Constitutional validity of frozen rent control provisions falters when changed economic conditions make the regime arbitrary under Article 14.

The Supreme Court of India examined whether the Bombay Rent Act's standard-rent regime, tied to historic rent levels and restrictive increases, had become arbitrary under Article 14 because inflation and changed economic conditions had eroded its rational basis. It noted that a statutory restriction valid when enacted can become unconstitutional if prolonged continuance makes it unreasonable, discriminatory, and disconnected from present realities. Relying on the scheme of the law, the burden on landlords, and official material showing frozen rents no longer yielded a reasonable return, the Court found the continued operation of the old rent-fixation mechanism could not be justified as a reasonable social measure and required fresh legislative revision.

---

---

Issues: Whether the provisions of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 fixing standard rent with reference to 1 September 1940 or the first letting and restricting increases in rent had, by reason of inflation and changed economic conditions, become arbitrary and violative of Article 14 of the Constitution of India.

Analysis: The Court held that a statutory provision valid when enacted may, with the passage of time and a substantial change in circumstances, become unreasonable, arbitrary, and discriminatory. It examined the scheme of the rent control law, the freezing of rent at historic levels, the limited and inadequate scope for upward revision, the burden of taxes and maintenance on landlords, and the material placed on record showing official recognition that frozen rents no longer yielded a reasonable return. The Court also relied on the legislative and administrative background, including committee reports and governmental resolutions, to conclude that the economic basis for the impugned standard-rent regime had worn out. Applying Article 14, the Court found that continued insistence on the old rent-fixation mechanism could no longer be justified as a reasonable social measure.

Conclusion: The impugned standard-rent provisions were held to have become arbitrary and unconstitutional in their continued operation, and the High Court's view upholding them was found to be incorrect.

Final Conclusion: The appeals were disposed of without immediate striking down of the provisions, but the Court declared that any further extension of the existing regime without suitable legislative revision would be invalid. The decision effectively placed the standard-rent scheme under constitutional disapproval and called for fresh legislation consistent with Article 14.

Ratio Decidendi: A statutory restriction that was reasonable when enacted can become unconstitutional if, by reason of prolonged continuance in changed economic and social conditions, it loses its rational basis and operates arbitrarily or discriminatorily.

---