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Issues: (i) Whether the tenant-company, having charged enhanced rent from the sub-tenant, could retain only the contractual rent payable to the landlord or was bound to pass on the increased rent received. (ii) Whether expenditure on the leased shops and accessions made during the tenancy could be adjusted against arrears of rent, and whether the CLB's direction reducing payment to 75 per cent could stand.
Issue (i): Whether the tenant-company, having charged enhanced rent from the sub-tenant, could retain only the contractual rent payable to the landlord or was bound to pass on the increased rent received.
Analysis: The rights and liabilities of a lessee, in the absence of contrary contract or local usage, were examined under Section 108 of the Transfer of Property Act, 1882. The provisions relied upon made it clear that the lessee is bound to disclose material facts, pay rent to the lessor, and cannot by private arrangement with a sub-tenant divest the landlord's right to rent. The Court held that where the tenant-company itself had realised enhanced rent from the sub-tenant, the landlord could not be confined to the original contractual rent merely because the lease deed had fixed a lower amount. The CLB's view that non-payment of proportionate increased rent amounted to oppression was upheld.
Conclusion: The tenant-company was bound to pay the increased rent received from the sub-tenant to the landlord, and the challenge to that extent failed.
Issue (ii): Whether expenditure on the leased shops and accessions made during the tenancy could be adjusted against arrears of rent, and whether the CLB's direction reducing payment to 75 per cent could stand.
Analysis: Clause (d) of Section 108 of the Transfer of Property Act, 1882 was applied to hold that accessions made during the continuance of the lease follow the leased property and must be surrendered on determination of the lease. On that footing, the amount spent on accessions or improvements could not be set off against arrears of rent. The same reasoning led to the conclusion that the direction limiting payment to 75 per cent was not legally sustainable, because the entire increased rent realised from the sub-tenant formed part of the amount payable to the landlord. The Court therefore modified the CLB's order to remove the adjustment of expenses and to require full payment of the enhanced rent.
Conclusion: Adjustment of expenditure against rent arrears was disallowed, and the CLB's 75 per cent direction was set aside in favour of full payment.
Final Conclusion: The tenant-company's appeal was dismissed, the landlord's appeal was allowed, and the CLB order was modified so that the landlord received the full enhanced rent without deduction for shop expenses or accessions.
Ratio Decidendi: A lessee who realises increased rent from a sub-tenant cannot withhold it from the lessor, and expenditure on accessions or improvements to the leased property cannot be adjusted against rent arrears in the absence of a statutory or contractual basis.
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