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The Bombay High Court upheld the Maharashtra Government's decision to increase lease rents in Bandra based on the Ready Reckoner (RR) rate, affirming its appropriateness given Bandra's high-end real estate. However, the court ruled that rent must remain fixed for the entire lease duration, not revised every five years as per government resolutions from 2006, 2012, and 2018. Justice B P Colabawalla and Justice Somasekhar Sunderesan noted that the revised rents, ranging from less than INR 2,000 to a maximum of INR 6,000 per month, were not exorbitant given Bandra's prime location. They emphasized that lessees have used the land almost free of cost since 1951, making the rent increase reasonable. However, the court struck down the clause for periodic rent revision, stating both the state and lessees cannot unilaterally modify the lease terms.
The Bombay High Court upheld the Maharashtra Government's decision to increase the lease rent in Mumbai's Bandra based on the Ready Reckoner (RR) rate, affirming that the decision was not "arbitrary" given the high-end real estate nature of the suburb. However, the court stipulated that the rent could not be revised every five years as per the government's resolutions and must remain fixed for the entire duration of the lease agreement. Advertisement
A division bench of Justices B P Colabawalla and Somasekhar Sunderesan delivered this ruling on July 10, while disposing of multiple petitions filed by several housing societies in Bandra. These societies were contesting the government resolutions from 2006, 2012, and 2018 that revised the rent on their long-term leases.
The court remarked that these societies have been enjoying extensive portions of land in Bandra, a prime location, almost free of cost. The court stated, "If one were to really break down what these individuals are paying now for government land leased to them, it can hardly be regarded as exorbitant."
The government's resolutions had adopted the RR to determine the lease rent payable, which the societies argued was illegal, claiming the rent increase was "400 to 1900 times" the original amount, which they deemed exorbitant. However, the bench noted that according to a chart submitted by the government, each society's liability towards the revised lease rent was a maximum of Rs 6,000 per month and, in some cases, even less than Rs 2,000 per month.
Taking these figures into account, the court observed that given the prime location of the properties at Bandra Bandstand, a highly sought-after real estate area in Mumbai, the increase in rent could not be considered exorbitant, extortionate, or manifestly arbitrary. The court further noted that since 1951, when their leases were renewed, the societies had been paying rent fixed at that time, with no revisions being effected even after the leases expired in 1981.
The court stated, "Considering the value of money and inflation (and the fact that no revision has been effected), it becomes obvious that these lessees have enjoyed and used all these properties virtually for free for 30 years even after their leases expired in 1981." Therefore, it could hardly be said that the increase in the revised rent was so exorbitant or manifestly arbitrary as to necessitate interference.
The bench reasoned that if individuals wish to hold large parcels of land in a prime locality and enjoy this luxury, it is only fair that they pay a reasonable sum, which is now the revised amount. The court asserted that while the law mandates that the government must be fair and reasonable in its dealings with citizens, this does not imply that the government must act as a charity.
The court acknowledged that, although the government should not act as a private landlord where profit is the primary motive, it is still entitled to a reasonable return on its land. Given the limited supply of land in an island city like Mumbai, the court noted that the lease rentals charged to societies occupying such finite resources must reflect the value of what they enjoy.
However, the bench found that the rent revision provision in the government resolutions was contrary to the lease agreement and quashed that specific clause. The court concluded, "Just as the lessees cannot, under the guise of calling upon the State to act fairly, unilaterally seek a modification in the contract, so also the State cannot unilaterally modify the contract entered into with the lessees."
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