The Full Bench of Kerala High Court has settled a question on the applicability of the Kerala Buildings (Lease and Rent Control) Act, 1965, (Rent Act) to areas that undergo a change in local governance, holding that the Act continues to apply even after a Panchayat is upgraded into a Municipality, without the need for any fresh notification by the State Government.
A Full Bench comprising Justice Sushrut Arvind Dharmadhikari, Justice Gopinath P. and Justice G. Girish answered a reference arising from conflicting Division Bench decisions on whether a further notification under Section 1(3) of the Rent Control Act is mandatory once a Panchayat ceases to exist and is converted into a Municipality.
Apart from the principal question, the Full Bench was also called upon to consider ancillary issues, including whether the Schedule to the Rent Control Act remains static unless amended by the State Government in exercise of its power under Section 1(3), or whether it is subject to automatic variation depending upon changes in the status of the concerned local authority, such as conversion from Panchayat to Municipality or Municipal Corporation, or upon delimitation of territorial boundaries of Panchayats, Municipalities, or Municipal Corporations.
The reference stemmed from eviction proceedings in respect of premises situated in Koothuparamba, which was originally a Panchayat included in Schedule I of the Rent Control Act but was later declared a Municipality. Tenants had objected to the maintainability of the eviction proceedings before the Rent Control Court, contending that once the Panchayat was upgraded, the Rent Act ceased to apply in the absence of a fresh notification amending Schedule I. The tenants relied upon an earlier Division Bench judgment in Koorantakath Kamaludeen vs. Kannyath Divakaran, O.P.(R.C.) No. 154/2024, contending that once Koothuparamba Panchayat ceased to exist and assumed the status of a Municipality, eviction proceedings ought to have been instituted before the regular Civil Court and not before the Rent Control Court.
However, Devision bench took a prima facie view that the decision in Koorantakath Kamaludeen appeared to run contrary to the scheme and provisions of the Rent Control Act. It observed that once an area is notified in Schedule I to the Act, a subsequent change in the status of the local authority governing that area would be of no consequence for the purposes of the Act, unless the area was expressly excluded by a separate notification or exempted under Section 25 of the Rent Control Act. The Division Bench further opined that the judgment in Koorantakath Kamaludeen may have been rendered without a proper scrutiny of the legal effect of Section 1 of the Rent Control Act, and it was in these circumstances that the matter was referred for consideration by a Full Bench.
Decision of the Full-Bench
Resolving the issue, the Full Bench held that the applicability of the Rent Control Act is area-centric. The Court emphasised that Section 1(2) of the Act makes the statute applicable to “areas” mentioned in the Schedule, and once an area is so notified, the Act automatically applies to it. A subsequent change in the administrative status of that area, whether from Panchayat to Municipality, or otherwise, does not affect the operation of the Act.
The Court clarified that Section 1(3) merely enables the Government to extend the Act to new areas or withdraw it from existing areas by notification. The proviso to Section 1(3), which requires a resolution of the local authority, operates only within the limited scope of that provision and cannot be read into Section 1(2). A mere change in nomenclature or status of a local body does not amount to either inclusion of a new area or withdrawal of an existing one so as to trigger Section 1(3).
The court held that if the conversion of a Panchayat into a Municipality were treated as necessitating a fresh notification under Sections 1(2) or 1(3), it would logically lead to endless “cascading issues”. A similar demand could then be raised whenever a municipality is transferred from one district to another, renamed, or subjected to delimitation exercises altering its boundaries. Such an interpretation would convert routine administrative changes into grounds for challenging the applicability of the Rent Act each time, which the Court found untenable and legally unsound.
The Court warned that permitting such an interpretation would open a “Pandora’s box”, allowing tenants to indefinitely stall eviction proceedings by insisting on fresh notifications following every administrative change. This, the Court held, was never the intention of the legislature while drafting and finalising Schedule I of the Rent Act and would run contrary to the very objectives for which the Act was enacted.
A significant aspect of the judgment is the Court’s holding that Schedule I of the Rent Control Act is an instance of legislation by incorporation. The geographical areas of Panchayats and Municipalities as they existed at the time of enactment were bodily lifted into the statute. Once incorporated, those areas remain static for the purposes of the Rent Act and are unaffected by later changes brought about under the Panchayat Raj Act or the Municipality Act. Accepting the contrary view, the Court cautioned, would render the Rent Act unworkable and open the floodgates for technical objections capable of indefinitely stalling eviction proceedings.
The Full Bench also underscored that the Rent Control Act, having received Presidential assent under Article 254 of the Constitution, is a special legislation governing landlord-tenant relations and prevails over general laws as well as over statutes relating to local self-government in so far as rent control and eviction are concerned.
Overruling Previous Judgements
While upholding the view taken by the referring Division Bench that the Rent Act continues to apply notwithstanding the conversion of a Panchayat into a Municipality, the Full Bench expressly overruled earlier Division Bench decisions. The Court overruled the Division Bench judgment in Koorantakath Kamaludeen, holding that the interpretation adopted therein was legally unsustainable. The Court held that the said judgment had proceeded on the erroneous premise that the proviso to Section 1(3) of the Rent Control Act could be invoked to control or limit the operation of Section 1(2), which determines the areas to which the Act applies.
The Full Bench explained that adopting the interpretation suggested in Koorantakath Kamaludeen would amount to impermissibly extending the scope of the proviso to Section 1(3) so as to govern Section 1(2). Emphasising that a proviso cannot travel beyond the provision to which it is appended, the Court observed that the proviso is merely a “plaster on the wall” of Section 1(3) and not of Section 1(2). The earlier Division Bench, the Court noted, had entirely overlooked this crucial distinction and had failed to examine either the independent operation of Section 1(2) or its correlation with Section 1(3).
In view of this inherent discrepancy in the understanding of the statutory scheme and the incorrect conflation of the two provisions, the Full Bench held that Koorantakath Kamaludeen did not correctly interpret Sections 1(2) and 1(3) of the Rent Control Act and suffered from an inherent fallacy of interpretation, rendering it vulnerable to reconsideration and overruling.
Since the full bench rejected the contention that the Rent Control Act becomes inapplicable upon the conversion of a Panchayat into a Municipality or due to subsequent alteration of territorial boundaries, holding that such a plea has no merit, the judgments in Koorantakath Kamaludeen, Biyyathu v. Abdurahimankutty, 1995 SCC OnLine Ker 45, and Karam Veettil Parukutty Amma v. Muhammedkutty, 2012 SCC OnLine Ker 29706, were held not to correctly lay down the law and were overruled. The Court, however, affirmed the prima facie view taken by the referring Division Bench as well as the decision in Meenakshy v. R. Ananthambal and others, 2014 SCC OnLine Ker 28721, holding that they correctly interpreted Section 1 of the Rent Control Act.
Answering the reference, the Full Bench remitted the matter to the Division Bench for final adjudication of the pending proceedings in accordance with the observations and conclusions recorded in the judgment. The Court also placed on record its appreciation for the assistance rendered by the Amicus Curiae, Advocate General of Kerala, Sri Gopalakrishna Kurup K.
