Bombay High Court Upholds Contractual Rent, Rejects Arbitrary Reduction by Appellate Court. Commercial lease agreements cannot be arbitrarily altered under the garb of standard rent fixation.
The Bombay High Court set aside the Appellate Court’s decision to reduce the contractual rent of the premises from ₹2,000 to ₹1,000 per month, restoring the Small Causes Court’s order that upheld the contractual rent. The Court observed that the standard rent provisions under the Bombay Rent Act could not be misused to reduce fair commercial rents. It emphasized that the tenant had willingly entered into a commercial agreement and paid the contractual rent for 18 years without objection.
Parties Involved:
Petitioners: Legal heirs of Shri Ashok Mohanshankar Vernekar, landlord.
Respondents: Legal heirs of Shri Shantaram M. Bhat, tenant.
Subject Matter of Dispute: The dispute pertained to the fixation of standard rent for a leased property comprising 27,000 sq. ft. of land in Chembur, Mumbai, leased for ₹2,000/month for 99 years.
Initial Proceedings in Small Causes Court: The tenant filed an application in 1979 to reduce the rent to ₹5/month. The Small Causes Court rejected the plea in 1996, holding the contractual rent was not excessive.
Revisional Proceedings in Appellate Court: The Appellate Court reduced the rent to ₹1,000/month in 1998, relying on valuation data from a Gift Deed and rejecting the landlord's valuation report.
High Court Observations on Statutory Scheme:
Bombay Rent Act (1947): Defines “standard rent” and restricts landlords from charging more than the standard rent.
Section 11(1)(a): Allows tenants to seek rent reduction if contractual rent is deemed excessive.
Findings of the High Court:
The tenant occupied the premises without objection for 18 years before seeking a rent reduction.
The contractual rent of ₹2,000/month was reasonable, given the property size and commercial nature of the lease (a cinema hall).
The Appellate Court erred in reducing the rent based on valuation figures that lacked credibility.
Judgment:
Restored the contractual rent of ₹2,000/month.
Directed the tenant to pay arrears with interest at 8% per annum.
Acts and Sections Discussed:
Bombay Rent Act, 1947:
Section 5(10): Defines “standard rent.”
Section 7: Restricts landlords from demanding rent beyond the standard rent.
Section 11(1)(a): Empowers tenants to seek fixation of standard rent.
Maharashtra Rent Control Act, 1999:
Sections 7(14)(b) and 11: Freezes rents based on historical agreements with limited annual increases.
Ratio Decidendi:
Commercial tenants cannot abuse the provisions of rent control laws to unreasonably reduce fair, contractually agreed-upon rents, particularly when the agreement has been honored for a significant period without objection.
