# D.C. BHATIA AND ORS v. UNION OF INDIA AND ANR

- **Citation:** [1994] Supp. 4 S.C.R. 539
- **Court:** Supreme Court of India
- **Decided:** 1994-10-19
- **Bench:** M.N. Venkatachaliah, Suhas C. Sen, S.B. Majmudar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/d-c-bhatia-and-ors-v-union-of-india-and-anr-12577
- **Pages:** 28

## Headnote

Constitution of Indi~Article 14-Constitutional validity of Section
A
B
3(c) of Delhi Rent Control Act-Held Not violative of Article 14 of ConstituC
ti on.
Delhi Rent Control Ac~ 1958, as amended by Act No. 52 of 1988-Section 3(c)-lnapplicability of provisions of Act to any premises whose monthly
rent exceeded Rs. 3,5or>-Constitutional validity-{Jpheld.
Delhi Rent Control Act, 1958, as amended by Act No. 52 of 1988-Section 3(c)-lnterpretation orApplicability of provision to tenancies created
prior to 1.12.198&-l'rovision to apply to premises which had already been let
out at monthly rent in excess of Rs. 3,500 when amendment made in 1988
came into force on 1.12.1988.
Delhi Rent Control Act, 1958, as amended by Act No. 52 of 1988-Section 3(crTerm "rent''-Whether to be construed as "standard rent''-Held,
Nrr-ft was exact amount of monthly rent that was being paid on relevant date
i.e. 1.12.198fr-No precondition of fixation of standard rent before applicfllion
D
E
of provisions of Section 3(c).
F
The Delhi Rent Control Act, as amended by Act No 52 of 1988 came
into effect from 1.12.1988. Section 3(c) of the amended Act provided that
the provisions of the Delhi Rent Control Act will not apply to any premises
whose monthly rent exceeded Rs. 3500. The Appellant filed a writ petition
in the Delhi High Court challenging the validity of Section 3(c) of the Act. G
The writ petition was dismissed, and it was held that section 3(c) was a
valid piece of legislation and did not contravene aoy of the provisions of
the Constitution oflndia. It was also held that section 3(c) was prospective
and did not affect the cases that were pending on the date it came into
operation.
539
H
A
B
c
540
SUPREME COURT REPORTS [1994) SUPP. 4 S.C.R.
These appeals were filed against the judgment of the Delhi High
Court. The main contention of the appellant was that the provision of
Section 3(c) of the Act was ultra vires Article 14 of the Constitution. It was
submitted that the classification of properties on the basis of rent was
arbitrary and discriminatory. In any event, the cut off point at Rs. 3,500
for the purpose of exclusion from the benefit of the Rent Control Legislation was fixed arbitrarily. It was also contended that provisions of Section
3(c) were prospective and would not apply to premises which were already
tenanted on the date on which the Amending Act came into force.
Dismissing the appeals, this Court
HELD : 1.1. In order to strike a balance between the interests of the
landlords and the tenants and for giving a boost to house building activity,
the Iegislatnre in its wisdom has decided to restrict the protection of the
Delhi Rent Control Act only to those premises for which rent is payable
D upto Rs. 3500 per month and has decided not to extend this statutory
protection to the premises codstructed on or after the date of coming into
operation of the Amending Act for a period of ten years. This is a matter
of Legislative policy. [551-D]
E
F
1.2. It is for the legislature to decide what should be the cut-olTpoint
for the purpose of classification and Legislature of necessity must have a
lot of latitude in this regard. The safeguard provided by Article 14 of the
Constitntion can only be invoked, if the classification is made on the
grounds which were totally irrelevant to the object of the statute. But, if
there is some nexus between the objects sought to be achieved and the
classification, the Legislature is presnmed to have acted in proper exercise
of its constitutional power. The classification in practice may result in
some hardship. But, a statutory discrimination can not be set aside, if
there are facts on the basis of which the statntory discrimination can be
justified. It is for the legislature to decide whether or not any section of
the people shonld be protected in any way by law. For this pnrpose, the
G Legislatnre can identify the section of the people who needs protection and
decision how the classification will be done or what will

## Text

_Characters 0–39,915 of 63,872. This is a partial read: ask again with offset=39915 for what follows._

D.C. BHATIA AND ORS.
v.
UNION OF INDIA AND ANR.
OCTOBER 19, 1994
(M.N. VENKATACHALIAH, CJ, SUHAS C. SEN AND
S.B. MAJMUDAR, JJ.]
Constitution of Indi~Article 14-Constitutional validity of Section
A
B
3(c) of Delhi Rent Control Act-Held Not violative of Article 14 of ConstituC
ti on.
Delhi Rent Control Ac~ 1958, as amended by Act No. 52 of 1988-Section 3(c)-lnapplicability of provisions of Act to any premises whose monthly
rent exceeded Rs. 3,5or>-Constitutional validity-{Jpheld.
Delhi Rent Control Act, 1958, as amended by Act No. 52 of 1988-Section 3(c)-lnterpretation orApplicability of provision to tenancies created
prior to 1.12.198&-l'rovision to apply to premises which had already been let
out at monthly rent in excess of Rs. 3,500 when amendment made in 1988
came into force on 1.12.1988.
Delhi Rent Control Act, 1958, as amended by Act No. 52 of 1988-Section 3(crTerm "rent''-Whether to be construed as "standard rent''-Held,
Nrr-ft was exact amount of monthly rent that was being paid on relevant date
i.e. 1.12.198fr-No precondition of fixation of standard rent before applicfllion
D
E
of provisions of Section 3(c).
F
The Delhi Rent Control Act, as amended by Act No 52 of 1988 came
into effect from 1.12.1988. Section 3(c) of the amended Act provided that
the provisions of the Delhi Rent Control Act will not apply to any premises
whose monthly rent exceeded Rs. 3500. The Appellant filed a writ petition
in the Delhi High Court challenging the validity of Section 3(c) of the Act. G
The writ petition was dismissed, and it was held that section 3(c) was a
valid piece of legislation and did not contravene aoy of the provisions of
the Constitution oflndia. It was also held that section 3(c) was prospective
and did not affect the cases that were pending on the date it came into
operation.
539
H
A
B
c
540
SUPREME COURT REPORTS [1994) SUPP. 4 S.C.R.
These appeals were filed against the judgment of the Delhi High
Court. The main contention of the appellant was that the provision of
Section 3(c) of the Act was ultra vires Article 14 of the Constitution. It was
submitted that the classification of properties on the basis of rent was
arbitrary and discriminatory. In any event, the cut off point at Rs. 3,500
for the purpose of exclusion from the benefit of the Rent Control Legislation was fixed arbitrarily. It was also contended that provisions of Section
3(c) were prospective and would not apply to premises which were already
tenanted on the date on which the Amending Act came into force.
Dismissing the appeals, this Court
HELD : 1.1. In order to strike a balance between the interests of the
landlords and the tenants and for giving a boost to house building activity,
the Iegislatnre in its wisdom has decided to restrict the protection of the
Delhi Rent Control Act only to those premises for which rent is payable
D upto Rs. 3500 per month and has decided not to extend this statutory
protection to the premises codstructed on or after the date of coming into
operation of the Amending Act for a period of ten years. This is a matter
of Legislative policy. [551-D]
E
F
1.2. It is for the legislature to decide what should be the cut-olTpoint
for the purpose of classification and Legislature of necessity must have a
lot of latitude in this regard. The safeguard provided by Article 14 of the
Constitntion can only be invoked, if the classification is made on the
grounds which were totally irrelevant to the object of the statute. But, if
there is some nexus between the objects sought to be achieved and the
classification, the Legislature is presnmed to have acted in proper exercise
of its constitutional power. The classification in practice may result in
some hardship. But, a statutory discrimination can not be set aside, if
there are facts on the basis of which the statntory discrimination can be
justified. It is for the legislature to decide whether or not any section of
the people shonld be protected in any way by law. For this pnrpose, the
G Legislatnre can identify the section of the people who needs protection and
decision how the classification will be done or what will be the cnt-olT point
for the purpose of making such classification. The classification may be
· done on income basis or rental basis or some other basis. The court can
only consider whether the classification has been done on an nnderH standable basis having regard to the object to the statnte. The Court will
D.C. BHATIA v. U.0.1.
541
not question its validity on the gronnd of lack of legislative wisdom. A
Moreover, the classification cannot be .\one with mathematical precision.
The legislature must have considerable latitude for making the classification having regard to the surrounding circumstances and decide whether
cut-off point for the classification on the basis of monthly rent should be
Rs. 3500 or more. If the classification is totally irrational and has no nexus B
with the object sought to be achieved by the statute, then only will the court
strike down such classification. [551-F-G, 561-D-F]
1.3. So far as the ceiling limit of Rs. 3500 is concerned, it is well
settled that a provision initially valid can in the long run tum out to have
become discriminatory. An exemption with the passage of time may not C
have any nexus with the objects sought to be achieved by the statute. It is
for the legislature to decide which particular section of people require
protection at any given point of time. This is a matter of legislative policy.
[557-C]
In the facts of this case, this Court is not persuaded to bold that D
impugned Section 3(c) of the Delhi Rent Control Act violates Article 14 of
the Constitution in any manner.
Hamam Singh and Ors. v. Regi.onal Transport Authority, <alcutta and
Ors., [1954] SCR 371; City of New orleans v. Dukes, 427 U.S. 297 (1976] E
and Delhi Cloth and General Mills Ltd. v.S. Paramjeet Singh, (1940] 4 SCC
723, relied on.
Rattan Arya v. State df Tamil Nadu and Anr. , [1986] 2 SCR 596 and
Motor General Traders v. State of AP, [1984] 1 SCC 222, distinguished.
2. The provisions of the repealed statute cannot be relied upon after
F
it has been repealed. But what bas been acquired under the Repealed Act
cannot be disturbed. But, if any new or further step is needed to be taken
under the Act, that cannot be taken after the Act is repealed. In the instant
case, the legislature bas decided to curtail or take away the protection of G
the Delhi Rent Control Act from a section of the tenants. The tenants bad
not acquired any vested right under the Delhi Rent Control Act, but bad
a right to take advantage of the provisions of the repealed Act so long as
that law remained in force. The provisions of Section 3(c) will also apply
to the premises which had already been let out at the monthly rent in excess
of Rs. 3500 when the 1988 amendment came into force. (563-B.F, 564-F]
H
A
B
c
542
SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.
Kay v. G9odwin [1830] 6 King 576, 582 : Kewal Singh v. Smt. Lajwanti,
[1981] I SCC 290 and Mohinder Kumar and Ors. v. State of Haryana and
Anr. [1985] 4 i;cc 221, relied on.
3. The term 'rent" cannot be construed as "standard rent" but has to
be construed as the rent which is actually being paid. The Legislature has
not used the expression "standard rent" in Section 3(c). Words normally
should be understood in the ordinary dictionary meaning. Section 3(c) was
introduced with a view to take away the benefit of the protection of the Act
from the tenants who could afford to pay more than Rs. 3500 per month
as rent. Only thing that has to be seen for the purpose of deciding the class
of tenants, who were being excluded from the ambit of the Rent Act, was
the exact amount of monthly rent that was being paid on the relevant date
i.e. 1.12.1988. There is no pre-condition of fixation of standard rent before
application of the provisions of Section 3 (CJ of the Act. (564-G, 565-A-D]
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4265 of
D 1991 etc. etc.
(Under Article 32 of the Constitution of India.)
Ashok H. Desai, Soli J Sorabjee, Dr. Shankar Ghose, K. Parasaran,
K.N. Bhat, K.K. Venugopal, Ashwani Kumar, A.K. Ganguli, D.V.Sehgal,
E
M.L. Verma, Har Dev Singh, V.B. Patel, A.B. Rohtagi, V.C. Mahajan, N.N.
Goswami, U~. Bachawat, Arnn Mohan, Yogesh K. Jain, K.K. Luthra,
Gobind Mukboty, K. Madhava Reddy, R. Venugopal Reddy, S. Ganesh,
P. VenugopaJ, K. J. John, Dr. Roxna Swamy, Manoj Wad, Bharat Sangal,
Rajiv Mehta, Kailash Vasdev, Ms. Radha Rangaswmi, S. Sukumaran,
p
Rahn! P. Dave, Arnn Kathapalia, R. Ayyam Perumal, Iqbal Butt, K.C.
Dua, Ratan Lal, Y.P. Mahajan, Sanjay Kishan Kaul, R.N. Seswani, Ms. B.
Sunita Rao, S.M. Sarin, P.N. Puri, S.L. Kakker, Divender Singh, S.
Sukumaran, Ranjit Kumar, Ravi Kher, J.K. Seth, H.K. Puri, S.K. Puri, Arun
K. Sinah, Ms. Pinki Anand, Ms. Gita Luthra, D.N. Goburdhan, V.J. Francis, V. Subramanian, Rishi Kesh, Madan Lokur, Subodh Markandeya, Ms.
G Chitra Markandeya, Ajay Singh, H.P. Sharma, Ms. Madho Moolchandani,
Sanjay Kaput, M.K. Michael, Ratan Lal, S.A. Shroff, Kailash Vasdev, V.K.
Verma, Promod B. Aggarwala, Raju Rama Chandran, Shri Narain, V.
Shekhar, P.H. Parekh, Ms. Lalita Kaushik, Sudhir Kr. Gupta, S.K.C. Pasi,
Ranjan Mukherjee, Ms. Vijay Lakshmi Menon, M.P. Shorawala, T.V.S.N.
H Chari, M.C. Dhingra, P.N. Gupta, Arnn Kumr Sharma, A.K. Srivastav, R.S.
D.C. BHATIA v. U.0.1. [SEN, J.]
543
Rana, Ms. Sushma Suri, L.C. Agarwala, Indra Makwana, Rajeev Sharma A
Ms. Chitra Mehendale, S. Parekh, T.C. Sharma, Ms. Neelam Sharma, P.K.
Jain, M.A. Khan, D.N. Goburdhun, V. Shekhar, Atul K. Bandhu, Vinod
Kumar, Rajiv Bahl, V.N. Koura, Ashok Grover, R. Mbhan, Nedumarau,
Ratan Lal, S.B. Upadhyay, Prashant Bhushan, V.K. Verma, R.N. Kapur,
A.S. Bhasme, V.B. Saharya, for Saharaya & Co. Mrs. Lalita Kaushik, B.
Dewan, P.N. Gupta, A.M. Khanwilkar, C.V.S. Rao, Ms. S. Janani Ms.
Naresh Bakshi R.P. Sharma, S.P. Pandey, Ms. A. Subhashin~ V.K Verma,
T.V.S.N. Chari, G. Prabhakar, M. Vijay Bhaskar, Nikhil Nayyar, A.T. Rao,
A. Subba Rao, S.K. Kulkarni, M.T. George, Narashimha P.S., P.K. Pillai,
B
P. Chowdhary, M. Veerappa, Ms. Indu Malhotra, Ms. Meenakshi Arora,
M.C. Dhingra, Kailash Vasdev, S. Ganesh, for JBD/A. V. Rangam, Bharat C
Sangal, R.P. Kapur, A.M. Khanwilkar, Ms. Madhu Sikri and S.K. Mehta
for the the appearing parties.
The Judgment of the Court was delivered by
SEN, J. This appeal has been heard along with a number of other
appeals, special leave petitions and writ petitions. Common questions of
law have arisen in all these matters relating to interpretation and constitutional validity_ of Section 3( c) of the Rent Control Act, 1958.
D
The Delhi Rent Control Act,as amended by Act No. 52 of 1988 came E
into effect from 1.12.88. Section 3( c) of the amended Act provided that the
provisions of the Delhi Rent Control Act will not apply to any premises
whose monthly rent exceeded Rs. 3,500.
The appellant thereon filed a writ petition in the Delhi High Court F
challenging the validity of the newly inserted section 3( c )'of the Act. The
appellant's writ petition was heard along with a batch of other writ petitions. By a judgment dated February 11, 1991, the Delhi High Court held
that Section 3( c) was a valid piece of legislation and did not contravene
any of the provisions of the Constitution. Following its judgment in Civil
Revision No. 470 of 1981 Ninnaljit Arora v. Bharat Steel Tubes, it also held G
that Section 3( c) was prospective and did not affect the cases that were
pending on the date it came into operation.
The present batch of appeals are directed against the judgment of
the Delhi High Court dated 11th February, 1991.
H
A
B
c
D
E
544
SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.
Section 3 of the Act lays down :
"3. A~t not to apply to certain premises. - Nothing ll). this Act shall
apply,
(a) to any premises belonging to the Government;
(b) to any tenancy or other like relationship created by a grant
from Government in respect of the premises taken on lease,
pr requisitioned, by the Government :
Ptovided that where any premises belonging to Government
have been or are lawfully let by any person by virtue of an
agre~ment with the Government or otherwise, then, notwithstanding any judgment, decree or order of any court or other authority,
the provisions of this Act shall apply to such tenancy.
( c) ,to any premises, whether residential or not, whose monthly
rent exceeds three thousand and five hundred rupees; or
( d) to any premises constructed on or after the commencement
of the Delhi Rent Control (Amendment) Act, 1988, for a
period of ten years from the date of completion ~f such
construction."
The ml!in contention of the appellant is that the provisions of subsection (c) of Section 3 is ultra vires Article 14 of the Constitution. It has
been contended that the legislature has not appreciated the present day
realities of lilndlord-tenant relationship. If landlords are given a free hand
F
to raise the ~ent of the premises then they will abuse this freedom and will
demand unreasonable and exhorbitant rents. The classification of properties on the r~ntal basis was arbitrary and discriminatory. In any event, the
cut-off point of Rs. 3,500 for the purpose of exclusion from the benefit of
the Rent Control legislation was fJXed arbitrarily. Lastly, it was contended
G that provisicf>ns of Section 3(c) are prospective and will not apply to
premises which were already tenanted on the date on which the Amendment Act came into force.
Before dealing with the various contentions raised specifically, it will
be useful tO'note certain facts leading to the insertion of sub-section (c) in
H
Section 3 of the Delhi Rent Control Act.
I
D.C. BHATIA v. U.0.1. [SEN, J.]
545
Various representations had been received by the Government about A
the hardship and injustice caused by the provisions of the Rent Act. An
Economic Administration Reforms Commission set up under the Chairmanship of Shri L.K. Jha went into this question and its Report No. 11
presented to the Government in September, 1982, suggested a number of
changes in the rent control law. The commission pointed out that the
freezing of rentals at old historic levels, the excessive protection of tenancy
rights and the extreme difficulty of recovering possession of the accommodation even for the owner's own used had (a) hit hard the house-owner
B
of modest means; (h) depressed property values and affected adversely the
revenues of municipal bodies and the state and Central Governments; ( c)
imposed onerous burdens on the administration and the judiciary and led c
to large number of pending cases; ( d) rendered investment in housing for
rental unattractive, inhibited the letting out of available accommodation,
brought about a deterioration of the existing stock of housing through the
neglect of maintenance, and thus had aggravated the acute scarcity of
accommodation for hire; ( e) encourage various malpractices and abuses D
such as on-money (pugree), partial receipts for rent, capital consideration
(in black money) for tenancy transfers, etc.; and (t) in general, tended to
protect the haves against the have-nots, i.e., the tenant (even if affluent) as
against the landlord (even if not so .affluent) and the sitting tenant as
against the prospective tenant who was looking for accommodation on rent
The Commission in the background of the aforesaid findings made
inter alia, the following recommendations :
E
(i)
There is a case for confining rent control to the relatively
modest premises occupied by the less affluent though it is F
difficult to draw a suitable dividing line for the purpose. We
would urged the State Governments to consider this possibility.
(ii) Considering the urgent need for new housing, and as an
incentive for the construction of houses, there should be an G
exemption from rent control on all the new construction for
a period of five years from the date of completion."
The National Commission of Urbanisation also made a report in
which the following points were made :
H
A
B
c
D
E
F
G
H
546
SUPREME COURT REPORTS [1994) SUPP. 4 S.C.R.
"(i) Housing has been recognised as the basic need, ranked next
only to food and clothing. But resources allocated and
,policies pursued have not yielded the expected results. Forty
'million people (about 25 per cent of India's total urban
population) live in slums and under conditions of multiple
deprivation - illegal land tenure, deficient environment and
kutcha shelter. In addition, a significant number live in innercity neighbourhood with decaying buildings and deficient
services. The supply of new shelter units is not adequate to
meet incremental needs - leave aside the backlog. This may
lead to a double ing of slum population - 75 million by 2001.
Nearly sixty per cent of households cannot afford a conventional pucca house and the lowest 10-15 per cent cannot even
afford a serviced site. Furthermore, given the resource constraints, it is not possible to provide new pucca houses for all
in the near future. The emphasis of housing policy therefore,
has to be on increasing shelter supply, improving and upgrading slums and conserving the existing housing stock.
(ii) There are always some households which are either not
interested in owning a house or just cannot afford to own one.
For such households rental housing is the only option. In 1981,
56.80 per cent of urban households were living in rented
premises. The main factors inhibiting investment in rental
housing and in the maintenance of rental stock are the various
rent control laws. The Commission had made extensive
recommendations concerning reforming rent laws in its Interim Report, which have been reiterated here. "
The Committee of the secretaries recommended, inter alia, :
"The Committee endorsed the view that there was need basically
to ~nfine the protection of rent control law to the weak tenant
and by and large exclude accommodations which were either
no11-residential in nature or were being used by better-off tenants.
It was agreed that large residential premises with a rental value
hi!!iher than a prescribed limit should be taken outside the purview
of the Rent Control Act, since these are used by the relatively
affluent tenants. In such cases higher rental incomes derived from
D.C. BHATIAv. U.0.1. [SEN, J.)
547
the property would be subject to various taxes, and there was no A
need to artificially depress these incomes by application of Rent
Control Act."
Subsequently the recommendations made by the Secretaries' Committee were examined by the Ministry and thereafter the decision was taken
to amend the Delhi Rent Control Act.
In the Statement of Objects and Reasons, the purpose of the amendment by the Delhi Rent Control (Amendment) Act, 1988 was stated as
under:
B
c
"The Delhi Rent Control Act, 1958 (59 of 1958) which came into
effect on 9th February, 1959, provides for control of Rents and
lodging houses and for the lease of vacant premises to the Government within tlk Union Territory of Delhi .
. J.. For quite sometime, there have been demands from the D
Associations of house owners as well as tenants for amendment of
Delhi Rent Control Act, 1958. The Committee on Petitions of
Rajya Sabha, The Economic Administration Reforms Commission,
Secretaries Committee and National Commission on Urbanisation
have also recommended amendment of certain provisions of the
Act. Considering these demands/recommendations as also the fact .E
that
with the passage of time, the circumstances have also
changed, necessitating a fresh look at the tenant-landlord relationship, the amendment of Delhi Rent Control Act, 1958 has been
proposed with the following objects :
(a) To rationalise the present rent control law by bringing about
a balance between the interests of landlords and tenants.
(b) To give a boost to house building activity and maintain the
existing housing stock in a reasonable state of repairs.
(c) To reduce litigation between landlords and tenants and to
ensure expeditious disposal of disputes between them.
3. The Bill seeks to achieve the above objects."
F
G
The original proposal in the Bill was to exempt from the purview of H
548
SUPREME COURT REPORTS (1994] SUPP. 4 S.C.R.
A
the Rent Act those premises whose monthly rent exceeded Rs. 1,500. The
Legislature, however, after considering various factors, drew the dividing
line at Rs. 3,500.
B
On behalf of the appellants it has been contended that under the Act
the premises have been divided into two categories - (a) premises in
respect of 'which rent payable per month is more than Rs. 3,500 and {b)
the other premises in respect of which rent is Rs. 3,500 or less per month.
This classification, according to the appellants, is unrealistic and without
any reasonable basis. Having regard to the rent at which flats are let out
in Delhi, Qne cannot possibly get any reasonable accommodation for less
C than Rs. 3,500. This means practically everybody in Delhi is being taken
out of the protection of the Rent Control Act.
It has further been contended that the figure of Rs. 3,500 is a static
and non escalating figure. In the case of Rattan Arya v. State of Tamil Nadu,
(1986] 2 $CR 596, it was clearly held that if the cut-off figure is static and
D non- esclllating, then the same is arbitrary and invalid.
Moreover, by introducing a figure of Rs. 3,500 for the all tenancies
irrespectjve of the vital differences in respect of the same, the Legislature
has treated unequals equally and therefore the provision is contrary to
E Article 14 of the Constitution of India and therefore, invalid. The Legislature has failed to take into account relevant factors such as the locality
were the premises are situated, the number of persons inhibiting the
premises, the size of the premises and the period of tenancy.
It was further contended that Section 3{ d) applies to new buildings
F constructed after the Amending Act of 1988, came into force and its object
is to give a boost to building activity. This has genuine nexus with the policy
of the Act; but if Section 3{c) is retrospective, in the sense that it·would
apply to existing premises, then it cannot obviously give a boost to building
activity and the introduction of such a provision will have no nexus to the
G object '1Jf the Act.
Various other arguments were made to establish that the classification of premises on the rental basis of Rs. 3,500 was wrong and unreasonable. It was argued that premises being used for commercial
purposes could not be equated to premises being used for residential
H purposes only. It was argued that a businessmen may initially start his
D.C. BHATIA v. U.0.1. (SEN, J.]
549
business in a locality in a small way and thereafter develop the business A
step by step. The locality, accessibility of the business place to the customers, goodwill are important factors for commercial establishments. If
a landlord is given a free hand to evict a commercial establishment from
his premises then it will be very difficult for the tenant to set up another
commercial establishment in a new part of the city. This may in the long
run lead to closure of the business altogether.
B
Taking this argument one step further it has been contended on
behalf of the State Bank of India, Union Bank of India, Indian Banks'
Association and other Banks that the Act has not made any distinction
between public sector banks and other tenants. It was argued that if a C
public sector bank as to shift its place of business, then it will have to shift
the entire banking services from one area to another. Banking services
include setting up of vaults, and providing lockers to customers apart from
usual merchant banking activities. Banks are opened only at sites approved
by the Reserve Bank of India. The Banks have set up large number of D
branches in tenanted premises all over Delhi with the approval of Reserve
Bank of India. The Banks did not try to purchase or build their own houses
because of the security provided by the existing rent laws. It was, therefore,
submitted that a classification on the rental basis regardless of all these
factors make the classification arbitrary and violative of Article 14 of the
Constitution and should be struck down.
E
It was contended on behalf of National Textile Corporation that it
has been set up solely for the purpose of reviving sick textile mills. It could
not be subjected to the same treatment as any other commercial establishment. The Government Companies have to discharge public duties and
their activities have to abide by the provisions of Part-III of the Constitution. The distinction between commercial activities of Government companies and commercial activities of private corporate bodies has been
ignored in the impugned legislation. This was also the argument of the
Bihar State Electricity Board.
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We are unable to uphold any of these contentions. The Rent Acts
were enacted originally as temporary measures in order to protect the
tenants from eviction and also from arbitrary enhancem~nts of rent. Before
these Rent Acts were passed rights and obligations of landlords and
tenants were regulated by the provisions of the Transfer of Property Act, H
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which was enacted in 1882. The Rent laws which were passed by various
State Legislatures drastically curtailed the landlord's power to enhance
rent and etjct the tenant.
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The question whether these restrictions were justified in law or not,
was raised in a large number of cases before this Court and the High
Courts. The challanges were turned down by the Courts on the ground that
these restriction of the Country at that time.
It was observed by Sarkaria, J., in the case of Naginda Ramdas v.
Dalpatnn lGhharam, [1974] 1 SCC 242 :
"Tlie strain of the last World War, Industrial Revolution, the large
scale exodus of the working people to the urban areas and the
srn;ial and political changes brought in their wake social problems
of considerable magnitude and complexity and their concomitant
evils. The country was faced with spiralling inflation, soaring cost
of living, increasing urban population and scarcity of accommodation. Rack renting and large scale eviction of tenants under the
guise of the ordinary law, exacerbated those conditions making the
economic life of the community unstable and insecure. To tackle
these problems and curb these evils, the legislatures of the states
in India enacted Rent Control legislations. "
The Rent Control Laws are now in force in Delhi for more than 50
years. New Delhi House Rent Control Order, 1939 was issued under Rule
21 of the ,Defence of India Rules. This was followed by a number of
legislation$ like Punjab Urban Rent Restriction Act,
1941 which was
F
extended to Delhi, Delhi Control Ordinance 1944, Delhi and Ajmer,
Bhilwara Control Act, Delhi Tenants (Temporary Protection) Act, 1956.
The present law i.e. Delhi Rent Control Act, 1958 was the last of a long
line of legislations which were passed to control the rents and to restrict
eviction of tenants except on the special grounds stated in the statute.
G
As a result of these legislations a host of problems have cropped up.
These proplems have been stated in the various Committee Reports set out
earlier in the judgment. Representations were also made by the landlords
highlighting these problems. Jn order to tackle the problems created by the
Rent Act, the Delhi Rent Control Act was amended in 1988 by Delhi Rent
H Control A,mending Act, 1988 (Act 57 of 1988).
D.C. BHATIA v. U.O.l. [SEN, J.]
551
The objects of the Amending Act are quite different from the objects A
of the parent Act. One of the objects of Amending Act was to rationalise
the Rent Control Law by bringing about a balance between the interest of
landlords and tenants. The object was not merely to protect the weaker
section of the community. In fact, the representations made by the
landlords' association and the reports of various committees indicated, the B
laws were being very often abused by the rich tenants against poor or
middle class landlords. The Rent Act had brought to a halt house-building
activity for letting out. Many people with accommodation to spare did not
let out such accommodation for the fear of losing the accommodation
altogether. As a result of all there, these was acute shortage of accommodation which caused hardship to the rich and the poor alike. In the light of C
this experience, the Amending Act of 1988 was passed.
In order to strike a balance between the interests of the landlords
and also the tenants and for giving a boost to house building activity, the
Legislature in its wisdom has decided to restrict the protection of the Rent D
Act only to those premises for which rent is payable upto the sum of Rs.
3,500 per month and has decided not to extend this statutory protection to
the premises constructed on or after the date of coming into operation of
the Amending Act for a period of ten years. This is a matter of legislative
policy. The Legislature could have repealed the Rent Act altogether. It can
also repeal it step by step. It has decided to confine the statutory protection E
to the existing tenancies whose monthly rent did not exceed Rs. 3,500.
In our view, it is for the legislature to decide what should be the
cut-off point for the purpose of classification and the legislature of necessity must have a lot of latitude in this regard. It is well settled that the F
safeguard provided by Article 14 of the Constitution can only be invoked,
if the classification is made on the grounds which are totally irrelevant to
the object of the statute. But, if there is some nexus between the objects
sought to be achieved and the classification, the Legislature is presumed
to have acted in proper exercise of its constitutional power. The classification in practice may result in some hardship. But, a statutory discrimination G
cannot be set aside, if there are facts on the basis of which this statutory
discrimination can be justified.
In the case of Harman Sing/1 and others v. Regional Transport
Authority, Calcutta and others, [1954] SCR 371, a Bench consisting of five H
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SUPREME COURT REPORTS (1994) SUPP. 4 S.C.R.
A judges of this Court upheld a notification issued by the Regional Transport
Authority, Calcutta Region, flXing lower tariff for smaller taxis. The benefit
of this lower fare was given to "small motor taxi cabs of not below 10 H.P.
and not above 19 H.P.'. Mahajan, J., speaking for the Couri observed :
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'The only point for consideration in the appeal is whether the issue
of licences to small taxi cabs between 10 and 19 H.P. to ply in the
streets of Calcutta and the fixation of lower rates of tariff for this
cla&s of taxis than that prescribed for taxis between 22 and 30 H.P.
vioiittes the fundamental rights of the appellants who are owners
of taxi cabs between 22 and 30 H.P., under articles 14 and 19{1)
(g} of the Constitution. In our judgment, this question can be
answered only in the negative. It has been repeatedly pointed out
by !his Court that in construing article 14 the courts should not
addpt a doctrinaire approach which might well choke all beneficial
legislation and that legislation which is based on a rational classification is permissible. A law applying to a class is constitutional
if there is sufficient basis of reason for it. In other words, a statutory
dis¢rimination cannot be set aside as the denial of equal protection
of the laws if any state of facts may reasonably be conceived to
justify it."
The Supreme Court of United States of America has also repeatedly
stated that \he constitutional guarantee of equality is offended only if the
classification rests on grounds wholly irrelevant to the achievement of the
State's objective. In the case of City of New Orleans v. Dukes, 427 U.S. 297
(1976), the Court had to deal with an ordinance that banned all pushcart
vendors fro~ the French Quarter, except those in continuous operations
for more th;m eight years. It was held :
''When local economic regulation is challenged solely as violating
the Equal Protection Clause, this Court consistently defers to
leglslative determinations as to the desirability of
particular
statutory discriminations ...... Unless a classification trammels fundamental personal rights or is drawn upon inherently suspect
distinctions such as race, religion, or alienage, our decisions
presume the constitutionality of the statutory discriminations and
re<lliire only that the classification challenged be rationally related
to a legitimate state interest. States are accorded wide latitude in
D.C. BHATIAv. U.0.1. [SEN, J.]
553
the regulation of their local economies under their police powers, A
and rational distinctions may be made with substantially less than
mathematical· exactitude. Legislatures may implement their
programme step-by-step...... in such economic areas, adopting
regulations that only partially ameliorate a perceived evil and
deferring complete elimination of the evil to future regulations.....
B
In short, the judiciary may not sit as a super- legislature to judge
the wisdom or undesirability of legislative policy determinations
made .in areas that neither affect fundamental rights nor proceed
along-suspect lines ... ; in the local economic sphere, it is "only the
invidious discrimination, the wholly arbitrary act, which cannot
stand consistently with the Fourteenth Amendment."
C
We were referred to a number of cases in course of the arguments.
In the case of Raval & Co. v. K.C Ramachandran & Ors., (1974] 2 SCR
629, the landlords had purchased a tenanted property in 1962 and made
an application under Section 4 of the Madras (now Tamil Nadu) Buildings D
{Lease and Rent Control) Act, 1960 for fixation of fair rent. The tenants
filed a writ petition seeking to restrain the landlords from proceedings with
this petition, on the ground that the application was misconceived. The
points raised in the writ petition were ultimately referred to a Full Bench
of the Madras High Court, which held that the Tamil Nadu Act controlled
both contractual tenancies and statutory tenancies, it was a complete Code E
in itself and enabled both landlords and tenants to seek the benefits of
fixation of fair rent. Ultimately, the matter came to this Court and was
heard by a Bench of Five Judges. Justice Alagiriswami, who delivered the
majority judgment, analysed the Tamil Nadu Act and after referring to the
earlier legislations relating to rent control, observed :
F
"The 1960 Act which replaced the 1949 Act adopted a c<\mpletely
new scheme of its own. It provided for the fixation of a fair rent
on the basis of the cost of construction and the cost of land and
after allowing for depreciation provided for a return of 6 per cent
in the case of residential buildings and 9 per cent in the case of G
non-residential buildings. It also provided for increase in rent for
such factors as locality, nearness to railway station, market, hospital, school etc. Another significant fact is that all new buildings
constructed after 1960 were exempt from the scope of the Act.
Still another departure was that the Act applies, in the case of H
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554
SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.
residential buildings, only if the monthly rent does not exceed Rs.
250. The Act also provides for fixation of fair rent under the new
provisions even though fair rent for the building might have been
fixe~ under the earlier repealed enactments. All these show that
the Madras Legislature had applied its mind to the problem of
housing and control of rents and provided a scheme of its own. It
did not proceed on the basis that the legislation regarding rent
control was only for the benefit of the tenants. It wanted it to be
fair both to the landlord as well as the tenant. Apparently it realised
that (he pegging of the rents at the 1940 rates had discouraged building
construction activity which ultimately is likely to affect every body
and !therefore, in order to encourage new constructions exempted
them a/together from the provisions of the Act. It did not proceed on
the basis that all tenants belonged to the weaker section of the
community and needed protection and that all landlords belonged
to the batter off classes. It confined the protection of the Act to the
weaker section paying rents below Rs. 250. It is clear, therefore, that
the Madras Legislature deliberately proceeded on the basis that
fair ~ent was to be fixed which was to be fair both to the landlords
as w¢ll as to the tenants and that only the poorer classes of tenants
needed protection. The facile assumption on the basis of which an
argument was advanced before this Court that all Rent Acts are
intended for the protection of tenants and, therefore, this Act also
should be held to be intended only for the protection of tenants
breaks down whom the provisions of the Act are examined in
detai). The provision that both the tenant as well as the landlord
can ~pply for fixation of a fair rent would become meaningless if
fixati9n of fair rent can only be downwards from the contracted
rent and the contract rent was not to be increased. Of course, it
has happened over the last few years that rents have increased
enormously and that is why it is argued on behalf of the tenants
that the contract rent should not be changed. If we could contemplate a situation where rents and prices are coming down this
argm11ent will break down. It is a realisation of the fact that prices
and rents have enormously increased and therefore, if rents are
pegg¢d at 1940 rates there would be no new construction and the
community as a whole would suffer that led the Madras Legislature
to exempt new buildings from the scope of the Act. It realised
D.C. BHATIA v. U.0.1. [SEN, J.]
555
apparently how dangerous was the feeling that only fools build A
houses for wise men to live in'."
Tamil Nadu Buildings (Lease and Rent Control) Act, 1960 came up
for considerations before this Court once again in the case of Ratta11 Arya
v. State of Tamil Nadu & A11r., (1986) 2 SCR 596. In that case, vires of
Section 30(ii) of the Act was challenged. This provision exempted from the B
operation of the Act 'any residential building or part thereof occupied by
anyone tenant if the monthly rent paid by him in respect of that building
or part exceeds for hundred rupees'. It was held :
"As a result of this provision while the tenant of a non-residential C
building is protected whether the rent is Rs. 50, Rs. 500 or Rs.
5000 per month, a tenant of a residential building is protected if
the rent is Rs. 50 but not if it is Rs. 500 or Rs. 5000 per month.
The counter-affidavit does not explain why any distinction
should be made between residential and non-residential buildings
in the matter of affording the protection of the provisions of the
Act."
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The counter-affidavit was set out ill extenso in the judgment to show E
that it did not state the reason for giving pr.eferential treatment to the
non-residential premises having regard to the object of the 'statute ie.
protection of the weaker section of the community.
The Court ultimately held :
F
"As we pointed out earlier, the argument based on protection of
the weaker sections of the community is entirely inconsistent with
the protection given to tenants of non-residential buildings who
are in a position to pay much higher rents than the rents which
those who are in occupation of residential buildings can ever pay. G
We are, therefore, satisfied that section 30(ii) of the Tamil Nadu
Buildings (Lease and Rent Control) Act, 1960 has to be struck
down as violative of Article 14 of the Constitution. A writ will issue
declaring Section 30(ii) as unconstitutional".
The main controversy in Rattan Arya's case was about the discriminaH
556
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A tion between residential and non-residential buildings.