Companies Act Case Law Smt. Leelabai Gajanan Pansare Vs The Oriental Insurance Co. Ltd.

Companies Act Case Law

Smt. Leelabai Gajanan Pansare Vs The Oriental Insurance Co. Ltd.

REPORTABLE

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5136 OF 2008
(arising out of SLP(C) No. 5855/07)
Smt. Leelabai Gajanan Pansare & Ors. … Appellants

v.

The Oriental Insurance Co. Ltd. & Ors. … Respondents

with
Civil Appeal Nos.5137-5138/08 @ SLP (C) No. 24789-24790/07 and
Civil Appeal No. 5139/08 @ SLP (C) No. 16237/08.
JUDGMENT

S. H. KAPADIA, J.

Civil Appeals arising out of S.L.P.(C) Nos. 5855/07 and S.L.P. (C) No.
16237/08:

Leave granted.

2. Applications for interventions are allowed.
3. An important question of law regarding interpretation of Section 3(1)

(b) of the Maharashtra Rent Control Act, 1999 is involved in the present

appeal, namely:-
“Whether a Government Company falls within the
compendious expression “any public sector undertakings
or corporation established by or under any Central or
2
State Act” in Section 3(1)(b) of the Maharashtra Rent
Control Act, 1999 (“Rent Act” in short).”
4. For the sake of convenience we may state the facts of the case in SLP

(C) No. 5855/07 in the case of Leelabai Gajanan Pansare & Ors. v. Oriental

Insurance Company Ltd. & Ors.
Facts:
5. Appellants-landlords had let out the suit-premises admeasuring 3214

sq. ft. (approx.) in Thane to Oriental Insurance Company Ltd. (“OIC” for

short). The rent was Rs. 10,000/- per month. Vide notice dated 15.4.2002

under Section 106 of the Transfer of Property Act, appellant terminated the

tenancy of the said Company. On failure of OIC to vacate the premises, they

instituted a suit for eviction. OIC took the plea that it is not covered under

Section 3(1)(b) of the Rent Act as it was “a protected tenant” under the said

Rent Act, 1999 and, therefore, could not be evicted. In the said suit, the

landlord pleaded that OIC is a Public Sector Undertaking and/or

Corporation having a total paid up share capital of more than Rs.

1,00,00,000.

 

6. OIC resisted the suit by filing its written statement inter alia

contending that it is neither a PSU nor a Corporation; that it was not
3
exempted under Section 3(1)(b) of the Rent Act; that it was neither a bank

nor a PSU, nor a foreign mission, nor MNC and nor a public limited

company having paid up share capital of more than Rs. 1,00,00,000.

According to OIC, it was a Government company carrying on its own

insurance business and that the premises let to it stood fully protected by the

provisions of the Rent Act as they did not fall in any of the categories

mentioned in Section 3(1)(b) of the said Rent Act.

 

7. By Judgment and Order dated 9.7.2004 in Special Civil Suit No.

202/03 the trial court held that OIC is a Government company under Section

617 of the 1956 Act over which the GOI has overall control qua insurance

business. The trial court further held that OIC stood established as a

subsidiary of GIC that came into existence in 1972 pursuant to

nationalization of General Insurance. According to the trial court since OIC

is a Government company under Section 617 of the 1956 Act and since GOI

has overall control over its functioning, it is entitled to protection from

eviction by the landlords under Section 3(1)(a) which gives protection to

premises let to the Government or local authority or to premises taken on

behalf of the Government. In other words, according to the trial court, since

GOI exercises deep and pervasive control over the respondent company

herein, the said premises occupied by it were entitled to protection under the
4
second part of Section 3(1)(a). According to the said Judgment and Order

dated 9.7.2004 the said suit stood dismissed by the trial court.

8. Aggrieved by the dismissal of the suit by the trial court, appellants

herein preferred an appeal being FA No. 1245/04. By the impugned

judgment dated 20.12.2006, the Bombay High Court held that exempted

premises under Section 3(1)(b) of the Rent Act, 1999 are PSUs but not

Government Companies incorporated under the Companies Act, 1956. It

was further held that a Government Company stands in a different category

and by the very absence of the words “Government Company” in Section 3

(1)(b) it is clear that the Legislature did not intend their exemption from the

protection under the said Rent Act, 1999 consequently, the High Court

dismissed FA No. 1245/04 filed by the appellants. Hence, this civil appeal.

Contentions:
9. The basic ground of challenge in this civil appeal that the High Court

having held that OIC is the PSU had erred in holding that a Government

Company stood under a separate category which is absent in Section 3(1)(b)

and thus continues to enjoy protection of the said Rent Act. According to

the appellants, this amounts to judicial legislation by the High Court as the

High Court has read into Section 3(1)(b) the words, namely, “except

Government companies”. According to the appellants, by such exclusion of
5
Government companies from the PSUs, the High Court has excluded a large

number of PSUs from the purview of Section 3(1)(b), which is not the

intention of the Legislature. This, according to the appellants, is contrary to

the legislative policy and such interpretation defeats the very purpose of

Section 3(1)(b) of the Rent Act. According to the appellants, in the

alternative, in any event, OIC is a public limited company having a paid up

share capital of rupees more than one crore and, therefore, in any event, the

said company would fall in the second part of Section 3(1)(b) which denies

to such public limited companies the protection of the said Rent Act, 1999.

 

10. Shri Shyam Divan, learned senior counsel appearing on behalf of the

appellants submitted that the concept of a “Government Company” is alien

to the scheme of Section 3(1)(b). The legislature, according to the learned

counsel, has not used the expression “Government Company” anywhere in

Section 3(1)(b). There was no justification, according to the learned

counsel, for the High Court to introduce the concept of Government

Company when the legislature has not adverted to the said expression.

According to the learned counsel, by importing the concept of “Government

Company” in Section 3(1)(b), the High Court has resorted to judicial

legislation, which is not permissible. According to the learned counsel, it is
6
the function of the legislature to decide upon the entities to which Rent Act

protection should be extended to and conversely the entities that may be

excluded from such protection. According to the learned counsel, in

enacting Section 3(1)(b), the legislature has clearly indicated that premises

let to PSUs and Public Limited Companies having a paid up capital of Rs.

1,00,00,000 or more would not be entitled to protection of the Rent Act,

1999. However, the legislature did not include in Section 3(1)(b) “holding

company”, “subsidiary company”, “sick industrial company” etc., all of

which are concepts like “Government Company” that are specifically

defined in the 1956 Act. Instead, the legislature employed the concept of

Private Limited Companies and Public Limited Companies having a paid up

share capital of Rs. 1,00,00,000 or more. It was submitted that although

holding company or subsidiary company or sick industrial company are not

expressly mentioned in Section 3(1)(b), it is not open to such entities to

claim that since none of these specific expressions abovementioned are used

in Section 3(1)(b), they are entitled to Rent Act protection. According to the

learned counsel, a Holding company or Subsidiary company or Sick

industrial company is an addition to a public limited or private limited

company having a paid up share capital of more than Rs. 1,00,00,000.

According to the learned counsel, the concept of holding company,
7
subsidiary company or a sick industrial company are additional

characteristics.

11. Learned counsel next contended that Oriental Insurance Company

(OIC), United India Insurance Company(UIC) as well as Bharat Petroleum

Corporation Ltd. (BPCL) answers the description of a “PSU”, which is

understood in several statutes to include a Government Company under

Section 617 of the 1956 Act. Therefore, according to the learned counsel,

there is no reason why the expression PSUs as used in Section 3(1)(b)

should be read to exclude OIC which is a Government Company where

100% of the shares are held by the Central Government.

12. On literal interpretation of Section 3(1)(b), learned counsel submitted

that the expression “or any PSUs” as used in Section 3(1)(b) is a separate

stand-alone category like, banks, foreign missions, international agencies

etc.. The said expression is separated from the rest of the provision by the

word `or” which is disjunctive and giving a natural meaning to the said

word separates PSUs from the next expression relating to statutory

Corporations. Therefore, according to the learned counsel, there is no reason

why the expression `any PSUs” should be restricted to statutory

corporations, particularly when the disjunctive word “or” separates the two

phrases in Section 3(1)(b). In this connection, learned counsel submitted
8
that the word PSU is not specifically defined in the Rent Act. It is not

defined in the 1956 Act. Learned counsel submitted that under Rules of

Procedure and Conduct of Business in Lok Sabha under Chapter XXVI

there is reference to Constitution of Parliamentary Committees. Rule 312A

refers to functions of “Committee on PSUs” specified in the Fourth

Schedule. Item 5 of Part I of the Fourth Schedule (List of Public

Undertakings) refers to the Life Insurance Corporation of India (LIC)

whereas Part II of the same Schedule refers to Public Undertakings which

are Government Companies under the 1956 Act. That, every Government

Company whose annual report is placed before Parliament under Section

619A of the 1956 Act falls in part II of the Fourth Schedule which refers to

List of Public Undertakings. According to the learned counsel, OIC, UIC

and BPCL are Government Companies, therefore, they fall in Part II of the

Fourth Schedule to the Rules of Procedure and Conduct of Business in the

Lok Sabha. Learned counsel further pointed out that even, according to the

annual reports/financial statements of OIC, the said undertaking is a PSU.

Learned counsel submitted that the above Business Rules indicate

Legislative Understanding of the word PSU to include Government

Companies.
9
13. On the question of purposive interpretation, learned counsel

submitted that in Malpe Vishwanath Acharya and ors. v. State of

Maharashtra and anr. (1998) 2 SCC 1 the Supreme Court held that the

provisions of the Bombay Rents, Hotel and lodging House Rates Control

Act, 1947 (“1947 Act”) relating to the determination and fixation of

standard rent on account of inflation and price rise could no longer be

considered to be reasonable and, therefore, provisions in the Bombay Rent

Act, namely, Section 5(10), 18 and 19 dealing with the definitions of

“standard rent” and prohibition and receipt of premium were liable to be

struck down as unreasonable and arbitrary. Learned counsel submitted that

following the said judgment of this Court a Joint Committee was constituted

by the Maharashtra Legislature to evolve a package which was done and

which consisted of nominal increase in the standard rent, legalization of

receipt of premium by the landlords which was earlier prohibited under the

1947 Act and the expansion of Section 3(1)(b) by which entities enumerated

therein were to loose protection of the said Rent Act. According to the

learned counsel, but for the said package the above provisions of the 1947

Act were liable to be struck down. In the circumstance, learned counsel

submitted that the legislative scheme adopted by the legislature to protect

the Rent Act from the vice that was recognized in the case of Malpe
1
0

Vishwanath Acharya (supra) hinges upon Section 3(1)(b) being interpreted

in a fair manner. According to the learned counsel, should the scope of

Section 3(1)(b) be restricted by excluding Government companies as done

by the impugned judgment of the High Court then the larger objective of the

legislature would stand defeated and the standard rent provisions under the

Rent Act (1999 Act) would be rendered vulnerable. According to the

learned counsel, the golden thread which runs through Section 3(1)(b) of the

Rent Act is the economic criteria. In this connection, learned counsel

submitted that each of the entities mentioned in Section 3(1)(b) are cash-

rich entities. These entities are tenants paying rent to the landlords. These

entities, according to the learned counsel, are excluded from the Rent Act

protection, particularly when with the passage of time, the landlords were

not able to maintain their property and, consequently, these properties

became dilapidated for want of maintenance on account of poor return on

their investments and on account of increase in taxes and price rise.

According to the learned counsel, the Report of the Joint Committee

indicates that it had taken into account all the above factors, including the

judgment of this Court in Malpe Vishwanath Acharya (supra) and,

accordingly, gave a package of the above three items enumerated above

including Section 3(1)(b) so that maximum number of poor tenants would
1
1
continue to get protection with the exclusion of those tenants who have the

paying capacity. Therefore, according to the learned counsel, when PSUs, as

understood by Parliament, the Reporting Ministry and the Comptroller and

Auditor-General have understood PSUs to include Government Companies

and Statutory Corporations then this Court must give a plain, simple and

clear meaning to the words PSUs in Section 3(1)(b) in order to avoid any

challenge to the said sub-section on the ground of invidious classification

having no rational nexus with the objects sought to be achieved. According

to the learned counsel, if the said expression “PSUs” in the said sub-section

is confined to statutory corporations and if PSUs and statutory corporations

are classified under one distinct category, as contended on behalf of the

respondents, then the consequence would be that in the Insurance Industry,

OIC and UIC (Government companies) would get protection of the Rent

Act, 1999 whereas LIC, which is a statutory corporation, would stand

excluded from such protection. It is this type of arbitrary discrimination

which needs to be avoided in interpreting Section 3(1)(a). According to the

learned counsel, therefore, one needs to give the meaning to the words PSUs

as understood by the Committee on Public Undertakings, the Reporting

Ministry and by the Comptroller and Auditor-General and if so read, all the

three entities herein, namely, IOC/UIC/BPCL would come within the
1
2
meaning of expression PSUs in Section 3(1)(b) of the Rent Act. Therefore,

according to the learned counsel, the impugned judgment needs to be set

aside.

14. Shri R.F. Nariman, learned senior counsel appearing on behalf of the

The Hongkong & Shanghai Banking Corporation Ltd. submitted that

Section 3(1) of the said Rent Act must be read as a whole in order to

understand the meaning and purport of the said section. According to the

learned counsel, the rationale behind under Section 3(1)(a) in providing that

the tenants of Government or a local authority will not have the protection

of the Rent Act, whilst providing that the Government or local authority in

its capacity as a tenant will have the protection of the Rent Act is that

Government or a local authority performs sovereign and governmental

functions. In other words, learned counsel urged that Government or a local

authority is covered by the ambit of Section 3(1)(a) as long as it does not

enter the arena of commercial activity. Learned counsel next submitted that

the concept of a “Government Company” is not a part of Section 3(1)(a).

According to the learned counsel, the said sub-section 3(1)(a) is bodily

lifted from Section 4(1) of Bombay Rent Act, 1947. That Act was a

temporary enactment. According to the learned counsel, the absence of the

words “Government Company” in sub-section 3(1)(a) and the presence of
1
3
the expression “any PSUs” in Section 3(1)(b) leads to the inevitable

conclusion that Government Companies were not entitled to receive the

protection of the said Rent Act. According to the learned counsel, banks,

PSUs, statutory corporations and private and public limited companies

mentioned in Section 3(1)(b) are in the commercial sector and, therefore,

they will not have the protection of the Rent Act when they are the tenants.

According to the learned counsel, the object of the said Rent Act is to

extend protection of the said Rent Act to tenants who are Government, local

authorities and those who are not affluent and who do not have the capacity

to pay market rent. On the point of literal interpretation, learned counsel

submitted that on a plain reading of Section 3(1)(b) it would be clear that

PSUs and statutory corporations fall in two separate and distinct

categories/classes of tenants who are not entitled to the protection of the

said Rent Act. In this connection, learned counsel placed heavy reliance on

the word “or” occurring in Section 3(1)(b) after the word Banks and before

the words “any corporation established by or under any Central or State

Act”. Learned counsel submitted that the word “or” indicated the PSUs are

disjunctive and form a separate category by themselves. In this connection,

learned counsel further submitted that to interpret “PSUs” to mean statutory

corporations alone would lead to tautology as it would make the said words
1
4
superfluous and, therefore, it was submitted that the expression “PSUs”

must be read to mean all PSUs, namely, statutory corporations, public sector

companies, Government companies etc.. Learned counsel submitted that the

legislature has used the words PSUs in plural deliberately as it desired

statutory corporations, public sector companies and Government companies

etc. to fall as part of the genus, namely, PSU. Therefore, according to the

learned counsel, PSU is the genus whereas Government companies,

statutory corporations and public sector companies etc. are species.

15. Learned counsel next submitted that Section 3(1)(b) applies to any

corporation established by or under any Central or State Act; that, a

“corporation” would include a company; that such corporation does not

have to be established by a Central or State Act. It can also be established

under a Central or State Act, for example, GIC is established under General

Insurance Business Nationalisation Act, 1972 as a Government Company.

Therefore, according to the learned counsel, if Section 3(1)(b) is read in the

manner suggested by the respondent the words PSUs in Section 3(1)(b)

would be wholly redundant as there would be no undertakings left apart

from the statutory corporations established by or under any Central or State

Act because the expression “or under” subsumes all forms of corporations

so established. Learned counsel further submitted that Section 16 of General
1
5
Insurance Business (Nationalisation) Act, 1972, in particular sub-section

(2), shows that four companies, including OIC and UIC, render combined

services of general insurance business all over India. According to the

learned counsel, all the said four companies are the Government Companies

which even on the narrow interpretation placed by the respondent, are

corporations established under the Nationalisation Act. Therefore, learned

counsel submitted that “PSUs” should be read in the widest possible term so

as to include within it every kind of establishments through which the

Government would do business. Therefore, according to the learned

counsel, PSUs would encompass Government companies, statutory

corporations, public sector companies etc. through which the Government is

doing business. Reliance was placed on various statutes which have defined

PSUs to include Government companies. One such statute is “Building and

Other Construction Workers (Regulation of Employment and Conditions of

Service) Act, 1996” which defines PSUs under Section 2(1)(a)(ii) as any

corporation established by or under any Central or State Act or a

Government Company as defined in Section 617 of the said 1956 Act,

which is owned, controlled or managed by the Central Government.

Learned counsel pointed out further that LIC is a statutory corporation

established under the LIC Act 1956; that Sections 21, 27, 28, 28(A) and 38
1
6
of the said LIC Act show that LIC is under the control of the Central

Government and not Parliament. It is further pointed out that under Section

6(2)(g) and (h), LIC is entitled to run business other than the business of life

insurance in certain circumstances. Therefore, according to the learned

counsel, LIC could in given circumstances run the business of general

insurance. What is pointed out by the learned counsel is that various

anomalies would arise if this Court was to accept the interpretation placed

on Section 3(1)(b) of the said Rent Act. According to the learned counsel, in

terms of Section 3(1)(b) LIC is not different from GIC, which is a

Government company established under a Central Act, or from other four

nationalized insurance companies including OIC and UIC. All the said

companies are doing the business of insurance, namely, LIC is in the

business of life insurance whilst the others are in the business of general

insurance. All the said insurance companies, according to the learned

counsel, are mammoth undertakings having a paid up share capital in excess

of Rs. 1,00,00,000. Therefore, learned counsel submitted that if the

interpretation of Section 3(1)(b) given by the respondent(s) herein is

accepted it would mean extension of protection of the said Rent Act to the

four insurance companies including, OIC and UIC, while not extending

such protection to LIC and GIC, which interpretation would run foul of
1
7
Article 14 of the Constitution. Learned counsel submitted that any

interpretation of Section 3(1)(b) must be such as would uphold its

constitutional validity and, therefore, the four insurance companies, namely,

OIC, UIC, New India Assurance Company and National Insurance

Company must also not be entitled to the protection of the said Rent Act.

16. Learned counsel submitted that while interpreting Section 3(1)(b) the

principle of noscittur a sociis must be adopted which would mean that

Section 3(1)(b) applies to different categories of tenants all of whom can

afford to pay at the market rate. According to the learned counsel, all the

different kinds of tenants enumerated in Section 3(1)(b) are financially

giants, namely, PSUs, statutory corporations, banks, multinational

companies, international agencies, private or public limited companies with

a paid up share capital of Rs. 1,00,00,000 or more etc. These tenants,

according to the learned counsel, do not require the protection of the Rent

Act. Learned counsel next submitted that in any event OIC and UIC are

public limited companies having a paid up share capital of more than Rs.

1,00,00,000 and, therefore, stand excluded from the protection of the Rent

Act. In this connection, learned counsel urged that Government Companies

and Insurance Companies are merely sub-species of public limited

companies under the 1956 Act; the genus “company” is divided into three
1
8
species – “existing company”, “private company” and “public company”;

that various sub-species including holding and subsidiary companies,

insurance companies, Government companies etc. are all public limited

companies under 1956 Act.

17. Lastly, learned counsel urged that when the legislature provided

under Section 3(1)(b) that private limited companies and public limited

companies having a paid up share capital of Rs. 1,00,00,000 or more were

to be excluded from the protection of the Rent Act, it was providing for all

bodies carrying on business in the corporate form under the 1956 Act,

which have a paid up share capital of Rs. 1,00,00,000 or more. Therefore,

according to the learned counsel, the legislature had no intention of carving

out an exception in the case of Government companies defined under

Section 617 of the 1956 Act as erroneously held by the High Court.

18. Shri Soli J. Sorajbee, learned senior counsel appearing for the

applicants-intervenors submitted that the legislative policy under the Rent

Act legislation in India is to confine protection to the weaker sections of the

society and not to extend such protection to the entities which can withstand

the forces of demand and supply. In this connection, learned counsel

submitted that Section 3(1)(b) strikes a balance between the interest of the

landlord and the tenant; it is neither pro-landlord nor anti-tenant. It is pro –
1
9
public interest. According to the learned counsel, the impugned judgment

frustrates the object of Section 3(1)(b) as indicated hereinabove. Further,

according to the learned counsel, it was not open to the High Court to

exclude Government Companies from PSUs referred to in Section 3(1)(b).

According to the learned counsel, such an exercise undertaken by the High

Court amounts to judicial legislation as it was not open to the High Court to

read into Section 3(1)(b) the words, namely, “except Government

companies”. According to the learned counsel, such judicial legislation is

liable to be set aside by this Court. Learned counsel further submitted that

the basic rationale underlying the exemption granted by Section 3(1)(b) is

that the entities and bodies mentioned therein, in the legislative judgments

are not in need of Rent Act protection. In this connection, the learned

counsel submitted that it is this rationale which becomes explicit when

Section 3(1)(b) excludes a private or public limited company having paid up

share capital of Rs. 1,00,00,000 or more from Rent Act protection. Learned

counsel submitted in this connection that if a company becomes a

Government company, it is not equally in need of Rent Act protection so

long as its paid up capital is Rs. 1,00,00,000 or more. Learned counsel

submitted that for the purposes of Rent Act protection, there is no

fundamental or qualitative distinction between a public limited company
2
0
with Rs. 1,00,00,000 paid up share capital and a Government company with

Rs. 1,00,00,000 paid up share capital. According to the learned counsel, a

company on becoming a Government company does not undergo

metamorphosis so as to result in the emergence of a separate entity under

the 1956 Act, which needs Rent Act protection to which it was formerly not

entitled. The consequence, according to the learned counsel, of a company

becoming a Government Company is that the Government Company is

placed under a special system of control and merely because the entire share

holding is owned by the Central Government will not make the incorporated

company a Central Government. In this connection, learned counsel relied

upon the judgment of this Court in A. K. Bindal and anr. v. Union of

India and ors. 2003(5)SCC 163 at 175. According to the learned counsel,

the need for Rent Act protection does not arise merely because a company is

placed under strict control and regulations. The need for Rent Act protection

or its absence has no nexus whatsoever with the strict regime of control

imposed on a Government company by Section 619 of the 1956 Act. In this

connection, learned counsel submitted that if a public limited company with

paid up share capital of Rs. 1,00,00,000 is not entitled to Rent Act

protection under Section 3(1)(b), that company on becoming a Government

company cannot claim protection of the Rent Act to which it was not
2
1
entitled as a public limited company so long as its paid up share capital is

Rs. 1,00,00,000 or more. According to the learned counsel, for the purpose

of Section 3(1)(b) what is relevant and decisive is the criterion of Rs.

1,00,00,000 paid up share capital and not the degree or extent of control

exercised over the company as held by the trial court and so long as the said

criterion is satisfied and continues to be satisfied, the company remains

outside the purview of the Rent Act. Any other interpretation, according to

the learned counsel, would lead to invidious discrimination between a

public limited company with one crore paid up share capital and a

Government company with the same paid up share capital. According to the

learned counsel, if the share capital of a Government company is reduced to

Rs. 99 lacs then it would be entitled to protection under the Rent Act.

19. According to Shri Parag P. Tripathi, learned Additional Solicitor

General appearing on behalf of the respondent-Oriental Insurance Co. Ltd.

(“OIC”), the principle issue raised revolves around the meaning and purport

of the compendious expression “any Public Sector Undertakings or any

Corporation established by or under any Central or State Act.” According to

the learned counsel, a Government Company is sui generis in structure and

in statutory treatment thereof, therefore, it does not fall within the above

compendious expression. According to the learned counsel, the exclusion

clause, namely, Section 3(1)(b) applies to PSUs established by or under any
2
2
Central or State Act but not to a Government company, like the OIC, which

is not so established.

20. Learned counsel next urged that a Government company is sui

generis and also does not fall either within the concept of private or public

limited company simplicitor. In other words, according to the learned

counsel, Section 3(1)(b) does not apply to a Government company as it is

not established by or under any Central or State Act and nor does it fall

within the concept of public limited company simplicitor. In this connection

he submitted that an exemption or exclusionary clause, particularly in the

context of Rent Act, to the extent that it excludes a class or category of

tenants has to be narrowly interpreted. According to the learned counsel,

Section 3(1)(b) of the said Rent Act needs to be interpreted in the context of

the 1956 Act. It was submitted that under the definition of “company”

under Section 2(10) of the 1956 Act, which refers to Section 3 of that Act,

the definition Section of Government Company refers to Section 617 of the

1956 Act. According to the learned counsel, Section 3 of the Companies Act

deals with company [see section 3(1)(i)]; existing company [section 3(1)

(ii)]; private company [section 3(1)(iii)] and public company [section 3(1)

(iv)]. According to the learned counsel, it is not possible to proceed on the

basis as if public and private companies are two sub-sets, which exhausts

the “field” of companies. In this connection he submitted that Section 3 of
2
3
the 1956 Act does not define a public company exhaustively as a company;

that, Section 3 of the Companies Act merely states that the public limited

company is not a private company and, therefore, the strict dichotomy

between public or private may not be entirely correct insofar as the

Companies Act is concerned.

21. According to the learned counsel, Section 617 of the 1956 Act is sui

generis as is indicated by the Chapter Heading in Part XIII “General” which

is “Application of Act to Government Companies”; that a Government

company cannot be treated as public or private company, particularly when

a separate chapter is made applicable to Government companies. According

to the learned counsel, the scheme of Section 617 indicates that,

Government Companies have separate set of auditors, namely, CAG; annual

reports are required to be laid before the Houses of Parliament under

Section 619A and the wide ranging power of the Central Government to

modify and make non-applicable any of the provisions of the Companies

Act to such companies except Sections 618, 619 and 619A. Similarly,

according to the learned counsel, under Section 616, there is reference to

companies governed by Special Acts. According to the learned counsel,

Section 616 recognizes that several companies are covered by the Special

Acts. They stand on a different footing vis-`-vis public and private

companies under the 1956 Act. In the event of inconsistency between the
2
4
Special Acts and the Companies Act, it is the former which would prevail.

Therefore, in respect of Government companies, which are governed by the

Special Acts, their status as a Government company would prevail and the

said companies would necessarily have to be treated as sui generis. In other

words, according to the learned counsel, the structure of a Government

company like OIC under the Insurance Act is totally different from the

structure of a public limited company under the Companies Act. In this

connection, learned counsel placed reliance on the various provisions of the

Insurance Act in the context of winding up to bring out the difference

between a Government company on one hand and the public limited

company on the other hand.

22. All the above arguments have been canvassed to show that OIC is not

a public limited company as is sought to be argued on behalf of the

appellants. All the above arguments are advanced to show that structurally

there is a difference between a Government company and an ordinary

company under the provisions of the 1956 Act as well as Statutory

Corporations.

 

23. In the context of the said Rent Act, learned counsel submitted that, in

Section 3(1)(b) a compendious expression used is “any public sector

undertakings or any corporation established by or under any Central or State
2
5
Act”. He urged that there is no “comma” after the words “any public sector

undertakings”. Therefore, according to the learned counsel, Section 3(1)(b)

of the said Rent Act applies to PSUs and statutory corporations “established

by or under any Central or State Act.” Therefore, according to the learned

counsel, a Government company incorporated under the Companies Act

would fall outside Section 3(1)(b) and thus would be entitled to the

protection of the Rent Act. In this connection, learned counsel placed

reliance on the Report of the Joint Committee which vide para 19 refers to

“Other PSUs including Government Undertakings or Corporations

established by or under Central or State enactments.” According to the

learned counsel, what has emerged from the said report is that the Joint

Committee intended to include Government/semi-Government undertakings

or corporations within the words “other public sector undertakings”,

however, the Legislature has dropped the said inclusion from the expression

“Public Sector Undertakings” and simply proceeded to specify “Public

Sector Undertakings or Corporation” which were established by or under

any Central or State Act. Therefore, according to the learned counsel, in the

said sub-section 3(1)(b) the expression “Public Sector Undertakings” was

given a narrow interpretation by the Legislature though the Joint Committee

recommended much wider definition of the words PSUs.
2
6

 

24. Learned counsel submitted that the expression “PSU” has not been

defined in the said Rent Act. It was submitted that even if the said

expression has been defined as including Government companies, it would

still be open to the respondent to contend that for the purposes of the

exclusion clause, the expression PSU should be narrowly construed so as to

exclude Government companies therefrom. Learned counsel submitted that

Section 3(1)(b) is an exemption clause which excludes tenants from

applicability of the said Rent Act, 1999 and, therefore, has to be narrowly

interpreted. Lastly, learned counsel submitted that in a landlord-tenant

statute, if two views are possible one favouring the tenant should be

preferred.

 

25. On the aspect of incorporation, learned counsel submitted that LIC is

a statutory corporation whereas GIC is not. According to the learned

counsel, GIC is a Government company. Therefore, according to the learned

counsel, the legislative scheme has maintained a distinction between

statutory corporation and a Government company incorporated under the

Companies Act. According to the learned counsel, this distinction cannot be

said to be a distinction without any difference. Therefore, it was submitted
2
7
that it is always open to the Legislature to either proceed on the basis that

both LIC and GIC will be excluded or that only LIC and not GIC, being a

Government company, would be excluded. According to the learned

counsel, these are the options open to the Legislature and the exercise of

one or the other option will not vitiate the Legislature as being violative of

Article 14 of the Constitution. Moreover, according to the learned counsel,

there is a valid differentia between a statutory corporation like LIC and

Government companies, like GIC, OIC etc. According to the learned

counsel, in the matter of categorization, it is open to the Legislature to give

protection only to statutory corporations. However, in the present case, the

Legislature has excluded statutory corporations from such protection.

According to the learned counsel, the Legislature has given protection to

Government companies but has not extended protection to statutory

corporations as it has treated Government companies more akin to the

Government as is referred to in sub-section 3(1)(a) of the Act.

 

26. To sum up, the basic contention advanced by learned Additional

Solicitor General is that a Government company does not fall within the

compendious expression “any PSUs or any corporation established by or

under any Central or State Act”. In other words, according to the learned
2
8
counsel, the impugned judgment of the High Court commends to be

sustained though in a different matrix.

 

27. Dr. Rajeev Dhavan appearing on behalf of Bharat Petroleum

Corporation Ltd.-appellant (SLP(C) Nos. 24789-90/07) submitted that the

word `PSU’ is a term of parlance and that it is not a term of art. Learned

counsel submitted that in this case the court is required to give contextual

interpretation to the words `PSUs’ in Section 3(1)(b) and if such a

interpretation is given then the position which emerges is that the words

PSUs or any statutory corporation constitute one separate specific category

and, therefore, to that extent he adopts the arguments advanced on behalf of

the Oriental Insurance Company Ltd. that the Act vide Section 3(1)(b)

excludes PSUs and statutory corporations established by or under Central or

State Act alone from the protection of the Rent Act. Therefore, according to

the learned counsel, if a PSU or a corporation is a Government company

under the 1956 Act then such PSUs/corporations would continue to get

protection of the Rent Act. According to the learned counsel, Oriental

Insurance Company Ltd. is a Government Company, it is not a PSU

established by or under any Central or State Act and, therefore, it continues

to enjoy the protection of the Rent Act even after enactment of Section 3(1)
2
9
(b). Learned counsel further urged that the said Rent Act has been enacted

to protect tenants from eviction; that, tenants protection is a part of housing;

that, the said Rent Act is not concerned with poverty/protection to the

weaker section as is sought to be contended on behalf of the appellants but

essentially, according to the learned counsel, it deals with two aspects,

namely, tenancy protection and rent fixation. According to the learned

counsel, it would be wrong to say that the said Rent Act has been enacted

only to protect those who cannot afford to pay. Learned counsel submitted

that under the Rent Act a stipulated percentage of rent increase is allowed to

the landlords on annual basis. This, according to the learned counsel, is one

aspect of the Rent Act. The other aspect is to protect tenancy. Therefore,

according to the learned counsel, the Rent Act touches both these aspects.

Further, according to the learned counsel, Section 3(1) has to be read in its

entirety. Under the second part of Section 3(1)(a) protection is given in

respect of premises let to the Government or local authority and to premises

taken on behalf of the Government by or in the name of a designated officer.

Learned counsel submitted that, in the present case, a Government

company gets protection from eviction under second part of Section 3(1)(a)

and since Government company is not one of the categories mentioned in

Section 3(1)(b) such companies which are tenants would continue to get
3
0
protection under second part of Section 3(1)(a). Learned counsel submitted

that even if one is to give purposive interpretation to the said section, it is

clear that in cases of tenancy created in favour of Government, local

authority or Government companies, the court is concerned with public

necessity and public need. According to the learned counsel, a bare reading

of the second part of Section 3(1)(a) indicates that the Rent Act in question

also assumes that the Government, local authorities and Government

companies need protection of the Rent Act. Learned counsel submitted that

there is nothing in the report of the Joint Committee or in the Statement of

Objects and Reasons to exclude premises let out to Government companies.

Learned counsel further submitted that if Section 3(1)(a) is to be given full

interpretation then all governmental functions should be taken into account.

That, Section 3(1)(a) cannot be confined to non-commercial activity.

Therefore, according to the learned counsel, the distinction made between

governmental functions and commercial functions to interpret Section 3(1)

is erroneous. According to the learned counsel, Government operates in

railways, transport and energy sectors. It operates via departments,

Government companies and statutory corporations. When it operates

through its department like bureau of public enterprises the matter will

squarely come under Section 3(1)(a). However, in view of Section 3(1)(b)
3
1
when a Government operates through a statutory corporation the matter

would fall under Section 3(1)(b) because the legislature in its wisdom has

excluded premises let to statutory corporations and to public limited

companies having paid up share capital of Rs. 1,00,00,000 or more from the

protection of the Rent Act. According to the learned counsel since an

ordinary company under the Companies Act is different from the

Government company under that Act, it is clear that Government companies

would continue to get protection by virtue of Section 3(1)(b) as the said

company is owned by the Government. Learned counsel submitted that one

need not go by ownership or the form in which an entity is incorporated.

One has to take into account the test of incorporation, the nature of the

functions which entities carried on and the ownership. According to the

learned counsel, Section 3(1)(b) refers to separate and distinct categories.

According to the learned counsel, the last category consists of private

limited companies and public limited companies having a paid up share

capital of Rs. 1,00,00,000 or more. Learned counsel submitted that it would

be wrong to contend that this last category subsumes the categories

enumerated earlier in the first part of Section 3(1)(b). For the aforestated

reasons, learned counsel submitted that no interference is called for in this

matter.
3
2

 

28. Relevant Provisions for Consideration:

(a) Maharashtra Rent Control Act, 1999

Preamble

An Act to unify, consolidate and amend the law relating
to the control of rent and repairs of certain premises and of
eviction and for encouraging the construction of new houses by
assuring a fair return on the investment by landlords and to
provide for the matters connected with the purposes aforesaid.


Section 2. Application

(1) This Act shall, in the first instance, apply to premises let
for the purposes of residence, education, business, trade
or storage in the areas specified in Schedule I and
Schedule II.

Section 3. Exemption

(1) This Act shall not apply-

(a) to any premises belonging to the Government or a local
authority or apply as against the Government to any
tenancy, licence or other like relationship created by a
grant from or a licence given by the Government in
respect of premises requisitioned or taken on lease or on
licence by the Government, including any premises taken
on behalf of the Government on the basis of tenancy or
of licence or other like relationship by, or in the name of
any officer subordinate to the Government authorized in
this behalf; but it shall apply in respect of premises let,
or given on licence, to the Government or a local
3
3
authority or taken on behalf of the Government on such
basis by, or in the name of, such officer;

(b) to any premises let or sub-let to banks, or any Public
Sector Undertakings or any Corporation established by
or under any Central or State Act, or foreign missions,
international agencies, multinational companies, and
private limited companies and public limited companies
having a paid up share capital of rupees one crore or
more.

Explanation.- For the purpose of this clause the
expression “bank” means,-

(i) the State Bank of India constituted under the State Bank
of India Act, 1955;

(ii) a subsidiary bank as defined in the State Bank of India
(Subsidiary Banks) Act, 1959;

(iii) A corresponding new bank constituted under section 3 of
the Banking Companies (Acquisition and Transfer of
Undertakings) Act, 1970 or under section 3 of the Banking
Companies (Acquisition and Transfer of Undertaking) Act,
1980; or

(iv) any other bank, being a scheduled bank as defined in
clause (e) of section 2 of the Reserve Bank of India Act, 1934.

(2) The State Government may direct that all or any of the
provisions of this Act shall, subject to such conditions and
terms as it may specify, not apply-

(i) to premises used for public purpose of a charitable nature
or to any class of premises used for such purposes;

(ii) to premises held by a public trust for a religious or
charitable purpose and let at a nominal or concessional rent;
3
4
(iii) to premises held by a public trust for a religious or
charitable purpose and administered by a local authority; or

(iv) to premises belonging to or vested in an university
established by any law for the time being in force.

Provided that, before issuing any direction under this sub-
section, the State Government shall ensure that the tenancy
rights of the existing tenants are not adversely affected.

(3) The expression “premises belonging to the Government
or a local authority” in sub-section (1) shall, notwithstanding
anything contained in the said sub-section or in any judgment,
decree or order of a court, not include a building erected on any
land held by any person from the Government or a local
authority under an agreement, lease, licence or other grant,
although having regard to the provisions of such agreement,
lease, licence or grant the building so erected may belong or
continue to belong to the Government or the local authority, as
the case may be, and such person shall be entitled to create a
tenancy in respect of such building or a part thereof.
(b) The Companies Act, 1956:

Preamble

An Act to consolidate and amend the law relating to
companies and certain other associations.

Section 2. Definitions.- In this Act, unless the context
otherwise requires.-

(5) “banking company” has the same meaning as in the
Banking Companies Act, 1949 (10 of 1949)

(7) “body corporate” or “corporation” includes a company
incorporated outside India but does not include-

(a) a corporation sole;
3
5
(b) a co-operative society registered under any law
relating to co-operative societies; and
(c) any other body corporate (not being a company as
defined in this Act) which the Central Government
may, by notification in the Official Gazette,
specify in this behalf.

(10) “company” means a company as defined in section 3.

(16) “existing company” means an existing company as
defined in section 3.

(18) “Government company” means a Government company
within the meaning of section 617.

(19) “holding company” means a holding company within the
meaning of section 4.

(21) “insurance company” means a company which carries on
the business of insurance either solely or in conjunction
with any other business or businesses.

(23) “limited company” means a company limited by shares
or by guarantee.

(23A) “listed public companies” means a public company
which has any of its securities listed in any recognized
stock exchange.

Section 3. Definitions of “company”,
“existing company”, “private company” and
“public company”
(1) In this Act, unless the context otherwise requires, the
expressions “company”, “existing company”, “private
“company” and “public company” shall, subject to the
provisions of subsection (2), have the meanings specified
below:
3
6
(i) “company” means a company formed and registered
under this Act or an existing company as defined in
clause (ii);
(ii) “existing company” means a company formed and
registered under any of the previous companies laws
specified below:
(a) any Act or Acts relating to companies in force
before the Indian Companies Act, 1866 (10 of
1866) and repealed by the Act;
(b) the Indian Companies Act, 1866 (10 of 1866);
(c) the Indian Companies Act, 1882 (6 of 1882);
(d) the Indian Companies Act, 1913 (7 of 1933);
(e) the Registration of Transferred Companies
Ordinance 1942 (54 of 1942); and
(f) any law corresponding to any of the Acts or the
Ordinance aforesaid and in force-
(1) in the merged territories or in a Part B State
(other than the State of Jammu and Kashmir),
or any part thereof, before the extension thereto
of the Indian Companies Act, 1913 (7 of 1913);
or
(2) in the State of Jammu and Kashmir, or any
part thereof, before the commencement of the
Jammu and Kashmir (Extension of Laws) Act,
1956 (62 of 1956), in so far as banking,
insurance and financial corporations are
concerned, and before the commencement of
the Central Laws (Extension to Jammu and
Kashmir) Act, 1968 (25 of 1968) insofar as
other corporations are concerned; and
3
7
(g) the Portugese Commercial Code in so far as it
relates to “sociedades anonimas”;
(iii) “private company” means a company which has a
minimum paid-up capital of one lakh rupees or such
higher paid-up capital as may be prescribed, and by its
articles,-
(a) restricts the right to transfer its shares, if any;
(b) limits the number of its members to fifty not
including-
(i) persons who are in the employment of the
company, and
(ii) persons who, having been formerly in the
employment of the company, were members of
the company while in that employment and
have continued to be members after the
employment ceased; and
(c) prohibits any invitation to the public to
subscribe for any shares in, or debentures of, the
company;
(d) prohibits any invitation or acceptance of
deposits from persons other than its members,
directors or their relatives:
Provided that where two or more persons hold one
or more shares in a company jointly, they shall, for
the purposes of this definition, be treated as a
single member;
(iv) “public company” means a company which-
(a) is not a private company;
3
8
(b) has a minimum paid-up capital of five lakh
rupees or such higher paid-up capital, as may be
prescribed;
(c) is a private company which is a subsidiary of a
company which is not a private company.
(2) Unless the context otherwise requires, the following
companies shall not be included within the scope of any of the
expressions defined in clauses (i) to (iv) of sub-section (1), and
such companies shall be deemed, for the purposes of this Act,
to have been formed and registered outside India:-
(a) a company the registered office whereof is in Burma,
Aden or Pakistan and which immediately before the
separation of that country from India was a company as
defined in clause (i) of sub-section (1);
(3) Every private company, existing on the commencement of
the Companies (Amendment) Act, 2000, with a paid-up capital
of less than one lakh rupees, shall, within a period of two years
from such commencement, enhance its paid-up capital to one
lakh rupees.

(4) Every public company, existing on the commencement of
the Companies (Amendment) Act, 2000, with a paid-up capital
of less than five lakh rupees, shall within a period of two years
from such commencement, enhance its paid-up capital to five
lakh rupees.

(5) Where a private company or a public company fails to
enhance its paid-up capital in the manner specified in sub-
section (3) or sub-section (4), such company shall be deemed to
be a defunct company within the meaning of section 560 and
its name shall be struck off from the register by the Registrar.

(6) A company registered under section 25 before or after the
commencement of Companies (Amendment) Act, 2000 shall
not be required to have minimum paid-up capital specified in
this section.
3
9

Section 25. Power to dispense with
“Limited” in name of charitable or other
company

(1) Where it is proved to the satisfaction of the Central
Government that an association:-
(a) is about to be formed as a limited company for
promoting commerce, art, science, religion, charity or
any other useful object, and
(b) intends to apply its profits, if any, or other income in
promoting its objects, and to prohibit the payment of any
dividend to its members,
the Central Government may, by licence, direct that the
association may be registered as a company with limited
liability, without the addition to its name of the word “Limited”
or the words “Private Limited”.
(2) The association may thereupon be registered accordingly;
and on registration shall enjoy all the privileges, and (subject to
the provisions of this section) be subject to all the obligations,
of limited companies.
(3) Where it is proved to the satisfaction of the Central
Government-
(a) that the objects of a company registered under this
Act as a limited company are restricted to those specified
in clause (a) of sub-section (1), and
(b) that by its constitution the company is required to
apply its profits, if any, or other income in promoting its
objects and is prohibited from paying any dividend to its
members,
4
0
the Central Government may, by licence, authorise the
company by a special resolution to change its name, including
or consisting of the omission of the word “Limited” or the
words “Private Limited”; and section 23 shall apply to a change
of name under this sub-section as it applies to a change of name
under section 21.
(4) A firm may be a member of any association or company
licensed under this section, but on the dissolution of the firm,
its membership of the association or company shall cease.
(5) A licence may be granted by the Central Government under
this section on such conditions and subject to such regulations
as it thinks fit, and those conditions and regulations, shall be
binding on the body to which the licence is granted, and where
the grant is under sub-section (1), shall, if the Central
Government so directs, be inserted in the memorandum, or in
the articles, or partly in the one and partly in the other.
(6) It shall not be necessary for a body to which a licence is so
granted to use the word “Limited” or the words “Private
Limited” as any part of its name and, unless its articles
otherwise provide, such body shall, if the Central Government
by general or special order so directs and to the extent specified
in the directions, be exempt from such of the provisions of this
Act as may be specified therein.
(7) The licence may at any time be revoked by the Central
Government, and upon revocation, the Registrar shall enter the
word “Limited” or the words “Private Limited” at the end of the
name upon the register of the body to which it was granted; and
the body shall cease to enjoy the exemption granted by this
section:
Provided that, before a licence is so revoked, the Central
Government shall give notice in writing of its intention to the
body, and shall afford it an opportunity of being heard in
opposition to the revocation.
(8)(a) A body in respect of which a licence under this section is
in force shall not alter the provisions of its memorandum with
4
1
respect to its objects except with the previous approval of the
Central Government signified in writing.
(b) The Central Government may revoke the licence of such a
body if it contravenes the provisions of clause (a).
(c) In according the approval referred to in clause (a), the
Central Government may vary the licence by making it subject
to such conditions and regulations as that Government thinks
fit, in lieu of, or in addition to, the conditions and regulations,
if any, to which the licence was formerly subject.

(d) Where the alteration proposed in the provisions of the
memorandum of a body under this sub-section is with respect
to the objects of the body so far as may be required to enable it
to do any of the things specified in clauses (a) to (g) of sub-
section (1) of section 17, the provisions of this sub-section
shall be in addition to, and not in derogation of, the provisions
of that section.
(9) Upon the revocation of a licence granted under this section
to a body the name of which contains the words “Chamber of
Commerce”, that body shall, within a period of three months
from the date of revocation or such longer period as the Central
Government may think fit to allow, change its name to a name
which does not contain those words; and-
(a) The notice to be given under the proviso to sub-
section (7) to that body shall include a statement of the
effect of the foregoing provisions of this sub-section; and
(b) Section 23 shall apply to a change of name under this
sub-section as it applies to a change of name under
section 21.
(10) If the body makes default in complying with the
requirements of sub-section (9), it shall be punishable with fine
which may extend to five thousands rupees for every day
during which the default continues.


4
2

Section 616. Application of Act to
Insurance, banking, electricity supply and
other companies governed by special Acts.
The provisions of this Act shall apply-
(a) to insurance companies, except in so far as the said
provisions are inconsistent with the provisions of the Insurance
Act, 1938;

(b) to banking companies, except in so far as the said
provisions are inconsistent with the provisions of the Banking
Companies Act, 1949;

(c) to companies engaged in the generation or supply of
electricity, except in so far as the said provisions are
inconsistent with the provisions of the Indian Electricity Act,
1910 or the Electricity Supply 1948;

(d) to any other company governed by any special Act for the
time being in force, except in so far, as the said provisions are
inconsistent with the provisions of such special Act;

(e) to such body corporate, incorporated by any Act for the
time being in force, as the Central Government may, by
notification in the Official Gazette, specify in this behalf,
subject to such exceptions, modifications or adaptation, as may
be specified in the notification.

Section 617. Definition of “Government
Company”.

For the purposes of this Act Government company means any
company in which not less than fifty one per cent of the paid-
up share capital is held by the Central Government, or by any
State Government or Governments, or partly by the Central
Government and partly by one or more State Governments and
includes a company which is a subsidiary of a Government
company as thus defined.
4
3
Point for Determination:
29. Whether the High Court was right in holding that the words PSUs in

Section 3(1)(b) excluded Government Companies as defined under Section

617 of the 1956 Act.
Findings:

 

30. Economics looks at life from the viewpoint of a man, not from that of

an angel.

 

31. In order to give purposive interpretation to Section 3(1)(b) of the said

Rent Act one has to go back in history to the object behind enactment of the

Bombay Rent Act, 1947 (“1947 Act”). That Act was passed to amend and

consolidate the law relating to rents, repairs, eviction of tenants, control of

rates of hotels and lodging houses and to control charges of licensed

premises since 1.2.1973. The Act was passed to control the rents so as to

prevent the landlords from exploiting the tenants by charging exorbitant

rents with a view to take wrong advantage of growing acute shortage of
4
4
accommodation in urban areas. Thus, that Act was also enacted to give

further protection to the tenants, it intended to provide for responsibility of

carrying out usual tenable repairs by transferring the duty of the tenants to

carry out such repairs under the Transfer of Property Act to the landlord and

thereby compelling him to keep the premises let out in good condition at his

costs. In short, the said 1947 Act stood enacted with the intention to control

rents, repairs, rates of hotels and eviction of tenants.

 

32. Section 4 of the 1947 Act dealt with exemptions. There were three

limbs of Section 4(1) which are similar to Section 3(1)(a) of the Rent Act,

1999. The first limb exempted the premises belonging to the Government or

local authority from the operation of the 1947 Act if the Government was

the owner of a building with sitting tenants therein, the latter were not

protected by the 1947 Act. The second limb of Section 4(1) inter alia

provided that the Act did not apply against the Government companies to

any tenancy created by a grant from the Government in respect of premises

taken on lease by the Government or in respect of premises requisitioned by

the Government. The third limb of Section 4(1) applied when the

Government or a local authority was a tenant. Section 3-A of the Bombay

Housing Board Act, 1948 placed the Board in the same privileged position

as that of the Government under Section 4(1) of the 1947 Act. The said
4
5
Bombay Housing Board Act, 1948 stood replaced by Maharashtra Housing

and Area Development Act, 1976 (“MHADA Act”) which was enacted to

consolidate, unify, and amend laws relating to housing, repairing and

reconstructing dangerous buildings. In the Statement of Objects and

Reasons it is mentioned that in urban areas and, particularly in Greater

Mumbai area the old buildings had outlived their lives and have rendered

themselves in a bad state of repairs and in order to prevent possible collapse

of old buildings necessity was felt to take up the programme of repairs and

reconstruction of such buildings.

 

33. To continue our discussion on Bombay Rent Act, 1947, Section 5(10)

defined `standard rent’. Under that section there were six types of standard

rent, namely, rent fixed by the court under the previous Rent Acts of 1939

and 1944, rent charged on 1.9.1940 if the premises were let for the first time

on that date, if the premises were let before 1.9.1940 then the rent first

charged, if the premises were let after 1.9.1940 then the rent first charged

when let, if the premises were exempted from standard rent then after the

five years period the rent was not to exceed 15% on the investment made in

construction and outgoings and in any other cases rent fixed by the court
4
6
which may vary from time to time. Thus, the fixed date-line was 1.9.1940.

The standard rent was subject to Section 11.

 

34. Our object of the above discussion regarding provisions of the

Bombay Rent Act, 1947 is two-fold. Firstly, to point out that there has been

a structural change made by the Legislature in the present Rent Act vis-`-vis

the 1947 Act. Secondly, we have analysed the relevant provisions of the

1947 Act to indicate the change in the economic conditions between 1947

and 31.3.2000 when the present Rent Act came into force.

35. Broadly, we may state that the twin objects for enacting the 1947 Act

was tenancy protection and rent restriction. In 1947, the economic scenario

was different from the scenario that prevails after 31.3.2000. In 1947 rent

forming provided an important source of unearned income to the landlords

which led to the landlords charging exorbitant rent in urban areas. Return on

investments at that time constituted considerable returns to the landlords. At

that time, it was worth investing in the business of leasing. The cost of

repairs was comparatively much less. The purchasing power of the rupee

was relatively higher than the purchasing power of the rupee after

31.3.2000. However, by 1976, with the rise in the cost of living index, the

said investments made in 1940’s started giving negative returns. Coupled
4
7
with the price rise and increase in cost of repairs and maintenance,

municipal taxes also increased. The result was that the net asset value

became negative. Consequently, old buildings started collapsing for lack of

maintenance. Even today thousands of buildings in Greater Mumbai are in a

dilapidated condition for lack of resources. Therefore, in 1976, the

Legislature enacted MHADA 1976 precisely to undertake repairs and

constructions of old dilapidated buildings for which cess was levied.

However, with the passage of time, it appears that the position deteriorated

and investments in this sector became negligible by 31.3.2000. With the

price rise and with the increase in the cost of construction, certain

provisions of the 1947 Act by which standard rent stood pegged/frozen as

on 1.9.1940 and the provision imposing a ban on the landlords from

receiving premium under Sections 18 and 19 of the 1947 Act became

vulnerable to challenge as violative of Article 14 of the Constitution. Those

provisions, as discussed above, were Sections 5(10), 11, 18 and 19. This

position was further compounded when large premises, particularly in South

Mumbai stood occupied by cash-rich entities like, statutory corporations

and corporate bodies who insisted on paying meager standard rent under the

1947 Act.
4
8
36. Ultimately, the economic reasons led one of the landlords by the

name Malpe Vishwanath Acharya to challenge the provisions of Section 5

(10), 7, 9(2)(b) and 11(1)(a) of the 1947 Act. We quote hereinbelow paras 8,

15, 17, 22, 25, 26, 27, 28, 29, 30 and 31of the judgment of this Court in the

case of Malpe Vishwanath Acharya and ors. v. State of Maharashtra

and anr. (1998) 2 SCC 1:
“8. There is considerable judicial authority in support of
the submission of learned counsel for the appellants that
with the passage of time a legislation which was justified
when enacted may become arbitrary and unreasonable
with the change in circumstances. In the State of M.P.
v. Bhopal Sugar Industries Ltd. (1964) 6 SCR 846
dealing with a question whether geographical
classification due to historical reasons would be valid
this Court at SCR p. 853 observed as follows:
“Differential treatment arising out of the
application of the laws so continued in
different regions of the same reorganised
State, did not therefore immediately attract
the clause of the Constitution prohibiting
discrimination. But by the passage of time,
considerations of necessity and expediency
would be obliterated, and the grounds which
justified classification of geographical
regions for historical reasons may cease to
be valid. A purely temporary provision
which because of compelling forces
justified differential treatment when the
Reorganisation Act was enacted cannot
obviously be permitted to assume
permanency, so as to perpetuate that
treatment without a rational basis to support
it after the initial expediency and necessity
have disappeared.”

xxx
4
9
15. The aforesaid decisions clearly recognise and
establish that a statute which when enacted was justified
may, with the passage of time, become arbitrary and
unreasonable. It is, therefore, to be seen whether the
aforesaid principle is applicable in the instant case. Can
it be said that even though the provisions relating to the
fixation of standard rent were valid when the Bombay
Rent Act was passed in 1947 the said provision, as
amended, can still be regarded as valid now?
xxx

17. A perusal of the aforesaid extracts of reports and
resolutions clearly demonstrates that since the last two
decades the authorities themselves seem to be convinced
that the pegging down of the rents to the pre-war stage
and even thereafter, is no longer reasonable.
Unfortunately apart from lip service little of note has
been done. Even the Rent Control Bill introduced in
1993 has not yet become law.
Xxx

22. The aforesaid illustration, which has not been
seriously disputed, clearly brings out the arbitrariness of
the standard rent provisions contained in the Bombay
Rent Act. It is true that the aforesaid illustration has
reference to the monthly rent of Rs 100 as on 1-9-
1940 and does not relate to the premises which are let
out after the Act had come into force. As far as Section 5
(10) is concerned the standard rent of the premises let
out after 1-9-1940 is that rent at which the premises were
first let. Even so the rapid increase in the expenses for
repair and other outgoings and the decreasing net amount
of rent which remains with the landlord, clearly show
that the non-provision in the Act for reasonable increase
in the rent, with the passage of time, is leading to
arbitrary results. This is also demonstrated from the facts
in the case of Petitioner 3 who owns Unit No. A-18 on
the first floor admeasuring 808 sq. ft. in the property
known as Shri Ram Industrial Estate situated at 13 J.D.
Ambedkar Road, Mumbai. The said building belongs to
a cooperative society and Unit No. A-18 was given on
lease and licence basis by an agreement dated 23-8-1964
by the appellant to Lokmitra Sahakari Printing and
Publishing Society Ltd. on a monthly compensation of
Rs 686.80 per month. Liabilities of repairs is on the
5
0
appellant and according to it this amount received in
respect of the said unit by the appellant is Rs 563.65 per
month inclusive of all taxes. Out of this sum Appellant 3
has to pay Rs 216.33 as municipal taxes leaving a
balance of Rs 320.22. From this amount the society
outgoings is Rs 250 per month, leaving a balance of only
Rs 70.20 per month with the said appellant. Another
instance which has been given is that of Appellant 4 who
owns a property known as Ram Mahal situated at 8,
Dinshaw Vachha Road, Mumbai. The said building has
20 residential flats and the building was purchased by
Appellant 4 in the year 1955, although it had been
constructed prior to 1940. Flat No. 15 on the 5th floor of
the said building had been let out by the previous owners
to M/s Bennett Coleman & Co. Ltd., who were the
sitting tenants at the time when the property was
purchased. The flat measures 1710 sq. ft. and monthly
rent for the same is Rs 460 per month inclusive of
permitted increase and repairs. According to the
appellant the income by way of rent has remained
constant while the expenditure has been increased and
the total gross rent of the building which he receives is
Rs 1,72,032 per annum while it incurs an annual
expense of Rs 1,93,245 consisting of BMC taxes,
repairs, ground rent, maintenance charges inclusive of
small electricity bill and the insurance premium. He is,
therefore, suffering a loss of Rs 21,213 every year. It is
not necessary to examine the correctness of these details
except to note that what was reasonable on 1-9-1940 or
in 1950s or in 1960s can no longer be regarded as
reasonable at this point of time.
xxx

25. It is true that one of the reasons for enacting the rent
control legislation is to prevent exploitation of the
tenants by the landlords. One of the protections which
has been provided to the tenants in the rent legislation
throughout the country is the concept of standard rent.
Each State has definite laws with regard thereto. In some
case, like in Delhi, the Rent Control Act is not applicable
if the rent is Rs 3500 or more while in the other States
Rent Control Act is not applicable to certain categories
of persons. In the Bombay Rent Act, with which we are
concerned, the standard rent as on 1-9-1940 or the first
rent of the premises which was let out thereafter is the
standard rent. The pegging down of rent, coupled with
5
1
the inability of the landlord to evict the tenants, has
given rise to unlawful tendencies. In the Statement of
Objects and Reasons annexed to LA Bill No. 79 of 1986
introduced in the Maharashtra Legislature providing for
amendment to the Bombay Rent Control Act with regard
to clause 3 it was, inter alia, stated as follows:
“The freezing of standard rent prevailing
on 1st September, 1940 has deprived the
landlords of getting reasonable and
adequate return to undertake maintenance
and repairs to the old buildings. Despite the
penal provisions in the Act for charging any
premium from a tenant, such freezing of
rent results in charging `pugree’ or deposit
or similar illicit payments which are widely
prevalent. The construction of new
tenements on rental basis has considerably
ceased with the result that low and middle
income groups are not getting premises on
rent….” (emphasis added)

26. Notwithstanding the fact that the State Legislature
was conscious of the illegal payments which are made
because of the rent restriction law no effective steps have
been taken so far to strike a balance between the interests
of the landlords and the tenants.

27. It is true that whenever a special provision, like the
Rent Control Act, is made for a section of the society it
may be at the cost of another section, but the making of
such a provision or enactment may be necessary in the
larger interest of the society as a whole but the benefit
which is given initially if continued results in increasing
injustice to one section of the society and an unwarranted
largess or windfall to another, without appropriate
corresponding relief, then the continuation of such a law
which necessarily, or most likely, leads to increase in
lawlessness and undermines the authority of the law can
no longer be regarded as being reasonable. Its
continuance becomes arbitrary.

28. The legislature itself, as already noticed
hereinabove, has taken notice of the fact that pugree
system has become prevalent in Mumbai because of the
5
2
Rent Restriction Act. This Court was also asked to take
judicial notice of the fact that in view of the
unreasonably low rents which are being received by the
landlords, recourse is being taken to other methods to
seek redress. These methods which are adopted are
outside the four corners of the law and are slowly giving
rise to a state of lawlessness where, it is feared, the
courts may become irrelevant in deciding disputes
between the landlords and tenants. This should be a
cause of serious concern because if this extra-judicial
backlash gathers momentum the main sufferers will be
the tenants, for whose benefit the Rent Control Acts are
framed.

29. Insofar as social legislation, like the Rent Control
Act is concerned, the law must strike a balance between
rival interests and it should try to be just to all. The law
ought not to be unjust to one and give a disproportionate
benefit or protection to another section of the society.
When there is shortage of accommodation it is desirable,
may, necessary that some protection should be given to
the tenants in order to ensure that they are not exploited.
At the same time such a law has to be revised
periodically so as to ensure that a disproportionately
larger benefit than the one which was intended is not
given to the tenants. It is not as if the Government does
not take remedial measures to try and offset the effects of
inflation. In order to provide fair wage to the salaried
employees the Government provides for payment of
dearness and other allowances from time to time.
Surprisingly this principle is lost sight of while
providing for increase in the standard rent — the
increases made even in 1987 are not adequate, fair or just
and the provisions continue to be arbitrary in today’s
context.

30. When enacting socially progressive legislation the
need is greater to approach the problem from a holistic
perspective and not to have a narrow or short-sighted
parochial approach. Giving a greater than due emphasis
to a vocal section of society results not merely in the
miscarriage of justice but in the abdication of
responsibility of the legislative authority. Social
legislation is treated with deference by the courts not
merely because the legislature represents the people but
also because in representing them the entire spectrum of
views is expected to be taken into account. The
legislature is not shackled by the same constraints as the
courts of law. But its power is coupled with a
responsibility. It is also the responsibility of the courts to
5
3
look at legislation from the altar of Article 14 of the
Constitution. This article is intended, as is obvious from
its words, to check this tendency; giving undue
preference to some over others.

31. Taking all the facts and circumstances into
consideration we have no doubt that the existing
provisions of the Bombay Rent Act relating to the
determination and fixation of the standard rent can no
longer be considered to be reasonable. The said
provisions would have been struck down as having now
become unreasonable and arbitrary but we think it is not
necessary to strike down the same in view of the fact that
the present extended period of the Bombay Rent Act
comes to an end on 31-3-1998. The Government’s
thinking reflected in various documents itself shows that
the existing provisions have now become unreasonable
and, therefore, require reconsideration. The new bill is
under consideration and we leave it to the legislature to
frame a just and fair law keeping in view the interests of
all concerned and in particular the resolution of the State
Ministers for Housing of 1992 and the National Model
Law which has been circulated by the Central
Government in 1992. We are not expressing any opinion
on the provisions of the said Model Law but as the same
has been drafted and circulated amongst all the States
after due deliberation and thought, there will, perhaps,
have to be very good and compelling reasons in
departing from the said Model Law. Mr Nargolkar
assured us that this Model Law will be taken into
consideration in the framing of the proposed new Rent
Control Act.”
37. The important point to be noted is that in the above judgment it has

been held that with the passage of time the 1947 Act which was justified

when enacted had become arbitrary and unreasonable with the change in

economic circumstances. It has been further observed in the said judgment

that the 1947 Act relating to determination and fixation of standard rent can

no longer be considered to be reasonable. However, this Court felt that
5
4
though the provisions mentioned above were liable to struck down as

unreasonable and arbitrary keeping in mind the consequences that the

tenants may lose protection of the Rent Act, this Court gave an opportunity

to the Government to consider enactment of a Model Law. This judgment

was delivered by the apex Court on 19.12.1997.

 

38. Therefore, the legislature was required to keep in mind the

vulnerability of fixing standard rent as on 1.9.1940. At the same time, the

legislature had to keep in mind two aspects, namely, tenancy protection and

rent restriction. The problem arose on account of economic factors.

However, the legislature found the solution by evolving an economic

criterion. The legislature evolved a package under which the prohibition on

receiving premium under Section 18 of the 1947 Act stood deleted. In other

words, landlords were given the liberty to charge premium. The second

package was to exclude cash-rich body corporates and statutory

corporations from the protection of the Rent Act. This part of the economic

package helps the landlords to enhance the rent and charge rent to the

entities mentioned in Section 3(1)(b) who can afford to pay rent at the

market rate. This was the second item in the economic package offered to

the landlords under the present Rent Act. The third item of the Rent Act was

to give the benefit of annual increase of rent @ 5% under the present Rent
5
5
Act. All three items constituted one composite package for the landlords.

The underlying object behind the said economic package is to balance and

maintain the two-fold objects of the Rent Act, namely, tenancy protection

and rent protection. The idea behind excluding cash-rich entities from the

protection of the Rent Act is also to continue to give protection to tenants

who cannot afford to pay rent at market rate.

39. The above discussion is relevant because we must understand the

reason why Section 3(1)(b) came to be enacted. As stated above, in our

view, with the offer of an economic package to the landlords, the legislature

has tried to maintain a balance. The provisions of the earlier Rent Act, as

stated above, have become vulnerable, unreasonable and arbitrary with the

passage of time as held by this Court in the above judgment. The legislature

was aware of the said judgment. It is reflected in the report of the Joint

Committee. In our view, the changes made in the present Rent Act by which

landlords are permitted to charge premium, the provisions by which cash-

rich entities are excluded from the protection of the Rent Act and the

provision providing for annual increase at a nominal rate of 5% are

structural changes brought about by the present Rent Act, 1999 vis-`-vis the

1947 Act. The Rent Act of 1999 is the sequel to the judgment of this Court

in the case of Malpe Vishwanath Acharya (supra).
5
6

 

40. The entire discussion hereinabove is, therefore, not only to go behind

Section 3(1)(b) and ascertain the reasons for enactment of the said sub-

section but also to enable this Court to give purposive interpretation to the

said sub-section.

 

41. In the light of the discussion mentioned hereinabove, we need to

interpret Section 3(1)(b). The said sub-section excludes entities enumerated

therein from the protection of the said Rent Act, namely, banks, PSUs,

statutory corporations, foreign missions, international agencies,

multinational companies and private limited companies and public limited

companies having a paid up share capital of Rs. 1,00,00,000 or more. The

question which arises for determination concerns the character of PSUs in

the context of Section 3(1)(b).

 

42. The word `PSU’ is not a term of art. It is not defined in the said Rent

Act. It is not defined in the Companies Act. However, the said term finds

place in the Report of the Study Team on Public Sector Undertakings. One

such Report of the Study Team is dated 10.6.1967. The Study Team was

appointed on 20.5.1966. It submitted its Report to the Chairman,

Administrative Reforms Commission, Government of India. Under Chapter
5
7
XIV, the Committee has discussed the forms of organization, namely,

departmental undertaking, Government company and PSU. It observed that

departmental undertakings are unsuitable for industrial and commercial

enterprises. It is further observed that, in India, the Government has adopted

the method of running companies by directly holding shares in them.

According to the Committee, this is the pattern of public sector in India.

This, according to the Committee, is apart from statutory corporations

which are set up or established under Central/State Acts. According to the

Committee, a public corporation as a form covers statutory corporation,

Government company and public sector company. According to the

Committee, PSU and Government company are to be equated in the sense

that these two entities are the same when it comes to autonomy and

flexibility as compared to departmental undertakings. One point may be

noted at this stage. The concept of PSU and the concept of Government

company became relevant after introduction of economic reforms in 1991.

With the said reforms, market orientation was given to our economy. It is

around this time that the role of PSU became important. Both, the PSU as

well as the Government company, were given autonomy and flexibility in

commercial sectors. Annexure I to the Report of the Study Team on PSUs

dated 10.6.1967 indicates clearly that Government companies stood covered
5
8
under the concept of PSUs. In the present matter, the High Court has taken a

view that Government companies stands excluded from PSU under Section

3(1)(b) as Government companies are separate and distinct entities from

PSUs and since Government Company is not in the enumerated items in

Section 3(1)(b) one cannot include the said entity within the meaning of the

word PSU. This view of the High Court is erroneous for the simple reason

that the word PSU is not defined under any Act. The word PSU is indicated

in various Parliamentary Committees on Administrative Reforms so that in

financial, employment and in policy matters, the Central/ State Government

could evolve norms/standards. It is no doubt true that the public character of

the functions performed by the Undertaking determine the character of that

undertaking. It is the public character of the functions of the undertaking

which makes it a PSU. However, there is no conclusive test for determining

the status of an undertaking as a PSU. In judging the character of an entity,

the court has to keep in mind the context in which the word PSU is used in a

given enactment. There are a number of tests which could be applied in

judging the character of an entity, namely, the test of origin, the test of

agency or instrumentality of the State, the functional test, the monopolistic

status of an entity, test concerning areas of operations, the test of economies

of scale, the test of control, the role of the entity in the priority sector etc.
5
9
Therefore, there is no one conclusive test applicable to decide the character

of an entity. For example, nationalized banks have been held to fall within

State by this Court on an application of the test of control. Similarly, the test

of “agency or instrumentality” that came to be laid down brought the

Government companies, as defined under Section 617 of the 1956 Act, to be

included within the concept of State for the purposes of Article 12 of the

Constitution (see: Som Prakash Rekhi v. UOI and anr. [1981]1SCC449).

Therefore, none of the above tests is conclusive in itself. Suffice it to state

that Government companies under Section 617 are understood by the

Legislature to be a part of PSUs. Therefore, even on the web site of Central

Government, Undertakings under the caption of PSUs/PSEs, we find

Government companies, State owned Government companies being listed

under the caption of PSUs/PSEs. These items have been enumerated on the

basis of Legislative Understanding. According to the book titled “Growth of

Trade, Commerce and PSUs” written by Shri Suresh Prasad Padhy, the

PSUs may be in the form of departmental units, corporations, Government

companies, autonomous bodies or authorities. Corporate governance,

according to Geeta Gouri, is one of the major process for putting PSEs and

PSUs on the right track. In the list of PSUs published on the web site of the

Central Governmet, BPCL is shown as a PSU. Similarly, MTNL and
6
0
BSNL are Government companies which are also shown as PSUs.

According to Bishwa Nath Singh, author of “Public Enterprise in Theory

and Practice” for “efficient working of public enterprises a combination of

economy and accountability is essential. The corporate form of undertaking

has an advantageous position because it has necessary flexibility and

operational freedom. The statutory corporations are set up under specific

Statute of Parliament which statute indicates the extent of their

accountability and the nature of Parliamentary control. On the other hand, a

Government company is possessed with the merits of easy formation,

flexibility in administration, wider source of resources mobilization,

freedom from accounting and audit laws and procedures applicable to

Government departments as well as providing a balance between autonomy

and control. For its formation, there is no need of a separate enactment.

Under the Indian Companies Act, 1956, a company may be established by

issue of executive order by a Gazette notification or on a formal registration

by a Memorandum and Articles of Association. This form of organization is

free from day-to-day Government Interference. Thus, all the important

forms of organization for the PSUs have certain advantages and certain

limitations. A majority of PSUs in India are in the company form and the

idea behind bringing more PSUs in this form has been mainly that of
6
1
autonomy. Similar is the case of statutory corporations which are also

created to mitigate the drawbacks of departmental administration” (see page

91).

 

43. In the Eleventh Report of the Committee on Public Undertakings

(2005 – 2006) one of the topics related to Health Care Insurance. In the

introduction, the committee has referred to health insurance schemes issued

by four public sectors general insurance companies, namely, National

Insurance Company Ltd., New India Assurance Company Ltd., OICL and

UICL. In the said introduction, there is also reference to LIC, a statutory

corporation, which also offers health covers. This Report indicates that

companies under Section 617 of the Companies Act, 1956, including OICL

and UICL, are all classified under one category, namely PSUs. The

Committee was headed by the Chairman, Rupchand Pal, its members

consisted of MPs from Lok Sabha and Rajya Sabha. The Report also refers

to the opening up of the insurance industry in the year 2000 for competition

from private players including banks and it also refers to the constitution of

a regulatory authority, namely, Insurance Regulatory and Development

Authority Act, 1999.
6
2
44. A similar Committee on Public Undertakings had conducted studies

on OICL and National Insurance Company Ltd. in 2001-2002 consisting of

MPs from Lok Sabha and Rajya Sabha. This Report also indicates that the

Legislature has taken into account the impact of privatization on the

insurance sector. In the Report, public sector undertakings cover public

sector companies. The Report indicates that in the insurance sector, the

players consist of public sector companies, LIC (statutory corporation) as

well as Government companies under Section 617 of the 1956 Act. In the

Report, the history of OIC is set out (see: para 2). The point to be noted is

that all Parliamentary Committees on public undertakings have proceeded

on the basis that OIC and UICL are companies under Section 617 of the

1956 Act; that they are public sector insurance companies and accordingly

they are all treated as body corporates falling under PSUs.
45. Therefore, the above discussion indicates clearly that statutory

corporations, public sector companies and Government companies are

merely corporate forms. India’s PSUs may be in the corporate forms or in

the form of statutory corporations or in the form of public sector companies.

This is the legislative understanding indicated by various Parliamentary

Committees like Estimates Committee, Administrative Reforms
6
3
Commission and Study Team on PSUs constituted by Administrative

Reforms Commission. The insurance industry in India has private players in

it like Bajaj Allianz Life. It also has SBI Life as one of the players. It also

has LIC in the said sector/industry besides OIC, UIC etc. This aspect is

important.

 

46. According to the respondents, the words `PSUs’ in Section 3(1)(b)

has to be read with the words any corporation established by or under

Central or State Act. In other words, according to the respondents, only

those PSUs which are established by or under any Central or State Act alone

stand excluded from the protection of the Rent Act. According to the

respondents, PSUs which are Government companies incorporated under

Section 617 of the 1956 Act are entitled to the protection as they are not

expressly excluded under Section 3(1)(b). We do not find merit in this

submission. Firstly, it may be noted that several entities have been

enumerated in Section 3(1)(b), namely, banks, PSUs or statutory

corporations, foreign missions, international agencies, multinational

companies and private limited and public limited companies having a paid

up share capital of Rs. 1,00,00,000 or more. As stated above, the said Rent

Act, 1999 has brought about structural changes in the legislation. In this

case, it was open to the legislature to opt for any of the tests, namely, test of
6
4
origin, test of public character of the functions performed by each of these

entities, test of public character of each of the undertakings, test of agency

or instrumentality, test of monopolistic status, test of mobilization of

resources etc. In the present case, we find that the legislature has opted for

an economic criteria, namely, entities which are in a position to pay rent at

market rates are to stand excluded from Rent Act protection. This is the test

of Financial Capability. This is the golden thread which runs through

Section 3(1)(a). Be it banks, PSUs. Statutory corporations, multinational

companies, foreign missions, international agencies and public and private

limited companies having a paid up share capital of Rs. 1,00,00,000 or more

stand excluded from the Rent Act protection. This criteria has been selected

by the legislature knowing fully well that each of these entities including

PSUs can afford to pay rent at the market rates. Secondly, we have given in-

depth consideration to the contention advanced on behalf of the respondents

on the interpretation of Section 3(1)(b). We are of the view that to accept

the contention of the respondents, namely, that only PSUs which are

established by or under the Central or State Acts will not get protection

whereas PSUs which are Government companies incorporated under the

1956 Act would continue to get protection would make the Section 3(1)(b)

vulnerable to challenge as violative of Article 14 of the Constitution. In this
6
5
regard, it may be noted that in the insurance industry, we have LIC, banks,

private sector companies and Government companies. To say that LIC being

a statutory corporation stands excluded from the provisions of the Rent Act

whereas Government companies incorporated under the Companies Act,

1956 would continue to get protection would lead to arbitrary

discrimination under Article 14 to the Constitution. In the case cited by Mr.

Soli J. Sorabjee, learned counsel for the appellants, namely, Shah and Co.

v. State of Maharashtra (1967) 3 SCR 466 this Court held that to place

such a construction as will save the statute from constitutional challenge is a

well settled principle of interpretation. In the said Judgment, it has been

held as follows:
“to place such a construction as will save the statute from
constitutional challenge … having special regard for the
principle of constitutional adjudication which makes it
decisive in the choice of fair alternatives that one
construction may raise serious constitutional questions
avoided by another. …”. (emphasis supplied)
47. Moreover, if we are to hold that PSUs do not include Government

companies, as held by the High Court, we would be disturbing the package

offered by the Legislature of allowing increase of rent annually at 5%,

allowing the landlords to accept premium and exclusion of certain entities

from the protection of the Rent Act under Section 3(1)(b). On the other
6
6
hand, acceptance of the arguments advanced on behalf of the respondents

on the interpretation of Section 3(1)(b) would make the Act vulnerable to

challenge as violative of Article 14 of the Constitution. Therefore, we are of

the view that on a plain meaning of the words `PSUs’ as understood by the

Legislature, it is clear that, India’s PSUs are in the form of statutory

corporations, public sector companies, Government companies and

companies in which the public are substantially interested (see: Income tax

Act, 1961). When the word PSU is mentioned in Section 3(1)(b), the State

Legislature is presumed to know the recommendations of the various

Parliamentary Committees on PSUs. These entities are basically cash-rich

entities. They have positive net asset value. They have positive net worths.

They can afford to pay rents at the market rate. Thirdly, we are of the view

that, in this case, the principle of noscittur a sociisis clearly applicable.

According to this principle, when two or more words which are susceptible

to analogous meaning are coupled together, the words can take their colour

from each other. Applying this test, we hold that Section 3(1)(b) clearly

applies to different categories of tenants all of whom are capable of paying

rent at the market rates. Multinational companies, international agencies,

statutory corporations, Government companies, public sector companies can

certainly afford to pay rent at the market rates. This thought is further
6
7
highlighted by the last category in Section 3(1)(b). Private limited

companies and public limited companies having paid up share capital of

more than Rs. 1,00,00,000 are excluded from the protection of the Rent Act.

This further supports the view which we have taken that each and every

entities mentioned in Section 3(1)(b) can afford to pay rent at the market

rates. We may note that to meet the challenge of discrimination under

Article 14 it is not sufficient to state that there is an intelligible differentia

but it is further essential requirement to show that the differentia has a

rational nexus to the object sought to be achieved by the Statute in question.

(see: State of Rajasthan v. Mukanchand and ors. (1964) 6 SCR 903.) As

stated above, Section 3(1)(b) strikes a balance between the interest of the

landlords and the tenants; it is neither pro-landlords nor anti-tenants. It is

pro-public interest. In this connection, one must keep in mind the fact that

the said Rent Act, 1999 involves a structural change vis-`-vis the Bombay

Rent Act, 1947. As stated above, with the passage of time, the 1947 Act

became vulnerable to challenge as violative of Article 14. As stated above,

the legislature has strike to balance the twin objectives of Rent Act

protection and rent restriction for those who cannot afford to pay rents at the

market rates. To accept the interpretation advanced on behalf of the

respondents for excluding Government companies from the meaning of the
6
8
words “PSUs” in Section 3(1)(b) would amount to disturbing the neat

balance struck by the Legislature. OIC and UIC are Government companies.

They have paid up capital of more than Rs. 100 crores. They can easily

afford to pay rents at the market rates. The legislature in its wisdom has kept

PSUs, including Government companies, outside the Rent Act. We have to

proceed on the basis that the State Legislature was aware of the meaning of

the words PSUs as understood by the various Parliamentary Committees. If

Government companies are to be excluded from Section 3(1)(b) then the test

of intelligible differentia having rational nexus to the objects sought to be

achieved by the said Rent Act would stand defeated. We cannot exclude

such PSUs from Section 3(1)(b) as is sought to be contended on behalf of

the respondents. PSUs including Government Companies are independent

companies/corporations. They cannot be equated to the “Government” in

Section 3(1)(a). We have to read Section 3(1)(b) in its entirety. We have to

read the said section keeping in mind the reasons for its enactment. Lastly,

we are of the view that the High Court judgment is erroneous when it adds

words to Section 3(1)(b), namely, “which is not a Government company”. In

other words, the High Court states that OIC/UIC and BPCL are public

undertakings, however, they are Government companies incorporated under

Section 617 of the 1956 Act and, therefore, stand excluded from Section 3
6
9
(1)(b). In this connection it may be stated that High Court has relied upon

the definition of Government Company under Section 617 of the Companies

Act. In the case of Union of India and others v. R.C. Jain and others –

1981 (2) SCC 308 this Court has enunciated the principle that “the

definition of an expression in one Act must not be imported into another. It

would be a new terror in the construction of Acts if we were required to

limit a word to an unnatural sense because in some Act which is not

incorporated or referred to such an interpretation is given to it for the

purposes of that Act alone.” Lastly, the interpretation placed by the High

Court on the word “PSUs” in Section 3(1)(b) amounts to judicial legislation

and further it defeats the very object of Section 3(1)(b).

 

48. Before concluding, we may note that we have interpreted the words

`PSUs’ in Section 3(1)(b) purely in the context of the provisions of the

Maharashtra Rent Control Act, 1999. Our judgment is, therefore, confined

strictly to the said provisions of the Rent Act.

49. For the aforestated reasons, we hold that OIC, UIC and BPCL and

such other Government companies as defined under Section 617 of the

Companies Act are not entitled to protection of the Maharashtra Rent

Control Act, 1999 in view of the provisions of Section 3(1)(b).
7
0

 

50. Accordingly, civil appeals arising out of SLP(C) No. 5855/07 and

16237/08 filed by Smt. Leelabai Gajanan Pansare & Ors. and Hongkong &

Shanghai Banking Corporation Ltd. respectively are allowed with no order

as to costs.

 

Civil Appeals arising out of SLP(C) Nos. 24789-24790/07:
[Bharat Petroleum Corporation Ltd. v. Sunil Niranjan Jhaveri]
51. Leave granted.

 

52. A decree for possession was passed by the Small Causes Court at

Mumbai against the appellant herein – M/s Bharat Petroleum Corporation

Ltd. (BPCL). It was confirmed by the Appellate Bench of the Small Causes

Court.

 

53. The decree was challenged by BPCL by filing Civil Revision

Application No. 173/07 in Bombay High Court. The said CRA No. 173/07

stood rejected by the impugned order dated 4.5.2007. That decision was

given on the merits of the case and not on the interpretation of Section 3(1)

(b) of the Maharashtra Rent Control Act, 1999 (“Rent Act”). However,

thereafter a review petition was moved by BPCL vide CRA No. 173/07 in
7
1
which one of the grounds taken by BPCL was that in view of the decision of

the Division Bench of the Bombay High Court in the case of Smt. Leela

Gajanan Pansare v. Oriental Insurance Co. Ltd. and ors. dated 20.12.2006

in First Appeal No. 1245/04 the Revision Petition of BPCL needs to be

made absolute and the decree of the Small Causes Court was required to be

set aside. The review petition was dismissed by the High Court for lack of

factual foundation. Hence, these civil appeals.

 

54. Today, vide civil appeal arising out of SLP(C) No. 5855/07 we have

set aside the Division Bench judgment of the Bombay High Court dated

20.12.2006 in the case of Smt. Leela Gajanan Pansare v. Oriental Insurance

Co. Ltd..

 

55. Accordingly, we dismiss these civil appeals filed by BPCL for the

reasons contained in our judgment in the case of Smt. Leela Gajanan

Pansare v. Oriental Insurance Co. Ltd. (supra) with no order as to costs.

 

56. Since Oriental Insurance Company Ltd., United India Insurance

Company Ltd. and Bharat Petroleum Corporation Ltd. are liable to be

evicted, decree against them for eviction shall not be executed for a period
7
2
of one year commencing from the date of this judgment on their giving

undertaking in the usual form within a period of four weeks.
……………………………J.
(S.H. Kapadia)

 

……………………………J.
(B. Sudershan Reddy)
New Delhi;
August 20, 2008.

Leave a Comment