SC order changes equations on rented commercial properties

SC order changes equations on rented commercial properties
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First Published: Mon, Jun 23 2008. 07 19 AM IST

(Illustration: Malay Karmakar/Mint)
(Illustration: Malay Karmakar/Mint)
Updated: Mon, Jun 23 2008. 07 19 AM IST
The Delhi Rent Control Act, 1958, was enacted by Parliament with a view to providing for the control of rents and evictions and rates of hotels and lodging houses, and for the lease of vacant premises to the government in certain areas in the Union territory of Delhi.
Under section 14(1)(e) of the Act, if a landlord can show that he has no other reasonably suitable residential accommodation and that the tenanted premises is, in fact, required by the landlord for his own purposes (as stated in the Act), then he can apply to the relevant authority for eviction of a tenant.
(Illustration: Malay Karmakar/Mint)
The original clause dealing with the eviction of a tenant for the bona fide use of the landlord limited its scope to only “residential premises” and did not cover premises let out for “commercial purposes”. This classification was initially created by an amendment to the Act in 1947.
A landlord wanting to evict the tenant of a commercial establishment could not avail of these eviction provisions under the Act.
However, after a Supreme Court ruling in the matter of Satyawati Sharma (Dead) (represented by her legal representatives) vs Union of India in mid-April 2008, this position changed.
In this case, it was held that section 14(1)(e) of the Act is violative of the doctrine of equality enshrined in Article 14 of the Constitution, as it discriminates between the premises let for residential and commercial purposes. This judgement of the Supreme Court deviated from, and overruled, an earlier judgement of the full bench of the Delhi high court that had protected commercial tenants. The high court had upheld the distinction between a lease for residential and commercial purposes, and had allowed landlords to recover the premises only in case the tenant was using it for residential purposes. The apex court had noted that the classification made with reference to eviction of the tenant of residential and non-residential premises on the bona fide need of the landlord was irrational, arbitrary and discriminatory.
In the recent case, the Supreme Court held that a landlord who lets out a premises for commercial purposes to a tenant under certain circumstances may need the premises for some changed conditions at a later date and accordingly, such landlord should not be deprived of the right to recover such commercial premises. However, this right of the landlord is subject to the landlord being able to prove that he does not have any other reasonably suitable premises.
The court suggested that the discrimination with regard to residential and non-residential premises should be done away with as the bona fide need may be the same.
The rationale of the apex court was simple. It stated that the legislative intent behind the Act was to safeguard the tenant’s right against exorbitant rents and mala fide eviction of tenants by landlords.
However, statutory protection of tenants cannot be extended to such an extent that the landlord is precluded from evicting the tenant for the rest of his life even when the landlord bona fide requires the premises for his personal or occupational use.
The term “bona fide” is of a wide import and has been the subject matter of judicial interpretation.
“Bona fide” connotes good faith, which is suggestive of honesty of purpose. Bona fide requirement would entail a twofold concept: First, the need must be a genuine and not a frivolous one; and second, the landlord is not motivated by extraneous considerations in trying to recover possession from the tenant. The bona fide need of the landlord should be genuine and honest, conceived in good faith.
Further, the court should also consider it reasonable to gratify that need. The reasonable requirement of the landlord should have an element of need as opposed to a mere desire or wish. The bona fide requirement of a landlord for the premises should be a sense of felt need, which is an outcome of a sincere, honest desire, and not a mere pretence to evict a tenant. In order to testify the bona fide intent of the landlord for eviction of the tenant of the property in the context of residential premises, courts are known to scrutinize the social status of the landlord, his way of living, the number of family members already living with him and the accommodation that he is already living in.
What remains to be seen now is how the courts would, while upholding the recent judgement of the Supreme Court, interpret and ascertain the bona fide needs of a landlord when it comes to commercial properties.
The Supreme Court has tried to strike harmony between the rights of a tenant and those of a landlord so that the bona fide requirements of the landlord and the tenant in the expanding explosion of need and population and shortage of space can be balanced.
Send your comments to lawfullyyours@livemint.com
This column is contributed by Gautam Varma of AZB & Partners, Advocates & Solicitors.
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First Published: Mon, Jun 23 2008. 07 19 AM IST