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CASE NO.:

Appeal (civil) 4688 of 2006

PETITIONER:

Vasu Dev Singh & Ors.

RESPONDENT:

Union of India & Ors.

DATE OF JUDGMENT: 07/11/2006

BENCH:

S.B. Sinha & P.P. Naolekar

JUDGMENT:

J U D G M E N T

[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

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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. \026 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

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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

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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

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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 :

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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)

1 SCC 318]; and Orient Paper and Industries Ltd. & Anr. Vs. State of

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:

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(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 \026 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."

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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:

"\005..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 :

"\005..But such exemption cannot be on the basis of the

workers and their wages differentiating between

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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:

"\005.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

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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

Nair & Ors. Vs. State of Tamil Nadu & Ors. [(1987) 4 SCC 238 ] stating :

"It is common knowledge that there is acute

shortage of housing, various factors have led to this

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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 \026

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.

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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:

"\005Given 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 :

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"\005..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.

\005. 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

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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 :

"\005.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]

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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.

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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

Court in Tharumal & Anr. Vs. Masjid Hajum Pharosan Va Madrassa

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-

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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\005\005 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

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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 :

"\005. 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.

\005.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 :

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"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,

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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 :

"\005\005This is a case where the Legislature while passing

the law had given the exemption apparently as an

incentive to encourage building activity. The learned

counsel were not able to show how the continuance of

the exemption in the case of persons who have built

houses more than two decades ago will act as an

incentive to builders of new houses now. If that is

really so, then there is no justification to continue to

have the restrictions imposed by the Act on buildings

built prior to August 26, 1957 also and the whole Act

should have to be repealed for if the impugned

exemption can act as an incentive the repeal of the Act

should also act as an incentive. We are of the view that

in the instant cases no investigation as contemplated in

the above two decisions of this Court is necessary. The

long period that has elapsed after the passing of the Act

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itself serves as a crucial factor in deciding the question

whether the impugned law has become discriminatory

or not because the ground on which the classification of

buildings into two categories is made is not a historical

or geographical one but is an economic one. Exemption

was granted by way of an incentive to encourage

building activity and in the circumstances such

exemption cannot be allowed to last for ever."

[Emphasis supplied]

This Court referred to, with approval, the decision of this Court in

R.M.D. Chamarbaugwalla & Anr. etc. vs. Union of India & Anr. etc.

[1957 SCR 930] stating that it is legitimate to take into account the history of

legislation, its object and title and preamble to it holding :

"The incentive to build provides a rational basis for

classification and it is necessary in the national interest,

that there should be freedom from restrictions for a

limited period of time. It is always open to the State

Legislature or the State Government to take action by

amending the Act itself or under Section 26 of the Act,

as the case may be, not only to provide incentive to

persons who are desirous of building new houses, as it

serves a definite social purpose but also to mitigate the

rigour to such class of landlords who may have recently

built their houses for a limited period as it has been done

in the Union Territory of Chandigarh as brought out in

our recent judgment in Punjab Tin Supply Co.,

chandigarh v. Central Government."

In M/s. Kesho Ram (supra) also exemption was granted for a period

of five years and following P.J. Irani, Sadhu Singh and Punjab Tin

Supply validity of the notification was upheld.

This Court upheld the validity of a notification in Parripati

Chandrasekharrao & Sons vs. Alapati Jalaiah [(1995) 3 SCC 709] on

different ground. The questions which have been raised herein did not fall

for consideration in the said decision. It is, therefore, not an authority for the

proposition as to whether such a notification is ultra vires Section 3 of the

Act or not. In that case, this Court was considering a question as to whether

the right vested in the tenant can be taken away during the pendency of a

proceeding as therein the High Court, while exercising its revisional

jurisdiction held that the Rent controller had jurisdiction to interfere and

decide the application filed by the tenant, upon arriving at a finding that the

notification impugned therein had no application to the tenant's proceedings.

The said view of the High Court was reversed by this Court opining

that the right of a tenant could be taken away by such notification.

In S. Kandaswamy Chettiar vs. State of Tamil Nadu & Anr.

[(1985) 1 SCC 290] this Court, while following P.J. Irani, held that

exemption issued in favour of those which are public trusts, was valid having

regard to the provisions contained in Tamil Nadu Buildings (Lease and Rent

Control) Act, 1960. This Court referred to decision in Gorieb v. Fox (71 L

Ed 1228 : 274 US 603) and held that there must be some rationale behind the

conferral of such power on the State Government to grant exemption and

stated that:

"\005.Obviously the power to grant exemptions under

Section 29 of the Act has been conferred not for making

any discrimination between tenants and tenants but to

avoid undue hardship or abuse of the beneficial

provisions that may result from uniform application of

such provisions to cases which deserve different

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treatment. Of course, as observed by this Court in P.J.

Irani case the power has to be exercised in accordance

with the policy and object of the enactment gatherable

from the Preamble as well as its operative provisions or

as said in the American decision without subverting the

general purposes of the enactment."

This Court again noticed that the notification was in consonance with

the object of the Act which had three purposes, namely, (1) the regulation of

letting of residential and non-residential buildings, (2) the control of rents of

such buildings, and (3) the prevention of unreasonable eviction of tenants

from such buildings.

In Buywell Corporation (supra), a bench of the Andhra Pradesh High

Court upheld a notification granting permanent exemption to all buildings

whose rent was more than Rs.1000/-. We do not, for the reasons stated

hereinafter, think that the law laid down therein is correct.

Classification for exclusion of building :

The word 'building' includes a part of building let out for any purpose

whether being actually used for that purpose or not. The Act applies to

rented building. Section 3 refers to `a building'. While constituting the term

'building', it is to be read as 'rented building' and having regard to the

definition of 'building', a part of the building would also come within the

purview thereof. In that view of the matter, rent of a building, which has

been let out, would be a relevant criteria for classification of the tenanted

premises.

The question, however, is whether by fixing Rs.1500/- as the monthly

rental for granting exemption from operation of the said Act most of the

buildings in the Union Territory would be covered and what would be the

effect thereof.

In this connection, our attention was drawn to a notice dated

30.11.2002 purported to be issued under Section 106 of the Transfer of

Property Act on behalf of one Sarabjit Singh and Kamaljit Singh to his

tenant Shri Brij Mohan Gaind wherein although monthly rent was Rs.3000/-;

damages were claimed @ Rs.90,000/-. Yet again, in terms of a letter of an

advocate dated 27.01.2003, issued on behalf of one S. Harcharan Singh Brar

to M/s. Sodhi Boot House, wherein monthly rent was Rs.2,100/-, but

damages were claimed @ Rs.2,00,000/- per month from the date of expiry

of the notice period upto the date of handing over the possession.

It was further shown that after the said notification was issued, the

price of land have sky-rocketed.

We, for the purpose of determination of the issue, need not go into the

correctness or otherwise of the said contentions but we may only notice that

they have not been specifically denied or disputed by Respondents. We,

however, hasten to add that we would not intend to lay down a law that even

for the purpose of enactment of an amending legislation the consequence

thereof would be a relevant criteria.

We, however, do not agree with the submissions of the learned

counsel appearing on behalf of Appellants that notification issued on the

basis of rental of a building premise is bad in law. We may notice some of

the decisions of this court upholding validity of notification issued under

similar provisions as under:

(a) The notification dated 12.8.1974 issued by the State of Madras

under Section 29 of the Tamil Nadu Buildings (Lease and Rent

Control) Act, 1960 exempting all buildings owned by Hindu,

Christian and Muslim religious public trusts and public

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charitable trusts without any restriction on the period of its

operation was upheld in S. Kandaswamy Chettiar (supra).

(b) Notification dated 21.11.1976 issued by the State of Madras

under Section 29 of the Tamil Nadu Buildings (Lease and Rent

Control) Act, 1960 exempting all buildings belonging to all co-

operative societies was upheld in S.M. Mahendru & Co. &

Ors. vs. State of Tamil Nadu & Anr. [(1985) 1 SCC 395].

Precedent dealing with the amending statutes :

The amendment made in Section 3(c) of the Delhi Rent Act, 1958 was

the first legislation where the National Housing Policy was implemented.

The effect of the said legislation has been noticed hereinbefore.

Rental not exceeding Rs.3500/- per month by the Government of

Delhi amending Delhi Rent Control Act was upheld in D.C. Bhatia & Ors.

vs. Union of India & Anr. [(1995) 1 SCC 104]. The Karnataka Rent

Control Act, 1961 exempting the buildings fetching a rental for more than

Rs.500/- in C.N. Rudramurthy vs. K. Barkathulla Khan & Ors. [(1998) 8

SCC 275] has also been upheld. Similarly amendment made by the State of

Jammu and Kashmir in the Jammu and Kashmir Rent Control Act,

exempting the tenants whose income exceeds Rs.40,000/- per annum was

held to be intra vires in Delhi Cloth & General Mills etc. vs. S. Paramjit

Singh & Anr. etc. [(1990) 4 SCC 723]. Indisputably the legislature of a

State has the requisite legislative power therefor.

The question, however, which falls for our consideration is as to

whether such exemption could be granted by an executive order issued under

Section 3 or only by way of an amendment.

We would, for the said purpose, notice D.C. Bhatia (supra) in some

details. This Court, therein was dealing with an amendment made by the

Legislature to the following effect :

"3. Act not to apply to certain premises \026 Nothing

in this Act shall apply;

(a) \005..

(b) \005..

(c) to any premises, whether residential or not,

whose monthly rent exceeds three thousand

and five hundred rupees; or\005"

The Court took notice of the materials brought on records of the case

including the National Housing Policy leading to insertion of sub-Section (c)

in Section 3 of the Delhi Rent Control Act. It also referred to the Statement

of Objects and Reasons of the said Act. It was noticed that :

"The original proposal in the bill was to exempt from

the purview of the Rent Act those premises whose

monthly rent exceeded Rs.1500. The legislature,

however, after considering various factors, drew the

dividing line at Rs.3500."

The Delhi Rent Control Act was amended in the year 1988, the

Statements of Objects and Reasons whereof was as under:

"For quite some time, there have been demands

from the 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

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demands/recommendations as also the fact 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."

One of the contentions raised therein was that Rs.3500/- per month

was such a meagre amount of rent for the town of Delhi; practically

everybody would be taken out of the protection of the Rent Control Act.

Repelling the said contention, this Court opined that the objects of the

amending Act were quite different from the objects of the Parent Act as the

object of the Amending Act was not merely to protect the weaker sections of

the society, i.e., the tenants but also the landlords. It was noticed that prior

to enactment of the said amendment, various representations were made by

the landlords' association. It was thought by the legislature that the Rent Act

had brought halt to the housing building activity for letting out. Keeping in

view the acute shortage of accommodation causing hardship to the rich and

the poor alike, the Act was held to have been enacted to strike a balance

between the interests of the landlords and those of the tenants and for giving

a boost to house building activity and pursuant thereto the legislature in its

wisdom decided to restrict the protection of the Rent Act not only to those

premises in respect whereof rent payable was upto Rs.3500/- per month but

also decided not to extend the statutory protection to the premises

constructed on or after the date of coming into operation of the Act for a

period of ten years. It was categorically held that as the Legislature could

repeal the Rent Act altogether, it could do so also step by step. The said

amendment was found to be one of the steps for repealing the Act opining :

"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

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 cannot be set aside, if there are facts on

the basis of which this statutory discrimination can be

justified."

As regards the nexus for the ceiling limit of Rs.3500/-, the Court

observed that the exemption, with the passage of time, may not have any

nexus with the objects sought to be achieved by the statute. But, it was for

the legislature to decide which particular section of people requires

protection at any given point of time. The persons who, as of then, were

paying less than Rs.42,000/- per year were considered to be belonging to

weaker section. The wisdom of the legislature was again emphasized in

paragraph 52 thereof holding:

"We are unable to uphold this contention for a number

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of reasons. Prior to the enactment of the Rent Control

Act by the various State Legislatures, the legal

relationship between the landlord and tenant was

governed by the provisions of the Transfer of Property

Act. Delhi Rent Control Act provided protection to the

tenants from drastic enhancement of rent by the landlord

as well as eviction, except on certain specific grounds.

The legislature by the Amendment Act No. 57 of 1988

has partially repealed the Delhi Rent Control Act. This

is a case of express repeal. By Amending Act the

legislature has withdrawn the protection hitherto

enjoyed by the tenants who were paying Rs. 3500 or

above as monthly rent. If the tenants were sought to be

evicted prior to the amendment of the Act, they could

have taken advantage of the provisions of the Act to

resist such eviction by the landlord. But this was

nothing more than a right to take advantage of the

enactment. The tenant enjoyed statutory protection as

long as the statute remained in force and was applicable

to him. If the statute ceases to be operative, the tenant

cannot claim to continue to have the old statutory

protection. It was observed by Tindal, C.J., in the case

of Kay v. Goodwin, 130 ER 1403 : (ER p.1405)

"The effect of repealing a statute is to

obliterate it as completely from the records

of the parliament as if it had never been

passed; and, it must be considered as a law

that never existed, except for the purpose

of those actions which were commenced,

prosecuted, and concluded whilst it was an

existing law.""

The Karnataka Rent Control Act, 1961 was amended by reason of

Section 31 of the Amending Act exempting buildings fetching a rental of

more than Rs.3500/- from the ambit thereof. The question as regards

validity of the said provision came up for consideration before this Court in

C.N. Rudramurthy vs. K. Barkathulla Khan & Ors. [(1998) 8 SCC 275],

wherein D.C. Bhatia (supra) was followed. We need not, therefore, deal

with the ratio in the said decision separately.

The legislature of Jammu and Kashmir amended Section 3(iii). The

classification of tenants on the basis of income made therein was upheld by

this Court in Delhi Cloth & General Mills etc. vs. S. Paramjit Singh &

Anr. etc. [(1990) 4 SCC 723] in the following terms :

"\005It is the tenant that the legislature intends to protect

and not the landlord or his building. The test adopted by

the legislature for this purpose is with reference to the

tenant's net income, whether accruing inside or outside

the State, as on the date of the landlord's application for

eviction as well as on the date of the decree for eviction.

The legislative object is, therefore, to protect tenants

who are economically weaker in comparison to those

affluent tenants falling outside the specified limit of

income, and at the same time to encourage construction

of new buildings which will result in better availability

of accommodation, employment opportunity and

economic prosperity. This is a reasonable classification

which does not suffer from the vice of being too vague

or broad. Classification based on income is well known

to law. Such classification has a reasonable relation to

the twin legislative objects mentioned above. We see

nothing unreasonable or irrational or unworkable or

vague or unfair or unjust in the classification adopted by

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the impugned provision."

Having noticed the notifications and the precedents operating in the

field, we may notice the distinguishing features of this case.

Statutory scheme :

It is trite that legal history can be taken into consideration for

construction of a statute. Chandigarh, admittedly, is a new town. It was

meant to be used as a union territory in terms of the provisions of the Punjab

Resettlement Act. It enjoys a unique feature which no other town in India

does, namely, capital of two States as also being an Union Territory in itself.

Although it is a capital of two States, the essential functions of a legislative

authority as also power of administrations are in the hands of the Central

Government in terms of Article 239 of the Constitution of India. It is the

Parliament alone which would legislate on its behalf. The Central

Government extended the beneficial legislation of rent control in the Union

Territory. It was declared an urban area only in November, 1972. In view of

the Full Bench Decision of the Punjab & Haryana High Court in Dr.

Harkishan Singh vs. Union of India & Ors., (AIR 1975 P&H 160 : 1975

PLR 163), the Parliament enacted the 1974 Act in terms whereof the

provisions of 1949 Act were extended to the Union Territory of Chandigarh.

The 1949 Act is a pre-constitutional legislation. The 1974 Act was enacted

immediately after partition of India. The State of Punjab during pre-partition

days was known as State of East Punjab. It consisted of areas both urban

and rural. The main purpose at the time of enactment of the said Act might

have been restricted to two areas, i.e., (1) rent of certain premises situated

within the limits of urban areas (2) eviction of tenants therefrom, whereas

the main enactment applied to the entire State of Punjab. The extension of

1949 Act, evidently would apply to the Union Territory of Chandigarh.

Sub-section (2) of Section 1 of the 1949 Act made a distinction between the

urban area and cantonment area. It was not to apply to the cantonment area

and presumably for that reason the preamble uses the word "certain

premises". The definition of building in the Act provides for a broad

meaning. It includes out houses, go-downs, furniture, except a room in a

hotel, hostel or boarding house. The types of premises to which the said Act

would apply, thus may be found out from the definition of 'building' itself.

Unlike similar legislations enacted by other State Governments, the

Act is not a temporary Act. It is indisputably in force for a period of more

than 57 years.

Legislative policy :

Legislative Policy of a State can be gathered from the Preamble, the

Statement of Objects and Reasons and the core provisions contained therein.

It is, however, not much in dispute that the Rent Act was a beneficent

legislation which sought to protect a category of the tenants occupying

rented buildings specified therein not only from enhancement of rent, but

also from unreasonable eviction. The Act furthermore provides for

protection of the tenants from unreasonable harassment at the hands of the

landlords.

The Transfer of Property Act governed the field relating to eviction of

all kinds of tenants. For eviction of a monthly tenant, 15 days' notice ending

with the tenancy month, as envisaged under Section, 106 thereof was

sufficient to bring an action for a landlord to evict his tenant. The tenant,

inter alia, could raise a defence of defect in the said notice in case eviction is

sought for or applicability of other provisions thereof as also non-compliance

of the other requirements contained therein.

The Transfer of Property Act does not contain any provision

empowering any court to regulate enhancement of rent. No provision

existed therein also for protection of tenants from harassment at the hands of

the landlords, as for example, disconnecting the electrical and water

connection from the tenanted premises. The Rent Control Act, on the other

hand, was enacted to protect the tenant, inter alia, in relation to the matters

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noticed hereinbefore.

We may briefly notice the core provisions of the 1949 Act. Section 3

of the Act empowers the Administrator to issue an exemption notification.

Sections 4, 5 and 6 deal with determination of fair rent. Section 10 prohibits

the landlord from disconnecting electrical energy, etc. Section13 enumerates

the grounds upon which the landlord seeks eviction of a tenant.

The legislative policy of the State was, therefore, required to be

deciphered from the said provisions.

Different Rent Control Acts enacted by different States use different

preambles. Some Acts provide for control of rents, eviction and rents,

letting houses, the lease of vacant premises to Government and some Acts

seek to control only enhancement of rent or fixation of rent, unreasonable

eviction of tenants. It is permissible to read the preamble of a statute to

ascertain the legislative policy.

We are not oblivious that in construing a statute, preamble may not

have a role to play unless the meaning thereof is obscure or if plain meaning

is to be given, the same would lead to an absurdity, but, (1) the preamble

being a part of the statute can be read along with other portions of the Act to

give clear meaning to the provisions and to decide whether they are clear or

ambiguous, (2) the preamble in itself is not an enacting provision as other

relevant enacting words have to be found elsewhere in the Act, and (3) the

utility of the preamble diminishes if the statutory provisions are themselves

capable of given a literal meaning. {See Union of India vs. Elphinstone

Spg. & Wvg. Co. Ltd. & Ors. [(2001) 4 SCC 139].}

Preamble of a statute, as stated in State of Rajasthan & Ors. v.

Basant Nahata (supra), however, provides for a key to understand it. It,

together with the Statement of Objects and Reasons which are called heart

and soul of the statute, may have to be considered in a given situation for the

purpose of giving effect thereto.

In Vasantlal Maganbhai Sanjanwala vs. State of Bombay & Ors.

[(1961) 1 SCR 341] a provision empowering Provincial Government to fix a

lower rent of the maximum rent payable by the tenants was upheld on the

ground that the legislation policy and principles may be found out from the

preamble and provisions of the Act. Subba Rao, J., while expressing his

dissention, opined :

"\005..When the decisions say that the legislature shall lay

down the legislative policy and its formulation as a rule

of conduct, they do not mean vague and general

declaration of policy, but a definite policy controlling

and regulating the powers conferred on the executive for

carrying into effect that policy."

Both the majority and minority, therefore emphasized on the

importance of the legislative policy which must not be vague and should be

definite and bona fide.

It is equally well settled that a policy underlying the statute should be

gathered from reading the statute, including its preamble as a whole. Once,

however, the words used in statute have a plain meaning, the courts should

not busy themselves to find out the supposed intention or the policy

underlying statute. {See Sardar Gurmej Singh vs. Sardar Partap Singh

Kairon, 1960 (1) SCR 909.} But we are herein concerned with somewhat a

different question, viz., whether the impugned notification is violative of the

legislative policy.

In Lachmi Narain & Ors. v. Union of India & Ors. [(1976) 2 SCC

953], this Court was considering the effect of a notification issued in terms

of Section 2 of the Union Territories (Laws) Act, 1950, where the words

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"not less than three months' notice" were substituted by the words "such

previous notice as it considers reasonable" were struck down stating that :

"The impugned notification, dated December 7,

1957, transgress the limits which circumscribe the scope

and exercise of the power conferred by Section 2 of

Laws Act, at least in two respects.

Firstly, the power has not been exercised

contemporaneously with the extension or for the

purposes of the extension of the Bengal Act to Delhi.

The power given by Section 2 of the Laws Act had

exhausted itself when the Bengal Act was extended,

with some alterations, to Delhi by notification, dated

April 28, 1951. The impugned notification has been

issued on December 7, 1957, more than 6= years after

the extension."

It was further held that:

"Secondly, the alteration sought to be introduced

by this notification (December 7, 1957) in Section 6(2),

goes beyond the scope of the "restrictions and

modifications" permissible under Section 2 of the Laws

Act; it purports to change the essential features of sub-

section (2) of Section 6, and the legislative policy

inherent therein."

This Court was also of the opinion that Section 6(2) of the Act

embodies a determination of a legislative policy and its formulation as an

absolute rule of conduct which could be diluted, changed or amended only

by the legislature in exercise of its essential legislative function. Necessarily

taking recourse to executive action was forbidden.

In State of Rajasthan & Ors. v. Basant Nahata (supra), the question

as to whether the public policy could be the subject matter of delegation of

essential legislative function, this Court opined:

"There cannot be any doubt whatsoever that the

court shall not invalidate a legislation on the ground of

delegation of essential legislative function or on the

ground of conferring unguided, uncontrolled and vague

powers upon the delegate without taking into account

the preamble of the Act as also other provisions of the

statute in the event they provide good means of finding

out the meaning of the offending statute."

It was further held :

"Hence, Section 22-A of the Act through a

subordinate legislation cannot control the transactions

which fall out of scope thereof.

We have noticed hereinbefore the effect of a

power of attorney under the Indian Contract Act or the

Power-of-Attorney Act. A subordinate legislation

which is not backed up by any statutory guideline under

the substantive law and opposed to the enforcement of a

legal right, in our opinion, thus, would not be valid."

Analysis :

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The decisions of this Court clearly point out the distinctive features

between the power of the Administrator in terms of a provision of the nature

of Section 3 of the Act and the power of the legislature to amend the law.

The executive government can exercise its power of exemption in the

following circumstances:

(1) Where such exemption had been granted only for a

limited period;

(2) in respect of new buildings;

(3) in respect of the government buildings, buildings

belonging to the local-self government and other public

sector undertakings; and

(4) areas belonging to the Cantonment Board which was

outside the purview of the applicability of the original act

having regard to the fact that such areas of the

cantonment are governed by separate Act, like

Cantonment Acts.

(5) Where the same would come within the purview of the

delegated legislation.

(6) Where the tenants or tenanted premises form a distinct

and separate class.

(7) Where having regard to the constitutional scheme that

any State within the meaning of Article 12 of the

Constitution of India would not treat its tenants in an

unfair and arbitrary manner despite the rent control laws

being not applicable in their case; as they would be

treated to be forming a separate class; and

(8) Where the exemption notification is granted for a limited

period or in respect of new buildings for a limited period.

In other words, the Administrator will have no jurisdiction to issue a

notification which would have a permanent impact. The Administrator

cannot change the basic features of the law or act contrary to the legislative

policy.

The legislature, on the other hand, can not only repeal the statute, it

can change the basic features of the law. The only limitation on the part of

the legislature is that ordinarily it cannot take away a vested right.

Validity of the impugned notification :

At the outset, we may notice that the learned counsel appearing on

behalf of Appellants did not question the constitutionality of Section 3 of the

Act. We are, therefore, concerned only with the validity of the impugned

notification dated 7.11.2002. For the aforementioned purpose we would

proceed on the basis that the rental fetched by a tenanted building or a part

thereof can give rise to reasonable classification. The principal question,

therefore, which would arise for consideration is as to whether the impugned

notification satisfies the tests laid down in P.J. Irani (supra).

One of the grounds for invalidating the notification would be if

irrelevant factors have been taken into consideration. Another test which can

be applied is as to whether the notification is otherwise malafide in the sense

that the same has been used for unauthorised purpose.

The Administrator is said to have taken into consideration the

National Housing Policy, which was circulated as far back in the year 1992.

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Such a balancing procedure indisputably was recommended to be done by

way of legislation and not by executive action. The National Housing

Policy recommended for step by step repeal of the Act and substituted the

same by a new permanent Act. By reason thereof the fact that most of the

States had enacted temporary Acts which had been extended from time to

time, was, thus, taken into consideration. Only because some exemption

notifications had been issued under the Punjab Act by itself may not be a

ground to follow the same blindly inasmuch as the Punjab Act applies to the

entire State. There may not be any town in the said State which may be as

important as Chandigarh and where the rental of the tenanted premises

would be as high as in the said town. We have seen hereinbefore how the

Administrator himself has described the status of Chandigarh. Despite the

same, he equated Chandigarh with other towns of the State of Punjab.

The Administrator in issuing the notification has missed the relevance

of the distinction between the National Housing Policy and the legislative

policy. The power of exemption could be exercised having regard to the

legislative intent and policy whereas the National Housing Policy could be

given effect to by the legislature in modifying, varying or altogether doing

away with the existing legislative policy and laying down a new policy

therefor. Change of legislative policy with the aid of the National Housing

Policy was not within the domain of the Administrator. It was the sole

prerogative of the legislature.

A statute can be amended, partially repealed or wholly repealed by the

legislature only. The philosophy underlying a statute or the legislative

policy, with the passage of time, may be altered but therefor only the

legislature has the requisite power and not the executive. The delegated

legislation must be exercised, it is trite, within the parameters of essential

legislative policy. The question must be considered from another angle.

Delegation of essential legislative function is impermissible. It is essential

for the legislature to declare its legislative policy which can be gathered from

the express words used in the statute or by necessary implication, having

regard to the attending circumstances. It is impermissible for the legislature

to abdicate its essential legislative functions. The legislature cannot delegate

its power to repeal the law or modify its essential features.

Section 3 of the Act, indisputably, is constitutionally valid. It,

however, provides for an enabling provision. The Central Government, by

reason of the said provision, has been empowered to direct that all or any of

the said provisions would not apply to any of the building or rented buildings

or any class of buildings or any rented lands.

Sections 4, 5 and 6 of the Act dealt with the determination of fair rent.

Submissions of Mr. Nariman and Mr. Venugopal, both appearing for the

landlords, however, are, inconsistent with each other. Whereas Mr. Nariman

submitted that Sections 4,5 and 6 for all practical purport and intent are not

applicable as regard to the town of Chandigarh; according to Mr.

Venugopal, Section 4(4)(ii)(c) would be applicable and thus enhancement of

rent even in respect of the buildings, which came into existence after 1965-

66, is permissible.

When the 1949 Act was passed, there was no 'building' in Chandigarh

within the meaning of the said Act. In terms of Section 4(3)(i) & (ii) of the

said Act, the increase in the basic rent was contemplated where the rate of

rental was Rs.25/- to Rs.50/-. It may not, thus, be correct to contend that

Sections 4, 5 and 6 of the Act did not provide for enhancement of rent at all.

Any rent which exceeded a sum of Rs.50/- would also come within the

purview of Section 5 of the Act but by reason thereof, it cannot be said that

the Act sought to provide for a cut-off mark as regard the quantum of rent

which could have been the subject matter of enhancement. However, it

cannot be denied that having regard to the fact that the question as regard

enhancement of rent was required to be considered by the Rent Controller

with reference to rent payable when the Act came into force, hardly any

relief could be granted in favour of the landlord. Appellants also in their

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writ petition stated:

"That at this stage, it is important to mention here that

Sections 4 and 5 of the Punjab Act of 1949 are not

applicable to Chandigarh, as no building existed in the

year 1939. The Parliament, while enacting the East

Punjab Urban Rent Restriction (Extension to Chandigarh)

Act, 1974 intentionally did not provide fixation of fair

rent or increase in the fair rent and gave more protection

to the tenants of Chandigarh than the tenants of State of

Punjab."

If the rental of Rs.50/- cannot be considered to be a cut-off mark, the

same by itself would not mean, as was contended by Mr. Venugopal, that

exemption granted in respect of a building the rent whereof exceeds

Rs.1500/- would meet the object of the Act as the philosophy underlying it

was to protect only such buildings where only tenants belonging to weaker

sections reside. Sections 4, 5 and 6 of the Act are not the only provisions

which provide for the protection of the tenants. What shall be the criteria to

determine the question as to who would fall within the purview thereof

depends upon a host of factors. Due application of mind was, thus,

necessary for determining the said question.

Section 13 of the Act enumerates the grounds upon which the landlord

may seek eviction of a tenant. Section 13-A is an exception to Section 13 in

the sense that the same provides for grounds for eviction of a tenant in

certain cases enumerated therein. Section 13-B enables the landlords named

therein to recover immediate possession of the residential building or

scheduled building and/or non-residential building to accrue to Non-resident

Indian. The legislature itself, therefore, provided for speedy relief to a

section of landlords. It is interesting to note that whereas eviction of a tenant

from a residential building was permissible, it was made impermissible so

far as non-residential premises are concerned, but, the same has been

declared ultra vires by this Court.

The provisions have been enacted for the purpose of protection of

tenants of certain provisions.

The word "certain premises", thus, for the purpose of ascertaining the

legislative policy must be construed having regard to the definition of

"building" only. The word "certain premises", having regard to its

applicability in the urban areas, would also mean that the premises situated

in the urban area and not in rural area.

The reason behind the enactment of the 1949 Act is well known and

has been noticed by this Court in a large number of cases. It was conceived

as a measure to overcome shortage of rental accommodation in the wake of

Second World War and the influx of refugees following partition. The

Union of India also accepts that the object of the State Act to provide for

control and regulation of the rental housing market, determination of fair

rent, protection of tenants against indiscriminate eviction at the hands of

landlords and the rights of the landlords for recovery of tenanted premises in

specific cases.

The reasons for which the impugned notification was issued was

stated to be that the social objective of the Rent Control Act had not been

realised and it had various other adverse effects including simulation of

investment in rental housing especially from the lower and middle income

groups. A model Rent Control legislation was circulated in the year 1992

wherein proposal was made to give exemption to residential non-residential

premises carrying more than specified rental of Rs.1500/- per month. The

Government of India had been advocating urban section reforms and had

introduced an urban reforms incentive scheme whereunder funds are to be

provided by it and to urban sector reforms such reform was to be carried out

for removing the rental laws.

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However, National Housing Policy itself suggests that the existing rent

control laws were to be repealed. The National Housing Policy, it was

proposed, should be achieved step by step so as to enable the States to enact

a permanent law.

What was, therefore, contemplated was amendment of the existing

legislation by the legislature so as to achieve partial repeal of the Act. The

National Housing Policy or the Central Government did not and could not

recommend that what can be done only by the legislature, can be achieved

through the route of notification issued by the Administration under section

3 of the Act.

Mr. Nariman contended that it is a virtual amendment by the

Administrator but an Administrator cannot make an amendment. Concept of

virtual amendment of a legislative act by the executive is unknown. He has

a limited jurisdiction and such jurisdiction must be exercised within the

parameters of law as laid down in P.J. Irani (supra).

In D.C. Bhatia (supra) it has clearly been pointed out that it is the

legislature's function alone to make amendment and such measures are

permissible so as to enable the legislature to achieve the goal as set down in

terms of the national policy. The Government of Delhi did so.

Even in Motor General (Supra) this Court has held that what can be

done by a temporary measure cannot be done for an indefinite period,

inasmuch as the exemption cannot be granted in perpetuity. This Court

clearly pointed out that an earlier notification which was applicable for a

limited period cannot be sustained after a lapse of 23 years. Kandasamy

(supra) is again an authority for the proposition that certain institutions, as

for example, charitable institution which let out its property can be granted

exemption having regard to the purport and object for which the same had

been constituted.

It is not disputed that a delegate must act within the four corners of the

Act, the guidelines wherefor must be provided for in the Act itself.

The classification as regards the premises occupied and possessed by

the State the Local Self Government or other public sectors, however, stand

on a different footing. It is now beyond any controversy that this Court

treated the houses stated to be belonging to the State or public sector

undertaking absolutely on a different footing on the pre-supposition that they

would not unreasonably enhance the rental of the premises and they would

conduct themselves in such a manner so as to make a tenant feel that they

would be subjected to unreasonable eviction.

In Baburao Shantaram More vs. Bombay Housing Board & Anr.

[(1954) SCR 572 : AIR 1954 SC 153], this Court has held:

"It is not to be expected that the Government or

local authority or the Board would be actuated by

any profit-making motive so as to unduly enhance

the rents or eject the tenants from their respective

properties as private landlords are or are likely to

be. Therefore, the tenants of the Government or

local authority or the Board are not in need of

such protection as the tenants of private landlords

are and this circumstance is a cogent basis for

differentiation. The two classes of tenants are not

by force of circumstances placed on an equal

footing and the tenants of the Government or local

authority or the Board cannot, therefore, complain

of any denial of equality before the law or of

equal protection of the law. "

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M/s. Dwarkadas Marfatia & Sons vs. Board of Trustees of the

Port of Bombay [(1989) 3 SCC 293] is another instance where the Court

placed faith on the public sector stating:

"The field of letting and eviction of tenants is

normally governed by the Rent Act. The Port

Trust is statutorily exempted from the operation

of the Rent Act on the basis of its

public/governmental character. The legislative

assumption or expectation as noted in the

observations of Chagla, C.J. in Rampratap

Jaidayal case cannot make such conduct a matter

of contract pure and simple. These corporations

must act in accordance with certain constitutional

conscience and whether they have so acted, must

be discernible from the conduct of such

corporations. In this connection, reference may be

made on the observations of this Court in Som

Prakash Rekhi v. Union of India reiterated in

M.C. Mehta v. Union of India wherein at p. 148

this Court observed: (SCC p. 480, para 55)

"It is dangerous to exonerate corporations

from the need to have constitutional con-

science; and so, that interpretation, language

permitting, which makes governmental

agencies, whatever their mien, amenable to

constitutional limitations must be adopted by

the court as against the alternative of

permitting them to flourish as an imperium in

imperio."

Therefore, Mr Chinai was right in

contending that every action/activity of the

Bombay Port Trust which constituted "State"

within Article 12 of the Constitution, in respect of

any right conferred or privilege granted by any

statute is subject to Article 14 and must be

reasonable and taken only upon lawful and

relevant grounds of public interest.'"

{See also Jamshed Hormusji Wadia vs. Board of Trustees, Port of

Mumbai & Anr. [(2004) 3 SCC 214]; and Municipal Corpn., Chandigarh

& Ors. vs. Shantikunj Investment (P) Ltd. & Ors. [(2006) 4 SCC 109].}

Even the criterion underlying the policy is required to be changed by

way of modification or variation in the standard of rent, object whereof

should have been achieved only by making suitable amendments in the Act

itself. The Administrator could not have tinkered with the provisions of the

Act.

What should have been the criterion for fixing the quantum of rent so

as to render the classification constitutional and valid in law although is not a

matter which would ordinarily fall for consideration of the court, but the

question as to whether by reason of fixation of such a rent which would

render the Act inapplicable to a large section of the tenants, in our

considered view, would come within the scope of judicial review.

We, however, cannot accept the submission that as Appellants

themselves in the writ petition contended that as in the year 1978 a building

standing on a land of 1500 square yards with 3 to 4 bed rooms, one drawing

and dining room, garage and servant quarter, was available on a monthly rent

of Rs.1000/-and, thus, on that premise a presumption can be raised that such

tenanted premises used to be occupied by the affluent families, those who

are paying less than Rs.1500/- continued to be protected and, thus, the same

would come within the purview of the legislative policy and the object and

purport of the Act. The criterion which was required to be considered was

not as to what rent a building could have fetched in 1978 but what would

have been a fair criterion as regard the quantum of rent when the notification

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was issued. For that purpose, no data has been collected nor has any study

been made. As to how the said criterion had been fixed is not known.

Except stating that the rent of Rs.1500/- to Rs.3500/- was made the criterion

in terms of the National Housing Policy, the Administrator did not assign

any other reason.

If the contention of Appellants is correct that in Chandigarh 99% of

the lands have already been leased out, the scope of applicability of the new

housing scheme might not be of much relevance. The Administrator while

issuing the impugned notification misdirected himself in law insofar as he

failed to take into consideration that he could not have exercised any

jurisdiction in terms thereof as the National Housing Policy, inter alia,

contains the guidelines for the State legislatures for enactment of law and the

same was not meant to be taken recourse to by the Executive Government of

the State. While exercising his jurisdiction under Section 3 of the Act, the

Administrator was required to apply his own mind to the relevant facts.

Application of mind on the part of the Administrator was also necessary

having regard to the rate of inflation and other factors including the prevalent

rental in the neighbouring areas of the States of Punjab and Haryana. He

further failed to take into consideration that in terms of National Housing

Policy, that quantum of rent was made flexible. Only a broad guideline had

been provided therefor. What was necessary to be applied was the principle

and not the minimum rent specified therein.

For the aforementioned purpose, it was necessary to collect relevant

data. Rental of Rs.1500/- could not have been applied mechanically. The

High Court has followed D.C. Bhatia (supra) but it has failed to notice that

in D.C. Bhatia (supra) itself whereas the proposal in the bill was to fix

Rs.1500/- as the outer limit, the members of the legislature upon deliberation

in the matter, had fixed the quantum of rent at Rs.3500/-. Furthermore, for

the aforementioned purpose, the lowest ceiling of Rs.1500/- might have been

treated to be fair in the year 1992 but the same would have lost much

significance and relevance in the year 2002 in view of the passage of time.

The rate of inflation and other relevant factors as well as the fact that the per

capita income in UT of Chandigarh is considered to be the highest in the

country, were necessary to be taken into consideration. This Court, in

Prabhakaran Nair & Ors. vs. State of Tamil Nadu & Ors. [(1987) 4 SCC

238], opined that a National Housing Policy should be formulated and the

observations made therein had been given effect to. But, this Court never

intended that a National Housing Policy would be applied in a manner not

contemplated under our constitutional scheme.

A new legislative policy indisputably was framed having regard to the

new economic policy of the Central Government as was formulated in the

year 1991. However, by reason thereof only it cannot be said that the social

justice doctrine, as adumbrated in the preamble of the Constitution, need not

be given effect to under any situation. Social justice legislations and other

legislations beneficent to the weaker sections of the country are still on the

statute book. The rent Acts would continue to control the terms and

conditions of tenancy. On some occasions, only the same can be interpreted

differently having regard to change in time. But, it was not for the executive

government to do so. They have not been repealed. Repealing of such acts

can be brought about by the competent legislature. What would be the

legislative policy in relation thereto was within the exclusive domain of the

Central Government. The Constitution of India, having regard to the

provisions of Articles 245 and 246 of the Constitution of India clearly

demarcate the fields of legislation and, thus, it would not be correct to

contend that only because that the Central Government has changed its

economic policy, the same must be reflected in all the legislative fields

occupied by the State legislature.

In D.C. Bhatia (supra), this Court clearly held that what can be done

by the legislature cannot be done by the delegatee. Yet again, in B.K.

Industries & Ors. v. Union of India & Ors. [(1993) Supp. 3 SCC 621], this

Court clearly opined that by reason of such notification the delegatee cannot

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take recourse of the virtual repeal of the Act. Having regard to the fact that

the rental of Rs.1500 per month for the town of Chandigarh was too low a

rent, the submissions of Appellants are of some significance that by reason

thereof, over 9/10th of the tenanted premises would go out of the purview of

the Rent Act.

In Rattan Arya & Ors. vs. State of Tamil Nadu & Anr. [AIR 1986

SC 1444], this Court categorically observed that fixing exemption limit at

Rs.400/- had become unrealistic with the passage of time particularly in view

of the hike in rents. In this case, the manner in which the rate of rent of the

tenanted premise or the value of the property has gone up as evident from the

data furnished by Appellants in their writ petition. The same was not denied

or disputed.

For the aforementioned purpose, our attention has been down to

certain documents to show the effect of the said notification, i.e., that

immediately thereafter exorbitant rent was claimed from the tenants by the

landlords.

We, therefore, in this case, have sufficient materials on record to hold

that Rs.1500/- could not have been fixed as the quantum of rent for the

purpose of extending the exemption provision under Section 3 of the Act to

the Administrator.

The legislative objective and policy indisputably must be considered

having regard to the preamble and other core provisions of the Act. Section

3 although is a part of the Act, but the same cannot be said to contain an in-

built policy so as to empower the Administrator to do all such things which

can be done by the legislature itself.

By taking recourse to the preamble, it cannot be said, as has been

submitted by Mr. Nariman, that the power to exclude the tenanted premises

can be exercised without taking into consideration the legislative policy and

the object of the Act. It may be true that by reason of Section 3 of the Act,

no arbitrary power as such has been conferred in view of the fact that the Act

applies only to certain classes of land and building but the same would not

mean that the Administrator is free to take any action in any manner he likes.

The action of the Administrator is indisputably subject to judicial review.

It is also true that the term 'building' having regard to its definition

would mean tenanted building and, thus, the building fetching a rent to a

prescribed extent can form the base for determining criterion for the purpose

of classification but the same would not mean that the Administrator would

be entitled to lay down a criterion which would be applicable only to a large

section of the tenants.

Moreover, the notification has not been issued for a limited period. It

will have, therefore, a permanent effect. Submission of Mr. Nariman that

having regard to the provisions of the General Clauses Act, the same can be

modified, amended at any time and withdrawn, cannot be accepted for more

than one reason. Firstly, Respondent proceeded on the basis that the said

notification has been issued with a view to give effect to the National policy,

i.e., amendments must be carried out until a new Rent Act is enacted.

Whether the Act would be enacted or not is a matter of surmises and

conjectures. It would be again a matter of legislative policy which was not

within the domain of the Administrator. Secondly, the Administrator in

following the National policy proceeded on the basis that the provisions of

the Act must ultimately be repealed. When steps are taken to repeal the Act

either wholly or in part, the intention becomes clear i.e. the same is not

meant to be given a temporary effect. When the repealed provisions are

sought to be brought back to the statute-book, it has to be done by way of

fresh legislation. In any event, the General Clauses Act shall not apply to an

executive action. Executive actions can be taken by a person who is

statutorily authorized therefor. He is required to apply his own mind. What

can be done in future by another authority cannot be a ground for upholding

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an executive act.

Conclusion :

For the reasons, aforementioned, the impugned judgments cannot be

sustained which are set aside accordingly. The appeals are allowed.

However, in the facts and circumstances of the case, there shall be no order

as to costs.