Madras High Court
Greaves Ltd. vs V.S. Raghavan And Vijayaraghavan on 27 February, 2007
Equivalent citations: 2007(2)CTC262, (2007)4MLJ229
Author: R. Banumathi
Bench: R. Banumathi
ORDER R. Banumathi, J.
1. Aggrieved by fixation of fair rent at Rs. 59,590/-, Tenant has preferred these revisions. The demised premises is situated at No. 13, II Line Beach Road, Madras.
2. For convenience, parties are referred in their original rank in RCOP.
3. Revision Petitioner, a registered Company, has become Tenant in respect of the entire premises consisting of ground floor and first and second floors with a total plinth area of about 11,287 sq. ft. on a monthly rent of Rs. 20,000/-. The premises was being used for non-residential purpose. Stating that the premises is situated in prime commercial locality, landlords filed Petition under Section 4 of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960, [in short, the Act], for fixation of fair rent at Rs. 65,400/- [ Rs. 5.79 per sq. ft.].
4. The Respondent/Tenant resisted that application contending that the premises is over 100 years old and the Respondent had to spend considerable amount year after year for maintenance and repairing, to keep the building in a habitual condition. Stating that the building is situated in a narrow street of secondary commercial locality, the Respondent denied that the Petition premises is a Class Type 'I' building. According to the Respondents, the rent of Rs. 20,000/- paid, is fair rent and the same has to be fixed as fair rent.
5. Finding that the building is aged 70 years and calculating 1% depreciation, Rent Controller fixed the cost of construction, including amenities at Rs. 11,12,334/-. On the basis of Ex.R-3, Rent Controller fixed the ground value at Rs. 11,00,000/- and fixed the market value of the site at Rs. 26,13,417/- and fixed the fair rent at Rs. 37,258/- [ Rs. 3.30 per sq.ft.].
6. Aggrieved by the rent fixed by the Rent Controller, both landlords and Tenant have preferred appeal. Before the Rent Control Appellate Authority, additional document Ex.P-6 was produced and on that basis, Appellate Authority fixed the market value of the site at Rs. 20,00,000/- per ground and calculated the market value of the site at Rs. 47,51,666/-. Calculating the cost of construction, and value of the building at Rs. 12,07,335/- Appellate Authority fixed the fair rent at Rs. 59,590/-.
7. Assailing the impugned Order, the learned Counsel for the Tenant has interalia raised the following contentions:
Appellate Authority grossly erred in arriving at cost land depending solely on the guideline value and the Sale Deed Ex.P-6 adduced by the landlords in the appellate stage;
The Appellate Authority erred in accepting the document as evidence in the appellate stage and Respondent/Tenant were not afforded any opportunity to refute the recitals in Ex.P-6 - Sale Deed;
Ex.R-2 filed by Tenant related to a property which was very proximate to the Petition property and therefore, it had a direct bearing on the value of the Petition property and Appellate Authority erred in rejecting Ex. R-2.
8. Making elaborate submissions, the learned Counsel for the Petitioner has submitted that the market value of the site is not only the value of the land, but other amenities like prime locality, access road and other aspects are to be taken note of and premium is also to be added. It was further submitted that the document Ex.P-6 produced by the landlords is in respect of exact opposite to the demised premises, whereas Ex.R-2 produced by the Tenant is in remote area. It was further submitted that even in the absence of examination of the parties, the Court can very well adopt the valuation in the document produced and the fair rent fixed by the Appellate Authority is reasonable and in accordance with the rules. In support of his contention, the learned Counsel has placed reliance upon the following decisions:
1994(2)LW 228 Rahmath Nish Begum v. Vijayakumar; 1988(2) LW 49 Collector of Madras v. Gajendran; 75 LW 111 Venkataswami v. Abdul Rahim & Sons; 70 LW 345 Rayala Corporation v. Syed Bawker and Co.; 69 LW 453 Basavamma and Anr. v. Lakshmikantha Rathnamma; Bhagwathula Samanna and Ors. v. Special Tahsildar, Land Acquisition; Land Acquisition Officer and Mandal Revenue Officer v. Narasaiah.
9. Fixation of fair rent shall be made considering the following three important factors:
(1) Cost of the site in which the building is constructed.
(2) The value of construction of the building, and (3) The cost of provision of any one or more of the amenities specified in Schedule I as on the date of application for the fixation of fair rent. 1983 MLJ (II) 252 : 96 LW 487 [K. Kaliammal and Ors. v. Athi V. Ramachandra and Ors.].
10. While fixing fair rent for any given building, Rent Controller and Appellate Authority should follow the proceedings laid down under Section 4 of the Act. Fair rent has to be fixed considering the pleadings and evidence available on record irrespective of the plea taken by the parties.
11. Building value:
Building has Madras terrace/RCC Roofing in ground floor and first floor and a small portion in the rear has AC sheet roofing. Second floor is partly builtup with AC sheet roofing. Basement of the superstructure is with brick work and plaster. The building has basic amenities like sanitary arrangements, water connection, wash basins and necessary electrical installations. So far as value of the building is concerned, there is not much difference in the value fixed by the Rent Controller and the Appellate Authority. Rent Controller has calculated the value of the building at Rs. 11,12,334/-. Appellate Authority has calculated the market value at Rs. 12,07,335/-.
12. According to the Respondent/Tenant, the Company had put up AC Sheet in the second floor in an area of about 459 sq.ft. Both the Rent Controller and the Appellate Authority had not taken into account the AC Sheet area of 459 sq.ft. in the second floor for calculating the market value of the building.
13. Both the Rent Controller and the Appellate Authority had fixed the age of the building at 70 years and adopted depreciation at 1%. The Appellate Authority has slightly increased the cost of construction for the first floor and the second floor. Though the Appellate Authority had not assigned any reason for adopting a slightly higher value. In consideration of type of building and amenities provided, the building cost fixed by Appellate Authority at Rs. 12,07,335/- cannot be interfered with.
14. Land Value:
Tenanted premises is No. 13, II Line Beach Road, Madras-1. The Petitioner has produced Ex.P-5 Doc. No. 441/94 dated 22.08.1994. Ex.P-5 Sale Deed relates to Burma Bazar Shop No. 15 - an extent of 21 sq.ft. [6' x 31/2'], sold for Rs. 35,000/- in 1994. In Ex.P-5, site value is stated as Rs. 12,000/- and the superstructure as Rs. 14,000/-. Onbehalf of the landlord, it was argued that Ex.P-5 is to be taken as the basis for calculating the market value of the site sq.ft. value at Rs. 1000/- and sought to fix the market value at Rs. 24 lakhs per ground.
15. It is well settled that small plots do not provide useful guidance for determining the market value. While calculating the market value of the site, it is to be correctly determined so that there is neither unjust enrichment on the part of the landlord nor costing heavy on the Tenant. For the proposition that small plots cannot be said to be same criterion for large area, reference shall be made to the following few decision of the Supreme Court Collector of Lakhimpur v. Bhuban Chandra Dutta; Prithvu Raj Taneja v. State of M.P. Kausalya Devi Bogra v. Land Acquisition Officer and Land Acquisition Officer Kummarapally v. Nookala Rajamollu and Ors.]. Hence the rate fixed for small plot cannot be the basis for fixation of the market value for an extent of 5,702 sq.ft.
16. Further, it is matter of knowledge that Burma Bazar is one of the busy market areas in Parry's Corner and an important commercial locality of Chennai. Small shops vie with each other to get space and shops in this area. Under no stretch of imagination, can the landlord urge the Court to fix the market value on the basis of Ex.P-5 - Sale Deed, which is a Sale Deed relating to Burma Bazar shop.
17. Tenants have filed Ex.R-3 Sale Deed Doc. No. 423/95 dated 31.05.1995 relating to property in No. 17, Moor Street/ Sydina Bahrunudeen Street, which is said to be at the rear portion of the Petition premises. Under Ex.R-3 Sale Deed, extent of 1,200 sq.ft. was sold for Rs. 4,30,000/-. If we go by Ex.R-3, ground value would be Rs. 8,60,000/-. Taking that as basis, Rent Controller has fixed the market value at Rs. 11 lakhs per ground.
18. In RCA No. 737/96, the landlord filed M.P. No. 896/96 and produced an additional document, Sale Deed dated 30.05.1991, relating to a property situated in I Line Road, Beach Road. In spite of objection raised by the Tenant, that Sale Deed was received as additional evidence as Ex.P-6. On the basis of Ex.P-6, the Appellate Authority fixed the ground value at Rs. 20,00,000/-. For more than one reason, taking Ex.P-6 as the basis for fixing the market value at Rs. 20,00,000/- is erroneous. Under Section 23 of the Act, Appellate Authority is vested with discretion to accept additional evidence. Appellate Authority can permit additional evidence if it feels that for the purpose of proper disposal of the appeal, additional evidence is required. But when additional evidence is received, Appellate Authority has to afford sufficient opportunity to the opposite party. Without affording opportunity to the Tenant, Appellate Authority had received Ex.P-6 and erroneously adopted the value given in Ex.P-6-Sale Deed.
19. For taking Ex.P-6 as the basis for fixing market value at Rs. 20,00,000/- per ground, there is total non-application of mind. Under Ex.P-6 Sale Deed, what has been sold is "entire III Floor of premises measuring built up area of 2,745.30 sq.ft., together with 18.38% of the total extent of land measuring 4,803 sq.ft.". That built up area of 2,745.30 sq.ft. and undivided 18.38% share in 4803 sq.ft. was sold for Rs. 25,000/-. The Appellate Authority had not at all looked into the recitals of Ex.P-6. What was sold under Ex.P-6 is, built up area and undivided share of 18.38% in total, and the Appellate Authority committed serious error in taking the value of land at Rs. 25,00,000/- in Ex.P-6 as the basis for fixing market value of the site.
20. For the foregoing discussion, Exs.P-3 and P-6 cannot at all form basis for fixing the market value. Holding that mere production and marking of document by consent is not sufficient; to prove its contents and proving of the facts or contents stated in the document, evidence of person is necessary, in 1996(2) LW 658 [K. Ramanathan [died] and Ors. v. B.K. Nalini Jayanthi], First Bench of this Court has held as follows:
... Therefore, as held by the Supreme Court in and , referred to supra, persons connected with the sale transactions or the attesting witnesses should be examined in Order to prove the transactions as well as the factors referred to therein. The burden of proof is always on the landlord to prove in each case the market value or the site in which the building is constructed, the cost of construction of the building and the cost of provision of any one or more of the amenities specified for fixation of fair rent. [see also 1996 (2) LW 637 Rahmath Fathima v. Kader Mohideen].
21. Considering the method of ascertainment of market value and holding that guideline value contained in basic valuation register maintained by the Revenue Department or Municipality do not form basis for determination of market value, in [Sakthi & Co. through its Partner, Veeranan v. Shree Desigachary], Full Bench of this Court has held as follows:
14. The methods of valuation for ascertaining the market value, as suggested in the above decisions, are as follows:
(1) Opinion of experts;
(2) The price paid within a reasonable time in bonafide transactions of purchase of the lands acquired or the lands adjacent to the lands acquired and possessing similar advantages. Evidence of bona fide sales between willing prudent vendor and prudent vendee of the lands acquired or situated near about that land possessing same or similar advantageous features would furnish basis to determine market value.
(3) A number of years purchase of the actual or immediately prospective profits of the lands acquired.
15. It is a settled law, as laid down in the judgments referred to above, that in determining the market value, the Court has to take into account either one or the other three methods to determine market value of the lands appropriate on the facts of a given case. According to the Supreme Court, generally, the second method of valuation is accepted, as the best. This method would furnish the evidence of bona fide sales between willing prudent vendor and prudent vendee of the lands acquired or situated near about that land possessing same or similar advantageous features, which would enable the Court to determine the market value correctly.
18. Therefore, our conclusions are as follows : (1)The guideline value, contained in the Basic Valuation Register, maintained by the Revenue Department or the Municipality for the purpose of collecting stamp duty, has no statutory base or force. It cannot form a foundation to determine the market value mentioned thereunder in instrument brought for registration.
(2) Evidence of bona fide sales between willing prudent vendor and prudent vendee of the lands acquired or situated near about that land possessing same or similar advantageous features would furnish basis to determine the market value. In this case, the guideline value alone has been considered, which, in our view, is illegal.
(3) The Rent Controller and the Rent Control Appellate Authority, in the present case, are not right in relying upon the guideline value, maintained by the Revenue Department, for arriving at a fair rent, to be fixed under Section 4 of the Tamil Nadu Buildings (Lease & Rent Control) Act,1960.
22. Ex.P-3 being Sale Deed for a small extent of 21 sq. ft., it cannot be taken as basis for fixing the market value. Likewise, Ex.P-6 being Sale Deed for built up area and site, cannot form basis for fixation of value of the site. That apart, in Ex.P-6, Purchaser was already Tenant in the said premises. Perhaps to retain that property, under compulsion, purchaser thereon might have boosted the sale price. In any event, value of the building sold under Ex.P-6 cannot at all form basis for fixing the market value. Approach of the Appellate Authority taking Ex.P-6 as basis for fixation of market value is perverse and cannot be sustained.
23. As noticed earlier, Ex.R-3 is the Sale Deed dated 31.05.1995, for 1,200 sq.ft. at Moore Street, sold for Rs. 4,30,000/-. Taking that as basis, Rent Controller has fixed the market value of the site at Rs. 11,00,000/- per ground. The property sold under Ex.R-3 is said to be rear side of Petition premises at a distance of about one furlong. Since Petition premises is in the II Line Beach Road, it would be appropriate to fix a slightly higher market value, than that fixed by the Rent Controller would be appropriate. Taking into consideration the locality and other facts and evidence, it would be appropriate to fix the ground value at Rs. 12,50,000/-.
24. Fair rent is fixed at Rs. 41,771/-, as calculated below:
Amount in Rs.
Value of the Building
as fixed by the Appellate Authority 12,07,335.00
Market value of the site per ground = Rs. 12,50,000
For 5702 sq.ft. = 12,50,000 x 5702
------------------- = Rs. 29,69,791.66
2,400
Rounded to 29,69,792.00
----------------
41,77,127.00
----------------
Monthly rent at 12% = 41,77,127 x 12 x 1
------------------------- = 41,771.00
100 x 12
25. The Order of Appellate Authority fixing fair rent at Rs. 59,590/- is perverse and unreasonable. When the findings of Appellate Authority is perverse, exercising revisional jurisdiction under Section 25 of the Act, High Court can examine the correctness and propriety of findings of Rent Control Appellate Authority. On such analysis, in my considered view, fixation of rent at Rs. 59,590/- is excessive and arbitrary and is to be reduced to Rs. 41,771/- as calculated above.
26. The Order of Rent Control Appellate Authority in RCA Nos. 701/1996 and 737/1996 are modified. Fair rent is fixed at Rs. 41,771/-, which is payable from the date of Petition till the date of vacating the premises i.e. November, 2004. No costs.