Transfer Of Tenancy Does Not Amount To Creation Of New Tenancy: Bombay High Court

Brief Background

The Petitioner is one of the various tenants and occupants of certain structures which were to be re-developed. The re-development of the two cessed structures would be regulated by Development Control Regulation or DCR 33(7) read with Appendix-III to the Development Control Regulations, 1991. This, inter alia, allows existing tenants or occupants whose names are certified by MHADA to be given permanent alternate accommodation in the redeveloped building.

In 2010, one of the original tenants assigned her tenancy rights with respect to one of the Rooms in favour of the Petitioner. The Chief Officer of the Repair Board held that since the developer had purchased the 22 tenancies or occupancies from the old tenants and inducted 22 new tenants and therefore these tenants could not be accepted. He took the view that DCR 33(7) contemplates the rehabilitation only of old tenants/occupants. Further, The Chief Officer of the Repair Board had in its No Objection Certificates noted that 22 different private limited companies shown as "newly inducted occupants" be treated as a single occupier in possession of the owner.

Before the Bombay High Court, the petitioner submitted that there is no prohibition in DCR 33 (7) or Appendix-III against the transfer of exchange of tenancies. The prohibition is on the creation of new tenancies. It was also submitted that by way of the transfer of 22 old tenancies, the number of tenancies have not increased, no original tenancies have been sub-divided and no new tenancies have been created. The Petitioner had prayed that MHADA be directed to de-club the combined premised and to treat the Petitioner as a separate tenant.

To the contrary, the Respondents argued that the purpose of DCR 33 (7) is to rehabilitate old tenants and therefore these transfers must be treated as new tenancies.

At the onset, the judgement authored by Justice G.S.Patel, notes that "it is immediately apparent that "a new tenancy" is not the same as a transfer of an old tenancy." The Court also notes that the Housing Board and MHADA are concerned with the condition of housing structures and that the transfer of tenancies does not fall within the purview of the MHADA Act. It notes:

"The Affidavit in Reply reiterates the view that the purpose of DCR 33(7) is to rehabilitate old tenants and therefore these transfers must be treated as new tenancies. We are unable to accept this submission in view of the specific clauses of Appendix-III referred to above, read with the provisions of the Maharashtra Rent Control Act. Further it seems to us that MHADA's concern is in regard to the protection or reconstruction of cessed (that is to say tenanted) structures. The Housing Board and the MHADA Act are concerned with the condition of the housing structure. Tenancies cannot be created, surrendered or transferred under the MHADA Act. This is possible only under the Maharashtra Rent Control Act." (Paras 23-24).

The Court also observes that whereas earlier under the Rent Control statute of 1947 transfer of tenancies were illegal, under Section 55 and Section 56 of the Maharashtra Rent Control Act, 1999 transfers of tenancy are permitted with the requirement that these must be registered- a condition which is satisfied in the present case.

The Court holds that in cases of mere transfer of tenancy, which is not the same as creation of new tenancy, the prohibition in DCR 33 (7) and Appendix-III would not apply. It also holds that the only concern under the Rent Act and DC Regulations should be whether a new tenancy has been created and not whether the entities which have acquired tenancy are connected to one another. It notes:

"The contention in the Affidavit in Reply that the corporate veil should be pierced or that these companies should be treated as the group of companies does not appeal to us. The concern is not about whether the entities are connected to each other but whether there is an attempt to create a 'new tenancy' or whether something impermissible has been done contrary to the provisions of the Rent Act and the DC Regulations. On the other hand, if there is a mere transfer of a tenancy—that is to say not the creation of a new tenancy—then the prohibition in DCR 33(7) and Appendix-III cannot apply." (Para 26)

Accordingly, the judgement directs MHADA to issue a revised NOC in line with the directions to remove the condition of clubbing the tenancies and treating all of them as a single residential unit and owner-occupied.

Case Title: Alice Realities Pvt Ltd v State of Maharashtra

Coram: Justice G.S.Patel, Justice Madhav J. Jamdar

Citation: 2022 LiveLaw (Bom) 12

Read/Download the Judgement here