Rent Law | Failure to Respond to Notices Regarding Rent Enhancement Implies Acceptance Of New Terms: Andhra Pradesh High Court

Andhra Pradesh High Court, in The Regional Manager & Others v. Sri Rukmini Krishna Modern Rice Mill & Others, partially allowed an appeal concerning a landlord-tenant dispute involving the enhancement of rent and recovery of repair costs. The court upheld the trial court's award of ₹11,78,851 to the respondent-landlord but modified the interest rate on the awarded amount, reducing it from 12% to 6% per annum post-decree.

The respondent, Sri Rukmini Krishna Modern Rice Mill, had leased six godowns to the appellant, The Regional Manager and others, on an oral agreement. The initial lease period was for two years, beginning on January 16, 1991, with a rent of 65 paise per sq. foot. After the lease expired, the respondent requested an increase in rent to ₹2 per sq. foot in line with prevailing market rates. The respondent also demanded reimbursement for repair costs amounting to ₹22,900, which were incurred at the appellant's request.

The appellants failed to respond to multiple reminders and notices from the respondent, prompting the respondent to file a suit for recovery of the enhanced rent and repair costs. The II Additional Senior Civil Judge, Kakinada, decreed in favor of the respondent on April 21, 2003, leading to the appellants filing this appeal.

Oral Agreement and Rent Enhancement: The court addressed whether there was a binding oral agreement between the parties for the enhancement of rent. The appellants contended that there was no concluded contract for increasing the rent from 65 paise to ₹2 per sq. foot. However, the court noted that the appellants had continued in possession of the godowns after the lease period expired and failed to respond to multiple notices demanding enhanced rent.

"Failure to respond to the plaintiff’s repeated notices for rent enhancement implied acceptance of the new terms."

Failure to Enter Witness Box – Adverse Inference: The appellants did not produce any witnesses or enter the witness box to rebut the plaintiff’s claims, which led the court to draw an adverse inference against them. Citing the Supreme Court's decision in Vidhyadhar v. Manikrao [(1999) AIR SC 1441], the court stated:

"Where the party to the suit does not appear into witness box and does not offer himself for cross-examination, a presumption arises that the case set up by him is not correct."

Claim for Repair Costs: The respondent had claimed ₹22,900 for repair costs, which the appellants had agreed to pay. Despite the appellants’ written requests to carry out repairs, they did not deny the claim during trial or produce any evidence against it. The court found that the respondent was entitled to recover the repair costs as per the oral agreement.

Modification of Interest Rate: The trial court had awarded interest at 12% per annum from the date of the suit until the date of realization. The High Court, however, found this rate to be excessive, particularly after the decree was passed. Referring to the Supreme Court’s judgment in Central Bank of India v. Ravindra [(2002) 1 SCC 367], the court held:

"Penal interest cannot be capitalized, and future interest on decreed amounts should not exceed reasonable limits."

Consequently, the court reduced the interest rate to 6% per annum from the date of the decree until realization, while maintaining 12% interest from the date of the suit until the decree.

The court upheld the trial court's award of ₹11,78,851 to the respondent for enhanced rent and repair costs, modifying only the post-decree interest rate. The court awarded:

12% interest per annum from the date of the suit until the date of the decree.

6% interest per annum thereafter until realization of the decreed amount.

The appeal was partially allowed, with the decree of the trial court being upheld, except for the modification of the interest rate.

Date of Decision: October 18, 2024

The Regional Manager & Others v. Sri Rukmini Krishna Modern Rice Mill & Others