AHMAD ALI Versus ZUBEDA

1. This appeal calls in question the order passed by the learned Second Rent Controller, Sukkur, dated 23‑2‑1987, directing the appellant to hand over vacant possession of the demised premises to the respondent within 120 days of the passing of the impugned order. The facts of the case, briefly stated, are that the appellant in this case is the respondent's tenant in respect of a shop situated on the ground floor of the building situated on Plot No.E‑3260 Frere Road, Sukkur at a monthly rent of Rs.400. The tenancy was originally governed by a written agreement dated 1‑10‑1981, which expired on 31‑8‑1982. It is pertinent to point out that at the time of the agreement, the appellant had deposited a sum of Rs.10,000 with the respondent and this amount, according to clause (3) of the agreement was refundable to the appellant on termination of the tenancy and on delivery of peaceful and vacant possession of the demised premises, in as good and sound a condition in which the same had been received by the appellant from the respondent. After the expiry of the tenancy agreement, although the appellant continued to pay rent to the respondent at the agreed rate up to December, 1982 but thereafter the appellant stopped the payment of the rent to the respondent. The respondent then sent a notice dated 30‑3‑1984 through his Advocate to the appellant by registered post, acknowledgement due, demanding arrears of rent and also calling upon him to hand over vacant possession of the premises to him but to no effect. Consequently, on 1‑10‑1984, the respondent filed an application before the learned Controller under section 15 of the Sind Rented Premises Ordinance, 1979 seeking the appellant's ejectment from the demised premises on the ground of default as well as personal use,.

2. The application was resisted by the appellant as according to him, after the expiry of the tenancy agreement there was an understanding between the respondent and the appellant that the security deposit of Rs.10,000 lying with the respondent was to be adjusted towards the future rent with effect from January, 193'1. Thereafter, the appellant started adjusting the aforesaid amount towards the monthly rent as agreed. It was further contended that Rs.9,200 had already been adjusted in this respect by the appellant leaving a balance of Rs.800 which was still to be adjusted accordingly. It was also denied that the premises were required in good faith by the respondent as claimed by him.

3. The learned Controller after recording evidence, although, was not impressed by the second plea of the respondent but he found that the appellant had been a defaulter in respect of the payment of rent to the respondent and consequently he ordered his ejectment from the demised premises as pointed out above. I have heard Mr. M.A. Rashid, learned counsel for the appellant and Mr. Abdul Naeem, learned counsel for the respondent. Mr. M.A. Rashid has firstly argued that since, according to the aforesaid understanding, the security deposit lying with the respondent was to be adjusted towards future rent, there was, in fact no default committed by the appellant. His next argument in the alternative. was that in any case, the amount lying with the respondent as security deposit had become refundable to the appellant after expiry of the tenancy agreement and the same could, therefore, be adjusted towards rent by the former and consequently, there was no default committed by the appellant in any case. Reliance has mainly been placed by the counsel on the case of Muhammad Yousuf v. Abdullah P L D 1980 SC 298. Mr. Abdul Naeem, on the other hand, has fully supported the impugned order. The learned counsel has also placed reliance on the two recent judgments given by the Supreme Court and reported as Mrs. Zarina Khawaja v. Agha Mahboob Shah P L D 1988 SC 190 and Syed Asghar Ali Imam v. Muhammad Ali P L D 1988 SC 228. Before referring to the respective contentions of the counsel, it is pertinent: to point out that the respondent's attorney Muhammad Tahir, who was examined by her in support of the first contention completely denied that there was any agreement or understanding between the respondent and the appellant, according to which the deposit of Rs.10,000 was to be adjusted towards the future rent will effect from 1‑1‑1983. A copy of the tenancy agreement has also been brought by him on record and clause (3) thereof provides as follows:‑

4. "3. That besides the rent the tenant has paid a sum of Rs.10,000.00 (Rupees ten thousand only) to the landlady who acknowledged the same as SECURITY DEPOSIT, refundable, free of interest by the said landlady to the said tenant on termination of tenancy and on delivery of peaceful vacant possession of the entire demised premises, in as good and sound condition as he received it from the said landlady, in all respects."

5. As against this, the appellant has filed his own affidavit, reiterating his earlier statement made in the written statement but apart from such verbal assertion made in the affidavit no documentary evidence was produced by him in support of his plea. From the above evidence, it is difficult to accept the appellant's plea that the deposit of Rs.10,000 was to be adjusted towards the future rent from 1‑1‑1983. Clause (3) of the Tenancy agreement clearly shows that the amount deposited with the respondent was refundable only on termination of the tenancy and on delivery of peaceful and vacant possession of the demised premises by the appellant to the respondent in the same condition as they had been received by the former. The plea raised by the appellant that after the expiry of the tenancy agreement, there was a variation in the terms thereof, A admittedly is not supported by any documentary evidence and since the oral evidence given by the appellant in this respect was completely denied by the respondent through her son and attorney Muhammad. Tahir, the plea raised by the appellant in this respect was rightly ruled out of consideration by the learned Controller. Had there bean any such understanding between the parties, the same would have been reduced to writing. I am, therefore, not impressed by the first argument of Mr. M.A. Rashid.

6. Turning now to the second argument of the counsel, it is pertinent first to refer to the case of Muhammad Yousuf decided by the Supreme Court, upon which the learned counsel has heavily relied. In this case a security deposit of Rs.1,000 was lying with the landlord and the same, according to the terms of agreement, was to be confiscated by the landlord in case the tenant failed to pay rent for three consecutive months or to give vacant possession of the premises to the landlord at the termination of the tenancy. After termination of the tenancy agreement, although the tenant continued to be in possession of the premises but he stopped payment of the rent to the landlord with the result that an eviction application was filed by the landlord before the Rent Controller on the ground of default. The application was decided in favour of the landlord and even the appeal filed by the tenant was dismissed. However, when the matter ultimately wert before the Supreme Court, it was held as follows‑

7. "As, in our opinion, the rights and liabilities of the appellant, in the instant case, are governed exclusively by the said ordinance, the question of the amount of rent due from him has to be determined in accordance with the provisions of clause (i) of subsection (2) of section 13 of the said Ordinance.Under this clause, a tenant has to pay the rent due from him "within fifteen days of the expiry of the time fixed in the agreement of tenancy with his landlord or in the absence of any such agreement within sixty days from the period for which the rent is a payable;". The words "the agreement of tenancy" mean an agreement which is in force, and not an agreement which has expired and is dead. Therefore, in the instant case, when the respondent filed his eviction application on the 9th of May 1970, the appellant was in default in the payment of rent for the month of December, 1969, and for the months of January and February, 1970. The rent thus due from him was Rs.600. But, as against this, the respondent had failed to return to the appellant the "security deposit" of Rs.1,000 despite the expiry of the lease agreement. The respondent was no doubt entitled to deduct the electricity charges before returning this amount, but even after deducting these charges, the amount lying with him far exceeded Rs.600." It was further observed in the case:‑

8. "It is true that the appellant had not demanded the return of his deposit on the expiry of his lease, and further as the debtor, it was for him to find the creditor, therefore, he should have informed the respondent to adjust the arrears of rent against his deposit with the respondent. This he did not do, but even on the footing that this resulted in a failure to pay rent within the meaning of section 13 of the said Ordinance, it was a very technical default and it would reduce the law to a farce, if the respondent was evicted for being in debt to the respondent (on account of his failure to pay rent) when in fact the overall position was that the respondent was in debt to the appellant. Therefore, there could not be a more appropriate case for the exercise of the Court's discretion, under section 13 of the said Ordinance in the tenant's favour. Accordingly, even on the footing that the appellant was in technical default in the payment of rent on the date of the eviction application filed against him, we have no hesitation in exercising our discretion in his favour."

9. It is pertinent to refer to another decision of the Supreme Court in the case of Mirza Abdul Aziz Beg v. Mushtaque Ahmed Sheikh 1980 SCMR 834, wherein a similar plea raised or behalf of the tenant was not accepted by the Hon'ble Supreme Court against the order of the Rent Controller, ejecting the tenant for non‑payment of rent. However, Mr. M. A. Rashid after himself referring to this case tried to distinguish the same from the facts of the instant case as although in the above case, the tenant's security deposit lying with the landlord was adjustable against the rent due against him but such deposit was lying with the landlord by way of security against the tenant's liability for damage if any caused to the demised premises and since the agreement of tenancy between the landlord and the tenant was still subsisting at the time when the default had been committed by the tenant, the Supreme Court declined to interfere with the order of eviction of the tenant passed by the Rent Controller.

10. The basic question, however, is whether the ratio of the above cases is attracted to the facts of the present case. Since, admittedly, there was a written tenancy agreement between the parties, the question would be, whether after the expiry of such agreement the same would become irrelevant for regulating the relationship between them or whether the same would still continue to govern such relationship. The position of the tenant who continues to occupy the demised premises after the expiry of the tenancy cannot be much different from that of a tenant holding over as envisaged by section 116 of the Transfer of Property Act. In the case of Mrs. Zarina Khawaja v. Agha Mahboob Shah P L D 1988 SC 190, one of the cases upon which Mr. Abdul Naeem, learned counsel for the respondent has relied Muhammad Afzal Zullah, J, who delivered the judgment, has said: ‑ "after the expiry of the agreement of tenancy the general law of holding over by the tenant has not been repealed or modified by the rent laws except to the extent that it comes in conflict with the provisions of the Rent Restriction Law. On the contrary, it was specifically provided in the definition of a 'tenant' in section 2 of the West Pakistan Urban Rent Restrictior Ordinance, 1959, that a tenant would include a tenant continuing in possession after the termination of the tenancy in his favour". The definition of tenant in the present Sind Law also provides that a tenant would include "any person who pontinues to be in possession or occupation of the premises after the termination of his tenancy". Not only this, the present Sind Law made it more clear when the provisions contained in sections 6 and 15(2)(i) of the Sind Rented Premises Ordinance, 1979, providing that no tenancy would remain valid beyond the mutually agreed period and that a tenant would be liable to be evicted. on termination of such period, were repealed. The obvious reason was that the pre‑existing law before the re‑enactment was kept intact; namely, that the previous tenancy arrangements between the parties will continue to operate notwithstanding the termination of the period and will govern the continuance of tenancy as visualised in the definition of the tenant holding over. However, notwithstanding the continued operation of the terms of the agreement after the termination of the agreement; by process of law as aforesaid, its provisions whenever they are in conflict with the rent law, shall not be operative . . . . . . The terms of the so‑called expired agreement which are not repugnant to the rent law shall continue to operate. For example, the rate of rent, the mode of payment thereof including its advance payment or deposit, provision for agreed increase in rent provided it is not after the determination of fair rent, provision for re‑entry of a tenant after he vacates the premises for re‑construction, all covenants which support the conditions in section 15 of the Sind Law and section 13 of the Law repealed by it, and similar other conditions and comments."....

11. In Digby v. Atkin (1815) 4 Camp.275 Lord Ellenborough opined that "where the tenant holds over after the expiration of the term, he impliedly holds subject to all covenants in the lease which are applicable to his new situation." Some of the other cases, also decided by the English Courts, which can be referred to on the point are as follows:‑

(1) Lee v. Smith (1854), 9 Exch.662.

(2) Finch v. Miller (1848) 5 C.B.428.

(3) Wyatt v. Cole (1877) 36 L.T. 613.

(4) Thomas v. Packer (1857) I. H & N. 669.

(5) Sanders v. Karnell (1858) 1 F.&F. 356.

12. In case of Mrs. Zarina Khawaja, the appellant had sought eviction of his tenant and one of the grounds was that of default. The order passed by the Rent Controller for depositing the arrears and future rent was complied with by the tenant only in respect of the future rent. Consequently, an order was passed under section 16(2) of the Sind Rented Premises Ordinance, 1979 by striking off his defence and directing his eviction. However, an appeal filed by the tenant was allowed on the ground that the security deposit of the tenant which was lying with the landlady should have been adjusted against the outstanding amount. On a. petition being filed by the landlady, leave was granted by the Supreme Court to examine, whether the security deposit could be adjusted against the amount which was to be deposited by the tenant as rent. The following questions were framed amongst others by the Supreme Court for determination:‑ .

(1) ................................................

13. (2)

(3) ................................................

(4) Whether on termination of an agreement of tenancy when the tenant remains in occupation as of right subject to liability under the Rent Restriction Law, the terms of agreement become irrelevant for regulating the tenancy ?

(5) If not whether a security amount with the landlord in pursuance of stipulation in the expired agreement, can be and should be dealt with in any manner other than that provided in the agreement ?

(6) Whether the use of security amount by the High Court for absolving the tenant in this case from liability of eviction for non ompliance with the order of deposit, is permissible in law ?

(7) .............. .

14. The Supreme Court after extensively referring to the case‑law on he point answered the above questions as follows: "Thus, it can safely be said that the rent laws Dermit all. covenants in agreements, alive or expired; which, are permissible under the general law and not inconsistent with or repugnant to that special law; and enforces the same accordingly whenever it is so required under that law. In addition, they also remain operative for other purposes permitted by the general law. The fourth question is answered in the negative. The answer to the fifth question has already been rendered. A provision in the expired agreement regarding security deposit for protecting the landlord's interest, if otherwise lawful under the general law, cannot be varied under the rent law and has to be applied for the purpose provided in the agreement and not otherwise. The next question (sixth) is to be answered in the light of the foregoing discussion, in the negative. The security deposit in this case is to be applied by the landlord, according to the terms quoted earlier, to compensate himself at the time of the tenant handing over possession to him, for unpaid rent and/or damages caused by the tenant to the property at any time. Its application by the High Court for absolving the tenant respondent from liability to make a deposit under section 16(2) and old 13(6) is impermissible and unlawful. The default remained intact notwithstanding the security deposit. It is clarified that the covenant in each agreement as to security will be construed according to the agreement itself." In the case of Syed Asghar Ali Imam v. Muhammad Ali, reported in P L D 1988 SC 228, a similar question once again arose before the Supreme Court and it has been observed at page 231 of the report as follows:‑

15. "Although it is not mentioned in the agreement as to how and when the security deposit will be adjusted or applied, but it can easily be spelled out from the use of the word security and the positive provisions regarding payment of rent in advance at specified time as also the payment of other charges; and the provisions in the negative form that the tenant shall not cause loss or damage to the property or to the landlord. The security deposit, therefore, is to be adjusted by the landlord when the tenant vacates the premises towards unpaid rent or against other payments or loss at any time. It could not be adjusted against the current liability to pay the rent. It has to be adjusted in accordance with the terms of the agreement and not by the Rent Controller at his will. It has been so held by us in the case of Mst. Zarina Khawaja."

16. The above decisions make it abundantly clear that even after the expiry of the tenancy agreement, the tenancy would continue to be governed by the same terms and conditions as contemplated in the agreement between the parties unless the same are in conflict with the current 'law. As clause (3) of the agreement in the instant case B clearly provided for refund of the security by the respondent only on expiration of the tenancy and delivery of the premises to him by the appellant, the respondent was under no obligation to adjust the rent in question from the security deposit The tenancy, as pointed out above, continued to be governed by the same terms. The facts of the case of Muhammad Yousaf v. Abdullah on which Mr. M. A. Rashid has relied, are clearly distinguishable as in that case the security deposit lying with the landlord which was meant to cover any default made by the tenant for a consecutive period of three months, had become adjustable after the expiry of the tenancy agreement. In any case, the ratio of the cases of Mrs. Zarina Khawaja and Syed Asghar Ali Imam is fully attracted to the facts of the instant case. Consequently, I find no person to interfere with the findings arrived at by the learned Controller on the question of default. For the aforesaid reasons, his appeal was‑ dismissed by me by a short order, dated 6‑11‑1988. 1 would, however, refrain from burdening the appellant with costs in view of the questions raised in this ‑appeal.

17. A . A . /A‑468/ K Appeal dismissed.