Tenancy – Determination of Annual ratable – Property exempt from Rent Control Legislation – Value – Mumbai Municipal Corporation Act, 1888, section 154(1) and Maharashtra Rent Control Act, 1999 section 3.

On a difference of opinion in a Division Bench, in an appeal arising out of the decision of a Single Judge, the following question of law was sent for reference to a third judge:

In view of the repeal of the Bombay Rent Act and enactment of the Maharashtra Rent Control Act, is the Bombay Municipal Corporation justified in taking into consideration the actual amount of rent received or receivable by the landlord in relation to the units which are let out, but where the lease is exempted from the provisions of the Rent Act for determination of annual letting value with effect from 1st April 2000?

The issue which falls for determination relates to the consequences, if any, that would ensue in computing the ratable value of land or building where the premises in a building are exempt from the provisions of the Rent Control legislation. According to the Municipal Corporation, when the premises are exempt from the operation of the Rent Control legislation, the contractual bargain between a landlord and a tenant is not circumscribed by the provision for the fixation of standard rent in the Rent Act. Moreover, once the premises are exempt from the Rent Act, it is not unlawful for a landlord to receive rent in excess of the standard rent. On the other hand, according to the property owners, the true test to be applied is whether the Rent Control legislation is in operation in the area in which the premises are situated and if it is, it would make no difference that the premises are exempt from the operation of the Rent Control legislation. Hence, according to the property owners, even if the premises are exempt from the Rent Act, the annual value for the purposes of municipal legislation cannot exceed the standard rent under the Rent Control legislation.

The Hon’ble Court observed that where the premises are exempt from the operation of the Maharashtra Rent Control Act, 1999, by the provisions of section 3, the Assessing Authority in determining the annual rent at which the premises might reasonably be expected to let from year to year u/s. 154(1) is not constrained by the outer limit of the standard rent determinable with reference to the provisions of the Rent Act and secondly, where the premises are exempt from the provisions of the Maharashtra Rent Control Act, 1999, it is not unlawful for the landlord to claim or receive an amount in excess of the standard rent, since the provisions of section 10 would not be attracted. In such a case, the actual rent received by the landlord is in the absence of special circumstances a relevant consideration which may be borne in mind by the Assessing Authority while determining the rateable value for the purposes of municipal taxation u/s. 154(1) of the MMC Act, 1888. The Assessing Authority must have regard to all relevant facts and circumstances while applying the standard of reasonableness u/s. 154(1), including the prevalent rate of rents of lands and buildings in the vicinity of the property being assessed, the advantages and disadvantages relating to the premises, such as, the situation, the nature of the property, the obligations and liabilities attached thereto and other features, if any, which enhance or decrease their value.