Modern Public School vs State of Punjab and another

K. Kannan, J.—The petitioner has challenged the action of the 2nd respondent in according to the petitioner a municipal property on lease on condition that the petitioner shall pay 10% of the market value of the land as lease money from the date of the occupation of the land. It is the contention that the petitioner has taken possession of the property and he has been running a school on a no profit basis. The contention is that the requirement of payment of 10% of the market value as rent is excessive and it violates their own policy spelt out through the Secretary, Local Government Department of 12/19th December, 1977 that in respect of recognized/registered educational and charitable institutions, the Municipal Committee shall be allowed to lease out the land with prior approval of the State Government at the rate of 5% of the market value. This itself ought to be really a ceiling, for, the Municipal Committee had actually passed a resolution that the property shall be leased out to the petitioner for 99 years at the rate of Rs.100 per annum.

The above resolution itself records that it was being sent to the Secretary, Local Government, Punjab, through the Deputy Commissioner to the SDO, Ferozepur and the Deputy Director, Ferozepur, for consideration of the Government along with the respective recommendations for lease as per the resolution. In response to the communication sent to the Government, the Government has announced that lease would be granted in favour of the petitioner if they agreed to pay 10% of the market value of the land as lease money from the date of occupation of the property and if the management failed to give such a consent, they would not be allowed to retain the land and the municipality would be free to eject them from the land as under unauthorized occupation. It is this decision of the Government which is in challenge before this Court.

The learned senior counsel for the petitioner would contend that the school is being run at the property of panchayat on no profit basis and the assessment of 10% of the value of the land would be grossly inequitable. The contention is that if at all, the lease could have been given only at 5% of the value in terms of the Government policy that allowed for leasing of land of municipality at the rate of 5% of the market value of the land. The policy is spelt out through a communication of the Secretary to Government to all the Deputy Commissioners in the State of Punjab by letter dated 12/19th December, 1977 (Annexure P-5). In my view, the impugned decision brought through the communication (Annexure P-4) is definitely arbitrary to the extent that it does not follow the declared policy of the Government as found expressed in the communication in Annexure P-5, referred to above. The relevant clause in the policy is reproduced:

In case of recognized/registered educational and charitable institutions, Municipal Committees are allowed to lease out the land, with prior approval of the State Government, at the rate of 5% of the market value of the land. This will be subject to the stipulation that land so leased out should not be suitable for commercial exploitation.

Even while asserting for the petitioner''s entitlement to lease in the manner recommended by the Municipal Committee, the learned senior counsel would contend that at the highest rate, it could never be more than 5% of the market value and the same shall also be for a continuous period of 99 years.

If the Government itself had not finalized the decision and was giving only a proposal, I cannot chart out a plan to the benefit of the petitioner. However, having regard to the fact that the petitioner is said to be engaged in a non-commercial activity of running a school, I will allow the petitioner''s claim to the extent that the impugned decision directing the payment of lease initially at the rate of 10% of the market value was not justified. It shall, however, be at 5% of the market value as annual rental value for the property. I am informed that the petitioner is paying the rent at 5% of the market value as annual rent.

It is brought out through a memo No.1/153/85-LG Unit II/9954, dated 21.07.1986 that the Government has framed a policy regarding periodical increase in rents for municipal property. The policy reads thus:

It has been decided that present policy should continue to be in force. While taking this decision the escalation in value of property in the State generally has been kept in view.

Another important point pertaining to this subject which has been considered relates to regularizing change of transfer to tenancy from original owners to the subletees. There have been cases when on the death or similar eventualities, the possession of Municipal shops/property was transferred to another tenant or even to the partner of a firm to whom these were given on rent originally. No instructions/guidelines have so far been issued as to in which manner these properties should be transferred.

On considering this matter in detail, it has been decided that all such transfers of tenancies from the original tenant should be regularized by charging 10 times of the annual rent of a Municipal shop/property.

It has also been found that there has been legal complication in Municipal Committee charging the amount of rent from the tenants on account of non-execution of requisite agreements with tenants.

It has, therefore, been decided that in the case of renting out of Municipal shops/properties, proper agreements should be got executed. It should be the personal responsibility of the Executive Officer to ensure meticulous compliance of this requirement.

That at the time of auction of Municipal property the Regional deputy Director of Local Government/his office Superintendent, and a representative of the Deputy Commissioner should be present.

It has accordingly been decided that hereafter in case of representative of Deputy Commissioner, an officer not below the rank of Tehsildar should represent the Deputy Commissioner and that Regional Deputy Director should be invariably personally at all such auctions.

A still later memo issued on 13.11.1995 deals with the leasing of land vested in municipal councils. It requires that all municipal lands shall be disposed of in open auction. In exceptional cases lease of municipal lands with prior approval of the Government in favour of institutions which are purely charitable in nature is permitted. The relevant clause are clauses 2, 4, 5 and 6, which are reproduced:

Government has decided that while generally all Municipal lands should be disposed off through open auction, in exceptional cases Municipal lands may be leased out with prior approval of Government but only in favour of these institutions which are purely charitable in nature and devoted to the welfare of children, women, widows, old age and disabled persons and orphans as also for institutions devoted to providing general health services, mental health services and running de-addiction centres.

The allotment of land would initially be made for a period of one year which could be extended depending upon the performance of the allottee and ensuring that the land so allotted is utilized strictly for desired purpose.

The new rates of lease money should be @ 10% of the market value of the land to be calculated on the basis of Collector''s rates in case of charitable institutions and 20% for others in place of existing 5% and 10% respectively.

The lease agreements should be carefully drafted so that in the event of violation of any clause of the agreement, the land reverts back to the concerned Local Body.

Although the instruction makes possible the lease of rent for 10% of the market value on the basis of the Collector''s rates in case of charitable institutions, I will allow for the continuance of the 5% from the date of the institution of the writ petition till 31.12.1995 and from 01.01.1996, it shall be 10% of the market value to be collected on the basis of the Collector''s rates. A fresh assessment on the basis of new instructions may be taken and communicated to the petitioner. If the petitioner cannot settle for mutually acceptable terms with the respondent, the respondent shall be at liberty to take back possession of the property in accordance with law. The decision shall be taken as regards the lease payable and the period of lease within a period of 12 weeks. The petitioner shall be allowed to participate in the process of determination of al the terms which shall be transparent and in accordance with any relevant rules or guidelines governing the grant of lease of the property of the Municipal Committee. The petitioner can show all their accounts, the receipts and expenditure, the number of students who are studying, the affordability of rent, etc. to help the government finalize the rate of lease payable. It should be borne in mind that it is not immediately a free hold that can be auctioned in public. It is already in the hands of the petitioner where the school is being run. The assessment of lease shall, therefore, be on the basis that it is being used by the petitioner for a non-commercial educational purpose. With these observations, the writ petition is disposed of.