1. This Rule is against an order of the Second Additional District Judge at Howrah in Miscellaneous Appeal No. 262 of 1966. The order was made on the 18th September, 1967.
2. On the 30th March, 1950 the West Bengal Premises Rent Control (Temporary Provisions) Act 1950 came into force. Section 9 (1) (f) of the Act reads thus:--
'In any of the following cases, the Controller shall on application by any landlord or tenant, fix the standard rent as set forth hereunder:--
Where any premises have been wholly or substantially constructed after the 31st day of December, 1949, by fixing the standard rent payable for one year at a rate not less than four per centum and not more than six per centum of the reasonable costs of construction added to the reasonable price of the land included in the premises as on the date of commencement of such construction taking into account the prevailing rate of rent in the locality for similar accommodation with similar advantages and amenities and the comparative advantages or disadvantages of accommodation in the premises:
Provided that where the premises whose standard rent is to be fixed form a part of the construction the standard rent shall be fixed at a rate which is fairly proportionate to the total standard rent of the entire construction.'
3. On November 30, 1950 the above provisions were amended by the Amendment Act 62 of 1950. The new Section 9 (1) (f) stood as follows:--
'In any of the following cases, the Controller shall on application by any landlord or tenant, fix me standard rent as set forth hereunder:--
Where any premises have been wholly or are substantially constructed after the 31st day of December, 1949, by fixing the standard rent payable for one year at a rate equal to six per centum of the actual cost of construction as determined by the Controller added to the market price as on the 31st day of December, 1916, of the land included in the premises or to the market price of the said land as on the date of the completion of the construction whichever is less:
Provided that where the premiseswhose standard rent is to be fixed form a part of the construction the standard rent shall be fixed at a rate which is fairly proportionate to the total standard rent of the entire construction.'
4. On the 9th June, 1954 the tenants (Opposite Parties Nos. 1 and 2 before us) of a shop room at premises No. 1 Satya Narayan Temple Road, Salkia, Howrah, instituted Rent Control Case No. 09 of 1954 in the Court of the Rent Controller of Howrah for fixation of standard rent payable by them under Section 9 (1) (f) of the 1950 Act. On the date of this application these two tenants were paying rent at the rate of Rs. 60/- per month for the shop room.
5. The Rent Controller of Howrah on the 18th February, 1963 fixed the standard rent at Rs. 29/- per month. The landlords (Petitioners Nos. 1 to 3 beforeus) preferred an appeal to the Additional District Judge. This was Miscellaneous Appeal No. 50 of 1963.
6. The Additional District Judge, Howrah, on the 27th July, 1963 determined the costs of construction at Rs. 19,031/-. But he disagreed with the Controller's assessment of the value of the land. He sent the case back to the Controller on remand.
7. The Rent Controller by his order No. 113 dated the 12th October, 1966 valued the land at Rs. 4,200/-. The total value, therefore, came to Rupees 23,231/- (Rs. 19,031 for construction plus Rs. 4,200/- for the land). The rent of the entire premises was fixed at Rs. 116-15 per month. And the rent of the shop room was fixed at Rs. 40/- per month. The landlords again preferred an appeal. This was Miscellaneous Appeal No. 261 of 1966.
8. The Second Additional District Judge of Howrah disposed of the last-mentioned appeal on the 18th September, 1967. He affirmed the order of the Kent Controller with a modification that the rate of rent, that is Rs. 40/- per month would be effective from the 1st of Baishakh 1361 B. S. instead of the 1st May, 1964.
9. The present Rule was obtained on the 18th December, 1967.
10. Mr. R. K. Banerjee, learned counsel for the petitioners contends before us that the amended provisions of Section 9 (1) (f) are ultra vires the Constitution. Learned counsel submits that rent is monetary compensation which the tenant pays to the landlord for his occupation. Rent is also one of the indices of the value of the property. An artificial fixation of rent, therefore, affects the valuation of the land and the structures thereon. Such artificial fixation is irrational. From these points of view the rent that the tenant pays must be just and reasonable. Mr. Banerjee says that fixation of percentage by the legislature he is not challenging, because, the legislature has the right to enact the percentage of total value of the property which should be payable as rent. But the fixation of the value of land on hypothetical basis dating it back to the 31st of December, 1946 is destructive of the principle of monetary compensation and ascertainment of proper value of land and structure. Mr. Banerjee further submits that all the rent restriction Ordinances and Acts up to 1956 were of temporary duration. It is, therefore, improper for the legislature to fix rents on such artificial considerations with respect to past or future dates. Mr. Banerjee has also referred us to Section 8 of the West Bengal Premises Tenancy Act, 1956 which is a permanent Act. Section 8 (1) (d) of the Act contains provisions similar to those inSection 9 (1) (f) of the previous Act and in these permanent provisions instead of market price as on the 31st December, 1946, the market price on the date 'of commencement of construction' has been introduced. In other words, the legislature has tried to revert to the original provisions of Section 9 (1) (f) of the 1950 Act
11. Mr. Banerjee has also argued that although the 1950 Act was a temporary Act, standard rent fixed under that Act was practically unalterable in view of the provisions of Section 9 of the 1956 Act. This section lays down that rent payable for any premises can be increased only when there has been an increase in the tenant's share of the municipal rates and taxes or when any construction has been made at the instance of the tenant. The position, therefore, is that when rents are determined under the amended provisions of Section 9 (1) (f) of the 1950 Act, the landlord is for all practical purposes irreparably prejudiced.
12. Mr. Banerjee points out that the legislature in the 1956 Act, by reverting more or less to the original Section 9 (1) (f) of the 1950 Act shows that it has realised that rents fixed under the amended provisions of Section 9 (1) (f) were not fair.
13. For all the reasons aforesaid, counsel for the petitioners has urged that the amended provisions of Section 9 (1) (f) of the 1950 Act offend against Article 19(1)(f) of the Constitution, as they seek to impose unreasonable restrictions on the right to acquire or hold property. Mr. Banerjee has contended further that these amended provisions violate Article 14 of the Constitution as well. By these provisions a discrimination has been made between owners of land who had made constructions before the 31st December, 1949 and those who have made constructions after the 31st December, 1949. The same class of land has been treated differently.
14. Mr. Banerjee has relied upon two decisions of the Supreme Court in support of his proposition that it is not permissible to affect retrospectively the valuation of the property. These are the decisions in State, of West Bengal v. Mrs. Bela Banerjee, AIR 1951 SC 170 and Jayvantsinghji Ranmalsinghji v. State of Gujarat, : AIR1962SC821 In Bela Banerjee's case the Supreme Court was considering the provisions of Section 8 of the West Bengal Land Development and Planning Act, 1948. This was a permanent Act and Section 8 prescribed that lands might be acquired under it at the market value on the 31st December, 1946. The Supreme Court has said that fixation of this ceiling of compensation without reference to the value of the laud at the time of the acquisition is arbitrary and cannot be regarded as due compliance in letter and spirit with the requirement of Article 31(2). We have to point out that apart from the fact that this was a case under Article 31(2), the Supreme Court itself has said further that fixing of an anterior date for the ascertainment of value may not, in certain circumstances, be violation of the constitutional requirement as, for instance, when the proposed scheme of acquisition becomes known before it is launched and prices rise sharply in anticipation of the benefits to be derived under it; but the fixing of an anterior date, which might have no relation to the value of the land when it is acquired, may be, many years later, cannot but be regarded as arbitrary. The Supreme Court has expressed the view that any principle for determining compensation which denies to the owner any increment in value cannot result in the ascertainment of the true equivalent of the land appropriated. The result, therefore, is that it all depends on the circumstances in which an anterior date of valuation is fixed by the legislature and there may be cases in which fixation with reference to an anterior date may not be violative of any of the provisions of the Constitution.
15. In Jayvantsinghji's case, : AIR1962SC821 cited above the Supreme Court had to construe, inter alia, the provisions of Sections 3, 4 and 6 of the Bombay Land Tenure Abolition Laws (Amendment) Act, 1958. In paragraph 14 of the Judgment the Supreme Court has observed that the right of the petitioners to the purchase price under Section 32-H of the Tenancy Act, 1948 from those of their tenants who were non-permanent on April 1, 1957 was a right of property in respect of which the petitioner has a guarantee under Article 19(1)(f). The provisions in Sections 3, 4 and 6 of the impugned Act of 1958, according to the Supreme Court, in so far as they laid down that in certain circumstances a tenant would be deemed to be a permanent tenant from the date of the Taluqdari Abolition Act, 1949, adversely affected the right of the petitioner with retrospective effect. This is again a case in which certain provisions were considered to be unconstitutional on the peculiar circumstances that arose and cannot be treated as a guiding authority in all cases. In our case the amended provisions of Section 9 (1) (f) of the 1950 Act were considered by a Special Bench of this Court in Iswari Prosad Goenka v. N. R. Sen, : AIR1952Cal273 Harries, C. J. who presided over this Bench observed at pp. 723 to 724 as follows:--
'It was urged that owing to the increase in the cost of building materials and the cost of maintenance, the rents permitted by these Rent Control Acts arewholly unreasonable, and therefore the Court would be bound to hold that the Rent Control Act of 1950 as amended, is in its entirety ultra vires the Constitution.
There can be no doubt that the cost of building materials has greatly increased and that the Rent Control Act of 1950 has very drastically curtailed the rights of the landlord to demand what rent he pleases from a tenant. It may be that the margin of profit allowed to the landlord by the Rent Act of 1950 is small, but that would not of necessity, make the Act ultra vires us bring an unreasonable restriction on the landlord's rights. What has to be considered is whether these restrictions on the landlord's rights are justified, having regard to the circumstances which would inevitably arise if landlords were free to charge what rent they wished. It appears to me that in the interests of law and order and good Government, restrictions on the landlord's rights were absolutely necessary, for otherwise thousands of tenants would have been ejected and persons would have been compelled to pay far more than they could afford for most inferior accommodation. In considering whether the restrictions imposed on the landlords arc reasonable regard must be had to the position of the tenants. Would it be in the interest of good Government and in the public interest generally for thousands of people to be rendered homeless and for thousands of others to be compelled to pay exorbitant rents and to be literally at the mercy of their landlords? It appears to me that in the circumstances existing in this country and particularly in this State, the control of the rents during the War and particularly after partition, was essential and had any Government failed to take action in this matter serious consequences might well have arisen which might have shaken the very foundation of this State and indeed of the whole of India. In my view it cannot possibly be said that in the circumstances existing when these Acts were passed, the restrictions imposed by the Acts generally were unreasonable more than were necessary in the interests of the general public.'
10. The above observations of Harries, C. J., constitute an effective answer to Mr. Banerjee's arguments based on Article 19(1)(f) of the Constitution. But we may go deeper into this matter. We have looked into the statement of objects and reasons which was laid before the legislature in support of the amended provisions of Section 9 (1) (f) of the 1950 Act. The relevant portion of this statement runs thus:--
'It is also proposed to amend Section 9 (1) (f) of the Act assuring a return of Six per cent on capital investment with a View to increasing construction of newhouses for letting purposes, the need for which has become more imperative than ever on account of large scale influx of refugees from East Bengal.'
17. The learned Advocate-General has also placed before us the speech which was delivered on the floor of legislature by the Minister concerned. In this speech the Minister says:--
'....Two questions have emerged since the Act was passed, which have necessitated further amendment of this Act of 1950. In the first place .... it is seen that in Calcutta we are not going to have very many new houses and representations have been made that unless better terms, than those that have been provided for in the Act of 1950 are offered, owners of lands will not feel encouraged to build new houses. It is therefore just to give encouragement to the owners of land to build new houses which this province needs so much at the present moment when there is such an influx of refugees and other people to Calcutta and the urban areas. Government have thought it fit and proper to assure the owners of land that if they build new houses they can expect better return. That is the reason for the proposed amendment of Section 9 of the Act.....'.
18. The learned Advocate-General has also placed before us extracts from notes and orders of the land and Land Revenue Department's file relevant for our purposes. In these extracts we find the Following observations made by the officers who were dealing with the file:--
'In this connection it may be noted that the question of amending Clause (f) of Sub-section (1) of Section 9 of the Act has also been taken up for consideration as desired by Hon'ble Chief Minister with a view to creating conditions and facilities for construction of more new houses......'
19. From the above statements it appears that at the relevant time owing to large influx of refugees from East Bengal and rush of population into the City of Calcutta and its neighbouring areas it was felt that more houses should be constructed in this city and in the suburbs, but the authorities found that it was necessary to provide for incentives to give encouragements to land-holders to build new houses. That is why they amended the provisions of Section 9 (1) (f) in order that the owners of land might have better terms to induce them to undertake new constructions. It is in this context that we have to analyse the old provisions of Section 9 (1) (f) and compare them with the new provisions. We set out below a comparative chart consisting of the old and the new provisions:--
1.At a rate not less than four percentum and more than six percentum.
1.Fixed rate of six per cent with no discretion to the Controller.
2.Percentum of reasonable costs of construction.
2.Percentum of the actual costs of construction.
3.Add to reasonable costs of construction reasonable price of the land included in the premises as on the date of the commencementof such construction taking into account the prevailing rate of rent in the locality for similar accommodation with similar advantages and amenities and the comparativeadvantages or disadvantages of accommodation in the premises.
3.Add to the actual costs of construction the market price of the land as on the 3Ist day of December, 1940 or onthe date of completion of the construction whichever is less.
20. Mr. Banerjee for the petitioner concedes that so far as costs of construction are concerned, the amended provisions are improvements on the original provisions. But he urges that the same argument does not apply to the price of land. On the contrary, with respect to the price of land, in the amended provisions, the landlord has been adversely affected.
21. We are unable to accept this contention of Mr. Banerjee. Firstly the legislature thought that by the amended provisions it was providing inducements to landlords for building new houses. Secondly, we have to consider the cumulative effect of the old provisions and that of the new provisions. It seems to us that the old provisions, cumulatively speaking, were less advantageous to the landlords. In the old provisions there were three uncertain factors, namely, (1) the percentage of standard rent could vary from four to six per cent, (2) it was for the Controller to determine the reasonable costs of construction and (3) it was also for the Controller to determine the reasonable price of land having regard to the Ideality in which it was situate. All these factors were uncertain and the legislature by the amended provisions tried, as far as possible, to make them certain. In this view of the matter we are unable to say that the amended provisions impose unreasonable restrictions on landlords and as such they violate Article 19(1)(f) of the Constitution. That the legislature thought it necessary to change these provisions again in the 1956 Act docs not seem to us to be relevant to the issue under consideration. Firstly the 1956 Act is a permanent Act whereas the 1950 Act was to remain in operation temporarily. Secondly, when it came to be enacted as a permanent legislation, the authorities might have thought that the market value as on the 31st December, 1946 was not proper. Thirdly, it may be that the purpose for which Section 9 (1) (f) was amended had failed. But these are not the tests for determining the validity or the vires of the Act having regard to the immediate object sought to be achieved.
22. We now proceed to discusswhether the amended provisions violate Article 14 of the Constitution. The Supreme Court has repeatedly laid down that while Article 14 forbids class legislation, it does not forbid reasonable classification for the purpose of legislation. In order, however, to pass the test of reasonable classification, two conditions must be fulfilled, namely, (1) that the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group and (2) that that differentia must have a rational relation to the object sought to be achieved by the statute in question. What is necessary is that there must be a nexus between the basis of classification and the object of the Act under consideration (vide Ram Krishna Dalrnia v. S. R. Tendolkar, : 1SCR279
23. In the instant case owing to large influx of population necessitating new constructions, the legislature has made a classification. It has placed constructions after the 31st of December, 1949 in one group and constructions before that date in another group. But there is clearly a nexus between the basis of classification and the object sought to be achieved. We have already said, whether or not the legislature has succeeded in achieving this object is a different matter altogether.
24. Incidentally, we may refer to a judgment of the Bombay High Court and one of the Allahabad High Court which have some relevance to the points urged before us in the present case. In A. S. Ruben v. Narayan Moreshwar, : AIR1953Bom174 , Explanation (a) to Section 13(1)(g) of the Bombay Bents, Hotel and Lodging House Rates Control Act, 1947 was challenged. Section 13(1)(g) entitled a landlord to recover possession from his tenant if he required the premises reasonably and bona fide for occupation by himself or for any person for whose benefit the premises were held. Sub-clause (2) of Section 13 gave a further protection to the tenant. It said that even though a landlord might establish his requirements, the tenant would still be protected if the Courtcame to the conclusion, on a consideration of a balance of convenience, that the ejectment would result in greater hardship to the tenant than to the landlord. Explanation (a) to Section 13(1)(g) was as follows:--
'Explanation (a): A person shall not be deemed to be a landlord unless he has acquired his interest in the premises at a date prior to the beginning of the tenancy, or the 1st day of January, 1947, whichever is later or, if the interest had devolved on him by inheritance or succession, his predecessor-in-title had acquired the interest at a dale prior to the beginning of the tenancy, or the first day of January, 1947, whichever is later.'
25. The Bombay High Court has Said that this explanation is not hit by Article 14 of the Constitution. Article 14, states the Bombay High Court, does not prohibit the legislature from classifying in certain cases. But if it does classify, and if it does lay down that a particular class is exempt from a particular law, that classification must be on a reasonable basis. The Bombay High Court proceeds to add that the Government had found that in recent years there had been many purchases of houses -- properties and as the owners might apply for ejectment of their tenants, it was necessary to enact Explanation (a). And the legislature was fully justified in extending protection to the tenants by framing this particular explanation. As the discrimination was justified and there was a reasonable basis for the discrimination, the selection of the date itself, says the Bombay High Court, must be left to the good sense and intelligence of the legislature, and in this particular case there was 'prima facie' good sense and intelligence in selecting January 1, 1947. The Bombay High Court has also held that as the explanation does not offend against Article 14 of the Constitution, no question arises with regard to Article 19(1)(f); the explanation is in the interest of the general public and is not ultra vires,
26. In our case a similar situation has arisen. No doubt the legislature has chosen an anterior date for purposes of valuation of the land. But it seems that the anxiety of the legislature was to ensure more constructions. That is why a return of six per cent of the actual cost of constructions was provided for in the amended Section 9 (1) (f) of the West Bengal Premises Rent Control Act, 1950 and so far as the price of land is concerned, there is no evidence on record to show that a lesser value than what was prescribed in the original provisions was intended by the legislature. In any event, the cumulative effect of what the landlord would get taking into consideration his actual costs of construction and the value of the land on which the construction stands appears to be better than what the original provisionshad contemplated. For these reasons we cannot say that the new provisions of Section 9 (1) (f) offend against Article 14 of the Constitution, and since these were provisions meant to serve the general interest of the public, they do not also offend against Article 19(1)(f) of the Constitution.
27. The case of the Allahabad High Court is : AIR1952All703 (Raman Das v. State of Uttar Pradesh). This is a Full Bench judgment of the Allahabad High Court. Certain provisions of the Uttar Pradesh Temporary Control of Rent and Eviction Act, 1947 came to he considered in this judgment. For our purposes it would be relevant to set out paragraph 10 of the judgment at page 706. The paragraph runs thus:--
'The last point urged is that there is discrimination between the owners of houses built after July 1, 1946, and the owners of houses constructed before that elate. The history behind this Act explains the reason for this difference. The Act was passed early in 1947 at a time when there was acute shortage of accommodation. It was thought that an Act of this kind controlling the activities of landlords might discourage persons from building houses and as it was necessary in the public interest that as many houses should be built as possible an incentive was given to those who had lands and were willing to spend money that any houses built by them would be at their complete disposal and no restrictions would be imposed on the same. The Act as originally drafted, therefore did not apply to houses built after July 1, 1946. In 1948, however, it was found that this privilege was being abused and fancy rents were being asked for such premises and by an amendment a proviso was added giving the owners a right of occupation of premises built by them after July 1, 1946, but otherwise allowing the District Magistrate to have control over allotment of these premises, We do not think that there was no just basis, therefore, for this discrimination between houses built before July 1, 1916, and those built after July 1, 1946. We do not think, therefore, that the proviso in any way affects the validity of the Act.'
28. In the instant case the reasons for amending Section 9 (1) (f) have been fully discussed in the earlier part of this judgment. The legislature was seeking to give incentive to construction of new buildings and the discrimination that it has made between constructions before the 31st December, 1949 and after the 31st December, 1949 appears to be justified by the situation, namely, shortage of accommodation due to influx of population which the legislature was seeking to meet.
29. In the premises aforesaid we are of opinion that the amended provisionsof Section 9 (1) (f) of the West Bengal Premises Rent Control Act, 1950 do not violate either Article 19(1)(f) or Article 14 of the Constitution.
30. The Rule is, therefore, discharged. There will be no order as to costs.
31. Let the records be sent back as early as possible.
32. I agree.