P L D 1971 Karachi 783 (PLP)

(4) Nothing in this section shall be deemed to entitle the Controller to fix the fair rent of a building or rented land at an amount less than the rent payable for such building or rented land under a subsisting lease entered into before the 1st day of January 1950. (5) Nothing in this section shall apply to the rent of any building constructed after the date of coming into force of this Ordinance or empower the Controller to fix the fair rent of any such building. (6) On and from such date as Government may, by notification, appoint in this behalf, the Controller shall not entertain any application under subsection (1) after the expiry of one hundred and twenty days- (a) from the said date where the building or rented land has been occupied by the tenant before the said date; and (b) from the date of the occupation of the building or rented land by the tenant, in any other case. (7) Notwithstanding anything contained in this section, the fair rent of any building in the Karachi area shall be- (a) in relation to any residential building constructed before the 15th day of August 1947-- (i) the rent at which the building was let on the first day of December 1941, or where it was not let on that date the rent at which it was 1st let before that date, with the addition in either of the foregoing cases of the permitted increase; or (ii) in the case of any building let under a lease for a period of five years or upwards commencing on or before the first day of January 1937, which has expired after the first day of December 1941, the rent fixed by such lease for the period including the first day of December 1941, with the addition of the permitted increase; or (iii) in any of .the cases specified in subsection (8) such rent, as, having regard to the provisions of this Ordinance and the circumstances of the case, the Controller deems just; or (iv) in any other case, such rent as may be determined by the Controller having due regard to the prevailing rates of rent for the same or similar accommodation in similar circumstances during the twelve months prior to the first day of December 1941, and the permitted increase, and in the case of a building which has been constructed after that date also to any general increase in the case of sites and building construction; (b) in relation to any non-residential building constructed before the 15th day of August 1947 (i) the rent at which the building was let on the first day of December 1942, or where it was not let on that date, the rent at which it was last 1st before that date, with the addition, in either of the foregoing cases, of the permitted increase ; or (ii) in the case of any building let under a lease for a period of five years or upwards commencing on or before the first day of January 1938, which has expired after the first day of December 1942, the rent fixed by such lease for the period including the first day of December 1942, with the addition of the permitted increase ; or (iii) in any other case, such rent as may be determined by the Controller having due regard to the prevailing rates of rent for the same or similar accommodation in similar circumstances during the twelve months prior to the first day of December 1942, and in the case of any building which has been constructed after that date, also to any general increase in the case of sites and building construction ; (c) in relation to any building, residential or otherwise, constructed after the 15th day of August 1947, but before the first day of July 1963, such rent as shall secure to the landlord a net return of six per centum, and in the case of any such building first let on or after the twentieth day of October 1959, eight per centum per annum on the total cost (which shall include the value of the land) and the cost of construction of the building after deducing the taxes, insurance premium for insurance against fire or earth-quake but not otherwise, and an amount equal to one and a half per centum of the total cost by way of expenses for maintenance and repairs. (8) For the purposes of clause (a) (iii) of subsection (7), the Controller may fix the fair rent at such amount as, having regard to the provisions of this Ordinance and the circum stances of the case, he deems just (a) where by reason of any building having been let at one time as a whole and at another time in parts or where a tenant has sublet or sublets a part of any premises let to him, or for any other reason, any difficulty arises in giving effect to the provisions of this Ordinance, or where in the case of any building let furnished, it is necessary to distinguish for the purposes of giving effect to the provisions of this Ordinance, the amount payable as hire of furniture ; (b) where any premises have been or are let rent-free or at a nominal rent or for some consideration in addition to rent. (9) For the purposes of subsection (7), `permitted increase' means- (a) in a case to which clause (a) (i) or clause (a) (ii) of sub section (7), applies- (i) twenty-five per centum of the rent of the building let on the first day of December 1941, or where it was not let on that date, the rent at which it was last let before that date, or the rent referred to in clause (a) (ti) of subsection (7) ; and (ii) an amount not exceeding seven and a half per centum, and in the case of any addition, improvement or alteration made on or after the twentieth day of October 1959, eight per centum per annum of any addition, improvement or alteration (not includ ing in necessary repairs or repairs usually made to buildings in the locality) made, at the landlord's expense, to or in the build ing since the first day of December 1941, or as the case may be, since the date when the premises were last let before that date ; (b) in a case to which clause (b) (i) or clause (b) (ii) of sub section (7) applies (i) where the rent of the building let on the first day of December 1942, or where it was not let on that date, the rent at which it was last let before that date or the rent referred to in clause (b) (ii) of subsection (7) does not exceed fifty rupees per month, or where the building is used for accommodating a school, hospital, dispensary, library, maternity-home, nursing-horn: or such charitable or public institution, as may be notified in this behalf by Government in the official Gazette, ten per centum of the rent payable in each case, and in all other cases, fifty per centum of such rent ; and (ii) an amount not exceeding seven and a half per centum, and in the case of any addition, improvement or alteration, made on or after the twentieth day of October 1959, eight per centum per annum of the cost of any addition, improvement or alteration (not included in necessary repairs or repairs usually made to buildings, in the locality), made, at the land lord's expense, to or in the building since the first day of December 1942, or as the case may be, since the date when the building was last let before that date ; (c) in a case to which clause (c) of subsection (7) applies, an amount which would secure to the landlord a net return of six per centum, and in the case of any addition, improve ment or alteration made after the twentieth day of October 1959, eight per centum per annum on the cost of any addition, improvement or alteration made by the landlord after allowing for the deductions referred to in clause (c) of sub section (7)."

8. If the above-mentioned two sections are taken together, then no doubt is left in the mind that section 9 of the Ordinance c deals with the increase of rent by the addition up to one-half of increased rates, etc. of local authority and section 4 of the Ordinance deals with the determination of fair rent.

9. There appears to be another misconception in the orders that have been made by the Rent Controller as well as the first appellate Courts and it is that distinction has not been kept in view between increase in taxes and increase in the rental value. These are two entirely different entities. It is true that the basis for determining the taxes is the rental value but these two are fixed separately. After fixing the rental value calculations are made on that basis for determining the taxes ; therefore, it is incorrect to refer to "assessment" without specifying, for purposes of decisions like those which have been made in these cases, a distinction between the assessment of rental value and the assessment of tax. An order under section 9 of the Ordi nance can be made for increased rent by addition up to one-half of increased taxes but under that section the basic rent cannot be increased by taking into consideration the increased rental value. For purposes of determining a dispute about the increase in basic rent, or in other words for determining the fair rent, the principles contained in section 4 of the West Pakistan Urban Rent Restriction Ordinance, 1959 are to be taken into consideration.

10. The Rent Controller as well as the first appellate Courts have come to the conclusion that in terms of section 9 of the Ordinance all that is required for adding a portion of the increased taxes to the agreed rent is the approval of the Rent Controller and that such approval could be given by him during the proceedings which were held under subsection (6) of section 13 of the Ordinance. The view which prevailed was that merely for the purpose of granting such an approval it was necessary that separate applications under section 9 of the Ordinance be submitted and separate proceedings be taken. Counsel for the appellants have criticized this view by taking the stand that the considerations which might be involved for adding a portion of the increased taxes to the rent may or may not be very simple ; therefore, a correct view cannot be taken in every case merely by referring to the need of the approval of the Rent Controller. The approval of the Rent Controller itself may involve consideration of complicated questions. In this case, according to counsel for the appellants, the assessment of tax has been made by the relevant authorities on the total rental value of the property which the landlord purported to proportionately distribute amongst the tenants ; therefore, a question can arise as to whether that distribution is accurate or not. I may only state here that there may be cases in which the addition of a portion of the increased taxes to the existing rent may be a vary simple affair. In such cases perhaps it may be advisable not to insist on the submission of separate applications under section 9 of the Ordinance because such procedure is bound to take its own time and thus delay the fixation of tentative rent for purposes of subsection (6) of section 13 of the Ordinance, but it depends upon the facts of each case as to whether the determination of the amount of a portion of increased taxes is so simple as to obviate the necessity of filing applications under section 9 of the Ordinance or not. If complications are anticipated, then it will be an error to merge the proceedings which are contemplated under section 9 of the Ordinance into the proceedings which may be going on under subsection (6) of section 13 of the Ordinance.

11. But as far as the proceedings which are contemplated under section 4 of the Ordinance are concerned they definitely need to be held separately from the proceedings which may be going on under subsection (6) of section 13 of the Ordinance. I have reproduced above section 4 in order to indicate how erroneous is the view that increase in the basic rent, which is governed by section 4, can be determined during the proceedings which may be pending under subsection (6) of section

13. The considerations which are involved are far too numerous to be duly examined as an ancillary part of another proceeding. In these cases owing to the misapprehensions to which reference has been made above distinction has not been drawn between enhancement of basic rent itself by way of fixing fair rent and the addition of a part of taxes to the existing rent. The result is that section 4 of the Ordinance has not been mentioned at any time during the proceedings. Counsel for the landlord insisted that the consideration of section 4 of the Ordinance was not involved in these cases because according to them the basic or fair rent could be increased by taking into consideration the enhanced rental value under section 9 of the Ordinance. I have tried to explain the error of this view.

12. A look at section 4 and the several provisions of which it consists should leave no doubt that they require separate proceedings. In these cases the Rent Controller and the first appellate Courts were not in a position to realise this aspect of the matter because of the absence of an attempt to distinguish between increased taxes and enhanced rental value. In some of the orders expressions have been used which indicate that not only that this distinction has been omitted while using the word "assessment" but also that the desire of the landlord to increase the basic rent on the basis of the enhanced rental value has been missed.

13. In the above circumstances, it is proper that the proceedings should take place afresh. I, therefore, accept these appeals, set aside all judgments of the first appellate Courts given in them as well as all orders of the Rent Controller made in them. The proceedings in terms of subsection (6) of section 13 of the West Pakistan Urban Rent Restriction Ordinance, 1959 should now take place afresh and if the landlord desires to get any part of the increased taxes added to the agreed rent or to get the basic rent itself increased, then proceedings should be taken in the light of the above observations.

14. In view of the diffused view of the provisions of law that appears to have prevailed, I leave the parties to bear their own costs. K. B. A. Appeals accepted.