' NAIMUDDIN, J.--This appeal, by leave, is from the judgment of the High Court of Sindh dated 25-11- 1984 whereby it dismissed F.R A. No, 343 of 1981 filed by the appellant against the order of the Controller who had dismissed the appellant's application for eviction of the tenant/respondent on the ground of default in payment of the rent for the month of January, 1973 and that of June & July, 1973.
2. Leave was granted to consider the contention whether in view of the stipulation contained in the agreement of tenancy that the amount of security deposit of Rs,500 was not liable to be adjusted towards the future rent, such deposit could be considered for the purpose of absolving the respondent of the default in payment of rent.
3. The relevant facts are that the respondent is the tenant in respect of Flat No,5 of the building situated on Plot No,21, Delhi Cooperative Housing Society Limited, Karachi owned by the appellant, under the agreement of tenancy commencing from 1-1-1971 which was for 11 months. Under the terms of the agreement, the respondent paid a sum of Rs,500 as security. The term as to the security deposit reads-as follows:- "That the tenant has paid Rs,500 as security deposit which sum shall remain with the owner and the same shall not be adjusted towards future rent. The said security deposit shall be refunded after vacating the premises in good condition and after all the dues of K.E.S.C. And gas charges and conservancy charges are duly paid. The tenant shall produce the receipt of all these payments for verification by the owner before refund of deposit is claimed. In the event of non- payment of any of these charges, the deposit shall be utilized to pay these charges."
4. The defence of the respondent, inter alia, was that he had tendered rent for the month of January, 1973 through cheque dated 16-2-1973 for which the appellant had issued receipt. Since the cheque was dishonoured, therefore, he paid the rent in cash to the Chowkidar of the appellant.
Regarding the rent for the months of June and July, 1973, he stated that he had sent a cheque for Rs,530 which was refused by the appellant on the ground that it was less by Rs,40 as the amount of rent for the two months was Rs,570 and thereafter he started depositing the rent in Court within time.
5. After recording evidence of the parties, the Rent Controller found that the respondent did not commit default so far as the rent for the months of June and July, 1973 was concerned for if the appelllant had accepted the cheque for Rs,530, the rent for the month of June was tendered within due time and on refusal of the cheque, the rent of June and July was deposited in Court within 60 days. So far as the rent for the month of January, 1973 is concerned, he did not believe the respondent that he had paid the rent in cash to the Chowkidar of the appellant on dishonour of the cheque. The Controller, however, exercised his discretion in favour of the respondent by stating as follows:- "Moreover, the tenancy is very old and prior to that there was no complaint regarding the default committed by opponent or any other overt action, at the hands of the opponent, therefore, he cannot be termed as deliberate defaulter, in the payment of rent. Moreover, he cannot be asked for the alleged default and the old standing tenancy cannot be ignored."
' And dismissed the application.
6. Aggrieved by the order, the appellant took the matter to the High Court in appeal, but the High Court rejected the same without adverting to the discretion exercised by the Controller by holding by the impugned judgment that; "Factually there was no default if the rent for the month of January, 1973 and the aforesaid sum of Rs,40 would have been adjusted against the above sum of Rs,500 as there would have still remained a balance of Rs,175 with the appellant."
' And concluded as follows:-- "I am, therefore, in agreement with the conclusion of the learned Rent Controller that there was no default though on a different ground. The appeal is, therefore, dismissed, but there will be no order as to costs."
7. We have heard Mr. Rehmat Elahi, Advocate for the appellant and Mr. Qamarul Islam Abbas Advocate for the respondent.
8. This appeal could have been dismissed on the short ground that the default was only for one month and the Controller had exercised his discretion in favour of the respondent and the High Court had not adverted to it or held that it was not duly exercised by the Controller.
9. However, since leave was granted to consider the question whether the deposit of Rs,500 could be adjusted towards rent, we propose to deal with this question also. We have produced the term of tenancy hereinbefore under which the deposit of Rs,500 was made as security. It clearly states that the amount shall not be adjusted towards future rent. It further provides that the amount is deposited as security for electric, gas and conservancy charges and if any of these charges remain outstanding the same will be adjusted against them otherwise refunded on vacating the premises in good condition. Therefore, it is clear that according to the term, the amount of security deposit could not be adjusted against the future rent which was not paid in due time. Reliance is placed on Syed Asghar Ali Imam v. Muhammad Ali (PLD 1988 Supreme Court 228) wherein this Court, in spite of the fact that there was no mention in the agreement as to how and when the security deposit will be adjusted or applied, held that "it could not be adjusted against the current liability to pay the rent". It would be of some advantage if the relevant passage which appears at page 231 of the report is quoted here. It reads as follows:- "Although it is not mentioned in the agreement as to how and when the security deposit will be adjusted or applied, but it can easily be spelled out from the use of the word security and the positive provisions regarding payment of rent in advance at specified time as also the payment of other charges; and the provisions in the negative form that the tenant shall not cause loss or damage to the property or to the landlord. The security deposit, therefore, is to he adjusted by the landlord when the tenant vacates the premises towards unpaid rent or against other payments or loss at any time. It could not be adjusted against the current liability to pay the rent. It has to be adjusted in accordance with the terms of the agreement and not by the Rent Controller at his will. It has been so held by us in the case of Mst. Zarina Khawaja."
' In the case on hand the term under which the security deposit was made specifically states that it cannot be adjusted against the future rent and it could be returned only after the premises is vacated in good condition. Therefore, the High Court was not right when it held that the amount of security could be adjusted against the rent due during the occupation of the premises by the tenant or before surrender of vacant possession of the premises as it would amount to changing the terms of agreement on which the premises is held by the tenant.
10. However, the learned counsel for the respondent argued that the tenancy agreement was for 11 months and it had already expired when the default was committed, therefore, its terms could not be pressed into service after the tenancy had become statutory and in support the learned counsel relied on Muhammad Yousaf v. Abdullah (PLD 1980 Supreme Court 298) and Sheikh Abdus Sattar v. Malik Muhammad Afzal and others (PLD 1985 Supreme Court 148). In the latter case, the view taken by the High Court based on former case was approved in the following terms: "Viewed in its true perspective the agreement relied upon by the petitioner came to an end in year 1972 on the expiry of its term according to which it was to enure only for 11 months because there was no further renewal. So, after the expiry of the agreement the rights and liabilities of the tenant fell to be governed by the provisions of the West Pakistan Urban Rent Restrictions Ordinance, 1959, which regulate the terms as to ejectment."
' We endorse this view based as it is on the view taken by this Court itself in Muhammad Yusuf v.
Abdullah. The first contention is accordingly repelled."
' In Muhammad Yousufs case (supra) the lessor under the agreement of lease was liable to return the security deposit to the lessee on the expiry of period of lease, but he did not return the same nor did the lessee demand the same. In the present case the security amount was to be returned on vacating the premises as provided in the agreement. Therefore, the amount of security could neither be demanded nor adjusted unless the premises was vacated and all dues on account of electricity, gas and conservancy were paid or adjusted and the term as to security would remain in force as would be the agreement with regard to the quantum of rent or any other terms which are not in conflict with any provision of the Sindh Urban Rent Restriction Ordinance, 1959 as in force then or with the Sindh Rented Premises Ordinance, 1979, as governing the field now. Moreover, this question came up for further consideration in Syed Asghar Ali Imam's case (supra) and it was observed at page 231 of the report as follows:- "The other question as to whether the agreement which contains the covenants about the security having expired, the nature of this deposit will undergo a change, we have answered in the negative in the said case. Other related questions also having been examined, it is not necessary to deal with them again. The said case will also govern the first question posed in the leave granting order of this case--the answer being in the negative. It is so notwithstanding the fact that the law applicable in this case is the repealed Rent Restriction Ordinance of 1959. Our judgment in the case of Mst. Zarina Khawaja deals with and applies to the situation under both laws--that of 1979 and 1959. Thus, the agreement as to the security in this case would continue to operate notwithstanding its expiry.
' The second question as already analysed depends upon the terms of agreement; which, in this case do not permit the utilisation of the security deposit for obviating the default committed by the respondent in payment of the rent in accordance with the terms of the agreement. Hence, the impugned judgment is liable to be set aside in this behalf."
11. However, in view of the fact that the Controller exercised his discretion in favour of the respondent and the High Court had not held that the exercise of discretion was in any manner arbitrary, capricious or uncalled for, we would accordingly uphold the order passed on the application for eviction and dismiss this appeal, but leave the parties to hear their own costs.