Maharashtra Govt Decision Hiking Lease Rentals In Mumbai's Bandra Not Extortionate: High Court

The Bombay High Court has held that the State Government's decision to calculate lease rent based on the value of land given in the 'Ready Reckoner' was not arbitrary. However, it ruled the Government Resolution allowing lease rent revision every 5 years, as per the value of land on date of such revision, was invalid because the original lease deed did not stipulate such revision.The Division Bench of Justice Somasekhar Sundaresan and Justice B. P. Colabawalla were considering a bunch of petitions challenging the constitutional validity of the Maharashtra State's Government Resolutions (GR), namely, 2006 GR, 2012 GR and 2018 GR. The government had granted long-term leases of government land to various lessees, located in Bandra, Mumbai. The 2006 GR adopted 'Annual Statement of Rates' ('Ready Reckoner') to determine the value of the leased-out government lands. 'Ready Reckoner' is the annual statement prepared by the State government, showing the average rates of lands and buildings (residential or commercial) in various parts of the State, Thus, Ready Reckoner determines the market value of a land and/or property in a particular area of the State. Further, the 2012 and 2018 GRs provided a methodology to calculate the lease rent at which the expired leases would be renewed by the Government.The petitioners contended that the fixation of such lease rent on the basis of the value of the land, as provided in the Ready Reckoner, significantly increased the rent payable by them, thus making the rent increase manifestly arbitrary and unreasonable.The High Court decided on the following three issues: (a) Whether the Government could fix the lease rent for the lands leased to the petitioners on the basis of the Ready Reckoner? (b) Whether the increase in lease rent provided in 2006, 2012 and 2018 GRs is exorbitant or arbitrary? (c) Whether the Government could revise the lease rent every 5 years, based on the value of land on date of such revision? Lease fixed based on Ready Reckoner The Petitioners contended that as per the judgment in Ratti Palonji Kapadia vs. State of Maharashtra & Ors., (1992) Mh. LJ 1356), the Bombay High Court had set-aside the State Government's decision to increase the lease rent of the petitioners by 25 times for residential buildings and 50 times for commercial buildings. As the Court in Ratti Palonji Kapadia had observed that State could not act arbitrarily while exercising contractual rights, the petitioners relied on it to contend that the value of the land (as per the Ready Reckoner) could not be considered for calculating the revised lease rent. The Court however rejected the petitioners' contention, noting that in Ratti Palonji Kapadia case, the court did not lay down an absolute prohibition against the government revising lease rents based on the market value of the land. The Court stated that the lease rent could be increased considering the market value of the land, if it is done in a fair and reasonable manner and the lease rent is not exorbitant. It noted that in 2012 and 2018 GRs, the lease rent was fixed by considering only 25% of the value of the land and not on full market value of the land. “…the lease rent is not fixed on the basis of the full market value of the land as if it is an open undeveloped plot of land, but by taking into consideration only 25% of the value of the land [as per the Ready Reckoner]. This is for the reason that the lessees are sitting lessees on the land belonging to the Government, and if the said land was to be acquired and/or sold, the Government would be entitled to only 25% of the compensation. Hence, we find that there is a proper rationale for the decision taken in the 2012 and 2018 GRs” it stated. Examining the determination of the value of land, the Court referred to the Bombay Stamp (Determination of True Market Value of Property) Rules, 1995 which provide for preparation of Annual Statement of Rates/Ready Reckoner. The Court observed that an expert body of persons fix the average rate of lands and buildings and that the Ready Reckoner is prepared with great deal of detailing, with rated even being fixed street wise. It stated that “there is nothing wrong in the Government looking to the Ready Reckoner rate as a reasonable benchmark of value for the purposes of calculating the revised lease rent.” The Court therefore held that the government could fix lease rent by taking into account the value of the land as per the Ready Reckoner. Increase in lease rent through GRs The petitioners contended that lease rent increased through the GRs was manifestly arbitrary as it sought to increase it by 400 to 1900 times. The Court referenced a chart provided by the petitioners showing the increase in lease rent. It observed that each member's liability towards the revised lease rent is a maximum of Rs.6,000 per month, and in some cases, even less than Rs.2,000 per month. In view of this, the Court stated that the increase in lease rent was not...

Maharashtra Govt Decision Hiking Lease Rentals In Mumbai's Bandra Not Extortionate: High Court

Sanjana Dadmi

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