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Quashes Retrospective Rent Hikes by Mumbai Port Authority, Reaffirms Wadia Judgment
The has allowed a batch of 145 writ petitions challenging the revision of rents by the , quashing retrospective rent hikes and reaffirming the legal principles laid down by the in Jamshed Hormusji Wadia v. . A Division Bench of Justice Bharati Dangre and Justice Manjusha Deshpande held that the rates fixed under the “compromise proposals” upheld by the would govern the petitioners up to , and that subsequent retrospective fixation of rates could not be sustained.
A Long-Standing Dispute Over Port Trust Rents
The litigation has its origins in the 1980s when the then sought to enhance rents based on a valuation report prepared by , which pegged the value of its leased lands at Rs. 521 crores. The tenants challenged the enhancement, and after years of litigation, the matter reached the in Jamshed Hormusji Wadia v. The & Anr. (). In that seminal judgment, the apex court declared that the BPT, as an instrumentality of the State, must act fairly and reasonably. It upheld a “” that had been approved by the Board in , with modifications reducing the rate of return to 10% for non-residential and 8% for residential users. The Court also noted that the BPT could not engage in “” or .
Following the 's decision, the BPT passed a resolution in extending the rates with a 4% annual increase up to 2012, and by virtue of Resolution No. 204 of 1997, fresh leases for 30 years from were granted, effectively extending the application of those rates up to 2024.
The Impugned Rent Revisions and Retrospective SORs
Despite this settled framework, the — acting under the — issued e-gazette notifications in October and November 2021 fixing Scale of Rates (SOR) retrospectively from to , and from to . These SORs were based on the , which prescribed fixation of SOR based on the highest of several market-linked factors, including state ready reckoner rates, transaction values, and valuer reports. The MbPA, which succeeded the BPT under the (MPA Act), adopted these SORs and issued individual demand notices to tenants seeking payment of differential arrears for the past decade.
Petitioners' Arguments: Violation of Wadia Principles and Retrospectivity
, appearing for the lead petitioner Arsheesh Jamshed Wadia, argued that the compromise proposals approved by the were binding on the MbPA and that the rates fixed thereunder were applicable up to 2024. He submitted that the respondent's attempt to fix rents retrospectively, based on market value, was contrary to the principles of fairness and reasonableness laid down in Wadia . He further contended that after the MPA Act came into force on , TAMP lost its power to fix tariff/rates, and that Section 27 of the new Act explicitly prohibits retrospective fixation of rates. Khambata also invoked the doctrines of and , arguing that the issues regarding rent revision had been finally determined by the .
Respondents' Defense: Right to Revise Rents and PGLM Compliance
, representing the MbPA, argued that the had only fixed rates up to March 31, 2000, and that the authority was entitled to revise rents thereafter. He submitted that the PGLM 2015 guidelines, issued by the under , required the port to fix rates based on market value, and that a 6% return on the prevailing market value was not exorbitant. He also contended that the , which bars , applies only to relating to different classes of goods and vessels, not to lease rents fixed under contractual arrangements.
Court's Analysis: Governs Until 2024; Retrospective SORs Invalid
The Division Bench meticulously traced the history of the litigation and the scope of the 's decision. It noted that the BPT itself, through its resolution No. 31 of , had committed to applying the rates up to 2024. The Court held that the revision of rents was governed by the and that the only course available to the MbPA was to revise the rates after , in accordance with the principles laid down in Wadia .
On the issue of retrospective SORs, the Court interpreted , along with the . It rejected the respondents' narrow construction of the proviso, holding that the prohibition on applies to all scales, fees, and rates fixed under sub-section (1), including lease rents. The Court observed:
“The proviso serve the purpose of carving out an exception to the effect that though there is a power of fixation and implementation of scales, fees and rates by the Board of each Major Port Authority or Committees, constituted by the Board, in accordance with , such fixation of scales, fees, rates shall be in consonance with the norms as may be prescribed and it shall not be with .”
The Court further held that TAMP, after the MPA Act came into force, could only function as an Adjudicatory Board under , and tariff setting was excluded from its functions. Therefore, the notifications published in November and December 2021 were .
PGLM 2015 Struck Down as Contrary to Wadia Principles
Addressing the challenge to Clause 13 of PGLM 2015, the Court found that the guideline, which required the to choose the highest of five market-linked factors, amounted to and . It observed:
“…the to chose one of the highest factor amongst the five factors and… an attempt to profiteer as would be arrived at, by comparing various prices as set out in the said clause, is getting a price which would be the prevailing market value of land and this is hit by the ratio of Wadia.”
The Court read down Clause 13 insofar as it applies to the MbPA, directing that any future rent fixation must comply with the principle that there shall be no or , and that the rates shall be fair and reasonable.
The Final Decision and Its Implications
The Court passed the following orders:
- Declared that the rates of rent fixed under the compromise proposals upheld in Jamshed Wadia are applicable to the petitioners up to .
- Quashed the e-gazette notifications dated , , and the speaking orders fixing SORs retrospectively.
- Quashed the subsequent notifications and circulars issued by the MbPA adopting those SORs, as well as the individual demand notices.
- Held that after , the MbPA is at liberty to fix rents, but must do so in accordance with the , avoiding and .
- Read down Clause 13 of PGLM 2015 in its application to the Port Authority.
The judgment reinforces the constitutional obligation of state instrumentalities to act justly and fairly in contractual matters, even when exempted from rent control laws. It also clarifies that retrospective fixation of rates, especially without clear statutory authority, is impermissible.
All pending interim applications were disposed of, with no order as to costs.
