The Punjab Rent Act 1995 : Treading On Thin Ice

Amit Jain, Advocate
Punjab & Haryana High Court, Chandigarh
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Date : 02/07/2020 - Location : House No. 714 Sector 8-B, Chandigarh
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The Punjab Rent Act 1995 : Treading On Thin Ice

Rent Legislations have been the subject matter of a lot of criticism and a continuous discussion has been going on over the years debating the advantages and disadvantages of rent laws in India. While the proponents of rent control laws claim that the rent control legislation protects the tenants from the unscrupulous landlords and prevent landlords from charging exorbitant rents and evicting tenants without any sufficient cause. On the other hand, the opponents state that the rent laws impose unnecessary stringent conditions on the landlords and deny the landlords to get appropriate rental value or push them towards endless litigation in order to get the premises vacated.

As per Census 2011, there were a total of 27.37 million rented households in India, of which 79.4% or 21.72 million are urban rented households. Due to the rapid industrial and economic development taking place in the country, migration to urban areas has increased many folds. Every year, millions move to towns and cities, or dense linear settlements along national and state highways. However today there is a steep decline in the number of people living in rented accommodation. According to the Economic Survey 2017-18, 12% of the total housing stock in urban India remains vacant. There are deep systemic problems within the rental market and addressing them is of utmost importance for solving India's enormous housing challenge.

Archaic Rent Laws- Due to the out-dated rental laws in India and the nature of the provisions contained therein, it discourages the landlords from renting out their properties as the rents are abysmally low and the long litigation period makes eviction difficult. Resultantly in major cities lot of properties have become unviable to be maintained and are being allowed to crumble rather than rent out the same.

The Rent Control legislations, post-independence were initially introduced with the objective to counteract the inequality of bargaining power between landlords and tenants. The regulations outlined in some of the State-enacted Rent Control Acts prevented landlords from charging market-based increase in rents and tenants kept paying rent at rates that were frozen years ago. The landlord-tenant relationship in India has always been a very complicated subject and despite tenancy and rent-related laws in India, things have not improved and have rather deteriorated. The tenancy laws in India are considered as "pro-tenant" but due to intervention of our judiciary through various landmark judgments, a sort of balance has been created upholding the rights of landlords in cases related to the eviction of tenants.

In the budget speech in 2019, Finance Minister Nirmala Sitharaman, proposed the Model Tenancy Act to replace the ageing rental laws of the country, stating that "they do not address the relationship between the lessor and the lessee realistically and fairly".

Under the Indian Constitution, the enactment and implementation of rent control laws is the responsibility of the individual States. In the State of Punjab in particular, the British enacted The Punjab Rent Restriction Act 1941. The said Act was replaced by The Punjab Urban Rent Restriction Act 1947. After the partition of the country in 1947, the East Punjab Rent Restrictions Act 1949 was enacted. This Act remained in force for almost 64 years and saw several transformations and modifications due to legislative amendments and judicial interpretations until it gave way to The Punjab Rent Act 1995 in the year 2013.

The 1949 Act faced severe criticism due to several reasons which included flawed provisions, onerous and limited grounds of ejectment, ineffective provisions, the lengthy legal process involved, unrealistic rent fixation etc.

Salient features of the Punjab Rent Act 1995- To overcome the shortcomings of the earlier Act, the revised Act was originally conceived in 1995, however, the Government had been sitting on implementation of the Act despite President assent since 1998 and the Act was never notified. The Act of 1995 finally came into effect on 30.11.2013 with the following Statement of objects & reasons:

"The National Housing Policy recognises the importance of expanding the availability of rental housing in urban areas. It is recognised that the rent control legislation in different States has resulted in stagnating rents, low returns on investment in rental housing, difficulty for landlords to resume possession in genu ine cases, and deteriorating housing stock. In order to solve the above problems and ensure a balance of interests of landlords and tenants, the Government of India, Ministry of Urban Development, have formulated the Model Rent Control Legislation and advised the States to amend their Rent Control Acts or enact new laws on the lines of the above-referred Model Rent Control Legislation. Hence this Bill."

(i) The Act provides for the regulation of rents, repairs and maintenance and eviction relating to premises and matters connected therewith in the State of Punjab. The Act applies only to the tenancies which have been created after the commencement of the new Act (except in case of NRI landlord). Further as per section 4, all new tenancies after the commencement of the Act are required to be through a registered agreement. Further, under section 3(2), contractual non-residential tenancies will be governed by the terms of the contract during the subsistence of the contract.

(ii) The right of inheritance of tenancy of residential premises is governed by section 5 which lays down that inheritance is now limited to 10 years from the death of the tenant and is restricted to the heirs who are dependent upon and residing with the tenant, who have no other alternative accommodation. In the case of non-residential tenancies, property is required to be vacated within one year of death of the tenant or dissolution of the tenant firm as the case may be.

(iii) The outdated and redundant concept of fair rent under the old Act had been discarded and as per section 6 the agreed rent shall be increased by five per cent of the last rent for two years and third year increase shall be based upon the increase in the Consumer Price index over the corresponding three years.

(iv) The Act for the first time lays down the duties and obligations of the landlord and the tenant as stated in section 17 and 18

(v) The scope of ejectment of the tenant has been widened with the introduction of new grounds of eviction under sections 20 and 26 which provide for the grounds of ejectment as follows:

(a) Arrears of rent

(b) Change of user

(c) Misuse

(d) Ceasing to occupy the premises

(e) Premises having become unfit and unsafe (with a right of election to re-enter on reconstruction)

(f) Premises required for development works or repairs or additions (with a right of election to re-enter on completion of works)

(g) Availability of alternate accommodation with tenant or family member

(h) Substantial damage or alteration subject to repairs by the tenant

(i) The tenant has ceased to be an employee of the landlord

(j) Conviction of tenant for nuisance or immoral or illegal activity

(k) Denial of the title of landlord, when such denial is not bona fide

(l) Failing to vacate on the agreed date under an agreement

(m) Breach of the condition imposed by the Government

(n) Personal necessity of the landlord or any member of his family if the landlord or such person has no other reasonable suitable accommodation, after 3 years of purchase or transfer.

(o) Subletting without the previous consent in writing of the landlord. The Act also provides for fine and imprisonment in case of subletting.

(vi) Section 21 to section 24 enumerates the special category of landlords entitled to immediate ejectment of premises let out by landlord, spouse or dependent son or daughter as under-

(a) Landlord whose allotment has been cancelled by Government agencies in case of residential premises

(b) A retiring member of armed forces or dependent of a martyr

(c) Central and State Government employees

(d) Widow

(e) handicapped persons,

(f) old persons ,

(g) freedom fighters, his widow or dependent son or daughter

(h) non-resident Indians

(vii) Act also introduces fixed term tenancy for a period of less than 5 years with the prior permission of rent controller under section 30 with the remedy of ejectment on the expiry of the period of tenancy.

(viii) Partial ejectment has been permitted pursuant to the consent of the landlord under section 20(3)

(ix) Under section 32 special provisions have been incorporated for recovery of possession in respect of corporate bodies or a public institution as landlord.

(x) Act provides for summary proceedings for ejectment along with the time frame to be followed at all stages of the proceedings.

Lack of Foresight - Already the Act has seen two massive amendments vide the Punjab Rent (Amendment) Act, 2013 (Punjab Act No. 33 of 2013) and the Punjab Rent (Amendment) Act, 2014 (Punjab Act No. 23 of 2014) whereby about 1/3rd of the provisions of the Act were repealed. Initially, the Act provided that the Rent Authority/tribunal will have the power to determine the dispute under the new Act. However, after a PIL titled as Bar council of Punjab and Haryana v. State of Punjab filed in the High Court, the operation of provisions providing such procedure was stayed by the Court. Thereafter the Government came up with various amendments and the old existing mechanism of adjudication by Rent Controllers /Appellate Authority comprised of judicial officers was retained. That besides the advantage of having the adjudication by judicial officers, the effectiveness of maintaining the same mechanism which was the bane of the old Act, would determine the future course of the Act of 1995.

Further, despite the notification of the 1995 Act, there is confusion about the applicability of the provisions of the 1995 Act to the existing proceedings. Section 75 provides that all cases in respect of the premises, other than owned by a non-resident Indian, let out prior to the commencement of this Act shall be governed and disposed of in accordance with the provisions of the old Act so repealed. The High Court in Krishan Kumar v. Kamla Devi, 2016(1) R.C.R. (Rent) 525 held that NRI landlords seeking ejectment under the special category will have to file fresh petitions under the new Act or amend the existing petitions to bring them in consonance with the new Act. A similar view was expressed in another decision of the High court in Randhir Singh v. Ranjodh Singh Mudhar, 2018(1) R.C.R. (Rent) 189. However in Adess Singh v. Manpreet Singh, 2020 (1) PLR 158 the court has made contrary observations. Still further in M/s Puran Singh v. Komal Sharma 2019(2) R.C.R. (Rent) 380 the court held that ordinary eviction petitions (other than NRI landlord) which have been pending prior to the commencement of the Act of 1995 will be governed and decided under the old Act. This anomaly due to the language of section 75 has created two categories in respect of pending petitions and needs to be rectified as it is likely to cause enormous confusion and wastage of court hours.

The procedure under the new Act still remains cumbersome. All orders, even interim order have been made appealable. The tenant has been provided multiple remedies which will delay the eviction process. E.g. Section 38(7)(e) provide that tenant will be entitled to file a review petition within ten days of the rejection of the application for leave to defend. The observations of the court in Krishan Kumar v. Kamla Devi, 2016(1) R.C.R. (Rent) 525 give an impression that that final order of ejectment is to be passed after the expiry of 10 day period of filing of review and decision thereof. On the other hand in Civil Revision No.236 of 2019 Inderpreet Kaur and another v. Manjit Kaur Shahi through her GPA-Kuldeep Singh, decided on 28.5.2020, though this argument was raised by the tenant, the revision was dismissed by the court without going into the merits of the argument as an appeal was pending before the Appellate Authority. This leaves us with the question as to whether the Rent Controller is obligated to put the proceedings in abeyance till the expiry of 10 day period before passing the final order or it is just a limitation period provided for availing the remedy of review. This issue is bound to arise in every case and needs to be deliberated and settled as early as possible.

Section 2(l) defined SFC as two different premises. This will again make the ejectment difficult and increase the cost of litigation as two petitions will be required to be filed for eviction from complete SCF.

Still further as per section 24(3) dealing with NRI landlords the term used is "returns to India for permanent residence". This could be interpreted to mean that the permanent return of NRI is a condition precedent before he can file an ejectment petition. This is again likely to give rise to an intense debate in as much as in the absence of similar expression in the old Act, the courts have held that NRI is not required to permanently return to India before seeking ejectment under the special provision.

Yet again no provision has been made for imposing market rent or mesne profits during the operation of an interim order in appeal after ejectment. Provisions of CPC are applicable to the Rent authorities under the Act for limited purposes as laid down under section 37 of the Act. This difficulty was faced by the courts under the old Act however the same was redressed by judicial precedents. It seems a similar course would be required to be adopted under the new Act.

The blanket restriction of 3 years on the landlord, from the date of acquisition of the property by transfer, for seeking eviction in case of personal necessity is highly unreasonable. The legislature ought to have provided for an exemption in suitable cases. This restriction will cause unnecessary hardship to landlords in genuine and deserving cases.

Surprisingly the statute lacks any clear provision for seeking eviction from vacant land except when required for construction as the definition of term "premises" only refers to a building or a part of the building and not to vacant land.

No provision has been incorporated regarding recognising and regulating rental management agencies that can professionally manage and rent out properties on behalf of the owners. This is a new concept which is likely to crop up in the future.

The Way Forward- That Punjab Rent Act 1995 is new legislation which has made tremendous changes in the rent regulations in the State of Punjab, however, it is still at a nascent stage. Courts will have to ensure that they are not trapped in the endless gamut of rules of CPC as was the situation in the proceedings under the old Act. There is negligible case law to support the intended implication of the various provisions of the new Act at the moment which makes the task of the courts all the more difficult ,as provisions and the expressions contained in the Act will be put to scrutiny through innovative legal arguments. Although subsequent amendments have further tweaked the Act for the better, it will be years before the legislation is fully developed and all disputes regarding interpretation of the statute are decisively settled but nevertheless, this is a step in the right direction though treading on thin ice.

(The Author is a practicing advocate in the High Court of Punjab and Haryana at Chandigarh and the views and opinions expressed are personal only)

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