Holding

Arrears of rent are recoverable only if they are not barred by the three‑year limitation period; thus the appellant could recover only the arrears within three years and the appeal was dismissed.

Summary

The appellant, Kamala Bakshi, claimed title to premises occupied by the respondent, Khairati Lal, who had entered into a 1960 agreement presented as an employer‑employee relationship but was in fact a tenancy. After a series of litigations, the Delhi High Court in 1991 declared the respondent a tenant and fixed the rent at Rs.140 per month. The appellant later demanded arrears of rent from 1960 to 1992; the respondent paid only the three years immediately preceding the notice. An eviction petition under Section 14(1)(a) of the Delhi Rent Control Act was dismissed by the Additional Rent Controller and the High Court on the ground that the arrears beyond three years were barred by the three‑year limitation period under the Indian Limitation Act. The Supreme Court held that "legally recoverable" arrears are those not barred by limitation, and that the limitation period applies from the date each rent became due, irrespective of the later declaration of tenancy. Consequently, the appellant could recover only the arrears within the three‑year period, and the appeal was dismissed.

Issues considered

The meaning of 'legally recoverable arrears of rent' under Section 14(1)(a) of the Delhi Rent Control Act, 1958.
Whether arrears of rent accruing before the 1991 High Court decision are barred by the three‑year limitation period under the Indian Limitation Act, 1963.

Legislation cited

Subjects

rent controlevictionarrears of rentlimitation periodlandlord‑tenant relationshipDelhi Rent Control ActSection 14(1)(a)legally recoverablefamily settlement

Judgment

KAMALA BAKSHI A
v.
KHAIRATI LAL

MARCH 30, 2000

[SYED SHAH MOHAMMED QUADRI AND S.N. PHUKAN, JJ.] B

Rent Control and Eviction :

Delhi Rent Control Act, 1958-Section 14( 1)(a)-Arrears of rent-Ap-
pellant' s father entered into an agreement in 1960with respondent terming the
relationship of landlord-tenant as that of employer-employee-Arrangement
c
failed-Eviction suit dismissed by Trial Court holding respondent to be a tenant
and not a licensee-High Court confirmed order in 199lenhancing rent pay-
able-Appellant sent notice for payment of an-ears of rent from 1960 to 1992-
Arrears paid for 3 years period prior to 1992-Eviction suit dismissed by Trial
Court and High Court as claim for arrears was time barred-On appeal Held, D
no entitlement to receive arrears of rent beyond period of 3 years-Declaration
of Court relates back to date on which parties entered into agreement camou-
flaging landlord-tenant relationship, but bar of limitation would apply-limi-
tation Act, 1963-Article 52.

Appellant's father, landlord, allowed the respondent to occupy the E
suit premises as the manager of his business, after an agreement between
them in 1960. The arrangement was entered into between them stating the
relationship as that of employer-employee and not landlord-tenant. A suit
for eviction was filed against the respondent as this arrangement failed.
High Court finally decided the matter in 1991, holding the respondent to be F
a tenant, enhancing the rent payable.

Appellant claimed title of the suit premises after death of her father
on the basis of a family settlement and sent a notice claiming arrears of
rent from 1960 to 1992. Respondent only paid arrears for period of three
G
years prior to 1992. An eviction suit was filed under Section 14(1)(a) of

--· the Delhi Rent Control Act, 1958 which was dismissed by Trial Court and
High Court as the claim was time barred. Hence this appeal.

The appellant contended before this Court that the claim was not
time barred, as all the legally payable rent could only be claimed after the H
773
774 SUPREME COURT REPORTS [2000] 2 S.C.R.
A judgment of the High Court in 1991 and never before.

The respondent contended before this Court that claim for recovery
of arrears of rent, which were not paid, was barred by limitation.
..;-

B
Dismissing the appeal, this Court
r
HELD : 1. Secti.on 14(1)(a) of the Delhi Rent Control Act, 1958
postulates making an order of eviction by any Court/Controller in favour
of the landlord and against a tenant for non-payment of arrears of rent
legally recoverable within two months of the service of notice of demand,
claiming the arrears of rent, on the tenant by the landlord. If the claim for
c recovery of arrears of rent is not enforceable in a court of law for having
become barred by limitation, the amount ceases to be 'legally recoverable'.
The appellant will be entitled to recover only that much of the arrears of
rent for which she can sue in a court of law, as for recovery of arrears of
rent Article 52 of the Indian Limitation Act prescribes a period of three
D years from the date the arrears become due. [777-F-H]

2. A distinction must be drawn between cases in which by virtue of an
order of the court a right accrues to a party to the lis, and cases in which
the court merely lays bare the truth well within the knowledge of the
parties. Parties in this case had actually entered into a transaction of
E
tenancy but camouflaged the relationship of landlord-tenant by executing a
document purporting to create a relationship of employer and employee
and in the litigation that ensued between them. The court discerned the
truth and declared the real position. Such a declaration by the Court
relates back to the date on which the parties entered into the arrangement/
F agreement under which the suit premises was put in possession of the
respondent. Cause of action had accrued to the appellant's father, in the
earlier round of litigation, to claim rent from inception of tenancy on the
basis of the true state of affairs, which were camouflaged but discovered
and declared by the court. Provisions of the Limitation Act would apply if
G arrears of rent were claimed later on. [779-G-H; 780-A-D]

Rangayya Appa Rao v. Bobba Sriramulu & Ors., 27 ILR Madras 143;
....
Ram Sarup & Am: v. Smt. Raj Dulari, AIR 1974 Delhi 23; MaimoonaKhatun
& Am: v. State of U.P. & Am:, [1980] 3 SCR 676, distinguished.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6231of1997.
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H
KAMALA BAKSHI v. KHAIRATI LAL [S.S. MOHAMMED QUADRI, J.] 775

From the Judgment and Order dated 28.11.96 of Delhi High Comt in A
·• C.R. No. 1002 of 1996.

Mrs. Rachana Joshi Issar for the Appellant.

A.K. Srivastava, Sudhir Chandra and Parmanand Gaur for the Respond-
ents. B

The Judgment of the Court was delivered by

SYED SHAH MOHAMMED QUADRI, J. This appeal of landlady, by
special leave, is directed against the order of the High Comt of Delhi in
C.R.No.1002 of 1996 dated November 28, 1996. This case had a chequered
c .
career. The present controversy is an off-shoot of the earlier litigation between
the parties. To appreciate the question involved in this case, it will be
necessary to set out briefly the facts giving rise to this appeal.

On March 2, 1960, the respondent, who is a tailor, occupied premises D
No.26, Faiz Bazar, Darya Ganj, Delhi (hereinafter referred to as 'the suit
premises') of H.S.Sharma, the father of the appellant. The said Sharma and
the respondent entered into an arrangement pursuant to which he executed a
document, Ext.P-1, on March 28, 1960 (Ext.P-1, however, bears the date June
28, 1960), purporting to join as Manager of the tailoring business said to be
of H.S.Sharma, which was being carried on in the suit premises. The said E
arrangement could not continue for long. On June 10, 1966, the said Sharma
filed a suit claiming mandatory injunction against the respondent on the
ground that he was a licensee in the suit premises in the capacity of Manager,
which having been terminated he had no right to remain there and that he be
directed to remove himself from the premises and further to restrain him from F
entering into the suit premises. The respondent contested the suit denying that
he was a licensee. He pleaded that he was carrying on his tailoring business
therein as a tenant on a monthly rent of Rs.30. Ext.P-1, it was alleged, was
executed to circumvent the provisions of the Delhi Rent Control Act, 195 8 (for
short 'the Act') and that it was not a valid document. The Trial Court accepted
G
the case of H.S.Sharma and decreed the suit, as prayed for, on December 21,
1974. The respondent went in appeal before the learned District Judge who
reversed the decree of the Trial Court believing the case set up by the
respondent that he was a tenant of the suit premises on a monthly rent of
Rs.30. Challenging the judgment of the learned District Judge dated April 16,
1979, Rajinder Kumar Sharma son of H.S. Sharma filed R.S.A.No.29 of 1980 H
776 SUPREME COURT REPORTS [2000] 2 S.C.R.
A in the High Court of Delhi. The finding of the Appellate Court that the said
Shanna was the landlord and the respondent was the tenant. was upheld but
the quantum of rent payable by the respondent was modified to Rs.140 by the
High Court on September 5, 1991. In the meanwhile, the said Shanna died
leaving the appellant and her brother Rajinder Kumar Shanna as his legal
representatives. The appellant claims title to the suit premises on the basis of
B
a family settlement.

On August 19, 1992 the appellant issued notice to the respondent
demanding rent for the period from March 28, 1960 to July 28, 1992
amounting to Rs.54,320. The respondent paid rent for the period of three years
c prior to 1.9.1992 and disowned his liability to pay arrears for the earlier
period. The appellant filed petition under Section 14(1)(a) of the Act for
eviction of the respondent from the suit premises for non-payment of arrears
of rent for the said period in the court of the Additional Rent Controller, Delhi.
)

The respondent pleaded that the arrears of rent for the period of three years
immediately preceding the demand notice dated August 19, 1992 were paid
D by him to the appellant; with regard to the rest of the period, it was pleaded,
that the arrears were not legally recoverable. By its order dated September 4,
1996, the Additional Rent Controller dismissed the petition holding that as the
respondent had paid arrears of rent at the rate of Rs.140 per month for the
period of three years immediately preceding the demand notice and the arrears
E of rent for the rest of the period was not legally recoverable, there was no
cause of action for the appellant to file the petition. Against the said order
dated September 4, 1996, the appellant filed C.R. No. 1002 of 1996 in the High
Court of Delhi, which was dismissed on November 28, 1996. It is the
correctness of that order of the High Court that is canvassed in this appeal.

F Ms. Rachna Joshi Issar, learned counsel appearing for the appellant.
strenuously argued that for the first time the rent of the suit premises @ Rs.140
per month was determined by the High Court on September 5, 1991 so earlier
to that judgment the appellant could not have claimed the rent as such 'the rent
legally payable' would be the arrears from March 28, 1960, the date of Ext.P-
G 1, but not for a period of three years prior to the date of the said judgment
of the High Court. The Additional Rent Controller and the High Court.
submitted the learned counsel, erred in holding the arrears of rent from the date
of Ext.P-1 till September 1989 to be barred by limitation.
....
Mr. Sudhir Chandra, learned senior counsel appearing for the respond-
H ent, contended that the cause of action for recovering the rent accrued to late
KAMALA BAKSHI v. KHAIRATI LAL [S.S. MOHAMMED QUADRI, J.] 777

Shanna each month after March 1960 when the rent became payable and that A
once the period of limitation started running it would not stop, therefore, the
claim for recovery of rent from March 28, 1960 till September 1, 1989 was
barred by limitation and as such not legally recoverable; the learned Addi-
tional Rent Controller and the High Court committed no error in law in
dismissing the petition of the appellant.
B
The short question that arises for consideration in this appeal is : what
is the meaning of the expression 'legally recoverable arrears of rent' in Section
14(1)(a) of the Act?

It will be useful to refer to Section 14(1)(a) here :
c
"14. Protection of tenant against eviction -

· (1) Notwithstanding anything to the contrary contained in any other
law or contract, no order or decree for the recovery of posses-
sion of any premises shall be made by any court or Controller
in favour of the landlord against a tenant :
D

Provided that the Controller may, on an application made to him
in the prescribed manner, make an order for the recovery of posses-
sion of the premises on one or more of the following grounds only,
namely - E
(a) that the tenant has neither paid nor tendered the whole of the
arrears of the rent legally recoverable from him within two months
of the date on which a notice of demand for the arrears of rent has
been served on him by the landlord in the manner provided in
Section 106 of the Transfer of Property Act, 1882 (4of1882)." F
A perusal of the provision shows that it postulates making an order of
eviction by any Court/Controller in favour of the landlord and against a tenant
for non-payment of aU"ears of rent legally recoverable within two months of
the service of notice of demand, claiming the arrears of rent, on the tenant by
· the landlord. It may be pointed out that if the claim of the appellant for G
recovery of arrears of rent was not enforceable in a court of law for having
become barred by limitation, the amount ceases to be 'legally recoverable'.
Here the appellant will be entitled to recover only that much of the arrears of
rent for which she can sue in a court of law. For recovery of arrears of rent
Article 52 of the Indian Limitation Act prescribes a period of three years from H
778 SUPREME COURT REPORTS [2000] 2 S.C.R.
A the date the arrears become due. Now, the question is narrowed down to this
: when did the rent of the suit premises become due? _,.

In the absence of any contract to the contrary the rent of a building
payable monthly will become due at the end of each month. Ms.lssar did not
join issue on that. She, however, vehemently argued that before the determi-
B nation of the rent by the High Court in the Second Appeal at the rate of Rs.140
per month, the appellant could not have recovered any rent; therefore, the rent
of the suit premises from the commencement of the tenancy became due only
on the date of the judgment of the High Court. She relied on the decision of
the Privy Council in Rangayya Appa Rao v. Bobba Sriramulu & Ors., [27 ILR
c Madras 143]. That was a case where the landholders granted a patta of
agricultural land to the tenant at a particular rate of rent. But Section 7 of the
Madras Rent Recovery Act, 1865 enacted, inter alia, that no suit brought and
no legal proceedings taken to enforce the te1ms of a tenancy shall be
sustainable in a civil court unless pattas and muchilkas have been exchanged
or patta has been tendered which the tenant was bound to accept, or unless
D
both parties had agreed to dispense with such document. If a patta was
tendered and the tenant refused to accept it, the landholder had the option to
proceed in a summary suit before the Collector for the acceptance of the patta.
In such a suit, it was for the Collector to settle the terms of tenancy including
the rent in accordance with the principles laid down in the Act. An appeal was
E provided from the Collector's decision to the Civil Comt. It was on those facts

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the Privy Council held that it was necessary for the landholder to take
proceedings under the said Act to have the proper rate of_ rent ascertained, so
th_e period of limitation in a suit for arrears of rent would run from the date
of the final decree determining the rent, and not from the close of the fasli year
p for which the rent was payable.

The learned counsel sought to derive suppo1t from the judgment of the
Delhi High Court in Ram Sarup & Am: v. Smt.Raj Dulari, AIR (1974) Delhi
23. In that case during the pendency of the proceedings for eviction of the
tenant, the court fixed the interim rent at the rate less than the contracted
G rent. The eviction petition was dismissed in default. Thereafter, the landlord
claimed the amount representing the difference in the contractual rent and
the interim rent fixed by the court. It was held by the High Cowt that so

H
long as the interim order was in force the landlord could not have recovered
the rent at the contractual rate, therefore, the cause of action to recover the
a1Tears of rent arose on the termination of the proceedings. The other
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KAMALA BAKSHI v. KHAIRATI LAL [S.S. MOHAMMED QUADRI, J.] 779
decisions of the High Courts cited by the learned counsel also laid down the A
same principle and it is futile to multiply the decisions here.

Learned counsel also cited the judgment of this Court in Maimoona
Khatun & Am: v. State of U.P. & Am:, [1980] 3 SCR 676. That case related
to claim of arrears of salary. A Government employee was dismissed from
BI
service. After his reinstatement, he did not receive his salary and while in
service he died. In the suit filed by his legal representatives for the recovery
of the arrears of salary, the Trial Court held that the employee was entitled to
his pay for the period in question. The decree of the Trial Court was confirmed
by the Appellate Court but the High Court found that the claim was barred
by limitation, though it upheld the findings that the employee was illegally c
prevented from discharging his duty. On appeal to this court it is held that
where an employee is dismissed or removed from service and is reinstated
either by the appointing authority or by virtue of the order of dismissal or
removal being set aside by a civil (competent) court, the starting point of
limitation will be the date when the right has actually accrued. Such a right D
accrues on the date of the reinstatement by the appointing authority; where no
suit is filed or the date of the decree if a suit is filed and decreed. And till that
stage is reached the right to recover arrears of salary does not accrue at all as
no question of suing for the arrears of salary will arise.

It may be pointed out that in Rangayya Appa Rao's case (supra), the
right to recover the rent did not accrue till the rent was determined by the
Collector. So also in the case of Ram Sarup & Anr. (supra), the right to recover
the difference of rent stood suspended during the pendency of the proceedings
by virtue of the order of the court, so the right did not accrue till the
proceedings terminated. In the last mentioned case on his dismissal from F
service the Government employee lost the right to claim the salary and that
he became entitled to claim salary only after the order of termination of his
services was set aside by this court. Those cases are clearly distinguishable
from the instant case. A distinction must be drawn between cases in which by
virtue of an order of the court a right accrues to a party to the lis, and cases
in which the coll.rt merely lays bare the truth well within the knowledge of the G
parties. In the former category the cases referred to above fall and in the latter
cases of the kind of the instant case fall. What happened here is that the parties
actually entered into a transaction of tenancy but camoutlaged the relationship
of landlord and tenant by executing a document purporting to create a
relationship of employer and employee and in the litigation that ensued H
780 SUPREME COURT REPORTS [2000] 2 S.C.R.
A between the parties the court had to discern the truth and declare the real
position in which the parties stood to one another. Such a declaration by the
court relates back to the date on which the parties entered into the arrange-
ment/agreement under which the suit premises was put in possession of the
respondent.

B It is true that in this case during the operation of the judgment of the
trial court, holding that the respondent is a trespa-sser, the appellant could not
have claimed any rent till the same was set aside by the appellate court holding
that the respondent was a tenant of the suit premises which was confumed by.
the High Court in Second Appeal on September 5, 1991. But that was the
c making of the appellant's father himself in the earlier round of litigation. This
case presents a good example of how an arrangement made to circumvent the
provisions of the Act to deprive the respondent of his legal rights thereunder
rebounded to disable the appellant of what she could otherwise be legally
entitled to. Here the cause of action has accrued to the appellant's father to
claim the rent from the respondent from the inception of the tenancy on the
·D basis of the true state of affairs which they camouflaged but which was finally
discovered and declared by the court.

In the result, we hold that the judgment of the High Court, under appeal,
does not suffer from any illegality. The appeai is without any merit and it is
·E accordingly dismissed. There shall be no order as to costs.

A.Q. Appeal dismissed.

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