We have already observed that on account of rapid growth of population in urban areas, landlords were tempted to terminate the tenancy of the existing tenants and asked for their eviction in order to let out the premises to the new tenants at high rents. Therefore, various States passed their respective rent control legislations for the first time during the second world war and since then there have been a rent control legislations applicable to various urban areas in different States, whose provisions are almost pari materia to each other, because they were enacted to provide for control of rents and evictions. In this Chapter we would be discussing provisions regarding rent with special reference to the Delhi Rent Control Act, 1958.
CHAPTER 2 deals with provisions regarding rent. The chapter starts with section 4 which specifically puts bar on recovery of rent in excess of standard rent unless such amount is lawful increase of the standard rent in accordance with the provisions of the Act. The definition of 'standard rent' contained in section 2(k) that the standard rent of a building means the standard rent referred to in section 6 or where the standard rent has been increased under section 7, such increased rent. This definition is not an inclusive but an exhaustive definition and it defines the standard rent to mean either the standard rent referred to in section 6 or the increased standard rent under section 7. It is significant to note that it does not contain any reference to section 9, sub-section (4). Whenever, therefore, any reference is made to standard rent in any provision of the Rent Act, it must mean standard rent as laid down in section 6 or increased standard rent as provided in section 7 and nothing more. Section 6 lays down the principles for determination of standard rent in almost all conceivable classes of cases and section 7 provides for increase in the standard rent where the landlord has incurred expenditure for any improvement, addition or structural alteration in the premises. Section 9, as the definition in section 2(k) clearly suggests and the marginal note definitely indicates, does not define what is standard rent but merely lays down the procedure for fixation of standard rent. The compulsive force of the formulae laid down in section 6 for the determination of standard rent and of the provisions of section 7 for increase in standard rent is not in any way whittled down by sub-section (2) of section 9 but a marginal discretion is given to the Controller to mitigate the rigour of the formulae where the circumstances of the case so require. The only discretion given to him is to make adjustments in the result arrived at on the application of the relevant formula, where it is necessary to do so by reason of the fact that the landlord might have made some alteration or improvement in the building or circumstances might have transpired affecting the condition or utility of the building or some such circumstances of similar character. Even while fixing such rent, the Controller does not enjoy unfettered discretion to do what he likes and he is bound to take into account the standard rent payable in respect of similar or nearly similar premises in the locality. The standard rent determinable on the principles set out in section 6, therefore, again becomes a governing consideration. The legislature obviously did not intend to vest unguided discretion in the Controller to fix such rent as he considers reasonable without any principles or norms to guide him and, therefore, it provided that in fixing reasonable rent, the Controller shall take into account the standard rent payable in respect of similar or nearly similar premises. The Controller must derive guidance from the standard rent of similar or nearly similar premises in the locality and apart from discharging the function of affording guidance to the Controller in fixing reasonable rent, this requirement also seeks to ensure that there is no wide disparity between the reasonable rent of the premises fixed by the Controller and the standard rent of similar or nearly similar premises situate in the locality. The process of reasoning which the Controller would have to follow in fixing reasonable rent would, therefore, be first to ascertain what is the standard rent payable in case of similar or nearly similar premises in the locality, and then to consider how far such standard rent in its application to the premises, needs adjustment having regard to the situation, locality and condition of the premises and the amenities provided therein. The reasonable rent so determined would be the standard rent of the premises fixed by the Controller. There may, however, be cases where there are no similar or nearly similar premises in the locality and in such cases guideline to the Controller would not be available and the Controller would have to determine as best as he can what rent would be reasonable having regard to the situation, locality and condition of the premises and the amenities provided therein. But such cases would by their very nature be extremely rare and even there, the Controller would not be on an uncharted sea: he would have to fix the reasonable rent of the premises taking into account the standard rent of similar or nearly similar premises in the adjoining locality and making necessary adjustments in such standard rent; Dr. Balbir Singh v. M.C.D., MANU/SC/0222/1984: AIR 1985 SC 339.
1.
Question of law decided: Laid down principles for determining rateable value of a building.
Facts of the case: This group of writ petitions and appeals raise interesting questions of law in regard to determination of rateable value of certain categories of properties situate in the Union territory of Delhi. The questions are of great importance since they affect the liability of a large number of property owners in the Union territory of Delhi to pay property tax under the Delhi Municipal Corporation Act, 1957 and the Punjab Municipal Act, 1911. The appeals before Supreme Court arose out of writ petitions filed in the High Court of Delhi challenging assessments made by the Municipal Corporation while the writ petitions fall broadly into two categories one category consisting of writ petitions which were originally filed in the High Court of Delhi but were subsequently transferred to this Court, while the other consisting of writ petitions which were filed directly in Supreme Court. Supreme Court was of the view that the writ petitions filed directly in the Court were not maintainable under article 32 of the Constitution since none of them complained of violation of any fundamental right and ordinarily would have been rejected straightway without going into the merits, but the parties before the court agreed that in view of the fact that these writ petitions involved identical questions as the appeals and the other writ petitions transferred to the Court and those questions would in any event have to be determined by the court, they should not be dismissed on the ground of non-maintainability but should be disposed of on merits on the assumption that they were maintainable. Court observed on the question raised in the matter as under:
"We are concerned in these appeals and writ petitions with four different categories of properties namely: (i) where the properties are self-occupied, that is, occupied by the owners; (ii) where the properties are partly self-occupied and partly tenanted; (iii) where the land on which the property is constructed is leasehold land with a restriction that the leasehold interest shall not be transferable without the approval of the lessor; and (iv) where the property has been constructed in stages. The question is as to how the rateable value is to be determined in respect of these four categories of properties. So far as properties situate, in the Union territory of Delhi except New Delhi are concerned, the determination of rateable value for the purpose of assessability to property tax is governed by the Delhi Municipal Corporation Act, 1957 while the determination of rateable value for the purpose of assessability to property tax in respect of properties situate in New Delhi is governed by the Punjab Municipal Act, 1911. The relevant provisions of both these statutes in respect of determination of rateable value for the purpose of assessability to property tax are almost identical as observed by this Court in Dewan Daulat Rai Kapur v. New Delhi Municipal Committee, MANU/SC/0393/1979: AIR 1980 SC 541 and it would therefore be sufficient if we refer to the provisions of the Delhi Municipal Corporation Act, 1957. Whatever we say in regard to determination of rateable value under the provisions of the Delhi Municipal Corporation Act, 1957 would apply equally in relation to determination of rateable value under the provisions of the Punjab Municipal Act, 1911."
Findings of the Court: Relevant findings for the purpose of our subject, have already been discussed above.
2.
Q.
Q.
Question of law decided: The mode and manner of exercising option by the landlord to claim increase in the rent is contained in section 8, which enjoins upon the landlord to serve a notice upon the tenant expressing and conveying his intention to make increase in the rent. The increased rent becomes due and recoverable on the expiry of 30 days from the date of the receipt of the same. Facts of the case: The defendant was let out a portion of the suit premises by Pritpal Singh, the father of the plaintiff at a rental of Rs. 1,350 p.m. through lease deed dated 30-9-1976. On additional portion being let out, the rent was enhanced to Rs. 2,800 p.m. On the death of Pritpal Singh, the plaintiff became the owner of the property on the basis of Will dated 24-2-1981 executed in his favour by Pritpal Singh. It is the admitted case of the parties that through lease agreement Ext. PW 1/2 dated 1-9-1982 the plaintiff let out the premises in question to the defendant on a monthly rent of Rs. 3,500. The agreement says that the lessor grants to the lessee the entire ground floor except one room in the right side of the main entrance, first floor and second floor in the property No. 487/79, Peera Garhi, Paschim Puri, Rohtak Road, Delhi for a period of 11 months at a monthly rent of Rs. 3,500, for commercial factory purposes and the lessee shall have the option to renew the lease, on the same rent, for a further period of 11 months, on the same terms and conditions. On 2-7-1992 notice Ext. Public Witness 1/3 was served by the plaintiff on the defendant demanding enhancement in rent at the rate of 10% and calling upon the defendant to increase the rent to Rs. 3,850 p.m. while maintaining that the Delhi Rent Control Act, 1958 has no application to the premises. According to the defendant enhancement was not agreed upon. The defendant continued to remit rent at the rate of Rs. 3,500 p.m. Cheques were returned by the plaintiff. It is stated that the plaintiff thereafter sent notice dated 19-12-1992 terminating the defendant's tenancy w.e.f. 30-6-1993. On failure to vacate, on the basis of notice dated 19-12-1992 the suit for eviction was filed. The defendant contested the suit inter alia on the grounds: that enhancement claimed by the plaintiff was unwarranted and illegal and the same was demanded merely to oust the defendant from the protective umbrella of Delhi Rent Control Act, 1958; that even if lease agreement Ext. PW 1/2, dated 1-9-1982 was unregistered the same, in view of section 49 of the Registration Act, 1908, can be looked into as regards the mode of determination of tenancy, being a collateral purpose and under the terms of the lease agreement the plaintiff had no right to terminate the lease; that the lease was for commercial factory purposes and the duration thereof will be from year to year and thus under law the plaintiff could have terminated the same only on serving six months' notice; the notice Ext. Public Witness 1/9 dated 19-12-1992 did not terminate the lease by the end of the period of tenancy. The suit was decreed holding that on service of notice Ext. Public Witness 1/3 the rent stood enhanced to Rs. 3,850 p.m., as such the premises in question are governed by the general provisions of the Transfer of Property Act, 1882 and not by the Delhi Rent Control Act, 1958, the tenancy was rightly terminated by due service of notice Ext .PW 1/9, the Court had jurisdiction to try the suit and the defendant was liable to pay damages after the tenancy was terminated, which as per the prevailing rent in the locality was held to Rs. 20,000 p.m. The judgment and decree passed by the Trial Court is now under challenge by the defendant primarily on the ground that there has been no valid termination of tenancy. The plaintiff could not have by his unilateral act enhanced the contractual rent from Rs. 3,500 to Rs. 3,850 and thereby debar the defendant from the protective umbrella of the Delhi Rent Control Act, 1958. Judgment and decree is also under challenge with regard to the quantum of damages granted at the rate of Rs. 20,000 p.m. Findings of the Court: The Division Bench of the Delhi High Court through Devender Gupta, Justice observed that there is a material difference between the rights which accrue to a landlord under the Common law and the protection which is afforded to the tenant under the Rent Control Legislation. In the former case the rights and remedies of the landlord and tenant are governed by the law of contract and the law governing property relations. These rights and remedies continued to govern their relationship unless they are regulated by protective legislation, in which case the said rights and remedies remain suspended till the protective legislation continues to remain in operation. Landlord's normal rights, vested in him by the general law, thus, continue to exist till and so long they are not abridged by the special protective legislation. Likewise in the case of tenant the protective shield extended to him survive only so long and to the extent the special protective legislation operates. As such, in the case of a tenant, the protection does not create any vested right which can operate beyond the period of the protection or during the period the protection is not in existence. When the protection does not exist the normal relations of landlord and tenant come into operation. It was further held that the theory of vested right, which may validly be pleaded in support of the landlord's case will not be available to the tenant where the tenant undoubtedly had the rights and remedies under the protective legislation, to claim reliefs against the landlord, lost the same, the moment the protection was taken away since rights and remedies being not vested ones. Undoubtedly under the protective legislation, namely, the Delhi Rent Control Act, 1958 the defendant had the protected umbrella and by virtue of the said protected umbrella he could have been evicted only on the strength of an order passed by Controller appointed under the Act and that also on any of the grounds enumerated under the said Act. Right of the landlord to seek eviction of the tenant under the general law, merely on terminating the tenancy stood suspended and will be deemed to have remained under suspension so long as and to the extent the protective legislation operates. Delhi Rent Control Act, 1958 was amended by the Delhi Rent Control (Amendment) Act, 1988 (52 of 1988). Amendment came into effect from
1-12-1988. Section 3(c) of the amended Act provided that the Delhi Rent Control Act, 1958 will not apply to any premises whose monthly rent exceeded Rs. 3,500. Interpretation and constitutional validity of section 3(c) of the Delhi Rent Control (Amendment) Act, 1988 was upheld in D.C. Bhatia v. UOI, MANU/SC/0516/1995: (1995) 1 SCC 104. The protection against eviction, except on proof of specified grounds, provided under the Delhi Rent Control Act, 1958, which was available to the defendant, not being a vested right, in terms of the ratio of the decision in Parripati Chandrasekhar Rao v. Alapati Jalaiah, MANU/SC/0343/1995: (1995) 3 SCC 709, it will not be permissible to uphold the contention raised on behalf of the defendant that the plaintiff could not, by his unilateral act, of serving a notice to enhance the rent, remove the protected shield available to him. On a combined reading of sections 6A and 8 of the Delhi Rent Control Act, 1958 it cannot be disputed that the landlord will be entitled to claim increase in the rent of the premies by 10% after every three years. Section 6A of the Act says that notwithstanding anything contained in the Act the standard rent or where no standard rent is fixed under the provisions of this Act in respect of any premises, the rent agreed upon between the landlord and tenant may be increased by 10% every three years. Admittedly agreed rent was Rs. 3,500, which was fixed in the year 1981. Landlord under section 6A of the Act as of a right could claim increase by 10%. The mode and manner of exercising the option by the landlord to claim increase in the rent is contained in section 8, which enjoins upon the landlord to serve a notice upon the tenant expressing and conveying his intention to make increase in the rent. The increased rent becomes due and recoverable on the expiry of 30 days from the date on which notice is given. It is not disputed that notice Ext. PW 1/2 in writing was sent on behalf of the plaintiff in the manner as provided in section 8 of the Delhi Rent Control Act, 1958. The enhancement in rent became effective on the expiry of 30 days from the date of receipt of the letter. With regard to the challenge to the impugned judgment on the ground of requiring six months notice to determine the lease it was held that an unregistered lease for manufacturing purpose cannot be deemed to be an yearly lease for the purpose of notice of termination, in view of the provisions contained in section 107 of the Transfer of Property Act, 1882. Consequetly, it was held that, the notice terminating tenancy in the instant case could not be held to be invalid and no interference was called for in the impugned judgment of the Trial Court holding that the tenancy of the defendant was rightly terminated. 3.
Q.
Question of law decided: Where there is an agreed rent between landlord and tenant either prior or earlier to the Amendment Act, providing that the provisions of the Rent Act would not apply to the premises whose monthly rent exceeded Rs. 3500, the tenant is estopped from taking a plea that it is not the standard rent. Facts of the case: On 7th May, 1976, an agreement was entered into between the appellant-tenant and the respondent-landlord, under which the appellant took on lease a shop on a monthly rent of Rs. 5,000 per month. On 11-4-1978, the appellant filed a petition for fixation of standard rent under section 9 of the Rent Act. The contention of the appellant was that the standard rent would be fixed at Rs. 1,350 per month and that the rent agreed upon at Rs. 5,000 per month was excessive. On 23-3-1987, the respondent filed his written statement. The case was pending on 1-12-1988 when section 3(c) was inserted by Amending Act 57 of 1988. On 27-5-2000, when the case was pending, the respondent moved an application under section 151, CPC before the Rent Controller seeking dismissal of standard rent application made by the tenant, in view of amended section 3(c). By order dated 16-12-2000, the Rent Controller allowed the landlord's application and consequently dismissed the standard rent application made by the tenant as incompetent and not maintainable. Being aggrieved, the appellant herein preferred Appeal No. 9 of 2001 before the Tribunal which was dismissed. Aggrieved, the appellant herein preferred second appeal bearing S.A.O. No. 4 of 2001 in the High Court which was also dismissed by the impugned judgment dated 4-5-2001. Hence, this Civil Appeal. Findings of the Court: The Supreme Court after perusing the case and on the subject observed as under: "We do not find merit in the above arguments. There is a difference between a mere right and what is right acquired or accrued. We have to examine the question herein with reference to sections 4, 6 and 9 of the Act. It is correct that under section 4 of the Rent Act, the tenant is not bound to pay rent in excess of the standard rent, whereas under section 9 he has a right to get the standard rent fixed. Such a right is the right to take advantage of an enactment and it is not an accrued right. In the case of D.C. Bhatia v. Union of India, MANU/SC/0516/1995: (1995) 1 SCC 104, it has been held that right of a statutory tenant to pay standard rent is a right to be governed by the Act and if the Legislature repeals the Act or a part of it, the statutory tenant can do nothing about it. It is a mere right and not a vested right. To the same effect is the judgment of this Court in the case of Thyssen Stahlunion GmBH v. Steel Authority of India Ltd., MANU/SC/0652/1999: (1999) 9 SCC 334, in which it is held that right to be governed by the Act is not a right of an enduring nature. What is unaffected by repeal is a right acquired or accrued under the Act. That till the decree is passed, there is no accrued right. The mere right existing on date of repeal to take advantage of the repealed provisions is not a right accrued within section 6(c) of the General Clauses Act, 1897. Further, there is a vast difference between rights of a tenant under the Rent Act and the rights of the landlord. The right of a statutory tenant to pay rent not exceeding standard rent or the right to get standard rent fixed are protective rights and not vested rights. On the other hand, the landlord has rights recognised under the law of the Contract and Transfer of Property Act which are vested rights and which are suspended by the provisions of the Rent Act but the day the Rent Act is withdrawn, the suspended rights of the landlord revive [See Parripati Chandrasekhar Rao & Sons v. Alapati Jalaiah, MANU/SC/0343/1995: (1995) 3 SCC 709]. Lastly, as held by this Court in the case of D.C. Bhatia (supra), the object of the Amending Act, 1988 was to rationalise the Rent Act, whereby the protection given to the richer tenant is withdrawn. The object of the Amendment Act, 1988 is to strike a balance between the claims of the landlord who get meagre rent, particularly in times of inflation and the tenants who equally need protection from arbitrary eviction. In the circumstances, we hold that in view of section 3(c) as amended, the application for fixation of standard rent filed by the tenant on 11-4-1978 has been correctly dismissed as infructuous. We have gone through the decisions cited by the learned Counsel for the appellant. The case of Ambalal Sarabhai Enterprises Ltd. v. Amrit Lal and Co., MANU/SC/0488/2001: (2001) 8 SCC 397, was a case involving rights of a landlord under section 14(1)(b) of the said Act. It was held that a ground of eviction based on illegal sub-letting under section 14(1)(b) of the Rent Act would not constitute a vested right of landlord, but it would be a right within the meaning of section 6(c) of the General Clauses Act, if proceeding for eviction is pending, however, the tenant has no vested right under the Rent Act as the tenant has only a protective right. In the present case, we are concerned with the nature of rights of the tenant under the Rent Act. The ratio of this decision supports our above view. The judgment of the Supreme Court in the case of Atma Ram Mittal v. Ishwar Singh Punia, (1998) 4 SCC 284, has no application to the present case. In that case, the landlord had instituted the suit, in Civil Court in Haryana, for possession of the shop rented out to the tenant in 1978, on the ground of arrears of rent. It was filed in the Civil Court as the premises in question were exempted for 10 years from the Rent Act. On behalf of the tenant, it was urged that in view of section 1(3) of the Rent Act the suit was not maintainable and under section 20 of the Rent Act the jurisdiction of the Civil Court was barred. However, during the pendency of the litigation, the period of exemption/immunity expired. The question was whether the premises which was not 10-years old on the date of the suit and which was exempted from the operation of the Rent Act would be governed by it on expiry of ten years during the pendency of the litigation. The tenant succeeded before the High Court on the ground that the suit was filed during the immunity period and it was barred under section 20 of the Rent Act. Allowing the appeal, this Court held that if the immunity from the Rent Act depended upon the ultimate disposal of the case within ten years, which is in reality an impossibility, the immunity would become illusory. In coming to that conclusion, this Court invoked the doctrine of actus curiae neminem gravabit - an act of the Court shall prejudice no man. In that case, the rights of the landlord under the Rent Act were suspended for 10 years but on expiry they stood revived. The matter was concerning the rights of the landlord. In the circumstances, the judgment of this Court in the Atma Ram Mittal (supra) has no application to the facts of the present case. Similarly, the judgment of this Court in Raval & Co. v. K.G. Ramachandran, MANU/SC/0416/1973: (1974) 1 SCC 424, has no application to the facts of the present case. In the said case, one of the arguments advanced on behalf of the tenant was that the fixation of fair rent under the Tamil Nadu Rent Control Act, could only be downwards from the contracted rent and the contract rent was not to be increased. It was held by this Court, by a majority decision, that the Tamil Nadu Rent Control Act, was a complete Code in respect of contractual tenancies as well as statutory tenancies. That the scheme of the Act was different from the Bombay Rent Act. On close reading of the Tamil Nadu Rent Control Act, this Court found that the fair rent was required to be fixed for the building which was something like an incident of tenure regarding the building. This conclusion was based on the scheme of the Tamil Nadu Rent Control Act. Hence, the judgment of this Court in the case of Raval & Co. (supra), has no application to the facts of this case. In any event of the matter where there is an agreed rent between landlord and tenant either prior or earlier to the Amending Act providing that the provisions of Rent Act will not apply to the premises whose monthly rent exceeded Rs. 3,500 the tenant is estopped from taking a plea that it is not the standard rent." Hence, the appeal was dismissed without any costs. 4.
Question of law decided: Provision regarding section 3(c) of the Delhi Rent Control Act, 1958, as introduced by Delhi Rent Control (Amendment) Act, 1988 is valid and not unconstitutional. Facts of the case: This appeal was heard alongwith number of other appeals, special leave petitions and writ petitions raising common question of law relating to interpretation and constitutional validity of section 3(c) of Delhi Rent Control Act, 1958. The Delhi Rent Control Act, as amended by Act No. 52 of 1988 came into effect from 1-12-88. Section 3(c) of the amended Act provided that the provisions of the Delhi Rent Control Act will not apply to any premises whose monthly rent exceeded Rs. 3,500. The appellant thereupon filed a writ petition in the Delhi High Court challenging the validity of the newly inserted section 3(c) of the Act. The appellant's writ petition was heard along with a batch of other writ petitions. By a judgment dated February 11, 1991, the Delhi High Court held that section 3(c) was a valid piece of legislation and did not contravene any of the provisions of the Constitution. Following its judgment in Civil Revision No. 470 of 1981 (Nirmaljit Arora v. Bharat Steel Tubes), it also held that section 3(c) was prospective and did not affect the cases that were pending on the date it came into operation. The appeals were directed against the judgment of the Delhi High Court dated 11th February, 1991. Findings of the Court: After perusing section 3 of the Delhi Rent Control Act, 1958, Supreme Court observed that- "In order to strike a balance between the interests of the landlords and also the tenants and for giving a boost to house building activity, the Legislature in its wisdom has decided to restrict the protection of the Rent Act only to those premises for which rent is payable upto the sum of Rs. 3,500 per month and has decided not to extend this statutory protection to the premises constructed on or after the date of coming into operation of the Amending Act for a period of ten years. The classification has been made on the basis of the rent payable on the premises." Hence constitutional validiry of the said amendment was upheld. 5.
Q.
Question of law decided: The provisions relating to standard rent namely sections 4, 6 and 9 of the Delhi Rent Control Act, 1958 offend articles 14, 19(1)(g) and 21 of the Constitution and accordingly are ultra vires the Constitution. Facts of the case: This is a writ petition whereby the petitioner primarily challenges the provisions of sections 4, 6, 9 of Delhi Rent Control Act, 1958 being violative of articles 14, 19(1)(g) and 21 of the Constitution of India. The petitioner also seeks a direction to the first respondent to rationalise the provisions of Delhi Rent Control Act, so that the petitioner is assured of receiving reasonable rent for his properties let out to the tenants. The petitioner is the owner of a building bearing No. 40-42, Janpath, New Delhi. It is claimed that the said building was completed in the year 1938 at a cost of Rs. 2,50,362.50 and the same was let out to various tenants about 40-50 years back. The grievance of the petitioner is that under the provisions of the Delhi Rent Control Act, 1958 the rent is pegged at a very low level which is highly unjust, unfair and unreasonable. The petitioner claims that his rights under articles 14, 19(1)(g) and 21 of the Constitution have been abridged by sections 4, 6 and 9 of the Delhi Rent Control Act, 1958. Findings of the Court: After perusing the definitions of 'basic rent' and 'standard rent' under section 2 of the Delhi Rent Control Act and other related provisions namely, sections 3 to 9 of the Act, read with Second Schedule appended thereto, the Court was of the view that when sections 4, 6 and 9 of the Delhi Rent Control Act, 1958 were enacted there may have been a justification, but with the passage of time the provisions have fallen foul of articles 14, 19(1)(g) and 21 of the Constitution due to changed circumstances. Even section 6A has not been able to cure the defects. Since the fact situation prevailing in the year 1958 has undergone a sea change, sections 4, 6 and 9 relating to standard rent have been rendered unjust, unreasonable and unfair as they have kept the standard rent yoked to the levels of the past, including the levels prior to the year 1944. Even if section 6A is applied to a situation where a landlord was getting Rs. 50 per month as standard rent in respect of his premises, the increase would be only Rs. 5 every three years. With such a meagre increase how would the landlord maintain himself, his family and the property. Obviously fair, just and reasonable increase in rents will act as an incentive for people to build and maintain their premises. The Court further observed that: "The National Housing Policy of 1992 which was considered and debated in the Parliament provides for giving stimulus to investment in rental housing. One of its major aims is to remove legal impediments in the growth of housing in general and rental housing in particular. Just, fair and reasonable increase in the rents will certainly give impetus to rental housing. It is a misconception that only wealthy people construct houses. On the contrary, persons of modest means and those serving in the Government and public and private sectors also build houses by taking loans in the hope that they will be able to pay off the loans by letting out their premises. It is a well-known fact that majority of flats and apartment buildings in Delhi have been allotted to persons belonging to low and middle income groups. They hardly fit in the mould of landlords. Their financial position is worse than some of the tenants. The situation of landlords in respect of old commercial tenancies is no different than the position of landlords in respect of old residential tenancies. It is not uncommon that commercial properties rented long back are fetching very meagre rents, while the tenants running their trades in those properties are earning huge profits. This is an unjust and unreasonable situation. It must be pointed out that it is not always correct that all tenants are poor or all landlords are rich. Poor and rich are evenly divided amongst landlords and tenants. Therefore, there is a need to rationalise the rents and treat both sides fairly. No one should gain at the cost of the other. As already noticed, the prices of goods and commodities have been continuously on the rise, but rents of premises to which Delhi Rent Control Act, 1958 applies, have remained more or less static. The Government and the employers in the public and private sectors in order to offset the effect of inflation compensate their employees by giving them dearness and other allowances which are increased from time-to-time, but the landlords who have let their properties since long and who are not in a position to get them back due to legal impediments are not lucky enough to be considered for grant of reasonable rents to minimise the effect of inflation. Since frozen rents are contributing to lack of interest in the people to build houses, it is contributing to growth of slums. This situation must be remedied. In case the present situation is allowed to continue it will also amount to wasting the much needed capital of the country. Reasonable increase in rents will not only generate income for the landlords, it will also generate increased taxes as higher rental income will give rise to higher collection of property tax and income tax from the landlords. The Supreme Court, while dealing with the vires of the Bombay, Rents, Hotel and Lodging House Rates Control Act, 1947 as amended by Act 18 of 1987, in Malpe Vishwanath Acharya v. State of Maharashtra, 1997 (7) SCALE 786 highlighted the baneful effect of frozen rentals in the context of dwindling money value and inflation. In this regard it kept in view the recommendation of various conferences, and reports and resolutions of Commissions and Committees including the report of the Economic Administrative Reforms Commission on Rent Control, commonly known as L.K. Jha Committee, which reads as follows:- "We now turn to the problem of existing tenancies. Many of these are very old and the rents were fixed a few decades ago. These old and frozen rents bear little relation to the present day maintenance costs, or to the current returns from alternative investments, or to the prevailing market rents in respect of new accommodation. In the case of new construction we have suggested that the periodical revision of rents should be based on a partial neutralisation of the effects of inflation. Applying the same principle to existing tenancies where rents have remained frozen for at least 5 years, what needs to be done is to update those rents by neutralising 50 per cent. of the inflation which has taken place from the time of initial determination of those rents upto the present time." ***** "Similarly in the case of existing tenancies, all that needs to be done is to provide a formula for updating the old frozen rents, and thereafter periodically revising them. The Supreme Court also took note of Resolution No. 4 passed at the Conference of the Housing Ministers of all States held on May 21/22, 1987 which inter alia recommended as follows:- "***** 4.2.This conference urges upon the Government of India to formulate and communicate to the State Governments for necessary action suitable guidelines as soon as possible during the current year for their consideration so as to provide for the expeditious amendment of Rent Control Laws with 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 erosion in the real value of rents. *****" Thereafter, the Court also considered unanimous recommendations of the Conference of the Chief Ministers of all States held at New Delhi in 1992 on the discussion related to static rents and problems arising therefrom. Hence the view taken was that, thus, it is apparent that there is an acute need to balance the rights of the tenants on the one hand and the landlords on the other. Besides, it cannot be disputed that the need of the hours is to give fillip to construction for rental housing. In case the rents remain shackled to low levels or they are hiked beyond proportion, the desired results will not be achieved. The provisions of sections 4, 6 and 9 cannot be upheld as they are keeping the rents chained to low level which render them arbitrary. This unreasonable and unfair restriction needs to be eliminated from the provisions dealing with standard rent. The High Court also took note of the deleterious effect of the non provision in the rent legislation for reasonable increase in the rentals, as observed by the Supreme Court in Malpe Vishwanath Acharya v. State of Maharashtra, 1997 (7) SCALE 786, in the following words:- ".....Even so with the rapid increase in the expenses for repair and other outgoing 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 the time, is leading to arbitrary results..." ***** That the tenants are, by and large, now getting an unwarranted benefit or windfall can also be illustrated by taking an example of a hypothetical tenant, i.e., an Assistant in the Government of India posted at Bombay in the year 1948. At that time the pay scale of the Assistant was Rs. 160 - 10 - 300 - 15 - 450 + 20% H.R.A. = Rs. 15.50 C.A.A. On the basis that he was drawing the maximum of scale, his total monthly emoluments would be Rs. 485.50 and if he had in 1948 taken premises on rent at Rs. 100 per month, he would be paying approximately 20% of his total emoluments by way of rent, without taking into consideration any deduction for repairs. That Assistant in 1997, after the report of 5th Pay Commission, would get a maximum basic salary of Rs. 9000 + 30% H.R.A. + Rs. 200 p.m. as CCA making the total emoluments of Rs. 11900 p.m. After taking into consideration the 1987 increase in rent, he would be paying about Rs. 170 p.m. in respect of the same premises instead of Rs. 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 would 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 Rs. 100 p.m. to Rs. 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 Rs. 100 p.m. That was the real income from rent which he had agreed to receive. Now with the increase in taxes, etc. he gets only Rs. 54 p.m. whereas in 1940, he got Rs. 100 minus Rs. 21.54 (municipal tax) i.e.
*****
"It is true that whenever a special provision, like the Rent Control Act, is made for a section of the society it may be at the cost of another section, but the making of such a provision or enactment may 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 largesse or windfall to another, without appropriate corresponding relief, then the continuation of such a law which necessarily, or most likely leads to increase in law lessness and undermines the authority of the law no longer be regarded as being reasonable. Its continuance becomes arbitrary.
The Legislation 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 four corners of the law and are slowly giving rise to a state of law to 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 extra judicial backlash gathers momentum the main sufferers will be tenants, for whose benefit the Rent Control Acts, are framed.
In so far as social legislation, like the Rent Control Act is concerned, the law must strike a balance between rival interest and it should try to be just to all. The law ought to be unjust to one and give a disproportionate benefit or protection to another section of the society. When there is shortage of accommodation it is desirable, way, necessary that some protection should be given to the tenants in order to ensure that they are not exploited. At the same time such a law has to be revised periodically so as to ensure that a disproportionately larger benefit than the one which was intended is not given to the tenants. It is not as if the Government does not take remedial measures to try and offset the effects of inflation. In order to provide fair wage to the salaried employees the Government provides for payment of dearness and other allowances from time-to-time. Surprisingly, this principle is lost sight of while providing for increase in the standard rent-the increase made even in 1987 are not adequate, fair or just and the provisions continue to be arbitrary in today's context.
When enacting socially progressive legislation the need is greater to approach the problem from a holistic perspective and not have a narrow or short sighted parochial approach. Giving a greater than due emphasis to a vocal section of society results not merely in the miscarriage of justice but in the abdication of responsibility of the Legislative Authority. Social legislation is treated with deference by the Courts not merely because the Legislature represents the people but also because in representing them the entire spectrum of views is expected to be taken into account. The Legislature is not shackled by the same constraints as the Courts of Law. But its power is coupled with a responsibility. It is also the responsibility of the Courts to look at legislation from the angle of article 14 of the Constitution. This article is intended, as is obvious from its words, to check this tenancy, giving undue preference to some over others."
The Court also relied upon the judgment of Kerala High Court in Issac Nina v. State of Kerala, 1995 (2) KLT 848, in which it was held as follows:-
".....What was once a non-discriminatory piece of legislation may in course of time become discriminatory and be exposed to a successful challenge on the ground that it violated fundamental rights of the Constitution."
".....As held by the Supreme Court in Inder Mohan Lal v. Ramesh Khanna, MANU/SC/0762/1987: (1987) 4 SCC 1, there is no presumption in all cases that the tenants are weaker sections. By lapse of time the tenants (at least many of them) doing business in commercial buildings taken on rent are far more affluent financially than the owners of the building in which they do business. Though the rent control legislation is stated to be a beneficial one, it must be reasonable, just and fair. It is true that there is a presumption as to the constitutionality of the provision of a legislative enactment and the Act should be so read as to prevent it from being exposed to the vice of unconstitutionality. But the presumption will stand rebutted if the scrutiny of the impugned provision would unmistakably establish that it violates a fundamental right."
".....The Supreme Court held in State of Madras v. V.C. Row, MANU/SC/0013/1952: AIR 1952 SC 196, that reasonableness of the restriction is to be considered both from the point of substantive law as well as procedural law. In deciding the reasonableness of the restriction several circumstances such as the purpose of the Act, the condition prevailing in the country at the time of enactment, duration of the restriction, extent and nature of the restriction, are to be taken into consideration."
"Disparity between the cost of living or the rupee value in 1965 and 1995 is so massively vast that it is absolutely unrealistic to act on the former for any final reckoning as for the latter. If a building was leased out in 1950, the property tax would have been, from the angle of today's money value, a piffling. The requirement in section 5(2) that the Court shall take into consideration the property tax fixed at the time of lease, if to be followed in 1995 in respect of a building leased in 1950, the result would be ostensibly unjust and unreasonable. We bear in mind that no provision is included in the Act for updating according to the rupee value while fixing the fair rent."
"Nor can we shut our eyes to the other side of the picture. A tenant who took the building for commercial purposes in 1950 could increase turnover of his business many times and as a corollary his margin of profit would have enhanced leaps and bounds. But the person who built the building (in which the tenant conducts the business) is entitled to get a rent based on 1950 money value. Similar position arises in the case of a residential building. The tenant who occupies the building would have augmented the resources or at least his income today is on par with the present money value. But the man who invested money to build a house in which the tenant is residing is entitled to get rent only at the rate based on the money value which prevailed at the time of letting."
"Apart from the fact that the impugned provisions are unjust and unreasonable as they offend article 14 of the Constitution, we may say that those provisions would offend article 19(1)(g) also."
"We are, therefore, of the opinion that the impugned provisions do not stand the test of reasonableness. Accordingly, we declare that provisions relating to fair rent, i.e., sections 5, 6 and 8 of the Act, put together are ultra vires the Constitution of India and are void."
Applying the same rationale as was applied by the Supreme Court in Malpe Vishwanath Acharya (supra) and the Kerala High Court in Issac Nina (supra), Judges were of the view that sections 4, 6 and 9 of the Delhi Rent Control Act, 1958, dealing with determination and fixation of standard rent, which have not taken into account the huge difference between the cost of living in the past and the present time, do not pass the test of reasonableness. The provisions are archaic. They contain no mechanism to compensate the landlords to offset inflation. There ought to be a mechanism to increase the agreed rents keeping in view the price index. The landlords are being treated arbitrarily, unreasonably and unfairly affecting their livelihood and in turn right to life and avocation. These provisions relating to standard rent, therefore, offend articles 14, 19(1)(g) and 21 of the Constitution.
Accordingly, the writ petition is allowed.
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