In Delhi, rents stuck in time due to archaic law
Landlords claim that the Delhi Rent Control Act, 1958, has allowed tenants to become rich doing business from such properties while the owners have been unable to make economic gains. | Photo Credit: Prashant Nakwe
Thanks to the Delhi Rent Control Act, 1958, many tenants in the city continue to occupy properties in prime commercial and residential spots for ‘absurdly low’ amounts per month. With the High Court reserving its verdict last week in an eight-year-old plea against the Act, Soibam Rocky Singh talks to the stakeholders
Retired Indian Railways employee Kulwant Singh is searching for a residential accommodation for his second son, who wishes to get married. Wearing a worn-out black turban, matching his visibly aged shirt, the 63-year-old zips around the city on his sole mode of personal transport — a scooter.
His family lives hand to mouth in a two-room flat in Karol Bagh. One of the rooms is occupied by his elder son, who is already married, and the remaining space is occupied by Mr. Singh, his wife and younger son.
Owner of prime property
First impressions aside, Mr. Singh is the owner of 160-square-yard prime property in a commercial hub on Karol Bagh’s Arya Samaj Road.
He said the current market rate of rent for the property, rented out to three different tenants by his late grandfather in 1928, is nearly ₹4 lakh per month.
However, Mr. Singh said the actual rent he receives every month is stuck around what it used to be five decades ago. “I get only ₹380, ₹100 and ₹50 individually from each tenant,” he said.
With his personal and family needs growing, Mr. Singh has a bona fide reason to seek possession of his property from his tenants. However, it is easier said than done. Mr. Singh has been embroiled in a protracted eviction case against his tenants for the past two years.
“It is not easy,” said Mr. Singh on the costs involved in fighting the legal battle.
“Both my sons work in the private sector... a decent rent from my properties would have helped us live a much better life,” he said.
He wants a verdict in his case soon but the date of hearing comes once every four to six months.
Delhi Rent Control Act
Mr. Singh is one among several individuals engaged in protracted litigation with tenants protected under the archaic Delhi Rent Control (DRC) Act, 1958.
In January 2010, three women moved the High Court challenging the constitutional validity of the Act. Lead petitioner in the case advocate Shobha Aggarwal contended that the Act had outlived its purpose.
“On one hand, the Act encourages economic activity of tenants, and on the other it puts unreasonable restrictions on occupation and business of landlords to make economic gains out of their own properties,” she said.
The advocate has also sought a direction to the government to compensate landlords for economic losses, and emotional and psychological trauma suffered by them because of the Act.
Since the first hearing on her plea in February 2010, some other petitions, either challenging the Act as a whole or portions of it, have been filed in the High Court.
All cases are being heard together by the High Court.
After 51 hearings spanning eight years, the court reserved its verdict on the petitions earlier this month.
A bit of history
In the aftermath of the Partition, people uprooted from current parts of Pakistan were forced to leave their homes and abandon business establishments.
The government of the time wanted to solve the acute problem of housing created due to sudden influx of refugees in Delhi.
It was felt that if landlords are readily allowed to evict tenants, those coming from west Pakistan would never be able to settle.
Faced with the problem of resettling refugees, the government imposed restrictions on the right to evict tenants from residential and non-residential premises.
The Delhi and Ajmer-Merwara Rent Control Act, 1947, and later DRC Act, 1958, were enacted to protect tenants against eviction.
Even now, almost the whole of Delhi is covered under the DRC Act, including the limits of the municipal corporations, the New Delhi Municipal Committee (as then called) and the Delhi Cantonment Board.
In 1988, an amendment was made to the DRC Act that allowed premises whose rent exceeded ₹3,500 per month to be excluded from the Act.
Three Acts govern rent
At present, there are three Acts governing rent leases in Delhi — Transfer of Property Act, 1882; Public Premises (Eviction of Unauthorized Occupants) Act, 1971; and the DRC Act, 1958.
Ms. Aggarwal said these Acts create three distinct classes of landlords and tenants in Delhi.
The first comprises landlords and tenants in properties fetching more than ₹3,500 per month. They are governed by the Transfer of Property Act. In these cases, the rent and tenure of tenancy can be freely negotiated.
The second consists of landlords of private properties fetching a rent of less than ₹3,500 per month. Governed by the DRC Act, these landlords can neither determine the rent nor evict tenants except under certain limited conditions or grounds.
The third class is of properties under the Public Premises (Eviction of Unauthorised Occupants) Act, 1971. A separate simplified procedure is followed for eviction of tenants or unauthorised occupants of such premises.
Rent of ₹10 and ₹50
Ms. Aggarwal has painstakingly compiled 105 judgments at lower courts-level showing the rent paid by commercial establishments in Connaught Place and nearby areas.
The rate of monthly rent is available in 86 cases. In 83.7% of these properties, the rent is less than ₹1,000 per month. In 52.3% properties, it was below ₹350. In some cases, the rent was as low as ₹10 to ₹50 per month.
Ironically, CBRE Research's ‘Global Prime Office Occupancy Costs survey’ shows that New Delhi’s Central Business District (CBD) of Connaught Place is the seventh most expensive prime office market in the world.
Ms. Aggarwal said the rent paid by tenants under the DRC Act ranges between ₹10 and ₹3,500 per month.
“Even when not using the property for years, tenants do not vacate it unless landlords agree to shell out huge sums of money. This has given rise to a predatory and grabbing mentality among tenants,” she said.
The DRC Act compels a landlord to refrain in perpetuity from evicting a tenant unless one of the limited grounds becomes available to him/ her or the rent reaches the threshold of ₹3,500 per month.
Ms. Aggarwal contended that since the DRC Act contains no mechanism to bring the historical rent to the present market rent, the tenant will forever pay less than ₹3,500 and continue to be protected.
The time period required for a property to reach the threshold limit of ₹3,500 for monthly rent ranging from ₹10 to ₹1,000 with 10% increase every three years starting in 1988 ranges between 184.38 years and 39.42 years, she claimed.
The advocate said most rent-controlled properties in Delhi fall under this category. This long a period is beyond an individual’s imagination, let alone plan for it.
She pointed out that the increase in rent is not automatic from the date of 1988 amendment and only prospective increases are allowed. Every three years, a notice for increase of rent has to be served and followed by a case in the court of the rent controller if the increased rent is not paid leading to constant litigation between landlord and tenant spanning decades, she said.
While the ceiling on rent has been maintained, Ms. Aggarwal said it has not stopped the civic bodies from increasing their revenue by introducing the unit area system of property tax in Delhi thereby placing extra burden on the property owners whose properties fall under the DRC Act.
Court’s previous opinion
In January 2002, the Delhi High Court had ruled that certain sections of the DRC Act dealing with determination and fixation of standard rent have not taken into account the huge difference between cost of living in the past and the present time.
Time required to reach the threshold of ₹3,500 with 10% increase every three years:
| Rent paid as on 1988 | Years until ₹3,500 is reached |
| ₹10 | 184.38 |
| ₹50 | 133.71 |
| ₹100 | 111.09 |
| ₹200 | 90.09 |
| ₹300 | 77.31 |
| ₹400 | 68.25 |
| ₹500 | 61.23 |
| ₹600 | 55.5 |
| ₹700 | 50.64 |
| ₹800 | 46.44 |
| ₹900 | 42.72 |
| ₹1,000 | 39.42 |
(Source: Petitioner’s submission before the high court)
The verdict, now famously known by the name of petitioner Raghunandan Saran Ashok Saran, had said that the “provisions are archaic”.
The High Court had then said there ought to be a mechanism to increase the agreed rents keeping in view the price index.
“Landlords are being treated arbitrarily, unreasonably and unfairly, affecting their livelihood and in turn right to life and avocation,” the High Court had said.
Sixteen years since the verdict, no mechanism has been put in place whereby landlords can increase rent keeping in view the price index, Ms. Aggarwal said.
The Supreme Court had noted in the April 2008 Satyawati Sharma case that almost five decades had passed since the DRC Act was enacted.
“During this long span of time, much water has flown down the Ganges. Those who came from west Pakistan as refugees and even their next generations have settled down in different parts of the country,” the top court had remarked.
Unbalanced rights
Ms. Aggarwal said even public sector companies, financial institutions, nationalised banks and Central government offices continue to take advantage of the DRC Act.
She pointed out that though tenants have become rich doing business from these properties, the landlords have been unable to make economic gains out of their own property.
Safety concerns
A major concern raised by Ms. Aggarwal and other property owners is that maintenance of such properties is impossible since the rent received is a pittance. This results in proliferation of dangerous buildings.
Old high-rises with rent-controlled tenants do not have fire safety measures due to the costs involved.
Ms. Aggarwal said that “lifetime tenancy with succession rights ensures that tenants do not leave the premises voluntarily even if the building becomes unsafe to occupy”.
Centre’s response
Responding to Ms. Aggarwal’s petition, the Union Urban Development Ministry had said in November 2014 that Section 6A of the DRC Act provides for an increase in rent by 10% every three years.
The Ministry had argued that the Act cannot be challenged “just because there is reduction in the amount of profit that the landlord may make”.
On the ₹3,500 threshold, the Ministry had argued that the classification was held as valid by the Supreme Court in a 1995 verdict.
An association of traders had moved an impleadment application before the High Court in the case contending that the DRC Act was brought in to protect the interest of tenants against overbearing and exploitative landlords.
The association had argued that issues raised in the petition had already been dealt with by the Supreme Court in its 1995 D.C. Bhatia verdict.
High pendency
Ms Aggarwal said adjudication under rent control spans decades and generations as it is in the tenant’s interest to prolong the life of the litigation.
“Approximately 10.15% (as of 2014) of all civil litigation at the District Courts in Delhi is under DRC Act,” she said, adding that the figures were much worse in the Central District, which comprises many old markets, at 27.9% of all civil cases.
This figure does not include other petitions arising out of DRC Act, including stay on subletting, increase of rent and others cases pending before various Civil Judges or District Judges.
