HC Clarifies Rent Enhancement Observations Do Not Create Automatic Liability:

The Punjab and Haryana High Court held that findings recorded in earlier rent proceedings regarding enhancement of rent and liability towards service tax/GST cannot automatically govern future disputes between the parties. The Court clarified that both the landlord and tenant would be free to agitate their respective claims in fresh proceedings, which must be decided independently on their own merits. Justice Vikas Bahl disposed of a batch of 14 connected revision petitions arising out of eviction proceedings between M/s Star World Wide Group Pvt. Ltd. and M/s G.D. Industrial Engineers.

The dispute related to six industrial sheds situated at Mathura Road, Faridabad, which had been leased under separate rent agreements executed between 2005 and 2006. The agreements were unregistered and initially provided for a three-year tenancy period, with a clause stipulating a 15% annual increase in rent if the tenant continued to occupy the premises beyond the agreed term without a fresh written extension.

The landlord initiated multiple eviction petitions alleging non-payment of rent, service tax and interest for different periods. During the proceedings, provisional rent assessments were made, and the tenant deposited the amounts determined by the Rent Controller. Ultimately, the Rent Controller declined eviction on the grounds of arrears, while observing that the landlord was entitled to enhanced rent at the rate of 15% annually. The Appellate Authority affirmed the orders.

Before the High Court, the tenant primarily contended that the observations regarding annual enhancement of rent should not be treated as granting the landlord an automatic right to claim increased rent indefinitely beyond the date of the Rent Controller’s orders. The landlord, on the other hand, sought clarification that the rejection of its claim for service tax reimbursement in the earlier proceedings should not prejudice its right to claim service tax/GST for subsequent periods.

“The observations of the Rent Controller in relief clause to the effect that the landlord is entitled to 15% enhanced rent every year would not be construed as entitling the landlord to seek enhanced rent of 15% every year after passing of the order by the Rent Controller.”

“This Court has not opined on the merits of the right of the landlord to claim enhanced rent or on the right of the tenant not to pay the enhanced rent as well as on the aspect of service tax/GST.”

The Court further held that the landlord could also initiate independent proceedings seeking reimbursement of service tax/GST, and any such claim would have to be examined afresh without being influenced by the findings recorded in the earlier eviction matters.

Thus, all the revision petitions were disposed of with liberty to both parties to pursue their respective claims in appropriate proceedings, to be adjudicated independently in accordance with law.