JUDGMENT <NAME>, <NAME>

1. The two petitioners before us are societies registered under the Societies Registration Act . The second petitioner, <ORG>, Kakinada Collected donations from public and started <ORG> at Kakinada in 1958. As the amount collected was not sufficient for the building and the equipment for the college and also for its running expenses, the society began to collect not only the tuition fees from the students, but also donations from persons who sponsor the applications for admission by the students. The college received donation of Rs. 6,000/- from each student in 1958. It was increased from time to time and at present it is receiving a sum of Rs. 16,000/- from each student. The increase was necessitated by reason of the increased expenditure consequent on the rise in prices of laboratory equipment etc. and increase in pay allowances of the teachers and other staff. In 1964 <ORG> and <ORG> to which the college was affiliated insisted on the college having a separate governing body instead of the governing body of <ORG>. Therefore, a separate society with its own constitution was registered under the name, Kakinada with a separate governing body and the second petitioner handed over the management of the college to the new governing body by a resolution dated 11-4-1964. The governing body consists among other of the following ex-officio members. The Secretary, <ORG>, State of Andhra Pradesh, the Director of <ORG>, the District Collector, East Godavari and the Superintendent of <ORG>, Kakinada.

2. Though no grant is given to the college by the <ORG>, the <ORG> has given the college the facility of using <ORG>, Kakinada for the purpose of teaching as without this facility the college could not function. The expenditure relating to the salaries etc., of the clinical staff working in the college and Hospital is being incurred by the <ORG>. There were persistent protests by the public against the exaction of Rs. 16,000/- per seat for every candidate admitted into the college and there were demands, in <ORG>, from <ORG>., and from the public that the petitioner and other medical colleges which were collecting capitation fee, should be taken over by the <ORG>. The <ORG> therefore decided that such colleges including the petitioner college should be taken over by the <ORG> in due course.

3. As a preliminary step to such acquisition the <ORG> passed an ordinance called the Rangaraya Medical College (Taking Over of Management) Ordinance 6 of 1977 whereby the management of the first petitioner college was vested in the <ORG>. The petitioners thereupon filed this writ petition praying for the issue of a writ in the nature of a writ of mandamus restraining the <ORG> from enforcing the provisions of the Andhra Pradesh Ordinance 6 of 1977.

4. Several grounds were urged in the writ petition against the validity of the Ordinance. The principal contention was that the ordinance is in substance one relating to compulsory acquisition of the petitioner's properties without making provision for payment of adequate compensation and violates Article. 31(2) of the Constitution. Although the ordinance purported to vest only the management of the college in the <ORG>, the various provisions of the Ordinance made it clear that, under the guise of management, all the assets and rights of the college were also taken over. It was submitted that the Ordinance was therefore outside the purview of Article. 31-A(1)(b) of the Constitution which covers only cases of taking over the management of property for a limited period in public interest. Lastly, it was urged that the Ordinance was brought about by the <ORG> at the instance of <NAME> one of the members of <ORG> of the second petitioner society who could not succeed in getting himself elected as President of the society. Apart from this, the present President is also the President of <ORG>. The State <ORG> which is headed by the <ORG> caused the Ordinance to be promulgated under the influence of <NAME> with the mala fide intention of causing loss to the society and harassing the President.

5. Before the writ petition was heard the Ordinance was replaced by the Rangaraya Medical College (Taking over of the Management) Act (17/77) which received the assent of the President on the 23rd of July, 1977. The petitioners were therefore allowed to amend their Writ Petition by challenging the validity of the Act which had replaced the ordinance. The petitioners filed W. P. M. P. No. 3722/77 praying for such an amendment. In this petition in addition to the various grounds urged in the writ petition it was also contended that under Article. 31-A(1)(b) of the Constitution the taking over of the management should be only for a limited period and does not cover taking over of the management for the purpose of acquisition. It was also contended that the expression taking over management in Article. 31-A(1)(b) of the Constitution would only apply to cases where management simpliciter was taken over without taking possession of the properties and assets of the petitioners.

6. In the counter affidavit filed on behalf of the <ORG>, the allegations of mala fide are denied. Neither <NAME> nor any other person had any concern with the promulgation or passing of the Ordinance. It was due to the persistent protests from the public against the exaction of huge capitation fee of nearly Rs. 16,000 per seat and the repeated complaints of responsible person like members of <ORG> and <ORG>, the Government decided to bring forth this legislation. <ORG> had also expressed the view that the <ORG> Government of Andhra Pradesh, Bihar, Maharashtra and Karnataka concerned should abolish the system of charging capitation fee for admission to the Medical Colleges concerned. It was also felt that if the system is abolished substantial number of seats could be reserved for Scheduled Castes and Scheduled Tribes in these colleges. It is also pointed out that most of the members who agitated for the taking over of the college include prominent members of <ORG> and opposition parties and it is therefore absurd to suggest that the legislation was effected as the President of the second petitioner was the President of <ORG>. On the merits it is stated that the Ordinance and the Act being legislation for taking over management of the property of the petitioners for a limited period in public interest they are outside the pale of Article. 31 of the Constitution and are covered by Article. 31-A(1)(b) of the Constitution and are not void because of the absence of provision for adequate compensation. It is denied that under the guise of taking over management the college itself is being acquired. It is submitted that the legislation is not one whereby the property of the petitioners is taken possession of, but is one whereby only the management of the property of the petitioners is taken over by the <ORG>.

7. Though allegations of mala fide are made in the petition, no sufficient material is placed before us to substantiate that plea. It is also to be noted that we are not concerned here with an executive act of the Government but with legislation duly passed by the legislature. It is well settled that the validity of a legislation cannot be attacked on the grounds of mala fides and it is not the province of the <ORG> to go into the motive of the legislature in enacting legislation, nor is it for the <ORG> to scan the wisdom or the reasonableness of the policy behind a statute. <NAME>, learned counsel for the petitioner, in the above circumstances very rightly in our opinion did not seriously press the contention that the legislation is vitiated by mala fides.

8. Article. 31-A(1)(b) of the Constitution was introduced by the Constitution Fourth Amendment in 1955 and reads:

"Notwithstanding anything contained in Article. 13 no law providing for

(a) ......................................................................................................................................................

(b) taking over of the management of any property by the <ORG> for a limited period either in public interest or in order to secure proper management of the property .....................................................................

(c) .......................................................................................................................................................

(d) ......................................................................................................................................................

(e) .......................................................................................................................................................

shall be deemed to be void on the ground that it is inconsistent with or takes away or abridges any of the rights conferred by Article. 14, Article. 19 or Article. 31 of the Constitution."

In order that Article. 31-A (1)(b) may apply (a) the legislation must be one whereby the management of any property is taken over by the state; (b) it should be for a limited period; (c) it should be in the public interest or in order to secure proper management of the property.

9. Section 4(1) of the Act provides at the management of the college shall in the <ORG> and shall continue to so vest for a period not exceeding five years, or until the medical college is acquired, whichever is earlier. It is clear from this provision that the management is taken over for a limited period, namely, not exceeding five years or until the medical college is acquired whichever is earlier. Hence condition (B) is satisfied. Reference was made to the decision of <ORG> in <CITATION> , . Under Section 44 of the Bombay Tenancy and Agricultural Lands Act  the State <ORG> was entitled to assume management in certain circumstances of any land-holder's estate. Section 61 provided that the State <ORG> may direct that the said management shall be terminated when it is of opinion that it is not necessary to continue the management of the estate. Rule. 35 of the Rules made under the Act stated that the Manager of an estate of which management has been assumed shall, before, the 31st day of March following the year in which the management has been assumed, send a report and state whether it is necessary to continue the management. After considering the report the State <ORG> shall decide whether the management should be terminated or continued and if so for what period, such period not being in excess of five years at a time. If the management was to be continued beyond the expiry of ten years, the Collector has to hold a formal inquiry and send a report to the State <ORG> which had to be taken into consideration by the State <ORG> before it decided to continue the management any further. <ORG> held that protection of Article. 31-A (1)(b) is available only where there is a definite limit in the law for the period of management. Neither Section 61 alone nor read with the rule indicate any such limit. They did not accept the argument that so long as there was possibility of return of land to the original owner it must be construed that the management is of a limited period. If the management was likely to continue for an indefinite period it was not in any sense limited. In the present case however, a limited period is fixed, namely, either five years or until acquisition of the college whichever is earlier. If it was stated in the Act that the management was until acquisition it could have been argued on the strength of the decision of <ORG> that the period is indefinite and it cannot be stated definitely when the college would be acquired. But in this case the legislature has taken care to provide that the period is either five years of until the acquisition of the college whichever is earlier. Thus, even if there is no acquisition the management cannot extend over a period of five years. We are therefore of the view that condition in Article. 31-A (1)(b) that the management should be for a limited period is fulfilled in this case.

10. Reference was also made to <ORG> v. <ORG>, ILR (1974) 1 Delhi 311. In that case Section 4(2) of the Sick Textile Under taking (Taking Over of Management) Act (1972) provided that, in certain circumstances, the Central <ORG> may make a declaration that the management of a textile undertaking ought to be taken over by it. The long title of the Act however recited that it was an Act to provide for taking over in the public interest of the management of the stick textile undertaking pending nationalisation of such undertakings. <ORG> held that Article. 31-A (1)(b) was not applicable. It observed that the specification for a limited period mentioned in the Article. necessarily assumes that after the expiry of the limited period the management will be returned to the old management but the impugned Act does not at all contemplate the return to private management and specifically provided for taking over of the management of sick textile undertakings pending nationalisation of such undertakings. Thus the take-over of management cannot be said to be for a limited period within Article. 31-A (1)(b). It is to be noticed that in that case Section 4(2) did not specify any period during which the <ORG> would be in management. It was only in the long title that it was mentioned that the taking over of management was pending nationalisation. Hence in that case there was no limited period. As observed by <ORG> in <CITATION> (supra) the period is indefinite as it could not be said with any degree of certainty when the undertaking would be nationalised. For the above reason we agree with the conclusion of <ORG>. We however do not agree with the observation that merely because he Act does not contemplate the return to private management and specifically provides for taking over of the management pending nationalisation it cannot be said to be for a limited period. Article 31-A (1)(b) does not require that the management should be handed over to the old management after the expiry of the period. If the period is limited, Art. 31-A (1)(b) would in our view be applicable even though at the end of the period the undertaking would be acquired and is not returned to the old management.

11. It was also contended that the management was not taken in public interest or to secure proper management of the property. In the counter affidavit it is stated that there was a clamour from all sources against the exaction of a huge amount of capitation fee of Rs.16,000/- per seat. Questions were raised in the legislature. Even the Central <ORG> pointed out that private medical colleges which were collecting such captitation fee should be taken over by the <ORG>. The petitioner was given the facility of using <ORG> , Kakinada and the expenditure relating to salaries of the clinical staff working in the college and hospital was incurred by the <ORG>. If the <ORG> felt that as the admission to the college was limited only to a privileged few who could afford to pay the enormous amount of Rs.16,000/- as capitation fee and when <ORG> was being utilised for the benefit of the college and considerable expenditure was incurred by the <ORG> for maintaining the clinical staff of the college and the hospital , it cannot be said that the <ORG> was not acting in public interest in deciding to acquire the college and to take over the management of the college in the meanwhile. It has also to be noted that this would enable the <ORG> to reserve some seats for the Scheduled Castes and Scheduled Tribes. In the above circumstances though a contention was raised in the writ petition that the management was not in the public interest, <NAME> could not and did not seriously argue that taking over of the college was not in public interest. He however contended that in this case condition (a) referred to above is not satisfied as this is not a case of mere taking over management. He submitted firstly that in truth and in fact, this is a case of acquisition of the college or at any rate taking possession of the college. He further submitted that in assuming that the management of the property was taken over, it is only taken over of the management simpliciter that is covered by Art. 31-A (1)(b) and in such taking over of the management is coupled with taking of possession it is outside the purview of the said Article. Mr. <NAME> drew our attention to the various provisions of the Act. Under S. 4(2) of the Act <ORG> shall be deemed to include all assets, rights and lease holds, powers, authorities and privileges and all property, movable and immovable, including lands, buildings, stores, instruments and vehicles, cash balances, reserve fund, investments and book debts and all other rights and interests arising out of such property as were immediately before the appointed day in the ownership, possession, power or control of the private management and all books of account, registers and all other documents of whatever nature relating thereto. Under S. 4 (3) any contract, whether express or implied or other arrangements in so far as it relates to the management of the medical college and in force immediately before the appointed day shall be deemed to have terminated on the appointed day. Under S. 4 (6) every person in whose possession or custody or under whose control the medical college or any part thereof or any property attached thereto may be immediately before the appointed day, shall deliver possession of the medical college or such part thereof or any properties attached thereto as the case may be to the special officer. Section 4(7) provides that liability incurred by the private management in relation to the medical college before the appointed day shall be enforceable against the private management and not against the <ORG> or the Special Officer. Private management is defined in S. 2 (f) as meaning both the societies namely petitioners 1 and 2. The learned counsel for the petitioners submit that these and other provisions make it clear that under the guise of taking over management, the <ORG> is practically acquiring the college or at any rate taking possession of the college. We are not inclined to agree with this submission. The preamble to that Act says that this is an Act to provide for the taking over of the management pending acquisition of the college. Under S. 4(1) it is only the management of the college it vests in the <ORG>. It is clear that these provisions that the legislation is one whereby the management of the college is taken over. It is no doubt true the college and its properties including cash balance etc., are also taken possession of by the Special Officer. But it is clear that such possession is taken only for the purpose of management. Without taking possession of the property, movable and immovable or the cash balance etc., it will be impossible to manage the college. Hence the mere fact that the act also provides for taking possession of the property of the college does not render the legislation any the less a legislation whereby the management of the college is taken over. The fact that possession is only taken for the purpose of management is made clear by S. 6 which provides that during the period when the management of the medical college remains vested in the <ORG> it shall pay to the person interested in respect of any property such sum as is equal to the rent which would have been payable for its use and occupation if it is an immovable property, or for its use if it is a movable property had it been taken on lease for that period. Under the proviso it is stated that if the sum is not settled by any agreement, the matter shall be referred to the arbitrator for making an award. An appeal lies to <ORG> against such award under S. 7 . Again the preamble makes it clear that the taking over of management is pending the legislation. In other words acquisition is to follow at a future date and is not made under the Act.

12. The learned counsel for the petitioner strongly relied on the decision of <ORG> in Amritsar Municipality v. State of Punjab, where taking over by <ORG> which were run by <ORG> together with all the buildings in which the schools were functioning and other movable and immovable properties connected with the institutions which belonged to the committee, under the Punjab Local Authorities (Aided Schools) Act (22 of 1959) was challenged. It was contended that taking over of movable and immovable property of the <ORG> could not possibly fall within Art. 31-A (1)(b) of the Constitution. <ORG> while observing that though under Art. 31-A (1)(b) the management of the Schools could be taken over by the state for a limited period in public interest, S. 3 (2) of the Act provided that all rights and interests of the <ORG> including the rights of maintenance, management and control shall be transferred and vest in <ORG>. This essentially had reference to proprietary and ownership rights apart from the rights pertaining to management and control. Further S. 6 of the Act provided that S. 52 (1) and S. 59 of the Punjab Municipal Act must be deemed to have been amended. By virtue of the amendment of S. 59 , of the Punjab Municipal Act, all rights and interests in the lands, buildings etc. of the school as also the movable property shall be deemed to have been transferred to <ORG>. In those circumstances it was held that S. 3 (2) of the Aided Schools Act and the amendments of S. 52 (1) of the Municipal Act were held to be unconstitutional as they contravened Art. 31 (2) of the Constitution. It has to be noticed that Ss. 3 (1), 4 and 5 which related only to the taking over management were held not to be in conflict with the Constitution in view of Art. 31-A (1)(b). The position in the present case is entirely different. Whereas in the case before <ORG> the proprietary and ownership rights apart form the rights pertaining to management and control were taken over by the Sections which were declared unconstitutional, in the present case it is only the management that is vested in the <ORG> under S. 4(1) of the Act. No doubt, S. 4(2) defined 'medical college' as including all rights and all property, movable and immovable including cash balances etc. but read with S. 4(1) it is clear that it is not the property but the management of such property that vests in the <ORG>. In <NAME> v. Sub-Divnl. Education Officer, Hazipur, it was held that the appointment of a Managing <ORG> of a school does not amount to acquisition of the school and therefore the action of the <ORG> under the Bihar High School (Control and Regulation of Administration ) Act, 1960, does not involve infringement of Art. 31 (2) of the Constitution. In this case also the effect of the Act is that the Special Officer steps into the shoes of the Managing <ORG> until the college is acquired. <CITATION> , <ORG> had to consider the validity of the Kerala University Act . One of the grounds on which it was attacked was that it violated Art. 31-a (1) (b) of the Constitution. Dealing with that contention <ORG> observed that the saving in Art. 31-A (1)(b) is not available as the assent of the President was required in order that the article is applicable and in that case the assent was not obtained. Further it was observed that S. 63 (1) of the Act involved the transfer of right to possession of the properties and that section provided for compulsory requisition of the properties within Art. 31 (2) and (2-A). It is thus seen that <ORG> was not dealing with a case where the <ORG> was only taking over management but a case which involved the transfer of possession by way of compulsory acquisition. The transfer of right to possession in that case was not merely an incident of right to management as in the present case.

13. The learned counsel for the petitioners also referred to the decision of <ORG> in <CITATION> ., . But this decision was rendered prior to the introduction of Art. 31-A (1)(b). As a matter of fact it was this decision that necessitated the Fourth Amendment of the Constitution under which Art. 31-A (1)(b) along with other articles was introduced. The observation of <ORG> in that decision are not in any way helpful in interpreting Art. 31-A (1)(b) which was introduced later.

14. The learned counsel for the petitioner submitted that under S. 4 (2) the cash balance also vests in the Government and it is settled law that in exercise of the right to acquire property, cash cannot be acquired and he referred to the decisions in <CITATION> , ; <ORG>. v. State of Bombay, and <ORG> v. <NAME>, . This argument proceeds upon a misconception, namely that cash balances are acquired by the Government. Reading S. 4(1) and (2) of the Act together it is clear that the Government has only the right to take possession of the cash balances for the purpose of management of the institution which vests in it under S. 4(1) . It cannot claim any proprietary interest over the cash balance or in respect of any other property, movable or immovable. The Government is entitled only to use the cash balance or the property for the purpose of managing the institution. The decisions relied on are of no application to this case.

15. The learned counsel for the petitioner also submitted that the expression 'private management' is defined as meaning both <ORG> as well as <ORG>. The two societies are distinct and separate entities. It is only the management of <ORG> that is being taken over, but under S. 4(2) of the Act all the rights, properties, movable and immovable, cash balances etc. of the private management are also taken possession of by the <ORG>. He submitted that in exercise of its power to take over the management of the College, it is not open to the <ORG> to take possession of the properties of <ORG> which is a distinct entity. In this connection he pointed out that under the Memorandum of Association of <ORG>, the activities of <ORG> are not restricted merely to the running of the college. As a matter of fact it is running a College of nursing which is quite distinct from <ORG>. The learned <ORG> Pleader conceded that the <ORG> did not intend to take possession of any property of the society unconnected with <ORG>. Even in the writ petition it is not stated that any property of <ORG> which is unconnected with the college is being taken possession of. It is always open to <ORG> to represent to the <ORG> that any item of property belongs only to <ORG> and has nothing to do with <ORG> in which case the learned <ORG> Pleader conceded that the <ORG> would not take such property. The learned <ORG> Pleader also submitted that on the strength of the counter affidavit of the <ORG> this was made clear by this <ORG> in W.P. 1211/77.

16. The learned counsel for the petitioner also drew our attention to S. 4(7) of the Act which is in the following terms:

"For the removal of doubts, it is hereby declared that any liability incurred by the private management in relation to the medical college before the appointed day shall be enforceable against the private management and not against the Government or the Special Officer".

17. He pointed out that while under S. 4(1) all the rights, properties, movable and immovable including cash balances are taken over by the <ORG> any liability incurred by the Management in relation to the Medical is not borne by the <ORG>. The <ORG> in the counter affidavit however has made it clear that this provision is only to protect the <ORG> from frivolous liabilities incurred previously and all legitimate debts and contracts which are not voidable under Act 17/77 will be taken over by the <ORG> and that S. 4(7) has to be read in conjunction with S. 4 (2) and Ss. 10 and 11. Section 4 (7) has been inserted in order to avoid the <ORG> from being foisted with all kinds of fictitious liabilities. In the writ petition there is no averment that there are any liabilities of the petitioners which the <ORG> is likely to refuse to take over. In view of the fair concession by the <ORG> in the counter affidavit that all legitimate debts and contracts would be taken over by the <ORG> it is unnecessary to consider the contention that S. 4(7) of the Act, if it is construed as wiping out all liabilities so far as the <ORG> is concerned, would be void as offending Art. 31 (2) of the Constitution.

18. For all the above reasons we are of the view that the impugned legislation is one covered by Art. 31-A (1)(b) of the Constitution and is therefore not liable to be struck down as violating Art. 31.

19. The Writ petition is dismissed with costs.

20. Advocate's fee Rs.250/-.

21. Petition dismissed.


PETITIONER: <NAME> & ORS. Vs. RESPONDENT: STATE OF MAHARASHTRA & ANR. DATE OF JUDGMENT: 19/12/1997 BENCH: B.N. KIRPAL, M. SRINAVASAN ACT: HEADNOTE: JUDGMENT:

WITH (WRIT PETITION (C) NOS. 17 AND 824 OF 1996) THE 19TH DAY OF DECEMBER, 1997 Present:

Hon'ble the Chief Justice Hon'ble Mr. Justice B.N. Kirpal Hon'ble Mr. Justice <NAME>, Sr. Adv., <NAME>, <NAME>, <NAME>, <NAME>, Ms. <NAME>, Ms. <NAME>, <NAME>, <NAME>, Advs. with him for the appellants.

<NAME>, Sr. Adv., <NAME>, <NAME>, Advs. with him for the Respondents.

<NAME>, Adv. for <NAME>, Adv. for Intervenor.

J U D G M E N T The following Judgment of the Court was delivered:

With WRIT Petition @ Nos. 17 and 824 of 1996 Kirpal, J.

Lex injusta non est lex', unjust laws are not laws, is what is being contended by the landlords in their challenge in these appeals, and the connected writ petitions, to the validity of the relevant provisions of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 (hereinafter referred to as 'the Bombay Rent Act') in so far as it provides that landlords cannot charge rent in excess of the standard rent.

The appellants are landlords or their representatives of different premises in Bombay which have been given on rent to various tenants. They had filed in <ORG> writ petitions 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 anc 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 <ORG> 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 <ORG> also observed that the writ petitions lacked particulars in order to satisfy the <ORG> that the relevant provisions of the Bombay Rent Act were unreasonable or arbitrary.

The Bombay Rent Act came into force on 13th February, 1938 This Act was meant to be a temporary measure. The original act was enacted only for two years, with a power to the <ORG> to extend the same by notification in this behalf. this Act has been extended from time to time a least on twenty occasions and the present extension remains in force upto 31st March, 1998. Sections 5(10) , 7 , 9(b) and 11(1)(a) which are being impugned in the present cases read as follows:

"5(10) "Standard rent" in relation to any premises means-

(a) Where the standard rent is fixed by the <ORG> and the Controller respectively under the Bombay Rent Restriction Act, 1939, or the Bombay Rents, Hotel Rates and Lodging House Rates (control) Act, 1944, such standard rent; or

(b) when the standard rent is not so fixed,-

subject to the provisions of section 11 ,-

(i) the rent at which the premises were let on the first day of September 1940,

(ii) where they were not let on the first day of September 1940, the rent at which they were last let before that day, or

(iii) where they were first let after the first day of September 1940, the rent at which they were first let or (iii-a) notwithstanding anything contained in paragraph (iii), the rent of the premises referred to in sub-section (1A) of section 4 shall, on expiry of the period of five years mentioned in that sub- section, not exceed the amount equivalent to the amount of net return of fifteen per cent, on the investment in the land and building and all the outgoing in respect of such premises: or]

(iv) on any of the cases specified in section 11 , the rent fixed by the <ORG>;

7. [(1)] Except where the rent is liable to periodical increment by virtue of an agreement entered into before the first day of September 1940, it shall not be lawful to claim or receive on account of rent for any premises any increase above the Standard rent, unless the landlord was, before the coming Standard rent, unless the landlord was, before the coming into operation of this Act, entitled to recover such increase under the provisions of the Bombay Rent Restriction Act, 1939, or the Bombay Rents, Hotel Rates and Lodging House Rates (Control) Act, 1944 or is entitled to recover such increase under the provisions of this Act [either before or after the commencement of the Bombay Rents, Hotel and Lodging 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 <ORG> may, upon an application made to it for that purpose, or in any suit or proceedings, fix the standard rent at such amount as, having regard to the provisions of this Act and circumstances of the case, the <ORG> deems just-

Where any premises are first let after the first day of September 1940 and the rent at which they are so let is in the opinion of the <ORG> excessive; or Where the <ORG> is satisfied that there is no sufficient evidence to ascertain the rent at which the premises were let in any one of the cases mentioned in [paragraphs (1) to (iii) of sub-clause (10) of Section 5 ; or Where by reason of the premises having been ; let at one item as a whole or imparts and at another time in parts or as a whole, or for any other reason, any difficulty arises in giving effect to this Part; or Where any premises have been or are let rent-free or at a nominal rent or for some consideration in addition to rent; or Without prejudice to the provisions of sub-section (1A) of section 4 and paragraph (iii-a) of sub-clause

(b) of clause (10) of Section 5 , where the Court is satisfied that the rent in respect of the premises referred to therein exceeds the limit of standard rent laid down in the said paragraph (iii-a); or Where there I any dispute between the landlord and the tenant regarding the amount of standard rent, Section 10 provides for an increase in rent where after the commencement of the Bombay Rents, Hotel and Lodging House Rates Control (Amendment) Act, 1986 a landlord is required to pay any fresh rate, cases, charges, tax land assessment, ground rent of land or any other levy on lands and buildings. Section 10 A enables the landlord to make an increase in the rent of the premises by a percentage specified therein in respect of those premises which were let on or before the first day of September 1940. Section 12 , inter alia, provides that ordinarily there shall be no ejectment of a tenant if he is ready to pay or is willing to pay the standard rent with permitted increase in the manner provided therein.

From the aforesaid provisions it is clear that in so far as the question of fixation of standard rent is concerned when the Act was enacted the premises fell into two categories; (a) those let on 1st September, 1940 and;

(b) those let for the first time after 1st September, 1940. According to Mr. <NAME> these provisions provide as under:

A. Premises 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

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 increase in monthly rent ( Section 10 ) The cost which have to be absorbed and borne by the landlord (without entitlement to pass on to tenants) therefore:

Entire cost of "tenantable" repairs U/s 23, which if the landlord does not carry out, and the tenant carries out the same, the tenant is permitted to deduct and recover the same from the landlord from year to year to the extent of 3 months rent in a year together with interest at the rate of 15% p.a.; under Section 23 as amended in 1987 by Maharashtra Act No. 18 of 1987. Landlord has had to bear the repair cases from 1.1.1970: first levied under the Bombay Building Repair and Reconstruction Board Act , 1969 replaced by Maharashtra Housing and Area Development Act, 1976 ( <ORG>)

- to the extent of 10% of the "ratable" value ( 8.5% of actual rent in a year), which in effect works out to one month's rent in a year.

50% of the total tax levied in lieu of the abolition of the Inami tenures ( w.e.f. 1.4.1971) under Bombay city (Inami & Special tenures) Abolition and Maharashtra Land Revenue Code (Amendment ) Act, 1969; Sections 7 , 8 , 10 . In case of leasehold land, the increase in ground rent paid by the landlord to private parties, i.e. parties other then <ORG>, total authority, statutory authority, etc. the entire increase is to Be borne by the landlord and no part of it can be passed on to tenant. ( This is the effect of Section 10 as amended by Maharashtra Act No. 18 of 1987.) B. Premises let out for the first time after 1.9.1940-such premises fall into 2 categories;

a) Where the landlord is himself the owner of the building in which flats are let to different tenants mostly from 1940-1950.

b) Where the landlord is himself a member of a co-operative housing society and holds the flat as owner member; but has let out the flat to a tenant - the rent will stand frozen at the amount paid on the date of the first letting; by reason of the definition of "standard rent" under Section 5 (10) (b)(iii) of the Act ("where they were first let after the first day of September, 1940 the rent at which they were first let"). These are "ownership flats" in "cooperative society buildings" constructed in the post -1950 period. Almost all constructions after 1950 are on this pattern.

c) In the decades of the fifties, sixties and seventies, the landlord member is invariably out of pocket as the ever increasing amounts of the outgoing and maintenance paid to the <ORG> 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. <NAME>, 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 7 and 11 of the Bombay RENT Act, is totally arbitrary and unrealistic and , therefore, unreasonable.

In reply it was submitted by Mr. <NAME>, learned senior counsel for the respondents that the writ petitions which were filed by the appellants did not give sufficient details as regards the rents which they were receiving from the tenanted premises. It was, therefore, contended that the claims made were hypothetical as there was no sufficient material to decide the truth of the assertions made by the appellants as regards negative returns from their rented properties. It was further submitted by the learned counsel that the respondent - <ORG> has become aware of the rising prices at least since 1986 and this had resulted in Maharashtra Act 18 of 1987 being passed whereby the Bombay Rent Act was amended. It was contended that an important concession which was made by the Amending Act was the introduction of Section 4 (1) A, which provided that the provisions relating to standard rent and permitted increases was not to apply for a period of five years to any premises the construction or reconstruction of which was completed on or after the appointed date, namely, 1.10.1987. This Amending Act also introduced Section 9 which; allowed to landlord to increase the rent for an improvement or structural alteration of the premises, excepting repairs under, Section 23 of the Bombay Rent Act. Furthermore, it was submitted that the amended Section 6 also entitled to landlord to increase the rent by addition of an amount not exceeding 15 per cent of the expenses incurred on account of special addition or special alterations or additional amenities, improvements or structural alterations. The landlord was further entitled to temporarily increase the rent at a rate not exceeding 18 per cent of the standard rent for special or heavy repairs. Reference was also made to Section 10 and 10A introduced by the Amending Act of 1986 whereby landlord could increase the rent in case he was required to pay fresh rates, charges etc. to the <ORG> or if he was required to cover the increase in water and electricity charges. The learned counsel reiterated that the <ORG> was aware and conscious about the problem of the landlords and was proceeding in the right direction to obviate their difficulties. In this connection the attention of the <ORG> was invited to the constitution of a committee headed by Mr. <NAME> in 1979 for the purpose of preparing a Unified Rent Control Act for the entire <ORG>. The <ORG> Law Commission had examined the recommendations of <ORG> and submitted its report. <ORG> had considered this report as well as the Model Rent Control Bill, forwarded to it by the Central <ORG>, and this had resulted in a new Rent Control Bill being introduced in the upper house of the <ORG> Legislature in July, 1993. This bill has been referred to <ORG> and it was accepted that the reading of the bill clause will be commenced in the <ORG> 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. <ORG> [ (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 the laws so continued in different regions of the same reorganised State, did not therefore immediately attract the clause of the Constitution prohibiting discrimination. But by the passage of time, considerations of necessity and expediency would be obliterated, and the grounds which justified classification of geographical regions for historical reason may cease to be valid. A purely temporary provision which because of compelling forces justified differential treatment when the Reorganisation Act was enacted cannot obviously be permitted to assume permanency, so as to perpetuate that treatment without a rational basis to support is after the initial expediency and necessity have disappeared."

In <NAME> and <NAME>. Vs. Union of India and Anr. [(1964) 7 S.C.R. 55] the challenge was to the validity of Section 87 B of the Code of Civil Procedure which granted exemption to the rulers of former India State from being sued except with the consent of the <ORG>. Government, Dealing with this question it was observed at page 60 as follows:

" If under the Constitution all citizens are equal, it maybe desirable to confine the operation of s.87B to past transactions and not to perpetuate the anomaly of the distinction between the rest of the citizens and Rulers of former Indian States. With the passage of time, the validity of historical considerations on which s. 87B is founded will wear Civil Procedure may later be open to serious challenge."

In <NAME> of Shri Admar Mutt etc. Vs. The Commissioner, <ORG> and Ors. [ (1980) 1 S.C.R. 368] this Court was called upon to consider the validity of the continued application of the provisions of the Madras Hindu Religious Endowment Act, 1951 in the area which had formerly been part of State of Madras and which had latter become part of the new State Of Mysore ( now Karnataka ) as a result of the State Re- Organisation Act, 1956. In this connection at page 387-388 it was observed by this Court as follows:

An indefinite extension and application of unequal laws for all time to come will militate against their true character as temporary measures taken in order to serve a temporary purpose. Thereby, the very foundation of their constitutionality shall have been destroyed the foundation being that section 119 of the State Reorganisation Act 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 <NAME>'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 <ORG> in Motor General Traders and <ORG> Vs. State of Andhra Pradesh and <ORG> 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, it could not be struck down at any time after it came into force. While referring to earlier decisions in <NAME> Vs. State of Madhya Pradesh [(1962) Suppl. 2 S.C.R. 257] and <ORG> (supra) it was observed at page 606 as follows "what may be unobjectionable as a transitional or temporary measure at an initial stage can still become discriminatory and hence violative of Article 14 of the Constitution of it is persisted in over a long period without any justification." Dealing with the contention that the impugned provisions had been in existence for over 23 years and had once been held to be valid by <ORG> and therefore this <ORG> should not pronounce upon its validity at this late stage, it was observed at page 614 that "what was justifiable during a short period has turned out to be a case of hostile discrimination by lapse of nearly a quarter of century... We are constrained to pronounce upon the validity of the impugned provision at this late stage because of grab of constitutionality which it may have possessed earlier has become worn out and its unconstitutionality is now brought to a successful challenge".

In <NAME> and <NAME>. Vs. State of Tamil Nadu and Anr. [(1986) 3 SCC 385 ] this Court had to consider the validity of Section 30 (ii) of the Tamil Nadu Buildings (Lease and Rent ) Control Act , 1960 which provided that tenants of residential building being monthly rent exceeding Rs. 400 were exempted from the protection of the Act whereas no such restriction was imposed in respect of tenants of non- residential buildings under the said Act. Holding that the tenants of the residential buildings required greater protection and that there was no justification in picking out the class of tenants of residential buildings paying a rent of more than Rs. 400/- per month and to deny them the right conferred generally on all tenants of buildings, residential or non-residential, and for this reason holding Section 30 (ii) of the Said Act as being violative of Article 14 at page 389 and 390 it was observed as follows:

"It certainly cannot be pretended the provision is intended to benefit the weaker sections of the people only. We must also observe here that whatever justification there may have been in 1973 when Section 30 (ii) was amended by imposing a ceiling of Rs. 400 on rent payable by tenants of residential 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 Rs. 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 <CITATION> . 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 <ORG> and <ORG> Vs. State Of U.P. and <ORG> [(1990) 1 SCC 109] where at pages 156-157 it was observed that "restriction valid under one circumstance may become invalid in changed circumstances". Reliance in support of this view was not only placed on some American decisions but also on the decision of this <ORG> in <ORG> case (supra).

Mr. <NAME> referred to the decision of this Court in <NAME> Vs. State of Punjab [(1988) 2 S.C.R. 107] and contended that the ratio of the said decision is clearly applicable to the present case. In <NAME> case a two Judge Bench of this Court was called upon to consider the validity of Section 4 of the East Punjab Urban Rent Restriction Act, 1949, which inter alia, provided that in determining the fair rent the rent controller shall fix the basic rent by taking into consideration the prevailing rates of rent in the locality for the same or similar accommodation in similar circumstances during a twelve months prior to 1st January, 1939. It was held in that case that the act in question had been passed in 1949 and it pegged the rent prevalent for similar houses in 1938 and as such it was not unreasonable per se. Even though there was an increase in the rents after the second world war and the partition of the country, it was held that fixing of the rents at the 1938 level could not be regarded as unreasonable when one of the objects of the act was to restrict the increase by providing for certain provisions as to fixation of a fair rent. In that case the main emphasis of the appellants was to assail Section 4 by comparing the said law with the legislation of different states. There was no argument raised or considered, as is being done in the present case, while relying on the decision of <ORG> in the cases of <NAME>, Motor General Traders and Synthetics and Chemicals (supra) that with the passage of time and with the consequent change of circumstances the continued operation of an act which was valid when enacted may become arbitrary and unreasonable.

The aforesaid decisions clearly recognise and establish that a statute which when enacted was justified may, with the passage of time, become arbitrary and unreasonable. It is, therefore, to be seen whether the aforesaid principle is applicable in the instant case. Can it be said that even though the provisions relating to the fixation of standard rent were valid when the Bombay Rent Act was passed in 1947 the said provision, as amended, 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. <NAME> merits acceptance. Reference may now be made to some of this material:-

1. A rent act inquiry committee of 1977 commonly known as <ORG>, was constituted by <ORG> 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 in order to assure a steady income in old age. As a result of rent control act, the return they got is inadequate even for subsistence because of the step increase in the cost of living. In para 6 (10) it observed that " having regard to the general increase in the cost of living, the <ORG> is of the view that there is a case for some general increase although not to the extent claimed by the property owners as the period of twenty years has elapsed since the last increase was allowed.

2. <ORG> which submitted its report in the year 1977 recommended the increase in the rents in the following terms "the commission, feels that there is immediate need for reasonable increase in standard rent."

3. In the 12th report of <ORG> 1979 on the rent control legislation para 91 dealing with this aspect reads as follows:

" The <ORG> does not want the rents to be static for long. The inflationary trend reflected by the rising consumer price index numbers at all centers in the State makes it imperative to make an objective assessment of the situation at regular intervals so that the remedial action may be possible by periodical variation in rents according as the situation demanded. Suggestions for such periodical survey was also made to the <ORG> by various representatives in evidence. The <ORG> by various representatives in evidence. The <ORG> feels that such a periodical survey would be much helpful in maintaining the balance between the landlord and the tenant. The possibility of the inflationary the landlord and the tenant. The possibility of the inflationary trend receding in future - though such possibility is not easy to entertain - cannot be totally ruled out, in which case the rents could be brought down to as reasonable level. if on the other hand, the inflationary trend continues unabated, then a reasonable rent increase may have to be resorted to . it is true that the <ORG>. can always take stock of the situation and come up with an appropriate measure to meet the situation at any given time. But the <ORG> does not want to leave the matter to an action being thought of by the <ORG>. The <ORG> thinks that it would be proper to make a specific provision in the unified Act which would cast an obligation on the <ORG> to hold periodical reviews and to take effective actions for rent variations according as the circumstances may warrant."

The <ORG> 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 <ORG> 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 that the monthly income of these tenants has gone up from 100 to 400 at least. However, there has not been a proportionate increase in the rents."

4. A Report of Economic Administrative Reforms Commission on Rent Control (commonly known as <ORG>) was presented to <ORG> in September 1982. In paragraph 51 of the said report, it stated 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 an 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 rent upto the present time."

The report further reads as under: "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."

5. On 21/22.5.1987 a conference of <ORG> was held to discuss various problems. Decisions taken at that Conference were recorded in the form of resolutions. With regard to Rent Control the unanimous resolution at the conference of Housing Ministers reads as under:

"RESOLUTION NO. IV RENT CONTROL 4.1. Realising the existing Rent Control Laws, have resulted in:

(i) disincentive to further investment in construction of houses for rental purposes;

(ii) neglect of timely repairs and maintenance of existing rental housing stock; and

(iii) debilitating the resources of municipal bodies by virtually freezing their income from property taxes which are based on rateable values.

4.2 This conference urges upon <ORG> 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 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 <ORG> while communicating President's assent to 1987 amendment to the Bombay Rent Act it was stated as follows:

"It is suggested that <ORG> may make subsequent amendments to the principal Act preferably within next 6 months by incorporating the following recommendation of the above conference ( Housing Ministers conference).

(a) Periodical upward revision of rents to neutralise the erosion in the real value of rents."

7. A conference of Chief Ministers of all states was held at New Delhi in 1992. One of the topics discussed pertained to static rents and the problems arising therefrom. A unanimous recommendation of this conference made on 9.3.1992 in this regard was as under:

" 4.3 The frozen rents have led to emergence of practices like key money. this apart from creating a block market in rental housing, the Act has reduced the accessibility of low income groups to rental housing, as they cannot afford to pay large deposits for rented premises."

4.4 The widening divergence between the interests of landlords and tenants has not only led to increased litigation under Rent Control Acts ( the rent control cases make for a majority of the cases in courts) but also to increased crimes.

A large number of criminal cases have their origin in disputes over rented properties."

The recommendation further reads:

" The important principle is that while the tenant will enjoy security of tenure is controlled premises, he should agree to pay a rent that provides adequate return on investment and provides for proper maintenance and taxes, so that he does not enjoy an unfair advantage over the landlord."

A perusal of the aforesaid extracts of reports and resolutions clearly demonstrates that since the last two decades the authorities themselves seem to be convinced that the pegging down of the rents to the pre war stage and even thereafter, is no longer reasonable. Unfortunately apart from lip service little of note has been done. Even the Rent control Bill introduced in 1993 has not yet become law.

It was submitted by Mr. <NAME> that even after the promulgation of the Rent Control act 1948 during the 1950s and 1960s there was not much escalation in the market rents. The rents which were determined during this period has become the standard rent by virtue of the definition in Section 5 (10) of the Bombay Rent Act. In the last few years, due to 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. <NAME> 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 <ORG> 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 constructed or reconstructed after the appointed date, namely,. 1.10.1987. Once this 'holiday' comes to an end the tenant would be entitled to get the standard rent fixed. The amendment of 1987 does not do away with the principle of pegging down of the rent at a rate when the premises are first let out. Increase in the cost of maintenance or fall in the value of money or the rise in the cost of index does not entitle a landlord to any increase. There has been no other material change in the act in this behalf. What the Amending Act of 1987 has done is merely to consolidate and rearrange the sections of the earlier act. Provisions contained in the present Sections 9 , 10 and 10A were found earlier, prior to the amendment in 1987, in Sections 10 , 10A , 10AA , 10AAA , 10C , 10D , 10E , and 10G . The only change introduced in these sections was that the rate of return on the expenses incurred for additional amenities for heavy repairs has been increased. The following tabulated comparative statement of the relevant provisions before and after 1.10.1987 will bring out the effect of the alteration, if any.

Tabulated Cooperative Statement

After Amending Before Amending Act 1987 Act of 1987

------------------------------------------------------------ S.9 (1) increase in rent on Identical provision in S.9 account of structural which is there in the original alterations or improvement Act since 1948. made with Tenants' written consent.

S.9 (2) increase on account of Similar provision in S. 10D(1) special additions or additional which was introduced in 1953.

amenities.

S.9(3) increase on account of Similar provision in S. 10D(4) additions, improvements or which was introduced in 1953.

additional amenities.

f S.9 (3)(a)- Temporary increase Similar provision in S. 10E is rent in account of special introduced in 1964. or heavy repairs.

S.10- Increase in or fresh Similar provision in S.10 rate, cess, charge or tax (since inception of Act) S.10A paid to local authority. ( introduced in 1949), S.10AA ( introduced in 1953) S.10AAA (introduced in 1962).

S.10 increase in rent on S. 10G introduced in 1973 account of increase in ground permitted recovery of one rent paid to Govt. local third of increase. authority or statutory authority.

During the course of his arguments Mr. Mr. <NAME> filed a statement indicating the financial impact of the rent restriction provisions on the assumption that the monthly rent on 1.9.1940 was Rs. 100. This statement takes into account the permitted increases incorporated in the Act including that of 1987 from time to time. The submission was as follows:

Assumption: that monthly rent on 1.9.1940 was Rs. 100 (exclusive of Municipal taxes) This is an accurate approximate average of rents paid in September 1940 in respect of flats of large areas situated in good localities. 1(a) From September 1940 till 13.21948, when the Rent Act came into force, the landlord continued to retain Rs. 100/- since the burden of tenantable repairs was on the tenant under Section 108 (m) of the T.P. Act .

(b) After 13.2.1948 this burden has been transferred to the landlord ( section 23 ): From 1.10.1987 upto date, the tenant is permitted to carry out " tenantable repairs" and recover the entire cost with interest at 15% per annum by deducting an amount equivalent to 3 months rent in a year.

(c) Hence invariably the landlord gets 25 per cent less than Rs. 100/- (Rs. 1200/- per year reduced to Rs. 900/- per year) as "tenantable repairs" are necessarily 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 landlord.

(A) taking base in 1940 at Rs. 100/- the value of the rupee in 1996 was only Rs. 1.5 in 1996 (B) in 1940 the wholesale price index was 13.2. This has risen to 876 by 1996 66 time (C) Value of one rupee silver coin of 1940, as on the 5th Dec. 1992 was Rs. 44/-

(D) Price of silver on 30.12.1939 was Rs. 52 per kg. It rose to Rs. 6945 per kg. On 31.12.1996, that is, by 130 times.

5. Thus if in 1940 the landlord was getting Rs. 1200/- per year as rent (exclusive of Municipal taxes in 1996 or 1997 he is getting Rs. 800 per year and in terms of value of rupee in 1940, this amount of Rs. 800 works out to only Rs. 12.12 (800/66)- against Rs. 1200 he was getting in 1940."

To put simply in a tabulated from the following is the comparative position of rent between 1940 and 1997 and the amount retained by the landlord Per Month

1940 1997

1) Rent per month inclusive of Municipal Taxes (Rs.) 100 170.09

2) Amount of Municipal Taxes to be paid by Owner (Rs.) 21.54 103.47

3) Amount of repair cess to be paid by Owner (Rs.) @ 10% of rateable value Nil 7.62

4) Amount retained by owner after payment of Municipal taxes & repair cess (Rs.) 78.46 64.00 N.B. No correction has been made for:-

1) The inflation/fall in purchasing value of the rupee which was about 66 times between 1940 & 1996 and the value of Rs. 100 in 1940 has come down to Rs. 1.5 in 1996.

2) Further in 1940 the tenants could not deduct any amount towards repairs but under Section 23 of the Rent Act in 1997 they can deduct 3 months Rent per year. The aforesaid illustration, which has not been seriously disputed, clearly brings out the arbitrariness of the standard rent provisions contained in the Bombay Rent Act. It is true that the aforesaid illustration has references to the monthly rent of Rs. 100 as on 1.9.1940 and does not relate to the premises which are let out after the Act had come in force. As far as Section 5 (10) is concerned the standard rent of the premises let out after 1.9.1940 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 <ORG> on a monthly compensation of Rs. 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 Rs. 563 . 65 per month inclusive of all taxes. Out of this sum the appellant no. 3 has to pay Rs. 216.33 as municipal taxes leaving a balance of Rs. 320.22. From this amount the society outgoings is Rs. 250 per month, leaving a balance of only Rs. 70.20 per month with the said appellant. Another instance which has been given is that of appellant no.4 who owns a property known as Ram Mahal situated at 8, Dinshaw Vachha Road, Mumbai. The said building has 20 residential flats and the building was purchased by appellant no. 4 in the year 1955, although it had been constructed prior to 1940, Flat no. 15 on the 5th floor of the said building had been let out by the previous owners to <ORG> Bennet Coleman & Co. Ltd., who were the sitting tenants at the time when the property was purchased. The flat measures 1710 sq. ft. and monthly rent for the same is Rs. 460 per month inclusive of permitted increase and repairs. According to the appellant the income by way of rent has remained constant while the expenditure has been increased and the total gross rent of the building which he receives is Rs. 1,72,032 per annum while it incurs an annual expenses of Rs. 1,93,245 consisting of <ORG> taxes, repairs, ground rent, maintenance charges inclusive of small electricity bill and the insurance premium. He is, therefore, suffering a loss of Rs. 21,213 every year. It is not necessary to examine the correctness of these details except to note that what was reasonable on 1st September, 1940 or in 1950s or in 1960s can no longer be regarded as reasonable at this point of time.

That the tenants are, by and large, now getting an unwarranted benefit or windfall can also be illustrated by taking an example of hypothetical tenant, i.e., an Assistant in <ORG> 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.C.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 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 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 gots only Rs. 54 p.m. whereas n 1940, he got Rs. 100 minus Rs. 21.54 (municipal tax ) i.e. Rs. 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 Rs. 100 p.m. of gross rent which he was getting in 1940, he now in 1997 gets a gross rent of about Rs. 170 which in real money terms, after taking the inflation into account, will be only about Rs. 2/- P.M. of the 1940 value. Had the Rent Control Act not been in force the landlord today may have been able to get todays equivalent of Rs. 100 of 1940 as rent i.e. about Rs. 6650 p.m. It is true that one of the reasons for enacting the rent control legislation is to prevent exploitation of the tenants by the landlords. One of the protections which has been provided to the tenants in the rent legislation throughout the country is the concept of standard rent. Each State has definite laws with regard thereto. In some case, like in Delhi, the rent control act is not applicable if the rent is Rs. 3500/- or more while in the other states rent control act is not applicable to certain categories of persons. In the Bombay Rent Act, with which we are concerned, the standard rent as on 1st September, 190 or the first rent of the premises which was let out thereafter is the standard rent. The paging down of rent, coupled with the inability of the landlord to evict the tenants, has given rise to unlawful tendencies. In the statement of objects and reasons annexed to the L.A. Bill No. 79 of 1986 introduced in <ORG> providing for amendment to the Bombay Rent Control Act with regard to clause 3 it was, inter alia, stated as follows:

" The freezing of standard rent prevailing on the 1st September, 1940 has deprived the landlords of getting reasonable and adequate return to undertake maintenance and repairs to the old buildings. Despite the penal provisions in the Act for charging any premium from a tenant, such freezing of rent results in charging 'pugree" or deposit or similar illicit payment which are widely prevalent. The con-structio of new tenements on rental basis has considerably caused with the result that low and middle income groups are not getting premises on rent............... "

(emphasis added) Notwithstanding the fact that <ORG> was conscious of the illegal payments which are made because of the rent restriction law no effective steps have been taken so far to strike a balance between the interests of the landlords and the tenants.

It is true that whenever a special provision, like the rent control act, is made for a section of the <ORG> 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 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 <ORG> 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 gathers momentum the main sufferers will be the 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 interests and it should try to be just to all. The law ought not 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, nay, necessary that some protection should be given to the tenants in order to ensure that they are no exploited. At the same item such a law has to be revised periodically so as to ensure that a disproportionately larger benefit them 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 todays context.

When enacting socially progressive legislation the need is greater to approach the problem from a holistic perspective and not to have a narrow or short sighted parochial approach. Giving a grater than due emphasis to a vocal section society results not marly in the miscarriage of justice but in the abdication of responsibility of the legislative authority. Social Legislation is treated with deference by the <ORG> not merely because the <ORG> 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 it's power is coupled with a responsibility. It is also the responsibility of the <ORG> to look at legislation from the alter of Article 14 of the Constitution. This article is intended, as is obvious from its words, to check this tendency; giving under performance some over others.

Taking all the facts and circumstances into consideration we have no doubt that the existing provisions of the Bombay Rent Act relating to the determination and fixation of the standard rent can no longer be considered to be reasonable. 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 <ORG> of 1992 and the National Model law which has been circulated by <ORG> 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. <NAME> assured us that this Model law will be taken into consideration in the framing of the proposed new Rent Control Act.

We, accordingly, dispose of these appeals without granting any immediate relief but we hold that the decision of <ORG> upholding validity of the impugned provisions relating to standard rent was not correct. We however refrain from striking down the said provision as the existing Act elapses on 31.31998 and we hope that new Rent Control Act will be enacted with effect from 1st April, 1998 keeping in view the observations made in this judgment in so far as fixation of standard rent is concerned. It is, however, made clear that any further extension of the existing provisions without bringing them in line with the views expressed in this judgment, would be invalid as being arbitrary and violative of Article 14 of the Constitution and therefore of no consequence. The respondents will pay the Costs.

In view of the aforesaid the writ petitions are disposed of


PETITIONER: <NAME> Vs. RESPONDENT: STATE OF MADHYA PRADESH AND OTHERS DATE OF JUDGMENT18/01/1977 BENCH: <NAME>, <NAME>: <NAME>, HANS RAJ SARKARIA, <NAME>, JASWANT CITATION: 1977 AIR 1560 1977 SCR (2) 633 1977 SCC (1) 684 CITATOR INFO : F 1984 SC 892 (13) ACT: Land Acquisition Act , 1894, S. 23- --Compulsory acquisi- tion of land--Whether price paid for small plots a crite- rion for determining compensation for vast areas--Assessment of market value, when to remain undisturbed. HEADNOTE: The appellant's land was acquired and compensation was awarded to him by the Land Acquisition Officer. Demanding a higher amount, the appellant had the matter referred to the District Judge who increased the award, but still discon- tented, the appellant went in appeal. <ORG> also increased the compensation but could not satisfy the appel- lant who thereupon obtained leave to appeal to <ORG>, contending that small plots of land adjoining his large area were sold at much higher rates. Dismissing the appeal, the <ORG>, HELD: 1. The price' paid for small plots of laud cannot provide a safe criterion for determining the amount of compensation for a vast area of land.. The large area of land cannot possibly fetch a price at the same rate at which small plots are sold. [635 A-B] Smt. Padma Uppal etc. v. <ORG> & Ors.  1 S.C.R. 329, applied. 2. The essential thing is to keen in view the relevant factors prescribed by the Act. If the judgment of the High <ORG> reveals that it has taken into consideration the relevant factors, the assessment of the market value of the acquired land should not be disturbed. [635 D-E] <NAME> (dead) by <CITATION> A.I.R. 1976 S.C. 2219, applied. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1827 of 1970. (From the Judgment and Decree dated 28-4-1970 of <ORG> (<ORG>) in First Appeal No. 133 of 1968).

<NAME> and <NAME>, for the appellants <NAME> and <NAME>, for the respondents. The Judgment of the Court was delivered by <ORG>, J. This is an appeal on certificate by <NAME> (now deceased and represented by his legal repre- sentatives) against the judgment of <ORG> whereby <ORG> partially accepted the appeal filed by the appellant regarding the quantum of compensa- tion for the acquisition of land.

A plot of land measuring 27 bighas and 17 biswas situated in Ashok Nagar, district Guna, belonging to the appellant was acquired for the construction o,f a police station and residential quarters for policemen. A bigha, it is stated, is equivalent to 2,500 square yards. The land sought to be acquired measured 68,658 square yards. Notification under section 4 of the Land Acquisition Act for the acquisition of the land was issued on April 7, 1961. The Land Acquisition Officer as per award dated June 13, 1961 awarded compensation for the land at the rate of Rs. 100 per bigha. In addition to that, he awarded a sum of Rs. 1,175 for large trees and Rs. 1,380 for small trees standing on the land. The appellant was also awarded Rs. 1,000 as compensation for a well which had been sunk in the. land, and Rs. 800 for a house standing on the land In all, the appellant was awarded a sum of Rs. 7,616. including solatium at the rate. of fifteen per cent by the Land Acqui- sition Officer.

The appellant wanted compensation for the land at the rate of Rs. 10 per square yard. He accordingly had the matter referred to the District Judge. Learned Additional District Judge determined the market value of the land in question to be Rs. 900 per bigha. Regarding the well, the Additional District Judge awarded compensation of Rs. 3,000 as against the amount of Rs. 1,000 which had been awarded by the Land Acquisition Officer. In other respects, the award of the Land Acquisition Officer was upheld. Computing solatium at the rate of 10 per cent, the. total amount awarded by District Judge to the appellant was Rs. 32,285 besides interest at the rate of six per cent per annum. The appellant not being satisfied with the award of the Additional District Judge took the matter in appeal to <ORG>. <ORG> awarded compensation to the appellant at the rate of Re. 1. per square yard for the land in question. <ORG> also awarded Rs. 2,500 for the loss of earnings to the appellant. The rate of solatium for compulsory acquisition was increased by <ORG> from ten per cent to, fifteen per cent. In all, the appel- lant was held entitled to a compensation of Rs. 88,381 besides interest at the rate of six per cent per annum. The appellant thereupon obtained a certificate of fit- ness for appeal to this Court under article 133(1)(a) of the Constitution, as it stood at that time.

In appeal before us, Mr. <NAME> on behalf of the appel- lant has argued that more than half of the land in dispute is within. the municipal limits of Ashok Nagar Municipality, while the remaining land was also likely to be included within those limits shortly. It is further stated that the land in question abutts Ashok Nagar-Isagarh Road and is situated near the tehsil building and the. railway station. Learned counsel has also referred to the fact that small plots of land adjoining the land in dispute were sold at rates of Rs. 9 and Rs. 8 per square yard during the years 1958 to 1960. In this respect, we find that <ORG> has considered most of the above circumstances and has come to the conclusion that Re. 1 per square yard represents fair market value of the land in dispute. <ORG> has also referred to the special circumstances under which the small plots were sold and their price was fixed. We agree with <ORG> that the price paid for small plots of land cannot provide a safe criterion for determining the amount of compensation for a vast area of land. We may in this context refer to a recent judgment in the case of Smt. Padma Uppal etc. v. <ORG> & <ORG>) wherein this Court observed that it is well settled that in determining compensation the value fetched for small plots of land cannot be applied to the lands covering a very large area and that the large area of land cannot possibly fetch a price at the same rate at which small plots are sold.

Section 23 of the Land Acquisition Act provides that in mining the amount of compensation to, be awarded for the land acquired under the Act, the <ORG> shall take into. account inter alia the market value of the land at the date of the publication of the notification under section 4 of the Act. The market value means the price that a willing purchaser would pay to a willing seller for the property having due regard to its existing condition with all its existing advantages and its potential possibilities when laid out in the most advantageous manner excluding any advantage due to the carrying out of the scheme for which the property is compulsorily acquired. In considering market value the disinclination of the vendor to part with his land and the urgent necessity of the purchaser to buy should be disregarded. There is an element of guess-work inherent in most cases involving determination of the market value of the acquired land. But this in the very nature of things cannot be helped. The essential thing is to keep in view the relevant factors prescribed by the Act. If the judgment of the High <ORG> reveals that it has taken into consideration the relevant factors, the assessment of the market value of the acquired land should not be dis- turbed (see <NAME> (dead) by L. rs. v. State of Bihar(2). After having been taken through the material on the record, we find no infirmity in the judgment of the High <ORG> as might induce us to disturb its find- ing. The appeal consequently fails and is dismissed but in the circumstances without costs.

Appeal dismissed.

(1) [1977] 1 S.C.R. 329, (2) A.I.R. 1976 S.C. 2219.