Supreme Court of India
MR. ANTHONY C. LEOversusNANDLAL BAL KRISHAN AND ORS.
- Citation
- 1996 INSC 1213
- Decided
- 24 October 1996
- Disposal
- Appeal(s) allowed
- Bench
- G N RAY
Holding
Summary adjudication of a tenant's rights based solely on a receiver's report is not justified; the matter must be dealt with in a regular proceeding under the appropriate Rent Act.
Summary
In a suit concerning the dissolution of a partnership, a receiver was appointed to preserve the disputed property, which included a restaurant premises occupied by the appellant, Anthony C. Leo, as a tenant. The receiver filed reports alleging that the tenant had made unauthorised constructions and was operating an illegal permit room serving liquor, and the High Court, relying on those reports, ordered demolition of the structures and refusal to renew the liquor permit without a separate eviction suit. The appellant contended that, as a third‑party tenant, his rights under the Bombay Rents Act could not be adjudicated in a summary manner and that any eviction must follow the procedure prescribed by the Rent Act. The Supreme Court held that the court could not pass such orders based solely on the receiver's reports and that the receiver could not interfere with the tenant's statutory rights. Consequently, the Court set aside the impugned order and allowed the appeal, directing that appropriate legal action under the Rent Act be pursued if necessary.
Issues considered
- Whether a court may, in summary proceedings based on a receiver's report, pass orders affecting the rights of a third‑party tenant.
- Whether the powers of a receiver under Order 40 of the CPC allow interference with tenancy rights protected by the Bombay Rents Act.
- Whether eviction or demolition of alleged unauthorised constructions requires a regular suit under the applicable Rent Act.
Legislation cited
- Bombay Rents Act
- Code of Civil Procedure, 1908s. Order 40 Rule 1(2), s. Order 40 Rule 1(3)
- Fire Brigade Rules
- Transfer of Property Act
Subjects
summary adjudicationreceivercustodia legistenant rightsBombay Rents ActOrder 40 CPCevictionunauthorised constructionpermit room
Judgment
MR. ANTHONY C. LEO A
v.
NANDLAL BAL KRISHAN AND ORS.
OCTOBER 24, 1996
B
(G.N. RAY AND B.L. HANSARIA, JJ.]
Code Of Civil Procedure, 1908-0rder 40, Rules 1 & 3-Property in
'custodia legis--Rights and obligations of third party, the tenant-Summary ad-
judication of-On the report of receiver-U'hether justified--Held, any in-
c
cidence of tenancy which is regulated and controlled by special statute, cannot
be altered varied or inteifered with except in accordance with the provisions
of such statute-But the tenant cannot claim protection of any assumed 1ight,
not flowing from the incidence of tenancy, in such situation, it is within right
of the court to pass suitable order or direction against the tenant on providing
him reasonable opportunity to defend, to which he would have been entitled D
in a regular court of law-Thus the question of summary adjudication to
depend on the nature of dispute and the defence claimed by third pafty-ln
the present case in view of the facts, report of the receiver could not have been
decided in summary proceeding.
Order 40, Rule 1(2) & (3)--Receiver-Duty of-Right and obligations of E
third party in respect of property in Custodia legis-fnteiference wit~Whether
pem1itted-Held, since the property is managed by the court through receiver,
the receiver is under. obligation to take all reasonable steps for preservation
and maintenance of such property-The receiver cannot inteifere with any
right of the third party, as the property does not rest free from incumbrances. F
In a suit with regard to dispute over a property, receiver was ap-
pointed by the High Court. The appellant was assigned tenancy of the
above property. During pendency of the suit, the landlords demanded
additional compensation for the structure of lifts and 2 box like stands in
the tenanted property from the appellant which was paid by him. This G
understanding was communicated to the receiver. After 16 years. of the
agreement, the receiver submitted a report to the High Court, in the
pending suit complaining against the appellant of having constructed the
above structures and prayed for directions of removal of the .same. In a
further report, the receiver alleged that the appellant was serving liquor H
669
670 SUPREME COURT REPORTS (1996] SUPP. 7 S.C.R.
A in permit room which was illegal and contrary to terms of lease granted
by Municipal Corporation to the Landlords and prayed for stopping the
activity. The appellant contended that when tenancy was assigned to him,
the structures were already in existence. Several affidavits were filed in
support of the fact; and that the landlords as well as the receiver were
B aware of the structure as additional compensation was paid by the appel·
lant to the landlords with regard to the structures and the receiver was
communicated of the same. He further contended that he was operating
the permit room after obtaining licence from the statutory authority.
The High Court on the basis of the reports directed the receiver to
C demolish the construction and directed the concerned authorities not to
renew 'the permit of the appellant. The Division Bench of High Court
dismissed the appeal against the above order.
In appeal to this court, the appellant contended that since he was
not party to the suit, his rights and protection as a tenant could not have
D been adjudicated in a summary manner on the basis of reports filed by a ·
receiver; and that the appointment of the receiver does not amount to
vesting of the properties in respect of which receiver was appointed by
annulling all encumbrances and rights of third parties and tenants in the
suit properties and that the right of a tenant over a suit property, well
E protected by the statute governing the relationship between a landlord and
tenant.
Allowing the appeal, this court
HELD : 1.1 In view of the fact that the appellant tenant has came
F out with a specific case, the contentions raised by the appellant should not
be decided in a summary proceeding to dispose of reports of the receiver
of a complaint by a party to the suit about alleged illegal activities by a
tenant in a property in suit. Any summary disposal of such dispute on the
claim of some legal right by the tenant is likely to seriously affect the tenant
because once some constructions in the tenanted premises are removed on
G a finding that such constructions were made illegally and unauthorisedly
by the tenant, the tenant not only suffers the said direction of reriioval at
present but becomes liable to be evicted from the suit premises for such
unauthorised construction by him. The findings against the tenant on the
question of running a permit room cannot but seriously affect the tenant's
H right to operate a permit room and is also likely to expose him to the risk
ANTHONY C. LEO v. NANDLAL BAL KRISHNAN 671
of being evicted from the suit premises. Therefore the impugned order A
cannot be held to be justified. (687-A-D]
1.2 The question of summary adjudication by the court appointing
the receiver or relegating the receiver to a regular suit for adjudication of
the dispute concerning third party will depend on the nature of dispute
and the defence claimed by the third party. If for the purpose of deciding B
the dispute of unauthorised and illegal activity affecting maintenance and
preservation of the property in custodia legis it becomes necessary to
determine any right claimed under a statute or flowing from some action
inter parte as may be pleaded and required to be decided, it is only
desirable that the court would restrain from such determination in the c
summary proceeding initiated before it on the complaint of the receiver or
a party to the suit and court will direct the receiver or a party for the suit
seek adjudication of the dispute before a competent court by bringing
appropriate legal action. Save as aforesaid, it will not be correct to contend
that in no case the court exercising control and supervision of the property D
in suit by appointing a receiver will be incompetent even to pass direction
against a third party for purpose of presentation of the property, once such
third party pleads defence in justification of his action. (686-B-E]
,
>·
.1.3. The court becomes custodia legis of the properties in suit in
respect of which receiver is appointed. Such dejure possession of the Court E
through its receiver, does not bring about vesting of the properties in
receiver or in court free from incumbrances even pendente lite. Despite
appointment of a receiver, rights and obligations of third parties in respect
of properties in custodia /egis remain unaffected. Where a receiver ap-
pointed by the court is in actual physical possession of a property, no one,
whoever he may be can disturb the possession of the receiver and the court F
may hold such person who disturbs receiver's possession as guilty for
committing contempt of court. A man, who has a right paramount to that
of receiver, must before he takes any step of his own motion, must apply
to the court for leave to assert his right. Grant of leave in such case is the
rule and refusal to grant leave is exception. The rule that receiver's G
possession will not be disturbed without leave of the court is, not ap-
plicable if the receiver is not in actual physical possession of the property.
(683-G-H, 684-A-B]
Everest Coal Company Pvt. Ltd. v. State of Bihar & Ors., AIR (1977)
SC 2304, referred to. H
672 SUPREME COURT REPORTS (1996) SUPP. 7 S.C.R.
A 1.4. Since the properties in a suit are being managed maintained and
administered by the Court through receiver the receiver is under an
obligation to take all reasonable steps for preservation and maintenance
of such properties. If for such. preservation action in civil or criminal court
is necessary, the receiver is to draw the attention of the Court, of relevant
B facts necessitating such legal action and take leave of the court to institute
appropriate legal proceedings for the preservation of the property. As the
property does not rest free from incumbrances in custodia legis by annull-
ing all rights and obligations attached to the property, the receiver cannot
interfere with any right of the third party. Sub rule (2) of Rule 1 of Order
40 of the Civil Procedure Code clearly indicates that the court and its
C officer, the receiver, does not possess any right higher than the right a
party to the suit possesses. [684-C-F]
1.5. No order for eviction of the tenant can be passed by the Court
at the instance of its officer, the receiver, without taking recourse to
D appropriate proceedings for eviction of the tenant under the appropriate
statute regulating and governing the inter-se rights of landlords arid
tenant. Where a rent act is applicable, the interse rights and obligations
of the Landlord and tenant are regulated and controlled by such Rent Act.
In areas where any special_ law governing the incidences of tenancy is not
applicable, the law relating to lessor and lessee as envisaged by the general
E law of land, namely, Transfer of Property Act, will regulate and determine
interse rights of landlord and tenant. In dealing with the rights and
obligations which a third party may have in respect of a property in which
a receiver has been appointed the receiver, like a party to the suit, will have
same limitations. The receiver will be bound by the incidences of tenancy
p flowing from the statute regulating and determining inter-se f!ghts of
landlord and tenant. Even apart from an eviction proceeding, any in·
cidence of tenancy which is regulated and controlled by a special statute
cannot be altered, aired or interfered with except in accordance with the
provisions of such statute. The court in such cases has no jurisdiction to
pass orders and direction affecting the right of the tenant protected,
G controlled or regulated by the Rent Act on the score of expediency in
passing some order or direction for the maintenance or preservation of
the property in custodia legis. [685-A, 684-F-G, 685-B-C]
1.6. Though a tenant of a property in Custodia /egis cannot be
H deprived of statutory protection of the rights of tenant vis-a-vis landlord
AN1HONYC.LE0v. NANDLALBALKRISHNAN[G.N.RAY,J.] 673
he cannot claim protection of any assumed right not flowing from the A
incidences of tenancy. If a tenant resorts to unauthorised and illegal
activity in respect of tenanted premises when such premises is in custodia
/egis, for prevention of such illegal and unauthorised activities not consis-
tent with any right flowing from the incidence of his tenancy, it may .not be
necessary to institute a suit for preventing the tenant from such illegal B
activities, but the court, being apprised by the receiver of such illegal
activities of a tenant, thereby obstructing the court's overall supervision
and concern for preserving or maintaining the property in custodia legis,
will be within its right to pass suitable order or direction against the tenant
for prevention of illegal and unauthorised activities after giving the tenant
reasonable opportunity to place his defences against allegation of unlawful C
and illegal activity must depend on the facts of each case. The Court, in
such a case, should ensure broadly that the tenant is not deprived of the
reasonable opportunity to which he would have been entitled if an action
against him in a court of law had been brought on such complaint.
[685-D, F-H, 686-A] D
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 13237 of
1996.
From the Judgment and Order dated 23:2.96 of the Bombay High
Court in Appeal (Lodged) No. 3/96 in Suit No. 1010 of 1973. E
Ms. Indu Malhotra for the Appellants.
Mrs. Manik Karanjawala for the Respondents.
The Judgment of the Court was delivered by F
G.N. RAY, J. Leave granted.
Heard learned counsel for the parties. The order dated February 23,
1996 passed by the Division Bench of the Bombay High Court in App~· ,.G
(Lodged) No. 3 of 1996 in Suit No. 1010 of 1973 in the Ordinary Origin~'
Civil Jurisdiction arising out of the Order dated December 6; 1995 passed·.
by the learned Single Judge on the reports of the receiver appointed by the
Court in the said Suit No. 1010 of 1973 in 1so far as the same affects the
appellant. Mr. Anthony C. Leo, is the subject matter of challenge in this
appeal. H
674 SUPREME COURT REPORTS (1996] SUPP. 7 S.C.R.
A Nandlal Balkrishnan Khanna and other partners of Khanna Con-
struction House obtained a lease of Plot No. 44 of Scheme No. 58, Worli
Estate, Bombay from the Municipal Corporation of Greater Bombay. The
said partners constructed a building on the said plot known as Khanna
Construction House. The appellant claims tenancy in respect of a room in
B the said premises under the said partners where he is running a business
named and styled as Flora Chinese Restaurant. In view of disputes arising
between the partners of Mis Khanna Construction House, one of the
partners filed a suit in the ordinary original civil jurisdiction of the Bombay
High Court being Suit No. 1010 of 1973 against other partners for dissolu-
tion of the firm and distribution of assets including the building Khanna
C Construction House. The appellant is not a party in said suit. Some time
in 1973, the Bombay High Court appointed a Receiver in the said suit in
respect of the assets of the partnership firm including the said building
Khanna Construction House.
D The appellant's case is that the landlords of the building granted
tenancy to Abdul Rehman Noor Mohammad and others in respect of
ground floor premises where the said tenants started a restaurant in the
name of Flora Restaurant. Some time in 1965, the said business together
with the goodwill and benefit of tenancy rights was taken over by J.S.
Khanna and S.G. Khanna. In April, 1967, the said Sri J.S. Khanna and S.G.
E Khanna assigned the said business as a going concern together with good-
will and benefit of tenancy rights to Father S. Perreira. On April 10, 1970,
Father Perreira transferred the said restaurant business to the appellant
together with the goodwill and benefits of tenancy. After taking over the
said business, the appellant changed the name of the business to Flora
F Chinese Restaurant. It is .the specified case of the appellant that when he
got assignment of tenancy and business of the restaurant, the tenanted
premises had already in it lofts and two stand like boxes attached on the
outer wall for storing gas cylinders and air conditioning units,
The appellant has contended that in 1979, the landlords made a
G .demand for additional compensation for the box type stands affixed on the
outer wall of the premises for storing gas cylinders and air conditioning
units. The landlord also raised some dispute regarding the chimney duct
,in the restaurant premises. According to the appellant, a meeting was held
between the appellant and the landlords at the instance of court receiver,
H and the landlords demanded extra compensation at the rate of Rs. 2 per
ANTIIONYC.LEOv. NANDLALBALKRISHNAN[G.N. RAY,J.] 675
square foot of the area where the said two stands for housing gas cylinders A
- and air conditioning units were installed. On measurement, the said area
was found to be 60 sq. ft. and the appellant had agreed to pay additionaL
amount of Rs. 120 per month. The landlords also insisted that the appellant
would bear additional insurance premium and the appellant had agreed to
such demand. The appellant has contended that under the Fire Brigade
B
Rules, the gas cylinders cannot be stored inside the premises but such gas
cylinders are required to be stored· outside the premises. The appellant
further contends that by letter dated June 25, 1979, the learned Advocate
of the respondent had informed the court receiver about such agreement
between the landlords and the appellant. The appellant has also contended
that in a meeting between the said receiver·and the parties to the suit, it c
was decided that the receiver would file a suit for eviction of the appellant
in the Court of Small Causes and one Mr. N.K. Desai was also engaged to
file such suit for eviction on behalf of the receiver. But till today, no such
eviction suit has been filed against the appellant.
D
In March, 1995, after a lapse of about 16 years, the landlords thought
of a short cut measure to evict the appellant from the said premises without
filing an ejectment suit in the Court of Small Causes and in furtherance of
such measure, induced the court receiver to submit a report to High Court
in the pending suit making complaint against the appellant of construction
of said lots and the said two stand type boxes on the outer wall for storage E
of gas cylinders and air conditioning units and the receiver prayed for a
direction from the High Court against the appellant for removal of the said
lofts and the said box type stands.
On August 22, 1995, the said receiver submitted a further report in F
the said suit alleging therein that appellant had a permit room in the said
restaurarit where liquor was being served and such activity was illegal and
contrary to the terms of lease granted by Greater Bombay Municipal
Corporation in favour of the landlords prohibiting running a bar in the
premises built on the leasehold land. The receiver also sought for a
direction from the High Court on the appellant for stopping the said illegal G
activity of using the premises as a permit room and serving.liquor in a room
in the said restauraiit. The appellant contends that th~ appellant was
carrying on the ·activity of having a permit room and serving liquor to
customers since several years after the lifting of the prohibition policy in
the State of Maharashtra. The appellant has also contended that he has H
676 SUPREME COURT REPORTS [1996] SUPP. 7 S.C.R.
A obtained licence for such permit room and service of liquor in the res-
taurant. The appellant has further contended that Greater Bombay
Municipal Corporation is agreeable to allow service of liquor and running
· a permit room in the leasehold property on payment of specified sum to
the Corporation and the appellant agrees to pay such amount to the
B Corporation.
In support of the contention of the appellant that long before the
receiver was appointed in the said suit inter-se the partners of the said firm,
the said two box type stands and lofts were in existence in the premises
where the appellant had been carrying on his business of restaurant,
C supporting affidavits were filed before the High Court by one Abdul Razak
Dawood stating that Flora Restaurant was started in 1962 by Noor
Mohammed and others (though the year of starting the said business of
restaurant was wrongly mentioned as 1962 instead of 1964). It was stated
by the said Razak that he was associated with the restaurant business ever
D since its inception and when J.S. Khanna and S.G. Khanna took over the
said business from Noor Mohammad, the said lofts and stands for storing
gas cylinders and air conditioning units were in existence. Mrs. Mantle D
pente .an.d her husband who were employed in the said restaurant in 1967,
also filed an affidavit stating that the said lofts and two stands were in
existence in 1967. Another affidavit affirmed by one Charlie D'Souza was
E also filed. The deponent stated that he had been working in the restaurant
since 1969 and ever since his employment, he had seen the said lofts and
stands. Similar affidavit was filed by R. Murusen stating that he was
employed in the kitchen of the restaurant in 1967 and he had seen the said
boxes and lofts ever since his employment in 1967.
F
The appellant also contended before the learned Single Judge,
before whom the reports of the receiver against him were filed, that the
receiver appointed in the suit for dissolution of partnership and for dis-
tribution of assets including the said building Khanna Construction House
was limited to adjudication of rights and obligations inter-se the parties and
G appellant not being party to the same, 3is rights qua tenant was not
requir1!d to be adjudicated in the said suit and, in any event, his right as a
tenant was protected under the Bombay Rents Act. Although the appellant
had not resorted to any act for which his tenancy could be terminated and
he could_ be evicted from the said premises under his occupation as a
H tenant:, even if it is assumed that the appellant was liable to be evicted from
AN1HONYC.LEOv.NANDIALBALKRISHNAN[GN.RAY,J.] 677
the said premises, such eviction could only be affected by institution of A
appropriate suit for eviction of the appellant in the Small Causes Court
- under the Bombay Rents Act on permissible grounds under the said Act.
It was quite open to the High Court to grant permission to the receiver for
institution of suit for eviction of the appellant after being prima f acie
satisfied on materials submitted before the Court that a case for instituting B
suit for eviction was justified.
The appellant also contended that the receiver is not entitled to
bypass the_ statutory requirement of evicting a tenant only in due process
of law by initiating eviction proceeding under the Bombay Rents Act in the
appropriate court simply by alleging, at the instance of landlords, that the C
tenant had made unauthorised constructions and had indulged in un-
authorised activity of using a portion of the ten~ted premises as a permit
room and place for service of liquor to the customers. The appellant also
contended that if the court would decide the question of. eviction of the
appellant only on the )Jasis of the reports of the receiver, the valuable rights D
of a tenant protected under the Bombay Rents Act would be defeated and
the tenant would be deprived to have a full fledged trial where he would
be entitled to lead evidence in support of his case and cross examine the
witnesses of the landlord.
Such contentions were, however, not accepted by the learned Judge E
and on the findings, inter alia, that the appellant had made unauthorised
construction of the said lofts and box type stands on the outer wall and
had also been using a portion of the tenanted premises as a permit room
and has been serving liquors to the customers in such portion, when under
the terms of lease granted by Greater Bombay Mullicipal Corporation to F
the landlords use of the leasehold property in vending liquors was
prohibited, and by such action of appellant, the lease in favour of the
landlords was liable to be cancelled, the learned Single Bench of the
Bombay High Court directed that t_he concerned authorities would not
renew the permit of the appellant for serving liquor and the receiver would
demolish unauthorised constructions with the aid of the police, if necessary. G
The appellant being aggrieved by such directions of the learned
Single Bench, preferred Appeal (Lodged) No. 3 before the Division Bench
of the High Court and the Division Bench by the impugned judgment
dismissed the appeal and upheld the directions given by the learned Single H
678 SUPREME COURT REPORTS [1996] SUPP. 7 S.C.R.
A Bench. The Division Bench, however, stayed demolition of the said con-
structions for a period of six weeks to enable the appellant to take legal
steps against the order.
At the hearing of the appeal, Mr. Salve, the learned Senior Counsel
appearing for the appellant, has contended that the receiver was appointed
B in the said suit for preservation of the properties in dispute for protecting
the interests of the parties to the suit. By such appointment, the court
became custodia legis of the properties in suit through the officer of the
court, namely, the receiver. Such appointment of receiver does not amount
to vesting of the properties in respect of which receiver was appointed by
C annulling all incumbrances and rights of third parties and tenants in the
suit properties. The anxiety of the receiver or, for that matter of the court
appointing the receiver to maintain the properties in suit may be well
appreciated. But being impelled by such anxiety, neither the receiver nor
the court can affect the tenant's rights in the suit property well protected ·
D by the statute governing the relationship between a landlord and tenant:
Mr. Salve has submitted that even prim a f acie there was no material
on the basis of which the High Court could come to the finding that the
appellant has altered the tenanted premises either before or after the
appointment of receiver and during the continuance of the receivership, in
E such a manner by making permanent constructions in the tenanted
premises which had either materially altered the nature and character of
the said premises or have endangered the safety and security of the same.
Mr. Salve has submitted that admittedly the tenanted premises was being
used as a restaurant for a very long time. The appellant became the tenant
p when Father Perreira had transferred the tenancy right together with
goodwill of the restaurant business as an ongoing business concern in
favour of the appellant in April, 1970 and since then, the appellant has
been running the business of restaurant by changing its name from Flora
Restaurant to Flora Chinese Restaurant.
G Mr. Salve has submitted that the alleged unauthorised construction,
namely, the said lofts and box type stands on the outer wall for storing gas I
•
cylinders and air conditioning units, were in existence long before the ~
appellant got the assignment of tenancy right in 1970. The appellant in
support of such contention about the existence of such lofts and box type
H stands, have filed supporting affidavits by a number of persons as already
ANIBONYC.LEOv.NANDLALBALKRISHNAN[G.N.RAY,J.) 679
indicated. A
Mr. Salve has submitted that for running a business of restaurant,
storage of gas cylinders was an indispensable necessity and it does not
requir~ any imagination that the predecessor of the appellant who had run
the business of the restaurant must had stored gas cylinders in the
premises. Under the Fire Brigade Rules, gas cylinders were required to be
B
stored by ensuring proper safety and such storage on outside walls was only
just and porper and in conformity of the Fire Brigade Rules. Precisely for
the said reason, the predecessors in restaurant business in the said
premises had made arrangements of such storage of gas cylinders by
constructing box type stands on the outer wall. Such box type constructions c
were also made for keeping air conditioning units. It is nobody's case that
the appellant installed air conditioning unit for the first time in the said
restaurant and it is the appellant who has been running the business of
restaurant in the premises in question for the first time after obtaining
assignment of tenancy rights.
D
Mr. Salve has submitted that the appellant's case of existence of the
said lofts and box type stands on the outer walls from long before his
induction as a tenant, gets ample support from the affidavits affirmed by a
number of persons who being closely associated With the restaurant busi-
ness in the tenanted premises long before the induction of the appellant, E,
have categorically stated about the existence of such lofts and box type
stands from long before the induction of the appellant as a tenant. Such
affidavits could not have been discarded in a summary manner in disposing
of the reports of the receiver, more so, when the valuable tenancy right of
a third party like the appellant was intrinsically involved in the exercise of F
giving directions affecting the interest of the tenant and nullifying the
statutory protection of a tenant.
Mr. Salve has also submitted that landlords and the receiver were
well aware of the existence of such lofts and box type constructions and in G
June 1979, the landlords made demands for extra payment at the rate of
Rs .. 2 per sq. ft. for such construction measuring 60 sq. ft. in all and also
additional premium on account of storing gas cylinders by the appellant.
The appellant's Advocate's letter dated June 25, 1979 sent to the receiver
clearly indicates the factum of landlords and receiver's awareness of the
existence of the said lofts and the box type stands and the agreement H
680 SUPREME COURT REPORTS (1996] SUPP. 7 S.C.R.
A arrived between the landlords and the appellant to pay additional sum of
Rs. 120 and additional amount on account of premium.
Mr. Salve has submitted that the landlords and the receiver were fully
aware of the legal position of the landlords vis-a-vis a tenant protected by
the Bombay Rents Act and a decision was taken long back to institute an
B eviction· suit by the receiver against the appellant in 'the Court of Small
Causes under the said Rents Act, but such eviction suit was not instituted
presumably on appreciating that such attempt for eviction would be an
exercise in futility. Mr. Salve has also submitted that running a bar in a
portion of the restaurant is only ancillary to the main business of an eating
C house or restaurant. Such bar was being run after obtaining valid licence
from the appropriate statutory authority. The allegation of the threat of
cancellation of the lease granted by the Municipal Corporation to the
landlords on account of running a bar in the said premises is also un-
founded, 3nd a case of such threat is being set up as a ploy to oust the
D appellant. Consumption of liquor was prohibited in Maharashtra when the
lease was llf~nted by the Corporation to the landlords and, accordingly in
the lease deed, a clause containing prohibition of using the leasehold
property for service of liquor was incorporated. There has been change in
the policy and Maharashtra is not a State where consumption of liquor in
public is prohibited. The Municipal Corporation on being approached by
E the appellant, has expressed its willingness to allow consumption of liquor
in the leasehold property by amending the terms of lease on payment of
specified sum.
Mr. Salve has further submitted that a tenant may be liable to be
F evicted for unauthorised construction or for other activities mentioned in
the Rent Act. But the tenant cannot be evicted from the tenanted premises
on the alleged ground of unauthorised construction or other illegal ac-
tivities which may enable the landlord to obtain order of eviction under the
Bombay Rents Act unless a suit for eviction is filed before the Small Causes
Court under the said Act and existence of grounds for eviction are clearly
G established by leading evidence in such suit. A landlord is also not entitled
to demofo;h alleged unauthorise~ construction in the tenanted premises
unless the dispute about such construction is adjudicated in an appropriate
fo~um. In any event, the dispute as to the existence of una,uthorised
ccmstruction by a tenant is required to be adjudicated only in a suit
H instituted against the tenant where such dispute may be resolved on the
ANTI-IONYC.LEOv.NANDLALBALKRISHNAN[G.N.RAY,J.] 681
basis of evidence to be adduced by the respective party by examining A
witnesses in support of the respective case.
Mr. Salve has submitted that the appellant is not a party in the said
suit. His rights and protection as a tenant could not have been adjudicated .
in a summary manner on the basis of reports filed by the receiver. The B
impugned order is not only illegal but manifestly unjust and improper
resulting in serious miscarriage of justice.
It has been contended by Mr. Salve that the receiver who merely
holds dejure possession of the property for the benefit of parties to the suit
without the property being vested in the receiver, has no higher rights than C
the landlords themselves. If there was no receiver, the remedy of the
landlords was to file a suit against the tenant in the Court of Small Causes
being the appropriate court under the Bombay Rents Act. Such position
.·is not changed by mere appointment of a court receiver in a suit inter-se
the landlords for distribution of properties in which the tenant is not a D
party. Mr. Salve has submitted that if such course of action against the
tenant is permitted, it would be easy for designing landlords to circumvent
the provisions of Rent Act by filing a suit amongst the landlords and after
obtaining an order for receiver in such suit even by the consent, and then,
with the instrumentality of the receiver to obtain orders from Court in the
said suit against the tenant in complete disregard of the' statutory protec- E
tion of the rights of the tenant under the Rents Act regulating inter-se rights
and obligations of a tenant and landlord. Mr. Salve has also submitted that
such procedure would be contrary to Order 40 Rule 1 (2) of Civil Proce-
dure Code which protects the rights of the persons who are not parties to
the suit as against the receiver. Mr. Salve has submitted that the impugned F
directions of the High Court for demolishing the said lofts and box type
constructions and also direction prohibiting renewal of licence for running
a bar by the appellant and restriction imposed on the appellant to have a
permit house and to run a bar in the tenanted premises, should be set aside
by allowing this appeal.
G
Mr. R. Nariman, the learned Senior Counsel appearing for the
respondents, has, however, disputed the contentions of Mr. Salve. Mr.
Nariman has contended that for an order of eviction of a tenant, a suit
under the appropriate Rent Act, where such Act is applicable is required
to be instituted and such protection of the tenant cannot be defeated H
682 SUPREME COURT REPORTS [1996] SUPP. 7 S.C.R.
A without taking recourse under the provisions of the Rent Act. But in the
instant case, no order of eviction of the tenant has been passed by the
Court in giving the directions on the receiver by the impugned order.
Mr. Nariman has submitted that the receiver has been appoint~d in
respect of properties in dispute including the building, Khanna Construc-
B tion House, because the Court felt it expedient to preserve the properties
in dispute by getting such properties supervised and administered by its
own officer, the receiver. When the properties are custodia legis, the Court
is not only competent to issue necessary orders and direction on its officer,
the receiver, for proper preservation and maintenance of such properties
C but in a way, the Court is under the obligation to issue appropriate orders
and directions for effecting such maintenance and preservation.
Mr. Nariman has contended that a tenant has a statutory protection
against eviction except on grounds for such evicti.on under the Rent Act
D and the rela1ionship between a landlord and a tenant is controlled and
regulated by the provisions of the Rent Act. The circumstances under
which an order of eviction is to be made, the authority which will pass such
order are contained in the Rent Act. Mr. Nariman has submitted that it
should be appreciated that although a tenant is free to enjoy peaceful
E possession of the tenanted premises, he has no right to destroy such
premises or indulge in such activities which are likely to seriously affect the
safety and security of the house. Similarly he is not entitled to indulge in
activities which will materially effect the nature and character of the
tenanted premises and is likely to bring about a situation by which the
superior right of the landlord in the premises \\@ be in jeopardy. Such
F action being per se illegal and unauthorised and beyond the usual rights of
a lessee vis-ai-vis the lessor, the lessor or landlord has not only right to
prevent such activities but has also right to take recourse to eviction of the
lessee or tenant by bringing an action for eviction in accordance with the
provisions of the relevant tenancy act. If a landlord is entitled to take
G suitable action for preventing a tenant in indulging in unlawful activities in
respect of tenanted premises, the receiver has certainly such right. The
receiver has a paramount duty to draw the attention of the Court appoint-
ing the receiver, of such unlawful activities by the tenant and to seek
appropriate direction by way of remedial measures to prevent such ac-
H tivities.
, ANlHONYC.LEOv.NANDLALBALKRISHNAN[G.N.RAY,J.) 683 -
Mr. Nariman has submitted that in the instant case, the receiver has A
not done anything extraordinary. Since the tenant had changed the nature
and character of the tenanted premises by making permanent construction
and had indulged in storing gas cylinders endangering the safety and
security not only of such premises but of the entire building and has
indulged in using the premises as a bar, even when the landlords under the B
terms of the lease are prohibited to indulge in such activities at the risk of
lease granted by Municipal Corporation of Greater Bombay being can-
celled, the receiver and, for that matter, the Court had a solemn duty to
pass appropriate orders and directions for prevention of such unauthorised
activities after affording the tenant an opportunity of being heard.
c
Mr. Nariman has submitted that the tenant was put to notice of the
allegation of his illegal activities in the tenanted premises and was also
given opportunity to raise his defences against such allegation. After giving
the tenant reasonable opportunity to place his case, the Court after being
satisfied that the tenant had indulged in illegal activities, not permitted to D
be undertaken in exercise of his right as a tenant, has passed the directions
contained in the impugned order so that the properties in custodia legis are
properly preserved during the pendency of the said suit. The landlords,
despite such orders or directions of the Court, still retain the right to bring
action for eviction under the Bombay Rents Act for the said illegal
activities. In the aforesaid facts, no interference is called for and the appeal E
should be dismissed.
Giving our careful consideration to the facts and circumstances of
the case and submissions made by the learned counsel for the parties, it
appears to us that a receiver is appointed by the Court when the Court F
entertains a view that for preservation of the properties in suit, till the rights
of parties to the suit are finally adjudicated, such properties should be
preserved by exercising control and supervision of the same through the
officer of the Court, the receiver. The Court becomes custodia legis of the
properties in suit in respect of which receiver is appointed. Such de jure G
possession of the Court through its receiver, however, does not bring about
vesting of the properties in receiver or in court free from incumbrances
evenpendente lite. Despite appointment of a receiver, rights and obligations
of third parties in respect of properties in custodia legis remain unaffected.
Where a receiver appointed by the Court is in actual physical possession
of a property, no one, whoever he may be, can disturb the possession of H
684 SUPREME COURT REPORTS [1996) SUPP. 7 S.C.R.
A the receiver and the Court may hold such person who disturbs receiver a
possession as guilty for committing contempt of court. A man, who thinks
he has a right paramount to that of receiver, must before he takes any step
of his own motion, apply to the Court for leave to assert his right. Grant
of leave in such case is the rule and refusal to grant leave is exception
(Everest Coal Company Pvt. Ltd. v. State of Bihar and Ors., AIR (1977) SC
B 2304. The rule that receiver's possession will not be disturbed without leave
of the Court is, however, not applicable if the receiver is not in actual
physical possession of the property.
Since the properties in a suit is being managed, maintained and
C administered by the Court through receiver, the receiver is under an
obligation to take all reasonable steps for preservation and maintenance of
such properties. If for such preservation, action in civil or criminal court
is· necessary, receiver is to draw the attention of the Court of relevant facts
necessitating such legal action and take leave of the Court to institute
D appropriate legal proceedings for the preservation of the property. As the
property does not vest free from incumbrances in custodia legis by annull-
ing all rights and obligations attached to the property, the receiver cannot
interfere with any right of the third party. Sub rule (2) of Rule 1 of Order
40 of the Code of Civil Procedure provides : "Nothing in this rule shall
authorise the court to remove from possession or custody of property any
E person whom any party to the suit has not a present right to remove."
Such sub-rule clearly indicates that the Court and its officer, the
receiver, does not possess any right higher than the right a party to the suit
possesses.
F
Where a. Rent Act is applicable, the inter-se rights and obligations of
the landlord and tenant are regulated and controlled by such Rent Act. In
areas where any special law governing the incidences of tenancy is not
applicable, the law referring to lessor and lessee as envisaged by the
general law of the land, namely, Transfer of Property Act, will regulate and
G determine inter se rights of landlord and tenant. In dealing with the rights
and obligations which a third party may have in respect of a property in
which a receiver has been appointed, the receiver, like a party to the suit,
will have the same limitation. The receiver will be bound by the incidences
of tenancy flowing from the statute regulating and determining inter se
H rights of landlord and tenant. Therefore, there is no manner of doubt that
AN1HONYC.LEOv. NANDLALBALKRISHNAN[G.N.RAY,J.) 685
no order for eviction of the tenant can be passed by the Court at the A
instance of its officer, the receiver, without taking recourse to appropriate
proceedings for eviction of the tenant under the appropriate statute
regulating and governing the inter-se rights of landlord and tenant. It may
also be emphasised here that even apart from an eviction proceeding any
incidence of tenancy which is regulated and controlled by a special statute
B
cannot be altered; varied or interferred with except in accordance with the
provisions of such statute. The Court in such cases has no jurisdiction to
pass orders and direction affecting the rights of the tenant protected,
controlled or regulated by Rent Act on the score of expediency in passing
some order or direction for the maintenance and preservation of the
property in rnstodia legis. c
. It is to be indicated that though a tenant of a property in custodia
legis cannot be deprived of statutory protection of the rights of tenant
vis-a-vis landlord, a tenant cannot claim protection of any assumed right
not flowing from the incidences of tenancy. For example, if a tenant starts D
making some unauthorised construction in the tenanted premises threaten-
ing safety and security of the tenanted premises or of the building as .a
whole, the landlord can certainly prevent such activities by the tenant by
bringing appropriate action in Court seeking prohibitory and mandatory
order against the tenant without seeking his eviction. Such right of the
landlord must be held to be in addition to his right to seek eviction under E
the appropriate tenancy law, if permitted.
In our view, if a tenant resorts to unauthorised and illegal activity in
respect of tenanted premises when such premises is in custodia legis, for
prevention of such illegal and unauthorised activities not consistent with F
any right flowing from the incidence of his tenancy, it may not be necessary
to institute a suit for preventing the tenant from such illegal activities; but
the Court, being apprised by the receiver of such illegal activities of a
tenant, thereby constructing the Court's overall supervision and concern
for preserving or maintaining the property in custodia legis, will be within
its right to pass suitable order or direction against the tenant for prevention G
of illegal and unauthorised activities after giving the tenant reasonable
opportunity to place his defences against allegation of unlawful and illegal
activity. What should be reasonable opportunity, must depend on the facts
of each case. The Court, in such a case, should ensure broadly that the
tenant is not deprived of the reasonable opportunity to which he would H
686 SUPREME COURT REPORTS [1996) SUPP. 7 S.C.R.
A have been entitled if an action against him in a court of law had b©en
brought on such complaint.
It appears to us that since the court -must be presumed to be fully
unbiased in deciding the allegation of unauthorised and illegal activities of
B a tenant causing prejudice against the lawful owner in the matter of
preservation and maintenance of the property pendente lite. the necessity
of adjudication of such dispute by another court by bringing a legal action
before it, as a matter of course, is neither necessary nor expedient. It
however, should be made clear that if for the purpose of deciding the
dispute of unauthorised and illegal activity affecting maintenance and
C preservation of the property in custodia legis it becomes nec,essary to
determine any right claimed under a statute or flowing from some action
inter pa1te as may be pleaded and required to be decided, it is only
desirable that the Court would refrain from such determination in the
summary proceeding initiated before it on the complaint of the receiver or
D a party to the suit and the Court will direct the receiver to seek adjudica-
tion of the disput1! before a competent court by bringing appropriate legal
action. Save as aforesaid, it will not be correct to contend that in no case
the Court exercising control and supervision of the property in suit by
appointing a receiver will be incompetent even to pass direction against a
third party for the: purpose of preservation of the property, once such third
E party pleads defence in justification of his action. The question of summary
adjudication by the Court appointing the receiver or relegating the receiver
to a regular suit for adjudication of the dispute concerning third party will
depend on the nature of dispute and the defence claimed by the third party.
F In the facts of the case, however, it appears to us that the appellant
tenant has come out with a specific case that the structures in question
were there before his induction as a tenant. In support of such contention,
a number of supporting affidavits have been filed. The appellant has also
contended that the landlords and the receiver were fully aware of the
existence of the structures long back, and according to the appellant, at
G one point of time an agreement was reached between the landlords and
the appellant for payment of a sum of Rs. 120 for such construction
covering about 60 sq. ft. besides further amount on account of additional
premium to be paid by the landlords and an Advocate's letter was sent to
the receiver apprising the receiver of such understanding between the
H parties.
AN1HONYC.LE0v.NANDLALBALKRISHNAN[G.N.RAY,J.) 687
I
The appellant has also claimed right to operate in a portion of the A
tenanted premises a permit room for serving liquor to the customers of the
hotel after obtaining licence from the statutory authority on the footing that
such right is incidental and ancillary to his right to operate an eating house
or restaurant. Such contention.5 should not be decided in a summary
proceeding to dispose of reports of the receiver or a complaint by a party B
to the suit about alleged illegal activities by a tenant in a property in suit.
Any summary disposal of such dispute on the claim of some legal right by
the tenant is likely to seriously affect the tenant, because once some
constructions in the tenanted premises are removed on a finding that such
constructions were made illegally and unauthorisedly by the tenant, the
tenant not only suffers the said direction of removal at present but becomes C
liable to be evicted from the suit premises for such unauthorised construc-
tion by him.· Similarly, the finding against the tenant on the question of
running a permit room cannot but seriously affect the tenant's right to
operate a permit room and is also likely to expose him to the risk of being
• evicted from the suit premises. D
In the aforesaid facts, the impugned order cannot be held to be
j1stified. We, therefore, allow the appeal and set aside the impugned order.
It will be open to the receiver to bring appropriate legal action against the
tenant appellant for removal of the alleged unauthorised structure and for
preventing him from running a permit room in the tenanted premises, E
besides instituting a suit for eviction under the Rent Act. By way of
abundant caution, we make it clear that we have not expressed any opinion
on the respective rights of the parties.
K.K.T. Appeal allowed.
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