Court Strikes Down Arbitrary Lease Rent Hikes Based on Ready Reckoner Rates. State Government Ordered to Frame New, Fair Policy for Lease Rent Determination Following Landmark Judgment.

Case Note & Summary

The challenge against the State Government's methodology for calculating lease rent for residential lands based on Ready Reckoner rates. The Petitioners argued that this methodology results in an exorbitant increase in lease rent, which is arbitrary and contrary to past judgments. The Court examined the principles laid down in the Ratti Palonji Kapadia case, which prohibited linking lease rentals to market value, and found that the methodology adopted by the State Government is arbitrary and unsustainable. The Court directed the State Government to frame a new policy for determining lease rents that is fair, reasonable, and gradual. The Court also upheld the provision for periodic revision of lease rent every five years, based on Ready Reckoner rates, but struck down the clause in the 2012 GR that allowed for such revisions during the lease term.

Resolution and Orders Arguments Presented Heard Mr. Rafique Dada for the Petitioners and other counsel, and the Advocate General and Government Pleader for the Respondents. Main Challenge The Petitioners challenge the State Government's methodology for calculating lease rent based on Ready Reckoner rates, arguing it results in an exorbitant increase and is arbitrary, contrary to past judgments. Legal Principles and Analysis Reference to Past Judgment The principles from the case of Ratti Palonji Kapadia & Anr. v. State of Maharashtra & Ors. are foundational, which struck down a similar lease rent increase based on market value as arbitrary and unjust. Petitioners' Assertions Petitioners argue the 2006, 2012, and 2018 GRs resurrect the disallowed principle of linking lease rents to market value, imposing an undue financial burden on lessees. Respondents' Defense Respondents claim the GRs aim to ensure fair returns on public lands, using Ready Reckoner rates as a reasonable and transparent method. Decision Evaluation of Methodology The Court finds the methodology results in a disproportionate increase in lease rents, which is arbitrary and unjustifiable. Rights and Policy The State can revise lease rents for fair returns, but must do so gradually and rationally, considering lessees' investments and historical rents. Conclusion on GRs The GRs dated 29th May 2006, 12th December 2012, and 5th May 2018, are quashed as they are arbitrary and unsustainable. Directions to Respondents

The State must frame a new policy for lease rents that is fair and reasonable, considering historical rents and lessees' investments.

All pending applications are disposed of accordingly.

No order as to costs.

Submissions by Mr. Dada Arbitrary GRs: Argues GRs are unreasonable and profit-motivated, increasing rents by 400 to 1900 times. Ratti Palonji Kapadia Case: References case prohibiting lease rent based on hypothetical market value. Maharashtra Rent Control Act: States should follow principles of the Act despite being exempt. Right to Shelter: Unreasonable rent increases violate Articles 19(1)(e) and 21. Public Policy and Welfare: Contradicts affordable housing policies. Lease Deed Violations: Claims GRs violate original lease terms. Unequal Treatment: Uniform valuation rate for all lands violates Article 14. Submissions by Dr. Saraf for the State Legal Framework: Lease terms governed by Lease Deed and Maharashtra Land Revenue Code. Government Grants Act: Terms of government grants are valid and precedence. Justification of Rent Increase: Fair and reasonable, not increased for 30 years, based on 25% land value. Historical Lease Terms: Past leases support current method. Precedent Cases: References cases supporting fair rent calculation. Fairness Doctrine: Fairness doesn't mean artificially low rents. Misplaced Reliance on Kapadia Case: Clarifies Court's position on market value basis. Decision on Lease Rent Increase Contention of Arbitrary Increase: Evaluates if lease rent increase is extortionate or exorbitant. Principles of Fairness The State must act in a fair, reasonable, and non-arbitrary manner in lease rent fixation. Reasonableness of Ready Reckoner Standardized Valuation: Ready Reckoner rates provide a logical basis for lease rent. Individual Case Adjustments

Special Circumstances: Allows for adjustments below Ready Reckoner value with approval.

Conclusion on Exorbitance: Lease rent fixed under GRs is not extortionate or arbitrary.

Periodic Lease Rent Revisions

Provision for Revisions: Addresses if revisions every 5 years are justified.

Frequent Revisions Argument: Contends they create uncertainty and financial burden.

Contractual Interpretation Lease deed allows for value-based reassessment. Balanced Approach

Periodic Reassessment: Maintains fairness, avoids extremes.

Affirmation of Revisions: Revisions every 5 years are fair and reasonable.

Conclusion

GRs are valid and enforceable, Government's actions in lease rent fixation are fair and constitutional.

Writ Petitions are dismissed, no order as to costs.

Final Provisions Partial Allowance: Revised lease rent upheld except for periodic revision every 5 years, struck down. Lump Sum Option: Lessees can pay lease rent in lump sum. Fixed Lease Terms: Lease terms should remain as originally agreed upon.