Vasu Dev Singh & Ors Vs. Union of India & Ors [2006] Insc 748 (7 November 2006)
S.B. Sinha & P.P. Naolekar
[Arising out of S.L.P. (Civil) No. 1804 of 2005] W I T H CIVIL APPEAL NO. 4689 OF 2006 @ S.L.P.(Civil)No.1810/2005, CIVIL APPEAL NO. 4690 OF 2006 @ S.L.P.(Civil)No.2758/2005, CIVIL APPEAL NO. 4691 OF 2006 @ S.L.P.(Civil)No.2760/2005, CIVIL APPEAL NO. 4692 OF 2006 @ S.L.P.(Civil)No.5354/2005, CIVIL APPEAL NO. 4693 OF 2006 @ S.L.P.(Civil)No.5647/2005 & CIVIL APPEAL NO. 4694 OF 2006 @ S.L.P.(Civil)No.6657/2005. S.B. SINHA , J :
Leave granted.
Background facts:
Appellants are tenants in the premises situated within the Union Territory of Chandigarh. They were protected in terms of the East Punjab Urban Rent Restriction Act, 1949 (for short, 'the 1949 Act'). The Administrator of Chandigarh in exercise of his power conferred upon him under Section 3 of the 1949 Act issued a notification dated 07.11.2002 whereby and whereunder it was directed that the provisions thereof would not apply to the buildings; monthly rent whereof exceeded Rs.1,500/-.
Aggrieved by issuance of the said notification, Appellants filed writ petitions before the High Court of Punjab and Haryana at Chandigarh, questioning the vires of Section 3 of the 1949 Act as also the validity of the said notification dated 07.11.2002 on diverse grounds. The said petitions have been dismissed. These appeals arise for the said judgments and orders. Before adverting to the questions involved in these appeals, we may notice the legislative history of the legislations in question.
Rent Act :
Union Territory of Chandigarh was a part of the State of Punjab prior to coming into force of the Punjab Reorganization Act, 1966. The Central Government in exercise of its power conferred under Section 87 thereof issued a notification for extending the provisions of 'the Act' to the Union Territory of Chandigarh. The 1949 Act is a pre-constitution Act.
The 1949 Act was enacted to restrict the increase of rent of certain premises situated within the limits of urban areas and the eviction of tenants therefrom. We may hereinafter notice a few provisions of the said Act.
"Building" has been defined in Section 2(a) to mean "any building or part of a building let for any purpose whether being actually used for that purpose or not, including any land, go-downs, out-houses, or furniture let therewith, but does not include a room in a hotel, hostel or boarding-house;" "Urban Area" has been defined in section 2(j) to include an area comprised in the Union Territory of Chandigarh. Section 3 of the 1949 Act provides for exemptions from the operation of the said Act, which is in the following terms :
"Exemptions. The Central Government may direct that all or any of the provisions of this Act shall not apply to any particular building or rented land or any class of buildings or rented lands." Sections 4 and 5 of the 1949 Act provide for prevention of unfair rent and increase in fair rent in the cases admissible as prescribed thereunder.
Section 8 of the 1949 Act provides for recovery of the rent which should have been paid. Section 9 provides for increase of rent on account of payment of rates of local authority but prohibits increase thereof on account of payment of other taxes. Section 10 provides that the landlord without just or sufficient cause cannot interfere with the amenities enjoyed by the tenant.
Section 13 protects the tenants from eviction, envisaging that unless one or more ground specified therein is satisfied, no tenant shall be evicted from the tenanted premises save and except in execution of a decree passed by the Rent Controller. Section 13A provides for right to recover immediate possession of residential or scheduled building to accrue to certain persons.
The operation of the said Act was extended to the Union Territory of Chandigarh by a notification, in terms whereof it with certain modifications came into force w.e.f. 04.11.1972. The said notification was struck down by the High Court on the premise that it was not declared to be an urban area. Chandigarh was declared to be an urban area in 1972.
The Parliament thereafter enacted the East Punjab Urban Rent Restriction (Extension to Chandigarh) Act, 1974 (for short "1974 Act"), the relevant provisions whereof read as under:
"1. This Act may be called the East Punjab Urban Rent Restriction Act (Extension to Chandigarh) Act, 1974.
2. In this Act, "the Act" means the East Punjab Urban Rent Restriction Act, 1949 as it extended to, and was in force, in certain areas in the pre-reorganisation State of Punjab (being areas which were administered by municipal committees, cantonment boards, town committee or notified area committee or areas notified as urban areas for the purposes of that Act) immediately before the 1st day of November, 1966.
3. Notwithstanding anything contained in any judgment, decree or order of any court, the Act shall subject to the modifications specified in the Schedule, be in force in, and be deemed to have been in force with effect from the 4th day of November, 1972 in the Union Territory of Chandigarh as if the provisions of the Act as so modified had been included in and formed part of this section and as if this section had been in force at all material times.
4. (1) Notwithstanding anything contained in any judgment, decree or order of any court, anything done or any action taken (including any notification or direction issued or rents fixed or permission granted or order made) or purported to have been done or taken under the Act shall be deemed to be as valid and effective as if the provisions of this Act had been in force at all material times when such thing was done or such action was taken.
(2) Nothing in this Act shall render any person guilty of any offence for any contravention of the provisions of the Act, which occurred before the commencement of this Act." Writ Proceedings :
Appellants herein filed separate writ petitions before the Punjab and Haryana High Court questioning the validity of the said notification dated 7.11.2002, wherein various contentions including the one relating to jurisdiction of the Administrator in that behalf was raised. In the said writ petition it was furthermore contended that the impugned notification was beyond the rule making power of the State Act.
The High Court, after hearing the matter on 11th March, 2004 at some length and upon taking notice of the submissions made on behalf of the parties considered it expedient to give opportunity to the Chandigarh Administration 'to have a rethinking in the light of the observations made therein so that a balance could be maintained between the rights of the tenants as well as those of the landlords'. Pursuant thereto an additional affidavit was filed on 29th July, 2004 wherein, inter ala, reference was made to the National Housing Policy adopted by the Central Government as also various correspondences entered into by and between it and Administration of Union Territory of Chandigarh to which we would advert to later. The High Court dismissed the said writ petitions holding that the said notification dated 7.11.2002 was not ultra vires the provisions of the 1949 Act.
High Court Judgment :
The High Court upheld the validity of the said notification stating :
(a) The Administrator has not acted contrary to the legislative policy enshrined under the statute.
(b) While considering the legislative policy and object behind the enactment of the 1949 Act, the court cannot overlook the fact that in the original enactment, amendments had been carried out by the legislature on at least on two different occasions.
(c) The Administrator having acted in furtherance of the power conferred upon him under Section 3 of the 1949 Act by the legislature itself, exercise of such power was not contrary to the legislative policy and/or preamble to the 1949 Act.
(d) By reason of the said notification exempting application of the provisions of the Act in respect of the tenanted premises fetching monthly rent of Rs.1500/- or more would not amount to repeal of the Act itself.
(e) The said notification having been issued pursuant to or in furtherance of the National Housing Policy and in terms of the Model Rent Law suggested by the Government of India, the same is valid in law.
(f) As the protection to the tenant was given in terms of the provisions of the Act read with the 1974 Act, the Administrator was fully empowered to withdraw the said protection in respect of a class of tenants.
(g) Section 3 of the Act does not suffer from the vice of excessive delegation as thereby no unguided or unfettered power has been conferred upon the Administrator.
(h) As by reason of Section 3 of the Act, any particular building or rented land or class of buildings can be subject matter thereof, the tenants who were paying monthly rent exceeding Rs.1500/- constituted a class by themselves.
(i) The classification made by the Administrator that the exemption as regard application of the Act shall be granted in respect of those premises which fetch rent exceeding a sum of Rs.1500/- per month was not arbitrary and, thus does not offend Article 14 of the Constitution of India.
(j) The notification would not be violative of Article 14 of the Constitution of India only because it may not be applicable in respect of a part of the same building.
Contentions :
The contentions of Appellants before us, inter alia, are:
(i) The Administrator as a delegatee could exercise his power under Section 3 of the Act only in terms of the legislative policy contained therein which would appear from the preamble, the Statements of Objects and Reasons and the core provisions thereof and not de' hors the same and, thus, the impugned notification being violative of the legislative policy, is unsustainable in law;
(ii) As the Administrator in a representative democracy represents the will of the people as a delegatee he was bound to act within the four- corners thereof;
(iii) A delegatee cannot transgress the basic features or essential policy of the Act;
(iv) As the power to lay down essential legislative functions vests in the Legislature, the same could not be delegated in favour of the Administrator.
(v) By reason of such delegation, the delegatee cannot in effect and substance repeal the provisions of the main Act so as to take away the heart and soul of beneficent legislations like the Rent Act;
(vi) Before exercising the power of delegated legislation, the Administrator was bound to take into consideration the relevant factors and for the said purpose it was required of him to be adequately informed as to how and to what extent the legislative policy may be given effect to;
(vii) The impugned notification being not restricted to particular buildings or class of buildings, the classification sought to be made on the basis of paying capacity of a tenant or the tenants themselves is ultra vires Section 3 of the Act;
(viii) The impugned notification is unconstitutional as it contravenes the legal philosophy underlying a beneficent legislation insofar as it has done away with the statutory limitations imposed upon the landlords to evict the tenant except on the grounds enumerated in Section 13 of the Act as also from enhancement of rent in an arbitrary manner.
The contentions of Respondents, on the other hand, are:
(i) Reasonable classification of 'tenants' and 'tenanted premises' is permissible in terms of Article 14 of the Constitution of India.
(ii) The Objects and Reasons of the 1974 Act, inter alia, was to regulate rent of the premises situated within the urban areas and there being no provision for enhancement of rent; by reason of the said notification, the Administrator sought to achieve a balance between the interests of the landlords and those of the tenants;
(iii) The notification whereby the landlord's property had been taken out of the rent control laws is in accordance with the policy of the Government of India as is reflected from the model rent laws circulated by the Ministry of Urban Development for the purpose of stimulating private investment in rental housing, and by reason thereof the balance was tilted in favour of the tenants which was causing deleterious, economic and social consequences;
(iv) The State having adopted a policy of allowing Foreign Direct Investment in housing, the said notification, being in tune with the current economic policy of the Government, the High Court rightly refrained from exercising its power of judicial review;
(v) In view of a large number of decisions of this Court it is now well settled that Section 3 of the Act is intra vires the Constitution;
(vi) The impugned notification is a conditional legislation and not a delegated legislation;
(vii) Merely because the exemption granted by the impugned notification is perpetual in nature, the same per se does not offend the legislative policy particularly in view of the fact that almost similar notifications have been upheld by this Court;
(viii) Though the Rent Act confers right on the tenants against exorbitant increase in rent and/or mala fide eviction; such statutory protection having caused great hardship to the landlords and having been abused by the tenants, corrective measures could be taken in terms of the said statute;
(ix) There being no provision for determination of a fair rent, Sections 4 and 5 of the Act cannot be implemented in case of a tenanted premises situated in Chandigarh;
(x) Despite the fact that the value of the property has increased, mala fide enhancement of rent and mala fide eviction of the tenants intended by the legislature acquire an ugly mood by the landlord at the hands of the tenants;
(xi) The court cannot overlook the fact, while considering the legislative policy, that several amendments have been carried out by the legislature to mitigate the hardships of the landlords and as the delegatee has acted keeping in view the legislative history, no exception can be taken to the exercise of the power of delegated legislation by the Administrator;
(xii) In view of the National Housing Scheme framed by the Government of India in the year 1991, the Administrator cannot be said to have committed any illegality in issuing the said notification as by reason thereof a balance has been sought to be maintained between the interests of the landlords and those of the tenants, particularly, in view of the fact that by reason thereof the landlords were to be provided adequate return on their investment and so as to see that the tenants do not enjoy any unfair advantage over the landlords.
Conditional legislation and delegated legislation:
We, at the outset, would like to express our disagreement to the contentions raised before us by the learned counsel appearing on behalf of Respondents that the impugned notification is in effect and substance a conditional legislation and not a delegated legislation. The distinction between conditional legislation and delegated legislation is clear and unambiguous. In a conditional legislation the delegatee has to apply the law to an area or to determine the time and manner of carrying it into effect or at such time, as it decides or to understand the rule of legislation, it would be a conditional legislation. The legislature in such a case makes the law, which is complete in all respects but the same is not brought into operation immediately. The enforcement of the law would depend upon the fulfilment of a condition and what is delegated to the executive is the authority to determine by exercising its own judgment as to whether such conditions have been fulfilled and/or the time has come when such legislation should be brought in force. The taking effect of a legislation, therefore, is made dependent upon the determination of such fact or condition by the executive organ of the Government. Delegated legislation, however, involves delegation of rule making power of legislation and authorises an executive authority to bring in force such an area by reason thereof. The discretion conferred on the executive by way of delegated legislation is much wider.
Such power to make rules or regulations, however, must be exercised within the four corners of the Act. Delegated legislation, thus, is a device which has been fashioned by the legislature to be exercised in the manner laid down in the legislation itself. By reason of Section 3 of the Act, Administrator, however, has been empowered to issue a notification whereby and whereunder, an exemption is granted for application of the Act itself.
In Hamdard Dawakhana (Wakf) Lal Kuan, Delhi & Anr. vs. Union of India & Ors. [(1960) 2 SCR 671], this Court stated:
"The distinction between conditional legislation and delegated legislation is this that in the former the delegate's power is that of determining when a legislative declared rule of conduct shall become effective; Hampton & Co. v. U.S. (276 U.S. 394) and the latter involves delegation of rule making power which constitutionally may be exercised by the administrative agent. This means that the legislature having laid down the broad principles of its policy in the legislation can then leave the details to be supplied by the administrative authority. In other words by delegated legislation the delegate completes the legislation by supplying details within the limits prescribed by the statute and in the case of conditional legislation the power of legislation is exercised by the legislature conditionally leaving to the discretion of an external authority the time and manner of carrying its legislation into effect as also the determination of the area to which it is to extend;" {See also M.P. High Court Bar Association vs. Union of India & Ors. [(2004) 11 SCC 766]; State of Tamil Nadu, represented by Secretary, Housing Deptt., Madras vs. K. Sabanayagam & Anr. [(1998) Orissa & Ors. [(1991) Supp.1 SCC 81].} Judicial review of delegated legislation :
While considering the validity of delegated legislation, the scope of judicial review is limited but the scope and effect thereof has to be considered having regard to the nature and object thereof.
The nature of delegated legislation can be broadly classified as:
(i) the rule-making power;
(ii) grant of exemption from the operation of a statute.
In the latter category, the scope of judicial review would be wider as the statutory authority while exercising its statutory power must show that the same had not only been done within the four-corners thereof but otherwise fulfils the criteria laid down therefor as was held by this Court, inter alia, in P.J. Irani vs. State of Madras & Anr. [(1962) 2 SCR 169].
In Craies on Statute Law, 7th edition, it is stated at page 297:
"The initial difference between subordinate legislation (of the kind dealt with in this chapter) and statute law lies in the fact that a subordinate law-making body is bound by the terms of its delegated or derived authority, and that courts of law, as a general rule, will not give effect to the rules, etc., thus made, unless satisfied that all the conditions precedent to the validity of the rules have been fulfilled. The validity of statutes cannot be canvassed by the courts, the validity of delegated legislation as a general rule can be. The courts therefore
(1) will require due proof that the rules have been made and promulgated in accordance with the statutory authority, unless the statute directs them to be judicially noticed;
(2) in the absence of express statutory provision to the contrary, may inquire whether the rule-making power has been exercised in accordance with the provisions of the statute by which it is created, either with respect to the procedure adopted, the form or substance of the regulation, or the sanction, if any, attached to the regulation : and it follows that the court may reject as invalid and ultra vires a regulation which fails to comply with the statutory essentials."
In G.P. Singh's Principles of Statutory Interpretation, Tenth Edition, it is stated at page 916:
"Grounds for judicial review Delegated legislation is open to the scrutiny of courts and may be declared invalid particularly on two grounds:
(a) Violation of the Constitution; and
(b) Violation of the enabling Act.
The second ground includes within itself not only cases of violation of the substantive provisions of the enabling Act, but also cases of violation of the mandatory procedure prescribed. It may also be challenged on the ground that it is contrary to other statutory provisions or that it so arbitrary that it cannot be said to be in conformity with the statute or Article 14 of the Constitution or that it has been exercised in bad faith.
The limitations which apply to the exercise of administrative or quasi-judicial power conferred by a statute except the requirement of natural justice also apply to the exercise of power of delegated legislation.
Rules made under the Constitution do not qualify as legislation in true sense and are treated as subordinate legislation and can be challenged in judicial review like delegated legislation. Compliance with the laying requirement or even approval by a resolution of Parliament does not confer any immunity to the delegated legislation but it may be a circumstance to be taken into account along with other factors to uphold its validity although as earlier seen a laying clause may prevent the enabling Act being declared invalid for excessive delegation." In Clariant International Ltd. & Anr. vs. Securities & Exchange Board of India [(2004) 8 SCC 524], this Court observed:
"When any criterion is fixed by a statute or by a policy, an attempt should be made by the authority making the delegated legislation to follow the policy formulation broadly and substantially and in conformity therewith. [See Secy., Ministry of Chemicals & Fertilizers, Govt. of India v. Cipla Ltd., SCC para 4.1.)" We may notice that in State of Rajasthan & Ors. vs. Basant Nahata [(2005) 12 SCC 77 : AIR 2005 SC 3401], it was pointed out :
"The contention raised to the effect that this Court would not interfere with the policy decision is again devoid of any merit. A legislative policy must conform to the provisions of the constitutional mandates. Even otherwise a policy decision can be subjected to judicial review." In B.K. Industries & Ors. vs. Union of India & Ors. [(1993) Supp. 3 SCC 621], this Court clearly held that a delegate cannot act contrary to the basic feature of the Act stating:
"..The words "so far as may be" occurring in Section 3(4) of the Cess Act cannot be stretched to that extent.
Above all it is extremely doubtful whether the power of exemption conferred by Rule 8 can be carried to the extent of nullifying the very Act itself. It would be difficult to agree that by view of the power of exemption, the very levy created by Section 3(1) can be dispensed with. Doing so would amount to nullifying the Cess Act itself. Nothing remains thereafter to be done under the Cess Act. Even the language of Rule 8 does not warrant such extensive power. Rule 8 contemplates merely exempting of certain exciseable goods from the whole or any part of the duty leviable on such goods. The principle of the decision of this Court in Kesavananda Bharati v. State of Kerala (1973) 4 SCC 225, applies here perfectly.
It was held therein that the power of amendment conferred by Article 368 cannot extend to scrapping of the Constitution or to altering the basic structure of the Constitution. Applying the principle of the decision, it must be held that the power of exemption cannot be utilised for, nor can it extend to, the scrapping of the very Act itself. To repeat, the power of exemption cannot be utilised to dispense with the very levy created under Section 3 of the Cess Act or for that matter under Section 3 of the Central Excise Act." The law, which, therefore, has been laid down is that if by a notification, the Act itself stands effaced; the notification may be struck down. But that may not be the only factor.
In Hindustan Lever & Ors. vs. Hindustan Lever Mazdoor Sabha & Ors. [(1994) Supp.1 SCC 1] this Court again laid down the law that exercise of power of exemption can be made on the basis of twin tests of the basic object underlying the Act and valid classification stating :
"..But such exemption cannot be on the basis of the workers and their wages differentiating between different classes of workmen of the same unit." {See also Nedurimilli Janardhana Reddy vs. Progressive Democratic Students' Union & Ors. [(1994) 6 SCC 506], Agricultural Market Committee vs. Shalimar Chemical Works Ltd [(1997) 5 SCC 516], Additional District Magistrate (Rev.) Delhi Admn. etc. vs. Siri Ram etc. [(2000) 5 SCC 451] and ITW Signode India Ltd. vs. Collector of Central Excise [(2004) 3 SCC 48].} It is interesting to note that in Secretary, Ministry of Chemicals & Fertilizers, Government of India vs. Cipla Ltd. & Ors. [(2003) 7 SCC 1], this Court opined:
"It is axiomatic that the contents of a policy document cannot be read and interpreted as statutory provisions. Too much of legalism cannot be imported in understanding the scope and meaning of the clauses contained in policy formulations. At the same time, the Central Government which combines the dual role of policy-maker and the delegate of legislative power, cannot at its sweet will and pleasure give a go-by to the policy guidelines evolved by itself in the matter of selection of drugs for price control. The Government itself stressed on the need to evolve and adopt transparent criteria to be applied across the board so as to minimize the scope for subjective approach and therefore came forward with specific criteria. It is nobody's case that for any good reasons, the policy or norms have been changed or have become impracticable of compliance." We may hereinafter notice the decisions relied upon by Mr. Nariman.
In Maharashtra State Board of Secondary and Higher Secondary Education & Anr. etc. vs. Paritosh Bhupeshkumar Sheth and Ors. [(1984) 4 SCC 27], this Court was concerned with a regulation laying down the terms and conditions for revaluating the answer papers. Indisputably, there exists a distinction between regulations, rules and bye-laws. The sources of framing regulations and bye-laws are different and distinct but the same, in our opinion, would not mean that the court will have no jurisdiction to interfere with any policy decision, legislative or otherwise.
In Indian Express Newspapers (Bombay) Pvt. Ltd. & Ors. etc. vs. Union of India & Ors. etc. [(1985) 1 SCC 641], the question which arose for consideration therein was as to whether the exemption notification issued under Section 25 of the Customs Act, 1962 was beyond the reach of the Administrative Law. Venkataramiah, J. speaking for the Bench, held that the Court exercising power of judicial review of a piece of subordinate legislation can exercise its jurisdiction, apart from the grounds on which a plenary legislation can be challenged, but if it is contrary to other statute or if it is so unreasonable so as to attract the wrath of Article 14 of the Constitution of India opined that the arbitrariness is not treated as a separate ground in India as it is a part of Article 14 of the Constitution stating:
".A distinction must be made between delegation of a legislative function in the case of which the question of reasonableness cannot be enquired into and the investment by statute to exercise particular discretionary powers. In the latter case the question may be considered on all grounds on which administrative action may be questioned, such as, non-application of mind, taking irrelevant matters into consideration, failure to take relevant matters into consideration, etc., etc. On the facts and circumstances of a case, a subordinate legislation may be struck down as arbitrary or contrary to statute if it fails to take into account very vital facts which either expressly or by necessary implication are required to be taken into consideration by the statue or, say, the Constitution. This can only be done on the ground that it does not conform to the statutory or constitutional requirements or that it offends Article 14 or Article 19(1)(a) of the Constitution.
It cannot, no doubt, be done merely on the ground that it is not reasonable or that it has not taken into account relevant circumstances which the Court considers relevant." It was categorically held that a subordinate legislation would not enjoy the same degree of immunity as a legislative act would.
To the same effect are the decisions of this Court in Khoday Distilleries Ltd. & Ors. vs. State of Karnataka & Ors. [(1996) 10 SCC 304] and Dai-ichi Karkaria Ltd. vs. Union of India & Ors. [(2000) 4 SCC 57], wherein Indian Express Newspapers (Bombay) Pvt. Ltd. (supra) was followed. We, therefore, need not deal with them separately It is not necessary for us to dilate on this subject as in Bombay Dyeing & Mfg. Co. Ltd. (3) vs. Bombay Environmental Action Group & Ors., reported in (2006) 3 SCC 434, the power of judicial review on delegated legislation has been considered at some details, opining :
"For the foregoing reasons, we are of the opinion that in cases where constitutionality and/ or interpretation of any legislation, be it made by the Parliament or an executive authority by way of delegated legislation, is in question, it would be idle to contend that a court of superior jurisdiction cannot exercise the power of judicial review. A distinction must be made between an executive decision laying down a policy and executive decision in exercise of its legislative making power. A legislation be it made by the Parliament/Legislature or by the executive must be interpreted within the parameters of the well-known principles enunciated by this Court. Whether a legislation would be declared ultra vires or what would be the effect and Page 1243 purport of a legislation upon interpretation thereof will depend upon the legislation in question vis-`-vis the constitutional provisions and other relevant factors. We would have to bear some of the aforementioned principles in mind while adverting to the rival contentions raised at the bar in regard to interpretation of DCR 58 as well as constitutionality thereof." {See also Kerala Samsthana Chetu Thozhilali Union vs. State of Kerala & Ors. [(2006) 4 SCC 327].} Judicial review of delegated legislation is, therefore, permissible.
National Housing Policy & other reasons for issuing the impugned notification :
It is not in dispute that the Central Government evolved a National Housing Policy. The said Policy, according to Respondents, was made pursuant to or in furtherance of a decision of this Court in Prabhakaran "It is common knowledge that there is acute shortage of housing, various factors have led to this problem. The laws relating to letting and of landlord and tenant in different States have from different States' angles tried to grapple the problem. Yet in view of the magnitude of the problem, the problem has become insoluble and the litigations abound and the people suffer. More houses must, therefore, be built, more accommodation and more spaces made available for the people to live in. The laws of landlord and tenant must be made rational, humane, certain and capable of being quickly implemented. Those landlords who are having premises in their control should be induced and encouraged to part with available accommodation for limited periods on certain safeguards which will strictly ensure their recovery when wanted. Men with money should be given proper and meaningful incentives as in some European countries to build houses, tax holidays for new houses can be encouraged. The tenants should also be given protection and security and certain amount of reasonableness in the rent. Escalation of prices in the urban properties, land, materials and houses must be rationally checked. This country very vitally and very urgently requires a National Housing Policy if we want to prevent a major breakdown of law and order and gradual disillusionment of people. After all shelter is one of our fundamental rights. New national housing policy must attract new buildings, encourage new buildings, make available new spaces, rationalise the rent structure and rationalise the rent provisions and bring certain amount of uniformity though leaving scope for sufficient flexibility among the States to adjust such legislation according to its needs. This Court and the High Court should also be relieved of the heavy burdens of this rent litigations. Tier of appeals should be curtailed. Laws must be simple, rational and clear.
Tenants are in all cases not the weaker sections. There are those who are weak both among the landlords as well as the tenants. Litigations must come to end quickly. Such new Housing Policy must comprehend the present and anticipate the future. The idea of a National Rent Tribunal on an All India basis with quicker procedure should be examined. This has become an urgent imperative of today's revolution. A fast changing society cannot operate with unchanging law and preconceived judicial attitude." The said national policy was made on or about 17.7.2002. Therein, it was, inter alia, recommended that appropriate amendments be made in the existing laws and regulations so as to achieve a balance of interests of both the landlords and tenants, which would stimulate further constructions. On the basis of series of consultations with the State Governments and various experts, the Ministry of Urban Development suggested various features of a model rent control law which was considered in the Chief Ministers' Conference held on 7.3.1992 laying down a broad frame-work therefor. The features as regards exemption laid down therein are as under: (1) No rent control law should apply to an urban area, population whereof as per the 1991 census exceeds 3 million; (2) Exemption to residential and non- residential premises carrying more than a rental value ranging from Rs.1500/- to Rs.3500/- per month as may be specified on city-wise basis.
The ceiling for rent will be automatically revised upwards as per escalation formula of standard rent. Exemption would extend to existing as well as new tenancies and covering new and existing constructions. (3) There should be a provision for fixation of standard rent by a certain specified percentage. (4) Rent Control Act should be made a permanent one.
Additional affidavit by the Administrator We have noticed hereinbefore that pursuant to an observation made by the High Court on 11.3.2004 an additional affidavit was filed before the High Court by the Administrator. In his additional affidavit affirmed on 24.7.2002, the Administrator assigned reasons for issuing the said notification. Reference was also made to the correspondences passed between the Central Government and the Union Territory culminating in issuance of the said notification.
We may take note of the contents of the said affidavit at some details.
In the said additional affidavit, it was stated:
"Given the nature of Rent Control Laws, it is submitted that the balance of rights of landlords and tenants is tilted in favour of tenants by these laws resulting in deleterious economic and social consequences as noted in the Urban Reforms Policy of Government of India. Therefore, the balance of rights would be fully restored if and when Urban Rent Control Laws, as they presently exist are repealed and contracts between tenants and landlords are governed by the law of the land subject to such special provisions as may be required to regulate such contracts given their specific nature. In these circumstances the Administration's notification dated 7.11.2002 is a step towards improving the balance of rights between landlords and tenants.
As regards the limit of exemption, which is Rs.1500/- p.m. it has been brought out that in various other States similar exemptions are in the range of Rs.1000-3500 p.m. Specific mention has been made of Section 3 of the Punjab Rent Act, 1995 which has not so far been notified by Government of Punjab, but wherein the State Government would have to notify the exemption for properties that have a deemed monthly rent above certain limit, that limit being between Rs.1500-3500/-. The Chandigarh Administration's notification limit of Rs.1500/- is in line with the range mentioned in the Punjab Act of 1995. As such it will not be in public interest to alter this limit." It was further averred :
"The Act came into effect in December 1988. Large number of writ petitions were filed in the Supreme Court challenging the constitutionality of the amendments. The Supreme Court, in a series of judgments, has upheld the validity of these amendments.
The Govt. of India has requested all the State Governments to enact amendments to rent control laws on similar lines. This was broadly endorsed, as a part of the Draft National Housing Policy, in the Conference of Housing Ministers in October 1990. A number of States have initiated amendments in this regard." In para 5 of the said recommendations, provisions have been made for grant of exemption to the residential or non-residential property according to the current price index.
In the written statement filed on behalf of Administrator it was stated :
"..The city of Chandigarh has grown in size, economy, population etc. and has occupied an important position so far as other cities in India are concerned.
Further, Chandigarh has the highest per capita income compared to any other city/state in the country as per the latest census. Suffice, it to submit the classification has a nexus with the object sought to be achieved. It is not violative of Article 14 of the Constitution of India nor does it amount to repeal of the 1974 Act.
It may be mentioned here that the stamp duty on conveyance deeds has been reduced from 12.5% to 6% by the Chandigarh Administration vide notification no.5645-HIII(5)-2002/14968 dated 2.8.02 issued under Section 9-A of the Indian Stamp Act, 1899.
. That the contents of ground (xiii) to (xix) denied being wrong and incorrect. As stated above, the Administrator has the jurisdiction to issue the notification dated 7-11-02. There is no requirement of any consultation or prior sanction." By a letter dated 17th July, 2002, the State Governments were, asked by Union of India to regulate the rent control and rental housing, inter alia, stating:
"As you are aware, in his Budget Speech 2002- 03, the Union Finance Minister has announced the creation of an Urban Reforms Incentive Fund with an outlay of Rs.500 crore for the year. During finalization of the size of Annual Plan of your State, the Planning Coimmission has indicated the amount out of this Fund, as part of State's share of resources (vide Annexure-I).
However, actual release is to be based on action on the reform front, for which a Memorandum of Agreement is to be signed between the State Government and Government of India. I enclose the draft of the MoA (Annexure II).
xxx xxx xxx xxx xxx
3. The specific actions to be taken by the States are indicated in the separate note at Annexure III.
The first instalment, equal to 1/3rd of the eligible amount, will be released on the State signing the MoA, to be followed by two further instalments for the financial year which will be based on the progress in implementing the agreed reform calendar, as indicated in Annexure III. We will also provide Guidelines for the reform items, for which an Expert Committee is at work. It may please be noted that "for purposes of release of funds the total package is to be taken into account and not any individual component".
4. You will agree that the reforms which have been mentioned in the Budget Speech and in this letter are long overdue in the urban sector. The incentive Fund only highlights them and encourages their adoption. The over-all intention is to encourage construction of housing including rental housing, to reduce transaction costs and delays in property transactions, to provide for easier availability of land for construction, and improve municipal finances with a view to developing infrastructure and civic services in our cities." The Central Government issued another letter on or about 10th December, 2002, wherein upon reference to the said notification dated 7.11.2002, a detailed report was called for as to what steps have been taken by the States concerned by the Ministry of Urban Development and Poverty Alleviation.
As regards reforming the Rent Control Act it was stated :
".In the MoA the State will undertake to carry out a range of reforms in rent control commencing, during the current year, with legislative measures to ensure that new construction (i.e., buildings constructed on or after 1-4-2002), and any vacancy of any existing building occurring on or after the date of the signing of the MoA, will not come under the ambit of Rent Control or tenancy protection. States which do not have a Rent Control Act will undertake not to introduce such a measure (rent control).
In order to qualify for the second and third instalments, the two measures to be taken are :
(i) the required legislation should have been enacted and brought into effect in respect of new construction/newly arising vacancy as agreed to in the MoA;
(ii) the State Government should have issued a Government Order/Resolution laying down the total policy of reform of rent control. The policy statement should include, in addition to the policy in respect of new construction or newly arising vacancy in an existing building as stated above, also the policy regarding existing tenancies. In respect of existing tenancies, the State will adopt the following in their policy:
i. To remove ceiling on rent on existing tenancies, and to provide for rents to move to market rates,
ii. To fix time limit of three years for existing tenancies which do not have a proper written lease agreement between landlords and tenants,
iii. To restrict tenancies to the life-time of lessee,
iv. To permit possession on termination of tenancy without recourse to litigation,
v. To create an Authority and provide guidelines to fix rents on the basis of market rates in respect of existing tenancies.
Action in the Year 2003-04 : The policy on existing tenancies should be brought into effect through appropriate legislative changes; in the second year of the scheme. Release of URIF in future years will be based on implementation of the agreed schedule of reform in respect of existing tenancies." [Emphasis supplied] Union of India, in its affidavit filed before the High Court, had referred to its letter dated 10.12.2002. The Joint Secretary, Finance, Chandigarh in response thereto by letter dated 23.12.2002 informed the Central Government about issuance of the said notification dated 7.11.2002 and the background thereof.
Notifications issued in respect of the city of Chandigarh and issued under Section 3 of the Act of 1949 :
Let us now consider some of the notifications to which our attention has been drawn by Mr. Nariman which were applicable to the city of Chandigarh and issued under Section 3 of the Act.
A press note was issued on 23rd May, 1959 by the Government of Punjab exempting the city of Chandigarh from the operation of the Act for a period of 25 years, the reference whereof, has been made in a Full Bench judgment of the Punjab and Haryana High Court in Dr. Harikishan Singh vs. Union of India & Ors. [AIR 1975 P&H 160]. The said press note was found to be invalid in law by the High Court. On or about 24.9.1974 a notification was issued by the Chief Commissioner under Section 3 of the Act exempting all new buildings from the purview of the Act for a period of five years. Yet again on 5.3.1985 the Chief Commissioner granted exemptions to all buildings and rented lands belonging to the Government.
We would deal with the said notification and similar other notifications issued by the State of Punjab and other States consequently a little later.
The Administrator of Union Territory of Chandigarh issued the impugned notification dated 7.11.2002 directing that the provision of the Act was not applied to the buildings and rented lands whose monthly rent exceeds Rs.1,500/-.
Before adverting to the question involved in these appeals, we may also notice similar notifications issued by the State of Punjab and other States to which our attention has been drawn by Mr. Nariman.
Other exemption notifications :
By reason of a notification dated 12.9.1950, the evacuee properties were exempted from the purview of rent laws. The premises vested in local Government bodies were also exempted by issue of notification dated 21.2.1947. Similarly, the lands and buildings belonging to Municipal Committee and Notified Area Committee, District Boards or Panchayats were also exempted by a notification dated 3.6.1959. The validity of the said notification has been upheld by the Full Bench of the Punjab & Haryana High Court in Hari Prasad Gupta vs. Jitender Kumar Kaushik reported in AIR 1982 P&H 165. By a notification dated 8.10.1959, buildings and rented lands belonging to the improvement trust were exempted. A similar notification was issued on 5.11.1959 exempting buildings and rented lands belonging to the Cantonment Boards of Ambala, Ferozpur and Jullunder.
The buildings belonging to the Government of India and the State of Punjab and other States were exempted by a notification dated 5.1.1949. Yet again, all the buildings and rented lands in the urban area of Mohali were exempted for the period from 28.1.1983 and expiring on 31.3.1995 by a notification dated 9.2.1984.
Indisputably, the validity of some of the aforementioned notification has been upheld by this Court in Punjab Tin Supply Co., Chandigarh & Ors. vs. Central Government & Ors. [(1984) 1 SCC 206], M/s. Kesho Ram & Co.& Ors. Etc. vs. Union of India & Ors. [(1989) 3 SCC 151], Firm Amar Nath Basheshar Dass vs. Tek Chand [(1972) 1 SCC 893] and Sadhu Singh vs. District Board, Gurdaspur & Anr. [(1969) RCR 156], however, we would consider the applicability of the decisions of this Court in this case hereinafter. The applicability of the said decision vis-`-vis the notifications which fall for consideration therein would be noticed by us.
Notifications issued by other States :
The Government of Rajasthan issued notification dated 19.5.1976 exempting the properties of Wakf Board which has been upheld by this Talimul Islam, Mirza Izsmail Road, Jaipur [(1994) 3 SCC 375].
The Andhra Pradesh Government has issued a notification dated 29.12.1983 under Section 26 of the Andhra Pradesh Buildings (Lease, Rent & Eviction) Control Act, 1960 exempting all buildings fetching rental of Rs.1,000/- from the purview of the Act w.e.f. 26.10.1983. The validity of the said notification came up for consideration before a learned Single Judge of the Andhra Pradesh High Court in Writ Petition No.8081 of 1986.
Following a Division Bench decision of the said Court in M/s. Buywell Corporation vs. Mahadevmal [1988 APLJ-1-345], the said writ petition was dismissed.
Statutes exempting application of the Act :
Mr. Nariman has drawn our attention to the amendments in the statutes made by some other States.
Section 2(g) of U.P. Urban Buildings (Regulation of Letting, Rent and Eviction) Act, 1972 was inserted, exempting buildings fetching rent of more than Rs.2000/-, by U.P. (Amendment) Act 5, 1995.
Legislature of the National Capital Region of Delhi amended Section 3(c) of the Delhi Rent Control Act, 1958 which was considered to be the role model by the Central Government exempting buildings fetching rent of more than Rs.3500/-. We would notice the decisions of the court in relation to the said amendments and in particular the amendment of Section 3(c) of Delhi Rent Control Act at an appropriate stage.
Precedents dealing with notifications :
The power of the superior Court to interfere with a notification by way of judicial review came up for consideration before this Court in P.J. Irani vs. The State of Madras & Anr. [I962 (2) SCR 169]. Having regard to the fact that the correctness and otherwise of the said decision of this Court is not in question and furthermore, as therein, the Court has laid down the parameters of judicial review elaborately, we would consider the same at some details.
In P.J. Irani (supra), a notification was issued exempting a cinema house, the lease whereof expired in 1942. Despite expiry of lease, he remained in possession. In terms of Madras (Lease & Rent Control) Act, 1946 came into force protecting tenants in possession from eviction even after expiry of their leases. In terms of Section 13 of the Act, the State was empowered to exempt any building or class of buildings from all or any of the provisions of the Act. The State of Madras issued a notification in exercise of the said power exempting the cinema house occupied by the said tenants. Validity of Section 13 of the said Act came to be questioned by the landlord before the High Court of Madras. The High Court held Section 13 of the Act to be ultra vires and also quashed the said notification dated 4th June, 1952. This Court in appeal thereagainst, although, upheld the validity of Section 13 of the Act but opined that the notification in question was bad in law. An order made under Section 13 of the Act was held to be amenable to judicial review on three grounds :
(1) If it was discriminatory,
(2) If it was made on grounds which were not germane or relevant to the policy and purpose of the Act; and
(3) if it was made on grounds which were mala fide.
This Court noticed that the legislation was enacted for achieving three purposes:
(i) the regulation of letting,
(ii) the control of rents; and
(iii) prevention of unreasonable eviction obtaining from the residential or non- residential buildings.
Before the High Court a memorandum, setting out the reasons why exemption was thought to be granted was filed, stating:
"(1) When the High Court offered in 1940 to lease out the premises in question for period of 21 years, Sri Chettiar elected to take it on lease only for period of seven years, which expired in 1947. As per the High Court's order in C.S.Nos.280 to 286 of 1939, Sri J.H. Irani, father of Sri P.J. Irani took a lease of the premises for a period of 13 years 11= months from 1947 and he deposited Rs.10,000/- towards the said lease. He is therefore entitled for the benefits from 1948 onwards.
(2) Had not the Rent Control Act come into force, Sri P.J. Irani would have got possession in the ordinary course as per High Court's order and the terms of the lease deed. The operation of the Act is therefore really a hardship to him.
(3) Sri Chettiar is only an absentee lessee and he is having several other business in South India.
(4) The conduct of Sri Chidambaram Chettiar in refusing to surrender the possession of the building to Sri P.J. Irani who had taken a valid lease under the order of the High Court is that of a hard litigant seeking to exploit the letter of the law without much regard to bona fides; and
(5) Sri Chettiar had already managed to be in possession of the building for five more years than he was legitimately entitled to be." The notification was quashed by the High Court stating:
"Reasons 1, 2 and 4 go together to have reference to the order of the High Court in 1940 directing the Receivers to execute a lease for seven years to the appellant and after the expiry of that period to grant a lease for fourteen years to the second respondent's father. It is undoubtedly true that but for the application of the Act, the second respondent's father would have obtained possession of the premises after the expiry of lease in favour of the appellant. That could be said of thousands of cases in which the leases in favour of tenants have expired and, but for the Act the owners would be entitled to obtain possession of the demised premises. If this circumstance alone is sufficient to exempt any premises from the operation of the Act, then the Act itself should be repealed There is no policy or principle involved in this circumstance." This Court agreed with the said view of the High Court holding ground Nos. 1 and 2 to be contrary to the legislative policy of the Act and ground No.3 not germane for granting exemption. Reason No.5 was held to be really no reason at all.
The scope of judicial review has, thus, been laid down succinctly.
Although we would notice hereinafter that various notifications issued by the Chief Commissioner, as also the Administrator of the Union Territory of Chandigarh and various other notifications issued by the State of Punjab and other States had been upheld in various judgments of this Court which we have noticed hereinbefore in those cases also, as for example in Sadhu Singh (supra), Punjab Tin Supply Co. (supra) and Kesho Ram (Supra), the ratio of P.J. Irani (supra) was followed. In Sadhu Singh (supra) while upholding the notification of exemption granted in favour of the District Board by this Court, a distinction was sought to be made that whereas in the Madras Act which was applicable in the case of P.J. Irani (supra), the expression used was "unreasonable eviction of tenants", in Punjab Act, the expression used was "eviction of tenants". But this Court found no distinction between the two Acts as one of the objects of the Acts was unreasonable eviction of tenants and the expression "unreasonable" thus was read in the title of the Rent Act.
So far as the first notification is concerned, the same has been upheld by this Court in Sadhu Singh vs. District Board, Gurdaspur & Anr. [(1969) RCR 156] following the case of P.J. Irani vs. State of Madras & Anr. [(1962) 2 SCR 169].
In Sadhu Singh (supra) P.J. Irani was distinguished stating :
"The learned counsel says that it may be that the decision of this Court in Irani's case concludes the question as far as Art.14 is concerned but different issues arise while dealing with the case of excessive delegated legislation. But, in our opinion, in this case the conclusion of the Court that enough guidance is afforded by the preamble and the operative provisions of the Act for the exercise of the discretionary powers vested in the Government also repels the argument regarding excessive delegation because if an Act gives sufficient guidance to an authority for the purpose of issuing a notification it cannot be said that there is excessive delegation." The notification dated 23.5.1959 has been quashed by the Punjab & Haryana High Court in Dr. Harkishan Singh vs. Union of India & Ors. [AIR 1975 P&H 160 = 1975 PLR 163], stating that :
". all that section 88 of the Punjab Re-organization Act means is that any law which was in force immediately before the appointed date i.e. 01.11.1966 in the erstwhile State of Punjab or any part thereof was to continue to apply to those territories irrespective of the re-organization of that State into four successor States.
.Since the East Punjab Rent Restriction Act did not apply to or was not in force in the territories, now comprised in the Union Territory of Chandigarh immediately before the appointed date, references to "Punjab" in section 1, clause 2 of the East Punjab Rent Restriction Act cannot be read as Union Territory of Chandigarh nor could this act be adopted under Section 89 of the Re-organization for facilitating its application to the Union Territory of Chandigarh or any part thereof. The Act had first to be applied to the Union Territory of Chandigarh or any part thereof by a notification in the official Gazette by the Central Government under Section 87 of the Re-organization Act with the necessary adaptation." Paragraph 16 of the Judgment concludes as follows :
"For the reasons given above, this petition is accepted and the notification of the Central Government dated October 13, 1972 published in the Government of India Gazette (Extraordinary) dated November 28, 1972 is hereby quashed and it is held that the Act has not been brought into force in the Union Territory of Chandigarh or any part thereof." The said decision has been approved by a larger Bench of this Court in M/s. Kesho Ram & Co. & Ors. Etc.vs. Union of India & Ors. [(1989) 3 SCC 151], wherein it was observed as follows :
"This is the third round of litigation initiated by tenants in challenging Section 3 of the East Punjab Rent Restriction Act, 1949 and notifications issued thereunder for the purpose of granting exemption to the newly constructed buildings in the urban areas for a period of five years from the operation of the provisions of the Act." In State of Madhya Pradesh vs. Kanhaiyalal & Ors. [1969 RCJ 695], P.J. Irani and Sadhu singh were followed opining :
"Before we can hold in favour of the State Government, we must be satisfied that the ground of exemption was germane to the policy of the Act. In this case there is no affidavit by any officer who had anything to do with the order granting exemption. The returns filed on behalf of the State Government do not throw any light on this question. It would appear that in granting the exemption the State applied merely a rule of thumb and issued the notification on the basis of the assertion by the trust that the entire rental income from the property was being applied to meet the expenses of the trust.
Such a statement only allows an institution to apply for exemption under section 3(2). By itself it is not enough.
Any institution covered by section 3(2) had to allege why it had become necessary for it to apply for exemption. It was not the case of the trust that they wanted to evict the tenants because they wanted the whole of the accommodation itself nor was it their plea that the income accruing to them was very low compared to prevailing rates of rent and that it was wholly inadequate for meeting the expenses of the trust.
If grounds like these or other relevant grounds had been alleged it would have been open to the State Government to consider the same and pass an order thereon. In our view State Government did not apply its mind which it was required to do under the Act before issuing a notification and the return does not disclose any ground which was germane to the purpose of the Act to support the claim for exemption." [Emphasis supplied] In Punjab Tin Supply (supra) the buildings which were granted either sewerage connection or electric connection were exempted for a period of five years by reason of the notification dated 31.1.1973. Following P.J. Irani (supra) it was held that the object of the Act can be gathered from its preamble. The legislative policy could be culled out from other provisions contained therein holding that the object and policy of the Act appears to be wider than some of the key provisions thereof. The Court noticed that the Act was passed as one of the measures was taken to mitigate the hardship caused to the tenants. Such mitigation can be attained by several measures, one of them being creation of incentive to persons with capital who were otherwise reluctant to invest in the construction of new buildings in view of the chilling effect of the rent control laws and to persuade the landlords to invest in the construction of new buildings by granting exemption in their favour for a period of 5 years is not the basis to the legislative policy stating :
"The impugned notification is not, therefore, ultra vires Section 3 of the Act as in its true effect, it advances the scheme, object and purposes of the Act which are articulated in the preamble and the substantive provisions of the Act. Moreover the classification of buildings into exempted buildings and unexempted buildings brought about by the notification bears a just and reasonable nexus to the object to be achieved namely the creation of additional housing accommodation to meet the growing needs of persons who have no accommodation to reside or to carry on business and it cannot be considered as discriminatory or arbitrary or unreasonable in view of the shortness of the period of exemption available in the case of each exempted building. The exemption granted for a period of five years only serves as an incentive as stated above and does not create a class of landlords who are forever kept outside the scope of the Act. The notification tries to balance the interests of the landlords on the one hand and of the tenants on the other in a reasonable way. We do not, therefore, agree with the submission that the notification either falls outside the object and policy of the statute or is discriminatory." [Emphasis supplied] Exemption from the application of the said Act was, thus, for a short period, and as such found to be in tune with the policy of the State. Had such exemption been for ever in favour of the landlords, the matter might have been otherwise. The validity of the said notification, therefore, was upheld because of the temporary nature of the statute.
Even in the said case, the Act was directed to be applied prospectively and not retrospectively.
In Motor General Traders & Anr. vs. State of Andhra Pradesh & Ors. [(1984) 1 SCC 222], exemption was initially granted in favour of the landlords for a period of five years but the same was being extended from time to time. In that situation, this Court was of the opinion that while earlier the exemption granted to the tenants under Section 32(b) of the Act had short life and the concession should be tolerated for a short while, but having regard to the extension granted, the same having not been done, the amendment was struck down holding that :
"This is a case where the Legislature while passing the law h
