Setback for Bandra landlords: HC okays upping their lease rent by 400 to 1,900 times

Bombay HC upholds lease rent increase for Bandra housing societies, strikes down clause for 5-year revision. Revision now every 30 years at lease renewal

MUMBAI: The Bombay high court (HC) on Wednesday upheld the validity of three Government Resolutions (GR) that increased lease rent of government lands allotted mainly for housing societies in Bandra from 400 to 1,900 times.

The bench heard several petitions filed by co-operative housing societies from Bandra West, most of which are in Bandstand. Representational Image (NoBroker)

The division bench of justice BP Colabawalla and justice Somasekhar Sundaresan, however, struck down a clause in one of the GRs issued in 2012 that sought to revise the lease rent every five years. Now, the upward revision would be made every 30 years, at the time of renewal of the leases.

The bench heard several petitions filed by several co-operative housing societies from Bandra West, most of which are in Bandstand. The societies had challenged three Government Resolutions issued in May 2006, December 2012 and May 2018. While the May 2006 GR introduced a policy of linking the ready reckoner value of the land with the annual lease rent, the 2012 GR introduced the method of calculating the lease rent.

Under the 2012 GR, the housing societies and charitable bodies were required to pay lease rent at the rate of 2% of the 25% ready reckoner value of the government land allotted to them, industrial establishments were to pay 4% and the lease rent for commercial and mixed-use entities was fixed at 5%.

The petitioner societies challenged the increase, contending that the state government was prohibited by earlier judgements from linking lease rent with the ready reckoner value of the lands.

They also challenged the GRs on the grounds of arbitrariness and therefore claimed those were violative of Article 14 of the Constitution. They argued that the rent was sought to be increased by 400 to 1,900 times and this increase can hardly be justified as being fair and reasonable in the eyes of law. They added that the state must act in a fair and reasonable manner and not like a private landlord with a profit motive.

The argument, however, failed to impress upon the bench, which held that the earlier high court orders on the issue did not prohibit the state government from linking the lease rent with the ready reckoner value of the lands but required the government to act fairly while dealing with its lessees.

As regards the argument of arbitrariness, the court said a perusal of the ready reckoner discloses a great deal of detailing wherein rates are fixed even street wise and at times different rates are provided for different areas, depending on its peculiarity.

“Once this is the case, we find 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 observed.

Besides, the court also considered that individual members of the housing societies would not be required to pay more than ₹6,000 per month towards lease rent. “When one takes these figures into consideration and especially the fact that the properties of the petitioners are located at Bandra Bandstand (a very sought-after, and high-end real estate area in Mumbai), one can hardly call this increase exorbitant, extortionate and/or manifestly arbitrary,” the bench said.

It clarified that when the law mandates the Government must be fair and reasonable in dealing with its citizens, it does not mean that the Government must do charity. “Though it is indeed true that the Government should not act as a private landlord where profit would be the prime motive, it is still entitled to a reasonable return on its land,” the bench added.