Bombay HC upholds state govt decision to hike lease rents based on ready reckoner rate | Mumbai News

In a relief to the state government, the Bombay High Court on Wednesday held that the state’s decision to fix rents based on the value of ready reckoner (RR) rate for the lands leased by it in Mumbai was ‘reasonable’ and ‘keeping with the times’.

It observed that the new method adopted through 2012 and 2018 Government Resolutions (GRs) to increase the lease rent was ‘fair’ and the revised rates “cannot be termed as exorbitant or extortionate.”

The bench, however, held that, “the government was not justified in revising or resetting the lease rent every five years even though the leases of petitioners were to be renewed for a period of 30 years.”

The HC set aside the specific clause in the impugned GR regarding the same and observed that the lease deed did not give the right to the state to “unilaterally change the lease rent intermittently during the tenure of the lease.”

It rejected the state’s ‘futile’ argument that the five-year renewal was required without which there will be ‘future fall of property prices in Mumbai’.

Festive offer

“Land in a city like Mumbai is a finite resource and it is not reasonable to expect land values to fall, except in exceptional and extraordinary circumstances. Even if land values were to come down for a temporary period (for example during the Covid-19 pandemic), they would stand corrected thereafter.  Land in Mumbai is a precious commodity, and prices of land are expected to only go up,” the bench observed.

A division bench of Justices B P Colabawalla and Somasekhar Sundaresan on July 10 passed a verdict in a batch of pleas filed by cooperative housing societies, occupants of bungalows in Bandra and two charitable institutions, against GRs of 2012 and 2018 fixing a new method for lease rents and renewals.

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Senior advocate Rafique Dada for the petitioners argued that the impugned GRs were ‘clearly illegal’ as they sought to increase the lease rent in an ‘unreasonable fashion,’ which is contrary to public policy and in violation of agreed contractual terms under original lease deeds and also the right under Article 14 (equality before law) of the Constitution.

The petitioners had claimed that due to impugned GRs, the lease rents, which were earlier fixed as per market rates of 1968, were increased exorbitantly (in some cases 400 to 1,900 times compared to earlier rates).

In one of the cases of petitioner housing society consisting of 20 members, the earlier annual lease rent fixed as per 1968 market value (and unchanged since then) was Rs 1,578 (for entire society), which was increased to Rs 14.32 lakh per year, resulting in every member paying Rs 5, 968 per month. In case of one of the petitioners holding an individual plot in Bandra, an annual lease rent of Rs 1,580 was revised to Rs 30.57 lakh (Rs 2.54 lakh per month).

Advocate General Birendra Saraf for the state government sought dismissal of pleas and argued that the increase was “not only fair and reasonable but fully justified.” He added, “For 30 years since 1981 (when petitioners were granted deemed renewal of lease till 2011), the petitioners have enjoyed the property with no increase in rent whatsoever.”

Justice Colabawalla for the bench held, “We do not find that the government, by taking the RR value into account (for determining the value of the land) is treating unequals as equal. The government is applying the RR to all the lands of the petitioners which is a fair and transparent method adopted by the government for valuation of the lands owned by it.”

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The bench noted that “properties of petitioners are located at Bandra Bandstand, which is a very sought-after and high-end real estate area in the city and one can hardly call this increase manifestly arbitrary.”

“We do not find that by this revision, the government is indulging in either rack renting, profiteering and/or indulging in unreasonable or whimsical evictions or bargains,” it added.

The court also asked the government to process the applications made by petitioners on or before March 7, 2024, that sought conversion of their land from Leasehold to Occupancy class after calculating arrears of lease rent.



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