Bombay High Court Quashes Port Authority's Retrospective Rent Hikes, Mandates Fair Rates & Rejects Profiteering-Based Land Valuation
The Bombay High Court has allowed a batch of 145 writ petitions challenging the revision of rents by the Mumbai Port Authority. The Court held that the rates fixed under the “compromise proposals” upheld by the Supreme Court in Jamshed Hormusji Wadia's case would govern the petitioners up to March 31, 2024. It further held that the subsequent retrospective fixation of rates could not be sustained.
A Division Bench comprising Justice Bharati Dangre and Justice Manjusha Deshpande was hearing the petitions seeking directions to the Board of Trustees of the Port of Bombay (BPT) to withdraw its communications enhancing rent through various tariff orders. The fixation of rates as per the statement of rates declared on various dates for different phases was assailed as exorbitant by the petitioners.
The Court noted that the Supreme Court in Jamshed Hormusji Wadia v. Board of Trustees of the Port of Mumbai & Anr. had held that State-owned or public-owned property is not to be dealt with at the absolute discretion of the executive. It was observed that considering the status of the Port Trust as an instrumentality of the State and as owner-cum-landlord, its action must be tested on the parameter of being “just, fair and reasonable”.
The Court observed that the “Compromise Proposal” had been accepted by the Division Bench of the High Court with modification. It noted that, pursuant to the decision of the Supreme Court, the Port Trust itself had extended the proposal up to 2024, under its Resolution No.31 of 2004. The Court therefore held that the revision of rents was governed by the “Compromise Proposal” and the available course of action for the Trust was to revise the proposal from 2024 onwards.
The Court then considered the issue of retrospective Scale Of Rates (SOR) fixed by Tariff Authority for Major Ports (TAMP) for the periods from October 1, 2012 to September 30, 2017 and October 1, 2017 to September 30, 2022. Reading Section 27 of the Major Port Authorities Act, 2021 alongside Major Ports Authorities Rules, 2021, the Court held that, since TAMP and the Mumbai Port Authority are instrumentalities of the State, they were also under an obligation to act fairly, reasonably and for a public purpose, and could not retrospectively demand differential rent/compensation.
“… 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 Section 14, such fixation of scales, fees, rates shall be in consonance with the norms as may be prescribed and it shall not be with retrospective effect,” the Court remarked.
The Court further held that, after the Major Port Authorities Act, 2021 came into force on November 3, 2021, TAMP ceased to have the earlier jurisdiction to fix tariffs/rates. TAMP could continue to function as the Adjudicatory Board until the constitution of the new Adjudicatory Board, but tariff setting was excluded from its functions. Therefore, the SORs for 2012-2017 and 2017-2022 published by TAMP in November and December 2021 were held to be null and void.
On Policy Guidelines For Land Management By Major Ports (PGLM) 2015, the Court noted that Clause 13 required the Land Allotment Committee to take into account the highest of several factors, including the Ready Reckoner rate, the highest rate of actual transactions in the Port's vicinity, the highest accepted tender-cum-auction rate and the rate arrived at by an approved valuer. The Court held that adopting the highest factor resulted in determination of the prevailing market value and amounted to an attempt to profiteer, which was hit by the ratio of Jamshed Wadia. It observed:
“… the Land Allotment Committee 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 accordingly held that the rates of rent fixed by the Port Authority based on “compromise proposals” which is upheld by the Apex Court in Jamshed Hormusji Wadia's case, are applicable to the petitioners up to 31/3/2024. It quashed the Gazette Notifications dated October 29, 2021 and December 18, 2021
The Court also quashed the demand notice served on petitioners seeking retrospective payment of differential arrears of lease/ tenancy. It declared that, after expiry of the period covered by the compromise proposal in 2024, the Mumbai Port Authority would be at liberty to fix rents, keeping in mind the principle laid down in Jamshed Wadia that there shall be no profiteering or rack-renting and that the rates fixed shall be fair and reasonable. The Court also read down the PGLM 2015 clause prescribing fixation of SOR on the basis of market value of land insofar as it applied to the Port Authority.
Case Title: Arsheesh Jamshed Wadia v. The Board of Mumbai Port Authority [WRIT PETITION NO.3143 OF 2022 and connected matters].