
test for holding against the appellant.
558
SUPREME COURT REPORTS
[1971] 1 s.c.R.
The minority judgment, on the other hand, in the said dcci-
,,ion, held that a stipulation by the lessee to remove! the buildings,
which he has been permitted to erect, when su_rren.dering the
land on the termination of the tenancy, is a stipulation as to thf
erection of buildings coming within the proviso to s.12 of the Act.
A perusal of the minority judgment further shows
that it was
~onceded by Mr. Setalvad, learned coun •el appearing for the
. ;.:ppellant-Iandlord, that a stipulation
limiting the quantum
of
compensation payable in respect of buiktings constructed by n
ten~'lt, provided for by s. 3 is within the meaning of the proviso to
· ~.l 2 as being one with respect to the erection of buildings. This
t'Oncession is no doubt not referred to in the majority judg:nent
. but, apart from the concession, the minority judgment has discussed this aspect further and it was held ultimately th~t the
~tipulation in the lea~~ deed before them whereunder the tenant
agreed to dismantle the buildings put up by him on the leased
land was a stipulation as to the erection of buildings and covered
by the proviso to s.12.
But, in accordance with the majority
·view, the appeal was dismissed.
Though prima facie the last part of the extract in the majority
jL1dgment, quoted above, and relied on by Mr. Manchanda, may
. ~ppear to support his contention as also the view taken by the
L.~tters Patent Bench, we are however· not inclined to hold that
the majority judgment in the above decision intended to lay down
that only stipulations regarding restrictions about the size, nature
ot the building constructed, the building materials to be
used
therein and the purpose for which the building is to be utilised,
·exhaust completely all the stipulations that are protected by the
·proviso to s.12. Those observations cannot be taken ont of the
context in which they appear.
A reading of the extract quoted
above from the majority judgment clearly shows that the object of
the statute was to protect tenants against any contractual engagements which may have been made expressly or by implication to
deprive themselves wholly or partially of the protection intended
to be conferrM by the statute. Having regard to this object, the
learned Judges have come to the conclusion that a stipulation to
vacate and deliver possession of the land after demolishing the
building constructed by the tenant will not amount to a snpulation
·as to the erection of buildings, coming under the proviso to s. 12.
On the other hand, the majority view is that the stipulation, that
came up for consideration before them, would reaily amount to
a stipulation bv a tenant giving up his right to enforce. the statutory right conferred on him under s.9. It is also significant to
oote that in the earlier part Of the judgment, the majority judgment has emphasized tha~ on account of the inflationary pressure. in the wale of the First World War many tenants who had
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constructed buildings on lands taken on lease by them were £Ought
to be evicted by the landlords and, with a view to prevent loss·
to such tenants, the Act was passed. The concluding part of the
t1bservations in the extract, r.~Jied on by Mr. Manchanda, will
have to be read in this background and, so read, in our opinion the
position becomes clear that the learned Judges were only reB ferring to the size and nature of the building, materials used for
building, etc .. as iilustrative examples of stipulations which will
be covered by the proviso to s. 12 of the Act.
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The provision in the lease deed which came up for cor.,ideration in the above decision, in and by which the tenant agreed to
surrender possession of the land after d.~molishing the b11iiding.
will, in our opinion. really amount'to the tenant contracimg himself out of the right to claim either compensation for the building
under s.3 or to exercise his option under s.9 to purchase the land
and that such a provision will be hit by the first part of s.12 which.
as we have alr.~ady indicated, prese1ves the rights given to a ten.Jn!
under the
Act Therefore, in
our opinion,
the deciskn in
Vajrapani's case(1) has been misunderstood by the learned
Judges of the Letters Patent Bench and tl.e said decisio'l is no
authority for the proposition that the stipulation contained in the
kase deed before u' cannot come within the proviso to "12.