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Judgment
The Writ Petition No. 1452 of 1996 was filed by one Elangovan (Appellant in W.A. No. 261 of 1996) against the Kodai-kanal Municipality
(Appellant in W.A. No. 321 of 1996) seeking to quash a notification in Re.No. 176/96-A4 dated 19-1-1996 issued by the said Municipality
proposing to conduct an auction for the right to choose the licensee to exhibit film shows in K.R.A. Kalai-arangam (Theatre) at Kodaikanal Road
for the period from 5-3-1996 to 4-3-1999 and for a consequential direction to the Municipality to renew the period of lease in favour of the said
petitioner for a further period of three years at an enhanced rent of being 15 per cent over the existing rate of rent. Onu C. Mahalingam, appellant
in W.A. No. 304 of 1996, got himself impleaded in the said writ petition as the successful bidder in the auction held pursuant to the impugned
notification. The writ petition was disposed of on 5-3-1996 by learned single Judge rejecting the claim for renewal, but directing a fresh auction.
The operative portion of the judgment is as follows :--
(1) Both the auction notice, dated 19-1-1996 and the final auction held on 5-2-1996 arc set aside.
(2) The offer of the renewal of the lease dated 30-1-1996 is also set aside.
(3) The first respondent is directed to call for fresh bids by way of public auction to lease out K.R.R. Kalai Arangam for a further period of three
years, in accordance with law.
(4) As the period of lease granted to the petitioner has come to an end with effect from 5-3-1996, the petitioner shall stop the running of the said
K.R.R. Kalai Arangam and hand over possession of K.R.R. Kalai Arangam to the first respondent.
All the parties are aggrieved in one way or the other by the above directions arid have filed the above writ appeals, as indicated already.
The facts leading to the said writ petition, W. P. No. 1452 of 1996 are as follows :--
The writ petitioner was the highest bidder in the auction conducted in the year 1989 for a period of three years from 1989 to 1992. In the auction
conducted during the year 1993, the petitioner was again the highest bidder and the period of licence was between 1993 till 5-3-1996. The
impugned auction notice, as already indicated, is for the grant of licence between 5-3-1996 and 4-3-1999 and the auction was to be conducted on
5-2-1996 at 11.00 a.m. Having issued the said auction notice, the Municipality had strangely issued a notice on 30-1-1996 to the writ petitioner,
the contents of which are very much relevant for the disposal of the writ appeals. The notice indicates that a sum of Rs. 1,74,718/ - was due and
payable by the writ petitioner as arrears of lease amount for the lease period, expired on 4-3-1996. The notice proceeds to say that if the writ
petitioner wanted to continue the lease hold right in himself he should pay the entire arrears and also agree to pay an enhanced rent at the rate of 15
per cent over and above the existing lease amount. The notice proceeded to say that the payment should be made and the writ petitioner should
inform his willingness immediate failing which the right to exhibit film shows would be sold in public auction.
It is the earnest endeavour of the writ petitioner to show that he was ready and willing to pay the entire arrears and also that he had expressed
his willingness to pay the enhanced rent as demanded. It is admitted that the notice dated 30-1-1996 was served on him, on the same day.
According to him, he appeared in the office of the Municipality on 2-2-1996 with a letter of willingness. He would have it that he was willing to pay
the entire arrears on 2-2-1996. It is his further case that the officials of the Municipality did not furnish him with the necessary challan enabling him
to make the payment of the arrears. They had also refused to receive the letter dated 2-2-1996 expressing his willingness for the enhanced rent. It
is further stated that the Commissioner of the Municipality was npt available on those days. 3-2-1996 and 4-2-1996 being Saturday and Sunday,
the writ petitioner approached the Municipality again on 5-2-1996. On that day, the challan was given and he had paid the arrears. He dropped
the letter in the Tapal box kept in the Municipality expressing his willingness for the renewal of the lease. It is to be remembered that the auction as
per the impugned notice was to be conducted only on 5-2-1996. It must also be kept in mind that the impugned auction notice had been published
in local Tamil Daily on 27-1-1996. This is the factual allegations on the basis of which the writ petitioner came to Court seeking the relief already
referred to. Since much will depend upon the truth of the above allegations, we will do well to refer to the counter affidavit of the Municipality in
this regard. It is stated that the letter dated 2-2-1996 was handed over to the Commissioner of Municipality only on 6-2-1996. It is admitted that
the Commissioner was not available in Station, but it is stated that nothing prevented the petitioner from remitting the arrears on or before 2-2-
1996. It is equally pointed out that the petitioner could have deposited the letter dated 2-2-1996 either in the Tapal box or with the officials of the
Municipality on 2-2-1996 itself. It is categorically denied that the officials of the Municipality had refused to furnish the necessary challan to enable
the petitioner to make the payment. It is also denied that the officials of the Municipality had refused to receive the letter dated 2-2-1996 said to
have been presented on 2-2-1996 itself. It is also pointed out that the arrears were deposited only on the afternoon of 5-2-1996. In the auction
conducted on the afternoon of 5-2-1996 there were 11 bidders and the. appellant in W.A. No. 304 of 1996 was the successful bidder for only a
sum of Rs. 2,00,700/- for the first year plus enhancement by 15 per cent for the succeeding years. One other interesting factor which will also have
a bearing on the disposal of the writ appeals, is the allegation that the writ petitioner was a chronic defaulter. The necessary allegations of the
Municipality which contained in paragraph 6 to 9 of the counter-affidavit and they are as follows :--
The petitioner herein in total violation of the stipulations, agreed to and in contravention of the terms of the agreement, failed to remit the licence
fee within the period prescribed in this behalf. The petitioner is a chronic defaulter right from the inception. The respondent; by notices dated 1-4-
1993, 13-4-1993, 11-5-1993, 8-6-1993, 2-2-1994, 13-12-1994 and 31-1-1995 demanded payment of arrears of licence fee and even such
demands have been ignored by the writ petitioner. As the petitioner had persisted in his default, by a registered notice dated 31-1-1995, the
respondent called upon the petitioner to remit the amounting arrears of Rs. 1,11,744/- accrued, due and payable by the petitioner. The petitioner
was further put on notice that in the event of his failing to remit the amount within a week from the date of receipt of the notice, the privilege will be
cancelled and will be reacutioned and he will be proceeded for all loss and damages. The said Memo, dated 31-1-1995 was duly served on the
petitioner and even after such notice, the petitioner had persisted in his default.
Once again, by notice dated 31-7-1995, the petitioner was required to remit the total arrears of fees amounting to Rs. 1,19,424/-within three
days of the receipt of the said notice and in default, the petitioner was also out on notice that the licence will be revoked and the privilege will be
reacutioned at the risk and cost of the petitioner and action will be taken for terminating the ''C'' form licence. The said letter has also been
acknowledged by the petitioner. By reply dated 13-9-1995, the petitioner while remitting Rs. 25,000/- undertook to pay arrears payable till the
end of September, 1995 within 25 days.
The respondent states that once again by notice dated 24-11-1995, the petitioner was called upon to remit the arrears of licence fee amounting
to Rs. 1,94,718/- within seven days from the date of receipt of the said demand notice, besides the petitioner was put on notice the privilege
granted to him will expire on 4-3-1996. The respondent specifically put the petitioner on notice that in the event of his failing to remit the arrears of
licence fee, the privilege in respect of K. R. R. Kalai Arangam would be cancelled and will be reauctioned at the risk and cost of the petitioner.
The said notice dated 24-11-1995 was also acknowledged by the petitioner on 9-12-1995. Even after the said notice, the petitioner had
committed further default and he was in arrears of Rs. 1,74,718/- as on 10-1-1996 and he was called upon to remit the arrears forthwith failing
which he was informed that the licence will be revoked and the privilege in respect of the Kalai Arangam will be reauctioned at the risk and cost of
the petitioner. The said notice dated 10-1-1996 was also acknowledged by the petitioner on 12-1-1996.
In spite of the said repeated written demands and reminders, the petitioner committed default and the default of the petitioner in payment of
licence fees is supine and he is a persistent defaulter in payment of licence fee. In the circumstances, once again, the respondent issued a notice on
30-1-1996 calling upon the petitioner to clear the arrears of Rs. 1,74,718/- and required the petitioner to intimate his willingness for the extension
of the licence for a year beyond 4-3-1996 subject to his agreeing to 15% increase in the annual fee and clearing all the arrears outstanding before
seeking for extension of the licence period.
We have extracted the relevant portions of the counter-affidavit only to show that the conduct of the writ petitioner and the fact that he has not
really approached the Court with clean hands. Mr. Kannadasan, for the writ petitioner was at pains to show that the writ petitioner was ready and
willing to pay the entire arrears even on 2-2-1996. We have already referred to the counter-affidavit of the Municipality which denies the
allegation. We are certainly inclined to accept the counter-affidavit of the Municipality in preference to that of the writ petitioner, Even assuming
that the petitioner was ready and willing on 2-2-1996, it surpasses our mind as to why the writ petitioner should wait till last date when the
impugned auction notice was certainly published in the local Tamil Daily on 27-1-1996. We are certainly convinced that the writ petitioner was not
bona fide in his attempt to pay up the arrears and seek extension of the lease because on 5-2-1996 the auction had been conducted and the
appellant in W.A. No. 304 of 1996 had become the successful bidder, It is only after the said auction that the petitioner had paid the arrears of
lease amount and submitted a letter agreeing for extension of lease. On facts, we reject the contention of the learned counsel for the writ petitioner
that the writ petitioner is entitled to the grant of a renewal at 15 per cent enhancement and that therefore, the impugned auction notice is illegal and
invalid. Apart from the fact that the auction had fetched a much higher amount than the 15 per cent enhancement offered by the writ petitioner, we
are satisfied that there are no legal infirmity in the auction notice and the points raised by learned counsel for the writ petitioner are not acceptable.
We will deal with certain legal submissions, strenuously urged by learned counsel for the Writ Petitioner.
The first contention of the writ petitioner/appellant in W.A. No. 261 of 1996, is that the Director of Municipal Administration in Roc No.
18985/89/ R3 dated 3-5-1994 had issued a Circular in furtherence of G.O.Ms. No. 285, M.A. & W.S. Department, dated 29-4-1985. It is
therefore, necessary to first look into the said Government Order dated 29-4-1985 for appreciating the subsequent Circular, Rule 12 of the Rules
relating to the receipts and expenditure of the Municipal Councils published in the notification 618 dated 1-5-1993 published in the Gazette dated
13-6-1933 had provided for the conduct of an auction in respect of the lease of the vacant lands, building, Banks, Stalls and shops etc. belonging
to the Municipalities in the State. The normal Rule was the conduct of an auction every year. By the said G.O.Ms. No. 285, dated 29-4-1985 the
said Rule was amended. The sum and substance of the said amendment is that auction shall be conducted once in three years, in the first instance
commencing from 1-4-1986. However, the Rule provided for a 15 per cent enhancement every year, though the auction was for a period of three
years. The existing leases as on 29-4-1985 were directed to be renewed for the year 1985-86 ending with 31-3-1986 after increasing the rent by
15 per cent. Any application for renewal should be filed within 90 days prior to the expiry of the lease period. Essentially it was a statutory renewal
of lease for a period of one year from 1-4-1985 to 31-3-1986 plus an auction to be conducted once in three years, with effect from 1-4-1986.
The Supreme Court had occasion to deal with this Government Order in Civil Appeal Nos. 1991 to 1994 of 1991 and W.P. (Civil) No. 400 of
1986, dated 23-4-1991. The relevant observations of the Supreme Court are as follows :--
It may be relevant to note that the Government has made an order dated 29th April, 1985 stating that the existing leases in Municipal properties
shall be extended from the year 1985-86 and the lease amount shall be calculated for 1985-86 at an increased rate at 15% more than the lease
amount for 1984-85. The Counsel for the petitioners submits that the petitioners are agreeable to pay the increased rate at 15% for once in three
years and they should be allowed to continue in their respective premises.
We have given our anxious consideration to the contentions urged by both the parties. It seems to us that there is no point in dispossessing the
petitioners if they are prepared to pay the enhanced rent as per the said Government Order. They are in the premises doing business apparently
with considerable investment. The periodical change of premises seems to be detrimental to their interests. If the Municipality is assured of
reasonable rent, it is proper that the peti- tioners be allowed to continue in the premises. They must however, pay the rent at the increased rate at
15% more than the amount which is payable by them. This increased rate of rent at 15% shall be payable once in a block period of three years
commencing from 1-4-1988. The increased rate of 15% for the period from 1-4-1988 to 1-4-1991 shall be payable within three months from
today.
The Cricular relied on by learned counsel for the petitioner/appellant, shows that the Municipalities were not able to collect the lease amount as
demanded by them every year. There was loss of revenue, resulting financial constraints suffered by the Municipalities and the Government was
proposing to take appropriate action. Pending such action, certain guidelines were issued. The first direction is that action should be taken against
lessees who were violating the conditions of lease calling for eviction of the lessees. The direction of the Supreme Court to collect enhanced rent of
the rate of 15 per cent only in a block period of three years should be followed. Certain other directions regarding taking of deposits were also
given in respect of new leases and renewal of leases. According to learned counsel for the petitioner, the above Govenrnent Order, Judgment of
the Supreme Court and the Circular dated 3-5-1994 would clearly prove that the impugned auction notice dated 19-1-1996 is illegal and also
proved that the petitioner is entitled for a renewal on his agreeing to pay 15 per cent enhancement. We do not accept this argument for more than
one reason. The first is that the Government Order and the subsequent judgment of the Supreme Court and the Circular referred ''only to ""leasing
out of Municipality buildings, Stalls, Lands, Shops, Bunks etc."" A Cinema theatre, in our opinion, does not come within the purview of the above
Government Order. The argument that buildings referred to, would include a Cinema theatre, cannot be accepted. In the whole of Tamil Nadu,
only one or two Municipalities own a Cinema theatre. The furniture and all other electrical fittings the buiiding are provided by the Municipality. The
screen and the Projector alone are hired by the lessee for exhibiting film shows. The right to exhibit film shows is covered by a peculiar
arrangement between the Distributers of the area and a Cinema threatre owner or lesseee. These arrangements depend upon the number of weeks
for which, each cinema film gets attention of the public and the ratio of apportionment of the collections between the threatre and the Distributor.
We therefore, hold that the said Government Order and Circular will not apply to Cinema theatres.
No doubt, a cinema theatre is also a building, but it cannot be classified as falling in the general category of buildings. Cinema theatre buildings
forms a different category. Unlike other buildings, it has to be constructed according to specifications as contained in the relevant enactment
namely, Tamil Nadu Cinemas (Regulation) Act (Act of IX of 1955) and the Rules framed thereunder. It has to be located at a place which fulkfills
the requirements as laid down in the Act and the Rules. It is not a mere building. It will have to be fitted with seats and of the equipments.
Therefore, the cinema theatre could not be considered as falling in the ordinary category of buildings.
The second reason is that the above Government Order will only apply to leasing out of Municipality buildings, shops etc. and not in respect of
licensing rights. That will lead us to the question whether the transaction in this case would amount to a lease transaction or only a licence
arrangement. Learned counsel for the petitioner has taken us through the tease deed in extenso, to show that the transaction was only a lease
arrangement and the parties are governed by a lessor-lessee relationship. No doubt, the earlier lease deed dated 5-3-1993 uses the expression
lessor, lessee, lease amount etc. But it is well-known that the use of such expression will not decide the character of the document. In fact, in
Balakrishnan V. S. v. Pudukkottai Municipality, Represented by the Commissioner, Pudukkottai, Pudukkotai Dist., 1994 (1) MLW 571 and in S.
Rajendran v. Nagercovil W.A. No. 263 of 1995) this Court has taken the view that the auction of the right to collect fees in a Weekly market by a
Municipality is not a lease but only a licence.
There also the Court has expressed the view that the more use of the word ''lease'' in the transaction would not clinch the issue. The question is
whether interest in an immovable property was being conferred on the transferee. For the purpose of finding out the nature of the transaction we
refer to the Schedule to the lease deed dated 5-3-1993 wherein the theatre given ""for running film shows"". If we now turn to the impugned auction
notice dated 19-1-1996, it says that the public auction would be conducted by the Municipality for chosing the person to exhibit cinema
programmes in the theatre. In Tamil, the right is described as (vernacular matter omitted). It means the right to exhibit cinema programmes as per
the Tamil Nadu Cinemas (Regulation) Act, 1955 in the said building is alone sold in auction. The fact that the Cinema theatre is used by the
transferee during the period when he exhibits cinema films, does not mean that a right or interest in the immovable property is conferred on the
transferee. On this ground also we hold that what was granted was only a licence to exhibit cinema films and not a lease hold right. For this reason
also, the above Government Order and the Circular will not apply to the case of the petitioner.
It is next contended by Mr. N. Kannadasan that the petitioner had a legitimate expectation and the same was on enforceable right where the
respondent/ Municipality had not given due weight to such expectation. Reliance is placed on Food Corporation of India Vs. M/s. Kamdhenu
Cattle Feed Industries, . The Supreme Court has also pointed out that the question whether the expectation of a party is reasonable or legitimate is
a question of fact to be decided in each case. Such a question had to be decided in the larger public interest. It is also pointed out that a bona fide
decision of the public authority reached after taking into account all the circumstances of the case would satisfy the requirement of non-arbitrariness
and withstand judicial scrutiny. In this case, we have noticed enough facts to show that the petitioner is not entitled to have any legitimate
expectation when he was in arrears for the previous lease period, to the tune of Rs. 1,74,718/-. Secondly, a fair opportunity was given to the writ
petitioner and he did not exercise the option till the auction was completed and a third party namely, the appellant in W.A. No. 304 of 1996 had
acquired the right. We therefore, reject the claim based on the theory of legitimate expectation.
As rightly, contended by learned counsel for the appellant in W.A. No. 304 of 1996 and as we have been from the detailed counter-affidavit of
the Municipality, it is clear that the writ petitioner has no right to seek the relief under Art. 226 of the Constitution of India purporting to enforce his
alleged right of renewal of lease. We are firmly of the opinion that on the facts and circumstances, the petitioner/appellant cannot seek renewal
because, not only he was a chronic defaulter during the earlier periods he had also not exercised his option within the time granted by the
Municipality. The auction had been completed in the forenoon of 5-2-1996 and the right of the third party claimants/ appellant in W.A. No. 304 of
1996 cannot therefore, be ignored and in fact his right is superior to that of the petitioner/ appellant as he is a bona fide participant in the auction.
Even from the point of view of the revenue we are satisfied that the amount offered by the third party claimant/appellant in W.A. No. 304 of 1996
is much more than the amount offered by the petitioner/appellant. We do not accept the reasons given by learned single Judge for directing a fresh
auction on the ground that the petitioner had very little time to participate in the auction. This is because the impugned notice was published in the
local Tamil Daily on 27-1-1996 itself. There is no allegation of any irregularity in the conduct of the auction. There were as many as 11 bidders
indicating there was proper publication of the auction notice. Therefore, the direction to conduct a fresh auction is in our opinion, not called for.
For all the above reasons, Writ Appeals, W.A. Nos. 304 and 321 of 1996 are allowed. Writ Appeal No. 261 of 1996 filed by the writ
petitioner is dismissed. No costs. The following directions are given in the writ petition :--
(i) The claim of the writ petitioner/appellant in W. A. No. 261 of 1996 for renewal of the lease is rejected.
(ii) The impugned auction notice dated 19-1-1996 and the auction held on 5-2-1996 are upheld as valid and enforceable.
(iii) Consequently, the Municipality is at liberty to accept the highest bid of the appellant in W.A. No. 304 of 1996 and execute the necessary lease
deed etc.
In view of the disposalof the above writ appeals, no furtheror separate orders are necessary in the connected C.M.Ps.
Appeals allowed.