Uadjiar v Marzook and Co. L.td
1978Present : Walpita, J.t Gunasekera, J. and
A. H. M. M. HADJIAR, Plaintiff-Appellantand
MARZOOK AND CO. LTD., Defendant-RespondentS. C 356/69 (F)—D. C. Colombo No. 1012/RE
Rent Restriction Act (Cap. 274) as amended by Act No. 10 of 1961,section 13(1A)—Excepted premises—Act becoming applicable
driving subsistence of tenancy—Whether original contract sub-sists—Tenant in arrears in respect of period prior to premisescoming under Rent Act—Liability to ejectment on failure to payagreed rent for that period. ?
Deposit in excess of amount permitted by Rent Restriction Actin hands of landlord—Act becoming applicable thereafter—Is land-lord liable to refund excess—Can it be set off against arrears.
Where the provisions of the Rent Restriction Act become applica-ble to premises which were earlier excepted premises the contractof tenancy which subsisted prior to the Act becoming applicablecontinues until terminated by a notice to quit. No new contractualrelationship thereby arises but a landlord cannot thereafter recovermore than the authorised rent payable in respect of such premises.Accordingly, a tenant who failed to pay the agreed rents that felldue prior to the Act hecoming applicable to such premises thoughsuch rent was in excess of the authorised rent, falls into arrearsand is liable to ejectment on this ground even after the premisesbecame subject to the Rent Restriction Act. It is not sufficient forhim to tender anything less than the agreed rent for the periodprior to the premises becoming subject to the Act.
Where a deposit in excess of the amount permitted by the RentRestriction Act was in the hands of the landlord prior to the Actbecoming applicable the landlord could retain this sum. Where thetenant has not asked for the excess to be refunded but on the otherhand asked the landlord to hold the full sum as a deposit to herefunded only when vacant possession was handed over, it is notopen to the tenant to say thereafter that the amount in excess ofthe amount permitted by the Rent Act should have been set offagainst arrears of rent due from him.
Cases referred to :
Sideek v. Sainambu Natchiya, 55 N.L.R., 367.
David Appuhamy v. Subramaniam, 55 N.L.R., 397.
Dias v. Peries, 52 N.L.R., 51.
WAX, PIT A, ,T.—Hadjiar v. Alurzook and Co. Ltd.
j/^PPEAL from a judgment of the District Court, Colombo..C- Thiagalingam, Q.C., with Motilal Nehru, for the plain tiff-appellant.
C. Ranganathan, Q.C., with J. W. Subasinghe, for the-defendant-respondent.
Cur. adv. vult.
March 28. 1978. Walpita, J.
In this action judgment has been, entered in favour of theplaintiff-appellant for arrears of rent,and damages, but an orderfor ejectment of the respondent was refused. This appeal isagainst that part of the order refusing ejectment.
When the appellant became owner of the Premises No. 175,.Second Cross Street, Pettah, the respondent was already occu-pying it as a tenant of the previous owner. The premises wasthen not subject to the Rent Restriction Act. The respondentattorned to the appellant aifd became his tenant undertaking topay the monthly rent of Rs. 1,000 as from 1. 4. 67. There was alsoa sum of Rs. 10,000 which was taken charge of by the appellantwhich the respondent wanted the appellant to keep as a deposit,to be refunded to the respondent on his giving vacant possessionof the premises.
The respondent failed to pay the rent of Rs. 1,000 agreed onfor the months April to July, 1967. In July the premises becamesubject to rent control and the authorised rent of the premiseswas now Rs. 632.17 per month but still no rent was paid.
On 31.8.67 the respondent by his letter PI dated 31.8.67,tendered Rs. 3,160.85 which he alleged was the rent for theperiod April to August 1967 at Rs. 632.17 per month. This theappellant refused to accept contending that rent was payableat Rs. 1,000 per month.
The appellant thereafter on 13.10.67 gave the respondent noticeto quit by the 31st January, 1968, and filed this action forejectment.
The learned District Judge has found that the respondent wasin arrears of rent for the period 1.4.67 to 30.6.67, but he refusedto allow the ejectment .of respondent as in his view the respon-dent did not refuse to pay the rent but only offered to paywhat was the authorised rent.
Mr Thiagalingam, for the appellant has submitted that the.learned District Judge was wrong when he refused to give anorder for ejectment. His contention is that once the respondentwas found to be in arrears of rent an order for ejectment shouldhave followed as he has lost the protection of the Rent Actand was liable to be ejected.
WALPITA, J.—Hadjiar v. Alarzooh and Cu. Ltd.
The contract of tenancy entered into between the parties on
4. 67 was a common law contract of tenancy where the respon-dent was obliged to pay Rs. 1,000 per month as rent for thepremises. This contract could be terminated by a notice to quitand ejectment obtained if the respondent failed to quit. Whenthe premises became subject to rent control the original contractcontinues but by operation of the provisions of the Rent Act thetenant could not be ejected unless he was in arrears of rentfor more than a month after it was due. Besides the landlordwas prohibited from charging any rent more than the authorisedrent. Even though the landlord could have terminated the tenancyafter reasonable notice and obtained vacant possession of thepremises before 30.6.67 Vie could not have done so by a meretermination of tenancy after 1.7.67 as the Rent Restriction Actwas in operation.
Mr. Ranganathan for the respondent submitted that under theRent Act two conditions are necessary before the tenant couldbe ejected from a rent controlled premises, (1) a termination ofthe tenancy, that is, by a notice as required by the Act, and (2)the tenant must be in arrears of rent. This is correct.
In this case the notice to quit was admitted but it is Mr.Ranganathan’s contention that the respondent was not in arrearsof rent in terms of the Rent Act. 'Rhe term rent according tohim is what is contemplated by the Rent Act, that is the rentchargeable under the Act and not the rent agreed on under thecontract prior to this premises being rent controlled. In thisconnection he drew our attention in his further written sub-missions to s. 12A (1) (a) of the Rent Act which provided that“ Notwithstanding anything in any other law, no action orproceedings for ejectment of the tenant of any premises to whichthis Act applies and the standard rent of which for a month doesnot exceed one hundred rupees shall be instituted or entertainedby any court unless where (a) the rent of such premises hasbeen in arrears for three months or more after it has becomedue”.
He submitted that at the time the ‘ rent becomes due * thatAct must apply to the premises and the rents in respect of thethree months, April, May and June, were due before 1st July,1967, on which date the Rent Act became applicable to the rentedpremises and therefore he says s. 12A (1) (a) cannot applyto the rents for April, May and June, 1967, or in other wordsthat though he was in arrears of rent for these three monthsthey are not the arrears of rent contemplated by that section.
In this case the authorised rent being over Rs. 100 namelyRs. 632.17, s. 12A (1) has no application. The section that applies
WALriTA, J.—Hadjiar v. Marzook and Co. Ltd.
in s. 13 (1A) which states that where the rent of any premisesexceeds Rs. 100 the landlord cannot institute an action for eject-ment of a tenant on the ground that the rent has been in arrearsfor one month after it has become due unless three months noticeof the termination of the tenancy has been given or if the tenanthas before the date of the termination of the tenancy as is givenin the landlrod’s notice tendered to the landlord all arrears ofrent.
Though this is so, Mr. Ranganathan’s submissions can stillapply but I am unable to accept this submission. If this argumentis accepted it means the earlier contract of tenancy came to anend once the premises became rent controlled and a new contrac-tual relationship unconnected with the original contract aroseas a result of the operation of the Rent Restriction Act. The RentRestriction Act does not have that effect. The original contract canonly be terminated by a notice to quit. It therefore continuedeven after the premises became rent controlled though by opera-tion of law the landlord could not recover a rent more than theauthorised rent.
The obligation on the part of the tenant was to pay the rentin time and in this case he had to pay the rant due, that isRs. 1,000 per month before July and the authorised rent there-after. Failure to meet that obligation would make him be inarrears of rent and therefore liable to ejectment. He could avoidan ejecment only if he tendered to the landlord as required bys. 13 (1A) (b) all arrears of rent. It is not sufficient for himto tender something less than Rs. 1,000 per month for the monthsof April to July.
Where a lease or contract of tenancy has been terminated byeffluxion of time or notice to quit, once the premises becomes rentcontrolled the tenant enjoys a statutory right of occupation or hebecomes a statutory tenant.
“It seems to be implicit in the Act that, so long as atenant enjoys the statutory right of occupation notwithstan-ding the termination of the earlier contract, a statutoryobligation is imposed on him to pay monthly ‘ rent ’ at theoriginal contractual rate ; and if he fails to honour this obli-gation, s. (13) (1) (a) may be brought into operation to de-prive him of the protection, which he previously enjoyed”—Gratiaen, J. in Sideek v. Sainambu Natchia, 55 N.L.R. 367.
That was a case where the tenancy had been terminated byeffluxion of time and also by a notice to quit. If that is so inthe case of a tenancy that has ended it is more so in the case of atenancy that “ still subsists ”. In this case the contract of tenancy•continued right throughout until it was terminated on 13. 10.67 but
W'ALPITA, J.— Hadjiar v. Marzook and Co. Ltd.
after the Rent Restriction Act was in operation. The respondentfailed to observe the conditions of the original contract to pay therent at Rs. 1,000 per month for the period 1.4.67 to 30.6.67. TheRent Act does not absolve him from that obligation.
He could still have remained a protected tenant if on receivingthe notice of termination he had paid up all arrears of rent.But this he did not do. Clearly he has lost the protection ofthe Act and is ligble to be ejected.
The learned Judge has found quite rightly that the respondentwas in arrears of rent for the period April to July. This beinghis finding an order for ejectment should have followed. In myview the learned Judge has misdirected himself on this and thisorder must be revised. The appellant is entitled to an order forejectment.
Mr. Ranganathan next submitted on behalf of the respondentthat in any event as the appellant had in his hands a sum ofRs. 10,000 he should have utilized this to deduct any rents whichwere in arrears and therefore the respondent could not be eject-ed for arrears of rent.
Documentary evidence to show the conditions under which thedeposit of Rs. 10,000 was held by the appellant was producedat the appeal and was permitted by us to be marked R1—R4especially as there was no objection by Counsel for the appellant.These documents were not before the learned District Judgeand we do not have his observations on them but we are in aposition to consider them ourselves in the light of the submis-sions made by Mr. Ranganathan.
The deposit of Rs. 10,000 was received by the appellant beforethe premises became rent controlled and it was not illegal todo so then. In such circumstances the landlord oould retain theexcess advance. Vide 52 N. L.R. 51. The respondent could haveasked for the release of the excess after the premises becamerent controlled but did not seek to do so. On the contrary byhis letter PI of 31.8.67, he wanted the appellant to hold the sumof R.s. 10,000 as a deposit to be refunded when vacant possessionof the premises was handed over. It is therefore not open tothe respondent to say now that the excess advance should havebeen set off against the arrears of rent due. He could haverecalled the deposit as it was illegal for the appellant to keepthe deposit after the premises became rent controlled but as by
his own volition he did not seek to do that ‘ the holding
of the deposit by the landlord to be returned in terms of thetenancy agreement did not constitute a debt which could be setoff against the rent’—Pulle, J. in. David Appuhamy v■ Subra-maniam, 55 N.L.R. 397.
XV'IJKSUKDERA, J.—Dias v. SuwarU
This submission that the deposit in the appellant’s handsshould have been used to set off the arrears of rent due thereforefails.
In these circumstances therefore we hold that the learnedJudge’s decision that the respondent was in arrears of rent wasa correct one but not that part of his order which holds thatthe appellant is not entitled to the ejectment of the respondent.
We therefore set aside that part of the judgment refusingejectment and make order that the respondent in addition topaying the rent and damages due as held by the learned Judgebe also ejected from the said premises.
The appellant is entitled to costs in both courts.
Gunasekera, J.—I agree.
Rat watte, J.—I agree.