Holding

The case is governed by Section 12(3)(a) as it stood before amendment; education cess quantified as a monthly amount makes the rent payable monthly, and the tenant's failure to comply with Section 12(3)(a) justifies eviction.

Summary

The Supreme Court examined a lease where the tenant paid a monthly rent of Rs.900 plus a monthly education cess of Rs.120. The tenant fell into arrears and did not pay the amount within one month of a statutory notice of termination. The principal issues were whether the amendment to Section 12(3) of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 was prospective and whether the education cess, although levied annually, could be treated as part of rent payable monthly, thereby invoking Section 12(3)(a). The Court held that the amendment was prospective, the parties had quantified the cess as a monthly payment making the total rent payable monthly, and the tenant failed to satisfy the conditions of Section 12(3)(a). Consequently, the eviction decree was upheld, the appeal dismissed with costs, and the tenant was given time to vacate by 31 December 1991.

Issues considered

The amendment to Section 12(3) of the Bombay Rents Act, 1947 is prospective or retrospective and its applicability to the present case
Whether rent inclusive of education cess, payable annually but quantified monthly, falls under Section 12(3)(a) or Section 12(3)(b)
Whether education cess can be treated as a permitted increase and part of rent payable monthly by agreement of the parties
Whether the tenant is entitled to protection under Section 12(3)(b) after paying arrears before the hearing
Whether the eviction order is justified given the tenant's failure to pay arrears within one month of notice

Legislation cited

Amendment Act 18 of 1987 (Bombay Rents Act)s. 25
Bombay Rents, Hotel and Lodging House Rates Control Act, 1947s. 11, s. 12(3)(a), s. 12(3)(b), s. 13, s. 5(7), s. 7
Maharashtra Education (Cess) Act, 1962s. 13, s. 15, s. 4(a), s. 8
Transfer of Property Acts. 106

Subjects

evictionrent arrearseducation cesspermitted increaseBombay Rents Actprospective amendmentlease agreementmonthly rentlandlord-tenant lawsub-letting

Judgment

RAJU KAKARA SHETIY
v. A
RAMESH PRATAPRAO SHIROLE AND ANR.
-~ ....
JANUARY 15, 1991

[K. JAGANNATHA SHETTY, A.M. AHMADI AND B
R.M. SAHAI, JJ.]

Bombay Rents, Hotel and Lodging House Rates .Control Act,
1947-Section 12(3)(a) and 13( l)(b)-Landlord's right to claim
__..i.. education cess-When arises-Whether its yearly payment could by
agreement be reduced to a monthiy payment,
c
The appellant-tenant executed a lease agreement of the demised
premises on a standard rent of Rs.900 per month. In addition thereto,
the tenant also undertook to pay a lump-sum of Rs.120 per month by
way of education cess and other taxes in respect of the premises.
1./ D
The 1st respondent filed a suit for eviction of the tenant inter alia
on the ground that he was in arrear of rent for more than six months
and had failed and neglected to pay the amount within one month from
the date of receipt of the notice served on him terminating the tenancy
and for eviction.
E
During the pendency of the suit, section 12(3) of the Bombay
~ Rents, Hotel and Lodging House Rates Control Act, 1947 was amended
whereby clauses (a) and (b) of sub-section 3 of section 12 were deleted

-- ..
and instead a new sub-section 3 was substituted which restricted the
court's right to pass a decree of eviction on the ground of arrears of
standard rent, etc., if the tenant paid or tendered in Court the arrears
F
as stipulated in the amended clause. The appellant claimed that the said
amendment bad retrospective effect and he was entitled to the benefit
'
thereof.

" The Trial Court dismissed the suit. The Court held that since the
tenant had failed to pay or deposit the arrears claimed by the eviction
G
notice within one month from the receipt thereof, he was liable to be
evicted under section 12(3)(a) of the Act, but in view of the substituted
section 12(3), he was entitled to protection as he had paid the entire
arrears together with interest and costs before the passing of the decree.
_.,,- \
On appeal, the Appellate Court reversed the decree of the trial H

51
52 SUPREME COURT REPORTS [ 1991] 1 S.C.R.

Court. The Appellate Court held that the tenant having failed to pay
A arrears within one month of receipt of a valid notice, he was liable to be
evicted under section 12(3)(a) of the Act, since the amended section
12(3) was prospective in nature.

The appellant-tenant preferred a writ petition to the High Court,
B which was dismissed on the ground of sub-letting.

Before this Court it was inter alia contended on behalf of the
appellant that (i) since the tenant was obliged to pay the education cess
and other taxes, by way of permitted increases, which were payable at
the end of the year, the case would not attract section 12(3)(a) as a part
of the rent became payable annually and not monthly and therefore the
c case attracted section 12(3)(b); and (ii) the tenant having deposited the
arrears, etc., in time, the courts below were not justified in granting an
eviction decree for arrears of rent under section 12(3)(a).

On the other hand, it was contended on behalf of the respondent
D that the case was clearly governed by the provisions of section 12(3)(a)
since indisputably the rent inclusive of the quantified tax amount was
payable by the month. It was argued that once the quantum in respect
of the tax was determined by agreement between the parties, the same
formed part of the rent and it was not open to contend that notwith-
standing the agreement the tax amount remained payable by the year
E and the tenant was obliged to pay the same only after the landlord had
paid the taxes to the local authority.

Dismissing the.appeal, this Court,

HELD: (1) In view of the decision of this Court, the case would be
F governed by section 12(3) as it stood before its amendment, since the
-~
substituted section 12(3) was found to be prospective in nature. [57G) I •
;~ L
Arjun Khiamal Makhijani v. Jamnadas C. Tuliani, (1989] 4 '
S.C.C. 612, followed.

G (2) It is clear from the terms of the lease agreement that the
parties intended the tenancy to be a monthly tenancy. [62C]

(3) The statutory right to recover the amount of education cess in
respect of the demised· premises from the occupant/tenant can be
quantified by agreement of parties so long as the amount quantified
H does not exce.ed the total amount actually paid by the owner by way of
education cess. [62E]
R.K. SHETIY v. R.P. SHIROLE 53

(4) It seems to be well-settled that education cess is a part of
'rent' within the meaning of the Act and when the same is claimed in A
addition to the contractual or standard rent in respect of the demised
premises it constitutes a permitted increase within the meaning of
section 5(7) of the Act and being payable on a year to year basis, the
rent ceases to be payable by the month. within the meaning of section
12(3)(a) of the Act. (630-EJ B

Panchal Mohan/al Jshwardas v. Maheshwari Mills Ltd., (1962] 3
G.L.J. 574; Prakash Surya v. Rasiklal Jshverlal Mehta, [1978] 1 R.C.R.
10; Vanlila Vadilal Shah v. Mahendrakumar J. Shah, A.I.R. 1975 Guj.
163; Muktabai Gangadas Kadam v. Muktabai Laxman Palwankar,
C

'
[1969] 71 B.L.R. 752; Bombay Municipal Corporation v. Life Insurance
Corporation of India, Bombay, [1971] 1 S.C.R. 335.

(5) If for convenience and to facilitate payment, the parties by
mutual consent work out an arrangement for the enforcement of the
owner's statutory right to recover the tax amount and for discharging
the tenant-occupant's statutory obligation to reimburse the owner, no D
reasons are seen for refusing to uphold such a contract and ifthe parties
have agreed thereunder to the tenant-occupant discharging his liability
by a fixed monthly payment not exceeding the total tax liability, the said
monthly payment would constitute 'rent' payable by the month within
the meaning of section 12(3)(a) of the Act. [64B-C]
E
Vishwambar Hemandas v. Narendra Jethalal Gajjar, A.LR. 1986
Guj. 153 overruled.

(6) As the tenant bad failed to comply with the requirement of
section 12(3)(a) to seek protection from eviction, the Courts below were
_)Ill' justified in ordering bis eviction. [64E] F

f-. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5020
of 1989.

From the Judgment and Order dated 7.12.1989 of the Bombay
High Court in W.P. No. 5021of1989. G

~- Dr. Y.S. Chitale, V.N. Ganpule, B. Rastogi, Ms. Suman and
.\ Ms. Punam Kumari for the Appellant .

V.M. Tarkunde, Ejaz Iqbal, H.S. Anand, R.F. Nariman and
H.D. Adhar for the Respondents. H
54 SUPREME COURT REPORTS [1991] 1 S.C.R.

The Judgment of the Court was delivered by
A
AHMADI, J. This is a tenant's appeal by special leave directed
against the judgment of the High Court of Maharashtra at Bombay
whereby it confirmed the eviction order passed by the 6th Additional
District Judge, Pune, in Civil Appeal No. 662 of 1988 in reversal of the
B order of dismissal of the suit passed oy the Learned Additional Judge 0f
the Court of Small Causes, Pune, in Civil Suit No. 348/85 on 30th
April, 1988. The brief facts giving rise to this appeal are as under:

On 5th February, 1976 the appellant executed a lease agreee-
ment in respect of a part of the ground floor of property bearing City
Survey No. 1205/2/9 situate at Shivaji Nagar, Pune city, more particu-
c larly described in paragraph 1 of the said agreement. The said pre-
mises were taken on rent for the purposes of restaurant business on
monthly rental basis. By clause 3 of the agreement the appellant un-
dertook to pay a total rent of Rs.1,000 per month for the demised y
premises (Rs.900 for the hotel portion and Rs.100 for the garage); the
D said rent being payable every month in advance. Clause 5 of the agree-
ment prohibited sub-letting of the premises or parting with the posses-
sion thereof in any other manner. As the appellant committed a
default in the payment of rent from June, 1983 to December, 1984 in
respect of hotel portion and from November, 1979 to December, 1984
in respect of the garage, the first respondent despatched a notice dated
E 31st December, 1984 terminating the appellant's tenancy as required
by Section 106 of the Transfer of Property Act. The appellant failed to
respond to the said notice and neglected to pay the amount of arrears
of rent claimed therein within one month from the date of receipt of
the notice. Consequently, the first respondent filed the suit which has
given rise to this appeal on 26th February, 1985, being Civil Suit
F No. 348 of 1985, seeking eviction on four grounds, namely, (i) the
tenant was in arrears of rent for more than six months and had failed
and neglected to pay the amount due within one month from the date
of receipt of the eviction notice, (ii) the tenant had raised a permanent
structure in the suit premises in breach of section 13(1)(b) of the
Bombay Rents, Hotel and Lodging House Rates Control Act, 1947
G (hereinafter called 'the Act'), (iii) the tenant was guilty of causing
nuisance and annoyance to the neighbours and (iv) the tenant had
sub-let the premises to second respondent without his consent.

The suit was contested by the appellant-tenant by his written
statement Exh. 25 and the supplementary written statements Exhs. 56
H and 60 filed after the amendments in the plaint. The second respon-
R.K. SHETIY v. R.P. SHI.k.IJLE [AHMADI, J.] 55

dent, the alleged\sub-tenant, adopted ·the written statement of the
J, appellant by his purshis Exh. 30. During the pendency of the suit A
Section 12(3) of the Act was amended by Section 25 of the Amend-
ment Act 18 of 1987 whereby clauses (a) and (b) of sub-section 3 of
section 12 were deleted and instead a new sub-section 3 was substi-
tuted which restricted the court's right to pass a decree for eviction on
the ground of arrears of standard rent and permitted increases, if on B
the first date of the hearing of the suit or on such other date as the
_..I. Court may fix, the tenant paid or tendered in court the standard rent
and permitted increase then due together with simple interest on the
amount of arrears at the rate of 9% per annum and thereafter con-
tinued to pay or tender in court regularly such standard rent and
permitted increases till the final decision of the suit and also paid the
cost of the suit as directed by the court. The appellant contended that c
the said amendment had retrospective effect and he was entitled to the
benefit thereof. In the alternative he also contended that he had paid
/
--r- the rent to the first respondent but the latter had failed to issue rent
receipts. He also questioned the validity of the notice terminating his
tenancy. He denied the allegation that he had sub-let the premises or D
had parted with the possession thereof in favour of the second respon-
dent or that he was guilty of causing nuisance and annoyance to the
neighbours. The allegation that he had raised a structure of a per-
manent nature in the hotel premises without the permission of first
~ respondent was also disputed. He, therefore, contended that the suit
was liable to fail. E
The learned Additional Small Causes Judge, Pune raised issues
at Exh. 36 and came to the conclusion that the agreed rent for the hotel
and the garage was Rs.900 per month and in addition thereto the
tenant had agreed to pay Rs.120 per month for education cess and
-'°I other taxes. He also concluded that the tenant had failed to pay the F
>-- rent fo respect of the garage from November, 1979 and in respect of
hotel from June, 1983. Since the tenant had failed to pay or deposit the
arrears claimed by the eviction notice dated 31.12.1984 within one
month from the receipt thereof, the Court held he was liable to be
evicted under section 12(3)(a) of the Act but in view of the substituted
Section 12(3), he was entitled to protection as he had paid the entire G
arrears together with interest and costs before the passing of the
_/ decree. He also held that there was no reliable evidence to show that
\ the tenant had sub-let the premises or had made any alteration of a
permanent nature without the consent of the first respondent. The
allegation of nuisance and annoyance was held not proved on facts and
was even. otherwise found to relate to a post-suit incident of 1986. On H
56 SUPREME COURT REPORTS [ 1991] 1 S.C.R.

these findings the learned Trial Judge dismissed the suit with no order
A as to costs. _>--
The first respondent, feeling aggrieved by the order of dismissal
of his suit, preferred an appeal being Civil Appeal No. 662/88. The
appellate court reversed the decree of the trial court holding that the
B rent was payable by the month and there being no dispute regarding
standard rent and permitted increases and the tenant having failed to
pay the arrea.rs within one month from the date of receipt of a valid
eviction notice dated 31st December, 1984, he was liable to be evicted
under section 12(3)(a) of the Act since the amended section 12(3)

c
introduced by Amending Act 18 of 1987 was prospective in nature. It
also took the view that since the premises was sub-let by the appellant
to the second respondent on a rental of Rs.2,000 per month, the
....
former was guilty of profiteering. So far as the other two contentions
regarding raising of a permanent structure and allegation of nuisance
and annoyance were concerned, the appellate court concurred with the r
findings recorded by the trial court. In this view that the appellate
D court took it allowed the appeal and ordered both the tenant and
sub-tenant to deliver vacant possession of the demised premises within
two months from the date of the order with costs throughout.

The appellant-tenant, feeling aggrieved by the order of eviction
passed by the learned 6th Additional District Judge, Pune. preferred a
E writ petition No. 5021of1989 to the High Court. The writ getition was
rejected at the admission stage by a short speaking order. The High
Court observed that the eviction notice was legal and proper and the
lower appellate court was right in concluding that the appellant had
sub-let the premises to the second respondent as alleged. The i:equcst
for extention of time to vacate was rejected as the tenant was unwilling
to file an undertaking in the usual form. Feeling aggrieved by the said
order the tenant has preferred the present appeal after obtaining
special leave.

The standard rent in respect of the demised premises has been
found by all the three courts to be Rs.900 per month (Rs.750 in respect
G of the hotel premises and Rs.150 in respect of the garage). In addition
thereto the tenant had undertaken to pay a lump-sum of Rs.120 per
month by way of education cess and other taxes in respect of the
demised premises. Thus the tenant was required to pay a consolidated
sum of Rs.1020 per month as rent to the first respondent. By 31st
December, 1984 the appellant-tenant had failed to pay the rent in
IH · respect of the hotel premises from 1st June, 1983 and in respect of the
R.K. SHETIY v. R.P. SHIROLE [AHMADI, J.] 57

garage area from 1st November, 1979; thus the arrears of rent in
respect of hotel premises came to Rs.16,530 and in respect of the A
1 g .rage premises Rs.9,300 aggregating to Rs.25,830. The first respon-
dt,nt, therefore, ser~ed the appellant with a notice terminating the
tenancy by the end of 31st January, 1985 and called upon the appellant
to pay the arrears of rent and vacate and handover peaceful possession
of the demised premises by that date. Even after the receipt of this B
notice, the appellant neither paid the amount due within one month of.
the receipt of the notice nor filed any application for fixation of.
'
,--J.. standard rent and/or the permitted increases under section 11 of the
Act. On the failure of the appellant to comply with the requirements of
the eviction notice, the first respondent filed a suit for eviction on 26th
February, 1985 on the grounds stated earlier. In the said eviction suit
the first respondent claimed the arrears of rent upto the end of c
December, 1984 as set out in the eviction notice and damages of
Rs.1020 for the month of January, 1985 together with Rs.250 by way of
notice charges. The total claim made came to Rs.27, 100. The appellate
-r Court and the High Court came to the conclusion that the newly sub-
stituted section 12(3) had no application and the case was governed by D
section 12(3)(a) as it stood before the amendment.

Dr. Chitale, the )earned counsel for the appellant frankly con-
ceded that in view of the decision of this Court in Arjun Khiamal 1
Makhijani v. Jamnadas C. Tuliani & Ors., [1989] 4 SCC 612, the case
A would be governed by section 12(3) as it stoud before its amendment E
by Amending Act 18 of 1987, since the substituted section 12(3) was
found to be prospective in nature. This Court in paragraph 14 of the
.... judgment at page 624 repelled the submission that it was retrospective
in operation in the following words:

"In our opinion, the tenants are not entitled even to the F
-"'"· benefit of the amended sub-section (3) of Section 12 of the
f. Act inasmuch as on a plain reading of the sub-section it is·
not possible to give it a retrospective operation."

Dr. Chitale was, therefore, justified in submitting that the decision of
this case must rest on the question whether it attracted section 12(3)(a) G
or section 12(3)(b) as it stood prior to the amendment. According to
/
Dr. Chitale since the tenant was obliged to pay the education cess and
·-~ other taxes by way of permitted increases which were payable at the
end of the year, the case would not :ittract section 12(3)(a) as a part of
the rent became payable annually and not monthly. He further con-
tended that there was nothing on the record to show that the landlord H
58 SUPREME COURT REPORTS - [1991] 1 S.C.R.

had paid the amount of education cess and other taxes and unless
A
payment of the taxes to the local authority was established the land-
lord had no right to claim the same from the tenant. According to him,
the landlord's right to recover the taxes arises not at the end of the
financial year but on the date on which he makes the payment to the
local authority. Dr. Chitale, therefore, submitted that the case
B attracted section 12(3)(b) and when the tenant deposited a sum of
Rs.37, 740 on 18th January, 1986 before the issues were settled on
_13th February, 1986 he could be said to have made the full payment of
the rent then due and therefore the courts below were not justified in
granting an eviction decree for arrears of rent under section 12(3)(a) of
the Act. In support of his contention he invited our attention to four
decisions of the Gujarat High Court, namely, Panchal Mohan/al
c Jshwardas v. Maheshwari Mills Ltd., [1962] 3 GLR 574; Prakash Surya
v. Rasiklal Jshverlal Mehta, [1978] 1 RCR 10; Vanlila Vadilal Shah v.
Mahendrakumar J. Shah, AIR 1975 Guj. 163 and Vishwambar
Hemandas v. Narendra Jethalal Gajjar, AIR 1986 Guj. 153. He also
placed reliance on a Bombay High Court decision in Muktabai
D Gangadas Kadam v. Muktabai Laxman Palwankar, [1969] 71 BLR 752
and the decision of this Court in Bombay Municipal Corporation v.
Life Insurance Corporation of India, Bombay, [1971] 1 SCR 335. On
the question of sub-letting he stated that the Trial Court had rightly
pointed out that the evidence falls far short of proof of sub-tenancy
and the Appellate Court as well as the High Court were in error in
E reversing that view of the Trial Court.

-
Mr. Tarkunde, the learned Advocate for the landlord, on the
other hand submitted that once the four ingredients of section 12(3)(a)
were shown to be satisfied, the Court had no alternative but to decree
the suit. A,ccording to him, the standard rent in respect of the demised
F premises was shown to be Rs.900 per month and in addition thereto
the tenant had agreed to pay a quantified sum of Rs.120 per month by
way of education cess and other taxes. It was proved as a fact that the
tenant had failed to pay the rent in respect of the garage from 1st
November, 1979 and the rent in respect of the hotel from 1st June,
1983. The tenant had also failed to pay the tax amount at the rate of
G Rs.120 per month from 1st June, 1983. Since there was no dispute in
regard to standard rent or permitted increases in this case, the tenant
was under an obligation to pay the entire amount due from him by way
of rent and taxes within one month of the receipt of the eviction notice
dated 31st December, 1984. Under section 12(1) of the Act a landlord
is not entitled to the recovery of possession of any premises so long as
H the tenant pays, or is ready and willing to pay, the amount of standard
R.K. SHETIY v. R.P. SHIROLE [AHMADI, J.] 59

rent and permitted increases, if any, and observes and performs the
)_ other conditions of the tenancy, insofar as they are consistent with the A
provisions of the Act. Section 12(2) places a restriction on the land-
lord's right to sue his teriant for recovery of possession on the ground
of non-payment of the standard rent and/or permitted increases due
from him. According to that section no suit for recovery of possession
can be instituted on the aforesaid ground until the expiration of one B
month next after notice in writing of th~ demand of the standard rent
and/or permitted increases has been served upon the tenant in the
manner set out in section 106 of the Transfer of Property Act. To
comply with this requirement the landlord had issued a notice on 31st
December, 1984 calling upon the tenant to pay the standard rent which
was in arrears along with the quantified tax amount in arrears upto
that date as detailed in the notice. The tenancy was terminated w.e.f. c
31st January, 1985. Admittedly, the tenant did not respond to this
notice nor did he pay or deposit the amount of arrears as claimed in the
notice within one month of the receipt thereof. He also did not file any
application for fixation of standard rent and/or permitted increases
under section 11 of the Act. There was, therefore, no question of the D
Court specifying the amount of interim rent or permitted increases
under sub-section (3) of Section 11 during the pendency of such an
application. Mr. Tarkunde, therefore, submitted that the case was
clearly governed by the provisions of section 12(3)(a) since indisput-
ably the rent inclusive of the quantified tax amount was payable by the
month; there was no dispute as regards the standard rent/permitted
Tncreases: the tenant was found to be in arrears of rent for more than six
months and he had failed to pay or deposit the rent within one month
after the receipt of the notice under section 12(2) of the Act. Accord-
ing to Mr. Tarkunde the submission that because the education cess
was payable by the year, a part of the rent was not payable by the
month and therefore section 12(3)(a) had no application is clearly p
misconceived for the simple reason that in the present case the land-
lord as well as the tenant had by agreement quantified the amount of
education cess and other taxes at Rs.120 per month and had not left
the determination of the amount to fluctuations in the tax amount
from time to time. Once the quantum in respect of the tax liability is
determined by agreement between the parties, the same forms part of G
the rent and it is not open to contend that notwithstanding the agree-
ment the ,tax amount remains payable by the year and the tenant is
obliged to pay the same only after the landlord has paid the taxes to
the loq1l authority. He, therefore, contended tli.at the case la~ on which
Dr. Chitale had placed reliance san have no application to tile special
facts and circumstances of the present case. H
60 SUPREME COUR'f REPORTS [1991] 1 S.C.R.

On the second question regarding sub-letting Mr. Tarkunde sub-
A
mitted that this Court should not interfere with a finding of fact
recorded by the Appellate Court and affirmed by the High Court since
it is nobody's case that the finding is perverse and not based on evi-
dence. In this connection, he took us through the relevant part of the
pleadings and the evidence to support his contention that the conclu-
B sion reached by the Appellate Court and the High Court was based on
evidence and was not perverse or against the weight of evidence. He
submitted that even if two views are possible this Court in exercise of
its powers under Article 136 of the Constitution should refrain from
disturbing a possible and plausible view.

We have given our anxious consideration to the rival views pro-
c pounded by the learned counsel for the appellant-tenant as well as the
respondent-landlord. On a consideration of the submissions made at
the bar and having regard to the provisions of law we are inclined to
think that the view taken by the Appellate Court and the High Court
does not demand interference. There is no dispute regarding the
D standard rent of the demised premises. Under clause 3 of the lease
agreement the rent was fixed at Rs.1,000 per month but subsequently
it seems to have been revised by consent of parties to Rs.1,020 per
month (Rs.900 for the demised premises and Rs.120 for education cess
and taxes). The rent was payable 'every month regularly in advance'
under clause 3 of the agreement. Clause 2 of the agreement states that
E the premises have been hired for restaurant business 'on monthly
rental basis'. It is, therefore, clear from the terms of the lease agree-

F
ment that the parties intended the tenancy to be a monthly tenancy.

The two clauses of section 12(3) as they stood before the Amend-
ment Act 18 of 1987 provided as under:
-
"12(3)(a). Where the rent is payable by the month and
there is no dispute regarding the amount of standard rent
or permitted increases, if such rent or increases are in
arrears for a period of six months or more and the tenant
neglects to make payment thereof until the expiration of
G the period or one month after notice referred to in sub-
section (2), the Court shall pass a decree for eviction in any
such suit for recovery of,possession:

(b) In any other case no decree for eviction shall be passed
in any such suit if, on the first day of hearing of the suit or
H on or before such other date as the _Court may fix, the
R.K. SHETIY v. R.. P. SHIROLE [AHMADI, J.] 61

tenant pays or tenders iit Court the standard rent and
A
permitted increases then due and thereafter continues to
pay or tender in Court regularly such rent and permitted
increases till the suit is finally decided-and also pays costs of
the suit as directed by the Court."

Explanation I states that if there is any dispute regarding standard rent B
or permitted increases the tenant shall be deemed to be ready and
willing to pay if, before the expiry of the period of one month after
notiee referred to in sub-section (2), he makes an application to the
Court under sub-section (3) of section 11 and thereafter pays or
tenders the amount of rent or permitted increases specified in the
order made by the Court.
c
Mr. Tarkunde, therefore, argued that even if the case is covered
by section 12(3)(b) since the tenant had failed to pay or deposit the full
-1" amount due to the landlord as claimed in the eviction notice by the
first date of hearing of the suit, i.e. 13th February, 1986, and had also
failed to make an application under section 11(3) of the Act, the D
tenant was not entitled to the protection of that provision also. Mr.
Tarkunde further submitted that the tenant was not regular in the
payment of rent and permitted increases for the subsequent period
also and there were long intervals between two payments made during
1 the pendency of the litigation. He, therefore, submitted that even if
/'--. section 12(3)(b) was invoked the tenant had failed to comply with the E
requirement of that provision and was, therefore, not entitled to its
protection. Since we are of the opinion that the case is covered by
- section 12(3)(a) we do not consider it necessary to examine this sub-
mission based on the true interpretation of section 12(3)(b) of the Act.

The only submission which Dr. Chitale made for taking the case F
out of the purview of section 12(3)(a) was that the entire rent was not
payable by the month which was the first condition to be satisfied for
invoking the said provision. According to him, since the tenant was
bound to pay education cess and other taxes in respect of the demised
premises which were payable from year to year, a part of the rent was
not payable by the month and therefore the first condition of section G
12(3)(a) was not satisfied. Hence, submitted Dr. Chitale, the case fell
within the phrase 'in any other case', by which clause (b) of section
12(3) opens. Before we answer the submission of Dr. Chitale it may be
advantageous to refer to the relevant provisions of the Maharashtra
Education (Cess) Act (Maharashtra Act XXVII of 1962). Section 4(a)
of the said Act provides for the levy and collection of tax (cess) on H
62 SUPREME COURT REPORTS [1991] 1 S.C.R.

ianas ana ouildings at the rates specified in Schedule A on the annual
A letting value of such lands or buildings. The primary responsibility to I
pay this tax is cast by section 8 on the owner of the land or building A
irrespective of whether or not he is in actual occupation thereof. Sec-
tion 13 next provides that on payment of the amount of the tax in
respect of such land or building the owner shall be entitled to receive
B that amount from the person in actual occupation of such land or
building during the period for which the tax was paid. Under section 15
any person entitled to receive any sum under section 13 is conferred
for the recovery thereof the same rights and remedies as if such sum ).._
were rent payable to him by the person from whom he is entitled to
receive the same. It thus seems clear that education cess is a tax and
the owner is primarily responsible to pay the same to the local author-
c ity and on such payment a right is conferred on him to recover the
same from the actual occupant in addition to the standard rent in
respect of the demised premises. Sub-section (3) of section 13 in terms
states that the recovery of any amount of tax from an occupier under
this provision shall not be deemed to be an increase for the pi,irposes of T
D section 7 of the Act. It is, therefore, obvious that the landlord has a
statutory right to recover the amount of education cess paid by him in
respect of the demised premises from the tenant-occupant and such
recovery shall not be an unlawful il)crease under of section 7 of the Act
but would squarely fall within the. expression 'permitted increases' as
defined by section 5(7) of the Act. This statutory right to recover the
E amount of education cess in respect of the demised premises from the / -
occupant-tenant can be quantified by agreement of parties so long as
the amount quantified does not exceed the total amount actually paid
by the owner by way of education cess. In the present case, it is
nobody's contention that the amount of Rs.120 per month payable by
way of education cess and other taxes was in excess of the amount
actually payable .under the relevant statutes to the local authority. The
-
F
Gujarat High Court has taken a consistent view that where the tenant ~-
is obliged under the terms of the tenancy or by virtue of the statute to j
pay the tax dues to the landlord, since such taxes which. form part of
the rent are payable annually the case ceases to be governed by section
12(3)(a) and falls within the purview of section 12(3)(b) of the Act. In
G Maheshwari Mills Ltd., under the terms of the tenancy the tenant was
obliged to pay the municipal taxes and property taxes in respect of the
demised premises. The Court took the view that such payment was by
way of rent and since the _municipal taxes and property taxes were 'r-
payable on year to year basis, a part of the rent was admittedly not
payable by the month and, therefore, section 12(3)(a) was not attrac-
H ted. In Prakash Surya the tenant had agreed to pay the municipal tax
R.K. SHETIY v. R.P. SHIROLE [AHMADI, J.] 63

and education cess. The amount payabie towards these taxes consti-
·A
1 tuted rent and since the same was payable at the end of the year tqe
Court held that the rent had ceased to be payable by the month and
hence section 12(3)(a) had no application. The same view was reite-
rated in Vanlila's case where education cess was payable by the tenant
by virtue of section 21 of the Gujarat Education Cess Act, 1962. Since
it constituted a part of the rent, to be precise permitted increase under B
section 5(7) of the Act, it was held that it took the case outside the
scope of section 12(3)(a) of the Act. In the case of Vishwambhar
Hemendas also since the rent was inclusive of taxes the Court held that
the case was governed by section 12(3)(b) of the Rent Act. The
Bombay High Court has expressed the same view in Muktabai's case.·
This Court in the Bombay Municipal Corporation's case held that
while section 7 of the Act prohibits increase above the standard rent it c
does not prohibit the recovery of increase to which a landlord is en-
titled under the other provisions of the said statute, namely, increase
by way of 'permitted increases'. Education cess is specifically recover-
able as rent by virtue of section 13 and as sub-section (3) thereof
provides that it shall not be treated as increase in rent under section 7
of the Act, there can be no doubt that such an increase falls with the
definition of 'permitted increases' under section 5(7) of the Act. It,
therefore, seems to be well-settled that education cess is a part of 'rent'
within the meaning of the Act and when the same is claimed in addi-
tion to the contractual or standard rent in respect of the demised
premises it constitutes a permitted increase within the meaning of E
section 5(7) of the Act and being payable on a year to year basis, the
rent ceases to be payable by the month within the meaning of section
- 12(3}(a) of the Act. But the question still survives whether the parties
can be -agreement quantify the said amount and make it payable on a
month to month basis provided of course the said ~ount does not exceed the
tax liability of the landlord; if it exceeds that liability it would infringe F
section 7 of the Act and the excess would not be allowed as permitted
increase within the meaning of section 5(7) of the Act. A right to
recover a certain tax amount from the tenant-occupant under the pro-
visions of a statute can be waived by the owner or quantified by agree-
ment at a figure not exceeding the total liability under the statute. If by
agreement the amount is so quantified and is made payable by the G
month not withstanding the owner's liability to pay the same annually
--{_.· to the local authority, the question is whether in such circumstances
the 'rent' can be said to be payable by the month within the meaning of
section 12(3)(a) of the Act? We see no reason why we should take the
view that even where the parties mutually agree and quantify the tax
amount payable by the tenant to the landlord on mont~ly basis, the H
64 SUPREME COURT REPORTS [1991] 1 S.C.R.

A rent should not be taken to be payable by the month within the mean-
ing of section 12(3)(a) of the Act. A statutory right to recover the tax .,.......,
,
amount by way of reimbursement can be waived or limited by the
holder of such right or the recovery can be regulated in the manner
mutually arranged or agreed upon by the concerned parties so long as
it is not in violation of statute. If for convenience and to facilitate
B
payment, the parties by mutual consent work out an arrangement for
the enforcetnen.t of the owner's statutory right to recover the tax
amount and for discharging the tenant-occupant's statutory obligation
to reimburse the owner, ~e see no reason for refusing to uphold such a ~~
contract and if thereunder the parties have agreed to the tenant-
occupant discharging his liability by a fixed monthly payment not
c exceeding the tax liability. The said monthly payment would constitute
'rent' payable by the month within the meaning of section 12(3)(a) of
the Act._ The view e_xpressed by the Guj~rat Hig~ Court in Vishwambar
Hemandas does not, with respect, stat~ the law correctly if it holds that
-
even in cases where the entire tax liability is on the landlord and the
tenant had to pay a gross rent of Rs.19.50 p.m. the mere recital in the 1r
D
lease that the rent is inclusive of taxes the case outside the purview of
section 12(3)(a) of the Act. We are, therefore, in respectful agreement
with the·view taken by the Appellate Court and the High Court in that
behalf. We, therefore, hold that as the tenant had failed to comply
with the requirement of secti.on 12(3)(a) to seek protection from evic-
ti on, the Courts below were justified in ordering his eviction.
E /-·
In the view that we taJ(e on the first point discussed above, it is
unnecessary-for us w examine the second point r_egarding sub-tenancy.

In the result we see no merit in this appeal and dismiss the same
with costs. We, however, grant time upto 31st December, 1991 to the
--
F
tenant to vac~te.

R.S.S. Appeal dismissed. l'