1954 (5) TMI 20 - SC - Indian Laws

Supreme Court: Money for executory agreement not offense under rent law

TOLARAM RELUMAL Versus STATE OF BOMBAY

The Supreme Court allowed the appeal, setting aside the conviction of the appellants under section 18(1) of the Bombay Rent Restriction Act, 1947. The ... - Issues Involved:1. Whether the receipt of Rs. 2,400 by the appellants fell within the mischief of section 18(1) of the Bombay Rent Restriction Act, 1947.2. Whether an executory agreement to grant a lease in the future constitutes an offense under section 18(1) of the Act.3. Interpretation of the terms 'in respect of' within the context of section 18(1) of the Act.4. Applicability of penal provisions to executory agreements under section 18(1) of the Act.Issue-Wise Detailed Analysis:1. Whether the receipt of Rs. 2,400 by the appellants fell within the mischief of section 18(1) of the Bombay Rent Restriction Act, 1947:The appellants were charged under section 18(1) of the Bombay Rent Restriction Act, 1947, for receiving Rs. 2,400 as premium or pugree for the grant of a lease of Block No. 15 in a building under construction. The magistrate found the appellants guilty and sentenced them to two months' rigorous imprisonment and a fine of Rs. 1,200 each. The High Court upheld the conviction, but the matter was referred to a Full Bench due to differing views on the interpretation of section 18(1). The Full Bench held that the receipt of consideration for an executory agreement was within the mischief of section 18(1) of the Act.2. Whether an executory agreement to grant a lease in the future constitutes an offense under section 18(1) of the Act:The Full Bench opined that the oral agreement did not constitute a lease but amounted to an agreement to grant a lease in the future. It held that the receipt of money for an executory agreement fell within the mischief of section 18(1). The Full Bench stated, 'What the Legislature has penalized is the receipt of a premium by the landlord and the Legislature has also required a nexus between the receipt by the landlord of a premium and the grant of a lease of any premises.'3. Interpretation of the terms 'in respect of' within the context of section 18(1) of the Act:The High Court emphasized the words 'in respect of' and concluded that the comprehensive expression used by the Legislature indicated that any nexus between the receipt of a premium and the grant of a lease fell within the penal provisions of section 18(1). However, the Supreme Court held that the High Court laid undue emphasis on the words 'in respect of.' The Supreme Court stated, 'Giving the words 'in respect of' their widest meaning, viz., 'relating to' or 'with reference to', it is plain that this relationship must be predicated of the grant, renewal or continuance of a lease.'4. Applicability of penal provisions to executory agreements under section 18(1) of the Act:The Supreme Court held that section 18(1) is penal in nature and should be construed strictly. The Court stated, 'It is a well-settled rule of construction of penal statutes that if two possible and reasonable constructions can be put upon a penal provision, the Court must lean towards that construction which exempts the subject from penalty rather than the one which imposes penalty.' The Court concluded that the receipt of money on an executory agreement did not fall within the mischief of section 18(1) as the section envisages the existence of a lease and the payment of an amount in respect of that lease.Conclusion:The Supreme Court allowed the appeal, set aside the conviction of the appellants, and ordered their acquittal. The Court held that the receipt of money by the appellants from the complainant at the time of the oral executory agreement of lease was not punishable under section 18(1) of the Act and was outside its mischief. The Court emphasized that the language of section 18(1) did not warrant the construction placed upon it by the Full Bench and that the relationship of landlord and tenant did not come into existence until a lease was executed.