Mumbai, The Bombay High Court upheld the Maharashtra government's decision to increase the tenancy rent in Mumbai's Bandra based on the Ready Reckoner (RR) rate, holding that it was not "arbitrary" as the suburb is a real estate zone of high level.
However, a division bench of Justices B P Colabawalla and Somasekhar Sunderesan said the rent cannot be reviewed every five years as per government rulings and must remain the same for the entire duration of the lease.
The court has disposed of a series of petitions filed by various housing societies in Bandra challenging government resolutions in 2006, 2012 and 2018 revising rents of long-term leases granted to them.
The court said the societies have been enjoying huge chunks of land in the prime location of Bandra virtually free of cost.
“If you really broke down what these people are now paying for the land rented to them by the government, it could hardly be considered exorbitant,” HC said.
Through these resolutions, the government took the political decision to adopt the RR to determine the lease rent payable.
The companies claimed that the resolutions were illegal because they sought to increase the rental rent between “400 and 1,900 times,” which they described as exorbitant.
However, the court noted that as per a chart submitted by the government, the liability of each society towards the revised lease rent is a maximum of Rs 6,000 per month and in some cases even less than Rs 2,000 per month.
“When these figures are taken into account and especially the fact that the properties of the petitioner societies are located in Bandra Bandstand (a highly sought after and high real estate area in Mumbai), one can hardly term this increase as exorbitant, exorbitant. and/or manifestly arbitrary,” the high court said.
The HC also noted that since 1951, when their lease contracts were renewed, the societies paid the rent fixed at that time.
"Taking into account the value of money and inflation (and the fact that no review has been carried out), it is clear that these tenants have enjoyed and used all of these properties virtually free of charge for 30 years, even after their lease contracts will expire in 1981," the court states. saying.
Taking these factors into account, the court said, the revised rent increase can hardly be said to be so exorbitant or manifestly arbitrary as to require intervention.
"If individuals want to own large plots of land in a prime locality and want to enjoy this luxury, it is only fair that they have to pay a reasonable sum for it which is now the revised amount," the court said in its order. .
The court said that while the law requires that the government must be fair and reasonable in dealing with its citizens, that does not mean that the government must do charity.
"While it is true that the government should not act like a private landowner whose primary motive would be profit, it is still entitled to a reasonable return on its land," HC said.
The court noted that land is scarce in an island city like Mumbai and when few societies occupy such a finite resource, the rents charged to them must be proportionate to what they enjoy.
The court, however, noted that the rent review provision in the resolutions would be contrary to the lease agreement and struck down that clause from the government resolutions.
"Just as the tenants cannot, under the pretext of asking the State to act fairly, unilaterally seek a modification of the contract, so the State cannot unilaterally modify the contract concluded with the tenants," he said.
However, a division bench of Justices B P Colabawalla and Somasekhar Sunderesan said the rent cannot be reviewed every five years as per government rulings and must remain the same for the entire duration of the lease.
The court has disposed of a series of petitions filed by various housing societies in Bandra challenging government resolutions in 2006, 2012 and 2018 revising rents of long-term leases granted to them.
The court said the societies have been enjoying huge chunks of land in the prime location of Bandra virtually free of cost.
“If you really broke down what these people are now paying for the land rented to them by the government, it could hardly be considered exorbitant,” HC said.
Through these resolutions, the government took the political decision to adopt the RR to determine the lease rent payable.
The companies claimed that the resolutions were illegal because they sought to increase the rental rent between “400 and 1,900 times,” which they described as exorbitant.
However, the court noted that as per a chart submitted by the government, the liability of each society towards the revised lease rent is a maximum of Rs 6,000 per month and in some cases even less than Rs 2,000 per month.
“When these figures are taken into account and especially the fact that the properties of the petitioner societies are located in Bandra Bandstand (a highly sought after and high real estate area in Mumbai), one can hardly term this increase as exorbitant, exorbitant. and/or manifestly arbitrary,” the high court said.
The HC also noted that since 1951, when their lease contracts were renewed, the societies paid the rent fixed at that time.
"Taking into account the value of money and inflation (and the fact that no review has been carried out), it is clear that these tenants have enjoyed and used all of these properties virtually free of charge for 30 years, even after their lease contracts will expire in 1981," the court states. saying.
Taking these factors into account, the court said, the revised rent increase can hardly be said to be so exorbitant or manifestly arbitrary as to require intervention.
"If individuals want to own large plots of land in a prime locality and want to enjoy this luxury, it is only fair that they have to pay a reasonable sum for it which is now the revised amount," the court said in its order. .
The court said that while the law requires that the government must be fair and reasonable in dealing with its citizens, that does not mean that the government must do charity.
"While it is true that the government should not act like a private landowner whose primary motive would be profit, it is still entitled to a reasonable return on its land," HC said.
The court noted that land is scarce in an island city like Mumbai and when few societies occupy such a finite resource, the rents charged to them must be proportionate to what they enjoy.
The court, however, noted that the rent review provision in the resolutions would be contrary to the lease agreement and struck down that clause from the government resolutions.
"Just as the tenants cannot, under the pretext of asking the State to act fairly, unilaterally seek a modification of the contract, so the State cannot unilaterally modify the contract concluded with the tenants," he said.
