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TMI Blog1997 (12) TMI 649X X X X Extracts X X X X X X X X Extracts X X X X ..... ions challenging the constitutional validity of Section 5(10) (B), Section 11 (1) and Section 12(3) of the Bombay Rent Act, inter alia, on the ground that the said provisions pertaining to standard rent were ultra vires Articles 14, 19 and 21 of the Constitution and consequently void. The main challenge to the said provisions was on the ground that the restriction on the right of the Landlords to increase rents, which ha been frozen as on 1st September, 1940 or at the time of the first letting, was no long a reasonable restriction and the said provisions had, with the passage of time, become arbitrary, discriminatory, unreasonable and consequently ultra vires Article 14 of the Constitution. By the impugned judgment the High Court dismissed the writ petitions, inter alia, holding that the object of the Bombay Rent Act was not to provide to the landlord an adequate return on its investment and it was not open to him to claim an increase in the rent by taking into account the increase in the land privies etc. The Court also observed that the writ petitions lacked particulars in order to satisfy the Court that the relevant provisions of the Bombay Rent Act were unreasonable or arbitrar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ging House Rates Control (Amendment) Act, 1986]. (2) (a) No person shall claim or receive on account of any license fee or charge for any premises or any part thereof, anything in excess of the standard rent and permitted increase(or, as the case may be, a proportionate part thereto), for such premises if they had been let, and such additional sum as is reasonable consideration for any amenities or other services supplied with the premises. (b) All the provisions of this Act in respect of the Standard rent and permitted increases in relation to any premises let, or if let, to a tenant, shall mutatis mutandis apply in respect of any license fee or charge and permitted increases and the additional sum mentioned above ]. 9.(b) Before making any increase under clause (a), the landlord shall obtain a certificate from the local authority that he was required by it to make or to provide such additions, he was required by it to make or to provide such additions, alterations, improvements or amenities and has completed them in conformity with its requirements. 11.(1) [ Subject to the provisions of section 11A in any of the following cases the Court may, upon an appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses let out before 1st September, 1940. In respect of (a) i.e. premises let out on or before 1.9.1940. rent paid on that date is the standard rent. i) and thus the ret is pegged at the rent paid as on 1.9.1940, subject to the increases mentioned below. ii) Those increases are of three types: a) those permitted U/s 10A In respect of premised let on or before 1.9.1940; increases are permitted to the extent of 5% to 7.5% over the standard rent for residential premises: And 7.5% - 12.5% in respect of non- residential premises- This is a one time permitted increase. b) Increase on account of heavy repairs, additional amenities and repairs required to be carried out under requisition from local authorities; increase in monthly rent is permitted to the extend of 15% per year on the actual cost incurred without interest (Section 9) c) Increase in ground rent, in respect of leasehold premises paid to the government, local authority and statutory authority is allowed to be passed on to the tenant by a proportionate increase in monthly rent (Section 10) d) increase in amount of property taxes after 13.2.1948 is allowed to be passed on to the tenant by a proportionate incr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asing amounts of the outgoing and maintenance paid to the Society are invariably more than the actual amount of rent received ( which had been frozen at first letting)/ In the decade of the eighties and the nineties however, the amount of the first letting being considerably higher, this incidence does not occur. Since increase in maintenance charges is absorbed in the amount of rent fixed. In both classes of cases i.e. the premises let on or before 1st September, 1940 and premises let on or after 1.9.1940, there are no statutory provisions which entitle the landlord to move the Count for an increase in standard rent. The Scheme of the Act negatives any such right (see Section 5 (10) read with Sec. 11(1)(a)). Mr. F.S. Nariman, learned senior counsel on behalf of the appellants submitted that a legislation which, when enacted, was justified on considerations of necessity and expediency may, with the passage of time, become arbitrary and unreasonable in changing circumstances. In view of the constant escalation in privies due to inflation and corresponding fall in the value of the rupee, ceiling on rentals, such as the one imposed by Section 5 (10)(a) and (b) read with Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of a committee headed by Mr. V.K. Tembe in 1979 for the purpose of preparing a Unified Rent Control Act for the entire State. The State Law Commission had examined the recommendations of the Tembe Committee and submitted its report. The Cabinet Sub- Committee had considered this report as well as the Model Rent Control Bill, forwarded to it by the Central Government, and this had resulted in a new Rent Control Bill being introduced in the upper house of the State Legislature in July, 1993. This bill has been referred to the Select Committee and it was accepted that the reading of the bill clause will be commenced in the State Legislature. There is considerable judicial authority in support of the submission of learned counsel for the appellants that with the passage of time a legislation which was justified when enacted may become arbitrary and unreasonable with the change in circumstances in the State of Madhya Pradesh Vs. Bhopal Sugar Industries [ (1964) 6 S.C.R. 846 ] dealing with a question whether geographical classification due to historical reasons would be valid this Court at page 853 observed as follows: Differential treatment arising out of the application of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serves the significant Purpose of giving reasonable time to the new units to consider the special circumstances obtaining in respect of diverse units. The decision to withdraw the application of unequal laws to equals cannot be delayed unreasonably because of the relevance of historical reasons which justify the application of unequal laws is bound to wear out with the passage of time. In Broom's Legal; Maxim ( 1939 Edition, page 97) can be found a useful principle Cessante Ratione legis Cessat Ipsa Lex , that is to say, Reason is the sour of the law, and when the reason of any particular law ceases, so does the law itself . This Court in Motor General Traders and Anr. Etc. etc. Vs. State of Andhra Pradesh and Ors. Etc. etc. [(1984) 1 S.C.R. 594] had to consider the validity of Section 32B of the Andhra Pradesh Building (Lease, Rent and Eviction) Control Act, 1960. This section provided that the Act would not apply to buildings constructed after 26th August, 1957. This exemption had continued for nearly a quarter of a century and it was argued that because of shortage of housing accommodation since the section had been valid from the commencement of the Act, therefore, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidential buildings to entitle them to seek the protection of the Act, the passage of time has made the ceiling utterly unreal. We are entitled to take judicial notice of the enormous multifold increase of rents throughout the country. Particularly in urban areas. it is common knowledge today that the accommodation which one could have possible got for ₹ 400 per month in 1973 will today cost at least five times more. In these days of universal, day to day escalation of rentals any ceiling such as that imposed by Section 30 (ii) in 1973 can only be considered to be totally artificial and irrelevant today. As held by this court in Motor General Traders v. State of A.P. a provision which was perfectly valid at the commencement of the Act could be challenged later on the ground of unconstitutionality and struck down on that basis. What was once a perfectly valid legislation, may in course of time, i become discriminatory and liable to challenge on the ground of its being violative of Article 14 . Lastly reference need be made to be made to Synthetics and Chemicals Ltd. and Ors. Vs. State Of U.P. and Ors. [(1990) 1 SCC 109] where at pages 156-157 it was observed that restric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, can still be regarded as valid now? Reports of different committees and resolutions of the minsters have been placed on record in an effort to show that these official agencies have, since over the last two decades, themselves felt that increase in rents was called for. The correctness or the authenticity of this material has not, in any way been doubted an therefore we see no reason as to why this cannot be taken into consideration in order to determine whether the submission of Mr. Nariman merits acceptance. Reference may now be made to some of this material:- 1. A rent act inquiry committee of 1977 commonly known as Tembe Committee, was constituted by the Government of Maharashtra which in its report submitted in the same year recognised that the pegging down of the rents to a date nearly thirty years back (at that time) had deprived the property owners of a reasonable return on their properties commensurate with the increase in the cost of living and the cost of building materials. It recognised that there were several small property owners all over the State who had invested the life time savings in building houses partly for the residence and partly for being let out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effective actions for rent variations according as the circumstances may warrant. The Commission further stated: In big cities like Bombay, a large number of slums have come into existence. if the rigorous of the Rent Act had not been there, new houses would have been constructed. At present 30 lakhs of people in the city of Bombay stay in slums and 11/2 lakh on pavement. If new buildings had been constructed, people who stay in slums today might have been in a position to get some decent accommodation. It was further stated The increase in the standard rent must be considered from the point of view of the Consumer Price Index. It was pointed out to the Commission that 46 percent of the lands belong to low income group, 27 percent belong to middle income group, and only 25 per cent belong to the higher income group. These figures will indicate that 75 per cent of the so-called landlords are really people who depend upon the rent of the property for their livelihood. To designate them as 'landlords' itself is undesirable. When one considers the financial position of the tenants, compared to the positions in 1940s, one clearly sees t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rent control Laws wit a view to providing for: (a) a reasonable return on investment in housing which will be comparable to, if no more favourable then, the return from and other avenues of investment, (b) periodical upward revision of rents to neutralise the crosion in the real value of rents (c) enabling expeditious resumptions of possession of a dwelling units for self occupation by a landlord who is the owner of only one such dwelling unit; (d) delinking of municipal property taxation from reteable values to the extent they are regulated by the Rent Control Laws, (e) Leave and licence system, (f) period tenancy, (g) protection to tenants from arbitrary eviction, (h) exemption from the provisions of the Act of new construction less than 5 years, (i) obviating delays in ligation by laying down suitable expeditious procedures, only one appeal to a higher authority instead of multi- level appeals constitution of tribunals to deal with disputes arising under the Act and barring the jurisdiction of Civil Court Act. 6. In the Letter dated 24.7.1987 from the Ministry of Home Affairs Government of India while communicating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o rapid inflation there has been step escalation of the expenses which the landlords have to incur without there being any corresponding increase in the rents. This has resulted, it was submitted, in the buildings not being repaired as the expenses involved made it uneconomical for the landlords to undertake this task. As already noticed it had been contended by MR. Nargolkar that realising the need being there for providing some relief to the landlords amendments amendments were made in the Bombay Rent Act in 1987. it was submitted that as a result of these amendments the landlords will be able to charge more rents and it cannot now be said that the Rent Control Act is not valid. It is true that some amendments were made in 1987 which clearly indicate that the State Legislature was conscious of the fact that there was a need to increase the standard rent. The question, however, is whether the exercise which was undertaken was merely cosmetic or did it bring about any tangible increase in the standard rent. section 4 (10)A was incorporated which provides that the provisions relating to standard rent would be inapplicable for a period of five years in respect of premises const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recurring in old buildings, and the cost of tenantable repairs keeps rising. 2. From 1.1.1970 onward the landlord has had to bear continuously ten per cent of rateable value (equivalent to 8.5% of the yearly rent) as repair cess i.e. one month's rent in a year. 3. Thus in case of all buildings constructed prior to 1.1.1970- (date of levy of compulsory repair cess - they constitute majority of buildings in all urban areas the landlord retains only 8 months rent in hand every year as against 12 months rent he was getting in September 1940:- (a)) this is without taking into consideration further inroads as a result of ground rent paid in respect of private leasehold lands where increase in ground rent is not permitted to be passed on effect of Section 10) (b) this is also without taking into 'account ever increasing outgoings and maintenance charges paid to co-operative Housing Societies by landlord members: not permitted to be passed on to tenants. 4. Meanwhile all this is further accentuated by the fall in the value of the rupee and rise in the wholesale price index which has totally eroded the amount receivable as rent in the hands of the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 940 is that rent at which the premises were fist let. Even so with the rapid increase in the expenses for repair and other outgoings and the decreasing net amount of rent which remains with the landlord, clearly shows that the non provision in the Act for reasonable increase in the rent, with the passage of time, is leading to arbitrary results. This is also demonstrated from the facts in the case of petitioner no.3 who owns Unit No. A-18 on the first floor admeasuring 808 sq. ft. in the property known as Shri Ram Industrial Estate situated at 13 J.D. Ambedkar Road, Mumbai. The said building belongs to a cooperative society and unit no.A-18 was given on lease and license basis b an agreement dated 23rd August, 1964 by the appellant to Lokmitra Sahakari Printing and Publishing Society ltd. on a monthly compensation of ₹ 686.80 per month. Liabilities of repairs is on the appellant and according to it this amount received in respect of the said unit by the appellant is ₹ 563 . 65 per month inclusive of all taxes. Out of this sum the appellant no. 3 has to pay ₹ 216.33 as municipal taxes leaving a balance of ₹ 320.22. From this amount the society outgoings is &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stead of ₹ 100/- which he was paying in 1948. This enhanced rent, would, however, represent only 0.9% of his salary. With the passage of time, the percentage of rent which would be paid by that hypothetical tenant would have gone down from 20% of his total salary to only 0.9% and this wold be the case of most of the tenants as we can take judicial notice of the fact that from 1948 till now, incomes have increased considerably, whereas the rent has increased only from ₹ 100/- p.m. to ₹ 170/- p.m. On the other hand, in the aforesaid example, the hardship to the landlord is that it was only in 1940 that he had agreed to accept rent of ₹ 100 p.m. That was the real income from rent which he had agreed to receive. Now with the increase in taxes etc., he gots only ₹ 54 p.m. whereas n 1940, he got ₹ 100 minus ₹ 21.54 (municipal tax ) i.e. ₹ 78.46. So not only is he getting lesser amount in hand but in terms of real value, after taking inflation into account, he is getting only a pittance. For ₹ 100 p.m. of gross rent which he was getting in 1940, he now in 1997 gets a gross rent of about ₹ 170 which in real money terms, after taki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be necessary in the larger interest of the society as a whole but the benefit which is given initially if continued results in increasing injustice to one section of the society and an unwarranted largess or windfall to another, without appropriate corresponding relief, then the continuation of such a law which necessarily, or most likely, leads to increase in lawlessness and undermines the authority of the law can no longer be regarded as being reasonable. Its continuance becomes arbitrary. The Legislature itself, as already noticed hereinabove, has taken notice of the fact that puggrie system has become prevalent in Mumbai because of the rent restriction act. This Court was also asked to take judicial notice of the fact that in view of the unreasonably low rents which are being received by the landlords, recourse is being taken to other methods to seek redress. These methods, which are adopted are outside the fore corners of the Law and are slowly giving rise to a state of lawlessness where, it is feared, the courts may become irrelevant in deciding disputes between the landlords and tenants. This should be a cause of serious concern because if this extn judicial back- lash ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easonable. The said provisions would have been struck down as having now become unreasonable and arbitrary but we think it is not necessary to strike down the same in view of the fact that the present extended period of the Bombay Rent Act comes to an end on 31st march, 1998. The government's thinking reflected in various documents itself shows that the existing provisions have now become unreasonable and, therefore, require reconsideration. The new bill is under consideration and we leave it to the legislature to frame a just and fair law keeping in view the interests of all concerned and in particular the resolution of the State Ministers for Housing of 1992 and the National Model law which has been circulated by the Central Government in 1992. We are not expressing any opinion on the provisions of the said Model law but as the same has been drafted and circulated amongst all the States after due deliberation and thought, there will, perhaps, have to be very good end compelling reasons in departing from the said Model Law. Mr. Nargolkar assured us that this Model law will be taken into consideration in the framing of the proposed new Rent Control Act. We, accordingly, disp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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