Holding

The standard‑rent provisions of the Bombay Rent Act are unreasonable and violate Article 14, but need not be struck down as the Act expires on 31 March 1998.

Summary

The appellants, a group of landlords, challenged Sections 5(10)(B), 11(1) and 12(3) of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, which fixed "standard rent" at the level prevailing on 1 September 1940 or at the first letting, thereby preventing rent increases. They argued that the provisions had become arbitrary, discriminatory and violative of Articles 14, 19 and 21 of the Constitution due to inflation and rising maintenance costs. The Bombay High Court dismissed the writ petitions; the Supreme Court reversed that decision, holding that the provisions are no longer reasonable and are unconstitutional under Article 14. However, because the Act was set to expire on 31 March 1998, the Court refrained from striking down the provisions and instead directed that they not be extended beyond that date, hoping a new rent‑control law would be enacted. The writ petitions were disposed of and the appeal was allowed.

Issues considered

The constitutional validity of the standard‑rent provisions of the Bombay Rent Act under Article 14 (and Articles 19, 21).
Whether a law that was reasonable at enactment can become arbitrary and unreasonable with the passage of time.
Whether the provisions should be struck down or merely not extended beyond the Act's expiry.

Legislation cited

Bombay Rents, Hotel and Lodging House Rates Control Act, 1947s. 11(1), s. 12(3), s. 5(10), s. 7, s. 9(b)
Constitution of Indias. Article 14, s. Article 19, s. Article 21

Subjects

rent controlstandard rentArticle 14unreasonable lawarbitrarinesslandlord‑tenantconstitutional validityBombay Rent Actperiodic revisionsocial legislation

Judgment

MALPE V!SHWANATH ACHARYA AND ORS. A
v.
STATE OF MAHARASHTRA AND ANR.

DECEMBER 19, 1997

[J.S. VERMA, CJ., B.N. KIRPAL AND M. SRINIVASAN, JJ.] B

Rellt Colltrol-Bombay Rellts, Hotel and Lodgillg House Rates Control
Act, 1947-Sectiolls S(JO)(B), 11(1), 12(3)-Stalldard Rellt-Fixatioll
of-Restrictioll oil the right of the /a11d/ords to increase rent by freezi11g rent
as Oil 1st September 1940 or at the time of the first letti11g-Validity of-Held c
to be unreasonable; as rapid i11crease i11 the expe11ses for repair and other
outgoi11gs a11d the decreasi11g 11et amount of rent remainillg with the la11dlord,
with the passage of time, is leading to arbitrary results-However it is llOt
11ecessary to stlike dow11 the said provisiolls as the existi11g Act elapses oil 31st
March 1998.
D
Social legislation-Rent Control Acts-Periodic revisio11 of-Necessity
f 01-Held, Pe1iodic revision ill social legislatio11 like Rent Control Act is
11ecessary to suike a balallce betweell 1ival illterests-lts absellce results it
increasillg injustice to olle sectio11 of the society leadi11g to increase in
lawlessness and undennining of the auth01ity of law-Continuance of such
E
law becomes unreasonable, disoimi11ato1y and ultra-vires A1ticle 14-Con-
stitutioll of India, 195(}-Aiticle 14.

Legislatioll-Lapse of time--Reasonable11ess of -Held, with the pas-
sage of time a legislation which was justified when enacted may become
arbitra1y alld Ullreasollable with the challge in circumstallces. F
Legal Maxims :

'Lex injusta llOI! est lex-Applicability of.

Two writ petitions mi behalf of several landlords were filed in the G
High Court of Bombay challenging the constitutional validity of Sections
5(10)(B), Section 11(1) and Section 12(3) of the Bombay Rents, Hotel and
Lodging House Rates Control Act, 1947 inter alia, on the ground that the
said provisions pertaining to standard rent were ultra vires Articles 14, 19
& 21 of the Constitution of India and consequently void. The Bombay High
Court dismissed the writ petition. Aggrieved, the landlords filed the H
717
718 SUPREME COURT REPORTS [1997] SUPP. 6 S.C.R.

A present appeals which were heard alongwith the connected writ petitions
bearing numbers 17/96 and 824/96.

On behalf of the appellants, it was contended that the restriction on
the right of the landlords to increase rents, which had been frozen as on 1st
· September 1940 or at the time of the first letting, was no longer a reasonable
B restriction and the said provisions had with the passage of time, become
arbitrary, discriminatory, unreasonable and consequently ultra vires Article
14 of the Constitution; and in view of the constant escalation in prices due
to inflation and corresponding fall in the value of Rupee, ceiling on rentals,
such as the one imposed by Sect.ion 5(10)(a) and (b) read with Sections 7
C and 11 of the Bombay Rent Act, was totally arbitrary, unrealistic and
unreasonable.

On behalf of the respondents it was submitted that the State was
aware about the problem of the landlords and was proceeding in the right
direction to obviate their difficulties by introducing certain amendments
D in the Bombay Rent Act in 1987. By virtue nf these amendments, a landlord
was allowed to increase the rent for an improvement or structural altera-
tion of the premises. Further the provisions relating to standard rent were
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 1-10-87. The landlord could also increase the rent in case he was
E required to pay fresh rates, charges etc. to the Government.

Disposing of the matters, this Court

HELD : 1. The High Court erred in upholding the validity of the
F impugned provisions relating to standard rent. Taking all the facts and
circumstances into consideration, there is on 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 it is not necessary to strike down the same
G in view of the fact that the present extended period of the Bombay Rent
Act comes to an end on 31st March 1998. It is hoped that a 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. The Government's thinking reflected in various docu-
ments itself shows that the existing provisions have now become un-
H reasonable and, therefore, require reconsiderations. [747-B]
MALPE VJSHWANATI-1 ACHARYA v. STATE 719

2.1. As far as Section 5(10) is concerned the standard rent of the A
premises let out after 1.9.1940 is that rent at which the premises were first
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 provisions in the Act for reasonable
increase in the rent, with the passage of time, is leading to arbitrary
results. A statute which when enacted was justified may, with the passage
B
of time, become arbitrary and unreasonable. The record 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. [742-E]
c
2.2. 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. In the
Bombay Rent Act, the standard rent as on lst September, 1940 or the first D
rent of the premises which was let out thereafte1· is the standard rent.
[744-A]
The pegging down of rent, coupled with the inability of the landlord
to evict the tenants, has given rise to unlawful tendencies. The tenants are
by and large, now getting an unwarranted benefit or windfall. What. was E
reasonable on 1st Septe~ber, 1940 or in 1950s or in 1960s can no longer
be regarded as reasonable at this point of time. It is true that some
amendments wer~ made in 1987 which clearly indicate that the State <;..
Legislature was conscious of the fact that there was a need to increase the
standard rent. But no effective steps have been taken so far to strike a
balance between the interests of the landlords and the tenants. [745-A]
F

3. The legislature itself has taken notice of the fact that puggrie
system has become prevalent in Mumbai because of the Rent Restriction
.Act. In view of the unreasonable low rents which are being received by the
landlords, recourse is being taken to other methods to seek redress. These G
methods which are adopted are outside the four 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
a
tenants. This should be cause of serious concern because if this extra
judicial back lash gathers momentum the main sufferers will be the H
720 SUPREME COURT REPORTS (1997] SUPP. 6 S.C.R.

A tenants, for whose benefit the Rent Control Acts are framed. [745-D-EJ

4.1. Enactment of special provisions such as the Rent Control Act
may be necessary in the larger interest of the society as a whole, but the
1Jenelit which is given initially, if continued, results in increasing injustice

to one section of the society and an unwarranted largess or windfall to
B another, without appropriate corresponding relief, then the continuation
of such a law can no longer be regarded as being reasonable. [745-C]

4.2. In so far as social legislation, like the Rent control Act is
concerned, the law must strike a balance between the rival interests and it
C should try and 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 not exploited. At the same time such a law has to be
revised periodically so as to ensure that a disproportionately larger benefit
D than the one which was intended is not given to the tenants. [745-G]

4.3. 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 greater than due
E emphasis to a vocal section of society results not merely in miscarriage of
justice but in abdication of responsibility of the legislative authority. Social
legislation is treated with deference by the courts not merely because the
legislature represents the people but also because in representing them the
entire spectrum of views is expected to be taken into account. It is also the
responsibility of the court~ to look at legislation from the altar of Article 14 of
F the Constitution. TI1is Article is intended, as is obvious from its words, to check
this tenancy of giving undue preference to some over others. [746-C-D]

State of M.P. v. Bhopal Sugar Indust1ies, [19641 6 SCR 846; Narottam
Kishore Dev Venna & Others v. UOI & Anr., [1964] 7 SCR 55; H.H. Shri
Swamiji of Slui Admar Mutt Etc. v. The Commissioner, Hindu Religi,ous and
G Chmitable Endowments Department & Others, [1980] 1 SCR 368; Motor
General Traders and Another Etc. v. State of Andhra Pradesh & Ors. Etc.
Etc., [1984] 1SCR594; Bhaiyalal Shukla v. State of Madhya Pradesh, [1962]
Suppl. 2 SCR 257; Rattan A1ya v. State of Tamil Nadu & Anr., [1986] 3 SCC
385; Synthetics & Chemicals Ltd. & Ors., v. State of U.P. & Ors., [1990] 1
H sec 1119, relied on.
MALPE VISHWANATH ACHARYA v. STATE [KIRPAL, J.] 721

Sant Lal Bharti v. State of Punjab, [1988] 2 SCR 107, distinguished. A

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2797-98
of 1992.

From the Judgment and Order dated 16.11.90 of the Bombay High
Court in W.P. Nos. 2337/86 and 2587 of 1990. B

F.S. Nariman, Mulraj Shah, P.H. Parekh, Jagdish Karia, Subhash
Sharma, Ms. Dhun Chapgar, Ms. Sunita Sharma, Nikhil Sakhardande and
Sameer Parekh for the Appellants.

M.S. Nargolkar, D.M. Nargolkar and S.M. Jadhav for the Respon- c
dents.

M.N. Shroff for K. V. Sreekumar for the Intervenor.

The Judgment of the Court was delivered by
D
KlkPAL, J. 'Lex injusta 11011 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 Rent, Hotel and Lodging House Rates Control Act, 1947
(hereinafter referred to as 'the Bombay Rent Act') in so far as it provides E
that landlords cannot charge rent in excess ofthe standard rent.

The appellants are landlords or their representative of different
premises in Bombay which have been given on rent to various tenants. They
had filed in the High Court of Bombay writ petitions challenging the
constitutional validity of Section 5(10)(B), Section 11(1) and Section 12(3) F
of the Bombay Rent Act, inter alia, on the ground that the said provisions
pertaining to standard rent were ultra vires Articles 14, 19 and 21 of the
-
' Constitution and consequently void. The main challenge to the said
provisions was on the ground that the restriction on the right of the
landlords to increase rents, which had been frozen as on 1st September, G
1940 or at the time of the first letting, was no longer a reasonable restriction
and the said provisions had, with the passage of time, become arbitrary,
discriminatory, unreasonable and consequently ultra vires Article 14 of the
Constitution. By the impugned judgment the High Court dismissed the writ
petitions, illter alia, holding that the object of the Bombay Rent Act was H
722 SUPREME COURT REPORTS (1997] SUPP. 6 S.C.R.

A 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 prices etc. The Court also observed that the writ
petitions lacked particulars in order to satisfy the Court that the relevant
provisions of the Bombay Rent Act were unreasonable or arbitrary.
B 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 Government to extend the same by
notification in this behalf. This Act has been extended from time to time
at least on twenty occasions and the present extension remains in force
C upto 31st March, 1998. Sections 5(10), 7, 9(b) and ll(l)(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 Court and the Controller
D
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
E 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,
F
th! rent at which they were last let before that day, or

(iii) where they first let after the first day of September 1940, the
rent at which they were first let or -·
G (iii-a) notwithstanding anything contained in paragraph (iii), the
rent of the premises referred to in sub-section (lA) 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
H building and all the outgoing in respect of such premises; or
MALPE VISHWANATH ACHAR YA v. STATE [KIRPAL, J.] 723

(iv) on any of the cases specified in section 11, the rent fixed by A
the Court;

7.(1) Except where the rent is liable to periodical increment by
virtue of an agreement entered into before the first day of Sep-
tember 1940, it shall not be lawful to claim or receive on account
of rent for any premises any increase above the Standard rent,
B
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 c
before or after the commencement of the Bombay Rent, Hotel and
Lodging Ho'.lse 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 D
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 considera-
tion for any amenities or other services supplied with the premises.
E
(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 in relation to the premises
given on license; and accordingly, the licensee. or licenser may
F
apply to the Court for the fixation of the license fee or charge and
permitted increases and the additional sum mentioned above.

9.(b) Before making any increase, under (a), the landlord shall
obtain a certificate from the local authority that he was required
by it to make or to provide such additions, alterations, improve- G
ments or amenities and has completed them in conformity with its
requirements.

11.(l) (Subject to the provisions of section llA in any of the
following) cases the Court may, upon an application made to it for H
724 SUPREME COURT REPORTS [1997) SUPP. 6 S.C.R.

A 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 Court 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
B Court excessive; or

where the Court 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 (i) to (iii) of sub-clause (10) of
c section 5; or

where by reasons of the premises having been; let at one time as
a whole or in parts 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
D
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 (IA) of section
4 and paragraph (iii-a) of sub-clause (b) of clause (10) of Section
E
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 is any dispute between the landlord and the tenant
F regarding the amount of standard rent.

Section 10 provides for an increase in rent where after the commen-
cement of the Bombay Rents, Hotel and Lodging Housing Rates Control
(Amendment) Act, 1986 a landlord is required to pay any fresh rate, cess,
G charges, tax, land assessment, ground rent of land or any other levy on
..
lands and buildings. Section lOA 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
H permitted increase in the manner provided therein.
MALPEVISHWANATHACHARYAv. STATE[KIRPAL,J.] 725

From the aforesaid provisions it is clear that in so far as the question A
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 out for the first time after 1st September 1940. According to
Mr. Nariman these provisions provide as under :

A. Premises let out before 1st September, 1940.
B

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 rent is pegged at the rent paid as on 1.9.1940, C
subject to the increases mentioned below.

(ii) Those increases are of three types :

(a) those permitted U/s lOA
D
in respect of premises 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 -
E
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 permitted to the extent of
F
15% per year on the actual cost incurred without interest (Section
9).

(c) Increase in ground rent, in respect of leasehold premises paid
to the government, local authority and statutory authority is al-
lowed to be passed on to the tenant by a proportionate increase G
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 proportionate increase in monthly
rent (Section 10). H
726 SUPREME COURT REPORTS [1997] SUPP. 6 S.C.R.

A The costs which have to be absorbed and borne by the
landlord (without entitlement to pass on to tenants) are
therefore :

entire cost of "tenantable" repairs U/s. 23, which if the
landlord does not carry out, and the tenant carries out the
B 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.
c Landlord had to bear the repair cess from 1.1.1970; first
levied under the Bombay Building Repair and Reconstruc-
tion Board Act, 1969 replaced by Maharashtra Housing and
Area Development Act, 1976 (MHADA) - to the extent of
10% of the "ratable" value (8.5 % of actual rent in a year),
D 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.
E
In case of leasehold land, the increase in gronnd rent paid by
the landlord to private parties i.e., parties other than Govern-.
ment, local authority, st.atutory authority, etc. the entire in-
crease is to be borne by the landlord and no part of it can be
F 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 :
G
(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 plate as owner member, bul
H has let out the flat to a tenant - the rent will stand frozen at
MALPE VISHWANATH AC HAR YA v. STATE [KIRPAL, J.] 727

the amount paid on the date of the first letting by reason of A
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 flat" in "cooperative society buildings" con-
structed in the post - 1950 period. Almost all constructions
after 1950 are on this pattern.
B

(c) In the decades of the fifties, siA1ies and seventies, the landlord
member is invariably out of pocket as the ever increasing
amounts of the outgoings and maintenance paid to the Society
are invariable more than the actual amount of rent received c
(which had been frozen at first letting)

In the decade of the eighties and nineties however, the
amount of the first letting being considerable higher, this
incidence does not occur. Since increase in maintenance
charges is absorbed in the amount of rent fixed. D

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 Court for an increase in standard rent. The Scheme of
the Act negatives any such right [see Section 5(10) read with
E
Sec. ll(l)(a)].

Mr. F.S. Nariman, learned senior counsel on behalf of the appellants
submitted that a legislation which, when enacted, was justified on
considerations of necessity and. expediency may, with the passage of time, F
become arbitrary and unreasonable in changing circumstances. In view of
the constant escalation in prices 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 Sections 7 and 11 of the Bombay Rent ·
Act, is totally arbitrary and unrealistic and, therefore, unreasonable.
G
In reply it was submitted by Mr. N.S. Nargolkar, learned senior
co•msel for the respondent 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 H

•
7'28 SUPREME COURT REPORTS (1997) SUPP. 6 S.\.R.

A 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 - State 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
B 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, l.10.1987. This Amending Act also introduced Section 9 which
c allowed a 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 Sec-
tion 6 also entitled a landlord to increase the rent by addition of an
amount not exceeding 15 per cent of the expenses incurred on account of
special additions or special alterations or additional amenities, improve-
D ments or structural alterations. The landlord was further entitled to tem-
porarily 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 lOA introduced by the Amending Act of 1986 whereby
landlord could increase the rent in case he was required to pay fresh
E rates, charges, etc. to the Government or if he was required to cover the
increase in water and electricity charges. The learned counsel reiterated
that the State 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 Court was ;nvited to the constitution
of a committee headed by Mr. V.K. Tembe in 1979 for the purpose of
F preparing a Unified Rent Control Act for the entire State. The State Law
Commission had examined the recommendations of the Tembe Committee
and submitted its report. The Cabinet Sub-Committee had considered this
report as well as the Model Rent Control Bill, forwarded to it by the
Central Government, and this had resulted in a new Rent Control Bill
being introduced in the upper house of the State Legislature in July, 1993.
G This bill has been referred to the Select Committee and it was accepted
that the reading of the bill clause by clause will be commenced in the State
Legislature.

There is considerable judicial authority in support of the submission
H of learned counsel for the appellants that with the passage of time a

•
MALPE VISHWANATH ACHARYA v. STATE [KIRPAL, J.] 729

legislation which was justified when enacted may become arbitrary and A
unreasonable with the change in circumstances. In the State of Madhya

- Pradesh v. Bhopal Sugar Industries, [1964) 6 S.C.R. 846 dealing with a
question whether geographical classification due to historical reasons
would be valid this Court at page 853 observed as follows :

"Differential treatment arising out of the application of the laws
B
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, considera-
tions of necessity and expediency would be obliterated, and the
grounds which justified classification of geographical regions for c
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 ob-
viously be permitted to assume permanency, so as to perpetuate
that treatment without a rational basis to support it after the initial D
expediency and necessity have disappeared.

In Narottam Kishore Dev Venna and Ors. v. Union of India and Anr.,
(1964) 7 S.C.R. 55 the challenge was to the validity of Section 87B of the
Code of Civil Procedure; which granted exemption to the rulers of former
India State from being sued except with the cnsert of the Central Govt. E
dealing with this question it was observed at page 60 as follows :

"If under the Constitution all citizens are equal, it may be
desirable to confine the operation of s. 87B to past transactions
and nor to perpetuate the anomaly of the distinction between the F
rest of the citizens and Rulers of former Indian States. With th-;
passage of time, the validity of historical considerations on which
s. 87B is founded will wear out and the continuance of the said
section in the Code of Civil Procedure may later be open to serious
challenge."
G
In H.H. Slui Swamiji Shri Admar Mutt Etc. v. The Commissio1w;
Hindu Religious & Chmitable Endowments Depaltment 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 H
730 SUPREME COURT REPORTS (1997] SUPP. 6 S.C.R.

A 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
B
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 Reor-
ganisation Act serves the significant purpose of giving reasonable
time to the new units to consider the special circumstances obtain-
c ing in respect of diverse units. The decision to withdraw the
application of unequal laws to equals cannot be delayed un-
reasonably because of the relevance of historical reasons which
justify the application of unequal laws is bound to wear out with
the passage of time. In Broom's Legal; Maxim (1939 Edition, page
D 97) can be found a useful principle "Cessante Ratione Legis Cessat
Ipsa Lex", that is to say, "Reason is the sour of the law, and when
the reason of any particular law ceases, so does the law itself'.

This Court in Motor General Traders and Anr. Etc. Etc. v. State of
E Andhra Pradesh and Ors. Etc. Etc., [1984] 1 S.C.R. 594 had to consider the
validity of Section 32B of the Andhra Pradesh Buildings (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 merely a quarter of a century and it was argued that because
of shortage of housing accommodation since the section had been valid
F 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
Bhaiyalal Shukla v. State of Madhya Pradesh, [1962] Suppl. 2 S.C.R. 257
and Bhopal Sugar Industries Ltd. (supra) it was observed at page 606 as
follows "what may be unobjectionable as a transitional or temporary
G measure at an initial stage can still become discriminatory and hence
violative of Article 14 of the Constitution if it is persisted in over a long
period without any justification". Dealing \vith the contention that the
impugned provisions had been in existence for over 23 years and had once
been held to be valid by the High Court and, therefore, this Court should
H not pronounce upon its validity at this late stage, it was observed at page
MALPEVISHWANATHACHARYAv. STATE [KIRPAL,J.] 731

614 that "what was justifiable during a short period has turned out to be a 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 constitution which it may
have possessed earlier has become worn out and its unconstitutionality is
now brought to a successful challenge".
B
In Rattan A1)1a and 010» v. 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 paying monthly rent exceeding Rs. 400
were exempted from the protection of the Act whereas no such restriction c
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 D
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 that the provision is intended E
to benefit the weaker section 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 F
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 G
such as that imposed by Section 30(ii) in 1973 can only be con-
sidered to be totally artificial and irrelevant today. As held by this
court in Motor General Trade10· v. State of A.P. a provisions which
was perfectly valid at the commencement of the Act could be
challenged later on the ground of unconstitutionality and struck H
732 SUPREME COURT REPORTS [1997] SUPP. 6 S.C.R.

A down on that basis. What was once a perfectly valid legislation,
may in course of time, become discriminatory and liable to chal-
lenge on the ground of its being Violative of Article 14."

Lastly reference need be made to Synthetics and Chemicals Ltd. and
Ors. v. State of U.P. a11d Ors., [1990] 1 SC~ 109 where at pages 156-157 it
B 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
Court in Motor Gc11eral Traders case (supra).

Mr. Nargolkar referred to the decision of this Court in Sant Lal
C Bhmti v. State of Punjab, [1988] 2 S.C.R. 107 and contended that the ratios
of the said decision is clearly applicable to the present case. In Sant Lal's
case a two Judge Bench of this Court was called upon to consider the
validity of Section 4 of East Punjab Urban Rent Restriction Act. 1949,
which intra alia, provided that in determining the fair rent the Rent
D 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 lst 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
E 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 un-
reasonable 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
F 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 a Three Judge Bench in the cases of Rattan Ary1a1 Motor
General Traders and Synthetics and Chemicals (supra) that with the passage
of time and with the consequent change of circumstances the continued
G 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 enacted was justified may, with the passage of time, become arbitrary
and unreasonable. It is, therefore, to be seen whether the aforesaid prin-
H ciple is applicable in the instant case. Can it be said that even though the
MALPE VISHWANATH ACHARYA v. STATE [KIRPAL, J.] 733

provisions relating to the fixation of standard rent were valid when the A
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 Ministers
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 B
was called for. The correctness or the authenticity of this material has not,
in any way, been doubted and, therefore, we see no reason as to why this
cannot be taken into consideration in order to determine whether the
submission of Mr. Nariman merits acceptance. Reference may now be
made to some of this material :
c
1. A rent Act inquiry committee of 1977 commonly known as Tembe
Committee, was constituted by the Government of Maharashtra which in
its report submitted in the same year recognised that the pegging down of
the rents to a date nearly thirty years back (at that time) had deprived the
property owners of a reasonable return on their properties commensurate D
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 steep increase in the cost E
of living. In para 6( 10) it observed that "having regard to the general
increase in the cost of living the Committee 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."
F
2. The Maharashtra State Law Commission 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 Maharashtra State Law Commission 1979
G
on the Rent Control Legislation, para 91 dealing with this aspect reads
as follows : ·

"The Commission does not want the rents to be static for Jong. The
inflationary trend reflected by the rising consumer price index H
734 SUPREME COURT REPORTS [1997] SUPP. 6 S.C.R.

A numbers at all centres in the State makes it imperative to make on
objective assessment of the situation at regular intervals so that the
remedial action may be possible by periodical variation in rents
according to as the situation demanded. Suggestions for such
periodical survey was also made to the Commission by various
-
representatives in evidence. The Commission feels that such a
B periodical survey would be much helpful in maintaining the balance
between the landlord and the tenant. The possibility of the infla-
tionary 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 on a reasonable level. If on the other
hand, the inflationary trend continues unabated, then a reasonable
c rent increase may have to be resorted to. It is true that the Govt.
can always take such stock of the situation and come up with an
appropriate measure to meet the situation at any given time. But
the Commission does not want to leave the matter to an action
being thought of by the Government. The Commission thinks that
D it would be proper to make a specific provision in the unified Act
which would cast an obligation on the Government to hold peri-
odical reviews and to take effective actions for rent variations
according as the circumstances may warrant."

The Commission further stated :
E
"In big cities like Bombay, a large number of slums have come into
existence. If the rigours 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
F in slums today might have been in a position to get some decent
accommodation.

It wa.s further stated :

"The increase ii;i the standard rent must be considered from the
G
point of view of the Consumer Price Index.

"It was pointed out to the Commission that 46 per cent of the lands
belong to low group, 27 per cent belong to middle income group,
and only 25 per cent belong to the higher income group. These
H figures will indicate that 75 per cent of the so-called landlords are
MALPE VISHWANA'J1H ACHARY Av. STATE [KIRPAL J.] 735

really people who depend upon the rent of the property for their A
livelihood. To designate them as 'landlords' itself is undesirable.
', When one considers the financial position of the tenants, compared
to the position 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."
B
4. A Report of Economic Administrative Reforms Commission on
Rent Control (commonly known as L.K. Jha Committee) was presented to
the Government of India 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
c
are very old and the rents were fixed a few decades ago. These
old and frozen rents bear little relation to the present day main-
tenance costs, or to the current returns from alternative invest-
ments, or to the prevailing market rents in respect of new
accommodation. In the case of new construction we have suggested D
that the periodical revision of rents should be based on a partial
neutralisation of the effect 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
E
determination of those rents 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 F
thereafter periodically revising them."

5. On 21/22.5.1987 a Conference of the Housing Ministers of all the
State was held to discuss various problems. Decisions taken at that Con-
ference were recorded in the form of resolutions. With regard to Rent G
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 : H
736 SUPREME COURT REPORTS (1997) SUPP. 6 S.C.R.

A (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

B (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 the Government of India to
formulate and communicate to the State Governments for neces-
c sary action suitable guidelines as soon as possible during the
current year for their consideration so as to provide for the
expeditious amendment of Rent Control Laws with a view to
providing for :

(a) a reasonable return on investment in housing which will be
D comparable to, if no more favourable then, the return from and
other avenues of investment,

(b) peliodical upward revision of rents to neutralise the erosion in
the real value of rents.
E (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 rateable values
to the extent they are regulated by Rent Control Laws.
F
(e) leave and licence system,

(f) period tenancy,

(g) protection to tenants from arbitrary eviction.
G
(h) exemption from the provisions of the Act of new construction
less than 5 years,

(i) obviating delays in litigation by laying down suitable expeditious
procedures, only one appeal to a higher authority instead of multi-
H level appeals, constitution of tribunals to deal with disputes arising
MALPE VISHWANATH ACHAR YA v. STATE [KIRPAL, J.] 737

under the Act and barring the jurisdiction of Civil Court Act." A
6. In the Letter dated 24.7.1987 from the Ministry of Home Affairs,
Government of India, while communicating President's assent to 1987
amendment to the Bombay Rent Act it was stated as follows :

"It is suggested that the State Government may make subsequent B
amendments to the principal Act preferable within next 6 months
by incorporating the following recommendation of the above con-
ference (Housing Ministers conference).

(a) Periodical upward revision of rents to neutralise the erosion
in the real value of rents." c
7. A conference of Chief Ministers of all State was held at New Delhi
m 1992. One of the topics discussed pertained to static rents and the
problems arising therefrom. A unanimous recommendation of this con-
ference made on 9.3.1992 in this regard was as under :
D
"4.3. The frozen rents have led to emergence of practices like key
money. This apart from creating a black 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."
.. , E
"4.4. The widening divergence between the interests of landlords
and tenants has not only led to increased litigation nnder Rent
Control Acts (the rent control cases make for a majority of the
cases) but also to increased crimes.

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

The recominendation further reads :

"The important principle is that while the tenant will enjoy G
security of tenure in 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 extracb of reports and reso.lutions clearly H
738 SUPREME COURT REPORTS (1997) SUPP. 6 S.C.R.

-A demonstrates that since that 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.

B It was submitted by Mr_ Nariman 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 have 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
C rapid inflation there has been steep 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.

D
As already noticed it had been contended by Mr. Nargolkar that
realising the need being there for providing some relief to the landlords
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.
E
It is true that some amendments were made in 1987 which clearly
indicate that the State Legislature was conscious of the fact that there wa5
a need to increase the standard rent. The question, however, is whether
the exercise which wa5 undertaken was merely cosmetic or did it bring
F 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
G 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 merely to consolidate and rearrange
H the sections of the earlier Act. Provisions contained in the present Sections
MALPEVISHWANATH ACHARYAv. STATE (KIRPAL,J.] 739

9, 10 and lOA were found earl~er, prior to the amendment in 1987, in A
Sections 10, lOA, lOAA, lOAAA, lOC, lOD, lOE and 100. 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 l.10.1987 will bring out the effect of the alteration, if any.
B
Tabulated Comparative Statement

After Amending Before Amending
Act of 1987 Act of 1987
S. 9(1) increase in rent on Identical provision in S. 9 which c
account of structural alterations is there in the original Act since
or improvement made with 1948.
Tenants' written consent.
S. 9(2) increase on account of Similar provision in S. lOD(l)
special additions or additional which was introduced in 1953. D
amenities.
S. 9(3) increase on account of Similar provisions in S. 10D(4)
additions, improvements or which was introduced in 1953.
additional amenities ordered by
local authority. E
S.9(3)(a) - Temporary increase Similar provision in S. lOE
in rent on account of special or introduced in 1964.
heavy repairs.
S. 10 - Increase in or fresh rate, Similar provisions in S. 10
cess, charge or tax paid to local (since inception of Act) S. lOA
F
authority. (introduced in 1949), S. lOAA
(introduced in 1953) S. lOAAA
(introduced in 1962).
S. 10 increase in rent on account S lOG introduced in 1973
of increase in ground rent paid to permitted recovery of one third G
Govt. local authority or statutory of increa~c.
authority.

During the course of his arguments Mr. Nariman filed a statement indicat-
ing the financial impact of the rent restriction provisions on the assumption H
740 SUPREME COURT REPORTS [1997] SUPP. 6 S.C.R.

A 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. JOO (exclusive
of Municipal taxes). This is an accurate approximate average of
B rents paid in September 1940 in respect of flats of large areas
situated in good localities.

l(a) From Septe1J1ber 1940 till 13.2.1948, 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
c 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

D
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
E 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. That in case of all buildings co11stmcted p1ior to l.1.1970 - (date
F
of levy of compulsory repair cess) - they constitute majority of
buildings in all urban areas the landlord retains only 8 months relit
in hand every year - as against 12 months rent he was getting in
September 1940 :-

G (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
H and maintenance charges paid to Co-operative Housing Societies by
MALPEVISHWANATHACHARYAv. STATE [KIRPAL,J.] 741

landlord members : not permitted to be passed on to tenants. A
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 :
B
(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
8.76 by 1996 : 66 time ·
c
(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 133 times.
D
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".
E
To put it simply in a tabulated form the following is the comparative
position of rent between 1940 and 1997 and the amount retained by the
landlord.

Per Month:
F
1940 1997

1. Rent per month inclusive
of Municipal Taxes (Rs.) 100 170.09
G
2. Amount of Municipal Taxes
to be paid by Owner (Rs.) 21.54 108.47

3. Amount of repair cess to be
paid by owner (Rs.)
@ 10% of rateable value Nil 7.62 H
742 SUPREME COURT REPORTS (1997] SUPP. 6 S.C.R.

A 4. Amount retained by owner
after payment of Municipal
truces & repair cess (~s.) 78.46 84.00

N.B. : No correction has been made for :

B (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
c 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 provision contained
in the Bombay Rent Act. It is true that the aforesaid illustration has
D reference 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 of the premises Jet out after
1.9.1940 is that rent at which the premises were first Jet. 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
E shows that the non provisions 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, Mum-
F bai. The said building belongs to a cooperative society and unit No. A-18
was given on lease and license basis by an agreement dated 23rd August,
1964 by the appellant to Lokmitra Sahakari Printing and Publishing Society
Ltd. 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
G of all truces. Out of this sum the appellant No. 3 has to pay Rs. 216.33 as
municipal truces leaving a balance of Rs. 320.22. From this amount the
society outgoings on 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 an Ram Mahal
f-I Situated at 8, Dinshaw Vachha Road, Mumbai. The said building has 20
MALPEVISHWANATHACHARYAv. STATE [KIRPAL,J.] 743

residential flats and the building was purchased by appellant No. 4 in the A
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 M/s. Bennet Coleman & Co. Ltd., who were the sitdng 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 months inclusive of permitted
increase and repairs. According to the appellant the income by way of rent
B
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 annual expenses of Rs. 1,93,245 consisting of BMC 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 c
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 a D
hypothetical tenant, i.e., an Assistant in the Government of India posted at
Bombay in the year 1948. At that time the pay scale of the Assistant was
Rs. 160-10-300-15-450 + 20%.H.R.A. + Rs. 15.50 C.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. E
100 per month, he would be paying approximately 20% of his total emolu-
ments by way of rent, without taking into consideration any deduction. for
repair. 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 increas.e in rent, he would be paying about Rs. F
170 p.m. in respect of the same premises instead of Rs. 100 which he was
paying in 1948. This enhanced rent, would, however, represent only 0.9%
of his salary. With the passage of time, the percentage of rent which would
be paid by that hypothetical tenant would have gone down from 20% of
his total salary to only 0.9% and this would be the case of most of the
tenants as we can take judicial notice of the fact that from 1948 till now, G
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 H-
•
744 SUPREME COURT REPORTS [1997) SUPP. 6 S.C.R.

A Rs.100 p.m. That was the real income from rent which he had agreed to
receive. Now with the increase in taxes etc., he gets only Rs. 54 p.m.
whereas in 1940, he got Rs. 100 minus Rs. 21.54 (municipal tax) i.e. 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
B gets a gross rent of about Rs. 170 which in real money term, after taking
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. 6600
p.m.
c
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
D State has definite laws with regard thereto. In same 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, 1940 or the first rent of the premises
which was let out thereafter is the standard rent. The pegging down of rent,
E 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 the Maharashtra Legislature
providing for amendment to the Bombay Rent Control Act with regard to
clause 3 it was, inter alia, stated as follows :
F
"The freezing of standard rent prevailing on the 1st September,
1940 has deprived the landlords of getting reasonable and ade-
quate 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·
•
G "pugree" or deposit or similar illicit payment which are widely
prevalent. The construction of new tenements on rental basis has
considerably ceased with the result that low and middle income
groups are not getting premises on rent... ..... "

H (emphasis added)
MALPEVISHWANATHACHARYAv. STATE [KIRPAL,J.] 745

Notwithstanding the fact that the State Legislature was conscious of A
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 society, it may be at the cost of another
B
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 ap-
propriate corresponding relief, then the continuation of such a law which c
necessarily, or most likely, leads to increase in lawlessness and undermines
the authority of the law can no longer be regarded as being reasonable. Its
continuance becomes arbitrary.

The Legislature itself as already noticed hereinabove, has taken
D
notice of the fact that pugree system has become prevalent in Mumbai
because of the Rent Restriction· Act. This court ras also asked to take
judicial notice of the fact that in view of the unreasonably low rents which
are being received by the landlords, recourse is being taken to other
methods to seek redress. These methods which are adopted are outside
the four corners of the law and are slowly giving rise to a state of E
lawlessness where, it is feared, the courts may become irrelevant in decid-
. ing disputes between the landlord and tenants. This should be a caµse of
serious concern because if this extra judicial back-lash gathers momentum
the main sufferers will be the tenants, for whose benefit the Rent Control
Acts are framed. F
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 dispropor-
tionate benefit or protection to another section of the society. When there
is shortage of accommodation it is desirable, nay, necessary that some G
protection should be given to the tenants in order to ensure that they are
not exploited. At the same time such a law to be revised periodically so as
to ensure that a disproportionately larger benefit than the one which was
intended is not given to the tenants. It is not as if the government does not
take remedial measures to try and off set the effects o(inflation. In order H
746 SUPREME COURT REPORTS (1997] SUPP. 6 S.C.R.

A to provide fair wage to the salaried employees the government p~ovides 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 increases made even in 1987 are not adequate, fair or just and the
provisions continue to be arbitrary in todays context.

B When enacting socially progressive legislation the need is greater to
approach the problem from a holistic perspective and not to have narrow
or short sighted parochial approach. Giving a greater than due emphasis
to a vocal section of society results not merely in the miscarriage of justice
but in the abdication of responsibility of the legislative authority. Social
C Legislation is treated with deference by the Courts not merely because the
Legislature represents the people but also because in representing them
the entire spectrum of views is expected to be taken into account. The
Legislature is not shackled by the same constraints as the courts of law.
But it's power is coupled with a responsibility. It is also the responsibility
D of the courts to look at legislation from the altar of Article 14 of the
Constitution. This Article is intended, as is obvious from its words, to check
this tendency; giving undue preference to 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
E 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,
F 1998. The government's thinking reflected in various documents itself
shows that the existing provisions have now become unreasonable and
therefore, require reconsideration. The new bill is under consideration and
we leave it to the Legislature to frame a just and fair law keeping in view
the interests of all concerned and in particular the resolution of the State
Ministers for Housing of 1992 and the National Model Law which has been
G circulated by the Central Government in 1992. We are not expressing any
opinion on the provisions of the said Model law but as the same has been
drafted and circulated amongst all the. States after due deliberation and
thought, there will, perhaps, have to be very good and compelling reasons
in departing from the said Model law. Mr. Nargolkar assured us that this
H Model law will be taken into consideration in the framing of the proposed
MALPE VISHWANATH ACHAR YA v. STATE [KIRPAL, J.) 747
new Rent Control Act. A
We, accordingly, dispose of these appeals, without granting any
immediate relief but we hold that the decision of the High Court upholding
the validity of the impugned provisions relating to standard rent was not
correct. We, however, refrain from striking down the said provisions as the
existing Act elapses on 31.3.1998 and we hope that a new Rent Control Act B
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 C
·14 of the Constitution and, therefore, of no consequence. The respondents
J
will pay the costs.

In view of the aforesaid the writ petitions are disposed of.

M.P. Appeals and petitions disposed of.