BOMBAY HIGH COURT RULES ON LEASE RENT IN MUMBAI

REAL ESTATE UPDATE

12th July, 2024

Issue No. 10/24-25

BOMBAY HIGH COURT RULES ON LEASE RENT IN MUMBAI

BACKGROUND 

In the matter of Vrindavan CHSL & Ors.  versus State of Maharashtra & Anr. before the Bombay High Court on 10th July 2024, the Petitioners contended that the fixation of lease rent in Bandra, Mumbai on the basis of the value of the land provided in the Ready Reckoner increases the rent payable and that this increase in rent is arbitrary.

Several Writ Petitions were filed before the Bombay High Court challenging the constitutional validity of terms of contract (Lease deeds) executed between the Petitioners and State Government of Maharashtra and the validity of Government resolutions dated 29th May 2006, 12th December 2012 and 5th May 2018 (‘GRs’).

FACTS

There are several plots in Bandra, Mumbai, which are granted on lease by the Secretary of the State for India for a period of 50 years.

Pursuant to the aforesaid as per Government Resolution dated 21st November 1957, the Government of Maharashtra executed lease deeds for a term of 30 years commencing from 1st January 1951 with lease rent to be paid in advance, basis which the Petitioners were put in possession of their respective plots of land.

The Lease deeds authorized construction of structures and provided for renewal of the lease on the terms and conditions mentioned. The GRs were passed resolving that the lease granted to the occupiers are to be renewed and the revised lease rent is to be fixed based on the value of the land (Ready reckoner).

JUDGMENT

The bench of the Bombay High Court in the above matter examined and decided on three issues:

  1. Whether the Government could fix the lease rent for the lands leased to the petitioners on the basis of the Ready Reckoner?
  2. Whether the increase in lease rent provided in GRs is exorbitant or arbitrary?
  3. Whether the Government could revise the lease rent every 5 years, based on the value of land on date of such revision?

The court examined 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 the average rate of lands and buildings / Ready Reckoner is prepared with great deal of detailing. 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.”. Justice B. P. Colabawalla ruled that the government can fix lease rent by considering the value of the land as per the Ready Reckoner. This decision was supported by a chart produced with each member’s liability towards revised lease rent with a maximum of Rs.6,000/- per month, and in some cases, even less than Rs.2,000/- per month. The judgment clarified that “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”.

However, the Court struck down Clause B(1)(d) of the 2012 GR stating that, as per Clause 2(a) of the Lease deed, the lessees had the option to pay the annual rent as a lump sum and if the government is allowed to revise the lease rent every five years, it would conflict with Clause 2(a).

In conclusion, the Court determined the following:

  • Increase in lease rent calculated as per the GRs, cannot be termed as exorbitant or arbitrary and the revised lease rent is fair and reasonable.
  • The government is justified in applying the Ready Reckoner to all the lands of the Petitioners as a fair and transparent method.
  • Clause B(1)(d) of the 2012 GR is unsustainable as the same is contrary to the bargain struck between the parties when they entered into the original Lease Deed.

The detailed judgement can be accessed here.

 

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