1997 (12) TMI 649 - SC - Indian Laws

Summary

Issues Involved:
1. Constitutional validity of Section 5(10)(B), Section 11(1), and Section 12(3) of the Bombay Rent Act.
2. Reasonableness of pegging rent at 1940 levels.
3. Adequacy of amendments made in 1987 to the Bombay Rent Act.
4. Impact of inflation and rising costs on the reasonableness of rent control provisions.

Summary of Judgment:

1. Constitutional Validity of Sections:
The appellants challenged the constitutional validity of Section 5(10)(B), Section 11(1), and Section 12(3) of the Bombay Rent Act, arguing that the provisions were ultra vires Articles 14, 19, and 21 of the Constitution. They contended that the restriction on landlords' right to increase rents, pegged to the levels of 1st September 1940, had become arbitrary, discriminatory, and unreasonable over time.

2. Reasonableness of Pegging Rent at 1940 Levels:
The Supreme Court acknowledged that a statute valid when enacted might become arbitrary and unreasonable over time. The Court noted that the pegging down of rents to pre-war levels was no longer reasonable. The Court referenced various reports and resolutions, including the Tembe Committee (1977), Maharashtra State Law Commission (1977 and 1979), and the Economic Administrative Reforms Commission (1982), which recognized the need for rent increases due to inflation and the rising cost of living.

3. Adequacy of 1987 Amendments:
The Court observed that while the 1987 amendments indicated the State Legislature's awareness of the need to increase standard rent, the changes were largely cosmetic and did not bring about a tangible increase in standard rent. The amendments did not address the principle of pegging rent at the initial letting rate, nor did they account for the increased cost of maintenance or inflation.

4. Impact of Inflation and Rising Costs:
The Court highlighted the financial impact of the rent restriction provisions, noting that landlords were receiving significantly less rent in real terms due to inflation and rising maintenance costs. The Court provided hypothetical examples to illustrate the disparity between the rent received and the expenses incurred by landlords, demonstrating the arbitrariness of the current rent control provisions.

Conclusion:
The Supreme Court held that the existing provisions of the Bombay Rent Act relating to the determination and fixation of standard rent could no longer be considered reasonable. The Court refrained from striking down the provisions immediately, given that the Act was set to expire on 31st March 1998. The Court expressed hope that a new Rent Control Act would be enacted by 1st April 1998, reflecting the observations made in the judgment. The Court made it clear that any further extension of the existing provisions without aligning them with the views expressed in the judgment would be invalid as arbitrary and violative of Article 14 of the Constitution. The respondents were directed to pay the costs. The writ petitions were disposed of accordingly.