SMT. LEELABAI GAJANAN PANSARE & ORS. v. THE ORIENTAL INSURANCE CO. LTD. & ORS

Citation: [2008] 12 S.C.R. 248

Court: Supreme Court of India

Bench: S.H. KAPADIA, B. SUDERSHAN REDDY

Case summary

SMT. LEELABAI GAJANAN PANSARE & ORS. v. THE ORIENTAL INSURANCE CO. LTD. & ORS.pdf

Judgment text

(2008] 12 S. C. R. 248 ~ ""' ~~ SMT. LEELABAI GAJANAN PANSARE & ORS. v. THE ORIENTAL INSURANCE CO. LTD. & ORS. (Civil Appeal No. 5136 of 2008 etc. ) AUGUST 20, 2008 [5. H. KAPADIA AND 8. SUDERSHAN REDDY, JJ. ] ~-- Maharashtra Rent Control Act, 1999 - s. 3 (1) (b) - Exemption from protection under the Act - To Government Company as defined u/s.

617 of Companies Act - Held: government Company falls within the meaning of 'Public Sector Undertakings ('PSUs') - Hence not entitled to protection under ·the Act in view of the exemption provision - Exclusion of Government Company from the meaning of 'PSUs' and inclusion of the Corporations established- under Central/State Statute alone, would make the provision violative of Article 14 of the Constitution - By application of the principle of noscittur a i sociis, the provision applies to different categories of tenants having financial capability to pay the rent - Such differentia has a rational nexus to the object sought to be achieved by the Statute - Constitution of India, 1950 - Article 14 - Companies Act, 1956 - s. 617. Interpretation of Statutes - Definition of an expression in one Act must not be imported to . anotherAct, unless the same is incorporated or referred to in the latter.

·t- Doctrines/Principles - Principle of noscittur a sociis - Applicability of Words and Phrases - 'Public Sector Undertakings' - Meaning of in the context of s. 3 (10) (b) of Maharashtra Rent ;. • control Act, 1999. ,,_ t- The question for consideration in the present appea1s is whether a Government Company, as defined under s. 617 of Companies Act, falls within the compendi- -( ( THE ORIENTAL INSU. CO. LTD. & ORS. '-f ous expression "any public sector undertakings or Corporation established by or under any Central or State Act" in s. 3 (1) (b) of Maharashtra Rent Control Act, 1999. Disposing of the appeals, the Court HELD: 1. Government companies as defined under Section 617 of the Companies Act are not entitled to pro- •, f. tection of the Maharashtra Rent Control Act, 1999 in view of the provisions of Section 3(1)(b).

The view of the High Court that Government companies stand excluded from PSU under Section 3(1)(b) of Maharashtra Rent Control Act, 1999, 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 is erroneous. The word PSU is not defined under any Act. It is indicated in various Parliamentary Committees on Administrative Reforms so that in finany cial, employment and in policy matters, the Central/ State Government could evolve norms/standards. It is the publie 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 ~r 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. Therefore, there is no one conclu- ... , .. J. sive test applicable to decide the character of an entity. Government companies under Section 617 of Companies Act, 1956 are understood by the Legislature to be a part of PSUs. [Paras 42 and 49] [303,E; 296,A-F, 296,G] *-' Som Prakash Rekhi v. Union of India and Anr. 1981 (1) SCC449 - relied on. "Growth of Trade, Commerce and PSUs" by Shri Suresh Prasad Padhy; "Public Enterprise in Theory and Practice" by Bishwa Nath Singh- referred to. 2.

On a plain meaning of the words 'PSUs' as underv stood by the Legislature, it is clear that, India's PSUs are in the form of statutory corporations, public sector com- ~--panies, Government companies and companies in which the public are substantially interested. When the word PSU is mentioned in Section 3(1 )(b), the State Legislature is rpresumed to know the recommendations of the various I Parliamentary Committees on PSUs. [Para 47] [301,B-C] 3. It is wrong to say that only those PSUs which are established by or under any Central or State Act alone -> stand excluded from the protection of the Rent Act and . the PSUs which are Government companies incorporated + lun_der Section 617 of Companies Act are entitled to the ).. -' protection as they are not expressly excluded under Sec- \= tion 3(1 )(b) of the Rent Control Act.

Several entities have been enumerated in Section 3(1}{b}, namely, banks, PSUs or statutory corporations, foreign missions, international r agencies, multinational companies and private limited and I public limited companies having a paid up share capital r of Rs. 1,00,00,000 or more. The Act has brought about structural changes in the legislation. In this case, it was Jc'open to the legislature to opt for any of the tests, namely, test of origin, test of public character of the functions per- r formed 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 f- -4 resources etc. In the present case, the legislature has I opted for an economic criteria, namely, entities which are in a position to pay rent at market rates are to stand ex- • eluded from Rent Act protection. This is the test of Finan- ,. ___ THE ORIENTAL INSU. CO. LTD. & ORS. '-f. cial Capability.

This is the golden thread which runs through Section 3(1 )(a). 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. In the present case, the principle of noscittur sociis is 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, it is held that Section 3(1 )(b) clearly applies to different categories of tenants all of whom are capable of paying rent at the market rates. [Paras 46 and 47] [299,C-G; 300,A-B, 301,D,E] 4. 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 Rent Act would stand defeated. It would make Sec- ) tion 3(1 )(b) vulnerable to challenge as violative of Article + 14 of the Constitution.

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 objecf sought to be achieved by the Statute in question. [Paras 46 and 47] [302,E; 300,C; 301,H; 302,A] Shah and Co. v. State of Maharashtra 1967 (3) SCR 466 - relied on. -Y- State ofRajasthan v. Mukanchand and ors. 1964 (6) SCR 903 - referred to. 5. 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 con- . -I nection, one must keep in mind the fact that the said Rent Act, 1999 involves a structural change vis-a-vis the Bombay Rent Act, 1947.

To accept the interpretation advanced on behalf of the respondents for excluding Government companies from the meaning of the words "PSUs" in Section I- I 3(1 )(b) would amount to disturbing the neat balance struck by the Legislature. [Para 47] [302,A-B; 302,C-D] 6. Th~ High Court judgment is erroneous when it .... adds words to Sectio_n 3(1)(b), namely, "which is not a I I Government company". High Court has relied upon the '' definition of Government Company under Section 617 of I ! the Companies Act. The definition of an expression in one . y I Act must not be imported into another. It would be a new terror in the construction of Acts if the Court is 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.

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). I [Para 47] [302,G-H; 303,A-C] ~ ' Union of India and Ors. v. R:C. Jain and Ors. 1981 (2) sec 308 - relied on. 7. If it is hel~ that PSUs do not include Government companies, it 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). [Para 47] [300,H; 301,A] 8. PSUs including Government Companies are independent companies/corporations. They cannot be equated. to the "Government" in Section 3(1 )(a). Section 3(1)(b) has to be read, in its entirety. The said Section has to be read, keeping in mind the reasons for its enactment. [Para 47] [302,F-G] Case Law Reference ·1981(1) SCC449 Relied on. 42 1967 (3) SCR 466 Relied on.

46 1964 (6) SCR 903 Referred to. 47 1981 (2) SCC 308 Relied on. 47 CIVILAPPELLATE JURISDICTION : Civil Appeal No. 5136 of 2008 From the Final Judgment and Order dated 20. 12. 2006 of ,,_ f the High Court of Judicature at Bombay in First Appeal No. 1245 of 2004 · WITH C. A. Nos. 5137-39 of 2008 Parag Tripathi, ASG. , Shyam Divan R. F. Nariman, Dr. Rajeev Dhavan, Sudhir Chandra and Soli J. Sorabjee, Gaurav Agrawal, Percy Gandy, Kaiwan Kalyaniwala, Debmalya Banerjee, Sonia Nigam, Nandini Gore, Manik Karanjawala, 0 Parijit Sinha, Reshmi Rea Singh, S. C. Ghosh, Snehashish Mukherjee, Mrinakl~nti Mandal, Vishnu Mehra, Kuna! , Sakshi Mittal, Promod Dayal, Nikunj Dayal, Anantbhushan Kanade, Yadunath Chaudhary, Gargi Shinde, D. B. Vohra, P. K. Seth, Pankaj Seth, Manjit Chawla, Nooruddin Dhilla, E. C. Agrawala, Mahesh Agarwal, Rishi Agrawala, Gaurav Goel, Amit Kumar Sharma and Gaurav Agrawal for the Appearing Parties. The Judgment of the Court was delivered by S. H. KAPADIA, J.

-'f Civil Appeals arising out of S. L. P. (C) Nos. 5855107 and S. LP. (C) No. 16237108: 1. 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:- "'JYhether a Government Company falls within the ,. \compendious expression "any public sector undertakings or corporation established by or under any Central or 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 ·'t-""' 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 ,.. _ tion 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 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. 262 SUPRE_ME COURT REPORTS [2008] 12 S. C. R. 15. Learned counsel next submitted that Section 3(1 )(b) _\_,. applies to any corporation established by or 1. mder 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 estabiished under a Central or State Act, for example, GIG 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 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 ' . . ~·... , 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: ,~ l 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 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 subsection 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 subsection (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. 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 engag~d 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. 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 6'17 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 accommodation in urban f 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 ~ ·Y 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 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 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 y,) charged, if the premises were let after 1.

9:194o:th~n_ the·:r~r:it first charged when let, if the premise$ wer~ exemptec;l tro'm st~n:: dard rent then after the five years p'eriod the renl was not' to exceed 15% On the investment made in CC:>nstruction· and dutgoings and in any other cases rent fixed bythe court which may vary from time to time. Thus, the fixed date-line: was 1. 9. 1. 940. The standard rent was subject to Section 11. ~- ·= A. W ' . - " . ' . . 34. Our object of the above discussioti _regarding grovisions of the Bombay Rent Act: 1947 is two-fold. firstly, to point out that there has been· a structural change maqe by;the Legislature in the presentRentAc;t ~is~~-vis-the '. t947Act. s·econfily; we have analysed the relev~nt prqyi~ions _bf . tti~ _1941 Acfj6 indicate the· change in th'e 'economic conditions betwe·en ·1947 and 31. 3. 2000 when t~e presen. t _Rent Acfca_rne. into t9rc'~. - ·. • .. . • ' : •• --· ';.. :: ''', ' ......... : - ' :' ': ' t . ' ~·: '..... , • 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 lhe· scenario that prevails after31 :32000. ·In 1947 rent forming provided·an important source· of une·arned ·income to the la'1'1dlords which. · led to the landlords charging· exorbit_ant rent in urba_n ·areas;;: Return on investments atthat time constituted considerable re-. turns to . the landlords. At that time, it was worth in. vesting··inthe business of leasing. The cost of repairs was comparatively mu0h. less: The purchasing power ofthe rupee was;re:latively . higher· than the Pl1rchasing power of the· rupee after 31. 3. 2000~ .. How.. ;· ever, by 1976, with the rise in the cost of living index, the~said investments made in 1940~s started giving negative retams. · Coupled 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 ne_gative. _ Cpnsequently, old buildings started ·collapsing for la~k of maintenancEi. E'ilef1 to-, day thousands of buildings _in Greater Mu. 1T1ba·i are: in. a dilap'i-:' ( dated condition for lack of resources. Therefore, in 1. 9. 76, the· Legislature enacted MHAOA 1~76_ pr_egi$ely to undert~~e>e pairs and constructions of old dilapidated l:>1Jildjng$ fo. r whJqh cess was levied. However, with the passa·ge of time,' it appears that the position deteriorated and investments in this sector becaryie ·negligible by 31. 3. 2000. With the price rise and with the incr~ase in the cost of construction, certain provisions of the 1947 Act by ·which standard rent stood pegged/frozen as on 1. 9. 1940 arid 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 ofArticle 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. 36. Ultimately, the economic reasons led one of the landlords by·ijie name MalpeVishwanath 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 31ofthejudgment of this Court in the case of Malpe Vishwanath Acharya and ors. v. State of Maharashtra and anr. (1. 998) 2. sc. c '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 ofMP 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 te. mporary 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 withouta rational basis to· support it after the -initial expediency aAd necessity. have disappeared. " xxx 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 thateven though the provisions relating to the fixatjon 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 report~ 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 d1sputed, 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 t~\ ' ~. y 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 tim'e, is leading to arbitrary · res·u1ts. , This is also demonstrated from the facts in the case of Petitioner 3 who owns Unit No. A-18 on the first floor a_dmeasLiring 808 sq. ft. in t~e property k.

nown as Shrl Ram > A Industrial Estate situated at 13 J. D. Ambedkar Road, Mumbai. The said building belongs to. a cooperative society and Unit No. ~-18 was given ori lease and licence basis by an agreement dated 23-8-1964 by the appeilant to Lokmitra Sahakari Printing . and . Publishing Society Ltd. on a monthly compensation of Rs 686. 80 per month: Liabilities of repairs is on the 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 amoundhe society outgoings is Rs 250 per month, leavjng ·balance of only Rs' 70. 20' per monthwith the said appellant. Another instance which has been given is that of Appellant 4 '· . who owns a prop~rty . ~nown as Ram Mahal situated at 8, .. Dinsh_aw Vachha Roa. d,: Mumbai. The said building has 20 ... :. residential flats and the b.

ull,ding was purchased by Appellant .. 4 in the year 1955, althoug~ it had been constructed prior to · 1940.. Flat No. 15 o·n the 5th flqor of the said building had been let otit by the previous'owners tp Mis Bennett Coleman & Co. Ltd. ,who were the sitting tenants at the time when the property . W? S purchased. The ~lat 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 :JSOO or more ·while in the other States Rent Control Act isnot applicable to ·certain categories of persons.

· ·1n the Bombay Rent Act, with which we are concerned, the standard rent as on 1-~1940 or the fil'$t rent of the premises·whith was let out thereafter is the standard rent The pegging down of rent, coupled with the inability of the landlord to evicttheJenants, has given rise to uniaWful tendencies. In the Statetnenfof Objects and Reasons annexed. to LA BillNo. 79 of-1986 introduced in the. Maharashtra Legislature providing for amendment to the ·eombay Rent ·ControlAct 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 fo undertake maintenance and repair's '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 bal_ance between the interests of the landlords . and the tenants. '" \, j 27, It is true that whenever aspecial 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 aprovision or enactment may be necessary in the larger interest of the · society as a whole but the benefit which is given initially if ~ontinued results in. increasing injustice to one section of the society-and an unwarranted largess or windfall to another, . > ..

( without appropriate cor~esponding reliefI then the continuation of such a law wliich 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 Rent Restriction Act. This Court was also ~sked 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 fear~d, the courts may become irrelevant in deciding . disputes between the landlords and tenants. This should be a caus. e 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 ,... --t 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 d. isproportionate benefit or . protection to another section of the society. When there is shortage of accommodation itis 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 aHowances 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 greateno 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 ot'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 23 power is coupled with a responsibility. It is also the responsibility of the courts to ·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 preferel'. lce to some over others. 31. Taking all the facts and cir,cumstances into consideration we have no doubt that the existing provisi_qns of th~ B_ombay 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 d9Wn as having now become unreasonable and arbitrary butwe thinkitis not necessary to stri~e 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 uncler 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 Sta,! e Ministers fer Housing of 1992. and the ·- . National Model Law which has been circulated by the Centra1 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 • j. 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 Gan no longer be considered to be reaso. nable. However, this Court felt that 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 op. portunity to the Government to consider enactment ota 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 legis-· lature evolved a package under which the prohibition on receiving premium under Section 18 of the 1947Act 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 menti. oned in Section 3(1 )(b)-who can afford to . pay rent at the market rate. This H- 294 SUPREME CO~RT REPORTS [2008] 12 S. C. R. . . was Jhe secon. d item in the economic package. offered to the land'lorc:ls under. the present Rent Act.

The third 'item of the Rent Act w·as to give the benefit of at1nuaf increase of re'nt @ s% underthe. Pf~sent Rent,t\ct. All threejtem~ cons~ituted Or1e composite package fqr the :landlords·. The. 1. ,m~erlying. qbje,ct,pehind · the said. economic package is to balan_ce arid r:naintai11 t~e twofold objects of. the RentAct, namely, tenancy. pr. otection. and rent protection. The idea. behind excluding cash-rich entities from the protection of the Rent Act is also to continue to . give protecti.? n t. o tenants _who can~ot affofd to pay r~nt at marketrate. ~ · · ·39. The. above discussion is relevant because we rpust understand·thereason why Section. 3(1)(b}came tObe enacted. As stated: above, inour view, with the. offer ofafreconomic 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 ;;irbitrary With the ·passage-of time as. held by this Court .

in the:above judgment. The"legislature was aware ofthe said judgment ltis reflected in the reportoftheJoint Committee. lri·ourview;lhe changes made in·:the present Rent Act by which landlords are permitt~d·to charge premium, the provisions by which cash-rich entities are excluded from the protection of the Rent Act and the provision p~9viding for annu. al increase a~ a norninalrat~ of 5%. are structural. changes broμght at>o~t by the present Rent Act, f999 yis- ~~yis. the . 1947'Act: The Rent Act of . 1999 is . the ,se'que·I fo the ' . ~ •• • ' • '.. : ' • ;.. . • ~ • • :• I. ' • • • . ,,, t ~('. (•. judgment of this Court in·the case of Malpe Vishwanath Acharya . (supr~):.. . . · · ,. ·· . · ·· ·. · · · · · ·' ·· '·~··. ·:';, "" ' ~ " : · ·. 40,.

'The' entire ·discussion hereinabove is; 'theretore,'·not only to go behind Section·3(1)(b) and ascertain the reasons for enactm:ent oMhe said sub-section but also to enable this Court to give purposive interpretation to the·said sub-'section, ·' ... ' •' • . :,. • • ;. ·- ·-. ' ' c- -:'- _. ", ' . ~ ·. ,. n. ()fth,e sa. id R~ntA,C:t, nan:ie. ly, banks, PSPs. statutory corpprations, fqribt· ha and Rajya Sabha'. The Report also refe'rs to .. - . -- the opening up ofthe insu'rance indu~try in the year 20. 00 for competitibn from private players including· banks and it also refers to the cohstitutioh of a regulatory authority, namely, lnsur- 0 a_nce "Regulatory and Development Authority Act,• 1999_ · ' • ,/ ' r ' I 44. -A similar Committee on Public Undertakings had cQnducted studies on OICL and National Insurance Company Ltd. in- 2001-2002 consisting ofMPs from Lok Sabha and. R. ajya Sabha. This Report.

also indicates that the Legislature has taken into accqunt the impactof privatization on the insurance sector. In. the Report, public s~ctor undertakings cover public sector companies. The Report inc;licates that in the insurance sector, the. players consist of public sectqr 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 pn 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. , · 1 45. Therefore, the above discussion indicates clearly that statutOrY. cbrporatfons, public sector companies ar. d Government companies are merely corporate forms.

India's PSUs may be in the corporate forms or in the form of statutory corpora- -- . , tions or in the form of public sector companies. This is the legislative understanding indicated by various Parliamentary Committees like Estimates Committee, Administrative Reforms 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 I Life as one of the players. It also has UC in the said sector/ -4 ~ 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 exeluded 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 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 s.

elected 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 ofArticle 14 of the Constitution. In this regard, it may be noted thaUn the insurance industry, we have LIC, banks, private sector companies and Government 0 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 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 ofArticle 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).

Whentheword 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 highlighted by the last category in Sec"'. tion 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 ofRajasthan 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- 8 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-a-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 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 mar- ... I,_ ket 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 f Parliamentary Committees. If Government companies are to t 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 cant ~ not 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 erro- ~1 neous 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, how- ever, they are Government companies incorporated under Section 617 of the 1956 Act and, therefore, stand excluded from Section 3(1 )(b). In this connection it may be stated that High Court has relied upon the definition of Gbvernment 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 inter- 0 preted the words 'PSUs' in Section 3(1 )(b) purely in the context of the provisions of the Maharashtr~ 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). 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.

24789-247901 07: [Bharat Petroleum Corporation Ltd. v. Sunil Niranjan - Jhaveri] ' 51. Leave granted. r \ ~- ·'"' 52. A decree for possession was passed by the Small Causes Court at Mumbai against the appellant herein - Mis 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 ("RentAct"). However, thereafter a review petition was moved by BPCL vide CRA No. 173/07 in 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/ . L 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. (su- . pra) 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 of one year commencing from the date of this judgment on their giving undertaking in the usual form within a period of four weeks. I.. - K. K. T. Appeals disposed of.