Bombay High Court
Prem Ratan Vohra vs Lalitkumar Dayalji Kakhani on 18 January, 1988
Equivalent citations: AIR1988BOM264, 1988(2)BOMCR210, (1988)90BOMLR71, AIR 1988 BOMBAY 264, (1988) 2 BOM CR 210, (1988) MAH LJ 321, (1988) MAHLR 970, (1988) 90 BOM LR 71
Author: P.B. Sawant
Bench: P.B. Sawant
JUDGMENT Sawant, J.
1. This is a Reference to the Full Bench for answering two questions of law, namely how should the market value of the suit property be arrived at for the purposes of jurisdiction of the Court whether by valuing it on the basis of the valuer's report or on the basis of the compensation or rent that is charged to the occupant, and if it is the latter, what should be the multiplier of the compensation or rent which should determine the value.
2. The facts which have given rise to the questions, are as follows :
The petitioner before us is the defendant-licensee in the suit filed by the respondent, who is the tenant-licensor of the suit premises. The suit premises admeasure 620 square feet and are situate on the first floor of Municipal House No. 22, Police Court Lane, Fort, Bombay. By a leave and licence agreement of October 5, 1967, the respondent created a licence in favour of the petitioner for a period of 11 months at the monthly compensation of Rs. 450/-. The agreement also mentioned that the defendant was given the use also of the property mentioned in the Schedule annexed to the agreement. The property so mentioned in the Schedule consisted of three racks, three old tube lights, a big water tank and electric fixtures. The agreement was renewed for two further periods of 11 months each on a reduced compensation of Rs. 425/- per month. The renewed period of licence expired on March 31, 1970. There is no dispute further that the rent of the suit premises was Rs. 44/-per month. The defendant fell in arrears of compensation to the tune of Rs. 12,8587- on August, 1969. The plaintiff, therefore, revoked the licence and instituted the present suit in the City Civil Court, Bombay on November 18, 1972 for possession of the suit premises along with the property mentioned in the Schedule. In January, 1973, the defendant filed his written statement and among other things, took a preliminary objection to the maintainability of the suit on the ground that on a proper valuation of the suit premises the City Civil Court had no jurisdiction to entertain and try the suit. It is necessary to state here that at the relevant time the pecuniary jurisdiction of the City Civil Court did not exceed Rs. 25,000.
3. The Court framed a preliminary issue with regard to the jurisdiction, and by its order dated October 20, 1983 valued the suit premises at Rs. 45,720/- and held that the Court had jurisdiction to entertain and try the suit since in the meanwhile pecuniary jurisdiction of the Court was raised to Rs. 50,000/-. Since the plaintiff had valued the suit at Rs. 4,400/- on the basis of 100 times the rent of the premises as was the practice in the said Court and had paid Court-fees accordingly, the Court also directed the plaintiff to pay additional Court-fees on the basis of the said valuation of Rs. 45,720/-. It is this order which was impugned in Writ Petition No. 89 of 1984.
4. Since there was a conflict of decisions between the Division Benches of this Court on the proper mode of valuation of the suit, one of us (Sawant, J.) by a speaking order of March 23, 1984, had referred the matter to the learned Chief Justice to be placed before a" Full Bench. That is how the matter has come up before us for hearing on the two questions.
5. Before we advert to the relevant decisions, it is necessary to refer to the provisions of the Suit Valuation Rules. In view of Rule 2(a) of the Maharashtra Suits Valuation (Determination of Value of Land for Jurisdictional Purposes) Rules, 1983, (hereinafter referred to as 'the Rules'), which are made under Section 3 of the Suit Valuation Act, 1887, for the purposes of jurisdiction also, the value of the property is to be deemed to be its market value. The decisions which have been relied on by both sides are all decisions under the Court-fees Act. Hence the ratio of the said decisions would be helpful to decide the issue of valuation of the property for the purposes of jurisdiction also.
6. The first of the decisions delivered by a Division Bench of this Court consisting of Patel and Shah, JJ. is in Letters Patent Appeal No, 13 of 1963 decided on 3-4-1963. In that case the market value was arrived at by taking the licence fee as the return on the property and multiplying it by 121/2, i.e. at 121/2 years' purchase. This was referred to and followed by another Division Bench (Patel and Tulzapurkar, JJ) in a case Aninha D'Costa v. Parvatibai. It is observed there as follows :
"Now, the words 'market value' mean the price which a willing purchaser would pay to a willing seller for the property on the day when the suit is filed. The method of valuation is familiar to most who deal with land acquisition cases. Two methods are very frequently adopted for determining the market value. One is by production of sale deeds of comparable properties in the vicinity of the property in question, during the period nearabout the date with respect to which the price has to be determined. The other is by reference to the net income of the property which it earns. One method is used to also check the result arrived at by the other. However, with all the care, the Court cannot determine the exact value. Sometimes, expert evidence is called to state the value of the property, but experience has shown in many cases that the expert for one party will say that the value is Rs. 100 and the expert for the other side will say that it is Rs. 1,000/-. Though discretion is given to the Court for adopting such procedure as it deems necessary for making the valuation, it has to determine the value of the property fairly, though, of course, the same exactness as one may expect under the Land Acquisition Act may not be required. We, therefore, adopted a ready method for determining the value of the property where it is earning income on the above case.
At this stage, it is also desirable to explain why we took only 121/2 year's purchase and not longer. If the market value of the property is to be assessed on the basis of the net income, then the number of years' purchase depends on the rate of interest on gilt dedged securities. Usually, in respect of non-agricultural income, it has become customary to adopt a rule of 16-2/3 years' purchase up to even 20 years' purchase. But then this method is on the hypothesis that the income is the normal income and is likely to be recovered for a reasonably long period. Now, the licence fees which are earned in the present days are Very exorbitant and the good or bad days cannot be expected to last for a considerably long time. We, therefore, took only 121/2 years' purchase of the licence fee".
In this case the suit premises were a flat in a co-operative housing society and the suit was filed by the owner of the premises who was himself the Licensor, against his licensee. The net income there was arrived at by deducting from the licence-fee, charges for furniture which was supplied along with the premises, and out-goings in respect of the flat.
6A. In Civil Revn. Appln. No. 146 of 1969 decided on June 10th, 1969 (Bom) by Justice Chandrachud (as he then was) sitting singly the licensee who was ousted from the premises had filed the suit against his licensor who was the tenant of the premises, claiming possession of the same. The learned Judge held that in such a case, the Court would be right in determining the market value of the suit premises on the basis of the return which the owner of the premises got from the tenant, and not on the basis of the return which the tenant got from his licensee. The learned Judge also held that the multiplier for the valuation which was adopted by the Division Bench in Aninha D'Costa's case supra, namely 121/2. years' rent was a proper one.
In Appeal No. 170 of 1965 decided on October 3, 1969 (Bom), Patel, J. sitting singly, took the view that since usually in the City Civil Court 100 months' value was taken as the market value of the property, the plaintiff must pay the Court-fees on that amount. It may also be mentioned here that the learned Judge took the monthly compensation which was payable by the licensee to the licensor as a basis and arrived at the net income of the property by deducting therefrom firstly the rental which the tenant-licensor in that casee was liable to pay to the landlord and, secondly, the compensation for the furniture which was also given along with the premises to the licensee.
7. It is apparent from the judgment in this case that the learned Judge(Patel, J.) had departed from the rule which he himself had laid down sitting in two separate Division Benches, as pointed out earlier, where the multiplier taken by the Benches was 121/2 years' net income of the suit premises. A later Division Bench (Vaiday and Mridul, JJ.) which decided on April 26, 1976 Appeal against Order No. 75 of 1975 (Bom) followed the decisions of the Division Benches in Letters Patent Appeal No. 13 of 1963 and in (supra) and tried to explain the different approaches in the four cases discussed above on the basis of the character of the parties who had filed the suits in question, viz. whether the plaintiff was the owner, tenant or the ousted licensee.
8. A scrutiny of the provisions of the statute as well as of the cases discussed above shows that the market-value of the property can be validly arrived at by adopting either of the two methods, viz. valuation of the property by the expert valuer as on the date of the suit or by multiplying the net income from the property by a certain multiplier. There was never a dispute with regard to the first method. The complications have arisen with regard to the second because of the conflicting decisions of the two learned single Judges. The conflict is compounded firstly because one of the learned Judges (Patel, J) has departed from the rule to which he was a party as a member of two earlier Division Benches and, secondly, by the fact that the third Division Bench has tried to resolve the apparent conflict on the basis of the character that the plaintiff fills.
9. Once it is agreed that besides the actual valuation of the property on the date of the filing of the suit, the only other mode of determining its market-value is on the basis of the income that it fetches, according to us, there should be no difficulty in resolving the conflict presented by the decisions. Whether it is the owner-licensor, tenant-licensor-or the ousted licensee who files the suit, what is sought to be recovered by them is the property in dispute. To them its worth is the net income it fetches or is capable of fetching of the loss which its deprivation causes. The rough and ready as well as a handy measure to estimate such worth is the compensation that is charged for its occupation and agreed to between the parties minus of course all the out goings which the licensor has to bear. The outgoings will include not only the rent, property taxes, maintenance and other charges, fees and levies the licensor has to pay in respect of the premises or on account of its use by the licensee but also the compensation or charges for the use of the fixtures and furnitures supplied to the licensee for his use. What this compensation and outgoings will be depend upon the facts of each case. In some cases, in addition to the compensation mentioned in the agreement, which may be nominal, the licensor might have received deposit refundable without interest. The income from such deposit calculated at the rate of interest which a nationalized bank would pay on such amount can reasonably be taken as a component of compensation. In other cases, the compensation charged may be shown together both for the premises and the fixtures and furniture or shown separately for each but split between the two disproportionately. In such cases, the Court may have to make its own calculations with regard to the reasonable compensation for the premises. In still other cases unaccounted amounts may have been taken in advance for the entire period of licence and the agreement may indicate only a small part of the compensation which is actually charged or chargeable. In these cases also the Court will have to draw its own inference with regard to compensation on the basis of available evidence. Human ingenuity knows no bounds and permutations and combinations in this respect can be galore. What is necessary in all such cases is to clear the smoke-screen and to find out the net income derived from the premises. The rental bf the premises unless nothing more is actually charged, can hardly be a basis for calculating the net income particularly when the agreement stipulates compensation that is recoverable. There is also no reason why the amount of compensation should be ignored and only the rent of the premises be taken as a basis. It is common knowledge that in many cases the rents are frozen statutorily and have become unrealistic whereas the compensations charged are fabulous and generally reflect the market value for the premises. There may however be cases where on account of peculiar relationship between the parties or for some special considerations the licensor may in fact charge no more than rent, or the compensation charged may be meagre. Each such case may have to be adjudged on its own facts. That, however, does not detract from the genral rule that ordinarily it is the net income calculated on the basis of the compensation minus the charges indicated above and not the rent of the premises which should form the criterion for determining the market-value of the premises.
In that view of the matter the character of the plaintiff also becomes irrelevant. There is no warrant for believing that the amount of '. compensation varies according to whether the owner or the tenant is the licensor. In many cases, the tenant may charge more compensation than the owner. Where further the ousted licensee is the plaintiff the value of the premises to him is no less than that to the licensor and there is no reason for adopting a different measure of valuation in his case. It is for this reason that, with respect, we are of the view that the mode of valuation need not differ with the character of the plaintiff.
10. That takes us to the next question, viz. of the proper multiplier of the net income that should be employed to arrive at the market-value of the property. In this respect, we find that all the three Division Benches and a learned single Judge have uniformly adopted 121/2 years' income or 150 months' income as the proper guide for calculating the market-value. Ironically, Patel, J., who had spoken for the two Divison Benches earlier alone departed from this rule later while sitting singly when he decided Appeal from Order No. 170 of 1965, as pointed out earlier. Unlike in (supra), the learned Judge in this case has not given any reason, except the practice in the City Civil Court for adopting 100 times the net income or hundred months' value as the market value of the premises. We are, however, more enamoured of the reasoning of the Division Bench in to which the learned Judge is a party and which we have quoted earlier and prefer to hold that 121/2 years' net income or 150 times the monthly net income will be the proper market-value of the property. For one thing the income from the gilt edged securities which is taken as a basis to arrive at the said multiplier is a safe and reliable criterion, since we are living in an economic structure which is not free from vicissitudes, however prolonged the intervals between the ups and downs. All the Courts further have almost uniformly accepted it as a basis and it has also been followed as matter of practice over a number of years now. There is no reason to depart from it. Nor do we see any other criterion which can be said to be markedly better.
11. Our answers to the two questions referred to us are, therefore, as follows : --
The basis for calculating the market-value of the property should be the compensation charged and not the rent of the premises in question. It is the net income which accrues to the licensor calculated in the manner stated hereinabove which should be taken as its unit value and its market value should be arrived at by multiplying it by 121/2 years' purchase or by one hundred and fifty months' value.
12. In view of our aforesaid conclusion, the trial Court's order dated October 20, 1983 is hereby set aside and the Court is directed to value the suit premises according to the principles laid down hereinabove.
13. Reference is answered accordingly.
14. Rule in Writ Petition No. 89 of 1984 is made absolute accordingly with no order as to costs.
15. The trial Court to fix the matter of valuation of the premises within two weeks after the receipt of the writ from this Court.