The State Government must act fairly and reasonably and in accordance with the public policy as laid down in the Bombay Rent Act, although the Act may not strictly apply to the State Government.

Headnote:
LEASE RENT - INCREASE - FAIRNESS AND REASONABLENESS - PUBLIC POLICY - RENT CONTROL LEGISLATION - STATE GOVERNMENT - ARBITRARINESS - NATURAL JUSTICE - PRINCIPLES OF FAIR PLAY - LEASE RENEWAL - PERIOD - JUSTIFICATION - MARKET VALUE OF LAND - RELEVANCE - RETREAT HOUSE - SPECIAL RENT - CHARITABLE ORGANISATIONS - EXEMPTION FROM RENT INCREASE.
Fact of the Case:

The petitioners, lessees of 48 plots of land situated at Mount Mary, Bandra Band Stand, Bombay, challenged a decision of the State Government dated 14th March, 1986, under which the State Government increased the lease rent in respect of residential plots of land in question to 25 times what the petitioners were paying as lease rent prior to 1st January, 1981 while renewing the leases of the petitioners for a period of 10 years from 1-1-1981 to 1-1-1991.
Finding of the Court:

The court held that the Government Resolution of 14th March, 1986, under which the lease period of these 48 plots is extended from 1-1-1981 to 31-12-1990 at a revised lease rent for residential plots at the rate of 25 times the rent prevailing as on 1st of January, 1981, and for commercial plots at 50 times the rent prevailing prior to 1st of January, 1981, cannot be considered as a fair and reasonable one, looking to all the circumstances; and that the action of the State Government is arbitrary and unreasonable.
Issues: 1. Whether the increase in lease rent by the State Government is fair and reasonable? 2. Whether the State Government's action is arbitrary and unreasonable? 3. Whether the principles of natural justice and fair play require that the affected lessees be heard before the State decides to increase rents? 4. Whether the market value of land is a relevant factor in determining the lease rent?
Ratio Decidendi: 1. The State Government must act fairly and reasonably and in accordance with the public policy as laid down in the Bombay Rent Act, although the Act may not strictly apply to the State Government. 2. The State Government cannot act arbitrarily or capriciously. 3. The State Government must take into account the full in the value of the rupee over the years, and an adequate return in terms of the changing value of the rupee or increase in maintenance costs and so on. 4. The State Government cannot increase rent bearing in mind the increase in the market value of the land. 5. The State Government must disclose to the affected lessees the basis on which the rent is proposed to be increased and reasons for the same, thereby taking them into confidence.
Final Decision: The court set aside the Government Resolution of 14th March, 1986 and the consequent orders and the notice of demand which have been issued on the petitioners herein and directed the respondents to renew leases afresh on the terms and conditions based upon principles set out earlier.

JUDGMENT - Mrs. MANOHAR SUJATA, J.:---Appeals Nos. 1141 of 1991 and 1152 of 1991 are in respect of Writ Petitions Nos. 3215 of 1991 and 3511 of 1991 respectively. These writ petitions have been admitted but no interim orders have been granted. These appeals are from the order refusing to grant any interim reliefs. By consent of parties the original writ petitions are also placed for hearing along with the group of Petitions Nos. 433 of 1987 and others. The respondents waive service in respect of these two petitions.

2. All these petitions pertain to 48 plots of land situated at Mount Mary, Bandra Band Stand, Bombay. The respondent i.e. the State of Maharashtra is the owner of these plots of land. The State has executed long term leases in respect of these plots of land in favour of private parties from 1907 onwards. The petitioners in these writ petitions are the present lessees of these 48 plots of land from the State Government. They have challenged in these writ petitions a decision of the State Government dated 14th March, 1986 under which the State Government has increased the lease rent in respect of residential plots of land in question to 25 times what the petitioners were paying as lease rent prior to 1st January, 1981 while renewing the leases of the petitioners for a period of 10 years from 1-1-1981 to 1-1-1991. Although the rent has been so increased from 1-1-1981 the decision in this regard has been taken only on 14-3-1986 and is intimated thereafter to the petitioners. A few of the petitioners were informed of this increase as late as in 1991 for the first time.

3. We will refer in detail to the facts in Writ Petition No. 433 of 1987 for the sake of convenience. The petitioners in this petition are lessees of Government Land Bearing Plot No. 209 situate at Bandra, Band Stand admeasuring 1226 square yards. The land was first leased to the lessee for a term of 50 years commencing from 1st January, 1901 at the yearly rent of Rs. 35/-. The lease deed is dated 25th July, 1907. Under Clause 6 of this lease deed, it is provided as follows:

"6. AND IT IS HEREBY FURTHER AGREED that in case the lessee shall duly pay the said rent, and perform all and every the conditions aforesaid to the satisfaction of the Collector, the lessee shall at the expiration of the said term of fifty (50) years be entitled to a renewal of the lease hereby granted, on a rental then to be fixed in reference to the general value of unimproved land similarly situated and not in reference to the special value given to the land hereby demised by improvements effected by the lessee for such further term and on such conditions as may then be determined by the Collector acting under the orders of the Governor of Bombay in Council."

4. After obtaining the lease the lessee in 1907 constructed a bungalow on the said plot. The bungalow consists of a ground floor, a mezzanine floor and first floor. The carpet area of the ground floor is about 2786 square feet. The ground floor of the bungalow was let out in the year 1933 and the ground floor is even now occupied by the family of the said tenant at a gross rent of Rs. 99/- per month in view of the provisions of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947. The plot of land and building are assessed to Municipal property taxes on the basis of rateable value of Rs. 2,210/-.

5. The period of the lease expired on 31st December, 1950. After expiry of the lease, the respondents continued to recover ground rent from the petitioners at the rate mentioned in the original lease, that is to say, at the rate of Rs. 35/- per year. On 30th March, 1955 a letter of that date was addressed to the petitioners informing them that the Government had ordered that the lease should be renewed for a period of 30 years with effect from 1-8-1951. The rent for the period 1-1-1951 to 31-7-1951 would be recovered at the rates mentioned in the expired lease. In respect of the renewed lease the revised rent was fixed at 5% o

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1992 Supreme(Bom) 239

The State Government must act fairly and reasonably and in accordance with the public policy as laid down in the Bombay Rent Act, although the Act may not strictly apply to the State Government.

Cases Referred (2)