Supreme Court Dismisses Appeal Against Rejection of Section 18(1) Challenge to Lease Validity — Lease for Construction of Buildings of Every Description Not Subject to Part II of Bombay Rents Act. The Court Held That the Purpose of the Lease as Expressed in the Deed Determines Part II Applicability, and a Lease for Constructing Any Building Does Not Fall Within Section 6(1).

Case Note & Summary

In this case, the Supreme Court of India considered the applicability of Part II of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 to a lease of open land granted for the purpose of constructing buildings of every description. The appellant, Osman Fakir Mohammed Divecha, was a tenant who had constructed structures on a portion of certain plots in Bandra, Greater Bombay. The original owner, Louis Fernandes, subsequently demised the entire plots to the respondents, Ali Akbar Javed Sadakya and another, by an indenture of lease dated December 5, 1958, for a period of 99 years. The lease empowered the lessees to construct and erect upon any part of the land buildings of every description. It also contained a clause requiring an advance payment of Rs. 10,000 by the lessees to the lessor, to be deducted from the monthly rent, and permitted the lessees to take construction loans from prospective tenants of the buildings to be erected, as an exception to a covenant against mortgaging or charging the property. The respondents filed suits in the Small Causes Court at Bombay under Section 13(1) of the Act, seeking eviction of the appellant and recovery of possession of the portions he occupied, claiming that the land was reasonably and bona fide required for the erection of a new building. The appellant resisted these suits on the ground that the lease between the owner and the respondents was illegal and void because it involved an advance payment which was prohibited under Section 18(1) of the Act, and consequently the respondents could not rely on it to maintain eviction proceedings. The Small Causes Court and its Appellate Bench rejected this contention, holding that Part II of the Act (which contains Section 18) did not apply to the lease because the land was not let for any of the purposes specified in Section 6(1), namely residence, education, business, trade, or storage. The High Court of Bombay, in a writ petition under Article 227, upheld these findings on the first two grounds and left the third undetermined. Before the Supreme Court, the appellant argued that the expression 'buildings of every description' in clause 8 of the lease included residential buildings, and that clause 2(c) allowing construction loans indicated that the real purpose was for residential buildings, thus bringing the lease within Section 6(1) and Part II. The Court, speaking through Shelat, J., rejected these submissions. It held that the crucial words in Section 6(1) are 'let for,' and it is the purpose of the lease as expressed, not any future action by the lessee, that determines whether Part II applies. The lease clearly stated that the lessees could construct buildings of every description, not limited to the purposes enumerated in Section 6(1). The Court distinguished its earlier decision in Mrs. Dossibai N.B. Jeejeebhoy v. Khemchand Gorumal & Ors., (1962) 3 SCR 921, where the lease specifically mentioned construction for residential, business, industrial or office purposes, thus coming within Section 6(1). Here, the scope was wider and did not restrict the purpose. Regarding clause 2(c), the Court observed that it was merely an exception to the covenant against mortgaging, inserted to allow construction loans if the lessees decided to build residential buildings. It did not define the purpose of the lease. Since the lease was not for any of the specific purposes, Part II, including Section 18(1), had no application. Accordingly, the Supreme Court dismissed the appeal with costs, affirming the concurrent findings of the lower courts and holding that the respondents were entitled to maintain the eviction suits under Section 13(1) of the Act.

Headnote

Issue of Consideration

Final Decision

Appeal dismissed with costs; it was held that the lease was not for purposes under Section 6(1), thus Part II and Section 18(1) did not apply, and the eviction suits could proceed.

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