@JUDGMENTTAG-ORDER
R. Banumathi, J.@mdashIn RCOP No. 8/1996, Rent Controller/DMC, Chengalpat has fixed the fair rent at Rs.12,000/- p.m. In the appeal preferred by the Tenant in RCA No. 7/1999, the Appellate Authority reduced the fair rent fixed, to Rs.7,435/- p.m. Aggrieved by the same, the Tenant and landlord have preferred these revisions. For convenience, parties are referred as per their rank in RCOP No. 8/1996. Factual background which led to these Revision Petitions are as follows :-
2.1. The demised premises is a building with plinth area of 675 sq.ft., out of 14 cents 292 sq.ft., measuring 100'' x 65'' in Alagesan Nagar, Chengalpat. Case of the landlord is that the property was let out to the first Respondent/Tenant for residential purpose about 12 years ago. Initially, the rent was at Rs.200/- and at the time of filing the RCOP, rent payable was Rs.1000/- p.m. According to the Petitioner, without his consent, the Respondent has converted the building into a non-residential one and sub-let it to the second Respondent. The property is nearby to the bus stand, school and market, which falls in ''A'' class construction and the landlord claimed fair rent of Rs.12,000/- p.m. on the basis of private Engineer''s Report, who has valued the property at Rs.15,,95,860/-.
2.2. The first Respondent/Tenant resisted the Petition denying any subletting. The first Respondent/Tenant contended that rent of Rs.1,000/- is reasonable and rent which sought to be fixed is unreasonable and excessive and Petition is filed with malafide intention.
2.3. The Rent Controller virtually accepted the Engineer''s Report, who has valued the property at Rs.15,95,860/- and accepting that estimation, fixed the fair rent at Rs.12,000/- p.m. The Appellate Authority reduced the same to Rs.7,435/-, which is challenged in these Revision Petitions.
2. Appearing for the Tenant, the learned Senior Counsel Mr. S. Parthasarathi has contended that the land value has been erroneously calculated on the basis of the documents, even without adducing any independent evidence. It was further submitted that when only ground floor portion has been let out to the Tenant, entire appurtenant of the building cannot be thrust upon the first Respondent/Tenant.
3. Laying stress upon Engineer''s Report and various documents, Mr. P.B. Balaji, the learned Counsel for the Petitioner/landlord contended that on the basis of evidence of PW-1 and Engineer''s report, Rent Controller has rightly fixed the rent at Rs.12,000/- p.m. and without any reasonable basis, the Appellate Authority has reduced the same and sought for restoration of the rent fixed by the Rent Controller.
4. Having regard to the submissions, the point falling for consideration is, whether in determining the market value of the site and apportioning the land, the Rent Control authorities have followed the statutory provisions ?
5. The fair rent of the building shall be made by considering the following three ingredients viz. -
"(1) Cost of the site in which the building is constructed.
(2) The cost 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 others Vs. Athi V. Ramachandra and others]."
6. Determination of fair rent has to be in accordance with the principles set out in statute and not limited to estimation by the landlord.
7. PW-2 - Consulting Engineer has estimated the value of the land and building at Rs.15,95,860/-. Calculating the rent at the rate of 9%, rent was arrived at Rs.11,968.95. The Rent Controller has virtually accepted the report of PW-2 and the estimation thereon, and fixed the rent at Rs.12,000/- p.m. The Rent Controller has not independently considered the cost of construction and the value of the site with apportionment thereof, in accordance with the statutory provisions. Order of the Rent Controller fixing the fair rent at Rs.12,000/- virtually accepting engineer''s report is perverse and unacceptable.
8. In a Petition for fixation of fair rent, cost of construction and land value are to be taken into consideration. Engineer''s Report on cost of construction and value of land are only guidelines and it need not be the sole basis for fixing the fair rent. In 1998 (1) MLJ 685 [77K; South India Corporation Agencies Ltd., rep. By its Secretary Vs.Chandrakanth C.Badani & others], Justice K. Govindarajan, has held as follows :-
"It is well settled that fair rent has to be fixed for a building after considering the pleadings and the evidence available on record irrespective of the concession made by the parties. Further fixation of fair rent has to be in accordance with the principles and not as estimated by the landlords."
The Order of the Rent Controller fixing fair rent solely on the basis of Engineer''s Report cannot be sustained.
9. The Appellate Authority calculated the fair rent by taking into consideration cost of construction, market value of the site and amenities. Though the Appellate Authority has given split up figures, method of calculation is erroneous and not in accordance with statute. The Appellate Authority has fixed fair rent not only on the basis of leased out portion but also on the portion of the shed put up by the Tenant. Any shed/building allowed to be constructed on the vacant land let out by the landlord is not a building let out to the Tenant and it cannot be valued as building, for fixation of fair rent. Since method of calculation and fan-rent arrived by the Appellate Authority is not in accordance with statute, it has become necessary to consider the matter at length.
10. When the lower Courts have made a legally wrong approach and committed a serious error in interpreting the provisions, the High Court, exercising the revisional jurisdiction u/s 25of the Act, it is open to the High Court to reassess the evidence and interfere with the orders of the Courts below if they are perverse and erroneous.
11. COST OF THE BUILDING :-
The expression "cost of building" includes not only the expenses incurred for constructing the building but also the value of advantage which the site of the building offers - such as nearness to markets and other public places, special amenities etc. The demised premises and the vacant site thereon are near to bus stand and market in Chengalpat and is stated to be in the heart of the town. Admittedly, the premises has the basic amenities - water supply, drainage, open well, electricity connection etc. PW-2 -Engineer has assessed the cost of construction per sq.ft. at Rs.189.49. The building is 39 years old and depreciation at the rate of 1% being allowed, PW-2 has fixed the cost/Of the building at Rs.1,11,687.12 as noted below :-
Amount in Rs.
Plinth area of the premises 675 sq.ft.
Cost of construction per sq.ft. Rs.189.49
675 x 189.49=1,27,908.00
Add : Basic AmenitiesWater, Drainage and toilet facilities 9,593.00
Electricity 12,790.00
4''5" Open Well 15,000.00
1,65,291.00
Less : Depreciation at 1% being Type I building for 39 years = 1,65,291 x 0.6757 53,603.88
The Appellate Authority has accepted the same. In consideration of the location of the building and other amenities available, the cost of construction estimated by PW-2 Engineer is reasonable.
12. On behalf of the Tenant it was contended that there was no provision u/s 4(5)(a) of the Act to provide a separate value or rate for electricity service connection and open well and they also do not fall under Schedule I Amenities. It was further submitted that electricity service connection and open well will come under basic amenities itself and separate cost cannot be added and it would be sufficient if 15% basic cost is added for basic amenities. Open well and internal water supply are necessarily to be taken as additional amenities. If open well is available, even when there is no water supply, the building will not have any water problem. The amenities such as open well, internal water supply, electric fans, tube lights, electric points, vacant land appurtenant to the building enjoyed by the Tenant, are the amenities, which would be taken into account in apportioning the value. Though it is desirable to adopt 15% of the cost of the amenities, when the building has additional amenities, cost of amenities need not be restricted to 15%. When the amenities provided for in the Schedule are present, the amenities need not be restricted to 15% of the cost.
13. In 100 LW 846 [Bombay Tyres International Ltd., Madras Vs. Express Newspapers Pvt. Ltd., Madras] the Court has held as:
"In the case of fixation of Fair Rent, judicial notice must be taken of the fact that cost of construction and cost of materials, which have to be used for the construction of a building including the fittings for water supply, sanitary fittings as well as for making electric installations have always been escalating and are considerably high. Therefore, having regard to the prevailing high level of cost of materials used for construction of a house there has to be a realistic approach in the matter of estimating the cost of construction and cost of making amenities available. Therefore it cannot be said that the increase of the percentage from 10 per cent to 15 per cent as awarded by the Appellate Authority for amenities is so excessive which should be interfered with in revision"
14. Market value of the site :-The market value of the site on which the building is constructed should also be taken into consideration while fixing the fair rent. While computing the market value of the site, the following two factors are to be taken into account viz., (1)the portion of the site on which the building is constructed, (2)a portion upto 50 per cent of the built up extent, if there is any vacant land appurtenant to such building and its extent is in excess of the built up extent.
15. As per the decision of the Full Bench in 1989 (2) MLJ 213 [Lodha Vs. Renganathan], in calculating the market value of the site in which the building is constructed, plinth area of the building one half thereof has to be taken into consideration. There is no difficulty in applying the formula if it is a case of one building and one Tenant. Complications arise when there is more than one storey on the building and there is more than one Tenant in each storey. With regard to second question referred to the Full Bench, as to the method of apportionment, in the said decision [1989 (2) MLJ 213], Full Bench has held as under:-
"The set of expressions ''and of a portion upto fifty per cent thereof cannot be read disjointedly and has got to be read conjontly along with the set of expressions preceding it. The expressions ''and of a portion upto fifty per cent thereof would have reference only to that portion of the sit on which the building is constructed. The formula to be applied, which is plain in our mind, is that an extent upto fifty per cent of the site on which the building is constructed has got to be carved, out of the vacant land, if any, appurtenant to such building and the market value of that fifty per cent must be added on to the market value of that portion of the site on which the building is constructed, and the rest of the portion of the vacant land has got to be treated as amenity. Reading the proviso as a whole, it is not possible to loose sight of the context in which the expression ''upto fifty per cent thereof occur and ''upto fifty per cent thereof could have reference only to ''that portion of the site on which the building is constructed''. The language of the proviso being plain, we cannot read it in any other manner, which, if done, in our view, would be a stilted one.......Only if there is any vacant land, appurtenant to such building, the application of this formula would arise. If there is no vacant land appurtenant to such building, the contingency to apply this formula would not arise at all. If there is any vacant land, appurtenant to such building, but its extent is equal to or less than the built up extent, the same will have to be annexed to the built up extent, to form the aggregate basis for arriving at the market value of the site. If there is any vacant land, appurtenant to such building, and its extent is in excess of the built up extent carving out of its fifty per cent of the built up extent, to be added to the built up extent, for calculating the market value of the site, the residue of the vacant land has to be treated as amenity"
[underlining added].
16. Holding that the landlord is not entitled to charge each Tenant occupying only small portion of the building with fair rent calculated on the basis of the market value with the plinth area of the entire building one-half thereto, in
17. It is well settled that building site and one-half of built up area is to be added for the purpose of fixing the market value. Remaining extent of vacant site is to be considered as amenity as envisaged in the Act. In the present case, the total land extent of the site is 6,500 sq.ft. Plinth area is 675 sq.ft. Total vacant land is 5,825 sq.ft. The building consists of two floors - Ground Floor and first floor. Only the ground floor has been leased out to the Tenant. The question arises as to how the common appurtenant land should be apportioned.
18. As per the decision of the Full Bench, the building site and one-half of the built up area is to be added for the purpose of fixation of market value. The remaining extent of vacant land is to be considered as amenity as envisaged in the Act.
19. While so calculating one half of the built up area, the Appellate Authority has erroneously taken into account the area of the shed put up by the Tenant. Leased out building portion is, plinth area of 675 sq.ft. The Tenant has put up shed in an extent of 1500 sq.ft. The Appellate Authority has calculated the market value of the site taking the built up area as 2175 sq.ft. [675 +1500], which is totally erroneous. Leased out premises is the ground floor portion in the building of plinth area in 675 sq.ft. In the premises, Tenant has put up 1500 sq.ft. shed. The Appellate Authority erred in fixing the market value of the site on the basis of one half of 2175 sq.ft. Building allowed to be constructed on vacant land let out by the landlord is not "building let out to Tenant" and it cannot be valued as building, as it is not building in terms of section 2(2)of the Act. In 2004 (1) CTC 64 = 2004 3 L.W. 533 [ML Yacoob Sheriff (D) by Legal Representatives. Vs. Rajrani Devi], the Supreme Court has held as :-
"... the value of the building constructed by the Tenant on vacant land let out by the landlord has to be treated as vacant land let out and calculated as per first proviso to sub-section (4) of Section 4. Excess portion of vacant land beyond 50% of appurtenant land to building is to be fictionally treated as amenity under Entry 15 of Schedule I. The Supreme Court has further held that "building allowed to be constructed on vacant land let out by landlord is not building let out to Tenant and it cannot be valued as building as it is not building in terms of Section 2(2) of the Act. Such building can only be treated as vacant land or amenity for purposes of fixation of fair rent...". 21. As noted earlier, the plinth area is 675 sq.ft. and the appurtenant land is 5,825 sq.ft. The learned Counsel for the landlord has contended that half of plinth area i.e. 675 % 2 is to be added for the purpose of calculating Market value of the site. According to the learned Counsel, leased out portion 337.5 sq.ft. and 50% of Plinth area of 675 sq.ft., in total 675 sq.ft. [675%2 + 675%2 = 675 sq.ft.] is to be taken into consideration for calculating the market value of the site leased out. Per contra, the learned Senior Counsel has submitted that only ground floor portion i.e. 337.5 sq.ft. is in occupation of the Tenant and half of that demised premises alone is to be added for calculating the market value of the site. Arguing further, the learned Senior Counsel submitted that apportioned built up land extent and 50% thereof would come only to 506.25 sq.ft. [337.5 + (337.5%2) = 506.25].
21. In the decision in
22. Next point to be considered is market value of the site. Parties have adduced oral and documentary evidence stating that the demised building is very near to bus stand, school and market. PW-2 - Engineer has valued the land cost at Rs.1,00,000/- per cent, the then prevailing market rate, in 1995-1996. The landlord has produced various documents Exs.A-6 to A-10 - Sale Deeds and Agreement of sale between various parties, showing that the land value is more than Rs.1,00,000/- per cent. Though in other documents, the value of the land is stated to be more than Rs.1,00,000 per cent, the value opined by PW-2 Engineer is taken as the market value i.e. Rs.1,00,000/- per cent. The market value of the land is calculated at Rs.1,54,687.50 as under :-
Land Apportionment & Land value
Plinth area 675 sq.ft. 50% of the same is added since the appurtenant land is more than the constructed area.
Since there are two floors
675%2 + 675%2 = 675 sq.ft.
Land value = Rs.1,00,000/- per cent
One Ground - 5.5 cents
4.5 X 1,00,000.00= Rs.5,50,000.00
675 x 5,50,000%2400= Rs.1,54,687.50
23. The building has Schedule I amenities. The building has compound wall, appurtenant land and other amenities. Hence as per Schedule I amenities, 50% of the total value, as per Section 4(4) of the Act, i.e. Rs.39,956.25 is to be added.
24. The fair rent is fixed at Rs.2,500/-p.m. as calculated below :-
Amount in Rs.
Building value = 1,11,687.12
Land value = 1,54,687.50
2,66,375.00
Add Schedule I Amenities Compound wall + Appurtenant land at 15% of the total value as per Section 4(4) of the Act= 39,956.25
3,06,331.25
Since the premises used for residential purpose, Annual rental value calculated at 9%
9 % 100 x 3,06,331.25=27,569.81
Fair rent per month Rs.27,569.81 % 12 = 2,297.48
Fair rent fixed at = 2,500.00
Fair rent though arrived at Rs.2,298 p.m., is fixed at Rs. 2,500/-.
25. Fair rent is fixed at Rs.2,500/- p.m. The premises though let out or residential purposes, the vacant land has been used mainly for non-residential purposes. That apart, the matter has been pending for nearly a decade. The Tenant has been in enjoyment of the vast extent of appurtenant site. In those circumstances of the case, this Court feels that for meeting the ends of justice, fair rent is fixed at Rs.2,500/-. Since orders of the Courts below are erroneous, the impugned Order of the Appellate Authority is modified accordingly.
26. CRP No. 1404/2001:
Order of the Appellate Authority in RCA No. 7/1999 on the file of the Principal Subordinate Court, Chingleput is modified. This Revision Petition is partly allowed with cost. Fair rent is fixed at Rs.2,500/- p.m. from the date of Petition RCOP No. 8/1996 and this CRP is ordered accordingly.
CRP No. 2022/2001:
This Revision Petition filed by the landlord is dismissed. The Tenant is directed to pay costs to the landlord through out. Consequently, CMP is also dismissed.
