Bombay High Court Asserts Power To Decide Standard Rent In Landlord-Tenant Disputes

Mumbai: The Bombay High Court has held that it has powers to decide on “standard rent” in case of dispute between the landlord and tenant, even where the agreement was signed after October 1, 1987. If it was left to the landlord, then they would “demand a fanciful or exorbitant amount of rent from the tenant and thereafter serve a notice under Section 15(2) [of the Maharashtra Rent Control Act] for recovery of arrears of rent”, the high court said.

The high court has ruled in favour of Maya Alagh, actor and wife of former MD of Britannia Industries Limited Sunil Alagh, in a rent dispute with the company over the flat rented in ‘IL Pallazo’ building on Little Gibbs Road in Malabar Hill. It has asked the company to continue charging standard rent of Rs 850 per month, which was agreed while signing the agreement in 1991. The HC has, however, said that the company can increase the rent by 4% per year.

The HC was hearing pleas filed by Britannia challenging the 2019 order of the Appellate Bench of Small Causes Court. The company had demanded a rent of Rs 2.75 lakh from 2005.

The company’s board agreed in August 1989 to rent a flat in Navroz Building on Bhulabhai Desai Road in Malabar Hill to Alagh for a rent of Rs 3,400 per month (basic rent of Rs 850 plus society maintenance) , and accordingly agreement was signed. Subsequently, in August 1994, the company changed accommodation to IL Pallazo building.

On November 25, 2004, the company terminated the tenancy on the ground that Sunil Alagh ceased to be its employee. It also returned the cheque advanced by Alagh and by a letter in February 2005, it demanded rent of Rs 2.75 lakh from the previous month. Later, it initiated suit for eviction under the Maharashtra Rent Control (MRC) Act before the small causes court.

She continued to pay rent at the rate of Rs 10,880 as agreed in the May 1991 Agreement while changing accommodation to IL Pallazo.

The small causes court, in 2017, directed Alagh to pay standard rent of Rs 10,880 per month alongwith 4% annual increase and all the leviable charges including taxes and society charge in respect of the suit premises. It also directed her to deposit Rs 1,30,560 with 15% interest on the arrears of rent for the period 1 January 2005 to 31 December 2005.

Both the parties challenged this before the Appellate bench, which in 2019, directed that the standard rent payable would be Rs 805, plus society maintenance charges.

The company challenged this before the HC.

Britannia’s counsel Navroz Seervai submitted that the definition of the term ‘standard rent’ under the MRC Act specifically excludes premises which are let after October 1, 1987. He argued that conscious exclusion of premises let after October 1, 1987 was following the Supreme Court judgment in a similar matter read with a report by a Joint Committee. The Committee indicated that exclusion was with the objective of unlocking substantial stock of housing premises, which owners were otherwise not willing to give on rental basis for the fixation of standard rent provisions.

Alagh’s counsel Surel Shah submitted that Section 2 of the MRC Act would apply to “premises let” and only the State Government has power not to apply the provisions to a particular premise. In this case, no such notification has been issued by the government excluding premises let after October 1, 1987.

The court said that a combined reading of the provisions of the MRC Act states that the “Court has jurisdiction to fix standard rent in every case where there is a dispute between the landlord and a tenant about standard rent even in respect of the premises which are let ‘after’ October 1, 1987”.

It added that if the company’s contention was accepted then, “the same would give license to landlords to demand astronomically high amount of rent solely for the purpose of ensuring eviction of the tenant under Section 15 of the MRC Act”.

“Here Applicant (Britannia) is clearly attempting to take advantage of change in position of law after enactment of MRC Act, which retrospectively withdrew statutory fixation of standard rent for post 1987 tenancies,” Justice Sandeep Marne said.

“There is no dispute to the position that under the mutually signed letter dated July 31, 1995 suit premises were offered to Respondent (Alagh) at monthly rent of Rs 4,500, which included then prevailing society maintenance charges of Rs 3,695, leaving the basic rent at Rs 805,” Justice Marne added while dismissing Britannia’s plea.