Motor General Traders & Anr. Etc. v. State of Andhra Pradesh & Ors. Etc.

CITATION1984 AIR 121
COURTSupreme Court of India
JUDGES/CORAMJustice E.S. Venkatramiah
DATE OF JUDGEMENT26.10.1983

Introduction

In the landmark decision in Motor General Traders & Another v. State of Andhra Pradesh & Others, the Division Bench of Hon’ble Apex Court while striking down Section 32(b) Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960 (Act) as unconstitutional overruled the decision in Chintapalli Achaiah v. P. Gopalakrishna Reddy and opined that the garb constitutionality which it may have possessed earlier had become worn out.

Facts

The facts of the case are as follows: In the instant case, the constitutional validity of Section 32(b) of the Act was under attack on the ground that it falls foul of the intransgressible fundamental right of equality, guaranteed under Article 14 of the Constitution of India.

The circumstances leading to the enactment of this Act can be traced back to October 1, 1953, when the State of Andhra, formerly a part of State of Madras came into existence under the provision of the Andhra State Act, 1953. By virtue of the provisions contained in Part VI of that Act, State of Andhra continued to be governed by the Madras Buildings (Lease and Rent Control) Act, 1949 (Madras Act, 1949). Consequently, on 1st November 1956, the new State of Andhra Pradesh was formed after an area known as Telangana, which formerly formed a part of the erstwhile State of Hyderabad and was subject to the Hyderabad House (Rent, Eviction, and Lease) Control Act, 1954 (Hyderabad Act, 1954) was merged with State of Andhra. By virtue of Section 119 of the States Reorganisation Act, the Hyderabad Act, 1954 continued to be in force in the Telangana area whereas, in the Andhra area, the Madras Act, 1949 too continued to be in force even after the formation of new Andhra Pradesh. The Government of Andhra Pradesh vide notification dated May 9 1956 exempted all buildings in the Andhra area whose construction was completed on or after 1st October 1953 from the Madras Act, 1949 for a period of three years from the date of such completion. Similarly, the State Government issued another notification dated 26th August, 1957 pursuant to which all buildings in the Telengana Area were exempted for a period of five years under the Hyderabad Act, 1954. Subsequently, both the said Madras Act and the Hyderabad Act were repealed and replaced by the Act.

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Considering that Section 32(b) of the Act, wherein buildings constructed on and after 26th August 1957 were exempted from the application of the Act, as violative of Article 14 of the Constitution on the ground it had led to the creation of two categories of landlords and tenants and notwithstanding the justification that might have existed when the Act was enacted, there was no rationale in continuing the exemption, the petitioners invoked the extraordinary writ jurisdiction of the Hon’ble Supreme Court of India.

Issues

The main issue in the case was: Whether the continuing exemption afforded to buildings constructed on and after 26th August 1957 under Section 32(b) of the Act was unconstitutional for being against the letter and spirit of Article 14 of the Constitution.

Summary of court decision and judgment

E.S. Venkataramiah, J speaking for the division bench of Hon’ble Supreme Court re-instilled the real notion of Article 14 as speaking of not merely formal equality but real and substantive equality. In arriving at the decision, reliance was placed upon the dual test laid down by this Hon’ble Court in Shri Ram Krishna Dalmia v. Shri Justice S.R. Tendolkar & Ors.[1]. Classification, it was held did not withstand the scrutiny of the dual test as a continuance of the impugned provision leads to the creation of a privileged class of landlords of buildings constructed subsequent to August 26, 1957 who are free from the shackles of the Act without any rationale. The Legislature, while granting the exemption intended to boost the construction activity to mitigate the acute shortage of housing accommodation. However, during the following 26 years from 26th August, 1957 thousands of buildings have been constructed and all of them are continuing to enjoy immunity from the provision of the Act. Most of the exempted buildings were more than 10 years old and thus there was no rationale for exempting them from the Act as the landlords of these buildings must have realized a large part of the investment made on such buildings by way of rents during all these years. In doing so, the Court took note of the undeniable fact that landlords may have benefited from the rising rents that may have accrued due to the continuous influx of population into urban areas. However, at the same, the Court did not deny the validity of the exemption that might exist in favor of buildings that were five, seven, or ten years old from the date of the Act. Ergo, the long period that had elapsed after the passing of the Act served as a crucial factor in determining whether the provision has had become discriminatory because the classification made was neither historical nor geographical but an economic one. Thus, negativing the first contention of the Respondent, it was held that undue preference cannot be allowed to perpetuate and it has caused more harm to the society than anticipated. Moreover, the two failed attempts to amend the section further strengthen this proposition. Thus the impugned provision was held unconstitutional for being violative of Article 14 of the Constitution. At the same time, it was left open to the State Government to enact new legislation to exempt newly constructed buildings for a limited period of time on the pattern of similar legislation undertaken by different States or to exempt such class of buildings for a given number of years from the provisions of the Act by the issue of a notification under section 26. Lastly, applying the principle of severability, it was held that the clause was not so inextricably bound up with the rest of the Act as to make it unworkable after the provision was struck down. The principles underlying the doctrine of severability as explained in Cooley’s Constitutional Limitations[2], D.S. Nakara & ors. v. Union of India[3] and R.M.D. Chamarbaugwalla v. Union of India[4] relied upon.

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Analysis

The judgment delivered by the Division Bench of Hon’ble Supreme Court expounds on the true scope and nature of Article 14. Though there is a presumption of constitutionality in favor of the constitutionality of an enactment, if there is nothing on the face of the law or the surrounding circumstances brought to the notice of the court on which the classification may reasonably be regarded as based, the presumption cannot be sustained.[5] In the present case, exemption, though was intended to serve as a catalyst to boost construction activity but its continuous nature rendered the classification evasive and arbitrary as the learned counsels were not able to show how the continuance of the exemption in the case of persons who have built houses more than two decades ago will set as an incentive to builders of new houses now. In doing so the Hon’ble Court relied upon State of Madhya Pradesh v. Bhopal Sugar Industries Ltd.[6], Vishwesha Thirtha Swamiar & ors. v. State of Mysore &Anr.[7]; H.H. Shri Swamiji of Shri Admar Mutt etc. v. The Commissioner Hindu Religious & Charitable Endowments Department &ors.[8], and Narottam Kishore Devverma & ors. v. Union of India &Anr. Recognizing that the decision may have an adverse effect on many who may have recently built houses by spending their life savings or by borrowing large funds during these inflationary days at high rates of interest, on the expectation and belief that they would not be subjected to the restrictions imposed by the Act, it was rightly held that the incentive to build could have provided a rational basis had the exemption been for a limited period of time.

Conclusion

The judgment reiterates the correct proposition of law that the Court is empowered to strike down legislation in subsequent litigation, though it was held to be reasonable and rational at the time of enactment. This was further reaffirmed in a plethora of cases such as Satyawati Sharma v. Union of India.[9]

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[1] AIR 1958 SC 538.

[2] (8thEdn.), Vol. 1, at pp. 360-362.

[3] [1983] 1 S.C.C. 305.

[4] AIR 1957 SC 628.

[5] Shri Ram Krishna Dalmia v. Shri Justice S.R. Tendolkar&Ors.AIR 1958 SC 538.

[6] [1964] 6 S.C.R. 846.

[7] [1972] 1 S.C.R. 137.

[8] [1980] 1 S.C.R. 368.

[9]AIR 2008 SC 3148.

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