Frozen fair rent under rent control laws can become unconstitutional when outdated ceilings burden landlords unfairly.

Sections 5, 6 and 8 of the Kerala Buildings (Lease and Rent Control) Act, 1965 were examined for constitutionality because they fixed fair rent by reference to outdated factors, provided no mechanism for periodic revision, and prohibited rent above the fair-rent ceiling. The Court held that a rent-control scheme which freezes rent for long periods despite changed economic conditions, rising costs and reduced money value becomes arbitrary and unreasonable, and can no longer qualify as a fair restriction on the landlord's rights under Articles 14 and 19(1)(g). It also held that the scheme infringed Article 21. The provisions were therefore held unconstitutional.

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Issues: (i) Whether Sections 5, 6 and 8 of the Kerala Buildings (Lease and Rent Control) Act, 1965, governing fixation and restriction of fair rent, are unconstitutional as being arbitrary and unreasonable under Articles 14 and 19(1)(g) of the Constitution of India and as infringing Article 21 of the Constitution of India; (ii) whether the legislative scheme, by keeping fair rent static without provision for periodic revision and by prohibiting receipt of rent in excess of fair rent, imposes an unreasonable restriction on the landlord's right to carry on business.

Issue (i): Whether Sections 5, 6 and 8 of the Kerala Buildings (Lease and Rent Control) Act, 1965, governing fixation and restriction of fair rent, are unconstitutional as being arbitrary and unreasonable under Articles 14 and 19(1)(g) of the Constitution of India and as infringing Article 21 of the Constitution of India.

Analysis: The provisions were examined in the light of changed economic conditions, the rise in cost of living, the fall in money value, and the absence of any mechanism for updating fair rent to reflect present-day realities. The fixation of fair rent with reference to historical property tax and the prohibition on enhancement were found to operate harshly where the rent had remained frozen for decades. The Court held that, though rent control legislation is beneficial, it must remain just, fair and reasonable; a measure that produces gross disparity and deprives the landlord of a realistic return cannot be sustained as reasonable classification or as a fair restriction.

Conclusion: The impugned provisions were held to be unconstitutional as violative of Articles 14, 19(1)(g) and 21 of the Constitution of India.

Issue (ii): Whether the combined operation of Sections 5, 6 and 8 of the Kerala Buildings (Lease and Rent Control) Act, 1965 imposes an unreasonable restriction on the landlord's right to carry on business by renting buildings.

Analysis: The activity of constructing buildings and letting them out for profit was treated as falling within the protection of the right to carry on business. The scheme was found to impose a static rent structure, prevent receipt of market-linked rent even from a willing tenant, and burden the landlord with maintenance obligations without corresponding adjustment in rent. This was held to destroy the balance required between individual freedom and social control and to go beyond permissible regulatory control.

Conclusion: The combined operation of Sections 5, 6 and 8 was held to be an unreasonable restriction on the landlord's right under Article 19(1)(g) of the Constitution of India.

Final Conclusion: The rent-control provisions relating to fair rent could not be sustained in the form in which they operated, and the challenge to their constitutional validity succeeded.

Ratio Decidendi: A rent-control scheme that freezes fair rent by reference to outdated conditions, without provision for periodic revision, and bars recovery of rent beyond that outdated ceiling, becomes unreasonable and unconstitutional when it operates arbitrarily against the landlord's fundamental rights.

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