P. J. Irani vs The State Of Madras

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 671 of 1957

Decision Date: 21 April 1961

Coram: N. Rajagopala Ayyangar, Bhuvneshwar P. Sinha, S.K. Das, A.K. Sarkar, Raghubar Dayal, J.R. Mudholkar

In this appeal, the Supreme Court examined a decision of a Division Bench of the Madras High Court that had been issued under a certificate pursuant to Articles 132 and 133(1) of the Constitution. The Court was called upon to consider two principal questions: whether section 13 of the Madras Buildings (Lease & Rent Control) Act, 1949, was constitutionally valid, and whether an order issued by the State Government under that statutory provision was lawful. The matter arose out of a dispute concerning a property identified as No. 1, Blackers Road, Mount Road, Madras. The land had originally belonged to Sir Haji Ismail Sait. In approximately 1914, a man named Venkayya obtained a lease of the premises from Sir Haji Ismail Sait and erected a cinema‑theatre there, operating it under the name “the Gaiety Theatre.” Venkayya later became insolvent, and the Official Assignee of Madras, in whose name his estate—including the leasehold interest—vested, secured a further lease of the same property from the representatives of the deceased Sir Haji Ismail Sait. That lease was granted for nine years commencing in March 1926. Subsequently, the Official Assignee sold the theatre super‑structure to Mrs. Madan and also assigned to her the unexpired portion of the lease. Mrs. Madan then obtained an additional lease from the representatives of Sir Haji Ismail Sait’s estate for a further period of seven years beginning in June 1935, thereby becoming the owner of the super‑structure and the lessee of the site, with the lease set to expire around May 1942.

The narrative continued when a second respondent, identified as T. S. P. L. P. Chidambaram Chetty, acquired from Mrs. Madan all of her rights in the theatre super‑structure and in the lease for a consideration of thirty‑six thousand rupees, as recorded in a registered deed dated 4 January 1937. He thereafter operated the cinema house. Parallel to these transactions, the heirs of Sir Haji Ismail Sait were engaged in litigation before the High Court of Madras concerning the original ownership of the property. By way of interim orders in two suits (C. S. Nos. 280 and 286 of 1939), the High Court appointed two advocates to act as joint receivers tasked with administering the disputed property. In the early months of 1940, J. H. Irani, the father of the appellant P. J. Irani, negotiated with the joint receivers for a lease of an adjacent parcel of land with the intention of constructing another cinema‑theatre. That lease was to last for twenty‑one years and was scheduled to terminate in April–May 1961. Irani also proposed to the receivers that he take a lease of the disputed property on which the Gaiety Theatre stood, extending the term to the same expiry date of April–May 1961. The receivers subsequently sought the Court’s directions regarding the granting of this lease. The Court offered the second respondent, whose existing lease was due to end in 1942, the option of entering into a new twenty‑one‑year lease commencing on 1 May 1940; however, he declined the proposal, expressing a preference not to accept such a lengthy term, although he indicated a willingness to accept a lease of shorter duration.

In the suits numbered C. S. Nos. 280 and 286 of 1939, the High Court appointed two advocates as Joint‑Receivers to manage the disputed property. In the early months of 1940, J. H. Irani, who was the father of the present appellant P. J. Irani, negotiated with the Joint‑Receivers for a lease of a parcel of land that lay next to No. 1 Blackers Road, intending to erect a cinema theatre on that site. The lease that Irani sought was for a term of twenty‑one years and was scheduled to expire around April‑May 1961. Irani also proposed to the Receivers that he should be granted a lease of the property that was the subject of the present dispute, the site on which the Gaiety Theatre stood, for the same twenty‑one‑year period ending in April‑May 1961. The Receivers thereafter applied to the Court for directions on how to grant such a lease. The Court offered the second respondent, whose existing lease was due to terminate in 1942, the option of entering into a new lease of twenty‑one years commencing on 1 May 1940. The second respondent declined to accept a lease of that length, stating that he was unwilling to bind himself for such a long period. He indicated, however, that he would consent to a renewal of his tenancy for an additional seven years beginning on 1 May 1940, which would extend his occupation by five years beyond the expiry of his then‑existing lease. Accordingly, on 2 May 1940 the Court issued an order stating: “The lessee of the Gaiety Theatre (Chidambaram Chetty) shall be granted a lease of seven years from this date. No further option shall be given. Upon the expiry of that period, that is, from 2 May 1947, the premises may be incorporated into the lease of J. H. Irani at the same rate of rent as is presently being paid by the lessee of the Gaiety Theatre.” Pursuant to that order, the Joint‑Receivers of the estate of the late Sir Haji Ismail Sait executed two lease deeds. The first deed granted the second respondent a lease for seven years commencing on 1 May 1940. The second deed was a reversionary lease granted to J. H. Irani for a period of thirteen years and eleven‑and‑a‑half months, beginning on 1 May 1947, i.e., immediately after the termination of the second respondent’s lease, and was drafted so that its term would run together with the lease of the adjoining property that Irani was to receive. Under the original terms, the second respondent’s lease would have ended on 1 May 1947. However, before that date the Madras Buildings (Lease & Rent Control) Act 1946 (Madras XV of 1946) came into force. That statute provided that tenants who remained in possession of residential or non‑residential buildings could not be removed except by proceedings instituted under the Act before the designated officers and on specified grounds, and that mere expiry of a lease term was not a valid ground for eviction. It is now agreed that the Act applied to the second respondent’s occupation of the disputed premises and that, despite the formal termination of his lease, the statute gave him a legal right to remain in possession after the lease expired.

In this matter, the reversionary lessee, Irani, demanded that the second respondent surrender possession in accordance with the conditions of his lease, but the respondent refused, relying on the Madras Buildings (Lease & Rent Control) Act, 1949, for the protection it afforded him. Consequently, the appellant, P. J. Irani, who was representing his deceased father's estate, instituted a suit before the original side of the Madras High Court (C. S. 479 of 1947) seeking to evict the second respondent from the property. The plaintiff contended that the lease originally granted to Venkayya covered a vacant site without any structures, and therefore the 1946 Act, which did not apply to leases of vacant sites, could not shield the respondent’s possession. The trial court dismissed the suit on 22 April 1948, holding that the lease included both the land and a building, bringing it within the protective scope of the Act. The appellant appealed the decision (Original Side Appeal 37 of 1948), but the appellate Division Bench affirmed the lower court’s finding on 29 July 1951. While the appeal remained pending, Irani applied to the Government of Madras for an exemption of the premises from the operation of the Act. By the time of this application the 1946 Act had been repealed and substantially re‑enacted in the Madras Buildings (Lease & Rent Control) Act, 1949; however, because the relevant provisions were identical, reference to the later Act sufficed. Section 13 of the 1949 Act authorized the State Government, by notification in the Fort St. George Gazette, to exempt any building or class of buildings from any or all provisions of the Act, stating: “Notwithstanding anything contained in this Act the State Government may by a notification in the Fort St. George Gazette exempt any building or class of buildings from all or any of the provisions of this Act.” The Government rejected Irani’s initial exemption request in an order dated 4 June 1951 on the ground that the matter was sub‑judice. After the Division Bench dismissed the appeal, Irani submitted a fresh petition in approximately December 1951 seeking the same exemption. The Government, by an order dated 4 June 1952, granted the exemption, and the corresponding notification appeared in the Fort St. George Gazette, stating that, under the powers conferred by section 13 of the Madras Buildings (Lease & Rent Control) Act, 1949, the building No. 1 Blackers Road, Mount Road, Madras (Gaiety Theatre) was exempted from all provisions of the Act, an order authenticated by the Chief Secretary to the Government.

In this matter the Governor of Madras, His Excellency, issued a notification exempting the building identified as No 1 Blackers Road, Mount Road, Madras (Gaiety Theatre) from all provisions of the Madras Buildings (Lease & Rent Control) Act, 1949 (Madras Act XXV of 1949); the notification was authenticated by the Chief Secretary to Government. The second respondent subsequently filed a petition before the High Court invoking Article 226 of the Constitution, challenging the legality and propriety of the exemption order on the principal ground that Section 13 of the Act, which empowers the Government to exempt particular buildings, confers an unguided and arbitrary discretion that is unconstitutional because it violates the equal protection guarantee of Article 14. In an affidavit supporting the petition, the second respondent further alleged that the impugned order contained no justification for depriving the petitioner of the beneficial provisions of the Rent Control Act. Both the State of Madras, whose order was challenged, and the appellant Irani, for whose benefit the exemption was granted, were made respondents to the writ petition. A learned Single‑Judge of the High Court dismissed the petition by order dated 12 March 1953, reasoning that the constitutional validity of Section 13 had already been affirmed by a Division Bench of the Court in another case. The second respondent then appealed under Clause 15 of the Letters Patent. When the appeal was heard, the Bench also considered two other appeals that raised the same question of whether Section 13 violated Article 14. All three appeals were heard together, and on 23 October 1953 the learned Judges pronounced a common judgment. They held that Section 13 in itself does not offend Article 14, but that each exemption order must be examined to determine whether it falls within the policy and purpose of the Act or whether it is discriminatory and thus impermissible under Article 14. Accordingly, the Judges scrutinised the reasons disclosed by the Government for granting exemption in each case. In the appeal filed by the second respondent, the Judges found that the reasons offered were not germane to the purpose for which the exemption power was conferred, and they consequently set aside the exemption order. Aggrieved by the High Court’s decision, Irani obtained a certificate under Articles 132 and 133(1) of the Constitution and filed the present appeal before this Court. The State of Madras did not file an appeal; however, as a respondent it submitted a statement, reiterated by counsel, indicating that it was not interested in disputing the correctness of the High Court’s judgment and preferred to leave the dispute to be resolved between the rival parties, namely Irani and the second respondent.

The State of Madras, although a respondent, asserted that it was not challenging the correctness of the High Court’s judgment but that the dispute should be resolved solely between the two opposing parties, namely Irani and the second respondent. The counsel appearing for the appellant Irani, identified as Mr Sachin Chowdhary, advanced two principal arguments before the Court. First, he contended that the order issued by the Government which exempted certain buildings under section 13 of the Act was an executive or administrative act, not a quasi‑judicial determination, and therefore the order was not subject to quashing by a writ of certiorari, contrary to the High Court’s view. Second, assuming that the order could be classified as quasi‑judicial, he maintained that such an order could be set aside only if it were made in bad faith or on grounds entirely irrelevant to the purpose of the legislation; he asserted that neither of these conditions existed in the present case and consequently the High Court was not justified in overturning the exemption. Counsel further submitted that the High Court had improperly assumed the role of an appellate body, substituting itself for the Government and deciding the matter on the basis of what the Court itself might have done if it were the authority empowered to grant exemption. He argued that this approach exceeded the supervisory jurisdiction conferred on the High Court by article 226, even when the order in question was quasi‑judicial. Before addressing these submissions, it is necessary to note that they rest upon the premise that the power conferred by section 13 of the Act on the State Government to exempt “buildings or class of buildings” from the operation of the Act is constitutionally valid. This premise is contested by counsel for the second respondent, Mr Viswanatha Sastri, who challenged the High Court’s decision dated 23 October 1953 that upheld the validity of section 13. Accordingly, the question raised by Mr Sastri must be resolved prior to consideration of the arguments supporting the appeal. Counsel for the appellant objected to allowing the respondent to contest the validity of section 13, observing that the issue had already been decided in the 23 October 1953 judgment and that the respondent had not appealed that judgment to this Court, thereby barring him from raising the question anew. The Court dismissed this objection as without merit, noting that the order dated 23 October 1953 left writ appeal 28 of 1953 pending before the High Court for further consideration, and the learned Chief Justice had observed in that judgment: “In this view we cannot strike down section 13 of the Act as inconsistent with the Constitution and void but we shall have to examine each case on its merits.”

After the earlier observation on constitutional questions, the Court proceeded to examine the merits of Writ Appeal 28 of 1953. The appeal was then decided on its substantive issues, and this detailed examination led to the appeal being allowed. Consequently, the Court held that the two judgments – the earlier one dealing with the constitutional point and the later one addressing the merits – must be read together as parts of a single proceeding, even though the Court had initially expressed its view on the constitutional aspect for the purpose of defining the arguments. The Court further observed that it was doubtful whether any appeal could have been filed against the High Court judgment dated 23 October 1953; and even if such an appeal had been possible, the respondent could not be barred from challenging the correctness of the High Court’s conclusion merely because he had not invoked Article 136 of the Constitution before this Court. Accordingly, the Court concluded that the respondent was entitled to support the judgment in his favour by contesting those parts of the High Court decision that were adverse to him. The submission made on behalf of the respondent argued that Section 13 of the Act gave the Government an unchecked and arbitrary power to discriminate between individual buildings, allowing the Government to select at its pleasure which buildings would fall within the provisions of the Act and which would be excluded. As a result, tenants in the excluded buildings would be denied the protection enjoyed by other similarly situated tenants. The submission further contended that even if a power to exempt an entire class of buildings could be justified on the ground of a rational classification that served the policy or purpose of the Act, the same justification could not be extended to a power that exempted individual buildings. Such individual exemptions, the argument went, would amount to an arbitrary exercise of power that discriminated between one building or tenant and another, thereby violating the requirement of equal protection of the laws enshrined in Article 14. The Court noted that these arguments were essentially the same as those presented before the learned Judges of the High Court, and that the High Court had rejected them. The High Court had pointed out that the enactment did disclose its policy and purpose with sufficient clarity to guide the exercise of the exemption power. The preamble to the Act, as quoted, stated: “Whereas it is expedient to regulate the letting of residential and non‑residential buildings and to control the rents of such buildings and to prevent unreasonable eviction of tenants therefrom in the State.” This preamble indicated that the legislation was intended to achieve three objectives: (i) the regulation of letting, (ii) the control of rents, and (iii) the prevention of unreasonable eviction of tenants from both residential and non‑residential buildings. The Court observed that the Act represented the latest step in a series of statutes enacted for these purposes.

In the period of the Second World War the Court observed that, inter alia, a large migration of people to urban centres produced an acute shortage of housing in the principal towns. Because of this shortage, tenants who were removed from the premises at the end of their tenancies were often unable to find other accommodation and were left homeless on the streets. The Court noted that, without regulation, owners of houses could unfairly exploit persons seeking accommodation. The legislation under discussion was enacted to protect occupants of buildings from being charged unreasonable rents and from being evicted without proper cause. The Court explained that the protection extended to tenants whose ordinary tenancy had expired and who therefore faced possible eviction, as well as to those who remained in possession after the expiry of their contractual term. Accordingly, the definition of “tenant” in the Act covered persons who continued to occupy premises despite the expiry of their tenancy and even those against whom civil courts had passed eviction decrees that had not been executed. While the Act conferred these rights on tenants, the Court recognised that such statutory protection might sometimes impose severe hardship on landlords or be abused by tenants. The Court stated that the statute could not anticipate every possible contingency and therefore could not provide detailed provisions for each situation. For this reason, the Act granted a general power of exemption to the State Government. The Court emphasized that this power was not intended to allow discrimination between tenants but only to further the policy and purpose of the Act, which, in the present case, was to prevent unreasonable eviction of tenants. The learned Judges of the High Court had held that section 13 of the Act was constitutionally valid, yet any individual exemption order issued by the Government could be subject to judicial review. The Court specified that such review would examine whether the order was discriminatory and thus violative of Article 14 of the Constitution, whether the order was based on grounds pertinent to the policy and purpose of the Act, and whether it was made in good faith and not mala fide. The Court expressed complete agreement with the High Court’s approach and conclusion concerning the constitutional validity of section 13. The Court further noted that the meaning and scope of Article 14 had been examined in several decisions, many of which were discussed in detail in the judgment delivered in Jyoti Pershad v. Administrator of Union Territory (Writ Petition 67 etc. of 1959). Consequently, the Court found it unnecessary to revisit those principles again, and merely observed that, in the present case, the preamble and operative provisions of the Act provided sufficient guidance for the exercise of the Government’s discretionary exemption power without offending the principle of equal protection of the laws.

In the present case the Court examined whether the statutory provision that empowered the Government to exercise a discretionary power could be attacked on the ground that it denied equal protection of the laws. The Court held that the provision under challenge falls within the fifth category of classifications identified in the analysis of Article 14 of the Constitution by Das C.J. in the decision of Ram Krishna Dalmia v. Justice Tendolkar. The judgment in that case explained that a statute must not merely create a class of persons or things to which its provisions shall apply and then leave it entirely to the Government’s discretion to decide which persons or things fall within that class, unless the statute itself provides a clear policy or principle to guide the exercise of that discretion. The Court emphasized that where the Government makes a selection or classification without following such a policy or principle, the resulting executive action—not the statute—must be held unconstitutional.

The Court further observed that an even more appropriate precedent was found in Sardar Inder Singh v. State of Rajasthan, where the validity of section 15 of the Rajasthan (Protection of Tenants) Ordinance, 1949, had been upheld. That provision authorised the Government to exempt any person or class of persons from the operation of the Act, and it was contended before the Court that such a power violated Article 14. The Court rejected this contention, noting that although the section itself did not specify the grounds for exemption, the preamble to the Ordinance clearly set out the legislative policy. Because that policy governed the operation of section 15, the Government’s decision could not be described as unguided. The Court referred to the decision in Harishanker Bagla v. The State of Madhya Pradesh to support this reasoning. Accordingly, the learned Judges of the High Court were correct in concluding that section 13 of the Act was constitutionally valid, but that individual orders issued by the Government under that section could be subject to judicial review in the manner previously indicated.

The Court then turned to the specific arguments raised by counsel for the appellant, who challenged the correctness of the High Court’s decision to set aside the Government’s order exempting the premises in dispute. The appellant argued that the order granting exemption was an executive or administrative act and therefore could not be quashed by a writ of certiorari. The Court noted that this was the first point raised by counsel and indicated that it would now consider the merit of that objection.

The Court found that the objection raised by the appellant lacked any substance. It observed that, had the High Court been correct in its view that the exemption order had been issued for reasons that did not fall within the purpose for which section 13 of the Act conferred power, such an order would have been discriminatory against the second respondent and would have infringed his fundamental right to equal protection of the laws. In that circumstance, the Court held that article 226 of the Constitution would certainly have been available to set aside an order that affected the petitioner's fundamental right. The Court further noted that the validity of section 13 had been upheld on the ground that individual orders made by the Government under that section were amenable to judicial review when they violated article 14. Consequently, no objection could be sustained to a judicial review of such individual orders. Moreover, even assuming that the order did not contravene article 14, the Court stated that if the High Court were right in holding that the order exceeded the powers conferred on the Government by section 13, there was still no basis for the contention that article 226 did not empower the Court to set aside an ultra vires order that struck at a person's statutory protection against eviction. The Court rejected any claim of immunity from judicial interference for orders that were plainly ultra vires merely because they were passed in good faith or without an indirect motive. It stressed that the power of the High Court under article 226 was not limited to writs falling within traditional English categories such as certiorari or mandamus; rather, the power was general and allowed the Court to issue any direction to authorities for the enforcement of fundamental rights or for other purposes. The second point advanced by the appellant’s counsel—identified as the main argument—asserted that the High Court erred in holding (a) that the reasons given by the Government were not germane to the purpose or policy of the Act and therefore outside the authority conferred by section 13, and (b) that the High Court had, in effect, acted as an appellate authority by scrutinising the reasons that induced the Government to grant the exemption and by pronouncing on the correctness of those reasons. Before addressing this contention, the Court found it necessary to consider the submission that the High Court was mistaken in calling for the reasons that had prompted the Government to issue the exemption, even though those reasons were before the Court and could be examined for legality. The Court concluded that this submission was not well founded. It reiterated that the entire basis for upholding the constitutional validity of section 13 and for finding that it did not offend the equal protection clause of article 14 rested on the principle that the discretion or power given to the Government was not unguided, unchannelled, or arbitrary, but had to be exercised in accordance with the policy and object of the enactment as discerned from the preamble and operative provisions.

In analysing section 13 of the Act together with the guarantee of equal protection of the law contained in Article 14 of the Constitution, the Court observed that the discretion or power conferred upon the Government was not to be exercised in an unguided, unchannelled or arbitrary manner. Rather, such power had to be exercised in conformity with the policy and objects of the statute, which could be discerned from its pre‑amble as well as from its operative provisions. The Court noted that if, on its face, the order granting exemption appeared to satisfy this requirement, the burden would then shift to the party challenging the order to persuade the Court, to a satisfactory degree, that the order was made in bad faith or on grounds that were not contemplated by, or were extraneous to, the purpose and principles governing the exercise of the power under the Act. The Court illustrated this principle by explaining that where an exemption is granted in favour of a particular class of buildings—such as those belonging to charitable, religious or secular organisations—the classification would be evident from the wording of the exemption order itself. Conversely, when the exemption does not disclose any class of buildings on its face but instead pertains to a specifically identified building owned by a particular person or occupied by a particular tenant, the exemption would prima facie appear discriminatory. In such circumstances, the Court held that the legality of the order could be sustained only if the Government disclosed the reasons that led to the decision to grant the exemption. In the case presently before the Court, the matter had reached the appellate Court, and the Advocate‑General had filed a memorandum setting out the reasons for granting exemptions in the three cases that were before that Court. Regarding the exemption that formed the subject of the controversy in writ appeal 28 of 1953, the Government’s memorandum stated that the building was exempted for the following reasons: (1) When the High Court in 1940 offered to lease the premises for a period of twenty‑one years, Sri Chettiar chose to take the lease for only seven years, which expired in 1947. Accordingly, under the High Court’s order in C.S. Nos. 280 to 286 of 1939, Sri J. H. Irani, father of Sri P. J. Irani, entered into a lease for a period of thirteen years and eleven‑and‑a‑half months beginning in 1947, and he deposited rupees 10,000 toward that lease, making him entitled to the benefits from 1948 onward. (2) Had the Rent Control Act not come into force, Sri P. J. Irani would have obtained possession in the ordinary course pursuant to the High Court’s order and the terms of the lease deed; therefore, the operation of the Act caused him hardship. (3) Sri Chettiar was only an absentee lessee and was engaged in several other businesses in South India. (4) The conduct of Sri Chidambaram Chettiar in refusing to surrender possession of the building to Sri P. J. Irani…

The Court noted that the appellant, having taken a valid lease under the orders of the High Court, acted as a hard litigant who sought to exploit the literal wording of the law without much regard to bona fides; it further observed that Sri Chettiar had already managed to remain in possession of the building for five years longer than he was legitimately entitled to be.

Accordingly, the learned Judges of the High Court held that the reasons which had prompted the Government to grant an exemption did not correspond to the policy or purpose of the Act, and consequently the order granting the exemption was invalid. In expressing this view, the High Court judges explained that reasons one, two and four were linked to the 1940 order of the High Court directing the Receivers to execute a lease for seven years in favour of the appellant and, after the expiry of that period, to grant a fourteen‑year lease to the father of the second respondent. They further observed that, but for the operation of the Act, the father of the second respondent would have obtained possession of the premises after the expiry of the lease in favour of the appellant. The judges pointed out that the same situation could be said of thousands of cases in which tenants’ leases have expired and, but for the Act, the owners would be entitled to recover possession of the demised premises. They added that if this circumstance alone were sufficient to exempt any premises from the operation of the Act, then the Act itself should be repealed, because no policy or principle was involved in that circumstance.

The Supreme Court agreed with the reasoning of the learned Judges. It held that the mere fact that a tenant continues in possession after the termination of his tenancy does not, by itself, provide a ground for eviction, since the very policy of the Act is to protect a tenant’s right to remain in possession after the term ends, given the great difficulty tenants face in obtaining alternative accommodation. Therefore, the termination of the second respondent’s tenancy could not justify the Government’s claim that he deserved eviction. The Court further observed that, even if the term had not expired, the tenant would have been entitled to continue in possession, irrespective of any exemption that might have been granted.

Learned counsel for the appellant argued that the High Court had erred by treating the present dispute as one between a landlord and a tenant, whereas it was in fact a contest between two tenants, and that the appellant should not be likened to a landlord. The Court found no merit in that contention, holding that a lessee of the reversion stands in the same position as a landlord and cannot claim any higher rights. Moreover, the appellant could not derive any advantage from the fact that the second respondent declined to accept a lease for a term longer than seven years when such an option had been offered to him by the High Court.

In the months of April and May 1940, the Court observed that the legal position of the second respondent could not be regarded as less favorable than the position he would have occupied had he entered into a lease for a fixed term of seven years that contained a covenant requiring him to surrender possession at the expiration of that term. The Court further noted that, although in May 1940 the second respondent was offered the opportunity to accept a lease for a longer period, he chose not to take that option. This decision, the Court held, did not alter his entitlement to the protection afforded by the statute, nor could it be used as a reason to withdraw that protection from him. The Court also agreed with the learned Judges of the High Court that the third ground cited by the Government was unrelated to the question of whether an exemption should be granted. It was pointed out that the Government had failed to examine an essential consideration – namely, whether the appellant possessed any other theatres where he could continue the business that he was operating at the Gaiety Theatre. The Court remarked that this omission was material. The statutory protection that was given to a tenant whose lease had expired was based on his inability to find alternative accommodation, whether that accommodation was a residence for a residential building or a place to carry on his business for a non‑residential building. This inability to secure an alternative premise was a relevant factor that the Government had neglected to consider. The High Court had described the fifth reason presented by the Government as not being a reason at all, and the Court concurred with that assessment. The statute, as the Court recognised, expressly granted tenants such as the second respondent the right to remain in possession after the lease ended, and the exercise of that statutory right by the tenant did not constitute any improper conduct that would justify depriving him of the protection provided by section 7. The learned Judges further observed that the Government’s order was defective because it did not take into account several material circumstances, including the considerable sums the second respondent had spent on improvements to the theatre in 1949. Those expenditures were relevant to the exercise of the Government’s power and, if they had been considered, would have weighed against the granting of the exemption. In view of the conclusion that the reasons advanced by the Government for its order were not germane to the policy and purpose of the statute, the Court held that it was unnecessary to pursue the matter any further.

The Court also addressed the further argument that the learned Judges of the High Court had improperly acted as a court of appeal. The Court gave a concise answer that the High Court Judges had not acted in such a capacity. It observed that the submission wrongly conflated the Court’s duty, under Article 226, to accept the factual findings of the lower tribunal in all but the most exceptional cases, with the relevance of those factual findings for determining whether the established facts satisfied the requirements for the Government to exercise its power under section 13 of the Act. The Court therefore dismissed the contention that the High Court had overstepped its jurisdiction, and reiterated that the factual determinations made by the High Court remained binding for the purpose of assessing the statutory grounds for exemption.

In the present case the facts that the Government discovered, or that it set out as the reasons for granting the exemption, were never contested before the High Court; the only allegation made by the second respondent and accepted by that Court was that those facts were irrelevant to justify the order, and consequently the appeal failed and was dismissed with costs awarded against the contesting second respondent. Justice Sarkar then noted that the judgment would address only one of the two questions raised by the appeal. The first question concerned whether section 13 of the Madras Buildings (Lease and Rent Control) Act, 1949 violated Article 14 of the Constitution. That statute, among other provisions, regulated the rents that landlords could charge and sought to prevent unreasonable eviction of tenants. Section 13, which was the subject of the challenge, authorised the State Government to exempt any building wholly or partly from the provisions of the Act. The contention advanced was that this power was arbitrary because the statute gave no guidance on how the exemption power should be exercised, thereby allowing unequal application of the law. Justice Sarkar observed that this issue had already been fully examined by his colleague Justice Ayyangar, who had held that section 13 did not offend Article 14, and he agreed with that conclusion, adding that he had nothing further to contribute on that point. The second question, which Justice Sarkar chose to consider, was whether the exemption power had been properly exercised in the facts of the present dispute. On this point, he arrived at a conclusion different from that reached by Justice Ayyangar. The exemption was effected by an order dated 4 June 1952, which removed from the operation of the Act certain premises used as a cinema house known as the Gaiety Theatre. The second respondent, who occupied the premises as a tenant, consequently lost the protection against eviction that the Act would otherwise have afforded him, and he therefore applied to the Madras High Court for a writ to set aside the order. While the High Court upheld the validity of section 13, which the second respondent also attacked, it held that the order had been issued for reasons that were not germane to the purpose for which the exemption power under section 13 was conferred, and it consequently quashed the order. The present appeal was filed against that decision of the High Court. The background of the order was that Sir Hajee Ismail Sait owned a parcel of land in Madras and, in 1914, granted a lease of that land to a certain Venkiah for the purpose of constructing a cinema house. It is not evident from the record whether Venkiah himself erected any cinema structure, and it appears that he later became insolvent, after which his assets, including the leasehold interest, passed to the Official Assignee.

The Official Assignee acquired the deceased Sir Hajee Ismail Sait’s assets, including the leasehold interest, and secured from Sir Hajee Ismail Sait’s representatives an extension of the original lease for a further nine‑year period beginning in 1926. Subsequently, Mrs Madan purchased the lease‑hold interest from the Official Assignee and thereafter obtained a new lease from the same representatives for a term of seven years commencing in June 1935 and slated to expire on 30 May 1942. That lease expressly granted Mrs Madan a first right of refusal should the lessor wish to lease the land again after the lease’s expiration. On 4 January 1937, the second respondent acquired from Mrs Madan the lease‑hold right together with the superstructure that had been erected on the land by a prior lessee; the building constructed on the site was thereafter known as the Gaiety Theatre. The lease obtained by the second respondent was scheduled to terminate on 30 May 1942.

In or about 1939, certain suits were instituted in the Madras High Court in its original jurisdiction for the purpose of administering the estate of Sir Hajee Ismail Sait. Orders issued in those suits appointed receivers to manage the estate, and thereafter the High Court continued to administer the estate through those receivers. It appears that, adjacent to the Gaiety Theatre premises, there existed another parcel of vacant land belonging to the same estate which was not generating any income. The High Court subsequently ordered that this adjoining vacant land also be let out on a long‑term lease.

In 1940, the appellant’s father offered to lease the adjoining vacant land at a monthly rent of Rs 450 for a period of twenty‑one years, with an option to renew the lease for an additional ten years, proposing to erect a show‑house upon that land. At that time the lease of the Gaiety Theatre premises held by the second respondent had only about two years remaining before its expiry. The appellant’s father, disinclined to have a competing show‑house in close proximity to his own project, suggested to the receivers that, upon the termination of the second respondent’s lease on 30 May 1942, he should be granted the lease of the Gaiety Theatre premises on the same rental terms currently being paid by the second respondent, and for a duration that would coincide with the term of his proposed lease of the adjoining land.

The receivers presented these proposals to the High Court for consideration. The Court then invited the second respondent to decide whether he would elect to take a fresh lease of the Gaiety Theatre premises for a term of twenty‑one years, exercising the renewal option that his existing lease contained. The second respondent indicated that he was unwilling to accept a twenty‑one‑year renewal; instead, he proposed that a lease of a shorter duration be granted to him.

In the proceedings before the High Court, the second respondent proposed that, instead of a renewal for twenty‑one years, he be granted an additional lease of only seven years on the condition that he would vacate the premises at the end of that period without seeking any extension or option. The High Court examined the proposals submitted by the appellant’s father and the second respondent, and, with the consent of both parties, issued orders on 21 March 1940 and on 2 and 3 May 1940. By these orders the Receivers were instructed to grant a lease of the land adjoining the Gaiety Theatre to the appellant’s father for a term of twenty‑one years beginning on 1 May 1940, together with an option to extend the lease for a further ten years. The same orders required the Receivers to grant the second respondent a lease of the Gaiety Theatre premises for a period of seven years commencing on the same date, but without any further option. In addition, the orders directed that the appellant’s father be given a lease of the Gaiety Theatre premises for a period of thirteen years, eleven months and a half, starting from the expiry of the second respondent’s seven‑year lease. The appellant’s father was required to deposit security of Rs 10,000 in respect of the leases to be granted to him, and he complied with that requirement. All of the leases were subsequently executed by the Receivers pursuant to the Court’s directions. It appears that the second respondent surrendered the balance of his lease, which would have expired on 30 May 1942. Relying on the Court’s orders, the leases, and the second respondent’s agreement to vacate, the appellant’s father constructed a new show‑house on the adjoining land, which later became known as the Casino Theatre. When the Rent Control Act came into force on 1 October 1946, its provisions prevented the second respondent from being evicted from the Gaiety Theatre premises even after his lease had ended. Exploiting the Act, the second respondent refused to vacate the premises after his lease expired on 30 April 1947, despite his earlier express commitment to do so. On 1 May 1947, the appellant’s mother, the appellant’s father having died, paid a further sum of Rs 9,000 to the Receivers as rent in advance, as required by the lease terms. The appellant thereafter succeeded to his father’s estate and initiated several legal actions to recover possession of the Gaiety Theatre premises, but those attempts were unsuccessful. Consequently, he appealed to the Government, which, after affording the second respondent a hearing and fully considering the matter, issued an order on 4 June 1952. The High Court subsequently required the Government to explain why it had exercised its power under section 13 to exempt the Gaiety Theatre premises from the operation of the Act, and the Advocate General representing the Government filed a memorandum setting out those reasons.

In answer to the request to set out the reasons for the Government’s order, the memorandum enumerated five specific points. First, it observed that when the High Court, in 1940, offered to lease the premises in question for a term of twenty‑one years, Sri Chidambaram Chettiar elected to take the lease for only seven years, a lease that consequently expired in 1947. The High Court’s order in Civil Suit Nos. 280‑286 of 1939 then granted Sri J. H. Irani a lease of the same premises for a period of thirteen years and eleven‑and‑a‑half months beginning in 1947, and he paid a deposit of ten thousand rupees toward that lease. Accordingly, Sri J. H. Irani became entitled to the benefits of the lease from the year 1948 onward. Second, the memorandum asserted that had the Rent Control Act not been in force, Sri P. J. Irani would have obtained possession of the premises in the ordinary course of law, in accordance with the High Court’s order and the terms of the lease deed; therefore, the operation of the Act imposed a hardship on him. Third, it noted that Sri Chettiar was an absentee lessee who owned and operated several other businesses in South India. Fourth, the memorandum described Sri Chidambaram Chettiar’s conduct in refusing to surrender possession of the building to Sri P. J. Irani, despite the latter holding a valid lease under the High Court’s orders, as that of a hard litigant seeking to exploit the literal wording of the law without regard to bona‑fides. Fifth, it pointed out that Sri Chettiar had remained in possession of the building for five years longer than he was lawfully entitled to do so.

The High Court, after examining these reasons, concluded that they did not further the purpose of the Rent Control Act and therefore could not justify the exemption. The present Court could not accept that conclusion. While it recognized that some of the reasons might, taken individually, have been insufficient to justify the order, it held that taken as a whole they referred to factual circumstances that demonstrated a legitimate exercise of the statutory power. Moreover, the Court observed that, based on the facts set out earlier in the judgment, it was unnecessary for the High Court to require the Government to provide reasons for its order, as the facts themselves were sufficient to show that the order fell within the objects of the Act and was not extraneous to section 13. Before proceeding further, the Court emphasized that, in determining whether the Government’s reasons were adequate to bring the order within the statutory objects, the High Court possessed no authority to act as an appellate body reviewing the Government’s decision. A court cannot overturn an order made under section 13 merely because it would not have made the order for the same reasons; its sole task is to ascertain whether the power was exercised for an extraneous purpose, that is, for any purpose other than that for which the power was granted. When an allegation is raised that the power was used for an unintended purpose, the initial burden of proof lies with the party making the allegation, requiring prima facie evidence before any shift of burden can occur.

The Court explained that when a party alleges that a power has been exercised improperly, the initial burden of proof lies with that alleging party. The alleging party must produce prima facie evidence to support the claim of abuse. Only after such evidence is shown may the burden shift to the opposite side. The Court further observed that the mere hardship experienced by a tenant at the time of eviction does not alone determine whether the eviction is “unreasonable.” The preamble of the Act declares its purpose to “prevent unreasonable eviction of tenants,” and the term “unreasonable” necessarily requires an assessment of all relevant circumstances, including the conduct of the parties involved, to decide what is unreasonable. Under section thirteen, the Government is obligated to examine every pertinent circumstance of the case or class of cases before deciding whether the protection afforded by the Act to a tenant or tenants should be withdrawn. The Court noted that section thirteen is not limited to institutions such as hospitals or schools; it may also apply to other situations where either there is no unreasonable eviction, or where the act of preventing eviction itself may be unreasonable. Consequently, the Court concluded that the Government’s decision to exempt the premises of the Gaiety Theatre from the operation of the Act fell within the authority granted by the Act. The High Court had not considered the matter from this perspective. For these reasons, the Court held that the order dated 4 June 1952 was a valid and lawful order and could not be set aside. Accordingly, the appeal was allowed, the High Court’s order was set aside, and the second respondent was ordered to bear the costs of all other parties throughout. In line with the majority judgment, the appeal was dismissed with costs awarded to the contesting second respondent.