State lease rent revision must be fair and non-arbitrary; fixed lease terms cannot be altered mid-term

State lease rent under the enabling statute may be revised, but the power must be exercised fairly, reasonably, and without arbitrariness even where rules have not yet been framed. Uniform rent reassessment for similarly situated properties was treated as non-discriminatory under Article 14, and interest for a period covered by stay orders could be levied, subject to reduction if excessive. A fixed lease term could not be overridden by enhanced rent during the subsisting initial term unless the lease deed itself authorised such revision; contractual renewal at Government-determined rent could operate only after the stipulated period.

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Issues: (i) whether the Chandigarh Administration could enhance lease rent and impose revised lease conditions in the absence of rules framed under the governing statute; (ii) whether the enhancement of rent was vitiated by arbitrariness or discrimination under Article 14 of the Constitution of India, and whether interest could be levied for the period during which stay orders operated; (iii) whether rent could be enhanced during the subsistence of a fixed lease term in the case of a lease expressly providing renewal on rent as determined by the Government.

Issue (i): whether the Chandigarh Administration could enhance lease rent and impose revised lease conditions in the absence of rules framed under the governing statute

Analysis: Section 3 of the Capital of Punjab (Development & Regulation) Act, 1952 authorises the Central Government to transfer land or buildings in Chandigarh on such terms and conditions as it thinks fit, while Section 22 empowers it to make rules regulating the terms and conditions of transfer, including rents and other dues. The absence of framed rules did not render the lease or the enhancement of rent unlawful or void, but the exercise of power had to remain within the bounds of fairness and reasonableness.

Conclusion: The power to enhance rent existed, but its exercise remained subject to the requirement of non-arbitrariness and fairness.

Issue (ii): whether the enhancement of rent was vitiated by arbitrariness or discrimination under Article 14 of the Constitution of India, and whether interest could be levied for the period during which stay orders operated

Analysis: The rent revision was supported by material showing reassessment on a uniform basis for similarly situated properties, and mere inaction in some other cases did not establish discrimination. The State, while dealing with its property and granting leases, cannot act like a private landlord at its sweet will and must conform to rational and non-discriminatory standards. On interest, a litigant who obtains stay of a monetary liability does so at its own risk, and the party who has had the benefit of the stay cannot avoid compensating the other side for the period of restraint; however, the rate fixed by the High Court was found to be excessive.

Conclusion: The enhancement was upheld as non-arbitrary and non-discriminatory, but the interest rate was reduced from 18% to 15% per annum for the stay period.

Issue (iii): whether rent could be enhanced during the subsistence of a fixed lease term in the case of a lease expressly providing renewal on rent as determined by the Government

Analysis: In the case of the lease that was still within its initial fixed term, the lease deed itself preserved a contractual right of renewal on rent as determined by the Government after the stipulated period. The Administration was not justified in enhancing rent during the initial three-year term, but the contractual clause permitted Government-determined rent upon renewal thereafter.

Conclusion: The enhancement during the first three years was impermissible, and the revised rent became operative only from 9 April 1993 in that case.

Final Conclusion: The appeals were substantially rejected on the main challenge, but the High Court's directions were modified by reducing the interest rate and by protecting the contractual rent position for the fixed initial term in the separate lease case; future rent enhancement was directed to await framing of rules under the statute.

Ratio Decidendi: Where the State leases out its property, it may impose and revise lease terms under the enabling statute, but in the absence of rules the power must be exercised fairly, reasonably, and without arbitrariness; a fixed contractual lease term cannot be disturbed by enhancement within that term unless the lease itself authorises it.

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