Fair Rent Control Act

In Raval & Co v. K.G. Ramachandran, the Supreme Court had the occasion to examine and find out the true object behind the enactment of Rent Laws. After recording the legislative history of the rent legislations in India Mr. Alagiriswami J. observed that “the Madras Legislature had applied its mind to the problem of housing and control of rent and provided a scheme of its own. It did not proceed on the basis that the legislation regarding rent control was only for the benefit of tenants. It wanted the Act to be fair both to the landlords as well as tenants. Apparently, it realized that the pegging of the rents at the 1940 rates had discouraged building construction activity which is likely to affect everybody and therefore in order to encourage new construction exempted the newly constructed building from the provisions of the Act. It did not proceed on the basis that all tenants belong to weaker section of the community and needed protection and that all landlords belonged to the better off classes. . . . It realized apparently how dangerous was the feeling that only ‘fools build houses for wise men to live in’ Mr. Bhagwati J. in dissenting minority judgment provided useful guidelines for interpreting the Rent Control provisions. “it is true that with the doctrine of laissez fair and the assumption by the State of a more dynamic and activist role, the principle or sanctity of contract which is one of the pillars of a free market economy, has in a number of cases been eroded by legislation. But if we examine such legislation it will be apparent that this has happened invariably in aid of weaker party to the contract. . . . . It is to counteract the injustice resulting from inequality in bargaining power and to bring about social or distributive justice, that social legislation interfere with sanctity of contract to restore the balance in the scales which are otherwise weighted in favour of the stronger party which has larger bargaining power. Ordinarily we do not find and indeed it would be a strange and rather incomprehensible phenomenon, that legislation intervenes to disturb the sanctity of contract for the benefit of a stronger party who does not need the protective hand of the legislature. This consideration we must constantly keep before us while constructing the relevant provisions of the Rent Acts.”