Holding

A tenant who, in good faith, deposits rent with the prescribed authority under Section 9(3) while a bona fide dispute over the landlord’s title exists is not in default, and dismissal of a suit for default does not settle that dispute.

Summary

The appellants, tenants of premises owned by Tamil Thalir Kalvi Kazhagam, faced an internal dispute between two claimants to the landlord's title after a change of president. Fearing liability, they applied under Section 9(3) of the Pondicherry Buildings (Lease and Rent Control) Act, 1969, to deposit rent with the Rent Controller, which was allowed. The landlord later sought eviction on the ground of willful default, arguing that a suit filed by one claimant was dismissed for default in 1984, thereby removing any doubt. The Supreme Court held that dismissal of a suit for default does not settle the dispute; until a competent court adjudicates the rights or the parties settle, the tenant may continue depositing rent with the prescribed authority without being deemed in default. Consequently, the lower courts' orders were quashed and the appeals were allowed.

Issues considered

Whether dismissal of a suit for default settles the dispute over the landlord's right to receive rent under Section 9(3).
Whether tenants who deposit rent with the prescribed authority under a bona fide doubt are liable for eviction for default.
Whether the amendment changing the prescribed authority affects the validity of earlier deposits.
Interpretation of the phrase "until the doubt is removed or the dispute is settled by the decision of a competent Court" in Section 9(3).

Subjects

rent controlevictionbona fide doubtlandlord-tenant disputeSection 9(3)defaultPondicherry Buildings (Lease and Rent Control) Actinterpretation of statutessettlement by competent court

Judgment

KANNAN AND ANR. A
·~
v.
:::- TAMIL TALIR KALVI KAZHAGAM

MAY 15, 1998

[K. VENKATASWAMI AND A.P. MISRA, JJ.] B

Rent Control and Eviction/Pondicherry Buildings (Lease And Rent
Control) Act, 1969-Ss. 9 (3), (4), & (5)-Two persons claiming rent-
Doubts as to whom rent is to be tendered-Rent tendered to the authority
as directed by the Rent Control/er-Contesting owners claiming that rent c
not having been paid, to them, there was a default-Held : Where there is
genuine doubt as to whom the rent is to be paid, due to a dispute between
alleged landlords which has not been settled by a competent court, there is
no default if rent is tendered to the concerned authority under the directions
of the Rent Controller. D
~~
Suit-Dismissal for default-Settlement of dispute involves adjudication
of the /is between the claimants by a competent court- Mere dismissal of suit
for default is not settlement of the dispute since doubts continue about the
real landlord to whom rent is to be tendered.

Interpretation of Statutes-When more than two interpretations are
E
possible, that which subserves the object of the Act should be followed.

The demised property which was taken on lease by the appellants

- ---..(
belonged to the Respondent institution of which, at the relevant time K was
the president. Later he was replaced by T. Due to a dispute between the
outgoing and incoming Presidents, both demanded rent from the appellants F
upon which, a bona fide doubt having arisen, the appellants filed a RCOP
before the Rent Controller under section 9 (3) of the Act. Since neither K
nor T, appeared and there were also other claimants, the Rent Controller
permitted the appellants to deposit the rent with concerned authority. The
respondent filed an application under Section 10 (2) (i) of the Act before the G
Rent Controller and prayed for eviction of the appellant for wilful default,
which was dismissed. An appeal however, was allowed on the ground that the
:
,.,. right procedure was not followed. High Court, in Revision, held that there
was a default since at the time of the eviction petition, there was no dispute
between the landlords and there was no justification for proceedings under
Section 9 (3) of the Act. In appeal to this Court, it was contended by the H
497
/

498 SUPREME COURT REPORTS [1998) 3 S.C.R.

A appellants that they had filed the application because of a genuiq,e doubt and
continued to deposit the rent regularly as per the directions of the Rent
controller and hence there was no default. This was disputed by the respondent
who pointed out that in 1984 the suit of K was dismissed and thereafter there
was no dispute, yet the appellants did not tender rent to the landlord.

B Allowing the appeal, this Court

HELD : 1. The appellants-tenants had not defaulted in the payment of
rent and they could not be held to be defaulters liable for eviction as doubt
could not be said to have been erased. It is not in dispute that in the year
C 1980 a dispute arose which caused the appellants to doubt as to whom rent
was payable, hence tender of the rent to the Rent Controller in the year 1982
was bona fide and valid. The present case is not a case of settlement between
the parties. The simple option left with the respondent was to have approached
the Controller (Prescribed Authority), where the matter was pending, for an
order and on it being passed the respondent would have received back all the
D deposited rent and thereafter would have obligated the appellants to pay the
future rent to the landlord. In view of this, the dispute not being settled by
any competent court, the preceding words, "until the doubt is removed"., are
of significance. In a case of this kind, is it inferable that merely on dismissal
of suit for default, the doubt would be said to have been removed from the
mind of the tenant, even if he was a party to such a suit. On the contrary,
E hope of removal of all possible doubts by decision in the suit of the contending
rights was washed away when the suit was dismissed for default. The doubt,
which was prior to the suit, returned back. Mere culmination of the suit in
the present case would have no effect as to create any obligation on the tenant
to stop rendering rent under Section 9 (3) and start paying to the landlord.
p In other words, in case he continues to deposit the rent regularly with the
Prescribed Authority it would not constitute default under the Act. It is not
a case that he has not tendered the rent. He is a tenant in the demised
premises since the year 1969. He has never defaulted and is paying the rent
regularly. He has continued to pay the rent even after dispute arose after
G waiting for some time and after making an application under Section 9 (3)
before the Rent Controller. [504-E, H, B-C; 505-C-E]

2. The preamble of the Act, refers to regulate the letting of building
and control of rents and prevention of unreasonable eviction of tenants. This
primarily confers benefit to the tenants. This is to protect any tenant from
H exploitation of landlords. However, this Act also ensures that landlord
KANNAN v. T.T.K. KAZHAGAM 499
regularly receives the rent due to him and in case any tenant defaults under A
the Act he renders himself liable for eviction. It ensures that if any rent
->o'
payable to the landlord is not paid without any reasonable cause or on mere
pretext to whom to pay the rent, is not paid, such tenant is evicted from the
premises in question. So the Act balances the interests of both, the tenant
and the landlords. That is why the tender of rent under sub-section (3) is only
when there is a bona fide doubt as to whom the rent is payable. Whether
B
there is or there is no bona fide doubt or dispute, the Rent Controller can
adjudicate in a case where a tenant approaches. In case there is no bona fide
doubt or dispute or the Controller does not reach such conclusion, he cannot
. ..,
get protection under the Act. But it protects the tenant otherwise. Hence, a
channel was devised to protect the tenant from being treated as defaulters.
In such circumstances, a tenant can continue to pay the rent to the prescribed
c
authority instead of the landlord. (504-D-G]

3. When two or more interpretations are possible, the one which
subserves to the object should be accepted. Sub-section (3) of Section 9
contemplates deposit of rent in case of bona fide doubt or dispute. This is to D
salvage tenant from evicting. However, this would depend on the facts of each
case. Thus, where there are two possible interpretations, the one which
..,. ...~ prevents a tenant from unreasonable eviction be accepted. The use of the
words" ..... the dispute is settled by the decision of a competent court" refer
to settlement of dispute by a competent court not dismissal of a suit for
default. In this case, it is not disputed by a competent court not dismissal E
of a suit for default. In this, it is not disputed that a dispute did arise inter
se between the landlords and if that be, it could only be said to have been
settled by a competent court by adjudication of the lis between the two, not
where suit is dismissed for default. A dismissal for default is not a settlement
of a dispute by a competent court. [505-E-F; 503-G)
·~
F
__.. Kameshwar Singh Srivastave v. JV Addi. Dist/. Judge, Lucknow, and
others, [1986) 4 sec 661, distinguished.

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1703-1704 of
1997.
G
From the Judgment and Order dated 17.9.96 of the Madras High Court
in C.R.P. Nos. 3346-3347of1988.

.... S. Sivasubramaniam, V. Balachandran and S. Arvind for the Appellants .

R. Venkataramani and Satya Mitra Garg, for the Respondent. H
500 SUPREME COURT REPORTS [1998] 3 S.C.R.

A The judgment of the Court was delivered by

MISRA, J. Since both the aforesaid appeals arise out of a common
order, the subject matter of dispute including pleadings and documents being
the same with common evidence resulting into a conimon order, hence they
are being disposed of by means of this common judgment.
B
The present appellants are the tenants and respondent, the landlord.
The short question raised is whether, on the facts and circumstances of this
case, the appellants are validly depositing the rent under Section 9 (3) of the
Pondicherry Buildings (Lease And Rent Control) Act, 1969, (hereinafter referred
C to as 'the Act'), could they be treated as defaulters liable for eviction, when
they continued to deposit the said rent as aforesaid in spite of inter se dispute
between the landlord culminating by dismissal of the suit for default?

To appreciate this point, it is necessary to dwell on the facts of this
case. Out of the two appellants, one appellant is a tenant in respect of the
D demised premises running the cycle store business in HRCOP No. 132 of 1986
for a monthly rent of Rs. 75 and the other appellant-tenant is running an
Engineering Workshop for a monthly rent of Rs. 85 in HRCOP No. 133 of 1986.
It is not in dispute that some internal squabbles arose in the administration
of Tamil Thalir Kalvi Kazhagam (hereinafter referred to as 'Kazhagam') who,
in fact, is the landlord receiving rent through its President. The appellants
E took the demised premises on lease from one Mr. Kogilasamy, the then
President of the said Kazhagam. Later, on 10th August, 1980 one Mr.
Thirumurgugan is said to have replaced the said Mr. Kogilasamy as he was
elected to be the new President. This led to an election dispute between the
outgoing and the incoming President. Thereafter, on 7th September, 1980 Mr.
F Thirumurgan, as the President, issued a notice to the appellants directing
them to pay the rent to the treasurer in future, though the name of the
treasurer was not indicated therein. On the other hand, the earlier President
Mr. Kogilasamy still demanded rent to be paid to him. In this background, a
bona fide doubt arose in the mind of the appellants as to whom they should
pay the rent. Hence, they filed RCOP Nos. 55 and 56 of 1982 before the Rent
G Controller under Section 9 (3) of the Act for permitting them to deposit the
present and the future rent. The appellants impleaded both the outgoing
President Mr. Kogilasamy and the incoming President Mr. Thirumurugan. In
spite of notice, none appeared. The Rent Controller consequently permitted
the appellants to deposit the rent. The order of the Rent Controller reveals
H that many other persons also claimed right to collect the rent of the demised
KANNAN v. T.T.K. KAZHAGAM [MISRA, J.) 501
property. Though the election of the President, as aforesaid, was on I 0th A
August, 1980 and the dispute erupting immediately thereafter but the earlier
President Mr. Kogilasamy filed a suit only in the year 1983, being O.S. No.
92 of 1983, before the Second Additional Sub-Judge, Pondicherry, for declaring
the election held on 10th August, 1980 as null and void and for permanent
injunction restraining the office bearers from carrying out the administration. B
The said suit was dismissed for default on the 6th February, 1984.

The submission of the respondent-landlord is, the period of limitation
being 30 years for setting aside the said order, it was not necessary to wait
for the said period of expire, hence, notice dated 8th August, 1985 was issued
by the incoming President to the appellants to pay the arrears of rent within C
a week. Instead of paying the rent, as a part of dilatory tactics, in reply,
sought for certain clarifications which were also replied back on 25th November,
1985. The submission is, at least from the date of the aforesaid suit of 1983
coming to an end and in any case from the date of the said notice there being
no dispute it was obligatory for the appellants-tenants to have tendered the
rent to the respondent-landlord, in not doing so, they defaulted by continuing D
to deposit the rent as before the Rent Controller.

··~ "' Section 9 of the said Act creates an avenue to a tenant to deposit the
rent with the Controller in certain circumstances. Section I 0 deals with grounds
of eviction of a tenant. It is not in dispute that a defaulting tenant is liable E
for eviction. The respondent-landlord filed an application under Section 10(2Xi)
of the aforesaid Act for the eviction of appellants-tenants on the ground of
willful default. The Rent Controller dismissed the said petition holding no
default. The First Appi:llate Court, while considering the question of default,
allowed the appeal on the sole ground that the appellants have not followed
the correct procedure by not depositing the rent to the prescribed authority. F
·-~ Under the Act, as amended, it was the Deputy Collector, who was prescribed
Authority, hence, deposit made before the Rent Controller could not be
proper deposit to save them from the default. In revision before the High
Court, it held the default on a different ground. It held that when the present
eviction proceedings being initiated in 1986, no dispute inter se between the G
landlords being pending, thus there was no justification for the appellants to
initiate proceedings under Section 9(3) of the Act. This finding of the First
Appellate Court, approved by the High Court, is quoted hereunder :-

"Eviction proceeding was initiated only in 1986, when there was no
dispute between the landlords and hence there was no justification on H
502 SUPREME CO CRT REPORTS [ 1998 J 3 S.C.R.

A the part of the tenant for initiating proceedings under Section 9(3) of
the Act."

This finding, on the face of it, is perverse. There was no initiation of
any proceeding afresh in 1986, in fact, proceeding was initiated only in the
year 1982, it was continuing only. This by itself changes the complexion of
B the interpretation. There was initiation of proceedings after the eviction
proceedings in the year 1986. To adjudicate and appreciate the controversy,
Sections 9 (3), (4) and (5) are quoted hereunder :-

"Section 9 (3) : Where any bona fide doubt or dispute arises as to the
person who is entitled to receive the rent for any building, the tenant
c may deposit such rent before such authority and in such manner as
may be prescribed and shall report to the Controller the circumstances
under which such deposit was made by him and may continue to
deposit any rent which may subsequently become due in respect of
the building before the same authority and in the same manner until
the doubt is removed or the dispute is settled by the decision of a
D competent Court or by a settlement between the parties or until the
Controller makes an order under clause (b) of sub-section (4), as the
case may be. ,
(4) (a) : The controller to whom a report is made under sub-section
(3) shall, if satisfied that a bona fide doubt or dispute exists in the
E matter, direct that, pending removal of the doubt or settlement of the
dispute as aforesaid, the deposit be held by the authority concerned.

(4) (b) : If the Controller is not so satisfied, he shall forthwith order
payment of the amount deposited to the landlord.

F (5) : Where the Controller passes an order under clause (a) of sub-
section (4) any amount deposited under sub-section. (3) may be
withdrawn only by the person who is declared by a competent Court
to be entitled thereto, or in case the doubt or dispute is removed by
settlement between the parties, only oy the person who is held by the
Controller to be entitled to the amount or amounts in accordance with
G such settlement."

Under sub-section (3) where any bona fide doubt in the mind of the
tenant or dispute about a landlord arises as to the person who is entitled to
receive the rent, to save the tenant of the consequences of default, a tenant
is permitted to deposit the rent in such manner as prescribed through an
H application before the Controller. It is within the premises of this said sub-
KANNAN v. T.T.K. KAZHAGAM [MISRA, J.] 503
section, learned senior counsel, Sh. S. Sivasubramaniam, appearing for the A
appellants, submits that after the said election of the President in 1980 a
dispute erupted between the two or more than two claimants to receive the
rent and such a situation persisted almost for two years, hence a bonafide
doubt arose in the mind of the appellants, so they made an application under
this sub-section for lending rent after complying with all the procedures as B
prescribed. On this, the Controller issued notices to both the contesting
claimants for the post of the President but in spite of this notice, none
appeared. Thereafter, as ordered, the appellants deposited the arrear of rent
and continued to deposit the rent regularly in terms of the order. Hence, in
such circumstances it was submitted that it would not constitute to be a
default for their eviction. C
On the other hand, learned senior counsel appearing for the landlord-
respondent, Mr. R. Venkataramani, repelling the arguments submitted with
great vehemence, the dispute, if at all, which precipitated in filing the aforesaid
suit in the year 1983 by Mr. Kogilasamy, was really dismissed for default on
the 6th February, 1984. Thereafter, no dispute remained, hence non-tendering D
of rent to the landlord by the appellants-tenants, who were also parties to the
same, in spite of the notice dated 8th August, 1985 through counsel, clearly
constitutes to be a default liable for eviction. For this, strong reliance is
placed on the following words of the said sub-section (3) :-

" ............ until the doubt is removed or the dispute is settled by the E
decision of a competent Court or by a settlement between the parties
or until the Controller makes an order under clause (b) of sub-section
(4), ......"

The submission is that sub-section (3) only permits continuing deposits
until the doubt is removed or dispute is settled by the decision of a competent F
court which, in the present case, is by the dismissal of the aforesaid suit.

Having heard learned counsel for the parties and having considered the
submissions, we find that this submission has no force. The use of the words
" ... the dispute is settled by the decision of a competent court" refer to G
settlement of dispute by a competent court not dismissal of a suit for default.
In this case, it is not disputed that a dispute did arise inter se between the
landlords and if that be, it could only be said to have been settled by a
competent court by adjudication of the /is between the two. Not where suit
is dismissed for default. A dismissal for default is not a settlement of a dispute
by a competent court. Further the very sub-section uses the words; " .... by H
504 SUPREME COURT REPORTS (1998]3 S.C.R.

A a settlement between the parties or until Controller makes an order".

The present is not a case of settlement between the parties. The sim pie
\ -
option left with the respondent was to have approached the Controller
(prescribed Authority), where the matter was pending, for an order and on it
being passed the respondent would have received back all the deposited rent
B and thereafter would have obligated the appellants to pay the future rent to
the landlord. In view of this, the dispute not being settled by any competent
court, the preceding words; "unitil the doubt is removed", are of significance.
In a case of this kind, is it inferable that merely on dismissal of suit for default,
the doubt would be said to have been removed from the mind of a tenant,
C even if he was a party to such a suit. On the contrary, hope of removal of
all possible doubts by decision in the suit of the contending rights was
washed away when the suit was dismissed for default. The doubt, which was
prior to the suit, returned back. The preamble of the Act states :-

"to regulate the letting of residential and non-residential buildings
D and the control of rents of such buildings and the prevention of
unreasonable eviction of tenants therefrom in the Union Territory of
Pondicherry."
, .
This refers to regulate the letting of building and control of rents and
prevention of unreasonable eviction of tenants. This primarily confers benefit
E to the tenants. This is to protect any tenant from the exploitation of landlords.
However, this Act also ensures that landlord regularly receives the rent due
to him and in case any tenant defaults under the Act he renders himself liable
for eviction. It ensures that if any rent payable to the landlord is not paid
without any reasonable cause or on mere pretext to whom to pay the rent,
F is not paid, such tenant is evicted from the premises in question. So the act
balances the interest of both, the tenant and the landlords. That is why the
tender of rent under sub-section (3)) is only when there is a bona fide doubt
as to whom the rent is payable. Whether there is or there is no bona fide
doubt or dispute, the Controller can adjudicate in case a tenant approaches.
In case, there is no bona fide doubt or dispute or the Controller does not
G reach such conclusion, he cannot get protection under the Act. But it protects
the tenant otherwise. Hence, a channel was devised to protect the tenants
from being treated as defaulters. In such circumstances, a tenant can continue
to pay the rent to the prescribed authority instead of the landlord. On the
facts of this case, it is not in dispute that in the year 1980 a dispute did arose
which caused the appellants to doubt as to whom rent be payable, hence
H tender of the rent to the Controller in the year 1982 was bona fide and valid.
KANNAN v. T.T.K. KAZHAGAM [MISRA, J.) 505
The question which remains for adjudication is, as submitted by the learned A
-,:1 counsel Mr. Venkataramani, whether after the aforesaid 1983 suit came to an
end, the rent should have been tendered to the landlord or not? We have
already recorded our findings above, mere culmination of the suit in the
present case would have no effect as to create any obligation on the tenant
to stop tendering rent under Section 9(3) and start paying to the landlord. In B
other words, in case he continues to deposit the rent regularly with the
Prescribed Authority it would not constitute to be a case of default under the
Act.

In the background of this case, the way the suit culminated without
adjudication of the rights between the parties, on dismissal of the suit for C
default and period for setting aside still subsisting even on the date when the
said notice was sent, in such circumstances it cannot be said that there could
not be any doubt in the mind of the tenants or earlier doubt stands removed.
If submission for the respondent is accepted, the very object of the Act and
protecting interest of tenant under Sub-section (3) of Section 9, would be
defeated. It would be against the very spirit and the objective of the Act D
which is to prevent the unreasonable eviction of tenants. It is not a case that
he has not tendered the rent. He is a tenant in the demised premises since
the year 1969. He has never defaulted and is paying the rent regularly. He has
continued to pay the rent even after dispute arose after waiting for some ti)Jle
and after making an application under Section 9(3) before the Rent Controller. E

When two or more interpretations are possible, the one which subserves
to the object should be accepted. We find sub-section (3) of Section 9
contemplates deposit of rent in case of bona fide doubt or dispute. This is
to salvage tenant from eviction. However, this would depend on the facts of
each case. Thus, where there are two possible interpretations, the one which F
prevents a tenant from unreasonable eviction be accepted.

Learned counsel for the respondent strongly relied upon the case
Kameshwar Singh Srivastava v. JV Addi. Distt. Judge, Lucknow and Others,
[1986]4SCC661 :-
G
"We should not be understood to have laid down that the tenant
should deposit rent in court instead of paying the same to the landlord.
Primarily a tenant is under a legal obligation to pay rent to the
landlord as and when due and if he fails to pay the same on demand
from the landlord and if he is in arrears for a period of more than four
months he would be liable to ejectment. Where there is a bona fide H
506 SUPREME COURT REPORTS [1998]3S.C.R.

A dispute regarding the landlord's right to receive rent on account of
there being several claimants or if the landlord refuses to accept the
rent without being several claimants or if the landlord refuses to
accept the rent without there being any justification for the same, the
tenant would be entitled to take proceedings under Section 30 of the
Act and deposit the rent in Court thereupon he would be deemed to
B have paid the rent to the landlord, consequently he would be relieved
of his liability of eviction. It does not however follow that the tenant
is entitled to disregard the landlord or ignore his demand for payment
of rent to him. The provisions of the Act safeguard tenant's interest
but it must be kept in mind that the landlord's right to receive rent and
c in t he event of the tenant's being in arrears of rent for a period of
more than four months, his right to evict the tenant is preserved. If
the tenant makes the deposit in court without there being any
justification for the same or if he refuses to pay the rent even on the
service of notice of demand by the landlord, he would be liable to
eviction. However the question whether the tenant is justified in
D depositing the rent in court and whether deeming provision of Section
30(6) would be available, to relieve him from the liability of eviction
would depend upon facts of each case. As noted earlier on the special
facts of the instant case we have no doubt in our mind that the
appellant had relieved himself from the liability of eviction and he was
E not in arrears of rent for a period of more than four months."

On the facts of this case, this decision is of no help to the respondent.
This refers to a case where the deposit of rent in Court is without any
justification or refusal to pay the rent even after notice in a case where there
is no bona fide doubt in the mind of a tenant in terms of Section 9(3) or even
F after removal of such doubt. However, on the facts of this case, as aforesaid,
we come to irresistible conclusion that the appellants-tenants had not defaulted
in the payment of rent and they could not be held to be defaulters liable for
eviction as doubt could not be said to have been erased.

So far decision of the First Appellate Court that rent was not deposited
G before proper authority, hence constituted to be default is also not sustainable.
It is an admitted case, when appellants-tenants made an application for
deposit of rent in the year 1982 the proper authority was the Rent Controller
before whom the rent was deposited regularly. The re.spondent's contlllltion .
is based on amendment to Section 9(3) of the Act brought in the year 1984
H where the Prescribed Authority became the Deputy Collector. We feel that in
KANNAN v. T.T.K. KAZHAGAM [MISRA, J.] 507
- .1 the absence of any submission made by the respondent either before the A
authorities whose orders are impugned or even before us with reference to
the Amending Act as to the consequences of pending proceeding initiated
prior to the Amending Act, inference contrary to the appellants cannot be
drawn. This apart, the matter was still pending before the prescribed Authority
of which respondent had notice that they could have raised this issue there. B
Hence we do not find any merit even to this submission of the respondent.

Hence, for the aforesaid reasons, both the judgment and order dated
28th November, 1988 passed by the First Principal District Judge, Pondicherry,
the first Appellate Authority, and the revisional orders of the High Court
dated 17th September, 1988, are hereby quashed. However, the landlord- C
respondent can withdraw the rent deposited with the prescribed Authority by
obtaining orders from it. Both the appeals are allowed. Cost on the parties.

I.M.A. Appeals allowed.