2006 (11) TMI 646 - SC - Indian Laws

Supreme Court Invalidates Chandigarh Notification Exempting High-Rent Buildings from Tenant Protection Law.

Vasu Dev Singh & Ors. Versus Union of India & Ors.

The SC invalidated the notification dated 07.11.2002 issued by the Administrator of Chandigarh, which exempted buildings with a monthly rent exceeding Rs. ... Validity of the notification issued, directing that the provisions thereof would not apply to the buildings; monthly rent - extending the exemption provision u/s 3 of the Act to the Administrator - whether exemption could be granted by an executive order issued u/s 3 or only by way of an amendment - Power conferred u/s 87 issued a notification - fixing the quantum of rent - HELD THAT:- 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 A statute can be amended, partially repealed or wholly repealed by the legislature only.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. 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 ₹ 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 ₹ 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 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 ₹ 1500/- to ₹ 3500/- was made the criterion in terms of the National Housing Policy, the Administrator did not assign any other reason. 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 u/s 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. Thus, it was necessary to collect relevant data. Rental of ₹ 1500/- could not have been applied mechanically. The High Court has followed D.C. Bhatia [1994 (10) TMI 301 - SUPREME COURT] but it has failed to notice that in D.C. Bhatia (supra) itself whereas the proposal in the bill was to fix ₹ 1500/- as the outer limit, the members of the legislature upon deliberation in the matter, had fixed the quantum of rent at ₹ 3500/-. Furthermore, for the aforementioned purpose, the lowest ceiling of ₹ 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 (9) TMI 421 - SUPREME COURT], 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. We, therefore, in this case, have sufficient materials on record to hold that ₹ 1500/- could not have been fixed as the quantum of rent for the purpose of extending the exemption provision u/s 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. 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 an executive act. Hence, 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. Issues Involved:1. Validity of the notification dated 07.11.2002 issued by the Administrator of Chandigarh.2. Legislative policy and its adherence.3. Scope of delegated legislation versus conditional legislation.4. Judicial review of delegated legislation.5. Classification for exclusion of buildings based on rental value.6. Impact of National Housing Policy on the notification.7. Role of the executive versus the legislature in amending laws.Issue-wise Detailed Analysis:1. Validity of the Notification Dated 07.11.2002:The appellants, tenants in Chandigarh, challenged the notification exempting buildings with monthly rent exceeding Rs. 1,500 from the East Punjab Urban Rent Restriction Act, 1949. They contended that the notification was ultra vires the legislative policy and the Act. The Supreme Court held that the Administrator could not issue a notification with a permanent impact that effectively repealed the Act's provisions. The notification was deemed invalid as it did not conform to the legislative policy and exceeded the scope of delegated legislation.2. Legislative Policy and Its Adherence:The legislative policy of the Rent Act aimed to protect tenants from unfair rent increases and eviction. The preamble, core provisions, and the historical context of the Act emphasized tenant protection. The Supreme Court noted that the Administrator's notification contradicted this policy by removing protections for a significant class of tenants, thus altering the Act's essential features, which only the legislature could do.3. Scope of Delegated Legislation Versus Conditional Legislation:The Court distinguished between conditional legislation, where the executive determines the application of a complete law, and delegated legislation, where the executive is given rule-making power within the framework of the Act. The notification in question was deemed to be delegated legislation, not conditional, and thus had to adhere strictly to the legislative policy and framework of the Act.4. Judicial Review of Delegated Legislation:The Court emphasized that delegated legislation is subject to judicial review, particularly when it involves granting exemptions from a statute. The review ensures that the executive's actions are within the scope of their delegated authority and adhere to the legislative policy. The notification was struck down as it failed to meet these criteria.5. Classification for Exclusion of Buildings Based on Rental Value:The classification of buildings based on rental value for exemption must have a reasonable basis and align with the legislative policy. The Court found that the Rs. 1,500 threshold was arbitrary and not based on any relevant data or study. It resulted in a significant number of tenants losing protection, which was contrary to the Act's intent.6. Impact of National Housing Policy on the Notification:The National Housing Policy recommended amendments to rent control laws to balance landlord and tenant interests. However, the Court held that such changes should be made through legislative amendments, not executive notifications. The Administrator's reliance on the National Housing Policy to justify the notification was misplaced, as it did not align with the legislative policy of the Rent Act.7. Role of the Executive Versus the Legislature in Amending Laws:The Court reiterated that only the legislature has the power to amend or repeal laws. The executive cannot change the fundamental features of a statute through delegated legislation. The Administrator's notification was seen as an overreach of executive power, effectively amending the Act without legislative approval.Conclusion:The Supreme Court set aside the impugned judgments and allowed the appeals, declaring the notification dated 07.11.2002 invalid. The Court emphasized the importance of adhering to legislative policy and the limits of delegated legislation, ensuring that significant changes to laws are made through proper legislative processes.