P. Muthusamy vs State of Tamil Nadu

W.P. No. 31177 of 2013 has been filed by way of public interest litigation seeking a direction to the respondents to bring the shops belonging to the third respondent-Municipality for fresh auction by taking into consideration of the representation made by the petitioner on 24.10.2013. W.P. Nos. 14372, 14373 and 14491 to 14494 of 2013 have been filed by the petitioners, who were the lessees of the shops belonging to the Municipality challenging the impugned resolution passed by the Chairman of the respondent-Municipality and the consequential auction notice issued by the Commissioner.

W.P. Nos. 7080 to 7084, 7595 to 7602 and 12535 to 12539 of 2013 have been filed by the petitioners challenging the rent fixed by the third respondent-Municipality.

W.P. Nos. 8594 to 8597 of 2013 have been filed to forbear the respondent-Municipality from evicting/cancelling the lease based on retrospective increase of rent.

W.P. Nos. 35194 and 35198 of 2013 have been filed to quash the tender notice dated 20.12.2013 issued by the respondent Municipality and published on 21.12.2013.

W.P. Nos. 35285, 35356, 35360 to 35369, 35371 and 35372 of 2013 and 120 of 2014 have been filed to quash the resolution dated 20.12.2013 issued by the Chairman of the respondent-Municipality and the consequential proceedings of the second respondent dated 20.12.2013 and published on 21.12.2013.

As all the writ petitions are interconnected and seeking relief against the very same respondent, they are dealt with by way of a common order.

Heard Mrs. Nalini Chidambaram, learned Senior Counsel for C. Uma, Mrs. Hema Sampath, learned Senior Counsel for Mr. S. Raveekumar, Mr. N. Ponraj, Mr. C. Prabakaran and Mr. S. Raveekumar, learned counsels appearing for the petitioners and Mr. P.H. Arvind Pandian, Additional Advocate General, Mr. P.S. Shivashanmughasundaram, Special Government Pleader, and Mr. M.S. Ramesh, Additional Government Pleader appearing for the respondents and perused the documents and counter affidavits filed by the respondents.

The petitioners in all the Writ Petitions have been given licence to occupy the shops by the respondent-Municipality for a fixed period and almost, all the writ petitioners have been in possession and enjoyment of the respective shops allotted to them for few decades starting from the year 1986 onwards. The petitioners in W.P. No. 31177 of 2013 are seeking a direction to the respondent--Municipality for fresh auction. The particulars of lease/licence in respect of the writ petitioners are hereunder:

Brief Facts:

The licensees of the shops have been paying a very meagre amount as rent/licence fee. Taking note of the prevailing market rent and the fact that they have been in possession for more than two decades, rents have been re-fixed as per the Government Order passed in G.O.Ms. No. 147 Municipal Administration and Water Supply (Finance IV) Department, dated 30.12.2000. Accordingly, the licence was treated as restored with effect from 01.04.2002 and the amount was fixed as per the prevailing market value at the relevant point of time. Writ petitions have been filed before this Court challenging the fixation of rent, in which, the learned single Judge, while setting aside the order passed by the Municipality, held that without hearing the petitioners the rent has been revised and consequently, the respondent-Municipality was directed to reconsider the issue afresh after affording sufficient opportunities.

During the pendency of the writ petitions, the period of licence was extended. The petitioners gave an undertaking that they would withdraw the writ petitions. The orders passed by this Court also show that the petitioners have agreed to pay the enhanced rent proposed to be fixed. As orders have been passed on merit and obviously, not taking into consideration of the undertaking given, the third-respondent Municipality passed orders thereafter, after affording sufficient opportunities to the licensees. However, challenging the fixation of rent, once again, the licensees approached this Court by filing W.P. Nos. 7080 to 7084, 7595 to 7602 and 12535 to 12539 of 2013. After passing Government Order in G.O.Ms. No. 147 Municipal Administration and Water Supply(Finance IV) Department, dated 30.12.2000, the Government passed another order in G.O.Ms. No. 92 Municipal Administration and Water Supply (Finance IV) Department, dated 03.07.2007, by which certain guidelines have been given for the proposed auction to all the Municipalities. The said Government Order has been passed subject to the proposed amendment of the relevant provisions of the District Municipalities Act.

As the licensees have not paid the enhanced rent fixed, the extension of licence during the pendency of the earlier writ petitions were cancelled by the impugned resolution dated 20.12.2013. Thereafter, an auction notification was issued on 21.12.2013. Challenging the abovesaid proceedings as well as the orders fixing the rent from 01.04.2002 onwards, the writ petitions have been filed.

Submissions of the Petitioners:

The learned counsels appearing for the petitioners submitted that after extending the lease, the respondent-Municipality cannot cancel the same unilaterally. The fixation of rent is contrary to the Government Orders passed in G.O.Ms. Nos. 147 and 92, Municipal Administration and Water Supply(Finance IV) Department dated 30.12.2000 and 03.07.2007 respectively. Some of the petitioners have paid the enhanced rent. Clarification has been issued clarifying the Government Order passed. The clarification issued by the Commissioner, Municipal Administration and Water Supply Department dated 12.03.2009 is binding on the respondent-Municipality. The impugned proceedings of the respondent Municipality dated 14.12.2012 in fixing the rent is not in consonance with the Government Orders. In support of the said contention, the learned counsels have made reliance upon the judgment of the Supreme Court in Labha Ram and Sons and Others Vs. State of Punjab and Others, .

Submissions of the Respondents:

Per contra, the learned Additional Advocate General appearing for the respondents and the learned counsel appearing for the petitioners in W.P. No. 31177 of 2013 submitted that what has been granted is only a licence. The Government Orders are subject to the compliance of the conditions by the licensees. They did not have any vested right to continue in a particular shop for eternity. The transactions are commercial in nature. It is not the case of the petitioners that they are paying more amount than the one that would be fetched in the proposed auction. The assessment made by the respondents would show that atleast five times more than the rent that is being paid would be obtained in the proposed auction. Most of the licensees are in occupation from 1986 onwards. It has been clearly stated in the Government Orders that steps will have to be taken to get the maximum revenue and the arrangement should not cause any financial loss to the local bodies. As a matter of rule, immovable properties will have to be leased out by public auction. Any extension of lease will have to be treated as a fresh and a new lease amount shall have to be fixed on the basis of the market rental value of that area. Any failure on the part of the lessee would result in cancellation of lease.

Government Orders governing the case:

The following are the directions, which form part of the said Government Order.

Generally the leasing out all the immovable properties of the Municipality and local for the first time, shall be decided by way of public auction.................

The lease which is granted for further period of three years, in such manner, will be fixed with the new lease amount. The new lease amount should be fixed on the basis of the market rental value of that area. For such fixation, the facts such as the rental amount of the shops which were let out for lease in the past one year, the level of the private shops or the rent being paid for the private building by the Government companies, for the office facility or any other purpose, shall be taken as base. On the basis of the rental value, which is calculated in this manner, the rent per sq.ft., shall be fixed on that basis, the new lease amount has to be fixed for the shop of the local bodies. Whatsoever it may be, the rent being fixed should be 15% more than the rent of the last year.

...

If the applicant did not come forward to pay the lease amount fixed on the new scale as decided by the Municipality, and within the period of 15 days as fixed for the acceptance of the new lease, that land/shop will be recovered from him and has to be let out on lease.

When the new lease is being fixed in the abovesaid manner, the local bodies should not suffer any financial loss.

The above said guidelines leave no room for any doubt that they have been given for the purpose of obtaining more revenue for the local bodies. After the said Government Order was passed, a subsequent Government Order was passed in G.O.(Ms). No. 92 Municipal Administration and Water Supply (MA4) Department dated 03.07.2007. The relevant guidelines of the said Government Order are extracted hereunder.

4 (i) At the time of leasing out all the immovable assets of Municipalities for the first time, it should be leased out in Public Auction.

(iii) After nine years, the lease rent has to be re-assessed. Priority can be given to extend the lease for a further period of nine years to the existing lessee, subject to condition that the then market value of the lease would be levied. In the event of the proposal not accepted then the property should be brought in Public Auction.

From the abovesaid guidelines also it is clear that the intention is augmentation of higher revenue.

Relevant facts:

Originally the rent was fixed based upon the Government Order passed in G.O.Ms. No. 147 Municipal Administration and Water Supply (Finance IV) Department, dated 30.12.2000, with effect from 01.04.2012. As mentioned above, it was set aside only on the ground of violation of principles of natural justice. Thereafter, once again the respondent-Municipality passed orders on 14.12.2012 fixing rent. As the said condition was not complied with by some of the licensees and only 15% of the original licence fee was paid by others, by the impugned resolution in resolution No. 1027 dated 20.12.2013, it was decided to cancel all the licences granted and to bring the shops for fresh auction. The said decision was made by taking into consideration of relevant materials, the financial condition of the Municipality, the welfare measures that are to be taken, the necessity for the proposed auction by way of augmenting more revenue, and the failure of the licensees to pay the amount fixed already and the legality of the proposed auction.

The impugned Resolution:

The following passages in the impugned resolution are apposite.

At present there has been shortage of sanitary workers in Dharapuram Municipality and consequently there has been lull in taking up sanitary work. The Government accepting the request of this Council has issued Government Order No. 1/2013 to fill up 55 Sanitary Workers for the Dharapuram Municipality. A condition is imposed that in the event of the expenditure is increased beyond 49% on the salary and pension of the employees, steps has to be taken to generate the income and the 55 vacant posts can be filled up. Already 17 sanitary workers vacancies have been filled up through compassionate grounds. The 49% expenditure would be reached if 5 posts are filled upon.

There has already been problem in filling up the remaining 33 vacancies of sanitary workers. Hence, only if appropriate steps are taken to generate revenue, the vacant posts can be filled up.

Moreover the Drinking Water Expansion Plan for Dharapuram Municipality, with the assistance from the Central-State Governments to the tune of Rs. 14.74 is being implemented. A sum of Rs. 1 crore has to be paid by way of contribution by the Municipality for this purpose.

Further in the auction conducted for the shops to be constructed in the bus stand, a highest bid of Rs. 12,100/- per month as monthly rent has been confirmed. A Security Deposit of Rs. 1,00,000/- has been paid. At the time of handing over the shop to the auctioneer, an additional Security deposit equivalent to 12 months rent would be collected.

Already for the shops inside the bus stand highest sum of Rs. 12,100/- as monthly rent and for the shops outside the bus stand monthly rent of Rs. 7,000/- was quoted. The rent paid by the lessees at present for the shops in the bus stand is as follows:

A sum of up to Rs. 1 crore can be generated as Earnest Money Deposit for the 75 shops in the Bus Stand through Public Auction. Further in the event of all the shops owned by the Municipality is put for public auction, approximately an amount of Rs. 2 crores as Security Deposit can be earned as revenue for the Municipality.

Accordingly, only when the revenue is increased, it is possible to not only fill the vacancies of 38 Sanitary Workers, development of the Town and infrastructure development and extend various facilities to the public. More over only when the financial position of our Municipality is improved, various schemes of the Central-State Governments can be implemented by paying contribution amount........................

The property of the Municipality is a common property. Individual persons have been continuing to enjoy for 27 consecutive years. Equal opportunity would be given to all, in order to use, by putting the common property in public auction. It would not only amount to upholding of Socio-economic justice, the income of the Municipality would also be increased and the basic facilities, expansion plans for the general public can also be undertaken and hence, the Council approval is sought for re-auction of the shops of the Municipality.

Office Note:

In the event of public auction is conducted at present, there is a possibility of increase the revenue. Equal opportunity is also given to all the general public to participate.

One person continues to run the shop for the 27 consecutive years. The just rights of others is taken away. Financial loss is caused to the Municipality due to continuous renewal of lease licence.

If public auction is not conducted, financial loss would occur. Due to financial loss, there is a possibility of audit objection. Hence, the Council Members are requested to express their views separately.

Agenda for the Special Meeting of the Council held on 20.12.2013.

Council Resolution No. 1027 dated 20.12.2013

Out of the 77 vacant posts permitted to be filled by the Government for the Dharapuram Municipality in G.O.(4D) 1, Municipal Administration and Water Supply Department dated 17.1.2013, 24 posts have only been filled up. Out of the remaining 53 vacant posts, 38 posts alone is in the category of Sanitary Workers. The present expense ratio of the Municipality is 45.79% as on 31.3.2013. In the event of 5 Sanitary Workers itself is appointed, the total expense ratio would reach 48.99%.

As per Government Order 1, the salary expenses of the Municipality should not exceed 49%. Therefore, by putting the Shops owned by the Municipality in Public Auction, the revenue can be increased. Increasing Municipality''s revenue in a proper manner is the best financial administration. Hence, the Council has decided to conduct public auction of all the Municipality owned shop, which has completed more than 9 years of auction.......

Resolution passed on auction of Municipality shops on 6.3.2013 and 25.11.2013 and the Resolutions passed renewing the lease licence till date is cancelled.

Hence, 3. This Council unanimously resolves to auction all the shops owned by the Municipality which is more than 9 years of last Public auction.

Impugned order fixing Rent:

In the mean while, in pursuant to the order passed by this Court remitting the issue of fixation of rent, making a reliance upon the Government Orders passed, the rent was fixed by the proceeding dated 14.12.2012 on the following reasons.

The Government Orders regularizing the lease of Municipality.

Your act of taking this shop on lease from the year 1985 and running the shop till date.

In order to get the increase in the lease and extension of lease, the application submitted by you stating that you abide the municipal conditions.

You had signed in the affidavit in the presence of the Notary public stating that the case before the High Court will be withdrawn and had obtained the extension of lease.

As per the above said affidavit, not withdrawing the case.

You had signed assuring that at the time of receiving the lease, and at the time of the extension of lease, will abide by the conditions imposed by the Municipality.

You having run the shop from the year 1989 till 2012, for more than 23 years, as per the letter which had been given by you about your stand as mentioned above and due to the reasons such as the financial position of Municipality and the development works and the loan amount borrowed for the construction of the bus stand shops, interest could not be repaid, and further in connection with the fixation of the rent, the letter of the Commissioner, Municipal Administration (referred to as 4 above), the audit objection of the Accountant General, Chennai, the affidavit notarized and submitted by you, the objection submitted by you for the increase in rent is not accepted. Hence, it is hereby ordered that from 1.4.2002 the monthly rent is fixed as Rs. 2090/-.

These are the background facts governing all the cases before us.

Discussion:

The facts narrated above would clearly indicate that the petitioners have been given only a licence to run the shops. Just because the word "lease" has been mentioned, a licence cannot ipso facto be converted into a lease. Admittedly, the licence issued has a fixed terms. Therefore, the petitioners do not have a legal or a vested right to continue in occupation for ever. There is no doubt that the provisions of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1961, does not apply to the case on hand. The petitioners can very well participate in the proposed auction. In other words, they cannot claim the right of a statutory tenant.

The object of letting out the shops is to collect more revenue for the respondent-Municipality, which is meant to be used for welfare measures. The Government Orders, as narrated above, are very specific about the purpose of auction followed by lease/licence. Since the transactions are commercial in nature, the petitioners, being licensees, cannot insist that the rent, which as they think, just and proper alone is liable to be paid. Since the licence is to be granted by the respondent-Municipality, while making offer, the said authority can impose its own terms in accordance with law. While accepting the said offer, the petitioners cannot insist that the condition attached therein cannot be imposed. A perusal of the Government Orders referred to above as well as the orders impugned make it clear that the rent has been fixed based upon the prevailing market value and not otherwise. What has been given by way of extension to an existing licensee was only a concession. The subsequent extension has been made during the pendency of the writ petitions. The said decision was made in view of the undertaking given by the licensees. An undertaking was given in connection with the payment as well as on the withdrawal of the writ petitions. The Government orders also state that in the event of non compliance of the conditions imposed including the payment of appropriate rent, a licensee is liable to be removed.

The resolution has been passed after making detailed discussion and it was also passed as a consequence of the earlier order dated 14.12.2012 by which rent was fixed. Since the said rent so fixed was not paid, the respondent-Municipality was made to pass the impugned resolution. Therefore, it cannot be said that the impugned resolution has been unilaterally passed and as such, the said decision is in accordance with the Government Orders passed, which confer the power on the respondent-Municipality to take action towards the eviction from the shops in the event of non payment of rent payable. The extraction of the related paragraphs of the resolution would clearly show that relevant materials have been taken into consideration while passing the same. The respondent-Municipality has got its own duty and obligation to perform. Appointments will have to be made to the public office and salaries will have to be paid. Money will have to be spent towards the welfare measures. The assessment made also indicates that the proposed auction would bring more money. The best way to get the maximum revenue is by way of public auction. This will also create a level playing field enabling others to participate along with the petitioners/licensees. Therefore, we do not find any arbitrariness in the action of the respondent-Municipality. The reliance made by the petitioners on the communication dated 12.03.2009 cannot be accepted since it cannot overreach the Government Orders which speak about removal when conditions are not complied with. The fact that the Commissioner of Municipal Administration directed the respondent-Municipality to fix the market rent as the rent payable based upon the Government Orders which in turn was complied with would also show that there is no quarrel with the position that the market rent shall be the basis for the fixation of the rent payable by the licensees. In any case, the petitioners, being the defaulters, cannot contend that they should be allowed to continue forever. As the orders impugned have been passed by taking into consideration of the relevant materials, we do not find any room for interference.

The decision relied upon by the learned counsels appearing for the petitioners Labha Ram and Sons and Others v. State of Punjab (supra) cited above has no application to the facts involved in the present cases. In the said decision the existing licensees were asked to vacate in view of the creation of a new multi complex.

It is settled law that an instrumentality of a State should always endeavour by following the procedure by way of public auction or inviting tender, as held in P.N. Chinnasamy and Others Vs. The Assistant Director of Town Panchayat and Others, , S. Selvarani Vs. The Commissioner, Karaikudi Municipality and Another, , C. Jayanthi Vs. The Commissioner Mettur Municipality and Eswari, , D. Kannan v. Commissioner of Municipal Administration, Chepauk CDJ 2010 MHC 1636 : LNIND 2010 MAD 759 and Ram and Shyam Company Vs. State of Haryana and Others, . Conclusion:

In the light of the discussions made above, W.P. Nos. 7080 to 7084, 7595 to 7602, 8594 to 8597, 12535 to 12539, 14372, 14373, 14491 to 14494, 35194, 35198, 35285, 35356, 35360 to 35369, 35371, 35372 of 2013 and W.P. No. 120 of 2014 are dismissed and consequently, W.P. No. 31177 of 2013 is allowed. However, there is no order as to costs. Consequently, the connected miscellaneous petitions are closed.