The condition for lease or rent has been incorporated by the landlord, if you are not agreeing to the terms you may look for some other place for rent.
The landlords do not want to get into this obligation for submitting to the verification formalities by the police for passport issues because they may not be willing to get into legal hassles due to this.
Therefore, there is no question of legality in imposing such conditions by the landlord.
There is a recent amendment in law stating that police verification s not required for re-issuance of passport. No police verification is required for reissue of passports, the government said today. “For reissue of passports, police verification is not required, provided the first passport had been issued on the basis of clear police report,”