K. Venkatasami Nayagar vs Union of India (UOI)

M. Anatanarayanan, C.J.—This revision proceeding involves a point of considerable interest with regard to fixation of fair rent u/s 4(3)(b) of

Madras Act XVIII of 1960. My attention has not been drawn to any precedent of this Court, in which the point has arisen for determination in the

particular form with which we are now concerned.

Briefly stated, the facts are that the revision Petitioner (landlord) and the Union of India represented by the Superintendent of Post Offices,

North Division, Madras-6 (Respondent), both went to the Rent Control Court for fixation of fair rent for premises No. 29, Kalmandapam Road,

Royapuram. Actually, the parties were content to have the matter of fair rent adjudicated, on admitted facts. The front portion of this building is

occupied by the Kalmandapam post office, and the rear portion by the Postmaster for residential purposes. Admittedly, the front portion has to be

classified under the first class, with regard to the rules for determination of fair rent, as it is a new structure built for the very purpose of housing the

post office. The point that now arises is whether the Courts below were justified in allowing for depreciation of this building in the assessment of

fair rent when (1) the building was a new structure and (2) in the statement by the Respondent, no claim had been made under the head

depreciation as such.

u/s 4(3)(b)(i) of the Act, the cost of construction has to be calculated under the Rules less depreciation at such rates as may be prescribed. The

formula for working out the fair rent is to be found under rule 14 of the rules framed under the Act, read with schedule II. Schedule II gives the

standard rates of depreciation. Illustration A is to this effect:

For a building of type I aged only 2 years-depreciation shall be 30 per cent and not 2 per cent.

The Courts below, therefore, felt constrained to allow for the minimum depreciation of ten per cent under the Act, the Rules and the schedule,

that I have referred to. The Courts were of the view that the fact that the Government did not refer to this head of allowance at all, in their

statement, did not absolve the Courts from their duty of determining fair rent under the Act and the rules.

The learned Counsel for the landlord (revision Petitioner) has pressed two arguments in the main. The first is that when Section 4(5)(6)(i) refers

to depreciation, the statue implies that depreciation must have actually occurred; it has no reference to any depreciation that has not taken place at

all. Hence the rule and schedule II are not in accordance with the Act, and are in conflict with the intendment of the Legislature in enacting Section

4(3)(6)(i), when the formula of the schedule provides for a minimum depreciation of 10 per cent even with respect to a building only two years old.

This is the main and important argument. The subsidiary argument is practically an argument of estoppel. When the State did not claim any

depreciation in its statement, the Courts were in error in making allowance under this head.

I shall deal with the first argument immediately, for that seems to me to be the interesting point, on which I must confess that no authorities would

appear to be available. The word depreciation is to be found annotated or defined in a number of technical works, but I have been able to come

across only two definitions that are at all helpful to the present context. In Corpus Juris Secundum, volume XXVI-A, page 492, the content of the

word is expressed as follows:

The word depreciation means loss or decline in value which occurs gradually over the useful life of material thing, due to physical wear, tear and

decay.

The Shorter Oxford Dictionary defines depreciation simply, as lowering of value. It will thus be seen that depreciation has two aspects. A

material object might already have suffered depreciation, depending on its age; that degree of depreciation is relevant when assessing the minimum

marketable value of the article. But it is also subject to future depreciation, and this would be relevant where a value is fixed which is to prevail in

future also. It is not disputed that, under the scheme of the Act, the fair rent once fixed will continue to govern the relationship between the parties

under the Act, only subject to changes as allowed for u/s 5 of the Act. Hence, it appears to me to be entirely justified and further a scientific

procedure, to allow for depreciation even with regard to a brand-new building. I am unable to hold that the rule and schedule II are in conflict with

the intendment of the Act, or that the expression is limited in its connotation to the lowering of value already suffered by the building.

The second point or ground of objection is a short one, and can be immediately disposed of. No doubt it would have been better if the State

had amended its claim statement by introducing some such words as in accordance with the Rules and the formula of schedule II under the Act,

etc. But the State did claim a fair rent which was definitely below the rent determined by the first Court, which was increased on appeal by the

tenant. Hence, the argument has no substance that the discount with regard to the depreciation embodied in the formula ought not to have been

allowed, because there is no reference to this item in the statement filed by the Respondent.

There is a final argument of some interest, submitted by the learned Counsel for the revision Petitioner. This is to the effect that the formula, as it

stands, is substantially inequitable; it can be shown that if this formula is applied over a period of years, using the mathematical mode specified, a

building that may be worth a few lakhs in the year of construction, may be worth almost a nominal amount by virtue of the mere factor of

depreciation, if a sufficiently long period is taken into consideration. But it must be remembered, that the Rent Control Act itself is a temporary Act,

which the Legislature extends from time to time; it is not intended as a permanent contribution to the corpus of the law. Presumably, this was kept

in mind when this formula was devised.

This revision petition, therefore, fails and is dismissed. In the circumstances there will be no order as to costs.