Query: In the case in hand, the rent agreement was silent about the rent escalation clause due to which the tenant has been depositing Rs. 2,500 till date. What is the take of Courts in standard rent escalation in commercial premises?

I. Brij Mohan and Anr vs. Bhanwari Devi and Ors. 

(2006) 1 RCR (RENT) 366 | 30-01-2006

Facts:

The suit was instituted by plaintiff for ejectment, mesne profits and fixing of standard rent. The appellant has challenged the fixation of provisional rent, which is claimed to be on the higher side. Rajasthan Premises (Control of Rent & Eviction) Act, 1950 is under consideration in this case.  The trial court has taken into consideration the factor of price rise to commodities in eight years. The price index almost gets doubled in eight years. Taking 32 years to be the total period, the trial court has come to the conclusion that Rs. 2,000/- should be the rent. The trial court considered one of the factors which is a relevant consideration in fixing the standard rent, i.e. escalation of the price in index.

Observation:

The High Court observed that at the time when the trial court exercises jurisdiction under Section 7 of the Act, it will generally have less material before it. Major evidence will only come at the trial. A summary enquiry is required to be undertaken. A correct note can be struck only if objective appreciation is made of the circumstances. A pragmatic view will be required to be taken keeping in view rational thoughts. A landlord cannot be permitted to get more than what he can chew. Similarly a tenant cannot be made to ridicule the landlord by not offering a reasonable rent.

The court further observed that if an analytical reading is given to Sub-section (3) of Section 6 of the Act, then we find that many parameters have been delineated in the Section to determine the standard rent. The section clearly speaks that the court should have due regard to the prevailing rent or standard rent for similar premises in the same locality for various amenities. The consideration can be one of the safest consideration available. But when this aspect is not suitably available then other parameters can be pressed into service. Another aspect available can be in the shape of cost of construction, maintenance and repairs etc. The premises can be valued for determining the current level of property prices for its maintenance and construction and this has to be read with such reasons which would be inclusive of the price of land, which goes on increasing periodically. These factors have to be proved by the plaintiff as special reasons. Apart from all these considerations, the Court is empowered to look into the other relevant considerations. For the purposes of looking into the relevancy of the other relevant considerations, the judicial notice could be taken of the market conditions and the prevailing circumstances.

Decision:

The High Court while dismissing the appeal held that the consideration which have prevailed with the trial court are not liable to be judicially interfered with. 

II. B.R. Rajani Proprietrix M/s. New Ramya Iyengar Bakery, Chennai v. Rajalakshmi

2017 MHC 7148 | 14-11-2017

Facts:

The tenant is the revision petitioner in both the Civil Revision Petitions and the respondent is the landlord. It is the case of the revision petitioner that he was inducted as a tenant under the respondent herein. The petition mentioned premises is a non-residential building situated in the prime area of Chennai at North Usman Road, T.Nagar. The revision petitioner herein is running bakery business in the petition mentioned property and the admitted rent at present is Rs.4,000/-. Whereas the respondent herein filed the above RCOP No.1168 of 2007 against the revision petitioner for fixation of fair rent under Section 4 of the Tamil Nadu Buildings (Lease and Rent Control) Act, 18 of 1960. The learned Rent Control Appellate Authority chose to fix the fair rent at Rs.21,924/- per month for the petition premises on having reliance upon the two sale deeds dated 11.10.2004 in Exhibits P3 and P5, which quote Rs.25,57,31,600/- per ground as the value of the property.

Observation:

The High Court observed that the fair rent was fixed on the basis of sale deeds adjacent to the petition mentioned premises. On careful consideration of the case records and from exhibits in Ex P3 and P5 it is disclosed that the value of the property is Rs.25,57,31,600/- per ground. Further it was observed that the petition premise is a Type-I premise possessing all the basic amenities being located in prime area of North Usman Road, which is a busy commercial area.

Decision:

The Court held that the rent fixed by learned Rent Control Appellate Authority at Rs.21,924/- per month for the petition premises is just and reasonable and the same does not call for any interference by this Court.

III. Sunil Goyal & Another v. Additional District Judge, Court No. 8 & Others

ILR (2011) 2 (RAJ) 530 | 22-03-2011

In this case, the Rajasthan High Court observed as below:

It is relevant to mention that property was let out in the year 1961. Suit was filed in the year 1983 and on the date of filing of the suit, the agreed rent was Rs. 425/- per month only. It is 28 years old matter. The property in dispute is situated in prime location of Jaipur City i.e. near Ganpati Plaza and opposite All India Radio Office, M.I. Road, Jaipur. Therefore, learned first appellate court committed an illegality in not increasing the amount of mesne profit as per reasonable rate and in fixing old rate of 1983 i.e. @ Rs. 425/- per month while granting stay against eviction of tenant. It was a duty of first appellate court to compensate the decree holder reasonably for loss occasioned by delay in execution of decree by grant of stay.

IV. Malpe Vishwanath Acharya v. State of Maharashtra 

AIR1998 SC 602 | 19-12-1997

In the said case, the Supreme Court has made the following observations:

“26. It is true that whenever a special provision, like the rent control act, is made for a section of the society it may be at the cost of another section, but the making of such a provision or enactment may be necessary in the larger interest of the society as a whole but the benefit which is given initially if continued results in increasing injustice to one section of the society and an unwarranted largess or windfall to another, without appropriate corresponding relief, then the continuation of such a law which necessarily, or most likely, leads to increase in lawlessness and undermines the authority of the law can no longer be regarded as being reasonable. Its continuance becomes arbitrary.”

“ 28. Insofar social legislation, like the rent control act is concerned, the law must strike a balance between rival interests and it should try to be just to all. The law ought not to be unjust to one and give a disproportionate benefit or protection to another section of the society. When there is shortage of accommodation it is desirable, may, necessary that some protection should be given to the tenants in order to ensure that they are not exploited. At the same time such a law has to be revised periodically so as to ensure that a disproportionately larger benefit than the one which was intended is not given to the tenants.”

_____________________________